Royal Caribbean 2000 Q2 Earnings

Royal Caribbean Cruises Ltd. (RCC) reported net income of $108.3 million, or $0.56 per share, on revenues of $680.7 million for its second quarter ended June 30, 2000, compared to net income of $85.3 million, or $0.47 per share, on revenues of $617.7 million for its second quarter last year. Second quarter 1999 results included a one-time $14 million charge related to environmental fines.

This year’s income increases were primarily attributable to capacity expansion, according to RCC CFO Richard Glasier. Net revenue yields were up 2 percent during the period. RCC also reported 3.0 million passenger cruise days for a load factor of 106.1 percent during its second quarter this year, compared to 2.7 million passenger cruise days and a load factor of 104.8 percent last year.

RCC reported net income of $213.8 million, or $1.11 per share, on revenues of $1.4 billion for the first six months of 2000, compared to net income of $175.5 million, or $0.96 per share, on revenues of $1.2 billion last year.

Royal Caribbean International (RCI) President Jack Williams offered a market-by­ market assessment of booking patterns during the second quarter. “Europe, where our capacity is flat or slightly down, shows a load factor up from last year. The seven-night Mediterranean market has shown a nice yield improvement,” Williams said, adding, “The seven-night Caribbean market is also showing a nice yield improvement.”

Bermuda loads are slightly down, with flat yields but no dramatic change, he continued. On a more negative front, Williams noted “Alaska has been a challenge, especially in the shoulder season. Our capacity is down about 10 percent from last year, and we expect our yields will be slightly down versus 1999.” Even more challenging is the short-cruise market, said Williams. “We do continue to see close-in bookings, and our load factors are down. We will continue to see a decline in yields in 2000.” Looking toward 2001, however, he noted, “We do expect this market to strengthen.”

In general, while RCC executives have echoed cautious sentiments voiced by Carnival Corporation and P&O, their public assessment appears slightly less negative. “We do think that yields will be down somewhat during the second half of the year,” said Glasier, ”but not as much as our two principal competitors have indicated.” Williams attributed RCC’s higher level of optimism to the market’s strong reaction to the Voyager and Millennium-class vessels.

In other news, Glasier confirmed that RCC has now closed the deal with U.K. tour operator First Choice to develop a new cruise line targeted at Europeans and to source more European passengers for RCI and Celebrity Cruises vessels.

Said Glasier, “There are two parts to the transaction, which closed this month: the first is a marketing alliance to accelerate our European sourcing strategy, which we have accomplished by taking a 20 percent equity stake in First Choice. The second part is a 50-50 joint venture to create a new European cruise operation, which will begin operations at the end of 2001 with the Viking Serenade.” To finalize the two­ part deal, he said, RCC paid $250 million in cash and contributed the vessel. He explained that the new line’s startup date had been delayed from spring 2001 to fall 2001 because “when we worked through the business plan and the marketing plan, we decided to wait until after the summer season.”

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