Royal Caribbean Achieves Double-Double, Reports 2017 Results, And Provides Forward Guidance

MIAMI, Jan. 24, 2018 /PRNewswire/ -- Royal Caribbean Cruises Ltd. (NYSE: RCL) today reported 2017 US GAAP and adjusted earnings of $7.53 per share — beating the Double-Double EPS target and the mid-point of previous guidance by $0.75 and $0.16, respectively.  In addition, the company announced that 2018 adjusted earnings are expected to be in the range of $8.55 to $8.75 per share.

KEY HIGHLIGHTS

Full Year 2017:

• US GAAP and Adjusted Net Income were $1.63 billion or $7.53 per share. Last year, US GAAP Net Income was $1.28 billion, or $5.93 per share, and Adjusted Net Income was $1.31 billion, or $6.08 per share.
• Gross Yields were up 5.7% on a Constant-Currency basis (up 5.9% As-Reported). Net Yields were up 6.4% on a Constant-Currency basis (up 6.5% As-Reported).
• Gross Cruise Costs per APCD increased 1.9% on a Constant-Currency and As-Reported basis. Net Cruise Costs ("NCC") excluding Fuel per APCD were up 2.0% on a Constant-Currency and As-Reported basis.

Full Year 2018 Outlook:

• Adjusted earnings are expected to be in the range of $8.55 to $8.75 per share.
• Net Yields are expected to increase 1.5% to 3.5% on a Constant-Currency basis (up 2.75% to 4.75% As-Reported).
• NCC excluding Fuel per APCD are expected to be up 1.5% to 2.0% on a Constant-Currency basis (up 2.0% to 2.5% As-Reported).

FULL YEAR 2017

US GAAP and Adjusted Net Income for the year were $1.63 billion or $7.53 per share.  This result beat the January 2017 mid-point guidance by $0.53 or $115 million and equates to a 23.8% year-over-year growth in earnings per share.  This result was achieved despite an unusually ferocious hurricane season which hurt earnings by approximately $55 million or $0.26 per share.

"Our teams worked hard to achieve the Double-Double goals and now they have done it", said Richard D. Fain, chairman and CEO.  "Each of the brands performed excellently during the past year raising their guest satisfaction and employee engagement scores to new heights.  This augurs well as we focus on our previously announced 20/20 Vision."

Net Yields increased 6.4% on a Constant-Currency basis versus 3.9% in 2016.  A combination of strong demand for our North American and European products as well as our onboard offerings drove the impressive growth rate. 

NCC excluding Fuel per APCD were up 2.0% on a Constant–Currency basis mainly driven by investments in revenue generating activities, relief efforts due to the hurricanes and payroll related incentives. 

"We started the year very well positioned to achieve our Double-Double goals, and 2017 ended up being exceptionally good, resulting in the company exceeding these goals," said Jason T. Liberty, executive vice president and CFO.  "Strong demand trends for cruising coupled with disciplined cost management helped deliver another record year for the company."

FOURTH QUARTER RESULTS

US GAAP and Adjusted Net Income for the fourth quarter were $288.0 million or $1.34 per share.  Last year, US GAAP and Adjusted Net Income were $261.1 million or $1.21 per share and $264.7 million, or $1.23 per share. 

Gross Yields were up 4.1% on a Constant-Currency basis.  Net Yields were up 3.9% on a Constant-Currency basis, beating the mid-point of the guidance by 165 basis points.  Strong close-in demand for our core products combined with better than expected onboard spend drove the outperformance.

Gross Cruise Costs per APCD increased 5.6% on a Constant-Currency basis.  Net Cruise Costs ("NCC") excluding Fuel per APCD were up 8.7% on a Constant-Currency basis.

Thank-you, Thank-you Bonus
As previously stated the company has now successfully completed the Double-Double — earnings per share have more than doubled during the Double-Double period and ROIC has risen above 10%.  This success has been possible due to the passion and commitment of our people and the company has decided to give them a surprise bonus for their Double-Double efforts. 

Today, the company announced that it will give a bonus to every one of its 66,000 employees equal to 5% of their salary, excluding corporate officers. This Thank-you, Thank-you Bonus will be in the form of equity grants vesting over 3 years, thus giving every employee a stake in the company's future success.  The Thank-you, Thank-you Bonus totals approximately $80 million.  It will also include major upgrading of crew facilities and recreation areas.

"Our people are what make our business," said Richard D. Fain, chairman and CEO.  "We wanted to show our appreciation in a tangible way and we wanted it to reach every employee regardless of level in the organization.  It was our way of saying thanks a million; in fact, thanks 80 million."

FULL YEAR 2018

The company's booked position for 2018 is better than last year's record high and at higher rates.  North American and European consumers continue to drive strong demand for all of our main products.  These trends, coupled with strong onboard spend and a positive outlook for our Asia Pacific products, are positioning the company for a 9^th consecutive year of yield growth.

We are also very excited about the 2018 introduction of both Symphony of the Seas and Azamara Pursuit in Europe, in April and August respectively, and the introduction of Celebrity Edge in Fort Lauderdale in November.  These new ships will be important contributors to 2018 yield growth.

The company expects a Net Yield increase in the range of 1.5% to 3.5% on a Constant-Currency basis and 2.75% to 4.75% on an As-Reported basis for the full year.

"Our yields are increasing on top of an exceptional 6.4% Net Yield growth experienced in 2017," said Jason T. Liberty, executive vice president and CFO.  "This is quite extraordinary and a testament to the strength in the demand for cruising and our brands."

NCC excluding Fuel are expected to be up 1.5% to 2.0% on a Constant-Currency and 2.0% to 2.5% on an As-Reported basis.

Taking into account current fuel pricing, interest rates, currency exchange rates and the factors detailed above, the company estimates 2018 Adjusted EPS will be in the range of $8.55 to $8.75 per share.

FIRST QUARTER 2018

Net Yields are expected to increase 3.0% to 3.5% on a Constant-Currency basis and approximately 5.5% As-Reported.

NCC excluding Fuel per APCD for the quarter are expected to be up approximately 10.0% on a Constant-Currency basis (up approximately 11.0% As-Reported).  Operating costs for the full year show continued good discipline, although the cadence of costs between quarters will vary.  Costs in the first quarter are expected to be higher driven by more drydock days, fewer APCDs and the lapping of hardware changes.

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 $0.95 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 $162 million and $675 million of fuel expense in its first quarter and full year 2018 guidance, respectively. 

Forecasted consumption is 50% hedged via swaps for 2018 and 46%, 36%, 14% and 0% hedged for 2019, 2020, 2021 and 2022, respectively. For the same five-year period, the average cost per metric ton of the hedge portfolio is approximately $441, $331, $340, $351 and $0, respectively. 

The company provided the following fuel statistics for the first quarter and full year 2018:

In summary, the company provided the following guidance for the first quarter and full year 2018:

LIQUIDITY AND FINANCING ARRANGEMENTS

As of December 31, 2017, liquidity was $2.2 billion, including cash and the undrawn portion of the company's unsecured revolving credit facilities.  The company noted that scheduled debt maturities for 2018, 2019, 2020, 2021 and 2022 are $1.2 billion, $0.8 billion, $1.3 billion, $0.7 billion and $1.4 billion, respectively.

CAPITAL EXPENDITURES AND CAPACITY GUIDANCE 

Based upon current ship orders, projected capital expenditures for full year 2018, 2019, 2020, 2021 and 2022 are $3.4 billion, $2.1 billion, $2.5 billion, $2.5 billion and $2.9 billion, respectively.  Capacity changes for 2018, 2019, 2020, 2021 and 2022 are expected to be 3.9%, 6.9%, 4.0%, 7.7% and 8.0%, 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 included the net loss related to the elimination of the Pullmantur reporting lag, the net gain related to the 51% sale of the Pullmantur and CDF Croisières de France ("CDF") brands, restructuring charges and other initiative costs related to our Pullmantur right-sizing strategy and other restructuring initiatives.

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.  For the year ended December 31, 2016, APCDs reported 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 targeted 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 the net gain related to the 51% sale of the Pullmantur and CDF brands, restructuring charges and other initiative costs related to our Pullmantur right-sizing strategy and other restructuring initiatives.

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. Net Yields excludes initiative costs related to the sale of the Pullmantur and CDF brands.

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 36% shareholder in the Chinese brand SkySea Cruises. Together, these brands operate a combined total of 49 ships with an additional thirteen on order as of December 31, 2017.  They operate diverse itineraries around the world that call on approximately 540 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 20/20 Vision initiatives.  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 exchange rates, interest rate and fuel price fluctuations; vacation industry competition and changes in industry capacity and overcapacity; 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.

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SOURCE Royal Caribbean Cruises Ltd.