"We are very pleased to begin our journey as a public company by posting strong results for 2012. In addition, our fourth quarter results marked our eighteenth consecutive quarter of year-over-year Adjusted EBITDA growth" 


- Kevin Sheehan, President and Chief Executive Officer of Norwegian Cruise Line




  • Despite the weaker than expected results from Europe and impact of Super Storm Sandy, Net Yields increased 2%. Full year load factor was only down 0.6%. Capacity for the year increased 1.7%. 
  • Hedging strategy of using swaps and collars.  Also look at ways of cutting fuel consumption.
  • Leverage is now below 5x and both rating agencies have upgraded their ratings as a result of the IPO and debt transactions consumated post IPO
  • Capacity for the next Q will be lower YoY but higher for the year of 2013.
  • Taking delivery of Norweign Breakaway in a few months, will bring the best of NYC to the seas


  • Seeing a lot of momentum on booking patterns over the last 5 weeks
  • Demand during WAVE season by region?
    • This year Christmas and NYE fell on Tuesday so it impacted bookings these weeks, however, since then they have been booking in that 20%ish zone similar to RCL.  
    • Europe is booking in-line with the rest of their itineraries for now.  When they get closer in, that's when they would drop prices or raise prices on Europe depending on booking patterns towards the end of Q1. Still too early to tell.
  • Seeing a healthy booking period - which has extended from 2012.  Reason for the wide guidance is that they are being cautious since it's their first quarter as a public company. Hope to narrow guidance as the year progresses. 
  • Only have 11 ships so they have more volatility when it comes to dry docking and NCC costs ex Fuel. They bought the Genting ship and that came with a $5MM charter fee.  Now that goes away.  3 dry docks per year are the right number for them.
  • Nothing unique to the Epic vs. their other ships.  It's a double digit improvement to the other ships - people stay up later and spend more money on drinks and the casino. The design of these new ships are probably even a little better than Epic.
  • Back on Jan 23rd they issued a statement to their passengers on the Jade that they wouldn't enter the Holy Land region given what was occurring and that cost them a little yield.
  • Alaska: Had 3 ships in the region up until a few years ago when the state put a large tax on their gas. Then the taxes were rolled back and they are bringing the 3rd ship back. 
  • Putting a scrubber on the Pride of America - costs a lot but allows them to use fuel more efficiently. Will do that with their new ships.
  • Drove down their fuel consumption by 1.5% last year due to efficiency measures and feel like they can continue to do that.





  • "Contributing to the increase in revenue were slightly higher Capacity Days in the quarter and a Net Yield improvement of 2.5%, or 2.7% on a Constant Currency basis, from higher ticket pricing and onboard spend per Capacity Day."
  • " NCC ex Fuel decreased ... from the timing of certain repairs and maintenance expense, including dry-docks, and business improvement initiatives."
  • "The delivery of our Breakaway and Breakaway Plus class vessels, designed to improve on the already successful platform of Norwegian Epic, along with our strong product proposition that offers a consistent experience throughout our fleet, has Norwegian well positioned for 2013 and beyond."
  • [1Q13] "Adjusted EPS guidance based on net income excluding one-time charges related to the Company's initial public offering, issuance of $300 million in senior unsecured notes, redemption of the full amount of the Company's outstanding $450 million 11.75% senior secured notes due 2016 and partial redemption of our outstanding $350 million 9.5% senior unsecured notes due 2018."
  • "On January 24, 2013 the Company closed on an initial public offering ("IPO") of 27,058,824 of its ordinary shares, including shares sold as a result of the full exercise by the underwriters of their option to purchase additional shares, at a price of $19.00 per share."
  • "On February 6, 2013, the Company closed on the sale of $300 million of senior unsecured notes due February 2018 at a coupon of 5.00% per annum. The notes were issued at a price of 99.451%. The aggregate net proceeds of the IPO and the notes offering, after deducting underwriting discounts, commissions, initial purchasers' discount and estimated fees and expenses, were used to prepay certain credit facilities, repay amounts pursuant to the Norwegian Sky Agreement, redeem the full amount of the outstanding $450 million 11.75% senior secured notes due 2016, redeem a portion of the outstanding $350 million 9.5% senior notes due 2018 and for general corporate purposes." 


Week 1 of Feb Sales Underwhelming

Takeaway: After a promotional-driven January, the underlying cadence of consumer spending does not appear to have changed meaningfully in Feb.

The sequential change in sales into the first week of February leaves much to be desired. The chart below (ICSC Retail Sales Data) allows us to layer the current year's sales trajectory over what we saw in 2012, 2011, and 2010. What we're seeing in 2013 is nothing to write home about. Perhaps we saw a negative impact from the storm that hit the East coast -- though we could have very well argued the opposite should have taken place.


Its only one data point for the first quarter of the new retail year -- so let's not get too bent out of shape over it. But after a promotional-driven January with decelerating spending towards the back of the month, the data (outlined by the red line in the chart) suggests that the underlying cadence of consumer spending has not changed meaningfully.


ICSC Sales Index By Year

Week 1 of Feb Sales Underwhelming - salesfeb


In preparation for PNK's 4Q earnings release tomorrow, we’ve put together the recent pertinent forward looking company commentary.



Pinnacle Entertainment Completes Acquisition of Retama Park Racetrack in Texas (1/30/2013)

  • Paid cash consideration of $15 million to acquire a 75.5% equity interest in Pinnacle Retama Partners, LLC (PRP).  PRP will use the  proceeds of the transaction primarily to refinance the existing indebtedness of Retama Development Corporation ("RDC").  In addition, the Company entered into a management contract with RDC to manage the day-to-day operations of Retama Park. In conjunction with the closing, RDC repaid approximately $3.3 million of loans owned by the Company that were used to maintain continuity in the operations of Retama Park Racetrack."

PNK acquires ASCA (12/21/2012)




  • “L'Auberge Baton Rouge... we have seen strong visitation as evidenced by over 48,000 new mychoice sign-ups during the first month of operations. VIP business has opened up ahead of pace and we're optimistic about our ability to drive continued pace in this segment given the high quality amenities at this property.”
  • “These results are being delivered with more efficient and effective marketing spend. For the quarter, marketing expense as a percent of gaming revenue was down 60 basis points. This marks the third consecutive quarter where marketing reinvestment has been reduced versus prior year.”
  • “Table game growth continues to be a great story at Lumière, up 21% year-over-year in table field for the quarter. River City's growth was driven by increased play on day of trips and overall increased frequency of visitation. Our continued focus on driving profitable revenue is again evident in the results coming out of St. Louis, with marketing expense as a percentage of gaming revenue down 180 basis points versus prior year.”
  • [Belterra] "We continue to grow admissions in a declining market, and we remain focused on leveraging our unique assets while maintaining marketing spend discipline.”
  • “In New Orleans, the property and the market are clearly struggling, but underlying trends at Boomtown got progressively better throughout the quarter, notwithstanding the impact of Hurricane Isaac.”
  • “We have tremendous conviction in the value of our company and are very pleased to be purchasing shares in what we view as very compelling levels.”
  • [River Downs] The project's expected to cost $209 million, excluding license fees, land and capitalized interest. We expect to begin construction this year with the entire facility scheduled to open in the first half of 2014. We have master planned this facility for future expansion should demand conditions warrant the additional investment.”
  • “At River City in St. Louis, the $82 million expansion is progressing rapidly with the parking garage expected to open in about a month. The multipurpose event center is expected to come online before the end of next summer, and the hotel will open in the second half of 2013.”
  • “To date, we have contributed about $14 million of the $15.6 million, and we expect the remaining funds to close in the fourth quarter. ACDL continues to make meaningful progress on the development. And while there is work to do on the regulatory front, the project remains on track to open the first quarter of next year.”
  • “We continue to improve our margins, not only in this property, but all of our properties.  We believe margins this quarter are sustainable going forward.”
  •  [L’Auberge Baton Rouge]  “We're pleased with September and initial results. October has a bit different calendar and – but we're pleased with what we see in October and most important, we really feel like we nailed this facility. It's a terrific facility with a wonderful management team that we're very optimistic over time. We're going to build profitable revenues and have really good financial outcomes here.”
  • [L’Auberge du Lac] “Houston is a very underpenetrated market where we think that there is a lot of unmet demand, and we've been able to yield that facility – meaningfully better over the last couple of years mostly by having more profitable guests that come through our place but given the depth of that market. So we think that there is certainly room to go there and we've made enhancements to our facilities to make sure that we can take advantage of that demand. And on the non-gaming revenue side, we've continued to make enhancement that drive non-gaming cash revenue which is part of the story.”
  • “In terms of the spend per visit increase, it is coming largely from our top three tiers, the quality of the guests that are visiting our properties and the incentives that we're providing to them are yielding higher spend per visit.”

Hedgeye Statistics

The total percentage of successful long and short trading signals since the inception of Real-Time Alerts in August of 2008.

  • LONG SIGNALS 80.46%
  • SHORT SIGNALS 78.35%


Takeaway: $AXP growth is likely to be stronger sequentially in 1Q based on January SpendTrend numbers from FirstData. Multiple expansion seems likely.

Growth Accelerates Notably in January

First Data released its January SpendTrend data this morning, which tracks aggregate same-store sales activity in the United States. January showed notable acceleration in credit card volume growth to +9.2% YoY vs. +4.3% YoY growth in December and +6.8% YoY growth in November. 


On an overall basis, including credit, debit and check, consumer spending volume growth in January also accelerated to 6.2% YoY, which was up from 4.0% in December and 5.8% YoY growth in November. January's 6.2% YoY growth was, in fact, in-line with the average rate of growth over the last 8 months of 2012.


FirstData flagged the following components as notable contributors to the strength of January's print: 


Retail dollar volume growth was the highest growth seen since August 2012. Dollar volume growth in building material & garden equipment & supply dealers and sporting goods, hobby, book & music stores were key contributors to the retail growth.


There also seems to be a bit of time-shifting going on, as consumers deferred some consumption in December over fiscal cliff apprehensions into January. Nevertheless, it's notable that the payroll tax increase as well as the tax increase on high earners appeared to have little impact on consumers' appetite for spending. 


We like to use SpendTrend data as a proxy for American Express' intra-quarter momentum. Amex didn't provide a January update, as they normally do, on either their 4Q12 earnings call or at their recent investor meeting. Based on the historical relationship between FirstData's credit volume and Amex' U.S. credit volume, we would expect that January's growth in billed business for U.S. card accelerated to 9.5%-13.3%, up from the 4Q12 growth rate of 6.9%. If this is sustainable, this would support multiple expansion. The stock is currently trading at 13x 2013 estimates. This is the low end of the range (13x - 14.5x) over the last twelve months.


It's also interesting to consider that Amex' international volume growth accelerated meaningfully in 4Q12 to 8.8%, up from 2.7% in 3Q12. With both U.S. and International now accelerating, and the benefits of cost cutting materializing, the company is in position to generate upside surprise to estimates (if they choose to let it flow through).


Our primary concern on Amex had been that the combination of tax hikes on its top tier clients coupled with higher payroll taxes on all its clients would suppress spending meaningfully. That, however counterintuitively, appears not to be happening. 






Joshua Steiner, CFA


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