NORWEGIAN CRUISE LINE HOLDINGS LTD. Financial Presentation
The following discussion and analysis contains forward-looking statements within the meaning of the federal securities laws, and should be read in conjunction with the disclosures we make concerning risks and other factors that may affect our business and operating results. You should read this information in conjunction with the consolidated financial statements and the notes thereto included in this annual report. See also "Cautionary Statement Concerning Forward-Looking Statements" immediately prior to Part I, Item 1 in this annual report. 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 fromMarch 2020 untilJuly 2021 due to the COVID-19 pandemic and our resumption of cruise voyages will be phased in gradually as described under "-Update Regarding COVID-19 Pandemic" below. Passenger ticket revenue primarily consists of revenue for accommodations, meals in certain restaurants on the ship, certain onboard entertainment, port fees and taxes and includes revenue for service charges and air and land transportation to and from the ship to the extent guests purchase these items from us. Onboard and other revenue primarily consists of revenue from casino, beverage sales, shore excursions, specialty dining, retail sales, spa services and 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:
Commissions, transportation and other primarily consists of direct costs
associated with passenger ticket revenue. These costs include travel advisor
? commissions, air and land transportation expenses, related credit card fees,
certain port fees and taxes and the costs associated with shore excursions and
hotel accommodations included as part of the overall cruise purchase price.
Onboard and other primarily consists of direct costs incurred in connection
? with onboard and other revenue, including casino, beverage sales and shore
excursions.
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.
? Fuel includes fuel costs, the impact of certain fuel hedges and fuel delivery
costs.
? Food consists of food costs for passengers and crew on certain ships.
? Other consists of repairs and maintenance (including Dry-dock costs), ship
insurance and other ship expenses.
Critical Accounting Policies
Our consolidated financial statements have been prepared in accordance withU.S. GAAP. The preparation of these consolidated financial statements requires us to make estimates, judgments and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of our consolidated financial statements and the reported amounts of revenue and expenses during the periods presented. We rely on historical experience and on various other assumptions that we believe to be reasonable under the circumstances to make these estimates and judgments. Actual results could differ materially from these estimates. We believe that the following critical accounting policies reflect the significant estimates and assumptions used in the preparation of our consolidated 51
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financial statements. These critical accounting policies, which are presented in detail in our notes to our audited consolidated financial statements, relate to liquidity, ship accounting and asset impairment.
Liquidity
We make several critical accounting estimates with respect to our liquidity.
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 beyond the containment of the pandemic. 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 in accordance with the terms of our credit card
processing agreements (see Note 13 - "Commitments and Contingencies"); and
? Expected incremental expenses for resumption of cruise voyages, including the
maintenance of and compliance with additional health and safety protocols.
Due to the duration and extent of the COVID-19 pandemic, further resurgences and 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, 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 certain ships, we cannot predict with certainty when our full fleet will be back in service at historical occupancy levels. Our projected liquidity requirements reflect our principal assumptions surrounding ongoing operating costs, as well as liquidity requirements for financing costs and necessary capital expenditures. We cannot make assurances that our assumptions used to estimate our liquidity requirements may not change because we have never experienced a complete cessation and resumption of our cruise voyages. Accordingly, the full effect of our suspension of cruise voyages 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 within our financial statements and there may be material changes to those estimates in future periods. The Company has taken and will continue to take proactive cost reduction and cash conservation measures to mitigate the financial and operational impacts of COVID-19.
Ship Accounting
Ships represent our most significant assets, and we record them at cost less accumulated depreciation. Depreciation of ships is computed on a straight-line basis over the weighted average useful lives of primarily 30 years after a 15% reduction for the estimated residual value of the ship. Ship improvement costs that we believe add value to our ships are capitalized to the ship and depreciated over the shorter of the improvements' estimated useful lives or the remaining useful life of the ship. When we record the retirement of a ship component included within the ship's cost basis, we estimate the net book value of the component being retired and remove it from the ship's cost basis. Repairs and maintenance activities are charged to expense as incurred. We account for Dry-dock costs under the direct expense method which requires us to expense
all
Dry-dock costs as incurred.
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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. The useful lives of ship improvements are estimated based on the economic lives of the new components. In addition, to determine the useful lives of the ship or ship components, we consider the impact of the historical useful lives of similar assets, manufacturer recommended lives and anticipated changes in technological conditions. Given the large and complex nature of our ships, our accounting estimates related to ships and determinations of ship improvement costs to be capitalized require judgment and are uncertain. Should certain factors or circumstances cause us to revise our estimate of ship service lives or projected residual values, depreciation expense could be materially lower or higher. In 2020, one ship had significant improvements that extended the remaining weighted average useful life of the vessel. Accordingly, we updated our estimate of both its useful life and residual value based on the new weighted average useful life of its current components. The impact of the change in estimate was accounted on a prospective basis and was not material. If circumstances cause us to change our assumptions in making determinations as to whether ship improvements should be capitalized, the amounts we expense each year as repairs and maintenance costs could increase, partially offset by a decrease in depreciation expense. If we reduced our estimated weighted average 30-year ship service life by one year, depreciation expense for the year endedDecember 31, 2021 would have increased by$16.2 million . In addition, if our ships were estimated to have no residual value, depreciation expense for the same period would have increased by$76.4 million . We believe our estimates for ship accounting are reasonable and our methods are consistently applied. We believe that depreciation expense is based on a rational and systematic method to allocate our ships' costs to the periods that benefit from the ships' usage.
Asset Impairment
We review our long-lived assets, principally ships, for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable. Assets are grouped and evaluated at the lowest level for which there are identifiable cash flows that are largely independent of the cash flows of other groups of assets. For ship impairment analyses, the lowest level for which identifiable cash flows are largely independent of other assets and liabilities is each individual ship. We consider historical performance and future estimated results in our evaluation of potential impairment and then compare the carrying amount of the asset to the estimated future cash flows expected to result from the use of the asset. If the carrying amount of the asset exceeds the estimated expected undiscounted future cash flows, we measure the amount of the impairment by comparing the carrying amount of the asset to its estimated fair value. We estimate fair value based on the best information available utilizing estimates, judgments and projections as necessary. Our estimate of fair value is generally measured by discounting expected future cash flows at discount rates commensurate with the associated risk. We evaluate goodwill and trade names for impairment onDecember 31 or more frequently when an event occurs or circumstances change that indicates the carrying value of a reporting unit may not be recoverable. For our evaluation of goodwill, we use a qualitative assessment which allows us to first assess qualitative factors to determine whether it is more likely than not (i.e., more than 50%) that the estimated fair value of a reporting unit is less than its carrying value. For trade names we also provide a qualitative assessment to determine if there is any indication of impairment.
In order to make this evaluation, we consider whether any of the following factors or conditions exist:
Changes in general macroeconomic conditions, such as a deterioration in general
? economic conditions; limitations on accessing capital; fluctuations in foreign
exchange rates; or other developments in equity and credit markets; Changes in industry and market conditions such as a deterioration in the
environment in which an entity operates; an increased competitive environment;
? a decline in market-dependent multiples or metrics (in both absolute terms and
relative to peers); a change in the market for an entity's products or
services; or a regulatory or political development;
? Changes in cost factors that have a negative effect on earnings and cash flows;
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? Decline in overall financial performance (for both actual and expected
performance);
Entity and reporting unit specific negative events such as changes in
? management, key personnel, strategy, or customers; litigation; or a change in
the composition or carrying amount of net assets; and
? Decline in share price (in both absolute terms and relative to peers).
We believe our estimates and judgments with respect to our long-lived assets, principally ships, goodwill, tradenames and other indefinite-lived intangible assets are reasonable. Nonetheless, if there was a material change in assumptions used in the determination of such fair values or if there is a material change in the conditions or circumstances that influence such assets, we could be required to record an impairment charge. If a material change occurred or the result of the qualitative assessment indicated it is more likely than not that the estimated fair value of the asset is less than its carrying value, we would conduct a quantitative assessment comparing the fair value to its carrying value.
We have concluded that our business has three reporting units. Each brand,
For our annual impairment evaluation, we performed a qualitative assessment for theRegent Seven Seas reporting unit and of each brand's trade names. As part of our analysis, we performed an assessment of the key assumptions impacting the quantitative tests performed in 2020 and performed sensitivities on cash flow projections, discount rates and royalty rates. As ofDecember 31, 2021 , there was$98.1 million of goodwill remaining for theRegent Seven Seas reporting unit. Trade names were$500.5 million as ofDecember 31, 2021 . As ofDecember 31, 2021 , our annual impairment reviews support the carrying values of these assets. Non-GAAP Financial Measures We use certain non-GAAP financial measures, such asNet Cruise Cost , Adjusted Net Cruise Cost Excluding Fuel, Adjusted EBITDA, Adjusted Net Income (Loss) and Adjusted EPS, to enable us to analyze our performance. See "Terms Used in this Annual Report" for the definitions of these and other non-GAAP financial measures. We utilizeNet 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, we believe changes inNet 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 fromMarch 2020 untilJuly 2021 , we did not have any Capacity Days during the suspension period. Accordingly, we have not presented herein per Capacity Day data for the years endedDecember 31, 2021 or 2020. As our business includes the sourcing of passengers and deployment of vessels outside of theU.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, theU.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 toU.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, 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. 54 Table of Contents In addition, Adjusted Net Income (Loss) and Adjusted EPS are non-GAAP financial measures that exclude certain amounts and are used to supplement GAAP net income (loss) and EPS. We use Adjusted Net Income (Loss) and Adjusted EPS as key performance measures of our earnings performance. We believe that both management and investors benefit from referring to these non-GAAP financial measures in assessing our performance and when planning, forecasting and analyzing future periods. These non-GAAP financial measures also facilitate management's internal comparison to our historical performance. In addition, management uses Adjusted EPS as a performance measure for our incentive compensation during normal operations. The amounts excluded in the presentation of these non-GAAP financial measures may vary from period to period; accordingly, our presentation of Adjusted Net Income (Loss) and Adjusted EPS may not be indicative of future adjustments or results. For example, for the year endedDecember 31, 2020 , we incurred$1.6 billion related to impairment losses. We included this as an adjustment in the reconciliation of Adjusted Net Income (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-K. 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.
Update Regarding COVID-19 Pandemic
Suspension of Cruise Voyages
Due to the impact of COVID-19, travel restrictions and limited access to ports around the world, inMarch 2020 , the Company implemented a voluntary suspension of all cruise voyages across our three brands. In the third quarter of 2021, we began a phased relaunch of certain cruise voyages with ships initially operating at reduced occupancy levels. Beginning inDecember 2021 , the spread of the Omicron variant of COVID-19, with its increased transmissibility, caused several operational challenges and disruptions, including new travel restrictions and increased protocols in ports of call limiting port availability, which led to the cancellation of certain voyages in the fourth quarter of 2021 and first quarter of 2022, and the postponement of the restart of certain vessels. As of the date hereof, 16 of our 28 ships, or 70% of our Berth capacity, are operating with guests on board. This excludes a vessel which was paused from service beginningDecember 2021 due to the cancellation of itsSouth Africa and related itineraries as a result of travel restrictions and other operational challenges due to the Omicron variant. We continue to execute on the phased relaunch plans for our 28-ship fleet. We expect to have approximately 85% of capacity operating by the end of the first quarter of 2022 with the full fleet expected to be back in operation during the early part of the second quarter of 2022. Refer to "Item 1A. Risk Factors" for further details regarding the uncertainties of returning to sailing at full fleet capacity, and "Item 1A. Risk Factors-If our phased restart of cruise operations does not resume as planned, we may not be in compliance with maintenance covenants in certain of our debt facilities" for details regarding the potential effect of delays on our debt covenants. In connection with the expiration of the Temporary Extension and Modification of Framework for Conditional Sailing Order onJanuary 15, 2022 , the CDC announced that it would be implementing theCOVID-19 Program for Cruise Ships Operating inU.S. Waters (the "Program"), a voluntary COVID-19 risk mitigation program for foreign-flagged cruise ships operating inU.S. waters. The CDC released details regarding the Program inFebruary 2022 , which we have reviewed. We currently remain opted into the Program. As part of our SailSAFE health and safety program, ourSailSAFE Global Health and Wellness Council , chaired by former head of theU.S. Food and Drug Administration , Dr.Scott Gottlieb , continues to advise the Company on health and safety protocols in light of advancements
in
medicine and technology.
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As a result of the unprecedented circumstances caused by the pandemic, we are
not able 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, and is expected to continue to have, on our financial
condition and operations.
Modified Policies
Our brands have launched cancellation policies for certain sailings booked during certain time periods to permit our guests to cancel cruises which were not part of a temporary suspension of voyages up to 15 days or 48 hours prior, depending on the brand, to embarkation and receive a refund in the form of a credit to be applied toward a future cruise. These programs were in place for cruises booked through specific time periods specified by brand. Certain cruises booked for certain periods, will be permitted a 60-day cancellation window for refunds. The future cruise credits issued under these programs are generally valid for any sailing throughDecember 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 our modified final payment schedule for most voyages onRegent Seven Seas Cruises throughJuly 31, 2022 , for certain voyages onOceania Cruises throughJune 30, 2022 and for all voyages onNorwegian Cruise Line throughApril 30, 2022 , which now requires payment 60 days prior to embarkation versus the standard 120 days.
Update on Bookings
Net booking volumes at the beginning of the fourth quarter of 2021 continued to demonstrate substantial week-over-week sequential growth after the slowdown in booking activity caused by the Delta variant of COVID-19. Net booking volumes in the latter part of the fourth quarter of 2021 began to be negatively impacted by the Omicron variant of COVID-19, primarily for close-in voyages in the first and second quarters of 2022. In recent weeks, as the Omicron wave subsided, net booking trends have improved sequentially. As a result, the Company's current cumulative booked position for the first half of 2022 is below the strong levels of 2019 at higher prices even when including the dilutive impact of future cruise credits, while booked position for the second half, when the full fleet is expected to be back in operation, is in line with the comparable 2019 period and at higher prices, also including the impact of future cruise credits. Booked position for each quarter compared to the comparable quarter in 2019 improves sequentially through the year. Booking trends for 2023 demonstrate continued strong demand for sailings with booked position and pricing higher and at record levels when compared to bookings for 2020 in 2019. Our full fleet may not resume operations 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 expect to report a net loss until we are able to resume regular voyages. As a result of Omicron variant-related impacts to operations in the first quarter of 2022, we now expect net cash provided by operating activities to be positive during the second quarter of 2022. 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.
Financing Transactions and Cost Containment Measures
In 2021 and 2022, we continued to take actions to bolster our financial condition while our global cruise voyages are disrupted. We have taken the following additional actions to enhance our liquidity profile and financial flexibility:
In
? and an equity offering, collectively totaling
From the proceeds, approximately
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In
? that provides additional liquidity to the Company. The Company has not drawn
and currently does not intend to draw under this commitment. If drawn, this
commitment will convert into an unsecured note maturing inApril 2024 .
? In
our 2024 Exchangeable Notes for approximately
In
? 1.125% exchangeable senior notes due 2027, which includes the full exercise of
the initial purchasers' greenshoe option. The proceeds were used to repurchase
a portion of our 2024 Exchangeable Notes.
In
the exchangeable senior notes due 2024 in a registered direct offering. The
proceeds of such offering were used to redeem
? principal amount of our 2024 Senior Secured Notes and
principal amount of our 2026 Senior Secured Notes, including any accrued but
unpaid interest thereon, to pay related premiums, fees and expenses and for
general corporate purposes, including the repurchase of a portion of our 2024
Exchangeable Notes.
In addition, in
debt financings, collectively totaling
? 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 principal payments on
debt maturing in the short-term, including, in each case, to pay any accrued
and unpaid interest thereon, as well as related premiums, fees and expenses.
Refer to Note 8 - "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 resume cruise voyages.
See "-Liquidity and Capital Resources" below for more information.
We have been experiencing some cost pressure in our supply chain due to
inflation. In an attempt to mitigate risks related to inflation, our
Executive Overview
The ongoing effects of COVID-19 on our operations and global bookings have had a significant adverse effect on our results of operations.
Total revenue decreased 49.4% to
For the year endedDecember 31, 2021 , we had net loss and diluted EPS of$(4.5) billion and$(12.33) , respectively. For the year endedDecember 31, 2020 , we had net loss and diluted EPS of$(4.0) billion and$(15.75) , respectively. Operating loss decreased 26.7% to$(2.6) billion for the year endedDecember 31, 2021 from$(3.5) billion for the year endedDecember 31, 2020 . 57
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We had Adjusted Net Loss and Adjusted EPS of$(2.9) billion and$(8.07) , respectively, for the year endedDecember 31, 2021 , including$1.6 billion of adjustments primarily consisting of losses on the extinguishment and modification of debt, compared to Adjusted Net Loss and Adjusted EPS of$(2.2) billion and$(8.64) , respectively, for the year endedDecember 31, 2020 . A 65.0% decrease in Adjusted EBITDA was incurred for the same period. We refer you to our "Results of Operations" below for a calculation of Adjusted Net Income (Loss), Adjusted EPS and Adjusted EBITDA.
Results of Operations
We reported total revenue, total cruise operating expense, operating income and net income as follows (in thousands, except per share data):
Year Ended December 31,
2021 2020 2019
Total revenue $ 647,986 $ 1,279,908 $ 6,462,376
Total cruise operating expense$ 1,608,037 $ 1,693,061 $ 3,663,261 Operating income (loss)$ (2,552,348) $ (3,484,135) $ 1,178,077 Net income (loss)$ (4,506,587) $ (4,012,514) $ 930,228 EPS: Basic$ (12.33) $ (15.75) $ 4.33 Diluted$ (12.33) $ (15.75) $ 4.30 The following table sets forth operating data as a percentage of total revenue: Year Ended December 31, 2021 2020 2019 Revenue Passenger ticket 60.6 % 67.7 % 69.9 % Onboard and other 39.4 % 32.3 % 30.1 % Total revenue 100.0 % 100.0 % 100.0 % Cruise operating expense Commissions, transportation and other 22.2 % 29.7 % 17.4 % Onboard and other 8.3 % 6.7 % 6.1 % Payroll and related 82.9 % 40.7 % 14.3 % Fuel 46.6 % 20.7 % 6.3 % Food 9.7 % 5.1 % 3.4 % Other 78.4 % 29.4 % 9.2 % Total cruise operating expense 248.1 % 132.3 % 56.7 %
Other operating expense Marketing, general and administrative 137.6 % 58.2 % 15.1 % Depreciation and amortization
108.2 % 56.1 % 10.0 %
Impairment loss - % 125.6 % - %
Total other operating expense 245.8 % 239.9 % 25.1 %
Operating income (loss) (393.9) % (272.2) % 18.2 %
Non-operating income (expense)
Interest expense, net (319.9) % (37.7) % (4.2) %
Other income (expense), net 19.1 % (2.6) % 0.1 %
Total non-operating income (expense) (300.8) % (40.3) % (4.1) %
Net income (loss) before income taxes (694.7) % (312.5) % 14.1 %
Income tax benefit (expense) (0.8) % (1.0) % 0.3 %
Net income (loss) (695.5) % (313.5) % 14.4 %
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The following table sets forth selected statistical information:
Year Ended December 31,
2021 2020 2019
Passengers carried 232,448 499,729 2,695,718 Passenger Cruise Days 1,778,899 4,278,602 20,637,949 Capacity Days 3,376,703 4,123,858 19,233,459 Occupancy Percentage 52.7 % 103.8 % 107.3 %
Gross Cruise Cost,Net Cruise Cost , Net Cruise Cost Excluding Fuel and Adjusted Net Cruise Cost Excluding Fuel were calculated as follows (in thousands, except Capacity Days and per Capacity Day data): Year Ended December 31, 2021 2020 Constant Constant 2021 Currency 2020 Currency 2019 Total cruise operating expense$ 1,608,037 $ 1,601,030 $ 1,693,061 $ 1,696,364 $ 3,663,261 Marketing, general and administrative expense 891,452 887,970 745,345 744,999 974,850 Gross Cruise Cost 2,499,489 2,489,000 2,438,406 2,441,363 4,638,111 Less: Commissions, transportation and other expense 143,524 143,186 380,710 382,132 1,120,886 Onboard and other expense 54,037 54,037 85,678 85,678 394,673 Net Cruise Cost 2,301,928 2,291,777 1,972,018 1,973,553 3,122,552 Less: Fuel expense 301,852 301,852 264,712 264,712 409,602 Net Cruise Cost Excluding Fuel 2,000,076 1,989,925 1,707,306 1,708,841 2,712,950 Less Non-GAAP Adjustments: Non-cash deferred compensation (1) 3,619 3,619 2,665 2,665 2,135 Non-cash share-based compensation (2) 124,077 124,077 111,297 111,297 95,055 Severance payments and other fees (3) - - - - 6,514 Redeployment of Norwegian Joy (4) - - - - 7,051 AdjustedNet Cruise Cost Excluding Fuel$ 1,872,380 $ 1,862,229 $ 1,593,344 $ 1,594,879 $ 2,602,195 Capacity Days 3,376,703 3,376,703 4,123,858 4,123,858 19,233,459 Gross Cruise Cost per Capacity Day$ 241.15 Net Cruise Cost per Capacity Day$ 162.35 Net Cruise Cost Excluding Fuel per Capacity Day$ 141.05 AdjustedNet Cruise Cost Excluding Fuel per Capacity Day$ 135.30
(1) Non-cash deferred compensation expenses related to the crew pension plan and
other crew expenses, which are included in payroll and related expense.
Non-cash share-based compensation expenses related to equity awards, which (2) are included in marketing, general and administrative expense and payroll and
related expense.
(3) Severance payments related to restructuring costs are included in marketing,
general and administrative expense.
Expenses related to the redeployment of Norwegian Joy from
operating expense and marketing, general and administrative expense.
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Adjusted Net Income (Loss) and Adjusted EPS were calculated as follows (in thousands, except share and per share data):
Year Ended December 31,
2021 2020 2019
Net income (loss) $ (4,506,587) $ (4,012,514) $ 930,228
Non-GAAP Adjustments:
Non-cash deferred compensation (1) 4,012 3,967 3,514
Non-cash share-based compensation (2) 124,077 111,297 95,055
Severance payments and other fees (3) - - 6,514
Extinguishment and modification of debt (4) 1,428,813 27,795
16,676
Amortization of intangible assets (5) - 9,831 18,414
Redeployment of Norwegian Joy (6) - - 30,629
Impairment loss (7) - 1,633,337 -
Non-cash interest on beneficial conversion
feature and payment-in-kind premium (8) - 26,082 -
Adjusted Net Income (Loss) $ (2,949,685) $ (2,200,205) $ 1,101,030
Diluted weighted-average shares outstanding
- Net income (loss) and Adjusted Net Income
(Loss) 365,449,967 254,728,932 216,475,076
Diluted loss per share $ (12.33) $ (15.75) $ 4.30
Adjusted EPS $ (8.07) $ (8.64) $ 5.09 Non-cash deferred compensation expenses related to the crew pension plan and (1) other crew expenses are included in payroll and related expense and other
income (expense), net.
Non-cash share-based compensation expenses related to equity awards are (2) included in marketing, general and administrative expense and payroll and
related expense.
(3) Severance payments related to restructuring costs are included in marketing,
general and administrative expense.
(4) Losses on extinguishments and modifications of debt are primarily included in
interest expense, net.
(5) Amortization of intangible assets related to the Acquisition of Prestige are
included in depreciation and amortization expense.
(6)Expenses related to the redeployment of Norwegian Joy from
Impairment loss consists of goodwill, trade name and property and equipment (7) 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.
Non-cash interest expense related to a beneficial conversion feature (8) recognized on our exchangeable notes and additional payment-in-kind interest
recognized upon transfer to the debt principal, which is recognized in
interest expense, net.
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EBITDA and Adjusted EBITDA were calculated as follows (in thousands):
Year Ended December 31,
2021 2020 2019
Net income (loss) $ (4,506,587) $ (4,012,514) $ 930,228
Interest expense, net 2,072,925 482,313 272,867Income tax (benefit) expense 5,267 12,467
(18,863)
Depreciation and amortization expense 700,845 717,840
646,188
EBITDA (1,727,550) (2,799,894)
1,830,420
Other (income) expense, net (1) (123,953) 33,599
(6,155)
Non-GAAP Adjustments: Non-cash deferred compensation (2) 3,619 2,665
2,135
Non-cash share-based compensation (3) 124,077 111,297
95,055
Severance payments and other fees (4) - -
6,514
Redeployment of Norwegian Joy (5) - -
7,051
Impairment loss (6) - 1,607,797 -
Adjusted EBITDA $ (1,723,807) $ (1,044,536) $ 1,935,020 In 2021 and 2020, primarily consists of gains and losses, net for forward (1) currency exchanges and derivatives not designated as hedges. In 2019,
primarily consists of gains and losses, net for forward currency exchanges
and proceeds from insurance and litigation settlements.
(2) Non-cash deferred compensation expenses related to the crew pension plan and
other crew expenses are included in payroll and related expense.
Non-cash share-based compensation expenses related to equity awards are (3) included in marketing, general and administrative expense and payroll and
related expense.
(4) Severance payments related to restructuring costs are included in marketing,
general and administrative expense.
(5)Expenses related to the redeployment of Norwegian Joy from
(6) Impairment loss consists of goodwill and trade name impairments.
Year Ended
Revenue Total revenue decreased 49.4% to$0.6 billion in 2021 compared to$1.3 billion in 2020. The adverse impact on revenue was due to the suspension of all cruise voyages inMarch 2020 through the first half of 2021 and the phased relaunch of certain cruise voyages with ships initially operating at reduced occupancy levels in the second half of 2021 as a result of the COVID-19 pandemic, which resulted in an 18.1% decrease in Capacity Days.
Expense
Total cruise operating expense decreased 5.0% in 2021 compared to 2020. In 2021, our cruise operating expenses prior to the resumption of cruise voyages 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. The reduction in cruise operating expense in 2021 reflects lower direct costs, such as commissions, in the second half of 2021 due to fewer Capacity Days partially offset by increases in expenses related to our return to service, such as costs related to crew and passenger testing for COVID-19. In 2020, our cruise operating expenses subsequent to the suspension of cruise voyages onMarch 13, 2020 primarily included the cost of protected commissions and crew costs, including salaries, food and other repatriation costs; fuel; and other ongoing costs such as insurance and ship maintenance. Gross Cruise Cost increased 2.5% in 2021 compared to 2020, primarily related to the change in costs described above offset by an increase in marketing, general and administrative expenses primarily related to the discontinuation of cost-saving initiatives described under "Update Regarding COVID-19 Pandemic-Financing Transactions and Cost Containment Measures" as we return to service. Total other operating expense decreased 48.2% in 2021 compared to 2020 primarily due to the impairment of goodwill 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. 61
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Interest expense, net was$2.1 billion in 2021 compared to$482.3 million in 2020. The increase in 2021 primarily reflects losses on extinguishment of debt and debt modification costs of$1.4 billion related to the repurchase of certain exchangeable notes as well as additional debt outstanding at higher interest rates, partially offset by lower LIBOR. 2020 included losses on extinguishment of debt and debt modification costs of$27.8 million . Other income (expense), net was income of$124.0 million in 2021 compared to expense of$33.6 million in 2020. Other income in 2021 was primarily due to gains from derivatives not designated as hedges and foreign currency exchange. Other expense in 2020 was primarily due to losses from foreign currency exchange and fuel hedges recognized in earnings as a result of the forecasted transactions no longer being probable or no longer designated as hedges. Income tax benefit (expense) was an expense of$5.3 million in 2021 compared to$12.5 million in 2020. In 2020, the tax expense is primarily due to a valuation allowance of$39.6 million recognized in the fourth quarter on certain net operating loss carryforwards partially offset by operating losses.
Year Ended
Revenue Total revenue decreased 80.2% to$1.3 billion in 2020 compared to$6.5 billion in 2019. The adverse impact on revenue was due to the cancellation of the vast majority of sailings in 2020 as a result of the COVID-19 pandemic, which resulted in a 78.6% decrease in Capacity Days.
Expense
Total cruise operating expense decreased 53.8% in 2020 compared to 2019. In 2020, our expenses subsequent to the suspension of voyages primarily included the cost of protected commissions and crew costs, including salaries, food and other repatriation costs; fuel; and other ongoing costs such as insurance and ship maintenance. To repatriate crew as fast as possible, the Company leveraged certain ships in its fleet to assist with the repatriation efforts along with utilizing scheduled chartered flights. Additionally, during the first quarter of 2020, there was a notable increase from 2019 in fuel expense associated with theInternational Maritime Organization's 2020 regulations, and cruise operating expense increased due to the addition of Norwegian Encore and Seven Seas Splendor to the fleet. Gross Cruise Cost decreased 47.4% in 2020 compared to 2019, due to a decrease in total cruise operating expense described above in addition to a 23.5% decrease in marketing, general and administrative expenses primarily due to cost savings initiatives in connection with the COVID-19 pandemic as described under "Update Regarding COVID-19 Pandemic-Financing Transactions and Cost Containment Measures." Total other operating expense increased 89.4% in 2020 compared to 2019 primarily due to the impairment of goodwill and trade names triggered by the COVID-19 pandemic. Depreciation and amortization expense also increased primarily due to the delivery of Norwegian Encore in the fourth quarter of 2019 and Seven Seas Splendor in the first quarter of 2020 as well as ship improvement projects. Interest expense, net was$482.3 million in 2020 compared to$272.9 million in 2019. The increase in 2020 is driven by additional debt outstanding at higher interest rates, partially offset by lower LIBOR. In 2020, interest expense also reflects losses on extinguishment of debt and debt modification costs of$27.8 million . 2019 included losses on extinguishment of debt and debt modification costs of$16.7 million . Other income (expense), net was expense of$33.6 million in 2020 compared to income of$6.2 million in 2019. Other expense in 2020 was primarily due to losses from foreign currency exchange and fuel hedges recognized in earnings as a result of the forecasted transactions no longer being probable or no longer designated as hedges. Other income in 2019 was primarily due to gains from insurance proceeds and a litigation settlement partially offset by losses on foreign currency exchange. 62 Table of Contents Income tax benefit (expense) was an expense of$12.5 million in 2020 compared to a benefit of$18.9 million in 2019. In 2020, the tax expense is primarily due to a valuation allowance of$39.6 million recognized in the fourth quarter on certain net operating loss carryforwards partially offset by operating losses. During 2018, we implemented certain tax restructuring strategies that created our ability to utilize the net operating loss carryforwards of Prestige, for which we had previously provided a full valuation allowance. As a result, we recorded a tax benefit of$35.7 million in connection with the reversal of substantially all of the valuation allowance in 2019.
Liquidity and Capital Resources
General
As ofDecember 31, 2021 , our liquidity was$2.7 billion , consisting of cash and cash equivalents, short-term investments and a$1 billion commitment available throughAugust 15, 2022 . Our primary ongoing liquidity requirements are to finance working capital, capital expenditures and debt service. As ofDecember 31, 2021 , we had a working capital deficit of$0.4 billion . This deficit included$1.6 billion of advance ticket sales, which represents the total revenue we collect in advance of sailing dates and accordingly are substantially more like deferred revenue balances rather than actual current cash liabilities. Our business model, along with our liquidity and undrawn export-credit backed facilities, allows us to operate with a working capital deficit and still meet our operating, investing and financing needs. During 2021 and 2022, the Company completed various debt financings and equity offerings totaling$7.0 billion in gross proceeds, of which$5.5 billion was used, or will be used, to extinguish debt and make principal payments maturing in the short-term. The NCLH equity offerings in March andNovember 2021 resulted in 99,436,801 ordinary shares being issued, which does not include any ordinary shares that may be issued pursuant to our exchangeable notes. See Note 8 - "Long-Term Debt" for further information. InJanuary 2021 , we amended our Senior Secured Credit Facility to further defer certain amortization payments due prior toJune 30, 2022 and to waive certain financial and other covenants throughDecember 31, 2022 . In connection with such amendment, our minimum liquidity requirement was increased to$200 million and such requirement applies throughDecember 31, 2022 . InNovember 2021 , the Company further amended the Senior Secured Credit Facility to provide that among other things, certain financial covenants shall be modified to provide that following the covenant relief period ending onDecember 31, 2022 , (a) free liquidity shall be required to be greater than or equal to$200,000,000 at any time, (b) the ratio of total net funded debt to total capitalization shall be required to be not greater than 0.86 to 1.00 onMarch 31, 2023 , 0.85 to 1.00 onJune 30, 2023 and 0.83 to 1.00 thereafter, and (c) the ratio of EBITDA to consolidated debt service shall be required to be greater than or equal to 1.25 to 1.00 unless free liquidity is greater than$200,000,000 . This amendment also included changes to certain baskets providing the ability to make certain investments and incur debt. In addition, inFebruary 2021 , we amended certain of our export-credit backed facilities to defer amortization payments aggregating approximately$680 million throughMarch 31, 2022 . We also amended all of our export-credit backed facilities to provide that, from the effective date of the amendments to and includingDecember 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. Additionally, inDecember 2021 , our export-credit backed facilities were amended to provide for, among other things, the expiration of certain provisions upon repayment in full of certain amortization payments that are the subject of previous deferral arrangements and the modification of certain financial covenants to apply fromJanuary 1, 2023 untilSeptember 30, 2025 , including the covenant to maintain at least$200 million in free liquidity, which was previously imposed untilDecember 31, 2022 . The amendments also made certain additional changes, including the relaxation of certain restrictions on our ability to incur and repay or prepay debt, create security and make dividends and other distributions. InJuly 2021 , we amended nine 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 consisting of provisions for the ship), modifications and financing premiums. 63
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InNovember 2021 , the Company executed a$1 billion commitment throughAugust 15, 2022 that provides additional liquidity to the Company. The Company has not drawn and currently does not intend to draw under this commitment. If drawn, this commitment will convert into an unsecured note maturing inApril 2024 . The Company's monthly average cash burn for the fourth quarter of 2021 was approximately$345 million , slightly below the prior estimate of approximately$350 million . Looking ahead, the Company expects the first quarter of 2022 monthly average cash burn to increase to approximately$390 million driven by the continued phased relaunch of additional vessels. This cash burn rate does not include expected cash inflows from new and existing bookings or contribution from ships that have re-entered service. Cash burn rates include ongoing ship operating expenses, administrative operating expenses, interest expense, taxes, debt deferral fees and expected non-newbuild capital expenditures and excludes 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 fourth quarter of 2021 cash burn rate and first quarter of 2022 estimate reflect the previously agreed to 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." 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. 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 of the COVID-19 global pandemic. Based on the liquidity estimates and our current resources, we have concluded we have sufficient liquidity to satisfy our obligations for at least the next 12 months. 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 cruise voyages or operate at significantly reduced occupancy levels for a prolonged period. There is no assurance that cash flows from operations and additional financings will be available in the future to fund our future obligations. Beyond 12 months, we will pursue refinancings and other balance sheet optimization transactions from time to time in order to reduce interest rates and extend debt 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 certain financial and other debt covenant waivers and added new free liquidity requirements. AtDecember 31, 2021 , taking into account such waivers, 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 to amend the covenants. However, no assurances can be made that such amendments 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. SinceMarch 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. SinceApril 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 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 and may issue additional ordinary shares from time to time, subject to our authorized number of ordinary shares. However, there is no guarantee that debt or equity financings will be available in the future to fund our obligations, or that they will be available on terms consistent with our expectations. 64
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As ofDecember 31, 2021 , we had advance ticket sales of$1.8 billion , including the long-term portion, which included approximately$0.7 billion of future cruise credits. We also have agreements with our credit card processors that, as ofDecember 31, 2021 , governed approximately$1.3 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 ofDecember 31, 2021 , we had cash collateral reserves of approximately$1.2 billion with credit card processors recognized in accounts receivable, net or other long-term assets. We may be required to pledge additional collateral and/or post additional cash reserves or take other actions that may reduce our liquidity.
Sources and Uses of Cash
In this section, references to 2021 refer to the year endedDecember 31, 2021 , references to 2020 refer to the year endedDecember 31, 2020 and references to 2019 refer to the year endedDecember 31, 2019 . Net cash used in operating activities was$2.5 billion in 2021 compared to net cash used in operating activities of$2.6 billion in 2020 and net cash provided by operating activities of$1.8 billion in 2019. The net cash used in operating activities included net losses due to the suspension of global cruise voyages fromMarch 2020 throughJuly 2021 and timing differences in cash receipts and payments relating to operating assets and liabilities. The net cash used in operating activities in 2021 included net loss of$(4.5) billion and a decrease of$1.2 billion in cash from accounts receivable, which includes our collateral reserves with credit card processors, offset by an increase in advance ticket sales of$521.9 million and loss on extinguishment of$1.4 billion . The net cash used in operating activities in 2020 includes net loss of$(4.0) billion , a decrease in advance ticket sales of$811.8 million and timing differences in cash receipts and payments relating to various operating assets and liabilities, which was offset primarily by a$1.6 billion impairment loss. The net cash provided by operating activities in 2019 includes net income of$0.9 billion as well as timing differences in cash receipts and payments relating to various operating assets and liabilities, including an increase in advance ticket sales of$347.4 million . Net cash used in investing activities was$1.0 billion in 2021, primarily related to newbuild payments and ship improvement projects and net purchases and maturities of short-term investments. Net cash used in investing activities was$1.0 billion in 2020, primarily related to payments for the delivery of Seven Seas Splendor, ships under construction, ship improvement projects and shoreside projects. Net cash used in investing activities was$1.7 billion in 2019, primarily related to payments for the delivery of Norwegian Encore, ships under construction, ship improvements and shoreside projects. Net cash provided by financing activities was$1.7 billion in 2021, primarily due to$2.6 billion in proceeds from the issuance of debt and$2.7 billion in proceeds from issuance of NCLH's ordinary shares offset by$2.1 billion of debt principal repayments and$1.4 billion of early redemption premiums. Net cash provided by financing activities was$6.6 billion in 2020, primarily due to$6.1 billion in proceeds from the issuance of debt and$1.5 billion in proceeds from issuance of NCLH's ordinary shares. Net cash used in financing activities was$53.4 million in 2019, primarily due to the repurchase of$349.9 million of NCLH's ordinary shares, net repayments of our Revolving Loan Facility and the net refinancing of term loans partially offset by the issuance of new debt.
Future Capital Commitments
Future capital commitments consist of contracted commitments, including ship construction contracts. Anticipated expenditures related to ship construction contracts are$1.6 billion ,$2.5 billion and$1.4 billion for the years endingDecember 31, 2022 , 2023 and 2024, respectively. We have export-credit backed financing in place for the anticipated expenditures related to ship construction contracts of$1.0 billion ,$2.0 billion and$0.7 billion for the years endingDecember 31, 2022 , 2023 and 2024, respectively. Anticipated non-newbuild capital expenditures are$0.5 billion for the year endedDecember 31, 2022 , which includes health and safety investments. Future expected capital expenditures will significantly increase our depreciation and amortization expense. 65
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For the Norwegian brand, we have six Prima Class Ships on order, each ranging from approximately 140,000 to 156,300 Gross Tons with approximately 3,215 to 3,550 Berths, with expected delivery dates from 2022 through 2027. For the Regent brand, we have one Explorer Class Ship on order to be delivered in 2023, which will be approximately 55,000 Gross Tons and 750 Berths. For theOceania 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 combined contract prices of the nine ships on order for delivery was approximately €7.7 billion, or$8.8 billion based on the euro/U.S. dollar exchange rate as ofDecember 31, 2021 . We have obtained export-credit backed 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.
Capitalized interest for the year ended
Material Cash Requirements
As of
2022 2023 2024 2025 2026 Thereafter Total
Long-term
debt (1) $ 1,355,898 $ 1,396,110 $ 4,478,143 $ 1,351,834 $ 2,633,812 $ 3,342,820 $ 14,558,617
Ship
construction
contracts (2) 1,483,391 2,278,139 1,105,038 1,605,329 1,008,318 881,541 8,361,756
Total $ 2,839,289 $ 3,674,249 $ 5,583,181 $ 2,957,163 $ 3,642,130 $ 4,224,361 $ 22,920,373 Includes principal as well as estimated interest payments with LIBOR held
constant as of
refinancings and undrawn export-credit backed facilities. Subsequent to
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 principal payments on
debt maturing in the short-term, including, in each case, to pay any accrued
and unpaid interest thereon, as well as related premiums, fees and expenses.
See Note 8 - "Long-Term Debt" for further information.
Ship construction contracts are for our newbuild ships based on the euro/
have committed undrawn export-credit backed facilities of
funds approximately 80% of our ship construction contracts.
For other operational commitments for lease and port obligations we refer you to Note 5 - "Leases" and Note 13 - "Commitments and Contingencies," respectively, for further information. 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. Substantially all of our ships are pledged as collateral for certain of our debt. We have received certain financial and other debt covenant waivers throughDecember 31, 2022 and added new free liquidity requirements. We believe we were in compliance with these covenants as ofDecember 31, 2021 . In addition, our existing debt agreements restrict, and any of our future debt arrangements may restrict, among other things, the ability of our subsidiaries, including NCLC, to make distributions and/or pay dividends to NCLH and NCLH's ability to pay cash dividends to its shareholders. NCLH is a holding company and depends upon its subsidiaries 66
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for their ability to pay distributions to it 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 believe our cash on hand, short-term investments, the undrawn$1 billion commitment, 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" for further information regarding the debt covenant 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. 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 transactions 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.
We refer you to "-Liquidity and Capital Resources" for information regarding collateral provided to our credit card processors.
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