01—Abstract
Summary
Summary of the 10-K filed February 21, 2018. Cited figures are marked; the original filing is the authoritative source.
Royal Caribbean Cruises Ltd. (RCL) reported strong financial performance for the fiscal year ended December 31, 2017, achieving record Adjusted Earnings Per Share (EPS) for the fourth consecutive year and exceeding targets set by its 'Double-Double' program.
The company saw an increase in total revenues to $8.8 billiona, driven by higher ticket prices and onboard spending per passenger. Despite disruptions from the 2017 hurricane season and geopolitical tensions impacting travel to South Korea, RCL demonstrated resilience and growth, signaling a positive outlook for the cruise industry. The company continues to focus on fleet modernization and expansion, with significant new ship orders across its global brands, including the upcoming Symphony of the Seas, Celebrity Edge, and Azamara Pursuit.
RCL also made strides in shareholder returns through share repurchases and a 25%b increase in its common stock dividend. Furthermore, the company's senior unsecured debt was upgraded to investment grade by Moody's and S&P, reflecting its improved financial health and strategic execution. RCL remains committed to cost efficiency, innovation, and enhancing the guest experience.
02—Key points
Key Highlights
- Record Adjusted EPS for the fourth consecutive year, exceeding 'Double-Double' program targets ($7.53 per diluted share in 2017).
- Total revenues increased by 3.3% to $8.8 billion in 2017, driven by higher ticket prices and onboard spending.
- Significant fleet expansion planned with multiple new ship orders across Royal Caribbean International, Celebrity Cruises, and Azamara Club Cruises brands.
- Successful completion of the 'Double-Double' program, achieving target Adjusted EPS and exceeding 10% Return on Invested Capital (ROIC).
- Shareholder returns enhanced through a $500 million share repurchase program and a 25% dividend increase.
- Credit rating upgraded to investment grade by Moody's and S&P, signaling improved financial stability.
- Resilience shown despite challenges like the 2017 hurricane season and China's South Korea travel restrictions, with Net Yields increasing by 6.4% on a constant currency basis.
03—One dollar
Follow one dollar
Of each $1.00 of revenue in FY2017, Royal Caribbean Cruises Ltd kept $0.19.
- Revenue$8.78B100.0%
- Cost of revenue−$4.90B55.8%
- Gross profit$3.88B44.2%
- Operating costs−$2.14B24.3%
- Operating income$1.74B19.9%
- Interest, other & tax−$118.9M1.4%
- Net income$1.63B18.5%
Where FY2017 revenue went
$8.78B- Cost of revenue: $4.90B, 56% of revenue
- Net income: $1.63B, 19% of revenue
- SG&A: $1.19B, 14% of revenue
- Other operating costs: $951.2M, 11% of revenue
- Interest, other & tax: $118.9M, 1.4% of revenue
Kept 19% as net incomeInterest, other & tax $118.9M · 1.4%
Full revenue history →04—Financials
Financial Highlights
Figures from 10-KFY2017filed February 21, 2018Financial Statements
FY2017 against FY2016
| Line item | FY2017FY2016 | Change |
|---|---|---|
| Revenue | $8.78B$8.50B | +3.3% |
| Cost of Revenue | $4.90B$5.02B | −2.4% |
| Gross Profit | $3.88B$3.48B | +11.5% |
| SG&A Expenses | $1.19B$1.11B | +7.0% |
| Operating Expenses | $7.03B$7.02B | +0.2% |
| Operating Income | $1.74B$1.48B | +18.1% |
| Interest Expense | $299.98M$307.37M | −2.4% |
| Net Income | $1.63B$1.28B | +26.6% |
| EPS (Basic) | $7.57$5.96 | +27.0% |
| EPS (Diluted) | $7.53$5.93 | +27.0% |
| Shares Outstanding (Basic) | 214.62M215.39M | −0.4% |
| Shares Outstanding (Diluted) | 215.69M216.32M | −0.3% |
05—Questions
Frequently Asked Questions
What are the company's key growth strategies moving forward?
RCL's key operating strategies involve protecting the health and safety of guests and employees, strengthening human capital, enhancing consumer engagement to drive revenues, expanding global brand awareness and market penetration, focusing on cost efficiency, strategically investing in fleet modernization and expansion with new state-of-the-art ships, optimizing ship deployment to maximize returns, enhancing technological capabilities, and maintaining strong relationships with travel agencies while improving direct consumer outreach.
How is the company managing its fleet and expansion plans?
RCL is committed to building state-of-the-art ships at a moderate growth rate and invests in upgrading and maintaining its existing fleet. The company has a significant number of new ships on order for its Global Brands, including Quantum-class, Oasis-class, Icon-class, and Edge-class ships, expected to enter service through 2024. Additionally, TUI Cruises, a joint venture, also has new ships on order. RCL continuously evaluates opportunities to order new ships, purchase existing ones, or sell older capacity to optimize its fleet.
What are the primary risks the company faces?
RCL faces several risks, including adverse economic conditions impacting demand, geopolitical events affecting travel, fluctuating fuel prices and currency exchange rates, increased operating costs, competition from other cruise lines and vacation alternatives, regulatory changes, reliance on shipyards and suppliers, potential for accidents or negative publicity, cyber security threats, and challenges in expanding into new markets.
How is the company addressing environmental regulations?
RCL is subject to various international and national environmental laws and regulations, including MARPOL regulations for pollution prevention. The company is implementing Advanced Emissions Purification (AEP) systems to meet stringent sulfur emission limits and is evaluating technological alternatives for nitrogen oxide emission limits. RCL also acknowledges the growing global focus on climate change and greenhouse gas emissions and is preparing for future regulations, though it does not expect material impacts to costs or operations from current Ballast Water Management Convention requirements.
06—Continue