10-QPeriod: Q2 FY2020

ROYAL CARIBBEAN CRUISES LTD Quarterly Report for Q2 Ended Jun 30, 2020

Filed August 10, 2020For Securities:RCL

Summary

Royal Caribbean Cruises Ltd. (RCL) experienced a significantly challenging second quarter of 2020, heavily impacted by the ongoing COVID-19 pandemic. The company reported a substantial net loss attributable to shareholders of $1.64 billion for the quarter, translating to a diluted loss per share of $(7.83), a stark contrast to the profitable period in 2019. Total revenues plummeted by 93.7% year-over-year to $175.6 million, primarily due to the voluntary suspension of all cruise operations from mid-March through at least October 2020. In response to the crisis, RCL took proactive measures to conserve liquidity, including reducing operating expenses, deferring capital expenditures, and raising additional debt. As of June 30, 2020, the company held approximately $4.1 billion in cash and cash equivalents. Despite these efforts, the company incurred significant impairment charges totaling $156.5 million during the quarter related to long-lived assets and credit losses, and faces ongoing uncertainty regarding the duration of the operational suspension and its impact on future demand and bookings. The company is focused on navigating the pandemic's effects and preparing for a safe return to operations.

Financial Highlights

50 data points
Beta

Revenue

$175.60M

-287.5% Gross Margin

Net Income

-$1.64B

-933.5% Net Margin

EPS (Diluted)

$-7.83

Total Assets

$33.31B

Cash & Equivalents

$4.15B

Free Cash Flow

-$2.39B

Financial Statements
Beta
Revenue$175.60M
Cost of Revenue$680.42M
Gross Profit-$504.81M
SG&A Expenses$301.42M
Operating Income-$1.28B
Interest Expense$218.89M
Net Income-$1.64B
EPS (Basic)$-7.83
EPS (Diluted)$-7.83
Shares Outstanding (Basic)209.38M
Shares Outstanding (Diluted)209.38M

Key Highlights

  • 1Net loss attributable to Royal Caribbean Cruises Ltd. of $1.64 billion for Q2 2020, compared to a net income of $472.8 million in Q2 2019.
  • 2Diluted loss per share of $(7.83) for Q2 2020, compared to diluted earnings per share of $2.25 in Q2 2019.
  • 3Total revenues decreased by 93.7% to $175.6 million in Q2 2020, down from $2.8 billion in Q2 2019.
  • 4The company reported $156.5 million in impairment and credit losses for the quarter, primarily due to the impact of COVID-19.
  • 5Liquidity stood at $4.1 billion in cash and cash equivalents as of June 30, 2020, with the company undertaking various financing actions to bolster its cash position.
  • 6Cruise operations were suspended from March 13, 2020, and extended through at least October 31, 2020 (excluding China and Australia).
  • 7The company reduced capital expenditures by approximately $4.4 billion for 2020 and 2021.

Frequently Asked Questions

The primary driver was the global COVID-19 pandemic, which led to a voluntary suspension of all cruise operations from mid-March through at least October 2020. This suspension resulted in a drastic reduction in revenues and increased operating expenses related to the shutdown and ongoing preparedness.

Royal Caribbean implemented several liquidity management strategies, including significant reductions in operating and capital expenditures, and secured additional financing. As of June 30, 2020, the company had $4.1 billion in cash and cash equivalents, bolstered by new debt issuances and amendments to credit facilities, including extended covenant waivers.

The company has extended its suspension of operations through at least October 31, 2020 (excluding certain regions). The timing and extent of resuming operations, as well as the impact on future demand and financial performance, remain uncertain due to the ongoing nature and evolving impact of the COVID-19 pandemic. The company expects to incur a net loss for the full year 2020.

Yes, the company recognized $156.5 million in impairment and credit losses during the quarter ended June 30, 2020. These charges were primarily related to the impairment of long-lived assets (ships, right-of-use assets) and credit losses on receivables, directly attributable to the ongoing impact of the COVID-19 pandemic.