01—Abstract
Summary
Summary of the 10-Q filed November 7, 2017. Cited figures are marked; the original filing is the authoritative source.
Royal Caribbean Cruises Ltd. (RCL) reported solid financial results for the third quarter and the first nine months of 2017.
Total revenues saw a slight increase for the quarter and a more significant rise year-over-year for the nine-month period, driven by both higher passenger ticket prices and increased onboard spending. The company successfully managed its operating expenses, which decreased year-over-year for both periods, contributing to improved operating income. Net income also saw substantial growth, with diluted EPS rising to $3.49a for the quarter and $6.19 for the nine months, up from $3.21 and $4.72 respectively in the prior year.
This performance was bolstered by strong equity investment income, particularly from its TUI Cruises joint venture, and effective hedging strategies that mitigated fuel price and currency fluctuations. The company also provided positive full-year 2017 guidance, indicating continued confidence in its operational performance and market position despite some impact from third-quarter hurricane disruptions.
02—Key points
Key Highlights
- Total revenues for the nine months ended September 30, 2017, increased by 2.8% to $6.77 billion compared to the prior year.
- Net income for the nine months increased by 31% to $1.34 billion, with diluted EPS rising to $6.19.
- Gross Yields and Net Yields showed significant increases, up 6.0% and 6.9% respectively for the nine months, indicating stronger pricing power.
- Cruise operating expenses decreased for both the quarter (1.6%) and the nine months (3.6%), reflecting effective cost management.
- Equity investment income saw a substantial increase of 26.9% to $120.4 million for the nine months, primarily from the TUI Cruises joint venture.
- The company provided positive full-year 2017 Adjusted EPS guidance of $7.35 to $7.40, reflecting strong performance expectations.
- Capital expenditures remain significant with $13.0 billion in ships on order, indicating a commitment to fleet expansion and modernization.
03—One dollar
Follow one dollar
Of each $1.00 of revenue in Q3 FY2017, Royal Caribbean Cruises Ltd kept $0.29.
- Revenue$2.57B100.0%
- Cost of revenue−$1.32B51.3%
- Gross profit$1.25B48.7%
- Operating costs−$513.8M20.0%
- Operating income$737.5M28.7%
- Interest, other & tax$15.4M0.6%
- Net income$752.8M29.3%
04—Financials
Financial Highlights
Figures from 10-QQ3 FY2017filed November 7, 2017Financial Statements
Q3 FY2017 against Q3 FY2016
| Line item | Q3 FY2017Q3 FY2016 | Change |
|---|---|---|
| Revenue | $2.57B$2.56B | +0.2% |
| Cost of Revenue | $1.32B$1.34B | −1.6% |
| Gross Profit | $1.25B$1.22B | +2.3% |
| SG&A Expenses | $273.64M$259.33M | +5.5% |
| Operating Income | $737.49M$734.96M | +0.3% |
| Interest Expense | $73.23M$82.61M | −11.4% |
| Net Income | $752.84M$693.26M | +8.6% |
| EPS (Basic) | $3.51$3.23 | +8.7% |
| EPS (Diluted) | $3.49$3.21 | +8.7% |
| Shares Outstanding (Basic) | 214.69M214.82M | −0.1% |
| Shares Outstanding (Diluted) | 215.82M215.67M | +0.1% |
05—Questions
Frequently Asked Questions
How did hurricane disruptions impact the company's results?
The company reported that hurricane-related disruptions in the third quarter of 2017 had an estimated negative impact of approximately $0.20 per share on diluted net income and Adjusted Net Income for both the quarter and the nine-month period. This was primarily due to canceled sailings and a decrease in capacity.
What is the company's outlook for the remainder of 2017?
Royal Caribbean provided positive guidance for the full year 2017, expecting Adjusted Earnings Per Share (Diluted) to be between $7.35 and $7.40. For the fourth quarter, they anticipated Net Yields to increase by approximately 3.5% (As Reported) and Adjusted EPS (Diluted) to be between $1.15 and $1.20.
How is the company managing its significant debt and capital commitments?
RCL has a substantial fleet expansion plan with $13.0 billion in ships on order as of September 30, 2017. They utilize a combination of cash flow from operations, drawdowns from credit facilities, incurring additional debt, and refinancing existing debt to manage these commitments. The company also maintains strong liquidity with cash and cash equivalents and available credit facilities, and they expect these resources to be adequate for their near-term obligations.
What is the impact of foreign currency exchange rates on the company's financial results?
The company operates globally and is exposed to foreign currency exchange rate fluctuations. For the nine months ended September 30, 2017, foreign currency exchange rates had a negative impact of approximately $15.2 million on passenger ticket revenues. However, they also have hedging strategies in place to mitigate these risks, and the overall impact is monitored closely, with 'Constant Currency' metrics often reported to show performance independent of currency shifts.
06—Continue