2016 Annual Report for Norwegian Cruiseline Holdings - 39

decreased 13.5% to $466 per metric ton in 2016 from $539 per metric ton in 2015. Adjusted Net Cruise Cost Excluding Fuel per Capacity Day increased
1.5% primarily due to the expenses discussed above (1.7% on a Constant Currency basis). We refer you to the "Results of Operations" above for a
reconciliation of Gross Cruise Cost to Adjusted Net Cruise Cost Excluding Fuel.
Interest expense, net increased to $276.9 million in 2016 from $221.9 million in 2015 primarily due to an increase in average debt balances outstanding
primarily associated with the delivery of new ships and newbuild installments as well as from higher interest rates due to an increase in LIBOR.
Additionally, in connection with refinancings of our senior notes and certain of our credit facilities, interest expense, net included losses on
extinguishment of debt and debt modification costs of $39.2 million in 2016 and losses on extinguishment of debt of $12.6 million in 2015.
Other income (expense), net was an expense of $8.3 million in 2016 compared to an expense of $46.7 million in 2015. In 2016, the expense was
primarily related to $16.1 million of unrealized and realized losses on fuel swap derivative hedge contracts partially offset by $4.5 million of gains on
foreign currency exchange and $3.9 million of gains on foreign currency exchange derivative hedge contracts. In 2015, the expense was primarily
related to $30.7 million of losses from the dedesignation of certain fuel swap derivative hedge contracts and the ineffectiveness of settled fuel swaps in
2015. Also included in 2015 was an expense of $26.2 million related to the fair value adjustment of a foreign exchange collar which does not receive
hedge accounting treatment partially offset by $11.0 million of foreign currency transaction gains.
In 2016, we had an income tax expense of $7.2 million compared to $6.8 million in 2015.
Year Ended December 31, 2015 ("2015") Compared to Year Ended December 31, 2014 ("2014")
Revenue
Total revenue increased 39.0% to $4.3 billion in 2015 compared to $3.1 billion in 2014. Gross Yield increased 18.3%. Net Revenue increased 37.9% in
2015, primarily due to an increase in Capacity Days of 17.5% and Net Yield of 17.4%. The increase in Capacity Days was primarily due to the
Acquisition of Prestige, the delivery of Norwegian Escape and the operation of Norwegian Getaway for the full year of 2015. The increase in Net Yield
was primarily due to an increase in passenger ticket pricing and higher onboard and other revenue. Adjusted Net Revenue for 2015 includes a deferred
revenue fair value adjustment of $32.4 million related to the Acquisition of Prestige. On a Constant Currency basis, Net Yield and Adjusted Net Yield
increased 19.4% and 20.0%, respectively, in 2015 compared to 2014.
Expense
Gross Cruise Cost increased 36.6% in 2015 compared to 2014 due to an increase in total cruise operating expense and marketing, general and
administrative expenses. Total cruise operating expense increased 36.4% in 2015 compared to 2014 primarily due to the increase in Capacity Days as
discussed above. Total other operating expense increased 46.0% in 2015 compared to 2014 primarily due to an increase in marketing, general and
administrative expenses primarily related to the Acquisition of Prestige including certain restructuring and severance costs, as well as amortization
expense related to the Prestige intangible assets and depreciation expense related to the Prestige ships. These increases were partially offset by the $43.4
million fair value adjustment for the contingent consideration related to the Acquisition of Prestige. On a Capacity Day basis, Net Cruise Cost increased
14.0% (14.8% on a Constant Currency basis) due to an increase in marketing, general and administrative expenses as discussed above and certain crew
related expenses, partially offset by a decrease in fuel expense which was primarily the result of a 13.8% decrease in the average fuel price to $539 per
metric ton in 2015 from $625 per metric ton in 2014. Adjusted Net Cruise Cost Excluding Fuel per Capacity Day increased 24.0% (25.0% on a Constant
Currency basis) primarily due to the increase in expenses discussed above.
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Interest expense, net increased to $221.9 million in 2015 from $151.8 million in 2014 primarily due to an increase in average debt outstanding in
connection with the Acquisition of Prestige.
Other income (expense), net was an expense of $46.7 million in 2015 compared to an expense of $10.9 million in 2014. This increase was primarily
related to an expense of $30.7 million from the dedesignation of certain fuel swap derivative hedge contracts and the ineffectiveness of settled fuel
swaps in 2015. Also included in 2015 was an expense of $26.2 million related to the fair value adjustment of a foreign exchange collar which does not
receive hedge accounting treatment partially offset by $11.0 million of foreign currency transaction gains.
We had an income tax expense of $6.8 million in 2015 compared to an income tax benefit of $2.3 million in 2014. During the fourth quarter of 2013, we
completed the implementation of a tax restructuring which had a favorable impact on the amount of income subject to U.S. corporate tax which
continued through calendar year 2014 and 2015. In addition, during the first quarter of 2014, we received information which allowed us to elect a tax
method to calculate deductible interest expense resulting in a tax benefit of $11.1 million including a $5.3 million non-recurring benefit that has been
excluded from Adjusted Net Income and Adjusted EPS for the year ended December 31, 2014.
Liquidity and Capital Resources
General
As of December 31, 2016, our liquidity was $749.3 million consisting of $128.3 million in cash and cash equivalents and $621.0 million available under
our New Revolving Loan Facility. Our primary ongoing liquidity requirements are to finance working capital, capital expenditures and debt service.

Table of Contents for the Digital Edition of 2016 Annual Report for Norwegian Cruiseline Holdings