News From

Royal Caribbean Cruises Ltd.

Corporate Communications Office

 

ROYAL CARIBBEAN REPORTS SECOND QUARTER EARNINGS AND

INCREASES FULL YEAR GUIDANCE

MIAMI – August 1, 2017 – Royal Caribbean Cruises Ltd. (NYSE: RCL) today reported US GAAP and Adjusted Earnings per Share (“EPS”) of $1.71 for the second quarter.  This represents EPS growth of nearly 60% over same time last year.  Better than anticipated performance in the second quarter combined with favorable booking trends are driving an increase in the Company’s full year Adjusted EPS guidance to a range of $7.35 to $7.45.

 

KEY HIGHLIGHTS

Second Quarter 2017 results:

 

>	US GAAP and Adjusted Net Income was $369.5 million or $1.71 per share.  Last year, US GAAP Net Income was $229.9 million or $1.06 per share and Adjusted Net Income was $235.2 million, or $1.09 per share in 2016.

>	Gross Yields were up 10.2% on a Constant-Currency basis (up 8.7% As-Reported).  Net Yields were up 11.5% on a Constant-Currency basis (up 9.9% As-Reported).

>	Gross Cruise Costs increased 1.2% on a Constant-Currency basis (0.6% As-Reported).  Net Cruise Costs (“NCC”) Excluding Fuel were down 0.9% on a Constant-Currency basis (down 1.4% As-Reported).

 

Full Year 2017 Forecast:

 

>	Adjusted EPS is expected to be in the range of $7.35 to $7.45 per share.

>	Net Yields are expected to increase 5.5% to 6.0% on a Constant-Currency basis, up approximately 6.0% on an As-Reported basis.

>	NCC Excluding Fuel are expected to be up approximately 1.0% on a Constant-Currency and As-Reported basis.

 

“Our brands are executing beautifully, keeping the business in an exceptionally strong position,” said Richard D. Fain, chairman and CEO.  “Strong close-in demand for cruise

bolstered the quarter, and we see further uplift for the balance of the year, positioning us well for the Double-Double and beyond.”

 

SECOND QUARTER RESULTS

 

US GAAP and Adjusted Net Income for the second quarter 2017 was $369.5 million or $1.71 per share, compared to US GAAP Net Income of $229.9 million or $1.06 per share and Adjusted Net Income of $235.2 million, or $1.09 per share in 2016.

 

Gross Yields were up 10.2% on a Constant-Currency basis.  Net Yields on a Constant-Currency basis increased 11.5%, exceeding prior guidance due to strong close-in demand driving higher pricing and occupancy.

 

Gross Cruise Costs increased 1.2% on a Constant-Currency basis.  Constant-Currency NCC Excluding Fuel decreased 0.9%.

 

Bunker pricing net of hedging for the second quarter was $527 per metric ton and consumption was 324,000 metric tons.

 

FULL YEAR 2017

 

The company updated full year Adjusted EPS guidance to a range of $7.35 to $7.45, a $0.30 increase at the midpoint versus previous guidance.  Bookings continue to be very robust.

 

The company’s booked position for the remainder of 2017 continues to set new records.  Looking further ahead, the company’s booked position for the next twelve months is also strong, up on both rate and volume, versus the same time last year.  Net Yields for the year on a Constant-Currency basis are expected to increase 5.5% to 6.0%, up relative to prior guidance due to the better results in the second quarter as well as stronger trends for the balance of the year.

NCC Excluding Fuel are expected to be up approximately 1.0% on a Constant-Currency basis for the year.

 

“Demand has remained strong, and we have captured the related revenue opportunity,” said Jason T. Liberty, executive vice president and CFO.  “These demand trends and continued cost discipline have resulted in the highest second quarter earnings in company history and have put us in position for another record year and achieving our Double-Double targets.”

 

Taking into account current fuel pricing, interest rates, currency exchange rates and the factors detailed above, the company expects 2017 EPS to be in the range of $7.35 to $7.45 per share.

 

 

THIRD QUARTER 2017

 

Constant-Currency Net Yields are expected to be up 4.0% to 4.5% in the third quarter of 2017.  Strong demand trends for Europe and North America products are driving improvement over an already strong previous year.  NCC Excluding Fuel are expected to be up approximately 4.0% on a Constant-Currency basis.

 

Based on current fuel pricing, interest rates, currency exchange rates and the factors detailed above, the company expects third quarter Adjusted EPS to be approximately $3.45 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 $176 million and $706 million of fuel expense in its third quarter and full year 2017 guidance, respectively.

 

Forecasted consumption is 64% hedged via swaps for 2017 and 54%, 45%, 35% and 15% hedged for 2018, 2019, 2020 and 2021, respectively. For the same five-year period, the average cost per metric ton of the hedge portfolio is approximately $487, $421, $331, $340 and $351, respectively. 

 

The company provided the following fuel statistics for the third quarter and full year 2017:

 

FUEL STATISTICS	Third Quarter 2017	Full Year 2017
Fuel Consumption (metric tons)	329,000	1,324,000
Fuel Expenses	$176 million	$706 million
Percent Hedged (fwd consumption)	63%	64%
Impact of 10% change in fuel prices	$8 million	$15 million

 

In summary, the company provided the following guidance for the third quarter and full year 2017:

 

 

GUIDANCE	Third Quarter 2017	Full Year 2017
Capacity Decrease	(4.0%)	(1.9%)
Depreciation and Amortization	$235 to $240 million	$945 to $953 million
Interest Expense, net	$65 to $70 million	$273 to $278 million
Adjusted EPS	Approx. $3.45	$7.35 to $7.45
GUIDANCE	Third Quarter 2017	Full Year 2017
1% Change in Currency	$6 million	$10 million
1% Change in Net Yield	$20 million	$36 million
1% Change in NCC x fuel	$9 million	$17 million
1% Change in LIBOR	$6 million	$16 million
Exchange rates used in guidance calculations
	Previous – April	Current - August
GBP	$1.28	$1.32
AUD	$0.76	$0.80
CAD	$0.74	$0.80
CNH	$0.15	$0.15
EUR	$1.09	$1.18

 

LIQUIDITY AND FINANCING ARRANGEMENTS

As of June 30, 2017, liquidity was $1.9 billion, including cash and the undrawn portion of the company's unsecured revolving credit facilities.  The company noted that scheduled debt maturities for the remainder of 2017, 2018, 2019, 2020 and 2021 are $0.8 billion, $1.9 billion, $0.8 billion, $1.1 billion and $0.6 billion, respectively.

 

CAPITAL EXPENDITURES AND CAPACITY GUIDANCE

 

Based upon current ship orders, projected capital expenditures for full year 2017, 2018, 2019, 2020 and 2021 are $0.6 billion, $2.8 billion, $1.6 billion, $2.1 billion and $2.4 billion, respectively.  Capacity changes for 2017, 2018, 2019, 2020 and 2021 are expected to be -1.9%, 3.3%, 6.6%, 3.9% and 7.9%, respectively.  These figures do not include potential ship sales or additions that we may elect to make in the future.

 

 

 

CONFERENCE CALL SCHEDULED

The company has scheduled a conference call at 10 a.m. Eastern Daylight Time today to discuss its earnings.  This call can be heard, either live or on a delayed basis, on the company's investor relations website at www.rclinvestor.com.

 

Selected Operational and Financial Metrics

 

Adjusted Net Income

Adjusted Net Income represents net income excluding certain items that we believe adjusting for is meaningful when assessing our performance on a comparative basis. For the periods presented, these items included the net loss related to the elimination of the Pullmantur reporting lag, restructuring charges and other initiative costs related to our Pullmantur right-sizing strategy.

 

Adjusted Earnings Per Share (“Adjusted EPS”)

Represents Adjusted Net Income divided by the diluted shares outstanding at the end of the reporting period. We believe this measure is meaningful when assessing our performance on a comparative basis. 

Available Passenger Cruise Days (“APCD”)

APCD is our measurement of capacity and represents double occupancy per cabin multiplied by the number of cruise days for the period. We use this measure to perform capacity and rate analysis to identify our main non-capacity drivers that cause our cruise revenue and expenses to vary.  APCDs reported in 2016 do not include the November and December 2015 APCD amounts related to the elimination of the Pullmantur reporting lag.

 

Constant-Currency

We believe Net Yields, Net Cruise Costs and Net Cruise Costs Excluding Fuel are our most relevant non-GAAP financial measures.  However, a significant portion of our revenue and expenses are denominated in currencies other than the US Dollar.  Because our reporting currency is the US Dollar, the value of these revenues and expenses in US Dollars will be affected by changes in currency exchange rates.  Although such changes in local currency prices are just one of many elements impacting our revenues and expenses, it can be an important element.  For this reason, we also monitor Net Yields, Net Cruise Costs, and Net Cruise Costs Excluding Fuel on a “Constant-Currency” basis – i.e., as if the current period’s currency exchange rates had remained constant with the comparable prior period’s rates.  We calculate "Constant-Currency" by applying the average prior year period exchange rates for each of the corresponding months of the reported and/or forecasted period, so as to calculate what the results would have been had exchange rates been the same throughout both periods.  We do not make predictions about future exchange rates and use current exchange rates for calculations of future periods.  It should be emphasized that the use of Constant-Currency is primarily used by us for comparing short-term changes and/or projections.  Over the longer term, changes in guest sourcing and shifting the amount of purchases between currencies can significantly change the impact of the purely currency-based fluctuations. 

 

DOUBLE-DOUBLE

Our DOUBLE-DOUBLE Program refers to the multi-year program designed to help us better communicate and motivate our employees about our business goals by articulating

longer-term financial objectives. Under the program, we are targeting Adjusted EPS of $6.78 in 2017 (double our 2014 Adjusted EPS of $3.39) and ROIC of 10% in 2017 (compared to ROIC of 5.9% in 2014).

 

Gross Cruise Costs

Gross Cruise Costs represent the sum of total cruise operating expenses plus marketing, selling and administrative expenses.

 

Gross Yields

Gross Yields represent total revenues per APCD.

 

Net Cruise Costs (“NCC”) and NCC Excluding Fuel

Represent Gross Cruise Costs excluding commissions, transportation and other expenses and onboard and other expenses and, in the case of Net Cruise Costs Excluding Fuel, fuel expenses. In measuring our ability to control costs in a manner that positively impacts net income, we believe changes in Net Cruise Costs and Net Cruise Costs Excluding Fuel to be the most relevant indicators of our performance.  Net Cruise Costs excludes initiative costs related to our Pullmantur right-sizing strategy.

 

Net Revenues

Net Revenues represent total revenues less commissions, transportation and other expenses and onboard and other expenses.   

 

Net Yields

Net Yields represent Net Revenues per APCD. We utilize Net Revenues and Net Yields to manage our business on a day-to-day basis as we believe that they are the most relevant measure of our pricing performance because they reflect the cruise revenues earned by us net of our most significant variable costs, which are commissions, transportation and other expenses and onboard and other expenses. 

 

Occupancy

Occupancy, in accordance with cruise vacation industry practice, is calculated by dividing Passenger Cruise Days by APCD.  A percentage in excess of 100% indicates that three or more passengers occupied some cabins.

 

Passenger Cruise Days

Passenger Cruise Days represent the number of passengers carried for the period multiplied by the number of days of their respective cruises.

 

 

For additional information see “Adjusted Measures of Financial Performance” below.

 

Royal Caribbean Cruises Ltd. (NYSE: RCL) is a global cruise vacation company that owns and operates three global brands: Royal Caribbean International, Celebrity Cruises and Azamara Club Cruises.  We are a 50% joint venture owner of the German brand TUI Cruises, a 49% shareholder in the Spanish brand Pullmantur and a minority shareholder in the Chinese brand SkySea Cruises. Together, these brands operate a combined total of 49 ships with an additional twelve on order.  They operate diverse itineraries around the world that call on approximately 535 destinations on all seven continents.  Additional information can be found on www.royalcaribbean.com, www.celebritycruises.com, www.azamaraclubcruises.com, www.tuicruises.com, www.pullmantur.es, or www.rclinvestor.com.

 

 

Certain statements in this release relating to, among other things, our future performance constitute forward-looking statements under the Private Securities Litigation Reform Act of 1995.  These statements include, but are not limited to: statements regarding revenues, costs and financial results for 2017 and beyond and expectations regarding the timing and results of our Double-Double initiative.  Words such as “anticipate,” “believe,” “could,” “driving,” “estimate,” “expect,” “goal,” “intend,” “may,” “plan,” “project,” “seek,” “should,” “will,” “would,” and similar expressions are intended to help identify forward-

looking statements.  Forward-looking statements reflect management’s current expectations, are based on judgments, are inherently uncertain and are subject to 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.  Examples of these risks, uncertainties and other factors include, but are not limited to the following: the impact of the economic and geopolitical environment on key aspects of our business, such as the demand for cruises, passenger spending, and operating costs; our ability to obtain new borrowings in amounts sufficient to satisfy our capital expenditures, debt repayments and other financing needs; incidents or adverse publicity concerning the travel industry generally or the cruise industry specifically; concerns over safety, health and security aspects of traveling; unavailability of ports of call; the uncertainties of conducting business internationally and expanding into new markets and new ventures; changes in operating and financing costs; the impact of foreign exchange rates, interest rate and fuel price fluctuations; vacation industry competition and changes in industry capacity and overcapacity; the impact of new or changing regulations on our business; emergency ship repairs, including the related lost revenue; the impact of issues at shipyards, including ship delivery delays, ship cancellations or ship construction cost increases; shipyard unavailability; and the unavailability or cost of air service.

 

More information about factors that could affect our operating results is included under the captions “Risk Factors” in our most recent quarterly report on Form 10-Q and “Management’s Discussion and Analysis of Financial Condition and Results of Operations” in our most recent annual report on Form 10-K and our recent quarterly report on Form 10-Q, copies of which may be obtained by visiting our Investor Relations website at www.rclinvestor.com or the SEC’s website at www.sec.gov. Undue reliance should not be placed on the forward-looking statements in this release, which are based on information available to us on the date hereof. We undertake no obligation to publicly update or revise any forward-looking statements, whether as a result of new information, future events or otherwise.

 

Adjusted Measures of Financial Performance

This press release includes certain adjusted financial measures as defined under Securities and Exchange Commission rules, which we believe provide useful information to investors as a supplement to our consolidated financial statements, which are prepared and presented in accordance with generally accepted accounting principles, or US GAAP.

 

The presentation of adjusted financial information is not intended to be considered in isolation or as a substitute for, or superior to, the financial information prepared and presented in accordance with US GAAP. These measures may be different from adjusted measures used by other companies. In addition, these adjusted measures are not based on any comprehensive set of accounting rules or principles. Adjusted measures have limitations in that they do not reflect all of the amounts associated with our results of operations as do the corresponding US GAAP measures.

 

A reconciliation to the most comparable US GAAP measure of all adjusted financial measures included in this press release can be found in the tables included at the end of this press release.  We have not provided a quantitative reconciliation of (i) projected Total revenues to projected Net Revenues, (ii) projected Gross Yields to projected Net Yields, (iii) projected Gross Cruise Costs to projected Net Cruise Costs and projected Net Cruise Costs Excluding Fuel and (iv) projected Net Income and Earnings per Share to projected Adjusted Net Income and Adjusted Earnings per Share because preparation of meaningful US GAAP projections of Total revenues, Gross Yields, Gross Cruise Costs, Net Income and Earnings per Share would require unreasonable effort. Due to significant uncertainty, we are unable to predict, without unreasonable effort, the future movement of foreign exchange rates, fuel prices and interest rates inclusive of our related hedging programs.  In addition, we are unable to determine the future impact of restructuring expenses or other non-core business related gains and losses which may result from strategic initiatives. These items are uncertain and could be material to our results of operations in accordance with US GAAP. Due to this uncertainty, we do not believe that reconciling information for such projected figures would be meaningful.

 

 

 

 

 

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