Royal Caribbean Cruise Lines 2005 Annual Report Download - page 24

Gross Yields and Net Yields were calculated as follows (in thousands,
except APCD and Yields):
Year Ended December 31,
2005 2004 2003
Passenger ticket $ 3,609,487 $ 3,359,201 $ 2,775,055
revenues
Onboard and
other revenues 1,293,687 1,196,174 1,009,194
Total revenues 4,903,174 4,555,375 3,784,249
Less:
Commissions,
transportation
and other 858,606 822,206 684,344
Onboard and other 308,611 300,717 249,537
Net revenues $ 3,735,957 $ 3,432,452 $ 2,850,368
APCD 21,733,724 21,439,288 19,439,238
Gross Yields $225.60 $212.48 $194.67
Net Yields $171.90 $160.10 $146.63
Gross Cruise Costs and Net Cruise Costs were calculated as follows
(in thousands, except APCD and costs per APCD):
Year Ended December 31,
2005 2004 2003
Total cruise operating
expenses $2,994,232 $2,819,383 $2,381,035
Marketing, selling
and administrative
expenses 635,308 588,267 514,334
Gross Cruise Costs 3,629,540 3,407,650 2,895,369
Less:
Commissions,
transportation
and other 858,606 822,206 684,344
Onboard and other 308,611 300,717 249,537
Net Cruise Costs $2,462,323 $2,284,727 $ 1,961,488
APCD 21,733,724 21,439,288 19,439,238
Gross Cruise Costs
per APCD $167.00 $158.94 $148.94
Net Cruise Costs
per APCD $113.30 $106.57 $100.90
Bookings and pricing levels continue to be solid. As a result, we fore-
cast Net Yields for the full year 2006 will increase in the range of 2%
to 4% compared to 2005. As announced on February 2, 2006, “at-
the-pump” fuel price was $425 per metric ton, which is 19% higher
than the average price for 2005 of $358 per metric ton. If fuel prices
for the rest of the year remain at that level, we estimate that our
2006 fuel costs (net of hedging and fuel savings initiatives) will
increase approximately $90 million. Fuel prices have not changed
significantly since our announcement on February 2, 2006.
Commencing with the first quarter of 2006, we will adopt the new
stock-based compensation accounting standard and begin expens-
ing stock options, which is expected to increase 2006 full year
expenses by $12 million.
Based on the above, we estimate that Net Cruise Costs per APCD for
2006 will increase in the range of 3% to 5% as compared to the prior
year. Higher fuel costs account for 3.0 to 4.0 percentage points of
this increase. Additionally, 2006 will be another year of minimal
capacity increases. Capacity will grow more substantially in 2007
and beyond, providing us with improved economies of scale to off-
set normal cost increases.
Depreciation and amortization is expected to be in the range of
$425 to $445 million and net interest expense is expected to be in
the range of $245 to $265 million.
In January 2006, we partially settled a pending lawsuit against Rolls
Royce and Alstom Power Conversion, (“Alstom”) co-producers of the
Mermaid pod-propulsion system on Millennium-class ships, for the
recurring Mermaid pod failures. Under the terms of the partial settle-
ment, we received $38.0 million from Alstom and released them
from the suit, which remains pending against Rolls Royce. The $38.0
million settlement resulted in an estimated gain of $36.0 million, net of
estimated reimbursements to insurance companies, which will be
recorded in other income during the first quarter of 2006.
Based upon the expectations and assumptions contained in this
outlook section (including the legal settlement with Alstom of $0.16
per share), we expect full year 2006 earnings per share to be in the
range of $2.95 to $3.15.
Expectations for the first quarter of 2006 are somewhat different
than the full year due to seasonal revenue patterns and the timing
of certain expenses. We expect Net Yields for the first quarter of
2006 will increase in the range of 1% to 2% compared to the first
quarter of 2005.
We estimate that Net Cruise Costs per APCD for the first quarter of
2006 will increase in the range of 12% to 13% compared to the
same quarter in 2005. This increase is primarily due to the following:
22 Royal Caribbean Cruises Ltd.
Management’s Discussion and
Analysis of Financial Condition
and Results of Operations (continued)