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Royal Caribbean Reports Second Quarter and Updates Full Year Guidance

Royal Caribbean Cruises Ltd. (NYSE, OSE: RCL) today reported second quarter results, updated its 2013 outlook and commented on initiatives to enhance profitability.


•  Net Income for the quarter was $24.7 million, or $0.11 per share, compared to a net loss of ($3.7 million), or ($0.02) per share, in 2012. Earnings during the quarter include an impact of $0.05 per share related to the Grandeur fire and a non-cash charge of $0.07 per share accounting correction related to the company’s affinity credit card program.

•  For the full year 2013, the company’s earnings outlook is essentially unchanged from the update that was provided in late May, which reflected the impact of the Grandeur of the Seas fire and the strengthening of the US dollar. EPS is expected to be in the range of $2.20 to $2.30. Constant-Currency Net Yields are expected to increase approximately 3% (excluding the affinity card adjustment).

•  The company’s cost control efforts are showing encouraging results. Excluding the Grandeur fire, Constant-Currency NCC excluding fuel increased 1.5% in the second quarter. NCC excluding fuel are now expected to grow 1% to 2% for the year (compared to prior guidance of 2% to 3%).

•  The company’s better than expected expenses in the second quarter and its reduced cost guidance are reflective of actions the company is taking as part of a broad profitability improvement program. These initiatives are aimed at increasing revenues and reducing expenses with a goal of improving the company’s returns on invested capital. While it is still early in the operating plan process, the company’s objective is to generate yield improvement and at least flat NCC excluding fuel in 2014.

“It is rewarding to see things coming together. While the operating environment has been frustrating, our bookings trajectory is looking good and I’m thrilled to see our cost initiatives beginning to pay off,” said Richard D. Fain, chairman and chief executive officer. “Exploiting this positive momentum will help us take our returns and our profitability to the next level,” Fain continued.

Second Quarter 2013 Results

Royal Caribbean today announced second quarter 2013 net income of $24.7 million, or $0.11 per share, versus a loss of ($3.7 million) or ($0.02) per share, in the second quarter of 2012. Included in the 2013 figures is a $0.05 per share impact related to the Grandeur fire and a $0.07 non-cash charge to correct an underestimate of the reward liability for its affinity credit card. Absent these two charges, earnings per share would have been $0.23 per share.

Net Yields on a Constant-Currency basis increased 2.8% for the quarter. Ticket revenue for the second quarter came in as expected, while on-board revenue outperformed expectations. Excluding the affinity card adjustment, Constant-Currency Net Yields in the quarter increased 3.9% versus the prior year.

NCC excluding fuel were better than anticipated and increased 2.3% on a Constant-Currency basis (1.5% excluding the impact from Grandeur). Costs were controlled across all areas of the business with hotel, vessel and administrative expense categories all performing more efficiently than expected.

Bunker pricing net of hedging for the second quarter was $697 per metric ton and consumption was 6,400 metric tons lower than expected at 333,600 metric tons.


Full Year 2013

Constant-Currency yields are expected to increase 2% to 3% (approximately 3% excluding the affinity card adjustment). The main shortfalls versus prior guidance are the affinity card adjustment, China sailings due to the conflict between China and Japan, and a modest reduction in expectations for the Caribbean. Despite ongoing discounting in the region, the company’s Caribbean forecast was only modestly impacted and demand remains solid. Europe continues to demonstrate year-over-year improvement, with net ticket yields expected to increase in the mid-single digits for the year. In aggregate, both pricing and booked load factors are higher for the second half of the year than at the same time last year.

Onboard revenues have benefited from improved U.S. consumer spending and the new onboard revenue venues the company has added through its revitalization efforts.

NCC excluding fuel are expected to be up 1% to 2% on a Constant-Currency basis. The company continues to focus on cost savings initiatives and has lowered the midpoint of its expense guidance by 100 basis points for the year.

Fuel costs are expected to be relatively unchanged from the company’s original guidance despite the recent increases in oil prices due to hedging and energy conservation measures.

Additionally, the US dollar has continued to strengthen against the basket of currencies in which the company trades. The US dollar is 5% stronger than when the company first issued guidance in January, the effect of which is detailed in the table below.

Full year earnings per share are expected to be in the range of $2.20 to $2.30.

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