2018 Annual Report for Norwegian Cruiseline Holdings - F-14

Contract Balances
Receivables from customers are included within accounts receivables, net. As of December 31, 2018 and January 1, 2018, our receivables
from customers were $17.3 million and $13.8 million, respectively.
Contract liabilities represent the Company's obligation to transfer goods and services to a customer. A customer deposit held for a future
cruise is generally considered a contract liability only when final payment is both due and paid by the customer and is usually recognized in
earnings within 180 days of becoming a contract. Other deposits held and included within advance ticket sales or other long-term liabilities
are not considered contract liabilities as they are largely cancelable and refundable. Our contract liabilities are included within advance ticket
sales. As of December 31, 2018 and January 1, 2018, our contract liabilities were $1.2 billion and $1.0 billion, respectively. Of the amounts
included within contract liabilities, approximately 50% were refundable in accordance with our cancellation policies. Approximately $1.0
billion of the January 1, 2018 contract liability balance has been recognized in revenue for the year ended December 31, 2018.
Our revenue is seasonal and based on the demand for cruises. Historically, the seasonality of the North American cruise industry generally
results in the greatest demand for cruises during the Northern Hemisphere's summer months. This predictable seasonality in demand has
resulted in fluctuations by quarter in our revenue and results of operations. The seasonality of our results is increased due to ships being
taken out of service for regularly scheduled Dry-docks, which we typically schedule during non-peak demand periods. This seasonality will
result in higher contract liability balances as a result of an increased number of reservations preceding these peak demand periods. The
addition of new ships also increases the contract liability balances prior to a new ship's delivery, as staterooms are usually made available for
reservation prior to the inaugural cruise. Norwegian Bliss, with approximately 4,000 Berths, was delivered on April 19, 2018 and added 8%
capacity to our fleet.
Practical Expedients and Exemptions
We do not disclose information about remaining performance obligations that have original expected durations of one year or less. We
recognize revenue in an amount that corresponds directly with the value to the customer of our performance completed to date. Variable
consideration, which will be determined based on a future rate and passenger count, is excluded from the disclosure and these amounts are
not material. These variable non-disclosed contractual amounts relate to our non-cancelable charter agreements and a leasing arrangement
with a certain port, both of which are long-term in nature. Amounts that are fixed in nature due to the application of minimum guarantees are
also not material and are not disclosed.
Contract Costs
Management expects that incremental commissions and credit card fees paid as a result of obtaining ticket contracts are recoverable;
therefore, we recognize these amounts as assets when they are paid prior to the voyage. Costs of air tickets and port taxes and fees that fulfill
future performance obligations are also considered recoverable and are recorded as assets. As of December 31, 2018, $116.3 million of costs
incurred to obtain customers and $32.5 million of costs to fulfill contracts with customers are recognized as assets within prepaid expenses
and other assets. Incremental commissions, credit card fees, air ticket costs, and port taxes and fees are recognized ratably over the voyage
sailing dates, concurrent with associated revenue, and are primarily in commissions, transportation and other expense.
Financial Statement Presentation
As of January 1, 2018, in connection with the adoption of Topic 606, we reclassified $51.6 million of deferred costs associated with
obtaining customer contracts to prepaid expenses and other assets from advance ticket sales.
Impacts on Financial Statements
The adoption of Topic 606 does not change the timing, classification or amount of revenue recognized from customers in our consolidated
financial statements nor does it change the timing, classification or amount of incremental costs to obtain and fulfill those contracts with
customers. Therefore, the adoption had no impact on our consolidated statement of operations or consolidated statement of comprehensive
income.

F-14

2018 Annual Report for Norwegian Cruiseline Holdings

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