NCLH - 4th Quarter and 2022 Year - Equity Depleted

[bmwman]

4 hours ago, Panhandle Couple said:

No not at all.

 

They took $700,000 of depreciation to get to the loss.  They actually made money on the cruises they sailed.  Don't confuse bottom line with "losing money".  Depreciation is a tax game, and everyone uses std charts.  Like saying your used car is worth $10,000 now, no matter how well you maintain it or how far you drive it.  

 

I'm disappointed that they didn't show separate 4th qtr numbers, then full year.  Reporting the last 3 qtrs is weird, but I get that they are trying to show what they did once all ships were sailing.

 

I will have to run numbers for total year with 3rd qtr numbers, but a few things stick out in my mind.

 

End of 3rd qtr they projected reducing long term debt by $240 M in 4th qtr.  Looks like they actually reduced more than $500 M. 

 

Cash on hand looks like it went from around $1.5 B to around $1 B.   Cash is very important to company because it shows if they can make payroll consistently.  They were likely keeping large amounts last year  to guard against more shut downs.  Now that that has passed, they are paying off debt faster.

 

They refinanced some debt from 2024 to 2028.  It cost more in the long run, but 2024 had a huge amount of debt payments.  This helps smooths the debt from 2024 to 2028.

 

Your analysis is flawed throughout iMHO.

 

Depreciation is a loss it is the cost of the ships and other assets due to the effluxion of time. It is simply an estimate of part of the cost of the capital costs.

 

They hsve not reduced debt by 500m$ where on earth did you get that from? They aint got that sort of cash and FDR would have spun that as he does with everything else. 

 

The markets are spooked and there is a sell off and i suspect that folk are not paying the prices nd the forward market is going to have to be discounted.

 

The next Leonardo has been delayed because of the cash position (currently unfunded) and the fact that the Prima is a total disaster and they need to remodel the ship. there will only ever be two in my view.

 

The cost of borrowing and the extensin to 2028 is "kicking the can down the road"  it just shows how bad their modeling was and they were 4 years out with their Cash flows. Say what you like these are horrible numbers and I think you do understand accounts, but we disagree on the analysis.

 

 

[bmwman]

4 hours ago, jbcallender said:

They are done for.  An undrawn commitment is a loan they haven't taken down yet - like the remaining credit limit on credit card.  They have comparatively little cash, paltry amount to come in from receivables.  Current ratio of .36 roughly.  Look for a buyout or sales of ships on the horizon.  Their customer base facing shrinking disposable income.  Recently rehabbed a lot of ships and built mega ships. Interest rates three times higher than 18 months ago. Ugly.

Very sensible analysis. A company of this size with .36 current ratio is not great at all. Your comments regarding their customer base are so true, especially for non-haven. You also forget one other thing. all-inclusive lux vacations are now looking a lot better value and thier is no longer the swing to these floating crowded ships as the cutbacks continue. 

 

TAKE OVER within 12 months and FDR toast - prediction 

[luv2kroooz]

1 hour ago, bmwman said:

Very sensible analysis. A company of this size with .36 current ratio is not great at all. Your comments regarding their customer base are so true, especially for non-haven. You also forget one other thing. all-inclusive lux vacations are now looking a lot better value and thier is no longer the swing to these floating crowded ships as the cutbacks continue. 

 

TAKE OVER within 12 months and FDR toast - prediction 

Well said. This example is ours....we have a certain amount of disposable income budgeted for vacations and honestly could afford to cruise multiple times over and are Sapphire with NCL and top tier with other cruise lines. But, we are also value based vacationers, actively seeking to get the most bang for our buck at all times, but more importantly during these times of inflation. That doesn't mean cheap, it means we are are looking for value in a product, often times paying more to receive more. Value can be perceived differently from cruiser to cruiser - I want a drink package...you hate alcohol, I think an industry leading, $20 service charge is excessive for what you get, but someone else would gladly pay $25.

 

I guess we are no longer part of Norwegians target market, as FDR stated they are looking for what he described as  an "affluent traveler". Better said, he wants people who don't care about how they spend their money. They exist here in CC, too. I have to wonder if there are enough affluent travelers to fill his ships. I mean at some point, just move to Regent or other luxury lines.

 

We haven't sailed NCL since pre Corona and have nothing booked. We've found greater value at land based resorts in and out of the US and on competing cruise lines like Princess and Carnival. We are actively looking to dump our 4 NCL cruise next certificates and are starting to see some limited deep discounting which is what will be required to bring us back on board to use our FCC. What we won't do is pay ridiculous cruise pricing coupled with what we perceive to be rip-off level onboard pricing for spotty Wifi, excursions if they don't change the port, service charges, and food and drink that I see for many of the offerings in exchange for the severe degradation of service that we see and hear about. An educated consumer is NCLs worst customer!

[At Sea At Peace]

7 hours ago, Panhandle Couple said:

No not at all.

 

They took $700,000 of depreciation to get to the loss.  They actually made money on the cruises they sailed.  Don't confuse bottom line with "losing money".  Depreciation is a tax game, and everyone uses std charts.  Like saying your used car is worth $10,000 now, no matter how well you maintain it or how far you drive it.  

 

 

Sorry, but in the world of finance and simple business, depreciation is an expense, the usage and exhaustion of the cost of the asset over time.  The cruise line doesn't write off the cost of new ship builds when delivered, they write them off as they are being used.  Straight-forward Generally Accepted Accounting Principles GAAP.

 

NCLH, like most public companies, use ACCRUAL basis of accounting and financial reporting, not the CASH basis.  

 

7 hours ago, Panhandle Couple said:

 

They actually made money on the cruises they sailed.  

 

 

No, they did not, not for the quarter ended 12/31/2022 or for the year ended 12/31/2022.

 

If you'd look at that statement and then the "operating section" of financial income statement for the quarter and year, they LOST $280,969,000 in the quarter ended 12/31/2022.  In that was $202,112,000 of depreciation.  Although the theory that depreciation isn't an expense is debunked, they still would have lost $78,857,000!  🤥  That is excluding the $201,126,000 for interest expense and other (and yes, you also have to accrue and pay interest).

 

  If you'd look at that statement and then the "operating section" of financial income statement for the quarter and year, they LOST $1,551,757,000 in the year ended 12/31/2022.  In that was $749,326,000 of depreciation.  Although the theory that depreciation isn't an expense is debunked, they still would have lost $802,431,000!  🤥  That is excluding the $724,946,000 for interest expense and other (and yes, you also have to accrue and pay interest).

 

7 hours ago, Panhandle Couple said:

 

Cash on hand looks like it went from around $1.5 B to around $1 B.   Cash is very important to company because it shows if they can make payroll consistently.  They were likely keeping large amounts last year  to guard against more shut downs. 

 

 

Cash did not increase year over year.

 

Cash DECREASED from $1,506,647,000 to $946,987,000 or $559,660,000!

 

To make matters worse, the yearly cash decrease was not even reflective of the true loss from operations as it was MASKED by the cash increase attributed to an increase in CUSTOMER DEPOSITS (Advance ticket sales) from $1,561,336,000 to $2,516,521,000 or $955,185,000!

 

 

 

7 hours ago, Panhandle Couple said:

 

They were likely keeping large amounts last year  to guard against more shut downs.  Now that that has passed, they are paying off debt faster.

 

 

No, they are not only not paying off debt faster, they are not even paying off debt.

 

They are incurring more debt, at a higher cost with tighter and more complex covenants, terms and conditions.

 

Their bonds are, with the exception of certain highly priority secured issuances, considered 'junk bonds' in the secondary market.

 

😉

 

[jbcallender]

6 hours ago, At Sea At Peace said:

 

Sorry, but in the world of finance and simple business, depreciation is an expense, the usage and exhaustion of the cost of the asset over time.  The cruise line doesn't write off the cost of new ship builds when delivered, they write them off as they are being used.  Straight-forward Generally Accepted Accounting Principles GAAP.

 

NCLH, like most public companies, use ACCRUAL basis of accounting and financial reporting, not the CASH basis.  

 

 

No, they did not, not for the quarter ended 12/31/2022 or for the year ended 12/31/2022.

 

If you'd look at that statement and then the "operating section" of financial income statement for the quarter and year, they LOST $280,969,000 in the quarter ended 12/31/2022.  In that was $202,112,000 of depreciation.  Although the theory that depreciation isn't an expense is debunked, they still would have lost $78,857,000!  🤥  That is excluding the $201,126,000 for interest expense and other (and yes, you also have to accrue and pay interest).

 

  If you'd look at that statement and then the "operating section" of financial income statement for the quarter and year, they LOST $1,551,757,000 in the year ended 12/31/2022.  In that was $749,326,000 of depreciation.  Although the theory that depreciation isn't an expense is debunked, they still would have lost $802,431,000!  🤥  That is excluding the $724,946,000 for interest expense and other (and yes, you also have to accrue and pay interest).

 

 

Cash did not increase year over year.

 

Cash DECREASED from $1,506,647,000 to $946,987,000 or $559,660,000!

 

To make matters worse, the yearly cash decrease was not even reflective of the true loss from operations as it was MASKED by the cash increase attributed to an increase in CUSTOMER DEPOSITS (Advance ticket sales) from $1,561,336,000 to $2,516,521,000 or $955,185,000!

 

 

 

 

No, they are not only not paying off debt faster, they are not even paying off debt.

 

They are incurring more debt, at a higher cost with tighter and more complex covenants, terms and conditions.

 

Their bonds are, with the exception of certain highly priority secured issuances, considered 'junk bonds' in the secondary market.

 

😉

 

Agree regarding depreciation.  Watch Warren Buffet and Charlie Mungers' view of depreciation and EBITDA.  The fact is they have debt service on the debt to buy the ships and do the refits.  Cash is king.  They are heading into season, they should have (no-pun) boatloads of cash from deposits, but don't.  Rising costs in all quarters - supplies, fuel, payrolls (while they are trying to pass that on to customers).  There is no safe harbor.  Again, no pun.