01—Abstract
Summary
Summary of the 10-Q filed April 24, 2014. Cited figures are marked; the original filing is the authoritative source.
Royal Caribbean Cruises Ltd. (RCL) reported a decrease in net income for the first quarter of 2014 compared to the same period in 2013, with net income falling to $26.5 milliona ($0.12 diluted EPS) from $76.2 million ($0.35 diluted EPS).
This decline was primarily driven by a 1.3%b decrease in total revenues, impacted by unfavorable foreign currency exchange rates and a slight reduction in ticket prices for Caribbean sailings. While cruise operating expenses saw a modest increase, a significant reduction in interest expense provided some offset. The company is actively managing its financial position through various initiatives, including restructuring efforts aimed at improving profitability and streamlining operations.
The sale of Pullmantur's non-core businesses on March 31, 2014, is expected to be reflected in the second quarter results and is anticipated to incur a net loss in the range of $6.0 million to $9.0 millionc. Despite the current quarter's earnings dip, RCL maintains a strong liquidity position with $216.5 million in cash and cash equivalents and $702.0 million available under credit facilities, and anticipates full-year 2014 adjusted diluted EPS to be between $3.25 and $3.45.
02—Key points
Key Highlights
- Net income for Q1 2014 decreased to $26.5 million from $76.2 million in Q1 2013, resulting in diluted EPS of $0.12 compared to $0.35.
- Total revenues declined by 1.3% to $1.9 billion, impacted by unfavorable foreign currency exchange rates and lower ticket prices for Caribbean sailings.
- Cruise operating expenses increased by 1.7% to $1.3 billion, primarily due to higher vessel maintenance and expenses related to Pullmantur's travel agency and air charter business.
- Interest expense, net of capitalized interest, decreased significantly by 24.0% to $68.6 million, benefiting from lower interest rates and a lower average debt level.
- The company completed the sale of Pullmantur's non-core businesses on March 31, 2014, with the financial impact to be recognized in Q2 2014.
- RCL has a solid liquidity position with $216.5 million in cash and cash equivalents and $702.0 million in available credit facilities.
- The company anticipates full-year 2014 Adjusted Diluted Earnings Per Share to be in the range of $3.25 to $3.45.
03—One dollar
Follow one dollar
Of each $1.00 of revenue in Q1 FY2014, Royal Caribbean Cruises Ltd kept $0.01.
- Revenue$1.89B100.0%
- Cost of revenue−$1.30B69.1%
- Gross profit$583.2M30.9%
- Operating costs−$485.8M25.7%
- Operating income$97.5M5.2%
- Interest, other & tax−$71.0M3.8%
- Net income$26.5M1.4%
04—Financials
Financial Highlights
Figures from 10-QQ1 FY2014filed April 24, 2014Financial Statements
Q1 FY2014 against Q1 FY2013
| Line item | Q1 FY2014Q1 FY2013 | Change |
|---|---|---|
| Revenue | $1.89B$1.91B | −1.3% |
| Cost of Revenue | $1.30B$1.28B | +1.7% |
| Gross Profit | $583.24M$629.03M | −7.3% |
| SG&A Expenses | $290.31M$274.03M | +5.9% |
| Operating Income | $97.47M$165.63M | −41.2% |
| Interest Expense | $68.57M$90.18M | −24.0% |
| Net Income | $26.46M$76.23M | −65.3% |
| EPS (Basic) | $0.12$0.35 | −65.7% |
| EPS (Diluted) | $0.12$0.35 | −65.7% |
| Shares Outstanding (Basic) | 221.29M219.10M | +1.0% |
| Shares Outstanding (Diluted) | 222.67M220.48M | +1.0% |
05—Questions
Frequently Asked Questions
What were the primary drivers of the decrease in net income for the first quarter of 2014?
The primary drivers for the decrease in net income were a 1.3% decline in total revenues, largely due to unfavorable foreign currency exchange rates and a decrease in passenger ticket revenues for Caribbean sailings. Additionally, cruise operating expenses saw a slight increase.
How is the company managing its debt and financing?
In January 2014, RCL borrowed $380.0 million and used it to repay €745.0 million in senior notes. The company also amended and restated several term loan facilities to reduce interest margins. As of March 31, 2014, RCL had $216.5 million in cash and cash equivalents and $702.0 million available under its unsecured credit facilities, indicating a strong liquidity position.
What is the status of the Pullmantur restructuring and the sale of its non-core businesses?
Pullmantur is undergoing restructuring to focus on its cruise business and Latin American expansion. On March 31, 2014, it sold the majority of its non-core businesses, including its land-based tour operations and travel agency. The financial impact of this sale, expected to be a net loss of $6.0 million to $9.0 million, will be reported in the second quarter of 2014.
What is the company's outlook for full-year 2014?
Royal Caribbean Cruises Ltd. projects full-year 2014 Adjusted Diluted Earnings Per Share to be in the range of $3.25 to $3.45. They also anticipate Net Yields to increase by 2% to 3% and Net Cruise Costs per APCD to remain flat to up 1% on a reported and constant currency basis.
06—Continue