Royal Caribbean Cruise Lines 2014 Annual Report Download - page 81

80 Royal Caribbean Cruises Ltd.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
record an impairment of Pullmantur’s tradenames and
trademarks for the year ended December 31, 2014 and
December 31, 2013, but for the year ended December
31, 2012, we recorded an impairment of $17.4 million.
During our 2014 annual impairment review, we deter-
mined the fair value of the trademarks and trade names
exceeded its carrying value by approximately 4%
resulting in no impairment to Pullmantur’s trademarks
and tradenames.
As described in Note 3. Goodwill, the persistent eco-
nomic instability in Pullmantur’s markets has created
significant uncertainties in forecasting operating results
and future cash flows used in our impairment analysis.
We continue to monitor economic events in these
markets for their potential impact on Pullmantur’s
business and valuation. Further, the estimation of fair
value utilizing discounted expected future cash flows
includes numerous uncertainties which require our
significant judgment when making assumptions of
expected revenues, operating costs, marketing, selling
and administrative expenses, interest rates, ship addi-
tions and retirements as well as assumptions regarding
the cruise vacation industry’s competitive environment
and general economic and business conditions, among
other factors. If there are changes to the projected
future cash flows used in the impairment analysis,
especially in Net Yields or if certain transfers of ves-
sels from our other cruise brands to the Pullmantur
fleet do not take place, an impairment charge with
respect to the Pullmantur reporting unit’s trademarks
and trade names will likely be required.
Finite-life intangible assets and related accumulated
amortization are immaterial to our 2014, 2013, and
2012 consolidated financial statements.
NOTE 5. PROPERTY AND EQUIPMENT
Property and equipment consists of the following
(in thousands):
 
Ships  
Ship improvements  
Ships under construction  
Land, buildings and improve-
ments, including leasehold
improvements and port
facilities  
Computer hardware and soft-
ware, transportation equip-
ment and other  
Total property and equipment  
Less—accumulated deprecia-
tion and amortization () ()
 
Ships under construction include progress payments
for the construction of new ships as well as planning,
design, interest and other associated costs. We capi-
talized interest costs of $28.8 million, $17.9 million
and $13.3 million for the years 2014, 2013 and 2012,
respectively.
In 2014, our conditional agreement with STX France to
build the fourth Oasis-class ship for Royal Caribbean
International became effective. Refer to Note 15. Com-
mitments and Contingencies for further information.
During 2014, we sold Celebrity Century to a subsidiary
of Skysea Holding International Ltd. (“Skysea Holding”)
for $220.0 million in cash. We agreed to charter the
Celebrity Century from the buyer until April 2015
to fulfill existing passenger commitments. The sale
resulted in a loss of $17.4 million that was recognized
in earnings during the third quarter of 2014 and is
reported within Other operating expenses in our
consolidated statements of comprehensive income
(loss). We subsequently acquired a 35% equity stake
in Skysea Holding in November 2014. See Note 6.
Other Assets for further discussion.
In December 2014, we terminated the leasing of
Brilliance of the Seas under the 25-year operating
lease originally entered into in July 2002, denomi-
nated in British pound sterling. As part of the agree-
ment, we purchased the Brilliance of the Seas for
a net settlement purchase price of approximately
£175.4 million or $275.4 million. At the date of pur-
chase, the total carrying amount of the ship, including
capital improvements previously accounted for as
leasehold improvements, was $330.5 million which
approximated the estimated fair market value of the
ship. We funded the purchase using proceeds from
our $1.2 billion unsecured revolving credit facility.
See Note 7. Long-Term Debt for further information.
During 2013, the fair value of Pullmantur’s aircraft
were determined to be less than their carrying value
and a restructuring related impairment charge of
$13.5 million was recognized in earnings during the
fourth quarter of 2013 and reported within Restruc-
turing and related impairment charges within our con-
solidated statements of comprehensive income (loss).
Furthermore, in 2012, the fair value of Pullmantur’s
aircraft were determined to be less than their carrying
value and an impairment charge of $48.9 million was
recognized in earnings during the fourth quarter of
2012 and reported within Impairment of Pullmantur
related assets within our consolidated statements of
comprehensive income (loss).