2018 Annual Report for Norwegian Cruiseline Holdings - 27

Fluctuations in foreign currency exchange rates could adversely affect our financial results.
We earn revenues, pay expenses, purchase and own assets and incur liabilities in currencies other than the U.S. dollar; most significantly a
portion of our revenue and expenses are denominated in foreign currencies, particularly British pound, Canadian dollar, euro and Australian
dollar. Because our consolidated financial statements are presented in U.S. dollars, we must translate revenues and expenses, as well as assets
and liabilities, into U.S. dollars at exchange rates in effect during or at the end of each reporting period. The strengthening of the U.S. dollar
against our other major currencies may adversely affect our U.S. dollar financial results and will reduce the U.S. dollar amount received upon
conversion of these currencies into U.S. dollars.
We have historically and may in the future enter into ship construction contracts denominated in euros or other foreign currencies. While we
have entered into foreign currency derivatives to manage a portion of the currency risk associated with such contracts, we are exposed to
fluctuations in the euro exchange rate for the portions of the ship construction contracts that have not been hedged. Additionally, if the
shipyard is unable to perform under the related ship construction contract, any foreign currency hedges that were entered into to manage the
currency risk would need to be terminated.
Our expansion into and investments in new markets may not be successful.
We believe there remains significant opportunity to expand our passenger sourcing into major markets, such as Europe and Australia, as well
as into emerging markets and to expand our itineraries in new markets, as we did with Cuba, and we are in the process of such expansion
efforts. Expansion into new markets requires significant levels of investment and attention from management. There can be no assurance that
these markets will develop as anticipated or that we will have success in these markets, and if we do not, we may be unable to recover our
investment spent to expand our business into these markets and may forgo opportunities in more lucrative markets, which could adversely
impact our business, financial condition and results of operations.
Overcapacity in key markets or globally could adversely affect our operating results.
We continue to expand our fleet through our newbuild program and expect to add 11 additional ships to our fleet through 2027. Our
competitors have also announced similar expansions to their fleets. These increases in capacity in the cruise industry globally and potential
overcapacity in certain key markets may cause us to lower pricing, which would reduce profitability and adversely affect our results of
operations. Additionally, older ships in our fleet may not be as competitive as new ships enter the market and we may not be able to sell such
older ships at optimal prices.
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. If there is a change in the diplomatic relationship between the U.S. and Cuba, or either government
issued sanctions or regulations that affect travel to Cuba, it is possible that we will no longer include Cuba in our itineraries. 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.
Our inability to obtain adequate insurance coverage may adversely affect our business, financial condition and results of operations.
There can be no assurance that our risks are fully insured against or that any particular claim will be fully paid by our insurance. Such losses,
to the extent they are not adequately covered by contractual remedies or insurance, could affect our financial results. In addition, we have
been and continue to be subject to calls, or premiums, in amounts based not only on our own claim records, but also the claim records of all
other members of the protection and indemnity associations through which we receive indemnity coverage for tort liability. Our payment of
these calls and increased premiums could result in significant expenses to us. If we, or other members of our protection and indemnity
associations, were to sustain significant losses in the future, our ability to obtain insurance coverage at commercially reasonable rates or at all
could be materially adversely affected. For example, in the past our protection and indemnity associations have increased certain deductibles
and determined not to cover certain categories of claims. Moreover, irrespective of the occurrence of such events, there can still be no
assurance that we will be able to obtain adequate insurance coverage at commercially reasonable rates or at all.

2018 Annual Report for Norwegian Cruiseline Holdings

Table of Contents for the Digital Edition of 2018 Annual Report for Norwegian Cruiseline Holdings