10-QPeriod: Q3 FY2009

ROYAL CARIBBEAN CRUISES LTD Quarterly Report for Q3 Ended Sep 30, 2009

Filed November 3, 2009For Securities:RCL

Summary

Royal Caribbean Cruises Ltd. (RCL) reported a decrease in total revenues for the third quarter and the first nine months of 2009 compared to the same periods in 2008. This decline was primarily attributed to increased discounting on ticket prices, a slight decrease in onboard spending, and the adverse impact of foreign currency fluctuations due to a stronger U.S. dollar. The company also experienced a decrease in occupancy rates, influenced by the global economic downturn and specific market pressures, particularly in Spain, as well as the impact of the H1N1 virus on certain destinations. Despite revenue challenges, RCL demonstrated effective cost management. Total cruise operating expenses decreased due to lower fuel prices, reduced commissions, and optimized transportation and lodging costs. Marketing, selling, and administrative expenses saw a slight increase, driven by international expansion efforts. The company's net income for the third quarter of 2009 was $230.4 million, or $1.07 per diluted share, compared to $411.9 million, or $1.92 per diluted share, in the prior year. For the nine-month period, net income was $159.1 million, or $0.74 per diluted share, a significant decrease from $572.2 million, or $2.67 per diluted share, in 2008. RCL anticipates further challenges in the fourth quarter of 2009, projecting a net loss per share, but forecasts full-year 2009 earnings per share of approximately $0.70, with expectations for year-over-year improvements in Net Yields in 2010.

Financial Highlights

25 data points
Beta

Revenue

$1.76B

36.7% Gross Margin

Net Income

$229.71M

13.0% Net Margin

EPS (Diluted)

$1.07

Cash & Equivalents

$285.86M

Free Cash Flow

-$508.58M

Financial Statements
Beta
Revenue$1.76B
Cost of Revenue$1.12B
Gross Profit$647.46M
SG&A Expenses$196.59M
Operating Income$306.84M
Interest Expense$74.60M
Net Income$229.71M
EPS (Basic)$1.07
EPS (Diluted)$1.07
Shares Outstanding (Basic)213.84M
Shares Outstanding (Diluted)215.67M

Key Highlights

  • 1Total revenues for Q3 2009 decreased by 14.5% to $1.76 billion compared to $2.06 billion in Q3 2008, primarily due to lower ticket prices and onboard spending.
  • 2Net income for Q3 2009 was $230.4 million ($1.07 per diluted share), down from $411.9 million ($1.92 per diluted share) in Q3 2008.
  • 3Fuel expenses decreased significantly (31.3% per metric ton in Q3 2009 vs. Q3 2008) due to lower fuel prices, contributing to lower overall operating expenses.
  • 4The company took delivery of the new Oasis of the Seas in October 2009 and Celebrity Equinox in July 2009, increasing capacity.
  • 5Net Yields decreased by 16.5% in Q3 2009 compared to Q3 2008, reflecting pricing pressures and reduced consumer spending.
  • 6Net Cruise Costs per Available Passenger Cruise Day (APCD) decreased by 10.0% in Q3 2009 compared to Q3 2008, demonstrating effective cost control measures.
  • 7The company maintained compliance with all debt covenants, with a Net Debt-to-Capital ratio of 48.5% as of September 30, 2009.

Frequently Asked Questions

The economic downturn significantly impacted RCL's financial performance, leading to a decrease in total revenues by 14.5% in Q3 2009 compared to Q3 2008. This was primarily due to higher discounts on ticket prices, reduced onboard spending, and a decrease in occupancy rates. The company reported a net income of $230.4 million for the quarter, a notable decrease from $411.9 million in the prior year.

Cruise operating expenses decreased by 12.5% in Q3 2009 compared to Q3 2008. Key drivers included a substantial reduction in fuel expenses due to lower market prices, decreased commissions resulting from discounted ticket prices, and lower air and transportation expenses. These cost-saving measures helped mitigate the impact of reduced revenues.

For the fourth quarter of 2009, RCL projected a net loss per share of approximately $0.05, expecting Net Yields to decrease by 7%-8% year-over-year. For the full year 2009, the company anticipated earnings per share of approximately $0.70. Looking ahead to 2010, RCL affirmed its outlook for year-over-year improvements in Net Yields and anticipated flat Net Cruise Costs per APCD, excluding fuel.

RCL maintained compliance with all its debt covenants. The Net Debt-to-Capital ratio stood at 48.5% as of September 30, 2009, a slight improvement from 49.3% at the end of 2008. The company also issued $300 million in senior unsecured notes in July 2009 and utilized financing arrangements for its new ship deliveries, indicating active management of its capital structure amidst economic challenges.