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NCL Corporation Reports Third Quarter Results for 2007
MIAMI
NCL Corporation Ltd. (“NCL” or the “Company”) reported a net loss of
$8.6 million on total revenues of $631.4 million for its third quarter
ended September 30, 2007. This compares to net income of $49.0 million
on total revenues of $597.5 million for the third quarter of 2006. Net
loss for the third quarter of 2007 included a non-cash foreign
exchange translation loss of $42.9 million primarily related to
marking-to-market of the Company’s Euro-denominated debt. Net income
for the third quarter of 2006 included $7.3 million in connection with
a settlement agreement for the remaining portion of our claims against
the builder of Pride of America, as well as a $2.5 million non-cash
foreign exchange translation gain primarily related to the
marking-to-market of the Company’s Euro-denominated debt.
Revenues for the third quarter of 2007 increased 5.7% compared to the
third quarter of 2006, driven primarily by a 6.3% increase in Net
Yields and a 2.8% increase in Capacity Days. Net Yields improved
primarily as result of an increase in passenger ticket prices due to
an increase in consumer demand. Gross Yields increased 2.8% from the
third quarter of 2006.
“Pricing in the Caribbean has stabilized and is improving,” said Colin
Veitch, president and chief executive officer of NCL Corporation Ltd.
“We are also encouraged that the measures we have taken with respect
to our Hawaii operations seem to be having a positive impact. These
improvements have contributed to our overall fourth quarter booking
levels and ticket prices being up versus levels achieved at the same
time last year. As a result, we expect that the change in net yields
for the full year 2007 will be positive.”
Net Cruise Costs per Capacity Day for the third quarter of 2007
increased 6.6% compared to the same period in the prior year. The
increase was primarily attributable to higher other operating expenses
(due primarily to the timing of maintenance and repairs expenses), and
higher marketing, general and administrative expenses mainly due to
additional professional fees primarily in connection with information
technology projects. Gross Cruise Costs per Capacity Day increased
2.3% from the third quarter of 2006.
In addition, average fuel prices for the third quarter, including the
impact of fuel hedges, increased 10% to $405 per metric ton from $368
per metric ton in the third quarter of 2006. This increase in price
contributed to a year-over-year increase in fuel costs of $3.5
million.
As a result of an increase in average outstanding borrowings, interest
expense (net of interest income) increased approximately 25.1% to
$42.6 million in the third quarter of 2007 from $34.0 million in the
third quarter of 2006.
The Company took delivery of Norwegian Gem, a 2,400-berth ship, on
October 1, 2007. After a series of voyages in the Mediterranean, the
ship will sail to the Bahamas from its homeport of New York City. On
November 5, 2007, Norwegian Crown, a 1,080-berth ship built in 1988
that was on charter to NCL, left the NCL fleet and was delivered to
its owner.
“With the delivery of Norwegian Gem and the return of Norwegian Crown,
NCL now has the youngest fleet of the major operators in the
industry,” said Veitch. “In addition, as our next ships are delivered,
the F3 One and F3 Two, we not only strengthen this distinction, but
expand on the highly successful “Freestyle Cruising” concept that is
unique to NCL. We look forward to the completion of the previously
announced $1 billion equity investment from Apollo, which we believe
will take place this quarter, allowing us to continue with this
exciting growth program.”
Terminology and Non-GAAP Financial Measures
Capacity Days
Capacity Days represent double occupancy per cabin multiplied by the
number of cruise days for the period.
Gross Cruise Costs
Gross Cruise Costs represent the sum of total cruise operating
expenses and marketing, general and administrative expenses.
Gross Yields
Gross Yields represent total revenues per Capacity Day.
Net Yields
Net Yields represent total revenues less commissions, transportation
and other expenses, and onboard and other expenses per Capacity Day.
The Company utilizes Net Yields to manage its business on a day-to-day
basis and believes that it is the most relevant measure of its pricing
performance and is commonly used in the cruise industry to measure
pricing performance. The Company has not provided a quantitative
reconciliation of projected Gross Yields to projected Net Yields due
to the significant uncertainty in projecting the costs deducted to
arrive at this measure. Accordingly, the Company does not believe that
reconciling information for such projected figures would be
meaningful.
Net Cruise Costs
Net Cruise Costs represent Gross Cruise Costs excluding commissions,
transportation and other expenses and onboard and other expenses. In
measuring the Company’s ability to control costs in a manner that
positively impacts net income (loss), the Company believes changes in
Net Cruise Costs and Net Cruise Costs Excluding Fuel to be the most
relevant indicators of its performance and are commonly used in the
cruise industry as a measurement of costs.
Net Income (Loss) Excluding Non-Cash Foreign Exchange Translation
Net Income (Loss) Excluding Non-Cash Foreign Exchange Translation
represents net income (loss) before the effect of non-cash foreign
exchange translation gains and losses. The Company believes that this
financial measure is useful because it excludes non-cash foreign
exchange translation gains and losses related to the translation of
balance sheet amounts which the Company believes are not relevant to
understanding the trends of the Company’s operational performance or
its prospects for future operational performance. Management uses this
measure to establish operational goals and believes that it may assist
in analyzing the underlying trends of the Company’s operational
performance over time.
Passenger Cruise Days
Passenger Cruise Days represent the number of passengers carried for
the period multiplied by the number of days in their respective
cruises.
Occupancy Percentage
Occupancy Percentage, in accordance with cruise industry practice,
represents the ratio of Passenger Cruise Days to Capacity Days. A
percentage in excess of 100% indicates that three or more passengers
occupied some cabins.
NCL Corporation Ltd. is the holding company for various subsidiary
companies involved in owning and operating the ships of Norwegian
Cruise Line, NCL America and Orient Lines.
NCL plans to build two new third generation Freestyle Cruising ships
for delivery in 2010. NCL today has the youngest fleet in the
industry, providing guests the opportunity to enjoy the flexibility of
Freestyle Cruising on the newest, most contemporary ships at sea, and
has recently added its latest new ship, the 2,400 passenger Norwegian
Gem.
For high resolution, downloadable images, please log onto NCL's Web
site at www.ncl.com/pressroom. For further information on NCL
Corporation, contact a travel agent or NCL in the U.S. and Canada at
(866) 234-0292.
This release may contain statements, estimates or projections that
constitute “forward-looking statements” as defined under U.S. federal
securities laws. Generally, the words “expect,” “anticipate,” “goal,”
“project,” “plan,” “believe,” “seek,” “will,” “may,” “forecast,”
“estimate,” “intend,” and “future,” and similar expressions are
intended to identify forward-looking statements, which are not
historical in nature. Forward-looking statements involve risks and
uncertainties that could cause actual results, performance or
achievements to differ significantly from NCL’s historical results or
those implied in forward-looking statements. These risks include, but
are not limited to, changes in cruise capacity, as well as capacity
changes in the overall vacation industry; introduction of competing
itineraries and other products by other companies; changes in general
economic, business and geo-political conditions; reduced consumer
demand for cruises as a result of any number of reasons, including
armed conflict, terrorist attacks, geo-political and economic
uncertainties or the unavailability of air service, and the resulting
concerns over the safety and security aspects of traveling; lack of
acceptance of new itineraries, products or services by the Company’s
targeted customers; the Company’s ability to implement brand
strategies and its shipbuilding programs, and to continue to expand
its business worldwide; costs of new initiatives, including those
involving the Company’s inter-island Hawaii cruise operations; changes
in interest rates, fuel costs or foreign currency rates; delivery
schedules of new ships; risks associated with operating
internationally; the impact of spread of contagious diseases;
accidents and other incidents affecting the health, safety, security
and vacation satisfaction of passengers and causing damage to ships,
which could cause the modification of itineraries or cancellation of a
cruise or series of cruises; the Company’s ability to attract and
retain qualified shipboard crew and maintain good relations with
employee unions; changes in other operating costs such as crew,
insurance and security costs; continued availability of attractive
port destinations; the impact of pending or threatened litigation; the
ability to obtain financing on terms that are favorable or consistent
with the Company’s expectations; changes involving the tax,
environmental, health, safety, security and other regulatory regimes
in which the Company operates; emergency ship repairs; disruptions to
the Company’s software and other information technology systems; the
implementation of regulations in the United States requiring United
States citizens to obtain passports for travel to additional foreign
destinations; weather and natural disasters; and other risks discussed
in NCL’s filings with the Securities and Exchange Commission. You
should not place undue reliance on forward-looking statements as a
prediction of actual results. NCL expressly disclaims any obligation
or undertaking to release publicly any updates or revisions to any
forward-looking statements to reflect any change in expectations or
events, conditions or circumstances on which any such statements are
based. In addition, certain financial measures in this release
constitute non-GAAP financial measures as defined by Regulation G. A
reconciliation of these items can be found attached hereto and on the
Company’s web site at www.ncl.com/investors.
Financial Tables Follow
NCL Corporation Ltd.
Consolidated Statements of Operations
(unaudited, in thousands of dollars)
Three months ended Nine months ended
September 30, September 30,
2006 2007 2006 2007
Revenues
Passenger ticket revenues $ 441,047
$ 465,881 $ 1,114,945
$ 1,217,337
Onboard and other revenues 156,433
165,551 411,867
457,964
Total revenues 597,480
631,432 1,526,812
1,675,301
Cruise operating expenses
Commissions, transportation and other 131,592
124,093 327,313
336,967
Onboard and other 58,083 61,999
142,698 156,071
Payroll and related 106,337
111,608 300,249
327,067
Fuel 41,902 45,372
122,063 132,448
Food 27,011 30,266
72,978 88,807
Ship charter costs 6,610 4,673
19,615 16,310
Other operating 62,210 73,047
186,074 213,912
Total cruise operating expenses 433,745
451,058 1,170,990
1,271,582
Marketing, general and administrative expenses 59,621
67,679 173,760
200,270
Depreciation and amortization expenses 30,991
35,795 86,413
106,998
Impairment loss - -
- 2,565
Total operating expenses 524,357
554,532 1,431,163
1,581,415
Operating income 73,123 76,900
95,649 93,886
Non-operating (income) expenses
Interest income (531 ) (363
) (2,759 ) (1,123 )
Interest expense, net of capitalized interest 34,572
42,933 97,300
124,484
Other (income) expenses, net (9,919 )
42,924 16,007 64,481
Total non-operating expenses 24,122
85,494 110,548
187,842
Net income (loss) $ 49,001 $ (8,594
) $ (14,899 ) $
(93,956 )
NCL Corporation Ltd.
Consolidated Balance Sheets
(unaudited, in thousands of dollars, except share data)
December 31,
September 30,
2006 2007
Assets
Current assets:
Cash and cash equivalents $ 63,530 $
47,881
Restricted cash 1,226 1,849
Accounts receivable, net 10,244
12,005
Amount due from Parent 5,033 266
Consumable inventories 33,392 40,692
Prepaid expenses and other 24,211
24,278
Total current assets 137,636
126,971
Property and equipment, net 3,816,292
3,824,130
Restricted cash 1,650 1,682
Goodwill 400,254
400,254
Tradenames 202,538
202,538
Other assets 71,254 66,548
Total assets $ 4,629,624 $
4,622,123
Liabilities and Shareholder’s Equity
Current liabilities:
Current portion of long-term debt $ 154,638
$ 159,352
Accounts payable 116,947
73,979
Accrued expenses and other liabilities 181,821
192,879
Advance ticket sales 314,050
345,994
Total current liabilities 767,456
772,204
Long-term debt 2,405,357
2,478,482
Other long-term liabilities 1,744
4,433
Total liabilities 3,174,557
3,255,119
Commitments and contingencies
Shareholder's equity
Common stock, $1.00 par value; 12,000 shares authorized; 12,000 shares
issued and outstanding
12 12
Additional paid-in capital 1,711,114
1,715,491
Accumulated other comprehensive loss (1,516 )
-
Accumulated deficit (254,543 )
(348,499 )
Total shareholder’s equity 1,455,067
1,367,004
Total liabilities and shareholder’s equity $ 4,629,624
$ 4,622,123
NCL Corporation Ltd.
Consolidated Statements of Cash Flows
(unaudited, in thousands of dollars)
Nine months ended
September 30,
2006 2007
Cash flows from operating activities
Net loss $ (14,899 ) $
(93,956 )
Adjustments to reconcile net loss to
net cash provided by operating activities:
Depreciation and amortization expenses 86,413
106,998
Impairment loss - 2,565
Loss on translation of debt 21,338
62,224
Other 689 499
Changes in operating assets and liabilities:
Increase in accounts receivable (1,704 )
(1,761 )
Increase in consumable inventories (898 )
(7,300 )
(Increase) decrease in prepaid expenses and other assets
(3,044 ) 9,124
Decrease in accounts payable (7,114 )
(42,968 )
Increase in accrued expenses and other liabilities 35,066
17,576
Increase in advance ticket sales 50,049
31,944
Net cash provided by operating activities 165,896
84,945
Cash flows from investing activities
Capital expenditures (254,991 )
(122,090 )
Decrease (increase) in restricted cash 46,647
(655 )
Proceeds from sale of asset -
1,440
Net cash used in investing activities (208,344 )
(121,305 )
Cash flows from financing activities
Principal repayments on long-term debt (242,054 )
(259,713 )
Proceeds from debt 297,435
274,748
Decrease in amount due from Parent 3,360
8,423
Deferred financing costs (1,080 )
(2,747 )
Net cash provided by financing activities 57,661
20,711
Net increase (decrease) in cash and cash equivalents 15,213
(15,649 )
Cash and cash equivalents at beginning of period 60,416
63,530
Cash and cash equivalents at end of period $ 75,629
$ 47,881
Non-cash investing activity
Capital lease obligations $ 8,379 $
580
NCL Corporation Ltd.
Non-GAAP Reconciling Information
(unaudited)
The following table sets forth selected statistical information for
the periods presented:
Three months ended Nine months ended
September 30, September 30,
2006 2007 2006 2007
Passengers Carried 329,087
355,889 858,196
983,534
Passenger Cruise Days 2,393,121
2,537,664 6,523,458
7,391,272
Capacity Days 2,220,144 2,281,324
6,101,011 6,874,511
Occupancy Percentage 107.8 % 111.2 %
106.9 % 107.5 %
Gross Yields and Net Yields were calculated as follows (in thousands,
except Capacity Days and Yields):
Three months ended
September 30,
Nine months ended
September 30,
2006
2007 2006 2007
Passenger ticket revenues $ 441,047 $
465,881 $ 1,114,945 $
1,217,337
Onboard and other revenues 156,433
165,551 411,867
457,964
Total revenues 597,480 631,432
1,526,812 1,675,301
Less:
Commissions, transportation and other 131,592
124,093 327,313
336,967
Onboard and other 58,083 61,999
142,698 156,071
Net revenues $ 407,805 $ 445,340
$ 1,056,801 $ 1,182,263
Capacity Days 2,220,144 2,281,324
6,101,011 6,874,511
Gross Yields $ 269.12 $ 276.78 $
250.26 $ 243.70
Net Yields $ 183.68 $ 195.21 $
173.22 $ 171.98
Gross Cruise Costs and Net Cruise Costs were calculated as follows (in
thousands, except Capacity Days and per Capacity Day data):
Three months ended
September 30,
Nine months ended
September 30,
2006
2007 2006 2007
Total cruise operating expenses $ 433,745
$ 451,058 $ 1,170,990 $
1,271,582
Marketing, general and administrative expenses
59,621
67,679
173,760
200,270
Gross Cruise Costs 493,366
518,737 1,344,750
1,471,852
Less:
Commissions, transportation and other 131,592
124,093 327,313
336,967
Onboard and other 58,083 61,999
142,698 156,071
Net Cruise Costs $ 303,691 $
332,645 $ 874,739 $
978,814
Capacity Days 2,220,144 2,281,324
6,101,011 6,874,511
Gross Cruise Costs per Capacity Day $ 222.22 $
227.38 $ 220.41 $ 214.10
Net Cruise Costs per Capacity Day $ 136.79 $
145.81 $ 143.38 $ 142.38 |