10-Q 1 ssc-2013331.htm 10-Q SSC-2013.3.31
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q

[X] QUARTERLY REPORT PERSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended March 31, 2013
OR
[ ] TRANSITION REPORT PERSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES AND EXCHANGE ACT OF 1934
For the transition period from to
Commission File Number: 333-178244
Seven Seas Cruises S. DE R.L.
(Exact Name of Registrant as Specified in Its Charter)
Republic of Panama
 
 
 
75-3262685
(State or Other Jurisdiction
of Incorporation)
 
 
 
(I.R.S. Employer
Identification No.)
8300 NW 33rd Street, Suite 100
Miami, FL 33122
(Address of Principal Executive Offices) (Zip Code)
Registrant's telephone number, including area code: (305) 514-2300
Not Applicable
(Former name, former address and former fiscal year, if changed since last report)
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 ¨ No x*
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 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
 
¨
 
Accelerated filer
 
¨
 
 
 
 
Non-accelerated filer
 
x
 
Smaller reporting company
 
¨
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).
Yes ¨ No x
* The registrant became subject to the filing requirements of Section 15(d) of the Securities Exchange Act of 1934 on May 10, 2012. The registrant filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the period it was required to file such reports and during the preceding 12 months notwithstanding that the registrant is no longer required to file such reports.




SEVEN SEAS CRUISES S. DE R.L.

TABLE OF CONTENTS





PART I – FINANCIAL INFORMATION
Item 1. Financial Statements

SEVEN SEAS CRUISES S. DE R.L.
CONSOLIDATED BALANCE SHEETS
(in thousands)
 
        (unaudited)
 
March 31, 2013
 
December 31, 2012
 

 

Assets

 

Current assets

 

Cash and cash equivalents
$
119,943

 
$
99,857

Trade and other receivables, net
10,439

 
7,279

Related party receivables
2,441

 
1,798

Inventories
6,548

 
6,572

Prepaid expenses
19,014

 
17,828

Other current assets
3,688

 
2,692

Total current assets
162,073

 
136,026

Property and equipment, net
632,328

 
637,324

Goodwill
404,858

 
404,858

Intangible assets, net
83,478

 
83,556

Other long-term assets
33,067

 
32,950

Total assets
$
1,315,804

 
$
1,294,714



 

Liabilities and Members' Equity

 

Current liabilities

 

Trade and other payables
$
2,878

 
$
4,483

Related party payables
—

 
131

Accrued expenses
48,378

 
43,733

Passenger deposits
188,965

 
169,463

Derivative liabilities
55

 
278

Current portion of long-term debt
745

 
—

Total current liabilities
241,021

 
218,088

Long-term debt
518,537

 
518,358

Other long-term liabilities
12,410

 
9,635

Total liabilities
771,968

 
746,081

Commitments and contingencies

 

Members' equity

 

Contributed capital
564,624

 
564,372

Accumulated deficit
(20,788
)
 
(15,739
)
Total members' equity
543,836

 
548,633

Total liabilities and members' equity
$
1,315,804

 
$
1,294,714




The accompanying notes are an integral part of these consolidated financial statements.
2

SEVEN SEAS CRUISES S. DE R.L.
CONSOLIDATED STATEMENTS OF (LOSS) INCOME AND COMPREHENSIVE (LOSS) INCOME
(unaudited, in thousands)
 
Three Months Ended March 31,
 
 
2013
 
2012
 
Revenue

 

 
Passenger ticket
$
113,438

 
$
110,128

 
Onboard and other
10,879

 
11,288

 
Total revenue
124,317

 
121,416

 

 
 
 
 
Cruise operating expense
 
 
 
 
Commissions, transportation and other
39,915

 
40,822

 
Onboard and other
2,680

 
2,256

 
Payroll, related and food
19,336

 
18,776

 
Fuel
11,477

 
12,113

 
Other ship operating
9,639

 
9,331

 
Other
1,249

 
1,280

 
Total cruise operating expense
84,296

 
84,578

 
Other operating expense
 
 
 
 
Selling and administrative
22,280

 
21,147

 
Depreciation and amortization
9,253

 
9,675

 
Total operating expense
115,829

 
115,400

 
Operating income
8,488

 
6,016

 

 
 
 
 
Non-operating income (expense)
 
 
 
 
Interest income
75

 
103

 
Interest expense
(10,048
)
 
(8,085
)
 
Other income (expense)
(3,485
)
 
2,513

 
Total non-operating expense
(13,458
)
 
(5,469
)
 
Income (loss) before income taxes
(4,970
)
 
547

 
Income tax expense
(79
)
 
(189
)
 
Net (loss) income
(5,049
)
 
358

 

 
 
 
 
Other comprehensive loss, net of tax:
—

 
—

 
Total comprehensive (loss) income
$
(5,049
)
 
$
358

 


The accompanying notes are an integral part of these consolidated financial statements.
3

SEVEN SEAS CRUISES S. DE R.L.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(unaudited, in thousands)
 
Three Months Ended
 
March 31,
 
2013
 
2012
Cash flows from operating activities
 
 
 
Net (loss) income
$
(5,049
)
 
$
358

Adjustments:
 
 
 
Depreciation and amortization
9,253

 
9,675

Amortization of deferred financing costs
504

 
785

Accretion of debt discount
201

 
126

Stock-based compensation
251

 
148

Unrealized gain on derivative contracts
(425
)
 
(1,262
)
Write-off deferred financing costs and debt discount
2,500

 
—

Prepayment penalty, excluded from loss on early extinguishment of debt
(2,093
)
 
—

Other, net
(11
)
 
(13
)
Changes in operating assets and liabilities:
 
 
 
Trade and other accounts receivable
(3,787
)
 
(3,283
)
Prepaid expenses and other current assets
(1,142
)
 
(513
)
Inventories
24

 
(1,059
)
Accounts payable and accrued expenses
5,257

 
477

Passenger deposits
21,219

 
12,480

Net cash provided by operating activities
26,702

 
17,919

Cash flows from investing activities
 
 
 
Purchases of property and equipment
(3,337
)
 
(4,913
)
Change in restricted cash
(25
)
 
205

Acquisition of intangible assets
(90
)
 
—

Net cash used in investing activities
(3,452
)
 
(4,708
)
Cash flows from financing activities
 
 
 
Debt issuance costs
(955
)
 
(130
)
Deferred payment to acquire intangible asset
(2,000
)
 
(2,000
)
Net cash used in financing activities
(2,955
)
 
(2,130
)
 
 
 
 
Effect of exchange rate changes on cash and cash equivalents
(209
)
 
78

Net increase in cash and cash equivalents
20,086

 
11,159

Cash and cash equivalents
 
 
 
Beginning of period
99,857

 
68,620

End of period
$
119,943

 
$
79,779



The accompanying notes are an integral part of these consolidated financial statements.
4

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(unaudited)


Note 1.General
Basis of Presentation
Seven Seas Cruises S. DE R.L. (“SSC”, “we” or “our”) is a Panamanian sociedad de responsibilidad limitada organized on November 7, 2007, and is owned by Classic Cruises, LLC (“CCL I”) and Classic Cruises II, LLC (“CCL II”). CCL I and CCL II are Delaware companies and each company owns 50% of SSC. Prestige Cruise Holdings, Inc. (“PCH”) owns both CCL I and CCL II. PCH is a 100%-owned subsidiary of our ultimate parent company, Prestige Cruises International, Inc. (“PCI”). PCI is controlled by funds affiliated with Apollo Global Management, LLC ("Apollo"). We commenced operations on February 1, 2008 upon the consummation of the Regent Seven Seas acquisition when we acquired substantially all the assets of Regent Seven Seas Cruises.
The accompanying interim consolidated financial statements include the accounts of SSC and its 100%-owned subsidiaries and have been prepared in accordance with generally accepted accounting principles in the United States. The financial information presented as of any date other than December 31 has been prepared from the books and records of the Company that are unaudited. Financial information as of December 31 has been derived from SSC’s audited financial statements, but does not include all disclosures required by generally accepted accounting principles.
The accompanying consolidated balance sheet at March 31, 2013 and the consolidated statements of income (loss) and comprehensive income (loss) for the three months ended March 31, 2013 and 2012 and consolidated statements of cash flows for the three months ended March 31, 2013 and 2012 are unaudited, and, in the opinion of management, contain all adjustments, consisting of only normal recurring adjustments, necessary for fair presentation. Our interim consolidated financial statements should be read in conjunction with our audited consolidated financial statements for the year ended December 31, 2012 and notes thereto included in our annual report on Form 10-K. Our operations are seasonal, and results from our interim periods are not necessarily indicative of the results to be expected for the entire year.
Significant Accounting Policies
Property and Equipment
As of January 1, 2013 we changed our estimate for all our ships' projected residual values. The change was triggered as we obtained recent sales information for luxury cruise ships that occurred in the three month period ended March 31, 2013. This new information, in conjunction with other comparable sale data points, was used in our analysis, which includes our consideration of anticipated technological changes, long-term cruise and vacation market conditions and replacement cost of similarly built vessels. As a result, we increased each ship's projected residual value from 15% to 30%. The change in estimate has been applied prospectively. The effect of the change on both operating income and net loss for the three month period ended March 31, 2013 is approximately $1.3 million of reduced depreciation expense. The estimated impact of this change for full year 2013 is a reduction of depreciation expense of approximately $5.0 million. We continue to evaluate relevant new factors and circumstances, which may cause us to revise our estimate in the future. If such a change is necessary, depreciation expense could be materially higher or lower.










5

Other
During 2012, we increased our passenger ticket revenue and commissions, transportation and other expenses by $1.6 million during the three months ended March 31, 2012. This revision relates to certain included costs that were originally recorded as a reduction of passenger ticket revenue and should have been recorded as commissions, transportation and other costs. We assessed the materiality of these errors on the previously issued financial statements in accordance with ASC 250-10-S99, the Securities and Exchange Commission ("SEC") guidance, Staff Accounting Bulletin No. 99, Materiality ("SAB 99") and the amounts recorded were deemed immaterial to previously issued unaudited quarterly financial statements and had no impact on net income or cash flows.


New Accounting Pronouncements
As of January 1, 2013, we adopted Financial Accounting Standards Board ASU 2011-11, Disclosures about Offsetting Assets and Liabilities. It requires an entity to disclose information about offsetting and related arrangements to enable users of its financial statements to understand the effect of those arrangements on its financial position. In 2013, this pronouncement was enhanced by ASU 2013-1. This update clarifies that ordinary receivables are not within the scope of ASU 2011-11 and it applies only to derivatives, repurchase agreements, reverse purchase agreements and other securities lending transactions. The adoption did not materially impact our consolidated financial statements.
In February 2013, the Financial Accounting Standards Board issued ASU 2013-02, Comprehensive Income (Topic 220): Reporting of Amounts Reclassified Out of Accumulated Other Comprehensive Income. It requires an entity to present the effects on the line items of net income of significant amounts reclassified out of accumulated other comprehensive income, but only if the item reclassified is required under U.S. GAAP to be reclassified to net income in its entirety in the same reporting period. Entities must also cross-reference to other disclosures currently required under U.S. GAAP for other reclassification items to be reclassified directly to net income in their entirety in the same reporting period. This standard was effective beginning January 1, 2013. The adoption did not materially impact our consolidated financial statements.
There are no other recently issued accounting pronouncements not yet adopted or recently issued pronouncements that we expect to have a material effect on the presentation or disclosure of our future consolidated operating results, cash flows or financial condition.
Note 2.    Property and Equipment, net
During the three months ended March 31, 2013, property and equipment, net decreased $5.0 million. Capital expenditures totaled $3.3 million and $4.9 million for the three months ended March 31, 2013 and 2012, respectively. Depreciation expense on assets in service was $8.4 million and $8.9 million for the three months ended March 31, 2013 and 2012, respectively.


6

Note 3.    Debt



March 31,

December 31,
(in thousands)


2013

2012
$300 million term loan, 4.75% and 6.25% as of March 31, 2013 and December 31, 2012, respectively, due through 2018


$
296,250


$
296,250

$225 million senior secured notes, 9.125%, due 2019


225,000


225,000

Total debt


521,250


521,250

Less: Original issue discount
 
 
(1,963
)
 
(2,892
)
Less: Current portion of long-term debt


(750
)

—

Long-term portion


$
518,537


$
518,358

Interest expense on third-party debt was $9.1 million and $6.9 million for the three months ended March 31, 2013 and 2012, respectively.

Term Loan
On February 1, 2013, we amended our previously existing $340.0 million credit agreement, consisting of a $300.0 million term loan and $40.0 million revolving credit facility. Interest on our term loan is calculated based upon LIBOR, with a floor of 1.25%, plus an applicable margin. In conjunction with this amendment, the applicable margin on the outstanding balance of $296.3 million was repriced to 3.5% from either 4.75% or 5.0% based on a leverage ratio in the original term loan. We paid $3.7 million of accrued interest, $3.0 million for a prepayment penalty, $1.3 million in arranger fees and $0.2 million in legal fees. There was no change to the terms of the revolving credit facility or the maturity date of the term loan. There was also no impact on financial covenants, liquidity or debt capacity.

We applied ASC 470-50 Debt - Modifications and Extinguishments to this transaction. After evaluating the criteria as applicable to syndicated loans, the re-pricing resulted in an extinguishment of debt for certain creditors whose balances were entirely re-paid. This repricing resulted in a debt modification for certain creditors whose terms were not substantially different before and after the amendment. The new fees paid and previously existing deferred financing costs were proportionally allocated between modification and extinguishment. Of the $4.4 million in fees, $3.1 million of the amendment fees were capitalized and are being amortized over the remaining term of the debt. New fees and previously existing deferred financing costs allocated to the extinguishment were included in the calculation of gain or loss on early extinguishment of debt, which resulted in a loss of $3.7 million and was recorded within other income (expense) in the consolidated statement of income and comprehensive income.

The credit agreement contains a number of covenants that impose operating and financial restrictions, including restrictions on us and our subsidiaries' ability to, among other things, incur additional indebtedness, pay dividends on or make distributions with respect to our capital stock, restrict certain transactions with affiliates, and sell certain key assets, primarily our ships. All of our debt is collateralized by our vessels. We believe that based on our cash on hand and expected future operating cash inflows, we will have sufficient cash flow to fund operations, meet our debt service requirements, and maintain compliance with the financial covenants under our credit agreements over the next twelve-month period.



7

The following schedule represents the maturities of long-term debt (in thousands):
For the twelve months ending March 31,
 
 
2014
 
 
$
750

2015
 
 
3,000

2016
 
 
3,000

2017
 
 
3,000

Thereafter
 
 
511,500


 
 
$
521,250

Note 4.    Derivative Instruments, Hedging Activities and Fair Value Measurements
We are exposed to market risks attributable to changes in interest rates, foreign currency exchange rates and fuel prices. We manage these risks through a combination of our normal operating and financing activities and through the use of derivative financial instruments pursuant to our hedging practices and policies as described below. The financial impacts of these hedging instruments are primarily offset by corresponding changes in the underlying exposures being hedged. We achieve this by closely matching the amount, term and conditions of the derivative instrument with the underlying risk being hedged. We do not hold or issue derivative financial instruments for trading or other speculative purposes. We monitor our derivative positions using techniques including market valuations and sensitivity analyses.
Fuel Price Risk
Our exposure to market risk for changes in fuel prices relates primarily to the consumption of fuel on our vessels. We use fuel derivative swap agreements to mitigate the financial impact of fluctuations in fuel prices. The fuel swaps do not qualify for hedge accounting; therefore, the changes in fair value of these fuel derivatives are recorded in other income (expense) in the accompanying consolidated statements of income and comprehensive income. As of March 31, 2013, we have hedged the variability in future cash flows for forecast fuel consumption occurring through 2014. As of March 31, 2013 and December 31, 2012, we have entered into the following fuel swap agreements:
 
 
Fuel Swap Agreements
 
 
As of March 31, 2013
 
As of December 31, 2012
 
 
(in barrels)
2013
 
156,000

 
207,975

2014
 
108,750

 
108,750

 
 
 
 
 
 
 
 
 
 
 
 
Fuel Swap Agreements
 
 
As of March 31, 2013
 
As of December 31, 2012
 
 
(% hedged - estimated consumption)
2013
 
57
%
 
56
%
2014
 
29
%
 
29
%



8

We have certain fuel derivative contracts that are subject to margin requirements. For these specific fuel derivative contracts, on any business day, we may be required to post collateral if the mark-to-market exposure assessed at our parent company level exceeds $3.0 million. The amount of collateral required to be posted is an amount equal to the difference between the mark-to-market exposure and $3.0 million. At March 31, 2013, the fair market value of our derivative liability related to this counterparty was approximately $0.1 million. As of March 31, 2013 and December 31, 2012, we were not required to post any collateral for our fuel derivative instruments as the exposure at our parent company level did not exceed $3.0 million.
We had no derivative instruments qualifying and designated as hedging instruments on the consolidated financial statements as of March 31, 2013 or December 31, 2012.
At March 31, 2013 and December 31, 2012, the fair values and line item captions of derivative instruments not designated as hedging instruments under FASB ASC 815-20 were:
 
 
 
Fair Value as of
 
Fair Value as of
(in thousands)
Balance Sheet Location
 
March 31, 2013
 
December 31, 2012
 
 
 
 
 
 
Fuel hedges
Other current assets
 
$
1,103

 
$
747

Fuel hedges
Other long-term assets
 
661

 
816

 
Total Derivatives Assets
 
$
1,764

 
$
1,563

 
 
 
 
 
 
Fuel hedges
Current liabilities - Derivative liabilities
 
55

 
278

 
Total Derivatives Liabilities
 
$
55

 
$
278



The effects of derivative instruments not designated as hedging instruments on the consolidated financial statements for the three months ended March 31, 2013 and March 31, 2012 were:
 
Location of Gain Recognized in Income on Derivative Instruments
 
 
 
 
 
 
Amount of Gain Recognized in Income on Derivative Instruments
(in thousands)
 
For the Three Months Ended March 31,
 
 
2013
 
2012
 
 
 
 
 
 
Foreign currency swap
Other income (expense)
 
$
—

 
$
209

Fuel hedges
Other income (expense)
 
572

 
2,285

Total
 
 
$
572

 
$
2,494

 
 
 
 
 
 

Fair Value Measurements
U.S. GAAP establishes a hierarchy for inputs used in measuring fair value that maximizes the use of observable inputs and minimizes the use of unobservable inputs by requiring that the most observable inputs be used when available. Observable inputs are inputs that market participants would use in pricing the asset or liability based on market data obtained from independent sources. Unobservable inputs are inputs that reflect our assumptions which market participants would use in pricing the asset or liability based on the best available

9

information under the circumstances. The hierarchy is broken down into three levels based on the reliability of the inputs as follows:
•
Level 1 Inputs – Quoted prices (unadjusted) in active markets for identical assets or liabilities that the Company has the ability to access.
•
Level 2 Inputs – Inputs other than quoted prices included within Level 1 that are observable for the asset and liability, either directly or indirectly.
•
Level 3 Inputs – Inputs that are unobservable for the asset or liability.
Fair Value of Financial Instruments
We use quoted prices in active markets when available to determine the fair value of our financial instruments. The fair value of our financial instruments that are not measured at fair value on a recurring basis are:
(in thousands)
 
Carrying Value as of
 
                        Fair Value as of
 
 
March 31,
2013
 
December 31,
2012
 
March 31,
2013
 
December 31,
2012
Long-term bank debt
(a)
$
294,282

 
$
293,358

 
$
300,240

 
$
321,972

Senior secured notes
 
225,000

 
225,000

 
244,125

 
239,063

Total
 
$
519,282

 
$
518,358

 
$
544,365

 
$
561,035

 
 
 
 
 
 
 
 
 
(a) The carrying value of the long-term bank debt is net of $2.0 million and $3.0 million of original issue discount as of March 31, 2013 and December 31, 2012, respectively.
Long-term bank debt: level 2 inputs were used to calculate the fair value of our long-term debt which was estimated using the present value of expected future cash flows which incorporates our risk profile. The valuation also takes into account debt maturity and interest rate based on the contract terms.
Senior secured notes: level 1 inputs were used to calculate the fair value of our Notes which was estimated using quoted market prices.
Other financial instruments: due to their short-term maturities and no interest rate, currency or price risk, the carrying amounts of cash and cash equivalents, passenger deposits, accrued interest, and accrued expenses approximate their fair values as of March 31, 2013 and December 31, 2012. We consider these inputs to be level 1 as all are observable and require no judgment for valuation.
The following table presents information about our financial instrument assets and liabilities that are measured at fair value on a recurring basis:
(in thousands)
 
As of March 31, 2013
 
As of December 31, 2012
Description
 
Total
 
Level 1
 
Level 2
 
Level 3
 
Total
 
Level 1
 
Level 2
 
Level 3
Assets
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Derivative financial instruments
(a)
$
1,764

 
$
—

 
$
1,764

 
$
—

 
$
1,563

 
$
—

 
$
1,563

 
$
—

Total Assets
 
$
1,764

 
$
—

 
$
1,764

 
$
—

 
$
1,563

 
$
—

 
$
1,563

 
$
—

Liabilities
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Derivative financial instruments
 
$
55

 
$
—

 
$
55

 
$
—

 
$
278

 
$
—

 
$
278

 
$
—

Total liabilities
 
$
55

 
$
—

 
$
55

 
$
—

 
$
278

 
$
—

 
$
278

 
$
—


10

(a) As of March 31, 2013, derivative financial instruments of $1.1 million and $0.7 million are classified as other current assets and other long-term assets, respectively, in the consolidated balance sheets. As of December 31, 2012, $0.7 million was classified as other current assets and $0.8 million was classified in other long-term assets.
Our derivative financial instruments in the table above consist of fuel hedge swaps. Fair value is derived using the valuation models that utilize the income value approach. These valuation models take into account the contract terms, such as maturity, and inputs, such as forward fuel prices, creditworthiness of the counter-party and us, as well as other data points. The data sources utilized in these valuation models that are significant to the fair value measurement are classified as Level 2 sources in the fair value input level hierarchy.
Non-recurring Measurements of Non-financial Assets
Goodwill and indefinite-lived intangible assets not subject to amortization are reviewed for impairment on an annual basis or earlier if there is an event or change in circumstances that would indicate that the carrying value of these assets could not be fully recovered. If the carrying amount exceeds the estimated discounted future cash flows, we measure the amount of the impairment by comparing the carrying amount of the asset to its fair value.
Other long-lived assets, such as our vessels, are reviewed for impairment whenever events or changes in circumstances indicate the carrying amount of an asset may not be recoverable. If the carrying amount of the asset exceeds the estimated expected undiscounted future cash flows, we measure the amount of the impairment by comparing the carrying amount of the asset to its fair value. The estimation of fair value measured by undiscounted or discounted expected future cash flows would be considered Level 3 inputs.
Our annual impairment tests are performed as of September 30th. As of March 31, 2013, there were no events or changes in circumstances that would indicate that the carrying amount of our long-lived assets, goodwill and indefinite-lived intangible assets would not be recoverable.

Note 5.    Commitments and Contingencies
Contingencies – Litigation
On an ongoing basis, we assess the potential liabilities related to any lawsuits or claims brought against us. While it is typically very difficult to determine the timing and ultimate outcome of such actions, we use our judgment to determine if it is probable that we will incur an expense related to the settlement or final adjudication of such matters and whether a reasonable estimation of such probable loss can be made. In assessing probable losses, we take into consideration estimates of the amount of insurance recoveries, if any. We accrue a liability when we believe a loss is probable and the amount of loss can be reasonably estimated. The majority of claims are covered by insurance and we believe the outcome of such claims, net of estimated insurance recoveries, will not have a material adverse impact on our financial condition or results of operations and cash flows.

Other

As mandated by the Federal Maritime Commission for sailings from U.S. ports, the availability of passenger deposits received for future sailings is restricted until the completion of the related sailing in accordance with FMC regulations. We meet this obligation by posting a $15.0 million surety bond.




11

In October 2012, PCH entered into a software license agreement with a third party vendor. This agreement grants PCH a non-exclusive, perpetual, royalty-free license to use the software, which is shared between us and OCI. Our portion of the license fee is $1.1 million, of which $0.3 million was paid in 2012 and $0.5 million was paid during the three months ended March 31, 2013. The balance is expected to be paid in the second quarter of 2013.
On January 31, 2013 our former President stepped down from his role and became a consultant to us. We entered into a Separation Agreement and a Consulting Agreement with our former president. Severance of $0.7 million was paid in 2013 pursuant to his employment agreement. The Consulting Agreement has a term of 24 months and has been treated as an intangible asset. At inception the non-compete clause within the agreement was valued at $0.6 million and represents an intangible asset in accordance with ASC 350 - Intangibles. The intangible asset has a finite useful life and is being amortized over the term of the agreement. For the three months ended March 31, 2013, we paid $0.1 million under this agreement. Our estimated amortization expense is $0.3 million for each year for the periods ended December 31, 2013 and 2014.
On March 22, 2013, our Chairman and Chief Executive Officer agreed to amend and extend his executive employment agreement with PCI through December 31, 2016. The amendment modifies certain terms of his existing employment agreement.
Note 7. Consolidating Financial Information
Our $225.0 million senior secured notes are collateralized by our vessels and guaranteed fully and unconditionally, jointly and severally by all our subsidiaries (the "Guarantors," and each a "Guarantor"). These Guarantors are 100% owned subsidiaries of the Company.
The following condensed consolidating financial statements for Seven Seas Cruises S. DE R.L. and the Guarantors present condensed consolidating statements of income (loss) and comprehensive income (loss) for three months ended March 31, 2013 and 2012, condensed consolidating balance sheets as of March 31, 2013 and December 31, 2012 and condensed consolidating statements of cash flows for the three months ended March 31, 2013 and 2012, using the equity method of accounting, as well as elimination entries necessary to consolidate the parent company and all of its subsidiaries.
On February 4, 2013, Seven Seas Voyager and Seven Seas Navigator exited the UK tonnage tax regime and will no longer be required to abide by certain UK specific regulations. Also on this date, we transferred these ships to new legal entities domiciled in the United States. The new vessel-owning subsidiaries are each a Guarantor. These transactions had no impact on our subsidiary guarantor financial statements within our condensed consolidating financial statements. Previously, Seven Seas Cruises S. DE R.L had charter hire agreements in place with the two UK subsidiaries, which previously owned the Seven Seas Voyager and Seven Seas Navigator. These agreements required Seven Seas Cruises S. DE R.L. to pay a daily hire fee to the subsidiary to administratively manage the vessels. The costs incurred by the vessel owning subsidiaries included deck and engine crew payroll and expenses, vessel insurance, depreciation and interest related to the terms loans. In addition to the vessel owning subsidiaries, we have a sales and marketing office that is a Guarantor.




12

Our vessel-owning subsidiaries were parties to our first lien term loan as both borrowers and guarantors. The applicable outstanding debt related to the first lien term loan is included in the Guarantor accounts as well as the related interest expense and deferred financing costs through August 2012. In August 2012, Seven Seas Cruises S. DE R.L. repaid its first lien term loan and concurrently entered into a new credit agreement. As a result of this transaction, our vessel-owning subsidiaries are only guarantors on the new credit agreement. In 2011, Seven Seas Cruises S. DE R.L repaid the second lien term loan. As the loan was repaid by Seven Seas Cruises S. DE R.L., the parent company, each subsidiary remains responsible for its portion of the related debt to Seven Seas Cruises S. DE R.L. and such obligation was recorded as an intercompany payable at the subsidiary level and eliminated within the condensed consolidating balance sheets.
Each subsidiary guarantee will be automatically released upon any one or more of the following circumstances: the subsidiary is sold or sells all of its assets; the subsidiary is declared “unrestricted” for covenant purposes; the subsidiary’s guarantee of other indebtedness is terminated or released; the requirements for legal defeasance or covenant defeasance or to discharge the indenture have been satisfied; or the subsidiary transfers ownership of a mortgaged vessel in connection with a permitted reflagging transaction.
During the first quarter of 2013, we determined that we did not properly classify $1.5 million of depreciation expense in our condensed consolidating financial information footnote in our first quarter of 2012 interim period and year-ended December 31, 2012. We should have presented the $1.5 million of vessel refurbishment depreciation expense in the Parent column instead of in the Subsidiaries Guarantors column. In addition, we determined that certain intercompany transactions for the first quarter of 2012 were incorrectly classified. As a result, the Subsidiaries related party revenue should have been $3.6 million higher at $26.8 million and the Subsidiaries cruise operating expense should have been $0.4 million higher at $8.1 million. These revisions have no impact on the consolidated balance sheet, statement of income (loss) and comprehensive income (loss) or statement of cash flows for any period presented. In accordance with accounting guidance found in ASC 250-10 (SEC Staff Accounting Bulletin No. 99, Materiality), we assessed the materiality of the errors and concluded that the error was not material to any of our previously issued financial statements. We will revise our previously issued financial statements in future filings.



13

Condensed Consolidating Balance Sheets
 
As of March 31, 2013
(in thousands)
Parent

Subsidiaries Guarantors

Eliminations

Consolidated
Assets








Current assets







Cash and cash equivalents
$
118,445


$
1,498


$
—


$
119,943

Trade and other receivable, net
10,232


207


—


10,439

Related party receivables
2,639


(198
)

—


2,441

Inventories
3,874


2,674


—


6,548

Prepaid expenses
17,713


1,301


—


19,014

Intercompany receivable
354,111


40,827


(394,938
)

—

Other current assets
3,688


—


—


3,688

Total current assets
510,702


46,309


(394,938
)

162,073

Property and equipment, net
73,950


558,378


—


632,328

Goodwill
404,858


—


—


404,858

Intangible assets, net
83,478


—


—


83,478

Other long-term assets
33,067


—


—


33,067

Investment in subsidiaries
247,328


—


(247,328
)

—

Total assets
$
1,353,383


$
604,687


$
(642,266
)

$
1,315,804









Liabilities and Members' Equity







Current liabilities







Trade and other payables
$
2,253


$
625


$
—


$
2,878

Intercompany payables
40,827


354,111


(394,938
)

—

Accrued expenses
45,755


2,623


—


48,378

Passenger deposits
188,965


—


—


188,965

Derivative liabilities
55


—


—


55

Current portion of long-term debt
745


—


—


745

Total current liabilities
278,600


357,359


(394,938
)

241,021

Long-term debt
518,537


—


—


518,537

Other long-term liabilities
12,410


—


—


12,410

Total liabilities
809,547


357,359


(394,938
)

771,968

Commitments and Contingencies







Members' equity







Contributed capital
564,624


134,036


(134,036
)

564,624

Accumulated (deficit) earnings
(20,788
)

113,292


(113,292
)

(20,788
)
Total members' equity
543,836


247,328


(247,328
)

543,836

Total liabilities and members' equity
$
1,353,383


$
604,687


$
(642,266
)

$
1,315,804




14

Condensed Consolidating Balance Sheets

As of December 31, 2012
(in thousands)
Parent

Subsidiaries Guarantors

Eliminations

Consolidated
Assets







Current assets







Cash and cash equivalents
$
98,815


$
1,042


$
—


$
99,857

Trade and other receivable, net
7,076


203


—


7,279

Related party receivables
1,798


—


—


1,798

Inventories
4,350


2,222


—


6,572

Prepaid expenses
15,971


1,857


—


17,828

Intercompany receivable
369,828


40,910


(410,738
)

—

Other current assets
2,692


—


—


2,692

Total current assets
500,530


46,234


(410,738
)

136,026

Property and equipment, net
74,070


563,254


—


637,324

Goodwill
404,858


—


—


404,858

Intangible assets, net
83,556


—


—


83,556

Other long-term assets
32,950


—


—


32,950

Investment in subsidiaries
236,220


—


(236,220
)

—

Total assets
$
1,332,184


$
609,488


$
(646,958
)

$
1,294,714









Liabilities and Members' Equity







Current liabilities







Trade and other payables
$
3,557


$
926


—


$
4,483

Related party payables
—


131


—


131

Intercompany payables
40,910


369,828


(410,738
)

—

Accrued expenses
41,350


2,383


—


43,733

Passenger deposits
169,463


—


—


169,463

Derivative liabilities
278


—


—


278

Total current liabilities
255,558


373,268


(410,738
)

218,088

Long-term debt
518,358


—


—


518,358

Other long-term liabilities
9,635


—


—


9,635

Total liabilities
783,551


373,268


(410,738
)

746,081

Commitments and Contingencies







Members' equity







Contributed capital
564,372


134,036


(134,036
)

564,372

Accumulated (deficit) earnings
(15,739
)

102,184


(102,184
)

(15,739
)
Total members' equity
548,633


236,220


(236,220
)

548,633

Total liabilities and members' equity
$
1,332,184


$
609,488


$
(646,958
)

$
1,294,714






15

Condensed Consolidating Statements of Income (Loss) and Comprehensive Income (Loss)
 
Three Months Ended March 31, 2013
(in thousands)
Parent

Subsidiaries Guarantors

Eliminations

Consolidated
Revenue







Passenger ticket
$
113,438


$
—


$
—


$
113,438

Onboard and other
10,879


—


—


10,879

Related Party Revenue
—


27,639


(27,639
)

—

Total revenue
124,317


27,639


(27,639
)

124,317

Cruise operating expense







Commissions, transportation and other
39,915


1,998


(1,998
)

39,915

Onboard and other
2,666


14


—


2,680

Payroll, related and food
16,015


3,321


—


19,336

Fuel
11,477


—


—


11,477

Other ship operating
6,593


3,046


—


9,639

Other
24,024


1,141


(23,916
)

1,249

Total cruise operating expense
100,690


9,520


(25,914
)

84,296

Selling and administrative
21,946


2,059


(1,725
)

22,280

Depreciation and amortization
4,376


4,877


—


9,253

Total operating expense
127,012


16,456


(27,639
)

115,829

Operating (loss) income
(2,695
)

11,183


—


8,488

Non-operating income (expense)







Interest expense
(10,048
)

—


—


(10,048
)
Interest income
74


1


—


75

Other income (expense)
(3,419
)

(66
)

—


(3,485
)
Equity in earnings of subsidiaries
11,107


—


(11,107
)

—

Total non-operating income (expense)
(2,286
)

(65
)

(11,107
)

(13,458
)
Income (loss) before income taxes
(4,981
)

11,118


(11,107
)

(4,970
)
Income tax expense, net
(68
)

(11
)

—


(79
)
Net (loss) income
(5,049
)

11,107


(11,107
)

(5,049
)
Total comprehensive (loss) income
$
(5,049
)

$
11,107


$
(11,107
)

$
(5,049
)

16

Condensed Consolidating Statements of Income and Comprehensive Income

Three Months Ended March 31, 2012
(in thousands)
Parent

Subsidiaries Guarantors

Eliminations

Consolidated
Revenue







Passenger ticket
$
110,128


$
—


$
—


$
110,128

Onboard and other
11,288


—


—


11,288

Related Party Revenue
—


26,802


(26,802
)

—

Total revenue
121,416


26,802


(26,802
)

121,416

Cruise operating expense







Commissions, transportation and other
40,761


1,992


(1,931
)

40,822

Onboard and other
2,256


—


—


2,256

Payroll, related and food
15,720


3,056


—


18,776

Fuel
12,113


—


—


12,113

Other ship operating
7,404


1,927


—


9,331

Other
23,403


1,128


(23,251
)

1,280

Total cruise operating expense
101,657


8,103


(25,182
)

84,578

Selling and administrative
20,818


1,949


(1,620
)

21,147

Depreciation and amortization
3,396


6,279


—


9,675

Total operating expense
125,871


16,331


(26,802
)

115,400

Operating (loss) income
(4,455
)

10,471


—


6,016

Non-operating income (expense)







Interest expense
(6,149
)

(1,936
)

—


(8,085
)
Interest income
102


1


—


103

Other income (expense)
2,492


21


—


2,513

Equity in earnings of subsidiaries
8,545


—


(8,545
)

—

Total non-operating income (expense)
4,990


(1,914
)

(8,545
)

(5,469
)
Income before income taxes
535


8,557


(8,545
)

547

Income tax expense, net
(177
)

(12
)

—


(189
)
Net income
358


8,545


(8,545
)

358

Total comprehensive income
$
358


$
8,545


$
(8,545
)

$
358










17


Condensed Consolidating Statements of Cash Flows

Three Months Ended March 31, 2013
(in thousands)
Parent

Subsidiaries Guarantors

Eliminations

Consolidated
Net cash provided by operating activities
$
26,207


$
495


$
—


$
26,702

Cash flows from investing activities







Purchases of property and equipment
(3,337
)

—


—


(3,337
)
Restricted cash
(25
)

—


—


(25
)
Acquisition of intangible assets
(90
)

—


—


(90
)
Net cash used in investing activities
(3,452
)

—


—


(3,452
)
Cash flows from financing activities







Debt issuance costs
(955
)

—


—


(955
)
Deferred payment to acquire intangible asset
(2,000
)

—


—


(2,000
)
Net cash used in financing activities
(2,955
)

—


—


(2,955
)
Effect of exchange rate changes on cash and cash equivalents
(170
)

(39
)

—


(209
)
Net increase in cash and cash equivalents
19,630


456


—


20,086

Cash and cash equivalents







Cash and cash equivalents at beginning of period
98,815


1,042


—


99,857

Cash and cash equivalents at end of period
$
118,445


$
1,498


$
—


$
119,943

Condensed Consolidating Statements of Cash Flows

Three Months Ended March 31, 2012
(in thousands)
Parent

Subsidiaries Guarantors

Eliminations

Consolidated
Net cash provided by (used in) operating activities
$
18,133


$
(214
)

$
—


$
17,919

Cash flows from investing activities







Purchases of property and equipment
(4,913
)

—


—


(4,913
)
Restricted cash
205


—


—


205

Net cash used in investing activities
(4,708
)

—


—


(4,708
)
Cash flows from financing activities







Debt issuance costs
(130
)

—


—


(130
)
Deferred payment to acquire intangible asset
(2,000
)

—


—


(2,000
)
Net cash used in financing activities
(2,130
)

—


—


(2,130
)
Effect of exchange rate changes on cash and cash equivalents
64


14


—


78

Net increase (decrease) in cash and cash equivalents
11,359


(200
)

—


11,159

Cash and cash equivalents







Cash and cash equivalents at beginning of period
67,771


849


—


68,620

Cash and cash equivalents at end of period
$
79,130


$
649


$
—


$
79,779


18

Item 2.    Management’s Discussion and Analysis of Financial Condition and Results of Operations.
Cautionary Note Concerning Factors That May Affect Future Results
The discussion under this caption “Management’s Discussion and Analysis of Financial Condition and Results of Operations” and elsewhere in this document includes forward-looking statements under the Private Securities Litigation Reform Act of 1995. All statements other than statements of historical facts, 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), made in this quarterly report 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:
•
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;
•
changes in cruise capacity, as well as capacity changes in the overall vacation industry;
•
intense competition from other cruise companies, as well as non-cruise vacation alternatives, which may affect our ability to compete effectively;
•
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;
•
changes in interest rates, fuel costs, or foreign currency rates;
•
the risks associated with operating internationally;
•
changes in general economic, business and geopolitical conditions;
•
the impact of changes in the global credit markets on our ability to borrow and our counter party credit risks, including with respect to our credit facilities, derivative instruments, contingent obligations and insurance contracts;
•
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 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 seasonal variations in passenger fare rates and occupancy levels at different times of the year;

19

•
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 the spread of contagious diseases;
•
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;
•
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 reputation harm, the modification of itineraries or cancellation of a cruise or series of cruises;
•
the continued availability of attractive port destinations;
•
our ability to attract and retain qualified shipboard crew members and key personnel; and
•
changes involving the corporate, tax, environmental, health, safety and other regulatory regimes in which we operate.
The above examples are not exhaustive. From time to time, new risks emerge and existing risks increase in relative importance to our operations. 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. Such 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 of this report. All subsequent written and oral forward-looking statements attributable to us or any person acting on our behalf are expressly qualified in their entirety by the cautionary statements contained or referred to in this section and in our risk factors set forth our Annual Report on Form 10-K filed with the Securities and Exchange Commission on March 8, 2013.
Critical Accounting Estimates
For a discussion of our critical accounting estimates, refer to Management’s Discussion and Analysis of Financial Condition and Results of Operations within our annual report on Form 10-K filed with the Securities and Exchange Commission on March 8, 2013.

As of January 1, 2013 we changed our estimate for all our ships' projected residual values. The change was triggered as we obtained recent sales information for luxury cruise ship sales that occurred in the three month period ended March 31, 2013. This new information, in conjunction with other comparable sale data points, was used in our analysis, which includes our consideration of anticipated technological changes, long-term cruise and vacation market conditions and replacement cost of similarly built vessels. As a result, we increased each ship's projected residual value from 15% to 30%. The change in estimate has been applied prospectively. The effect of the change on both operating income and net loss for the three month period ended March 31, 2013 is approximately $1.3 million of reduced depreciation expense. The estimated impact of this change for full year 2013 is a reduction of depreciation expense of approximately $5.0 million. We continue to evaluate relevant new factors and circumstances, which may cause us to revise our estimate in the future. If such a change is necessary, depreciation expense could be materially higher or lower.




20

Seasonality
Our revenues are seasonal, based on demand for cruises. Demand is strongest for cruises during the Northern Hemisphere’s summer months and holidays. In order to mitigate the impact of the winter weather in the Northern Hemisphere and to capitalize on the summer season in the Southern Hemisphere, we deploy our ships to South America, Asia, and the Caribbean during the Northern Hemisphere winter months.
Financial Presentation
Description of Certain Line Items
Revenues
Our revenue consists of the following:
•
Passenger ticket revenue consists of gross revenue recognized from the sale of passenger tickets net of dilutions, such as shipboard credits and certain included passenger shipboard event costs. Also included is gross revenue for air and related ground transportation sales.
•
Onboard and other revenue consists of revenue derived from the sale of goods and services rendered onboard the ships (net of related concessionaire costs), travel insurance (net of related costs), and cancellation fees. Also included in Onboard and other revenue is gross revenue from pre- and post-cruise hotel accommodations, shore excursions, land packages and ground transportation for which we assume the risks of loss for collections and cancellations. Certain of our cruises include free unlimited shore excursions (“FUSE”) and/or free pre-cruise hotel accommodations, and such free excursions and hotel accommodations have no revenue attributable to them. The costs for FUSE and free hotel accommodations are included in commissions, transportation and other expense in the consolidated statements of income (loss) and comprehensive income (loss).
•
Cash collected in advance for future cruises is recorded as a passenger deposit liability. Those deposits for sailings traveling more than 12 months in the future are classified as a long-term liability. We recognize the revenue associated with these cash collections in the period in which the cruise occurs. For cruises that occur over multiple periods, revenue is prorated and recognized ratably in each period based on the overall length of the cruise. Cancellation fee revenue, along with associated commission expense and travel insurance revenue, if any, are recorded in the period the cancellation occurs.
Expenses
Cruise Operating Expense
Our cruise operating expense consists of the following:
•
Commissions, transportation and other consists of payments made to travel agencies that sell our product, costs associated with air and related ground transportation pre-sold to our guests, all credit card fees, and the costs associated with shore excursions and hotel accommodations included as part of the overall cruise purchase price.
•
Onboard and other consists of costs related to land packages and ground transportation, as well as shore excursions and hotel accommodations costs not included in commissions, transportation and other.

21

•
Payroll, related and food consists of the costs of crew payroll and related expenses for shipboard personnel, as well as food expenses for both passengers and crew. We include food and payroll costs in a single expense line item as we contract with a single vendor to provide many of our hotel and restaurant services, including both food and labor costs, which are billed on a per-passenger basis. This per-passenger fee reflects the cost of both of the aforementioned expenses.
•
Fuel consists of fuel costs and related delivery and storage costs.
•
Other ship operating consists of port, deck and engine, certain entertainment-related expenses, and hotel consumables expenses.
•
Other consists primarily of dry-dock, ship insurance costs, and loss on disposals of assets.
Selling and administrative expense
Selling and administrative expense includes advertising and promotional activities, as well as shoreside personnel wages, benefits and expenses relating to our worldwide offices, professional fees, information technology support, our reservation call centers, and related support activities. Such expenditures are generally expensed in the period incurred.
Key Operational and Financial Metrics, including Non-GAAP
We utilize a variety of operational and financial metrics which are defined below to evaluate our performance and financial condition. As discussed in more detail herein, we use certain non-GAAP measures, such as EBITDA, 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 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. There are no specific rules or regulations for determining non-GAAP measures, and as such, there exists the possibility that they may not be comparable to other companies within the industry. 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 GAAP.
Adjusted EBITDA is net income (loss) excluding depreciation and amortization, interest income, interest expense, other income (expense), and income tax benefit (expense), and other supplemental adjustments in connection with the calculation of certain financial ratios in accordance with our credit agreements. Management believes 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. Management believes 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, management uses this financial measure to evaluate and forecast our business performance. Adjusted EBITDA is not intended to be a measure of liquidity or cash flows from operations or a measure 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 is subject to certain additional adjustments as permitted under our debt agreement. Our use of Adjusted EBITDA may not be comparable to other companies within our industry. Management compensates for these limitations by using Adjusted EBITDA as only one of several measures for evaluating our business performance. In addition, capital expenditures, which impact depreciation and amortization, interest expense, and income tax benefit (expense), are reviewed separately by management.


22

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. We use this measure to perform capacity and rate analysis to identify our main non-capacity drivers which cause our cruise revenue and expense to vary.
EBITDA is net income (loss) excluding depreciation and amortization, net interest expense, and income tax benefit (expense).
Gross Cruise Cost represents the sum of total cruise operating 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 (each of which is described above under Description of Certain Line Items).
Net Per Diem represents Net Revenue divided by Passenger Days Sold. 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. Other cruise lines use Net Yield to analyze business which is a similar measurement that divides Net Revenue by APCD instead of Passenger Days Sold. The distinction is significant as other cruise companies focus more on potential onboard sales resulting in a bias to fill each bed to maximize onboard revenue, at the expense of passenger ticket revenue. Conversely, as our product is substantially all-inclusive, we derive nearly all of our revenue from passenger ticket revenue. Hence it is far more important for us to maintain a pricing discipline focusing on passenger ticket revenue rather than to discount cruises in order to achieve higher occupancy to drive potential onboard revenues. We believe that this pricing discipline drives our revenue performance, our relatively long booking window, and allows us to maintain a positive relationship with the travel agency community.
Net Revenue represents total revenue less commissions, transportation and other expense, and onboard and other expense (each of which is described above under Description of Certain Line Items).
Net Yield represents Net Revenue per APCD.
Occupancy is calculated by dividing Passenger Days Sold by APCD.
Passenger Days Sold (“PDS”) represents the number of revenue passengers carried for the period multiplied by the number of days within the period of their respective cruises.







23

Executive Overview
Revenue was $124.3 million, an increase of 2.4% over the first quarter of 2012 on a 1.1% decrease in capacity.
Net Yield was $480.44, an increase of 5.5% over the first quarter of 2012 while occupancy was 92.0%, an increase of 0.2 percentage points over the first quarter of 2012.
Adjusted EBITDA was $19.5 million, a 9.7% increase compared with $17.7 million in the first quarter of 2012.
Net Cruise Cost, excluding Fuel and Other expense, per APCD increased by 5.2% to $301.32 in 2013 from $286.38 in 2012, primarily driven by non-recurring restructuring charges and increased operating costs due to signing a five-year agreement in March 2012 with Wartsila to maintain the engines throughout the fleet.
Fuel expense was $11.5 million compared to $12.1 million for the first quarter of 2012 driven by lower prices and lower consumption. Fuel net of settled hedges, was $11.3 million compared to $10.9 million for the first quarter of 2012.
Other expense was $1.2 million compared to $1.3 million for the first quarter of 2012.



                  

24


Results of Operations
Operating results for the three months ended March 31, 2013, compared to the same period in 2012, are shown in the following table (in thousands):
 
Three Months Ended March 31,
2013
 
2012
 
 
 
% of Total Revenues
 
 
 
% of Total Revenues
Revenue
 
 
 
 
 
 
 
Passenger ticket
$
113,438

 
91.2
 %
 
$
110,128

 
90.7
 %
Onboard and other
10,879

 
8.8
 %
 
11,288

 
9.3
 %
Total revenue
124,317

 
100.0
 %
 
121,416

 
100.0
 %
 
 
 
 
 
 
 
 
Cruise operating expense
 
 
 
 
 
 
 
Commissions, transportation and other
39,915

 
32.1
 %
 
40,822

 
33.6
 %
Onboard and other
2,680

 
2.2
 %
 
2,256

 
1.9
 %
Payroll, related and food
19,336

 
15.6
 %
 
18,776

 
15.5
 %
Fuel
11,477

 
9.2
 %
 
12,113

 
10.0
 %
Other ship operating
9,639

 
7.8
 %
 
9,331

 
7.7
 %
Other
1,249

 
1.0
 %
 
1,280

 
1.1
 %
Total cruise operating expense
84,296

 
67.8
 %
 
84,578

 
69.7
 %
Other operating expense
 
 
 
 
 
 
 
Selling and administrative
22,280

 
17.9
 %
 
21,147

 
17.4
 %
Depreciation and amortization
9,253

 
7.4
 %
 
9,675

 
8.0
 %
Total operating expense
115,829

 
93.2
 %
 
115,400

 
95.0
 %
Operating income
8,488

 
6.8
 %
 
6,016

 
5.0
 %
 
 
 
 
 
 
 
 
Non-operating income (expense)
 
 
 
 
 
 
 
Interest income
75

 
0.1
 %
 
103

 
0.1
 %
Interest expense
(10,048
)
 
(8.1
)%
 
(8,085
)
 
(6.7
)%
Other income (expense)
(3,485
)
 
(2.8
)%
 
2,513

 
2.1
 %
Total non-operating expense
(13,458
)
 
(10.8
)%
 
(5,469
)
 
(4.5
)%
Income before income taxes
(4,970
)
 
(4.0
)%
 
547

 
0.5
 %
Income tax expense
(79
)
 
(0.1
)%
 
(189
)
 
(0.2
)%
Net (loss) income
$
(5,049
)
 
(4.1
)%
 
$
358

 
0.3
 %

25

The following table sets forth selected statistical information. Passenger Days Sold refers to the number of revenue passengers carried for the period multiplied by the number of days within the period in their respective cruises. Available Passenger Cruise Days refers to a measurement of capacity that represents double occupancy per suite multiplied by the number of cruise days for the period.
 
 
Three Months Ended March 31,
 
 
2013
 
2012
Passenger Days Sold
 
156,527

 
157,873

APCD
 
170,100

 
171,990

Occupancy
 
92.0
%
 
91.8
%

Adjusted EBITDA was calculated as follows:
(in thousands)
Three Months Ended
March 31,
 
2013
 
2012
Net (loss) income
$
(5,049
)
 
$
358

Interest income
(75
)
 
(103
)
Interest expense
10,048

 
8,085

Depreciation and amortization
9,253

 
9,675

Income tax expense, net
79

 
189

Other (income) expense
3,485

 
(2,513
)
Equity-based compensation/transactions (a)
251

 
148

Non-recurring expenses (b)
701

 
397

Restructuring (c)
635

 
277

Fuel hedge gain (d)
147

 
1,232

ADJUSTED EBITDA
$
19,475

 
$
17,745


(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; non-recurring professional fees, and other costs associated with raising capital through debt and equity offerings; and certain litigation fees;
(c)
Restructuring charges represents non-recurring expenses associated with personnel changes, lease termination, and other corporate reorganizations to improve efficiencies.
(d)
Fuel hedge gain represents the realized gain on fuel hedges triggered by the settlement of the hedge instrument and is included in other income (expense).


26

In the following table, Net Per Diem is calculated by dividing net revenue by Passenger Days Sold, Gross Yield is calculated by dividing total revenue by Available Passenger Cruise Days, and Net Yield is calculated by dividing net revenue by Available Passenger Cruise Days as follows:
(in thousands, except Passenger Days Sold, Available Passenger Cruise Days, Net Per Diem, and Yield data)
 
Three Months Ended
March 31,
 
2013
 
2012
Passenger ticket revenue
 
$
113,438

 
$
110,128

Onboard and other revenue
 
10,879

 
11,288

Total revenue
 
124,317

 
121,416

Less:
 
 
 
 
Commissions, transportation and other expense
 
39,915

 
40,822

Onboard and other expense
 
2,680

 
2,256

Net Revenue
 
$
81,722

 
$
78,338

 
 
 
 
 
Passenger Days Sold
 
156,527

 
157,873

APCD
 
170,100

 
171,990

Net Per Diem
 
$
522.10

 
$
496.21

Gross Yield
 
730.85

 
705.95

Net Yield
 
480.44

 
455.48


In the following table, Gross Cruise Cost per Available Passenger Cruise Days is calculated by dividing Gross Cruise Cost by Available Passenger Cruise Days, and Net Cruise Cost per Available Passenger Cruise Days is calculated by dividing Net Cruise Costs by Available Passenger Cruise Days.

27

(in thousands, except APCD data)
 
Three Months Ended
March 31,
 
2013
 
2012
Total cruise operating expense
 
$
84,296

 
$
84,578

Selling and administrative expense
 
22,280

 
21,147

Gross Cruise Cost
 
106,576

 
105,725

Less:
 
 
 
 
Commissions, transportation and other expense
 
39,915

 
40,822

Onboard and other expense
 
2,680

 
2,256

Net Cruise Cost
 
$
63,981

 
$
62,647

Less:
 
 
 
 
Fuel
 
11,477

 
12,113

Other expense
 
1,249

 
1,280

Net Cruise Cost, excluding Fuel and Other
 
$
51,255

 
$
49,254

 
 
 
 
 
APCD
 
170,100

 
171,990

Gross Cruise Cost per APCD
 
$
626.55

 
$
614.72

Net Cruise Cost per APCD
 
376.14

 
364.25

Net Cruise Cost, excluding Fuel and Other, per
APCD
 
301.32

 
286.38


Three Months Ended March 31, 2013 ("2013") Compared to Three Months Ended March 31, 2012 ("2012")
Revenue
Total revenue increased $2.9 million or 2.4%, to $124.3 million in 2013 from $121.4 million in 2012. This increase was mainly due to:

•
Passenger ticket revenue increased $3.3 million or 3.0%, to $113.4 million in 2013 from $110.1 million in 2012, primarily due to pricing increases.
•
Onboard and other revenue decreased $0.4 million or 3.6%, to $10.9 million in 2013, from $11.3 million in 2012, primarily driven by a $0.8 million decrease in cancellation revenue, partially offset by a $0.4 million increase in revenue associated with other destination services.
Cruise Operating Expense
Total cruise operating expense decreased $0.3 million, or 0.3%, to $84.3 million in 2013, from $84.6 million in 2012. The increase was mainly due to:
•
$0.9 million decrease in Commissions, transportation and other, due to decreased air costs.
•
$0.4 million increase in Onboard and Other due to costs associated with other destination services.
•
$0.5 million increase in Payroll, related and food, due to general cost increases.
•
$0.6 million decrease in Fuel driven by a 3.8% decrease in our average cost per Metric Ton to $718 per Metric Ton in 2013 from $746 per Metric Ton in 2012 and a 1.5% decrease in consumption.
•
$0.3 million increase in Other ship operating, primarily driven by signing a five-year agreement with Wartsila to maintain the engines throughout the fleet.



28


Selling and Administrative Expense
Selling and administrative expense for 2013 increased $1.1 million, or 5.4%, to $22.3 million from $21.1 million for 2012. The increase was due to expenses associated with non-recurring restructuring costs of $0.7 million and increased sales and marketing expenses of $0.4 million.
Depreciation and Amortization Expense
Depreciation and amortization expense for 2013 decreased $0.4 million, or 4.4%, to $9.3 million from $9.7 million for 2012. In 2013, we increased each ship's projected residual value resulting in $1.3 million of reduced depreciation expense compared to 2012. This decrease was primarily offset by an increase in depreciation on vessel refurbishment of $0.7 million.
Non-Operating Income (Expense)
Interest expense increased $2.0 million, or 24.3%, to $10.0 million in 2013, from $8.1 million in 2012. The increase was primarily driven by the refinancing of our first lien term loan in August 2012 with a new term loan bearing a higher interest rate margin, which was subsequently repriced in February 2013.
Other expense increased $6.0 million to a $3.5 million loss in 2013, from a $2.5 million gain in 2012. In 2013, we had a loss on the extinguishment of debt of $3.7 million as a result of the repricing of our first lien term loan partially offset by a net gain of $0.6 million on our fuel hedge contracts. In 2012, we had a net gain of $2.3 million on fuel hedge contracts.
Net Yield
Net Yield increased by 5.5% to $480.44 for 2013 from $455.48 for 2012 primarily due to increased ticket prices and decreased product costs.
Net Cruise Cost per APCD
Net Cruise Cost per APCD increased by 3.3% to $376.14 in 2013 from $364.25 in 2012. Excluding fuel cost and other expense, Net Cruise Cost per APCD increased by 5.2% to $301.32 in 2013 from $286.38 in 2012, primarily driven by non-recurring restructuring charges and increased operating costs due to signing a five-year agreement with Wartsila to maintain the engines throughout the fleet.

Recently Adopted and Future Application of Accounting Standards
Refer to Note 1, Basis of Presentation, within the accompanying Consolidated Financial Statements. As of January 1, 2013, we adopted Financial Accounting Standards Board ASU 2011-11, Disclosures about Offsetting Assets and Liabilities. It requires an entity to disclose information about offsetting and related arrangements to enable users of its financial statements to understand the effect of those arrangements on its financial position. In 2013, this pronouncement was enhanced by ASU 2013-1. This update clarifies that ordinary receivables are not within the scope of ASU 2011-11 and it applies only to derivatives, repurchase agreements, reverse purchase agreements and other securities lending transactions. The adoption did not materially impact our consolidated financial statements.

29

In February 2013, the Financial Accounting Standards Board issued ASU 2013-02, Comprehensive Income (Topic 220): Reporting of Amounts Reclassified Out of Accumulated Other Comprehensive Income. It requires an entity to present the effects on the line items of net income of significant amounts reclassified out of accumulated other comprehensive income, but only if the item reclassified is required under U.S. GAAP to be reclassified to net income in its entirety in the same reporting period. Entities must also cross-reference to other disclosures currently required under U.S. GAAP for other reclassification items to be reclassified directly to net income in their entirety in the same reporting period. This standard was effective beginning January 1, 2013. The adoption did not materially impact our consolidated financial statements.
Refer to Note 2, Summary of Significant Accounting Policies to our audited financial statements and notes thereto included on Form 10-K filed with the Securities and Exchange Commission on March 8, 2013 for further information on Recent Accounting Pronouncements. Additionally, as an “emerging growth company”, we have elected the option to delay adoption of new or revised accounting standards applicable to public companies until such pronouncements are made applicable to private companies.
Liquidity and Capital Resources
Sources and Uses of Cash
Net cash provided by operating activities increased by $8.8 million to $26.7 million in 2013, from $17.9 million in 2012, as a decrease in net income adjusted for non-cash items (such as depreciation, amortization, stock compensation, and an unrealized loss on derivative contracts) of $1.3 million was offset by an increase in passenger deposits of $8.7 million and other working capital of $4.7 million.
Net cash used in investing activities decreased by $1.3 million to $3.5 million in 2013, from $4.7 million in 2012. The decrease was primarily due to lower capital expenditures in 2013.
Net cash used in financing activities increased $0.9 million to $3.0 million in 2013, from $2.1 million in 2012. The increase was due to costs associated with debt issuance costs associated with the repricing of our first lien credit facility in 2013.
Funding Sources and Future Commitments
As of March 31, 2013, our liquidity was $159.9 million, consisting of $119.9 million in cash and cash equivalents and $40.0 million available under our revolving credit facility. We had a working capital deficit of $78.9 million as of March 31, 2013, as compared to our working capital deficit of $100.5 million as of March 31, 2012. Similar to others in our industry, we operate with a substantial working capital deficit. This deficit is mainly attributable to (1) passenger deposits are normally paid in advance with a relatively low-level of accounts receivable, (2) rapid turnover results in a limited investment in inventories, and (3) voyage-related accounts payable usually become due after receipt of cash from related bookings. Passenger deposits remain a liability until the sailing date, however the cash generated from these advance receipts, as allowed by certain jurisdictions, is used interchangeably with cash on hand from other sources, such as our revolving credit facilities and other cash from operations. This cash can be used to fund operating expenses for the applicable future sailing, pay down revolving credit facilities, or any other use of cash.
In addition, we financed the purchase of our ships through long-term credit agreements of which the current portion of these instruments increase our working capital deficit. The current portion of long-term debt was $0.8 million, at March 31, 2013. We generated substantial cash flows from operations, and our business model, along with our revolving credit facility, has historically allowed us to maintain this working capital deficit and still meet our operating, investing and financing needs. We expect that we will continue to have working capital deficits in the future.

30

We have contractual obligations of which our debt maturities represent our largest funding requirement. As of March 31, 2013, we have $521.3 million in future debt maturities, of which $0.8 million is payable through March 31, 2014.
We believe our cash on hand, expected future operating cash inflows, additional borrowings under existing facilities, our ability to issue debt securities, and our ability to raise additional equity, including capital contributions, will be sufficient to fund operations, debt service requirements, and capital expenditures, and to maintain compliance with financial covenants under our credit agreements over the next twelve-month period. There is no assurance that cash flows from operations and additional fundings will be available in the future to fund our future obligations.

31

Contractual Obligations
As of March 31, 2013, our contractual obligations with initial or remaining terms in excess of one year, including interest expense on long-term debt obligations, were as follows:
 
Payments Due By Period
(in thousands)
Total
 
Less than
1 year
 
1 - 3 years
 
3 - 5 years
 
More than
5 years
Operating Activities:
 
 
 
 
 
 
 
 
 
Interest on long-term debt (1)
$
205,829

 
$
34,603

 
$
68,885

 
$
68,315

 
$
34,026

Operating lease obligations
1,491

 
747

 
744

 
—

 
—

Maintenance contract obligations (2)
6,685

 
1,707

 
3,414

 
1,564

 
—

Investing Activities:
 
 
 
 
 
 
 
 
 
Purchase obligations - equipment
5,827

 
1,572

 
2,834

 
1,421

 
—

Acquisition of intangible asset (3)
526

 
138

 
388

 
—

 
—

Financing Activities:
 
 
 
 
 
 
 
 
 
Long-term debt (4)
521,250

 
750

 
6,000

 
6,000

 
508,500

Capital lease obligation (5)
9,521

 
883

 
1,833

 
1,926

 
4,879

Total
$
751,129

 
$
40,400

 
$
84,098

 
$
79,226

 
$
547,405

 
(1)
Long-term debt obligations mature at various dates through fiscal year 2019 and bear interest at fixed and variable rates. Interest on variable rate debt is calculated based upon LIBOR, with a floor of 1.25%, plus the applicable margin ('All In Rate'). At March 31, 2013, the All In Rate was 4.75% and was used to estimate all periods. Amounts are based on existing debt obligations and do not consider potential refinancing of expiring debt obligations.
(2)
Amounts represent obligations under the five year maintenance agreement with a third party vendor for certain equipment purchases and monthly maintenance fees. The contract was signed on March 1, 2012 and has a term of sixty months.
(3)
Amounts represent obligations under the consulting agreement between PCH and our former President. The contract was effective on January 31, 2013 and has a term of twenty-four months.
(4)
Amounts represent debt obligations with initial terms in excess of one year. The contractual obligation under long-term debt does not reflect any excess cash flow payments we may be required to make pursuant to our senior secured credit facilities.
(5)
Amounts represent capital lease obligations with initial terms in excess of one year.

As a normal part of our business, depending on market conditions, pricing and our overall growth strategy, we continuously consider opportunities to enter into contracts for building additional ships. We may also consider the sale of ships or the purchase of existing ships. We continuously consider potential acquisitions and strategic alliances. If any of these were to occur, they would be financed through the incurrence of additional indebtedness, the issuance of additional capital contributions, or through cash flows from operations.
Off-Balance Sheet Arrangements
We are not party to any off-balance sheet arrangements, including guarantee contracts, retained or contingent interest, certain derivative instruments or variable interest entities that either have, or are reasonably likely to have, a current or future material effect on our financial condition, changes in our financial condition, revenues or expenses, results of operations, liquidity, capital expenditures or capital resources.

32


Debt Covenants
Our credit agreements contain a number of covenants that impose operating and financial restrictions, including requirements that we maintain a maximum loan-to-value ratio, a minimum interest coverage ratio (applicable only to our revolving credit facility) and restrictions on our and our subsidiaries’ ability to, among other things, incur additional indebtedness, issue preferred stock, pay dividends on or make distributions with respect to our capital stock, restrict certain transactions with affiliates, and sell certain key assets, principally our ships. As of March 31, 2013, we are in compliance with all debt covenants.






33

Item 3.    Quantitative and Qualitative Disclosures About Market Risk.
We are exposed to market risks attributable to changes in interest rates, foreign currency exchange rates and fuel prices. We manage these risks through a combination of our normal operating and financing activities and through the use of derivative financial instruments pursuant to our hedging practices and policies. For a discussion of our hedging strategies on market risks see Note 4, Derivative Instruments, Hedging Activities and Fair Value Measurements in the accompanying notes to consolidated financial statements and Item 7A, Quantitative and Qualitative Disclosures About Market Risk in our Annual Report on Form 10-K (333-178244) filed with the SEC on March 8, 2013.
Fuel Price Risk
Our exposure to market risk for changes in fuel prices relates primarily to the consumption of fuel on our vessels. Fuel expense, as a percentage of our total revenues, was approximately 9.2% and 10.0% for the three months ended March 31, 2013 and 2012, respectively. We use fuel derivative swap agreements to mitigate the financial impact of fluctuations in fuel prices. The fuel swaps do not qualify for hedge accounting; therefore, the changes in fair value of these fuel derivatives are recorded in other income (expense) in the accompanying consolidated statements of income and comprehensive income.
As of March 31, 2013 we have fuel derivative swap agreements with an aggregate notional amount of approximately $23.2 million maturing through 2014. These agreements hedge approximately 57% and 29% of our estimated fuel consumption in 2013 and 2014, respectively. The estimated fair value of these contracts at March 31, 2013 was approximately $1.8 million.

34

Item 4. Controls and Procedures.
Evaluation of Disclosure Controls and Procedures
Our management, with the participation of our Chief Executive Officer and Chief Financial Officer, evaluated the effectiveness of our disclosure controls and procedures as of March 31, 2013. Disclosure controls and procedures, as defined in Rules 13a-15(e) and 15d-15(e) of the Securities Exchange Act of 1934 (the "Exchange Act"), are designed to ensure that information required to be disclosed by us in the reports that we file or submit under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in the U.S. Securities and Exchange Commission's rules and forms. Disclosure controls and procedures include, without limitation, controls and procedures designed to ensure that information required to be disclosed by us in the reports that we file or submit under the Exchange Act is accumulated and communicated to management, including our principal executive and principal financial officers, or persons performing similar functions, as appropriate to allow timely decisions regarding required disclosure.
Management recognizes that any controls and procedures, no matter how well designed and operated, can provide only reasonable assurance of achieving the desired control objectives. In addition, the design of disclosure controls and procedures must reflect the fact that there are resource constraints and that management is required to apply judgment in evaluating the benefits of possible controls and procedures relative to their costs. Our Chief Executive Officer and Chief Financial Officer have evaluated our disclosure controls and procedures and have concluded, as of March 31, 2013, that all were effective.
Changes in Internal Control over Financial Reporting
There were no changes in our internal control over financial reporting identified in management’s evaluation pursuant to Rules 13a-15(d) or 15d-15(d) of the Exchange Act during the period covered by this Quarterly Report on Form 10-Q that materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.
PART II – OTHER INFORMATION
Item 6. Exhibits.



INDEX TO EXHIBITS
 
 
 
 
 
 
 
 
Exhibit Number
 
 
Incorporated by Reference
 
Filed/Furnished Herewith
Exhibit Description
 
Form
 
Exhibit
 
Filing Date
 
10.1

Amendment No.1 to Credit agreement
 
10-K
 
10.14
 
March 8, 2013
 

10.2

Frank J. Del Rio Employment Contract
 
 
 
 
 
 
 
X
Rule 13a-14(a)/15d-14(a) Certifications
 
 
 
 
 
 
 
 
31.1

Certification of Chief Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
 
 
 
 
 
 
 
X
31.2

Certification of Chief Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
 
 
 
 
 
 
 
X
Section 1350 Certifications
 
 
 
 
 
 
 
 
32.1

Certification of Chief Executive Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
 
 
 
 
 
 
 
X
32.2

Certification of Chief Financial Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
 
 
 
 
 
 
 
X
 
 
 
 
 
 
 
 
 
 
XBRL Documents
 
 
 
 
 
 
 
 
101.INS
XBRL Instance Document
 
 
 
 
 
 
 
X
101.SCH
XBRL Taxonomy Schema
 
 
 
 
 
 
 
X
101.CAL
XBRL Taxonomy Calculation Linkbase
 
 
 
 
 
 
 
X
101.DEF
XBRL Taxonomy Definition Linkbase
 
 
 
 
 
 
 
X
101.LAB
XBRL Taxonomy Label Linkbase
 
 
 
 
 
 
 
X
101.PRE
XBRL Taxonomy Presentation Linkbase
 
 
 
 
 
 
 
X


36

SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.
Seven Seas Cruises S. DE R.L.     
(Registrant)


Date: May 10, 2013
/s/ FRANK J. DEL RIO
Frank J. Del Rio, Chairman and Chief Executive Officer



Date: May 10, 2013
/s/ JASON M. MONTAGUE
Jason M. Montague, Executive Vice President and Chief Financial Officer

37