Royal Caribbean Cruise Lines 2003 Annual Report Download

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ROYAL CARIBBEAN CRUISES LTD.
2003 ANNUAL REPORT

Table of contents

  • Page 1
    R O Y A L C A R I B B E A N 2 0 0 3 A N N U A L C R U I S E S R E P O R T LT D .

  • Page 2
    ...Highlights (dollars in thousands, except per share data) 2003 2002 2001 Revenues Operating Income Net Income Earnings Per Share* Shareholders' Equity ... 03 14 88 89 90 91 92 93 94 95 96 97 98 99 00 01 02 03 Revenues ($ millions) Net Income ($ millions) R O Y A L C A R I B B E A N C R U I ...

  • Page 3
    ... much intact - strong brands with rising demand, favorable demographics in age and income, high satisfaction levels, and a modern, innovative fleet. Royal Caribbean International and Celebrity Cruises served three million guests in 2003 and topped 20 million passenger cruise days for the first time...

  • Page 4
    ... our Voyager-class ships on consumers and travel agents. Monarch of the Seas while Celebrity Cruises initiated winter sailings to the Mexican Riviera with Mercury. Most significantly, we assigned our newest Voyager-class ship, Mariner of the Seas, to Port Canaveral to capitalize on Central Florida...

  • Page 5
    ...International was named by Travel Weekly as the Best Overall Cruise Line. Royal Caribbean also has been named Best Large Ship Design, Best Caribbean Itinerary, and Best Family Cruise. In the 2003 prestigious Condé Nast Readers' Choice Awards, Celebrity Cruises was selected as the Best Premium Brand...

  • Page 6
    ... announcement that Celebrity Cruises will partner with Cirque du Soleil to enhance the entertainment on the Millennium-class ships has been extremely well-received by the travel trade and our loyal guest base. We believe these marketing alliances are providing great value to our onboard products. We...

  • Page 7
    ... management team. More than 30,000 shipboard and shoreside employees of Royal Caribbean International, Celebrity Cruises, Celebrity Xpeditions, and Royal Celebrity Tours deliver our cruise vacation product daily with great skill and enthusiasm. And, we could not attract three million guests per year...

  • Page 8
    ... Executive Officer, Royal Caribbean Cruises Ltd. JACK L. WILLIAMS President and Chief Operating Officer, Royal Caribbean International & Celebrity Cruises LUIS E. LEON Executive Vice President, Chief Financial Officer, Royal Caribbean Cruises Ltd. ADAM M. GOLDSTEIN Executive Vice President, Brand...

  • Page 9
    ...Discussion and Analysis of Financial Condition and Results of Operations 18 Report of Independent Certified Public Accountants 19 Consolidated Statements of Operations 20 Consolidated Balance Sheets 21 Consolidated Statements of Cash Flows 22 Consolidated Statements of Shareholders' Equity...

  • Page 10
    ... Cruises Lines Inc. and the terms "Royal Caribbean International" and "Celebrity Cruises" refer to our two cruise brands. In accordance with cruise industry practice, the term "berths" is determined based on double occupancy per cabin even though many cabins can accommodate three or more passengers...

  • Page 11
    ... is based on quoted market prices in active markets, if available. 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...

  • Page 12
    ... per cabin multiplied by the number of cruise days for the period. Gross Cruise Costs represent total operating expenses and marketing, selling and administrative expenses. Gross Yields represent total revenues per Available Passenger Cruise Day. Net Cruise Costs represent payroll and related, food...

  • Page 13
    MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (CONTINUED) Summary We reported total revenues, operating income, net income and earnings per share as shown in the following table (in thousands, except per share data): Year Ended December 31, The following ...

  • Page 14
    ... severance costs due to a reduction in force. fuel prices, insurance expenses and port expenses (the latter associated with itinerary changes, increased occupancy levels, and other increases). Based upon year-over-year comparisons, we expected Net Cruise Costs, on an Available Passenger Cruise Day...

  • Page 15
    ... and related expenses, fuel costs, Brilliance of the Seas lease payments, marketing costs associated with the Celebrity Cruises marketing campaign and a return to more normalized spending levels, partially offset by the reduction in the litigation settlement charge and a decrease in food costs...

  • Page 16
    ... and severance costs related to a reduction in force. On a per Available Passenger Cruise Day basis, marketing, selling and administra- Net cash provided by operating activities was $857.8 million in 2003 compared to $870.5 million in 2002 and $633.7 million in 2001. The change in each year was...

  • Page 17
    ... two ships on order designated for the Royal Caribbean International fleet. We are scheduled to take delivery of Jewel of the Seas, a Radiance-class ship, in the second quarter of 2004. In September 2003, we entered into an agreement with a shipyard to purchase an Ultra-Voyager ship scheduled for...

  • Page 18
    ... that require us, among other things, to maintain minimum liquidity, net worth, and fixed charge coverage ratio and limit our debt to capital ratio. We are in compliance with all covenants as of December 31, 2003. If A. Wilhelmsen AS. and Cruise Associates, our two principal shareholders, cease...

  • Page 19
    ... fair value of our longterm fixed rate debt at December 31, 2003, excluding our Liquid Yield OptionTM Notes and zero coupon convertible notes, was $3.2 billion using quoted market prices, where available, or using discounted cash flow analyses based on market rates available to us for similar debt...

  • Page 20
    ...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, 2003 and...

  • Page 21
    CONSOLIDATED STATEMENTS OF OPERATIONS Year Ended December 31, (in thousands, except per share data) 2003 $ 2,775,055 1,009,194 3,784,249 ,684,344 ,249,537 ,426,462 ,239,483 ,781,209 2002 $2,589,942 ,844,405 3,434,347 2001 $ 2,427,944 ,717,306 3,145,250 Passenger ticket revenues Onboard and ...

  • Page 22
    ... except share data) 2003 2002 ASSETS Current Assets Cash and cash equivalents Trade and other receivables, net Inventories Prepaid expenses and other...SHAREHOLDERS' EQUITY Current Liabilities Current portion of long-term debt Accounts payable Accrued expenses and other liabilities Customer deposits...

  • Page 23
    CONSOLIDATED STATEMENTS OF CASH FLOWS Year Ended December 31, (in thousands) 2003 2002 2001 OPERATING ACTIVITIES Net income Adjustments: Depreciation and amortization Accretion of original issue discount $ 280,664 362,695 48,874 10,011 (15,978) 6,670 19,756 (3,340) 161,640 (13,189) 857,803 $ ...

  • Page 24
    ... Accumulated Other Comprehensive Income (Loss) Treasury Stock Total Shareholders' Equity Balances at January 1, 2001 Issuance under employee related plans Common stock dividends Transition adjustment SFAS No. 133 Changes related to cash flow derivative hedges Net income ,00 ,0 ,00 ,00 ,00 ,00...

  • Page 25
    ... DESCRIPTION OF BUSINESS PROPERTY AND EQUIPMENT We are a global cruise company. We operate two cruise brands, Royal Caribbean International and Celebrity Cruises, with 18 cruise ships and 9 cruise ships, respectively, at December 31, 2003. Our ships operate on a selection of worldwide itineraries...

  • Page 26
    ... each period. STOCK-BASED COMPENSATION We operate two cruise brands, Royal Caribbean International and Celebrity Cruises. The brands have been aggregated as a single operating segment based on the similarity of their economic characteristics as well as product and services provided. Information by...

  • Page 27
    ... disclosures about the assets, obligations, cash flows and net periodic benefit cost of defined benefit pension plans and other postretirement benefit plans. The new disclosures are effective for financial statements with fiscal years ending after December 15, 2003. The implementation of the revised...

  • Page 28
    ... payments for the construction of new ships as well as planning, design, interest, commitment fees and other associated costs. We capitalized interest costs of $15.9 million, $23.4 million and $37.0 million for the years 2003, 2002 and 2001, respectively. Accumulated amortization related to ships...

  • Page 29
    ... choose to pay the purchase price in cash or common stock or a combination thereof. We have a $345.8 million unsecured variable rate term loan facility due 2007 and the unsecured revolving credit facility due 2008 available to us should the holders of the zero coupon convertible notes require us to...

  • Page 30
    ...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 purchase period. Shares of common stock of 21,280, 25,649 and 33,395 were issued under the ESPP at a weighted-average price of $19.56, $17.34 and $17.69 during 2003...

  • Page 31
    ... service. Annual contributions to the plan are based on fixed percentages of participants' salaries and years of service, not to exceed certain maximums. Pension cost was $9.4 million, $8.5 million and $8.3 million for the years 2003, 2002 and 2001, respectively. The reported fair values are based...

  • Page 32
    ...related to a ship construction contract, designated as cash flow hedges, was an unrealized gain, net of option premiums, of approximately $11.2 million at December 31, 2003. INTEREST RATE SWAP AGREEMENTS The fair values of our fuel swap and zero cost collar agreements were estimated based on quoted...

  • Page 33
    ...million based on the exchange rate at December 31, 2003, if the lease is canceled at year 10. Some of the contracts that we enter into include indemnification provisions that obligate us to make payments to the counterparty if certain events occur. These contingencies generally relate to changes in...

  • Page 34
    ... Associates and our Chief Executive Officer. They have the power to determine, among other things, our policies and the policies of our subsidiaries and actions requiring shareholder approval. NOTE 14. SUBSEQUENT EVENTS On March 12, 2004, we announced the cancellation of a oneweek sailing due to...

  • Page 35
    ... Hyatt Regency, Miami, Florida. OTHER INFORMATION You can obtain copies of the Company's annual report on Form 20-F, quarterly financial reports, press releases, and corporate governance documents through our Investor Relations website at www.rclinvestor.com, or by contacting our Investor Relations...

  • Page 36
    ROYAL CARIBBEAN CRUISES LTD., 1050 CARIBBEAN WAY, MIAMI, FLORIDA 33132