10-KPeriod: FY2002

ROYAL CARIBBEAN CRUISES LTD Annual Report, Year Ended Dec 31, 2002

Filed March 24, 2003For Securities:RCL

Summary

Royal Caribbean Cruises Ltd. (RCL) filed its 2002 annual report (10-K) on March 24, 2003. The company reported a strong revenue increase of 9.2% to $3.4 billion in 2002, driven by a 15% increase in capacity from new ship deliveries. Net income also saw a significant rise of 38.1% to $351.3 million, or $1.79 per diluted share, demonstrating effective operational management despite a challenging post-9/11 environment. The company highlighted its continued fleet expansion, with a focus on modern and innovative ships, and its strong market position with two distinct brands, Royal Caribbean International and Celebrity Cruises. RCL also noted the termination of its proposed merger with P&O Princess Cruises, which resulted in a break fee of $62.5 million. Looking ahead, RCL faced potential headwinds from increased industry capacity, intensified competition (especially with the announced Carnival/P&O Princess combination), and ongoing geopolitical and economic uncertainties. The company's financial health appears solid, supported by consistent operating cash flow and substantial assets. However, investors should monitor the company's significant debt load and upcoming credit facility expirations.

Key Highlights

  • 1Revenue increased by 9.2% to $3.4 billion in 2002, driven by a 15% increase in capacity from new ship deliveries.
  • 2Net income rose by 38.1% to $351.3 million ($1.79 per diluted share) in 2002, indicating strong profitability.
  • 3The company reported a fleet occupancy percentage of 104.5% in 2002, exceeding capacity due to cabins accommodating more than two guests.
  • 4The proposed merger with P&O Princess Cruises was terminated, resulting in a $62.5 million break fee received by RCL.
  • 5RCL continues its aggressive fleet expansion, with three new ships on order and an average fleet age of approximately five years.
  • 6The company's financial position is supported by $1.2 billion in liquidity, comprising cash and availability under its revolving credit facility.

Frequently Asked Questions

In 2002, Royal Caribbean Cruises Ltd. reported a revenue of $3.43 billion, a 9.2% increase from $3.15 billion in 2001. Net income grew by 38.1% to $351.3 million, or $1.79 per diluted share, up from $254.5 million, or $1.32 per diluted share, in 2001. This growth was primarily driven by an increase in capacity due to the addition of new ships.

Key risks include intense competition from other cruise lines and vacation alternatives, potential overcapacity in the cruise industry, a reduction in demand due to geopolitical and economic uncertainties (such as terrorism or war), adverse publicity, stricter environmental regulations, and the ability to secure favorable financing. The potential combination of Carnival Corporation and P&O Princess Cruises is also noted as a competitive threat.

As of December 31, 2002, RCL had $1.2 billion in liquidity, consisting of $0.2 billion in cash and equivalents and $1.0 billion available under its revolving credit facility, which was set to expire in June 2003. The company intends to replace this facility, though possibly for a lesser amount. RCL has a significant debt load of approximately $5.4 billion but is in compliance with its debt covenants. The company plans to fund future capital expenditures and debt payments through a combination of operating cash flow, credit facilities, and potentially new debt or equity issuances.

RCL continues to expand its fleet with modern ships. In 2002, three new ships were delivered, adding to the capacity. The company has three additional ships on order for delivery through the second quarter of 2004. The fleet's average age is approximately five years, which is considered one of the youngest in the industry.