Royal Caribbean Group today reported financial results for the second quarter of 2020 and commented on the company in light of the global COVID-19 pandemic.
Second Quarter 2020
Launched on March 13, 2020 and due to the COVID-19 pandemic, the company has halted its worldwide cruise operation, the company said.
This resulted in the cancellation of all sails by the second quarter of the company.
The company reported US GAAP Net Loss for the second quarter of 2020 of $ (1.6) billion as $ (7.83) per share compared to US GAAP Net Income of $ 472.8 million or $ 2.25 per share in the previous year. The 2020 results include a loss of non-cash cut of $ 156.5 million. The company reported adjusted net loss of $ (1.3) billion as $ (6.13) per share for the second quarter of 2020 compared to adjusted net income of $ 532.7 million or $ 2.54 per share in the second quarter. previous year. The net loss for the quarter is a result of the impact of the COVID-19 pandemic on the company.
Business Update
The COVID-19 pandemic poses an unusual challenge to our industry and society. Our teams are working insecurely to return to service quickly and do so by developing new protests for health and safety to the well-being of our guests, crew and destinations we seek to protect, “said Richard D. Fain, chairman and CEO. “In the meantime, we use this time to refine our operations to be as efficient as we can, while delivering the great experiences that so many people are really looking forward to.”
Regarding the new protocols for health and safety, the company is advised by a “Healthy Sail Panel” of experts in the fields of science and public health with backgrounds in medical practice, research, infectious disease, biosecurity, hospitality and maritime operations.
Update on liquidity actions and continued use of cash
Given the current environment, the company continues to prioritize and strengthen its liquidity, and works to ensure it is well positioned for recovery, it said, in a press release.
Since the last call for revenue, the company has taken further action to improve its liquidity, retain cash and secure additional financing. During these last efforts, the company highlighted the following:
• Issuing $ 1.0 billion priority guaranteed notes and $ 1.15 billion convertible notes;
• The issue of GBP 300 million commercial paper in the UK providing more than $ 370 million in additional liquidity;
• Completed a $ 12 billion vacation to 12 months of debt amortization of all export credit facilities;
• Amended more than $ 11 billion in commercial banking and export credit facilities to deliver bond exemptions by the fourth quarter of 2021; en
• Further reduced operating costs due to fleet set-up measures and actions to reduce sales, marketing and administrative expenses.
In addition, the company has $ 11.3 billion in dedicated credit facilities available for delivery of ships originally planned through 2025.
“We continue to take substantial action to support our financial position,” said Jason T. Liberty, executive vice president and CFO. “We have gained access to the capital market in an opportunistic way and continue to aggressively manage our spending. We are ready to navigate a volatile period while making decisions that position the company well for recovery.”
The company estimates the cash fire on average in the range of about $ 250 million to $ 290 million per month during a prolonged cessation of operations. This range includes all interest expenses, including the increases driven by recent capital increases. It also includes ongoing shipping costs, administrative expenses, hedging expenses, expected capital expenditures (net of dedicated financing in case of new construction) and excluding cash compensation from customer deposits, commissions, debt obligations and inflow of cash from new and existing bookings. The company is considering ways to further reduce its average monthly cash burn under a further prolonged out-of-service scenario and during resumption of operations.
Liquidity and financing arrangements
As of June 30, 2020, the company had liquidity of approximately $ 4.1 billion all in the form of cash and cash equivalents. The company notes that as of June 30, 2020, the planned maturity dates for debt for the remainder of 2020 and 2021 are $ 0.3 billion and $ 1.3 billion, respectively.
Capital expenditures and capacity upgrades
The expected capital expenditures for the rest of 2020 and 2021 are $ 0.6 billion and $ 1.8 billion, respectively. These expenditures are mostly related to new construction projects.
COVID-19 has implications for shipyard operations and will result in delivery delays for newbuilding. Currently, the company expects that three of the five ships originally planned for delivery between July 2020 and December of 2021 will be delivered within the remaining time frame. Two of these ships are Silver Moon and Silver Dawn, with a capacity of less than 600 berths.
Update on bookings
The extended suspension of cruising has significantly affected bookings for the remainder of 2020 that are significantly lower than the same time last year and at lower prices.
Although still early in the booking cycle, the reserved position for 2021 is well trending and is within historical reach. The company has implemented several programs to best serve the booking guests and provides the choice for future cruise credit (“FCCs”) as the opportunity to “Lift & Shift” their booking next year instead of giving it of amount of money. For the booking period since our last business update, approximately 60% of the 2021 bookings are new and the remainder is due to the redemption of FCCs and the “Lift & Shift” program. Prices for 2021 bookings are relatively flat year-over-year as the impact of the negative return on bookings made with future cruise credits increases; it’s year-over-year a bit up when they exclude them.
As of June 30, 2020, the company had $ 1.8 billion in customer deposits, of which approximately $ 300 million corresponds to the quarters of the fourth quarter 2020. About 48% of the guests who booked for canceled sailings requested cash amounts .
2020 Outlook
The size, duration and speed of COVID-19 remain uncertain. As a result, the company cannot estimate the impact of COVID-19 on its business, financial condition or near or long term financial or operational results with reasonable certainty. Notwithstanding the above, the Company expects to make a net loss on both a US GAAP and adjusted basis for its third quarter and fiscal year 2020, the extent of which will depend on the timing and extent of the return to service.
Interest expenses for the rest of the year (July 1, 2020 to December 31, 2020) will be in the range of $ 505 million to $ 515 million.
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