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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 March 31, 2021

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 369,933,035 ordinary shares outstanding as of April 30, 2021.

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

26

Item 3.

Quantitative and Qualitative Disclosures About Market Risk

42

Item 4.

Controls and Procedures

43

PART II. OTHER INFORMATION

Item 1.

Legal Proceedings

43

Item 1A.

Risk Factors

43

Item 6.

Exhibits

47

SIGNATURES

48

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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

March 31, 

    

2021

    

2020

Revenue

 

  

 

  

Passenger ticket

$

166

$

840,791

Onboard and other

 

2,934

 

406,091

Total revenue

 

3,100

 

1,246,882

Cruise operating expense

 

  

 

  

Commissions, transportation and other

 

9,033

 

332,368

Onboard and other

 

1,259

 

74,973

Payroll and related

 

82,138

 

247,147

Fuel

 

42,603

 

125,024

Food

 

6,308

 

49,216

Other

 

59,514

 

165,532

Total cruise operating expense

 

200,855

 

994,260

Other operating expense

 

  

 

  

Marketing, general and administrative

 

203,195

 

270,689

Depreciation and amortization

 

170,316

 

198,197

Impairment loss

1,607,797

Total other operating expense

 

373,511

 

2,076,683

Operating loss

 

(571,266)

 

(1,824,061)

Non-operating income (expense)

 

 

Interest expense, net

 

(824,441)

 

(68,907)

Other income (expense), net

 

27,243

 

5,823

Total non-operating income (expense)

 

(797,198)

 

(63,084)

Net loss before income taxes

 

(1,368,464)

 

(1,887,145)

Income tax benefit (expense)

 

(1,728)

 

6,173

Net loss

$

(1,370,192)

$

(1,880,972)

Weighted-average shares outstanding

 

  

 

  

Basic

 

329,377,207

 

213,630,798

Diluted

 

329,377,207

 

213,630,798

Loss per share

 

  

 

  

Basic

$

(4.16)

$

(8.80)

Diluted

$

(4.16)

$

(8.80)

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

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Norwegian Cruise Line Holdings Ltd.

Consolidated Statements of Comprehensive Loss

(Unaudited)

(in thousands)

Three Months Ended

March 31, 

    

2021

    

2020

Net loss

$

(1,370,192)

$

(1,880,972)

Other comprehensive loss:

 

  

 

  

Shipboard Retirement Plan

 

98

 

102

Cash flow hedges:

 

 

Net unrealized loss

 

(73,037)

 

(305,860)

Amount realized and reclassified into earnings

 

21,838

 

21,999

Total other comprehensive loss

 

(51,101)

 

(283,759)

Total comprehensive loss

$

(1,421,293)

$

(2,164,731)

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

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Norwegian Cruise Line Holdings Ltd.

Consolidated Balance Sheets

(Unaudited)

(in thousands, except share data)

March 31, 

December 31, 

    

2021

    

2020

Assets

 

  

 

  

Current assets:

 

  

 

  

Cash and cash equivalents

$

3,508,033

$

3,300,482

Accounts receivable, net

 

18,581

 

20,578

Inventories

 

84,691

 

82,381

Prepaid expenses and other assets

 

168,018

 

154,103

Total current assets

 

3,779,323

 

3,557,544

Property and equipment, net

 

13,401,337

 

13,411,226

Goodwill

 

98,134

 

98,134

Trade names

 

500,525

 

500,525

Other long-term assets

 

1,194,474

 

831,888

Total assets

$

18,973,793

$

18,399,317

Liabilities and shareholders’ equity

 

  

 

  

Current liabilities:

 

  

 

  

Current portion of long-term debt

$

37,033

$

124,885

Accounts payable

 

92,711

 

83,136

Accrued expenses and other liabilities

 

560,186

 

596,056

Advance ticket sales

 

1,120,124

 

1,109,826

Total current liabilities

 

1,810,054

 

1,913,903

Long-term debt

 

12,181,702

 

11,681,234

Other long-term liabilities

 

604,776

 

450,075

Total liabilities

 

14,596,532

 

14,045,212

Commitments and contingencies (Note 9)

 

  

 

  

Shareholders’ equity:

 

  

 

  

Ordinary shares, $0.001 par value; 490,000,000 shares authorized; 369,932,865 shares issued and outstanding at March 31, 2021 and 315,636,032 shares issued and outstanding at December 31, 2020

 

370

 

316

Additional paid-in capital

 

6,328,120

 

4,889,355

Accumulated other comprehensive income (loss)

 

(291,218)

 

(240,117)

Retained earnings (deficit)

 

(1,660,011)

 

(295,449)

Total shareholders’ equity

 

4,377,261

 

4,354,105

Total liabilities and shareholders’ equity

$

18,973,793

$

18,399,317

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)

Three Months Ended

March 31, 

    

2021

    

2020

Cash flows from operating activities

 

  

 

  

Net loss

$

(1,370,192)

$

(1,880,972)

Adjustments to reconcile net loss to net cash used in operating activities:

 

  

 

  

Depreciation and amortization expense

 

183,808

 

195,195

Impairment loss

1,607,797

Deferred income taxes, net

 

6

 

(6,120)

(Gain) loss on derivatives

(18,687)

13,619

Loss on extinguishment of debt

 

621,894

 

Provision for bad debts and inventory obsolescence

 

4,329

 

8,372

Gain on involuntary conversion of assets

(418)

Share-based compensation expense

 

26,601

 

32,758

Net foreign currency adjustments

 

(5,141)

 

(1,386)

Changes in operating assets and liabilities:

 

 

Accounts receivable, net

 

(2,648)

 

(23,109)

Inventories

 

(2,351)

 

9,258

Prepaid expenses and other assets

 

(406,813)

 

145,768

Accounts payable

 

6,626

 

258,215

Accrued expenses and other liabilities

 

35,341

 

(123,552)

Advance ticket sales

 

75,634

 

(288,544)

Net cash used in operating activities

 

(852,011)

 

(52,701)

Cash flows from investing activities

 

  

 

  

Additions to property and equipment, net

 

(136,350)

 

(610,155)

Cash paid on settlement of derivatives

(4,642)

(28,606)

Other

2,726

868

Net cash used in investing activities

 

(138,266)

 

(637,893)

Cash flows from financing activities

 

  

 

  

Repayments of long-term debt

 

(870,396)

 

(181,530)

Proceeds from long-term debt

 

1,161,672

 

2,007,870

Common share issuance proceeds, net

1,558,412

Proceeds from employee related plans

 

1,089

 

4,100

Net share settlement of restricted share units

 

(16,043)

 

(14,975)

Early redemption premium

 

(611,164)

 

Deferred financing fees

 

(25,742)

 

(12,993)

Net cash provided by financing activities

 

1,197,828

 

1,802,472

Effect of exchange rates on cash and cash equivalents

(4,493)

Net increase in cash and cash equivalents

 

207,551

 

1,107,385

Cash and cash equivalents at beginning of period

 

3,300,482

 

252,876

Cash and cash equivalents at end of period

$

3,508,033

$

1,360,261

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 March 31, 2021

Accumulated 

Additional

Other

Retained

Total

Ordinary 

Paid-in 

Comprehensive

Earnings

Treasury

Shareholders’

    

Shares

    

Capital

    

Income (Loss)

    

(Deficit)

    

Shares

    

Equity

Balance, December 31, 2020

 

$

316

$

4,889,355

$

(240,117)

$

(295,449)

$

 

$

4,354,105

Share-based compensation

 

 

26,601

 

 

 

 

26,601

Issuance of shares under employee related plans

 

 

1,089

 

 

 

 

1,089

Common share issuance proceeds, net

54

1,558,358

1,558,412

Net share settlement of restricted share units

 

 

(16,043)

 

 

 

 

(16,043)

Cumulative change in accounting policy

(131,240)

5,630

(125,610)

Other comprehensive loss, net

 

 

 

(51,101)

 

 

 

(51,101)

Net loss

 

 

 

 

(1,370,192)

 

 

(1,370,192)

Balance, March 31, 2021

$

370

$

6,328,120

$

(291,218)

$

(1,660,011)

$

$

4,377,261

Three Months Ended March 31, 2020

    

Accumulated 

    

    

    

Additional

Other

Retained

Total

Ordinary 

Paid-in 

Comprehensive

Earnings

Treasury

Shareholders’

    

Shares

    

Capital

    

Income (Loss)

    

(Deficit)

    

Shares

Equity

Balance, December 31, 2019

 

$

237

 

$

4,235,690

 

$

(295,490)

 

$

3,829,068

 

$

(1,253,926)

 

$

6,515,579

Share-based compensation

 

32,758

 

32,758

Issuance of shares under employee related plans

 

2

4,098

 

4,100

Net share settlement of restricted share units

 

(14,975)

 

(14,975)

Cumulative change in accounting policy

1,923

1,923

Other comprehensive loss, net

(283,759)

(283,759)

Net loss

 

(1,880,972)

 

(1,880,972)

Balance, March 31, 2020

$

239

$

4,257,571

$

(579,249)

$

1,950,019

$

(1,253,926)

$

4,374,654

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 March 31, 2021, we had 28 ships with approximately 59,150 Berths and had orders for nine additional ships to be delivered through 2027. Due to the novel coronavirus (“COVID-19”), we have temporarily suspended all global cruise voyages through June 2021 and announced a limited resumption of cruises beginning in July 2021. 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 83,000, which includes additional Berths we plan to add to our Project Leonardo ships, subject to certain conditions. 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, ongoing 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. As of the date of this filing and through June 2021, we have temporarily suspended all global cruise voyages and announced a limited resumption of cruises beginning in July 2021. Significant events affecting travel, including COVID-19, typically have an impact on demand for cruise vacations, with the full extent of the impact generally determined by the length of time the event influences travel decisions. We believe the ongoing effects of COVID-19 on our operations and global bookings have had, and will continue to have, a significant impact on our financial results and liquidity, and such negative impact may continue well beyond the containment of the pandemic.

In January 2021, we amended our Senior Secured Credit Facility to further defer certain amortization payments due prior to June 30, 2022 and to waive certain financial and other covenants through December 31, 2022. In February 2021, we amended certain of our export-credit backed facilities to further defer amortization payments through March 31, 2022, and we amended all of our export-credit backed facilities to suspend certain financial covenants through December 31, 2022. In connection with such amendments of our Senior Secured Credit Facility and our export-credit backed facilities,

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our minimum liquidity requirement was increased to $200 million and such requirement applies through December 31, 2022. In March 2021, the Company received additional financing through various debt financings and an equity offering, collectively totaling approximately $2.7 billion in gross proceeds. From the proceeds, approximately $1.5 billion was used to extinguish debt. Refer to Note 6 – “Long-Term Debt” for further details of the above transactions.

In April 2021, we announced a limited relaunch of certain cruise voyages embarking outside of the U.S. beginning in July 2021 with our ships initially operating at reduced occupancy levels. The timing for bringing our ships back to service and the percentage of our fleet in service will depend on a number of factors including, but not limited to, the duration and extent of the COVID-19 pandemic, further resurgences and new variants of COVID-19, the availability, distribution, rate of public acceptance and efficacy of vaccines and therapeutics for COVID-19, our ability to comply with governmental regulations, port availability, travel restrictions, bans and advisories, and our ability to re-staff our ships and implement new health and safety protocols.

The estimation of our future cash flow projections includes numerous assumptions that are subject to various risks and uncertainties. Upon the relaunch of cruise voyages, our principal assumptions for future cash flow projections include:

Expected gradual phased relaunch at reduced occupancy levels;
Forecasted cash collections primarily upon completion of future voyages and the payment of cash refunds for any further cancellations, in accordance with the terms of our credit card processing agreements (see Note 9 - “Commitments and Contingencies”); and
Expected incremental expenses for resumption of cruise voyages, including the maintenance of and compliance with additional health and safety protocols.

Due to the unknown duration and extent of the COVID-19 pandemic, travel restrictions, bans and advisories, uncertainties around our ability to comply with governmental regulations, the potential unavailability of ports and/or destinations, voyage cancellations and timing of redeployments, and a general impact on consumer sentiment regarding cruise travel, we cannot predict when our full fleet will be back in service at historical occupancy levels. Until our phased relaunch begins, our projected liquidity requirements reflect our principal assumptions surrounding the costs of the announced limited relaunch of certain cruise voyages, ongoing operating costs during the suspension of cruise voyages, as well as liquidity requirements for financing costs and necessary capital expenditures, and our ability to continue to implement cash conservation strategies, including, but not limited to:

Moving our ships that are not in service to minimum manning levels, which we expect would result in further reductions in crew payroll costs, fuel consumption, and maintenance costs;
Further reductions in general operating expenses; and
Further reductions in discretionary capital expenditures including cancellation or reduction in scope of certain Dry-docks.

We cannot make assurances that our assumptions used to estimate our liquidity requirements will not change due to the unique and unpredictable nature of the pandemic. Accordingly, the full effect of our suspension of cruise voyages on our financial performance and financial condition cannot be quantified at this time. We have made reasonable estimates and judgments of the impact of COVID-19 within our financial statements and there may be material changes to those estimates in future periods. We will report a net loss for the three months ending June 30, 2021 and expect to report a net loss until we are able to resume regular voyages, including for the year ending December 31, 2021.

Based on these actions and assumptions regarding the impact of COVID-19, and considering our available liquidity including cash and cash equivalents of $3.5 billion at March 31, 2021, we have concluded that after implementing the above cash conservation strategies, we have sufficient liquidity to satisfy our obligations for at least the next twelve months even in the event we do not resume cruise voyages during that period.

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Subsequent to the liquidity assessment period (twelve months from the issuance of these financial statements), the Company may require additional liquidity to meet ongoing obligations, including debt amortization payments and ship milestone payments net of export-credit financing, of approximately $670 million that are due in July 2022 and its minimum liquidity covenant requirements. The Company plans to take additional steps following the issuance of these financial statements to increase its liquidity, which may include additional debt and/or equity financing and potential further renegotiations of its debt amortization payments, newbuild payments and covenants. The extent of these actions to increase the Company’s liquidity will be dependent in part on the timing of the resumption of cruise voyages, which despite the Company’s expectations for a limited relaunch beginning July 2021, is uncertain. There can be no assurances that the Company will be successful in generating the additional liquidity necessary to meet its obligations beyond twelve months from the issuance of these financial statements on terms acceptable to the Company or at all. If the Company is unable to satisfy or renegotiate its minimum liquidity covenant requirements, it could have a significant adverse effect on the Company’s business, financial condition and operating results.

Basis of Presentation

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

Our operations are seasonal and results for interim periods are not necessarily indicative of the results for the entire fiscal year. Historically, demand for cruises has been strongest during the Northern Hemisphere’s summer months; however, our cruise voyages have been completely suspended since March 2020 due to 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, 2020, which are included in our most recent Annual Report on Form 10-K filed with the SEC on February 26, 2021.

Reclassifications

 

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

Loss Per Share

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

Three Months Ended

March 31, 

    

2021

    

2020

Net loss

$

(1,370,192)

$

(1,880,972)

Basic weighted-average shares outstanding

 

329,377,207

 

213,630,798

Dilutive effect of share awards

 

 

Diluted weighted-average shares outstanding

 

329,377,207

 

213,630,798

Basic loss per share

$

(4.16)

$

(8.80)

Diluted loss per share

$

(4.16)

$

(8.80)

For the three months ended March 31, 2021 and 2020, a total of 120.8 million and 7.0 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 (expense), net. We recognized gains of $4.8 million and $19.9 million for the three months ended March 31, 2021 and 2020, respectively, related to transactions denominated in other currencies.

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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 Accounting Standards Update (“ASU”) No. 2020-04, Reference Rate Reform (Topic 848): Facilitation of the Effects of Reference Rate Reform on Financial Reporting (“ASU 2020-04”), which provided guidance to alleviate the burden in accounting for reference rate reform by allowing certain expedients and exceptions in applying GAAP to contracts, hedging relationships and other transactions impacted by reference rate reform. The provisions apply only to those transactions that reference LIBOR or another reference rate expected to be discontinued due to reference rate reform. Adoption of the provisions of ASU 2020-04 are optional and are effective from March 12, 2020 through December 31, 2022. As of March 31, 2021, we have not adopted any expedients and exceptions under ASU 2020-04. We will continue to evaluate the impact of ASU 2020-04 on our consolidated financial statements.

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

March 31, 

    

2020

North America

$

951,056

Europe

 

13,335

Asia-Pacific

 

150,921

South America

76,306

Other

 

55,264

Total revenue

$

1,246,882

Amounts for the three months ended March 31, 2021 were excluded as the information was not meaningful. 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 75-85%. No other individual country’s revenues exceed 10% in any given period.

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Contract Balances

Receivables from customers are included within accounts receivable, net. As of March 31, 2021 and December 31, 2020, our receivables from customers were $1.1 million and $1.0 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 15 days prior to departure. 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. Future cruise credits that have been issued are 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 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 March 31, 2021 and December 31, 2020, our contract liabilities were $29.3 million and $23.1 million, respectively. Of the amounts included within advance ticket sales, the vast majority of deposits held were refundable in accordance with our cancellation policies and it is uncertain to what extent guests may request refunds. Refunds payable to guests are included in accounts payable. For the three months ended March 31, 2021, no revenue recognized was included in the contract liability balance at the beginning of the period. The revenue recognized in the three months ended March 31, 2020 that was included in contract liabilities as of the beginning of the period was $0.9 billion.

For cruise vacations that had been cancelled by us due to COVID-19, approximately $14.8 million and $92.0 million in costs to obtain these contracts, consisting of protected commissions, including those paid to employees, and credit card fees, were recognized in earnings during the three months ended March 31, 2021 and 2020, respectively.

4.   Leases

In April 2020, the FASB issued interpretive guidance relating to the accounting for lease concessions provided as a result of COVID-19. In this guidance, entities can elect not to apply lease modification accounting with respect to such lease concessions and instead, treat the concession as if it was a part of the existing contract. The Company has elected to not evaluate leases under the lease modification accounting framework for concessions that result from effects of the COVID-19 pandemic. In relation to our rights to use port facilities, we have elected the approach consistent with resolving a contingency, which allows us to remeasure the lease liability and recognize the amount of change in the lease liability as an adjustment to the carrying amount of the associated right-of-use asset. During the three months ended March 31, 2021, our port facilities were remeasured with a downward adjustment of $5.2 million to both other long-term assets and accrued expenses and other liabilities. Another $1.9 million was reclassified from accrued expenses and other liabilities to other long-term assets as a result of contractual extensions. As the full amount of the concession will not be determinable until the force majeure period under the related arrangements have ended, further remeasurements will be required. During the contingency period, we are recognizing lease expense for these port facilities as incurred.

Lease balances were as follows (in thousands):

    

Balance Sheet location

    

March 31, 2021

 

December 31, 2020

Operating leases

 

  

 

  

  

Right-of-use assets

 

Other long-term assets

$

203,076

$

209,037

Current operating lease liabilities

 

Accrued expenses and other liabilities

16,290

17,700

Non-current operating lease liabilities

 

Other long-term liabilities

180,712

185,414

Finance leases

 

  

  

Right-of-use assets

 

Property and equipment, net

11,095

11,948

Current finance lease liabilities

 

Current portion of long-term debt

5,089

5,143

Non-current finance lease liabilities

 

Long-term debt

3,651

4,648

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5.   Accumulated Other Comprehensive Income (Loss)

Accumulated other comprehensive income (loss) for the three months ended March 31, 2021 was as follows (in thousands):

Three Months Ended March 31, 2021

    

    

Change

Accumulated

Change

Related to

Other

Related to

Shipboard

Comprehensive

Cash Flow

Retirement

    

Income (Loss)

    

Hedges

 Plan

Accumulated other comprehensive income (loss) at beginning of period

$

(240,117)

$

(234,334)

$

(5,783)

  

Current period other comprehensive loss before reclassifications

 

(73,037)

 

(73,037)

  

 

  

Amounts reclassified into earnings

 

21,936

 

21,838

(1)

 

98

(2)

Accumulated other comprehensive income (loss) at end of period

$

(291,218)

$

(285,533)

(3)

$

(5,685)

  

Accumulated other comprehensive income (loss) for the three months ended March 31, 2020 was as follows (in thousands):

Three Months Ended March 31, 2020

    

    

Change

 

Accumulated

Change

Related to

Other

Related to

Shipboard

Comprehensive

Cash Flow

Retirement

    

Income (Loss)

    

Hedges

 Plan

Accumulated other comprehensive income (loss) at beginning of period

 

$

(295,490)

$

(289,362)

$

(6,128)

 

Current period other comprehensive loss before reclassifications

 

 

(305,860)

 

 

(305,860)

  

 

 

Amounts reclassified into earnings

 

 

22,101

 

 

21,999

(1)

 

102

(2)

Accumulated other comprehensive income (loss) at end of period

 

$

(579,249)

 

$

(573,223)

$

(6,026)

 

(1)We refer you to Note 7 “Fair Value Measurements and Derivatives” for the affected line items in the consolidated statements of operations.
(2)Amortization of prior-service cost and actuarial loss reclassified to other income (expense), net.
(3)Includes $44.4 million of loss expected to be reclassified into earnings in the next 12 months.

6.   Long-Term Debt

Modifications

In January 2021, NCLC entered into an amendment agreement (the “First Amendment”), which amends the Amended and Restated Credit Agreement, dated as of May 8, 2020 (the “Fifth ARCA” and, as amended by the First Amendment, the “Senior Secured Credit Facility”). The First Amendment provides that, among other things, (a) amortization payments due between the First Amendment effective date and prior to June 30, 2022 (the “First Amendment Deferral Period”) on the Legacy Term Loan A and Term Loan A-1 held by lenders that have consented to such deferral (the “First Amendment Deferring Lenders”) are deferred and such deferred principal amount constitutes a separate tranche of loans (the “Deferred Term Loan A-1”) and (b) the tranche of loans held by certain lenders (the “Fifth ARCA Deferring Lenders”) on which amortization payments due within the first year after effectiveness of the Fifth ARCA were deferred (the “Deferred Term Loan A”) of First Amendment Deferring Lenders were converted into Deferred Term Loan A-1 loans. The class of loans constituting the Term Loan A Facility (other than the Deferred Term Loan A) held by the Fifth ARCA Deferring Lenders (the “Term Loan A-1”) and the class of loans constituting the portion of the Term Loan A

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Facility that is held by lenders other than the Fifth ARCA Deferring Lenders (the “Legacy Term Loan A”) that were held by the First Amendment Deferring Lenders (other than amounts converted into the Deferred Term Loan A-1) constitute a separate tranche of loans (the “Term Loan A-2”), with the same terms as the Legacy Term Loan A and Term Loan A-1 under the Fifth ARCA, except that amortization payments on the Term Loan A-2 shall be deferred during the First Amendment Deferral Period and thereafter such Term Loan A-2 will amortize in an aggregate principal amount equal to approximately 5.88% per annum and the interest rate for Term Loan A-2 shall be modified as described below. The Deferred Term Loan A-1 will accrue interest (x) in the case of Eurocurrency loans, at a per annum rate based on LIBOR plus a margin of 2.50% or (y) in the case of base rate loans, at a per annum rate based on the base rate plus a margin of 1.50%. After the end of the First Amendment Deferral Period, the Deferred Term Loan A-1 will amortize in an aggregate principal amount equal to 25% per annum of the Deferred Term Loan A-1 outstanding immediately after the consummation of the First Amendment, in quarterly installments, and in the case of such payment due on the maturity date, an amount equal to the then unpaid principal amount of the Deferred Term Loan A-1 outstanding. The Legacy Term Loan A, Term Loan A-1 and Deferred Term Loan A that were held by lenders other than the First Amendment Deferring Lenders constitute separate classes of loans and were unchanged. The First Amendment resulted in deferred amortization payments aggregating approximately $70 million prior to June 30, 2022.

The First Amendment provides that, (a) from the First Amendment effective date to and including December 31, 2022 (the “Covenant Relief Period”) the testing of the loan to value, debt to capitalization and EBITDA to debt service covenants under the Senior Secured Credit Facility will be suspended and the free liquidity test will be replaced by a covenant to maintain at least $200 million in free liquidity, certified on a monthly basis. During the Covenant Relief Period the interest rate for Term Loan A-2 and revolving loans held by Lenders that consented to the First Amendment will be LIBOR plus 2.00% (or base rate plus 1.00%) with decreases subject to a leverage-based pricing grid. The First Amendment also makes certain other changes to the Senior Secured Credit Facility, including tightening certain of the baskets applicable to our ability to make certain asset dispositions, investments and restricted payments.

Additionally, in February 2021, NCLC amended all of its export-credit backed facilities to defer amortization payments aggregating approximately $680 million through March 31, 2022 and/or make certain changes in respect of covenants and undertakings contained therein.

The facilities that finance Norwegian Breakaway, Norwegian Getaway, Norwegian Escape, Norwegian Joy, Norwegian Bliss, Norwegian Encore, Seven Seas Explorer, Seven Seas Splendor, Riviera and Marina were amended to provide that, among other things, (a) amortization payments due from April 1, 2021 to March 31, 2022 (the “Second Deferral Period”) on the loans will be deferred and (b) the principal amounts so deferred will constitute separate tranches of loans under the facilities. The separate tranches of loans will accrue interest at a floating rate per annum based on six-month LIBOR plus a margin as follows:

Margin

529.8 million Breakaway one loan (Norwegian Breakaway)

1.10

%  

529.8 million Breakaway two loan (Norwegian Getaway)

1.40

%  

590.5 million Breakaway three loan (Norwegian Escape)

1.50

%  

729.9 million Breakaway four loan (Norwegian Joy)

1.50

%  

710.8 million Seahawk 1 term loan (Norwegian Bliss)

1.20

%  

748.7 million Seahawk 2 term loan (Norwegian Encore)

1.20

%  

Explorer newbuild loan

3.00

%  

Splendor newbuild loan

1.95

%  

Marina newbuild loan

0.75

%  

Riviera newbuild loan

0.75

%  

After the end of the Second Deferral Period, the deferred loans will amortize in an aggregate principal amount equal to 20% per annum of the deferred loans, in semiannual installments.

In addition, all of NCLC’s export-credit backed facilities were amended to provide that, from the effective date of the amendments to and including December 31, 2022, certain of the financial covenants under such facilities will be suspended and the free liquidity test will be replaced by a covenant to maintain at least $200 million in free liquidity.

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The amendments also made certain other changes to the facilities, including imposing further restrictions on NCLC’s ability to incur debt, create security, issue equity and make dividends and other distributions.

The amendments of the agreements described above resulted in aggregate modification expenses of $52.1 million, which is recognized in interest expense, net.

Unsecured Notes

In December 2020, NCLC conducted a private offering of $850.0 million aggregate principal amount of 5.875% senior unsecured notes due March 15, 2026 (the “2026 Senior Unsecured Notes”). In March 2021, NCLC completed an add-on offering of $575.0 million aggregate principal amount of additional 2026 Senior Unsecured Notes. The 2026 Senior Unsecured Notes pay interest at 5.875% per annum, semiannually on March 15 and September 15 of each year, to holders of record at the close of business on the immediately preceding March 1 and September 1, respectively. NCLC may redeem the 2026 Senior Unsecured Notes, in whole or part, at any time prior to December 15, 2025, at a price equal to 100% of the principal amount of the notes redeemed plus accrued and unpaid interest to, but excluding, the redemption date and a “make-whole premium.” NCLC may redeem the 2026 Senior Unsecured Notes, in whole or in part, on or after December 15, 2025, at a price equal to 100% of the principal amount of the notes plus accrued and unpaid interest to, but excluding, the redemption date. At any time and from time to time prior to December 15, 2022, NCLC may choose to redeem up to 40% of the aggregate principal amount of the 2026 Senior Unsecured Notes with the net proceeds of certain equity offerings, subject to certain restrictions, at a redemption price equal to 105.875% of the principal amount of the 2026 Senior Unsecured Notes redeemed plus accrued and unpaid interest to, but excluding, the redemption date, so long as at least 60% of the aggregate principal amount of the 2026 Senior Unsecured Notes issued remains outstanding following such redemption. The proceeds from the March 2021 issuance were used to repay the $230.0 million Pride of America Credit Facility and the remaining $222.6 million of the Jewel Credit Facility. The repayment of these debt agreements resulted in losses on extinguishment of debt of $1.1 million, which is recognized in interest expense, net.

In March 2021, NCL Finance, Ltd., an indirect, wholly-owned subsidiary of NCLH and NCLC, additionally conducted a private offering of $525.0 million aggregate principal amount of 6.125% senior unsecured notes due March 15, 2028 (the “2028 Senior Unsecured Notes”). The 2028 Senior Unsecured Notes pay interest at 6.125% per annum, semiannually on March 15 and September 15 of each year, commencing on September 15, 2021, to holders of record at the close of business on the immediately preceding March 1 and September 1, respectively. NCL Finance may redeem the 2028 Senior Unsecured Notes, in whole or part, at any time prior to December 15, 2027, at a price equal to 100% of the principal amount of the notes redeemed plus accrued and unpaid interest to, but excluding, the redemption date and a “make-whole premium.” NCL Finance may redeem the 2028 Senior Unsecured Notes, in whole or in part, on or after December 15, 2027, at a price equal to 100% of the principal amount of the notes plus accrued and unpaid interest to, but excluding, the redemption date. At any time and from time to time prior to March 15, 2024, NCL Finance may choose to redeem up to 40% of the aggregate principal amount of the 2028 Senior Unsecured Notes with the net proceeds of certain equity offerings, subject to certain restrictions, at a redemption price equal to 106.125% of the principal amount of the 2028 Senior Unsecured Notes redeemed plus accrued and unpaid interest to, but excluding, the redemption date, so long as at least 60% of the aggregate principal amount of the 2028 Senior Unsecured Notes issued remains outstanding following such redemption.

The indentures governing the 2026 Senior Unsecured Notes and 2028 Senior Unsecured Notes include requirements that, among other things and subject to a number of qualifications and exceptions, restrict the ability of NCLC and its restricted subsidiaries, as applicable, to (i) incur or guarantee additional indebtedness; (ii) pay dividends or distributions on, or redeem or repurchase, equity interests and make other restricted payments; (iii) make investments; (iv) consummate certain asset sales; (v) engage in certain transactions with affiliates; (vi) grant or assume certain liens; and (vii) consolidate, merge or transfer all or substantially all of their assets.

Exchangeable Notes

In August 2020, the FASB issued ASU No. 2020-06, Debt—Debt with Conversion and Other Options (Subtopic 470-20) and Derivatives and Hedging—Contracts in Entity’s Own Equity (Subtopic 815-40) Accounting for Convertible Instruments and Contracts in an Entity’s Own Equity (“ASU 2020-06”), which reduces the number of accounting

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models for convertible debt instruments and enhances transparency in disclosures. One model which is being eliminated is the bifurcation of embedded conversion features that are not accounted for separately as derivatives. Each of the 2024 Exchangeable Notes, 2025 Exchangeable Notes, and Private Exchangeable Notes (as defined below) contain conversion options that may be settled with NCLH’s ordinary shares. As the options will be both indexed to and settled in our ordinary shares, they are not accounted for separately as derivatives. The Private Exchangeable Notes contained a beneficial conversion feature, which was recognized within additional paid-in capital with an offsetting discount to the carrying amount of the debt. The discount was amortized to interest expense through December 31, 2020. On January 1, 2021, we early adopted ASU 2020-06 using a modified retrospective approach. As a result, the $131.2 million beneficial conversion feature previously recognized was reclassified from additional paid-in capital to long-term debt, and the discount amortization of $5.6 million was adjusted through retained earnings (deficit).

As of March 31, 2021, NCLC has outstanding $862.5 million aggregate principal amount of 6.00% exchangeable senior notes due May 15, 2024 (the “2024 Exchangeable Notes”). The 2024 Exchangeable Notes are guaranteed by NCLH on a senior basis. Holders may exchange their 2024 Exchangeable Notes at their option into redeemable preference shares of NCLC. Upon exchange, the preference shares will be immediately and automatically exchanged, for each $1,000 principal amount of exchanged 2024 Exchangeable Notes, into a number of NCLH’s ordinary shares based on the exchange rate. The exchange rate will initially be 72.7273 ordinary shares per $1,000 principal amount of 2024 Exchangeable Notes (equivalent to an initial exchange price of approximately $13.75 per ordinary share). The maximum exchange rate is 89.4454 and reflects potential adjustments to the initial exchange rate, which would only be made in the event of certain make-whole fundamental changes or tax redemption events. The exchange rate referred to above is also subject to adjustment for any stock split, stock dividend or similar transaction. The 2024 Exchangeable Notes pay interest at 6.00% per annum, semiannually on May 15 and November 15 of each year, to holders of record at the close of business on the immediately preceding May 1 and November 1, respectively.

As of March 31, 2021, NCLC also has outstanding $450.0 million aggregate principal amount of 5.375% exchangeable senior notes due August 1, 2025 (the “2025 Exchangeable Notes”). The 2025 Exchangeable Notes are guaranteed by NCLH on a senior basis. Holders may exchange their 2025 Exchangeable Notes at their option into redeemable preference shares of NCLC. Upon exchange, the preference shares will be immediately and automatically exchanged, for each $1,000 principal amount of exchanged 2025 Exchangeable Notes, into a number of NCLH’s ordinary shares based on the exchange rate. The exchange rate will initially be 53.3333 ordinary shares per $1,000 principal amount of 2025 Exchangeable Notes (equivalent to an initial exchange price of approximately $18.75 per ordinary share). The maximum exchange rate is 66.6666 and reflects potential adjustments to the initial exchange rate, which would only be made in the event of certain make-whole fundamental changes or tax redemption events. The exchange rate referred to above is also subject to adjustment for any stock split, stock dividend or similar transaction. The 2025 Exchangeable Notes pay interest at 5.375% per annum, semiannually on February 1 and August 1 of each year, to holders of record at the close of business on the immediately preceding January 15 and July 15, respectively.

As of December 31, 2020, NCLC also had outstanding $414.3 million aggregate principal amount of exchangeable senior notes due June 1, 2026 (the “Private Exchangeable Notes”), which amount included interest that had accreted to the principal amount, which were held by an affiliate of L Catterton (the “Private Investor”). The Private Exchangeable Notes accrued interest at a rate of 7.0% per annum for the first year post-issuance (which accreted to the principal amount). Holders were able to exchange their Private Exchangeable Notes at their option into redeemable preference shares of NCLC. Upon exchange, the preference shares would be immediately and automatically exchanged, for each $1,000 principal amount of exchanged Private Exchangeable Notes, into a number of NCLH’s ordinary shares based on the exchange rate. The exchange rate was initially approximately 82.6446 ordinary shares per $1,000 principal amount of Private Exchangeable Notes (equivalent to an initial exchange price of $12.10 per ordinary share). The maximum exchange rate was 90.9090 and reflected potential adjustments to the initial exchange rate, which would only be made in the event of certain make-whole fundamental changes or tax redemption events.

In March 2021, NCLH completed an equity offering that resulted in 52,577,947 ordinary shares being issued for gross proceeds of $1.6 billion. Approximately $1.0 billion of the cash proceeds from the offering were used to repurchase the Private Exchangeable Notes and extinguish the debt. The resulting loss on extinguishment was $620.8 million, which is recognized in interest expense, net.

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The following is a summary of NCLC’s convertible debt instruments as of March 31, 2021 (in thousands):

Unamortized

Principal

Deferred

Net Carrying

Fair Value

    

Amount

    

Financing Fees

    

Amount

    

Amount

    

Leveling

2024 Exchangeable Notes

$

862,500

$

(25,934)

$

836,566

$

1,920,029

Level 2

2025 Exchangeable Notes

450,000

(10,189)

439,811

804,002

Level 2

The remaining period over which the unamortized deferred financing fees will be recognized as non-cash interest expense is 3.1 years and 4.3 years for the 2024 Exchangeable Notes and 2025 Exchangeable Notes, respectively.

The following is a summary of NCLC’s convertible debt instruments as of December 31, 2020 (in thousands):

Unamortized Debt

Discount,

Principal

including Deferred

Net Carrying

Fair Value

    

Amount

    

Financing Fees

    

Amount

    

Amount

    

Leveling

2024 Exchangeable Notes

$

862,500

$

(27,559)

$

834,941

$

1,812,975

Level 2

2025 Exchangeable Notes

450,000

(10,609)

439,391

772,412

Level 2

Private Exchangeable Notes

414,311

(136,163)

278,148

1,098,082

Level 2

In addition, as of December 31, 2020, we had recognized a $19.3 million premium for payment-in-kind interest as additional paid-in capital for the Private Exchangeable Notes.

The following provides a summary of the interest expense of NCLC’s convertible debt instruments (in thousands):

Three Months

Ended March 31, 2021

Coupon interest

24,140

Amortization of deferred financing fees

2,893

Total

$

27,033

The effective interest rate is 7.07% and 5.97% for the 2024 Exchangeable Notes and 2025 Exchangeable Notes, respectively.

As of March 31, 2021, the if-converted value above par was $868.1 million on available shares of 62.7 million and $212.2 million on available shares of 24.0 million for the 2024 Exchangeable Notes and the 2025 Exchangeable Notes, respectively.

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Debt Repayments

The following are scheduled principal repayments on our long-term debt including finance lease obligations as of March 31, 2021 for each of the following periods (in thousands):

Year

    

Amount

Remainder of 2021

$

27,135

2022

 

844,803

2023

 

922,061

2024

 

5,056,035

2025

 

1,049,797

Thereafter

 

4,538,722

Total

$

12,438,553

Debt Covenants

We have received certain financial and other debt covenant waivers through December 31, 2022 and added new free liquidity requirements. At March 31, 2021, taking into account such waivers, we were in compliance with all of our debt covenants. If we do not continue to remain in compliance with our covenants, including following the expiration of any current waivers, we would have to seek additional amendments to our covenants. However, no assurances can be made that such amendments would be approved by our lenders. Generally, if an event of default under any debt agreement occurs, then pursuant to cross default and/or cross acceleration clauses, substantially all of our outstanding debt and derivative contract payables could become due, and all debt and derivative contracts could be terminated, which would have a material adverse impact on our operations and liquidity.

7.   Fair Value Measurements and Derivatives

Fair value is defined as the price at which an orderly transaction to sell an asset or to transfer a liability would take place between market participants at the measurement date under current market conditions (that is, an exit price at the measurement date from the perspective of a market participant that holds the asset or owes the liability).

Fair Value Hierarchy

The following hierarchy for inputs used in measuring fair value should maximize the use of observable inputs and minimize the use of unobservable inputs by requiring that the most observable inputs be used when available:

Level 1      Quoted prices in active markets for identical assets or liabilities that are accessible at the measurement dates.

Level 2      Significant other observable inputs that are used by market participants in pricing the asset or liability based on market data obtained from independent sources.

Level 3      Significant unobservable inputs we believe market participants would use in pricing the asset or liability based on the best information available.

Derivatives

We are exposed to market risk attributable to changes in interest rates, foreign currency exchange rates and fuel prices. We attempt to minimize these risks through a combination of our normal operating and financing activities and through the use of derivatives. We assess whether derivatives used in hedging transactions are “highly effective” in offsetting changes in the cash flow of our hedged forecasted transactions. We use regression analysis for this hedge relationship and high effectiveness is achieved when a statistically valid relationship reflects a high degree of offset and correlation between the fair values of the derivative and the hedged forecasted transaction. Cash flows from the derivatives are classified in the same category as the cash flows from the underlying hedged transaction. If it is determined that the hedged forecasted transaction is no longer probable of occurring, then the amount recognized in accumulated other

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comprehensive income (loss) is released to earnings. There are no amounts excluded from the assessment of hedge effectiveness and there are no credit-risk-related contingent features in our derivative agreements. We monitor concentrations of credit risk associated with financial and other institutions with which we conduct significant business. Credit risk, including but not limited to counterparty non-performance under derivatives, is not considered significant, as we primarily conduct business with large, well-established financial institutions with which we have established relationships, and which have credit risks acceptable to us, or the credit risk is spread out among many creditors. We do not anticipate non-performance by any of our significant counterparties.

As of March 31, 2021, we had fuel swaps which are used to mitigate the financial impact of volatility of fuel prices pertaining to approximately 366 thousand metric tons of our projected fuel purchases, maturing through December 31, 2023.

On January 1, 2021, our fuel swaps designated as hedges for marine gas oil maturing through December 31, 2021 were dedesignated as cash flow hedges. As of March 31, 2021, we had, in aggregate with previously dedesignated fuel swaps, approximately 405 thousand metric tons which were not designated as cash flow hedges maturing through December 31, 2022.

As of March 31, 2021, we had foreign currency forward contracts, matured foreign currency options and matured foreign currency collars which are used to mitigate the financial impact of volatility in foreign currency exchange rates related to our ship construction contracts denominated in euros. The notional amount of our foreign currency forward contracts was €1.9 billion, or $2.2 billion based on the euro/U.S. dollar exchange rate as of March 31, 2021.

As of March 31, 2021, we had interest rate swaps and collars, which are used to hedge our exposure to interest rate movements and manage our interest expense. The notional amount of our outstanding debt associated with the interest rate swaps and collars was $0.6 billion as of March 31, 2021.

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

Assets

Liabilities

March 31, 

December 31, 

March 31, 

December 31, 

    

Balance Sheet Location

    

2021

    

2020

    

2021

    

2020

Derivative Contracts Designated as Hedging Instruments

Fuel contracts

Prepaid expenses and other assets

$

165

$

$

242

$

Other long-term assets

1,286

463

Accrued expenses and other liabilities

 

192

 

 

528

 

35,973

Other long-term liabilities

 

1,976

 

 

3,867

 

28,947

Foreign currency contracts

Prepaid expenses and other assets

 

1,394

 

5,779

 

 

Other long-term assets

 

21,331

 

43,250

 

 

Accrued expenses and other liabilities

 

 

 

18,431

 

14,778

Other long-term liabilities

 

1,808

 

6,821

 

104,333

 

44,938

Interest rate contracts

Accrued expenses and other liabilities