10-KPeriod: FY2017

ROYAL CARIBBEAN CRUISES LTD Annual Report, Year Ended Dec 31, 2017

Filed February 21, 2018For Securities:RCL

Summary

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 billion, 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% 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.

Financial Highlights

52 data points
Beta

Revenue

$8.78B

44.2% Gross Margin

Net Income

$1.63B

18.5% Net Margin

EPS (Diluted)

$7.53

Total Assets

$22.36B

Cash & Equivalents

$120.11M

Free Cash Flow

$2.31B

Financial Statements
Beta
Revenue$8.78B
Cost of Revenue$4.90B
Gross Profit$3.88B
SG&A Expenses$1.19B
Operating Expenses$7.03B
Operating Income$1.74B
Interest Expense$299.98M
Net Income$1.63B
EPS (Basic)$7.57
EPS (Diluted)$7.53
Shares Outstanding (Basic)214.62M
Shares Outstanding (Diluted)215.69M

Key Highlights

  • 1Record Adjusted EPS for the fourth consecutive year, exceeding 'Double-Double' program targets ($7.53 per diluted share in 2017).
  • 2Total revenues increased by 3.3% to $8.8 billion in 2017, driven by higher ticket prices and onboard spending.
  • 3Significant fleet expansion planned with multiple new ship orders across Royal Caribbean International, Celebrity Cruises, and Azamara Club Cruises brands.
  • 4Successful completion of the 'Double-Double' program, achieving target Adjusted EPS and exceeding 10% Return on Invested Capital (ROIC).
  • 5Shareholder returns enhanced through a $500 million share repurchase program and a 25% dividend increase.
  • 6Credit rating upgraded to investment grade by Moody's and S&P, signaling improved financial stability.
  • 7Resilience 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.

Frequently Asked Questions

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.

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.

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.

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.