01—Abstract
Summary
Summary of the 10-Q filed April 24, 2012. Cited figures are marked; the original filing is the authoritative source.
Royal Caribbean Cruises Ltd. (RCL) reported first-quarter 2012 results that showed a significant year-over-year decline in net income, falling to $47.0 milliona ($0.21 diluted EPS) from $78.4 million ($0.36 diluted EPS) in the prior year period.
This decline was primarily driven by a substantial increase in cruise operating expenses, particularly fuel costs, which surged by 30.0% per metric ton. Total revenues saw a healthy 9.7% increase to $1.8 billionb, fueled by higher ticket prices and a 2.5% capacity increase, though partially offset by unfavorable foreign currency exchange rates. The company also noted the ongoing impact of the Costa Concordia incident, which is expected to negatively affect results in the second and third quarters of 2012, despite strong bookings for the fourth quarter of 2012 and 2013.
Despite the decrease in net income, RCL's financial position remains solid with a total debt-to-capital ratio of 49.8% and a net debt-to-capital ratio of 49.0% as of March 31, 2012. The company continues to invest in future growth, exercising its option for a second "Project Sunshine" ship due in 2015. Liquidity appears adequate, with $277.5 millionc in cash and cash equivalents and $805.0 million available under revolving credit facilities.
02—Key points
Key Highlights
- Net income decreased to $47.0 million ($0.21 diluted EPS) in Q1 2012 from $78.4 million ($0.36 diluted EPS) in Q1 2011.
- Total revenues increased by 9.7% to $1.8 billion, driven by higher ticket prices and a 2.5% capacity increase.
- Cruise operating expenses rose significantly by 14.0% to $1.3 billion, largely due to a 30.0% increase in fuel costs per metric ton and higher food and commission expenses.
- The company exercised an option for a second 'Project Sunshine' ship, scheduled for delivery in Q2 2015, indicating continued investment in fleet expansion.
- Net Yields increased by 6.4% due to higher ticket prices and strategic distribution changes, while Net Cruise Costs per APCD increased by 12.8%.
- The Costa Concordia incident is noted as having a negative short-term impact on 2012 results, particularly in Q2 and Q3.
- Liquidity remains strong with $277.5 million in cash and cash equivalents and $805.0 million available under credit facilities.
03—One dollar
Follow one dollar
Of each $1.00 of revenue in Q1 FY2012, Royal Caribbean Cruises Ltd kept $0.03.
- Revenue$1.83B100.0%
- Cost of revenue−$1.26B68.4%
- Gross profit$579.4M31.6%
- Operating costs−$444.0M24.2%
- Operating income$135.4M7.4%
- Interest, other & tax−$88.4M4.8%
- Net income$47.0M2.6%
04—Financials
Financial Highlights
Figures from 10-QQ1 FY2012filed April 24, 2012Financial Statements
Q1 FY2012 against Q1 FY2011
| Line item | Q1 FY2012Q1 FY2011 | Change |
|---|---|---|
| Revenue | $1.83B$1.67B | +9.7% |
| Cost of Revenue | $1.26B$1.10B | +14.0% |
| Gross Profit | $579.37M$570.92M | +1.5% |
| SG&A Expenses | $264.60M$248.14M | +6.6% |
| Operating Income | $135.38M$149.53M | −9.5% |
| Interest Expense | $92.67M$100.63M | −7.9% |
| Net Income | $46.96M$78.41M | −40.1% |
| EPS (Basic) | $0.22$0.36 | −38.9% |
| EPS (Diluted) | $0.21$0.36 | −41.7% |
| Shares Outstanding (Basic) | 217.58M216.51M | +0.5% |
| Shares Outstanding (Diluted) | 219.23M219.63M | −0.2% |
05—Questions
Frequently Asked Questions
What is the main reason for the decrease in net income compared to the prior year?
The primary driver for the decrease in net income was a significant increase in cruise operating expenses, particularly fuel costs which rose by 30.0% per metric ton. Higher food and commission expenses also contributed to the increased operating costs.
How is Royal Caribbean managing its fuel price risk?
Royal Caribbean utilizes fuel swap agreements and fuel call options to mitigate its exposure to fuel price fluctuations. As of March 31, 2012, approximately 56% of projected 2012 fuel consumption was hedged via swaps.
What is the expected impact of the Costa Concordia incident on Royal Caribbean's financial performance?
The company stated that the Costa Concordia tragedy is having a short-term negative effect on its results, with the greatest impact expected in the second and third quarters of 2012. However, they believe it will not have a significant long-term impact on the business.
What are the company's future capital expenditure plans?
Royal Caribbean has future capital commitments primarily related to new ship orders. As of March 31, 2012, they had 'Celebrity Reflection' and two 'Project Sunshine' ships on order, with an aggregate cost of approximately $3.0 billion, and anticipated overall capital expenditures of about $1.3 billion for 2012.
06—Continue