RCCL Reports Lower Fourth-Quarter Profits of $21.1 Million
Destination & Tourism February 04, 2013
Royal Caribbean Cruises Ltd. on Feb. 4 reported a fourth-quarter 2012 net income before impairment charges of $21.1 million, or 10 cents per share, versus income of $36.6 million, or 17 cents per share, in the fourth quarter of 2011. The non-cash impairment charges totaling $413.9 million related to the company’s Pullmantur brand.
For the full year 2012, net income before impairment charges was $432.2 million, or $1.97 per share, versus $607.4 million, or $2.77 per share for full year 2011.
The company said booking activity in the fourth quarter was slightly lower than the same time last year, with the greatest decline coming in the aftermath of super-storm Sandy. “However, the company has observed a much stronger booking pattern since the beginning of Wave Season and demand trends have been quite healthy,” the company said in its earnings release.
In recent weeks, booking volumes have been running approximately 20 percent ahead of the same time last year, due in part to the slower booking trends the company experienced after the Costa Concordia grounding in January 2012. “Normalizing for this favorable comparison, the company still considers the Wave Season to be off to a strong start, particularly from U.S. points of sale,” RCCL said. Booking volumes are exceeding those during the same period in 2011 and in the aggregate, forward booked load factors and pricing are higher than at this time in both 2011 and 2012.
RCCL Richard D. Fain, chairman and CEO said: “Excluding the Pullmantur impairment charges, our operating results came in remarkably close to our forecast from a year ago, which is notable given the challenging environment. Looking forward, we see a tale of two continents; North America is doing well, while parts of Europe continue to be a challenge. Nonetheless, we are encouraged that the former will countervail the latter allowing us to drive meaningful yield growth in 2013.”
For the 2013 outlook, net yields are expected to increase 2 to 4 percent and earnings per share are expected to be $2.30 to $2.50.
The company has in the past pointed out the risks related to Pullmantur and the Spanish economy. “While the 2013 Wave Season is broadly off to a promising start, booking volumes and pricing are down substantially in Spain due to the impact of additional austerity measures there, the lingering impact of the Costa Concordia tragedy and other factors,” the company said. “Accordingly, the company has recorded a total impairment charge of $413.9 million. Of this amount, approximately $319.2 million relates to goodwill and the balance relates to a valuation allowance for deferred tax assets, a reduction in the value of the trademarks and an impairment charge related to three aircraft that Pullmantur owns and operates.”
“While it is appropriate that we record this impairment charge now, we remain confident in and committed to the Pullmantur brand,” Fain said. “Despite terribly challenging multi-year economic headwinds, Pullmantur’s management team has done an excellent job in maintaining the brand’s market-leading position while simultaneously diversifying guest sourcing into new markets.”
Brian J. Rice, vice chairman and CFO, said demand from the U.S. and other source markets should offset any ongoing weakness in Europe. “In fact, we are optimistic that we will achieve record yields in the Caribbean and Alaska this year,” he said.
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