rcl-20200930

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

(Mark One)


☒			QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended September 30, 2020


☐			TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from to

Commission File Number: 1-11884

ROYAL CARIBBEAN CRUISES LTD.

(Exact name of registrant as specified in its charter)


Republic of Liberia						98-0081645
(State or other jurisdiction of incorporation or organization)						(I.R.S. Employer Identification No.)

1050 Caribbean Way, Miami, Florida 33132

(Address of principal executive offices) (zip code)

(305) 539-6000

(Registrant’s telephone number, including area code)

N/A

(Former name, former address and former fiscal year, if changed since last report)

Securities registered pursuant to Section 12(b) of the Act:

Title of each class

Trading Symbol(s)

Name of each exchange on which registered

Common Stock, par value $0.01 per share

RCL

New York Stock Exchange

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ☒ No ☐

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes ☒ No ☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

Large accelerated filer ☒

Accelerated filer ☐

Non-accelerated filer ☐

Smaller reporting company ☐

Emerging growth company ☐

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No ☒

There were 224,338,138 shares of common stock outstanding as of October 30, 2020.

Table of Contents

ROYAL CARIBBEAN CRUISES LTD.

TABLE OF CONTENTS


			Page

PART I. FINANCIAL INFORMATION

Item 1. Financial Statements			1

Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations			45

Item 3. Quantitative and Qualitative Disclosures About Market Risk			67

Item 4. Controls and Procedures			67

PART II. OTHER INFORMATION

Item 1. Legal Proceedings			68

Item 1A. Risk Factors			68

Item 2. Unregistered Sales of Equity Securities and Use of Proceeds			83

Item 5. Other Information			83

Item 6. Exhibits			84

SIGNATURES			86

Table of Contents

PART I. FINANCIAL INFORMATION

Item 1. Financial Statements

ROYAL CARIBBEAN CRUISES LTD.

CONSOLIDATED STATEMENTS OF COMPREHENSIVE (LOSS) INCOME

(unaudited; in thousands, except per share data)


	Quarter Ended September 30,
	2020		2019
Passenger ticket revenues	$	3,204	$	2,344,779
Onboard and other revenues	(36,892)		842,071
Total revenues	(33,688)		3,186,850
Cruise operating expenses:
Commissions, transportation and other	(3,321)		488,921
Onboard and other	6,036		200,656
Payroll and related	119,213		263,993
Food	5,640		149,621
Fuel	53,815		177,677
Other operating	127,226		342,170
Total cruise operating expenses	308,609		1,623,038
Marketing, selling and administrative expenses	246,779		352,725
Depreciation and amortization expenses	317,139		320,295
Impairment and credit losses	89,899		—
Operating (Loss) Income	(996,114)		890,792
Other expense:
Interest income	5,017		5,625
Interest expense, net of interest capitalized	(259,349)		(102,038)
Equity investment (loss) income	(78,013)		103,654


Other expense	(10,853)		(7,668)
	(343,198)		(427)
Net (Loss) Income	(1,339,312)		890,365
Less: Net Income attributable to noncontrolling interest	7,444		7,125
Net (Loss) Income attributable to Royal Caribbean Cruises Ltd.	$	(1,346,756)	$	883,240
(Loss) Earnings per Share:
Basic	$	(6.29)	$	4.21
Diluted	$	(6.29)	$	4.20
Weighted-Average Shares Outstanding:
Basic	214,163		209,575
Diluted	214,163		210,121
Comprehensive (Loss) Income
Net (Loss) Income	$	(1,339,312)	$	890,365
Other comprehensive income (loss):
Foreign currency translation adjustments	19,071		(15,510)
Change in defined benefit plans	(3,086)		(12,456)
Gain (loss) on cash flow derivative hedges	66,135		(265,224)

Total other comprehensive income (loss)	82,120		(293,190)
Comprehensive (Loss) Income	(1,257,192)		597,175
Less: Comprehensive Income attributable to noncontrolling interest	7,444		7,125
Comprehensive (Loss) Income attributable to Royal Caribbean Cruises Ltd.	$	(1,264,636)	$	590,050

The accompanying notes are an integral part of these consolidated financial statements.

ROYAL CARIBBEAN CRUISES LTD.

CONSOLIDATED STATEMENTS OF COMPREHENSIVE (LOSS) INCOME

(unaudited; in thousands, except per share data)


	Nine Months Ended September 30,
	2020		2019
Passenger ticket revenues	$	1,487,077	$	6,072,599
Onboard and other revenues	687,590		2,360,649
Total revenues	2,174,667		8,433,248
Cruise operating expenses:
Commissions, transportation and other	342,632		1,279,010
Onboard and other	151,333		510,255
Payroll and related	693,480		799,094
Food	154,439		436,002
Fuel	327,275		519,772
Other operating	830,689		1,037,113
Total cruise operating expenses	2,499,848		4,581,246
Marketing, selling and administrative expenses	944,087		1,144,546
Depreciation and amortization expenses	961,226		924,180
Impairment and credit losses	1,354,514		—
Operating (Loss) Income	(3,585,008)		1,783,276
Other expense:
Interest income	15,757		21,751
Interest expense, net of interest capitalized	(571,149)		(313,757)
Equity investment (loss) income	(140,258)		170,393


Other expense	(127,537)		(34,537)
	(823,187)		(156,150)
Net (Loss) Income	(4,408,195)		1,627,126
Less: Net Income attributable to noncontrolling interest	22,332		21,375
Net (Loss) Income attributable to Royal Caribbean Cruises Ltd.	$	(4,430,527)	$	1,605,751
(Loss) Earnings per Share:
Basic	$	(21.01)	$	7.67
Diluted	$	(21.01)	$	7.65
Weighted-Average Shares Outstanding:
Basic	210,894		209,477
Diluted	210,894		210,032
Comprehensive (Loss) Income
Net (Loss) Income	$	(4,408,195)	$	1,627,126
Other comprehensive (loss) income:
Foreign currency translation adjustments	55,698		(7,683)
Change in defined benefit plans	(16,953)		(22,831)
Loss on cash flow derivative hedges	(110,139)		(288,115)
Total other comprehensive (loss)	(71,394)		(318,629)
Comprehensive (Loss) Income	(4,479,589)		1,308,497
Less: Comprehensive Income attributable to noncontrolling interest	22,332		21,375
Comprehensive (Loss) Income attributable to Royal Caribbean Cruises Ltd.	$	(4,501,921)	$	1,287,122

The accompanying notes are an integral part of these consolidated financial statements.

Table of Contents

`ROYAL CARIBBEAN CRUISES LTD.

CONSOLIDATED BALANCE SHEETS

(in thousands, except share data)


	As of
	September 30,		December 31,
	2020		2019
	(unaudited)
Assets
Current assets
Cash and cash equivalents	$	3,016,788	$	243,738
Trade and other receivables, net of allowances of $7,673 and $5,635 at September 30, 2020 and December 31, 2019, respectively	165,225		305,821
Inventories	142,432		162,107
Prepaid expenses and other assets	197,195		429,211
Derivative financial instruments	10,155		21,751
Total current assets	3,531,795		1,162,628
Property and equipment, net	25,362,549		25,466,808
Operating lease right-of-use assets	584,477		687,555
Goodwill	809,471		1,385,644
Other assets, net of allowances of $73,156 and $0 at September 30, 2020 and December 31, 2019, respectively	1,540,518		1,617,649
Total assets	$	31,828,810	$	30,320,284
Liabilities, Redeemable Noncontrolling Interest and Shareholders’ Equity
Current liabilities
Current portion of debt	$	870,027	$	1,186,586
Commercial paper	386,683		1,434,180
Current portion of operating lease liabilities	102,251		96,976
Accounts payable	421,023		563,706
Accrued interest	234,375		70,090
Accrued expenses and other liabilities	677,594		1,078,345
Derivative financial instruments	113,474		94,875
Customer deposits	1,820,038		3,428,138
Total current liabilities	4,625,465		7,952,896
Long-term debt	17,633,737		8,414,110
Long-term operating lease liabilities	546,494		601,641
Other long-term liabilities	694,520		617,810
Total liabilities	23,500,216		17,586,457
Commitments and contingencies (Note 10)
Redeemable noncontrolling interest	—		569,981
Shareholders’ equity
Preferred stock ($0.01 par value; 20,000,000 shares authorized; none outstanding)	—		—
Common stock ($0.01 par value; 500,000,000 shares authorized; 242,502,983 and 236,547,842 shares issued, September 30, 2020 and December 31, 2019, respectively)	2,425		2,365
Paid-in capital	4,329,557		3,493,959
Retained earnings	6,929,710		11,523,326
Accumulated other comprehensive loss	(869,107)		(797,713)
Treasury stock (27,799,775 and 27,746,848 common shares at cost, September 30, 2020 and December 31, 2019, respectively)	(2,063,991)		(2,058,091)
Total shareholders’ equity	8,328,594		12,163,846
Total liabilities, redeemable noncontrolling interest and shareholders’ equity	$	31,828,810	$	30,320,284

The accompanying notes are an integral part of these consolidated financial statements.

ROYAL CARIBBEAN CRUISES LTD.

CONSOLIDATED STATEMENTS OF CASH FLOWS

(unaudited; in thousands)


	Nine Months Ended September 30,
	2020		2019
Operating Activities
Net (loss) income	$	(4,408,195)	$	1,627,126
Adjustments:
Depreciation and amortization	961,226		924,180
Impairment and credit losses	1,354,514		—
Net deferred income tax (benefit) expense	(4,586)		4,664
Loss on derivative instruments not designated as hedges	64,541		24,229
Share-based compensation expense	29,871		51,256
Equity investment loss (income)	140,258		(170,393)
Amortization of debt issuance costs	54,887		24,154
Amortization of commercial paper notes discount	7,269		23,583
Amortization of debt discounts and premiums	29,061		265
Loss on extinguishment of secured senior term loan	41,109		6,326
Currency translation adjustment losses	69,044		—
Change in fair value of contingent consideration	(45,126)		10,700
Changes in operating assets and liabilities:
Decrease (increase) in trade and other receivables, net	133,769		(36,682)
Decrease (increase) in inventories	19,675		(13,640)
Decrease in prepaid expenses and other assets	271,315		41,757
(Decrease) increase in accounts payable	(90,306)		51,011
Increase in accrued interest	164,284		50,011
(Decrease) increase in accrued expenses and other liabilities	(87,936)		81,026
(Decrease) increase in customer deposits	(1,608,355)		261,335
Dividends received from unconsolidated affiliates	2,215		148,285
Other, net	(4,789)		(2,125)
Net cash (used in) provided by operating activities	(2,906,255)		3,107,068
Investing Activities
Purchases of property and equipment	(1,573,241)		(2,341,895)
Cash received on settlement of derivative financial instruments	3,771		6,442
Cash paid on settlement of derivative financial instruments	(139,940)		(86,671)
Investments in and loans to unconsolidated affiliates	(87,943)		(6,889)
Cash received on loans to unconsolidated affiliates	15,581		27,697



Other, net	(6,921)		(1,028)
Net cash used in investing activities	(1,788,693)		(2,402,344)
Financing Activities
Debt proceeds	12,672,189		3,080,564
Debt issuance costs	(348,118)		(42,491)
Repayments of debt	(3,430,245)		(3,424,339)
Proceeds from issuance of commercial paper notes	6,765,816		19,807,417
Repayments of commercial paper notes	(7,837,635)		(19,684,288)

Dividends paid	(326,421)		(439,543)
Proceeds from exercise of common stock options	386		1,452

Other, net	(26,210)		(13,681)
Net cash provided by (used in) financing activities	7,469,762		(714,909)
Effect of exchange rate changes on cash	(1,764)		(937)
Net increase (decrease) in cash and cash equivalents	2,773,050		(11,122)
Cash and cash equivalents at beginning of period	243,738		287,852
Cash and cash equivalents at end of period	$	3,016,788	$	276,730

The accompanying notes are an integral part of these consolidated financial statements.

Table of Contents

ROYAL CARIBBEAN CRUISES LTD.

CONSOLIDATED STATEMENTS OF CASH FLOWS

(unaudited; in thousands)


	Nine Months Ended September 30,
	2020		2019
Supplemental Disclosure
Cash paid during the period for:
Interest, net of amount capitalized	$	258,063	$	179,497
Non-cash Investing Activities
Notes receivable issued upon sale of property and equipment	$	53,419	0
Purchase of property and equipment included in accounts payable and accrued expenses and other liabilities	$	13,603	0
Non-cash Financing Activities
Purchase of Silversea Cruises non-controlling interest	$	592,313	0
Termination of Silversea Cruises contingent consideration obligation	$	17,274	0

The accompanying notes are an integral part of these consolidated financial statements.

ROYAL CARIBBEAN CRUISES LTD.

CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY

(unaudited; in thousands)


	Common Stock		Paid-in Capital		Retained Earnings		Accumulated Other Comprehensive Loss		Treasury Stock		Total Shareholders' Equity
Balance at July 1, 2020	2,372		3,700,288		8,276,463		(951,227)		(2,063,991)		8,963,905

Activity related to employee stock plans	1		20,445		—		—		—		20,446


Silversea acquisition	52		608,824								608,876
Changes related to cash flow derivative hedges	—		—		—		66,135		—		66,135
Change in defined benefit plans	—		—		—		(3,086)		—		(3,086)
Foreign currency translation adjustments	—		—		3		19,071		—		19,074

Net loss attributable to Royal Caribbean Cruises Ltd.	—		—		(1,346,756)		—		—		(1,346,756)
Balance at September 30, 2020	$	2,425	$	4,329,557	$	6,929,710	$	(869,107)	$	(2,063,991)	$	8,328,594


	Common Stock		Paid-in Capital		Retained Earnings		Accumulated Other Comprehensive Loss		Treasury Stock		Total Shareholders' Equity
Balance at January 1, 2020	$	2,365	$	3,493,959	$	11,523,326	$	(797,713)	$	(2,058,091)	$	12,163,846

Activity related to employee stock plans	8		11,886		—		—		—		11,894
Equity component of convertible notes, net of issuance costs	—		208,988		—		—		—		208,988
Silversea acquisition	52		608,824		—		—		—		608,876
Common stock dividends, $0.78 per share	—		—		(163,089)		—		—		(163,089)
Changes related to cash flow derivative hedges	—		—		—		(110,139)		—		(110,139)
Change in defined benefit plans	—		—		—		(16,953)		—		(16,953)
Foreign currency translation adjustments	—		—		—		55,698		—		55,698
Purchases of treasury stock	—		5,900		—		—		(5,900)		—
Net loss attributable to Royal Caribbean Cruises Ltd.	—		—		(4,430,527)		—		—		(4,430,527)
Balance at September 30, 2020	$	2,425	$	4,329,557	$	6,929,710	$	(869,107)	$	(2,063,991)	$	8,328,594

The accompanying notes are an integral part of these consolidated financial statements.

Table of Contents

ROYAL CARIBBEAN CRUISES LTD.

CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY

(unaudited; in thousands)


	Common Stock	Paid-in Capital	Retained Earnings	Accumulated Other Comprehensive Loss	Treasury Stock	Total Shareholders' Equity
Balance at July 1, 2019	2,364	3,454,831	10,692,890	(653,173)	(1,958,509)	11,538,403
Activity related to employee stock plans	1	11,810	—	—	—	11,811
Common stock dividends, $0.78 per share	—	—	(163,357)	—	—	(163,357)
Changes related to cash flow derivative hedges	—	—	—	(265,224)	—	(265,224)
Change in defined benefit plans	—	—	—	(12,456)	—	(12,456)
Foreign currency translation adjustments	—	—	—	(