Royal Caribbean Cruise Lines 2002 Annual Report Download - page 22

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20
ROYAL CARIBBEAN CRUISES LTD.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS (continued)
Included in Other income (expense) in 2001 and 2000 is $19.4 million and $9.2 million, respec-
tively, of dividend income from our investment in convertible preferred stock of First Choice
Holidays PLC and $7.2 million and $10.2 million in 2001 and 2000, respectively, of compensa-
tion from a shipyard related to the late delivery of ships.
LIQUIDITY AND CAPITAL RESOURCES
SOURCES AND USES OF CASH
Net cash provided by operating activities was $870.5 million in 2002 compared to $633.7 mil-
lion in 2001 and $703.3 million in 2000. The change in each year was primarily due to the tim-
ing of cash receipts related to customer deposits and fluctuations in net income.
During the year ended December 31, 2002, our capital expenditures were approximately $1.0
billion compared to approximately $2.1 billion in 2001 and $1.3 billion in 2000. The largest por-
tion of capital expenditures related to the deliveries of
Constellation
and
Navigator of the Seas
in 2002;
Infinity
,
Radiance of the Seas
,
Summit
and
Adventure of the Seas
in 2001; and
Millennium
and
Explorer of the Seas
in 2000, as well as progress payments for ships under
construction in all years.
Capitalized interest decreased to $23.4 million in 2002 from $37.0 million in 2001 and $44.2
million in 2000 due to a lower average level of investment in ships under construction and
lower interest rates.
In July 2002, we financed the addition of
Brilliance of the Seas
to our fleet by novating our orig-
inal ship building contract and entering into a long-term operating lease denominated in British
pound sterling. The total lease term is 25 years cancelable by either party at years 10 and 18.
In connection with the novation of the contract, we received $77.7 million for reimbursement of
shipyard deposits previously made.
During 2002, we obtained financing of $0.3 billion related to the acquisition of
Constellation
. In
2001, we received net cash proceeds of $1.8 billion from the issuance of Senior Notes, Liquid
Yield Option™ Notes, Zero Coupon Convertible Notes, term loans, and drawings on our revolv-
ing credit facility as well as obtained financing of $0.3 billion related to the acquisition of
Summit
.
During 2000, we received net proceeds of $1.2 billion from the issuance of term loans and
drawings on our revolving credit facility. These funds were used for ship deliveries and general
corporate purposes, including capital expenditures. (See Note 6 – Long-Term Debt.)
The Liquid Yield Option™ Notes and the Zero Coupon Convertible Notes are zero coupon
bonds with yields to maturity of 4.875% and 4.75%, respectively, due 2021. Each Liquid Yield
Option™ Note and Zero Coupon Convertible Note was issued at a price of $381.63 and
$391.06, respectively, and will have a principal amount at maturity of $1,000. The Liquid Yield
Option™ Notes and Zero Coupon Convertible Notes are convertible at the option of the hold-
er into 17.7 million and 13.8 million shares of common stock, respectively, if the market price
of our common stock reaches certain levels. These conditions were not met at December 31,
2002 for the Liquid Yield Option™ Notes or the Zero Coupon Convertible Notes and therefore,
the shares issuable upon conversion are not included in the earnings per share calculation.
We may redeem the Liquid Yield Option™ Notes beginning on February 2, 2005, and the Zero
Coupon Convertible Notes beginning on May 18, 2006, at their accreted values for cash as a
whole at any time, or from time to time in part. Holders may require us to purchase any out-
standing Liquid Yield Option™ Notes at their accreted value on February 2, 2005 and February
2, 2011 and any outstanding Zero Coupon Convertible Notes at their accreted value on May
18, 2004, May 18, 2009, and May 18, 2014. We may choose to 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.