FORM 8-K
CURRENT REPORT
Pursuant To Section 13 or 15(d) of
The Securities Exchange Act of 1934
Date of report (Date of earliest event reported): October 28, 2016
ROYAL CARIBBEAN CRUISES LTD.
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(Exact Name of Registrant as Specified in Charter)
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Republic of Liberia
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(State or Other Jurisdiction of Incorporation)
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1-11884
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98-0081645
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(Commission File Number)
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(IRS Employer Identification No.)
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1050 Caribbean Way, Miami, Florida
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33132
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(Address of Principal Executive Offices)
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(Zip Code)
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Registrant’s telephone number, including area code: 305-539-6000
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Not Applicable
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(Former Name or Former Address, if Changed Since Last Report)
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o
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Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)
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o
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Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)
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o
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Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))
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o
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Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))
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ROYAL CARIBBEAN CRUISES LTD.
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Date:
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October 28, 2016
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By:
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/s/ Jason T. Liberty
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Name:
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Jason T. Liberty
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Title:
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Chief Financial Officer
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>
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Net Yields were up 2.9% on a Constant-Currency basis (up 0.4%, As-Reported), better than guidance driven mainly by strong close-in demand for North American itineraries.
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>
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Net Cruise Costs (“NCC”) excluding fuel were down 1.6% on a Constant-Currency basis (down 2.0%, As-Reported), in line with guidance.
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>
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US GAAP Net Income was $693.3 million or $3.21 per share, versus $228.8 million, or $1.03 per share in 2015. Last year’s figure includes an impairment charge related to Pullmantur.
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>
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Adjusted Net Income was $690.9 million, or $3.20 per share, better than expectations driven by strong yields and positive movements in currency and fuel during the quarter, versus $628.1 million, or $2.84 per share, in 2015.
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>
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Net Yields are expected to be up 4.0% or better on a Constant-Currency basis (up in the range of 1.7% to 2.0% As-Reported). Strong close-in demand for North American products in the third quarter is helping offset the impact from the delay in opening Empress of the Seas sailings in the fourth quarter.
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>
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NCC excluding fuel are expected to be up approximately 1.0% on a Constant-Currency basis (flat to up 1.0% As-Reported).
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>
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Adjusted EPS is expected to be in the range of $6.00 to $6.10 per share, unchanged from prior guidance.
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FUEL STATISTICS
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Fourth Quarter 2016
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Full Year 2016
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Fuel Consumption (metric tons)
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340,000
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1,371,000
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Fuel Expenses
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$189 million
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$720 million
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Percent Hedged (fwd consumption)
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68%
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68%
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Impact of 10% change in fuel prices
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$4.0 million
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$4.0 million
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GUIDANCE
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As-Reported
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Constant-Currency
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Fourth Quarter 2016
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||
Net Yields
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Approx. 4.5%
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Approx. 6.0%
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Net Cruise Costs per APCD
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Approx. (1.5%)
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(1.0%) to (1.5%)
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Net Cruise Costs per APCD
excluding Fuel
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Approx. (2.0%)
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Approx. (1.5%)
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Full Year 2016
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Net Yields
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1.7% to 2.0%
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4.0% or better
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Net Cruise Costs per APCD
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Approx. (2.0%)
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Approx. (1.5%)
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Net Cruise Costs per APCD
excluding Fuel
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Approx. 0.5%
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Approx. 1.0%
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GUIDANCE
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Fourth Quarter 2016
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Full Year 2016
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Capacity Increase
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(0.2%)
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3.3%
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Depreciation and Amortization
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$230 to $235 million
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$890 to $900 million
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Interest Expense, net
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$75 to $80 million
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$287 to $292 million
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Adjusted EPS
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Approx. $1.20
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$6.00 to $6.10
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GUIDANCE
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Fourth Quarter 2016
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Full Year 2016
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1% Change in Currency
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$4 million
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$4 million
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1% Change in Net Yield
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$15 million
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$15 million
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1% Change in NCC x fuel
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$8 million
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$8 million
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1% Change in LIBOR
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$12 million
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$12 million
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Exchange rates used in guidance calculations
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Previous – August
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Current - October
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GBP
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$1.32
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$1.22
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AUD
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$0.75
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$0.76
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CAD
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$0.76
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$0.75
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CNH
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$0.15
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$0.15
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EUR
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$1.10
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$1.09
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Quarter Ended
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Nine Months Ended
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|||||||||||||||
September 30,
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September 30,
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|||||||||||||||
2016
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2015
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2016
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2015
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|||||||||||||
Passenger ticket revenues
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$ | 1,899,956 | $ | 1,873,942 | $ | 4,794,653 | $ | 4,688,189 | ||||||||
Onboard and other revenues
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663,785 | 649,158 | 1,792,145 | 1,708,832 | ||||||||||||
Total revenues
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2,563,741 | 2,523,100 | 6,586,798 | 6,397,021 | ||||||||||||
Cruise operating expenses:
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||||||||||||||||
Commissions, transportation and other
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400,933 | 413,156 | 1,060,391 | 1,093,409 | ||||||||||||
Onboard and other
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159,887 | 175,214 | 399,739 | 438,558 | ||||||||||||
Payroll and related
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214,081 | 217,627 | 671,955 | 647,788 | ||||||||||||
Food
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125,732 | 122,124 | 371,759 | 361,317 | ||||||||||||
Fuel
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178,772 | 199,848 | 531,283 | 607,689 | ||||||||||||
Other operating
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260,718 | 259,057 | 857,161 | 777,291 | ||||||||||||
Total cruise operating expenses
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1,340,123 | 1,387,026 | 3,892,288 | 3,926,052 | ||||||||||||
Marketing, selling and administrative expenses
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257,430 | 256,060 | 845,808 | 817,040 | ||||||||||||
Depreciation and amortization expenses
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229,328 | 210,742 | 661,712 | 617,678 | ||||||||||||
Impairment of Pullmantur related assets
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— | 411,267 | — | 411,267 | ||||||||||||
Restructuring charges
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1,897 | — | 6,627 | — | ||||||||||||
Operating Income
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734,963 | 258,005 | 1,180,363 | 624,984 | ||||||||||||
Other income (expense):
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||||||||||||||||
Interest income
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6,472 | 1,735 | 14,875 | 8,244 | ||||||||||||
Interest expense, net of interest capitalized
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(82,610 | ) | (66,819 | ) | (226,803 | ) | (213,598 | ) | ||||||||
Other income (including a $21.7 million loss related to the 2016 elimination of the Pullmantur reporting lag for the nine months ended September 30, 2016 and including in the quarter and nine months ended September 30, 2015 a net deferred tax benefit of $12.0 million related to the Pullmantur impairment)
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34,432 | 35,866 | 53,867 | 39,354 | ||||||||||||
(41,706 | ) | (29,218 | ) | (158,061 | ) | (166,000 | ) | |||||||||
Net Income
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$ | 693,257 | $ | 228,787 | $ | 1,022,302 | $ | 458,984 | ||||||||
Earnings per Share:
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||||||||||||||||
Basic
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$ | 3.23 | $ | 1.04 | $ | 4.74 | $ | 2.09 | ||||||||
Diluted
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$ | 3.21 | $ | 1.03 | $ | 4.72 | $ | 2.08 | ||||||||
Weighted-Average Shares Outstanding:
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||||||||||||||||
Basic
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214,819 | 219,963 | 215,663 | 219,835 | ||||||||||||
Diluted
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215,667 | 221,137 | 216,575 | 220,979 | ||||||||||||
Comprehensive Income
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Net Income
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$ | 693,257 | $ | 228,787 | $ | 1,022,302 | $ | 458,984 | ||||||||
Other comprehensive income (loss):
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||||||||||||||||
Foreign currency translation adjustments
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4,043 | (4,191 | ) | 8,423 | (23,994 | ) | ||||||||||
Change in defined benefit plans
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(5,051 | ) | 3,318 | (12,148 | ) | 5,567 | ||||||||||
Gain (loss) on cash flow derivative hedges
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95,536 | (222,492 | ) | 254,624 | (280,968 | ) | ||||||||||
Total other comprehensive income (loss)
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94,528 | (223,365 | ) | 250,899 | (299,395 | ) | ||||||||||
Comprehensive Income
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$ | 787,785 | $ | 5,422 | $ | 1,273,201 | $ | 159,589 | ||||||||
STATISTICS
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Quarter Ended
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Nine Months Ended
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|||||||||||||||
September 30,
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September 30,
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|||||||||||||||
2016 | 2015 | 2016(1) | 2015 | |||||||||||||
Passengers Carried
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1,558,224 | 1,403,650 | 4,365,144 | 4,053,451 | ||||||||||||
Passenger Cruise Days
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10,727,918 | 10,176,750 | 30,367,048 | 28,856,742 | ||||||||||||
APCD
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9,766,482 | 9,465,368 | 28,503,681 | 27,284,750 | ||||||||||||
Occupancy
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109.8 | % | 107.5 | % | 106.5 | % | 105.8 | % |
As of
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||||||||
September 30,
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December 31,
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|||||||
2016
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2015
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|||||||
Assets
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(unaudited)
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|||||||
Current assets
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||||||||
Cash and cash equivalents
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$ | 178,428 | $ | 121,565 | ||||
Trade and other receivables, net
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273,422 | 238,972 | ||||||
Inventories
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118,849 | 121,332 | ||||||
Prepaid expenses and other assets
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231,442 | 220,579 | ||||||
Derivative financial instruments
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928 | 134,574 | ||||||
Total current assets
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803,069 | 837,022 | ||||||
Property and equipment, net
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20,230,803 | 18,777,778 | ||||||
Goodwill
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288,461 | 286,764 | ||||||
Other assets
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1,127,929 | 880,479 | ||||||
$ | 22,450,262 | $ | 20,782,043 | |||||
Liabilities and Shareholders’ Equity
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||||||||
Current liabilities
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||||||||
Current portion of long-term debt
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$ | 1,298,002 | $ | 899,542 | ||||
Accounts payable
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259,027 | 302,072 | ||||||
Accrued interest
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95,112 | 38,325 | ||||||
Accrued expenses and other liabilities
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678,874 | 658,601 | ||||||
Derivative financial instruments
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201,877 | 651,866 | ||||||
Customer deposits
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1,967,678 | 1,742,286 | ||||||
Total current liabilities
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4,500,570 | 4,292,692 | ||||||
Long-term debt
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8,419,850 | 7,627,701 | ||||||
Other long-term liabilities
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739,693 | 798,611 | ||||||
Commitments and contingencies
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||||||||
Shareholders’ equity
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||||||||
Preferred stock ($0.01 par value; 20,000,000 shares authorized; none outstanding)
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— | — | ||||||
Common stock ($0.01 par value; 500,000,000 shares authorized; 234,589,237 and 233,905,166 shares issued, September 30, 2016 and December 31, 2015, respectively)
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2,346 | 2,339 | ||||||
Paid-in capital
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3,316,385 | 3,297,619 | ||||||
Retained earnings
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7,702,260 | 6,944,862 | ||||||
Accumulated other comprehensive loss
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(1,077,534 | ) | (1,328,433 | ) | ||||
Treasury stock (20,019,237 and 15,911,971 common shares at cost, September 30, 2016 and December 31, 2015, respectively)
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(1,153,308 | ) | (853,348 | ) | ||||
Total shareholders’ equity
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8,790,149 | 8,063,039 | ||||||
$ | 22,450,262 | $ | 20,782,043 |
Nine Months Ended
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||||||||
September 30,
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||||||||
2016
|
2015
|
|||||||
Operating Activities
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||||||||
Net income
|
$ | 1,022,302 | $ | 458,984 | ||||
Adjustments:
|
||||||||
Depreciation and amortization
|
661,712 | 617,678 | ||||||
Impairment of Pullmantur related assets
|
— | 411,267 | ||||||
Net deferred income tax expense (benefit)
|
1,601 | (13,466 | ) | |||||
Loss on derivative instruments not designated as hedges
|
6,353 | 49,607 | ||||||
Changes in operating assets and liabilities:
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||||||||
Decrease in trade and other receivables, net
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9,823 | 24,130 | ||||||
Increase in inventories
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(6,379 | ) | (8,377 | ) | ||||
Decrease (increase) in prepaid expenses and other assets
|
2,484 | (30,649 | ) | |||||
Decrease in accounts payable
|
(17,313 | ) | (22,915 | ) | ||||
Increase in accrued interest
|
56,787 | 34,207 | ||||||
Increase in accrued expenses and other liabilities
|
23,216 | 11,558 | ||||||
Increase in customer deposits
|
197,277 | 65,511 | ||||||
Dividends received from unconsolidated affiliates
|
71,370 | 5,327 | ||||||
Other, net
|
(28,281 | ) | 5,074 | |||||
Net cash provided by operating activities
|
2,000,952 | 1,607,936 | ||||||
Investing Activities
|
||||||||
Purchases of property and equipment
|
(2,313,831 | ) | (1,360,637 | ) | ||||
Cash paid on settlement of derivative financial instruments
|
(172,878 | ) | (158,890 | ) | ||||
Investments in and loans to unconsolidated affiliates
|
(8,611 | ) | (54,250 | ) | ||||
Cash received on loans to unconsolidated affiliates
|
22,470 | 122,710 | ||||||
Other, net(2)
|
(44,709 | ) | (18,642 | ) | ||||
Net cash used in investing activities
|
(2,517,559 | ) | (1,469,709 | ) | ||||
Financing Activities
|
||||||||
Debt proceeds
|
6,038,560 | 2,962,501 | ||||||
Debt issuance costs
|
(83,793 | ) | (57,146 | ) | ||||
Repayments of debt
|
(4,818,262 | ) | (2,887,237 | ) | ||||
Purchases of treasury stock
|
(299,959 | ) | — | |||||
Dividends paid
|
(243,557 | ) | (197,718 | ) | ||||
Proceeds from exercise of common stock options
|
1,782 | 6,902 | ||||||
Other, net
|
2,179 | 1,778 | ||||||
Net cash provided by (used in) financing activities
|
596,950 | (170,920 | ) | |||||
Effect of exchange rate changes on cash
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(23,480 | ) | (9,129 | ) | ||||
Net increase (decrease) in cash and cash equivalents
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56,863 | (41,822 | ) | |||||
Cash and cash equivalents at beginning of period
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121,565 | 189,241 | ||||||
Cash and cash equivalents at end of period
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$ | 178,428 | $ | 147,419 | ||||
Supplemental Disclosure
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||||||||
Cash paid during the period for:
|
||||||||
Interest, net of amount capitalized
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$ | 140,335 | $ | 151,661 | ||||
Non-cash Investing Activities
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||||||||
Notes receivable issued upon sale of property and equipment
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$ | 213,042 | $ | — | ||||
Quarter Ended September 30,
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Nine Months Ended September 30,
|
|||||||||||||||||
2016
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2016 On a
Constant
Currency Basis
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2015
|
2016
|
2016 On a
Constant
Currency Basis
|
2015
|
|||||||||||||
Passenger ticket revenues
|
$ | 1,899,956 | $ | 1,952,378 | $ | 1,873,942 | $ | 4,794,653 | $ | 4,934,937 | $ | 4,688,189 | ||||||
Onboard and other revenues
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663,785 | 670,195 | 649,158 | 1,792,145 | 1,806,124 | 1,708,832 | ||||||||||||
Total revenues
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2,563,741 | 2,622,573 | 2,523,100 | 6,586,798 | 6,741,061 | 6,397,021 | ||||||||||||
Less:
|
||||||||||||||||||
Commissions, transportation and other
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400,933 | 410,399 | 413,156 | 1,060,391 | 1,086,888 | 1,093,409 | ||||||||||||
Onboard and other
|
159,887 | 160,036 | 175,214 | 399,739 | 401,285 | 438,558 | ||||||||||||
Net Revenues including other initiative costs
|
2,002,921 | 2,052,138 | 1,934,730 | 5,126,668 | 5,252,888 | 4,865,054 | ||||||||||||
Less:
|
||||||||||||||||||
Other initiative costs included
within Net Revenues
|
(1,843) | (1,790) | — | (1,843) | (1,790) | — | ||||||||||||
Net Revenues
|
$ | 2,004,764 | $ | 2,053,928 | $ | 1,934,730 | $ | 5,128,511 | $ | 5,254,678 | $ | 4,865,054 | ||||||
APCD
|
9,766,482 | 9,766,482 | 9,465,368 | 28,503,681 | 28,503,681 | 27,284,750 | ||||||||||||
Gross Yields
|
$ | 262.50 | $ | 268.53 | $ | 266.56 | $ | 231.09 | $ | 236.50 | $ | 234.45 | ||||||
Net Yields
|
$ | 205.27 | $ | 210.30 | $ | 204.40 | $ | 179.92 | $ | 184.35 | $ | 178.31 |
Quarter Ended September 30,
|
Nine Months Ended September 30,
|
||||||||||||||||
2016
|
2016 On a
Constant
Currency Basis
|
2015
|
2016
|
2016 On a
Constant
Currency Basis
|
2015
|
||||||||||||
Total cruise operating expenses
|
$ | 1,340,123 | $ | 1,350,295 | $ | 1,387,026 | $ | 3,892,288 | $ | 3,926,447 | $ | 3,926,052 | |||||
Marketing, selling and administrative expenses
|
257,430 | 260,471 | 256,060 | 845,808 | 856,941 | 817,040 | |||||||||||
Gross Cruise Costs
|
1,597,553 | 1,610,766 | 1,643,086 | 4,738,096 | 4,783,388 | 4,743,092 | |||||||||||
Less:
|
|||||||||||||||||
Commissions, transportation and other
|
400,933 | 410,399 | 413,156 | 1,060,391 | 1,086,888 | 1,093,409 | |||||||||||
Onboard and other
|
159,887 | 160,036 | 175,214 | 399,739 | 401,285 | 438,558 | |||||||||||
Net Cruise Costs including other initiative costs
|
1,036,733 | 1,040,331 | 1,054,716 | 3,277,966 | 3,295,215 | 3,211,125 | |||||||||||
Less:
|
|||||||||||||||||
Other initiative costs included within cruise operating expenses and marketing, selling and administrative expenses
|
(2,252) | (2,157) | — | 1,073 | 1,240 | — | |||||||||||
Net gain related to the sale of Pullmantur and CDF Croisières de France brands included within other operating expenses
|
(3,834) | (3,834) | — | (3,834) | (3,834) | — | |||||||||||
Net Cruise Costs
|
1,042,819 | 1,046,322 | 1,054,716 | 3,280,727 | 3,297,809 | 3,211,125 | |||||||||||
Less:
|
|||||||||||||||||
Fuel(3)
|
178,772 | 178,742 | 199,848 | 530,859 | 531,836 | 607,689 | |||||||||||
Net Cruise Costs Excluding Fuel
|
$ | 864,047 | $ | 867,580 | $ | 854,868 | $ | 2,749,868 | $ | 2,765,973 | $ | 2,603,436 | |||||
APCD
|
9,766,482 | 9,766,482 | 9,465,368 | 28,503,681 | 28,503,681 | 27,284,750 | |||||||||||
Gross Cruise Costs per APCD
|
$ | 163.58 | $ | 164.93 | $ | 173.59 | $ | 166.23 | $ | 167.82 | $ | 173.84 | |||||
Net Cruise Cost per APCD
|
$ | 106.78 | $ | 107.13 | $ | 111.43 | $ | 115.10 | $ | 115.70 | $ | 117.69 | |||||
Net Cruise Costs Excluding Fuel per APCD
|
$ | 88.47 | $ | 88.83 | $ | 90.32 | $ | 96.47 | $ | 97.04 | $ | 95.42 |
Quarter Ended September 30,
|
Nine Months Ended September 30,
|
|||||||||||||||
2016
|
2015
|
2016
|
2015
|
|||||||||||||
Net Income
|
$ | 693,257 | $ | 228,787 | $ | 1,022,302 | $ | 458,984 | ||||||||
Adjusted Net income
|
690,911 | 628,070 | 1,050,031 | 858,267 | ||||||||||||
Net Adjustments to Net Income- (Decrease) Increase
|
$ | (2,346 | ) | $ | 399,283 | $ | 27,729 | $ | 399,283 | |||||||
Adjustments to Net Income:
|
||||||||||||||||
Impairment of Pullmantur related assets(4)
|
$ | — | $ | 399,283 | $ | — | $ | 399,283 | ||||||||
Net loss related to the elimination of the Pullmantur reporting lag
|
— | — | 21,656 | — | ||||||||||||
Net gain related to the sale of the Pullmantur and CDF Croisières de France brands
|
(3,834 | ) | — | (3,834 | ) | — | ||||||||||
Restructuring charges
|
1,897 | — | 6,627 | — | ||||||||||||
Other initiative costs
|
(409 | ) | — | 3,280 | — | |||||||||||
Net Adjustments to Net Income- (Decrease) Increase
|
$ | (2,346 | ) | $ | 399,283 | $ | 27,729 | $ | 399,283 | |||||||
Earnings per Share - Diluted
|
$ | 3.21 | $ | 1.03 | $ | 4.72 | $ | 2.08 | ||||||||
Adjusted Earnings per Share - Diluted
|
3.20 | 2.84 | 4.85 | 3.88 | ||||||||||||
Net Adjustments to Net Income- (Decrease) Increase
|
$ | (0.01 | ) | $ | 1.81 | $ | 0.13 | $ | 1.80 | |||||||
Adjustments to Earnings per Share:
|
||||||||||||||||
Impairment of Pullmantur related assets(4)
|
$ | — | $ | 1.81 | $ | — | $ | 1.80 | ||||||||
Net loss related to the elimination of the Pullmantur reporting lag
|
— | — | 0.10 | — | ||||||||||||
Net gain related to the sale of the Pullmantur and CDF Croisières de France brands
|
(0.02 | ) | — | (0.02 | ) | — | ||||||||||
Restructuring charges
|
0.01 | — | 0.03 | — | ||||||||||||
Other initiative costs
|
— | — | 0.02 | — | ||||||||||||
Net Adjustments to Net Income- (Decrease) Increase
|
$ | (0.01 | ) | $ | 1.81 | $ | 0.13 | $ | 1.80 | |||||||
Weighted-Average Shares Outstanding - Diluted
|
215,667 | 221,137 | 216,575 | 220,979 | ||||||||||||