2016 Annual Report for Norwegian Cruiseline Holdings - F-7

Norwegian Cruise Line Holdings Ltd.
Notes to the Consolidated Financial Statements
1.

Description of Business and Organization
NCLH is a leading global cruise company which operates the Norwegian Cruise Line, Oceania Cruises and Regent Seven Seas Cruises brands.
We have 24 ships with approximately 46,500 Berths and plan to introduce eight additional ships through 2025 (we refer you to Note 16-
"Subsequent Events").
Norwegian commenced operations from Miami in 1966. In February 2000, Genting HK acquired control of and subsequently became the sole
owner of the Norwegian operations.
In January 2008, the Apollo Holders acquired 50% of the outstanding ordinary share capital of NCLC. As part of this investment, the Apollo
Holders assumed control of NCLC's Board of Directors. Also, in January 2008, the TPG Viking Funds acquired, in the aggregate, 12.5% of
NCLC's outstanding share capital from the Apollo Holders.
In February 2011, NCLH, a Bermuda limited company, was formed with the issuance to the Sponsors of, in aggregate, 10,000 ordinary shares,
with a par value of $.001 per share. On January 24, 2013, NCLH consummated the IPO. In connection with the consummation of the IPO, the
Sponsors' ordinary shares in NCLC were exchanged for the ordinary shares of NCLH at a share exchange ratio of 1.0 to 8.42565 and NCLH
became the owner of 100% of the ordinary shares and parent company of NCLC (the "Corporate Reorganization"). Accordingly, NCLH
contributed $460.0 million to NCLC and the historical financial statements of NCLC became those of NCLH. The Corporate Reorganization was
effected solely for the purpose of reorganizing our corporate structure. NCLH had not prior to the completion of the Corporate Reorganization
conducted any activities other than those incidental to its formation and to preparations for the Corporate Reorganization and IPO. The Corporate
Reorganization resulted in all parties being in the same economic position as they were immediately prior to the IPO. As the economic position of
the investors did not change as part of the Corporate Reorganization it is considered a nonsubstantive merger from an accounting perspective.
As a result of the Corporate Reorganization, NCLC was treated as a partnership for U.S. federal income tax purposes, and the terms of the
partnership (including the economic rights with respect thereto) were set forth in an amended and restated tax agreement for NCLC. Economic
interests in NCLC were represented by the partnership interests established under the tax agreement, which we refer to as "NCL Corporation
Units." The NCL Corporation Units held by NCLH (as a result of its ownership of 100% of the ordinary shares of NCLC) represented a 97.3%
economic interest in NCLC as of the consummation of the IPO. The remaining 2.7% economic interest in NCLC as of the consummation of the
IPO was in the form of Management NCL Corporation Units held by management (or former management).
In November 2014, we completed the Acquisition of Prestige.
In the fourth quarter of 2014, all Management NCL Corporation Units were exchanged for NCLH ordinary shares and restricted shares. NCLH
became the sole member and 100% owner of the economic interests in NCLC and the non-controlling interest no longer exists. Accordingly,
NCLC is now treated as a disregarded entity for U.S. federal income tax purposes. No new NCLC profits interests or Management NCL
Corporation Units will be issued; however, NCLH has granted, and expects to continue to grant, equity to its employees and members of its
Board of Directors under its long-term incentive plan.
The Sponsors have completed numerous Secondary Equity Offerings and as of December 31, 2016 have reduced their ownership to 29.4% of
NCLH's ordinary shares (we refer you to Note 8- "Related Party Disclosures").

Summary of Significant Accounting Policies
Basis of Presentation
Our consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States of
America and contain all normal recurring adjustments necessary for a fair statement of the results for the periods presented. Estimates are
required for the preparation of consolidated financial statements in accordance with generally accepted accounting principles and actual results
could differ from these estimates. All significant intercompany accounts and transactions are eliminated in consolidation.
Reclassification
Certain amounts in prior periods have been reclassified to conform to the current period presentation. During the fourth quarter of 2016, we
combined liabilities that were previously reflected in accounts payable with accrued liabilities in our consolidated balance sheets to better reflect
all accruals in one caption. This change was applied retrospectively. As of December 31, 2016 and December 31, 2015, accrued liabilities
increased and accounts payable decreased by $7.2 million and $5.9 million, respectively. This change does not impact net working capital
movements, operating cash flows or total current liabilities.
Cash and Cash Equivalents
Cash and cash equivalents are stated at cost, and include cash and investments with original maturities of three months or less at acquisition and
also include amounts due from credit card processors.

F-7

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