Royal Caribbean Cruises Ltd reported net income for the year of 474.7 million, or 2.26 per share, compared to 280.7 million, or 1.42 per share …
Royal Caribbean Cruises Ltd reported net income for the year of 474.7 million, or 2.26 per share, compared to 280.7 million, or 1.42 per share , in 2003. Revenues for the year increased 20.4% to 4.6 billion from revenues of $3.8 billion in 2003. The increase in revenues was attributable to a 10.3% increase in capacity coupled with an increase in cruise ticket prices, occupancy and onboard revenues. Gross Yields for the year increased 9.1% from 2003. Net Yields increased a record 9.2% from 2003. Occupancy reached 105.7%, up from 103.2% in 2003.
Despite hurricanes, sky-rocketing fuel costs and other challenges, 2004 was a very good year for the company, said Richard D. Fain, chairman and chief executive officer. We are especially pleased with our yield performance and our income growth. These results reflect the strong demand for our product, successful implementation of our brand building initiatives, and the underlying strength of the industry fundamentals.
Revenues for the fourth quarter of 2004 were $964.6 million, up 9.9% from $878.0 million in 2003. Gross Yields and Net Yields increased 4.7% and 4.4%, respectively. Net Yields in the fourth quarter have now surpassed those achieved in the fourth quarter of 2000. The company reported a net loss of $25.8 million, or $0.13 per share, for the fourth quarter of 2004, which compares with a net loss of $20.0 million, or $0.10 per share, for the fourth quarter of 2003. As previously disclosed, included in the fourth quarter of 2004 is $8.1 million associated with the reversal of a tax accrual.
For the fourth quarter of 2004, Gross Cruise Costs and Net Cruise Costs per APCD, increased 6.3% and 6.5%, respectively. An unexpected spike in at- the-pump fuel costs during November and December was the primary driver of this increase. During the fourth quarter of 2004, fuel costs represented approximately 7.1% of total revenues.
Commenting on these figures, Mr. Fain said: While the year as a whole has been very gratifying, we are disappointed that fuel and other costs hurt our fourth quarter results so much. In addition, onboard revenue, while up, did not reach the exceptional performance we had enjoyed during the first three quarters.
With three weeks of what has been characterized as the industry`s wave period completed, the company is able to report that bookings and pricing levels continue to be strong. Consumer demand is healthy across all products and for both brands. Many of the demand characteristics the company is now seeing are similar to those seen in the late 1990`s. As a result, the company currently forecasts Net Yields for the first quarter of 2005 will increase approximately 7% and Net Yields for the full year 2005 will increase in the range of 5% to 7%.
For 2005, the company has a relatively small capacity increase of 1.6%, which means fewer economies of scale to absorb inflationary and other cost pressures. In addition, uncertainty about fuel costs makes forecasting difficult. Assuming the yearly average at-the-pump price of fuel in 2005 is the same as the yearly average in 2004 and adjusting for fewer fuel hedges, the company currently expects that fuel costs will increase by approximately 8% per APCD.
Based on this assumption, the company expects Net Cruise Costs to increase in the range of 2% to 3% per APCD. This increase in fuel costs accounts for 1% of the increase in Net Cruise Costs per APCD. Compared to the same periods in the prior year, management anticipates that Net Cruise Costs will increase in the first half of the year and be flat to slightly down in the second half of the year.
Depreciation and amortization is expected to be in the range of $410 to $420 million and net interest expense is expected to be in the range of $305 to $315 million. Additionally, 2005 will be the initial year the company accrues income taxes associated with the final regulations under Internal Revenue Code Section 883. The company expects the application of the final regulations will reduce 2005 earnings per share by approximately $0.04 to $0.05.
Based upon these assumptions, management expects full year 2005 earnings per share to be in the range of $2.70 to $2.90. On the same basis, first quarter 2005 earnings per share are expected to be in the range of $0.50 to $0.55.
On December 13, 2004, Royal Caribbean International`s Sovereign of the Seas re-entered service after an extreme makeover that included bow-to-stern renovations and several new entertainment and dining options. Renovation highlights include the creation of the ship`s first balcony staterooms, the addition of Boleros Latin lounge, and the transformation of the Windjammer Cafe into the Windjammer Marketplace.
In response to steadily increasing demand for Celebrity Cruises` vacation experience in Europe, Celebrity Cruises announced the deployment of Century to Europe. Century`s deployment gives Celebrity Cruises, the top-rated premium line, a total of four ships in Europe for the 2005 season. As the U.S. dollar continues to decline against the euro, a growing number of savvy travelers are honing in on cruising as the definitive way to experience Europe. The European deployment of Century will allow the company to capitalize on this strong demand.
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