Royal Caribbean Results

Royal Caribbean Reports Record 2018 Results

Royal Caribbean Cruises

Royal Caribbean Cruises Ltd. (NYSE: RCL) today reported 2018 US GAAP earnings of $8.56 per share and adjusted earnings of $8.86 per share.  In addition, the company announced that 2019 adjusted earnings are expected to be in the range of $9.75 to $10.00 per share.

KEY HIGHLIGHTS

Full Year 2018:

  • US GAAP Net Income was $1.8 billion or $8.56 per share and Adjusted Net Income was $1.9 billion or $8.86 per share in 2018 versus US GAAP and Adjusted Net Income of $1.6 billion or $7.53 per share in 2017.
  • Gross Yields were up 3.8% in Constant-Currency (up 3.9% As-Reported).  Net Yields were up 4.4% in Constant-Currency (up 4.5% As-Reported).
  • Gross Cruise Costs per Available Passenger Cruise Days ("APCD") increased 3.0% in Constant-Currency (up 3.2% As-Reported).  Net Cruise Costs ("NCC") excluding Fuel per APCD were up 4.1% in Constant-Currency (up 4.4% As-Reported).

Full Year 2019 Outlook:

  • Adjusted earnings are expected to be in the range of $9.75 to $10.00 per share.
  • Net Yields are expected to increase 6.5% to 8.5% in Constant-Currency and 6.0% to 8.0% As-Reported.  These metrics include approximately 350 basis points from the operation of Silversea, the new cruise terminal in Miami and the Perfect Day development.
  • NCC excluding Fuel per APCD are expected to increase 8.5% to 9.0% in Constant-Currency and 8.25% to 8.75% As-Reported.  These metrics include approximately 650 basis points from the operation of Silversea, the cruise terminal in Miami and the Perfect Day development.

FULL YEAR 2018

US GAAP Net Income for the year was $1.8 billion or $8.56 per share and Adjusted Net Income was $1.9 billion or $8.86 per share.  This result beat the January 2018 mid-point guidance by $0.21 per share and equates to a 17.5% year-over-year growth in adjusted earnings per share.  This result was achieved despite the unfavorable impact from currency and fuel which negatively affected earnings by approximately $123 million or $0.58 per share versus the January 2018 guidance.

"This year our teams achieved record financial results while introducing four new vessels, acquiring Silversea Cruises, inaugurating two stunning cruise terminals and implementing Excalibur on about half of our fleet," said Richard D. Fain, chairman and CEO.  "By any measure 2018 was a particularly stellar year, and the strong Wave makes us optimistic about 2019 as well."

Net Yields were up 4.4% in Constant-Currency.  Strong demand for our core products, better onboard revenues and the consolidation from Silversea's operations drove the year-over-year increase.

NCC excluding Fuel per APCD were up 4.1% in Constant-Currency.  The main drivers behind the year-over-year increase were more drydock days, the lapping of hardware changes, investments in technology and the consolidation of Silversea's operations.

FOURTH QUARTER RESULTS

US GAAP Net Income for the fourth quarter was $315.7 million or $1.50 per share and Adjusted Net Income was $322.1 million or $1.53 per share.  Last year, US GAAP and Adjusted Net Income were $288.0 million or $1.34 per share.

Gross Yields were up 7.3% in Constant-Currency.  Net Yields were up 6.8% in Constant-Currency, slightly better than the midpoint of guidance.

Gross Cruise Costs per APCD increased 6.1% in Constant-Currency.  NCC excluding Fuel per APCD were up 5.1% in Constant-Currency, lower than guidance, driven by timing.

Favorability from depreciation and our joint ventures also contributed to the quarter's positive performance.

Lastly, a combination of a stronger dollar and fuel rates negatively impacted the quarter by $0.04.

Bunker pricing net of hedging for the fourth quarter was $546.70 per metric ton and consumption was 357,700 metric tons.

FULL YEAR 2019

The company expects full year Adjusted EPS guidance to be in the range of $9.75 to $10.00 per share.

Wave Season has started on a strong note and the company's overall booked position for 2019 is better than last year's record high and at higher rates.  Demand for our main products is strong across all quarters.

The company expects a Net Yield increase in the range of 6.5% to 8.5% in Constant-Currency and 6.0% to 8.0% As-Reported for the full year.  These metrics include approximately 350 basis points from the operation of Silversea, the cruise terminal in Miami and the Perfect Day water-park and resort on the island of Cococay in The Bahamas, which will launch in May of 2019.  As an ultra-luxury brand, Silversea's revenues and expenses, on a per APCD basis, are both higher than the company's average.  Moreover, our new Miami based terminal and Perfect Day will also increase both our revenue and cost metrics, since their additions do not include APCDs.  As such, we have provided the impact of these items on our yield and cost metrics' forward guidance.

"Our yield outlook for 2019 is very encouraging" said Jason T. Liberty, executive vice president and CFO.  "Demand for our brands continues to accelerate and we are well positioned for another year of double-digit growth in our earnings per share."

We are also very excited about the introduction of Celebrity Flora in May 2019 - the first ship designed for the Galapagos - and the introduction of Spectrum of the Seas in the China market in June 2019.  These new ships will also be contributors to 2019 yield growth.

NCC excluding Fuel are expected to be up 8.5% to 9.0% in Constant-Currency and 8.25% to 8.75% As-Reported.  These metrics include approximately 650 basis points from the operation of Silversea, the cruise terminal in Miami and the Perfect Day development.

Taking into account current fuel pricing, interest rates, currency exchange rates and the factors detailed above, the company estimates 2019 Adjusted EPS will be in the range of $9.75 to $10.00 per share.

FIRST QUARTER 2019

Net Yields are expected to increase 7.5% to 8.0% in Constant-Currency and 5.5% to 6.0% As-Reported.  These metrics include approximately 375 basis points from the operation of Silversea and the cruise terminal in Miami.

NCC excluding Fuel per APCD for the quarter are expected to be up approximately 10% in Constant-Currency (up 9.0% to 9.5% As-Reported).  These metrics include approximately 800 basis points from the operation of Silversea, the cruise terminal in Miami and the Perfect Day development.

The company also noted that Silversea's seasonality is similar to RCL's core products. Silversea, which was acquired on July 31 2018, will be accounted for on a one quarter lag.  Its traditionally weaker fourth quarter will therefore be included in RCL's first quarter results.

Based on current fuel pricing, interest rates, currency exchange rates and the factors detailed above, the company expects first quarter Adjusted EPS to be approximately $1.10 per share.

FUEL EXPENSE AND SUMMARY OF KEY GUIDANCE STATS

Fuel Expense

The company does not forecast fuel prices and its fuel cost calculations are based on current at-the-pump prices, net of hedging impacts.  Based on today's fuel prices, the company has included $163 million and $690 million of fuel expense in its first quarter and full year 2019 guidance, respectively.

Forecasted consumption is 58% hedged via swaps for 2019 and 54%, 28%, 19% and 0% hedged for 2020, 2021, 2022 and 2023, respectively.  For the same five-year period, the annual average cost per metric ton of the hedge portfolio is approximately $377, $430, $463, $554 and $0, respectively.

The company provided the following fuel statistics for the first quarter and full year 2019

FUEL STATISTICS

First Quarter 2019

Full Year 2019

Fuel Consumption (metric tons)

364,200

1,486,300

Fuel Expenses

$163 million

$690 million

Percent Hedged (fwd. consumption)

57%

58%

The company provided the following guidance for the first quarter and full year 2019:

GUIDANCE

       As-Reported

Constant-Currency

First Quarter 2019

Net Yields

5.5% to 6.0%

7.5% to 8.0%

Net Cruise Costs per APCD

6.5% to 7.0%

Approx. 7.5%

Net Cruise Costs per APCD ex. Fuel

9.0% to 9.5%

Approx. 10.0%

Full Year 2019

Net Yields

6.0% to 8.0%

6.5% to 8.5%

Net Cruise Costs per APCD

5.25% to 5.75%

5.5% to 6.0%

Net Cruise Costs per APCD ex. Fuel

8.25% to 8.75%

8.5% to 9.0%

GUIDANCE

First Quarter 2019

Full Year 2019

Capacity Change

10.8%

8.6%

Depreciation and Amortization

$289 to $293 million

$1,245 to $1,255 million

Interest Expense, net

$91 to $95 million

$393 to $403 million

Adjusted EPS

Approx. $1.10

$9.75 to $10.00

SENSITIVITY

First Quarter 2019

Full Year 2019

1% Change in Currency

$4 million

$21 million

1% Change in Net Yields

$19 million

$87 million

1% Change in NCC ex Fuel

$12 million

$45 million

100 basis pt. Change in LIBOR

$6 million

$36 million

10% Change in Fuel prices

$9 million

$37 million

Exchange rates used in guidance calculations

GBP

$1.32

AUD

$0.72

CAD

$0.76

CNH

$0.15

EUR

$1.14

LIQUIDITY AND FINANCING ARRANGEMENTS

As of December 31, 2018, liquidity was $1.3 billion, including cash and the undrawn portion of the company's unsecured revolving credit facilities, net of our outstanding commercial paper borrowings.  The company noted that scheduled debt maturities (excluding commercial paper) for 2019, 2020, 2021, 2022 and 2023 are $1.6 billion, $1.7 billion, $0.8 billion, $1.6 billion and $0.7 billion, respectively.

CAPITAL EXPENDITURES AND CAPACITY GUIDANCE

Based upon current ship orders, projected capital expenditures for full year 2019, 2020, 2021, 2022 and 2023 are $2.9 billion, $3.3 billion, $2.9 billion, $3.4 billion and $1.0 billion, respectively.  Capacity changes for 2019, 2020, 2021, 2022 and 2023 are expected to be 8.6%, 4.1%, 9.0%, 7.7% and 2.8%, respectively.  These figures do not include potential ship sales or additions that we may elect to make in the future.

ROYAL CARIBBEAN CRUISES LTD.

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS)

(unaudited, in thousands, except per share data)

Quarter Ended

Year Ended

December 31,

December 31,

2018

2017

2018

2017

Passenger ticket revenues

$

1,651,591

$

1,420,410

$

6,792,716

$

6,313,170

Onboard and other revenues

680,710

584,057

2,701,133

2,464,675

Total revenues

2,332,301

2,004,467

9,493,849

8,777,845

Cruise operating expenses:

Commissions, transportation and other

354,786

302,994

1,433,739

1,363,170

Onboard and other

124,550

100,080

537,355

495,552

Payroll and related

250,309

216,129

924,985

852,990

Food

139,560

123,659

520,909

492,857

Fuel

195,552

172,204

710,617

681,118

Other operating

295,656

230,635

1,134,602

1,010,892

Total cruise operating expenses

1,360,413

1,145,701

5,262,207

4,896,579

Marketing, selling and administrative expenses

327,693

311,059

1,303,144

1,186,016

Depreciation and amortization expenses

280,168

240,358

1,033,697

951,194

Operating Income

364,027

307,349

1,894,801

1,744,056

Other income (expense):

Interest income

6,138

13,345

32,800

30,101

Interest expense, net of interest capitalized

(97,420)

(69,800)

(333,672)

(299,982)

Equity investment income

42,524

35,888

210,756

156,247

Other income (expense)

5,184

1,257

11,107

(5,289)

(43,574)

(19,310)

(79,009)

(118,923)

Net Income

320,453

288,039

1,815,792

1,625,133

Less: Net income attributable to noncontrolling interest

4,750

4,750

Net Income attributable to Royal Caribbean

Cruises Ltd.

$

315,703

$

288,039

$

1,811,042

$

1,625,133

Earnings per Share:

Basic

$

1.51

$

1.35

$

8.60

$

7.57

Diluted

$

1.50

$

1.34

$

8.56

$

7.53

Weighted-Average Shares Outstanding:

Basic

209,001

213,831

210,570

214,617

Diluted

210,051

215,085

211,554

215,694

Comprehensive Income

Net Income

$

320,453

$

288,039

$

1,815,792

$

1,625,133

Other comprehensive income (loss):

Foreign currency translation adjustments

(411)

3,097

(14,251)

17,307

Change in defined benefit plans

694

697

7,643

(5,583)

(Loss) gain on cash flow derivative hedges

(397,437)

188,835

(286,861)

570,495

Total other comprehensive (loss) income

(397,154)

192,629

(293,469)

582,219

Comprehensive (Loss) Income

(76,701)

480,668

1,522,323

2,207,352

Less: Comprehensive income attributable to noncontrolling interest

4,750

4,750

Comprehensive (Loss) Income attributable to Royal Caribbean Cruises Ltd.

$

(81,451)

$

480,668

$

1,517,573

$

2,207,352

STATISTICS

Quarter Ended

Year Ended

December 31,

December 31,

2018 (1)

2017

2018 (1)

2017

Passengers Carried

1,582,311

1,397,262

6,084,201

5,768,496

Passenger Cruise Days

10,910,732

9,933,493

41,853,052

40,033,527

APCD

10,183,172

9,284,160

38,425,304

36,930,939

Occupancy

107.1

%

107.0

%

108.9

%

108.4

%

(1) These amounts only include August and September 2018 amounts for Silversea Cruises due to the three-month reporting lag.

ROYAL CARIBBEAN CRUISES LTD.

CONSOLIDATED BALANCE SHEETS

(in thousands, except share data)

As of

December 31,

December 31,

2018

2017

(unaudited)

Assets

Current assets

Cash and cash equivalents

$

287,852

$

120,112

Trade and other receivables, net

324,507

318,641

Inventories

153,573

111,393

Prepaid expenses and other assets

456,547

258,171

Derivative financial instruments

19,565

99,320

Total current assets

1,242,044

907,637

Property and equipment, net

23,466,163

19,735,180

Goodwill

1,378,353

288,512

Other assets

1,611,710

1,429,597

Total assets

$

27,698,270

$

22,360,926

Liabilities, redeemable noncontrolling interest and shareholders' equity

Current liabilities

Current portion of long-term debt

$

1,646,841

$

1,188,514

Commercial paper

775,488

Accounts payable

488,212

360,113

Accrued interest

74,550

47,469

Accrued expenses and other liabilities

899,761

903,022

Derivative financial instruments

78,476

47,464

Customer deposits

3,148,837

2,308,291

Total current liabilities

7,112,165

4,854,873

Long-term debt

8,355,370

6,350,937

Other long-term liabilities

583,254

452,813

Total liabilities

16,050,789

11,658,623

Redeemable noncontrolling interest

542,020

Shareholders' equity

Preferred stock ($0.01 par value; 20,000,000 shares authorized; none outstanding)

Common stock ($0.01 par value; 500,000,000 shares authorized; 235,847,683 and 235,198,901 shares issued, December 31, 2018 and December 31, 2017, respectively)

2,358

2,352

Paid-in capital

3,420,900

3,390,117

Retained earnings

10,263,282

9,022,405

Accumulated other comprehensive loss

(627,734)

(334,265)

Treasury stock (26,830,765 and 21,861,308 common shares at cost, December 31, 2018 and December 31, 2017, respectively)

(1,953,345)

(1,378,306)

Total shareholders' equity

11,105,461

10,702,303

Total liabilities, redeemable noncontrolling interest and shareholders' equity

$

27,698,270

$

22,360,926

ROYAL CARIBBEAN CRUISES LTD.

CONSOLIDATED STATEMENTS OF CASH FLOWS

(unaudited, in thousands)

Year Ended

December 31,

2018

2017

Operating Activities

Net Income

$

1,815,792

$

1,625,133

Adjustments:

Depreciation and amortization

1,033,697

951,194

Impairment losses

33,651

Net deferred income tax (benefit) expense

(2,679)

1,730

Loss (gain) on derivative instruments not designated as hedges

61,148

(61,704)

Share-based compensation expense

46,061

69,459

Equity investment income

(210,756)

(156,247)

Amortization of debt issuance costs

41,978

45,943

Gain on sale of property and equipment

(30,902)

Gain on sale of unconsolidated affiliate

(13,680)

Recognition of deferred gain

(21,794)

Changes in operating assets and liabilities:

Increase in trade and other receivables, net

(9,573)

(32,043)

(Increase) decrease in inventories

(23,849)

2,424

(Increase) decrease in prepaid expenses and other assets

(71,770)

20,859

Increase in accounts payable

91,737

36,780

Increase in accrued interest

18,773

1,303

Increase in accrued expenses and other liabilities

42,937

34,215

Increase in customer deposits

385,990

274,705

Dividends received from unconsolidated affiliates

243,101

109,677

Other, net

18,375

(17,960)

Net cash provided by operating activities

3,479,139

2,874,566

Investing Activities

Purchases of property and equipment

(3,660,028)

(564,138)

Cash received on settlement of derivative financial instruments

76,529

63,224

Cash paid on settlement of derivative financial instruments

(98,074)

Investments in and loans to unconsolidated affiliates

(27,172)

(10,396)

Cash received on loans to unconsolidated affiliates

124,238

62,303

Proceeds from the sale of property and equipment

230,000

Proceeds from the sale of unconsolidated affiliate

13,215

Acquisition of Silversea Cruises, net of cash acquired

(916,135)

Other, net

(1,731)

5,415

Net cash used in investing activities

(4,489,158)

(213,592)

Financing Activities

Debt proceeds

8,590,740

5,866,966

Debt issuance costs

(81,959)

(51,590)

Repayments of debt

(6,963,511)

(7,835,087)

Proceeds from issuance of commercial paper notes

4,730,286

Repayments of commercial paper notes

(3,965,450)

Purchase of treasury stock

(575,039)

(224,998)

Dividends paid

(527,494)

(437,455)

Proceeds from exercise of common stock options

4,264

2,525

Other, net

(13,764)

3,843

Net cash provided by (used in) financing activities

1,198,073

(2,675,796)

Effect of exchange rate changes on cash

(20,314)

2,331

Net increase (decrease) in cash and cash equivalents

167,740

(12,491)

Cash and cash equivalents at beginning of year

120,112

132,603

Cash and cash equivalents at end of year

287,852

120,112

Supplemental Disclosures

Cash paid during the year for:

Interest, net of amount capitalized

$

252,466

$

249,615

Non-Cash Investing Activities

Contingent consideration for the acquisition of Silversea Cruises

$

44,000

$

Purchases of property and equipment included in accounts payable and accrued expenses and other liabilities

$

$

139,644

Notes receivable issued upon sale of property and equipment

$

$

20,409

ROYAL CARIBBEAN CRUISES LTD.

NON-GAAP RECONCILING INFORMATION

(unaudited)

 Gross Yields and Net Yields were calculated as follows (in thousands, except APCD and Yields):

Quarter Ended December 31,

Year Ended December 31,

2018

2018 On a Constant Currency Basis

2017

2018

2018 On a Constant Currency Basis

2017

Passenger ticket revenues

$

1,651,591

$

1,676,250

$

1,420,410

$

6,792,716

$

6,784,937

$

6,313,170

Onboard and other revenues

680,710

683,669

584,057

2,701,133

2,697,798

2,464,675

Total revenues

2,332,301

2,359,919

2,004,467

9,493,849

9,482,735

8,777,845

Less:

Commissions, transportation

and other

354,786

358,653

302,994

1,433,739

1,432,267

1,363,170

Onboard and other

124,550

124,967

100,080

537,355

536,941

495,552

Net Revenues

$

1,852,965

$

1,876,299

$

1,601,393

$

7,522,755

$

7,513,527

$

6,919,123

APCD

10,183,172

10,183,172

9,284,160

38,425,304

38,425,304

36,930,939

Gross Yields

$

229.03

$

231.75

$

215.90

$

247.07

$

246.78

$

237.68

Net Yields

$

181.96

$

184.25

$

172.49

$

195.78

$

195.54

$

187.35

 Gross Cruise Costs, Net Cruise Costs and Net Cruise Costs Excluding Fuel were calculated as follows (in thousands, except APCD and costs per APCD):

Quarter Ended December 31,

Year Ended December 31,

2018

2018 On a Constant Currency Basis

2017

2018

2018 On a Constant Currency Basis

2017

Total cruise operating expenses

$

1,360,413

$

1,366,926

$

1,145,701

$

5,262,207

$

5,254,105

$

4,896,579

Marketing, selling and administrative expenses (2)

326,514

328,750

311,059

1,269,368

1,264,509

1,186,016

Gross Cruise Costs

1,686,927

1,695,676

1,456,760

6,531,575

6,518,614

6,082,595

Less:

Commissions, transportation and other

354,786

358,653

302,994

1,433,739

1,432,267

1,363,170

Onboard and other

124,550

124,967

100,080

537,355

536,941

495,552

Net Cruise Costs

1,207,591

1,212,056

1,053,686

4,560,481

4,549,406

4,223,873

Less:

Fuel

195,552

195,555

172,204

710,617

710,621

681,118

Net Cruise Costs Excluding Fuel

$

1,012,039

$

1,016,501

$

881,482

$

3,849,864

$

3,838,785

$

3,542,755

APCD

10,183,172

10,183,172

9,284,160

38,425,304

38,425,304

36,930,939

Gross Cruise Costs per APCD

$

165.66

$

166.52

$

156.91

$

169.98

$

169.64

$

164.70

Net Cruise Cost per APCD

$

118.59

$

119.03

$

113.49

$

118.68

$

118.40

$

114.37

Net Cruise Costs Excluding Fuel per APCD

$

99.38

$

99.82

$

94.94

$

100.19

$

99.90

$

95.93

(2)

For the quarter ended December 31, 2018, the amount does not include transaction costs related to the Silversea Cruises acquisition of $1.2 million. For the year ended December 31, 2018, the amount does not include transaction costs related to the Silversea Cruises acquisition of $31.8 million, the impairment and other costs related to the exit of our tour operations business of $11.3 million and the impact of the change in accounting principle of $9.2 million related to the recognition of stock-based compensation expense.

ROYAL CARIBBEAN CRUISES LTD.

NON-GAAP RECONCILING INFORMATION (CONTINUED)

(unaudited)

Adjusted Net Income attributable to Royal Caribbean Cruises Ltd. and Adjusted Earnings per Share were calculated as follows (in thousands, except per share data):

Quarter Ended December 31,

Year Ended December 31,

2018

2017

2018

2017

Net Income attributable to Royal Caribbean

Cruises Ltd.

$

315,703

$

288,039

$

1,811,042

$

1,625,133

Adjusted Net Income attributable to Royal

Caribbean Cruises Ltd.

322,084

288,039

1,873,363

1,625,133

Net Adjustments to Net Income

attributable to Royal Caribbean Cruises

Ltd. - Increase

$

6,381

$

$

62,321

$

Adjustments to Net Income attributable to

Royal Caribbean Cruises Ltd.:

Impairment loss related to Skysea Holding

$

$

$

23,343

$

Impairment and other costs related to exit of tour operations business (3)

11,255

Transaction costs related to the Silversea Cruises acquisition

1,179

31,759

Amortization of Silversea Cruises intangible assets resulting from the acquisition

2,046

2,046

Noncontrolling interest adjustment (4)

3,156

3,156

Impact of change in accounting principle (5)

(9,238)

Net Adjustments to Net Income attributable to Royal Caribbean Cruises Ltd. - Increase

$

6,381

$

$

62,321

$

Earnings per Share - Diluted

$

1.50

$

1.34

$

8.56

$

7.53

Adjusted Earnings per Share - Diluted

1.53

1.34

8.86

7.53

Net Adjustments to Earnings per Share - Increase

$

0.03

$

$

0.30

$

Adjustments to Earnings per Share:

Impairment loss related to Skysea Holding

$

$

$

0.11

$

Impairment and other costs related to exit of tour operations business (3)

0.05

Transaction costs related to the Silversea Cruises acquisition

0.01

0.15

Amortization of Silversea Cruises intangible assets resulting from the acquisition

0.01

0.01

Noncontrolling interest adjustment (4)

0.01

0.02

Impact of change in accounting principle (5)

(0.04)

Net Adjustments to Earnings per Share - Increase

$

0.03

$

$

0.30

$

Weighted-Average Shares Outstanding - Diluted

210,051

215,085

211,554

215,694

(3)

In 2014, we created a tour operations business that focused on developing, marketing and selling land based tours around the world through an e-commerce platform. During the second quarter of 2018, we decided to cease operations and exit this business. As a result, we incurred exit costs, primarily consisting of fixed asset impairment charges and severance expense.

(4)

Adjustment made to exclude the impact of the contractual accretion requirements associated with Silversea Cruises Group Ltd.'s noncontrolling interest.

(5)

In January 2018, we elected to change our accounting policy for recognizing stock-based compensation expense from the graded attribution method to the straight-line attribution method for time-based stock awards.

SOURCE Royal Caribbean Cruises Ltd.



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