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Significantly reduced FY 2012 guidance management optimistic about pricing recovering, resilient onboard spending, and no Costa impact on 2013 bookings. More transparency helps investor confidence this morning.

CALL NOTES

  • 'Confident' Costa Concordia (CC) incident will not have a long-term impact
  • Overall bookings remain down in the mid-to low teens
  • Close-in bookings declined more than farther-out bookings
  • Q2/Q3 2012 - level of uncertainty is high
  • Didn't want to make projections
  • Had anticipated higher yields in Europe due to easy comps pre-CC
  • China opportunity will take some time to pay off
  • 2012 yield: 1-2% yield comes from ship revitalization, international expansion, technology development
  • Had great pricing momentum going into 2012
  • First time, RCL has more non-US customers than US customers
  • 4Q Ticket yield: double digits in Caribbean; Europe yields were down
  • 2011: fuel cost EPS 20 cents; Japan Earthquake/Arab Spring cost 65 cents
  • 2011 pricing: improved slightly more in US than Europe but this is driven more by itinerary mix than economy
  • 2011: Operating cash flow $1.6BN; reduced debt by 650MM
  • Current booking environment:
    • Demand trends still fluctuating
    • All new itineraries were down by 20% following CC
    • Post CC: North American demand recovering steadily to high single digits decline; Europe weaker
  • Extra caution for forward guidance
  • 2013 bookings unaffected
  • Last 5 years, fuel efficiencies have decreased expenses by 18% but due to deployment of ships, fuel expenses will be higher YoY. 
  • 2012 Fuel expense impact: 57 cents higher than 2011; FX rate 20 cents higher
  • Have resumed full marketing programs
  • Non-Caribbean (20%) itineraries are doing well and performing ahead of last year
  • Started to see improvement in bookings this week; some pricing have returned to pre-CC levels
  • No increase in 'cruise rejection rate' through their research
  • Completed Summit revitalization last week
  • Reflection will deliver in Oct 2012

Q & A

  • Has Celebrity resumed advertising?
    • Yes, restarting originally planned 2nd week of Wave Season advertising
  • People seeing CC as an isolated incident
  • Wave Season could be extended
  • Higher Insurance premiums?
    • Nothing dramatic
  • Distribution changes: more weighted towards 1Q 2012; least in Q3; some in Q2 and Q4
  • Deployment initiatives: Voyager of the Seas is going to China; increased capacity in Australia - driving higher fuel consumption and expense
  • Somewhat increased Northern Europe capacity; decreased Eastern Europe capacity; Europe overall capacity is lower
  • Baltic off to good start despite hard comps
  • Would like to get 50% of Arab Spring impact (15/16% less capacity in Eastern Med)
  • Azamara ding well
  • Loyalty program: January sign ups was a record
  • 2012 On board rev: have not seen any notable decline or any decline in ship revenue last few weeks
  • Most of the 1Q volatility will be in March sailings and on-board rev spending
  • Onboard promotion: 50% deposit sale; UK promotion
  • May have a 1Q 2013 bump due to lost January bookings this year
  • Will lower pricing to fill ships but not right now
  • 1st time cruisers: did increase YoY

HIGHLIGHTS FROM RELEASE

RCL 4Q CONF CALL NOTES - RCL 

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FY 2012 EXPENSES

  • Distribution changes and deployment initiatives will increase NCCs by approximately 300 basis points.  Absent these changes, Constant-Currency NCC excluding fuel are expected to increase approximately 1% to 2% on a comparable basis (flat to 1% As-Reported.)  

OTHER

  • $1.1BN: cash and undrawn RC
  • Fuel
    • Forecasted consumption is now 55% hedged via swaps for all of 2012 and 47%, 30% and 20% for 2013, 2014 and 2015, respectively.  For the same four-year period, the average cost per metric ton of the hedge portfolio is approximately $521, $518, $575 and $580, respectively.  
  • Capex
    • Based on current ship orders, projected capital expenditures for 2012, 2013 and 2014 are $1.2 billion, $500 million and $1.1 billion, respectively.  The company has one option for a second Sunshine-Class vessel which would be delivered during the second quarter of 2015 that expires in late February 2012.  
    • Capacity increases for 2012, 2013 and 2014 are 2.1%, 2.5% and 0.6%, respectively.