Annual report pursuant to Section 13 and 15(d)

Commitments and Contingencies

Commitments and Contingencies
12 Months Ended
Dec. 31, 2015
Commitments And Contingencies Disclosure [Abstract]  
Commitments and Contingencies
12. Commitments and Contingencies


Operating Leases


Total expense under non-cancelable operating lease commitments, primarily for offices, motor vehicles and office equipment was $12.6 million, $9.2 million and $9.4 million for the years ended December 31, 2015, 2014 and 2013, respectively. As of December 31, 2015, minimum annual rentals for non-cancelable leases with initial or remaining terms in excess of one year were as follows (in thousands):


Year   Amount  
2016   $ 12,448  
2017     13,606  
2018     13,662  
2019     13,660  
2020     14,490  
Thereafter     88,814  
Total minimum annual rentals   $ 156,680  


Rental payments applicable to such operating leases are recognized on a straight-line basis over the term of the lease.


Ship Construction Contracts


We have orders with Meyer Werft for three Breakaway Plus Class Ships for delivery in the spring of 2017, spring of 2018 and fall of 2019. These ships will be the largest in our fleet, reaching approximately 164,600 Gross Tons and approximately 4,100 to 4,350 Berths each and will be similar in design and innovation to our Breakaway Class Ships. The combined contract price of these three ships is approximately €2.5 billion, or $2.7 billion based on the euro/U.S. dollar exchange rate as of December 31, 2015. We have export credit financing in place that provides financing for 80% of their contract prices. We also have a contract with Fincantieri shipyard to build a cruise ship to be named Seven Seas Explorer. The original contract price of this ship is approximately €343.0 million, or approximately $372.6 million, based on the euro/U.S. dollar exchange rate as of December 31, 2015. We have export credit financing in place that provides financing for 80% of the ship’s contract price. Seven Seas Explorer is expected to be delivered in the summer of 2016.


In connection with the contracts to build the ships, we do not anticipate any contractual breaches or cancellation to occur. However, if any would occur, it could result in, among other things, the forfeiture of prior deposits or payments made by us and potential claims and impairment losses which may materially impact our business, financial condition and results of operations.


As of December 31, 2015, minimum annual payments for non-cancelable ship construction contracts with initial or remaining terms in excess of one year were as follows (in thousands):


Year   Amount  
2016   $ 536,815  
2017     806,681  
2018     890,447  
2019     758,114  
Total minimum annual payments   $ 2,992,057  


Port Facility Commitments


As of December 31, 2015, future commitments to pay for usage of certain port facilities were as follows (in thousands):


Year   Amount  
2016   $ 33,217  
2017     29,141  
2018     20,403  
2019     20,858  
2020     21,326  
Thereafter     60,889  
Total port facility future commitments   $ 185,834  


The FMC requires evidence of financial responsibility for those offering transportation on passenger ships operating out of U.S. ports to indemnify passengers in the event of non-performance of the transportation. Accordingly, each of our three brands are required to maintain a $30.0 million third-party performance guarantee in respect of liabilities for non-performance of transportation and other obligations to passengers. The guarantee requirements are subject to additional consumer price index-based adjustments. Also, each of our brands has a legal requirement to maintain a security guarantee based on cruise business originated from the U.K. and, accordingly, has established separate bonds with the Association of British Travel Agents currently valued at approximately British Pound Sterling 6.5 million in the aggregate. We also are required to establish financial responsibility by other jurisdictions to meet liability in the event of non-performance of our obligations to passengers from those jurisdictions.


From time to time, various other regulatory and legislative changes have been or may in the future be proposed that may have an effect on our operations in the U.S. and the cruise industry in general.




In 2015, the Alaska Department of Environmental Conservation issued Notices of Violations to major cruise lines that operated in the state of Alaska, including NCLH, for alleged violations of the Alaska Marine Vessel Visible Emission Standards that occurred over the last several years. We are cooperating with the Alaska Department of Environmental Conservation and conducting our own internal investigation into these matters. However, we do not believe the ultimate outcome will have a material impact on our financial condition, results of operations or cash flows.


In the normal course of our business, various claims and lawsuits have been filed or are pending against us. Most of these claims and lawsuits are covered by insurance and, accordingly, the maximum amount of our liability is typically limited to our deductible amount. Nonetheless, the ultimate outcome of these claims and lawsuits that are not covered by insurance cannot be determined at this time. We have evaluated our overall exposure with respect to all of our threatened and pending litigation and, to the extent required, we have accrued amounts for all estimable probable losses associated with our deemed exposure. We are currently unable to estimate any other potential contingent losses beyond those accrued, as discovery is not complete nor is adequate information available to estimate such range of loss or potential recovery. We intend to vigorously defend our legal position on all claims and, to the extent necessary, seek recovery.