UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-K

[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the fiscal year ended December 31, ~~2012~~2013

[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES AND EXCHANGE ACT OF 1934

For the transition period from to

Commission File Number: 333-178244

Seven Seas Cruises S. DE R.L.

(Exact Name of Registrant as Specified in Its Charter)



Republic of Panama				75-3262685
(State or Other Jurisdiction of Incorporation)				(I.R.S. Employer Identification No.)

8300 NW 33^rd Street, Suite 100

Miami, FL 33122

(Address of Principal Executive Offices) (Zip Code)

Registrant's telephone number, including area code: (305) 514-2300

Securities registered pursuant to Section 12(b) of the Act: None

Securities registered pursuant to Section 12(g) of the Act: None

Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. Yes ¨ No x

Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act. Yes x No ¨

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ¨ No x*

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). Yes x No ¨

Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of registrant’s knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K.

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).

Yes ¨ No x

* The registrant became subject to the filing requirements of Section 15(d) of the Securities Exchange Act of 1934 on May 10, 2012. The registrant filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the period it was required to file such reports and during the past 90 days notwithstanding that the registrant is no longer required to file such reports.

SEVEN SEAS CRUISES S. DE R.L.

FORM 10-K

FOR THE FISCAL YEAR ENDED DECEMBER 31, ~~2012~~2013

TABLE OF CONTENTS

		Page
	Forward-Looking Statements	1
PART I.
Item 1.	Business	3
Item 1A.	Risk Factors	1820
Item 2.	Properties	2730
Item 3.	Legal Proceedings	2730
Item 4.	Mine Safety Disclosures	2730
PART II.
Item 5.	Market for Registrant's Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities	2831
Item 6.	Selected Financial Data	2831
Item 7.	Management's Discussion and Analysis of Financial Condition and Results of Operations	3033
Item 7A.	Quantitative and Qualitative Disclosures About Market Risk	4347
Item 8.	Financial Statements and Supplementary Data	4447
Item 9.	Changes In and Disagreements with Accountants on Accounting and Financial Disclosure	4447
Item 9A.	Controls and Procedures	4448
Item 9B.	Other Information	4548
PART III.
Item 10.	Directors, Executive Officers and Corporate Governance	4549
Item 11.	Executive Compensation	4852
Item 12.	Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters	5671
Item 13.	Certain Relationships and Related Transactions, and Director Independence	5873
Item 14.	Principal Accounting Fees and Services	6074
PART IV.
Item 15.	Exhibits, Financial Statement Schedules	6176
Signatures		6176

FORWARD-LOOKING STATEMENTS

Some of the statements in this Annual Report on Form 10-K constitute forward-looking statements that do not directly or exclusively relate to historical facts. The Private Securities Litigation Reform Act of 1995 provides a “safe harbor” for certain forward-looking statements as long as they are identified as forward-looking and are accompanied by meaningful cautionary statements identifying important factors that could cause actual results to differ materially from the expectations expressed or implied in the forward-looking statements.

All statements other than statements of historical facts, including, without limitation, those regarding our business strategy, financial position, results of operations, plans, prospects and objectives of management for future operations (including development plans and objectives relating to our activities), made in this Annual Report on Form 10-K are forward-looking. Many, but not all, of these statements can be found by looking for terms like “expect,” “anticipate,” “goal,” “project,” “plan,” “believe,” “seek,” “could,” “will,” “may,” “might,” “forecast,” “estimate,” “intend,” and “future” and for similar words. Forward-looking statements reflect management's current expectations and do not guarantee future performance and may involve risks, uncertainties and other factors that are difficult to predict and many of which are beyond our control. These factors could cause our actual results, performance, or achievements to differ materially from the future results, performance, or achievements expressed or implied in those forward-looking statements. Examples of these risks, uncertainties and other factors include, but are not limited to:


•	adverse economic conditions that may affect consumer demand for cruises, such as declines in the securities and real estate markets, declines in disposable income and consumer confidence;


•	changes in cruise capacity, as well as capacity changes in the overall vacation industry;


•	intense competition from other cruise companies, as well as non-cruise vacation alternatives, which may affect our ability to compete effectively;


•	the delivery schedules and estimated costs of newbuilds, in particular the Seven Seas Explorer, on terms that are favorable or consistent with our expectations;


•	our substantial leverage, including the inability to generate the necessary amount of cash to service our existing debt and the incurrence of substantial indebtedness in the future;


•	continued availability under our credit facilities and compliance with our covenants;


•	changes in interest rates, fuel costs, or foreign currency rates;


•	the risks associated with operating internationally;


•	changes in general economic, business and geopolitical conditions;


•	the impact of changes in the global credit markets on our ability to borrow and our counter party credit risks, including with respect to our credit facilities, derivative instruments, contingent obligations and insurance contracts;


•	the impact of problems encountered at shipyards, as well as any potential claim, impairment, loss, cancellation or breach of contract in connection with any contracts we have with shipyards;


•	the impact of any future changes relating to how travel agents sell and market our cruises;


•	the impact of any future increases in the price of, or major changes or reduction in, commercial airline services;


•	the impact of seasonal variations in passenger fare rates and occupancy levels at different times of the year;


•	adverse events impacting the security of travel that may affect consumer demand for cruises, such as terrorist acts, acts of piracy, armed conflict and other international events, including political hostilities or war;


•	the impact of the spread of contagious diseases;


•	the impact of mechanical failures or accidents involving our ships and the impact of delays, costs and other factors resulting from emergency ship repairs, as well as scheduled maintenance, repairs and refurbishment of our ships;


•	accidents, criminal behavior and other incidents affecting the health, safety, security and vacation satisfaction of passengers and causing damage to ships, which could, in each case, cause reputation harm, the modification of itineraries or cancellation of a cruise or series of cruises;


•	the continued availability of attractive port destinations;


•	our ability to attract and retain qualified shipboard crew members and key personnel; and


•	changes involving the corporate, tax, environmental, health, safety and other regulatory regimes in which we operate.

The above examples are not exhaustive. From time to time, new risks emerge and existing risks increase in relative importance to our operations. We expressly disclaim any obligation or undertaking to release publicly any updates or revisions to any forward-looking statement contained herein to reflect any change in our expectations with regard thereto or any change of events, conditions or circumstances on which any such statement was based. Such forward-looking statements are based on our current beliefs, assumptions, expectations, estimates and projections regarding our present and future business strategies and the environment in which we will operate in the future. These forward-looking statements speak only as of the date of this report. All subsequent written and oral forward-looking statements attributable to us or any person acting on our behalf are

and the environment in which we will operate in the future. These forward-looking statements speak only as of the date of this report. All subsequent written and oral forward-looking statements attributable to us or any person acting on our behalf are expressly qualified in their entirety by the cautionary statements contained or referred to in this section and in this Annual Report on Form 10-K, particularly in "Item 1A—Risk Factors".

You should read the following discussion of our financial condition and results of operations in conjunction with our consolidated financial statements and the related notes included in "Item 8 - Financial Statements and Supplementary Data" of this Annual Report on Form 10-K. In addition to our historical consolidated financial information, the following discussion contains forward-looking statements that reflect our plans, estimates, and beliefs. Our actual results could differ materially from those discussed in the forward-looking statements.

PART I

Item 1. Business

Our Company

Regent Seven Seas is a leading luxury cruise company with the industry’s most comprehensive all-inclusive product offering, across a wide variety of worldwide itineraries. We own and operate three, six-star luxury cruise vessels, Seven Seas Navigator, Seven Seas Mariner, and Seven Seas Voyager, with 1,890 berths in the aggregate. ~~Our~~We ~~focus~~are oncurrently ~~providing~~building ~~guests~~a ~~with~~750 ~~highly~~passenger ~~personalized~~ship, ~~service~~Seven Seas Explorer, ~~activities~~for delivery in the summer of 2016. The all-suite, all-balcony ship will feature sophisticated designer suites ranging from 300 to 3,500 square feet with an industry leading space ratio of 76.0 and ~~world~~a crew-~~class~~to-guest ~~accommodations~~ratio ~~has~~of ~~earned~~1:1.4. usThe ~~numerous~~ship ~~awards~~will include six open-seating gourmet restaurants, Regent’s signature nine-deck open atrium, a two-story theater, two boutiques and an expansive Canyon Ranch SpaClub®. Operationally, the vessel will be a green ship, employing the most advanced environmental systems and state-of- the-art technology.

WeOur ~~are~~focus ~~consistently~~on ~~ranked~~providing ~~among~~guests ~~the~~with ~~top~~highly ~~luxury~~personalized ~~cruise lines by various travel publications. In 2012~~service, ~~Condé Nast~~activities ~~Traveler ranked us 2nd in "Small~~ and ~~Mid~~world-~~Size~~class ~~Ship"~~accommodations ~~categories~~has ~~and~~earned ~~awarded~~ us ~~"Best~~numerous ~~Cabins"~~awards. ~~and~~Additionally, ~~"Platinum~~we ~~Circle".~~are Weconsistently ~~also~~ ranked ~~2nd~~among inthe ~~"Top~~top ~~Large-Ship~~luxury ~~Cruise~~cruise ~~Line"~~lines ~~category~~by ~~and~~various ~~were~~travel ~~honored~~publications. ~~with~~During ~~"World's~~2011, ~~Best~~2012 ~~Service"~~and ~~from~~2013, ~~Travel~~we +were ~~Leisure's~~bestowed ~~World's~~ "Best ~~Awards.~~Luxury ~~From the~~ Cruise ~~Critic~~Line" ~~Editor's~~by ~~Pick Awards~~Virtuoso, wea ~~received~~large ~~the~~network ~~"Best~~of ~~for~~travel ~~Luxury"~~agencies. ~~award~~Epicurious.com ~~Porthole~~has ~~Magazine~~also ~~named~~rated usSeven ~~"Best~~Seas ~~Northern~~Mariner ~~Europe~~as ~~Itineraries"~~having inamong ~~its~~the ~~Readers'~~best ~~Choice~~food ~~Awards~~at sea. We ~~were~~ also ~~bestowed~~recently won the "Best ~~Luxury~~For ~~Cruise Line~~Luxury" bycategory ~~Virtuoso,~~in athe ~~large~~2013 ~~network~~Cruise ofCritic ~~travel~~Editor's ~~agencies~~Picks Awards.

Our Inaward-winning ~~June~~fleet ~~2011,~~features wesome ~~were~~of ~~voted as having~~ the ~~best~~highest ~~suites~~space-to-guest atand ~~sea~~staff-to-guest byratios in the ~~Cruise~~industry, ~~Critic~~providing ~~Cruisers’~~guests ~~Choice~~with ~~Award—taking~~individually-tailored ~~both~~service ~~first~~ and ~~second~~what ~~place~~we ~~with~~believe ~~Seven~~to ~~Seas~~be ~~Voyager~~unparalleled ~~and~~cruise ~~Seven Seas Mariner, respectively~~accommodations. We ~~also~~sail ~~ranked~~to ~~among~~exotic ~~the~~destinations ~~best~~around ~~cruise lines in~~ the world ~~in their categories for “Best Overall~~,” ~~“Best~~allowing ~~Cruises~~us ~~for~~to ~~Dining,”~~provide ~~“Best~~our ~~Cruises~~guests ~~for~~with ~~Public~~a ~~Rooms,”~~global ~~“Best Cruises for Shore Excursions”~~ and ~~“Best~~differentiated ~~Cruises~~travel ~~For~~experience. ~~Value”~~Included ~~—all~~ in ~~the~~our ~~Small~~more ~~Ship~~than ~~category. Condé Nast~~250 ~~Traveler’s~~destinations ~~Cruise~~are ~~Poll~~Alaska, ~~of 2011 rated~~ the ~~Seven~~Caribbean, ~~Seas~~South ~~Voyager~~America, asNorthern Europe, the #1Mediterranean, ~~Large~~Africa, ~~Cruise~~South ~~Ship~~Pacific and ~~listed~~Asia. ~~Regent’s~~Our ~~itineraries~~cruises ~~among~~range ~~the~~from ~~“Dream~~seven ~~Itineraries~~days ~~for~~to ~~2012.”~~as ~~Epicurious.com~~many ~~rated~~as ~~Seven~~136 ~~Seas~~days, ~~Mariner~~depending ason ~~having among~~ the ~~best food at sea~~itinerary. We ~~also~~distinguish ~~earned~~ourselves ~~top~~from ~~honors~~other incruise ~~the~~competitors ~~Virtuoso~~on ~~Performance~~the ~~Awards,~~basis ~~which~~of ~~recognize~~the ~~luxury~~quality ~~travel~~of ~~experiences.~~our Atships, the ~~23rd~~all-inclusive ~~annual~~nature ~~Travel~~of ~~Mart~~our ~~conference~~product, at the ~~Bellagio~~individualized inservice ~~Las~~we ~~Vegas~~provide, ~~we won for “Best Luxury Cruise Experience”~~ and ~~were~~the ~~rated~~variety ~~“World’s Best Cruise Line” by readers~~ of ~~Condé~~itineraries ~~Nast~~we ~~Traveler magazine~~sail.

Our ~~award-winning~~target ~~fleet~~customers ~~features~~are ~~some~~primarily ofbaby ~~the~~boomers, ~~highest~~as ~~space-to-guest~~they represent an upscale customer base that is the largest and ~~staff-to-guest~~the ~~ratios~~fastest ingrowing segment of the ~~industry~~U.S. population. In 2013, ~~providing~~the ~~guests~~average ~~with~~Regent ~~individually-tailored~~Seven ~~service~~Seas ~~and~~customer ~~what~~was we63 ~~believe~~years toold. beContinued ~~unparalleled~~innovation ~~cruise~~across ~~accommodations.~~our Weproduct ~~sail~~offerings tonot ~~exotic~~only ~~destinations~~attracts ~~around~~new ~~the~~cruise ~~world~~passengers, ~~allowing~~but usalso todrives ~~provide~~a ~~our~~high ~~guests~~percentage ~~with~~of repeat customer traffic, a ~~global~~consistent ~~and~~source ~~differentiated~~of ~~travel~~our ~~experience~~passenger and revenue growth. ~~Included~~We inbelieve that our ~~250~~customer-centric ~~destinations~~operating ~~are Alaska~~model, and the ~~Caribbean,~~highly ~~South~~personalized ~~America,~~cruise ~~Northern~~experience ~~Europe,~~that ~~the~~we ~~Mediterranean~~offer, ~~Africa~~drive high customer satisfaction and ~~Asia.~~significant ~~Our~~repeat ~~cruises~~bookings ~~range~~totaling ~~from~~approximately ~~seven~~50% and 52% of our passenger days tosold asin ~~many~~2013 asand ~~143~~2012, ~~days~~respectively. This loyal customer base, ~~depending~~combined onwith our "market to fill" marketing strategy and the ~~itinerary.~~fact Wethat ~~distinguish~~guests ~~ourselves~~book ~~from~~cruises ~~other~~up ~~cruise~~to ~~competitors~~20 onmonths ~~the~~in ~~basis~~advance, with cash deposits typically 15% of the ~~quality~~total ofcruise ~~our~~package ~~ships,~~fare ~~the~~generally ~~all-inclusive~~due ~~nature~~within ofseven ~~our~~days ~~product~~of booking, ~~the~~creates ~~individualized~~significant ~~service~~advance wevisibility ~~provide,~~into ~~and~~our ~~the~~future ~~variety~~revenue ofand ~~itineraries~~provides wefor ~~sail~~strong cash flows.

~~Our~~For ~~target~~the ~~customers~~year ~~are~~ended ~~primarily~~December 31, ~~baby boomers~~2013, aswe ~~they~~had ~~represent~~total anrevenue ~~upscale~~of ~~customer~~$545.8 ~~base~~million, ~~that~~net isincome ~~the~~of ~~largest~~$22.6 million and ~~the~~Adjusted ~~fastest~~EBITDA ~~growing segment~~ of ~~the U~~$105.S.9 ~~population~~million. InThis ~~2012,~~represents ~~the~~an ~~average~~increase ~~Regent~~of ~~Seven~~3.2%, ~~Seas~~655.8%, ~~customer~~and ~~was 62 years old~~20.6% ~~Continued~~over ~~innovation~~2012 ~~across~~total ~~our~~revenue, ~~product~~net ~~offerings~~income ~~not~~and ~~only~~Adjusted ~~attracts new cruise passengers~~EBITDA, ~~but~~respectively. ~~also~~Revenue ~~drives~~growth was a ~~high~~result ~~percentage~~ of ~~repeat~~strong ~~customer~~bookings ~~traffic,~~and a ~~consistent~~favorable ~~source~~pricing ~~of our passenger and revenue growth~~environment. WeThe ~~believe~~increase ~~that~~in ~~our~~net ~~customer-centric~~income ~~operating~~was ~~model,~~primarily ~~and~~driven ~~the~~by ~~highly~~increases ~~personalized~~in ~~cruise~~net ~~experience~~yields. ~~that~~In wecomparing ~~offer,~~our ~~drive~~Adjusted ~~high~~EBITDA ~~customer~~Margin ~~satisfaction~~which ~~and~~was ~~significant~~19.4 ~~repeat bookings totaling approximately 52~~% ~~and~~ ~~53%~~at ofDecember ~~our~~31, ~~passenger~~2013, ~~revenue~~to inother ~~2012~~cruise ~~and 2011~~lines, ~~respectively.~~it ~~This~~is ~~loyal~~important ~~customer~~to ~~base,~~note ~~combined~~that ~~with~~ our ~~marketing~~more ~~strategy~~inclusive ~~and~~product ~~the~~offering ~~fact~~results ~~that~~in ~~guests~~higher ~~book~~Commissions, ~~cruises~~transportation upand toother 22expense. ~~months in advance~~Accordingly, ~~with~~we believe a ~~cash~~more ~~deposit~~appropriate ~~between~~margin ~~15%~~analysis -is ~~20%~~Net ofRevenue ~~the~~Adjusted ~~total~~EBITDA ~~cruise~~Margin, ~~package~~which ~~fare~~is ~~due~~Adjusted ~~within~~EBITDA ~~seven~~divided ~~days~~by ofNet ~~booking~~Revenue, ~~creates~~which ~~significant~~was ~~advance~~30.0% ~~visibility~~for ~~into~~the ~~our~~year ~~future~~ended ~~revenue~~December ~~and~~31, ~~provides for strong cash flows~~2013.

~~For~~We ~~the~~own ~~fiscal~~and ~~year~~operate ~~ended~~a ~~December 31,~~three-ship ~~2012,~~fleet wewith ~~had~~an ~~total~~aggregate ~~revenue~~appraised ofvalue ~~$529.1 million, net income~~ of $3607.05 million ~~and~~based ~~Adjusted~~on EBITDA of $87.9 million. This represents a 9% increase, 74% decrease and 9% decrease over 2011 revenue, net income and Adjusted EBITDA, respectively. Revenue growth was a result of strong bookings and a favorable pricing environment. Net income decreased, primarily attributable to an increase in operating expenses and higher effective interest rates from the ~~issuance~~average of ~~our senior secured notes and refinancing of~~ the ~~first~~appraisals ~~lien.~~performed Adjusted EBITDA declined due to increased commissions, transportation and other expenses. We incurred additional product costs associated with the increased inclusive product offerings we added to our European cruise packages in ~~light~~January of2014 ~~the~~by ~~softer~~two ~~European~~independent ~~market~~ship asbrokerage ~~well as costs associated with increased revenues and increased passenger days sold~~firms.

We own and operate a three-ship fleet with an aggregate appraised value of $615 million based on the average of the appraisals performed in January 2013 by two independent ship brokerage firms.

Our History

Regent is a leading luxury cruise company and traces its origins to 1992, when Seven Seas Cruise Line merged with Diamond Cruise to become Radisson Seven Seas Cruises. In 2006, wethe ~~began~~cruise ~~operating~~line ~~under~~was ~~the~~re-branded ~~name~~by its then-owner Carlson Company as Regent Seven Seas Cruises. In January 2008, Prestige Cruise Holdings, Inc. ("PCH") acquired substantially all of the assets of Regent Seven Seas Cruises, Inc. and the equity of certain of its affiliated companies and joint ventures from Carlson Cruises Worldwide, Inc. and Vlasov Shipping Corporation.

We are a 100%-owned subsidiary of PCH, the market leader in the upper premium and luxury segments of the cruise industry with approximately 6,400 berths between its Oceania Cruises and Regent Seven Seas brands. PCH is 100% owner of Oceania Cruises Inc. ("OCI"), which currently operates five vessels on worldwide itineraries. PCH is a 100%-owned subsidiary of our ultimate parent company, Prestige Cruises International, Inc. ("PCI"), which is primarily controlled by funds affiliated with Apollo Global Management, LLC ("Apollo"). 3

We are a 100%-owned subsidiary of PCH, the market leader in the Upscale segment, which is comprised of the Upper Premium and Luxury segments, of the $29 billion cruise industry, with approximately 6,442 berths between its Oceania Cruises and Regent Seven Seas brands. PCH is 100% owner of Oceania Cruises Inc. ("OCI"), which currently operates five vessels on worldwide itineraries. PCH is a 100%-owned subsidiary of our ultimate parent company, Prestige Cruises International, Inc. ("PCI"), which is primarily controlled by funds affiliated with Apollo Global Management, LLC ("Apollo").

Seven Seas Cruises S. DE R.L. is a sociedad de responsabilidad limitada, organized and existing under the laws of the Republic of Panama. Our principal executive offices are located at 8300 NW 33rd Street, Suite 100, Miami, FL 33122. Our telephone number at that address is (305) 514-2300. Our website is http://www.rssc.com. The information that appears on our website is not part of, and is not incorporated by reference into, this Annual Report on Form 10-K.

Our Industry

We believe that the cruise industry demonstrates positive fundamentals:

Strong Industry Growth

Cruising represents a small but growing sector of the overall vacation market. Cruising is a vacation alternative with broad appeal, as it offers a wide range of products from contemporary to luxury service offering to suit the various preferences of vacationing customers of all ages, backgrounds and interests. According to Cruise Lines International Association ("CLIA"), only 24% of the U.S. population has ever taken a cruise. ~~The industry’s collective marketing efforts and word of mouth from satisfied customers have produced millions of potential new customers. Globally~~However, CLIA estimates that during 2012, approximately 17.2 million passengers ~~took~~went on a CLIA North America member cruise, an increase of 5.3.8% over the preceding year. ~~Despite~~According ~~this~~to ~~growth~~CLIA, the ~~cruise~~number ~~industry~~of ~~still~~cruise ~~has~~passengers ~~lower~~originating ~~penetration~~from ~~levels~~North ~~compared~~America tohas ~~similar~~increased ~~land-based~~each ~~vacations.~~year Insince ~~2012,~~1995 ~~56.8 million~~as ~~people~~cruising ~~visited~~has ~~Orlando~~evolved ~~and~~from ~~39.7 million~~a ~~people~~niche ~~visited~~vacation ~~Las~~experience ~~Vegas,~~to ~~which~~a ~~highlights~~leisure ~~the~~holiday ~~cruise~~with ~~opportunities~~broad ~~that~~appeal ~~still~~across ~~exist~~all indemographic ~~the~~and ~~U.S.~~psychographic ~~cruise market~~groups. ~~Significant~~Despite ~~growth~~this ~~opportunities also exist for sourcing guests from the European and other international markets~~growth, ~~because~~ the ~~percentage~~cruise ofindustry ~~Europeans~~still ~~and~~has ~~Asians taking cruises are~~ lower ~~than~~penetration ~~the~~levels ~~percentage~~compared ~~of North~~to ~~Americans~~similar ~~taking~~land-based ~~cruises~~vacations. ~~According~~For ~~to CLIA~~example, ~~the~~based ~~number~~on ofindustry ~~cruise~~research, ~~passengers~~in ~~originating~~2013, ~~from~~approximately ~~North~~58.5 ~~America~~million ~~has~~people ~~increased~~visited inOrlando, ~~each~~Florida ~~year~~and ~~since~~approximately ~~1995~~40 asmillion ~~cruising~~people ~~has~~visited ~~evolved~~Las ~~from~~Vegas, aNevada. ~~niche~~We ~~vacation~~believe ~~experience~~this todata ahighlights ~~leisure~~the ~~holiday~~continued ~~with~~growth ~~broad~~potential ~~appeal~~for ~~across~~ocean ~~all~~going ~~demographics and nationalities~~cruising.

Attractive Demographics of Target Market

Long-term demographics are favorable for the cruise industry, in particular for the ~~luxury~~Upscale ~~market~~segment. Historically, people 55 years of age and older have had the highest disposable income levels and the most leisure time, making them the prime candidates for upper premium and luxury ship cruising given the ~~associated~~ longer itineraries and higher per diems of cruises in this category. According Into U.S. Census Bureau data, in 2010, the 55 ~~year~~years and older age group ~~had~~was comprised of 77 million ~~members~~individuals, representing approximately 25% of the U.S. population. This group is expected to increase to 87 million by 2015 and 106 million by 2025. The demographics in Europe are expected to follow a similar growth trend. There are 3.4 million high net worth individuals in North America, defined as having at least $1.0 million in investable assets. These individuals control $1112.47 trillion of wealth and represent ~~27.1~~approximately 31% of the global high net worth individual population. The demographics in Europe are expected to follow a similar growth trend.

~~Market~~International ~~Segment~~Growth in Emerging Markets

~~The~~Significant ~~cruise~~growth ~~sector~~opportunities isexist ~~segmented~~for ~~into~~sourcing ~~contemporary,~~guests ~~premium,~~from ~~upper~~Europe ~~premium,~~ and ~~luxury~~other ~~categories.~~international ~~The~~markets, ~~contemporary~~as ~~experience~~the ~~typically~~percentage ~~includes~~of ~~cruises~~guests onfrom ~~larger~~outside ~~ships~~North ~~that~~America ~~last~~who ~~seven~~have ~~days~~taken orcruises ~~fewer,~~is ~~have~~far alower ~~more~~than ~~casual~~the ~~ambiance~~percentage ~~and~~of ~~are~~North ~~less~~Americans. ~~expensive~~Emerging ~~than~~markets ~~premium,~~in ~~upper~~Asia ~~premium~~ and ~~luxury~~the ~~cruises.~~Pacific ~~The~~Rim ~~premium~~also ~~experience~~hold ~~typically~~strong ~~includes~~potential ~~cruises~~for ~~that~~us ~~last~~to ~~from~~source ~~seven~~future tocruise ~~fourteen days~~passengers. ~~Premium~~As ~~cruises~~recently ~~emphasize~~as ~~quality,~~seven ~~comfort~~years ago, ~~style~~no ~~and~~international ~~greater~~cruise ~~worldwide~~lines ~~destination-focused~~serviced ~~itineraries~~these regions. However, ~~with~~a ~~higher~~number ~~average~~of ~~pricing~~cruise ~~than~~lines in the ~~contemporary~~Contemporary ~~segment.~~and ~~Upper~~Premium ~~premium~~segments, iswhich atypically ~~niche~~include ~~market~~cruises ~~segment~~of ~~defined~~seven bydays anor ~~experience~~less, ~~that~~have ~~straddles~~a ~~the~~more ~~premium~~casual ambiance, and ~~luxury~~offer ~~segments~~the ~~but~~lowest ~~with~~prices, ~~smaller~~have recently deployed ships, ~~higher~~in ~~space~~Asia ~~per~~for ~~guest~~seasonal ~~and~~or ~~passenger~~year-round tooperations. ~~crew~~The ~~ratios~~increase ~~and~~in ~~more~~personal ~~refined~~wealth ~~culinary~~in ~~programs~~these ~~than~~and ~~the~~other ~~premium~~emerging ~~segment.~~markets ~~The~~is ~~luxury~~particularly ~~experience~~beneficial isto ~~characterized~~the bycruise ~~smaller~~industry, ~~vessel~~as ~~sizes~~historically, ~~than~~when the ~~contemporary~~living ~~and~~standards ~~premium~~improve ~~segments,~~in ~~unique~~a ~~itineraries~~country, the ~~highest~~population ~~service~~first ~~standards,~~focuses ~~the~~on ~~largest~~buying ~~accommodations~~physical assets (e.g., ~~gourmet~~houses, ~~culinary~~cars, ~~programs~~etc.) and ~~all-inclusive~~then ~~highly~~focuses ~~personalized~~on ~~service~~buying aspirational experiences, such as travel. ~~These~~Overall, ~~attributes~~the ~~provide~~growth ~~luxury~~in ~~operators~~cruising ~~pricing~~outside ~~leverage~~of asNorth ~~compared~~America tohas ~~the~~been ~~other~~increasing ~~segments~~at ofa ~~the~~considerably ~~cruise~~faster ~~market~~pace than within North America.

~~According~~Multiple to CLIA, North American passenger capacity included 222 ships with approximately 342,000 berths at the end of 2012. Luxury cruise companies account for 18 of the 222 ships and 2.6% of total berths. By the end of 2013, the number of luxury berths is expected to remain unchanged at 7,984, but the industry capacity will continue to increase such that luxury berths will only represent 2.2% of total berths.Segments

The cruise industry’s brands have been historically segmented into the Contemporary, Premium, Upper Premium and Luxury categories. Collectively, we refer to the Upper Premium and Luxury categories as the Upscale segment. The Premium segment typically includes cruises that range from seven to fourteen days. Premium cruises emphasize higher quality offerings, more personal comfort and greater worldwide itineraries, with higher average pricing than the Contemporary cruises.

Upper Premium is a niche market segment defined by an experience that straddles the Premium and Luxury segments but with smaller ships than those operated by the Premium lines, higher space and higher crew-to-guest ratios, more refined culinary programs, higher service standards and a greater destination-oriented focus than the Premium segment. The Luxury segment is characterized by the smallest vessel size, unique itineraries, the largest stateroom accommodations, gourmet culinary programs, highly personalized service and a more inclusive offering. These exclusive attributes, combined with limited supply growth and a growing worldwide target population, provide Upscale operators with significant pricing leverage as compared to the other segments of the cruise industry.

According to CLIA, North American passenger capacity included 225 ships with over 344,000 berths expected at the end of 2013. Luxury cruise companies account for 18 of the 225 ships and 2.3% of total berths. By the end of 2014, the number of luxury berths is expected to decrease 1.1% to 7,904, while the industry capacity will continue to increase such that luxury berths will only represent 2.2% of total berths.

The figures and attributes in the following chart represent what we believe are the typical characteristics of cruise industry segments:

Segment	Contemporary	Premium	Upper Premium	Luxury
Major Brands	Norwegian Cruise Line Carnival Cruise Line Royal CaribbeanCostaMSC Cruises	Holland America Line Celebrity Cruises Princess Cruises Cunard	Oceania Cruises Azamara Club Cruises	Regent Seven SeasSilversea CruisesCrystal CruisesSeabourn Cruises
Berths	1,700 – 5,000+	1,300 – 3,500+	684 – 1,250	200 – 1,070
Per Diem	$100 – $150	$150 – $250	$250 – $400	$500+
Pricing Model	A la carte	A la carte	A la carte	Inclusive
Length of Cruise	7 days or less	7 – 14 days	10 – 35180 days	7 – ~~100~~136+ days
Description	• Largest segment (~50% of market) • Larger ships with fixed dining and focus on onboard activities • Often the choice of first time cruisers	• Accounts for ~30% of market • Somewhat smaller ships with larger cabins and higher levels of service • Still appealing to broad market	• Unique combination of quality and value through midsized vessels • Destination-oriented cruises • Caters to the more experienced, affluent customer segment	• Ultra luxury and personalized service for affluent, experienced cruisers at industry leading per diems • Itineraries are extensive and unique • All-inclusive offering

High Barriers to Entry

The cruise industry is characterized by high barriers to entry, including the existence of ~~proven~~well-known ~~operating~~and established consumer brands, the cost, time and personal relationships required to develop strong travel agent network partnerships necessary for success, the large ~~expense~~capital ofexpenditures ~~building~~required to build new and sophisticated ships, the limited number of ship builders with experience in constructing passenger ships and the long lead time necessary to construct new ~~high quality vessels~~ships. Based on recently announced ~~newbuild~~newbuilds ~~vessels~~and depending on the intended industry segment, the cost to build a new cruise ship can range from $~~250.0~~340 million to $1.73 billion, or $~~193~~195,000 to $741,000 per berth,. ~~depending~~The ultimate cost depends on the ~~vessel~~ship’s size and product offering, with ~~recent~~the ~~luxury~~Upper ~~cruise~~Premium ~~vessel~~and ~~newbuilds~~Luxury segments having the highest cost per berth in the industry, ranging ~~between~~from $~~555~~443,000 to $741,000 per berth. The ~~luxury~~Luxury segment in particular has demonstrated high barriers to entry with ~~most of~~ our competitors having ~~been~~participated ~~market~~in ~~participants~~the market for an average of approximately 2324 years. We believe that the newbuild pipeline in the Upscale segment is relatively favorable compared to the broader industry, with few deliveries scheduled through 2016 other than Regent’s newbuild.

Competitive Strengths

Luxury Cruise Operator

We serve the luxury cruise segment primarily focused on the North American market, offering various global cruise itineraries that appeal to the more experienced, older and typically more affluent guest. We believe we operate a highly entrepreneurial and efficient organization through PCH and benefit from our focus on upscale passengers and sharing best practices, generating operating cost savings and enhanced operational efficiencies. We believe we have successfully positioned Regent Seven Seas as the luxury cruise operator of choice with our target passenger base by offering the most all-inclusive product in the industry, personalizing the passenger experience, developing unique itineraries and providing onboard enrichment programs and services. Travel professionals worldwide have recognized this leadership and have rewarded Regent Seven Seas with a significant number of industry honors.

Unique and High Quality Fleet

Our fleet, which consists of three owned ships, is designed to provide guests with the highest quality cruise experience throughout their stay. Our accommodations are large and luxurious, with space ratios of 58.78 to 68.68 (gross tons per guest), which are among the highest in the industry. Capacity is limited to 490 to 700 guests, allowing us to give each passenger a unique, personalized experience. As a result, our ships are less likely to have crowding or lines. Our cruises are staffed at a crew-to-guest ratio of approximately 1-to-1.6, further promoting individually tailored luxury service. Our three ships offer all-suite accommodations, with 90-100% of the suites featuring private balconies. We believe that Seven Seas Mariner and Seven Seas Voyager are the only ships in the world offering 100% suite-with-balcony accommodations.

~~Unique~~Our ~~and~~Competitive ~~Differentiated Product Offering~~Strengths

We ~~offer~~believe that the ~~industry’s~~following ~~most~~business ~~comprehensive all-inclusive cruising~~ model, ~~which~~attributes ~~differentiates~~enable us from other luxury cruise operators. Nearly every part of the cruise experience is included in the base price; from round-trip air transportation, pre-cruise hotel accommodations, fine dining, staff gratuities, shore excursions, to ~~top-shelf~~successfully ~~open~~execute bars. This unique all-inclusive offering provides a compelling value proposition for both customers and travel agents. Our destination-focused itineraries, augmented by exciting shore excursions and other land-based programs, including a diverse set of enrichment programs, comprised of workshops, lectures and classes led by relevant and often famous guest speakers, further differentiates us from many of our competitors. We feature itineraries that call on “must-see” and exotic destinations, many that include overnight stays in port, allowing guests to enjoy greater local cultural immersion. Our onboard dining experience features multiple open seating high quality dining venues, including Signatures, on two of our three vessels. Our spa facilities on each vessel feature the state-of-the-art Canyon Ranch SpaClub. We believe that our high quality guest experience sets us apart and provides an opportunity to maximize yield.strategy:

Loyal and Repeat Customer Base

Our award winning service, itineraries and all-inclusive model have resulted in nearly-perfect guest satisfaction ratings. Of the guests that responded to our 2012 onboard survey, we constantly score at our target of 9 or better on a scale of 10, based on the average score received from all guests per cruise. On the question of how likely the guest was to cruise with us again we received a rating of 100% of our target. As a result of high customer satisfaction, repeat guests accounted for 52% of total guests aboard our ships in 2012 (on a passenger revenue basis). We benefit from this loyal customer base in that 16% of the North American bookings, as measured by passenger revenue, are made directly with us as opposed to through travel agents, wholesalers, tour operators or another third party distribution channel. Direct bookings generate higher margins than those made through third parties. Our ability to consistently deliver a high quality product and achieve significant guest satisfaction continues to be a competitive advantage.

High Visibility and Differentiated Revenue Management Strategy

We have a disciplined and transparent pricing strategy. Our go-to-market strategy encourages people to book early to obtain the lowest price and stateroom of their choice, with bookings made up to 22 months in advance. Our average forward booking window as of December 31, 2012 and 2011 was 6.9 months and 6.7 months respectively, compared with an industry average which we believe is around 5 months. Given this advanced booking window, coupled with the fact that substantially all of our revenue is included in the ticket price, we believe our revenue visibility is 20-30% ahead of our industry peers. Unlike many cruise lines that discount inventory regularly, our strategy is to increase marketing efforts as the cruise date approaches to achieve targeted occupancy levels. We clearly articulate to customers and travel agents that prices will only increase as the cruise date approaches, as well as the specific dates on which those increases will occur. As such, we have educated the market that it is best to book a cruise with us early to obtain the best suites at the best value. We believe the travel agent community favors our go-to-market strategy as it allows them to provide value to their customers in a completely transparent manner, resulting in additional bookings well in advance of sailings. This early booking cycle allows us to make more informed decisions about pricing, inventory management and marketing efforts as the cruise date approaches.

Cash Flow Generation

Our business model allows us to generate a significant amount of free cash flow with high visibility. We begin to sell our inventory of suites up to 22 months prior to sailing with deposits due within seven days of booking and final payments generally collected 90 days before sailing. This results in working capital being a source of cash, provides visibility into our future revenues and corresponding cash flows and gives us ample time to adjust marketing initiatives as necessary. Moreover, we benefit from a favorable tax status as our income is primarily derived from the operation of cruise ships in international waters. As a result of these factors, we generate significant free cash flow; a portion of which we currently anticipate will be used for debt reduction.

Experienced Management Team

We are led by a management team with extensive cruise and leisure industry experience~~, with ownership in PCI, our ultimate parent company, and managing other global businesses~~. The team includes ~~Mr.~~ Frank J. Del Rio as Chairman and ~~Chief~~CEO ~~Executive Officer of PCI and PCH~~ with 1920 years of industry experience, ~~Mr.~~ Kunal S. Kamlani as President ~~and COO~~ of PCH, ~~and President of~~ Regent ~~Seven~~and ~~Seas~~Oceania with 1819 years of experience in the financial services and leisure industries, ~~Mr.~~ T. Robin Lindsay as Executive Vice President of Vessel Operations ~~of PCI and PCH~~ with 33 34 years of industry experience and ~~Mr.~~ Jason M. Montague as ~~Chief~~Executive ~~Financial~~Vice ~~Officer~~President ofand ~~PCI~~Chief ~~and~~Financial ~~PCH~~Officer with 1213 years of industry experience.

Shareholders and Sponsor

Our principal shareholder and sponsor, Apollo, has experience investing in the cruise, leisure and travel-related industries. Apollo is a leading global alternative asset manager with offices in New York, Los Angeles, London, Frankfurt, Luxembourg, Singapore, Hong Kong and Mumbai. As of December 31, ~~2012~~2013 and ~~2011~~2012, Apollo had assets under management of $~~113~~161 billion and $75113 billion, respectively, invested in its private equity, capital markets and real estate businesses. In addition to holding a controlling interest in PCH, through PCI, which in turn owns Regent Seven Seas and Oceania Cruises, Apollo holds a controlling interest in Norwegian Cruise Line Holdings Ltd., one of the leading global cruise line operators with operations in the ~~contemporary~~Contemporary segment of the cruise industry. Apollo also has current investments in other travel and leisure companies, including Caesars Entertainment and Great Wolf Resorts, and has in the past invested in Vail Resorts, Wyndham International and other hotel properties. For information regarding potential conflicts of interest between us and our sponsor, See "Item 1A—Risk Factors—Risks Related of Our Business—Our sponsor controls us and our sister company, Oceania Cruises, through its control of our parent companies PCI and PCH, and the interests of our sponsor and our parent companies may conflict with or differ from our interests."

~~Operating~~Cash ~~Strategies~~Flow Generation

Our business model allows us to generate a significant amount of free cash flow with high revenue visibility. We ~~seek~~encourage our target customers to ~~attract~~book ~~affluent~~their ~~vacationers~~cruise byvacations ~~offering~~as early as possible in the sales cycle and to prepay for certain optional services. We begin to sell our inventory up to 20 months prior to sail date, with deposits generally due within seven days of booking and final payment collected 90 to 150 days before sailing. This payment model results in passenger deposits being a ~~world~~source ~~class~~of ~~luxury~~cash, ~~cruise~~provides ~~product~~strong visibility into our future revenues and ~~service~~corresponding ~~through~~cash ~~unique~~flows and ~~diverse~~gives ~~itineraries~~us ~~aboard~~ample time to adjust selling price and sales and marketing initiatives to minimize acquisition costs and maximize net yields. Moreover, we benefit from favorable U.S. tax status, as our ~~three~~income is primarily derived from the operation of cruise ships in international waters and is therefore generally exempt from U.S. federal income taxes. As a result of these factors, we generate significant free cash flow, a portion of which can be used for debt reduction and capacity expansion.

Luxury Cruise Operator

We serve the Luxury cruise segment primarily focused on the North American market, offering various global cruise itineraries that appeal to the more experienced, older and typically more affluent guest. We believe we operate a highly entrepreneurial and efficient organization through PCH and benefit from our focus on upscale passengers and sharing best practices, generating operating cost savings and enhanced operational efficiencies. We believe we have successfully positioned Regent Seven Seas as the luxury cruise operator of choice with our target passenger base by offering the most all-inclusive product in the industry, personalizing the passenger experience, developing unique itineraries and providing onboard enrichment programs and services. Travel professionals worldwide have recognized this leadership and have rewarded Regent Seven Seas with a significant number of industry honors.

Delivery of the 750 guest newbuild, Seven Seas Explorer, is expected in the summer of 2016. The all-suite, all-balcony Seven Seas Explorer will feature sophisticated designer suites ranging from 300 square feet to 3,500 square feet with an industry leading space ratio of 76.0 (gross tons per guest) and a crew-to-guest ratio of 1 to 1.4. The ship will include six open-seating gourmet restaurants, Regent’s signature nine-deck open atrium, a two-story theater, three boutiques and an expansive Canyon Ranch SpaClub®. Operationally, it will be a green ship, employing the most

advanced environmental systems and state-of-the-art technology. Upon delivery of the Seven Seas Explorer, Regent will be the world’s largest luxury cruise line.

Leverage our All-Inclusive Positioning

We concentrate on leveraging our unique all-inclusive model to further increase market penetration and improve our occupancy and per diem metrics. We strive for innovative ways to enhance the onboard experience through new luxury cruise product offerings. For example, we added unlimited shore excursions in 2009, and added pre-cruise hotel packages in 2011 as part of our all-inclusive product offering. Through heightened communication with our travel agent partners and guests and the continued development of innovative marketing strategies, which are designed to emphasize our array of services and all-inclusive offering, we strive to increase our brand recognition and continue to grow our base of loyal customers.

~~Focus~~Our onBusiness ~~Maximizing Per Diem~~Strategies

We ~~are concentrating on improving our early booking occupancy rates to drive a higher per diem. We~~ believe ~~that better targeted and higher frequency marketing with a clear message of our brand attributes and~~ the differentiated array of our all-inclusive offerings in both the North American and international markets will help us maximize our occupancy ratio. To increase the benefits of our targeted marketing programs, we opened an outbound call center focused on optimizing leads created by our marketing programs and following up directly with consumers who have expressed interest in cruising with us. We believe this strategic change and other improvements to our sales organization and channels will help drive future growth in per diems. As an additional market opportunity, we are ~~also focused on sourcing passengers from~~ the ~~European~~key ~~market.~~components ~~Europe represented 11.4% and 10.5%~~ of ~~Regent~~our ~~Seven~~business ~~Seas' total revenues in 2012 and 2011, respectively.~~strategy:

~~Pursue~~ Disciplined Growth

As we achieve higher occupancy levels, we will consider various avenues available to us to enable further growth in passenger capacity. These possibilities include potential acquisitions of other cruise operators or a newbuild program in the future. These growth initiatives will be considered and potentially implemented ~~longer~~long term as it takes at least three years of lead time for a newbuild program and we believe that currently, there are no existing vessels available that would be complementary to our existing fleet. When evaluating growth opportunities, we will continue to focus on profitability and cash flow as well as maintaining a moderate leverage profile.

High Quality Fleet

Our fleet, which consists of three six-star luxury cruise ships, is designed to provide guests with the highest quality cruise experience throughout their stay. Our accommodations are large and luxurious, with space ratios of 58.78 to 68.68 (gross tons per guest), which are among the highest in the industry. Capacity is limited to 490 to 700 guests, allowing us to give each passenger a unique, personalized experience. As a result, our ships are less likely to have crowding or lines. Our cruises are staffed at a crew-to-guest ratio of 1 to 1.4 and 1 to 1.6, further promoting individually tailored luxury service. Our three ships offer all-suite accommodations, with 90-100% of the suites featuring private balconies.

Differentiated Product Offering

We offer the industry’s most comprehensive all-inclusive cruising model, which differentiates us from other luxury cruise operators. Nearly every part of the cruise experience is included in the base price; from round-trip air transportation, pre-cruise hotel accommodations, fine dining, staff gratuities, shore excursions, to top-shelf open bars. This unique all-inclusive offering provides a compelling value proposition for both customers and travel agents. Our destination-focused itineraries, augmented by exciting shore excursions and other land-based programs, including a diverse set of enrichment programs, comprised of workshops, lectures and classes led by relevant and often famous guest speakers, further differentiates us from many of our competitors. We feature itineraries that call on “must-see” and exotic destinations, many that include overnight stays in port, allowing guests to enjoy greater local cultural immersion. Our onboard dining experience features multiple open seating high quality dining venues, including Signatures, on two of our three vessels. Our spa facilities on each vessel feature the state-of-the-art Canyon Ranch SpaClub. We believe that our high quality guest experience sets us apart and provides an opportunity to maximize yield.

Loyal and Repeat Customer Base

Our target customer is 55 years of age or older, has a net worth of over $1.0 million, is well educated and is a seasoned world traveler. This target audience has reached an age and wealth status where the convenience, comfort and luxury amenities of an upscale cruise product are extremely appealing.

Our award-winning service, innovative itineraries, gourmet cuisine and luxurious onboard amenities have resulted in nearly perfect passenger satisfaction ratings. In 2013, approximately 98% of guests that responded to our survey reported that their cruise experience met or exceeded their expectations, and that they will “definitely” or “probably” return. As a result of high customer satisfaction, repeat guests accounted for 50% of total guests aboard our ships in 2013

~~Fleet~~(on ~~Overview~~a passenger days sold basis). Our ability to consistently deliver a high quality product and achieve significant guest satisfaction continues to be a competitive advantage.

WeDifferentiated ~~operate~~Revenue ~~three~~Management six-star luxury cruise vessels, Seven Seas Navigator, Seven Seas Mariner, and Seven Seas Voyager with world-class accommodations and amenities, 1,890 berths in aggregate and an average age of approximately twelve years. We operate at a maximum capacity of approximately 689,850 capacity nights per annum, assuming no dry-docks. Capacity on each ship is limited to 490 to 700 guests and our cruises are staffed at a crew-to-guest ratio of approximately 1-to-1.6. All of our ships offer all-suite accommodations with 90-100% of the suites featuring private balconies. Seven Seas Mariner and Seven Seas Voyager are the only ships in the world offering 100% suite-with-balcony accommodations.Strategy

We have implemented a differentiated price enhancing revenue management strategy that encourages our target market to book early to obtain the most attractive value offering, with bookings made up to 20 months in advance of sail date. This timeline provides us with greater visibility into our future revenues and gives us ample time to adjust sales, marketing and pricing initiatives as necessary. Due to the more inclusive nature of our product offerings, a greater percentage of our Net Revenue is comprised of net ticket revenue as compared to Contemporary and Premium segment cruise lines, which must wait until the actual sailing to gain visibility into much of their revenues, as their onboard revenue represents a greater portion of their total revenue. On average, our guests book seven to eight months in advance of sail date. Based on our research, we believe the industry average booking curve is five months or less.

When we launch new itineraries, we clearly articulate to potential customers and travel agents that prices are subject to increase as the cruise date approaches, as well as the specific dates on which those price increases may occur. We believe the travel agent community favors our pricing strategy as it allows them to provide value to their customers in a completely transparent manner, resulting in early bookings. This early booking cycle allows us to make more informed decisions about pricing, inventory management and marketing efforts.

Focus on Occupancy and Maximize Net Yields

We concentrate on improving our early booking occupancy rates to drive higher Net Yields. We execute targeted and high frequency marketing campaigns that communicate a distinct message of our differentiated value- packed cruise offerings in both North American and select international markets. To increase the effectiveness of our targeted marketing programs, we opened an outbound call center focused on optimizing leads created by our marketing programs and following up directly with consumers who have expressed interest in cruising with us. This dual prong strategy allows us to maximize the revenue potential from each customer contact (“leads”) generated by our various marketing campaigns. We expect that this strategic change and other initiatives in our sales organization and distribution channels will help drive sustainable growth in the number of guests carried and in Net Yields achieved. As an additional market opportunity, we are also focused on sourcing passengers from the European market. Europe represented 11.6% and 11.4% of Regent Seven Seas' total revenues in 2013 and 2012, respectively.

Due to our brands’ clear positioning and our target market focus on an older and more affluent clientele, we do not carry many families with children or groups of individuals that travel three or four to a stateroom. Conversely, we have a small but increased number of elderly guests who prefer to travel as “singles,” or one to a stateroom. Because 100% occupancy is based on two persons in a stateroom, we tend to report occupancies that are somewhat lower than those of the Premium and Contemporary cruise lines, while still sailing close to full in terms of cabin occupancy.

Improve Operating Efficiency and Lower Costs

We focus on driving continued financial performance through a variety of business improvement initiatives.

These initiatives focus on reducing costs while also improving the overall product quality we deliver to our customers.

Our business improvement initiatives focus on various cost containment programs such as contract negotiations, global purchasing and logistics, fuel consumption efficiencies and optimal itinerary deployments. We hedge our fuel purchases in order to provide greater visibility and certainty of our fuel expenses. As of December 31, 2013, we had hedged approximately 51% and 10% of our estimated fuel consumption for 2014 and 2015, respectively. In addition, we expect benefits derived from economies of scale from additional newbuilds will further drive operating efficiencies over the medium and long term.

Our Fleet

We operate three six-star luxury cruise ships, Seven Seas Navigator, Seven Seas Mariner, and Seven Seas Voyager with world-class accommodations and amenities, 1,890 berths in aggregate and an average age of approximately thirteen years. We operate at a maximum capacity of approximately 689,850 capacity nights per annum, assuming no drydocks. Capacity on each ship is limited to 490 to 700 guests and our cruises are staffed at a crew-to-guest ratio of 1 to 1.4 and 1 to 1.6. All of our ships offer all-suite accommodations with 90-100% of the suites featuring private balconies.

The following table describes certain features of our vessels:

	Seven SeasVoyager	Seven SeasMariner	Seven SeasNavigator
	Seven SeasExplorer	Seven SeasVoyager	Seven SeasMariner	Seven SeasNavigator
Entered Fleet	2003	2001	1999
Berths	750	700	700	490
Berths	700	700	490
Balconies	100%	100%	100%	90%
Balcony Offerings	100%	100%	90%
Gross tonnage	57,000	42,363	48,075	28,803
Gross Tonnage	42,363	48,075	28,803
Space ratio (1)	76.00	60.52	68.68	58.78
Space Ratio (gross tons per guest)	60.52	68.68	58.78
Accommodations (sq ft)	300-3,500	350 – 1,403	301 – 2,002	301 – 1,173
Suite Size	350 – 1,403 sq ft	301 – 2,002 sq ft	301 – 1,173 sq ft
Crew-to-guest ratio	1:1.4	1:1.6	1:1.6	1:1.4
Crew-to-Guest Ratio	1:1.6	1:1.6	1:1.4
Country of registry	Marshall Islands	Bahamas	Bahamas	Bahamas
Country of Registry	Bahamas	Bahamas	Bahamas
Restaurants	6	4	4	3
Restaurants	4	4	3
Year built	(2)	2003	2001	1999
Destinations	Asia PacificAfrica & IndiaMediterraneanNorthern Europe	CaribbeanMediterraneanSouth America	AlaskaCanadaCaribbeanNew England

We(1) ~~have~~Space ~~invested~~ratio ~~over~~refers ~~$115~~to ~~million~~a ~~from~~unit ~~February~~of ~~2008~~enclosed ~~through~~space ~~December~~per ~~2012~~passenger toon ~~completely~~the ~~modernize~~ship ~~our~~measured ~~fleet.~~in ~~These~~cubic ~~renovations~~feet, ~~represent~~and ~~major~~represents ~~elevations~~gross oftonnage divided by the ~~Regent~~number ~~Seven~~of ~~Seas~~double ~~product.~~occupancy berths.


(2)	The Seven Seas Explorer is currently under construction, with delivery expected in the summer of 2016.

We have invested over $137 million from February 2008 through December 2013 to completely modernize our fleet. These renovations represent major elevations of the Regent Seven Seas product.

Our Destinations

We deploy our fleet to worldwide destinations, allowing us to service our customers’ demands for a global and differentiated travel experience. Included in the primary destinations are Alaska, the Tropics, South America, Northern Europe, the Mediterranean, Africa, Asia and India. The following graph displays the global destinations of Regent Seven Seas.

These destination-focused itineraries, augmented by a comprehensive and complimentary shore excursion program, differentiate us from many of our competitors. To that end, we offer several Grand Voyage itineraries of 60 nights or more that call on “must-see” and exotic destinations, many of which include overnight stays in port, allowing guests to have more in-depth experiences than would otherwise be possible in a single day port call. At the same time, we have expanded our addressable market and captured guest spending for a greater portion of their cruising life cycle by selling segments of Grand Voyages and other shorter (i.e. 7 – 14 night) cruises designed for more time-constrained customers. The deployment flexibility created by the use of long itineraries translates off-peak seasons into more profitable portions of longer cruises.

Our multi-pronged operating strategy is aimed at delivering the most unique and differentiated luxury experiences for our travelers onboard and onshore that are highly-tailored to the individual while optimizing operational efficiencies. Given the relatively small size of our vessels, our fleet can access a greater number and variety of ports around the globe.

Onboard Services and Programs

We distinguish ourselves by our comprehensive all-inclusive onboard and onshore offering and the highly anticipatory onboard service. The core of the Regent Seven Seas guest experience centers on the ability to offer optionality throughout their cruise and to have their desires and needs met with, what we believe to be, world-class service levels in a relaxed atmosphere. We strive for innovative ways to enhance the onboard experience through new luxury cruise product offerings. For example, we added top-shelf open bars to the all-inclusive package in 2007, added unlimited shore excursions during 2009, and pre-cruise hotel packages in 2011 as part of our all-inclusive product offering.

Onboard and Shore Excursion Program

We strive to enhance our guest experience so they feel more like travelers instead of tourists. We accomplish this by innovating the traditionally uniform and regimented nature of cruising to make it fully customized and experiential. This aim is reflected in the onboard and onshore activity offerings including a wide choice of other onboard personal enrichment programs. For example, we bring in expert guest lecturers to provide insights and perspectives on a variety of topics. The speakers often have first-hand knowledge of the locales on an itinerary, and come from diverse backgrounds including the Foreign Service, leading universities, the arts and journalism. All of these programs enrich the passenger experience and round out our portfolio of onboard offerings to address the varied interests and discriminating tastes of our guests. In the diverse world of luxury travel, we have continued to differentiate ourselves and drive customer loyalty by providing such unique experiences.

experience and round out our portfolio of onboard offerings to address the varied interests and discriminating tastes of our guests. In the diverse world of luxury travel, we have continued to differentiate ourselves and drive customer loyalty by providing such unique experiences.

Food and Dining

In addition to luxurious accommodations and unique enrichment opportunities, we offer the finest of culinary experiences. An important aspect of the dining experience aboard our ships is open seating dining. Unlike large ship cruises, where dining times and tables are typically assigned in advance, on our ships guests may choose from a variety of restaurants onboard and dine when they wish. We also offer complimentary 24-hour room service, allowing guests the option of enjoying a private dinner in-suite or on their own balcony. Top-shelf open bar is included in the price and can be enjoyed at the onboard restaurants, in any of the bars, and as part of the 24-hour room service.

Other Onboard Amenities

All ships feature a state-of-the-art spa, wellness and fitness facility, and full-service beauty salon operated by Canyon Ranch. Canyon Ranch SpaClub offers all the most popular spa treatments and physical facilities such as body and skin-care treatment rooms, a well-equipped gym and weight room with cardio and weight training equipment, a juice bar, men’s and women’s locker rooms, thalassotherapy, and sauna and steam rooms. We also serve a full range of Canyon Ranch’s Spa Cuisine at mealtimes. The ~~healthy~~health-focused menu items are available for breakfast, lunch and dinner at the main dining rooms, casual dining venues, poolside and on the 24-hour room service menu for in-suite dining. On select voyages, Canyon Ranch healthy living experts offer on-board presentations and workshops addressing lifestyle change, healthy living and stress management.

Evening entertainment includes a nightclub with live music, a multi-tiered show lounge featuring a variety of production shows from Broadway revues to classical concerts and other headliner acts, and a casino. Each ship also includes a well-stocked library, an outdoor pool deck, an internet café, paddle tennis and a jogging track. Shopping is available at several onboard duty-free boutiques.

Pre- and Post-Cruise Activity / Guest Services

We can handle virtually all aspects of guest reservations and transportation requirements, including arranging pre- and post-cruise hotel bookings and air transportation. During both ~~2012~~2013 and ~~2011~~2012, approximately 54% of our guests elected to take advantage of our free air program, which includes a comprehensive package of air, meet and greet services, and ground transfer to and from the ship. In addition, we offer guests the opportunity to purchase pre- and post-cruise hotel accommodations and land packages.

Loyalty Program

We maintain a loyalty program designed to cultivate long-term customer relationships with our customers. The Regent Seven Seas loyalty program, the "Regent Seven Seas Society," focuses on our most active customers and covers over ~~224~~238,000 Regent Seven Seas Society households as of December 31, ~~2012~~2013. ItThe ~~has~~programs have evolved to offer a range of guest rewards tailored to customer preferences, and are awarded in proportion to a member’s number of nights onboard.

The program offers significant value to us, both directly and indirectly. Its members act as ambassadors for the Regent Seven Seas cruise experience, conveying the benefits of the platform to potential customers. In addition, repeat cruisers tend to reserve future cruises farther in advance than first-timers, giving us earlier insight into future booking revenue. The program base is extremely active, with members re-qualifying themselves frequently. Acquisition costs for Regent Seven Seas Society members are much lower than traditional guests, in part because loyal customers record their preferences electronically, allowing us to target them with marketing customized to their preferred itinerary and interests. Customer loyalty continued to be an important driver of our business; 5250% and 5352% of total guests aboard our ships in ~~2012~~2013 and ~~2011~~2012, respectively, on a passenger ~~revenue~~days sold basis, were repeat guests.

Sales &and Marketing

We have a U.S.-based sales team of 3534 people that collectively oversee important strategic relationships and develop marketing plans and budgets for marketing campaigns across key accounts. This team sells our cruises to almost 3,200 producing travel agents, charter and incentive clients. We also utilize onboard sales consultants to directly book current passengers for their next itinerary. Approximately 6% of cruise revenue was achieved through this onboard channel in 2012 and 2011.over

We are focused on increasing our sales and marketing efforts to complement existing travel agency relationships and give us the flexibility to adapt to changing market conditions. We maintain an outbound call center, with 20 sales agents focused on optimizing leads created by our marketing programs and following up directly with consumers who have expressed interest. This strategic change offers attractive occupancy growth potential as the traditional inbound-only call center shifts toward a sales-generating orientation. Approximately 8% and 7% of bookings in 2012 and 2011, respectively, as measured by passenger revenue, were made directly with us through one of these call centers or through our website. Internationally, we operate one office in the UK. Additional international revenue comes from general sales agents (GSAs) throughout the world with the majority of sales coming from Australia, Germany, Mexico and Brazil.11

3,000 producing travel agents, charter and incentive clients. We also utilize onboard sales consultants to directly book current passengers for their next itinerary.

We are focused on increasing our sales and marketing efforts to complement existing travel agency relationships and give us the flexibility to adapt to changing market conditions. We maintain an outbound call centers focused on optimizing leads created by our marketing programs and following up directly with consumers who have expressed interest. This strategic change offers attractive occupancy growth potential as the traditional inbound-only call center shifts toward a sales-generating orientation. Internationally, we operate one office in the UK. Additional international revenue comes from general sales agents (GSAs) throughout the world with the majority of sales coming from Australia, Germany, Mexico and Brazil.

Our sales efforts are supported by a robust and targeted marketing platform. We place a strong focus on product innovation, not only for stimulating repeat business, but also for driving new demand for our products, and our marketing effort supports that focus. Innovations in online capabilities provide more efficient methods for communicating with past and prospective guests, including the integration of print and online marketing efforts, which increase efficiencies and product exposure.

Our Ship Operations

Crew ~~and Staff~~

Our best-in-class guest service levels are paramount in the ~~luxury~~Luxury segment, where travelers have discriminating tastes and high expectations for service quality. We have dedicated significant attention and resources to ensure our service offerings meet the demands of all our guests. We have implemented more rigorous onboard training programs and established additional human resources and career development resources. In addition, to ensure that guests receive highly personalized service and attention, we have right-sized the ~~on-board~~onboard staff to offer crew-to-guest ratios of approximately 1-to-1.6, which is among the highest in the industry. Our dedication to anticipating and meeting our guests’ every need differentiates our operations and fosters close relationships between guests and the crew, helping to build customer loyalty.

Logistics and Technology

Sophisticated and efficient maintenance and operations systems support the technical superiority and modern look of our fleet. We have a department to manage deck and engine operations in-house for both Regent Seven Seas and our sister company, Oceania Cruises, which has resulted in higher quality maintenance and better cost control.

Ship Maintenance

Every 24 to 36 months each of our ships is taken out of service during a ~~dry-dock~~drydock for approximately ten days for scheduled maintenance work, repairs, and improvements. Our classification societies require each ship to ~~dry-dock~~drydock twice every five years with a maximum duration between each ~~dry-dock~~drydock not exceeding three years without prior approval from the classification society. ~~Dry-dock~~Drydock procedures are typically performed during off-peak demand periods to minimize the effect on revenues.

Seasonality

The seasonality of the cruise industry generally results in the greatest demand for cruises during the summer months of the third quarter. This predictable seasonality in demand has resulted in fluctuations in our revenue and results of operations. The effect of seasonality on our results is increased due to ships being taken out of service for regularly scheduled ~~dry-docks~~drydocks, which we typically schedule during ~~non~~off-peak demand periods.

Our revenues are seasonal, based on demand for cruises. Demand is strongest for cruises during the Northern Hemisphere’s summer months and holidays. In order to mitigate the impact of the winter weather in the Northern Hemisphere and to capitalize on the summer season in the Southern Hemisphere, we deploy our ships to South America, Asia and the Caribbean during the Northern Hemisphere winter months.

Employees

As of December 31, ~~2012~~2013, we had a total of ~~669~~687 of Regent Seven Seas officers, crew members and other employees. We had ~~368~~387 officers and crew members onboard our fleet and ~~301~~300 shoreside employees. Individuals who we refer to as our shoreside employees are employed by a related entity, Prestige Cruise Services, LLC, and provide services to us under the terms of a master shared services agreement. In addition, we utilize the services of a third party to provide hotel and restaurant service employees. See “"Item 13— - Certain Relationships and Related Party Transactions and Director Independence—Master Services Agreement” for additional information about our master services agreement and relationship with Prestige Cruise Services, LLC.

Insurance

We maintain marine insurance on the hull and machinery of our ships, which ~~includes~~are ~~coverage~~maintained ~~for disbursements, earnings and increased value,~~ in amounts related to the estimated market value of each ship. The coverage for each of the hull and machinery policies is maintained with syndicates of insurance underwriters from the European and U.S. insurance markets.

In addition to the marine insurance coverage in respect of the hull and machinery of our ships discussed above, we seek to maintain comprehensive insurance coverage at commercially reasonable rates and believe that our current coverage is adequate to protect against most of the accident-related risks involved in the conduct of our business. We carry:

• protection and indemnity insurance (that is, coverage for ~~third~~passenger, crew and third-party liabilities) on each ship, including insurance against risk of ~~oil~~ pollution ~~liability~~liabilities;

• war risk insurance, including terrorist risk insurance, on each ship in an amount equal to the total insured hull value, subject to certain coverage limits, deductibles and exclusions~~—the~~. The terms of our marine war risk policies include provisions where underwriters can give seven days’ notice to the insured that the policies will be ~~cancelled~~canceled, which is typical for policies in the marine industry; ~~and~~

• insurance for ~~our~~cash ~~shoreside property and general liability risks.~~onboard;

We• ~~believe~~insurance ~~that~~for ~~all of~~ our ~~insurance~~shoreside ~~coverage,~~property ~~including those noted above, is subject to market-standard limitations, exclusions~~ and ~~deductible~~general ~~levels.~~liability Werisks; ~~will endeavor to obtain insurance coverage in amounts~~ and ~~at premiums that are commercially acceptable to us.~~

We• docyber ~~not~~insurance ~~carry~~(privacy ~~business~~liability ~~interruption~~and ~~insurance~~network ~~for~~security ~~our~~insurance), ~~ships~~which ~~based~~provides oncoverage ~~our~~for ~~evaluation~~theft of ~~the~~personally ~~risks~~identifiable ~~involved~~non-public ~~and~~information ~~protective~~in ~~measures~~computer ~~already~~data inand ~~place~~hard copy form, asliability ~~compared~~arising tofrom ~~the~~failure ~~cost~~to ofcomply ~~insurance.~~with Westate ~~carry~~breach-notice ~~business~~laws ~~interruption~~and ~~insurance~~failure ~~for~~to ~~certain~~comply ofwith our ~~shoreside operations.~~privacy

11policies.

~~The~~All ~~Athens Convention Relating to the Carriage~~ of ~~Passengers~~our ~~and~~insurance ~~Their~~coverage, ~~Luggage~~including ~~by Sea (1974) and~~ the ~~Protocol~~coverage todescribed ~~the Athens Convention Relating to the Carriage of Passengers and Their Luggage by Sea (1976) are generally applicable to passenger ships. The U.S. has not ratified the Athens Convention. However~~above, ~~with~~is ~~limited~~subject ~~exceptions, the 1976 Protocol~~ to ~~the~~market-standard Athens Convention may be contractually enforced with respect to cruises that do not call at a U.S. port. The International Maritime Organization Diplomatic Conference agreed to a new protocol to the Athens Convention on November 1limitations, ~~2002~~exclusions ~~(the “2002 Protocol”). The 2002 Protocol, which has not yet been entered into force, establishes for the first time a no-fault liability regime~~ and adeductible ~~level of compulsory insurance which must be maintained by passenger ship operators with a right of direct action against the insurer~~levels. ~~The~~We ~~European~~will ~~Union~~endeavor ~~adopted~~to ~~the~~continue European Union Regulation 392/2009 (“EU Passenger Liability Regulation”) on the liability of carriers of passengers by sea, which became effective on December 31, 2012. This regulation incorporates the 2002 Protocol in many ways, requiring us to ~~maintain~~obtain ~~compulsory~~ insurance ~~for~~coverage ~~liability for passenger death or personal injury. The EU Passenger Liability Regulation applies to all EU registered vessels as well as non-EU registered vessels embarking or disembarking passengers~~ in EUamounts ~~member~~and ~~states. We~~at ~~are~~premiums ~~required to have a Certificate of Financial Responsibility from an EU flag state on the applicable ships as evidence~~ that weare ~~carry~~commercially ~~the~~acceptable ~~compulsory insurance up~~ to ~~the limits prescribed under the 2002 Protocol~~us. ~~The cost of compliance with the EU Passenger Liability Regulation does not have a material impact on operating costs.~~

The Athens Convention Relating to the Carriage of Passengers and Their Luggage by Sea (1974) and the Protocol to the Athens Convention Relating to the Carriage of Passengers and Their Luggage by Sea (1976) are generally applicable to passenger ships. The United States has not ratified the Athens Convention. However, with limited exceptions, the 1976 Protocol to the Athens Convention may be contractually enforced with respect to cruises that do not call at a U.S. port. The International Maritime Organization Diplomatic Conference agreed to a new protocol to the Athens Convention on November 1, 2002 (the “2002 Protocol”). The 2002 Protocol, which will be entered into force on April 23, 2014, establishes for the first time a level of compulsory insurance which must be maintained by passenger ship operators with a right of direct action against the insurer. We believe our ship’s entries with their respective protection and indemnity associations will provide the compulsory insurance; however, no assurance can be given that affordable and secure insurance markets will be available to provide the level and type of coverage required under the 2002 Protocol.

Trademarks

Our ships have been operating under the Regent Seven Seas brand since 2006. In connection with the Regent Seven Seas Transaction, we entered into a trademark license agreement with Carlson granting us the exclusive right to use the “Regent” brand family of marks in the luxury cruise market. The agreement has since been assumed by Regent Hospitality Worldwide, Inc. The license had royalties that we paid on a quarterly basis. The trademark license agreement had an initial term of ten years and automatically renewed for additional one-year terms unless terminated by the parties. In February 2011, we amended the terms of this agreement. The amended and restated trademark license agreement allows us to use the Regent trade name, in conjunction with cruises, in perpetuity, subject to the terms and conditions stated in the agreement. In consideration for the rights and privilege to use the license under this agreement, we agreed to pay the licensor approximately $9.1 million. The amount remaining to be paid as of December 31, 2012 is $2.0 million, which was paid in February 2013. We own various U.S. and foreign trademark registrations ~~that are widely recognized worldwide~~, including registrations covering “Seven Seas Cruises,” “Seven Seas Navigator,” “Seven Seas Mariner,” “Seven Seas Voyager” and “Luxury Goes Exploring.” We also claim common law rights in trademarks and trade names used in conjunction with our ships, incentive programs, customer loyalty program, and specialty services rendered on board our ships.

The Regent ships have been operating under the Regent brand since 2006. In connection with the Regent Seven Seas Transaction, we entered into a trademark license agreement with Regent Hospitality Worldwide, Inc. granting us the right to use the “Regent” brand family of marks, which we amended in February 2011. The amended trademark

license agreement allows Regent to use the Regent trade name, in conjunction with cruises, in perpetuity, subject to the terms and conditions stated in the agreement. In consideration for the rights and privilege to use the license under this agreement, Regent paid the licensor approximately $9.1 million.

Competition

Governmental Regulations

Maritime - General

The international, national, state and local laws, regulations, treaties and other legal requirements applicable to our operations change regularly, depending on the itineraries of our ships and the ports and countries visited. Our ships, which are registered with and regulated by ~~The~~the Bahamas, ~~and~~ are required to comply with the international conventions that govern health, environmental, safety and security matters in relation to our guests, crew and ships. ~~The~~Regulatory authorities in the Bahamas ~~conducts~~conduct periodic inspections, or ~~appoints~~appoint ship classification societies to conduct periodic inspections on their behalf, to verify compliance with these regulations. In addition, requirements of the European Union (“EU”), the ~~U.S.~~United States and the other international ports that our ships visit apply to some aspects of our ship operations.

Our ships are also subject to periodic class surveys, ~~including dry-dock inspections,~~ by ship classification societies, including drydock inspections, to verify that ~~our~~they ~~ships~~ have been maintained in accordance with the rules of the classification societies and that recommended maintenance and required repairs have been satisfactorily completed. Class certification is ~~one of the necessary documents~~ required for our cruise ships to be flagged in a specific country, obtain liability insurance and legally operate as passenger cruise ships. ~~Dry-dock~~Drydock frequency is a statutory requirement controlled under the International Convention for Safety of Life at Sea (“SOLAS”). Our ships qualify to ~~dry-dock~~drydock ~~once or~~ twice every five years. ~~Dry-dock~~ Drydock, which requires that the ship be temporarily taken out-of-service, typically lasts for an average of ten days. Significant drydock work includes repairs, maintenance, ship improvement projects and hull inspection and related activities, such as pressure cleaning and bottom painting, and maintenance of steering gear equipment, stabilizers, thruster equipment and tanks.

12As noted above, our ships are subject to inspection by the port regulatory authorities in the various countries that they visit. Such inspections include verification of compliance with the maritime safety, security, environmental, customs, immigration, health and labor regulations applicable to each port as well as with international requirements. For example, in U.S. ports, these authorities include the U.S. Coast Guard, U.S. Customs and Border Protection and U.S Public Health, and in Canada, such authorities include the Canadian Coast Guard and Public Health Agency of Canada. In EU ports, the Paris Memorandum of Understanding authorizes the enforcement of internationally accepted conventions through Port State Control inspections by the relevant authorities. For example, in Italian ports, these authorities include the Italian Coast Guard, Maritime Health and the State Police. In U.K. ports, these authorities include the Maritime and Coastguard Agency, the Department for Transport’s Transport Security team, and the Port Health Authority. Similar Memoranda of Understanding govern Port State Control inspections of our ships in most other areas of the world where we operate.

lasts for an average of ten days. Significant dry-dock work includes, hull inspection and related activities (such as scraping, pressure cleaning and bottom painting, maintenance of steering propulsion, stabilizers, thruster equipment and ballast tanks). While the ship is out of the water in dry-dock, we also perform other repairs and maintenance and ship improvement projects.

As noted above, our ships are subject to inspection by the port regulatory authorities in the various countries that they visit. Such inspections include verification of compliance with the maritime safety, security, environmental, customs, immigration, health and labor regulations applicable to each port as well as with international requirements. For example, in U.S. ports these authorities include the U.S. Coast Guard and U.S. Customs and Border Protection and in Canada, the Canadian Coast Guard. In EU ports, the Paris Memorandum of Understanding authorizes the enforcement of internationally accepted conventions through Port State Control inspections by the relevant authorities. For example, in Italian ports these authorities include the Italian Coast Guard, Maritime Health and the State Police. In UK ports, these authorities include the Maritime and Coastguard Agency, the Department for Transport's Transport Security team, otherwise known as TRANSEC, and the Port Health Authority. Similar Memoranda of Understanding govern Port State Control inspections of our ships in most other areas of the world where we operate.

Maritime - Safety

The International Maritime Organization (“IMO”), a specialized agency of the United Nations, has adopted safety standards as part of SOLAS, which apply to all of our ships. SOLAS establishes requirements for vessel design, structural features, construction methods and materials, refurbishment standards, life-saving equipment, fire protection and detection, safe management and operation and security in order to help ensure guest and crew safety and security. All of our crew undergo regular safety training exercises that meet all international maritime regulations.

SOLAS requires implementation of the International Safety Management Code (“ISM Code”), which provides an international standard for the safe management and operation of ships and for pollution prevention. The ISM Code is mandatory for passenger vessel operators. Our shoreside and shipboard operations and ships are regularly audited by ~~national authorities and maintain the required certificates of compliance with the ISM Code.~~

national authorities and maintain the required certificates of compliance with the ISM Code.

Maritime - Security

Our ships are subject to various security requirements, including the International Ship and Port Facility Security Code (“ISPS Code”, a part of SOLAS); the U.S. Maritime Transportation Security Act of 2002, which addresses port and waterway security and the U.S. Cruise Vessel Security and Safety Act, which ~~will~~phased ~~phase~~ in through 2013 and applies to all of our ships that embark or disembark passengers in the U.S. These maritime security regulations require that, among other things, we implement specific security measures; conduct vessel security assessments; identify and deter security threats; and develop security plans that may include guest, vehicle and baggage screening procedures, security patrols, establishment of restricted areas, personnel identification procedures, access control measures and installation of surveillance equipment. Our ships are regularly audited and maintain the required certificates of compliance with the ISPS Code.

Maritime - Environmental

We are subject to numerous international, national, state and local environmental laws, regulations and treaties that govern, among other things, air emissions, waste discharge, water management and disposal and the storage, handling, use and disposal of hazardous substances such as chemicals, solvents and paints. In addition to the existing legal requirements, we are committed to helping to preserve the environment because a clean, unspoiled environment is a key element that attracts guests to our ships. If we violate or fail to comply with environmental laws, regulations or treaties, we could be fined, or otherwise sanctioned, by regulators. We have made, and will continue to make, capital and other expenditures to comply with environmental laws, regulations and treaties.

~~Maritime -~~ International

The environmental convention governing ships is the IMO International Convention for the Prevention of Pollution from Ships (“MARPOL”). This convention includes requirements designed to prevent and minimize both accidental and operational pollution by oil, sewage, garbage and air emissions. Many countries have ratified and adopted IMO Conventions that, among other things, impose liability for pollution damage, subject to defenses and to monetary limits. Monetary limits do not apply where the spill is caused by the owner'’s actual fault or by the owner'’s intentional or reckless conduct. All of our ships must carry an International Oil Pollution Prevention Certificate, an International Sewage Pollution Prevention Certificate, an International Air Pollution Prevention Certificate and a Garbage Management Plan. These certificates and plan are issued by the ship’s state of registry and evidence their compliance with the MARPOL regulations regarding oil, sewage and air pollution prevention. In jurisdictions that have not adopted the IMO Conventions, various national, regional or local laws and regulations have been established to address these issues and/or may have more stringent requirements.

must carry an International Oil Pollution Prevention Certificate, an International Sewage Pollution Prevention Certificate, an International Air Pollution Prevention Certificate and a Garbage Management Plan. These certificates and plan are issued by the ship's state of registry and evidence their compliance with the MARPOL regulations regarding oil, sewage and air pollution prevention. In jurisdictions that have not adopted the IMO Conventions, various national, regional or local laws and regulations have been established to address these issues and/or may have more stringent requirements, and we comply with them.

Recently adopted amendments to MARPOL will make the Baltic Sea a “Special Area” where sewage discharges from passenger ships will be restricted. We are not certain as to when these amendments are expected to enter into effect. The underlying requirements may impact our operations unless suitable port waste facilities are available, or new technologies for onboard waste treatment are developed. Accordingly, the cost of complying with these requirements is not determinable at this time, however, we do not expect it to be material.

~~Maritime -~~ U.S. Federal and State

The U.S. Act to Prevent Pollution from Ships, which implements the MARPOL convention, provides for severe civil and criminal penalties related to ship-generated pollution for incidents in U.S. waters within three nautical miles and in some cases within the 200-mile exclusive economic zone.

The U.S. Oil Pollution Act of 1990 (“OPA 90”) provides for strict liability for water pollution caused by oil pollution or possible oil pollution incidents in the 200-mile exclusive economic zone of the ~~U.S.~~United States, subject to defined monetary limits. OPA 90 requires that in order for us to operate in U.S. waters, we must have Certificates of Financial Responsibility from the U.S. Coast Guard for each of our ships that operate in these waters. We have these certificates that demonstrate our ability to meet the maximum amount of OPA 90 related liability that our ships could be subject to for removal costs and damages, such as from an oil spill or a release of a hazardous substance.

The Clean Water Act of 1972 and other laws and regulations provide the U.S. Environmental Protection Agency (“EPA”) with the authority to regulate commercial vessels'’ incidental discharges of ballast water, bilge water, gray water, ~~anti-fouling paints and other substances during normal operations within the U.S. three mile territorial sea and inland waters.~~

The U.S. National Pollutant Discharge Elimination System was designed to minimize pollution within U.S. territorial waters. For our affected ships, all of the requirements are laid out in the Vessel General Permit (“VGP”), which are an EPA requirement. The VGP establishes effluent limits for 26 specific discharges incidental to the normal operation of a vessel. In addition to these discharge and vessel specific requirements, the VGP includes requirements for inspections, monitoring, reporting and record-keeping.15

~~Most~~anti-fouling paints and other substances during normal operations within the U.S. ~~states~~three ~~that~~mile ~~border~~territorial ~~navigable~~sea ~~waterways~~and orinland ~~sea~~waters. ~~coasts~~The ~~have~~U.S. ~~also~~National ~~enacted~~Pollutant ~~environmental~~Discharge ~~regulations~~Elimination ~~that~~System ~~impose~~was ~~strict~~designed ~~liability~~to ~~for~~minimize ~~removal~~pollution ~~costs~~within ~~and~~U.S. ~~damages~~territorial ~~resulting~~waters. ~~from~~For aour ~~discharge~~affected ships, all of ~~oil~~the orrequirements aare ~~release~~laid ofout ain ~~hazardous~~the ~~substance~~Vessel General Permit (“VGP”), which is an EPA requirement. ~~These~~The ~~laws~~VGP ~~may~~establishes beeffluent ~~more~~limits ~~stringent~~for ~~than~~26 Uspecific discharges incidental to the normal operation of a vessel.S. ~~federal~~In ~~law~~addition to these discharge and invessel ~~some~~specific ~~cases~~requirements, ~~have~~the noVGP ~~statutory~~includes ~~limits~~requirements offor ~~liability~~inspections, monitoring, reporting and record-keeping.

Most U.S. states that border navigable waterways or sea coasts have also enacted environmental regulations that impose strict liability for removal costs and damages resulting from a discharge of oil or a release of a hazardous substance. These laws may be more stringent than U.S. federal law and in some cases have no statutory limits of liability. The state of Alaska enacted legislation that prohibits certain discharges in designated Alaskan waters and requires that certain discharges be monitored to verify compliance with the standards established by the legislation. Both the state and federal environmental regimes in Alaska are more stringent than the federal regime under the Federal Water Pollution Control Act with regard to discharge from vessels. The legislation also provides that repeat violators of the regulations could be prohibited from operating in Alaskan waters.

~~Maritime -~~ EU

The EU has adopted a substantial and diverse range of environmental measures aimed at improving the quality of the environment. To support the implementation and enforcement of European environmental legislation, the EU has adopted directives on environmental liability and enforcement and a recommendation providing for minimum criteria for environmental inspections. The European Commission'’s (“EC”) strategy is to reduce atmospheric emissions from seagoing ships. The EC strategy seeks to implement SOx Emission Control Areas set out in MARPOL as discussed below. In addition, the EC goes beyond the IMO by introducing requirements to use low sulfur (less than 0.1%) marine gas oil in EU ports.

~~Maritime -~~ Low Sulfur Fuel

MARPOL specifies requirements for Emission Control Areas (“ECAs”) with stricter limitations on sulfur emissions in these areas. Ships operating in the Baltic Sea ECA, the North Sea/English Channel ECA and the North American ECA are required to use fuel with a sulfur content of no more than 1% or use alternative emission reduction methods, provided the alternatives are at least as effective in terms of emissions reductions. Beginning in January 2014, the area which extends approximately 50 miles off the coasts of Puerto Rico and the U.S. Virgin Islands will also become an ECA, but we do not believe this will result in a significant impact on our fuel costs. Other additional ECAs may also be established in the future, such as for areas around Australia, Hong Kong, Japan, the Mediterranean Sea and Mexico. From January 2015 and thereafter, the fuel sulfur content limit in ECAs will be further reduced to 0.1%. Compliance with these requirements will further increase our fuel costs.

14The MARPOL global limit on fuel sulfur content outside of ECAs will be reduced to 0.5% from the current 3.5% global limit on and after January 2020. The 0.5% global standard will be subject to an IMO review by 2018 to determine the availability of fuel oil to comply with this standard, taking into account the global fuel oil market supply and demand, an analysis of trends in fuel oil markets and any other relevant issues. If the IMO determines that there is insufficient fuel to comply with the 0.5% standard in January 2020, then this requirement will be delayed to January 2025, at the latest. However, the European Union Parliament and Council have set 2020 as the final date for the 0.5% fuel sulfur limit to enter force, regardless of the 2018 IMO review results. This European Union Sulfur Directive will cover European Union Member State territorial waters that are within 12 nautical miles of their coastline. We believe that compliance with the 0.5% global standard could significantly increase our fuel costs. However, the magnitude of this increase is not reasonably determinable at this time due to the length of time until the global standard becomes effective and the other potential mitigating factors discussed below. The cost impacts from implementing progressively lower sulfur content requirements may be mitigated by the favorable impact of future changes in the supply and demand balance for marine and other fuels, future developments of and investments in sulfur emission abatement and propulsion technologies, including more advanced engines, more effective hull coatings and paints, exhaust gas cleaning systems and propeller design, more efficient shipboard systems, the use of alternative lower cost and lower emission fuels, such as liquefied natural gas (“LNG”) at sea and in port.

approximately 50 miles off the coasts of Puerto Rico and the U.S. Virgin Islands will also become an ECA, but we do not believe this will result in a significant impact on our fuel costs. Other additional ECAs may also be established in the future, such as for areas around Australia, Hong Kong, Japan, the Mediterranean Sea and Mexico. From January 2015 and thereafter, the fuel sulfur content limit in ECAs will be further reduced to 0.1%. Compliance with these requirements will further increase our fuel costs. 16

The MARPOL global limit on fuel sulfur content outside of ECAs will be reduced to 0.5% from the current 3.5% global limit on and after January 2020. The 0.5% global standard will be subject to an IMO review by 2018 to determine the availability of fuel oil to comply with this standard, taking into account the global fuel oil market supply and demand, an analysis of trends in fuel oil markets and any other relevant issues. If the IMO determines that there is insufficient fuel to comply with the 0.5% standard in January 2020, then this requirement will be delayed to January 2025, at the latest. However, the European Union Parliament and Council have set 2020 as the final date for the 0.5% fuel sulfur limit to enter force, regardless of the 2018 IMO review results. This European Union Sulfur Directive will cover European Union Member State territorial waters that are within 12 nautical miles of their coastline. We believe that compliance with the 0.5% global standard could significantly increase our fuel costs. However, the magnitude of this increase is not reasonably determinable at this time due to the length of time until the global standard becomes effective and the other potential mitigating factors discussed below.Labor

~~The~~In ~~cost~~2006, ~~impacts~~the ~~from~~International ~~implementing~~Labor ~~progressively~~Organization ~~lower~~(“ILO”), ~~sulfur~~an ~~content~~agency ~~requirements~~of ~~may~~the beUnited ~~mitigated~~Nations bythat ~~the~~develops ~~favorable~~and ~~impact~~oversees international labor standards, adopted a new Consolidated Maritime Labor Convention (“MLC 2006”). MLC 2006 contains a comprehensive set of ~~future~~global ~~changes~~standards based on those that are already found in ~~the~~68 ~~supply~~maritime labor Conventions and ~~demand~~Recommendations ~~balance~~adopted ~~for~~by ~~marine~~the ~~and~~ILO ~~other~~since ~~fuels,~~1920. ~~future~~MLC ~~developments~~2006 includes a broad range of ~~and~~requirements, ~~investments~~such inas ~~sulfur~~a ~~emission~~broader ~~abatement~~definition ~~and~~of ~~propulsion~~a ~~technologies~~seafarer, ~~including~~minimum ~~more~~age ~~advanced~~of ~~engines~~seafarers, ~~more~~medical ~~effective~~certificates, ~~hull~~recruitment ~~coatings~~practices, ~~and~~training, ~~paints~~repatriation, ~~exhaust~~food, ~~gas~~recreational ~~cleaning~~facilities, ~~systems~~health and ~~propeller~~welfare, ~~design~~hours of work and rest, ~~more~~accommodations, ~~efficient~~wages ~~shipboard~~and ~~systems~~entitlements. MLC 2006 added requirements not previously in effect, in the ~~use~~areas of ~~alternative~~occupational ~~lower~~safety ~~cost~~ and ~~lower~~health. ~~emission~~MLC ~~fuels~~2006 became effective in certain countries commencing August 2013. The International Convention on Standards of Training, ~~such~~Certification asand ~~liquefied~~Watchkeeping ~~natural~~for ~~gas~~Seafarers (“~~LNG~~STCW”), atas ~~sea~~amended, establishes minimum standards relating to training, certification and inWatchkeeping ~~port.~~for our seafarers.

~~Maritime~~Financial ~~- Labor~~Requirements

InOur ~~2006,~~ships ~~the International Labor Organization (“ILO”), an agency of the United Nations~~ that ~~develops~~call ~~and~~on ~~oversees international labor standards, adopted a new Consolidated Maritime Labor Convention (“MLC 2006”)~~U.S. ~~MLC~~ports ~~2006 contains a comprehensive set of global standards based on those that~~ are ~~already~~regulated ~~found in 68 maritime labor Conventions and Recommendations adopted~~ by the ~~ILO~~Federal ~~since~~Maritime ~~1920. MLC~~Commission 2006 includes a broad range of requirements, such as a broader definition of a seafarer, minimum age of seafarers, medical certificates, recruitment practices, training, repatriation, food, recreational facilities, health and welfare, hours of work and rest, accommodations, wages and entitlements. MLC 2006 will add requirements not previously in effect, in the areas of occupational safety and health. MLC 2006 will become effective in certain countries commencing August 2013. The International Convention on Standards of Training, Certification and Watchkeeping for Seafarers (“~~STCW~~FMC”),. as46 ~~amended, establishes minimum standards relating to training, certification and watchkeeping for our seafarers~~U. S.C.

~~Maritime~~44102, which is administered by the FMC, requires all of our ships that call on U.S. ports and embark or disembark guests in U.S. ports to establish financial responsibility for their liability to passengers for nonperformance of transportation, for personal injury and for loss of life. The FMC’s regulations require that a cruise line demonstrate its financial responsibility for nonperformance of transportation through a guarantee, escrow arrangement, surety bond or insurance. In February, 2013, the FMC approved amendments to the performance bond requirements that will increase the required guarantee requirements from $15 million to $30 million per operator over a two-year ~~Financial~~period, ~~Requirements~~with a $22 million required guarantee as of April 2014 and a $30 million required guarantee as of April 2015. Once fully effective in April 2015, the guarantee requirements will be subject to additional consumer price index based adjustments. We do not anticipate that compliance with the new rules will have a material adverse effect on our costs.

Our ships that call on U.S. ports are regulated by the Federal Maritime Commission (“FMC”). Public Law 89-777, which is administered by the FMC, requires all our ships that call on U.S. ports and embark or disembark guests in U.S. ports to establish financial responsibility for their liability to passengers for nonperformance of transportation, for personal injury and for loss of life. The FMC's regulations require that a cruise line demonstrate its financial responsibility for nonperformance of transportation through a guarantee, escrow arrangement, surety bond or insurance. In February 2013, the FMC approved amendments to the performance bond requirements that will increase the required guarantee requirements from $15 million to $30 million per operator over a two-year phase in period. Once phased in, the guarantee requirements will be subject to additional consumer price index based adjustments. The new rules become effective in the second quarter of 2014. We do not anticipate that compliance with the new rules will have a material effect on our costs.

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.

Taxation

International shipping income

In many of the jurisdictions in which we operate as a non-resident ship operator, the shipping revenue derived therefrom is taxed on a “deemed international shipping income” basis, meaning that the tax is levied based on a statutorily prescribed percentage of “gross shipping income” derived from the relevant jurisdictions. We believe that “gross shipping income” consists of cruise package fares received from passengers. The applicability of U.S. federal income taxes to us is separately discussed below.

Revenue from shipboard activities

In most countries in which we operate, tax is payable on income derived within the respective jurisdictions. We believe that the majority of the onboard revenue generated from activities such as beverage and gift shop sales is derived while the ships are navigating in international waters. Consequently, we are of the view that onboard revenue generated from such activities is not taxable. The majority of the countries in which we operate adopt the definition of territorial waters in accordance with Article 3 of the 1982 United Nations Convention on the Law of the Sea whereby 12 nautical miles from the baseline of the respective countries is the limit for taxation purposes unless there are express domestic laws which state otherwise.

U.S. federal income taxation of Regent Seven Seas shipping income

The following discussion of the application to the Company of U.S. federal income tax laws is based upon current provisions of the Internal Revenue Code (the "“Code"”), legislative history, U.S. Treasury regulations, administrative rulings and court decisions. The following description is subject to change and any change could affect the continuing accuracy of this discussion (and any such change may also have retroactive effect).

Under Section 883 of the Code, certain foreign corporations, though engaged in the conduct of a trade or business within the United States, are exempt from ~~U.S.~~ United States federal income and branch profits taxes on (or in respect of) gross income derived from or incidental to the international operation of ships. U.S. Treasury regulations provide that a foreign corporation will qualify for the Section 883 exemption if, in relevant part: (i) the foreign country in which the foreign corporation is organized grants an “equivalent exemption” from tax for income from the international operation of ships of sufficiently broad scope to corporations organized in the U.S. (an “Equivalent Exemption”) and (ii) the foreign corporation is a “controlled foreign corporation” (a “CFC”) for more than half of the taxable year, and more than 50% of its stock is owned by qualified U.S. persons for more than half of the taxable year (the “CFC Test”). In addition, the U.S. Treasury regulations require a foreign corporation and certain of its direct and indirect shareholders to satisfy detailed substantiation requirements (“Substantiation Requirements”) in order to establish that the foreign corporation meets the CFC Test.

We believe that substantially all of our income derived from the international operation of ships is properly categorized as Shipping Income, and that our income other than Shipping Income is not currently, nor is it expected to become, a material amount. It is possible, however, that a material amount of our income may not actually qualify (or will not qualify) as Shipping Income.17

a foreign corporation will qualify for the Section 883 exemption if, in relevant part: (i) the foreign country in which the foreign corporation is organized grants an “equivalent exemption” from tax for income from the international operation of ships of sufficiently broad scope to corporations organized in the U.S. (an “Equivalent Exemption”) and (ii) the foreign corporation is a “controlled foreign corporation” (a “CFC”) for more than half of the taxable year, and more than 50% of its stock is owned by qualified U.S. persons for more than half of the taxable year (the “CFC Test”). In addition, the U.S. Treasury regulations require a foreign corporation and certain of its direct and indirect shareholders to satisfy detailed substantiation requirements (“Substantiation Requirements”) in order to establish that the foreign corporation meets the CFC Test.

For purposes of the CFC Test, a qualified U.S. person is defined as an individual who is a U.S. citizen or resident alien, a domestic corporation or one of certain domestic tax-exempt trusts. Stock owned by or for a domestic partnership, taxable domestic trust, estate, mutual insurance company or similar entity is treated for these purposes as owned proportionately by its partners, beneficiaries, grantors or other interest holders.

We believe that substantially all of Regent’s income derived from the international operation of ships is properly categorized as Shipping Income, and that our income other than Shipping Income is not currently, nor is it expected to become, a material amount. It is possible, however, that a material amount of our income may not actually qualify (or will not qualify) as Shipping Income.

Even if our interpretation of Section 883 is correct, the exemption for Shipping Income is not applicable in any year in which we do not satisfy complex stock ownership tests, as described above. Additionally, any change in our operations could change the amount of our income that is considered Shipping Income under Section 883. Finally, any change in the tax laws governing our operations, including Section 883 of the Code and the regulations thereunder, could increase the amount of our income that is subject to tax. Any of the foregoing risks could significantly increase our exposure to U.S. federal income and branch profits tax.

The U.S.-source portion of our income that is not Shipping Income is generally subject to U.S. federal corporate income tax on a net basis (generally at a 35% rate) and possible state and local taxes, and our effectively connected earnings and profits generally are subject to an additional branch profits tax of 30%.

For ~~purposes~~U.S. offederal ~~the~~income ~~CFC~~tax ~~Test~~purposes, awe ~~qualified~~and our non-U.S. ~~person~~subsidiaries isare ~~defined~~disregarded as anentities ~~individual~~separate ~~who~~from our parent. We rely on our parent corporation, PCH, to meet the requirements necessary to qualify for the benefits of Section 883. PCH is organized as a company in Panama, which grants an equivalent tax exemption to U.S. ~~citizen~~corporations, orand ~~resident~~is ~~alien,~~thus classified as a ~~domestic~~qualified ~~corporation~~foreign orcountry ~~one~~for purposes of ~~certain~~Section ~~domestic~~883. ~~tax~~PCH is currently classified as a CFC and we believe we meet the ownership and substantiation requirements of the CFC test under the regulations. Therefore, we believe most of our income and the income of our ship-owning subsidiaries, which is derived from or incidental to the international operation of ships, is exempt ~~trusts~~from U.S. ~~Stock~~federal ~~owned~~income bytaxation orunder ~~for~~Section a883. ~~domestic~~In ~~partnership~~2005, ~~taxable~~final ~~domestic~~regulations ~~trust~~became effective under Section 883, ~~estate~~which, ~~mutual~~among ~~insurance~~other ~~company~~things, ornarrow ~~similar~~somewhat ~~entity~~the isscope ~~treated~~of ~~for~~activities ~~these~~that ~~purposes~~are considered by the Internal Revenue Service to be incidental to the international operation of ships. The activities listed in the regulations as ~~owned~~not ~~proportionately~~being byincidental ~~its~~to ~~partners~~the international operation of ships include income from the sale of air and land transportation, ~~beneficiaries~~shore excursions, ~~grantors~~and orpre- ~~other~~and ~~interest~~post-cruise ~~holders~~tours. To the extent the income from these activities is earned from sources within the United States that income is subject to U.S. taxation.

We and our non-U.S. subsidiaries are disregarded as entities separate from their owner for U.S. federal income tax purposes, and accordingly, rely on the ability of our parent corporation, PCH, to meet the requirements necessary to qualify for the benefits of Section 883.

PCH is organized as a company in Panama, which grants an Equivalent Exemption. While PCH is currently classified as a CFC and we believe PCH meets the CFC Test because more than 50% in value of its stock is owned, or is treated as owned, by qualified U.S. persons for more than half of the taxable year, the application of this test is subject to some uncertainty and there is no assurance that our view is correct.

At this time, we believe that substantially all of our income is Shipping Income and that PCH will be able to meet the requirements (including the Substantiation Requirements) provided in the U.S. Treasury regulations necessary for our Shipping Income to be subject to the exemption provided in Section 883 of the Code; however, we can give no assurance that we will in fact be able to meet the foregoing requirements.

Taxation of Regent Seven Seas’ international shipping income where Section 883 of the Code is inapplicable

We believe that, if the Shipping Income of Regent ~~Seven Seas~~ were not exempt from U.S. federal income taxation under Section 883 of the Code, as described above, that income, as well as any other income from cruise operations ~~of Regent Seven Seas~~ that is not Shipping Income, to the extent derived from U.S. sources, generally would be taxed on a net basis under Section ~~882~~ of the Code (after allowance for deductions, assuming that a true and accurate federal income tax return is filed within the permitted time frame) at graduated U.S. federal corporate income tax rates (currently, a maximum of 35%), and possible state and local income taxes. Regent Seven Seas would also be subject to a 30% (unless a lower treaty rate applies) federal branch profits tax under Section 884 of the Code, generally on the portion of our earnings and profits that was derived from U.S. sources each year to the extent such earnings and profits were not properly viewed as reinvested and maintained in the U.S. business of Regent Seven Seas. To the extent that our income derived from the use of our ships, or services related to the use of our ships, is not exempt under Section 883 of the Code or subject to net basis taxation under Section 882 of the Code, such income would be subject to a 4% gross basis tax under Section 887 of the Code. We believe that the income of Regent Seven Seas generally would not be subject to the 4% gross basis tax under Section 887 of the Code.

While any such U.S. federal, state and local income taxes and branch profits taxes would be a liability of our parent, PCH (because we and our subsidiaries are considered disregarded entities for U.S. federal and applicable state and local income tax purposes), and not a liability of ours or our subsidiaries, we may effectively bear the cost of any such taxes because we are permitted to make tax distributions to PCH to pay such taxes.18

~~Income~~the ofCode ~~Regent~~(after ~~Seven~~allowance ~~Seas~~for ~~derived~~deductions, ~~from~~assuming ~~U.S. sources~~that ~~includes~~a ~~100%~~true ofand ~~its~~accurate federal income, iftax ~~any,~~return ~~from~~is ~~transportation~~filed ~~that~~within ~~begins~~the ~~and~~permitted ~~ends~~time inframe) ~~the~~at graduated U.S. federal corporate income tax rates (currently, ~~and~~a ~~50%~~maximum of ~~its~~35%), and possible state and local income ~~from~~taxes. ~~transportation~~We ~~that~~would ~~either~~also ~~begins~~be orsubject ~~ends~~to ina ~~the~~30% ~~U.S.~~(unless ~~Income~~a ~~from~~lower ~~transportation~~treaty ~~that~~rate ~~neither~~applies) ~~begins~~federal ~~nor~~branch ~~ends~~profits intax under Section 884 of the ~~U.S.~~Code, ~~would~~generally ~~not~~on bethe ~~taxable.~~portion ~~There~~of ~~are~~our ~~indications~~earnings inand ~~the~~profits ~~legislative~~that ~~history~~was ofderived from U.S. sources each year to the ~~transportation~~extent ~~income~~such ~~source~~earnings ~~rules~~and ~~that~~profits ~~suggest~~were ~~that~~not aproperly ~~cruise~~viewed ~~that~~as ~~begins~~reinvested and ~~ends~~maintained in athe U.S. ~~port,~~ ~~but~~business of Regent. To the extent that ~~calls~~our onincome ~~one~~derived from the use of our ships, or ~~more~~services ~~foreign~~related ~~ports~~to the use of our ships, ~~will~~is ~~derive~~not ~~U.S. source~~exempt ~~income~~under ~~only~~Section ~~from~~883 of the ~~first~~Code ~~and~~or ~~last~~subject ~~legs~~to net basis taxation under Section 882 of the Code, such ~~cruise.~~income ~~However,~~would ~~since~~be ~~there~~subject ~~are~~to noa ~~regulations~~4% orgross ~~other~~basis ~~IRS~~tax ~~guidance~~under ~~with~~Section ~~respect~~887 toof ~~these~~the ~~rules,~~Code. We believe that the ~~applicability~~income of ~~the~~Regent ~~transportation~~generally ~~income~~would ~~source~~not ~~rules~~be insubject to the ~~aforesaid~~4% ~~manner~~gross isbasis ~~not~~tax ~~free~~under ~~from~~Section ~~doubt~~887 of the Code.

Income of Regent derived from U.S. sources includes 100% of its income, if any, from transportation that begins and ends in the United States, and 50% of its income from transportation that either begins or ends in the United States. Income from transportation that neither begins nor ends in the United States would not be taxable. There are indications in the legislative history of the transportation income source rules that suggest that a cruise that begins and ends in a U.S. port, but that calls on one or more foreign ports, will derive U.S. source income only from the first and last legs of such cruise. However, since there are no regulations or other IRS guidance with respect to these rules, the applicability of the transportation income source rules in the aforesaid manner is not free from doubt.

Certain State, Local and Non-U.S. Tax Matters

We may be subject to state, local and non-U.S. income or non-income taxes in various jurisdictions, including those in which we transact business, own property, or reside. We may be required to file tax returns in some or all of those jurisdictions. The state, local or non-U.S. tax treatment of Regent ~~Seven Seas~~ may not conform to the U.S. federal income tax treatment discussed above. We may be required to pay non-U.S. taxes on dispositions of foreign property, or operations involving foreign property may give rise to non-U.S. income or other tax liabilities in amounts that could be substantial.

Available Information

We file annual reports on Form 10-K, quarterly reports on Form 10-Q, ~~and~~ current reports on Form 8-K and other information with the SEC. You may read and copy any document we file with the SEC at the SEC's public reference room at 100 F Street, N.E., Washington, D.C. 20549. Please call the SEC at 1-800-SEC-0330 for further information on the public reference room. Our SEC filings are also available to the public at the SEC's website at http://www.sec.gov.

1719

Item 1A. Risk Factors

Certain risk factors may have a material adverse effect on our business, financial condition and results of operations. You should consider carefully the risks and uncertainties described below, in addition to other information contained in this Annual Report on Form 10-K, including our consolidated financial statements and related notes. The risks and uncertainties described below are not the only ones we face. Additional risks and uncertainties that we are unaware of, or that we currently believe are not material, may also become important factors that adversely affect our business. If any of the following risks actually occurs, our business, financial condition, results of operations, and future prospects could be materially and adversely affected. In connection with the forward-looking statements that appear in this Annual Report on Form 10-K, you should also carefully review the cautionary statement referred to under "Forward-Looking Statements."

Risks Related to Our Business

Adverse economic conditions in the North American region and throughout the world and related factors such as fluctuating or increasing fuel prices, declines in the securities and real estate markets, and perceptions of these conditions that decrease the level of disposable income of consumers or consumer confidence could adversely affect our financial condition and results of operations.

Our revenues are highly concentrated from North American passengers, comprising 83% of our total cruise revenues for the year ended December 31, ~~2012~~2013. Adverse changes in the perceived or actual economic climate, such as higher fuel prices, stock and real estate market declines and/or volatility, more restrictive credit markets, higher unemployment and underemployment rates, higher taxes, and changes in governmental policies, ~~could~~both ~~reduce~~in ~~the~~North ~~level~~America ofand ~~discretionary~~worldwide, ~~income~~could orreduce consumer's ~~confidence~~discretionary inincome ~~the~~or ~~countries~~consumer ~~from which we source our guests~~confidence. Consequently, this may negatively affect demand for cruise vacations in North America and worldwide , which are a discretionary purchase. Decreases in demand could lead to price discounting which, in turn, could reduce the profitability of our business. In addition, these conditions can also impact our suppliers, which can result in disruptions in our suppliers' service and financial losses for us.

An increase in the supply of cruise ships without a corresponding increase in passenger demand could adversely affect our financial condition and results of operations.

Historically, cruise capacity has grown with demand. According to CLIA, North American passenger capacity included ~~222~~225 ships with approximately ~~342~~344,000 berths at the end of ~~2012~~2013. Luxury cruise companies account for 1618 of the ~~222~~225 ships and 2.3% of total berths. In order to profitably utilize this new capacity, the cruise industry will ~~likely~~ need to ~~improve~~increase ~~its~~the ~~percentage~~portion ~~share~~ of the U. S. population who has cruised at least once, which ~~currently~~was is approximately 24% in 2013, according to CLIA. If there is an industry-wide increase in capacity without a corresponding increase in public demand, we, as well as the entire cruise industry, could experience reduced occupancy rates and/or be forced to discount our prices, which could adversely affect our financial condition and results of operations.

We face intense competition from other cruise companies as well as non-cruise vacation alternatives and we may not be able to compete effectively which could adversely affect our financial condition and results of operations.

We face intense competition from other cruise companies in North America where the cruise market is mature and developed. The North American cruise industry is highly concentrated among three companies. As of December 31, ~~2012~~2013, Carnival Corporation, Royal Caribbean Cruises Ltd. and Norwegian Cruise Line Holdings Ltd. together account for 8182% of North American cruise passenger berth capacity. We compete against these operators principally on the quality of our ships, differentiated product offering , selection of our itineraries and value proposition of our cruises. In addition, Carnival Corporation and Royal Caribbean Cruises Ltd. have multiple brands with various price points with ships deployed in numerous geographic regions. In addition to their increased scale and diversification, they may have greater financial, technological, sales and marketing resources than we do. We also face competition for many itineraries from other cruise operators as well as competition from non-cruise vacation alternatives. In the event we do not compete effectively, our financial condition and results of operations could be adversely affected.

Our substantial indebtedness could adversely affect our ability to raise additional capital to fund our operations, limit our ability to react to changes in the economy or our industry and prevent us from making debt service payments.

We are highly leveraged with a high level of floating rate debt, and our level of indebtedness could limit cash flow available for our operations and could adversely affect our financial condition, prospects and flexibility. As of December 31, ~~2012~~2013, we had $521.3 million of outstanding indebtedness (excluding amounts due to affiliates), which consisted of $296.3 million outstanding under our senior secured credit ~~facilities~~facility and $225.0 million under the senior secured notes. As of ~~December 31, 2012, we had $40.0 million available for additional borrowing under our revolving credit facility.~~

December 31, 2013, we had $40.0 million available for borrowing under our revolving credit facility and approximately $440.0 million in available borrowings under our loan agreement to finance the construction of the Seven Seas Explorer.

Our substantial indebtedness could:


•	limit our ability to borrow money for our working capital, capital expenditures, development projects, debt service requirements, strategic initiatives or other purposes;


•	make it more difficult for us to satisfy our obligations with respect to our indebtedness, and any failure to comply with the obligations of any of our debt instruments, including restrictive covenants and borrowing conditions, could result in an event of default under the agreements governing our indebtedness;


•	require us to dedicate a substantial portion of our cash flow from operations to the repayment of our indebtedness thereby reducing funds available to us for other purposes;


•	limit our flexibility in planning for, or reacting to, changes in our operations or business;


•	make us more highly leveraged than some of our competitors, which may place us at a competitive disadvantage;


•	make us more vulnerable to downturns in our business or the economy generally and in the industry in which we operate;


•	limit our ability to make strategic acquisitions, introduce new technologies or exploit business opportunities;

• limit, ~~along~~our ~~with~~ability ~~the~~to ~~financial~~borrow ~~and~~additional ~~other~~funds ~~restrictive~~or ~~covenants~~dispose inof ~~our indebtedness~~assets, among other ~~things,~~financial ~~our~~restrictive ~~ability~~covenants toin ~~borrow~~the ~~additional~~agreements ~~funds~~governing orour ~~dispose of assets~~indebtedness; and

• make our credit card processors seek more restrictive terms in respect ofto our credit card arrangements~~; and~~.

•Any ~~expose~~of usthe tofactors ~~the~~listed ~~risk~~above could materially and adversely affect our business and our results of ~~increased~~operations. Furthermore, our interest expense could increase if interest rates asrise, since certain portions of our ~~borrowings~~debt ~~are~~bear interest at afloating ~~variable~~rates. ~~rate~~If we do not have sufficient cash flows to service our debt, we may be required to refinance all or part of ~~interest~~our existing debt, sell assets, borrow more money or sell securities, none of which we can guarantee we will be able to do.

We may be able to incur significant additional indebtedness in the future. Although the agreements governing our indebtedness contain limitations on the incurrence of certain additional indebtedness, these limitations are subject to a number of important qualifications and exceptions, and the indebtedness incurred in compliance with these limitations could be substantial. If we incur new indebtedness, the related risks, including those described above, could intensify.

We may not be able to generate sufficient cash to service all of our indebtedness, including the notes, and may be forced to take other actions to satisfy our obligations under our indebtedness that may not be successful.

Our ability to satisfy our debt obligations will depend upon, among other things:


•	our future financial and operating performance, which will be affected by prevailing economic conditions and financial, business, regulatory and other factors, many of which are beyond our control; and

• our ~~future~~ ability to ~~borrow~~access available borrowings under our senior secured credit ~~facilities~~facility, the availability of which depends on, among other things, our ~~complying~~compliance with the covenants in our senior secured credit ~~facilities~~facility.

We cannot assure you that our business will generate sufficient cash flow from operations, or that we will be able to ~~draw~~access available borrowings under our senior secured credit ~~facilities~~facility or otherwise, in an amount sufficient to fund our liquidity needs. If our cash flows and capital resources are insufficient to service our indebtedness, we may be forced to reduce or delay capital expenditures, sell assets, seek additional capital or restructure or refinance our indebtedness, including the notes. Our ability to restructure or refinance our indebtedness will depend upon numerous factors, including but not limited to the condition of the capital markets, our financial condition at such time, credit ratings and the performance of our industry in general. Any refinancing of our indebtedness could be at higher interest rates and may require us to comply with more onerous covenants, which could further restrict our business operations. In the absence of operating results or resources sufficient to service our indebtedness, we could also face substantial liquidity problems and might be required to dispose of material assets or operations to meet our debt service and other obligations. Some or all of our assets may be illiquid and may have no readily ascertainable market value; however, and we may not be able to consummate such dispositions for fair market value or at all. Furthermore, any proceeds that we could realize from any such dispositions may not be adequate to meet our debt service obligations then due. These alternative measures may not be successful and may not permit us to meet our scheduled debt service obligations. In addition, the terms of existing or future debt agreements may restrict us from adopting some of these alternatives. Neither our sponsor nor any of its affiliates has any continuing obligation to provide us with debt or equity financing.

If our cash flows and capital resources are insufficient to service our indebtedness, we may be forced to reduce or delay capital expenditures, sell assets, seek additional capital or restructure or refinance our indebtedness, including the notes. These alternative measures may not be successful and may not permit us to meet our scheduled debt service obligations. Our ability to restructure or refinance our debt will depend on the condition of the capital markets and our financial condition at such time. Any refinancing of our debt could be at higher interest rates and may require us to comply with more onerous covenants, which could further restrict our business operations. In addition, the terms of existing or future debt agreements may restrict us from adopting some of these alternatives. Further, some or all of our assets may be illiquid and may have no readily ascertainable market value. In the absence of such operating results and resources, we could face substantial liquidity problems and might be required to dispose of material assets or operations to meet our debt service and other obligations. We may not be able to consummate those dispositions for fair market value or at all. Furthermore, any proceeds that we could realize from21

any such dispositions may not be adequate to meet our debt service obligations then due. Neither our sponsor nor any of its affiliates has any continuing obligation to provide us with debt or equity financing.

Increases in fuel prices or other cruise operating costs could have an adverse impact on our financial condition and results of operations.

Fuel costs accounted for 11.5% of our total cruise operating expenses for the year ended December 31, 2012 as compared to 12.3% and 11.3% for the years ended December 31, 2011 and 2010, respectively. Economic and political conditions in certain parts of the world make it challenging to predict future fuel prices. Future increases in fuel prices would increase our cost of cruise ship operations. We could also experience increases in other cruise operating costs, such as crew, insurance and security costs, due to market forces and economic or political instability beyond our control. Despite any fuel hedges, increases in fuel prices or other cruise operating costs could have a material adverse effect on our financial condition and results of operations. Additionally, significant declines in fuel prices could result in margin calls under certain of our fuel hedges that could create a short-term liquidity risk. While we anticipate that the costs of any such margin calls would be recouped over time as a result of lower fuel costs, any such margin calls may affect our ability to comply with the covenant obligations under our credit agreements.

Conducting business internationally may result in increased costs and risks.

We operate our business internationally and plan to continue to develop our international presence. Operating internationally exposes us to a number of risks. Examples include political risks and risks of increase in duties and taxes as well

as changes in laws and policies affecting cruising, vacation or maritime businesses, or governing the operations of foreign-based companies. Because some of our expenses are incurred in foreign currencies, we are exposed to exchange rate risks. Additional risks include interest rate movements, imposition of trade barriers, restrictions on repatriation of earnings, withholding and other taxes on remittances and other payments by subsidiaries, and changes in and application of foreign taxation structures, including value added taxes. Furthermore, we operate in waters and call at ports that have experienced political and civil unrest, insurrection and armed hostilities. If we are unable to address these risks adequately, our financial condition and results of operations could be adversely affected.

The agreements governing our indebtedness contain restrictions that will limit our flexibility in operating our business.

The agreements governing our indebtedness contain, and any instruments governing future indebtedness of ours would likely contain, a number of covenants that will impose ~~significant~~ operating and financial restrictions on us.For example, ~~including~~our loan agreement to finance our newbuild requires that we maintain a minimum liquidity balance, a maximum debt to Adjusted EBITDA ratio, a minimum Adjusted EBITDA to debt service ratio and a maximum debt to adjusted equity ratio requirements, ~~under~~and our senior secured credit ~~facilities~~facility requires that we maintain a maximum loan-to-value ratio, a minimum interest coverage ratio (applicable only to our revolving credit facility) and restrictions on our and our subsidiaries’ ability to, among other things:


•	incur or guarantee additional indebtedness or issue preferred stock;


•	grant liens on assets;


•	pay dividends or make distributions to our stockholders;


•	repurchase or redeem capital stock or subordinated indebtedness;


•	make investments or acquisitions;

• ~~incur~~restrict ~~restrictions on~~ the ability of our subsidiaries to pay dividends or to make other payments to us;


•	enter into transactions with our affiliates;


•	merge or consolidate with other companies or transfer all or substantially all of our assets;


•	transfer or sell assets;

• pledge the capital stock issued by the ~~Guarantors~~guarantors of our indebtedness; and


•	designate our subsidiaries as unrestricted subsidiaries.

In addition, our ability to meet those financial covenants can be affected by events beyond our control, and there can be no assurance that we will meet those covenants. A failure to comply with these covenants could result in an event of default under the facilities or the existing agreements, which, if not cured or waived, could have a material adverse effect on our business, financial condition and results of operations. In the event of any default under our senior secured credit ~~facilities~~facility or our other indebtedness, the holders of our indebtedness thereunder:


•	will not be required to lend any additional amounts to us, if applicable;

• could, in certain circumstances, elect to declare all indebtedness outstanding, together with accrued and unpaid interest and fees, to be due and payable and terminate all commitments to extend further credit, if applicable; or


•	could require us to apply all of our available cash to repay such indebtedness.

Additionally, under the terms of the agreements governing our indebtedness, certain holders could bring actions against us that would cause cross defaults under our other indebtedness. If we were unable to repay those amounts, the holders of our indebtedness under our senior secured credit ~~facilities~~facility could proceed against the collateral granted to them to secure that indebtedness. As a result of these restrictions, we would be limited in the manner in which we conduct our business, and we may be unable to engage in favorable business activities or finance future operations or capital needs.

As a result of these restrictions, we would be limited in the manner in which we conduct our business, and we may be unable to engage in favorable business activities or finance future operations or capital needs.

The impact of disruptions in the global credit markets may adversely affect our ability to borrow and could increase our counterparty credit risks, including those under our credit facilities, derivative instruments, contingent obligations and insurance contracts.

There can be no assurance that we will be able to borrow additional money on terms as favorable as our current debt, on commercially acceptable terms, or at all.

Economic downturns, including failures of financial institutions, and any related liquidity crisis, can disrupt the capital and credit markets. Such disruptions could cause counterparties under our credit facilities, derivative instruments, contingent obligations and insurance contracts to be unable to perform their obligations or to breach their obligations to us under our contracts with them, or result in failures of financial institutions to fund required borrowings under our loan agreements and to pay us amounts that may become due under our derivative contracts and other agreements. ~~Also,~~We we could be limited in obtaining funds to pay amounts due to our counterparties under our derivative contracts and to pay amounts that may become due under other agreements. If we were to elect to replace any counterparty for its failure to perform its obligations under such instruments, we would likely incur significant costs to replace the counterparty. Any failure to replace any counterparties under these circumstances may result in additional costs to us.

2022

~~instruments,~~Increases wein ~~would~~fuel ~~likely~~prices ~~incur~~or ~~significant~~other ~~costs~~cruise tooperating ~~replace~~could ~~the~~have ~~counterparty.~~an ~~Any~~adverse ~~failure~~impact toon ~~replace~~our ~~any~~financial ~~counterparties~~condition ~~under~~and ~~these~~results ~~circumstances~~of ~~may result in additional costs to us or an ineffective instrument~~operations.

~~Delays~~Fuel costs accounted for 11.1% of our total cruise operating expenses for the year ended December 31, 2013 as compared to 11.5% and 12.3% for the years ended December 31, 2012 and 2011, respectively. Economic, market and political conditions in ~~ship~~certain ~~refurbishments~~parts of the world make it challenging to predict future fuel prices and~~/or~~ availability of fuel. Future increases in fuel prices would increase our cost of cruise ship operations. We could also experience increases in other cruise operating costs, such as food, crew, port, repairs and maintenance, insurance and security costs, due to market forces and economic or political instability beyond our control. Despite any fuel hedges we are currently a party to or may enter into in the future, increases in fuel prices or other cruise operating costs could ~~adversely~~have ~~affect~~a material adverse effect on our financial condition and results of operations ~~and~~if ~~financial~~we ~~condition~~are unable to recover these increased costs through price increases charged to our guests. Conversely, significant declines in fuel prices could result in margin calls under certain of our fuel hedges which could create a short-term liquidity risk. While we anticipate that the costs of any such margin calls would be recouped over time as a result of lower fuel costs, any such margin calls may affect our ability to comply with the covenant obligations under our credit agreements.

~~The~~Conducting ~~refurbishment,~~business ~~repair~~internationally and maintenance of our cruise ships is a complex process and involves risks similar to those encountered in other large and sophisticated equipment refurbishment and repair projects. Our ships are subject to the risk of mechanical failures or accidents, which we have occasionally experienced and have had to repair. If there is a mechanical failure or accident in the future, we may be unable to procure spare parts when needed or make repairs without incurring material expense or suspension of service, especially if a problem affects certain specialized maritime equipment, such as the radar, a pod propulsion unit, the electrical/power management system, the steering gear, the gyro system or another vital system aboard a ship. In addition, availability, work stoppages, insolvency or financial problems in the shipyards refurbishing or repairing our ships, or other “force majeure” events that are beyond our control and the control of shipyards or subcontractors, could also delay or prevent the refurbishment, repair and maintenance of our ships. The consolidation of the control of certain European cruise shipyards could result in ~~higher~~increased ~~prices~~costs ~~for refurbishment~~ and ~~repairs due to reduced competition~~risks. Also, the lack of qualified shipyard repair facilities could result in the inability to repair and maintain our ships on a timely basis. These potential events and the associated losses, to the extent that they are not adequately covered by contractual remedies or insurance, could adversely affect our results of operations and financial condition.

We operate our business internationally and plan to continue to develop our international presence. Operating internationally exposes us to a number of risks, including political risks, risks of increase in duties and taxes, risks relating to anti-bribery laws, as well as risks that laws and policies affecting cruising, vacation or maritime businesses, or governing the operations of foreign-based companies may change. Additional risks include interest rate movements, imposition of trade barriers, restrictions on repatriation of earnings, withholding and other taxes on remittances and other payments by subsidiaries, and changes in and application of foreign taxation structures, including value added taxes. Furthermore, we operate in waters and call at ports that have experienced political and civil unrest, insurrection and armed hostilities. If we are unable to address these risks adequately, our financial condition and results of operations could be adversely affected.

Operating internationally also exposes us to numerous and sometimes conflicting legal and regulatory requirements. In many parts of the world, including countries in which we operate, practices in the local business communities might not conform to international business standards. We must adhere to policies designed to promote legal and regulatory compliance as well as applicable laws and regulations. However, we might not be successful in ensuring that our employees, agents, representatives and other third parties with which we associate throughout the world properly adhere to them. Failure by us, our employees or any of these third parties to adhere to our policies or applicable laws or regulations could result in penalties, sanctions, damage to our reputation and related costs, which in turn could negatively affect our results of operations and cash flows.

Our efforts to expand our business into new markets may not be successful.

While our historical focus has been to serve the North American cruise market, we are expanding our focus to increase our international guest sourcing. In 2010, 20.0% of our passengers were sourced from outside the United States, which grew to 25.1% in 2013. 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 in the Asia Pacific region. Expansion into these new markets requires significant level of investment. 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, which could adversely impact our business, financial condition and results of operations.

Fluctuations in foreign currency exchange rates could affect our financial results.

We have historically and may in the future enter into ship construction contracts denominated in euros. While we have entered into foreign currency swaps and collar options 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. Termination of these contracts could result in a significant loss and materially have an adverse effect on our results of operations.

Delays in our shipbuilding program and ship repairs, maintenance and refurbishments could adversely affect our results of operations and financial condition.

The new construction, refurbishment, repair and maintenance of our cruise ships are complex processes and involve risks similar to those encountered in other large and sophisticated equipment construction, refurbishment

and repair projects. Our ships are subject to the risk of mechanical failure or accident, which we have occasionally experienced and have had to repair. If there is a mechanical failure or accident in the future, we may be unable to procure spare parts when needed or make repairs without incurring material expense or suspension of service, especially if a problem affects certain specialized maritime equipment, such as the radar, a pod propulsion unit, the electrical/power management system, the steering gear or the gyro system.

In addition, availability, work stoppages, insolvency or financial problems in the shipyards’ construction, refurbishment or repair of our ships, or other “force majeure” events that are beyond our control and the control of shipyards or subcontractors, could also delay or prevent the newbuild delivery, refurbishment, repair and maintenance of our ships. Any termination or breach of contract following such an event may result in, among other things, the forfeiture of prior deposits or payments made by us, potential claims and impairment of losses. A significant delay in the delivery of a new ship, or a significant performance deficiency or mechanical failure of a new ship could also have an adverse effect on our business. The consolidation of the control of certain European cruise shipyards could result in higher prices for refurbishment and repairs due to reduced competition. Also, the lack of qualified shipyard repair facilities could result in the inability to repair and maintain our ships on a timely basis. These potential events and the associated losses, to the extent that they are not adequately covered by contractual remedies or insurance, could adversely affect our results of operations and financial condition.

We rely on external distribution channels for passenger bookings; major changes in the availability of external distribution channels could undermine our customer base.

The majority of our passengers book their cruises through independent travel agents, wholesalers and tour operators. In the event that the travel agent distribution channel is adversely impacted by an economic downturn, this could reduce the distribution channels available for us to market and sell our cruises and we could be forced to use alternative distribution channels which we are not accustomed to. If this were to occur, it could have an adverse impact on our financial condition and results of operations.

Additionally, these parties generally sell and market our cruises on a nonexclusive basis. Although we offer commission and other incentives to them for booking our cruises, there can be no guarantee that our competitors will not offer higher commissions and incentives in the future. Travel agents may face increasing pressure from our competitors, particularly in the North American market, to sell and market these competitors’ cruises exclusively. If such exclusive arrangements were introduced, there can be no assurances that we will be able to find alternative distribution channels to ensure that our customer base would not be affected.

We rely on third parties to provide hotel management services for our vessels and other services and are exposed to the risks facing such providers and, in certain circumstances, we may not be able to replace them or we may be forced to replace them at an increased cost to us.

We rely on external third parties to provide hotel management services for our vessels and certain other services that are vital to our business. If these service providers suffer financial hardship or are otherwise unable to continue providing such services, we cannot guarantee that we will be able to replace such service providers in a timely manner, which may cause an interruption in our operations. To the extent that we are able to replace such service providers, we may be forced to pay an increased cost for equivalent services. Both the interruption of operations and the replacement of the third party service providers at an increased cost could adversely impact our financial condition and results of operations.

We rely on scheduled commercial airline services for passenger connections; increases in the price of, or major changes or reduction in, commercial airline services could undermine our customer base.

A number of our passengers depend on scheduled commercial airline services to transport them to ports of embarkation for our cruises. Increases in the price of airfare, due to increases in fuel prices, fuel surcharges, changes in commercial airline services as a result of strikes, weather or other events, or the lack of availability due to schedule changes or a high level of airline bookings could increase our cruise operating expenses which would, in turn, have an adverse effect on our financial condition and results of operations.

2124

Acts of terrorism, acts of piracy, armed conflict and threats thereof, and other international events impacting the security of travel could adversely affect the demand for cruises and as a result adversely affect our financial condition and results of operations.

Past acts of terrorism and piracy have had an adverse effect on tourism, travel and the availability of air service and other forms of transportation. The threat or possibility of future terrorist acts, an increase in or outbreak of additional hostilities or armed conflict abroad or the possibility thereof, an increase in the activity of pirates operating off the western coast of Africa, or otherwise throughout the world, political unrest and instability, ~~such as~~ the ~~recent upheaval of the political system in Egypt, the~~ issuance of travel advisories by national governments, and other geopolitical uncertainties have had in the past and may again in the future have an adverse impact on the demand for cruises and consequently the pricing for cruises. Decreases in demand and reduced pricing in response to such decreased demand would adversely affect our financial condition and results of operations by reducing our profitability.

Our revenues are seasonal owing to variations in passenger fare rates and occupancy levels at different times of the year; we may not be able to generate revenues that are sufficient to cover our expenses during certain periods of the year.

The demand for our cruises is seasonal, with greatest demand generally for cruises occurring during the third quarter. This seasonality in demand has resulted in fluctuations in our revenues and results of operations. The seasonality of our results is increased due to ships being taken out of service for ~~dry-dock~~drydock periods, which we typically schedule during non-peak demand periods for such ships. Accordingly, seasonality in demand and ~~dry-dock~~drydock periods could adversely affect our ability to generate sufficient revenues to cover expenses particularly during certain periods of the year.

Future epidemics and viral outbreaks may have an adverse effect on our financial condition and results of operations.

Public perception about the safety of travel and adverse publicity related to passenger or crew illness, including incidents of H1N1 flu, stomach flu, or other contagious diseases, may impact demand for cruises and adversely affect our future sales, financial condition and results of operations.

Adverse incidents involving cruise ships may have an adverse effect on our financial condition and results of operations.

Cruise ship operations carry an inherent risk of loss caused by adverse events at sea or in port and by weather conditions. Adverse incidents could involve collisions, groundings, fire, oil spills, other maritime or environmental mishaps, missing passengers, inappropriate crew or passenger behavior, onboard crimes, human errors, terrorism, piracy, political action and civil unrest or insurrection.

Adverse incidents such as these could result in increased costs, lost sales, injuries, lost lives or reputational damage. We could be forced to cancel a cruise or a series of cruises due to such events, resulting in reimbursements to passengers, increased port-related costs and lost revenue. If there is a significant accident, mechanical failure or similar problem involving a ship, we may have to place a ship in an extended ~~dry-dock~~drydock period for repairs. This could result in material lost revenue and/or expenditures, and there can be no assurance that insurance proceeds would compensate us fully or at all for our losses. We have experienced unscheduled ~~dry-docks~~drydocks in the past and there can be no assurances that we will not experience unexpected ~~dry-docks~~drydocks in the future. Any such event involving our cruise ships or other cruise ships may adversely affect passengers’ perceptions of safety, negatively affect future industry performance or result in increased governmental or other regulatory oversight. Such incidents also may lead to litigation against us. We may suffer penalties, fines and damages from judgments or settlements of any ongoing or future claims against us. Anything that damages our reputation (whether or not justified), including adverse publicity about passenger safety, could adversely impact demand and reduce our sales. Such incidents may have a material adverse impact on our financial condition and results of operations.

There can be no assurance that all risks are insured against or that any particular claim will be fully paid. Such losses, to the extent they are not adequately covered by contractual remedies or insurance, could affect our financial condition and results of operations. We have been and may 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 could result in significant expenses to us which could reduce our cash flows. If we were to sustain significant losses in the future, our ability to obtain insurance coverage or coverage at commercially reasonable rates could be materially adversely affected.

2225

Data security breaches, denial of service attacks, and/or disruptions to information technology, telecommunications, and/or other networks could have an adverse impact on our financial results.

The integrity and reliability of our information technology, telecommunications, and other networks are crucial to our operations and financial results. Disruptions to these networks could impair our operations and have an adverse impact on our financial results, negatively affect our reputation and customer demand. In addition, certain networks are dependent on third-party technologies, systems and service providers for which there is no certainty of uninterrupted availability. Among other things, actual or threatened natural disasters (e.g., hurricanes, earthquakes, tornadoes, fires, floods) or similar events, information systems failures, computer viruses, denial or service attacks, and other cyber-attacks may cause disruptions to our information technology, telecommunications, and other networks. While we have and continue to invest in business continuity, disaster recovery, and data restoration plans, we cannot completely insulate ourselves from disruptions that could result in adverse effects on our operations and financial results. We ~~do not~~ carry limited business interruption insurance for ~~our~~certain ~~ships~~of ~~based on~~ our ~~evaluation~~shoreside ~~of the risks involved and protective measures already in place~~operations, assubject ~~compared~~ to ~~the~~limitations, ~~cost~~exclusions ofand ~~insurance~~deductibles. ~~We carry business interruption insurance for certain of our shoreside operations.~~

In the event of a data security breach of our systems and/or third party systems, we may incur costs associated with, the following: breach response, notification, forensics, regulatory investigations, public relations, consultants, credit identity monitoring, credit freezes, fraud alert, credit identity restoration, credit card cancellation, credit card reissuance or replacement, regulatory fines and penalties, vendor fines and penalties, legal fees and damages. Denial of service attacks may result in costs associated with, among other things, the following: response, forensics, public relations, consultants, data restoration, legal fees, and settlement. In addition, data security breaches or denial of service attacks may cause business interruption, information technology disruption, disruptions as a result of regulatory investigation, digital asset loss related to corrupted or destroyed data, damage to our reputation, damages to intangible property, and other intangible damages, such as loss of consumer confidence, all of which could impair our operations and have an adverse impact on our financial results. While we have and continue to invest in data and information technology security initiatives, we cannot completely insulate ourselves from the risks of data security breaches and denial of service attacks which could result in adverse effects on our operations and financial results. We carry privacy liability and network security insurance to partially cover us in the event of an attack.

Unavailability of ports of call may adversely affect our results of operations and financial condition.

We believe that attractive port destinations are a major reason why passengers choose to go on a particular cruise versus an alternative vacation option. 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 and safety concerns, adverse weather conditions and natural disasters, financial limitations on port development, political instability, exclusivity arrangements that ports may have with our competitors, local governmental regulations, 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. Any limitations on the availability of ports of call or on the availability of shore excursion and other service providers at such ports could adversely affect our results of operations and financial condition.

The loss of key personnel, our inability to recruit or retain qualified personnel or the diversion of our key personnel’s attention could adversely affect our results of operations.

We rely upon the ability, expertise, judgment, discretion, integrity and good faith of our senior management team. Our success is dependent upon our personnel and key consultants and our ability to recruit and retain high quality employees. We must continue to recruit, retain and motivate management and other employees sufficient to maintain our current business and support our projected growth. The loss of services of any of our key management, in particular, Mr. Frank J. Del Rio, the Chief Executive Officer of PCI and PCH, could have a material adverse effect on our business. See “Item 10 - Directors, Executive Officers and Corporate Governance" for additional information about our management personnel.

The leadership of our chief executive officer and other executive officers has been a critical element of our success. The death or disability of Mr. Frank J. Del Rio or other extended or permanent loss of his services, or any negative market or industry perception with respect to him or arising from his loss, could have a material adverse effect on our business. Our other executive officers and other members of senior management have substantial experience and expertise in our business and have made significant contributions to our growth and success. The unexpected loss of services of one or more of these individuals could also adversely affect us. We are not protected by key man or similar life insurance covering members of our senior management. We have employment agreements with certain of our executive officers, but these agreements do not guarantee that any given executive will remain with us.

2326

Additionally, certain individuals who we refer to as our employees or as part of our management are employed by Prestige Cruise Services, LLC, an indirect subsidiary of our parent companies, PCI and PCH, and provide services to us under the terms of a master services agreement. Certain of these individuals, including members of our senior management team such as Mr. Frank J. Del Rio, Chairman and Chief Executive Officer of PCI and PCH, Mr. Kunal S. Kamlani, President and Chief Operating Officer of PCH, Mr. Jason M. Montague, the Chief Financial Officer of PCI and PCH, and Mr. T. Robin Lindsay, the Executive Vice President of Vessel Operations of PCI and PCH, whom also provide services to our sister company, Oceania Cruises. Any or all of these employees may be required to focus their time and energies on matters relating to Oceania Cruises that otherwise could be directed to our business and operations. If management’s or such employees’ attention is significantly diverted from their responsibilities to us, it could affect our ability to service our existing business and develop new business, which could have a material adverse effect on our business and results of operations. See “Item 13—Certain Relationships and Related Party Transactions, and Director Independence—Master Services Agreement” for additional information about our master services agreement and relationship with Prestige Cruise Services, LLC.

Our sponsor controls us and our sister company, Oceania Cruises, through its control of our parent companies PCI and PCH, and the interests of our sponsor and our parent companies may conflict with or differ from our interests.

Apollo beneficially owns 79.5% of our equity interests indirectly through its ownership of 79.5% of the capital stock on a fully-diluted basis of PCI, our ultimate parent company and the direct parent company of PCH, its 100%-owned subsidiary. In addition, four of our administrators are affiliated with Apollo. As a result, Apollo, through its voting and board control of our parent companies, PCI and PCH, has the ability to control our policies and business, including the election of our administrators, the approval of significant transactions such as mergers, tender offers and the sale of all or substantially all of our assets, the decision to access the capital markets and the extent to which, if at all, the net proceeds of any capital raising activities at PCI or PCH are contributed to us. Apollo has the authority, subject to the terms of our debt, to issue additional debt, implement debt repurchase programs, pay dividends, pay advisory fees (including to itself or its affiliates) and make other key decisions, and they may do so at any time. The interests of Apollo and its affiliates could conflict with or differ from our interests.

Additionally, our ultimate parent companies, PCI and PCH, are also the ultimate parent companies of our sister company, Oceania Cruises. Therefore, in addition to controlling our activities through its control of PCI and PCH, Apollo can also control the activities of our sister company through this same ownership and control structure. Our sponsor and our management team (which is the same as the management team of Oceania Cruises) have determined to keep the branding and, in large part, operation of our company and Oceania Cruises entirely separate, and there can be no assurance that Apollo will not decide to focus its attention and resources on matters relating to Oceania Cruises that otherwise could be directed to our business and operations. If our sponsor determines to focus attention and resources on Oceania Cruises or any new business lines of PCI or PCH instead of us, it could affect our ability to expand our existing business or develop new business.

There are no agreements among us and any affiliates of Apollo that govern the outcome of any conflicts of interests. There is no assurance that when conflicts of interest arise, any or all of these affiliates will act in our best interests or that any conflict of interest will be resolved in our favor. Moreover, the concentration of ownership held by Apollo could delay, defer or prevent a change of control of our company or impede a merger, takeover or other business combinations which may otherwise be viewed favorably to us. Apollo may also pursue acquisition opportunities that may be complementary to our business, and as a result, those acquisition opportunities may not be available to us.

A failure to keep pace with developments in technology could impair our operations or competitive position.

Our business continues to demand the use of sophisticated systems and technology. These systems and technologies must be refined, updated and replaced with more advanced systems on a regular basis. If we are unable to do so on a timely basis or within reasonable cost parameters, our business could suffer. We also may not achieve the benefits that we anticipate from any new system or technology, such as fuel abatement technologies, and a failure to do so could result in higher than anticipated costs or could impair our operating results.

24Our sponsor controls us and our sister company, Oceania Cruises, through its control of our parent companies PCI and PCH, and the interests of our sponsor and our parent companies may conflict with or differ from our interests.

Apollo beneficially owns 78.3% of our equity interests indirectly through its ownership of 78.3% of the capital stock (calculated on a fully-diluted basis) of PCI, our ultimate parent company and the direct parent company of PCH, its 100%-owned subsidiary. In addition, four of our administrators are affiliated with Apollo. As a result, Apollo, through its voting and board control of our parent companies, PCI and PCH, has the ability to control our policies and business, including the election of our administrators, the approval of significant transactions such as mergers, tender offers and the sale of all or substantially all of our assets, the decision to access the capital markets and the extent to which, if at all, the net proceeds of any capital raising activities at PCI or PCH are contributed to us. Apollo has the authority, subject to the terms of our debt, to issue additional debt, implement debt repurchase programs, pay dividends, pay advisory fees (including to itself or its affiliates) and make other key decisions, and they may do so at any time. The interests of Apollo and its affiliates could conflict with or differ from our interests.

Furthermore, Apollo is in the business of making investments in companies, and may from time to time acquire and hold interests in businesses that compete directly or indirectly with us. For example, Apollo currently holds a controlling interest in Norwegian Cruise Line Holdings Ltd., which, though it does not compete with us in the Luxury segment, competes with us indirectly as a cruise operator. Additionally, even if Apollo invests in competing businesses through PCI or PCH, such investments may be made through Oceania Cruises or a newly-formed subsidiary of PCI or PCH. Any such investment may increase the potential for the conflicts of interest discussed in this risk factor. There are no agreements among us and any affiliates of Apollo that govern the outcome of any conflicts of interests. There is no assurance that when conflicts of interest arise, any or all of these affiliates will act in our best interests or that any conflict of interest will be resolved in our favor. Moreover, the concentration of ownership held by Apollo could delay, defer or prevent a change of control of our company or impede a merger, takeover or other business combinations which may otherwise be viewed favorably to us. Apollo may also pursue acquisition opportunities that may be complementary to our business, and as a result, those acquisition opportunities may not be available to us.

Risks Related to the Regulatory Environment in Which We Operate

Future changes in applicable tax laws, or our inability to take advantage of favorable tax regimes, may have an adverse impact on our financial condition and results of operations.

As we generally derive revenue from shipboard activity in international waters and not in a particular jurisdiction, our exposure to income tax is limited in some instances. We do, however, submit to the income tax regimes of the jurisdictions in which we operate and pay taxes as required by those regimes.

It is possible that certain states, countries or ports of call that our ships visit may also decide to assess new taxes or fees or change existing taxes or fees specifically applicable to the cruise industry and its employees and/or guests, which could adversely affect our financial condition and results of operations.

Provided that we satisfy certain complex stock ownership tests (as described below), income that is considered to be derived from the international operation of ships, as well as certain income that is considered to be incidental to such income (“Shipping Income”), is currently exempt from U.S. federal income taxes under Section 883 of the Internal Revenue Code of 1986, as amended (the “Code”). The U.S.-source portion of our Shipping Income (if we do not qualify for the exemption under Section 883 of the Code) and the U.S.-source portion of our income that is not Shipping Income are generally subject to U.S. federal corporate income tax on a net basis (generally at a 35% rate) and possible state and local taxes, and our effectively connected earnings and profits generally are subject to an additional branch profits tax of 30%. See “Item 1—Business—Taxation—U.S. federal income taxation of Regent Seven Seas shipping income” below for a more detailed discussion of these taxes (and a 4% federal gross income tax that could apply to Shipping Income in limited circumstances). While any such U.S. federal, state and local income taxes and branch profits taxes would be a liability of our parent, PCH (because we and our subsidiaries are considered disregarded entities for U.S. federal and applicable state and local income tax purposes), and not a liability of ours or our subsidiaries, we may effectively bear the cost of any such taxes because we are permitted to make tax distributions to PCH to pay such taxes.

(“Shipping Income”), is currently exempt from U.S. federal income taxes under Section 883 of the Internal Revenue Code of 1986, as amended (the “Code”). The U.S.-source portion of our Shipping Income (if we do not qualify for the exemption under Section 883 of the Code) and the U.S.-source portion of our income that is not Shipping Income are generally subject to U.S. federal corporate income tax on a net basis (generally at a 35% rate) and possible state and local taxes, and our effectively connected earnings and profits generally are subject to an additional branch profits tax of 30%. See “Item 1—Business—Taxation—U.S. federal income taxation of Regent Seven Seas shipping income” below for a more detailed discussion of these taxes (and a 4% federal gross income tax that could apply to Shipping Income in limited circumstances). While any such U.S. federal, state and local income taxes and branch profits taxes would be a liability of our parent, PCH (because we and our subsidiaries are considered disregarded entities for U.S. federal and applicable state and local income tax purposes), and not a liability of ours or our subsidiaries, we may effectively bear the cost of any such taxes because we are permitted to make tax distributions to PCH to pay such taxes.

We believe substantially all of our income derived from the international operation of ships is properly categorized as Shipping Income, and that our income other than Shipping Income is not currently, nor is it expected to become, a material amount. It is possible, however, that a material amount of our income does not actually qualify (or will not qualify) as Shipping Income.

Even if our interpretation of Section 883 is correct, the exemption for Shipping Income is not applicable in any year in which we do not satisfy complex stock ownership tests as described above (see “Item 1—Business—Taxation—U.S. federal income taxation of Regent Seven Seas shipping income”). While we believe that we have satisfied the ownership tests and expect to continue to do so absent a material change in our ownership, the application of these tests is subject to some uncertainty and there is no assurance that our view is correct. Further, for the exemption for Shipping Income to apply we must satisfy the Substantiation Requirements (as defined above in “Item 1—Business—Taxation—U.S. federal income taxation of Regent Seven Seas shipping income”). While we expect we will satisfy such requirements, we can give no assurance that we will be able to do so. Additionally, any change in our operations could change the amount of our income that is considered Shipping Income under Section 883. Finally, any change in the tax laws governing our operations, including Section 883 of the Code and the regulations thereunder, could increase the amount of our income that is subject to tax. Any of the foregoing risks could significantly increase our exposure to U.S. federal income and branch profits taxes.

The Seven Seas Navigator and Seven Seas Voyager were operated by subsidiaries that were strategically and commercially managed in the United Kingdom (“UK”) and these subsidiaries had elected to enter the UK tonnage tax regime. With effect from February 4, 2013, both ships exited the UK tonnage tax regime upon transfer of the ships to U.S. subsidiaries. ~~See Note 10 to the audited consolidated financial statements included elsewhere in this Annual Report on Form 10-K.~~

We are subject to complex laws and regulations, including environmental laws and regulations, which could adversely affect our operations; any changes in the current laws and regulations could lead to increased costs or decreased revenue and adversely affect our business prospects, financial condition and results of operations.

Increasingly stringent federal, state, local and international laws and regulations on environmental protection, and health and safety of workers could affect our operations. Many aspects of the cruise industry are subject to governmental regulation by the U.S. Environmental Protection Agency, the International Maritime Organization, ~~commonly referred to as the~~ ("IMO"), the Council of the European Union, and the U.S. Coast Guard, as well as international treaties such as the International Convention for the Safety of Life at Sea, ~~commonly referred to as~~ ("SOLAS"), the International Convention for the Prevention of Pollution from Ships, ~~commonly referred to as~~ ("MARPOL,") and the Standard of Training Certification and Watchkeeping for Seafarers("STCW"). International regulations regarding ballast water and shipboard/shore-side security have been adopted. Additionally, ~~commonly~~the ~~referred~~U.S. toand various state, foreign and international regulatory agencies have enacted or are considering new environmental regulations or policies, such as ~~STCW~~requiring the use of low sulfur fuels, increasing fuel efficiency requirements, restricting diesel engine emissions, and managing cruise ship waste. Compliance with such laws and regulations may entail significant expenses for ship modification and changes in operating procedures which could adversely impact our operations as well as our competitors’ operations. In 2010, Alaska issued a final permit that regulates discharges of treated wastewater from cruise ships for the ~~recently-adopted~~summer ~~Manning~~tourist ~~Convention~~seasons running from 2010 to 2012. ~~International~~The permit provides for the cruise companies to gather data on performance of new shipboard environmental control systems that will allow a scientific review committee to advise state officials on improving the regulations. These issues are, and we believe will continue to be, an area of focus by the relevant authorities throughout the world. This could result in the enactment of more stringent regulation of cruise ships that would subject us to increasing compliance costs in the future. See "Item 1—Business—Governmental Regulations" for additional information regarding ~~ballast~~these risks.

water and shipboard/shore-side security have been adopted. Additionally, the U.S. and various state, foreign and international regulatory agencies have enacted or are considering new environmental regulations or policies, such as requiring the use of low sulfur fuels, increasing fuel efficiency requirements, restricting diesel engine emissions, and managing cruise ship waste. Compliance with such laws and regulations may entail significant expenses for ship modification and changes in operating procedures which could adversely impact our operations as well as our competitors’ operations. In 2010, Alaska issued a final permit that regulates discharges of treated wastewater from cruise ships for the summer tourist seasons running from 2010 to 2012. The permit provides for the cruise companies to gather data on performance of new shipboard environmental control systems that will allow a scientific review committee to advise state officials on improving the regulations.

The Maritime Labor Convention 2006 (“MLC”) will come into effect in August 2013. The MLC will regulate many aspects of maritime crew labor and will impact the worldwide sourcing of new crew.

These issues are, and we believe will continue to be, an area of focus by the relevant authorities throughout the world. This could result in the enactment of more stringent regulation of cruise ships that would subject us to increasing compliance costs in the future. See "Item 1—Business—Governmental Regulations" for additional information regarding these risks.

By virtue of our operations in the U.S., the U.S. Federal Maritime Commission (the "FMC") requires us to maintain a $15 million third party performance guarantee on our behalf in respect of liabilities for non-performance of transportation and other obligations to passengers. The FMC is reviewing the existing guarantee requirements and may propose material increases which, if adopted, may significantly increase the amount of our required guarantees and, accordingly, our cost of compliance. There can be no assurance that such an increase in the amount of our guarantees, if required, would be available to us. As required by Package Travel, Package Holiday and Package Tours Regulations at December 31, 2012, we maintained surety bonds for cruise business originating in the United Kingdom of £2.5 million ($4.1 million). For cruise business originating in Germany, we maintain financial protection insurance of €0.7 million ($0.9 million).

We may be subject to taxation under the laws of certain jurisdictions.

We may be subject to state, local and non-U.S. income or non-income taxes in various jurisdictions, including those in which we transact business, own property or reside. We may be required to file tax returns in some or all of those jurisdictions. Our state, local or non-U.S. tax treatment may not conform to the U.S. federal income tax treatment of Section 883 of the Code discussed in the risk factor above. We may be required to pay non-U.S. taxes on dispositions of foreign property and operations involving foreign property may give rise to non-U.S. income or other tax liabilities in amounts that could be substantial. For example, we operated Seven Seas Navigator and Seven Seas Voyager under long-term charter agreements by subsidiaries that were strategically and commercially managed in the UK. These charter agreements are subject to the ongoing review of the taxing authorities in these jurisdictions and such review could result in the imposition of additional taxes in such jurisdictions.

Our state, local or non-U.S. tax treatment may not conform to the U.S. federal income tax treatment of Section 883 of the Code discussed in the risk factor above. We may be required to pay non-U.S. taxes on dispositions of foreign property and operations involving foreign property may give rise to non-U.S. income or other tax liabilities in amounts that could be substantial.

The various tax regimes to which we are currently subject result in a relatively low effective tax rate on our world-wide income. These tax regimes, however, are subject to change. Moreover, we may become subject to new tax regimes and may be unable to take advantage of favorable tax provisions afforded by current or future law.

Litigation, enforcement actions, fines or penalties could adversely impact our financial condition or results of operations and damage our reputation.

Our business is subject to various U.S. and international laws and regulations that could lead to enforcement actions, fines, civil or criminal penalties or the assertion of litigation claims and damages. In addition, improper conduct by our employees or agents could damage our reputation and/or lead to litigation or legal proceedings that could result in civil or criminal penalties, including substantial monetary fines. In certain circumstances, it may not be economical to defend against such matters, and a legal strategy may not ultimately result in us prevailing in a matter. Such events could lead to an adverse impact on our financial condition or results of operations.

As a result of any ship-related or other incidents, litigation claims, enforcement actions and regulatory actions and investigations, including, but not limited to, those arising from personal injury, loss of life, loss of or damage to personal property, business interruption losses or environmental damage to any affected coastal waters and the surrounding area, may be asserted or brought against various parties including us and/or our cruise brands. The time and attention of our management may also be diverted in defending such claims, actions and investigations. Subject to applicable insurance coverage, we may also incur costs both in defending against any claims, actions and investigations and for any judgments, fines, civil or criminal penalties if such claims, actions or investigations are adversely determined.

As an “emerging growth company” under the JOBS Act, we are permitted to, and intend to, rely on exemptions from certain disclosure requirements.

As an “emerging growth company” under the JOBS Act, we are permitted to, and intend to, rely on exemptions from certain disclosure requirements. We are an emerging growth company until the earliest of: (i) the last day of the fiscal year during which we had total annual gross revenues of $1 billion or more, (ii) the last day of the fiscal year following the fifth anniversary of the date of the first sale of our common stock pursuant to an effective registration statement, (iii) the date on which we have, during the previous 3-year period, issued more than $1 billion in non-convertible debt or (iv) the date on which we are deemed a “large accelerated issuer” as defined under the federal securities laws. For so long as we remain an emerging growth company, we will not be required to:


•	have an auditor report on our internal control over financial reporting pursuant to Section 404(b) of the Sarbanes-Oxley Act;


•	comply with any requirement that may be adopted by the Public Company Accounting Oversight Board (“PCAOB”) regarding mandatory audit firm rotation or a supplement to the auditor’s report providing additional information about the audit and the financial statements (auditor discussion and analysis);

• submit certain executive compensation matters to shareholders advisory votes pursuant to the “say on frequency” and “say on pay” provisions (requiring a non-binding shareholder vote to approve compensation of certain executive officers) and the “say on golden parachute” provisions (requiring a non-binding shareholder vote to approve golden parachute arrangements for certain executive officers in connection with mergers and certain other business combinations) of the Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010; and

officers) and the “say on golden parachute” provisions (requiring a non-binding shareholder vote to approve golden parachute arrangements for certain executive officers in connection with mergers and certain other business combinations) of the Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010; and


•	include detailed compensation discussion and analysis in our filings under the Exchange Act, and instead may provide a reduced level of disclosure concerning executive compensation.

Although we intend to rely on the exemptions provided in the JOBS Act, the exact implications of the JOBS Act for us are still subject to interpretations and guidance by the SEC and other regulatory agencies. In addition, as our business grows, we may no longer satisfy the conditions of an emerging growth company. We are currently evaluating and monitoring developments with respect to these new rules and we cannot assure you that we will be able to take advantage of all of the benefits from the JOBS Act.

In addition, as an “emerging growth company,” we may elect under the JOBS Act to delay adoption of new or revised accounting pronouncements applicable to public companies until such pronouncements are made applicable to private ~~companies. Therefore, our financial statements may not be comparable to those of companies that comply with standards that are otherwise applicable to public companies.~~

companies. Therefore, our financial statements may not be comparable to those of companies that comply with standards that are otherwise applicable to public companies.

Item 2. Properties

Information about our cruise ships, including their size and primary areas of operation, estimated expenditures and financing may be found under “Item 1—Business—~~Fleet~~Our ~~Overview~~Fleet” and “Item 7—Management’s Discussion and Analysis of Financial Condition and Results of Operations—Liquidity and Capital Resources.”

Our principal executive ~~offices,~~office ~~which~~is welocated ~~share~~in ~~with~~Miami, ~~OCI~~Florida. ~~and~~We ~~PCH,~~ are atparty ~~8300~~to NWthree ~~33rd~~real ~~Street,~~property ~~Suite~~leases: ~~100,~~in Miami, FLFlorida, ~~33122.~~where ~~This~~we lease ~~was~~77,543 ~~executed~~square byfeet afor ~~related~~our ~~party.~~executive ~~Additionally~~office: in Omaha, weNebraska, ~~are~~where ~~party~~we tolease ~~two~~approximately ~~real~~17,641 ~~property~~square ~~leases~~feet for ~~office~~our ~~space~~call center: and in ~~Omaha~~Southampton, ~~Nebraska~~England, ~~and~~where ~~Southampton~~we lease approximately 6,083 ~~England~~square feet for our international office. These leases expire at various times through 2022, subject to renewal options. We believe that our facilities are in good condition and are adequate for our current needs, and that we are capable of obtaining additional facilities as necessary.

Item 3. Legal Proceedings

We are routinely involved in claims typical within the cruise industry. The majority of these claims are covered by insurance. We believe the outcome of such claims, net of expected insurance recoveries, will not have a material adverse impact on our financial condition or results of operations.

Item 4. Mine Safety Disclosures

Not applicable.

2730

Table of Contents

PART II

Item 5. Market for Registrant's Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities

~~Not~~Our ~~applicable~~equity is privately held and thus there is no established public trading market for our common equity.

Item 6. Selected Financial Data

Statements of Income data for the years ended December 31, ~~2012~~2013, ~~2011~~2012 and ~~2010~~2011 has been derived from this Annual Report on Form 10-K in "Item 15 - Exhibits, Financial Statements - Consolidated Statements of Income and Comprehensive Income". Balance Sheet data as of December 31, ~~2012~~2013 and ~~2011~~2012 has been derived from this Annual Report on Form 10-K in "Item 15— - Exhibits, Financial Statements— - Consolidated Balance Sheets".

Statements of Income data for the ~~year~~years ended December 31, ~~2009~~2010 and ~~the~~2009 ~~11 months ended December 31, 2008~~ and Balance Sheet data as of December 31, ~~2010~~2011, ~~2009~~2010 and ~~2008~~2009 have been derived from our audited consolidated financial statements which are not included in this Annual Report on Form 10-K. We ~~refer you to our Registration Statement filed on Form S-4 amendment No. 5, as filed with the SEC on May 7, 2012 and became effective on May 10, 2012, file number 333-178244.~~

Our audited consolidated financial statements and the notes thereto have been prepared in accordance with accounting principles generally accepted in the U.S. ("GAAP"). The selected ~~unaudited~~historical consolidated financial data ~~for~~should ~~the~~be ~~one~~read ~~month~~in ~~ended~~conjunction ~~January 31,~~with ~~2008~~“Item ~~was~~7. ~~derived~~Management’s ~~from~~Discussion ~~the~~and ~~accounting~~Analysis ~~records~~of Financial Condition and Results of Operations” and our consolidated financial statements and the ~~Predecessor~~notes ~~Company,~~thereto ~~Carlson~~included ~~Cruises~~elsewhere ~~Worldwide,~~in ~~Inc.~~this ~~and~~Annual ~~its~~Report ~~subsidiaries~~on Form 10-K. Historical results are not necessarily indicative of results that may be expected for any future period.

Our audited consolidated financial statements and the notes thereto have been prepared in accordance with accounting principles generally accepted in the U.S. ("GAAP"). The selected historical consolidated financial data should be read in conjunction with “Management’s Discussion and Analysis of Financial Condition and Results of Operations” and our consolidated financial statements and the notes thereto included elsewhere in this Annual Report on Form 10-K. Historical results are not necessarily indicative of results that may be expected for any future period.



	Regent Seven Seas
	Year ended December 31,
(in thousands)	2013			2012			2011			2010			2009
Statements of Income data
Revenue
Passenger ticket	$	494,145		$	477,606		$	437,582		$	400,368		$	315,869
Onboard and other	51,675			51,529			48,313			48,873			45,273
Total revenue	545,820			529,135			485,895			449,241			361,142
Cruise operating expense
Commissions, transportation and other	178,494			185,446			150,580			124,671			88,604
Onboard and other	13,944			12,811			12,035			12,640			15,136
Payroll, related and food	79,501			78,150			73,098			69,415			64,712
Fuel	40,752			42,573			40,592			32,240			25,578
Other ship operating	42,565			43,707			38,524			39,067			33,362
Other	10,280			9,153			14,044			6,479			29,477
Total cruise operating expense	365,536			371,840			328,873			284,512			256,869
Selling and administrative	79,054			75,061			72,279			77,376			67,240
Depreciation and amortization	36,840			40,624			39,222			36,523			42,107
Total operating expense	481,430			487,525			440,374			398,411			366,216
Operating income (loss)	64,390			41,610			45,521			50,830			(5,074		)
Non-operating income (expense)
Interest income	291			434			222			100			85
Interest expense	(38,400		)	(36,287		)	(31,497		)	(38,753		)	(41,983		)
Other income (expense) ⁽¹⁾	(3,738		)	(2,674		)	(2,928		)	(130		)	10,181
Total non-operating expense	(41,847		)	(38,527		)	(34,203		)	(38,783		)	(31,717		)
Income (loss) before income taxes	22,543			3,083			11,318			12,047			(36,791		)
Income tax benefit (expense), net	39			(95		)	139			(292		)	292
Net income (loss)	$	22,582		$	2,988		$	11,457		$	11,755		$	(36,499	)

2831

				Regent Seven Seas												Predecessor Company
	Year ended December 31,												Elevenmonths endedDecember 31,			One monthendedJanuary 31,
(in thousands)	2012			2011			2010			2009			2008			2008
Statements of Income data
Revenue
Passenger ticket	$	477,606		$	437,582		$	400,368		$	315,869		$	340,494		$	25,741
Onboard and other	51,529			48,313			48,873			45,273			59,828			5,725
Total revenue	529,135			485,895			449,241			361,142			400,322			31,466
Cruise operating expense
Commissions, transportation and other	185,446			150,580			124,671			88,604			80,583			6,522
Onboard and other	12,811			12,035			12,640			15,136			19,150			805
Payroll, related and food	78,150			73,098			69,415			64,712			65,529			6,846
Fuel	42,573			40,592			32,240			25,578			33,208			3,516
Other ship operating	43,707			38,524			39,067			33,362			35,973			2,992
Other	9,153			14,044			6,479			29,477			12,063			4,714
Total cruise operating expense	371,840			328,873			284,512			256,869			246,506			25,395
Selling and administrative	75,061			72,279			77,376			67,240			65,724			5,475
Depreciation and amortization	40,624			39,222			36,523			42,107			45,322			1,690
Total operating expense	487,525			440,374			398,411			366,216			357,552			32,560
Operating income (loss)	41,610			45,521			50,830			(5,074		)	42,770			(1,094		)
Non-operating income (expense)
Interest expense	(36,287		)	(31,497		)	(38,753		)	(41,983		)	(43,340		)	(1,850		)
Interest income	434			222			100			85			1,324			145
Other income (expense) (1)	(2,674		)	(2,928		)	(130		)	10,181			(6,285		)	1,438
Total non-operating expense	(38,527		)	(34,203		)	(38,783		)	(31,717		)	(48,301		)	(267		)
Income (loss) before income taxes	3,083			11,318			12,047			(36,791		)	(5,531		)	(1,361		)
Income tax benefit (expense), net	(95		)	139			(292		)	292			91			359
Net income (loss) (2)	$	2,988		$	11,457		$	11,755		$	(36,499	)	$	(5,440	)	$	(1,002	)


(1)	Other income (expense) consists of a variety of non-operating items including but not limited to foreign transaction gains and losses, realized gain on early extinguishment of debt, and gains (losses) on derivative instruments.

(2) Net loss attributable to non-controlling interest was $294 for January 2008. Net loss attributable to the Predecessor Company was $708 for January 2008.



	Regent Seven Seas
	Year ended December 31,
(in thousands)	2013		2012		2011		2010		2009
Balance Sheet data (at end of period)
Cash and cash equivalents	$	138,526	$	99,857	$	68,620	$	37,258	$	27,754
Total assets	$	1,352,468	$	1,294,714	$	1,283,790	$	1,229,877	$	1,254,232
Passenger deposits	$	197,696	$	174,547	$	165,990	$	153,705	$	144,491
Total debt (1)	$	519,512	$	518,358	$	518,500	$	501,786	$	526,786
Total liabilities	$	778,093	$	746,081	$	739,152	$	700,309	$	749,558
Total members’ equity	$	574,375	$	548,633	$	544,638	$	529,568	$	504,674

			Regent Seven Seas								Predecessor Company
	Year ended December 31,								Elevenmonths endedDecember 31,		One monthendedJanuary 31,
(in thousands)	2012		2011		2010		2009		2008		2008
Balance Sheet data (at end of period)
Cash and cash equivalents	$	99,857	$	68,620	$	37,258	$	27,754	$	55,075	$	45,370
Total assets	1,294,714		1,283,790		1,229,877		1,254,232		1,309,530		487,996
Passenger deposits	174,547		165,990		153,705		144,491		120,300		145,481
Total debt (1)	518,358		518,500		501,786		526,786		587,500		348,833
Total liabilities	746,081		739,152		700,309		749,558		796,692		573,517
Total members’ equity (stockholders’ deficit)	548,633		544,638		529,568		504,674		512,838		(85,521		)

(1) Includes the debt discount of $1.7 million and $2.9 million as of December 31, 2013 and 2012, respectively.

~~(1) In 2012, net of $2.9 million of original issue discount, which is classified as long-term.~~32

Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations.

The following discussion and analysis of our financial condition and results of operations is intended to clarify the results of our operations, certain changes in our financial position, liquidity, capital structure and business developments for the periods covered by the consolidated financial statements included in this Annual Report on Form 10-K. This discussion should be read in conjunction with, and is qualified by reference to, the other related information including, but not limited to, the audited consolidated financial statements (including the notes thereto and the independent registered public accounting firm's reports thereon), and the description of our business, all as set forth in this Annual Report on Form 10-K, as well as the risk factors discussed below and in "Item 1A—Risk Factors".

Certain statements in this "Item 7-Management's Discussion and Analysis of Financial Condition and Results of Operations" are forward-looking statements. See “Forward-Looking Statements” and "Item 1A—Risk Factors".

Key Operational and Financial Metrics, including Non-GAAP

We utilize a variety of operational and financial metrics which are defined below to evaluate our performance and financial condition. We use certain non-GAAP measures, such as EBITDA, Adjusted EBITDA, Net Per Diems, Net Yields, and Net Cruise Costs to enable us analyze our performance and financial condition. We utilize these financial measures to manage our business on a day-to-day basis and believe that they are the most relevant measures of our performance. Some of these measures are commonly used in the cruise industry to measure performance. We believe these non-GAAP measures provide expanded insight to measure revenue and cost performance, in addition to the standard United States GAAP based financial measures. There are no specific rules or regulations for determining non-GAAP measures, and as such, there exists the possibility that they may not be comparable to other companies within our industry. The presentation of non-GAAP financial information is not intended to be considered in isolation or as a substitute for, or superior to, the financial information prepared and presented in accordance with GAAP.

EBITDA is net income (loss) excluding depreciation and amortization, net interest expense, and income tax benefit (expense).

Adjusted EBITDA is net income (loss) excluding depreciation and amortization, interest income, interest expense, other income (expense), and income tax benefit (expense), and other supplemental adjustments in connection with the calculation of certain financial ratios in accordance with our debt agreements. Management believes Adjusted EBITDA, when considered along with other performance measures, is a useful measure as it reflects certain operating drivers of our business, such as sales growth, operating costs, selling and administrative expense, and other operating income and expense. Management believes Adjusted EBITDA can provide a more complete understanding of the underlying operating results and trends and an enhanced overall understanding of our financial performance and prospects for the future. While Adjusted EBITDA is not a recognized measure under GAAP, management uses this financial measure to evaluate and forecast our business performance. Adjusted EBITDA is not intended to be a measure of liquidity or cash flows from operations or a measure comparable to net income as it does not take into account certain requirements such as capital expenditures and related depreciation, principal and interest payments, and tax payments, and it is subject to certain additional adjustments as permitted under our debt agreement. Our use of Adjusted EBITDA may not be comparable to other companies within our industry. Management compensates for these limitations by using Adjusted EBITDA as only one of several measures for evaluating our business performance. In addition, capital expenditures, which impact depreciation and amortization, interest expense, and income tax benefit (expense), are reviewed separately by management.

Available Passenger Cruise Days (“APCD”) is our measurement of capacity and represents double occupancy per cabin multiplied by the number of cruise days for the period. We use this measure to perform capacity and rate analysis to identify our main non-capacity drivers which cause our cruise revenue and expense to vary.

Gross Cruise Cost represents the sum of total cruise operating expense plus selling and administrative expense.

Gross Yield represents total revenue per APCD.

Net Cruise Cost represents Gross Cruise Cost excluding commissions, transportation and other expense, and onboard and other expense (each of which is described below under Description of Certain Line Items).

Net Cruise Cost, excluding Fuel and Other represents Gross Cruise Cost excluding commissions, transportation and other expense, onboard and other expense, fuel expense and other expense (each of which is described below under Description of Certain Line Items).

Net Per Diem represents Net Revenue divided by Passenger Days Sold. We utilize Net Per Diem to manage our business on a day-to-day basis as we believe that it is the most relevant measure of our pricing performance as it reflects the revenues earned by us, net of our most significant variable costs. Other cruise lines use Net Yield to analyze business which is a similar measurement that divides Net Revenue by APCD instead of Passenger Days Sold. The distinction is significant as other cruise companies focus more on potential onboard sales resulting in a bias to fill each bed to maximize onboard revenue, at the expense of passenger ticket revenue. Conversely, as our product is substantially all-inclusive, we derive nearly all of our revenue from passenger ticket revenue. Hence it is far more important for us to maintain a pricing discipline focusing on passenger ticket revenue rather than to discount cruises in order to achieve higher occupancy to drive potential onboard revenues. We believe that this pricing discipline drives our revenue performance, our relatively long booking window, and allows us to maintain a positive relationship with the travel agency community.

Net Revenue represents total revenue less commissions, transportation and other expense, and onboard and other expense (each of which is described below under Description of Certain Line Items).

Net Yield represents Net Revenue per APCD.

Occupancy is calculated by dividing Passenger Days Sold by APCD.

Passenger Days Sold (“PDS”) represents the number of revenue passengers carried for the period multiplied by the number of days within the period of their respective cruises.

Financial Presentation

Description of Certain Line Items

Revenues

Our revenue consists of the following:


•	Passenger ticket revenue consists of gross revenue recognized from the sale of passenger tickets net of dilutions, such as shipboard credits and certain included passenger shipboard event costs. Also included is gross revenue for air and related ground transportation sales.

•

Onboard and other revenue consists of revenue derived from the sale of goods and services rendered onboard the ships (net of related concessionaire costs), travel insurance (net of related costs), and cancellation fees. Also included in Onboard and other revenue is gross revenue from pre- and post-cruise hotel accommodations, shore excursions, land packages, and ground transportation for which we assume the risks of loss for collections and cancellations. Certain of our cruises include free unlimited shore excursions (“FUSE”) and/or free pre-cruise hotel accommodations, and such free excursions and hotel accommodations have no revenue attributable to them. The costs for FUSE and free hotel accommodations are included in commissions, transportation and other expense in the consolidated statements of income and comprehensive income.

•

Cash collected in advance for future cruises is recorded as a passenger deposit liability. Those deposits for sailings traveling more than 12 months in the future are classified as a long-term liability. We recognize the revenue associated with these cash collections in the period in which the cruise occurs. For cruises that occur over multiple periods, revenue is prorated and recognized ratably in each period based on the overall length of the cruise. Cancellation fee revenue, along with associated commission expense and travel insurance revenue, if any, are recorded in the period the cancellation occurs.

Expenses

Cruise Operating Expense

Our cruise operating expense consists of the following:


•	Commissions, transportation and other consists of payments made to travel agencies that sell our product, costs associated with air and related ground transportation pre-sold to our guests, all credit card fees, and the costs associated with shore excursions and hotel accommodations included as part of the overall cruise purchase price.


•	Onboard and other consists of costs related to land packages and ground transportation, as well as shore excursions and hotel accommodations costs not included in commissions, transportation and other.

•

Payroll, related and food consists of the costs of crew payroll and related expenses for shipboard personnel, as well as food expenses for both passengers and crew. We include food and payroll costs in a single expense line item as we contract with a single vendor to provide many of our hotel and restaurant services, including both food and labor costs, which are billed on a per-passenger basis. This per-passenger fee reflects the cost of both of the aforementioned expenses.


•	Fuel consists of fuel costs and related delivery and storage costs.


•	Other ship operating consists of port, deck and engine, certain entertainment-related expenses, and hotel consumables expenses.

• Other consists primarily of ~~dry-dock~~drydock, ship insurance costs, and loss on disposals.

Selling and administrative expense

Selling and administrative expense includes advertising and promotional activities, ~~the fee we paid to license the “Regent” trade name, as well as~~ shoreside personnel wages, benefits and expenses relating to our worldwide offices, professional fees, information technology support, our reservation call centers, and related support activities. Such expenditures are generally expensed in the period incurred.

~~Key~~Critical ~~Operational~~Accounting ~~and Financial Metrics, including Non-GAAP~~Estimates

WeOur ~~utilize~~consolidated ~~a variety of operational and~~ financial ~~metrics~~statements ~~which~~ are ~~defined~~prepared ~~below~~in toaccordance ~~evaluate~~with ~~our performance and financial condition~~GAAP. AsCertain ~~discussed~~of inour ~~more~~accounting ~~detail~~estimates ~~herein,~~are wedeemed ~~use certain non-GAAP measures~~“critical,” ~~such~~ as ~~EBITDA,~~they ~~Adjusted~~require ~~EBITDA,~~management’s ~~Net~~highest ~~Per~~degree ~~Diem,~~of ~~Net Yield~~judgment, ~~and~~estimates ~~Net Cruise Cost, which allow us to perform capacity~~ and ~~rate analysis to separate the impact of known capacity changes from other less predictable changes which affect our business~~assumptions. We believe ~~these~~our ~~non-GAAP~~most ~~measures~~critical ~~provide~~accounting ~~expanded~~estimates ~~insight to measure revenue and cost performance, in addition to the standard United States GAAP based financial measures. There~~ are ~~no specific rules or regulations for determining non-GAAP measures, and~~ as such, there exists the possibility that they may not be comparable to other companies within the industry. The presentation of non-GAAP financial information is not intended to be considered in isolation or as a substitute for, or superior to, the financial information prepared and presented in accordance with GAAP.follows:

~~Adjusted~~Asset EBITDA is net income (loss) excluding depreciation and amortization, interest income, interest expense, other income (expense), and income tax benefit (expense), and other supplemental adjustments in connection with the calculation of certain financial ratios in accordance with our loan indenture. Management believes Adjusted EBITDA, when considered along with other performance measures, is a useful measure as it reflects certain operating drivers of our business, such as sales growth, operating costs, selling and administrative expense, and other operating income and expense. Management believes Adjusted EBITDA can provide a more complete understanding of the underlying operating results and trends and an enhanced overall understanding of our financial performance and prospects for the future. While Adjusted EBITDA is not a recognized measure under GAAP, management uses this financial measure to evaluate and forecast our business performance. Adjusted EBITDA is not intended to be a measure of liquidity or cash flows from operations or a measure comparable to net income as it does not take into account certain requirements such as capital expenditures and related depreciation, principal and interest payments, and tax payments, and it is subject to certain additional adjustments as permitted under our debt agreement. Our use of Adjusted EBITDA may not be comparable to other companies within our industry. Management compensates for these limitations by using Adjusted EBITDA as only one of several measures for evaluating our business performance. In addition, capital expenditures, which impact depreciation and amortization, interest expense, and income tax benefit (expense), are reviewed separately by management.impairment

~~EBITDA~~In isconnection with the Regent Seven Seas Transaction, we recorded goodwill as the excess of the purchase price over the estimated fair value of net ~~income~~assets acquired, including identifiable intangible assets. We assess goodwill for impairment in accordance with ASC 350, Intangibles—Goodwill and Other, which requires that goodwill be tested for impairment at the “reporting unit level” (~~loss~~“Reporting Unit”) ~~excluding~~at ~~depreciation~~least annually and ~~amortization~~more frequently when events or circumstances dictate, ~~net~~as ~~interest~~defined ~~expense~~by ASC 350. Consistent with our determination that we have only one reporting segment, ~~and~~we ~~income~~have ~~tax~~determined ~~benefit~~that ~~(expense)~~there is only one Reporting Unit.

~~Gross~~The ~~Cruise~~impairment ~~Cost~~review ~~represents~~for goodwill allows us to first assess qualitative factors to determine whether it is necessary to perform the ~~sum~~more detailed two-step quantitative goodwill impairment test. We would perform the two-step test if our qualitative assessment determined it is more-likely-than-not that a Reporting Unit’s fair value is less than its carrying amount. We elected to bypass the qualitative assessment and proceed directly to step one of ~~total~~the ~~cruise~~quantitative ~~operating~~test. ~~expense~~The ~~plus~~quantitative ~~selling~~test for goodwill consists of a two-step process of first determining the estimated fair value of the Reporting Unit and ~~administrative~~comparing ~~expense~~it to the carrying value of the net assets allocated to the Reporting Unit. If the estimated fair value of the Reporting Unit exceeds the carrying value, no further analysis or write-down of goodwill is required. If the estimated fair value of the Reporting Unit is less than the carrying value of its net assets, the implied fair value of the Reporting Unit is allocated to all of its underlying assets and liabilities, including both recognized and unrecognized tangible and intangible assets, based on their estimated fair value. If necessary, goodwill is then written down to its implied fair value.

3135

~~Gross~~Our ~~Yield~~annual ~~represents~~impairment ~~total~~test ~~revenue~~date ~~per~~is ~~APCD~~September 30, which coincides with our annual budget/forecasting cycle and the end of our seasonally highest quarter. As of September 30, 2013, we did not have any impairment on goodwill, indefinite-lived intangible assets or other long-lived assets.

~~Net~~The ~~Cruise~~principal ~~Cost~~assumptions ~~represents~~used ~~Gross~~in ~~Cruise~~our ~~Cost~~discounted ~~excluding~~cash ~~commissions~~flow model related to forecasting future operating results, ~~transportation~~including discount rate, net revenue yields, net cruise costs including fuel prices, capacity changes, weighted-average cost of capital for comparable publicly-traded companies and ~~other~~terminal ~~expense~~values, which are all considered level 3 inputs. Cash flows were calculated using our 2013 projected operating results as a base. To that base we added projected future years' cash flows, considering the macro-economic factors and ~~onboard~~internal occupancy level projections, cost structure and other ~~expense~~variables. ~~(each~~We discounted the projected future years' cash flows using a rate equivalent to the weighted-average cost of ~~which~~capital isfor ~~described~~comparable ~~above~~publicly-traded ~~under~~companies. ~~Description~~Based on the discounted cash flow model, we determined that the estimated fair value of ~~Certain~~goodwill ~~Line~~exceeded ~~Items)~~the carrying value and is therefore not impaired. The estimated fair value exceeded its carrying value by 62% as of September 30, 2013.

~~Net~~The ~~Cruise~~estimation ~~Cost~~of ~~excluding~~fair ~~Fuel~~value ~~and~~utilizing ~~Other~~discounted ~~represents~~expected ~~Gross~~future ~~Cruise~~cash ~~Cost~~flows ~~excluding~~includes ~~commissions,~~numerous ~~transportation~~uncertainties ~~and~~which ~~other~~require ~~expense~~significant judgments when making assumptions of expected revenues, ~~onboard~~operating costs, selling and ~~other~~administrative ~~expense~~expenses, ~~fuel~~capital ~~expense~~expenditures, as well as assumptions regarding the cruise vacation industry competition and ~~other~~business ~~expense~~conditions, ~~(each~~among ofother ~~which~~factors. It is ~~described~~reasonably possible that changes in our assumptions and projected operating results above ~~under~~could ~~Description~~lead ofto ~~Certain~~impairment ~~Line~~of ~~Items).~~our goodwill.

~~Net~~Identifiable ~~Per~~Intangible Diem represents Net Revenue divided by Passenger Days Sold. We utilize Net Per Diem to manage our business on a day-to-day basis as we believe that it is the most relevant measure of our pricing performance as it reflects the revenues earned by us, net of our most significant variable costs. Other cruise lines use Net Yield to analyze business which is a similar measurement that divides Net Revenue by APCD instead of Passenger Days Sold. The distinction is significant as other cruise companies focus more on potential onboard sales resulting in a bias to fill each bed to maximize onboard revenue, at the expense of passenger ticket revenue. Conversely, as our product is substantially all-inclusive, we derive nearly all of our revenue from passenger ticket revenue. Hence it is far more important for us to maintain a pricing discipline focusing on passenger ticket revenue rather than to discount cruises in order to achieve higher occupancy to drive potential onboard revenues. We believe that this pricing discipline drives our revenue performance, our relatively long booking window, and allows us to maintain a positive relationship with the travel agency community.Assets

~~Net~~Specific ~~Revenue~~to ~~represents~~the ~~total~~Regent ~~revenue~~Seven ~~less~~Seas ~~commissions~~Transaction in 2008, ~~transportation~~we recorded identifiable intangible assets consisting of Trade names, Customer Relationships, Non-Competition Agreements, Backlog and ~~other~~Customer ~~expense~~Database. The Trade names acquired in this transaction, “Seven Seas Cruises” and ~~onboard~~“Luxury Goes Exploring” were determined to have indefinite lives. During 2011, we amended our agreement with Regent Hospitality Worldwide, which granted us exclusive and ~~other~~perpetual ~~expense~~licensing rights to use the “Regent” trade name and trademarks (~~each~~Regent oflicensing ~~which~~rights) isin ~~described~~conjunction ~~above~~with ~~under~~cruises, ~~Description~~subject ofto ~~Certain~~the ~~Line~~terms ~~Items~~and conditions stated in the agreement. The amended and restated trademark license agreement allows us to use the Regent trade name and trademark rights (“Regent licensing rights”), in conjunction with cruises, in perpetuity, subject to the terms and conditions stated in the agreement. The Regent licensing rights are being amortized over an estimated useful life of 40 years.

~~Net~~Our ~~Yield~~identifiable ~~represents~~intangible ~~Net~~assets, ~~Revenue~~except ~~per~~the ~~APCD~~trade names acquired in the 2008 Regent Seven Seas Transaction noted above, are subject to amortization over their estimated lives and are reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable based on market factors and operational considerations. Identifiable intangible assets not subject to amortization, such as trade names, are reviewed for impairment whenever events or circumstances indicate, but at least annually, by comparing the estimated fair value of the intangible asset with its carrying value.

~~Occupancy~~We performed our annual impairment review of our trade names as of September 30, 2013 using the relief-from-royalty method. The royalty rate used is ~~calculated~~based byon ~~dividing~~comparable ~~Passenger~~royalty ~~Days~~agreements ~~Sold~~in the tourism and hospitality industry. The discount rate used was the same rate used in our goodwill impairment test. Based on the discounted cash flow model, we determined the fair value of our trade names exceeded their carrying value and are therefore not impaired. The fair value exceeded its carrying value by ~~APCD~~86% as of September 30, 2013.

~~Passenger~~The ~~Days~~estimation ~~Sold~~of ~~(“PDS”)~~fair ~~represents~~value ~~the~~using ~~number~~discounted expected future cash flows includes numerous uncertainties that require significant judgments when developing assumptions of ~~revenue~~expected ~~passengers~~revenues, ~~carried~~operating ~~for~~costs, ~~the~~selling ~~period~~and ~~multiplied~~administrative byexpenses, ~~the~~capital ~~number~~expenditures and future impact of ~~days~~competitive ~~within~~forces. ~~the~~It ~~period~~is reasonably possible that changes in our assumptions and projected operating results used in our cash flow model could lead to an impairment of ~~their~~goodwill ~~respective~~and ~~cruises~~or tradename.

Ship Accounting

In connection with the Regent Seven Seas Transaction, we recorded our ships at their estimated fair values, which was calculated based on a market approach that took into consideration recent transactions of similar ships, conditions of the cruise market at the date of valuation and the price a willing third party would pay for a ship with similar characteristics. Our ships represent our most significant asset and are stated at cost less accumulated depreciation. Depreciation of the ships is computed net of projected residual values using the straight-line method over their original estimated service lives of 30 years. Service life is based on when the assets were originally placed in service and we did not extend this life at the time of the Regent Seven Seas Transaction. Our service life and residual value estimates take into consideration the impact of anticipated technological changes, long-term cruise and vacation market conditions, and historical useful lives of similarly built ships.

As of January 1, 2013, we changed our estimate for all our ships’ projected residual values. The change was triggered as we obtained recent sales information for luxury cruise ship sales that occurred during the three months ended March 31, 2013. As a result, we increased each ship’s projected residual value from 15% to 30%. The change in estimate has been applied prospectively. The estimated impact of this change for full year 2013 is a reduction of depreciation expense of approximately $5.3 million. We periodically review and evaluate these estimates and judgments based on historical experiences and new factors and circumstances. As part of our ongoing reviews, our estimates may change in the future. If such a change is necessary, depreciation expense could be materially higher or lower.

Improvement costs that add value to the ships and have a useful life greater than one year are capitalized as additions to the ships and are depreciated over the lesser of the ships’ remaining service lives or the improvements’ estimated useful lives. Improvement costs are related to new components that have been added to, replaced or refurbished on the ship. The remaining estimated cost and accumulated depreciation (i.e. book value) of replaced ship components are written off and any resulting losses are recognized in the consolidated statements of operations. Examples of significant capitalized improvement costs are electrical system upgrades, such as the upgrade of stabilizers, electrical system generators and the refurbishment of major mechanical systems such as diesel engines, boilers, and generators, along with new stateroom and guest facility equipment. Given the very large and complex nature of our ships, our accounting estimates related to ships and determination of ship improvement costs to be capitalized require considerable judgment of management and are inherently uncertain.

Drydock costs are scheduled maintenance activities that require the ships to be taken out of service and are expensed as incurred. Drydocks are required to maintain each vessel’s Class certification. Class certification is necessary in order for our cruise ships to be flagged in a specific country, obtain liability insurance and legally operate as passenger cruise ships. Typical drydock costs include drydocking fees and wharfage services provided by the drydock facility, hull inspection and certification related activities, external hull cleaning and painting below the waterline including pressure cleaning and scraping, additional below the waterline work such as maintenance and repairs on propellers and replacement of seals, cleaning and maintenance on holding tanks and sanitary discharge systems, related outside contractor services including travel and related expenses and freight and logistics costs related to drydock activities. Repair and maintenance activities are charged to expense as incurred.

We review our ships for impairment whenever events or changes in circumstances indicate that the carrying amount of these assets may not be fully recoverable. The assessment of possible impairment is based on our ability to recover the carrying value of these assets based on our estimate of its undiscounted future cash flows. If estimated future cash flows are less than the carrying value of an asset, an impairment charge is recognized for the difference between the asset’s estimated fair value and its carrying value. We perform our ship impairment reviews on an individual ship basis utilizing an undiscounted cash flow analysis. The principle assumptions used in the undiscounted cash model are projected operating results, including net per diems, net cruise costs, projected occupancy, available passenger days, and projected growth.

We believe our estimates and judgments with respect to our ships are reasonable. However, should certain factors or circumstances cause us to revise our estimates of ship service lives, projected residual value or the lives of major improvements, depreciation expense could be materially higher or lower. If circumstances cause us to change our assumptions in making determinations as to whether ship improvements should be capitalized, the amount we expense each year as repair and maintenance costs could increase, partially offset by a decrease in depreciation expense. If we had reduced our estimated average service life of our ships by one year, depreciation expense for 2013 would have increased by $0.9 million. If our ships were estimated to have no residual value, depreciation expense for 2013 would have increased by $4.4 million.

Contingencies—Litigation

On an ongoing basis, we assess the potential liabilities related to any lawsuits or claims brought against us. While it is typically very difficult to determine the timing and ultimate outcome of such actions, we use our best judgment to determine if it is probable that we will incur an expense related to the settlement or final adjudication of such matters and whether a reasonable estimation of such probable loss, if any, can be made. In assessing probable losses, we take into consideration estimates of the amount of insurance recoveries, if any. We accrue a liability when we believe a loss is probable and the amount of loss can be reasonably estimated. Due to the inherent uncertainties related to the eventual outcome of litigation and potential insurance recoveries, it is possible that certain matters may be resolved for amounts materially different from any provisions or disclosures that we have previously made.

Recently Adopted and Future Application of Accounting Standards

Refer to “Item 15—Exhibits, Financial Statements—Recent Accounting Pronouncements” of this Annual Report on Form 10-K.

JOBS Act

On April 5, 2012, the JOBS Act was signed into law. The JOBS Act contains provisions that, among other things, reduce certain reporting requirements for qualifying public companies. Section 107 of the JOBS Act also provides that an “emerging growth company” can take advantage of the extended transition period provided in Section 7(a)(2)(B) of the Securities Act for complying with new or revised accounting standards. In other words, an “emerging growth company” can delay the adoption of certain accounting standards until those standards would otherwise apply to private companies. Consequently, our financial statements may not be comparable to those of companies that comply with public company effective dates.

Subject to certain conditions set forth in the JOBS Act, as an “emerging growth company,” we may choose to rely on certain exemptions. See “Item 1A—Risk Factors—Risks Related to Our Business—As an “emerging growth company” under the JOBS Act, we are permitted to, and intend to, rely on exemptions from certain disclosure requirements.”

Executive Overview

• Revenue ~~for~~was ~~2012 increased 8.9% to~~ $~~529~~545.18 million, ~~compared~~for to2013 versus $~~485~~529.91 million infor ~~2011~~2012, asan ~~occupancy~~increase ~~increased~~of 23.~~5 percentage points from 91.9~~2% ~~in 2011 to 94.4% in 2012.~~;

• Net Yield increased 0.6.8% to $~~484~~517.5051 in ~~2012~~2013 from $~~481~~484.8250 in ~~2011.~~2012;

• Net Cruise Cost ~~per APCD~~, excluding ~~Fuel~~fuel and ~~Other~~other, ~~expense~~per APCD, increased 5.2.1% ~~over~~in ~~2011~~2013 versus 2012 primarily driven by ~~non-recurring restructuring charges,~~ increased ~~port~~sales ~~expense due to changes in itinerary mix~~ and ~~increased~~marketing ~~operating~~ costs ~~due to signing a five year agreement with Wartsila to maintain the engines throughout the fleet.~~;

• Fuel expense, net of settled fuel hedges, was $4140.3 million ~~compared~~in to2013 versus $3541.53 million in ~~2011~~2012 driven by ~~higher~~lower prices ~~partially offset by lower consumption. As of December 31, 2012, the Company has hedged approximately 56% of expected fuel consumption for 2013~~ and ~~29% of expected fuel~~ consumption ~~for 2014.~~;

• Other expense was $910.23 million ~~compared~~in to2013 ~~$14~~versus 9.02 million in ~~2011. The~~ 2012; ~~decrease is due to expenses associated with two dry-docks in 2011 versus one in 2012.~~and

• Adjusted EBITDA ~~was~~increased 20.6% to $87105.9 million ~~for~~in ~~2012,~~2013 ~~compared~~from to $9687.79 million ~~for~~in ~~2011~~2012.

3238

Results of Operations

Operating results for the year ended December 31, ~~2012,~~2013 compared to the same periods in ~~2011~~2012 and ~~2010,~~2011 are shown in the following table ~~(in thousands)~~:

	Year Ended December 31,
	2012					2011					2010
	2013					2012					2011
				% of Total Revenues					% of Total Revenues					% of Total Revenues
(in thousands)				% of Total Revenues					% of Total Revenues					% of Total Revenues
Revenue
Passenger ticket	$	~~477~~494,~~606~~145		90.35	%	$	~~437~~477,~~582~~606		90.13	%	$	~~400~~437,~~368~~582		8990.1	%
Onboard and other	51,~~529~~675			9.75	%	4851,~~313~~529			9.97	%	48,~~873~~313			109.9	%
Total revenue	~~529~~545,~~135~~820			100.0	%	~~485~~529,~~895~~135			100.0	%	~~449~~485,~~241~~895			100.0	%
Cruise operating expense
Commissions, transportation and other	~~185~~178,~~446~~494			3532.07	%	~~150~~185,~~580~~446			3135.0	%	~~124~~150,~~671~~580			2731.80	%
Onboard and other	1213,~~811~~944			2.46	%	12,~~035~~811			2.54	%	12,~~640~~035			2.85	%
Payroll, related and food	7879,~~150~~501			14.86	%	7378,~~098~~150			1514.08	%	6973,~~415~~098			15.50	%
Fuel	4240,~~573~~752			87.05	%	4042,~~592~~573			8.40	%	3240,~~240~~592			78.24	%
Other ship operating	4342,~~707~~565			87.38	%	3843,~~524~~707			78.93	%	3938,~~067~~524			8.7.9	%
Other	910,~~153~~280			1.79	%	149,~~044~~153			21.97	%	614,~~479~~044			12.49	%
Total cruise operating expense	~~371~~365,~~840~~536			7067.30	%	~~328~~371,~~873~~840			6770.73	%	~~284~~328,~~512~~873			6367.37	%
Other operating expense
Selling and administrative	7579,~~061~~054			14.25	%	7275,~~279~~061			14.92	%	7772,~~376~~279			1714.29	%
Depreciation and amortization	4036,~~624~~840			76.7	%	3940,~~222~~624			87.17	%	3639,~~523~~222			8.1	%
Total operating expense	~~487~~481,~~525~~430			9288.12	%	~~440~~487,~~374~~525			9092.61	%	~~398~~440,~~411~~374			8890.76	%
Operating income	4164,~~610~~390			711.98	%	4541,~~521~~610			97.49	%	5045,~~830~~521			119.34	%
Non-operating income (expense)
Interest income	~~434~~291			0.1	%	~~222~~434			—0.1	%	~~100~~222			—	%
Interest expense	(3638,~~287~~400		)	(67.90	)%	(3136,~~497~~287		)	(6.59	)%	(3831,~~753~~497		)	(8.6.5	)%
Other income (expense)	(23,~~674~~738		)	(0.57	)%	(2,~~928~~674		)	(0.65	)%	(~~130~~2,928		)	—(0.6	)%
Total non-operating expense	(3841,~~527~~847		)	(7.37	)%	(3438,~~203~~527		)	(7.03	)%	(3834,~~783~~203		)	(87.60	)%
Income before income taxes	322,~~083~~543			04.61	%	113,~~318~~083			20.36	%	1211,~~047~~318			2.73	%
Income tax (expense) benefit	(95		)	—	%	139			—	%	(292		)	(0.1	)%
Income tax benefit (expense)	39			—	%	(95		)	—	%	139			—	%
Net income	$	222,~~988~~582		04.61	%	$	112,~~457~~988		20.46	%	$	11,~~755~~457		2.64	%

3339

The following table sets forth selected statistical information. Passenger Days Sold refers to the number of revenue passengers carried for the period multiplied by the number of days within the period in their respective cruises. Available Passenger Cruise Days refers to a measurement of capacity that represents double occupancy per suite multiplied by the number of cruise days for the period.

	Twelve Months Ended December 31,
	2012		2011		2010
	2013		2012		2011
Passenger Days Sold	~~644~~649,~~950~~196		~~616~~644,~~490~~950		~~602~~616,~~191~~490
APCD	682,920		670,950		673,050
Available Passenger Cruise Days	682,850		682,920		670,950
Occupancy	9495.41	%	9194.94	%	8991.59	%

Adjusted EBITDA was calculated as follows:

(in thousands)	Year Ended December 31,
	2012			2011			2010
	2013			2012			2011
Net income	$	222,~~988~~582		$	112,~~457~~988		$	11,~~755~~457
Interest income	(~~434~~291		)	(~~222~~434		)	(~~100~~222		)
Interest expense	3638,~~287~~400			3136,~~497~~287			3831,~~753~~497
Depreciation and amortization	4036,~~624~~840			3940,~~222~~624			3639,~~523~~222
Income tax (benefit) expense, net	95(39		)	~~(139~~95		)	~~292~~(139		)
Other (income) expense	23,~~674~~738			2,~~928~~674			~~130~~2,928
Equity-based compensation/transactions (a)	~~1,007~~706			~~799~~1,007			~~2,154~~799
Non-recurring expenses (b)	1,482			4,006			13,277
Fuel hedge gain (b)	429			1,310			5,125
Restructuring (c)	1,516			820			1,288
Loss on disposal (c)	146			303			1,174
Fuel hedge gain (d)	1,310			5,125			1,129
Other addback expenses per credit agreement (d)	3,403			2,998			4,826
Loss on disposal (e)	303			1,174			—
Adjusted EBITDA	$	105,914		$	87,852		$	96,667
ADJUSTED EBITDA	$	87,852		$	96,667		$	105,201


(a)	Equity-based compensation/transactions represent stock compensation expense in each period.

(b) ~~Non-recurring~~Fuel ~~expenses~~hedge gain represents the ~~net~~realized ~~impact~~gain ofon ~~time~~fuel ~~out~~hedges oftriggered ~~service~~by asthe asettlement ~~result~~ of ~~unplanned~~the ~~and~~hedge ~~non-recurring~~instrument ~~repairs to vessels; expenses associated with consolidating corporate headquarters; non-recurring professional fees,~~ and ~~other~~is ~~costs~~included ~~associated with raising capital through debt and equity offerings; certain litigation fees; and the fees paid to license the name “Regent”~~ in ~~the~~other ~~first~~income ~~quarter of 2011~~(expense). ~~In February 2011, we amended the Regent license agreement to perpetually license the “Regent” name; as such we will not incur any future license fees.~~

(c) ~~Restructuring~~Loss ~~charges~~on ~~represents~~disposal ~~non-recurring~~primarily ~~expenses~~represents ~~associated~~asset ~~with~~write-offs ~~personnel~~during ~~changes,~~vessel ~~lease~~drydock ~~termination, and other corporate reorganizations to improve efficiencies~~periods.

(d) ~~Fuel~~Other ~~hedge~~addback ~~gain~~expenses per credit agreement represents the ~~realized~~net ~~gain~~impact onof ~~fuel~~time ~~hedges~~out ~~triggered~~of byservice ~~the~~as ~~settlement~~a result of ~~the~~unplanned ~~hedge~~repairs ~~instrument~~to vessels; certain expenses associated with personnel changes and islease ~~included~~termination; inand other ~~income~~corporate ~~(expense)~~reorganizations to improve efficiencies. In February 2011, we amended the Regent license agreement to perpetually license the “Regent” name; as such it will not incur any future license fees.

~~(e) Loss on disposal primarily represents asset write-offs during vessel dry-dock periods.~~40

34In the following table, Net Per Diem is calculated by dividing Net Revenue by Passenger Days Sold, Gross Yield is calculated by dividing total revenue by Available Passenger Cruise Days ("APCD"), and Net Yield is calculated by dividing Net Revenue by Available Passenger Cruise Days as follows:

In the following table, Net Per Diem is calculated by dividing net revenue by Passenger Days Sold, Gross Yield is calculated by dividing total revenue by Available Passenger Cruise Days, and Net Yield is calculated by dividing net revenue by Available Passenger Cruise Days as follows:



(in thousands, except Passenger Days Sold, Available Passenger Cruise Days, Net Per Diem, and Yield data)	Year Ended December 31,
	2013		2012		2011
Passenger ticket revenue	$	494,145	$	477,606	$	437,582
Onboard and other revenue	51,675		51,529		48,313
Total revenue	545,820		529,135		485,895
Less:
Commissions, transportation and other expense	178,494		185,446		150,580
Onboard and other	13,944		12,811		12,035
Net Revenue	$	353,382	$	330,878	$	323,280
Passenger Days Sold	649,196		644,950		616,490
Available Passenger Cruise Days	682,850		682,920		670,950
Net Per Diem	$	544.34	$	513.03	$	524.39
Gross Yield	799.33		774.81		724.19
Net Yield	517.51		484.50		481.82

(in thousands, except Passenger Days Sold, Available Passenger Cruise Days, Net Per Diem, and Yield data)	Year Ended December 31,
	2012		2011		2010
Passenger ticket revenue	$	477,606	$	437,582	$	400,368
Onboard and other revenue	51,529		48,313		48,873
Total revenue	529,135		485,895		449,241
Less:
Commissions, transportation and other expense	185,446		150,580		124,671
Onboard and other expense	12,811		12,035		12,640
Net Revenue	$	330,878	$	323,280	$	311,930
Passenger Days Sold	644,950		616,490		602,191
APCD	682,920		670,950		673,050
Net Per Diem	$	513.03	$	524.39	$	517.99
Gross Yield	774.81		724.19		667.47
Net Yield	484.50		481.82		463.46

In the following table, Gross Cruise Cost per Available Passenger Cruise Days is calculated by dividing Gross Cruise Cost by Available Passenger Cruise Days, and Net Cruise Cost per Available Passenger Cruise Days is calculated by dividing Net Cruise Costs by Available Passenger Cruise Days.

(in thousands, except APCD data)	Year Ended December 31,
	2012		2011		2010
	2013		2012		2011
Total cruise operating expense	$	~~371~~365,~~840~~536	$	~~328~~371,~~873~~840	$	~~284~~328,~~512~~873
Selling and administrative expense	7579,~~061~~054		7275,~~279~~061		7772,~~376~~279
Gross Cruise Cost	~~446~~444,~~901~~590		~~401~~446,~~152~~901		~~361~~401,~~888~~152
Less:
Commissions, transportation and other expense	~~185~~178,~~446~~494		~~150~~185,~~580~~446		~~124~~150,~~671~~580
Onboard and other expense	12,811		12,035		12,640
Onboard and other	13,944		12,811		12,035
Net Cruise Cost	$252,152	~~248,644~~	$248,644	~~238,537~~	$238,537	~~224,577~~
Less:
Fuel	4240,~~573~~752		4042,~~592~~573		3240,~~240~~592
Other expense	910,~~153~~280		149,~~044~~153		614,~~479~~044
Net Cruise Cost, excluding Fuel and Other	$	~~196~~201,~~918~~120	$	~~183~~196,~~901~~918	$	~~185~~183,~~858~~901
APCD	682,~~920~~850		~~670~~682,~~950~~920		~~673~~670,~~050~~950
Gross Cruise Cost per APCD	$	~~654~~651.4008	$	~~597~~654.8940	$	~~537~~597.6889
Net Cruise Cost per APCD	~~364~~369.0926		~~355~~364.5209		~~333~~355.6752
Net Cruise Cost, excluding Fuel and Other, per APCD	~~288~~294.3553		~~274~~288.0935		~~276~~274.1409

3541

Year Ended December 31, ~~2012~~2013 ~~("2012")~~ Compared to Year Ended December 31, ~~2011 ("2011")~~2012

Revenue

Total revenue increased $4316.27 million, or 83.92%, to $~~529~~545.18 million in ~~2012,~~2013 from $~~485~~529.91 million in ~~2011~~2012. This increase was ~~mainly~~primarily due to the following:

• Passenger ticket revenue increased $4016.05 million, or 93.15%, to $~~477~~494.61 million in ~~2012~~2013, from $~~437~~477.6 million in ~~2011~~2012, ~~driven~~as bya result of a $2013.24 million increase due to ~~PDS~~pricing increases and a $193.81 million increase due to ~~pricing~~additional PDS.

• Onboard and other revenue increased $30.2 million, or 60.74%, to $51.57 million in ~~2012~~2013 ~~from~~as compared to $4851.35 million in ~~2011~~2012, ~~driven~~which bywas due to a $20.23 million increase ~~due~~in toadditional PDS, ~~and~~partially offset by a decrease of $1.0.1 million ~~increase~~in ~~due~~certain toonboard ~~pricing~~passenger revenues.

Cruise Operating Expense

Total cruise operating expense ~~increased~~decreased $426.93 million, or ~~13.~~1.7%, to $~~371~~365.85 million in ~~2012,~~2013 from $~~328~~371.98 million in ~~2011~~2012. The ~~increase~~decrease was ~~mainly~~primarily due to the following:

• $347.90 million ~~increase~~decrease in Commissions, transportation and other, ~~of which, $27.9 million was driven~~ primarily byattributable ~~increased air costs and additional product costs associated with the increased inclusive product offerings we added~~ to ~~our~~lower ~~European~~air ~~cruise~~ticket ~~packages in light of the softer European market while costs associated with increased revenues and increased PDS drove $7.0 million of the increase.~~pricing;

• $5.1.8 million ~~increase~~decrease in ~~Payroll,~~Fuel ~~related~~due ~~and~~to ~~food,~~a ~~of which, $~~2.19% ~~million~~decrease ~~was driven by an increase~~ in ~~hotel~~our ~~services~~average ~~costs~~cost ~~due~~per toMetric anTon ~~increase~~ in ~~PDS~~2013, ~~while~~from ~~$1.8~~an ~~million~~average ~~was~~cost ~~attributable~~per toMetric ~~higher~~Ton ~~food~~of ~~costs~~$732 ~~per~~in ~~PDS,~~2012 ~~based~~to on$711 ~~CPI~~in ~~changes~~2013 and ~~the~~a ~~remaining $~~1.25% ~~million~~decrease ~~was~~in ~~due~~fuel toconsumption ~~general~~in ~~cost~~Metric ~~increases~~Tons.

•Partially ~~$2.0 million increase in Fuel driven by a 8.3% increase in our average cost per Metric Ton to $735 per Metric Ton in 2012 from $679 per Metric Ton in 2011,~~ offset by athe ~~3.2% decrease in consumption.~~following:

• $51.24 million increase in ~~Other ship operating~~Payroll, ~~primarily~~related ~~driven~~and byfood ~~increased port expense~~ due primarily to ~~changes~~an increase in ~~itinerary~~hotel ~~mix~~services costs and increased ~~operating~~occupancy ~~costs due to signing a five year agreement with Wartsila to maintain the engines throughout the fleet~~rates.

• $41.91 million ~~decrease~~increase in ~~Other,~~Onboard ~~primarily~~and ~~due~~other tois ~~expenses~~attributable ~~associated~~to ~~with~~an ~~two~~increase ~~dry-docks~~ in ~~2011~~other ~~versus~~destination ~~one~~services inand ~~2012~~shore excursion costs.

Selling and Administrative Expense

Selling and administrative expense ~~for 2012~~ increased $24.80 million, or 35.93 %, to $7579.1 million, ~~from~~in 2013 versus $7275.31 million ~~for~~in ~~2011~~2012. The increase was ~~mainly~~ due to ~~expenses~~$4.7 ~~associated~~million ~~with~~in ~~non-recurring~~marketing ~~restructuring~~costs, ~~charges~~offset ofby ~~$1.5~~a ~~million~~reduction asin ~~well~~general asand ~~other~~administrative costs ~~related~~totaling to$0.7 ~~payroll~~million.

Depreciation and Amortization Expense

Depreciation and amortization expense ~~for~~decreased ~~2012 increased~~ $13.48 million, or 39.64 %, to $36.8 million in 2013 versus $40.6 million in 2012. At January 1, 2013, we increased each ship's projected residual value from 15% to 30% resulting in a $395.23 million decrease in depreciation expense for ~~2011,~~2013 ~~mainly~~as ~~driven~~compared to 2012. This decrease was partially offset by ~~increased~~increases in depreciation expense on ~~capitalizable~~vessel ~~ship~~refurbishment ~~improvements~~of ~~made~~$1.2 inmillion ~~2011~~and amortization expense related to a non-compete agreement of $0.3 million.- See "Note 2. Summary of Significant Accounting Policies", "Note 3. Property, Plant and ~~2012~~Equipment" and "Note 4. Intangible Assets" in the accompanying notes to the consolidated financial statements.

Non-Operating Income (Expense)

~~Interest~~Total non-operating expense increased $43.83 million, or 158.26 %, to $3641.38 million in ~~2012,~~2013 from $3138.5 million in ~~2011~~2012. The increase was ~~primarily~~due ~~driven~~to by the refinancing of our first lien term loan in August 2012 with a new term loan bearing a higher interest rate margin and by the refinancing of our second lien term loan in May 2011 with senior secured notes bearing a higher fixed interest rate.following:

~~Other~~• ~~income~~Interest (expense) ~~decreased~~increased $0.2.1 million, or 85.78 %, to $238.74 million in ~~2012,~~2013 from $236.93 million in ~~2011. In~~ 2012, ~~we had a net gain of $2.1 million on our fuel hedge contracts~~ due to ~~an increase in fuel prices during~~ the ~~year, offset by a loss on the extinguishment of debt of $4.5 million as part of the~~ refinancing of our first lien ~~term~~credit ~~loan. In~~facility ~~2011,~~in weAugust ~~had~~2012, ~~a loss on~~ the ~~extinguishment~~terms of ~~debt~~which ofinclude ~~$7.5~~a ~~million~~higher asinterest ~~part~~rate. ofSee ~~our~~"Note ~~refinancing~~5. ofDebt" ~~our~~in ~~second~~the ~~lien~~accompanying ~~term~~notes ~~loan,~~to ~~combined~~the ~~with~~consolidated afinancial ~~net gain of $4~~statements.~~5 million on fuel hedges.~~

3642

•

Other expense increased by $1.0 million or 37.0% to $3.7 million in 2013 from $2.7 million in 2012. In 2013, we recorded a loss on the extinguishment of debt totaling $3.7 million, as a result of repricing our first lien credit facility. In 2012, we recorded a loss on the extinguishment of debt totaling $4.5 million as a result of refinancing the first lien credit facility, which was partially offset by a $2.1 million net gain on our fuel hedge contracts.

Net Yield

Net Yield increased by 0$33.01, or 6.8%, to $~~484~~517.5051 ~~for~~in ~~2012,~~2013 from $~~481~~484.8250 ~~for~~in ~~2011~~2012, ~~mainly~~which was primarily due to ~~higher~~an ~~occupancy~~increase ~~and increases~~ in our ticket prices ~~partially offset by additional product costs associated with the increased inclusive product offerings we added to our European cruise packages in light of the softer European market~~.

Net Cruise Cost per APCD

Net Cruise Cost per APCD increased by 2$5.17, or 1.4%, to $~~364~~369.0926 in ~~2012,~~2013 from $~~355~~364.5209 in ~~2011~~2012. ~~Excluding~~Net ~~fuel~~Cruise ~~cost~~Cost, excluding fuel and other ~~expense~~, ~~Net Cruise Cost~~ per APCD increased by 5$6.18, or 2.1%, to $~~288~~294.3553 in ~~2012~~2013 from $~~274~~288.0935 in ~~2011~~2012, primarily driven by ~~non-recurring restructuring charges,~~ increased ~~port~~sales ~~expense due to changes in itinerary mix~~ and ~~increased~~marketing ~~operating~~ costs ~~due to signing a five year agreement with Wartsila to maintain the engines throughout the fleet~~.

Year Ended December 31, ~~2011~~2012 ~~("2011")~~ Compared to Year Ended December 31, ~~2010 ("2010")~~2011

Revenue

Total revenue ~~in 2011~~ increased $3643.72 million, or 8.29%, to $~~485~~529.91 million in 2012, from $~~449~~485.29 million in ~~2010,~~2011. ~~primarily~~This ~~driven~~increase bywas ~~higher~~primarily ~~passenger~~due ~~ticket~~to ~~revenue.~~the following:

• Passenger ticket revenue increased $3740.20 million, or 9.31%, to $~~437~~477.6 million in ~~2011~~2012, from $~~400~~437.46 million in ~~2010~~2011, ~~mainly~~ driven by ~~higher~~a ~~ticket~~$20.2 ~~pricing,~~million ~~which~~increase ~~increased~~in byPDS ~~6.8%,~~ and ~~higher occupancy, which increased from 89.5% to 91.9%, partially offset by~~ a 0$19.3%8 ~~decline~~million inincrease ~~capacity due to scheduled dry-docks for Seven Seas Mariner and Seven Seas Voyager~~ in ~~2011~~pricing.

• Onboard and other revenue ~~decreased~~increased $03.62 million, or 16.17%, to $4851.35 million in ~~2011~~2012 from $48.93 million in ~~2010~~2011, driven by ~~an increase in occupancy, offset by~~ a $2.92 million ~~non-recurring~~increase ~~insurance recovery~~ in ~~2010~~PDS ~~resulting~~and ~~from~~ a ~~vessel’s~~$1.0 ~~unexpected~~million ~~out~~increase ofin ~~service for repairs~~pricing.

Cruise Operating Expense

Total cruise operating expense increased $4442.49 million, or 1513.61%, to $~~328~~371.98 million in ~~2011~~2012, from $~~284~~328.59 million in ~~2010~~2011. The increase was primarily due to: the following:

• A $2534.9 million increase in ~~Commission~~Commissions, transportation and other, ~~driven~~of bywhich, an$27.9 ~~increase~~million inwas ~~air~~driven ~~participation~~primarily ~~with~~by ~~54.3%~~increased ~~of our passengers receiving~~ air incosts ~~2011~~and ~~versus~~additional ~~44.1%~~product incosts ~~2010.~~associated ~~This~~with ~~increase~~the inincreased ~~air~~inclusive ~~participation~~product ~~resulted~~offerings inwe ~~$11.7~~added ~~million~~to ~~of additional expense in 2011. We also launched~~ our ~~free~~European ~~included~~cruise ~~hotel~~packages ~~program~~ in ~~2011~~light ~~which~~of ~~resulted~~the insofter ~~additional~~European ~~expense~~market ofand the remaining $37.20 million. ~~The remaining increase~~ was ~~primarily driven by related costs~~ associated with increased revenues and increased PDS.

• An $85.41 million increase in ~~Fuel~~Payroll, ~~expense~~related and food, of which $2.1 million was driven by aan ~~32%~~ increase in ~~our~~hotel ~~average~~services ~~cost~~costs ~~per~~due ~~Metric~~to ~~Ton~~an toincrease in PDS, $~~679~~1.8 million was attributable to higher food costs per ~~Metric~~PDS, ~~Ton~~based inon ~~2011~~CPI ~~from~~changes and the remaining $~~515~~1.2 ~~per~~million ~~Metric~~was ~~Ton~~due into ~~2010~~general cost increases.

• A $72.60 million increase in ~~Other~~Fuel ~~expenses~~driven ~~primarily~~by ~~attributable~~a to8.3% aincrease ~~17-day~~in ~~scheduled~~our ~~dry-dock~~average ~~for~~cost ~~the~~per ~~Seven~~Metric ~~Seas~~Ton ~~Voyager~~to in$735 ~~the~~per ~~third~~Metric ~~quarter~~Ton ofin ~~2011~~2012 ~~and~~from a$679 ~~10-day~~per ~~scheduled~~Metric ~~dry-dock~~Ton ~~for~~in ~~the~~2011, ~~Seven~~partially ~~Seas~~offset ~~Mariner~~by ina ~~the~~3.2% ~~second~~decrease ~~quarter~~in offuel ~~2011~~consumption.

• A $35.72 million increase in ~~Payroll,~~Other ~~related~~ship &operating, ~~food~~ primarily driven by ~~$1.5~~increased ~~million~~port ~~higher~~expenses ~~food~~due ~~costs~~to ~~per~~changes ~~PDS,~~in ~~based~~our onitinerary ~~CPI~~mix ~~changes,~~ and ~~$1.0~~increased ~~million~~operating ~~higher food~~ costs due to ~~increased~~signing ~~passenger~~a ~~counts~~five year agreement with Wartsila to maintain the engines throughout the fleet.


•	$4.9 million decrease in Other, primarily due to expenses associated with two drydocks in 2011 versus one in 2012.

Selling and Administrative Expense

Selling and administrative expense ~~for~~increased ~~2011 decreased~~ $52.18 million, or 63.69%, to $7275.31 million in 2012 from $7772.43 million for ~~2010~~2011. The ~~decrease~~increase was primarily due to aemployee ~~$3.1~~related ~~million reduction in trade name royalty fees and $1~~costs.~~6 million reduction in incentive compensation expense.~~

3743

Depreciation and Amortization Expense

Depreciation and amortization expense ~~for 2011~~ increased by $21.74 million, or 3.6%, to $3940.26 million infor ~~2011,~~2012 ~~compared~~from to $3639.52 million for ~~2010~~2011, ~~mainly~~ driven by increased depreciation on capitalizable ship improvements. made in 2012 and 2011.

Non-Operating Income (Expense)

Interest expense ~~decreased~~increased $74.38 million, or 1815.72%, to $3136.53 million in ~~2011~~2012, from $3831.85 million in ~~2010~~2011. The ~~decrease~~increase was ~~mainly~~primarily driven by ~~lower effective interest rates, resulting from~~ the refinancing of ~~the~~our ~~second~~first lien credit facility August 2012 with a new term loan bearing a higher interest rate and the ~~expiration~~refinancing of our ~~interest~~second ~~rate~~lien ~~swaps~~term loan in ~~February~~May 2011. with senior secured notes bearing a higher fixed interest rate.

Other income (expense) ~~primarily~~decreased ~~consisted~~$0.2 ofmillion, ~~fuel~~or ~~hedge gains (losses)~~8.7%, ~~foreign~~to ~~currency~~$2.7 ~~translation~~million ~~gains~~in ~~(losses)~~2012, ~~and~~from a$2.9 ~~loss~~million onin ~~the early extinguishment of debt~~2011. In ~~2011~~2012, we had a ~~loss~~net gain of $72.51 million on ~~early~~our ~~extinguishment~~fuel ofhedge ~~debt~~contracts ~~partially~~due to an increase in fuel prices during the year, offset by a loss on the extinguishment of debt of $4.5 million inas ~~net~~part ~~gains~~of onthe refinancing of our ~~fuel~~first ~~hedge~~lien ~~contracts~~credit facility. In ~~2010~~2011, we had a loss on the extinguishment of debt of $07.45 million as part of ~~losses~~our refinancing of our second lien term loan, combined with a net gain of $4.5 million on fuel hedges.

Net Yield

Net Yield increased by 40.16% to $~~481~~484.8250 for ~~2011~~2012, from $~~463~~481.4682 for ~~2010~~2011, mainly due to higher occupancy and increases in our ticket prices, ~~higher~~partially ~~passenger~~offset ~~spending~~by ~~levels,~~additional ~~and~~product ~~higher~~costs ~~occupancy,~~associated aswith ~~discussed~~the ~~above~~increased inclusive product offerings we added to our European cruise packages in light of the softer European market.

Net Cruise Cost per APCD

Net Cruise Cost per APCD increased by 62.64% to $~~355~~364.5209 in ~~2011~~2012, from $~~333~~355.6752 in ~~2010~~2011. Excluding fuel cost and other expense, Net Cruise Cost per APCD ~~decreased~~increased by 05.72% to $288.35 in 2012 from $274.09 in 2011, ~~compared~~primarily driven by non-recurring restructuring charges, increased port expense due to ~~$276.14~~changes in ~~2010.~~itinerary mix and increased operating costs due to signing a five year agreement with Wartsila to maintain the engines throughout the fleet.

Liquidity and Capital Resources

In this section, references to 2012 refer to the year ended December 31, 2012, references to 2011 refer to the year ended December 31, 2011 and references to 2010 refer to the year ended December 31, 2010.

Sources and Uses of Cash

Net ~~cash~~Cash ~~provided~~Provided by ~~operating~~Operating ~~activities~~Activities decreased by $13.8 million to $61.9 million in 2012, from $75.7 million in 2011, primarily due to a decrease in net income adjusted for non-cash items (such as depreciation, amortization, stock compensation, and an unrealized loss on derivative contracts) of $13.0 million, and a decrease in working capital of $0.8 million. Net cash provided by operating activities was $50.8 million for the year ended December 31, 2010 primarily due to net income in 2010 of $11.8 million, non-cash expenses of $55.1 million, an increase in passenger deposits of $9.2 million and a decrease in timing differences of cash payments relating to operating assets and liabilities of a $13.4 million.

Net cash ~~used~~provided inby ~~investing~~operating activities ~~decreased~~increased by $3125.04 million to $2187.23 million in ~~2012~~2013, from $5261.19 million in ~~2011~~2012. The ~~decrease~~change was primarily due to ~~the~~an ~~change~~increase in ~~restricted~~net ~~cash,~~income ~~lower~~of ~~capital~~$19.6 ~~expenditures~~million inand ~~2012~~an ~~and~~increase ~~the~~in ~~Regent~~working ~~trade~~capital ~~name~~of ~~and~~$13.4 ~~Regent~~million, ~~licensing~~partially ~~rights~~offset ~~acquired~~by inother ~~2011.~~non-cash ~~For~~income/expenses ~~the~~to ~~year~~net ~~ended~~income ~~December~~totaling ~~31,~~$7.6 ~~2010~~million. ~~net~~The ~~cash~~favorable ~~used~~change in ~~investing~~working ~~activities~~capital was ~~$15.8 million~~ primarily ~~consisting~~attributable ofto a $1814.97 million ofincrease ~~additions~~in topassenger ~~property~~deposits, ~~and~~partially ~~equipment~~offset by other changes in ~~connection~~working ~~with~~capital ~~ship~~accounts. ~~improvements,~~The ~~which~~change in other non-cash income/expense was ~~offset~~primarily bydue a ~~reduction~~decrease in depreciation and amortization expense of $3.08 million, increase in ~~restricted~~unrealized loss on derivatives of $1.3 million and other changes in non-cash income/expense.

Net cash ~~used~~provided inby ~~financing~~operating activities ~~was~~decreased by $913.68 million ~~in 2012 compared~~ to $761.9 million ~~provided by financing activities~~ in ~~2011~~2012, ~~and~~from $2575.07 million ~~used by financing activities~~ in ~~2010~~2011. InThe ~~2012,~~change wewas ~~made~~primarily ~~net~~due ~~payments~~to ofa ~~$7.6~~decrease ~~million~~in ~~associated~~net ~~with~~income ~~the~~adjusted ~~refinancing of our first lien credit facility. We also paid $2.0 million~~ for ~~previously~~other ~~acquired~~non-cash ~~Regent~~income/expense ~~licensing rights. In 2011, we received net proceeds~~ of $913.30 million ~~from the issuance of senior secured notes. For the year ended December 31~~, ~~2010~~and ~~net~~a ~~cash~~decrease ~~used~~ in ~~financing~~working ~~activities~~capital ~~was~~of $~~25.~~0.8 million ~~consisting of debt payments~~.

38Net Cash Used in Investing Activities

Net cash used in investing activities increased $15.9 million to $37.1 million in 2013 from $21.2 million in 2012. The change was attributable to an increase in capital expenditures totaling $22.8 million, partially offset by a decrease in restricted cash of $7.0 million.

Net cash used in investing activities decreased by $30.9 million to $21.2 million in 2012, from $52.1 million in 2011. The decrease was primarily due to the change in restricted cash, lower capital expenditures in 2012 and the Regent trade name and Regent licensing rights acquired in 2011.

Net Cash Used in Financing Activities

Net cash used in financing activities was $11.4 million in 2013 compared to $9.6 million in 2012 and $7.9 million provided by financing activities in 2011. During 2013, we made net payments of $9.3 million on the senior secured credit facility and paid $2.0 million for previously acquired Regent licensing rights. In 2012, we made net payments of $7.6 million associated with the refinancing of our first lien credit facility and paid $2.0 million for previously acquired Regent licensing rights. In 2011, we received net proceeds of $7.9 million from the issuance of senior secured notes. See "Note 5. Debt" in the accompanying notes to the consolidated financial statements.

Funding Sources and Future Commitments

AsAt of December 31, ~~2012~~2013, our liquidity was $~~139~~178.9 million, consisting of $99138.9 million in cash and cash equivalents and $40.0 million available under our revolving credit facility. We had a working capital deficit of $8274.1 million asat of December 31, ~~2012~~2013, as compared to ~~our~~a working capital deficit of $~~100~~82.1 million asat of December 31, ~~2011~~2012. Similar to others in our industry, we operate with a substantial working capital deficit. This deficit is ~~mainly~~ attributable to the following factors: (1i) passenger deposits are normally paid in advance with a relatively low-level of accounts receivable, (2ii) rapid turnover results in a limited investment in inventories, and (3iii) voyage-related accounts payable usually become due after receipt of cash from related bookings. Passenger deposits remain a liability until the sailing date,; however, the cash generated from these advance receipts, as allowed by certain jurisdictions, is used interchangeably with cash on hand from other sources, such as our revolving credit facilities and other cash from operations. This cash can be used to fund operating expenses for the applicable future sailing, pay down ~~revolving~~our senior secured credit ~~facilities~~facility, orfund ~~any~~down ~~other~~payments ~~use~~on ofnew ~~cash~~vessels or other uses.

~~The~~We ~~agreements~~have ~~governing~~contractual ~~our~~obligations ~~indebtedness contain a number~~ of ~~covenants~~which ~~that impose operating and financial restrictions, including requirements that we maintain a maximum loan-to-value ratio, a minimum interest coverage ratio (applicable only to~~ our ~~revolving~~debt ~~credit~~maturities ~~facility)~~represent ~~and restrictions on~~ our ~~and~~largest ~~our~~funding ~~subsidiaries'~~requirement. ~~ability~~As ~~to,~~of ~~among~~December ~~other things~~31, ~~incur additional indebtedness~~2013, ~~issue~~we ~~preferred~~have ~~stock,~~$521.3 ~~pay~~million ~~dividends~~in onfuture ordebt ~~make distributions with respect to our capital stock~~maturities, ~~restrict~~of ~~certain~~which ~~transactions~~$3.0 ~~with~~million ~~affiliates,~~is ~~and~~payable ~~sell~~through ~~certain~~December ~~key~~2014.See ~~assets,~~"Note ~~principally our ships~~5. AsDebt" ofin ~~December 31,~~the ~~2012,~~accompanying wenotes ~~are~~to inconsolidated ~~compliance~~financial ~~with all debt covenants~~statements.

The Weagreements ~~generate~~governing ~~substantial~~our ~~cash~~indebtedness ~~flows~~contain ~~from~~a ~~operations,~~number ~~and~~of ~~our~~covenants ~~business~~that ~~model,~~impose ~~along~~operating ~~with~~and ~~our~~financial ~~revolving~~restrictions, ~~credit~~including ~~facility,~~requirements ~~has~~that ~~historically~~we ~~allowed~~maintain usa maximum loan-to-value ~~maintain~~ratio, ~~this~~a ~~working~~minimum ~~capital~~interest ~~deficit~~coverage ~~and~~ratio ~~still~~(applicable ~~meet~~only to our ~~operating~~revolving credit facility, ~~investing~~if drawn) and ~~financing~~restrictions ~~needs.~~on Weour ~~expect~~and ~~that~~our wesubsidiaries' ~~will~~ability ~~continue~~ to, ~~have~~among ~~working~~other ~~capital~~things, ~~deficits~~incur inadditional ~~the~~indebtedness, ~~future.~~issue Wepreferred ~~have~~stock, ~~contractual~~pay ~~obligations~~dividends ofon ~~which~~or ~~our~~make ~~debt~~distributions ~~maturities~~with ~~represent~~respect to our ~~largest~~capital ~~funding~~stock, ~~requirement.~~restrict Ascertain oftransactions ~~December~~with 31affiliates, ~~2012~~and sell certain key assets, weprincipally ~~have~~our ~~$521~~ships.3 ~~million~~As inof ~~future~~December 31, ~~debt maturities~~2013, ofwe ~~which~~are ~~none~~in iscompliance ~~payable~~with ~~through~~all ~~December~~financial ~~2013.~~debt covenants.

We believe our cash on hand, expected future operating cash inflows, additional borrowings under ~~existing~~our ~~facilities~~senior secured credit facility, our ability to issue debt securities, and our ability to raise additional equity, including capital contributions, will be sufficient over the next twelve-month period to fund operations, debt service requirements, and capital expenditures, ~~and~~as towell as maintain compliance with financial covenants under ~~our~~the ~~credit~~ agreements ~~over~~governing ~~the~~our ~~next twelve-month period~~indebtedness. There is no assurance; however, that cash flows from operations and additional fundings will be available in the future to fund our future obligations.

OnEffective ~~February~~July 1, 2013, we ~~amended~~entered ~~our~~into ~~previously~~a ~~existing~~definitive ~~$340~~contract ~~million~~with ~~first~~Italy’s ~~lien~~Fincantieri ~~credit~~shipyard ~~facilty,~~to ~~consisting~~build ~~of both~~ a ~~$300~~luxury ~~million~~cruise ~~term~~ship ~~loan~~to ~~and~~be anamed ~~$40~~the ~~million~~Seven ~~revolving~~Seas ~~credit facility~~Explorer. In ~~conjunction~~Under ~~with this amendment,~~ the ~~outstanding~~terms ~~balance~~ of the ~~term~~Euro-denominated ~~loan~~contract, ofwe ~~$296.3~~will ~~million~~pay ~~was repriced with a margin of 3~~€343.5%0 ~~compared~~million toor ~~either~~approximately 4$471.~~75%~~3 ormillion ~~5.0%~~(calculated ~~based~~ on ~~a leverage ratio in~~ the ~~original~~applicable ~~term~~exchange ~~loan.~~rate ~~There~~at ~~was~~December no31, ~~change~~2013) to Fincantieri for the ~~$40~~new ~~million~~vessel. ~~revolving~~During ~~credit~~July ~~facility~~2013, orwe ~~the~~made ~~maturity~~a ~~date~~payment of ~~the~~approximately ~~term loan~~$22. ~~There~~0 ~~was~~million noto ~~impact~~Fincantieri onfor ~~covenants,~~the ~~liquidity~~initial orinstallment ~~debt~~payment ~~capacity~~for Seven Seas Explorer.

39On July 31, 2013, we entered into a loan agreement providing for borrowings of up to approximately $440.0 million with a syndicate of financial institutions to finance 80% of the contract cost of Seven Seas Explorer, plus the export credit agency premium. We are required to pay various fees to the lenders under this loan agreement, including a commitment fee of 1.10% per annum on the undrawn loan amount payable semi-annually until the delivery of the vessel.The twelve year fully amortizing loan requires semi-annual principal and interest payments commencing six months following the draw-down date. Borrowings under this loan agreement will bear interest, at our election, at either (i) a fixed rate of 3.43% per year, or (ii) six month LIBOR plus 2.8% per year. Guarantees under this loan agreement are provided by us and PCH. As of December 31, 2013, we did not have any outstanding borrowings under this loan agreement.

As a normal part of our business, depending on market conditions, pricing and our overall growth strategy, we may consider opportunities to enter into contracts for building additional ships. We may also consider the sale of ships, the purchase of existing ships, potential acquisitions and strategic alliances. If any of these were to occur, they would be financed through the incurrence of additional indebtedness, the issuance of additional capital contributions, or through cash flows from operations.

Contractual Obligations

AsAt of December 31, ~~2012~~2013, our contractual obligations with initial or remaining terms in excess of one year, including interest expense on long-term debt obligations, were as follows:

	Payments Due By Period
(in thousands)	Total		Less than1 year		1 - 3 years		3 - 5 years *		More than5 years
Operating Activities:
Long-term debt (1)	$	521,250	$	3,000	$	6,000	$	287,250	$	225,000
Interest on long-term debt (1)	$	239,066	$	39,047	$	77,734	$	76,984	$	45,301
Interest on long-term debt (2)(3)	211,798		40,226		96,909		66,964		7,699
Operating lease obligations	1,676		744		900		32		—
Capital lease obligation (4)	8,863		900		1,867		1,962		4,134
Maintenance contract obligations (2)	7,112		1,707		3,414		1,991		—
Operating lease obligations	3,914		768		1,285		732		1,129
Investing Activities:
Ship purchase (5)	447,881		23,573		424,308		—		—
Regent licensing rights (3)	2,000		2,000		—		—		—
Maintenance contract obligations (6)	10,300		3,292		6,465		543		—
Purchase obligations - equipment (2)	6,655		2,085		2,762		1,808		—
Employment agreements (7)	4,260		2,352		1,908		—		—
Financing Activities:
Total	$	1,208,266	$	74,111	$	538,742	$	357,451	$	237,962
Long-term debt (4)	521,250		—		6,000		6,000		509,250
Capital lease obligation (5)	6,227		561		1,164		1,224		3,278
Total	$	783,986	$	46,144	$	91,974	$	88,039	$	557,829

~~(1)~~*Please ~~Long-term~~note ~~debt~~this ~~obligations~~column ~~mature~~includes atyears ~~various~~4 ~~dates through fiscal year 2019~~ and ~~bear interest at fixed and variable rates~~5. Interest on variable rate debt is calculated based upon LIBOR, with a floor of 1.25%, plus the applicable margin. At December 31, 2012, the LIBOR rate was 1.25% for all periods. Amounts are based on existing debt obligations and do not consider potential refinancing of expiring debt obligations.

(21) Amounts represent debt obligations ~~under~~with ~~the~~initial ~~five~~terms ~~year~~in ~~maintenance~~excess ~~agreement~~of ~~with~~one ayear. ~~third~~The ~~party~~contractual ~~vendor~~obligation ~~for~~under ~~certain~~long-term ~~equipment~~debt ~~purchases~~does ~~and~~not ~~monthly~~reflect ~~maintenance~~any ~~fees.~~excess ~~The~~cash ~~contract~~payments ~~was~~we ~~signed~~may onbe ~~March~~required 1,to ~~2012~~make ~~and~~pursuant ~~has~~to aour ~~term~~senior ofsecured ~~sixty~~credit ~~months~~facility.

(32) ~~Amounts~~Long-term ~~represent~~debt obligations ~~under~~mature ~~the~~at ~~terms~~various dates through fiscal year 2019 and bear interest at fixed and variable rates. Interest on variable rate debt is calculated based upon LIBOR, with a floor of 1.25%, plus the ~~Regent~~applicable ~~trademark~~margin. ~~license~~At ~~agreement~~December 31, 2013, the LIBOR rate was 1.25%. Amounts are based on existing debt obligations and do not consider potential refinancing of expiring debt obligations.

(43) ~~Amounts~~Under ~~represent~~the ~~debt~~loan ~~obligations~~agreement ~~with~~for ~~initial~~the ~~terms~~Seven inSeas ~~excess~~Explorer, ofSSC ~~one~~is ~~year.~~required ~~The~~to ~~contractual~~pay ~~obligation~~various fees to the lenders under ~~long-term~~this ~~debt~~loan ~~does~~agreement, ~~not~~including ~~reflect~~a ~~any~~commitment ~~excess~~fee ~~cash~~of ~~flow~~1.10% ~~payments~~per weannum ~~may~~on bethe ~~required~~undrawn toloan ~~make~~amount ~~pursuant~~payable tosemi-annually ~~our~~until ~~senior~~the ~~secured~~delivery ~~credit~~of ~~facilities~~the vessel and certain agency fees. See "Note 5. Debt" in the accompanying notes to financial statements.

(54) Amounts represent capital lease obligations with an initial term in excess of one year.

As(5) aAmount ~~normal~~represents ~~part~~our ofcontract ~~our~~with ~~business,~~Italy's ~~depending~~Fincantieri onshipyard ~~market~~to ~~conditions,~~build ~~pricing~~the ~~and~~Seven ~~our~~Seas ~~overall~~Explorer. ~~growth~~Under ~~strategy,~~the weterms ~~continuously~~of ~~consider~~the ~~opportunities~~contract, toSSC ~~enter~~will ~~into~~pay ~~contracts~~€325.9 ~~for~~million ~~building~~or ~~additional~~approximately ~~ships~~$447.9 Wemillion ~~may~~(calculated ~~also~~based ~~consider~~on the ~~sale~~applicable ofexchange ~~ships~~rate orat ~~the~~December ~~purchase~~31, of2013) ~~existing~~to ~~ships.~~Fincantieri Wefor ~~continuously~~the ~~consider~~remaining ~~potential~~balance ~~acquisitions~~of ~~and~~the ~~strategic~~new ~~alliances~~vessel. IfWe ~~any~~made ofthe ~~these~~first ~~were~~payment toin ~~occur~~July 2013, ~~they~~of ~~would~~€17.2 bemillion ~~financed~~or ~~through~~approximately ~~the~~$22.0 ~~incurrence~~million. ofSee ~~additional~~"Note ~~indebtedness,~~5. ~~the~~Debt" ~~issuance~~and of"Note ~~additional~~12. ~~capital~~Commitments ~~contributions,~~and orContingencies" ~~through~~in ~~cash~~the ~~flows~~accompanying ~~from~~notes ~~operations.~~to financial statements.


(6)	Amounts represent obligations under the five year maintenance agreement with a third party vendor for certain equipment purchases. See "Note 12. Commitments and Contingencies" in the accompanying notes to the financial statements.


(7)	Amounts due to executive officers and key employees. See "Note 12. Commitments and Contingencies" in the accompanying notes to the financial statements.

On July 31, 2013, SSC entered into a loan agreement providing for borrowings of up to approximately $440.0 million to finance 80% of the construction cost for the Seven Seas Explorer, plus the export credit agency premium. SSC is required to pay various fees to the lenders under this loan agreement, including a commitment fee of 1.10% per annum on the undrawn loan amount payable semi-annually until the delivery of the vessel. As of December 31, 2013, we did not have any outstanding borrowings under this loan agreement. See "Note 5. Debt" in the accompanying notes to the financial statements.

Off-Balance Sheet Arrangements

We are not party to any off-balance sheet arrangements, including guarantee contracts, retained or contingent interest, certain derivative instruments or variable interest entities that either have, or are reasonably likely to have, a ~~current or future material effect on our financial condition, changes in our financial condition, revenues or expenses, results of operations, liquidity, capital expenditures or capital resources.~~

~~Critical Accounting Estimates~~46

~~Our~~current ~~consolidated~~or ~~financial~~future ~~statements~~material ~~are~~effect ~~prepared~~on inour ~~accordance~~financial ~~with~~condition, ~~GAAP.~~changes ~~Certain~~in of our ~~accounting~~financial ~~estimates~~condition, ~~are~~revenues ~~deemed~~or ~~“critical~~expenses,” asresults ~~they require management’s highest degree~~ of ~~judgment~~operations, ~~estimates~~liquidity, ~~and~~capital ~~assumptions.~~expenditures Weor ~~believe~~capital ~~our~~resources. ~~most critical accounting estimates are as follows:~~

Asset impairment

Goodwill

In connection with the Regent Seven Seas Transaction, we recorded goodwill as the excess of the purchase price over the estimated fair value of net assets acquired, including identifiable intangible assets. We assess goodwill for impairment in accordance with ASC 350, Intangibles—Goodwill and Other, which requires that goodwill be tested for impairment at the “reporting unit level” (“Reporting Unit”) at least annually and more frequently when events or circumstances dictate, as defined by ASC 350. Consistent with our determination that we have only one reporting segment, we have determined that there is only one Reporting Unit.

In 2012, we adopted new authoritative accounting guidance that allows us to first assess qualitative factors to determine whether it is necessary to perform the two-step quantitative goodwill impairment test. We would perform the two-step test if our qualitative assessment determined it is more-likely-than-not that a reporting unit’s fair value is less than its carrying amount. We may also elect to bypass the qualitative assessment and proceed directly to step one of the quantitative test. The impairment review for goodwill consists of a two-step process of first determining the fair value of the Reporting Unit and comparing it to the carrying value of the net assets allocated to the reporting unit. If the fair value of the Reporting Unit exceeds the carrying value, no further analysis or write-down of goodwill is required. If the fair value of the Reporting Unit is less than the carrying value of its net assets, the implied fair value of the Reporting Unit is allocated to all of its underlying assets and liabilities, including both recognized and unrecognized tangible and intangible assets, based on their fair value. If necessary, goodwill is then written down to its implied fair value.

Our annual impairment test date is September 30, which coincides with our annual budget/forecasting cycle and the end of our seasonally highest quarter. As of September 30, 2012, we did not have any impairment on goodwill, indefinite-lived intangible assets or other long-lived assets.

The principal assumptions used in the discounted cash flow model are projected operating results, discount rate, weighted-average cost of capital and terminal value. Cash flows were calculated using our 2012 projected operating results as a base. To that base we added future years’ cash flows, considering the global economic environment as well as internal projections based on projected occupancy levels, cost structure and other variables. We discounted the projected cash flows using a rate equivalent to our weighted-average cost of capital. Based on the discounted cash flow model, we determined that the fair value of goodwill exceeded the carrying value and is therefore not impaired. The fair value exceeds its carrying value by 54% as of September 30, 2012.

The estimation of fair value utilizing discounted expected future cash flows includes numerous uncertainties which require significant judgments when making assumptions of expected revenues, operating costs, selling and administrative expenses, capital expenditures, as well as assumptions regarding the cruise vacation industry competition and business conditions, among other factors. It is reasonably possible that changes in our assumptions and projected operating results above could lead to impairment of our goodwill.

Identifiable Intangible Assets

Specific to the Regent Seven Seas Transaction in 2008, we recorded identifiable intangible assets consisting of Trade names, Customer Relationships, Non-Competition Agreements, Backlog and Customer Database. The Trade names acquired in this transaction, “Seven Seas Cruises” and “Luxury Goes Exploring” were determined to have indefinite lives. During 2011, we amended our agreement with Regent Hospitality Worldwide, which granted us exclusive and perpetual licensing rights to use the “Regent” trade name and trademarks (Regent licensing rights) in conjunction with cruises, subject to the terms and conditions stated in the agreement. The amended and restated trademark license agreement allows us to use the Regent trade name and trademark rights (“Regent licensing rights”), in conjunction with cruises, in perpetuity, subject to the terms and conditions stated in the agreement. The Regent licensing rights are being amortized over an estimated useful life of 40 years.

Our identifiable intangible assets, except the trade names acquired in the 2008 Regent Seven Seas Transaction noted above, are subject to amortization over their estimated lives and are reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable based on market factors and operational considerations. Identifiable intangible assets not subject to amortization, such as trade names, are reviewed for impairment whenever events or circumstances indicate, but at least annually, by comparing the estimated fair value of the intangible asset with its carrying value.

We performed our annual impairment review of our trade names as of September 30, 2012 using the relief-from-royalty method. The royalty rate used is based on comparable royalty agreements in the tourism and hospitality industry. The discount rate used was the same rate used in our goodwill impairment test. Based on the discounted cash flow model, we determined the fair value of our trade names exceeded their carrying value and are therefore not impaired. The fair value exceeded its carrying value by 81% as of September 30, 2012.

Ship Accounting

In connection with the Regent Seven Seas Transaction, we recorded our ships at their estimated fair values, which was calculated based on a market approach that took into consideration recent transactions of similar ships, conditions of the cruise market at the date of valuation and the price a willing third party would pay for a ship with similar characteristics. Our ships represent our most significant asset and are stated at cost less accumulated depreciation. Depreciation of the ships is computed net of projected residual values of 15% using the straight-line method over their original estimated service lives of 30 years. Service life is based on when the assets were originally placed in service and we did not extend this life at the time of the Regent Seven Seas Transaction. Our service life and residual value estimates take into consideration the impact of anticipated technological changes, long-term cruise and vacation market conditions, and historical useful lives of similarly built ships.

Dry-dock costs are scheduled maintenance activities that require the ships to be taken out of service and are expensed as incurred. Dry-docks are required to maintain each vessel’s Class certification. Class certification is necessary in order for our cruise ships to be flagged in a specific country, obtain liability insurance and legally operate as passenger cruise ships. Typical dry-dock costs include dry-docking fees and wharfage services provided by the dry-dock facility, hull inspection and certification related activities, external hull cleaning and painting below the waterline including pressure cleaning and scraping, additional below the waterline work such as maintenance and repairs on propellers and replacement of seals, cleaning and maintenance on holding tanks and sanitary discharge systems, related outside contractor services including travel and related expenses and freight and logistics costs related to dry-dock activities. Repair and maintenance activities are charged to expense as incurred.

During the second quarter of 2012, the Seven Seas Navigator underwent a dry dock, in which improvements were made. Due to the increase in its carrying value, we performed an impairment review utilizing an undiscounted cash flow analysis. The principle assumptions used in the undiscounted cash model were projected operating results, including net per diems, net cruise costs, projected occupancy, available passenger days and projected growth. As a result of our impairment review, we determined the revised carrying amount is recoverable and not impaired. Since acquiring the ships in 2008, we have not recognized any impairment losses on any of our ships.

We believe our estimates and judgments with respect to our ships are reasonable. However, should certain factors or circumstances cause us to revise our estimates of ship service lives, projected residual value or the lives of major improvements, depreciation expense could be materially higher or lower. If circumstances cause us to change our assumptions in making determinations as to whether ship improvements should be capitalized, the amount we expense each year as repair and maintenance costs could increase, partially offset by a decrease in depreciation expense. If we had reduced our estimated average service life of our ships by one year, depreciation expense for 2012 would have increased by $0.9 million. If our ships were estimated to have no residual value, depreciation expense for 2012 would have increased by $4.4 million.

Contingencies—Litigation

Recently Adopted and Future Application of Accounting Standards

Refer to section “Item 15—Exhibits, Financial Statements—Recent Accounting Pronouncements” of this Annual Report on Form 10-K.

JOBS Act

Item 7A. Quantitative and Qualitative Disclosures About Market Risk

We are exposed to market risks attributable to changes in interest rates, foreign currency exchange rates and fuel prices. We manage these risks through a combination of our normal operating and financing activities and through the use of derivative financial instruments pursuant to our hedging practices and policies. For a discussion of our hedging strategies on market risks see discussions below and Note 6,. "Derivative Instruments, Hedging Activities and Fair Value Measurements" in the accompanying notes to the consolidated financial statements.

Interest Rate Risk

Our exposure to market risk for changes in interest rates relates to our long-term debt obligations including future interest payments. We have used interest rate swap agreements to modify our exposure to interest rate fluctuations and to manage our interest expense. There were no outstanding interest rate swap agreements as of December 31, ~~2012~~2013. We estimate that a hypothetical one percentage point increase in LIBOR would increase our ~~2013~~2014 annual interest expense by approximately $0.2 million.

Foreign Currency Exchange Risk

Our exposure to foreign currency exchange rate risk relates to our ~~euro~~ Euro-denominated installment payments related to our newbuild ship contract, vessel ~~dry-dock~~drydock and other operational expenses. We have entered into foreign currency swaps to limit the exposure to movements in the foreign currency exchange rates. ~~There were no outstanding foreign currency swap agreements as of December 31, 2012.~~

43During August 2013, we entered into a foreign currency collar option with an aggregate notional amount of €274.4 million ($377.1 million as of December 31, 2013) to limit our exposure to foreign currency exchange rates for Euro-denominated payments related to the ship construction contract for the Seven Seas Explorer. The notional amount of the collar represents 80% of the construction contract of the vessel due at delivery. This foreign currency collar option was designated as a cash flow hedge at the inception of the instrument and will mature in June 2016. The estimated fair value of the foreign currency collar option at December 31, 2013 was approximately $3.0 million. We estimate that a hypothetical 1.0% increase in the Euro spot rate at December 31, 2013 would increase the fair market value of the option by approximately $2.2 million, assuming all other variables remain constant.

Fuel Price Risk

Our exposure to market risk for changes in fuel prices relates primarily to the consumption of fuel on our vessels. Fuel expense, as a percentage of our total revenues, was approximately 87.15% in ~~2012,~~2013 ~~8.4% in 2011~~ and 78.20% in ~~2010~~2012. We use fuel derivative swap agreements to mitigate the financial impact of fluctuations in fuel prices. At December 31, 2013, we had fuel swap agreements to pay fixed prices for fuel with an aggregate notional amount of approximately $19.7 million, maturing through 2015. These agreements hedge approximately 188,850 barrels, or 51%, of our estimated 2014 fuel consumption and 37,500 barrels, or 10%, of our estimated 2015 fuel consumption. The fuel swaps do not qualify for hedge accounting; therefore, the changes in fair value of these fuel derivatives are recorded in other income (expense) in the accompanying consolidated statements of income and comprehensive income.

As of December 31, 2012, we had fuel swap agreements to pay fixed prices for fuel with an aggregate notional amount of approximately $28.1 million, maturing through 2014. These agreements hedge approximately 56% and 29% of our estimated fuel consumption in 2013 and 2014, respectively. The estimated fair value of these contracts at December 31, ~~2012~~2013 was approximately $10.39 million. We estimate that a hypothetical 10% increase in our weighted-average fuel price on December 31, ~~2012~~2013 would increase our anticipated ~~2013~~2014 fuel cost by approximately $2.25 million, net of the impact of fuel swap agreements.

Item 8. Financial Statements and Supplementary Data

Our consolidated financial statements are filed under this item, beginning on page F-1 of this Annual Report on Form 10-K.

Item 9. Changes In and Disagreements With Accountants on Accounting and Financial Disclosure

None.

Item 9A. Controls and Procedures

Evaluation of Disclosure Controls and Procedures

Our management, with the participation of our Chief Executive Officer and Chief Financial Officer, evaluated the effectiveness of our disclosure controls and procedures as of December 31, ~~2012~~2013. Disclosure controls and procedures, as defined in Rules 13a-15(e) and 15d-15(e) of the Securities Exchange Act of 1934, as amended (the "Exchange Act"), are designed to ensure that information required to be disclosed by us in the reports that we file or submit under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in the SEC's rules and forms. Disclosure controls and procedures include, without limitation, controls and procedures designed to ensure that information required to be disclosed by us in the reports that we file or submit under the Exchange Act is accumulated and communicated to management, including our principal executive and principal financial officers, or persons performing similar functions, as appropriate to allow timely decisions regarding required disclosure. Our Chief Executive Officer and Chief Financial Officer have evaluated our disclosure controls and procedures and have concluded, as of December 31, ~~2012~~2013, that all were effective at the reasonable assurance level.

Management's Report on Internal Control over Financial Reporting

~~This~~Management ~~Annual~~is ~~Report~~responsible onfor ~~Form~~establishing 10and maintaining adequate internal controls over financial reporting (as defined in Rules13a-K15(f) ~~does~~and ~~not~~15d-15(f) ~~include~~of athe ~~report~~Exchange Act). Because of ~~management's~~its ~~assessment~~inherent ~~regarding~~limitation, internal ~~control~~controls over financial reporting may not prevent or andetect ~~attestation~~misstatements. ~~report~~Also, projections of ~~the~~any ~~company's~~evaluation ~~registered~~of ~~public~~effectiveness ~~accounting~~of ~~firm~~such ~~due~~controls to afuture ~~transition~~periods ~~period~~are ~~established~~subject byto ~~rules~~the risk that controls may become inadequate because of changes in conditions, or that the ~~Securities~~degree ~~and~~of ~~Exchange~~compliance ~~Commission~~with the policies or procedures may deteriorate.

Management has performed an assessment of the effectiveness of our internal controls over financial reporting as of December 31, 2013. In making this assessment, management elected to use the criteria set forth Internal Control - Integrated Framework (1992) created by the Committee of Sponsoring Organizations of the Treadway Commission ("COSO") as the chosen internal control framework. Based on our assessment using those criteria, management concluded that, as of December 31, 2013, our controls over financial reporting were effective at the reasonable assurance level.

This Annual Report on Form 10-K does not include an attestation report of our independent registered certified public accounting firm regarding our internal controls over financial reporting. Management's report was not subject to attestation by our independent registered public accounting firm pursuant to SEC rules that permit the company to provide only management's assessment in this Annual Report on Form 10-K.

Changes in Internal Control over Financial Reporting

There were no changes in our internal control over financial reporting identified in management’s evaluation pursuant to Rules 13a-15(d) or 15d-15(d) of the Exchange Act during the period covered by this Annual Report on Form 10-K that materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

Limitations on Effectiveness of Controls and Procedures

In designing and evaluating the disclosure controls and procedures, management recognizes that any controls and procedures, no matter how well designed and operated, can provide only reasonable assurance of achieving the desired control objectives. In addition, the design of disclosure controls and procedures must reflect the fact that there are resource constraints and that management is required to apply judgment in evaluating the benefits of possible controls and procedures relative to their costs.

Item 9B. Other Information

Disclosure pursuant to Section 219 of the Iran Threat Reduction and Syria Human Rights Act

On February 12, 2013, certain investment funds affiliated with Apollo Global Management, LLC beneficially owned approximately 19.6% of the ordinary shares of LyondellBasell Industries N.V. (“LyondellBasell”) and have certain director nomination rights. LyondellBasell may be deemed to be under common control with us, but this statement is not meant to be an admission that common control exists. As a result, it appears that we are required to provide disclosures as set forth herein pursuant to Section 219 of the new Iran Threat Reduction and Syria Human Rights Act of 2012 and Section 13(r) of the Securities Exchange Act of 1934, as amended. The Annual Report on Form 10-K for the year ended December 31, 2012 filed by LyondellBasell with the SEC on February 12, 2013 contained the disclosure set forth below (with all references contained therein to “the Company” being references to LyondellBasell and its consolidated subsidiaries).48

~~The~~Apollo ~~disclosure~~Global ~~below~~Management, ~~does~~LLC ~~not~~(“Apollo”) ~~relate~~has provided notice to ~~any~~us ~~activities~~that, ~~conducted~~as of October 24, 2013, certain investment funds managed by usaffiliates of Apollo beneficially owned approximately 22% of the limited liability company interests of CEVA Holdings, LLC (“CEVA”). Under the limited liability company agreement governing CEVA, certain investment funds managed by affiliates of Apollo hold a majority of the voting power of CEVA and ~~does~~have ~~not~~the ~~involve~~right to elect a majority of the board of CEVA. CEVA may be deemed to be under common control with us, orbut ~~our~~this ~~management~~statement is not meant to be an admission that common control exists. ~~The~~ ~~disclosure~~As ~~relates~~a ~~solely~~result, it appears that we are required to ~~activities~~provide ~~conducted~~disclosures byas ~~LyondellBasell~~set forth below pursuant to Section 219 of the Iran Threat Reduction and ~~its~~Syria ~~consolidated~~Human ~~subsidiaries~~Rights Act of 2012 (“ITRA”) and Section 13(r) of the Securities Exchange Act of 1934, as amended (the “Exchange Act”).

Apollo ~~“Disclosure~~has ~~pursuant~~informed us that CEVA has provided it with the information below relevant to Section ~~219~~13(r) of the ~~Iran~~Exchange ~~Threat~~Act. ~~Reduction~~The &disclosure ~~Syria~~below ~~Human~~does ~~Rights~~not ~~Act~~relate to any activities conducted by us and does not involve us or our management. The disclosure relates solely to activities conducted by CEVA and its consolidated subsidiaries. We have not independently verified or participated in the preparation of the disclosure below.

~~Certain~~“Through ~~non-U.S.~~an ~~subsidiaries~~internal review of ~~our~~its ~~predecessor,~~global ~~LyondellBasell AF~~operations, ~~licensed~~CEVA ~~processes~~has toidentified ~~construct~~the ~~and~~following ~~operate~~transactions ~~manufacturing plants~~ in ~~Iran~~an ~~that~~Initial ~~produce~~Notice ~~polyolefin~~of ~~plastic~~Voluntary ~~material,~~Self-Disclosure ~~which~~that isCEVA ~~used~~filed inwith the ~~packaging of household and consumer goods~~U.S. ~~The~~Treasury ~~subsidiaries~~Department ~~also~~Office ~~provided~~of ~~engineering~~Foreign ~~support~~Assets ~~and~~Control ~~supplied~~(“OFAC”) ~~catalyst~~on ~~products~~October to28, be2013. ~~used~~CEVA’s inreview ~~these~~is ~~manufacturing operations~~ongoing. InCEVA ~~2009,~~will ~~the~~file ~~Company~~a ~~made~~further ~~the~~report ~~decision~~with toOFAC ~~suspend~~after ~~the~~completing ~~pursuit~~its ~~of any new business dealings in Iran~~review.

AsThe ~~previously~~internal ~~disclosed~~review byindicates ~~the Company~~that, in ~~2010~~February 2013, ~~our~~CEVA ~~management~~Freight ~~made~~Holdings ~~the~~(Malaysia) ~~further~~SDN ~~decision~~BHD to(“CEVA ~~terminate~~Malaysia”) ~~all~~provided ~~business~~customs bybrokerage ~~the~~for ~~Company~~export and ~~its~~local ~~direct~~haulage ~~and~~services ~~indirect~~for ~~subsidiaries~~a ~~with~~shipment ~~the~~of ~~government,~~polyethylene ~~entities~~resin ~~and~~to ~~individuals in~~ Iran. ~~The~~shipped ~~termination~~on ~~was~~a ~~made~~vessel inowned ~~accordance with all applicable laws~~ and/or ~~with~~operated ~~the~~by ~~knowledge~~HDS ofLines, ~~U.S.~~also ~~Government~~an ~~authorities~~SDN. AsThe ~~part~~revenues ofand ~~the~~net ~~termination,~~profits wefor ~~entered~~these ~~into~~services ~~negotiations~~were ~~with~~approximately ~~Iranian~~$779.54 ~~counterparties~~USD inand ~~order~~$311.13 toUSD, ~~exit our contractual obligations~~respectively. In AsSeptember ~~described below~~2013, ~~two~~CEVA ~~transactions~~Malaysia ~~occurred~~provided ~~under~~customs ~~settlement~~brokerage ~~agreements~~services infor ~~early 2012, although~~ the ~~agreements~~import tointo ~~cease~~Malaysia ~~our~~of ~~activities~~fruit ~~with~~juice ~~these~~from ~~counterparties~~Alifard ~~were~~Co. ~~entered into~~ in ~~2011.~~Iran Invia ~~January~~HDS ~~2012,~~Lines. ~~one~~The ofrevenues ~~our~~and ~~non-U.S.~~net ~~subsidiaries~~profits ~~received~~for athese ~~final~~services ~~payment~~were of approximately €3$227.541 ~~million~~USD ~~for~~and a$89.29 ~~shipment~~USD, ~~of catalyst from an entity that is 50% owned by the National Petrochemical Company of Iran~~respectively.

~~Our~~These ~~shipment~~transactions ofviolate the ~~catalyst~~terms ~~was~~of ininternal ~~February~~CEVA ~~2012~~compliance aspolicies, ~~part~~which ofprohibit ~~the~~transactions ~~agreement~~involving ~~related~~Iran. toUpon ~~our~~discovering ~~termination~~these ~~and~~transactions, ~~cessation~~CEVA ofpromptly ~~all~~launched ~~business~~an ~~under~~internal ~~agreements~~investigation, ~~with~~and ~~the~~is ~~counterparty.~~taking Inaction ~~2012,~~to ~~the~~block ~~gross~~and ~~revenue~~prevent ~~from~~such ~~this~~transactions ~~limited~~in ~~activity~~the ~~was~~future. ~~approximately,~~CEVA ~~€4.2~~intends ~~million~~to ~~and~~cooperate ~~profit~~with ~~attributable~~OFAC toin itits ~~was~~review ~~approximately,~~of ~~€2.4~~this ~~million~~matter. ”

In January and February of 2012, one of the Company's non-U.S. subsidiaries provided certain engineering documents relating to a polyolefin plastic process to a licensee comprising three Iranian companies, one of which is 20% owned by the National Oil Company of Iran. The provision of documents was the Company's final act with respect to the termination and cessation of all business under agreements with the counterparties. No gross revenue or profit was attributable to this activity in 2012. The transactions disclosed in this report do not constitute violations of applicable anti-money laundering laws or sanctions laws administered by the U.S. Department of the Treasury, Office of Foreign Assets Control (OFAC), and are not the subject of any enforcement actions under the Iran sanction laws. 49

We have not conducted, and do not intend to conduct, any further business activities in Iran or with Iranian counterparties.”

PART III

Item 10. Directors, Executive Officers and Corporate Governance

Set forth below are the names, ages and current positions of our current executive officers and administrators as of March 812, ~~2013~~2014. Our seven administrators act similarly to a board of directors of a U.S. corporation. For purposes of this Annual Report on Form 10-K, we refer to them collectively as the Board of Directors.

Name	Age	Position
Frank J. Del Rio	5859	Administrator; Chairman and Chief Executive Officer of PCI and PCH
Adam M. Aron	5859	Administrator
Kevin E. Crowe	3031	Administrator
Russell W. Galbut	6061	Administrator
Daniel M. Holtz	5354	Administrator
Steve Martinez	44	Administrator
Eric L. Press	4748	Administrator
Jason M. Montague	39	Chief Financial Officer of PCI and PCH
Executive Officers and Senior Management
Kunal S. Kamlani	40	President and Chief Operating Officer of PCH, President of Regent Seven Seas
Robert J. Binder	49	Vice Chairman and President of PCI
T. Robin Lindsay	55	Executive Vice President of Vessel Operations for PCI and PCH
Jason M. Montague	40	Executive Vice President and Chief Financial Officer of PCI and PCH
Kunal S. Kamlani	41	President of PCH and Chief Operating Officer of PCI and PCH
T. Robin Lindsay	56	Executive Vice President of Vessel Operations of PCI and PCH

Frank J. Del Rio is the founder of Oceania Cruises, isour ~~Chairman~~sister ~~and~~company, ~~Chief Executive Officer of PCI~~ and ~~PCH,~~has ~~our~~served ~~parent~~as ~~companies~~Chairman ~~and~~of the ~~parent~~Board ~~companies~~ of ~~Oceania~~Directors ~~Cruises,~~and ~~has~~Chief ~~been~~Executive aOfficer ~~member~~ of ~~the boards of directors of~~ PCI and PCH ~~and~~or ~~Oceania~~its ~~Cruises~~predecessor since ~~April~~October ~~2007 and became our Administrator in July 2009~~2002. Based in Miami, Florida, Mr. Del Rio is responsible for the financial and strategic development of ~~Oceania Cruises and us~~Prestige. Between 2003 and 2007, Mr. Del Rio was instrumental in the development and growth of Oceania ~~Cruises~~. Prior to founding Oceania ~~Cruises~~, Mr. Del Rio played a vital role in the development of Renaissance Cruises, serving as Co-Chief Executive Officer, Executive Vice President and CFO from 1993 to April 2001. Mr. Del Rio holds a B.S. in Accounting from the University of Florida and is a Certified Public Accountant (inactive license). Mr. Del Rio brings a wealth of managerial and operational expertise to our Board as a result of his significant experience as CEO of our company and his long track record of success in the cruise industry.

Adam M. Aron has been a member of the boards of directors of PCI and PCH, our parent companies, and Oceania Cruises, our sister company, since April 2007 and became our Administrator in July 2009. He ishas been Chairman of the board of directors and CEO of World Leisure Partners, Inc., a personal consultancy for matters related to travel and tourism and high-end real estate development, which acts in partnership with Apollo. Mr. Aron has previously served as Chairman of the board of directors and Chief Executive Officer of Vail Resorts, Inc. from 1996 to 2006; President and CEO of NCL Corporation Ltd., from 1993 to 1996; Senior Vice President of Marketing for United Airlines, from 1990 to 1993; and Senior Vice President-Marketing for Hyatt Hotels Corporation, ~~and~~from ~~Chairman~~1987 ofto ~~the Board and Chief Executive Officer of Vail Resorts, Inc~~1990. Mr. Aron currently serves on the boards of directors of Cap Jaluca Properties Ltd., E-miles, Inc., Norwegian Cruise Line Holdings Ltd., and Starwood Hotels and Resorts Worldwide. Mr. Aron also serves on the boards of directors of a number of non-profit organizations. He is a member of the Council on Foreign Relations, Business Executives for National Security, and is a former member of the Young Presidents'’ Organization. In addition, Mr. Aron formerly served as First Vice Chairman of the U.S. Travel Association and as Vice Chairman of the National Finance Committee of the Democratic Senatorial Campaign Committee for the 2008 election cycle. Mr. Aron was previously selected by the U.S. Secretary of Defense to participate in the Joint Civilian Orientation Conference in 2004, was appointed by the U.S. Secretary of Agriculture to serve on the board of directors of the National Forest Foundation from 2000 through 2006 and was a delegate to President Clinton'’s White House Conference on Travel and Tourism. Mr. Aron received a ~~Master~~M.B.A. ~~of Business Administration degree~~ with distinction from the Harvard Business School and a ~~Bachelor~~B.S. ofcum ~~Science~~laude ~~Cum Laude~~ from Harvard College. Mr. Aron provides our Board with substantial knowledge of and expertise in the cruise, travel and hospitality industries. In addition, his directorships at other public companies provide him with broad experience on governance issues facing public companies.

Kevin E. Crowe has been a member of the boards of directors of PCI and PCH, our parent companies, and Oceania Cruises, our sister company, since December 2009 and became our Administrator in December 2009. Mr. Crowe joined Apollo in 2006 and is a Principal. Mr. Crowe currently serves on the board of directors of Nine Entertainment Co Holdings, Ltd. and Norwegian Cruise Line Holdings Ltd. He previously served as a director for Quality Distribution, Inc. Prior to joining Apollo, Mr. Crowe was a member of the Financial Sponsors Group at Deutsche Bank. Mr. Crowe ~~currently serves on the board of directors of Norwegian Cruise Holdings Ltd. and Nine Entertainment Co. Mr. Crowe~~ graduated from Princeton University ~~with an AB in Economics and a certificate in Finance.~~

4650

~~Russell~~with Wan B.A. ~~Galbut~~in ~~has~~Economics ~~been~~and a ~~member~~certificate ~~of the boards of directors of PCI and PCH, our parent companies, and Oceania Cruises, our sister company, since April 2007 and became our Administrator~~ in ~~July 2009~~Finance. Mr. ~~Galbut~~Crowe ~~currently~~brings ~~serves~~to onour ~~the~~Board ~~board~~experience ofin ~~directors of Gibraltar Private Bank and Trust, is~~ the ~~Chairman~~issues offacing ~~the~~public ~~Board~~companies ~~of Hebrew Homes Health Network~~ and ismultinational abusinesses, ~~member of the American Arbitration Association. Mr. Galbut received a Bachelor of Science in Hotel Administration from Cornell University~~ and ahis ~~Juris~~directorships ~~Doctorate~~at ~~from~~other ~~the~~public ~~University~~companies ofprovide ~~Miami.~~him ~~Mr.~~with ~~Galbut~~broad isexperience aon ~~Certified~~governance ~~Public~~issues ~~Accountant~~facing ~~(inactive~~public ~~license)~~companies.

~~Daniel~~Russell MW. ~~Holtz~~Galbut has been a member of the boards of directors of PCI and PCH, our parent companies, and Oceania Cruises, our sister company, since April 2007 and became our Administrator in ~~July~~September ~~2009~~2005. ~~Since 1998,~~ Mr. ~~Holtz~~Galbut ~~has~~currently ~~served~~serves as the Managing Principal of ~~Walden~~Crescent ~~Capital~~Heights, ~~Management~~one of America’s largest and most respected residential developers of quality condominiums. Having been active in the urban mixed-use real estate sector for over 30 years, Mr. Galbut and Crescent Heights are a ~~Miami~~“best in class” developer with a successful track record of new constructions and renovations. Crescent Heights has been active in over 15 markets from coast-~~based~~to-coast ~~financial~~and ~~services~~has ~~company~~developed over 35,000 residential units, including pioneering the condo hotel concept. After graduating from Cornell University with a degree in Hotel Management, Mr. ~~Holtz~~Galbut ~~currently~~became ~~serves~~the onyoungest ~~the~~consultant ~~boards~~with ofthe ~~directors~~then-accounting firm of ~~Verifier~~Laventhal ~~Capital~~Krekstein, LHorwath and Horwath.L Mr.C. ~~and~~Galbut ~~IWM~~was ~~Holdings~~a Florida licensed CPA from 1975 to 2004. In 1980, LMr.L Galbut received his J.CD. Hedegree isfrom ~~also~~the ~~involved~~University inof ~~numerous~~Miami ~~non-profit~~School of Law. Besides serving on the boards of directors of Prestige and ~~civic~~Crescent ~~organizations~~Heights, ~~including~~Mr. ~~serving~~Galbut asalso ~~member~~serves ofon the ~~Board~~board of ~~Trustees~~directors of ~~Holtz~~Gibraltar ~~Center~~Private ~~for~~Bank ~~Maternal~~ and ~~Child~~Trust. ~~Care~~He atalso ~~Jackson~~sits ~~Memorial~~on ~~Hospital~~several inother ~~Miami,~~charitable ~~Florida~~boards, including the ~~Museum~~National Board of ~~Contemporary~~the ~~Art~~Simon inWiesenthal ~~North~~Institute ~~Miami,~~and ~~Florida~~Colel ~~and~~Chabad, the ~~Aspen~~largest ~~Art~~free ~~Museum~~food bank in ~~Aspen, Colorado~~Israel. Mr. ~~Holtz~~Galbut ~~holds~~provides anour ~~undergraduate~~Board ~~degree~~with ~~from~~significant ~~the~~expertise ~~University~~in ofaccounting, ~~Florida~~legal, corporate finance and transactional matters.

~~Steve~~Daniel ~~Martinez~~M. Holtz has been a member of the boards of directors of PCI and PCH, our parent companies, and Oceania Cruises, our sister company, since April 2007 and became our Administrator ~~since~~in ~~January~~September ~~2008~~2005. Since 1998, Mr. ~~Martinez~~Holtz ~~joined~~has ~~Apollo~~served inas ~~2000~~Managing ~~and~~Principal ~~is a Senior Partner and Head~~ of ~~the~~Walden ~~Asia~~Capital ~~Pacific~~Management, ~~region. He has led investments at Apollo in~~ a ~~variety~~Miami-based offinancial ~~sectors~~services ~~including~~company. ~~leisure,~~Mr. ~~media,~~Holtz ~~shipping and industrials and~~ currently serves on the boards of directors of ~~Norwegian~~Verifier ~~Cruise~~Capital, ~~Line~~L.L.C. ~~Holdings,~~and ~~Veritable~~IWM ~~Maritime~~Holdings, ~~Nine~~L.L.C. ~~Entertainment,~~He ~~and~~is ~~Rexnord~~also ~~Corporation.~~involved Hein ~~has~~numerous ~~previously~~non-profit ~~served~~and oncivic ~~the~~organizations, ~~boards~~including ofserving ~~directors~~as member of ~~Allied~~the ~~Waste~~Board ~~Industries,~~of ~~Goodman~~Trustees ~~Global,~~of ~~Hughes~~Holtz ~~Telematics,~~Center ~~Jacuzzi~~for ~~Brands~~Maternal and ~~Hayes-Lemmerz~~Child ~~International.~~Care ~~Prior~~at toJackson ~~joining~~Memorial ~~Apollo,~~Hospital ~~Mr.~~in ~~Martinez~~Miami, ~~was~~Florida, athe ~~member~~Museum of ~~the~~Contemporary ~~mergers~~Art ~~and~~in ~~acquisitions~~North ~~department~~Miami, ofFlorida ~~Goldman~~and ~~Sachs~~the &Aspen ~~Co.~~Art ~~with~~Museum ~~responsibilities~~ in ~~merger~~Aspen, ~~structure~~Colorado. ~~negotiation~~Mr. ~~and~~Holtz ~~financing.~~holds ~~Before~~an ~~that~~undergraduate hedegree ~~worked~~from atthe ~~Bain~~University &of ~~Company~~Florida. ~~Tokyo~~With ~~advising~~his ~~U.S.~~experience ~~corporations~~in onthe ~~corporate~~financial ~~strategies~~services inindustry ~~Japan.~~as ~~Mr.~~well ~~Martinez~~as ~~received~~his adirectorships ~~Master's~~on ofother ~~Business~~companies, ~~Administration~~Mr. ~~from~~Holtz ~~the~~brings ~~Harvard~~to ~~Business~~our ~~School~~Board ~~and~~extensive aexperience ~~Bachelor~~managing ofsophisticated ~~Arts~~businesses, ~~and~~insight ~~Bachelor~~into oforganizational ~~Science~~and ~~from~~corporate ~~the~~governance ~~University~~issues, ofas ~~Pennsylvania~~well ~~and~~as ~~the~~financial ~~Wharton~~acumen ~~School~~critical ofto ~~Business,~~a ~~respectively~~public company.

~~Eric~~Steve L.Martinez ~~Press~~ has been a member of the boards of directors of PCI and PCH, our parent companies, and Oceania Cruises, our sister company, since April 2007 and ~~became~~ our Administrator insince ~~July~~January ~~2009~~2008. He isMr. aMartinez ~~partner~~joined at Apollo, ~~where~~in he2000 ~~has~~and ~~worked~~is ~~since~~a ~~1998. From~~Senior ~~1992~~Partner toand ~~1998,~~Head ~~Mr.~~of ~~Press~~the ~~was~~Asia ~~associated~~Pacific ~~with~~region. ~~the~~He ~~law~~has ~~firm~~led ofinvestments ~~Wachtell,~~at ~~Lipton,~~Apollo ~~Rosen~~in &a ~~Katz,~~variety ~~specializing~~of insectors ~~mergers~~including leisure, ~~acquisitions~~media, ~~restructurings~~shipping and ~~related~~industrials, ~~financing~~and ~~transactions.~~currently ~~From~~serves ~~1987~~on tothe ~~1989,~~boards ~~Mr.~~of ~~Press~~directors ~~was~~of aNorwegian ~~consultant~~Cruise ~~with~~Line ~~The~~Holdings ~~Boston~~Ltd., ~~Consulting~~Veritable ~~Group~~Maritime, aNine ~~management~~Entertainment ~~consulting~~Co ~~firm~~Holdings, ~~focused~~Ltd. onand ~~corporate~~Rexnord ~~strategy~~Corporation. ~~Mr.~~ ~~Press~~He ~~also~~has ~~serves~~previously served on the boards of directors of ~~Apollo~~Allied ~~Commercial~~Waste ~~Real~~Industries, ~~Estate~~Inc., ~~Finance~~Goodman Global, ~~(July~~Inc., ~~2009~~Hughes -Telematics ~~present)~~Inc., ~~Athene~~Jacuzzi ReBrands ~~(July~~Corp. ~~2009~~and toHayes-Lemmerz ~~present)~~International, ~~Affinion~~Inc. ~~Group~~Prior ~~(October 2006~~ to ~~present)~~joining Apollo, ~~Caesars~~Mr. ~~Entertainment~~Martinez ~~(January~~was ~~2008~~a tomember ~~present),~~of ~~Metals~~the ~~USA~~mergers ~~(November~~and ~~2005~~acquisitions todepartment ~~present),~~of ~~Noranda~~Goldman ~~Aluminum~~Sachs ~~(March~~& ~~2007~~Co. towith ~~present)~~responsibilities ~~and~~in ~~Verso~~merger ~~Paper~~structure ~~Corp~~negotiation ~~(December~~and ~~2008~~financing. toBefore ~~present). Previously~~that, he ~~served~~worked onat ~~the~~Bain ~~boards~~& ofCompany ~~directors~~Tokyo, ofadvising ~~Innkeepers~~U.S. ~~USA~~corporations ~~(June~~on ~~2007~~corporate tostrategies ~~April~~in ~~2010),~~Japan. ~~Quality~~Mr. ~~Distribution,~~Martinez ~~Inc~~received a M.B.A. ~~(May~~from ~~2004~~the toHarvard ~~May~~Business ~~2008),~~School ~~Wyndham~~and ~~International~~a ~~(May~~B.A. ~~2005~~and toB.S. ~~August~~from ~~2005)~~the ~~and~~University ~~AEP~~of ~~Industries~~Pennsylvania ~~(June~~and ~~2004~~the toWharton ~~February~~School ~~2005)~~of Business, respectively. Mr. ~~Press~~Martinez ~~graduated~~brings ~~magna~~to ~~cum~~our ~~laude~~Board ~~from~~extensive ~~Harvard~~experience ~~College~~in ~~with~~the anissues ~~A.B.~~facing public companies and multinational business, including expertise in ~~Economics~~management, accounting, corporate finance and ~~Yale~~transactional ~~Law~~matters. ~~School~~In addition, ~~where~~his hedirectorships ~~was~~at aother ~~Senior~~public ~~Editor~~companies ofprovide ~~the~~him ~~Yale~~with ~~Law~~broad ~~Review~~experience on governance issues facing public companies.

~~Jason~~Eric ML. ~~Montague~~Press ishas ~~the~~been ~~Executive~~a ~~Vice~~member ~~President~~of ~~and~~the ~~Chief~~boards ~~Financial~~of ~~Officer~~directors of PCI and PCH., our parent companies, and Oceania Cruises, our sister company, since April 2007 and became our Administrator in July 2009. He is ~~responsible~~a ~~for~~partner ~~all~~at ~~day-to-day~~Apollo, ~~financial~~where ~~operations~~he ashas ~~well~~worked assince ~~the~~1998. ~~mid-~~From ~~and~~1992 ~~long-term~~to ~~strategic~~1998, ~~planning~~Mr. ~~and~~Press ~~financial~~was ~~development~~associated with the law firm of ~~PCH~~Wachtell, ~~and~~Lipton, ~~its~~Rosen ~~two~~& ~~brands~~Katz LLP, ~~Oceania~~specializing ~~Cruises~~in mergers, acquisitions, restructurings and related ~~Regent~~financing ~~Seven~~transactions. ~~Seas~~From 1987 to 1989, Mr. ~~Part~~Press ofwas ~~the~~a ~~Oceania~~consultant ~~Cruises'~~with ~~start-up~~The ~~team~~Boston Consulting Group, a management consulting firm focused on corporate strategy. Mr. ~~Montague~~Press ~~has~~also ~~seen~~serves on the ~~company~~boards ~~through~~of ~~the~~directors ~~purchase~~ of ~~its~~Apollo ~~three~~Commercial ~~R-Class~~Real ~~vessels~~Estate Finance, ~~the~~Athene ~~equity~~Group ~~investment~~Ltd., byAffinion ~~Apollo~~Group, ~~the~~Inc., ~~financing~~Caesars ~~for~~Entertainment ~~the~~Corporation, ~~Oceania-Class~~Noranda ~~newbuilds~~Aluminum, Inc. and Verso Paper Corp. Previously, he served on the ~~acquisition~~boards ~~and~~of ~~integration~~directors of ~~Regent~~Innkeepers ~~Seven~~USA ~~Seas.~~Trust, ~~Prior~~Quality toDistribution, ~~joining~~Inc., ~~Oceania~~Wyndham ~~Cruises~~International, heAEP ~~operated~~Industries aInc. ~~successful~~and ~~consulting~~Metals ~~practice~~USA ~~focused~~Holdings onCorp. ~~strategic~~Mr. ~~planning~~Press graduated magna cum laude from Harvard College with an A.B. in Economics, and ~~development~~from Yale Law School, where he was a Senior Editor of ~~small~~the toYale ~~medium-sized~~Law ~~companies~~Review. HeMr. ~~previously~~Press ~~held~~brings to our Board extensive experience in the ~~position~~issues offacing ~~Vice~~public ~~President~~companies ~~Finance~~and ~~for~~multinational ~~Alton~~business, ~~Entertainment~~including ~~Corporation~~expertise in management, aaccounting, ~~brand~~legal, ~~equity~~corporate ~~marketer~~finance ~~who~~and ~~was~~transactional ~~majority~~matters. ~~owned~~In byaddition, ~~the~~his ~~Interpublic~~directorships ~~Group~~at ofother ~~Companies.~~public ~~Mr.~~companies ~~Montague~~provide ~~holds~~him awith ~~BSBA~~broad inexperience ~~Accounting~~on ~~from~~governance ~~the~~issues ~~University~~facing ofpublic ~~Miami~~companies.

~~Kunal~~Robert SJ. ~~Kamlani~~Binder ishas ~~the~~served ~~President~~as ~~and Chief Operating Officer of PCH, responsible for~~ the ~~overall~~Vice ~~strategic~~Chairman ~~marketing,~~since ~~sales,~~May ~~e-commerce,~~2011 ~~public relations, promotions~~ and ~~procurement for both Oceania Cruises and Regent Seven Seas. Additionally, he serves as~~ President of ~~Oceania~~PCI ~~Cruises~~since ~~and effective~~ January ~~31, 2013 President of Regent Seven Seas~~2008. ~~Mr.~~He ~~Kamlani~~oversees ~~rejoined~~the ~~PCH~~global inexpansion ~~September 2011 from Bank~~ of ~~America/Merrill~~our ~~Lynch,~~brands ~~where~~and heis ~~served~~responsible asfor ~~head of the multi-billion dollar Global Investment Solutions division with approximately 1~~sales,~~000~~ ~~employees~~marketing ~~worldwide. Prior to that, Mr. Kamlani was the Chief Financial Officer for PCH. His past experiences also include serving as the Chief Operating Officer of Smith Barney~~ and ~~Vice~~branding ~~President~~efforts ~~of corporate development for Starwood Hotels & Resorts~~internationally. Mr. ~~Kamlani earned his MBA from Columbia University and a bachelor's degree in Economics and Political Science from Colgate University.~~

4751

T.Binder ~~Robin~~has ~~Lindsay~~played isa key role in the ~~Executive~~development ~~Vice~~and ~~President~~design of ~~Vessel~~the ~~Operations~~new ~~for~~Oceania ~~PCI~~ships, ~~and~~the ~~PCH,~~new restaurant concepts and ~~oversees~~the ~~all~~introduction ~~marine,~~of ~~technical~~the ~~and~~Bon ~~hotel~~Apetit ~~operations.~~Culinary MrCenter. ~~Lindsay~~He ~~was~~is ~~instrumental~~co-founder inof ~~the~~Oceania ~~extensive~~and ~~refurbishment~~previously ~~and~~served ~~launch~~as President of Oceania. ~~Cruises'~~Before ~~Regatta~~launching Oceania, ~~Insignia~~Mr. ~~and~~Binder ~~Nautica~~was ~~and~~ the ~~development~~President of Meadowoods Consulting, which provided consulting services to the ~~new~~financial ~~1,250-guest~~and ~~Oceania-Class~~travel ~~newbuilds.~~services Mrindustries. ~~Lindsay~~From ~~possesses~~1992 ato ~~substantial~~2001 ~~amount~~he ofheld ~~experience~~several executive posts in the ~~luxury~~ cruise ~~arena~~industry. ~~and~~Mr. Binder has ~~overseen~~also ~~the~~held ~~design~~senior ~~and~~management ~~construction~~positions ofat ~~many~~JP ofMorgan ~~the~~Chase, ~~industry's~~where ~~most~~he ~~acclaimed~~was ~~luxury~~a ~~cruise~~Strategic ~~ships.~~Planning ~~Prior~~Officer, toand ~~joining~~at ~~Oceania~~Renaissance Cruises ~~in 2003~~, ~~Mr.~~where ~~Lindsay~~he was ~~the Senior~~ Vice President of ~~Vessel~~Sales. ~~Operations~~Mr. atBinder ~~Silversea~~earned ~~Cruises~~master’s degrees in both Finance and, ~~prior~~Marketing tofrom ~~that,~~Cornell ~~Vice~~University ~~President~~and ofdid ~~Operations~~his atundergraduate ~~Radisson~~studies ~~Seven~~at ~~Seas~~Purdue ~~Cruises~~University.

Jason M. Montague is the Executive Vice President and Chief Financial Officer of PCI and PCH, a position he has held since 2010. He is responsible for all day-to-day financial operations as well as the mid- and long-term strategic planning and financial development of Prestige and its two brands, Oceania and Regent. Part of the Oceania’s start-up team, Mr. Montague has seen the company through the purchase of its three R-Class vessels, the equity investment by Apollo, the financing for the Oceania-Class newbuilds and the acquisition and integration of Regent. Prior to joining Oceania, he operated a successful consulting practice focused on strategic planning and development of small to medium-sized companies. Before that, he held the position of Vice President Finance for Alton Entertainment Corporation, a brand equity marketer that was majority owned by the Interpublic Group of Companies. Mr. Montague holds a bachelor’s degree in Accounting from the University of Miami.

Kunal S. Kamlani is the President of PCH and Chief Operating Officer of PCI and PCH and has served as the President of Oceania since September 2011 and Regent since February 2013. Mr. Kamlani is responsible for revenue management, strategic marketing, sales, e-commerce, public relations and procurement for both Oceania and Regent. Mr. Kamlani rejoined us in September 2011 from Bank of America/Merrill Lynch, where he served as head of the multi-billion dollar Global Investment Solutions division with approximately 1,000 employees worldwide. Prior to that, Mr. Kamlani was Chief Financial Officer of PCH from August 2009 through March 2010. His past experiences also include serving as the Chief Operating Officer of Smith Barney and Vice President of corporate development for Starwood Hotels & Resorts. Mr. Kamlani earned his M.B.A. from Columbia University and a bachelor’s degree in Economics and Political Science from Colgate University.

T. Robin Lindsay is the Executive Vice President of Vessel Operations for PCI and PCH, and oversees all marine, technical and hotel operations. . Mr. Lindsay was instrumental in the extensive refurbishment and launch of Oceania’s Regatta, Insignia and Nautica and the development of the new Marina and Riviera. Mr. Lindsay possesses a substantial amount of experience in the luxury cruise industry and has overseen the design and construction of many of the industry’s most acclaimed luxury cruise ships. Prior to joining Oceania in 2003, Mr. Lindsay was the Senior Vice President of Vessel Operations at Silversea Cruises and, prior to that, Vice President of Operations at Radisson Seven Seas Cruises. Mr. Lindsay earned his B.S. degree from Louisiana Tech University.

Audit Committee

Our audit committee has a charter and consists of Kevin E. Crowe, Russell W. Galbut, and Daniel M. Holtz. Our Board of Directors has determined that Russell W. Galbut qualifies as an audit committee financial expert as defined in Item 407(d)(5) of Regulation S-K.

Compensation Committee Interlocks and Insider Participation

Our compensation committee consists of Adam M. Aron, Daniel M. Holtz, and Steve Martinez. None of our executive officers serves as a member of a board of directors or compensation committee (or other committee performing equivalent functions) of any entity that has one or more executive officers serving on our Board of Directors or compensation committee. No interlocking relationship exists between any member of our Board of Directors or any member of the compensation committee (or other committee performing equivalent functions) of any other company.

Code of ~~Ethical~~ Business Conduct and Ethics

Our Board of Directors has adopted a Code of ~~Ethical~~ Business Conduct and Ethics that is applicable to all officers, directors and employees. Upon request and free of charge, any person may obtain a copy of our Code of ~~Ethical~~ Business Conduct and Ethics. Written requests should be addressed to Regent Seven Seas c/o Jason Worth, Senior Director ~~Treasury~~of ~~and Investor Relations~~Finance, 8300 NW 33rd Street, Suite 100, Miami, FL 33122.

4852

Item 11. Executive Compensation

This section identifies the material elements of compensation awarded to, earned by or paid to our executive officers identified in the Summary Compensation Table, which we refer to in this section as our “named executive officers” or “NEOs.” This section also provides a discussion of the process and rationale for the compensation decisions of the Board of Directors and its Compensation Committee and describes the role of various parties in determining our executive compensation programs. Unless otherwise specified, references throughout this “Executive Compensation” section to the Board of Directors or the Compensation Committee are to the board or compensation committee of Prestige Cruise Holdings, Inc. (“PCH”), our parent company.

The named executive officers for ~~2012~~2013 and ~~2011 and~~ their principal position as of December 31, ~~2012~~2013 are:

Frank J. Del Rio	Chief Executive Officer of PCH and Chairman of the Board
Kunal S. Kamlani	President and Chief Operating Officer of PCH and President of Oceania Cruises. Effective January 31, 2013, President of Regent Seven Seas.
Mark S. Conroy	President of Regent Seven Seas Cruises



Named Executive Officer		Position
Frank J. Del Rio		Chairman of the Board and Chief Executive Officer of PCI and PCH
Robert J. Binder		Vice Chairman and President of PCI
Jason M. Montague		Executive Vice President and Chief Financial Officer of PCI and PCH
Kunal S. Kamlani		President of PCH and Chief Operating Officer of PCI and PCH
T. Robin Lindsay		Executive Vice President of Vessel Operations of PCI and PCH
Mark S. Conroy		Former President of Regent Seven Seas Cruises

~~Summary~~Executive Compensation ~~Table~~Program ~~for~~Objectives ~~Fiscal 2012~~ and ~~2011~~Philosophy

The ~~following~~Company’s ~~table provides summary information concerning compensation paid or accrued during the fiscal year ended December 31, 2012 to our named~~ executive ~~officers. The table below presents total~~ compensation atarrangements ~~the~~are ~~parent~~guided ~~company~~by ~~level. The percentage of NEO compensation expense allocated to~~ the ~~Company~~following ~~is 51% in 2012 and 53% in 2011 excluding Mark Conroy, whose allocation is 100%. Our allocation of compensation expense for NEO's in 2012 and 2011 is $4.1 million and $2.4 million, respectively.~~ principles:

Name and PrincipalPosition	Year	Salary		Bonus		OptionAwards (1)		Non-equityIncentive PlanCompensation		All Other Compensation (2)		Total
Frank J. Del RioChief Executive Officer of PCH and Chairman of the Board	2012	$	1,452,000	$	—	$	42,199	$	1,452,000	$	60,149	$	3,006,348
	2011	$	1,320,000	$	—	$	7,049	$	699,347	$	92,726	$	2,119,122
Kunal S. Kamlani (3)President and Chief Operating Officer of PCH	2012	$	750,000	$	750,000	$	1,374,198	$	—	$	17,246	$	2,891,444
	2011	$	256,849	$	500,000	$	—	$	—	$	22,547	$	779,396
Mark S. ConroyPresident of Regent Seven Seas Cruises	2012	$	550,000	$	—	$	28,588	$	467,500	$	13,200	$	1,059,288
	2011	$	535,000	$	—	$	40,461	$	318,028	$	13,318	$	906,807


•	We believe that a capable, experienced and highly motivated executive management team is critical to our success and to the creation of long-term shareholder value.

~~(1)~~• ~~Represents~~We ~~the~~believe ~~aggregate~~that ~~grant~~the ~~date~~most ~~fair~~effective ~~value of options granted to such named~~ executive ~~officers~~compensation inprogram ~~2012~~is ~~and~~one ~~2011,~~that ~~computed~~focuses in accordance with FASB ASC Topic 718, disregarding any estimates of forfeitures related to service-based vesting conditions. See Note 7 to the Company's consolidated financial statements set forth in this Annual Report on ~~Form~~pay ~~10-K~~ for ~~the~~performance ~~assumptions~~and ~~made~~(i) inrewards ~~determining those values. The value shown in Fiscal 2012 for Mr. Del Rio represents~~ the ~~incremental~~achievement ~~fair value~~ of ~~his~~annual, ~~previously~~long-term ~~granted~~and ~~options~~strategic ~~attributable~~goals toand ~~the modification that occurred during 2012~~ (~~see the section titled "Long Term Equity Incentive Compensation" below for additional detail~~ii). ~~Mr.~~aligns ~~Conroy's option awards were forfeited in November 2012 (see~~ the ~~section~~interests ~~titled~~of ~~"Employment~~our ~~Agreements"~~executives ~~below~~with ~~for~~those ~~additional~~of ~~detail)~~our shareholders.

~~(2)~~The ~~Included within Mr. Del Rio'~~Company’s ~~'All~~2013 ~~Other~~executive ~~Compensation'~~compensation isprogram ~~$32,000~~was ~~personal~~designed ~~allowance,~~according ~~$27,600~~to ~~car~~the ~~allowance,~~above ~~personal~~principles ~~tax service~~ and ~~cruise~~had ~~benefits.~~the ~~Included~~primary ~~within~~aim ~~Mr.~~of ~~Kamlani's~~(1) ~~'All~~attracting ~~Other~~and ~~Compensation'~~retaining isexecutives ~~$13,200~~with ~~car~~the ~~allowance~~requisite skills and ~~cruise~~experience ~~benefits.~~to ~~Mr.~~help ~~Conroy's~~achieve ~~'All~~our ~~Other~~business ~~Compensation'~~objectives ~~amount~~of ~~includes~~developing ~~$13,200~~and ~~car~~expanding ~~allowance.~~business ~~The~~opportunities ~~cruise~~that ~~benefit~~improve ~~was~~long-term ~~valued~~shareholder onvalue; ~~the~~and ~~basis~~(2) ofencouraging ~~the~~executives ~~aggregate incremental cost~~ to ~~us,~~achieve ~~including~~our ~~the~~business ~~costs~~objectives ~~for~~by ~~food,~~linking ~~beverages,~~executive ~~shore~~compensation ~~excursions,~~to ~~airport~~Company ~~transfers,~~performance ~~pre~~ and ~~post~~long-term ~~cruise~~shareholder ~~hotel stays, onboard internet, onboard amenities and gratuities~~value.

49Our compensation approach for our named executive officers in 2013 had three key elements, designed to be consistent with the Company’s compensation philosophy and business objectives: (1) base salary; (2) annual incentive bonuses; and (3) long-term equity awards, subject to both time and performance-based vesting requirements. In structuring executive compensation arrangements, our Compensation Committee carefully considers how each component of our compensation program meets our business objectives.

~~(3)~~Base Mrsalary is intended to attract and retain highly qualified executives, by providing current cash compensation commensurate with expertise, experience, tenure, performance, potential and scope of responsibility. ~~Kamlani's~~The ~~employment~~annual ~~began~~incentive ~~during~~bonuses motivate our executives to perform and meet our short term business goals and annual financial objectives. The equity based component of our executive compensation approach fosters a long term view of the ~~third~~business ~~quarter~~and helps align officer interests with shareholder interests. Further, we believe that equity awards that vest based on time enhance the stability of our senior team and asprovide ~~such~~greater heincentives ~~did~~for ~~not~~our ~~earn~~named ~~his~~executive ~~entire~~officers ~~2011~~to ~~annualized~~remain ~~base~~with ~~salary~~the Company. We believe that the combination of annual fixed pay and equity ownership provides our named executive officers with an appropriate mix of guaranteed current cash compensation, allowing them to stay focused on their duties, and long term compensation, encouraging them to work toward increasing long term shareholder value.

We believe that a substantial portion of an executive officer’s compensation should be at-risk, in accordance with our compensation philosophy that links executive compensation to the attainment of business objectives and earnings performance, over the near and long term, which in turn enables us to attract, retain and reward executive officers who contribute to our success. For the named executive officers as a group, excluding Mark S. Conroy, for fiscal 2013, on an annualized basis, base salary represents 48.5% of their total target direct compensation, annual bonus and non-equity incentive compensation

combined represents 44.7% of their total target direct compensation, long-term incentives (stock options) represent 6.8% of their total target direct compensation and all other compensation represents 2.3% of their total target direct compensation. The Company believes that this is an appropriate mix of fixed and variable compensation intended to incentivize our named executive officers to focus on both continued improved annual operating performance and continued long-term growth of the Company. In determining the appropriate mix of compensation components for each of our named executive officers, our Compensation Committee annually assesses, among other factors, each named executive officer’s responsibilities, prior experience and value to the Company, as well as each named executive officer’s expected level of contribution toward achieving the Company’s long-term objectives.

Compensation Setting Process

Compensation Consultants; Review of Relevant Compensation Data

Consistent with past practice, in 2013 neither our Compensation Committee nor management retained a compensation consultant to review or recommend the amount or form of compensation paid to our executive officers, including our named executive officers, or our administrators. We have not adopted a policy regarding compensation consultant independence. We will consider the implementation of such a policy if and when we decide to retain a compensation consultant to assist us with our executive compensation programs in the future.

Our Compensation Committee believes that, in order to effectively attract and retain high level executive talent, each element of the compensation program should establish compensation levels that take into account current market practices. Our Compensation Committee does not “benchmark” executive compensation at any particular level in comparison with other companies. Rather, our Compensation Committee familiarizes itself with compensation trends and competitive conditions through the review of non-customized third-party market surveys and other relevant publicly available data. In setting compensation levels for 2013, after determining the types and amount of compensation based on its own evaluation, our Compensation Committee considered publicly available compensation data solely to determine the relative strengths and weaknesses of our compensation packages on an aggregate basis. Our Compensation Committee also relied on its extensive experience managing portfolio companies and considered each executive’s level of responsibility for the overall operations of the Company, historical Company practices, long-term market trends, internal pay equity, expectations regarding future named executive officer contributions, our own performance, budget considerations and succession planning and retention strategies.

Role of Executive Officers in Compensation Decisions

The Compensation Committee makes all compensation decisions related to the CEO and equity-based compensation awards. The Compensation Committee, together with recommendations and input from our CEO, sets and determines the compensation for the other named executive officers.

Compensation Risk Assessment

The Company conducted a risk assessment of our compensation policies and practices and concluded that such policies and practices do not create risks that are reasonably likely to have a material adverse effect on the Company. In particular, the Compensation Committee believes that the design of our annual performance incentive program and long-term equity incentives provides a balanced approach and an effective and appropriate mix of incentives to ensure our executive compensation program is focused on long-term shareholder value creation. To strengthen the relationship between pay and performance, our annual cash incentive bonus plan and many of our equity grants are subject to the achievement of pre-established performance goals established independently of the plan participants. In addition, a portion of such variable pay is delivered through equity awards with both time-based and performance-based vesting schedules, and performance periods covering multiple years, thus emphasizing retention and long-term company performance while discouraging the taking of short-term risks at the expense of long-term results.

Compensation Elements

The three key compensation elements for our named executive officers identified above (base pay, annual performance bonus and long-term equity awards), as well as other elements of compensation, are discussed below.

Base Salary

Base Salary is intended to provide a baseline level of fixed compensation that reflects each named executive officer’s level of responsibility. Each named executive officer is party to an employment agreement that provides for a fixed base salary,

subject to annual review. The initial base salary level for each named executive officer was negotiated in connection with the executive joining the Company or our affiliates or upon a change of his responsibilities. Decisions regarding adjustments to base salaries are made at the discretion of our Compensation Committee, though the salaries are generally subject only to increases, not decreases. In reviewing base salary levels for our named executive officers, the Compensation Committee annually considers and assesses, among other factors, a named executive officer’s current base salary, job responsibilities, leadership and experience, and value to our Company. In addition, as noted above, base salary levels are generally intended to be consistent with competitive market base salary levels, but are not specifically targeted or “benchmarked” against any particular company or group of companies.

The chart below indicates the annual base salary for each of our named executive officers in 2013.



Named Executive Officer	2013 Annual Base Salary
Frank J. Del Rio	$	1,597,200
Jason M. Montague	$	475,000
Robert J. Binder	$	300,000
Kunal S. Kamlani	$	900,000
T. Robin Lindsay	$	475,000
Mark S. Conroy	$	550,000

Annual Incentive Bonus

Each named executive officer, with the exception of Messrs. Kamlani and Conroy, is eligible to receive an annual cash bonus for fiscal 2013 in accordance with the Company’s 2013 management incentive compensation plan (the “MICP”), subject to the provisions of his employment agreement. The 2013 MICP provides for bonus payments upon the achievement of an EBITDA-based corporate performance goal. We use our annual incentive bonus program to incentivize and motivate our named executive officers by providing the opportunity to receive additional compensation tied to annual Company performance.

Each year, the Compensation Committee establishes the performance goal after careful review of the annual budget. For 2013, the Compensation Committee determined that the MICP bonus target would be an adjusted EBITDA of PCH and its consolidated subsidiaries, defined as earnings before interest, other income (expense), income taxes, depreciation and amortization, and MICP compensation expense adjusted for the impact from settled fuel hedges (“MICP EBITDA”). We believe the MICP EBITDA performance target is useful as it reflects certain operating drivers of our business, such as sales growth, operating costs, selling and administrative expenses and other operating income and expense. The MICP EBITDA target was $251.3 million for 2013. The Compensation Committee reserves the right to adjust the performance goal during the course of the year to take into consideration changes in deployment of the fleet, major unforeseen and uncontrollable events and other non-recurring and extraordinary costs and revenues experienced by us during the year. For 2013, the Compensation Committee recommended, and the Board approved, that MICP EBITDA would be adjusted for certain fuel related items and certain other miscellaneous expenses.

The following chart sets forth the MICP EBITDA levels at which various levels of incentive payout would become available to our named executive officers for 2013, with the bonus percentage amounts expressed as a percentage of the named executive officer's base salary for 2013. Between these points the payout is calculated on a sliding straight line basis. There is no maximum bonus for the named executive officers and the sliding straight line allocation between 92.5% and 100% will be applied to MICP EBITDA over 100% of performance target.



Name	Percentage of MICP EBITDA goal Achieved		Annual Incentive Bonus Percentage
Frank J. Del Rio	76.2	%	—	%
	80.9	%	15.3	%
	92.5	%	63.6	%
	100.0	%	100.0	%
Jason M. Montague	76.2	%	—	%
	80.9	%	11.5	%
	92.5	%	47.7	%
	100.0	%	75.0	%
Robert J. Binder	76.2	%	—	%
	80.9	%	13.0	%
	92.5	%	54.1	%
	100.0	%	85.0	%
Kunal S. Kamlani (1)	—	%	—	%
T. Robin Lindsay	76.2	%	—	%
	80.9	%	11.5	%
	92.5	%	47.7	%
	100.0	%	75.0	%
Mark S. Conroy (2)	76.2	%	—	%
	80.9	%	13.0	%
	92.5	%	54.1	%
	100.0	%	85.0	%


(1)	Mr. Kamlani’s minimum guaranteed bonus is not based on performance against MICP EBITDA.

(2)

The Company agreed with Mark S. Conroy on September 26, 2012 that he would step down as president of Regent on January 30, 2013. As of January 31, 2013 he was appointed as an executive adviser to the CEO and President of PCH. In connection with these arrangements, on November 9, 2012 the Company entered into a Separation Agreement and an Independent Contractor Agreement with Mr. Conroy. In connection therewith, Mr. Conroy will receive amounts to which he is entitled pursuant to his existing employment agreement.

PCH fiscal 2013 MICP EBITDA was 102.7% of our performance target. Frank J. Del Rio received an annual bonus equal to 112.8% of his annual salary, Kunal S. Kamlani and Robert J. Binder received an annual bonus of 95.9% of their annual salary and Jason M. Montague and T. Robin Lindsay received an annual bonus of 84.6% of their annual salary.

Long-Term Equity Incentive Compensation

We believe that long-term compensation of our executives, including our named executive officers, should be directly linked to the value provided to shareholders. Accordingly, our long-term equity incentive program is intended to directly align a significant portion of the compensation of our named executive officers with the interests of our shareholders by motivating and rewarding creation and preservation of long-term shareholder value with measurement over a multi-year performance period. In this regard, the Compensation Committee determined that stock options in Prestige is the most appropriate equity-based compensation award, as it provides value only if there is appreciation in the value of Prestige’s ordinary shares following the date of grant, and no value if there is no such appreciation. We use a combination of time-based vesting awards (which enhance retention) and performance-based vesting (which strengthens the link between pay and performance).

Certain of our named executive officers have been granted stock options pursuant to the 2008 Stock Option Plan of Prestige (the “Prestige option plan”). Each option granted under the Prestige option plan represents the right to purchase one ordinary share of Prestige. Our philosophy is that options are granted to named executive officers when the Compensation

Committee determines that it would be to the advantage and in the best interests of the Company and its stockholders to grant such options as an inducement to enter into or remain in the employ of the Company or one of its subsidiaries and as an incentive for increased efforts during such employment. The number of equity awards granted annually to our named executive officers is determined both in the discretion of the Compensation Committee and pursuant to certain agreements with certain named executive officers. Option grants to the CEO are at the discretion of the Compensation Committee, while grants to all other named executive officers are determined by the Compensation Committee after consultation with and recommendation of the CEO.

Mr. Del Rio was not granted any options in 2013, in light of the significant option grants made in 2009 in connection with the signing of his employment agreement.

Mr. Kamlani is entitled to receive time-based option grants in connection with his employment which vests in three cumulative and substantially equal installments on each of the first, second and third anniversaries of his employment for his 2012 grant and on December 31, 2013, 2014 and 2015 for his 2013 grant.

For Mr. Montague, Mr. Binder and Mr. Lindsay, fifty percent (50%) of the option grants have time-based vesting in three cumulative and substantially equal installments at the end of each calendar year of the grant date, provided that the named executive officer remains continuously employed in active service with the Company or one of its subsidiaries. The remaining fifty percent (50%) of the option grants have performance-based vesting in three substantially equal installments on December 31 of each applicable performance measurement year if the applicable MICP EBITDA performance target for such year (which is the same target as used under the 2013 MICP) is satisfied. If the performance targets for any year are not satisfied, the performance based options scheduled to vest that year are forfeited. However, the Board of Directors or Compensation Committee reserves the right to vest or modify the options to the extent it determines that achievement of the performance criteria was affected by changes in deployment of fleet, major unforeseen and uncontrollable events and other non- recurring and extraordinary costs experienced by the Company during the year.

For Mr. Conroy, as part of his Separation Agreement entered into on November 9, 2012, all of his existing option grants were either canceled or forfeited; vested options were canceled and unvested options were forfeited as of such date. Also, pursuant to his Independent Contractor Agreement, on February 11, 2013, Mr. Conroy was granted 100,000 options which vest on January 31, 2015.

The performance target for the performance-based options is the same as the MICP EBITDA target. The performance criteria for Messrs. Montague, Binder and Lindsay’s performance-based options were met, and their options based on 2013 performance vested in full on December 31, 2013.

Except as otherwise provided in a named executive officer’s employment agreement, unvested options are generally forfeited upon a termination from service, although certain option holders will also become vested in their awards in connection with certain terminations of employment. For a discussion of vesting under specific termination scenarios, see the section titled, “Potential Payments upon Termination of Employment and Change of Control” below.

Other Elements of Compensation

Benefits and Perquisites

We provide our named executive officers with the opportunity to participate in our medical, dental and insurance programs and vacation and other holiday pay, all in accordance with the terms of such plans and programs in effect from time to time and substantially on the same terms as those generally offered to our other employees.

In addition, certain of the named executive officers receive a cash automobile allowance, as well as Company paid long term disability coverage. The Company believes that the level and mix of perquisites it provides to the named executive officers is consistent with market compensation practices.

Severance Arrangements and Change in Control Benefits

Each of our named executive officers is employed pursuant to an employment agreement that provides for severance benefits upon an involuntary termination of the named executive officer’s employment by us, a termination by the executive as a result of a constructive termination, or in certain instances, non-renewal of an employment agreement. The severance benefit in each employment agreement was negotiated in connection with the commencement of each executive’s employment with the Company, or upon a change of their responsibilities. In each case, our Board of Directors or Compensation Committee

determined that it was appropriate to provide the executive with severance and related benefits in light of his or her position with the Company, general competitive practices and as part of an overall compensation package. The severance benefits payable to each of our named executive officers upon a qualifying termination of employment generally includes a cash payment based on the executive’s base salary (and bonus, in some cases) and continued medical benefits and car allowance for the applicable severance period at the Company’s expense.

The Company does not believe that the named executive officers should be entitled to any “single-trigger” cash severance benefits merely because of a change in control of the Company. Accordingly, none of the named executive officers are entitled to any such payments or benefits upon the occurrence of a change in control of the Company, unless there is an actual or constructive termination of employment following such change in control (“double-trigger” payments). However, the employment agreements for certain executives provide for additional payments to make them whole for any excise taxes that may be imposed on them in the event of a change in control, which payments were agreed to by the Compensation Committee in connection with the negotiation of the executive’s overall compensation package, and which the Compensation Committee believes are reasonable and competitive. The material terms of such payments and benefits are described in the section titled “Potential Payments Upon a Termination or Change in Control.”

Summary Compensation Table for Fiscal 2013

The following table provides summary information concerning compensation paid or accrued during the fiscal year ended December 31, 2013, 2012 and 2011 to our named executive officers. The table below presents total compensation at the PCH level. The percentage of NEO compensation expense allocated to the Company in 2013 was 48%, excluding Mark Conroy, whose allocation is 100%. Our allocation of compensation expense for NEO's in 2013 was $4.9 million.



Name and Principal Position	Year	Salary		Bonus		Option Awards ⁽³⁾		Non-equity Incentive Plan Compensation		All Other Compensation ⁽⁴⁾		Total
Frank J. Del Rio Chairman of the Board and Chief Executive Officer of PCI and PCH	2013	$	1,597,200	$	—	$	—	$	1,801,582	$	109,600	$	3,508,382
	2012	$	1,452,000	$	—	$	42,199	$	1,452,000	$	60,149	$	3,006,348
	2011	$	1,320,000	$	—	$	7,049	$	699,347	$	92,726	$	2,119,122
Jason M. Montague Executive Vice President and Chief Financial Officer of PCI and PCH	2013	$	475,000	$	—	$	177,309	$	401,837	$	19,791	$	1,073,937
	2012	$	400,000	$	—	$	83,533	$	300,000	$	13,200	$	796,733
	2011	$	325,000	$	—	$	40,497	$	170,466	$	15,377	$	551,340
Robert J. Binder (1) Vice Chairman and President of PCI	2013	$	300,000	$	—	$	25,330	$	287,631	$	—	$	612,961
Kunal S. Kamlani (2) President of PCH and Chief Operating Officer of PCI and PCH	2013	$	900,000	$	750,000	$	272,222	$	112,892	$	29,417	$	2,064,531
	2012	$	750,000	$	750,000	$	1,374,198	$	—	$	17,246	$	2,891,444
	2011	$	256,849	$	500,000	$	—	$	—	$	22,547	$	779,396
Mark S. Conroy President of Regent Seven Seas Cruises	2013	$	42,308	$	—	$	123,281	$	39,558	$	788,301	$	993,448
	2012	$	550,000	$	—	$	28,588	$	467,500	$	13,200	$	1,059,288
	2011	$	535,000	$	—	$	40,461	$	318,028	$	13,318	$	906,807
T. Robin Lindsay Executive Vice President of Vessel Operations of PCI and PCH	2013	$	475,000	$	—	$	25,963	$	401,837	$	13,200	$	916,000
	2012	$	450,000	$	—	$	73,925	$	164,835	$	13,200	$	701,960
	2011	$	425,000	$	—	$	40,914	$	222,917	$	13,200	$	702,031


(1)	Mr. Binder first became a named executive officer in 2013.


(2)	Mr. Kamlani rejoined the Company from Bank of America/Merrill Lynch during the third quarter of 2011 and as such he did not earn his entire 2011 annualized base salary. Prior to that, Mr. Kamlani was the Chief Financial Officer for PCH.

(3)

Represents the aggregate grant date fair value of options granted to such named executive officers in 2013, computed in accordance with FASB ASC Topic 718, disregarding any estimates of forfeitures related to service-based vesting conditions. See "Note 7. Share-Based Employee Compensation"in the accompanying notes to the consolidated financial statements for the assumptions made in determining those values.

(4)

Included within Mr. Del Rio’s “All Other Compensation” for fiscal 2013 is $62,000 personal allowances, $27,600 car allowance, and $20,000 personal tax service. Included within Mr. Montague’s and Mr. Kamlani’s “All Other Compensation” for fiscal 2013 is $13,200 car allowance and cruise benefits. Included within Mr. Lindsay’s “All Other Compensation” for fiscal 2013 is $13,200 car allowance. Mr. Conroy’s “All Other Compensation” amount for fiscal 2013 includes $550,000 severance, $137,500 consulting fees, $65,053 COBRA, $27,500 car allowance and $5,908 Long Term Care insurance premium and cruise benefits. The cruise benefit was valued on the basis of the aggregate incremental cost to the Company.

Grants of Plan-Based Awards for Fiscal 2013

The following chart provides information concerning equity awards granted in 2013 to our named executive officers.



		Estimated Future Payouts Under Equity Incentive Plan Awards (1)			Estimated Future Payouts Under Equity Incentive Plan Awards (2)			All other Option Awards: # of Securities Underlying (3)	Grant Date Fair Value of Options
Name	Grant Date	Threshold ($)	Target ($)	Maximum ($)	Threshold ($)	Target ($)	Maximum ($)	Options	Awards (4)
Frank J. Del Rio	—	—	1,597,200	—	—	—	—	—	—
Jason M. Montague		—	356,250	—	—	—	—	—	—
	2/11/13	—	—	—	—	—	—	35,000	88,654
	2/11/13	—	—	—	—	11,666	—	—	30,692
	2/11/13	—	—	—	—	11,667	—	—	29,538
	2/11/13	—	—	—	—	11,667	—	—	28,424
Robert J. Binder		—	255,000	—	—		—
	2/11/13	—	—	—	—	—	—	5,000	12,665
	2/11/13	—	—	—	—	1,666	—	—	4,383
	2/11/13	—	—	—	—	1,667	—	—	4,220
	2/11/13	—	—	—	—	1,667	—	—	4,061
Kunal S. Kamlani	2/11/13	—	—	—	—	—	—	100,000	272,222
Mark S. Conroy(5)	2/11/13	—	—	—	—	—	—	100,000	123,281
T. Robin Lindsay		—	356,250	—	—	—	—	—	—
	2/11/13	—	—	—	—	—	—	5,125	12,982
	2/11/13	—	—	—	—	1,708	—	—	4,494
	2/11/13	—	—	—	—	1,708	—	—	4,324
	2/11/13	—	—	—	—	1,709	—	—	4,164

(1)

Represents potential payout levels based on 2013 performance for awards granted pursuant to the 2013 MICP. There is no maximum amount payable under the 2013 MICP. Mr. Kamlani’s bonus is fully discretionary, with a minimum guaranteed bonus of $750,000. For amounts actually paid to each of the named executive officers pursuant to such awards based on results achieved in 2013, see the Summary Compensation Table column titled “Non-Equity Incentive Plan Compensation.” For a more detailed description of the potential payout under the 2013 MICP, see “Annual Incentive Bonus.”


(2)	Represents performance-based options granted to such named executive officers in 2013 pursuant to the Prestige option plan. There is no threshold or maximum performance and the options are generally forfeited if the relevant performance target is not satisfied. For a more detailed description of the performance-based options, see “Long-Term Equity Incentive Compensation.”


(3)	Represents time-based options granted to such named executive officers in 2013, pursuant to the Prestige option plan. The options vest and become exercisable in three cumulative and substantially equal installments at the end of each calendar year of the grant

date, provided that the named executive officer remains continuously employed in active service with the Company or one of its subsidiaries.

(4)

Represents the aggregate grant date fair value of options granted to such named executive officers in 2013, computed in accordance with FASB ASC Topic 718, disregarding any estimates of forfeitures related to service-based vesting conditions. See "Note 7. Share-Based Employee Compensation" in the accompanying notes to the consolidated financial statements for the assumptions made in determining those values.


(5)	Represents time-based options granted to such named executive officer in 2013, pursuant to the Prestige option plan. The options vest and become exercisable on January 31, 2015.

Outstanding Equity Awards

At Fiscal 2013 Year-End



	Option Awards
Name	Number of Securities Underlying Unexercised Options (#) Exercisable	Number of Securities Underlying Unexercised Options (#) Unexercisable	Equity Incentive Plan Awards: Number of Securities Underlying Unexercised Unearned Options (#)	Option Exercise Price ($)	Option Expiration Date
Frank J. Del Rio	1,000,000	—	—	8.00	7/1/2017
	216,216	—	—	9.25	1/1/2018
Jason M. Montague	15,000	—	—	40.02	6/1/2015
	15,000	—	—	40.32	4/22/2016
	7,500	—	—	8.00	3/31/2017
	25,000	—	—	8.00	12/15/2017
	55,000	—	—	10.11	38/31/2018
	12,500	—	—	9.50	1/1/2019
	20,000	5,000 (2)	5,000 (4)	4.87	2/10/2020
	23,333	23,333 (3)	23,334 (5)	5.79	2/11/2021
Robert J. Binder	45,000	—	—	40.02	6/1/2015
	40,000	—	—	40.32	4/22/2016
	50,000	—	—	8.00	12/15/2017
	50,000	—	—	10.11	3/31/2018
	3,333	3333 (3)	3334 (5)	5.79	2/11/2021
Kunal S. Kamlani	400,000	200,000 (6)	—	4.87	2/28/2020
	33,334	66,666 (3)	—	5.79	2/11/2021
Mark S. Conroy (1)	—	100,000	—	8.85	1/31/2021
T. Robin Lindsay	30,000	—	—	40.02	6/1/2015
	30,000	—	—	40.32	4/22/2016
	45,000	—	—	8.00	3/31/2017
	7,500	—	—	8.00	12/15/2017
	50,000	—	—	10.11	3/31/2018
	12,500	—	—	9.50	1/1/2019
	16,500	4,125 (2)	4,125 (4)	4.87	2/10/2020
	3,417	3,417 (3)	3,416 (5)	5.79	2/11/2021


(1)	As part of Mr. Conroy’s Separation Agreement and Independent Contractor Agreement entered into on November 9, 2012, he received a grant of 100,000 options, which will vest and become exercisable on January 31, 2015 provided that he remains in compliance with the agreement.


(2)	Options will vest and become exercisable on December 31, 2014, provided that the named executive officer remains continuously employed in active service with the Company or one of its subsidiaries.


(3)	Options will vest and become exercisable ratably on December 31, 2014 and December 31, 2015, provided that the named executive officer remains continuously employed in active service with the Company or one of its subsidiaries.


(4)	Options will vest and become exercisable on December 31, 2014, subject to the achievement of the 2014 MICP EBITDA target.


(5)	Options will vest and become exercisable ratably on December 31, 2014 and December 31, 2015, if the applicable MICP EBITDA performance target for such year is satisfied.


(6)	Options will vest and become exercisable on August 29, 2014, provided that the named executive officer remains continuously employed in active service with the Company or one of its subsidiaries.

Employment Agreements

Though the employment agreements reference the boards and compensation committees of various subsidiaries and affiliates, our current practice is that compensation decisions are made by the board and/or compensation committee of PCH.

Frank J. Del Rio

~~Pursuant~~The toCompany ~~an employment agreement with Oceania Cruises~~ and ~~PCI dated July 1, 2009, Mr. Del Rio is employed as~~ Chairman and Chief Executive Officer of the ~~above~~Company, ~~companies~~Frank ~~and any of their majority owned subsidiaries~~J. ~~The term of Mr.~~ Del Rio's, ~~employment~~agreed ~~agreement~~on ~~is four~~March ~~years. The agreement provides for a 2011 annual base salary of $1~~22,~~320,000,~~ ~~subject~~2013 to aamend ~~mandatory ten percent (10%) increase each year. For 2010~~ and ~~2011,~~extend Mr. Del Rio’s isexecutive ~~eligible~~employment ~~for~~agreement anwith ~~annual~~Prestige ~~cash~~through ~~bonus~~December ~~of $1~~31,~~000,000~~ ~~each~~2016. ~~year,~~The ~~subject~~amendment tomodifies ~~his~~certain ~~continued~~terms ~~employment through the last day~~ of ~~each~~his ~~year~~existing ~~and~~employment ~~the attainment of performance objectives established by the board of directors of PCI (such performance objectives to be consistent with those applicable to other senior executives of PCI)~~agreement. ~~For 2012,~~ Mr. Del Rio’s isannual ~~eligible~~base salary for athe ~~target~~period ~~incentive~~July ~~bonus~~1, ~~equal~~2013 tothrough ~~one~~December ~~hundred percent (100%) of his then current salary~~31, ~~provided~~2013 ~~that~~will ~~the actual bonus shall~~ be ~~determined~~at bya ~~the~~prorated ~~board~~rate of ~~PCI in its sole discretion~~$1,597,200. ~~based~~Beginning on ~~performance~~January ~~objectives~~1, ~~established~~2014 ~~with~~and ~~respect~~for toeach ~~that~~ year ~~by the board~~thereafter, ~~in good faith consultation with~~ Mr. Del Rio. Inshall ~~2009,~~receive ~~pursuant~~an toannual ~~his~~base ~~officer~~salary ~~employment~~of ~~agreement~~$1, Mr750,000. ~~Del~~ ~~Rio~~Effective ~~received~~as anof ~~option~~March to22, ~~purchase 216~~2013,~~216~~ ~~shares of PCI~~Mr. ~~Such~~Del ~~option~~Rio ~~grant~~will ~~was~~receive ~~intended~~a astravel ~~incentive~~allowance ~~compensation~~of ~~for 2010 and 2011~~$30,000 ~~with~~per ~~fifty percent (50%) vesting at the end of each~~ year, ~~subject~~and tocertain ~~continued~~other ~~employment~~benefits. ~~and~~In the ~~achievement~~event of ~~performance~~a ~~objectives~~termination ~~established by the board~~ of ~~PCI. Additionally, in 2009, pursuant to his officer employment agreement,~~ Mr. Del Rio’s ~~received~~employment abefore ~~time~~the ~~based~~end ~~option~~of tothe ~~purchase~~term ~~1,000,000 shares~~ of ~~PCI,~~his ~~with~~employment ~~fifty~~either ~~percent~~ (~~50%~~1) ~~vesting~~ onby ~~the~~Prestige ~~second~~without ~~anniversary~~cause ofwithin ~~the~~180 ~~grant,~~days ~~and~~prior ~~then~~to ~~an additional twenty five percent (25%) vesting on each of~~ the ~~third~~sale ~~and fourth anniversaries~~ of ~~the~~Prestige ~~grant.~~or Asany atime ~~condition~~thereafter, toor ~~receiving~~(2) ~~such~~by ~~option,~~ Mr. Del Rio ~~was~~for ~~required~~good toreason ~~make~~any antime ~~equity~~after ~~investment in PCI, in~~ the ~~amount~~sale of $3Prestige,~~000,000.~~ ~~The agreement also provides for participation in employee benefit plans and perquisite programs generally available to similarly situated executives. In particular,~~ Mr. Del Rio is entitled to ana ~~automobile~~severance ~~allowance~~equal ofto ~~$2,300~~the ~~per~~sum ~~month,~~of atwo ~~personal~~years ~~expense allowance~~ of ~~$12,000~~Base ~~per~~Salary ~~year~~and ~~(subject~~targeted toannual ~~review~~incentive bonus, and ~~upward~~certain ~~adjustment),~~other anbenefits including continued allowance for country club dues and fees ~~up to $20~~,~~000~~ ~~per~~automobile ~~year (subject to review and upward adjustment), an~~ allowance ~~for tax advice and preparation up to $20~~,~~000~~ ~~per~~health/medical ~~year,~~plan ~~business~~benefits ~~class travel~~ and ~~forty~~certain ~~(40) days~~other ~~annual~~benefits ~~paid vacation. Mr. Del Rio is also eligible~~ for atwo ~~tax “gross up,” to make him whole in the event that tax is due under Section 280G of the Internal Revenue Code in connection with payments contingent on a change in control of PCI~~years.

For 2013, Mr. Del Rio is eligible for a target incentive bonus equal to one hundred percent (100%) of his then current salary, provided that the actual bonus shall be determined by the Board in its sole discretion, based on performance objectives established with respect to that year by the Board, in good faith consultation with Mr. Del Rio. In 2009, pursuant to his officer employment agreement, Mr. Del Rio received an option to purchase 216,216 shares of Prestige. Such option grant was intended as incentive compensation for 2010 and 2011, with fifty percent (50%) vesting at the end of each year, subject to continued employment and the achievement of performance objectives established by the Board. Additionally, in 2009, pursuant to his officer employment agreement, Mr. Del Rio received a time based option to purchase 1,000,000 shares of Prestige, with fifty percent (50%) vesting on the second anniversary of the grant, and then an additional twenty five percent (25%) vesting on each of the third and fourth anniversaries of the grant. As a condition to receiving such option, Mr. Del Rio was required to make an equity investment in Prestige, in the amount of $3,000,000. The agreement also provides for participation in employee benefit plans and perquisite programs generally available to similarly situated executives. In particular, Mr. Del Rio is entitled to an automobile allowance of $2,300 per month, a personal expense allowance of $12,000 per year (subject to review and upward adjustment), an allowance for country club dues and fees up to $20,000 per year (subject to review and upward adjustment), an allowance for tax advice and preparation up to $20,000 per year, business class travel and forty (40) days annual paid vacation. Mr. Del Rio is also eligible for a tax “gross up,” to make him whole in the event that an excise tax is due under Section 280G of the Internal Revenue Code in connection with payments contingent on a change in control of Prestige.

Jason M. Montague

Mr. Montague is employed as Executive Vice President and Chief Financial Officer pursuant to an employment agreement with PCS, dated January 1, 2013. The term of Mr. Montague’s original employment agreement is three years. The agreement provides for a minimum annual base salary of $475,000, which shall be evaluated for an upward adjustment annually before each compensation determination date, which shall be no later than the first quarter of the applicable fiscal year. Mr. Montague is eligible for an annual cash bonus in an amount to be determined at the sole discretion of the compensation committee of PCS based on MICP EBITDA and the job performance of Mr. Montague. The agreement also provides for participation in employee benefit plans and perquisite programs generally available to our senior executives. In particular, Mr. Montague is entitled to an annual automobile allowance of $13,200, twenty-five (25) days annual paid vacation and business class travel. Mr. Montague is also eligible for a tax “gross up,” to make him whole in the event that an excise tax is due under Section 280G of the Internal Revenue Code in connection with payments contingent on a change in control of PCS.

Robert J. Binder

Mr. Binder is employed as Vice Chairman and President pursuant to an employment agreement with PCS, dated January 1, 2013. The term of Mr. Binder’s agreement is one year. The agreement provides for an annual base salary of $300,000. Mr. Binder is eligible for an annual cash bonus in an amount to be determined at the sole discretion of the compensation committee of PCS based on EBITDA and the job performance of Mr. Binder. The agreement also provides for participation in employee benefit plans and perquisite programs generally available to our senior executives. In particular, Mr. Binder is entitled to fifteen

(15) days annual paid vacation, business class travel internationally and first class travel to California. Mr. Binder is also eligible for a tax “gross up,” to make him whole in the event that an excise tax is due under Section 280G of the Internal Revenue Code in connection with payments contingent on a change in control of PCS.

Mr. Binder has entered into a new employment agreement effective January 1, 2014, which will terminate December 31, 2016. The agreement provides for a minimum base salary of $500,000, which shall be evaluated for an upward adjustment annually before each compensation determination date, which shall be no later than the first quarter of the applicable fiscal year. Mr. Binder is eligible for an annual cash bonus in an amount to be determined at the sole discretion of the compensation committee of PCS based on MICP EBITDA and the job performance of Mr. Binder. The agreement also provides for participation in employee benefit plans and perquisite programs generally available to our senior executives. In particular, Mr. Binder is entitled to twenty- five (25) days annual paid vacation, business class travel and first class travel to California. Mr. Binder is also eligible for a tax “gross up,” to make him whole in the event that an excise tax is due under Section 280G of the Internal Revenue Code in connection with payments contingent on a change in control of PCS.

Kunal S. Kamlani

Pursuant to an employment agreement with Oceania ~~Cruises~~ and PCH dated June 17, 2011, Mr. Kamlani is employed as President and Chief Operating Officer of the above companies and any of their majority owned subsidiaries. The initial term of Mr. Kamlani'’s employment expires on December 31, 2014, and the term will automatically renew for an additional year and each anniversary thereafter, unless either party gives written notice of non-renewal within ninety days prior to the expiration of the term (including any renewal thereof). The agreement provides for an annual base salary of $750,000, which shall be reviewed on an annual basis and may be increased, but not decreased, at the discretion of the Board of Directors. Mr. Kamlani is eligible for an annual cash bonus equal to a minimum of $750,000, pro-rated for any fiscal year in which Mr. Kamlani is not employed for the entire year ~~($500,000 minimum for 2011, based on a September start date)~~. If Oceania ~~Cruises~~, PCH, and each of their majority owned subsidiaries do not pay any form of cash bonus to their executives or key employees generally, the payment of Mr. Kamlani'’s cash bonus may be deferred for up to one calendar year, if such deferral is permitted under applicable law. The employment agreement also provides Mr. Kamlani a time based option to purchase 600,000 shares of ~~PCI~~Prestige which vest in three cumulative and substantially equal installments on each of the first, second and third anniversaries of his employment, and contemplates future additional grants subject to ~~board~~Board discretion and evaluation of Mr. Kamlani'’s performance. Mr. Kamlani is eligible for participation in employee benefit plans and perquisite programs generally available to executives of Oceania ~~Cruises~~. In particular, Mr. Kamlani is entitled to an annual automobile allowance of $13,200, and twenty (20) days annual paid vacation ~~and reimbursement of legal expenses in 2011, up to $10,000, for fees incurred in connection with the drafting and negotiation of the employment agreement~~.

Mark Conroy

Effective January 31, 2013, Mr. Conroy ~~was~~stepped ~~employed~~down as President of Regent. ~~Seven~~He ~~Seas~~previously was employed pursuant to an employment agreement with PCS and ~~PCI~~Prestige dated February 1, 2011. The ~~initial~~agreement ~~term~~provided for a minimum annual base salary of $535,000. Mr. Conroy's ~~employment~~was ~~agreement~~eligible ~~was two~~for ~~years~~an ~~and~~annual cash bonus, the ~~term~~target ~~automatically~~of ~~renewed~~which ~~for~~shall anbe ~~additional~~determined ~~year~~by ~~and~~PCS ~~each~~pursuant ~~anniversary~~to ~~thereafter,~~its ~~unless~~then ~~either~~applicable ~~party~~management ~~gives~~incentive ~~written~~compensation ~~notice~~plan, ofprovided ~~non-renewal~~that ~~within~~Mr. ~~ninety~~Conroy’s ~~days~~actual ~~prior~~bonus toamount will be determined by the ~~expiration~~board of ~~the~~PCS ~~term~~in ~~(including~~its ~~any~~discretion ~~renewal~~based ~~thereof)~~on performance objectives it establishes with respect to a particular fiscal year. ~~The~~Mr. ~~agreement~~Conroy ~~provided~~was eligible for aparticipation ~~minimum~~in ~~annual~~employee ~~base~~benefit ~~salary~~plans and perquisite programs generally available to executives of ~~$535~~PCS. In particular,~~000,~~ ~~which~~Mr. Conroy was ~~reviewed~~entitled onto an annual ~~basis~~automobile ~~and~~allowance ~~could~~of ~~be increased~~$13,200 ~~but~~and ~~not~~six ~~decreased,~~(6) atweeks ~~the~~of ~~discretion~~annual ofpaid vacation.

50T. Robin Lindsay

~~the~~Mr. ~~board~~Lindsay ofis employed as Executive Vice President, Vessel Operations pursuant to an employment agreement with PCS, dated January 1, 2012. The term of Mr. ~~Conroy~~ ~~was~~Lindsay’s ~~eligible~~employment ~~for~~agreement anis ~~annual~~three ~~cash~~years. ~~bonus,~~The ~~the~~agreement ~~target~~provides for a minimum annual base salary of $450,000, which ~~was~~shall ~~determined~~be byevaluated ~~PCS~~for ~~pursuant~~an toupward ~~its~~adjustment ~~then~~annually ~~applicable~~before ~~management~~each ~~incentive~~ compensation ~~plan~~determination date, ~~provided~~which ~~that~~shall ~~Mr. Conroy's~~be ~~actual~~no ~~bonus~~later ~~amount~~than ~~was~~the ~~determined~~first byquarter of the ~~board~~applicable offiscal ~~PCS~~year. inMr. ~~its~~Lindsay ~~discretion~~is ~~based~~eligible onfor ~~performance~~an ~~objectives~~annual itcash ~~establishes~~bonus ~~with~~in ~~respect~~an amount to abe ~~particular~~determined ~~fiscal~~at ~~year.~~the ~~The~~sole ~~employment~~discretion ~~agreement~~of ~~also~~the ~~provided~~compensation ~~Mr. Conroy~~committee anof ~~option~~PCS tobased ~~purchase~~on ~~12,500~~EBITDA ~~shares~~and the job performance of ~~PCI~~Mr. MrLindsay. ~~Conroy~~ ~~was~~The ~~eligible~~agreement also provides for participation in employee benefit plans and perquisite programs generally available to ~~executives~~our ofsenior ~~PCS~~executives. In particular, Mr. ~~Conroy~~ ~~was~~Lindsay is entitled to an annual automobile allowance of $13,200, ~~and~~twenty-five ~~six~~ (625) ~~weeks~~ ofdays annual paid vacation and business class travel. Mr. Lindsay is also eligible for a tax “gross up,” to make him whole in the event that an excise tax is due under Section 280G of the Internal Revenue Code in connection with payments contingent on a change in control of PCS.

On September 26, 2012, PCH agreed with Mark Conroy that he would step down as president of Regent Seven Seas on January 31, 2013 and become a consultant to SSC for a two year period. In connection with these arrangements, on November 9, 2012 we entered into a Separation Agreement and a Consulting Agreement with Mr. Conroy. In connection therewith, Mr. Conroy will receive amounts to which he is entitled pursuant to his existing employment agreement. Mr. Conroy's employment agreement is filed as Exhibit 10.9 to Amendment No. 1 to Form S-4 filed by us with the Securities and Exchange Commission on March 1, 2012.

Annual Incentive Bonus

Each named executive officer is eligible to receive an annual cash bonus for fiscal 2012 subject to the provisions of his employment agreement. Mr. Del Rio and Mr. Conroy are eligible in accordance with the Company's 2012 management incentive compensation plan (the “MICP”). The 2012 MICP provides for bonus payments upon the achievement of an EBITDA based corporate performance goal. In 2012, pursuant to his employment agreement, Mr. Kamlani is eligible to receive a cash bonus in an amount determined by the Board of Directors of PCH, subject to a guaranteed minimum annual bonus of $750,000.

Each year, the Compensation Committee establishes the performance goal after careful review of the annual budget. For 2012, the Compensation Committee determined that the MICP bonus target would be an adjusted EBITDA of PCH and its consolidated subsidiaries, defined as earnings before interest, other income (expense), income taxes, depreciation and amortization, and MICP compensation expense adjusted for the impact from settled fuel hedges (“MICP EBITDA”). The Compensation Committee reserves the right to adjust the performance goal during the course of the year to take into consideration changes in deployment of the fleet, major unforeseen and uncontrollable events and other non-recurring and extraordinary costs and revenues experienced by us during the year. For 2012, the Compensation Committee recommended, and the Board approved, that MICP EBITDA would be adjusted for the impact of lost revenue due to an OCI ship receipt delay and certain other miscellaneous expenses.

The following chart sets forth the MICP EBITDA levels at which various levels of incentive payout would become available to our named executive officers for 2012, with the bonus percentage amounts expressed as a percentage of the named executive officer's base salary for 2012. Between these points the payout is calculated on a sliding straight line basis. There is no maximum bonus for the named executive officers and the sliding straight line allocation between 91.7% and 100% will be applied to MICP EBITDA over 100% of performance target.

Name	Percentage ofMICP EBITDAgoal Achieved		Annual IncentiveBonus Percentage
Frank J. Del Rio	74.9	%	—	%
	79.4	%	13.7	%
	91.7	%	63.0	%
	100.0	%	100.0	%
Kunal S. Kamlani	—	%	—	%
Mark S. Conroy	74.9	%	—	%
	79.4	%	11.6	%
	91.7	%	53.6	%
	100.0	%	85.0	%

PCH fiscal 2012 MICP EBITDA was 100% of our performance target. As a result, Frank J. Del Rio and Mark Conroy received an annual bonus equal to 100.0% and 85.0% of their base salaries, respectively.

Long-Term Equity Incentive Compensation

Certain of our named executive officers have been granted stock options pursuant to the 2008 Stock Option Plan of PCI (the “Prestige option plan”). Each option granted under the Prestige option plan represents the right to purchase one share of the common stock of PCI, which is our ultimate parent company.

Mr. Del Rio was not granted any options in 2012, in light of the significant option grants made in 2009 in connection with the signing of his employment agreement. However, a portion of his performance based options granted in 2010 were modified in 2012 as discussed below.

Mr. Kamlani is entitled to receive a time-based option grant in connection with his employment which vests in three cumulative and substantially equal installments on each of the first, second and third anniversaries of his employment.

For Mr. Conroy, as part of his Separation and Consulting Agreements entered into on November 9, 2012, all of his existing option grants were either canceled or forfeited; vested shares were canceled and unvested shares were forfeited as of such date.

The performance target for the performance-based options is the same as the MICP EBITDA target. As noted above, for 2012, the Compensation Committee recommended, and the Board approved, that MICP EBITDA would be adjusted for the impact of lost revenue due to an OCI ship receipt delay and certain other miscellaneous expenses. Of our named executive officers, the adjustment to the MICP EBITDA affected only Mr. Del Rio, as Mr. Kamlani was only granted time-based options and Mr. Conroy's options were forfeited in November 2012, prior to the MICP EBITDA adjustment. As a result of this adjustment, the performance criteria for Mr. Del Rio's performance-based options was met, and his options vested in full as of December 31, 2012.

Except as otherwise provided in a named executive officer's employment agreement, unvested options are generally forfeited upon a termination from service, although certain option holders will also become vested in their awards in connection with certain terminations of employment. For a discussion of vesting under specific termination scenarios, see the section titled, “Potential Payments upon Termination of Employment and Change of Control” below.

The following chart provides information concerning equity awards granted in 2012 to our named executive officers.

Name	GrantDate	Number of Performance Based Options (1)	Number of Time Based Options (2)
Frank J. Del Rio	—	(3)	—
Kunal S. Kamlani	4/13/12	—	600,000
Mark S. Conroy (4)	2/10/12	6,250	6,250

(1) Represents performance-based options granted to such named executive officers in 2012 pursuant to the Prestige option plan. There is no threshold or maximum performance and the options are generally forfeited if the relevant performance target is not satisfied.

(2) Represents time-based options granted to such named executive officers in 2012, pursuant to the Prestige option plan. The options vest and become exercisable in three cumulative and substantially equal installments at the end of each calendar year of the grant date, provided that the named executive officer remains continuously employed in active service with us.

(3) Mr. Del Rio did not receive an option grant in 2012. However, the adjustment to his existing performance-based options described above resulted in an accounting charge equal to the increase in the fair value of the options as determined for accounting purposes under FASB ASC Topic 718, Stock Compensation.

(4) Mark Conroy's 2012 granted options were canceled on November 9, 2012 when he signed his Separation and Consulting agreements.

Outstanding Equity Awards

At Fiscal 2012 Year-End

	Option Awards
Name	Number ofSecuritiesUnderlyingUnexercisedOptions(#)Exercisable	Number ofSecuritiesUnderlyingUnexercisedOptions(#)Unexercisable	EquityIncentivePlan Awards:Number ofSecuritiesUnderlyingUnexercisedUnearnedOptions (#)	OptionExercisePrice($)	OptionExpirationDate
Frank J. Del Rio	750,000	250,000 (1)	—	8.00	7/1/2017
	216,216	—	—	9.25	1/1/2018
Kunal S. Kamlani	200,000	400,000 (2)	—	4.87	2/18/2020
Mark S. Conroy	—	—	—	—	—

(1) Options will vest and become exercisable on the fourth anniversary of the July 1, 2009 grant date, provided that the named executive officer remains continuously employed in active service with us or one of our subsidiaries.

(2) Options will vest and become exercisable ratably on the second and third anniversary of the September employment anniversary date, provided that the named executive officer remains continuously employed in active service with us or one of our subsidiaries.

Potential Payments upon Termination of Employment and Change of Control

Pursuant to their employment agreements, each of our named executive officers is eligible to receive certain payments and benefits in connection with termination of employment under various circumstances. The potential benefits payable to our named executive officers in the event of termination of employment under various scenarios are described below.

Payments Made Upon Any Termination of Employment. Regardless of the manner in which a named executive officer's employment terminates, such named executive officer is entitled to receive amounts earned during the term of employment including accrued but unpaid base salary through the date of termination, accrued but unpaid incentive bonus for the year prior to the year of termination (except with respect to terminations for Cause, as defined in each employment agreement), unreimbursed employment-related expenses owed to the named executive officer under our policies and the value of any accrued benefits under any of our employee benefit programs (in accordance with the terms of such programs). 64

Inand ~~addition~~benefits toin ~~the~~connection ~~accrued~~with ~~obligations,~~termination ~~subject to an officer executing a release~~ of ~~claims in favor of the Company, the~~ employment ~~agreements~~under ~~provide~~various ~~for~~circumstances. ~~certain~~The ~~additional~~potential benefits payable to beour ~~paid~~named executive officers in ~~connection~~the ~~with~~event aof termination of employment under ~~the~~various ~~circumstances~~scenarios are described below: .

The following table summarizes the approximate value of the termination payments and benefits that each of our named executive officers would receive if he had terminated employment at the close of business on December 31, 2013. The table does not include certain amounts that the named executive officer would be entitled to receive under certain plans or arrangements that do not discriminate in scope, terms or operation, in favor of our executive officers and that are generally available to all salaried employees.



Name	Voluntary termination or Cause	Death or Disability	Termination Without Cause or for Good Reason		Termination Without Cause or for Good Reason Following a Change in Control		Non-Renewal of an Employment Agreement (2)
Frank J. Del Rio
Severance Payment	—	—	—		$	3,373,600	—
Annual Bonus Award	—	—	$	1,597,200	$	3,194,400	—
Medical Continuation	—	—	—		$	48,436	—
Stock Option Acceleration	—	—	—		—		—
Jason M. Montague
Severance Payment	—	—	$	963,200	$	1,000,000	—
Annual Bonus Award	—	—	$	356,250	$	356,250	—
Medical Continuation	—	—	$	33,560	—		—
Stock Option Acceleration (1)	—	—	$	149,834	$	149,834	—
Robert J. Binder
Severance Payment	—	—	$	600,000	1,000,000		$	300,000
Annual Bonus Award	—	—	$	255,000	255,000		—
Medical Continuation	—	—	$	9,824	—		$	9,824
Stock Option Acceleration (1)	—	—	$	18,134	$	18,134	—
Kunal S. Kamlani
Severance Payment	—	—	$	1,650,000	$	1,650,000	—
Annual Bonus Award	—	—	$	750,000	$	750,000	—
Medical Continuation	—	—	$	33,560	$	33,560	—
Stock Option Acceleration (1)	—	—	$	639,332	$	639,332	—
T. Robin Lindsay
Severance Payment

Large accelerated filer

Accelerated filer

Non-accelerated filer

Smaller reporting company

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