| Document and Entity Information | ||
| 3 Months Ended
Mar. 31, 2010 | Apr. 23, 2010
| |
| Document Type | 10-Q | |
| Amendment Flag | false | |
| Document Period End Date | 2010-03-31 | |
| Document Fiscal Year Focus | 2,010 | |
| Document Fiscal Period Focus | Q1 | |
| Trading Symbol | RCL | |
| Entity Registrant Name | ROYAL CARIBBEAN CRUISES LTD | |
| Entity Central Index Key | 0000884887 | |
| Current Fiscal Year End Date | --12-31 | |
| Entity Filer Category | Large Accelerated Filer | |
| Entity Common Stock, Shares Outstanding | 214,950,119 |
| CONSOLIDATED STATEMENTS OF OPERATIONS (USD $) | ||
| In Thousands, except Per Share data | 3 Months Ended
Mar. 31, 2010 | 3 Months Ended
Mar. 31, 2009 |
| Passenger ticket revenues | $1,082,521 | $949,270 |
| Onboard and other revenues | 403,129 | 376,332 |
| Total revenues | 1,485,650 | 1,325,602 |
| Cruise operating expenses: | ||
| Commissions, transportation and other | 268,650 | 235,829 |
| Onboard and other | 90,935 | 83,234 |
| Payroll and related | 179,434 | 168,746 |
| Food | 92,647 | 85,403 |
| Fuel | 154,939 | 154,875 |
| Other operating | 238,670 | 224,249 |
| Total cruise operating expenses | 1,025,275 | 952,336 |
| Marketing, selling and administrative expenses | 211,048 | 189,157 |
| Depreciation and amortization expenses | 157,575 | 139,856 |
| Operating Income | 91,752 | 44,253 |
| Other income (expense): | ||
| Interest income | 1,369 | 1,730 |
| Interest expense, net of interest capitalized | (83,924) | (79,462) |
| Other income (expense) | 78,250 | (2,759) |
| Nonoperating Income (Expense), Total | (4,305) | (80,491) |
| Net Income (Loss) | $87,447 | ($36,238) |
| Earnings (Loss) per Share: | ||
| Basic | 0.41 | -0.17 |
| Diluted | 0.4 | -0.17 |
| Weighted-Average Shares Outstanding: | ||
| Basic | 214,314 | 213,687 |
| Diluted | 216,975 | 213,687 |
| CONSOLIDATED BALANCE SHEETS (USD $) | ||
| In Thousands | 3 Months Ended
Mar. 31, 2010 | 12 Months Ended
Dec. 31, 2009 |
| Current assets | ||
| Cash and cash equivalents | $278,104 | $284,619 |
| Trade and other receivables, net | 257,592 | 338,804 |
| Inventories | 111,349 | 107,877 |
| Prepaid expenses and other assets | 187,076 | 180,997 |
| Derivative financial instruments | 83,107 | 114,094 |
| Total current assets | 917,228 | 1,026,391 |
| Property and equipment, net | 15,229,627 | 15,268,053 |
| Goodwill | 763,554 | 792,373 |
| Other assets | 1,126,737 | 1,146,677 |
| Assets, Total | 18,037,146 | 18,233,494 |
| Current liabilities | ||
| Current portion of long-term debt | 1,255,673 | 756,215 |
| Accounts payable | 242,350 | 264,554 |
| Accrued interest | 114,206 | 147,547 |
| Accrued expenses and other liabilities | 529,818 | 521,190 |
| Customer deposits | 1,230,133 | 1,059,524 |
| Total current liabilities | 3,372,180 | 2,749,030 |
| Long-term debt | 6,847,719 | 7,663,555 |
| Other long-term liabilities | 351,845 | 321,192 |
| Commitments and contingencies (Note 6) | ||
| 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; 225,226,933 and 224,258,247 shares issued, March 31, 2010 and December 31, 2009, respectively) | 2,252 | 2,243 |
| Paid-in capital | 2,994,006 | 2,973,495 |
| Retained earnings | 4,842,397 | 4,754,950 |
| Accumulated other comprehensive income | 40,451 | 182,733 |
| Treasury stock (10,308,683 common shares at cost, March 31, 2010 and December 31, 2009) | (413,704) | (413,704) |
| Total shareholders' equity | 7,465,402 | 7,499,717 |
| Liabilities and Stockholders' Equity, Total | $18,037,146 | $18,233,494 |
| CONSOLIDATED BALANCE SHEETS (Parenthetical) (USD $) | ||
| Mar. 31, 2010
| Dec. 31, 2009
| |
| Preferred stock, par value | 0.01 | 0.01 |
| Preferred stock, shares authorized | 20,000,000 | 20,000,000 |
| Preferred stock, outstanding | 0 | 0 |
| Common stock, par value | 0.01 | 0.01 |
| Common stock, shares authorized | 500,000,000 | 500,000,000 |
| Common stock, shares issued | 225,226,933 | 224,258,247 |
| Treasury stock, common shares | 10,308,683 | 10,308,683 |
| CONSOLIDATED STATEMENTS OF CASH FLOWS (USD $) | ||
| In Thousands | 3 Months Ended
Mar. 31, 2010 | 3 Months Ended
Mar. 31, 2009 |
| Operating Activities | ||
| Net income (loss) | $87,447 | ($36,238) |
| Adjustments: | ||
| Depreciation and amortization | 157,575 | 139,856 |
| Changes in operating assets and liabilities: | ||
| Decrease in trade and other receivables, net | 89,135 | 64,954 |
| (Increase) decrease in inventories | (4,625) | 2,959 |
| Increase in prepaid expenses and other assets | (5,298) | (500) |
| Decrease in accounts payable | (21,437) | (2,304) |
| Decrease in accrued interest | (33,341) | (20,306) |
| Decrease in accrued expenses and other liabilities | (15,922) | (28,610) |
| Increase (decrease) in customer deposits | 156,128 | (33,143) |
| Other, net | 3,262 | 27,240 |
| Net cash provided by operating activities | 412,924 | 113,908 |
| Investing Activities | ||
| Purchases of property and equipment | (166,397) | (219,339) |
| Cash received on settlement of derivative financial instruments | 746 | 26,658 |
| Loans and equity contributions to unconsolidated affiliates | (152,209) | |
| Proceeds from the sale of Celebrity Galaxy | 290,928 | |
| Other, net | (3,076) | (6,434) |
| Net cash used in investing activities | (168,727) | (60,396) |
| Financing Activities | ||
| Debt proceeds | 135,033 | 813 |
| Debt issuance costs | (16,063) | (105) |
| Repayments of debt | (378,596) | (1,502) |
| Proceeds from exercise of common stock options | 8,600 | |
| Other, net | 401 | (567) |
| Net cash used in financing activities | (250,625) | (1,361) |
| Effect of exchange rate changes on cash | (87) | 855 |
| Net (decrease) increase in cash and cash equivalents | (6,515) | 53,006 |
| Cash and cash equivalents at beginning of period | 284,619 | 402,878 |
| Cash and cash equivalents at end of period | 278,104 | 455,884 |
| Cash paid during the period for: | ||
| Interest, net of amount capitalized | $73,937 | $70,884 |
| Introductory Disclosure | |
| 3 Months Ended
Mar. 31, 2010 | |
| Introductory Disclosure | As used in this quarterly report on Form 10-Q, the terms Royal Caribbean, the Company, we, our and us refer to Royal Caribbean Cruises Ltd. and the terms Royal Caribbean International, Celebrity Cruises, Pullmantur, Azamara Club Cruises and CDF Croisires de France refer to our cruise brands. In accordance with cruise vacation industry practice, the term berths is determined based on double occupancy per cabin even though many cabins can accommodate three or more passengers. This report should be read in conjunction with our annual report on Form 10-K for the year ended December31, 2009. |
| General | |
| 3 Months Ended
Mar. 31, 2010 | |
| General | Note 1. General Description of Business We are a global cruise company. We own five cruise brands, Royal Caribbean International, Celebrity Cruises, Pullmantur, Azamara Club Cruises, and CDF Croisires de France. In addition, we have a 50% investment in a joint venture with TUI AG which operates the brand TUI Cruises. Basis for Preparation of Consolidated Financial Statements The unaudited consolidated financial statements are prepared in accordance with accounting principles generally accepted in the United States of America. Estimates are required for the preparation of financial statements in accordance with these principles. Actual results could differ from these estimates. All significant intercompany accounts and transactions are eliminated in consolidation. We consolidate entities over which we have control, usually evidenced by a direct ownership interest of greater than 50% and variable interest entities where we are determined to be the primary beneficiary. See Note 5. Other Assets for further information regarding our variable interest entities. For affiliates where significant influence over financial and operating policies exists, usually evidenced by a direct ownership interest from 20% to 50%, the investment is accounted for using the equity method. We believe the accompanying unaudited consolidated financial statements contain all normal recurring accruals necessary for a fair statement. Our revenues are seasonal and results for interim periods are not necessarily indicative of results for the entire year. |
| Summary of Significant Accounting Policies | |
| 3 Months Ended
Mar. 31, 2010 | |
| Summary of Significant Accounting Policies | Note 2. Summary of Significant Accounting Policies Recently Adopted Accounting Standards In January 2010, we adopted authoritative guidance which eliminates the concept of a qualifying special-purpose entity, creates more stringent conditions for reporting a transfer of a portion of a financial asset as a sale, clarifies other sale-accounting criteria, and changes the initial measurement of a transferors interest in transferred financial assets. The adoption of this guidance did not have a material impact on our consolidated financial statements. In January 2010, we adopted authoritative guidance which eliminates exceptions to consolidating qualifying special-purpose entities, contains new criteria for determining the primary beneficiary and increases the frequency of required reassessments to determine whether a company is the primary beneficiary of a variable interest entity. This guidance also contains a new requirement that any term, transaction, or arrangement that does not have a substantive effect on an entitys status as a variable interest entity, a companys power over a variable interest entity or a companys obligation to absorb losses or its right to receive benefits of an entity must be disregarded. The elimination of the qualifying special-purpose entity concept and its consolidation exceptions means more entities will be subject to consolidation assessments and reassessments. The adoption of this guidance did not have a material impact on our consolidated financial statements. In January 2010, authoritative guidance was issued requiring enhanced disclosures for fair value measurements. Entities are required to separately disclose the amounts and reasons of significant transfers in and out of the first two levels of the fair value hierarchy. Entities are also required to present information about purchases, sales, issuances and settlements of fair value measurements within the third level of the fair value hierarchy on a gross basis. We adopted this authoritative guidance, with the exception of the disclosures about purchases, sales, issuance and settlements which will be effective for our fiscal year 2011 interim and annual consolidated financial statements. The adoption of this guidance did not have an impact on our 2010 consolidated financial statements. The remaining disclosures will be added to our future filings when applicable. |
| Earnings (Loss) Per Share | |
| 3 Months Ended
Mar. 31, 2010 | |
| Earnings (Loss) Per Share | Note 3. Earnings (Loss) Per Share A reconciliation between basic and diluted earnings (loss) per share is as follows (in thousands, except per share data): Quarter Ended March31, 2010 2009 Net income (loss) for basic and diluted earnings (loss) per share $ 87,447 $ (36,238 ) Weighted-average common shares outstanding 214,314 213,687 Dilutive effect of stock options and restricted stock awards 2,661 Diluted weighted-average shares outstanding 216,975 213,687 Basic earnings (loss) per share $ 0.41 $ (0.17 ) Diluted earnings (loss) per share $ 0.40 $ (0.17 ) Diluted earnings (loss) per share did not include options to purchase 3.7million shares for the quarter ending March31, 2010 and 6.5million shares for the quarter ending March31, 2009 because the effect of including them would have been antidilutive. |
| Long-Term Debt | |
| 3 Months Ended
Mar. 31, 2010 | |
| Long-Term Debt | Note 4. Long-Term Debt In March 2010, we entered into a credit agreement providing financing for Allure of the Seas, which is scheduled for delivery in the fourth quarter of 2010. The credit agreement provides for an unsecured term loan for up to 80% of the purchase price of the vessel or approximately $1.1 billion which will be 95% guaranteed by Finnvera, the official export credit agency of Finland. The loan amortizes over 12 years and each of the lenders has the ability upon proper notice to exit the facility on the seventh anniversary of the credit agreement. When the loan is drawn it will bear interest at LIBOR plus a margin of 2.20%. We will be required to secure Allure of the Seas if at the time we draw down on our loan to purchase the vessel our senior debt is rated below BB- by Standard Poors or below Ba3 by Moodys. In April 2010, we took delivery of Celebrity Eclipse. To finance the purchase, we drew in full $566.1 million under an unsecured term loan which is 95% guaranteed by Hermes, the official export credit agency of Germany. The loan amortizes over 12 years and bears interest at LIBOR plus a margin of 0.37%, currently approximately 0.83%. Our financing agreements contain covenants that require us, among other things, to maintain minimum net worth and a fixed charge coverage ratio and limit our net debt-to-capital ratio. Our minimum net worth and maximum net debt-to-capital calculations exclude the impact of accumulated other comprehensive income (loss) on total shareholders equity. The fixed charge coverage ratio is calculated by dividing net cash from operations for the past four quarters by the sum of dividend payments plus scheduled principal debt payments in excess of any new financings for the past four quarters (fixed charges). We are currently in compliance with all debt covenants. As of March31, 2010, our net worth was $7.4 billion compared with a minimum requirement of $5.2 billion, our net-debt-to-capital was 51.3% compared to a maximum limit of 62.5% and our fixed charge coverage ratio exceeded the minimum requirement of 1.25x as our fixed charges for the period were $0.00. |
| Other Assets | |
| 3 Months Ended
Mar. 31, 2010 | |
| Other Assets | Note 5. Other Assets Variable Interest Entities Authoritative guidance addresses consolidation by business enterprises of Variable Interest Entities (VIEs), which are entities in which the equity investors have not provided enough equity to finance its activities or the equity investors (1)cannot directly or indirectly make decisions about the entitys activities through their voting rights or similar rights; (2)do not have the obligation to absorb the expected losses of the entity; (3)do not have the right to receive the expected residual returns of the entity; or (4)have voting rights that are not proportionate to their economic interests and the entitys activities involve or are conducted on behalf of an investor with a disproportionately small voting interest. We have determined that our 40% noncontrolling interest in a ship repair and maintenance facility which we initially invested in 2001, is a VIE. The facility serves cruise and cargo ships, oil and gas tankers, and offshore units. We utilize this facility, among other ship repair facilities, for our regularly scheduled drydocks and certain emergency repairs as may be required. As of March31, 2010, our investment in this entity including equity and loans, which is also our maximum exposure to loss as we are not contractually required to provide any financial or other support to the facility, was approximately $66.3 million and was included within other assets in our consolidated balance sheets. We have determined we are not the primary beneficiary as we do not have the power to direct the activities that most significantly impact the facilitys economic performance. Accordingly, we do not consolidate this entity and account for this investment under the equity method of accounting. In conjunction with our acquisition of Pullmantur in 2006, we obtained a 49% noncontrolling interest in Pullmantur Air, S.A. (Pullmantur Air), a small air business that operates three aircrafts in support of Pullmanturs operations. We have determined Pullmantur Air is a VIE for which we are the primary beneficiary as we have the power to direct the activities that most significantly impacts its economic performance and we are obligated to absorb its losses. In accordance with authoritative guidance, we have consolidated the assets and liabilities of Pullmantur Air. We do not disclose the assets and liabilities of Pullmantur Air as they are immaterial to our March31, 2010 consolidated financial statements. We have determined that our 50% interest in the TUI Cruises GmbH joint venture with TUI AG, which operates the brand TUI Cruises, is a VIE. As of March31, 2010, our investment in this entity which is substantially our maximum exposure to loss, was approximately $183.7 million and was included within other assets in the consolidated balance sheet. We have determined that we are not the primary beneficiary of TUI Cruises. We believe that the power to direct the activities that most significantly impact TUI Cruises economic performance are shared between ourselves and TUI AG. All the significant operating and financial decisions of TUI Cruises require the consent of both parties which we believe |
| Commitments and Contingencies | |
| 3 Months Ended
Mar. 31, 2010 | |
| Commitments and Contingencies | Note 6. Commitments and Contingencies Capital Expenditures. As of March31, 2010, the expected dates our ships on order will enter service and their approximate berths are as follows: Ship Expectedto EnterService Approximate Berths Royal Caribbean International: Oasis-class: Allure of the Seas 4thQuarter2010 5,400 Celebrity Cruises: Solstice-class: Celebrity Eclipse1 2ndQuarter2010 2,850 Celebrity Silhouette 3rd Quarter 2011 2,850 Unnamed 4th Quarter 2012 2,850 Total Berths 13,950 1 We took delivery of Celebrity Eclipse in April 2010. The aggregate cost of these ships is approximately $4.2 billion, of which we have deposited $528.6 million as of March31, 2010. Approximately 5.6% of the aggregate cost was exposed to fluctuations in the euro exchange rate at March31, 2010. Litigation In January 2010, we reached a settlement with Rolls Royce, in our lawsuit that was pending in the Circuit Court for Miami-Dade County, Florida against Rolls Royce for the recurring Mermaid pod failures. As part of the settlement, each party dismissed the lawsuit with prejudice and released the other from all claims and counterclaims made by each party against the other. Under the terms of the settlement, we received a payment in the first quarter of 2010 of approximately $68.0 million, net of costs and payments to insurers and will receive an additional $20.0 million that will be payable within five years. We recorded a one-time gain of approximately $85.6 million in the first quarter of 2010 in connection with this settlement, comprised of the $68.0 million payment and the net present value of the $20.0 million receivable or $17.6 million. This amount was recognized within other income (expense) in our consolidated financial statements. The Miami District Office of the United States Equal Employment Opportunity Commission (EEOC) has alleged that certain of our shipboard employment practices do not comply with United States employment laws. In June 2007, the EEOC proposed payment of monetary sanctions of approximately $27.0 million and certain remedial actions. Following discussions with the EEOC regarding this matter, the EEOC informed us in April 2008 that they transferred the matter to its legal unit for litigation review. To date, no legal proceedings have been initiated. We believe we have meritorious defenses to these claims and, if proceedings are initiated, we intend to vigorously pursue them. In 2008, the Office of the Attorney General of Florida initiated an investigation to determine whether there had been a violation of Florida or Federal anti-trust laws in connection with the imposition of supplemental charges for fuel implemented by a number of cruise lines. The Attorney General sought and received documentary information from the Company. In February 2010, the Company was informed that the Attorney General has no plans to take any further action. In January 2006, a purported class action lawsuit was filed in the United States District Court for the Southern District of New York alleging that we and certain o |
| Comprehensive Income (Loss) | |
| 3 Months Ended
Mar. 31, 2010 | |
| Comprehensive Income (Loss) | Note 7. Comprehensive Income (Loss) Comprehensive income (loss) includes net income (loss), foreign currency translation adjustments and changes in the fair value of derivative instruments that qualify as cash flow hedges. The cumulative changes in fair value of the derivatives are deferred and recorded as a component of accumulated other comprehensive income (loss) until the hedged transactions are realized and recognized in earnings. Comprehensive income income (loss) was as follows (in thousands): Quarter Ended March31, 2010 2009 Net income (loss) $ 87,447 $ (36,238 ) Changes related to cash flow derivative hedges (111,916 ) (15,965 ) Foreign currency translation adjustments (30,366 ) (17,659 ) Total comprehensive loss $ (54,835 ) $ (69,862 ) |
| Fair Value Measurements and Derivative Instruments | |
| 3 Months Ended
Mar. 31, 2010 | |
| Fair Value Measurements and Derivative Instruments | Note 8. Fair Value Measurements and Derivative Instruments Fair Value Measurements The Company uses quoted prices in active markets when available to determine the fair value of its financial instruments. The estimated fair value of our financial instruments that are not measured at fair value on a recurring basis are as follows (in thousands): AtMarch 31, 2010 AtDecember 31, 2009 Long-term debt (including current portion of long-term debt) $ 7,618,139 $ 7,744,915 Long-Term Debt The fair values of our senior notes and senior debentures were estimated by obtaining quoted market prices. The fair values of all other debt were estimated using the present value of expected future cash flows which incorporates our risk profile. Other Financial Instruments The carrying amounts of cash and cash equivalents, accounts receivable, accounts payable, accrued interest and accrued expenses approximate fair value at March31, 2010 and December31, 2009. In addition, assets and liabilities that are recorded at fair value have been categorized based upon the fair value hierarchy in accordance with authoritative guidance. The following table presents information about the Companys financial instruments recorded at fair value on a recurring basis (in thousands): Fair Value Measurements at March31, 2010 Using Fair Value Measurements at December31, 2009 Using Description Total Level 11 Level 22 Level 33 Total Level 11 Level 22 Level 33 Assets: Derivative financial instruments4 $ 335,696 315,153 20,543 $ 385,760 375,762 9,998 Investments5 $ 7,784 7,784 $ 8,923 8,923 Total Assets $ 343,480 $ 7,784 $ 315,153 $ 20,543 $ 394,683 $ 8,923 $ 375,762 $ 9,998 Liabilities: Derivative financial instruments6 $ 189,908 189,908 $ 79,337 79,337 Total Liabilities $ 189,908 $ $ 189,908 $ $ 79,337 $ $ 79,337 $ 1. Inputs based on quoted prices (unadjusted) in active markets for identical assets or liabilities that we have the ability to access. Valuation of these items does not entail a significant amount of judgment. 2. Inputs other than quoted prices included within Level 1 that are observable for the asset or liability, either directly or indirectly. Fair value is derived using valuation models that utilize the income valuation approach. These valuation models take into account the contract terms such as maturity, as well as other inputs such as exchange rates, fuel types, fuel curves, interest rate yield curves, creditworthiness of the counterparty and the Company. 3. Fair value for fuel call options is derived using standard option p |
