Royal Caribbean Cruise Lines 2012 Annual Report Download - page 32

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PART I
an additional impairment charge of the Pullmantur
reporting unit’s goodwill and trademarks and trade
names may be required.
We may not be able to obtain sufficient financing or
capital for our needs or may not be able to do so
on terms that are acceptable or consistent with our
expectations.
To fund our capital expenditures and scheduled debt
payments, we have historically relied on a combination
of cash flows provided by operations, drawdowns
under available credit facilities, the incurrence of addi-
tional indebtedness and the sale of equity or debt
securities in private or public securities markets. The
decrease in consumer cruise spending as a result
of the Costa Concordia incident and the economic
uncertainty in Europe had an adverse impact on our
cash flows from operations in 2012. See “—Adverse
worldwide economic, geopolitical or other conditions…”
and “—Incidents or adverse publicity concerning the
cruise vacation industry…” for more information. If
worldwide economic conditions worsen or there is
another significant incident impacting the cruise
industry, our operational cash flows could be nega-
tively affected.
Although we believe we can access sufficient liquidity
to fund our operations and obligations as expected,
there can be no assurances to that effect. During
2013, we anticipate raising additional funds in the
capital or credit markets as part of our refinancing
strategy for our upcoming 2013 and 2014 maturities.
Our ability to access additional funding as and when
needed, our ability to timely refinance and/or replace
our outstanding debt securities and credit facilities on
acceptable terms and, our cost of funding will depend
upon numerous factors including but not limited to
the vibrancy of the financial markets, our financial
performance and credit ratings and the performance
of our industry in general. See “Item 7. Management’s
Discussion & Analysis of Financial Condition and Results
of Operations—Funding Needs and Sources” for more
information.
Our inability to satisfy the covenants required by our
credit facilities could adversely impact our liquidity.
Our debt agreements contain covenants, including
covenants restricting our ability to take certain
actions and financial covenants that require us to
maintain minimum net worth and fixed charge cover-
age ratios and limit our net debt-to-capital ratio. Our
ability to comply with the terms of our outstanding
facilities may be affected by general economic condi-
tions, industry conditions and other events, some of
which may be beyond our control. In addition, our
ability to make borrowings under our available credit
facilities is subject to the absence of material adverse
changes in our business. Our ability to maintain our
credit facilities may also be impacted by changes in
our ownership base. More specifically, we may be
required to prepay a majority of our debt facilities
if (i) any person other than A. Wilhelmsen AS. and
Cruise Associates and their respective affiliates (the
“Applicable Group”) acquires ownership of more than
33% of our common stock and the Applicable Group
owns less of our common stock than such person or
(ii) subject to certain exceptions, during any 24-month
period, a majority of the Board is no longer comprised
of individuals who were members of the Board on the
first day of such period. Certain of our outstanding
debt securities also contain change of control provi-
sions that would be triggered by the acquisition of
greater than 50% of our common stock by a person
other than a member of the Applicable Group coupled
with a ratings downgrade.
Our failure to comply with the terms of our debt facili-
ties could result in an event of default. Generally, if
an event of default under any debt agreement occurs,
then pursuant to cross default acceleration clauses,
our outstanding debt and derivative contract pay-
ables could become due and/or terminated. We can-
not provide assurances that we would have sufficient
liquidity to repay or refinance the borrowings under
any of the credit facilities or settle other outstanding
contracts if such amounts were accelerated upon an
event of default.
In addition, under several of our agreements with
credit card processors that accept credit cards for
the sale of cruises and other services, the credit card
processor may hold back a reserve from our credit card
receivables following the occurrence of certain events,
including a default under our major credit facilities. As
of December 31, 2012, we were not required to main-
tain any reserve under such agreements.
Incidents or adverse publicity concerning the cruise
vacation industry, unusual weather conditions and
other natural disasters or disruptions could affect our
reputation as well as impact our sales and results
of operations.
The operation of cruise ships, airplanes, land tours,
port facilities and shore excursions involves the risk
of accidents, illnesses, environmental incidents and
other incidents which may bring into question guest
safety, health, security and vacation satisfaction which
could negatively impact our reputation. Incidents
involving cruise ships, and, in particular the safety
and security of guests and crew, such as the Costa
Concordia incident, media coverage thereof, as well
as adverse media publicity concerning the cruise
vacation industry or unusual weather patterns or nat-
ural disasters or disruptions, such as hurricanes and
earthquakes, and the collateral impact thereof could
impact demand for our cruises. The considerable
expansion in the use of social media over recent years
has compounded the potential scope of the negative