Company reports strong growth in adjusted EPS of 61%
Acquisition of Prestige Cruise Holdings completed in Fourth Quarter
Integration on track with identified synergies of $50 million
Wiesbaden, February 18, 2015 – Norwegian Cruise Line Holdings Ltd. (NASDAQ: NCLH) (NCL Corporation Ltd., “Norwegian Cruise Line Holdings”, “Norwegian” or “the Company”), has reported financial results for the quarter and year ended 31 December 2014, and provided guidance for the first quarter and full year 2015. Reported results for the quarter and year ended December 31, 2014 include the results of the recently acquired Prestige Cruise Holdings, Inc. (“Prestige Cruise Holdings”, “Prestige”) beginning on the closing of the acquisition on November 19, 2014. Due to the abbreviated period of consolidation of Prestige’s results, certain metrics are presented both on an as reported basis and on a basis excluding the results of Prestige (“Norwegian Stand-alone”).
Full Year 2014 Highlights
- Acquisition of Prestige Cruise Holdings, parent company of Oceania Cruises and Regent Seven Seas Cruises, diversifies Company’s product portfolio
- Adjusted EPS improvement of 61,0% (64,5% on a Norwegian Stand-alone basis)
- Adjusted Net Yield increase of 4,8% (3,3% on a Norwegian Stand-alone basis)
- Revenue increase of 21,6% to $3,1 billion
- Introduction of Norwegian Getaway, Norwegian Cruise Line’s first year-round, Miami-based ship in over a decade
Full Year 2014 Results
“Looking back at our accomplishments over the past year, it is clear that 2014 will be remembered as one of solid growth and game-changing expansion for the company,” said Frank Del Rio, President and Chief Executive Officer of Norwegian Cruise Line Holdings Ltd. “Strong results are a testament to the hard work and dedication of our team members who, despite operating in a challenging environment, kept a keen eye on optimizing pricing and managing expenses while delivering exceptional holiday experiences to our guests. Looking ahead, the acquisition of Prestige has created the cruise industry’s most dynamic and diversified operator, one that is well-positioned to realise meaningful synergies and deliver superior results. I look forward to leading this exciting organisation, which mixes a deep history in the industry with an entrepreneurial spirit that is unique among cruise operators,” continued Del Rio.
The Company reported on an as reported basis a 61,0% increase in Adjusted EPS to $2,27, on Adjusted Net Income of $480,6 million, which excludes expenses related to the Prestige acquisition and other items. On a GAAP basis, diluted earnings per share and net income were $1,62 and $338,4 million, respectively. Earnings per share for 2014 include a$(0,03) per share impact related to an incident on board Oceania Cruises’ Insignia in December 2014. On a Norwegian Stand-alone basis, Adjusted EPS increased 64,5% to $2,32. This follows a 45% increase in Adjusted EPS in 2013 and further demonstrates the Company’s underlying earnings power.
A 25,5% improvement in Adjusted Net Revenue to $2,4 billion was driven by a 19,8% increase in Capacity Days coupled with a 4,8% improvement in Adjusted Net Yield. Adjusted Net Revenue excludes a deferred revenue fair value adjustment of $10,1 million related to the acquisition of Prestige. The increase in Capacity Days was primarily a result of the addition of Norwegian Breakaway and Norwegian Getaway, which entered the Norwegian Cruise Line fleet in April 2013 and January 2014, respectively, and the addition of Capacity Days from the Prestige fleet. The improvement in Adjusted Net Yield was primarily the result of a 3,3% increase in Norwegian Stand-alone Net Yield (3,2% on a Constant Currency basis) and partially due to the addition of Prestige’s brands to the fleet. Revenue for the period increased 21,6% to $3,1 billion from $2,6 billion in 2013.
On an as reported basis, Adjusted Net Cruise Cost Excluding Fuel per Capacity Day increased 3,5%. Adjusted Net Cruise Cost Excluding Fuel per Capacity Day increased 1,0% on a Norwegian Stand-alone basis (0,8% on a Constant Currency basis) due to investments in conjunction with the Norwegian NEXT programme as well as increased marketing expenses to drive demand and stimulate close-in bookings in the fourth quarter and to carry momentum into Wave season.
The Company’s fuel price per metric ton, excluding the impact of hedges, was $605 compared to $686 in 2013. The Company experienced a negative impact in 2014 of $10,3 million on the Company’s hedge portfolio due to recent reductions in fuel prices compared to a benefit of $4,7 million in 2013. Net of hedges, fuel price per metric ton decreased to $625 compared to $675 in 2013. The Company’s fuel consumption per Capacity Day decreased 3,1%.
Interest expense, net was $151,8 million in 2014 compared to $282,6 million in 2013. Interest expense for 2014 reflected an increase in average debt outstanding associated with new build financings and debt incurred in connection with the acquisition of Prestige, substantially offset by lower interest rates from the benefits of the redemption of higher rate debt and refinancing transactions. In addition, 2014 reflects $15,4 million of expenses related to financing transactions in conjunction with the acquisition of Prestige while 2013 reflects $160,6 million of expenses associated with debt prepayments.
Fourth Quarter 2014 Results
Due to the timing of the closing of the acquisition, results from the consolidation of Prestige are more evident in the fourth quarter compared to the full year. Adjusted EPS in the period was $0,36 on Adjusted Net Income of $77,6 million, and excludes debt-related and other expenses related to the Prestige acquisition. On a GAAP basis, loss per share and net loss for the quarter were $(0,12) and $(25,6) million, respectively. On a Norwegian Stand-alone basis, Adjusted EPS was $0,40. GAAP earnings per share as well as Adjusted EPS on both an as reported and Norwegian Stand-alone basis include the benefit of the completion of our global tax platform.
Adjusted Net Revenue, for the period, which excludes the aforementioned deferred revenue fair value adjustment, increased 37,5% to $618.7 million on 23,8% growth in Capacity Days from the addition of Norwegian Getaway and the Prestige fleet as well as an 11,1% improvement in Adjusted Net Yield resulting from the addition of the Prestige fleet and a 3,9% increase on a Norwegian Stand-alone basis (4,5% on a Constant Currency basis).
Adjusted Net Cruise Cost Excluding Fuel per Capacity Day increased 9,9% as a result of the addition of the Prestige fleetand was essentially flat on a Norwegian Stand-alone basis. Fuel price per metric ton, excluding hedges was $529 for the fourth quarter of 2014 and $656 in 2013. The impact of the change in fuel prices on the Company’s hedge portfolio in these same periods was a negative impact of $10,5 million in 2014 and a benefit of $0,8 million in 2013. Fuel price per metric ton, net of hedges, was $599 compared to $649 in the fourth quarter of 2013.
Interest expense, net increased to $56,4 million from $24,6 million primarily due to the aforementioned expenses in connection with the acquisition of Prestige and incremental interest expense related to the additional debt incurred in connection with the acquisition.
2015 Guidance and Sensitivities
In addition to the results for the fourth quarter and full year 2014, the Company also provided the following guidance for the first quarter and full year 2015, along with accompanying sensitivities. Guidance for Adjusted Net Yield and Adjusted Net Cruise Cost Excluding Fuel per Capacity Day are provided on an as reported basis as well as a Combined Company basis which compares expectations to 2014 results that include Prestige results assuming the acquisition had occurred at the beginning of 2014.
“Until recently, our booked revenue had been on par with prior year; however, the last three weeks of this Wave season has seen a significant acceleration in booking volume. Norwegian Escape is in a better booked position than her last two predecessor sister ships, Norwegian Breakaway and Norwegian Getaway, and Seven Seas Explorer has set both single day and single week booking records at the Regent brand. At year end, and as of today, the company has more booked revenue and the highest net yields on future sailings than ever before, including full year 2015 and 2016,” said Del Rio. “As anticipated, the combined impacts of the challenging Caribbean capacity and pricing environment along with a normalized winter season for the Norwegian brand, which last year included an extended bareboat charter of Norwegian Jade for the Sochi Olympics, results in tempered expectations for the first quarter. Looking to the balance of the year, the outlook is much more encouraging with solid pricing and booking trends across all markets. While 2015 is primarily an organic year, we expect to deliver robust Adjusted EPS growth of approximately 23%,” said Del Rio.
First Quarter 2015
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Combined Company (1)
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Combined Company(1)
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As Reported
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As Reported
|
Constant Currency
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As Reported
|
As Reported
|
Constant
Currency | |||||||||||||||
Adjusted Net Yield
|
17,0 to 18,0%
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(1,0) to (2,0)%
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Flat to (1,0)%
|
Approx. 17,5%
|
Approx.
1,5% |
Approx. 3,0%
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Adjusted Net Cruise Cost
Excluding Fuel per Capacity Day |
27,0 to 28,0%
|
4,5 to
5,5% |
5,0 to
6,0% |
Approx. 23,5%
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Approx. 2,75%
|
Approx. 3,25%
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Adjusted EPS (2)
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$0,20 to $0,24
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$2,70 to $2,90
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Depreciation and amortization
|
$80 to $85 million
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$335 to $345 million
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Interest expense, net
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$55 to $60 million
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$220 to $230 million
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Effect on Adjusted EPS of a
1% change in Adjusted Net Yield (3) |
$0,03
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$0,15
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(1) Combined Company compares 2015 estimates with the combined results of Norwegian and Prestige for the first quarter and full year 2014
(2) Net of full year impact of Insignia incident of $0,07 of which $0,05 is included in guidance for the first quarter
(3) Based on midpoint of guidance
The following reflects the Company’s expectations regarding fuel consumption and pricing, along with accompanying sensitivities.
First Quarter 2015
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Full Year 2015
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Fuel consumption in metric tons
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170.000
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685.000
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Fuel price per metric ton
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$305
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$350
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Fuel price per metric ton, net of hedges
|
$510
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$525
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Effect on Adjusted EPS of a 10% change
in fuel prices, net of hedges |
$0,01
|
$0,04
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As of December 31, 2014, the Company had hedged approximately 68%, 55%, 39% and 8% of its 2015, 2016, 2017 and 2018 projected metric tons of fuel purchases, respectively. The average fuel price per metric ton of the hedge portfolio for the same periods is $520, $468, $416 and $400, respectively.
Future capital commitments consist of contracted commitments, including future expected capital expenditures for business enhancements such as ship Dry-dock refurbishments as part of the Norwegian NEXT programme and ship construction contracts. As of December 31, 2014, anticipated capital expenditures together with amounts for ship construction and related export credit financing were as follows (in thousands, based on the euro/U.S. dollar exchange rate as of December 31, 2014):
Full Year
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2015
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2016
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2017
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Ship construction
|
$ 975.782
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$ 648.378
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$ 891.064
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Ship financing
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(683.663)
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(477.197)
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(666.112)
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Ship construction net of financing
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$ 292.119
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$ 171.181
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$ 224.952
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Business Enhancement Capital Expenditures, including ROI
Capital Expenditures (1) (2) |
$ 154.000
|
$ 160.000
|
$ 156.000
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Incremental ROI Capital Expenditures for exhaust gas scrubbers
|
$ 28.000
|
$ 8.000
|
-
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Company Updates and Other Business Highlights
In November 2014, the Company completed the acquisition of Prestige Cruise Holdings for total transaction consideration of $3,025 billion in cash, stock and the assumption of debt. Additionally, contingent cash consideration of up to $50 million would be payable to Prestige shareholders upon achievement of certain 2015 performance milestones. The Company issued $680 million in senior unsecured notes in a private placement to fund a portion of the purchase price along with related fees and expenses.
At the time of the acquisition the Company announced cost synergies in the $25 million range. The Company is reiterating this level for 2015, having identified synergies in the consolidation of office operations, insurance costs, port fees and shore excursion concessionaire contracts. In addition the Company has so far identified revenue synergies of $15 million exclusively from opportunities in on-board revenue, for a first year synergy figure of at least $40 million, which is embedded in the Company’s guidance. The same items that constitute this $40 million synergy in 2015, equate to approximately $50 million in 2016.
In December 2014, an incident on board Oceania Cruises’ Insignia resulted in the cancellation of certain voyages. Repairs on the vessel are on schedule for a return to service in March 2015. The impact of this incident has been included in the Company’s first quarter and full year 2015 guidance.
In 2014 the Company continued its tradition of recruiting strong leaders with extensive experience both inside and outside of the cruise industry. With over 20 years of experience in the cruise industry, Frank J. Del Rio assumed the role of President and Chief Executive Officer of Norwegian Cruise Line Holdings after founding and leading Oceania Cruises and later Prestige Cruise Holdings through over 10 years of growth and a preeminent position in the upscale cruise segment. Drew Madsen joined the Company in October 2014 as President and Chief Operating Officer of the Norwegian Cruise Line brand. Mr. Madsen brings with him over 30 years of experience in the hospitality and consumer products industries. In December 2014, Jason Montague was appointed President and Chief Operating Officer of Prestige, overseeing both the Oceania Cruises and Regent Seven Seas Cruises brands. Mr. Montague previously served as Chief Financial Officer of Prestige.
