The Company achieves its 25thconsecutive quarter of adjusted EBITDA growth.
This superb performance represents a 29% improvement in adjusted BPA.
The acquisition of Prestige Cruises International is well on track for closing in the fourth quarter.
Norwegian Cruise Line (NASDAQ: NCLH, Norwegian Cruise Line Holdings Ltd., NCL Corporation Ltd., (hereinafter "Norwegian" or "the Company") yesterday reported results for the quarter ended September 30, 2014 and has published its forecasts for the fourth quarter and the full year 2014.
Key news from the third quarter
- 29.1% improvement in adjusted EPS, to $1.11 ($0.86 in 2013)
- Net Yield increased by 3.0% (2.6% on a constant currency basis)
- Revenue increased by 13.7% to $907.0 million
- Adjusted EBITDA increased by 20.5% to $326.7 million
- The Company agrees to acquire Prestige Cruises International, Inc. (“Prestige Cruises”), the leading cruise operator in the luxury segment; the closing of the transaction is expected in the fourth quarter of 2014
Third Quarter Results
“Our results this quarter mark a significant milestone in Norwegian’s evolution, as we have seen 12-month adjusted EBITDA growth for the 25th consecutive quarter, along with continued improvement in our margins,” said Kevin Sheehan, President and CEO of Norwegian Cruise Line Holdings Ltd. “Over that six-plus-year period, Norwegian’s adjusted EBITDA has grown at an industry-leading compound annual growth rate of 23%, with proportional margin expansion of more than 1,600 basis points to 27.6%, and we expect further expansion in the future as we continue to successfully execute our strategies,” Sheehan continued.
For the third quarter of 2014, the Company reported a 29.1% increase in adjusted EPS to $1.11 on adjusted net income of $232.2 million, compared to $0.86 on adjusted net income of $182.2 million for the same period in 2013. In accordance with generally accepted accounting principles (GAAP), diluted earnings per share and net income were $0.97 and $201.1 million, respectively.
Net income for the quarter increased 16.5% to $694.4 million, driven by a 13.1% increase in capacity days and a 3.0% increase in net yield. This increase was primarily due to the addition of the Norwegian Getaway to the fleet in January 2014. The improvement in net yield was driven by higher revenue from ticket sales, onboard spending, and other sources. Revenue for the period totaled $907.0 million, compared to $797.9 million in 2013.
The adjusted net cost of cruising per capacity day, excluding fuel, increased 2.6% (2.2% on a constant currency basis), which includes the investment in the Company’s Norwegian NEXT program, designed to further enhance the guest experience with the introduction of new upgrades, experiences, and modifications. The fuel price per metric ton, free of hedges, was $641, compared to $695 in 2013.
Net interest expense totaled $32.3 million in the quarter compared to $26.6 million in 2013, as a result of incremental borrowing and higher interest rates.
Forecasts and sensitivities for 2014
In addition to the third-quarter results, the Company also published the following guidance reflecting its expectations for the fourth quarter and the full year 2014, along with related sensitivities. This guidance excludes the impact of the acquisition of Prestige Cruises, which is expected to close in the fourth quarter of 2014.
“We are confident in achieving our full-year adjusted EPS growth target of over 60% that we set at the beginning of the year. This will further demonstrate our capabilities and ability to deliver consistent financial performance despite the external headwinds we have experienced throughout the year,” Sheehan stated.
| Fourth quarter 2014 | Fiscal Year 2014 | ||||||
| Audited currency | Constant currency | Audited currency | Constant currency | ||||
| Net Yield | 3,5-4,0% | 4,0-4,5% | 3,2-3,3% | 3,2-3,3% | |||
| Net cost of cruise per capacity day excluding fuel, adjusted (1) |
Unchanging towards a slight decline | Invariable | Invariable towards slight increase | Invariable towards slight increase | |||
| BPA adjusted | $0.37 to $0.41 | $2.28 to $2.32 | |||||
| Depreciation and amortization | 63 to 66 million dollars | $252 to $255 million | |||||
| Net interest expense | 32 to 35 million dollars | $127 to $130 million | |||||
| Effect on adjusted EPS of a 1% change in Net Yield (2) |
0,02$ | 0,02$ | |||||
(1) The complete exercise includes two dry docks
(2) It is based on the midpoint of the forecasts
The Company's expectations regarding fuel consumption and price, along with related sensitivities, are reflected below.
| Fourth quarter 2014 | Fiscal Year 2014 | ||
| Fuel consumption in metric tons | 130.000 | 502.000 | |
| Fuel price per metric ton, free of hedges | 615$ | 630$ | |
| Effect on adjusted EPS of a 10% change in fuel prices, net of hedges |
0,01$ | Insignificant | |
As of September 30, 2014, the Company has covered approximately 91%, 59%, 50% and 10% of its metric ton fuel purchase forecasts for the remainder of 2014, 2015, 2016 and 2017, respectively.
Future capital commitments are contractual, including anticipated future capital expenditures for business improvements and shipbuilding contracts. As of September 30, 2014, anticipated capital expenditures, together with amounts allocated to shipbuilding and the financing of linked export credits, were broken down as follows (in thousands, according to the euro/dollar exchange rate as of September 30, 2014):
| Fourth quarter | Complete exercise | |||||||
| 2014 | 2014 | 2015 | 2016 | |||||
| Shipbuilding | 63.889$ | 847.785$ | 924.203$ | 253.517$ | ||||
| Boat financing | (42.341) | (737.119) | (712.770) | (139.495) | ||||
| Boat building free of financing | 21.548$ | 110.666$ | 211.433$ | 114.022$ | ||||
| Capital expenditures for business improvement, including capital expenditures with return on investment (1) (2) (3) | 35.000$ | 98.000$ | 83.000$ | 90.000$ | ||||
| Incremental capital expenditures with return on investment for wastewater treatment plants | 14.000$ | 27.000$ | 27.000$ | 10.000$ | ||||
(1) The fourth quarter and the full year 2014 include $23 million and $49 million, respectively, in capital expenditures with return on investment.
(2) The fourth quarter and the full financial years of 2014, 2015 and 2016 do not include amounts for wastewater treatment plants.
(3) The fourth quarter and the full fiscal years 2014 and 2015 include the investment allocated to the development of the Company's future cruise destination in Belize.
Company updates and other news
Last September, the Company announced an agreement to acquire Prestige Cruises, the parent company of Oceania Cruises and Regent Seven Seas Cruises, for a total of $3.025 billion in cash, stock, and debt assumption, with accompanying financing arranged. The agreement also includes a contingent cash consideration of up to $50 million for Prestige shareholders if certain performance metrics are met in 2015. The acquisition is expected to immediately boost 2015 revenues, in addition to the $25 million in synergies identified from the outset, resulting in a significant one-figure percentage increase in earnings per share (EPS). The acquisition is expected to close in the fourth quarter of 2014.
The merger of Norwegian Cruise Line, Oceania Cruises, and Regent Cruises has created an industry-leading cruise company with an unparalleled growth trajectory and a product portfolio that spans key segments of the cruise industry. With a combined capacity of approximately 6,400 passengers across its two brands, Prestige Cruises has become the market leader in the luxury segment of the cruise industry. Oceania Cruises has positioned itself in the upscale cruise sector as a company specializing in cruises focused on destinations, gourmet dining experiences, elegant accommodations, and personalized service aboard its fleet of five midsize ships. Prestige Cruises' luxury brand, Regent SevenSeas, offers passengers the most luxurious and all-inclusive vacations in the cruise industry. Its fleet currently consists of three all-suite ships, with a fourth ship, the Seven Seas Explorer, joining the fleet in summer 2016.
Norwegian's newest ship, the Norwegian Escape, is well on track for its scheduled delivery in October 2015. The keel-laying ceremony was held on September 19, marking the official start of construction. The Norwegian Escape will be the largest ship in the fleet to date, with a capacity for 4,200 passengers at double occupancy and a gross tonnage of 164,000. Accommodations include the largest version of the company's signature luxury "ship within a ship" concept, The Haven by Norwegian®. The Norwegian Escape will be based on the same innovative platform as the Breakaway class, combining popular established elements with a host of new spaces and interactive experiences. Among the elements incorporated from the Breakaway class are the integration of The Waterfront and 678 Ocean Place. The Waterfront concept features an open-air promenade lined with restaurants and bars, offering a unique and unforgettable connection to the ocean. On Deck 8, The Waterfront connects to 678 Ocean Place, a unique space spanning three decks with a constant array of dining options, bars, and entertainment. Other Norwegian Cruise Line classics, such as Cagney's Steakhouse and O'Sheehan's Neighborhood Bar & Grill, will also be featured on the Norwegian Escape. More new additions will be announced in the coming months.
*Note: The information and figures are a translation of the original English press release. In case of discrepancies, the information contained in the original English text attached to this document shall prevail.
