Royal Caribbean Cruise Lines 2012 Annual Report Download - page 48

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PART II
• Onboard and other expenses, which consist of the
direct costs associated with onboard and other rev-
enues, including the costs of products sold onboard
our ships, vacation protection insurance premiums,
costs associated with pre- and post-cruise tours and
related credit card fees as well as the minimal costs
associated with concession revenues, as the costs
are mostly incurred by third-party concessionaires;
• Payroll and related expenses, which consist of costs
for shipboard personnel (costs associated with our
shoreside personnel are included in marketing, sell-
ing and administrative expenses);
• Food expenses, which include food costs for both
guests and crew;
• Fuel expenses, which include fuel and related deliv-
ery and storage costs, including the financial impact
of fuel swap agreements; and
• Other operating expenses, which consist primarily
of operating costs such as repairs and maintenance,
port costs that do not vary with passenger head
counts, vessel operating lease costs, costs associated
with Pullmantur’s land-based tours and Pullmantur
Air’s charter business to third parties, vessel related
insurance and entertainment.
We do not allocate payroll and related costs, food
costs, fuel costs or other operating costs to the expense
categories attributable to passenger ticket revenues
or onboard and other revenues since they are incurred
to provide the total cruise vacation experience.
SELECTED OPERATIONAL AND FINANCIAL METRICS
We utilize a variety of operational and financial metrics
which are defined below to evaluate our performance
and financial condition. As discussed in more detail
herein, certain of these metrics are non-GAAP financial
measures which we believe provide useful information
to investors as a supplement to our consolidated
financial statements, which are prepared and pre-
sented in accordance with GAAP. The presentation
of non-GAAP financial information is not intended to
be considered in isolation or as a substitute for, or
superior to, the financial information prepared and
presented in accordance with GAAP.
Available Passenger Cruise Days (“APCD”) is our
measurement of capacity and represents double
occupancy per cabin multiplied by the number of
cruise days for the period. We use this measure to
perform capacity and rate analysis to identify our
main non-capacity drivers that cause our cruise
revenue and expenses to vary.
Gross Cruise Costs represent the sum of total cruise
operating expenses plus marketing, selling and
administrative expenses.
Gross Yields represent total revenues per APCD.
Net Cruise Costs and Net Cruise Costs Excluding Fuel
represent Gross Cruise Costs excluding commissions,
transportation and other expenses and onboard and
other expenses and, in the case of Net Cruise Costs
Excluding Fuel, fuel expenses (each of which is
described above under the Description of Certain Line
Items heading). In measuring our ability to control
costs in a manner that positively impacts net income,
we believe changes in Net Cruise Costs and Net Cruise
Costs Excluding Fuel to be the most relevant indica-
tors of our performance. A reconciliation of historical
Gross Cruise Costs to Net Cruise Costs and Net Cruise
Costs Excluding Fuel is provided below under Results
of Operations. We have not provided a quantitative
reconciliation of projected Gross Cruise Costs to
projected Net Cruise Costs and projected Net Cruise
Costs Excluding Fuel due to the significant uncer-
tainty in projecting the costs deducted to arrive at
these measures. Accordingly, we do not believe that
reconciling information for such projected figures
would be meaningful.
Net Debt-to-Capital is a ratio which represents total
long-term debt, including current portion of long-term
debt, less cash and cash equivalents (“Net Debt”)
divided by the sum of Net Debt and total shareholders’
equity. We believe Net Debt and Net Debt-to-Capital,
along with total long-term debt and shareholders’
equity are useful measures of our capital structure.
A reconciliation of historical Debt-to-Capital to Net
Debt-to-Capital is provided below under Results
of Operations.
Net Revenues represent total revenues less commis-
sions, transportation and other expenses and onboard
and other expenses (each of which is described above
under the Description of Certain Line Items heading).
Net Yields represent Net Revenues per APCD. We uti-
lize Net Revenues and Net Yields to manage our busi-
ness on a day-to-day basis as we believe that it is the
most relevant measure of our pricing performance
because it reflects the cruise revenues earned by us
net of our most significant variable costs, which are
commissions, transportation and other expenses and
onboard and other expenses. A reconciliation of his-
torical Gross Yields to Net Yields is provided below
under Results of Operations. We have not provided a
quantitative reconciliation of projected Gross Yields
to projected Net Yields due to the significant uncer-
tainty in projecting the costs deducted to arrive at