Royal Caribbean Cruise Lines 2004 Annual Report Download

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ROYAL CARIBBEAN CRUISES LTD.
annual report 2004

Table of contents

  • Page 1
    ROYAL CARIBBEAN CRUISES LTD. annual report 2004

  • Page 2
    ... Royal Caribbean Cruises Ltd. ADAM GOLDSTEIN President Royal Caribbean International DANIEL J. HANRAHAN President Celebrity Cruises LUIS E. LEON Executive Vice President & Chief Financial Officer Royal Caribbean Cruises Ltd. BRIAN J. RICE Executive Vice President, Revenue Performance Royal Caribbean...

  • Page 3
    ... passengers in 2004. We have three Freedom-class ships on order for an additional capacity of approximately 10,800 berths with scheduled deliveries in 2006, 2007 and 2008. Our common stock is listed on the New York Stock Exchange and the Oslo Stock Exchange under the symbol RCL. Our headquarters...

  • Page 4
    ... per share. Other milestones achieved in 2004 are equally noteworthy: • Royal Caribbean International and Celebrity Cruises served 3.4 million guests, up from 3.0 million in 2003. • Occupancy reached 105.7%, up from 103.2% in 2003, reaching a historic high. • Driven by a 10.3% increase in...

  • Page 5
    ... to change our fundamental business model. adding substantial revenue without adding commensurate costs. A renovated and renamed Empress of the Seas (formerly Nordic Empress) received a royal welcome in May at our newest cruise port, Cape Liberty, in Bayonne, N.J. And our oldest ship in the fleet...

  • Page 6
    ...passengers looking out their windows in Boston and New York City saw the innovative spots appear as a moving filmstrip. Royal Caribbean earned its share of accolades in 2004. The brand's numerous awards included being named the Best Overall Cruise Line in Travel Weekly's annual poll of travel agents...

  • Page 7
    ... sales teams for Royal Caribbean and Celebrity to better communicate each brand's distinctive qualities to our trade partners and guests. We also are increasing the level of local sales support for our travel partners. In December, we rolled out a new home-based portal on the CruisingPower.com web...

  • Page 8
    ...Royal Caribbean's Serenade of the Seas. Our remaining ships and newbuilds are being outfitted with AWP systems as quickly as practical. Hanrahan have assumed the positions of president of Royal Caribbean International and Celebrity Cruises, respectively. I have every confidence that they will build...

  • Page 9
    ... Management's Report on Internal Control Over Financial Reporting 18 Report of Independent Registered Public Accounting Firm 19 Consolidated Statements of Operations 20 Consolidated Balance Sheets 21 Consolidated Statements of Cash Flows 22 Consolidated Statements of Shareholders' Equity...

  • Page 10
    ...impact of changes in other laws and regulations affecting our business, • the impact of pending or threatened litigation, • the delivery of scheduled new ships, • emergency ship repairs, • negative incidents involving cruise ships including those involving the health and safety of passengers...

  • Page 11
    ..., operating costs, marketing, selling and administrative expenses, interest rates, ship additions and retirements, cruise vacation industry competition and general economic and business conditions, among other factors. Goodwill is reviewed annually or whenever events or changes in circumstances...

  • Page 12
    ...air and other transportation expenses, port costs that vary with passenger head counts and related credit card fees. Onboard and other expenses consist of the direct costs associated with onboard and other revenues. These costs include the cost of products sold onboard our ships, vacation protection...

  • Page 13
    ... 31, 2004 Passenger ticket revenues Onboard and other revenues Total revenues Cruise operating expenses Commissions, transportation and other Onboard and other Payroll and related Food Other operating Total cruise operating expenses Marketing, selling and administrative expenses Depreciation and...

  • Page 14
    ...Board ("FASB") issued Statement of Financial Accounting Standards No. 123 (revised 2004), "Share-Based Payment," ("SFAS 123R"). SFAS 123R requires the measurement and recognition of compensation expense at the fair value of employee stock awards, except for employee share purchase plans if they meet...

  • Page 15
    .... In addition, advertising costs increased primarily due to an increase in television media spending and the launch of the Cirque du Soleil and Xpeditions marketing campaigns for Celebrity Cruises. The increase in port expenses was primarily attributed to itinerary changes. In 2004, we incurred...

  • Page 16
    ... of the Seas lease payments and new initiatives associated with the Celebrity Cruises marketing campaign. The change in the concession arrangement resulted in higher payroll and related expenses and onboard and other expenses, partially offset by a decrease in food costs. Fuel costs as a percentage...

  • Page 17
    ... 2, 2011, respectively. These accreted values were calculated based on the number of notes outstanding at December 31, 2004. We may choose to pay any amounts in cash or common stock or a combination thereof. (3) We are obligated under noncancelable operating leases primarily for a ship, offices...

  • Page 18
    ... 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...

  • Page 19
    ... risk for changes in fuel prices relates to the consumption of fuel on our ships. Fuel cost, as a percentage of our total revenues, was approximately 5.5% in 2004, 5.2% in 2003 and 4.5% in 2002. Historically, we have used fuel swap agreements and zero cost collars to mitigate the financial impact of...

  • Page 20
    ... is to express an opinion on these financial statements based on our audits. We conducted our audits of these statements in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain...

  • Page 21
    ...Passenger ticket revenues Onboard and other revenues Total revenues Cruise operating expenses Commissions, transportation and other Onboard and other Payroll and related Food Other operating Total cruise operating expenses Marketing, selling and administrative expenses... financial statements. $ ,474...

  • Page 22
    ... liabilities Current portion of long-term debt Accounts payable Accrued expenses and other liabilities Customer deposits Total current liabilities Long-term debt Other long-term liabilities Commitments and contingencies (Note 12) Shareholders' equity Common stock ($.01 par value; 500,000,000 shares...

  • Page 23
    CONSOLIDATED STATEMENTS OF CASH FLOWS Year Ended December 31, (in thousands) 2004 2003 2002 Operating Activities Net income Adjustments: Depreciation and amortization Accretion of original issue discount on debt Changes in operating assets and liabilities: (Increase) decrease in trade and other...

  • Page 24
    ... Earnings Accumulated Other Comprehensive Income (Loss) Treasury Stock Total Shareholders' Equity Balances at January 1, 2002 Issuance under employee related plans Common stock dividends Changes related to cash flow derivative hedges Net income $ 1,923 7 - - - $ 2,045,904 7,745 - - - $ 1,731...

  • Page 25
    ... 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 19 and 10 cruise ships, respectively, at December 31, 2004. Our ships operate on a selection of worldwide...

  • Page 26
    ...is not highly effective as a hedge, changes in fair value of the derivatives are recognized in earnings immediately. FOREIGN CURRENCY TRANSACTIONS Year Ended December 31, 2004 Net income, as reported Deduct: Total stock-based employee compensation expense determined under fair value method for all...

  • Page 27
    ... Board ("APB") Opinion No. 25, "Accounting for Stock Issued to Employees," and amends SFAS No. 95, "Statement of Cash Flows." SFAS 123R requires the measurement and recognition of compensation expense at fair value of employee stock awards, except for employee share purchase plans if they meet...

  • 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 $7.2 million, $15.9 million and $23.4 million for the years 2004, 2003 and 2002, respectively. Accumulated amortization related to ships...

  • Page 29
    ... stock. Offerings to employees are made on a quarterly 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...

  • Page 30
    ... 2000 Stock Award Plan provides for the issuance, in addition to nonqualifed stock options, of (i) incentive stock options, (ii) stock appreciation rights, (iii) restricted stock, (iv) restricted stock units and (v) performance shares. We awarded 331,756 and 14,025 restricted stock units in 2004 and...

  • Page 31
    ...exempt from United States corporate tax on income from the international operation of ships pursuant to Section 883 of the Internal Revenue Code. Income tax expense related to our remaining subsidiaries was not significant for the years ended December 31, 2004, 2003 and 2002. Final regulations under...

  • Page 32
    ...in fuel prices relates to the forecasted consumption of fuel on our ships. Historically, we have used fuel swap and zero cost collar agreements to mitigate the impact of fluctuations in fuel prices. As of December 31, 2004 and 2003, we had fuel swap agreements, designated as cash flow hedges, to pay...

  • Page 33
    ...the exchange rate at December 31, 2004, if the lease is canceled in 2012. NOTE 13. RELATED PARTIES A. Wilhelmsen AS. and Cruise Associates collectively own approximately 37.8% of our common stock and are parties to a shareholders' agreement which provides that our board of directors will consist of...

  • Page 34
    ... quarter of 2004. SELECTED FINANCIAL DATA The selected consolidated financial data presented below for the years 2000 through 2004 and as of the end of each such year, are derived from our audited financial statements and should be read in conjunction with those financial statements and the related...

  • Page 35
    ... report on Form 10-K, quarterly financial reports, press releases and corporate governance documents through our Investor Relations website at www.rclinvestor.com or by contacting the Investor Relations Department at our corporate headquarters. Our chief executive officer and chief financial officer...