Norwegian Cruise Line (NCL) has announced a loss of $87 million on revenues of $780 million for the year ended Dec. 31 , 1995, compared to a loss of $4.5 million on revenues of $871 million for 1994.

Included in the results for 1995 are restructuring costs from merging the Royal Cruise Line ships into the NCL fleet; write-off of RCL goodwill; and write-down of ships, which are partially offset by gain on the sale of assets.

The company also attributed the increased loss in 1995 to the weakness of RCL and costs associated with its refinancing efforts.

NCL President and CEO Adam Aron said that NCL achieved a $12.6 million improvement in income in 1995, experiencing a 9.2 percent improvement in yields, a 7.2 percent decrease in costs, and a 2.3 percent improvement in operating margin.

Meanwhile. a report from NCL addressed to the Norwegian Stock Exchange presented the following numbers:

  1995  1994
NCL net loss ($12.0) ($24.6)
RCL net loss ($24.0) ($5.1)
Common Expenses ($5.5) $1.9
Gain on RVL ship sale 0.0 $35.1
Gain on NCL ship sale $22.7 $8.5
Gain/write-down RCL ships      ($33.5) ($5.2)
Write-off of RCL goodwill ($12.8) 0.0
Restructuring costs ($11.9) 0.0
Currency translation loss ($9.7) ($15.1)
Result ($87.0)      ($4.5)

(The amounts are in millions.)

In addition, based on the partial numbers provided in the prepared statement from NCL, CIN has prepared the following chart:

NCL brand only 1995 1996
Revenue $530.8 $558.1
Total costs and expenses          $483.2 $520.7
Operating income $47.6 $37.4
Net income ($12.0) ($24.6)
Est. pax. cruise days 2,439,249       2,796,653
Revenue per pax. day $217.28 $199.56
Op. income per pax day $19.51 $13.57

(The amounts are in millions except revenues per pax. day and operating income per pax. day.)

The Test

As of now, NCL consists of one brand only, providing management with a single focus effort.

Whether this company will sink or swim now depends entirely on the management of its debt. There are still $700 million outstanding which burdened the company with more than $90 million in interest payments in 1995.

If the interest payments could be reduced to a more reasonable level in the range of eight to nine percent, the company's annual interest burden would be reduced to some $50 million a year. That in turn would send $40 million straight to the bottom line which last year would have changed the result for NCL from a net loss of $12 million to net income of $28 million.

In addition, NCL should realize a net gain from the sale of the Star Odyssey and the expected sale of the Royal Odyssey possibly also the Norwegian Crown.

But it is not all that simple.

By merging RCL ships into NCL, the company now has more ships, at least in the short term, that are relatively inefficient compared to the competition. NCL also received three new ships that had to be positioned and filled with passengers on short notice. The combination may have a negative impact on earnings.

Meanwhile, in the long term, NCL must shed the older ships and build new, more efficient ships, which in turn, will inflate the debt load(!), which the company can ill afford.

In summary, if numbers can be relied upon, NCL can still survive, even prosper, if management is up to the test. But there are still rough seas ahead for NCL.

In Norway, meanwhile, NCL's shares have gotten a 20 percent boost and rose to NOK 12.30 at press time.