Royal Caribbean Cruise Lines 2013 Annual Report Download - page 49
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PART II
It should be emphasized that Constant Currency is
primarily used for comparing short-term changes
and/or projections. Over the longer term, changes in
guest sourcing and shifting the amount of purchases
between currencies can significantly change the
impact of the purely currency-based fluctuations.
The use of certain significant non-GAAP measures,
such as Net Yields, Net Cruise Costs and Net Cruise
Costs Excluding Fuel, allow us to perform capacity
and rate analysis to separate the impact of known
capacity changes from other less predictable changes
which affect our business. We believe these non-GAAP
measures provide expanded insight to measure reve-
nue and cost performance in addition to the standard
United States GAAP based financial measures. There
are no specific rules or regulations for determining
non-GAAP and Constant Currency measures, and as
such, there exists the possibility that they may not be
comparable to other companies within the industry.
EXECUTIVE OVERVIEW
We believe our results of operations for 2013 rein-
force the resilience of our business and the strength
of our brands. Despite the effect of last year’s nega-
tive industry media coverage and a slowly improving,
but still challenging, global economy, we achieved
diluted Adjusted Earnings per Share of $2.40 in 2013
as compared to $1.97 in 2012. Earnings per share was
$2.14 in 2013 compared to $0.08 in 2012. Additionally,
our net income and Adjusted Net Income for 2013
was $473.7 million and $530.6 million, respectively,
and our Net Yields increased 2.7% and 3.2% on a
Constant Currency basis.
Our ticket and onboard revenues grew in 2013 despite
our capacity remaining relatively flat. Strong close-in
demand for Europe and Asia drove 2013 improvement
in passenger ticket revenue. Our global presence
enables us to source guests from stronger markets in
order to generate higher yields on an opportunistic
basis with the ultimate goal of maximizing our long-
term return on invested capital and shareholder value.
Investments in ship revitalizations and other onboard
enhancements led to onboard revenue growth in 2013.
In 2014, we will continue to focus on the development
of key markets in Asia and on sourcing guests and
adding capacity to the markets where we expect sig-
nificant growth and profitability. We will also continue
to invest in ship revitalizations, technology and other
onboard revenue initiatives which we believe will drive
profitability and improve the guest experience.
Our continued focus on cost control has helped us to
maintain our profitability despite a tough operating
environment. During 2013, we incurred $56.9 million
in restructuring and related impairment charges asso-
ciated with our profitability initiatives. Our first initia-
tive relates to the restructuring and consolidation of
our global sales, marketing, general and administra-
tive structure, including the consolidation of most of
our call centers located outside of the United States
and the establishment of brand dedicated sales, mar-
keting and revenue management teams in key prior-
ity markets. Our second initiative involves strategic
changes to the Pullmantur brand which include the
opening of a regional head office in Latin America
to place operating management closer to the Latin
American market, and the sale of Pullmantur’s non-
cruise businesses to allow Pullmantur to focus on its
core business. We anticipate benefits as a result of
the Pullmantur changes to occur in 2015 and beyond.
We expect to incur approximately $23 million in addi-
tional restructuring and other costs in connection to
both profitability initiatives in 2014.
During 2013, we ordered a third Royal Caribbean
International Quantum-class ship and the conditional
agreement to construct the third Royal Caribbean
International Oasis-class ship became effective. Both
ships are scheduled for delivery in the second quarter
of 2016. We also have a second Quantum-class ship
on order which is expected to enter service in the
second quarter of 2015 and two ships on order for
our joint venture TUI Cruises which are scheduled
for delivery in the second quarters of 2014 and 2015.
Each of these ships has committed financing arrange-
ments. In late 2014, we will accept delivery of the first
of a new generation of Royal Caribbean International
cruise ships, Quantum of the Seas.
As part of our vessel revitalization program, twelve
ships were revitalized for the Royal Caribbean Interna-
tional brand from 2011 to 2013 to incorporate certain
of the most popular features of the Oasis-class ships
on certain Freedom-class, Radiance-class and Vision-
class ships. An additional two ships are scheduled
for revitalization in 2014. During 2010, the Celebrity
Cruises brand began a revitalization program for all
four Millenium-class ships to incorporate certain
Solstice-class features. The Celebrity revitalization
program was completed in 2013.