Norwegian Cruise Line Holdings today reported financial results for the second quarter ended June 30, 2020.
“In recent weeks, we have taken further action to bolster our liquidity position in response to the COVID-19 global pandemic, including our highly successful $1.5 billion gross triple-tranche capital raise in July, which we believe positions us to withstand a scenario of prolonged voyage suspensions,” said Frank Del Rio, president and chief executive officer of Norwegian Cruise Line Holdings Ltd. “Our guests continue to demonstrate their desire for cruise vacations in the future. Looking ahead, we made significant progress in our Roadmap to Relaunch with the formation of our Healthy Sail Panel, comprised of globally recognized public health experts, which is tasked with providing recommendations to advance our public health response to COVID-19 and inform us on the development of a science-backed plan for a safe and healthy return to cruising.”
Along with the broader travel and leisure industry, the company has experienced swift and significant impacts related to the COVID-19 global pandemic which have resulted in voyage suspensions through October 31, 2020, according to a press release.
While booking volumes since the emergence of COVID-19 remain below historical levels, the company’s overall cumulative booked position and pricing for 2021 are within historical ranges including bookings made with future cruise credits.
All three brands have instituted programs for guests on cancelled sailings as a result of the Company’s voyage suspension which include offering value-add future cruise credits typically for 125% of the cruise fare paid in lieu of providing cash refunds.
The company said it continues to take swift, proactive measures to further mitigate the financial and operational impacts of COVID-19. This action plan includes previously outlined cost reduction and cash conservation levers which include reducing operating and capital expenditures, improving the debt maturity profile and securing additional capital.
The company’s targeted monthly cash burn is on average, approximately $160 million per month during the suspension of operations. This includes ongoing ship operating expenses, administrative operating expenses, interest expense, taxes and expected capital expenditures and excludes cash refunds of customer deposits as well as cash inflows from new and existing bookings. This also excludes debt amortization and newbuild related payments which are currently deferred through March 31, 2021. The new monthly cash burn estimate is at the high end of the previously disclosed range due to additional interest expense related to the July capital raise, maintaining more ships in warm layup due to various port requirements and weather restrictions, increased costs associated with fluctuating travel restrictions for crew and additional marketing investments.
As of June 30, 2020, the company’s total debt position was $10.3 billion and the Company’s cash and cash equivalents were $2.3 billion.
In July 2020, the company closed on a series of capital markets transactions to further bolster liquidity and extend its debt maturity profile. As a result of significant demand, oversubscription and the full exercise of the option to purchase additional ordinary shares and partial exercise of the option to purchase exchangeable senior notes, the total amount of gross proceeds were approximately $1.5 billion.
“We continue to adapt to this unprecedented and fluid environment and take swift and proactive measures to reduce costs, conserve cash and enhance our liquidity profile,” said Mark A. Kempa, executive vice president and chief financial officer of Norwegian Cruise Line Holdings Ltd. “Our recent capital raises have enabled us to extend our debt maturity profile and secure additional liquidity providing us with a strong foundation to withstand the impact of COVID-19.”
Second Quarter 2020 Results
GAAP net income (loss) was $(715.2) million or EPS of $(2.99) compared to $240.2 million or $1.11 in the prior year. The Company reported Adjusted Net Income (Loss) of $(666.4) million or Adjusted EPS of $(2.78), in 2020, which included $48.8 million of adjustments primarily consisting of expenses related to non-cash compensation and losses on extinguishment and modifications of debt. This compares to Adjusted Net Income and Adjusted EPS of $282.1 million and $1.30, respectively, in 2019.
Revenue decreased to $16.9 million compared to $1.7 billion in 2019 due to the complete suspension of voyages in the quarter.
Total cruise operating expense decreased 68.5% in 2020 compared to 2019. In 2020, our cruise operating expenses were primarily related to the continued payment of protected commissions as additional sailings were cancelled, crew costs, including salaries, food and repatriation costs, and fuel.
Fuel price per metric ton, net of hedges increased to $594 from $493 in 2019. The Company reported fuel expense of $49 million in the period. In addition, a net loss of $8.3 million was recorded in other income (expense), net related to a reduction in forecasted fuel consumption resulting from voyage cancellations due to COVID-19, resulting in a de-designation of the associated fuel hedges.
Interest expense, net was $114.5 million in 2020 compared to $66.0 million in 2019. The change in interest expense reflects additional debt outstanding, partially offset by lower LIBOR rates. Included in 2020 were losses on extinguishment of debt and debt modification costs of $21.2 million compared to $1.2 million in 2019.
Other income (expense), net was expense of $14.4 million in 2020 compared to a gain of $3.6 million in 2019. In 2020, the expense primarily related to losses on foreign currency exchange and losses on fuel hedges released into earnings as a result of the forecasted transactions no longer being probable. A $8.3 million net loss was recorded in the quarter related to a reduction in forecasted fuel consumption due to voyage cancellations, resulting in a de-designation of the associated fuel hedges.