Royal Caribbean Cruise Lines 2009 Annual Report Download

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Royal Caribbean Cruises Ltd.
2009 Annual Report

Table of contents

  • Page 1
    Royal Caribbean Cruises Ltd. 2009 Annual Report

  • Page 2
    ..., swimming pools, sun decks, beauty salons, exercise and spa facilities, ice skating rinks, in-line skating, basketball courts, rock climbing walls, miniature golf courses, gaming facilities, lounges, bars, Las Vegas-style entertainment, cinemas and Royal Promenades, which include interior shopping...

  • Page 3
    ... of a change in accounting principle Shareholders' Equity $ $ millions 88 $ 295 89 $ 348 90 $ 400 91 $ 404 92 $ 464 93 $ 733 94 $ 846 95 $ 965 96 $1,085 97 $2,019 98 $2,455 99 $3,261 00 $3,616 01 $3,757 02 $4,035 03 $4,263 04 $4,805 05 $5,554 Royal Caribbean Cruises Ltd. 1

  • Page 4
    ... operating theaters. Long-term, Pullmantur remains a strong strategic fit for our brand portfolio, but we expect that 2010 will bring only marginal improvement in this segment of our business. More broadly, we still have a long way to go in achieving an acceptable return profile for our investors...

  • Page 5
    ... the future. otherwise. Europeans cruised Europe and North Americans cruised the Caribbean. Second, the growing global appeal of our product is bringing new guests into cruising. The cruise secret is out beyond North America and the value, quality and caliber of vacation that we offer is gaining...

  • Page 6
    ... onboard its five ships, which visit the Mediterranean, Baltic, Caribbean, Mexico, and South America. Acquired by Royal Caribbean Cruises Ltd. in 2006, the company also provides tour operations in Europe and Africa and operates three aircraft. www.pullmanturcruises.com Azamara Club Cruises...

  • Page 7
    ... (Address of principal executive offices) (zip code) (305) 539-6000 (Registrant's telephone number, including area code) Securities registered pursuant to Section 12(b) of the Act: Title of each class Name of each exchange on which registered Common Stock, par value $.01 per share New York Stock...

  • Page 8
    ... as of the last business day of the registrant's most recently completed second fiscal quarter. There were 214,178,302 shares of common stock outstanding as of February 12, 2010. DOCUMENTS INCORPORATED BY REFERENCE The information required under Part III of this report is incorporated herein by...

  • Page 9
    ... Information Directors, Executive Officers and Corporate Governance Executive Compensation Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters Certain Relationships and Related Transactions, and Director Independence Principal Accountant Fees and Services...

  • Page 10
    ..., offering cruise itineraries that range from two to 18 nights. Royal Caribbean International offers a variety of itineraries to destinations worldwide, including Alaska, Asia, Australia, Bermuda, Canada, the Caribbean, Europe, Hawaii, Latin America, the Middle East, the Panama Canal and New Zealand...

  • Page 11
    ...shopping, and dining and entertainment venues. Pullmantur's tour operations sell land-based travel packages to Spanish guests including hotels and flights primarily to Caribbean resorts, and land-based tour packages to Europe aimed at Latin American guests. Azamara Club Cruises In 2009, Azamara Club...

  • Page 12
    ... high level of service. Azamara Club Cruises sails in Asia, Western & Northern Europe, the Mediterranean, the Panama Canal and the less-traveled islands of the Caribbean, with more overnight and late-night stays in every region. Azamara Club Cruises offers a wide array of onboard services, amenities...

  • Page 13
    ...have itineraries that call on destinations in Alaska, Asia, Australia, the Bahamas, Bermuda, California, Canada, the Caribbean, Europe, the Galapagos Islands, Hawaii, Mexico, the Middle East, New England, New Zealand, the Panama Canal and South America. In an effort to penetrate untapped markets and...

  • Page 14
    ...cruise vacations. For instance, in 2008, Royal Caribbean International launched a new brand campaign, "The Nation of Why Not." This brand campaign highlights Royal Caribbean International's global destinations and innovative onboard amenities. Royal Caribbean International's communication strategies...

  • Page 15
    ... Club Cruises with several marketing campaigns and through other channels. Azamara Club Cruises' marketing mix includes extensive online marketing, print advertising in key travel magazines, trade advertising, as well as extensive collaboration with up-market travel agents in such areas as training...

  • Page 16
    ... services and other amenities. The launch of the Freedom-class ships also introduced several new experiences to cruising, including a surf simulator and an interactive water park called the H2O ZoneTM . Royal Caribbean International took delivery of a second Freedom-class ship, Liberty of the Seas...

  • Page 17
    ... to Bermuda and Canada. Azamara Club Cruises will continue to offer sailings in Western & Northern Europe, Asia, the Mediterranean, the Panama Canal and the less-traveled islands of the Caribbean. Also, Pullmantur and CDF Croisières de France will continue to offer European itineraries on all ships...

  • Page 18
    ...000 in 2005 to approximately 1.5 million in 2009. We sell and market our global brands, Royal Caribbean International, Celebrity Cruises and Azamara Club Cruises, to passengers outside of North America through our offices in the United Kingdom, Germany, Norway, Italy, Spain, Singapore, China, Brazil...

  • Page 19
    ... booking spa & beverage packages in advance. We also deployed major system enhancements to support innovative new programs, including Choice Air, "My Time Dining" and "Celebrity Select Dining". Travel Agency Support and Direct Business Travel agencies generate the majority of bookings for our ships...

  • Page 20
    ... vacation planners in our call centers in Miramar, Florida, Wichita, Kansas and Addlestone, England offering cruise planning expertise and personal attention for direct bookings. Direct booking channels for Royal Caribbean International, Celebrity Cruises and Azamara Club Cruises are available...

  • Page 21
    ... Asia Bahamas Bahamas Europe, Caribbean Europe, Caribbean Eastern Caribbean Caribbean, Europe, Panama Canal Southern Caribbean, Bermuda, Canada/New England Alaska, Panama Canal, South America Southern Caribbean, Panama Canal, Alaska Alaska, Panama Canal, Bahamas, Eastern Caribbean Western Caribbean...

  • Page 22
    ... 700 Europe, Caribbean, Panama Canal 700 Europe, Asia 750 Mediterranean, Caribbean 92,300 2 3 4 5 6 7 8 9 The year a ship entered or will enter service refers to the year in which the ship commenced cruise revenue operations for the Company, which is the same as the year the ship was built...

  • Page 23
    ...planned number of berths are as follows: Ship Expected to Enter Service Approximate Berths Royal Caribbean International: Oasis-class: Allure of the Seas Celebrity Cruises: Solstice-class: Celebrity Eclipse Celebrity Silhouette Unnamed 4th Quarter 2010 2nd Quarter 2010 3rd Quarter 2011 4th Quarter...

  • Page 24
    ...hotel packages to our Royal Caribbean International, Celebrity Cruises and Azamara Club Cruises guests. We also offer escorted, premium land-tour vacation packages in Alaska, Asia, Australia, the Canadian Rockies, Europe, New Zealand and Latin America. These escorted, premium land-tour vacations are...

  • Page 25
    ...can be given that affordable and secure insurance markets will be available to provide the level of coverage required under the 2002 Protocol. Trademarks We own a number of registered trademarks related to the Royal Caribbean International, Celebrity Cruises, Pullmantur and CDF Croisières de France...

  • Page 26
    ... international compliance certificates relating to oil, sewage and air pollution prevention for all of our ships. On January 1, 2010, a European Union directive regarding the use of low sulfur fuels for ships became effective. The directive places a 0.1% sulfur content limit on all marine fuels used...

  • Page 27
    ... the operator of Celebrity Cruises and Azamara Club Cruises, are foreign corporations engaged in a trade or business in the United States, and our ship-owning subsidiaries are foreign corporations that, in many cases, depending upon the itineraries of their ships, receive income from sources within...

  • Page 28
    ... the Internal Revenue Service to be incidental to the international operation of ships. The activities listed in the regulations as not being incidental to the international operation of ships include income from the sale of air and land transportation, shore excursions and pre- and postcruise tours...

  • Page 29
    .... conduct a trade or business in the United States, we and Celebrity Cruises Inc. would be taxable at regular corporate rates on our separate company taxable income (i.e., without regard to the income of our ship-owning subsidiaries), from United States sources, which includes 100% of income, if any...

  • Page 30
    ...of positions with Ford Motor Company in Spain and in the United Kingdom, including Pan-European Fleet Business Manager of Ford of Europe, Ltd. Lawrence Pimentel has served as President and Chief Executive Officer of Azamara Club Cruises since July 2009. From 2001 until January 2009, Mr. Pimentel was...

  • Page 31
    .... In such capacity, Mr. Rice was responsible for revenue management, air/sea, groups, international operations, decision support, reservations and customer service for both Royal Caribbean International and Celebrity Cruises. As part of his responsibilities, Mr. Rice oversees revenue performance...

  • Page 32
    ... and tours. We face significant competition from other cruise lines on the basis of cruise pricing, travel agent preference and also in terms of the nature of ships and services we offer to passengers. Our principal competitors within the cruise vacation industry include Carnival Corporation & plc...

  • Page 33
    ... conditions and risk of increases in duties and taxes as well as changes in laws and policies affecting cruising, vacation or maritime businesses, or governing the operations of foreign-based companies. Additional risks include currency fluctuations, interest rate movements, imposition of trade...

  • Page 34
    ... of our ports of call or on the availability of shore excursion and other service providers at such ports could adversely affect our results of operations. Price increases for commercial airline service for our passengers or major changes or reduction in commercial airline service could adversely...

  • Page 35
    ...results of operations. A change in our tax status under the United States Internal Revenue Code, or other jurisdictions, may have adverse effects on our income . We and a number of our subsidiaries are foreign corporations that derive income from a United States trade or business and/or from sources...

  • Page 36
    ...feet from Miami-Dade County, Florida, under long-term leases with initial terms expiring in various years on and after 2011. We also lease offices to administer our Royal Caribbean International, Celebrity Cruises' and Azamara Club Cruises' operations internationally, including offices in Addlestone...

  • Page 37
    ... violation of Florida or Federal anti-trust laws in connection with the imposition of supplemental charges for fuel implemented by a number of cruise lines. The Attorney General sought and received documentary information from the Company. In February 2010, the Company was informed that the Attorney...

  • Page 38
    ...Fine Art LLC, doing business as Park West At Sea (together, "Park West"), and other named and unnamed parties, including Royal Caribbean Cruises Ltd. and Celebrity Cruises Inc. and other unaffiliated cruise line companies. The actions are being brought on behalf of purchasers of artwork at shipboard...

  • Page 39
    ... Related Stockholder Matters and Issuer Purchases of Equity Securities Market Information Our common stock is listed on the New York Stock Exchange ("NYSE") and the Oslo Stock Exchange ("OSE") under the symbol "RCL". The table below sets forth the high and low prices of our common stock as reported...

  • Page 40
    ..., based on performance of the Company's common stock with the performance of the Standard & Poor's 500 Composite Stock Index and the Dow Jones United States Travel and Leisure Index for a five year period by measuring the changes in common stock prices from December 31, 2004 to December 31, 2009. 30

  • Page 41
    .../07 12/08 12/09 Royal Caribbean Cruises Ltd. S&P 500 Dow Jones United States Travel & Leisure $100.00 $100.00 $100.00 $ 83.79 $104.91 $101.64 $ 78.11 $121.48 $124.45 $ 81.29 $128.16 $122.70 $26.74 $80.74 $79.59 $ 49.16 $102.11 $104.25 The stock performance graph assumes for comparison...

  • Page 42
    ... and the related notes. (Amounts include Pullmantur effective January 1, 2007). 2009 Year Ended December 31, 2008 2007 2006 (in thousands, except per share data) 2005 Operating Data: Total revenues Operating income Income before cumulative effect of a change in accounting principle Cumulative...

  • Page 43
    ...or changes in tax, environmental, health, safety, security and other laws and regulations affecting our business or our principal shareholders, pending or threatened litigation, enforcement actions, fines or penalties, the impact of delayed or cancelled ship orders, emergency ship repairs, including...

  • Page 44
    ...the straight-line method over estimated service lives of primarily 30 years. Our service life and residual value estimates take into consideration the impact of anticipated technological changes, long-term cruise and vacation market conditions and historical useful lives of similarly-built ships. In...

  • Page 45
    ..., selling and administrative expenses, interest rates, cruise vacation industry competition and general economic and business conditions, among other factors. Quoted market prices are often not available for individual reporting units and for indefinite-life intangible assets. Accordingly, we base...

  • Page 46
    ... our annual impairment review for goodwill during the fourth quarter of 2009. We determined the fair value of our two reporting units which include goodwill, Royal Caribbean International and Pullmantur, using a probability-weighted discounted cash flow model. The principal assumptions used in...

  • Page 47
    ... from the sale of goods and/or services onboard our ships not included in passenger ticket prices, cancellation fees, sales of vacation protection insurance, pre- and post-cruise tours, Pullmantur's land-based tours and hotel and air packages. Also included are revenues we receive from independent...

  • Page 48
    ... consist of the direct costs associated with onboard and other revenues. These costs include the cost of products sold onboard our ships, vacation protection insurance premiums, costs associated with pre- and post-cruise tours and related credit card fees. These costs also include minimal costs...

  • Page 49
    ... of new cost-containment initiatives including the renegotiation of long-term contracts with our vendors and a detailed emphasis on cost control. In addition, our Solstice and Oasis-class ships provide us with cost efficiencies through their scale and fuel efficiencies. We expect our 2010 Net Cruise...

  • Page 50
    ... credit facility. We took delivery of Celebrity Equinox , the second Solstice-class ship for Celebrity Cruises. To finance the purchase, we drew in full $524.5 million of an unsecured term loan. We took delivery of Oasis of the Seas, the first Oasis-class ship for Royal Caribbean International...

  • Page 51
    ... three years: Year Ended December 31, 2009 2008 2007 Passenger ticket revenues Onboard and other revenues Total revenues Cruise operating expenses Commissions, transportation and other Onboard and other Payroll and related Food Fuel Other operating Total cruise operating expenses Marketing, selling...

  • Page 52
    ...and costs per APCD): 2009 Year Ended December 31, 2008 2007 Total cruise operating expenses Marketing, selling and administrative expenses Gross Cruise Costs Less: Commissions, transportation and other Onboard and other Net Cruise Costs APCD Gross Cruise Costs per APCD Net Cruise Costs per APCD Net...

  • Page 53
    ... in a change in our fuel expenses of approximately $34.0 million for the full year 2010, after taking into account existing hedges. We expected a 11.4% increase in capacity in 2010, primarily driven by a full year of Oasis of the Seas, which entered service in December 2009, a full year of Celebrity...

  • Page 54
    ...a result of discounted ticket prices, a decrease in air expense due to a reduction in guests booking air service through us, a decrease in transportation and lodging expenses related to certain itinerary changes, and the impact of the stronger United States dollar against the euro, British pound and...

  • Page 55
    ... discounts on our ticket prices, the decrease in onboard spending, a stronger United States dollar compared to the euro, British pound and Canadian dollar as well as the impact of the itinerary modifications and diminished demand for our cruises and tours to Mexico and the Caribbean as mentioned...

  • Page 56
    ... in the case against Pentair Water Treatment (OH) Company (formerly known as Essef Corporation). These increases were partially offset by a gain of $18.5 million in 2007 related to certain derivatives instruments associated with our ship construction firm commitments denominated in euros that did...

  • Page 57
    ... capital leases, including a pre-payment of approximately $100.0 million to retire our unsecured term loan, LIBOR plus 1.38%, due November 2010. This change was offset by an increase in debt issuance costs of $37.3 million primarily related to the Oasis of the Seas and Celebrity Equinox financings...

  • Page 58
    ... Our future capital commitments consist primarily of new ship orders. As of December 31, 2009, we had one Oasis-class ship designated for Royal Caribbean International and three Solstice-class ships, designated for Celebrity Cruises, on order for an aggregate additional capacity of approximately...

  • Page 59
    ... of cash from related bookings. In addition, we finance the purchase of our ships through long-term debt instruments of which the current portion of these instruments increases our working capital deficit. The current portion of long-term debt increased from $471.9 million as of December 31, 2008 to...

  • Page 60
    ... and will consider further newbuild orders as market conditions warrant; however, if a newbuild order were to be placed in the near term, a new delivery would not arrive before 2013. We anticipate that our cash flows from operations, our current available credit facilities and our current financing...

  • Page 61
    ... Foreign Currency Exchange Rate Risk for further information). The estimated fair value of our long-term fixed rate debt at December 31, 2009, was $5.1 billion using quoted market prices, where available, or using the present value of expected future cash flows which incorporates risk profile. The...

  • Page 62
    ...us to an increasing level of foreign currency exchange risk. Movements in foreign currency exchange rates may affect the translated value of our earnings and cash flows associated with our international operations. Fuel Price Risk Our exposure to market risk for changes in fuel prices relates to the...

  • Page 63
    ... 31, 2009 has been audited by PricewaterhouseCoopers LLP, the independent registered certified public accounting firm that audited our consolidated financial statements included in this Annual Report on Form 10-K, as stated in their report, which is included on page F-2. Changes in Internal Controls...

  • Page 64
    ... the Securities and Exchange Commission not later than 120 days after the close of the fiscal year, except that the information concerning the executive officers called for by Item 401(b) of Regulation S-K is included in Part I of this Annual Report on Form 10-K. We have adopted a Code of Business...

  • Page 65
    ... Statements and Supplementary Data and are included beginning on page F-1 of this report. (2) Financial Statement Schedules None. (3) Exhibits The exhibits listed on the accompanying Index to Exhibits are filed or incorporated by reference as part of this Annual Report on Form 10-K and such Index...

  • Page 66
    ... authorized. ROYAL CARIBBEAN CRUISES LTD. (Registrant) By: /S/ BRIAN J. RICE Brian J. Rice Executive Vice President and Chief Financial Officer (Principal Financial Officer) February 23, 2010 Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by...

  • Page 67
    Eyal M. Ofer Director /S/ * THOMAS J. Thomas J. Pritzker Director /S/ * WILLIAM William K. Reilly Director /S/ * BERNT Bernt Reitan Director PRITZKER K. REILLY R EITAN /S/ * A RNE A LEXANDER Arne Alexander Wilhelmsen Director *By: /S/ 57 W ILHELMSEN BRIAN J. RICE Brian J. Rice, as Attorney-...

  • Page 68
    ... dated as of July 15, 1994 between the Company, as issuer, and The Bank of New York Trust Company, N.A., successor to NationsBank of Georgia, National Association, as Trustee (incorporated by reference to Exhibit 2.4 to the Company's 1994 Annual Report on Form 20-F filed with the Commission, File...

  • Page 69
    ... 25, 2007 among the Company, as issuer, The Bank of New York, as trustee, transfer agent, principal paying agent and security registrar, and AIB/BNY Fund Management (Ireland) Limited, as Irish paying agent (incorporated by reference to Exhibit 10.1 to the Company's Current Report on Form 8-K filed...

  • Page 70
    ... the Commission on May 13, 2009 and Exhibit 10.1 to the Company's Quarterly Report on Form 10-Q for the quarterly period ended September 30, 2009 filed with the Commission). - Credit Agreement dated as of November 26, 2009 among Celebrity Eclipse Inc., KfW IPEX-Bank GmbH, as agent for Euler Hermes...

  • Page 71
    ...Plan Restricted Stock Unit Agreement (incorporated by reference to Exhibit 10.36 to the Company's 2007 Annual Report on Form 10-K filed with the Commission). - Royal Caribbean Cruises Ltd. 2008 Equity Incentive Plan (incorporated by reference to Exhibit 10.1 to the Company's Quarterly Report on Form...

  • Page 72
    ... Commission and Exhibit 10.34 to the Company's 2008 Annual Report on Form 10-K filed with the Commission). - Royal Caribbean Cruises Ltd. Executive Short-Term Bonus Plan dated as of September 12, 2008 (incorporated by reference to Exhibit 10.2 to the Company's Quarterly Report on Form 10-Q for the...

  • Page 73
    ....1 - List of Subsidiaries. - Consent of PricewaterhouseCoopers LLP, an independent registered certified public accounting firm. - Consent of Drinker Biddle & Reath LLP. - Power of Attorney - Certification of Richard D. Fain required by Rule 13a-14(a) or Rule 15d-14(a) of the Securities Exchange Act...

  • Page 74
    ROYAL CARIBBEAN CRUISES LTD. INDEX TO CONSOLIDATED FINANCIAL STATEMENTS Page Report of Independent Registered Certified Public Accounting Firm Consolidated Statements of Operations Consolidated Balance Sheets Consolidated Statements of Cash Flows Consolidated Statements of Shareholders' Equity ...

  • Page 75
    ... of Royal Caribbean Cruises, Ltd. and its subsidiaries at December 31, 2009 and 2008, and the results of their operations and their cash flows for each of the three years in the period ended December 31, 2009 in conformity with accounting principles generally accepted in the United States of America...

  • Page 76
    ROYAL CARIBBEAN CRUISES LTD. CONSOLIDATED STATEMENTS OF OPERATIONS Year Ended December 31, 2009 2008 2007 (in thousands, except per share data) Passenger ticket revenues Onboard and other revenues Total revenues Cruise operating expenses: Commissions, transportation and other Onboard and other ...

  • Page 77
    ... Accounts payable Accrued interest Accrued expenses and other liabilities Customer deposits Hedged firm commitments Total current liabilities Long-term debt Other long-term liabilities Commitments and contingencies (Note 14) Shareholders' equity Preferred stock ($0.01 par value; 20,000,000 shares...

  • Page 78
    ROYAL CARIBBEAN CRUISES LTD. CONSOLIDATED STATEMENTS OF CASH FLOWS 2009 Year Ended December 31, 2008 (in thousands) 2007 Operating Activities Net income Adjustments: Depreciation and amortization Changes in operating assets and liabilities: (Increase) decrease in trade and other receivables, net ...

  • Page 79
    ... stock dividends Changes related to cash flow derivative hedges Change in defined benefit plans Foreign currency translation adjustments Net income Balances at December 31, 2008 Issuance under employee related plans Distribution of Rabbi Trust shares Changes related to cash flow derivative hedges...

  • Page 80
    ... of Business We are a global cruise company. We own five cruise brands, Royal Caribbean International, Celebrity Cruises, Pullmantur, Azamara Club Cruises, and CDF Croisières de France with a combined total of 38 ships at December 31, 2009. Our ships operate on a selection of worldwide itineraries...

  • Page 81
    ... leasehold improvements is computed using the shorter of the lease term or related asset life. (See Note 5. Property and Equipment.) We review long-lived assets for impairment whenever events or changes in circumstances indicate, based on estimated undiscounted future cash flows, that the carrying...

  • Page 82
    ..., $100.0 million and $99.0 million for the years 2009, 2008 and 2007, respectively. Derivative Instruments We enter into various forward, swap and option contracts to manage our interest rate exposure and to limit our exposure to fluctuations in foreign currency exchange rates and fuel prices. These...

  • Page 83
    ...brands, Royal Caribbean International, Celebrity Cruises, Pullmantur, Azamara Club Cruises and CDF Croisières de France. The brands have been aggregated as a single reportable segment based on the similarity of their economic characteristics as well as products and services provided. Information by...

  • Page 84
    ... conditions for reporting a transfer of a portion of a financial asset as a sale, clarifies other sale-accounting criteria, and changes the initial measurement of a transferor's interest in transferred financial assets. This guidance will be effective for our fiscal year 2010 interim and annual...

  • Page 85
    ...127 $792,373 We performed our annual impairment review for goodwill during the fourth quarter of 2009. We determined the fair value of our two reporting units which include goodwill, Royal Caribbean International and Pullmantur, using a probability-weighted discounted cash flow model. The principal...

  • Page 86
    ...-life intangible asset - Pullmantur trademarks and trade names Foreign currency translation adjustment Total $235,610 5,953 $241,563 $246,014 (10,404) $235,610 We performed the annual impairment review of our trademarks and trade names during the fourth quarter of 2009 using a discounted cash...

  • Page 87
    ... million to serve as its first ship, which began sailing in May 2009. Concurrently with entering into the agreement to sell Celebrity Galaxy, we executed certain forward exchange contracts to lock in the sales price at approximately $315.0 million. Due to the related party nature of this transaction...

  • Page 88
    ...During 2009, we entered into a credit agreement based on terms originally agreed to in August 2006 providing financing for Celebrity Eclipse, which is scheduled for delivery in the second quarter of 2010. The credit agreement provides for an unsecured term loan for up to 80% of the purchase price of...

  • Page 89
    ... are subject to customary funding conditions. During 2009, we entered into a credit agreement based on terms originally agreed to in June 2007 providing financing for Celebrity Silhouette which is scheduled for delivery in the third quarter of 2011. The credit agreement provides for an unsecured...

  • Page 90
    ... 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 period and the last business day of each month of the purchase period. Shares of common stock of 65,005, 36,836 and 20,759 were issued under...

  • Page 91
    ROYAL CARIBBEAN CRUISES LTD. NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS-(Continued) Stock options activity and information about stock options outstanding are summarized in the following tables: WeightedAverage Exercise Price WeightedAverage Remaining Contractual Term (years) Stock Options ...

  • Page 92
    ... $15.1 million for the years ended December 31, 2009, 2008 and 2007, respectively. Note 12. Income Taxes We and the majority of our subsidiaries are currently exempt from United States corporate tax on United States source income from the international operation of ships pursuant to Section 883 of...

  • Page 93
    ROYAL CARIBBEAN CRUISES LTD. NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS-(Continued) Note 13. Fair Value Measurements and Derivative Instruments Fair Value Measurements The Company uses quoted prices in active markets when available to determine the fair value of its financial instruments. The ...

  • Page 94
    ...the Company. Fair value for fuel call options is derived using standard option pricing models with inputs based on the options' contract terms, such as exercise price and maturity, and data either readily available or derived from public market information, such as fuel curves, volatility levels and...

  • Page 95
    ... circumstances this option is available to us. We normally require guarantees to support new ship progress payments to shipyards. Derivative Instruments We are exposed to market risk attributable to changes in interest rates, foreign currency exchange rates and fuel prices. We manage these risks...

  • Page 96
    ...hedge accounting is discontinued, cash flows subsequent to the date of discontinuance are classified consistent with the nature of the instrument. Interest Rate Risk Our exposure to market risk for changes in interest rates relates to our long-term debt obligations including future interest payments...

  • Page 97
    ...and $204.7 million, as a hedge of our net investment in Pullmantur and TUI Cruises, respectively. Fuel Price Risk Our exposure to market risk for changes in fuel prices relates to the consumption of fuel on our ships. We use fuel swap agreements and fuel call options to mitigate the financial impact...

  • Page 98
    ... As of December 31, 2009 Balance Sheet Location Fair Value Derivatives designated as hedging instruments under FASB ASC 815-20 1 Interest rate swaps Cross currency swaps Foreign currency forward contracts Foreign currency forward contracts Fuel swaps Fuel swaps Total derivatives designated as...

  • Page 99
    ... in Income on Hedged Item Year Ended December 31, 2009 Derivatives and related Hedged Items under Subtopic 815-20 Fair Value Hedging Relationships In thousands Location of Gain (Loss) Recognized in Income on Derivative and Hedged Item Interest rate swaps Cross currency swaps Interest rate swaps...

  • Page 100
    ...31, 2009 Location of Gain (Loss) Reclassified from Accumulated OCI into Income (Effective Portion) Amount of Gain (Loss) Reclassified from Accumulated OCI into Income (Effective Portion) Year Ended December 31, 2009 Interest rate swaps $ Foreign currency forward contracts 120,867 Foreign currency...

  • Page 101
    ... 815-20 In thousands Location of Gain (Loss) Recognized in Income on Derivative Foreign exchange contracts Fuel call options Other income / (expense) Other income / (expense) $ 247 (2,538) (2,291) $ Credit Related Contingent Features Starting in 2012, our current interest rate and cross...

  • Page 102
    ...Fine Art LLC, doing business as Park West At Sea (together, "Park West"), and other named and unnamed parties, including Royal Caribbean Cruises Ltd. and Celebrity Cruises Inc. and other unaffiliated cruise line companies. The actions are being brought on behalf of purchasers of artwork at shipboard...

  • Page 103
    ... the Brilliance of the Seas operating lease, we have agreed to indemnify the lessor to the extent its after-tax return is negatively impacted by unfavorable changes in corporate tax rates, capital allowance deductions and certain unfavorable determinations which may be made by United Kingdom tax...

  • Page 104
    ...million for the years 2009, 2008 and 2007, respectively. Other 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 taxes, increased lender capital...

  • Page 105
    ROYAL CARIBBEAN CRUISES LTD. NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS-(Continued) Note 16. Subsequent Events We evaluated subsequent events through February 23, 2010, the date our financial statements were issued. F-32

  • Page 106
    ... during 2007 and 2008 due to an error in data embedded in the interest rate swap valuation software we use. The third quarter of 2009 included a $12.3 million adjustment representing the cumulative reduction in a deferred tax liability due to the change in Spanish statutory tax rates enacted in 2006...

  • Page 107
    ... own the Royal Caribbean Cruises Ltd. stock at time of sailing. Onboard credit is calculated in US dollars except on sailings where the onboard currency used is a foreign currency (in which case the onboard credit will be converted at a currency exchange rate determined by the cruise line) and is...

  • Page 108
    ... Code of Business Conduct and Ethics are available at www.rclinvestor.com. ADDITIONAL INFORMATION You also may obtain copies of our annual report on Form 10-K, quarterly financial reports, press releases and corporate governance documents free of charge through our Investor Relations website at www...

  • Page 109
    ... Our vision is to empower and enable our Em ployees to deliver the best vacation experience to our Guest s, thereby generating superior returns to our S har eholder s and enhancing the well-being of our C om m unit ies. ROYAL CARIBBEAN CRUISES LTD. 1050 Caribbean Way, Miami, Florida 33132-2096 USA