Norwegian Cruise Line, today reported results for the quarter ended June 30, 2013, and provided guidance for the third quarter and full year 2013.
- Adjusted Net Income growth of 67.1% to $60.2 million with Adjusted EPS of $0.29
- Adjusted EBITDA increase of 12.8% to $152.3 million
- Net Yield increase of 3.5% (3.7% on a Constant Currency basis)
- Successful delivery and launch of Norwegian Breakaway
- Refinancing transactions strengthen balance sheet, lower interest expense going forward
Second Quarter 2013 Results
“While the addition of Norwegian Breakaway to our fleet was undoubtedly the highlight of the quarter, our strong results, which include our twentieth consecutive quarter of year-over-year Adjusted EBITDA growth, are equally as notable,” said Kevin Sheehan, president and chief executive officer of Norwegian Cruise Line. “Other initiatives in the quarter, from the refinancing of certain credit facilities to further optimize our capital structure, to the enhancements carried out on Pride of America at her recent dry-dock, demonstrate our culture of leaving no stone unturned in order to add incremental value for our shareholders and enhance the cruise experience for our guests.”
The Company reported Adjusted Net Income for the second quarter of 2013 of $60.2 million and Adjusted EPS of $0.29 compared to $36.0 million and $0.20 in 2012, respectively. Adjusted Net Income and Adjusted EPS exclude expenses totaling $70.1 million related to refinancing transactions in the quarter (see “Transactions in the Quarter”). On a GAAP basis, net loss and diluted loss per share were $(8.8) million and $(0.04), respectively.
An increase in Capacity Days and improvement in Net Yield resulted in a 12.0% increase in Net Revenue in the quarter. The addition of Norwegian Breakaway to the fleet, partially offset by planned Dry-docks for Pride of America and Norwegian Pearl, contributed to the 8.2% increase in Capacity Days while improvements in both passenger ticket and onboard revenue resulted in a 3.5% (3.7% on a Constant Currency basis) increase in Net Yield.
Adjusted Net Cruise Cost excluding Fuel per Capacity Day increased 4.8% on both an as reported and Constant Currency basis over prior year due to the timing of planned Dry-docks along with inaugural and launch expenses related to Norwegian Breakaway. Fuel price per metric ton, net of hedges, was essentially flat to prior year at $686 compared to $684 in 2012.
Interest expense, net in the quarter exceeded prior year by $54.8 million primarily due to expenses totaling $70.1 million related to the refinancing of certain credit facilities and the redemption of the remaining balance of the Company’s $350 million 9.5% Senior Unsecured Notes due 2018 (see “Transactions in the Quarter”).
Transactions in the Quarter
During the quarter the Company completed two refinancing transactions which strengthened the Company’s balance sheet and will reduce interest expense going forward. The first transaction, a new $1.3 billion credit facility comprised of a $675 million term loan and a $625 million non-amortizing revolving credit facility, refinanced certain credit facilities secured by Norwegian Star, Spirit, Sun, Dawn, Pearl and Gem. In conjunction with this transaction the Company redeemed the remaining $228 million outstanding balance of its $350 million 9.5% Senior Unsecured Notes due 2018. The second transaction amended certain credit facilities secured by Norwegian Jewel, Jade and Pride of America to reduce applicable margins and enhance certain terms and conditions. These transactions resulted in no material change in debt levels. Expenses related to the transactions, including write-off of deferred financing fees and premiums for the redemption of the Senior Unsecured Notes, totaled $70.1 million and are included in interest expense.
2013 Guidance and Sensitivities
In addition to the results for the second quarter 2013, the Company also issued the following guidance, which reflects its expectations for the third quarter and full year 2013, along with accompanying sensitivities.
As of June 30, 2013, the Company had hedged approximately 93%, 63% and 51% of its remaining 2013, 2014 and 2015 projected fuel purchases in metric tons, respectively.
Future capital commitments consist of contracted commitments, including future expected capital expenditures for business enhancements and ship construction contracts. As of June 30, 2013, anticipated capital expenditures for business enhancements were $40.5 million for the remainder of 2013, and $83.0 million for each of the years 2014 and 2015. As of June 30, 2013, anticipated capital expenditures for ship construction were $42.8 million for the remainder of 2013, $747.9 million for 2014 and $799.3 million for 2015, of which export credit financing is in place of $667.6 million for 2014 and $630.3 million for 2015, based on the euro/U.S. dollar exchange rate as of June 30, 2013.
Newbuild Update and Other Highlights
Norwegian Breakaway, the Company’s most innovative ship to date, was christened in a ceremony in New York City on May 8. Presided over by Buddy Valastro, star of TLC’s Cake Boss, the ceremony included performances from several entertainment companies on board, including Rock of Ages and Burn the Floor, along with speeches from New York City Mayor Bloomberg, as well as dignitaries from Bermuda and the Bahamas, and a blessing from Cardinal Timothy Dolan. The ceremony culminated with the ship’s godmothers, the Radio City Rockettes, breaking the ceremonial champagne bottle on the ship’s hull. After sailings for travel partners and other invited guests, Norwegian Breakaway began her seasonal itinerary of seven-day voyages from New York to Bermuda. “The delivery of Norwegian Breakaway marks the latest step in a disciplined newbuild program intended to take the company to the next level. Her design and features have received an overwhelmingly positive response from guests and travel partners alike and we look forward to welcoming new and seasoned cruisers to experience all that New York’s ship has to offer,” said Sheehan.
Also in the quarter, the Company revealed additions to the entertainment line-up for Norwegian Getaway, sister ship of Norwegian Breakaway, which is scheduled for delivery in January 2014 and sailing year-round from Miami. Tony Award nominated Legally Blonde will be the headlining production at the Getaway Theater, which will also house a Latin-inspired production of Burn the Floor. The Company has also partnered with Levity Entertainment Group, the largest producer of comedians in the world, to provide talent for Headliners Comedy Club. Sharing the Headliners venue will be Howl at the Moon, the popular dueling pianos production. These productions join the previously announced Illusionarium and The Grammy Experience, to round out an extraordinary line-up of entertainment at sea.
The Company completed two planned Dry-docks in the quarter for Pride of America and Norwegian Pearl. The Dry-dock for Pride of America, which began late in the first quarter, incorporated several guest-facing enhancements including the addition of the fleet’s popular Brazilian steakhouse, Moderno Churrascaria. In addition, two projects were begun during the Dry-dock which will be completed by the end of the year. First is the addition of 32 staterooms, including 24 suites and four Studio staterooms for single travelers. Second, with Pride of America sailing her itinerary entirely within the Emission Control Area, fuel scrubbers are being installed to reduce the ship’s emissions. “The combination of additional suites and fuel scrubbers will enhance the returns on an already successful and unique offering in our product mix,” said Sheehan regarding the enhancements to Pride of America.
On July 16 an order for a second Breakaway Plus class vessel for delivery in spring 2017 was affirmed. The first Breakaway Plus class vessel is scheduled for delivery in the fourth quarter of 2015. Both vessels are 163,000 gross tons with 4,200 berths, making them the largest in Norwegian’s fleet. The combined contract price for these two vessels, which will be constructed in Germany by Meyer Werft GmbH, is ?1.4 billion. The Company has export credit financing in place for 80% of the contract price.