Royal Caribbean Reports Record 2018 Results And Provides Forward Guidance

MIAMI, Jan. 30, 2019 /PRNewswire/ -- Royal Caribbean Cruises Ltd. (NYSE: RCL) today reported 2018 US GAAP earnings of $8.56 per share and adjusted earnings of $8.86 per share.  In addition, the company announced that 2019 adjusted earnings are expected to be in the range of $9.75 to $10.00 per share.

KEY HIGHLIGHTS

Full Year 2018:

• US GAAP Net Income was $1.8 billion or $8.56 per share and Adjusted Net Income was $1.9 billion or $8.86 per share in 2018 versus US GAAP and Adjusted Net Income of $1.6 billion or $7.53 per share in 2017.
• Gross Yields were up 3.8% in Constant-Currency (up 3.9% As-Reported).  Net Yields were up 4.4% in Constant-Currency (up 4.5% As-Reported).
• Gross Cruise Costs per Available Passenger Cruise Days ("APCD") increased 3.0% in Constant-Currency (up 3.2% As-Reported).  Net Cruise Costs ("NCC") excluding Fuel per APCD were up 4.1% in Constant-Currency (up 4.4% As-Reported).

Full Year 2019 Outlook:

• Adjusted earnings are expected to be in the range of $9.75 to $10.00 per share.
• Net Yields are expected to increase 6.5% to 8.5% in Constant-Currency and 6.0% to 8.0% As-Reported.  These metrics include approximately 350 basis points from the operation of Silversea, the new cruise terminal in Miami and the Perfect Day development.
• NCC excluding Fuel per APCD are expected to increase 8.5% to 9.0% in Constant-Currency and 8.25% to 8.75% As-Reported.  These metrics include approximately 650 basis points from the operation of Silversea, the cruise terminal in Miami and the Perfect Day development.

FULL YEAR 2018

US GAAP Net Income for the year was $1.8 billion or $8.56 per share and Adjusted Net Income was $1.9 billion or $8.86 per share.  This result beat the January 2018 mid-point guidance by $0.21 per share and equates to a 17.5% year-over-year growth in adjusted earnings per share.  This result was achieved despite the unfavorable impact from currency and fuel which negatively affected earnings by approximately $123 million or $0.58 per share versus the January 2018 guidance.

"This year our teams achieved record financial results while introducing four new vessels, acquiring Silversea Cruises, inaugurating two stunning cruise terminals and implementing Excalibur on about half of our fleet," said Richard D. Fain, chairman and CEO.  "By any measure 2018 was a particularly stellar year, and the strong Wave makes us optimistic about 2019 as well."

Net Yields were up 4.4% in Constant-Currency.  Strong demand for our core products, better onboard revenues and the consolidation from Silversea's operations drove the year-over-year increase.

NCC excluding Fuel per APCD were up 4.1% in Constant-Currency.  The main drivers behind the year-over-year increase were more drydock days, the lapping of hardware changes, investments in technology and the consolidation of Silversea's operations.

FOURTH QUARTER RESULTS

US GAAP Net Income for the fourth quarter was $315.7 million or $1.50 per share and Adjusted Net Income was $322.1 million or $1.53 per share.  Last year, US GAAP and Adjusted Net Income were $288.0 million or $1.34 per share.

Gross Yields were up 7.3% in Constant-Currency.  Net Yields were up 6.8% in Constant-Currency, slightly better than the midpoint of guidance.

Gross Cruise Costs per APCD increased 6.1% in Constant-Currency.  NCC excluding Fuel per APCD were up 5.1% in Constant-Currency, lower than guidance, driven by timing.

Favorability from depreciation and our joint ventures also contributed to the quarter's positive performance.

Lastly, a combination of a stronger dollar and fuel rates negatively impacted the quarter by $0.04.

Bunker pricing net of hedging for the fourth quarter was $546.70 per metric ton and consumption was 357,700 metric tons.

FULL YEAR 2019

The company expects full year Adjusted EPS guidance to be in the range of $9.75 to $10.00 per share.

Wave Season has started on a strong note and the company's overall booked position for 2019 is better than last year's record high and at higher rates.  Demand for our main products is strong across all quarters.

The company expects a Net Yield increase in the range of 6.5% to 8.5% in Constant-Currency and 6.0% to 8.0% As-Reported for the full year.  These metrics include approximately 350 basis points from the operation of Silversea, the cruise terminal in Miami and the Perfect Day water-park and resort on the island of Cococay in The Bahamas, which will launch in May of 2019.  As an ultra-luxury brand, Silversea's revenues and expenses, on a per APCD basis, are both higher than the company's average.  Moreover, our new Miami based terminal and Perfect Day will also increase both our revenue and cost metrics, since their additions do not include APCDs.  As such, we have provided the impact of these items on our yield and cost metrics' forward guidance.

"Our yield outlook for 2019 is very encouraging" said Jason T. Liberty, executive vice president and CFO.  "Demand for our brands continues to accelerate and we are well positioned for another year of double-digit growth in our earnings per share."

We are also very excited about the introduction of Celebrity Flora in May 2019 - the first ship designed for the Galapagos - and the introduction of Spectrum of the Seas in the China market in June 2019.  These new ships will also be contributors to 2019 yield growth.

NCC excluding Fuel are expected to be up 8.5% to 9.0% in Constant-Currency and 8.25% to 8.75% As-Reported.  These metrics include approximately 650 basis points from the operation of Silversea, the cruise terminal in Miami and the Perfect Day development.

Taking into account current fuel pricing, interest rates, currency exchange rates and the factors detailed above, the company estimates 2019 Adjusted EPS will be in the range of $9.75 to $10.00 per share.

FIRST QUARTER 2019

Net Yields are expected to increase 7.5% to 8.0% in Constant-Currency and 5.5% to 6.0% As-Reported.  These metrics include approximately 375 basis points from the operation of Silversea and the cruise terminal in Miami.

NCC excluding Fuel per APCD for the quarter are expected to be up approximately 10% in Constant-Currency (up 9.0% to 9.5% As-Reported).  These metrics include approximately 800 basis points from the operation of Silversea, the cruise terminal in Miami and the Perfect Day development.

The company also noted that Silversea's seasonality is similar to RCL's core products. Silversea, which was acquired on July 31 2018, will be accounted for on a one quarter lag.  Its traditionally weaker fourth quarter will therefore be included in RCL's first quarter results.

Based on current fuel pricing, interest rates, currency exchange rates and the factors detailed above, the company expects first quarter Adjusted EPS to be approximately $1.10 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 $163 million and $690 million of fuel expense in its first quarter and full year 2019 guidance, respectively.

Forecasted consumption is 58% hedged via swaps for 2019 and 54%, 28%, 19% 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 $377, $430, $463, $554 and $0, respectively.

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

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

LIQUIDITY AND FINANCING ARRANGEMENTS

As of December 31, 2018, liquidity was $1.3 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 scheduled debt maturities (excluding commercial paper) for 2019, 2020, 2021, 2022 and 2023 are $1.6 billion, $1.7 billion, $0.8 billion, $1.6 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 $2.9 billion, $3.3 billion, $2.9 billion, $3.4 billion and $1.0 billion, respectively.  Capacity changes for 2019, 2020, 2021, 2022 and 2023 are expected to be 8.6%, 4.1%, 9.0%, 7.7% and 2.8%, 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 Standard 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 Earnings per Share ("Adjusted EPS")

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

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 include the impairment loss related to Skysea Holding, the impairment loss and other costs related to the exit of our tour operations business, transaction costs related to the Silversea Cruises acquisition, the amortization of the Silversea Cruises intangible assets resulting from the acquisition, the noncontrolling interest adjustment to exclude the impact of the contractual accretion requirements  and the impact of the change in accounting principle related to the recognition of stock-based compensation expense from the graded attribution method to the straight-line attribution method for time-based stock awards.

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 which excludes canceled cruise days and drydock days.  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.

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 in "Constant-Currency" - 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.

Gross Cruise Costs

Gross Cruise Costs represent the sum of total cruise operating expenses plus marketing, selling and administrative expenses.  For the periods presented, Gross Cruise Costs exclude the impairment loss and other costs related to the exit of our tour operations business, transaction costs related to the Silversea Cruises acquisition and the impact of the change in accounting principle related to the recognition of stock-based compensation expense from the graded attribution method to the straight-line attribution method for time-based stock awards, which were included within 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 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 measures 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 controls and operates four global brands: Royal Caribbean International, Celebrity Cruises, Azamara Club Cruises and Silversea Cruises.  We are also a 50% joint venture owner of the German brand TUI Cruises and  a 49% shareholder in the Spanish brand Pullmantur Cruceros.  Together these brands operate a combined total of 60 ships with an additional 16 on order as of December 31, 2018.  They operate diverse itineraries around the world that call on all seven continents.  Additional information can be found on www.royalcaribbean.com, www.celebritycruises.com, www.azamaraclubcruises.com, www.silversea.com, www.tuicruises.com, www.pullmantur.es, or www.rclinvestor.com.  

Certain statements in this release relating to, among other things, our future performance constitutes 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 2018 and beyond. 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 or capital 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 currency exchange rates, interest rate and fuel price fluctuations; vacation industry competition and changes in industry capacity and overcapacity; the risks and costs associated with protecting our systems and maintaining integrity and security of our business information, as well as personal data of our guests, employees and others;  the impact of new or changing legislation and 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, as well as our other filings with the SEC, 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 defined as non-GAAP financial measures 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.

SOURCE Royal Caribbean Cruises Ltd.