Norwegian Cruise Line today reported results for the three months ended June 30, 2011.

Adjusted EBITDA for the second quarter ended June 30, 2011 increased 29.0% to $123.5 million from $95.7 million in the same period of 2010 on improved revenue performance and continued business improvement initiatives. Net Revenue for the quarter increased 19.8% to $418.0 million from $349.0 million in 2010 as a result of a 14.9% increase in Capacity Days, due to the addition of Norwegian Epic to the fleet in June 2010, along with an improvement in Net Yield of 4.2%. The increase in Net Yield was a result of both higher passenger ticket pricing and increased onboard spend per Capacity Day.

Net Cruise Cost per Capacity Day increased 1.1% in the second quarter primarily due to an increase in the price of fuel along with Dry-dock related costs substantially offset by business improvement initiatives. The price of fuel in the second quarter increased 17.1% to $595 per metric ton from $508 in 2010. Excluding fuel expense, Net Cruise Cost per Capacity Day decreased 1.1%.

Regarding the Company’s second quarter results, Norwegian Cruise Line President and Chief Executive Officer Kevin Sheehan commented, “I’m pleased to see continued strong Net Yield growth throughout the fleet.” Continued Sheehan, “Controllable costs were kept in check despite this environment of high fuel prices, while initiatives aimed at improving the guest experience resulted in record satisfaction scores in the quarter.”

As the Company continues to increase the sourcing of foreign passengers and deploy more vessels outside of North America, foreign currency fluctuations have an increasing effect on our financial results. In order to measure results on a comparable basis, certain non-GAAP financial measures are now shown on both a reported and Constant Currency basis, whereby revenues and expenses denominated in major foreign currencies are converted to U.S. dollars at the same rates used in the prior comparable period. For the second quarter of 2011, on a Constant Currency basis, the increase in Net Yield from the same period in 2010 was 3.4%. On a Constant Currency basis, Net Cruise Cost per Capacity day increased 0.7% and excluding fuel expense, decreased 1.6%.

Interest expense, net of capitalized interest, increased to $46.7 million in the quarter compared to $37.0 million in 2010 due to increased borrowings attributable to the addition of Norwegian Epic. Other expense was $0.3 million in 2011 compared to $33.8 million in 2010 which included a $33.1 million charge for foreign exchange contracts related to the financing of Norwegian Epic. Net income for the quarter was $29.2 million on revenue of $568.6 million compared to a net loss of $14.9 million on revenue of $477.9 million in 2010.

Quarter Highlights and Updates
As with the Norwegian Star in 2010 and Norwegian Sun in early 2011, Norwegian Dawn underwent an extended multi-million dollar Dry-dock in May to carry out additions and refurbishments to drive revenue and enhance the onboard guest experience. Accommodation improvements included the addition of fifty-eight new suites and staterooms, along with upgraded flat screen televisions in all staterooms. Enhancements to the public areas included the addition of the popular Moderno Churrascaria, an industry first Brazilian-themed specialty restaurant when introduced on Norwegian Epic, a new layout for the Dawn Club Casino, and a complete renovation of the Kid’s Crew and Teen Club.

In June, the first reveal of the two new Project Breakaway ships, scheduled for delivery in the spring of 2013 and 2014, debuted the balcony and mini-suite stateroom designs. These staterooms are the result of learnings from ships across the fleet and are designed to evoke popular modern boutique hotels. The layouts and designs were conceived in part by the same firm responsible for the award-winning Studio staterooms on Norwegian Epic. In July, the second reveal centered around the suites complex, an exclusive area which offers passengers on the Project Breakaway ships an additional level of privacy and luxury. Modeled after the suites complex which first appeared on Norwegian Jewel in 2005 and carried on each vessel through to Norwegian Epic in 2010, this “ship within a ship” is comprised of 76 suites, 42 of which are located in the main complex with the balance spread throughout the ship. The suites share a private courtyard and pool area, restaurant, bar and concierge lounge. So unique is this concept that the Company announced the branding of the suite complexes throughout the fleet as The Haven by Norwegian. The two Project Breakaway ships will join the five existing ships, Norwegian Epic, Norwegian Gem, Norwegian Jade, Norwegian Pearl and Norwegian Jewel in offering accommodations in this exclusive enclave.

“At Norwegian we’re as eager to bring into our fleet two brand new, state of the art ships in 2013 and 2014, as we are when working on refreshing our current ships with new accommodations, designs and features to deliver a world class vacation for our guests,” commented Sheehan. “And we are truly excited with the introduction of The Haven by Norwegian. This branding will allow us to more effectively communicate the offerings and amenities of The Haven complexes currently on five of our vessels, growing to seven vessels after the introduction of the Breakaways.”

Terminology
Adjusted EBITDA. Earnings before interest, other income (expense) including taxes, impairment loss, depreciation and amortization and other supplemental adjustments.

Berths. Double occupancy capacity per cabin even though many cabins can accommodate three or more passengers.

Capacity Days. Berths multiplied by the number of cruise days for the period.

Constant Currency. A calculation whereby foreign currency-denominated revenues and expenses in a period are converted at the U.S. dollar exchange rate of a comparable period in order to eliminate the effects of foreign exchange fluctuations.

Dry-dock - A process whereby a ship is positioned in a large basin where all of the fresh/sea water is pumped out in order to carry out cleaning and repairs of those parts of a ship which are below the water line.

Gross Cruise Cost. The sum of total cruise operating expense and marketing, general and administrative expense.

Gross Yield. Total revenue per Capacity Day.

Net Cruise Cost. Gross Cruise Cost less commissions, transportation and other expense and onboard and other expense.

Net Cruise Cost Excluding Fuel. Net Cruise Cost less fuel expense.

Net Per Diem. Net Revenue per Passenger Cruise Day.

Net Revenue. Total revenue less commissions, transportation and other expense and onboard and other expense.

Net Yield. Net Revenue per Capacity Day.

Occupancy Percentage or Load Factor. The ratio of Passenger Cruise Days to Capacity Days. A percentage in excess of 100% indicates that three or more passengers occupied some cabins.

Passenger Cruise Days. The number of passengers carried for the period, multiplied by the number of days in their respective cruises.

Non-GAAP Financial Measures
We use certain non-GAAP financial measures, such as Net Revenue, Net Yield, Net Cruise Cost and Adjusted EBITDA to enable us to analyze our performance. We utilize Net Revenue and Net Yield to manage our business on a day-to-day basis and believe that they are the most relevant measures of our revenue performance because they reflect the revenue earned by us net of significant variable costs and are commonly used in the cruise industry to measure revenue performance. In measuring our ability to control costs in a manner that positively impacts net income, we believe changes in Net Cruise Cost and Net Cruise Cost Excluding Fuel to be the most relevant indicators of our performance and are commonly used in the cruise industry as a measurement of costs.

As our business includes the sourcing of passengers and deployment of vessels outside of North America, a portion of our revenue and expenses are denominated in foreign currencies, particularly euro and British pound sterling, which are subject to fluctuations in currency exchange rates versus our reporting currency, the U.S. dollar. In order to monitor results excluding these fluctuations, we calculate certain non-GAAP measures on a Constant Currency basis whereby current period revenue and expenses denominated in foreign currencies are converted to U.S. dollars using currency exchange rates of the comparable period. We believe that presenting these non-GAAP measures on both a reported and Constant Currency basis is useful in providing a more comprehensive view of trends in our business.

We believe that Adjusted EBITDA is appropriate to provide additional information to investors as it enables us to analyze our performance. You are encouraged to evaluate each adjustment and the reasons we consider them appropriate for supplemental analysis. In evaluating Adjusted EBITDA, you should be aware that in the future we may incur expenses similar to the adjustments in this presentation. Our presentation of Adjusted EBITDA should not be construed as an inference that our future results will be unaffected by unusual or non-recurring items.

Adjusted EBITDA is not a defined term under GAAP. Adjusted EBITDA is not intended to be a measure of liquidity or cash flows from operations or measures 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 includes other supplemental adjustments.

Our non-GAAP financial measures may not be comparable to other companies within our industry. Please see a historical reconciliation of these measures to items in our consolidated financial statements below in the “Results of Operations” section.