10-QPeriod: Q2 FY2012

ROYAL CARIBBEAN CRUISES LTD Quarterly Report for Q2 Ended Jun 30, 2012

Filed July 27, 2012For Securities:RCL

Summary

Royal Caribbean Cruises Ltd. (RCL) reported a net loss of $3.7 million 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 billion, 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 billion in cash and available credit facilities, and remains committed to its long-term capital expenditure plans, including the construction of new ships.

Financial Highlights

47 data points
Beta

Revenue

$1.82B

28.8% Gross Margin

Net Income

-$3.65M

-0.2% Net Margin

EPS (Diluted)

$-0.02

Total Assets

$19.70B

Cash & Equivalents

$212.21M

Free Cash Flow

$222.79M

Financial Statements
Beta
Revenue$1.82B
Cost of Revenue$1.30B
Gross Profit$524.99M
SG&A Expenses$247.57M
Operating Income$96.91M
Interest Expense$89.11M
Net Income-$3.65M
EPS (Basic)$-0.02
EPS (Diluted)$-0.02
Shares Outstanding (Basic)217.87M
Shares Outstanding (Diluted)217.87M

Key Highlights

  • 1Reported a net loss of $3.7 million for Q2 2012, compared to a net income of $93.5 million in Q2 2011.
  • 2Total revenues increased by 3.0% to $1.8 billion in Q2 2012.
  • 3Cruise operating expenses increased by 9.3% to $1.3 billion in Q2 2012, largely due to higher fuel costs.
  • 4Fuel expenses increased by 16.8% per metric ton year-over-year.
  • 5Net Yields increased by 1.8% in Q2 2012.
  • 6Company is undertaking strategic deployment initiatives in markets like Australia and China.
  • 7Liquidity remains strong with $1.1 billion in cash and available credit facilities as of June 30, 2012.

Frequently Asked Questions

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.

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.

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.

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.