NCL Corporation Ltd.

Consolidated Statements of Comprehensive Income

(Unaudited)

(in thousands)

Three Months Ended
September 30, Nine Months Ended
September 30,
2018 2017 2018 2017
Net income $ 475,412 $ 396,227 $ 810,335 $ 660,806
Other comprehensive income:
Shipboard Retirement Plan 107 104 319 313
Cash flow hedges:
Net unrealized gain 15,365 97,276 48,047 221,512
Amount realized and reclassified into earnings (10,706 ) 11,644 (19,214 ) 31,593
Total other comprehensive income 4,766 109,024 29,152 253,418
Total comprehensive income $ 480,178 $ 505,251 $ 839,487 $ 914,224


	Three Months Ended				Nine Months Ended
	September 30,				September 30,
	2019		2018		2019		2018
Net income	$	455,309	$	475,412	$	817,989	$	810,335
Other comprehensive income (loss):
Shipboard Retirement Plan		95		107		284		319
Cash flow hedges:
Net unrealized gain (loss)		(209,511)		15,365		(211,548)		48,047
Amount realized and reclassified into earnings		(448)		(10,706)		(16,722)		(19,214)
Total other comprehensive income (loss)		(209,864)		4,766		(227,986)		29,152
Total comprehensive income	$	245,445	$	480,178	$	590,003	$	839,487

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

~~NCL Corporation Ltd.~~

~~Consolidated Balance Sheets~~

~~(Unaudited)~~

~~(in thousands, except share data)~~

September 30,
2018 December 31,
2017
Assets
Current assets:
Cash and cash equivalents $ 278,546 $ 170,757
Accounts receivable, net 45,997 43,961
Inventories 95,950 82,121
Prepaid expenses and other assets 298,263 216,111
Total current assets 718,756 512,950
Property and equipment, net 12,029,140 11,040,488
Goodwill 1,388,931 1,388,931
Tradenames 817,525 817,525
Other long-term assets 353,119 310,445
Total assets $ 15,307,471 $ 14,070,339
Liabilities and shareholders’ equity
Current liabilities:
Current portion of long-term debt $ 679,908 $ 619,373
Accounts payable 59,423 53,317
Accrued expenses and other liabilities 659,837 512,504
Due to NCLH 53,042 61,732
Advance ticket sales 1,648,742 1,303,498
Total current liabilities 3,100,952 2,550,424
Long-term debt 5,875,252 5,688,392
Other long-term liabilities 186,707 162,919
Total liabilities 9,162,911 8,401,735
Commitments and contingencies (Note 10)
Shareholders’ equity:
Ordinary shares, $.0012 par value; 40,000,000 shares authorized; 31,164,004 shares issued and outstanding at September 30, 2018 and December 31, 2017 37 37
Additional paid-in capital 3,956,543 3,874,586
Accumulated other comprehensive income 54,405 25,253
Retained earnings 2,133,575 1,768,728
Total shareholders’ equity 6,144,560 5,668,604
Total liabilities and shareholders’ equity $ 15,307,471 $ 14,070,339

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

~~NCL Corporation Ltd.~~

~~Consolidated Statements of Cash Flows~~

~~(Unaudited)~~

~~(in thousands)~~

Nine Months Ended
September 30,
2018 2017
Cash flows from operating activities
Net income $ 810,335 $ 660,806
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization 420,154 385,957
Gain on derivatives — (71 )
Deferred income taxes, net 3,875 14,969
Loss on extinguishment of debt 6,346 —
Provision for bad debts and inventory 3,420 1,592
Share-based compensation expense 88,797 63,664
Net foreign currency adjustments (4,494 ) —
Changes in operating assets and liabilities:
Accounts receivable, net (5,084 ) 656
Inventories (14,237 ) (13,923 )
Prepaid expenses and other assets (34,451 ) (14,626 )
Accounts payable 3,119 3,909
Accrued expenses and other liabilities 133,898 76,571
Advance ticket sales 316,268 187,131
Net cash provided by operating activities 1,727,946 1,366,635
Cash flows from investing activities
Additions to property and equipment, net (1,361,678 ) (1,129,514 )
Promissory note receipts 755 —
Settlement of derivatives 64,796 (35,255 )
Net cash used in investing activities (1,296,127 ) (1,164,769 )
Cash flows from financing activities
Repayments of long-term debt (1,233,499 ) (1,006,620 )
Proceeds from long-term debt 1,491,352 1,217,060
Due to NCLH, net (8,690 ) 20,543
Dividends (445,500 ) —
Contribution from NCLH 7,000 —
Net share settlement of restricted share units (13,840 ) (6,342 )
Early redemption premium (5,154 ) —
Deferred financing fees (115,699 ) (32,473 )
Net cash (used in) provided by financing activities (324,030 ) 192,168
Net increase in cash and cash equivalents 107,789 394,034
Cash and cash equivalents at beginning of period 170,757 126,041
Cash and cash equivalents at end of period $ 278,546 $ 520,075

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

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NCL Corporation Ltd.

Consolidated ~~Statements of Changes in Shareholders’ Equity~~Balance Sheets

(Unaudited)

(in ~~thousands)~~thousands, except share data)

Ordinary
Shares Additional
Paid-in
Capital Accumulated
Other
Comprehensive
(Loss) Income Retained
Earnings Total
Shareholders’
Equity
Balance, December 31, 2016 $ 37 $ 3,796,042 $ (316,186 ) $ 1,007,780 $ 4,487,673
Share-based compensation — 63,664 — — 63,664
Net share settlement of restricted share units — (6,342 ) — — (6,342 )
Change in accounting policy (share-based forfeitures) — (2,153 ) — 2,153 —
Other comprehensive income, net — — 253,418 — 253,418
Net income — — — 660,806 660,806
Balance, September 30, 2017 $ 37 $ 3,851,211 $ (62,768 ) $ 1,670,739 $ 5,459,219

Balance, December 31, 2017 $ 37 $ 3,874,586 $ 25,253 $ 1,768,728 $ 5,668,604
Share-based compensation — 88,797 — — 88,797
Net share settlement of restricted share units — (13,840 ) — — (13,840 )
Contribution from NCLH — 7,000 — — 7,000
Cumulative change in accounting policy — — (12 ) 12 —
Other comprehensive income, net — — 29,164 — 29,164
Dividends — — — (445,500 ) (445,500 )
Net income — — — 810,335 810,335
Balance, September 30, 2018 $ 37 $ 3,956,543 $ 54,405 $ 2,133,575 $ 6,144,560


	September 30,		December 31,
	2019		2018
Assets
Current assets:
Cash and cash equivalents	$	400,502	$	162,419
Accounts receivable, net		67,698		55,249
Inventories		94,254		90,202
Prepaid expenses and other assets		273,149		241,088
Total current assets		835,603		548,958
Property and equipment, net		12,288,897		12,119,253
Goodwill		1,388,931		1,388,931
Tradenames		817,525		817,525
Other long-term assets		600,827		329,948
Total assets	$	15,931,783	$	15,204,615
Liabilities and shareholders’ equity
Current liabilities:
Current portion of long-term debt	$	605,106	$	681,218
Accounts payable		72,151		159,564
Accrued expenses and other liabilities		861,015		713,612
Due to NCLH		38,369		50,394
Advance ticket sales		1,861,636		1,593,219
Total current liabilities		3,438,277		3,198,007
Long-term debt		5,672,626		5,810,873
Other long-term liabilities		589,421		277,914
Total liabilities		9,700,324		9,286,794
Commitments and contingencies (Note 11)
Shareholders’ equity:
Ordinary shares, $.0012 par value; 40,000,000 shares authorized; 31,164,004 shares issued and outstanding at September 30, 2019 and December 31, 2018		37		37
Additional paid-in capital		4,048,349		3,983,714
Accumulated other comprehensive income (loss)		(391,346)		(163,360)
Retained earnings		2,574,419		2,097,430
Total shareholders’ equity		6,231,459		5,917,821
Total liabilities and shareholders’ equity	$	15,931,783	$	15,204,615

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

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NCL Corporation Ltd.

Consolidated Statements of Cash Flows

(Unaudited)

(in thousands)


	Nine Months Ended
	September 30,
	2019		2018
Cash flows from operating activities
Net income	$	817,989	$	810,335
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization expense		482,497		420,154
Deferred income taxes, net		(25,883)		3,875
Loss on extinguishment of debt		3,988		6,346
Provision for bad debts and inventory obsolescence		2,852		3,420
Gain on involuntary conversion of assets		(2,800)		—
Share-based compensation expense		82,070		88,797
Net foreign currency adjustments		(4,326)		(4,494)
Changes in operating assets and liabilities:
Accounts receivable, net		(12,741)		(5,084)
Inventories		(4,681)		(14,237)
Prepaid expenses and other assets		2,220		(34,451)
Accounts payable		(86,525)		3,119
Accrued expenses and other liabilities		(24,300)		133,898
Advance ticket sales		262,938		316,268
Net cash provided by operating activities		1,493,298		1,727,946
Cash flows from investing activities
Additions to property and equipment, net		(615,985)		(1,361,678)
Issuance of loans		(36,392)		—
Cash received on settlement of derivatives		289		64,796
Cash paid on settlement of derivatives		(556)		—
Other		7,719		755
Net cash used in investing activities		(644,925)		(1,296,127)
Cash flows from financing activities
Repayments of long-term debt		(2,882,354)		(1,233,499)
Proceeds from long-term debt		2,652,000		1,491,352
Dividends		(341,000)		(8,690)
Due to NCLH, net		(12,025)		(445,500)
Contribution from NCLH		3,500		7,000
Net share settlement of restricted share units		(20,935)		(13,840)
Early redemption premium		(117)		(5,154)
Deferred financing fees		(9,359)		(115,699)
Net cash used in financing activities		(610,290)		(324,030)
Net increase in cash and cash equivalents		238,083		107,789
Cash and cash equivalents at beginning of period		162,419		170,757
Cash and cash equivalents at end of period	$	400,502	$	278,546

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

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NCL Corporation Ltd.

Consolidated Statements of Changes in Shareholders’ Equity

(Unaudited)

(in thousands)


	Three Months Ended September 30, 2019
					Accumulated
			Additional		Other				Total
	Ordinary		Paid-in		Comprehensive		Retained		Shareholders’
	Shares		Capital		Income (Loss)		Earnings		Equity
Balance, June 30, 2019	$	37	$	4,023,034	$	(181,482)	$	2,266,110	$	6,107,699
Share-based compensation		—		25,420		—		—		25,420
Net share settlement of restricted share units		—		(105)		—		—		(105)
Other comprehensive loss, net		—		—		(209,864)		—		(209,864)
Dividends		—		—		—		(147,000)		(147,000)
Net income		—		—		—		455,309		455,309
Balance, September 30, 2019	$	37	$	4,048,349	$	(391,346)	$	2,574,419	$	6,231,459

	Nine Months Ended September 30, 2019
					Accumulated
			Additional		Other				Total
	Ordinary		Paid-in		Comprehensive		Retained		Shareholders’
	Shares		Capital		Income (Loss)		Earnings		Equity
Balance, December 31, 2018	$	37	$	3,983,714	$	(163,360)	$	2,097,430	$	5,917,821
Share-based compensation		—		82,070		—		—		82,070
Net share settlement of restricted share units		—		(20,935)		—		—		(20,935)
Contribution from NCLH		—		3,500		—		—		3,500
Other comprehensive loss, net		—		—		(227,986)		—		(227,986)
Dividends		—		—		—		(341,000)		(341,000)
Net income		—		—		—		817,989		817,989
Balance, September 30, 2019	$	37	$	4,048,349	$	(391,346)	$	2,574,419	$	6,231,459

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

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NCL Corporation Ltd.

Consolidated Statements of Changes in Shareholders’ Equity - Continued

(Unaudited)

(in thousands)


	Three Months Ended September 30, 2018
					Accumulated
			Additional		Other				Total
	Ordinary		Paid-in		Comprehensive		Retained		Shareholders’
	Shares		Capital		Income (Loss)		Earnings		Equity
Balance, June 30, 2018	$	37	$	3,928,006	$	49,639	$	1,658,163	$	5,635,845
Share-based compensation		—		28,962		—		—		28,962
Net share settlement of restricted share units		—		(425)		—		—		(425)
Other comprehensive income, net		—		—		4,766		—		4,766
Net income		—		—		—		475,412		475,412
Balance, September 30, 2018	$	37	$	3,956,543	$	54,405	$	2,133,575	$	6,144,560

	Nine Months Ended September 30, 2018
					Accumulated
			Additional		Other				Total
	Ordinary		Paid-in		Comprehensive		Retained		Shareholders’
	Shares		Capital		Income (Loss)		Earnings		Equity
Balance, December 31, 2017	$	37	$	3,874,586	$	25,253	$	1,768,728	$	5,668,604
Share-based compensation		—		88,797		—		—		88,797
Net share settlement of restricted share units		—		(13,840)		—		—		(13,840)
Contribution from NCLH		—		7,000						7,000
Cumulative change in accounting policy		—		—		(12)		12		—
Other comprehensive income, net		—		—		29,164		—		29,164
Dividends		—		—		—		(445,500)		(445,500)
Net income		—		—		—		810,335		810,335
Balance, September 30, 2018	$	37	$	3,956,543	$	54,405	$	2,133,575	$	6,144,560

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

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NCL Corporation 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 NCLC (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~~“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), (vi) “Apollo” refers to Apollo Global Management, LLC, its subsidiaries and the affiliated funds it manages and the “Apollo Holders” refers to one or more of NCL Athene LLC, AIF VI NCL (AIV), L.P., AIF VI NCL (AIV II), L.P., AIF VI NCL (AIV III), L.P., AIF VI NCL (AIV IV), L.P., Apollo Overseas Partners (Delaware) VI, L.P., Apollo Overseas Partners (Delaware 892) VI, L.P., Apollo Overseas Partners VI, L.P., Apollo Overseas Partners (Germany) VI, L.P., AAA Guarantor — Co-Invest VII, L.P., AIF VI Euro Holdings, L.P., AIF VII Euro Holdings, L.P., Apollo Alternative Assets, L.P., Apollo Management VI, L.P. and Apollo Management VII, L.P. and (vii) “Genting HK” refers to Genting Hong Kong Limited and/or its affiliates (formerly Star Cruises Limited and/or its affiliates) (Genting HK owns NCLH’s ordinary shares indirectly through Star NCLC Holdings Ltd., its Bermuda wholly-owned subsidiary (“Star NCLC”)).

References to the “U.S.” are to the United States of America, and ~~“dollars”~~“dollar(s)” or “$” are to U.S. dollars, the “U.K.” are to the United Kingdom and ~~“euros”~~“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”~~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 September 30, ~~2018,~~2019, we had 26 ships with approximately 54,400 ~~Berths. We plan~~Berths and had orders for 11 additional ships to ~~introduce eight additional ships~~be delivered through 2027, subject to certain conditions.

Norwegian Encore ~~is on order for delivery~~was delivered in ~~the fall of~~October 2019. We ~~also~~refer you to Note 15 – “Subsequent Events” for additional information. We have an2 Explorer Class ~~Ship,~~Ships, Seven Seas Splendor and 1 additional ship, on order for delivery in the winter of ~~2020.~~2020 and fall of 2023, respectively. We have 2 Allura Class Ships on order for delivery in the winter of 2022 and spring of 2025. Project Leonardo will introduce an additional ~~six~~6 ships with expected delivery dates from 2022 through 2027. These additions to our fleet will increase our total Berths to approximately ~~78,900.~~82,000.

2. Summary of Significant Accounting Policies

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. The interim consolidated financial statements should be read in conjunction with the audited consolidated financial statements for the year ended December 31, ~~2017,~~2018, which are included in our most recent Annual Report on Form 10-K filed ~~for the year ended December 31, 2017 (“Annual Report”),~~ with the SEC.

~~Revenue and Expense Recognition~~

~~On January 1, 2018, we adopted the Financial Accounting Standards Board (“FASB”) Accounting Standards Update (“ASU”) No. 2014-09,~~~~Revenue from Contracts with Customers, (Topic 606)~~(“Topic 606”). Topic 606 supersedes the revenue recognition requirements in Accounting Standards Codification 605—Revenue Recognition (“Topic 605”). Using the modified retrospective method, we applied the new requirements to those contracts which were not completed as of January 1, 2018. Results for reporting periods beginning after January 1, 2018 are presented below under “— Financial Statement Presentation” and “— Impacts on Financial Statements,” while prior period amounts are not adjusted and continue to be reported in accordance with our historic accounting under Topic 605.

~~Nature of Goods and Services~~

We offer our guests a multitude of cruise fare options when booking a cruise. Our cruise ticket prices generally include cruise fare and a wide variety of onboard activities and amenities, as well as meals and entertainment. In some instances, cruise ticket prices include round-trip airfare to and from the port of embarkation, complimentary beverages, unlimited shore excursions, free internet, pre-cruise hotel packages, and on some of the exotic itineraries, pre- or post-land packages. Prices vary depending on the particular cruise itinerary, stateroom category selected and the time of year that the voyage takes place. Passenger ticket revenue also includes full ship charters as well as port fees and taxes.

During the voyage, we generate onboard and other revenue for additional products and services which are not included in the cruise fare, including casino operations, certain food and beverage, gift shop purchases, spa services, photo services and other similar items. Food and beverage, casino operations and shore excursions are generally managed directly by us while retail shops, spa services, art auctions and internet services may be managed through contracts with third-party concessionaires. These contracts generally entitle us to a fixed percentage of the gross sales derived from these concessions, which is recognized on a net basis. While some onboard goods and services may be prepaid prior to the voyage, we utilize point-of-sale systems for discrete purchases made onboard. Certain of our product offerings are bundled and we allocate the value of the bundled goods and services between passenger ticket revenue and onboard and other revenue based upon the relative standalone selling prices of those goods and services.

~~Timing of Satisfaction of Performance Obligations and Significant Payment Terms~~

The payment terms and cancellation policies vary by brand, stateroom category, length of voyage, and country of purchase. A deposit for a future booking is required at or soon after the time of booking. Final payment is generally due between 120 days and 180 days before the voyage. Deposits on advance ticket sales are deferred when received, and include amounts that are refundable. Deferred amounts are subsequently recognized as revenue ratably during the voyage sailing days as services are rendered over time on the ship. Deposits are generally cancellable and refundable prior to sailing, but may be subject to penalties, depending on the timing of cancellation. The inception of substantive cancellation penalties generally coincides with the dates that final payment is due, and penalties generally increase as the voyage sail date approaches. Cancellation fees are recognized in passenger ticket revenue in the month of the cancellation.

Goods and services associated with onboard revenue are generally provided at a point in time and revenue is recognized when the performance obligation is satisfied. Onboard goods and services rendered may be paid at disembarkation. A receivable is recognized for onboard goods and services rendered when the voyage is not completed before the end of the period.

Cruises that are reserved under full ship charter agreements are subject to the payment terms of the specific agreement and may be either cancelable or non-cancelable. Deposits received on charter voyages are deferred when received and included in advance ticket sales. Deferred amounts are subsequently recognized as revenue ratably over the voyage sailing dates.

~~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.

~~Disaggregation of Revenue~~

~~Revenue and cash flows are affected by economic factors in various geographical regions.~~

~~Revenues by destination consisted of the following (in thousands):~~

Three Months Ended
September 30, Nine Months Ended
September 30,
2018 2017 2018 2017
North America $ 997,550 $ 873,062 $ 2,724,298 $ 2,493,101
Europe 763,680 679,168 1,227,046 1,125,274
Asia-Pacific 77,986 79,439 499,377 268,383
Other 19,140 20,069 223,212 259,864
Total revenue $ 1,858,356 $ 1,651,738 $ 4,673,933 $ 4,146,622

~~Contract Balances~~

Receivables from customers are included within accounts receivables, net. As of September 30, 2018 and January 1, 2018, our receivables from customers were $19.7 million and $13.8 million, respectively.

Contract liabilities represent the Company’s obligation to transfer goods and services to a customer. A customer deposit held for a future cruise is generally considered a contract liability only when final payment is both due and paid by the customer and is usually recognized in earnings within 180 days of becoming a contract. Other deposits held and included within advance ticket sales or other long-term liabilities are not considered contract liabilities as they are largely cancelable and refundable. Our contract liabilities are included within advance ticket sales. As of September 30, 2018 and January 1, 2018, our contract liabilities were $1.3 billion and $1.0 billion, respectively. Of the amounts included within contract liabilities, approximately 50% were refundable in accordance with our cancellation policies. Approximately $1.0 billion of the January 1, 2018 contract liability balance has been recognized in revenue for the nine months ended September 30, 2018.

Our revenue is seasonal and based on the demand for cruises. Historically, the seasonality of the North American cruise industry generally results in the greatest demand for cruises during the Northern Hemisphere’s summer months. This predictable seasonality in demand has resulted in fluctuations by quarter in our revenue and results of operations. The seasonality of our results is increased due to ships being taken out of service for regularly scheduled Dry-docks, which we typically schedule during non-peak demand periods. This seasonality will result in higher contract liability balances as a result of an increased number of reservations preceding these peak demand periods. The addition of new ships also increases the contract liability balances prior to a new ship’s delivery, as staterooms are usually made available for reservation prior to the inaugural cruise. Norwegian Bliss, with approximately 4,000 Berths, was delivered on April 19, 2018 and added 8% capacity to our fleet.

~~Practical Expedients and Exemptions~~

We do not disclose information about remaining performance obligations that have original expected durations of one year or less. We recognize revenue in an amount that corresponds directly with the value to the customer of our performance completed to date. Variable consideration, which will be determined based on a future rate and passenger count, is excluded from the disclosure and these amounts are not material. These variable non-disclosed contractual amounts relate to our non-cancelable charter agreements and a leasing arrangement with a certain port, both of which are long-term in nature. Amounts that are fixed in nature due to the application of minimum guarantees are also not material and are not disclosed.

~~Contract Costs~~

Management expects that incremental commissions and credit card fees paid as a result of obtaining ticket contracts are recoverable; therefore, we recognize these amounts as assets when they are paid prior to the voyage. Costs of air tickets and port taxes and fees that fulfill future performance obligations are also considered recoverable and are recorded as assets. As of September 30, 2018, $118.4 million of costs incurred to obtain customers and $25.6 million of costs to fulfill contracts with customers are recognized as assets within prepaid expenses and other assets. Incremental commissions, credit card fees, air ticket costs, and port taxes and fees are recognized ratably over the voyage sailing dates, concurrent with associated revenue, and are primarily in commissions, transportation and other expense.

~~Financial Statement Presentation~~

As of January 1, 2018, in connection with the adoption of Topic 606, we reclassified $51.6 million of deferred costs associated with obtaining customer contracts to prepaid expenses and other assets from advance ticket sales.

~~Impacts on Financial Statements~~

The adoption of Topic 606 does not change the timing, classification or amount of revenue recognized from customers in our consolidated financial statements nor does it change the timing, classification or amount of incremental costs to obtain and fulfill those contracts with customers. Therefore, the adoption had no impact on our consolidated statement of operations or consolidated statement of comprehensive income.

The following table summarizes the impact of the adoption of Topic 606 on our consolidated balance sheet which has been adjusted for deferred contract costs that would have been included, net, in advance ticket sales as of September 30, 2018 (in thousands):

As Reported Adjustments Balances Without
Adoption of Topic
606
Prepaid expenses and other assets $ 298,263 $ (59,881 ) $ 238,382
Total assets $ 15,307,471 $ (59,881 ) $ 15,247,590
Advance ticket sales $ 1,648,742 $ (59,881 ) $ 1,588,861
Total liabilities and shareholders’ equity $ 15,307,471 $ (59,881 ) $ 15,247,590

~~The following table summarizes the impact of the adoption of Topic 606 on our consolidated statement of cash flows for the nine months ended September 30, 2018 (in thousands):~~

As Reported Adjustments Balances Without
Adoption of Topic
606
Changes in operating assets and liabilities:
Prepaid expenses and other assets $ (34,451 ) $ 8,282 $ (26,169 )
Advance ticket sales $ 316,268 $ (8,282 ) $ 307,986
Net cash provided by operating activities $ 1,727,946 $ — $ 1,727,946

Foreign Currency

The majority of our transactions are settled in U.S. dollars. We ~~translate~~remeasure assets and liabilities ~~of our~~denominated in foreign ~~subsidiaries~~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 gain of $9.9 million and a loss of $0.2 ~~million and $4.0~~ million for the three months ended September 30, ~~2018~~2019 and ~~2017,~~2018, respectively, and a gain of ~~$10.7~~$5.6 million and a ~~loss~~gain of ~~$14.8~~$10.7 million for the nine months ended September 30, ~~2018~~2019 and ~~2017,~~2018, 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 ~~the amortization of deferred financing fees is~~they are included in interest expense, net.

Recently ~~Issued and~~ Adopted Accounting Guidance

In August 2018, the ~~FASB~~Financial Accounting Standards Board ("FASB") issued ~~ASU~~Accounting Standard Update ("ASU") No. 2018-15, ~~Intangibles~~—Intangibles—Goodwill and Other—Internal-Use Software (Subtopic 350-40): Customer’s Accounting for Implementation Costs Incurred in a Cloud Computing Arrangement That isIs a Service Contract (a consensus of the ~~FAS~~FASB Emerging Issues Task Force),which is designed to align the accounting for costs of implementing a cloud computing service arrangement, regardless of whether the hosting arrangement conveys a license to the hosted software. ~~The update requires that for~~For hosting arrangements considered to be a service contract, the update requires that the criteria for capitalization of developing or obtaining internal-use software shall be applied.

On April 1, 2019, we adopted ASU 2018-15 and elected the prospective transition approach. The update is effective for annual periods, including interim periods within those annual periods, beginning after December 15, 2020, with early adoption permitted, including adoption in any interim period. A prospective or retrospective transition approach must be elected. The Company is evaluating the impact of adopting this ~~guidance on the Company’s consolidated financial statements.~~

~~On January 1, 2018, the Company adopted ASU No. 2017-12,~~~~Derivatives and Hedging (Topic 815) — Targeted Improvements to Accounting for Hedging Activities~~~~, which simplifies the~~ accounting for derivatives. For derivative instruments that are designated and qualify as cash flow hedges, the gain or loss on the derivative instrument is reported as a component of other comprehensive income, reclassified into earnings in the same period or periods during which the hedged transaction affects earnings and presented in the same income statement line item as the earnings effect of the hedged item. The Company recorded a cumulative effect adjustment to accumulated other comprehensive income (loss) with a corresponding adjustment to the opening balance of retained earnings related to the elimination of the separate measurement of ineffectiveness for its cash flow hedges, upon adoption. The adjustments werepolicy was not material to the Company’s consolidated financial statements. ~~We refer you to Note 8. “Fair Value Measurements and Derivatives” in these notes to consolidated financial statements.~~

Recently Issued Accounting Guidance

~~On January 1, 2018, the Company adopted~~In June 2016, FASB issued ASU No. ~~2016-16,~~2016-13, ~~Income Taxes~~Financial Instruments—Credit Losses (Topic ~~740) — Intra-Entity Transfers~~326): Measurement of ~~Assets Other Than Inventory,~~Credit Losses on Financial Instruments,which ~~requires companies~~will require an entity to present the net amount expected to be collected for certain financial assets, including trade receivables. Under this update, on initial recognition and at each reporting period, an entity will be required to recognize an allowance that reflects the ~~income-tax consequences~~entity’s current estimate of ~~an intra-entity transfer~~credit losses expected to be incurred over the life of ~~an asset other than inventory when~~ the ~~transfer occurs, rather than when the asset has been sold to an outside party. No~~financial instrument. The update will be applied prospectively with a cumulative-effect adjustment was necessary as the Company did not have previously unamortized deferred income tax expense from past intra-entity transfers. The adoption does not have an impact on continuing operations, net income or any other financial statement line items for the current period.

~~In December 2017, the Tax Cuts and Jobs Act (“the Act”) was enacted. Among other provisions, the Act reduced the corporate income tax rate from 35%~~ to 21%. Also in December 2017, the SEC staff issued Staff Accounting Bulletin No. 118, which addresses the recognition of provisional amounts when a company does not have the necessary information available, prepared or analyzed (including computations) in reasonable detail to complete its accounting for the effect of the changes required by the Act. The measurement period ends when a company has obtained, prepared and analyzed the information necessary to finalize its accounting, but cannot extend beyond one year. As of September 30, 2018, the Company has not completed the accounting for the tax effects of enactment of the Act; however, as described below, the Company has made reasonable provisional best estimates, which are subject to change. The most significant impact of the Actretained earnings. This update will be effective for the Company ~~was a $4.5 million reduction~~for fiscal years beginning after December 15, 2019 and interim periods within those fiscal years. The adoption of the value of net deferred tax liabilities (which represent future tax expenses) recorded in 2017 as a discrete tax benefit resulting from the corporate tax rate reduction from 35% to 21%. Any adjustments to the provisional amount through the end of 2018this standard will be recorded as adjustments to income tax expense in income from operations. The provisional amounts incorporate assumptions made based upon the Company’s current interpretation of the Act and may change as the Company receives additional clarification and implementation guidance. Other aspects of the Act are either not ~~applicable or not expected to~~ have a material impact on the Company’s consolidated financial statements.

In January 2017, the FASB issued ASU No. 2017-04,Intangibles—Goodwill and Other (Topic 350) — Simplifying the Test for Goodwill Impairment, which simplifies the test for goodwill impairment by eliminating Step 2 from the goodwill impairment test. Step 2 measures a goodwill impairment loss by comparing the implied fair value of a reporting unit’s goodwill with the carrying amount of that goodwill. The guidance is effective for annual or any interim goodwill impairment tests in years beginning after December 15, 2019, with early adoption permitted for interim or annual goodwill impairment tests performed on testing dates after January 1, 2017. The Company does not expect to early adopt this guidance. The Company will evaluate, upon adoption of this guidance, the impact of this guidance on the Company’s consolidated financial statements.

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3. Revenue Recognition

~~In February 2016, the FASB issued ASU No. 2016-02,~~~~Leases (Topic 842),~~~~which sets out the principles for the recognition, measurement, presentation~~Disaggregation of Revenue

Revenue and ~~disclosure of leases. The update was issuedto increase transparency and comparability among organizations byrecognizing~~ ~~rights and obligations resulting from leases as lease assets and liabilities on the balance sheetand disclosing key information about leasing arrangements~~ for leases with a term of 12 months or more. The update modifies lessors’ classification criteria for leases and the accounting for sales-type and direct financing leases. The update requires qualitative and quantitative disclosures designed to give financial statement users additional information on the amount, timing, and uncertainty of cash flows ~~arising from leases. The update~~are affected by economic factors in various geographical regions. Revenues by destination were as follows (in thousands):


	Three Months Ended				Nine Months Ended
	September 30,				September 30,
	2019		2018		2019		2018
North America	$	930,151	$	997,550	$	2,881,606	$	2,724,298
Europe		831,814		763,680		1,374,001		1,227,046
Asia-Pacific		128,415		77,986		418,421		499,377
Other		23,471		19,140		307,730		223,212
Total revenue	$	1,913,851	$	1,858,356	$	4,981,758	$	4,673,933

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 ~~effective for annual reporting periods,~~available and ~~interim periods within those annual periods, beginning after December 15, 2018, with early adoption permitted. The Company has engaged a third party to assist in reviewing~~management regularly reviews the ~~Company’s existing leases~~brand level operating results and, ~~evaluating the Company’s existing contracts to identify those that are~~therefore, each brand is considered ~~to be leases under the new guidance. The Company plans to adopt the practical expedients offered by the guidance~~an operating segment. Our operating segments have similar economic and ~~is evaluating the impact of those expedients upon adoption. The update is to be applied retrospectively with a cumulative-effect adjustment on January 1, 2019. Upon implementation~~qualitative characteristics, including similar long-term margins and similar products and services; therefore, we aggregate all of the ~~guidance,~~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 ~~Company expects~~U.S. Revenue attributable to ~~increase, on its consolidated~~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 September 30, 2019 and December 31, 2018, our receivables from customers were $15.9 million and $17.3 million, respectively.

Our contract liabilities are included within advance ticket sales. As of September 30, 2019 and December 31, 2018, our contract liabilities were $1.4 billion and $1.2 billion, respectively. Of the amounts included within contract liabilities, approximately 55% were refundable in accordance with our cancellation policies. For the nine months ended September 30, 2019, $1.2 billion of revenue recognized was included in the contract liability balance ~~sheet, both assets and liabilities to reflect~~at the ~~lease rights and obligations, respectively, and~~beginning of the ~~Company expects to make additional related disclosures.~~period.

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4. Intangible Assets

The carrying amounts of intangible assets subject to amortization are included inwithin other long-term assets. The gross carrying amounts of intangible assets, the related accumulated amortization, the net carrying amounts and the weighted-average amortization periods of the Company’s intangible assets are listed in the ~~consolidated balance sheets.~~

~~Intangible assets consisted of the~~ following tables (in thousands, except amortization period):

September 30, 2018
Gross Carrying
Amount Accumulated
Amortization Net Carrying
Amount
Weighted-
Average
Amortization
Period
(in years)

Customer relationships $ 120,000 $ (85,533 ) $ 34,467 6.0
Licenses 3,368 (2,544 ) 824 5.6
Total intangible assets subject to amortization $ 123,368 $ (88,077 ) $ 35,291


	September 30, 2019
							Weighted-
							Average
	Gross Carrying		Accumulated		Net Carrying		Amortization
	Amount		Amortization		Amount		Period (Years)
Customer relationship	$	120,000	$	(105,566)	$	14,434	6.0
License		750		(312)		438	10.0
Total intangible assets subject to amortization	$	120,750	$	(105,878)	$	14,872

	December 31, 2017
	Gross Carrying Amount		Accumulated Amortization			Net Carrying Amount		Weighted- Average Amortization Period (in years)
Customer relationships	$	120,000	$	(66,866	)	$	53,134		6.0

										December 31, 2018
																Weighted-
																Average
										Gross Carrying		Accumulated		Net Carrying		Amortization
										Amount		Amortization		Amount		Period (Years)
Customer relationship										$	120,000	$	(91,756)	$	28,244	6.0
Licenses		3,368		(1,601	)		1,767		5.6		3,368		(2,874)		494	5.6
Non-compete agreements		660		(660	)		—		1.0
Total intangible assets subject to amortization	$	124,028	$	(69,127	)	$	54,901			$	123,368	$	(94,630)	$	28,738

The aggregate amortization expense for intangible assets is as follows (in thousands):


	Three Months Ended				Nine Months Ended
	September 30,				September 30,
	2019		2018		2019		2018
Amortization expense	$	4,622	$	6,553	$	13,866	$	19,610

The following table sets forth the Company’s estimated aggregate amortization expense for each of ~~intangible assets for~~ the ~~periods presented~~five years below (in thousands):

Three Months Ended
September 30, Nine Months Ended
September 30,
2018 2017 2018 2017
Amortization expense $ 6,553 $ 7,780 $ 19,610 $ 23,445


	Amortization
Year ended December 31,	Expense
2020	$	9,906
2021		75
2022		75
2023		75
2024		75

5. Leases

On January 1, 2019, we adopted ASU No. 2016-02, Leases (“Topic 842”). Topic 842 supersedes the lease accounting requirements in Accounting Standards Codification (“ASC”) 840—Leases. In August 2018, the FASB issued ASU 2018-11, Targeted Improvements to Topic 842, which included an option to apply the new leases standard at the adoption date using a modified retrospective approach, which the Company elected.

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Nature of Leases

We have finance leases for certain ship equipment and a corporate office. We have operating leases for port facilities, corporate offices, warehouses, and certain equipment. Many of our leases include both lease and non-lease components. We have adopted the practical expedient which allows us to combine lease and non-lease components by class of asset. We have applied this expedient for office leases, port facilities, and certain equipment.

Significant Assumptions and Judgments in Applying Topic 842 and Practical Expedients Elected

Our leases contain both fixed and variable payments. Fixed payments and variable lease payments that depend on a rate or index are included in the calculation of the right-of-use asset. Other variable payments are excluded from the calculation unless there is an unavoidable fixed minimum cost related to those payments such as a minimum annual guarantee. Our lease assets are amortized on a straight-line basis except for our rights to use port facilities. The expenses related to port facilities are amortized based on passenger counts as this basis represents the pattern in which the economic benefit is derived from the right to use the underlying asset.

For non-consecutive lease terms, which relate to our rights to use certain port facilities, the term of the lease is based on the number of days on which we have the right to use a specified asset. We have adopted the practical expedient to exclude leases with terms of less than one year from being included on the balance sheet. Lease expense for agreements that are short-term are disclosed below and include both fixed and variable payments.

Certain leases include one or more options to extend or terminate and are primarily in five-year increments. Lease extensions and terminations, including auto-renewing lease terms, were only included in the calculation of the right-of-use asset to the extent that the right to renew or terminate was at the option of the lessor only or where there was a more than insignificant penalty for termination.

As our leases do not have a readily determinable implicit rate, we used our weighted average cost of debt to determine the net present value of the lease payments at the adoption date. Our weighted average cost of debt is similar to the incremental borrowing rate we would have obtained if we had borrowed collateralized debt over the lease term to purchase the asset, and the rate was adjusted for longer term leases.

We have also adopted the practical expedient which allows us, by class of asset, to not separate lease and non-lease components when we are the lessor in the underlying transaction, the transactions would otherwise be accounted for under ASC 606–Revenue Recognition and the non-lease components are the predominant components of the agreements. We have applied this practical expedient to transactions with cruise passengers and concession service providers related to the use of our ships. We refer you to Note 3 – “Revenue Recognition.”

Impacts on Financial Statements

As a result of the adoption of Topic 842 on January 1, 2019, we recorded operating lease right-of-use assets of $235.0 million and operating lease liabilities of $243.8 million. Another $8.8 million was reclassified to the operating right-of-use assets from other asset and liability accounts relating to the existing leases. The adoption of Topic 842 did not result in the identification of new finance leases. The adoption does not significantly change the timing, classification or amount of expense recognized in our consolidated financial statements nor does it change the timing, classification or amount of cash payments included within the consolidated statement of cash flows.

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The ~~following table sets forth the estimated annual aggregate amortization~~components of ~~intangible assets for the periods presented~~lease expense and revenue were as follows (in thousands):

Year Ended December 31, Amortization
Expense
2019 $ 18,489
2020 9,906
2021 75
2022 75
2023 75


	Three Months		Nine Months
	Ended		Ended
	September 30, 2019		September 30, 2019
Operating lease expense	$	7,738	$	26,187
Variable lease expense		3,141		7,624
Short-term lease expense		12,477		37,958
Finance lease cost:
Amortization of right-to-use assets		474		1,304
Interest on lease liabilities		318		986
Operating lease revenue		65		311
Sublease income		403		1,211

~~Accumulated Other Comprehensive Income~~

Lease balances were as follows (in thousands):


	Balance Sheet location	September 30, 2019
Operating leases
Right-of-use assets	Other long-term assets	$	221,145
Current operating lease liabilities	Accrued expenses and other liabilities		(22,204)
Non-current operating lease liabilities	Other long-term liabilities		(208,487)

Finance leases
Right-of-use assets	Property and equipment, net		14,334
Current finance lease liabilities	Current portion of long-term debt		(5,938)
Non-current finance lease liabilities	Long-term debt		(9,912)

Supplemental cash flow information related to leases was as follows (in thousands):


	Nine Months Ended
	September 30, 2019
Cash paid for amounts included in the measurement of lease liabilities:
Operating cash outflows from operating leases	$	26,363
Operating cash outflows from finance leases		800
Financing cash outflows from finance leases		2,207

Right-of-use assets obtained in exchange for lease obligations:
Operating leases		6,567
Finance leases		705

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As of September 30, 2019, maturities of lease liabilities, weighted-average remaining lease terms and discount rates for our leases were as follows (in thousands, except lease terms and discount rates):


	Operating			Finance
	leases			leases
Remainder of 2019	$	5,554		$	1,920
2020		32,487			5,110
2021		32,084			4,912
2022		31,787			3,957
2023		31,652			730
Thereafter		143,671			1,306
Total		277,235			17,935
Less: Present value discount		(46,544)			(2,085)
Present value of lease liabilities	$	230,691		$	15,850
Weighted average remaining lease term (years)		8.49			3.93
Weighted average discount rate		4.26	%		7.56	%

As previously disclosed in our Annual Report on Form 10-K for the year ended December 31, 2018, future minimum lease payments for operating leases having initial or remaining noncancelable lease terms in excess of one year were as follows under the previous lease accounting standard (ASC 840) (in thousands):


Year	December 31, 2018
2019	$	16,651
2020		16,105
2021		15,315
2022		14,391
2023		13,462
Thereafter		52,626
Total minimum annual rentals	$	128,550

Leases That Have Not Yet Commenced

We have multiple agreements that have been executed where the lease term has not commenced as of September 30, 2019. These are primarily related to our rights to use certain port facilities currently under construction. Although we may have provided design input, construction management services, or loans related to these assets, we have determined that we do not control these assets during the period of construction. These port facilities are expected to open for use during 2020 and include undiscounted minimum annual guarantees of approximately $1.1 billion of passenger fees.

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6. Accumulated Other Comprehensive Income (Loss)

Accumulated other comprehensive income (loss) ~~consisted of the following~~ for the ~~periods presented~~nine months ended September 30, 2019 was as follows (in thousands):

	Nine Months Ended September 30, 2018
	Accumulated Other Comprehensive Income (Loss)			Change Related to Cash Flow Hedges			Change Related to Shipboard Retirement Plan

															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	$	25,253		$	33,214		$	(7,961	)	$	(163,360)	$	(158,096)		$	(5,264)
Current period other comprehensive income before reclassifications		48,047			48,047			—
Current period other comprehensive loss before reclassifications											(211,548)		(211,548)			—
Amounts reclassified into earnings		(18,895	)		(19,214	) (1)		319	(2)		(16,438)		(16,722)	(1)		284	(2)
Accumulated other comprehensive income (loss) at end of period	$	54,405		$	62,047	(3)	$	(7,642	)	$	(391,346)	$	(386,366)	(3)	$	(4,980)

Accumulated other comprehensive income (loss) for the nine months ended September 30, 2018 was as follows (in thousands):


						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	$	25,253	$	33,214		$	(7,961)
Current period other comprehensive income before reclassifications		48,047		48,047			—
Amounts reclassified into earnings		(18,895)		(19,214)	(1)		319	(2)
Accumulated other comprehensive income (loss) at end of period	$	54,405	$	62,047		$	(7,642)

Nine Months Ended September 30, 2017
Accumulated
Other
Comprehensive
(Loss) Income Change
Related to
Cash Flow
Hedges Change
Related to
Shipboard
Retirement
Plan
Accumulated other comprehensive loss at beginning of period $ (316,186) $ (308,265 ) $ (7,921 )
Current period other comprehensive income before reclassifications 221,512 221,512 —
Amounts reclassified into earnings 31,906 31,593 (1) 313 (4)
Accumulated other comprehensive loss at end of period $ (62,768 ) $ (55,160 ) $ (7,608 )

(1)

We refer you to Note 8—9— “Fair Value Measurements and Derivatives” ~~in these notes to consolidated financial statements~~ 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 ~~$55.0~~$45.7 million of ~~gain~~loss expected to be reclassified into earnings in the next 12 months.

~~(4)~~

~~Amortization of prior-service cost and actuarial loss reclassified to payroll and related expense.~~

~~Property and Equipment, net~~

7. Property and Equipment, net

Property and equipment, net increased ~~$1.0 billion~~$169.6 million for the nine months ended September 30, ~~2018~~2019 primarily due to ~~the delivery of Norwegian Bliss~~ships under construction and ship improvement projects.

~~Long-Term Debt~~

~~On April 19, 2018,~~8. Long-Term Debt

NCLC entered into a Fourth Amended and Restated Credit Agreement, dated as of January 2, 2019, with a subsidiary of NCLC, as co-borrower and JPMorgan Chase Bank, N.A., as administrative agent, and certain other lenders. This revised facility, among other things, (a) reduced the pricing of our existing $875 million Revolving Loan Facility, (b) reduced the pricing and increased the approximately $1.3 billion principal amount outstanding under the term loan A facility to $1.6 billion, and (c) extended the maturity dates for our Revolving Loan Facility and our term loan A facility to 2024, subject to certain conditions. We used the proceeds from the increase in our term loan A facility to prepay all of the then outstanding amounts under our term loan B facility. The transaction resulted in a loss on extinguishment of debt of $2.9 million.

The applicable margin under the new term loan A facility and new Revolving Loan Facility is determined by reference to a total leverage ratio, with an applicable margin of between 1.75% and 1.00% with respect to Eurocurrency loans and

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between 0.75% and 0.00% with respect to base rate loans. The margin as of September 30, 2019 for borrowings under the new term loan A facility and new Revolving Loan Facility was 1.25% with respect to Eurocurrency borrowings. In addition to paying interest on outstanding principal under the borrowings, we ~~took delivery~~are obligated to pay a quarterly commitment fee at a rate determined by reference to a total net leverage ratio, with a maximum commitment fee of ~~Norwegian Bliss. To~~0.30%.

NCLC entered into a $230 million credit agreement, dated as of January 10, 2019, with Nordea Bank ABP, New York Branch, as administrative agent and collateral agent, and certain other lenders. The proceeds of this term loan will be used for general corporate purposes, including to finance the ~~payment~~pre-delivery installments due ~~upon delivery, we had export financing in place for 80% of~~to the ~~contract price.~~builder under the Company’s shipbuilding contracts. The ~~associated $850.0~~$230 million term loan is secured by Pride of America Ship Holding, LLC and bears interest at LIBOR plus a ~~fixed rate~~margin of ~~3.92% with a~~1.00%. The term loan matures on January 10, 2021; however, NCLC may elect to extend the maturity date to January 10, 2022 provided certain conditions are met. Should NCLC elect to extend the maturity date, the interest rate will be LIBOR plus a margin of ~~April 19, 2030. Principal~~1.10% for the third year.

NCLC entered into a $260 million credit agreement, dated as of May 15, 2019, with Bank of America, N.A., as administrative agent and ~~interest payments are payable semiannually.~~

~~On April 4, 2018, we redeemed $135.0 million~~collateral agent, and certain other lenders. The proceeds of this term loan were used to prepay the then outstanding principal amount of the $700.0 million aggregate principal amount of outstanding 4.750% Senior Notes due 2021 (the “Notes”) at a price equal to 100% of the principal amount of the Notes being redeemed and paid the premium of $5.1 million and accrued interest of ~~$1.9 million.~~the Norwegian Epic term loan. The ~~redemption also~~$260 million term loan is secured by Norwegian Jewel Limited, bears interest at LIBOR plus a margin of 0.80%, and matures on May 15, 2022. The transaction resulted in a ~~write off~~loss on extinguishment of ~~$1.2 million~~debt of ~~certain fees. Following the partial redemption, $565.0 million aggregate principal amount of Notes remained outstanding.~~$1.1 million.

~~Related Party Disclosures~~

In March 2018, as part of a public equity offering of NCLH’s ordinary shares owned by the Apollo Holders and Genting HK, NCLH repurchased 4,722,312 of its ordinary shares sold in the offering for approximately $263.5 million pursuant to its then existing share repurchase program.

~~As of September 30, 2018, the ownership of NCLH’s ordinary shares consisted of the following:~~

Shareholder Number of
Shares Percentage
Ownership
Apollo Holders 15,728,782 7.1 %
Genting HK 3,148,307 1.4 %

9. 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 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

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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 September 30, ~~2018,~~2019, we had fuel swaps and collars, which are used to mitigate the financial impact of volatility of fuel prices pertaining to approximately ~~0.9~~1.3 million metric tons of our projected fuel purchases, maturing through December 31, ~~2020.~~

2022.

As of September 30, ~~2018,~~2019, we had fuel swaps which were not designated as cash flow hedges. Due to a change in our choice of hedged fuel type, we entered into fuel contracts to sell approximately 10 thousand metric tons of fuel and immediately dedesignated fuel contracts to buy approximately 10 thousand metric tons of the same fuel. The agreements mature through December 31, 2019.

As of September 30, 2019, 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 ~~€2.0~~€2.6 billion, or ~~$2.3~~$2.8 billion based on the euro/U.S. dollar exchange rate as of September 30, ~~2018.~~

2019.

As of September 30, ~~2018,~~2019, we had interest rate ~~swap agreements~~swaps and collars, which are used to hedge our exposure to interest rate movements and to manage our interest expense. The notional amount of our outstanding debt associated with the interest rate ~~swap agreements~~swaps and collars was ~~$1.0~~$1.7 billion as of September 30, ~~2018.~~

2019.

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

		Assets				Liabilities

											Assets				Liabilities
											September 30,		December 31,		September 30,		December 31,
										Balance Sheet Location	2019		2018		2019		2018
Derivative Contracts Designated as Hedging Instruments	Balance Sheet Location	September 30, 2018		December 31, 2017		September 30, 2018		December 31, 2017

Fuel contracts
	Prepaid expenses and other assets	$	52,471	$	19,220	$	—	$	2,406
	Other long-term assets		32,357		19,854		281		3,469
	Accrued expenses and other liabilities		—		—		—		3,348
	Other long-term liabilities		—		576		—		2,148
										Prepaid expenses and other assets	$	50	$	2,583	$	346	$	1
										Other long-term assets		53		197		—		29
										Accrued expenses and other liabilities		17		1,173		35,439		19,547
										Other long-term liabilities		261		933		36,233		51,184
Foreign currency contracts
	Prepaid expenses and other assets		2,229		52,300		—		730
	Other long-term assets		33,337		85,081		2,976		—
	Accrued expenses and other liabilities		—		—		118		—
	Other long-term liabilities		4,747		—		9,312		—
										Prepaid expenses and other assets		—		5,285		—		1,497
										Other long-term assets		—		3,514		—		—
										Accrued expenses and other liabilities		—		112		97,524		5,145
										Other long-term liabilities		—		2,874		156,339		40,476
Interest rate contracts
	Prepaid expenses and other assets		1,984		—		—		—
	Other long-term assets		1,177		—		—		—
	Accrued expenses and other liabilities		—		—		—		1,020
Total derivative contracts designated as hedging instruments		$	128,302	$	177,031	$	12,687	$	13,121
										Prepaid expenses and other assets		—		519		—		—
										Other long-term assets		—		27		—		—
										Accrued expenses and other liabilities		—		—		2,984		—
										Other long-term liabilities		—		—		3,284		—
Total derivatives designated as hedging instruments											$	381	$	17,217	$	332,149	$	117,879

Derivative Contracts Not Designated as Hedging Instruments

Fuel contracts										Prepaid expenses and other assets	$	667	$	—	$	—	$	—
										Accrued expenses and other liabilities		495		—		—		—

Total derivatives not designated as hedging instruments											$	1,162	$	—	$	—	$	—
Total derivatives											$	1,543	$	17,217	$	332,149	$	117,879

The fair values of swap and forward contracts are determined based on inputs that are readily available in public markets or can be derived from information available in publicly quoted markets. The Company determines the value of options

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and collars utilizing an option pricing model based on inputs that are either readily available in public markets or can be derived from information available in publicly quoted markets. The option pricing model used by the Company is an industry standard model for valuing options and is used by the broker/dealer community. The inputs to this option pricing model are the option strike price, underlying price, risk-free rate of interest, time to expiration, and volatility. The fair value of option contracts considers both the intrinsic value and any remaining time value associated with those derivatives that have not yet settled. The Company also considers counterparty credit risk and its own credit risk in its determination of all estimated fair values.

Our derivatives and financial instruments were categorized as Level 2 in the fair value hierarchy, and we had no derivatives or financial instruments categorized as Level 1 or Level 3. Our derivative contracts include rights of offset with our counterparties. We have elected to net certain assets and liabilities within counterparties when the rights of offset exist. We are not required to post cash collateral related to our derivative instruments.

The following table discloses the gross and net amounts recognized within assets and liabilities ~~include the following~~ (in thousands):

September 30, 2018	Gross Amounts		Gross Amounts Offset			Total Net Amounts		Gross Amounts Not Offset			Net Amounts

															Gross				Gross
													Gross		Amounts		Total Net		Amounts
September 30, 2019													Amounts		Offset		Amounts		Not Offset		Net Amounts
Assets	$	123,555	$	(3,257	)	$	120,298	$	(34,549	)	$	85,749	$	770	$	(346)	$	424	$	—	$	424
Liabilities		9,430		(4,747	)		4,683		(3,716	)		967		331,803		(773)		331,030		(260,131)		70,899

December 31, 2017	Gross Amounts		Gross Amounts Offset			Total Net Amounts		Gross Amounts Not Offset			Net Amounts

															Gross				Gross
													Gross		Amounts		Total Net		Amounts
December 31, 2018													Amounts		Offset		Amounts		Not Offset		Net Amounts
Assets	$	176,455	$	(6,605	)	$	169,850	$	(127,924	)	$	41,926	$	12,125	$	(1,527)	$	10,598	$	(6,872)	$	3,726
Liabilities		6,516		(576	)		5,940		(1,020	)		4,920		116,352		(5,092)		111,260		(35,718)		75,542

The effects of cash flow hedge accounting on accumulated other comprehensive income (loss) were as follows (in thousands):


					Location of Gain
					(Loss) Reclassified
					from Accumulated	Amount of Gain (Loss) Reclassified
	Amount of Gain (Loss)				Other Comprehensive	from Accumulated Other
	Recognized in Other				Income (Loss) into	Comprehensive
Derivatives	Comprehensive Income				Income	Income (Loss) into Income
	Three Months		Three Months			Three Months		Three Months
	Ended		Ended			Ended		Ended
	September 30, 2019		September 30, 2018			September 30, 2019		September 30, 2018
Fuel contracts	$	(65,726)	$	24,439	Fuel	$	1,657	$	11,595
Foreign currency contracts		(142,627)		(10,062)	Depreciation and amortization		(703)		(703)
Interest rate contracts		(1,158)		988	Interest expense, net		(506)		(186)
Total gain (loss) recognized in other comprehensive income	$	(209,511)	$	15,365		$	448	$	10,706

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The effects of cash flow hedge accounting on the consolidated statements of operations include the following (in thousands):

Derivatives	Amount of Gain (Loss) Recognized in Other Comprehensive Income						Location of Gain (Loss) Reclassified from Accumulated Other Comprehensive Income (Loss) into Income	Amount of Gain (Loss) Reclassified from Accumulated Other Comprehensive Income (Loss) into Income
	Three Months Ended September 30, 2018			Three Months Ended September 30, 2017				Three Months Ended September 30, 2018			Three Months Ended September 30, 2017

														Three Months Ended September 30, 2019						Three Months Ended September 30, 2018
																Depreciation						Depreciation
																and		Interest				and		Interest
														Fuel		Amortization		Expense, net		Fuel		Amortization		Expense, net
Total amounts of income and expense line items presented in the consolidated statements of operations in which the effects of cash flow hedges are recorded														$	98,943	$	156,215	$	60,188	$	99,643	$	143,700	$	69,540

Amount of gain (loss) reclassified from accumulated other comprehensive income (loss) into income
Fuel contracts	$	24,439		$	30,452		Fuel	$	11,595		$	(9,796	)		1,657		—		—		11,595		—		—
Foreign currency contracts		(10,062	)		66,849		Depreciation and amortization		(703	)		(1,157	)		—		(703)		—		—		(703)		—
Interest rate contracts		988			(25	)	Interest expense, net		(186	)		(691	)		—		—		(506)		—		—		(186)
Total gain (loss) recognized in other comprehensive income	$	15,365		$	97,276			$	10,706		$	(11,644	)

The effects of cash flow hedge accounting on accumulated other comprehensive income (loss) were as follows (in thousands):


					Location of Gain
					(Loss) Reclassified
					from Accumulated	Amount of Gain (Loss) Reclassified
	Amount of Gain (Loss)				Other Comprehensive	from Accumulated Other
	Recognized in Other				Income (Loss) into	Comprehensive
Derivatives	Comprehensive Income				Income	Income (Loss) into Income
	Nine Months		Nine Months			Nine Months		Nine Months
	Ended		Ended			Ended		Ended
	September 30, 2019		September 30, 2018			September 30, 2019		September 30, 2018
Fuel contracts	$	14,205	$	88,935	Fuel	$	19,060	$	23,024
Foreign currency contracts		(218,724)		(43,951)	Depreciation and amortization		(2,108)		(2,761)
Interest rate contracts		(7,029)		3,063	Interest expense, net		(230)		(1,049)
Total gain (loss) recognized in other comprehensive income	$	(211,548)	$	48,047		$	16,722	$	19,214

The effects of cash flow hedge accounting on the consolidated statements of operations include the following (in thousands):

	Three Months Ended September 30, 2018								Three Months Ended September 30, 2017
	Fuel		Depreciation and Amortization			Interest Expense, net			Fuel			Depreciation and Amortization			Interest Expense, net

																		Nine Months Ended September 30, 2019						Nine Months Ended September 30, 2018
																				Depreciation						Depreciation
																				and		Interest				and		Interest
																		Fuel		Amortization		Expense, net		Fuel		Amortization		Expense, net
Total amounts of income and expense line items presented in the consolidated statements of operations in which the effects of cash flow hedges are recorded	$	99,643	$	143,700		$	69,540		$	91,231		$	134,532		$	66,339		$	297,727	$	482,227	$	199,660	$	288,286	$	415,648	$	202,226


Amount of gain (loss) reclassified from accumulated other comprehensive income (loss) into income
Fuel contracts		11,595		—			—			(9,796	)		—			—			19,060		—		—		23,024		—		—
Foreign currency contracts		—		(703	)		—			—			(1,157	)		—			—		(2,108)		—		—		(2,761)		—
Interest rate contracts		—		—			(186	)		—			—			(691	)		—		—		(230)		—		—		(1,049)

~~The effects of cash flow hedge accounting on accumulated other comprehensive income (loss) include the following (in thousands):~~

Derivatives
Amount of Gain (Loss)
Recognized in Other
Comprehensive Income

Location of Gain
(Loss) Reclassified
from Accumulated
Other Comprehensive
Income (Loss) into
Income

Amount of Gain (Loss) Reclassified
from Accumulated Other Comprehensive
Income (Loss) into Income

Nine Months Ended
September 30, 2018

Nine Months Ended
September 30, 2017

Nine Months Ended
September 30, 2018

Nine Months Ended
September 30, 2017

Fuel contracts $ 88,935 $ (635 ) Fuel $ 23,024 $ (26,383 )
Foreign currency contracts (43,951 ) 221,913 Depreciation and amortization (2,761 ) (2,909 )
Interest rate contracts 3,063 234 Interest expense, net (1,049 ) (2,301 )
Total gain (loss) recognized in other comprehensive income $ 48,047 $ 221,512 $ 19,214 $ (31,593 )

~~The effects of cash flow hedge accounting on the consolidated statements of operations include the following (in thousands):~~

Nine Months Ended September 30, 2018 Nine Months Ended September 30, 2017
Fuel Depreciation
and
Amortization Interest
Expense, net Fuel Depreciation
and
Amortization Interest
Expense, Net
Total amounts of income and expense line items presented in the consolidated statements of operations in which the effects of cash flow hedges are recorded $ 288,286 $ 415,648 $ 202,226 $ 266,780 $ 376,878 $ 183,497

Amount of gain (loss) reclassified from accumulated other comprehensive income (loss) into income
Fuel contracts 23,024 — — (26,383 ) — —
Foreign currency contracts — (2,761 ) — — (2,909 ) —
Interest rate contracts — — (1,049 ) — — (2,301 )

Long-Term Debt

As of September 30, ~~2018~~2019 and December 31, ~~2017,~~2018, the fair value of our long-term debt, including the current portion, was ~~$6,693.9~~$6,417.1 million and ~~$6,448.6~~$6,601.9 million, respectively, which was ~~$13.9~~$39.3 million higher and ~~$23.5~~$8.4 million ~~higher,~~lower, respectively, than the carrying values. The difference between the fair value and carrying value of our long-term debt is due to our fixed and variable rate debt obligations carrying interest rates that are above or below market rates at the measurement dates. The fair value of our long-term debt was calculated based on estimated rates for the same or similar instruments with similar terms and remaining maturities, ~~resulting in~~considered to be Level 2 inputs in the fair value hierarchy.

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Market risk associated with our long-term variable rate debt is the potential increase in interest expense from an increase in interest rates. ~~The calculation of the fair value of our long-term debt is considered a Level 2 input.~~

Other

The carrying amounts reported in the consolidated balance sheets of all other financial assets and liabilities approximate fair value.

10. Employee Benefits and Compensation Plans

Share Option Awards

The following ~~table sets forth~~is a summary of option activity under NCLH’s Amended and Restated 2013 Performance Incentive Plan ~~including 208,335 previously awarded performance-based share option awards, for which a grant date was established in 2018,~~ for the ~~period presented:~~nine months ended September 30, 2019:

Number of Share Option Awards Weighted-Average Exercise Price
Weighted-
Average
Contractual
Term
Aggregate
Intrinsic Value
Time-
Based
Awards Performance-
Based
Awards Market-
Based
Awards Time-
Based
Awards Performance-
Based
Awards Market-
Based
Awards (in years) (in thousands)
Outstanding as of January 1, 2018
6,580,898 373,969 208,333 $ 49.18 $ 31.39 $ 59.43 6.99 $ 50,021
Granted — 208,335 — $ — $ 59.43 $ — — $ —
Exercised (625,611 ) (109,285 ) — $ 34.44 $ 19.00 $ — — $ —
Forfeited and cancelled (192,333 ) (52,084 ) — $ 54.70 $ 59.43 $ — — $ —
Outstanding as of September 30, 2018 5,762,954 420,935 208,333 $ 50.60 $ 45.01 $ 59.43 6.46 $ 47,269


										Weighted-
	Number of Share Option Awards			Weighted-Average Exercise Price						Average
	Time-	Performance-	Market-	Time-		Performance-		Market-		Contractual	Aggregate
	Based	Based	Based	Based		Based		Based		Term	Intrinsic Value
	Awards	Awards	Awards	Awards		Awards		Awards		(years)	(in thousands)
Outstanding as of January 1, 2019	5,686,793	410,499	208,333	$	50.65	$	45.67	$	59.43	6.22	$	13,946
Exercised	(311,732)	(138,306)	—		38.19		19.00		—
Forfeited and cancelled	(83,666)	(156,251)	—		56.30		59.43		—
Outstanding as of September 30, 2019	5,291,395	115,942	208,333	$	51.29	$	58.96	$	59.43	5.63	$	20,576

Restricted Ordinary Share Awards

The following is a summary of ~~NCLH’s~~ restricted NCLH ordinary share activity for the ~~period presented:~~nine months ended September 30, 2019:

Number of
Time-Based
Awards
Weighted-
Average Grant
Date Fair Value

Non-vested as of January 1, 2018 858 $ 58.33
Vested (429 ) $ 58.25
Non-vested as of September 30, 2018 429 $ 58.41


	Number of
	Time-	Weighted-
	Based	Average Grant
	Awards	Date Fair Value
Non-vested as of January 1, 2019	429	$	58.41
Vested	(429)		58.41
Non-vested as of September 30, 2019	—	$	—

Restricted Share Unit Awards

On March 1, ~~2018,~~2019, NCLH granted ~~to certain employees 1.6~~1.9 million time-based restricted share unit awards to our employees, which vest ~~equally~~in substantially equal annual installments over three years. ~~Also~~Additionally, on March 1, ~~2018,~~2019, NCLH ~~also~~ granted 0.5 million performance-based restricted share units to certain members of our management team, ~~0.5 million performance-based restricted share units,~~ which vest upon the achievement of certain pre-established performance targets established for the 2019 and ~~which amount assumes~~2020 calendar years and the ~~maximum level~~satisfaction of ~~achievement.~~an additional time-based vesting requirement that generally requires continued employment through March 1, 2022.

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The following ~~table sets forth~~is a summary of NCLH restricted share unit activity ~~and includes 0.3 million previously awarded performance-based restricted share awards for which the grant date was established in 2018 (the number reported assumes the maximum level of achievement),~~ for the ~~period presented:~~

Number of
Time-Based
Awards Weighted-
Average Grant
Date Fair Value Number of
Performance-
Based Awards Weighted-
Average Grant
Date Fair Value Number of
Market-
Based Awards Weighted-
Average Grant
Date Fair Value
Non-vested as of January 1, 2018 2,555,477 $ 50.86 — $ — 50,000 $ 59.43
Granted 1,613,077 $ 56.73 843,998 $ 56.58 — $ —
Vested (1,032,760 ) $ 50.66 — $ — — $ —
Forfeited or expired (142,227 ) $ 53.31 (18,384 ) $ 56.43 — $ —
Non-vested as of September 30, 2018 2,993,567 $ 53.98 825,614 $ 56.58 50,000 $ 59.43

~~Share-based compensation expense for the three and~~ nine months ended September 30, 2018 was $29.0 million and $88.8 million, respectively, of which $24.9 million and $77.0 million, respectively, was recorded in marketing, general and administrative expense and $4.1 million and $11.8 million, respectively, was recorded in payroll and related expense, in the consolidated statements of operations.2019:


	Number of	Weighted-		Number of		Weighted-		Number of	Weighted-
	Time-Based	Average Grant		Performance-		Average Grant		Market-	Average Grant
	Awards	Date Fair Value		Based Awards		Date Fair Value		Based Awards	Date Fair Value
Non-vested as of January 1, 2019	2,973,032	$	53.98	825,614		$	56.58	50,000	$	59.43
Granted	1,929,495		55.00	462,282	(1)		55.27	—		—
Vested	(1,430,124)		53.02	(121,000)			56.27	—		—
Forfeited or expired	(167,261)		55.03	(37,500)			56.27	—		—
Non-vested as of September 30, 2019	3,305,142	$	54.94	1,129,396		$	56.09	50,000	$	59.43

(1)	Number of performance-based restricted share units included assumes maximum achievement of performance targets.

~~Share-based~~The compensation expense recognized for share-based compensation for the three and nine months ended September 30, 2017 was $21.5 million and $63.7 million, respectively, of which $18.6 million and $57.1 million, respectively, was recorded in marketing, general and administrative expense and $2.9 million and $6.6 million, respectively, was recorded in payroll and related expense inperiods presented include the ~~consolidated statements of operations.~~following (in thousands):

~~10.~~


	Three Months Ended				Nine Months Ended
	September 30,				September 30,
	2019		2018		2019		2018
Payroll and related expense	$	4,489	$	4,012	$	12,974	$	11,779
Marketing, general and administrative expense		20,931		24,950		69,096		77,018
Total share-based compensation expense	$	25,420	$	28,962	$	82,070	$	88,797

11. Commitments and Contingencies

Ship Construction Contracts

Project Leonardo will introduce an additional ~~six~~6 ships, each approximately 140,000 Gross Tons with approximately 3,300 Berths, with expected delivery dates from 2022 through 2027, subject to certain conditions. The effectiveness of the confirmed orders to construct two of the ships, expected to be delivered in 2026 and 2027, is contingent, among other things, upon the Company’s entry into committed financing arrangements. We have a Breakaway Plus Class Ship, Norwegian Encore, with approximately 168,000 Gross Tons ~~with~~and 4,000 Berths, that was delivered in October 2019. We refer you to Note 15 – “Subsequent Events” for additional information. For the Regent brand, we have orders for 2 Explorer Class Ships, Seven Seas Splendor and an additional ship, to be delivered in 2020 and 2023, respectively. Each of the Explorer Class Ships will be approximately 55,000 Gross Tons and 750 Berths. For the Oceania Cruises brand, we have orders for 2 Allura Class Ships to be delivered in 2022 and 2025. Each of the Allura Class Ships will be approximately 67,000 Gross Tons and 1,200 Berths.

The combined contract prices of the 11 ships on order for delivery ~~in the fall~~as of September 30, 2019 ~~and an Explorer Class Ship, Seven Seas Splendor, with~~was approximately ~~55,000 Gross Tons with 750 Berths, on order for delivery in the winter of 2020.~~

~~The combined contract price of the aforementioned eight ships is approximately €7.1~~€8.3 billion, or ~~$8.4~~$9.0 billion based on the euro/U.S. dollar exchange rate as of September 30, ~~2018. For six of the ships, we~~2019. We have obtained export credit financing which is expected to fund approximately 80% of the contract price of each ship, ~~expected to be delivered through 2025,~~ subject to certain conditions. We do not anticipate any contractual ~~breach~~breaches or ~~cancellation of the contracts~~cancellations to ~~build these ships; however,~~occur. However, if any such events were to occur, it could result in, among other things, the forfeiture of prior deposits or payments made by us ~~subject to certain refund guarantees,~~ and potential claims and impairment losses which may materially impact our business, financial condition and results of operations.

Litigation

Helms-Burton Act

In August 2019, 2 lawsuits were filed against NCLH in the United States District Court for the Southern District of Florida under Title III of the Cuban Liberty and Solidarity (Libertad) Act of 1996, also known as the Helms-Burton Act. The complaint filed by Havana Docks Corporation alleges it holds an interest in the Havana Cruise Port Terminal and the complaint filed by Javier Garcia-Bengochea alleges that he holds an interest in the Port of Santiago, Cuba, both of which were expropriated by the Cuban Government. The complaints further allege that the Company “trafficked” in those properties by embarking and disembarking passengers at these facilities. The plaintiffs seek all available statutory remedies, including the value of the expropriated property, plus interest, treble damages, attorneys’ fees and costs.

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Although we believe we have meritorious defenses to the claims and intend to vigorously defend these matters, as of September 30, 2019, we are unable to reasonably estimate any potential contingent loss from these matters due to a lack of legal precedence.

Other

In the normal course of our business, various other claims and lawsuits have been filed or are pending against us. Most of these claims and lawsuits are covered by insurance and, accordingly, the maximum amount of our liability is typically limited to our deductible amount.

Nonetheless, the ultimate outcome of these claims and lawsuits that are not covered by insurance cannot be determined at this time. We have evaluated our overall exposure with respect to all of our threatened and pending litigation and, to the extent required, we have accrued amounts for all estimable probable losses associated with our deemed exposure. We are currently unable to estimate any other potential contingent losses beyond those accrued, as discovery is not complete nor is adequate information available to estimate such range of loss or potential recovery. However, based on our current knowledge, we do not believe that the aggregate amount or range of reasonably possible losses with respect to these matters will be material to our consolidated results of operations, financial condition or cash flows. We intend to vigorously defend our legal position on all claims and, to the extent necessary, seek recovery.

~~11.~~

~~Other Income (Expense), Net~~

12. Other Income, Net

For the three months ended September 30, 2019, other income, net was $10.3 million primarily due to gains from foreign currency exchange. For the nine months ended September 30, 2019, other income, net was $13.4 million, primarily due to gains from insurance proceeds, a litigation settlement and foreign currency exchange. For the three and nine months ended September 30, 2018, other income, ~~(expense),~~ net was ~~income of~~ $0.1 million and $11.4 million, respectively, primarily due to foreign currency exchange gains.

13. Income Tax Expense

For the three ~~months ended September 30, 2017, other income (expense), net was expense of $3.3 million, due to foreign currency exchange losses. For the~~and nine months ended September 30, ~~2017, other~~2019, we had an income ~~(expense), net was~~tax expense of ~~$11.7~~$7.1 million ~~due~~and a benefit of $23.4 million, respectively. During 2018, we implemented certain tax restructuring strategies that created our ability to ~~foreign currency exchange losses, partially offset by~~utilize the net operating loss carryforwards of Prestige, for which we had previously provided a ~~gain from an insurance claim.~~full valuation allowance. As disclosed in our Annual Report on Form 10-K, we engaged in a section 382 study to determine the amount of the Prestige net operating loss carryforwards that could be utilized against future taxable income. In March 2019, we completed this study resulting in a tax benefit of $35.7 million in connection with the reversal of substantially all of the valuation allowance.

~~12.~~

14. Supplemental Cash Flow Information

For the nine months ended September 30, 2019 and 2018, we had non-cash investing activities ~~related to~~in connection with property and equipment of $17.4 million and $17.8 million, respectively.

15.Subsequent Events

In October 2019, we took delivery of Norwegian Encore. We had export financing in place for 80% of the contract price. The associated $882.9 million term loan bears interest at 3.92% with a maturity date of October 30, 2031. Principal and ~~net foreign currency adjustments~~interest payments shall be paid semiannually.

In October 2019, we entered into a $75 million revolving credit line agreement that matures in October 2020 and bears interest at LIBOR plus a margin of $4.5 million related to euro-denominated debt related to the financing of two of our Project Leonardo ships. For the nine months ended September 30, 2017, we had non-cash investing activities related to property and equipment of $15.2 million and non-cash investing activities related to capital leases of $13.3 million.0.95%.

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Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations

Cautionary Statement Concerning Forward-Looking Statements

Certain statements in this report constitute forward-looking statements within the meaning of the U.S. federal securities laws intended to qualify for the safe harbor from liability established by the Private Securities Litigation Reform Act of 1995. All statements other than statements of historical facts contained, or incorporated by reference, in this report, including, without limitation, those regarding our business strategy, financial position, results of operations, plans, prospects and objectives of management for future operations (including expected fleet additions, development plans, ~~and~~ objectives relating to our ~~activities)~~activities and expected performance in new markets), are forward-looking statements. Many, but not all, of these statements can be found by looking for words like “expect,” “anticipate,” “goal,” “project,” “plan,” “believe,” “seek,” “will,” “may,” “forecast,” “estimate,” ~~“intend”~~“intend,” “future” and similar words. Forward-looking statements do not guarantee future performance and may involve risks, uncertainties and other factors which could cause our actual results, performance or achievements to differ materially from the future results, performance or achievements expressed or implied in those forward-looking statements. Examples of these risks, uncertainties and other factors include, but are not limited to the impact ~~of the following:~~

of:

·●

adverse events impacting the security of travel, such as terrorist acts, armed conflict and threats thereof, acts of piracy, and other international events;

·●

adverse incidents involving cruise ships;

·●

adverse general economic and related factors, such as fluctuating or increasing levels of unemployment, underemployment and the volatility of fuel prices, declines in the securities and real estate markets, and perceptions of these conditions that decrease the level of disposable income of consumers or consumer confidence;

·●

the spread of epidemics and viral outbreaks;

·●

~~our expansion into and investments in new markets;~~

~~the risks and increased costs associated with operating internationally;~~

breaches in data security or other disturbances to our information technology and other networks;

·●

the risks and increased costs associated with operating internationally;

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changes in fuel prices and/or other cruise operating costs;

·●

fluctuations in foreign currency exchange rates;

·●

our expansion into and investments in new markets;

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overcapacity in key markets or globally;

·●

the unavailability of attractive port destinations;

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our inability to obtain adequate insurance coverage;

·●

evolving requirements and regulations regarding data privacy and protection and any actual or perceived compliance failures by us;

·●

our indebtedness and restrictions in the agreements governing our indebtedness that limit our flexibility in operating our ~~business;~~

business, including the significant portion of ~~our~~ assets ~~pledged as~~that are collateral under ~~our existing debt agreements and the ability of our creditors to accelerate the repayment of our indebtedness;~~these agreements;

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volatility and disruptions in the global credit and financial markets, which may adversely affect our ability to borrow and could increase our counterparty credit risks, including those under our credit facilities, derivatives, contingent obligations, insurance contracts and new ship progress payment guarantees;

·●

our inability to recruit or retain qualified personnel or the loss of key personnel;

·●

delays in our shipbuilding program and ship repairs, maintenance and refurbishments;

·●

our reliance on third parties to provide hotel management services to certain ships and certain other services;

18●

future increases in the price of, or major changes or reduction in, commercial airline services;

·●

amendments to our collective bargaining agreements for crew members and other employee relation issues;

·●

~~our inability to obtain adequate insurance coverage;~~

~~future changes relating to how external distribution channels sell and market our cruises;~~

pending or threatened litigation, investigations and enforcement actions;

·●

our ~~ability~~inability to keep pace with developments in technology;

·●

seasonal variations in passenger fare rates and occupancy levels at different times of the year;

·●

changes involving the tax and environmental regulatory regimes in which we operate; and

·●

other factors set forth under “Risk ~~Factors.”~~ Factors” herein and in our Annual Report on Form 10-K for the year ended December 31, 2018, filed with the SEC on February 27, 2019 (“Annual Report on Form 10-K”).

The above examples are not exhaustive and new risks ~~uncertainties and other factors~~ emerge from time to time. Such forward-looking statements are based on our current beliefs, assumptions, expectations, estimates and projections regarding our present and future business strategies and the environment in which we expect to operate in the future. These forward-looking statements speak only as of the date made. We expressly disclaim any obligation or undertaking to release publicly any updates or revisions to any forward-looking statement to reflect any change in our expectations with regard thereto or any change of events, conditions or circumstances on which any such statement was based, except as required by law.

Terminology

This report includes certain non-GAAP financial measures, such as Net Revenue, Net Yield, Net Cruise Cost, Adjusted Net Cruise Cost Excluding Fuel, Adjusted ~~Net Income~~EBITDA and Adjusted ~~EBITDA.~~Net Income. Definitions of these ~~non-GAAP~~non- GAAP financial measures are included below. ~~We refer you to “Results of Operations” below for~~For further information about our non-GAAP financial measures including detailed adjustments made in ~~calculating~~calculation our non-GAAP financial measures and a reconciliation to the most directly comparable GAAP financial ~~measure.~~

measure, we refer you to “Results of Operations” below.

Unless otherwise indicated in this report, the following terms have the meanings set forth below:

•~~Acquisition of Prestige.~~ ~~In November 2014 we acquired Prestige in a cash and stock transaction, including the assumption of debt, for total consideration of $3.025 billion.~~

•~~Adjusted EBITDA.~~ ~~EBITDA adjusted for other income (expense), net and other supplemental adjustments.~~

•~~Adjusted Net Cruise Cost Excluding Fuel.~~ ~~Net Cruise Cost Excluding Fuel expense adjusted for supplemental adjustments.~~

•~~Adjusted Net Income.~~ ~~Net income adjusted for supplemental adjustments.~~

•~~Berths.~~ ~~Double occupancy capacity per cabin (single occupancy per studio cabin) although many cabins can accommodate three or more passengers.~~

•~~Breakaway Four Loan~~~~. €729.9 million Breakaway Four loan maturing in 2029.~~

•~~Breakaway Plus Class Ships~~~~. Norwegian Escape, Norwegian Joy, Norwegian Bliss and a ship on order, Norwegian Encore.~~

•~~Business Enhancement Capital Expenditures~~~~. Capital expenditures other than those related to new ship construction and ROI Capital Expenditures.~~

•~~Capacity Days.~~ ~~Available Berths multiplied by the number of cruise days for the period.~~

•~~Constant Currency.~~ A calculation whereby foreign currency-denominated revenue and expenses in a period are converted at the U.S. dollar exchange rate of a comparable period to eliminate the effects of foreign exchange fluctuations.

•~~Dry-dock.~~ A process whereby a ship is positioned in a large basin where all of the fresh/sea water is pumped out in order to carry out cleaning and repairs of those parts of a ship which are below the water line.

•~~EBITDA.~~ ~~Earnings before interest, taxes, and depreciation and amortization.~~

19●

Acquisition of Prestige. In November 2014, we acquired Prestige in a cash and stock transaction for total consideration of $3.025 billion, including the assumption of debt.

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Adjusted EBITDA. EBITDA adjusted for other income, net and other supplemental adjustments.

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Adjusted Net Cruise Cost Excluding Fuel. Net Cruise Cost Excluding Fuel adjusted for supplemental adjustments.

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Adjusted Net Income. Net income adjusted for supplemental adjustments.

•~~Explorer Class Ships.~~~~Regent’s Seven Seas Explorer and a ship on order, Seven Seas Splendor.~~

•~~GAAP.~~ ~~Generally accepted accounting principles in the U.S.~~

•~~Gross Cruise Cost.~~ ~~The sum~~Table of ~~total cruise operating expense and marketing, general and administrative expense.~~Contents

•

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Allura Class Ships. Oceania Cruises’ two ships on order.

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Berths. Double occupancy capacity per cabin (single occupancy per studio cabin) even though many cabins can accommodate three or more passengers.

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Breakaway Plus Class Ships. Norwegian Escape, Norwegian Joy, Norwegian Bliss and Norwegian Encore.

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Capacity Days. Available Berths multiplied by the number of cruise days for the period.

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Constant Currency. A calculation whereby foreign currency-denominated revenue and expenses in a period are converted at the U.S. dollar exchange rate of a comparable period to eliminate the effects of foreign exchange fluctuations.

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Dry-dock. A process whereby a ship is positioned in a large basin where all of the fresh/sea water is pumped out in order to carry out cleaning and repairs of those parts of a ship which are below the water line.

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EBITDA. Earnings before interest, taxes, and depreciation and amortization.

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Explorer Class Ships. Regent’s Seven Seas Explorer, Seven Seas Splendor, and an additional ship on order.

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GAAP. Generally accepted accounting principles in the U.S.

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Gross Cruise Cost. The sum of total cruise operating expense and marketing, general and administrative expense.

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Gross Tons. A unit of enclosed passenger space on a cruise ship, such that one gross ton equals 100 cubic feet or 2.831 cubic meters.

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Gross Yield. Total revenue per Capacity Day.

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Net Cruise Cost. Gross Cruise Cost less commissions, transportation and other expense and onboard and other expense.

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Net Cruise Cost Excluding Fuel. Net Cruise Cost less fuel expense.

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Net Revenue. Total revenue less commissions, transportation and other expense and onboard and other expense.

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Net Yield. Net Revenue per Capacity Day.

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Occupancy Percentage. The ratio of Passenger Cruise Days to Capacity Days. A percentage greater than 100% indicates that three or more passengers occupied some cabins.

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Passenger Cruise Days. The number of passengers carried for the period, multiplied by the number of days in their respective cruises.

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Project Leonardo. The next generation of ships for our Norwegian brand.

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Revolving Loan Facility. $875.0 million senior secured revolving credit facility.

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SEC. U.S. Securities and Exchange Commission.

Table of ~~enclosed passenger space on a cruise ship, such that one gross ton equals 100 cubic feet or 2.831 cubic meters.~~Contents

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Shipboard Retirement Plan. An unfunded defined benefit pension plan for certain crew members which computes benefits based on years of service, subject to certain requirements.

•~~Gross Yield.~~ ~~Total revenue per Capacity Day.~~

•~~Net Cruise Cost.~~ ~~Gross Cruise Cost less commissions, transportation and other expense and onboard and other expense.~~

•~~Net Cruise Cost Excluding Fuel.~~ ~~Net Cruise Cost less fuel expense.~~

•~~Net Revenue.~~ ~~Total revenue less commissions, transportation and other expense and onboard and other expense.~~

•~~Net Yield.~~ ~~Net Revenue per Capacity Day.~~

•~~Occupancy Percentage~~~~. The ratio of Passenger Cruise Days to Capacity Days. A percentage greater than 100% indicates that three or more passengers occupied some cabins.~~

•~~Passenger Cruise Days.~~ ~~The number of passengers carried for the period, multiplied by the number of days in their respective cruises.~~

•~~Project Leonardo.~~~~The next generation of ships for our Norwegian brand.~~

•~~Revolving Loan Facility~~~~. $875.0 million senior secured revolving credit facility maturing in 2021.~~

•~~ROI Capital Expenditures.~~~~Comprised of project-based capital expenditures which have a quantified return on investment.~~

•~~SEC.~~~~U.S. Securities and Exchange Commission.~~

•~~Secondary Equity Offering(s).~~~~Secondary public offering(s) of NCLH’s ordinary shares in March 2018, November 2017, August 2017, December 2015, August 2015, May 2015, March 2015, March 2014, December 2013 and August 2013.~~

•~~Shipboard Retirement Plan~~~~. An unfunded defined benefit pension plan for certain crew members which computes benefits based on years of service, subject to certain requirements.~~

Non-GAAP Financial Measures

We use certain non-GAAP financial measures, such as Net Revenue, Net Yield, Net Cruise Cost, Adjusted Net Cruise Cost Excluding Fuel, Adjusted ~~Net Income~~EBITDA and Adjusted ~~EBITDA~~Net Income, to enable us to analyze our performance. ~~We refer you to~~See “Terminology” ~~above~~ for the definitions of these and other non-GAAP financial measures. We utilize Net Revenue and Net Yield to manage our business on a day-to-day basis and believe that they are the most relevant measures of our revenue performance because they reflect the revenue we earned by us net of significant variable costs. In measuring our ability to control costs in a manner that positively impacts net income, we believe changes in Net Cruise Cost and Adjusted Net Cruise Cost Excluding Fuel to be the most relevant indicators of our performance.

As our business includes the sourcing of passengers and deployment of vessels outside of the U.S., a portion of our revenue and expenses are denominated in foreign currencies, particularly British pound, Canadian dollar, ~~euro~~Euro and Australian dollar which are subject to fluctuations in currency exchange rates versus our reporting currency, the U.S. dollar. In order to monitor results excluding these fluctuations, we calculate certain non-GAAP measures on a Constant Currency basis, whereby current period revenue and expenses denominated in foreign currencies are converted to U.S. dollars using currency exchange rates of the comparable period. We believe that presenting these non-GAAP measures on both a reported and Constant Currency basis is useful in providing a more comprehensive view of trends in our business.

We believe that Adjusted EBITDA is appropriate as a supplemental financial measure as it is used by management to assess operating performance. We also believe that Adjusted EBITDA is a useful measure in determining our performance as it reflects certain operating drivers of our business, such as sales growth, operating costs, marketing, general and administrative expense and other operating income and expense. Adjusted EBITDA is not a defined term under GAAP nor is it intended to be a measure of liquidity or cash flows from operations or a measure comparable to net income, as it does not take into account certain requirements such as capital expenditures and related depreciation, principal and interest payments and tax payments and it includes other supplemental adjustments.

In addition, Adjusted Net Income is a non-GAAP financial measure that excludes certain amounts and is used to supplement GAAP net income. We use Adjusted Net Income as a key performance measure of our earnings performance. We believe that both management and investors benefit from referring to this non-GAAP financial measure in assessing our performance and when planning, forecasting and analyzing future periods. This non-GAAP financial measure also facilitates management’s internal comparison to our historical performance. The amounts excluded in the presentation of this non-GAAP financial measure may vary from period to period; accordingly, our presentation of Adjusted Net Income may not be indicative of future adjustments or results. For example, for the nine months ended September 30, 2018, we ~~incurred $6.3~~had a benefit of $0.9 million related to ~~the extinguishment~~reimbursements of ~~debt due to the partial redemption of our 4.750% Senior Notes due 2021.~~legal costs. We included this as an adjustment in the reconciliation of Adjusted Net Income since the ~~extinguishment of debt is~~gains are not representative of our day-to-day operations and we have included similar adjustments in prior periods; however, this adjustment did not occur ~~in the comparable prior period or the three months ended September 30, 2018, each of which~~and is ~~presented with this Quarterly Report on Form 10-Q and this adjustment is therefore~~ not included in the ~~reconciliation for these periods.~~

comparative period presented within this Form 10-Q.

You are encouraged to evaluate each adjustment used in calculating our non-GAAP financial measures and the reasons we consider our non-GAAP financial measures appropriate for supplemental analysis. In evaluating our non-GAAP financial measures, you should be aware that in the future we may incur expenses similar to the adjustments in our presentation. Our non-GAAP financial measures have limitations as analytical tools, and you should not consider these measures in isolation or as a substitute for analysis of our results as reported under GAAP. Our presentation of our non-GAAP financial measures should not be construed as an inference that our future results will be unaffected by unusual or non-recurring items. Our non-GAAP financial measures may not be comparable to other companies. Please see a historical reconciliation of these measures to the most comparable GAAP measure presented in our consolidated financial statements below in the “Results of Operations” section.

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Financial Presentation

We categorize revenue from our cruise and cruise-related activities as either “passenger ticket” revenue or “onboard and other” revenue. Passenger ticket revenue and onboard and other revenue vary according to ~~the~~ product offering, the size of the ship in operation, the length of cruises operated and the markets in which the ship operates. Our revenue is seasonal based on demand for cruises, which has historically been strongest during the Northern Hemisphere’s summer months. Passenger ticket revenue primarily consists of revenue for accommodations, meals in certain restaurants on the ship, certain onboard entertainment, and includes revenue for service charges and air and land transportation to and from the ship to the extent guests purchase these items from us. Onboard and other revenue primarily consists of revenue from ~~casino,~~gaming, beverage sales, shore excursions, specialty dining, retail sales, spa services and photo services. Our onboard revenue is derived from onboard activities we perform directly or that are performed by independent concessionaires, from which we receive a share of their revenue.

Our cruise operating expense is classified as follows:

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Commissions, transportation and other primarily consists of direct costs associated with passenger ticket revenue. These costs include travel agent commissions, air and land transportation expenses, related credit card fees, certain port expenses and the costs associated with shore excursions and hotel accommodations included as part of the overall cruise purchase price.

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Onboard and other primarily consists of direct costs incurred in connection with onboard and other revenue, including casino, beverage sales and shore excursions.

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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.

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Fuel includes fuel costs, the impact of certain fuel hedges and fuel delivery costs.

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Food consists of food costs for passengers and crew on certain ships.

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Other consists of repairs and maintenance (including Dry-dock costs), ship insurance and other ship expenses.

~~Onboard and other primarily consists of direct costs incurred in connection with onboard and other revenue, including casino, beverage sales and shore excursions expenses.~~

~~Fuel includes fuel costs, the impact of certain fuel hedges and fuel delivery costs.~~

~~Food consists of food costs for passengers and crew on certain ships.~~

~~Other consists of repairs and maintenance, including Dry-dock costs, ship insurance and other ship expenses.~~

Critical Accounting Policies

~~We refer you to~~For a discussion of our critical accounting policies and estimates, see “Critical Accounting Policies” included in our Annual Report ~~filed with~~on Form 10-K for the ~~SEC,~~year ended December 31, 2018 under ~~“Item 7— Management’s~~the caption “Management’s Discussion and Analysis of Financial Condition and Results of ~~Operations” for a discussion of our critical accounting policies and estimates.~~Operations.” We have made no significant changes to our critical accounting policies and estimates from those described in our Annual ~~Report.~~Report on Form 10-K for the year ended December 31, 2018.

Quarterly Overview

Three ~~Months Ended~~months ended September 30, 2019 (“2019”) compared to three months ended September 30, 2018 (“2018”) ~~Compared to Three Months Ended September 30, 2017 (“2017”)~~

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Total revenue increased 3.0% to $1.9 billion compared to slightly less than $1.9 billion.

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Net Revenue increased 1.4% to $1.5 billion compared to $1.4 billion.

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Net income was $455.3 million compared to $475.4 million.

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Operating income was $512.3 million compared to $551.3 million.

~~Total revenue increased 12.5% to $1.9 billion from $1.7 billion.~~

~~Net Revenue increased 11.8% to $1.4 billion from $1.3 billion.~~

~~Net income was $475.4 million, as compared to $396.2 million.~~

~~Operating income increased to $551.3 million from $477.5 million.~~

~~Adjusted Net Income was $511.5 million in 2018, which included $36.0 million~~Table of adjustments primarily consisting of expenses related to non-cash compensation, amortization of intangible assets and certain other adjustments. Adjusted Net Income was $432.1 million in 2017, which included $35.8 million of adjustments primarily consisting of expenses related to non-cash compensation and certain other adjustments.Contents

~~Adjusted EBITDA improved 14.0%~~

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Adjusted Net Income was $486.2 million in 2019, which included $30.9 million of adjustments primarily consisting of expenses related to non-cash compensation and amortization of intangible assets. Adjusted Net Income was $511.5 million in 2018, which included $36.0 million of adjustments primarily consisting of expenses related to non-cash compensation and amortization of intangible assets.

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Adjusted EBITDA decreased 4.1% to $694.5 million compared to $724.5 ~~million compared to $635.8~~ million.

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In June 2019, the Office of Foreign Assets Control of the United States Department of the Treasury removed the authorization for group people-to-people educational travel by U.S. persons to Cuba. As a result, we have stopped sailings to Cuba effective June 5, 2019 and revised the affected iteneraries. This regulatory change has had a negative impact on earnings for both the three and nine months ended September 30, 2019. We expect a negative impact to continue throughout the remainder of 2019 and into 2020 as a result of the cessation of cruises to Cuba.

We refer you to our “Results of Operations” below for a calculation of Net Revenue, Adjusted ~~EBITDA~~Net Income and Adjusted ~~Net Income.~~EBITDA.

Results of Operations

The following table sets forth operating data as a percentage of total revenue:


	Three Months Ended				Nine Months Ended
	September 30,				September 30,
	2019		2018		2019		2018
Revenue
Passenger ticket	71.8	%	71.8	%	70.8	%	70.6	%
Onboard and other	28.2	%	28.2	%	29.2	%	29.4	%
Total revenue	100.0	%	100.0	%	100.0	%	100.0	%
Cruise operating expense
Commissions, transportation and other	17.3	%	16.2	%	17.2	%	16.5	%
Onboard and other	6.4	%	6.3	%	6.2	%	6.0	%
Payroll and related	12.3	%	12.3	%	13.8	%	14.1	%
Fuel	5.2	%	5.4	%	6.0	%	6.2	%
Food	3.0	%	3.0	%	3.3	%	3.4	%
Other	7.6	%	6.8	%	9.2	%	8.6	%
Total cruise operating expense	51.8	%	50.0	%	55.7	%	54.8	%
Other operating expense
Marketing, general and administrative	13.2	%	12.7	%	14.9	%	14.6	%
Depreciation and amortization	8.2	%	7.7	%	9.7	%	8.9	%
Total other operating expense	21.4	%	20.4	%	24.6	%	23.5	%
Operating income	26.8	%	29.6	%	19.7	%	21.7	%
Non-operating income (expense)
Interest expense, net	(3.1)	%	(3.7)	%	(4.0)	%	(4.3)	%
Other income, net	0.5	%	—	%	0.3	%	0.2	%
Total non-operating income (expense)	(2.6)	%	(3.7)	%	(3.7)	%	(4.1)	%
Net income before income taxes	24.2	%	25.9	%	16.0	%	17.6	%
Income tax benefit (expense)	(0.4)	%	(0.3)	%	0.4	%	(0.3)	%
Net income	23.8	%	25.6	%	16.4	%	17.3	%

Three Months Ended
September 30, Nine Months Ended
September 30,
2018 2017 2018 2017
Revenue
Passenger ticket 71.8 % 72.2 % 70.6 % 70.3 %
Onboard and other 28.2 % 27.8 % 29.4 % 29.7 %
Total revenue 100.0 % 100.0 % 100.0 % 100.0 %
Cruise operating expense
Commissions, transportation and other 16.2 % 16.1 % 16.5 % 16.5 %
Onboard and other 6.3 % 6.0 % 6.0 % 6.0 %
Payroll and related 12.3 % 12.5 % 14.1 % 14.3 %
Fuel 5.4 % 5.5 % 6.2 % 6.4 %
Food 3.0 % 3.3 % 3.4 % 3.6 %
Other 6.8 % 7.4 % 8.6 % 8.9 %
Total cruise operating expense 50.0 % 50.8 % 54.8 % 55.7 %
Other operating expense
Marketing, general and administrative 12.7 % 12.2 % 14.6 % 14.1 %
Depreciation and amortization 7.7 % 8.1 % 8.9 % 9.1 %
Total other operating expense 20.4 % 20.3 % 23.5 % 23.2 %
Operating income 29.6 % 28.9 % 21.7 % 21.1 %
Non-operating (expense) income
Interest expense, net (3.7 )% (4.0 )% (4.3 )% (4.4 )%
Other income (expense), net 0.0 % (0.2 )% 0.2 % (0.3 )%
Total non-operating expense (3.7 )% (4.2 )% (4.1 )% (4.7 )%
Net income before income taxes 25.9 % 24.7 % 17.6 % 16.4 %
Income tax expense (0.3 )% (0.7 )% (0.3 )% (0.4 )%
Net income 25.6 % 24.0 % 17.3 % 16.0 %

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The following table sets forth selected statistical information:


	Three Months Ended				Nine Months Ended
	September 30,				September 30,
	2019		2018		2019		2018
Passengers carried	726,921		823,413		2,054,908		2,128,673
Passenger Cruise Days	5,387,662		5,493,932		15,377,185		15,177,982
Capacity Days	4,854,292		4,941,643		14,198,092		13,958,331
Occupancy Percentage	111.0	%	111.2	%	108.3	%	108.7	%

Three Months Ended September 30, Nine Months Ended September 30,
2018 2017 2018 2017
Passengers carried 823,413 741,216 2,128,673 1,868,512
Passenger Cruise Days 5,493,932 5,071,115 15,177,982 13,819,421
Capacity Days 4,941,643 4,590,789 13,958,331 12,811,155
Occupancy Percentage 111.2 % 110.5 % 108.7 % 107.9 %

Net Revenue, Gross Yield and Net Yield were calculated as follows (in thousands, except Capacity Days and Yield data):


	Three Months Ended						Nine Months Ended
	September 30,						September 30,
			2019						2019
			Constant						Constant
	2019		Currency		2018		2019		Currency		2018
Passenger ticket revenue	$	1,373,779	$	1,385,715	$	1,334,460	$	3,526,456	$	3,561,062	$	3,301,372
Onboard and other revenue		540,072		540,071		523,896		1,455,302		1,455,302		1,372,561
Total revenue		1,913,851		1,925,786		1,858,356		4,981,758		5,016,364		4,673,933
Less:
Commissions, transportation and other expense		330,893		333,330		301,349		857,848		865,013		769,564
Onboard and other expense		122,971		122,971		117,747		309,447		309,447		281,232
Net Revenue	$	1,459,987	$	1,469,485	$	1,439,260	$	3,814,463	$	3,841,904	$	3,623,137
Capacity Days		4,854,292		4,854,292		4,941,643		14,198,092		14,198,092		13,958,331
Gross Yield	$	394.26	$	396.72	$	376.06	$	350.88	$	353.31	$	334.85
Net Yield	$	300.76	$	302.72	$	291.25	$	268.66	$	270.59	$	259.57

Three Months Ended September 30, Nine Months Ended September 30,
2018 2018
Constant
Currency 2017 2018 2018
Constant
Currency 2017
Passenger ticket revenue $ 1,334,460 $ 1,336,565 $ 1,192,023 $ 3,301,372 $ 3,280,610 $ 2,916,731
Onboard and other revenue 523,896 523,896 459,715 1,372,561 1,372,561 1,229,891
Total revenue 1,858,356 1,860,461 1,651,738 4,673,933 4,653,171 4,146,622
Less:
Commissions, transportation and other expense 301,349 301,614 266,173 769,564 764,601 683,628
Onboard and other expense 117,747 117,747 98,476 281,232 281,232 250,254
Net Revenue $ 1,439,260 $ 1,441,100 $ 1,287,089 $ 3,623,137 $ 3,607,338 $ 3,212,740
Capacity Days 4,941,643 4,941,643 4,590,789 13,958,331 13,958,331 12,811,155
Gross Yield $ 376.06 $ 376.49 $ 359.79 $ 334.85 $ 333.36 $ 323.67
Net Yield $ 291.25 $ 291.62 $ 280.36 $ 259.57 $ 258.44 $ 250.78

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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):

Three Months Ended September 30, Nine Months Ended September 30,
2018 2018
Constant
Currency 2017 2018 2018
Constant
Currency 2017
Total cruise operating expense $ 928,944 $ 927,984 $ 838,165 $ 2,559,818 $ 2,546,877 $ 2,310,205
Marketing, general and administrative expense 234,459 235,189 201,588 685,882 683,625 586,099
Gross Cruise Cost 1,163,403 1,163,173 1,039,753 3,245,700 3,230,502 2,896,304
Less:
Commissions, transportation and other expense 301,349 301,614 266,173 769,564 764,601 683,628
Onboard and other expense 117,747 117,747 98,476 281,232 281,232 250,254
Net Cruise Cost 744,307 743,812 675,104 2,194,904 2,184,669 1,962,422
Less: Fuel expense 99,643 99,643 91,231 288,286 288,286 266,780
Net Cruise Cost Excluding Fuel 644,664 644,169 583,873 1,906,618 1,896,383 1,695,642
Less Non-GAAP Adjustments:
Non-cash deferred compensation expense (1) 543 543 878 1,627 1,627 2,524
Non-cash share-based compensation expense (2) 28,962 28,962 21,444 88,797 88,797 63,664
Secondary Equity Offering expenses (3) — — 462 — — 462
Severance payments and other fees (4) — — — — — 2,399
Acquisition of Prestige expenses (5) — — — — — 500
Other (6) — — 999 (912 ) (912 ) 2,605
Adjusted Net Cruise Cost Excluding Fuel $ 615,159 $ 614,664 $ 560,090 $ 1,817,106 $ 1,806,871 $ 1,623,488

Capacity Days 4,941,643 4,941,643 4,590,789 13,958,331 13,958,331 12,811,155
Gross Cruise Cost per Capacity Day $ 235.43 $ 235.38 $ 226.49 $ 232.53 $ 231.44 $ 226.08
Net Cruise Cost per Capacity Day $ 150.62 $ 150.52 $ 147.06 $ 157.25 $ 156.51 $ 153.18
Net Cruise Cost Excluding Fuel per Capacity Day $ 130.46 $ 130.36 $ 127.18 $ 136.59 $ 135.86 $ 132.36
Adjusted Net Cruise Cost Excluding Fuel per Capacity Day $ 124.48 $ 124.38 $ 122.00 $ 130.18 $ 129.45 $ 126.72


	Three Months Ended						Nine Months Ended
	September 30,						September 30,
			2019						2019
			Constant						Constant
	2019		Currency		2018		2019		Currency		2018
Total cruise operating expense	$	990,764	$	996,548	$	928,944	$	2,775,839	$	2,792,417	$	2,559,818
Marketing, general and administrative expense		254,535		255,904		234,459		742,857		747,431		685,882
Gross Cruise Cost		1,245,299		1,252,452		1,163,403		3,518,696		3,539,848		3,245,700
Less:
Commissions, transportation and other expense		330,893		333,330		301,349		857,848		865,013		769,564
Onboard and other expense		122,971		122,971		117,747		309,447		309,447		281,232
Net Cruise Cost		791,435		796,151		744,307		2,351,401		2,365,388		2,194,904
Less: Fuel expense		98,943		98,943		99,643		297,727		297,727		288,286
Net Cruise Cost Excluding Fuel		692,492		697,208		644,664		2,053,674		2,067,661		1,906,618
Less Non-GAAP Adjustments:
Non-cash deferred compensation (1)		533		533		543		1,601		1,601		1,627
Non-cash share-based compensation (2)		25,420		25,420		28,962		82,070		82,070		88,797
Redeployment of Norwegian Joy (3)		—		—		—		7,051		7,051		—
Other (4)		—		—		—		—		—		(912)
Adjusted Net Cruise Cost Excluding Fuel	$	666,539	$	671,255	$	615,159	$	1,962,952	$	1,976,939	$	1,817,106
Capacity Days		4,854,292		4,854,292		4,941,643		14,198,092		14,198,092		13,958,331
Gross Cruise Cost per Capacity Day	$	256.54	$	258.01	$	235.43	$	247.83	$	249.32	$	232.53
Net Cruise Cost per Capacity Day	$	163.04	$	164.01	$	150.62	$	165.61	$	166.60	$	157.25
Net Cruise Cost Excluding Fuel per Capacity Day	$	142.66	$	143.63	$	130.46	$	144.64	$	145.63	$	136.59
Adjusted Net Cruise Cost Excluding Fuel per Capacity Day	$	137.31	$	138.28	$	124.48	$	138.25	$	139.24	$	130.18

(1)

Non-cash deferred compensation expenses related to the crew pension plan and other crew expenses, which are included in payroll and related expense.

(2)

Non-cash share-based compensation expenses related to equity awards, which are included in marketing, general and administrative expense and payroll and related expense.

(3)

~~Secondary Equity Offering~~Expenses related to the redeployment of Norwegian Joy from Asia to the U.S. and the closing of the Shanghai office, which are included in other cruise operating expense and marketing, general and administrative expense.

(4)	Primarily related to expenses and reimbursements related to certain legal costs, which are included in marketing, general and administrative expense.
	~~(4)~~	~~Severance payments and other fees related to restructuring costs and other severance arrangements are included in marketing, general and administrative expense.~~
	~~(5)~~	~~Acquisition of Prestige expenses are included in marketing, general and administrative expense.~~
	~~(6)~~	~~Other primarily related to expenses and reimbursements for certain legal costs included in marketing, general and administrative expense.~~

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Adjusted Net Income was calculated as follows (in thousands):

Three Months Ended September 30, Nine Months Ended September 30,
2018 2017 2018 2017
Net income $ 475,412 $ 396,227 $ 810,335 $ 660,806
Non-GAAP Adjustments:
Non-cash deferred compensation expenses (1) 864 878 2,591 2,524
Non-cash share-based compensation expenses (2) 28,962 21,444 88,797 63,664
Secondary Equity Offering expenses (3) — 462 — 462
Severance payments and other fees (4) — — — 2,399
Acquisition of Prestige expenses (5) — — — 500
Amortization of intangible assets (6) 6,222 7,568 18,666 22,704
Extinguishment of debt (7) — — 6,346 —
Impairment on assets held for sale (8) — 2,935 — 2,935
Tax benefit (9) — 1,550 — 1,550
Other (10) — 999 (912 ) 2,605
Adjusted Net Income $ 511,460 $ 432,063 $ 925,823 $ 760,149


	Three Months Ended				Nine Months Ended
	September 30,				September 30,
	2019		2018		2019		2018
Net income	$	455,309	$	475,412	$	817,989	$	810,335
Non-GAAP Adjustments:
Non-cash deferred compensation (1)		878		864		2,636		2,591
Non-cash share-based compensation (2)		25,420		28,962		82,070		88,797
Extinguishment and modification of debt (3)		—		—		7,268		6,346
Amortization of intangible assets (4)		4,603		6,222		13,809		18,666
Redeployment of Norwegian Joy (5)		—		—		30,629		—
Other (6)		—		—		—		(912)
Adjusted Net Income	$	486,210	$	511,460	$	954,401	$	925,823

(1)

Non-cash deferred compensation expenses related to the crew pension plan and other crew expenses, which are included in payroll and related expense and other income, ~~(expense),~~ net.

(2)

Non-cash share-based compensation expenses related to equity awards, which are included in marketing, general and administrative expense and payroll and related expense.

(3)

~~Secondary Equity Offering expenses~~Losses on extinguishment of debt and modification of debt are included in ~~marketing, general and administrative expense.~~interest expense, net.

	(4)	~~Severance payments and other fees related to restructuring costs and other severance arrangements are included in marketing, general and administrative expense.~~
	~~(5)~~	~~Acquisition of Prestige expenses are included in marketing, general and administrative expense.~~
	~~(6)~~	Amortization of intangible assets related to the Acquisition of Prestige, which are included in depreciation and amortization expense.

(5)

~~(7)~~

~~Losses on extinguishments of debt due~~Expenses related to the ~~partial redemption~~redeployment of ~~our 4.750% Senior Notes due 2021,~~Norwegian Joy from Asia to the U.S. and the closing of the Shanghai office, which are included in ~~interest~~other cruise operating expense, ~~net.~~marketing, general and administrative expense and depreciation and amortization expense.

(6)	~~(8)~~	~~Loss on sale of Hawaii land-based operations.~~
	~~(9)~~	~~Tax benefit primarily due to the reversal of tax contingency reserves in 2017.~~
	~~(10)~~	~~Other primarily~~Primarily related to expenses and reimbursements ~~for~~related to certain legal costs, which are included in marketing, general and administrative expense.

EBITDA and Adjusted EBITDA were calculated as follows (in thousands):

Three Months Ended
September 30, Nine Months Ended
September 30,
2018 2017 2018 2017
Net income $ 475,412 $ 396,227 $ 810,335 $ 660,806
Interest expense, net 69,540 66,339 202,226 183,497
Income tax expense 6,399 11,625 11,378 17,451
Depreciation and amortization 143,700 134,532 415,648 376,878
EBITDA 695,051 608,723 1,439,587 1,238,632
Other (income) expense (1) (98 ) 3,262 (11,354 ) 11,686
Non-GAAP Adjustments:
Non-cash deferred compensation expenses (2) 543 878 1,627 2,524
Non-cash share-based compensation expenses (3) 28,962 21,444 88,797 63,664
Secondary Equity Offering expenses (4) — 462 — 462
Severance payments and other fees (5) — — — 2,399
Acquisition of Prestige expenses (6) — — — 500
Other (7) — 999 (912 ) 2,605
Adjusted EBITDA $ 724,458 $ 635,768 $ 1,517,745 $ 1,322,472


	Three Months Ended				Nine Months Ended
	September 30,				September 30,
	2019		2018		2019		2018
Net income	$	455,309	$	475,412	$	817,989	$	810,335
Interest expense, net		60,188		69,540		199,660		202,226
Income tax (benefit) expense		7,091		6,399		(23,381)		11,378
Depreciation and amortization expense		156,215		143,700		482,227		415,648
EBITDA		678,803		695,051		1,476,495		1,439,587
Other income, net (1)		(10,251)		(98)		(13,433)		(11,354)
Non-GAAP Adjustments:
Non-cash deferred compensation (2)		533		543		1,601		1,627
Non-cash share-based compensation (3)		25,420		28,962		82,070		88,797
Redeployment of Norwegian Joy (4)		—		—		7,051		—
Other (5)		—		—		—		(912)
Adjusted EBITDA	$	694,505	$	724,458	$	1,553,784	$	1,517,745

(1)	Primarily consists of gains and losses, net for proceeds from insurance, a litigation settlement and foreign currency exchanges.

(2)	Non-cash deferred compensation expenses related to the crew pension plan and other crew expenses, which are included in payroll and related expense.

(3)	Non-cash share-based compensation expenses related to equity awards, which are included in marketing, general and administrative expense and payroll and related expense.

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(4)	~~Secondary Equity Offering expenses~~Expenses related to the redeployment of Norwegian Joy from Asia to the U.S. and the closing of the Shanghai office, which are included in other cruise operating expense and marketing, general and administrative expense.

(5)	~~Severance payments and other fees related to restructuring costs and other severance arrangements, which are included in marketing, general and administrative expense.~~
~~(6)~~	~~Acquisition of Prestige expenses are included in marketing, general and administrative expense.~~
~~(7)~~	~~Other primarily~~Primarily related to expenses and reimbursements ~~for~~related to certain legal costs, which are included in marketing, general and administrative expense.

Three ~~Months Ended~~months ended September 30, 2019 (“2019”) compared to three months ended September 30, 2018 (“2018”) ~~Compared to Three Months Ended September 30, 2017 (“2017”)~~

Revenue

Total revenue increased ~~12.5%~~3.0% to $1.9 billion in ~~2018, as~~2019 compared to ~~$1.7~~slightly less than $1.9 billion in ~~2017.~~2018. Gross Yield increased ~~4.5%~~4.8%. Net Revenue increased ~~11.8%~~1.4% to $1.5 billion in 2019 from $1.4 billion in 2018 ~~from $1.3 billion in 2017,~~ due to ~~an increase in Capacity Days of 7.6% and~~ an increase in Net Yield of ~~3.9%. The increase~~3.3% a decrease in Capacity Days ~~was primarily due to Norwegian Bliss joining our fleet in the second quarter~~ of ~~2018.~~1.8%. The increase in Gross Yield and Net Yield was primarily due to an increase in passenger ticket pricing and ~~Occupancy Percentage.~~onboard spending. The decrease in Capacity Days was primarily due to Dry-docks and hurricane relief efforts. On a Constant Currency basis, Net Yield increased ~~4.0%~~3.9%.

Expense

Total cruise operating expense increased ~~10.8%~~6.7% in ~~2018, as~~2019 compared to ~~2017,~~2018 primarily due to continuing effects from the ~~increase in Capacity Days.~~redeployment of Norwegian Joy during the second quarter of 2019 and incremental direct costs related to air promotions. Gross Cruise Cost increased ~~11.9%~~7.0% in ~~2018, as~~2019 compared to ~~2017, primarily~~2018 due to ~~higher~~an increase in total cruise operating expense and ~~to a lesser extent, due to higher~~ marketing, general and administrative expenses. Total other operating expense increased ~~12.5%~~8.6% in ~~2018, as~~2019 compared to ~~2017.~~2018. Marketing, general and administrative expenses increased primarily due to ~~higher incentive compensation expense.~~an increase in advertising and promotions. Depreciation and amortization ~~expense~~expenses increased primarily due to ~~the addition of Norwegian Bliss and~~ ship improvement projects. On a Capacity Day basis, Net Cruise Cost ~~per Capacity Day~~ increased ~~2.4% (2.4%~~8.2% (8.9% on a Constant Currency basis) primarily due to ~~higher~~an increase in marketing, general and administrative ~~expenses.~~expenses, Dry-dock expenses and other ship operating costs. Adjusted Net Cruise Cost Excluding Fuel per Capacity Day increased ~~2.0% (2.0%~~10.3% (11.1% on a Constant Currency basis).

Interest expense, net was $60.2 million in 2019 compared to $69.5 million in ~~2018, as compared to $66.3 million in 2017.~~2018. The ~~increase in interest expense~~decrease reflects ~~additional~~lower outstanding debt ~~incurred in connection~~balances and lower margins associated with the delivery of Norwegian Bliss in April 2018, Project Leonardo financing, and higher interest rates due to an increase in London Interbank Offered Rate (“LIBOR”). The increase in interest expense wasrecent refinancings, partially offset by ~~the benefit from the October 2017 full redemption of our 4.625% Senior Notes due 2020 and the benefit from the April 2018 partial $135.0 million redemption of our 4.75% Senior Notes due 2021.~~newbuild financings.

Other income, ~~(expense),~~ net was income of $10.3 million in 2019 compared to $0.1 million in ~~2018, as compared to expense of $3.3 million in 2017. Other~~2018. In 2019, the income ~~in 2018 was~~ primarily ~~due~~related to gains on foreign currency ~~exchange; whereas, other expense in 2017 was primarily due to losses on foreign currency~~ exchange.

~~Income~~In 2019, we had an income tax expense ~~was~~of $7.1 million compared to $6.4 million in ~~2018, as~~2018.

Nine months ended September 30, 2019 (“2019”) compared to $11.6 million in 2017. Income tax in 2017 reflects a tax benefit of $1.3 million associated with the reversal of prior years’ tax contingency reserves due to the expiration of the statute of limitations.

~~Nine Months Ended~~nine months ended September 30, 2018 (“2018”) ~~Compared to Nine Months Ended September 30, 2017 (“2017”)~~

Revenue

Total revenue increased ~~12.7%~~6.6% to $5.0 billion in 2019 from $4.7 billion in ~~2018, as compared to $4.1 billion in 2017.~~2018. Gross Yield increased ~~3.5%~~4.8%. Net Revenue increased ~~12.8%~~5.3% to $3.8 billion in 2019 from $3.6 billion in 2018 ~~from $3.2 billion in 2017,~~ due to an increase in Capacity Days of ~~9.0%~~1.7% and an increase in Net Yield of 3.5%. The increase in Capacity Days was primarily due to a full nine months of Norwegian Bliss in 2019 and was partially offset by a reduction in Capacity Days while Norwegian Joy was undergoing revitalization and ~~Norwegian Bliss joining our fleet in the second quarter of 2017~~repairs and ~~2018, respectively.~~maintenance including scheduled Dry-docks. The increase in Gross Yield and Net Yield was primarily due to an increase in passenger ticket pricing and ~~Occupancy Percentage.~~an increase in onboard spending. On a Constant Currency basis, Net Yield increased ~~3.1%~~4.2%.

Expense

Total cruise operating expense increased ~~10.8%~~8.4% in ~~2018, as~~2019 compared to ~~2017,~~2018 primarily due to a full nine months of Norwegian Bliss in 2019, the ~~increase in Capacity Days.~~redeployment of Norwegian Joy during the second quarter of 2019, and incremental direct costs related to air promotions. Gross Cruise Cost increased ~~12.1%~~8.4% in ~~2018, as~~2019 compared to ~~2017,~~2018 due to ~~higher~~an increase in total cruise operating expense and ~~to a lesser extent, due to higher~~ marketing, general and administrative expenses. Total other operating expense increased ~~14.4%~~

Table of Contents

11.2% in ~~2018, as~~2019 compared to ~~2017.~~2018. Marketing, general and administrative expenses increased primarily due to ~~higher incentive compensation expense.~~an increase in advertising and promotions. Depreciation and amortization ~~expense~~expenses increased primarily due to the additions of Norwegian ~~Joy and~~Bliss, renovation of Norwegian ~~Bliss~~Joy and ship improvement projects. On a Capacity Day basis, Net Cruise Cost ~~per Capacity Day~~ increased ~~2.7% (2.2%~~5.3% (5.9% on a Constant Currency basis) primarily due to ~~higher~~an increase in marketing, general and administrative expenses, costs associated with the cessation of cruises to Cuba and ~~to a lesser extent, due to higher maintenance and repairs, including Dry-dock expenses.~~other ship operating costs. Adjusted Net Cruise Cost Excluding Fuel per Capacity Day increased ~~2.7% (2.2%~~6.2% (7.0% on a Constant Currency basis).

Interest expense, net was $199.7 million in 2019 compared to $202.2 million in ~~2018, as compared to $183.5 million in 2017.~~2018. The ~~increase~~decrease in interest expense reflects ~~additional~~lower outstanding debt ~~incurred in connection~~balances and lower margins associated with ~~the delivery of Norwegian Joy~~recent refinancings, partially offset by newbuild financings and ~~Norwegian Bliss in the second quarter of 2017 and 2018, respectively, Project Leonardo financing, and higher interest rates due to~~ an increase in LIBOR. ~~The increase~~Interest expense, net also included losses on extinguishment and modification of debt of $7.3 million in ~~interest expense was partially offset by the benefit from the October 2017 full redemption of our 4.625% Senior Notes due 2020~~2019 and ~~the benefit from the April 2018 partial $135.0 million redemption of our 4.75% Senior Notes due 2021. Also included in 2018 is~~ $6.3 million ~~of redemption premium and write-off of fees~~ in ~~connection with the partial redemption.~~

2018.

Other income, ~~(expense),~~ net was income of $13.4 million in 2019 compared to $11.4 million in ~~2018, as compared~~2018. In 2019, the income primarily related to ~~expense of $11.7 million in 2017. Other income~~gains from insurance proceeds, a litigation settlement and foreign currency exchange, and in 2018, ~~was~~the income primarily ~~due~~related to gains on foreign currency ~~exchange; whereas, other~~exchange.

In 2019, we had an income tax benefit of $23.4 million compared to an expense ~~in 2017 was primarily due to losses on foreign currency exchange, partially offset by an insurance settlement.~~

~~Income tax expense was~~of $11.4 million in 2018. During 2018, ~~as compared~~we implemented certain tax restructuring strategies that created our ability to ~~$17.5 million~~utilize the net operating loss carryforwards of Prestige, for which we had previously provided a full valuation allowance. As a result, in ~~2017. Income tax in 2017 reflects~~2019 we recorded a tax benefit of ~~$1.3~~$35.7 million ~~associated~~in connection with the reversal of ~~prior years’ tax contingency reserves due to the expiration~~substantially all of the ~~statute of limitations.~~valuation allowance.

Liquidity and Capital Resources

General

As of September 30, ~~2018,~~2019, our liquidity was ~~$1.2~~$1.3 billion consisting of ~~$278.5~~$400.5 million in cash and cash equivalents and $875.0 million available under our Revolving Loan Facility. Our primary ongoing liquidity requirements are to finance working capital, capital expenditures and debt service.

As of September 30, ~~2018,~~2019, we had a working capital deficit of ~~$2.4~~$2.6 billion. This deficit included ~~$1.6~~$1.9 billion of advance ticket sales, which represents the total revenue we collect in advance of sailing dates and accordingly is substantially more like deferred revenue balances rather than actual current cash liabilities. Our business model, along with our Revolving Loan Facility, allows us to operate with a working capital deficit and still meet our operating, investing and financing needs.

We evaluate potential sources of additional liquidity, including the capital markets, in the ordinary course of business. We will continue to evaluate opportunities to optimize our capital structure, taking into consideration our current and expected capital requirements, our assessment of prevailing market conditions and expectations regarding future conditions, and the contractual and other restrictions to which we are subject.

Sources and Uses of Cash

~~Nine Months Ended~~In this section, references to “2019” refer to the nine months ended September 30, ~~2018 (“2018”) Compared~~2019 and references to ~~Nine Months Ended~~“2018” refer to the nine months ended September 30, ~~2017 (“2017”)~~

2018.

Net cash provided by operating activities was $1.5 billion in 2019 as compared to $1.7 billion in ~~2018, as compared to $1.4 billion in 2017.~~2018. The net cash provided by operating activities included timing differences in cash receipts and payments relating to operating assets and liabilities. Advance ticket sales increased by $262.9 million in 2019 compared to $316.3 million in ~~2018~~2018. Deferred tax assets/liabilities decreased by $25.9 million in 2019 compared to ~~$187.1~~an increase of $3.9 million in ~~2017. Without~~2018 primarily due to the ~~adoption~~reversal of Topic 606, advance ticket sales would have increased by $308.0 million in 2018. We refer you to Note 2— “Summary of Significant Accounting Policies— Revenue and Expense Recognition” in the notes to consolidated financial statements for a discussion of the effects of the adoption of Topic 606.

valuation allowances.

Net cash used in investing activities was $644.9 million in 2019 and $1.3 billion in 2018, ~~as compared to $1.2 billion in 2017,~~ primarily related to payments for ~~ship deliveries,~~ ships under construction and ship improvement projects.

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Net cash used in financing activities was $610.3 million in 2019 primarily due to a dividend of $341.0 million for the repurchase of NCLH ordinary shares, net repayments of our Revolving Loan Facility and the net refinancing of term loans partially offset by the issuance of new debt. Net cash used in financing activities was $324.0 million in 2018 ~~as compared to net cash provided by financing activities of $192.2 million in 2017. The net cash used in financing activities in 2018 was~~ primarily due to net repayments of our Revolving Loan Facility and other loan facilities offset by borrowings on newbuild facilities. ~~We made a partial redemption in April~~During 2018, ofwe redeemed $135.0 million principal amount of ~~our 4.75%~~the $700.0 million aggregate principal amount of outstanding 4.750% Senior Notes due 2021. Additionally, in 2018, we issued a dividend for the repurchase of NCLH ordinary shares and we incurred deferred financing fees related to financing of newbuild ships. Net cash provided by financing activities in 2017 was primarily due to the proceeds from our Breakaway Four Loan, partially offset by the repayments of other loan facilities, our net repayment of our then existing revolving loan facility and payment of deferred financing fees.

Future Capital Commitments

Future capital commitments consist of contracted commitments, including ship construction contracts, and future expected capital expenditures necessary for operations as well as our ship refurbishment projects. As of September 30, ~~2018,~~2019, our anticipated capital expenditures were ~~$0.3~~$1.0 billion for the remainder of ~~2018~~2019 and ~~$1.4~~$1.2 billion and ~~$0.9~~$0.8 billion for the years ending December 31, ~~2019~~2020 and ~~2020,~~2021, respectively. We have export credit financing in place for the anticipated expenditures related to ship construction contracts of ~~$0.05~~$0.7 billion for the remainder of ~~2018, $0.6 billion for~~ 2019 and $0.5 billion for ~~2020.~~2020 and $0.2 billion for 2021. These future expected capital expenditures will significantly increase our depreciation and amortization expense as we take delivery of the ships.

Project Leonardo will introduce an additional six ships, each approximately 140,000 Gross Tons with approximately 3,300 Berths, with expected delivery dates from 2022 through 2027, subject to certain conditions. The effectiveness of the confirmed orders to construct two of the ships, expected to be delivered in 2026 and 2027, is contingent, among other things, upon the Company’s entry into committed financing arrangements, with terms acceptable to us. We haveNorwegian Encore, a Breakaway Plus Class Ship ~~Norwegian Encore,~~with approximately 168,000 Gross Tons ~~with~~and 4,000 Berths, was delivered in October 2019. For the Regent brand, we have orders for two Explorer Class Ships, Seven Seas Splendor and an additional ship, to be delivered in 2020 and 2023, respectively. Each of the Explorer Class Ships 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 2022 and 2025. Each of the Allura Class Ships will be approximately 67,000 Gross Tons and 1,200 Berths.

The combined contract prices of the 11 ships on order for delivery, including Norwegian Encore, which was delivered in ~~the fall of~~October 2019, ~~and an Explorer Class Ship, Seven Seas Splendor,~~was approximately ~~55,000 Gross Tons with 750 Berths, on order for delivery in the winter of 2020.~~

Capitalized interest for the three and nine months ended September 30, 2019 was $8.9 million and $25.3 million, respectively, and for the three and nine months ended September 30, 2018 was $6.4 million and $23.2 million, respectively, ~~and for the three and nine months ended September 30, 2017 it was $6.2 million and $21.8 million, respectively,~~ primarily associated with the construction of our newbuild ships.

Off-Balance Sheet ~~Transactions~~

Arrangements

None.

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Contractual Obligations

As of September 30, ~~2018,~~2019 our contractual obligations with initial or remaining terms in excess of one year, including interest payments on long-term debt obligations, included the following (in thousands):

Total Less than
1 year 1-3 years 3-5 years More than
5 years
Long-term debt (1) $ 6,679,612 $ 679,908 $ 2,205,859 $ 1,882,111 $ 1,911,734
Operating leases (2) 131,737 17,456 31,180 27,562 55,539
Ship construction contracts (3) 5,184,623 107,904 1,446,033 1,971,744 1,658,942
Port facilities (4) 1,002,302 61,757 116,169 116,432 707,944
Interest (5) 1,016,039 219,023 399,608 189,715 207,693
Other (6)(7) 1,428,885 250,748 431,078 357,587 389,472
Total (8) $ 15,443,198 $ 1,336,796 $ 4,629,927 $ 4,545,151 $ 4,931,324




Less than





More than

Total

1 year

1-3 years

3-5 years

5 years
Long-term debt (1)

$
6,377,983

$
605,106

$
2,051,990

$
2,194,802

$
1,526,085
Operating leases (2)

277,235

31,707

63,973

62,762

118,793
Ship construction contracts (3)

5,239,506

1,283,986

1,229,429

1,921,886

804,205
Port facilities (4)

2,067,778

62,430

129,372

136,685

1,739,291
Interest (5)

875,181

199,635

338,179

190,277

147,090
Other (6)

1,362,419

268,576

455,388

393,518

244,937
Total (7)

$
16,200,102

$
2,451,440

$
4,268,331

$
4,899,930

$
4,580,401
(1) Long-term debt includes ~~discounts and~~ premiums aggregating ~~$0.4~~$0.2 million and ~~capital~~finance leases. Long-term debt excludes deferred financing fees which are a direct deduction from the carrying value of the related debt liability in the consolidated balance sheets.
(2) Operating leases are primarily for offices, motor vehicles and office equipment.
(3) Ship construction contracts are for our newbuild ships based on the euro/U.S. dollar exchange rate as of September 30, ~~2018.~~2019. Export credit financing is in place from syndicates of banks. The amount does not include the two Project Leonardo ships, one Explorer Class Ship and two Allura Class Ships which ~~are~~were still subject to ~~financing,~~certain Italian government approvals as ~~described below.~~of September 30, 2019. The Explorer Class Ship and one Allura Class Ship received Italian government approvals in October 2019. The contractual obligations for these two ships includes the following (in thousands):




Less than





More than

Total

1 year

1-3 years

3-5 years

5 years
Ship construction contracts

$
1,148,527

$
90,610

$
114,679

$
943,238

$
—

(4) Port facilities represent our usage of certain port facilities.
(5) Interest includes fixed and variable rates with LIBOR held constant as of September 30, ~~2018.~~2019.
(6) Other includes future commitments for service, maintenance and other ~~Business Enhancement Capital Expenditures~~business enhancement capital expenditures contracts.
(7) ~~Other also includes revisions to amounts previously included in our Annual Report, for the periods of less than 3 years.~~
~~(8)~~ $~~0.5~~0.7 million of unrecognized tax benefits were excluded from the “Total” contractual obligations as of September 30, ~~2018~~2019 because an estimate of the timing of future tax settlements cannot be reasonably determined.
The two Project Leonardo ships expected to be delivered in 2026 and 2027 are not included in the table above because the effectiveness of the confirmed orders to construct the two ships is contingent, among other things, upon the Company’s entry into committed financing arrangements. The ship construction contract commitments include the following (in thousands):
Total Less than
1 year 1-3 years 3-5 years More than
5 years
Ship construction contracts $ 1,856,640 $ 37,133 $ — $ — $ 1,819,507
Other
Certain service providers may require collateral in the normal course of our business. The amount of collateral may change based on certain terms and conditions.
As a routine part of our business, depending on market conditions, exchange rates, pricing and our strategy for growth, we regularly consider opportunities to enter into contracts for the building of additional ships. We may also consider the sale of ships, potential acquisitions and strategic alliances. If any of these were to occur, they may be financed through the incurrence of additional permitted indebtedness, through cash flows from operations, or through the issuance of debt, equity or equity-related securities.
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 and restrict our ability to

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pay dividends. Substantially all of our ships and other property and equipment are pledged as collateral for certain of our debt. We believe we were in compliance with these covenants as of September 30, ~~2018.~~

2019.

In addition, our existing debt agreements restrict, and any of our future debt arrangements may restrict, among other things, the ability of NCLC to make distributions and/or pay dividends to NCLH and NCLH’s ability to pay cash dividends to its shareholders. NCLH is a holding company and depends upon its subsidiaries for their ability to pay distributions to finance any dividend or pay any other obligations of NCLH. However, we do not believe that these restrictions have had or are expected to have an impact on our ability to meet any cash obligations.

The impact of changes in world economies and especially the global credit markets can create a challenging environment and may reduce future consumer demand for cruises and adversely affect our counterparty credit risks. In the event this environment deteriorates, our business, financial condition and results of operations could be adversely impacted.

We believe our cash on hand, expected future operating cash inflows, additional available borrowings under our Revolving Loan Facility 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 ~~twelve-month~~12-month period. There is no assurance that cash flows from operations and additional financings will be available in the future to fund our future obligations.

Item 3. Quantitative and Qualitative Disclosures About Market Risk
General
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. The financial impacts of these derivative instruments are primarily offset by corresponding changes in the underlying exposures being hedged. We achieve this by closely matching the notional, term and conditions of the derivatives with the underlying risk being hedged. We do not hold or issue derivatives for trading or other speculative purposes. Derivative positions are monitored using techniques including market valuations and sensitivity analyses.
Interest Rate Risk
As of September 30, ~~2018,~~2019, we had interest rate swap and collar agreements to hedge our exposure to interest rate movements and to manage our interest ~~expense by hedging the interest rate risks associated with variable rates on our outstanding borrowings.~~expense. As of September 30, ~~2018, 73%~~2019, 75% of our debt was fixed and ~~27%~~25% was variable, which includes the effects of the interest rate swaps and collars. The notional amount of outstanding debt associated with the interest rate derivative agreements as of September 30, 2019 was $1.7 billion. As of December 31, 2018, 72% of our debt was fixed and 28% was variable, which includes the effects of the interest rate swaps. The notional amount of our outstanding debt associated with the interest rate swap agreements was $1.0 billion as of December 31, 2018. The change in our fixed rate percentage from December 31, 2018 to September 30, ~~2018. As of December 31, 2017, 54% of our debt~~2019 was ~~fixed and 46% was variable, which includes the effects of the interest rate swaps. The notional amount of outstanding debt associated with the~~due to an additional interest rate swap ~~agreements was $218.6 million as of December 31, 2017. The change from December 31, 2017 to September 30, 2018 was due to additional interest rate swaps~~ executed and the repayment of certain variable rate debt.
Based on our September 30, ~~2018~~2019 outstanding variable rate debt balance, a one percentage point increase in annual LIBOR interest rates would increase our annual interest expense by approximately ~~$18.4~~$11.2 million excluding the effects of capitalization of interest.
Foreign Currency Exchange Rate Risk
As of September 30, ~~2018,~~2019, 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. 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 ~~€2.4~~€2.0 billion, or ~~$2.7~~$2.2 billion based on the euro/U.S. dollar exchange rate as of September 30, ~~2018.~~2019. As of December 31, ~~2017,~~2018, the payments not hedged aggregated ~~€3.3~~€2.2 billion, or ~~$4.0~~$2.5 billion, based on the euro/U.S. dollar exchange rate as of December 31, ~~2017.~~2018. The change from December 31, ~~2017~~2018 to September 30, ~~2018~~2019 was due to ~~the delivery~~

Table of ~~a ship in April 2018 and~~ Contents

additional foreign exchange derivatives executed. We estimate that a 10% change in the euro as of September 30, ~~2018~~2019 would result in a ~~$0.3~~$0.2 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. Fuel expense, as a percentage of our total cruise operating expense, was ~~10.7%~~10.0% and ~~10.9%~~10.7% for the three months ended September 30, ~~2018~~2019 and ~~2017,~~2018, respectively, and ~~11.3%~~10.7% and ~~11.5%~~11.3% for the nine months ended September 30, ~~2018~~2019 and ~~2017,~~2018, respectively. We use fuel derivative agreements to mitigate the financial impact of fluctuations in fuel prices and as of September 30, 2019, we had hedged approximately 70%, 56%, 50% and 18% of our remaining 2019, 2020, 2021 and 2022 projected metric tons of fuel purchases, respectively. As of December 31, 2018, we had hedged approximately ~~64%~~57%, ~~48%~~53% and ~~38%~~33% of our ~~remaining 2018,~~ 2019, 2020 and ~~2020, respectively,~~2021 projected metric tons of fuel ~~purchases. As of~~purchases, respectively. Additional hedges executed between December 31, ~~2017, we had hedged approximately 65%, 48%~~2018 and ~~26% of~~September 30, 2019 have lowered our ~~2018, 2019 and 2020, respectively, projected metric tons of fuel purchases. The change in~~ fuel price ~~risk from December 31, 2017 to September 30, 2018 was due to additional fuel hedges executed.~~

risk.

We estimate that a 10% increase in our weighted-average fuel price would increase our anticipated ~~2018~~2019 fuel expense by ~~$11.9~~$10.2 million. This increase would be partially offset by an increase in the fair value of our fuel swap agreements of ~~$6.3~~$5.4 million. Fair value of our derivative contracts is derived using valuation models that utilize the income valuation approach. These valuation models take into account the contract terms such as maturity, ~~and~~as well as other inputs such as fuel types, fuel curves, creditworthiness of the counterparty and the Company, as well as other data points.

Item 4. Controls and Procedures
Evaluation of Disclosure Controls and Procedures
Our management has evaluated, with the participation of our Chief Executive Officer and Chief Financial Officer, the effectiveness of our disclosure controls and procedures, as such term is defined in Rule 13a-15(e) under the Securities Exchange Act of 1934, as amended, ~~(“Securities Exchange Act”),~~ as of September 30, ~~2018.~~2019. There are inherent limitations toin the effectiveness of any system of disclosure controls and procedures, including the possibility of human error and the circumvention or overriding of the controls and procedures. Accordingly, even effective disclosure controls and procedures can only provide reasonable assurance of achieving their control objectives. Based upon management’s evaluation, our Chief Executive Officer and Chief Financial Officer concluded that our disclosure controls and procedures were effective as of September 30, ~~2018,~~2019 to provide reasonable assurance that the information required to be disclosed by us in the reports we file or submit under the Securities Exchange Act of 1934, as amended, is recorded, processed, summarized and reported within the time periods specified in the rules and forms of the SEC, and that it is accumulated and communicated to our management, including our Chief Executive Officer and Chief Financial Officer, as appropriate, to allow timely decisions regarding required disclosure.
Changes in Internal Control Over Financial Reporting
There have been no changes in our internal control over financial reporting during the quarter ended September 30, ~~2018~~2019 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.
Limitations on the Effectiveness of Controls
It should be noted that any system of controls, however well designed and operated, can provide only reasonable, and not absolute, assurance that the objectives of the system will be met. In addition, the design of any control system is based in part upon certain assumptions about the likelihood of future events. Because of these and other inherent limitations of control systems, there is only the reasonable assurance that our controls will succeed in achieving their goals under all potential future conditions.

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PART II. OTHER INFORMATION
Item 1. Legal Proceedings
Booksafe Travel Protection Plan
OnAs previously disclosed in our Quarterly Reports on Form 10-Q for the quarters ended March 31, 2019 and June 30, 2019, on September 21, 2018, a ~~purported~~proposed class-action lawsuit was filed by Marta and Jerry Phillips and others against NCL Corporation Ltd. in the United States District Court for the Southern District of Florida relating to the marketing and sales of our Booksafe Travel Protection Plan. The plaintiffs purport to represent an alleged class of passengers who purchased Booksafe Travel Protection Plans. The complaint ~~alleges~~alleged that the Company concealed that it received proceeds on the sale of the travel insurance portion of the plan. The complaint sought an unspecified amount of damages, fees and costs. The Company moved to invoke the arbitration clause of the ticket contract to move the case out of Federal Court. On May 29, 2019, the Court granted the motion and compelled the plaintiffs to submit their claims to arbitration on an individual basis, dismissing the claims before the Court with prejudice. The plaintiffs have filed a notice of appeal. We believe we have meritorious defenses to the claim and that any liability which may arise as a result of this action will not have a material impact on our consolidated financial statements.
Helms-Burton Act
On August 27, 2019, two lawsuits were filed against Norwegian Cruise Line Holdings Ltd., the parent company of NCL Corporation Ltd., in the United States District Court for the Southern District of Florida under Title III of the Cuban Liberty and Solidarity (Libertad) Act of 1996, also known as the Helms-Burton Act. The complaint filed by Havana Docks Corporation alleges it holds an interest in the Havana Cruise Port Terminal and the complaint filed by Javier Garcia-Bengochea alleges that he holds an interest in the Port of Santiago, Cuba, both of which were expropriated by the Cuban Government. The complaints further allege that the Company “trafficked” in those properties by embarking and disembarking passengers at these facilities. The plaintiffs seek all available statutory remedies, including the value of the expropriated property, plus interest, treble damages, attorneys’ fees and costs. We believe we have meritorious defenses to the claims and intend to vigorously defend these matters.
Other
In the normal course of our business, various other claims and lawsuits have been filed or are pending against us. Most of these claims and lawsuits are covered by insurance and, accordingly, the maximum amount of our liability is typically limited to our deductible amount.
Nonetheless, the ultimate outcome of these claims and lawsuits that are not covered by insurance cannot be determined at this time. We have evaluated our overall exposure with respect to all of our threatened and pending litigation and, to the extent required, we have accrued amounts for all estimable probable losses associated with our deemed exposure. We are currently unable to estimate any other potential contingent losses beyond those accrued, as discovery is not complete nor is adequate information available to estimate such range of loss or potential recovery. However, based on our current knowledge, we do not believe that the aggregate amount or range of reasonably possible losses with respect to these matters will be material to our consolidated results of operations, financial condition or cash flows. We intend to vigorously defend our legal position on all claims and, to the extent necessary, seek recovery.
Item 1A. Risk Factors
We refer you to our Annual Report on Form 10-K for a discussion of the risk factors that affect our business and financial results. We wish to caution ~~the reader~~you that the risk factors discussed in “Item 1A. Risk Factors” in our Annual Report on Form 10-K, elsewhere in this report or other SEC filings, could cause future results to differ materially from those stated in any forward-looking statements.
Other than updates to the risk factors set forth below, there have been no material changes in our risk factors from those disclosed in our Annual ~~Report.~~Report on Form 10-K.

~~Breaches in data security or other disturbances to our information technology and other networks could impair our operations and have a material adverse impact on~~Table of Contents

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 ~~integrity~~availability of ports, including the specific port facility at which our guests will embark and ~~reliability~~disembark, is affected by a number of factors, including, but not limited to, existing capacity constraints, security, safety and environmental concerns, adverse weather conditions and natural disasters such as hurricanes, floods, typhoons and earthquakes, financial limitations on port development, political instability, exclusivity arrangements that ports may have with our ~~information technology systems~~competitors, local governmental regulations and fees, local community concerns about port development and other ~~networks are crucial~~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. For example, we had to temporarily change certain itineraries in the Caribbean due to damage some ports sustained during an active hurricane season in 2017. There can be no assurance that our ports of call will not be similarly affected in the future. Additionally, in June 2019, the Office of Foreign Assets Control of the United States Department of the Treasury removed the authorization for group people-to-people educational travel by U.S. persons to Cuba. Concurrently, the United States Department of Commerce’s Bureau of Industry and Security removed the authorization to travel for most non-commercial aircraft and all passenger and recreational vessels, including cruise ships, on temporary sojourn in Cuba. Combined, these rulings effectively eliminated the ability of cruise lines to offer cruise travel to Cuba. Limitations on the availability of ports of call or on the availability of shore excursions and other service providers at such ports have adversely affected our business, ~~operations. Disruptions to these systems~~financial condition and results of operations in the past and could do so in the future.

Litigation, enforcement actions, fines or ~~networks~~penalties could ~~impair~~adversely impact our financial condition or results of operations and ~~have~~damage our reputation.

Our business is subject to various U.S. and international laws and regulations that could lead to enforcement actions, fines, civil or criminal penalties or the assertion of litigation claims and damages. In addition, improper conduct by our employees or agents could damage our reputation and/or lead to litigation or legal proceedings that could result in civil or criminal penalties, including substantial monetary fines. In certain circumstances, it may not be economical to defend against such matters, and a legal strategy may not ultimately result in us prevailing in a matter. Such events could lead to an adverse impact on our financial condition or results of operations.

As a result of any ship-related or other incidents, litigation claims, enforcement actions and ~~negatively affect~~regulatory actions and investigations, including, but not limited to, those arising from personal injury, loss of life, loss of or damage to personal property, business interruption losses or environmental damage to any affected coastal waters and the surrounding area, may be asserted or brought against various parties, including us and/or our ~~reputation~~cruise brands. The time and ~~customer demand. In addition,~~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. Government announced that, effective May 2, 2019, it will no longer suspend the right of private parties to bring litigation under Title III of the Cuban Liberty and Solidarity (Libertad) Act of 1996, popularly known as the Helms-Burton Act, allowing 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 (e.g., hurricanes, earthquakes, tornadoes, fires, floods or similar events), information systems failures, computer viruses, denial of service attacksindividuals whose property was confiscated by the Cuban government beginning in 1959 to sue anyone who "traffics" in the property in question in U.S. courts. To date, several claims have now been brought against us and other ~~cyber-attacks may cause disruptions to our information technology, telecommunications and other networks. While we~~companies who have ~~and continue to invest~~done business in ~~business continuity, disaster recovery, data restoration plans and data and information technology security, we cannot completely insulate ourselves from disruptions that~~Cuba. If these suits are successful, they could result in ~~adverse effects on~~substantial monetary damages against the Company.

Future changes in applicable tax laws, or our ~~operations~~inability to take advantage of favorable tax regimes, could increase the amount of taxes we must pay.

We believe and ~~financial results. We carry limited business interruption insurance for~~have taken the position that our income that is considered to be derived from the international operation of ships as well as certain ~~shoreside operations,~~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 ~~limitations, exclusions~~change at any time, possibly with retroactive effect.

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We believe and ~~deductibles.~~

We have ~~made significant investments in our information technology systems to optimize booking procedures, enhance~~taken the ~~marketing power~~position that substantially all of our ~~websites~~income derived from the international operation of ships is properly categorized as shipping income and control costs. As part of our ordinary business operations, we and certain of our third-party service providers collect, process, transmit and store a large volume of personally identifiable information, including email addresses, home addresses and financial data such as credit card information. The security of the systems and networks where we and our service providers store this data is a critical element of our business. We review and update our systems and have implemented processes and procedures to protect against security breaches and unauthorized access to our data. Despite our implementation of security measures, our systems and networks are vulnerable to computer viruses, malware, worms, hackers and other security issues, 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. For example, in October 2018, we discovered limited instances of unauthorized access to certain employee e-mail communications, some of which contained proprietary business and personally identifiable information. We have implemented additional safeguards, and we do not believe that we ~~experienced any material losses related to this incident; however, there can be no assurance that this or any other breach or incident will~~do not have a material ~~impact on~~amount of non-qualifying income. It is possible, however, that a much larger percentage of our ~~operations and financial results~~income does not qualify (or will not qualify) as shipping income. Moreover, the exemption for shipping income is only available for years in which NCLH will satisfy complex stock ownership tests or the publicly traded test under Section 883 as described in “Item 1—Business— Taxation—Exemption of International Shipping Income under Section 883 of the Code.” There are factual circumstances beyond our control, including changes in the ~~future. In addition, we may not be in a position~~direct and indirect owners of NCLH’s ordinary shares, which could cause us or our subsidiaries to promptly address attacks or unauthorized access or to implement adequate preventative measures if we are unable to immediately detect such attacks. Our failure to successfully prevent, mitigate or timely respond tolose the benefit of this tax exemption. Finally, any ~~unauthorized use of our information systems to gain access to sensitive information, corrupt data or create general disturbances~~changes in our operations ~~systems~~ could ~~impair~~significantly increase our ~~ability~~exposure to ~~conduct business~~either the Net Tax Regime or the 4% Regime (each as defined in “Item 1—Business—Taxation”), and ~~damage~~we can give no assurances on this matter.

If we or any of our ~~reputation.~~

subsidiaries were not to qualify for the exemption under Section 883, our or such subsidiary’s U.S.-source income would be subject to either the Net Tax Regime or the 4% Regime (each as defined in “Item 1— Business— Taxation”). 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. Therefore, we can give no assurances on this matter. We refer you to “Item 1—Business—Taxation.”

We ~~are also~~may be subject to ~~laws relating~~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 ~~privacy of personal data, including European Union data privacy regulations. The compromise of our information systems resulting~~file tax returns in the loss, disclosure, misappropriation of or access to the personally identifiable information of our guests, prospective guests or employees could result in governmental investigation, civil liability or regulatory penalties under laws protecting the privacy of personal information, anysome or all of those jurisdictions. Our state, local or non-U.S. tax treatment may not conform to the U.S. federal income tax treatment discussed above. 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 could disrupt our operations and materially adversely affect our business. Additionally, any material failure by us or our service providers to maintain compliance with the Payment Card Industry security requirements or to rectify a data security issue maywe are currently subject result in ~~fines and restrictions~~a relatively low effective tax rate on our ~~ability to accept credit cards as a form of payment.~~

In the event of a data security breach of our systems and/or third-party systems or a denial of service attack, 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. In addition, data security breaches or denial of service attacks 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, 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.

Evolving requirements and regulations regarding data privacy and protection and any actual or perceived compliance failures by us could increase our liability and costs and otherwise materially adversely affect our business operations.

~~We process and store sensitive information relating to our guests, employees, business partners and others and we~~worldwide income. These tax regimes, however, are subject to ~~requirements~~change, possibly with retroactive effect. 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 ~~regulations regarding data privacy and protection~~subject all or a portion of our shipping income to taxation in multiple jurisdictions. Government regulators, privacy advocates and individuals are increasingly scrutinizing how companies collect, process, store, share and transmit personal data. New laws governing data privacy and protection, such as the European Union’s General Data Protection Regulation (“GDPR”) have been enacted and more are being considered worldwide. The GDPR contains stringent data privacy and protection requirements and enables regulatorsU.S. Moreover, we may become subject to impose significant penalties for non-compliance. 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 increasenew tax regimes and may be ~~interpreted~~unable to take advantage of favorable tax provisions afforded by current or future law, including exemption of branch profits and ~~applied~~dividend withholding taxes under the U.S. – U.K. Income Tax Treaty on income derived in ~~a manner that~~respect of our U.S.–flagged operation.

The government of Bermuda recently enacted the Economic Substance Act 2018 which sets forth minimum economic substance requirements for entities established in Bermuda. The Company is ~~inconsistent or possibly conflicting~~currently analyzing these rules in anticipation of further guidance from ~~one jurisdiction to another.~~

~~Any actual or perceived failure by us or our business partners~~Bermuda authorities on the application of the Economic Substance Act 2018. If the Company is unable to comply with ~~posted privacy policies, federal, state~~such requirements, the Company may consider alternate jurisdictions or international data privacy and protection laws and regulations, or privacy commitments contained in our contracts could result in proceedings against us by governmental entities or others and significant fines,otherwise become subject to tax regimes which could have a material adverse effect on our business and operating results and harm our reputation. Additionally, if third parties we work with, such as vendors, violate applicable laws or regulations or our policies, such violations may ~~also result in increased liability for us and have an adverse effect on our business.~~be less favorable.

Existing and future legal and regulatory restrictions on our ability to collect and use data could also negatively affect our ability to market our business, result in increased compliance costs, and otherwise affect our business processes, all

Table of ~~which could have an adverse effect on our financial results.~~Contents

Item 6. Exhibits
~~10.1~~

10.1

~~Employment~~Second Supplemental Agreement, dated August 15, 2019, to Seahawk Two Credit Agreement, dated July 14, 2014, by and ~~between~~among Seahawk Two, Ltd., NCL ~~(Bahamas)~~International, Ltd., as shareholder, and ~~Mark Kempa, entered into on September 10, 2018~~various other lenders therein defined and a related guarantee by NCL Corporation Ltd. (incorporated herein by reference to Exhibit 10.1 to Norwegian Cruise Line Holdings Ltd.’s ~~Current~~Quarterly Report on Form ~~8-K~~10-Q filed on ~~September 11, 2018~~November 8, 2019 (File No. 001-35784)) †#
10.2

Side Letter, dated August 7, 2019, to €529.8 million Breakaway Two Credit Agreement, dated November 18, 2010, as amended, by and among Breakaway Two, Ltd., NCL Corporation Ltd., NCL International, Ltd. and KfW IPEX-Bank GmbH (incorporated herein by reference to Exhibit 10.2 to Norwegian Cruise Line Holdings Ltd.’s Quarterly Report on Form 10-Q filed on November 8, 2019 (File No. 001-35784))#
31.1*
Certification of the President and Chief Executive Officer pursuant to Rule 13a-14(a) of the Securities Exchange Act of 1934
31.2*
31.2*
Certification of the Executive Vice President and Chief Financial Officer pursuant to Rule 13a-14(a) of the Securities Exchange Act of 1934
32.1**
32.1**
Certifications of the President and Chief Executive Officer and the Executive Vice President and Chief Financial Officer pursuant to Rule 13a-14(b) of the Securities Exchange Act of 1934 and Section 1350 of Chapter 63 of Title 18 of the United States Code

101*

101*
The following unaudited consolidated financial statements ~~are~~ from NCL Corporation Ltd.’s Quarterly Report on Form ~~10-Q~~10‑Q for the quarterly period ended September 30, ~~2018,~~2019, formatted in ~~Extensible Business Reporting Language (XBRL), as follows:~~Inline XBRL:

~~(i)~~

(i)    the Consolidated Statements of Operations for the three and nine months ended September 30, ~~2018~~2019 and ~~2017;~~2018;

~~(ii)~~

(ii)   the Consolidated Statements of Comprehensive Income for the three and nine months ended September 30, ~~2018~~2019 and ~~2017;~~2018;

~~(iii)~~

(iii)  the Consolidated Balance Sheets as of September 30, ~~2018~~2019 and December 31, ~~2017;~~2018;

~~(iv)~~

(iv)  the Consolidated Statements of Cash Flows for the nine months ended September 30, ~~2018~~2019 and ~~2017;~~2018;

~~(v)~~

(v)   the Consolidated Statements of Changes in Shareholders’ Equity for the three and nine months ended September 30, ~~2018~~2019 and ~~2017;~~2018; and

~~(vi)~~

(vi)  the Notes to the Consolidated Financial ~~Statements, tagged in summary and detail.~~Statements.

*
104*

~~Filed herewith.~~
The cover page from NCL Corporation Ltd.’s Quarterly Report on Form 10-Q for the quarter ended September 30, 2019, formatted in Inline XBRL and included in the interactive data files submitted as Exhibit 101.
*Filed herewith.
**   Furnished herewith.
#
** ~~Furnished herewith.~~
† ~~Management contract or compensatory plan.~~
Certain portions of this document that constitute confidential information have been redacted in accordance with Regulation S-K, Item 601(b)(10).

32

42

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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.

NCL CORPORATION LTD.
(Registrant)
By:
/s/ FRANK J. DEL RIO
Name:
Frank J. Del Rio
Title:
President and Chief Executive Officer
(Principal Executive Officer)
By:
/s/MARK A. KEMPA
Name:
Mark A. Kempa
Title:
Executive Vice President and Chief Financial Officer
(Principal Financial Officer)

Dated: November ~~9, 2018~~8, 2019

33
43

Bermuda		20-0470163
(State or other jurisdiction of	~~(I.R.S. Employer~~
incorporation or organization)		(I.R.S. Employer Identification No.)

7665 Corporate Center Drive, Miami, Florida 33126		33126
(Address of principal executive offices)		(zip code)

Title of each class	Trading Symbol(s)	Name of each exchange on which registered
N/A	N/A	N/A

Large accelerated filer ¨◻	Accelerated filer ¨◻
Non-accelerated filer x⌧	Smaller reporting company ¨☐
Emerging growth company ¨☐

		~~Page~~
		Page
PART I. FINANCIAL INFORMATION

Item 1.	Financial Statements	1 3

Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	18 24

Item 3.	Quantitative and Qualitative Disclosures About Market Risk	29 37

Item 4.	Controls and Procedures	30 38

PART II. OTHER INFORMATION

Item 1.	Legal Proceedings	30 39

Item 1A.	Risk Factors	30 39

Item 6.	Exhibits	32 42

SIGNATURES		33 43

	Three Months Ended September 30,						Nine Months Ended September 30,
	2018			2017			2018			2017
Revenue
Passenger ticket	$	1,334,460		$	1,192,023		$	3,301,372		$	2,916,731
Onboard and other		523,896			459,715			1,372,561			1,229,891
Total revenue		1,858,356			1,651,738			4,673,933			4,146,622
Cruise operating expense
Commissions, transportation and other		301,349			266,173			769,564			683,628
Onboard and other		117,747			98,476			281,232			250,254
Payroll and related		227,707			206,142			656,868			593,502
Fuel		99,643			91,231			288,286			266,780
Food		56,038			53,883			160,785			147,401
Other		126,460			122,260			403,083			368,640
Total cruise operating expense		928,944			838,165			2,559,818			2,310,205
Other operating expense
Marketing, general and administrative		234,459			201,588			685,882			586,099
Depreciation and amortization		143,700			134,532			415,648			376,878
Total other operating expense		378,159			336,120			1,101,530			962,977
Operating income		551,253			477,453			1,012,585			873,440
Non-operating (expense) income
Interest expense, net		(69,540	)		(66,339	)		(202,226	)		(183,497	)
Other income (expense), net		98			(3,262	)		11,354			(11,686	)
Total non-operating expense		(69,442	)		(69,601	)		(190,872	)		(195,183	)
Net income before income taxes		481,811			407,852			821,713			678,257
Income tax expense		(6,399	)		(11,625	)		(11,378	)		(17,451	)
Net income	$	475,412		$	396,227		$	810,335		$	660,806

	Ordinary Shares		Additional Paid-in Capital			Accumulated Other Comprehensive (Loss) Income			Retained Earnings			Total Shareholders’ Equity
Balance, December 31, 2016	$	37	$	3,796,042		$	(316,186	)	$	1,007,780		$	4,487,673
Share-based compensation		—		63,664			—			—			63,664
Net share settlement of restricted share units		—		(6,342	)		—			—			(6,342	)
Change in accounting policy (share-based forfeitures)		—		(2,153	)		—			2,153			—
Other comprehensive income, net		—		—			253,418			—			253,418
Net income		—		—			—			660,806			660,806
Balance, September 30, 2017	$	37	$	3,851,211		$	(62,768	)	$	1,670,739		$	5,459,219

Balance, December 31, 2017	$	37	$	3,874,586		$	25,253		$	1,768,728		$	5,668,604
Share-based compensation		—		88,797			—			—			88,797
Net share settlement of restricted share units		—		(13,840	)		—			—			(13,840	)
Contribution from NCLH		—		7,000			—			—			7,000
Cumulative change in accounting policy		—		—			(12	)		12			—
Other comprehensive income, net		—		—			29,164			—			29,164
Dividends		—		—			—			(445,500	)		(445,500	)
Net income		—		—			—			810,335			810,335
Balance, September 30, 2018	$	37	$	3,956,543		$	54,405		$	2,133,575		$	6,144,560

	As Reported		Adjustments			Balances Without Adoption of Topic 606
Prepaid expenses and other assets	$	298,263	$	(59,881	)	$	238,382
Total assets	$	15,307,471	$	(59,881	)	$	15,247,590
Advance ticket sales	$	1,648,742	$	(59,881	)	$	1,588,861
Total liabilities and shareholders’ equity	$	15,307,471	$	(59,881	)	$	15,247,590

Year Ended December 31,	Amortization Expense
2019	$	18,489
2020		9,906
2021		75
2022		75
2023		75

	Nine Months Ended September 30, 2017
	Accumulated Other Comprehensive (Loss) Income			Change Related to Cash Flow Hedges			Change Related to Shipboard Retirement Plan
Accumulated other comprehensive loss at beginning of period	$	(316,186)		$	(308,265	)	$	(7,921	)
Current period other comprehensive income before reclassifications		221,512			221,512			—
Amounts reclassified into earnings		31,906			31,593	(1)		313	(4)
Accumulated other comprehensive loss at end of period	$	(62,768	)	$	(55,160	)	$	(7,608	)

Shareholder	Number of Shares		Percentage Ownership
Apollo Holders		15,728,782		7.1	%
Genting HK		3,148,307		1.4	%

	Number of Share Option Awards								Weighted-Average Exercise Price						Weighted- Average Contractual Term		Aggregate Intrinsic Value
	Time- Based Awards			Performance- Based Awards			Market- Based Awards		Time- Based Awards		Performance- Based Awards		Market- Based Awards		(in years)		(in thousands)
Outstanding as of January 1, 2018		6,580,898			373,969			208,333	$	49.18	$	31.39	$	59.43		6.99	$	50,021
Granted		—			208,335			—	$	—	$	59.43	$	—		—	$	—
Exercised		(625,611	)		(109,285	)		—	$	34.44	$	19.00	$	—		—	$	—
Forfeited and cancelled		(192,333	)		(52,084	)		—	$	54.70	$	59.43	$	—		—	$	—
Outstanding as of September 30, 2018		5,762,954			420,935			208,333	$	50.60	$	45.01	$	59.43		6.46	$	47,269

	Number of Time-Based Awards			Weighted- Average Grant Date Fair Value
Non-vested as of January 1, 2018		858		$	58.33
Vested		(429	)	$	58.25
Non-vested as of September 30, 2018		429		$	58.41

	Number of Time-Based Awards			Weighted- Average Grant Date Fair Value		Number of Performance- Based Awards			Weighted- Average Grant Date Fair Value		Number of Market- Based Awards		Weighted- Average Grant Date Fair Value
Non-vested as of January 1, 2018		2,555,477		$	50.86		—		$	—		50,000	$	59.43
Granted		1,613,077		$	56.73		843,998		$	56.58		—	$	—
Vested		(1,032,760	)	$	50.66		—		$	—		—	$	—
Forfeited or expired		(142,227	)	$	53.31		(18,384	)	$	56.43		—	$	—
Non-vested as of September 30, 2018		2,993,567		$	53.98		825,614		$	56.58		50,000	$	59.43

	Three Months Ended September 30,						Nine Months Ended September 30,
	2018			2017			2018			2017
Passengers carried		823,413			741,216			2,128,673			1,868,512
Passenger Cruise Days		5,493,932			5,071,115			15,177,982			13,819,421
Capacity Days		4,941,643			4,590,789			13,958,331			12,811,155
Occupancy Percentage		111.2	%		110.5	%		108.7	%		107.9	%

	Total		Less than 1 year		1-3 years		3-5 years		More than 5 years
Long-term debt (1)	$	6,679,612	$	679,908	$	2,205,859	$	1,882,111	$	1,911,734
Operating leases (2)		131,737		17,456		31,180		27,562		55,539
Ship construction contracts (3)		5,184,623		107,904		1,446,033		1,971,744		1,658,942
Port facilities (4)		1,002,302		61,757		116,169		116,432		707,944
Interest (5)		1,016,039		219,023		399,608		189,715		207,693
Other (6)(7)		1,428,885		250,748		431,078		357,587		389,472
Total (8)	$	15,443,198	$	1,336,796	$	4,629,927	$	4,545,151	$	4,931,324


			Less than						More than
	Total		1 year		1-3 years		3-5 years		5 years
Long-term debt (1)	$	6,377,983	$	605,106	$	2,051,990	$	2,194,802	$	1,526,085
Operating leases (2)		277,235		31,707		63,973		62,762		118,793
Ship construction contracts (3)		5,239,506		1,283,986		1,229,429		1,921,886		804,205
Port facilities (4)		2,067,778		62,430		129,372		136,685		1,739,291
Interest (5)		875,181		199,635		338,179		190,277		147,090
Other (6)		1,362,419		268,576		455,388		393,518		244,937
Total (7)	$	16,200,102	$	2,451,440	$	4,268,331	$	4,899,930	$	4,580,401

~~10.1~~
10.1		~~Employment~~Second Supplemental Agreement, dated August 15, 2019, to Seahawk Two Credit Agreement, dated July 14, 2014, by and ~~between~~among Seahawk Two, Ltd., NCL ~~(Bahamas)~~International, Ltd., as shareholder, and ~~Mark Kempa, entered into on September 10, 2018~~various other lenders therein defined and a related guarantee by NCL Corporation Ltd. (incorporated herein by reference to Exhibit 10.1 to Norwegian Cruise Line Holdings Ltd.’s ~~Current~~Quarterly Report on Form ~~8-K~~10-Q filed on ~~September 11, 2018~~November 8, 2019 (File No. 001-35784)) †#
10.2		Side Letter, dated August 7, 2019, to €529.8 million Breakaway Two Credit Agreement, dated November 18, 2010, as amended, by and among Breakaway Two, Ltd., NCL Corporation Ltd., NCL International, Ltd. and KfW IPEX-Bank GmbH (incorporated herein by reference to Exhibit 10.2 to Norwegian Cruise Line Holdings Ltd.’s Quarterly Report on Form 10-Q filed on November 8, 2019 (File No. 001-35784))#
31.1*		Certification of the President and Chief Executive Officer pursuant to Rule 13a-14(a) of the Securities Exchange Act of 1934
31.2*
31.2*		Certification of the Executive Vice President and Chief Financial Officer pursuant to Rule 13a-14(a) of the Securities Exchange Act of 1934
32.1**
32.1**		Certifications of the President and Chief Executive Officer and the Executive Vice President and Chief Financial Officer pursuant to Rule 13a-14(b) of the Securities Exchange Act of 1934 and Section 1350 of Chapter 63 of Title 18 of the United States Code


101*
101*		The following unaudited consolidated financial statements ~~are~~ from NCL Corporation Ltd.’s Quarterly Report on Form ~~10-Q~~10‑Q for the quarterly period ended September 30, ~~2018,~~2019, formatted in ~~Extensible Business Reporting Language (XBRL), as follows:~~Inline XBRL:

~~(i)~~		(i) the Consolidated Statements of Operations for the three and nine months ended September 30, ~~2018~~2019 and ~~2017;~~2018;

~~(ii)~~		(ii) the Consolidated Statements of Comprehensive Income for the three and nine months ended September 30, ~~2018~~2019 and ~~2017;~~2018;

~~(iii)~~		(iii) the Consolidated Balance Sheets as of September 30, ~~2018~~2019 and December 31, ~~2017;~~2018;

~~(iv)~~		(iv) the Consolidated Statements of Cash Flows for the nine months ended September 30, ~~2018~~2019 and ~~2017;~~2018;

~~(v)~~		(v) the Consolidated Statements of Changes in Shareholders’ Equity for the three and nine months ended September 30, ~~2018~~2019 and ~~2017;~~2018; and

~~(vi)~~		(vi) the Notes to the Consolidated Financial ~~Statements, tagged in summary and detail.~~Statements.

* 104*		~~Filed herewith.~~ The cover page from NCL Corporation Ltd.’s Quarterly Report on Form 10-Q for the quarter ended September 30, 2019, formatted in Inline XBRL and included in the interactive data files submitted as Exhibit 101.

#
**		~~Furnished herewith.~~

†		~~Management contract or compensatory plan.~~ Certain portions of this document that constitute confidential information have been redacted in accordance with Regulation S-K, Item 601(b)(10).