10-QPeriod: Q2 FY2009

ROYAL CARIBBEAN CRUISES LTD Quarterly Report for Q2 Ended Jun 30, 2009

Filed July 29, 2009For Securities:RCL

Summary

Royal Caribbean Cruises Ltd. (RCL) reported a net loss of $35.1 million ($0.16 per diluted share) for the second quarter ended June 30, 2009, a significant downturn compared to a net income of $84.7 million ($0.40 per diluted share) in the same period of 2008. This decline was driven by a 14.8% decrease in total revenues to $1.3 billion, largely due to reduced ticket prices, lower onboard spending, and the adverse impact of foreign currency fluctuations. Despite these challenges, the company managed to reduce total cruise operating expenses by 11.5% and marketing, selling, and administrative expenses by 3.0%, partly due to cost-saving initiatives and lower fuel prices. Capital expenditures remained substantial, with a focus on new ship deliveries, including the highly anticipated 'Oasis of the Seas' scheduled for Q4 2009.

Financial Highlights

24 data points
Beta

Revenue

$1.35B

28.4% Gross Margin

Net Income

-$36.28M

-2.7% Net Margin

EPS (Diluted)

$-0.17

Cash & Equivalents

$309.76M

Free Cash Flow

$124.70M

Financial Statements
Beta
Revenue$1.35B
Cost of Revenue$965.43M
Gross Profit$383.58M
SG&A Expenses$190.59M
Operating Income$55.06M
Interest Expense$69.52M
Net Income-$36.28M
EPS (Basic)$-0.17
EPS (Diluted)$-0.17
Shares Outstanding (Basic)213.78M
Shares Outstanding (Diluted)213.78M

Key Highlights

  • 1Reported a net loss of $35.1 million for Q2 2009, a sharp contrast to a net profit of $84.7 million in Q2 2008.
  • 2Total revenues declined by 14.8% to $1.3 billion, primarily due to price discounting and reduced onboard spending.
  • 3Net Yields decreased significantly by 17.9%, reflecting the challenging economic environment.
  • 4Total cruise operating expenses were reduced by 11.5% year-over-year due to cost controls and lower fuel prices.
  • 5The company is preparing for the delivery of 'Oasis of the Seas' in Q4 2009, a key growth initiative.
  • 6Despite the loss, the company remains in compliance with all debt covenants.
  • 7Shareholders' equity increased to $7.05 billion from $6.80 billion at the end of 2008, partly due to comprehensive income.

Frequently Asked Questions

The primary reason for the net loss of $35.1 million in the second quarter of 2009 was a significant decrease in total revenues, down 14.8% to $1.3 billion. This revenue decline was largely attributed to lower ticket prices, reduced onboard spending, and adverse foreign currency movements, indicating a challenging demand environment.

Royal Caribbean implemented cost management strategies, resulting in an 11.5% decrease in total cruise operating expenses and a 3.0% reduction in marketing, selling, and administrative expenses compared to the prior year's second quarter. Factors contributing to this included lower fuel costs, reduced commissions, and general cost-saving initiatives.

The company has significant capital commitments for new ship construction, with an aggregate cost of approximately $6.5 billion for six ships on order. Financing for these vessels is being secured through a combination of committed unsecured bank financing arrangements, export credit agency guarantees, and potentially drawing on existing credit facilities and future cash flows. The delivery of 'Oasis of the Seas' in Q4 2009 is a major upcoming capital event.

For the full year 2009, the company forecasts Net Yields to decrease approximately 14% and Net Cruise Costs per APCD to decrease approximately 10% compared to 2008. They expect full-year earnings per share to be in the range of $0.70 to $0.80, assuming current fuel prices.