Royal Caribbean Cruises Earnings 2019-09-30

RCL 10Q Quarterly Report

Balance Sheet	Income Statement	Cash Flow

Comparables ($MM TTM)
Ticker	M Cap	Assets	Liab	Rev	G Profit	Net Inc	EBITDA	EV	G Margin	EV/EBITDA	ROA
CCL	34,213	44,001	18,706	20,500	7,926	3,060	5,448	43,543	39%	8.0	7%
RCL	25,038	29,809	17,714	10,375	4,643	1,863	3,416	33,725	45%	9.9	6%
NCLH	11,554	15,966	9,816	6,307	0	983	1,577	17,605	0%	11.2	6%
BIP	9,374	36,580	21,912	0	0	0	0	9,080			0%
HII	9,338	7,230	5,602	8,550	0	687	1,146	11,074	0%	9.7	10%
KEX	4,544	6,233	2,911	2,942	0	110	433	6,116	0%	14.1	2%
GLNG	2,170	4,807	2,981	0	0	0	0	4,031			0%
MATX	1,621	2,658	1,892	2,245	0	93	235	2,433	0%	10.4	4%
EURN	1,547	4,127		0	0	0	0	1,436			0%
SSW	1,403	7,478	4,970	0	0	0	0	4,629			0%

Document

Table of Contents

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

(Mark One)



☒	QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended September 30, 2019



☐	TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from to

Commission File Number: 1-11884

ROYAL CARIBBEAN CRUISES LTD.

(Exact name of registrant as specified in its charter)



Republic of	Liberia	98-0081645
(State or other jurisdiction of incorporation or organization)		(I.R.S. Employer Identification No.)

1050 Caribbean Way, Miami, Florida 33132

(Address of principal executive offices) (zip code)

(305) 539-6000

(Registrant’s telephone number, including area code)

N/A

(Former name, former address and former fiscal year, if changed since last report)

Securities registered pursuant to Section 12(b) of the Act:



Title of each class	Trading Symbol(s)	Name of each exchange on which registered
Common stock, par value $0.01 per share	RCL	New York Stock Exchange

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ☒ No ☐

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes ☒ No ☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.



Large accelerated filer	☒	Accelerated filer	☐
Non-accelerated filer	☐	Smaller reporting company	☐
		Emerging growth company	☐

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No ☒

There were 209,631,168 shares of common stock outstanding as of October 23, 2019.

Table of Contents

ROYAL CARIBBEAN CRUISES LTD.

TABLE OF CONTENTS

Table of Contents

PART I. FINANCIAL INFORMATION

Item 1. Financial Statements

ROYAL CARIBBEAN CRUISES LTD.

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS)

(unaudited; in thousands, except per share data)



	Quarter Ended September 30,
	2019			2018
Passenger ticket revenues	$	2,344,779		$	2,042,911
Onboard and other revenues	842,071			753,276
Total revenues	3,186,850			2,796,187
Cruise operating expenses:
Commissions, transportation and other	488,921			430,039
Onboard and other	200,656			171,028
Payroll and related	263,993			221,205
Food	149,621			133,324
Fuel	177,677			182,415
Other operating	342,170			273,353
Total cruise operating expenses	1,623,038			1,411,364
Marketing, selling and administrative expenses	352,725			325,167
Depreciation and amortization expenses	320,295			259,923
Operating Income	890,792			799,733
Other income (expense):
Interest income	5,625			5,831
Interest expense, net of interest capitalized	(102,038		)	(86,510		)
Equity investment income	103,654			95,169
Other expense	(7,668		)	(3,832		)
	(427		)	10,658
Net Income	890,365			810,391
Less: Net Income attributable to noncontrolling interest	7,125			—
Net Income attributable to Royal Caribbean Cruises Ltd.	$	883,240		$	810,391
Earnings per Share:
Basic	$	4.21		$	3.88
Diluted	$	4.20		$	3.86
Weighted-Average Shares Outstanding:
Basic	209,575			209,054
Diluted	210,121			209,928
Comprehensive Income
Net Income	$	890,365		$	810,391
Other comprehensive income (loss):
Foreign currency translation adjustments	(15,510		)	(3,479		)
Change in defined benefit plans	(12,456		)	1,153
(Loss) gain on cash flow derivative hedges	(265,224		)	36,946
Total other comprehensive (loss) income	(293,190		)	34,620
Comprehensive Income	597,175			845,011
Less: Comprehensive Income attributable to noncontrolling interest	7,125			—
Comprehensive Income attributable to Royal Caribbean Cruises Ltd.	$	590,050		$	845,011

The accompanying notes are an integral part of these consolidated financial statements.

Table of Contents

ROYAL CARIBBEAN CRUISES LTD.

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS)

(unaudited; in thousands, except per share data)



	Nine Months Ended September 30,
	2019			2018
Passenger ticket revenues	$	6,072,599		$	5,141,125
Onboard and other revenues	2,360,649			2,020,423
Total revenues	8,433,248			7,161,548
Cruise operating expenses:
Commissions, transportation and other	1,279,010			1,078,953
Onboard and other	510,255			412,805
Payroll and related	799,094			674,676
Food	436,002			381,349
Fuel	519,772			515,065
Other operating	1,037,113			838,946
Total cruise operating expenses	4,581,246			3,901,794
Marketing, selling and administrative expenses	1,144,546			975,451
Depreciation and amortization expenses	924,180			753,529
Operating Income	1,783,276			1,530,774
Other income (expense):
Interest income	21,751			26,662
Interest expense, net of interest capitalized	(313,757		)	(236,252		)
Equity investment income	170,393			168,232
Other (expense) income	(34,537		)	5,923
	(156,150		)	(35,435		)
Net Income	1,627,126			1,495,339
Less: Net Income attributable to noncontrolling interest	21,375			—
Net Income attributable to Royal Caribbean Cruises Ltd.	$	1,605,751		$	1,495,339
Earnings per Share:
Basic	$	7.67		$	7.08
Diluted	$	7.65		$	7.05
Weighted-Average Shares Outstanding:
Basic	209,477			211,099
Diluted	210,032			211,973
Comprehensive Income
Net Income	$	1,627,126		$	1,495,339
Other comprehensive income (loss):
Foreign currency translation adjustments	(7,683		)	(13,840		)
Change in defined benefit plans	(22,831		)	6,949
(Loss) gain on cash flow derivative hedges	(288,115		)	110,576
Total other comprehensive (loss) income	(318,629		)	103,685
Comprehensive Income	1,308,497			1,599,024
Less: Comprehensive Income attributable to noncontrolling interest	21,375			—
Comprehensive Income attributable to Royal Caribbean Cruises Ltd.	$	1,287,122		$	1,599,024

The accompanying notes are an integral part of these consolidated financial statements.

Table of Contents

ROYAL CARIBBEAN CRUISES LTD.

CONSOLIDATED BALANCE SHEETS

(in thousands, except share data)



	As of
	September 30,			December 31,
	2019			2018
	(unaudited)
Assets
Current assets
Cash and cash equivalents	$	276,730		$	287,852
Trade and other receivables, net	348,991			324,507
Inventories	167,213			153,573
Prepaid expenses and other assets	399,390			456,547
Derivative financial instruments	11,633			19,565
Total current assets	1,203,957			1,242,044
Property and equipment, net	25,005,404			23,466,163
Operating lease right-of-use assets	697,461			—
Goodwill	1,373,065			1,378,353
Other assets	1,545,574			1,611,710
Total assets	$	29,825,461		$	27,698,270
Liabilities, Redeemable Noncontrolling Interest and Shareholders’ Equity
Current liabilities
Current portion of debt	$	943,060		$	1,646,841
Commercial paper	922,201			775,488
Current portion of operating lease liabilities	93,058			—
Accounts payable	538,949			488,212
Accrued interest	124,561			74,550
Accrued expenses and other liabilities	979,939			899,761
Derivative financial instruments	101,561			78,476
Customer deposits	3,410,205			3,148,837
Total current liabilities	7,113,534			7,112,165
Long-term debt	8,819,212			8,355,370
Long-term operating lease liabilities	620,570			—
Other long-term liabilities	731,844			583,254
Total liabilities	17,285,160			16,050,789
Commitments and contingencies (Note 11)
Redeemable noncontrolling interest	563,394			542,020
Shareholders’ equity
Preferred stock ($0.01 par value; 20,000,000 shares authorized; none outstanding)	—			—
Common stock ($0.01 par value; 500,000,000 shares authorized; 236,494,616 and 235,847,683 shares issued, September 30, 2019 and December 31, 2018, respectively)	2,365			2,358
Paid-in capital	3,466,641			3,420,900
Retained earnings	11,412,773			10,263,282
Accumulated other comprehensive loss	(946,363		)	(627,734		)
Treasury stock (26,887,147 and 26,830,765 common shares at cost, at September 30, 2019 and December 31, 2018, respectively)	(1,958,509		)	(1,953,345		)
Total shareholders’ equity	11,976,907			11,105,461
Total liabilities, redeemable noncontrolling interest and shareholders’ equity	$	29,825,461		$	27,698,270

The accompanying notes are an integral part of these consolidated financial statements.

Table of Contents

ROYAL CARIBBEAN CRUISES LTD.

CONSOLIDATED STATEMENTS OF CASH FLOWS

(unaudited; in thousands)



	Nine Months Ended September 30,
	2019			2018
Operating Activities
Net Income	$	1,627,126		$	1,495,339
Adjustments:
Depreciation and amortization	924,180			753,529
Impairment losses	—			33,651
Net deferred income tax expense (benefit)	4,664			(2,926		)
Loss on derivative instruments not designated as hedges	24,229			41,397
Share-based compensation expense	51,256			63,420
Equity investment income	(170,393		)	(168,232		)
Amortization of debt issuance costs	24,154			31,656
Amortization of commercial paper notes discount	23,583			3,844
Loss on extinguishment of debt	6,326			—
Change in fair value of contingent consideration	10,700			—
Gain on sale of unconsolidated affiliate	—			(13,680		)
Recognition of deferred gain	—			(21,794		)
Changes in operating assets and liabilities:
Increase in trade and other receivables, net	(36,682		)	(17,141		)
Increase in inventories	(13,640		)	(21,760		)
Decrease (increase) in prepaid expenses and other assets	41,757			(76,471		)
Increase in accounts payable	51,011			35,433
Increase in accrued interest	50,011			45,735
Increase (decrease) in accrued expenses and other liabilities	81,026			(15,856		)
Increase in customer deposits	261,335			349,230
Dividends received from unconsolidated affiliates	148,285			241,697
Other, net	(1,860		)	(10,087		)
Net cash provided by operating activities	3,107,068			2,746,984
Investing Activities
Purchases of property and equipment	(2,341,895		)	(2,509,127		)
Cash received on settlement of derivative financial instruments	6,442			74,008
Cash paid on settlement of derivative financial instruments	(86,671		)	(50,891		)
Investments in and loans to unconsolidated affiliates	(6,889		)	(15,194		)
Cash received on loans to unconsolidated affiliates	27,697			49,501
Proceeds from the sale of unconsolidated affiliate	—			13,215
Acquisition of Silversea Cruises, net of cash acquired	—			(916,135		)
Other, net	(1,028		)	(3,989		)
Net cash used in investing activities	(2,402,344		)	(3,358,612		)
Financing Activities
Debt proceeds	3,080,564			6,626,295
Debt issuance costs	(42,491		)	(54,775		)
Repayments of debt	(3,424,339		)	(5,833,602		)
Proceeds from issuance of commercial paper notes	19,807,417			2,165,991
Repayments of commercial paper notes	(19,684,288		)	(1,171,000		)
Purchases of treasury stock	—			(575,039		)
Dividends paid	(439,543		)	(381,465		)
Proceeds from exercise of common stock options	1,452			4,206
Other, net	(13,681		)	(14,857		)
Net cash (used in) provided by financing activities	(714,909		)	765,754
Effect of exchange rate changes on cash	(937		)	(19,417		)
Net (decrease) increase in cash and cash equivalents	(11,122		)	134,709
Cash and cash equivalents at beginning of period	287,852			120,112
Cash and cash equivalents at end of period	$	276,730		$	254,821
Supplemental Disclosure
Cash paid during the period for:
Interest, net of amount capitalized	$	179,497		$	154,231
Non-cash Investing Activities
Contingent consideration for the acquisition of Silversea Cruises	$	—		$	44,000

The accompanying notes are an integral part of these consolidated financial statements.

Table of Contents

ROYAL CARIBBEAN CRUISES LTD.

CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY

(unaudited; in thousands)



	Common Stock		Paid-in Capital		Retained Earnings			Accumulated Other Comprehensive Income (Loss)			Treasury Stock			Total Shareholders' Equity
Balance at July 1, 2019	$	2,364	$	3,454,831	$	10,692,890		$	(653,173	)	$	(1,958,509	)	$	11,538,403
Activity related to employee stock plans	1		11,810		—			—			—			11,811
Common stock dividends, $0.78 per share	—		—		(163,357		)	—			—			(163,357		)
Changes related to cash flow derivative hedges	—		—		—			(265,224		)	—			(265,224		)
Change in defined benefit plans	—		—		—			(12,456		)	—			(12,456		)
Foreign currency translation adjustments	—		—		—			(15,510		)	—			(15,510		)
Net Income attributable to Royal Caribbean Cruises Ltd.	—		—		883,240			—			—			883,240
Balance at September 30, 2019	$	2,365	$	3,466,641	$	11,412,773		$	(946,363	)	$	(1,958,509	)	$	11,976,907



	Common Stock		Paid-in Capital		Retained Earnings			Accumulated Other Comprehensive Income (Loss)			Treasury Stock			Total Shareholders' Equity
Balance at January 1, 2019	$	2,358	$	3,420,900	$	10,263,282		$	(627,734	)	$	(1,953,345	)	$	11,105,461
Activity related to employee stock plans	7		45,741		—			—			(5,164		)	40,584
Common stock dividends, $2.18 per share	—		—		(456,260		)	—			—			(456,260		)
Changes related to cash flow derivative hedges	—		—		—			(288,115		)	—			(288,115		)
Change in defined benefit plans	—		—		—			(22,831		)	—			(22,831		)
Foreign currency translation adjustments	—		—		—			(7,683		)	—			(7,683		)
Net Income attributable to Royal Caribbean Cruises Ltd.	—		—		1,605,751			—			—			1,605,751
Balance at September 30, 2019	$	2,365	$	3,466,641	$	11,412,773		$	(946,363	)	$	(1,958,509	)	$	11,976,907

The accompanying notes are an integral part of these consolidated financial statements.

Table of Contents

ROYAL CARIBBEAN CRUISES LTD.

CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY -Continued

(unaudited; in thousands)



	Common Stock		Paid-in Capital		Retained Earnings			Accumulated Other Comprehensive Income (Loss)			Treasury Stock			Total Shareholders' Equity
Balance at July 1, 2018	$	2,358	$	3,397,561	$	9,429,784		$	(265,200	)	$	(1,790,805	)	$	10,773,698
Activity related to employee stock plans	—		28,249		—			—			—			28,249
Common stock dividends, $0.70 per share	—		—		(146,283		)	—			—			(146,283		)
Changes related to cash flow derivative hedges	—		—		—			36,946			—			36,946
Change in defined benefit plans	—		—		—			1,153			—			1,153
Foreign currency translation adjustments	—		—		—			(3,479		)	—			(3,479		)
Purchases of treasury stock	—		—		—			—			(162,540		)	(162,540		)
Net Income attributable to Royal Caribbean Cruises Ltd.	—		—		810,391			—			—			810,391
Balance at September 30, 2018	$	2,358	$	3,425,810	$	10,093,892		$	(230,580	)	$	(1,953,345	)	$	11,338,135



	Common Stock		Paid-in Capital		Retained Earnings			Accumulated Other Comprehensive Income (Loss)			Treasury Stock			Total Shareholders' Equity
Balance at January 1, 2018	$	2,352	$	3,390,117	$	9,022,405		$	(334,265	)	$	(1,378,306	)	$	10,702,303
Cumulative effect of accounting changes	—		—		(23,476		)	—			—			(23,476		)
Activity related to employee stock plans	6		35,693

Closing Price ($)	Shares Out (MM)	Market Cap ($MM)
$0.00	210	$25,038

10-Q	2019-10-30	Quarter: 2019-09-30
10-Q	2019-07-26	Quarter: 2019-06-30
10-Q	2019-05-02	Quarter: 2019-03-31
10-K	2019-02-22	Annual: 2018-12-31
10-Q	2018-10-26	Quarter: 2018-09-30
10-Q	2018-08-02	Quarter: 2018-06-30
10-Q	2018-04-30	Quarter: 2018-03-31
10-K	2018-02-21	Annual: 2017-12-31
10-Q	2017-11-07	Quarter: 2017-09-30
10-Q	2017-08-01	Quarter: 2017-06-30
10-Q	2017-04-28	Quarter: 2017-03-31
10-K	2017-02-23	Annual: 2016-12-31
10-Q	2016-10-28	Quarter: 2016-09-30
10-Q	2016-08-02	Quarter: 2016-06-30
10-Q	2016-04-29	Quarter: 2016-03-31
10-K	2016-02-22	Annual: 2015-12-31
10-Q	2015-10-23	Quarter: 2015-09-30
10-Q	2015-07-31	Quarter: 2015-06-30
10-Q	2015-04-23	Quarter: 2015-03-31
10-K	2015-02-23	Annual: 2014-12-31
10-Q	2014-10-23	Quarter: 2014-09-30
10-Q	2014-07-24	Quarter: 2014-06-30
10-Q	2014-04-24	Quarter: 2014-03-31
10-K	2014-02-20	Annual: 2013-12-31
10-Q	2013-10-24	Quarter: 2013-09-30
10-Q	2013-07-26	Quarter: 2013-06-30
10-Q	2013-04-25	Quarter: 2013-03-31
10-Q	2012-07-27	Quarter: 2012-06-30
10-Q	2012-04-24	Quarter: 2012-03-31
10-K	2012-02-29	Annual: 2011-12-31
10-Q	2011-10-31	Quarter: 2011-09-30
10-Q	2011-08-01	Quarter: 2011-06-30
10-Q	2011-04-28	Quarter: 2011-03-31
10-K	2011-02-24	Annual: 2010-12-31
10-Q	2010-07-23	Quarter: 2010-06-30
10-Q	2010-04-29	Quarter: 2010-03-31
10-K	2010-02-23	Annual: 2009-12-31

8-K	2019-12-18	Enter Agreement, Off-BS Arrangement, Exhibits
8-K	2019-12-13	Enter Agreement, Off-BS Arrangement, Exhibits
8-K	2019-10-30	Earnings, Regulation FD, Exhibits
8-K	2019-07-25	Earnings, Regulation FD, Exhibits
8-K	2019-06-11	Other Events
8-K	2019-06-06	Other Events, Exhibits
8-K	2019-05-30	Shareholder Vote
8-K	2019-05-01	Earnings, Regulation FD, Exhibits
8-K	2019-04-05	Enter Agreement, Off-BS Arrangement, Exhibits
8-K	2019-02-08	Officers
8-K	2019-01-30	Earnings, Regulation FD, Exhibits
8-K	2018-12-04	Officers, Amend Bylaw, Exhibits
8-K	2018-10-25	Earnings, Regulation FD, Exhibits
8-K	2018-08-02	Earnings, Regulation FD, Exhibits
8-K	2018-07-31	Other Events, Exhibits
8-K	2018-06-29	Enter Agreement, Off-BS Arrangement, Exhibits
8-K	2018-06-14	Enter Agreement, Off-BS Arrangement, Exhibits
8-K	2018-06-14	Other Events
8-K	2018-06-13	Other Events, Exhibits
8-K	2018-05-21	Shareholder Vote
8-K	2018-05-08	Officers, Exhibits
8-K	2018-04-26	Earnings, Regulation FD, Exhibits
8-K	2018-03-19	Other Events, Exhibits
8-K	2018-03-19	Officers, Exhibits
8-K	2018-01-24	Earnings, Regulation FD, Exhibits

EX-10.1	a2019q3exhibit101.htm
EX-31.1	a2019q3exhibit311.htm
EX-31.2	a2019q3exhibit312.htm
EX-32.1	a2019q3exhibit321.htm



	Page

PART I. FINANCIAL INFORMATION

Item 1. Financial Statements	1

Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations	32

Item 3. Quantitative and Qualitative Disclosures About Market Risk	52

Item 4. Controls and Procedures	52

PART II. OTHER INFORMATION

Item 1. Legal Proceedings	54

Item 1A. Risk Factors	54

Item 2. Unregistered Sales of Equity Securities and Use of Proceeds	63

Item 6. Exhibits	64

SIGNATURES	65