Royal Caribbean Cruises .(RCL) - 2024 Q1 - Quarterly Report

Form 10-Q Filing Information This section details the filing specifics of the Quarterly Report (Form 10-Q) for Royal Caribbean Cruises Ltd., including registrant status and common stock information - The document is a Quarterly Report (Form 10-Q) filed by ROYAL CARIBBEAN CRUISES LTD. for the quarterly period ended March 31, 2024[3] - The registrant is a large accelerated filer and is not a shell company[5] - There were 257,349,196 shares of common stock outstanding as of April 22, 2024[5] Common Stock Information | 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 | Table of Contents This section provides an organized overview of the Form 10-Q's structure, detailing its main parts and specific items - The Table of Contents outlines the structure of the Form 10-Q, dividing it into Part I (Financial Information) and Part II (Other Information), with specific items and their corresponding page numbers[7] PART I. FINANCIAL INFORMATION This section encompasses the core financial data, including statements, notes, and management's analysis of the company's financial performance and condition Item 1. Financial Statements This section presents the unaudited consolidated financial statements, including the statements of comprehensive income (loss), balance sheets, cash flows, and shareholders' equity, along with detailed notes providing context and breakdowns of various financial accounts and transactions Consolidated Statements of Comprehensive Income (Loss) This section presents the company's financial performance over the period, detailing revenues, expenses, and net income or loss - Total revenues increased by $842 million (29.2%) year-over-year, driven by growth in both passenger ticket and onboard revenues[10] - The company achieved a significant turnaround from a net loss of $(48) million in Q1 2023 to a net income of $364 million in Q1 2024[10] Consolidated Statements of Comprehensive Income (Loss) Highlights | Metric | Quarter Ended March 31, 2024 ($ million) | Quarter Ended March 31, 2023 ($ million) | | :------------------------------------------ | :--------------------------------------- | :--------------------------------------- | | Passenger ticket revenues | $2,542 | $1,897 | | Onboard and other revenues | $1,186 | $989 | | Total revenues | $3,728 | $2,886 | | Total cruise operating expenses | $2,056 | $1,793 | | Operating Income | $750 | $272 | | Net Income (Loss) | $364 | $(48) | | Net Income (Loss) attributable to Royal Caribbean Cruises Ltd. | $360 | $(48) | | Diluted Earnings (Loss) per Share ($) | $1.35 | $(0.19) | Consolidated Balance Sheets This section provides a snapshot of the company's financial position at specific dates, outlining assets, liabilities, and shareholders' equity - Total assets slightly increased, while total liabilities decreased, leading to an increase in total shareholders' equity from December 31, 2023, to March 31, 2024[12] - Customer deposits significantly increased by $729 million, reflecting strong future bookings[12] Consolidated Balance Sheets Highlights | Metric | As of March 31, 2024 ($ million) | As of December 31, 2023 ($ million) | | :------------------------------------------ | :------------------------------- | :---------------------------------- | | Total assets | $35,190 | $35,131 | | Total liabilities | $29,865 | $30,232 | | Total shareholders' equity | $5,325 | $4,899 | | Customer deposits | $6,040 | $5,311 | | Long-term debt | $18,876 | $19,732 | Consolidated Statements of Cash Flows This section details the cash inflows and outflows from operating, investing, and financing activities over the reporting period - Net cash provided by operating activities remained robust at $1.3 billion for both periods, primarily driven by customer deposits[14][173] - Net cash used in financing activities decreased significantly by $693 million, mainly due to higher debt proceeds offsetting repayments in 2024 compared to 2023[14][175] Consolidated Statements of Cash Flows Highlights | Metric | Three Months Ended March 31, 2024 ($ million) | Three Months Ended March 31, 2023 ($ million) | | :-------------------------------- | :------------------------------------------ | :------------------------------------------ | | Net cash provided by operating activities | $1,328 | $1,310 | | Net cash used in investing activities | $(296) | $(234) | | Net cash used in financing activities | $(1,091) | $(1,784) | | Net decrease in cash and cash equivalents | $(60) | $(708) | | Cash and cash equivalents at end of period | $437 | $1,227 | Consolidated Statements of Shareholders' Equity This section tracks changes in the company's equity accounts, reflecting net income, other comprehensive income, and share transactions - Shareholders' equity attributable to Royal Caribbean Cruises Ltd. increased by $426 million during Q1 2024, primarily due to net income of $360 million and positive changes in accumulated other comprehensive loss[19] Shareholders' Equity Attributable to Royal Caribbean Cruises Ltd. | Date | Amount ($ million) | | :---------------- | :----------------- | | Balance at January 1, 2024 | $4,899 | | Balance at March 31, 2024 | $5,325 | Notes to the Consolidated Financial Statements This section provides detailed explanations and additional information supporting the consolidated financial statements, clarifying accounting policies and significant transactions - Royal Caribbean Group operates three global cruise brands (Royal Caribbean International, Celebrity Cruises, Silversea Cruises) and holds a 50% joint venture interest in TUI Cruises GmbH, with a combined fleet of 65 ships[24] - Customer deposits increased to $6.04 billion as of March 31, 2024, up from $5.31 billion at December 31, 2023, with contract liabilities of $2.9 billion[12][41] - The company issued $1.25 billion of 6.25% senior unsecured notes due 2032 and used the proceeds to redeem $1.25 billion of 11.625% Senior Notes due 2027, resulting in a $116 million loss on extinguishment of debt[67] - As of March 31, 2024, the company was in compliance with all debt covenants and expects to remain so for the next twelve months[70] - Future capital commitments for new ship orders total approximately $8.1 billion, with $748 million deposited as of March 31, 2024[84] - No dividends were declared during Q1 2024 or Q1 2023, as the company is restricted under certain credit facilities[90] - Approximately 86.3% of the company's debt was effectively fixed-rate as of March 31, 2024, managed through interest rate swap agreements[113] Total Debt (Net of Unamortized Debt Issuance Costs) | Date | Amount ($ million) | | :---------------- | :----------------- | | As of March 31, 2024 | $20,519 | | As of December 31, 2023 | $21,452 | Projected Fuel Purchases Hedged | Year | % Hedged (As of March 31, 2024) | | :--- | :------------------------------ | | 2024 | 62% | | 2025 | 45% | | 2026 | 15% | Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations This section provides management's perspective on the company's financial condition and results of operations, including an overview of financial presentation, key operational and financial metrics, a detailed comparison of Q1 2024 and Q1 2023 results, and an analysis of liquidity and capital resources. It also includes cautionary statements regarding forward-looking information Cautionary Note Concerning Forward-Looking Statements This section advises readers on the inherent uncertainties and risks associated with forward-looking statements within the report - The report contains forward-looking statements based on management's current expectations, which are subject to inherent uncertainties, risks, and other factors that could cause actual results to differ materially[133] - Readers are cautioned not to place undue reliance on forward-looking statements, and the company undertakes no obligation to publicly update or revise them[134] Overview This section outlines the key areas of discussion within management's analysis, including financial presentation and performance metrics - The discussion covers financial presentation, operational and financial metrics, Q1 2024 vs. Q1 2023 results, and liquidity and capital resources[135] Critical Accounting Policies and Estimates This section directs readers to the Annual Report for a comprehensive discussion of the company's critical accounting policies and estimates - For a discussion of critical accounting policies and estimates, refer to Item 7 of the Annual Report on Form 10-K for the year ended December 31, 2023[136] Seasonality This section explains the seasonal nature of the company's revenues and its deployment strategies to optimize demand throughout the year - Revenues are seasonal, with demand historically strongest during the Northern Hemisphere's summer months and holidays[137] - Deployment strategies focus on the Caribbean, Asia, and Australia during the Northern Hemisphere's winter to capitalize on the Southern Hemisphere's summer season[137] Financial Presentation This section clarifies how the company categorizes its revenues and expenses and defines the operational and non-GAAP financial metrics used for performance evaluation - Revenues are categorized into Passenger ticket revenues (tickets, air transportation) and Onboard and other revenues (onboard sales, casino, cancellation fees, insurance, tours, port facility fees, concessionaire revenues, procurement services)[138] - Cruise operating expenses include commissions, transportation and other; onboard and other; payroll and related; food; fuel; and other operating expenses[138] - The company utilizes various operational and non-GAAP financial metrics, such as Adjusted EBITDA, Adjusted EPS, Net Yields, and Net Cruise Costs, to evaluate performance and manage the business[139][140][141][142][143][144][146][148] Results of Operations This section provides a detailed comparison of the company's financial performance for the current and prior periods, highlighting key drivers of change - Total revenues increased by $842 million in Q1 2024 compared to Q1 2023, primarily due to a 9.4% increase in capacity (new ships like Icon of the Seas, Celebrity Ascent, Silver Nova), higher ticket prices, and increased onboard spending[153][168] - Total cruise operating expenses increased by $263 million, primarily due to higher drydock and maintenance expenses and increased commissions driven by higher ticket prices[169][171] - Marketing, selling and administrative expenses increased by $74 million (16.1%), mainly due to higher payroll and benefits (headcount, stock price) and increased advertising[169] - Interest expense, net, increased by $(64) million (17.8%), largely due to a $116 million loss on extinguishment of debt, partially offset by debt repayment and lower cost refinancing[170] Net Income and Adjusted Net Income (Q1 2024 vs. Q1 2023) | Metric | Quarter Ended March 31, 2024 ($ million) | Quarter Ended March 31, 2023 ($ million) | | :------------------------------------------ | :--------------------------------------- | :--------------------------------------- | | Net Income (Loss) attributable to Royal Caribbean Cruises Ltd. | $360 | $(48) | | Adjusted Net Income (Loss) attributable to Royal Caribbean Cruises Ltd. | $478 | $(59) | Key Operational Metrics (Q1 2024 vs. Q1 2023) | Metric | Quarter Ended March 31, 2024 | Quarter Ended March 31, 2023 | | :------------------ | :--------------------------- | :--------------------------- | | Passengers Carried | 2,054,382 | 1,806,270 | | Passenger Cruise Days | 13,149,708 | 11,474,742 | | APCD | 12,285,830 | 11,233,489 | | Occupancy | 107.0% | 102.1% | Yields and Costs per APCD (Q1 2024 vs. Q1 2023) | Metric | Quarter Ended March 31, 2024 ($) | Quarter Ended March 31, 2023 ($) | | :--------------------------- | :------------------------------- | :------------------------------- | | Gross Margin Yields | $104.59 | $65.25 | | Net Yields | $247.20 | $206.88 | | Gross Cruise Costs per APCD | $210.89 | $200.65 | | Net Cruise Costs per APCD | $154.65 | $151.51 | | Net Cruise Costs Excluding Fuel per APCD | $129.91 | $124.63 | Future Application of Accounting Standards This section discusses the company's ongoing evaluation of new accounting pronouncements and their potential impact on future financial reporting - The company is evaluating the impact of recent accounting pronouncements, including ASU 2023-05 (Joint Venture Formations), ASU 2023-07 (Segment Reporting), and ASU 2023-09 (Income Tax Disclosures)[27][29][30][172] Liquidity and Capital Resources This section assesses the company's ability to meet its short-term and long-term financial obligations, detailing cash position, credit facilities, and capital commitments - As of March 31, 2024, the company had $3.7 billion in liquidity, consisting of $0.4 billion in cash and cash equivalents and $3.3 billion in undrawn revolving credit facility capacity[186] - Net cash provided by operating activities was $1.3 billion for both Q1 2024 and Q1 2023, primarily driven by customer deposits[173] - Future capital commitments for new ship orders total approximately $8.1 billion, with $5.9 billion in committed financing as of March 31, 2024[177][185] - Anticipated overall full-year capital expenditures for 2024 are approximately $3.4 billion[178] - The company is in compliance with its debt covenants and expects to maintain compliance for at least the next twelve months[189] - No dividends have been declared since Q1 2020, as dividend payments or share repurchases would require repayment of deferred amounts under export credit facilities[190] Material Cash Requirements (as of March 31, 2024) | Category | Remainder of 2024 ($ million) | 2025 ($ million) | 2026 ($ million) | 2027 ($ million) | 2028 ($ million) | Thereafter ($ million) | Total ($ million) | | :-------------------- | :---------------------------- | :--------------- | :--------------- | :--------------- | :--------------- | :--------------------- | :---------------- | | Operating Activities: | | | | | | | | | Interest on debt | $742 | $1,031 | $899 | $752 | $577 | $1,380 | $5,381 | | Other | $106 | $153 | $171 | $158 | $132 | $977 | $1,697 | | Investing Activities: | | | | | | | | | Ship purchase obligations | $1,923 | $2,161 | $1,274 | — | — | — | $5,358 | | Total | $2,771 | $3,345 | $2,344 | $910 | $709 | $2,357 | $12,436 | Item 3. Quantitative and Qualitative Disclosures About Market Risk This section refers to the company's Annual Report on Form 10-K for a detailed discussion of market risks, stating that there have been no material changes to its exposure since the 2023 Annual Report - There have been no material changes to the company's exposure to market risks since the filing of its Annual Report on Form 10-K for the year ended December 31, 2023[192] Item 4. Controls and Procedures Management, including the CEO and CFO, evaluated the effectiveness of disclosure controls and procedures as of March 31, 2024, concluding they are effective. No material changes in internal control over financial reporting were identified during the quarter - The company's disclosure controls and procedures were evaluated and deemed effective as of March 31, 2024, providing reasonable assurance for information disclosure[193] - No changes in internal control over financial reporting materially affected, or are reasonably likely to materially affect, the company's internal control during Q1 2024[194] PART II. OTHER INFORMATION This section covers additional disclosures not directly related to the core financial statements, including legal matters, risk factors, and equity transactions Item 1. Legal Proceedings The company is appealing a December 2022 judgment of approximately $112 million in the Havana Docks Action lawsuit under the Helms-Burton Act, believing it has meritorious grounds. Routine claims typical of the cruise industry are covered by insurance and are not expected to have a material adverse impact - The company is appealing a final judgment of approximately $112 million in the Havana Docks Action lawsuit, related to alleged trafficking in the Havana Cruise Port Terminal[199] - Routine claims within the cruise industry are mostly covered by insurance and are not expected to materially impact the company's financial condition or results of operations[200] Item 1A. Risk Factors There have been no material changes to the risk factors previously disclosed in the company's Annual Report on Form 10-K for the fiscal year ended December 31, 2023 - No material changes to the risk factors have occurred since the company's most recent Annual Report on Form 10-K[201] Item 2. Unregistered Sales of Equity Securities and Use of Proceeds No repurchases of common stock occurred during Q1 2024, except for shares related to employee stock plans (e.g., unvested performance shares and shares withheld for taxes). Any future share repurchases would require repayment of deferred amounts under export credit facilities - No common stock repurchases were made during the quarter ended March 31, 2024, apart from 220,305 shares related to employee stock plans (e.g., unvested performance shares and shares withheld for taxes)[204][205] - Future share repurchases would necessitate the repayment of amounts deferred under export credit facilities[204] Item 5. Other Information This section discloses Rule 10b5-1 trading arrangements entered into by Michael W. Bayley (President and CEO of Royal Caribbean International) and R. Alexander Lake (Chief Legal Officer and Secretary) in February 2024 for the sale of company common stock - Michael W. Bayley, President and CEO of Royal Caribbean International, entered a 10b5-1 trading arrangement on February 14, 2024, to sell up to 73,356 shares, expiring August 30, 2024[206] - R. Alexander Lake, Chief Legal Officer and Secretary, entered a 10b5-1 trading arrangement on February 23, 2024, to sell up to 7,750 shares, expiring February 21, 2025[207] Item 6. Exhibits This section lists all exhibits filed with the Form 10-Q, including legal documents, employment agreements, certifications from executive officers, and interactive data files - Exhibits include the Indenture and Form of 6.250% Senior Notes due 2032, an Employment Agreement, and certifications from the CEO and CFO[211] - The financial statements for the period ended March 31, 2024, are filed in iXBRL (Inline extensible Reporting Language) format[211] SIGNATURES This section formally attests to the accuracy and completeness of the Form 10-Q filing by an authorized officer of the company - The report was signed on behalf of Royal Caribbean Cruises Ltd. by Naftali Holtz, Chief Financial Officer, on April 25, 2024[213]