01—Abstract
Summary
Summary of the 10-Q filed August 1, 2011. Cited figures are marked; the original filing is the authoritative source.
Royal Caribbean Cruises Ltd. (RCL) reported a significant increase in total revenues for the second quarter and the first six months of 2011 compared to the prior year, driven by a rise in capacity and improved Net Yields, partly due to favorable foreign currency exchange rates.
Despite geopolitical challenges that necessitated deployment adjustments and pricing reductions in certain regions, the company managed to grow its top line. However, operating expenses also increased, primarily due to higher capacity and fuel costs, along with increased marketing, selling, and administrative expenses associated with international expansion. The company's net income saw a substantial improvement in the second quarter, reaching $93.5 milliona ($0.43 per diluted share) from $53.7 million ($0.25 per diluted share) in the prior year.
For the six-month period, net income increased to $171.9 millionb ($0.78 per diluted share) from $133.6 million ($0.61 per diluted share). This improved profitability was partly aided by a non-recurring gain on fuel options in the first half of 2011, which offset a one-time litigation settlement gain in the prior year. The company also successfully managed its debt, with Net Debt-to-Capital decreasing to 49.1% as of June 30, 2011.
02—Key points
Key Highlights
- Total revenues increased by 10.4% to $1.8 billion in Q2 2011 and 11.4% to $3.4 billion in the first six months of 2011 compared to the same periods in 2010.
- Net income rose to $93.5 million ($0.43/share diluted) in Q2 2011 and $171.9 million ($0.78/share diluted) in the first six months of 2011, showing significant year-over-year growth.
- Net Yields increased by 3.8% for both the quarter and the six-month period, driven by favorable foreign currency exchange rates and increased ticket prices.
- Capacity, measured by Available Passenger Cruise Days (APCD), increased by 6.6% in Q2 and 8.3% in the first six months of 2011.
- Net Debt-to-Capital improved to 49.1% as of June 30, 2011, down from 52.5% as of December 31, 2010, indicating a strengthening balance sheet.
- The company reinstated its quarterly dividend in Q3 2011, declaring a $0.10 per share dividend, signaling confidence in future financial performance.
- Significant capital expenditures are planned for new ship construction, with aggregate costs of approximately $2.7 billion for ships on order as of June 30, 2011.
03—One dollar
Follow one dollar
Of each $1.00 of revenue in Q2 FY2011, Royal Caribbean Cruises Ltd kept $0.05.
- Revenue$1.77B100.0%
- Cost of revenue−$1.19B67.1%
- Gross profit$582.5M32.9%
- Operating costs−$414.3M23.4%
- Operating income$168.2M9.5%
- Interest, other & tax−$74.7M4.2%
- Net income$93.5M5.3%
04—Financials
Financial Highlights
Figures from 10-QQ2 FY2011filed August 1, 2011Financial Statements
Q2 FY2011 against Q2 FY2010
| Line item | Q2 FY2011Q2 FY2010 | Change |
|---|---|---|
| Revenue | $1.77B$1.60B | +10.4% |
| Cost of Revenue | $1.19B$1.09B | +9.1% |
| Gross Profit | $582.50M$515.51M | +13.0% |
| SG&A Expenses | $242.26M$211.79M | +14.4% |
| Operating Income | $168.19M$143.68M | +17.1% |
| Interest Expense | $92.97M$90.66M | +2.5% |
| Net Income | $93.49M$53.73M | +74.0% |
| EPS (Basic) | $0.43$0.25 | +72.0% |
| EPS (Diluted) | $0.43$0.25 | +72.0% |
| Shares Outstanding (Basic) | 217.03M215.04M | +0.9% |
| Shares Outstanding (Diluted) | 219.37M217.56M | +0.8% |
05—Questions
Frequently Asked Questions
What were the main drivers of revenue growth in the second quarter of 2011?
Revenue growth was primarily driven by a 6.6% increase in capacity, largely due to the addition of the 'Allure of the Seas' and a full quarter of 'Celebrity Eclipse'. Favorable foreign currency exchange rates and an increase in ticket prices also contributed to the 3.8% rise in Net Yields.
How did the company's profitability change compared to the previous year?
Profitability improved significantly. Net income for the second quarter of 2011 was $93.5 million ($0.43 per diluted share), up from $53.7 million ($0.25 per diluted share) in the second quarter of 2010. For the first six months of 2011, net income was $171.9 million ($0.78 per diluted share), compared to $133.6 million ($0.61 per diluted share) in the same period of 2010.
What is the company's current financial leverage and outlook?
The company's financial leverage improved, with Net Debt-to-Capital decreasing to 49.1% as of June 30, 2011, from 52.5% at the end of 2010. The company forecasts Net Yields to increase by approximately 5% for the full year 2011 and expects full-year diluted earnings per share to be in the range of $2.85 to $2.95.
Are there any significant financial risks or uncertainties highlighted in the report?
The report mentions risks associated with the global economic environment's impact on demand, potential disruptions in financial markets affecting counterparties, fluctuations in operating and financing costs (including fuel, foreign exchange, and interest rates), competition, and regulatory changes. Geopolitical events like unrest in Northern Africa and the earthquake in Japan also impacted operations and required deployment changes and pricing adjustments.
06—Continue