Royal Caribbean Cruise Lines 2001 Annual Report Download - page 37

Management’s Discussion and Analysis of Financial Condition and Results of Operations (continued)
Royal Caribbean Cruises Ltd. 35
In June 2001, we deferred our options to purchase two addi-
tional Radiance-class vessels with delivery dates in the third
quarters of 2005 and 2006. The options have an aggregate
contract price of $804.6 million. Our right to cancel the
options was extended to on or before July 26, 2002.
Pursuant to the joint venture agreement entered into in
November 2001 with P&O Princess, we have committed up
to $500.0 million in shareholder equity, with approximately
$5.0 million contributed to date and the balance due and
payable when called by the joint venture company. We have
agreed to assign our ship-build contracts for Serenade of the Seas
and Jewel of the Seas to the joint venture company. The aggregate
contract price of these two ships, excluding capitalized interest
and other ancillary costs, is approximately $0.8 billion, of which
we have deposited $79.3 million as of December 31, 2001.
Also, we have obtained commitments for export financing for
up to 80% of the contract price of these two vessels. Any
payments we have made under these contracts prior to assign-
ment will be credited against our shareholder equity commitment.
The joint venture shareholders intend that the joint venture
company be financed through third-party indebtedness and
each joint venture shareholder has committed to provide
necessary credit support in the form of guarantees on a pro rata
basis, subject to legal or regulatory restrictions. To the extent
that third-party financing cannot be obtained, and if approved in
accordance with the terms of the joint venture agreement, the
joint venture shareholders will provide financing on a pro rata
basis on identical terms. Subject to the terms of the joint
venture agreement, the agreement can be terminated by either
party if certain commercial benchmarks have not been achieved
by January 1, 2003 or April 1, 2003.
Under the joint venture agreement, if a change of control
occurs with respect to a joint venture shareholder, the other
shareholder has a right to acquire the interest of that shareholder
at fair market value in exchange for preferred stock or a 15-year
subordinated note (or a combination thereof) of the purchasing
shareholder. Notwithstanding the foregoing, the joint venture
shareholder subject to a change of control has the right, subject
to certain conditions, to put its interest in the joint venture to
the other joint venture shareholder at a discount to fair market
value in exchange for preferred stock or a 20-year subordinated
note (or a combination thereof) of the purchasing shareholder.
We have $5.6 billion of long-term debt of which $238.6 million
is due during the 12-month period ending December 31, 2002.
The vast majority of our property and equipment consists of
vessels. We own all but two ships, which were financed with
capital leases. These capital lease obligations are included as a
component of long-term debt. (See Note 6 – Long-Term Debt.)
We are obligated under noncancelable operating leases
primarily for office and warehouse facilities, computer equip-
ment and motor vehicles. As of December 31, 2001, future
minimum lease payments under noncancelable operating leases
aggregated to $87.9 million, due primarily through 2016. We
have future commitments to pay for our usage of certain port
facilities, maintenance contracts and communication services
aggregating $228.2 million, due through 2014. (See Note 12 –
Commitments and Contingencies.)
As a normal part of our business, depending on market condi-
tions, pricing and our overall growth strategy, we continuously
consider opportunities to enter into contracts for the building
of additional ships. We may also consider the sale of ships. We
continuously consider potential acquisitions and strategic
alliances. If any of these were to occur, they would be financed
through the incurrence of additional indebtedness, the
issuance of additional shares of equity securities or through
cash flows from operations.
FUNDING SOURCES
As of December 31, 2001, our liquidity was $1.4 billion
consisting of approximately $0.7 billion in cash and cash equiv-
alents and approximately $0.7 billion available under our
$1.0 billion unsecured revolving credit facility. Our $1.0 billion
revolving credit facility expires June 2003. Any amounts
outstanding at that time will be payable immediately if the facil-
ity is not renewed. We intend to renew or replace this facility
prior to its expiration date. The margin and facility fee under
our $1.0 billion unsecured revolving credit facility and the
$625.0 million unsecured term loan vary with our credit rating
and were increased 0.20% and 0.25%, respectively, as a result
of the lowering of our credit rating by Standard & Poors to
BB+ and Moody’s to Ba2 in the fourth quarter of 2001 and
currently are at their highest contractual levels. In addition, we
have obtained commitments for export financing for up to