Royal Caribbean Results

Royal Caribbean Reports Record First Quarter 2019 Earnings

Royal Caribbean Cruises

Royal Caribbean Cruises Ltd. (NYSE: RCL) today reported record first quarter results and updated its full year Adjusted EPS guidance to a range of $9.65 to $9.85 per share.  This range includes negative impacts of $0.25 related to the incident in the Grand Bahama Shipyard and approximately $0.25 as a result of a stronger dollar and higher fuel prices versus the January guidance.  The vast majority of these impacts are being offset by better first quarter results and an improved revenue outlook.

For the first quarter, the company reported US GAAP earnings of $1.19 per share and adjusted earnings of $1.31 per share, beating the previous guidance mainly due to better revenue.

KEY HIGHLIGHTS

First Quarter 2019 results:

  • US GAAP Net Income was $249.7 million or $1.19 per share and Adjusted Net Income was $275.8 million or $1.31 per share. Last year, US GAAP Net Income was $218.7 million or $1.02 per share, and Adjusted Net Income was $232.8 million or $1.09 per share.
  • Gross Yields were up 10.8% in Constant-Currency (up 8.8% As-Reported). Net Yields were up 9.3% in Constant-Currency (up 7.2% As-Reported).
  • Gross Cruise Costs per Available Passenger Cruise Days ("APCD") increased 9.5% in Constant-Currency (up 8.5% As-Reported). Net Cruise Costs ("NCC") excluding Fuel per APCD were up 9.6% in Constant-Currency (up 8.7% As-Reported).

Full Year 2019 Outlook:

  • Net revenue yields in the first quarter beat our previous guidance and are expected to do so for the rest of the year as well. Overall, the company's booked position remains at a record level in both rate and volume.
  • Adjusted earnings for the full year are expected to be in the range of $9.65 to $9.85 per share. This range includes the negative impacts of $0.25 per share from the incident in the Grand Bahama Shipyard and approximately $0.25 per share from currency and fuel since the January guidance.
  • Net Yields are expected to increase 7.5% to 9.0% in Constant-Currency (up 6.5% to 8.0% As-Reported). These metrics include approximately 350 basis points from the operation of Silversea, the new cruise terminal and the Perfect Day development.
  • NCC excluding Fuel per APCD are expected to be up approximately 10.0% in Constant-Currency (up approximately 9.5% As-Reported). The main driver of the increase versus the January guidance is the loss of cruise days as a result of canceled sailings. These metrics include approximately 700 basis points from the operation of Silversea, the new cruise terminal and the Perfect Day development.

Grand Bahama Shipyard Incident:

On April 1, 2019, Royal Caribbean's Oasis of the Seas was undergoing maintenance at the Grand Bahama Shipyard when an accident involving the drydock caused two construction cranes to collapse on the stern of the ship.  The damage to the ship was extensive and the ship had to go to a dock in Europe for repairs.  As a result, the ship was taken out of service for almost a month and is expected to return back to service for its normally scheduled May 5, 2019 sailing.  The company estimates the direct financial impact of this unusual event, net of insurance, will be a reduction of approximately $0.25 per share to the company's full year Adjusted EPS, mostly driven by lost revenue.

FIRST QUARTER 2019

US GAAP Net Income for the first quarter of 2019 was $249.7 million or $1.19 per share and Adjusted Net Income was $275.8 million or $1.31 per share, beating the January guidance by $0.21 per share.  Last year, US GAAP Net Income was $218.7 million or $1.02 per share and Adjusted Net Income was $232.8 million or $1.09 per share.  The improvement over last year was mainly driven by increased revenue from our global brands.

Gross Yields were up 10.8% and Net Yields were up 9.3% in Constant-Currency, higher than the January guidance due to better than anticipated demand for onboard experiential products and activities as well as strong close in demand for our core products.

Gross Cruise Costs per APCD increased 9.5% in Constant-Currency.  NCC excluding Fuel per APCD were up 9.6% in Constant-Currency, slightly lower than guidance, driven by timing.

Additionally, better than expected performance below the line, mainly due to better than expected performance from our joint ventures, contributed to the first quarter's positive performance.

Bunker pricing net of hedging for the first quarter was $444.1 per metric ton and consumption was 360,700 metric tons.

"We are very pleased to report another record-breaking quarter and to be driving towards record earnings for the year," said Jason T. Liberty, executive vice president and CFO.  "The demand trends are strong, further exhibiting the strength for our brands and the public's growing propensity to cruise."

FULL YEAR 2019 OUTLOOK

The company expects its full year Adjusted EPS to be in the range of $9.65 to $9.85 per share.  This range includes the negative impact of $0.25 per share from the shipyard incident and also includes the negative impact of approximately $0.25 per share from currency and fuel since the January guidance.  Better first quarter results and an improved revenue outlook are offsetting the vast majority of these two negative impacts.  Excluding these impacts, Adjusted EPS would have been in the range of $10.15 to $10.35 per share.

Overall, the company's booked position remains at a record level in both rate and volume.  As it has in the past, the company noted that its booked position on rate and volume is a product of numerous factors including market forces, itinerary composition, market segmentation and the company's revenue management decisions.

Net Yields for the year are expected to increase 7.5% to 9.0% in Constant-Currency, up relative to prior guidance due to better results in the first quarter as well as stronger demand for the balance of the year.  While the incident at the Grand Bahama Shipyard had a negative impact on overall revenue, it was neutral to Net Yields.

NCC excluding Fuel for the year are expected to be up approximately 10.0% in Constant-Currency, higher than previous guidance mainly due to the canceled sailings that reduced capacity.

Taking into account current fuel pricing, interest and currency exchange rates, and the factors detailed above, the company estimates 2019 Adjusted EPS will be in the range of $9.65 to $9.85 per share.

"It is exciting to see our team exceeding the very bullish revenue targets we established at the beginning of the year," said Richard D. Fain, chairman and CEO.  "We continue to see another great year in a long line of positive results driven by the continued strength of our brands."

SECOND QUARTER 2019

Net Yields are expected to increase approximately 9.5% in Constant-Currency and 8.0% to 8.5% As-Reported.  These metrics include approximately 400 basis points from the operation of Silversea, the new cruise terminal and the Perfect Day development.

NCC excluding Fuel per APCD for the quarter are expected to increase approximately 10.0% in Constant-Currency and 9.0% to 9.5% As-Reported.  These metrics include approximately 800 basis points from the operation of Silversea, the new cruise terminal and the Perfect Day development.

Based on current fuel pricing, interest and currency exchange rates, and the factors detailed above, the company expects second quarter Adjusted EPS to be in the range of $2.45 to $2.50 per share.  Excluding the impact from the Grand Bahama Shipyard incident, and the currency and fuel headwinds versus the January guidance, Adjusted EPS for the second quarter would have been in the range of $2.65 to $2.70 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 $182 million and $707 million of fuel expense in its second quarter and full year 2019 guidance, respectively.

Forecasted consumption is 58% hedged via swaps for the remainder of 2019 and 54%, 29%, 18% 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 $388, $430, $463, $554 and $0, respectively.

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

FUEL STATISTICS

Second Quarter 2019

Full Year 2019

Fuel Consumption (metric tons)

378,500

1,482,000

Fuel Expenses

$182 million

$707 million

Percent Hedged (fwd. consumption)

56%

58%

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

GUIDANCE

      As-Reported            Constant-Currency

Second Quarter 2019

Net Yields

8.0% to 8.5%

Approx. 9.5%

Net Cruise Costs per APCD

Approx. 7.0%

7.5% to 8.0%

Net Cruise Costs ex.Fuel per APCD

9.0% to 9.5%

Approx. 10.0%

Full Year 2019

Net Yields

6.5% to 8.0%

7.5% to 9.0%

Net Cruise Costs per APCD

6.5% to 7.0%

Approx. 7.0%

Net Cruise Costs ex.Fuel per APCD

Approx. 9.5%

Approx. 10.0%

GUIDANCE

Second Quarter 2019

Full Year 2019

Capacity change

11.0%

8.1%

Depreciation and Amortization

$307 to $311 million

$1,240 to $1,250 million

Interest Expense, net

$99 to $103 million

$384 to $392 million

Adjusted EPS

 $2.45 to $2.50

$9.65 to $9.85

SENSITIVITY

Second Quarter 2019

Remaining periods 2019

1% Change in Currency

$4 million

$16 million

1% Change in Net Yields

$20 million

$63 million

1% Change in NCC ex Fuel

$10 million

$31 million

100 Basis pt. change in LIBOR

$7 million

$27 million

10% Change in Fuel prices

$10 million

$30 million

Exchange rates used in guidance calculations

GBP

$1.29

AUD

$0.70

CAD

$0.74

CNH

$0.15

EUR

$1.12

LIQUIDITY AND FINANCING ARRANGEMENTS

As of March 31, 2019, liquidity was $1.7 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 as of March 31, 2019, scheduled debt maturities (excluding commercial paper) for the remainder of 2019, 2020, 2021, 2022 and 2023 are $1.5 billion, $1.2 billion, $0.8 billion, $1.4 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 $3.0 billion, $3.9 billion, $3.1 billion, $3.5 billion and $2.7 billion, respectively.  Capacity changes for 2019, 2020, 2021, 2022 and 2023 are expected to be 8.1%, 4.2%, 9.3%, 8.0% and 3.5%, 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

March 31,

2019

2018

Passenger ticket revenues

$

1,709,984

$

1,425,644

Onboard and other revenues

729,783

602,112

Total revenues

2,439,767

2,027,756

Cruise operating expenses:

Commissions, transportation and other

363,155

290,609

Onboard and other

135,170

99,537

Payroll and related

269,532

227,156

Food

139,534

119,642

Fuel

160,171

160,341

Other operating

346,142

278,734

Total cruise operating expenses

1,413,704

1,176,019

Marketing, selling and administrative expenses

414,947

337,361

Depreciation and amortization expenses

292,285

240,230

Operating Income

318,831

274,146

Other income (expense):

Interest income

9,784

7,733

Interest expense, net of interest capitalized

(100,415)

(67,878)

Equity investment income

33,694

28,752

Other expense

(5,088)

(24,100)

(62,025)

(55,493)

Net Income

256,806

218,653

Less: Net Income attributable to noncontrolling interest

7,125

Net Income attributable to Royal Caribbean Cruises Ltd.

$

249,681

$

218,653

Earnings per Share:

Basic

$

1.19

$

1.03

Diluted

$

1.19

$

1.02

Weighted-Average Shares Outstanding:

Basic

209,322

212,610

Diluted

209,874

213,602

Comprehensive Income

Net Income

$

256,806

$

218,653

Other comprehensive income (loss):

Foreign currency translation adjustments

564

1,160

Change in defined benefit plans

(653)

7,760

Gain on cash flow derivative hedges

48,843

142,530

Total other comprehensive income

48,754

151,450

Comprehensive Income

305,560

370,103

Less: Comprehensive Income attributable to noncontrolling interest

7,125

Comprehensive Income attributable to Royal Caribbean Cruises Ltd.

$

298,435

$

370,103

STATISTICS

Quarter Ended

March 31,

2019 (1)

2018

Passengers Carried

1,533,226

1,404,951

Passenger Cruise Days

10,561,817

9,625,781

APCD

9,860,600

8,915,706

Occupancy

107.1

%

108.0

%

 (1)

Due to the three-month reporting lag, these amounts include October, November and December of 2018 amounts for Silversea Cruises.

ROYAL CARIBBEAN CRUISES LTD.

CONSOLIDATED BALANCE SHEETS

(in thousands, except share data)

As of

March 31,

December 31,

2019

2018

(unaudited)

Assets

Current assets

Cash and cash equivalents

$

248,197

$

287,852

Trade and other receivables, net

374,982

324,507

Inventories

157,939

153,573

Prepaid expenses and other assets

491,553

456,547

Derivative financial instruments

60,451

19,565

Total current assets

1,333,122

1,242,044

Property and equipment, net

23,641,251

23,466,163

Operating lease right-of-use assets

777,551

Goodwill

1,378,362

1,378,353

Other assets

1,589,763

1,611,710

Total assets

$

28,720,049

$

27,698,270

Liabilities, Redeemable Noncontrolling Interest and Shareholders' Equity

Current liabilities

Current portion of debt

$

1,646,324

$

1,646,841

Commercial paper

1,112,030

775,488

Current portion of operating lease liabilities

88,497

Accounts payable

497,180

488,212

Accrued interest

120,131

74,550

Accrued expenses and other liabilities

823,097

899,761

Derivative financial instruments

89,023

78,476

Customer deposits

3,729,661

3,148,837

Total current liabilities

8,105,943

7,112,165

Long-term debt

7,526,330

8,355,370

Long-term operating lease liabilities

708,371

Other long-term liabilities

560,690

583,254

Total liabilities

16,901,334

16,050,789

Redeemable noncontrolling interest

549,645

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; 236,380,544 and

235,847,683 shares issued, March 31, 2019 and December 31, 2018, respectively)

2,364

2,358

Paid-in capital

3,432,419

3,420,900

Retained earnings

10,366,612

10,263,282

Accumulated other comprehensive loss

(578,980)

(627,734)

Treasury stock (26,830,765 common shares at cost, at both March 31, 2019 and

December 31, 2018)

(1,953,345)

(1,953,345)

Total shareholders' equity

11,269,070

11,105,461

Total liabilities, redeemable noncontrolling interest and shareholders' equity

$

28,720,049

$

27,698,270

ROYAL CARIBBEAN CRUISES LTD.

CONSOLIDATED STATEMENTS OF CASH FLOWS

(unaudited, in thousands)

Three Months Ended March 31,

2019

2018

Operating Activities

Net income

$

256,806

$

218,653

Adjustments:

Depreciation and amortization

292,285

240,230

Impairment losses

23,343

Net deferred income tax expense (benefit)

2,983

(1,504)

Gain on derivative instruments not designated as hedges

(4,780)

(7,810)

Share-based compensation expense

27,322

20,164

Equity investment income

(33,694)

(28,752)

Amortization of debt issuance costs

10,366

10,108

Changes in operating assets and liabilities:

Increase in trade and other receivables, net

(44,382)

(10,181)

(Increase) decrease in inventories

(4,366)

567

Increase in prepaid expenses and other assets

(12,323)

(89,725)

Increase in accounts payable

8,843

110,467

Increase in accrued interest

45,581

42,919

Decrease in accrued expenses and other liabilities

(68,688)

(109,136)

Increase in customer deposits

580,735

477,878

Dividends received from unconsolidated affiliates

42,435

37,918

Other, net

(20,669)

(11,017)

Net cash provided by operating activities

1,078,454

924,122

Investing Activities

Purchases of property and equipment

(470,116)

(1,720,232)

Cash received on settlement of derivative financial instruments

5,803

64,487

Cash paid on settlement of derivative financial instruments

(678)

Cash received on loans to unconsolidated affiliates

11,824

13,953

Other, net

2,719

(3,353)

Net cash used in investing activities

(450,448)

(1,645,145)

Financing Activities

Debt proceeds

316,810

2,544,737

Debt issuance costs

(3,675)

(41,344)

Repayments of debt

(1,146,674)

(1,394,222)

Proceeds from issuance of commercial paper notes

5,039,834

Repayments of commercial paper notes

(4,711,208)

Purchases of treasury stock

(275,038)

Dividends paid

(146,817)

(127,840)

Proceeds from exercise of common stock options

241

3,863

Other, net

(16,192)

1,697

Net cash (used in) provided by financing activities

(667,681)

711,853

Effect of exchange rate changes on cash

20

303

Net decrease in cash and cash equivalents

(39,655)

(8,867)

Cash and cash equivalents at beginning of period

287,852

120,112

Cash and cash equivalents at end of period

$

248,197

$

111,245

Supplemental Disclosure

Cash paid during the period for:

Interest, net of amount capitalized

$

37,103

$

16,953

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 March 31,

2019

2019 On a

Constant

Currency

Basis

2018

Passenger ticket revenues

$

1,709,984

$

1,749,294

$

1,425,644

Onboard and other revenues

729,783

735,466

602,112

Total revenues

2,439,767

2,484,760

2,027,756

Less:

Commissions, transportation and other

363,155

369,111

290,609

Onboard and other

135,170

135,684

99,537

Net Revenues

$

1,941,442

$

1,979,965

$

1,637,610

APCD

9,860,600

9,860,600

8,915,706

Gross Yields

$

247.43

$

251.99

$

227.44

Net Yields

$

196.89

$

200.80

$

183.68

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 March 31,

2019

2019 On a

Constant

Currency

Basis

2018

Total cruise operating expenses

$

1,413,704

$

1,425,102

$

1,176,019

Marketing, selling and administrative expenses (2) (3)

413,761

418,357

346,599

Gross Cruise Costs

1,827,465

1,843,459

1,522,618

Less:

Commissions, transportation and other

363,155

369,111

290,609

Onboard and other

135,170

135,684

99,537

Net Cruise Costs

1,329,140

1,338,664

1,132,472

Less:

Fuel

160,171

160,184

160,341

Net Cruise Costs Excluding Fuel

$

1,168,969

$

1,178,480

$

972,131

APCD

9,860,600

9,860,600

8,915,706

Gross Cruise Costs per APCD

$

185.33

$

186.95

$

170.78

Net Cruise Costs per APCD

$

134.79

$

135.76

$

127.02

Net Cruise Costs Excluding Fuel per APCD

$

118.55

$

119.51

$

109.04

(2)

For the quarter ended March 31, 2019, the amount does not include the transaction costs related to the Silversea Cruises acquisition of $1.2 million.

(3)

For the quarter ended March 31, 2018, the amount does not include the impact of the change in accounting principle related to the recognition of stock-based compensation expense, which resulted in an increase to Net Income attributable to Royal Caribbean Cruises Ltd. of $9.2 million.

ROYAL CARIBBEAN CRUISES LTD.

NON-GAAP RECONCILING INFORMATION (CONTINUED)

(unaudited)

Adjusted Net Income and Adjusted Earnings per Share were calculated as follows (in thousands, except per share data):

Quarter Ended March 31,

2019

2018

Net Income attributable to Royal Caribbean Cruises Ltd.

$

249,681

$

218,653

Adjusted Net Income attributable to Royal Caribbean Cruises Ltd.

275,847

232,758

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

Increase

$

26,166

$

14,105

Adjustments to Net Income attributable to Royal Caribbean Cruises Ltd.:

Transaction costs related to Silversea Cruises acquisition

$

1,186

$

Amortization of Silversea Cruises intangible assets resulting from the acquisition

3,069

Noncontrolling interest adjustment(4)

21,911

Impairment loss related to Skysea Holding

23,343

Impact of change in accounting principle(5)

(9,238)

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

Increase

$

26,166

$

14,105

Earnings per Share - Diluted

$

1.19

$

1.02

Adjusted Earnings per Share - Diluted

1.31

1.09

Net Adjustments to Earnings per Share

$

0.12

$

0.07

Adjustments to Earnings per Share:

Transaction costs related to Silversea Cruises acquisition

$

0.01

$

Amortization of Silversea Cruises intangible assets resulting from the acquisition

0.01

Noncontrolling interest adjustment(4)

0.10

Impairment loss related to Skysea Holding

0.11

Impact of change in accounting principle(5)

(0.04)

Net Adjustments to Earnings per Share

$

0.12

$

0.07

Weighted-Average Shares Outstanding - Diluted

209,874

213,602

(4)

Adjustment made to exclude the impact of the contractual accretion requirements associated with the put option held by 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, resulting in an increase to Net Income attributable to Royal Caribbean Cruises Ltd. of $9.2 million, which is reported within Marketing, selling and administrative expenses in our consolidated statements of comprehensive income (loss) for the quarter ended March 31, 2018.

SOURCE Royal Caribbean Cruises Ltd.



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