Royal Caribbean Cruise Lines 2012 Annual Report Download - page 55

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PART II
Net Cruise Costs
Net Cruise Costs increased 6.9% in 2012 compared to
2011 due to the 1.4% increase in capacity and a 5.4%
increase in Net Cruise Cost per APCD. The increase
in Net Cruise Costs per APCD was primarily due to
an increase in fuel and Pullmantur’s land-based tours,
hotel and air packages expenses as discussed above.
In addition, the increase in Net Cruise Cost per APCD
was due to the changes in our international distribu-
tion system mainly in Brazil and certain deployment
initiatives. Net Cruise Costs per APCD increased 6.8%
in 2012 compared to 2011 on a Constant Currency basis.
Net Cruise Costs Excluding Fuel per APCD increased
2.7% in 2012 compared to 2011. Net Cruise Costs
Excluding Fuel per APCD increased 4.2% in 2012 com-
pared to 2011 on a Constant Currency basis.
YEAR ENDED DECEMBER 31, 2011 COMPARED TO
YEAR ENDED DECEMBER 31, 2010
In this section, references to 2011 refer to the year
ended December 31, 2011 and references to 2010 refer
to the year ended December 31, 2010.
Revenues
Total revenues for 2011 increased $784.8 million or
11.6% to $7.5 billion from $6.8 billion in 2010. Approxi-
mately $507.8 million of this increase was attributable
to a 7.5% increase in capacity. The increase in capac-
ity was primarily due to a full year of revenue gener-
ated by Allure of the Seas which entered service in
December 2010, the addition of Celebrity Silhouette
which entered service in July 2011, and a full year of
Celebrity Eclipse which entered service in April 2010.
This increase in capacity was partially offset by the
sale of Celebrity Mercury to TUI Cruises in February
2011. In addition, approximately $277.0 million of the
increase in revenue was driven by an increase in ticket
prices and the favorable effect of changes in foreign
currency exchange rates related to our revenue trans-
actions denominated in currencies other than the
United States dollar. These increases were partially
mitigated by the impact of geopolitical events includ-
ing the political unrest in the Eastern Mediterranean
and Northern Africa and the earthquake and related
events in Japan which offset pricing improvements in
other regions. These events resulted in deployment
changes to avoid calling on ports in those areas and
pricing reductions to stimulate demand in other areas.
Onboard and other revenues included concession rev-
enues of $273.4 million in 2011 compared to $237.0
million for the same period in 2010. The increase in
concession revenues was due to an increase in spend-
ing on a per passenger basis and the increase in
capacity mentioned above.
Cruise Operating Expenses
Total cruise operating expenses for 2011 increased
$484.5 million or 10.9% to $4.9 billion from $4.5 bil-
lion for 2010. Approximately $335.2 million of the
increase was attributable to the 7.5% increase in
capacity mentioned above. Other significant drivers
of the increase include an increase in fuel, air and
other hotel and vessel expenses and head taxes, as
well as the unfavorable effect of changes in foreign
currency exchange rates related to our cruise oper-
ating expenses denominated in currencies other than
the United States dollar. Fuel expenses, which are
net of the financial impact of fuel swap agreements,
increased 18.4% per metric ton in 2011 as compared
to 2010 primarily as a result of increasing fuel prices.
The increase in air and other hotel and vessel
expenses and head taxes were primarily due to
deployment changes.
Marketing, Selling and Administrative Expenses
Marketing, selling and administrative expenses for 2011
increased $112.5 million or 13.3% to $960.6 million
from $848.1 million for 2010. The increase was due to
an increase in marketing, selling and payroll expenses
primarily associated with our international expansion
and, to a much lesser extent, an increase in expenses
associated with technological innovations.
Depreciation and Amortization Expenses
Depreciation and amortization expenses for 2011
increased $58.7 million or 9.1% to $702.4 million from
$643.7 million for 2010. The increase is primarily
due to a full year of Allure of the Seas which entered
service in December 2010, the addition of Celebrity
Silhouette which entered service in July 2011, and a
full year of Celebrity Eclipse which entered service in
April 2010. These increases were partially offset by
the sale of Celebrity Mercury to TUI Cruises and the
sale of Bleu de France.
Other Income (Expense)
Interest expense, net of interest capitalized, increased
to $382.4 million in 2011 from $371.2 million in 2010.
The increase was due to a reduction in interest capi-
talized for ships under construction. Interest capital-
ized decreased to $14.0 million in 2011 from $28.1
million in 2010 primarily due to a lower average level
of investment in ships under construction. Gross inter-
est expense decreased to $396.4 million from $399.3
million in 2010. The decrease was primarily due to
lower interest rates partially offset by a higher aver-
age debt level.
Other income decreased to $32.9 million in 2011 from
$75.0 million in 2010. The $42.1 million decrease in
other income was due primarily to an $89.0 million
gain recorded from a litigation settlement during 2010
that did not recur in 2011, which was partially offset by: