Royal Caribbean IPO Details

Royal Caribbean Cruise Line’s initial public offering (IPO) of 10 million shares of common stock has been priced at $18 per share. At press time, the stock was trading on the New York Stock Exchange under the symbol “RCL” at $18.75.

The shares are offered both in the United States and internationally by a group of underwriters led by Lehman Brothers, Lazard Freres & Co. and Merrill Lynch & Co. The net proceeds from the offering will be used to repay debt and for general corporate purposes.

In a prepared statement, Richard D. Fain, Chairman and CEO, said “we are pleased at the market’s very strong reception of this offering and excited about becoming a public company.”

First Quarter

RCCL bas announced net income of $20.2 million on revenues of $270.4 million for the first quarter ended April 2, 1993, compared to net income of $4.4 million on revenues of $215.2 million for the same quarter of 1992.

The revenue increase was in part attributed to a 203 percent increase in passenger cruise days as the result of added capacity following the introduction of the 2,354-passenger Majesty of the Seas in April 1992 and improved fleet yields resulting from the implementation of yield management programs.

Operating income for the flrst quarter was $38.9 million, compared to $22.9 million for the same quarter in 1992, a reflection of continuing economies of scale, higher revenue yields and increased operating margins resulting from improved cost controls, according to RCCL.

RCCL has offered 10 million shares, or 16.2 percent of its total stock, at $18 a share, generating gross proceeds of $180 million, and net proceeds to RCCL of $168 million.

The former owners, Anders Wilhelm Sen & Co. of Norway and the Pritzker family, have reduced their holdings to 41 percent each. Fain holds two percent ownership in RCCL.

The offering puts a total evaluation of RCCL at approximately $1.1 billion. In 1988, RCCL was evaluated at approximately $800 million, when it was reorganized under new ownership. The company has since added three more ships and grown substantially.

RCCL did rather well in the first quarter of 1993. Operating income, expressed as a percentage of revenues, were 143 percent. The inevitable comparison to Carnival Cruise Lines shows that Carnival generated operating income equal to 15.8 percent of revenues. Debt service for RCCL, however, diluted its net income to 7.5 percent of revenues compared to 15.7 percent for Carnival.

Analysts are predicting that RCCL will continue on its earnings course throughout the year, indicating total net income for the year around $100 million.

RCCL also did well in terms of load factors, according to estimates made by this newsletter (CIN), RCCL achieved an average load factor of 98.1 percent in its first quarter ended March 31, 1993, compared to 98.2 percent last year. Carnival achieved slightly better load factors at 100.9 percent for its first quarter, ended February 28, 1993, and 102 percent in the same period last year.

At present, both RCCL and Carnival trade at price/earnings (P/E) ratios around 16 and 17.

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