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

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

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). Yes x No ¨

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

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

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

There were ~~227,114,541~~228,162,188 ordinary shares outstanding as of ~~August 3, 2016.~~July 31, 2017.

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Table of Contents

PART I. FINANCIAL INFORMATION

Item 1. Financial Statements

Norwegian Cruise Line Holdings Ltd.

Consolidated Statements of Operations

(Unaudited)

(in thousands, except share and per share data)

	Three Months Ended June 30,						Six Months Ended June 30,						Three Months Ended June 30,						Six Months Ended June 30,
	2016			2015			2016			2015			2017			2016			2017			2016
Revenue
Passenger ticket	$	818,478		$	787,991		$	1,558,590		$	1,458,474		$	938,014		$	818,478		$	1,724,708		$	1,558,590
Onboard and other		368,357			297,442			705,877			565,141			406,089			368,357			770,176			705,877
Total revenue		1,186,835			1,085,433			2,264,467			2,023,615			1,344,103			1,186,835			2,494,884			2,264,467
Cruise operating expense
Commissions, transportation and other		193,536			192,438			368,973			364,265			223,315			193,536			417,455			368,973
Onboard and other		75,790			67,885			139,755			126,530			83,367			75,790			151,778			139,755
Payroll and related		184,476			161,930			361,619			319,559			194,724			184,476			387,360			361,619
Fuel		80,607			91,581			162,279			178,955			86,663			80,607			175,549			162,279
Food		49,769			43,699			100,772			85,550			47,340			49,769			93,518			100,772
Other		121,722			98,746			236,983			205,120			116,833			121,722			246,380			236,983
Total cruise operating expense		705,900			656,279			1,370,381			1,279,979			752,242			705,900			1,472,040			1,370,381
Other operating expense
Marketing, general and administrative		149,307			107,164			329,881			261,321			193,649			149,307			385,693			329,881
Depreciation and amortization		104,610			104,607			205,905			204,583			123,141			104,610			242,346			205,905
Total other operating expense		253,917			211,771			535,786			465,904			316,790			253,917			628,039			535,786
Operating income		227,018			217,383			358,300			277,732			275,071			227,018			394,805			358,300
Non-operating income (expense)
Interest expense, net		(68,420	)		(52,446	)		(128,174	)		(103,435	)		(64,196	)		(68,420	)		(117,156	)		(128,174	)
Other expense		(10,753	)		(3,717	)		(7,948	)		(33,856	)
Other income (expense), net														(5,609	)		(10,753	)		(8,424	)		(7,948	)
Total non-operating income (expense)		(79,173	)		(56,163	)		(136,122	)		(137,291	)		(69,805	)		(79,173	)		(125,580	)		(136,122	)
Net income before income taxes		147,845			161,220			222,178			140,441			205,266			147,845			269,225			222,178
Income tax expense		(2,599	)		(2,726	)		(3,703	)		(3,403	)		(6,793	)		(2,599	)		(8,842	)		(3,703	)
Net income	$	145,246		$	158,494		$	218,475		$	137,038		$	198,473		$	145,246		$	260,383		$	218,475
Weighted-average shares outstanding
Basic		226,972,076			225,698,078			227,105,804			225,003,460			227,931,135			226,972,076			227,701,109			227,105,804
Diluted		227,884,704			230,228,144			227,997,970			229,664,210			229,090,085			227,884,704			228,824,296			227,997,970
Earnings per share																��
Basic	$	0.64		$	0.70		$	0.96		$	0.61		$	0.87		$	0.64		$	1.14		$	0.96
Diluted	$	0.64		$	0.69		$	0.96		$	0.60		$	0.87		$	0.64		$	1.14		$	0.96

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

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Norwegian Cruise Line Holdings Ltd.

Consolidated Statements of Comprehensive Income

(Unaudited)

(in thousands)

	Three Months Ended June 30,				Six Months Ended June 30,					Three Months Ended June 30,				Six Months Ended June 30,
	2016		2015		2016		2015			2017		2016		2017		2016
Net income	$	145,246	$	158,494	$	218,475	$	137,038		$	198,473	$	145,246	$	260,383	$	218,475
Other comprehensive income:
Shipboard Retirement Plan		108		120		216		239			104		108		209		216
Cash flow hedges:
Net unrealized income (loss)		5,007		70,491		75,457		(33,274	)
Net unrealized income											131,519		5,007		124,236		75,457
Amount realized and reclassified into earnings		23,781		26,564		58,331		48,450			10,244		23,781		19,949		58,331
Total other comprehensive income		28,896		97,175		134,004		15,415			141,867		28,896		144,394		134,004
Total comprehensive income	$	174,142	$	255,669	$	352,479	$	152,453		$	340,340	$	174,142	$	404,777	$	352,479

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

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Norwegian Cruise Line Holdings Ltd.

Consolidated Balance Sheets

(Unaudited)

(in thousands, except share data)

	June 30, 2016			December 31, 2015			June 30, 2017			December 31, 2016
Assets
Current assets:
Cash and cash equivalents	$	145,964		$	115,937		$	219,315		$	128,347
Accounts receivable, net		60,366			44,996			50,359			63,215
Inventories		67,697			58,173			77,089			66,255
Prepaid expenses and other assets		166,003			121,305			167,153			153,276
Total current assets		440,030			340,411			513,916			411,093
Property and equipment, net		10,068,499			9,458,805			10,974,087			10,117,689
Goodwill		1,388,931			1,388,931			1,388,931			1,388,931
Tradenames		817,525			817,525			817,525			817,525
Other long-term assets		242,764			259,085			251,717			238,673
Total assets	$	12,957,749		$	12,264,757		$	13,946,176		$	12,973,911
Liabilities and Shareholders’ Equity
Liabilities and shareholders’ equity
Current liabilities:
Current portion of long-term debt	$	581,804		$	629,840		$	600,500		$	560,193
Accounts payable		46,511			51,369			47,242			38,002
Accrued expenses and other liabilities		573,812			640,568			462,516			541,753
Due to Affiliate		—			20,769
Advance ticket sales		1,390,137			1,023,973			1,543,869			1,172,870
Total current liabilities		2,592,264			2,366,519			2,654,127			2,312,818
Long-term debt		5,971,143			5,767,697			6,083,226			5,838,494
Other long-term liabilities		275,981			349,661			217,074			284,873
Total liabilities		8,839,388			8,483,877			8,954,427			8,436,185
Commitments and contingencies (Note 9)
Commitments and contingencies (Note 8)
Shareholders’ equity:
Ordinary shares, $.001 par value; 490,000,000 shares authorized; 232,365,986 shares issued and 227,054,025 shares outstanding at June 30, 2016 and 232,179,786 shares issued and 227,815,301 shares outstanding at December 31, 2015		232			232
Ordinary shares, $.001 par value; 490,000,000 shares authorized; 233,380,598 shares issued and 228,068,637 shares outstanding at June 30, 2017 and 232,555,937 shares issued and 227,243,976 shares outstanding at December 31, 2016								233			232
Additional paid-in capital		3,849,537			3,814,536			3,937,211			3,890,119
Accumulated other comprehensive income (loss)		(278,646	)		(412,650	)		(170,079	)		(314,473	)
Retained earnings		786,493			568,018			1,463,639			1,201,103
Treasury shares (5,311,961 and 4,364,485 ordinary shares at June 30, 2016 and December 31, 2015, respectively, at cost)		(239,255	)		(189,256	)
Treasury shares (5,311,961 ordinary shares at June 30, 2017 and December 31, 2016, at cost)								(239,255	)		(239,255	)
Total shareholders’ equity		4,118,361			3,780,880			4,991,749			4,537,726
Total liabilities and shareholders’ equity	$	12,957,749		$	12,264,757		$	13,946,176		$	12,973,911

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

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Norwegian Cruise Line Holdings Ltd.

Consolidated Statements of Cash Flows

(Unaudited)

(in thousands)

	Six Months Ended June 30,						Six Months Ended June 30,
	2016			2015			2017			2016
Cash flows from operating activities
Net income	$	218,475		$	137,038		$	260,383		$	218,475
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization expense		212,268			214,717			248,618			212,268
Loss on derivatives		2,866			27,475			375			2,866
Deferred income taxes, net		388			424			5,165			388
Gain on contingent consideration		—			(43,400	)
Write-off of deferred financing fees		11,427			195			—			11,427
Provision for bad debts and inventory		1,115			—			535			1,115
Share-based compensation expense		31,449			14,166			42,220			31,449
Changes in operating assets and liabilities:
Accounts receivable, net		(16,335	)		(4,369	)		12,301			(16,335	)
Inventories		(9,674	)		(3,246	)		(10,814	)		(9,674	)
Prepaid expenses and other assets		(25,903	)		(9,932	)		(21,719	)		(25,903	)
Accounts payable		(10,865	)		(47,038	)		10,129			(10,865	)
Accrued expenses and other liabilities		(25,798	)		13,063			(28,382	)		(25,798	)
Advance ticket sales		358,625			412,602			400,920			358,625
Net cash provided by operating activities		748,038			711,695			919,731			748,038
Cash flows from investing activities
Additions to property and equipment, net		(764,899	)		(205,056	)		(1,065,265	)		(764,899	)
Settlement of derivatives		(34,129	)		—			(35,255	)		(34,129	)
Net cash used in investing activities		(799,028	)		(205,056	)		(1,100,520	)		(799,028	)
Cash flows from financing activities
Repayments of long-term debt		(2,386,427	)		(791,403	)		(921,329	)		(2,386,427	)
Repayments to Affiliate		(18,522	)		(18,522	)		—			(18,522	)
Proceeds from long-term debt		2,564,116			340,060			1,217,060			2,564,116
Proceeds from the exercise of share options		3,007			55,023
Proceeds from employee share purchase plan		1,172			—
Proceeds from employee related plans								13,213			4,179
Net share settlement of restricted share units								(6,187	)		—
Purchases of treasury shares		(49,999	)		—			—			(49,999	)
Deferred financing fees and other		(32,330	)		(3,663	)		(31,000	)		(32,330	)
Net cash provided by (used in) financing activities		81,017			(418,505	)
Net cash provided by financing activities								271,757			81,017
Net increase in cash and cash equivalents		30,027			88,134			90,968			30,027
Cash and cash equivalents at beginning of period		115,937			84,824			128,347			115,937
Cash and cash equivalents at end of period	$	145,964		$	172,958		$	219,315		$	145,964

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

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Norwegian Cruise Line Holdings Ltd.

Consolidated Statements of Changes in Shareholders’ Equity

(Unaudited)

(in thousands)

	Ordinary Shares		Additional Paid-in Capital		Accumulated Other Comprehensive Income (Loss)			Retained Earnings		Treasury Shares			Total Shareholders’ Equity
Balance, December 31, 2014	$	230	$	3,702,344	$	(242,642	)	$	140,881	$	(82,000	)	$	3,518,813
Share-based compensation		—		14,166		—			—		—			14,166
Proceeds from the exercise of share options		2		55,021		—			—		—			55,023
Other comprehensive income, net		—		—		15,415			—		—			15,415
Net income		—		—		—			137,038		—			137,038
Balance, June 30, 2015	$	232	$	3,771,531	$	(227,227	)	$	277,919	$	(82,000	)	$	3,740,455
																Ordinary Shares		Additional Paid-in Capital			Accumulated Other Comprehensive Income (Loss)			Retained Earnings		Treasury Shares			Total Shareholders’ Equity
Balance, December 31, 2015	$	232	$	3,814,536	$	(412,650	)	$	568,018	$	(189,256	)	$	3,780,880		$	232	$	3,814,536		$	(412,650	)	$	568,018	$	(189,256	)	$	3,780,880
Share-based compensation		—		31,449		—			—		—			31,449			—		31,449			—			—		—			31,449
Proceeds from the exercise of share options		—		2,380		—			—		—			2,380			—		2,380			—			—		—			2,380
Proceeds from employee share purchase plan		—		1,172		—			—		—			1,172			—		1,172			—			—		—			1,172
Treasury shares		—		—		—			—		(49,999	)		(49,999	)		—		—			—			—		(49,999	)		(49,999	)
Other comprehensive income, net		—		—		134,004			—		—			134,004			—		—			134,004			—		—			134,004
Net income		—		—		—			218,475		—			218,475			—		—			—			218,475		—			218,475
Balance, June 30, 2016	$	232	$	3,849,537	$	(278,646	)	$	786,493	$	(239,255	)	$	4,118,361		$	232	$	3,849,537		$	(278,646	)	$	786,493	$	(239,255	)	$	4,118,361
Balance, December 31, 2016																$	232	$	3,890,119		$	(314,473	)	$	1,201,103	$	(239,255	)	$	4,537,726

Share-based compensation																	—		42,220			—			—		—			42,220
Issuance of shares under employee related plans																	1		13,212			—			—		—			13,213
Change in accounting policy (share-based forfeitures)																	—		(2,153	)		—			2,153		—			—
Net share settlement of restricted share units																	—		(6,187	)		—			—		—			(6,187	)
Other comprehensive income, net																	—		—			144,394			—		—			144,394
Net income																	—		—			—			260,383		—			260,383
Balance, June 30, 2017																$	233	$	3,937,211		$	(170,079	)	$	1,463,639	$	(239,255	)	$	4,991,749

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

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Norwegian Cruise Line Holdings Ltd.

Notes to Consolidated Financial Statements

(Unaudited)

Unless otherwise indicated or the context otherwise requires, references in this report to (i) the “Company,” “we,” “our” and “us” refer to NCLH (as defined below) and its subsidiaries (including Prestige (as defined below), except for periods prior to the consummation of the Acquisition of Prestige (as defined below)), (ii) “NCLC” refers to NCL Corporation Ltd., (iii) “NCLH” refers to Norwegian Cruise Line Holdings Ltd., (iv) “Norwegian Cruise Line” or “Norwegian” refers to the Norwegian Cruise Line brand and its predecessors, (v) “Prestige” refers to Prestige Cruises International, Inc., together with its consolidated subsidiaries, (vi) “PCH” refers to Prestige Cruise Holdings, Inc., Prestige’s direct ~~wholly owned~~wholly-owned subsidiary, which in turn is the parent of 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) ~~and (vii) “Affiliate” refers to Genting Hong Kong Limited and/or its affiliates (formerly Star Cruises Limited and/or its affiliates)~~. References to the “U.S.” are to the United States of America, “dollars” or “$” are to U.S. dollars, the “U.K.” are to the United Kingdom and “euros” or “€” are to the official currency of the Eurozone.

Description of Business and Organization

~~NCLH is~~We are a leading global cruise company which operates the Norwegian Cruise Line, Oceania Cruises and Regent Seven Seas Cruises brands. ~~We have 24~~As of June 30, 2017, we had 25 ships with approximately ~~46,500 Berths including Sirena, previously under a Bareboat Charter, which joined our Oceania Cruises’ fleet in April 2016 and Seven Seas Explorer which was delivered in June 2016.~~50,400 Berths. We ~~will~~plan to introduce ~~four~~seven additional ships through 2025 and we have an option to ~~our fleet through 2020 including~~introduce two additional ships for delivery in 2026 and 2027, subject to certain conditions. Norwegian Bliss and an additional Breakaway Plus Class Ship are on order for delivery in the spring of 2018 and fall of 2019. We have an Explorer Class Ship on order for delivery in the winter of 2020. ~~Norwegian Joy is on order for~~Project Leonardo will introduce an additional four ships with expected delivery ~~in the spring of 2017 and two additional Breakaway Plus Class Ships are on order for deliveries to the Norwegian fleet in the spring of 2018 and fall of 2019.~~dates through 2025. These additions to our fleet (exclusive of the option for two additional ships) will increase our total Berths to approximately ~~59,300.~~72,300.

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, ~~2015,~~2016, which are included in our most recently filed Annual Report on Form 10-K.

Reclassification

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

Earnings Per Share

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

	Three Months Ended June 30,				Six Months Ended June 30,				Three Months Ended June 30,				Six Months Ended June 30,
	2016		2015		2016		2015		2017		2016		2017		2016
Net income	$	145,246	$	158,494	$	218,475	$	137,038	$	198,473	$	145,246	$	260,383	$	218,475
Basic weighted-average shares outstanding		226,972,076		225,698,078		227,105,804		225,003,460		227,931,135		226,972,076		227,701,109		227,105,804
Dilutive effect of share awards		912,628		4,530,066		892,166		4,660,750		1,158,950		912,628		1,123,187		892,166
Diluted weighted-average shares outstanding		227,884,704		230,228,144		227,997,970		229,664,210		229,090,085		227,884,704		228,824,296		227,997,970
Basic earnings per share	$	0.64	$	0.70	$	0.96	$	0.61	$	0.87	$	0.64	$	1.14	$	0.96
Diluted earnings per share	$	0.64	$	0.69	$	0.96	$	0.60	$	0.87	$	0.64	$	1.14	$	0.96

For the three months ended June 30, 2017 and 2016, a total of 5.2 million and 6.3 million shares, respectively; and for the six months ended June 30, 2017 and 2016, a total of 6.4 million and 6.9 million shares, respectively, have been excluded from diluted weighted-average shares outstanding because the effect of including them would have been anti-dilutive.

Revenue and Expense Recognition

Deposits received from guests for future voyages are recorded as advance ticket sales and are subsequently recognized as passenger ticket revenue along with onboard and other revenue, and all associated direct costs of a voyage are recognized as cruise operating expenses on a pro-rata basis over the period of the voyage. Guest cancellation fees are recognized in passenger ticket revenue in the month of the cancellation. Certain of our product offerings are accounted for under the guidance included within multi-element arrangements and result in an allocation of the fair value between passenger ticket revenue and onboard and other revenue.

~~Table of Contents~~

Revenue and expenses include port fees and taxes. The amounts included on a gross basis are ~~$71.8~~$80.4 million and ~~$62.4~~$71.5 million for the three months ended June 30, ~~2016~~2017 and ~~2015,~~2016, respectively, and ~~$134.3~~$152.1 million and ~~$114.3~~$134.0 million for the six months ended June 30, 2017 and 2016, ~~and 2015,~~ respectively.

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Foreign Currency

The majority of our transactions are settled in U.S. dollars. We translate assets and liabilities of our foreign subsidiaries 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 expense.~~ We recognized ~~gains~~a loss of ~~$3.9~~$8.1 million and ~~$0.8~~a gain of $3.7 million for the three months ended June 30, ~~2016~~2017 and ~~2015,~~2016, respectively, and ~~a loss~~losses of ~~$0.3~~$10.8 million and ~~a gain of $5.7~~$0.3 million for the six months ended June 30, ~~2016~~2017 and ~~2015,~~2016, respectively.

Depreciation and Amortization Expense

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

Recently Issued Accounting Pronouncements

In ~~May 2016,~~January 2017, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) No. 2017-04 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. Early adoption is permitted for interim or annual goodwill impairment tests performed on testing dates after January 1, 2017. We do not expect to early adopt this guidance. We are currently evaluating the impact of the adoption of this guidance to our consolidated financial statements.

In August 2016, the FASB issued ASU No. 2016-15 which amends Topic 230 (Statement of Cash Flows) to eliminate discrepancies in reporting certain items in the statement of cash flows. The guidance is effective for annual periods beginning after December 15, 2017 and interim periods within those annual periods with early adoption permitted. The transition should be made using a retrospective approach. We do not believe that the adoption of this guidance will be material to our consolidated statements of cash flows.

In May 2016, the FASB issued ASU No. 2016-12 which addresses improvements to the guidance on revenue from contracts from customers regarding ~~collectibility,~~collectability, noncash consideration, and completed contracts at transition. Additionally, it provides a practical expedient for contract modifications at transition and an accounting policy election related to the presentation of sales taxes and other similar taxes collected from customers. The effective date of this guidance is upon adoption of ASU No. ~~2014-09.~~2014-09 which is presented below. We are currently evaluating the impact of the adoption of this ~~newly issued~~ guidance to our consolidated financial statements.

In May 2016, the FASB issued ASU No. 2016-11 which is a rescission of Securities and Exchange Commission guidance related to the issuance of ASU No. 2014-09 which is presented below. The effective date of this guidance is upon adoption of ASU No. 2014-09. We are currently evaluating the impact of the adoption of this ~~newly issued~~ guidance to our consolidated financial statements.

In April 2016, the FASB issued ASU No. 2016-10 which does not change the core principle of the guidance in ASU No. 2014-09 but clarifies two aspects: identifying performance obligations and the licensing implementation guidance, while retaining the related principles for those areas. The effective date of this guidance is upon adoption of ASU No. 2014-09. We are currently evaluating the impact of the adoption of this ~~newly issued~~ guidance ~~to our consolidated financial statements.~~

In March 2016, the FASB issued ASU No. 2016-09 to improve multiple aspects of the accounting for share-based payment transactions, including income tax consequences, classification of awards as either equity or liabilities and classification on the statement of cash flows. The guidance is effective for annual periods beginning after December 15, 2016 and interim periods within those annual periods with early adoption permitted. We do not believe that the adoption of this guidance will be material to our consolidated financial statements.

In February 2016, the FASB issued ASU No. 2016-02 which sets out the principles for the recognition, measurement, presentation and disclosure of leases for both parties to a contract (i.e. lessees and lessors). The ASU requires lessees to recognize assets and liabilities on the balance sheet for the rights and obligations created by all leases with terms of more than 12 months. The ASU further modifies lessors’ classification criteria for leases and the accounting for sales-type and direct financing leases. The ASU will also require 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 ASU is effective for annual reporting periods, and interim periods within those annual periods, beginning after December 15, 2018 with early adoption permitted. The ASU is to be applied using a modified retrospective approach. ~~We are currently evaluating the impact of the adoption of this newly issued guidance to our consolidated financial statements.~~

In July 2015, the FASB issued ASU No. 2015-11 to simplify the measurement of inventory for all entities. This applies to all inventory that is measured using either the first-in, first-out or average cost method. The guidance requires an entity to measure inventory at the lower of cost or net realizable value. The guidance must be applied prospectively and will be effective for our interim and annual reporting periods beginning after December 15, 2016. Early adoption is permitted as of the beginning of an interim or annual reporting period. We are currently evaluatingTo evaluate the impact of the adoption of this guidance, we are currently reviewing our existing leases and evaluating contracts to ~~our consolidated financial statements.~~

~~In April 2015,~~determine what might be considered a lease under the FASB issued ASU No. 2015-05 to clarify a customer’s accounting for fees paid in a cloud computing arrangement. The amendments provide guidance to customers about whether a cloud computing arrangement includes a software license or if the arrangement should be accounted for as a service contract. This guidance will impact the accounting of software licenses but will not change a customer’s accounting for service contracts. The guidance will be effective for annual periods, including interim periods

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~~within those annual periods, beginning after December 15, 2015. We have adopted this guidance and there has not been an impact to our consolidated financial statements.~~new guidance.

In May 2014, the FASB issued ASU No. 2014-09 which requires entities to recognize revenue through the application of a five-step model, including identification of the contract, identification of the performance obligations, determination of the transaction price, allocation of the transaction price to the performance obligation and recognition of revenue as the entity satisfies the performance obligations. Entities have the option of using either a full retrospective or a modified approach to adopt the guidance.

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In August 2015, the FASB issued ASU No. 2015-14 deferring the effective date for one year. We can elect to adopt the provisions of ASU No. 2014-09 for annual periods beginning after December 15, 2017 including interim periods within that reporting period or we can elect to early adopt the guidance as of the original effective date. We expect to adopt a modified retrospective application for annual periods beginning after December 15, 2017. We have initiated an assessment of our systems, data and processes related to the implementation of this guidance. This assessment is expected to be completed during 2017. Additionally, we are currently evaluating ~~the impact~~our performance obligations and believe that our application of the ~~adoption~~guidance could result in changes in classification and additional disclosures. We also are evaluating other criteria such as the timing of ~~this~~contract terms, gross and net presentation and other items that the guidance ~~to our consolidated financial statements.~~addresses.

Intangible Assets

The gross carrying amounts of intangible assets included within other long-term 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 following ~~table~~tables (in thousands, except amortization period):

	June 30, 2016									June 30, 2017
	Gross Carrying Amount		Accumulated Amortization			Net Carrying Amount		Weighted- Average Amortization Period (Years)		Gross Carrying Amount		Accumulated Amortization			Net Carrying Amount		Weighted- Average Amortization Period (Years)
Customer relationships	$	120,000	$	(26,060	)	$	93,940		6.0	$	120,000	$	(51,730	)	$	68,270		6.0
Licenses		3,368		(461	)		2,907		5.6		3,368		(1,171	)		2,197		5.6
Non-compete agreements		660		(165	)		495		1.0		660		(660	)		—		1.0
Total intangible assets subject to amortization	$	124,028	$	(26,686	)	$	97,342			$	124,028	$	(53,561	)	$	70,467
License (Indefinite-lived)	$	4,427	$	—		$	—			$	4,427

	December 31, 2015									December 31, 2016
	Gross Carrying Amount		Accumulated Amortization			Net Carrying Amount		Weighted- Average Amortization Period (Years)		Gross Carrying Amount		Accumulated Amortization			Net Carrying Amount		Weighted- Average Amortization Period (Years)
Customer relationships	$	120,000	$	(15,527	)	$	104,473		6.0	$	120,000	$	(36,593	)	$	83,407		6.0
Backlog		70,000		(70,000	)		—		1.0
Licenses		3,368		(208	)		3,160		5.6		3,368		(807	)		2,561		5.6
Non-compete agreements											660		(495	)		165		1.0
Total intangible assets subject to amortization	$	193,368	$	(85,735	)	$	107,633			$	124,028	$	(37,895	)	$	86,133
License (Indefinite-lived)	$	4,427	$	—		$	—			$	4,427

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

Three Months Ended
June 30, Six Months Ended
June 30,
2016 2015 2016 2015
Amortization expense $ 5,562 $ 20,992 $ 10,951 $ 39,222
Three Months Ended
June 30, Six Months Ended
June 30,
2017 2016 2017 2016
Amortization expense $ 7,750 $ 5,562 $ 15,665 $ 10,951

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

Year ended December 31, Amortization
Expense
2017 $ 31,342
2018 26,058
2019 18,489
2020 9,906
2021 75
4. ~~Accumulated Other Comprehensive Income (Loss)~~
~~Accumulated other comprehensive income (loss) for the six months ended June 30, 2016 was as follows (in thousands):~~
Year ended December 31, Amortization
Expense
2018 $ 26,163
2019 18,489
2020 9,906
2021 75
2022 75

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4. Accumulated Other Comprehensive Income (Loss)

Accumulated
Other
Comprehensive
Income (Loss) Change
Related to
Cash Flow
Hedges Change
Related to
Shipboard
Retirement
Plan
Accumulated other comprehensive income (loss) at beginning of period $ (412,650 ) $ (405,298 ) $ (7,352 )
Current period other comprehensive income before reclassifications 75,457 75,457 —
Amounts reclassified into earnings 58,547 58,331 (1) 216 (2)
Accumulated other comprehensive income (loss) at end of period $ (278,646 ) $ (271,510 )(3) $ (7,136 )
Accumulated other comprehensive income (loss) for the six months ended June 30, 2017 was as follows (in thousands):
Accumulated
Other
Comprehensive
Income (Loss) Change
Related to
Cash Flow
Hedges Change
Related to
Shipboard
Retirement
Plan
Accumulated other comprehensive income (loss) at beginning of period $ (314,473 ) $ (307,618 ) $ (6,855 )
Current period other comprehensive income before reclassifications 124,236 124,236 —
Amounts reclassified into earnings 20,158 19,949 (1) 209 (2)
Accumulated other comprehensive income (loss) at end of period $ (170,079 ) $ (163,433 )(3) $ (6,646 )

(1) We refer you to Note 7—6— “Fair Value Measurements and Derivatives” for the affected line items in the consolidated statements of operations.
(2) Amortization of prior-service cost and actuarial loss reclassified to payroll and related expense.
(3) Includes ~~$73.6~~$44.4 million of loss expected to be reclassified into earnings in the next 12 months.

Accumulated other comprehensive income (loss) for the six months ended June 30, ~~2015~~2016 was as follows (in thousands):

Accumulated
Other
Comprehensive
Income (Loss) Change
Related to
Cash Flow
Hedges Change
Related to
Shipboard
Retirement
Plan Accumulated
Other
Comprehensive
Income (Loss) Change
Related to
Cash Flow
Hedges Change
Related to
Shipboard
Retirement
Plan
Accumulated other comprehensive income (loss) at beginning of period $ (242,642 ) $ (234,188 ) $ (8,454 ) $ (412,650 ) $ (405,298 ) $ (7,352 )
Current period other comprehensive loss before reclassifications (33,274 ) (33,274 ) —
Current period other comprehensive income before reclassifications 75,457 75,457 —
Amounts reclassified into earnings 48,689 48,450 (1) 239 (2) 58,547 58,331 (1) 216 (2)
Accumulated other comprehensive income (loss) at end of period $ (227,227 ) $ (219,012 ) $ (8,215 ) $ (278,646 ) $ (271,510 ) $ (7,136 )

(1) We refer you to Note 7—6— “Fair Value Measurements and Derivatives” for the affected line items in the consolidated statements of operations.
(2) Amortization of prior-service cost and actuarial loss reclassified to payroll and related expense.

5. 5. Property and Equipment, net

Property and equipment, net increased ~~$609.7~~$856.4 million for the six months ended June 30, ~~2016~~2017 primarily due to the delivery of ~~Seven Seas Explorer~~Norwegian Joy, ships under construction and ~~the refurbishment of several ships.~~ship improvement projects.

6. 6. ~~Long-Term Debt~~
In June 2016, NCLC and Voyager Vessel Company, LLC, indirect subsidiaries of NCLH, entered into a Second Amended and Restated Credit Agreement (the “Amended Senior Secured Credit Facility”) with a syndicate of banks which restates the Amended and Restated Credit Agreement, dated as of October 31, 2014 (the “Existing Senior Secured Credit Facility”). The Amended Senior Secured Credit Facility amends the Existing Senior Secured Credit Facility to, among other things, (i) (a) increase the aggregate amount of commitments under the Revolving Loan Facility from $625.0 million to $750.0 million (the “New Revolving Loan Facility”) and (b) increase the aggregate principal amount outstanding under the $1.38 billion term loan facility from $1.16 billion to $1.51 billion (the “New Term Loan A Facility”) and (ii) extend the maturity of the New Term Loan A Facility and the New Revolving Loan Facility to June 2021 (the “Extended Maturity Date”). The agreement incorporates a springing maturity date for the New Term Loan A Facility and the New Revolving Loan Facility such that both mature on (A) the earlier date that is 91 days prior to the final maturity date of NCLC’s $680.0 million aggregate principal amount of 5.25% senior unsecured notes due 2019 (the “5.25% Notes”) if on such date (x) the 5.25% Notes have not been repaid (or refinanced with indebtedness maturing after the Extended Maturity Date) by such date and (y) free liquidity does not exceed the aggregate principal amount of outstanding 5.25% Notes by at least $50.0 million and (B) the earlier date that is 91 days prior to the final maturity date of NCLC’s $600.0 million aggregate principal amount of 4.625% senior unsecured notes due 2020 (the “4.625% Notes”) if on such date (x) the 4.625% Notes have not been repaid (or refinanced with indebtedness maturing after the Extended Maturity Date) by such date and (y) free liquidity does not exceed the aggregate principal amount of outstanding 4.625% Notes by at least $50.0 million. NCLC used proceeds of approximately $1.59 billion from the New Term Loan A Facility and the New Revolving Loan Facility to prepay the entire outstanding principal amount of the Revolving Loan Facility, the $1.38 billion term loan facility and the $350.0 million term loan facility.
The New Term Loan A Facility and New Revolving Loan Facility bear interest at a rate per annum of (a) an adjusted LIBOR rate or (b) a base rate determined by reference to the greatest of (i) the federal funds rate plus 0.50%, (ii) the prime rate in effect on such day and (iii) the adjusted LIBOR rate plus 1%, in each case plus an applicable margin that is determined by reference to a total leverage ratio, with an applicable margin of between 2.25% and 1.50% with respect to Eurocurrency loans and between 1.25% and 0.50% with respect to base rate loans. The initial applicable margin for borrowings is 2.25% with respect to Eurocurrency borrowings and 1.25% with respect to base rate borrowings.
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The New Term Loan A Facility will be paid in quarterly installments commencing in September 2016, in a principal amount equal to (a) in the case of installments payable on or prior to June 6, 2018, 1.25% of the loans outstanding immediately after the closing date under the New Term Loan A Facility and (b) in the case of installments payable after June 6, 2018, 2.50% of the loans outstanding immediately after the closing date under the New Term Loan A Facility, with the remaining unpaid principal amount of loans under the New Term Loan A Facility due and payable in full at maturity on June 6, 2021. Principal amounts outstanding under the New Revolving Loan Facility are due and payable in full at maturity on June 6, 2021, subject to earlier repayment pursuant to the springing maturity date described above.
In addition to paying interest on outstanding principal under the borrowings, we are obligated to pay a quarterly commitment fee at a rate determined by reference to a total leverage ratio, with a maximum commitment fee of 40% of the applicable margin for Eurocurrency loans.
In June 2016, we took delivery of Seven Seas Explorer. To finance the payment due upon delivery, we had export financing in place for 80% of the contract price. The associated $373.6 million term loan bears interest at 3.43% with a maturity date of June 30, 2028. Principal and interest payments shall be paid semiannually.
7. Fair Value Measurements and Derivatives

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

Fair Value Hierarchy

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

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

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

Level 3 Significant unobservable inputs we believe market participants would use in pricing the asset or liability based on the best information available.
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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. The determination of ineffectiveness is based on the amount of dollar offset between the cumulative change in fair value of the derivative and the cumulative change in fair value of the hedged transaction at the end of the reporting period. If it is determined that a derivative is not highly effective as a hedge, or if the hedged forecasted transaction is no longer probable of occurring, then the amount recognized in accumulated other comprehensive income (loss) is released to earnings. In addition, the ineffective portion of our highly effective hedges is recognized in earnings immediately and reported in other income (expense), net in our consolidated statements of operations. 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 and our New Revolving Loan Facility, is not considered significant, as we primarily conduct business with large, well-established financial institutions that we have established relationships with and that have credit risks acceptable to us or the credit risk is spread out among a large number of creditors. We do not anticipate non-performance by any of our significant counterparties.
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The following table sets forth our derivatives measured at fair value and discloses the balance sheet location (in thousands):

Asset Liability
Balance Sheet location June 30,
2016 December 31,
2015 June 30,
2016 December 31,
2015
Fuel swaps designated as hedging instruments
Prepaid expenses and other assets $ 15,972 $ — $ — $ —
Other long-term assets 7,084 — — —
Accrued expenses and other liabilities — — 82,672 128,740
Other long-term liabilities 7,340 — 79,646 132,494
Fuel swaps not designated as hedging instruments
Accrued expenses and other liabilities — — 1,801 —
Foreign currency forward contracts designated as hedging instruments
Prepaid expenses and other assets 6,135 — 3,414 —
Other long-term assets 2,577 3,446 386 1,370
Accrued expenses and other liabilities 731 — 13,514 8,737
Other long-term liabilities 1,814 551                   20,165 24,181
Foreign currency collar not designated as a hedging instrument
Accrued expenses and other liabilities — — — 42,993
Interest rate swaps designated as hedging instruments
Accrued expenses and other liabilities — — 4,328 4,079
Other long-term liabilities — — 3,973 3,395
Asset Liability
Balance Sheet location June 30,
2017 December 31,
2016 June 30,
2017 December 31,
2016
Fuel swaps designated as hedging instruments
Prepaid expenses and other assets $ 5,955 $ 20,288 $ — $ —
Other long-term assets 897 — — —
Accrued expenses and other liabilities 1,056 — 41,865 44,271
Other long-term liabilities 6,255 13,237 34,529 38,608
Foreign currency forward contracts designated as hedging instruments
Prepaid expenses and other assets 13,509 — 144 —
Other long-term assets 28,718 14 — —
Accrued expenses and other liabilities 2,141 — 4,665 61,788
Other long-term liabilities — — — 88,920
Interest rate swaps designated as hedging instruments
Accrued expenses and other liabilities — — 2,546 3,331
Other long-term liabilities — — — 1,151

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 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 (in thousands):

June 30, 2016 Gross Amounts Gross
Amounts
Offset Total Net
Amounts Gross
Amounts Not
Offset Net Amounts
June 30, 2017 Gross Amounts Gross
Amounts
Offset Total Net
Amounts Gross
Amounts Not
Offset Net Amounts
Assets $ 31,768 $ (3,800 ) $ 27,968 $ (2,715 ) $ 25,253 $ 49,079 $ (144 ) $ 48,935 $ (40,103 ) $ 8,832
Liabilities 206,099 (9,885 ) 196,214 (30,707 ) 165,507 83,605 (9,452 ) 74,153 (3,609 ) 70,544

December 31, 2015 Gross Amounts Gross
Amounts
Offset Total Net
Amounts Gross
Amounts Not
Offset Net Amounts
December 31, 2016 Gross Amounts Gross
Amounts
Offset Total Net
Amounts Gross
Amounts Not
Offset Net Amounts
Assets $ 3,446 $ (1,370 ) $ 2,076 $ (2,043 ) $ 33 $ 20,302 $ — $ 20,302 $ (14 ) $ 20,288
Liabilities 344,619 (551 ) 344,068 (336,645 ) 7,423 238,069 (13,237 ) 224,832 (155,190 ) 69,642
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Fuel Swaps

As of June 30, ~~2016,~~2017, we had fuel swaps maturing through December 31, ~~2019~~2020 which are used to mitigate the financial impact of volatility in fuel prices pertaining to approximately ~~1.8~~1.5 million metric tons of our projected fuel purchases.

The effects on the consolidated financial statements of the fuel swaps which were designated as cash flow hedges were as follows (in thousands):

Three Months Ended
June 30, Six Months Ended
June 30,
2016 2015 2016 2015
Gain recognized in other comprehensive income  – effective portion $ 85,808 $ 34,133 $ 76,302 $ 31,332
Loss recognized in other expense – ineffective portion (3,524 ) (3,194 ) (8,751 ) (9,245 )
Amount reclassified from accumulated other comprehensive income (loss) into fuel expense 20,440 15,297 51,577 35,833
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Three Months Ended
June 30, Six Months Ended
June 30,
2017 2016 2017 2016
Gain (loss) recognized in other comprehensive income  – effective portion $ (4,884 ) $ 85,808 $ (31,087 ) $ 76,302
Loss recognized in other income (expense), net – ineffective portion (431 ) (3,524 ) (801 ) (8,751 )
Amount reclassified from accumulated other comprehensive income (loss) into fuel expense 8,584 20,440 16,587 51,577

~~As of June 30, 2016, we~~We had fuel swaps ~~pertaining to approximately 22,000 metric tons~~that matured which were not designated as cash flow hedges. These fuel swaps were previously designated as cash flow hedges and were dedesignated due to a change in our expected future fuel purchases mix.

The effects on the consolidated financial statements of the fuel swaps which were dedesignated and recognized into earnings were as follows (in thousands):

Three Months Ended
June 30, Six Months Ended
June 30,
2016 2015 2016 2015
Loss recognized in other expense $ (92 ) $ — $ (92 ) $ —
Amount reclassified from accumulated other comprehensive income (loss) into other expense 1,465 10,000 2,994 10,000
~~Fuel Collars~~
~~We had fuel collars that matured and were used to mitigate the financial impact of volatility in fuel prices of our fuel purchases.~~
~~The effects on the consolidated financial statements of the fuel collars which were designated as cash flow hedges were as follows (in thousands):~~
Three Months Ended
June 30, Six Months Ended
June 30,
2016 2015 2016 2015
Amount reclassified from accumulated other comprehensive income (loss) into fuel expense $ — $ 10 $ — $ 248
Three Months Ended
June 30, Six Months Ended
June 30,
2017 2016 2017 2016
Loss recognized in other income (expense), net $ — $ (92 ) $ — $ (92 )
Amount reclassified from accumulated other comprehensive income (loss) into other income (expense), net — 1,465 — 2,994

Foreign Currency Options
We had foreign currency options that matured which consisted of call options with deferred premiums. These options were used to mitigate the financial impact of volatility in foreign currency exchange rates related to our ship construction contracts denominated in euros. If the spot rate at the date the ships were delivered was less than the strike price under these option contracts, we would have paid the deferred premium and would not exercise the foreign currency options.

The effects on the consolidated financial statements of the foreign currency options which were designated as cash flow hedges were as follows (in thousands):

Three Months Ended
June 30, Six Months Ended
June 30,
2016 2015 2016 2015
Amount reclassified from accumulated other comprehensive income (loss) into depreciation and amortization expense $ 330 $ 330 $ 660 $ 660
Three Months Ended
June 30, Six Months Ended
June 30,
2017 2016 2017 2016
Amount reclassified from accumulated other comprehensive income (loss) into depreciation and amortization expense $ 330 $ 330 $ 660 $ 660

Foreign Currency Forward Contracts

As of June 30, ~~2016,~~2017, we had foreign currency forward contracts which are used to mitigate the financial impact of volatility in foreign currency exchange rates related to our ship construction contracts ~~and forecasted Dry-dock payments~~ denominated in euros. The notional amount of our foreign currency forward contracts was ~~€2.3~~€1.8 billion, or ~~$2.6~~$2.1 billion based on the euro/U.S. dollar exchange rate as of June 30, ~~2016.~~2017.

The effects on the consolidated financial statements of the foreign currency forward contracts which were designated as cash flow hedges were as follows (in thousands):

Three Months Ended
June 30, Six Months Ended
June 30,
2016 2015 2016 2015
Gain (loss) recognized in other comprehensive income – effective portion $ (79,900 ) $ 36,928 $ 2,611 $ (60,447 )
Gain (loss) recognized in other expense – ineffective portion (2 ) 8 9 (7 )
Amount reclassified from accumulated other comprehensive income (loss) into depreciation and amortization expense 656 (63 ) 1,301 (127 )
~~We had foreign currency forward contracts that matured and were used to mitigate the volatility of foreign currency exchange rates related to financial instruments denominated in foreign currencies.~~
Three Months Ended
June 30, Six Months Ended
June 30,
2017 2016 2017 2016
Gain (loss) recognized in other comprehensive income – effective portion $ 136,428 $ (79,900 ) $ 155,064 $ 2,611
Gain (loss) recognized in other income (expense), net – ineffective portion (16 ) (2 ) (66 ) 9
Amount reclassified from accumulated other comprehensive income (loss) into depreciation and amortization expense 656 656 1,274 1,301

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The effects on the consolidated financial statements of foreign currency forward contracts which were not designated as cash flow hedges were as follows (in thousands):

Three Months Ended
June 30, Six Months Ended
June 30,
2016 2015 2016 2015
Gain (loss) recognized in other expense $ (6,133 ) $ 99 $ (6,133 ) $ 99
Three Months Ended
June 30, Six Months Ended
June 30,
2017 2016 2017 2016
Loss recognized in other income (expense), net $ — $ (6,133 ) $ — $ (6,133 )
Foreign Currency ~~Collars~~Collar

We had foreign currency collars that matured and were used to mitigate the volatility of foreign currency exchange rates related to our ship construction contracts denominated in euros.

The effects on the consolidated financial statements of the foreign currency collar which was designated as a cash flow hedge was as follows (in thousands):

Three Months Ended
June 30, Six Months Ended
June 30,
2016 2015 2016 2015
Amount reclassified from accumulated other comprehensive income (loss) into depreciation and amortization expense $ (91 ) $ (91 ) $ (182 ) $ (182 )
Three Months Ended
June 30, Six Months Ended
June 30,
2017 2016 2017 2016
Amount reclassified from accumulated other comprehensive income (loss) into depreciation and amortization expense $ (91 ) $ (91 ) $ (182 ) $ (182 )

The effect on the consolidated financial statements of the foreign currency collar which was not designated as a cash flow hedge was as follows (in thousands):

Three Months Ended
June 30, Six Months Ended
June 30,
2016 2015 2016 2015
Gain (loss) recognized in other expense $ (3,313 ) $ 9,350 $ 10,312 $ (19,603 )
Three Months Ended
June 30, Six Months Ended
June 30,
2017 2016 2017 2016
Gain (loss) recognized in other income (expense), net $ — $ (3,313 ) $ — $ 10,312

Interest Rate Swaps

As of June 30, ~~2016,~~2017, we had interest rate swap agreements to hedge our exposure to interest rate movements and to manage our interest expense. The notional amount of outstanding debt associated with the interest rate swap agreements was ~~$366.3 million.~~$250.7 million as of June 30, 2017.

The effects on the consolidated financial statements of the interest rate swaps which were designated as cash flow hedges were as follows (in thousands):

Three Months Ended
June 30, Six Months Ended
June 30,
2016 2015 2016 2015
Loss recognized in other comprehensive income – effective portion $ (901 ) $ (570 ) $ (3,456 ) $ (4,159 )
Gain (loss) recognized in other expense – ineffective portion — (5 ) 3 (12 )
Amount reclassified from accumulated other comprehensive income (loss) into interest expense, net 981 1,081 1,981 2,018
~~We had an interest rate swap that matured in January 2015, which was used to mitigate our exposure to interest rate movements and to manage our interest expense.~~
~~The effect on the consolidated financial statements of the interest rate swap contract which was not designated as a hedging instrument was as follows (in thousands):~~
Three Months Ended
June 30, Six Months Ended
June 30,
2016 2015 2016 2015
Loss recognized in other expense $ — $ — $ — $ (2 )
Three Months Ended
June 30, Six Months Ended
June 30,
2017 2016 2017 2016
Gain (loss) recognized in other comprehensive income – effective portion $ (25 ) $ (901 ) $ 259 $ (3,456 )
Gain recognized in other income (expense), net – ineffective portion — — — 3
Amount reclassified from accumulated other comprehensive income (loss) into interest expense, net 765 981 1.610 1,981

Long-Term Debt

As of June 30, ~~2016~~2017 and December 31, ~~2015,~~2016, the fair value of our long-term debt, including the current portion, was ~~$6.7 billion~~$6,864.4 million and ~~$6.5 billion,~~$6,525.7 million, respectively, which was ~~$11.5~~$48.1 million ~~higher~~ and ~~$6.6~~$11.6 million ~~lower,~~higher, 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
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calculated based on estimated rates for the same or similar instruments with similar terms and remaining maturities resulting in Level 2 inputs in the fair value hierarchy. 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.

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7. Employee Benefits and Compensation Plans
Share-Based Compensation
As a result of our adoption of ASU No. 2016-09, beginning in the first quarter of 2017, we began accounting for forfeitures as they occur, rather than estimating expected forfeitures. Pursuant to the modified-retrospective application, the net cumulative effect of this change was recognized as a $2.2 million increase to retained earnings as of January 1, 2017 (we refer you to our consolidated statements of changes in shareholders’ equity).

Share Option Awards
~~On March 1, 2016, we granted 1.0 million share option awards to our employees at an exercise price of $50.31 with a contractual term of ten years. The share options vest equally over three years.~~

The following is a summary of option activity under our ~~share option plan~~Amended and Restated 2013 Performance Incentive Plan for the six months ended June 30, ~~2016~~2017 (excludes the impact of ~~364,584~~208,335 previously awarded performance-based options as no grant date has been established):

Number of Share Option
Awards Weighted-Average Exercise
Price Per Share Weighted-
Average
Contractual Term
Aggregate
Intrinsic Value
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 (years) (in thousands) Time-
Based
Awards Performance-
Based
Awards Market-
Based
Awards Time-
Based
Awards Performance-
Based
Awards Market-
Based
Awards (years) (in thousands)
Outstanding as of December 31, 2015 7,702,071 432,752 208,333 $ 47.35 $ 19.00 $ 59.43 8.59 $ 104,864
Outstanding as of January 1, 2017 7,775,058 432,978 208,333 $ 48.04 $ 23.86 $ 59.43 7.81 $ 35,429
Granted 1,060,000 52,083 — 50.13 59.43 — — 156,249 — — 59.43 — — —
Exercised (89,534 ) (51,857 ) — 25.48 19.00 — (383,203 ) (59,218 ) — 28.33 19.00 — — —
Forfeited and cancelled (466,527 ) — — 49.10 — — (325,030 ) (93,749 ) — 55.03 59.43 — — —
Outstanding as of June 30, 2016 8,206,010 432,978 208,333 $ 47.85 $ 23.86 $ 59.43 8.31 $ 30,800
Outstanding as of June 30, 2017 7,066,825 436,260 208,333 $ 48.79 $ 29.62 $ 59.43 7.44 $ 61,204

Restricted Ordinary Share Awards

The following is a summary of restricted ordinary share activity for the six months ended June 30, ~~2016:~~2017:

Number of
Time-Based
Awards Weighted-
Average Grant
Date Fair
Value Per Share Number of
Time-Based
Awards Weighted-
Average Grant
Date Fair
Value
Non-vested as of January 1, 2016 43,653 $ 5.87
Non-vested as of January 1, 2017 16,872 $ 7.63
Granted — — — —
Vested (16,830 ) 5.85 (11,338 ) 5.53
Forfeited or expired (352 ) 2.50 — —
Non-vested and expected to vest as of June 30, 2016 26,471 $ 5.92
Non-vested and expected to vest as of June 30, 2017 5,534 $ 11.94

Restricted Share Unit Awards

On March 1, ~~2016,~~2017, we granted ~~1.2~~1.7 million time-based restricted share unit awards to our employees which vest equally over three years. Additionally, on March 1, 2017, we awarded 121,000 performance-based restricted share units to certain members of our management team which vest upon the achievement of certain pre-established performance targets.

The following is a summary of restricted share unit activity for the six months ended June 30, ~~2016~~2017 (excludes the impact of ~~87,500~~171,000 previously awarded performance-based restricted share units as no grant date was established):

Number of
Time-Based
Awards Weighted-
Average Grant
Date Fair
Value Per Share Number of
Performance-
Based
Awards Weighted-
Average Grant
Date Fair
Value Per Share Number of
Market-
Based
Awards Weighted-
Average Grant
Date Fair
Value Per Share 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, 2016 150,000 $ 59.43 — $ — 50,000 $ 59.43
Non-vested as of January 1, 2017 1,305,335 $ 50.38 — $ — 50,000 $ 59.43
Granted 1,246,990 50.41 12,500 50.00 — — 1,750,612 50.96 37,500 49.76 — —
Vested (37,500 ) 59.43 (12,500 ) 50.00 — — (440,508 ) 50.67 (15,000 ) 49.76 — —
Forfeited or expired (50,000 ) 50.31 — — — — (36,507 ) 50.61 (22,500 ) 49.76 — —
Non-vested and expected to vest as of June 30, 2016 1,309,490 $ 51.19 — $ — 50,000 $ 59.43
Non-vested and expected to vest as of June 30, 2017 2,578,932 50.72 — — 50,000 59.43

The share-based compensation expense for the six months ended June 30, ~~2016~~2017 was ~~$31.4~~$42.2 million of which ~~$27.7~~$38.5 million was recorded in marketing, general and administrative expense and $3.7 million was recorded in payroll and related expense.

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8. 9. Commitments and Contingencies

Ship Construction Contracts

Project Leonardo will introduce an additional four ships with expected delivery dates through 2025 and we have an option to introduce two additional ships for delivery in 2026 and 2027, subject to certain conditions. These four ships are each approximately 140,000 Gross Tons with approximately 3,300 Berths. We have ~~Norwegian Joy~~an Explorer Class Ship on order for delivery in the winter of 2020. This ship is approximately 55,000 Gross Tons and 750 Berths. We have two ~~other~~ Breakaway Plus Class Ships on order ~~with Meyer Werft shipyard~~ for delivery in the ~~spring of 2017,~~ spring of 2018 and fall of 2019, respectively. These ships ~~will be amongst the largest in our fleet, reaching~~are approximately ~~164,600~~168,000 Gross ~~Tons.~~Tons each with approximately 4,000 Berths each. The combined contract price of these ~~three~~seven ships iswas approximately ~~€2.6~~€5.5 billion, or ~~$2.9~~$6.3 billion based on the euro/U.S. dollar exchange rate as of June 30, ~~2016.~~2017. We have export credit financing in place that provides financing for 80% of their contract prices. In June 2016, we took delivery of Seven Seas Explorer. We have an additional Explorer Class Ship on order with Fincantieri shipyard with an original contract price of approximately €422.0 million, or approximately $468.7 million based on the euro/U.S. dollar exchange rate as of June 30, 2016. We have export credit financing in place that provides financing for 80% of theeach ship’s contract price. ~~The additional Explorer Class Ship is~~For ships expected to be delivered inafter 2023, the ~~winter of 2020.~~
contract price is subject to adjustment under certain circumstances.

In connection with the contracts to build ~~these~~the ships, we do not anticipate any contractual ~~breaches~~breach or cancellation to occur. However, if any would 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

In the normal course of our business, various 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~~the 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.

9. ~~10.~~ ~~Restructuring Costs~~Other Income (Expense), Net

~~Due~~For the three months ended June 30, 2017, other income (expense), net was a $5.6 million expense which included $8.1 million of losses due to foreign currency exchange partially offset by $2.5 million of gains primarily due to a gain from an insurance claim. For the ~~Acquisition of Prestige, a number of employee positions were consolidated. As of~~three months ended June 30, 2016, ~~we had an accrual balance~~the $10.8 million expense included $14.5 million of ~~$1.9~~losses due to derivatives partially offset by $3.7 million ~~for restructuring costs for severance and other employee-related costs. The~~of foreign currency exchange gains. For the six months ended June 30, 2017, the $8.4 million expense included $10.8 million of foreign currency exchange losses partially offset by $2.4 million ~~for~~of gains primarily due to a gain from an insurance claim. For the six months ended June 30, 2016, isthe $7.9 million expense included ~~in marketing, general and administrative expense.~~$11.8 million of losses on fuel derivatives partially offset by $3.9 million of gains which was primarily due to forward exchange derivative gains.
~~The following table summarizes changes in the accrual for restructuring costs (in thousands):~~
Restructuring costs
Accrued expense balance as of December 31, 2015 $ (4,144 )
Amounts paid 4,610
Additional accrued expense (2,404 )
Accrued expense balance as of June 30, 2016 $ (1,938 )

10. ~~11.~~ Supplemental Cash Flow Information

For the six months ended June 30, 2017 and 2016, we had non-cash investing activities in connection with property and equipment of $10.3 million and $32.0 million, ~~and for~~respectively. For the six months ended June 30, ~~2015,~~2017, we had non-cash investing activities in connection with capital leases of ~~$27.6~~$5.4 million.
~~12.~~ ~~Revision to the Consolidated Statement of Cash Flows~~
During the three months ended September 30, 2015, we determined that for the six months ended June 30, 2015, cash payments related to property and equipment were reported as a decrease in cash flows from operating activities related to the change in accrued expenses and other liabilities and prepaid and other assets when it should have been reported as a decrease in cash flows from investing activities related to additions to property and equipment. The consolidated statements of cash flows for the six months ended June 30, 2015 have been revised to increase cash from operating activities related to the change in accrued expenses and other liabilities and prepaid and other assets and increase investing cash outflows from additions to property and equipment by $18.5 million. We have determined that the revision is not material to our consolidated financial statements individually and in the aggregate.

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~~13.~~ ~~Subsequent Event~~
~~Amendment to Credit Agreement~~
NCLC, a subsidiary of NCLH, entered into a Supplemental Agreement, dated July 26, 2016, by and among NCLC, as guarantor, Breakaway Four, Ltd. (the “Borrower”), as borrower, NCL International Ltd., as shareholder, and KfW IPEX-Bank GmbH (“KfW”), as facility agent and lender (the “Credit Agreement Amendment”), which amends the Credit Agreement, dated as of October 12, 2012, by and among NCLC, as parent, the Borrower and KfW, as facility agent and lender (the “Existing Credit Agreement”). The Credit Agreement Amendment amends the Existing Credit Agreement to, among other things, increase the aggregate principal amount of commitments under the multi-draw term loan credit facility from €590.5 million to €729.9 million.
~~Except as provided in the Credit Agreement Amendment, all other provisions of the Existing Credit Agreement remain in full force.~~
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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 development plans and objectives relating to our activities), 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” and “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:

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 risks and increased costs associated with operating internationally;~~
~~an impairment of our tradenames or goodwill could adversely affect our financial condition and operating results;~~
~~our efforts to expand our business into new markets;~~
~~adverse events impacting the security of travel, such as terrorist acts, acts of piracy, armed conflict and threats thereof and other international events;~~
~~breaches in data security or other disturbances to our information technology and other networks;~~
~~the spread of epidemics and viral outbreaks;~~
~~adverse incidents involving cruise ships;~~
~~changes in fuel prices and/or other cruise operating costs;~~
~~our hedging strategies;~~
~~our inability to obtain adequate insurance coverage;~~
~~our substantial indebtedness, including the ability to raise additional capital to fund our operations, and to generate the necessary amount of cash to service our existing debt;~~
~~restrictions in the agreements governing our indebtedness that limit our flexibility in operating our business;~~
~~the significant portion of our assets pledged as collateral under our existing debt agreements and the ability of our creditors to accelerate the repayment of our indebtedness;~~
~~our ability to incur significantly more debt despite our substantial existing indebtedness;~~
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;
~~fluctuations in foreign currency exchange rates;~~
~~our inability to recruit or retain qualified personnel or the loss of key personnel;~~
~~future changes relating to how external distribution channels sell and market our cruises;~~
~~our reliance on third parties to provide hotel management services to certain ships and certain other services;~~
~~delays in our shipbuilding program and ship repairs, maintenance and refurbishments;~~
~~future increases in the price of, or major changes or reduction in, commercial airline services;~~
~~seasonal variations in passenger fare rates and occupancy levels at different times of the year;~~
~~our ability to keep pace with developments in technology;~~
~~amendments to our collective bargaining agreements for crew members and other employee relation issues;~~
~~the continued availability of attractive port destinations;~~
~~pending or threatened litigation, investigations and enforcement actions;~~
~~changes involving the tax and environmental regulatory regimes in which we operate; and~~
~~other factors set forth under “Risk Factors” in our most recently filed Annual Report on Form 10-K and “Item 1A. Risk Factors” in this report.~~
• 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;
• adverse events impacting the security of travel, such as terrorist acts, armed conflict and threats thereof, acts of piracy, and other international events;
• the risks and increased costs associated with operating internationally;
• our expansion into and investments in new markets;
• breaches in data security or other disturbances to our information technology and other networks;
• the spread of epidemics and viral outbreaks;
• adverse incidents involving cruise ships;
• changes in fuel prices and/or other cruise operating costs;
• any impairment of our tradenames or goodwill;
• our hedging strategies;
• our inability to obtain adequate insurance coverage;
• our substantial indebtedness, including the ability to raise additional capital to fund our operations, and to generate the necessary amount of cash to service our existing debt;
• restrictions in the agreements governing our indebtedness that limit our flexibility in operating our business;
• the significant portion of our assets pledged as collateral under our existing debt agreements and the ability of our creditors to accelerate the repayment of our indebtedness;
• 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;
• fluctuations in foreign currency exchange rates;
• overcapacity in key markets or globally;
• our inability to recruit or retain qualified personnel or the loss of key personnel;
• future changes relating to how external distribution channels sell and market our cruises;
• our reliance on third parties to provide hotel management services to certain ships and certain other services;
• delays in our shipbuilding program and ship repairs, maintenance and refurbishments;
• future increases in the price of, or major changes or reduction in, commercial airline services;
• seasonal variations in passenger fare rates and occupancy levels at different times of the year;
• our ability to keep pace with developments in technology;
• amendments to our collective bargaining agreements for crew members and other employee relation issues;
• the continued availability of attractive port destinations;
• pending or threatened litigation, investigations and enforcement actions;
• changes involving the tax and environmental regulatory regimes in which we operate; and
• other factors set forth under “Risk Factors” in our most recently filed Annual Report on Form 10-K, as such risk factors may be amended, supplemented or superseded from time to time by other reports we file with the Securities and Exchange Commission (the “SEC”).

The above examples are not exhaustive and new risks 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 ~~will~~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.

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Terminology

This report includes certain non-GAAP financial measures, such as Net Revenue, Net Yield, Net Cruise Cost, Adjusted Net Revenue, Adjusted Net Yield, Adjusted Net Cruise Cost Excluding Fuel, Adjusted EBITDA, Adjusted Net Income and Adjusted EPS. Definitions of these non-GAAP financial measures are included below. For further information about our non-GAAP financial measures including detailed adjustments made in calculating our non-GAAP financial measures and a reconciliation to the most directly comparable GAAP financial 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, pursuant to the Merger Agreement, we acquired Prestige in a cash and stock transaction for total consideration of $3.025 billion, including the assumption of debt.

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

•Adjusted EPS. Adjusted Net Income divided by the number of diluted weighted-average shares outstanding.

•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.

•Adjusted Net Revenue. Net Revenue adjusted for supplemental adjustments.

•Adjusted Net Yield. Net Yield adjusted for supplemental adjustments.

•BareboatCharter. The hire of a ship for a specified period of time whereby no crew or provisions are provided by the Company.

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

•Breakaway Class Ships.Norwegian Breakaway and Norwegian Getaway.

•Breakaway Four Loan Facility.€729.9 million Breakaway four loan due 2029.
•Breakaway Plus Class Ships. ~~The next generation of ships which are similar in design~~Norwegian Escape, Norwegian Joy, Norwegian Bliss and ~~innovation to Breakaway Class Ships.~~a fourth ship on order.

•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 in order to eliminate the effects of the 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.

•EPS. Earnings per share.

•Explorer Class Ships.Regent’s Seven Seas Explorer and a second ship on order.

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

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

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

•Gross Yield. Total revenue per Capacity Day.
•~~Management NCL Corporation Units.~~ NCLC’s previously outstanding profits interests issued to management (or former management) of NCLC which were converted into units in NCLC. All Management NCL Corporation Units were exchanged for NCLH ordinary shares and restricted shares in the fourth quarter of 2014.
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•Merger Agreement. Agreement and Plan of Merger, dated as of September 2, 2014, by and among Prestige, NCLH, Portland Merger Sub, Inc. and Apollo Management, L.P., as amended, for the Acquisition of Prestige.

•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.

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

•Net Yield. Net Revenue per Capacity Day.
•~~New~~~~Revolving Loan Facility~~. $750.0 million senior secured revolving credit facility maturing on June 6, 2021, subject to an earlier springing maturity date as described in Note 6— “Long-Term Debt” in our Consolidated Financial Statements included herein. The New Revolving Loan Facility amended and restated the Revolving Loan Facility.

•Occupancy Percentage. The ratio of Passenger Cruise Days to Capacity Days. A percentage in excess of 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.
•New Revolving Loan Facility. ~~$625.0~~$750.0 million senior secured revolving credit facility ~~which was~~maturing on June 6, 2021, subject to ~~mature on May 24, 2018 was amended and restated in June 2016 (such amendment and restatement is referred to herein as the New Revolving Loan Facility).~~an earlier springing maturity date.
•Project Leonardo.The next generation of ships for our Norwegian brand.

•ROI Capital Expenditures.Comprised of project-based capital expenditures which have a quantified return on investment.
•~~Secondary Equity Offering(s).~~~~Secondary public offering(s) of NCLH’s ordinary shares in 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, Adjusted Net Revenue, Net Yield, Adjusted Net Yield, Net Cruise Cost, Adjusted Net Cruise Cost Excluding Fuel, Adjusted EBITDA, Adjusted Net Income and Adjusted EPS, to enable us to analyze our performance. See “Terminology” for the definitions of these 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 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 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 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. Adjusted EBITDA is not 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 Revenue and Adjusted Net Yield, which ~~excludes~~exclude certain business combination accounting entries, are non-GAAP financial measures that we believe are useful as supplemental measures in evaluating the performance of our operating business and provide greater transparency into our results of operations. Adjusted Net Income and Adjusted EPS are non-GAAP financial measures that exclude certain amounts and are used to supplement GAAP net income and EPS. We use Adjusted Net Income
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and Adjusted EPS as key performance measures of our earnings performance. We believe that both management and investors benefit from referring to these non-GAAP financial measures in assessing our performance and when planning, forecasting and analyzing future periods. These non-GAAP financial measures also facilitate management’s internal comparison to our historical performance. In addition, management uses Adjusted EPS as a performance measure for our incentive compensation. The amounts excluded in the presentation of these non-GAAP financial measures may vary from period to period; accordingly, our presentation of Adjusted Net Revenue, Adjusted Net Yield, Adjusted Net Income and Adjusted EPS may not be indicative of future adjustments or results. For example, for the ~~three and six months~~year ended ~~June 30,~~December 31, 2016, we incurred ~~an $11.4~~$28.0 million ~~write-off~~related to the extinguishment of ~~deferred financing fees~~debt due to the refinancing of certain credit facilities. We included ~~the $11.4 million~~this as an adjustment in the reconciliation of Adjusted Net Income since ~~these amounts are~~the extinguishment of debt is not representative of our day-to-day operations and we have included ~~other write-offs of deferred financing fees as~~similar adjustments in prior ~~periods.~~periods; however, this adjustment did not occur and is not included in the periods presented within this Form 10-Q.
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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.

Financial Presentation

Revenue from our cruise and cruise-related activities are categorized by us as “passenger ticket revenue” and “onboard and other revenue.” Passenger ticket revenue and onboard and other revenue vary according to 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 gaming, beverage sales, shore excursions, specialty dining, retail sales, spa services, photo services as well as certain Bareboat Charter revenue. We record onboard revenue 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:

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, costs associated with service charges, certain port expenses and the costs associated with shore excursions and hotel accommodations included as part of the overall cruise purchase price.

Onboard and other primarily consists of direct costs that are incurred in connection with onboard and other revenue. These include costs incurred in connection with gaming, beverage sales and shore excursions.

Payroll and related consists of the cost of wages and benefits for shipboard employees and costs of certain inventory items, including food, for a third party that provides crew and other hotel services for certain ships.

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

For a discussion of our critical accounting policies and estimates, see “Critical Accounting Policies” included in our Annual Report on Form 10-K for the year ended December 31, ~~2015~~2016 under the caption “Management’s Discussion and Analysis of Financial Condition and Results of Operations.” We have made no significant changes to our critical accounting policies and estimates from those described in our Annual Report on Form 10-K for the year ended December 31, ~~2015.~~2016.
However, in accordance with Item 303(a)(3)(ii) of Regulation S-K and Section V of SEC Release No. 33-8350, we are including additional disclosure which is presented below:
Asset Impairment
We review our long-lived assets, principally ships, for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable. Assets are grouped and evaluated at the lowest level for which there are identifiable cash flows that are largely independent of the cash flows of other groups of assets. We consider historical performance and future estimated results in our evaluation of potential impairment and then compare the carrying amount of the asset to the estimated future cash flows expected to result from the use of the asset. If the carrying amount of the asset exceeds the estimated expected undiscounted future cash flows, we measure the amount of the impairment by comparing the carrying amount of the asset to its fair value. We estimate fair value based on the best information available making whatever estimates, judgments and projections we considered necessary. The estimation of fair value is generally measured by discounting expected future cash flows at discount rates commensurate with the risk involved.

2018
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We evaluate goodwill for impairment annually or more frequently when an event occurs or circumstances change that indicates the carrying value of a reporting unit may not be recoverable. For our evaluation of goodwill and tradenames we use the Step 0 Test which allows us to first assess qualitative factors to determine whether it is more likely than not (i.e., more than 50%) that the fair value of a reporting unit is less than its carrying value. In order to make this evaluation, we consider the following circumstances:
General macroeconomic conditions such as a deterioration in general economic conditions; limitations on accessing capital; fluctuations in foreign exchange rates; or other developments in equity and credit markets;
Industry and market conditions such as a deterioration in the environment in which an entity operates; an increased competitive environment; a decline in market-dependent multiples or metrics (in both absolute terms and relative to peers); a change in the market for an entity’s products or services; or a regulatory or political development;
Changes in cost factors that have a negative effect on earnings and cash flows;
Overall financial performance (for both actual and expected performance);
Entity and reporting unit specific events such as changes in management, key personnel, strategy, or customers; litigation; or a change in the composition or carrying amount of net assets; and
Share price (in both absolute terms and relative to peers).
We believe our estimates and judgments with respect to our long-lived assets, principally ships, and goodwill and other indefinite-lived intangible assets are reasonable. Nonetheless, if there was a material change in assumptions used in the determination of such fair values or if there is a material change in the conditions or circumstances that influence such assets, we could be required to record an impairment charge. If a material change occurred, we may conduct a quantitative assessment comparing the fair value of each reporting unit to its carrying value, including goodwill. This is called the Step I Test which consists of a combined approach using the expected future cash flows and market multiples to determine the fair value of the reporting units.
In the third quarter of 2016, based on the performance of the Oceania Cruises reporting unit, we performed an interim goodwill impairment evaluation consisting of a Step I Test. Based on that evaluation, we determined that there was no impairment of goodwill because its fair value exceeded its carrying value. For our annual impairment evaluation, we performed a Step 0 Test for the Norwegian reporting unit and Step I Tests for the Regent Seven Seas and the Oceania Cruises reporting units. As a result of the Step 0 Test for the Norwegian reporting unit, we determined there were no factors indicating it was more likely than not (i.e., more than 50%) that the fair value of the reporting unit was less than its carrying value. Based on the results of the Step 1 Tests, we determined there was no impairment of goodwill because the fair value of the Oceania Cruises and Regent Seven Seas reporting units exceeded their carrying values by 24% and 81%, respectively. However, if the fair value of any reporting unit declines in future periods, its goodwill may become impaired at that time. As of December 31, 2016 and June 30, 2017, there was $523.0 million, $462.1 million and $403.8 million of goodwill for the Oceania Cruises, Regent Seven Seas and Norwegian reporting units, respectively. As of December 31, 2016, our annual review consisting of the Step 0 and Step I Tests supported the carrying values of these assets. Subsequent to December 31, 2016, the Company has continued to monitor the results of each of these reporting units and will perform the necessary tests should events occur or circumstances change that indicate the carrying value of a reporting unit may not be recoverable.
Quarterly Overview

~~Seven Seas Explorer~~
Norwegian Joy was delivered in ~~June 2016 to our Regent fleet. This~~April 2017. The ship is approximately ~~55,000~~168,000 Gross Tons with ~~750~~approximately 3,880 Berths.
~~Sirena, previously under a Bareboat Charter, joined our Oceania Cruises fleet in April 2016. This ship is approximately 30,000 Gross Tons with 684 Berths.~~

Three months ended June 30, ~~2016~~2017 (“~~2016”~~2017”) compared to ~~the~~ three months ended June 30, ~~2015~~2016 (“~~2015”~~2016”)

Total revenue increased ~~9.3%~~13.3% to $1.3 billion compared to $1.2 billion.
Net Revenue increased 13.1% to $1.0 billion ~~in 2016~~ compared to $1.1 billion in 2015 primarily due to an increase in Capacity Days and improved pricing. Gross Yield was relatively unchanged. Net Revenue in 2016 increased 11.2% to $917.5 million from $825.1 million in 2015 due to an increase in Capacity Days of 9.4% and an increase in Net Yield of 1.7%. The increase in Capacity Days was primarily due to the delivery of Norwegian Escape in October 2015 and Sirena joining our fleet in April 2016 slightly offset by the scheduled Dry-docks. The increase in Net Yield was primarily due to improved pricing.
$0.9 billion.

~~We had net~~
Net income and diluted EPS ofwas $198.5 million and $0.87, respectively, compared to $145.2 million and $0.64, ~~respectively, in 2016.~~ respectively.
Operating income was ~~$227.0~~$275.1 million ~~in 2016~~ compared to ~~$217.4 million in 2015. We had~~ $227.0 million.
Adjusted Net Income and Adjusted EPS were $232.7 million and $1.02, respectively, in 2017, which included $34.3 million of adjustments primarily consisting of expenses related to non-cash compensation and certain other adjustments. Adjusted Net Income and Adjusted EPS were $192.6 million and $0.85, ~~respectively,~~ in 2016, which ~~includes~~included $47.3 million of adjustments primarily consisting of expenses related to deferred financing fees, derivatives, non-cash compensation and certain other adjustments.
Adjusted EBITDA improved ~~12.0% in 2016~~21.0% to $424.9 compared to ~~2015.~~ $351.1 million.
We refer you to our “Results of ~~Operations��~~Operations” below for a calculation of Net Revenue, ~~Net Yield,~~ Adjusted Net Income, Adjusted EPS and Adjusted EBITDA.
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Results of Operations

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

Three Months Ended
June 30, Six Months Ended
June 30, Three Months Ended
June 30, Six Months Ended
June 30,
2016 2015 2016 2015 2017 2016 2017 2016
Revenue
Passenger ticket 69.0 % 72.6 % 68.8 % 72.1 % 69.8 % 69.0 % 69.1 % 68.8 %
Onboard and other 31.0 % 27.4 % 31.2 % 27.9 % 30.2 % 31.0 % 30.9 % 31.2 %
Total revenue 100.0 % 100.0 % 100.0 % 100.0 % 100.0 % 100.0 % 100.0 % 100.0 %
Cruise operating expense
Commissions, transportation and other 16.3 % 17.7 % 16.3 % 18.0 % 16.6 % 16.3 % 16.7 % 16.3 %
Onboard and other 6.4 % 6.3 % 6.2 % 6.3 % 6.2 % 6.4 % 6.1 % 6.2 %
Payroll and related 15.5 % 14.9 % 16.0 % 15.8 % 14.5 % 15.5 % 15.5 % 16.0 %
Fuel 6.8 % 8.5 % 7.2 % 8.9 % 6.4 % 6.8 % 7.0 % 7.2 %
Food 4.2 % 4.0 % 4.4 % 4.2 % 3.5 % 4.2 % 3.8 % 4.4 %
Other 10.3 % 9.1 % 10.4 % 10.1 % 8.7 % 10.3 % 9.9 % 10.4 %
Total cruise operating expense 59.5 % 60.5 % 60.5 % 63.3 % 55.9 % 59.5 % 59.0 % 60.5 %
Other operating expense
Marketing, general and administrative 12.6 % 9.9 % 14.6 % 12.9 % 14.4 % 12.6 % 15.5 % 14.6 %
Depreciation and amortization 8.8 % 9.6 % 9.1 % 10.1 % 9.2 % 8.8 % 9.7 % 9.1 %
Total other operating expense 21.4 % 19.5 % 23.7 % 23.0 % 23.6 % 21.4 % 25.2 % 23.7 %
Operating income 19.1 % 20.0 % 15.8 % 13.7 % 20.5 % 19.1 % 15.8 % 15.8 %
Non-operating income (expense)
Interest expense, net (5.8 )% (4.8 )% (5.7 )% (5.1 )% (4.8 )% (5.8 )% (4.7 )% (5.7 )%
Other expense (0.9 )% (0.4 )% (0.3 )% (1.7 )%
Other income (expense), net (0.4 )% (0.9 )% (0.3 )% (0.3 )%
Total non-operating income (expense) (6.7 )% (5.2 )% (6.0 )% (6.8 )% (5.2 )% (6.7 )% (5.0 )% (6.0 )%

Net income before income taxes 12.4 % 14.8 % 9.8 % 6.9 % 15.3 % 12.4 % 10.8 % 9.8 %
Income tax expense (0.2 )% (0.2 )% (0.2 )% (0.1 )% (0.5 )% (0.2 )% (0.4 )% (0.2 )%
Net income 12.2 % 14.6 % 9.6 % 6.8 % 14.8 % 12.2 % 10.4 % 9.6 %

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The following table sets forth selected statistical information:

Three Months Ended
June 30, Six Months Ended
June 30,
2016 2015 2016 2015
Passengers carried 574,838 527,676 1,126,313 1,041,202
Passenger Cruise Days 4,237,020 3,948,773 8,522,314 7,716,888
Capacity Days 3,974,508 3,634,143 7,965,450 7,190,611
Occupancy Percentage 106.6 % 108.7 % 107.0 % 107.3 %
Three Months Ended
June 30, Six Months Ended
June 30,
2017 2016 2017 2016
Passengers carried 569,857 574,838 1,098,211 1,126,313
Passenger Cruise Days 4,517,788 4,237,020 8,748,306 8,522,314
Capacity Days 4,189,750 3,974,508 8,220,366 7,965,450
Occupancy Percentage 107.8 % 106.6 % 106.4 % 107.0 %

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

Three Months Ended
June 30, Six Months Ended
June 30, Three Months Ended
June 30, Six Months Ended
June 30,
2016 2016
Constant
Currency 2015 2016 2016
Constant
Currency 2015 2017 2017
Constant
Currency 2016 2017 2017
Constant
Currency 2016
Passenger ticket revenue $ 818,478 $ 822,398 $ 787,991 $ 1,558,590 $ 1,575,030 $ 1,458,474 $ 938,014 $ 948,291 $ 818,478 $ 1,724,708 $ 1,742,798 $ 1,558,590
Onboard and other revenue 368,357 368,358 297,442 705,877 705,877 565,141 406,089 406,089 368,357 770,176 770,176 705,877
Total revenue 1,186,835 1,190,756 1,085,433 2,264,467 2,280,907 2,023,615 1,344,103 1,354,380 1,186,835 2,494,884 2,512,974 2,264,467
Less:
Commissions, transportation and other expense 193,536 194,383 192,438 368,973 373,288 364,265 223,315 225,429 193,536 417,455 421,947 368,973
Onboard and other expense 75,790 75,790 67,885 139,755 139,755 126,530 83,367 83,367 75,790 151,778 151,778 139,755
Net Revenue 917,509 920,583 825,110 1,755,739 1,767,864 1,532,820 1,037,421 1,045,584 917,509 1,925,651 1,939,249 1,755,739
Non-GAAP Adjustment:
Deferred revenue (1) 297 297 7,294 757 757 28,488 — — 297 — — 757
Adjusted Net Revenue $ 917,806 $ 920,880 $ 832,404 $ 1,756,496 $ 1,768,621 $ 1,561,308 $ 1,037,421 $ 1,045,584 $ 917,806 $ 1,925,651 $ 1,939,249 $ 1,756,496
Capacity Days 3,974,508 3,974,508 3,634,143 7,965,450 7,965,450 7,190,611 4,189,750 4,189,750 3,974,508 8,220,366 8,220,366 7,965,450
Gross Yield $ 298.61 $ 299.60 $ 298.68 $ 284.29 $ 286.35 $ 281.42 $ 320.81 $ 323.26 $ 298.61 $ 303.50 $ 305.70 $ 284.29
Net Yield $ 230.85 $ 231.62 $ 227.04 $ 220.42 $ 221.94 $ 213.17 $ 247.61 $ 249.56 $ 230.85 $ 234.25 $ 235.91 $ 220.42
Adjusted Net Yield $ 230.92 $ 231.70 $ 229.05 $ 220.51 $ 222.04 $ 217.13 $ 247.61 $ 249.56 $ 230.92 $ 234.25 $ 235.91 $ 220.51

(1) ��Reflects deferred revenue fair value adjustments related to the Acquisition of Prestige that were made pursuant to business combination accounting rules.

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
June 30, Six Months Ended
June 30, Three Months Ended
June 30, Six Months Ended
June 30,
2016 2016
Constant
Currency 2015 2016 2016
Constant
Currency 2015 2017 2017
Constant
Currency 2016 2017 2017
Constant
Currency 2016
Total cruise operating expense $ 705,900 $ 707,178 $ 656,279 $ 1,370,381 $ 1,376,337 $ 1,279,979 $ 752,242 $ 754,209 $ 705,900 $ 1,472,040 $ 1,476,176 $ 1,370,381
Marketing, general and administrative expense 149,307 149,288 107,164 329,881 330,604 261,321 193,649 194,219 149,307 385,693 386,581 329,881
Gross Cruise Cost 855,207 856,466 763,443 1,700,262 1,706,941 1,541,300 945,891 948,428 855,207 1,857,733 1,862,757 1,700,262
Less:
Commissions, transportation and other expense 193,536 194,383 192,438 368,973 373,288 364,265 223,315 225,429 193,536 417,455 421,947 368,973
Onboard and other expense 75,790 75,790 67,885 139,755 139,755 126,530 83,367 83,367 75,790 151,778 151,778 139,755
Net Cruise Cost 585,881 586,293 503,120 1,191,534 1,193,898 1,050,505 639,209 639,632 585,881 1,288,500 1,289,032 1,191,534
Less: Fuel expense 80,607 80,607 91,581 162,279 162,279 178,955 86,663 86,663 80,607 175,549 175,549 162,279
Net Cruise Cost Excluding Fuel 505,274 505,686 411,539 1,029,255 1,031,619 871,550 552,546 552,969 505,274 1,112,951 1,113,483 1,029,255
Less Non-GAAP Adjustments:
Non-cash deferred compensation (1) 792 792 1,029 1,583 1,583 2,482 823 823 792 1,646 1,646 1,583
Non-cash share-based compensation (2) 16,204 16,204 2,161 31,449 31,449 14,166 24,017 24,017 16,204 42,220 42,220 31,449
Secondary Equity Offerings’ expenses (3) — — 1,022 — — 1,022
Severance payments and other fees (4) 869 869 3,289 2,899 2,899 13,676
Management NCL Corporation Units exchange expenses (5) — — — — — 624
Acquisition of Prestige expenses (6) 1,273 1,273 10,891 3,014 3,014 11,291
Contingent consideration adjustment (7) — — (34,300 ) — — (43,400 )
Severance payments and other fees (3) — — 869 2,399 2,399 2,899
Acquisition of Prestige expenses (4) 250 250 1,273 500 500 3,014
Other (5) 1,606 1,606 — 1,606 1,606 —
Adjusted Net Cruise Cost Excluding Fuel $ 486,136 $ 486,548 $ 427,447 $ 990,310 $ 992,674 $ 871,689 $ 525,850 $ 526,273 $ 486,136 $ 1,064,580 $ 1,065,112 $ 990,310

Capacity Days 3,974,508 3,974,508 3,634,143 7,965,450 7,965,450 7,190,611 4,189,750 4,189,750 3,974,508 8,220,366 8,220,366 7,965,450
Gross Cruise Cost per Capacity Day $ 215.17 $ 215.49 $ 210.08 $ 213.45 $ 214.29 $ 214.35 $ 225.76 $ 226.37 $ 215.17 $ 225.99 $ 226.60 $ 213.45
Net Cruise Cost per Capacity Day $ 147.41 $ 147.51 $ 138.44 $ 149.59 $ 149.88 $ 146.09 $ 152.56 $ 152.67 $ 147.41 $ 156.74 $ 156.81 $ 149.59
Net Cruise Cost Excluding Fuel per Capacity Day $ 127.13 $ 127.23 $ 113.24 $ 129.21 $ 129.51 $ 121.21 $ 131.88 $ 131.98 $ 127.13 $ 135.39 $ 135.45 $ 129.21
Adjusted Net Cruise Cost Excluding Fuel per Capacity Day $ 122.31 $ 122.42 $ 117.62 $ 124.33 $ 124.62 $ 121.23 $ 125.51 $ 125.61 $ 122.31 $ 129.51 $ 129.57 $ 124.33

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(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) ~~Expenses related to the Secondary Equity Offerings, which are included in marketing, general and administrative expense.~~
~~(4)~~ Severance payments and other expenses related to restructuring costs and other severance arrangements, which are included in marketing, general and administrative expense.
~~(5)~~ ~~Expenses related to the exchange of Management NCL Corporation Units for ordinary shares, which are included in marketing, general and administrative expense.~~
~~(6)~~(4) Expenses related to the Acquisition of Prestige, which are included in marketing, general and administrative expense.
~~(7)~~(5) ~~Contingent consideration fair value adjustment~~Expenses primarily related to ~~the Acquisition of Prestige,~~a legal settlement, which isare included in marketing, general and administrative expense.

Adjusted Net Income and Adjusted EPS were calculated as follows (in thousands, except share and per share data):

Three Months Ended
June 30,

Six Months Ended
June 30,

2016 2015 2016 2015
Net income 145,246 158,494 218,475 137,038
Non-GAAP Adjustments:
Non-cash deferred compensation (1) 792 1,029 1,583 2,482
Non-cash share-based compensation (2) 16,204 2,334 31,449 14,339
Secondary Equity Offerings’ expenses (3) — 1,022 — 1,022
Severance payments and other fees (4) 869 3,289 2,899 13,676
Management NCL Corporation Units exchange expenses (5) — — — 624
Acquisition of Prestige expenses (6) 1,273 10,891 3,014 11,291
Deferred revenue (7) 297 7,294 757 28,488
Amortization of intangible assets (8) 5,267 20,913 10,535 39,059
Contingent consideration adjustment (9) — (34,300 ) — (43,400 )
Derivative adjustment (10) 10,911 650 (1,185 ) 29,603
Deferred financing fees and other (11) 11,714 — 11,714 —
Adjusted Net Income $ 192,573 $ 171,616 $ 279,241 $ 234,222
Diluted weighted–average shares outstanding 227,884,704 230,228,144 227,997,970 229,664,210
Diluted earnings per share $ 0.64 $ 0.69 $ 0.96 $ 0.60
Adjusted EPS $ 0.85 $ 0.75 $ 1.22 $ 1.02

Three Months Ended
June 30,

Six Months Ended
June 30,

2017 2016 2017 2016
Net income 198,473 145,246 260,383 218,475
Non-GAAP Adjustments:
Non-cash deferred compensation (1) 823 792 1,646 1,583
Non-cash share-based compensation (2) 24,017 16,204 42,220 31,449
Severance payments and other fees (3) — 869 2,399 2,899
Acquisition of Prestige expenses (4) 250 1,273 500 3,014
Deferred revenue (5) — 297 — 757
Amortization of intangible assets (6) 7,568 5,267 15,136 10,535
Derivative adjustment (7) — 10,911 — (1,185 )
Deferred financing fees and other (8) — 11,714 — 11,714
Other (9) 1,606 — 1,606 —
Adjusted Net Income $ 232,737 $ 192,573 $ 323,890 $ 279,241
Diluted weighted–average shares outstanding 229,090,085 227,884,704 228,824,296 227,997,970
Diluted earnings per share $ 0.87 $ 0.64 $ 1.14 $ 0.96
Adjusted EPS $ 1.02 $ 0.85 $ 1.42 $ 1.22

(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) ~~Expenses related to the Secondary Equity Offerings, which are included in marketing, general and administrative expense.~~
~~(4)~~ Severance payments and other expenses related to restructuring costs and other severance arrangements, which are included in marketing, general and administrative expense.
~~(5)~~ ~~Expenses related to the exchange of Management NCL Corporation Units for ordinary shares, which are included in marketing, general and administrative expense.~~
~~(6)~~(4) Expenses related to the Acquisition of Prestige, which are included in marketing, general and administrative expense.
~~(7)~~(5) Deferred revenue fair value adjustments related to the Acquisition of Prestige that were made pursuant to business combination accounting rules, which are primarily included in ~~Net Revenue.~~passenger ticket revenue.
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~~(8)~~(6) Amortization of intangible assets related to the Acquisition of Prestige, which are included in depreciation and amortization expense.
~~(9)~~ ~~Contingent consideration fair value adjustment related to the Acquisition of Prestige, which is included in marketing, general and administrative expense.~~
~~(10)~~(7) Losses and net gains for the fair value adjustment of a foreign exchange collar which does not receive hedge accounting and losses due to the dedesignation of certain ~~fuels~~fuel swaps. These adjustments are included in other ~~expense.~~income (expense), net.
~~(11)~~(8) ~~Primarily~~Expenses primarily related to the write-off of deferred financing fees related to the refinancing of certain credit facilities, which isare included in interest expense, net.
(9) Expenses primarily related to a legal settlement, which are included in marketing, general and administrative expense.
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Table of Contents

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

Three Months Ended
June 30, Six Months Ended
June 30, Three Months Ended
June 30, Six Months Ended
June 30,
2016 2015 2016 2015 2017 2016 2017 2016
Net income $ 145,246 $ 158,494 $ 218,475 $ 137,038 $ 198,473 $ 145,246 $ 260,383 $ 218,475
Interest expense, net 68,420 52,446 128,174 103,435 64,196 68,420 117,156 128,174
Income tax expense 2,599 2,726 3,703 3,403 6,793 2,599 8,842 3,703
Depreciation and amortization expense 104,610 104,607 205,905 204,583 123,141 104,610 242,346 205,905
EBITDA 320,875 318,273 556,257 448,459 392,603 320,875 628,727 556,257
Other expense (1) 10,753 3,717 7,948 33,856 5,609 10,753 8,424 7,948
Non-GAAP Adjustments:
Non-cash deferred compensation (2) 792 1,029 1,583 2,482 823 792 1,646 1,583
Non-cash share-based compensation (3) 16,204 2,161 31,449 14,166 24,017 16,204 42,220 31,449
Secondary Equity Offerings’ expenses (4) — 1,022 — 1,022
Severance payments and other fees (5) 869 3,289 2,899 13,676
Management NCL Corporation Units exchange expenses (6) — — — 624
Acquisition of Prestige expenses (7) 1,273 10,891 3,014 11,291
Deferred revenue (8) 297 7,294 757 28,488
Contingent consideration adjustment (9) — (34,300 ) — (43,400 )
Severance payments and other fees (4) — 869 2,399 2,899
Acquisition of Prestige expenses (5) 250 1,273 500 3,014
Deferred revenue (6) — 297 — 757
Other (7) 1,606 — 1,606 —
Adjusted EBITDA $ 351,063 $ 313,376 $ 603,907 $ 510,664 $ 424,908 $ 351,063 $ 685,522 $ 603,907

(1) Primarily consists of gains and losses, net for derivative contracts and ~~forward~~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.
(4) ~~Expenses related to the Secondary Equity Offerings, which are included in marketing, general and administrative expense.~~
~~(5)~~ Severance payments and other expenses related to restructuring costs and other severance arrangements, which are included in marketing, general and administrative expense.
~~(6)~~ ~~Expenses related to the exchange of Management NCL Corporation Units for ordinary shares, which are included in marketing, general and administrative expense.~~
~~(7)~~(5) Expenses related to the Acquisition of Prestige, which are included in marketing, general and administrative expense.
~~(8)~~(6) Deferred revenue fair value adjustments related to the Acquisition of Prestige that were made pursuant to business combination accounting rules, which are primarily included in ~~Net Revenue.~~passenger ticket revenue.
(7) ~~(9)~~ ~~Contingent consideration fair value adjustment~~Expenses primarily related to ~~the Acquisition of Prestige,~~a legal settlement, which isare included in marketing, general and administrative expense.

Three months ended June 30, ~~2016~~2017 (“~~2016”~~2017”) compared to three months ended June 30, ~~2015~~2016 (“~~2015”~~2016”)

Revenue

Total revenue increased ~~9.3%~~13.3% to $1.3 billion in 2017 compared to $1.2 billion in 2016 ~~compared to $1.1 billion in 2015~~ primarily due to an increase in Capacity ~~Days and improved pricing.~~Days. Gross Yield ~~was relatively unchanged.~~increased 7.4%. Net Revenue increased 13.1% in 2017 to $1.0 billion from $0.9 billion in 2016 ~~increased 11.2% to $917.5 million from $825.1 million in 2015~~ due to an increase in Capacity Days of ~~9.4% and~~5.4%, an increase in Net Yield of ~~1.7%.The~~7.3% and an increase in Occupancy Percentage. The increase in Capacity Days was primarily due to a reduction in the amount of Dry-docks in 2017 compared to 2016 and the delivery of ~~Norwegian Escape~~Seven Seas Explorer in ~~October 2015 and Sirena joining our fleet in April 2016 slightly offset by the scheduled Dry-docks.~~June 2016. The increase in Gross Yield and Net Yield was primarily due to ~~improved pricing.~~an increase in passenger ticket pricing and higher onboard and other revenue. Adjusted Net Revenue, in 2016, includes a deferred revenue fair value adjustment of ~~$7.3~~$0.3 million ~~in 2015~~ related to the Acquisition of Prestige. On a Constant Currency basis, Net Yield and Adjusted Net Yield increased ~~2.0% and 1.2%, respectively,~~8.1% in ~~2016~~2017 compared to ~~2015.~~2016.
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Expense

Gross Cruise Cost increased ~~12.0%~~10.6% in ~~2016~~2017 compared to ~~2015~~2016 due to an increase in total cruise operating expense and marketing, general and administrative ~~expense.~~expenses. Total cruise operating expense increased ~~7.6%~~6.6% in ~~2016~~2017 compared to ~~2015~~2016 primarily due to the increase in Capacity Days as discussed above and ~~an increase~~crew payroll and related costs which was partially offset by a decrease in repairs and maintenance including Dry-dock expenses. Total other operating expense increased ~~19.9%~~24.8% in ~~2016~~2017 compared to ~~2015~~2016 due to an increase in marketing, general and administrative expenses and an increase in depreciation and amortization expense. Marketing, general and administrative expenses increased primarily due to an increase in advertising and marketing expenses as well as an increase in share-based compensation. Depreciation and amortization expense increased primarily due to ship improvement projects and the ship additions. On a Capacity Day basis, Net Cruise Cost increased 3.5% (3.6% on a Constant Currency basis) primarily due to an increase in marketing, general and administrative expenses which included an increase in share-based compensation expense of $11.8 million. The increase was also due to recognition of a $34.3 million contingent consideration adjustment related to the Acquisition of Prestige which resulted in a reduction to expense in 2015 but not in 2016. Depreciation and amortization expense was relatively unchanged as the increase due to the addition of Norwegian Escape and ship improvement projects in 2016 was offset by the recognition in 2015 of an incremental $15.6 million of amortization of intangible assets due to the Acquisition of Prestige. On a Capacity Day basis, Net Cruise Cost increased 6.5% (6.6% on a Constant Currency basis) due to the increases in expenses discussed above partially offset by a ~~decrease~~reduction in ~~fuel expense which was primarily due to a 15.9% decrease in the average fuel price to $469 per metric ton in 2016 from $558 per metric ton in 2015.~~maintenance and repairs including Dry-dock expenses. Adjusted Net Cruise Cost Excluding Fuel per Capacity Day increased ~~4.0% (4.1%~~2.6% (2.7% on a Constant Currency basis) primarily due to the increase in ~~certain~~ expenses discussed above. ~~We refer you to the “Results of Operations” above for a reconciliation of Gross Cruise Cost to Adjusted Net Cruise Cost Excluding Fuel.~~

Interest expense, net ~~increased~~was $64.2 million in 2017 compared to $68.4 million in ~~2016 from $52.4 million in 2015 primarily due to~~2016. Interest expense for 2017 reflects an increase in average debt balances outstanding primarily associated with the delivery of ~~Norwegian Escape in October 2015~~new ships and ~~slightly~~newbuild installments, as well as higher interest rates due to an increase in ~~LIBOR rates. The increase in interest~~LIBOR. Interest expense ~~net also includes~~for 2016 included a write-off of $11.4 million of deferred financing fees related to the refinancing of certain of our credit ~~facilities.~~facilities in 2016.

Other income (expense), net was an expense ~~was~~of $5.6 million in 2017 compared to an expense of $10.8 million in ~~2016 compared~~2016. In 2017, the expense was primarily related to ~~$3.7 million in 2015.~~losses on foreign currency exchange and unrealized and realized losses on derivatives partially offset by income from an insurance settlement. In 2016, the expense was primarily related to unrealized and realized losses on fuel ~~swap~~ derivative hedge contracts and foreign exchange derivative ~~hedge~~ contracts partially offset by gains on foreign currency exchange. In 2015, the expense was primarily related to the dedesignation of certain fuel swap derivative hedge contracts and the ineffectiveness of settled fuel swaps in 2015. The expense in 2015 was partially offset by income related to the fair value adjustment for a foreign exchange collar which does not receive hedge accounting treatment.

In ~~2016,~~2017, we had an income tax expense of ~~$2.6~~$6.8 million compared to ~~$2.7~~$2.6 million in ~~2015.~~2016.
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Six months ended June 30, ~~2016~~2017 (“~~2016”~~2017”) compared to six months ended June 30, ~~2015~~2016 (“~~2015”~~2016”)
Revenue

Total revenue increased ~~11.9%~~10.2% to $2.5 billion in 2017 compared to $2.3 billion in 2016 ~~compared to $2.0 billion in 2015~~ primarily due to an increase in Capacity ~~Days and improved pricing.~~Days. Gross Yield increased ~~slightly.~~6.8%. Net Revenue increased 9.7% in ~~2016 increased 14.5%~~2017 to $1.9 billion from $1.8 billion ~~from $1.5 billion~~ in ~~2015~~2016 due to an increase in Capacity Days of ~~10.8%~~3.2% and an increase in Net Yield of ~~3.4%.The~~6.3%. The increase in Capacity Days was primarily due to the delivery of ~~Norwegian Escape~~Seven Seas Explorer in ~~October 2015 slightly offset by~~June 2016, Sirena joining our fleet in April 2016 and a reduction in the ~~scheduled~~amount of Dry-docks in 2017 compared to 2016. The increase in Gross Yield and Net Yield was primarily due to ~~improved pricing.~~an increase in passenger ticket pricing and higher onboard and other revenue. Adjusted Net Revenue, in 2016, includes a deferred revenue fair value adjustment of ~~$28.5~~$0.8 million ~~in 2015~~ related to the Acquisition of Prestige. On a Constant Currency basis, Net Yield and Adjusted Net Yield increased ~~4.1% and 2.3%, respectively,~~7.0% in ~~2016~~2017 compared to ~~2015.~~2016.

Expense

Gross Cruise Cost increased ~~10.3%~~9.3% in ~~2016~~2017 compared to ~~2015~~2016 due to an increase in total cruise operating expense and marketing, general and administrative ~~expense.~~expenses. Total cruise operating expense increased ~~7.1%~~7.4% in ~~2016~~2017 compared to ~~2015~~2016 primarily due to the increase in Capacity Days as discussed above and ~~an increase in Dry-dock expenses.~~crew payroll and related costs. Total other operating expense increased ~~15.0%~~17.2% in ~~2016~~2017 compared to ~~2015 primarily~~2016 due to an increase in marketing, general and administrative expenses ~~which included~~and depreciation and amortization expense. Marketing, general and administrative expenses increased primarily due to an increase in advertising and marketing expenses ~~of $12.5 million and~~as well as an increase in share-based compensation of $13.6 million. The increase was also due to recognition of a $43.4 million contingent consideration adjustment related to the Acquisition of Prestige which resulted in a reduction to expense in 2015 but not in 2016.expense. Depreciation and amortization expense ~~was relatively unchanged as the increase~~increased primarily due to the ~~addition of Norwegian Escape and~~ ship improvement projects ~~in 2016 was offset by~~and the ~~recognition in 2015 of an incremental $28.5 million of amortization of intangible assets due to the Acquisition of Prestige.~~ship additions. On a Capacity Day basis, Net Cruise Cost increased ~~2.4% (2.6% on~~4.8% (on an actual and a Constant Currency basis) due to ~~the increases~~an increase in marketing, general and administrative expenses ~~discussed above partially offset by a decrease in fuel expense which was primarily due to a 16.4% decrease in the average fuel price to $453 per metric ton in 2016 from $542 per metric ton in 2015.~~and crew payroll and related costs. Adjusted Net Cruise Cost Excluding Fuel per Capacity Day increased ~~2.6% (2.8% on~~4.2% (on an actual and a Constant Currency basis) primarily due to the increase in ~~certain~~ expenses discussed above. ~~We refer you to the “Results of Operations” above for a reconciliation of Gross Cruise Cost to Adjusted Net Cruise Cost Excluding Fuel.~~

Interest expense, net ~~increased~~was $117.2 million in 2017 compared to $128.2 million in ~~2016 from $103.4 million~~2016. Interest expense for 2017 reflects higher interest rates driven by an increase in ~~2015 primarily due to~~LIBOR, as well as an increase in average debt balances outstanding primarily associated with the delivery of ~~Norwegian Escape in October 2015 as well as higher interest rates due~~
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~~to an increase in LIBOR rates. The increase in interest~~new ships and newbuild installments. Interest expense ~~net also includes~~for 2016 included a write-off of $11.4 million of deferred financing fees related to the refinancing of certain of our credit ~~facilities.~~facilities in 2016.

Other income (expense), net was an expense ~~was~~of $8.4 million in 2017 compared to an expense of $7.9 million in ~~2016 compared~~2016. In 2017, the expense was primarily related to losses on foreign currency exchange and unrealized and realized losses on derivatives partially offset by income from an ~~expense of $33.9 million in 2015.~~insurance settlement. In 2016, the expense was primarily related to unrealized and realized losses on fuel swap derivative hedge contracts and losses on foreign exchange partially offset by gains on foreign exchange derivative hedge contracts. In 2015, the expense was primarily related to the dedesignation of certain fuel swap derivative hedge contracts and the ineffectiveness of settled fuel swaps in 2015. Also included in 2015 was the expense related to the fair value adjustment for a foreign exchange collar which does not receive hedge accounting treatment.

In ~~2016,~~2017, we had an income tax expense of ~~$3.7~~$8.8 million compared to ~~$3.4~~$3.7 million in ~~2015.~~2016.

Liquidity and Capital Resources

General

As of June 30, ~~2016,~~2017, our liquidity was ~~$817.0~~$969.3 million consisting of ~~$146.0~~$219.3 million in cash and cash equivalents and ~~$671.0~~$750.0 million under our New Revolving Loan Facility. Our primary ongoing liquidity requirements are to finance working capital, capital expenditures and debt service.

As of June 30, ~~2016,~~2017, we had a working capital deficit of ~~$2.2~~$2.1 billion. This deficit included ~~$1.4~~$1.5 billion of advance ticket sales, which represents the revenue we collect in advance of sailing dates, and accordingly, are substantially more like deferred revenue balances rather than actual current cash liabilities. Our business model, along with our New 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 believe that prevailing market conditions, particularly in the debt capital markets, are generally favorable. We will continue to evaluate opportunities to ~~increase~~optimize our ~~liquidity in the near term,~~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.
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Sources and Uses of Cash

In this section, references to “2017” refer to the six months ended June 30, 2017 and references to “2016” refer to the six months ended June 30, ~~2016 and references to “2015” refer to the six months ended June 30, 2015.~~2016.

Net cash provided by operating activities was $919.7 million in 2017 as compared to $748.0 million in ~~2016 as compared to $711.7 million in 2015. The change in net cash provided by operating activities reflects net income in 2016 of $218.5 compared to a net income in 2015 of $137.0 million.~~2016. The net cash provided by operating activities included timing differences in cash receipts and payments relating to operating assets and liabilities. Net income increased to $260.4 million in 2017 from $218.5 million in 2016. Advance ticket sales was $400.9 million in 2017 compared to $358.6 million in 2016.

Net cash used in investing activities was ~~$799.0 million~~$1.1 billion in 2017 primarily related to payments for the delivery of Norwegian Joy, ship improvements and shoreside projects. Net cash used in investing activities was $0.8 billion in 2016 primarily related to payments for the delivery of Seven Seas Explorer, ship improvements, ships under construction and shoreside projects. ~~Net cash used in investing activities was $205.1 million in 2015, primarily related to payments for ship improvements, ships under construction and shoreside projects.~~

Net cash provided by financing activities was $271.8 million in 2017 primarily due to the proceeds from our Breakaway Four Loan Facility partially offset by the repayments of other loan facilities, our net repayment of our New Revolving Loan Facility and deferred financing fees and other. Net cash provided by financing activities was $81.0 million in 2016 primarily due to net proceeds of our New Revolving Loan Facility and other loan facilities partially offset by the repurchase of our ordinary shares and deferred financing fees and ~~other in 2016. Net cash used in financing activities was $418.5 million in 2015 primarily due to net repayments of our Revolving Loan Facility and other loan facilities.~~other.

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.~~operations. As of June 30, ~~2016,~~2017, our anticipated capital expenditures were ~~$0.2~~$0.3 billion for the remainder of ~~2016 and $1.3~~2017, $1.4 billion for ~~each of~~ the ~~years~~year ending December 31, ~~2017~~2018 and ~~2018,~~$1.2 billion for the year ending December 31, 2019, of which we have export credit financing in place for the expenditures related to ship construction contracts of ~~$47.8~~$48.2 million for the remainder of ~~2016,~~2017, $0.8 billion for 2018 and $0.6 billion for ~~2017 and $0.7 billion for 2018. These future expected capital expenditures will significantly increase our depreciation and amortization expense.~~2019.

Project Leonardo will introduce an additional four ships with expected delivery dates through 2025 and we have an option to introduce two additional ships for delivery in 2026 and 2027, subject to certain conditions. These four ships are each approximately 140,000 Gross Tons with approximately 3,300 Berths. We have ~~Norwegian Joy~~an Explorer Class Ship on order for delivery in the winter of 2020. This ship is approximately 55,000 Gross Tons and 750 Berths. We have two ~~other~~ Breakaway Plus Class Ships on order ~~with Meyer Werft shipyard~~ for delivery in the ~~spring of 2017,~~ spring of 2018 and fall of 2019, respectively. These ships ~~will be the largest in our fleet, reaching~~are approximately ~~164,600~~168,000 Gross ~~Tons.~~Tons each with approximately 4,000 Berths each. The combined contract price of these ~~three~~seven ships iswas approximately ~~€2.6~~€5.5 billion, or ~~$2.9~~$6.3 billion based on the euro/U.S. dollar exchange rate as of June 30, ~~2016.~~2017. We have export credit financing in place that provides financing for 80% of their contract prices. In June 2016, we took delivery of Seven Seas Explorer. We have an additional Explorer Class Ship on order with Fincantieri shipyard with an original contract price of approximately €422.0 million, or approximately $468.7 million based on the euro/U.S. dollar exchange rate as of June 30, 2016. We have export credit financing in place that provides financing for 80% of theeach ship’s contract price. ~~The additional Explorer Class Ship is~~For ships expected to be delivered inafter 2023, the ~~winter of 2020.~~contract price is subject to adjustment under certain circumstances.
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In connection with the contracts to build ~~these~~the ships, we do not anticipate any contractual breaches or cancellation to occur. However, if any would 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.

Capitalized interest for the three and six months ended June 30, ~~2016~~2017 was ~~$8.9~~$7.1 million and ~~$16.0~~$15.6 million, respectively, and for the three and six months ended June 30, ~~2015~~2016 was ~~$7.4~~$8.9 million and ~~$15.1~~$16.0 million, respectively, primarily associated with the construction of our ~~Breakaway Plus Class Ships.~~newbuild ships.

Off-Balance Sheet Transactions

None.

Contractual Obligations

As of June 30, ~~2016,~~2017, our contractual obligations with initial or remaining terms in excess of one year, including interest payments on long-term debt obligations, were as follows (in thousands):

Total Less than
1 year 1-3 years 3-5 years More than
5 years Total Less than
1 year 1-3 years 3-5 years More than
5 years
Long-term debt (1) $ 6,681,472 $ 581,804 $ 1,098,874 $ 3,347,485 $ 1,653,309 $ 6,816,695 $ 600,500 $ 1,239,407 $ 3,265,429 $ 1,711,359
Operating leases (2) 154,896 13,857 29,326 28,997 82,716 144,595 15,893 30,692 28,449 69,561
Ship construction contracts (3) 3,212,792 951,838 1,113,418 1,147,536 — 6,070,769 1,103,593 1,366,011 1,078,537 2,522,628
Port facilities (4) 280,723 43,177 67,001 53,843 116,702 252,159 42,996 61,018 49,043 99,102
Interest (5) 1,008,903 211,013 383,754 252,439 161,697 1,054,239 235,590 404,680 243,136 170,833
Other (6) 158,625 56,370 48,848 29,985 23,422 174,101 52,545 70,832 31,534 19,190
Total $ 11,497,411 $ 1,858,059 $ 2,741,221 $ 4,860,285 $ 2,037,846 $ 14,512,558 $ 2,051,117 $ 3,172,640 $ 4,696,128 $ 4,592,673
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(1) Includes premiums aggregating ~~$0.6~~$0.5 million. Also includes capital leases. The amount excludes deferred financing fees which are included in the consolidated balance sheets as an offset to long-term debt.
(2) Primarily for offices, motor vehicles and office equipment.
(3) For our newbuild ships based on the euro/U.S. dollar exchange rate as of June 30, ~~2016.~~2017. Export credit financing is in place from syndicates of banks.
(4) Primarily for our usage of certain port facilities.
(5) Includes fixed and variable rates with LIBOR held constant as of June 30, ~~2016.~~2017.
(6) Future commitments for service, ~~and~~ maintenance ~~contracts~~ and other Business Enhancement Capital ~~Expenditures.~~Expenditure contracts.

The table above does not include ~~$11.2~~$11.1 million of unrecognized tax benefits.

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

~~Our~~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, maintain certain other ratios and restrict our ability to pay dividends. ~~Our~~Substantially all of our ships and ~~substantially all~~ other property and equipment are pledged as collateral for certain of our debt. We believe we were in compliance with these covenants as of June 30, ~~2016.~~2017.

The impact of changes in world economies and especially the global credit markets ~~has created~~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 New Revolving Loan Facility and our ability to issue debt securities or ~~raise~~ 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
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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 ~~amount,~~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 June 30, ~~2016,~~2017, we had interest rate swap agreements to hedge our exposure to interest rate movements and to manage our interest expense. As of June 30, ~~2016, 55%~~2017, 61% of our debt was fixed and ~~45%~~39% was variable, which includes the effects of the interest rate swaps. The notional amount of outstanding debt associated with the interest rate swap agreements as of June 30, ~~2016~~2017 was ~~$366.3~~$250.7 million. Based on our June 30, ~~2016~~2017 outstanding variable rate debt balance, a one percentage point increase in annual LIBOR interest rates would increase our annual interest expense by approximately ~~$30.1~~$26.3 million excluding the effects of capitalization of interest.
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Foreign Currency Exchange Rate Risk

As of June 30, ~~2016,~~2017, 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 ~~€506.4 million,~~€3.5 billion, or ~~$562.4 million~~$4.0 billion based on the euro/U.S. dollar exchange rate as of June 30, ~~2016.~~2017. We estimate that a 10% change in the euro as of June 30, ~~2016~~2017 would result in a ~~$56.2 million~~$0.4 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 ~~11.4%~~11.5% and ~~14.0%~~11.4% for the three months ended June 30, ~~2016~~2017 and ~~2015,~~2016, respectively, and ~~11.8%~~11.9% and ~~14.0%~~11.8% for the six months ended June 30, ~~2016~~2017 and ~~2015,~~2016, respectively. We use fuel derivative agreements to mitigate the financial impact of fluctuations in fuel prices and as of June 30, ~~2016,~~2017, we had hedged approximately ~~88%~~76%, ~~82%~~65%, ~~55%~~48% and ~~50%~~26% of our remaining ~~2016,~~ 2017, 2018, 2019 and ~~2019~~2020, respectively, projected metric tons of fuel ~~purchases, respectively.~~purchases. We estimate that a 10% increase in our weighted-average fuel price would increase our anticipated ~~2016~~2017 fuel expense by ~~$13.0~~$15.5 million. This increase would be partially offset by an increase in the fair value of our fuel swap agreements of ~~$8.0~~$9.0 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, 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 ~~Rule 13a-15(e),~~of 1934, as amended, as of June 30, ~~2016.~~2017. There are inherent limitations to 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 ~~our~~ management’s evaluation, our Chief Executive Officer and Chief Financial Officer concluded that our disclosure controls and procedures were effective as of June 30, ~~2016~~2017 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 ~~Securities and Exchange Commission,~~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.
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Changes in Internal Control Over Financial Reporting

There have been no changes in our internal control over financial reporting during the quarter ended June 30, ~~2016~~2017 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

In the normal course of our business, various 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 ~~2015~~2016 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 that the risk factors discussed in “Item 1A. Risk Factors” in our ~~2015~~2016 Annual Report on Form 10-K, elsewhere in this report or other ~~Securities and Exchange Commission~~SEC filings, could cause future results to differ materially from those stated in any forward-looking statements.
Other than the risk factors set forth below, there have been no material changes to our risk factors disclosed in our 2015 Annual Report on Form 10-K. The first risk factor below is an amended and restated version of a risk factor included in “Item 1A. Risk Factors” in our 2015 Annual Report on Form 10-K:
~~Conducting business internationally may result in increased costs and risks.~~
We operate our business internationally and plan to continue to develop our international presence. Operating internationally exposes us to a number of risks, including political risks, risks of increases in duties and taxes, risks relating to anti-bribery laws, as well as risks that laws and policies affecting cruising, vacation or maritime businesses, or governing the operations of foreign-based companies may change. Additional risks include imposition of trade barriers, restrictions on repatriation of earnings, withholding and other taxes on remittances and other payments by subsidiaries and changes in and application of foreign taxation structures, including value added taxes. If we are unable to address these risks adequately, our business, financial condition and results of operations could be materially and adversely affected.
Operating internationally also exposes us to numerous and sometimes conflicting legal and regulatory requirements. In many parts of the world, including countries in which we operate, practices in the local business communities might not conform to international business standards. We have implemented safeguards and policies to prevent violations of various anti-corruption laws that prohibit improper payments or offers of payments to foreign governments and their officials for the purpose of obtaining or retaining business by our employees and agents. However, our existing safeguards and policies and any future improvements may prove to be less than effective and our employees or agents may engage in conduct prohibited by our policies, but for which we nevertheless may be held responsible. If our employees or agents violate our policies, if we fail to maintain adequate record-keeping and internal accounting practices to accurately record our transactions or if we fail to implement or maintain other adequate safeguards, we may be subject to regulatory sanctions or severe criminal or civil sanctions and penalties.
We have operations in and source passengers from the United Kingdom and other member countries of the European Union. On June 23, 2016, voters in the United Kingdom approved an advisory referendum to withdraw from the European Union. The proposed withdrawal has resulted in increased volatility in the global financial markets and caused severe volatility in global currency exchange rate fluctuations that resulted in the strengthening of the U.S. dollar against foreign currencies, such as the euro, in which we do business. The proposed withdrawal could potentially adversely affect tax, legal and regulatory regimes to which our business in the region is subject. The withdrawal could also, among other potential outcomes, disrupt the free movement of goods, services and people between the United Kingdom and the European Union. Further, uncertainty around these issues could lead to adverse effects on the economy of the United Kingdom and the other economies in which we operate making it more difficult to source passengers from these regions. These events could have a material adverse effect on our business, financial condition and results of operations.
~~An impairment of our tradenames or goodwill could adversely affect our financial condition and operating results.~~
We evaluate tradenames and goodwill for impairment on an annual basis, or more frequently when circumstances indicate that the carrying value of a reporting unit may not be recoverable. Several factors including a challenging operating environment, impacts affecting consumer demand or spending, the deterioration of general macroeconomic conditions, or other factors could result in a change to the future cash flows we expect to derive from our operations. Reductions of the cash flows used in the impairment analyses may result in the recording of an impairment charge to a reporting unit’s tradename or goodwill. We will continue to monitor these intangible assets for potential impairment and perform interim testing of our tradenames or goodwill as necessary.
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Item 2. Unregistered Sales of Equity Securities and Use of Proceeds

Purchases of Equity Securities by the Issuer

On April 29, 2014, NCLH’s Board of Directors authorized, and NCLH announced, a three-year share repurchase program for up to $500.0 million. The share repurchase program was scheduled to expire on April 29, 2017, but was extended through April 29, 2020. Under this program, NCLH may make repurchases in the open market, in privately negotiated transactions, in accelerated repurchase programs or in structured share repurchase programs, and any repurchases may be made pursuant to Rule 10b5-1 plans. There was no share repurchase activity during the three months ended June 30, ~~2016~~2017, and as of June 30, ~~2016,~~2017, $263.5 million remained available for repurchases of our outstanding ordinary shares under the share repurchase program.
Item 5. Other Information
None.
Item 6. Exhibits

2.1 Agreement and Plan of Merger, dated as of September 2, 2014, by and among Prestige Cruises International, Inc., Norwegian Cruise Line Holdings Ltd., Portland Merger Sub, Inc. and Apollo Management, L.P. (incorporated herein by reference to Exhibit 2.1 to Norwegian Cruise Line Holdings Ltd.’s Form 8-K filed on September 4, 2014 (File No. 001-35784))

2.2 Amendment No. 1 to the Agreement and Plan of Merger, dated as of October 6, 2014, by and among Prestige Cruises International, Inc., Norwegian Cruise Line Holdings Ltd., Portland Merger Sub, Inc. and Apollo Management, L.P. (incorporated herein by reference to Exhibit 2.1 to Norwegian Cruise Line Holdings Ltd.’s Form 8-K filed on October 8, 2014 (File No. 001-35784))

10.1* Second Amended and Restated Credit Agreement, dated as of June 6, 2016, by and among NCL Corporation Ltd., as borrower, Voyager Vessel Company, LLC, as co-borrower, JPMorgan Chase Bank, N.A., as administrative agent and as collateral agent and a syndicate of other banks party thereto as joint bookrunners, arrangers, co-documentation agents and lenders+
~~10.2~~ ~~Amended and Restated 2013 Performance Incentive Plan~~ (~~incorporated herein by reference to Exhibit 10.1 to Norwegian Cruise Line Holdings Ltd.’s Form 8-K filed on May 24, 2016 (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* 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** 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* The following unaudited consolidated financial statements are from Norwegian Cruise Line Holdings Ltd.’s Quarterly Report on Form 10-Q for the quarter ended June 30, ~~2016,~~2017, formatted in Extensible Business Reporting Language (XBRL), as follows:

(i) the Consolidated Statements of Operations for the three and six months ended June 30, ~~2016~~2017 and ~~2015;~~2016;
28
Table of Contents
(ii) the Consolidated Statements of Comprehensive Income for the three and six months ended June 30, ~~2016~~2017 and ~~2015;~~2016;

(iii) the Consolidated Balance Sheets as of June 30, ~~2016~~2017 and December 31, ~~2015;~~2016;

(iv) the Consolidated Statements of Cash Flows for the six months ended June 30, ~~2016~~2017 and ~~2015;~~2016;

(v) the Consolidated Statements of Changes in Shareholders’ Equity for the six months ended June 30, ~~2016~~2017 and ~~2015;~~2016; and

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

* Filed herewith.
** Furnished herewith.
+ ~~Confidential treatment has been requested with respect to certain portions of this exhibit. Omitted portions have been filed separately with the Securities and Exchange Commission.~~
# ~~Management contract or compensatory plan.~~

3129
Table of Contents

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.

NORWEGIAN CRUISE LINE HOLDINGS LTD.
(Registrant)

By: /s/ FRANK J. DEL RIO
Name: Frank J. Del Rio
Title: President and Chief Executive Officer
(Principal Executive Officer)

By: /s/ WENDY A. BECK
Name: Wendy A. Beck
Title: Executive Vice President and Chief Financial
Officer
(Principal Financial Officer)

Dated: August 9, ~~2016~~2017

3230

Large accelerated filerx	x	Accelerated filer	¨

Non-accelerated filer	¨ (Do not check if a smaller reporting company)	Smaller reporting company¨
Emerging growth company ¨	¨

		Page
PART I. FINANCIAL INFORMATION

Item 1.	Financial Statements	1

Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	1715

Item 3.	Quantitative and Qualitative Disclosures About Market Risk	26

Item 4.	Controls and Procedures	27

PART II. OTHER INFORMATION

Item 1.	Legal Proceedings	28

Item 4.1A.	~~Controls and Procedures~~Risk Factors	28

~~PART II. OTHER INFORMATION~~

~~Item 1.~~	~~Legal Proceedings~~	30

~~Item 1A.~~	~~Risk Factors~~	30

Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	3128

Item 5.	Other Information	28

Item 6.	Exhibits	3128

SIGNATURES		3230

Year ended December 31,	Amortization Expense
2017	$	31,342
2018		26,058
2019		18,489
2020		9,906
2021		75

	Accumulated Other Comprehensive Income (Loss)			Change Related to Cash Flow Hedges			Change Related to Shipboard Retirement Plan
Accumulated other comprehensive income (loss) at beginning of period	$	(412,650	)	$	(405,298	)	$	(7,352	)
Current period other comprehensive income before reclassifications		75,457			75,457			—
Amounts reclassified into earnings		58,547			58,331	(1)		216	(2)
Accumulated other comprehensive income (loss) at end of period	$	(278,646	)	$	(271,510	)(3)	$	(7,136	)

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.

		Asset				Liability
	Balance Sheet location	June 30, 2016		December 31, 2015		June 30, 2016		December 31, 2015
Fuel swaps designated as hedging instruments
	Prepaid expenses and other assets	$	15,972	$	—	$	—	$	—
	Other long-term assets		7,084		—		—		—
	Accrued expenses and other liabilities		—		—		82,672		128,740
	Other long-term liabilities		7,340		—		79,646		132,494
Fuel swaps not designated as hedging instruments
	Accrued expenses and other liabilities		—		—		1,801		—
Foreign currency forward contracts designated as hedging instruments
	Prepaid expenses and other assets		6,135		—		3,414		—
	Other long-term assets		2,577		3,446		386		1,370
	Accrued expenses and other liabilities		731		—		13,514		8,737
	Other long-term liabilities		1,814		551		20,165		24,181
Foreign currency collar not designated as a hedging instrument
	Accrued expenses and other liabilities		—		—		—		42,993
Interest rate swaps designated as hedging instruments
	Accrued expenses and other liabilities		—		—		4,328		4,079
	Other long-term liabilities		—		—		3,973		3,395

June 30, 2016	Gross Amounts		Gross Amounts Offset			Total Net Amounts		Gross Amounts Not Offset			Net Amounts
June 30, 2017													Gross Amounts		Gross Amounts Offset			Total Net Amounts		Gross Amounts Not Offset			Net Amounts
Assets	$	31,768	$	(3,800	)	$	27,968	$	(2,715	)	$	25,253	$	49,079	$	(144	)	$	48,935	$	(40,103	)	$	8,832
Liabilities		206,099		(9,885	)		196,214		(30,707	)		165,507		83,605		(9,452	)		74,153		(3,609	)		70,544

	Number of Share Option Awards								Weighted-Average Exercise Price Per Share						Weighted- Average Contractual Term		Aggregate Intrinsic Value		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		(years)		(in thousands)		Time- Based Awards			Performance- Based Awards			Market- Based Awards		Time- Based Awards		Performance- Based Awards		Market- Based Awards		(years)		(in thousands)
Outstanding as of December 31, 2015		7,702,071			432,752			208,333	$	47.35	$	19.00	$	59.43		8.59	$	104,864
Outstanding as of January 1, 2017																				7,775,058			432,978			208,333	$	48.04	$	23.86	$	59.43		7.81	$	35,429
Granted		1,060,000			52,083			—		50.13		59.43		—						—			156,249			—		—		59.43		—		—		—
Exercised		(89,534	)		(51,857	)		—		25.48		19.00		—						(383,203	)		(59,218	)		—		28.33		19.00		—		—		—
Forfeited and cancelled		(466,527	)		—			—		49.10		—		—						(325,030	)		(93,749	)		—		55.03		59.43		—		—		—
Outstanding as of June 30, 2016		8,206,010			432,978			208,333	$	47.85	$	23.86	$	59.43		8.31	$	30,800
Outstanding as of June 30, 2017																				7,066,825			436,260			208,333	$	48.79	$	29.62	$	59.43		7.44	$	61,204

	Number of Time-Based Awards			Weighted- Average Grant Date Fair Value Per Share		Number of Time-Based Awards			Weighted- Average Grant Date Fair Value
Non-vested as of January 1, 2016		43,653		$	5.87
Non-vested as of January 1, 2017							16,872		$	7.63
Granted		—			—		—			—
Vested		(16,830	)		5.85		(11,338	)		5.53
Forfeited or expired		(352	)		2.50		—			—
Non-vested and expected to vest as of June 30, 2016		26,471		$	5.92
Non-vested and expected to vest as of June 30, 2017							5,534		$	11.94

	Number of Time-Based Awards			Weighted- Average Grant Date Fair Value Per Share		Number of Performance- Based Awards			Weighted- Average Grant Date Fair Value Per Share		Number of Market- Based Awards		Weighted- Average Grant Date Fair Value Per Share		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, 2016		150,000		$	59.43		—		$	—		50,000	$	59.43
Non-vested as of January 1, 2017																1,305,335		$	50.38		—		$	—		50,000	$	59.43
Granted		1,246,990			50.41		12,500			50.00		—		—		1,750,612			50.96		37,500			49.76		—		—
Vested		(37,500	)		59.43		(12,500	)		50.00		—		—		(440,508	)		50.67		(15,000	)		49.76		—		—
Forfeited or expired		(50,000	)		50.31		—			—		—		—		(36,507	)		50.61		(22,500	)		49.76		—		—
Non-vested and expected to vest as of June 30, 2016		1,309,490		$	51.19		—		$	—		50,000	$	59.43
Non-vested and expected to vest as of June 30, 2017																2,578,932			50.72		—			—		50,000		59.43

	Restructuring costs
Accrued expense balance as of December 31, 2015	$	(4,144	)
Amounts paid		4,610
Additional accrued expense		(2,404	)
Accrued expense balance as of June 30, 2016	$	(1,938	)

	•	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;
	•	adverse events impacting the security of travel, such as terrorist acts, armed conflict and threats thereof, acts of piracy, and other international events;
	•	the risks and increased costs associated with operating internationally;
	•	our expansion into and investments in new markets;
	•	breaches in data security or other disturbances to our information technology and other networks;
	•	the spread of epidemics and viral outbreaks;
	•	adverse incidents involving cruise ships;
	•	changes in fuel prices and/or other cruise operating costs;
	•	any impairment of our tradenames or goodwill;
	•	our hedging strategies;
	•	our inability to obtain adequate insurance coverage;
	•	our substantial indebtedness, including the ability to raise additional capital to fund our operations, and to generate the necessary amount of cash to service our existing debt;
	•	restrictions in the agreements governing our indebtedness that limit our flexibility in operating our business;
	•	the significant portion of our assets pledged as collateral under our existing debt agreements and the ability of our creditors to accelerate the repayment of our indebtedness;
	•	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;
	•	fluctuations in foreign currency exchange rates;
	•	overcapacity in key markets or globally;
	•	our inability to recruit or retain qualified personnel or the loss of key personnel;
	•	future changes relating to how external distribution channels sell and market our cruises;
	•	our reliance on third parties to provide hotel management services to certain ships and certain other services;
	•	delays in our shipbuilding program and ship repairs, maintenance and refurbishments;
	•	future increases in the price of, or major changes or reduction in, commercial airline services;
	•	seasonal variations in passenger fare rates and occupancy levels at different times of the year;
	•	our ability to keep pace with developments in technology;
	•	amendments to our collective bargaining agreements for crew members and other employee relation issues;
	•	the continued availability of attractive port destinations;
	•	pending or threatened litigation, investigations and enforcement actions;
	•	changes involving the tax and environmental regulatory regimes in which we operate; and
	•	other factors set forth under “Risk Factors” in our most recently filed Annual Report on Form 10-K, as such risk factors may be amended, supplemented or superseded from time to time by other reports we file with the Securities and Exchange Commission (the “SEC”).

	(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)	~~Expenses related to the Secondary Equity Offerings, which are included in marketing, general and administrative expense.~~
	~~(4)~~	Severance payments and other expenses related to restructuring costs and other severance arrangements, which are included in marketing, general and administrative expense.
	~~(5)~~	~~Expenses related to the exchange of Management NCL Corporation Units for ordinary shares, which are included in marketing, general and administrative expense.~~
	~~(6)~~(4)	Expenses related to the Acquisition of Prestige, which are included in marketing, general and administrative expense.

	~~(8)~~(6)	Amortization of intangible assets related to the Acquisition of Prestige, which are included in depreciation and amortization expense.
	~~(9)~~	~~Contingent consideration fair value adjustment related to the Acquisition of Prestige, which is included in marketing, general and administrative expense.~~
	~~(10)~~(7)	Losses and net gains for the fair value adjustment of a foreign exchange collar which does not receive hedge accounting and losses due to the dedesignation of certain ~~fuels~~fuel swaps. These adjustments are included in other ~~expense.~~income (expense), net.
	~~(11)~~(8)	~~Primarily~~Expenses primarily related to the write-off of deferred financing fees related to the refinancing of certain credit facilities, which isare included in interest expense, net.
	(9)	Expenses primarily related to a legal settlement, which are included in marketing, general and administrative expense.

	Total		Less than 1 year		1-3 years		3-5 years		More than 5 years		Total		Less than 1 year		1-3 years		3-5 years		More than 5 years
Long-term debt (1)	$	6,681,472	$	581,804	$	1,098,874	$	3,347,485	$	1,653,309	$	6,816,695	$	600,500	$	1,239,407	$	3,265,429	$	1,711,359
Operating leases (2)		154,896		13,857		29,326		28,997		82,716		144,595		15,893		30,692		28,449		69,561
Ship construction contracts (3)		3,212,792		951,838		1,113,418		1,147,536		—		6,070,769		1,103,593		1,366,011		1,078,537		2,522,628
Port facilities (4)		280,723		43,177		67,001		53,843		116,702		252,159		42,996		61,018		49,043		99,102
Interest (5)		1,008,903		211,013		383,754		252,439		161,697		1,054,239		235,590		404,680		243,136		170,833
Other (6)		158,625		56,370		48,848		29,985		23,422		174,101		52,545		70,832		31,534		19,190
Total	$	11,497,411	$	1,858,059	$	2,741,221	$	4,860,285	$	2,037,846	$	14,512,558	$	2,051,117	$	3,172,640	$	4,696,128	$	4,592,673

2.1	Agreement and Plan of Merger, dated as of September 2, 2014, by and among Prestige Cruises International, Inc., Norwegian Cruise Line Holdings Ltd., Portland Merger Sub, Inc. and Apollo Management, L.P. (incorporated herein by reference to Exhibit 2.1 to Norwegian Cruise Line Holdings Ltd.’s Form 8-K filed on September 4, 2014 (File No. 001-35784))

2.2	Amendment No. 1 to the Agreement and Plan of Merger, dated as of October 6, 2014, by and among Prestige Cruises International, Inc., Norwegian Cruise Line Holdings Ltd., Portland Merger Sub, Inc. and Apollo Management, L.P. (incorporated herein by reference to Exhibit 2.1 to Norwegian Cruise Line Holdings Ltd.’s Form 8-K filed on October 8, 2014 (File No. 001-35784))

10.1*	Second Amended and Restated Credit Agreement, dated as of June 6, 2016, by and among NCL Corporation Ltd., as borrower, Voyager Vessel Company, LLC, as co-borrower, JPMorgan Chase Bank, N.A., as administrative agent and as collateral agent and a syndicate of other banks party thereto as joint bookrunners, arrangers, co-documentation agents and lenders+

~~10.2~~	~~Amended and Restated 2013 Performance Incentive Plan~~ (~~incorporated herein by reference to Exhibit 10.1 to Norwegian Cruise Line Holdings Ltd.’s Form 8-K filed on May 24, 2016 (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*	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**	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*	The following unaudited consolidated financial statements are from Norwegian Cruise Line Holdings Ltd.’s Quarterly Report on Form 10-Q for the quarter ended June 30, ~~2016,~~2017, formatted in Extensible Business Reporting Language (XBRL), as follows:

	(ii)	the Consolidated Statements of Comprehensive Income for the three and six months ended June 30, ~~2016~~2017 and ~~2015;~~2016;

	(iii)	the Consolidated Balance Sheets as of June 30, ~~2016~~2017 and December 31, ~~2015;~~2016;

	(iv)	the Consolidated Statements of Cash Flows for the six months ended June 30, ~~2016~~2017 and ~~2015;~~2016;

	(v)	the Consolidated Statements of Changes in Shareholders’ Equity for the six months ended June 30, ~~2016~~2017 and ~~2015;~~2016; and

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

*	Filed herewith.
**	Furnished herewith.
+	~~Confidential treatment has been requested with respect to certain portions of this exhibit. Omitted portions have been filed separately with the Securities and Exchange Commission.~~
#	~~Management contract or compensatory plan.~~

	NORWEGIAN CRUISE LINE HOLDINGS LTD. (Registrant)

	By:	/s/ FRANK J. DEL RIO
	Name:	Frank J. Del Rio
	Title:	President and Chief Executive Officer
		(Principal Executive Officer)

	By:	/s/ WENDY A. BECK
	Name:	Wendy A. Beck
	Title:	Executive Vice President and Chief Financial
		Officer
		(Principal Financial Officer)