Norwegian Cruise Line Holdings Ltd. (NYSE: NCLH) (together with NCL
Corporation Ltd., “Norwegian Cruise Line Holdings”, “Norwegian,”
“we” or the “Company”) today provided a business update on the
impacts of COVID-19 and its continued resumption of cruise
operations.
COVID-19 and Resumption of Cruise
Operations
In the third quarter of 2021, we began a phased
relaunch of certain cruise voyages with ships initially operating
at reduced occupancy levels. By the end of the third quarter, we
operated vessels totaling approximately 40% of our berth
capacity.
Beginning in December 2021, the spread of the
Omicron variant of COVID-19, with its increased transmissibility,
caused several operational challenges and disruptions, including
new travel restrictions and increased protocols in ports of call
limiting port availability, which led to the cancellation of
certain voyages in the fourth quarter of 2021 and first quarter of
2022, and the postponement of the restart of certain vessels. As of
the date hereof, 16 of our 28 ships, or 70% of our berth capacity,
are operating with guests on board. This excludes a vessel which
was paused from service beginning December 2021 due to the
cancellation of its South Africa and related itineraries as a
result of travel restrictions and other operational challenges due
to the Omicron variant. We expect to have approximately 85% of
berth capacity operating by the end of the first quarter of 2022
with the full fleet expected to be back in operation during the
early part of the second quarter of 2022.
On January 14, 2022, we announced that our three
brands have opted into the U.S. Centers for Disease Control and
Prevention’s (“CDC”) COVID-19 Program for Cruise Ships Operating in
U.S. Waters (the “Program”), the agency’s voluntary COVID-19 risk
mitigation program for foreign-flagged cruise ships operating in
U.S. waters. The Program was announced in connection with the
expiration of the Temporary Extension and Modification of Framework
for Conditional Sailing Order on January 15, 2022, and we await the
release of additional information about the Program from the CDC.
In addition, as part of our SailSAFE health and safety program, our
SailSAFE Global Health and Wellness Council, chaired by former head
of the U.S. Food and Drug Administration, Dr. Scott Gottlieb,
continues to advise the Company on health and safety protocols in
light of advancements in medicine and technology.
Booking Environment and Outlook
Net booking volumes in the beginning of the
fourth quarter of 2021 continued to demonstrate week-over-week
sequential growth after the slowdown in booking activity caused by
the Delta variant of COVID-19. Net booking volumes in the later
part of the fourth quarter 2021 were negatively impacted by the
Omicron variant of COVID-19, primarily for close-in voyages in the
first and second quarters of 2022. In recent weeks, net booking
volumes have continued to improve sequentially. As a result of the
impacts from Omicron, as of February 6, 2022, the Company’s
cumulative booked position for the first half of 2022 is below the
extraordinarily strong levels of 2019 while the second half, when
the full fleet is expected to be back in operation, is in line with
the comparable 2019 period. Concurrently, pricing for the first
half, second half and full year 2022 are above the record levels
for the same time in 2019, even when including the dilutive impact
of future cruise credits. Booking trends for 2023 demonstrate
continued strong demand for sailings in the medium and longer term
with booked position and pricing meaningfully higher and at record
levels when compared to 2019.
Liquidity, Cash Burn and Financial Action
Plan
We continue to take proactive measures to
enhance liquidity and financial flexibility in the current
environment. As of September 30, 2021, our total debt position was
$12.4 billion and our liquidity, consisting of cash and cash
equivalents and short-term investments, was $1.9 billion.
We have taken the following additional actions to enhance our
liquidity profile and financial flexibility since September 30,
2021:
- In November 2021, NCL Corporation
Ltd. (“NCLC”) entered into a $1.0 billion commitment through August
15, 2022 that provides additional liquidity to the Company. If
drawn, this commitment will convert into an unsecured note maturing
in April 2024. The Company has not drawn and currently does not
intend to draw under this commitment.
- In November 2021, NCLC issued $1.15
billion aggregate principal amount of 1.125% Exchangeable Senior
Notes due 2027 (the “2027 Exchangeable Notes”), which includes the
full exercise of the initial purchasers’ greenshoe option. The
initial exchange rate per $1,000 principal amount of 2027
Exchangeable Notes is 29.6850 ordinary shares, which is equivalent
to an initial exchange price of approximately $33.69 per ordinary
share, subject to adjustment in certain circumstances.
- In November 2021, we repurchased
$715.9 million aggregate principal amount of our 6.00% Exchangeable
Senior Notes due 2024 (the “2024 Exchangeable Notes”) for
approximately $1.4 billion.
- In November 2021, the Company
issued 46,858,854 ordinary shares to certain holders of the 2024
Exchangeable Notes in a registered direct offering. The proceeds of
such offering were used to redeem $236.25 million aggregate
principal amount of our 12.25% Senior Secured Notes due 2024 and
$262.50 million aggregate principal amount of our 10.250% Senior
Secured Notes due 2026, including any accrued but unpaid interest
thereon, to pay related premiums, fees and expenses and for general
corporate purposes, including the repurchase of a portion of the
2024 Exchangeable Notes.
Our monthly average cash burn for the fourth quarter of 2021 was
approximately $345 million, slightly lower than our prior estimate
of $350 million for the fourth quarter of 2021. The cash burn rate
includes ongoing ship operating expenses, administrative operating
expenses, interest expense, taxes, debt deferral fees and
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.
Outlook
While we cannot estimate the impact of the
COVID-19 pandemic on our business, financial condition or near- or
longer-term financial or operational results with certainty, we
will report a net loss for the fourth quarter and full year ending
December 31, 2021 and expect to report a net loss until we are able
to resume regular voyages.
As a result of Omicron variant-related impacts
to operations in the first quarter of 2022, we now expect net cash
provided by operating activities to be positive during the second
quarter of 2022. Despite the impact of the Omicron variant on the
booking environment, and based on our current projections and
market and public health conditions, we expect to have positive
Adjusted Net Income1 for the second half of 2022.
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 nearly 60,000 berths, these
brands offer itineraries to more than 490 destinations worldwide.
The Company has nine additional ships scheduled for delivery
through 2027, comprising approximately 24,000 berths.
About
SailSAFE
Norwegian Cruise Line Holdings Ltd. established
its SailSAFE health and safety program in response to the unique
challenges of the COVID-19 global pandemic to protect guests, crew
and communities visited. SailSAFE is a robust and comprehensive
health and safety strategy with new and enhanced protocols to
create multiple layers of protection against COVID-19. This
science-backed plan for a safe and healthy return to cruising was
developed in conjunction with a diverse group of globally
recognized experts and will be continuously improved, modified and
refined using the best available science and technology. For more
information on the SailSAFE health and safety program please visit
http://www.nclhltd.com/Health-and-Safety.
About the
SailSAFE Global Health and Wellness Council
The SailSAFE Global Health and Wellness Council
(“Council”) was established by Norwegian Cruise Line Holdings Ltd.
to provide expert advice on the implementation, compliance with and
continuous improvement of the Company’s SailSAFE health and safety
program. The Council will complement the work of the Healthy Sail
Panel and continuously evaluate and identify ways to improve health
and safety standards, utilizing the best technologies and
information available. The Council is cross-functional, diverse and
extensively experienced, comprised of four experts at the forefront
of their fields and led by Chairman of the Council, Dr. Scott
Gottlieb, former commissioner of the U.S. Food and Drug
Administration.
Terminology
Adjusted Net Income. Net income,
adjusted for non-cash compensation expense and any potential
impacts associated with financing activities.
Non-GAAP Financial
Measures
We use certain non-GAAP financial measures, such
as Adjusted Net Income, to enable us to analyze our performance.
Adjusted Net Income is non-GAAP financial measure that excludes
certain amounts and is used to supplement GAAP net income. We use
Adjusted Net Income as a key performance measure of our earnings
performance. We believe that both management and investors benefit
from referring to this non-GAAP financial measure in assessing our
performance and when planning, forecasting and analyzing future
periods. This non-GAAP financial measure also facilitate
management’s internal comparison to our historical performance. The
amounts excluded in the presentation of this non-GAAP financial
measure may vary from period to period; accordingly, our
presentation of Adjusted Net Income may not be indicative of future
adjustments or results. The Company does not provide estimated
future results on a GAAP basis because the Company is unable to
predict, with reasonable certainty, the future movement of foreign
exchange rates or the future impact of certain gains and charges.
These items are uncertain and will depend on several factors,
including industry conditions, and could be material to the
Company’s results computed in accordance with GAAP.
Cautionary Statement Concerning
Forward-Looking StatementsSome of the statements,
estimates or projections contained in this release are
“forward-looking statements” within the meaning of the U.S. federal
securities laws intended to qualify for the safe harbor from
liability established by the Private Securities Litigation Reform
Act of 1995. All statements other than statements of historical
facts contained in this release, including, without limitation,
those regarding our business strategy, financial position, results
of operations, plans, prospects, actions taken or strategies being
considered with respect to our liquidity position, valuation and
appraisals of our assets and objectives of management for future
operations (including those regarding expected fleet additions, our
ability to weather the impacts of the COVID-19 pandemic, our
expectations regarding the resumption of cruise voyages and the
timing for such resumption of cruise voyages, the implementation of
and effectiveness of our health and safety protocols, operational
position, demand for voyages, plans or goals for our sustainability
program and decarbonization efforts, our expectations for future
cash flows and profitability, financing opportunities and
extensions, and future cost mitigation and cash conservation
efforts and efforts to reduce operating expenses and capital
expenditures) are forward-looking statements. Many, but not all, of
these statements can be found by looking for words like “expect,”
“anticipate,” “goal,” “project,” “plan,” “believe,” “seek,” “will,”
“may,” “forecast,” “estimate,” “intend,” “future” and similar
words. Forward-looking statements do not guarantee future
performance and may involve risks, uncertainties and other factors
which could cause our actual results, performance or achievements
to differ materially from the future results, performance or
achievements expressed or implied in those forward-looking
statements. Examples of these risks, uncertainties and other
factors include, but are not limited to the impact of:
- the spread of epidemics, pandemics
and viral outbreaks and specifically, the COVID-19 pandemic,
including its effect on the ability or desire of people to travel
(including on cruises), which is expected to continue to adversely
impact our results, operations, outlook, plans, goals, growth,
reputation, cash flows, liquidity, demand for voyages and share
price;
- implementing precautions in
coordination with regulators and global public health authorities
to protect the health, safety and security of guests, crew and the
communities we visit and to comply with regulatory restrictions
related to the pandemic and the implementation of any such
precautions;
- legislation prohibiting companies
from verifying vaccination status;
- our indebtedness and restrictions
in the agreements governing our indebtedness that require us to
maintain minimum levels of liquidity and be in compliance with
maintenance covenants and otherwise limit our flexibility in
operating our business, including the significant portion of assets
that are collateral under these agreements;
- our ability to work with lenders
and others or otherwise pursue options to defer, renegotiate,
refinance or restructure our existing debt profile, near-term debt
amortization, newbuild related payments and other obligations and
to work with credit card processors to satisfy current or potential
future demands for collateral on cash advanced from customers
relating to future cruises;
- our need for additional financing
or financing to optimize our balance sheet, which may not be
available on favorable terms, or at all, and our outstanding
exchangeable notes and any future financing which may be dilutive
to existing shareholders;
- the unavailability of ports of
call;
- future increases in the price of,
or major changes or reduction in, commercial airline services;
- changes involving the tax and
environmental regulatory regimes in which we operate, including new
regulations aimed at reducing greenhouse gas emissions;
- the accuracy of any appraisals of
our assets as a result of the impact of the COVID-19 pandemic or
otherwise;
- our success in controlling
operating expenses and capital expenditures;
- trends in, or changes to, future
bookings and our ability to take future reservations and receive
deposits related thereto;
- adverse events impacting the
security of travel, such as terrorist acts, armed conflict and
threats thereof, acts of piracy, and other international
events;
- adverse incidents involving cruise
ships;
- adverse general economic and
related factors, such as fluctuating or increasing levels of
unemployment, underemployment and the volatility of fuel prices,
declines in the securities and real estate markets, and perceptions
of these conditions that decrease the level of disposable income of
consumers or consumer confidence;
- breaches in data security or other
disturbances to our information technology and other networks or
our actual or perceived failure to comply with requirements
regarding data privacy and protection;
- changes in fuel prices and the type
of fuel we are permitted to use and/or other cruise operating
costs;
- mechanical malfunctions and
repairs, delays in our shipbuilding program, maintenance and
refurbishments and the consolidation of qualified shipyard
facilities;
- the risks and increased costs
associated with operating internationally;
- our inability to recruit or retain
qualified personnel or the loss of key personnel or employee
relations issues;
- our inability to obtain adequate
insurance coverage;
- pending or threatened litigation,
investigations and enforcement actions;
- any further impairment of our
trademarks, trade names or goodwill;
- volatility and disruptions in the
global credit and financial markets, which may adversely affect our
ability to borrow and could increase our counterparty credit risks,
including those under our credit facilities, derivatives,
contingent obligations, insurance contracts and new ship progress
payment guarantees;
- our reliance on third parties to
provide hotel management services for certain ships and certain
other services;
- fluctuations in foreign currency
exchange rates;
- our expansion into new markets and
investments in new markets and land-based destination
projects;
- overcapacity in key markets or
globally; and
- other factors set forth under the
section entitled “Risk Factors” in our Annual Report on
Form 10-K for the year ended December 31, 2020 and our
Quarterly Reports on Form 10-Q for the periods ended March 31,
2021, June 30, 2021 and September 30, 2021.
Additionally, many of these risks and
uncertainties are currently amplified by and will continue to be
amplified by, or in the future may be amplified by, the COVID-19
pandemic. It is not possible to predict or identify all such risks.
There may be additional risks that we consider immaterial or which
are unknown. In addition, some of our executive officers and
directors have not sold their shares in NCLH since the beginning of
the COVID-19 pandemic as a gesture of support for our company as
they navigated us through unprecedented challenges. Now that we
have resumed operations, we anticipate that our executive officers
and directors may sell shares under Rule 10b5-1 plans beginning in
the first quarter of 2022 as part of their ordinary course
financial planning.
The above examples are not exhaustive and new
risks emerge from time to time. Such forward-looking statements are
based on our current beliefs, assumptions, expectations, estimates
and projections regarding our present and future business
strategies and the environment in which we expect to operate in the
future. These forward-looking statements speak only as of the date
made. We expressly disclaim any obligation or undertaking to
release publicly any updates or revisions to any forward-looking
statement to reflect any change in our expectations with regard
thereto or any change of events, conditions or circumstances on
which any such statement was based, except as required by law.
Investor Relations &
Media Contact |
|
Edel Cruz |
|
(305)
468-2339InvestorRelations@nclcorp.com |
|
1 See “Terminology” and “Non-GAAP Financial Measures” below for
additional information about Adjusted Net Income.
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