Norwegian Cruise Line Holdings Ltd. Quarterly report pursuant to Section 13 or 15(d)

Quarterly report pursuant to Section 13 or 15(d)

Summary of Significant Accounting Policies (Policies)

Summary of Significant Accounting Policies (Policies)

9 Months Ended

Sep. 30, 2023

Liquidity

As of September 30, 2023, we had liquidity of approximately $2.2 billion, including cash and cash equivalents of $681.6 million and borrowings available under our $875 million undrawn Revolving Loan Facility and $650 million undrawn commitment of Class B Notes and Backstop Notes issuable by NCLC less related fees (see Note 7 – “Long-Term Debt”). Additionally, in October 2023, we increased our Revolving Loan Facility to $1.2 billion (see Note 7 – “Long-Term Debt”). We believe that we have sufficient liquidity to fund our obligations and expect to remain in compliance with our financial covenants for at least the next twelve months from the issuance of these financial statements.

We will continue to pursue various opportunities to refinance future debt maturities to reduce interest expense and/or to extend the maturity dates associated with our existing indebtedness and obtain relevant financial covenant amendments or waivers, if needed.

Basis of Presentation

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

Our operations are seasonal and results for interim periods are not necessarily indicative of the results for the entire fiscal year. Historically, demand for cruises has been strongest during the Northern Hemisphere’s summer months; 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				Nine Months Ended
	September 30,				September 30,
	2023		2022		2023		2022
Net income (loss) - Basic EPS	$	345,868	$	(295,394)	$	272,663	$	(1,787,429)
Effect of dilutive securities - exchangeable notes		17,510		—		13,809		—
Net income (loss) and assumed conversion of exchangeable notes - Diluted EPS	$	363,378	$	(295,394)	$	286,472	$	(1,787,429)
Basic weighted-average shares outstanding		425,398,415		420,798,538		424,087,517		419,224,710
Dilutive effect of share awards		3,676,562		—		2,594,108		—
Dilutive effect of exchangeable notes		82,510,468		—		34,137,750		—
Diluted weighted-average shares outstanding		511,585,445		420,798,538		460,819,375		419,224,710
Basic EPS	$	0.81	$	(0.70)	$	0.64	$	(4.26)
Diluted EPS	$	0.71	$	(0.70)	$	0.62	$	(4.26)

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 that are dilutive are included in the effect of dilutive securities above. During the three months ended September 30, 2023, each of the exchangeable notes was dilutive. During the nine months ended September 30, 2023, only the 2027 1.125% Exchangeable Notes were dilutive. For the three months ended September 30, 2023 and 2022, a total of 3.8 million and 96.3 million shares, respectively, and for the nine months ended September 30, 2023 and 2022, a total of 54.4 million and 93.5 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 gains of $15.7 million and $34.7 million for the three months ended September 30, 2023 and 2022, respectively, and a loss of $4.2 million and a gain of $79.4 million for the nine months ended September 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

Accounts receivable, net included $42.0 million and $118.4 million due from credit card processors as of September 30, 2023 and December 31, 2022, respectively.