RCL beat consensus driven by better cost controls but net yields were softer than guidance.


"Demand for our cruises remains on track with our earlier projections. The strengthening of the US Dollar will clearly result in a reduction of our reported yields, but also provides a corresponding reduction in expenses. Most importantly, our continued focus on cost controls and efficiency is driving improved earnings."

- Brian J. Rice, executive vice president and chief financial officer



  • "Business conditions have remained on target in each of the company's main markets while improved cost control has enabled the company to raise its earnings guidance for the year"
  • "Operating costs were lower than expected due mainly to strong cost control, energy conservation measures, expense timing and currency fluctuations"
  • "Based on current estimates for 2010, the company anticipates that 30% of its net revenues, and 20% of its NCC excluding fuel will be denominated in currencies other than US Dollar, with the British Pound and the Euro being the most significant components."
  • Guidance:
    • Net Yields: 4% for 3Q and 3% - 4% for FY2010 (7% and 4% - 5% respectively on a Constant Currency basis).
    • NCC: -1% for 3Q and -1% to -2% for the full year.
    • EPS: FY2010 increased by $0.10 from $2.25 to $2.35 and 3Q EPS from $1.52 to $1.57.



  • Only negative factor in results is weakness of Euro and Sterling.  Cost management will help alleviate currency impact.
  • Already assumed "lackluster 2010 with a slow and steady recovery."
  • Do not see immediate need to tap capital markets.
  • Strong dollar adversely impacted EPS by 2 cents.
  • Net ticket yields up 7.1% YoY
  • Timing of maintenance and marketing expenses shift also impacted lower NCC. (100 bps)
  • 3% improvement in fuel consumption, mainly from newer vessels... these improvements will carry forward.
  • Booking environment: "stable and remarkably consistent"; revenue projection unchanged. Volume of bookings up 11% since 1Q.  Much higher advanced bookings as % of load factor.
  • Domestic bookings very consistent; European bookings showing resilience despite credit crisis.
  • Since beginning of 2010, booking window expanded, close to pre-recession times. Buying patterns are positive at this time.
  • 1/2 of revs come from non-US guests.
  • Revs impacted by Euro, Pound, and Canadian Dollar (degree of impact in that order).
  • Currency has lowered yields by 100bps since last guidance.
  • For 2011,
    • "steady and consistent, off to an encouraging start"; low visibility.
  • In 2Q, increased % of debt of fixed interest--fixed debt ratio from 45% to 55%; entered into fixed-to-floating swap, obtained $100 MM cash proceeds.
  • 3 vessels on order--Allure of the Seas, Celebrity Silhouette Solstice IV, and V.
  • Dreamworks element on Allure of the Seas.
  • Allure of the Seas to be delivered in October; will start trip in Port Everglade on Dec 1.
  • Celebrity Silhouette--to be delivered in July 2011.
  • Alaska and European pricing strong for Celebrity ships.
  • 50% of capacity will be Solstice class once Silhouette joins--will be youngest fleet in the market.



  • On-board spending
    • On-board rev up modestly in 2Q; Pullmantur revs in Dominican Republic hurt by Haiti in 2Q.
    • +1 to 2% YoY for 2010.
  • Spain market
    • Seriously depressed, no signs of nearby recovery; hasn't gotten better or worse since 1Q.
  •  Booking
    • Booking window: pricing up a bit YoY
  • Euro down 7% from peg since 1Q; Sterling down 3% from peg since 1Q; Canadian $ slightly favorable.
  • Net Cruise Costs per APCD, excluding fuel guidance:
    • Benefiting 100bps from FX
    • 5 cents of benefit of "absolute lower costs."
  • 4Q pricing weakness?
    • 4Q as expected.
    • Most sensitive to significant changes, but no indication of any changes at this time (e.g. bookings).
  • Expense cuts permanent?
    • Low inflationary period have helped.
    • Won't see 100% of reductions as seen in 2009.
  • No change in ship building philosophy
    • Talking to shipyards: more margin improvement in future rather than just capacity growth.
  • Oasis and Allure of the Seas together for 2011: do not expect same yield performance as Oasis by itself.
  • On-board revs: beverage doing well; art auctions not going well.
    • Revs from Non-US customers: flat to slightly up YoY.
  • Close in bookings and pricing:
    • 2Q exactly as expected.
  • FX Impact:
    • 100% of FX impact on revs will be on ticket.
  • Solstices doing well in Caribbean; Eclipse doing well in UK market.
  • Higher pricing for Solstice ships; other ships as expected in terms of pricing.
  • Crawling back 30-33% of what happened last year--North America contributing, improvement in European pricing.
  • Current cost of capital:
    • WACC: just under 9%; will climb as de-leveraging continues.
    • Cost of debt is very low: solstice ships--LIBOR+100bps
    • Interest expense guidance unchanged despite the new swap.
  • Book to load factor:
    • Customer source-- for 3Q, increase in European guests, particularly UK guests; for 4Q, more guests coming out of North America and more European guests source into the Caribbean.
  • Pleased with Developmental products--sourced with non-US customers.

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