Royal Caribbean Cruise Lines 2004 Annual Report Download - page 28

NOTE 3. TERMINATION OF PROPOSED
COMBINATION WITH P&O PRINCESS CRUISES PLC
In October 2002, our proposed combination with P&O Princess
Cruises plc (“P&O Princess”) was terminated prior to its con-
summation and P&O Princess paid us a break fee of $62.5 mil-
lion. We incurred approximately $29.5 million of merger-related
costs. The net proceeds of $33.0 million were included in other
income. We also agreed to terminate, effective as of January
1, 2003, our joint venture with P&O Princess. The venture was
terminated before it commenced business operations.
NOTE 4. PROPERTY AND EQUIPMENT
Property and equipment consists of the following (in thousands):
2004 2003
Land $7,056 $7,056
Ships 11,056,851 10,536,947
Ships under capital leases 773,562 772,986
Ships under construction 153,415 121,167
Other 415,785 365,535
12,406,669 11,803,691
Less – accumulated
depreciation and amortization (2,213,226) (1,860,196)
$10,193,443 $9,943,495
Ships under construction include progress payments for the con-
struction of new ships as well as planning, design, interest, com-
mitment 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 under capital leases was $206.5 million and
$183.3 million at December 31, 2004 and 2003, respectively.
NOTE 5. OTHER ASSETS
Wehold redeemable convertible preferred stock in First
Choice Holidays PLC denominated in British pound sterling val-
ued at approximately $300 million. The redeemable convertible
preferred stock carries a 6.75% coupon. Dividends of $24.7
million, $21.5 million and $20.3 million were earned in 2004,
2003 and 2002, respectively and recorded in other income. If
fully converted, our holding would represent approximately a
17% interest in First Choice Holidays PLC.
VARIABLE INTEREST ENTITY
We have determined that one of our minority interests, a ship repair
facility in which we invested in April 2001, is a variable interest enti-
ty; however,we arenot the primarybeneficiaryand accordingly we
do not consolidate this entity. As of December 31, 2004, our
investment in this entity including equity and loans, which is also our
maximum exposure to loss, was approximately $42 million.
NOTE 6. LONG-TERM DEBT
Long-term debt consists of the following (in thousands):
2004 2003
Unsecured revolving
credit facilities $–$ –
Unsecured senior notes
and senior debentures,
6.75% to 8.75%, due
2005 through 2013,
2018 and 2027 2,258,436 2,400,284
Liquid Yield OptionTM Notes
with yield to maturity of
4.875%, due 2021 694,316 661,640
Zero coupon convertible
notes with yield to maturity
of 4.75%, due 2021 408,484 390,535
$625 million unsecured term
loan, LIBOR plus
1.25%, due 2005 575,000 625,000
$360 million unsecured
term loan, LIBOR plus
1.0%, due 2006 360,000 360,000
$300 million unsecured
term loan, LIBOR plus 0.8%,
due 2009 through 2010 200,000 200,000
$225 million unsecured
termloan, LIBOR plus 1.75%,
due 2006 through 2012 225,000 –
Unsecured term loan, 8.0%,
due through 2006 35,694 59,919
Term loans, 7.1% to 8.0%,
due through 2010, secured
by certain Celebrity ships 225,964 308,842
Term loans, LIBOR plus 0.45%
to 1.535%, due through 2010,
secured by certain Celebrity ships 401,390 459,586
Capital lease obligations
with implicit interest rates
ranging from 6.5% to 7.2%,
due through 2011 347,660 369,998
5,731,944 5,835,804
Less – current portion (905,374) (315,232)
Long-term portion $4,826,570 $5,520,572
ROYAL CARIBBEAN CRUISES LTD.
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NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)