10-K 1 t1500098_10k.htm FORM 10-K
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K
(Mark One)
| x | ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
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For the fiscal year ended December 31, 2014
OR
| ¨ | TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
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For the transition period from to
Commission file number: 001-35784
NORWEGIAN CRUISE LINE HOLDINGS LTD.
(Exact name of registrant as specified in its charter)
| Bermuda | 98-0691007 |
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| (State or other jurisdiction of incorporation or organization) | (I.R.S. Employer Identification No.) |
7665 Corporate Center Drive, Miami, Florida 33126
(Address of principal executive offices) (zip code)
(305) 436-4000
(Registrant’s telephone number, including area code)
Securities registered pursuant to Section 12(b) of the Act:
| Title of each class | Name of each exchange on which registered |
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| Ordinary shares, par value $.001 per share | The NASDAQ Stock Market LLC |
Securities registered pursuant to Section 12(g) of the Act: None
Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. Yes x No ¨
Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act. Yes ¨ No x
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes x No ¨
Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). Yes x No ¨
Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of registrant’s knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K. x
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company (See the definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act).
| Large accelerated filer | x | Accelerated filer | ¨ |
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| Non-accelerated filer | ¨ (Do not check if a smaller reporting company) | Smaller reporting company | ¨ |
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Act). Yes ¨ No x
As of June 30, 2014, the last business day of the registrant’s most recently completed second fiscal quarter, the aggregate market value of voting stock held by non-affiliates of the registrant based upon the closing sales price for the registrant’s ordinary shares as reported on The NASDAQ Stock Market was $2.8 billion.
There were 227,718,824 ordinary shares outstanding as of February 20, 2015.
Documents Incorporated by Reference
Portions of the Proxy Statement for the registrant’s 2015 Annual General Meeting of Shareholders, to be filed with the Securities and Exchange Commission not later than 120 days after December 31, 2014, are incorporated by reference in Part III herein.
NORWEGIAN CRUISE LINE HOLDINGS LTD.
TABLE OF CONTENTS
Terms Used in this Annual Report
Unless otherwise indicated or the context otherwise requires, references in this annual report to (i) the “Company,” “we,” “our” and “us” refer to NCLH (as defined below) and its subsidiaries (including Prestige (as defined below), except for periods prior to the consummation of the Acquisition of Prestige (as defined below)), (ii) “NCLC” refers to NCL Corporation Ltd., (iii) “NCLH” refers to Norwegian Cruise Line Holdings Ltd., (iv) “Norwegian Cruise Line” or “Norwegian” refers to the Norwegian Cruise Line brand and its predecessors and “NCL America” or “NCLA” refers to our U.S.-flagged operations, (v) “Prestige” refers to Prestige Cruises International, Inc., a Panamanian corporation, together with its consolidated subsidiaries, (vi) “PCH” refers to Prestige Cruise Holdings, Inc., Prestige’s direct wholly-owned subsidiary, which in turn is the parent of Oceania Cruises, Inc. (“Oceania”) and the parent of Seven Seas Cruises S. DE R.L. (“Regent”). Oceania also refers to the brand Oceania Cruises and Regent also refers to the brand Regent Seven Seas Cruises, (vii) “Apollo” refers to Apollo Global Management, LLC, its subsidiaries and the affiliated funds it manages and the “Apollo Funds” refers to one or more of AIF VI NCL (AIV), L.P., AIF VI NCL (AIV II), L.P., AIF VI NCL (AIV III), L.P., AIF VI NCL (AIV IV), L.P., AAA Guarantor – Co-Invest VI (B), L.P., Apollo Overseas Partners (Delaware) VI, L.P., Apollo Overseas Partners (Delaware 892) VI, L.P., Apollo Overseas Partners VI, L.P., Apollo Overseas Partners (Germany) VI, L.P., AAA Guarantor — Co-Invest VII, L.P., AIF VI Euro Holdings, L.P., AIF VII Euro Holdings, L.P., Apollo Alternative Assets, L.P., Apollo Management VI, L.P. and Apollo Management VII, L.P., (viii) “TPG Global” refers to TPG Global, LLC, “TPG” refers to TPG Global and its affiliates and the “TPG Viking Funds” refers to one or more of TPG Viking, L.P., TPG Viking AIV I, L.P., TPG Viking AIV II, L.P., and TPG Viking AIV III, L.P. and/or certain other affiliated investment funds, each an affiliate of TPG, (ix) “Genting HK” refers to Genting Hong Kong Limited and/or its affiliates (formerly Star Cruises Limited and/or its affiliates), and (x) “Affiliate(s)” or “Sponsor(s)” refers to Genting HK, the Apollo Funds and/or the TPG Viking Funds. References to the “U.S.” are to the United States of America, “dollars” or “$” are to U.S. dollars, “U.K.” are to the United Kingdom and “euros” or “€” are to the official currency of the Eurozone.
This annual report includes certain non-GAAP financial measures, such as Net Revenue, Net Yield, Net Cruise Cost, Adjusted Net Yield, Adjusted Net Revenue, Adjusted Net Cruise Cost Excluding Fuel, Adjusted EBITDA, Adjusted Net Income and Adjusted EPS. Definitions of these non-GAAP financial measures are included below. For further information about our non-GAAP financial measures including detailed adjustments made in calculating our non-GAAP financial measures and a reconciliation to the most directly comparable GAAP financial measure, we refer you to “Item 7—Management’s Discussion and Analysis of Financial Condition and Results of Operations.”
Unless otherwise indicated, in this annual report, the following terms have the meanings set forth below:
| • | Acquisition of Prestige. In November 2014, pursuant to the Merger Agreement, we acquired Prestige in a cash and stock transaction for total consideration of $3.025 billion, including the assumption of debt. The acquisition consideration is subject to an additional cash payment of up to $50 million upon achievement of certain 2015 revenue milestones. |
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| • | Adjusted EBITDA. EBITDA adjusted for other income (expense) and other supplemental adjustments. |
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| • | Adjusted EPS. Adjusted Net Income divided by the number of diluted weighted-average shares. |
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| • | Adjusted Net Cruise Cost Excluding Fuel. Net Cruise Cost less fuel expense adjusted for supplemental adjustments. |
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| • | Adjusted Net Income. Net income adjusted for supplemental adjustments. |
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| • | Adjusted Net Revenue. Net Revenue adjusted for supplemental adjustments. |
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| • | Adjusted Net Yield. Net Yield adjusted for supplemental adjustments. |
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| • | Berths. Double occupancy capacity per cabin (single occupancy per studio cabin) even though many cabins can accommodate three or more passengers. |
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| • | Breakaway Class Ships. Norwegian Breakaway and Norwegian Getaway. |
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| • | Breakaway Plus Class Ships. The next generation of ships which are similar in design and innovation to Breakaway Class Ships. |
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| • | Business Enhancement Capital Expenditures. Capital expenditures other than those related to new ship construction and ROI Capital Expenditures. |
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| • | Capacity Days. Available Berths multiplied by the number of cruise days for the period. |
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| • | Charter. The hire of a ship for a specified period of time. |
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| • | CLIA. Cruise Lines International Association, Inc., a non-profit marketing and training organization formed in 1975 to promote cruising. |
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| • | Constant Currency. A calculation whereby foreign currency-denominated revenue and expenses in a period are converted at the U.S. dollar exchange rate of a comparable period in order to eliminate the effects of the foreign exchange fluctuations. |
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| • | Dry-dock. A process whereby a ship is positioned in a large basin where all the fresh/sea water is pumped out in order to carry out cleaning and repairs of those parts of a ship which are below the water line. |
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| • | EPS. Earnings per share. |
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| • | EBITDA. Earnings before interest, taxes and depreciation and amortization. |
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| • | GAAP. Generally accepted accounting principles in the U.S. |
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| • | Gross Cruise Cost. The sum of total cruise operating expense and marketing, general and administrative expense. |
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| • | Gross Tons. A unit of enclosed passenger space on a cruise ship, such that one Gross Ton = 100 cubic feet or 2.831 cubic meters. |
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| • | Gross Yield. Total revenue per Capacity Day. |
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| • | IMO. International Maritime Organization, a United Nations agency that sets international standards for shipping. |
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| • | IPO. The initial public offering of 27,058,824 ordinary shares, par value $.001 per share, of NCLH, which was consummated on January 24, 2013. |
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| • | Major North American Cruise Brands. Norwegian Cruise Line, Carnival Cruise Lines, Royal Caribbean International, Holland America, Princess Cruises and Celebrity Cruises. |
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| • | Management NCL Corporation Units. NCLC’s previously outstanding profits interests issued to management (or former management) of NCLC which were converted into units in NCLC in connection with our corporate reorganization. |
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| • | Merger Agreement. Agreement and Plan of Merger, dated as of September 2, 2014, by and among Prestige, NCLH, Portland Merger Sub, Inc. and Apollo Management, L.P., as amended, for the Acquisition of Prestige. |
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| • | Net Cruise Cost. Gross Cruise Cost less commissions, transportation and other expense and onboard and other expense. |
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| • | Net Cruise Cost Excluding Fuel. Net Cruise Cost less fuel expense. |
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| • | Net Revenue. Total revenue less commissions, transportation and other expense and onboard and other expense. |
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| • | Net Yield. Net Revenue per Capacity Day. |
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| • | Norwegian Sky Purchase Agreement. Memorandum of agreement, dated June 1, 2012, between Ample Avenue Limited, as seller, and Norwegian Sky, Ltd., as buyer, related to our purchase of Norwegian Sky. |
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| • | Norwegian Stand-alone. Results of operations excluding consolidation of results of Prestige. |
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| • | Occupancy Percentage. 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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| • | Passenger Cruise Days. The number of passengers carried for the period, multiplied by the number of days in their respective cruises. |
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| • | Regent Seven Seas Transaction. The transaction that closed on January 31, 2008, pursuant to which PCH purchased substantially all of the assets of Regent Seven Seas Cruises, Inc. and the equity of certain of its affiliated companies and joint ventures from Carlson Cruises Worldwide, Inc. and Vlasov Shipping Corporation. |
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| • | R-Class ship and O-Class ship. Oceania operates five ships. The R-Class ships are highly-rated five-star ships featuring country club style accommodations. The O-Class ships feature private balconies in 95% of staterooms. |
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| • | ROI Capital Expenditures. Comprised of project-based capital expenditures which have a quantified return on investment. |
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| • | SEC. U.S. Securities and Exchange Commission. |
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| • | Secondary Equity Offering(s). Secondary public offering(s) of NCLH’s ordinary shares in March 2014, December 2013 and August 2013. |
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| • | Selling Shareholders. Certain of the Apollo Funds and Star NCLC Holdings Ltd. (“Star NCLC”). Genting HK owns NCLH’s ordinary shares indirectly through Star NCLC, its wholly-owned subsidiary. |
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| • | Shipboard Retirement Plan. An unfunded defined benefit pension plan for certain crew members which computes benefits based on years of service, subject to certain requirements. |
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| • | Upscale Segment. The combination of the upper premium and luxury segments of the cruise industry. |
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Industry and Market Data
This annual report includes market share and industry data and forecasts that we obtained from industry publications, third-party surveys and internal Company surveys. Industry publications, including those from CLIA and surveys and forecasts generally state that the information contained therein has been obtained from sources believed to be reliable. All CLIA information, obtained from the CLIA website “www.cruising.org,” relates to CLIA member lines. All other references to third-party information are to information that is publicly available at nominal or no cost. We use the most currently available industry and market data to support statements as to our market position.
Although we believe that the industry publications and third-party sources are reliable, we have not independently verified any of the data from industry publications or third-party sources. Similarly, while we believe our internal estimates with respect to our industry are reliable, our estimates have not been verified by any independent sources. While we are not aware of any misstatements regarding any industry data presented herein, our estimates, in particular as they relate to market share and our general expectations, involve risks and uncertainties and are subject to change based on various factors, including those discussed under “Item 1A—Risk Factors” and “Item 7— Management’s Discussion and Analysis of Financial Condition and Results of Operations” in this annual report.
Cautionary Statement Concerning Forward-Looking Statements
Certain statements in this annual report constitute forward-looking statements 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, or incorporated by reference, in this annual report, including, without limitation, those regarding our business strategy, financial position, results of operations, plans, prospects and objectives of management for future operations (including development plans and objectives relating to our activities), 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” and “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 effects of costs incurred in connection with the Acquisition of Prestige; |
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| • | the ability to realize, or delays in realizing, the anticipated benefits of the Acquisition of Prestige; |
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| • | the assumption of certain potential liabilities relating to Prestige’s business; |
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| • | the diversion of management’s attention away from operations as a result of the integration of Prestige’s business; |
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| • | the effect that the Acquisition of Prestige may have on employee relations and on our ability to retain key personnel; |
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| • | the adverse impact of general economic conditions 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; |
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| • | the risks associated with operating internationally, including changes in interest rates and/or foreign currency exchange rates; |
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| • | changes in fuel prices and/or other cruise operating costs; |
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| • | our efforts to expand our business into new markets; |
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| • | our substantial indebtedness, including the ability to raise additional capital to fund our operations, and to generate the necessary amount of cash to service our existing debt; |
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| • | restrictions in the agreements governing our indebtedness that limit our flexibility in operating our business; |
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| • | the significant portion of our assets pledged as collateral under our existing debt agreements and the ability of our creditors to accelerate the repayment of our indebtedness; |
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| • | our ability to incur significantly more debt despite our substantial existing indebtedness; |
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| • | the impact of 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; |
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| • | adverse events impacting the security of travel, such as terrorist acts, acts of piracy, armed conflict and threats thereof and other international events; |
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| • | the impact of the spread of epidemics and viral outbreaks; |
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| • | the impact of any future changes relating to how external distribution channels sell and market our cruises; |
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| • | our reliance on third parties to provide hotel management services to certain of our ships and certain other services; |
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| • | the impact of delays in our shipbuilding program and ship repairs, maintenance and refurbishments; |
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| • | the impact of any future increases in the price of, or major changes or reduction in, commercial airline services; |
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| • | the impact of seasonal variations in passenger fare rates and occupancy levels at different times of the year; |
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| • | the effect of adverse incidents involving cruise ships and our ability to obtain adequate insurance coverage; |
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| • | the impact of any breaches in data security or other disturbances to our information technology and other networks; |
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| • | our ability to keep pace with developments in technology; |
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| • | the impact of amendments to our collective bargaining agreements for crew members and other employee relation issues; |
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| • | the continued availability of attractive port destinations; |
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| • | the impact of pending or threatened litigation, investigations and enforcement actions; |
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| • | changes involving the tax and environmental regulatory regimes in which we operate; |
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| • | the control of our business by our Sponsors; and |
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| • | other factors set forth under “Risk Factors.” |
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The above examples are not exhaustive and new risks emerge from time to time. Our 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 will operate in the future. These forward-looking statements speak only as of the date made. Except as required by law, we expressly disclaim any obligation or undertaking to release publicly any updates or revisions to any forward-looking statement contained herein 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.
PART I
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