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Norwegian Cruise Line Reports Results for Third Quarter 2013

October 31, 2013 Financial No Comments Email Email

Norwegian Cruise Line (NASDAQ: NCLH, Norwegian Cruise Line Holdings Ltd., NCL Corporation Ltd., “Norwegian” or “the Company”), today reported results for the quarter ended September 30, 2013, and provided guidance for the fourth quarter and full year 2013. CentaraQuarter Highlights

  • Adjusted Net Income growth of 42.1% to $182.2 million with Adjusted EPS of $0.86
  •  Adjusted EBITDA increase of 21.2% to $271.0 million
  •  Net Yield increase of 4.1% (3.9% on a Constant Currency basis)

Third Quarter 2013 Results

“While the environment this year has become more challenging than anticipated, we demonstrated once again our ability to execute and post solid earnings.  Our results for the quarter are the product of a summer season which was bolstered by the premium pricing from Norwegian Breakaway in her first full quarter of operation,” said Kevin Sheehan, president and chief executive officer of Norwegian Cruise Line.  “Improved ticket pricing and onboard spend, along with better than expected results from business improvement initiatives drove incremental EPS in the quarter.”

The Company reported Adjusted Net Income for the third quarter of 2013 of $182.2 million and Adjusted EPS of $0.86 compared to $128.2 million and $0.72 in 2012, respectively.  On a GAAP basis, net income and diluted earnings per share were $170.9 million and $0.82, respectively for the third quarter of 2013.

A 14.9% increase in Capacity Days from the addition of Norwegian Breakaway to the fleet, coupled with a 4.1% increase in Net Yield, (or 3.9% on a Constant Currency basis) resulted in a 19.6% improvement in Net Revenue for the period.  The improvement in Net Yield was a result of higher pricing and onboard revenue in the period.

Adjusted Net Cruise Cost excluding Fuel per Capacity Day increased 4.6% (or 4.3% on a Constant Currency basis) over prior year.  Fuel price, net of hedges, increased 2.4% to $695 per metric ton compared to $679 in 2012. The increase was partially offset by fuel consumption efficiencies particularly from the addition of Norwegian Breakaway to the fleet.

Interest expense, net for the quarter decreased significantly to $26.6 million from $47.2 million in the prior year mainly due to lower rates, resulting from the benefits of the redemption of higher rate debt and refinancing transactions completed earlier in the year.

2013 Guidance and Sensitivities

In addition to the results for the third quarter 2013, the Company also issued the following guidance, which reflects its expectations for the fourth quarter and full year 2013, along with accompanying sensitivities.

In thousands except per share data

Fourth Quarter 2013

 

Full Year 2013

 

As Reported

Constant Currency

As Reported

Constant Currency

Net Yield

4.0 to 5.0%

4.0 to 5.0%

4.0 to 4.5%

4.0 to 4.5%

Adjusted Net Cruise Cost
Excluding Fuel per Capacity Day (1)

6.0 to 7.0%

6.0 to 7.0%

3.5 to 4.5%

3.5 to 4.5%

Adjusted EPS

$0.13 to $0.18

$1.35 to $1.40

Depreciation and amortization

$55 to $60 million

$215 to $220 million

Adjusted Interest Expense, net

$24 to $29 million

$122 to $127 million

Effect on Adjusted EPS of a
1% change in Net Yield (2)

$0.02

$0.02

  1. Full year includes inaugural costs and three incremental Dry-docks
  2. Based on midpoint of guidance

The following reflects the Company’s expectations regarding fuel consumption and pricing, along with accompanying sensitivities.

 

Fourth Quarter 2013

Full Year 2013

Fuel consumption in metric tons

125,000

455,000

Fuel price per metric ton

$655

$680

Effect on Adjusted EPS of a 10% change
in fuel prices, net of hedges (in thousands)

$0.01

$0.01

As of September 30, 2013, the Company had hedged approximately 93%, 64%, 51% and 15% of its remaining 2013, 2014, 2015 and 2016 projected fuel purchases, respectively.

Future capital commitments consist of contracted commitments, including future expected capital expenditures for business enhancements and ship construction contracts. As of September 30, 2013, anticipated capital expenditures together with amounts for export credit financing for ship construction were as follows (in thousands, based on the euro/U.S. dollar exchange rate as of September 30, 2013):

  Fourth Quarter      Full Year  
Ship construction      $ 37,143     $ 787,591     $  940,321      $114,041  
Ship financing                —      (696,213)        (749,290)        (45,345)  
Ship construction net of financing      $ 37,143     $    91,378     $  191,031      $   68,696  
Business Enhancement Capital Expenditures (1)      $ 22,147     $ 110,000      $   90,000       $  85,000  
  1. For the fourth quarter and full year 2013, Business Enhancement Capital Expenditures include approximately $7.0 million and $40.0 million for ROI Capital Expenditures, respectively.

Newbuild Update and Other Highlights

The Company is building on the success of its latest ship, Norwegian Breakaway, with the introduction of her sister ship, Norwegian Getaway, in January 2014.  To be positioned year-round in Miami, Norwegian Getaway will bring to sea many of the elements that make Miami one of the world’s top vacation destinations.  Along with the previously announced Aqua Park, Illusionarium and the Waterfront, the Company recently announced the addition of South Florida-themed restaurants and lounges The Tropicana Room, Flamingo Bar & Grill along with the Sugarcane Mojito Bar and an Ice Bar.  Buddy Valastro, who operates a branch of Carlo’s Bake Shop on Norwegian Breakaway, will introduce the concept on Norwegian Getaway. The Company also looked to a local Miami institution for the selection of Norwegian Getaway’s godmothers, tapping the Miami Dolphins Cheerleaders to christen the ship in a ceremony in February.  “Norwegian Getaway’s Miami touches, from dining to lounges, will bring the best of the Magic City to sea,” said Sheehan.  “With her sister ship Norwegian Breakaway, which brings the sights and sounds of New York City to sea, we are bringing the cruise industry a one-two punch of vessels inspired by two of the world’s most exciting destinations.”

Following Norwegian Getaway will be the introduction of two of the Company’s Breakaway Plus vessels in 2015 and 2017.  A recent naming contest with over 100,000 entries from across the world resulted in the selection of the names Norwegian Escape and Norwegian Bliss, keeping with the Company’s trend of ship names which describe and support its unique proposition of freedom and flexibility.  Slightly larger than the two Breakaway-class ships, Norwegian Escape and Bliss will have approximately 4,200 berths, making them the largest in Norwegian’s fleet.  The ships will include fuel scrubbers, which reduce emissions to comply with regulations for vessels sailing near coastal areas.

The Company’s year-round, Hawaii-based ship, Pride of America, is in the final phases of installation of its own fuel scrubbers, making her the first of Norwegian’s vessels to utilize this technology.  In September the ship opened to guests a new set of suites, inside and studio staterooms, thirty-two in all.  The addition of these new staterooms enhances the returns on one of the Company’s highest-yielding ships.

Also in the quarter the Company completed a Secondary Offering of 23 million ordinary shares previously held by the Company’s Sponsors.  The Company received no proceeds from the offering.

Conference Call

The Company has scheduled a conference call for Tuesday, October 29, 2013 at 10:00 a.m. EDT to discuss third quarter 2013 results.  A link to the live webcast can be found on the Company’s Investor Relations website at www.investor.ncl.com. A replay of the conference call will also be available on the website for 30 days after the call.

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