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What changed in Norwegian Cruise Line Holdings's 10-K — 2022 vs 2023

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Paragraph-level year-over-year comparison of Norwegian Cruise Line Holdings's 2022 and 2023 10-K annual filings, covering the Business, Risk Factors, Legal Proceedings, Cybersecurity, MD&A and Market Risk sections. Every new, removed and edited paragraph is highlighted side-by-side so you can see exactly what management changed in the 2023 report.

+450 added−465 removedSource: 10-K (2024-02-28) vs 10-K (2023-02-28)

Top changes in Norwegian Cruise Line Holdings's 2023 10-K

450 paragraphs added · 465 removed · 321 edited across 7 sections

Item 1. Business

Business — how the company describes what it does

159 edited+65 added−66 removed104 unchanged
Biggest changeTo supplement the committee, a Decarbonization Action Group comprised of senior leaders across the organization was also created to enhance cross-collaboration and coordination in support of our climate action strategy and goals. ​ In late 2021, we also began climate risks and scenario planning which resulted in the publication of our first disclosure aligned with the Task Force on Climate-related Financial Disclosures (“TCFD”) framework in April 2022, which can be found on our website. ​ We also drive social impact through our philanthropy initiatives, partnerships and community engagement programs in our local communities and at the destinations we visit worldwide. ​ We provide regular updates to our stakeholders on our sustainability efforts and promote awareness on important topics, including environmental stewardship, through our Sail & Sustain program, our annual ESG report and through various communications regarding important sustainability initiatives across various distribution channels including but not limited to press releases, social media and our corporate website.
Biggest changeWe strive to be a great partner to each destination we visit, working together to find sustainable, long-term solutions for the communities, while at the same time allowing our guests to experience all that these incredible destinations have to offer. ​ We provide regular updates to our stakeholders on our sustainability efforts and promote awareness on important topics through our Sail & Sustain program, our annual ESG report and through various communications regarding important sustainability initiatives across distribution channels including but not limited to press releases, social media and our corporate website.
Mr. Farkas was formerly a partner in the Miami offices of the law firm Mase and Gassenheimer specializing in maritime litigation. Before that he was an Assistant State Attorney for the Eleventh Judicial Circuit in and for Miami-Dade County, Florida. Mr.
Farkas was formerly a partner in the Miami offices of the law firm Mase and Gassenheimer specializing in maritime litigation. Before that he was an Assistant State Attorney for the Eleventh Judicial Circuit in and for Miami-Dade County, Florida. Mr.
The enforcement mechanism for CII has not yet been defined. The EEXI is a one-time design re-certification requirement that updates energy efficiency requirements for existing ships and regulates carbon dioxide emissions related to installed engine power, transport capacity and ship speed. Compliance with the EEXI is not expected to have a material impact on our operations.
The enforcement mechanism for CII has not yet been defined. The EEXI is a one-time design re-certification requirement that updates energy efficiency requirements for existing ships and regulates carbon dioxide emissions related to installed engine power, transport capacity and ship speed. Ongoing compliance with the EEXI is not expected to have a material impact on our operations.
Treasury Regulations require a foreign corporation and certain of its direct and indirect shareholders to satisfy detailed substantiation and reporting requirements. NCLH is incorporated in Bermuda, a qualified foreign country which grants an equivalent exemption, and NCLH meets the publicly traded test because its ordinary shares were primarily and regularly traded on the New York Stock Exchange (“NYSE”).
Treasury Regulations require a foreign corporation and certain of its direct and indirect shareholders to satisfy detailed substantiation and reporting requirements. NCLH is incorporated in Bermuda, which is a qualified foreign country that grants an equivalent exemption, and NCLH meets the publicly-traded test because its ordinary shares were primarily and regularly traded on the New York Stock Exchange (“NYSE”).
We refer you to “Item 1A—Risk Factors—Our inability to recruit or retain qualified personnel or the loss of key personnel or employee relations issues may materially adversely affect our business, financial condition and results of operations” for more information regarding our relationships with union employees and our collective bargaining agreements that are currently in place.
We refer you to “Item 1A—Risk Factors— Our failure or inability to recruit or retain qualified personnel or the loss of key personnel or employee relations issues may materially adversely affect our business, financial condition and results of operations” for more information regarding our relationships with union employees and our collective bargaining agreements that are currently in place.
If we do not have a fixed place of business in the U.S. or substantially all of our income is not derived from regularly scheduled transportation, the income will generally not be considered to be effectively connected income. In that case, we would be subject to a special 4% tax on our U.S.-source shipping income (the “4% Tax Regime”).
If we do not have a fixed place of business in the U.S. or substantially all of our income is not derived from regularly scheduled transportation, the income will generally not be considered to be effectively connected income. In that case, we would be subject to a special 4% tax on our gross U.S.-source shipping income (the “4% Tax Regime”).
Available Information We file annual reports on Form 10-K, quarterly reports on Form 10-Q, current reports on Form 8-K, proxy statements and other information with the SEC. Our SEC filings are available to the public at the SEC’s website at http://www.sec.gov . We also maintain an Internet site at http://www.nclhltd.com .
Available Information We file annual reports on Form 10-K, quarterly reports on Form 10-Q, current reports on Form 8-K, proxy statements and other information with the SEC. Our SEC filings are available to the public at the SEC’s website at http://www.sec.gov . We also maintain an Internet site at https://www.nclhltd.com .
In general terms, substantial economic substance means: (i) the entity is actually directed and managed in the jurisdiction; (ii) core income-generating activities relating to the applicable relevant activity are performed in the jurisdiction; (iii) there are adequate employees in the jurisdiction; (iv) the entity maintains adequate physical presence in the jurisdiction; and (v) there is adequate operating expenditure in the jurisdiction.
In general terms, adequate economic substance means: (i) the entity is actually directed and managed in the jurisdiction; (ii) core income-generating activities relating to the applicable relevant activity are performed in the jurisdiction; (iii) there are adequate employees in the jurisdiction; (iv) the entity maintains adequate physical presence in the jurisdiction; and (v) there is adequate operating expenditure in the jurisdiction.
If we do not qualify for exemption under Section 883, or if the provision was repealed, then any U.S.-sourced shipping income or any other income that is considered to be effectively connected income would be subject to U.S. federal corporate income taxation on a net basis (generally at a 21% rate) and state and local taxes, and our effectively connected earnings and profits may also be subject to an additional branch profits tax of 30%, unless a lower treaty rate applies (the “Net Tax Regime”).
If we do not qualify for exemption under Section 883, or if the provision was repealed, then any U.S.-sourced shipping income or any other income that is considered to be effectively connected income would be subject to U.S. federal corporate income taxation on a net basis (generally at a 21% rate) and state and local taxes, and our effectively connected earnings and profits may also be subject to an additional branch profits tax and branch-level interest tax of 30%, unless a lower treaty rate applies (the “Net Tax Regime”).
Exemption of International Shipping Income under Section 883 of the Code Under Section 883 of the Code (“Section 883”) and the related regulations, a foreign corporation will be exempt from U.S. federal income taxation on its U.S.-source income derived from the international operation of ships (“shipping income”) if: (a) it is organized in a qualified foreign country, which is one that grants an “equivalent exemption” from tax to corporations organized in the U.S. in respect of each category of shipping income for which exemption is being 25 Table of Contents claimed under Section 883; and (b) either: (1) more than 50% of the value of its stock is beneficially owned, directly or indirectly, by qualified shareholders, which includes individuals who are “residents” of a qualified foreign country; (2) one or more classes of its stock representing, in the aggregate, more than 50% of the combined voting power and value of all classes of its stock are “primarily and regularly traded on one or more established securities markets” in a qualified foreign country or in the U.S.
Exemption of International Shipping Income under Section 883 of the Code Under Section 883 of the Code (“Section 883”) and the related regulations, a foreign corporation will be exempt from U.S. federal income taxation on its U.S.-source income derived from the international operation of ships (“shipping income”) if: (a) it is organized in a qualified foreign country, which is one that grants an “equivalent exemption” from tax to corporations organized in the U.S. in respect of each category of shipping income for which exemption is being claimed under Section 883; and (b) either: (1) more than 50% of the value of its stock is beneficially owned, directly or indirectly, by qualified shareholders, which includes individuals who are “residents” of a qualified foreign country; (2) one or more classes of its stock representing, in the aggregate, more than 50% of the combined voting power and value of all classes of its stock are “primarily and regularly traded on one or more established securities markets” in a qualified foreign country or in the U.S.
Thomas for a 10-year term through September 2026 with an option to extend the agreement for an additional five years. ● an agreement with the Port of Seattle for a 15-year lease through October 2030 with an option to extend the agreement for an additional five years. ● an agreement with the Huna Totem Corporation that includes preferential berthing rights, for which a second pier in Icy Strait Point, Alaska has been developed. 30 Table of Contents ● a 30-year preferential berthing agreement with Ward Cove Dock Group, LLC, who has constructed a new double ship pier in Ward Cove, Ketchikan, Alaska.
Thomas for a 10-year term through September 2026 with an option to extend the agreement for an additional five years. ● an agreement with the Port of Seattle for a 15-year lease through October 2030 with an option to extend the agreement for an additional five years. ● an agreement with the Huna Totem Corporation that includes preferential berthing rights, for which a second pier in Icy Strait Point, Alaska has been developed. ● a 30-year preferential berthing agreement with Ward Cove Dock Group, LLC, who has constructed a new double ship pier in Ward Cove, Ketchikan, Alaska.
National Park Service whereby our ships are permitted to call on Glacier Bay during each summer cruise season through September 30, 2029. ● an agreement with the British Virgin Islands Port Authority granting priority berthing rights for a 15-year term through April 2032 with options to extend the agreement for two additional five-year terms. ● an agreement with the West Indian Company Limited granting priority berthing rights in St.
National Park Service whereby our ships are permitted to call on Glacier Bay during each summer cruise season through September 30, 2029. ● an agreement with the British Virgin Islands Port Authority granting priority berthing rights for a 15-year term through April 2030 with options to extend the agreement for two additional five-year terms. ● an agreement with the West Indian Company Limited granting priority berthing rights in St.
The pier has been built to simultaneously accommodate two of Norwegian Cruise Line’s 4,000 passenger Breakaway Plus Class Ships. ● An agreement with Glacier Creek Development, LLC for construction and operation of a cruise terminal and related berthing facilities in Whittier, Alaska, expected to be operational for the 2024 season. ● An agreement with AAK’W Landing LLC for the development of berthing facilities in Juneau Alaska, expected to be operational in 2025 or 2026.
The pier has been built to simultaneously accommodate two of Norwegian Cruise Line’s 4,000 passenger Breakaway Plus Class Ships. ● An agreement with Glacier Creek Development, LLC for construction and operation of a cruise terminal and related berthing facilities in Whittier, Alaska, expected to be operational for the 2024 season. ● An agreement with AAK’W Landing LLC for the development of berthing facilities in Juneau Alaska, expected to be operational in 2026 or 2027.
We have also continued the Kloster Visionary Award which honors the Company’s founder, Knut Kloster, by recognizing a team member whose spirit of innovation follows in the footsteps of this visionary. Through the shipboard Vacation Hero Awards program, shipboard supervisors and management recognize select shipboard team members that have proven to be outstanding in selected categories.
We have also continued the Kloster Visionary Award which honors the Company’s founder, Knut Kloster, by recognizing a shipboard or shoreside team member whose spirit of innovation follows in the footsteps of this visionary. Through the shipboard Vacation Hero Awards program, shipboard supervisors and management recognize select shipboard team members that have proven to be outstanding in selected categories.
West Coast ​ Norwegian Sky ​ 1999 ​ Asia, The Bahamas, Canada & New England, Caribbean, Central America, Europe ​ Norwegian Spirit ​ 1998 ​ Alaska, Asia, Australia & New Zealand, Hawaii, South Pacific ​ Oceania Cruises ​ ​ ​ ​ Oceania Vista (3) ​ 2023 ​ The Bahamas, Bermuda, Canada & New England, Caribbean, Central America, Europe, Mexico-Pacific ​ Oceania Riviera ​ 2012 ​ Africa, Alaska, Asia, The Bahamas, Bermuda, Caribbean, Europe ​ Oceania Marina ​ 2011 ​ Africa, Antarctica, Caribbean, Central America, Europe, South America ​ Oceania Nautica ​ 2000 ​ Africa, Asia, Australia & New Zealand, Bermuda, Canada & New England, Caribbean, Central America, Europe, Hawaii, South America, South Pacific ​ Oceania Sirena ​ 1999 ​ The Bahamas, Bermuda, Caribbean, Central America, Europe, South America ​ Oceania Regatta ​ 1998 ​ Alaska, Asia, Australia & New Zealand, Hawaii, Mexico-Pacific, South Pacific, U.S.
West Coast ​ Norwegian Sky ​ 1999 ​ Asia, The Bahamas, Canada & New England, Caribbean, Central America, Europe ​ Norwegian Spirit ​ 1998 ​ Alaska, Asia, Australia & New Zealand, Hawaii, South Pacific ​ Oceania Cruises ​ ​ ​ ​ Oceania Allura (3) ​ 2025 ​ The Bahamas, Canada & New England, Caribbean, Europe ​ Oceania Vista ​ 2023 ​ Africa, Asia, The Bahamas, Bermuda, Canada & New England, Caribbean, Central America, Europe, Mexico-Pacific, South America, South Pacific ​ Oceania Riviera ​ 2012 ​ Africa, Alaska, Asia, Australia & New Zealand, The Bahamas, Bermuda, Caribbean, Europe, South Pacific ​ Oceania Marina ​ 2011 ​ Africa, Antarctica, Bermuda, Canada & New England, Caribbean, Central America, Europe, South America ​ Oceania Nautica ​ 2000 ​ Africa, Asia, Australia & New Zealand, Bermuda, Canada & New England, Caribbean, Central America, Europe, Hawaii, South America, South Pacific ​ Oceania Sirena ​ 1999 ​ Asia, Australia The Bahamas, Bermuda, Caribbean, Central America, Europe, Hawaii, South America, South Pacific ​ Oceania Regatta ​ 1998 ​ Alaska, Asia, Australia & New Zealand, Hawaii, Mexico-Pacific, South Pacific, U.S.
The two newest ships in the Regent fleet, Seven Seas Splendor and Seven Seas Explorer, also feature the Regent Suite, a 4,443 square-foot luxurious suite accommodation that includes an in-suite spa retreat, a 1,300 square-foot wraparound veranda, and a glass-enclosed solarium sitting area. ​ Itinerary Optimization & Premium Itinerary Mix ​ We manage our ships’ deployments to promote a better breadth of itineraries, sell cruises further in advance and maximize profitability while also considering our efforts to reduce greenhouse gas emissions.
The three newest ships in the Regent fleet, Seven Seas Grandeur, Splendor and Explorer, also feature the Regent Suite, a 4,443 square-foot luxurious suite accommodation that includes an in-suite spa retreat, a 1,300 square-foot wraparound veranda, and a glass-enclosed solarium sitting area. ​ Itinerary Optimization & Premium Itinerary Mix ​ We manage our ships’ deployments to promote a better breadth of itineraries, sell cruises further in advance and maximize profitability while also considering our efforts to reduce greenhouse gas emissions.
Oceania Cruises’ ticket prices may include air transportation and certain other amenities. Regent’s ticket prices typically include air transportation, unlimited shore excursions, a pre-cruise hotel night stay (for concierge level and above), premium wines and top shelf liquors, specialty restaurants, Wi-Fi, valet laundry and gratuities.
Oceania Cruises’ ticket prices may include air transportation and certain other amenities. Regent’s ticket prices typically include air transportation, unlimited shore excursions, a pre-cruise hotel night stay (for concierge level and above), premium wines and liquors, specialty restaurants, Wi-Fi, valet laundry and gratuities.
Item 1. Business History and Development of the Company Norwegian commenced operations from Miami in 1966, launching the modern cruise industry by offering weekly departures from Miami to the Caribbean. In February 2011, NCLH, a Bermuda limited company, was formed.
Item 1. Business History and Development of the Company Norwegian commenced operations from Miami, Florida in 1966, launching the modern cruise industry by offering weekly departures from Miami, Florida to destinations in the Caribbean. In February 2011, NCLH, a Bermuda limited company, was formed.
For example, the International Port and Ship Facility Code (“ISPS Code”) was adopted by the IMO in December 2002 with the goal of strengthening maritime security by placing new requirements on governments, port authorities and shipping companies. Amendments to SOLAS required that ships constructed in accordance with pre-1974 SOLAS requirements install automatic sprinkler systems.
For example, the International Port and Ship Facility Code (“ISPS Code”) was adopted by the IMO in December 2002 with the goal of strengthening maritime security by placing new requirements on governments, port authorities and shipping companies. ​ 23 Table of Contents Amendments to SOLAS required that ships constructed in accordance with pre-1974 SOLAS requirements install automatic sprinkler systems.
To the extent practical, each ship’s crew, catering and hotel staff remain with the ship during the Dry-dock period and assist in performing repair and maintenance work. Accordingly, Dry-dock work is typically performed during non-peak demand periods to minimize the adverse 18 Table of Contents effect on revenue that results from ships being out of service.
To the extent practical, each ship’s crew, catering and hotel staff remain with the ship during the Dry-dock period and assist in performing repair and maintenance work. Accordingly, Dry-dock work is typically performed during non-peak demand periods to minimize the adverse effect on revenue that results from ships being out of service.
For ships that receive a D rating for three consecutive years, or an E rating for one year, a corrective action plan will need to be developed and approved. In 2023, ships will be required to reduce carbon intensity by 5% from a 2019 baseline with 2% incremental improvements each year thereafter until 2030.
For ships that receive a D rating for three consecutive years, or an E rating for one year, a corrective action plan will need to be developed and approved. Beginning in 2023, ships are now required to reduce carbon intensity by 5% from a 2019 baseline, with 2% incremental improvements each year thereafter until 2030.
Our largest operating expenditures are for payroll and related (including our contract with a third party who provides certain crew services), fuel, airfare, food and beverage, advertising and marketing and travel advisor services. Most of the supplies that we require are available from numerous sources at competitive prices.
Our largest operating expenditures are for payroll and related (including our contract with a third party who provides certain crew services), fuel, airfare, food and 17 Table of Contents beverage, advertising and marketing and travel advisor services. Most of the supplies that we require are available from numerous sources at competitive prices.
We are also investing in shore power capabilities, which with the appropriate port infrastructure would allow us to connect to onshore electrical power grids to supply much of the power needed while docked.
We are also investing in shore power technology, which with the appropriate port infrastructure would allow us to connect to onshore electrical power grids to supply much of the power needed while docked.
The Transportation Workers Identification Credential is a U.S. requirement for accessibility into and onto U.S. ports and U.S.-flagged ships. 24 Table of Contents Maritime-Labor In 2006, the International Labor Organization (“ILO”), an agency of the United Nations that develops and oversees international labor standards, adopted a new Consolidated Maritime Labor Convention (“MLC 2006”).
The Transportation Workers Identification Credential is a U.S. requirement for accessibility into and onto U.S. ports and U.S.-flagged ships. Maritime-Labor In 2006, the International Labor Organization (“ILO”), an agency of the United Nations that develops and oversees international labor standards, adopted a new Consolidated Maritime Labor Convention (“MLC 2006”).
In January 2013, NCLH completed its IPO and the ordinary shares of NCLC were exchanged for the ordinary shares of NCLH, and NCLH became the owner of 100% of the ordinary shares and parent company of NCLC (the “Corporate Reorganization”). In November 2014, we completed the Acquisition of Prestige.
In January 2013, NCLH completed its IPO and the ordinary shares of NCLC were exchanged for the ordinary shares of NCLH, and NCLH became the owner of 100% of the ordinary shares and parent company of NCLC. In November 2014, we completed the Acquisition of Prestige.
The international, national, state and local laws, regulations, treaties and other legal requirements applicable to our operations change regularly, depending on the itineraries of our ships and the ports and countries visited. Our ships are subject to inspection by the port regulatory authorities in the various countries that they visit.
The international, national, state and local laws, regulations, treaties and other 19 Table of Contents legal requirements applicable to our operations change regularly, depending on the itineraries of our ships and the ports and countries visited. Our ships are subject to inspection by the port regulatory authorities in the various countries that they visit.
Pursuant to the legislation passed in each jurisdiction, entities subject to each jurisdiction’s laws that carry out relevant activities as specified in such laws, are required to demonstrate substantial economic substance in that jurisdiction.
Pursuant to the legislation passed in each jurisdiction, entities subject to each jurisdiction’s laws that carry out relevant activities as specified in such laws, are required to demonstrate adequate economic substance in that jurisdiction.
For these purposes, shipping income attributable to transportation that begins or ends, but that does not both begin and end, in the U.S., which we refer to as “U.S.-source shipping income,” will be considered to be 50% derived from sources within the U.S.
For these purposes, shipping income attributable to transportation that begins or ends, but that does not both begin and end, in the United States, which we refer to as “U.S.-source shipping income,” will be considered to be 50% derived from sources within the United States.
In addition, we have entered into various agreements relating to port or berthing rights for our ships, which include the following: ● an agreement with the Government of Bermuda whereby we are permitted weekly calls in Bermuda through 2028 from Boston and New York. ● contracts with the Port of New Orleans, Port Miami, Port Canaveral, Manhattan Cruise Terminal, A.J.
In addition, we have entered into various agreements relating to port or berthing rights for our ships, which include the following: ● an agreement with the Government of Bermuda whereby we are permitted weekly calls in Bermuda through 2028 from Boston and New York. ● contracts with the Port of New Orleans, Port Miami, Port Canaveral, New York City Economic Development Corporation (Manhattan Cruise Terminal), A.J.
West Coast ​ Pride of America ​ 2005 ​ Hawaii ​ Norwegian Dawn ​ 2002 ​ Africa, Asia, Caribbean, Europe ​ Norwegian Star ​ 2001 ​ Antarctica, Europe, South America ​ Norwegian Sun ​ 2001 ​ Alaska, Asia, Central America, South America, U.S.
West Coast ​ Pride of America ​ 2005 ​ Hawaii ​ Norwegian Dawn ​ 2002 ​ Africa, Asia, Caribbean, Europe ​ Norwegian Star ​ 2001 ​ Antarctica, Europe, South America ​ Norwegian Sun ​ 2001 ​ Alaska, Asia, Central America, Mexico-Pacific, South America, South Pacific, U.S.
In order to expand our public health protocols, we have developed an Infectious Disease Management System that our crew members are trained on prior to returning to service.
In order to expand our public health protocols, we have developed Infectious Disease Management Protocols that our crew members are trained on prior to returning to service.
We expect to make material 23 Table of Contents investments in our business to comply with these laws and regulations; however, the total impact cannot be determined as we are evaluating our compliance plans. We refer you to “—Our Mission, Competitive Strengths & Business Strategies — Our Commitment to Sustainability” for information related to our Environmental, Social and Governance strategy.
We expect to make material investments in our business to comply with these laws and regulations; however, the total impact cannot be determined as we are evaluating our compliance plans. We refer you to “—Our Mission, Competitive Strengths & Business Strategies — Our Commitment to Sustainability” for information related to our Environmental, Social and Governance strategy.
From September 2008 to November 2014, he served as Vice President, Corporate and Capital Planning, and was an instrumental figure in the completion of NCLH’s IPO in 2013 and the 31 Table of Contents Acquisition of Prestige in 2014. From January 2007 to August 2008, he served as Director, Corporate and Capital Planning.
From September 2008 to November 2014, he served as Vice President, Corporate and Capital Planning, and was an instrumental figure in the completion of NCLH’s IPO in 2013 and the Acquisition of Prestige in 2014. From January 2007 to August 2008, he served as Director, Corporate and Capital Planning.
Our U.S.-source shipping income is considered effectively connected income if we have, or are considered to have, a fixed place of business in the U.S. involved in the earning of U.S.-source shipping 26 Table of Contents income, and substantially all of our U.S.-source shipping income is attributable to regularly scheduled transportation, such as the operation of a vessel that follows a published schedule with repeated sailings at regular intervals between the same points for voyages that begin or end in the U.S.
Our U.S.-source shipping income is considered effectively connected income if we have, or are considered to have, a fixed place of business in the United States involved in the earning of U.S.-source shipping income, and substantially all of our U.S.-source shipping income is attributable to regularly scheduled transportation, such as the operation of a vessel that follows a published schedule with repeated sailings at regular intervals between the same points for voyages that begin or end in the United States.
Some environmental groups continue to lobby for more extensive oversight of cruise ships and have generated negative publicity about the cruise industry and its environmental impact. If we violate or fail to comply with environmental laws, regulations or treaties, we could be fined or otherwise sanctioned by regulators.
Some environmental groups continue to lobby for more stringent restrictions of cruise ships and have generated negative publicity about the cruise industry and its environmental impact. If we violate or fail to comply with environmental laws, regulations or treaties, we could be fined or otherwise sanctioned by regulators.
In 2019, we launched Silver Cove, the latest enhancement designed to elevate the guest experience. This exclusive oceanfront lagoon area includes private beachfront villas, a Mandara Spa with beachfront treatments as well as the exclusive Moët & Chandon Bar and upscale Silver Cove Restaurant and Bar.
In 2019, we launched Silver Cove, the latest enhancement designed to elevate the guest experience on Great Stirrup Cay. This exclusive oceanfront lagoon area includes private beachfront villas, a Mandara Spa with beachfront treatments as well as the exclusive Moët & Chandon Bar and upscale Silver Cove Restaurant and Bar.
Farkas joined the Company in January 2004, he has held the positions of Secretary from 2010 to 2013, Senior Vice President and General Counsel from 2008 through 32 Table of Contents 2018, Vice President and Assistant General Counsel from 2005 to 2008, and Assistant General Counsel from 2004 to 2005 and was instrumental in the Company’s IPO and the Acquisition of Prestige.
Farkas joined the Company in January 2004, he has held the positions of Secretary from 2010 to 2013, Senior Vice President and General Counsel from 2008 through 2018, Vice President and Assistant General Counsel from 2005 to 2008, and Assistant General Counsel from 2004 to 2005 and was instrumental in the Company’s IPO and the Acquisition of Prestige. Mr.
Our vessels call on ports including Scandinavia, Northern Europe, the Mediterranean, the Greek Isles, 13 Table of Contents Alaska, Canada and New England, Hawaii, Asia, Tahiti and the South Pacific, Australia and New Zealand, Africa, India, South America, the Panama Canal and the Caribbean.
Our vessels call on ports including Scandinavia, Northern Europe, the Mediterranean, the Greek Isles, Alaska, Canada and New England, Hawaii, Asia, Tahiti and the South Pacific, Australia and New Zealand, Africa, India, South America, the Panama Canal and the Caribbean.
For information regarding risks associated with our compliance with legal and regulatory requirements, see “Part I Item 1A-Risk Factors” in this annual report on Form 10-K, including the risk factor titled “We are subject to complex laws and regulations, including environmental, health and safety, labor, data privacy and protection and maritime laws and regulations, which could adversely affect our operations and certain recently introduced laws and regulations and future changes in laws and regulations could lead to increased costs and/or decreased revenue.” Taxation U.S.
For information regarding risks associated with our compliance with legal and regulatory requirements, see “Part I Item 1A-Risk Factors” in this Annual Report, including the risk factor titled “We are subject to complex laws and regulations, including environmental, health and safety, labor, data privacy and protection and maritime laws and regulations, which could adversely affect our operations and certain recently introduced laws and regulations and future changes in laws and regulations could lead to increased costs and/or decreased revenue.” 24 Table of Contents Taxation U.S.
We also own and operate a cruise destination in Belize, Harvest Caye, which we introduced in November 2016. We have developed, in conjunction with Port Miami, a new terminal, which is our primary facility at the port.
We also own and operate a cruise destination in Belize, Harvest Caye, which we introduced in November 2016. We have 30 Table of Contents developed, in conjunction with Port Miami, a new terminal, which is our primary facility at the port.
West Coast ​ Regent Seven Seas Grandeur (4) ​ 2023 ​ The Bahamas, Bermuda, Canada & New England, Caribbean, Central America, Europe, Mexico-Pacific ​ Seven Seas Splendor ​ 2020 ​ Antarctica, The Bahamas, Bermuda, Canada & New England, Caribbean, Central America, Europe, Mexico-Pacific, South America ​ Seven Seas Explorer ​ 2016 ​ Africa, Alaska, Asia, Australia & New Zealand, The Bahamas, Caribbean, Central America, Europe, Mexico-Pacific ​ Seven Seas Voyager ​ 2003 ​ Africa, Antarctica, Bermuda, Europe, South America ​ Seven Seas Mariner ​ 2001 ​ Africa, Alaska, Asia, Australia & New Zealand, The Bahamas, Bermuda, Canada & New England, Caribbean, Central America, Europe, Hawaii, Mexico-Pacific, South America, South Pacific, U.S.
West Coast ​ 11 Table of Contents Regent Seven Seas Grandeur ​ 2023 ​ The Bahamas, Bermuda, Canada & New England, Caribbean, Central America, Europe, Mexico-Pacific ​ Seven Seas Splendor ​ 2020 ​ Africa, Antarctica, The Bahamas, Bermuda, Canada & New England, Caribbean, Central America, Europe, Mexico-Pacific, South America ​ Seven Seas Explorer ​ 2016 ​ Alaska, Asia, Australia & New Zealand ​ Seven Seas Voyager ​ 2003 ​ Africa, Asia, Antarctica, Australia & New Zealand, Bermuda, Europe, South America, South Pacific ​ Seven Seas Mariner ​ 2001 ​ Africa, Alaska, Asia, Australia & New Zealand, The Bahamas, Bermuda, Canada & New England, Caribbean, Central America, Europe, Hawaii, Mexico-Pacific, South America, South Pacific, U.S.
Economic Substance Requirements NCLH and NCLC are exempted companies formed under the laws of Bermuda and some of their subsidiaries have been formed in Bermuda, Guernsey, Isle of Man, British Virgin Islands, Cayman Islands or The Bahamas.
Economic Substance Requirements NCLH and NCLC are exempted companies formed under the laws of Bermuda and some of their subsidiaries have been formed or continued in Bermuda, Guernsey, Isle of Man, British Virgin Islands, St. Lucia or The Bahamas.
Effective January 2024, ships over 5,000 Gross Tons that transport passengers or cargo to or from E.U. member state ports would be required to purchase and surrender emissions allowances equivalent to emissions for all or a half of a covered voyage, depending on whether the voyage was between two E.U. ports or an E.U. and a non-E.U. port.
Effective January 2024, ships over 5,000 Gross Tons that transport passengers or cargo to or from E.U. or EEA ports are required to purchase and surrender emissions allowances equivalent to emissions for all or a half of a covered voyage, depending on whether the voyage was between two E.U. or EEA ports or an E.U. or EEA and a non-E.U. or EEA port.
Juneau Dock, Ogden Point Cruise Ship Terminal in Victoria, BC, Port of Southampton, Puerto Costa Maya, Port of Roatan, Puerto Plata, and various Hawaiian ports pursuant to which we receive preferential Berths to the exclusion of other vessels for certain specified days of the week at the terminals. ● a concession permit with the U.S.
Juneau Dock, Ogden Point Cruise Ship Terminal in Victoria, BC, Port of Southampton, ITM, and various Hawaiian ports pursuant to which we receive preferential berths to the exclusion of other vessels for certain specified days of the week at the terminals. ● a concession permit with the U.S.
In addition, strategies to reduce greenhouse gas emissions as well as ship deployment modifications could mitigate the impact of these regulations. ● ETS: The maritime transport sector was recently approved to be included in the scope of the ETS.
In addition, strategies to reduce GHG emissions as well as ship deployment modifications could mitigate the impact of these regulations. ● ETS: The maritime transport sector was approved to be included in the scope of the ETS.
This private destination is the Company’s private island featuring over 1,500 feet of accessible beachfront with white sand beaches; over 50 cabana and villa options; an array of shore excursions including a new over water zipline experience that extends nearly 3,000 feet in length; and on-island food and beverage offerings.
This private island features over 1,500 feet of accessible beachfront with white sand beaches; over 50 cabana and villa options; an array of shore excursions including a new over water zipline experience that extends nearly 3,000 feet in length; and on-island food and beverage offerings.
Diversity, Equity and Inclusion Our Company is committed to fostering an inclusive workforce, where diverse backgrounds are represented, engaged and empowered to generate and execute on innovative ideas. Our commitment to diversity and inclusion is demonstrated by our Board of Directors, which is 50% diverse with three female directors and one director from an under-represented minority community.
Diverse and Inclusive Culture Our Company is committed to fostering an inclusive workforce, where diverse backgrounds are represented, engaged and empowered to generate and execute on innovative ideas. This commitment is also demonstrated by our Board of Directors, which is 50% diverse with three female directors and one director from an under-represented minority community.
We maintain numerous sales offices which support sales and marketing efforts in various markets outside of North America including the United Kingdom, Europe, Hong Kong, Australia, Brazil, India, Japan and Singapore. Our Commitment to Sustainability ​ The continued success of our business is linked to our ability to operate and grow sustainably.
We maintain numerous sales offices which support sales and marketing efforts in various markets outside of North America including the United Kingdom, Europe, Asia, Australia and Brazil. Our Commitment to Sustainability ​ The continued success of our business is linked to our ability to operate and grow sustainably.
West Coast ​ Norwegian Escape ​ 2015 ​ The Bahamas, Bermuda, Canada & New England, Caribbean, Europe ​ Norwegian Getaway ​ 2014 ​ The Bahamas, Bermuda, Canada & New England, Caribbean, Europe ​ Norwegian Breakaway ​ 2013 ​ Bermuda, Canada & New England, Caribbean, Europe ​ Norwegian Epic ​ 2010 ​ Bermuda, Caribbean, Europe ​ Norwegian Gem ​ 2007 ​ The Bahamas, Bermuda, Canada & New England, Caribbean, Central America, Europe ​ Norwegian Jade ​ 2006 ​ Africa, Asia, The Bahamas, Caribbean, Europe ​ Norwegian Pearl ​ 2006 ​ The Bahamas, Bermuda, Canada & New England, Caribbean, Central America, Europe ​ Norwegian Jewel ​ 2005 ​ Alaska, Asia, Caribbean, Central America, Mexico-Pacific, U.S.
West Coast ​ Norwegian Escape ​ 2015 ​ The Bahamas, Bermuda, Canada & New England, Caribbean, Europe ​ Norwegian Getaway ​ 2014 ​ The Bahamas, Bermuda, Canada & New England, Caribbean, Europe ​ Norwegian Breakaway ​ 2013 ​ Bermuda, Canada & New England, Caribbean, Europe ​ Norwegian Epic ​ 2010 ​ The Bahamas, Bermuda, Caribbean, Europe ​ Norwegian Gem ​ 2007 ​ The Bahamas, Bermuda, Canada & New England, Caribbean, Central America, Europe ​ Norwegian Jade ​ 2006 ​ Africa, Alaska, Asia, The Bahamas, Caribbean, Central America, Europe, U.S.
As of December 31, 2022, the composition of our workforce was as follows: ​ ​ ​ Gender diversity (1) Male % Female % All shoreside team members 39% 61% Shoreside Managers/above 53% 47% All shipboard team members 79% 21% 3-stripe/above (equivalent to Manager level) 85% 15% ​ ​ Ethnic diversity (2) Non-URMs % URMs % All shoreside team members in the U.S. who have self-identified 33% 67% Shoreside Managers/above in the U.S. who have self-identified 46% 54% (1) While we present male and female, we acknowledge this is not fully encompassing of all gender identities.
As of December 31, 2023, the composition of our workforce was as follows: ​ ​ ​ Gender diversity (1) Male % Female % All shoreside team members 41% 59% Shoreside Managers/above 52% 48% All shipboard team members 79% 21% 3-stripe/above (equivalent to Manager level) 85% 15% ​ ​ Ethnic diversity (2) Non-URMs % URMs % All shoreside team members in the U.S. who have self-identified 33% 67% Shoreside Managers/above in the U.S. who have self-identified 47% 53% (1) While we present male and female, we acknowledge this is not fully encompassing of all gender identities.
The NYSE is considered to be an established securities market in the U.S. Therefore, we believe that NCLH qualifies for the benefits of Section 883.
The NYSE is considered to be an established securities market in the United States. Therefore, we believe that NCLH qualifies for the benefits of Section 883.
Prior to that, he served as Interim Chief Financial Officer from March 2018 to August 2018 and as NCLH’s Senior Vice President, Finance, from November 2014 to August 2018.
Kempa has served as Executive Vice President and Chief Financial Officer since August 2018. Prior to that, he served as Interim Chief Financial Officer from March 2018 to August 2018 and as NCLH’s Senior Vice President, Finance, from November 2014 to August 2018.
West Coast ​ Seven Seas Navigator ​ 1999 ​ Africa, Asia, Australia & New Zealand, Bermuda, Canada & New England, Caribbean, Europe, South America, South Pacific ​ (1) The table above does not include the five additional ships on order. (2) The second of the Prima Class Ships, which is expected to be delivered in the summer of 2023.
West Coast ​ Seven Seas Navigator ​ 1999 ​ Africa, Asia, Australia & New Zealand, The Bahamas, Bermuda, Canada & New England, Caribbean, Europe, South America, South Pacific ​ (1) The table above does not include the three additional ships on order. (2) The third of the Prima Class Ships, which is expected to be delivered in 2025.
In 2018, the Vessel Incidental Discharge Act (“VIDA”), which will eventually replace the VGP, was signed into law, and in October 2020, the EPA published a notice of proposed rulemaking to establish national standards of performance under VIDA that would apply to 20 different types of vessel equipment and systems, as well as general discharge standards that would apply to all types of vessel incidental discharges.
In 2018, the Vessel Incidental Discharge Act (“VIDA”), which will eventually replace the VGP, was signed into law, and the EPA published a notice of proposed rulemaking in 2020 and a supplemental notice of proposed rulemaking in 2023 to establish national standards of performance under VIDA that would apply to 20 different types of vessel equipment and systems, as well as general discharge standards that would apply to all types of vessel incidental discharges within 12 nautical miles of the United States.
Additional ECAs may also be established in the future, with areas around Norway, Japan, and the Mediterranean Sea being considered. 21 Table of Contents Ballast water discharges are governed by the MARPOL Ballast Water Management Convention, which came into force in 2017 (“The Convention”), and which governs the discharge of ballast water from ships.
Additional ECAs may also be established in the future, with areas around Norway and Japan being considered. Ballast water discharges are governed by the MARPOL Ballast Water Management Convention, which came into force in 2017 (the “Convention”), and which governs the discharge of ballast water from ships.
For additional information regarding our sustainability initiatives, please visit our website at www.nclhltd.com. ​ Highly Experienced Management Team Our senior management team is comprised of executives with extensive experience in the cruise, travel, leisure and hospitality-related industries. Mr. Frank Del Rio is our President and Chief Executive Officer. Mr.
For additional information regarding our sustainability initiatives, please visit our website at www.nclhltd.com. ​ Highly Experienced Management Team ​ Our senior management team is comprised of executives with extensive experience in the cruise, travel, leisure and hospitality-related industries.
Retention and Engagement We have a history of strong retention rates across our shoreside and shipboard teams which we attribute to our culture that allows our team members to thrive and achieve their career goals. For the full year of 2022, the company experienced the highest shoreside voluntary retention rate in recent years.
Retention and Engagement We have a history of strong retention rates across our shoreside and shipboard teams which we attribute to our culture that allows our team members to thrive and achieve their career goals. For the full year of 2023, the Company experienced its highest shoreside voluntary retention rate as compared to the prior four years.
The requirements will be phased in from 2024 to 2026. Beginning in 2024, covered entities would be required to procure and surrender allowances equivalent to 40% of their verified carbon emissions, with the amount increasing to 70% of carbon emissions in 2025 and 100% of greenhouse gas emissions in 2026, with allowances to be surrendered in the following year.
The requirements will be phased in from 2024 to 2026. Covered entities are required to procure and surrender allowances equivalent to 40% of their verified carbon emissions from 2024, with the amount increasing to 70% of carbon emissions from 2025 and 100% of GHG emissions from 2026, with allowances to be surrendered by September in the following year.
Our SMS is approved and audited regularly by our classification society, Lloyds Register, and it also undergoes regular internal audits as well as periodic inspections by the U.S.
Our SMS is approved and audited regularly by our classification society, Lloyds Register, and it also undergoes regular internal audits as well as periodic inspections by the U.S. Coast Guard, flag state and other port and state authorities.
As of December 31, 2022, we have in place approximately £68.6 million of security guarantees for our brands as well as a consumer protection policy covering up to £82.4 million. The Company has provided approximately $29.7 million in cash to secure all the financial security guarantees required. Compliance with these regulations has had an impact on our financial condition.
As of December 31, 2023, we have in place approximately £62.4 million of security guarantees for our brands as well as a consumer protection policy covering up to £107.9 million. The Company has provided approximately $1.5 million in cash to secure all the financial security guarantees required. Compliance with these regulations has had an impact on our financial condition.
We evaluate, monitor, and implement energy-savings projects on our existing ships including but not limited to HVAC system upgrades, LED lighting, low friction silicone hull coating, hydrodynamic upgrades, and waste heat recovery projects. ​ There is no clear path today to achieve net zero for the cruise industry, and this effort will require significant technology advancements including commercially viable and scalable low or zero emission fuels, but we are committed to doing our part to facilitate this transition.
We evaluate, monitor, and implement energy-savings projects on our existing ships including but not limited to HVAC system upgrades, LED lighting, hydrodynamic upgrades, and Waste Heat Recovery projects. ​ The path towards net zero is complex, and this effort will require significant technology advancements including commercially viable and scalable low or zero GHG emission fuels, but we are committed to doing our part to facilitate this transition.
We utilize a multi-channel marketing strategy that may include a combination of print, television, radio, digital, website/e-commerce, direct mail, social media, mobile and e-mail campaigns, partnerships, customer loyalty initiatives, market research, consumer events and business-to-business events. We continue to enhance and expand our use of digital marketing and social media to drive cost efficiencies.
We utilize a multi-channel marketing strategy that may include a combination of print, television, radio, digital, website/e-commerce, direct mail, social media and influencer marketing, mobile and e-mail campaigns, partnerships, customer loyalty initiatives, market research, public relations, consumer events and business-to-business events.
The 75-acre destination features Belize’s only cruise ship pier, an expansive seven-acre white sand beach, 15,000 sq. ft. pool with swim up bar, multiple dining options and a nature center with wildlife experiences plus adventure tours. ​ Disciplined Fleet Expansion For the Norwegian brand, we have five Prima Class Ships on order, each ranging from approximately 143,500 to 169,000 Gross Tons with 3,100 or more Berths, with currently scheduled delivery dates from 2023 through 2028.
The 75-acre destination features Belize’s only cruise ship pier, an expansive seven-acre white sand beach, 15,000 sq. ft. pool with swim up bar, multiple dining options and a nature center with wildlife experiences plus adventure tours. ​ Disciplined Fleet Expansion For the Norwegian brand, we have four Prima Class Ships on order with currently scheduled delivery dates from 2025 through 2028.
Regent’s all-inclusive offering includes business class air on intercontinental flights, unlimited shore excursions, 1-night pre-cruise hotel package in Concierge Suites and higher, specialty restaurants, unlimited beverages, including fine wines and spirits, pre-paid gratuities, unlimited Wi-Fi, transfers between airport and ship, valet laundry service and other amenities.
Regent’s all-inclusive offering includes business class air on intercontinental flights, unlimited shore excursions, one-night pre-cruise hotel package in Concierge Suites and higher, specialty restaurants, unlimited beverages, including fine wines and spirits, pre-paid gratuities, unlimited Wi-Fi, transfers between airport and ship, valet laundry service and other amenities. ​ The Norwegian, Oceania Cruises and Regent brands all offer a high level of onboard service.
Oceania Cruises and Regent are known for their quality of service, including some of the highest crew-to-guest ratios in the industry and a staff trained to deliver personalized and attentive service. Rich Stateroom Mix The Norwegian, Oceania Cruises and Regent fleets offer an attractive mix of staterooms, suites and villas.
Oceania Cruises and Regent are known for their high level of service, including some of the highest crew-to-guest ratios in the industry with trained staff providing personalized service and world class cuisine. Rich Stateroom Mix The Norwegian, Oceania Cruises and Regent fleets offer an attractive mix of staterooms, suites and villas.
For example, legislation has been proposed in the past that would eliminate the benefits of the exemption from U.S. federal income tax under Section 883 and subject all or a portion of our shipping income to taxation in the U.S.
These tax regimes, however, are subject to change, possibly with retroactive effect. Legislation has been proposed in the past that would eliminate the benefits of the exemption from U.S. federal income tax under Section 883 and subject all or a portion of our shipping income to taxation in the U.S.
We entered into a trademark license agreement with Regent Hospitality Worldwide, Inc., which we amended in February 2011, granting us the right to use the “Regent” brand family of marks.
We entered into a trademark license agreement with Regent Hospitality Worldwide, Inc., which we amended in February 2011, granting us the right to use the “Regent” brand family of marks. The amended trademark license agreement allows Regent to use the Regent trade name, in conjunction with cruises, in perpetuity, subject to the terms and conditions in the agreement.
Income items considered non-incidental to the international operation of ships include income from the sale of single-day cruises, shore excursions, air and other transportation, and pre- and post-cruise land packages. We believe that substantially all of our income currently derived from the international operation of ships is shipping income.
Income items considered non-incidental to the international operation of ships include income from the sale of single-day cruises, shore excursions, air and other transportation, and pre- and post-cruise land packages.
In some instances, cruise ticket prices include round-trip airfare to and from the port of embarkation, complimentary beverages, unlimited shore excursions, internet, valet laundry services, pre-cruise hotel packages, and on some of the exotic itineraries pre or post land packages.
In some instances, cruise ticket prices include round-trip airfare to and from the port of embarkation, complimentary beverages, unlimited shore excursions, internet, valet laundry services, pre-cruise hotel packages, as well as pre- or post-cruise land packages at many destinations we sail to around the world.
Our website also contains other items of interest to our investors, including, but not limited to, investor events, press and earnings releases and sustainability initiatives. Information about our Executive Officers The following table sets forth certain information regarding NCLH’s executive officers as of February 16, 2023. ​ ​ ​ ​ ​ Name Age Position Frank J.
Our website also contains other items of interest to our investors, including, but not limited to, investor events, press and earnings releases and sustainability initiatives. 31 Table of Contents Information about our Executive Officers The following table sets forth certain information regarding NCLH’s executive officers as of February 16, 2024. ​ ​ ​ ​ ​ Name Age Position Harry Sommer 56 Director, President and Chief Executive Officer Mark A.
See “Item 1A—Risk Factors” for additional information. 11 Table of Contents Our Fleet ​ The following table presents information about our ships and their primary areas of operation based on current and future itineraries, which are subject to change. ​ ​ Ship (1) Year Built Primary Areas of Operation Norwegian ​ ​ ​ Norwegian Viva (2) ​ 2023 ​ The Bahamas, Caribbean, Europe ​ Norwegian Prima ​ 2022 ​ The Bahamas, Bermuda, Canada & New England, Caribbean, Europe ​ Norwegian Encore ​ 2019 ​ Alaska, The Bahamas, Caribbean, Central America, Mexico-Pacific, U.S.
Refer to Note 8 – “Long-Term Debt” for further details about the above transactions. 10 Table of Contents Our Fleet ​ The following table presents information about our ships and their primary areas of operation based on current and future itineraries, which are subject to change. ​ ​ Ship (1) Year Built Primary Areas of Operation Norwegian ​ ​ ​ Norwegian Aqua (2) ​ 2025 ​ Europe, Caribbean ​ Norwegian Viva ​ 2023 ​ The Bahamas, Caribbean, Europe ​ Norwegian Prima ​ 2022 ​ The Bahamas, Bermuda, Canada & New England, Caribbean, Europe ​ Norwegian Encore ​ 2019 ​ Alaska, The Bahamas, Caribbean, Central America, Mexico-Pacific, U.S.
(4) The last of the Explorer Class Ships, which is expected to be delivered in the fall of 2023. 12 Table of Contents Our Mission, Competitive Strengths & Business Strategies Our core mission is to provide exceptional vacation experiences delivered by passionate team members committed to world-class hospitality and innovation.
(3) The second of the Allura Class Ships, which is expected to be delivered in 2025. ​ Our Mission, Competitive Strengths & Business Strategies Our core mission is to provide exceptional vacation experiences delivered by passionate team members committed to world-class hospitality and innovation.
Prior to every cruise setting sail, we hold a mandatory safety drill for all guests during which important safety information is reviewed and demonstrated. We also show a safety video which runs continuously on the stateroom televisions. Our fleet is equipped with modern navigational control and fire prevention and control systems.
Prior to every cruise setting sail, we show a safety video, which runs continuously on the stateroom televisions, and familiarize guests with their muster stations and important safety information. Our fleet is equipped with modern navigational control and fire prevention and control systems.
Coast Guard, flag state and other port and state authorities. 19 Table of Contents Insurance We maintain insurance on the hull and machinery of our ships, which are maintained in amounts related to the estimated market value of each ship.
Insurance We maintain insurance on the hull and machinery of our ships, which are maintained in amounts related to the estimated market value of each ship.
Casino Player Strategy We have non-exclusive arrangements with casino partners worldwide whereby loyal gaming guests are offered cruise reward certificates redeemable for cruises. Through property sponsored events and joint marketing programs, we have the opportunity to market cruises to these guests.
Experiences at Sea focuses on corporate, incentive and affinity-focused clients across all three of our brands. Casino Player Strategy We have non-exclusive arrangements with casino partners worldwide whereby loyal gaming guests are offered cruise reward certificates redeemable for cruises. Through property sponsored events and joint marketing programs, we have the opportunity to market cruises to these guests.
Prior to that, he served as Executive Vice President, International Business Development from May 2015 to January 2019. From February 2015 until May 2015, he served as Executive Vice President and Chief Integration Officer for NCLH. Mr.
From February 2015 until May 2015, he served as Executive Vice President and Chief Integration Officer for NCLH. Mr.
In addition to the insurance coverage on the hull and machinery of our ships, we seek to maintain comprehensive insurance coverage and believe that our current coverage is at appropriate levels to protect against most of the accident-related risks involved in the conduct of our business.
The coverage for each of the hull and machinery policies is maintained with syndicates of insurance underwriters from the European and U.S. insurance markets. 18 Table of Contents In addition to the insurance coverage on the hull and machinery of our ships, we seek to maintain comprehensive insurance coverage and believe that our current coverage is at appropriate levels to protect against most of the accident-related risks involved in the conduct of our business.
With regard to air emissions from seagoing ships, the E.U. requires the use of low sulfur (less than 0.1%) marine gas oil in E.U. ports. All non-ECA waters have a 0.5% fuel sulfur limit. As part of its Fit for 55 package, the E.U. is in the process of adopting several rules aimed at reducing greenhouse gas emissions.
With regard to air emissions from seagoing ships, the E.U. requires the use of low sulfur (less than 0.1%) marine gas oil in E.U. ports. All non-ECA waters have a 0.5% fuel sulfur limit.
These and other impacts could result in additional delays in ship deliveries in the future, which may be prolonged. We believe these new ships will allow us to continue expanding the reach of our brands, position us for accelerated growth and provide an optimized return on invested capital.
We believe these new ships will allow us to continue expanding the reach of our brands, position us for accelerated growth and provide an optimized return on invested capital.
For example, the Organization for Economic Co-operation and Development and numerous jurisdictions (including the U.K.) have had an increased focus on issues concerning the taxation of multinational businesses and several related reforms have been put forth (including the implementation of a global 27 Table of Contents minimum tax rate of at least 15% for large multinational businesses), which could have a negative effect on our business, financial condition and results of operations.
For example, the OECD and numerous jurisdictions have had an increased focus on issues concerning the taxation of multinational businesses and have adopted several related reforms including the implementation of a global minimum tax rate of at least 15% for large multinational businesses starting January 1, 2024 or later, which could have a negative effect on our business, financial condition and results of operations.

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Item 1A. Risk Factors

Risk Factors — what could go wrong, per management

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Biggest changeIt may take us longer than expected to return to historical occupancy levels and our occupancy levels may be negatively impacted by concerns that cruises are susceptible to the spread of infectious diseases, disruptions to travel due to travel restrictions, health concerns, or other factors, as well as adverse changes in the perceived or actual economic climate due to the impact of COVID-19 or other future pandemics or other public health crises. ​ To date, the COVID-19 pandemic has resulted in significant costs and lost revenue as a result of, among other things, the suspension of cruise voyages, implementation of additional health and safety measures, reduced demand for cruise vacations, guest compensation, itinerary modifications, redeployments and cancellations, travel restrictions and advisories, the unavailability of ports and/or destinations and protected commissions.
Biggest changeThis caused significant costs and lost revenue as a result of, among other things, the suspension of cruise voyages, implementation of additional health and safety measures, reduced demand for cruise vacations, guest compensation, itinerary modifications, redeployments and cancellations, travel restrictions and advisories, the unavailability of ports and/or destinations and protected commissions.
In general terms, substantial economic substance means: (i) the entity is actually directed and managed in the jurisdiction; (ii) core income-generating activities relating to the applicable relevant activity are performed in the jurisdiction; (iii) there are adequate employees in the jurisdiction; (iv) the entity maintains adequate physical presence in the jurisdiction; and (v) there is adequate operating expenditure in the jurisdiction.
In general terms, adequate economic substance means: (i) the entity is actually directed and managed in the jurisdiction; (ii) core income-generating activities relating to the applicable relevant activity are performed in the jurisdiction; (iii) there are adequate employees in the jurisdiction; (iv) the entity maintains adequate physical presence in the jurisdiction; and (v) there is adequate operating expenditure in the jurisdiction.
Increases in the price of airfare due to increases in fuel prices, fuel surcharges, changes in commercial airline services as a result of health and safety events, strikes or other staffing shortages, weather or other events, or the lack of availability due to schedule changes or a high level of airline bookings has and could adversely affect our ability to deliver guests and crew to or from our ships and thereby increase our cruise operating expenses which, in turn, has an adverse effect on our financial condition and results of operations.
Increases in the price of airfare due to increases in fuel prices, fuel surcharges, changes in commercial airline services as a result of health and safety events, strikes or other staffing shortages, weather or other events, or the lack of availability due to schedule changes or a high level of airline bookings has and could adversely affect our ability to transport guests and crew to or from our ships and thereby increase our cruise operating expenses which, in turn, has an adverse effect on our financial condition and results of operations.
Such events or conditions may also have downstream effects on the global economic environment, including increased fuel and commodity pricing, supply chain shortages, labor shortages, volatility in the global capital markets, contraction of the global economy leading to decreased consumer discretionary spending, and other effects impossible to predict at this time. ​ Armed conflicts, including Russia’s ongoing invasion of Ukraine, have also impacted, and could in the future impact, our profitability and product offering by limiting the destinations to which we can travel and our operations by making it more difficult to source crew members and third-party vendors from affected regions and making it more difficult or costly to source goods we need to run our operations or to build or maintain our ships.
Such events or conditions may also have downstream effects on the global economic environment, including increased fuel and commodity pricing, supply chain shortages, labor shortages, volatility in the global capital markets, contraction of the global economy leading to decreased consumer discretionary spending, and other effects impossible to predict at this time. ​ Armed conflicts, including Russia’s ongoing invasion of Ukraine and the Israel-Hamas war, have also impacted, and could in the future impact, our profitability and product offering by limiting the destinations to which we can travel and our operations by making it more difficult to source crew members and third-party vendors from affected regions and making it more difficult or costly to source goods we need to run our operations or to build or maintain our ships.
We have also been, and may continue to be, negatively impacted by adverse impacts to our travel agencies and suppliers due to COVID-19, and we may experience similar impacts in the event of a future pandemic or other public health crises. ​ We have been, and may in the future be, subject to heightened governmental regulations, travel advisories, travel bans and restrictions that have and could significantly impact our global guest sourcing and our access to various ports of call around the globe.
We were also negatively impacted by adverse impacts to our travel agencies and suppliers due to COVID-19, and we may experience similar impacts in the event of a future pandemic or other public health crises. ​ We have been, and may in the future be, subject to heightened governmental regulations, travel advisories, travel bans and restrictions that have and could significantly impact our global guest sourcing and our access to various ports of call around the globe.
In 2023, ships are required to reduce carbon intensity by 5% from a 2019 baseline, with 2% incremental improvements each year thereafter until 2030. The EEXI is a design re-certification requirement that updates energy efficiency requirements for existing ships and regulates carbon dioxide emissions related to installed engine power, transport capacity and ship speed.
Beginning in 2023, ships are now required to reduce carbon intensity by 5% from a 2019 baseline, with 2% incremental improvements each year thereafter until 2030. The EEXI is a design re-certification requirement that updates energy efficiency requirements for existing ships and regulates carbon dioxide emissions related to installed engine power, transport capacity and ship speed.
However, a change in our estimated future operating cash flows may result in a decline in fair value in future periods, which may result in a need to recognize additional impairment charges. ​ Operational Related Risk Factors ​ Unavailability of ports of call may materially adversely affect our business, financial condition and results of operations. ​ 37 Table of Contents We believe that attractive port destinations are a major reason why guests choose to go on a particular cruise or on a cruise vacation.
However, a change in our estimated future operating cash flows may result in a decline in fair value in future periods, which may result in a need to recognize additional impairment charges. ​ Operational Related Risk Factors ​ Unavailability of ports of call may materially adversely affect our business, financial condition and results of operations. ​ We believe that attractive port destinations are a major reason why guests choose to go on a particular cruise or on a cruise vacation.
The regulatory framework for data privacy and protection is uncertain for the foreseeable future, and it is possible that legal and regulatory obligations may continue to increase and may be interpreted and applied in a manner that is inconsistent or possibly conflicting from one jurisdiction to another. ​ In the event of a data security breach of our systems and/or third-party systems or a cyber-attack or other cyber incident, we may incur costs associated with the following: response, notification, forensics, regulatory investigations, public relations, consultants, credit identity monitoring, credit freezes, fraud alert, credit identity restoration, credit card cancellation, credit card reissuance or replacement, data restoration, regulatory fines and penalties, vendor fines and penalties, legal fees, damages and settlements.
The regulatory framework for data privacy and protection is uncertain for the foreseeable future, and it is possible that legal and regulatory obligations may continue to increase and may be interpreted and applied in a manner that is inconsistent or possibly conflicting from one jurisdiction to another. ​ In the event of a data security breach of our systems and/or third-party systems or a cybersecurity incident, we may incur costs associated with the following: response, notification, forensics, regulatory investigations, public relations, consultants, credit identity monitoring, credit freezes, fraud alert, credit identity restoration, credit card cancellation, credit card reissuance or replacement, data restoration, regulatory fines and penalties, vendor fines and penalties, legal fees, damages and settlements.
Such disruptions could cause counterparties under our credit facilities, derivatives, contingent obligations, insurance contracts and new ship progress payment guarantees to be unable to perform their obligations or to breach their obligations to us under our contracts with them, which could include failures of financial institutions to 36 Table of Contents fund required borrowings under our loan agreements and to pay us amounts that may become due under our derivative contracts and other agreements.
Such disruptions could cause counterparties under our credit facilities, derivatives, contingent obligations, insurance contracts and new ship progress payment guarantees to be unable to perform their obligations or to breach their obligations to us under our contracts with them, which could include failures of financial institutions to fund required borrowings under our loan agreements and to pay us amounts that may become due under our derivative contracts and other agreements.
COVID-19 related regulations have also sometimes prevented us from using commercial airline services to transport our crew members to and from our ships, which has resulted in increased costs to our Company. ​ Global events and conditions, including terrorist acts, armed conflicts, acts of piracy, and other international events impacting the security of travel or the global economy, or threats thereof, could adversely affect our business. ​ Global events and conditions, including the threat or possibility of future terrorist acts, outbreaks of hostilities or armed conflict, political unrest and instability, the issuance of government travel advisories or elevated threat warnings, increases in the activity of pirates, and other geo-political uncertainties, or the possibility or fear of such events, have had in the past and may again in the future have an adverse impact on our business.
COVID-19 related regulations also prevented us from using commercial airline services to transport our crew members to and from our ships, which resulted in increased costs to our Company. ​ Global events and conditions, including terrorist acts, armed conflicts, acts of piracy, and other international events impacting the security of travel or the global economy, or threats thereof, could adversely affect our business. 36 Table of Contents ​ Global events and conditions, including the threat or possibility of future terrorist acts, outbreaks of hostilities or armed conflict, political unrest and instability, the issuance of government travel advisories or elevated threat warnings, increases in the activity of pirates, and other geo-political uncertainties, or the possibility or fear of such events, have had in the past and may again in the future have an adverse impact on our business.
In addition, concern about climate change may cause consumers to avoid certain kinds of travel including cruise and air travel, which could impact our ability to source guests. Increasing concerns about greenhouse gas emissions may attract scrutiny from investors and may make it more difficult and/or costly for us to raise capital.
In addition, concern about climate change may cause consumers to avoid certain kinds of travel including cruise and air travel, which could impact our ability to source guests. Increasing concerns about GHG emissions may attract scrutiny from investors and may make it more difficult and/or costly for us to raise capital.
Cyber-attacks can include computer viruses, malware, worms, hackers and other malicious software programs or other attacks, including physical and electronic break-ins, router disruption, sabotage or espionage, disruptions from unauthorized access and tampering (including through social engineering such as phishing attacks), impersonation of authorized users and coordinated denial-of-service attacks.
Cybersecurity threats can include computer viruses, malware, worms, hackers and other malicious software programs or other attacks, including physical and electronic break-ins, router disruption, sabotage or espionage, disruptions from unauthorized access and tampering (including through social engineering such as phishing attacks), impersonation of authorized users and coordinated denial-of-service attacks.
In addition, these conditions could also impact our suppliers, which could result in disruptions in our suppliers’ services and financial losses for us. ​ Breaches in data security or other disturbances to our information technology and other networks or our actual or perceived failure to comply with requirements regarding data privacy and protection could impair our operations, subject us to significant fines, penalties and damages, and have a material adverse impact on our business, financial condition and results of operations. ​ The integrity and reliability of our information technology systems and networks are crucial to our business operations and disruptions to these systems or networks could impair our operations, have an adverse impact on our financial results and negatively affect our reputation and customer demand.
In addition, these conditions could also impact our suppliers, which could result in disruptions in our suppliers’ services and financial losses for us. ​ Breaches in data security or other disturbances to our information systems and other networks or our actual or perceived failure to comply with requirements regarding data privacy and protection could impair our operations, subject us to significant fines, penalties and damages, and have a material adverse impact on our business, financial condition and results of operations. ​ The integrity and reliability of our information systems and networks are crucial to our business operations and a breach, compromise, damage or other disruption to these systems or networks could impair our operations, have an adverse impact on our financial results and negatively affect our reputation and customer demand.
We have also made, and plan to continue to make, investments in land-based projects including port facilities and destination projects that are susceptible to impacts from, among other things, weather events, regulatory restrictions, labor risks, shortages of goods and materials and resistance from local populations.
We have also made, and plan to continue to make, investments in land-based projects including port facilities and destination projects that are susceptible to impacts from, among other things, weather events, regulatory restrictions, labor risks, 43 Table of Contents shortages of goods and materials and resistance from local populations.
Pursuant to the legislation passed in each jurisdiction, entities subject to each jurisdiction’s laws that carry out relevant activities as specified in such laws, are required to demonstrate substantial economic substance in that jurisdiction.
Pursuant to the legislation passed in each jurisdiction, entities subject to each jurisdiction’s laws that carry out relevant activities as specified in such laws, are required to demonstrate adequate economic substance in that jurisdiction.
The IMO, a United Nations agency with responsibility for the safety and security of shipping and the prevention of marine pollution by ships, the Council of the 44 Table of Contents European Union, individual countries, the United States, and individual states have implemented and are considering, new laws and rules to manage cruise ship operations.
The IMO, a United Nations agency with responsibility for the safety and security of shipping and the prevention of marine pollution by ships, the Council of the European Union, individual countries, the United States, and individual states have implemented and are considering, new laws and rules to manage cruise ship operations.
A weaking of the U.S. dollar against the euro would have a negative impact on our financial performance to the extent that these contracts have not been hedged.
A weakening of the U.S. dollar against the euro would have a negative impact on our financial performance to the extent that these contracts have not been hedged.
If the equity and credit markets deteriorate, including as a result of political unrest or war, it may make any necessary debt or equity financing more difficult to 38 Table of Contents obtain in a timely manner or on favorable terms, more costly or more dilutive.
If the equity and credit markets deteriorate, including as a result of political unrest or war, it may make any necessary debt or equity financing more difficult to obtain in a timely manner or on favorable terms, more costly or more dilutive.
If such entities cannot establish compliance with these 46 Table of Contents requirements, we may be liable to penalties and fines in the applicable jurisdictions and/or required to re-domicile such entities to different jurisdictions that may have tax regimes and other regulatory regimes which may be less favorable. ​ Risks Related to NCLH’s Ordinary Shares ​ Shareholders of NCLH may have greater difficulties in protecting their interests than shareholders of a U.S. corporation. ​ We are a Bermuda exempted company.
If such entities cannot establish compliance with these requirements, we may be liable to pay additional penalties and fines in the applicable jurisdictions and/or required to re-domicile such entities to different jurisdictions that may have tax regimes and other regulatory regimes which may be less favorable. ​ Risks Related to NCLH’s Ordinary Shares ​ Shareholders of NCLH may have greater difficulties in protecting their interests than shareholders of a U.S. corporation. ​ We are a Bermuda exempted company.
Consequently, this may negatively affect demand for cruise vacations in these countries, which are a discretionary purchase. Decreases in demand for cruise vacations could result in price discounting or lower Occupancy Percentages, which, in turn, could reduce the profitability of our business.
Consequently, this may negatively affect demand for cruise vacations in these countries, which are a discretionary purchase. Decreases in demand for cruise vacations could result in price discounting or lower Occupancy Percentages, which, in turn, could reduce the profitability of our 38 Table of Contents business.
For example, the IMO adopted two requirements that went into effect in 2023, the Carbon Intensity Indicator and Energy Efficiency Ship Index, which each regulate carbon emissions for ships, and the E.U. will regulate carbon dioxide emissions from passenger and cargo ships over 5,000 Gross Tons under its Emissions Trading System beginning in 2024.
For example, the IMO adopted two requirements that went into effect in 2023, the Carbon Intensity Indicator and Energy Efficiency Ship Index, which each regulate carbon emissions for ships, and the E.U. has begun to regulate carbon dioxide emissions from passenger and cargo ships over 5,000 Gross Tons under its Emissions Trading System beginning in 2024.
The requirements are proposed to be phased in from 2024 to 2026.
The requirements are to be phased in from 2024 to 2026.
Ships 40 Table of Contents in our fleet that do not have exhaust gas cleaning systems, and in specified areas even ships with exhaust gas cleaning systems, will be required to use low-sulfur fuels. Low-sulfur fuels may be costly due to increased demand and scarcity if suppliers are not able to produce sufficient quantities.
Ships in our fleet that do not have exhaust gas cleaning systems, and in specified areas even ships with exhaust gas cleaning systems, will be required to use low-sulfur fuels. Low-sulfur fuels may be costly due to increased demand and scarcity if suppliers are not able to produce sufficient quantities.
We may be required to pay non-U.S. taxes on dispositions of foreign property or operations involving foreign property that may give rise to non-U.S. income or other tax liabilities in amounts that could be substantial. ​ The various tax regimes to which we are currently subject result in a relatively low effective tax rate on our worldwide income.
We may be required to pay non-U.S. taxes on dispositions of foreign property or operations involving foreign property that may give rise to non-U.S. income or other tax liabilities in amounts that could be substantial. ​ The various tax regimes to which we have historically been subject result in a relatively low effective tax rate on our worldwide income.
Additional risks include imposition of trade barriers, withholding and other taxes on remittances and other payments by subsidiaries and changes in and application of foreign 41 Table of Contents taxation structures, including value added taxes.
Additional risks include imposition of trade barriers, withholding and other taxes on remittances and other payments by subsidiaries and changes in and application of foreign taxation structures, including value added taxes.
In addition, data security breaches, a cyber-attack or other cyber incident may cause business interruption, information technology disruption, disruptions as a result of regulatory investigation or litigation, digital asset loss related to corrupted or destroyed data, loss of company assets, damage to our reputation, damages to intangible property and other intangible damages, such as loss of consumer confidence, all of which could impair our operations and have an adverse impact on our financial results. ​ Changes in fuel prices and the type of fuel we are permitted to use and/or other cruise operating costs would impact the cost of our cruise ship operations and our hedging strategies may not protect us from increased costs related to fuel prices. ​ Fuel expense is a significant cost for our Company.
In addition, a data security breach or cybersecurity incident may cause business interruption, information system disruption, disruptions as a result of regulatory investigation or litigation, digital asset loss related to corrupted or destroyed data, loss of company assets, damage to our reputation, damages to intangible 39 Table of Contents property and other intangible damages, such as loss of consumer confidence, all of which could impair our operations and have an adverse impact on our financial results. ​ Changes in fuel prices and the type of fuel we are permitted to use and/or other cruise operating costs would impact the cost of our cruise ship operations and our hedging strategies may not protect us from increased costs related to fuel prices. ​ Fuel expense is a significant cost for our Company.
A significant delay in the delivery of a new ship, or a significant performance deficiency or mechanical failure of a new ship could also have an adverse effect on our business.
A significant delay in the delivery of a 40 Table of Contents new ship, or a significant performance deficiency or mechanical failure of a new ship could also have an adverse effect on our business.
In March 2020, we implemented a voluntary suspension of all cruise voyages across our three brands. We began resuming cruise voyages in July 2021 in a phased manner and completed the phased relaunch of our entire fleet in early May 2022.
In March 2020, we implemented a voluntary suspension of all cruise voyages across our three brands due to the COVID-19 pandemic. We began resuming cruise voyages in July 2021 in a phased manner and completed the phased relaunch of our entire fleet in early May 2022.
We experience cyber-attacks of varying degrees on our systems and networks and, as a result, unauthorized parties have obtained in the past, and may in the future obtain, access to our computer systems and networks, including cloud-based platforms.
We experience cybersecurity threats and incidents of varying degrees on our systems and networks and, as a result, unauthorized parties have obtained in the past, and may in the future obtain, access to our computer systems and networks, including cloud-based platforms.
The loss of services of one or more of these individuals could materially adversely affect us. ​ Negative perceptions about the cruise industry due to the COVID-19 pandemic, carbon intensity or otherwise may make it increasingly difficult to retain and hire additional crew members to staff our fleet and to recruit new employees generally. ​ Impacts related to climate change may adversely affect our business, financial condition and results of operations. ​ There has been an increased focus on greenhouse gas and other emissions from global regulators, consumers and other stakeholders.
The loss of services of one or more of these individuals could materially adversely affect us. ​ Negative perceptions about the cruise industry, carbon intensity, sustainability or otherwise may make it increasingly difficult to retain and hire additional crew members to staff our fleet and to recruit new employees generally. 41 Table of Contents ​ Impacts related to climate change may adversely affect our business, financial condition and results of operations. ​ There has been an increased focus on GHG and other emissions from global regulators, consumers and other stakeholders.
It is possible that other states, countries or ports of call that our ships regularly visit may also decide to assess new taxes or fees or change existing taxes or fees specifically applicable to the cruise industry and its employees and/or guests, which could increase our operating costs and/or could decrease the demand for cruises. ​ Future changes in applicable tax laws, or our inability to take advantage of favorable tax regimes, could increase the amount of taxes we must pay. ​ We believe and have taken the position that our income that is considered to be derived from the international operation of ships as well as certain income that is considered to be incidental to such income (“shipping income”), is exempt from U.S. federal income taxes under Section 883, based upon certain assumptions as to shareholdings and other information as more fully described in “Item 1—Business—Taxation.” The provisions of Section 883 are subject to change at any time, possibly with retroactive effect. ​ 45 Table of Contents We believe and have taken the position that substantially all of our income derived from the international operation of ships is properly categorized as shipping income and that we do not have a material amount of non-qualifying income.
It is possible that other states, countries or ports of call that our ships regularly visit may also decide to assess new taxes or fees or change existing taxes or fees specifically applicable to the cruise industry and its employees and/or guests, which could increase our operating costs and/or could decrease the demand for cruises. ​ Changes in tax laws, or challenges to our tax positions could adversely affect our results of operations and financial condition. ​ We believe and have taken the position that our income that is considered to be derived from the international operation of ships as well as certain income that is considered to be incidental to such income (“shipping income”), is exempt from U.S. federal income taxes under Section 883, based upon certain assumptions as to shareholdings and other information as more fully described in “Item 1—Business—Taxation.” The provisions of Section 883 are subject to change at any time, possibly with retroactive effect. ​ We believe and have taken the position that substantially all of our income derived from the international operation of ships is properly categorized as shipping income and that we do not have a material amount of non-qualifying income.
To the extent 43 Table of Contents that we are able to replace such service providers, we may be forced to pay an increased cost for equivalent services.
To the extent that we are able to replace such service providers, we may be forced to pay an increased cost for equivalent services.
We refer you to “Item 1—Business—Taxation.” ​ We may be subject to state, local and non-U.S. income or non-income taxes in various jurisdictions, including those in which we transact business, own property or reside. We may be required to file tax returns in some or all of those jurisdictions.
Therefore, we can give no assurances on this matter. We refer you to “Item 1—Business—Taxation.” ​ We may be subject to state, local and non-U.S. income or non-income taxes in various jurisdictions, including those in which we transact business, own property or reside. We may be required to file tax returns in some or all of those jurisdictions.
We have had instances of COVID-19 on our ships and there is no guarantee that the health and safety protocols we implement will be successful in preventing the spread of pandemics onboard our ships and among our passengers and crew. ​ We have been and may continue to be the subject of lawsuits and investigations stemming from COVID-19.
We have had instances of disease outbreaks, such as COVID-19, on our ships and there is no guarantee that the health and safety protocols we implement will be successful in preventing the spread of infectious disease onboard our ships and among our passengers and crew. ​ We have been and may in the future be the subject of lawsuits and investigations stemming from outbreaks of infectious disease.
If adequate funds are not available on acceptable terms, or at all, we may be unable to fund our operations or respond to competitive pressures, which could negatively affect our business.
We may not have sufficient available collateral to pledge to support additional financing. If adequate funds are not available on acceptable terms, or at all, we may be unable to fund our operations or respond to competitive pressures, which could negatively affect our business.
Under the proposed directive, which has not been formally approved, ships over 5,000 Gross Tons that transport passengers or cargo to or from E.U. member state ports would be required to purchase and surrender emissions allowances equivalent to emissions for all or a half of a covered voyage, depending on whether the voyage was between two E.U. ports or an E.U. and a non-E.U. port.
Under the directive ships over 5,000 Gross Tons that transport passengers or cargo to or from E.U. member state or EEA ports are required to purchase and surrender emissions allowances equivalent to emissions for all or a half of a covered voyage, depending on whether the voyage was between two E.U. or EEA ports or an E.U. or EEA and a non-E.U. or EEA port.
The time and attention of our management may also be diverted in defending such claims, actions and investigations. Subject to applicable insurance coverage, we may also incur costs both in defending against any claims, actions and investigations and for any judgments, fines, civil or criminal penalties if such claims, actions or investigations are adversely determined. ​ The U.S.
Subject to applicable insurance 42 Table of Contents coverage, we may also incur costs both in defending against any claims, actions and investigations and for any judgments, fines, civil or criminal penalties if such claims, actions or investigations are adversely determined. ​ The U.S.
We may be subject to increased costs and our management team may be required to devote significant time to satisfying economic substance requirements in certain of these jurisdictions.
We have in the past and may in the future be subject to increased costs and our management team may be required to devote 46 Table of Contents significant time to satisfying economic substance requirements in certain of these jurisdictions.
We also expect to be required to use alternate fuel sources in the future as additional regulations aimed at reducing carbon intensity are introduced or in order to achieve any emissions reduction targets we have and may in the future adopt.
We will also be required to use alternate fuel sources in the future as regulations aimed at reducing carbon intensity have been introduced and we may choose to use alternative fuels in order to achieve any emissions reduction targets we have and may in the future adopt.
Beginning in 2024, covered entities would be required to procure and surrender allowances equivalent to 40% of their carbon emissions, with the amount increasing to 70% of carbon emissions in 2025 and 100% of greenhouse gas emissions in 2026. ​ Compliance with such laws and regulations are expected to entail significant expenses for a combination of: ship modifications, purchases of emissions allowances, alternative fuels and higher-cost compliant newbuilds.
Beginning in 2024, covered entities are required to procure and surrender allowances equivalent to 40% of their carbon emissions, with the amount increasing to 70% of carbon emissions in 2025 and 100% of GHG emissions in 2026. ​ Compliance with such laws and regulations have resulted in increased costs to our Company and are expected to entail significant expenses for a combination of: ship modifications, purchases of emissions allowances, alternative fuels and 44 Table of Contents higher-cost compliant newbuilds.
Two such certified claims against us are pending and additional claims may be brought against us in the future. If these suits are successful after we have exhausted our ability to appeal, we may be required to pay substantial monetary damages.
One such certified claim against us is pending and additional claims may be brought against us in the future. If this suit is successful after we have exhausted our ability to appeal, we may be required to pay substantial monetary damages.
If any of the risks discussed or additional risks and uncertainties not currently known to us or that we currently deem to be immaterial actually occur, our business, financial condition and results of operations could be materially adversely affected.
If any of the risks discussed or additional risks and uncertainties not currently known to us or that we currently deem to be immaterial actually occur, our business, financial condition and results of operations could be materially adversely affected. The ordering of the risk factors below is not intended to reflect an indication of priority or likelihood.
Further, the Russia-Ukraine conflict has contributed to extreme volatility in the global financial markets and has had, and is expected to continue to have, further global economic consequences, including disruptions of the global supply chain and energy markets and heightened volatility of commodity fuel prices.
Further, armed conflicts have contributed to extreme volatility in the global financial markets and have had, and may continue to have, further global economic consequences, including disruptions of the global supply chain and energy markets and heightened volatility of commodity fuel prices.
For example, under the Senior Secured Credit Facility, we are required to maintain a loan to value ratio of no less than 0.70 to 1.00.
For example, under the Sixth ARCA, we are required to maintain a loan to value ratio of less than 0.70 to 1.00.
Financial covenants include free liquidity of no less than $250,000,000 at all times, a total net funded debt to total capitalization ratio of less than 0.93 to 1.00 for the quarter ending March 31, 2023, 0.92 to 1.00 for the quarter ending June 30, 2023, 0.91 to 1.00 for the quarters ending September 30, 2023, December 31, 2023 and March 31, 2024, 0.90 to 1.00 for the quarter ending June 30, 2024, 0.88 to 1.00 for the quarter ending September 30, 2024 and 0.87 to 1.00 for the quarter ending December 31, 2024 and an EBITDA to consolidated debt service ratio of at least 1.25 to 1.00 at the end of each fiscal quarter unless free liquidity is greater than or equal to $300,000,000 at that time.
Financial covenants include free liquidity of no less than $250,000,000 at all times, a total net funded debt to total capitalization ratio and an EBITDA to consolidated debt service ratio of at least 1.25 to 1.00 at the end of each fiscal quarter unless free liquidity is greater than or equal to $300,000,000 at that time.
Our credit ratings, which have been downgraded as a result of the impact on our business of the COVID-19 pandemic, could be further downgraded, which could have an impact on the availability and/or cost of financing.
Our credit ratings, which have been downgraded in the past, could be further downgraded, which could have an impact on the availability and/or cost of financing.
The impacts of COVID-19, Russia’s invasion of Ukraine, modifications the Company plans to make to its newbuilds, including initiatives to improve environmental sustainability, and other macroeconomic events have resulted in some delays in expected ship deliveries, and may result in additional delays in ship deliveries in the future, which may be prolonged.
The impacts of global events including armed or geopolitical conflicts and pandemics, a lack of viable drydock facilities, modifications the Company plans to make to its newbuilds, including initiatives to improve environmental sustainability, and other macroeconomic events have resulted in some delays in expected ship deliveries, and may result in additional delays in ship deliveries in the future, which may be prolonged.
However, we cannot predict the timing of these developments or their impact on our indebtedness or financial condition. ​ Any further impairment of our trade names or goodwill could adversely affect our financial condition and operating results. ​ We evaluate trade names and goodwill for impairment on an annual basis, or more frequently when circumstances indicate that the carrying value of a reporting unit may not be recoverable.
Any failure to replace any counterparties under these circumstances may result in additional costs to us or an ineffective instrument. ​ Any further impairment of our trade names or goodwill could adversely affect our financial condition and operating results. ​ We evaluate trade names and goodwill for impairment on an annual basis, or more frequently when circumstances indicate that the carrying value of a reporting unit may not be recoverable.
The availability of ports, including the specific port facility at which our guests will embark and disembark, is affected by a number of factors, including, but not limited to, health, safety, and environmental concerns, existing capacity constraints, security, adverse weather conditions and natural disasters such as hurricanes, floods, typhoons and earthquakes, financial limitations on port development, political instability, armed conflicts such as Russia’s invasion of Ukraine, exclusivity arrangements that ports may have with our competitors, local governmental regulations and fees, local community concerns about port development and other adverse impacts on their communities from additional tourists and sanctions programs implemented by the Office of Foreign Assets Control of the United States Treasury Department or other regulatory bodies.
The availability of ports is affected by a number of factors, including, but not limited to, health, safety, and environmental concerns, existing capacity constraints, security, adverse weather conditions and natural disasters such as hurricanes, floods, typhoons and earthquakes, financial limitations on port development, political instability, armed conflicts, exclusivity arrangements that ports may have with our competitors, governmental regulations, including sanctions, and fees, local community concerns about port development and tourism.
Our business, financial condition and results of operations may be materially and adversely affected by any negative impact on the global economy, capital markets or commodity fuel prices resulting from the conflict in Ukraine or any other geopolitical tensions. ​ Adverse incidents involving cruise ships may adversely affect our business, financial condition and results of operations. ​ The operation of cruise ships carries an inherent risk of loss caused by adverse weather conditions and maritime disasters, including, but not limited to, oil spills and other environmental mishaps, extreme weather conditions such as hurricanes, floods and typhoons, fire, mechanical failure, collisions, human error, war, terrorism, piracy, political action, civil unrest and insurrection in various countries and other circumstances or events.
We cannot predict the number or outcome of any such proceedings and the impact that they will have on our financial results, but any such impact may be material. ​ Epidemics, pandemics and viral outbreaks or other wide-ranging public health crises in the future would likely also adversely affect our business, financial condition and results of operations. ​ Adverse incidents involving cruise ships may adversely affect our business, financial condition and results of operations. ​ The operation of cruise ships carries an inherent risk of loss caused by adverse weather conditions and maritime disasters, including, but not limited to, oil spills and other environmental mishaps, extreme weather conditions such as 37 Table of Contents hurricanes, floods and typhoons, fire, mechanical failure, collisions, human error, war, terrorism, piracy, political action, civil unrest and insurrection in various countries and other circumstances or events.
For example, currently and in the past, regulatory changes, the COVID-19 pandemic, armed conflicts and damages to ports from hurricanes have prohibited our cruise voyages from visiting certain regions, including Cuba, Russia, Japan and some ports in the Caribbean. There can be no assurance that our ports of call will not be similarly affected in the future.
For example, currently and in the past, regulatory changes, disease outbreaks resulting in a global pandemic, armed conflicts and damages to ports from hurricanes have prohibited our cruise voyages from visiting certain regions, including Cuba, Russia, Japan and some ports in the Caribbean.
The ability to raise additional financing depends on numerous factors that are outside of our control, including general economic and market conditions, the health of financial institutions, our 35 Table of Contents credit ratings and investors’ and lenders’ assessments of our prospects and the prospects of the cruise industry in general.
The ability to raise additional financing depends on numerous factors that are outside of our control, including general economic and market conditions, the health of financial institutions, our credit ratings and investors’ and lenders’ assessments of our prospects and the prospects of the cruise industry in general. 34 Table of Contents If we raise additional funds by issuing debt, we may be subject to limitations on our operations due to restrictive covenants, which may be more restrictive than the covenants in our existing debt agreements, and we may be required to further encumber our assets.
As of the date of this filing, we believe that NCLH and its subsidiaries will satisfy the publicly traded test imposed under Section 883 and therefore believe that NCLH will qualify for the exemption under Section 883.
As of the date of this filing, we believe that NCLH and its subsidiaries will satisfy the publicly-traded test imposed under Section 883 and therefore believe that NCLH will qualify for the exemption under Section 883. However, as discussed above, there are factual circumstances beyond our control that could cause NCLH to not meet the stock ownership or publicly-traded tests.
This could result in material lost revenue and/or increased expenditures. ​ The adverse impact of general economic and related factors, such as fluctuating or increasing levels of interest rates, unemployment, underemployment and the volatility of fuel prices, declines in the securities and real estate markets and perceptions of these conditions can decrease the level of disposable income of consumers or consumer confidence.
If we are unable to attract new customers, or fail to do so in a cost-effective manner, our growth could be slower than we expect and our business could be harmed. ​ The adverse impact of general economic and related factors, such as fluctuating or increasing levels of interest rates, unemployment, underemployment and the volatility of fuel prices, declines in the securities and real estate markets and perceptions of these conditions can decrease the level of disposable income of consumers or consumer confidence.
If there is a mechanical failure or accident in the future, we may be unable to procure spare parts when needed or make repairs without incurring material expense or suspension of service, especially if a problem affects certain specialized maritime equipment, such as the radar, a pod propulsion unit, the electrical/power management system, the steering gear or the gyro system. ​ In addition, availability, work stoppages, insolvency or financial problems in the shipyards’ construction, refurbishment or repair of our ships, other “force majeure” events that are beyond our control and the control of shipyards or subcontractors, or changes to technical specifications due to regulatory changes, sustainability initiatives or other strategic initiatives could also delay or prevent the newbuild delivery, refurbishment and repair and maintenance of our ships.
If there is a mechanical failure or accident in the future, we may be unable to procure spare parts when needed or make repairs without incurring material expense or suspension of service, especially if a problem affects certain specialized maritime equipment, such as the radar, a pod propulsion unit, the electrical/power management system, the steering gear or the gyro system.
In addition, we may not be in a position to promptly address security breaches, unauthorized access or other cyber-attacks or incidents or to implement adequate preventative measures if we are unable to immediately detect such incidents.
There can be no assurance that a breach or incident will not have a material impact on our operations and financial results in the future. In addition, we may not be in a position to promptly address security breaches, unauthorized access or other cybersecurity incidents or to implement adequate preventative measures if we are unable to immediately detect such incidents.
We may 42 Table of Contents fall short of any sustainability goals we set, including those disclosed in this report, which may result in negative impacts to our reputation, financial condition and results of operations. ​ Our inability to obtain adequate insurance coverage may adversely affect our business, financial condition and results of operations. ​ There can be no assurance that our risks are fully insured against or that any particular claim will be fully paid by our insurance.
Conversely, backlash against our sustainability initiatives and commitments may harm our reputation among other stakeholders and expose us to related liabilities. ​ Our inability to obtain adequate insurance coverage may adversely affect our business, financial condition and results of operations. ​ There can be no assurance that our risks are fully insured against or that any particular claim will be fully paid by our insurance.
For example, the Organization for Economic Co-operation and Development and numerous jurisdictions (including the United Kingdom) have had an increased focus on issues concerning the taxation of multinational businesses and several related reforms have been put forth (including the implementation of a global minimum tax rate of at least 15% for large multinational businesses), which could have a negative effect on our business, financial condition and results of operations. ​ Our ability to comply with economic substance requirements in certain jurisdictions and increased costs associated with our efforts to comply may have a negative impact on our operations. ​ Our Company and certain of its subsidiaries may be subject to economic substance requirements in their jurisdictions of formation, including, but not limited to, Bermuda, Guernsey, Isle of Man, British Virgin Islands, Cayman Islands, the Bahamas, Saint Lucia and Marshall Islands.
The occurrence of any of the foregoing tax risks could have a material adverse effect on our business, financial condition and results of operations. ​ Our ability to comply with economic substance requirements in certain jurisdictions and increased costs associated with our efforts to comply may have a negative impact on our operations. ​ Our Company and certain of its subsidiaries are or may be subject to economic substance requirements in their jurisdictions of formation or continuation, including, but not limited to, Bermuda, Guernsey, Isle of Man, British Virgin Islands, the Bahamas and Saint Lucia.
Also, we may be limited in obtaining funds to pay amounts due to our counterparties under our derivative contracts and to pay amounts that may become due under other agreements. If we were to elect to replace any counterparty for their failure to perform their obligations under such instruments, we would likely incur significant costs to replace the counterparty.
If we were to elect to replace any counterparty for their failure to perform their obligations under such instruments, we would likely incur significant costs to replace the counterparty.
In addition, certain networks are dependent on third-party technologies, systems and service providers for which there is no certainty of uninterrupted availability.
In addition, certain networks are dependent on third-party technologies, systems and service providers for which there is no certainty of uninterrupted availability. Among other things, actual or threatened natural disasters, information systems failures, computer viruses, denial-of-service attacks and other cybersecurity incidents may cause disruptions to our information systems, telecommunications and other networks.
Among other things, actual or threatened natural disasters, information systems failures, computer viruses, denial-of-service attacks and other cyber-attacks may cause disruptions to our information technology, telecommunications and other networks. 39 Table of Contents Our business continuity, disaster recovery, data restoration plans and data and information technology security may not prevent disruptions that could result in adverse effects on our operations and financial results.
Our business continuity, disaster recovery, data restoration plans and data and information system security may not prevent disruptions that could result in adverse effects on our operations and financial results.
Due to environmental and over-crowding concerns, some local governments have begun to take measures to limit the number of cruise ships and passengers allowed at certain destinations. For example, Dubrovnik, Venice and Barcelona have either implemented or considered implementing such limitations on cruise ships and passengers.
For example, Dubrovnik, Venice and Barcelona have either implemented or considered implementing such limitations on cruise ships and passengers.
In connection with the forward-looking statements that appear in this annual report, you should also carefully review the cautionary statement referred to under “Cautionary Statement Concerning Forward–Looking Statements.” ​ COVID-19 and Debt/Liquidity Related Risk Factors ​ Public health crises, including the COVID-19 pandemic, have had, and may in the future have, a significant impact on our financial condition, results, operations, outlook, plans, goals, growth, reputation, cash flows, liquidity, demand for voyages and share price. ​ The COVID-19 pandemic has had, and may continue to have, significant negative impacts on all aspects of our business, and a future pandemic or other public health crisis could have a similar effect.
Our business, financial condition and results of operations may be materially and adversely affected by any negative impact on the global economy, capital markets or commodity fuel prices resulting from armed conflicts and other geopolitical tensions. ​ Public health crises have had, and may in the future have, a significant impact on our financial condition, results, operations, outlook, plans, goals, growth, reputation, cash flows, liquidity, demand for voyages and share price. ​ Public health crises, such as the COVID-19 pandemic, could have significant negative impacts on all aspects of our business.
Epidemics, pandemics and viral outbreaks or other wide-ranging public health crises in the future would likely also adversely affect our business, financial condition and results of operations. ​ If our results of operations and financial performance do not recover as planned, we may not be in compliance with maintenance covenants in certain of our debt facilities. ​ Certain of our debt facilities include maintenance and financial covenants.
In connection with the forward-looking statements that appear in this Annual Report, you should also carefully review the cautionary statement referred to under “Cautionary Statement Concerning Forward–Looking Statements.” ​ Debt/Liquidity Related Risk Factors ​ If our results of operations and financial performance do not recover as planned, we may not be in compliance with maintenance covenants in certain of our debt facilities. ​ Certain of our debt facilities include maintenance and financial covenants.
Removed
The impacts of the COVID-19 pandemic and the associated debt we incurred related to the COVID-19 pandemic have also had the effect of heightening many of the risks described below. The ordering of the risk factors below is not intended to reflect an indication of priority or likelihood.
Added
Also, we may be limited in obtaining funds to pay amounts due to our counterparties 35 Table of Contents under our derivative contracts and to pay amounts that may become due under other agreements.
Removed
We cannot predict the number or outcome of any such proceedings and the impact that they will have on our financial results, but any such impact may be material. ​ As a result of the impacts of COVID-19, provisions in our credit card processing and other commercial agreements have and may continue to adversely affect our liquidity.
Added
There can be no assurance that our ports of call will not be similarly affected in the future. Due to environmental and over-crowding concerns, some local governments have begun to take measures to limit the number of cruise ships and passengers allowed at certain destinations.
Removed
We have agreements with several credit card companies to process the sale of tickets and provide other services.
Added
This could result in material lost revenue and/or increased expenditures. ​ Our business depends on maintaining and strengthening our brand to attract new customers and maintain ongoing demand for our offerings, and a significant reduction in such demand could harm our results of operations. ​ Our name and brand image are integral to the growth of our business, as well as to the implementation of our strategies for expanding our business.
Removed
Under these agreements, the credit card companies could, under certain circumstances and upon written notice, require us to maintain a reserve, which reserve would be funded by the credit card companies withholding or offsetting our credit card receivables, or our posting of cash or other collateral.
Added
Our ability to execute our marketing and growth strategy depends on many factors, including the perceived quality of our services, the impact of our communication activities, including advertising, social media, and public relations, and our management of the customer experience, including direct interfaces through customer service.
Removed
As a result of the impacts of COVID-19, certain of our credit card processors currently hold cash collateral reserves.
Added
Maintaining, promoting, and positioning our brand are important to expanding our customer base and will depend largely on the success of our marketing efforts and our ability to provide consistent, high-quality customer experiences. ​ We have used, and expect to continue to use, corporate partnerships, brand ambassadors, traditional, digital, and social media to promote our business.
Removed
We may be required to pledge additional collateral and/or post additional cash reserves or take other actions that may further reduce our liquidity. ​ COVID-19 has also had the effect of heightening many of the other risks described herein, such as those relating to our need to generate sufficient cash flows to service our indebtedness, our ability to comply with the covenants contained in 34 Table of Contents the agreements that govern our indebtedness and our access to raise additional capital in the future.
Added
Marketing campaigns can be expensive and may not result in the cost-effective acquisition of customers.
Removed
Accordingly, as a result of these unprecedented circumstances, we cannot predict the full impact of COVID-19 on our business, financial condition and results of operations.
Added
Ineffective marketing, ongoing and sustained promotional activities, negative publicity, unfair labor practices, and failure to protect the intellectual property rights in our brand are some of the potential threats to the strength of our brand, and those and other factors could rapidly and severely diminish customer confidence in us.
Removed
The testing of the covenants under the Senior Secured Credit Facility was suspended to and including December 31, 2022, with the exception of the free liquidity test. As a result of the COVID-19 pandemic, we paused our global fleet cruise operations from March 2020 until July 2021.
Added
Furthermore, actions taken by individuals that we partner with, such as brand ambassadors, influencers or our associates, that fail to represent our brand in a manner consistent with our brand image, whether through our social media platforms or their own, could also harm our brand reputation and materially impact our business.

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Item 2. Properties

Properties — owned and leased real estate

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Biggest changeItem 2. Properties Information about our cruise ships may be found under “Item 1. Business—Our Fleet” and “Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations—Liquidity and Capital Resources.” NCLH’s principal executive offices are located in Miami, Florida where we lease approximately 386,224 square feet of facilities.
Biggest changeItem 2. Properties Information about our cruise ships may be found under “Item 1. Business—Our Fleet” and “Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations—Liquidity and Capital Resources.” NCLH’s principal executive offices are located in Miami, Florida where we lease approximately 393,571 square feet of facilities.

Item 3. Legal Proceedings

Legal Proceedings — active lawsuits and investigations

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Biggest changeMine Safety Disclosures None. ​ 48 Table of Contents PART II ​
Biggest changeMine Safety Disclosures None. ​ 49 Table of Contents PART II ​

Item 5. Market for Registrant's Common Equity

Market for Common Equity — stock, dividends, buybacks

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Biggest changeItem 5. Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities Market Information NCLH’s ordinary shares are listed on the NYSE under the symbol “NCLH.” Holders As of February 16, 2023, there were 274 record holders of NCLH’s ordinary shares.
Biggest changeItem 5. Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities Market Information NCLH’s ordinary shares are listed on the NYSE under the symbol “NCLH.” Holders As of February 16, 2024, there were 278 record holders of NCLH’s ordinary shares.
Any determination to pay dividends in the future will be at the discretion of our Board of Directors and will depend upon our results of operations, financial condition, restrictions imposed by applicable law and our financing agreements and other factors that our Board of Directors deems relevant. ​ 49 Table of Contents Stock Performance Graph This performance graph shall not be deemed “soliciting material” or to be “filed” with the SEC for purposes of Section 18 of the Exchange Act, or otherwise subject to the liabilities under that Section, and shall not be deemed to be incorporated by reference into any filing of NCLH under the Securities Act of 1933, as amended, or the Exchange Act .
Any determination to pay dividends in the future will be at the discretion of our Board of Directors and will depend upon our results of operations, financial condition, restrictions imposed by applicable law and our financing agreements and other factors that our Board of Directors deems relevant. ​ 50 Table of Contents Stock Performance Graph This performance graph shall not be deemed “soliciting material” or to be “filed” with the SEC for purposes of Section 18 of the Exchange Act, or otherwise subject to the liabilities under that Section, and shall not be deemed to be incorporated by reference into any filing of NCLH under the Securities Act of 1933, as amended, or the Exchange Act .
The Stock Performance Graph assumes that $100 was invested at the closing price of our ordinary shares on the NYSE and in each index on the last trading day of fiscal 2017. Past performance is not necessarily an indicator of future results. The stock prices used were as of the close of business on the respective dates.
The Stock Performance Graph assumes that $100 was invested at the closing price of our ordinary shares on the NYSE and in each index on the last trading day of fiscal 2018. Past performance is not necessarily an indicator of future results. The stock prices used were as of the close of business on the respective dates.
Item 6. [Reserved] ​ 50 Table of Contents
Item 6. [Reserved] ​ 51 Table of Contents

Item 7. Management's Discussion & Analysis

Management's Discussion & Analysis (MD&A) — revenue / margin commentary

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Biggest changeSecurities and Exchange Commission on March 1, 2022. ​ We reported total revenue, total cruise operating expense, operating loss and net loss as follows (in thousands, except per share data): ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Year Ended December 31, ​ 2022 2021 Total revenue ​ $ 4,843,760 ​ $ 647,986 Total cruise operating expense ​ $ 4,267,086 ​ $ 1,608,037 Operating loss ​ $ (1,551,757) ​ $ (2,552,348) Net loss ​ $ (2,269,909) ​ $ (4,506,587) EPS: ​ ​ Basic ​ $ (5.41) ​ $ (12.33) Diluted ​ $ (5.41) ​ $ (12.33) ​ 58 Table of Contents The following table sets forth operating data as a percentage of total revenue: ​ ​ ​ ​ ​ ​ ​ ​ ​ Year Ended December 31, ​ 2022 2021 Revenue ​ ​ ​ ​ ​ Passenger ticket 67.2 % 60.6 % Onboard and other 32.8 % 39.4 % Total revenue 100.0 % 100.0 % Cruise operating expense Commissions, transportation and other 21.4 % 22.2 % Onboard and other 7.4 % 8.3 % Payroll and related 22.5 % 82.9 % Fuel 14.2 % 46.6 % Food 5.4 % 9.7 % Other 17.2 % 78.4 % Total cruise operating expense 88.1 % 248.1 % Other operating expense Marketing, general and administrative 28.5 % 137.6 % Depreciation and amortization 15.5 % 108.2 % Total other operating expense 44.0 % 245.8 % Operating loss (32.1) % (393.9) % Non-operating income (expense) Interest expense, net (16.5) % (319.9) % Other income (expense), net 1.6 % 19.1 % Total non-operating income (expense) (14.9) % (300.8) % Net loss before income taxes (47.0) % (694.7) % Income tax benefit (expense) 0.1 % (0.8) % Net loss (46.9) % (695.5) % ​ The following table sets forth selected statistical information: ​ ​ ​ ​ ​ ​ ​ Year Ended December 31, ​ 2022 2021 Passengers carried 1,663,275 232,448 Passenger Cruise Days 12,791,773 1,778,899 Capacity Days (1) 17,566,069 3,376,703 Occupancy Percentage 72.8 % 52.7 % (1) Excludes certain capacity on Pride of America which was temporarily unavailable. ​ ​ 59 Table of Contents Adjusted Gross Margin was calculated as follows (in thousands): ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Year Ended December 31, ​ ​ ​ 2022 ​ ​ ​ ​ ​ ​ Constant ​ ​ ​ ​ ​ ​ 2022 Currency ​ 2021 Total revenue ​ $ 4,843,760 ​ $ 4,891,222 ​ $ 647,986 Less: ​ ​ ​ Total cruise operating expense ​ ​ 4,267,086 ​ ​ 4,306,953 ​ ​ 1,608,037 Ship depreciation ​ ​ 700,988 ​ ​ 700,988 ​ ​ 650,138 Gross Margin ​ ​ (124,314) ​ ​ (116,719) ​ ​ (1,610,189) Ship depreciation ​ ​ 700,988 ​ ​ 700,988 ​ ​ 650,138 Payroll and related ​ ​ 1,088,639 ​ ​ 1,089,184 ​ ​ 537,439 Fuel ​ ​ 686,825 ​ ​ 687,022 ​ ​ 301,852 Food ​ 263,807 ​ 267,500 ​ 62,999 Other ​ 835,254 ​ 857,657 ​ 508,186 Adjusted Gross Margin ​ $ 3,451,199 ​ $ 3,485,632 ​ $ 450,425 ​ Gross Cruise Cost, Net Cruise Cost, Net Cruise Cost Excluding Fuel and Adjusted Net Cruise Cost Excluding Fuel were calculated as follows (in thousands): ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Year Ended December 31, ​ ​ ​ ​ 2022 ​ ​ ​ ​ ​ Constant ​ ​ ​ ​ 2022 Currency 2021 Total cruise operating expense ​ $ 4,267,086 ​ $ 4,306,953 ​ $ 1,608,037 Marketing, general and administrative expense ​ 1,379,105 ​ 1,389,087 ​ 891,452 Gross Cruise Cost ​ 5,646,191 ​ 5,696,040 ​ 2,499,489 Less: ​ ​ ​ Commissions, transportation and other expense ​ 1,034,629 ​ 1,047,658 ​ 143,524 Onboard and other expense ​ 357,932 ​ 357,932 ​ 54,037 Net Cruise Cost ​ 4,253,630 ​ 4,290,450 ​ 2,301,928 Less: Fuel expense ​ 686,825 ​ 687,022 ​ 301,852 Net Cruise Cost Excluding Fuel ​ 3,566,805 ​ 3,603,428 ​ 2,000,076 Less Non-GAAP Adjustments: ​ ​ ​ Non-cash deferred compensation (1) ​ 2,797 ​ 2,797 ​ 3,619 Non-cash share-based compensation (2) ​ 113,563 ​ 113,563 ​ 124,077 Restructuring costs (3) ​ ​ 12,140 ​ ​ 12,140 ​ ​ — Adjusted Net Cruise Cost Excluding Fuel ​ $ 3,438,305 ​ $ 3,474,928 ​ $ 1,872,380 (1) Non-cash deferred compensation expenses related to the crew pension plan and other crew expenses, which are included in payroll and related expense.
Biggest changeSecurities and Exchange Commission on February 28, 2023. ​ We reported total revenue, total cruise operating expense, operating income (loss) and net income (loss) as follows (in thousands, except per share data): ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Year Ended December 31, ​ 2023 2022 Total revenue ​ $ 8,549,924 ​ $ 4,843,760 Total cruise operating expense ​ $ 5,468,587 ​ $ 4,267,086 Operating income (loss) ​ $ 930,911 ​ $ (1,551,757) Net income (loss) ​ $ 166,178 ​ $ (2,269,909) EPS: ​ ​ Basic ​ $ 0.39 ​ $ (5.41) Diluted ​ $ 0.39 ​ $ (5.41) ​ The following table sets forth operating data as a percentage of total revenue: ​ ​ ​ ​ ​ ​ ​ ​ ​ Year Ended December 31, ​ 2023 2022 Revenue ​ ​ ​ ​ ​ Passenger ticket 67.3 % 67.2 % Onboard and other 32.7 % 32.8 % Total revenue 100.0 % 100.0 % Cruise operating expense Commissions, transportation and other 22.0 % 21.4 % Onboard and other 7.0 % 7.4 % Payroll and related 14.8 % 22.5 % Fuel 8.4 % 14.2 % Food 4.2 % 5.4 % Other 7.6 % 17.2 % Total cruise operating expense 64.0 % 88.1 % Other operating expense Marketing, general and administrative 15.7 % 28.5 % Depreciation and amortization 9.4 % 15.5 % Total other operating expense 25.1 % 44.0 % Operating income (loss) 10.9 % (32.1) % Non-operating income (expense) Interest expense, net (8.5) % (16.5) % Other income (expense), net (0.5) % 1.6 % Total non-operating income (expense) (9.0) % (14.9) % Net income (loss) before income taxes 1.9 % (47.0) % Income tax benefit (expense) — % 0.1 % Net income (loss) 1.9 % (46.9) % ​ 58 Table of Contents The following table sets forth selected statistical information: ​ ​ ​ ​ ​ ​ ​ Year Ended December 31, ​ 2023 2022 Passengers carried 2,716,546 1,663,275 Passenger Cruise Days 23,311,672 12,791,773 Capacity Days (1) 22,652,588 17,566,069 Occupancy Percentage 102.9 % 72.8 % (1) Excludes certain capacity on Pride of America, which was temporarily unavailable in 2022. ​ Adjusted Gross Margin and Net Yield were calculated as follows (in thousands except Capacity Days and per Capacity Day data): ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Year Ended December 31, ​ ​ ​ 2023 ​ 2022 Total revenue ​ $ 8,549,924 ​ $ 4,843,760 Less: ​ ​ Total cruise operating expense ​ ​ 5,468,587 ​ ​ 4,267,086 Ship depreciation ​ ​ 753,629 ​ ​ 700,988 Gross Margin ​ ​ 2,327,708 ​ ​ (124,314) Ship depreciation ​ ​ 753,629 ​ ​ 700,988 Payroll and related ​ ​ 1,262,119 ​ ​ 1,088,639 Fuel ​ ​ 716,833 ​ ​ 686,825 Food ​ 358,310 ​ 263,807 Other ​ 648,142 ​ 835,254 Adjusted Gross Margin ​ $ 6,066,741 ​ $ 3,451,199 Capacity Days ​ 22,652,588 ​ ​ ​ Gross Margin per Capacity Day ​ $ 102.76 ​ ​ ​ Net Yield ​ $ 267.82 ​ ​ ​ 59 Table of Contents 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, ​ ​ 2023 2022 Total cruise operating expense ​ $ 5,468,587 ​ $ 4,267,086 Marketing, general and administrative expense ​ 1,341,858 ​ 1,379,105 Gross Cruise Cost ​ 6,810,445 ​ 5,646,191 Less: ​ ​ Commissions, transportation and other expense ​ 1,883,279 ​ 1,034,629 Onboard and other expense ​ 599,904 ​ 357,932 Net Cruise Cost ​ 4,327,262 ​ 4,253,630 Less: Fuel expense ​ 716,833 ​ 686,825 Net Cruise Cost Excluding Fuel ​ 3,610,429 ​ 3,566,805 Less Other Non-GAAP Adjustments: ​ ​ Non-cash deferred compensation (1) ​ 2,312 ​ 2,797 Non-cash share-based compensation (2) ​ 118,940 ​ 113,563 Restructuring costs (3) ​ ​ — ​ ​ 12,140 Adjusted Net Cruise Cost Excluding Fuel ​ $ 3,489,177 ​ $ 3,438,305 Capacity Days ​ 22,652,588 ​ ​ ​ Gross Cruise Cost per Capacity Day ​ $ 300.65 ​ ​ ​ Net Cruise Cost per Capacity Day ​ $ 191.03 ​ ​ ​ Net Cruise Cost Excluding Fuel per Capacity Day ​ $ 159.38 ​ ​ ​ Adjusted Net Cruise Cost Excluding Fuel per Capacity Day ​ $ 154.03 ​ ​ ​ (1) Non-cash deferred compensation expenses related to the crew pension plan and other crew expenses, which are included in payroll and related 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.
Adjusted EBITDA is not a defined term under GAAP nor is it intended to be a measure of liquidity or cash flows from operations or a measure comparable to net income (loss), as it does not take into account certain requirements such as capital expenditures and related depreciation, principal and interest payments and tax payments and it includes other supplemental adjustments.
The amounts excluded in the presentation of these non-GAAP financial measures may vary from period to period; accordingly, our presentation of Adjusted Net Loss and Adjusted EPS may not be indicative of future adjustments or results. For example, for the year ended December 31, 2022, we incurred $12.1 million related to restructuring costs or charges.
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 ended December 31, 2022, we incurred $12.1 million related to restructuring costs or charges.
See “Terms Used in this Annual Report” for the definitions of these and other non-GAAP financial measures. We utilize Adjusted Gross Margin to manage our business on a day-to-day basis because it reflects revenue earned net of certain direct variable costs.
See “Terms Used in this Annual Report” for the definitions of these and other non-GAAP financial measures. We utilize Adjusted Gross Margin and Net Yield to manage our business on a day-to-day basis because it reflects revenue earned net of certain direct variable costs.
The proceeds from the 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.
The net proceeds from the 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.
The proceeds from the 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.
The net proceeds from the 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.
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.
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 undiscounted future cash flows expected to result from the use of the asset.
In addition, Adjusted Net Loss and Adjusted EPS are non-GAAP financial measures that exclude certain amounts and are used to supplement GAAP net loss and EPS. We use Adjusted Net Loss and Adjusted EPS as key performance measures of our earnings performance.
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 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 51 Table of Contents critical accounting policies reflect the significant estimates and assumptions used in the preparation of our consolidated financial statements.
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 52 Table of Contents financial statements.
Each brand, Oceania Cruises, Regent Seven Seas and Norwegian, constitutes a business for which discrete financial information is available and management regularly reviews the operating results and, therefore, each brand is considered an operating segment. For our annual impairment evaluation, we performed a qualitative assessment for the Regent Seven Seas reporting unit and of each brand’s trade names.
Each brand, Oceania Cruises, Regent Seven Seas and Norwegian, constitutes a business for which discrete financial information is available and management regularly reviews the operating results and, therefore, each brand is considered an operating segment. For our annual impairment evaluation, we performed a quantitative assessment for the Regent Seven Seas reporting unit and of each brand’s trade names.
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 expense or extend debt maturities.
There is no assurance that cash flows from operations and additional financings will be available in the future to fund our future obligations. Beyond the next 12 months, we will pursue refinancings and other balance sheet optimization transactions in order to reduce interest expense and/or extend debt maturities.
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.
Passenger ticket revenue primarily consists of revenue for accommodations, meals in certain restaurants on the ship, certain onboard entertainment, government taxes, fees and port expenses 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.
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.
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.
Refer to “—Liquidity and Capital Resources—General” 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.
Refer 65 Table of Contents to “—Liquidity and Capital Resources—General” 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.
Although the agreements vary, these requirements may generally be satisfied either through a percentage of customer payments withheld or providing cash 63 Table of Contents funds directly to the card processor. Any cash reserve or collateral requested could be increased or decreased.
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.
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. Approximately $13.7 billion of our assets are pledged as collateral for certain of our debt.
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. Approximately $16.2 billion of our assets are pledged as collateral for certain of our debt.
We have obtained or expect to obtain fixed rate 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.
We have obtained fixed-rate export-credit backed financing which is expected to fund approximately 80% of the contract price of each ship on order, subject to certain conditions. We do not anticipate any contractual breaches or cancellations to occur.
We also have agreements with our credit card processors that, as of December 31, 2022, governed approximately $2.4 billion in advance ticket sales that had been received by the Company relating to future voyages.
We also have agreements with our credit card processors that, as of December 31, 2023, governed approximately $2.9 billion in advance ticket sales that had been received by the Company relating to future voyages.
For a comparison of the Company’s results of operations for the fiscal years ended December 31, 2021 to the year ended December 31, 2020, see “Item 7, Management’s Discussion and Analysis of Financial Condition and Results of Operations” in the Company’s Annual Report on Form 10-K for the year ended December 31, 2021, which was filed with the U.S.
For a comparison of the Company’s results of operations for the fiscal years ended December 31, 2022 to the year ended December 31, 2021, see “Item 7, Management’s Discussion and 57 Table of Contents Analysis of Financial Condition and Results of Operations” in the Company’s annual report on Form 10-K for the year ended December 31, 2022, which was filed with the U.S.
Future Capital Commitments Future capital commitments consist of contracted commitments, including ship construction contracts. Anticipated expenditures related to ship construction contracts are $2.4 billion, $0.5 billion and $1.8 billion for the years ending December 31, 2023, 2024 and 2025, respectively.
Future Capital Commitments Future capital commitments consist of contracted commitments, including ship construction contracts. Anticipated expenditures related to ship construction contracts are $0.4 billion, $2.1 billion and $1.4 billion for the years ending December 31, 2024, 2025 and 2026, respectively.
Sources and Uses of Cash In this section, references to 2022 refer to the year ended December 31, 2022, references to 2021 refer to the year ended December 31, 2021. Net cash provided by operating activities was $210.0 million in 2022 compared to net cash used in operating activities of $2.5 billion in 2021.
Sources and Uses of Cash In this section, references to 2023 refer to the year ended December 31, 2023, references to 2022 refer to the year ended December 31, 2022. Net cash provided by operating activities was $2.0 billion in 2023 compared to net cash provided by operating activities of $210.0 million in 2022.
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 on December 31 or more frequently when an event occurs or circumstances change that indicates the carrying value of a reporting unit may not be recoverable.
Our estimate of fair value is generally measured by discounting expected future cash flows at discount rates commensurate with the associated risk. 53 Table of Contents We evaluate goodwill and trade names for impairment annually or more frequently when an event occurs or circumstances change that indicates the carrying value of a reporting unit may not be recoverable.
For the Company’s cash flow activities for the fiscal year ended December 31, 2020, see “Item 7, Management’s Discussion and Analysis of Financial Condition and Results of Operations” in the Company’s Annual Report on Form 10-K for the year ended December 31, 2021, which was filed with the U.S. Securities and Exchange Commission on March 1, 2022.
For the Company’s cash flow activities for the fiscal year ended December 31, 2021, see “Item 7, Management’s Discussion and Analysis of Financial Condition and Results of Operations” in the Company’s annual report on Form 10-K for the year ended December 31, 2022, which was filed with the U.S. Securities and Exchange Commission on February 28, 2023.
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.
We believe our estimates and judgments with respect to our long-lived assets, principally ships, goodwill, trade names and other indefinite-lived intangible assets are reasonable.
Our revenue is seasonal based on demand for cruises, which has historically been strongest during the Northern Hemisphere’s summer months; however, our cruise voyages were completely suspended from March 2020 until July 2021 due to the COVID-19 pandemic and our resumption of cruise voyages was phased in gradually, with full operation of our fleet resumed in May 2022 as described under “—Update Regarding COVID-19 Pandemic” below.
Our revenue is seasonal based on demand for cruises, which has historically been strongest during the Northern Hemisphere’s summer months; however, our cruise voyages were completely suspended from March 2020 until July 2021 due to the COVID-19 pandemic and our resumption of cruise voyages was phased in gradually, with full operation of our fleet resumed in May 2022.
For trade names we also provide a qualitative assessment to determine if there is any indication of impairment. 53 Table of Contents 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; ● 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).
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; ● 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).
In measuring our ability to control costs in a manner that positively impacts our results of operations, we believe changes in Adjusted Gross Margin, Net Cruise Cost and Adjusted Net Cruise Cost Excluding Fuel to be the most relevant indicators of our performance.
In measuring our ability to control costs in a manner that positively impacts our net income (loss), we believe changes in Adjusted Gross Margin, Net Yield, Net Cruise Cost and Adjusted Net Cruise Cost Excluding Fuel to be the most relevant indicators of our performance.
Simultaneously, the amount of the commitment was reduced to $650 million, which may be drawn in up to two draws, and in connection with the execution of the amended commitment letter, NCLC issued $250 million aggregate principal amount of senior secured notes due 2028. NCLC will use the net proceeds for general corporate purposes.
Simultaneously, the amount of the commitment was reduced to $650 million, which may be drawn in up to two draws, and in connection with the execution of the current commitment letter, NCLC issued $250 million aggregate principal amount of 9.75% senior secured notes due 2028. NCLC used the net proceeds for general corporate purposes.
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.
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. In addition, management uses Adjusted EBITDA as a performance measure for our incentive compensation.
However, there is no guarantee that debt or equity financings will be available in the future to fund our obligations, or that they will be available on terms consistent with our expectations. ​ As of December 31, 2022, we had advance ticket sales of $2.7 billion, including the long-term portion, which included approximately $144.0 million of future cruise credits.
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. ​ 63 Table of Contents As of December 31, 2023, we had advance ticket sales of $3.2 billion, including the long-term portion, which included approximately $78.0 million of future cruise credits.
We included this as an adjustment in the reconciliation of Adjusted Net Loss since the expenses are not representative of our day-to-day operations; however, this adjustment did not occur and is not included in the comparative period presented within this Form 10-K.
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 Annual Report.
Capitalized interest for the year ended December 31, 2022 and 2021 was $58.4 million and $43.6 million, respectively, primarily associated with the construction of our newbuild ships.
Capitalized interest for the year ended December 31, 2023 and 2022 was $56.4 million and $58.4 million, respectively, primarily associated with the construction of our newbuild ships.
Simultaneously, the amount of the commitment was reduced to $650 million, which may be drawn in up to two draws, and in connection with the execution 62 Table of Contents of the amended commitment letter, NCLC issued $250 million aggregate principal amount of senior secured notes due 2028. NCLC will use the net proceeds for general corporate purposes.
Simultaneously, the amount of the commitment 55 Table of Contents was reduced to $650 million, which may be drawn in up to two draws, and in connection with the execution of the current commitment letter, NCLC issued $250 million aggregate principal amount of 9.75% senior secured notes due 2028. NCLC used the net proceeds for general corporate purposes.
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.
These costs include travel advisor commissions, air and land transportation expenses, related credit card fees, certain government taxes, fees and port expenses 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, benefits and logistics 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. ● 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.
If we reduced our estimated weighted average ship service life by one year, depreciation expense for the year ended December 31, 2022 would have increased by $18.8 million. In addition, if our ships were estimated to have no residual value, depreciation expense for the same period would have increased by $82.8 million.
If we reduced our estimated weighted average ship service life by one year, depreciation expense for the year ended December 31, 2023 would have increased by $19.4 million. In addition, if our ships were estimated to have no residual value, depreciation expense for the same period would have increased by $84.4 million.
Our costs have been, and are expected to continue to be, adversely impacted by these increases. We have used, and may continue to use, derivative instruments to attempt to mitigate the risk of adverse changes in fuel prices and interest expense.
Our costs have been, and are expected to continue to be, adversely impacted by these factors. We have used, and may continue to use, derivative instruments to attempt to mitigate the risk of volatility in fuel prices and interest rates.
We have export-credit backed financing in place for the anticipated expenditures related to ship construction contracts of $1.9 billion, $0.1 billion and $1.1 billion for the years ending December 31, 2023, 2024 and 2025, respectively. Anticipated non-newbuild capital expenditures are $0.4 billion for the year ended December 31, 2023.
We have export-credit backed financing in place for the anticipated expenditures related to ship construction contracts of $0.2 billion, $1.5 billion and $0.8 billion for the years ending December 31, 2024, 2025 and 2026, respectively. Anticipated non-newbuild capital expenditures are $475 million for the year ended December 31, 2024.
In an attempt to mitigate risks related to inflation, our supply chain department has negotiated contracts with varying terms, with a goal of providing us with the ability to take advantage of cost declines when they occur, and diversified our sourcing options. These strategies may not fully offset the impact of current macroeconomic conditions.
In an attempt to mitigate risks related to inflation, our supply chain department has negotiated contracts with varying terms, with a goal of providing us with the ability to take advantage of cost declines when they occur, and diversified our sourcing options.
Based on the design, structure and technological advancements made to this new class of ship and the analysis of its major components, which is generally performed upon the introduction of a new class of ship, we have assigned the Prima Class Ships a weighted-average 52 Table of Contents useful life of 35 years with a residual value of 10%.
Based on the design, structure and technological advancements made to these new classes of ships and the analyses of their major components, which is generally performed upon the introduction of a new class of ship, we have assigned the Prima Class Ships and Allura Class Ships a weighted-average useful life of 35 years with a residual value of 10%.
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.
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. ​ Our Moody’s long-term issuer rating is B2, our senior secured rating is B1 and our senior unsecured rating is Caa1.
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 dynamic nature of the current operating environment, including the impacts of the COVID-19 global pandemic, Russia’s ongoing invasion of Ukraine and current macroeconomic conditions such as inflation, rising fuel prices and rising interest rates.
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 dynamic nature of the current operating environment, including any current macroeconomic events and conditions such as inflation, rising fuel prices and higher interest rates.
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.
We believe we were in compliance with our covenants as of December 31, 2023. 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.
Future expected capital expenditures will significantly increase our depreciation and amortization expense. For the Norwegian brand, we have five Prima Class Ships on order, each ranging from approximately 143,500 to 169,000 Gross Tons with 3,100 or more Berths, with currently scheduled delivery dates from 2023 through 2028.
Future expected capital expenditures will significantly increase our depreciation and amortization expense. For the Norwegian brand, we have four Prima Class Ships on order, each ranging from approximately 156,300 to 169,000 Gross Tons with 3,550 to 3,850 Berths, with currently scheduled delivery dates from 2025 through 2028.
(3) Restructuring costs related to the workforce reduction are included in marketing, general and administrative expense. ​ 60 Table of Contents Adjusted Net Loss and Adjusted EPS were calculated as follows (in thousands, except share and per share data): ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Year Ended December 31, ​ 2022 2021 Net loss ​ $ (2,269,909) ​ $ (4,506,587) Non-GAAP Adjustments: ​ ​ Non-cash deferred compensation (1) ​ 4,048 ​ 4,012 Non-cash share-based compensation (2) ​ 113,563 ​ 124,077 Restructuring costs (3) ​ 12,140 ​ — Extinguishment and modification of debt (4) ​ 193,374 ​ 1,428,813 Adjusted Net Loss ​ $ (1,946,784) ​ $ (2,949,685) Diluted weighted-average shares outstanding - Net loss and Adjusted Net Loss ​ 419,773,195 ​ 365,449,967 Diluted loss per share ​ $ (5.41) ​ $ (12.33) Adjusted EPS ​ $ (4.64) ​ $ (8.07) (1) Non-cash deferred compensation expenses related to the crew pension plan and other crew expenses are included in payroll and related expense and other income (expense), net.
(3) Restructuring costs related to the workforce reduction are included in marketing, general and administrative expense. ​ ​ 60 Table of Contents Adjusted Net Income (Loss) and Adjusted EPS were calculated as follows (in thousands, except share and per share data): ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Year Ended December 31, ​ 2023 2022 Net income (loss) ​ $ 166,178 ​ $ (2,269,909) Non-GAAP Adjustments: ​ ​ Non-cash deferred compensation (1) ​ 4,039 ​ 4,048 Non-cash share-based compensation (2) ​ 118,940 ​ 113,563 Restructuring costs (3) ​ — ​ 12,140 Extinguishment and modification of debt (4) ​ 8,822 ​ 193,374 Adjusted Net Income (Loss) ​ $ 297,979 ​ $ (1,946,784) Diluted weighted-average shares outstanding - Net income (loss) and Adjusted Net Income (Loss) ​ 427,400,849 ​ 419,773,195 Diluted EPS ​ $ 0.39 ​ $ (5.41) Adjusted EPS ​ $ 0.70 ​ $ (4.64) (1) Non-cash deferred compensation expenses related to the crew pension plan and other crew expenses are included in payroll and related expense and other income (expense), net.
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. ​ We believe our cash on hand, the impact of the undrawn commitment less related fees, the backstop financing available from October 4, 2023 through January 2, 2024, 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.
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. ​ We believe our cash on hand, the impact of the undrawn commitment less related fees, borrowings available under our $1.2 billion fully undrawn Revolving Loan Facility, 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.
(4) Restructuring costs related to the workforce reduction are included in marketing, general and administrative expense. ​ Year Ended December 31, 2022 (“2022”) Compared to Year Ended December 31, 2021 (“2021”) Revenue Total revenue increased 647.5% to $4.8 billion in 2022 compared to $0.6 billion in 2021.
(4) Restructuring costs related to the workforce reduction are included in marketing, general and administrative expense. ​ 61 Table of Contents Year Ended December 31, 2023 (“2023”) Compared to Year Ended December 31, 2022 (“2022”) Revenue Total revenue increased 76.5% to $8.5 billion in 2023 compared to $4.8 billion in 2022.
(4) Losses on extinguishments and modifications of debt are primarily included in interest expense, net. ​ EBITDA and Adjusted EBITDA were calculated as follows (in thousands): ​ ​ ​ ​ ​ ​ ​ ​ ​ Year Ended December 31, ​ 2022 2021 Net loss ​ $ (2,269,909) ​ $ (4,506,587) Interest expense, net ​ 801,512 ​ 2,072,925 Income tax (benefit) expense ​ (6,794) ​ 5,267 Depreciation and amortization expense ​ 749,326 ​ 700,845 EBITDA ​ (725,865) ​ (1,727,550) Other (income) expense, net (1) ​ (76,566) ​ (123,953) Other Non-GAAP Adjustments: ​ ​ Non-cash deferred compensation (2) ​ 2,797 ​ 3,619 Non-cash share-based compensation (3) ​ 113,563 ​ 124,077 Restructuring costs (4) ​ ​ 12,140 ​ ​ — Adjusted EBITDA ​ $ (673,931) ​ $ (1,723,807) (1) Primarily consists of gains and losses, net of foreign currency remeasurements and derivatives not designated as hedges.
(4) Losses on extinguishments and modifications of debt are primarily included in interest expense, net. ​ EBITDA and Adjusted EBITDA were calculated as follows (in thousands): ​ ​ ​ ​ ​ ​ ​ ​ ​ Year Ended December 31, ​ 2023 2022 Net income (loss) ​ $ 166,178 ​ $ (2,269,909) Interest expense, net ​ 727,531 ​ 801,512 Income tax (benefit) expense ​ (3,002) ​ (6,794) Depreciation and amortization expense ​ 808,568 ​ 749,326 EBITDA ​ 1,699,275 ​ (725,865) Other (income) expense, net (1) ​ 40,204 ​ (76,566) Other Non-GAAP Adjustments: ​ ​ Non-cash deferred compensation (2) ​ 2,312 ​ 2,797 Non-cash share-based compensation (3) ​ 118,940 ​ 113,563 Restructuring costs (4) ​ ​ — ​ ​ 12,140 Adjusted EBITDA ​ $ 1,860,731 ​ $ (673,931) (1) Primarily consists of gains and losses, net of foreign currency remeasurements, and in 2022, derivatives not designated as hedges.
This deficit included $2.5 billion of advance ticket sales, which represents the total revenue we collected in advance of sailing dates and accordingly are substantially more like deferred revenue balances rather than actual current cash liabilities.
As of December 31, 2023, we had a working capital deficit of $4.7 billion. This deficit included $3.1 billion of advance ticket sales, which represents the total revenue we collected in advance of sailing dates and accordingly are substantially more like deferred revenue balances rather than actual current cash liabilities.
We had Adjusted Net Loss and Adjusted EPS of $(1.9) billion and $(4.64), respectively, for the year ended December 31, 2022, including $0.3 billion of adjustments primarily consisting of losses on the extinguishment and modification of debt and share-based compensation, compared to Adjusted Net Loss and Adjusted EPS of $(2.9) billion and $(8.07), respectively, for the year ended December 31, 2021.
We had Adjusted Net Income and Adjusted EPS of $298.0 million and $0.70, respectively, for the year ended December 31, 2023, including $131.8 million of adjustments primarily consisting of share-based compensation, compared to Adjusted Net Loss and Adjusted EPS of $(1.9) billion and $(4.64), respectively, for the year ended December 31, 2022.
In July 2022, we amended our $1 billion commitment, which provided additional liquidity to the Company through March 31, 2023. In February 2023, the commitment was further extended through February 2024, with an option for NCLC to further extend the commitments through February 2025 at its election.
In February 2023, our $1 billion commitment letter was extended through February 2024, with an option for NCLC to further extend the commitments through February 2025 at its election.
In July 2022, we amended our $1 billion commitment, which provided additional liquidity to the Company through March 31, 2023. In February 2023, the commitment was further extended through February 2024, with an option for NCLC to further extend the commitments through February 2025 at its election.
In February 2023, our $1 billion commitment letter was extended through February 2024, with an option for NCLC to further extend the commitments through February 2025 at its election.
The net cash provided by operating activities in 2022 included net losses of $(2.3) billion, an increase in advance ticket sales of $928.9 million and loss on extinguishment of $188.8 million.
The net cash provided by operating activities in 2022 included net losses of $(2.3) billion, an increase in advance ticket sales of $928.9 million and loss on extinguishment of debt of $188.8 million. Net cash used in investing activities was $2.9 billion in 2023, primarily related to three new ship deliveries and newbuild payments.
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.
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. Financing Transactions In February 2023, NCLC issued $600 million aggregate principal amount of 8.375% senior secured notes due 2028.
Furthermore, we are exposed to fluctuations in the euro exchange rate for certain portions of ship construction contracts that have not been hedged. See “Item 1A—Risk Factors” for additional information. Climate Change We believe the increasing focus on climate change and evolving regulatory requirements will materially impact our future capital expenditures and results of operations.
Furthermore, we are exposed to fluctuations in the euro exchange rate for certain portions of ship construction contracts that have not been hedged. See “Item 1A. Risk Factors” in our Annual Report for additional information.
In the third quarter of 2022, the Company took delivery of Norwegian’s first Prima Class Ship.
In 2022 and 2023, the Company took delivery of Norwegian’s first Prima Class Ship and Oceania Cruises’ first Allura Class Ship, respectively.
You should read this discussion in conjunction with the consolidated financial statements and the notes thereto included elsewhere in this annual report.
Results of Operations The discussion below compares the results of operations for the year ended December 31, 2023 to the year ended December 31, 2022. You should read this discussion in conjunction with the consolidated financial statements and the notes thereto included elsewhere in this Annual Report.
Executive Overview Total revenue increased 647.5% to $4.8 billion for the year ended December 31, 2022 compared to $0.6 billion for the year ended December 31, 2021. Capacity Days increased by 420.2%. For the year ended December 31, 2022, we had net loss and diluted EPS of $(2.3) billion and $(5.41), respectively.
Capacity Days increased by 29.0%. For the year ended December 31, 2023, we had net income and diluted EPS of $166.2 million and $0.39, respectively. For the year ended December 31, 2022, we had net loss and diluted EPS of $(2.3) billion and $(5.41), respectively.
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.
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. In February 2023, NCLC issued $600 million aggregate principal amount of 8.375% senior secured notes due 2028.
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.
No term loans remain outstanding. Refer to Note 8 – “Long-Term Debt” for further details about the above financing transactions. Based on our liquidity estimates and our current resources, we have concluded we have sufficient liquidity to satisfy our obligations for at least the next 12 months.
Since April 2020, S&P Global has downgraded our issuer credit rating to B, lowered our issue-level rating on our $875 million Revolving Loan Facility and $1.5 billion Term Loan A Facility to BB-, our issue-level rating on our other senior secured notes to B+ and our senior unsecured rating to B-.
Our S&P Global issuer credit rating is B, our issue-level rating on our $1.2 billion Revolving Loan Facility, 2028 Senior Secured Notes and 2029 Senior Secured Notes is BB-, our issue-level rating on our other senior secured notes is B+ and our senior unsecured rating is CCC+.
A 60.9% improvement in Adjusted EBITDA was incurred for the same period. We refer you to our “Results of Operations” below for a calculation of Adjusted Net Loss, Adjusted EPS and Adjusted EBITDA. Results of Operations The discussion below compares the results of operations for the year ended December 31, 2022 to the year ended December 31, 2021.
Adjusted EBITDA increased to $1.9 billion for the year ended December 31, 2023 from $(673.9) for the year ended December 31, 2022. We refer you to our “Results of Operations” below for a calculation of Adjusted Net Income (Loss), Adjusted EPS and Adjusted EBITDA.
For example, certain ports have become temporarily unavailable to us due to hurricane damage and other destinations have either considered or implemented restrictions on cruise operations due to environmental concerns. See Item 1A, “Risk Factors” for additional information.
For example, certain ports have become temporarily unavailable to us due to hurricane damage and other destinations have either considered or implemented restrictions on cruise operations due to environmental concerns. Refer to “Impacts related to climate change may adversely affect our business, financial condition and results of operations” in “Item 1A. Risk Factors” for further information.
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.
These critical accounting policies, which are presented in detail in our notes to our audited consolidated financial statements, relate to ship accounting and asset impairment. Ship Accounting Ships represent our most significant assets, and we record them at cost less accumulated depreciation.
(2) Ship construction contracts are for our newbuild ships based on the euro/U.S. dollar exchange rate as of December 31, 2022. As of December 31, 2022, we have committed undrawn export-credit backed facilities of $5.6 billion which funds approximately 80% of our ship construction contracts.
As of December 31, 2023, we have committed undrawn export-credit backed facilities of $5.4 billion which funds approximately 80% of our ship construction contracts.
Refer to Item 1A, “Risk Factors” for further details regarding uncertainty related to Russia’s ongoing invasion of Ukraine and other risks and uncertainties that may cause our results to differ from our expectations.
Refer to Item 1A, “Risk Factors” for further details regarding risks and uncertainties that may cause our results to differ from our expectations. At December 31, 2023, we were in compliance with all of our debt covenants.
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 the Oceania Cruises brand, we have orders for two Allura Class Ships to be delivered in 2023 and 2025.
For 64 Table of Contents the Oceania Cruises brand, we have an order for one Allura Class Ship to be delivered in 2025. The Allura Class Ship will be approximately 67,800 Gross Tons and 1,250 Berths.
At December 31, 2022, taking into account such amendments, we were in compliance with all of our debt covenants. If we do not continue to remain in compliance with our covenants, we would have to seek additional amendments to or waivers of the covenants.
If we do not continue to remain in compliance with our covenants, we would have to seek additional amendments to or waivers of the covenants. However, no assurances can be made that such amendments or waivers would be approved by our lenders.
Includes exchangeable notes which can be settled in shares. Excludes the impact of any future possible refinancings and undrawn export-credit backed facilities.
Includes exchangeable notes which can be settled in shares. Excludes the impact of any future possible refinancings and undrawn export-credit backed facilities. (2) Ship construction contracts are for our newbuild ships based on the euro/U.S. dollar exchange rate as of December 31, 2023.
Excluding these losses, interest expense increased primarily as a result of higher debt balances and higher rates partially offset by lower interest expense in connection with refinancings. Other income (expense), net was income of $76.6 million in 2022 compared to $124.0 million in 2021.
Excluding these losses, interest expense increased primarily as a result of higher rates. Other income (expense), net was expense of $40.2 million in 2023 compared to income of $76.6 million in 2022. In 2023, the expense primarily related to net losses on foreign currency remeasurements.
We expect to incur significant expenses related to these regulatory requirements, which may include expenses related to greenhouse gas emissions reduction initiatives and the purchase of emissions allowances, among other things. If requirements become more stringent, we may be required to change certain operating procedures, for example slowing the speed of our ships, which could adversely impact our operations.
We expect to incur significant expenses related to these regulatory requirements and commitments, which may include expenses related to greenhouse gas emissions reduction initiatives and the purchase of emissions 56 Table of Contents allowances, among other things.
As of December 31, 2022, our annual impairment reviews support the carrying values of these assets. ​ Non-GAAP Financial Measures We use certain non-GAAP financial measures, such as Adjusted Gross Margin, Net Cruise Cost, Adjusted Net Cruise Cost Excluding Fuel, Adjusted EBITDA, Adjusted Net Loss and Adjusted EPS, to enable us to analyze our performance.
See Note 2 – “Summary of Significant Accounting Policies” for more information. 54 Table of Contents Non-GAAP Financial Measures We use certain non-GAAP financial measures, such as Adjusted Gross Margin, Net Yield, Net Cruise Cost, Adjusted Net Cruise Cost Excluding Fuel, Adjusted EBITDA, Adjusted Net Income (Loss) and Adjusted EPS, to enable us to analyze our performance.
In 2022, revenue primarily increased as we returned to service with 12.8 million Passenger Cruise Days compared to 1.8 million in 2021. 61 Table of Contents Expense Total cruise operating expense increased 165.4% in 2022 compared to 2021.
In 2023, revenue primarily increased as a result of increases in our Occupancy following our return to service with 23.3 million Passenger Cruise Days compared to 12.8 million in 2022. Expense Total cruise operating expense increased 28.2% in 2023 compared to 2022.
Each of the Allura Class Ships will be approximately 67,000 Gross Tons and 1,200 Berths. 64 Table of Contents As of December 31, 2022, the combined contract prices of the eight ships on order for delivery was approximately €6.7 billion, or $7.2 billion based on the euro/U.S. dollar exchange rate as of December 31, 2022.
As of December 31, 2023, the combined contract prices, including amendments and change orders, of the five ships on order for delivery was approximately €5.8 billion, or $6.4 billion based on the euro/U.S. dollar exchange rate as of December 31, 2023.
As of December 31, 2022, we had cash collateral reserves of approximately $622.0 million with credit card processors, of which approximately $118.4 million is recognized in accounts receivable, net and approximately $503.6 million in 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.
During the year ended December 31, 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.
Total other operating expense increased 33.7% in 2022 compared to 2021 primarily due to the increase in marketing, general and administrative expenses. Interest expense, net was $0.8 billion in 2022 compared to $2.1 billion in 2021. The decrease in 2022 primarily reflects lower losses from extinguishment of debt and debt modification costs, which were $1.4 billion in 2021.
Gross Cruise Cost increased 20.6% in 2023 compared to 2022, primarily related to the change in costs described above. Interest expense, net was $727.5 million in 2023 compared to $801.5 million in 2022. The decrease in 2023 primarily reflects lower losses from extinguishment of debt and debt modification costs, which were $8.8 million in 2023 and $193.4 million in 2022.
Macroeconomic Trends and Uncertainties As a result of conditions associated with global events, including the downstream effects of the COVID-19 pandemic and 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.
Approximately 1% of second quarter 2024 capacity and 1% of 2024 capacity were expected to sail through the Red Sea. Macroeconomic Trends and Uncertainties As a result of conditions associated with global macroeconomic events, the global economy, including the financial and credit markets, has experienced volatility and disruptions, including impacts to inflation rates, fuel prices, foreign currencies and interest rates.
Our primary ongoing liquidity requirements are to finance working capital, capital expenditures and debt service. As of December 31, 2022, we had a working capital deficit of $3.2 billion.
Liquidity and Capital Resources General As of December 31, 2023, our liquidity of $2.3 billion consisted of cash and cash equivalents of $402.4 million, borrowings available under our $1.2 billion fully undrawn Revolving Loan Facility and a $650 million undrawn commitment less related fees. Our primary ongoing liquidity requirements are to finance working capital, capital expenditures and debt service.
As part of our analysis, we performed an assessment of current factors compared to key assumptions impacting the quantitative tests performed in 2020. As of December 31, 2022, there was $98.1 million of goodwill remaining for the Regent Seven Seas reporting unit. Trade names were $500.5 million as of December 31, 2022.
Based on the results of the assessment, we determined there was no impairment of goodwill because the fair value of the Regent Seven Seas reporting unit substantially exceeded its carrying value. As of December 31, 2023, there was $98.1 million of goodwill remaining for the Regent Seven Seas reporting unit. Trade names were $500.5 million as of December 31, 2023.
In 2022, our cruise operating expenses increased as more ships resumed voyages, resulting in higher payroll, fuel, and direct variable costs of fully operating ships. Costs for certain items such as food, fuel and logistics also increased related to inflation.
In 2023, our cruise operating expenses increased due to the resumption of voyages, resulting in higher payroll, food and direct variable costs of fully operating ships. In 2022, the year started with 16 ships operating with guests onboard and ended with the full fleet in service, which was completed in May 2022.
After giving effect to an amendment to our newbuild agreements for the last two Prima Class Ships subsequent to December 31, 2022, our material cash requirements for ship construction contracts are as follows (in thousands): ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ 2023 2024 2025 2026 2027 Thereafter Total Ship construction contracts ​ $ 2,204,378 ​ $ 213,353 ​ $ 1,573,183 ​ $ 1,071,080 ​ $ 1,021,461 ​ $ 952,200 ​ $ 7,035,655 ​ Excludes the impact of expected future ship construction contract amendments noted above. ​ 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.
Excludes the impact of expected future ship construction contracts that are not effective noted above. ​ 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.

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Item 7A. Quantitative and Qualitative Disclosures About Market Risk

Market Risk — interest-rate, FX, commodity exposure

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Biggest changeWe estimate that a 10% change in the euro as of December 31, 2022 would result in a $0.5 billion change in the U.S. dollar value of the foreign currency denominated remaining payments. Fuel Price Risk Our exposure to market risk for changes in fuel prices relates to the forecasted purchases of fuel on our ships.
Biggest changeThe change from December 31, 2022 to December 31, 2023 was due to an increase in contract price for our newbuild agreements. We estimate that a 10% change in the euro as of December 31, 2023 would result in a $0.6 billion change in the U.S. dollar value of the foreign currency denominated remaining payments.
This increase would be partially offset by an increase in the fair value of our fuel swap agreements of $38.2 million. Fair value of our derivative contracts is derived using valuation models that utilize the income valuation approach.
This increase would be partially offset by an increase in the fair value of our fuel swap agreements of $34.1 million. Fair value of our derivative contracts is derived using valuation models that utilize the income valuation approach.
Derivative positions are monitored using techniques including market valuations and sensitivity analyses. Interest Rate Risk As of December 31, 2022, 75% of our debt was fixed and 25% was variable.
Derivative positions are monitored using techniques including market valuations and sensitivity analyses. Interest Rate Risk As of December 31, 2023, 95% of our debt was fixed and 5% was variable.
The change in our fixed rate percentage from December 31, 2021 to December 31, 2022 was primarily due to the addition of fixed rate debt.
The change in our fixed rate percentage from December 31, 2022 to December 31, 2023 was primarily due to the addition of fixed rate debt and refinancing variable rate debt with fixed rate debt.
We use fuel derivative agreements to mitigate the financial impact of fluctuations in fuel prices and as of December 31, 2022, we had hedged approximately 50% of our 2023 projected metric tons of fuel purchases. As of December 31, 2021, we had hedged approximately 24% of our 2023 projected metric tons of fuel purchases.
We use fuel derivative agreements to mitigate the financial impact of fluctuations in fuel prices and as of December 31, 2023, we had hedged approximately 53% and 21% of our 2024 and 66 Table of Contents 2025 projected metric tons of fuel purchases, respectively.
Additional fuel swaps were executed between December 31, 2021 to December 31, 2022 to lower our fuel price risk. We estimate that a 10% increase in our weighted-average fuel price would increase our anticipated 2023 fuel expense by $67.7 million.
As of December 31, 2022, we had hedged none of our 2024 or 2025 projected metric tons of fuel purchases. Additional fuel swaps were executed between December 31, 2022 to December 31, 2023 to lower our fuel price risk. We estimate that a 10% increase in our weighted-average fuel price would increase our anticipated 2024 fuel expense by $63.7 million.
As of December 31, 2021, 72% of our debt was fixed and 28% was variable, which includes the effects of an interest rate swap that matured during the year ended December 31, 2022. The notional amount of our outstanding debt associated with the interest rate swap was $0.2 billion as of December 31, 2021.
As of December 31, 2022, 75% of our debt was fixed and 25% was variable, which includes the effects of an interest rate swap that matured during the year ended December 31, 2022.
These derivatives hedge the foreign currency exchange rate risk on a portion of the payments on our ship construction contracts. The payments not hedged aggregate €4.5 billion, or $4.8 billion based on the euro/U.S. dollar exchange rate as of December 31, 2022.
Foreign Currency Exchange Rate Risk As of December 31, 2023, future ship construction obligations aggregate €5.4 billion, or $6.0 billion based on the euro/U.S. dollar exchange rate as of December 31, 2023. As of December 31, 2022, the ship construction obligations aggregated €4.5 billion, or $4.8 billion, based on the euro/U.S. dollar exchange rate as of December 31, 2022.
Fuel expense, as a percentage of our total cruise operating expense, was 16.1% for the year ended December 31, 2022 and 18.8% for the year ended December 31, 2021.
Fuel Price Risk Our exposure to market risk for changes in fuel prices relates to the forecasted purchases of fuel on our ships. Fuel expense, as a percentage of our total cruise operating expense, was 13.1% for the year ended December 31, 2023 and 16.1% for the year ended December 31, 2022.
Based on our December 31, 2022 outstanding variable rate debt balance, a one percentage point increase in annual LIBOR interest rates would increase our annual interest expense by approximately $34.1 million excluding the effects of capitalization of interest. 66 Table of Contents Foreign Currency Exchange Rate Risk As of December 31, 2022, we had foreign currency derivatives to hedge the exposure to volatility in foreign currency exchange rates related to our ship construction contracts denominated in euros.
Based on our December 31, 2023 outstanding variable rate debt balance, a one percentage point increase in annual Term SOFR interest rates would increase our annual interest expense by approximately $6.8 million excluding the effects of capitalization of interest.
Removed
As of December 31, 2021, the payments not hedged aggregated €5.0 billion, or $5.7 billion, based on the euro/U.S. dollar exchange rate as of December 31, 2021. The change from December 31, 2021 to December 31, 2022 was due to the addition of foreign currency forwards and the delivery of Norwegian Prima.

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