Royal Caribbean Cruise Lines 2013 Annual Report Download - page 59
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CONTRACTUAL OBLIGATIONS
As of December 31, 2013, our contractual obligations were as follows (in thousands):
PaymentsDueByperiod
Total
LessThan
Year –Years –Years
MoreThan
Years
Operating Activities:
Operating lease obligations(1)(2)
Interest on long-term debt(3)
Other(4)
Investing Activities:
Ship purchase obligations — —
Financing Activities:
Long-term debt obligations(5)
Capital lease obligations(6)
Other(7)
Total
() We are obligated under noncancelable operating leases primarily for a ship, offices, warehouses and motor vehicles.
() Under the Brilliance of the Seas lease agreement, we may be required to make a termination payment of approximately £65.4 million, or approxi-
mately $108.3 million based on the exchange rate at December 31, 2013, if the lease is canceled in 2020. This amount is included in the more than
5 years column. Interest on the Brilliance of the Seas lease agreement is calculated based on the applicable variable interest rate at December 31, 2013.
() Long-term debt obligations mature at various dates through fiscal year 2027 and bear interest at fixed and variable rates. Interest on variable-rate
debt is calculated based on forecasted debt balances, including interest swapped using the applicable rate at December 31, 2013. Debt denominated
in other currencies is calculated based on the applicable exchange rate at December 31, 2013.
() Amounts represent future commitments with remaining terms in excess of one year to pay for our usage of certain port facilities, marine consum-
ables, services and maintenance contracts.
() Amounts represent debt obligations with initial terms in excess of one year.
() Amounts represent capital lease obligations with initial terms in excess of one year.
() Amounts represent fees payable to sovereign guarantors in connection with certain of our export credit debt facilities and facility fees on our
revolving credit facilities.
As a normal part of our business, depending on mar-
ket conditions, pricing and our overall growth strat-
egy, we continuously consider opportunities to enter
into contracts for the building of additional ships. We
may also consider the sale of ships or the purchase of
existing ships. We continuously consider potential
acquisitions and strategic alliances. If any of these
were to occur, they would be financed through the
incurrence of additional indebtedness, the issuance of
additional shares of equity securities or through cash
flows from operations.
OFF-BALANCE SHEET ARRANGEMENTS
In July 2002, we entered into an operating lease
denominated in British pound sterling for the Brilliance
of the Seas. The lease payments vary based on sterling
LIBOR and are included in Other operating expenses
in our consolidated statements of comprehensive
income (loss). Brilliance of the Seas lease expense
amounts were approximately £12.3 million, £14.6 mil-
lion and £15.9 million, or approximately $19.1 million,
$23.3 million and $25.6 million for the years ended
December 31, 2013, 2012 and 2011, respectively. The
lease has a contractual life of 25 years; however, both
the lessor and we have certain rights to cancel the
lease at year 18 (i.e., 2020) upon advance notice given
approximately one year prior to cancellation. In the
event of early termination at year 18, we have the
option to cause the sale of the vessel at its fair value
and to use the proceeds towards the applicable termi-
nation payment.
Alternatively, we could opt at such time to make a ter-
mination payment of approximately £65.4 million, or
approximately $108.3 million based on the exchange
rate at December 31, 2013 and relinquish our right to
cause the sale of the vessel. Under current circum-
stances we do not believe early termination of this
lease is probable.
Under the Brilliance of the Seas operating lease, we
have agreed to indemnify the lessor to the extent its
after-tax return is negatively impacted by unfavorable
changes in corporate tax rates, capital allowance
deductions and certain unfavorable determinations
which may be made by United Kingdom tax authori-
ties. These indemnifications could result in an increase
in our lease payments. We are unable to estimate the
maximum potential increase in our lease payments due
to the various circumstances, timing or a combination
of events that could trigger such indemnifications.
The United Kingdom tax authorities are disputing the
lessor’s accounting treatment of the lease and the
lessor and tax authorities are in discussions on the
matter. If the characterization of the lease is ultimately
determined to be incorrect, we could be required to
indemnify the lessor under certain circumstances.
PART II