10-QPeriod: Q1 FY2009

ROYAL CARIBBEAN CRUISES LTD Quarterly Report for Q1 Ended Mar 31, 2009

Filed April 23, 2009For Securities:RCL

Summary

Royal Caribbean Cruises Ltd. (RCL) reported a net loss of $36.2 million, or $0.17 per share, for the first quarter of 2009, a significant reversal from a net income of $75.6 million, or $0.35 per share, in the same period of 2008. This downturn is attributed to a challenging economic environment, which led to a 7.2% decrease in total revenues to $1.3 billion, primarily driven by discounted ticket prices and a 13.5% decline in Net Yields. While capacity increased by 6.5% due to new ship additions, lower occupancy rates, particularly impacting the Pullmantur brand, contributed to the weaker financial performance. Despite the current financial headwinds, the company is actively managing costs, with Net Cruise Costs per Available Passenger Cruise Day (APCD) decreasing by 7.0%. RCL is also strategically positioning for the future with significant new ship deliveries planned through 2012, supported by secured financing arrangements. The company maintains substantial liquidity with $455.9 million in cash and cash equivalents and an undrawn revolving credit facility, though it notes the increased difficulty in accessing capital markets due to current economic conditions and recent credit rating downgrades.

Financial Highlights

24 data points
Beta

Revenue

$1.33B

28.2% Gross Margin

Net Income

-$36.24M

-2.7% Net Margin

EPS (Diluted)

$-0.17

Cash & Equivalents

$455.88M

Free Cash Flow

-$105.43M

Financial Statements
Beta
Revenue$1.33B
Cost of Revenue$952.34M
Gross Profit$373.27M
SG&A Expenses$189.16M
Operating Income$44.25M
Interest Expense$79.46M
Net Income-$36.24M
EPS (Basic)$-0.17
EPS (Diluted)$-0.17
Shares Outstanding (Basic)213.69M
Shares Outstanding (Diluted)213.69M

Key Highlights

  • 1Reported a net loss of $36.2 million for Q1 2009, compared to a net income of $75.6 million in Q1 2008.
  • 2Total revenues decreased by 7.2% to $1.3 billion, driven by discounted pricing and a 13.5% drop in Net Yields.
  • 3Occupancy rates declined to 101.2% from 104.4%, with particular pressure on the Spanish Pullmantur brand.
  • 4Net Cruise Costs per APCD decreased by 7.0%, indicating effective cost management.
  • 5Company has secured financing for significant new ship deliveries, including the Oasis-class and Solstice-class vessels.
  • 6Liquidity remains strong with $455.9 million in cash and cash equivalents, though access to capital markets may be challenged by credit rating downgrades.

Frequently Asked Questions

The primary reason for the decline in profitability is the adverse impact of the ongoing worldwide economic downturn. This has led to reduced consumer demand, necessitating discounted ticket prices and resulting in lower Net Yields. Combined with a decrease in occupancy rates, particularly on some brands, this has shifted the company from a net profit to a net loss.

Royal Caribbean is implementing cost-saving measures. Notably, Marketing, Selling, and Administrative expenses decreased due to payroll reductions as part of a cost-savings initiative. Furthermore, Net Cruise Costs per Available Passenger Cruise Day (APCD) decreased by 7.0%, reflecting efforts to control operational expenses despite increased capacity from new ship deliveries.

For the full year 2009, the company expects Net Yields to decrease by 12% to 13% and Net Cruise Costs per APCD to decrease by 10% to 12%. Despite these challenges, they forecast full-year earnings per share to be around $1.35, assuming current fuel prices. The company anticipates a 5.9% increase in capacity for the full year, driven by new ship additions.

Royal Caribbean has significant capital commitments for new ship construction, with an aggregate cost of approximately $6.5 billion for six new vessels scheduled through 2012. The company has secured committed financing arrangements for these ships, including export credit agency guarantees, and expects its cash flows from operations, existing credit facilities, and these financing arrangements to be adequate to meet its obligations.