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Table of Contents

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

(Mark One)

    QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended June 30, 2020

OR

    TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from                      to                     

Commission File Number: 001-35784

NORWEGIAN CRUISE LINE HOLDINGS LTD.

(Exact name of registrant as specified in its charter)

Bermuda

    

98-0691007

(State or other jurisdiction of incorporation or organization)

(I.R.S. Employer Identification No.)

7665 Corporate Center Drive, Miami, Florida 33126

33126

(Address of principal executive offices)

(zip code)

(305) 436-4000

(Registrant’s telephone number, including area code)

N/A

(Former name, former address and former fiscal year, if changed since last report)

Securities registered pursuant to Section 12(b) of the Act:

Title of each class

    

Trading Symbol(s)

    

Name of each exchange on which registered

Ordinary shares, par value $0.001 per share

 

NCLH

 

The New York Stock Exchange

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.   Yes      No  

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).   Yes      No  

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

Large accelerated filer 

Accelerated filer

Non-accelerated filer

Smaller reporting company

Emerging growth company

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.   

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).   Yes      No  

There were 275,618,888 ordinary shares outstanding as of July 31, 2020.

Table of Contents

TABLE OF CONTENTS

  

    

Page

PART I. FINANCIAL INFORMATION

Item 1.

Financial Statements

3

Item 2.

Management’s Discussion and Analysis of Financial Condition and Results of Operations

30

Item 3.

Quantitative and Qualitative Disclosures About Market Risk

49

Item 4.

Controls and Procedures

50

PART II. OTHER INFORMATION

Item 1.

Legal Proceedings

51

Item 1A.

Risk Factors

52

Item 2.

Unregistered Sales of Equity Securities and Use of Proceeds

56

Item 5.

Other Information

57

Item 6.

Exhibits

57

SIGNATURES

61

2

Table of Contents

PART I. FINANCIAL INFORMATION

Item 1. Financial Statements

Norwegian Cruise Line Holdings Ltd.

Consolidated Statements of Operations

(Unaudited)

(in thousands, except share and per share data)

Three Months Ended

Six Months Ended

June 30, 

June 30, 

    

2020

    

2019

    

2020

    

2019

Revenue

 

  

 

  

 

  

 

  

Passenger ticket

$

13,835

$

1,179,404

$

854,626

$

2,152,677

Onboard and other

 

3,094

 

484,873

 

409,185

 

915,230

Total revenue

 

16,929

 

1,664,277

 

1,263,811

 

3,067,907

Cruise operating expense

 

  

 

  

 

  

 

  

Commissions, transportation and other

 

34,601

 

297,691

 

366,969

 

526,955

Onboard and other

 

3,188

 

107,063

 

78,161

 

186,476

Payroll and related

 

128,744

 

229,385

 

375,891

 

452,492

Fuel

 

48,992

 

100,531

 

174,016

 

198,784

Food

 

6,997

 

54,347

 

56,213

 

109,392

Other

 

79,130

 

169,407

 

244,662

 

310,976

Total cruise operating expense

 

301,652

 

958,424

 

1,295,912

 

1,785,075

Other operating expense

 

  

 

  

 

  

 

  

Marketing, general and administrative

 

131,436

 

240,901

 

402,125

 

489,843

Depreciation and amortization

 

179,252

 

156,271

 

377,449

 

326,012

Impairment loss

1,607,797

Total other operating expense

 

310,688

 

397,172

 

2,387,371

 

815,855

Operating income (loss)

 

(595,411)

 

308,681

 

(2,419,472)

 

466,977

Non-operating income (expense)

 

 

  

 

 

  

Interest expense, net

 

(114,537)

 

(65,969)

 

(183,444)

 

(139,472)

Other income (expense), net

 

(14,418)

 

3,616

 

(8,595)

 

3,182

Total non-operating income (expense)

 

(128,955)

 

(62,353)

 

(192,039)

 

(136,290)

Net income (loss) before income taxes

 

(724,366)

 

246,328

 

(2,611,511)

 

330,687

Income tax benefit (expense)

 

9,123

 

(6,138)

 

15,296

 

27,660

Net income (loss)

$

(715,243)

$

240,190

$

(2,596,215)

$

358,347

Weighted-average shares outstanding

 

  

 

  

 

  

 

  

Basic

 

239,342,745

 

215,426,441

 

226,486,772

 

216,328,943

Diluted

 

239,342,745

 

216,810,766

 

226,486,772

 

217,837,005

Earnings (loss) per share

 

  

 

  

 

  

 

  

Basic

$

(2.99)

$

1.11

$

(11.46)

$

1.66

Diluted

$

(2.99)

$

1.11

$

(11.46)

$

1.65

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

3

Table of Contents

Norwegian Cruise Line Holdings Ltd.

Consolidated Statements of Comprehensive Income (Loss)

(Unaudited)

(in thousands)

Three Months Ended

Six Months Ended

June 30, 

June 30, 

    

2020

    

2019

    

2020

    

2019

Net income (loss)

$

(715,243)

$

240,190

$

(2,596,215)

$

358,347

Other comprehensive income (loss):

 

  

 

  

 

  

 

  

Shipboard Retirement Plan

 

102

 

94

 

204

 

189

Cash flow hedges:

 

 

 

 

  

Net unrealized gain (loss)

 

54,478

 

(17,189)

 

(251,382)

 

(2,037)

Amount realized and reclassified into earnings

 

28,782

 

(9,274)

 

50,781

 

(16,274)

Total other comprehensive income (loss)

 

83,362

 

(26,369)

 

(200,397)

 

(18,122)

Total comprehensive income (loss)

$

(631,881)

$

213,821

$

(2,796,612)

$

340,225

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

4

Table of Contents

Norwegian Cruise Line Holdings Ltd.

Consolidated Balance Sheets

(Unaudited)

(in thousands, except share data)

June 30, 

December 31, 

    

2020

    

2019

Assets

 

  

 

  

Current assets:

 

  

 

  

Cash and cash equivalents

$

2,259,949

$

252,876

Accounts receivable, net

 

74,213

 

75,109

Inventories

 

82,263

 

95,427

Prepaid expenses and other assets

 

334,243

 

306,733

Total current assets

 

2,750,668

 

730,145

Property and equipment, net

 

13,488,514

 

13,135,337

Goodwill

 

98,134

 

1,388,931

Tradenames

 

500,525

 

817,525

Other long-term assets

 

690,218

 

612,661

Total assets

$

17,528,059

$

16,684,599

Liabilities and shareholders’ equity

 

  

 

  

Current liabilities:

 

  

 

  

Current portion of long-term debt

$

337,338

$

746,358

Accounts payable

 

484,927

 

100,777

Accrued expenses and other liabilities

 

648,216

 

782,275

Advance ticket sales

 

1,113,374

 

1,954,980

Total current liabilities

 

2,583,855

 

3,584,390

Long-term debt

 

10,011,872

 

6,055,335

Other long-term liabilities

 

595,307

 

529,295

Total liabilities

 

13,191,034

 

10,169,020

Commitments and contingencies (Note 11)

 

  

 

  

Shareholders’ equity:

 

  

 

  

Ordinary shares, $0.001 par value; 490,000,000 shares authorized; 280,798,331 shares issued and 256,347,472 shares outstanding at June 30, 2020 and 237,533,270 shares issued and 213,082,411 shares outstanding at December 31, 2019

 

281

 

237

Additional paid-in capital

 

4,851,781

 

4,235,690

Accumulated other comprehensive income (loss)

 

(495,887)

 

(295,490)

Retained earnings

 

1,234,776

 

3,829,068

Treasury shares (24,450,859 at June 30, 2020 and December 31, 2019, at cost)

 

(1,253,926)

 

(1,253,926)

Total shareholders’ equity

 

4,337,025

 

6,515,579

Total liabilities and shareholders’ equity

$

17,528,059

$

16,684,599

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

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Norwegian Cruise Line Holdings Ltd.

Consolidated Statements of Cash Flows

(Unaudited)

(in thousands)

Six Months Ended

June 30, 

    

2020

    

2019

Cash flows from operating activities

 

  

 

  

Net income (loss)

$

(2,596,215)

$

358,347

Adjustments to reconcile net income (loss) to net cash provided by (used in) operating activities:

 

  

 

  

Depreciation and amortization expense

 

379,375

 

326,471

Impairment loss

1,607,797

Deferred income taxes, net

 

(14,458)

 

(29,793)

Loss on derivatives

8,294

Loss on extinguishment of debt

 

5,014

 

3,988

Provision for bad debts and inventory obsolescence

 

10,359

 

1,057

Gain on involuntary conversion of assets

(1,403)

(2,810)

Share-based compensation expense

 

55,147

 

56,650

Net foreign currency adjustments

 

160

 

(716)

Changes in operating assets and liabilities:

 

 

Accounts receivable, net

 

(2,108)

 

(15,121)

Inventories

 

11,996

 

(1,342)

Prepaid expenses and other assets

 

(115,066)

 

(57,929)

Accounts payable

 

369,519

 

(81,690)

Accrued expenses and other liabilities

 

(202,547)

 

(74,470)

Advance ticket sales

 

(844,244)

 

558,579

Net cash provided by (used in) operating activities

 

(1,328,380)

 

1,041,221

Cash flows from investing activities

 

  

 

  

Additions to property and equipment, net

 

(725,477)

 

(413,888)

Cash received on settlement of derivatives

 

 

289

Cash paid on settlement of derivatives

(28,606)

Other

2,519

4,047

Net cash used in investing activities

 

(751,564)

 

(409,552)

Cash flows from financing activities

 

  

 

  

Repayments of long-term debt

 

(207,863)

 

(2,808,615)

Proceeds from long-term debt

 

3,962,655

 

2,652,000

Common share issuance proceeds, net

441,935

Proceeds from employee related plans

 

4,100

 

11,368

Net share settlement of restricted share units

 

(15,318)

 

(20,830)

Purchases of treasury shares

 

 

(200,071)

Early redemption premium

 

 

(117)

Deferred financing fees

 

(94,559)

 

(9,330)

Net cash provided by (used in) financing activities

 

4,090,950

 

(375,595)

Effect of exchange rates on cash and cash equivalents

(3,933)

Net increase in cash and cash equivalents

 

2,007,073

 

256,074

Cash and cash equivalents at beginning of period

 

252,876

 

163,851

Cash and cash equivalents at end of period

$

2,259,949

$

419,925

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

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Norwegian Cruise Line Holdings Ltd.

Consolidated Statements of Changes in Shareholders’ Equity

(Unaudited)

(in thousands)

Three Months Ended June 30, 2020

Accumulated 

Additional

Other

Total

Ordinary 

Paid-in 

Comprehensive

Retained

Treasury

Shareholders’

Shares

    

Capital

    

Income (Loss)

    

Earnings

    

Shares

    

Equity

Balance, March 31, 2020

 

$

239

$

4,257,571

$

(579,249)

$

1,950,019

$

(1,253,926)

$

4,374,654

Share-based compensation

 

 

22,389

 

 

 

 

22,389

Common share issuance proceeds, net

42

440,924

440,966

Net share settlement of restricted share units

 

 

(343)

 

 

 

 

(343)

Beneficial conversion feature

131,240

131,240

Other comprehensive income, net

 

 

 

83,362

 

 

 

83,362

Net loss

 

 

 

 

(715,243)

 

 

(715,243)

Balance, June 30, 2020

$

281

$

4,851,781

$

(495,887)

$

1,234,776

$

(1,253,926)

$

4,337,025

Six Months Ended June 30, 2020

Accumulated 

Additional

Other

Total

Ordinary 

Paid-in 

Comprehensive

Retained

Treasury

Shareholders’

    

Shares

    

Capital

    

Income (Loss)

    

Earnings

    

Shares

    

Equity

Balance, December 31, 2019

 

$

237

$

4,235,690

$

(295,490)

$

3,829,068

$

(1,253,926)

 

$

6,515,579

Share-based compensation

 

 

55,147

 

 

 

 

55,147

Issuance of shares under employee related plans

 

2

 

4,098

 

 

 

 

4,100

Common share issuance proceeds, net

42

440,924

440,966

Net share settlement of restricted share units

 

 

(15,318)

 

 

 

 

(15,318)

Beneficial conversion feature

131,240

131,240

Cumulative change in accounting policy

1,923

1,923

Other comprehensive loss, net

 

 

 

(200,397)

 

 

 

(200,397)

Net loss

 

 

 

 

(2,596,215)

 

 

(2,596,215)

Balance, June 30, 2020

$

281

$

4,851,781

$

(495,887)

$

1,234,776

$

(1,253,926)

$

4,337,025

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

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Norwegian Cruise Line Holdings Ltd.

Consolidated Statements of Changes in Shareholders’ Equity - Continued

(Unaudited)

(in thousands)

Three Months Ended June 30, 2019

Accumulated 

    

    

    

Additional

Other

Total

Ordinary 

Paid-in 

Comprehensive

Retained

Treasury

Shareholders’

Shares

    

Capital

    

Income (Loss)

    

Earnings

    

Shares

Equity

Balance, March 31, 2019

 

$

237

 

$

4,145,530

 

$

(153,400)

 

$

3,016,997

 

$

(1,104,062)

 

$

5,905,302

Share-based compensation

 

 

29,651

 

 

 

 

29,651

Issuance of shares under employee related plans

 

 

3,624

 

 

 

 

3,624

Treasury shares

(75)

(75)

Net share settlement of restricted share units

 

 

(1,980)

 

 

 

 

(1,980)

Other comprehensive loss, net

 

 

 

(26,369)

 

 

 

(26,369)

Net income

 

 

 

 

240,190

 

 

240,190

Balance, June 30, 2019

$

237

$

4,176,825

$

(179,769)

$

3,257,187

$

(1,104,137)

$

6,150,343

Six Months Ended June 30, 2019

    

Accumulated 

    

    

    

Additional

Other

Total

Ordinary 

Paid-in 

Comprehensive

Retained

Treasury

Shareholders’

    

Shares

    

Capital

    

Income (Loss)

    

Earnings

    

Shares

Equity

Balance, December 31, 2018

 

$

235

 

$

4,129,639

 

$

(161,647)

 

$

2,898,840

 

$

(904,066)

 

$

5,963,001

Share-based compensation

 

 

56,650

 

 

 

 

56,650

Issuance of shares under employee related plans

 

2

 

11,366

 

 

 

 

11,368

Treasury shares

(200,071)

(200,071)

Net share settlement of restricted share units

 

 

(20,830)

 

 

 

 

(20,830)

Other comprehensive loss, net

 

 

 

(18,122)

 

 

 

(18,122)

Net income

 

 

 

 

358,347

 

 

358,347

Balance, June 30, 2019

$

237

$

4,176,825

$

(179,769)

$

3,257,187

$

(1,104,137)

$

6,150,343

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

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Norwegian Cruise Line Holdings Ltd.

Notes to Consolidated Financial Statements

(Unaudited)

Unless otherwise indicated or the context otherwise requires, references in this report to (i) the “Company,” “we,” “our” and “us” refer to NCLH (as defined below) and its subsidiaries (including Prestige (as defined below), except for periods prior to the consummation of the Acquisition of Prestige (as defined below)), (ii) “NCLC” refers to NCL Corporation Ltd., (iii) “NCLH” refers to Norwegian Cruise Line Holdings Ltd., (iv) “Norwegian Cruise Line” or “Norwegian” refers to the Norwegian Cruise Line brand and its predecessors, and (v) “Prestige” refers to Prestige Cruises International S. de R.L. (formerly Prestige Cruises International, Inc.), together with its consolidated subsidiaries, including Prestige Cruise Holdings S. de R.L. (formerly Prestige Cruise Holdings, Inc.), Prestige’s direct wholly-owned subsidiary, which in turn is the parent of Oceania Cruises S. de R.L. (formerly Oceania Cruises, Inc.) (“Oceania Cruises”) and Seven Seas Cruises S. de R.L. (“Regent”) (Oceania Cruises also refers to the brand by the same name and Regent also refers to the brand Regent Seven Seas Cruises).

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

1.   Description of Business and Organization

We are a leading global cruise company which operates the Norwegian Cruise Line, Oceania Cruises and Regent Seven Seas Cruises brands. As of June 30, 2020, we had 28 ships with approximately 59,150 Berths and had orders for nine additional ships to be delivered through 2027, subject to certain conditions. Due to the novel coronavirus (“COVID-19”), we have temporarily suspended global cruise voyages through October 31, 2020. We refer you to Note 2 – “Summary of Significant Accounting Policies” for further information.

We have one Explorer Class Ship on order for delivery in 2023. We have two Allura Class Ships on order for delivery in 2023 and 2025. Project Leonardo will introduce an additional six ships with expected delivery dates from 2022 through 2027. These additions to our fleet will increase our total Berths to approximately 82,000. The impacts of COVID-19 on the shipyards where our ships are under construction (or will be constructed) have resulted in some delays in expected ship deliveries, and the impacts of COVID-19 could result in additional delays in ship deliveries in the future, which may be prolonged.

2.   Summary of Significant Accounting Policies

Liquidity and Management’s Plan

Due to the continued spread of COVID-19, growing travel restrictions and limited access to ports around the world, in March 2020, the Company implemented a voluntary suspension of all cruise voyages across its three brands, which has subsequently been extended through October 31, 2020. On March 14, 2020, concurrent with our and the broader cruise industry’s original suspension, the U.S. Centers for Disease Control and Prevention (“CDC”) issued a No Sail Order through April 13, 2020, which was subsequently extended through July 24, 2020. On July 16, 2020, the CDC extended its No Sail Order until the earliest of (a) the expiration of the Secretary of Health and Human Services’ declaration that COVID-19 constitutes a public health emergency, (b) the date the Director of the CDC rescinds or modifies the No Sail Order based on specific public health or other considerations or (c) September 30, 2020. In addition, the duration of any voluntary suspensions we have implemented and the resumption of operations outside of the United States will be dependent, in part, on the severity and duration of the COVID-19 pandemic, the status of the CDC’s No Sail Order, the lifting of various travel restrictions and travel bans issued by various countries around the world, as well as the availability of ports around the world. Significant events affecting travel, including COVID-19, typically have an impact on the demand for cruise vacations, with the full extent of the impact generally determined by the length of time the event influences travel decisions. We believe the ongoing effects of COVID-19 on our operations and global bookings have had, and will continue to have, a significant impact on our financial results and liquidity, and such negative impact

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may continue well beyond the containment of such an outbreak. Due to the unknown duration and extent of the COVID-19 pandemic, travel restrictions and advisories, the potential unavailability of ports and/or destinations, unknown cancellations and timing of redeployments and a general impact on consumer sentiment regarding cruise travel, the full effect on our financial performance and financial condition cannot be quantified at this time, but we expect to report a net loss for the year ending December 31, 2020.

Since March 2020, we have taken several actions to bolster our financial condition while our global cruise voyages are suspended. In March 2020, NCLC borrowed the full amount of $1.55 billion under its $875 million Revolving Loan Facility and its $675 million Epic Credit Facility, dated as of March 5, 2020. We have taken additional measures to improve our liquidity by refinancing existing debt amortization, including under our agreements with export credit agencies and related governments, and by extending the maturities and refinancing amortization under other agreements, which has resulted in approximately $1.6 billion of payment deferrals. See Note 8 – “Long-Term Debt” for further information. Through June 30, 2020, the Company received additional financing through various debt financings and an equity offering totaling $2.4 billion in gross proceeds. The equity offering resulted in 41,818,181 shares being issued in exchange for gross proceeds of $460 million. See Note 8 – “Long-Term Debt” for further information on the debt financings. Subsequent to June 30, 2020, the Company received another $1.5 billion in gross proceeds from additional debt financings and an additional equity offering, of which approximately $675 million was used to repay in full and terminate the Epic Credit Facility. Refer to Note 8 – “Long-Term Debt” for further information on the debt financings and Note 16 – “Subsequent Events” for further information on the equity financing. The Company has also undertaken several proactive cost reduction and cash conservation measures to mitigate the financial and operational impacts of COVID-19, through the reduction of capital expenditures and operating expenses, including food, fuel, insurance, port charges and reduced crew manning of vessels during the suspension, resulting in lower crew payroll expense.

In accordance with Accounting Standards Update (“ASU”) No. 2014-15, Presentation of Financial Statements—Going Concern (Subtopic 205-40): Disclosure of Uncertainties about an Entity’s Ability to Continue as a Going Concern, the Company has evaluated whether there are conditions and events, considered in the aggregate, that raise substantial doubt about the Company’s ability to continue as a going concern within one year after the date that the consolidated financial statements are issued. Based on the actions the Company has taken as described above and our resulting current resources, the Company has alleviated the substantial doubt previously disclosed and has sufficient liquidity to satisfy our obligations over the next twelve months and maintain minimum levels of liquidity as required by certain of our debt agreements.

Basis of Presentation

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

Our operations are seasonal and results for interim periods are not necessarily indicative of the results for the entire fiscal year. Historically, demand for cruises has been strongest during the Northern Hemisphere’s summer months; however, demand for cruises during the summer months of 2020 has been materially adversely impacted by the COVID-19 pandemic. The interim consolidated financial statements should be read in conjunction with the audited consolidated financial statements for the year ended December 31, 2019, which are included in our most recent Annual Report on Form 10-K filed with the SEC, as updated by our Current Report on Form 8-K filed on July 8, 2020.

Reclassifications

 

Certain amounts in prior periods have been reclassified to conform to the current period presentation.

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Earnings (Loss) Per Share

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

Three Months Ended

Six Months Ended

June 30, 

June 30, 

    

2020

    

2019

    

2020

    

2019

Net income (loss)

$

(715,243)

$

240,190

$

(2,596,215)

$

358,347

Basic weighted-average shares outstanding

 

239,342,745

 

215,426,441

 

226,486,772

 

216,328,943

Dilutive effect of share awards

 

 

1,384,325

 

 

1,508,062

Diluted weighted-average shares outstanding

 

239,342,745

 

216,810,766

 

226,486,772

 

217,837,005

Basic earnings (loss) per share

$

(2.99)

$

1.11

$

(11.46)

$

1.66

Diluted earnings (loss) per share

$

(2.99)

$

1.11

$

(11.46)

$

1.65

For the three months ended June 30, 2020 and 2019, a total of 59.2 million and 3.6 million shares, respectively, and for the six months ended June 30, 2020 and 2019, a total of 33.1 million and 4.5 million shares, respectively, have been excluded from diluted weighted-average shares outstanding because the effect of including them would have been anti-dilutive.

Foreign Currency

The majority of our transactions are settled in U.S. dollars. We remeasure assets and liabilities denominated in foreign currencies at exchange rates in effect at the balance sheet date. Gains or losses resulting from transactions denominated in other currencies are recognized in our consolidated statements of operations within other income, net. We recognized a loss of $10.2 million and $3.3 million for the three months ended June 30, 2020 and 2019, respectively, and a gain of $9.7 million and a loss of $4.3 million for the six months ended June 30, 2020 and 2019, respectively, related to transactions denominated in other currencies.

Depreciation and Amortization Expense

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

Recently Issued Accounting Guidance

In March 2020, the Financial Accounting Standards Board (“FASB”) issued ASU No. 2020-04, Reference Rate Reform (Topic 848): Facilitation of the Effects of Reference Rate Reform on Financial Reporting (“ASU 2020-04”), which provided guidance to alleviate the burden in accounting for reference rate reform by allowing certain expedients and exceptions in applying GAAP to contracts, hedging relationships and other transactions impacted by reference rate reform. The provisions apply only to those transactions that reference LIBOR or another reference rate expected to be discontinued due to reference rate reform. Adoption of the provisions of ASU 2020-04 are optional and are effective from March 12, 2020 through December 31, 2022. We are currently evaluating the impact of ASU 2020-04 on our consolidated financial statements.

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3.   Revenue Recognition

Disaggregation of Revenue

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

Three Months Ended

Six Months Ended

June 30, 

June 30, 

    

2020

    

2019

    

2020

    

2019

North America

$

3,366

$

968,466

$

954,422

$

1,951,455

Europe

 

9,701

 

508,435

 

23,036

 

542,187

Asia-Pacific

 

 

67,239

 

150,921

 

290,006

South America

3,765

76,306

94,068

Other

 

3,862

 

116,372

 

59,126

 

190,191

Total revenue

$

16,929

$

1,664,277

$

1,263,811

$

3,067,907

North America includes the U.S., the Caribbean, Canada and Mexico. Europe includes the Baltic region, Canary Islands and Mediterranean. Asia-Pacific includes Australia, New Zealand and Asia. Other includes all other international territories.

Segment Reporting

We have concluded that our business has a single reportable segment. Each brand, Norwegian, Oceania Cruises and Regent, constitutes a business for which discrete financial information is available and management regularly reviews the brand level operating results and, therefore, each brand is considered an operating segment. Our operating segments have similar economic and qualitative characteristics, including similar long-term margins and similar products and services; therefore, we aggregate all of the operating segments into one reportable segment.

Although we sell cruises on an international basis, our passenger ticket revenue is primarily attributed to U.S.-sourced guests who make reservations in the U.S. Revenue attributable to U.S.-sourced guests has historically approximated 75-80%. No other individual country’s revenues exceed 10% in any given period.

Contract Balances

Receivables from customers are included within accounts receivable, net. As of June 30, 2020 and December 31, 2019, our receivables from customers were $4.5 million and $15.3 million, respectively.

Beginning in March 2020, our brands launched new cancellation policies to permit our guests to cancel cruises which are not part of the Company’s temporary suspension of voyages up to 48 hours or 15 days, depending on the brand, prior to embarkation and receive a refund in the form of a credit to be applied toward a future cruise. These programs are currently in place for cruises booked through specific time periods specified by brand, and for cruises scheduled to embark through specified time periods, depending on the brand. The future cruise credit is valid for any sailing through December 31, 2022, and we may extend this offer. The future cruise credits are not contracts, and therefore, guests who have elected this option are excluded from our contract liability balance; however, the credit for the original amount paid is included in advance ticket sales.

Our contract liabilities are included within advance ticket sales. As of June 30, 2020 and December 31, 2019, our contract liabilities were $66.1 million and $1.4 billion, respectively. Of the amounts included within contract liabilities as of June 30, 2020, approximately 40% were refundable in accordance with our cancellation policies. For the six months ended June 30, 2020, $0.9 billion of revenue recognized was included in the contract liability balance at the beginning of the period.

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For cruise vacations that had been cancelled by us due to COVID-19, approximately $38.6 million and $130.6 million in costs to obtain these contracts, consisting of protected commissions and credit card fees, were recognized in earnings during the three and six months ended June 30, 2020, respectively.

4.   Intangible Assets

We evaluate goodwill and tradenames 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. In March 2020, the Company announced a voluntary suspension of all cruise voyages for its three brands, which has subsequently been extended through October 31, 2020. Due to the temporary suspension of operations and decline in our stock price, we performed interim goodwill and tradename impairment tests as of March 31, 2020. We refer you to Note 9 – “Fair Value Measurements and Derivatives” for information on our valuation assumptions.

The changes in the carrying amount of goodwill for each reporting unit for the six months ended June 30, 2020 are as follows (in thousands):

Reporting Unit

Norwegian

Regent

Cruise

Oceania

Seven Seas

Total

Line

    

Cruises

    

Cruises

    

Goodwill

Balance, December 31, 2019

 

$

403,805

$

523,026

$

462,100

$

1,388,931

Impairment loss

 

(403,805)

 

(523,026)

 

(363,966)

 

(1,290,797)

Balance, June 30, 2020