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Royal Caribbean Reports Record Fourth Quarter 2007 Earnings
 
MIAMI - January 30, 2008 - Royal Caribbean Cruises Ltd. (NYSE/OSX: RCL) today announced record net income for the fourth quarter 2007 of $70.8 million, or $0.33 per share, compared to net income of $46.6 million, or $0.22 per share, in 2006. Revenues were better than expected, driven by stronger close-in bookings, while fuel costs were higher due to rising fuel prices. Revenues for the fourth quarter 2007 increased to $1.5 billion from revenues of $1.2 billion in the fourth quarter 2006.

Net income for the full year 2007 was $603.4 million, or $2.82 per share, compared to net income of $633.9 million, or $2.94 per share, for the full year 2006. Revenues for the full year 2007 increased to $6.1 billion from revenues of $5.2 billion for the full year 2006.

"It is very gratifying to see such a strong performance, especially in light of the broader consumer and economic environment," said Richard D. Fain, Chairman and Chief Executive Officer. "We are particularly pleased with the solid yield performance of our brands, which produced such healthy earnings despite significantly higher fuel costs." Higher fuel prices increased operating costs by $45 million in 2007, which reduced earnings per share by $0.21.

Fain continued, "Despite pressures on consumer spending, yields for the year were consistent with our original expectations, growing 0.3% on a comparable basis (i.e. excluding Pullmantur). This is a testament to the strength and momentum of our products."
 
Key metrics for the fourth quarter 2007, as compared to the fourth quarter 2006, were as follows:

  • Net Yields on a comparable basis increased 3.2%; higher than guidance of an increase in a range around 2%. Including Pullmantur, Net Yields increased 11.0%.
  • Excluding fuel, Net Cruise Costs per APCD on a comparable basis increased 3.4%; higher than guidance of an increase in a range around 2%. Including Pullmantur, Net Cruise Costs per APCD increased 12.1%.
  • Fuel prices increased 41% versus the fourth quarter of 2006, while fuel costs per APCD increased 19%, benefiting from energy saving initiatives and hedging. The average at-the-pump price for the quarter was $555 per metric ton versus $395 per metric ton in 2006.
  • Net Cruise Costs per APCD on a comparable basis increased 5.9%; higher than guidance of an increase in a range around 2%. Including Pullmantur, Net Cruise Costs per APCD increased 13.4%.

Outlook - 2008
The company provided the following estimates for the first quarter and full year 2008, as compared to the first quarter and full year 2007, respectively.

First Quarter 2008 Full Year 2008
Capacity 8.8% 5.1%
Net Yields approx. 7% approx. 4%
Net Cruise Costs per APCD approx. 1% approx. 2%
Net Cruise Costs per APCD, excluding Fuel (1%) - (2%) 1% - 2%

 
The company expects to have a 5.1% increase in capacity in 2008, driven primarily by a full year of Liberty of the Seas, the April delivery of Independence of the Seas, Pullmantur's purchase of Pacific Star, and the November delivery of Celebrity Solstice.

"The early indications from the 'wave period' are encouraging," said Fain. "We continue to see healthy booking volumes and improved pricing over the same time last year. Based on this improving revenue performance and our focus on controlling costs, we expect 2008 to be a year of double-digit improvement in EPS."

The company does not forecast fuel prices and its cost guidance for fuel is based on current "at-the-pump" prices including any hedge impacts. Fuel prices remain volatile; however, the company has taken a number of actions to reduce energy consumption and fuel expense. The company is 52% and 45% hedged for the first quarter and full year, respectively. If fuel prices for 2008 remain at today's level, fuel costs for the first quarter 2008 would be approximately $145 million, or $492 per metric ton. The corresponding figures for the full year 2008 would be approximately $595 million, or $484 per metric ton. A 10% change in the market price of fuel would result in changes of $8 million and $35 million in fuel costs for the first quarter and full year, respectively.

First Quarter 2008 Full Year 2008
Depreciation and Amortization $123 to $128 Million $525 to $545 Million
Interest Expense $82 to $87 Million $340 to $360 Million
Earnings Per Share $0.30 to $0.35 $3.20 to $3.40

 
Based on these estimates, and assuming that fuel prices remain at today's level, the company expects its first quarter 2008 earnings per share to be $0.30 to $0.35, and expects full year 2008 earnings per share to be $3.20 to $3.40.

As of December 31, 2007, liquidity was $1.4 billion, comprising $0.2 billion in cash and cash equivalents and $1.2 billion in available credit on the company's unsecured revolving credit facility.

Based on current ship orders, projected capital expenditures for 2008, 2009, 2010, and 2011, are estimated to be $1.9 billion, $2.0 billion, $2.2 billion, and $1.0 billion, respectively. Projected capacity increases for the same four years are estimated at 5.1%, 9.3%, 11.4%, and 6.4%, respectively.

The company has scheduled a conference call at 10 a.m. Eastern Standard Time today to discuss its earnings. This call can be heard, either live or on a delayed basis, on the company's investor relations web site at www.rclinvestor.com.
 
Terminology

Available Passenger Cruise Days ("APCD")
APCDs are our measurement of capacity and represent double occupancy per cabin multiplied by the number of cruise days for the period.

Gross Cruise Costs
Gross Cruise Costs represent the sum of total cruise operating expenses plus marketing, selling and administrative expenses.

Gross Yields
Gross Yields represent total revenues per APCD.

Net Cruise Costs
Net Cruise Costs represent Gross Cruise Costs excluding commissions, transportation and other expenses and onboard and other expenses. In measuring our ability to control costs in a manner that positively impacts net income, we believe changes in Net Cruise Costs to be the most relevant indicator of our performance. We have not provided a quantitative reconciliation of projected Gross Cruise Costs to projected Net Cruise Costs due to the significant uncertainty in projecting the costs deducted to arrive at this measure. Accordingly, we do not believe that reconciling information for such projected figures would be meaningful.

Net Debt-to-Capital
Net Debt-to-Capital is a ratio which represents total long-term debt, including current portion of long-term debt, less cash and cash equivalents ("Net Debt") divided by the sum of Net Debt and total shareholders' equity. We believe Net Debt and Net Debt-to-Capital, along with total long-term debt and shareholders' equity are useful measures of our capital structure.

Net Revenues
Net Revenues represent total revenues less commissions, transportation and other expenses and onboard and other expenses.

Net Yields
Net Yields represent Net Revenues per APCD. We utilize Net Revenues and Net Yields to manage our business on a day-to-day basis as we believe that it is the most relevant measure of our pricing performance because it reflects the cruise revenues earned by us net of our most significant variable costs, which are commissions, transportation and other expenses and onboard and other expenses. We have not provided a quantitative reconciliation of projected Gross Yields to projected Net Yields due to the significant uncertainty in projecting the costs deducted to arrive at this measure. Accordingly, we do not believe that reconciling information for such projected figures would be meaningful.

Occupancy
Occupancy, in accordance with cruise vacation industry practice, is calculated by dividing Passenger Cruise Days by APCD. A percentage in excess of 100% indicates that three or more passengers occupied some cabins.

Passenger Cruise Days
Passenger Cruise Days represent the number of passengers carried for the period multiplied by the number of days of their respective cruises.


Royal Caribbean Cruises Ltd. is a global cruise vacation company that operates Royal Caribbean International, Celebrity Cruises, Pullmantur Cruises, Azamara Cruises and CDF Croisieres de France. The company has a combined total of 35 ships in service and seven under construction. It also offers unique land-tour vacations in Alaska, Asia, Australia, Canada, Europe, Latin America and New Zealand.
 
Certain statements in this news release are forward-looking statements. Forward-looking statements do not guarantee future performance and may involve risks, uncertainties and other factors, which could cause our actual results, performance or achievements to differ materially from the future results, performance or achievements expressed or implied in those forward-looking statements. Such factors include general economic and business conditions, vacation industry competition, including cruise vacation industry competition, changes in vacation industry capacity, including over capacity in the cruise vacation industry, the impact of tax laws and regulations affecting our business or our principal shareholders, the impact of changes in other laws and regulations affecting our business, the impact of pending or threatened litigation, the delivery of scheduled new ships, emergency ship repairs, negative incidents involving cruise ships including those involving the health and safety of passengers, reduced consumer demand for cruises as a result of any number of reasons, including geopolitical and economic uncertainties, the unavailability of air service, armed conflict, terrorist attacks and the resulting concerns over safety and security aspects of traveling, the impact of the spread of contagious diseases, our ability to obtain financing on terms that are favorable or consistent with our expectations, changes in our stock price or principal shareholders, the impact of changes in operating and financing costs, including changes in foreign currency, interest rates, fuel, food, payroll, insurance and security costs, the implementation of regulations in the United States requiring United States citizens to obtain passports for travel to additional foreign destinations, weather, and other factors described in further detail in Royal Caribbean Cruises Ltd.'s filings with the Securities and Exchange Commission. The above examples are not exhaustive and new risks emerge from time to time. We undertake no obligation to publicly update or revise any forward-looking statements, whether as a result of new information, future events or otherwise. In addition, certain financial measures in this news release constitute non-GAAP financial measures as defined by Regulation G. A reconciliation of these items can be found on our investor relations website at www.rclinvestor.com.

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