01—Abstract
Summary
Summary of the 10-Q filed July 27, 2012. Cited figures are marked; the original filing is the authoritative source.
Royal Caribbean Cruises Ltd. (RCL) reported a net loss of $3.7 milliona for the second quarter of 2012, a significant decrease from a net income of $93.5 million in the same period of 2011.
This downturn was primarily driven by a substantial increase in cruise operating expenses, particularly fuel costs, which rose by 16.8% per metric ton. While total revenues saw a modest increase of 3.0% to $1.8 billionb, driven by a 1.8% rise in Net Yields and capacity, higher operating costs outpaced revenue growth. The company highlighted strategic initiatives, including changes in its international distribution system and increased deployment in markets like Australia and China, which are expected to positively impact Net Yields.
However, these initiatives, combined with rising fuel prices and general operating cost inflation, led to a 9.3% increase in cruise operating expenses. Despite these challenges, RCL maintained a strong liquidity position with $1.1 billionc in cash and available credit facilities, and remains committed to its long-term capital expenditure plans, including the construction of new ships.
02—Key points
Key Highlights
- Reported a net loss of $3.7 million for Q2 2012, compared to a net income of $93.5 million in Q2 2011.
- Total revenues increased by 3.0% to $1.8 billion in Q2 2012.
- Cruise operating expenses increased by 9.3% to $1.3 billion in Q2 2012, largely due to higher fuel costs.
- Fuel expenses increased by 16.8% per metric ton year-over-year.
- Net Yields increased by 1.8% in Q2 2012.
- Company is undertaking strategic deployment initiatives in markets like Australia and China.
- Liquidity remains strong with $1.1 billion in cash and available credit facilities as of June 30, 2012.
03—One dollar
Follow one dollar
For each $1.00 of revenue in Q2 FY2012, Royal Caribbean Cruises Ltd lost $0.00.
- Revenue$1.82B100.0%
- Cost of revenue−$1.30B71.2%
- Gross profit$525.0M28.8%
- Operating costs−$428.1M23.5%
- Operating income$96.9M5.3%
- Interest, other & tax−$100.6M5.5%
- Net income−$3.7M0.2%
04—Financials
Financial Highlights
Figures from 10-QQ2 FY2012filed July 27, 2012Financial Statements
Q2 FY2012 against Q2 FY2011
| Line item | Q2 FY2012Q2 FY2011 | Change |
|---|---|---|
| Revenue | $1.82B$1.77B | +3.0% |
| Cost of Revenue | $1.30B$1.19B | +9.3% |
| Gross Profit | $524.99M$582.50M | −9.9% |
| SG&A Expenses | $247.57M$242.26M | +2.2% |
| Operating Income | $96.91M$168.19M | −42.4% |
| Interest Expense | $89.11M$92.97M | −4.2% |
| Net Income | -$3.65M$93.49M | −103.9% |
| EPS (Basic) | $-0.02$0.43 | −104.7% |
| EPS (Diluted) | $-0.02$0.43 | −104.7% |
| Shares Outstanding (Basic) | 217.87M217.03M | +0.4% |
| Shares Outstanding (Diluted) | 217.87M219.37M | −0.7% |
05—Questions
Frequently Asked Questions
What caused the significant drop in profitability from Q2 2011 to Q2 2012?
The primary driver for the drop in profitability was a substantial increase in cruise operating expenses, notably fuel costs which rose by 16.8% per metric ton. While revenues grew, the increased operating expenses, including higher fuel, food, and administrative costs, outpaced revenue growth, leading to a net loss for the quarter.
What is the company's outlook for the remainder of 2012?
RCL anticipates a Net Yield increase of flat to 1% as reported, or 2% to 3% on a constant currency basis for the full year 2012. Net Cruise Costs per APCD are expected to increase by approximately 5% as reported, or 6% to 7% on a constant currency basis. Diluted EPS for the full year is projected to be between $1.70 and $1.80.
How is Royal Caribbean managing its fuel costs and currency exchange rate risks?
The company utilizes fuel swap agreements and fuel call options to mitigate the impact of fuel price fluctuations. These are accounted for as cash flow hedges where applicable. For foreign currency risks, they employ foreign currency forward contracts, collar options, and cross currency swap agreements, also utilizing hedging strategies for construction contracts and net investments in foreign operations.
What is the status of the company's new ship orders?
RCL has three new ships on order: 'Celebrity Reflection' (expected Q4 2012), and two 'Project Sunshine' ships (expected Q4 2014 and Q2 2015), adding approximately 11,200 berths. Committed financing arrangements are in place for these vessels, often with sovereign guarantees.
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