Royal Caribbean reports better than expected quarter

oasis of the seasOCTOBER 24, 2013 — Royal Caribbean Cruises Ltd. (NYSE: RCL) shares rose this morning as the company reported "better than expected" third quarter results, updated its 2013 outlook and provided early commentary for 2014.

The company said the results were driven by stronger close-in demand and good cost control which more than offset the revenue and cost impacts from Celebrity Millennium's unscheduled drydocking after an August propulsion pod problem.

Constant-Currency Net Yield for the third quarter increased 2.6%, which was 110 basis points better than the mid-point of previous guidance. Stronger close-in demand in Europe and Asia, as well as robust onboard revenue drove the revenue improvement.

Royal Caribbean says that bookings on its cruise ships for 2014 remain ahead on both load factor and rate. Most markets and products are showing year-over-year improvement, including Europe, Alaska and Asia, while advanced bookings for the Caribbean are somewhat weaker.

The company says that 2014 should be the fifth consecutive year for yield growth and current earnings estimates are consistent with Street consensus of $3.06 per share.

"We are beginning to see the payoff from our efforts to improve returns during these challenging times," said Richard D. Fain, chairman and chief executive officer. "We have a ways to go, but our strategy and our investments are driving higher revenues and achieving cost efficiencies that bode well for 2014 and beyond. We are especially grateful for our employees' dedication to our profitability improvement initiatives," Fain continued.


Full Year 2013 The company's yield outlook has improved for the full year 2013. Constant-Currency Net Yield outlook for the full year has been raised to an increase of approximately 3%. Constant-Currency expectations for NCC excluding fuel are unchanged at an increase of 1% to 2%. Fuel costs are expected to be $3 million lower than previously calculated due primarily to energy conservation measures and the Millennium unscheduled drydock.

Based on the above and current fuel prices and currency exchange rates, the company expects that full year adjusted earnings per share will increase to a range of $2.30 to $2.35 per share.

Fourth Quarter 2013 Constant-Currency Net Yields are expected to be up 2% to 3% in the fourth quarter of 2013 and NCC excluding fuel are expected to increase 1% to 2% on a Constant-Currency basis. Based on current fuel pricing and currency exchange rates, the company expects that fourth quarter adjusted earnings will be in the range of $0.15 to $0.20 per share.

The company expects to incur additional restructuring and related expenses during the fourth quarter, on top of the $13.9 million it has recorded year-to-date.

Booking Environment The company's booked load factors are currently ahead of the same time last year in all four quarters of 2014. Booked prices for the first quarter are in-line with the same time last year and are up for the second, third and fourth quarters. Caribbean bookings have consistently been running ahead of the same time last year, although slightly below on a capacity adjusted basis.

"Caribbean pricing remains under some pressure, but while it is early in the booking cycle, we expect yields in the Caribbean to be flat to only slightly down in 2014," said Jason T. Liberty, chief financial officer. "Fortunately, the summer Caribbean is a core strength of ours and with the improvements we are seeing in our other products, we are forecasting overall yield improvement in the low single digits for 2014," said Liberty.

Booked load factors and rate are both up significantly year-over-year for Europe, which will account for 22% of the company's capacity in 2014. Despite the continued territorial dispute between China and Japan, Asian bookings are up considerably. Advanced bookings for Alaska and the company's other product lines are also providing encouragement for yield improvement.


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