Item 1. Financial Statements

Norwegian Cruise Line Holdings Ltd.

Consolidated Statements of Operations

(Unaudited)

(in thousands, except share and per share data)

​	​	​	​	​	​	​	​	​	​	​	​	​
​	​	Three Months Ended					​	Six Months Ended
​	​	June 30,					​	June 30,
​		2023			2022			2023			2022
Revenue		​			​			​			​
Passenger ticket	​	$	1,478,474	​	$	793,892	​	$	2,687,315	​	$	1,136,347
Onboard and other	​		727,018	​		393,289	​		1,340,116	​		572,774
Total revenue	​		2,205,492	​		1,187,181	​		4,027,431	​		1,709,121
Cruise operating expense	​			​			​			​
Commissions, transportation and other	​		506,855	​		256,190	​		916,539	​		344,148
Onboard and other	​		161,880	​		96,155	​		281,577	​		128,705
Payroll and related	​		308,220	​		262,580	​		612,375	​		503,307
Fuel	​		164,242	​		181,189	​		359,110	​		316,698
Food	​		87,770	​		61,157	​		183,736	​		100,673
Other	​		154,643	​		216,045	​		310,691	​		415,198
Total cruise operating expense	​		1,383,610	​		1,073,316	​		2,664,028	​		1,808,729
Other operating expense	​			​			​			​
Marketing, general and administrative	​		352,222	​		329,080	​		688,235	​		625,287
Depreciation and amortization	​		197,115	​		181,587	​		391,905	​		360,663
Total other operating expense	​		549,337	​		510,667	​		1,080,140	​		985,950
Operating income (loss)	​		272,545	​		(396,802)	​		283,263	​		(1,085,558)
Non-operating income (expense)	​		​	​		​	​		​	​		​
Interest expense, net	​		(177,692)	​		(144,377)	​		(348,949)	​		(472,062)
Other income (expense), net	​		(8,043)	​		30,991	​		(16,998)	​		69,111
Total non-operating income (expense)	​		(185,735)	​		(113,386)	​		(365,947)	​		(402,951)
Net income (loss) before income taxes	​		86,810	​		(510,188)	​		(82,684)	​		(1,488,509)
Income tax benefit (expense)	​		(694)	​		867	​		9,479	​		(3,526)
Net income (loss)	​	$	86,116	​	$	(509,321)	​	$	(73,205)	​	$	(1,492,035)
Weighted-average shares outstanding	​			​			​			​
Basic	​		424,178,775	​		419,107,330	​		423,421,203	​		418,424,753
Diluted	​		461,075,240	​		419,107,330	​		423,421,203	​		418,424,753
Earnings (loss) per share	​			​			​			​
Basic	​	$	0.20	​	$	(1.22)	​	$	(0.17)	​	$	(3.57)
Diluted	​	$	0.20	​	$	(1.22)	​	$	(0.17)	​	$	(3.57)

​

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

​

Norwegian Cruise Line Holdings Ltd.

Consolidated Statements of Comprehensive Income (Loss)

(Unaudited)

(in thousands)

​	​	​	​	​	​	​	​	​	​	​	​	​
​	​	Three Months Ended					​	Six Months Ended
​	​	June 30,					​	June 30,
​		2023			2022			2023			2022
Net income (loss)	​	$	86,116	​	$	(509,321)	​	$	(73,205)	​	$	(1,492,035)
Other comprehensive loss:	​			​			​			​
Shipboard Retirement Plan	​		64	​		94	​		128	​		2,570
Cash flow hedges:	​		​	​		​	​		​	​		​
Net unrealized loss	​		(4,577)	​		(90,503)	​		(23,052)	​		(51,199)
Amount realized and reclassified into earnings	​		2,547	​		(36,075)	​		(7,327)	​		(43,577)
Total other comprehensive loss	​		(1,966)	​		(126,484)	​		(30,251)	​		(92,206)
Total comprehensive income (loss)	​	$	84,150	​	$	(635,805)	​	$	(103,456)	​	$	(1,584,241)

​

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

​

Norwegian Cruise Line Holdings Ltd.

Consolidated Balance Sheets

(Unaudited)

(in thousands, except share data)

​	​	​	​	​	​	​
​	​	June 30,		​	December 31,
​		2023			2022
Assets		​			​
Current assets:		​			​
Cash and cash equivalents	​	$	899,135	​	$	946,987
Accounts receivable, net	​		219,116	​		326,272
Inventories	​		153,850	​		148,717
Prepaid expenses and other assets	​		576,478	​		450,893
Total current assets	​		1,848,579	​		1,872,869
Property and equipment, net	​		15,054,710	​		14,516,366
Goodwill	​		98,134	​		98,134
Trade names	​		500,525	​		500,525
Other long-term assets	​		1,146,264	​		1,569,800
Total assets	​	$	18,648,212	​	$	18,557,694
Liabilities and shareholders’ equity	​			​
Current liabilities:	​			​
Current portion of long-term debt	​	$	1,125,754	​	$	991,128
Accounts payable	​		148,328	​		228,742
Accrued expenses and other liabilities	​		1,198,386	​		1,318,460
Advance ticket sales	​		3,345,767	​		2,516,521
Total current liabilities	​		5,818,235	​		5,054,851
Long-term debt	​		11,994,555	​		12,630,402
Other long-term liabilities	​		820,201	​		803,850
Total liabilities	​		18,632,991	​		18,489,103
Commitments and contingencies (Note 10)	​			​
Shareholders’ equity:	​			​
Ordinary shares, $0.001 par value; 980,000,000 shares authorized; 425,155,523 shares issued and outstanding at June 30, 2023 and 421,413,565 shares issued and outstanding at December 31, 2022	​		425	​		421
Additional paid-in capital	​		7,661,646	​		7,611,564
Accumulated other comprehensive income (loss)	​		(507,330)	​		(477,079)
Accumulated deficit	​		(7,139,520)	​		(7,066,315)
Total shareholders’ equity	​		15,221	​		68,591
Total liabilities and shareholders’ equity	​	$	18,648,212	​	$	18,557,694

​

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

​

Norwegian Cruise Line Holdings Ltd.

Consolidated Statements of Cash Flows

(Unaudited)

(in thousands)

​	​	​	​	​	​	​
​	​	Six Months Ended
​	​	June 30,
​		2023			2022
Cash flows from operating activities		​			​
Net loss	​	$	(73,205)	​	$	(1,492,035)
Adjustments to reconcile net loss to net cash provided by (used in) operating activities:	​			​
Depreciation and amortization expense	​	​	425,288	​		391,320
Loss on derivatives	​	​	9,423	​	​	47
Loss on extinguishment of debt	​		2,801	​		188,433
Provision for bad debts and inventory obsolescence	​		1,497	​		2,500
Gain on involuntary conversion of assets	​	​	(4,583)	​	​	(1,880)
Share-based compensation expense	​		72,691	​		62,840
Net foreign currency adjustments on euro-denominated debt	​		1,822	​		(12,063)
Changes in operating assets and liabilities:	​		​	​		​
Accounts receivable, net	​		106,709	​		566,265
Inventories	​		(5,815)	​		(36,748)
Prepaid expenses and other assets	​		321,120	​		(542,730)
Accounts payable	​		(72,345)	​		(127,188)
Accrued expenses and other liabilities	​		(75,009)	​		137,225
Advance ticket sales	​		826,221	​		755,189
Net cash provided by (used in) operating activities	​		1,536,615	​		(108,825)
Cash flows from investing activities	​			​
Additions to property and equipment, net	​		(974,190)	​		(326,303)
Proceeds from maturities of short-term investments	​	​	—	​	​	240,000
Cash paid on settlement of derivatives	​	​	(23,379)	​	​	—
Other	​	​	5,367	​	​	5,237
Net cash used in investing activities	​		(992,202)	​		(81,066)
Cash flows from financing activities	​			​
Repayments of long-term debt	​		(2,500,777)	​		(1,268,888)
Proceeds from long-term debt	​		2,038,187	​		2,073,175
Proceeds from employee related plans	​		2,618	​		2,557
Net share settlement of restricted share units	​		(25,223)	​		(11,991)
Early redemption premium	​		—	​		(172,012)
Deferred financing fees	​		(107,070)	​		(36,359)
Net cash provided by (used in) financing activities	​		(592,265)	​		586,482
Net increase (decrease) in cash and cash equivalents	​		(47,852)	​		396,591
Cash and cash equivalents at beginning of period	​		946,987	​		1,506,647
Cash and cash equivalents at end of period	​	$	899,135	​	$	1,903,238

​

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

​

Norwegian Cruise Line Holdings Ltd.

Consolidated Statements of Changes in Shareholders’ Equity

(Unaudited)

(in thousands)

​

​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​
​	​	Three Months Ended June 30, 2023
​	​	​	​	​	​	​	​	Accumulated		​	​	​	​	​	​
​	​	​	​	​	Additional		​	Other		​	​		​	Total
​	​	Ordinary		​	Paid-in		​	Comprehensive		​	Accumulated		​	Shareholders’
​	​	Shares			Capital			Income (Loss)			Deficit			Equity (Deficit)
Balance, March 31, 2023		$	424	​	$	7,631,028	​	$	(505,364)	​	$	(7,225,636)	​	$	(99,548)
Share-based compensation		​	—	​	​	44,536	​	​	—	​	​	—	​	​	44,536
Issuance of shares under employee related plans		​	1	​	​	(1)	​	​	—	​	​	—	​	​	—
Net share settlement of restricted share units		​	—	​	​	(13,917)	​	​	—	​	​	—	​	​	(13,917)
Other comprehensive loss, net		​	—	​	​	—	​	​	(1,966)	​	​	—	​	​	(1,966)
Net income		​	—	​	​	—	​	​	—	​	​	86,116	​	​	86,116
Balance, June 30, 2023	​	$	425	​	$	7,661,646	​	$	(507,330)	​	$	(7,139,520)	​	$	15,221
​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​
​	​	Six Months Ended June 30, 2023
​	​	​	​	​	​	​	​	Accumulated		​	​	​	​	​	​
​	​	​	​	​	Additional		​	Other		​	​		​	Total
​	​	Ordinary		​	Paid-in		​	Comprehensive		​	Accumulated		​	Shareholders’
​		Shares			Capital			Income (Loss)			Deficit			Equity (Deficit)
Balance, December 31, 2022		$	421	​	$	7,611,564	​	$	(477,079)	​	$	(7,066,315)	​	$	68,591
Share-based compensation		​	—		​	72,691		​	—		​	—		​	72,691
Issuance of shares under employee related plans		​	4		​	2,614		​	—		​	—		​	2,618
Net share settlement of restricted share units		​	—		​	(25,223)		​	—		​	—		​	(25,223)
Other comprehensive loss, net		​	—		​	—		​	(30,251)		​	—		​	(30,251)
Net loss		​	—		​	—		​	—		​	(73,205)		​	(73,205)
Balance, June 30, 2023	​	$	425	​	$	7,661,646	​	$	(507,330)	​	$	(7,139,520)	​	$	15,221

​

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

​

Norwegian Cruise Line Holdings Ltd.

Consolidated Statements of Changes in Shareholders’ Equity - Continued

(Unaudited)

(in thousands)

​

​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​
​	​	Three Months Ended June 30, 2022
​	​	​	​	​	​	​	​	Accumulated			​	​		​	​
​	​	​	​	​	Additional		​	Other		​	​		​	Total
​	​	Ordinary		​	Paid-in		​	Comprehensive		​	Accumulated		​	Shareholders’
​	​	Shares			Capital			Income (Loss)			Deficit			Equity (Deficit)
Balance, March 31, 2022		$	419	​	$	7,537,111	​	$	(250,808)	​	$	(5,779,120)	​	$	1,507,602
Share-based compensation		​	—		​	30,048		​	—		​	—		​	30,048
Net share settlement of restricted share units		​	—		​	(30)		​	—		​	—		​	(30)
Other comprehensive loss, net		​	—		​	—		​	(126,484)		​	—		​	(126,484)
Net loss		​	—	​	​	—	​	​	—	​	​	(509,321)	​	​	(509,321)
Balance, June 30, 2022	​	$	419	​	$	7,567,129	​	$	(377,292)	​	$	(6,288,441)	​	$	901,815
​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​
​	​	Six Months Ended June 30, 2022
​		​	​	​	​	​	​	Accumulated			​	​		​	​
​	​	​	​	​	Additional		​	Other		​	​		​	Total
​	​	Ordinary		​	Paid-in		​	Comprehensive		​	Accumulated		​	Shareholders’
​		Shares			Capital			Income (Loss)			Deficit			Equity (Deficit)
Balance, December 31, 2021		$	417	​	$	7,513,725	​	$	(285,086)	​	$	(4,796,406)	​	$	2,432,650
Share-based compensation		​	—		​	62,840		​	—		​	—		​	62,840
Issuance of shares under employee related plans		​	2		​	2,555		​	—		​	—		​	2,557
Net share settlement of restricted share units		​	—		​	(11,991)		​	—		​	—		​	(11,991)
Other comprehensive loss, net	​	​	—		​	—		​	(92,206)		​	—		​	(92,206)
Net loss		​	—	​	​	—	​	​	—	​	​	(1,492,035)	​	​	(1,492,035)
Balance, June 30, 2022	​	$	419	​	$	7,567,129	​	$	(377,292)	​	$	(6,288,441)	​	$	901,815

​

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

​

​

​

Norwegian Cruise Line Holdings Ltd.

Notes to Consolidated Financial Statements

(Unaudited)

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

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

1. Description of Business and Organization

We are a leading global cruise company which operates the Norwegian Cruise Line, Oceania Cruises and Regent Seven Seas Cruises brands. As of June 30, 2023, we had 30 ships with approximately 62,000 Berths and had orders for seven additional ships to be delivered through 2028.

Norwegian Viva was delivered in August 2023. We refer you to Note 13 – “Subsequent Event” for additional

information. We have four Prima Class Ships on order with currently scheduled delivery dates from 2025 through 2028. We have one Explorer Class Ship on order for delivery in 2023. We have one Allura Class Ship on order for delivery in 2025. These additions to our fleet will increase our total Berths to approximately 82,000.

​

​

2. Summary of Significant Accounting Policies

Liquidity and Management’s Plan

Due to the impact of COVID-19, in March 2020, the Company implemented a voluntary suspension of all cruise voyages across its three brands. In the third quarter of 2021, we began a phased relaunch of our fleet, which was completed in early May 2022, with all ships now in operation with guests on board. As a result of actions the Company undertook in response to the impacts of the COVID-19 pandemic, we have a substantial debt balance and we require a significant amount of our liquidity and cash flows to service our debt.

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 normalized Occupancy levels, which are expected to be between approximately 105% to 106% annually;

	●	Expected sustained increase in revenue per Passenger Cruise Day through a combination of both passenger ticket and onboard revenue as compared to 2019;

	●	Expected timing of cash collections for bookings;

	●	Expected fuel prices based on forward curves; and

	●	Expected impact of inflation on cost items other than fuel.

Our projected liquidity requirements also reflect our principal assumptions surrounding ongoing operating costs, as well as liquidity requirements for financing costs and necessary capital expenditures and our expectation that holders of the 2024 Exchangeable Notes will exchange their 2024 Exchangeable Notes for shares. In addition, as a result of lingering impacts associated with the COVID-19 pandemic and other global events, such as Russia’s ongoing invasion of Ukraine

and actions taken by the United States and other governments in response to the invasion, the global economy, including the financial and credit markets, has experienced significant volatility and disruptions, including increases in inflation rates, fuel prices, and interest rates. 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, including our substantial debt balance, have had, and will continue to have, a significant impact on our financial results and liquidity.

We cannot make assurances that our assumptions used to estimate our liquidity requirements will not change materially due to the dynamic nature of the current economic landscape. We have made reasonable estimates and judgments of the impact of these events within our financial statements; however, there may be material changes to those estimates in future periods. We have taken actions to improve our liquidity, including completing various capital market and financing transactions and making capital expenditure and operating expense reductions, and we expect to continue to pursue further opportunities to improve our liquidity.

Based on these actions and assumptions as discussed above, and considering our liquidity of approximately $2.4 billion, including cash and cash equivalents of $899.1 million and borrowings available under our $875 million undrawn Revolving Loan Facility and $650 million undrawn commitment less related fees (see Note 7 – “Long-Term Debt”) as of June 30, 2023, we have concluded that we have sufficient liquidity to satisfy our obligations for at least the next twelve months. In addition, we have $300 million of backstop committed financing for amounts outstanding under the Senior Secured Credit Facility, which is available between October 4, 2023 and January 2, 2024 (see Note 7 – “Long-Term Debt”).

Basis of Presentation

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

Our operations are seasonal and results for interim periods are not necessarily indicative of the results for the entire fiscal year. Historically, demand for cruises has been strongest during the Northern Hemisphere’s summer months; however, our cruise voyages were completely suspended from March 2020 until July 2021 due to the COVID-19 pandemic and our resumption of cruise voyages was phased in gradually through May 2022. The interim consolidated financial statements should be read in conjunction with the audited consolidated financial statements for the year ended December 31, 2022, which are included in our most recent Annual Report on Form 10-K filed with the SEC on February 28, 2023.

Earnings (Loss) Per Share

Basic earnings (loss) per share is computed by dividing net income (loss) by the basic weighted-average number of shares outstanding during each period. Diluted earnings (loss) per share is computed by dividing net income (loss) and assumed conversion of exchangeable notes by diluted weighted-average shares outstanding.

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

​	​	​	​	​	​	​	​	​	​	​	​	​
​	​	Three Months Ended					​	Six Months Ended
​	​	June 30,					​	June 30,
​		2023			2022			2023			2022
Net income (loss) - Basic EPS	​	$	86,116	​	$	(509,321)	​	$	(73,205)	​	$	(1,492,035)
Effect of dilutive securities - exchangeable notes	​	​	4,603	​	​	—	​	​	—	​	​	—
Net income (loss) and assumed conversion of exchangeable notes - Diluted EPS	​	$	90,719	​	$	(509,321)	​	$	(73,205)	​	$	(1,492,035)
Basic weighted-average shares outstanding	​		424,178,775	​		419,107,330	​		423,421,203	​		418,424,753
Dilutive effect of share awards	​		2,758,715	​		—	​		—	​		—
Dilutive effect of exchangeable notes	​	​	34,137,750	​	​	—	​	​	—	​	​	—
Diluted weighted-average shares outstanding	​		461,075,240	​		419,107,330	​		423,421,203	​		418,424,753
Basic EPS	​	$	0.20	​	$	(1.22)	​	$	(0.17)	​	$	(3.57)
Diluted EPS	​	$	0.20	​	$	(1.22)	​	$	(0.17)	​	$	(3.57)

​

Each exchangeable note (see Note 7 – “Long-Term Debt”) is individually evaluated for its dilutive or anti-dilutive impact on EPS. Only the interest expense and weighted average shares for exchangeable notes which are dilutive are included in the effect of dilutive securities above. During the three months ended June 30, 2023, only the 2027 1.125% Exchangeable Notes were dilutive. For the three months ended June 30, 2023 and 2022, a total of 55.7 million and 97.7 million shares, respectively, and for the six months ended June 30, 2023 and 2022, a total of 89.6 million and 92.1 million shares, respectively, have been excluded from diluted weighted-average shares outstanding because the effect of including them would have been anti-dilutive.

Foreign Currency

The majority of our transactions are settled in U.S. dollars. We remeasure assets and liabilities denominated in foreign currencies at exchange rates in effect at the balance sheet date. The resulting gains or losses are recognized in our consolidated statements of operations within other income (expense), net. We recognized a loss of $11.1 million and a gain of $36.4 million for the three months ended June 30, 2023 and 2022, respectively, and a loss of $19.8 million and a gain of $44.7 million for the six months ended June 30, 2023 and 2022, respectively, related to remeasurement of assets and liabilities denominated in foreign currencies. Remeasurements of foreign currency related to operating activities are recognized within changes in operating assets and liabilities in the consolidated statement of cash flows.

Depreciation and Amortization Expense

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

Accounts Receivable, Net

Accounts receivable, net included $31.5 million and $118.4 million due from credit card processors as of June 30, 2023 and December 31, 2022, respectively.

​

3. Revenue Recognition

Disaggregation of Revenue

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

​

​	​	​	​	​	​	​	​	​	​	​	​	​
​	​	Three Months Ended					​	Six Months Ended
​	​	June 30,					​	June 30,
​		2023			2022			2023			2022
North America	​	$	1,221,177	​	$	673,503	​	$	2,582,230	​	$	1,160,938
Europe	​		880,129	​		499,917	​		961,447	​		524,714
Asia-Pacific	​		89,890	​		13,362	​		295,552	​		21,654
Other	​	​	14,296	​	​	399	​	​	188,202	​	​	1,815
Total revenue	​	$	2,205,492	​	$	1,187,181	​	$	4,027,431	​	$	1,709,121

​

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, products and services; therefore, we aggregate all of the operating segments into one reportable segment.

Although we sell cruises on an international basis, our passenger ticket revenue is primarily attributed to U.S.-sourced guests who make reservations through the U.S. Revenue attributable to U.S.-sourced guests has approximated 83-87% of total revenue over the preceding three fiscal years. No other individual country’s revenues exceed 10% in any given period.

Contract Balances

Receivables from customers are included within accounts receivable, net. As of June 30, 2023 and December 31, 2022, our receivables from customers were $91.6 million and $94.2 million, respectively, primarily related to in-transit credit card receivables.

​

Our standard payment and cancellation penalties apply for all sailings after March 31, 2023. Future cruise credits that have been issued as face value reimbursement for cancelled bookings due to COVID-19 are approximately $81.2 million. 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.

​

Our contract liabilities are included within advance ticket sales. As of June 30, 2023 and December 31, 2022, our contract liabilities were $2.5 billion and $1.7 billion, respectively. Of the amounts included within contract liabilities as of June 30, 2023, approximately 40% were refundable in accordance with our cancellation policies. Of the deposits included within advance ticket sales, the majority are refundable in accordance with our cancellation policies and it is uncertain to what extent guests may request refunds. Refunds payable to guests are included in accounts payable. For the six months ended June 30, 2023, $1.7 billion of revenue recognized was included in the contract liability balance at the beginning of the period.

​

​

​

4. Leases

Operating lease balances were as follows (in thousands):

​

​	​	​	​	​	​	​	​	​
​		Balance Sheet location		June 30, 2023			December 31, 2022
Operating leases				​		​	​
Right-of-use assets		Other long-term assets	​	$	715,537	​	$	707,086
Current operating lease liabilities		Accrued expenses and other liabilities	​	​	40,149	​	​	39,689
Non-current operating lease liabilities		Other long-term liabilities	​	​	597,056	​	​	588,064

​

​

​

5. Accumulated Other Comprehensive Income (Loss)

Accumulated other comprehensive income (loss) for the six months ended June 30, 2023 was as follows (in thousands):

​

​	​	​	​	​	​	​	​	​	​	​
​	​	Six Months Ended June 30, 2023								​
​		​	​		​	​	​	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	​	$	(477,079)	​	$	(480,578)	​	$	3,499
Current period other comprehensive loss before reclassifications	​		(23,052)	​		(23,052)			—
Amounts reclassified into earnings	​		(7,199)	​		(7,327)	(1)		128	(2)
Accumulated other comprehensive income (loss) at end of period	​	$	(507,330)	​	$	(510,957)	(3)	$	3,627

​

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

​

​	​	​	​	​	​	​	​	​	​	​
​	​	Six Months Ended June 30, 2022								​
​		​	​		​	​	​	Change
​	​	Accumulated		​	Change		​	Related to		​
​	​	Other		​	Related to		​	Shipboard		​
​	​	Comprehensive		​	Cash Flow		​	Retirement		​
​		Income (Loss)			Hedges		​	Plan		​
Accumulated other comprehensive income (loss) at beginning of period		$	(285,086)	​	$	(279,696)	​	$	(5,390)
Current period other comprehensive income (loss) before reclassifications			(48,818)			(51,199)			2,381
Amounts reclassified into earnings			(43,388)			(43,577)	(1)		189	(2)
Accumulated other comprehensive income (loss) at end of period		$	(377,292)		$	(374,472)	​	$	(2,820)

(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 $24.0 million of loss expected to be reclassified into earnings in the next 12 months.

​

​

​

​

**6.**Property and Equipment, Net

Property and equipment, net increased $538.3 million for the six months ended June 30, 2023 primarily due to the delivery of Oceania Cruises’ Vista. We determine the weighted average useful lives of our ships based primarily on our estimates of the useful lives of the ships’ major component systems on the date of acquisition, such as cabins, main diesels, main electric, superstructure and hull, and their related proportional weighting to the ship as a whole. We have assessed the weighted-average useful life of the components of Oceania Cruises’ Vista and assigned a useful life and residual value to the Allura Class Ships consistent with our accounting policy. The useful life and residual value consider the historical useful lives of similar assets, manufacturer recommended lives, planned maintenance programs, anticipated changes in technological conditions and the related proportional weighting of the major components of the Allura Class Ships.

7. Long-Term Debt

In February 2023, NCLC issued $600.0 million aggregate principal amount of 8.375% senior secured notes due 2028 (the “2028 Senior Secured Notes”). The 2028 Senior Secured Notes and related guarantees are secured by first-priority interests in, among other things and subject to certain agreed security principles, thirteen of our vessels that also secure the Senior Secured Credit Facility. The 2028 Senior Secured Notes are guaranteed by our subsidiaries that own the vessels that secure the 2028 Senior Secured Notes. NCLC may redeem the 2028 Senior Secured Notes at its option, in whole or in part, at any time and from time to time prior to February 1, 2025, 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 2028 Senior Secured Notes at its option, in whole or in part, at any time and from time to time on or after February 1, 2025, at the redemption prices set forth in the indenture governing the 2028 Senior Secured Notes plus accrued and unpaid interest and additional amounts, if any, to, but excluding, the redemption date. At any time and from time to time prior to February 1, 2025, NCLC may choose to redeem up to 40% of the aggregate principal amount of the 2028 Senior Secured Notes with the net proceeds of certain equity offerings, subject to certain restrictions, at a redemption price equal to 108.375% of the principal amount of the 2028 Senior 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 2028 Senior Secured Notes issued remains outstanding following such redemption. The 2028 Senior Secured Notes pay interest at 8.375% 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.

The proceeds from the 2028 Senior Secured Notes were used to repay the loans outstanding under our Term Loan A Facility that otherwise would have become due in January 2024, including to pay any accrued and unpaid interest thereon, as well as related premiums, fees and expenses. As a result, all of the remaining term loans outstanding under our Term Loan A Facility will mature in January 2025, subject to, if a one-time minimum liquidity threshold is not satisfied on September 16, 2024, a springing maturity date of September 16, 2024.

The indenture governing the 2028 Senior Secured Notes includes requirements that, among other things and subject to a number of qualifications and exceptions, restrict the ability of NCLC and its restricted subsidiaries, as applicable, to (i) incur or guarantee additional indebtedness; (ii) pay dividends or distributions on, or redeem or repurchase, equity interests and make other restricted payments; (iii) make investments; (iv) consummate certain asset sales; (v) engage in certain transactions with affiliates; (vi) grant or assume certain liens; and (vii) consolidate, merge or transfer all or substantially all of their assets.

In July 2022, NCLC entered into a $1 billion amended and restated commitment letter (the “commitment letter”) with the purchasers named therein (collectively, the “Commitment Parties”), which superseded a $1 billion commitment letter previously executed in November 2021. The commitment letter, among other things, extended the commitments thereunder through March 31, 2023. In February 2023, the Commitment Parties further amended the commitment letter (the “amended commitment letter”) to extend certain commitments thereunder through February 2024, with an option for NCLC to further extend such commitments through February 2025 at its election. Pursuant to the amended commitment letter, the Commitment Parties have agreed to purchase from NCLC an aggregate principal amount of up to $650 million of senior secured notes at NCLC’s option. NCLC has the option to make up to two draws, consisting of (i) $250 million of senior secured notes due 2028 that, if issued, will accrue interest at a rate of 11.00% per annum subject

to a 1.00% increase or decrease based on certain market conditions at the time drawn (the “Class B Notes”) and (ii) $400 million aggregate principal amount of 8.00% senior secured notes due five years after the issue date (the “Backstop Notes”). The Class B Notes and the Backstop Notes are subject to a quarterly commitment fee of 0.75% for so long as the commitments with respect to Class B Notes or the Backstop Notes, as applicable, are outstanding, which fee will be increased to 1.00% if NCLC extends the commitments through February 2025 at its election. If drawn, the Class B Notes will be subject to an issue fee of 2.00%, and the Backstop Notes will be subject to a quarterly duration fee of 1.50%, as well as an issue fee of 3.00%.

In February 2023, in connection with the execution of the amended commitment letter, NCLC issued $250 million aggregate principal amount of 9.75% senior secured notes due 2028 (the “Class A Notes” and, collectively with the Class B Notes and the Backstop Notes, the “Notes”), subject to an issue fee of 2.00%. NCLC used the net proceeds from the Class A Notes for general corporate purposes. NCLC may redeem the Class A Notes at its option, in whole or in part, at any time and from time to time prior to February 22, 2025, 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 Class A Notes at its option, in whole or in part, at any time and from time to time on or after February 22, 2025, at the redemption prices set forth in the indenture governing the Class A Notes, plus accrued and unpaid interest and additional amounts, if any, to, but excluding, the redemption date. The Class A Notes pay interest at 9.75% per annum, quarterly on February 15, May 15, August 15 and November 15 of each year, to holders of record at the close of business on the immediately preceding February 1, May 1, August 1 and November 1, respectively.

The Class A Notes are, and the Class B Notes and the Backstop Notes, if issued, 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 Class A Notes are, and the Class B Notes and the Backstop Notes, if issued, will be, guaranteed by our subsidiaries that own the property that secures the Notes as well as certain additional subsidiaries whose assets do not secure the Notes.

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

In February 2023, NCLC entered into a Backstop Agreement with Morgan Stanley & Co. LLC (“MS”), pursuant to which MS has agreed to provide backstop committed financing to refinance and/or repay in whole or in part amounts outstanding under the Senior Secured Credit Facility. Pursuant to the Backstop Agreement, we may, at our sole option, issue and sell to MS (subject to the satisfaction of certain conditions) five-year senior unsecured notes up to an aggregate principal amount sufficient to generate gross proceeds of $300 million at any time between October 4, 2023 and January 2, 2024.

In April 2023, $82.5 million in aggregate principal amount of the Revolving Loan Facility due January 2024 was assigned to a new lender, and the maturity date was extended by one year to January 2025. The terms of the assigned principal are the same as the existing lenders who extended commitments in December 2022 under Amendment No. 4 to the Senior Secured Credit Facility.

In April 2023, we took delivery of Oceania Cruises’ Vista. We had export credit financing in place for 80% of the contract price. The associated $632.6 million term loan bears interest at a fixed rate of 3.64% with a maturity date of April 30, 2035. Principal and interest payments are payable semiannually.

In May and June 2023, certain of NCLC’s export-credit backed facilities were amended to replace LIBOR with Term SOFR. In connection with these amendments, the Company adopted 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 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. As of June 30, 2023, we have applied certain optional expedients in our accounting for these amendments and the impact was immaterial.

Exchangeable Notes

The following is a summary of NCLC’s exchangeable notes as of June 30, 2023 (in thousands):

​	​	​	​	​	​	​	​	​	​	​	​	​	​	​
​	​	​	​	​	Unamortized		​	​	​	​	​	​	​	​
​	​	Principal		​	Deferred		​	Net Carrying		​	Fair Value
​		Amount			Financing Fees			Amount			Amount			Leveling
2024 Exchangeable Notes (1)	​	$	146,601	​	$	(1,329)	​	$	145,272	​	$	242,046	​	Level 2
2025 Exchangeable Notes	​	​	450,000	​	​	(5,264)	​	​	444,736	​	​	616,397	​	Level 2
2027 1.125% Exchangeable Notes	​	​	1,150,000	​	​	(20,777)	​	​	1,129,223	​	​	1,059,518	​	Level 2
2027 2.5% Exchangeable Notes	​	​	473,175	​	​	(9,077)	​	​	464,098	​	​	450,458	​	Level 2

(1)	Classified within current portion of long-term debt as of June 30, 2023. We expect that the holders of the 2024 Exchangeable Notes will exchange their 2024 Exchangeable Notes for shares.

The following is a summary of NCLC’s exchangeable notes as of December 31, 2022 (in thousands):

​	​	​	​	​	​	​	​	​	​	​	​	​	​	​
​	​	​	​	​	Unamortized		​	​	​	​	​	​	​	​
​	​	Principal		​	Deferred		​	Net Carrying		​	Fair Value
​		Amount			Financing Fees			Amount			Amount			Leveling
2024 Exchangeable Notes	​	$	146,601	​	$	(1,993)	​	$	144,608	​	$	161,840	​	Level 2
2025 Exchangeable Notes	​	​	450,000	​	​	(6,312)	​	​	443,688	​	​	433,580	​	Level 2
2027 1.125% Exchangeable Notes	​	​	1,150,000	​	​	(23,457)	​	​	1,126,543	​	​	763,830	​	Level 2
2027 2.5% Exchangeable Notes	​	​	473,175	​	​	(10,184)	​	​	462,991	​	​	331,743	​	Level 2

​

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

​	​	​	​	​	​	​	​	​	​	​	​	​
​	​	Three Months Ended					​	Six Months Ended
​	​	June 30,					​	June 30,
​	​	2023			2022		​	2023			2022
Coupon interest	​	$	14,437	​	$	13,924	​	$	28,875	​	$	26,916
Amortization of deferred financing fees	​	​	2,856	​	​	2,865	​	​	5,499	​	​	5,140
Total	​	$	17,293	​	$	16,789	​	$	34,374	​	$	32,056

​

As of June 30, 2023, the effective interest rate is 7.04%, 5.97%, 1.64% and 3.06% for the 2024 Exchangeable Notes, 2025 Exchangeable Notes, 2027 1.125% Exchangeable Notes and 2027 2.5% Exchangeable Notes, respectively.

​

​

Debt Repayments

The following are scheduled principal repayments on our long-term debt including exchangeable notes which can be settled in shares and finance lease obligations as of June 30, 2023 (in thousands):

​

​	​	​	​
Year		Amount
Remainder of 2023	​	$	475,986
2024	​		1,712,045
2025	​		1,899,496
2026	​		2,106,171
2027	​		3,158,887
2028	​	​	1,815,376
Thereafter	​		2,227,032
Total	​	$	13,394,993

​

Debt Covenants

As of June 30, 2023, we were in compliance with all of our debt covenants. If we do not continue to remain in compliance with our covenants, we would have to seek additional amendments to or waivers of 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 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.

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 critical terms match or regression analysis for hedge relationships 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 June 30, 2023, we had fuel swaps, which are used to mitigate the financial impact of volatility of fuel prices pertaining to approximately 481 thousand metric tons of our projected fuel purchases, maturing through December 31, 2024.

As of June 30, 2023, we had fuel swaps pertaining to approximately 11 thousand metric tons of our projected fuel purchases which were not designated as cash flow hedges maturing through December 31, 2023.

As of June 30, 2023, we had foreign currency forward contracts 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 €1.2 billion, or $1.3 billion based on the euro/U.S. dollar exchange rate as of June 30, 2023.

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

​	​	​	​	​	​	​	​	​	​	​	​	​	​	​
​	​	​	​	Assets					​	Liabilities
​	​	​	​	June 30,		​	December 31,		​	June 30,		​	December 31,
​		Balance Sheet Location		2023			2022			2023			2022
Derivative Contracts Designated as Hedging Instruments			​	​	​	​	​	​	​	​	​	​	​	​
​	​	​	​	​	​	​	​	​	​	​	​	​	​	​
Fuel contracts	​	​	​	​	​	​	​	​	​	​	​	​	​	​
​	​	Prepaid expenses and other assets	​	$	11,535	​	$	53,224	​	$	—	​	$	7,137
​	​	Other long-term assets	​	​	—	​	​	3,869	​	​	—	​	​	655
​	​	Accrued expenses and other liabilities	​		5,695	​		—	​		19,504	​		—
​	​	Other long-term liabilities	​		385	​		—	​		4,323	​		—
Foreign currency contracts	​	​	​	​	​	​	​	​	​	​	​	​	​	​
​	​	Prepaid expenses and other assets	​		4,739	​		3,617	​		—	​		—
​	​	Accrued expenses and other liabilities	​		5,259	​		4,386	​		139,871	​		177,746
Total derivatives designated as hedging instruments			​	$	27,613	​	$	65,096	​	$	163,698	​	$	185,538
​	​	​	​	​	​	​	​	​	​	​	​	​	​	​
Derivative Contracts Not Designated as Hedging Instruments			​	​	​	​	​	​	​	​	​	​	​	​
​	​	​	​	​	​	​	​	​	​	​	​	​	​	​
Fuel contracts	​	​	​	​	​	​	​	​	​	​	​	​	​	​
​	​	Prepaid expenses and other assets	​	$	—	​	$	84	​	$	—	​	$	348
​	​	Other long-term assets	​	​	—	​	​	—	​	​	—	​	​	191
​	​	Accrued expenses and other liabilities	​	​	—	​		—	​	​	1,175	​	​	—
Total derivatives not designated as hedging instruments			​	$	—	​	$	84	​	$	1,175	​	$	539
Total derivatives	​	​	​	$	27,613	​	$	65,180	​	$	164,873	​	$	186,077

​

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 an option pricing model 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 model used by the Company is an industry standard model for valuing options and is used by the broker/dealer community. The inputs to this option pricing model are the option strike price, underlying price, risk-free rate of interest, time to expiration, and volatility. The fair value of option contracts considers 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.

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

​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​
​	​	​	​	​	Gross		​	​	​	​	Gross		​	​	​
​	​	Gross		​	Amounts		​	Total Net		​	Amounts		​	​	​
June 30, 2023		Amounts			Offset			Amounts			Not Offset			Net Amounts
Assets	​	$	16,274	​	$	—	​	$	16,274	​	$	(4,739)	​	$	11,535
Liabilities	​	​	164,873	​	​	(11,339)	​	​	153,534	​	​	(108,668)	​	​	44,866

​

​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​
​	​	​	​	​	Gross		​	​	​	​	Gross		​	​	​
​	​	Gross		​	Amounts		​	Total Net		​	Amounts		​	​	​
December 31, 2022		Amounts			Offset			Amounts			Not Offset			Net Amounts
Assets	​	$	60,794	​	$	(8,331)	​	$	52,463	​	$	(3,617)	​	$	48,846
Liabilities	​	​	177,746	​	​	(4,386)	​	​	173,360	​	​	(146,381)	​	​	26,979

​

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

​

​	​	​	​	​	​	​	​	​	​	​	​	​	​	​
​	​	​	​	​	​	​	​	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)
​	​	Three Months		​	Three Months		​	​	​	Three Months		​	Three Months
​	​	Ended		​	Ended		​	​	​	Ended		​	Ended
​		June 30, 2023			June 30, 2022			​		June 30, 2023			June 30, 2022
Fuel contracts	​	$	(12,055)	​	$	52,249		Fuel	​	$	572	​	$	37,342
Fuel contracts	​	​	—	​	​	—	​	Other income (expense), net	​	​	(306)	​	​	—
Foreign currency contracts	​		7,478	​		(142,752)		Depreciation and amortization	​		(2,813)	​		(1,267)
Total gain (loss) recognized in other comprehensive loss	​	$	(4,577)	​	$	(90,503)			​	$	(2,547)	​	$	36,075

​

​	​	​	​	​	​	​	​	​	​	​	​	​	​	​
​	​	​	​	​	​	​	​	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, 2023			June 30, 2022		​	​		June 30, 2023			June 30, 2022
Fuel contracts		$	(41,070)	​	$	144,732	​	Fuel		$	13,169	​	$	46,151
Fuel contracts	​	​	—	​	​	—	​	Other income (expense), net	​	​	(343)	​	​	—
Foreign currency contracts			18,018	​		(195,931)	​	Depreciation and amortization			(5,499)	​		(2,534)
Interest rate contracts			—	​		—	​	Interest expense, net			—	​		(40)
Total gain (loss) recognized in other comprehensive loss		$	(23,052)	​	$	(51,199)	​			$	7,327	​	$	43,577

​

​

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

​

​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​
​	​	Three Months Ended June 30, 2023								​	Three Months Ended June 30, 2022
​	​	​	​	​	Depreciation		​	​	​	​	​	​	​	Depreciation		​	​	​
​	​	​	​	​	and		​	Other Income		​	​	​	​	and		​	Interest
​		Fuel			Amortization			(Expense), net			Fuel			Amortization			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	​	$	164,242	​	$	197,115	​	$	(8,043)	​	$	181,189	​	$	181,587	​	$	144,377
​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​
Amount of gain (loss) reclassified from accumulated other comprehensive income (loss) into income (expense)	​			​			​			​			​			​
Fuel contracts	​	​	572	​	​	—	​	​	—	​	​	37,342	​	​	—	​	​	—
Foreign currency contracts	​	​	—	​	​	(2,813)	​	​	—	​	​	—	​	​	(1,267)	​	​	—
​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​
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	​	​	—	​	​	—	​	​	(306)	​	​	—	​	​	—	​	​	—

​

​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​
​	​	Six Months Ended June 30, 2023								​	Six Months Ended June 30, 2022
​	​	​	​	​	Depreciation		​	​	​	​	​	​	​	Depreciation		​	​	​
​	​	​	​	​	and		​	Other Income		​	​	​	​	and		​	Interest
​		Fuel			Amortization			(Expense), net			Fuel			Amortization			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	​	$	359,110	​	$	391,905	​	$	(16,998)	​	$	316,698	​	$	360,663	​	$	472,062
​	​	​		​	​		​	​	​	​	​		​	​		​	​
Amount of gain (loss) reclassified from accumulated other comprehensive income (loss) into income (expense)		​			​			​	​		​			​			​
Fuel contracts		​	13,169		​	—		​	—		​	46,151		​	—		​	—
Foreign currency contracts		​	—	​	​	(5,499)		​	—		​	—		​	(2,534)		​	—
Interest rate contracts		​	—		​	—		​	—		​	—		​	—		​	(40)
​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​
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	​	​	—	​	​	—	​	​	(343)	​	​	—	​	​	—	​	​	—

​

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
​	​	​	Three Months Ended					​	Six Months Ended
​	​	​	June 30,					​	June 30,
​	Location of Gain (Loss)		2023			2022			2023			2022
Derivatives not designated as hedging instruments	​	​			​			​			​
Fuel contracts	Other income (expense), net	​	$	(251)	​	$	4,335	​	$	(847)	​	$	34,078
Foreign currency contracts	Other income (expense), net	​	​	(1,315)	​	​	(11,856)	​	​	(1,528)	​	​	(11,856)

​

​

​

​

Long-Term Debt

As of June 30, 2023 and December 31, 2022, the fair value of our long-term debt, including the current portion, was $12.2 billion and $11.9 billion, respectively, which was $1.2 billion and $2.0 billion 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 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, May 2021 and June 2022, the plan was amended and restated (the “Restated 2013 Plan”) pursuant to approval from the Board of Directors and NCLH’s shareholders. Among other things, under the Restated 2013 Plan, the number of NCLH’s ordinary shares that could have been delivered pursuant to all awards granted under the plan was increased to a maximum aggregate limit of 39,375,106 shares. In June 2023, NCLH’s shareholders approved a further amendment and restatement of the Restated 2013 Plan to increase the number of NCLH ordinary shares that may be delivered by 2,633,900, resulting in an increase in the maximum aggregate limit to 42,009,006 shares.

Restricted Share Unit Awards

In March 2023, NCLH granted 5.8 million time-based restricted share unit awards to our employees, which primarily vest in substantially equal installments over three years. Additionally, in March 2023, NCLH granted 0.8 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 2025 and the satisfaction of an additional time-based vesting requirement that generally requires continued employment through March 1, 2026.

The following is a summary of restricted share unit activity for the six months ended June 30, 2023:

​

​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​
​	​	Number of	​	Weighted-		​	Number of	​	Weighted-		​	Number of	​	Weighted-
​	​	Time-Based	​	Average Grant		​	Performance-	​	Average Grant		​	Market-	​	Average Grant
​		Awards		Date Fair Value			Based Awards		Date Fair Value			Based Awards		Date Fair Value
Non-vested as of January 1, 2023		6,980,707	​	$	22.83		2,749,939	​	$	26.30		50,000	​	$	59.43
Granted		5,933,520	​	​	15.05	​	919,890	​	​	14.87		—	​	​	—
Vested		(3,339,307)	​	​	24.66	​	(1,363,469)	​	​	22.14		—	​	​	—
Forfeited or expired		(201,540)	​	​	18.85	​	—	​	​	—		(50,000)	​	​	59.43
Non-vested as of June 30, 2023		9,373,380	​	​	17.34		2,306,360	​	​	24.20		—	​	​	—

​

​

Share Option Awards

The following table sets forth a summary of option activity under NCLH’s Restated 2013 Plan for the period presented:

​

​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​
​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	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, 2023		4,198,595	​	114,583	​	208,333	​	$	51.92	​	$	59.43	​	$	59.43	​	2.29	​	$	—
Forfeited and cancelled		(587,114)	​	—		(208,333)	​	​	45.11	​	​	—	​	​	59.43	​	​	​
Outstanding as of June 30, 2023		3,611,481	​	114,583		—	​	​	53.03	​	​	59.43	​	​	—	​	1.77	​	​	—

​

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

​	​	​	​	​	​	​	​	​	​	​	​	​
​	​	Three Months Ended					​	Six Months Ended
​	​	June 30,					​	June 30,
​		2023			2022			2023			2022
Payroll and related expense	​	$	4,876	​	$	5,732	​	$	9,333	​	$	11,936
Marketing, general and administrative expense	​		39,660	​		24,316	​		63,358	​		50,904
Total share-based compensation expense	​	$	44,536	​	$	30,048	​	$	72,691	​	$	62,840

​

​

​

10. Commitments and Contingencies

Ship Construction Contracts

For the Norwegian brand, the second Prima Class Ship, Norwegian Viva, at approximately 143,500 Gross Tons and 3,100 Berths, was delivered in August 2023. We refer you to Note 13 – “Subsequent Event” for additional information. For the Norwegian brand, we have four Prima Class Ships on order, each ranging from approximately 156,300 to 169,000 Gross Tons with 3,450 or more Berths, with currently scheduled delivery dates from 2025 through 2028. 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 an order for one additional Allura Class Ship to be delivered in 2025, which will be approximately 67,000 Gross Tons and 1,200 Berths. The impacts of COVID-19 on the shipyards where our ships are under construction (or will be constructed), Russia’s ongoing invasion of Ukraine, initiatives to improve environmental sustainability and modifications the Company plans to make to its newbuilds and/or other macroeconomic events have resulted in delays in expected ship deliveries. These and other impacts could result in additional delays in ship deliveries in the future, which may be prolonged.

​

The combined contract prices of the seven ships on order for delivery, including Norwegian Viva, as of June 30, 2023 was approximately €7.4 billion, or $8.1 billion based on the euro/U.S. dollar exchange rate as of June 30, 2023. We have obtained export credit financing which is expected to fund approximately 80% of the contract price of each ship and related financing premiums, subject to certain conditions. 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

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.

​

Helms-Burton Act

On August 27, 2019, two lawsuits were filed against 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 Javier Garcia-Bengochea (the “Garcia-Bengochea Matter”) alleges that he holds an interest in the Port of Santiago, Cuba, and the complaint filed by Havana Docks Corporation (the “Havana Docks Matter”) alleges it holds an interest in the Havana Cruise Port Terminal, 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, 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 September 1, 2020, the district court in the Garcia-Bengochea Matter entered an order staying all case deadlines and administratively closed the case pending the outcome of an appeal in a related case brought by the same plaintiff, in which the district court granted another cruise line defendant judgment on the pleadings. As to the appeal in the related case, in November 2022, the Eleventh Circuit issued an opinion affirming the dismissal and, on February 8, 2023, issued its mandate to the district court. After the April 10, 2023 deadline for filing a petition for certiorari with the U.S. Supreme Court passed in the related appeals with the plaintiff taking no action there, on April 19, 2023, the plaintiff voluntarily dismissed with prejudice the action against the Company. In the Havana Docks Matter, after various motions challenging the sufficiency of plaintiff’s complaint were resolved and voluminous discovery was completed, both sides filed motions for summary judgment. On March 21, 2022, the court issued an order granting plaintiff’s motion for summary judgment on the issue of liability and denying the Company’s cross-motion for summary judgment. The court scheduled a trial on determination of damages only for November 2022. The plaintiff elected to seek what the court ruled to be its baseline statutory damage amount, which was the amount of the certified claim plus interest, trebled and with attorneys’ fees. Given this, there was no fact issue to be tried, and the matter was removed from the trial calendar. On December 30, 2022, the court entered a final judgment of approximately $112.9 million and, on January 23, 2023, the Company filed a notice of appeal from that judgment. On April 12, 2023, the Company posted a sufficient supersedeas bond with the court to prevent any efforts by the plaintiff to collect on the judgment pending the appeal. On June 30, 2023, the Company filed its opening appellate brief with the United States Court of Appeals for the Eleventh Circuit. For the Havana Docks Matter, we believe that the likelihood of loss is reasonably possible but not probable at this time; therefore, no liability has been recorded. The ability to make such estimates and judgments can be affected by various factors including, among other things: lack of legal precedent, stage of the proceedings, legal uncertainties inherent within the litigation process, availment of appellate remedies, and involvement of numerous parties. We continue to believe we have meritorious defenses to the Havana Docks Matter. However, if the plaintiff prevails in the final outcome of this matter, there may be a material adverse impact on the Company’s financial condition, results of operations and/or cash flows.

Other

We are a party to a claim against a vendor which resulted in a verdict of approximately $159 million in favor of the Company in October 2022. The court entered a final judgment of approximately that amount in February 2023. Thereafter, the vendor posted a bond and appealed the judgment. On July 12, 2023, the vendor filed its initial appellate brief. At this time, there can be no assurance that the Company will ultimately prevail in the final outcome of this claim, and no receivable has been recognized by the Company.

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 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 $3.2 billion in advance ticket sales at June 30, 2023 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 June 30, 2023, we had cash reserves of approximately $31.5 million with credit card processors recognized in accounts receivable, net. During the three months ended June 30, 2023, the Company received a return of cash collateral from one credit card processor of $500 million, which was previously classified as other long-term assets. We may be required to pledge additional collateral and/or post additional cash reserves or take other actions in the future that may adversely affect our liquidity.

​

​

11. Other Income (Expense), Net

For the three and six months ended June 30, 2023, other income (expense), net consisted of expense of $8.0 million and $17.0 million, respectively, primarily due to losses on foreign currency remeasurements. For the three and six months ended June 30, 2022, other income (expense), net consisted of income of $31.0 million and $69.1 million, respectively, primarily due to gains on foreign currency remeasurements.

​

12. Supplemental Cash Flow Information

For the six months ended June 30, 2023 and 2022, we had non-cash investing activities consisting of changes in accruals related to property and equipment of $49.4 million and $145.5 million, respectively.

​

13. Subsequent Event

​

In August 2023, we took delivery of Norwegian Viva. 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 2.77% with a maturity date of August 3, 2035. Principal and interest payments are payable semiannually.

​

​

​

​

​