Financial News

Royal Caribbean reports second quarter 2011 results

In:
27Jul2011

Royal Caribbean has made a few financial announcements today, chief among them are...

  • Royal Caribbean management identified an error in a previous accounting treatment of interest expense in connection with its amortization of certain financing fees.  Royal Caribbean has revised its past financial statements to reflect the correct accounting.
  • Royal Caribbean's second quarter EPS was 47 cents before the Interest Expense revision (see above).  After making the adjustment, Royal Caribbean earnings were 43 cents per share.
  • If you exclude the Interest Expense revision, full year 2011 EPS guidance is now expected to be $3.05 to $3.15.  This reflects a 10 cent reduction to prior guidance due to continuing low bookings in the Eastern Mediterranean sailings.
  • Royal Caribbean's Board of Directors have reinstated the quarterly dividend at a rate of 10 cents per share, payable on August 30, 2011 to shareholders of record at the close of business on August 12, 2011.

Here are Royal Caribbean's Second Quarter 2011 results

  • Royal Caribbean's net income was $93.5 million, or $0.43 per share, versus $53.7 million, or $0.25 per share, in 2010.
  • Royal Caribbean's revenues improved to $1.8 billion for the quarter, which is up from $1.6 billion in the same quarter of 2010.  The increase is a result of increases in capacity and yield improvements.   Net yields for the second quarter of 2011 increased 3.8% (0.8% on a Constant-Currency basis). 
  • Costs for 2011's second quarter were nearly unchanged.  In fact, most expense categories performed better than expected.
  • At-the-pump fuel pricing declines have lagged those of WTI during the quarter resulting in second quarter fuel pricing very similar to earlier calculations at $599 per metric ton. During the quarter and prior to the market declines in WTI pricing, the company monetized a portion of its WTI option portfolio thereby realizing a significant portion of the first quarter's marked-to-market gains. As a result of these actions, the net marked-to-market valuation of fuel options was immaterial in the second quarter.

Revenue:

For the full year, the company expects Net Yields to improve approximately 5% on an as-reported basis and 2% to 3% on a Constant-Currency basis. For the third quarter, the company expects Net Yields to improve approximately 5% on an as-reported basis and 1% to 2% on a Constant-Currency basis. Excluding Mediterranean sailings, third quarter Net Yields are expected to increase approximately 11% (approximately 9% on a Constant-Currency basis).

Two factors that influenced the company's outlook in April are again affecting the outlook on yields, geopolitical events and fluctuations in the U.S. Dollar:

Geopolitical: The ongoing conflicts in the Eastern Mediterranean and its spillover effects continues to create hesitation around travel to the region. Some of this was already evident at the time of the company's last guidance. However, during the second quarter, the civil unrest in the Eastern Mediterranean expanded to other areas including Syria and Greece and the level of concern amongst travelers grew as tensions in the region dominated the headlines. This has resulted in a full year yield reduction of approximately 150 basis points versus April guidance. Net Yields for the Mediterranean are now expected to be down approximately 4% for the year, which is in stark contrast with the rest of the company's portfolio. The impact related to the events in Japan was reasonably clear by the time of the last guidance. The impact on bookings was immediate, but the situation has now stabilized. The guidance for 2011 has not changed materially from previous guidance and the outlook going forward is very positive.

Strengthening of the U.S. Dollar: In a reversal of the trends observed in April, the company's revenues have been negatively influenced by the strengthening of the U.S. Dollar relative to other currencies. Assuming current currency exchange rates, the company expects Net Yields for the full year on an as-reported basis to decline approximately 50 basis points from its previous guidance as a result of currency.

The company noted that with the exception of the Eastern Mediterranean, it continues to observe strong demand for its products, especially the Caribbean, Alaska and Northern Europe. The strength of this demand (both rate and volume) reinforces that Eastern Mediterranean pricing softness this summer appears to be geopolitically related and that the economic demand for its products is strong. Further supporting this premise, excluding the Mediterranean, Net Yields for the year are expected to be up approximately 8% (approximately 6% on a Constant-Currency basis).

Net Cruise Costs (Excluding Fuel):

For the full year, the company expects NCC excluding fuel to increase approximately 3% on an as-reported basis and 1% - 2% on a Constant-Currency basis. For the third quarter, the company expects NCC excluding fuel to increase 4% to 5% on an as-reported basis and approximately 2% on a Constant-Currency basis.

The company has remained focused on tight cost controls and has reduced operating costs 100 basis points more than expected through a number of initiatives. In addition the strengthening U.S. Dollar has improved NCC excluding fuel a further 50 basis points since April.

Fuel Expense

The company does not forecast fuel prices and its fuel cost calculations are based on current at-the-pump prices, net of hedging impacts. Based on today's fuel prices the company has included $202 million and $763 million of fuel expense in its third quarter 2011 and full year 2011 guidance, respectively. These figures also take account further energy savings initiatives which continue to reduce the company's already low level of energy consumption.

Forecasted consumption is now 55% hedged for the remainder of 2011 at a WTI barrel equivalent rate of approximately $67 bbl, 55% hedged in 2012 at an equivalent rate of $72 bbl, 47% hedged in 2013 at an equivalent rate of $78 bbl, 30% hedged in 2014 at an equivalent rate of $87 bbl and 20% hedged in 2015 at an equivalent rate of $88 bbl. Additionally, the company also utilizes fuel options to further protect against escalating fuel prices. WTI fuel options at strike prices ranging from $90 bbl to $100 bbl cover an additional 8% and 11% of estimated consumption in 2012 and 2013, respectively.

The company provided the following fuel statistics for the third quarter and full year 2011:

FUEL STATISTICS                       Third Quarter 2011 Full Year 2011

        Fuel Consumption                      335,000            1,319,000

        Fuel Expenses                         $202 Million       $763 Million

        Percent Hedged (fwd consumption)      53%                55%

        Impact of 10% change in fuel prices * $10 million        $20 million

        *excludes marked-to-market impact of fuel options.

        





In addition, based on the assumed fuel statistics above, the company provided the following guidance for the third quarter and full year 2011.

GUIDANCE                      As-Reported          Constant-Currency

                                      Third Quarter 2011

        Net Yields                    Approx. 5%           1% to 2%

        Net Cruise Costs per APCD     Approx. 6%           4% to 5%

        Net Cruise Costs per APCD,    4% to 5%             Approx. 2%

        excluding Fuel

                                      Full Year 2011

        Net Yields                    Approx. 5%           2% to 3%

        Net Cruise Costs per APCD     Approx. 4%           Approx. 3%

        Net Cruise Costs per APCD,    Approx. 3%           1% to 2%

        excluding Fuel

                                      Third Quarter 2011   Full Year 2011

        EPS                           $1.85 to $1.90       $2.85 to $2.95

        Capacity Increase             6.3%                 7.6%

        Depreciation and Amortization $175 to $180 million $705 to $710 million

        Interest Expense, net         $88 to $93 million   $355 to $365 million

        Exchange rates used in guidance calculations

        EUR                           $1.45

        GBP                           $1.64

        





Liquidity and Financing Arrangements

As of June 30, 2011, and taking into account the new revolver, liquidity was $1.3 billion, including cash and the undrawn portion of the company's unsecured revolving credit facilities. Additionally, the company has committed unsecured financing on its remaining newbuilds.

The company has renewed its primary revolving credit facility that was due to expire in June of 2012. The facility has been extended to 5 years and now matures in July 2016. It can be drawn up to $875 million. This facility combined with the company's $525 million facility due in November 2014, provides the company with access to $1.4 billion in unsecured revolving credit facilities. The company intends to maintain staggered maturity profiles on these two facilities going forward to further reduce refinancing risks.

Capital Expenditures and Capacity Guidance

The company took delivery of the Celebrity Silhouette on July 18th. Celebrity Silhouette is the fourth in a series of five of the highly acclaimed Celebrity Solstice-class vessels and will initially split her time between Caribbean and European itineraries.

Based on current ship orders, projected capital expenditures for 2011, 2012, 2013 and 2014 are $1.1 billion, $1.2 billion, $500 million and $1.1 billion, respectively. These estimates include the recently announced Project Sunshine, energy savings initiatives and additional refurbishment investments.

Capacity increases for the same four years are 7.6%, 1.9%, 2.5% and 0.7%, respectively.

Conference Call Scheduled

The company has scheduled a conference call at 10 a.m. Eastern Daylight Time tomorrow to discuss its earnings. This call can be heard, either live or on a delayed basis, on the company's investor relations web site at www.rclinvestor.com .

Selected Operational and Financial Metrics

Available Passenger Cruise Days ("APCD")

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 the main non-capacity drivers that cause our cruise revenues and expenses to vary.

Constant-Currency

We believe Net Yields and Net Cruise Costs are our most relevant non-GAAP financial measures. However, a significant portion of our revenue and expenses are denominated in currencies other than the United States dollar. Because our reporting currency is the United States dollar, the value of these revenues and expenses can be affected by changes in currency exchange rates. Although such changes in local currency prices is just one of many elements impacting our revenues and expenses, it can be an important element. For this reason, we also monitor Net Yields and Net Cruise Costs as if the current periods' currency exchange rates had remained constant with the comparable prior periods' rates, or on a "Constant-Currency" basis. We calculate "Constant-Currency" by applying the average 2010 monthly exchange rates for each month of the period during 2010 to the results during the corresponding months in 2011, so as to calculate what the results would have been had exchange rates been the same throughout both periods. It should be emphasized that the use of Constant-Currency is primarily used for comparing short-term changes and/or projections.

Over the longer term, changes in guest sourcing and shifting the amount of purchases between currencies significantly change the impact of the purely currency based fluctuations.

Gross Cruise Costs

Gross Cruise Costs represent the sum of total cruise operating expenses plus marketing, selling and administrative expenses.

Gross Yields

Gross Yields represent total revenues per APCD.

Net Cruise Costs and Net Cruise Costs Excluding Fuel

Net Cruise Costs and Net Cruise Costs Excluding Fuel represent Gross Cruise Costs excluding commissions, transportation and other expenses and onboard and other expenses and, in the case of Net Cruise Costs Excluding Fuel, fuel (each of which is described above under the Description of Certain Line Items heading). In measuring our ability to control costs in a manner that positively impacts net income, we believe changes in Net Cruise Costs and Net Cruise Costs Excluding Fuel to be the most relevant indicators of our performance. A reconciliation of historical Gross Cruise Costs to Net Cruise Costs and Net Cruise Costs Excluding Fuel is provided below under Results of Operations. We have not provided a quantitative reconciliation of projected Gross Cruise Costs to projected Net Cruise Costs and projected Net Cruise Costs Excluding Fuel due to the significant uncertainty in projecting the costs deducted to arrive at these measures. Accordingly, we do not believe that reconciling information for such projected figures would be meaningful.

Net Debt-to-Capital

Net Debt-to-Capital is a ratio which represents total long-term debt, including the current portion of long-term debt, less cash and cash equivalents ("Net Debt") divided by the sum of Net Debt and total shareholders' equity. We believe Net Debt and Net Debt-to-Capital, along with total long-term debt and shareholders' equity are useful measures of our capital structure.

Net Revenues

Net Revenues represent total revenues less commissions, transportation and other expenses and onboard and other expenses.

Net Yields

Net Yields represent Net Revenues per APCD. We utilize Net Revenues and Net Yields to manage our business on a day-to-day basis as we believe that it is the most relevant measure of our pricing performance because it reflects the cruise revenues earned by us net of our most significant variable costs, which are commissions, transportation and other expenses and onboard and other expenses. We have not provided a quantitative reconciliation of projected Gross Yields to projected Net Yields due to the significant uncertainty in projecting the costs deducted to arrive at this measure. Accordingly, we do not believe that reconciling information for such projected figures would be meaningful.

Occupancy

Occupancy, in accordance with cruise vacation industry practice, is calculated by dividing Passenger Cruise Days by APCD. A percentage in excess of 100% indicates that three or more passengers occupied some cabins.

Passenger Cruise Days

Passenger Cruise Days represent the number of passengers carried for the period multiplied by the number of days of their respective cruises.

Royal Caribbean Cruises Ltd. is a global cruise vacation company that operates Royal Caribbean International, Celebrity Cruises, Pullmantur, Azamara Club Cruises, CDF Croisieres de France, and TUI Cruises through a 50% joint venture. The company has a combined total of 40 ships in service and two under construction. It also offers unique land-tour vacations in Alaska, Asia, Australia, Canada, Europe, Latin America and New Zealand. Additional information can be found on www.royalcaribbean.com , www.celebrity.com , www.pullmantur.es , www.azamaraclubcruises.com , www.cdfcroisieresdefrance.com , www.tuicruises.com or www.rclinvestor.com .

Certain statements in this release relating to, among other things, our future performance constitute forward-looking statements under the Private Securities Litigation Reform Act of 1995. These statements include, but are not limited to, statements regarding expected financial results for the third quarter and full year 2011 and the yields expected in 2011. Words such as "anticipate," "believe," "could," "estimate," "expect," "goal," "intend," "may," "plan," "project," "seek," "should," "will," and similar expressions are intended to identify these forward-looking statements. Forward-looking statements reflect management's current expectations, are inherently uncertain and are subject to 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 the following: the impact of the economic environment on the demand for cruises, the impact of the economic environment on our ability to generate cash flows from operations or obtain new borrowings from the credit or capital markets in amounts sufficient to satisfy our capital expenditures, debt repayments and other financing needs, the uncertainties of conducting business internationally and expanding into new markets, changes in operating and financing costs, vacation industry competition and changes in industry capacity and overcapacity, emergency ship repairs, including the related lost revenue, the impact of ship delivery delays, ship cancellations or ship construction price increases, financial difficulties encountered by shipyards or their subcontractors and adverse publicity concerning the cruise vacation industry and the unavailability or cost of air service.

More information about factors that could affect our operating results is included under the captions "Risk Factors" and "Management's Discussion and Analysis of Financial Condition and Results of Operations" in our most recent annual report on Form 10-K and subsequent quarterly reports on Form 10-Q, copies of which may be obtained by visiting our Investor Relations web site at www.rclinvestor.com or the SEC's web site at www.sec.gov . Undue reliance should not be placed on the forward-looking statements in this release, which are based on information available to us on the date hereof. We undertake no obligation to publicly update or revise any forward-looking statements, whether as a result of new information, future events or otherwise.

Non-GAAP Measures of Financial Performance

This press release includes certain non-GAAP financial measures as defined under Securities and Exchange Commission rules, which we believe provide useful information to investors as a supplement to our consolidated financial statements which are prepared and presented in accordance with generally accepted accounting principles, or GAAP.

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. These measures may be different from non-GAAP measures used by other companies. In addition, these non-GAAP measures are not based on any comprehensive set of accounting rules or principles. Non-GAAP measures have limitations in that they do not reflect all of the amounts associated with our results of operations as do the corresponding GAAP measures.

A reconciliation to the most comparable GAAP measure of all non-GAAP financial measures included in this press release can be found in the tables included at the end of this press release.

Financial Tables Follow

        





ROYAL CARIBBEAN CRUISES LTD.

        CONSOLIDATED STATEMENTS OF OPERATIONS

        (unaudited, in thousands, except per share data)

                                                                              Quarter Ended               Six Months Ended

                                                                              June 30,                    June 30,

                                                                              --------------------------  ----------------------------

                                                                                 2011          2010           2011           2010

                                                                                 ---------     ---------      ---------      ---------

           Passenger ticket revenues                                          $  1,296,789  $  1,159,453  $   2,523,306  $   2,241,974

           Onboard and other revenues                                            471,084       442,244        916,562        845,373

                                                                                 ---------     ---------      ---------      ---------

           Total revenues                                                        1,767,873     1,601,697      3,439,868      3,087,347

                                                                                 ---------     ---------      ---------      ---------

           Cruise operating expenses:

                  Commissions, transportation and other                          299,174       271,140        578,723        539,790

                  Onboard and other                                              134,938       124,190        237,428        215,125

                  Payroll and related                                            198,794       188,608        403,281        368,042

                  Food                                                           99,149        93,850         199,231        186,497

                  Fuel                                                           188,128       164,118        354,189        319,057

                  Other operating                                                265,192       244,281        513,594        482,951

                                                                                 ---------     ---------      ---------      ---------

                          Total cruise operating expenses                        1,185,375     1,086,187      2,286,446      2,111,462

           Marketing, selling and administrative expenses                        242,258       211,795        490,396        422,843

           Depreciation and amortization expenses                                172,050       160,031        345,302        317,606

                                                                                 ---------     ---------      ---------      ---------

           Operating Income                                                      168,190       143,684        317,724        235,436

                                                                                 ---------     ---------      ---------      ---------

           Other income (expense):

                  Interest income                                                6,478         1,363          10,259         2,732

                  Interest expense, net of interest capitalized                  (92,968)      (90,661)       (193,593)      (182,189)

                  Other income (expense)                                         11,791        (655)          37,511         77,595

                                                                                 ---------     ---------      ---------      ---------

                                                                                 (74,699)      (89,953)       (145,823)      (101,862)

                                                                                 ---------     ---------      ---------      ---------

           Net Income                                                         $  93,491     $  53,731     $   171,901    $   133,574

           Earnings Per Share:

           Basic                                                              $  0.43       $  0.25       $   0.79       $   0.62

           Diluted                                                            $  0.43       $  0.25       $   0.78       $   0.61

           Weighted-Average Shares Outstanding:

           Basic                                                                 217,028       215,043        216,771        214,680

           Diluted                                                               219,370       217,561        219,516        217,304

        





STATISTICS

                                Quarter Ended           Six Months Ended

                                June 30,                June 30,

                                ---------------------   -----------------------

                                2011        2010        2011         2010

                                ---------   ---------   ----------   ----------

          Passengers Carried    1,185,679   1,112,984   2,400,489    2,230,514

          Passenger Cruise Days 8,337,646   7,817,339   16,783,344   15,402,065

          APCD                  8,038,014   7,543,536   16,138,310   14,897,628

          Occupancy             103.7%      103.6%      104.0%       103.4%

        





ROYAL CARIBBEAN CRUISES LTD.

        CONSOLIDATED BALANCE SHEETS

        (in thousands, except share data)

                                                                                                 As  of

                                                                                                 --------------------------------

                                                                                                 June 30,        December 31,

                                                                                                 2011            2010

                                                                                                 --------------  ----------------

                                                                                                 (unaudited)

              Assets

              Current assets

                                 Cash and cash equivalents                                       $      551,460  $        419,929

                                 Trade and other receivables, net                                273,708         266,710

                                 Inventories                                                     145,547         126,797

                                 Prepaid expenses and other assets                               225,326         145,144

                                 Derivative financial instruments                                130,835         56,491

                                                                                                 --------------  ----------------

                                 Total current assets                                            1,326,876       1,015,071

              Property and equipment, net                                                        16,440,866      16,771,677

              Goodwill                                                                           800,436         759,328

              Other assets                                                                       1,380,320       1,107,753

                                                                                                 --------------  ----------------

                                                                                                 $ 19,948,498    $   19,653,829

              Liabilities and Shareholders' Equity

              Current liabilities

                                 Current portion of long-term debt                               $      703,245  $     1,198,929

                                 Accounts payable                                                343,162         249,047

                                 Accrued interest                                                100,253         160,906

                                 Accrued expenses and other liabilities                          480,656         553,218

                                 Customer deposits                                               1,660,614       1,283,073

                                                                                                 --------------  ----------------

                                 Total current liabilities                                       3,287,930       3,445,173

              Long-term debt                                                                     7,901,646       7,951,187

              Other long-term liabilities                                                        410,643         356,717

              Commitments and contingencies

              Shareholders' equity

                                 Preferred stock ($0.01 par value; 20,000,000 shares authorized;

                                 none outstanding)                                               -               -

                                 Common stock ($0.01 par value; 500,000,000 shares authorized;

                                 227,366,165 and 226,211,731 shares issued, June 30, 2011        2,273           2,262

                                 and December 31, 2010, respectively)

                                 Paid-in capital                                                 3,054,797       3,027,130

                                 Retained earnings                                               5,431,899       5,259,998

                                 Accumulated other comprehensive income                          273,014         25,066

                                 Treasury stock (10,308,683 common shares at                     (413,704)       (413,704)

                                 cost, June 30, 2011 and December 31, 2010)

                                                                                                 --------------  ----------------

                                 Total shareholders' equity                                      8,348,279       7,900,752

                                                                                                 --------------  ----------------

                                                                                                 $ 19,948,498    $   19,653,829

        





ROYAL CARIBBEAN CRUISES LTD.

                                            CONSOLIDATED STATEMENTS OF CASH FLOWS

                                            (unaudited, in thousands)

                                                                                                Six Months Ended

                                                                                                June 30,

                                                                                                --------------------------------------------------

                                                                                                2011                       2010

                                                                                                -------------------------  -----------------------

        Operating Activities

        Net income                                                                              $                 171,901  $               133,574

        Adjustments:

                                            Depreciation and amortization                       345,302                    317,606

                                            (Gain) loss on fuel call options                    (24,803)                   7,348

        Changes in operating assets and liabilities:

                                            Decrease in trade and other receivables, net        63,803                     127,131

                                            Increase in inventories                             (17,316)                   (5,607)

                                            Increase in prepaid expenses and other assets       (83,740)                   (37,937)

                                            Increase in accounts payable                        92,619                     23,622

                                            Decrease in accrued interest                        (60,653)                   (42,500)

                                            Decrease in accrued expenses and other liabilities  (21,931)                   (13,572)

                                            Increase in customer deposits                       306,070                    320,382

        Cash received on settlement of derivative financial instruments                         -                          172,993

        Other, net                                                                              (4,510)                    7,862

        Net cash provided by operating activities                                               766,742                    1,010,902

        Investing Activities

        Purchases of property and equipment                                                     (251,565)                  (847,541)

        Cash received (paid) on settlement of derivative financial instruments                  25,250                     (7,121)

        Loans to unconsolidated affiliates                                                      (69,682)                   -

        Proceeds from the sale of ships                                                         345,000                    -

        Other, net                                                                              (3,044)                    (8,266)

        Net cash provided by (used in) investing activities                                     45,959                     (862,928)

        Financing Activities

        Debt proceeds                                                                           702,442                    1,081,069

        Debt issuance costs                                                                     (28,593)                   (36,929)

        Repayments of debt                                                                      (1,376,801)                (1,168,928)

        Proceeds from exercise of common stock options                                          17,923                     11,377

        Other, net                                                                              705                        748

        Net cash used in financing activities                                                   (684,324)                  (112,663)

        Effect of exchange rate changes on cash                                                 3,154                      (1,110)

        Net increase in cash and cash equivalents                                               131,531                    34,201

        Cash and cash equivalents at beginning of period                                        419,929                    284,619

        Cash and cash equivalents at end of period                                              $                 551,460  $               318,820

        Supplemental Disclosure

        Cash paid during the period for:

                                            Interest, net of amount capitalized                 $                 223,438  $               159,288

        





ROYAL CARIBBEAN CRUISES LTD.

        NON-GAAP RECONCILING INFORMATION

        (unaudited)

        Gross Yields and Net Yields were calculated as follows (in thousands, except APCD and Yields):

                                                            Quarter Ended                                         Six Months Ended

                                                            June 30,                                              June 30,

                                                            ---------------------------------------------------   -----------------------------------------------------

                                                                 2011            2011                 2010             2011             2011                 2010

                                                                                 On a                                                   On a

                                                                                 Constant                                               Constant

                                                                                 Currency basis                                         Currency basis

                                                                 ---------       --------------       ---------        ----------       --------------       ----------

        Passenger ticket revenues                           $    1,296,789  $    1,250,933       $    1,159,453   $    2,523,306   $    2,461,208       $    2,241,974

        Onboard and other revenues                               471,084         463,063              442,244          916,562          907,073              845,373

                                                                 ---------       --------------       ---------        ----------       --------------       ----------

        Total revenues                                           1,767,873       1,713,996            1,601,697        3,439,868        3,368,281            3,087,347

        Less:

                      Commissions, transportation and other      299,174         287,707              271,140          578,723          564,182              539,790

                      Onboard and other                          134,938         130,240              124,190          237,428          232,411              215,125

        Net revenues                                        $    1,333,761  $    1,296,049       $    1,206,367   $    2,623,717   $    2,571,688       $    2,332,432

        APCD                                                     8,038,014       8,038,014            7,543,536        16,138,310       16,138,310           14,897,628

        Gross Yields                                        $    219.94     $    213.24          $    212.33      $    213.15      $    208.71          $    207.24

        Net Yields                                          $    165.93     $    161.24          $    159.92      $    162.58      $    159.35          $    156.56

        





Gross Cruise Costs and Net Cruise Costs were calculated as follows (in thousands, except APCD and costs per APCD):

                                                       Quarter Ended                                         Six Months Ended

                                                       June 30,                                              June 30,

                                                       ---------------------------------------------------   -----------------------------------------------------

                                                            2011            2011                 2010             2011             2011                 2010

                                                                            On a                                                   On a

                                                                            Constant                                               Constant

                                                                            Currency basis                                         Currency basis

                                                            ---------       --------------       ---------        ----------       --------------       ----------

        Total cruise operating expenses                $    1,185,375  $    1,157,939       $    1,086,187   $    2,286,446   $    2,255,110       $    2,111,462

        Marketing, selling and administrative expenses      242,258         233,152              211,795          490,396          479,644              422,843

                                                            ---------       --------------       ---------        ----------       --------------       ----------

        Gross Cruise Costs                                  1,427,633       1,391,091            1,297,982        2,776,842        2,734,754            2,534,305

        Less:

               Commissions, transportation and other        299,174         287,707              271,140          578,723          564,182              539,790

               Onboard and other                            134,938         130,240              124,190          237,428          232,411              215,125

        Net Cruise Costs                               $    993,521    $    973,144         $    902,652     $    1,960,691   $    1,938,161       $    1,779,390

        Less:

               Fuel                                         188,128         186,823              164,118          354,189          352,379              319,057

                                                            ---------       --------------       ---------        ----------       --------------       ----------

        Net Cruise Costs Excluding Fuel                $    805,393    $    786,321         $    738,534     $    1,606,502   $    1,585,782       $    1,460,333

        APCD                                                8,038,014       8,038,014            7,543,536        16,138,310       16,138,310           14,897,628

        Gross Cruise Costs per APCD                    $    177.61     $    173.06          $    172.07      $    172.07      $    169.46          $    170.11

        Net Cruise Costs per APCD                      $    123.60     $    121.07          $    119.66      $    121.49      $    120.10          $    119.44

        Net Cruise Costs Excluding Fuel per APCD       $    100.20     $    97.83           $    97.90       $    99.55       $    98.26           $    98.02

        





Net Debt-to-Capital was calculated as follows (in thousands):

                                                                                 As of

                                                                                       June 30,      December 31,

                                                                                       ----------    ----------------------------

                                                                                       2011          2010

                                                                                       ----------    ----------------------------

        Long-term debt, net of current portion                                   $     7,901,646   $ 7,951,187

        Current portion of long-term debt                                              703,245       1,198,929

                                                                                       ----------    ----------------------------

        Total debt                                                                     8,604,891     9,150,116

        Less: Cash and cash equivalents                                                551,460       419,929

                                                                                       ----------    ----------------------------

        Net Debt                                                                 $     8,053,431   $ 8,730,187

        Total shareholders' equity                                               $     8,348,279   $ 7,900,752

        Total debt                                                                     8,604,891     9,150,116

                                                                                       ----------    ----------------------------

        Total debt and shareholders' equity                                            16,953,170    17,050,868

        Debt-to-Capital                                                                50.8%         53.7%

        Net Debt                                                                       8,053,431     8,730,187

                                                                                       ----------    ----------------------------

        Net Debt and shareholders' equity                                        $     16,401,710  $ 16,630,939

        Net Debt-to-Capital                                                            49.1%         52.5%

        





ROYAL CARIBBEAN CRUISES LTD.

        EFFECT OF CORRECTION ON CONSOLIDATED STATEMENTS OF OPERATIONS

        (in thousands, except per share data)

                                                                          Year Ended                                       Year Ended

                                                                          December 31, 2010                                December 31, 2009

                                                                                                                           ----------------------------------------------

                                                                             As Previously     Adjustment     As Revised      As Previously     Adjustment     As Revised

                                                                             Reported                                         Reported

                                                                             -------------     ----------     ----------      -------------     ----------     ----------

           Interest expense, net of interest capitalized                  $  (339,393)      $  (31,814)    $  (371,207)    $  (300,012)      $  (9,936)     $  (309,948)

           Total other expense                                               (255,166)         (31,814)       (286,980)       (326,090)         (9,936)        (336,026)

           Net Income                                                        547,467           (31,814)       515,653         162,421           (9,936)        152,485

           Earnings per Share:

           Basic                                                          $  2.55           $  (0.15)      $  2.40         $  0.76           $  (0.05)      $  0.71

           Diluted                                                        $  2.51           $  (0.15)      $  2.37         $  0.75           $  (0.05)      $  0.71

                                                                          Quarter Ended                                    Quarter Ended

                                                                          March 31, 2011                                   March 31, 2010

                                                                          (unaudited)

                                                                          ----------------------------------------------

                                                                             As Previously     Adjustment     As Revised      As Previously     Adjustment     As Revised

                                                                             Reported                                         Reported

                                                                             -------------     ----------     ----------      -------------     ----------     ----------

           Interest expense, net of interest capitalized                  $  (87,483)       $  (13,142)    $  (100,625)    $  (83,924)       $  (7,604)     $  (91,528)

           Total other expense                                               (57,982)          (13,142)       (71,124)        (4,305)           (7,604)        (11,909)

           Net Income                                                        91,552            (13,142)       78,410          87,447            (7,604)        79,843

           Earnings per Share:

           Basic                                                          $  0.42           $  (0.06)      $  0.36         $  0.41           $  (0.04)      $  0.37

           Diluted                                                        $  0.42           $  (0.06)      $  0.36         $  0.40           $  (0.04)      $  0.37

                                                                          Quarter Ended                                    Quarter Ended

                                                                          June 30, 2010                                    June 30, 2009

                                                                                                                           ----------------------------------------------

                                                                             As Previously     Adjustment     As Revised      As Previously     Adjustment     As Revised

                                                                             Reported                                         Reported

                                                                             -------------     ----------     ----------      -------------     ----------     ----------

           Interest expense, net of interest capitalized                  $  (83,846)       $  (6,815)     $  (90,661)     $  (68,327)       $  (1,190)     $  (69,517)

           Total other expense                                               (83,138)          (6,815)        (89,953)        (90,148)          (1,190)        (91,338)

           Net Income (Loss)                                                 60,546            (6,815)        53,731          (35,086)          (1,190)        (36,276)

           Earnings (Loss) per Share:

           Basic                                                          $  0.28           $  (0.03)      $  0.25         $  (0.16)         $  (0.01)      $  (0.17)

           Diluted                                                        $  0.28           $  (0.03)      $  0.25         $  (0.16)         $  (0.01)      $  (0.17)

                                                                          Six Months Ended                                 Six Months Ended

                                                                          June 30, 2010                                    June 30, 2009

                                                                                                                           ----------------------------------------------

                                                                             As Previously     Adjustment     As Revised      As Previously     Adjustment     As Revised

                                                                             Reported                                         Reported

                                                                             -------------     ----------     ----------      -------------     ----------     ----------

           Interest expense, net of interest capitalized                  $  (167,770)      $  (14,419)    $  (182,189)    $  (147,789)      $  (1,190)     $  (148,979)

           Total other expense                                               (87,443)          (14,419)       (101,862)       (170,639)         (1,190)        (171,829)

           Net Income (Loss)                                                 147,993           (14,419)       133,574         (71,324)          (1,190)        (72,514)

           Earnings (Loss) per Share:

           Basic                                                          $  0.69           $  (0.07)      $  0.62         $  (0.33)         $  (0.01)      $  (0.34)

           Diluted                                                        $  0.68           $  (0.07)      $  0.61         $  (0.33)         $  (0.01)      $  (0.34)

                                                                          Quarter Ended                                    Quarter Ended

                                                                          September 30, 2010                               September 30, 2009

                                                                                                                           ----------------------------------------------

                                                                             As Previously     Adjustment     As Revised      As Previously     Adjustment     As Revised

                                                                             Reported                                         Reported

                                                                             -------------     ----------     ----------      -------------     ----------     ----------

           Interest expense, net of interest capitalized                  $  (82,494)       $  (6,588)     $  (89,082)     $  (73,912)       $  (684)       $  (74,596)

           Total other expense                                               (88,735)          (6,588)        (95,323)        (76,449)          (684)          (77,133)

           Net Income                                                        356,767           (6,588)        350,179         230,392           (684)          229,708

           Earnings per Share:

           Basic                                                          $  1.66           $  (0.03)      $  1.63         $  1.08           $  0.00        $  1.07

           Diluted                                                        $  1.64           $  (0.03)      $  1.61         $  1.07           $  0.00        $  1.07

                                                                          Nine Months Ended                                Nine Months Ended

                                                                          September 30, 2010                               September 30, 2009

                                                                                                                           ----------------------------------------------

                                                                             As Previously     Adjustment     As Revised      As Previously     Adjustment     As Revised

                                                                             Reported                                         Reported

                                                                             -------------     ----------     ----------      -------------     ----------     ----------

           Interest expense, net of interest capitalized                  $  (250,264)      $  (21,007)    $  (271,271)    $  (221,701)      $  (1,873)     $  (223,574)

           Total other expense                                               (176,178)         (21,007)       (197,185)       (247,088)         (1,873)        (248,961)

           Net Income                                                        504,760           (21,007)       483,753         159,068           (1,873)        157,195

           Earnings per Share:

           Basic                                                          $  2.35           $  (0.10)      $  2.25         $  0.74           $  (0.01)      $  0.74

           Diluted                                                        $  2.32           $  (0.10)      $  2.23         $  0.74           $  (0.01)      $  0.73

        





ROYAL CARIBBEAN CRUISES LTD.

        EFFECT OF CORRECTION ON CONSOLIDATED BALANCE SHEETS

        (in thousands)

                                                  As of                                                     As of

                                                  December 31, 2010                                         December 31, 2009

                                                  --------------------------------------------------------  -------------------------------------------------------

                                                     As Previously Reported     Adjustment     As Revised      As Previously Reported     Adjustment     As Revised

                                                     ----------------------     ----------     ----------      ----------------------     ----------     ----------

           Property and equipment, net            $  16,769,181              $  2,496       $  16,771,677   $  15,268,053              $  384         $  15,268,437

           Other assets                              1,151,324                  (43,571)       1,107,753       1,146,677                  (9,453)        1,137,224

           Total assets                              19,694,904                 (41,075)       19,653,829      18,233,494                 (9,069)        18,224,425

           Accrued expenses and other liabilities    552,543                    675            553,218         521,190                    867            522,057

           Total current liabilities                 3,444,498                  675            3,445,173       2,749,030                  867            2,749,897

           Retained earnings                         5,301,748                  (41,750)       5,259,998       4,754,950                  (9,936)        4,745,014

           Total shareholders' equity                7,942,502                  (41,750)       7,900,752       7,499,717                  (9,936)        7,489,781

           Total assets and liabilities              19,694,904                 (41,075)       19,653,829      18,233,494                 (9,069)        18,224,425

        





ROYAL CARIBBEAN CRUISES LTD.

        EFFECT OF CORRECTION ON CONSOLIDATED STATEMENT OF CASH FLOWS

        (in thousands)

        The correction did not have an effect on the Company's operating cash flows.  The following table presents the effect on the individual line items within operating cash flows on the Company's Consolidated Statement of Cash Flows for June 30, 2010.

                                                                              Six Months Ended June 30, 2010

                                                                              ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

                                                                                                 As Previously         Adjustment            Reclassification(1)    As Revised

                                                                                                 Reported

                                                                                                 ------------------    ------------------    -------------------    --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

                           Net Income                                         $                  147,993             $ (14,419)            $ -                    $ 133,574

                           Decrease in accrued expenses and other liabilities                    (13,514)              (58)                  -                      (13,572)

                           Other, net                                                            733                   14,477                (7,348)                7,862

        (1) For the six months ended June 30, 2010, $7.3 million has been reclassified in the consolidated statement of cash flows from other, net within net cash flows provided by operating activities to (gain) loss on fuel call options within net cash flows provided by operating activities in order to conform to the current year presentation.

        





Reminder: Royal Caribbean 2nd Quarter Earnings Report tomorrow at 10am

In:
27Jul2011

For those interested, a quick reminder that Royal Caribbean will announce its second quarter 2011 financial earnings report Thursday, July 28 at 10am Eastern time.  Wall Street Analysts consensus calls for a profit of $0.45 a share on $1.8 billion revenue.

Royal Caribbean estimates have a range of $0.09 a share. The high estimate calls for profit of $0.5 a share and the low estimate is calling for a profit of $0.41 a share, a year ago for the quarter the company reported $0.28 a share.

The report should take about an hour and you can listen to it live on the Royal Caribbean Investor web site or by phone, please dial (877) 663-9606 in the US and Canada. International phone calls should be made to (706) 758-4628. There is no passcode or meeting number. 

Royal Caribbean outperforming Carnival in last minute bookings

In:
27Jul2011

Wells Fargo Leisure is reporting that pricing for North America cruise bookings made about 60 days prior to departure remain strong for cruises that go to the Caribbean and Canada.  

These analysts also indicated that Royal Caribbean has been out-performing Carnival Cruises in the last four weeks on close-in bookings.

This is good news for Royal Caribbean because they have a second quarter earnings call scheduled for tomorrow and analysts have changed their for 2011-12 earnings per share estimates from $3.30 to $3.76 (previously $3.28 to $3.73) on Royal Caribbean.

During the earnings call, analysts said they expect Royal Caribbean to reaffirm its 3% to 5% net yield guidance for 2011, and an earnings per share guidance of $3.10 to $3.30.

Wall Street expecting good news from Royal Caribbean's Second Quarter Earnings Call

In:
25Jul2011

Royal Caribbean will announce its second quarter 2011 earnings on Thursday but financial analysts are expecting some good news to be coming from Royal Caribbean.

Analysts expect a profit of 44 cents per share, which is up 57.1% from Royal Caribbean's actual earnings for the second quarter of 2010.  This estimate has gone down over the past three months from 58 cents, but the 44 cent estimate has been unchanged for the last month.  For the year, many analysts project a net income of $3.17 per share, which is an increase of 48.8% from 2010.

These bullish predictions are based in part on Royal Caribbean's past performance over the last few quarters, especially the first quarter of 2011 when Royal Caribbean beat earnings forecasts by 18 cents.

In terms of revenue, analysts expect Royal Caribbean to post $1.8 billion in revenue for the quarter, which is an increase of 12.5% from the year ago quarter.  Total revenue for the year is expected to be $7.61 billion, an increase of 12.7% from last year’s revenue of $6.75 billion.

Royal Caribbean Second Quarter 2011 Earnings Call Scheduled

In:
21Jul2011

Royal Caribbean will hold a conference call on July 28, 2011 at 10am to discuss its second quarter 2011 financial results.

The call will be available on-line at the company's investor relations web site, www.rclinvestor.com. To listen to the call by phone, please dial (877) 663-9606 in the US and Canada. International phone calls should be made to (706) 758-4628. There is no passcode or meeting number. A replay of the webcast will be available at the same site for a month following the call.

Royal Caribbean stock price expected to rise

In:
18Jul2011

The Wall Street Journal thinks Royal Caribbean's stock could head higher despite economic issues elsewhere in the economy.

Consumers have returned to cruising, which has helped Royal Caribbean raise prices last year after steep discounts to offset a surplus in supply with newer ships coming online in recent years.

Royal Caribbean's net yield, a measure of revenue per available passenger space, recovered to $164.87 a day in 2010 from $158.27 in 2009. But that still is 11% off a peak of $184.87 in 2008.

Another good indicator for Royal Caribbean is that most Americans are unlikely to forego their vacation plans, even if the price for vacations are going up.  The average Royal Caribbean guest is in his early 40s with 75% of Royal Caribbean cruises having cruised before.  Credit Suisse claims cruise customers have an average household income of about $75,000 a year.

A big issue affecting stock price is the price of oil, but Royal Caribbean, unlike competitor Carnival Cruise Line, has hedges in place that lock in fuel costs near current levels. Some 56% of its 2011 fuel needs are hedged and 55% for 2012.

Nonetheless, The WSJ expects Royal Caribbean's stock "look priced for a profitable ride".

Royal Caribbean makes Fortune Top 10 Picks for 2011

In:
06Jul2011

Every year Fortune Magazine publishes its list of the ten best stocks for the rest of 2011 and Royal Caribbean has made their list.  Fortune Magazine describes the list as stocks that are "expected to bolster their profits an average of 61% next year -- vs. 14% for the S&P -- and yet they trade at an average 12 times next year's earnings, vs. 13 times for the S&P."

Coming in at number 9 is Royal Caribbean and Fortune Magazine seems to like how well the stock has done in the recent past, "After a stormy period, the sailing has lately been -- dare we say it? -- smooth for Royal Caribbean. The cruise company was pounded by the Great Recession, with earnings dipping from $2.68 to 75¢ per share between 2008 and 2009. Now leisure spending is recovering, and Royal Caribbean is benefiting from the fact that cruises have always cost less than comparable land vacations. The company's earnings are on pace to rise 168% in 2010. By comparison, operating earnings at Disney's theme parks and resorts fell 7% during Walt Disney Co.'s fiscal year that ended Oct. 2.".

Royal Caribbean's stock is trading at about $40 a share right now, but Ken Kuhrt, an analyst and fund manager at Ariel Investments, believes Royal Caribbean stock deserves a P/E closer to 17, which was Royal Caribbean's average valuation from 1997 to 2007. That translates to a stock price of $54 -- just the sort of gain that could fund a nice little vacation.

Royal Caribbean announces better than expected first quarter 2011 results

In:
28Apr2011

Royal Caribbean has announced better than expected first quarter results and updated guidance for the remainder of 2011.  Net income for the first quarter of 2011 was $91.6 million, or $0.42 per share, which is an increase from the first quarter of 2010 when  net income was $87.4 million, or $0.40 per share.

In addition, Royal Caribbean reported revenues improved to $1.7 billion in the first quarter of 2011 compared to $1.5 billion in the first quarter of 2010 as a result of capacity increases and yield improvements.

Royal Caribbean Chairman Richard Fain was happy with the results, but mentions world events reduced the possible money that could have been made, "The year started off with a roar — strong bookings, low costs and solid profits — and in the first quarter every one of our brands exceeded its forecast.  Unfortunately, the events in Northern Africa and Japan have turned what was shaping up as a spectacular year into merely a very good one. Nonetheless, other than adjustments for fuel pricing, our earnings guidance for the year is essentially intact despite these dramatic geopolitical events. The demand for the majority of our products has remained quite strong and even the impacted itineraries have begun to improve."

Of particular interest are these results from quarter one

  • Net income was $91.6 million, or $0.42 per share versus, $87.4 million, or $0.40 per share in 2010. Included in the 2010 results was a one-time gain of $85.6 million, or $0.39 per share related to a legal settlement;
  • Net Yields increased 4.0% (2.8% on a Constant-Currency basis);
  • Net Cruise Costs per APCD (“NCC”) were up 0.2% (down 0.1% on a Constant-Currency basis);
  • Included in Other Income/(Expense) was an $0.11 per share marked-to-market gain on the company’s fuel option portfolio.  

You can read the full results here

Royal Caribbean First Quarter 2011 Results

In:
Category: 
28Apr2011

MIAMI, April 28, 2011 /PRNewswire/ -- Royal Caribbean Cruises Ltd. (NYSE, OSE: RCL) today announced better than expected first quarter results and updated guidance for the remainder of 2011.

Key Highlights

  • For the First Quarter 2011:
    • Net income was $91.6 million, or $0.42 per share versus, $87.4 million, or $0.40 per share in 2010. Included in the 2010 results was a one-time gain of $85.6 million, or $0.39 per share related to a legal settlement;
    • Net Yields increased 4.0% (2.8% on a Constant-Currency basis);
    • Net Cruise Costs per APCD (“NCC”) were up 0.2% (down 0.1% on a Constant-Currency basis);
    • Included in Other Income/(Expense) was an $0.11 per share marked-to-market gain on the company’s fuel option portfolio.  
  • 2011 Guidance:
    • The company has been able to largely offset higher fuel prices through its hedging strategies as well as the impact of currency exchange rates.  The effects of recent geopolitical events in Northern Africa and Japan have also been partially offset by improvements in the company’s other itineraries.  As a result, full year EPS guidance has been reduced by $0.15 per share to a range of $3.10 to $3.30.  


“The year started off with a roar — strong bookings, low costs and solid profits — and in the first quarter every one of our brands exceeded its forecast,” said Richard D. Fain, chairman and chief executive officer.  Fain added, “Unfortunately, the events in Northern Africa and Japan have turned what was shaping up as a spectacular year into merely a very good one.  Nonetheless, other than adjustments for fuel pricing, our earnings guidance for the year is essentially intact despite these dramatic geopolitical events.  The demand for the majority of our products has remained quite strong and even the impacted itineraries have begun to improve.”

First Quarter 2011 Results

Royal Caribbean Cruises Ltd. today announced net income for the first quarter 2011 of $91.6 million, or $0.42 per share.  This compares to net income of $87.4 million, or $0.40 per share, in the first quarter of 2010, which included a gain on a legal settlement of $85.6 million, or $0.39 per share.  An $0.11 per share marked-to-market gain on the company’s fuel option portfolio is included in first quarter 2011 results.    

Revenues improved to $1.7 billion in the first quarter of 2011 compared to $1.5 billion in the first quarter of 2010 as a result of capacity increases and yield improvements.  Net Yields for the first quarter of 2011 increased 4.0% (2.8% on a Constant-Currency basis).  The company saw improvement in both ticket and onboard revenue yields and across all major product groups.

Costs in the first quarter of 2011 were well controlled with most expense categories performing better than expected.  While a less significant factor, some timing shifts to later in 2011 occurred.  NCC were up 0.2%, and NCC excluding fuel increased 0.8%.  Excluding currency impacts, the comparable figures show decreases of 0.1% and increases of 0.6%, respectively.        

At-the-pump fuel pricing (including the benefit of the company’s hedging program) was very similar to earlier calculations at $511 per metric ton.  As previously disclosed, in addition to its fuel hedging activities the company has purchased various fuel options as further protection against rising fuel prices.  Unlike its fuel swaps which largely receive hedge accounting treatment, fuel options are marked-to-market to the income statement at the end of each reporting period.  During the first quarter of 2011 the value of the company’s fuel option portfolio increased by $24.2 million, or $0.11 per share, and the associated gain was booked to Other Income/(Expense).  

2011 Outlook

The company provided the following updates to its forward guidance:

Revenue:

For the full year, the company expects Net Yields to improve 5% to 7% on an as-reported basis and 3% to 5% on a Constant-Currency basis.  For the second quarter, the company expects Net Yields to improve approximately 5% on an as-reported basis and between 1% and 2% on a Constant-Currency basis.

As compared to prior guidance, three significant factors have influenced the company’s outlook on yields: geopolitical events, the weakening of the U.S. Dollar and increased tour activities.

  • Geopolitical:  Bookings at the beginning of the year in the Mediterranean and in Asia were quite strong.  However, events in Northern Africa led to itinerary modifications of 63 sailings and the tragic series of calamities in Japan led to itinerary modifications of 21 sailings. The combination of these events is expected to have a direct negative impact on the company’s yields of approximately 1% for the full year.



  • Weakening of the U.S. Dollar:  The company’s revenues are favorably influenced when the U.S. Dollar weakens versus other currencies.  Assuming current currency exchange rates, the company expects Net Yields for the full year on an as-reported basis to improve between 1% and 2% from its previous guidance as a result of currency.



  • Increased tour activity:  The company’s Spanish brand, Pullmantur, operates a tour company that includes revenue from land tours, air charter and travel distribution.  Recently, Pullmantur has improved its aircraft utilization, and expanded its tour operations and cruise distribution activities in Spain.  This combination is expected to improve Net Yields for the full year by approximately 1%.  


The yield accretion associated with currency exchange rates and increased tour activities will provide more benefit to the company in the third and fourth quarters.  Conversely, the most significant geopolitical yield pressures are expected to occur in the second quarter.  

The company also noted that it observed a broad slowdown in bookings for Mediterranean sailings following the unrest in Northern Africa.  These booking volumes have now returned to normal levels as a result of reduced pricing.  The effect of this booking disruption has been largely offset by the company’s other product groups, including Caribbean and Alaskan itineraries, which continue to show better than expected year-over-year improvement.  

Net Cruise Costs (Excluding Fuel):

For the full year, the company expects NCC excluding fuel to increase 4% to 5% on an as-reported basis and 2% - 3% on a Constant-Currency basis.  For the second quarter, the company expects NCC excluding fuel to increase between 4% - 5% on an as-reported basis and approximately 2% on a Constant-Currency basis.

Two of the factors influencing the company’s yield outlook, currency exchange rates and increased tour activities, are also affecting NCC guidance.  

  • Weakening of the U.S. Dollar:  While the weakening of the U.S. Dollar has a favorable impact on revenues, it has the opposite impact on costs. Assuming current currency exchange rates, the company expects 2011 NCC excluding fuel on an as-reported basis to increase approximately 1% for the full year from the previous guidance as a result of currency.



  • Increased tour activity:  The expansion of tour operations within the company’s Pullmantur brand is expected to increase the company’s NCC excluding fuel between 1% and 2% for the full year.  The expanded tour activities are not expected to have a material impact on 2011’s profitability.


The company is experiencing some inflationary cost pressures related to food and transportation but this pressure has been offset through savings initiatives in other areas.  

These offsets have been obtained without reducing the strategic marketing, web and consumer engagement investments that the company announced at the beginning of the year.  

Fuel Expense

The company does not forecast fuel prices and its cost calculations are based on current at-the-pump prices net of hedging impacts. Based on today’s fuel prices the company has included $189 million and $770 million of fuel expense in its second quarter 2011 and full year 2011 guidance, respectively.  

Forecasted consumption is now 56% hedged for the remainder of 2011 at a WTI barrel equivalent rate of approximately $75 bbl, 55% hedged in 2012 at a rate of $86 bbl, 40% hedged in 2013 at a rate of $91 bbl and 10% hedged in 2014 at a rate of $103 bbl.  Additionally, the company also utilizes fuel options to further protect against escalating fuel prices.  WTI Fuel options at strike prices ranging from $90 bbl to $150 bbl cover an additional 44%, 25%, and 11% of estimated consumption in 2011, 2012 and 2013, respectively.        

The company provided the following fuel statistics and guidance for the second quarter and full year 2011.




Fuel Statistics

 
 

Second Quarter 2011

Full Year 2011

 

Fuel Consumption

317,000 mt

1,326,000 mt

 

Fuel Expenses

$189 Million

$770 Million

 

Percent Hedged (forward consumption)

58%

56%

 

Impact of 10% change in fuel prices *

$9 Million

$31 Million

 


* excludes marked-to-market impact of fuel options.

 
   


 




Guidance

 
 

Second Quarter 2011

 
 

As-Reported

Constant-Currency

 

Net Yields

Approx. 5%

1% to 2%

 

Net Cruise Costs per APCD

Approx. 5%

Approx. 3%

 

Net Cruise Costs per APCD,        

 excluding Fuel

4% to 5%

Approx. 2%

 
   
 

Full Year 2011

 
 

As-Reported

Constant-Currency

 

Net Yields

5% to 7%

3% to 5%

 

Net Cruise Costs per APCD

5% to 6%

Approx. 4%

 

Net Cruise Costs per APCD,        

 excluding Fuel

4% to 5%

2% to 3%

 
    
 

Second Quarter 2011

Full Year 2011

 

EPS

$0.40 to $0.45

$3.10 to $3.30

 

Capacity Increase

6.6%

7.5%

 

Depreciation and Amortization

$170 to $175 Million

$705 to $715 Million

 

Interest Expense, net

$75 to $80 Million

$310 to $320 Million

 
  

Exchange rates used in guidance calculations

 

EUR / USD

1.47

1.47

 

GBP / USD

1.66

1.66

 
  
   


 

Liquidity and Financing Arrangements

As of March 31, 2011, liquidity was $1.6 billion, including cash and the undrawn portion of the company’s unsecured revolving credit facilities.  Additionally, the company has committed unsecured financing on its three remaining newbuilds.  

Capital Expenditures and Capacity Guidance

Based on current ship orders, projected capital expenditures for 2011, 2012, 2013 and 2014 are $1.1 billion, $1.2 billion, $500 million and $1.1 billion, respectively.  These estimates include the recently announced Project Sunshine, energy savings initiatives and additional refurbishment investments.  

Capacity increases for the same four years are 7.5%, 1.4%, 2.2% and 0.7%, respectively.

Conference Call Scheduled

The company has scheduled a conference call at 10 a.m. Eastern Daylight Time today to discuss its earnings.  This call can be heard, either live or on a delayed basis, on the company’s investor relations web site at www.rclinvestor.com.

Selected Operational and Financial Metrics

Available Passenger Cruise Days (“APCD”)

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 revenues and expenses to vary.  

Constant-Currency

We believe Net Yields and Net Cruise Costs are our most relevant non-GAAP financial measures.  However, a significant portion of our revenue and expenses are denominated in currencies other than the United States dollar. Because our reporting currency is the United States dollar, the value of these revenues and expenses can be affected by changes in currency exchange rates.  Although such changes in local currency prices is just one of many elements impacting our revenues and expenses, it can be an important element.  For this reason, we also monitor Net Yields and Net Cruise Costs as if the current periods' currency exchange rates had remained constant with the comparable prior periods' rates, or on a “Constant-Currency” basis.  We calculate "Constant-Currency" by applying the average 2010 monthly exchange rates for each month of the period during 2010 to the results during the corresponding months in 2011, so as to calculate what the results would have been had exchange rates been the same throughout both periods.   It should be emphasized that the use of Constant-Currency is primarily used for comparing short-term changes and/or projections.  

Over the longer term, changes in guest sourcing and shifting the amount of purchases between currencies significantly change the impact of the purely currency based fluctuations.  

Gross Cruise Costs

Gross Cruise Costs represent the sum of total cruise operating expenses plus marketing, selling and administrative expenses.

Gross Yields

Gross Yields represent total revenues per APCD.

Net Cruise Costs

Net Cruise Costs represent Gross Cruise Costs excluding commissions, transportation and other expenses and onboard and other expenses.  In measuring our ability to control costs in a manner that positively impacts net income, we believe changes in Net Cruise Costs to be the most relevant indicator of our performance.  We have not provided a quantitative reconciliation of projected Gross Cruise Costs to projected Net Cruise Costs due to the significant uncertainty in projecting the costs deducted to arrive at this measure.  Accordingly, we do not believe that reconciling information for such projected figures would be meaningful.

Net Debt-to-Capital

Net Debt-to-Capital is a ratio which represents total long-term debt, including current portion of long-term debt, less cash and cash equivalents (“Net Debt”) divided by the sum of Net Debt and total shareholders' equity.  We believe Net Debt and Net Debt-to-Capital, along with total long-term debt and shareholders' equity are useful measures of our capital structure.  

Net Revenues

Net Revenues represent total revenues less commissions, transportation and other expenses and onboard and other expenses.

Net Yields

Net Yields represent Net Revenues per APCD.  We utilize Net Revenues and Net Yields to manage our business on a day-to-day basis as we believe that it is the most relevant measure of our pricing performance because it reflects the cruise revenues earned by us net of our most significant variable costs, which are commissions, transportation and other expenses and onboard and other expenses.  We have not provided a quantitative reconciliation of projected Gross Yields to projected Net Yields due to the significant uncertainty in projecting the costs deducted to arrive at this measure.  Accordingly, we do not believe that reconciling information for such projected figures would be meaningful.

Occupancy

Occupancy, in accordance with cruise vacation industry practice, is calculated by dividing Passenger Cruise Days by APCD.  A percentage in excess of 100% indicates that three or more passengers occupied some cabins.

Passenger Cruise Days

Passenger Cruise Days represent the number of passengers carried for the period multiplied by the number of days of their respective cruises.

Royal Caribbean Cruises Ltd. is a global cruise vacation company that operates Royal Caribbean International, Celebrity Cruises, Pullmantur, Azamara Club Cruises, CDF Croisieres de France, and TUI Cruises through a 50% joint venture.  The company has a combined total of 39 ships in service and three under construction.  It also offers unique land-tour vacations in Alaska, Asia, Australia, Canada, Europe, Latin America and New Zealand.  Additional information can be found on www.royalcaribbean.com, www.celebrity.com, www.pullmantur.com, www.azamaraclubcruises.com, www.cdfcroisieresdefrance.com, www.tuicruises.com or www.rclinvestor.com.

Certain statements in this release relating to, among other things, our future performance constitute forward-looking statements under the Private Securities Litigation Reform Act of 1995.  These statements include, but are not limited to, statements regarding expected financial results for the first quarter and full year 2011 and the yields expected in 2011.  Words such as “anticipate,” “believe,” “could,” “estimate,” “expect,” “goal,” “intend,” “may,” “plan,” “project,” “seek,” “should,” “will,” and similar expressions are intended to identify these forward-looking statements.  Forward-looking statements reflect management’s current expectations, are inherently uncertain and are subject to 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 the following: the impact of the economic environment on the demand for cruises, the impact of the economic environment on our ability to generate cash flows from operations or obtain new borrowings from the credit or capital markets in amounts sufficient to satisfy our capital expenditures, debt repayments and other financing needs, the uncertainties of conducting business internationally and expanding into new markets, changes in operating and financing costs, vacation industry competition and changes in industry capacity and overcapacity, emergency ship repairs, including the related lost revenue, the impact of ship delivery delays, ship cancellations or ship construction price increases, financial difficulties encountered by shipyards or their subcontractors and adverse publicity concerning the cruise vacation industry and the unavailability or cost of air service.  

More information about factors that could affect our operating results is included under the captions “Risk Factors” and “Management’s Discussion and Analysis of Financial Condition and Results of Operations” in our most recent annual report on Form 10-K and subsequent quarterly reports on Form 10-Q, copies of which may be obtained by visiting our Investor Relations web site at www.rclinvestor.com or the SEC’s web site at www.sec.gov. Undue reliance should not be placed on the forward-looking statements in this release, which are based on information available to us on the date hereof. We undertake no obligation to publicly update or revise any forward-looking statements, whether as a result of new information, future events or otherwise.

Non-GAAP Measures of Financial Performance

This press release includes certain non-GAAP financial measures as defined under Securities and Exchange Commission rules, which we believe provide useful information to investors as a supplement to our consolidated financial statements which are prepared and presented in accordance with generally accepted accounting principles, or GAAP.

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.  These measures may be different from non-GAAP measures used by other companies. In addition, these non-GAAP measures are not based on any comprehensive set of accounting rules or principles. Non-GAAP measures have limitations in that they do not reflect all of the amounts associated with our results of operations as the corresponding GAAP measures.

Reconciliation to the most comparable GAAP measure of all non-GAAP financial measures included in this press release can be found in the tables included at the end of this press release.

Financial Tables Follow
















ROYAL CARIBBEAN CRUISES LTD.

 

CONSOLIDATED STATEMENTS OF OPERATIONS

 

(unaudited, in thousands, except per share data)

 
              
        

Quarter Ended

 
        

March 31,

 
         

2011

  

2010

 
              
 

Passenger ticket revenues

  

$

1,226,517

 

$

1,082,521

 
 

Onboard and other revenues

   

445,478

  

403,129

 
  

Total revenues

   

1,671,995

  

1,485,650

 
 

Cruise operating expenses:

        
  

Commissions, transportation and other

 

279,549

  

268,650

 
  

Onboard and other

   

102,490

  

90,935

 
  

Payroll and related

   

204,487

  

179,434

 
  

Food

     

100,082

  

92,647

 
  

Fuel

     

166,061

  

154,939

 
  

Other operating

   

248,402

  

238,670

 
   

Total cruise operating expenses

  

1,101,071

  

1,025,275

 
 

Marketing, selling and administrative expenses

 

248,138

  

211,048

 
 

Depreciation and amortization expenses

  

173,252

  

157,575

 
 

Operating Income

   

149,534

  

91,752

 
 

Other income (expense):

        
  

Interest income

   

3,781

  

1,369

 
  

Interest expense, net of interest capitalized

 

(87,483)

  

(83,924)

 
  

Other income

    

25,720

  

78,250

 
         

(57,982)

  

(4,305)

 
 

Net Income

    

$

91,552

 

$

87,447

 
              
 

Earnings Per Share:

        
 

Basic

$

0.42

 

$

0.41

 
 

Diluted

$

0.42

 

$

0.40

 
              
 

Weighted-Average Shares Outstanding:

      
 

Basic

      

216,511

  

214,314

 
 

Diluted

      

219,626

  

216,975

 
              
              
               


 









 STATISTICS

 
    

Quarter Ended

 
    

March 31,

 
     

2011

 

2010

 
         

Passengers Carried

 

1,214,809

 

1,117,530

 
         

Passenger Cruise Days

 

8,445,699

 

7,584,725

 
         

APCD

   

8,100,296

 

7,354,093

 
         

Occupancy

  

104.3%

 

103.1%

 
        


 








ROYAL CARIBBEAN CRUISES LTD.

CONSOLIDATED BALANCE SHEETS

(in thousands, except share data)

 
  

As  of

 
  

March 31,

 

December 31,

 
  

2011

 

2010

 
  

(unaudited)

   

Assets

    

Current assets

    
 

Cash and cash equivalents

$      470,258

 

$419,929

 
 

Trade and other receivables, net

276,885

 

266,710

 
 

Inventories

140,557

 

126,797

 
 

Prepaid expenses and other assets

182,082

 

145,144

 
 

Derivative financial instruments

144,904

 

56,491

 
 

  Total current assets

1,214,686

 

1,015,071

 
      

Property and equipment, net

16,401,579

 

16,769,181

 

Goodwill

786,725

 

759,328

 

Other assets

1,372,502

 

1,151,324

 
  

$ 19,775,492

 

$19,694,904

 
      

Liabilities and Shareholders' Equity

    

Current liabilities

    
 

Current portion of long-term debt

$      702,484

 

$1,198,929

 
 

Accounts payable

334,985

 

249,047

 
 

Accrued interest

114,657

 

160,906

 
 

Accrued expenses and other liabilities

454,719

 

552,543

 
 

Customer deposits

1,404,031

 

1,283,073

 
 

  Total current liabilities

3,010,876

 

3,444,498

 

Long-term debt

8,076,793

 

7,951,187

 

Other long-term liabilities

409,840

 

356,717

 
      

Commitments and contingencies

    
      

Shareholders' equity

    
 

Preferred stock ($0.01 par value; 20,000,000 shares authorized;

    
 

  none outstanding)

-

 

-

 
 

Common stock ($0.01 par value; 500,000,000 shares authorized;

    
 

227,302,678 and 226,211,731 shares issued, March 31, 2011
  and December 31, 2010, respectively)

2,273

 

2,262

 
 

Paid-in capital

3,048,894

 

3,027,130

 
 

Retained earnings

5,393,300

 

5,301,748

 
 

Accumulated other comprehensive income

247,220

 

25,066

 
 

Treasury stock (10,308,683 common shares at
  cost, March 31, 2011 and December 31, 2010)

(413,704)

 

(413,704)

 
 

  Total shareholders' equity

8,277,983

 

7,942,502

 
  

$ 19,775,492

 

$   19,694,904

 
     


 






ROYAL CARIBBEAN CRUISES LTD.

CONSOLIDATED STATEMENTS OF CASH FLOWS

(unaudited, in thousands)

 
  

Quarter Ended

 
  

March 31,

 
  

2011

 

2010

 
      

Operating Activities

    

Net income

$             91,552

 

$            87,447

 

Adjustments:

    
 

Depreciation and amortization

173,252

 

157,575

 
 

Unrealized (gain) loss on fuel call options

(24,170)

 

3,098

 

Changes in operating assets and liabilities:

    
 

Decrease in trade and other receivables, net

35,648

 

89,135

 
 

Increase in inventories

(12,658)

 

(4,625)

 
 

Increase in prepaid expenses and other assets

(38,014)

 

(5,298)

 
 

Increase (decrease) in accounts payable

85,050

 

(21,437)

 
 

Decrease in accrued interest

(46,249)

 

(33,341)

 
 

Decrease in accrued expenses and other liabilities

(51,399)

 

(15,922)

 
 

Increase in customer deposits

80,524

 

156,128

 

Other, net

(8,117)

 

164

 

Net cash provided by operating activities

285,419

 

412,924

 
      

Investing Activities

    

Purchases of property and equipment

(66,304)

 

(166,397)

 

Cash received on settlement of derivative financial instruments

-

 

746

 

Loans to unconsolidated affiliates

(56,532)

 

-

 

Proceeds from the sale of ships

345,000

 

-

 

Other, net

(4,413)

 

(3,076)

 

Net cash provided by (used in) investing activities

217,751

 

(168,727)

 
      

Financing Activities

    

Debt proceeds

485,501

 

135,033

 

Debt issuance costs

(11,498)

 

(16,063)

 

Repayments of debt

(944,269)

 

(378,596)

 

Proceeds from exercise of common stock options

17,259

 

8,600

 

Other, net

339

 

401

 

Net cash used in financing activities

(452,668)

 

(250,625)

 
      

Effect of exchange rate changes on cash

(173)

 

(87)

 
      

Net increase (decrease) in cash and cash equivalents

50,329

 

(6,515)

 

Cash and cash equivalents at beginning of period

419,929

 

284,619

 

Cash and cash equivalents at end of period

$           470,258

 

$          278,104

 
      

Supplemental Disclosure

    

Cash paid during the period for:

    
 

Interest, net of amount capitalized

$           122,775

 

$            73,937

 
     


 









ROYAL CARIBBEAN CRUISES LTD.

NON-GAAP RECONCILING INFORMATION

(unaudited)

 
         

Gross Yields and Net Yields were calculated as follows (in thousands, except APCD and Yields):

 
         
  

Quarter Ended

 
  

March 31,

 
   

2011

 

2011
On a
Constant
Currency
basis

 

2010

 
         

Passenger ticket revenues

$

1,226,517

$

1,210,275

$

1,082,521

 

Onboard and other revenues

 

445,478

 

444,010

 

403,129

 

Total revenues

 

1,671,995

 

1,654,285

 

1,485,650

 

Less:

       
 

Commissions, transportation and other

 

279,549

 

276,475

 

268,650

 
 

Onboard and other

 

102,490

 

102,171

 

90,935

 

Net revenues

$

1,289,956

$

1,275,639

$

1,126,065

 
         

APCD

 

8,100,296

 

8,100,296

 

7,354,093

 

Gross Yields

$

206.41

$

204.23

$

202.02

 

Net Yields

$

159.25

$

157.48

$

153.12

 
        


 









Gross Cruise Costs and Net Cruise Costs were calculated as follows (in thousands, except APCD and costs per APCD):

 
 
         
  

Quarter Ended

 
  

March 31,

 
   

2011

 

2011
On a
Constant
Currency
basis

 

2010

 
         

Total cruise operating expenses

$

1,101,071

$

1,097,171

$

1,025,275

 

Marketing, selling and administrative expenses

 

248,138

 

246,492

 

211,048

 

Gross Cruise Costs

 

1,349,209

 

1,343,663

 

1,236,323

 

Less:

       
 

Commissions, transportation and other

 

279,549

 

276,475

 

268,650

 
 

Onboard and other

 

102,490

 

102,171

 

90,935

 

Net Cruise Costs

$

967,170

$

965,017

$

876,738

 
         

APCD

 

8,100,296

 

8,100,296

 

7,354,093

 

Gross Cruise Costs per APCD

$

166.56

$

165.88

$

168.11

 

Net Cruise Costs per APCD

$

119.40

$

119.13

$

119.22

 
        


 











Net Debt-to-Capital was calculated as follows (in thousands):

 
       
   

As  of

 
   

March 31,

 

December 31,

 
  

2011

 

2010

 

Long-term debt, net of current portion

$

8,076,793

$

7,951,187

 

Current portion of long-term debt

 

702,484

 

1,198,929

 

Total debt

 

8,779,277

 

9,150,116

 

Less: Cash and cash equivalents

 

470,258

 

419,929

 

Net Debt

$

8,309,019

$

8,730,187

 
      

Total shareholders' equity

$

8,277,983

$

7,942,502

 

Total debt

 

8,779,277

 

9,150,116

 

Total debt and shareholders' equity

 

17,057,260

 

17,092,618

 

Debt-to-Capital

 

51.5%

 

53.5%

 

Net Debt

 

8,309,019

 

8,730,187

 

Net Debt and shareholders' equity

$

16,587,002

$

16,672,689

 

Net Debt-to-Capital

 

50.1%

 

52.4%

 
          


 

Reminder: Royal Caribbean 1st Quarter Earnings Report tomorrow at 10am

In:
27Apr2011

For those interested, a quick reminder that Royal Caribbean will announce their first quarter 2011 financial earnings report Thursday, April 28 at 10am Eastern time.  On average, analysts predict that Royal Caribbean will post $0.57 EPS next quarter.

The report should take about an hour and you can listen to it live on the Royal Caribbean Investor web site or by phone, please dial (877) 663-9606 in the US and Canada. International phone calls should be made to (706) 758-4628. There is no passcode or meeting number. 

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