Royal Caribbean Reports First Quarter 2004 Results

[CoachTerry14]

Press Release Source: Royal Caribbean Cruises Ltd.

 

 

Royal Caribbean Reports First Quarter 2004 Results

 

MIAMI, April 21 -- Royal Caribbean Cruises Ltd. announced today that net income for the first quarter of 2004 was $95.8 million, or $0.47 per share. This compares to $53.2 million, or $0.27 per share, for the first quarter of 2003. Revenues for the first quarter of 2004 increased 20.6% to $1.1 billion from revenues of $880.2 million in the first quarter of 2003. The increase in revenues was primarily due to a 13.4% increase in capacity coupled with an increase in cruise ticket prices. Gross Yields for the first quarter of 2004 increased 6.3% from the first quarter of 2003. Net Yields, which the company considers a better measure of revenue performance, increased 5.3% from the first quarter of 2003. Gross Yields increased more than Net Yields due to a higher percentage of passengers choosing to book their air transportation through the company.

 

"We are pleased with the first quarter results, and especially our ability to command yield improvements during a period of significant capacity growth for the industry," said Richard D. Fain, chairman and chief executive officer of Royal Caribbean Cruises Ltd. "The market is absorbing new capacity well, and we are encouraged with the demand and pricing trends we are seeing for the remainder of the year."

 

In mid-2003, bookings and pricing began to stabilize and set the stage for a strong 2004 "wave season." These expectations came to fruition with strong pricing and volume growth across both the Royal Caribbean International and Celebrity Cruise brands. As a result of the improved booking environment and favorable prior year comparisons, the company currently forecasts that Net Yields for the second quarter of 2004 will increase in the range of 9% to 11% compared to the second quarter of 2003. Prior year political disruptions and limited visibility makes forecasting Net Yields for the second half of the year more difficult. Assuming there are no external shocks and current booking trends continue, the company still expects Net Yields for the full year 2004 will increase in the range of 5% to 7% from the prior year.

 

Compared to the first quarter of 2003, Gross Cruise Costs and Net Cruise Costs, on a per Available Passenger Cruise Day basis, for the first quarter of 2004 increased 4.9% and 2.6%, respectively. For the full year 2004, the company's forecast of Net Cruise Costs, on a per Available Passenger Cruise Day basis, remains unchanged at an increase of 1% to 2% from the prior year. However, the timing of this increase is not evenly spread throughout the year. Due primarily to higher marketing and fuel expenses, the company estimates that Net Cruise Costs, on a per Available Passenger Cruise Day basis, for the second quarter of 2004 will increase at a rate higher than that experienced in the first quarter of 2004. The increase in marketing expenses for the second quarter is driven by the fact that the company suspended a significant amount of advertising activities at the start of the Iraq war and did not return to normal levels until late in the second quarter of 2003. For the second half of the year, the company expects Net Cruise Costs per Available Passenger Cruise Day to be roughly flat as compared to the same period of 2003.

 

Based upon these expectations, management continues to anticipate 2004 earnings per share to be in the range of $2.10 to $2.30.

 

Earnings per share for the first quarter of 2004 were reduced by approximately $0.01 due to the dilutive impact of the company's May 2001 zero coupon convertible notes, which became convertible for the first time at the end of the first quarter of 2004. These notes are convertible and will remain so for the second, third and fourth quarters provided the share price of the company's common stock closes above $34.68, $35.09 and $35.50, respectively, for 20 out of the last 30 trading days of each quarter. The aforementioned earnings per share estimate assumes that these notes remain convertible throughout the year and dilute earnings per share by approximately $0.06.

 

In addition to the May 2001 zero coupon convertible notes, the company's February 2001 Liquid Yield Option Notes are not currently convertible but will become so during the second, third and fourth quarters if the share price of the company's common stock closes above $46.08, $46.64 and $47.20, respectively, for 20 out of the last 30 trading days of each quarter. The 2004 earnings per share estimate does not assume that these notes become convertible. In the event that these notes become convertible for the remainder of the year, earnings per share would be further reduced by approximately $0.02.

 

This month the company will add Jewel of the Seas to its fleet, which is the fourth in the 2,100-passenger Radiance-class series for Royal Caribbean International. The Jewel of the Seas and her sister ships, Radiance of the Seas, Brilliance of the Seas and Serenade of the Seas, have nearly three acres of exterior glass with panoramic elevators facing the sea and almost 600 balcony staterooms each. In addition to myriad entertainment options, Jewel of the Seas also features a wide range of activities and amenities to appeal to guests of all ages from the adults-only Solarium and the luxurious ShipShape Day Spa to the rock-climbing wall and a miniature golf course.

 

Just three months after Celebrity's announcement of Celebrity Xpeditions, a series of exotic experiences and exceptional excursions in the Galapagos Islands, the Arctic, Moscow and elsewhere, Celebrity and world-renowned entertainment enterprise Cirque du Soleil announced an exclusive, six-year agreement. Celebrity will sponsor Cirque du Soleil touring shows in North America and Europe, offer guests one-of-a-kind pre- and post-cruise experiences, capitalize on a variety of cross-marketing opportunities, and develop an exclusive and unique entertainment concept onboard select ships.

 

The company has scheduled a conference call at 10 a.m. eastern standard time today to discuss its earnings. This call can be listened to live or on a delayed basis on the company's investor relations web site at www.rclinvestor.com.

Terminology

 

Available Passenger Cruise Days

 

Available Passenger Cruise Days represent double occupancy per cabin multiplied by the number of cruise days for the period.

 

Gross Yields

Gross Yields represent total revenues per Available Passenger Cruise Day.

 

 

Net Yields

 

Net Yields represent total revenues less commissions, transportation and other, and onboard and other expenses per Available Passenger Cruise Day. We utilize Net Yields for revenue management purposes and believe that it is the most relevant measure of our pricing performance. We have not provided a quantitative reconciliation of projected Gross Yields to projected Net Yields due to the significant uncertainty in projecting the costs deducted to arrive at this measure. We utilize Net Yields to manage our business on a day-to-day basis and believe it is a more relevant measure of our performance. As such, we do not believe that reconciling information is meaningful.

 

Gross Cruise Costs

 

Gross Cruise Costs represent total operating expenses and marketing, selling and administrative expenses.

 

Net Cruise Costs

 

Net Cruise Costs represent payroll and related, food and other operating expenses and marketing, selling and administrative expenses. In measuring our ability to control costs in a manner that positively impacts net income, we believe changes in Net Cruise Costs to be the most relevant indicator of our performance. We have not provided a quantitative reconciliation of projected Gross Cruise Costs to projected Net Cruise Costs due to the significant uncertainty in projecting the costs deducted to arrive at this measure. We utilize Net Cruise Costs to manage our business on a day-to-day basis and believe it is a more relevant measure of our performance. As such, we do not believe that reconciling information is meaningful.

 

Royal Caribbean Cruises Ltd. is a global cruise vacation company that operates Royal Caribbean International and Celebrity Cruises, with a combined total of 28 ships in service and two under construction or on firm order. The company also offers unique cruisetour vacations in Alaska, Canada and Europe. Additional information can be found on www.royalcaribbean.com, www.celebrity.com or www.rclinvestor.com.

Certain statements in this news release are forward-looking statements. Forward-looking statements do not guarantee future performance and may involve risks, uncertainties and other factors, which could cause our actual results, performance or achievements to differ materially from the future results, performance or achievements expressed or implied in those forward-looking statements. Such factors include general economic and business conditions, vacation industry competition (including cruise industry competition), changes in vacation industry capacity (including cruise capacity), the impact of tax laws and regulations affecting our business or our principal shareholders, the impact of changes in other laws and regulations affecting our business, the impact of pending or threatened litigation, the delivery of scheduled new ships, emergency ship repairs, incidents involving cruise ships, reduced consumer demand for cruises as a result of any number of reasons (including armed conflict, terrorist attacks, geo-political and economic uncertainties or the unavailability of air service), changes in our stock price, interest rates or oil prices, weather and other factors described in further detail in Royal Caribbean Cruises Ltd.'s filings with the Securities and Exchange Commission. The above examples are not exhaustive and new risks emerge from time to time. We undertake no obligation to publicly update or revise any forward-looking statements, whether as a result of new information, future events or otherwise. In addition, certain financial measures in this presentation constitute non-GAAP financial measures as defined by Regulation G. A reconciliation of these items can be found on our investor relations website at www.rclinvestor.com. Financial Tables Follow

 

 

ROYAL CARIBBEAN CRUISES LTD.

CONSOLIDATED STATEMENTS OF OPERATIONS

(unaudited, in thousands, except per share data)

 

First Quarter Ended

March 31,

-------------------------

2004 2003

--------- --------

 

 

Passenger ticket revenues $790,093 $653,130

Onboard and other revenues 271,591 227,034

--------- ---------

Total revenues 1,061,684 880,164

--------- ---------

Operating expenses

Commissions, transportation and other 203,904 159,631

Onboard and other 57,883 50,542

Payroll and related 115,942 101,381

Food 65,836 57,723

Other operating 210,834 183,292

--------- ---------

Total operating expenses 654,399 552,569

Marketing, selling and

administrative expenses 150,238 123,984

Depreciation and amortization expenses 96,579 88,669

--------- ---------

Operating Income 160,468 114,942

--------- ---------

 

Other income (expense)

Interest income 1,449 1,105

Interest expense, net of capitalized interest (75,740) (64,884)

Other income (expense) 9,669 2,011

--------- ---------

(64,622) (61,768)

--------- ---------

Net Income $95,846 $53,174

========= =========

EARNINGS PER SHARE:

Basic $0.49 $0.28

========= =========

Diluted $0.47 $0.27

========= =========

 

WEIGHTED-AVERAGE SHARES OUTSTANDING:

Basic 197,425 193,029

========= =========

Diluted 216,000 194,905

========= =========

 

 

STATISTICS

 

First Quarter Ended

March 31,

------------------------

2004 2003

--------- ---------

 

Occupancy as a percentage of total capacity 104.2% 101.7%

 

Passenger Cruise Days 5,512,049 4,743,164

 

Available Passenger Cruise Days 5,289,536 4,663,592

 

 

ROYAL CARIBBEAN CRUISES LTD.

CONSOLIDATED BALANCE SHEETS

(in thousands, except share data)

 

As of

-------------------------

March 31, December 31,

2004 2003

--------- --------

(unaudited)

ASSETS

Current Assets

Cash and cash equivalents $552,997 $330,086

Trade and other receivables, net 88,206 89,489

Inventories 56,628 53,277

Prepaid expenses and other assets 109,084 101,698

----------- -----------

Total current assets 806,915 574,550

Property and Equipment - at cost less

accumulated depreciation and amortization 9,938,965 9,943,495

Goodwill, net 278,561 278,561

Other Assets 534,036 526,136

----------- -----------

$11,558,477 $11,322,742

=========== ===========

 

LIABILITIES AND SHAREHOLDERS' EQUITY

Current Liabilities

Current portion of long-term debt $314,265 $315,232

Accounts payable 194,781 187,756

Accrued expenses and other liabilities 255,868 271,944

Customer deposits 879,795 729,595

----------- -----------

Total current liabilities 1,644,709 1,504,527

 

Long-Term Debt 5,509,907 5,520,572

Other Long-Term Liabilities 38,026 34,746

 

Commitments and Contingencies

 

Shareholders' Equity

Common stock ($.01 par value; 500,000,000

shares authorized; 198,304,185 and

196,106,658 shares issued) 1,983 1,961

Paid-in capital 2,143,357 2,100,612

Retained earnings 2,232,310 2,162,195

Accumulated other comprehensive income (3,958) 5,846

Treasury stock (566,298 and 556,212

common shares at cost) (7,857) (7,717)

----------- -----------

Total shareholders' equity 4,365,835 4,262,897

----------- -----------

$11,558,477 $11,322,742

=========== ===========

 

 

ROYAL CARIBBEAN CRUISES LTD.

CONSOLIDATED STATEMENTS OF CASH FLOWS

(unaudited, in thousands)

 

First Quarter Ended

March 31,

-------------------------

2004 2003

--------- --------

OPERATING ACTIVITIES

Net income $95,846 $53,174

Adjustments:

Depreciation and amortization 96,579 88,669

Accretion of original issue discount 12,610 11,941

Changes in operating assets and liabilities:

Increase in trade and other

receivables, net (702) (14,132)

Increase in inventories (3,181) (7,374)

Increase in prepaid expenses and other assets (35,174) (16,778)

Increase (decrease) in accounts payable 5,821 (6,160)

Decrease in accrued expenses and

other liabilities (9,566) (16,571)

Increase in customer deposits 149,986 32,457

Other, net 1,599 1,175

----------- ----------

Net cash provided by operating activities 313,818 126,401

----------- ----------

 

INVESTING ACTIVITIES

Purchases of property and equipment (79,182) (42,269)

Other, net 12,326 (10,131)

----------- --------

Net cash used in investing activities (66,856) (52,400)

----------- --------

FINANCING ACTIVITIES

Repayments of long-term debt, net (24,961) (133,266)

Dividends (28,460) (25,095)

Proceeds from exercise of stock options 42,158 875

Other, net (12,788) (8,286)

----------- ----------

Net cash used in financing activities (24,051) (165,772)

----------- ----------

 

Net Increase (Decrease) in Cash and

Cash Equivalents 222,911 (91,771)

Cash and Cash Equivalents at

Beginning of Period 330,086 242,584

----------- ----------

Cash and Cash Equivalents at End of Period $552,997 $150,813

=========== ==========

Supplemental Disclosure

Cash paid during the year for:

Interest, net of amount capitalized $62,255 $63,851

 

Source: Royal Caribbean Cruises Ltd.

[superjerryw]

I guess revenues will be even higher next year with the new Johnny Rokcets surcharge.....

 

 

Donuts, is there anything they can't do....

[abridalmaven]

I was thinking of buying my grandson a share. His parents bought him one fron Disney and they have a nice program where you buy it for babies and they wave the extra fees ( something to do with registering it in his name vs and adult)

 

My vacation pics

http://community.webshots.com/user/abridalmaven

Norwegian Dawn May 23

[yarlenna]

Gee, I'm glad RCI is doing so well. I wonder if this will allow them to return the old room steward to room ratio - and retire the ranch steak.

 

Work like a dog. Live like a pauper. Save all your money. Then Cruise!

[y14]

Amen!

 

Rhapsody

 

Monarch of the Seas

Disney Wonder

[Brad1185]

If I can remember right, Carnival had a $230m net income for the first quarter, they are bigger, but more than double RCI. If the JR surcharge was increased to $5.95, it would give them several million more in revenue and make the fee worshippers happier.

[swooldri]

RCI is in business to make money. If you have a problem with the product, then go else where.

[Mark_K]

<BLOCKQUOTE class="ip-ubbcode-quote"><font size="-1">quote:</font><HR>Originally posted by Brad1185:

If I can remember right, Carnival had a $230m net income for the first quarter, they are bigger, but more than double RCI. If the JR surcharge was increased to $5.95, it would give them several million more in revenue and make the fee worshippers happier.<HR></BLOCKQUOTE>Depending on the elasticity of demand, raising the JR surcharge could cause them to lose revenues.

 

----------------------------------------------------------

 

"Nothing so needs reforming as other people's habits" Mark Twain

 

"Nothing so needs reforming as other people's formal night attire, poolside attire, child rearing practices, walk-talkie usage, chair hogging, seat saving, line cutting ..." Mark_K