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1Q guidance disappointing given high expectations

"These improved results reflect the strong reception our new ships have received along with the solid branding our different cruise brands have enjoyed. WAVE is off to a solid start and supports our earlier confidence in meaningful pricing recovery and record financial performance in 2011."

-Richard D. Fain, chairman and chief executive officer


  • "During this last quarter, extreme weather conditions impacted some of the company's voyages and impaired some of its guests' ability to make their departures. Absent these weather disruptions, Net Yields on a Constant Currency basis would have increased 4.7%, in line with previous guidance."
  • "Early "WAVE season" bookings have been encouraging and booked load factors and average per diems are ahead of same time last year."
  • "In commenting on its guidance, the company noted the potential for an increasing role of its tour operations which include Royal Celebrity Tours, Pullmantur's tour businesses and other operations on its yield and net cruise costs metrics.  Because these tour businesses have relatively low margins, this volatility has little impact on bottom line results but can cause fluctuations in the financial statistics for revenues and operating costs."
  • "Forecasted consumption is now 58% hedged for the remainder of 2011, 55% hedged in 2012, and 30% hedged in 2013."
  • "Forecasted fuel consumption per APCD is down a further 6% for 2011." 
  • Liquidity/financing update:
    • Liquidity: $1.6BN (cash and the undrawn portion revolving credit facilities)
    • "Company has $1.3 billion of committed unsecured financing on its two remaining newbuilds."
    • "During the fourth quarter of 2010 the company finalized an additional unsecured revolving credit facility in the amount of $525 million due in November, 2014. Going forward, the company anticipates maintaining two separate revolving credit facilities with staggered maturity dates to further reduce refinancing risk."
  • Capex: $1.0 billion, $1.0 billion and $350 million for 2011, 2012, and 2013 respectively. 
  • Capacity increase for 2012 of 1.2% and 2.2% for 2013
  • 1Q2011 Guidance:
    • Net Yields: 2-3% as reported, 1-2% on a constant currency; previous guidance: 2-4%
    • NCC: 1%
    • NCC (ex fuel): 2%, 1-2% on a constant currency
    • Fuel consumption: 326K metric tons; 63% hedged
    • Fuel expenses: $168MM
    • Capacity increase: 10.2%
    • D&A: 170-175MM
    • Interest expense, net: $80-85MM
    • EPS: $0.10-0.15
  • 2011 Guidance:
    • Net Yields: 4% to 6% as reported, previous guidance 4-5%
    • NCC: 2% as reported, previous guidance 0-1%
    • Fuel consumption: 1,322K metric tons; 63% hedged
    • Fuel expenses: $705MM
    • Capacity increase: 7.4%
    • D&A: 695-715MM
    • Interest expense, net: 305-325MM
    • EPS: $3.25-3.45


  • Since 3Q CC, slight "upward bias" in bookings for 2011
  • Expect more than 50% of guests will be international in 2011
  • New build application in process
  • In 2012, 55% of Celebrity will comprise of Solstice hardware; 63% of Royal Caribbean International fleet will be comprised of Oasis, Freedom and Voyager class ships.
  • Still early in WAVE season, booking demand within expectations
  • 1Q 2010 had 39 cent legal settlement
  • 1Q Net yield increase--mostly from ticket revs, on-board spending flat
  • For 2011, higher marketing/selling expenses
  •  $500MM maturity in February (no capital markets needed)
  • Europe: adding 3 ships this summer
  • Close-in bookings still healthy. Newer products still selling at premium pricing.

Q & A

  • No change in 1Q outlook from 3 months ago
  • 1Q NCC: increase in guidance due to higher marketing expenses pushed into 1Q from 4Q
  • 4Q bookings were as expected
  • Forecast for FX: do not include new building projects
  • Impact on top line as ships come out of service: schedule dry docks during softer seasons
  • Weather effect for 1Q?
    •  No cruise disruptions
  • Seasonality: Alaska operations more volatile in summer; Spanish market more volatile in 3Q.
  • Not interested in selling Azamara brand or ships.
  • WAVE is key to bookings strength for 2Q and 3Q but less of an effect compared to previous years
  • 4Q 2010 Ticket revs: exactly as expected
  • 2Q trends: should show "healthy yield improvements"
  • 3Q yields will be better than 2Q
  • APD running higher than a year ago
  • 50%of revenues booked for 2011
  • Improvements: one major change on ship at end of year
  • Mexico itineraries
    • On west coast of Mexico, Allure of the Seas is on its way
  • Customer deposits growth is mainly due to pricing