Royal Caribbean Q1 Results

Royal Caribbean Cruises today announced a net loss for the first quarter 2009 of $36.2 million, or $0.17 per share, compared to net income of $75.6 million, or $0.35 per share, in 2008. The company said the results were significantly better than prior guidance of a loss between $0.30 and $0.35.

Revenues were $1.3 billion, versus $1.4 billion in the first quarter of 2008. Net Yields decreased 13.5% from the prior year. The overall revenue environment was slightly better than previous guidance due to stable close-in booking patterns. Onboard net yield declined consistent with the company’s prior expectations.

Fuel costs benefited from reductions in at-the-pump pricing and continued consumption reduction initiatives and were $10 million better than previous estimates. NCC declined 7.0% versus the first quarter of 2008 and excluding fuel declined 6.8%.

Revenue Environment

While consumer spending continues to be impacted by the economy, the company noted that its overall revenue environment has remained relatively consistent since the end of last year. Discounting continues to be aggressive, yet remains within the range of previous guidance and booking volumes have been sufficient for the company to achieve its forecasted occupancy levels. “In January, we noted that our booking patterns had begun to stabilize but that there was still a high level of uncertainty in the market,” said Brian J. Rice, executive vice president and chief financial officer. “Since then, we have seen consumer behavior stabilize even further. We are obviously not completely back to equilibrium yet, but the predictability of our bookings gets better every day and the risk of a dramatic deviation continues to fall.”

Second quarter net yields are projected to decline approximately 17% on an as-reported basis and approximately 12% on a constant dollar basis. Third quarter yields are projected to perform slightly better than the second quarter on both an as-reported and constant dollar basis, mainly due to the company’s Pullmantur brand, which will have much easier comparables from the prior year due to the earlier deterioration in the Spanish economy, according to Royal Caribbean.

The second and third quarter net yields are projected to show the largest yield declines on an as-reported basis, as each quarter is impacted by approximately five percentage points based on current exchange rates. On a constant dollar basis, the second and third quarters are also being impacted by relatively weaker demand for the company’s seasonal premium itineraries such as Alaska.

Many of these same factors indicate that the fourth quarter will not suffer as large a revenue decline. In addition to having more favorable currency comparables and a product mix that is weighted more heavily toward relatively stronger Caribbean products, the company’s fourth quarter will be compared to last year’s fourth quarter which already included an impact from the economic downturn. Lastly, bookings for the Oasis of the Seas are extremely robust and are expected to have a significant accretive impact on yields.

For the full year, the company expects Net Yields to decline 12% – 13% on an as-reported basis and 9% – 10% on a constant dollar basis. “A later booking pattern continues to make forecasting difficult, but our visibility gets better every day,” said Rice. “We have lowered our revenue forecast marginally to take into account selected areas of weakness including a more cautious view of onboard revenue, but overall, our bookings continue to come in within the range of our earlier expectations. In today’s world, that is significant.”

Forward Guidance Summary

The company’s guidance for the second quarter is for earnings per share to be from flat to a loss of $0.05 and the full year guidance is

As of March 31, 2009, liquidity was $1.1 billion, including cash and the undrawn portion of the company’s unsecured revolving credit facility. Liquidity improved by roughly $100 million during the first quarter of 2009, primarily due to the net proceeds from the sale of Galaxy to the Company’s German joint-venture, TUI Cruises.

In April, the company announced that it had obtained financing commitments for up to 80% of the cost ($1.05 billion) of Royal Caribbean International’s Oasis of the Seas, which is scheduled for delivery in the fourth quarter of 2009.

The company also entered into a credit agreement with KfW-IPEX for an unsecured term loan for up to 80% of the contract price of Celebrity Equinox (USD Equivalent of euro 412M), which is scheduled for delivery in the third quarter. The loan is in conjunction with an agreement to provide financing which was executed in 2005.

Also during the quarter, the company entered into an agreement with KfW-IPEX for a 12-year unsecured term loan for up to 80% of the contract price of Celebrity Solstice IV (USD Equivalent of euro 444M), which is scheduled for delivery in 2011. The loan will bear interest at a fixed rate of 5.82%.

Based on current ship orders, projected capital expenditures for 2009, 2010, 2011 and 2012, estimates are unchanged at $2.1 billion, $2.2 billion, $1.0 billion, and $1.0 billion, respectively.

Projected capacity increases for the same four years are 5.9%, 11.4%, 8.4%, and 3.0%, respectively. The company’s capacity figures have been updated for the sale of Pullmantur’s Oceanic, which was sold to its new owner during the month of April.

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