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RCL swings to Q1 loss on COVID-19 impact, liquidity bolstered to $3.3bn

As expected, the COVID-19 crisis pushed Royal Caribbean Cruises Ltd. to a first quarter loss. Recent actions lifted liquidity to $3.3bn, and monthly cash burn is now estimated at $250m to $275m.

The company reiterated its expectation for net losses in Q2 and full-year 2020 but said it isn't currently able to forecast specifics with reasonable certainty. Much depends on the timing and extent of a return to service.

'A changed world'

'We understand that when our ships return to service, they will be sailing in a changed world. How well we anticipate and solve for this new environment will play a critical role in keeping our guests and crew safe and healthy, as well as position our business and that of our travel agent partners to return to growth,' RCL Chairman and CEO Richard Fain said.

After global cruise operations were suspended March 13, 130 sailings were canceled during Q1, resulting in 20% less capacity than guidance and 17% less versus the same time last year

$1.1bn impairment charge

Adjusted net loss was $310.4m, or a loss of $1.48 per share, compared to adjusted net income of $275.8m, or $1.31 per share in Q1 2019. US GAAP net loss was $1.4bn, or a loss of $6.91 per share, compared to US GAAP net income of $249.7m, or $1.19 per share, in the prior year.  The 2020 results include a non-cash asset impairment loss of $1.1bn.

Total revenues were $2bn, down from $2.4bn the year before.

45% of travelers request refunds, bookings still coming in

As of April 30, approximately 45% of passengers booked on canceled sailings have requested cash refunds. Additionally, as of March 31, the company had $2.4bn in customer deposits. RCL said it continues to take bookings for 2020, 2021 and 2022, and receive new customer deposits and final payments on these bookings.

Actions to secure additional financing, cut costs

The company has arranged $4bn in additional financing through a secured bond issuance and increased revolver capacity, reduced 2020 capital expenditures by $3bn, got an $0.8bn 12-month debt holiday from certain export-credit backed facilities and substantially reduced operating expenses due to fleet layup and reductions in sales, marketing and administrative expenses.

Monthly cash burn is estimated at approximately $250m to $275m during a prolonged suspension of operations. This includes ongoing ship operating expenses, administrative expenses, debt service expense, hedging costs and expected necessary capital expenditures (net of committed financings in the case of newbuilds). It excludes cash refunds of customer deposits as well as cash inflows from new and existing bookings.

RCL said it is is considering ways to further reduce the average monthly requirement under a prolonged out-of-service scenario and during start-up of operations.

Greater liquidity

At April 30, the company had liquidity of approximately $2.3bn in the form of cash and cash equivalents. After completing its $3.3bn senior secured notes offering this week, RCL improved its liquidity position by approximately $1bn.

As of of May 19, the expected debt maturities for the remainder of 2020 and 2021 are $0.4bn and $0.9bn, respectively.

Since the last earnings call, RCL has identified approximately $3bn and $1.4bn of capital expenditure reductions or deferrals in 2020 and 2021, respectively. The projected capex for remainder of 2020 is $0.5bn and for 2021 is $2.1bn. The company continues to evaluate ways to further reduce these expenditures.

Shipyard operations have been impacted by COVID-19 and likely will result in delays of newbuilds planned for delivery in 2020 and 2021.

Interest expense/fuel cost

Interest expense for the remainder of the year (April 1 through December) will be in the range of $590m to $610m.

As of March 31, RCL had hedged approximately 60%, 39%, 23% and 5% of its total projected metric tons of fuel consumption for the remainder of 2020, 2021, 2022 and 2023, respectively. For the same four-year period, the annual average cost per metric ton of the hedge portfolio is approximately $433, $435, $514 and $580, respectively.

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