Royal Caribbean Cruise Lines 2010 Annual Report Download - page 52

PART II
ROYAL CARIBBEAN CRUISES LTD. 49
method investments in 2008, for a net change of
$19.2 million when comparing these periods. This
change was primarily due to the start-up of operations
of one of our investments. The change in other income
(expense) was also due to a $17.6 million settlement
gain received in the case against Pentair Water
Treatment (OH) Company (formerly known as Essef
Corporation) during 2008 that did not recur in 2009.
These changes were offset by an out of period adjust-
ment recorded in 2009 of $12.3 million to correct an
error in our deferred tax liability. The out of period
adjustment represents the cumulative reduction to a
deferred tax liability due to the change in the enacted
Spanish statutory tax rate used to calculate the lia-
bility in 2006 which was identified during the third
quarter of 2009.
Net Yields
Net Yields decreased 14.2% in 2009 compared to
2008 primarily due to the higher 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 above.
Net Cruise Costs
Net Cruise Costs decreased 5.2% in 2009 compared
to 2008 due to a 9.8% decrease in Net Cruise Cost per
APCD offset by the 5.1% increase in capacity mentioned
above. The decrease in Net Cruise Costs per APCD
was primarily driven by the decrease in fuel expenses,
the decrease in air and tour expenses and the decrease
in marketing, selling and administrative expenses.
RECENTLY ADOPTED, AND FUTURE APPLICATION OF,
ACCOUNTING STANDARDS
Refer to Note 2. Summary of Significant Accounting
Policies to our consolidated financial statements for
further information on Recently Adopted Accounting
Standards and Future Application of Accounting
Standards.
LIQUIDITY AND CAPITAL RESOURCES
Sources and Uses of Cash
Cash flow generated from operations provides us with
a significant source of liquidity. Net cash provided by
operating activities increased $818.1 million to $1.7
billion for 2010 compared to $844.9 million for 2009.
The increase is primarily due to an increase in cash
generated from ticket sales. The increase in cash from
ticket sales is a result of higher capacity and occu-
pancy, along with cruises being purchased for higher
prices. As a result of the above factors, we received
$811.5 million more in customer deposits during 2010
as compared to 2009. The increase is also due to the
monetization of certain of our interest rate, cross
currency and fuel swap agreements during 2010 of
approximately $173.0 million. The monetization of the
interest rate and cross currency swap agreements was
done in an effort to increase our fixed rate percent-
age of debt. The monetization of our fuel swaps was
done in connection with our decision to terminate
transactions with a counterparty that no longer met
our guidelines. These increases were partially offset
by the timing of payments on our accounts payable
and prepaid expenses and other assets.
Net cash used in investing activities was $2.3 billion
for 2010, consistent with 2009. During 2010, our use
of cash was primarily related to capital expenditures
of $2.2 billion, down from $2.5 billion in 2009. The
decrease in capital expenditures during 2010 is due
to a lower level of ships under construction compared
to 2009. In 2009, we also used $181.7 million of cash
to make equity contributions to our unconsolidated
affiliates. These amounts were partially offset by
$290.9 million of proceeds received from the sale of
Celebrity Galaxy to TUI Cruises in 2009 and to $110.8
million of cash received in 2009 on settlements on
our foreign currency forward contracts compared to
$91.3 million of cash paid in 2010 on settlements on
our foreign currency forward contracts.
Net cash provided by financing activities was $757.0
million for 2010 compared to $1.3 billion in 2009. This
change was due to an increase in repayments of debt
of approximately $651.8 million partially offset by an
increase in debt proceeds of approximately $103.1 mil-
lion. The increase in repayments of debt was primarily
due to repayments of $820.0 million on our revolving
credit facilities during 2010 as compared to $375.0
million in 2009. In addition, during 2010 we repaid a
senior unsecured note due in May 2010 along with
repayments of various loan facilities related to recent
ship deliveries. The increase in debt proceeds was
due to borrowings of $715.0 million on our revolving
credit facilities during 2010 as compared to $425.0
million in 2009. This increase was partially offset by
net proceeds of $285.4 million from our $300.0 mil-
lion senior unsecured notes issued during 2009 which
did not recur in 2010. These increases were offset by
a $29.6 million increase in debt issuance costs. During
2010, we received $26.2 million in connection with the
exercise of common stock options.
FUTURE CAPITAL COMMITMENTS
Our future capital commitments consist primarily of
new ship orders. As of December 31, 2010, we had two
Solstice-class ships, designated for Celebrity Cruises,
on order for an aggregate additional capacity of