Royal Caribbean Cruise Lines 2002 Annual Report Download

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Table of contents

  • Page 1
    ROYAL CARIBBEAN CRUISES LTD. 2002 annual report

  • Page 2
    ... 2.8 million guests sailed in 2002 on the 25 ships of Royal Caribbean International and Celebrity Cruises, enabling Royal Caribbean Cruises Ltd. to post a 38-percent increase in net income with record revenues of $ 3.4 billion. Nearing the peak of expansion in 2002, the company surpassed 50,000...

  • Page 3
    ..., except per share data) 2002 2001 2000 Revenues Operating Income Net Income Earnings Per Share* Shareholders' Equity (*diluted) $3,434,347 550,975 351,284 $ 1.79 $4,034,694 $3,145,250 455,605 254,457 $ 1.32 $3,756,584 $2,865,846 569,540 445,363 $ 2.31 $3,615,915 ROYAL CARIBBEAN CRUISES LTD.

  • Page 4
    ...our business as efficiently as possible, constantly seeking - and finding - ways to control or avoid costs. By launching a combined seven new ships and 16,500 berths in 2001 and 2002 - peak years in a decade of expansion - we raised our profile in the eyes of vacationers ROYAL CARIBBEAN CRUISES LTD...

  • Page 5
    .... Celebrity Cruises completed its stylish Millennium class with Constellation, the fourth ship in the series. Celebrity, the fastest-growing of the premium brands, has doubled its capacity to 16,350 berths, compared to 1999. Brilliance of the Seas and Navigator of the Seas joined the Royal Caribbean...

  • Page 6
    4 Rhapsody of the Seas made Galveston, Texas, a year-round homeport. New dining options (opposite page) on Navigator of the Seas included Jade, with Asian fusion foods. ROYAL CARIBBEAN CRUISES LTD.

  • Page 7
    ...that doubled awareness of the Celebrity Cruises brand, we targeted savvy travelers in "A True Departure" campaign. Meanwhile, Royal Caribbean International continued its acclaimed "Get Out There" advertising campaign and also launched communication of GOLD Anchor Service to emphasize the outstanding...

  • Page 8
    ... the Seas, our fourth Voyager-class ship, entered service in December 2002 and exemplified this evolution (and innovation) in amenities. There are still the trendsetting recreational features - the rock-climbing wall, ice-skating rink, and inline skating track - and, of course, the spectacular Royal...

  • Page 9
    ... Royal Celebrity Tours (opposite page) now has four glass-domed traincars in Alaska. include the wine bar Vintages, the cruise industry's first wine education and entertainment venue; Boleros, the first Latin jazz bar at sea; Chops Grille, a popular steakhouse borrowed from our Radiance-class ships...

  • Page 10
    ... and shoreside employees of Royal Caribbean International and Celebrity Cruises whose talent, job dedication, and professionalism never waver. I am also very grateful to the many experienced pros in the travel-agent community, the lifeblood of our distribution system. Finally, I thank our Board of...

  • Page 11
    ... Caribbean International urges vacationers with active lifestyles to "Get Out There." Celebrity Cruises promotes "A True Departure" by targeting the savvy travelers who are offered luxurious settings, such as The Olympic dining room (opposite page) on M i l l e n n i u m . ROYAL CARIBBEAN CRUISES...

  • Page 12
    ... a gas-turbine engine that powers all Millennium- and Radiance-class ships, Chief Engineer Iraklis Baltsavias (pointing) explains a maintenance procedure to Capt. Gerasimos Andrianatos. First Engineer George Spirellis makes the adjustment. 10 Royal Caribbean International and Celebrity Cruises sail...

  • Page 13
    ... to protect our fragile ocean environment. I am also proud of the men and women who serve on our ships and their dedication to our commitment to our ABC (Above and Beyond Compliance) program. Sincerely, 11 CAPT. WILLIAM S. WRIGHT Senior VP, Safety & Environment ROYAL CARIBBEAN CRUISES LTD.

  • Page 14
    ... International Partners JACK L. WILLIAMS GERT W. MUNTHE Ferd Private Equity LAURA LAVIADA Pro Mujer BERNARD W. ARONSON ACON Investments, LLC President and Chief Operating Officer, Royal Caribbean International and Celebrity Cruises RICHARD D. FAIN Royal Caribbean Cruises Ltd. BONNIE S. BIUMI...

  • Page 15
    ... 25 Consolidated Balance Sheets 26 Consolidated Statements of Cash Flows 27 Consolidated Statements of Shareholders' Equity 28 Notes to the Consolidated Financial Statements 40 Report of Independent Certified Public Accountants 41 Shareholder Information ROYAL CARIBBEAN CRUISES LTD.

  • Page 16
    ... Lines Inc. and the terms "Royal Caribbean International" and "Celebrity Cruises" refer to our two cruise brands. In accordance with industry practice, the term "berths" represents double occupancy capacity per cabin even though many cabins can accommodate three or more guests. Certain statements...

  • Page 17
    ... We have three ships on order for the Royal Caribbean International brand. The planned berths and expected delivery dates of the ships on order are as follows: Ship Voyager class: Mariner of the Seas Radiance class: (1) Serenade of the Seas Jewel of the Seas Expected Delivery Date 4th Quarter 2003...

  • Page 18
    .... Such markets are often not available for used cruise ships. Accordingly, we also base fair value on independent appraisals, sales price negotiations and projected future cash flows discounted at a rate determined by management to be commensurate with our business risk. The estimation of fair value...

  • Page 19
    ... Accountants issued a proposed Statement of Position (" SOP" ), " Accounting for Certain Costs and Activities Related to Property, Plant and Equipment." Under the proposed SOP, we would be required to adopt a component method of accounting for our ships. Using this method, each component of a ship...

  • Page 20
    ...additions of Infinity, Radiance of the Seas, Summit and Adventure of the Seas during 2001, and Constellation, Brilliance of the Seas and Navigator of the Seas in 2002, partially offset by the transfer of Viking Serenade to Island Cruises, our joint venture with First Choice Holidays PLC. The decline...

  • Page 21
    ... primarily due to the addition of Millennium and Explorer of the Seas in 2000, and Infinity, Radiance of the Seas, Summit and Adventure of the Seas in 2001. The increase in new capacity was partially offset by the cancellation of 14 weeks of sailings due to ship incidents and the events of September...

  • Page 22
    ... price in cash or common stock or a combination thereof. In addition, we have a three-year, $345.8 million unsecured variable rate term loan facility available to us should the holders of the Zero Coupon Convertible Notes require us to purchase their notes on May 18, 2004. ROYAL CARIBBEAN CRUISES...

  • Page 23
    ...in convertible preferred stock issued by First Choice Holidays PLC. (See Note 5 - Other Assets.) Independently, we entered into a joint venture with First Choice Holidays PLC to launch a new cruise brand, Island Cruises. As part of the transaction, ownership of Viking Serenade was transferred to the...

  • Page 24
    ... for up to 80% of the contract price of two ships on order, Serenade of the Seas and Jewel of the Seas, not to exceed $624.0 million in aggregate. Capital expenditures and scheduled debt payments will be funded through a combination of cash flows from operations, drawdowns under our available...

  • Page 25
    ... 10% increase in our weighted-average fuel price for the year ended December 31, 2002 would increase our 2003 fuel cost by approximately $18.1 million. This increase would be partially offset by a $1.5 million increase in the fair value of our fuel swap agreements. ROYAL CARIBBEAN CRUISES LTD.

  • Page 26
    ...share data) 2002 2001 2000 INCOME STATEMENT Revenues Expenses ...Income $ 351,284 $ 254,457 $ 445,363 EARNINGS PER SHARE: Basic $ $ 1.82 1.79 $ $ 1.32 1.32 $ $ 2.34 2.31 24 Diluted The accompanying notes are an integral part of these financial statements. ROYAL CARIBBEAN CRUISES...

  • Page 27
    ...and 475,524 common shares at cost) Total shareholders' equity 25 1,930 2,053,649 1,982,580 3,693 (7,158) 4,034,694 $10,538,531 1,923 2,045,904 1,731,423 (16,068) (6,598) 3,756,584 $10,368,782 The accompanying notes are an integral part of these financial statements. ROYAL CARIBBEAN CRUISES LTD.

  • Page 28
    ... Increase (decrease) in customer deposits Other, net Net cash provided by operating activities INVESTING ACTIVITIES Purchases of property and equipment Investment in convertible preferred stock Net proceeds from ship transfer to joint venture Other, net Net cash used in investing activities (689...

  • Page 29
    ...371,045 2001 $254,457 7,775 (23,843) $238,389 2000 $445,363 - - $445,363 Net income Transition adjustment SFAS No. 133 Changes related to cash flow derivative hedges Total comprehensive income The accompanying notes are an integral part of these financial statements. ROYAL CARIBBEAN CRUISES LTD.

  • Page 30
    ... CONSOLIDATED FINANCIAL STATEMENTS NOTE 1. GENERAL DESCRIPTION OF BUSINESS We are a global cruise company. We operate two cruise brands, Royal Caribbean International and Celebrity Cruises, with 16 cruise ships and 9 cruise ships, respectively, at December 31, 2002. Our ships operate on a selection...

  • Page 31
    ... of common stock outstanding during each period. Diluted earnings per share is computed by dividing net income by the weighted-average number of shares of common stock, common stock equivalents and other potentially dilutive securities outstanding during each period. ROYAL CARIBBEAN CRUISES LTD.

  • Page 32
    ...-average assumptions: 2002 2001 2.5% 43.3% 4% 5 years 2000 2.0% 38.4% 6% 6 years 30 Dividend yield Expected stock price volatility Risk-free interest rate Expected option life 2.7% 42.9% 3% 5 years SEGMENT REPORTING We operate two cruise brands, Royal Caribbean International and Celebrity...

  • Page 33
    ...No. 148 amends the requirements of SFAS No. 123 requiring prominent disclosures in annual and interim financial statements about the method of accounting for stock-based employee compensation and the effect of the method used on reported results. We continue to use the intrinsic value method and, as...

  • Page 34
    ... loans bearing interest at LIBOR plus 0.45% to 1.535%, due through 2010, secured by certain Celebrity ships Capital lease obligations with implicit interest rates ranging from 7.0% to 7.2%, due through 2011 Less - current portion Long-term portion (122,544) $5,322,294 ROYAL CARIBBEAN CRUISES LTD.

  • Page 35
    ...pay the purchase price in cash or common stock or a combination thereof. In addition, we have a three-year $345.8 million unsecured variable rate term loan facility available to us should the holders of the Zero Coupon Convertible Notes require us to purchase their notes on May 18, 2004. During 2002...

  • Page 36
    ... basis. Subject to certain limitations, the purchase price for each share of common stock is equal to 90% of the average of the market prices of the common stock as reported on the New York Stock Exchange on the first business day of the purchase period and the last business day of each month of the...

  • Page 37
    ...STATEMENTS (continued) Stock option activity and information about stock options outstanding are summarized in the following tables: STOCK OPTION ACTIVITY 2002 Weighted Average Exercise Price 2001 Weighted Average Exercise Price 2000 Weighted Average Exercise Price... ROYAL CARIBBEAN CRUISES LTD.

  • Page 38
    ... 9. RETIREMENT PLANS 36 We maintain a defined contribution pension plan covering all of our full-time shoreside employees who have completed the minimum period of continuous service. Annual contributions to the plan are based on fixed percentages of participants' salaries and years of service, not...

  • Page 39
    ... The fair values of our Senior Notes, Senior Debentures, Liquid Yield Optionâ„¢ Notes and Zero Coupon Convertible Notes were estimated by obtaining quoted market prices. The fair values of all other debt were estimated using discounted cash flow analyses based on market rates available to us for...

  • Page 40
    ...Southern District of New York on behalf of current and former crew members alleging that we failed to pay the plaintiffs their full wages. The suit sought payment of (i) the wages alleged to be owed, (ii) penalty wages under 46 United States Code Section 10313 and (iii) punitive damages. In November...

  • Page 41
    NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (continued) OPERATING LEASES On July 5, 2002, we added Brilliance of the Seas to Royal Caribbean International's fleet. In connection with this addition, we novated our original ship building contract and entered into a longterm operating lease ...

  • Page 42
    ...In our opinion, the accompanying consolidated balance sheets and the related consolidated statements of operations, of cash flows and of shareholders' equity present fairly, in all material respects, the financial position of Royal Caribbean Cruises Ltd. and its subsidiaries at December 31, 2002 and...

  • Page 43
    SHAREHOLDER INFORMATION CORPORATE OFFICE COMMON STOCK Royal Caribbean Cruises Ltd. 1050 Caribbean Way Miami, Florida 33132 Telephone (305) 539-6000 Telecommunications Display Device (305) 539-4440 Internet http:/ / www.royalcaribbean.com http:/ / www.celebrity.com Transfer Agent & Registrar ...

  • Page 44
    ...In our opinion, the accompanying consolidated balance sheets and the related consolidated statements of operations, of cash flows and of shareholders' equity present fairly, in all material respects, the financial position of Royal Caribbean Cruises Ltd. and its subsidiaries at December 31, 2002 and...

  • Page 45
    Royal Caribbean Cruises Ltd., 1050 Caribbean Way, Miami, Florida 33132