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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 6-K
REPORT OF FOREIGN ISSUER PURSUANT TO RULES 13a-16 OR 15d-16
UNDER THE SECURITIES EXCHANGE ACT OF 1934
FOR THE MONTH OF MAY , 1998
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ROYAL CARIBBEAN CRUISES LTD.
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(TRANSLATION OF REGISTRANT'S NAME INTO ENGLISH)
1050 CARIBBEAN WAY, MIAMI, FLORIDA 33132
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(ADDRESS OF PRINCIPAL EXECUTIVE OFFICES)
INDICATE BY CHECK MARK WHETHER THE REGISTRANT FILES OR WILL FILE ANNUAL
REPORTS UNDER COVER FORM 20-F OR FORM 40-F.
FORM 20-F X FORM 40-F
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INDICATE BY CHECK MARK WHETHER THE REGISTRANT BY FURNISHING THE INFORMATION
CONTAINED IN THIS FORM IS ALSO THEREBY FURNISHING THE INFORMATION TO THE
COMMISSION PURSUANT TO RULE 12g3-2(b) UNDER THE SECURITIES EXCHANGE ACT OF 1934.
YES NO X
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ROYAL CARIBBEAN CRUISES LTD.
QUARTERLY FINANCIAL REPORT
FIRST QUARTER 1998
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ROYAL CARIBBEAN CRUISES LTD.
INDEX TO QUARTERLY FINANCIAL REPORT
PAGE
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Consolidated Statements of Operations
for the First Quarters ended March 31, 1998
and 1997 1
Consolidated Balance Sheets as of
March 31, 1998 and December 31, 1997 2
Consolidated Statements of Cash
Flows for the First Quarters ended
March 31, 1998 and 1997 3
Notes to the Consolidated Financial
Statements 4
Management's Discussion and
Analysis of Financial Condition and
Results of Operations 6
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ROYAL CARIBBEAN CRUISES LTD.
CONSOLIDATED STATEMENTS OF OPERATIONS
(UNAUDITED, IN THOUSANDS, EXCEPT PER SHARE DATA)
FIRST QUARTER ENDED MARCH 31,
---------------------------------
1998 1997
----------- ------------
REVENUES $ 659,777 $ 394,590
----------- -----------
EXPENSES
Operating 396,410 254,319
Marketing, selling and administrative 96,292 53,751
Depreciation and amortization 47,614 25,883
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540,316 333,953
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OPERATING INCOME 119,461 60,637
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OTHER INCOME (EXPENSE)
Interest income 2,579 458
Interest expense, net of capitalized interest (42,556) (22,105)
Other income (expense) (1,947) (509)
----------- -----------
(41,924) (22,156)
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NET INCOME $ 77,537 $ 38,481
=========== ===========
EARNINGS PER SHARE DATA:
BASIC EARNINGS PER SHARE:
Net income $ 0.91 $ 0.58
=========== ===========
Weighted Average Shares
Outstanding 81,893,096 63,837,296
=========== ===========
DILUTED EARNINGS PER SHARE:
Net income $ 0.88 $ 0.58
=========== ===========
Weighted Average Shares
Outstanding 88,610,311 66,765,782
=========== ===========
The accompanying notes are an integral part of these financial statements.
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ROYAL CARIBBEAN CRUISES LTD.
CONSOLIDATED BALANCE SHEETS
(IN THOUSANDS)
<TABLE>
<CAPTION>
AS OF
---------------------------------
MARCH 31, DECEMBER 31,
1998 1997
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(UNAUDITED)
ASSETS
<S> <C> <C>
CURRENT ASSETS
Cash and cash equivalents $ 548,147 $ 110,793
Trade and other receivables, net 25,994 22,628
Inventories 35,863 37,274
Prepaid expenses 47,614 40,450
----------- -----------
Total current assets 657,618 211,145
PROPERTY AND EQUIPMENT - at cost less accumulated
depreciation 4,836,103 4,785,290
GOODWILL - less accumulated amortization of $99,555
and $96,952, respectively 317,611 320,214
OTHER ASSETS 21,783 23,098
----------- -----------
$ 5,833,115 $ 5,339,748
=========== ===========
LIABILITIES AND SHAREHOLDERS' EQUITY
CURRENT LIABILITIES
Current portion of long-term debt $ 140,963 $ 141,013
Accounts payable 106,670 108,474
Accrued liabilities 250,225 210,454
Customer deposits 424,772 429,403
----------- -----------
Total current liabilities 922,630 889,344
LONG-TERM DEBT 2,659,962 2,431,683
COMMITMENTS AND CONTINGENCIES
SHAREHOLDERS' EQUITY
Preferred stock 172,500 172,500
Common stock 843 811
Paid-in capital 1,358,785 1,189,114
Retained earnings 722,894 660,655
Treasury stock (4,499) (4,359)
----------- -----------
Total shareholders' equity 2,250,523 2,018,721
----------- -----------
$ 5,833,115 $ 5,339,748
=========== ===========
</TABLE>
The accompanying notes are an integral part of these financial statements.
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ROYAL CARIBBEAN CRUISES LTD.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED, IN THOUSANDS)
<TABLE>
<CAPTION>
FIRST QUARTER ENDED MARCH 31,
---------------------------------
1998 1997
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<S> <C> <C>
OPERATING ACTIVITIES
Net income $ 77,537 $ 38,481
Adjustments:
Depreciation and amortization 47,614 25,883
Changes in operating assets and
Increase in trade and other receivables, net (3,367) (1,732)
Decrease in inventories 1,411 871
Increase in prepaid expenses (6,171) (2,915)
Decrease in accounts payable (1,805) (971)
Increase (decrease) in accrued liabilities 38,562 (2,623)
(Decrease) increase in customer deposits (4,631) 22,148
Other 605 806
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Net cash provided by operating activities 149,755 79,948
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INVESTING ACTIVITIES
Purchase of property and equipment (92,372) (80,452)
Other (164) (1,566)
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Net cash used in investing activities (92,536) (82,018)
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FINANCING ACTIVITIES
Proceeds from issuance of long-term debt 296,141 --
Repayment of long-term debt (68,685) (160,105)
Proceeds from issuance of preferred stock -- 167,325
Proceeds from issuance of common stock 165,532 --
Dividends (15,298) (8,939)
Other 2,445 963
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Net cash provided by (used in) financing activities 380,135 (756)
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NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS 437,354 (2,826)
CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD 110,793 40,419
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CASH AND CASH EQUIVALENTS AT END OF PERIOD $ 548,147 $ 37,593
=========== ===========
SUPPLEMENTAL DISCLOSURE
Interest paid, net of amount capitalized $ 25,227 $ 24,137
=========== ===========
</TABLE>
The accompanying notes are an integral part of these financial statements.
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ROYAL CARIBBEAN CRUISES LTD.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
NOTE 1 - BASIS FOR PREPARATION OF CONSOLIDATED FINANCIAL STATEMENTS
In the opinion of management the accompanying unaudited consolidated financial
statements contain all normal recurring accruals necessary for a fair
presentation. The Company's revenues are moderately seasonal and results for
interim periods are not necessarily indicative of the results for the entire
year.
The interim unaudited Consolidated Financial Statements should be read in
conjunction with the audited Consolidated Financial Statements and notes thereto
for 1997.
NOTE 2 - ACQUISITION
On July 2, 1997 the Company entered into a definitive agreement to acquire all
of the outstanding stock of Celebrity Cruise Lines Inc. and its subsidiaries
("Celebrity"). Celebrity is a provider of cruises to the North American market.
This acquisition has been accounted for under the purchase method and the
results of the operations of Celebrity have been included in the consolidated
financial statements since July 1, 1997. The total cost of the acquisition was
allocated to the tangible assets acquired and liabilities assumed based on their
respective fair values.
The following unaudited pro forma information presents a summary of consolidated
results of operations of the Company, including Celebrity, as if the acquisition
had occurred January 1, 1996.
---------------------------------------------------------
Three Months
Ended
(In thousands, except per share data) March 31, 1997
---------------------------------------------------------
Revenue $522,928
Net Income 32,815
Basic Earnings per Share $0.44
Diluted Earnings per Share $0.44
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The unaudited pro forma results have been prepared for comparative purposes only
and include certain adjustments, such as additional depreciation expense as a
result of a step-up in the basis of fixed assets and increased interest expense
on acquisition debt. They do not purport to be indicative of the results which
actually would have been achieved if this acquisition had been effected on the
date indicated or of those results which may be obtained in the future.
NOTE 3 - LONG-TERM DEBT
On March 16, 1998, the Company completed a debt offering of $150.0 million of
6.75% Senior Notes due 2008 and $150.0 million of 7.25% Senior Debentures due
2018. Net proceeds to the Company were approximately $296.1 million.
NOTE 4 - COMMON STOCK
On March 9, 1998, the Company completed an offering of 6,900,000 shares of
common stock at a public offering price of $56.50 per share. Of the total shares
sold, 3,849,655 shares were sold by selling shareholders and the balance of
3,050,345 shares were sold by the Company. After deduction of the underwriting
discount and other estimated expenses of the offering, net proceeds to the
Company were approximately $165.5 million.
NOTE 5 - COMMITMENTS AND CONTINGENCIES
In the first quarter of 1998, the Company signed contracts for the construction
of one Voyager-class vessel scheduled for delivery in February 2001 and two
Millennium-class vessels scheduled for delivery in June 2000 and January 2001.
The Company also has three Eagle-class vessels on order scheduled for delivery
in the fall of 1999, fall of 2000 and spring of 2002. The aggregate contract
price of the six ships, which excludes capitalized interest and other ancillary
costs, is approximately $2.5 billion. Additionally, the Company has the right,
cancellable on or before January 31, 1999, to purchase up to three additional
vessels with delivery dates between September 2001 and June 2002 at an aggregate
contract price of approximately $1.0 billion (two of which are denominated in
French francs and are subject to change based on fluctuations in exchange
rates).
NOTE 6 - SUBSEQUENT EVENT
On May 11, 1998, the Company completed the sale of SONG OF AMERICA for
approximately $95 million. The Company anticipates that it will realize a gain
on the sale of approximately $30 million which will be recorded in the second
quarter of 1998. The Company will continue to operate SONG OF AMERICA under a
charter agreement until March 1999.
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ROYAL CARIBBEAN CRUISES LTD.
MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
Certain statements under this caption "Management's Discussion and
Analysis of Financial Condition and Results of Operations", may constitute
"forward-looking statements" under the Private Securities Litigation Reform Act
of 1995. Such forward-looking statements are not guarantees of future
performance and involve known and unknown risks, uncertainties and other
factors, which may cause the actual results, performance or achievements to
differ materially from the future results, performance or achievements expressed
or implied in such forward-looking statements. Such factors include inter alia
general economic and business conditions, cruise industry competition,
integration of Celebrity into the Company, the impact of tax laws and
regulations affecting the Company and its principal shareholders, changes in
other laws and regulations affecting the Company, delivery schedule of new
vessels, emergency ship repairs, incidents involving cruise vessels at sea,
changes in interest rates, Year 2000 compliance and weather.
RESULTS OF OPERATIONS
SUMMARY. Revenues for the first quarter of 1998 increased 67.2% to
$659.8 million compared to $394.6 million for the same period in 1997 due to
increased capacity, including the acquisition of Celebrity and increased revenue
per available lower berth ("Yield"). Operating income increased 97% to $119.5
million, as compared to $60.6 million for the same period in 1997. Net income
for the first quarter increased to $77.5 million, or $0.88 per share on a
diluted basis, as compared to $38.5 million, or $0.58 per share, for the first
quarter of 1997.
The following table presents statements of operations data as a percentage of
total revenues:
FIRST QUARTER ENDED MARCH 31,
-----------------------------
1998 1997
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REVENUES 100.0% 100.0%
EXPENSES:
OPERATING 60.1 64.4
MARKETING, SELLING AND ADMINISTRATIVE 14.6 13.6
DEPRECIATION AND AMORTIZATION 7.2 6.6
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OPERATING INCOME 18.1 15.4
OTHER INCOME (EXPENSE) (6.4) (5.6)
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NET INCOME 11.7% 9.8%
======= =======
The Company's revenues are moderately seasonal, due to variations in rates and
occupancy percentages.
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REVENUES. Total revenues increased 67.2% to $659.8 million for the
first quarter of 1998 as compared to $394.6 million for the first quarter of
1997 as a result of a 64.3% increase in capacity and a 1.8% increase in Yield.
The acquisition of Celebrity contributed 46.6% of the capacity increase. The
capacity increase in the Royal Caribbean fleet of 17.7% was a result of the
introduction of the 2,000-passenger RHAPSODY OF THE SEAS and the 1,950-passenger
ENCHANTMENT OF THE SEAS in the second and third quarters of 1997, respectively,
partially offset by the departure from the fleet of Song OF NORWAY and SUN
VIKING in the first quarter of 1997 and the fourth quarter of 1997,
respectively. The Yield improvement was a result of higher per diems and
occupancy levels. Occupancy for the first quarter of 1998 was 104.6% compared to
103.4% for the same period in 1997.
EXPENSES. Operating expenses increased 55.9% to $396.4 million for the
first quarter of 1998 as compared to $254.3 million for the first quarter of
1997 as a result of additional costs associated with the increase in capacity.
As a percent of revenue, operating expenses decreased 4.3% primarily due to
improved cruise ticket pricing as well as the inclusion of Celebrity results in
1998 versus 1997. Celebrity's operating expenses as a percent of revenue were
lower than Royal Caribbean's primarily because of lower shipboard cost of sales
due to the use of concessionaires onboard Celebrity vessels.
Marketing, selling and administrative expenses increased 79.1% to $96.3 million
for the first quarter of 1998 from $53.8 million in 1997. The majority of the
increase in the period was due to the acquisition of Celebrity as well as higher
advertising costs. As a percent of revenue, marketing, selling and
administrative expenses increased 1.0% for the first quarter of 1998 compared to
the same period in 1997 as a result of expanded advertising activities for both
the Royal Caribbean International and Celebrity Cruises brands.
Depreciation and amortization increased to $47.6 million for the first quarter
of 1998 from $25.9 million for the first quarter of 1997. The increase is
primarily due to the acquisition of Celebrity as well as the addition of
RHAPSODY OF THE SEAS and ENCHANTMENT OF THE SEAS.
OTHER INCOME (EXPENSE). Interest expense, net of capitalized interest,
increased to $42.6 million in the first quarter of 1998 as compared to $22.1
million for the first quarter of 1997 as a result of an increase in the average
debt level driven by the Company's fleet expansion program and the acquisition
of Celebrity in 1997.
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LIQUIDITY AND CAPITAL RESOURCES
SOURCES AND USES OF CASH. Net cash provided by operating activities was
$149.8 million for the first quarter of 1998 as compared to $79.9 million for
the first quarter of 1997. The increase was primarily due to higher net income
as well as timing differences in cash payments relating to operating assets and
liabilities.
In March 1998, the Company issued $150.0 million of 6.75% Senior Notes due 2008
and $150.0 million of 7.25% Senior Debentures due 2018. The net proceeds to the
Company were approximately $296.1 million (see Note 3 - Long-Term Debt).
In March 1998, the Company issued 3,050,345 shares of common stock. The net
proceeds to the Company were approximately $165.5 million (see Note 4 - Common
Stock).
During the first quarter of 1998, the Company paid a quarterly cash dividend of
$0.15 per common share or $12.2 million. In addition, the Company paid a
quarterly cash dividend of $.91 per preferred share or $3.1 million.
The Company's capital expenditures increased to $92.4 million for the first
quarter of 1998 as compared to $80.5 million for the first quarter of 1997.
Capital expenditures included $65.8 million and $68.6 million in payments for
ships under construction in the first quarter of 1998 and 1997, respectively.
Also included in capital expenditures are shoreside capital expenditures and
costs for vessel refurbishing to maintain consistent fleet standards.
FUTURE COMMITMENTS. In the first quarter of 1998, the Company signed
contracts for the construction of one Voyager-class vessel scheduled for
delivery in February 2001 and two Millennium-class vessels scheduled for
delivery in June 2000 and January 2001. The Company also has three Eagle-class
vessels on order scheduled for delivery in the fall of 1999, fall of 2000 and
spring of 2002. The aggregate contract price of the six ships, which excludes
capitalized interest and other ancillary costs, is approximately $2.5 billion.
Additionally, the Company has the right, cancellable on or before January 31,
1999, to purchase up to three additional vessels with delivery dates between
September 2001 and June 2002 at an aggregate contract price of approximately
$1.0 billion (two of which are denominated in French francs and are subject to
change based on fluctuations in exchange rates. In April 1998, the Company took
delivery of the 2,000-passenger VISION OF THE SEAS and made the final payment of
$276.4 million.
FUNDING SOURCES. As of March 31, 1997, the Company's liquidity was
$1,548.1 million consisting of $548.1 million in cash and cash equivalents and
$1.0 billion available on the $1.0 billion revolving credit facility (the "$1
Billion Revolving Credit Facility"). In addition, the agreements related to the
ships on order require the shipyards to make available export financing for up
to 80% of the contract price of the vessels.
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The Company's cash management practice is to utilize excess cash to reduce
outstanding balances under the $1 Billion Revolving Credit Facility, and to the
extent the cash balances exceed the amounts drawn under the $1 Billion Revolving
Credit Facility, the Company invests in short-term securities.
In addition, the Company continuously considers potential acquisitions,
strategic alliances and adjustments to its fleet composition, including the
acquisition or disposition of vessels. If any such acquisitions, strategic
alliances and adjustments to its fleet composition were to occur, they would be
financed by the issuance of additional shares of equity securities, the
incurrence of additional indebtedness or from cash flows from operations.
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INCORPORATION BY REFERENCE
This report on Form 6-K is hereby incorporated by reference in registrant's
Registration Statement on Form F-3, File No. 333-8707, filed with the Securities
and Exchange Commission.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned, thereunto duly authorized.
ROYAL CARIBBEAN CRUISES LTD.
(Registrant)
Date: May 22, 1998 By /s/ Richard J. Glasier
---------------------------------------------
Richard J. Glasier
Executive Vice President and Chief Financial
Officer
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