2016 Annual Report for Norwegian Cruiseline Holdings - 41
Off-Balance Sheet Transactions
As of December 31, 2016, our contractual obligations, with initial or remaining terms in excess of one year, including interest payments on long-term
debt obligations, were as follows (in thousands):
Ship construction contracts(3)
(1) Includes premiums aggregating $0.5 million. Also includes capital leases. The amount excludes deferred financing fees which are included in
the consolidated balance sheets as an offset to long-term debt.
(2) Primarily for offices, motor vehicles and office equipment.
(3) For our newbuild ships based on the euro/U.S. dollar exchange rate as of December 31, 2016. Export credit financing is in place from
syndicates of banks.
(4) Primarily for our usage of certain port facilities.
(5) Includes fixed and variable rates with LIBOR held constant as of December 31, 2016.
(6) Future commitments for service, maintenance and other Business Enhancement Capital Expenditure contracts.
The table above does not include the ships on order after December 31, 2016 as part of Project Leonardo.
The table above does not include $11.1 million of unrecognized tax benefits (we refer you to the Notes to the Consolidated Financial Statements Note-
11 "Income Tax").
Certain service providers may require collateral in the normal course of our business. The amount of collateral may change based on certain terms and
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.
Certain of our debt agreements contain covenants that, among other things, require us to maintain a minimum level of liquidity, as well as limit our net
funded debt-to-capital ratio, maintain certain other ratios and restrict our ability to pay dividends. Substantially all of our ships and other property and
equipment are pledged as collateral for certain of our debt. We believe we were in compliance with these covenants as of December 31, 2016.
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 existing credit facility and our ability to
issue debt securities or raise additional equity, will be sufficient to fund operations, debt payment requirements, capital expenditures and maintain
compliance with covenants under our debt agreements over the next twelve-month period. There is no assurance that cash flows from operations and
additional financings will be available in the future to fund our future obligations.
Item 7A. Qualitative and Quantitative Disclosures about Market Risk
We are exposed to market risk attributable to changes in interest rates, foreign currency exchange rates and fuel prices. We attempt to minimize these
risks through a combination of our normal operating and financing activities and through the use of derivatives. The financial impacts of these derivative
instruments are primarily offset by corresponding changes in the underlying exposures being hedged. We achieve this by closely matching the notional,