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 ~~September~~June 30, ~~2021~~2022

☐ 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: 333-128780

NCL CORPORATION LTD.

(Exact name of registrant as specified in its charter)

Bermuda		20-0470163
(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
N/A	N/A	N/A

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 ⌧

(Note: The registrant is a voluntary filer of reports required to be filed under Section 13 or 15 (d) of the Securities Exchange Act of 1934).

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 31,164,004 ordinary shares outstanding as of ~~October~~July 31, ~~2021.~~2022.

Table of Contents

PART I. FINANCIAL INFORMATION

Item 1. Financial Statements

NCL Corporation Ltd.

Consolidated Statements of Operations

(Unaudited)

(in thousands)


	Three Months Ended				Nine Months Ended				Three Months Ended				Six Months Ended
	September 30,				September 30,				June 30,				June 30,
	2021		2020		2021		2020		2022		2021		2022		2021
Revenue
Passenger ticket	$	86,127	$	4,667	$	87,877	$	859,293	$	793,892	$	1,584	$	1,136,347	$	1,750
Onboard and other		66,954		1,851		72,672		411,036		393,289		2,784		572,774		5,718
Total revenue		153,081		6,518		160,549		1,270,329		1,187,181		4,368		1,709,121		7,468
Cruise operating expense
Commissions, transportation and other		32,338		4,038		47,935		371,007		256,190		6,564		344,148		15,597
Onboard and other		19,306		4,728		21,841		82,889		96,155		1,276		128,705		2,535
Payroll and related		154,440		65,571		323,225		441,462		262,580		86,647		503,307		168,785
Fuel		79,238		48,224		175,931		222,240		181,189		54,090		316,698		96,693
Food		16,672		3,426		27,314		59,639		61,157		4,334		100,673		10,642
Other		137,762		64,170		294,092		308,832		216,045		96,816		415,198		156,330
Total cruise operating expense		439,756		190,157		890,338		1,486,069		1,073,316		249,727		1,808,729		450,582
Other operating expense
Marketing, general and administrative		228,473		156,351		616,440		556,820		328,074		184,901		624,208		387,967
Depreciation and amortization		173,289		177,488		517,867		554,937		181,587		174,262		360,663		344,578
Impairment loss		—		—		—		1,607,797
Total other operating expense		401,762		333,839		1,134,307		2,719,554		509,661		359,163		984,871		732,545
Operating loss		(688,437)		(517,478)		(1,864,096)		(2,935,294)		(395,796)		(604,522)		(1,084,479)		(1,175,659)
Non-operating income (expense)
Interest expense, net		(184,524)		(154,501)		(824,304)		(343,993)		(167,805)		(179,448)		(516,129)		(639,780)
Other income (expense), net		226,442		(89,005)		(145,450)		(325,412)		519,749		(82,627)		490,871		(371,892)
Total non-operating income (expense)		41,918		(243,506)		(969,754)		(669,405)		351,944		(262,075)		(25,258)		(1,011,672)
Net loss before income taxes		(646,519)		(760,984)		(2,833,850)		(3,604,699)		(43,852)		(866,597)		(1,109,737)		(2,187,331)
Income tax benefit (expense)		(294)		2,832		(2,949)		13,216		547		(927)		(3,846)		(2,655)
Net loss	$	(646,813)	$	(758,152)	$	(2,836,799)	$	(3,591,483)	$	(43,305)	$	(867,524)	$	(1,113,583)	$	(2,189,986)

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

Table of Contents

NCL Corporation Ltd.

Consolidated Statements of Comprehensive Loss

(Unaudited)

(in thousands)


	Three Months Ended				Nine Months Ended				Three Months Ended				Six Months Ended
	September 30,				September 30,				June 30,				June 30,
	2021		2020		2021		2020		2022		2021		2022		2021
Net loss	$	(646,813)	$	(758,152)	$	(2,836,799)	$	(3,591,483)	$	(43,305)	$	(867,524)	$	(1,113,583)	$	(2,189,986)
Other comprehensive income (loss):
Shipboard Retirement Plan		98		101		295		305		94		99		2,570		197
Cash flow hedges:
Net unrealized gain (loss)		(45,134)		87,710		(73,497)		(163,672)		(90,503)		44,674		(51,199)		(28,363)
Amount realized and reclassified into earnings		12,948		36,072		48,328		86,853		(36,075)		13,542		(43,577)		35,380
Total other comprehensive income (loss)		(32,088)		123,883		(24,874)		(76,514)		(126,484)		58,315		(92,206)		7,214
Total comprehensive loss	$	(678,901)	$	(634,269)	$	(2,861,673)	$	(3,667,997)	$	(169,789)	$	(809,209)	$	(1,205,789)	$	(2,182,772)

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

Table of Contents

NCL Corporation Ltd.

Consolidated Balance Sheets

(Unaudited)

(in thousands, except share data)

September 30,

December 31,


2021

2020

Assets





Current assets:





Cash and cash equivalents

$
1,933,908

$
3,299,340

Accounts receivable, net

990,384

20,578

Inventories

108,177

82,381

Prepaid expenses and other assets

241,259

147,556

Total current assets

3,273,728

3,549,855

Property and equipment, net

13,480,120

13,411,226

Goodwill

98,134

98,134

Trade names

500,525

500,525

Other long-term assets

1,370,046

831,888

Total assets

$
18,722,553

$
18,391,628

Liabilities and shareholders’ equity





Current liabilities:





Current portion of long-term debt

$
543,739

$
124,885

Accounts payable

94,949

83,136

Accrued expenses and other liabilities

860,619

596,717

Due to NCLH

40,480

37,790

Advance ticket sales

1,440,294

1,109,826

Total current liabilities

2,980,081

1,952,354

Long-term debt

10,583,507

10,128,754

Exchangeable notes

2,178,874

2,691,720

Other long-term liabilities

1,039,563

447,492

Total liabilities

16,782,025

15,220,320

Commitments and contingencies (Note 10)





Shareholders’ equity:





Preference shares (Series A-1: $1,000 par value; 2,000,000 shares authorized; 0 shares issued and outstanding at September 30, 2021 and December 31, 2020; Series A-2: $1,000 par value; 2,000,000 shares authorized; 0 shares issued and outstanding at September 30, 2021 and December 31, 2020; and Series A-3: $1,000 par value; 1,000,000 shares authorized; 0 shares issued and outstanding at September 30, 2021 and December 31, 2020)

—

—

Ordinary shares ($0.0012 par value; 40,000,000 shares authorized; 31,164,004 shares issued and outstanding at September 30, 2021 and December 31, 2020)

37

37

Additional paid-in capital

7,352,618

5,721,725

Accumulated other comprehensive income (loss)

(266,704)

(241,830)

Retained earnings (deficit)

(5,145,423)

(2,308,624)

Total shareholders’ equity

1,940,528

3,171,308

Total liabilities and shareholders’ equity

$
18,722,553

$
18,391,628


	June 30,		December 31,
	2022		2021
Assets
Current assets:
Cash and cash equivalents	$	1,897,269	$	1,500,357
Short-term investments		—		240,000
Accounts receivable, net		598,256		1,167,473
Inventories		154,397		118,205
Prepaid expenses and other assets		470,984		264,691
Total current assets		3,120,906		3,290,726
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	$	19,102,359	$	18,718,995
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		1,596,374		1,058,401
Due to NCLH		39,512		37,995
Advance ticket sales		2,331,203		1,561,336
Total current liabilities		5,072,623		3,767,794
Long-term debt		10,067,535		9,863,980
Exchangeable notes		1,889,931		1,801,517
Other long-term liabilities		938,561		997,055
Total liabilities		17,968,650		16,430,346
Commitments and contingencies (Note 10)
Shareholders’ equity:
Preference shares (Series A-1: $1,000 par value; 2,000,000 shares authorized; 0 shares issued and outstanding at June 30, 2022 and December 31, 2021; Series A-3: $1,000 par value; 1,000,000 shares authorized; 0 shares issued and outstanding at June 30, 2022 and December 31, 2021; Series A-4: $1,000 par value; 2,000,000 shares authorized; 0 shares issued and outstanding at June 30, 2022 and December 31, 2021; and Series A-5: $1,000 par value; 1,000,000 shares authorized; 0 shares issued and outstanding at June 30, 2022)		—		—
Ordinary shares ($0.0012 par value; 40,000,000 shares authorized; 31,164,004 shares issued and outstanding at June 30, 2022 and December 31, 2021)		37		37
Additional paid-in capital		8,540,619		8,489,770
Accumulated other comprehensive income (loss)		(379,005)		(286,799)
Accumulated deficit		(7,027,942)		(5,914,359)
Total shareholders’ equity		1,133,709		2,288,649
Total liabilities and shareholders’ equity	$	19,102,359	$	18,718,995

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

Table of Contents

NCL Corporation Ltd.

Consolidated Statements of Cash Flows

(Unaudited)

(in thousands)

Nine Months Ended

September 30,


2021

2020
Cash flows from operating activities




Net loss

$
(2,836,799)

$
(3,591,483)
Adjustments to reconcile net loss to net cash used in operating activities:




Depreciation and amortization expense

626,843

598,380
Impairment loss

—

1,607,797
Deferred income taxes, net

79

(17,550)
Loss on derivatives

179,354

293,045
Loss on extinguishment of debt

237,065

10,480
Provision for bad debts and inventory obsolescence

14,118

16,293
Gain on involuntary conversion of assets

(7,706)

(1,340)
Share-based compensation expense

88,974

81,009
Net foreign currency adjustments

(7,238)

3,746
Changes in operating assets and liabilities:

Accounts receivable, net

(979,890)

(12,103)
Inventories

(26,676)

12,757
Prepaid expenses and other assets

(65,856)

85,424
Accounts payable

15,012

11,536
Accrued expenses and other liabilities

141,264

(179,764)
Advance ticket sales

469,595

(834,560)
Net cash used in operating activities

(2,151,861)

(1,916,333)
Cash flows from investing activities




Additions to property and equipment, net

(539,530)

(873,142)
Cash paid on settlement of derivatives

(14,465)

(31,520)
Other

11,024

3,047
Net cash used in investing activities

(542,971)

(901,615)
Cash flows from financing activities




Repayments of long-term debt

(889,206)

(888,800)
Proceeds from long-term debt

1,345,041

5,225,090
Due to NCLH, net

2,690

962
Contribution from NCLH

1,558,957

741,795
Net share settlement of restricted share units

(16,672)

(15,334)
Early redemption premium

(611,164)

(1,376)
Deferred financing fees and other

(60,246)

(117,388)
Net cash provided by financing activities

1,329,400

4,944,949
Effect of exchange rates on cash and cash equivalents

—

(3,267)
Net increase (decrease) in cash and cash equivalents

(1,365,432)

2,123,734
Cash and cash equivalents at beginning of period

3,299,340

231,239
Cash and cash equivalents at end of period

$
1,933,908

$
2,354,973


	Six Months Ended
	June 30,
	2022		2021
Cash flows from operating activities
Net loss	$	(1,113,583)	$	(2,189,986)
Adjustments to reconcile net loss to net cash used in operating activities:
Depreciation and amortization expense		435,387		415,000
(Gain) loss on derivatives		(421,713)		402,102
Loss on extinguishment of debt		188,433		237,065
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		(542,410)		(242,630)
Accounts payable		(127,188)		26,205
Accrued expenses and other liabilities		137,507		45,783
Advance ticket sales		755,189		191,609
Net cash used in operating activities		(107,464)		(1,482,249)
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
Due to NCLH, net		1,517		1,323
Contribution from NCLH		—		1,558,957
Net share settlement of restricted share units		(11,991)		(16,658)
Early redemption premium		(172,012)		(611,164)
Deferred financing fees and other		(36,359)		(28,532)
Net cash provided by financing activities		585,442		1,247,357
Net increase (decrease) in cash and cash equivalents		396,912		(935,107)
Cash and cash equivalents at beginning of period		1,500,357		3,299,340
Cash and cash equivalents at end of period	$	1,897,269	$	2,364,233

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

Table of Contents

NCL Corporation Ltd.

Consolidated Statements of Changes in Shareholders’ Equity

(Unaudited)

(in thousands)


	Three Months Ended September 30, 2021										Three Months Ended June 30, 2022
					Accumulated										Accumulated
			Additional		Other		Retained		Total				Additional		Other				Total
	Ordinary		Paid-in		Comprehensive		Earnings		Shareholders’		Ordinary		Paid-in		Comprehensive		Accumulated		Shareholders’
	Shares		Capital		Income (Loss)		(Deficit)		Equity		Shares		Capital		Income (Loss)		Deficit		Equity
Balance, June 30, 2021	$	37	$	7,312,710	$	(234,616)	$	(4,498,610)	$	2,579,521
Balance, March 31, 2022											$	37	$	8,510,601	$	(252,521)	$	(6,984,637)	$	1,273,480
Share-based compensation		—		39,922		—		—		39,922		—		30,048		—		—		30,048
Net share settlement of restricted share units		—		(14)		—		—		(14)		—		(30)		—		—		(30)
Other comprehensive loss, net		—		—		(32,088)		—		(32,088)		—		—		(126,484)		—		(126,484)
Net loss		—		—		—		(646,813)		(646,813)		—		—		—		(43,305)		(43,305)
Balance, September 30, 2021	$	37	$	7,352,618	$	(266,704)	$	(5,145,423)	$	1,940,528
Balance, June 30, 2022											$	37	$	8,540,619	$	(379,005)	$	(7,027,942)	$	1,133,709

	Nine Months Ended September 30, 2021										Six Months Ended June 30, 2022
					Accumulated										Accumulated
			Additional		Other		Retained		Total				Additional		Other				Total
	Ordinary		Paid-in		Comprehensive		Earnings		Shareholders’		Ordinary		Paid-in		Comprehensive		Accumulated		Shareholders’
	Shares		Capital		Income (Loss)		(Deficit)		Equity		Shares		Capital		Income (Loss)		Deficit		Equity
Balance, December 31, 2020	$	37	$	5,721,725	$	(241,830)	$	(2,308,624)	$	3,171,308
Balance, December 31, 2021											$	37	$	8,489,770	$	(286,799)	$	(5,914,359)	$	2,288,649
Share-based compensation		—		88,974		—		—		88,974		—		62,840		—		—		62,840
Net share settlement of restricted share units		—		(16,672)		—		—		(16,672)		—		(11,991)		—		—		(11,991)
Contribution from NCLH		—		1,558,957		—		—		1,558,957
Other		—		(366)		—		—		(366)
Other comprehensive loss, net		—		—		(24,874)		—		(24,874)		—		—		(92,206)		—		(92,206)
Net loss		—		—		—		(2,836,799)		(2,836,799)		—		—		—		(1,113,583)		(1,113,583)
Balance, September 30, 2021	$	37	$	7,352,618	$	(266,704)	$	(5,145,423)	$	1,940,528
Balance, June 30, 2022											$	37	$	8,540,619	$	(379,005)	$	(7,027,942)	$	1,133,709

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

Table of Contents

NCL Corporation Ltd.

Consolidated Statements of Changes in Shareholders’ Equity - Continued

(Unaudited)

(in thousands)


	Three Months Ended September 30, 2020										Three Months Ended June 30, 2021
					Accumulated										Accumulated
			Additional		Other		Retained		Total				Additional		Other				Total
	Ordinary		Paid-in		Comprehensive		Earnings		Shareholders’		Ordinary		Paid-in		Comprehensive		Accumulated		Shareholders’
	Shares		Capital		Income (Loss)		(Deficit)		Equity		Shares		Capital		Income (Loss)		Deficit		Equity
Balance, June 30, 2020	$	37	$	4,565,658	$	(497,600)	$	(133,772)	$	3,934,323
Balance, March 31, 2021											$	37	$	7,291,240	$	(292,931)	$	(3,631,086)	$	3,367,260
Share-based compensation		—		25,862		—		—		25,862		—		22,451		—		—		22,451
Net share settlement of restricted share units		—		(16)		—		—		(16)		—		(615)		—		—		(615)
Contribution from NCLH		—		277,296		—		—		277,296
Other												—		(366)		—		—		(366)
Other comprehensive income, net		—		—		123,883		—		123,883		—		—		58,315		—		58,315
Net loss		—		—		—		(758,152)		(758,152)		—		—		—		(867,524)		(867,524)
Balance, September 30, 2020	$	37	$	4,868,800	$	(373,717)	$	(891,924)	$	3,603,196
Balance, June 30, 2021											$	37	$	7,312,710	$	(234,616)	$	(4,498,610)	$	2,579,521

	Nine Months Ended September 30, 2020										Six Months Ended June 30, 2021
					Accumulated										Accumulated
			Additional		Other		Retained		Total				Additional		Other				Total
	Ordinary		Paid-in		Comprehensive		Earnings		Shareholders’		Ordinary		Paid-in		Comprehensive		Accumulated		Shareholders’
	Shares		Capital		Income (Loss)		(Deficit)		Equity		Shares		Capital		Income (Loss)		Deficit		Equity
Balance, December 31, 2019	$	37	$	4,061,330	$	(297,203)	$	2,697,636	$	6,461,800
Balance, December 31, 2020											$	37	$	5,721,725	$	(241,830)	$	(2,308,624)	$	3,171,308
Share-based compensation		—		81,009		—		—		81,009		—		49,052		—		—		49,052
Net share settlement of restricted share units		—		(15,334)		—		—		(15,334)		—		(16,658)		—		—		(16,658)
Contribution from NCLH		—		741,795		—		—		741,795		—		1,558,957		—		—		1,558,957
Cumulative change in accounting policy		—		—		—		1,923		1,923
Other comprehensive loss, net		—		—		(76,514)		—		(76,514)
Other												—		(366)		—		—		(366)
Other comprehensive income, net												—		—		7,214		—		7,214
Net loss		—		—		—		(3,591,483)		(3,591,483)		—		—		—		(2,189,986)		(2,189,986)
Balance, September 30, 2020	$	37	$	4,868,800	$	(373,717)	$	(891,924)	$	3,603,196
Balance, June 30, 2021											$	37	$	7,312,710	$	(234,616)	$	(4,498,610)	$	2,579,521

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

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~~NCL~~NCL Corporation 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 NCLC (as defined below) and its subsidiaries, ~~(including Prestige (as defined below),~~ (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, ~~and~~ (v) ~~“Prestige”~~“Oceania Cruises” refers to Prestige Cruises International S. de R.L. (formerly Prestige Cruises International, Inc.), together with its consolidated subsidiaries, including Prestige Cruise Holdings S. de R.L. (formerly Prestige Cruise Holdings, Inc.), Prestige’s direct wholly-owned subsidiary, which in turn is the ~~parent of~~ Oceania Cruises ~~S. de R.L. (formerly Oceania Cruises, Inc.) (“Oceania Cruises”)~~brand and (vi) “Regent” refers to the Regent Seven Seas Cruises ~~S. de R.L. (“Regent”) (Oceania Cruises also refers to the brand by the same name and Regent also refers to the brand 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~~June 30, ~~2021,~~2022, we had 28 ships with approximately 59,150 Berths and had orders for 9 additional ships to be delivered through 2027. Due to ~~the novel coronavirus (“COVID-19”),~~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 5 additional Prima Class Ships on order with expected delivery dates from 2023 through 2027. We have 1 Explorer Class Ship on order for delivery in 2023. We have 2 Allura Class Ships on order for delivery in 2023 and 2025. ~~Project Leonardo will introduce an additional 6 ships with expected delivery dates from 2022 through 2027.~~ These additions to our fleet will increase our total Berths to approximately 83,000, which includes additional Berths we plan to add to our Project Leonardo ships, subject to certain conditions. The impacts of COVID-19 on the shipyards where our ships are under construction (or will be constructed) have resulted in some delays in expected ship deliveries, and the impacts of COVID-19 could result in additional delays in ship deliveries in the future, which may be prolonged.83,000.

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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 3 brands. As of the date hereof, 11 of our ships were operating with guests on board as part of our phased return to service. Significant events affecting travel, including COVID-19, typically have an impact on demand for cruise vacations, with the full extent of the impact generally determined by the length of time the event influences travel decisions. We believe the ongoing effects of COVID-19 on our operations and global bookings have had, and will continue to have, a significant impact on our financial results and liquidity, and such negative impact may continue well beyond the containment of the pandemic.

In January 2021, we amended our Senior Secured Credit Facility to further defer certain amortization payments due prior to June 30, 2022 and to waive certain financial and other covenants through December 31, 2022. In February 2021, we amended certain of our export-credit backed facilities to further defer amortization payments through March 31, 2022, and we amended all of our export-credit backed facilities to suspend certain financial covenants through December 31, 2022. In connection with such amendments of our Senior Secured Credit Facility and our export-credit backed facilities, our minimum liquidity requirement was increased to $200 million and such requirement applies through December 31, 2022. In March 2021, the Company received additional financing through various debt financings and an equity offering, collectively totaling approximately $2.7 billion in gross proceeds. From the proceeds, approximately $1.5 billion was used to extinguish debt. In November 2021, the Company executed a $1 billion commitment through August 15, 2022 that provides additional liquidity to the Company. Refer to Note 7 – “Long-Term Debt” for further details of the above transactions.

In the third quarter of 2021, we began a phased relaunch of certain cruise voyages with our ships initially operating at reduced occupancy levels. ~~The~~In early May 2022, the Company ~~continues to execute on~~completed the phased relaunch ~~plans~~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 ~~its 28-ship fleet. The Company expects to have approximately 75% of capacity operating by December 31, 2021~~cruise vacations, with the full ~~fleet expected to be back in operation~~extent of the impact determined by ~~April 1, 2022.~~the length of time the event influences travel decisions. The ~~timing for bringing our ships back to service, 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 ~~and new more contagious and/or vaccine-resistant variants~~ of COVID-19 or the ~~availability, distribution, rate~~emergence of other public ~~acceptance and efficacy of vaccines and therapeutics for COVID-19,~~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 ~~re-staff~~staff our ~~ships~~ships. In addition, as a result of conditions associated with the COVID-19 pandemic and ~~implement new health~~other global events, such as Russia’s invasion of Ukraine and ~~safety protocols.~~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.

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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 ~~phased~~ return to ~~service at reduced occupancy levels, increasing over time until we reach~~ 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 ~~primarily upon completion of future voyages and the payment of cash refunds for any further cancellations,~~ 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 ~~incremental expenses for resumption~~continued higher fuel prices and the impact of ~~cruise voyages, including the maintenance of and compliance with additional health and safety protocols.~~inflation.

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We cannot make assurances that our assumptions used to estimate our liquidity requirements will not change due to the ~~unique and unpredictable~~dynamic nature of the ~~pandemic, including its magnitude and duration.~~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 ~~COVID-19~~these events within our financial statements and there may be material changes to those estimates in future periods. ~~We will report a net loss for the three months and year ending December 31, 2021 and expect to report a net loss until we are able to resume regular voyages.~~ 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 ~~other~~further opportunities to improve our ~~liquidity and to refinance our debt to reduce interest expense and extend maturities.~~liquidity.

Based on these actions and assumptions ~~regarding the impact of COVID-19,~~as discussed above, and considering our ~~available liquidity, including~~ cash and cash equivalents of $1.9 billion as of ~~September~~June 30, ~~2021,~~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 ~~will be~~was phased in ~~gradually as described under “—Liquidity and Management’s Plan” above.~~gradually. The interim consolidated financial statements should be read in conjunction with the audited consolidated financial statements for the year ended December 31, ~~2020,~~2021, which are included in our most recent Annual Report on Form 10-K filed with the SEC on ~~February 26,~~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.

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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		(550,107)		(385,000)		(935,107)
Cash and cash equivalents at end of period		2,749,233		(385,000)		2,364,233

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. ~~Gains~~The resulting gains or losses ~~resulting from transactions denominated in other currencies~~ are recognized in our consolidated statements of operations within other income (expense), net. We recognized ~~a gain~~gains of ~~$9.9~~$36.4 million and ~~a loss of $12.3~~$0.2 million for the three months ended ~~September~~June 30, ~~2021~~2022 and ~~2020,~~2021, respectively, and ~~a gain~~gains of ~~$14.9~~$44.7 million and ~~a loss of $2.6~~$5.0 million for the ~~nine~~six months ended ~~September~~June 30, ~~2021~~2022 and ~~2020,~~2021, respectively, related to ~~transactions~~remeasurement of assets and liabilities denominated in ~~other~~foreign currencies.

Depreciation and Amortization Expense

The amortization of deferred financing fees and debt discounts are 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 ~~includes $964.7~~included $455.4 million and $1.1 billion due from credit card processors as of ~~September~~June 30, 2022 and December 31, 2021, which is expected to be collected within the next 12 months. Prior to the resumption of cruise operations, these amounts were classified in other long-term assets as a result of the uncertainty surrounding the timing of their collection.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 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

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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 ~~September~~June 30, ~~2021,~~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.

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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				Nine Months Ended				Three Months Ended		Six Months Ended
	September 30,				September 30,				June 30,		June 30,
	2021		2020		2021		2020		2022		2022
North America	$	77,418	$	1,967	$	80,562	$	956,389	$	673,503	$	1,160,938
Europe		75,474		2,195		78,316		25,231		499,917		524,714
Asia-Pacific		74		362		1,061		151,283		13,362		21,654
South America		115		471		610		76,777		399		1,815
Other		—		1,523		—		60,649
Total revenue	$	153,081	$	6,518	$	160,549	$	1,270,329	$	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. ~~Other includes all other international territories.~~

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 1 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 ~~historically~~ approximated ~~75-85%~~80-87% of total ~~revenue.~~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 ~~September~~June 30, ~~2021 and December 31, 2020,~~2022, our receivables from customers were ~~$7.8 million and $1.0 million, respectively.~~$62.5 million.

~~Beginning in March 2020, our brands launched new~~

Our cancellation policies to permit ~~our~~certain guests to cancel cruises ~~which are not part of the Company’s temporary suspension of voyages~~booked within certain windows for specified time periods up to 15 days prior to ~~departure. These programs were~~departure or in ~~place for cruises booked through specific time periods specified by brand,~~the event of a positive COVID-19 test, and ~~for cruises scheduled to embark through October 31, 2021.~~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 or other long-term liabilities as applicable.~~sales.

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Our contract liabilities are included within advance ticket sales. As of ~~September~~June 30, ~~2021~~2022 and December 31, ~~2020,~~2021, our contract liabilities were ~~$234.0 million~~$1.4 billion and ~~$23.1~~$161.8 million, respectively. Of the amounts included within contract liabilities as of June 30, 2022, approximately ~~25%~~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 ~~nine~~six months ended ~~September~~June 30, ~~2021, no~~2022, $120.2 million of revenue recognized was included in the contract liability balance at the beginning of the period. ~~The revenue recognized in the nine months ended September 30, 2020 that was included in contract liabilities as~~

Table of ~~the beginning of the period was $0.9 billion.~~Contents

For cruise vacations that had been cancelled by us due to COVID-19, during the three months ended ~~September~~June 30, 2021, ~~and 2020,~~ approximately ~~$0.9~~$11.2 million, ~~and $15.5 million, respectively,~~ and during the ~~nine~~six months ended ~~September~~June 30, 2022 and 2021, ~~and 2020,~~ approximately ~~$26.9~~$0.3 million and ~~$160.4~~$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

~~In April 2020, the FASB issued interpretive guidance relating to the accounting for~~Operating lease concessions provided as a result of COVID-19. In this guidance, entities can elect not to apply lease modification accounting with respect to such lease concessions and instead, treat the concession as if it was a part of the existing contract. The Company has elected to not evaluate leases under the lease modification accounting framework for concessions that result from effects of the COVID-19 pandemic. In relation to our rights to use port facilities, we have elected the approach consistent with resolving a contingency, which allows us to remeasure the lease liability and recognize the amount of change in the lease liability as an adjustment to the carrying amount of the associated right-of-use asset. As the full amount of the concession will not be determinable until the force majeure period under the related arrangements have ended, periodic remeasurements will be required. During the contingency period, we are recognizing lease expense for these port facilities as incurred.

~~Lease~~ balances were as follows (in thousands):

Balance Sheet location

September 30, 2021

December 31, 2020
Operating leases


Right-of-use assets

Other long-term assets

$
789,303

$
209,037
Current operating lease liabilities

Accrued expenses and other liabilities

37,109

17,700
Non-current operating lease liabilities

Other long-term liabilities

662,043

185,414

Finance leases

Right-of-use assets

Property and equipment, net

10,078

11,948
Current finance lease liabilities

Current portion of long-term debt

4,561

5,143
Non-current finance lease liabilities

Long-term debt

2,135

4,648

During the three and nine months ended September 30, 2021, right-of-use assets obtained in exchange for lease obligations were $501.4 million for operating leases to use certain port faciliaties. The leases had terms ranging from approximately 20 years to 32 years and incremental borrowing rates ranging from 4.3% to 5.8%.


	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

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~~As of September 30, 2021, maturities of lease liabilities were as follows (in thousands):~~

Operating

leases

Remainder of 2021

$
12,423

2022

42,937

2023

61,225

2024

64,996

2025

66,514

Thereafter

1,083,480

Total

1,331,575

Less: Present value discount

(632,423)

Present value of lease liabilities

$
699,152

5. Accumulated Other Comprehensive Income (Loss)

Accumulated other comprehensive income (loss) for the ~~nine~~six months ended ~~September~~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	$	(286,799)	$	(280,343)		$	(6,456)
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	$	(379,005)	$	(375,119)	(3)	$	(3,886)

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

Nine Months Ended September 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

$
(241,830)

$
(234,981)

$
(6,849)

Current period other comprehensive loss before reclassifications

(73,497)

(73,497)


—

Amounts reclassified into earnings

48,623

48,328
(1)

295
(2)
Accumulated other comprehensive income (loss) at end of period

$
(266,704)

$
(260,150)
(3)
$
(6,554)

~~Accumulated other comprehensive income (loss) for the nine months ended September 30, 2020 was as follows (in thousands):~~


	Nine Months Ended September 30, 2020								Six Months Ended June 30, 2021
						Change								Change
	Accumulated		Change			Related to			Accumulated		Change			Related to
	Other		Related to			Shipboard			Other		Related to			Shipboard
	Comprehensive		Cash Flow			Retirement			Comprehensive		Cash Flow			Retirement
	Income (Loss)		Hedges			Plan			Income (Loss)		Hedges			Plan
Accumulated other comprehensive income (loss) at beginning of period	$	(297,203)	$	(290,009)		$	(7,194)		$	(241,830)	$	(234,981)		$	(6,849)
Current period other comprehensive loss before reclassifications		(163,672)		(163,672)			—			(28,363)		(28,363)			—
Amounts reclassified into earnings		87,158		86,853	(1)		305	(2)		35,577		35,380	(1)		197	(2)
Accumulated other comprehensive income (loss) at end of period	$	(373,717)	$	(366,828)		$	(6,889)		$	(234,616)	$	(227,964)		$	(6,652)

(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 ~~$2.6~~$87.9 million of ~~loss~~gain expected to be reclassified into earnings in the next 12 months.

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6.Property and Equipment, net

Property and equipment, net increased ~~$68.9~~$112.5 million for the ~~nine~~six months ended ~~September~~June 30, ~~2021~~2022 primarily due to ships under ~~construction and ship improvement projects.~~construction.

7. Long-Term Debt

~~Credit Facilities~~

In January 2021, NCLC entered into an amendment agreement (the “First Amendment”), which amends the Amended and Restated Credit Agreement, dated as of May 8, 2020 (the “Fifth ARCA” and, as amended by the First Amendment, the “Senior Secured Credit Facility”). The First Amendment provides that, among other things, (a) amortization payments due between the First Amendment effective date and prior to June 30,February 2022, (the “First Amendment Deferral Period”) on the Legacy Term Loan A and Term Loan A-1 held by lenders that have consented to such deferral (the “First Amendment Deferring Lenders”) are deferred and such deferred principal amount constitutes a separate tranche of loans (the “Deferred Term Loan A-1”) and (b) the tranche of loans held by certain lenders (the “Fifth ARCA Deferring Lenders”) on which amortization payments due within the first year after effectiveness of the Fifth ARCA were deferred (the “Deferred Term Loan A”) of First Amendment Deferring Lenders were converted into Deferred Term Loan A-1 loans. The class of loans constituting the Term Loan A Facility (other than the Deferred Term Loan A) held by the Fifth ARCA Deferring Lenders (the “Term Loan A-1”) and the class of loans constituting the portion of the Term Loan A Facility that is held by lenders other than the Fifth ARCA Deferring Lenders (the “Legacy Term Loan A”) that were held by the First Amendment Deferring Lenders (other than amounts converted into the Deferred Term Loan A-1) constitute a separate tranche of loans (the “Term Loan A-2”), with the same terms as the Legacy Term Loan A and Term Loan A-1 under the Fifth ARCA, except that amortization payments on the Term Loan A-2 shall be deferred during the First Amendment Deferral Period and thereafter such Term Loan A-2 will amortize in an aggregate principal amount equal to approximately 5.88% per annum and the interest rate for Term Loan A-2 shall be modified as described below. The Deferred Term Loan A-1 will accrue interest (x) in the case of Eurocurrency loans, at a per annum rate based on LIBOR plus a margin of 2.50% or (y) in the case of base rate loans, at a per annum rate based on the base rate plus a margin of 1.50%. After the end of the First Amendment Deferral Period, the Deferred Term Loan A-1 will amortize in an aggregate principal amount equal to 25% per annum of the Deferred Term Loan A-1 outstanding immediately after the consummation of the First Amendment, in quarterly installments, and in the case of such payment due on the maturity date, an amount equal to the then unpaid principal amount of the Deferred Term Loan A-1 outstanding. The Legacy Term Loan A, Term Loan A-1 and Deferred Term Loan A that were held by lenders other than the First Amendment Deferring Lenders constitute separate classes of loans and were unchanged. The First Amendment resulted in deferred amortization payments aggregating approximately $70 million prior to June 30, 2022.

The First Amendment provides that, (a) from the First Amendment effective date to and including December 31, 2022 (the “Covenant Relief Period”) the testing of the loan to value, debt to capitalization and EBITDA to debt service covenants under the Senior Secured Credit Facility will be suspended and the free liquidity test will be replaced by a covenant to maintain at least $200 million in free liquidity, certified on a monthly basis. During the Covenant Relief Period the interest rate for Term Loan A-2 and revolving loans held by Lenders that consented to the First Amendment will be LIBOR plus 2.00% (or base rate plus 1.00%) with decreases subject to a leverage-based pricing grid. The First Amendment also makes certain other changes to the Senior Secured Credit Facility, including tightening certain of the baskets applicable to our ability to make certain asset dispositions, investments and restricted payments.

Additionally, in February 2021, NCLC amended all of its export-credit backed facilities to defer amortization payments aggregating approximately $680 million through March 31, 2022 and/or make certain changes in respect of covenants and undertakings contained therein.

The facilities that finance Norwegian Breakaway, Norwegian Getaway, Norwegian Escape, Norwegian Joy, Norwegian Bliss, Norwegian Encore, Seven Seas Explorer, Seven Seas Splendor, Riviera and Marina were amended to provide that, among other things, (a) amortization payments due from April 1, 2021 to March 31, 2022 (the “Second Deferral Period”) on the loans will be deferred and (b) the principal amounts so deferred will constitute separate tranches of loans under

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~~the facilities. The separate tranches of loans will accrue interest at a floating rate per annum based on six-month LIBOR plus a margin as follows:~~


	~~Margin~~
~~€529.8 million Breakaway one loan (Norwegian Breakaway)~~	~~1.10~~	%
~~€529.8 million Breakaway two loan (Norwegian Getaway)~~	~~1.40~~	%
~~€590.5 million Breakaway three loan (Norwegian Escape)~~	~~1.50~~	%
~~€729.9 million Breakaway four loan (Norwegian Joy)~~	~~1.50~~	%
~~€710.8 million Seahawk 1 term loan (Norwegian Bliss)~~	~~1.20~~	%
~~€748.7 million Seahawk 2 term loan (Norwegian Encore)~~	~~1.20~~	%
~~Explorer newbuild loan~~	~~3.00~~	%
~~Splendor newbuild loan~~	~~1.95~~	%
~~Marina newbuild loan~~	~~0.75~~	%
~~Riviera newbuild loan~~	~~0.75~~	%

~~After the end of the Second Deferral Period, the deferred loans will amortize in an aggregate principal amount equal to 20% per annum of the deferred loans, in semiannual installments.~~

In addition, all of NCLC’s export-credit backed facilities were amended to provide that, from the effective date of the amendments to and including December 31, 2022, certain of the financial covenants under such facilities will be suspended and the free liquidity test will be replaced by a covenant to maintain at least $200 million in free liquidity. The amendments also made certain other changes to the facilities, including imposing further restrictions on NCLC’s ability to incur debt, create security, issue equity and make dividends and other distributions.

In April 2021, an agreement was executed to defer certain newbuild related debt amortization to July 2022. The aggregate amount of debt amortization that was deferred was €31.2 million, or $36.1 million based on the euro/U.S. dollar exchange rate as of September 30, 2021. The interest rate on the newbuild related debt was increased to 4.5~~% per annum.~~

The amendments of the agreements described above resulted in aggregate modification expenses of $52.1 million for the nine months ended September 30, 2021, which is recognized in interest expense, net.

In May 2021, NCLC entered into a €28.8 million loan facility for newbuild related payments. The facility bears interest at a rate of 4.5% per annum. As of September 30, 2021, €19.2 million, or $22.2 million based on the euro/U.S. dollar exchange rate as of September 30, 2021, was drawn under this facility, which matures on July 1, 2022.

In July 2021, we amended 9 credit facilities for our newbuild agreements and increased the combined commitments under such credit facilities by approximately $770 million to cover owner’s supply (generally consists of provisions for the ship), modifications and financing premiums. Subsequently, in September 2021, excess commitments totaling approximately $230 million were cancelled under 2 of the credit facilities as a result of hedging euro below the rate used to determine the maximum commitments in U.S. dollars.

~~Unsecured Notes~~

~~In December 2020,~~ NCLC conducted a private offering (the “Notes Offering”) of ~~$850.0~~$1,000 million in aggregate principal amount of 5.875% senior ~~unsecured~~secured notes due ~~March 15, 2026~~2027 (the ~~“2026 Senior Unsecured~~“2027 Secured Notes”)~~. In March 2021, NCLC completed an add-on offering of $575.0~~ and $600 million in aggregate principal amount of ~~additional 2026 Senior~~7.750% senior notes due 2029 (the “2029 Unsecured ~~Notes.~~ Notes”).

The ~~2026 Senior Unsecured~~2027 Secured Notes ~~pay~~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 ~~at 5.875% per annum, semiannually on March 15~~in, among other things and ~~September 15~~subject to certain agreed security principles, three of ~~each year, to holders of record at~~our vessels, namely the ~~close of business on~~Norwegian Jade vessel, the ~~immediately preceding March 1~~Norwegian Epic vessel and ~~September 1, respectively.~~ the Sirena vessel.

NCLC may redeem the ~~2026 Senior Unsecured~~2027 Secured Notes at its option, in whole or in part, at any time and from time to time prior to ~~December~~February 15, ~~2025,~~2024, at a “make-whole” redemption price, ~~equal to 100% of the principal amount of the notes redeemed~~ plus accrued and unpaid interest and additional amounts, if any, to, but excluding, the redemption ~~date and a “make-whole premium.”~~date. NCLC may redeem the ~~2026 Senior Unsecured~~2027 Secured Notes at its option, in whole or in part, at any time and from time to time on or after ~~December~~February 15, ~~2025,~~2024, at ~~a price equal to 100% of~~ the ~~principal amount of~~redemption prices set forth in the ~~notes~~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 ~~December~~February 15, ~~2022,~~

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2024, NCLC may choose to redeem up to 40% of the aggregate principal amount of the ~~2026 Senior Unsecured~~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 ~~2026 Senior~~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 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 2026 Senior Unsecured Notes issued remains outstanding following such redemption. The proceeds from the March 2021 issuance were used to repay the $230.0 million Pride of America Credit Facility and the remaining $222.6 million of the Jewel Credit Facility. The repayment of these debt agreements resulted in losses on extinguishment of debt of $1.1 million for the nine months ended September 30, 2021, which is recognized in interest expense, net.

In March 2021, NCL Finance, Ltd., an indirect, wholly-owned subsidiary of NCLH and NCLC, additionally conducted a private offering of $525.0 million aggregate principal amount of 6.125% senior unsecured notes due March 15, 2028 (the “2028 Senior Unsecured Notes”). The 2028 Senior Unsecured Notes pay interest at 6.125% per annum, semiannually on March 15 and September 15 of each year, to holders of record at the close of business on the immediately preceding March 1 and September 1, respectively. NCL Finance may redeem the 2028 Senior Unsecured Notes, in whole or part, at any time prior to December 15, 2027, at a price equal to 100% of the principal amount of the notes redeemed plus accrued and unpaid interest to, but excluding, the redemption date and a “make-whole premium.” NCL Finance may redeem the 2028 Senior Unsecured Notes, in whole or in part, on or after December 15, 2027, at a price equal to 100% of the principal amount of the notes plus accrued and unpaid interest to, but excluding, the redemption date. At any time and from time to time prior to March 15, 2024, NCL Finance may choose to redeem up to 40% of the aggregate principal amount of the 2028 Senior Unsecured Notes with the net proceeds of certain equity offerings, subject to certain restrictions, at a redemption price equal to 106.125% of the principal amount of the 2028 Senior 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 2028 Senior2029 Unsecured Notes issued remains outstanding following such redemption.

The indentures governing the ~~2026 Senior Unsecured~~2027 Secured Notes and ~~2028 Senior~~the 2029 Unsecured Notes include requirements that, among other things and subject to a number of qualifications and exceptions, restrict our ability and the ability of ~~NCLC and its~~our 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~~our assets.

In ~~November 2021, the Company executed~~February 2022, NCLC also conducted a $1 billion commitment through August 15, 2022 that provides additional liquidity to the Company. If drawn, this commitment will convert into an unsecured note paying interest at 8.0% per annum, semiannually, and maturingprivate offering (the “Exchangeable Notes Offering”) of $473.2 million in ~~April 2024. As of the date hereof, the Company has not drawn under this commitment.~~

~~Exchangeable Notes~~

~~In August 2020, the FASB issued ASU No. 2020-06,~~ Debt—Debt with Conversion and Other Options (Subtopic 470-20) and Derivatives and Hedging—Contracts in Entity’s Own Equity (Subtopic 815-40) Accounting for Convertible Instruments and Contracts in an Entity’s Own Equity (“ASU 2020-06”), which reduces the number of accounting models for convertible debt instruments and enhances transparency in disclosures. One model which is being eliminated is the bifurcation of embedded conversion features that are not accounted for separately as derivatives. Each of the 2024 Exchangeable Notes, 2025 Exchangeable Notes, and Private Exchangeable Notes (as defined below) contain or contained conversion options that may be settled with NCLH’s ordinary shares. As the options will be both indexed to and settled in ordinary shares of NCLH, they are accounted for separately as derivatives for NCLC. Due to the bifurcation of the options as derivatives, NCLC does not use one of the models that was eliminated, and the adoption of 2020-06 did not have a material effect.

~~NCLC has outstanding $862.5 million~~ aggregate principal amount of ~~6.00%~~2.5% exchangeable senior notes due ~~May~~February 15, ~~2024~~2027 (the ~~“2024~~“2027 2.5% Exchangeable Notes”). The ~~2024~~2027 2.5% Exchangeable Notes are guaranteed by NCLH on a senior basis. ~~Holders~~At their option, holders may exchange their ~~2024~~2027 2.5% Exchangeable Notes for, at ~~their option into redeemable preference~~the election of NCLC, cash, ordinary shares of ~~NCLC. Upon~~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 ~~the preference shares will be immediately and automatically exchanged, for each $1,000 principal amount of~~obligation solely in ordinary

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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, ~~2024~~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 ~~72.7273~~28.9765 ordinary shares per $1,000 principal amount of ~~2024~~2027 2.5% Exchangeable Notes (equivalent to an initial exchange price of approximately ~~$13.75~~$34.51 per ordinary share). The maximum exchange rate is ~~89.4454~~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 ~~2024~~2027 2.5% Exchangeable Notes pay interest at ~~6.00%~~2.5% per annum, semiannually on ~~May~~February 15 and ~~November~~August 15 of each year, to holders of record at the close of business on the immediately preceding ~~May 1 and November 1, respectively.~~

NCLC also has outstanding $450.0 million aggregate principal amount of 5.375% exchangeable senior notes due August 1, 2025 (the “2025 Exchangeable Notes”). The 2025 Exchangeable Notes are guaranteed by NCLH on a senior basis. Holders may exchange their 2025 Exchangeable Notes at their option into redeemable preference shares of NCLC. Upon exchange, the preference shares will be immediately and automatically exchanged, for each $1,000 principal amount of exchanged 2025 Exchangeable Notes, into a number of NCLH’s ordinary shares based on the exchange rate. The exchange rate will initially be 53.3333 ordinary shares per $1,000 principal amount of 2025 Exchangeable Notes (equivalent to an initial exchange price of approximately $18.75 per ordinary share). The maximum exchange rate is 66.6666 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 2025 Exchangeable Notes pay interest at 5.375% per annum, semiannually on February 1 and August 1, ~~of each year, to holders of record at the close of business on the immediately preceding January 15 and July 15,~~ respectively.

~~As of December 31, 2020,~~ NCLC ~~also had outstanding $414.3 million aggregate principal amount of exchangeable senior notes due June 1, 2026 (the “Private Exchangeable Notes”), which amount included interest that had accreted to~~has used, or will use, the ~~principal amount, which were held by an affiliate of L Catterton (the “Private Investor”). The Private~~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 ~~at a rate~~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 ~~7.0% per annum~~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 first year post-issuance (which accreted to the principal amount). Holders were able to exchange their Private Exchangeable Notes at their option into redeemable preference shares of NCLC. Upon exchange, the preference shares would be immediately and automatically exchanged, for each $1,000 principal amount of exchanged Private Exchangeable Notes, into a number of NCLH’s ordinary shares based on the exchange rate. The exchange rate was initially approximately 82.6446 ordinary shares per $1,000 principal amount of Private Exchangeable Notes (equivalent to an initial exchange price of $12.10 per ordinary share). The maximum exchange rate was 90.9090 and reflected 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.six months ended June 30, 2022.

In July 2022, the Company 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 ~~2021, NCLH completed~~31, 2023. Under the amended commitment, the Commitment Parties have agreed to purchase an ~~equity offering that resulted in 52,577,947 ordinary shares being issued for gross proceeds~~aggregate of ~~$1.6 billion. Approximately $1.0~~$1 billion of notes at NCLC’s option. NCLC has the ~~cash proceeds from~~option to make up to 2 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 ~~offering were used~~issue date (the “Unsecured Notes” and, together with the Secured Notes, the “Notes”). The Secured Notes must be issued prior to ~~repurchase~~ the ~~Private Exchangeable~~Unsecured Notes, and ~~extinguish~~ the ~~debt.~~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 ~~resulting loss on extinguishment was $236.0 million for~~Secured Notes will also be guaranteed by our subsidiaries that own the ~~nine months ended September 30, 2021, which is recognized in interest expense, net.~~property that secures the Secured Notes as well as certain additional 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 ~~convertible debt instruments~~exchangeable notes as of ~~September~~June 30, ~~2021~~2022 (in thousands):

Unamortized Debt

��

Discount,

Principal

including Deferred

Net Carrying

Fair Value


Amount

Financing Fees

Amount

Amount

Leveling
2024 Exchangeable Notes

$
862,500

$
(284,106)

$
578,394

$
1,838,514

Level 2
2025 Exchangeable Notes

450,000

(135,250)

314,750

777,285

Level 2

The remaining period over which the unamortized debt discount will be recognized as non-cash interest expense is 2.6 years and 3.8 years for the 2024 Exchangeable Notes and 2025 Exchangeable Notes, respectively.


			Unamortized Debt
			Discount,
	Principal		including Deferred		Net Carrying		Fair Value
	Amount		Financing Fees		Amount		Amount		Leveling
2024 Exchangeable Notes	$	146,601	$	(37,250)	$	109,351	$	157,902	Level 2
2025 Exchangeable Notes		450,000		(114,932)		335,068		423,477	Level 2
2027 1.125% Exchangeable Notes		1,150,000		(237,786)		912,214		738,323	Level 2
2027 2.5% Exchangeable Notes		473,175		(98,663)		374,512		323,595	Level 2

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The following is a summary of NCLC’s ~~convertible debt instruments~~exchangeable notes as of December 31, ~~2020~~2021 (in thousands):

Unamortized Debt

Discount,

Principal

including Deferred

Net Carrying

Fair Value


Amount

Financing Fees

Amount

Amount

Leveling
2024 Exchangeable Notes

$
862,500

$
(338,571)

$
523,929

$
1,812,975

Level 2
2025 Exchangeable Notes

450,000

(153,299)

296,701

772,412

Level 2
Private Exchangeable Notes

414,311

(399,366)

14,945

1,098,082

Level 2

~~In addition, we recognize debt conversion options within exchangeable notes. Refer to Note 8— “Fair Value Measurements and Derivatives.”~~


			Unamortized Debt
			Discount,
	Principal		including Deferred		Net Carrying		Fair Value
	Amount		Financing Fees		Amount		Amount		Leveling
2024 Exchangeable Notes	$	146,601	$	(44,772)	$	101,829	$	249,358	Level 2
2025 Exchangeable Notes		450,000		(128,603)		321,397		642,591	Level 2
2027 1.125% Exchangeable Notes		1,150,000		(259,380)		890,620		1,088,510	Level 2

The following provides a summary of the interest expense of NCLC’s ~~convertible debt instruments~~exchangeable notes (in thousands):

Three Months

Nine Months

Ended September 30, 2021

Ended September 30, 2021
Coupon interest

18,984

62,109
Amortization of discount and deferred financing fees

25,911

73,674
Total

$
44,895

$
135,783

Interest expense, including amortization of debt discounts and coupon interest, recognized related to the convertible debt instruments was $44.4 million and $62.9 million for the three and nine months ended September 30, 2020, respectively.


	Three Months Ended				Six Months Ended
	June 30,				June 30,
	2022		2021		2022		2021
Coupon interest	$	13,924	$	18,985	$	26,916	$	43,125
Amortization of discount and deferred financing fees		26,259		24,150		49,207		47,763
Total	$	40,183	$	43,135	$	76,123	$	90,888

The effective interest rate is ~~22.78%~~22.74%, 15.89%, 6.28% and ~~15.89%~~7.89% for the 2024 Exchangeable Notes, 2025 Exchangeable Notes, 2027 1.125% Exchangeable Notes and ~~2025~~2027 2.5% Exchangeable Notes, respectively.

Debt Repayments

The following are scheduled principal repayments on our long-term debt including finance lease obligations as of ~~September~~June 30, ~~2021~~2022 for each of the following periods (in thousands):


Year	Amount		Amount
Remainder of 2021	$	9,794
2022		866,626
Remainder of 2022			$	529,276
2023		933,399		937,406
2024		5,069,391		3,686,473
2025		1,063,107		1,070,738
2026				1,973,939
2027				3,024,927
Thereafter		4,659,587		2,201,918
Total	$	12,601,904	$	13,424,677

Debt Covenants

~~We have received~~During the year ended December 31, 2021, we amended certain financial and other debt ~~covenant waivers through December 31, 2022~~covenants and added new free liquidity requirements. ~~At September~~As of June 30, ~~2021,~~2022, taking into account such ~~waivers,~~amendments, we were in compliance with all of our debt covenants. If we do not continue to remain in compliance with our covenants, ~~including following the expiration of any current waivers,~~ we would have to seek additional amendments to or waivers of our covenants. However, no assurances can be made that such amendments or waivers would be approved by our lenders. Generally, if an event of default under any debt agreement occurs, then pursuant to cross default and/or cross acceleration clauses, substantially all of our outstanding

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debt and derivative contract payables could become due, and all debt and derivative contracts could be terminated, which would have a material adverse impact on our operations and liquidity.

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8. Fair Value Measurements and Derivatives

Fair value is defined as the price at which an orderly transaction to sell an asset or to transfer a liability would take place between market participants at the measurement date under current market conditions (that is, an exit price at the measurement date from the perspective of a market participant that holds the asset or owes the liability).

Fair Value Hierarchy

The following hierarchy for inputs used in measuring fair value should maximize the use of observable inputs and minimize the use of unobservable inputs by requiring that the most observable inputs be used when available:

Level 1 Quoted prices in active markets for identical assets or liabilities that are accessible at the measurement dates.

Level 2 Significant other observable inputs that are used by market participants in pricing the asset or liability based on market data obtained from independent sources.

Level 3 Significant unobservable inputs we believe market participants would use in pricing the asset or liability based on the best information available.

Derivatives

We are exposed to market risk attributable to changes in interest rates, foreign currency exchange rates and fuel prices. We attempt to minimize these risks through a combination of our normal operating and financing activities and through the use of derivatives. We assess whether derivatives used in hedging transactions are “highly effective” in offsetting changes in the cash flow of our hedged forecasted transactions. We use regression analysis for this hedge relationship and high effectiveness is achieved when a statistically valid relationship reflects a high degree of offset and correlation between the fair values of the derivative and the hedged forecasted transaction. Cash flows from the derivatives are classified in the same category as the cash flows from the underlying hedged transaction. If it is determined that the hedged forecasted transaction is no longer probable of occurring, then the amount recognized in accumulated other comprehensive income (loss) is released to earnings. There are no amounts excluded from the assessment of hedge effectiveness and there are no credit-risk-related contingent features in our derivative agreements. We monitor concentrations of credit risk associated with financial and other institutions with which we conduct significant business. Credit risk, including but not limited to counterparty non-performance under derivatives, is not considered significant, as we primarily conduct business with large, well-established financial institutions with which we have established relationships, and which have credit risks acceptable to us, or the credit risk is spread out among many creditors. We do not anticipate non-performance by any of our significant counterparties.

As of ~~September~~June 30, ~~2021,~~2022, we had fuel swaps, which are used to mitigate the financial impact of volatility of fuel prices pertaining to approximately ~~366~~286 thousand metric tons of our projected fuel purchases, maturing through December 31, 2023.

~~On January 1, 2021, our fuel swaps designated as hedges for marine gas oil maturing through December 31, 2021 were dedesignated as cash flow hedges.~~ As of ~~September~~June 30, ~~2021,~~2022, we had ~~in aggregate with previously dedesignated fuel swaps,~~ approximately ~~153~~173 thousand metric tons which were not designated as cash flow hedges maturing through December 31, ~~2022.~~2023.

As of ~~September~~June 30, ~~2021,~~2022, we had foreign currency forward contracts, matured foreign currency options and matured foreign currency collars which are used to mitigate the financial impact of volatility in foreign currency exchange rates related to our ship construction contracts denominated in euros. The notional amount of our hedged foreign currency forward contracts was ~~€2.3~~€2.5 billion, or ~~$2.7~~$2.6 billion based on the euro/U.S. dollar exchange rate as of ~~September~~June 30, ~~2021.~~2022.

During the three months ended June 30, 2022, we entered into foreign currency forward contracts used as economic hedges to mitigate the financial impact of volatility in foreign currency exchange rates related to our accrued ship construction payments denominated in euros. As of June 30, 2022, the notional amount of these foreign currency forward contracts was €0.3 billion, or $0.3 billion based on the euro/U.S. dollar exchange rate as of June 30, 2022.

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As of ~~September~~June 30, 2021, we had an interest rate swap, which is used to hedge our exposure to interest rate movements and manage our interest expense. The notional amount of our outstanding debt associated with the interest rate swap was $0.2 billion as of September 30, 2021.

~~As of September 30, 2021,~~2022, we had conversion options embedded in our exchangeable notes. The notional amounts of our outstanding options as of ~~September~~June 30, ~~2021~~2022 were ~~62.7~~10.7 million, 24.0 million, 34.1 million and ~~24.0~~13.7 million NCLH shares for the 2024 Exchangeable Notes, ~~and~~ 2025 Exchangeable Notes, 2027 1.125% Exchangeable Notes and 2027 2.5% Exchangeable Notes, respectively.

The derivatives measured at fair value and the respective location in the consolidated balance sheets include the following (in thousands):


		Assets				Liabilities					Assets				Liabilities
		September 30,		December 31,		September 30,		December 31,			June 30,		December 31,		June 30,		December 31,
	Balance Sheet Location	2021		2020		2021		2020		Balance Sheet Location	2022		2021		2022		2021
Derivative Contracts Designated as Hedging Instruments

Fuel contracts
	Prepaid expenses and other assets	$	20,852	$	—	$	—	$	—	Prepaid expenses and other assets	$	97,263	$	29,349	$	—	$	—
	Other long-term assets		22,324		—		—		—	Other long-term assets		33,093		19,554		—		—
	Accrued expenses and other liabilities		—		—		—		35,973
	Other long-term liabilities		—		—		—		28,947
Foreign currency contracts
	Prepaid expenses and other assets		819		5,779		—		—	Prepaid expenses and other assets		—		4,898		—		—
	Other long-term assets		10,898		43,250		—		—	Accrued expenses and other liabilities		—		—		322,523		98,592
	Accrued expenses and other liabilities		—		—		90,954		14,778	Other long-term liabilities		—		—		41,177		73,496
	Other long-term liabilities		2,410		6,821		56,775		44,938
Interest rate contracts
	Accrued expenses and other liabilities		—		—		1,281		6,776
	Other long-term liabilities		—		—		—		452	Accrued expenses and other liabilities		—		—		—		469
Total derivatives designated as hedging instruments		$	57,303	$	55,850	$	149,010	$	131,864		$	130,356	$	53,801	$	363,700	$	172,557

Derivative Contracts Not Designated as Hedging Instruments

Fuel contracts
	Prepaid expenses and other assets	$	12,283	$	—	$	—	$	—	Prepaid expenses and other assets	$	22,924	$	10,836	$	—	$	—
	Other long-term assets		1,873		—		—		—	Other long-term assets		6,790		3,476		44		—
	Accrued expenses and other liabilities		—		546		—		6,732
Foreign currency contracts
	Other long-term liabilities		—		—		—		3,534	Accrued expenses and other liabilities		—		—		11,277		—

Debt conversion options	Exchangeable notes		—		—		1,285,730		1,856,145	Exchangeable notes		—		—		158,786		487,671
Total derivatives not designated as hedging instruments		$	14,156	$	546	$	1,285,730	$	1,866,411		$	29,714	$	14,312	$	170,107	$	487,671
Total derivatives		$	71,459	$	56,396	$	1,434,740	$	1,998,275		$	160,070	$	68,113	$	533,807	$	660,228

The fair values of swap and forward contracts are determined based on inputs that are readily available in public markets or can be derived from information available in publicly quoted markets. The Company determines the value of options and collars utilizing option pricing models based on inputs that are either readily available in public markets or can be derived from information available in publicly quoted markets. The option pricing models used by the Company are industry standard models for valuing options and are used by the broker/dealer community. The inputs to the option pricing models are the option strike prices, underlying prices, risk-free rates of interest, time to expiration, and both historical and implied volatilities. The fair values of option contracts consider both the intrinsic value and any remaining time value associated with those derivatives that have not yet settled. The Company also considers counterparty credit risk and its own credit risk in its determination of all estimated fair values.

Our derivatives and financial instruments were categorized as Level 2 in the fair value hierarchy, and we had no derivatives or financial instruments categorized as Level 1 or Level 3. Our derivative contracts include rights of offset with our counterparties. We have elected to net certain assets and liabilities within counterparties when the rights of offset exist. We are not required to post cash collateral related to our derivative instruments.

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with our counterparties. We have elected to net certain assets and liabilities within counterparties when the rights of offset exist. We are not required to post cash collateral related to our derivative instruments.

The following table discloses the gross and net amounts recognized within assets and liabilities (in thousands):


			Gross				Gross						Gross				Gross
	Gross		Amounts		Total Net		Amounts				Gross		Amounts		Total Net		Amounts
September 30, 2021	Amounts		Offset		Amounts		Not Offset		Net Amounts
June 30, 2022											Amounts		Offset		Amounts		Not Offset		Net Amounts
Assets	$	69,049	$	—	$	69,049	$	(69,049)	$	—	$	160,070	$	(44)	$	160,026	$	—	$	160,026
Liabilities		1,434,740		(2,410)		1,432,330		(1,423,212)		9,118		533,763		—		533,763		(533,763)		—


			Gross				Gross						Gross				Gross
	Gross		Amounts		Total Net		Amounts				Gross		Amounts		Total Net		Amounts
December 31, 2020	Amounts		Offset		Amounts		Not Offset		Net Amounts
December 31, 2021											Amounts		Offset		Amounts		Not Offset		Net Amounts
Assets	$	49,029	$	—	$	49,029	$	(49,029)	$	—	$	68,113	$	—	$	68,113	$	(68,113)	$	—
Liabilities		1,998,275		(7,367)		1,990,908		(1,913,496)		77,412		660,228		—		660,228		(660,228)		—

The effects of cash flow hedge accounting on accumulated other comprehensive income (loss) were as follows (in thousands):


					Location of Gain									Location of Gain
					(Loss) Reclassified									(Loss) Reclassified
					from Accumulated	Amount of Gain (Loss) Reclassified								from Accumulated	Amount of Gain (Loss) Reclassified
	Amount of Gain (Loss)				Other Comprehensive	from Accumulated Other				Amount of Gain (Loss)				Other Comprehensive	from Accumulated Other
	Recognized in Other				Income (Loss) into	Comprehensive Income				Recognized in Other				Income (Loss) into	Comprehensive Income
Derivatives	Comprehensive Loss				Income (Expense)	(Loss) into Income (Expense)				Comprehensive Loss				Income (Expense)	(Loss) into Income (Expense)
	Three Months		Three Months			Three Months		Three Months		Three Months		Three Months			Three Months		Three Months
	Ended		Ended			Ended		Ended		Ended		Ended			Ended		Ended
	September 30, 2021		September 30, 2020			September 30, 2021		September 30, 2020		June 30, 2022		June 30, 2021			June 30, 2022		June 30, 2021
Fuel contracts	$	19,202	$	(10,958)	Fuel	$	(10,278)	$	(15,091)	$	52,249	$	25,456	Fuel	$	37,342	$	(8,652)
Fuel contracts		—		—	Other income (expense), net		(65)		(17,434)		—		—	Other income (expense), net		—		(1,538)
Foreign currency contracts		(64,306)		98,539	Depreciation and amortization		(1,267)		(1,267)		(142,752)		19,281	Depreciation and amortization		(1,267)		(1,266)
Interest rate contracts		(30)		129	Interest expense, net		(1,338)		(2,280)		—		(63)	Interest expense, net		—		(2,086)
Total gain (loss) recognized in other comprehensive loss	$	(45,134)	$	87,710		$	(12,948)	$	(36,072)	$	(90,503)	$	44,674		$	36,075	$	(13,542)

Location of Gain

(Loss) Reclassified

from Accumulated

Amount of Gain (Loss) Reclassified

Amount of Gain (Loss)

Other Comprehensive

from Accumulated Other

Recognized in Other

Income (Loss) into

Comprehensive Income
Derivatives

Comprehensive Loss

Income (Expense)

(Loss) into Income (Expense)

Nine Months

Nine Months

Nine Months

Nine Months

Ended

Ended

Ended

Ended

September 30, 2021

September 30, 2020


September 30, 2021

September 30, 2020
Fuel contracts

$
68,708

$
(181,666)

Fuel

$
(27,101)

$
(35,186)
Fuel contracts

—

—

Other income (expense), net

(11,793)

(43,718)
Foreign currency contracts

(142,466)

28,346

Depreciation and amortization

(3,800)

(3,662)
Interest rate contracts

261

(10,352)

Interest expense, net

(5,634)

(4,287)
Total gain (loss) recognized in other comprehensive loss

$
(73,497)

$
(163,672)



$
(48,328)

$
(86,853)

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~~The effects of cash flow hedge accounting on the consolidated statements of operations include the following (in thousands):~~

Three Months Ended September 30, 2021

Three Months Ended September 30, 2020




Depreciation







Depreciation




and

Interest

Other Income

and

Interest

Other Income

Fuel

Amortization

Expense, net

(Expense), net

Fuel

Amortization

Expense, net

(Expense), net
Total amounts of income and expense line items presented in the consolidated statements of operations in which the effects of cash flow hedges are recorded

$
79,238

$
173,289

$
184,524

$
226,442

$
48,224

$
177,488

$
154,501

$
(89,005)
















Amount of gain (loss) reclassified from accumulated other comprehensive income (loss) into income (expense)
















Fuel contracts

(10,278)

—

—

—

(15,091)

—

—

—
Foreign currency contracts

—

(1,267)

—

—

—

(1,267)

—

—
Interest rate contracts

—

—

(1,338)

—

—

—

(2,280)

—

Amount of gain (loss) reclassified from accumulated other comprehensive income (loss) into income (expense) as a result that a forecasted transaction is no longer probable of occurring

Fuel contracts

—

—

—

(65)

—

—

—

(17,434)

Amount of gain recognized in income as a result of failing effectiveness tests

Fuel contracts

—

—

—

—

—

—

—

5,507


					Location of Gain
					(Loss) Reclassified
					from Accumulated	Amount of Gain (Loss) Reclassified
	Amount of Gain (Loss)				Other Comprehensive	from Accumulated Other
	Recognized in Other				Income (Loss) into	Comprehensive Income
Derivatives	Comprehensive Loss				Income (Expense)	(Loss) into Income (Expense)
	Six Months		Six Months			Six Months		Six Months
	Ended		Ended			Ended		Ended
	June 30, 2022		June 30, 2021			June 30, 2022		June 30, 2021
Fuel contracts	$	144,732	$	49,506	Fuel	$	46,151	$	(16,823)
Fuel contracts		—		—	Other income (expense), net		—		(11,728)
Foreign currency contracts		(195,931)		(78,160)	Depreciation and amortization		(2,534)		(2,533)
Interest rate contracts		—		291	Interest expense, net		(40)		(4,296)
Total gain (loss) recognized in other comprehensive loss	$	(51,199)	$	(28,363)		$	43,577	$	(35,380)

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Nine Months Ended September 30, 2021

Nine Months Ended September 30, 2020



Depreciation

Depreciation

and

Interest

Other Income

and

Interest

Other Income

Fuel

Amortization

Expense, net

(Expense), net

Fuel

Amortization

Expense, net

(Expense), net
Total amounts of income and expense line items presented in the consolidated statements of operations in which the effects of cash flow hedges are recorded

$
175,931

$
517,867

$
824,304

$
(145,450)

$
222,240

$
554,937

$
343,993

$
(325,412)
















Amount of gain (loss) reclassified from accumulated other comprehensive income (loss) into income (expense)
















Fuel contracts

(27,101)

—

—

—

(35,186)

—

—

—
Foreign currency contracts

—

(3,800)

—

—

—

(3,662)

—

—
Interest rate contracts

—

—

(5,634)

—

—

—

(4,287)

—

Amount of gain (loss) reclassified from accumulated other comprehensive income (loss) into income (expense) as a result that a forecasted transaction is no longer probable of occurring

Fuel contracts

—

—

—

(11,793)

—

—

—

(43,718)

Amount of gain recognized in income as a result of failing effectiveness tests

Fuel contracts

—

—

—

—

—

—

—

5,507

The effects of cash flow hedge accounting on the consolidated statements of operations include the following (in thousands):


	Three Months Ended June 30, 2022						Three Months Ended June 30, 2021
			Depreciation						Depreciation
			and		Interest				and		Interest		Other Income
	Fuel		Amortization		Expense, net		Fuel		Amortization		Expense, net		(Expense), net
Total amounts of income and expense line items presented in the consolidated statements of operations in which the effects of cash flow hedges are recorded	$	181,189	$	181,587	$	167,805	$	54,090	$	174,262	$	179,448	$	(82,627)

Amount of gain (loss) reclassified from accumulated other comprehensive income (loss) into income (expense)
Fuel contracts		37,342		—		—		(8,652)		—		—		—
Foreign currency contracts		—		(1,267)		—		—		(1,266)		—		—
Interest rate contracts		—		—		—		—		—		(2,086)		—

Amount of gain (loss) reclassified from accumulated other comprehensive income (loss) into income (expense) as a result that a forecasted transaction is no longer probable of occurring
Fuel contracts		—		—		—		—		—		—		(1,538)


	Six Months Ended June 30, 2022						Six Months Ended June 30, 2021
			Depreciation						Depreciation
			and		Interest				and		Interest		Other Income
	Fuel		Amortization		Expense, net		Fuel		Amortization		Expense, net		(Expense), net
Total amounts of income and expense line items presented in the consolidated statements of operations in which the effects of cash flow hedges are recorded	$	316,698	$	360,663	$	516,129	$	96,693	$	344,578	$	639,780	$	(371,892)

Amount of gain (loss) reclassified from accumulated other comprehensive income (loss) into income (expense)
Fuel contracts		46,151		—		—		(16,823)		—		—		—
Foreign currency contracts		—		(2,534)		—		—		(2,533)		—		—
Interest rate contracts		—		—		(40)		—		—		(4,296)		—

Amount of gain (loss) reclassified from accumulated other comprehensive income (loss) into income (expense) as a result that a forecasted transaction is no longer probable of occurring
Fuel contracts		—		—		—		—		—		—		(11,728)

The effects of derivatives not designated as hedging instruments on the consolidated statements of operations include the following (in thousands):


		Amount of Gain (Loss) Recognized in Income									Amount of Gain (Loss) Recognized in Income
		Three Months Ended				Nine Months Ended					Three Months Ended				Six Months Ended
		September 30,				September 30,					June 30,				June 30,
	Location of Gain (Loss)	2021		2020		2021		2020		Location of Gain (Loss)	2022		2021		2022		2021
Derivatives not designated as hedging instruments
Fuel contracts	Other income (expense), net	$	7,398	$	(17)	$	57,505	$	3,629	Other income (expense), net	$	4,335	$	17,935	$	34,078	$	50,107
Foreign currency contracts										Other income (expense), net		(11,856)		(57)		(11,856)		(57)
Debt conversion options	Other income (expense), net		221,722		(65,225)		(202,914)		(280,850)	Other income (expense), net		488,759		(108,127)		421,760		(424,636)

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Long-Term Debt

~~Long-Term Debt~~

As of ~~September~~June 30, ~~2021~~2022 and December 31, ~~2020,~~2021, the fair value of our long-term debt, including the current portion, was ~~$14.2~~$11.6 billion and $12.5 billion, respectively, which was ~~$0.7~~$1.5 billion ~~higher~~ and ~~$1.0~~$0.2 billion ~~higher,~~lower, respectively, than the carrying values, excluding deferred financing costs. The difference between the fair value and carrying value of our long-term debt is due to our fixed and variable rate debt obligations carrying interest rates that are above or below market rates at the measurement dates. The fair value of our long-term revolving and term loan facilities was calculated based on estimated rates for the same or similar instruments with similar terms and remaining maturities. The fair value of our exchangeable

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notes considers observable risk-free rates; credit spreads of the same or similar instruments; and share prices, tenors, and historical and implied volatilities which are sourced from observable market data. The inputs are considered to be Level 2 in the fair value hierarchy. Market risk associated with our long-term variable rate debt is the potential increase in interest expense from an increase in interest rates or from an increase in share values.

Other

The carrying amounts reported in the consolidated balance sheets of all other financial assets and liabilities approximate fair value.

9. Employee Benefits and Compensation Plans

In January 2013, NCLH adopted the 2013 Performance Incentive Plan, which provided for the issuance of up to 15,035,106 of NCLH’s ordinary shares pursuant to awards granted under the plan. In May 2016 and May 2021, the plan was amended and restated (“Restated 2013 Plan”) pursuant to approval from ~~NCLH’s~~the Board of Directors and NCLH’s shareholders. Among other things, under the Restated 2013 Plan, the number of NCLH’s ordinary shares that may be delivered pursuant to all awards granted under the plan was increased ~~by an additional 12,430,000 shares~~ to a ~~new~~ maximum aggregate limit of ~~27,465,106~~32,375,106 shares. In ~~May 2021,~~June 2022, NCLH’s shareholders approved a further amendment and restatement of the Restated 2013 Plan ~~was further amended and restated~~ to increase the number of NCLH ordinary shares that may be delivered by ~~4,910,000 shares~~7,000,000, resulting in an increase in the maximum aggregate limit to ~~32,375,106~~39,375,106 shares.

~~Share Option Awards~~

~~The following is a summary of option activity under NCLH’s Restated 2013 Plan for the nine months ended September 30, 2021:~~

Weighted-

Number of Share Option Awards

Weighted-Average Exercise Price

Average

Aggregate


Time-

Performance-

Market-

Time-

Performance-

Market-

Contractual

Intrinsic

Based

Based

Based

Based

Based

Based

Term

Value

Awards

Awards

Awards

Awards

Awards

Awards

(years)

(in thousands)
Outstanding as of January 1, 2021

4,525,207

114,583

208,333

$
51.96

$
59.43

$
59.43

4.42

$
—
Forfeited and cancelled

(96,862)

—

—

52.49

—

—


Outstanding as of September 30, 2021

4,428,345

114,583

208,333

51.95

59.43

59.43

3.68

—

Restricted Share Unit Awards

In ~~June 2021,~~March 2022, NCLH granted ~~3.1~~4.8 million time-based restricted share unit awards to our employees, which primarily vest in substantially equal installments ~~each March 1~~ over three years. Additionally, in ~~June 2021,~~March 2022, NCLH granted ~~0.7~~1.9 million performance-based restricted share units to certain members of our management team, which vest upon the achievement of certain pre-established performance targets established through ~~2023~~2024 and the satisfaction of an additional time-based vesting requirement that generally requires continued employment through March 1, ~~2024.~~2025.

The following is a summary of NCLH restricted share unit activity for the ~~nine~~six months ended ~~September~~June 30, ~~2021:~~2022:


	Number of	Weighted-		Number of	Weighted-		Number of	Weighted-		Number of	Weighted-		Number of	Weighted-		Number of	Weighted-
	Time-Based	Average Grant		Performance-	Average Grant		Market-	Average Grant		Time-Based	Average Grant		Performance-	Average Grant		Market-	Average Grant
	Awards	Date Fair Value		Based Awards	Date Fair Value		Based Awards	Date Fair Value		Awards	Date Fair Value		Based Awards	Date Fair Value		Based Awards	Date Fair Value
Non-vested as of January 1, 2021	6,663,925	$	30.54	1,565,184	$	39.42	50,000	$	59.43
Non-vested as of January 1, 2022										7,771,623	$	27.02	1,841,113	$	35.68	50,000	$	59.43
Granted	3,135,993		30.89	736,898		40.89	—		—	4,890,659		18.56	1,857,750		18.48	—		—
Vested	(1,746,838)		47.01	(460,969)		56.73	—		—	(2,553,746)		36.06	(186,339)		55.27	—		—
Forfeited or expired	(225,752)		28.71	—		—	—		—	(175,506)		22.96	(292,043)		35.59	—		—
Non-vested as of September 30, 2021	7,827,328		27.05	1,841,113		35.68	50,000		59.43
Non-vested as of June 30, 2022										9,933,030		20.61	3,220,481		24.63	50,000		59.43

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The compensation expense recognized for share-based compensation for the periods presented include the following (in thousands):


	Three Months Ended				Nine Months Ended				Three Months Ended				Six Months Ended
	September 30,				September 30,				June 30,				June 30,
	2021		2020		2021		2020		2022		2021		2022		2021
Payroll and related expense	$	6,525	$	5,483	$	16,225	$	15,214	$	5,732	$	4,735	$	11,936	$	9,700
Marketing, general and administrative expense		33,397		20,379		72,749		65,795		24,316		17,716		50,904		39,352
Total share-based compensation expense	$	39,922	$	25,862	$	88,974	$	81,009	$	30,048	$	22,451	$	62,840	$	49,052

10. Commitments and Contingencies

Ship Construction Contracts

~~Project Leonardo will introduce an~~For the Norwegian brand, the first Prima Class Ship, Norwegian Prima, at approximately 143,500 Gross Tons and with 3,100 Berths, was delivered in July 2022. We refer you to Note 14 – “Subsequent Event” for additional ~~6 ships,~~information. We have 5 additional Prima Class Ships on order, each ranging from approximately ~~140,000~~143,500 to 156,300 Gross Tons with approximately ~~3,215~~3,100 to 3,550 Berths, with expected delivery dates from ~~2022~~2023 through 2027. For the Regent brand, we have an order for 1 Explorer Class Ship to be delivered in 2023, which will be approximately 55,000 Gross Tons and 750 Berths. For the Oceania Cruises brand, we have orders for 2 Allura Class Ships to be delivered in 2023 and 2025. Each of the Allura Class Ships will be approximately 67,000 Gross Tons and 1,200 Berths. The impacts of COVID-19 on the shipyards where our ships are under construction (or will be constructed) have resulted in some delays in expected ship deliveries, and the impacts of COVID-19, ~~could~~Russia’s invasion of Ukraine and/or other macroeconomic events are expected to result in additional delays in ship deliveries in the future, which may be prolonged.

The combined contract prices of the 9 ships on order for delivery, including Norwegian Prima, as of ~~September~~June 30, ~~2021~~2022 was approximately ~~€7.6~~€7.7 billion, or ~~$8.8~~$8.1 billion based on the euro/U.S. dollar exchange rate as of ~~September~~June 30, ~~2021.~~2022. We have obtained export credit financing which is expected to fund approximately 80% of the contract price of each ship, subject to certain conditions. We do not anticipate any contractual breaches or cancellations to occur. However, if any such events were to occur, it could result in, among other things, the forfeiture of prior deposits or payments made by us and potential claims and impairment losses which may materially impact our business, financial condition and results of operations.

Litigation

~~Class Actions~~

On March 12, 2020, a class action complaint, Eric Douglas v. Norwegian Cruise Lines, Frank J. Del Rio and Mark A. Kempa, Case No. 1:20-CV-21107, was filed in the United States District Court for the Southern District of Florida, naming the Company, Frank J. Del Rio, the Company’s President and Chief Executive Officer, and Mark A. Kempa, the Company’s Executive Vice President and Chief Financial Officer, as defendants. Subsequently, 2 similar class action complaints were also filed in the United States District Court for the Southern District of Florida naming the same defendants. On July 31, 2020, a consolidated amended class action complaint was filed by lead plaintiff’s counsel. The complaint asserted claims, purportedly brought on behalf of a class of shareholders, under Sections 10(b) and 20(a) of the Securities Exchange Act of 1934, and Rule 10b-5 promulgated thereunder, and alleged that the Company made false and misleading statements to the market and customers about COVID-19. The complaint sought unspecified damages and an award of costs and expenses, including reasonable attorneys’ fees, on behalf of a purported class of purchasers of our ordinary shares between February 20, 2020 and March 10, 2020. On April 10, 2021, the case was dismissed and closed, and the plaintiffs no longer have the right to appeal.

Investigations

In March 2020, the Florida Attorney General announced an investigation related to the Company’s marketing during the COVID-19 pandemic. Following the announcement of the investigation by the Florida Attorney General, we received notifications from other attorneys general and governmental agencies that they are conducting similar investigations. The Company is cooperating with these ongoing investigations, the outcomes of which cannot be predicted at this time.

~~Table of Contents~~

Helms-Burton Act

On August 27, 2019, 2 lawsuits were filed against ~~NCLH~~Norwegian Cruise Line Holdings Ltd. in the United States District Court for the Southern District of Florida under Title III of the Cuban Liberty and Solidarity (Libertad) Act of 1996, also known as the Helms-Burton Act. The complaint filed by Havana Docks Corporation (the “Havana Docks Matter”) alleges it holds an interest in the Havana Cruise Port Terminal and the complaint filed by Javier Garcia-Bengochea (the “Garcia-Bengochea Matter”) alleges that he holds an interest in the Port of Santiago, Cuba, both of which were expropriated by the Cuban Government. The complaints further allege that the Company “trafficked” in those properties by embarking and disembarking passengers at these ~~facilities.~~facilities, as well as profiting from the Cuban Government’s possession of the property. The plaintiffs seek all available statutory remedies, including the value of the expropriated property, plus interest, treble damages, attorneys’ fees and costs. On January 7, 2020, the United States District Court for

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the Southern District of Florida dismissed the claim by Havana Docks Corporation. On April 14, 2020, the district court granted Havana Docks Corporation’s motion to reconsider and vacated its order dismissing the claim, allowing Havana Docks Corporation to file an amended complaint on April 16, 2020. On April 24, 2020, we filed a motion seeking permission to appeal the district court’s order which was subsequently denied. Discovery in the Havana Docks Matter has now concluded and appropriate motions for summary ~~judgement have been~~judgment were filed. ~~Trial for~~On March 21, 2022, the court in the Havana Docks Matter isissued an order granting the plaintiff’s motion for summary judgment on the issue of liability and scheduled a trial on damages only for ~~March~~September 2022, which was subsequently delayed until November 2022. The Company filed a motion for interlocutory appeal seeking to have the appellate court review the district court’s order granting summary judgment which was subsequently denied. On September 1, 2020, the ~~Court~~court in the Garcia-Bengochea Matter entered an order staying all case deadlines and administratively closed the ~~Garcia-Bengochea Matter~~case pending the outcome of ~~the~~an appeal in a related case brought by the same plaintiff. We believe we have meritorious defenses to the claims and intend to vigorously defend these matters. As of ~~September~~June 30, ~~2021,~~2022, we are unable to reasonably estimate any potential ~~contingent~~ loss or range of losses from these ~~matters due~~matters. The ability to amake such estimates and judgments can be affected by various factors including, among other things: lack of legal ~~precedent.~~precedent, stage of the proceedings, legal uncertainties inherent within the litigation process and involvement of numerous parties. However, if the plaintiffs prevail in the final outcome of these matters, there may be a material adverse impact on the Company’s financial condition or results of operations and cash flows.

Other

In the normal course of our business, various other claims and lawsuits have been filed or are pending against us. Most of these claims and lawsuits are covered by insurance and, accordingly, the maximum amount of our liability is typically limited to our deductible amount.

Nonetheless, the ultimate outcome of these claims and lawsuits that are not covered by insurance cannot be determined at this time. We have evaluated our overall exposure with respect to all of our threatened and pending litigation and, to the extent required, we have accrued amounts for all estimable probable losses associated with our deemed exposure. We are currently unable to estimate any other potential ~~contingent~~ losses beyond those accrued, as discovery is not complete nor is adequate information available to estimate such range of loss or potential recovery. However, based on our current knowledge, we do not believe that the aggregate amount or range of reasonably possible losses with respect to these matters will be material to our consolidated results of operations, financial condition or cash flows. We intend to vigorously defend our legal position on all claims and, to the extent necessary, seek recovery.

Other Contingencies

The Company also has agreements with its credit card processors that govern approximately ~~$1.5~~$2.1 billion in advance ticket sales at ~~September~~June 30, ~~2021~~2022 that have 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. Although the agreements vary, these requirements may generally be satisfied either through a percentage of customer payments withheld or providing cash funds directly to the card processor. Any cash reserve or collateral requested could be increased or decreased. As of ~~September~~June 30, ~~2021,~~2022, we had cash reserves of approximately ~~$1.2~~$1.0 billion with credit card processors, of which approximately $455.4 million is recognized in accounts receivable, net orand approximately $508.2 million in other long-term assets. ~~Subsequent to September~~As of June 30, ~~2021, $388.3 million in~~2022, a portion of the cash reserves ~~have been released~~is classified as long-term due to ~~the Company.~~a change in terms to a static reserve, as currently required by a credit card processor, subject to periodic review. We may be required to pledge additional collateral and/or post additional cash reserves or take other actions that may further reduce our liquidity.

11. Other Income (Expense), Net

For the three months ended ~~September~~June 30, ~~2021~~2022 and ~~2020,~~2021, other income (expense), net was income of ~~$226.4~~$519.7 million and expense of ~~$89.0~~$82.6 million, respectively, and for the ~~nine~~six months ended ~~September~~June 30, 2022 and 2021, was income of $490.9 million and ~~2020, was~~ expense of $371.9 million, respectively, primarily due to net gains and losses from conversion options on our exchangeable notes.

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~~$145.5 million and $325.4 million, respectively, primarily due to gains and losses from conversion options on our exchangeable notes.~~

12. Supplemental Cash Flow Information

For the ~~nine~~six months ended ~~September~~June 30, ~~2021~~2022 and ~~2020,~~2021, we had non-cash investing activities consisting of changes in accruals related to property and equipment of ~~$64.6~~$145.5 million and ~~$29.1~~$49.1 million, respectively.

13. Related Party Disclosures

NCLC, as issuer, NCLH, as guarantor, and U.S. Bank National Association, as trustee were all parties to an indenture, dated May 28, 2020 (the “Indenture”) related to the Private Exchangeable Notes, which were held by ~~the Private Investor. The terms~~an affiliate of ~~the Private Exchangeable Notes are more fully described under Note 7 — “Long-Term Debt”~~L Catterton (the “Private Investor”). Based on the initial exchange rate for the Private Exchangeable Notes, the Private Investor beneficially owned approximately 10% of NCLH’s outstanding ordinary shares as of December 31, 2020. The initial exchange rate for the Private Exchangeable Notes could have been adjusted in the event of certain make-whole fundamental changes or tax redemption events (each, as described in the Indenture), but the maximum number of NCLH ordinary shares issuable upon an exchange in the event of such an adjustment would not have exceeded ~~46,577,947~~.46,577,947. The Private Exchangeable Notes also contained certain anti-dilution provisions that could have subjected the exchange rate to additional adjustment if certain events had occurred.

NCLH, NCLC and the Private Investor also entered into an investor rights agreement dated May 28, 2020 (the “Investor Rights Agreement”), which provided that, among other things, the Private Investor was entitled to nominate one person for appointment to the board of directors of NCLH until the first date on which the Private Investor no longer beneficially owned in the aggregate at least 50% of the number of NCLH’s ordinary shares issuable upon exchange of the Private Exchangeable Notes beneficially owned by the Private Investor in the aggregate as of May 28, 2020 (subject to certain adjustments).

The Investor Rights Agreement also provided for customary registration rights for the Private Investor and its affiliates, including demand and piggyback registration rights, contained customary transfer restrictions and provided that the Private Investor and its affiliates were subject to a voting agreement with respect to certain matters during a specified period of time.

In a privately negotiated transaction among NCLH, NCLC and the Private Investor, NCLC agreed to repurchase all of the outstanding Private Exchangeable Notes for an aggregate repurchase price of approximately $1.0 billion (the “Repurchase”). On March 9, 2021, in connection with the settlement of the Repurchase, the trustee cancelled the aggregate principal amount outstanding under the Private Exchangeable Notes and confirmed that NCLC had satisfied and discharged its obligations under the Indenture. In connection with the Repurchase, we and the Private Investor agreed to terminate the Investor Rights Agreement effective upon the consummation of the Repurchase. Notwithstanding the termination, we and the Private Investor agreed that certain provisions related to indemnification and expense reimbursement would survive in accordance with their terms.

14. Subsequent Event

In July 2022, we took delivery of Norwegian Prima. We had export credit financing in place for 80% of the contract price. The associated $1.1 billion term loan bears interest at a fixed rate of 2.68% with a maturity date of July 31, 2034. Principal and interest payments are payable semiannually.

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Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations

Cautionary Statement Concerning Forward-Looking Statements

Some of the statements, estimates or projections contained in this report are “forward-looking statements” within the meaning of the U.S. 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 ~~suspension of certain cruise voyages, our ability to weather~~expectations regarding the impacts of the COVID-19 pandemic, Russia’s invasion of Ukraine and general macroeconomic conditions, our expectations regarding ~~the resumption of~~ cruise ~~voyages and the timing for such resumption of cruise voyages,~~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. 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. Forward-looking statements do not guarantee future performance and may involve risks, uncertainties and other factors which could cause our actual results, performance or achievements to differ materially from the future results, performance or achievements expressed or implied in those forward-looking statements. Examples of these risks, uncertainties and other factors include, but are not limited to the impact of:

●

the spread of epidemics, pandemics and viral outbreaks and specifically, the COVID-19 pandemic, including its effect on the ability or desire of people to travel (including on cruises), which are expected to continue to adversely impact our results, operations, outlook, plans, goals, growth, reputation, cash flows, liquidity, demand for voyages and share price;

●

our ability to comply with the United States Centers for Disease Control and Prevention’s (“CDC”) Conditional Order and any additional or future regulatory restrictions on our operations and to otherwise develop enhanced health and safety protocols to adapt to the pandemic’s unique challenges;

●

~~legislation prohibiting companies from verifying vaccination status;~~

●

coordination and cooperation with the CDC, the federal government and global public health authorities to take precautions to protect the health, safety and security of guests, crew and the communities visited and the implementation of any such precautions;

●

our ability to work with lenders and others or otherwise pursue options to defer, renegotiate, refinance or restructure our existing debt profile, near-term debt amortization, newbuild related payments and other obligations and to work with credit card processors to satisfy current or potential future demands for collateral on cash advanced from customers relating to future cruises;

●

~~our need for additional financing or financing to optimize our balance sheet, which may not be available on favorable terms, or at all, and may be dilutive to existing shareholders;~~

●

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

●

~~the accuracy of any appraisals of our assets as a result of the impact of the COVID-19 pandemic or otherwise;~~

●

~~our success in controlling operating expenses and capital expenditures;~~

the spread of epidemics, pandemics and viral outbreaks, including the COVID-19 pandemic, and their effect on the ability or desire of people to travel (including on cruises), which is expected to continue to adversely impact our results, operations, outlook, plans, goals, growth, reputation, cash flows, liquidity, demand for voyages and share price;

29implementing precautions in coordination with regulators and global public health authorities to protect the health, safety and security of guests, crew and the communities we visit and to comply with regulatory restrictions related to the pandemic;

legislation prohibiting companies from verifying vaccination status;

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

our need for additional financing or financing to optimize our balance sheet, which may not be available on favorable terms, or at all, and our outstanding exchangeable notes and any future financing which may be dilutive to existing shareholders;

the unavailability of ports of call;

future increases in the price of, or major changes or reduction in, commercial airline services;

changes involving the tax and environmental regulatory regimes in which we operate, including new regulations aimed at reducing greenhouse gas emissions;

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●

~~our guests’ election to take cash refunds in lieu of future cruise credits or the continuation of any trends relating to such election;~~

●

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

●

~~the unavailability of ports of call;~~

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~~future increases in the price of, or major changes or reduction in, commercial airline services;~~

●

~~adverse events impacting the security of travel, such as terrorist acts, armed conflict and threats thereof, acts of piracy, and other international events;~~

●

~~adverse incidents involving cruise ships;~~

●

adverse general economic and related factors, such as fluctuating or increasing levels of unemployment, underemployment and the volatility of fuel prices, declines in the securities and real estate markets, and perceptions of these conditions that decrease the level of disposable income of consumers or consumer confidence;

●

~~any further impairment of our trademarks, trade names or goodwill;~~

●

~~breaches in data security or other disturbances to our information technology and other networks or our actual or perceived failure to comply with requirements regarding data privacy and protection;~~

the accuracy of any appraisals of our assets as a result of the impact of the COVID-19 pandemic or otherwise;

●

~~changes in fuel prices and the type of fuel we are permitted to use and/or other cruise operating costs;~~

●

~~mechanical malfunctions and repairs, delays in our shipbuilding program, maintenance and refurbishments and the consolidation of qualified shipyard facilities;~~

●

~~the risks and increased costs associated with operating internationally;~~

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~~fluctuations in foreign currency exchange rates;~~

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~~overcapacity in key markets or globally;~~

●

~~our expansion into and investments in new markets;~~

●

~~our inability to obtain adequate insurance coverage;~~

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~~pending or threatened litigation, investigations and enforcement actions;~~

●

volatility and disruptions in the global credit and financial markets, which may adversely affect our ability to borrow and could increase our counterparty credit risks, including those under our credit facilities, derivatives, contingent obligations, insurance contracts and new ship progress payment guarantees;

●

~~our inability to recruit or retain qualified personnel or the loss of key personnel or employee relations issues;~~

●

~~our reliance on third parties to provide hotel management services for certain ships and certain other services;~~

●

~~our inability to keep pace with developments in technology;~~

~~Table of Contents~~our success in controlling operating expenses and capital expenditures;

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~~changes involving the tax and environmental regulatory regimes in which we operate; and~~

●

other factors set forth under “Risk Factors” herein and in our Annual Report on Form 10-K for the year ended December 31, 2020, filed with the SEC on February 26, 2021 (“Annual Report on Form 10-K”).

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, such as terrorist acts, armed conflict, such as Russia’s invasion of Ukraine, and threats thereof, acts of piracy, and other international events;

adverse incidents involving cruise ships;

adverse general economic and related factors, including as a result of the impact of the COVID-19 pandemic, Russia’s invasion of Ukraine or otherwise, such as fluctuating or increasing levels of interest rates, inflation, unemployment, underemployment and the volatility of fuel prices, declines in the securities and real estate markets, and perceptions of these conditions that decrease the level of disposable income of consumers or consumer confidence;

breaches in data security or other disturbances to our information technology and other networks or our actual or perceived failure to comply with requirements regarding data privacy and protection;

changes in fuel prices and the type of fuel we are permitted to use and/or other cruise operating costs;

mechanical malfunctions and repairs, delays in our shipbuilding program, maintenance and refurbishments and the consolidation of qualified shipyard facilities;

the risks and increased costs associated with operating internationally;

our inability to recruit or retain qualified personnel or the loss of key personnel or employee relations issues;

our inability to obtain adequate insurance coverage;

pending or threatened litigation, investigations and enforcement actions;

any further impairment of our trademarks, trade names or goodwill;

our reliance on third parties to provide hotel management services for certain ships and certain other services;

fluctuations in foreign currency exchange rates;

our expansion into new markets and investments in new markets and land-based destination projects;

overcapacity in key markets or globally; and

other factors set forth under “Risk Factors” herein and in our Annual Report on Form 10 K for the year ended December 31, 2021, filed with the SEC on March 1, 2022 (“Annual Report on Form 10 K”).

Additionally, many of these risks and uncertainties are currently amplified by and will continue to be amplified by, or in the future may be amplified by, the COVID-19 ~~pandemic.~~pandemic, Russia’s invasion of Ukraine and the impact of general

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macroeconomic conditions. It is not possible to predict or identify all such risks. There may be additional risks that we consider immaterial or which are unknown.

In addition, some of our executive officers and directors have not sold their shares in NCLH since the beginning of the COVID-19 pandemic as a gesture of support for our Company as they navigated us through unprecedented challenges. Now that we have resumed operations, we anticipate that our executive officers and directors may sell NCLH shares under Rule 10b5-1 plans beginning in the first quarter of 2022 as part of their ordinary course financial planning.

The above examples are not exhaustive and new risks emerge from time to time. Such forward-looking statements are based on our current beliefs, assumptions, expectations, estimates and projections regarding our present and future business strategies and the environment in which we expect to operate in the future. These forward-looking statements speak only as of the date made. We expressly disclaim any obligation or undertaking to release publicly any updates or revisions to any forward-looking statement to reflect any change in our expectations with regard thereto or any change of events, conditions or circumstances on which any such statement was based, except as required by law.

Terminology

This report includes certain non-GAAP financial measures, such as Adjusted Gross Margin, Net Cruise Cost, Adjusted Net Cruise Cost Excluding Fuel, Adjusted EBITDA and Adjusted Net Loss. Definitions of these non- GAAP financial measures are included below. For further information about our non-GAAP financial measures including detailed adjustments made in calculation our non-GAAP financial measures and a reconciliation to the most directly comparable GAAP financial measure, we refer you to “Results of Operations” below.

Unless otherwise indicated in this report, the following terms have the meanings set forth below:

●

~~Acquisition~~2024 Exchangeable Notes. On May 8, 2020, pursuant to an indenture among NCLC, as issuer, NCLH, as guarantor, and U.S. Bank National Association, as trustee, NCLC issued $862.5 million aggregate principal amount of ~~Prestige.~~exchangeable senior notes due 2024.

●

2024 Senior Secured Notes. InOn May 14, 2020, pursuant to an indenture among NCLC, as issuer, the guarantors party thereto, and U.S. Bank National Association, as trustee and security agent, NCLC issued $675.0 million aggregate principal amount of 12.25% senior secured notes due 2024.

●

2025 Exchangeable Notes. On July 21, 2020, pursuant to an indenture among NCLC, as issuer, NCLH, as guarantor, and U.S. Bank National Association, as trustee, NCLC issued $450.0 million aggregate principal amount of exchangeable senior notes due 2025.

●

2026 Senior Secured Notes. On July 21, 2020, pursuant to an indenture among NCLC, as issuer, the guarantors party thereto, and U.S. Bank National Association, as trustee and security agent, NCLC issued $750.0 million aggregate principal amount of 10.25% senior secured notes due 2026.

●

2027 1.125% Exchangeable Notes. On November ~~2014, we acquired Prestige in a cash~~19, 2021, pursuant to an indenture among NCLC, as issuer, NCLH, as guarantor, and ~~stock transaction for total consideration~~U.S. Bank National Association, as trustee, NCLC issued $1,150.0 million aggregate principal amount of ~~$3.025 billion, including the assumption of debt.~~exchangeable senior notes due 2027.

●

Adjusted EBITDA. EBITDA adjusted for other income (expense), net and other supplemental adjustments.

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Adjusted Gross Margin. Gross margin adjusted for payroll and related, fuel, food, other and ship depreciation. Gross margin is calculated pursuant to GAAP as total revenue less total cruise operating expense and ship depreciation.

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Adjusted Net Cruise Cost Excluding Fuel. Net Cruise Cost Excluding Fuel adjusted for supplemental adjustments.

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Adjusted Net Loss. Net loss adjusted for supplemental adjustments.

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Allura Class Ships. Oceania Cruises’ ~~two ships~~Vista and one additional ship on order.

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Berths. Double occupancy capacity per cabin (single occupancy per studio cabin) even though many cabins can accommodate three or more passengers.

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Capacity Days. Berths available for sale multiplied by the number of cruise days for the period for ships in service.

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CDC. The U.S. Centers for Disease Control and Prevention.

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~~Conditional Order.~~ ~~The CDC’s Framework for Conditional Sailing Order issued on October 30, 2020 that introduced a phased approach for the resumption of passenger cruises. These phases include: a) the~~

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establishment of laboratory testing of crew onboard cruise ships in U.S. waters; b) simulated voyages designed to test a cruise ship operator’s ability to mitigate COVID-19 on cruise ships; c) a certification process; and d) a return to passenger voyages in a manner that mitigates the risk of COVID-19 introduction, transmission or spread among passenger and crew onboard ships and ashore to communities. The Conditional Order replaced the CDC’s previously issued No Sail Order that expired on October 31, 2020 and remained in effect until November 1, 2021. The CDC adopted a Temporary Extension and Modification of the Framework for Conditional Sailing Order (the “Temporary Extension”) that became effective on November 1, 2021 and will remain in effect until the earlier of a) the expiration of the Secretary of Health and Human Services’ declaration that COVID-19 constitutes a public health emergency, b) the CDC Director’s rescission or modification of the Temporary Extension based on specific public health or other considerations, or c) January 15, 2022 at which point it will revert to a voluntary program. Effective as of July 23, 2021, for cruise ships arriving in, within, or departing from a port in Florida, the Conditional Order only persists as a non-binding recommendation.

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Constant Currency. A calculation whereby foreign currency-denominated revenue and expenses in a period are converted at the U.S. dollar exchange rate of a comparable period to eliminate the effects of foreign exchange fluctuations.

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Dry-dock. A process whereby a ship is positioned in a large basin where all of the fresh/sea water is pumped out in order to carry out cleaning and repairs of those parts of a ship which are below the water line.

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EBITDA. Earnings before interest, taxes, and depreciation and amortization.

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Explorer Class Ships. Regent’s Seven Seas Explorer, Seven Seas Splendor, and Seven Seas Grandeur.

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GAAP. Generally accepted accounting principles in the U.S.

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Gross Cruise Cost. The sum of total cruise operating expense and marketing, general and administrative expense.

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Gross Tons. A unit of enclosed passenger space on a cruise ship, such that one gross ton equals 100 cubic feet or 2.831 cubic meters.

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~~Jewel Credit Facility.~~ The Credit Agreement, dated as of May 15, 2019 (as amended by Amendment No. 1 to the Credit Agreement, dated as of May 1, 2020, and as further amended by Amendment No. 2 to the Credit Agreement dated as of January 29, 2021), among NCLC, as borrower, the lenders party thereto, Bank of America, N.A., as administrative agent and collateral agent, Bank of America, N.A., Truist Bank (formerly known as Branch Banking and Trust Company), Fifth Third Bank and Mizuho Bank, Ltd., as joint bookrunners and arrangers, and Bank of America, N.A., Truist Bank (formerly known as Branch Banking and Trust Company), Fifth Third Bank and Mizuho Bank, Ltd., as co-documentation agents, providing for a $260.0 million senior secured credit facility.

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Net Cruise Cost. Gross Cruise Cost less commissions, transportation and other expense and onboard and other expense.

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Net Cruise Cost Excluding Fuel. Net Cruise Cost less fuel expense.

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Occupancy Percentage. The ratio of Passenger Cruise Days to Capacity Days. A percentage greater than 100% indicates that three or more passengers occupied some cabins.

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Passenger Cruise Days. The number of passengers carried for the period, multiplied by the number of days in their respective cruises.

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~~Pride of America Credit Facility.~~Prima Class Ships. ~~The Credit Agreement, dated as of January 10, 2019 (as amended by Amendment No. 1 to the Credit Agreement, dated as of April 28, 2020,~~Norwegian Prima, Norwegian Viva and as further amended by Amendment No. 2 to the Credit Agreement, dated as of January 29, 2021), among NCLC, as borrower, the lenders party thereto, Nordea Bank Abp, New York Branch, as administrative agent and collateral agent, and Nordea Bank Abp, New York Branch, Mizuho Bank, Ltd., MUFG Bank, Ltd., and Skandinaviska Enskilda Banken AB (Publ), as joint bookrunners, arrangers and co-documentation agents, providing for a $230.0 million senior secured credit facility.four additional ships on order.

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~~Project Leonardo.~~Private Exchangeable Notes. ~~The next generation~~On May 28, 2020, pursuant to an indenture among NCLC, as issuer, NCLH, as guarantor, and U.S. Bank National Association, as trustee, NCLC issued $400.0 million aggregate principal amount of ~~ships for our Norwegian brand.~~exchangeable senior notes due 2026.

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Revolving Loan Facility. $875.0 million senior secured revolving credit facility.

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SEC. U.S. Securities and Exchange Commission.

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~~Senior Secured Credit Facility.~~ ~~The Credit Agreement, originally dated as of May 24, 2013, as amended and restated on~~ October 31, 2014, June 6, 2016, October 10, 2017, January 2, 2019 and May 8, 2020, and as further amended on January 29, 2021 and March 25, 2021, by and among NCLC and Voyager Vessel Company, LLC, as co-borrowers, JPMorgan Chase Bank, N.A., as administrative agent and as collateral agent, and various lenders and agents, providing for a senior secured credit facility consisting of (i) the Revolving Loan Facility and (ii) the Term Loan A Facility.

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Shipboard Retirement Plan. An unfunded defined benefit pension plan for certain crew members which computes benefits based on years of service, subject to certain requirements.

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Term Loan A Facility. The senior secured term loan A facility having an outstanding principal amount of approximately $1.5 billion as of ~~September~~June 30, ~~2021.~~2022.

Non-GAAP Financial Measures

We use certain non-GAAP financial measures, such as Adjusted Gross Margin, Net Cruise Cost, Adjusted Net Cruise Cost Excluding Fuel, Adjusted EBITDA and Adjusted Net Loss, to enable us to analyze our performance. See “Terminology” for the definitions of these and other non-GAAP financial measures. We utilize Adjusted Gross Margin to manage our business on a day-to-day basis because it reflects revenue earned net of certain direct variable costs. 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 Cruise Cost and Adjusted Net Cruise Cost Excluding Fuel to be the most relevant indicators of our performance. As a result of our voluntary suspension of sailings from March 2020 until July 2021 ~~we did not have any Capacity Days during the suspension period. Accordingly, we have not presented herein~~and our gradual phased return to service beginning in July 2021, per Capacity Day data is not meaningful for the three ~~or nine~~and six months ended ~~September~~June 30, 2022 or June 30, 2021 ~~or September 30, 2020.~~and is not presented herein.

As our business includes the sourcing of passengers and deployment of vessels outside of the U.S., a portion of our revenue and expenses are denominated in foreign currencies, particularly British pound, Canadian dollar, Euro and Australian dollar which are subject to fluctuations in currency exchange rates versus our reporting currency, the U.S. dollar. In order to monitor results excluding these fluctuations, we calculate certain non-GAAP measures on a Constant Currency basis, whereby current period revenue and expenses denominated in foreign currencies are converted to U.S. dollars using currency exchange rates of the comparable period. We believe that presenting these non-GAAP measures on both a reported and Constant Currency basis is useful in providing a more comprehensive view of trends in our business.

We believe that Adjusted EBITDA is appropriate as a supplemental financial measure as it is used by management to assess operating performance. We also believe that Adjusted EBITDA is a useful measure in determining our performance as it reflects certain operating drivers of our business, such as sales growth, operating costs, marketing, general and administrative expense and other operating income and expense. Adjusted EBITDA is not a defined term under GAAP nor is it intended to be a measure of liquidity or cash flows from operations or a measure comparable to net income (loss), as it does not take into account certain requirements such as capital expenditures and related depreciation, principal and interest payments and tax payments and it includes other supplemental adjustments.

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In addition, Adjusted Net Loss is a non-GAAP financial measure that excludes certain amounts and is used to supplement GAAP net loss. We use Adjusted Net Loss as a key performance measure of our earnings performance. We believe that both management and investors benefit from referring to this non-GAAP financial measure in assessing our performance and when planning, forecasting and analyzing future periods. This non-GAAP financial measure also facilitates management’s internal comparison to our historical performance. The amounts excluded in the presentation of this non-GAAP financial measure may vary from period to period; accordingly, our presentation of Adjusted Net Loss may not be indicative of future adjustments or results. For example, for the nine months ended September 30, 2020, we incurred $1.6 billion related to impairment losses. We included this as an adjustment in the reconciliation of Adjusted Net Loss since the expenses are not representative of our day-to-day operations; however, this adjustment did not occur and is not included in the comparative period presented within this Form 10-Q.

You are encouraged to evaluate each adjustment used in calculating our non-GAAP financial measures and the reasons we consider our non-GAAP financial measures appropriate for supplemental analysis. In evaluating our non-GAAP financial measures, you should be aware that in the future we may incur expenses similar to the adjustments in our presentation. Our non-GAAP financial measures have limitations as analytical tools, and you should not consider these measures in isolation or as a substitute for analysis of our results as reported under GAAP. Our presentation of our non-GAAP financial measures should not be construed as an inference that our future results will be unaffected by unusual or non-recurring items. Our non-GAAP financial measures may not be comparable to other companies. Please see a historical reconciliation of these measures to the most comparable GAAP measure presented in our consolidated financial statements below in the “Results of Operations” section.

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Financial Presentation

We categorize revenue from our cruise and cruise-related activities as either “passenger ticket” revenue or “onboard and other” revenue. Passenger ticket revenue and onboard and other revenue vary according to product offering, the size of the ship in operation, the length of cruises operated and the markets in which the ship operates. Our revenue is seasonal based on demand for cruises, which has historically 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 ~~will be~~was phased in ~~gradually as described under “—Update Regarding COVID-19 Pandemic” below.~~gradually. Passenger ticket revenue primarily consists of revenue for accommodations, meals in certain restaurants on the ship, certain onboard entertainment, 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 gaming, beverage sales, shore excursions, specialty dining, retail sales, spa services and photo 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.

Our cruise operating expense is classified as follows:

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Commissions, transportation and other primarily consists of direct costs associated with passenger ticket revenue. These costs include travel agent commissions, air and land transportation expenses, related credit card fees, certain port expenses and the costs associated with shore excursions and hotel accommodations included as part of the overall cruise purchase price.

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Onboard and other primarily consists of direct costs incurred in connection with onboard and other revenue, including casino, beverage sales and shore excursions.

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Payroll and related consists of the cost of wages and benefits for shipboard employees and costs of certain inventory items, including food, for a third party that provides crew and other hotel services for certain ships. The cost of crew repatriation, including charters, housing, testing and other costs related to COVID-19 are also included.

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Fuel includes fuel costs, the impact of certain fuel hedges and fuel delivery costs.

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Food consists of food costs for passengers and crew on certain ships.

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Other consists of repairs and maintenance (including Dry-dock costs), ship insurance and other ship expenses.

Critical Accounting Policies

For a discussion of our critical accounting policies and estimates, see “Critical Accounting Policies” included in our Annual Report on Form 10-K under the caption “Management’s Discussion and Analysis of Financial Condition and Results of Operations.” We have made no significant changes to our critical accounting policies and estimates from those described in our Annual Report on Form 10-K.

Russia’s Invasion of Ukraine

The conflict from Russia’s invasion of Ukraine resulted in the cancellation or modification of approximately 60 sailings in 2022, which included all voyages with calls to ports in Russia. Three ships were redeployed as a result of the conflict including Norwegian Getaway to Port Canaveral, Oceania Cruises’ Marina to the British Isles and Regent’s Seven Seas Splendor to Northern Europe. In addition, the Company has also removed all calls to ports in Russia from its itineraries in 2023 and 2024. In addition to the direct impacts noted above, the conflict has also had indirect impacts to customer demand (see “Update on Bookings”) and the cost of fuel and could continue to have an impact on travel and consumer discretionary spending.

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Update Regarding COVID-19 Pandemic

~~Suspension~~Safe Resumption of ~~Cruise Voyages~~Operations

Due to the impact of COVID-19, travel restrictions and limited access to ports around the world, in March 2020, the Company implemented a voluntary suspension of all cruise voyages across our three brands. AsIn the third quarter of 2021, we began a phased relaunch of certain cruise voyages with ships initially operating at reduced occupancy levels. In early May 2022, the ~~date hereof, 11~~Company completed the phased relaunch of ~~our~~its entire fleet with all ships ~~were operating~~now in operation with guests on ~~board as part~~board. The level of occupancy on our ships and the percentage of our ~~phased return~~fleet in service will depend on a number of factors including, but not limited to, ~~service.~~ the duration and extent of the COVID-19 pandemic, further resurgences of COVID-19 or the emergence of other public health crises, our ability to comply with governmental regulations and implement new health and safety protocols, port availability, travel restrictions, bans and advisories, our ability to staff certain ships and additionally the impact of other events impacting travel or consumer discretionary spending, such as Russia’s invasion of Ukraine, and general macroeconomic conditions discussed below under “Macroeconomic Trends and Uncertainties.”

The Company continues to ~~execute on~~benefit from significant improvements in the ~~phased relaunch plans~~public health environment. In July 2022, the CDC announced that its voluntary COVID-19 Program for ~~its 28-ship fleet.~~Cruise Ships Operating in U.S. Waters was no longer in effect, but that it will continue to publish health and safety guidance. The Company ~~expects~~continues to ~~have approximately 75% of capacity operating by December 31, 2021~~operate under its science-backed SailSAFE health and safety program which will evolve along with the ~~full fleet expected~~public health environment. Effective September 3, 2022, vaccinated guests aged 12 and over will no longer have any pre-cruise COVID-19 related protocols and unvaccinated travelers may embark with a negative COVID-19 test taken within 72 hours prior to departure. Guests 11 and under will be ~~back in operation by April 1, 2022. Certain sailings have been~~exempt from all vaccination and testing requirements. Requirements may differ for guests traveling on voyages departing from or ~~may be cancelled in conjunction~~visiting destinations with ~~the new voyage resumption plans for each vessel. As a result of the unprecedented circumstances caused by the pandemic, we are~~specific local regulations, including but not ~~able~~limited to ~~predict the full impact of the pandemic on our Company. Refer to “Item 1A. Risk Factors” for further details regarding the significant impact the COVID-19 pandemic has had,~~Canada, Greece and ~~is expected to~~Bermuda. The Company will continue to ~~have, on our financial condition~~evaluate its protocols and ~~operations.~~modify as needed as the public health environment evolves.

~~Preparation for the Safe Resumption of Operations~~

~~We have developed SailSAFE~~^TM, a comprehensive and multi-faceted health and safety strategy to enhance our already rigorous protocols and address the unique public health challenges posed by COVID-19. In July 2020, we announced a collaboration with Royal Caribbean Group to form a group of experts called the “Healthy Sail Panel” to guide the industry in the development of new and enhanced cruise health and safety standards. The panel is co-chaired by Dr. Scott Gottlieb, former commissioner of the U.S. Food and Drug Administration, and Governor Mike Leavitt, former Secretary of the U.S. Department of Health and Human Services, and consists of globally recognized experts from various disciplines, including public health, infectious disease, biosecurity, hospitality and maritime operations. On September 21, 2020, the expert panel published a report, which included detailed best practices across five key areas of focus to protect the public health and safety of guests, crew and the communities where our cruise ships visit. The panel also submitted its recommendations to the CDC, in response to a CDC request for public comment to inform future public health guidance and preventative measures relating to travel on cruise ships. The panel’s recommendations have informed new detailed health and safety protocols for our return-to-service plan.

The Company ~~also further extended its depth and breadth of experts with the formation of its SailSAFE Global Health and Wellness Council, comprised of four experts~~follows applicable local protocols at the ~~forefront of their fields~~ports and led by Chairman Dr. Scott Gottlieb. The Council’s work complements the Healthy Sail Panel initiative and focuses on the implementation, compliance with and continuous improvement of health and safety protocols across the Company’s operations. The Company continues to work with its expert advisors, the Healthy Sail Panel, and global public health authorities and government agencies to refine its comprehensive and multi-layered health and safety strategy to enhance its already rigorous health and safety standards in response to COVID-19.

Pursuant to the Conditional Order, the CDC has issued and may continue to issue additional requirements through technical instructions or orders as needed and the phases of the Conditional Order may be subject to change based on public health considerations, including the trajectory of the pandemic and the ability of cruise ship operators to successfully employ measures that mitigate the risk of COVID-19.destinations it visits. We have received conditional sailing certificates for certain ships and are in the process of seeking certifications for additional ships in our fleet that will be operating out of the U.S. Additionally, in the U.S., certain states have enacted legislation prohibiting companies from verifying the vaccination status of guests. We challenged such a prohibition in Florida in court and received a preliminary injunction allowing us to operate as planned. As a result of these and other regulatory requirements and other logistical challenges,

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~~the timeline for our ability to return our entire fleet to cruises both in and outside of the U.S. is fluid. Nevertheless, we~~ continue to work with ~~other~~ federal agencies, public health authorities and national and local governments in areas where we operate to take all necessary measures to protect our guests, crew and the communities ~~visited~~visited. The protocol revisions in conjunction with continued easing of travel restrictions and reopening to cruise in more ports around the globe are positive as ~~we begin~~it reduces friction, expands the addressable cruise market, brings variety to ~~resume operations.~~

~~We began a phased relaunch of cruise voyages in July 2021. Initially each ship is expected to operate at reduced occupancy, which will gradually increase over time. Based~~itineraries, and provides additional catalysts on the ~~current conditions, we are planning for all ships~~road to sail at full capacity by June 30, 2022. We plan to continue gradually launching ships from each brand through April 1, 2022. Refer to “Item 1A. Risk Factors” for further details regarding the uncertainties of returning to sailing at full fleet capacity.recovery.

Modified Policies

~~Our brands~~We have launched ~~new~~ cancellation policies for certain sailings booked during certain time periods to permit ~~our~~certain guests to cancel cruises which were not part of ~~our~~a temporary suspension of voyages up to 15 days prior to embarkation or in the event of a positive COVID-19 test and receive a refund in the form of a credit to be applied toward a future cruise. These programs ~~were~~are in place for cruises booked through specific time periods specified by ~~brand, and for cruises scheduled to embark through October 31, 2021.~~brand. Certain cruises booked for certain periods, will be permitted a 60-day or 75-day cancellation window for refunds. The future cruise credits issued under these programs are generally valid for any sailing through December 31, 2022, and we may extend the length of time these future cruise credits may be redeemed. The use of such credits may prevent us from garnering certain future cash collections as staterooms booked by guests with such credits will not be available for sale, resulting in less cash collected from bookings to new guests. We may incur incremental commission expense for the use of these future cruise credits. In addition, to provide more flexibility to our guests, we ~~have also extended~~modified our ~~modified~~ final payment schedule for all voyages on Regent Seven Seas Cruises through September 30, 2021, on Oceania Cruises through October 31, 2021 and for specified future voyages, and for the majority of voyages on Norwegian Cruise Line through April 30, 2022, which now requiresschedules to require payment 60 days prior to embarkation versus the standard 120 ~~days. Our brands currently expect to provide cash refunds~~days for ~~cash bookings~~most voyages on Regent Seven Seas Cruises through July 31, 2022 and for ~~future sailings we may cancel.~~certain voyages on Oceania Cruises through September 30, 2022.

~~Update~~Financing Transactions

In 2022, we have continued to take actions to bolster our financial condition while the global cruise environment remains challenging. To enhance our liquidity profile and financial flexibility, in February 2022, we received additional financing through various debt financings, collectively totaling $2.1 billion in gross proceeds, which has been, or will be, used to redeem all of the outstanding 2024 Senior Secured Notes and 2026 Senior Secured Notes and to make scheduled

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principal payments on ~~Bookings~~debt maturing in 2022, including, in each case, to pay any accrued and unpaid interest thereon, as well as related premiums, fees and expenses.

In July 2022, the Company amended its $1 billion commitment, which provides additional liquidity to the Company, extending the commitment through March 31, 2023. The Company has not drawn and currently does not intend to draw under this commitment.

~~Net booking volumes in~~See Note 7 – “Long-Term Debt” for more information.

Update on Bookings

As expected, the third quarter of 2021 were negatively impacted by the Delta variant of COVID-19. The resulting slowdown in net booking volumes was heavily weighted to sailings in the fourth quarter of 2021 and early 2022 and improved sequentially through 2022. The impact has since abated and net bookings have materially improved over the past several weeks with particular strengthCompany’s current cumulative booked position for ~~bookings related to sailings in~~ the second half of 2022 ~~and into 2023. Despite~~remains below the ~~temporary Delta impact, the Company’s overall cumulative booked position for full year 2022 is in line with 2019’s record levels~~comparable 2019 period but at higher ~~pricing~~prices even when including the dilutive impact of future cruise ~~credits. The overall~~credits and despite the impact in the third quarter of the Russia-Ukraine conflict on premium-priced Baltic and Eastern Mediterranean itineraries.

Booking trends for full year 2023 remain positive with cumulative booked position ~~for~~in line with a record 2019 inclusive of the ~~second half of 2022, when the full fleet is expected~~Company’s 20% increase in capacity. Pricing continues to be ~~back in operation and at normalized occupancy levels, is meaningfully~~significantly higher than that of 2019 at a similar point in time and thus at ~~higher prices. Our~~record levels for full year 2023.

Sequentially, net booking volumes continue to increase as the Company’s brands ramp up to sail at historical load factor levels; however, our full fleet may not ~~resume operations~~achieve historical occupancy levels on our expected schedule and as a result, current booking data may not be informative. In addition, because of our updated cancellation policies, bookings may not be representative of actual cruise revenues.

There are remaining uncertainties about when our full fleet will be back ~~in service~~ at historical occupancy levels and, accordingly, we cannot estimate the impact on our business, financial condition or near- or longer-term financial or operational results with certainty; however, we will report a net loss for the ~~three months~~third quarter of 2022.

Macroeconomic Trends and ~~year ending December 31, 2021~~Uncertainties

As a result of conditions associated with the COVID-19 pandemic and other global events, such as Russia’s invasion of Ukraine and actions taken by the United States and other governments in response to the invasion, the global economy, including the financial and credit markets, has recently experienced significant volatility and disruptions, including increases in inflation rates, fuel prices, and interest rates. Our costs have been and are expected to be impacted by these increases. To attempt to mitigate the risk of adverse changes in fuel prices and interest expense, we have used and may continue to use derivatives. In an attempt to mitigate risks related to inflation, our Supply Chain Department has negotiated contracts with varying terms, with a goal of providing us with the ability to take advantage of cost declines as and when they occur, and diversified our sourcing options. Due to the dynamic nature of the current economic landscape, the severity and duration of the impact of these conditions on our business cannot be predicted. See Item 1A, “Risk Factors” for additional information.

Climate Change

We believe the increasing focus on climate change and evolving regulatory requirements may materially impact our future capital expenditures and results of operations. We expect to ~~report a net loss until~~incur significant expenses related to these regulatory requirements, which may include expenses related to greenhouse gas emissions reduction initiatives and the purchase of emissions allowances, among other things. If requirements become more stringent, we may be required to change certain operating procedures, for example slowing the speed of our ships, which could adversely impact our operations. We are ~~able~~evaluating the effects of climate change related requirements, which are still evolving, and, consequently, the full impact to ~~resume regular voyages.~~the Company is not yet known. Refer to “Impacts related to climate change may adversely affect our business, financial condition and results of operations” in “Item 1A. Risk Factors” in our Annual Report on Form 10-K for further ~~details regarding the significant impact the COVID-19 pandemic has had, and is expected to continue to have, on our financial condition and operations.~~

~~Financing Transactions and Cost Containment Measures~~

In 2021, we have continued to take actions to bolster our financial condition while our global cruise voyages are disrupted. In March 2021, we received additional financing through various debt financings and NCLH’s equity offering, collectively totaling $2.7 billion in gross proceeds. From the proceeds, approximately $1.5 billion was used to extinguish debt. In November 2021, the Company executed a $1 billion commitment through August 15, 2022 thatinformation.

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~~provides additional liquidity to the Company. Refer to Note 7 – “Long-Term Debt” for further details about the above transactions.~~

We undertook several proactive cost reduction and cash conservation measures to mitigate the financial and operational impacts of the COVID-19 pandemic, including the reduction of capital expenditures and deferral of debt amortization as well as a reduction in operating expenses, including ship operating expenses and selling, general and administrative expenses. Cost savings initiatives to reduce selling, general and administrative expenses, which had already been implemented at the beginning of 2021, included the significant reduction or deferral of marketing expenditures, the implementation of hiring freezes, a 20% salary or hours reduction for certain shoreside team members, a pause in our 401(k) matching contributions, corporate travel freezes for shoreside employees, and employee furloughs. These cost savings initiatives have now been discontinued as we continue our resumption of cruise voyages.

~~See “—Liquidity and Capital Resources” below for more information.~~

Quarterly Overview

Three months ended ~~September~~June 30, ~~2021~~2022 (“~~2021~~”2022”) compared to three months ended ~~September~~June 30, ~~2020~~2021 (“~~2020~~”2021”)

●

Total revenue increased to ~~$153.1 million~~$1.2 billion compared to ~~$6.5~~$4.4 million.

●

Net loss was ~~$ (646.8)~~$(43.3) million compared to ~~$(758.2)~~$(867.5) million.

●

Operating loss was ~~$ (688.4)~~$(395.8) million compared to ~~$(517.5)~~$(604.5) million.

●

Gross margin was $(56.9) million compared to $(408.9) million. Adjusted Gross Margin was $834.8 million compared to $(3.5) million.

●

Adjusted Net Loss was ~~$ (800.2)~~$(477.3) million in ~~2021,~~2022, which included ~~$(153.4)~~$(434.0) million of adjustments primarily ~~consisting of gains on~~related to our debt conversion options. Adjusted Net Loss was ~~$(638.6)~~$(713.8) million in ~~2020,~~2021, which included ~~$119.6~~$153.8 million of adjustments primarily related to ~~non-cash compensation and losses on to~~ our debt conversion options.

●

Adjusted EBITDA ~~decreased 51.3%~~improved 54.9% to ~~$ (474.3)~~$(183.5) million compared to ~~$(313.5)~~$(406.9) million.

We refer you to our “Results of Operations” below for a calculation of Adjusted Gross Margin, Adjusted Net Loss and Adjusted EBITDA.

Results of Operations

The following table sets forth selected statistical information:


	Three Months Ended			Nine Months Ended				Three Months Ended			Six Months Ended
	September 30,			September 30,				June 30,			June 30,
	2021		2020	2021		2020		2022		2021	2022		2021
Passengers carried	57,931		—	57,931		499,729		393,943		—	585,093		—
Passenger Cruise Days	402,656		—	402,656		4,278,602		2,999,303		—	4,428,749		—
Capacity Days(1)	701,350		—	701,350		4,123,858		4,639,435		—	7,617,788		—
Occupancy Percentage	57.4	%		57.4	%	103.8	%	64.6	%		58.1	%

(1)	Excludes certain capacity on Pride of America which is temporarily unavailable.

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Adjusted Gross Margin was calculated as follows (in thousands):


	Three Months Ended						Six Months Ended
	June 30,						June 30,
			2022						2022
			Constant						Constant
	2022		Currency		2021		2022		Currency		2021
Total revenue	$	1,187,181	$	1,194,502	$	4,368	$	1,709,121	$	1,717,276	$	7,468
Less:
Total cruise operating expense		1,073,316		1,079,679		249,727		1,808,729		1,817,447		450,582
Ship depreciation		170,736		170,736		163,526		337,392		337,392		323,157
Gross margin		(56,871)		(55,913)		(408,885)		(437,000)		(437,563)		(766,271)
Ship depreciation		170,736		170,736		163,526		337,392		337,392		323,157
Payroll and related		262,580		262,712		86,647		503,307		503,433		168,785
Fuel		181,189		181,213		54,090		316,698		316,723		96,693
Food		61,157		61,449		4,334		100,673		101,071		10,642
Other		216,045		219,809		96,816		415,198		420,988		156,330
Adjusted Gross Margin	$	834,836	$	840,006	$	(3,472)	$	1,236,268	$	1,242,044	$	(10,664)

Gross Cruise Cost, Net Cruise Cost, Net Cruise Cost Excluding Fuel and Adjusted Net Cruise Cost Excluding Fuel were calculated as follows (in thousands):

Three Months Ended

Nine Months Ended

September 30,

September 30,

2021

2021




Constant





Constant


2021

Currency

2020

2021

Currency

2020
Total cruise operating expense

$
439,756

$
437,453

$
190,157

$
890,338

$
883,944

$
1,486,069
Marketing, general and administrative expense

228,473

228,236

156,351

616,440

612,852

556,820
Gross Cruise Cost

668,229

665,689

346,508

1,506,778

1,496,796

2,042,889
Less:





Commissions, transportation and other expense

32,338

32,304

4,038

47,935

47,659

371,007
Onboard and other expense

19,306

19,306

4,728

21,841

21,841

82,889
Net Cruise Cost

616,585

614,079

337,742

1,437,002

1,427,296

1,588,993
Less: Fuel expense

79,238

79,238

48,224

175,931

175,931

222,240
Net Cruise Cost Excluding Fuel

537,347

534,841

289,518

1,261,071

1,251,365

1,366,753
Less Non-GAAP Adjustments:

Non-cash deferred compensation (1)

904

904

667

2,714

2,714

1,999
Non-cash share-based compensation (2)

39,922

39,922

25,862

88,974

88,974

81,009
Adjusted Net Cruise Cost Excluding Fuel

$
496,521

$
494,015

$
262,989

$
1,169,383

$
1,159,677

$
1,283,745


	Three Months Ended						Six Months Ended
	June 30,						June 30,
			2022						2022
			Constant						Constant
	2022		Currency		2021		2022		Currency		2021
Total cruise operating expense	$	1,073,316	$	1,079,679	$	249,727	$	1,808,729	$	1,817,447	$	450,582
Marketing, general and administrative expense		328,074		330,755		184,901		624,208		628,246		387,967
Gross Cruise Cost		1,401,390		1,410,434		434,628		2,432,937		2,445,693		838,549
Less:
Commissions, transportation and other expense		256,190		258,341		6,564		344,148		346,527		15,597
Onboard and other expense		96,155		96,155		1,276		128,705		128,705		2,535
Net Cruise Cost		1,049,045		1,055,938		426,788		1,960,084		1,970,461		820,417
Less: Fuel expense		181,189		181,213		54,090		316,698		316,723		96,693
Net Cruise Cost Excluding Fuel		867,856		874,725		372,698		1,643,386		1,653,738		723,724
Less Non-GAAP Adjustments:
Non-cash deferred compensation (1)		699		699		905		1,398		1,398		1,810
Non-cash share-based compensation (2)		30,048		30,048		22,451		62,840		62,840		49,052
Adjusted Net Cruise Cost Excluding Fuel	$	837,109	$	843,978	$	349,342	$	1,579,148	$	1,589,500	$	672,862

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

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

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Adjusted Net Loss was calculated as follows (in thousands):


	Three Months Ended				Nine Months Ended				Three Months Ended				Six Months Ended
	September 30,				September 30,				June 30,				June 30,
	2021		2020		2021		2020		2022		2021		2022		2021
Net loss	$	(646,813)	$	(758,152)	$	(2,836,799)	$	(3,591,483)	$	(43,305)	$	(867,524)	$	(1,113,583)	$	(2,189,986)
Non-GAAP Adjustments:
Non-cash deferred compensation (1)		1,002		992		3,009		2,975		1,012		1,004		2,024		2,007
Non-cash share-based compensation (2)		39,922		25,862		88,974		81,009		30,048		22,451		62,840		49,052
Extinguishment and modification of debt (3)		3,562		6,636		292,752		27,795		—		—		188,433		289,190
Amortization of intangible assets (4)		—		2,774		—		8,321
Impairment loss (5)		—		—		—		1,633,337
Debt conversion option, discount and expenses (6)		(197,921)		83,296		270,684		318,908
Debt conversion option, discount and expenses (4)										(465,062)		130,311		(377,329)		468,605
Adjusted Net Loss	$	(800,248)	$	(638,592)	$	(2,181,380)	$	(1,519,138)	$	(477,307)	$	(713,758)	$	(1,237,615)	$	(1,381,132)

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

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

(3)	Losses on extinguishment of debt and modification of debt are included in interest expense, net.

(4)	~~Amortization of intangible assets related to the Acquisition of Prestige, which are included in depreciation and amortization expense.~~

~~(5)~~

Impairment loss consists of goodwill, trade name and property and equipment impairments. The impairments of goodwill and trade names are included in impairment loss and the impairment of property and equipment is included in depreciation and amortization expense.

~~(6)~~

Consists of non-cash gains and losses related to our debt conversion options, which are recognized in other income (expense), net. Also includes the related debt discount, which is amortized to interest expense, net.

EBITDA and Adjusted EBITDA were calculated as follows (in thousands):


	Three Months Ended				Nine Months Ended				Three Months Ended				Six Months Ended
	September 30,				September 30,				June 30,				June 30,
	2021		2020		2021		2020		2022		2021		2022		2021
Net loss	$	(646,813)	$	(758,152)	$	(2,836,799)	$	(3,591,483)	$	(43,305)	$	(867,524)	$	(1,113,583)	$	(2,189,986)
Interest expense, net		184,524		154,501		824,304		343,993		167,805		179,448		516,129		639,780
Income tax (benefit) expense		294		(2,832)		2,949		(13,216)		(547)		927		3,846		2,655
Depreciation and amortization expense		173,289		177,488		517,867		554,937		181,587		174,262		360,663		344,578
EBITDA		(288,706)		(428,995)		(1,491,679)		(2,705,769)		305,540		(512,887)		(232,945)		(1,202,973)
Other (income) expense, net (1)		(226,442)		89,005		145,450		325,412		(519,749)		82,627		(490,871)		371,892
Other Non-GAAP Adjustments:
Non-cash deferred compensation (2)		904		667		2,714		1,999		699		905		1,398		1,810
Non-cash share-based compensation (3)		39,922		25,862		88,974		81,009		30,048		22,451		62,840		49,052
Impairment loss (4)		—		—		—		1,607,797
Adjusted EBITDA	$	(474,322)	$	(313,461)	$	(1,254,541)	$	(689,552)	$	(183,462)	$	(406,904)	$	(659,578)	$	(780,219)

(1)	Primarily consists of gains or losses from conversion options on our exchangeable notes.

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

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

~~(4)~~

~~Impairment loss consists of goodwill and trade name impairments.~~

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

Revenue

Total revenue increased to $1.2 billion in 2022 compared to $4.4 million in 2021. In 2022, revenue increased as we returned to service with 3.0 million Passenger Cruise Days. In 2021, voyages were cancelled due to the COVID-19 pandemic.

Expense

Total cruise operating expense increased 329.8% in 2022 compared to 2021. In 2022, the second quarter started with 23 ships operating with guests onboard and ended with the entire 28-ship fleet in service compared to 2021, during which

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~~Three months ended~~ ~~September 30, 2021~~ (“~~2021~~~~”) compared to three months ended~~ ~~September 30, 2020~~ (“~~2020~~”)

~~Revenue~~

Total revenue increased to $153.1 million in 2021 compared to $6.5 million in 2020. Revenue in 2021 and 2020 has been adversely impacted due to the cancellation of sailings as a result of the COVID-19 pandemic. Revenue increased in 2021 as certain ships have returned to service.

~~Expense~~

~~Total cruise operating expense increased 131.3% in 2021 compared to 2020.~~all voyages were cancelled. In 2021, our cruise operating expenses increased primarily related to crew costs, including salaries, food and other travel costs as we began our return to service; fuel; ship maintenance, including Dry-dock expenses; and costs related to COVID-19, including crew and passenger testing. In 2020,2022, our cruise operating expenses were ~~primarily~~increased due to the resumption of voyages, resulting in higher payroll, fuel, and direct variable costs of fully operating ships. Costs for certain items such as food, fuel and logistics also increased related to ~~crew~~inflation. Additionally, in 2022, there was an increase in COVID-19 related costs, including ~~salaries, food and other repatriation costs; fuel; and other ongoing costs such as insurance and ship maintenance.~~testing. Gross Cruise Cost increased ~~92.8%~~222.4% in ~~2021~~2022 compared to 2020 primarily related to the increase in costs described above and an increase in marketing, general and administrative expenses as we return to sailing. Total other operating expense increased 20.3% in 2021 ~~compared to 2020~~ primarily due to the increase in marketing, general and administrative costs as a result of the discontinuation of cost savings initiatives described under “Update Regarding COVID-19 Pandemic—Financing Transactions and Cost Containment Measures” as we return to service.

Interest expense, net was $184.5 million in 2021 compared to $154.5 million in 2020. The increase in interest expense reflects additional debt outstanding at higher interest rates, partially offset by lower LIBOR.

Other income (expense), net was income of $226.4 million in 2021 compared to expense of $89.0 million in 2020. The income and expenses were primarily due to gains and losses from conversion options on our exchangeable notes.

~~Nine months ended~~~~September 30, 2021~~ (“~~2021~~~~”) compared to~~ ~~nine months ended~~~~September 30, 2020~~ ~~(“2020”)~~

~~Revenue~~

Total revenue decreased 87.4% to $160.5 million in 2021 compared to $1.3 billion in 2020. In 2021, the adverse impact on revenue was due to the cancellation of sailings as a result of the COVID-19 pandemic and lower occupancy as we return to service. In 2020, voyages were cancelled beginning March 13, 2020.

~~Expense~~

Total cruise operating expense decreased 40.1% in 2021 compared to 2020. In 2021, our cruise operating expenses were primarily related to crew costs, including salaries, food and other travel costs; fuel; and other ongoing costs such as insurance and ship maintenance, including Dry-dock expenses. In 2020, our cruise operating expenses subsequent to the suspension of cruise voyages on March 13, 2020 primarily included the cost of protected commissions and crew costs, including salaries, food and other repatriation costs. Gross Cruise Cost decreased 26.2% ~~in 2021 compared to 2020~~ primarily related to the change in costs described above ~~offset by~~plus an increase in marketing, general and administrative expenses primarily related to ~~the discontinuation of cost savings initiatives described under “Update Regarding COVID-19 Pandemic—Financing Transactions and Cost Containment Measures”~~increased marketing costs as we ~~return~~returned to service. Total other operating expense ~~decreased 58.3%~~increased 41.9% in ~~2021~~2022 compared to ~~2020~~2021 primarily due to the ~~impairment of goodwill~~increase in marketing, general and ~~trade names triggered by the COVID-19 pandemic in 2020. Depreciation and amortization expense decreased primarily due to a $25.5 million impairment loss recognized in 2020.~~administrative expenses.

Interest expense, net was ~~$824.3~~$167.8 million in ~~2021~~2022 compared to ~~$344.0~~$179.4 million in ~~2020.~~2021. The ~~increase~~decrease in interest expense reflects lower interest expense in connection with recent refinancings, partially offset by higher debt balances and higher LIBOR rates.

Other income (expense), net was income of $519.7 million in 2022 compared to expense of $82.6 million in 2021. The gains and losses were primarily due to changes from conversion options on our exchangeable notes.

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

Revenue

Total revenue increased to $1.7 billion in 2022 compared to $7.5 million in 2021. In 2022, revenue increased as we returned to service with 4.4 million Passenger Cruise Days. In 2021, voyages were cancelled due to the COVID-19 pandemic.

Expense

Total cruise operating expense increased 301.4% in 2022 compared to 2021. In 2022, the six months started with 16 ships operating with guests onboard and ended with the entire 28-ship fleet in service compared to 2021, during which all voyages were cancelled. In 2022, our cruise operating expenses were increased due to the resumption of voyages, resulting in higher payroll, fuel, and direct variable costs of fully operating ships. Costs for certain items such as food, fuel and logistics also increased related to inflation. Additionally, in 2022, there was an increase in COVID-19 related costs, including testing. Gross Cruise Cost increased 190.1% in 2022 compared to 2021 primarily related to the change in costs described above plus an increase in marketing, general and administrative expenses primarily related to increased marketing costs as we returned to service. Total other operating expense increased 34.4% in 2022 compared to 2021 primarily due to the increase in marketing, general and administrative expenses.

Interest expense, net was $516.1 million in 2022 compared to $639.8 million in 2021. The decrease in interest expense reflects lower losses in 2022 from extinguishment of debt and debt modification costs, which were $188.4 million in 2022 compared to $289.2 million in 2021. Excluding these losses, interest expense decreased as a result of ~~$292.8 million primarily related to~~lower interest expense in connection with the ~~repurchase of the Private Exchangeable Notes as well as additional debt outstanding at higher interest rates,~~recent refinancings, partially offset by ~~lower LIBOR.~~higher debt balances and higher LIBOR rates.

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Other income (expense), net was income of $490.9 million in 2022 compared to expense of ~~$145.5~~$371.9 million in ~~2021 compared to $325.4 million in 2020.~~2021. The ~~expenses~~gains and losses were primarily due to ~~losses~~changes from conversion options on our exchangeable notes.

Liquidity and Capital Resources

General

As of ~~September~~June 30, ~~2021,~~2022, our liquidity ~~was $1.9 billion consisting~~consisted of cash and cash ~~equivalents.~~equivalents of $1.9 billion and a $1 billion undrawn commitment less related fees. Our primary ongoing liquidity requirements are to finance working capital, capital expenditures and debt service.

In ~~January 2021,~~February 2022, we amended our Senior Secured Credit Facility to further defer certain amortization payments due prior to June 30, 2022 and to waive certain financial and other covenants through December 31, 2022. In connection with such amendment, our minimum liquidity requirement was increased to $200 million and such requirement applies through December 31, 2022.

In addition, in February 2021, we amended certain of our export-credit backed facilities to defer amortization payments aggregating approximately $680 million through March 31, 2022. We also amended all of our export-credit backed facilities to provide that, from the effective date of the amendments to and including December 31, 2022, certain of the financial covenants under such facilities will be suspended and the free liquidity test will be replaced by a covenant to maintain at least $200 million in free liquidity. The amendments also made certain other changes to the facilities, including imposing further restrictions on NCLC’s ability to incur debt, create security, issue equity and make dividends and other distributions.

~~In March 2021, the Company~~ received additional financing through various debt financings, ~~and NCLH’s equity offering,~~ collectively totaling ~~$2.7~~$2.1 billion in gross ~~proceeds. The Pride of America Credit Facility and Jewel Credit Facility were extinguished from~~ proceeds, which has been, or will be, used to redeem all of the outstanding 2024 Senior Secured Notes and 2026 Senior Secured Notes and to make scheduled principal payments on debt ~~financings. We also extinguished the Private Exchangeable Notes~~maturing in ~~March 2021 by using approximately $1.0 billion~~2022, including, in each case, to

Table of ~~cash proceeds from NCLH’s equity offering completed in March 2021 to repurchase the notes. See Note 7 – “Long-Term Debt” for further information.~~Contents

~~In July 2021, we amended nine credit facilities for our newbuild agreements~~pay any accrued and ~~increased the combined commitments under such credit facilities by approximately $770 million to cover owner’s supply (generally consists of provisions for the ship), modifications~~unpaid interest thereon, as well as related premiums, fees and ~~financing premiums.~~

~~In November 2021, the Company executed a $1 billion commitment through August 15, 2022 that provides additional liquidity to the Company.~~expenses. Refer to Note 7 – “Long-Term Debt” for further information.

~~The Company's monthly average cash burn for the third quarter of 2021 was approximately $275 million, below prior guidance of approximately $285 million. Looking ahead,~~In July 2022, the Company ~~expects fourth quarter of 2021 monthly average cash burn~~amended its $1 billion commitment, which provides additional liquidity to ~~increase to approximately $350 million driven by~~ the ~~continued phased relaunch of additional vessels. This cash burn rate~~Company, extending the commitment through March 31, 2023. The Company has not drawn and currently does not ~~include expected cash inflows from new and existing bookings or contribution from ships that have re-entered service.~~intend to draw under this commitment. See Note 7 – “Long-Term Debt” for more information.

Cash burn rates include ongoing ship operating expenses, administrative operating expenses, interest expense, taxes, debt deferral fees and expected non-newbuild capital expenditures and exclude cash refunds of customer deposits as well as cash inflows from new and existing bookings, newbuild related capital expenditures and other working capital changes. Future cash burn rate estimates also exclude unforeseen expenses. The third quarter of 2021 cash burn rate and fourth quarter estimate also reflect the deferral of debt amortization and newbuild related payments.

We continue to expect a gradual phased relaunch of our ships, with our ships initially operating at reduced occupancy levels as described in “Update Regarding COVID-19 Pandemic— Preparation for the Safe Resumption of Operations.” Refer to “Item 1A. Risk Factors” for further details regarding the significant impact the COVID-19 pandemic has had, and is expected to continue to have, on our financial condition and operations. The estimation of our future cash flow projections includes numerous assumptions that are subject to various risks and uncertainties. Refer to Note 2 – “Summary of Significant Accounting Policies” for further information on liquidity and management’s plan. Refer to “Item 1A. Risk Factors” for further details regarding uncertainty related to Russia’s invasion of Ukraine.

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There can be no assurance that the accuracy of the assumptions used to estimate our liquidity requirements will be correct, and our ability to be predictive is uncertain due to the ~~unknown magnitude and duration~~dynamic nature of the current operating environment, including the impacts of the COVID-19 global ~~pandemic.~~pandemic, Russia’s invasion of Ukraine and current macroeconomic conditions such as inflation, rising fuel prices and rising interest rates. Based on the liquidity estimates and our current resources, we have concluded we have sufficient liquidity to satisfy our obligations for at least the next ~~twelve~~12 months. Nonetheless, we anticipate that we will need additional equity and/or debt financing to fund our operations in the future if ~~we are unable to resume our cruise voyages on the schedule expected, and particularly if~~ a substantial portion of our fleet ~~continues to have suspended~~suspends cruise voyages or ~~operate~~operates at ~~significantly~~ reduced occupancy levels for a prolonged period. ~~We also expect~~There is no assurance that cash flows from operations and additional financings will be available in the future to ~~opportunistically~~fund our future obligations. Beyond 12 months, we will pursue ~~refinancing~~refinancings and other balance sheet optimization transactions from time to time ~~which could include equity, equity-linked~~in order to reduce interest expense or extend debt ~~financing.~~maturities. We expect to collaborate with financing institutions regarding these refinancing and optimization transactions as opportunities arise in the short-term to amend long-term arrangements.

We have received amendments to certain financial and other debt ~~covenant waivers through December 31, 2022~~covenants and added new free liquidity requirements. The relief offered by the debt covenant amendments is generally in effect through December 31, 2022. At ~~September~~June 30, ~~2021,~~2022, taking into account such ~~waivers,~~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 ~~amend~~or waivers of the covenants. However, no assurances can be made that such amendments or waivers would be approved by our lenders. Generally, if an event of default under any debt agreement occurs, then pursuant to cross default and/or cross acceleration clauses, substantially all of our outstanding debt and derivative contract payables could become due, and all debt and derivative contracts could be terminated, which would have a material adverse impact to our operations and liquidity.

Since March 2020, Moody’s has downgraded our long-term issuer rating to B2, our senior secured rating to B1 and our senior unsecured rating to Caa1. Since April 2020, S&P Global has downgraded our issuer credit rating to B, lowered our issue-level rating on our $875 million Revolving Loan Facility and $1.5 billion Term Loan A Facility to BB-, our issue-level rating on our ~~$675 million 2024 Senior Secured Notes and $750 million 2026 Senior Secured Notes~~other senior secured notes to B+ and our senior unsecured rating to B-. If our credit ratings were to be further downgraded, or general market conditions were to ascribe higher risk to our rating levels, our industry, or us, our access to capital and the cost of any debt or equity financing will be further negatively impacted. We also have ~~significant~~ capacity to incur additional indebtedness under our debt ~~agreements. On May 20, 2021, NCLH’s shareholders~~agreements and may issue additional ordinary shares from time to time, subject to our authorized ~~a 490,000,000 increase in the~~ number of ordinary ~~shares available for issuance.~~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 ~~September~~June 30, ~~2021,~~2022, we had advance ticket sales of ~~$1.7~~$2.5 billion, including the long-term portion, which included approximately ~~$0.75~~$0.4 billion of future cruise credits. We also have agreements with our credit card processors that, as of ~~September~~June 30, ~~2021,~~2022, governed approximately ~~$1.5~~$2.1 billion in advance ticket sales that had been received by the Company relating to future voyages. These agreements allow the credit card processors to require under certain circumstances, including the existence of a material adverse change, excessive chargebacks and other triggering events, that the Company maintain a reserve which would be satisfied by posting collateral. Although the agreements vary, these requirements may generally be satisfied either through a percentage of customer payments withheld or providing cash funds directly to the card processor. Any cash reserve or collateral requested could be increased or decreased.

As of ~~September~~June 30, ~~2021,~~2022, we had cash collateral reserves of approximately ~~$1.2~~$1.0 billion with credit card processors, of which

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approximately $455.4 million is recognized in accounts receivable, net orand approximately $508.2 million in other long-term assets. ~~Subsequent to September 30, 2021, $388.3 million in cash reserves have been released to the Company.~~ We may be required to pledge additional collateral and/or post additional cash reserves or take other actions that may further reduce our liquidity.

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Sources and Uses of Cash

In this section, references to “2022” refer to the six months ended June 30, 2022 and references to “2021” refer to the ~~nine~~six months ended ~~September~~June 30, ~~2021 and references to “2020” refer to the nine months ended September 30, 2020.~~2021.

Net cash used in operating activities was ~~$2.2 billion~~$107.5 million in ~~2021~~2022 as compared to net cash used in operating activities of ~~$1.9~~$1.5 billion in ~~2020.~~2021. The net cash used in operating activities included net losses and timing differences in cash receipts and payments relating to operating assets and liabilities. The net losses include losses on extinguishment of debt of $188.4 million in 2022 and $237.1 million in 2021. Advance ticket sales increased by ~~$469.6~~$755.2 million in 2022. Advance ticket sales increased by $191.6 million in 2021 ~~compared to a decrease of $834.6 million~~while the change in ~~2020 while our~~ accounts receivable, net and prepaid expenses and other assets, which ~~contains~~contain our reserves with credit card processors, decreased cash by ~~$979.9~~$408.1 million ~~compared to a decrease of $12.1~~and $242.6 million, respectively, in ~~2020.~~2021.

Net cash used in investing activities was ~~$543.0~~$81.1 million in ~~2021~~2022 and ~~$901.6~~$700.2 million in ~~2020,~~2021. The net cash used in investing activities was primarily related to newbuild payments and ship improvement projects offset by proceeds from maturities of short-term investments in ~~2021~~2022. The net cash used in investing activities was primarily related to purchases of short-term investments and newbuild payments ~~for Seven Seas Splendor and ship improvement projects~~ in ~~2020.~~2021.

Net cash provided by financing activities was ~~$1.3~~$0.6 billion in 2022 primarily due to the proceeds of $2.1 billion from our various note offerings partially offset by debt repayments and related redemption premiums associated with extinguishment of certain senior secured notes. Net cash provided by financing activities was $1.2 billion in 2021 primarily due to the proceeds of $2.7 billion from our various notes and a contribution from NCLH’s equity offering partially offset by debt repayments and a related redemption premium associated with extinguishment of the Private Exchangeable Notes. Net cash provided by financing activities was $4.9 billion in 2020 primarily due to the proceeds of $5.2 billion from our revolving credit facilities, various notes, and newbuild loans partially offset by debt repayments. Additionally, we received a contribution of $741.8 million from NCLH.

Future Capital Commitments

Future capital commitments consist of contracted commitments, including ship construction contracts. Anticipated expenditures related to ship construction contracts were ~~$0.1~~$1.5 billion for the remainder of ~~2021~~2022 and ~~$1.6~~$2.5 billion and ~~$2.5~~$1.3 billion for the years ending December 31, ~~2022~~2023 and ~~2023,~~2024, respectively. The Company has export credit financing in place for the anticipated expenditures related to ship construction contracts of ~~$0.1~~$1.0 billion for the remainder of ~~2021~~2022 and ~~$1.0~~$2.0 billion and ~~$2.0~~$0.6 billion for the years ending December 31, ~~2022~~2023 and ~~2023,~~2024, respectively. Anticipated non-newbuild capital expenditures for the remainder of ~~2021~~2022 are approximately ~~$0.2 billion and approximately $0.5 billion for the year ended December 31, 2022, which includes health and safety investments.~~$0.25 billion. Future expected capital expenditures will significantly increase our depreciation and amortization expense.

~~Project Leonardo will introduce an~~For the Norwegian brand, the first Prima Class Ship, Norwegian Prima, at approximately 143,500 Gross Tons and with 3,100 Berths, was delivered in July 2022. We have five additional ~~six ships,~~Prima Class Ships on order, each ranging from approximately ~~140,000~~143,500 to 156,300 Gross Tons with approximately ~~3,215~~3,100 to 3,550 Berths, with expected delivery dates from ~~2022~~2023 through 2027. For the Regent brand, we have an order for one Explorer Class Ship to be delivered in 2023, which will be approximately 55,000 Gross Tons and 750 Berths. For the Oceania Cruises brand, we have orders for two Allura Class Ships to be delivered in 2023 and 2025. Each of the Allura Class Ships will be approximately 67,000 Gross Tons and 1,200 Berths. The impacts of COVID-19 on the shipyards where our ships are under construction (or will be constructed) have resulted in some delays in expected ship deliveries, and the impacts of COVID-19, ~~could~~Russia’s invasion of Ukraine and/or other macroeconomic events are expected to result in additional delays in ship deliveries in the future, which may be prolonged.

The combined contract prices of the nine ships on order for delivery, including Norwegian Prima, was approximately ~~€7.6~~€7.7 billion, or ~~$8.8~~$8.1 billion based on the euro/U.S. dollar exchange rate as of ~~September~~June 30, ~~2021.~~2022. We have obtained export credit financing which is expected to fund approximately 80% of the contract price of each ship, subject to certain conditions. We do not anticipate any contractual breaches or cancellations to occur. However, if any such events were to

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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 ~~September~~June 30, 2022 and 2021 ~~and 2020~~ was ~~$12.5~~$14.8 million and ~~$6.8~~$9.9 million, respectively, and for the ~~nine~~six months ended ~~September~~June 30, 2022 and 2021 ~~and 2020~~ was ~~$30.6~~$28.1 million and ~~$18.1~~$18.0 million, respectively, primarily associated with the construction of our newbuild ships.

43Material Cash Requirements

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~~Off-Balance Sheet Arrangements~~

~~None.~~

~~Contractual Obligations~~

As of ~~September~~June 30, ~~2021,~~2022, our ~~contractual obligations with initial or remaining terms in excess of one year, including interest payments on long-term~~material cash requirements for debt ~~obligations, included the following~~and ship construction were as follows (in thousands):


	Remainder of
	2022		2023		2024		2025		2026		2027			Thereafter		Total
Long-term debt (1)	$	815,527	$	1,477,887	$	4,094,787	$	1,425,683	$	2,240,882	$	3,190,068	��	$	2,371,482	$	15,616,316
Ship construction contracts (2)		1,443,383		2,247,667		1,051,423		1,493,134		932,173		814,250			—		7,982,030
Total	$	2,258,910	$	3,725,554	$	5,146,210	$	2,918,817	$	3,173,055	$	4,004,318		$	2,371,482	$	23,598,346

Less than





More than

Total

1 year

1-3 years

3-5 years

5 years
Long-term debt (1)

$
12,601,904

$
543,701

$
5,484,750

$
4,422,019

$
2,151,434
Operating leases (2)

1,331,575

49,288

120,343

131,846

1,030,098
Ship construction contracts (3)

8,501,410

1,500,556

2,533,925

3,581,820

885,109
Port facilities (4)

522,564

27,957

64,707

52,752

377,148
Interest (5)

2,308,796

560,465

1,034,129

524,251

189,951
Other (6)

1,217,097

112,658

439,542

416,017

248,880
Total

$
26,483,346

$
2,794,625

$
9,677,396

$
9,128,705

$
4,882,620

(1)

~~Long-term debt excludes discounts, premiums, deferred financing fees~~Includes principal as well as estimated interest payments with LIBOR held constant as of June 30, 2022. Excludes the impact of any future possible refinancings and ~~conversion options, which are a direct addition or deduction from the carrying value of the related debt liability in the consolidated balance sheets.~~undrawn export-credit backed facilities.

(2)	~~Operating leases are primarily for port facilities and offices.~~

~~(3)~~

Ship construction contracts are for our newbuild ships based on the euro/U.S. dollar exchange rate as of ~~September~~June 30, ~~2021. Export credit financing is in place from syndicates~~2022. As of ~~banks. Approximately $1.0~~June 30, 2022, we have committed undrawn export-credit backed facilities of approximately $6.5 billion which funds approximately 80% of ~~the~~our ship construction ~~contracts due in less than one year are financed under export credit or other newbuild related financing.~~contracts.

~~(4)~~

Port facilities represent our usage of certain port facilities. Our port facilities agreements include force majeure provisions that may alleviate an unspecified amount of obligations under minimum guarantees during the COVID-19 pandemic. In March 2020, the Company provided the required notice that such provisions were being enacted. Customary practice is to prorate these obligations for the annual period impacted. A portion of our port fees may be waived as a result of these provisions, including those ports that are presented within operating leases in the table above.

~~(5)~~

~~Interest includes fixed and variable rates with LIBOR held constant as of September 30, 2021.~~

~~(6)~~

~~Other includes future commitments for service, maintenance and other business enhancement capital expenditures contracts.~~

~~Other~~

~~Certain service providers may require collateral in the normal course of our business. The amount of collateral may change based on certain terms and conditions.~~

As a routine part of our business, depending on market conditions, exchange rates, pricing and our strategy for growth, we regularly consider opportunities to enter into contracts for the building of additional ships. We may also consider the sale of ships, potential acquisitions and strategic alliances. If any of these were to occur, they may be financed through the incurrence of additional permitted indebtedness, through cash flows from operations, or through the issuance of debt, equity or equity-related securities.

Funding Sources

Certain of our debt agreements contain covenants that, among other things, require us to maintain a minimum level of liquidity, as well as limit our net funded debt-to-capital ratio and maintain certain other ~~ratios and restrict our ability to pay dividends.~~ratios. Substantially all of our ships ~~and other property and equipment~~ are pledged as collateral for certain of our debt. We have received amendments to certain financial and other debt ~~covenant waivers through December 31, 2022~~covenants and added new

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free liquidity requirements. ~~At September 30, 2021,~~After taking into account such ~~waivers,~~amendments, we believe we were in compliance with ~~all~~these covenants as of ~~our debt covenants.~~June 30, 2022.

In addition, our existing debt agreements restrict, and any of our future debt arrangements may restrict, among other things, the ability of NCLC to make distributions and/or pay dividends to NCLH and NCLH’s ability to pay cash dividends to its shareholders. NCLH is a holding company and depends upon its subsidiaries for their ability to pay distributions to finance any dividend or pay any other obligations of NCLH. However, we do not believe that these restrictions have had or are expected to have an impact on our ability to meet any cash obligations.

~~In light of the measures described under "Update Regarding COVID-19 Pandemic—Financing Transactions and Cost Containment Measures", we~~We believe our cash on hand, the ~~recently completed~~net impact of the undrawn $1 billion commitment less related fees, the expected return of a portion of the cash collateral from our credit card processors, expected future operating cash inflows and our ability to issue debt securities or additional equity securities, will be sufficient to fund operations, debt payment requirements, capital expenditures and maintain compliance with covenants under our debt agreements over the next 12-month period. Certain debt covenant waivers and modifications were received in 2021 to enable the Company to maintain this compliance. Refer to “—Liquidity and Capital ~~Resources”~~Resources—General” for further information regarding the debt covenant ~~waivers. There is no assurance that~~waivers and liquidity requirements.

Other

Certain service providers may require collateral in the normal course of our business. The amount of collateral may change based on certain terms and conditions.

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financed through the incurrence of additional permitted indebtedness, through cash flows from operations, or through the issuance of debt, equity or equity-related securities.

We refer you to “—Liquidity and ~~additional financings will be available in the future~~Capital Resources—General” for information regarding collateral provided to ~~fund~~ our future obligations. Furthermore, we anticipate that we will need additional equity and/or debt financing to fund our operations in the future if we are unable to resume our cruise voyages on the schedule expected, and particularly if a substantial portion of our fleet continues to have suspended cruise voyages or operate at significantly reduced occupancy levels for a prolonged period. We also expect to opportunistically pursue refinancings and other balance sheet optimization transactions from time to time, which could include equity, equity-linked or debt financings.credit card processors.

Item 3. Quantitative and Qualitative Disclosures About Market Risk

General

Interest Rate Risk

As of ~~September~~June 30, ~~2021, we had interest rate swap and collar agreements to hedge our exposure to interest rate movements and to manage our interest expense. As of September 30, 2021,~~2022, 73% of our debt was fixed and 27% was variable, which includes the effects of the interest rate swaps. The notional amount of outstanding debt associated with the interest rate derivative agreements as of September 30, 2021 was $0.2 billion.variable. As of December 31, ~~2020, 74%~~2021, 72% of our debt was fixed and ~~26%~~28% was variable, which includes the effects of ~~the~~an interest rate ~~swaps and collars.~~swap that matured during the six months ended June 30, 2022. The notional amount of our outstanding debt associated with the interest rate ~~swaps and collars~~swap was ~~$0.7~~$0.2 billion as of December 31, ~~2020.~~2021. The change in our fixed rate percentage from December 31, ~~2020~~2021 to ~~September~~June 30, ~~2021~~2022 was primarily due to ~~the maturity of various interest~~principal amortization payments on variable rate ~~derivatives.~~debt. Based on our ~~September~~June 30, ~~2021~~2022 outstanding variable rate debt balance, a one percentage point increase in annual LIBOR interest rates would increase our annual interest expense by approximately ~~$34.2~~$36.5 million excluding the effects of capitalization of interest.

Foreign Currency Exchange Rate Risk

As of ~~September~~June 30, ~~2021,~~2022, we had foreign currency derivatives to hedge the exposure to volatility in foreign currency exchange rates related to our ship construction contracts denominated in euros. These derivatives hedge the foreign currency exchange rate risk on a portion of the payments on our ship construction contracts. The payments not hedged aggregate ~~€4.9~~€4.5 billion, or $4.7 billion based on the euro/U.S. dollar exchange rate as of June 30, 2022. As of December 31, 2021, the payments not hedged aggregated €5.0 billion, or $5.7 billion, based on the euro/U.S. dollar exchange rate as of ~~September 30, 2021. As of~~

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December 31, ~~2020, the payments not hedged aggregated €5.0 billion, or $6.1 billion, based on the euro/U.S. dollar exchange rate as of December 31, 2020.~~2021. The change from December 31, ~~2020~~2021 to ~~September~~June 30, ~~2021~~2022 was due to the addition of foreign currency ~~hedges.~~forwards. We estimate that a 10% change in the euro as of ~~September~~June 30, ~~2021~~2022 would result in a ~~$0.6~~$0.5 billion change in the U.S. dollar value of the foreign currency denominated remaining payments.

Fuel Price Risk

Our exposure to market risk for changes in fuel prices relates to the forecasted purchases of fuel on our ships. Fuel expense, as a percentage of our total cruise operating expense, was ~~18.0%~~16.9% and ~~25.4%~~21.7% for the three months ended ~~September~~June 30, ~~2021~~2022 and ~~2020,~~2021, respectively, and ~~19.8%~~was 17.5% and ~~15.0%~~21.5% for the ~~nine~~six months ended ~~September~~June 30, ~~2021~~2022 and ~~2020,~~2021, respectively. We use fuel derivative agreements to mitigate the financial impact of fluctuations in fuel prices and as of ~~September~~June 30, ~~2021,~~2022, excluding fuel swaps for transactions that are no longer probable of occurrence, we had hedged approximately ~~47%, 35%~~41% and ~~14%~~31% of our remaining ~~2021,~~ 2022 and 2023 projected metric tons of fuel purchases, respectively. As of December 31, ~~2020,~~2021, we had hedged approximately ~~59%, 37%~~42% and ~~15%~~24% of our ~~2021,~~ 2022 and 2023 projected metric tons of fuel purchases, respectively. The percentage of fuel purchases hedged changed between December 31, ~~2020~~2021 and ~~September~~June 30, ~~2021~~2022 primarily due to changes in forecasted purchases and the ~~termination~~addition of ~~certain~~ fuel swaps.

We estimate that a 10% increase in our weighted-average fuel price would increase our anticipated ~~2021~~2022 fuel expense by ~~$10.9~~$48.2 million. This increase would be offset by an increase in the fair value of all our fuel swap agreements of ~~$4.8~~$32.7 million. Fair value of our derivative contracts is derived using valuation models that utilize the income valuation

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approach. These valuation models take into account the contract terms such as maturity, as well as other inputs such as fuel types, fuel curves, creditworthiness of the counterparty and the Company, as well as other data points.

Item 4. Controls and Procedures

Evaluation of Disclosure Controls and Procedures

Our management has evaluated, with the participation of our Chief Executive Officer and Chief Financial Officer, the effectiveness of our disclosure controls and procedures, as such term is defined in Rule 13a-15(e) under the Securities Exchange Act of 1934, as amended, as of ~~September~~June 30, ~~2021.~~2022. There are inherent limitations in the effectiveness of any system of disclosure controls and procedures, including the possibility of human error and the circumvention or overriding of the controls and procedures. Accordingly, even effective disclosure controls and procedures can only provide reasonable assurance of achieving their control objectives. Based upon management’s evaluation, our Chief Executive Officer and Chief Financial Officer concluded that our disclosure controls and procedures were effective as of ~~September~~June 30, ~~2021~~2022 to provide reasonable assurance that the information required to be disclosed by us in the reports we file or submit under the Securities Exchange Act of 1934, as amended, is recorded, processed, summarized and reported within the time periods specified in the rules and forms of the SEC, and that it is accumulated and communicated to our management, including our Chief Executive Officer and Chief Financial Officer, as appropriate, to allow timely decisions regarding required disclosure.

Changes in Internal Control Over Financial Reporting

There have been no changes in our internal control over financial reporting during the quarter ended ~~September~~June 30, ~~2021~~2022 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

Limitations on the Effectiveness of Controls

It should be noted that any system of controls, however well designed and operated, can provide only reasonable, and not absolute, assurance that the objectives of the system will be met. In addition, the design of any control system is based in part upon certain assumptions about the likelihood of future events. Because of these and other inherent limitations of control systems, there is only the reasonable assurance that our controls will succeed in achieving their goals under all potential future conditions.

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PART II. OTHER INFORMATION

Item 1. Legal Proceedings

See the section titled “Litigation” in “Item 1—Financial Statements—Notes to Consolidated Financial Statements—Note 10 Commitments and Contingencies” in Part I of this quarterly report for information about legal proceedings.

Item 1A. Risk Factors

We refer you to our Annual Report on Form 10-K for a discussion of the risk factors that affect our business and financial results. We wish to caution you that the risk factors discussed in “Item 1A. Risk Factors” in our Annual Report on Form 10-K, elsewhere in this report or other SEC filings, could cause future results to differ materially from those stated in any forward-looking statements. You should not interpret the disclosure of a risk to imply that the risk has not already materialized. The COVID-19 ~~has~~pandemic, Russia’s invasion of Ukraine and the impact of general macroeconomic conditions have also had the effect of heightening many of the other risks described in the “Risk Factors” included in our Annual Report on Form 10-K, such as those relating to our need to generate sufficient cash flows to service our indebtedness, and our ability to comply with the covenants contained in the agreements that govern our indebtedness.

Other than updates to the risk factors set forth below, there have been no material changes in our risk factors from those disclosed in our Annual Report on Form 10-K.

~~COVID-19~~Global events and conditions, including terrorist acts, armed conflicts, including Russia’s ongoing invasion of Ukraine, acts of piracy, and other international events impacting the security of travel or the global economy, or threats thereof, could adversely affect our business.

Global events and conditions, including the threat or possibility of future terrorist acts, outbreaks of hostilities or armed conflict, political unrest and instability, the issuance of government travel advisories or elevated threat warnings, increases in the activity of pirates, and other geo-political uncertainties, or the possibility or fear of such events, have had in the past and may again in the future have an adverse impact on our business. Any of these events or conditions may adversely affect demand for, and by extension pricing of, our cruises. Such events or conditions may also have downstream effects on the global economic environment, including increased fuel and commodity pricing, supply chain shortages, labor shortages, volatility in the global capital markets, contraction of the global economy leading to decreased consumer discretionary spending, and other effects impossible to predict at this time.

Armed conflicts, including Russia’s ongoing invasion of Ukraine, have impacted, and could in the future impact, our profitability and product offering by limiting the destinations to which we can travel and our operations by making it more difficult to source crew members and third-party vendors from affected regions and making it more difficult or costly to source goods we need to run our operations or to build or maintain our ships. Further, the Russia-Ukraine conflict has contributed to extreme volatility in the global financial markets and has had, and is expected to continue to have, ~~a significant impact on our financial condition and operations. The current, and uncertain future, impact~~further global economic consequences, including disruptions of the ~~COVID-19 pandemic, including its effect on the ability~~global supply chain and energy markets and heightened volatility of commodity fuel prices. Such volatility or desire of people to travel (including on cruises), is expected to continue to impact our results, operations, outlook, plans, goals, growth, reputation, cash flows, liquidity, demand for voyages and share price.

The spread of COVID-19 and the developments surrounding the global pandemic are having significant negative impacts on all aspects of our business. In March 2020, we implemented a voluntary suspension of all cruise voyages across our three brands. We began resuming cruises voyages in July 2021 on a limited basis and as of the date hereof eleven of our ships were operating with guests on board as part of our phased return to service. We expect the remaining ships in our fleet will continue incrementally resuming voyage operations through April 1, 2022, but due to the uncertainties surrounding the COVID-19 pandemic, it may take us longer than expected to return our entire fleet to cruise voyage operations and/or the suspension could potentially be reinstated, and the total length of time the majority of our fleet is out of cruise voyage operations or operating at significantly reduced occupancy levels may be prolonged. In addition, we have been, and will continue to be, further negatively impacted by related developments, including heightened governmental regulations and travel advisories, including recommendations and orders by the U.S. Department of State, the CDC and the Department of Homeland Security, and travel bans and restrictions, each of which has impacted, and is expected to continue to significantly impact, global guest sourcing and our access to various ports of call around the globe. On October 30, 2020, the CDC issued a Conditional Order that introduces a phased approach for the resumption of passenger cruises in the U.S. depending on a cruise line’s ability to implement certain protocols and procedures, which has been extended through January 15, 2022. We have received conditional sailing certificates for certain ships and are in the process of seeking certifications for additional ships in our fleet that will be operating out of the U.S., but our ability to comply with the Conditional Order in the future is unknown. As a result of these and other regulatory requirements and other logistical challenges, the timeline for our ability to return our entire fleet to cruises both in and outside of the U.S. is fluid. Additionally, in the U.S., certain states have enacted legislation prohibiting companies from verifying the vaccination status of guests, which in some instances we have challenged in court. Compliance with the Conditional Order and other regulations involves significant costs and could create significant uncertainties about our ability to continue to operate our cruise voyages in the U.S. We will continue to incur COVID-19 related costs as we implement and maintain health-related protocols on our ships, such as controlled capacity and testing, whichdisruptions have had, and may continue to have, ~~a significant effect on~~adverse consequences to our ~~operations. In addition,~~business, our suppliers and our customers. If the ~~industry is subject to enhanced health~~equity and safety requirements which have been, and may continue to be, costly and take a significant amount of time to implement across our fleet. We have had instances of COVID-19 on our ships and there is no guarantee that the health and safety protocols we implement will be successful in preventing the spread of COVID-19 onboard our ships and among our passengers and crew in the future.

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~~To date, the COVID-19 pandemic has resulted in significant costs and lost revenue~~credit markets deteriorate, including as a result of the suspension of cruise voyages, implementation of additional health and safety measures, reduced demand for cruise vacations, guest compensation, itinerary modifications, redeployments and cancellations, travel restrictions and advisories, the unavailability of ports and/political unrest or ~~destinations, costs~~war, it may make any necessary debt or equity financing more difficult to ~~return our passengers to their home destinations and expenses to transport our crew to and from our ships and to assist some of our crew that were unable to return home~~obtain in ~~an optimal time frame with food and housing.~~

~~Our ability to transport crew to and from our ships is dependent~~a timely manner or on a number of factors, including the ability to transport crew members to and from their home countries due to the limited number of commercial flights and charter options available, and governmental restrictions and regulations with respect to disembarking crew members and travel generally. Additionally, our policy that crew members must be fully vaccinated has created logistical challenges due to limitations on vaccine supplies, logistical complexities relating to vaccinating crew members who reside in different countries around the world and vaccine hesitancy. Such restrictions on crew travel and challenges in making sure our crew members have been vaccinated has impacted and could continue to impact our ability to staff our ships as operations continue to resume.

Between March 12, 2020 and April 30, 2020, three class action lawsuits were filed against us under Sections 10(b) and 20(a) of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), and Rule 10b-5 promulgated thereunder, alleging that we made false and misleading statements to the market and customers about COVID-19, which were combined and later dismissed in April 2021. In addition, in March 2020 the Florida Attorney General announced an investigation related to our marketing during the COVID-19 pandemic. Following the announcement of the investigation by the Florida Attorney General, we received notifications from other attorneys general and governmental agencies that they are conducting similar investigations. We may be the subject of additional lawsuits and investigations stemming from COVID-19. We cannot predict the numberfavorable terms, more costly or ~~outcome of any such proceedings and the impact that they will have on our financial results, but any such impact may be material.~~

We have nine newbuilds on order, scheduled to be delivered through 2027. The impacts of COVID-19 on the shipyards where our ships are under construction or will be constructed, have resulted in some delays in expected ship deliveries, and the impacts of COVID-19 could result in additional delays in ship deliveries in the future, which may be prolonged.

Due to the unknown duration and extent of the COVID-19 pandemic, travel restrictions, bans and advisories, uncertainties around our ability to comply with the Conditional Order and/or any additional or future regulatory restrictions on our operations, the potential unavailability of ports and/or destinations, unknown cancellations and timing of redeployments and a general impact on consumer sentiment regarding cruise travel, there are continuing uncertainties about when our full fleet will be back in service at historical occupancy levels. Moreover, demand for cruises may remain weak for a significant length of time and we cannot predict if and when each brand will return to pre-pandemic demand or pricing levels. Due to the discretionary nature of leisure travel spending and the competitive nature of the cruise industry, our revenues are heavily influenced by the condition of the U.S. economy and economies in other regions of the world. Unfavorable conditions in these broader economies have resulted, and may result in the future, in decreased demand for cruise vacations, changes in booking practices and related reactions by our competitors, all of which in turn have had, and may continue to have in the future, a strong negative effect on our business. In particular, our bookings may be negatively impacted by enhanced health and safety protocols, including vaccination requirements, concerns that cruises are susceptible to the spread of infectious diseases as well as adverse changes in the perceived or actual economic climate, including higher unemployment rates, declines in income levels and loss of personal wealth resulting from the impact of COVID-19. The ongoing COVID-19 pandemic and associated decline in economic activity and increase in unemployment levels are expected to have a severe and prolonged effect on the global economy generally and, in turn, is expected to depress demand for cruise vacations into the foreseeable future. In addition, we cannot predict the impact COVID-19 will have on our partners, such as travel agencies, suppliers and other vendors. We may be adversely impacted by any adverse impact our partners suffer. The global supply chain has also been negatively impacted by COVID-19, which has had an effect on our operations and our ability to source supplies. We cannot predict the impact on our financial performance and our cash flows required for cash refunds of fares for cancelled sailings as a result of the effects of the COVID-19 pandemic and the public’s concern regarding the health and safety of travel, including by cruise ship, and related decreases in demand for travel and cruising. Depending on the timing for bringing our full fleet back in service and number of cancellations, we may be required to provide cash refunds for a substantial

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~~portion of the balance of our advanced ticket sales. Accordingly, as a result of these unprecedented circumstances, we cannot predict the full impact of COVID-19 on our~~more dilutive. Our business, financial condition and results of ~~operations.~~

~~Moreover, our ability to attract~~operations may be materially and retain guests and crew depends, in part, upon the perception and reputation of our Company and our brands and the public’s concerns regarding the health and safety of travel generally, as well as regarding the cruise industry and our ships. Actual or perceived risk of infection could have an adverse effectadversely affected by any negative impact on the ~~public’s perception of~~global economy, capital markets or commodity fuel prices resulting from the Company, which could harm our reputation and business. Additionally, some of our protocols, such as our requirement that all guests and crew must be vaccinated for our initial voyages, may attract negative publicity.

~~As a result of the impacts of COVID-19, provisions~~conflict in ~~our credit card processing and~~Ukraine or any other commercial agreements have and may continue to adversely affect our liquidity. We have agreements with several credit card companies to process the sale of tickets and provide other services. Under these agreements, the credit card companies could, under certain circumstances and upon written notice, require us to maintain a reserve, which reserve would be funded by the credit card companies withholding or offsetting our credit card receivables, or our posting of cash or other collateral. As a result of the impacts of COVID-19, we have seen an increase in demand from consumers for refunds on their tickets, and we anticipate this will continue to be the case for the near future. As of September 30, 2021, we had cash reserves of approximately $1.2 billion with credit card processors recognized in accounts receivable, net or other long-term assets. Subsequent to September 30, 2021, $388.3 million in cash reserves have been released to the Company. We may be required to pledge additional collateral and/or post additional cash reserves or take other actions that may further reduce our liquidity. As a consequence, our financial position and liquidity could be further materially impacted.

As a result of all of the foregoing, we will report a net loss for the three months and year ending December 31, 2021 and expect to report a net loss until we are able to resume regular voyages. Our ability to forecast our cash inflows and additional capital needs is hampered, and we could be required to raise additional capital in the future. Our access to and cost of financing will depend on, among other things, global economic conditions, conditions in the global financing markets, the availability of sufficient amounts of financing, the terms and conditions of our existing debt agreements and any agreements governing future indebtedness, our prospects and our credit ratings. Since March 2020, Moody’s has downgraded our long-term issuer rating to B2, our senior secured rating to B1 and our senior unsecured rating to Caa1. Since April 2020, S&P Global has downgraded our issuer credit rating to B, lowered our issue-level rating on our $875 million Revolving Loan Facility and $1.5 billion Term Loan A Facility to BB-, our issue-level rating on our $675 million 2024 Senior Secured Notes and $750 million 2026 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. Accordingly, 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.geopolitical tensions.

The ~~agreements governing our indebtedness contain, and any instruments governing future indebtedness~~ongoing invasion of ours may contain, covenants that impose significant operating and financial restrictions on us, including restrictions or prohibitions on our ability to, among other things: incur or guarantee additional debt or issue certain preference shares; pay dividends on or make distributions in respect of our share capital or make other restricted payments, including the ability of our subsidiaries to pay dividends or make distributions to us; repurchase or redeem capital stock or subordinated indebtedness; make certain investments or acquisitions; transfer, sell or create liens on certain assets; and consolidate or merge with, or sell or otherwise dispose of all or substantially all of our assets to other companies. As a result of these covenants, we are limited in the manner in which we conduct our business, and we may be unable to engage in favorable business activities or finance future operations or capital needs. The terms of any instruments governing future indebtednessUkraine may also ~~require us to provide incremental collateral, which may further restrict our business operations.~~

The extent of the effects of the pandemic on our business and the cruise industry at large is highly uncertain and will ultimately depend on future developments, many of which are outside of our control, including, but not limited to, the duration, spread, severity and any recurrence of the pandemic, the severity and transmission rates of new more contagious and/or vaccine-resistant variants of COVID-19, the availability, distribution, rate of public acceptance and efficacy of vaccines and therapeutics for COVID-19, the duration and scope of related federal, state and local government orders and restrictions, the extent of the impact of COVID-19 on overall demand for cruise vacations and

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~~the length of time it takes for demand and pricing to return and normal economic and operating conditions to resume, all of which are highly uncertain and cannot be predicted. COVID-19 has also had~~have the effect of heightening many ~~of the~~ other risks ~~described herein, such as those relating to~~disclosed in our ~~need to generate sufficient cash flows to service our indebtedness,~~Annual Report on Form 10-K, any of which could materially and ~~our ability to comply with the covenants contained in the agreements that govern our indebtedness.~~

~~Additionally, epidemics, pandemics and viral outbreaks or other wide-ranging health scares in the future would likely also~~ adversely affect our business ~~financial condition~~ and results of ~~operations~~.operations.

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Item 6. Exhibits




10.1		Amendment and Restatement Agreement, dated as of June 17, 2021, but effective as of July 5, 2021, among Leonardo One, Ltd., as borrower, NCL Corporation Ltd., as guarantor, NCL International, Ltd., as shareholder, Norwegian Cruise Line Holdings Ltd.~~, the lenders party thereto, Crédit Agricole Corporate~~ Amended and Investment Bank, BNP Paribas Fortis S.A./N.V., KfW IPEX-Bank GmbH, HSBC Bank PLC and Cassa Depositi e Prestiti S.P.A., as joint mandated lead arrangers, and the other parties thereto, which amends and restates the Loan Agreement, originally dated as of April 12, 2017Restated 2013 Performance Incentive Plan (incorporated herein by reference to Exhibit 10.1 to Norwegian Cruise Line Holdings Ltd.’s Form ~~10-Q~~8-K filed on ~~August 9, 2021~~June 17, 2022 (File No. 001-35784))#
~~10.2~~		Amendment and Restatement Agreement, dated as of June 17, 2021, but effective as of July 5, 2021, among Leonardo Two, Ltd., as borrower, NCL Corporation Ltd., as guarantor, NCL International, Ltd., as shareholder, Norwegian Cruise Line Holdings Ltd., the lenders party thereto, Crédit Agricole Corporate and Investment Bank, BNP Paribas Fortis S.A./N.V., HSBC Bank PLC and Cassa Depositi e Prestiti S.P.A., as joint mandated lead arrangers, and the other parties thereto, which amends and restates the Loan Agreement, originally dated as of April 12, 2017 (incorporated herein by reference to Exhibit 10.2 to Norwegian Cruise Line Holdings Ltd.’s Form 10-Q filed on August 9, 2021 (File No. 001-35784))#
~~10.3~~		Amendment and Restatement Agreement, dated as of June 17, 2021, but effective as of July 6, 2021, among Leonardo Three, Ltd., as borrower, NCL Corporation Ltd., as guarantor, NCL International, Ltd., as shareholder, Norwegian Cruise Line Holdings Ltd., the lenders party thereto, HSBC Bank PLC, BNP Paribas Fortis S.A./N.V., KfW IPEX-Bank GmbH and Cassa Depositi e Prestiti S.P.A., as joint mandated lead arrangers, and the other parties thereto, which amends and restates the Loan Agreement, originally dated as of April 12, 2017 (incorporated herein by reference to Exhibit 10.3 to Norwegian Cruise Line Holdings Ltd.’s Form 10-Q filed on August 9, 2021 (File No. 001-35784))#
~~10.4~~		Amendment and Restatement Agreement, dated as of June 17, 2021, but effective as of July 6, 2021, among Leonardo Four, Ltd., as borrower, NCL Corporation Ltd., as guarantor, NCL International, Ltd., as shareholder, Norwegian Cruise Line Holdings Ltd., the lenders party thereto, KfW IPEX-Bank GmbH, BNP Paribas Fortis S.A./N.V., HSBC Bank PLC and Cassa Depositi e Prestiti S.P.A., as joint mandated lead arrangers, and the other parties thereto, which amends and restates the Loan Agreement, originally dated as of April 12, 2017 (incorporated herein by reference to Exhibit 10.4 to Norwegian Cruise Line Holdings Ltd.’s Form 10-Q filed on August 9, 2021 (File No. 001-35784))#
~~10.5~~		Amendment and Restatement Agreement, dated as of June 17, 2021, but effective as of July 5, 2021, among Leonardo Five, Ltd., as borrower, NCL Corporation Ltd., as guarantor, NCL International, Ltd., as shareholder, Norwegian Cruise Line Holdings Ltd., the lenders party thereto, Crédit Agricole Corporate and Investment Bank, BNP Paribas Fortis S.A./N.V., HSBC Bank PLC, KfW IPEX-Bank GmbH, Cassa Depositi e Prestiti S.P.A., Banco Santander, S.A. and Société Générale, as joint mandated lead arrangers, and the other parties thereto, which amends and restates the Loan Agreement, originally dated as of December 19, 2018 (incorporated herein by reference to Exhibit 10.5 to Norwegian Cruise Line Holdings Ltd.’s Form 10-Q filed on August 9, 2021 (File No. 001-35784))#
~~10.6~~		Amendment and Restatement Agreement, dated as of June 17, 2021, but effective as of July 5, 2021, among Leonardo Six, Ltd., as borrower, NCL Corporation Ltd., as guarantor, NCL International, Ltd., as shareholder, Norwegian Cruise Line Holdings Ltd., the lenders party thereto, Crédit Agricole Corporate and Investment Bank, BNP Paribas Fortis S.A./N.V., HSBC Bank PLC, KfW IPEX-Bank GmbH, Cassa Depositi e Prestiti S.P.A., Banco Santander, S.A. and Société Générale, as joint mandated lead arrangers, and the other parties thereto, which amends and restates the Loan Agreement, originally dated as of December 19, 2018 (incorporated herein by reference to Exhibit 10.6 to Norwegian Cruise Line Holdings Ltd.’s Form 10-Q filed on August 9, 2021 (File No. 001-35784))#
~~10.7~~		Amendment and Restatement Agreement, dated as of June 17, 2021, but effective as of July 5, 2021, among Explorer III New Build, LLC, as borrower, NCL Corporation Ltd., as guarantor, Seven Seas Cruises S. de R.L., as shareholder, Norwegian Cruise Line Holdings Ltd., the lenders party thereto, Crédit Agricole Corporate and Investment Bank, BNP Paribas Fortis S.A./N.V., HSBC Bank PLC, KfW IPEX-

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		Bank GmbH, Cassa Depositi e Prestiti S.P.A., Banco Santander, S.A. and Société Générale., as joint mandated lead arrangers, and the other parties thereto, which amends and restates the Loan Agreement, originally dated as of December 19, 2018 (incorporated herein by reference to Exhibit 10.7 to Norwegian Cruise Line Holdings Ltd.’s Form 10-Q filed on August 9, 2021 (File No. 001-35784))#
~~10.8~~		Amendment and Restatement Agreement, dated as of June 17, 2021, but effective as of July 5, 2021, among O Class Plus One, LLC, as borrower, NCL Corporation Ltd., as guarantor, Oceania Cruises S. de R.L., as shareholder, Norwegian Cruise Line Holdings Ltd., the lenders party thereto, Crédit Agricole Corporate and Investment Bank, BNP Paribas Fortis S.A./N.V., HSBC Bank PLC, KfW IPEX-Bank GmbH, Cassa Depositi e Prestiti S.P.A., Banco Santander, S.A. and Société Générale., as joint mandated lead arrangers, and the other parties thereto, which amends and restates the Loan Agreement, originally dated as of December 19, 2018 (incorporated herein by reference to Exhibit 10.8 to Norwegian Cruise Line Holdings Ltd.’s Form 10-Q filed on August 9, 2021 (File No. 001-35784))#
~~10.9~~		Amendment and Restatement Agreement, dated as of June 17, 2021, but effective as of July 5, 2021, among O Class Plus Two, LLC, as borrower, NCL Corporation Ltd., as guarantor, Oceania Cruises S. de R.L., as shareholder, Norwegian Cruise Line Holdings Ltd., the lenders party thereto, Crédit Agricole Corporate and Investment Bank, BNP Paribas Fortis S.A./N.V., HSBC Bank PLC, KfW IPEX-Bank GmbH, Cassa Depositi e Prestiti S.P.A., Banco Santander, S.A. and Société Générale., as joint mandated lead arrangers, and the other parties thereto, which amends and restates the Loan Agreement, originally dated as of December 19, 2018 (incorporated herein by reference to Exhibit 10.9 to Norwegian Cruise Line Holdings Ltd.’s Form 10-Q filed on August 9, 2021 (File No. 001-35784))#
~~10.10~~		Commitment Letter, dated as of November 1, 2021, among NCL Corporation Ltd. and the purchasers named therein (incorporated herein by reference to Exhibit 10.10 to Norwegian Cruise Line Holdings Ltd.’s Form 10-Q filed on November 9, 2021 (File No. 001-35784))†
31.1*		Certification of the President and Chief Executive Officer pursuant to Rule 13a-14(a) of the Securities Exchange Act of 1934
31.2*		Certification of the Executive Vice President and Chief Financial Officer pursuant to Rule 13a-14(a) of the Securities Exchange Act of 1934
32.1**		Certifications of the President and Chief Executive Officer and the Executive Vice President and Chief Financial Officer pursuant to Rule 13a-14(b) of the Securities Exchange Act of 1934 and Section 1350 of Chapter 63 of Title 18 of the United States Code


101*		The following unaudited consolidated financial statements from NCL Corporation Ltd.’s Quarterly Report on Form 10‑Q for the quarterly period ended ~~September~~June 30, ~~2021,~~2022, formatted in Inline XBRL:

		(i) the Consolidated Statements of Operations for the three and ~~nine~~six months ended ~~September~~June 30, ~~2021~~2022 and ~~2020;~~2021;

		(ii) the Consolidated Statements of Comprehensive Loss for the three and ~~nine~~six months ended ~~September~~June 30, ~~2021~~2022 and ~~2020;~~2021;

		(iii) the Consolidated Balance Sheets as of ~~September~~June 30, ~~2021~~2022 and December 31, ~~2020;~~2021;

		(iv) the Consolidated Statements of Cash Flows for the ~~nine~~six months ended ~~September~~June 30, ~~2021~~2022 and ~~2020;~~2021;

		(v) the Consolidated Statements of Changes in Shareholders’ Equity for the three and ~~nine~~six months ended ~~September~~June 30, ~~2021~~2022 and ~~2020;~~2021; and

		(vi) the Notes to the Consolidated Financial Statements.

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104*

The cover page from NCL Corporation Ltd.’s Quarterly Report on Form 10-Q for the quarter ended ~~September~~June 30, ~~2021,~~2022, formatted in Inline XBRL and included in the interactive data files submitted as Exhibit 101.

*Filed herewith.

** Furnished herewith.

~~# Certain portions of this document that constitute confidential information have been redacted in accordance with Regulation S-K Item 601(b)(10).~~† Management contract or compensatory plan.

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SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.


	NCL CORPORATION LTD.
	(Registrant)

	By:	/s/ FRANK J. DEL RIO
	Name:	Frank J. Del Rio
	Title:	President and Chief Executive Officer
		(Principal Executive Officer)

	By:	/s/ MARK A. KEMPA
	Name:	Mark A. Kempa
	Title:	Executive Vice President and Chief Financial Officer
		(Principal Financial Officer)

Dated: ~~November~~August 9, ~~2021~~2022

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		Page
PART I. FINANCIAL INFORMATION

Item 1.	Financial Statements	3

Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	2925

Item 3.	Quantitative and Qualitative Disclosures About Market Risk	4540

Item 4.	Controls and Procedures	4641

PART II. OTHER INFORMATION

Item 1.	Legal Proceedings	4742

Item 1A.	Risk Factors	4742

Item 6.	Exhibits	5143

SIGNATURES		5444


	Operating
	leases
Remainder of 2021	$	12,423
2022		42,937
2023		61,225
2024		64,996
2025		66,514
Thereafter		1,083,480
Total		1,331,575
Less: Present value discount		(632,423)
Present value of lease liabilities	$	699,152


	Three Months		Nine Months
	Ended September 30, 2021		Ended September 30, 2021
Coupon interest		18,984		62,109
Amortization of discount and deferred financing fees		25,911		73,674
Total	$	44,895	$	135,783


										Weighted-
	Number of Share Option Awards			Weighted-Average Exercise Price						Average	Aggregate
	Time-	Performance-	Market-	Time-		Performance-		Market-		Contractual	Intrinsic
	Based	Based	Based	Based		Based		Based		Term	Value
	Awards	Awards	Awards	Awards		Awards		Awards		(years)	(in thousands)
Outstanding as of January 1, 2021	4,525,207	114,583	208,333	$	51.96	$	59.43	$	59.43	4.42	$	—
Forfeited and cancelled	(96,862)	—	—		52.49		—		—
Outstanding as of September 30, 2021	4,428,345	114,583	208,333		51.95		59.43		59.43	3.68		—


			Less than						More than
	Total		1 year		1-3 years		3-5 years		5 years
Long-term debt (1)	$	12,601,904	$	543,701	$	5,484,750	$	4,422,019	$	2,151,434
Operating leases (2)		1,331,575		49,288		120,343		131,846		1,030,098
Ship construction contracts (3)		8,501,410		1,500,556		2,533,925		3,581,820		885,109
Port facilities (4)		522,564		27,957		64,707		52,752		377,148
Interest (5)		2,308,796		560,465		1,034,129		524,251		189,951
Other (6)		1,217,097		112,658		439,542		416,017		248,880
Total	$	26,483,346	$	2,794,625	$	9,677,396	$	9,128,705	$	4,882,620