Regent Seven Seas Cruises Reports Results for Third Quarter 2011: Net Yield Growth of 3.9 Percent

MIAMI--(BUSINESS WIRE)--Regent Seven Seas Cruises (Seven Seas Cruises S. DE R.L. or the “Company”) today reported results for the quarter ended September 30, 2011.

Net Yield for the third quarter of 2011 was up 3.9 percent driven by higher pricing with Net Per Diem up 3.0 percent and occupancy increasing 0.8 percentage points. In the third quarter of 2011, we had a 6.8 percent reduction in capacity caused by a 17-day scheduled drydock for Seven Seas Voyager. There were no drydocks in the third quarter of 2010. Net income was $19.5 million for the third quarter of 2011 compared to net income of $27.7 million for the third quarter of 2010. Adjusted EBITDA was $40.6 million on revenue of $151.3 million for the third quarter of 2011, compared to Adjusted EBITDA of $47.5 million on revenue of $152.1 million for the third quarter of 2010.

Commenting on the third quarter, the Company’s Chairman and CEO, Frank Del Rio, stated, “Regent’s luxury cruise experience continues to be very well received by both our guests and travel agency partners. We are thrilled with the record occupancy and yields we were able to obtain in the third quarter. The Seven Seas Voyager’s drydock in September completes the ambitious $100 million plus upgrade program that we embarked upon nearly four years ago, and we believe the results are impressive. We continue to invest in our luxury fleet to provide our guests with the best possible vacation experience.”

Other key operating metrics for the third quarter of 2011 compared to the prior year are as follows:

• Net Cruise Cost, excluding Fuel and Other expense, per APCD decreased 1.7 percent, to $278 in 2011 compared to $283 in 2010, mainly due to decreases in repair and maintenance expense and selling and administrative expense.
• Fuel expense increased 44.7 percent, or $3.0 million, reflecting higher prices. Our economic hedging strategy was able to partially offset this increase, as we recognized a $1.3 million cash benefit on executed fuel hedge contracts during the quarter that offset 42.8 percent of the price increase. The realized gain of fuel derivatives was recorded in other income (expense) as these instruments do not qualify for hedge accounting.
• Other expense was up $5.0 million primarily attributable to a 17-day scheduled drydock for the Seven Seas Voyager in 2011. There were no drydocks in the third quarter of 2010.

About Regent Seven Seas Cruises

Regent Seven Seas Cruises is the world’s most inclusive luxury cruise line. Fares include all-suite accommodations, round-trip air, highly personalized service, acclaimed cuisine, fine wines and spirits, sightseeing excursions in every port, a pre-cruise luxury hotel package and gratuities. Three award-winning, all-suite vessels, Seven Seas Mariner, Seven Seas Voyager, and Seven Seas Navigator, are among the most spacious at sea and visit more than 300 destinations around the globe.

About Prestige Cruise Holdings

Prestige Cruise Holdings (PCH) is the parent company of Oceania Cruises and Regent Seven Seas Cruises. Formed in 2007 to manage select assets in Apollo Management's cruise investment portfolio, PCH is led by Chairman & CEO Frank J. Del Rio and President & COO Kunal S. Kamlani. PCH is the market leader in the upper-premium and luxury segments of the cruise industry with nearly 5,200 berths between the Oceania Cruises and Regent Seven Seas Cruises brands, a number the company expects will grow to approximately 6,400 berths by 2012.

Terminology

Adjusted EBITDA is net income (loss) excluding depreciation and amortization, net interest expense, other income (expense), income tax benefit (expense), and other supplemental adjustments in connection with the calculation of certain financial ratios in accordance with our loan indenture.

Available Passenger Cruise Days (“APCD”) is our measurement of capacity and represents double occupancy per cabin multiplied by the number of cruise days for the period.

Gross Cruise Cost represents the sum of total cruise operation expense plus selling and administrative expense.

Gross Yield represents total revenue per APCD.

Net Cruise Cost represents Gross Cruise Cost excluding commissions, transportation and other expense, and onboard and other expense.

Net Per Diem represents Net Revenue divided by Passenger Days Sold.

Net Revenue represents total revenue less commissions, transportation and other expense and onboard and other expense.

Net Yield represents Net Revenue per APCD.

Occupancy is calculated by dividing Passenger Days Sold by APCD.

Passenger Days Sold represents the number of revenue passengers carried for the period multiplied by the number of days within the period of their respective cruises.

Non-GAAP Financial Measures

We use certain non-GAAP measures, such as Adjusted EBITDA, Net Per Diem, Net Yield, and Net Cruise Cost, which allow us to perform capacity and rate analysis to separate the impact of known capacity changes from other less predictable changes which affect our business. We utilize Net Per Diem to manage our business on a day-to-day basis as we believe that it is the most relevant measure of our pricing performance as it reflects the revenues earned by us, net of our most significant variable costs. In measuring our ability to control costs in a manner that positively impacts net income, we believe Net Cruise Cost to be the most relevant indicator of our performance. We believe these non-GAAP measures provide expanded insight to measure revenue and cost performance in addition to the standard United States GAAP based financial measures. The presentation of non-GAAP financial information is not intended to be considered in isolation or as a substitute for, or superior to, the financial information prepared and presented in accordance with United States GAAP.

We believe that Adjusted EBITDA is appropriate to provide additional information to investors as it enables us to analyze our performance. We believe Adjusted EBITDA, when considered along with other performance measures, is a useful measure as it reflects certain operating drivers of our business, such as sales growth, operating costs, selling and administrative expense and other operating income and expense. We believe Adjusted EBITDA can provide a more complete understanding of the underlying operating results and trends and an enhanced overall understanding of our financial performance and prospects for the future. While Adjusted EBITDA is not a recognized measure under GAAP, we use this financial measure to evaluate and forecast our business performance. You are encouraged to evaluate each adjustment and the reasons we consider them appropriate for supplemental analysis. In evaluating Adjusted EBITDA, you should be aware that in the future we may incur expenses similar to the adjustments in this presentation. Our presentation of Adjusted EBITDA should not be construed as an inference that our future results will be unaffected by unusual or non-recurring items.

Adjusted EBITDA is not a defined term under GAAP. Adjusted EBITDA differs from the term EBITDA as it is commonly used. Adjusted EBITDA is not intended to be a measure of liquidity or cash flows from operations or measures comparable to net income as it does not take into account certain requirements such as capital expenditures and related depreciation, principal and interest payments and tax payments, and it includes other supplemental adjustments.

Our non-GAAP financial measures may not be comparable to other companies within our industry. Please see a historical reconciliation of these measures to items in our consolidated financial statements below in Results of Operations.

Forward-Looking Statements

This release may contain statements, estimates or projections that constitute “forward-looking statements” as defined under U.S. federal securities laws. All statements other than statements of historical facts, 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. Many, but not all, of these statements can be found by looking for terms like “expect,” “anticipate,” “goal,” “project,” “plan,” “believe,” “seek,” “could,” “will,” “may,” “might,” “forecast,” “estimate,” “intend,” and “future” and for similar words. Forward-looking statements reflect management’s current expectations and 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, our ability to provide our guests with the best possible vacation experience; our substantial leverage, including the inability to generate the necessary amount of cash to service our existing debt and the incurrence of substantial indebtedness in the future; continued availability under our credit facilities and compliance with our covenants; our ability to incur significantly more debt despite our substantial existing indebtedness; the impact of changes in our credit ratings; the impact of changes in the global credit markets on our ability to borrow and our counterparty credit risks, including with respect to our credit facilities, derivative instruments, contingent obligations and insurance contracts; adverse economic conditions that may affect consumer demand for cruises such as declines in the securities and real estate markets, declines in disposable income and consumer confidence and higher unemployment rates; changes in general economic, business and geopolitical conditions; the risks associated with operating internationally; adverse events impacting the security of travel that may affect consumer demand for cruises such as terrorist acts, acts of piracy, armed conflict and other international events including political hostilities or war; the impact of any future changes relating to how travel agents sell and market our cruises; the impact of any future increases in the price of, or major changes or reduction in, commercial airline services; the impact of problems encountered at shipyards, as well as any potential claim, impairment, loss, cancellation or breach of contract in connection with any contracts we have with shipyards; the impact of mechanical failures or accidents involving our ships and the impact of delays, costs and other factors resulting from emergency ship repairs as well as scheduled maintenance, repairs and refurbishment of our ships; the total loss of one or more of our vessels as a result of a marine casualty; the impact of the spread of contagious diseases; the impact of weather and natural disasters; changes in interest rates, fuel costs, or foreign currency rates; changes involving the corporate, tax, environmental, health, safety and other regulatory regimes in which we operate; increases in our future fuel expenses related to implementing recently proposed International Maritime Organization regulations, which require the use of higher priced low sulfur fuels in certain cruising areas; accidents, criminal behavior and other incidents affecting the health, safety, security and vacation satisfaction of passengers and causing damage to ships, which could, in each case, cause reputational harm, the modification of itineraries or cancellation of a cruise or series of cruises; general industry trends, including the introduction of competing itineraries and other products and services by other companies; changes in cruise capacity, as well as capacity changes in the overall vacation industry; the continued availability of attractive port destinations; intense competition from other cruise companies as well as non-cruise vacation alternatives which may affect our ability to compete effectively; our ability to attract and retain qualified shipboard crewmembers and key personnel; the lack of acceptance of new itineraries, products or services by our targeted passengers; changes in other operating costs such as crew, insurance and security costs; the impact of pending or threatened litigation and investigations; the implementation of regulations in the U.S. requiring U.S. citizens to obtain passports for travel to additional foreign destinations; and the possibility of environmental liabilities and other damage that is not covered by insurance or that exceeds our insurance coverage. The above examples are not exhaustive. From time to time, new risks emerge and existing risks increase in relative importance to our operations. You should not place undue reliance on forward-looking statements as a prediction of actual results. Such forward-looking statements are based on our beliefs, assumptions, expectations, estimates and projections regarding our present and future business strategies and the environment in which we will operate in the future. 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. In addition, certain financial measures in this release constitute non-GAAP financial measures as defined by Regulation G. A reconciliation of these items can be found attached hereto and on the Company’s web site at www.rssc.com/investors.

SEVEN SEAS CRUISES S. DE R.L.
CONSOLIDATED STATEMENTS OF OPERATIONS
(unaudited, in thousands)
	Quarter Ended						Nine Months Ended
	September 30,						September 30,
	2011			2010			2011			2010
Revenue
Passenger ticket	$	135,939		$	137,549		$	339,392		$	316,621
Onboard and other		15,401			14,514			38,568			36,045
Total revenue		151,340			152,063			377,960			352,666
Cruise operating expense
Commissions, transportation and other		47,710			43,742			114,934			93,085
Onboard and other		4,950			6,363			10,202			10,971
Payroll, related and food		18,824			18,657			54,010			52,778
Fuel		9,570			6,613			30,182			23,621
Other ship operating		9,878			10,639			28,825			30,376
Other		6,525			1,502			12,848			4,551
Total cruise operating expense		97,457			87,516			251,001			215,382
Other operating expense
Selling and administrative		16,334			19,872			54,506			59,850
Depreciation and amortization		9,500			9,379			27,537			27,199
Total other operating expense		25,834			29,251			82,043			87,049
Operating income		28,049			35,296			44,916			50,235
Non-operating income (expense)
Interest income		75			52			138			75
Interest expense		(7,973	)		(9,654	)		(23,385	)		(29,117	)
Other income (expense)		(807	)		2,005			(3,904	)		(894	)
Total non-operating expense		(8,705	)		(7,597	)		(27,151	)		(29,936	)
Income before income taxes		19,344			27,699			17,765			20,299
Income tax benefit (expense)		115			(37	)		165			(189	)
Net income	$	19,459		$	27,662		$	17,930		$	20,110

SEVEN SEAS CRUISES S. DE R.L.
CONSOLIDATED BALANCE SHEETS
(unaudited, in thousands)
	As of			As of
	September 30,			December 31,
	2011			2010
Assets
Current assets
Cash and cash equivalents	$	105,797		$	37,258
Restricted cash		727			4,075
Trade accounts receivable		6,965			6,849
Other accounts receivable		39			6,427
Inventories		5,517			2,343
Prepaid expenses		17,871			13,855
Other current assets		4,270			5,186
Total current assets		141,186			75,993
Property and equipment, net		665,138			656,848
Goodwill		404,858			404,858
Intangible assets, net		86,762			80,760
Other assets		30,956			11,418
Total assets	$	1,328,900		$	1,229,877
Liabilities and Members' Equity
Current liabilities
Accounts payable	$	4,852		$	7,451
Accrued expenses		50,978			32,460
Passenger deposits		161,921			150,589
Derivative liabilities		171			2,814
Current portion of long-term debt		21,250			25,000
Total current liabilities		239,172			218,314
Long-term debt		524,750			476,786
Other long-term liabilities		14,065			5,209
Total liabilities		777,987			700,309
Members' equity
Contributed capital		563,167			562,566
Accumulated deficit		(12,254	)		(30,184	)
Accumulated other comprehensive loss		-			(2,814	)
Total members' equity		550,913			529,568
Total liabilities and members' equity	$	1,328,900		$	1,229,877

SEVEN SEAS CRUISES S. DE R.L.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(unaudited, in thousands)
	Nine Months Ended
	September 30,
	2011			2010
Cash flows from operating activities
Net income	$	17,930		$	20,110
Adjustments to reconcile net income to net cash
provided by operating activities:
Depreciation and amortization		27,537			27,199
Amortization of deferred financing costs		2,686			3,077
Accretion of debt discount		295			-
Stock-based compensation		600			1,554
Unrealized loss on derivative contracts		627			1,587
Loss on disposals		925			-
Loss on early extinguishment of debt		7,502			-
Other, net		(126	)		(130	)
Changes in operating assets and liabilities:
Trade and other accounts receivable		6,359			1,912
Prepaid expenses and other current assets		(4,193	)		(11,313	)
Inventories		(3,172	)		(478	)
Accounts payable and accrued expenses		3,212			(9,810	)
Passenger deposits		15,440			20,525
Net cash provided by operating activities		75,622			54,233
Cash flows from investing activities
Capital expenditures		(21,956	)		(15,011	)
(Increase) decrease in restricted cash		(16,652	)		1,780
Acquisition of Regent tradename rights		(4,445	)		-
Net cash used in investing activities		(43,053	)		(13,231	)
Cash flows from financing activities
Repayment of long-term debt		(180,786	)		(18,750	)
Proceeds from the issuance of senior secured notes		225,000			-
Debt issuance costs		(7,022	)		-
Costs associated with early extinguishment of debt		(1,393	)		-
Capital contributions		-			19
Net cash provided by (used in) financing activities		35,799			(18,731	)
Effect of exchange rate changes on cash and cash equivalents		171			(462	)
Net increase in cash and cash equivalents		68,539			21,809
Cash and cash equivalents
Beginning of period		37,258			27,754
End of period	$	105,797		$	49,563
Supplemental Schedule of Non-cash Investing and    Financing Activities
Increase (decrease) in accrual of capital expenditures	$	10,394		$	(12,194	)
Issuance of parent company shares		-			1,969
Increase in accrued intangible asset		3,449			-

SEVEN SEAS CRUISES S. DE R.L.
NON-GAAP RECONCILING INFORMATION
(unaudited)
The following table sets forth selected statistical information:
	Quarter Ended				Nine Months Ended
	September 30,				September 30,
	2011		2010		2011		2010
Passenger Days Sold	158,135		168,332		454,120		466,675
APCD	161,980		173,880		497,070		515,970
Occupancy	97.6	%	96.8	%	91.4	%	90.4	%

Adjusted EBITDA was calculated as follows (in thousands):
	Quarter Ended September 30,						Nine Months Ended September 30,
	2011			2010			2011			2010
Net income	$	19,459		$	27,662		$	17,930		$	20,110
Interest income		(75	)		(52	)		(138	)		(75	)
Interest expense		7,973			9,654			23,385			29,117
Depreciation and amortization		9,500			9,379			27,537			27,199
Income tax benefit (expense), net		(115	)		37			(165	)		189
Other income (expense)		807			(2,005	)		3,904			894
Equity-based compensation/transactions (a)		172			658			600			1,554
Non-recurring expenses (b)		410			2,030			3,452			4,885
Restructuring charges (c)		276			208			680			653
Fuel hedge gain (loss) (d)		1,262			(108	)		4,043			798
Loss on disposals (e)		925			-			925			-
ADJUSTED EBITDA	$	40,594		$	47,463		$	82,153		$	85,324

(a)	Equity-based compensation/transactions represent stock compensation expense in each period.
(b)	Non-recurring expenses represents the net impact of time out of service as a result of unplanned and non-recurring repairs to vessels; expenses associated with consolidating corporate headquarters; professional fees and other costs associated with raising capital through debt and equity offerings; certain litigation fees; and the fees paid to license the name “Regent” in 2010 and first quarter 2011. In February 2011, we amended the Regent license agreement to perpetually license the “Regent” name; as such we will not incur any future license fees.
(c)	Restructuring charges represents the costs associated with restructuring our ship holding companies and other corporate reorganizations associated with improving efficiencies.
(d)	Fuel hedge gain represents the realized gain on fuel hedges triggered by the settlement of the hedge.
(e)	Loss on disposals represents the non-cash charge associated with writing-off the remaining net book value of certain fixed assets replaced during drydocks.

SEVEN SEAS CRUISES S. DE R.L.
NON-GAAP RECONCILING INFORMATION
(unaudited)
Net Per Diem, Gross Yield and Net Yield were calculated as follows (in thousands, except Passenger Days Sold, APCD, Net Per Diem, and Yield data):
	Quarter Ended September 30,				Nine Months Ended September 30,
	2011		2010		2011		2010
Passenger ticket revenue	$	135,939	$	137,549	$	339,392	$	316,621
Onboard and other revenue		15,401		14,514		38,568		36,045
Total revenue		151,340		152,063		377,960		352,666
Less:
Commissions, transportation and other expense		47,710		43,742		114,934		93,085
Onboard and other expense		4,950		6,363		10,202		10,971
Net Revenue	$	98,680	$	101,958	$	252,824	$	248,610
Passenger Days Sold		158,135		168,332		454,120		466,675
APCD		161,980		173,880		497,070		515,970
Net Per Diem	$	624.02	$	605.70	$	556.73	$	532.73
Gross Yield		934.31		874.53		760.38		683.50
Net Yield		609.21		586.37		508.63		481.83

Gross Cruise Cost and Net Cruise Cost were calculated as follows (in thousands, except APCD and cost per APCD):
	Quarter Ended September 30,				Nine Months Ended September 30,
	2011		2010		2011		2010
Total cruise operating expense	$	97,457	$	87,516	$	251,001	$	215,382
Selling and administrative expense		16,334		19,872		54,506		59,850
Gross Cruise Cost		113,791		107,388		305,507		275,232
Less:
Commissions, transportation and other expense		47,710		43,742		114,934		93,085
Onboard and other expense		4,950		6,363		10,202		10,971
Net Cruise Cost		61,131		57,283		180,371		171,176
Less:
Fuel		9,570		6,613		30,182		23,621
Other expense		6,525		1,502		12,848		4,551
Net Cruise Cost, excluding Fuel and Other	$	45,036	$	49,168	$	137,341	$	143,004
APCD		161,980		173,880		497,070		515,970
Gross Cruise Cost per APCD	$	702.50	$	617.60	$	614.61	$	533.43
Net Cruise Cost per APCD		377.40		329.44		362.87		331.76
Net Cruise Cost, excluding Fuel and Other, per    APCD		278.03		282.77		276.30		277.16