NCL CORPORATION REPORTS
FOURTH QUARTER AND FULL YEAR RESULTS FOR 2005
MIAMI – February 28, 2006 - NCL Corporation
Ltd. (“NCL” or the “Company”) reported
net income of $19.2 million on total revenues of $1.6 billion
for its year ended December 31, 2005, as compared to a net
loss of $8.7 million on total revenues of $1.3 billion for
the year ended December 31, 2004. The Company reported a
net loss of $28.8 million for the fourth quarter of 2005
on total revenues of $398.3 million, compared to a net loss
of $37.7 million on total revenues of $324.5 million for
the same period in 2004.
Quarter Results
Driven primarily by a 14.8% increase in Capacity Days and
a 3.3% increase in Net Yields, total revenues for the fourth
quarter of 2005 increased 22.8% compared to the fourth quarter
of 2004. Net Yields improved in the fourth quarter of 2005
from the same quarter in 2004 primarily as a result of higher
cruise ticket prices. Gross Yields increased 6.9% from the
fourth quarter of 2004.
Net Cruise Costs per Capacity Day for the
fourth quarter of 2005 increased 6.1% compared to the fourth
quarter of 2004. The increase in these costs was primarily
due to increased payroll and related expenses and higher
fuel costs, partially offset by lower other operating expenses,
SG&A and ship charter expenses, on a capacity adjusted
basis. Gross Cruise Costs per Capacity Day increased 9.2%.
The growth in payroll and related expenses
is primarily attributable to increased payroll costs associated
with U.S. crew used in the Company’s inter-island
cruises in Hawaii, which began operations in June 2004 and
expanded to two ships with the introduction of the Pride
of America at the end of the second quarter of 2005. During
the quarter, average fuel prices increased 50% to $327 per
metric ton from $218 per metric ton in 2004. Also during
the quarter, the Company began managing its fuel costs through
entering into fuel swap agreements and as of December 31,
2005 had hedged 25% and 5% of 2006’s estimated fuel
consumption for its first and second quarters, respectively.
Full Year Results
Total revenues for the year ended December 31, 2005 increased
by 20.8% compared to the year ended December 31, 2004. This
increase was primarily attributable to a 12.6% increase
in Capacity Days and a 6.6% increase in Net Yields. The
strong growth in Net Yields for the year ended December
31, 2005 was due to higher cruise ticket prices and an increase
in onboard spending. Gross Yields increased 7.3% compared
to the year ended December 31, 2004.
Net Cruise Costs per Capacity Day for the
year ended December 31, 2005 increased 7.1% compared to
the prior year. Consistent with the fourth quarter results,
the increase in these costs was primarily due to increases
in both payroll and related expenses and fuel costs. Average
fuel prices for 2005 increased 40% to $282 per metric ton
from $202 per metric ton for 2004. The increase in payroll
and related expenses and fuel costs accounted for 5.1 and
3.4 percentage points, respectively, of the increase in
Net Cruise Costs. These increases were partially offset
by other operating efficiencies. Gross Cruise Costs per
Capacity Day increased 7.7%.
Earnings for the year ended December 31, 2005
include a foreign exchange translation gain of $29.4 million
compared to a loss of $9.5 million for the year ended December
31, 2004, associated with the Company’s Euro-denominated
debt. In December 2005, the Company converted the outstanding
balance of the export-credit loan associated with the Pride
of America from Euro to U.S. dollars at an exchange rate
of 1.169625 and simultaneously fixed the interest rate on
the loan at a rate of 5.715%.
“We continue to be pleased with the
improvement in our Operating Income per Capacity Day”
said Colin Veitch, president and chief executive officer
of NCL Corporation Ltd. “This metric continues to
show improvement despite the effect of higher fuel costs
and the significant start-up costs associated with the expansion
of our Hawaii trade.”
Outlook
After a surge during the fourth quarter, demand for 2006
has stabilized. As a result, the Company, like its competitors,
is not seeing as robust a “wave season” as it
did in the prior year. Based upon the current demand environment,
the Company expects Net Yields for the full year of 2006
to be up roughly 5% but flat for the first quarter of 2006
due to the timing of its fleet expansion in the premium-priced
Hawaii trade.
The Company is looking forward to the delivery
of the Pride of Hawaii, the newest addition to the NCL America
fleet, in April of 2006. Upon its arrival, NCL America will
have three modern cruise ships designed specifically for
Freestyle Cruising that are unique in offering a 7-day inter-island
cruise experience in Hawaii. The Company has two additional
ships on order, the Norwegian Pearl and the Norwegian Gem,
which are scheduled for delivery in the fourth quarters
of 2006 and 2007, respectively.
The Company has scheduled a conference call
at 10 a.m. eastern standard time today to discuss its earnings.
This call can be listened to live or on a delayed basis,
on the Company’s web site at www.ncl.com/investors.
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 represents 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 believe that it is the most relevant
measure of its pricing performance and is commonly used
in the cruise industry to measure pricing performance.
Net Cruise Costs
Net Cruise Costs represent Gross Cruise Costs excluding
commission, 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, the Company believes changes in Net Cruise Costs
to be the most relevant indicator of its performance and
is commonly used in the cruise industry as a measurement
of costs.
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.
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here to view NCL Corporation LTD. Consolidated Statements
of Operations, Balance Sheets, Cash Flows, and Non-GAAP
Reconciling Information.
This earnings release may contain
statements, estimates or projections that constitute “forward-looking
statements” as defined under U.S. federal securities
laws. Generally, the words “will,” “may,”
“believes,” “expects,” “intends,”
“anticipates,” “projects,” “plans,”
“seeks,” 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 our targeted customers;
our ability to implement brand strategies and our shipbuilding
programs, and to continue to expand our business worldwide;
changes in interest rates, oil prices 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; our 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 our expectations;
changes involving the tax, environmental, health, safety,
security and other regulatory regimes in which we operate;
emergency ship repairs; the implementation of regulations
in the United States requiring United States citizens to
obtain passports for travel to additional foreign destinations;
weather; 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.
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