01—Abstract
Summary
Summary of the 10-K filed February 24, 2009. Cited figures are marked; the original filing is the authoritative source.
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 billiona, 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.
02—Key points
Key Highlights
- Total revenues increased by 6.2% to $6.5 billion in 2008, driven by a 5.2% increase in capacity.
- Net 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.
- Fuel expenses per available passenger cruise day (APCD) increased by 25.7% compared to 2007.
- The company discontinued its quarterly dividend starting in Q4 2008 to enhance liquidity.
- Cost-saving initiatives were implemented, including the elimination of approximately 400 shore-side positions.
- Net Debt-to-Capital ratio increased to 49.3% in 2008 from 44.7% in 2007, reflecting higher debt levels.
- RCL took delivery of two new ships in 2008: Independence of the Seas and Celebrity Solstice.
03—One dollar
Follow one dollar
Of each $1.00 of revenue in FY2008, Royal Caribbean Cruises Ltd kept $0.09.
- Revenue$6.53B100.0%
- Cost of revenue−$4.40B67.4%
- Gross profit$2.13B32.6%
- Operating costs−$1.30B19.9%
- Operating income$832.0M12.7%
- Interest, other & tax−$258.3M4.0%
- Net income$573.7M8.8%
Where FY2008 revenue went
$6.53B- Cost of revenue: $4.40B, 67% of revenue
- Net income: $573.7M, 8.8% of revenue
- SG&A: $776.5M, 12% of revenue
- Other operating costs: $520.4M, 8.0% of revenue
- Interest, other & tax: $258.3M, 4.0% of revenue
Kept 8.8% as net incomeNet income $573.7M · 8.8%
Full revenue history →04—Financials
Financial Highlights
Figures from 10-KFY2008filed February 24, 2009Financial Statements
| 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 |
05—Questions
Frequently Asked Questions
What was the financial performance of Royal Caribbean Cruises Ltd. in 2008?
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.
How did the company respond to the worsening economic conditions in 2008?
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.
What is the company's outlook for 2009?
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.
What are the company's major fleet development plans?
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.
06—Continue