Royal Caribbean Reports Record Second Quarter Earnings and Increases Guidance for the Year

28 Jul, 2004, 15:30 BST Fra Royal Caribbean Cruises Ltd.

MIAMI, July 28 /PRNewswire/ --

Royal Caribbean Cruises Ltd. (NYSE: RCL; Oslo) announced today that net income for the second quarter of 2004 was $122.2 million, or $0.59 per share. This compares to $55.7 million, or $0.28 per share, for the second quarter of 2003. Revenues for the second quarter of 2004 increased 26.2% to $1.1 billion from revenues of $905.8 million in the second quarter of 2003. The increase in revenues was primarily due to a 12.4% increase in capacity coupled with an increase in cruise ticket prices, occupancy and onboard revenues. Gross Yields for the second quarter of 2004 increased 12.3% from the second quarter of 2003. Net Yields, which the company considers a better measure of revenue performance, increased 12.6% from the second quarter of 2003.

"These are exciting times at Royal Caribbean," said Richard D. Fain, chairman and chief executive officer of Royal Caribbean Cruises Ltd. "The marketplace is demonstrating characteristics that we haven't seen since prior to 2001."

The booking environment continues to be strong as evidenced by widespread improvements in pricing and occupancy. The company has continued to focus on its "strategic pricing" programs as a result of which the booking curve continues to be longer than in 2003. In addition, the company has been able to fill on a more profitable basis remaining berths as sailings approach. This has resulted in higher occupancy and higher yields. Assuming there are no external shocks, the company currently forecasts that Net Yields for the third and fourth quarters of 2004 will increase in the range of 10% to 11% and 1% to 3%, respectively, compared to the same periods last year. On this basis, the company expects Net Yields for the full year 2004 will increase in the range of 7% to 9% from the prior year.

The company first remarked on the improvement in the yield environment last spring, but the fact that this improvement has continued is very gratifying. The company attributes part of the yield improvements to its success in anticipating and managing market demand via its revenue management.

Gross Cruise Costs and Net Cruise Costs, on a per Available Passenger Cruise Day basis, for the second quarter of 2004 increased 8.1% and 6.6%, respectively, compared to the same quarter in 2003. Consistent with industry and market trends, year-over-year cost comparisons were negatively impacted by increases in fuel prices. Year-over-year comparisons were also affected by an increase in marketing, selling and administrative expenses, as well as crew and port expenses.

For the second half of 2004, the company estimates that Net Cruise Costs, on a per Available Passenger Cruise Day basis, will be flat to up 2% as compared to the same period from the prior year. The company estimates that Net Cruise Costs, on a per Available Passenger Cruise Day basis, for the third quarter of 2004 will increase in the range of 4% to 5% and for the fourth quarter of 2004 will be flat to down 2% compared to the same periods in 2003.

Based upon these expectations, management anticipates 2004 earnings per share to be in the range of $2.25 to $2.40.

The 2005 booking season has just begun and is off to a good start. While the company does not have enough visibility to provide specific yield guidance, demand is stronger than at the same time last year and early indications, assuming there are no external shocks, point to a positive yield environment.

In a separate release, the company today announced that it was lengthening and refurbishing Enchantment of the Seas. The addition of a 73-foot midsection and refurbishment will increase the vessel's overall length to 990 feet and add 151 staterooms. The additional space and extensive renovations will also accommodate new public areas onboard Enchantment of the Seas, including a new specialty restaurant, Royal Caribbean International's hallmark Boleros Latin lounge and Latte'tudes coffee shop and ice cream parlor. In addition, existing spaces will be extensively reconditioned. The expansion of Enchantment of the Seas will add substantial revenue without adding commensurate costs, while significantly improving the overall passenger experience. The Enchantment of the Seas' transformation comes in the wake of extensive enhancements to Empress of the Seas and Monarch of the Seas. The line also has announced plans to revitalize Sovereign of the Seas this fall.

"Projects like these give us a two-fold benefit -- upgrading our fleet while producing a good ROI on the capital expenditures," said Fain.

During the second quarter, the company officially opened Cape Liberty Cruise Port in Bayonne, N.J. Cape Liberty Cruise Port is located at the northeast corner of The Peninsula at Bayonne Harbor, a 430-acre, man-made peninsula that extends into New York Harbor. The new cruise port offers passengers outstanding views of the harbor, the Verrazano Narrows Bridge, the Statue of Liberty and lower Manhattan. Royal Caribbean International has two ships at the new port in 2004, from May through October. Voyager of the Seas offers an alternating schedule of five-night Canada and nine-night Caribbean cruises. Empress of the Seas offers alternating six-night and eight-night Bermuda itineraries.

The company has scheduled a conference call at 10 a.m. eastern daylight time today to discuss its earnings. This call can be listened to live or on a delayed basis on the company's investor relations web site at http://www.rclinvestor.com.

Terminology

Available Passenger Cruise Days

Available Passenger Cruise Days represent double occupancy per cabin multiplied by the number of cruise days for the period.

Gross Yields

Gross Yields represent total revenues per Available Passenger Cruise Day.

Net Yields

Net Yields represent Gross Yields excluding commissions, transportation and other expenses and onboard and other expenses per Available Passenger Cruise Day. We utilize Net Yields for revenue management purposes and believe that it is the most relevant measure of our pricing performance. We have not provided a quantitative reconciliation of projected Gross Yields to projected Net Yields due to the significant uncertainty in projecting the costs deducted to arrive at this measure. We utilize Net Yields to manage our business on a day-to-day basis and believe it is a more relevant measure of our performance. As such, we do not believe that reconciling information is meaningful.

Gross Cruise Costs

Gross Cruise Costs represent total operating expenses and marketing, selling and administrative expenses.

Net Cruise Costs

Net Cruise Costs represent Gross Cruise Costs excluding commissions, transportation and other expenses and onboard and other expenses. In measuring our ability to control costs in a manner that positively impacts net income, we believe changes in Net Cruise Costs to be the most relevant indicator of our performance. We have not provided a quantitative reconciliation of projected Gross Cruise Costs to projected Net Cruise Costs due to the significant uncertainty in projecting the costs deducted to arrive at this measure. We utilize Net Cruise Costs to manage our business on a day-to-day basis and believe it is a more relevant measure of our performance. As such, we do not believe that reconciling information is meaningful.

Royal Caribbean Cruises Ltd. is a global cruise vacation company that operates Royal Caribbean International and Celebrity Cruises, with a combined total of 29 ships in service and one under construction. The company also offers unique cruisetour vacations in Alaska, Canada and Europe. Additional information can be found on http://www.royalcaribbean.com, http://www.celebrity.com or http://www.rclinvestor.com.

Certain statements in this news release are forward-looking statements. Forward-looking statements do not guarantee future performance and may involve risks, uncertainties and other factors, which could cause our actual results, performance or achievements to differ materially from the future results, performance or achievements expressed or implied in those forward-looking statements. Such factors include general economic and business conditions, vacation industry competition (including cruise industry competition), changes in vacation industry capacity (including cruise capacity), the impact of tax laws and regulations affecting our business or our principal shareholders, the impact of changes in other laws and regulations affecting our business, the impact of pending or threatened litigation, the delivery of scheduled new ships, emergency ship repairs, incidents involving cruise ships, reduced consumer demand for cruises as a result of any number of reasons (including armed conflict, terrorist attacks, geo-political and economic uncertainties or the unavailability of air service), changes in our stock price, interest rates or oil prices, weather and other factors described in further detail in Royal Caribbean Cruises Ltd.'s filings with the Securities and Exchange Commission. The above examples are not exhaustive and new risks emerge from time to time. We undertake no obligation to publicly update or revise any forward-looking statements, whether as a result of new information, future events or otherwise. In addition, certain financial measures in this news release constitute non-GAAP financial measures as defined by Regulation G. A reconciliation of these items can be found on our investor relations website at http://www.rclinvestor.com.

                           Financial Tables Follow 
 
 
     
                           ROYAL CARIBBEAN CRUISES LTD. 
                      CONSOLIDATED STATEMENTS OF OPERATIONS 
                 (unaudited, in thousands, except per share data) 
 
     
                            Second Quarter Ended      Six Months Ended 
                                  June 30,                June 30, 
                            ---------------------  ---------------------- 
                               2004       2003        2004        2003 
                            ----------  ---------  ----------  ---------- 
     
     Passenger ticket       
      revenues              $  844,554   $663,817  $1,634,647  $1,316,947 
     Onboard and other      
      revenues                 298,445    242,024     570,036     469,058 
                             ----------  ---------  ----------  ---------- 
       Total revenues        1,142,999    905,841   2,204,683   1,786,005 
                             ----------  ---------  ----------  ---------- 
     Operating expenses 
       Commissions,         
        transportation and  
        other                  206,552    164,718     410,456     324,349 
       Onboard and other        77,294     62,191     135,177     112,733 
       Payroll and related     123,987    103,644     239,929     205,025 
       Food                     65,755     57,534     131,591     115,257 
       Other operating         233,843    192,379     444,677     375,671 
                             ----------  ---------  ----------  ---------- 
         Total operating    
          expenses             707,431    580,466   1,361,830   1,133,035 
 
     Marketing, selling and 
      administrative        
      expenses                 143,321    119,457     293,559     243,441 
     Depreciation and       
      amortization expenses     97,661     88,715     194,240     177,384 
                             ----------  ---------  ----------  ---------- 
     Operating income          194,586    117,203     355,054     232,145 
                             ----------  ---------  ----------  ---------- 
     Other income (expense) 
       Interest income           1,333        809       2,782       1,914 
       Interest expense,    
        net of capitalized  
        interest               (77,146)   (66,750)   (152,886)   (131,634) 
       Other income         
        (expense)                3,386      4,410      13,055       6,421 
                             ----------  ---------  ----------  ---------- 
                               (72,427)   (61,531)   (137,049)   (123,299) 
                             ----------  ---------  ----------  ---------- 
     Net income              $ 122,159   $ 55,672   $ 218,005   $ 108,846 
                             ==========  ========== ==========  ========== 
 
     EARNINGS PER SHARE: 
       Basic                  $   0.61    $  0.29    $   1.10    $   0.56 
                             ==========  ========== ==========  ========== 
       Diluted                $   0.59    $  0.28    $   1.05    $   0.56 
                             ==========  ========== ==========  ========== 
 
     WEIGHTED-AVERAGE       
      SHARES OUTSTANDING: 
       Basic                   198,786    193,158     198,106     193,093 
                             ==========  ========== ==========  ========== 
       Diluted                 216,730    195,882     216,335     195,394 
                             ==========  ========== ==========  ========== 
   
     
     
          STATISTICS 
     
                              Second Quarter Ended      Six Months Ended 
                                      June 30,                June 30, 
                             ---------------------  ---------------------- 
                                 2004       2003        2004        2003 
                             ----------  ---------  ----------  ---------- 
     
     Occupancy as a         
      percentage of total   
      capacity                  106.2%     101.8%      105.2%      101.7% 
     
     Passenger Cruise Days   5,639,115  4,809,952  11,151,164   9,553,116 
     
     Available Passenger    
      Cruise Days            5,312,326  4,726,704  10,601,862   9,390,296 
 
 
 
                          ROYAL CARIBBEAN CRUISES LTD. 
                           CONSOLIDATED BALANCE SHEETS 
                        (in thousands, except share data) 
 
                                                           As of 
                                                 --------------------------- 
                                                 June 30,       December 31, 
                                                    2004              2003 
                                                -----------     ------------ 
                                                (unaudited) 
                   ASSETS 
    Current assets 
      Cash and cash equivalents                $   706,337       $   330,086 
      Trade and other receivables, net              94,957            89,489 
      Inventories                                   64,965            53,277 
      Prepaid expenses and other assets             94,865           101,698 
                                               ------------      ------------ 
           Total current assets                    961,124           574,550 
     Property and equipment - at cost     
      less accumulated depreciation  
      and amortization                          10,238,150         9,943,495 
     Goodwill - less accumulated          
      amortization of $138,606                     278,561           278,561 
     Other assets                                  535,790           526,136 
                                               ------------      ------------ 
                                               $12,013,625       $11,322,742 
                                               ============      ============ 
     
    LIABILITIES AND SHAREHOLDERS' EQUITY 
    Current liabilities 
      Current portion of long-term debt        $ 1,080,736       $   315,232 
      Accounts payable                             195,515           187,756 
      Accrued expenses and other          
       liabilities                                 284,025           271,944 
      Customer deposits                          1,037,036           729,595 
                                               ------------      ------------ 
           Total current liabilities             2,597,312         1,504,527 
 
    Long-term debt                               4,896,425         5,520,572 
    Other long-term liabilities                     31,867            34,746 
     
    Commitments and contingencies 
     
    Shareholders' equity 
     Common stock ($.01 par value;        
      500,000,000 shares authorized; 
      198,990,778 and 196,106,658 shares  
       issued)                                       1,990             1,961 
     Paid-in capital                             2,159,053         2,100,612 
     Retained earnings                           2,328,608         2,162,195 
     Accumulated other comprehensive      
      income                                         6,367             5,846 
     Treasury stock (576,384 and 556,212  
      common shares at cost)                        (7,997)           (7,717) 
                                                -----------      ------------ 
           Total shareholders' equity            4,488,021         4,262,897 
                                                -----------      ------------ 
                                               $12,013,625       $11,322,742 
                                               ============      ============ 
 
 
                          ROYAL CARIBBEAN CRUISES LTD. 
                      CONSOLIDATED STATEMENTS OF CASH FLOWS 
                            (unaudited, in thousands) 
     
                                                       Six Months Ended 
                                                           June 30, 
                                                  -------------------------- 
                                                    2004              2003 
                                                  ---------         -------- 
    OPERATING ACTIVITIES 
    Net income                                    $218,005          $108,846 
    Adjustments: 
      Depreciation and amortization                194,240           177,384 
      Accretion of original issue         
       discount on debt                             25,401            24,139 
    Changes in operating assets and       
     liabilities: 
      Increase in trade and other         
       receivables, net                             (5,686)          (17,406) 
      Increase in inventories                      (11,518)          (10,976) 
      Increase in prepaid expenses and    
       other assets                                (43,192)          (18,985) 
      Increase (decrease) in accounts     
       payable                                       6,555            (3,758) 
      Increase (decrease) in accrued      
       expenses and other liabilities               19,112           (23,207) 
      Increase in customer deposits                307,227           162,388 
      Other, net                                       244            (7,558) 
                                                  ---------         --------- 
    Net cash provided by operating        
     activities                                    710,388           390,867 
                                                  ---------         --------- 
 
    INVESTING ACTIVITIES 
    Purchases of property and equipment           (476,002)          (98,108) 
    Other, net                                      (3,951)          (22,688) 
                                                  ---------         --------- 
    Net cash used in investing activities         (479,953)         (120,796) 
                                                  ---------         --------- 
 
    FINANCING ACTIVITIES 
    Repayments of long-term debt, net              (93,724)         (169,672) 
    Net proceeds from issuance of debt             225,000           244,910 
    Dividends                                      (54,321)          (50,211) 
    Proceeds from exercise of stock       
     options                                        55,329             4,230 
    Other, net                                      13,532           (12,929) 
                                                  ---------         --------- 
    Net cash provided by financing        
     activities                                    145,816            16,328 
                                                  ---------         --------- 
    Net increase in cash and cash         
     equivalents                                   376,251           286,399 
    Cash and cash equivalents at          
     beginning of period                           330,086           242,584 
                                                  ---------         ---------
    Cash and cash equivalents at end of   
     period                                       $706,337          $528,983 
                                                  =========         ========= 
  
    Supplemental Disclosure 
    Cash paid during the year for: 
      Interest, net of amount capitalized         $131,623          $111,887 
                                                  =========         =========

Web site: http://www.royalcaribbean.com

KILDE Royal Caribbean Cruises Ltd.