Royal Caribbean Reports First Quarter Results and Updates 2012 Guidance

MIAMI, April 20, 2012 /PRNewswire/ -- Royal Caribbean Cruises Ltd. (NYSE, OSE: RCL) today reported better than expected first quarter results and updated its guidance for the remainder of 2012.

KEY HIGHLIGHTS

• Results For the First Quarter of 2012:
  • Net income was $47.0 million, or $0.21 per share, versus $78.4 million, or $0.36 per share, in 2011;
  • Net Yields increased 7.0% on a Constant-Currency basis (+6.4% As-Reported).   Net Cruise Costs ("NCC") excluding fuel increased 5.7% on a Constant-Currency basis (+5.1% As-Reported);
  • Consistent with prior guidance, approximately 350 basis points of the Net Yield improvement and approximately 500 basis points of the NCC excluding fuel increase during the quarter related to previously announced deployment initiatives and changes to the company's distribution system.

As expected, booking activity has continued to gradually improve over the last several months. Since the company's earnings announcement on February 2, 2012, the price of oil has risen which, at current levels and net of hedging, would increase bunker expenses $0.15 per share for the year.

• Second Quarter 2012:
  • Net Yields are expected to increase 4% to 5% on a Constant-Currency basis (+2% to + 3% As-Reported).  Earnings per share are expected to be within a range of ($0.05) to $0.05.
• Full Year 2012:
  • Net Yields are expected to increase 2% to 5% on a Constant-Currency basis (+1 to +4% As-Reported).  Earnings per share are expected to be within a range of $1.80 to $2.10.

"First quarter results were satisfactory given the difficult and uncertain operating environment and we continue to see gradual improvement in the demand for our great vacations," said Richard D. Fain, chairman and chief executive officer. Fain continued, "We did not expect the impact of the tragedy to be long term and we are seeing evidence the effects are waning."

As announced in the company's February 2, 2012 earnings release, Net Yields and NCC's this year are being influenced by two unique factors:

Firstly, the company made some changes related to its International distribution system in 2011 which carry on into 2012 and will increase yields. The changes also increase expenses, but the bottom line impact is not material.

Secondly, the company has increased its commitment in certain deployment initiatives which increase revenues but also increase related expenses. For example, China represents a strategic market initiative the company is augmenting significantly.

These factors are referred to collectively throughout this release as "deployment initiatives and changes to the company's distribution system" and unless otherwise noted, are reflected in the company's forward guidance. Also announced in February, these factors are expected to increase Net Yields by approximately 200 basis points and NCC excluding fuel by approximately 300 basis points for the full year 2012.

First Quarter 2012 Results

Royal Caribbean Cruises Ltd. today announced first quarter 2012 net income of $47.0 million, or $0.21 per share, versus $78.4 million, or $0.36 per share, in 2011. First Quarter 2012 results included a $0.01 per share mark-to-market gain on the company's fuel option portfolio versus an $0.11 per share gain in the first quarter of 2011. Except for fuel pricing, all operational metrics for the first quarter were in line with or better than the company's previous guidance.

Revenues improved to $1.8 billion in the first quarter of 2012 compared to $1.7 billion in the first quarter of 2011 as a result of capacity increases and yield improvements. Net Yields increased 7.0% on a Constant-Currency basis (+6.4% As-Reported). NCC excluding fuel increased 5.7% on a Constant-Currency basis (+5.1% As-Reported). Approximately 350 basis points of the Net Yield improvement and approximately 500 basis points of the NCC increases during the quarter relate to previously announced deployment initiatives and changes to the company's distribution system.

Bunker pricing net of hedging for the first quarter was $664 per metric ton and consumption was 342,000 metric tons.

2012 Outlook

Revenues

The company reported that overall, booking trends and pricing have been consistent with prior guidance.

Cumulative bookings since early February have been down mid single digits, although gradual improvement continues. Bookings from the United States have been running ahead of same time last year for the past four weeks.

As expected, pricing reductions within the range of the company's previous guidance have been implemented to address booking shortfalls on certain products through the end of the third quarter. Nevertheless, Constant-Currency booked APD's remain ahead of the same time last year in all quarters. Overall, pricing remains in line with or higher than the same time last year for all major itinerary groups with the exception of Europe.

Bookings for the fourth quarter of 2012 and for 2013 sailings remain strong, with both load factors and pricing running ahead of same time last year. In addition, the company has seen an increase in summer demand for its Pullmantur brand's tour product.

"Despite the extraordinary disruptions to our booking patterns this year, thus far the recovery is consistent with our forecasts," said Brian J. Rice, executive vice president and chief financial officer. Rice continued, "The Caribbean and Alaska remain healthy and as expected, a wide range of outcomes still persist regarding Europe this summer. While the marketplace is still volatile and uncertain, we are narrowing our yield and EPS ranges to reflect our best estimates at this time."

Taking into account current booking patterns, the company has narrowed its range of guidance for full year 2012 Net Yield increases to +2% to +5% on a Constant-Currency basis and +1% to +4% on an As-Reported basis. Excluding deployment initiatives and changes to the company's distribution system, Net Yields are projected to be flat to up 3% on a Constant-Currency basis for the full year 2012.

Expenses

For the full year, NCC excluding fuel are expected to increase approximately 5% on a Constant-Currency basis (approximately +4% As-Reported). Excluding deployment initiatives and changes to the company's distribution system, Constant-Currency NCC excluding fuel are expected to increase approximately 2% on a comparable basis to prior year. Versus February guidance, increased sales in the Pullmantur brand's tour product are modestly increasing full year cost estimates by 50 basis points.

Earnings Guidance

Taking into account current fuel pricing and currency exchange rates, and the factors detailed above, the company currently estimates 2012 earnings will be in the range of $1.80 to $2.10 per share.

SECOND QUARTER OUTLOOK

Revenues

For the second quarter of 2012, Net Yields are expected to increase 4% to 5% on a Constant-Currency basis (+2% to +3% As-Reported). Excluding previously referenced deployment initiatives and changes to the company's distribution system, Constant-Currency Net Yields are projected to increase approximately 2%.

Expenses

For the second quarter of 2012, NCC excluding fuel are expected to increase 10% to 11% on a Constant-Currency basis (+8% to +9% As-Reported). Approximately half of the NCC excluding fuel increase in the quarter relates to the previously referenced deployment initiatives and changes to the company's distribution system. NCC excluding fuel are higher than normal in the second quarter due to marketing and related cost shifts from the first quarter and increased drydock days and related maintenance.

Earnings Guidance

Taking into account current fuel pricing and currency exchange rates, and the factors detailed above, the company currently estimates that second quarter 2012 EPS will be within a range of ($0.05) to $0.05.

FUEL EXPENSE & GUIDANCE SUMMARY

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 $232 million and $923 million of fuel expense in its second quarter 2012 and full year 2012 guidance, respectively.

Forecasted consumption is now 56% hedged via swaps for the remainder of 2012 and 51%, 33% and 20% hedged for 2013, 2014 and 2015, respectively. For the same four-year period, the average cost per metric ton of the hedge portfolio is approximately $525, $545, $593 and $580, respectively.

In addition to the above-mentioned fuel hedges, the company also has fuel options to further protect against escalating fuel prices. The company currently has options expiring in 2013 at a strike price of $90 bbl that cover an estimated 9% of 2013 consumption.

The company provided the following fuel statistics for the second quarter and full year 2012:

*excludes mark-to-market impact of fuel options.

The company provided the following additional guidance for the second quarter and full year of 2012:

Liquidity and Financing Arrangements

As of March 31, 2012, liquidity was $1.1 billion, including cash and the undrawn portion of the company's unsecured revolving credit facilities. Additionally, the company has committed unsecured financing on its newbuilds. The company noted that debt maturities for 2012, 2013, and 2014 are $600 million, $1.6 billion, and $1.9 billion, respectively.

Capital Expenditures and Capacity Guidance

Based on current ship orders, projected capital expenditures for 2012, 2013, 2014 and 2015 are $1.3 billion, $600 million, $1.1 billion and $1.0 billion, respectively.

Capacity increases for 2012, 2013, 2014 and 2015 are 1.5%, 1.1%, 1.4% and 6.9%, respectively.

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 web site at www.rclinvestor.com.

Selected Operational and Financial Metrics

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 the main non-capacity drivers that cause our cruise revenues and expenses to vary.

Constant-Currency

We believe Net Yields and Net Cruise Costs are our most relevant non-GAAP financial measures. However, a significant portion of our revenue and expenses are denominated in currencies other than the United States dollar. Because our reporting currency is the United States 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 is just one of many elements impacting our revenues and expenses, it can be an important element. For this reason, we also monitor Net Yields and Net Cruise Costs 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. 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 significantly change the impact of the purely currency based fluctuations.

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 and Net Cruise Costs Excluding Fuel

Net Cruise Costs and Net Cruise Costs 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 (each of which is described above under the Description of Certain Line Items heading). 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. A reconciliation of historical Gross Cruise Costs to Net Cruise Costs and Net Cruise Costs Excluding Fuel is provided below under Results of Operations. We have not provided a quantitative reconciliation of projected Gross Cruise Costs to projected Net Cruise Costs and projected Net Cruise Costs Excluding Fuel due to the significant uncertainty in projecting the costs deducted to arrive at these measures. Accordingly, we do not believe that reconciling information for such projected figures would be meaningful.

Net Debt-to-Capital

Net Debt-to-Capital is a ratio which represents total long-term debt, including the current portion of long-term debt, less cash and cash equivalents ("Net Debt") divided by the sum of Net Debt and total shareholders' equity. We believe Net Debt and Net Debt-to-Capital, along with total long-term debt and shareholders' equity are useful measures of our capital structure.

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 it is the most relevant measure of our pricing performance because it reflects 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. 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. Accordingly, we do not believe that reconciling information for such projected figures would be meaningful.

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.

Royal Caribbean Cruises Ltd. is a global cruise vacation company that operates Royal Caribbean International, Celebrity Cruises, Pullmantur, Azamara Club Cruises, CDF Croisieres de France, and TUI Cruises through a 50% joint venture. The company has a combined total of 39 ships in service and three under construction. It also offers unique land-tour vacations in Alaska, Asia, Australia, Canada, Europe, Latin America and New Zealand. Additional information can be found on www.royalcaribbean.com, www.celebrity.com, www.pullmantur.es, www.azamaraclubcruises.com, www.cdfcroisieresdefrance.com, www.tuicruises.com 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 expected financial results for the second quarter and full year 2012 and the costs and yields expected in 2012 and other future periods. Words such as "anticipate," "believe," "could," "estimate," "expect," "goal," "intend," "may," "plan," "project," "seek," "should," "will," and similar expressions are intended to identify these forward-looking statements. Forward-looking statements reflect management's current expectations, 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 environment on the demand for cruises, the impact of the economic environment on our ability to generate cash flows from operations or obtain new borrowings from the credit or capital markets in amounts sufficient to satisfy our capital expenditures, debt repayments and other financing needs, the uncertainties of conducting business internationally and expanding into new markets, changes in operating and financing costs, vacation industry competition and changes in industry capacity and overcapacity, emergency ship repairs, including the related lost revenue, the impact of ship delivery delays, ship cancellations or ship construction price increases, financial difficulties encountered by shipyards or their subcontractors and incidents or adverse publicity concerning the cruise vacation industry such as the Costa Concordia casualty 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" and "Management's Discussion and Analysis of Financial Condition and Results of Operations" in our most recent annual report on Form 10-K and subsequent quarterly reports on Form 10-Q, copies of which may be obtained by visiting our Investor Relations web site at www.rclinvestor.com or the SEC's web site 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.

Non-GAAP Measures of Financial Performance

This press release includes certain non-GAAP 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 GAAP.

The presentation of non-GAAP 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 GAAP. These measures may be different from non-GAAP measures used by other companies. In addition, these non-GAAP measures are not based on any comprehensive set of accounting rules or principles. Non-GAAP measures have limitations in that they do not reflect all of the amounts associated with our results of operations as do the corresponding GAAP measures.

A reconciliation to the most comparable GAAP measure of all non-GAAP financial measures included in this press release can be found in the tables included at the end of this press release.

Financial Tables Follow