MIAMI, Feb. 25, 2021 (GLOBE NEWSWIRE) -- Norwegian Cruise Line Holdings Ltd. (NYSE: NCLH) today reported financial results for the fourth quarter and full year ended December 31, 2020 and provided a business update.

“While 2020 has been without a doubt the most challenging year in the Company’s 50 plus year history, our team responded to the unprecedented environment with swift and decisive action. Our Company demonstrated once again its adaptability and resiliency, underscored by the unwavering commitment and dedication from our team members across the globe,” said Frank Del Rio, president and chief executive officer of Norwegian Cruise Line Holdings Ltd. “Looking ahead, we are encouraged by the accelerating rollout of vaccines, the progress towards herd immunity and the strong demand for future cruise vacations.”

Health and Safety

The Company continues to work with its expert advisors, the Healthy Sail Panel, and global public health authorities and government agencies to refine its comprehensive and multi-layered health and safety strategy to enhance its already rigorous health and safety standards in response to COVID-19. The Company is continuously evaluating and identifying ways to improve these standards as science, technology and knowledge of SARS-CoV-2 advances including incorporating recent vaccine advancements into its overall strategy for the eventual return to service.

The Company continues to work through the requirements of the U.S. Centers for Disease Control and Prevention (“CDC”) after the issuance of the Framework for Conditional Sailing Order (the “Conditional Order”) which permits cruise ship passenger operations in U.S. waters under certain conditions. However, significant uncertainties remain regarding specific requirements of the Conditional Order including pending technical instructions from the CDC.

Booking Environment and Outlook

The Company’s current suspension of global cruise voyages includes all voyages on Norwegian Cruise Line, Oceania Cruises and Regent Seven Seas Cruises through May 31, 2021.

While overall booking volumes since the emergence of the COVID-19 global pandemic remain below historical levels, there continues to be demand for future cruise vacations. Despite reduced sales and marketing investments, and a travel agency industry that has not been at full strength for months, bookings have been strong for future periods resulting in an elongated booking window as guests book further into the future. The Company’s overall cumulative booked position for the second half of 2021 remains below historical levels, driven by continued uncertainty around timing of the resumption of cruising and the shift of limited marketing investments to 2022 sailings. Pricing for the second half of 2021 is in line with pre-pandemic levels, even after including the dilutive impact of future cruise credits (“FCC”).

While still early in the booking cycle, 2022 booking trends are very positive driven by strong pent up demand. The Company is experiencing robust future demand across all brands with the overall cumulative booked position for the first half of 2022 significantly ahead of 2019’s record levels with pricing in line when excluding the dilutive impact of FCCs.

As of December 31, 2020, the Company had $1.2 billion of advance ticket sales, including the long-term portion of advance ticket sales, which includes approximately $0.85 billion of future cruise credits.

Liquidity and Financial Action Plan

The Company continues to take swift, proactive measures to mitigate the financial and operational impacts of the COVID-19 pandemic. This financial action plan includes cost reduction and cash conservation levers which include reducing operating and capital expenditures, improving the Company’s debt maturity profile and securing additional capital. As of December 31, 2020, the Company’s total debt position was $11.8 billion and the Company’s cash and cash equivalents was $3.3 billion. The Company was in compliance with all debt covenants as of December 31, 2020.

The Company has taken the following additional actions to enhance liquidity since September 30, 2020:

• Raised $824 million, net of underwriting fees, with an equity offering of 40 million ordinary shares in November 2020.
• Issued $850 million of 5.875% senior unsecured notes due 2026 in an oversubscribed offering in December 2020.
• Amended all export credit agency backed credit agreements to defer approximately $680 million of amortization payments through March 31, 2022 and received covenant waivers through December 31, 2022.
• Deferred certain newbuild-related payments of approximately €220 million through March 31, 2022.
• Provided additional near-term financial flexibility by amending the Pride of America and Norwegian Jewel credit facilities to suspend the testing of certain financial covenants.
• Amended Senior Secured Credit Facility to defer approximately $70 million of certain amortization payments due prior to June 30, 2022 and suspend the testing of certain financial covenants through December 31, 2022.
• Extended salary reductions and furloughs for certain shoreside team members.
• Continued significant reductions or deferrals of near-term marketing expenses and non-essential capital expenditures.

The Company's monthly average cash burn for the fourth quarter 2020 was approximately $190 million and included approximately $15 million per month of additional relaunch-related expenses as the Company began preparing vessels for a potential return to service in early 2021, in connection with the CDC Conditional Order, which did not materialize. The incremental relaunch costs were associated with crew re-staffing, re-positioning and provisioning of vessels, implementation of new health and safety protocols and a ramp-up of demand-generating marketing investments which helped further stimulate the strong future demand the Company is experiencing.

For the first quarter of 2021, the Company expects the average cash burn rate to temporarily remain elevated at approximately $190 million per month, or approximately $170 million per month excluding non-recurring debt modification costs, as it ramps down relaunch-related expenses and repatriates crew. The Company has incurred approximately $60 million of one-time debt deferral and modification costs and fees in the first quarter of 2021 as a result of successful debt deferrals and covenant waivers and suspensions, which combined with newbuild payment extensions, have resulted in approximately $1 billion of additional liquidity over the next 12 months. Once the ramp down of relaunch-related expenses are complete, the Company expects its average cash burn rate to decrease and remain at reduced levels until return to service preparations resume.

Cash burn rates include ongoing ship operating expenses, administrative operating expenses, interest expense, taxes and expected non-newbuild capital expenditures and excludes cash refunds of customer deposits as well as cash inflows from new and existing bookings, newbuild related capital expenditures and other working capital changes. Future cash burn rate estimates also exclude unforeseen expenses. The fourth quarter 2020 cash burn rate and first quarter 2021 estimate also reflect the deferral of debt amortization and newbuild related payments.

“We continue to take proactive measures to bolster our efforts to weather the ongoing uncertainty of the public health environment, including two highly successful capital markets transactions executed in the fourth quarter which raised nearly $1.7 billion and demonstrate the continued confidence of our investors in our business model,” said Mark A. Kempa, executive vice president and chief financial officer of Norwegian Cruise Line Holdings Ltd. “We are seeking to minimize cash burn and maximize financial flexibility in the near-term while balancing preparations for the future resumption of cruising. Despite the near-term challenges we face, we remain focused on our long-term strategic priorities and creating a clear path to financial recovery.”

Full Year 2020 Results

GAAP net loss was $(4.0) billion or EPS of $(15.75) compared to net income of $930.2 million or EPS of $4.30 in the prior year. The Company reported Adjusted Net Loss of $(2.2) billion or Adjusted EPS of $(8.64) in 2020. This compares to Adjusted Net Income and Adjusted EPS of $1.1 billion and $5.09, respectively, in 2019.

Revenue decreased 80.2% to $1.3 billion compared to $6.5 billion in 2019. The adverse impact on revenue was due to the cancellation of the vast majority of sailings in 2020 as a result of the COVID-19 pandemic, which resulted in a 78.6% decrease in Capacity Days.

Cruise operating expense decreased 53.8% in 2020 compared to 2019 driven by the suspension of global cruise voyages. In 2020, expenses subsequent to the suspension of voyages primarily included the cost of protected commissions, crew costs including salaries, food and other repatriation costs, fuel and other ongoing costs such as insurance and ship maintenance.

Fuel price per metric ton, net of hedges increased to $599 from $491 in 2019. The Company reported fuel expense of $264.7 million in 2020.

Interest expense, net was $482.3 million in 2020 compared to $272.9 million in 2019. The increase in 2020 was driven by additional debt outstanding at higher interest rates, partially offset by lower LIBOR. In 2020, interest expense also reflects losses on extinguishment of debt and debt modification costs of $27.8 million. 2019 included losses on extinguishment of debt and debt modification costs of $16.7 million.

Other income (expense), net was expense of $33.6 million in 2020 compared to income of $6.2 million in 2019. In 2020, the expense primarily related to losses on foreign currency exchange and losses on fuel derivatives recognized in earnings. A $23.2 million net loss was recorded in the year primarily related to the de-designation of fuel hedges.

Income tax benefit (expense) was an expense of $12.5 million in 2020 compared to a benefit of $18.9 million in 2019. In 2020, the tax expense is primarily due to a valuation allowance of $39.6 million recognized in the fourth quarter on certain net operating loss carryforwards partially offset by operating losses.

Fourth Quarter 2020 Results

GAAP net loss was $(738.9) million or EPS of $(2.51) compared to net income of $121.3 million or EPS of $0.56 in the prior year. The Company reported Adjusted Net Loss of $(683.8) million or Adjusted EPS of $(2.33) in 2020. This compares to Adjusted Net Income and Adjusted EPS of $155.7 million and $0.73, respectively, in 2019.

Revenue decreased to $9.6 million compared to $1.5 billion in 2019 due to the complete suspension of voyages in the quarter.

Total cruise operating expense decreased 76.7% in 2020 compared to 2019. In 2020, our cruise operating expenses were primarily related to crew costs, including salaries, food and other repatriation costs, fuel, and other ongoing costs such as insurance and ship maintenance.

Fuel price per metric ton, net of hedges increased to $574 from $508 in 2019. The Company reported fuel expense of $42.5 million in the period.

Interest expense, net was $159.2 million in 2020 compared to $73.2 million in 2019. The change in interest expense reflects additional debt outstanding at higher interest rates, partially offset by lower LIBOR. Included in 2019 were losses on extinguishment of debt and debt modification costs of $9.4 million.

Other income (expense), net was an expense of $(1.3) million in 2020 compared to an expense of $(7.3) million in 2019. In 2020, the expense primarily related to losses on foreign currency exchange, partially offset by gains on fuel derivatives recognized in earnings. A $11.4 million net gain was recorded in the quarter primarily related to the de-designation of fuel hedges.

2021 Outlook

As a consequence of the COVID-19 pandemic, while the Company cannot estimate the impact on its business, financial condition or near- or longer-term financial or operational results with certainty, it will report a net loss for the first quarter ending March 31, 2021 and expects to report a net loss until the Company is able to resume voyages.

As of December 31, 2020, the Company had hedged approximately 59%, 37% and 15% of its total projected metric tons of fuel consumption for 2021, 2022 and 2023, respectively. The following table provides amounts hedged and price per barrel of heavy fuel oil (“HFO”) which is hedged utilizing U.S. Gulf Coast 3% (“USGC”) and marine gas oil (“MGO”) which is hedged utilizing Gasoil.

^{(1) These derivatives were de-designated for accounting purposes in the fourth quarter of 2020 but still represent economic hedges and may be re-designated in the future.}

Anticipated total capital expenditures for first quarter 2021 are approximately $90 million which includes health and safety investments. The Company is not providing total capital expenditure guidance for full year 2021 or future years at this time given the uncertain and evolving current environment. However, after recent deferrals the Company’s anticipated expenditures related to ship construction contracts were $0.4 billion, $1.6 billion and $2.5 billion for the years ending December 31, 2021, 2022 and 2023, respectively. The Company has export credit financing in place for the anticipated expenditures related to ship construction contracts of $0.2 billion, $0.8 billion and $1.8 billion for the years ending December 31, 2021, 2022 and 2023, respectively. The impacts of COVID-19 on the shipyards where the Company’s ships are under construction, or will be constructed, have resulted in some minor delays in ship deliveries, and the impact of COVID-19 could result in additional delays in ship deliveries in the future, which may be prolonged.

Interest Expense, net is expected to be approximately $200 million for the first quarter 2021, which includes approximately $50 million of one-time debt modification costs¹, and approximately $650 million for full year 2021. Depreciation and Amortization is expected to be approximately $170 million for the first quarter 2021 and approximately $700 million for full year 2021.

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^{1 Excludes approximately $10 million of associated lender fees incurred in the first quarter 2021 which are expected to be capitalized and amortized over the life of the associated loans.}

About Norwegian Cruise Line Holdings Ltd.

Norwegian Cruise Line Holdings Ltd. (NYSE: NCLH) is a leading global cruise company which operates the Norwegian Cruise Line, Oceania Cruises and Regent Seven Seas Cruises brands. With a combined fleet of 28 ships with approximately 59,150 berths, these brands offer itineraries to more than 490 destinations worldwide. The Company has nine additional ships scheduled for delivery through 2027.

About the Healthy Sail Panel

Norwegian Cruise Line Holdings Ltd. in collaboration with Royal Caribbean Group established the Healthy Sail Panel (“HSP”), a group of 11 leading experts to help inform the cruise industry in the development of new and enhanced cruise health and safety standards in response to the global COVID-19 pandemic. The HSP, co-chaired by Dr. Scott Gottlieb, former commissioner of the U.S. Food and Drug Administration and Governor Mike Leavitt, former Secretary of the U.S. Department of Health and Human Services, consists of globally recognized experts from various disciplines, including public health, infectious disease, biosecurity, hospitality and maritime operations. The panel’s work, including 74 detailed recommendations across five key areas of focus, is informing the Company’s health and safety protocols and has been widely shared with the cruise industry and open to any other industry that could benefit from the HSP’s scientific and medical insights.