Royal Caribbean Cruise Lines 2002 Annual Report Download - page 23

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ROYAL CARIBBEAN CRUISES LTD.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS (continued)
In July 2000, we invested approximately $300 million 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 joint venture at a valu-
ation of $95.4 million. The contribution of Viking Serenade represented our 50% investment in
the joint venture, as well as $47.7 million in proceeds used towards the purchase price of the
convertible preferred stock.
We made principal payments totaling approximately $603.3 million, $45.6 million and $128.1
million under various term loans, senior notes, revolving credit facility and capital leases during
2002, 2001 and 2000, respectively.
During 2002, 2001 and 2000, we paid quarterly cash dividends on our common stock totaling
$100.1 million, $100.0 million and $91.3 million, respectively. In April 2000, we redeemed all
outstanding shares of our convertible preferred stock and dividends ceased to accrue. We paid
quarterly cash dividends on our convertible preferred stock totaling $3.1 million in 2000.
FUTURE COMMITMENTS
We currently have three ships on order for an additional capacity of 7,266 berths. The aggre-
gate contract price of the three ships, which excludes capitalized interest and other ancillary
costs, is approximately $1.3 billion, of which we have deposited $0.2 billion as of December 31,
2002. We anticipate that overall capital expenditures will be approximately $1.1 billion, $0.5 bil-
lion and $0.1 billion for 2003, 2004 and 2005, respectively.
We have options to purchase two additional Radiance-class ships with delivery dates in the
fourth quarters of 2005 and 2006. The options have an aggregate contract price of $0.8 billion
and expire on September 19, 2003. Under the terms of the options, the shipyard has the abili-
ty to terminate them upon providing us advance notice.
We have $5.4 billion of long-term debt of which $0.1 billion is due during the 12-month period
ending December 31, 2003. Included in Long-term debt are two ships financed with capital
leases. (See Note 6 – Long-Term Debt.)
We are obligated under noncancelable operating leases primarily for a ship, office and warehouse
facilities, computer equipment and motor vehicles. As of December 31, 2002, future minimum
lease payments under noncancelable operating leases aggregated to $413.9 million, due through
2028. We have future commitments to pay for our usage of certain port facilities, maintenance
contracts and communication services aggregating to $261.6 million, due through 2027. (See
Note 12 – Commitments and Contingencies.)
Under the
Brilliance of the Seas long-term operating lease, we have agreed to indemnify the les-
sor to the extent its after-tax return is negatively impacted by unfavorable changes in corporate
tax rates and capital allowance deductions. These indemnifications could result in an increase in
our annual lease payments. We are unable to estimate the maximum potential increase in such
lease payments due to the various circumstances, timing or combination of events that could trig-
ger such indemnifications. Current facts indicate that an indemnification is not probable; howev-
er, if one occurs, we may have remedies available to us under the terms of the lease agreement.
As a normal part of our business, depending on market conditions, 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.