Royal Caribbean Reports Higher 2Q Net Income of $60.5 Million
07/26/2010
Royal Caribbean Cruises Ltd. (RCCL) reported second quarter 2010 net income increased to $60.5 million, or $0.28 per share, compared to a net loss of $35.1 million, or ($0.16) per share, in second quarter of 2009. Revenues improved to $1.6 billion in the second quarter of 2010 compared to $1.3 billion in the second quarter of 2009, as a result of capacity increases and yield improvements. Net yields for the second quarter of 2010 increased 4.9 percent despite the impact of the stronger U.S. dollar.
The cruise company also said business conditions have remained on target in each of its main markets while improved cost control has enabled it to raise its earnings guidance for the year. Operating costs were lower than expected due mainly to strong cost control, energy conservation measures, expense timing and currency fluctuations;
RCCL said second quarter net yields increased 4.9 percent (5.4 percent on a Constant Currency basis). Second quarter net cruise costs per APCD (NCC) declined 2.8 percent (2 percent on a Constant Currency basis). The company said net yields are expected to increase approximately 4 percent in the third quarter and 3 to 4 percent for the year as a whole (7 percent and 4 to 5 percent, respectively, on a Constant Currency basis). NCC are expected to be down 1 percent for the third quarter and down approximately 1 to 2 percent for the full year. EPS expectation for the full year 2010 has been increased by $0.10 to $2.25 to $2.35. Third quarter 2010 EPS is expected to be in the range of $1.52 to $1.57.
“What a difference a year makes. It is gratifying to post another solid quarter with improvement in yields and strong cost control,” said Richard Fain, RCCL’s chairman and chief executive officer. “Despite ongoing uncertainty with the economy, our profitability continues to improve and our booking environment continues to be remarkably stable. We remain focused on strengthening our financial position and I am encouraged about the tremendous global response to our brands.”
Improved fuel consumption efforts resulted in significantly better fuel consumption of 318,000 metric tons during the second quarter. At-the-pump pricing (including the benefit of the company's hedging) was virtually unchanged. Altogether, the quarter's fuel expenditures were approximately $6 million better than previous calculations.
“Demand for our cruises remains on track with our earlier projections," said Brian Rice, executive vice president and chief financial officer. “The strengthening of the U.S. dollar will clearly result in a reduction of our reported yields, but also provides a corresponding reduction in expenses. Most importantly, our continued focus on cost controls and efficiency is driving improved earnings.”
Given the recent volatility in currency exchange rates, RCCL said it is expanding its disclosures regarding currency and has defined a non-GAAP measure of “Constant Currency.” Based on current estimates for 2010, the company anticipates that 30 percent of its net revenues, and 20 percent of its NCC excluding fuel will be denominated in currencies other than U.S. dollar, with the British pound and the euro being the most significant components.
The company does not forecast fuel prices and its cost calculations are based on current at-the-pump prices net of hedging impacts. Based on today's fuel prices RCCL has included $170 million and $652 million of fuel expense in its third quarter 2010 and full year 2010 guidance, respectively. The company said it has made additional progress over the past quarter in optimizing the fuel consumption on many of its newer itineraries, as well as fine tuning the operations on its newest hardware. The ongoing focus on fuel consumption has allowed the company to further reduce its full year 2010 consumption estimate to 1,327,000 metric tons of fuel versus the estimates the company provided in April. The company's fuel consumption is currently 47 percent hedged for the third quarter of 2010. In keeping with its previously disclosed hedging strategy, forecasted consumption is now 48 percent hedged for the remainder of 2010, 55 percent hedged in 2011, 50 percent hedged in 2012 and 20 percent hedged in 2013.
As of June 30, 2010, in addition to committed unsecured financing on its three remaining newbuild ships, liquidity was $1 billion, including cash and the undrawn portion of the company's unsecured revolving credit facility. Based on current ship orders, projected capital expenditures for 2010, 2011 and 2012 are $2.2 billion, $1 billion, and $1 billion, respectively. Capacity increases for the same three years are 11.5 percent, 7.1 percent and 2 percent, respectively. These capacity estimates reflect the recently announced February 2011 sale of the Celebrity Mercury. For more information, visit www.rclinvestor.com.
