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NCL (Norwegian Cruise Line) completed a strategic repositioning in 2008, implementing a number of initiatives that have led to record results and improved financial performance even within a challenging economic environment. Highlights from 2008 included the augmentation of its senior management team in the Miami head office with both seasoned managers and industry veterans; enhancement of its onboard product with the full implementation of Freestyle 2.0; significant improvement in the way it conducts business with its travel partners through Partnership 2.0; realignment of its Hawaii operations; restructuring of its new build program; and a keen focus on managing and streamlining its cost structure.
"The Company achieved record improvements in both EBITDA and Net Yields in 2008 despite an extremely challenging economy,” said Kevin Sheehan, NCL’s Chief Executive Officer. “We worked diligently in 2008 to transform the Company with the successful implementation of a variety of measures and initiatives. The result is a new Company, one that is extremely focused on customer service, financial performance and is well poised to come through this difficult period.”
Full year results
NCL reported a record setting 18,2% increase in EBITDA in 2008 of $228,1 million versus $192,9 million in 2007. On a pro forma basis, EBITDA1 2 increased 55,7% to $300,1 million versus the prior year after including the impact of restructuring initiatives such as the re-flagging and redeployment of Pride of Hawaii and Pride of Aloha from the Company’s U.S.-flagged fleet to its international fleet as Norwegian Jade and Norwegian Sky, respectively, as well as other cost saving initiatives.
In 2008, net revenues increased 2,9% despite a 3,7% decrease in capacity. Total revenues for 2008 were $2,1 billion versus $2,2 billion in 2007, a 3,2% decrease. Net Yields1 for 2008 increased 6,9% from the prior year while Gross Yields1 were modestly higher. Operating income for the Company increased by 46,3% to $65,5 million in 2008 from $44,8 million in 2007, excluding impairment charges in 2008 of $128,8 million related to the cancellation of a contract to build a ship and $2,6 million in 2007 related to the sale of Oceanic. Excluding these one-time charges, the Company reported a net loss of $83,0 million for its year ended December 31, 2008, as compared to a net loss of $224,4 million for the prior year. Results for the year ended December 31, 2008 include a non-cash foreign exchange translation gain of $101,8 million primarily related to marking-to-market the Company’s Euro denominated debt, offset by $99,9 million of losses due to the change in fair value of our derivative contracts. The Company reported a non-cash foreign exchange translation loss of $94,5 million for the same period in 2007. Interest expense (net of capitalized interest), decreased by $23,0 million year-over-year as a result of lower average outstanding debt balances for the year.
In the first few months of 2009, the Company experienced strong bookings with a rise of 15% year-over-year through March 15, 2009. In 2009, the Company will return the last of its older chartered ships (Norwegian Majesty) to Star Cruises, completing the transformation of its fleet to 100% modern ships purpose-built for Freestyle Cruising. The Company is eagerly anticipating the arrival of its next generation of Freestyle Cruising ship, Norwegian Epic, scheduled for delivery in May 2010. The arrival of Norwegian Epic represents the next step in this exciting evolution of the Company’s fleet. The Company announced further details about the ship’s wide range of accommodations on March 18, 2009, the innovative dining and amenities on April 3, 2009 and will reveal information about the entertainment on May 20, 2009. The Company will also open Norwegian Epic’s 2010 itineraries for sale to the public on May 20, 2009.
In recent months, the Company had been exploring alternatives to optimize its capital structure. In conjunction with an equity investment by its shareholders of $100 million, the Company has refinanced approximately $800 million of debt that it had coming due in 2009 and 2010.
“This is an extremely exciting time for NCL. We’ve transformed the Company, improved our financial performance, negotiated new lender terms and received additional financial support from our shareholders,” added Sheehan. “All of these elements are helping us to weather this challenging climate.”
Theodore is the Co-Founder and Managing Editor of TravelDailyNews Media Network; his responsibilities include business development and planning for TravelDailyNews long-term opportunities.
