01—Abstract
Summary
Summary of the 10-Q filed August 2, 2016. Cited figures are marked; the original filing is the authoritative source.
Royal Caribbean Cruises Ltd. (RCL) reported solid financial results for the second quarter and the first half of 2016, demonstrating year-over-year growth in both revenue and net income.
Total revenues increased by 2.3% in the second quarter and 3.8% for the first six months, driven by capacity increases and higher onboard spending per passenger. The company also managed its operating expenses effectively, with total cruise operating expenses decreasing slightly in the quarter and increasing modestly over six months, benefiting from lower fuel costs. Net income for the second quarter rose to $229.9 milliona ($1.06 per diluted share) from $185.0 million ($0.84 per diluted share) in the prior year.
For the six-month period, net income increased to $329.0 millionb ($1.52 per diluted share) from $230.2 million ($1.04 per diluted share). These results reflect strong operational performance, strategic initiatives, and effective management of costs. The company also provided an optimistic outlook for the full year 2016, projecting adjusted earnings per share between $6.00 and $6.10.
02—Key points
Key Highlights
- Total revenues increased by 2.3% for the second quarter of 2016 to $2.11 billion and by 3.8% for the first six months to $4.02 billion, compared to the same periods in 2015.
- Net income for the second quarter of 2016 was $229.9 million, an increase of 24.3% from $185.0 million in the second quarter of 2015. Diluted EPS was $1.06 compared to $0.84.
- For the first six months of 2016, net income was $329.0 million, a significant increase from $230.2 million in the prior year. Diluted EPS was $1.52 compared to $1.04.
- The company took delivery of two new ships, Ovation of the Seas and Harmony of the Seas, during the second quarter, financed through substantial new debt facilities.
- RCL completed the sale of 51% of its interest in Pullmantur and CDF Croisières de France in July 2016, retaining a 49% stake and shifting these businesses to equity method accounting.
- Shareholder returns were supported by dividends and ongoing share repurchases, with $50 million remaining under a $500 million repurchase program authorized in October 2015.
- The company provided an updated outlook for full-year 2016, projecting adjusted diluted EPS to be between $6.00 and $6.10, indicating confidence in continued profitability.
03—One dollar
Follow one dollar
Of each $1.00 of revenue in Q2 FY2016, Royal Caribbean Cruises Ltd kept $0.11.
- Revenue$2.11B100.0%
- Cost of revenue−$1.31B62.3%
- Gross profit$794.7M37.7%
- Operating costs−$512.4M24.3%
- Operating income$282.3M13.4%
- Interest, other & tax−$52.4M2.5%
- Net income$229.9M10.9%
04—Financials
Financial Highlights
Figures from 10-QQ2 FY2016filed August 2, 2016Financial Statements
Q2 FY2016 against Q2 FY2015
| Line item | Q2 FY2016Q2 FY2015 | Change |
|---|---|---|
| Revenue | $2.11B$2.06B | +2.3% |
| Cost of Revenue | $1.31B$1.32B | −0.4% |
| Gross Profit | $794.67M$741.91M | +7.1% |
| SG&A Expenses | $290.78M$274.15M | +6.1% |
| Operating Income | $282.27M$261.30M | +8.0% |
| Interest Expense | $78.75M$76.62M | +2.8% |
| Net Income | $229.91M$184.97M | +24.3% |
| EPS (Basic) | $1.07$0.84 | +27.4% |
| EPS (Diluted) | $1.06$0.84 | +26.2% |
| Shares Outstanding (Basic) | 215.26M219.91M | −2.1% |
| Shares Outstanding (Diluted) | 216.13M220.90M | −2.2% |
05—Questions
Frequently Asked Questions
What was the primary driver for the revenue increase in the second quarter and first half of 2016?
The increase in total revenues was primarily driven by a rise in capacity (up 5.6% in Q2 and 5.2% year-to-date) and an increase in onboard and other revenues, which benefited from higher passenger spending per person due to ship upgrade programs and various revenue-enhancing initiatives.
How did fuel costs impact the company's operating expenses?
Fuel costs decreased significantly, contributing to lower total cruise operating expenses. For the second quarter, fuel expense decreased by $36.8 million excluding capacity impact, and for the first six months, it decreased by $75.3 million, reflecting lower prices per metric ton.
What significant events occurred regarding the company's portfolio during this period?
The company took delivery of two new ships, Ovation of the Seas and Harmony of the Seas, which increased its fleet capacity. Additionally, Royal Caribbean completed the sale of a 51% stake in its Pullmantur and CDF Croisières de France businesses in July 2016, moving these entities to equity method accounting.
How is the company managing its debt and capital structure?
The company financed the new ship deliveries with substantial new debt. Despite an increase in total debt, management highlighted that the company was well in excess of all debt covenant requirements as of June 30, 2016, including minimum net worth and debt-to-capital ratios.
06—Continue