2017 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
We are a leading global cruise company which operates the Norwegian Cruise Line, Oceania Cruises and Regent Seven Seas Cruises
brands. As of December 31, 2017, we had 25 ships with approximately 50,400 Berths. We plan to introduce seven additional ships
through 2025 and we have an option to introduce two additional ships for delivery in 2026 and 2027, subject to certain conditions.
Norwegian Bliss and Norwegian Encore are on order for delivery in the spring of 2018 and fall of 2019, respectively. We also have an
Explorer Class Ship, Seven Seas Splendor, on order for delivery in the winter of 2020. Project Leonardo will introduce an additional
four ships with expected delivery dates through 2025. These additions to our fleet (exclusive of the option for two additional ships) will
increase our total Berths to approximately 72,300.
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. In January 2013, NCLH completed its IPO, pursuant to which it sold 27,058,824 ordinary
shares for net proceeds, after deducting underwriting discounts and commissions and expenses, of approximately $473.9 million. In
connection with the consummation of the IPO, the Sponsors' ordinary shares in NCLC were exchanged for the ordinary shares of
NCLH, and NCLH became the owner of 100% of the ordinary shares and parent company of NCLC (the "Corporate Reorganization").
At the same time, 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 prepare for the
Corporate Reorganization and the IPO. As the economic position of the investors did not change as part of the Corporate Reorganization
it was considered a nonstubstantive merger from an accounting perspective.
In November 2014, we completed the Acquisition of Prestige. We believe that the combination of Norwegian and Prestige creates a
cruise operating company with a rich product portfolio and strong market presence.
The Sponsors have completed numerous Secondary Equity Offerings and as of December 31, 2017 have reduced their ownership to
16.8% of NCLH's ordinary shares (we refer you to Note 7- "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 presentation 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 properly reflect promotional discounts allocated between passenger ticket
revenue to onboard and other revenue. During the fourth quarter of 2017 we reclassified $21.9 million of revenue from passenger ticket
revenue to onboard and other revenue for the prior three quarters. This cumulative adjustment for 2017 amends the multi-element
allocation of revenue between these two financial statement line items. This change does not impact total revenue or net income, nor did
it impact any periods in 2016 or 2015.
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

Table of Contents for the Digital Edition of 2017 Annual Report for Norwegian Cruiseline Holdings