Royal Caribbean Cruise Lines 2014 Annual Report Download - page 57

56 Royal Caribbean Cruises Ltd.
PART II
our current ownership interest in TUI Cruises below
37.5% through 2019.
Some of the contracts that we enter into include
indemnification provisions that obligate us to make
payments to the counterparty if certain events occur.
These contingencies generally relate to changes in
taxes, increased lender capital costs and other similar
costs. The indemnification clauses are often standard
contractual terms and are entered into in the normal
course of business. There are no stated or notional
amounts included in the indemnification clauses and
we are not able to estimate the maximum potential
amount of future payments, if any, under these indem-
nification clauses. We have not been required to make
any payments under such indemnification clauses in
the past and, under current circumstances, we do not
believe an indemnification obligation is probable.
Other than the items described above, we are not
party to any other off-balance sheet arrangements,
including guarantee contracts, retained or contingent
interest, certain derivative instruments and variable
interest entities, that either have, or are reasonably
likely to have, a current or future material effect on
our financial position.
FUNDING NEEDS AND SOURCES
We have significant contractual obligations of which
our debt service obligations and the capital expendi-
tures associated with our ship purchases represent
our largest funding needs. As of December 31, 2014,
we have approximately $2.3 billion in contractual
obligations due through December 31, 2015 of which
approximately $790.9 million relates to debt maturities,
$946.8 million relates to the acquisition of Anthem of
the Seas along with progress payments on our other
ship purchases and $245.2 million relates to interest
on long-term debt. We have historically relied on a
combination of cash flows provided by operations,
drawdowns under our available credit facilities, the
incurrence of additional debt and/or the refinancing
of our existing debt and the issuance of additional
shares of equity securities to fund these obligations.
We had a working capital deficit of $3.0 billion as of
December 31, 2014 as compared to a working capital
deficit of $3.3 billion as of December 31, 2013. Included
within our working capital deficit is $799.6 million
and $1.6 billion of current portion of long-term debt,
including capital leases, as of December 31, 2014 and
December 31, 2013, respectively. The decrease in work-
ing capital deficit was primarily due to the decrease in
current maturities of long-term debt. Similar to others
in our industry, we operate with a substantial working
capital deficit. This deficit is mainly attributable to the
fact that, under our business model, a vast majority of
our passenger ticket receipts are collected in advance
of the applicable sailing date. These advance passen-
ger receipts remain a current liability until the sailing
date. The cash generated from these advance receipts
is used interchangeably with cash on hand from other
sources, such as our revolving credit facilities and
other cash from operations. The cash received as
advanced receipts can be used to fund operating
expenses for the applicable future sailing or other-
wise, pay down our revolving credit facilities, invest
in long-term investments or any other use of cash.
In addition, we have a relatively low-level of accounts
receivable and rapid turnover results in a limited
investment in inventories. We generate substantial
cash flows from operations and our business model,
along with our unsecured revolving credit facilities,
has historically allowed us to maintain this working
capital deficit and still meet our operating, investing
and financing needs. We expect that we will continue
to have working capital deficits in the future.
As of December 31, 2014, we have on order two
Quantum-class ships and two Oasis-class ships each
of which has committed unsecured bank financing
arrangements which include sovereign financing
guarantees. Refer to Note 15. Commitments and
Contingencies to our consolidated financial state-
ments under Item 8. Financial Statements and
Supplementary Data for further information.
During 2014, we repaid our €745.0 million 5.625%
unsecured senior notes with proceeds from our
$380.0 million unsecured term loan facility and our
revolving credit facilities and we amended and
restated our €365.0 million unsecured term loan
due July 2017 primarily to reduce the margin on the
facility. Additionally, in March 2014, we amended our
unsecured term loans for Oasis of the Seas and Allure
of the Seas primarily to reduce the margins on those
facilities and eliminate the lenders’ option to exit
those facilities in 2015 and 2017, respectively.
During 2014, we increased the capacity of our unse-
cured revolving credit facility due August 2018 by
$300 million by utilizing the accordion feature, bring-
ing our total capacity under this facility to $1.2 billion
as of December 31, 2014. We purchased the Brilliance
of the Seas for a net settlement purchase price of
approximately £175.4 million or $275.4 million using
proceeds from this facility. Refer to Note 7. Long-Term
Debt to our consolidated financial statements under
Item 8. Financial Statements and Supplementary Data
for further information.
As of December 31, 2014, we had liquidity of $1.0 bil-
lion, consisting of approximately $189.2 million in cash
and cash equivalents and $800.9 million available
under our unsecured credit facilities. We anticipate
that our cash flows from operations and our current
financing arrangements, as described above, will be