10-KPeriod: FY2008

ROYAL CARIBBEAN CRUISES LTD Annual Report, Year Ended Dec 31, 2008

Filed February 24, 2009For Securities:RCL

Summary

Royal Caribbean Cruises Ltd. (RCL) reported its 2008 annual results amidst a challenging global economic environment. The company experienced revenue growth driven by increased capacity, with total revenues reaching $6.5 billion, up 6.2% from 2007. This growth was primarily attributed to the introduction of new ships and a slight increase in gross yields. However, net income declined to $573.7 million from $603.4 million in the prior year, resulting in diluted earnings per share of $2.68 compared to $2.82 in 2007. This decline was influenced by rising operating expenses, particularly fuel costs, which increased significantly year-over-year. In response to the economic downturn, RCL took measures to preserve liquidity, including discontinuing its quarterly dividend, curtailing non-shipbuild capital expenditures, and reducing its workforce. The company also highlighted its ongoing strategy to expand passenger sourcing outside of North America to diversify its customer base and drive future growth. Looking ahead, RCL anticipated continued economic challenges impacting demand and pricing in 2009, projecting a decline in net yields.

Financial Highlights

27 data points
Beta

Revenue

$6.53B

32.6% Gross Margin

Net Income

$573.72M

8.8% Net Margin

EPS (Diluted)

$2.68

Cash & Equivalents

$402.88M

Free Cash Flow

-$1.15B

Financial Statements
Beta
Revenue$6.53B
Cost of Revenue$4.40B
Gross Profit$2.13B
SG&A Expenses$776.52M
Operating Expenses$5.70B
Operating Income$831.98M
Interest Expense$327.31M
Net Income$573.72M
EPS (Basic)$2.69
EPS (Diluted)$2.68

Key Highlights

  • 1Total revenues increased by 6.2% to $6.5 billion in 2008, driven by a 5.2% increase in capacity.
  • 2Net income decreased to $573.7 million ($2.68 diluted EPS) from $603.4 million ($2.82 diluted EPS) in 2007, impacted by rising operating expenses.
  • 3Fuel expenses per available passenger cruise day (APCD) increased by 25.7% compared to 2007.
  • 4The company discontinued its quarterly dividend starting in Q4 2008 to enhance liquidity.
  • 5Cost-saving initiatives were implemented, including the elimination of approximately 400 shore-side positions.
  • 6Net Debt-to-Capital ratio increased to 49.3% in 2008 from 44.7% in 2007, reflecting higher debt levels.
  • 7RCL took delivery of two new ships in 2008: Independence of the Seas and Celebrity Solstice.

Frequently Asked Questions

In 2008, Royal Caribbean Cruises Ltd. reported a 6.2% increase in total revenues to $6.5 billion, primarily due to a 5.2% increase in capacity from new ship deliveries. However, net income decreased by 4.9% to $573.7 million ($2.68 diluted EPS) from $603.4 million ($2.82 diluted EPS) in 2007. This decline was influenced by a significant increase in operating expenses, notably fuel costs, and a slight decrease in onboard and other revenues.

Facing a challenging global economic downturn, Royal Caribbean Cruises Ltd. focused on preserving cash and liquidity. Key actions included discontinuing its quarterly dividend in the fourth quarter of 2008, curtailing non-shipbuild capital expenditures, and implementing cost-saving initiatives expected to yield around $125 million annually, which involved reducing shore-side positions and non-core operations.

The company anticipated a challenging 2009, with significant deterioration in consumer confidence and spending due to the ongoing economic downturn. Management expected a decrease in Net Yields by 9% to 13% compared to 2008 and a decrease in Net Cruise Costs per APCD by 7% to 9%. Earnings per share for the full year 2009 were projected to be around $1.40.

Royal Caribbean Cruises Ltd. had six new ships on order: two Oasis-class ships for Royal Caribbean International and four Solstice-class ships for Celebrity Cruises, scheduled to enter service between late 2009 and 2012. These new vessels were expected to increase passenger capacity by approximately 28% by the end of 2012. The company secured financing for the Solstice-class ships and was in the process of securing financing for the Oasis-class ships.