Royal Caribbean Cruise Lines 2003 Annual Report Download - page 12

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TERMINOLOGY
Available Passenger Cruise Days represent double occupancy
per cabin multiplied by the number of cruise days for the period.
Gross Cruise Costs represent total operating expenses and
marketing, selling and administrative expenses.
Gross Yields represent total revenues per Available
Passenger Cruise Day.
Net Cruise Costs represent payroll and related, food and
other operating expenses (each of which are described below
under the Results of Operations heading) and marketing, sell-
ing and administrative expenses.
Net Yields represent total revenues less commissions, trans-
portation and other, and onboard and other expenses (each of
which are described below under the Results of Operations
heading) per Available Passenger Cruise Day.
Occupancy Percentage, in accordance with cruise industry
practice, is calculated by dividing Passenger Cruise Days
by Available Passenger Cruise Days. A percentage in
excess of 100% indicates that three or more passengers
occupied some cabins.
Passenger Cruise Days represent the number of passengers
carried for the period multiplied by the number of days of
their respective cruises.
RESULTS OF OPERATIONS
For the year ended December 31, 2003, we changed the
reporting format of our consolidated statements of operations
to separately present our significant sources of revenue and
their directly related variable costs and expenses. We have
also separately identified certain ship operating expenses,
such as payroll and related expenses and food costs. In con-
nection with this change, we have included port costs that vary
with passenger head counts in the expense category attributa-
ble to passenger ticket revenues, which resulted in a change to
Net Yields. All prior periods were reclassified to conform to the
current year presentation.
Our revenues consist of the following:
Passenger ticket revenues consist of revenue recognized from
the sale of passenger tickets and the sale of air transportation
to our ships.
Onboard and other revenues consist primarily of revenues
from the sale of goods and/or services onboard our ships, can-
cellation fees, sales of vacation protection insurance and pre
and post tours. Also included are revenues we receive from
independent third party concessionaires that pay us a percent-
age of their revenues in exchange for the right to provide
selected activities onboard our ships.
Our operating expenses consist of the following:
Commissions, transportation and other expenses consist of
those costs directly associated with passenger ticket rev-
enues, including travel agent commissions, air and other trans-
portation expenses, port costs that vary with passenger head
counts and related credit card fees.
Onboard and other expenses consist of the direct costs asso-
ciated with onboard and other revenues. These costs include
the cost of products sold onboard our ships, vacation protec-
tion insurance premiums, costs associated with pre and post
tours and related credit card fees. Concession revenues have
minimal costs associated with them, as the costs related to
these activities are incurred by the concessionaires.
Payroll and related expenses consist of costs for shipboard
personnel, including officers, crew, hotel and administrative
employees.
Food expenses include food costs for both passengers and crew.
Other operating expenses consist of operating costs such as
fuel, repairs and maintenance, port costs that do not vary with
passenger head counts, insurance, entertainment and all other
operating costs.
We do not allocate payroll and related costs, food costs or other
operating costs to the expense categories attributable to pas-
senger ticket revenues or onboard and other revenues since
they are incurred to provide the total cruise vacation experience.
ROYAL CARIBBEAN CRUISES LTD.
MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS (CONTINUED)