Royal Caribbean Cruise Lines 2012 Annual Report Download - page 50

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PART II
to continue these efforts during 2013. In addition, dur-
ing 2013 we will continue to strengthen our revenue
enhancement opportunities by strategically investing
in a number of projects, including the introduction
of beverage packages fleet wide, retail and casino
enhancements, the continuation of our vessel revital-
ization program, the introduction of new onboard rev-
enue initiatives and various information technology
infrastructure investments. We also intend to enhance
our focus on identifying the needs of our guests and
creating product features that our customers value.
We are focused on targeting high-value guests by
better understanding consumer data and insights and
creating communication strategies that best resonate
with our target audiences. In 2013, we will continue to
focus on the development of key markets in Asia and
we will focus on sourcing guests and adding capacity
to other markets where we expect significant growth
and profitability, such as Australia. We believe these
initiatives will provide opportunities for increased
ticket and onboard revenues with the ultimate goal of
maximizing our long-term return on invested capital
and shareholder value.
During 2012, we took delivery of Celebrity Reflection,
the fifth and final Solstice-class ship, and ordered a
third Oasis-class ship through a conditional agreement.
The agreement is subject to certain closing conditions
and is expected to become effective in the first quar-
ter of 2013. The ship is scheduled for delivery in the
second quarter of 2016. We also have two Quantum-
class ships on order for Royal Caribbean International
which are expected to enter service in the third quarter
of 2014 and in the second quarter of 2015, respectively,
and two ships on order for our joint venture TUI Cruises
which are scheduled for delivery in the second quar-
ter of 2014 and second quarter of 2015, respectively.
As part of our vessel revitalization program, five ships
were revitalized for the Royal Caribbean International
brand during 2012. By the end of 2013, we expect that
all of the Vision-class and Freedom-class ships and
all but one of the Radiance-class ships will have been
revitalized. For the Celebrity Cruises brand, two ships
underwent revitalization during 2012 to incorporate
certain Solstice-class features. By the end of 2013, the
Millennium-class revitalization program will be com-
plete as the final ship is scheduled to be revitalized
during the course of 2013.
As of December 31, 2012, our liquidity position remained
strong at $2.2 billion, consisting of approximately
$194.9 million in cash and cash equivalents and $2.0
billion available under our unsecured credit facilities.
In addition, we continue to be focused on our goal
of returning to an investment grade credit rating. We
have already made strides in this direction and further
improvements are anticipated through increasing
operating cash flow, a moderate capital expenditure
program, retiring of debt and favorable financing
programs.
In 2012, we implemented a number of actions in fur-
therance of our refinancing strategy for our maturities
in 2013 and 2014. These actions, which enabled us to
refinance a portion of our outstanding indebtedness
with later maturity debt without increasing our total
level of indebtedness included:
• obtaining funds through the incurrence of $940.0
million of new debt obligations, including $650.0
million of 5.25% unsecured senior notes due
November 2022 and a $290.0 million unsecured
term loan due February 2016. With these funds
we were able to repay amounts outstanding under
our revolving credit facilities and repurchase €255.0
million, or approximately $328.0 million, in aggre-
gate principal amount of our €1.0 billion 5.625%
unsecured senior notes due 2014, and
• our establishment of new borrowing capacity,
including €365.0 million in available capacity under
a Euro-denominated unsecured term loan due July
2017 to be drawn at any time on or prior to June 30,
2013 and $233.0 million of additional revolving
credit capacity utilizing the accordion feature on our
revolving facility due July 2016.
During 2013, it is likely we will secure additional liquid-
ity in the capital and/or credit markets as part of our
refinancing strategy for our upcoming 2013 and 2014
maturities. We anticipate funding these maturities
and other obligations in 2013 through a combination
of currently available and anticipated new credit facili-
ties and other financing arrangements and operating
cash flows.
RESULTS OF OPERATIONS
In addition to the items discussed above under
“Executive Overview”, significant items for 2012
include:
• Total revenues increased 2.0% to $7.7 billion from
$7.5 billion in 2011 partially due to a 1.5% increase in
Net Yields and a 1.4% increase in capacity (measured
by APCD for such period).
• Cruise operating expenses increased 4.3% to $5.2
billion from $4.9 billion in 2011 partially due to an
increase in fuel expenses and the 1.4% increase in
capacity noted above.
• We recognized an impairment charge of $385.4 mil-
lion to write down Pullmantur’s goodwill to its implied
fair value and to write down trademarks and trade