使用警語:中文譯文來源為 Google 翻譯,僅供參考,實際內容請以英文原文為主
Operator
Good morning, my name is Rebecca, and I will be your conference facilitator.
At this time I would like to welcome everyone to the Royal Caribbean second quarter earnings conference call.
All lines have been placed on mute to prevent any background noise.
After the speakers' remarks, there will be a question and answer period.
If you would like to ask a question during this time, simply press star, then the number one on your telephone key pad.
If you would like to withdraw your question, press star then the number two on your telephone key pad.
Thank you, at this time I would like to turn the call over to Mr. Richard Fain, Chairman and CEO of Royal Caribbean Cruises Limited.
You may begin, sir.
Richard Fain - Chairman, CEO
Thank you, operator and good morning, ladies and gentlemen.
And I would like to thank you all for participating in our second quarter earnings release conference call.
We really do appreciate the opportunity to discuss our results for the quarter and then to answer your questions.
With me today is Jack Williams, President and Chief Operating Officer of Royal Caribbean and Celebrity Cruises;
Bonnie Biumi, Senior Vice President and acting CFO; and Dan Mathewes, Manager of Investor Relations.
As reported in our press release, net income for the quarter was $55.7 million or 28 cent as share This is down from the $66.7 million or 34 cents a share that we earned in the same quarter of last year, but it is in fact much better than we anticipated just a few months ago.
As most of you know, our primary internal measure of revenue performance is net yield.
For the quarter, net yields were down 4.8% for the same period in 2002.
Looking at the quarter, our main challenge was that not only did we have a 50.5% increase in capacity but we had to make up for the big hole that was caused by the war in Iraq.
The war and its buildup of course occurred at a perfect time during what is normally our heaviest booking period.
And they resulted in a 30% fall-off in our bookings during the period.
At the time of our last conference call, the war was just ending and we already saw a dramatic pickup in business.
We expected that that trend would continue.
And on that basis, we predicted that yields for the second quarter would be down 6% to 9%.
In making that prediction, we knew that to even be within the 6% to 9% range, we needed further strengthening from the improvement we had already seen.
Fortunately, not only did bookings continue to pick up, but they picked up for longer and at a stronger pace than we expected.
As a result, our actual yields did better than expected and ended up outside the range at the 4.8% figure we're reporting this morning.
We believe this reflects not only the general impact of the entire cruise industry but more importantly reflects the strong efforts we have made to strengthen our branding within the marketplace.
Looking forward to the second half of the year again requires us to make predicts about how the market recovery will continue to develop.
The second half also presents aggressively more difficult comparisons to last year, as our yield changes during the third and fourth quarters of last year were better than the yield changes during the first and second quarter of last year.
Nevertheless, based on the booking patterns that we are now seeing, and assuming that those booking patterns continue as strong as they are currently, and even strengthen a bit, this would result in our getting a yield decline of 2% to 4% in the third quarter and flat to slightly down yield in the fourth quarter.
Sorry, I think I said the fourth quarter.
It's 2% to 4% in the third quarter and flat to slightly down in the fourth quarter.
Of course I have to emphasize the uncertainty of any of these predictions.
Predictions are always difficult but especially so in a time when fundamental booking patterns and other factors affecting our industry are changing so rapidly.
Nevertheless, the booking situation does appear to have stabilized.
And we have enough bookings in hand to have a reasonable basis for our forecast.
In fact, we think these estimates are quite reasonable.
And, absent something unexpected, the likelihood of deviating significantly outside these ranges is limited.
In assessing why the market seems to have recovered as well as it has, we believe there are a number of factors.
Firstly, we think that there is a vast untapped potential out there for cruise passengers.
High satisfaction rates of our guests continues to attract new first timers and we think there a long way to go.
Another factor was the deployment choices we made.
In retrospect, for example, our decision to maintain a five ship deployment in Europe this year now seems about ideal.
There were some skeptical voices, even strident voices, but the results have certainly validated our decision.
In addition, our decision to broaden our home ports to include so many new drive destinations has also proven to be fortuitous.
It has also had an unexpected side benefit.
We are now going to many new home ports where the local communities have demonstrated their enthusiasm for us.
Cruise lines always favor going where they're wanted and those communities are now seeing in a very tangible way the benefit of hosting cruise lines.
Through other factors that appear to be working, our focus on containing cost, and on strengthening our financial condition.
Our goal is to improve our margins and our balance sheet and we believe that his quarter provides further comfort that we are making good progress toward those goals.
I would like to turn the microphone over to Bonnie who will provide more information on the company's results.
Bonnie Biumi - SVP and acting CFO
Good morning, everyone.
We will review our second quarter results and provide some additional guidance for 2003 and we'll then ask Jack to give you an update on booking trends.
Before I start we need to refer you to the first slide of our presentation.
This can be found at our website, www.RCLinvestor.com.
Some of the comments we made or will be making are forward-looking and subject to changes based upon the items listed on this slide and disclosures in our SEC filing.
Additionally, it is important to note that, in accordance with the SEC's regulation G, we have provided reconciliations between gross and net yields, and operating and running expenses for the second quarters of 2003 and 2002 in our press release.
We will be filing the information for the third and fourth quarters of 2002, under a separate form 6-K sometime today.
After our filing is complete, this information will also be available on our website.
Our second quarter results are summarized on slide two.
Revenues for the quarter were $906 million up, 10% from the prior year.
The increase in revenues is attributable to an increase in our capacity of 15.5%, partially offset by a decrease in gross revenue yields of 4.6%.
Net yields decreased 4.8%.
The decrease in net yields primarily associated with lower occupancy and cruise ticket prices which were partially offset by an increase in pit board revenues.
The net yield change is significantly better than the guidance of down 6% to 9% was provided at the time we filed our first quarter with the SEC in the middle of May.
This is because during the last four to five weeks of the quarter we saw stronger recovery in bookings and pricing than we originally anticipated especially for those sailing within 90 days.
Bookings continue to come close in and if you look at slide three, you can see that through June 30th of this year, approximately 48% of our bookings are coming within 90 days.
Because of the close-in nature of bookings, visibility remains limited but most especially for the fourth quarter has historically been our seasonally weakest quarter.
That makes forecasting our net yields performance more difficult than in prior years.
Assuming booking and pricing trends continue we forecast that net yields for the third quarter will be down 2% to 4% and that net yields for the fourth quarter will be roughly flat to slightly down.
This would result in 2003 full year net -- full year net yields being down approximately 1% to 2%.
Jack will provide more details on booking trends in just a few minutes.
Operating expenses for the quarter were $581 million, up from $449 - up from $499 million in 2002.
Which is an increase of 1% on a per passenger cruise day basis.
This increase was primarily attributable to higher fuel prices and the impact of Brilliance of the Sea lease payments, offset by lower commission expenses associated with lower ticket prices and other economies of scale.
Fuel continues to be more expensive than last year and represented 5.1% of revenues in the second quarter of 2003.
This compares to 4.5% for the same quarter of last year, and 5.8% for the first quarter of 2003.
Based upon the current forward curve, we estimate that fuel expenses for the full year will likely be at the high end of the guidance previously given or roughly 5% of revenue.
SG&A expenses for the quarter were $119 million compared to $107 million last year or up 11%.
On a per -- per available passenger cruise day basis SG&A were down 3.6%.
The increase in absolutely dollars is primarily contributable to our new initiatives associated with the Celebrity brand marketing campaign.
As we mentioned we went dark on advertising at the start of Iraq war and we didn't return to normal levels until late May.
As of the end of the second quarter, we had not spent the money saved but plan to do so by the end of the year.
On a combined basis, operating and SG&A expenses per available passenger cruise day were flat.
Running and SG&A expenses were up 1.7% on an available passenger cruise day basis.
Again, this increase is primarily attributable to fuel and the Brilliance lease payments.
The company estimates that running and SG&A for the second half of the year will be relatively flat or maybe up slightly.
For the full year of 2003, the company estimates that running and G&A will increase 2% to 3% on available passenger cruise day basis, which is consistent with the guidance we gave you last quarter.
Our previous guidance for depreciation and amortization of $360 million to $370 million remains unchanged.
However, due to the continuation of historically low interest rates, our net interest estimates now are $265 to $275 million.
Turning to our balance sheet, our net to debt capital ratio was 55% at June 30th.
As you can see on slide four, our liquidity as of June 30th was $1.3 billion.
This includes one OECD facility available for use on Jewel of the Seas which is scheduled for delivery in Q2 of '04.
During July we left OECD financing for Serenade of the Seas lapse and will fund this ship delivery with cash.
Also, during July the company referred an additional $15 million commitment for it's unsecured resolving credit facility.
This additional commitment has increased the availability under the facility to $550 million, and did not alter any of the facilities existing terms.
On slide five, you can see the company's estimates that capital expenditures for 2003, 2004, and 2005 will be approximately $1.1 billion, $.5 billion and $100 billion respective.
These estimate do not reflect any potential new ship orders.
Five, six and seven show our ship delivery schedule and our capacity information.
At this point I would like to ask Jack to give us an update on bookings.
Jack?
Jack Williams - Pres, COO
Thank you, Bonnie and good morning ladies and gentlemen and thank you for joining us on the call.
I'm going to spend the next few minutes and briefly discuss the general tone of bookings and provide some additional highlights by our major product lines.
As you all will recall during our last conference call, the war in Iraq was just winding down and beginning to conclude and we were anxiously watching the market and closely monitoring the market for potential upticks in the business trying to determine what kind of recovery we might be going into.
Since then, we have indeed seen a nice recovery in our business since the end of the war in early April, gross bookings have been up over 25% over prior year for the last three months.
We have essentially eliminated our load factor deficit so to same time last year for the remainder of 2003.
Our Q3 load factor is now slightly ahead of last year and our Q4 load factor is in the mid single digits ahead of last year.
Over the last 15 weeks we have seen a dramatic increase in demand versus the previous 15 weeks and as Bonnie mentioned most of that demand has been highly concentrated on close in bookings and has really had the most dramatic impact on Q2 and Q3 sailing.
I think at this time I would just summarize the general tone of booking as follows: for 2003, the reported second quarter yield performance will be the bottom for the year.
Clearly, the third and fourth quarters will be better than what we reported in '03.
The very strong close in booking activity that we have seen for the same time for some time now appears to be sustainable.
Barring any other major geopolitical events I don't see any reason why this trend should not continue and equally encouraging are July and August close in demand strength was not driven by discounting as a stimulus.
At least at the macro level at this time there are no major gaping holes at any of the product levels, for the remainder of 2003.
Which is also some very encouraging news.
We've been quite pleased with the post-war recovery, and the business we've seen since our last call.
Let me turn it and just give you some quick product highlights by major products in terms of the seven night Caribbean which represents 42% of our total capacity, that will be a 13% increase year over year in capacity.
Our book load factor is slightly ahead of last year.
Our booked APD is down slightly and our core products, which are the seven-night Caribbean and the short Caribbean and Bahamas, should have the strongest year over year performance once we conclude 2003.
And as I mention in every call and convention, the Voyager class ships remain the ships of choice in the Caribbean and still give a nice premium there.
The short Caribbean and the Bahamas represent 13% of our total capacity.
That is a 9% decline in capacity year over year.
Our booked load factor right now is ahead of same time last year and our booked APD is only down slightly.
But we do forecast that this will be one of the products where we will see a modest yield improvement over 2002 and again, the demand for our short products has been particularly strong as we get closer to sailing.
The long Caribbean is now 8% of our total capacity.
That's a 1% decline in year over year capacity.
Booked load factor is behind the same time last year, our APDs are flat right now.
We've seen the long Caribbean products perform quite well through the summer but we do see some challenges for the fall.
Primarily as we've added both Horizon and the Zenith to this product line.
Alaska is performing quite well, 7% of our total capacity, 6% increase in capacity year over year.
Our booked load factor is below same time last year slightly but last year, we did sell too fast, our APDs are down slightly, we've seen a very nice increase in our cruise tour guest which is up about 30% over last season and overall, the market is performing to our expectations.
The Muse on the other hand has been somewhat of a disappointment this year representing just 4% of our total capacity.
A 1% change in year over year capacity.
Our booked load facts and our APDs are below last year, as everybody knows, there is a lot of competitive capacity now, to New York, which is impacting some of the cruise rates out in New York for this season.
The Canal, which is only 4% of our total capacity, is up 60% year over year, our load factor a little behind last year, but our APDs are up nicely at year over year and we would expect this market despite a 60% increase in capacity to have yields about equal to what we did in 2002.
And as Richard mentioned in his opening comments, Europe has been quite satisfying for us this year.
While it represents 8% of our total capacity, that is a 91% change increase in capacity year over year.
As we redeploy back into Europe after the events of 9/11.
Our load factors just slightly behind where we were at the same time last year despite that significant capacity increase, our APDs are down from where they were same time last year.
And despite the fact that we will see our yields down from 2002, they nonetheless are going to be significantly higher than other redeployment scenarios that we would have had with those ships, we are pretty pleased with what we're seeing in Europe.
That is a little update on each of the product highlights.
I would like now to just kind of draw your attention to the final slide of the presentation.
You can see the big news right now is that we are taking on a new ship in the Royal Caribbean International fleet.
The Serenade of the Seas, which Richard will be leaving tomorrow to take delivery on July 31st in Europe.
This is the third of the four Radiance class ships for Royal Caribbean International, 2110 passenger capacity and a double occupancy, 2500 maximum capacity when you had thirds, and fourths. 1055 state rooms, of which 817 do have ocean views and almost 600 have balconies.
In terms of itineraries.
The Serenade between September and October this year will be doing four and five night Canadian itineraries out of New York City and then in November we will reposition to San Juan where she will do seven nights southern Caribbean cruising and then in May of '04, we'll go into Alaska for the Alaska season.
Absolutely beautiful ship.
We are delighted to have her coming into the fleet in the next couple of weeks and into service on September 1 and of course following that will be the Mariner of the Seas, the final Voyager class ship.
So big news in the Royal Caribbean International front, as relates to new hardware, quite excited about the Serenade and she is booking just fine right now.
So with that I think we will turn it back to our Chairman and we'll open it up for Q&A.
Operator
At this time I would like to remind everyone if you would like to ask a question, please press star and the number one on your telephone key pad.
We will pause for just a moment to compile the Q&A roster.
Your first question comes from Jill Krutick of Smith Barney.
Jill Krutick
Thanks very much.
This is Jill Krutick.
Carnival was talking about some pricing neutrality moves where they would charge the same prices to all their distributors, across all their different channels of distribution.
I was curious if Royal Caribbean would consider such a move and what the ramifications of such a move might mean for the industry.
And secondly, Jack, you provided the capacity by region, which is incredibly helpful.
I was curious if you might have a similar break down for next year's expectations, in terms of the capacity by region?
Thank you very much.
Jack Williams - Pres, COO
Yes Jill, this is Jack.
In terms of the first question on Carnival's recent comments about channel neutrality in terms of pricing and the agency community, I can say for many, many years, at least the last 10 or 15 years, Royal Caribbean International and Celebrity Cruises we have not had -- we have not been having preferential pricing in the agency community.
So this is a move that Carnival is making, in terms of how they choose to price within that channel.
I think it is a good move.
I think that in terms of the agency community, I'm not sure I would have used the word neutrality as much as the word fairness, but nonetheless, in terms of allowing the agencies to compete on an equal playing field in the absence of pricing, of fairness, whereby no particular agency is leveraged against another agency to preferential pricing.
You will not have a good competitive, healthy, vigorous, agency community that we all depend upon, so we're not going to have to change our pricing philosophy at this stage because as I mentioned, we do not provide preferential pricing in the community now.
We are looking forward to continuing to build our relationships with the agency community and we continue to grow the business, we are going to have to have a very strong, vibrant agency community so all in all I was pretty pleased with those comments.
In terms of the capacity next year, I might ask that you maybe give Dan a call after the call.
We do have those numbers available, Jill, but they're not at my fingertips.
But we can give you the capacity for 2004 per product line no problem at all.
Jill Krutick
Okay.
Jack, just to follow-up, perhaps then in terms of just how the pricing picture lays out for next year, what do you see as sort of the pluses and minuses that are working for and against the industry?
Thanks.
Jack Williams - Pres, COO
As we mentioned Jill, and as I said in my comments and I think we all touched upon it, we continue to see this close end booking phenomena, I think that is right now going to be quite sustainable as we're already going to see -- starting to see some of the move into the fourth quarter.
Clearly, it's way too early to tell what is going to happen right now out into 2004.
As I mentioned in my comments, Jill, I don't see any reason why we shouldn't continue to see this recovery going forward from here in the absence of any major geopolitical events that have been hitting this industry over the next couple of years.
That is what I'm hoping for in 2004 is to have a real nice stable global economy and the absence of any major events that have caused this industry to suffer time and time again over the last few years.
Outside of that we will know a lot more about 2004 as we talk to you about our third quarter performance.
Jill Krutick
Great.
Thanks very much.
Best of luck.
Operator
Your next question comes from Dean Gianoukus of JP Morgan.
Dean Gianoukus
First, can you talk about what you think about Princess's decision to move more aggressively into the Caribbean?
And then secondly, given the run-up in the stock, can you just give us an idea what your thoughts are, you know, on many a potential equity offering given your capital structure?
Thanks.
Jack Williams - Pres, COO
Sure, Dean.
I think our -- on the first question, on Celebrity moving -- sorry, on Princess moving into the Caribbean, that's something which they have been talking about for many years.
I don't think that is a surprise to anyone.
They have tried do so in the past, and I think it is a natural move for them, and I think we continue to feel we're very well positioned there.
And I just think that is a natural evolution in the industry.
I'm not sure if that changes anything that dramatically.
With respect to the stock price, and the possible equity offering, obviously I can't make comments about that.
It is the sort of thing we look at all the time.
I don't think any management is ever satisfied with the share price at any level, we shouldn't be, but it is not something that we speculate on.
Dean Gianoukus
Okay.
Thanks.
Operator
Your next question comes from David Leibowitz of Burnham.
David Leibowitz
Congratulations on a great quarter.
Richard Fain - Chairman, CEO
Thanks, Dave.
David Leibowitz
Following up on the question about next year, are you going to be moving ships into new venues or increasing your presence in let's say Europe or Asia?
And are you going to move the larger vessels, the Voyager class elsewhere?
Richard Fain - Chairman, CEO
Yeah.
I think Jack may want to cover more of the specifics.
You know, we made some fairly dramatic moves over the last couple of years.
The biggest of which was actually the expansion in the drive market which is something I think we've said we thought was going to be happening anyhow, but 9/11 and the Iraq war accelerated that, we had a huge increase in Europe this year, but that was mainly because we had pulled back the year before.
So we are pretty much back on track with respect to Europe than what we had been.
I think are you going to see more evolutionary changes with the Voyager moving up to New York next year which is really very exciting, but I think most of the changes going forward are more evolutionary rather than revolutionary.
David Leibowitz
Also, can I reconfirm something that was said, which was in looking at yield in the second half, that it is pretty much locked in, and you don't see much variance up or down from the guidance you gave us during this conference call?
Or did I misunderstand that?
Richard Fain - Chairman, CEO
Well, since it was my quote, I think -- I don't think we used the term locked in and I don't tend to suggest that.
I think we said that we had enough visibility that we thought that range was a reasonably good range.
And absent something different, we thought that that range was unlikely to be -- we were unlikely to go outside that range by any significant amount.
Absent some change, we think at this point would be unexpected.
But I didn't mean to imply that it is all locked in.
Rather, that I think we have enough bookings and enough insight into the way the trend is going, to make those predictions.
David Leibowitz
And the impression I was left with is that we expect yields to be higher next year, all things being equal.
Is that an accurate statement?
Richard Fain - Chairman, CEO
Well, I think -- we think we've done pretty well to give such detailed yields for the third and fourth quarter, but clearly, we're optimistic about the direction that this is heading.
David Leibowitz
Okay.
And lastly, there was no mention made about the Ultra Voyager and the potential two ships.
Is there anything you would like to update us since the announcement?
Richard Fain - Chairman, CEO
I don't really think there is anything new on that.
And we really have been fairly consistent, except when we have to, we aren't going to be making any comments about possible lead expansion, unless we have something firm.
David Leibowitz
Thank you again.
And congratulations.
Richard Fain - Chairman, CEO
Thanks, Dave.
Operator
Your next question comes from Felicia Kantor of Lehman Brothers.
Felicia Kantor
Hi, guys.
Nice quarter.
I have a couple questions, first is, we're hearing anecdotally that the Royal Caribbean brands aren't discounting as much as your competition is.
Basically, the agents are seeing Royal Caribbean and Celebrities pricings stay firm, relatively firm.
First I'm wondering if you can agree to that and second I'm wondering if you could speak to your ability to hold firm on pricing more than your peers and then I think I'm going to ask - I want to ask this question a different way.
I think it has been asked almost twice now in other ways.
As you mentioned the close in bookings make it difficult to forecast, but if you had to a put a percentage certainty on your third and fourth quarter guidance, what would that be?
And then also, I'm wondering if the close in bookings are a trend that might persist in the industry going forward?
I'm wondering what you think your ability to provide guidance with uncertainty going forward is going to be?
Richard Fain - Chairman, CEO
Felicia, let me take the one in terms of the price and Royal Caribbean / Celebrity pricing as you've seen in the marketplace.
We constantly are monitoring our pricing relative to not only our cruise category, our competition to cruise category, but also to the land based pricing that's out there with all the "all inclusives".
We believe and feel that our products are superior products when it comes to the kind of vacation offerings that we have, again, within category and also against land based options, and therefore try to price at a premium we can.
But we are in a highly competitive market where there's a lot of growth in the market right now.
I think our yield performance over the last several quarters pretty much speaks for itself in terms of how we are stacking against our competition.
And again it is such -- it can be such a volatile situation, Felicia, that, you know, I can't sit here and tell you that we will continue to perform the way that we have been on a relative basis.
I feel confident we can.
There is a lot going on in the marketplace and again, I think our performance over the last couple of quarters pretty much speaks for itself in terms of our ability of the yield performance, vis-à-vis those two categories.
But again, it's a weekly theme that we do, we're monitoring across all product lines, we're trying to get the best yield forecast we can out of the fleet at any given time.
In terms of the -- I want to say -- you want to take the guidance question, Bonnie?
Bonnie Biumi - SVP and acting CFO
Sure, Felicia on the probability, I don't think we should put a probability to it.
I will tell you that we do a lot of work to give you the estimates that we give you and we try to give you the best estimate we can, taking trends and forward looking information into regard, and we do forecast that we see improving trends and we do put those in the numbers.
As Richard said, it would take something unusual that we don't expect at this time to make us see outside that guidance.
Felicia Kantor
Okay.
And then just one final question, which isn't really a final follow-up, but I'm wondering, regarding your incorporation in Liberia, I'm wondering, given the current of acceleration intention there, is any risk to your incorporation there?
Bonnie Biumi - SVP and acting CFO
We don't believe so.
It is something we are monitoring.
Unfortunately, changing your incorporation is a very difficult cumbersome process.
It is not something you can do overnight.
It requires a lot of changes to your Bylaws and shareholder's vote, so we are keeping an eye on it and to our knowledge there is no impact on it at this point.
Felicia Kantor
Okay.
Thanks.
Operator
Your next question comes from Steve Kent of Goldman Sachs.
Steve Kent
Hi, good morning,.
Could you just give us a little bit more comment on some of the booking trends are you seeing?
For example, are the close in bookings that are you seeing, are they coming in at higher prices?
And if so, what I'm asking are the high end boats, in particular, coming in?
Which I think would be a positive indicator for trends on a go forward basis.
And I guess, I'll just ask this in one more way, what percentage of your bookings are complete for 2003?
Are you 60% complete for the next two quarters?
Are you 30% complete?
Jack Williams - Pres, COO
Steve, let me just take that for you real quick.
In terms of the close in bookings trends that we've been talking about for the last several calls and as I mentioned we are quite pleased with what we're seeing right now.
I do believe it is sustainable.
July, August, close in bookings where we really built double digit load factors within 30-60 days of sailing, came in, and we were not discounting heavily during that time period to stimulate those bookings.
So that's a relatively new phenomena that we're seeing and we're quite pleased with.
And, in fact, in July we built some good load factor points within 30 days at a premium over last year so that is a good indication that the close in bookings are strong and they are sustainable and they are now coming out of the discount and definitely get to the load factor points that we have right now.
And on the second question,.
Steve Kent
Excuse me?
Richard Fain - Chairman, CEO
I didn't get the second question.
Could you repeat your second question there?
Steve Kent
I was saying what percentage of your bookings are complete for 2003?
Are you 60% complete for Q3 and Q4? 70%? 30?
Richard Fain - Chairman, CEO
I don't have that information with me, Steve, right now.
Maybe you can do a follow-up with Dan after the call and discuss that with him.
But I don't have that available with me right now.
Bonnie Biumi - SVP and acting CFO
Actually, Steve, that's not something we give out.
I think Jack gave you an indication that on a load factor basis, we're consistent with same time last year for the third quarter and slightly up for the fourth quarter but we don't actually give out those numbers.
Steve Kent
Okay.
Thanks.
Bonnie Biumi - SVP and acting CFO
You're welcome.
Operator
Your next question comes from Robin Farley of UBS.
Robin Farley
Great, thanks.
With this momentum, with the improvement in bookings regarding Ultra Voyager, I know you said you're not prepared to say anything now, but is it still fair for us to conclude that based on the dollar/euro relationship that the cost of that is not at a point now where it would be attractive to you?
Richard Fain - Chairman, CEO
Well, yeah, I think it is clear that the dollar / euro is the consideration for us.
And obviously, we would like to see -- what we try to do is bring down our costs, through our ROI, and we like to see the euro -- so we have not acted on that, and but I think we're also fairly careful not to talk about exactly what it would take for us to act and when we would do so.
Robin Farley
Okay.
Just to clarify, there is an August deadline I guess in your agreement with the shipyard and then there is a later December deadline for deciding on that order.
Is -- at this point; there anything, if the August deadline comes and goes, is there any reason for that agreement to not be in place through the December deadline at this point?
Bonnie Biumi - SVP and acting CFO
No, Robin, what's is we have a planned delivery date in the second quarter of '05 -- '06, I'm sorry, and if we pass the August deadline and the delivery date has a possibility of being later, but the agreement itself does not go away and cannot go away until --
Robin Farley
I'm sorry, does not go away until when.
Bonnie Biumi - SVP and acting CFO
The December 31st date.
It is the difference between the August and the December date just solely relate to delivery date, the delivery date has a possibility of moving if we decide.
Robin Farley
And great.
If we can get an update, the Millennium it was taken out of service, it looked like there was only one cruise canceled, the 11-day cruise.
At this point are you able to confirm that the cruise following that would not be canceled?
Jack Williams - Pres, COO
Yeah, Robin, we are proceeding with the work in the dry dock right now.
We've got the two going, the trials tomorrow night, the 29th, and heading for Venice to pick up the second sailing.
So at this point we don't look like we will have any further cancellations.
And succeeding as planed.
Richard Fain - Chairman, CEO
You know, Robin I have to just add, you said only one cruise.
Unfortunately, somehow or another, we don't know how it is, but it knows, it knows when it would be most painful and it was an 11-night cruise and one of our most profitable and somehow when we do have a breakdown, it never happens on the weak sailings.
I don't know how it know, but it knows.
Robin Farley
So this is the worst possible cruise to be canceled?
Richard Fain - Chairman, CEO
Of all the cruises, it is the single highest per diem cruise we have.
Robin Farley
My last question is just regarding your expectation of any additional commitments to your credit facility increased I guess by about 50 million.
Are you expecting that to be further?
Bonnie Biumi - SVP and acting CFO
Absolutely.
We're hopeful that it will.
You know, the war has not been over that long, and we have not really made a big push or a big effort on it but it is something we constantly will focus on and will continue to various lenders to come in.
Robin Farley
Great.
Thank very much.
Operator
Your next question comes from David Anders of Merrill Lynch.
David Anders
Jack, could you give us a little update on the Celebrity and brand differentiation?
Our last quarter you talked about brand recognition and what not, which is, kind of, the soft end of it.
Do you have any hard, kind of, hard numbers as far as how Celebrity is performing?
Jack Williams - Pres, COO
Yes, I would be happy to.
As I mentioned on last call, Celebrity had a very successful advertising campaign.
We just finished two new commercials, we will be launching a new campaign in the next several weeks.
I think that will sustain the good - a needed brand awareness increase that we've seen over the last five to six months and that continues to move up in the consideration set from all the independent outside research that we do on these type of campaigns.
So we have a lot of momentum going there with the campaign.
It is unfortunate that we did have the Millennium cancellation, but setting that aside, once we get this other campaign launched, in conjunction with our other -- some other major promotional themes that we will be doing, one coming up on August 2nd.
It is the Hampton, the beach, I think it will keep Celebrity top of mind in the trade and develop significant awareness within the general consumer out there, so we're real happy with what we're seeing in terms of the success of those campaigns.
David Anders
Just as a follow-up, from a financial perspective, are you seeing that translate into better pricing gains than the Royal brand or how do we think about that?
Jack Williams - Pres, COO
We don't provide information by brand, as you well know, but ultimately these type of campaigns these type of efforts typically include the overall performance of a brand and I suspect that is what will happen with Celebrity as well.
David Anders
Okay, thanks.
Operator
Your next question comes from Scott Barry of CSFB.
Edward Loh
Hey guys.
It's Ed Loh for Scott Barry.
I wanted to ask two questions, one on the Celebrity question, can you give us the sense, at least directionally, of the improvements since you guys took the last new build in Q2 of '02?
And then I have a housekeeping item afterwards.
Jack Williams - Pres, COO
In terms of -- I'm not sure what you mean, in terms of directionally.
As I mentioned in terms of all the metrics that we're looking at that relate to those campaigns they've moved quite significantly in terms of Celebrity, the position in the marketplace, and just generate awareness, and so on and so forth.
In terms of directionally and all the other kind of metrics it is moving with the sister brand and following the industry trends that we've seen.
Not deviating one way or the other significantly.
It's just kind of moving along with what I've seen of other brand performance and of course sister brands.
Richard Fain - Chairman, CEO
Yeah, Ed, I, and I would just add, you know also, Celebrity has tended to be in some different itineraries and focus on different groups which may be hurt more.
For example, as Jack mentioned earlier, Bermuda.
It has always been a strong point for Celebrity.
It is probably one of the -- one of the weaker of our itineraries at the moment.
Due to just the, active, relatively speaking, as it was previously.
And obviously Celebrity also does more longer cruises.
And those have been -- those have been ,again, in the down market, those are the kinds of cruises that are hurt more, so we -- for competitive reasons, if nothing else, we've been sort of leery of providing too much detail on the individual brand.
So I thought I would give you that oversight.
Edward Loh
Great.
And then just finally, can you remind us, you guys took a $20 million charge in the third quarter of last year, can you remind us what that was for?
Jack Williams - Pres, COO
There was a litigation expense, and it was a settlement of a class action case, settled.
About a year ago.
Edward Loh
Great.
Thank you very much.
Operator
Your next question comes from Timothy Conder of A.G. Edwards.
Timothy Conder
Thank you.
Let me offer my congratulations, also.
A couple of items.
Could you give a little bit of additional color on onboard spending trends on a year over year basis?
Number two, if you could give a little color, also, on where you stand with hedging on fuel.
Bonnie, I know you gave some expectations for the year, but maybe just update us as to where you're hedged as a percent of your needs?
And then if we could make the assumption that as you're looking at the balance of '03, if the trends in bookings and pricing would continue into '04, would it be out of the question to assume that net yields in '04 could be up in the range of 2% to 5%?
Bonnie Biumi - SVP and acting CFO
Tim, first of all on the onboard spend question, onboard spend continues to hold very nicely and actually ends up as we've progressed not big movement but it continues to decrease.
On the fuel question, we remain 20% hedged for the back half of the year.
We had hoped to put on some more hedges, the experts, or the so-called experts, had predicted after the Iraq war, we would see the cliff and we would see WCI prices come down in the 21, 22 dollar range.
And as you know, we have not seen that, and in, fact they've been continuing at historically high levels which is why I said our guidance would be at the high end of the range if not maybe even a little bit more.
As far as next year's yields, you know really, we don't like to speculate.
We clearly hope we see up yields but we don't have enough visibility and enough information to really give you a good sense for what is going to happen next year.
Timothy Conder
Okay.
I guess on the onboard spending, Bonnie, I you do have any as a percent of revenues this year relative to last year either for the quarter or year to date?
Bonnie Biumi - SVP and acting CFO
No, it is not something we disclose.
It is does continue to trend nicely.
We also get a pickup this year because we did change our concession with Celebrity as we mentioned.
So there's, you know, the gross versus net syndrome.
But, you know, it's still running in the 20% plus or minus, you know, percent in total revenues.
Timothy Conder
And then looking again potentially into '04, would there be consideration given to adding that sixth ship in next year?
And -- into Europe?
And then, again, to revisit an issue that it sounds like has been asked multiple times here, in the back half of the '0 year, if I'm hearing you right, you're potentially more comfortable that you won't go on the down side of your yield guidance, but are leaving the upside more open.
Is that a fair interpretation?
Bonnie Biumi - SVP and acting CFO
No, first of all, Jewel of the Seas, that comes out in the second quarter of next year will be due her first season in Europe so I think that will have -- I think that is makes us the seventh ship in Europe, sixth ship, sorry, in Europe.
Instead of five this year we will have six next year.
I don't think that is the proper interpretation of the guidance.
I think it is meant for both ends of the range.
Timothy Conder
Okay.
Congratulations again and thank you.
Richard Fain - Chairman, CEO
Thank you.
Operator
Your next question comes from Brian Egger of Harris Nesbit Gerard.
Brian Egger
Good morning.
I just had two questions for you.
First of all, with respect to your two Radiance class vessel options, which I believe expire in mid-September, do you have the ability, or I guess I should ask also the intention, to extend those options beyond that date?
And my second question is with respect to the company's air/sea mix, do you have any sense that with all the move toward home porting of late, that that ratio is beginning to stabilize or reach some type of peak level?
Bonnie Biumi - SVP and acting CFO
I will take the second question.
On the air/sea mix front, air/sea for this quarter was just slightly up year over year.
Or down year over year.
I think it was half a percent off from the prior quarter.
If you called Dan afterwards we will give you the exact number.
It is hard to say, I mean the intuitive response to the answer about home porting is yes, we think that means that the air/sea mix of passengers have gone down as people are driving closer -- are able to drive because the ports have moved closer to them.
Unfortunately we don't have data that that can tell you that we are trying to change the data points that we gathered so we have some hard data for that.
We can only tell you how many people book air with us.
We can't tell you if they don't book air with us, whether they book air or whether they drive.
And actually the air/sea numbers for last year for the second quarter were 14.5 % and the air/sea numbers for this year were 15.1% or up .6%.
Richard Fain - Chairman, CEO
I might just add to that point, Brian, many of your.
I would suspect some increase penetration out of North America over what we saw this year even.
Jack Williams - Pres, COO
And Brian, with respect to your question about the two RadianCE class options, in Germany, those options do expire, in September, and we either have -- and if we wanted to extend them, we -- first of we could exercise them by that date.
Or if we don't, they expire, unless we negotiate something with the shipyard to accept them.
Brian Egger
Okay.
Thank you.
Operator
Your next question comes from Paul Keung of CIBC.
Paul Keung
Yeah I got a couple of simple questions.
One IS, on the Voyager class you talked about the premium pricing there.
I guess what is that premium pricing?
And I guess more importantly have you seen the premium improve sequentially.
And the second one is on the concession agreement.
Can you quantify the amount of the concession impact on your deploying this year versus last year?
Bonnie Biumi - SVP and acting CFO
On the concession arrangement, I don't think we've given out any specific numbers.
We did say that while it did affect different line items that it had a net positive impact to net income over.
Jack Williams - Pres, COO
And in terms of the Voyager premiums, Paul, that does vary by itinerary and of course by season.
As we got into the Iraq war conflict, we saw those premiums narrow, as you can imagine, the market started to dry up, and then we saw those premiums coming into a stronger recovery out of that, begin to pick back up again, but they do vary quite substantially by season and by itinerary.
Paul Keung
But a normal season, what would that look like?
Richard Fain - Chairman, CEO
Again, I don't want to divulge that information for competitive reasons but we do get a nice premium on the Voyager class ship throughout every season.
And it will vary in the market at any given time.
Paul Keung
Thanks.
Operator
Your next question comes from Mitra Negaard of Nordea Securities.
Mitra Negaard
Hello.
Congratulations on a great quarter.
Just a couple of questions.
Could you repeat you what said about the itinerary going forward in 2003?
And also the next question, do you have any possibility of getting the numbers between the differing net and gross yields in Q3 and Q4?
Excuse me not for this year but for last year?
Bonnie Biumi - SVP and acting CFO
Yes, earlier in the call we did state that we are filing a separate filing with the SEC today that will have the third and fourth quarters for 2002 net yields, as well as running the reconciliation between operating running and net and gross yields.
And as soon as that filing is done this morning we will also post those on our website so they will be available today.
As far as guidance we gave, we gave guidance with respect to running and G&A expenses.
We said for the full year, the company estimates that running and G&A expenses will be - will increase 2% to 3% on a per PPCD basis and for the second half of the year that they should be flat to slightly up.
Mitra Negaard
You haven't given any guidance specifically for SG&A?
Bonnie Biumi - SVP and acting CFO
No, but you pretty much have all the line items now so I think you will be able to work it out.
Mitra Negaard
Thank you.
Operator
Your next question --
Richard Fain - Chairman, CEO
And operator, I think we have time for two more questions.
Operator
Okay.
Your next question comes from Marino Biachi of Citigroup.
Marino Biachi
Yes, good morning.
Question for Bonnie.
You normally provide us a little bit of guidance with respect to some of the balance sheet numbers.
You can help me out with total debt, equity and so on and so forth?
Bonnie Biumi - SVP and acting CFO
Hi, Marino, how are you doing?
Marino Biachi
Not bad.
Bonnie Biumi - SVP and acting CFO
Our total debt are about $5.5, $5.6 billion.
Our shareholder's equity is a little bit over $4 billion.
Is there anything else you want?
Marino Biachi
Yeah, actually, what is the Cap Ex for the quarter, for the six months?
Bonnie Biumi - SVP and acting CFO
Can you do me a favor and call Dan?
I don't typically have that information with me but I'm sure he does.
Marino Biachi
No problems.
And then the run up and cash balances from the first quarter, basically that's reflected $275 million dollars.
Bonnie Biumi - SVP and acting CFO
Part of that is the bond offering that we did in May.
And the rest is just increasing cash from operations from -- the new customer deposits.
Marino Biachi
Okay.
Fair enough.
That's all.
Thank you.
Operator
Your final question comes from Joe Hovorka of Raymond James.
Joe Hovorka - CFA
Hi, thanks.
I had a question on your load factors for the third and the fourth quarter.
With the bookings coming close in, it seems odd that the fourth quarter is up slightly while the third quarter is even.
Can you explain the difference there?
And then one last question, deposits on the balance sheet at the end of the quarter?
Thanks.
Jack Williams - Pres, COO
On the load factor information, Joe, as I mentioned third quarter is slightly above last year, fourth quarter is a little bit stronger than last year.
As we saw the events earlier in the year impacting our booking, they were clearly impacting the closer in booking.
Primarily the war is what I'm referring to.
And out into the fourth quarter, even as we look -- as we're looking into the first quarter this year, the fourth quarter was not being impacted nearly as much because it was much further away from the sailing date.
And as we just got closer in, the close in bookings started impacting the second and third quarter, the whole deficit that built up during the war, the fourth quarter continued to book and now we're starting , the close end bookings are starting to impact sailings for the September month.
So I just think it was further away from the event that were impacting all the sailings from the time those events have gone on.
Bonnie Biumi - SVP and acting CFO
From a customer, deposit standpoint is roughly $730 million, Joe.
Joe Hovorka - CFA
Thank you.
Richard Fain - Chairman, CEO
All right.
Well, I would like to thank you all very much for participating in this call.
We appreciate the chance to provide more color to the earnings announcement and I would like to thank Jack, Bonnie and Dan for their help in this.
And of course if you have more questions, you're welcome to call in with Dan to answer those.
Thank you all for participating.
Operator
This concludes today's conference call.
You may now disconnect.