01—Abstract
Summary
Summary of the 10-Q filed July 23, 2010. Cited figures are marked; the original filing is the authoritative source.
Royal Caribbean Cruises Ltd. (RCL) reported a significant turnaround in its financial performance for the second quarter ended June 30, 2010, compared to the same period in the prior year.
The company achieved a net income of $60.5 milliona, or $0.28 per diluted share, a substantial improvement from a net loss of $35.1 million, or ($0.16) per diluted share, in the second quarter of 2009. This recovery was driven by a 18.7% increase in total revenues, reaching $1.6 billion, largely attributed to a 14.6% increase in capacity and a 4.9% rise in Net Yields. The company is actively managing its fleet expansion, taking delivery of the 'Celebrity Eclipse' and anticipating the 'Allure of the Seas' in late 2010.
Financial health is further bolstered by a strong net cash provided by operating activities of $1.01 billionb for the first six months of 2010, an increase from $342.9 million in the prior year. Despite a substantial debt load, RCL appears to be effectively navigating its financial obligations and has reaffirmed its full-year 2010 earnings per share guidance, indicating continued positive momentum.
02—Key points
Key Highlights
- Significant improvement in profitability: RCL reported a net income of $60.5 million in Q2 2010, a stark contrast to a net loss in Q2 2009.
- Revenue growth driven by capacity and yield: Total revenues increased by 18.7% to $1.6 billion, fueled by higher capacity and improved Net Yields.
- Strong operating cash flow: Net cash provided by operating activities for the first six months of 2010 was $1.01 billion, demonstrating robust cash generation.
- Fleet expansion continues: The company took delivery of the 'Celebrity Eclipse' and has 'Allure of the Seas' scheduled for Q4 2010, indicating strategic growth.
- Improved cost management: Net Cruise Costs per Available Passenger Cruise Day (APCD) decreased by 2.8% year-over-year for the quarter.
- Positive outlook reiterated: The company maintained its full-year 2010 earnings per share guidance, signaling confidence in continued performance.
- Settlement of litigation provided a one-time gain: A $68 million payment (part of an $85.6 million gain) from a settlement with Rolls Royce contributed to financial results.
03—One dollar
Follow one dollar
Of each $1.00 of revenue in Q2 FY2010, Royal Caribbean Cruises Ltd kept $0.03.
- Revenue$1.60B100.0%
- Cost of revenue−$1.09B67.8%
- Gross profit$515.5M32.2%
- Operating costs−$371.8M23.2%
- Operating income$143.7M9.0%
- Interest, other & tax−$90.0M5.6%
- Net income$53.7M3.4%
04—Financials
Financial Highlights
Figures from 10-QQ2 FY2010filed July 23, 2010Financial Statements
Q2 FY2010 against Q2 FY2009
| Line item | Q2 FY2010Q2 FY2009 | Change |
|---|---|---|
| Revenue | $1.60B$1.35B | +18.7% |
| Cost of Revenue | $1.09B$965.43M | +12.5% |
| Gross Profit | $515.51M$383.58M | +34.4% |
| SG&A Expenses | $211.79M$190.59M | +11.1% |
| Operating Income | $143.68M$55.06M | +160.9% |
| Interest Expense | $90.66M$69.52M | +30.4% |
| Net Income | $53.73M-$36.28M | +248.1% |
| EPS (Basic) | $0.25$-0.17 | +247.1% |
| EPS (Diluted) | $0.25$-0.17 | +247.1% |
| Shares Outstanding (Basic) | 215.04M213.78M | +0.6% |
| Shares Outstanding (Diluted) | 217.56M213.78M | +1.8% |
05—Questions
Frequently Asked Questions
What is the primary driver behind the company's improved financial performance in the second quarter of 2010?
The primary driver for the improved financial performance was a combination of increased capacity, a 14.6% rise in available passenger cruise days, and a 4.9% increase in Net Yields, which reflects higher ticket prices and onboard spending per passenger. This led to a significant increase in total revenues and a return to profitability.
How is Royal Caribbean managing its debt and financial obligations given the substantial amount of long-term debt?
Royal Caribbean is managing its debt through strong operating cash flows, strategic refinancing of its debt portfolio (including terminating certain swap agreements to increase its fixed percentage of debt), and securing committed financing for new ship deliveries. As of June 30, 2010, the company was in compliance with all debt covenants and had liquidity of $1.0 billion.
What is the company's outlook for the remainder of 2010?
The company expects positive trends to continue. For the third quarter of 2010, they anticipate Net Yields to increase by approximately 4% (7% on a constant currency basis) and Net Cruise Costs per APCD to decrease by approximately 1%. For the full year 2010, they project Net Yields to increase by 3-4% and Net Cruise Costs per APCD to decrease by 1-2%, reiterating their full-year EPS guidance of $2.25 to $2.35.
Are there any significant legal proceedings or contingent liabilities that investors should be aware of?
The company is involved in various legal proceedings, including a lawsuit settlement with Rolls Royce which resulted in a gain, and ongoing matters related to employment practices and artwork sales on ships. While they believe they have meritorious defenses for most claims, these could potentially impact financial results. The majority of routine claims are covered by insurance.
06—Continue