Royal Caribbean Cruises Ltd today reported full year 2012 results and provided an initial outlook for 2013.
Results For the Full Year 2012:
Full year Net Yields increased 3.0% on a Constant-Currency basis; 1.5% As-Reported;
Net Cruise Costs ("NCC") excluding fuel increased 4.2% on a Constant-Currency basis; 2.7% As-Reported;
Net income before the non-cash impairment charge described below was $432.2 million, or $1.97 per share, versus net income of $607.4 million, or $2.77 per share, in 2011. This exceeded the company's previous guidance due to better yields from late bookings, partially offset by super-storm Sandy; and
The company recorded non-cash impairment charges totaling $413.9 million related to the Pullmantur brand during the fourth quarter resulting in reported net income of $18.3 million, or $0.08 per share for the full year of 2012.
Net Yields are expected to increase 2% to 4% on a Constant-Currency and 3% to 5% on an As-Reported basis;
NCC excluding fuel are expected to be up 2% to 3% on a Constant-Currency basis and up approximately 3% on an As-Reported basis, directly related to increased insurance expenses and investments in marketing and technology; and
Earnings per share are expected to be within a range of $2.30 to $2.50.
"Excluding the Pullmantur impairment charges, our operating results came in remarkably close to our forecast from a year ago, which is notable given the challenging environment," said Richard D. Fain, chairman and chief executive officer.
Fain continued, "Looking forward, we see a tale of two continents; North America is doing well, while parts of Europe continue to be a challenge. Nonetheless, we are encouraged that the former will countervail the latter allowing us to drive meaningful yield growth in 2013."
Pullmantur Impairment Charges
The company conducts an analysis of the carrying value of its assets on a regular basis and in the past has pointed out the risks related to Pullmantur and the Spanish economy.
While the 2013 WAVE season is broadly off to a promising start, booking volumes and pricing are down substantially in Spain due to the impact of additional austerity measures there, the lingering impact of the Costa Concordia tragedy and other factors.
Accordingly, the company has recorded a total impairment charge of $413.9 million. Of this amount, approximately $319.2 million relates to goodwill and the balance relates to a valuation allowance for deferred tax assets, a reduction in the value of the trademarks and an impairment charge related to three aircraft that Pullmantur owns and operates.
Regarding the impairment charge, Richard D. Fain, chairman and chief executive officer commented, "While it is appropriate that we record this impairment charge now, we remain confident in and committed to the Pullmantur brand. Despite terribly challenging multi-year economic headwinds, Pullmantur's management team has done an excellent job in maintaining the brand's market-leading position while simultaneously diversifying guest sourcing into new markets."
Fourth Quarter 2012 Results
Royal Caribbean Cruises Ltd. today announced fourth quarter 2012 net income before impairment charges of $21.1 million, or $0.10 per share, versus income of $36.6 million, or $0.17 per share, in the fourth quarter of 2011. During the quarter the company recorded non-cash impairment charges totaling $413.9 million related to the company's Pullmantur brand.
Both close-in bookings and onboard spending were stronger than expected for the fourth quarter, resulting in a Net Yield increase of 1.8% on a Constant-Currency basis versus prior guidance of up approximately 1%.
NCC excluding fuel were in-line with previous expectations and increased 1.0% on a Constant-Currency basis and 0.4% on an As-Reported basis.
Approximately 110 basis points of the Net Yield improvement and approximately 60 basis points of the NCC excluding fuel increases during the quarter relate to previously announced deployment initiatives and changes to the company's international distribution system.
Bunker pricing net of hedging for the fourth quarter was $671 per metric ton and consumption was 341,800 metric tons.
Full Year 2012 Results
Full year 2012 net income before impairment charges was $432.2 million, or $1.97 per share, versus income of $607.4 million, or $2.77 per share for full year 2011. Net Yields increased 3.0% on a Constant-Currency basis; 1.5% As-reported. NCC excluding fuel increased 4.2% on a Constant-Currency basis; 2.7% As-Reported.
Approximately 240 basis points of the Net Yield improvement and approximately 350 basis points of the NCC excluding fuel increases for the year relate to previously announced deployment initiatives and changes to the company's international distribution system. The company does not anticipate meaningful influences on yields or NCC measurements from changes in deployment or international distribution in 2013.
Bunker pricing net of hedging for full year 2012 was $668 per metric ton and consumption was 1,361,100 metric tons.
Full Year 2013
Booking activity in the fourth quarter was slightly lower than the same time last year, with the greatest decline coming in the aftermath of super-storm Sandy. However, the company has observed a much stronger booking pattern since the beginning of WAVE season and demand trends have been quite healthy.
In recent weeks, booking volumes have been running approximately 20% ahead of the same time last year, due in part to the slower booking trends the company experienced after the Costa Concordia grounding in January of 2012. Normalizing for this favorable comparison, the company still considers the WAVE season to be off to a strong start, particularly from U.S. points of sale. Booking volumes are exceeding those during the same period in 2011 and in the aggregate, forward booked load factors and pricing are higher than at this time in both 2011 and 2012.
Full year Net Yields in 2013 are expected to increase 2% to 4% on a Constant-Currency basis and 3% to 5% on an As-Reported basis.
"We were proactive in reducing our deployment and guest sourcing programs from Europe due to uncertain consumer spending patterns as austerity measures continue to pressure the region," commented Brian J. Rice, vice-chairman and chief financial officer. Rice continued, "Encouragingly though, demand from our other source markets, especially the U.S., is strong and should more than offset any ongoing weakness in Europe. In fact, we are optimistic that we will achieve record yields in the Caribbean and Alaska this year."
NCC excluding fuel are expected to be up 2% to 3% on a Constant-Currency basis and up approximately 3% on an As-Reported basis, directly related to higher insurance costs and investments in marketing activities and technology. These investments are expected to drive yield accretion in 2013 with accelerating benefits in pricing in 2014 and beyond. Excluding the aforementioned insurance, marketing and technology investments, NCC excluding fuel are expected to be approximately flat year-over-year on a Constant-Currency basis.
Taking into account current fuel pricing and currency exchange rates and the factors detailed above, the company currently estimates 2013 earnings will be in the range of $2.30 to $2.50 per share.