(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.

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 ~~224,689,497~~215,395,406 ordinary shares outstanding as of ~~May 1, 2018.~~April 30, 2019.

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

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

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

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

We are a leading global cruise company which operates the Norwegian Cruise Line, Oceania Cruises and Regent Seven Seas Cruises brands. As of March 31, ~~2018,~~2019, we had 2526 ships with approximately ~~50,400~~54,400 Berths ~~excluding Norwegian Bliss, which was delivered on April 19, 2018 (we refer you to Note 12— “Subsequent Events”). We plan to introduce six~~and had orders for 11 additional ships ~~through 2025 and we have an option~~ to ~~introduce two additional ships for delivery in 2026 and~~be delivered through 2027, subject to certain conditions.

Norwegian Encore is on order for delivery in the fall of 2019. We ~~also~~ have antwo Explorer Class ~~Ship,~~Ships, Seven Seas Splendor and one additional ship, on order for delivery in the winter of ~~2020.~~2020 and fall of 2023, respectively. We have two Allura Class Ships on order for delivery in the winter of 2022 and spring of 2025. Project Leonardo will introduce an additional ~~four~~six ships with expected delivery dates from 2022 through ~~2025.~~2027. These additions to our fleet ~~(exclusive of the option for two additional ships)~~ will increase our total Berths to approximately ~~72,300.~~82,000.

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

Our operations are seasonal and results for interim periods are not necessarily indicative of the results for the entire fiscal year. Historically, demand for cruises has been strongest during the Northern Hemisphere’s summer months. The interim consolidated financial statements should be read in conjunction with the audited consolidated financial statements for the year ended December 31, ~~2017,~~2018, which are included in our most recent Annual Report on Form 10-K filed with the ~~Securities and Exchange Commission.~~SEC.

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

For the three months ended March 31, ~~2018~~2019 and ~~2017,~~2018, a total of ~~3.4~~5.5 million and ~~7.5~~3.4 million shares, respectively, have been excluded from diluted weighted-average shares outstanding because the effect of including them would have been anti-dilutive.

The majority of our transactions are settled in U.S. dollars. We translate assets and liabilities of our foreign subsidiaries at exchange rates in effect at the balance sheet date. Gains or losses resulting from transactions denominated in other currencies are recognized in our consolidated statements of operations within other income (expense), net and such losses were approximately $1.0 million and $1.8 million for the three months ended March 31, 2019 and 2018, respectively.

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.

In August 2018, the Financial Accounting Standards Board (“FASB”) issued Accounting Standard Update (“ASU”) No. 2018-15, Intangibles—Goodwill and Other—Internal-Use Software (Subtopic 350-40): Customer’s Accounting for Implementation Costs Incurred in a Cloud Computing Arrangement That is a Service Contract (a consensus of the FAS Emerging Issues Task Force), which is designed to align the accounting for costs of implementing a cloud computing service arrangement, regardless of whether the hosting arrangement conveys a license to the hosted software. For hosting arrangements considered to be a service contract, the update requires that the criteria for capitalization of developing or obtaining internal-use software shall be applied. The update is effective for annual periods, including interim periods within those annual periods, beginning after December 15, 2020, with early adoption permitted, including adoption in any interim period. A prospective or retrospective transition approach must be elected. The Company is evaluating the impact of this guidance on the Company’s consolidated financial statements.

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

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

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.

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.

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.

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.

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

Receivables from customers are included within accounts receivables, net. As of March 31, ~~2018~~2019 and ~~January 1,~~December 31, 2018, our receivables from customers were ~~$12.2 million and $13.8 million, respectively.~~$17.3 million.

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~~2019, and ~~January 1,~~December 31, 2018, our contract liabilities were ~~$1.2~~$1.5 billion and ~~$1.0~~$1.2 billion, respectively. Of the amounts included within contract liabilities, approximately ~~50%~~60% were refundable in accordance with our cancellation policies. For the three months ended March 31, ~~2018, $0.8~~2019, $1.0 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”).

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.

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.

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):

~~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):~~

The majority of our transactions are settled in U.S. dollars. We translate assets and liabilities of our foreign subsidiaries at exchange rates in effect at the balance sheet date. Gains or losses resulting from transactions denominated in other currencies are recognized in our consolidated statements of operations within other income (expense), net and such losses were approximately $1.8 million and $2.8 million for the three months ended March 31, 2018 and 2017, respectively.

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.

In January 2017, the Financial Accounting Standards Board issued 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 will evaluate the impact of this guidance to our consolidated financial statements upon adoption of the guidance.

On January 1, 2018, we adopted ASU No. 2016-16 which requires companies to recognize the income-tax consequences of an intra-entity transfer of an asset other than inventory when the transfer occurs, rather than when the asset has been sold to an outside party. This adoption resulted in 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 flow hedges, to accumulated other comprehensive income (loss) with a corresponding adjustment to the opening balance of retained earnings, which was not material to our financial statements (we refer you to Note 7. “Fair Value Measurements and Derivatives”).

The 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):

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

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

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

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

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

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

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

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

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

As of March 31, 2019, maturities of lease liabilities, weighted-average remaining lease terms and discount rates for our leases were as follows (in thousands, except lease terms and discount rates):

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

We have multiple agreements that have been executed where the lease term has not commenced as of March 31, 2019. These are primarily related to our rights to use certain port facilities currently under construction. Although we may have provided design input, construction management services, or funding related to these assets, we have determined that we do not control these assets during the period of construction. These port facilities are expected to open for use during 2020 and include undiscounted minimum annual guarantees of approximately $806.7 million of passenger fees.

Accumulated other comprehensive income (loss) for the three months ended March 31, 2019 was as follows (in thousands):

Accumulated other comprehensive income (loss) for the three months ended March 31, 2018 was as follows (in thousands):

~~Accumulated other comprehensive income (loss) for the three months ended March 31, 2017 was as follows (in thousands):~~

Property and equipment, net increased ~~$45.1~~$61.8 million for the three months ended March 31, ~~2018~~2019 primarily due to ships under construction and ship improvement projects. ~~Norwegian Bliss was delivered on April 19, 2018 (we refer you to Note 12— “Subsequent Events”).~~

~~In March 2018,~~NCLC entered into a Fourth Amended and Restated Credit Agreement, dated as ~~part~~ of January 2, 2019, with a ~~public equity offering~~subsidiary of NCLC, as co-borrower and JPMorgan Chase Bank, N.A., as administrative agent, and certain other lenders. This revised facility, among other things, (a) reduced the pricing of our ~~ordinary shares owned by~~existing $875 million Revolving Loan Facility, (b) reduced the ~~Apollo Holders~~pricing and ~~Genting HK, we repurchased 4,722,312~~increased the approximately $1.3 billion principal amount outstanding under the term loan A facility to $1.6 billion, and (c) extended the maturity dates for our Revolving Loan Facility and our term loan A facility to 2024, subject to certain conditions. We used the proceeds from the increase in our term loan A facility to prepay all of the then outstanding amounts under our ~~ordinary shares sold~~term loan B facility. The transaction resulted in ~~the offering for approximately $263.5 million pursuant to our then existing share repurchase program. As~~a loss on extinguishment of ~~March 31, 2018, the ownership percentages~~debt of ~~NCLH’s ordinary shares were as follows:~~ $2.9 million.

The applicable margin under the new term loan A facility and new Revolving Loan Facility is determined by reference to a total leverage ratio, with an applicable margin of between 1.75% and 1.00% with respect to Eurocurrency loans and between 0.75% and 0.00% with respect to base rate loans. The current margin for borrowings under the new term loan A facility and new Revolving Loan Facility is 1.50% with respect to Eurocurrency borrowings. In addition to paying interest on outstanding principal under the borrowings, we are obligated to pay a quarterly commitment fee at a rate determined by reference to a total net leverage ratio, with a maximum commitment fee of 0.30%.

NCLC entered into a $230 million credit agreement, dated as of January 10, 2019, with Nordea Bank ABP, New York Branch, as administrative agent, and certain other lenders. The proceeds of this term loan will be used for general corporate purposes, including to finance the pre-delivery installments due to the builder under the Company’s shipbuilding contracts. The interest rate is LIBOR plus a margin of 1.00%. The term loan matures on January 10, 2021; however, NCLC may elect to extend the maturity date to January 10, 2022 provided certain conditions are met. Should NCLC elect to extend the maturity date the interest rate will be LIBOR plus a margin of 1.10% for the third year.

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).

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.~~

We are exposed to market risk attributable to changes in interest rates, foreign currency exchange rates and fuel prices. We attempt to minimize these risks through a combination of our normal operating and financing activities and through the use of derivatives. We assess whether derivatives used in hedging transactions are “highly effective” in offsetting changes in the cash flow of our hedged forecasted transactions. We use regression analysis for this hedge relationship and high effectiveness is achieved when a statistically valid relationship reflects a high degree of offset and correlation between the fair values of the derivative and the hedged forecasted transaction. Cash flows from the derivatives are classified in the same category as the cash flows from the underlying hedged transaction. If it is determined that the hedged forecasted transaction is no longer probable of occurring, then the amount recognized in accumulated other comprehensive income (loss) is released to earnings. There are no amounts excluded from the assessment of hedge effectiveness and there are no credit-risk-related contingent features in our derivative agreements. We monitor concentrations of credit risk associated with financial and other institutions with which we conduct significant business. Credit risk, including but not limited to counterparty non-performance under derivatives, is not considered significant, as we primarily conduct business with large, well-established financial institutions ~~that~~with which we have established relationships, ~~with~~ and ~~that~~which have credit risks acceptable to us, or the credit risk is spread out among ~~a large number of~~many creditors. We do not anticipate non-performance by any of our significant counterparties.

As of March 31, ~~2018,~~2019, we had fuel swaps ~~maturing through December 31, 2020~~and collars, which are used to mitigate the financial impact of volatility of fuel prices pertaining to approximately ~~1.1~~1.2 million metric tons of our projected fuel ~~purchases.~~purchases, maturing through December 31, 2021.

As of March 31, ~~2018,~~2019, we had fuel swaps which were not designated as cash flow hedges. Due to a change in our choice of hedged fuel type, we entered into fuel contracts to sell approximately 29 thousand metric tons of fuel and immediately dedesignated fuel contracts to buy approximately 29 thousand metric tons of the same fuel. The agreements mature through December 31, 2019.

As of March 31, 2019, we had foreign currency forward contracts, matured foreign currency options and matured foreign currency collars which are used to mitigate the financial impact of volatility in foreign currency exchange rates related to our ship construction contracts denominated in euros. The notional amount of our foreign currency forward contracts was ~~€1.9~~€2.4 billion, or ~~$2.3~~$2.7 billion based on the euro/U.S. dollar exchange rate as of March 31, ~~2018.~~2019.

As of March 31, ~~2018,~~2019, we had interest rate swap agreements which are used to hedge our exposure to interest rate movements and to manage our interest expense. The notional amount of our outstanding debt associated with the interest rate swap agreements was ~~$218.6 million~~$1.2 billion as of March 31, ~~2018.~~2019.

The ~~following table sets forth our~~ derivatives measured at fair value and ~~discloses~~ the respective location in the consolidated balance ~~sheet location~~sheets include the following (in thousands):

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):

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

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

As of March 31, ~~2018~~2019, and December 31, ~~2017,~~2018, the fair value of our long-term debt, including the current portion, was ~~$6,457.9~~$6,686.1 million and ~~$6,448.6~~$6,601.9 million, respectively, which was ~~$5.8~~$30.3 million ~~lower~~higher and ~~$23.5~~$8.4 million ~~higher,~~lower, respectively, than the carrying values. The difference between the fair value and carrying value of our long-term debt is due to our fixed and variable rate debt obligations carrying interest rates that are above or below market rates at the measurement dates. The fair value of our long-term debt was calculated based on estimated rates for the same or similar instruments with similar terms and remaining maturities, ~~resulting in~~considered to be Level 2 inputs in the fair value hierarchy. 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.~~

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

The following is a summary of option activity under NCLH’s Amended and Restated 2013 Performance Incentive Plan for the three months ended March 31, ~~2018:~~2019:

The following is a summary of restricted NCLH ordinary share activity for the three months ended March 31, ~~2018:~~2019:

On March 1, ~~2018,~~2019, NCLH granted ~~1.6~~1.9 million time-based restricted share unit awards to our employees which vest ~~equally~~in substantially equal annual installments over three years. Additionally, on ~~February 27, 2018 and~~ March 1, ~~2018,~~2019, 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.~~targets established for the 2019 and 2020 calendar years and the satisfaction of an additional time-based vesting requirement that generally requires continued employment through March 1, 2022.

The following is a summary of restricted share unit activity for the three months ended March 31, ~~2018:~~2019:

The share-based compensation expense for the three months ended March 31, 2019 was $27.0 million of which $23.2 million was recorded in marketing, general and administrative expense and $3.8 million was recorded in payroll and related expense. The share-based compensation expense for the three months ended March 31, 2018 was $28.1 million of which $24.7 million was recorded in marketing, general and administrative expense and $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.

Project Leonardo will introduce an additional ~~four~~six 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. Each of the four Project Leonardo ships iseach approximately 140,000 Gross Tons with approximately 3,300 ~~Berths.~~Berths, with expected delivery dates from 2022 through 2027, subject to certain conditions. 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 one additionala Breakaway Plus Class Ship, Norwegian Encore, with approximately 168,000 Gross Tons and 4,000 Berths, on order for delivery in the fall of 2019. For the Regent brand, we have orders for two Explorer Class Ships, Seven Seas Splendor and an additional ship, to be delivered in 2020 and 2023, respectively. Each of ~~Norwegian Bliss and Norwegian Encore is~~the Explorer Class Ships will be approximately ~~168,000~~55,000 Gross Tons ~~with~~and 750 Berths. For the Oceania Cruises brand, we have orders for two Allura Class Ships to be delivered in 2022 and 2025. Each of the Allura Class Ships will be approximately ~~4,000~~67,000 Gross Tons and 1,200 Berths.

The combined contract ~~price of these seven ships (exclusive~~prices of the ~~option~~11 ships on order for ~~two additional ships)~~delivery was approximately ~~€5.6~~€7.9 billion, or ~~$6.9~~$8.9 billion based on the euro/U.S. dollar exchange rate as of March 31, ~~2018.~~2019. We have obtained export credit financing ~~for the ships~~ which is expected to fund approximately 80% of the contract price of each ship, ~~expected to be delivered through 2025,~~ subject to certain conditions. ~~For ships expected to be delivered after 2023, the contract prices are subject to adjustment under certain circumstances.~~

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

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.

For the three months ended March 31, ~~2018,~~2019, other income (expense), net was a ~~$1.7~~$0.4 million expense, primarily due to foreign currency exchange losses. For the three months ended March 31, ~~2017,~~2018, the ~~$2.8~~$1.7 million expense was due to foreign currency exchange ~~and fuel swap derivative~~ losses.

For the three months ended March 31, 2019, we had an income tax benefit of $33.8 million. During 2018, we implemented certain tax restructuring strategies that created our ability to utilize the net operating loss carryforwards of Prestige, for which we had previously provided a full valuation allowance. As disclosed in our Annual Report on Form 10-K, we engaged in a section 382 study to determine the amount of the Prestige net operating loss carryforwards that could be utilized against future taxable income. In March of 2019, we completed this study resulting in a tax benefit of $35.7 million in connection with the reversal of substantially all of the valuation allowance.

For the three months ended March 31, ~~2018~~2019 and ~~2017,~~2018, we had non-cash investing activities in connection with property and equipment of $9.8 million and $25.7 million, ~~and $23.0 million,~~ respectively.

On April 19, 2018, we took delivery of Norwegian Bliss. To finance the payment due upon delivery, we had export financing in place for 80% of the contract price. The associated $850.0 million term loan bears interest at 3.92% with a maturity date of 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.

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

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

The 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.

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

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

•~~Acquisition of Prestige.~~ ~~In November 2014, we acquired Prestige in a cash and stock transaction 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.~~

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

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

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

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

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

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

•~~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.~~

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

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

•~~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.~~

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

•~~Revolving Loan Facility~~~~. $875.0 million senior secured revolving credit facility maturing on June 6, 2021.~~

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

•~~Secondary Equity Offering(s).~~~~Secondary public offering(s) of NCLH’s ordinary shares in 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.~~

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

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

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

In addition, Adjusted Net Income 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 Income and Adjusted EPS may not be indicative of future adjustments or results. For example, for the three months ended March 31, 2018, we incurred $0.5 million related to Secondary Equity Offering expenses. We included this as an adjustment in the reconciliation of Adjusted Net Income since the offering expenses are 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 comparative period presented within this Form 10-Q.

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

~~Revenue~~We categorize revenue from our cruise and cruise-related activities ~~are categorized by us~~ as either “passenger ~~ticket revenue” and~~ticket” revenue or “onboard and ~~other~~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 ~~casino,~~gaming, beverage sales, shore excursions, specialty dining, retail sales, spa services and photo services. Our onboard revenue is derived from onboard activities we perform directly or that are performed by independent concessionaires, from which we receive a share of their revenue.

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, ~~2017~~2018 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, ~~2017.~~2018.

Three months ended March 31, ~~2018~~2019 (“~~2018”~~2019”) compared to three months ended March 31, ~~2017~~2018 (“~~2017”~~2018”)

~~Adjusted EBITDA improved 25.3% to $326.4 million compared to $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.

Results of Operations

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

Three Months Ended
March 31,
2018 2017
Revenue
Passenger ticket 68.8 % 68.4 %
Onboard and other 31.2 % 31.6 %
Total revenue 100.0 % 100.0 %
Cruise operating expense
Commissions, transportation and other 16.9 % 16.9 %
Onboard and other 5.5 % 5.9 %
Payroll and related 16.2 % 16.7 %
Fuel 7.2 % 7.7 %
Food 3.9 % 4.0 %
Other 9.7 % 11.3 %
Total cruise operating expense 59.4 % 62.5 %
Other operating expense
Marketing, general and administrative 17.6 % 16.7 %
Depreciation and amortization 10.1 % 10.4 %
Total other operating expense 27.7 % 27.1 %
Operating income 12.9 % 10.4 %
Non-operating income (expense)
Interest expense, net (4.6 )% (4.6 )%
Other income (expense), net (0.1 )% (0.2 )%
Total non-operating income (expense) (4.7 )% (4.8 )%
Net income before income taxes 8.2 % 5.6 %
Income tax expense (0.2 )% (0.2 )%
Net income 8.0 % 5.4 %

~~Table of Contents~~

	Three Months Ended March 31,
	2019			2018
Revenue
Passenger ticket		69.3	%		68.8	%
Onboard and other		30.7	%		31.2	%
Total revenue		100.0	%		100.0	%
Cruise operating expense
Commissions, transportation and other		16.3	%		16.9	%
Onboard and other		5.7	%		5.5	%
Payroll and related		15.9	%		16.2	%
Fuel		7.0	%		7.2	%
Food		3.9	%		3.9	%
Other		10.1	%		9.7	%
Total cruise operating expense		58.9	%		59.4	%
Other operating expense
Marketing, general and administrative		17.7	%		17.6	%
Depreciation and amortization		12.1	%		10.1	%
Total other operating expense		29.8	%		27.7	%
Operating income		11.3	%		12.9	%
Non-operating income (expense)
Interest expense, net		(5.3	)%		(4.6	)%
Other income (expense), net		(0.0	)%		(0.1	)%
Total non-operating income (expense)		(5.3	)%		(4.7	)%
Net income before income taxes		6.0	%		8.2	%
Income tax benefit (expense)		2.4	%		(0.2	)%
Net income		8.4	%		8.0	%

The following table sets forth selected statistical information:

	Three Months Ended March 31,						Three Months Ended March 31,
	2018			2017			2019			2018
Passengers carried		617,440			528,354			645,052			617,440
Passenger Cruise Days		4,724,604			4,230,518			4,975,440			4,724,604
Capacity Days		4,466,471			4,030,616			4,716,929			4,466,471
Occupancy Percentage		105.8	%		105.0	%		105.5	%		105.8	%

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

	Three Months Ended March 31,						Three Months Ended March 31,
	2018		2018 Constant Currency		2017		2019		2019 Constant Currency		2018
Passenger ticket revenue	$	889,866	$	876,793	$	786,694	$	973,273	$	984,690	$	889,866
Onboard and other revenue		403,537		403,537		364,087		430,357		430,357		403,537
Total revenue		1,293,403		1,280,330		1,150,781		1,403,630		1,415,047		1,293,403
Less:
Commissions, transportation and other expense		218,340		215,291		194,140		229,264		231,613		218,340
Onboard and other expense		70,688		70,688		68,411		79,413		79,413		70,688
Net Revenue		1,004,375		994,351		888,230		1,094,953		1,104,021		1,004,375
Capacity Days		4,466,471		4,466,471		4,030,616		4,716,929		4,716,929		4,466,471
Gross Yield	$	289.58	$	286.65	$	285.51	$	297.57	$	299.99	$	289.58
Net Yield	$	224.87	$	222.63	$	220.37	$	232.13	$	234.06	$	224.87

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 March 31,								Three Months Ended March 31,
	2018			2018 Constant Currency			2017		2019		2019 Constant Currency		2018
Total cruise operating expense	$	768,091		$	763,593		$	719,798	$	826,651	$	830,020	$	768,091
Marketing, general and administrative expense		227,015			224,692			192,044		248,942		251,070		227,015
Gross Cruise Cost		995,106			988,285			911,842		1,075,593		1,081,090		995,106
Less:
Commissions, transportation and other expense		218,340			215,291			194,140		229,264		231,613		218,340
Onboard and other expense		70,688			70,688			68,411		79,413		79,413		70,688
Net Cruise Cost		706,078			702,306			649,291		766,916		770,064		706,078
Less: Fuel expense		93,431			93,431			88,886		98,253		98,253		93,431
Net Cruise Cost Excluding Fuel		612,647			608,875			560,405		668,663		671,811		612,647
Less Non-GAAP Adjustments:
Non-cash deferred compensation (1)		542			542			823		534		534		542
Non-cash share-based compensation (2)		28,102			28,102			18,203		26,999		26,999		28,102
Secondary Equity Offering expenses (3)		482			482			—		—		—		482
Severance payments and other fees (4)		—			—			2,399
Acquisition of Prestige expenses (5)		—			—			250
Other (6)		(992	)		(992	)		—
Redeployment of Norwegian Joy (4)										5,016		5,016		—
Other (5)										—		—		(992	)
Adjusted Net Cruise Cost Excluding Fuel	$	584,513		$	580,741		$	538,730	$	636,114	$	639,262	$	584,513
Capacity Days		4,466,471			4,466,471			4,030,616		4,716,929		4,716,929		4,466,471
Gross Cruise Cost per Capacity Day	$	222.79		$	221.27		$	226.23	$	228.03	$	229.19	$	222.79
Net Cruise Cost per Capacity Day	$	158.08		$	157.24		$	161.09	$	162.59	$	163.26	$	158.08
Net Cruise Cost Excluding Fuel per Capacity Day	$	137.17		$	136.32		$	139.04	$	141.76	$	142.43	$	137.17
Adjusted Net Cruise Cost Excluding Fuel per Capacity Day	$	130.87		$	130.02		$	133.66	$	134.86	$	135.53	$	130.87

~~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 fees~~Expenses related to ~~restructuring costs~~the redeployment of Norwegian Joy from Asia to the U.S. and ~~other severance arrangements,~~the closing of the Shanghai office, which are included in other cruise operating expense and marketing, general and administrative expense.

~~(5)~~26

~~Expenses related to the Acquisition of Prestige, which are included in marketing, general and administrative expense.~~

~~(6)~~(5)

Primarily related to reimbursements of certain legal 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 March 31,					Three Months Ended March 31,
	2018			2017		2019		2018
Net income	$	103,155		$	61,910	$	118,157	$	103,155
Non-GAAP Adjustments:
Non-cash deferred compensation (1)		863			823		879		863
Non-cash share-based compensation (2)		28,102			18,203		26,999		28,102
Secondary Equity Offering expenses (3)		482			—		—		482
Severance payments and other fees (4)		—			2,399
Acquisition of Prestige expenses (5)		—			250
Amortization of intangible assets (6)		6,222			7,568
Extinguishment and modification of debt (4)							6,093		—
Amortization of intangible assets (5)							4,603		6,222
Redeployment of Norwegian Joy (6)							25,028		—
Other (7)		(992	)		—		—		(992	)
Adjusted Net Income	$	137,832		$	91,153	$	181,759	$	137,832
Diluted weighted-average shares outstanding – Net income and Adjusted Net Income		229,187,628			228,555,952		218,873,272		229,187,628
Diluted earnings per share	$	0.45		$	0.27	$	0.54	$	0.45
Adjusted EPS	$	0.60		$	0.40	$	0.83	$	0.60

(1)

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

(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~~Losses on extinguishment of debt and ~~other fees related to restructuring costs and other severance arrangements, which~~modification of debt are included in ~~marketing, general and administrative expense.~~interest expense, net.

(5)

~~Expenses related to the Acquisition of Prestige, which are included in marketing, general and administrative expense.~~

~~(6)~~

Amortization of intangible assets related to the Acquisition of Prestige, which are included in depreciation and amortization expense.

(6)	Expenses related to the redeployment of Norwegian Joy from Asia to the U.S. and the closing of the Shanghai office, which are included in other cruise operating expense, marketing, general and administrative expense and depreciation and amortization expense.
(7)	Primarily related to reimbursements of certain legal costs, which are included in marketing, general and administrative expense.

~~Table of Contents~~

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

	Three Months Ended March 31,					Three Months Ended March 31,
	2018			2017		2019			2018
Net income	$	103,155		$	61,910	$	118,157		$	103,155
Interest expense, net		59,698			52,960		73,503			59,698
Income tax expense		2,534			2,049
Income tax (benefit) expense							(33,798	)		2,534
Depreciation and amortization expense		131,244			119,205		169,741			131,244
EBITDA		296,631			236,124		327,603			296,631
Other (income) expense, net (1)		1,666			2,815		434			1,666
Non-GAAP Adjustments:
Non-cash deferred compensation (2)		542			823		534			542
Non-cash share-based compensation (3)		28,102			18,203		26,999			28,102
Secondary Equity Offering expenses (4)		482			—		—			482
Severance payments and other fees (5)		—			2,399
Acquisition of Prestige expenses (6)		—			250
Other (7)		(992	)		—
Redeployment of Norwegian Joy (5)							5,016			—
Other (6)							—			(992	)
Adjusted EBITDA	$	326,431		$	260,614	$	360,586		$	326,431

(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)

(6)

~~Expenses related to the Acquisition of Prestige, which are included in marketing, general and administrative expense.~~

~~(7)~~

Primarily related to reimbursements of certain legal costs, which are included in marketing, general and administrative expense.

Three months ended March 31, ~~2018~~2019 (“~~2018”~~2019”) compared to three months ended March 31, ~~2017~~2018 (“~~2017”~~2018”)

Revenue

Total revenue increased ~~12.4%~~8.5% to $1.4 billion in 2019 compared to $1.3 billion in ~~2018 compared to $1.2 billion in 2017.~~2018. Gross Yield increased ~~1.4%~~2.8%. Net Revenue increased ~~13.1%~~9.0% to $1.1 billion in 2019 from $1.0 billion in 2018 ~~from $0.9 billion in 2017~~ due to an increase in Capacity Days of ~~10.8%~~5.6% and an increase in Net Yield of ~~2.0%~~3.2%. The increase in Capacity Days was primarily due to Norwegian ~~Joy~~Bliss joining our fleet in the second quarter of ~~2017.~~2018. The increase in Gross Yield and Net Yield was primarily due to an increase in passenger ticket pricing. On a Constant Currency basis, Net Yield increased ~~1.0%~~4.1%.

Expense

Total cruise operating expense increased ~~6.7%~~7.6% in ~~2018~~2019 compared to ~~2017~~2018 primarily due to the increase in Capacity Days as discussed above. Gross Cruise Cost increased ~~9.1%~~8.1% in ~~2018~~2019 compared to ~~2017~~2018 due to an increase in total cruise operating expense and marketing, general and administrative expenses. Total other operating expense increased ~~15.1%~~16.9% in ~~2018~~2019 compared to ~~2017. Marketing, general and administrative expenses increased~~2018 primarily due to ~~incentive compensation.~~expenses related to the redeployment of Norwegian Joy and an increase in advertising and promotions. Depreciation and amortization expenses increased primarily due to the addition of Norwegian Bliss, renovation of Norwegian Joy and ship improvement projects. On a Capacity Day basis, Net Cruise Cost ~~decreased 1.9% (2.4%~~increased 2.9% (3.3% 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. Adjusted Net Cruise Cost Excluding Fuel per Capacity Day ~~decreased 2.1% (2.7%~~increased 3.0% (3.6% on a Constant Currency basis).

Interest expense, net was $73.5 million in 2019 compared to $59.7 million in ~~2018 compared to $53.0 million in 2017.~~2018. The increase in interest expense reflects additional debt in connection with the delivery of Norwegian ~~Joy~~Bliss in ~~April 2017,~~2018, Project Leonardo financing, as well as higher interest rates due to an increase in ~~LIBOR, partially offset by the benefit from the full redemption~~LIBOR. Also included in ~~October 2017~~2019 were losses on extinguishment of ~~our 4.625% Senior Notes due 2020.~~debt and debt modification costs of $6.1 million.

Other income (expense), net was an expense of ~~$1.7~~$0.4 million in ~~2018~~2019 compared to an expense of ~~$2.8~~$1.7 million in ~~2017.~~2018. In 2019 and 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.~~

In ~~2018,~~2019, we had an income tax benefit of $33.8 million compared to an income tax expense of $2.5 million ~~compared~~in 2018. During 2018, we implemented certain tax restructuring strategies that created our ability to ~~$2.0~~utilize the net operating loss carryforwards of Prestige, for which we had previously provided a full valuation allowance. As a result, we recorded a tax benefit of $35.7 million in ~~2017.~~

~~Table~~connection with the reversal of ~~Contents~~substantially all of the valuation allowance.

Liquidity and Capital Resources

General

As of March 31, ~~2018,~~2019, our liquidity was $1.2 billion consisting of ~~$301.7~~$304.7 million in cash and cash equivalents and $875.0 million available under our Revolving Loan Facility. Our primary ongoing liquidity requirements are to finance working capital, capital expenditures and debt service.

As of March 31, ~~2018,~~2019, we had a working capital deficit of ~~$2.3~~$2.7 billion. This deficit included ~~$1.7~~$2.0 billion of advance ticket sales, which represents the total revenue we collect in advance of sailing dates and accordingly is substantially more like deferred revenue balances rather than actual current cash liabilities. Our business model, along with our Revolving Loan Facility, allows us to operate with a working capital deficit and still meet our operating, investing and financing needs.

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

Sources and Uses of Cash

In this section, references to “2019” refer to the three months ended March 31, 2019 and references to “2018” refer to the three months ended March 31, ~~2018 and references to “2017” refer to the three months ended March 31, 2017.~~2018.

Net cash provided by operating activities was $535.4 million in 2019 as compared to $610.8 million in ~~2018 as compared to $434.9 million in 2017.~~2018. The net cash provided by operating activities included timing differences in cash receipts and payments relating to operating assets and liabilities. Advance ticket sales increased by $439.4 million in 2019 compared to $375.6 million in ~~2018~~2018. Deferred tax assets/liabilities decreased by $32.1 million in 2019 compared to ~~$222.9 million in 2017. Without the adoption~~an increase of ~~ASU No. 2014-09, the Advance ticket sales would have increased by $359.0~~$0.8 million in 2018 ~~(we refer you~~primarily due to ~~Note 2—~~“~~Summary~~the reversal 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).~~valuation allowances.

Net cash used in investing activities was $221.9 million in 2019 and $143.6 million in 2018, ~~and $117.8 million in 2017,~~ primarily related to payments for ships under construction and ship improvement projects.

Net cash used in financing activities was $172.6 million in 2019 primarily due to the repurchase of $200.0 million of NCLH’s ordinary shares, net repayments of our Revolving Loan Facility and the net refinancing of term loans offset by the issuance of new debt. Net cash used in financing activities was $341.6 million in 2018 primarily due to net repayments of our Revolving Loan Facility and other loan 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 loan facilities.~~

Future Capital Commitments

Future capital commitments consist of contracted commitments, including ship construction contracts, and future expected capital expenditures necessary for operations as well as our ship refurbishment projects. As of March 31, ~~2018,~~2019, our anticipated capital expenditures were $1.4 billion for the remainder of ~~2018, $1.3~~2019 and $1.2 billion and ~~$0.9~~$0.7 billion for the years ending December 31, ~~2019~~2020 and ~~2020,~~2021, respectively. We have export credit financing in place for the anticipated expenditures related to ship construction contracts of ~~$0.7~~$0.6 billion for the remainder of ~~2018, $0.6 billion for~~ 2019 and $0.5 billion for ~~2020.~~2020 and $0.2 billion for 2021. These future expected capital expenditures will significantly increase our depreciation and amortization expense as we take delivery of the ships.

Project Leonardo will introduce an additional ~~four~~six 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. Each of the four Project Leonardo ships iseach approximately 140,000 Gross Tons with approximately 3,300 ~~Berths.~~Berths, with expected delivery dates from 2022 through 2027, subject to certain conditions. 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 one additionala Breakaway Plus Class Ship, Norwegian Encore, with approximately 168,000 Gross Tons with 4,000 Berths, on order for delivery in the fall of 2019. For the Regent brand, we have orders for two Explorer Class Ships, Seven Seas Splendor and an additional ship, to be delivered in 2020 and 2023, respectively. Each of ~~Norwegian Bliss and Norwegian Encore is~~the Explorer Class Ships will be approximately ~~168,000~~55,000 Gross Tons ~~with~~and 750 Berths. For the Oceania Cruises brand, we have orders for two Allura Class Ships to be delivered in 2022 and 2025. Each of the Allura Class Ships will be approximately ~~4,000~~67,000 Gross Tons and 1,200 Berths.

~~Table of Contents~~

Capitalized interest for the three months ended March 31, 2019 and 2018 ~~and 2017~~ was ~~$10.1~~$7.8 million and ~~$8.5~~$10.1 million, respectively, primarily associated with the construction of our newbuild ships.

Off-Balance Sheet Transactions

None.

Contractual Obligations

As of March 31, ~~2018,~~2019 our contractual obligations with initial or remaining terms in excess of one year, including interest payments on long-term debt obligations, ~~were as follows~~included the following (in thousands):

Total Less than
1 year 1-3 years 3-5 years More than
5 years
Long-term debt (1) $ 6,463,202 772,187 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

	Total		Less than 1 year		1-3 years		3-5 years		More than 5 years
Long-term debt (1)	$	6,655,616	$	608,307	$	2,017,505	$	2,293,993	$	1,735,811
Operating leases (2)		287,961		31,638		63,329		62,137		130,857
Ship construction contracts (3)		5,088,646		1,221,722		309,601		2,001,570		1,555,753
Port facilities (4)		1,572,383		45,079		114,891		120,439		1,291,974
Interest (5)		1,056,941		219,865		406,426		252,585		178,065
Other (6)		1,320,957		248,428		419,588		350,783		302,158
Total (7)	$	15,982,504	$	2,375,039	$	3,331,340	$	5,081,507	$	5,194,618

(1)

~~Includes discounts and~~Long-term debt includes premiums aggregating ~~$0.5 million. Also includes capital~~$0.3 million and finance leases. ~~The amount~~Long-term debt excludes deferred financing fees which are ~~included~~a direct deduction from the carrying value of the related debt liability in the consolidated balance ~~sheets as an offset to long-term debt.~~sheets.

(2)

~~Primarily~~Operating leases are primarily for offices, motor vehicles and office equipment.

(3)

~~For~~Ship construction contracts are for our newbuild ships based on the euro/U.S. dollar exchange rate as of March 31, ~~2018.~~2019. Export credit financing is in place from syndicates of banks. The amount does not include the two Project Leonardo ships, one Explorer Class Ship and two Allura Class Ships which were still subject to certain Italian government approvals as of March 31, 2019.

(4)

~~Primarily for~~Port facilities represent our usage of certain port facilities.

(5)

~~Includes~~Interest includes fixed and variable rates with LIBOR held constant as of March 31, ~~2018.~~2019.

(6)

~~Future~~Other includes future commitments for service, maintenance and other ~~Business Enhancement Capital Expenditure~~business enhancement capital expenditures contracts.

(7)

~~The table has been updated to reflect revisions to amounts previously included in~~$0.5 million of unrecognized tax benefits were excluded from the ~~Annual Report on Form 10-K for~~“Total” contractual obligations as of March 31, 2019 because an estimate of the ~~year ended December 31, 2017 for the periods less than 3 years in the “Other” category.~~timing of future tax settlements cannot be reasonably determined.

~~The table above does not include $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, and 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 March 31, ~~2018.~~2019.

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~~NCLH’s ability to pay cash dividends to ~~our~~its shareholders. ~~We are~~NCLH is a holding company and ~~depend~~depends upon ~~our~~its subsidiaries for their ability to pay distributions to usit to finance any dividend or pay any other obligations of NCLH. However, we do not believe that these restrictions have had or are expected to have an impact on our ability to meet any cash obligations.

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

We believe our cash on hand, expected future operating cash inflows, additional available borrowings under our Revolving Loan Facility and our ability to issue debt securities or additional equity securities, will be sufficient to fund operations, debt payment requirements, capital expenditures and maintain compliance with covenants under our debt agreements over the next ~~twelve-month~~12-month period. There is no assurance that cash flows from operations and additional financings will be available in the future to fund our future obligations.

2630

~~Table of Contents~~

Item 3. Quantitative and Qualitative Disclosures About Market Risk

General

Interest Rate Risk

As of March 31, ~~2018,~~2019, we had interest rate swap agreements to hedge our exposure to interest rate movements and to manage our interest expense. As of March 31, ~~2018, 56%~~2019, 75% of our debt was fixed and ~~44%~~25% 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 March 31, 2019 was $1.2 billion. As of December 31, 2018, 72% of our debt was ~~$218.6 million.~~fixed and 28% was variable, which includes the effects of the interest rate swaps. The notional amount of our outstanding debt associated with the interest rate swap agreements was $1.0 billion as of December 31, 2018. The change from December 31, 2018 to March 31, 2019 was due to an additional interest rate swap executed and the repayment of variable rate debt. Based on our March 31, ~~2018~~2019 outstanding variable rate debt balance, a one percentage point increase in annual LIBOR interest rates would increase our annual interest expense by approximately ~~$28.2~~$16.9 million excluding the effects of capitalization of interest.

Foreign Currency Exchange Rate Risk

As of March 31, ~~2018,~~2019, we had foreign currency derivatives to hedge the exposure to volatility in foreign currency exchange rates related to our ship construction contracts denominated in euros. These derivatives hedge the foreign currency exchange rate risk on a portion of the payments on our ship construction contracts. The payments not hedged aggregate ~~€3.3~~€1.9 billion, or ~~$4.1~~$2.1 billion based on the euro/U.S. dollar exchange rate as of March 31, 2019. As of December 31, 2018, the payments not hedged aggregated €2.2 billion, or $2.5 billion, based on the euro/U.S. dollar exchange rate as of December 31, 2018. The change from December 31, 2018 to March 31, 2019 was due to additional foreign exchange derivatives executed. We estimate that a 10% change in the euro as of March 31, ~~2018~~2019 would result in a ~~$0.4~~$0.2 billion change in the U.S. dollar value of the foreign currency denominated remaining payments.

Fuel Price Risk

Our exposure to market risk for changes in fuel prices relates to the forecasted purchases of fuel on our ships. Fuel expense, as a percentage of our total cruise operating expense, was ~~12.2%~~11.9% and ~~12.3%~~12.2% for the three months ended March 31, ~~2018~~2019 and ~~2017,~~2018, respectively. We use fuel derivative agreements to mitigate the financial impact of fluctuations in fuel prices and as of March 31, 2019, we had hedged approximately 70%, 54% and 36% of our remaining 2019, 2020 and 2021 projected metric tons of fuel purchases, respectively. As of December 31, 2018, we had hedged approximately ~~64%~~57%, ~~48%~~53% and ~~26%~~33% of our ~~remaining 2018,~~ 2019, 2020 and ~~2020, respectively,~~2021 projected metric tons of fuel ~~purchases.~~ purchases, respectively. The change in fuel price risk from December 31, 2018 to March 31, 2019 was due to additional fuel hedges executed.

We estimate that a 10% increase in our weighted-average fuel price would increase our anticipated ~~2018~~2019 fuel expense by ~~$31.6~~$34.2 million. This increase would be partially offset by an increase in the fair value of our fuel swap agreements of ~~$15.9~~$20.2 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 March 31, ~~2018.~~2019. 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 March 31, ~~2018~~2019 to provide reasonable assurance that the information required to be disclosed by us in the reports we file or submit under the Securities Exchange Act of 1934, as amended, is recorded, processed, summarized and reported within the time periods specified in the rules and forms of the SEC, and that it is accumulated and communicated to our management, including our Chief Executive Officer and ~~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 March 31, ~~2018~~2019 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

Limitations on the Effectiveness of Controls

It should be noted that any system of controls, however well designed and operated, can provide only reasonable, and not absolute, assurance that the objectives of the system will be met. In addition, the design of any control system is based in part upon certain assumptions about the likelihood of future events. Because of these and other inherent limitations of control systems, there is only the reasonable assurance that our controls will succeed in achieving their goals under all potential future conditions.

~~Table of Contents~~

PART II. OTHER INFORMATION

Item 1. Legal Proceedings

On September 21, 2018, a purported class-action lawsuit was filed by Marta and Jerry Phillips and others against NCL Corporation Ltd. in the United States District Court for the Southern District of Florida relating to the marketing and sales of our Booksafe Travel Protection Plan. The plaintiffs purport to represent an alleged class of passengers who purchased Booksafe Travel Protection Plans. The complaint alleges that the Company concealed that it received proceeds on the sale of the travel insurance portion of the plan. The complaint seeks an unspecified amount of damages, fees and costs. We believe we have meritorious defenses to the claim and that any liability which may arise as a result of this action will not have a material impact on our consolidated financial statements.

Item 1A. Risk Factors

We refer you to our ~~2017~~ Annual Report on Form 10-K for a discussion of the risk factors that affect our business and financial results. ~~There have been no material changes in our risk factors from those disclosed in our 2017 Annual Report on Form 10-K.We~~We wish to caution the reader that the risk factors discussed in “Item 1A. Risk Factors” in our ~~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.

Other than the risk factors set forth below, there have been no material changes in our risk factors from those disclosed in our Annual Report on Form 10-K.

Unavailability of ports of call may materially adversely affect our business, financial condition and results of operations.

We believe that attractive port destinations are a major reason why guests choose to go on a particular cruise or on a cruise vacation. The availability of ports, including the specific port facility at which our guests will embark and disembark, is affected by a number of factors, including, but not limited to, existing capacity constraints, security, safety and environmental concerns, adverse weather conditions and natural disasters such as hurricanes, floods, typhoons and earthquakes, financial limitations on port development, political instability, exclusivity arrangements that ports may have with our competitors, local governmental regulations and fees, local community concerns about port development and other adverse impacts on their communities from additional tourists and sanctions programs implemented by the Office of Foreign Assets Control of the United States Treasury Department or other regulatory bodies. For example, we had to temporarily change certain itineraries in the Caribbean due to damage some ports sustained during an active hurricane season in 2017. There can be no assurance that our ports of call will not be similarly affected in the future.

We garner a pricing premium from our itineraries to Cuba as opposed to other Caribbean itineraries. In April 2019, the U.S. Government stated that it will be tightening restrictions on travel to Cuba. If there is a change in regulations that affect travel to Cuba, it is possible that we will no longer be able to sail to Cuba. Any limitations on the availability of ports of call, including Cuba, or on the availability of shore excursions and other service providers at such ports could adversely affect our business, financial condition and results of operations.

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

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

As a result of any ship-related or other incidents, litigation claims, enforcement actions and regulatory actions and investigations, including, but not limited to, those arising from personal injury, loss of life, loss of or damage to personal property, business interruption losses or environmental damage to any affected coastal waters and the surrounding area, may be asserted or brought against various parties, including us and/or our cruise brands. The time and attention of our management may also be diverted in defending such claims, actions and investigations. Subject to applicable insurance coverage, we may also incur costs both in defending against any claims, actions and investigations and for any judgments, fines, civil or criminal penalties if such claims, actions or investigations are adversely determined.

The U.S. Government announced that, effective May 2, 2019, it will no longer suspend the right of private parties to bring litigation under Title III of the Cuban Liberty and Solidarity (Libertad) Act of 1996, popularly known as the Helms-Burton Act, allowing certain individuals whose property was confiscated by the Cuban government beginning in 1959 to sue anyone who "traffics" in the property in question in U.S. courts. Monetary and other claims may now be brought against us and other companies doing business in Cuba. If these suits are successful, they could result in substantial monetary damages against the Company and/or impact the Company’s future scheduled Cuba cruise itineraries.

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

We believe and have taken the position that our income that is considered to be derived from the international operation of ships as well as certain income that is considered to be incidental to such income (“shipping income”), is exempt from U.S. federal income taxes under Section 883, based upon certain assumptions as to shareholdings and other information as more fully described in “Item 1—Business—Taxation.” The provisions of Section 883 are subject to change at any time, possibly with retroactive effect.

We believe and have taken the position that substantially all of our income derived from the international operation of ships is properly categorized as shipping income and that we do not have a material amount of non-qualifying income. It is possible, however, that a much larger percentage of our income does not qualify (or will not qualify) as shipping income. Moreover, the exemption for shipping income is only available for years in which NCLH will satisfy complex stock ownership tests or the publicly traded test under Section 883 as described in “Item 1—Business— Taxation—Exemption of International Shipping Income under Section 883 of the Code.” There are factual circumstances beyond our control, including changes in the direct and indirect owners of NCLH’s ordinary shares, which could cause us or our subsidiaries to lose the benefit of this tax exemption. Finally, any changes in our operations could significantly increase our exposure to either the Net Tax Regime or the 4% Regime (each as defined in “Item 1—Business—Taxation”), and we can give no assurances on this matter.

If we or any of our subsidiaries were not to qualify for the exemption under Section 883, our or such subsidiary’s U.S.-source income would be subject to either the Net Tax Regime or the 4% Regime (each as defined in “Item 1— Business— Taxation). As of the date of this filing, we believe that NCLH and its subsidiaries will satisfy the publicly traded test imposed under Section 883 and therefore believe that NCLH will qualify for the exemption under Section 883. However, as discussed above, there are factual circumstances beyond our control that could cause NCLH to not meet the stock ownership or publicly traded tests. Therefore, we can give no assurances on this matter. We refer you to “Item 1—Business—Taxation.”

We may be subject to state, local and non-U.S. income or non-income taxes in various jurisdictions, including those in which we transact business, own property or reside. We may be required to file tax returns in some or all of those jurisdictions. Our state, local or non-U.S. tax treatment may not conform to the U.S. federal income tax treatment discussed above. We may be required to pay non-U.S. taxes on dispositions of foreign property or operations involving foreign property that may give rise to non-U.S. income or other tax liabilities in amounts that could be substantial.

The various tax regimes to which we are currently subject result in a relatively low effective tax rate on our worldwide income. These tax regimes, however, are subject to change, possibly with retroactive effect. For example, legislation has been proposed in the past that would eliminate the benefits of the exemption from U.S. federal income tax under Section 883 and subject all or a portion of our shipping income to taxation in the U.S. Moreover, we may become subject to new tax regimes and may be unable to take advantage of favorable tax provisions afforded by current or future law, including exemption of branch profits and dividend withholding taxes under the U.S. – U.K. Income Tax Treaty on income derived in respect of our U.S.–flagged operation.

The government of Bermuda recently enacted the Economic Substance Act 2018 which sets forth minimum economic substance requirements for entities established in Bermuda. The Company is currently analyzing these rules in anticipation of further guidance from Bermuda authorities on the application of the Economic Substance Act 2018. If the Company is unable to comply with such requirements, the Company may consider alternate jurisdictions or otherwise become subject to tax regimes which may be less favorable.

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

Purchases of Equity Securities by the Issuer

On April ~~29, 2014,~~17, 2018, 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 (the “Original Repurchase Program”). As of March 31, 2018, there was no cash remaining available for repurchases under the Original Repurchase Program.

~~Share repurchase activity during the three months ended 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 4,722,312 of our 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~~(the “Repurchase Program”) authorizing NCLH ~~may~~to purchase up to $1.0 billion of ~~its~~NCLH’s ordinary ~~shares (the “Repurchase Program”).~~shares. 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~~Under the Repurchase Program, shares may ~~take place~~be repurchased in ~~the~~ open market transactions or in privately negotiated transactions, including structured and derivative transactions such as accelerated share repurchase transactions, and may be made under a plan complying with Rule 10b5-1 ~~plan.~~under the Securities Exchange Act.

Share repurchase activity during the three months ended March 31, 2019 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, 2019 – January 31, 2019		—	$	—	$	598,694
February 1, 2019 – February 28, 2019		—	$	—	$	598,694
March 1, 2019 – March 31, 2019		3,624	$	55.18	$	398,699
Total for the three months ended March 31, 2019		3,624	$	55.18	$	398,699

Item 5. Other Information

None.

~~Table of Contents~~

Item 6. Exhibits

10.1*31.1*

~~Amendment No. 15, dated March 1, 2018, to Office Lease Agreement, dated December 1, 2006, as amended, by and between SPUS7 Miami ACC, LP and NCL (Bahamas) Ltd.+~~

10.2*

~~Transition, Release and Consulting Agreement by and between NCL (Bahamas) Ltd. and 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 ~~Interim~~Executive Vice President and Chief Financial Officer ~~and Senior Vice President, 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 ~~Interim~~Executive Vice President and Chief Financial Officer ~~and Senior Vice President, 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~~quarterly period ended March 31, ~~2018,~~2019, formatted in Extensible Business Reporting Language (XBRL), as follows:

(i)

the Consolidated Statements of Operations for the three months ended March 31, ~~2018~~2019 and ~~2017;~~2018;


	(ii)	the Consolidated Statements of Comprehensive Income for the three ~~months~~ ended March 31, ~~2018~~2019 and ~~2017;~~2018;


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


	(iv)	the Consolidated Statements of Cash Flows for the three months ended March 31, ~~2018~~2019 and ~~2017;~~2018;


	(v)	the Consolidated Statements of Changes in Shareholders’ Equity for the three months ended March 31, ~~2018~~2019 and ~~2017;~~2018; 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.~~

2934

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

Dated: May ~~7, 2018~~10, 2019

3035

Bermuda		98-0691007
(State or other jurisdiction of incorporation or organization)		(I.R.S. Employer Identification No.)

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

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

Title of each class		Trading Symbol(s)		Name of each exchange on which registered
Ordinary shares, par value $0.001 per share		NCLH		The New York Stock Exchange

	Three Months Ended March 31,
	2018			2017
Net income	$	103,155		$	61,910
Other comprehensive income:
Shipboard Retirement Plan		105			105
Cash flow hedges:
Net unrealized gain (loss)		48,576			(7,283	)
Amount realized and reclassified into earnings		(1,785	)		9,705
Total other comprehensive income		46,896			2,527
Total comprehensive income	$	150,051		$	64,437

	March 31, 2018			December 31, 2017
Assets
Current assets:
Cash and cash equivalents	$	301,748		$	176,190
Accounts receivable, net		41,159			43,961
Inventories		80,427			82,121
Prepaid expenses and other assets		337,441			216,065
Total current assets		760,775			518,337
Property and equipment, net		11,085,572			11,040,488
Goodwill		1,388,931			1,388,931
Tradenames		817,525			817,525
Other long-term assets		432,182			329,588
Total assets	$	14,484,985		$	14,094,869
Liabilities and shareholders’ equity
Current liabilities:
Current portion of long-term debt	$	772,187		$	619,373
Accounts payable		65,573			53,433
Accrued expenses and other liabilities		535,278			513,717
Advance ticket sales		1,720,505			1,303,498
Total current liabilities		3,093,543			2,490,021
Long-term debt		5,580,290			5,688,392
Other long-term liabilities		172,079			166,690
Total liabilities		8,845,912			8,345,103
Commitments and contingencies (Note 9)
Shareholders’ equity:
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		4,020,584			3,998,694
Accumulated other comprehensive income (loss)		73,862			26,966
Retained earnings		2,047,152			1,963,128
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		5,639,073			5,749,766
Total liabilities and shareholders’ equity	$	14,484,985		$	14,094,869

		Page
PART I. FINANCIAL INFORMATION

Item 1.	Financial Statements	13

Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	1720

Item 3.	Quantitative and Qualitative Disclosures About Market Risk	2731

Item 4.	Controls and Procedures	2731

PART II. OTHER INFORMATION

Item 1.	Legal Proceedings	2832

Item 1A.	Risk Factors	2832

Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	2833

Item 5.	Other Information	2834

Item 6.	Exhibits	2934

SIGNATURES		3035

	Ordinary Shares		Additional Paid-in Capital			Accumulated Other Comprehensive Income (Loss)			Retained Earnings			Treasury Shares			Total Shareholders’ Equity
Balance, December 31, 2016	$	232	$	3,890,119		$	(314,473	)	$	1,201,103		$	(239,255	)	$	4,537,726
Share-based compensation		—		18,203			—			—			—			18,203
Issuance of shares under employee related plans		—		9,466			—			—			—			9,466
Change in accounting policy (share-based forfeitures)		—		(2,153	)		—			2,153			—			—
Net share settlement of restricted share units		—		(4,550	)		—			—			—			(4,550	)
Other comprehensive income, net		—		—			2,527						—			2,527
Net income		—		—			—			61,910			—			61,910
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

	March 31, 2019			December 31, 2018
Assets
Current assets:
Cash and cash equivalents	$	304,708		$	163,851
Accounts receivable, net		57,054			55,249
Inventories		90,101			90,202
Prepaid expenses and other assets		316,532			241,011
Total current assets		768,395			550,313
Property and equipment, net		12,181,007			12,119,253
Goodwill		1,388,931			1,388,931
Tradenames		817,525			817,525
Other long-term assets		605,235			329,948
Total assets	$	15,761,093		$	15,205,970
Liabilities and shareholders’ equity
Current liabilities:
Current portion of long-term debt	$	608,307		$	681,218
Accounts payable		66,665			159,564
Accrued expenses and other liabilities		731,221			716,499
Advance ticket sales		2,023,227			1,593,219
Total current liabilities		3,429,420			3,150,500
Long-term debt		5,934,185			5,810,873
Other long-term liabilities		492,186			281,596
Total liabilities		9,855,791			9,242,969
Commitments and contingencies (Note 11)
Shareholders’ equity:
Ordinary shares, $.001 par value; 490,000,000 shares authorized; 236,844,434 shares issued and 215,386,265 shares outstanding at March 31, 2019 and 235,484,613 shares issued and 217,650,644 shares outstanding at December 31, 2018		237			235
Additional paid-in capital		4,145,530			4,129,639
Accumulated other comprehensive income (loss)		(153,400	)		(161,647	)
Retained earnings		3,016,997			2,898,840
Treasury shares (21,458,169 and 17,833,969 ordinary shares at March 31, 2019 and December 31, 2018, respectively, at cost)		(1,104,062	)		(904,066	)
Total shareholders’ equity		5,905,302			5,963,001
Total liabilities and shareholders’ equity	$	15,761,093		$	15,205,970

	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

	March 31, 2018									March 31, 2019
	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	$	(73,088	)	$	46,912		6.0	$	120,000	$	(96,359	)	$	23,641		6.0
Licenses		3,368		(1,883	)		1,485		5.6
License											750		(275	)		475		10.0
Total intangible assets subject to amortization	$	123,368	$	(74,971	)	$	48,397			$	120,750	$	(96,634	)	$	24,116

	December 31, 2017									December 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	$	(66,866	)	$	53,134		6.0	$	120,000	$	(91,756	)	$	28,244		6.0
Licenses		3,368		(1,601	)		1,767		5.6		3,368		(2,874	)		494		5.6
Non-compete agreements		660		(660	)		—		1.0
Total intangible assets subject to amortization	$	124,028	$	(69,127	)	$	54,901			$	123,368	$	(94,630	)	$	28,738

Year ended December 31,	Amortization Expense		Amortization Expense
2019	$	18,489
2020		9,906	$	9,906
2021		75		75
2022		75		75
2023		75		75
2024				75

	Three Months Ended March 31, 2019
Operating lease expense	$	8,359
Variable lease expense	$	2,705
Short-term lease expense	$	10,076
Finance lease cost:
Amortization of right-to-use assets	$	244
Interest on lease liabilities	$	342
Operating lease revenue	$	165
Sublease income	$	404

	Balance Sheet location	March 31, 2019
Operating leases
Right-of-use assets	Other long-term assets	$	229,174
Current operating lease liabilities	Accrued expenses and other liabilities	$	21,975
Non-current operating lease liabilities	Other long-term liabilities	$	215,983

Finance leases
Right-of-use assets	Property and equipment, net	$	14,544
Current finance lease liabilities	Current portion of long-term debt	$	5,349
Non-current finance lease liabilities	Long-term debt	$	11,440

	Three Months Ended March 31, 2019
Cash paid for amounts included in the measurement of lease liabilities:
Operating cash outflows from operating leases	$	8,305
Operating cash outflows from finance leases	$	275
Financing cash outflows from finance leases	$	503

Right-of-use assets obtained in exchange for lease obligations:
Operating leases	$	770

	Three Months Ended March 31,
	2019		2018
North America	$	982,989	$	875,179
Europe		33,752		31,070
Asia-Pacific		222,767		267,718
South America		90,303		69,274
Other		73,819		50,162
Total Revenue	$	1,403,630	$	1,293,403

	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

	Operating leases			Finance leases
Remainder of 2019	$	23,186		$	3,903
2020		31,903			4,769
2021		31,606			4,821
2022		31,462			3,896
2023		30,874			730
Thereafter		138,930			1,306
Total		287,961			19,425
Less: Present value discount		(50,003	)		(2,636	)
Present value of lease liabilities	$	237,958		$	16,789
Weighted average remaining lease term (years)		8.90			4.56
Weighted average discount rate		4.26	%		7.67	%

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

	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	$	(161,647	)	$	(157,449	)	$	(4,198	)
Current period other comprehensive income before reclassifications		15,152			15,152			—
Amounts reclassified into earnings		(6,905	)		(7,000	)(1)		95	(2)
Accumulated other comprehensive income (loss) at end of period	$	(153,400	)	$	(149,297	)(3)	$	(4,103	)

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	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

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

Fuel contracts
	Prepaid expenses and other assets	$	22,652	$	2,583	$	3,579	$	1
	Other long-term assets		12,880		197		1,996		29
	Accrued expenses and other liabilities		547		1,173		2,943		19,547
	Other long-term liabilities		1,015		933		10,685		51,184
Foreign currency contracts
	Prepaid expenses and other assets		1,060		5,285		—		1,497
	Other long-term assets		—		3,514		—		—
	Accrued expenses and other liabilities		376		112		40,234		5,145
	Other long-term liabilities		—		2,874		77,107		40,476
Interest rate contracts
	Prepaid expenses and other assets		459		519		—		—
	Other long-term assets		—		27		—		—
	Accrued expenses and other liabilities		—		—		624		—
	Other long-term liabilities		—		—		553		—
Total derivatives designated as hedging instruments		$	38,989	$	17,217	$	137,721	$	117,879

Derivative Contracts Not Designated as Hedging Instruments

Fuel contracts	Prepaid expenses and other assets	$	3,700	$	—	$	241	$	—

Total derivatives not designated as hedging instruments		$	3,700	$	—	$	241	$	—
Total derivatives		$	42,689	$	17,217	$	137,962	$	117,879

March 31, 2018	Gross Amounts		Gross Amounts Offset			Total Net Amounts		Gross Amounts Not Offset			Net Amounts
March 31, 2019													Gross Amounts		Gross Amounts Offset			Total Net Amounts		Gross Amounts Not Offset			Net Amounts
Assets	$	223,392	$	(7,312	)	$	216,080	$	(117,233	)	$	98,847	$	40,751	$	(5,816	)	$	34,935	$	(1,519	)	$	33,416
Liabilities		6,352		(190	)		6,162		(332	)		5,830		132,146		(1,938	)		130,208		(114,046	)		16,162

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	)

Derivatives	Amount of Gain (Loss) Recognized in Other Comprehensive Income						Location of Gain (Loss) Reclassified from Accumulated Other Comprehensive Income (Loss) into Income	Amount of Gain (Loss) Reclassified from Accumulated Other Comprehensive Income (Loss) into Income
	Three Months Ended March 31, 2019			Three Months Ended March 31, 2018				Three Months Ended March 31, 2019			Three Months Ended March 31, 2018
Fuel contracts	$	96,508		$	(6,012	)	Fuel	$	7,518		$	3,525
Foreign currency contracts		(80,278	)		54,493		Depreciation and amortization		(703	)		(1,159	)
Interest rate contracts		(1,078	)		95		Interest expense, net		185			(581	)
Total gain (loss) recognized in other comprehensive income	$	15,152		$	48,576			$	7,000		$	1,785

	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	)

	Three Months Ended March 31, 2019							Three Months Ended March 31, 2018
	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	$	98,253	$	169,741		$	73,503	$	93,431	$	131,244		$	59,698

Amount of gain (loss) reclassified from accumulated other comprehensive income (loss) into income
Fuel contracts		7,518		—			—		3,525		—			—
Foreign currency contracts		—		(703	)		—		—		(1,159	)		—
Interest rate contracts		—		—			185		—		—			(581	)

	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)
Outstanding as of January 1, 2018		6,580,898			373,969			208,333	$	49.18	$	31.39	$	59.43		6.99	$	50,021
Granted		—			208,335			—		—		59.43		—		—		—
Exercised		(117,805	)		—			—		39.27		—		—		—		—
Forfeited and cancelled		(60,083	)		(52,084	)		—		52.08		59.43		—		—		—
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 Share Option Awards								Weighted-Average Exercise Price						Weighted-
	Time- Based Awards			Performance- Based Awards			Market- Based Awards		Time- Based Awards		Performance- Based Awards		Market- Based Awards		Average Contractual Term (years)		Aggregate Intrinsic Value (in thousands)
Outstanding as of January 1, 2019		5,686,793			410,499			208,333	$	50.65	$	45.67	$	59.43		6.22	$	13,946
Exercised		(129,150	)		(54,695	)		—		38.40		19.00		—
Forfeited and cancelled		(27,000	)		(156,251	)		—		57.03		59.43		—
Outstanding as of March 31, 2019		5,530,643			199,553			208,333	$	50.90	$	42.21	$	59.43		6.02	$	33,072

	Number of Time-Based Awards			Weighted- Average Grant Date Fair Value
Non-vested as of January 1, 2018		858		$	58.33
Granted		—			—
Vested		(429	)		58.25
Forfeited or expired		—			—
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
Non-vested as of January 1, 2019		429		$	58.41
Vested		(429	)		58.41
Non-vested and expected to vest as of March 31, 2019		-		$	-

	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, 2018		2,555,477		$	50.86		—		$	—		50,000	$	59.43
Non-vested as of January 1, 2019																2,973,032		$	53.98		825,614		$	56.58		50,000	$	59.43
Granted		1,606,156			56.74		843,998			56.58		—		—		1,902,847			55.03		462,282	(1)		55.27		—		—
Vested		(938,637	)		56.68		—									(1,358,074	)		53.13		(121,000	)		56.27		—		—
Forfeited or expired		(39,872	)		52.72		(12,500	)		59.43		—		—		(35,536	)		54.74		(37,500	)		56.27		—		—
Non-vested and expected to vest as of March 31, 2018		3,183,124		$	53.90		831,498		$	55.94		50,000	$	59.43
Non-vested and expected to vest as of March 31, 2019																3,482,269		$	54.88		1,129,396		$	56.09		50,000	$	59.43


•·	Operating income was ~~$167.1~~$158.3 million compared to ~~$119.7~~$167.1 million.