UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

(Mark One)

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

For the quarterly period ended ~~June 30, 2017~~March 31, 2018

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

For the transition period from to

Commission File Number: 001-35784

NORWEGIAN CRUISE LINE HOLDINGS LTD.

(Exact name of registrant as specified in its charter)

Bermuda

98-0691007

(State or other jurisdiction of

incorporation or organization)

(I.R.S. Employer

Identification No.)

7665 Corporate Center Drive, Miami, Florida 33126

(Address of principal executive offices) (zip code)

(305) 436-4000

(Registrant’s telephone number, including area code)

N/A

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

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, smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

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

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

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

There were ~~228,162,188~~224,689,497 ordinary shares outstanding as of ~~July 31, 2017.~~May 1, 2018.

TABLE OF CONTENTS

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 March 31,
	2017			2016			2017			2016			2018			2017
Revenue
Passenger ticket	$	938,014		$	818,478		$	1,724,708		$	1,558,590		$	889,866		$	786,694
Onboard and other		406,089			368,357			770,176			705,877			403,537			364,087
Total revenue		1,344,103			1,186,835			2,494,884			2,264,467			1,293,403			1,150,781
Cruise operating expense
Commissions, transportation and other		223,315			193,536			417,455			368,973			218,340			194,140
Onboard and other		83,367			75,790			151,778			139,755			70,688			68,411
Payroll and related		194,724			184,476			387,360			361,619			209,824			192,636
Fuel		86,663			80,607			175,549			162,279			93,431			88,886
Food		47,340			49,769			93,518			100,772			50,656			46,178
Other		116,833			121,722			246,380			236,983			125,152			129,547
Total cruise operating expense		752,242			705,900			1,472,040			1,370,381			768,091			719,798
Other operating expense
Marketing, general and administrative		193,649			149,307			385,693			329,881			227,015			192,044
Depreciation and amortization		123,141			104,610			242,346			205,905			131,244			119,205
Total other operating expense		316,790			253,917			628,039			535,786			358,259			311,249
Operating income		275,071			227,018			394,805			358,300			167,053			119,734
Non-operating income (expense)
Interest expense, net		(64,196	)		(68,420	)		(117,156	)		(128,174	)		(59,698	)		(52,960	)
Other income (expense), net		(5,609	)		(10,753	)		(8,424	)		(7,948	)		(1,666	)		(2,815	)
Total non-operating income (expense)		(69,805	)		(79,173	)		(125,580	)		(136,122	)		(61,364	)		(55,775	)
Net income before income taxes		205,266			147,845			269,225			222,178			105,689			63,959
Income tax expense		(6,793	)		(2,599	)		(8,842	)		(3,703	)		(2,534	)		(2,049	)
Net income	$	198,473		$	145,246		$	260,383		$	218,475		$	103,155		$	61,910
Weighted-average shares outstanding
Basic		227,931,135			226,972,076			227,701,109			227,105,804			227,343,577			227,468,526
Diluted		229,090,085			227,884,704			228,824,296			227,997,970			229,187,628			228,555,952
Earnings per share				��
Basic	$	0.87		$	0.64		$	1.14		$	0.96		$	0.45		$	0.27
Diluted	$	0.87		$	0.64		$	1.14		$	0.96		$	0.45		$	0.27

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

Table of Contents

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 March 31,
	2017		2016		2017		2016		2018			2017
Net income	$	198,473	$	145,246	$	260,383	$	218,475	$	103,155		$	61,910
Other comprehensive income:
Shipboard Retirement Plan		104		108		209		216		105			105
Cash flow hedges:
Net unrealized income		131,519		5,007		124,236		75,457
Net unrealized gain (loss)										48,576			(7,283	)
Amount realized and reclassified into earnings		10,244		23,781		19,949		58,331		(1,785	)		9,705
Total other comprehensive income		141,867		28,896		144,394		134,004		46,896			2,527
Total comprehensive income	$	340,340	$	174,142	$	404,777	$	352,479	$	150,051		$	64,437

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

Table of Contents

Norwegian Cruise Line Holdings Ltd.

Consolidated Balance Sheets

(Unaudited)

(in thousands, except share data)

	June 30, 2017			December 31, 2016			March 31, 2018			December 31, 2017
Assets
Current assets:
Cash and cash equivalents	$	219,315		$	128,347		$	301,748		$	176,190
Accounts receivable, net		50,359			63,215			41,159			43,961
Inventories		77,089			66,255			80,427			82,121
Prepaid expenses and other assets		167,153			153,276			337,441			216,065
Total current assets		513,916			411,093			760,775			518,337
Property and equipment, net		10,974,087			10,117,689			11,085,572			11,040,488
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		251,717			238,673			432,182			329,588
Total assets	$	13,946,176		$	12,973,911		$	14,484,985		$	14,094,869
Liabilities and shareholders’ equity
Current liabilities:
Current portion of long-term debt	$	600,500		$	560,193		$	772,187		$	619,373
Accounts payable		47,242			38,002			65,573			53,433
Accrued expenses and other liabilities		462,516			541,753			535,278			513,717
Advance ticket sales		1,543,869			1,172,870			1,720,505			1,303,498
Total current liabilities		2,654,127			2,312,818			3,093,543			2,490,021
Long-term debt		6,083,226			5,838,494			5,580,290			5,688,392
Other long-term liabilities		217,074			284,873			172,079			166,690
Total liabilities		8,954,427			8,436,185			8,845,912			8,345,103
Commitments and contingencies (Note 8)
Commitments and contingencies (Note 9)
Shareholders’ equity:
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
Ordinary shares, $.001 par value; 490,000,000 shares authorized; 234,709,747 shares issued and 224,675,474 shares outstanding at March 31, 2018 and 233,840,523 shares issued and 228,528,562 shares outstanding at December 31, 2017								235			233
Additional paid-in capital		3,937,211			3,890,119			4,020,584			3,998,694
Accumulated other comprehensive income (loss)		(170,079	)		(314,473	)		73,862			26,966
Retained earnings		1,463,639			1,201,103			2,047,152			1,963,128
Treasury shares (5,311,961 ordinary shares at June 30, 2017 and December 31, 2016, at cost)		(239,255	)		(239,255	)
Treasury shares (10,034,273 and 5,311,961 ordinary shares at March 31, 2018 and December 31, 2017, respectively, at cost)								(502,760	)		(239,255	)
Total shareholders’ equity		4,991,749			4,537,726			5,639,073			5,749,766
Total liabilities and shareholders’ equity	$	13,946,176		$	12,973,911		$	14,484,985		$	14,094,869

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

Table of Contents

Norwegian Cruise Line Holdings Ltd.

Consolidated Statements of Cash Flows

(Unaudited)

(in thousands)

	Six Months Ended June 30,						Three Months Ended March 31,
	2017			2016			2018			2017
Cash flows from operating activities
Net income	$	260,383		$	218,475		$	103,155		$	61,910
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization expense		248,618			212,268			134,546			121,593
Loss on derivatives		375			2,866
(Gain) loss on derivatives								(10	)		406
Deferred income taxes, net		5,165			388			809			1,186
Write-off of deferred financing fees		—			11,427
Provision for bad debts and inventory		535			1,115			1,266			323
Share-based compensation expense		42,220			31,449			28,102			18,203
Changes in operating assets and liabilities:
Accounts receivable, net		12,301			(16,335	)		1,618			14,943
Inventories		(10,814	)		(9,674	)		1,363			(5,184	)
Prepaid expenses and other assets		(21,719	)		(25,903	)		(45,709	)		(9,473	)
Accounts payable		10,129			(10,865	)		13,163			27,423
Accrued expenses and other liabilities		(28,382	)		(25,798	)		(3,180	)		(19,321	)
Advance ticket sales		400,920			358,625			375,638			222,935
Net cash provided by operating activities		919,731			748,038			610,761			434,944
Cash flows from investing activities
Additions to property and equipment, net		(1,065,265	)		(764,899	)		(143,874	)		(117,777	)
Settlement of derivatives		(35,255	)		(34,129	)
Promissory note receipts								249			—
Net cash used in investing activities		(1,100,520	)		(799,028	)		(143,625	)		(117,777	)
Cash flows from financing activities
Repayments of long-term debt		(921,329	)		(2,386,427	)		(252,826	)		(465,237	)
Repayments to Affiliate		—			(18,522	)
Proceeds from long-term debt		1,217,060			2,564,116			290,878			236,000
Proceeds from employee related plans		13,213			4,179			5,961			9,466
Net share settlement of restricted share units		(6,187	)		—			(12,171	)		(4,550	)
Purchases of treasury shares		—			(49,999	)		(263,505	)		—
Deferred financing fees and other		(31,000	)		(32,330	)
Net cash provided by financing activities		271,757			81,017
Deferred financing fees								(109,915	)		(1,404	)
Net cash used in financing activities								(341,578	)		(225,725	)
Net increase in cash and cash equivalents		90,968			30,027			125,558			91,442
Cash and cash equivalents at beginning of period		128,347			115,937			176,190			128,347
Cash and cash equivalents at end of period	$	219,315		$	145,964		$	301,748		$	219,789

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

Table of Contents

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			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
Share-based compensation		—		31,449			—			—		—			31,449
Proceeds from the exercise of share options		—		2,380			—			—		—			2,380
Proceeds from employee share purchase plan		—		1,172			—			—		—			1,172
Treasury shares		—		—			—			—		(49,999	)		(49,999	)
Other comprehensive income, net		—		—			134,004			—		—			134,004
Net income		—		—			—			218,475		—			218,475
Balance, June 30, 2016	$	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		$	232	$	3,890,119		$	(314,473	)	$	1,201,103		$	(239,255	)	$	4,537,726

Share-based compensation		—		42,220			—			—		—			42,220			—		18,203			—			—			—			18,203
Issuance of shares under employee related plans		1		13,212			—			—		—			13,213			—		9,466			—			—			—			9,466
Change in accounting policy (share-based forfeitures)		—		(2,153	)		—			2,153		—			—			—		(2,153	)		—			2,153			—			—
Net share settlement of restricted share units		—		(6,187	)		—			—		—			(6,187	)		—		(4,550	)		—			—			—			(4,550	)
Other comprehensive income, net		—		—			144,394			—		—			144,394			—		—			2,527						—			2,527
Net income		—		—			—			260,383		—			260,383			—		—			—			61,910			—			61,910
Balance, June 30, 2017	$	233	$	3,937,211		$	(170,079	)	$	1,463,639	$	(239,255	)	$	4,991,749
Balance, March 31, 2017																		232		3,911,085			(311,946	)		1,265,166			(239,255	)		4,625,282

Balance, December 31, 2017																		233		3,998,694			26,966			1,963,128			(239,255	)		5,749,766
Share-based compensation																		—		28,102			—			—			—			28,102
Issuance of shares under employee related plans																		2		5,959			—			—			—			5,961
Treasury shares																		—		—			—			—			(263,505	)		(263,505	)
Net share settlement of restricted share units																		—		(12,171	)		—			—			—			(12,171	)
Cumulative change in accounting policy																		—		—			(12	)		(19,131	)		—			(19,143	)
Other comprehensive income, net																		—		—			46,908			—			—			46,908
Net income																		—		—			—			103,155			—			103,155
Balance, March 31, 2018																	$	235	$	4,020,584		$	73,862		$	2,047,152		$	(502,760	)	$	5,639,073

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

Table of Contents

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 S. de R.L. (formerly Prestige Cruises International, Inc.), together with its consolidated subsidiaries, ~~(vi) “PCH” refers to~~including Prestige Cruise Holdings S. de R.L. (formerly Prestige Cruise Holdings, Inc.), Prestige’s direct wholly-owned subsidiary, which in turn is the parent of Oceania Cruises S. de R.L. (formerly Oceania Cruises, Inc.) (“Oceania Cruises”) and Seven Seas Cruises S. DE R.L. (“Regent”) (Oceania Cruises also refers to the brand by the same name and Regent also refers to the brand Regent Seven Seas Cruises), (vi) “Apollo” refers to Apollo Global Management, LLC, its subsidiaries and the affiliated funds it manages and the “Apollo Holders” refers to one or more of NCL Athene LLC, AIF VI NCL (AIV), L.P., AIF VI NCL (AIV II), L.P., AIF VI NCL (AIV III), L.P., AIF VI NCL (AIV IV), L.P., Apollo Overseas Partners (Delaware) VI, L.P., Apollo Overseas Partners (Delaware 892) VI, L.P., Apollo Overseas Partners VI, L.P., Apollo Overseas Partners (Germany) VI, L.P., AAA Guarantor — Co-Invest VII, L.P., AIF VI Euro Holdings, L.P., AIF VII Euro Holdings, L.P., Apollo Alternative Assets, L.P., Apollo Management VI, L.P. and Apollo Management VII, L.P. and (vii) “Genting HK” refers to Genting Hong Kong Limited and/or its affiliates (formerly Star Cruises Limited and/or its affiliates) (Genting HK owns NCLH’s ordinary shares indirectly through Star NCLC Holdings Ltd., its Bermuda wholly-owned subsidiary (“Star NCLC”)). References to the “U.S.” are to the United States of America, and “dollars” 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

We are a leading global cruise company which operates the Norwegian Cruise Line, Oceania Cruises and Regent Seven Seas Cruises brands. As of ~~June 30, 2017,~~March 31, 2018, we had 25 ships with approximately 50,400 ~~Berths.~~Berths, excluding Norwegian Bliss, which was delivered on April 19, 2018 (we refer you to Note 12— “Subsequent Events”). We plan to introduce ~~seven~~six additional ships through 2025 and we have an option to introduce two additional ships for delivery in 2026 and 2027, subject to certain conditions. Norwegian ~~Bliss and an additional Breakaway Plus Class Ship are~~Encore is on order for delivery in the ~~spring of 2018 and~~ fall of 2019. We also have an Explorer Class Ship, Seven Seas Splendor, on order for delivery in the winter of 2020. Project Leonardo will introduce an additional four ships with expected delivery dates through 2025. These additions to our fleet (exclusive of the option for two additional ships) will increase our total Berths to approximately 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, ~~2016,~~2017, which are included in our most ~~recently filed~~recent Annual Report on Form ~~10-K.~~

~~Reclassification~~

~~Certain amounts in prior periods have been reclassified to conform to~~10-K filed with the ~~current period presentation.~~Securities and Exchange Commission.

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 March 31,
	2017		2016		2017		2016		2018		2017
Net income	$	198,473	$	145,246	$	260,383	$	218,475	$	103,155	$	61,910
Basic weighted-average shares outstanding		227,931,135		226,972,076		227,701,109		227,105,804		227,343,577		227,468,526
Dilutive effect of share awards		1,158,950		912,628		1,123,187		892,166		1,844,051		1,087,426
Diluted weighted-average shares outstanding		229,090,085		227,884,704		228,824,296		227,997,970		229,187,628		228,555,952
Basic earnings per share	$	0.87	$	0.64	$	1.14	$	0.96	$	0.45	$	0.27
Diluted earnings per share	$	0.87	$	0.64	$	1.14	$	0.96	$	0.45	$	0.27

For the three months ended ~~June 30,~~March 31, 2018 and 2017, ~~and 2016,~~ a total of ~~5.2~~3.4 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~~7.5 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~~

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

Table of Contents

Revenue and Expense Recognition

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

Nature of goods and services

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

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

Timing of satisfaction of performance obligations and significant payment terms

The payment terms and cancellation policies vary by brand, stateroom category, length of voyage, and country of purchase. A deposit for a future booking is required at or soon after the time of booking. Final payment is normally due between 75 days and 180 days before the voyage. Deposits on advance ticket sales are deferred when received, and include amounts that are refundable. Deferred amounts are subsequently recognized as revenue ratably during the voyage sailing days as services are rendered over time on the ship. Deposits are generally cancellable and refundable prior to sailing, but may be subject to penalties, depending on the timing of cancellation. The inception of substantive cancellation penalties generally coincides with the dates that final payment is due, and penalties generally increase as the voyage sail date approaches. Cancellation fees are recognized in passenger ticket revenue in the month of the cancellation. Onboard goods and services rendered may be paid at disembarkation. A receivable is recognized for onboard goods and services rendered when the voyage is not completed before the end of the period.

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

Financial statement presentation

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

Segment Reporting

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

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

Table of Contents

Disaggregation of Revenue

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

Three Months Ended
March 31,
2018 2017
North America $ 875,179 $ 850,671
Europe 31,070 26,162
Asia-Pacific 267,718 133,430
Other 119,436 140,518
$ 1,293,403 $ 1,150,781
Contract Balances
Receivables from customers are included within accounts receivables, net. As of March 31, 2018 and January 1, 2018, our receivables from customers were $12.2 million and $13.8 million, respectively.
Contract liabilities represent the Company’s obligation to transfer goods and services to a customer. A customer deposit held for a future cruise is generally considered a contract liability only when final payment is both due and paid by the customer and is usually recognized in earnings within 180 days of becoming a contract. Other deposits held and included within advance ticket sales or other long-term liabilities are not considered contract liabilities as they are largely cancelable and refundable. Our contract liabilities are included within advance ticket sales. As of March 31, 2018 and January 1, 2018, our contract liabilities were $1.2 billion and $1.0 billion, respectively. Of the amounts included within contract liabilities, approximately 50% were refundable in accordance with our cancellation policies. For the three months ended March 31, 2018, $0.8 billion of revenue recognized was included in the contract liability balance at the beginning of the period.
Our revenue is seasonal and based on the demand for cruises. Historically, the seasonality of the North American cruise industry generally results in the greatest demand for cruises during the Northern Hemisphere’s summer months. This predictable seasonality in demand has resulted in fluctuations by quarter in our revenue and results of operations. The seasonality of our results is increased due to ships being taken out of service for regularly scheduled Dry-docks, which we typically schedule during non-peak demand periods. This seasonality will result in higher contract liability balances as a result of an increased number of reservations preceding peak demand periods. The addition of new ships also increases the contract liability balances prior to a new ship’s delivery, as staterooms are usually made available for reservation prior to the inaugural cruise. Norwegian Bliss, with approximately 4,000 berths, adding 8% capacity to our fleet, was delivered on April 19, 2018 (we refer you to Note 12— “Subsequent Events”).
Practical Expedients and Exemptions
We do not disclose information about remaining performance obligations that have original expected durations of one year or less. We recognize revenue in an amount that corresponds directly with the value to the customer of our performance completed to date. Variable consideration, which will be determined based on a future rate and passenger count, is excluded from the disclosure and these amounts are not material. These variable non-disclosed contractual amounts relate to our non-cancelable charter agreements and a leasing arrangement with a certain port, both of which are long-term in nature. Amounts that are fixed in nature due to the application of minimum guarantees are also not material and are not disclosed.
Contract Costs
Management expects that incremental commissions and credit card fees paid as a result of obtaining ticket contracts are recoverable; therefore, we recognize these amounts as assets when they are paid prior to the voyage. Costs of air tickets and port taxes and fees that fulfill future performance obligations are also considered recoverable and are recorded as assets. As of March 31, 2018, $115.0 million of costs incurred to obtain customers and $25.0 million of costs to fulfill contracts with customers are recognized as assets within prepaid expenses and other assets. Incremental commissions, credit card fees, air ticket costs, and port taxes and fees are recognized ratably over the voyage sailing dates, concurrent with associated revenue, and are primarily in commission, transportation and other expense.
8
Table of Contents
Impacts on Financial Statements
The adoption of Topic 606 does not change the timing, classification or amount of revenue recognized from customers in our consolidated financial statements nor does it change the timing, classification or amount of incremental costs to obtain and fulfill those contracts with customers. Therefore, the adoption had no impact on our consolidated statement of operations or consolidated statement of comprehensive income.
The following table summarizes the impacts of Topic 606 adoption on our consolidated balance sheet which has been adjusted for deferred contract costs that would have been included, net, in Advance ticket sales as of March 31, 2018 (in thousands):
As reported Adjustments Balances without
adoption of Topic
606
Prepaid expenses and other assets $ 337,441 $ (68,230 ) $ 269,211
Total assets 14,484,985 (68,230 ) 14,416,755
Advance ticket sales 1,720,505 (68,230 ) 1,652,275
Total liabilities and shareholders’ equity $ 14,484,985 $ (68,230 ) $ 14,416,755
The following table summarizes the impacts of our adoption of Topic 606 on our consolidated statement of cash flows for the three months ended March 31, 2018 (in thousands):
As reported Adjustments Balances without
adoption of Topic
606
Changes in operating assets and liabilities:
Prepaid expenses and other assets $ (45,709 ) $ 16,631 $ (29,078 )
Advance ticket sales 375,638 (16,631 ) 359,007
Net cash provided by operating activities $ 610,761 $ — $ 610,761

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. WeGains or losses resulting from transactions denominated in other currencies are recognized ~~a loss~~in our consolidated statements of ~~$8.1~~operations within other income (expense), net and such losses were approximately $1.8 million and ~~a gain of $3.7~~$2.8 million for the three months ended ~~June 30,~~March 31, 2018 and 2017, ~~and 2016, respectively, and losses of $10.8 million and $0.3 million for the six months ended June 30, 2017 and 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 and Adopted Accounting ~~Pronouncements~~Guidance
In December 2017, the Tax Cuts and Jobs Act (“the Act”) was enacted. Among other provisions, the Act reduces the U.S. federal corporate tax rate from 35% to 21%. The SEC staff issued Staff Accounting Bulletin No. 118, which addresses how a company recognizes provisional amounts when a company does not have the necessary information available, prepared or analyzed (including computations) in reasonable detail to complete its accounting for the effect of the changes required by the Act. The measurement period ends when a company has obtained, prepared and analyzed the information necessary to finalize its accounting, but cannot extend beyond one year. As of March 31, 2018, we have not completed the accounting for the tax effects of enactment of the Act; however, as described below, we have made a reasonable estimate of the effects on existing deferred tax balances. These amounts are provisional and subject to change. The most significant impact of the Act for the Company was a $7.4 million reduction of the value of net deferred tax liabilities (which represent future tax expenses) that was recorded in 2017 as a discrete tax benefit as a result of lowering the U.S. corporate income tax rate from 35% to 21%. The tax benefit represents a provisional amount and the Company’s current best estimates. Any adjustments recorded to the provisional amount through the end of 2018 will be included in income from operations as an adjustment to tax expense. The provisional amounts incorporate assumptions made based upon the Company’s current interpretation of the Act and may change as the Company receives additional clarification and implementation guidance. Other aspects of the Act are either not applicable or not expected to have a material impact on the Company’s financial statements.
9
Table of Contents

In January 2017, the Financial Accounting Standards Board ~~(“FASB”)~~ issued ~~Accounting Standards Update (“ASU”)~~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~~will evaluate the impact ~~of the adoption~~ of this guidance to our consolidated financial ~~statements.~~statements upon adoption of the guidance.

~~In August 2016, the FASB issued~~On January 1, 2018, we adopted ASU No. ~~2016-15~~2016-16 which ~~amends Topic 230 (Statement~~requires companies to recognize the income-tax consequences of ~~Cash Flows)~~an intra-entity transfer of an asset other than inventory when the transfer occurs, rather than when the asset has been sold to ~~eliminate discrepancies~~an outside party. This adoption resulted in ~~reporting certain~~a cumulative-effect adjustment of $19.1 million to retained earnings. This amount captures the write-off of previously unamortized deferred income tax expense from past intra-entity transfers involving assets other than inventory, not previously recognized under U.S. GAAP. The adoption does not have an impact on continuing operations, net income or any other financial statement line items for the current period.
On January 1, 2018, we adopted ASU No. 2017-12 which simplifies the accounting for derivatives. For derivative instruments that are designated and qualify as a cash flow hedge, the gain or loss on the derivative instrument is reported as a component of other comprehensive income and reclassified into earnings in the same period or periods during which the hedged transaction affects earnings and is presented in the same income statement line item as the earnings effect of the hedged item. Upon adoption, the guidance required a cumulative effect adjustment, relating to the elimination of the separate measurement of ineffectiveness for cash ~~flows. The guidance is effective for annual periods beginning after December 15, 2017 and interim periods within those annual periods~~flow hedges, to accumulated other comprehensive income (loss) with ~~early adoption permitted. The transition should be made using~~ a ~~retrospective approach. We do~~corresponding adjustment to the opening balance of retained earnings, which was not ~~believe that the adoption of this guidance will be~~ material to our ~~consolidated~~financial statements ~~of cash flows.~~
~~In May 2016, the FASB issued ASU No. 2016-12 which addresses improvements~~(we refer you to ~~the guidance on revenue from contracts from customers regarding collectability, noncash consideration,~~Note 7. “Fair Value Measurements 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 which is presented below. We are currently evaluating the impact of the adoption of this 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 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 guidance 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)Derivatives”). 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. To evaluate the impact of the adoption of this guidance, we are currently reviewing our existing leases and evaluating contracts to determine what might be considered a lease under the 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.
7
~~Table of Contents~~
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 our performance obligations and believe that our application of the guidance could result in changes in classification and additional disclosures. We also are evaluating other criteria such as the timing of contract terms, gross and net presentation and other items that the guidance addresses.

3. Intangible Assets

The ~~gross~~ carrying amounts of intangible assets subject to amortization are included within other long-term assets. The gross carrying amounts of intangible assets, the related accumulated amortization, the net carrying amounts and the weighted-average amortization periods of the Company’s intangible assets are listed in the following tables (in thousands, except amortization period):

June 30, 2017 March 31, 2018
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 $ (51,730 ) $ 68,270 6.0 $ 120,000 $ (73,088 ) $ 46,912 6.0
Licenses 3,368 (1,171 ) 2,197 5.6 3,368 (1,883 ) 1,485 5.6
Non-compete agreements 660 (660 ) — 1.0
Total intangible assets subject to amortization $ 124,028 $ (53,561 ) $ 70,467 $ 123,368 $ (74,971 ) $ 48,397
License (Indefinite-lived) $ 4,427

December 31, 2016 December 31, 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 $ (36,593 ) $ 83,407 6.0 $ 120,000 $ (66,866 ) $ 53,134 6.0
Licenses 3,368 (807 ) 2,561 5.6 3,368 (1,601 ) 1,767 5.6
Non-compete agreements 660 (495 ) 165 1.0 660 (660 ) — 1.0
Total intangible assets subject to amortization $ 124,028 $ (37,895 ) $ 86,133 $ 124,028 $ (69,127 ) $ 54,901
License (Indefinite-lived) $ 4,427

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

Three Months Ended
June 30, Six Months Ended
June 30,
2017 2016 2017 2016
Amortization expense $ 7,750 $ 5,562 $ 15,665 $ 10,951
Three Months Ended
March 31,
2018 2017
Amortization expense $ 6,504 $ 7,915

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 Amortization
Expense
2018 $ 26,163
2019 18,489 $ 18,489
2020 9,906 9,906
2021 75 75
2022 75 75
2023 75

810
Table of Contents

4. Accumulated Other Comprehensive Income (Loss)

Accumulated other comprehensive income (loss) for the ~~six~~three months ended ~~June 30, 2017~~March 31, 2018 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 $ (314,473 ) $ (307,618 ) $ (6,855 ) $ 26,966 $ 33,861 $ (6,895 )
Current period other comprehensive income before reclassifications 124,236 124,236 — 48,576 48,576 —
Amounts reclassified into earnings 20,158 19,949 (1) 209 (2) (1,680 ) (1,785 )(1) 105 (2)
Accumulated other comprehensive income (loss) at end of period $ (170,079 ) $ (163,433 )(3) $ (6,646 ) $ 73,862 $ 80,652 (3) $ (6,790 )

(1) We refer you to Note 6—7— “Fair Value Measurements and Derivatives” for the affected line items in the consolidated statements of operations.
(2) Amortization of prior-service cost and actuarial loss reclassified to ~~payroll and related expense.~~other income (expense).
(3) Includes ~~$44.4~~$9.5 million of ~~loss~~gain expected to be reclassified into earnings in the next 12 months.

Accumulated other comprehensive income (loss) for the ~~six~~three months ended ~~June 30, 2016~~March 31, 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) 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 ) $ (314,473 ) $ (307,618 ) $ (6,855 )
Current period other comprehensive income before reclassifications 75,457 75,457 — (7,283 ) (7,283 ) —
Amounts reclassified into earnings 58,547 58,331 (1) 216 (2) 9,810 9,705 (1) 105 (2)
Accumulated other comprehensive income (loss) at end of period $ (278,646 ) $ (271,510 ) $ (7,136 ) $ (311,946 ) $ (305,196 ) $ (6,750 )

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

5. Property and Equipment, net

Property and equipment, net increased ~~$856.4~~$45.1 million for the ~~six~~three months ended ~~June 30, 2017~~March 31, 2018 primarily due to ~~the delivery of Norwegian Joy,~~ ships under construction and ship improvement projects. Norwegian Bliss was delivered on April 19, 2018 (we refer you to Note 12— “Subsequent Events”).

6. Related Party Disclosures
In March 2018, as part of a public equity offering of our ordinary shares owned by the Apollo Holders and Genting HK, we repurchased 4,722,312 of our ordinary shares sold in the offering for approximately $263.5 million pursuant to our then existing share repurchase program. As of March 31, 2018, the ownership percentages of NCLH’s ordinary shares were as follows:
Shareholder Number of
Shares Percentage
Ownership
Apollo Holders 15,728,782 7.0 %
Genting HK 3,148,307 1.4 %
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).

11
Table of Contents
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.~~
Level 1 — Quoted prices in active markets for identical assets or liabilities that are accessible at the measurement dates.
9
~~Table of Contents~~Level 2 — Significant other observable inputs that are used by market participants in pricing the asset or liability based on market data obtained from independent sources.
Level 3 — Significant unobservable inputs we believe market participants would use in pricing the asset or liability based on the best information available.

Derivatives

We are exposed to market risk attributable to changes in interest rates, foreign currency exchange rates and fuel prices. We attempt to minimize these risks through a combination of our normal operating and financing activities and through the use of derivatives. We assess whether derivatives used in hedging transactions are “highly effective” in offsetting changes in the cash flow of our hedged forecasted transactions. We use regression analysis for this hedge relationship and high effectiveness is achieved when a statistically valid relationship reflects a high degree of offset and correlation between the fair values of the derivative and the hedged forecasted transaction. Cash flows from the derivatives are classified in the same category as the cash flows from the underlying hedged transaction. 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.

As of March 31, 2018, we had fuel swaps maturing through December 31, 2020 which are used to mitigate the financial impact of volatility of fuel prices pertaining to approximately 1.1 million metric tons of our projected fuel purchases.
As of March 31, 2018, we had foreign currency forward contracts, matured foreign currency options and matured foreign currency collars which are used to mitigate the financial impact of volatility in foreign currency exchange rates related to our ship construction contracts denominated in euros. The notional amount of our foreign currency forward contracts was €1.9 billion, or $2.3 billion based on the euro/U.S. dollar exchange rate as of March 31, 2018.
As of March 31, 2018, 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 $218.6 million as of March 31, 2018.
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,
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
Asset Liability
Balance Sheet location March 31,
2018 December 31,
2017 March 31,
2018 December 31,
2017
Fuel contracts designated as hedging instruments
Prepaid expenses and other assets $ 17,637 $ 19,220 $ 3,089 $ 2,406
Other long-term assets 14,540 19,854 4,152 3,469
Accrued expenses and other liabilities 60 — 3,107 3,348
Other long-term liabilities 130 576 2,913 2,148
Foreign currency contracts designated as hedging instruments
Prepaid expenses and other assets 78,438 52,300 71 730
Other long-term assets 112,777 85,081 — —
Interest contracts designated as hedging instruments
Accrued expenses and other liabilities — — 332 1,020
Total derivatives designated as hedging instruments $ 223,582 $ 177,031 $ 13,664 $    13,121
12
Table of Contents

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, 2017 Gross Amounts Gross
Amounts
Offset Total Net
Amounts Gross
Amounts Not
Offset Net Amounts
March 31, 2018 Gross Amounts Gross
Amounts
Offset Total Net
Amounts Gross
Amounts Not
Offset Net Amounts
Assets $ 49,079 $ (144 ) $ 48,935 $ (40,103 ) $ 8,832 $ 223,392 $ (7,312 ) $ 216,080 $ (117,233 ) $ 98,847
Liabilities 83,605 (9,452 ) 74,153 (3,609 ) 70,544 6,352 (190 ) 6,162 (332 ) 5,830

December 31, 2016 Gross Amounts Gross
Amounts
Offset Total Net
Amounts Gross
Amounts Not
Offset Net Amounts
December 31, 2017 Gross Amounts Gross
Amounts
Offset Total Net
Amounts Gross
Amounts Not
Offset Net Amounts
Assets $ 20,302 $ — $ 20,302 $ (14 ) $ 20,288 $ 176,455 $ (6,605 ) $ 169,850 $ (127,924 ) $ 41,926
Liabilities 238,069 (13,237 ) 224,832 (155,190 ) 69,642 6,516 (576 ) 5,940 (1,020 ) 4,920

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

Location of gain or
(loss) reclassified
from accumulated
other
comprehensive
income (loss) into
income

Amount of gain or (loss) reclassified
from accumulated other comprehensive
income (loss) into income

Three Months
Ended March 31,
2018

Three Months
Ended March 31,
2017

Three Months
Ended March 31,
2018

Three Months
Ended March 31,
2017

Fuel contracts $ (6,012 ) $ (26,203 ) Fuel $ 3,525 $ (8,003 )
Foreign currency contracts 54,493 18,636 Depreciation and amortization expense (1,159 ) (857 )
Interest rate contracts 95 284 Interest expense, net (581 ) (845 )
Total gain (loss) recognized in other comprehensive income $ 48,576 $ (7,283 ) $ 1,785 $ (9,705 )
The effects of cash flow hedge accounting on the consolidated financial statements of operations were as follows (in thousands):

For the three months
ended March 31, 2018

For the three months
ended March 31, 2017

Fuel
Depreciation
and
amortization

Interest
expense, net
Fuel
Depreciation
and
amortization

Interest
expense, net

Total amounts of income and expense line items presented in the consolidated statements of operations in which the effects of cash flow hedges are recorded $ 93,431 $ 131,244 $ 59,698 $ 88,886 $ 119,205 $ 52,960

The effects of cash flow hedges:
Fuel contracts:
Amount of gain or (loss) reclassified from accumulated other comprehensive income (loss) into income 3,525 — — (8,003 ) — —
Foreign currency contracts:
Amount of gain or (loss) reclassified from accumulated other comprehensive income (loss) into income — (1,159 ) — — (857 ) —
Interest rate contracts:
Amount of gain or (loss) reclassified from accumulated other comprehensive income (loss) into income — — (581 ) — — (845 )
1013
Table of Contents

~~Fuel Swaps~~
As of June 30, 2017, we had fuel swaps maturing through December 31, 2020 which are used to mitigate the financial impact of volatility in fuel prices pertaining to approximately 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,
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
We had fuel swaps 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,
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,
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, 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 denominated in euros. The notional amount of our foreign currency forward contracts was €1.8 billion, or $2.1 billion based on the euro/U.S. dollar exchange rate as of June 30, 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,
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
11
~~Table of Contents~~
~~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,
2017 2016 2017 2016
Loss recognized in other income (expense), net $ — $ (6,133 ) $ — $ (6,133 )
~~Foreign Currency 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,
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,
2017 2016 2017 2016
Gain (loss) recognized in other income (expense), net $ — $ (3,313 ) $ — $ 10,312
~~Interest Rate Swaps~~
As of June 30, 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 $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,
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, 2017~~March 31, 2018 and December 31, ~~2016,~~2017, the fair value of our long-term debt, including the current portion, was ~~$6,864.4~~$6,457.9 million and ~~$6,525.7~~$6,448.6 million, respectively, which was ~~$48.1~~$5.8 million lower and ~~$11.6~~$23.5 million 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 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.

12
~~Table of Contents~~
7.8. 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

The following is a summary of option activity under ~~our~~NCLH’s Amended and Restated 2013 Performance Incentive Plan for the ~~six~~three months ended ~~June 30, 2017 (excludes the impact of 208,335 previously awarded performance-based options as no grant date has been established):~~March 31, 2018:

Number of Share Option
Awards Weighted-Average Exercise
Price 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 January 1, 2017 7,775,058 432,978 208,333 $ 48.04 $ 23.86 $ 59.43 7.81 $ 35,429
Outstanding as of January 1, 2018 6,580,898 373,969 208,333 $ 49.18 $ 31.39 $ 59.43 6.99 $ 50,021
Granted — 156,249 — — 59.43 — — — — 208,335 — — 59.43 — — —
Exercised (383,203 ) (59,218 ) — 28.33 19.00 — — — (117,805 ) — — 39.27 — — — —
Forfeited and cancelled (325,030 ) (93,749 ) — 55.03 59.43 — — — (60,083 ) (52,084 ) — 52.08 59.43 — — —
Outstanding as of June 30, 2017 7,066,825 436,260 208,333 $ 48.79 $ 29.62 $ 59.43 7.44 $ 61,204
Outstanding as of March 31, 2018 6,403,010 530,220 208,333 $ 49.34 $ 39.65 $ 59.43 6.77 $ 47,171

Restricted Ordinary Share Awards

The following is a summary of restricted NCLH ordinary share activity for the ~~six~~three months ended ~~June 30, 2017:~~March 31, 2018:

Number of
Time-Based
Awards Weighted-
Average Grant
Date Fair
Value Number of
Time-Based
Awards Weighted-
Average Grant
Date Fair
Value
Non-vested as of January 1, 2017 16,872 $ 7.63
Non-vested as of January 1, 2018 858 $ 58.33
Granted — — — —
Vested (11,338 ) 5.53 (429 ) 58.25
Forfeited or expired — — — —
Non-vested and expected to vest as of June 30, 2017 5,534 $ 11.94
Non-vested and expected to vest as of March 31, 2018 429 $ 58.41
14
Table of Contents

Restricted Share Unit Awards

On March 1, ~~2017, we~~2018, NCLH granted ~~1.7~~1.6 million time-based restricted share unit awards to our employees which vest equally over three years. Additionally, on February 27, 2018 and March 1, ~~2017, we awarded 121,000~~2018, NCLH granted 0.3 million and 0.5 million performance-based restricted share units, respectively, 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~~three months ended ~~June 30, 2017 (excludes the impact of 171,000 previously awarded performance-based restricted share units as no grant date was established):~~March 31, 2018:

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 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, 2017 1,305,335 $ 50.38 — $ — 50,000 $ 59.43
Non-vested as of January 1, 2018 2,555,477 $ 50.86 — $ — 50,000 $ 59.43
Granted 1,750,612 50.96 37,500 49.76 — — 1,606,156 56.74 843,998 56.58 — —
Vested (440,508 ) 50.67 (15,000 ) 49.76 — — (938,637 ) 56.68 —
Forfeited or expired (36,507 ) 50.61 (22,500 ) 49.76 — — (39,872 ) 52.72 (12,500 ) 59.43 — —
Non-vested and expected to vest as of June 30, 2017 2,578,932 50.72 — — 50,000 59.43
Non-vested and expected to vest as of March 31, 2018 3,183,124 $ 53.90 831,498 $ 55.94 50,000 $ 59.43

The share-based compensation expense for the ~~six~~three months ended ~~June 30, 2017~~March 31, 2018 was ~~$42.2~~$28.1 million of which ~~$38.5~~$24.7 million was recorded in marketing, general and administrative expense and ~~$3.7~~$3.4 million was recorded in payroll and related expense. The share-based compensation expense for the three months ended March 31, 2017 was $18.2 million of which $17.4 million was recorded in marketing, general and administrative expense and $0.8 million was recorded in payroll and related expense.

13
~~Table of Contents~~
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~~Each of the four Project Leonardo ships ~~are each~~is approximately 140,000 Gross Tons with approximately 3,300 Berths. We have an Explorer Class Ship, Seven Seas Splendor, on order for delivery in the winter of 2020. This ship is approximately 55,000 Gross Tons and 750 Berths. Norwegian Bliss was delivered on April 19, 2018 (we refer you to Note 12— “Subsequent Events”). We have ~~two~~one additional Breakaway Plus Class ~~Ships~~Ship, Norwegian Encore, on order for delivery in the ~~spring of 2018 and~~ fall of ~~2019, respectively. These ships are~~2019. Each of Norwegian Bliss and Norwegian Encore is approximately 168,000 Gross Tons ~~each~~ with approximately 4,000 ~~Berths each.~~Berths. The combined contract price of these seven ships (exclusive of the option for two additional ships) was approximately ~~€5.5~~€5.6 billion, or ~~$6.3~~$6.9 billion based on the euro/U.S. dollar exchange rate as of ~~June 30, 2017.~~March 31, 2018. We have obtained export credit financing ~~in place that provides financing~~ for the ships which is expected to fund approximately 80% of the contract price of each ~~ship’s contract price.~~ship expected to be delivered through 2025, subject to certain conditions. For ships expected to be delivered after 2023, the contract ~~price is~~prices are subject to adjustment under certain circumstances.

In connection with the contracts to build ~~the~~these ships, we do not anticipate any contractual breach or cancellation to occur. However, if any ~~would~~were to occur, it could result in, among other things, the forfeiture of prior deposits or payments made by us, subject to certain refund guarantees, and potential claims and impairment losses which may materially impact our business, financial condition and results of operations.

Litigation

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 ~~the~~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.

9.10. Other Income (Expense), Net

For the three months ended ~~June 30, 2017,~~March 31, 2018, other income (expense), net was a ~~$5.6~~$1.7 million expense, ~~which included $8.1 million of losses~~primarily due to foreign currency exchange ~~partially offset by $2.5 million of gains primarily due to a gain from an insurance claim.~~losses. For the three months ended ~~June 30, 2016,~~March 31, 2017, the ~~$10.8~~$2.8 million expense ~~included $14.5 million of losses~~was due to ~~derivatives partially offset by $3.7 million of~~ foreign currency exchange ~~gains. For the six months ended June 30, 2017, the $8.4 million expense included $10.8 million~~and fuel swap derivative losses.
15
Table of foreign currency exchange losses partially offset by $2.4 million of gains primarily due to a gain from an insurance claim. For the six months ended June 30, 2016, the $7.9 million expense included $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.Contents

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

For the ~~six~~three months ended ~~June 30,~~March 31, 2018 and 2017, ~~and 2016,~~ we had non-cash investing activities in connection with property and equipment of ~~$10.3~~$25.7 million and ~~$32.0~~$23.0 million, respectively. ~~For~~
12. Subsequent Events
On April 19, 2018, we took delivery of Norwegian Bliss. To finance the ~~six months ended June 30, 2017,~~payment due upon delivery, we had ~~non-cash investing activities~~export financing in ~~connection~~place for 80% of the contract price. The associated $850.0 million term loan bears interest at 3.92% with ~~capital leases~~a maturity date of ~~$5.4 million.~~April 19, 2030. Principal and interest payments shall be paid semiannually.

On April 17, 2018, the Board of Directors of NCLH approved a three-year share repurchase program under which NCLH may purchase up to $1.0 billion of its ordinary shares (the “Repurchase Program”). Pursuant to the Repurchase Program, NCLH may repurchase its ordinary shares from time to time, in amounts, at prices and at such times as it deems appropriate, subject to market conditions and other considerations.
On April 4, 2018, we redeemed $135.0 million principal amount of the $700.0 million aggregate principal amount of outstanding 4.750% Senior Notes due 2021 (the “Notes”) at a price equal to 100% of the principal amount of the Notes being redeemed and paid the premium of $5.2 million and accrued interest of $1.9 million. The redemption also resulted in a write off of $1.2 million of certain fees. Following the partial redemption, $565.0 million aggregate principal amount of Notes remained outstanding. The redemption of the Notes resulted in a reclassification of $135.0 million to short-term debt in the consolidated balance sheet as of March 31, 2018.
1416
Table of Contents

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 events impacting the security of travel, such as terrorist acts, armed conflict and threats thereof, acts of piracy, and other international events;
· adverse incidents involving cruise ships;
· adverse general economic and related factors, such as fluctuating or increasing levels of unemployment, underemployment and the volatility of fuel prices, declines in the securities and real estate markets, and perceptions of these conditions that decrease the level of disposable income of consumers or consumer confidence;
•· ~~adverse events impacting~~ the ~~security~~spread of ~~travel, such as terrorist acts, armed conflict~~epidemics and ~~threats thereof, acts of piracy,~~viral outbreaks;
· our expansion into and ~~other international events;~~investments in new markets;
•· 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~~fluctuations in foreign currency exchange rates;
· overcapacity in key markets or globally;
· the unavailability of ~~our tradenames or goodwill;~~attractive port destinations;
•· 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~~delays in our shipbuilding program and ~~market our cruises;~~ship repairs, maintenance and refurbishments;
•· 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;
· amendments to our collective bargaining agreements for crew members and other employee relation issues;
•17
Table of Contents
· our inability to obtain adequate insurance coverage;
· future changes relating to how external distribution channels sell and market our cruises;
· pending or threatened litigation, investigations and enforcement actions;
· our ability to keep pace with developments in technology;
· 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”).Factors.”

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 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.

15
~~Table of Contents~~
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.~~
•~~Bareboat Charter.~~ ~~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. Norwegian Escape, Norwegian Joy, Norwegian Bliss and a fourth ship on ~~order.~~order, Norwegian Encore.

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

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

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

18
Table of Contents
•Explorer Class Ships.Regent’s Seven Seas Explorer and a second ship on ~~order.~~order, Seven Seas Splendor.

•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.
•~~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.
16
~~Table of Contents~~

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

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

•Net Yield. Net Revenue per Capacity Day.

•Occupancy Percentage. The ratio of Passenger Cruise Days to Capacity Days. A percentage 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~~ Project Leonardo.The next generation of ships for our Norwegian brand.
•Revolving Loan Facility. ~~$750.0~~$875.0 million senior secured revolving credit facility maturing on June 6, ~~2021, subject to an earlier springing maturity date.~~
•~~Project Leonardo.~~~~The next generation of ships for our Norwegian brand.~~2021.

•ROI Capital Expenditures.Comprised of project-based capital expenditures which have a quantified return on investment.
•SEC.U.S. Securities and Exchange Commission.
•Secondary Equity Offering(s).Secondary public offering(s) of NCLH’s ordinary shares in March 2018, November 2017, August 2017, December 2015, August 2015, May 2015, March 2015, March 2014, December 2013 and August 2013.

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

Non-GAAP Financial Measures

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

In addition, Adjusted Net Revenue and Adjusted Net Yield, which exclude certain business combination accounting entries, are non-GAAP financial measures that we believe are useful as supplemental measures in evaluating the performance
19
Table of ~~our operating business and provide greater transparency into our results of operations.~~ Contents
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 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 year ended December 31, 2016, we incurred $28.0 million related to the extinguishment of debt due to the refinancing of certain credit facilities. We included this as an adjustment in the reconciliation of Adjusted Net Income since the extinguishment of debt is not representative of our day-to-day operations and we have included similar adjustments in prior periods; however, this adjustment did not occur and is not included in the periods presented within this Form 10-Q.
17
~~Table of Contents~~

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,~~casino, beverage sales, shore excursions, specialty dining, retail sales, spa services and photo ~~services as well as certain Bareboat Charter revenue. We record~~services. Our onboard revenue is derived from onboard activities we perform directly or that are performed by independent concessionaires, from which we receive a share of their revenue.

Our cruise operating expense is classified as follows:

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,~~casino, beverage sales and shore excursions.

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

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.

20
Table of Contents
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, ~~2016~~2017 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, ~~2016.~~2017.

~~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.
18
~~Table of Contents~~
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
~~Norwegian Joy was delivered in April 2017. The ship is approximately 168,000 Gross Tons with approximately 3,880 Berths.~~

Three months ended ~~June 30, 2017~~March 31, 2018 (“~~2017”~~2018”) compared to three months ended ~~June 30, 2016~~March 31, 2017 (“~~2016”~~2017”)

Total revenue increased ~~13.3%~~12.4% to $1.3 billion compared to $1.2 billion.

Net Revenue increased 13.1% to $1.0 billion compared to $0.9 billion.

~~Net income and diluted EPS was $198.5 million and $0.87, respectively, compared to $145.2 million and $0.64, respectively.~~
~~Operating income was $275.1 million compared to $227.0 million.~~
• Net income and diluted EPS was $103.2 million and $0.45, respectively, compared to $61.9 million and $0.27, respectively.
• Operating income was $167.1 million compared to $119.7 million.

Adjusted Net Income and Adjusted EPS were ~~$232.7~~$137.8 million and ~~$1.02,~~$0.60, respectively, in ~~2017,~~2018, which included ~~$34.3~~$34.7 million of adjustments primarily consisting of expenses related to non-cash compensation, amortization of intangible assets and certain other adjustments. Adjusted Net Income and Adjusted EPS were ~~$192.6~~$91.2 million and ~~$0.85,~~$0.40, respectively, in ~~2016,~~2017, which included ~~$47.3~~$29.2 million of adjustments primarily consisting of expenses related to ~~deferred financing fees, derivatives,~~ non-cash compensation, amortization of intangible assets and certain other adjustments.

Adjusted EBITDA improved ~~21.0%~~25.3% to ~~$424.9~~$326.4 million compared to ~~$351.1~~$260.6 million.

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

19
~~Table of Contents~~
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
March 31,
2017 2016 2017 2016 2018 2017
Revenue
Passenger ticket 69.8 % 69.0 % 69.1 % 68.8 % 68.8 % 68.4 %
Onboard and other 30.2 % 31.0 % 30.9 % 31.2 % 31.2 % 31.6 %
Total revenue 100.0 % 100.0 % 100.0 % 100.0 % 100.0 % 100.0 %
Cruise operating expense
Commissions, transportation and other 16.6 % 16.3 % 16.7 % 16.3 % 16.9 % 16.9 %
Onboard and other 6.2 % 6.4 % 6.1 % 6.2 % 5.5 % 5.9 %
Payroll and related 14.5 % 15.5 % 15.5 % 16.0 % 16.2 % 16.7 %
Fuel 6.4 % 6.8 % 7.0 % 7.2 % 7.2 % 7.7 %
Food 3.5 % 4.2 % 3.8 % 4.4 % 3.9 % 4.0 %
Other 8.7 % 10.3 % 9.9 % 10.4 % 9.7 % 11.3 %
Total cruise operating expense 55.9 % 59.5 % 59.0 % 60.5 % 59.4 % 62.5 %
Other operating expense
Marketing, general and administrative 14.4 % 12.6 % 15.5 % 14.6 % 17.6 % 16.7 %
Depreciation and amortization 9.2 % 8.8 % 9.7 % 9.1 % 10.1 % 10.4 %
Total other operating expense 23.6 % 21.4 % 25.2 % 23.7 % 27.7 % 27.1 %
Operating income 20.5 % 19.1 % 15.8 % 15.8 % 12.9 % 10.4 %
Non-operating income (expense)
Interest expense, net (4.8 )% (5.8 )% (4.7 )% (5.7 )% (4.6 )% (4.6 )%
Other income (expense), net (0.4 )% (0.9 )% (0.3 )% (0.3 )% (0.1 )% (0.2 )%
Total non-operating income (expense) (5.2 )% (6.7 )% (5.0 )% (6.0 )% (4.7 )% (4.8 )%
Net income before income taxes 15.3 % 12.4 % 10.8 % 9.8 % 8.2 % 5.6 %
Income tax expense (0.5 )% (0.2 )% (0.4 )% (0.2 )% (0.2 )% (0.2 )%
Net income 14.8 % 12.2 % 10.4 % 9.6 % 8.0 % 5.4 %

2021
Table of Contents

The following table sets forth selected statistical information:

Three Months Ended
June 30, Six Months Ended
June 30, Three Months Ended
March 31,
2017 2016 2017 2016 2018 2017
Passengers carried 569,857 574,838 1,098,211 1,126,313 617,440 528,354
Passenger Cruise Days 4,517,788 4,237,020 8,748,306 8,522,314 4,724,604 4,230,518
Capacity Days 4,189,750 3,974,508 8,220,366 7,965,450 4,466,471 4,030,616
Occupancy Percentage 107.8 % 106.6 % 106.4 % 107.0 % 105.8 % 105.0 %

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,
2017 2017
Constant
Currency 2016 2017 2017
Constant
Currency 2016
Passenger ticket revenue $ 938,014 $ 948,291 $ 818,478 $ 1,724,708 $ 1,742,798 $ 1,558,590
Onboard and other revenue 406,089 406,089 368,357 770,176 770,176 705,877
Total revenue 1,344,103 1,354,380 1,186,835 2,494,884 2,512,974 2,264,467
Less:
Commissions, transportation and other expense 223,315 225,429 193,536 417,455 421,947 368,973
Onboard and other expense 83,367 83,367 75,790 151,778 151,778 139,755
Net Revenue 1,037,421 1,045,584 917,509 1,925,651 1,939,249 1,755,739
Non-GAAP Adjustment:
Deferred revenue (1) — — 297 — — 757
Adjusted Net Revenue $ 1,037,421 $ 1,045,584 $ 917,806 $ 1,925,651 $ 1,939,249 $ 1,756,496
Capacity Days 4,189,750 4,189,750 3,974,508 8,220,366 8,220,366 7,965,450
Gross Yield $ 320.81 $ 323.26 $ 298.61 $ 303.50 $ 305.70 $ 284.29
Net Yield $ 247.61 $ 249.56 $ 230.85 $ 234.25 $ 235.91 $ 220.42
Adjusted Net Yield $ 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.~~
Three Months Ended
March 31,
2018 2018
Constant
Currency 2017
Passenger ticket revenue $ 889,866 $ 876,793 $ 786,694
Onboard and other revenue 403,537 403,537 364,087
Total revenue 1,293,403 1,280,330 1,150,781
Less:
Commissions, transportation and other expense 218,340 215,291 194,140
Onboard and other expense 70,688 70,688 68,411
Net Revenue 1,004,375 994,351 888,230
Capacity Days 4,466,471 4,466,471 4,030,616
Gross Yield $ 289.58 $ 286.65 $ 285.51
Net Yield $ 224.87 $ 222.63 $ 220.37

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
March 31,
2017 2017
Constant
Currency 2016 2017 2017
Constant
Currency 2016 2018 2018
Constant
Currency 2017
Total cruise operating expense $ 752,242 $ 754,209 $ 705,900 $ 1,472,040 $ 1,476,176 $ 1,370,381 $ 768,091 $ 763,593 $ 719,798
Marketing, general and administrative expense 193,649 194,219 149,307 385,693 386,581 329,881 227,015 224,692 192,044
Gross Cruise Cost 945,891 948,428 855,207 1,857,733 1,862,757 1,700,262 995,106 988,285 911,842
Less:
Commissions, transportation and other expense 223,315 225,429 193,536 417,455 421,947 368,973 218,340 215,291 194,140
Onboard and other expense 83,367 83,367 75,790 151,778 151,778 139,755 70,688 70,688 68,411
Net Cruise Cost 639,209 639,632 585,881 1,288,500 1,289,032 1,191,534 706,078 702,306 649,291
Less: Fuel expense 86,663 86,663 80,607 175,549 175,549 162,279 93,431 93,431 88,886
Net Cruise Cost Excluding Fuel 552,546 552,969 505,274 1,112,951 1,113,483 1,029,255 612,647 608,875 560,405
Less Non-GAAP Adjustments:
Non-cash deferred compensation (1) 823 823 792 1,646 1,646 1,583 542 542 823
Non-cash share-based compensation (2) 24,017 24,017 16,204 42,220 42,220 31,449 28,102 28,102 18,203
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 —
Secondary Equity Offering expenses (3) 482 482 —
Severance payments and other fees (4) — — 2,399
Acquisition of Prestige expenses (5) — — 250
Other (6) (992 ) (992 ) —
Adjusted Net Cruise Cost Excluding Fuel $ 525,850 $ 526,273 $ 486,136 $ 1,064,580 $ 1,065,112 $ 990,310 $ 584,513 $ 580,741 $ 538,730

Capacity Days 4,189,750 4,189,750 3,974,508 8,220,366 8,220,366 7,965,450 4,466,471 4,466,471 4,030,616
Gross Cruise Cost per Capacity Day $ 225.76 $ 226.37 $ 215.17 $ 225.99 $ 226.60 $ 213.45 $ 222.79 $ 221.27 $ 226.23
Net Cruise Cost per Capacity Day $ 152.56 $ 152.67 $ 147.41 $ 156.74 $ 156.81 $ 149.59 $ 158.08 $ 157.24 $ 161.09
Net Cruise Cost Excluding Fuel per Capacity Day $ 131.88 $ 131.98 $ 127.13 $ 135.39 $ 135.45 $ 129.21 $ 137.17 $ 136.32 $ 139.04
Adjusted Net Cruise Cost Excluding Fuel per Capacity Day $ 125.51 $ 125.61 $ 122.31 $ 129.51 $ 129.57 $ 124.33 $ 130.87 $ 130.02 $ 133.66

2122
Table of Contents

(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 a Secondary Equity Offering, which are included in marketing, general and administrative expense.
(4) Severance payments and other ~~expenses~~fees related to restructuring costs and other severance arrangements, which are included in marketing, general and administrative expense.
~~(4)~~(5) Expenses related to the Acquisition of Prestige, which are included in marketing, general and administrative expense.
~~(5)~~(6) ~~Expenses primarily~~Primarily related to areimbursements of certain legal ~~settlement,~~costs, which are 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,
Three Months Ended
March 31,
2017 2016 2017 2016 2018 2017
Net income 198,473 145,246 260,383 218,475 $ 103,155 $ 61,910
Non-GAAP Adjustments:
Non-cash deferred compensation (1) 823 792 1,646 1,583 863 823
Non-cash share-based compensation (2) 24,017 16,204 42,220 31,449 28,102 18,203
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
Secondary Equity Offering expenses (3) 482 —
Severance payments and other fees (4) — 2,399
Acquisition of Prestige expenses (5) — 250
Amortization of intangible assets (6) 7,568 5,267 15,136 10,535 6,222 7,568
Derivative adjustment (7) — 10,911 — (1,185 )
Deferred financing fees and other (8) — 11,714 — 11,714
Other (9) 1,606 — 1,606 —
Other (7) (992 ) —
Adjusted Net Income $ 232,737 $ 192,573 $ 323,890 $ 279,241 $ 137,832 $ 91,153
Diluted weighted–average shares outstanding 229,090,085 227,884,704 228,824,296 227,997,970
Diluted weighted-average shares outstanding – Net income and Adjusted Net Income 229,187,628 228,555,952
Diluted earnings per share $ 0.87 $ 0.64 $ 1.14 $ 0.96 $ 0.45 $ 0.27
Adjusted EPS $ 1.02 $ 0.85 $ 1.42 $ 1.22 $ 0.60 $ 0.40

(1) Non-cash deferred compensation expenses related to the crew pension plan and other crew expenses, which are included in payroll and related ~~expense.~~expense and other income (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 a Secondary Equity Offering, which are included in marketing, general and administrative expense.
(4) Severance payments and other ~~expenses~~fees related to restructuring costs and other severance arrangements, which are included in marketing, general and administrative expense.
~~(4)~~(5) Expenses related to the Acquisition of Prestige, which are included in marketing, general and administrative expense.
~~(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 passenger ticket revenue.
(6) Amortization of intangible assets related to the Acquisition of Prestige, which are included in depreciation and amortization expense.
(7) ~~Losses and net gains for the fair value adjustment of a foreign exchange collar which does not receive hedge accounting and losses due~~Primarily related to ~~the dedesignation~~reimbursements of certain ~~fuel swaps. These adjustments are included in other income (expense), net.~~
~~(8)~~ ~~Expenses primarily related to the write-off of deferred financing fees related to the refinancing of certain credit facilities, which are included in interest expense, net.~~
~~(9)~~ ~~Expenses primarily related to a~~ legal ~~settlement,~~costs, which are included in marketing, general and administrative expense.

2223
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
March 31,
2017 2016 2017 2016 2018 2017
Net income $ 198,473 $ 145,246 $ 260,383 $ 218,475 $ 103,155 $ 61,910
Interest expense, net 64,196 68,420 117,156 128,174 59,698 52,960
Income tax expense 6,793 2,599 8,842 3,703 2,534 2,049
Depreciation and amortization expense 123,141 104,610 242,346 205,905 131,244 119,205
EBITDA 392,603 320,875 628,727 556,257 296,631 236,124
Other expense (1) 5,609 10,753 8,424 7,948
Other (income) expense, net (1) 1,666 2,815
Non-GAAP Adjustments:
Non-cash deferred compensation (2) 823 792 1,646 1,583 542 823
Non-cash share-based compensation (3) 24,017 16,204 42,220 31,449 28,102 18,203
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
Secondary Equity Offering expenses (4) 482 —
Severance payments and other fees (5) — 2,399
Acquisition of Prestige expenses (6) — 250
Other (7) 1,606 — 1,606 — (992 ) —
Adjusted EBITDA $ 424,908 $ 351,063 $ 685,522 $ 603,907 $ 326,431 $ 260,614

(1) Primarily consists of gains and losses, net for derivative contracts and foreign currency exchanges.
(2) Non-cash deferred compensation expenses related to the crew pension plan and other crew expenses, which are included in payroll and related expense.
(3) Non-cash share-based compensation expenses related to equity awards, which are included in marketing, general and administrative expense and payroll and related expense.
(4) Expenses related to a Secondary Equity Offering, which are included in marketing, general and administrative expense.
(5) Severance payments and other ~~expenses~~fees related to restructuring costs and other severance arrangements, which are included in marketing, general and administrative expense.
~~(5)~~ (6) Expenses related to the Acquisition of Prestige, which are included in marketing, general and administrative expense.
~~(6)~~ ~~Deferred revenue fair value adjustments~~(7) Primarily related to ~~the Acquisition~~reimbursements of ~~Prestige that were made pursuant to business combination accounting rules, which are primarily included in passenger ticket revenue.~~
~~(7)~~ ~~Expenses primarily related to a~~certain legal ~~settlement,~~costs, which are included in marketing, general and administrative expense.

Three months ended ~~June 30, 2017~~March 31, 2018 (“~~2017”~~2018”) compared to three months ended ~~June 30, 2016~~March 31, 2017 (“~~2016”~~2017”)
Revenue

Total revenue increased ~~13.3%~~12.4% to $1.3 billion in ~~2017~~2018 compared to $1.2 billion in ~~2016 primarily due to an increase in Capacity Days.~~2017. Gross Yield increased ~~7.4%~~1.4%. Net Revenue increased 13.1% ~~in 2017~~ to $1.0 billion in 2018 from $0.9 billion in ~~2016~~2017 due to an increase in Capacity Days of ~~5.4%,~~10.8% and an increase in Net Yield of ~~7.3% and an increase in Occupancy Percentage.~~2.0%. The increase in Capacity Days was primarily due to ~~a reduction~~Norwegian Joy joining our fleet in the ~~amount~~second quarter of ~~Dry-docks in 2017 compared to 2016 and the delivery of Seven Seas Explorer in June 2016.~~2017. The increase in Gross Yield and Net Yield was primarily due to 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 $0.3 million related to the Acquisition of Prestige.~~pricing. On a Constant Currency basis, Net Yield ~~and Adjusted Net Yield~~ increased ~~8.1% in 2017 compared to 2016.~~1.0%.

Expense

Total cruise operating expense increased 6.7% in 2018 compared to 2017 primarily due to the increase in Capacity Days as discussed above. Gross Cruise Cost increased ~~10.6%~~9.1% in ~~2017~~2018 compared to ~~2016~~2017 due to an increase in total cruise operating expense and marketing, general and administrative expenses. Total cruise operating expense increased 6.6% in 2017 compared to 2016 primarily due to the increase in Capacity Days as discussed above and 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 ~~24.8%~~15.1% in ~~2017~~2018 compared to ~~2016 due to an increase in marketing, general and administrative expenses and an increase in depreciation and amortization expense.~~2017. Marketing, general and administrative expenses increased primarily due to ~~an increase in advertising and marketing expenses as well as an increase in share-based~~incentive compensation. Depreciation and amortization ~~expense~~expenses increased primarily due to the addition of Norwegian Joy and ship improvement ~~projects and the ship additions.~~projects. On a Capacity Day basis, Net Cruise Cost ~~increased 3.5% (3.6%~~decreased 1.9% (2.4% on a Constant Currency basis) ~~primarily~~ due to a decrease in maintenance and repairs including Dry-dock expenses partially offset by an increase in marketing, general and administrative ~~expenses partially offset by a reduction in maintenance and repairs including Dry-dock~~ expenses. Adjusted Net Cruise Cost Excluding Fuel per Capacity Day ~~increased 2.6%~~decreased 2.1% (2.7% on a Constant Currency basis) ~~primarily due to the increase in expenses discussed above.~~.

Interest expense, net was ~~$64.2~~$59.7 million in ~~2017~~2018 compared to ~~$68.4~~$53.0 million in ~~2016. Interest expense for 2017 reflects an~~2017. The increase in ~~average~~interest expense reflects additional debt ~~balances outstanding primarily associated~~in connection with the delivery of ~~new ships and newbuild installments,~~Norwegian Joy in April 2017, Project Leonardo financing, as well as higher interest rates due to an increase in ~~LIBOR. Interest expense for 2016 included a write-off of $11.4 million of deferred financing fees related to~~LIBOR, partially offset by the ~~refinancing of certain~~benefit from the full redemption in October 2017 of our ~~credit facilities in 2016.~~4.625% Senior Notes due 2020.

Other income (expense), net was an expense of ~~$5.6~~$1.7 million in ~~2017~~2018 compared to an expense of ~~$10.8~~$2.8 million in ~~2016.~~2017. In 2018, the expense was primarily related to losses on foreign currency exchange. 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 insurance settlement. In 2016, the expense was primarily related to unrealized and realized losses on fuel derivative hedge contracts and foreign exchange derivative contracts partially offset by gains on foreign currency exchange.derivatives.

In ~~2017,~~2018, we had an income tax expense of ~~$6.8~~$2.5 million compared to ~~$2.6~~$2.0 million in ~~2016.~~2017.

2324
Table of Contents
~~Six months ended June 30, 2017 (“2017”) compared to six months ended June 30, 2016 (“2016”)~~
~~Revenue~~
Total revenue increased 10.2% to $2.5 billion in 2017 compared to $2.3 billion in 2016 primarily due to an increase in Capacity Days. Gross Yield increased 6.8%. Net Revenue increased 9.7% in 2017 to $1.9 billion from $1.8 billion in 2016 due to an increase in Capacity Days of 3.2% and an increase in Net Yield of 6.3%. The increase in Capacity Days was primarily due to the delivery of Seven Seas Explorer in June 2016, Sirena joining our fleet in April 2016 and a reduction in the amount of Dry-docks in 2017 compared to 2016. The increase in Gross Yield and Net Yield was primarily due to 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 $0.8 million related to the Acquisition of Prestige. On a Constant Currency basis, Net Yield and Adjusted Net Yield increased 7.0% in 2017 compared to 2016.
~~Expense~~
Gross Cruise Cost increased 9.3% in 2017 compared to 2016 due to an increase in total cruise operating expense and marketing, general and administrative expenses. Total cruise operating expense increased 7.4% in 2017 compared to 2016 primarily due to the increase in Capacity Days as discussed above and crew payroll and related costs. Total other operating expense increased 17.2% in 2017 compared to 2016 due to an increase in marketing, general and administrative expenses and 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 expense. Depreciation and amortization expense increased primarily due to the ship improvement projects and the ship additions. On a Capacity Day basis, Net Cruise Cost increased 4.8% (on an actual and a Constant Currency basis) due to an increase in marketing, general and administrative expenses and crew payroll and related costs. Adjusted Net Cruise Cost Excluding Fuel per Capacity Day increased 4.2% (on an actual and a Constant Currency basis) primarily due to the increase in expenses discussed above.
Interest expense, net was $117.2 million in 2017 compared to $128.2 million in 2016. Interest expense for 2017 reflects higher interest rates driven by an increase in LIBOR, as well as an increase in average debt balances outstanding primarily associated with the delivery of new ships and newbuild installments. Interest expense for 2016 included a write-off of $11.4 million of deferred financing fees related to the refinancing of certain of our credit facilities in 2016.
Other income (expense), net was an expense of $8.4 million in 2017 compared to an expense of $7.9 million in 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 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 2017, we had an income tax expense of $8.8 million compared to $3.7 million in 2016.~~

Liquidity and Capital Resources

General

As of ~~June 30, 2017,~~March 31, 2018, our liquidity was ~~$969.3 million~~$1.2 billion consisting of ~~$219.3~~$301.7 million in cash and cash equivalents and ~~$750.0~~$875.0 million available 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, 2017,~~March 31, 2018, we had a working capital deficit of ~~$2.1~~$2.3 billion. This deficit included ~~$1.5~~$1.7 billion of advance ticket sales, which represents the total revenue we collect in advance of sailing dates and accordingly ~~are~~is 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 optimize our capital structure, taking into consideration our current and expected capital requirements, our assessment of prevailing market conditions and expectations regarding future conditions, and the contractual and other restrictions to which we are subject.
24
~~Table of Contents~~

Sources and Uses of Cash

In this section, references to “2018” refer to the three months ended March 31, 2018 and references to “2017” refer to the ~~six~~three months ended ~~June 30, 2017 and references to “2016” refer to the six months ended June 30, 2016.~~March 31, 2017.

Net cash provided by operating activities was ~~$919.7~~$610.8 million in ~~2017~~2018 as compared to ~~$748.0~~$434.9 million in ~~2016.~~2017. 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~~increased by $375.6 million in ~~2017~~2018 compared to ~~$358.6~~$222.9 million in ~~2016.~~2017. Without the adoption of ASU No. 2014-09, the Advance ticket sales would have increased by $359.0 million in 2018 (we refer you to Note 2—“Summary of Significant Accounting Policies— Revenue and Expense Recognition” of the Notes to Consolidated Financial Statements for more on the effects of adoption of ASU No. 2014-09).

Net cash used in investing activities was ~~$1.1 billion~~$143.6 million in 2018 and $117.8 million 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~~ship improvement projects.

Net cash ~~provided by~~used in financing activities was ~~$271.8~~$341.6 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 20162018 primarily due to net ~~proceeds~~repayments of our ~~New~~ Revolving Loan Facility and other loan ~~facilities partially offset by the repurchase~~facilities. Additionally, in 2018, we repurchased $263.5 million of our ordinary shares and incurred deferred financing fees related to financing of newbuild ships. In 2017, net cash used in financing activities was $225.7 million primarily due to net repayments of our then existing revolving loan facility and ~~other.~~other loan facilities.

Future Capital Commitments

Future capital commitments consist of contracted commitments, including ship construction contracts, and future expected capital expenditures necessary for ~~operations.~~operations as well as our ship refurbishment projects. As of ~~June 30, 2017,~~March 31, 2018, our anticipated capital expenditures were ~~$0.3~~$1.4 billion for the remainder of ~~2017, $1.4~~2018, $1.3 billion and $0.9 billion for the ~~year ending December 31, 2018 and $1.2 billion for the year~~years ending December 31, 2019 ~~of which we~~and 2020, respectively. We have export credit financing in place for the anticipated expenditures related to ship construction contracts of ~~$48.2 million~~$0.7 billion for the remainder of ~~2017, $0.8 billion for~~ 2018, ~~and~~ $0.6 billion for ~~2019.~~2019 and $0.5 billion for 2020. These future expected capital expenditures will significantly increase our depreciation and amortization expense as we take delivery of the ships.

Project Leonardo will introduce an additional 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~~Each of the four Project Leonardo ships ~~are each~~is approximately 140,000 Gross Tons with approximately 3,300 Berths. We have an Explorer Class Ship, Seven Seas Splendor, on order for delivery in the winter of 2020. This ship is approximately 55,000 Gross Tons and 750 Berths. Norwegian Bliss was delivered on April 19, 2018 (we refer you to Note 12— “Subsequent Events”). We have ~~two~~one additional Breakaway Plus Class ~~Ships~~Ship, Norwegian Encore, on order for delivery in the ~~spring of 2018 and~~ fall of ~~2019, respectively. These ships are~~2019. Each of Norwegian Bliss and Norwegian Encore is approximately 168,000 Gross Tons ~~each~~ with approximately 4,000 ~~Berths each.~~Berths. The combined contract price of these seven ships (exclusive of the option for two additional ships) was approximately ~~€5.5~~€5.6 billion, or ~~$6.3~~$6.9 billion based on the euro/U.S. dollar exchange rate as of ~~June 30, 2017.~~March 31, 2018. We have obtained export credit financing ~~in place that provides financing~~ for the ships which is expected to fund approximately 80% of the contract price of each ~~ship’s contract price.~~ship expected to be delivered through 2025, subject to certain conditions. For ships expected to be delivered after 2023, the contract ~~price is~~prices are subject to adjustment under certain circumstances.

In connection with the contracts to build ~~the~~these ships, we do not anticipate any contractual ~~breaches~~breach or cancellation to occur. However, if any ~~would~~were to occur, it could result in, among other things, the forfeiture of prior deposits or payments made by us, subject to certain refund guarantees, and potential claims and impairment losses which may materially impact our business, financial condition and results of operations.

25
Table of Contents
Capitalized interest for the three ~~and six~~ months ended ~~June 30,~~March 31, 2018 and 2017 was ~~$7.1~~$10.1 million and ~~$15.6 million, respectively, and for the three and six months ended June 30, 2016 was $8.9 million and $16.0~~$8.5 million, respectively, primarily associated with the construction of our newbuild ships.

Off-Balance Sheet Transactions

None.

Contractual Obligations

As of ~~June 30, 2017,~~March 31, 2018, 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
Long-term debt (1) $ 6,816,695 $ 600,500 $ 1,239,407 $ 3,265,429 $ 1,711,359
Operating leases (2) 144,595 15,893 30,692 28,449 69,561
Ship construction contracts (3) 6,070,769 1,103,593 1,366,011 1,078,537 2,522,628
Port facilities (4) 252,159 42,996 61,018 49,043 99,102
Interest (5) 1,054,239 235,590 404,680 243,136 170,833
Other (6) 174,101 52,545 70,832 31,534 19,190
Total $ 14,512,558 $ 2,051,117 $ 3,172,640 $ 4,696,128 $ 4,592,673
25
Total Less than
1 year 1-3 years 3-5 years More than
5 years
Long-term debt (1) $ 6,463,202 772,187 1,248,165 2,753,129 1,689,721
Operating leases (2) 128,428 15,404 28,872 26,206 57,946
Ship construction contracts (3) 6,255,252 1,051,336 1,345,138 1,171,738 2,687,040
Port facilities (4) 306,293 44,108 78,846 55,565 127,774
Interest (5) 935,758 224,407 378,589 188,192 144,570
Other (6)(7) 1,504,037 237,267 436,407 356,971 473,392
Total $ 15,592,970 $ 2,344,709 $ 3,516,017 $ 4,551,801 $ 5,180,443
~~Table of Contents~~

(1) Includes discounts and premiums aggregating $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, 2017.~~March 31, 2018. 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, 2017.~~March 31, 2018.
(6) Future commitments for service, maintenance and other Business Enhancement Capital Expenditure contracts.
(7) The table has been updated to reflect revisions to amounts previously included in the Annual Report on Form 10-K for the year ended December 31, 2017 for the periods less than 3 years in the “Other” category.

The table above does not include ~~$11.1~~$0.5 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

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. Substantially all of our ships and other property and equipment are pledged as collateral for certain of our debt. We believe we were in compliance with these covenants as of ~~June 30, 2017.~~March 31, 2018.
In addition, our existing debt agreements restrict, and any of our future debt arrangements may restrict, among other things, the ability of our subsidiaries, including NCLC, to make distributions and/or pay dividends to NCLH and our ability to pay cash dividends to our shareholders. We are a holding company and depend upon our subsidiaries for their ability to pay distributions to us to finance any dividend or pay any other obligations of NCLH. However, we do not believe that these restrictions have had or are expected to have an impact on our ability to meet any cash obligations.

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

We believe our cash on hand, expected future operating cash inflows, additional available borrowings under our ~~New~~ Revolving Loan Facility and our ability to issue debt securities or additional equity securities, will be sufficient to fund operations, debt payment requirements, capital expenditures and maintain compliance with covenants under our debt agreements over the next twelve-month period. There is no assurance that cash flows from operations and additional financings will be available in the future to fund our future obligations.
26
Table of Contents

Item 3. Quantitative and Qualitative Disclosures About Market Risk

General

We are exposed to market risk attributable to changes in interest rates, foreign currency exchange rates and fuel prices. We attempt to minimize these risks through a combination of our normal operating and financing activities and through the use of derivatives. The financial impacts of these derivative instruments are primarily offset by corresponding changes in the underlying exposures being hedged. We achieve this by closely matching the notional, term and conditions of the derivatives with the underlying risk being hedged. We do not hold or issue derivatives for trading or other speculative purposes. Derivative positions are monitored using techniques including market valuations and sensitivity analyses.
Interest Rate Risk

As of ~~June 30, 2017,~~March 31, 2018, we had interest rate swap agreements to hedge our exposure to interest rate movements and to manage our interest expense. As of ~~June 30, 2017, 61%~~March 31, 2018, 56% of our debt was fixed and ~~39%~~44% 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, 2017~~March 31, 2018 was ~~$250.7~~$218.6 million. Based on our ~~June 30, 2017~~March 31, 2018 outstanding variable rate debt balance, a one percentage point increase in annual LIBOR interest rates would increase our annual interest expense by approximately ~~$26.3~~$28.2 million excluding the effects of capitalization of interest.

26
~~Table of Contents~~
Foreign Currency Exchange Rate Risk

As of ~~June 30, 2017,~~March 31, 2018, 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 ~~€3.5~~€3.3 billion, or ~~$4.0~~$4.1 billion based on the euro/U.S. dollar exchange rate as of ~~June 30, 2017.~~March 31, 2018. We estimate that a 10% change in the euro as of ~~June 30, 2017~~March 31, 2018 would result in a $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 ~~11.5%~~12.2% and ~~11.4%~~12.3% for the three months ended ~~June 30,~~March 31, 2018 and 2017, ~~and 2016, respectively, and 11.9% and 11.8% for the six months ended June 30, 2017 and 2016,~~ respectively. We use fuel derivative agreements to mitigate the financial impact of fluctuations in fuel prices and as of ~~June 30, 2017,~~March 31, 2018, we had hedged approximately ~~76%, 65%~~64%, 48% and 26% of our remaining ~~2017,~~ 2018, 2019 and 2020, respectively, projected metric tons of fuel purchases. We estimate that a 10% increase in our weighted-average fuel price would increase our anticipated ~~2017~~2018 fuel expense by ~~$15.5~~$31.6 million. This increase would be partially offset by an increase in the fair value of our fuel swap agreements of ~~$9.0~~$15.9 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 Interim Chief Financial Officer, the effectiveness of our disclosure controls and procedures, as such term is defined in Rule 13a-15(e) under the Securities Exchange Act of 1934, as amended, as of ~~June 30, 2017.~~March 31, 2018. 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 management’s evaluation, our Chief Executive Officer and Interim Chief Financial Officer concluded that our disclosure controls and procedures were effective as of ~~June 30, 2017~~March 31, 2018 to provide reasonable assurance that the information required to be disclosed by us in the reports we file or submit under the Securities Exchange Act of 1934, as amended, is recorded, processed, summarized and reported within the time periods specified in the rules and forms of the SEC, and that it is accumulated and communicated to our management, including our Chief Executive Officer and Interim Chief Financial Officer, as appropriate, to allow timely decisions regarding required disclosure.

Changes in Internal Control Over Financial Reporting

There have been no changes in our internal control over financial reporting during the quarter ended ~~June 30, 2017~~March 31, 2018 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.

27
Table of Contents

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 ~~2016~~2017 Annual Report on Form 10-K for a discussion of the risk factors that affect our business and financial results. WeThere have been no material changes in our risk factors from those disclosed in our 2017 Annual Report on Form 10-K.We wish to caution the reader that the risk factors discussed in “Item 1A. Risk Factors” in our ~~2016~~2017 Annual Report on Form 10-K, elsewhere in this report or other SEC filings, could cause future results to differ materially from those stated in any forward-looking statements.

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. There2020 (the “Original Repurchase Program”). As of March 31, 2018, there was no ~~share~~cash remaining available for repurchases under the Original Repurchase Program.
Share repurchase activity during the three months ended ~~June 30, 2017, and~~March 31, 2018 was as follows (in thousands):
Period Total Number
of Shares
Purchased as
Part of a
Publicly
Announced
Program Average
Price Paid
per Share Approximate
Dollar Value of
Shares that May
Yet be
Purchased
Under the
Program
(in thousands)
January 1, 2018– January 31, 2018 — $ — $ 263,505
February 1, 2018 – February 28, 2018 — $ — $ 263,505
March 1, 2018 – March 31, 2018 4,722 (1) $ 55.80 $ —
Total for the three months ended March 31, 2018 4,722 $ 55.80 $ —
(1) Represent the repurchase of ~~June 30, 2017, $263.5 million remained available for repurchases~~4,722,312 of our ~~outstanding~~ ordinary shares sold in a Secondary Equity Offering by the Apollo Holders and Genting HK on March 2, 2018.
On April 17, 2018, the Board of Directors of NCLH approved a three-year share repurchase program under which NCLH may purchase up to $1.0 billion of its ordinary shares (the “Repurchase Program”). Pursuant to the Repurchase Program, NCLH may repurchase its ordinary shares from time to time, in amounts, at prices and at such times as it deems appropriate, subject to market conditions and other considerations. Repurchases under the Repurchase Program may take place in the open market or in privately negotiated transactions, including structured and derivative transactions such as accelerated share repurchase ~~program.~~transactions and may be made under a Rule 10b5-1 plan.

Item 5. Other Information

None.

28
Table of Contents
Item 6. Exhibits

~~2.1~~ 10.1* Amendment No. 15, dated March 1, 2018, to Office Lease Agreement, ~~and Plan of Merger,~~ dated December 1, 2006, as ~~of September 2, 2014,~~amended, by and ~~among Prestige Cruises International, Inc., Norwegian Cruise Line Holdings~~between SPUS7 Miami ACC, LP and NCL (Bahamas) Ltd.~~, Portland Merger Sub, Inc.~~+
10.2* Transition, Release 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~~Consulting Agreement ~~and Plan of Merger, dated as of October 6, 2014,~~ by and ~~among Prestige Cruises International, Inc., Norwegian Cruise Line Holdings~~between NCL (Bahamas) 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))~~Wendy A. Beck, dated February 2, 2018†
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~~Interim Chief Financial Officer and Senior Vice President, ~~and Chief Financial Officer~~Finance 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~~Interim Chief Financial Officer and Senior Vice President, ~~and Chief Financial Officer~~Finance 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, 2017,~~March 31, 2018, formatted in Extensible Business Reporting Language (XBRL), as follows:

(i) the Consolidated Statements of Operations for the three ~~and six~~ months ended ~~June 30, 2017~~March 31, 2018 and ~~2016;~~2017;

28
~~Table of Contents~~
(ii) the Consolidated Statements of Comprehensive Income for the three ~~and six~~ months ended ~~June 30, 2017~~March 31, 2018 and ~~2016;~~2017;
(iii) the Consolidated Balance Sheets as of ~~June 30, 2017~~March 31, 2018 and December 31, ~~2016;~~2017;
(iv) the Consolidated Statements of Cash Flows for the ~~six~~three months ended ~~June 30, 2017~~March 31, 2018 and ~~2016;~~2017;
(v) the Consolidated Statements of Changes in Shareholders’ Equity for the ~~six~~three months ended ~~June 30, 2017~~March 31, 2018 and ~~2016;~~2017; and
(vi) the Notes to the Consolidated Financial Statements, tagged in summary and detail.

* Filed herewith.
** Furnished herewith.
† Management contract or compensatory plan.
+ 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.

29
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~~MARK A. ~~BECK~~ KEMPA
Name: ~~Wendy~~Mark A. ~~Beck~~Kempa
Title: ~~Executive~~Interim Chief Financial Officer and Senior Vice President, ~~and Chief Financial~~
~~Officer~~Finance
(Principal Financial Officer)

Dated: ~~August 9, 2017~~May 7, 2018

30

		Page
PART I. FINANCIAL INFORMATION

Item 1.	Financial Statements	1

Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	1517

Item 3.	Quantitative and Qualitative Disclosures About Market Risk	2627

Item 4.	Controls and Procedures	27

PART II. OTHER INFORMATION

Item 1.	Legal Proceedings	28

Item 1A.	Risk Factors	28

Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	28

Item 5.	Other Information	28

Item 6.	Exhibits	2829

SIGNATURES		30

	As reported		Adjustments			Balances without adoption of Topic 606
Prepaid expenses and other assets	$	337,441	$	(68,230	)	$	269,211
Total assets		14,484,985		(68,230	)		14,416,755
Advance ticket sales		1,720,505		(68,230	)		1,652,275
Total liabilities and shareholders’ equity	$	14,484,985	$	(68,230	)	$	14,416,755

	June 30, 2017									March 31, 2018
	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	$	(51,730	)	$	68,270		6.0	$	120,000	$	(73,088	)	$	46,912		6.0
Licenses		3,368		(1,171	)		2,197		5.6		3,368		(1,883	)		1,485		5.6
Non-compete agreements		660		(660	)		—		1.0
Total intangible assets subject to amortization	$	124,028	$	(53,561	)	$	70,467			$	123,368	$	(74,971	)	$	48,397
License (Indefinite-lived)	$	4,427

	December 31, 2016									December 31, 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	$	(36,593	)	$	83,407		6.0	$	120,000	$	(66,866	)	$	53,134		6.0
Licenses		3,368		(807	)		2,561		5.6		3,368		(1,601	)		1,767		5.6
Non-compete agreements		660		(495	)		165		1.0		660		(660	)		—		1.0
Total intangible assets subject to amortization	$	124,028	$	(37,895	)	$	86,133			$	124,028	$	(69,127	)	$	54,901
License (Indefinite-lived)	$	4,427

Year ended December 31,	Amortization Expense		Amortization Expense
2018	$	26,163
2019		18,489	$	18,489
2020		9,906		9,906
2021		75		75
2022		75		75
2023				75

	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	$	(314,473	)	$	(307,618	)	$	(6,855	)	$	26,966		$	33,861		$	(6,895	)
Current period other comprehensive income before reclassifications		124,236			124,236			—			48,576			48,576			—
Amounts reclassified into earnings		20,158			19,949	(1)		209	(2)		(1,680	)		(1,785	)(1)		105	(2)
Accumulated other comprehensive income (loss) at end of period	$	(170,079	)	$	(163,433	)(3)	$	(6,646	)	$	73,862		$	80,652	(3)	$	(6,790	)

Shareholder	Number of Shares		Percentage Ownership
Apollo Holders		15,728,782		7.0	%
Genting HK		3,148,307		1.4	%

~~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, 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

June 30, 2017	Gross Amounts		Gross Amounts Offset			Total Net Amounts		Gross Amounts Not Offset			Net Amounts
March 31, 2018													Gross Amounts		Gross Amounts Offset			Total Net Amounts		Gross Amounts Not Offset			Net Amounts
Assets	$	49,079	$	(144	)	$	48,935	$	(40,103	)	$	8,832	$	223,392	$	(7,312	)	$	216,080	$	(117,233	)	$	98,847
Liabilities		83,605		(9,452	)		74,153		(3,609	)		70,544		6,352		(190	)		6,162		(332	)		5,830

Derivatives	Amount of gain or (loss) recognized in other comprehensive income						Location of gain or (loss) reclassified from accumulated other comprehensive income (loss) into income	Amount of gain or (loss) reclassified from accumulated other comprehensive income (loss) into income
	Three Months Ended March 31, 2018			Three Months Ended March 31, 2017				Three Months Ended March 31, 2018			Three Months Ended March 31, 2017
Fuel contracts	$	(6,012	)	$	(26,203	)	Fuel	$	3,525		$	(8,003	)
Foreign currency contracts		54,493			18,636		Depreciation and amortization expense		(1,159	)		(857	)
Interest rate contracts		95			284		Interest expense, net		(581	)		(845	)
Total gain (loss) recognized in other comprehensive income	$	48,576		$	(7,283	)		$	1,785		$	(9,705	)

	For the three months ended March 31, 2018								For the three months ended March 31, 2017
	Fuel		Depreciation and amortization			Interest expense, net			Fuel			Depreciation and amortization			Interest expense, net
Total amounts of income and expense line items presented in the consolidated statements of operations in which the effects of cash flow hedges are recorded	$	93,431	$	131,244		$	59,698		$	88,886		$	119,205		$	52,960

The effects of cash flow hedges:
Fuel contracts:
Amount of gain or (loss) reclassified from accumulated other comprehensive income (loss) into income		3,525		—			—			(8,003	)		—			—
Foreign currency contracts:
Amount of gain or (loss) reclassified from accumulated other comprehensive income (loss) into income		—		(1,159	)		—			—			(857	)		—
Interest rate contracts:
Amount of gain or (loss) reclassified from accumulated other comprehensive income (loss) into income		—		—			(581	)		—			—			(845	)

	Number of Share Option Awards								Weighted-Average Exercise Price						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 January 1, 2017		7,775,058			432,978			208,333	$	48.04	$	23.86	$	59.43		7.81	$	35,429
Outstanding as of January 1, 2018																				6,580,898			373,969			208,333	$	49.18	$	31.39	$	59.43		6.99	$	50,021
Granted		—			156,249			—		—		59.43		—		—		—		—			208,335			—		—		59.43		—		—		—
Exercised		(383,203	)		(59,218	)		—		28.33		19.00		—		—		—		(117,805	)		—			—		39.27		—		—		—		—
Forfeited and cancelled		(325,030	)		(93,749	)		—		55.03		59.43		—		—		—		(60,083	)		(52,084	)		—		52.08		59.43		—		—		—
Outstanding as of June 30, 2017		7,066,825			436,260			208,333	$	48.79	$	29.62	$	59.43		7.44	$	61,204
Outstanding as of March 31, 2018																				6,403,010			530,220			208,333	$	49.34	$	39.65	$	59.43		6.77	$	47,171

	Number of Time-Based Awards			Weighted- Average Grant Date Fair Value		Number of Time-Based Awards			Weighted- Average Grant Date Fair Value
Non-vested as of January 1, 2017		16,872		$	7.63
Non-vested as of January 1, 2018							858		$	58.33
Granted		—			—		—			—
Vested		(11,338	)		5.53		(429	)		58.25
Forfeited or expired		—			—		—			—
Non-vested and expected to vest as of June 30, 2017		5,534		$	11.94
Non-vested and expected to vest as of March 31, 2018							429		$	58.41

	Number of Time-Based Awards			Weighted- Average Grant Date Fair Value		Number of Performance- Based Awards			Weighted- Average Grant Date Fair Value		Number of Market- Based Awards		Weighted- Average Grant Date Fair Value		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, 2017		1,305,335		$	50.38		—		$	—		50,000	$	59.43
Non-vested as of January 1, 2018																2,555,477		$	50.86		—		$	—		50,000	$	59.43
Granted		1,750,612			50.96		37,500			49.76		—		—		1,606,156			56.74		843,998			56.58		—		—
Vested		(440,508	)		50.67		(15,000	)		49.76		—		—		(938,637	)		56.68		—
Forfeited or expired		(36,507	)		50.61		(22,500	)		49.76		—		—		(39,872	)		52.72		(12,500	)		59.43		—		—
Non-vested and expected to vest as of June 30, 2017		2,578,932			50.72		—			—		50,000		59.43
Non-vested and expected to vest as of March 31, 2018																3,183,124		$	53.90		831,498		$	55.94		50,000	$	59.43

	•	~~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;

	•·	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;

	•	~~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;

	•	~~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;

	•	~~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

•	Net income and diluted EPS was $103.2 million and $0.45, respectively, compared to $61.9 million and $0.27, respectively.

•	Operating income was $167.1 million compared to $119.7 million.

	Three Months Ended March 31,
	2018		2018 Constant Currency		2017
Passenger ticket revenue	$	889,866	$	876,793	$	786,694
Onboard and other revenue		403,537		403,537		364,087
Total revenue		1,293,403		1,280,330		1,150,781
Less:
Commissions, transportation and other expense		218,340		215,291		194,140
Onboard and other expense		70,688		70,688		68,411
Net Revenue		1,004,375		994,351		888,230
Capacity Days		4,466,471		4,466,471		4,030,616
Gross Yield	$	289.58	$	286.65	$	285.51
Net Yield	$	224.87	$	222.63	$	220.37

	~~(4)~~(5)	Expenses related to the Acquisition of Prestige, which are included in marketing, general and administrative expense.
	~~(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 passenger ticket revenue.

	(7)	~~Losses and net gains for the fair value adjustment of a foreign exchange collar which does not receive hedge accounting and losses due~~Primarily related to ~~the dedesignation~~reimbursements of certain ~~fuel swaps. These adjustments are included in other income (expense), net.~~
	~~(8)~~	~~Expenses primarily related to the write-off of deferred financing fees related to the refinancing of certain credit facilities, which are included in interest expense, net.~~
	~~(9)~~	~~Expenses primarily related to a~~ legal ~~settlement,~~costs, which are included in marketing, general and administrative expense.

~~(6)~~	~~Deferred revenue fair value adjustments~~(7)	Primarily related to ~~the Acquisition~~reimbursements of ~~Prestige that were made pursuant to business combination accounting rules, which are primarily included in passenger ticket revenue.~~
~~(7)~~	~~Expenses primarily related to a~~certain legal ~~settlement,~~costs, which are included in marketing, general and administrative expense.

	Total		Less than 1 year		1-3 years		3-5 years		More than 5 years
Long-term debt (1)	$	6,816,695	$	600,500	$	1,239,407	$	3,265,429	$	1,711,359
Operating leases (2)		144,595		15,893		30,692		28,449		69,561
Ship construction contracts (3)		6,070,769		1,103,593		1,366,011		1,078,537		2,522,628
Port facilities (4)		252,159		42,996		61,018		49,043		99,102
Interest (5)		1,054,239		235,590		404,680		243,136		170,833
Other (6)		174,101		52,545		70,832		31,534		19,190
Total	$	14,512,558	$	2,051,117	$	3,172,640	$	4,696,128	$	4,592,673

Period	Total Number of Shares Purchased as Part of a Publicly Announced Program			Average Price Paid per Share		Approximate Dollar Value of Shares that May Yet be Purchased Under the Program (in thousands)
January 1, 2018– January 31, 2018		—		$	—	$	263,505
February 1, 2018 – February 28, 2018		—		$	—	$	263,505
March 1, 2018 – March 31, 2018		4,722	(1)	$	55.80	$	—
Total for the three months ended March 31, 2018		4,722		$	55.80	$	—

	10.2*	Transition, Release 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~~Consulting Agreement ~~and Plan of Merger, dated as of October 6, 2014,~~ by and ~~among Prestige Cruises International, Inc., Norwegian Cruise Line Holdings~~between NCL (Bahamas) 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))~~Wendy A. Beck, dated February 2, 2018†


31.1*	Certification of the President and Chief Executive Officer pursuant to Rule 13a-14(a) of the Securities Exchange Act of 1934