Annual Report of a Foreign Private Issuer — Form 20-F
Filing Table of Contents
Document/Exhibit Description Pages Size
1: 20-F Royal Caribbean Cruises Ltd. 57 291K
2: EX-2.10 Ninth Supplemental Indenture 13 42K
3: EX-2.11 Tenth Supplemental Indenture 42 131K
4: EX-2.14 Credit Agreement Dated 6/9/2000 93 298K
5: EX-2.15 Credit Agreement Dated 12/20/2000 88 285K
6: EX-8.1 List of Significant Subsidiaries 1 8K
7: EX-10.1 Consent of Pricewaterhousecoopers LLP 1 6K
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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 20-F
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(MARK ONE)
[ ] REGISTRATION STATEMENT PURSUANT TO SECTION 12(B) OR (G) OF
THE SECURITIES EXCHANGE ACT OF 1934
OR
[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE
SECURITIES EXCHANGE ACT OF 1934
FOR THE FISCAL YEAR ENDED DECEMBER 31, 2000
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE
SECURITIES EXCHANGE ACT OF 1934
COMMISSION FILE NUMBER: 1-11884
ROYAL CARIBBEAN CRUISES LTD.
(Exact name of Registrant as specified in its charter)
REPUBLIC OF LIBERIA
(Jurisdiction of incorporation or organization)
1050 CARIBBEAN WAY, MIAMI, FLORIDA 33132
(Address of principal executive offices)
Securities registered or to be registered pursuant to Section 12(b) of the
Act:
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TITLE OF EACH CLASS NAME OF EACH EXCHANGE ON WHICH REGISTERED
------------------- -----------------------------------------
Common Stock, par value $.01 per share New York Stock Exchange
Liquid Yield Option(TM) Notes due February 2, New York Stock Exchange
2021
Securities registered or to be registered pursuant to Section 12(g) of the
Act: None
Securities for which there is a reporting obligation pursuant to Section
15(d) of the Act: None
Indicate the number of outstanding shares of each of the issuer's classes
of capital or common stock as of the close of the period covered by the annual
report: As of December 31, 2000, the Registrant had outstanding 192,122,088
shares of common stock, par value $.01 per share.
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
Registrant was required to file such reports) and (2) has been subject to such
filing requirements for the past 90 days.
Yes [X] No [ ]
Indicate by check mark which financial statement item the registrant has
elected to follow:
Item 17 [ ] Item 18 [X]
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ROYAL CARIBBEAN CRUISES LTD.
INDEX TO ANNUAL REPORT ON FORM 20-F
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PAGE
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PART I
Item 1. Identity of Directors, Senior Management and Advisers....... 1
Item 2. Offer Statistics and Expected Timetable..................... 1
Item 3. Key Information............................................. 1
Item 4. Information on the Company.................................. 3
Item 5. Operating and Financial Review and Prospects................ 16
Item 6. Directors, Senior Management and Employees.................. 22
Item 7. Major Shareholders and Related Party Transactions........... 28
Item 8. Financial Information....................................... 28
Item 9. The Offer and Listing....................................... 30
Item 10. Additional Information...................................... 30
Item 11. Quantitative and Qualitative Disclosures About Market
Risk........................................................ 33
Item 12. Description of Securities Other than Equity Securities...... 33
PART II
Item 13. Defaults, Dividend Arrearages and Delinquencies............. 34
Item 14. Material Modifications to the Rights of Security Holders and
Use of Proceeds............................................. 34
Item 15. Reserved.................................................... 34
Item 16. Reserved.................................................... 34
PART III
Item 17. Financial Statements........................................ 34
Item 18. Financial Statements........................................ 34
Item 19. Exhibits.................................................... 34
SIGNATURES............................................................ 35
PART I
As used in this Annual Report on Form 20-F, the terms "Royal Caribbean,"
"the Company," "we," "our" and "us" refer to Royal Caribbean Cruises Ltd., the
term "Celebrity" refers to Celebrity Cruise Lines Inc. and the terms "Royal
Caribbean International" and "Celebrity Cruises" refer to our two cruise brands.
In accordance with cruise industry practice, the term "berths" is determined
based on double occupancy per cabin even though some cabins can accommodate
three or four guests.
ITEM 1. IDENTITY OF DIRECTORS, SENIOR MANAGEMENT AND ADVISERS
Not applicable.
ITEM 2. OFFER STATISTICS AND EXPECTED TIMETABLE
Not applicable.
ITEM 3. KEY INFORMATION
SELECTED FINANCIAL DATA
The following selected financial data are for each of the fiscal years in
the period 1996 through 2000 and as of the end of each such fiscal year. The
financial information presented for fiscal years 2000, 1999, and 1998 and as of
the end of fiscal years 2000 and 1999 is derived from our financial statements
and should be read together with such financial statements and the related notes
included elsewhere herein. The 1997 financial information includes the results
of Celebrity commencing July 1, 1997.
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YEAR ENDED DECEMBER 31,
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2000 1999 1998 1997 1996
---------- ---------- ---------- ---------- ----------
(IN THOUSANDS, EXCEPT PER SHARE DATA)
OPERATING DATA:
Revenues........................... $2,865,846 $2,546,152 $2,636,291 $1,939,007 $1,357,325
Operating income................... 569,540 480,174 488,735 303,555 217,033
Income before extraordinary item... 445,363 383,853 330,770 182,685 150,866
Net income......................... 445,363 383,853 330,770 175,127 150,866
PER SHARE DATA -- DILUTED:
Operating income................... $ 2.95 $ 2.58 $ 2.70 $ 1.99 $ 1.69
Income before extraordinary item... $ 2.31 $ 2.06 $ 1.83 $ 1.20 $ 1.17
Net income......................... $ 2.31 $ 2.06 $ 1.83 $ 1.15 $ 1.17
Weighted average shares and
potentially dilutive shares..... 192,935 186,456 181,165 152,174 128,427
Dividends declared per common
share........................... $ 0.48 $ 0.40 $ 0.34 $ 0.29 $ 0.27
BALANCE SHEET DATA:
Total assets....................... $7,828,465 $6,380,511 $5,686,076 $5,339,748 $2,842,299
Total debt, including capital
leases.......................... 3,410,096 2,342,177 2,469,082 2,572,696 1,366,967
Common stock....................... 1,921 1,812 1,690 811 638
Total shareholders' equity......... 3,615,915 3,261,156 2,454,758 2,018,721 1,084,934
1
RISK FACTORS
The Risk Factors noted below and elsewhere in this Annual Report on Form
20-F are important factors, among others, that could cause actual results to
differ from expected or historic results. It is not possible to predict or
identify all such factors. Consequently, this list should not be considered a
complete statement of all potential risks or uncertainties. See Item 5.
"Operating and Financial Review and Prospects," for a note regarding
forward-looking statements.
Taxation of the Company
We and our wholly owned subsidiary, Celebrity Cruises Inc., the operator of
Celebrity Cruises, are foreign corporations engaged in a trade or business in
the United States, and our vessel-owning subsidiaries are foreign corporations
that, in many cases, depending upon the itineraries of their vessels, receive
income from sources within the United States. However, Drinker Biddle & Reath
LLP, our United States tax counsel, has delivered to us its opinion to the
effect that, pursuant to Section 883 of the Internal Revenue Code, our income,
the income of Celebrity Cruises Inc. and the vessel-owning subsidiaries, in each
case derived from or incidental to the international operation of a ship or
ships, is exempt from United States income tax. We believe that substantially
all of our income, the income of Celebrity Cruises Inc. and our vessel-owning
subsidiaries is derived from or incidental to the international operation of a
ship or ships within the meaning of Section 883 of the Internal Revenue Code.
Tax counsel is of the opinion based on certain representations and
assumptions that we, Celebrity Cruises Inc., and our vessel-owning subsidiaries
currently qualify for the Section 883 exemption because each of them is
incorporated in a qualifying jurisdiction and our stock is primarily and
regularly traded on an established securities market in the United States or
Norway. To date, however, no final Treasury regulations or other definitive
interpretations of the relevant portions of Section 883 have been promulgated,
although regulations have been proposed. As noted in tax counsel's opinion, such
regulations or official interpretations could differ materially from tax
counsel's interpretation of this Internal Revenue Code provision and, even in
the absence of such regulations or official interpretations, the Internal
Revenue Service might successfully challenge such interpretation. In addition,
the provisions of Section 883 are subject to change at any time by legislation.
Moreover, changes could occur in the future with respect to the identity,
residence, or holdings of our direct or indirect shareholders that could affect
us and our subsidiaries' eligibility for the Section 883 exemption. Accordingly,
there can be no assurance that we and our subsidiaries are, and will in the
future be, exempt from United States income tax on United States source shipping
income.
If we, Celebrity Cruises Inc., and our vessel-owning subsidiaries were not
entitled to the benefit of Section 883 of the Internal Revenue Code, each would
be subject to United States taxation on a portion of its income. See Taxation of
the Company within Item 4 for a discussion of the taxation of us, Celebrity
Cruises Inc., and our vessel-owning subsidiaries in the absence of an exemption
under Section 883 of the Internal Revenue Code.
We Are Controlled By Principal Shareholders
As of March 1, 2001, A. Wilhelmsen AS., a Norwegian corporation indirectly
owned by members of the Wilhelmsen family of Norway, owned approximately 24.1%
of our common stock and Cruise Associates, a Bahamian general partnership
indirectly owned by various trusts primarily for the benefit of certain members
of the Pritzker family of Chicago, Illinois, and various trusts primarily for
the benefit of certain members of the Ofer family, owned approximately 25.1% of
our common stock. A. Wilhelmsen AS. and Cruise Associates have the power to
determine, among other things:
- our policies and the policies of our subsidiaries,
- the persons who will be our directors and officers and the directors and
officers of our subsidiaries and
- all actions requiring shareholder approval.
2
A. Wilhelmsen AS. and Cruise Associates are parties to a shareholders'
agreement. The agreement provides that our Board of Directors will consist of
the following persons:
- four nominees of A. Wilhelmsen AS.,
- four nominees of Cruise Associates and
- our Chief Executive Officer.
The shareholders' agreement provides that the boards of directors of our
subsidiaries shall have substantially similar composition. As a result of our
acquisition of Celebrity, A. Wilhelmsen AS. and Cruise Associates have also
agreed to vote their shares of our common stock to elect one additional director
to our Board of Directors to be nominated by Archinav Holdings, Ltd., a former
shareholder of Celebrity, for a specified period until 2004. In addition, until
either of them should decide otherwise, A. Wilhelmsen AS. and Cruise Associates
have agreed to vote their shares of common stock in favor of two additional
named directors of our Board of Directors. During the term of the shareholders'
agreement, certain corporate actions require the approval of at least one
director nominated by A. Wilhelmsen AS. and one director nominated by Cruise
Associates. Our principal shareholders are not prohibited from engaging in a
business that may compete with our business, subject to certain exceptions. The
failure of A. Wilhelmsen AS. and Cruise Associates to continue to own a
specified percentage of our common stock might obligate us to prepay
indebtedness outstanding under and/or result in the termination of some of our
credit facilities.
We Are Not a U.S. Corporation
Our corporate affairs are governed by our Restated Articles of
Incorporation and By-Laws and by the Business Corporation Act of Liberia. The
provisions of the Business Corporation Act of Liberia resemble provisions of the
corporation laws of a number of states in the United States. However, while most
states have a fairly well developed body of case law interpreting their
respective corporate statutes, there are very few judicial cases in Liberia
interpreting the Business Corporation Act of Liberia. For example, the rights
and fiduciary responsibilities of directors under Liberian law are not as
clearly established as the rights and fiduciary responsibilities of directors
under statutes or judicial precedent in existence in certain United States
jurisdictions. Thus, our public shareholders may have more difficulty in
protecting their interests in the face of actions by the management, directors
or controlling shareholders than would shareholders of a corporation
incorporated in a United States jurisdiction.
ITEM 4. INFORMATION ON THE COMPANY
HISTORY AND DEVELOPMENT OF THE COMPANY
Royal Caribbean International was founded in 1968. The current parent
corporation, Royal Caribbean Cruises Ltd., was incorporated on July 23, 1985 in
the Republic of Liberia under the Business Corporation Act of Liberia. The
address of the principal executive offices is 1050 Caribbean Way, Miami, Florida
33132; the telephone number is (305) 539-6000. Our registered agent is Michael
J. Smith, Vice President, General Counsel and Secretary, 1050 Caribbean Way,
Miami, Florida 33132.
We are the world's second largest cruise company with 21 cruise ships that
have 42,226 berths. We operate our cruise ships through two cruise brands, Royal
Caribbean International and Celebrity Cruises.
See Item 5. Operating and Financial Review and Prospects and the Business
Overview sections that follow for more information regarding our history and
development, significant capital expenditures, vessels under construction and
methods of financing.
BUSINESS OVERVIEW
General
We operate two brands, Royal Caribbean International and Celebrity Cruises.
We acquired Celebrity in July 1997. Both brands offer a wide array of shipboard
activities, services and amenities, including swimming
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pools, sun decks, beauty salons, exercise and massage facilities, gaming
facilities, lounges, bars, show-time entertainment, retail shopping and cinemas.
Our ships operate on a selection of worldwide itineraries that call on
approximately 200 destinations.
The Royal Caribbean International Brand
Royal Caribbean International serves the volume cruise vacation market
which we categorize as the contemporary and premium segments. The brand operates
14 cruise ships with 29,932 berths, offering various cruise itineraries that
range from two to 16 nights and call on destinations throughout the world.
Royal Caribbean International's strategy is to attract an array of
vacationing consumers in the contemporary segment of the volume market by
providing a wide variety of itineraries and cruise lengths with multiple options
for onboard dining, entertainment, and other onboard activities. Additionally,
we offer a variety of shore excursions at each port of call. We believe that the
variety and quality of Royal Caribbean International's product offering
represents excellent value to consumers, especially to couples and families
traveling with children. Because of the brand's extensive product offerings, we
believe Royal Caribbean International is well positioned to attract new
consumers to the cruise industry and continue to bring past guests back for
their next vacation. While the brand is positioned at the upper end of the
contemporary segment, we believe that Royal Caribbean International's quality
enables it to attract consumers from the premium segment as well, thereby
achieving the broadest market coverage of any of the major brands in the cruise
industry.
The Celebrity Cruises Brand
Celebrity Cruises primarily serves the premium segment of the cruise
vacation market. Celebrity Cruises operates seven cruise ships with 12,294
berths and offers various cruise itineraries that range from five to 15 nights.
Celebrity Cruises' strategy is to attract consumers who want an enhanced
cruise vacation in terms of modern vessels, gourmet dining and service,
extensive and luxurious spa facilities, large staterooms and a high
staff-to-guest ratio. These are hallmarks of the premium cruise vacation market,
which is Celebrity Cruises' primary target. Celebrity Cruises also attracts
consumers from the contemporary and luxury cruise categories. Celebrity Cruises
is expanding its fleet to provide an increasing variety of itineraries and
cruise lengths and therefore has a higher proportion of its fleet deployment in
seasonal markets (i.e. Alaska, Bermuda, Europe and South America) than does the
Royal Caribbean International brand.
INDUSTRY
Since 1970, cruising has been one of the fastest growing sectors of the
vacation market, as the number of North American guests has grown to an
estimated 6.9 million in 2000 from 0.5 million in 1970, a compound annual growth
rate of approximately 9.1%. We have capitalized on the increasing popularity of
cruises through an extensive fleet expansion program.
According to our estimates, the North American market was served by an
estimated 111 cruise ships with approximately 99,050 berths at the end of 1995.
The number of berths in the industry is estimated to have increased to
approximately 148,450 berths on 120 ships by the end of 2000. The net increase
in capacity over the last five years is inclusive of approximately 49 ships with
approximately 33,800 berths that have either been retired or moved out of the
North American market. There are a number of cruise ships on order with an
estimated 88,050 berths which will be placed in service between 2001 and 2005.
Although we cannot predict the rate at which future retirements will occur, we
believe ship retirements will continue due to competitive pressures and the age
of the vessels.
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The following table details the growth in the North American cruise market
of both guests and weighted average berths over the past five years:
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WEIGHTED
NORTH AVERAGE
AMERICAN SUPPLY OF BERTHS
CRUISE MARKETED IN
YEAR GUESTS(1) NORTH AMERICA(2)
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1996....................................................... 4,659,000 105,586
1997....................................................... 5,051,000 109,257
1998....................................................... 5,428,000 118,747
1999....................................................... 5,894,000 130,152
2000....................................................... 6,886,000 144,499
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(1) Source: Cruise Lines International Association based on guests carried for
at least two consecutive nights.
(2) Source: Cruise Lines International Association and our estimates.
Cruise lines compete for consumers' disposable leisure time spending with
other vacation alternatives such as land-based resort hotels and sightseeing
destinations, and public demand for such activities is influenced by general
economic conditions. We believe that cruise guests currently represent only a
small share of the vacation market and that a significant portion of cruise
guests carried are "first-time cruisers."
Our ships operate worldwide and call on destinations in Alaska, Australia,
the Bahamas, Bermuda, Canada, the Caribbean, Europe, the Far East, Hawaii,
Mexico, New England, the Panama Canal, Scandinavia and South America.
Competition for cruise guests in all of these geographic areas is vigorous. In
most of these areas, we compete with cruise ships owned by other international
operators. We compete with a number of cruise lines; however, our principal
competitors are Carnival Cruise Line, Holland America Line, Norwegian Cruise
Line and Princess Cruises. We compete principally on the basis of quality of
service, variety of itineraries and price.
OPERATING STRATEGIES
Our principal operating strategies are to:
- build the awareness and market penetration of both brands,
- continue to expand our fleet with state-of-the-art cruise ships,
- maintain our competitive position with respect to the quality and
innovation of our onboard product,
- broaden our itineraries worldwide,
- further expand our international guest sourcing,
- utilize sophisticated yield management systems (revenue optimization per
berth),
- further improve our technological capabilities and
- maintain strong relationships with travel agencies, the principal
industry distribution system.
Brand Awareness
Our strategy is to continue to broaden the recognition of both the Royal
Caribbean International brand and the Celebrity Cruises brand in the cruise
vacation marketplace. Each brand has a distinct identity and marketing focus but
utilizes shared infrastructure resources.
Royal Caribbean International has positioned itself in the contemporary and
premium segments of the cruise vacation market and focuses on providing multiple
choices to its guests through a variety of itineraries, accommodations, dining
options, ship activities and shore excursions. Hallmarks of the brand include
friendly
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and engaging service, modern ships, family programs, entertainment, health and
fitness, and activities designed for guests of all ages.
Celebrity Cruises primarily serves the premium segment of the cruise
vacation market. The brand is recognized for its gourmet dining, impeccable
service, large staterooms, a high staff-to-guest ratio and luxurious spa
facilities. In 1999 and 1998, Berlitz named Celebrity Cruises the highest rated
premium cruise line in the large vessel category (over 1,000 berths).
Fleet Expansion
Currently, our combined fleet has an average age of approximately five
years, which we believe is the youngest of any major cruise company. Based on
the ships currently on order, our year-end berth capacity is expected to
increase to 60,432 berths by December 31, 2004.
Our increased average ship size and number of available berths have enabled
us to achieve certain economies of scale. Larger ships allow us to transport
more guests than smaller ships without a corresponding increase in certain
operating expenses. This increase in fleet size also provides a larger revenue
base to absorb our marketing, selling and administrative expenses.
Royal Caribbean International. Founded in 1968, Royal Caribbean
International was the first cruise line to design ships especially for warm
water year round cruising. Royal Caribbean International operated a modern fleet
in the 1970s and early 1980s, establishing a reputation for high quality.
Between 1988 and 1992, the brand tripled its capacity by embarking on its first
major capital expansion program.
Royal Caribbean International committed to its second capital expansion
program with orders for six Vision-class vessels, ranging in size from 1,804 to
2,000 berths, for delivery from 1995 through 1998. During this same period,
Royal Caribbean International sold four of its original vessels because these
ships were older in age and design and no longer consistent with its image and
marketing strategy. Each Vision-class ship features a seven-deck atrium with
glass elevators, skylights and glass walls, a pool and entertainment complex
covered by a moveable glass roof, hundreds of cabins with verandahs, a two-deck
main dining room, a state-of-the-art show theater, a glass-encased
indoor/outdoor cafe and a shopping mall.
Royal Caribbean International is currently engaged in its third capital
expansion program. It placed Voyager of the Seas and Explorer of the Seas, the
first two Voyager-class vessels, in service in November 1999 and October 2000,
respectively. Royal Caribbean International has three additional Voyager-class
vessels on order. We believe the Voyager-class vessels are the largest and most
innovative passenger cruise ships ever built. Each ship is approximately 140,000
gross tons with 3,114 berths. This new class of vessels is designed to provide
more diverse vacation options for families and for those seeking active sports
and entertainment alternatives during their vacation experience. Each
Voyager-class ship has a variety of unique features: the cruise industry's first
horizontal atrium (which is four decks tall, longer than a football field and
provides entertainment, shopping and dining experiences), recreational
activities such as rock climbing, ice skating, miniature golf and full court
basketball, enhanced staterooms, expanded dining options and a variety of
intimate spaces.
Royal Caribbean International took delivery of Radiance of the Seas, the
first Radiance-class vessel, in March 2001. Royal Caribbean International has
three additional Radiance-class vessels on order and options to purchase two
more vessels. The Radiance-class vessels (approximately 90,000 gross tons each)
are a progression from the brand's Vision-class series and have approximately
2,100 berths each. The Radiance-class ships incorporate many of the dining and
entertainment options of the Voyager-class vessels, as well as offer a wide
array of unique features. These features include panoramic, glass elevators
facing outward to the sea, floor-to-ceiling glass windows offering spectacular
sea views, and a billiards club.
Celebrity Cruises. Celebrity Cruises was founded in 1990 and operated
three ships between 1992 and 1995. Between 1995 and 1997, Celebrity Cruises
undertook its first capital expansion program, adding three Century-class
vessels which range in size from 1,750 to 1,850 berths and disposing of one of
its original three vessels. Celebrity Cruises is currently engaged in its second
capital expansion program and took delivery of Millennium and Infinity, the
first two of the Millennium-class vessels, in June 2000 and February 2001,
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respectively. Celebrity Cruises has two additional Millennium-class vessels
(approximately 90,000 gross tons each) on order which will have 2,038 berths
each.
The Millennium-class ships are a progression from the Century-class
vessels, which have been widely accepted in the premium segment of the
marketplace. This new class of vessels builds on the brand's primary strengths,
including gourmet dining, spacious staterooms and suites complete with
verandahs, luxurious spa facilities and impeccable service. On the
Millennium-class ships, an entire resort deck is dedicated to health, fitness
and the rejuvenating powers of water. Celebrity Cruises' spas are among the most
luxurious spas afloat and offer a variety of features, including a large
hydropool with neck massage and body jets. Guests can relax in Millennium's
Notes music library, smoke cigars at Michael's Club or stop by The Platinum Club
for champagne and caviar.
Product Innovation
We recognize the need for new and innovative onboard products and
experiences for our guests, which we develop based on guest feedback, crew
suggestions and competitive product reviews. Accordingly, we continue to invest
in design innovations on new ships and additional product offerings on our
existing fleet. Expanded dining options, recreational activities such as rock
climbing and ice skating and the latest technology such as our Internet Cafe and
interactive television are among the services currently offered.
In March 2000, we announced the creation of Royal Celebrity Tours, a new
tour company, offering premium land tour programs in Alaska for guests traveling
on ships operating under the Royal Caribbean International and Celebrity Cruises
brands. The aim is to significantly enhance our vacation products in Alaska. The
decision to form the company was based on an extensive analysis of the Alaska
vacation market, and was reinforced by strong encouragement from travel partners
and guests regarding our need to provide land-based tour opportunities. Programs
will begin with the 2001 Alaska season.
Worldwide Itineraries
Our ships operate worldwide with a selection of itineraries that call on
approximately 200 destinations. New ships allow us to expand into new
destinations, itineraries and markets. Royal Caribbean International offers the
Exotic Destinations program which provides global cruise itineraries spanning
four continents. For the third year in a row, we are deploying Celebrity Cruises
vessels in the European market. Celebrity Cruises has also introduced Celebrity
Voyages(SM), which offers 10 to 15-night itineraries throughout the Caribbean
and South America. We continue to dedicate additional capacity to shorter
itineraries with the implementation of four and five-night (5/5/4) cruises out
of Ft. Lauderdale and San Juan and by establishing a Royal Caribbean
International vessel year-round in Port Canaveral to provide three and
four-night Bahamas cruises. In addition, both Royal Caribbean International and
Celebrity Cruises are expanding their home ports with Galaxy in Stockholm in the
summer, Zenith in Tampa in the winter and Rhapsody of the Seas alternating
between Galveston, Tampa and New Orleans.
International Guests
In connection with our global expansion, international guests have provided
an increasing share of our growth. International guests have grown from
approximately 7% of total guests in 1991 to approximately 18% of total guests in
2000. One of our strategies is to use fleet deployment and expanded itineraries
to increase our guest sourcing outside North America. In 2001, we have dedicated
Splendour of the Seas as a product designed to attract European and Latin
American guests. Over the past few years, we have increased our investment in
information technology spending and increased our international advertising to
enhance brand awareness worldwide. We carry out our international sales effort
through our sales offices located in London, Frankfurt, Oslo, Genoa and Paris,
and a network of 39 independent international representatives located throughout
the world. We are also able to accept bookings in various currencies. See Note 2
of the Consolidated Financial Statements for additional information on revenues
by geographic area for each of the last three financial years.
7
In connection with our international strategy, in July 2000 we entered into
a multi-faceted strategic alliance with First Choice Holidays PLC, one of the
United Kingdom's largest integrated tour operators. We also entered into a joint
venture with First Choice Holidays PLC to launch a European cruise line.
First Choice Holidays PLC now provides both brands with a significantly
larger distribution base in the United Kingdom and access to First Choice
Holidays PLC's significant retail outlets, operated under several well-known
brand names, as well as use of its new distribution technology, including its
unique interactive digital sales technology and online e-retail outlets. We have
provided First Choice Holidays PLC with special training and promotional
material geared at increasing the distribution of both brands.
This marketing alliance was solidified by our investment of approximately
$300 million in convertible preferred stock issued by First Choice Holidays PLC.
If fully converted, our holding would represent less than a 20% interest in
First Choice Holidays PLC.
Additionally, we entered into a joint venture with First Choice Holidays
PLC to launch a new cruise brand targeting the European vacation mass-market.
Viking Serenade, a 1,512-passenger ship currently operating under the Royal
Caribbean International brand, will be the first ship operated by the new cruise
line, which has yet to be named. As part of the transaction, Viking Serenade
will be renamed and offer itineraries out of the Mediterranean in summer and out
of the Caribbean in winter. Operations are expected to begin in the spring of
2002.
Revenue Management
We have developed what we believe to be the most sophisticated revenue
management system in the industry. At the core of the system is a database of
over 30 million records of both booking and "spill" (when a potential customer
chooses not to book a cruise due to price or availability) detail. The system
applies complex algorithms and heuristics to the data to provide us with
significant knowledge of the market such as expected demand, price elasticity
and expected retention of bookings. Based on this information, we take price,
inventory and marketing actions to maximize revenue. We are continuously working
to further refine the system through increased market segmentation, integration
of other revenues into the model, and further automation of the decision
process.
Technological Development
We continue to invest heavily in information technology to support our
corporate infrastructure and guest and travel trade relations. We now have fully
automated our pierside embarkation process. We have developed a corporate
shoreside intranet as well as electronic ship-to-shore communication tools to
improve our internal productivity. Both Royal Caribbean International and
Celebrity Cruises have extensive websites that are world class marketing portals
with consumer booking engines, providing access to millions of Internet users
throughout the world. We also have begun installing interactive televisions in
guests' staterooms, enabling them to shop for shore excursions, select a dinner
wine and monitor their onboard accounts. Other innovations include Royal
Caribbean Online, which allows guests access to the Internet. For the trade, we
have cruisingpower.com, a website dedicated to Internet communications with the
travel community, and browser-based booking systems with three of the four
principal global distribution systems. We have also launched CruiseManager, an
independent browser-based booking tool for the trade.
Travel Agency Support
Almost all of the bookings for our ships are made by independent travel
agencies and we are committed to supporting the travel agency community. We
maintain a large sales support organization including a district sales team of
approximately 135 members that supports both brands in North America. We were
the first cruise company to develop an automated booking system for the trade,
CruiseMatch(R) 2000. This automated reservations system allows travel agents
direct access to our computer reservation system to improve ease of bookings.
More than 30,000 independent travel agencies worldwide can book cruises for both
brands using CruiseMatch(R) 2000. Our Customer Service Center uses
state-of-the-art technology to help travel agents
8
resolve guest service issues prior to sailing. We operate two reservation call
centers, one in Miami, Florida and the other in Wichita, Kansas, thereby
offering flexibility and extended hours of operations.
SALES, MARKETING AND GUEST SERVICES
In addition to our large sales support organization, we believe that
maintaining personal contact with travel agency owners, managers and front-line
retail agents is crucial to retaining travel agency loyalty. We augment this
type of contact with an extensive program of seminars, CD-ROM training tools and
Internet updates designed to familiarize travel agents with the cruise industry
and the marketing of cruises.
Royal Caribbean International has a comprehensive marketing program with an
emphasis on building consumer preference using the tag line, Like no vacation on
earth(R). Through its advertising, Royal Caribbean International positions
itself as a provider of high quality, excellent value, all-inclusive cruise
vacations. Royal Caribbean International's marketing strategy focuses on
educating and enticing non-cruisers to the brand, while continuing to invite
past guests to sail again. Royal Caribbean International's current television
campaign, using the popular "Lust for Life" music, appeals to a broad
demographic of consumers who have an interest in a vacation that allows them to
experience its innovative ships, while seeing the world and choosing from
exciting onboard and destination activities.
Celebrity Cruises pursues a comprehensive integrated strategic marketing
program addressing both potential cruise guests as well as the travel trade.
Celebrity Cruises has launched a new communications campaign in the first
quarter of 2001 to further enhance its position as a premium cruise line for
individuals who seek tailored vacation experiences of exceptional quality. The
campaign also aims to increase the level and depth of consumer and trade
awareness of Celebrity Cruises' expanding fleet and itineraries. Celebrity
Cruises is well positioned among the top brands in the premium cruise vacation
segment based on its well-regarded "signature" elements including: gourmet
dining opportunities, personalized and unobtrusive guest service, museum quality
artwork, well-appointed staterooms, high staff-to-guest ratio, use of innovative
technology, the large well-equipped AquaSpas(SM), and one of the youngest fleets
in the industry.
We offer to handle travel aspects related to guest reservations and
transportation. Arranging guest air transportation is one of our important areas
of operation. We have developed a new technology, EZ-Book, which enables an
automated process of booking air travel at the lowest costs and preferred
routing. We maintain a comprehensive relationship with many of the major
airlines ranging from fare negotiation and space handling to baggage transfer.
9
OPERATIONS
Cruise Ships and Itineraries
We operate 21 ships, under two brands, on a selection of worldwide
itineraries ranging from two to 16 nights that call on approximately 200
destinations. The following table represents summary information concerning our
ships and their areas of operation based on 2001 itineraries (subject to
change):
[Enlarge/Download Table]
YEAR VESSEL
ENTERED SERVICE BERTHS PRIMARY AREAS OF OPERATION
--------------- ------ ------------------------------------
ROYAL CARIBBEAN INTERNATIONAL
Adventure of the Seas(1).......... 2001 3,114 Southern Caribbean
Radiance of the Seas.............. 2001 2,100 Pacific Northwest, Alaska, Southern
Caribbean
Explorer of the Seas.............. 2000 3,114 Eastern Caribbean
Voyager of the Seas............... 1999 3,114 Western Caribbean
Vision of the Seas................ 1998 2,000 Panama Canal, Hawaii, Alaska,
Mexican Riviera, Caribbean
Enchantment of the Seas........... 1997 1,950 Eastern & Western Caribbean
Rhapsody of the Seas.............. 1997 2,000 Alaska, Western Caribbean, Mexican
Riviera
Grandeur of the Seas.............. 1996 1,950 Southern Caribbean, Europe
Splendour of the Seas............. 1996 1,804 Europe, South America
Legend of the Seas................ 1995 1,804 Europe, Far East, Australia
Majesty of the Seas............... 1992 2,354 Bahamas
Monarch of the Seas............... 1991 2,354 Southern Caribbean, Western
Caribbean
Viking Serenade(2)(3)............. 1982/1991 1,512 Mexican Baja
Nordic Empress.................... 1990 1,600 Southern Caribbean, Bermuda
Sovereign of the Seas............. 1988 2,276 Bahamas
CELEBRITY CRUISES
Summit(1)......................... 2001 2,038 Caribbean
Infinity.......................... 2001 2,038 Alaska, Southern Caribbean
Millennium........................ 2000 2,038 Europe, Eastern & Western Caribbean
Mercury........................... 1997 1,870 Alaska, South America
Galaxy............................ 1996 1,870 Southern Caribbean, Europe
Century........................... 1995 1,750 Eastern & Western Caribbean
Zenith............................ 1992 1,374 Bermuda, Western Caribbean
Horizon........................... 1990 1,354 Caribbean, Bermuda
---------------
(1) Vessel is scheduled for delivery in 2001, but is not yet in service.
(2) Indicates year placed in service and year redeployed after conversion to
expand capacity.
(3) As part of the First Choice Holidays PLC transaction, ownership of Viking
Serenade was transferred to the new joint venture. Royal Caribbean
International will continue to operate Viking Serenade under a charter
agreement until early 2002.
Currently, the combined fleets of Royal Caribbean International and
Celebrity Cruises have an average age of approximately five years, which we
believe is the youngest of any major cruise company.
10
We have eight ships on order as follows:
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EXPECTED
VESSELS DELIVERY DATES BERTHS
------- ----------------- ------
ROYAL CARIBBEAN INTERNATIONAL
Voyager-class:
Adventure of the Seas(1)............................... 4th Quarter 2001 3,114
Unnamed................................................ 4th Quarter 2002 3,114
Unnamed................................................ 4th Quarter 2003 3,114
Radiance-class:(2)
Brilliance of the Seas................................. 2nd Quarter 2002 2,100
Unnamed................................................ 2nd Quarter 2003 2,100
Unnamed................................................ 1st Quarter 2004 2,100
CELEBRITY CRUISES
Millennium-class:
Summit(1).............................................. 3rd Quarter 2001 2,038
Unnamed................................................ 2nd Quarter 2002 2,038
---------------
(1) Included in table on prior page -- Cruise Ships and Itineraries.
(2) We also have two options on Radiance-class vessels with delivery dates in
the third quarters of 2005 and 2006.
The Voyager-class vessels are being built in Turku, Finland by
Kvaerner-Masa Yards; the Radiance-class vessels are being built in Papenburg,
Germany by Meyer Werft; and the Millennium-class vessels are being built by
Chantiers de l'Atlantique in St. Nazaire, France. These three yards have built
the majority of the vessels in both the Royal Caribbean International and
Celebrity Cruises fleets.
Shipboard Activities and Shipboard Revenues
Both brands offer modern fleets with a wide array of shipboard activities,
services and amenities including swimming pools, sun decks, spa facilities
(which include massage and exercise facilities), beauty salons, gaming
facilities (which operate while the ships are at sea), lounges, bars, Las
Vegas-style entertainment, retail shopping, libraries, cinemas, conference
centers, and shore excursions at each port of call. While many shipboard
activities are included in the base price of a cruise, additional revenues are
realized from gaming, the sale of alcoholic and other beverages, the sale of
gift shop items and shore excursions, photography and spa services. In addition,
both Royal Caribbean International and Celebrity Cruises offer a catalogue gift
service to provide travel agents and others with the opportunity to purchase
"bon voyage" gifts.
Seasonality
Our revenues are seasonal based on the demand for cruises. In recent years,
demand has peaked during the summer.
Guests and Capacity
The following table sets forth the aggregate number of guests carried and
the number of guests carried expressed as a percentage of the capacity of our
ships:
[Enlarge/Download Table]
YEAR ENDED DECEMBER 31,
---------------------------------
2000 1999 1998
--------- --------- ---------
Number of Guests Carried.............................. 2,049,902 1,704,034 1,841,152
Occupancy Percentage.................................. 104.4% 104.7% 105.2%
In accordance with cruise industry practice, capacity is determined based
on double occupancy per cabin even though some cabins can accommodate three or
four guests; accordingly, a percentage in excess of 100% indicates that more
than two guests occupied some cabins.
11
Cruise Pricing
Our cruise prices include a wide variety of activities and amenities,
including meals and entertainment. Prices vary depending on the destination,
cruise length, cabin category selected and the time of year the voyage takes
place. Additionally, we offer air transportation as a service for our guests
that elect to utilize our air program. Our air transportation prices vary by
gateway and destination and are available from cities in the United States,
Canada and Europe. Furthermore, we sell insurance which provides guests with
coverage for trip cancellation, medical protection and baggage protection.
SUPPLIERS
Our largest purchases are for airfare, food and related items, advertising,
fuel, hotel supplies and products related to guest accommodations. Most of the
supplies we require are available from numerous sources at competitive prices.
Our largest operating cost is air transportation for our guests. None of our
suppliers provided goods or services in excess of 10% of our revenues in 2000.
INSURANCE
We maintain an aggregate of approximately $8.9 billion of insurance on the
hull and machinery of our ships, which includes additional coverage for
disbursements, earnings and increased value, which are maintained in amounts
related to the value of each vessel. The coverage for each of the hull policies
is maintained with syndicates of insurance underwriters from the British,
Scandinavian, United States and other international insurance markets.
Liability coverage for shipowners, commonly referred to as protection and
indemnity insurance, is available through a worldwide network of mutual
insurance associations. Each of these associations participates in and is
subject to rules issued by the International Group of Protection and Indemnity
Associations. We maintain protection and indemnity insurance on each of our
ships through either Assuranceforeningen GARD or the United Kingdom Mutual Steam
Ship Assurance Association (Bermuda) Limited.
We maintain war risk insurance on each vessel through a Norwegian war risk
insurance organization in an amount equal to the total insured hull value. This
coverage includes physical damage to the vessel and protection and indemnity
risks for which coverage would be excluded by reason of war exclusion clauses in
the hull policies or rules of the indemnity insurance organizations.
We also maintain a form of business interruption insurance with our
insurance underwriters in the event that a vessel is unable to operate during
scheduled cruise periods due to loss or damage to the vessel arising from
certain covered events which last more than a specified period of time.
Insurance coverage is also maintained for certain events which would result in a
delayed delivery of our contracted new vessels, which we normally place starting
approximately two years prior to the scheduled delivery dates.
Insurance coverage for shoreside property, shipboard consumables and
inventory and general liability risks are maintained with insurance underwriters
in the United States and the United Kingdom. We have decided not to carry
business interruption insurance for our shoreside operations based on our
evaluation of the risks involved and our protective measures already in place,
as compared to the premium expense.
All insurance coverage is subject to certain limitations, exclusions and
deductible levels. In addition, in certain circumstances, we co-insure a portion
of these risks. Premiums charged by insurance carriers, including carriers in
the maritime insurance industry, increase or decrease from time to time and tend
to be cyclical in nature. We historically have been able to obtain insurance
coverage in amounts and at premiums we have deemed to be commercially
acceptable. We believe that, based on our historical experience, we will
continue to be able to do so.
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TRADEMARKS
We own a number of registered trademarks relating to, among other things,
the name "Royal Caribbean" and its crown and anchor logo, the name "Celebrity"
and its "X" logo, and the names of our cruise ships. We believe such trademarks
are widely recognized throughout the world and have considerable value.
REGULATION
All of our ships are registered in Norway or Liberia except for Mercury
which is registered in Panama. Each ship is subject to regulations issued by its
country of registry, including regulations issued pursuant to international
treaties governing the safety of the ship and its guests. Each country of
registry conducts periodic inspections to verify compliance with these
regulations. In addition, ships operating out of United States ports are subject
to inspection by the United States Coast Guard for compliance with international
treaties and by the United States Public Health Service for sanitary conditions.
Our ships are required to comply with international safety standards
defined in the Safety of Life at Sea Convention. The Safety of Life at Sea
Convention standards are revised from time to time, and the most recent
modifications are being phased in through 2010. We do not anticipate that we
will be required to make any material expenditures in order to comply with these
rules.
In 1993, the Safety of Life at Sea Convention was amended to adopt the
International Safety Management Code. The International Safety Management Code
provides an international standard for the safe management and operation of
ships and for pollution prevention. The International Safety Management Code
became mandatory for passenger vessel operators such as ourselves on July 1,
1998.
We are also subject to various United States and international laws and
regulations relating to environmental protection. Under such laws and
regulations, we are prohibited from, among other things, discharging certain
materials, such as petrochemicals and plastics, into the waterways.
We are required to obtain certificates from the United States Federal
Maritime Commission relating to our ability to meet liability in cases of
nonperformance of obligations to guests as well as casualty and personal injury.
Under the Federal Maritime Commission's current regulations, we are required to
provide a $15 million bond for each of Royal Caribbean International and
Celebrity Cruises as a condition to obtaining the required certificates. The
Federal Maritime Commission has proposed a revision to its regulations that
would require us to significantly increase the amount of this bond based on the
level of our customer deposits. We have indicated to the Federal Maritime
Commission that we support an increase in the bond amount and do not expect any
revisions to the Federal Maritime Commission regulations to have a material
effect on us.
We are required to obtain certificates from the United States Coast Guard
relating to our ability to meet liability in cases of water pollution. Under the
United States Coast Guard's current regulations, Royal Caribbean International
and Celebrity Cruises are required to provide guarantees of approximately $123.5
million and $81.2 million, respectively, as a condition to obtaining the
required certificates.
We believe that we are in material compliance with all the regulations
applicable to our ships and that we have all licenses necessary to conduct our
business. From time to time various other regulatory and legislative changes
have been or may in the future be proposed that could have an effect on the
cruise industry in general.
TAXATION OF THE COMPANY
The following discussion of the application of the federal income tax laws
to us and to our subsidiaries is based on the current provisions of the Internal
Revenue Code; proposed, temporary and final Treasury Department regulations;
administrative rulings; and court decisions. All of the foregoing are subject to
change, and any change thereto could affect the accuracy of this discussion.
Application of Section 883 of the Internal Revenue Code
We and our subsidiary, Celebrity Cruises Inc., the operator of Celebrity
Cruises, are foreign corporations engaged in a trade or business in the United
States, and our vessel-owning subsidiaries are foreign corporations
13
that, in many cases, depending upon the itineraries of their vessels, receive
income from sources within the United States. Under Section 883 of the Internal
Revenue Code, certain foreign corporations are not subject to United States
income or branch profits tax on United States source income derived from or
incidental to the international operation of a ship or ships, including income
from the leasing of such ships.
A foreign corporation will qualify for the benefits of Section 883 of the
Internal Revenue Code if in relevant part (i) the foreign country in which the
foreign corporation is organized grants an equivalent exemption to corporations
organized in the United States and (ii) more than 50% of the value of its
capital stock is owned, directly or indirectly, by individuals who are residents
of a foreign country that grants such an equivalent exemption to corporations
organized in the United States ("qualifying shareholders") or the stock of the
corporation (or the direct or indirect corporate parent thereof) is "primarily
and regularly traded on an established securities market" in the United States
or another qualifying country, such as Norway.
In the opinion of our United States tax counsel, and based on the
representations and assumptions set forth therein, we, Celebrity Cruises Inc.
and our vessel-owning subsidiaries qualify for the benefits of Section 883
because we and each of those subsidiaries are incorporated in a qualifying
jurisdiction and our common stock is primarily and regularly traded on an
established securities market in the United States or Norway. In addition, we
believe that substantially all of our income is derived from or incidental to
the international operation of a ship or ships. Any United States source income
not so derived will be subject to United States taxation, but we believe that
such income is not a material portion of our total income.
Although no final regulations have been promulgated that explain when stock
will be considered "primarily and regularly traded on an established securities
market" for purposes of Section 883, regulations on this subject have been
proposed by the Internal Revenue Service. The proposed regulations have no
current legal effect and may be modified before they are finalized. They
provide, in relevant part, that a corporation's stock will satisfy this
requirement only if more than 50% is owned by persons who each own less than 5%
of the value of the corporation's stock.
Our United States tax counsel expects us to meet the ownership requirements
of Section 883 in 2001 and beyond because (i) more than 50% of our common stock
is owned by persons who each own less than 5% of the value of such stock,
directly or by attribution, and (ii) in any event, the regulations as ultimately
finalized should permit identifiable direct 5% shareholders and indirect
shareholders who hold their interests through 5% shareholders to count favorably
toward the 50% test if they reside in qualifying jurisdictions, thereby
increasing the margin by which we meet such test. Additionally, in May 2000 our
Articles of Incorporation were amended to prohibit any person, other than our
two existing largest shareholders, from holding shares that give such person in
the aggregate more than 4.9% of the relevant class or classes of our shares
although under Liberian law this amendment may not be enforceable with respect
to shares of common stock that voted against the provision or abstained from the
vote.
There can be no assurance that the opinions of our United States tax
counsel set forth above will be accepted by the Internal Revenue Service or the
courts. Furthermore, Section 883 has been the subject of legislative
modifications in past years that have had the effect of limiting its
availability to certain taxpayers and there can be no assurance that future
legislation or certain changes in our stock ownership will not preclude us from
obtaining the benefits of Section 883.
Taxation in the Absence of an Exemption under Section 883 of the Internal
Revenue Code
In the event that we, Celebrity Cruises Inc., or our vessel-owning
subsidiaries were to fail to meet the requirements of Section 883 of the
Internal Revenue Code, or if such provision were repealed, then as explained
below, such companies would be subject to United States income taxation on only
a portion of their income.
Since we and Celebrity Cruises Inc. conduct a trade or business in the
United States, we and Celebrity Cruises Inc. would be taxable at regular
corporate rates on our company taxable income (i.e., without regard to the
income of our vessel-owning subsidiaries), from United States sources, which
includes 100% of income, if any, from transportation which begins and ends in
the United States (not including possessions of the
14
United States), 50% of income from transportation which either begins or ends in
the United States, and no income from transportation which neither begins nor
ends in the United States. The legislative history of the transportation income
source rules suggests that a cruise that begins and ends in a United States
port, but that calls on more than one foreign port, will derive United States
source income only from the first and last legs of such cruise. Because there
are no regulations or other Internal Revenue Service interpretations of these
rules, the applicability of the transportation income source rules in the
aforesaid favorable manner is not free from doubt. In addition, if any of our
earnings and profits effectively connected with our United States trade or
business are withdrawn or are deemed to have been withdrawn from our United
States trade or business (by dividend distribution, for example, or otherwise),
such withdrawn amount would be subject to a "branch profits" tax at the rate of
30%. The amount of such earnings and profits would be equal to the aforesaid
United States source income, with certain generally minor adjustments, less
income taxes. Finally, we and Celebrity Cruises Inc. would also be potentially
subject to tax on portions of certain interest paid by us at rates of up to 30%.
If Section 883 of the Internal Revenue Code were not available to a
vessel-owning subsidiary, such subsidiary would be subject to a special 4% tax
on its United States source gross transportation income, if any, each year
because its income is derived from the leasing of a vessel and because it does
not have a fixed place of business in the United States. Such United States
source gross transportation income may be determined under any reasonable
method, including ratios based upon (i) days traveling directly to or from
United States ports to total days traveling; or (ii) the lessee's United States
source gross income from the vessel (as determined under the source rules
discussed in the preceding paragraph, and subject to the assumptions and
qualifications set forth therein) to the lessee's total gross income from the
vessel.
ORGANIZATIONAL STRUCTURE
We hold directly or indirectly all of the voting stock of the following
significant subsidiaries:
[Download Table]
NAME INCORPORATION
---- -------------
Celebrity Cruise Lines Inc. ........................ Cayman Islands
Celebrity Cruises Holdings Inc. .................... Liberia
Cruise Mar Shipping Holdings Ltd. .................. Liberia
Celebrity Cruises Inc. ............................. Liberia
PROPERTY, PLANTS AND EQUIPMENT
Information about our cruise ships including their size and primary areas
of operation may be found within the Fleet Expansion and Cruise Ships and
Itineraries sections within Business Overview, Item 4. Information regarding our
cruise ships under construction, estimated expenditures and financing may be
found within the Fleet Expansion, Future Commitments, and Funding Sources
sections of Item 5. Information about leased vessels and encumbrances on vessels
may be found within the Material Contracts section of Item 10.
Our principal executive office and shoreside operations are located at the
Port of Miami, Florida where we lease three office buildings totaling
approximately 359,430 square feet from Miami-Dade County, Florida under
long-term leases with initial terms expiring in various years on and after 2011.
We also lease space in Wichita, Kansas for use primarily as an additional
reservation center and have recently entered into a lease for additional office
space in Miramar, Florida.
Royal Caribbean International operates two private destinations: (i) an
island we own in the Bahamas which we call CocoCay; and (ii) Labadee, a secluded
peninsula which we lease and is located on the north coast of Haiti.
We believe that our facilities are adequate for our current needs. We
evaluate our needs periodically and obtain additional facilities when considered
necessary.
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ITEM 5. OPERATING AND FINANCIAL REVIEW AND PROSPECTS
Certain statements under this caption, "Operating and Financial Review and
Prospects" constitute forward-looking statements under the Private Securities
Litigation Reform Act of 1995. Forward-looking statements do not guarantee
future performance and may involve risks, uncertainties and other factors which
could cause our actual results, performance or achievements to differ materially
from the future results, performance or achievements expressed or implied in
those forward-looking statements. Examples of these risks, uncertainties and
other factors include:
- general economic and business conditions,
- cruise industry competition,
- changes in cruise industry capacity,
- the impact of tax laws and regulations affecting our business or our
principal shareholders,
- the impact of changes in other laws and regulations affecting our
business,
- the impact of pending or threatened litigation,
- the delivery schedule of new vessels,
- emergency ship repairs,
- incidents involving cruise vessels at sea,
- reduced consumer demand for cruises as a result of any number of reasons,
including armed conflict or political instability,
- changes in interest rates or oil prices, and
- weather.
GENERAL
We reported record net income and earnings per share for the year ended
December 31, 2000 as shown in the table below. Net income increased 16.0% to
$445.4 million or $2.31 per share on a diluted basis compared to $383.9 million
or $2.06 per share in 1999. The increase in net income is primarily the result
of an increase in capacity associated with the addition to the fleet of Voyager
of the Seas in 1999, and Millennium and Explorer of the Seas in 2000.
Net income for 1999 and 1998 includes $17.3 million and $9.0 million,
respectively, of non-recurring settlement-related charges. Net income for 1998
also includes a reduction in earnings of approximately $9.0 million related to a
grounding incident involving Monarch of the Seas. Accordingly, on a comparable
basis, before the settlements and incident, earnings increased to $445.4 million
or $2.31 per share in 2000 from $401.2 million or $2.15 per share in 1999 and
from $348.8 million or $1.93 per share in 1998. (See Year Ended December 31,
1999 Compared to Year Ended December 31, 1998.)
[Enlarge/Download Table]
FOR THE YEAR ENDED DECEMBER 31,
---------------------------------------
2000 1999 1998
----------- ----------- -----------
(IN THOUSANDS, EXCEPT PER SHARE DATA)
Revenues................................................... $2,865,846 $2,546,152 $2,636,291
Operating Income........................................... 569,540 480,174 488,735
Net Income................................................. 445,363 383,853 330,770
Basic Earnings Per Share................................... 2.34 2.15 1.90
Diluted Earnings Per Share................................. 2.31 2.06 1.83
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Selected Statistical Information (unaudited):
[Enlarge/Download Table]
2000 1999 1998
---------- ---------- ----------
Guests Carried............................................. 2,049,902 1,704,034 1,841,152
Guest Cruise Days.......................................... 13,019,811 11,227,196 11,607,906
Occupancy Percentage....................................... 104.4% 104.7% 105.2%
Fleet Expansion
Our current fleet expansion program, which began with the introduction of
Voyager of the Seas in 1999, continued with the delivery of Millennium in June
2000, Explorer of the Seas in September 2000, Infinity in February 2001 and
Radiance of the Seas in March 2001. With the addition of Radiance of the Seas,
our fleet consists of 21 ships with approximately 42,226 berths.
We have eight ships on order. The planned berths and expected delivery
dates of the ships on order are as follows:
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EXPECTED
VESSELS DELIVERY DATES BERTHS
------- ----------------- ------
ROYAL CARIBBEAN INTERNATIONAL
Voyager-class:
Adventure of the Seas.................................. 4th Quarter 2001 3,114
Unnamed................................................ 4th Quarter 2002 3,114
Unnamed................................................ 4th Quarter 2003 3,114
Radiance-class:(1)
Brilliance of the Seas................................. 2nd Quarter 2002 2,100
Unnamed................................................ 2nd Quarter 2003 2,100
Unnamed................................................ 1st Quarter 2004 2,100
CELEBRITY CRUISES
Millennium-class:
Summit................................................. 3rd Quarter 2001 2,038
Unnamed................................................ 2nd Quarter 2002 2,038
---------------
(1) We also have two options on Radiance-class vessels with delivery dates in
the third quarters of 2005 and 2006.
We believe the Voyager-class vessels are the largest and most innovative
passenger cruise ships ever built. The Radiance-class vessels are a progression
from Royal Caribbean International's Vision-class vessels, while the
Millennium-class vessels are a progression from Celebrity Cruises' Century-class
vessels.
Based on the ships currently on order, our year-end berth capacity will
increase to 60,432 berths by December 31, 2004.
In May 1998, we sold Song of America for $94.5 million and recognized a
gain on the sale of $31.0 million. We operated Song of America under a charter
agreement until March 1999.
In July 2000, we entered into a joint venture with First Choice Holidays
PLC to launch a European cruise line. As part of the transaction, ownership of
Viking Serenade was transferred to the new joint venture at a valuation of
approximately $95.4 million resulting in a deferred gain of $3.8 million. Royal
Caribbean International will continue to operate Viking Serenade under a charter
agreement until early 2002 at which time the vessel will move to the new joint
venture. (See Liquidity and Capital Resources.)
17
RESULTS OF OPERATIONS
The following table presents operating data as a percentage of revenues.
As a result of settlements in 2000, 1999 and 1998 and the inclusion of
loss-of-hire insurance in Other income (expense) in 2000 and 1999, certain
operating margins are not comparative year over year. (See Year Ended December
31, 2000 Compared to Year Ended December 31, 1999.)
[Enlarge/Download Table]
FOR THE YEAR ENDED
DECEMBER 31,
-------------------------
2000 1999 1998
----- ----- -----
Revenues.................................................... 100.0% 100.0% 100.0%
Expenses:
Operating................................................. 57.7 58.8 60.5
Marketing, selling and administrative..................... 14.4 14.6 13.6
Depreciation and amortization............................. 8.0 7.8 7.4
----- ----- -----
Operating Income............................................ 19.9 18.8 18.5
Other Income (Expense)...................................... (4.4) (3.8) (6.0)
----- ----- -----
Net Income.................................................. 15.5% 15.0% 12.5%
===== ===== =====
YEAR ENDED DECEMBER 31, 2000 COMPARED TO YEAR ENDED DECEMBER 31, 1999
Revenues
Revenues increased 12.6% to $2.9 billion in 2000 compared to $2.5 billion
for the same period in 1999. The increase in revenues is due to a 16.4% increase
in capacity partially offset by a 3.3% decline in gross revenue per available
lower berth. The increase in capacity is primarily associated with the addition
to the fleet of Voyager of the Seas in 1999, and Millennium and Explorer of the
Seas in 2000. The decline in gross revenue per available lower berth was due to
lower cruise ticket prices, a lower percentage of guests electing to use our air
program and lower shipboard revenue per diems due to a higher use of
concessionaires onboard the Royal Caribbean International vessels in 2000.
Concessionaires pay us a net commission, which is recorded as revenue, in
contrast to in-house operations, where shipboard revenues and related cost of
sales are recorded on a gross basis. Net revenue per available lower berth for
2000 was approximately the same as in 1999. Occupancy for 2000 was 104.4%
compared to 104.7% in 1999.
Expenses
Operating expenses increased 10.4% to $1.7 billion in 2000 as compared to
$1.5 billion in 1999. The increase is primarily due to additional costs
associated with increased capacity and an increase in fuel costs, partially
offset by a decrease in air expenses due to a lower percentage of guests
electing to use our air program, as well as lower shipboard cost of sales due to
the increased use of concessionaires as discussed previously. Included in 1999
operating expenses are charges of $17.3 million, related to settlements with the
U.S. Department of Justice and the State of Alaska. Excluding the settlements,
operating expenses as a percentage of revenues decreased to 57.7% in 2000 from
58.1% in 1999.
Marketing, selling and administrative expenses increased 11.0% to $412.8
million in 2000 from $371.8 million in 1999. The increase is primarily due to
television advertising costs associated with our new advertising campaigns to
promote brand awareness, as well as increased administrative staffing levels and
investment in information technology to support our growth. Marketing, selling
and administrative expenses as a percentage of revenues decreased from 14.6% in
1999 to 14.4% in 2000.
Depreciation and amortization increased 16.7% to $231.0 million in 2000
from $197.9 million in 1999. The increase is due to incremental depreciation
associated with the addition of new ships, as well as shoreside capital
expenditures primarily related to information technology in support of our
growth plans.
18
Other Income (Expense)
Gross interest expense (excluding capitalized interest) increased to $198.5
million in 2000 as compared to $165.2 million in 1999. The increase is due
primarily to higher debt levels associated with our fleet expansion program and
higher interest rates. Capitalized interest increased $9.6 million from $34.6
million in 1999 to $44.2 million in 2000, due to an increase in expenditures
related to ships under construction.
Included in Other income (expense) in 2000 is approximately $10.2 million
of compensation from the shipyard related to the delivery of Millennium and $9.2
million of dividend income from our July 2000 investment in convertible
preferred stock of First Choice Holidays PLC. (See Liquidity and Capital
Resources.) Included in Other income (expense) in 1999 is $26.5 million of
loss-of-hire insurance resulting from ships out of service.
YEAR ENDED DECEMBER 31, 1999 COMPARED TO YEAR ENDED DECEMBER 31, 1998
Revenues
Revenues decreased 3.4% to $2.5 billion in 1999 compared to $2.6 billion
for the same period in 1998. The decline in revenues is due to a 2.9% decrease
in capacity and a 0.6% decline in gross revenue per available lower berth. The
reduction in capacity is associated with the departure of Song of America from
the fleet in March 1999 and a temporary decline in capacity resulting from a
grounding incident involving Monarch of the Seas in December 1998 and
unscheduled engine repairs on Grandeur of the Seas and Enchantment of the Seas
during the first half of 1999. The reduction in capacity was partially offset by
the full-year impact of Vision of the Seas which entered service in the second
quarter of 1998 and Voyager of the Seas which entered service in the fourth
quarter of 1999. The decrease in gross revenue per available lower berth is
primarily due to a reduction in air revenue per diems associated with fewer
guests using our air program, partially offset by improved guest per diems.
Expenses
Operating expenses decreased 6.1% to $1.5 billion in 1999 as compared to
$1.6 billion in 1998. Included in operating expenses are charges of $17.3
million and $9.0 million in 1999 and 1998, respectively, related to settlements
with the U.S. Department of Justice and the State of Alaska. The decrease in
operating expenses is primarily due to the decline in capacity and lower air
costs from fewer guests using our air program. As a percentage of revenues,
operating expenses decreased from 60.5% in 1998 to 58.8% in 1999 primarily due
to fewer guests using our air program.
Marketing, selling and administrative expenses increased 3.5% to $371.8
million in 1999 from $359.2 million in 1998. The increase is primarily due to an
increased investment in information technology and an increase in international
advertising to enhance our brand awareness worldwide. As a percentage of
revenues, marketing, selling and administrative expenses increased to 14.6% in
1999 from 13.6% in 1998. Approximately half of the margin increase is the result
of higher expenses described above and approximately half is due to a decline in
revenues from ships out of service.
Depreciation and amortization remained relatively consistent at $197.9
million in 1999 compared to $194.6 million in 1998.
Other Income (Expense)
Gross interest expense (excluding capitalized interest) decreased to $165.2
million in 1999 as compared to $182.8 million in 1998. The decline is primarily
due to a decrease in the average debt level from prepayments made during 1998 as
well as a decrease in interest rates. Capitalized interest increased $19.6
million from $15.0 million in 1998 to $34.6 million in 1999, due to an increase
in expenditures related to ships under construction.
Included in Other income (expense) in 1999 is $26.5 million of loss-of-hire
insurance resulting from ships out of service. Other income (expense) in 1998
includes a gain of $31.0 million from the sale of Song of
19
America as well as a $32.0 million charge related to the write-down to fair
market value of Viking Serenade. Also included in Other income (expense) in 1998
is $3.8 million of net costs related to the Monarch of the Seas incident.
LIQUIDITY AND CAPITAL RESOURCES
Sources and Uses of Cash
Net cash provided by operating activities was $703.3 million in 2000 as
compared to $583.4 million in 1999 and $526.9 million in 1998. The increase for
all years was primarily due to higher net income.
In connection with our international strategy, in July 2000 we entered into
a multi-faceted strategic alliance with First Choice Holidays PLC, one of the
United Kingdom's largest integrated tour operators. This marketing alliance was
solidified by our investment of approximately $300 million in convertible
preferred stock issued by First Choice Holidays PLC. Additionally, we entered
into a joint venture with First Choice Holidays PLC to launch a new cruise line
targeting the European vacation mass-market. Viking Serenade, a 1,512-berth ship
currently operating under the Royal Caribbean International brand, will be the
first ship operated by the new cruise line, which has yet to be named. As part
of the transaction, ownership of Viking Serenade was transferred to the new
joint venture at a valuation of $95.4 million. The contribution of Viking
Serenade represents our 50% investment in the joint venture as well as $47.7
million in proceeds towards the purchase price of the convertible preferred
stock.
In 1999, we issued 10,825,000 shares of common stock. The net proceeds were
approximately $487.4 million.
During 2000, 1999 and 1998, we paid quarterly cash dividends on our common
stock totaling $91.3 million, $69.1 million and $55.2 million, respectively, as
well as quarterly cash dividends on our preferred stock, totaling $3.1 million,
$12.5 million and $12.5 million, respectively.
We made principal payments totaling approximately $128.1 million, $127.9
million and $343.2 million under various term loans and capital leases during
2000, 1999 and 1998, respectively. In connection with the delivery of Millennium
and Explorer of the Seas and the purchase of convertible preferred shares, we
drew $1.2 billion on various credit facilities.
During the year ended December 31, 2000, our capital expenditures were
approximately $1.3 billion as compared to $1.0 billion during 1999 and $0.6
billion during 1998. The largest portion of capital expenditures related to the
delivery of Millennium and Explorer of the Seas in 2000, Voyager of the Seas in
1999, Vision of the Seas in 1998, as well as progress payments for ships under
construction in all years.
We received proceeds of $94.5 million from the sale of Song of America
during 1998.
Capitalized interest increased to $44.2 million in 2000 from $34.6 million
in 1999 and $15.0 million in 1998. The increase in all years was due to an
increase in expenditures related to vessels under construction.
Future Commitments
We currently have eight ships on order for an additional capacity of 19,718
berths. The aggregate contract price of the eight ships, which excludes
capitalized interest and other ancillary costs, is approximately $3.4 billion,
of which we have deposited $248.0 million as of December 31, 2000. Additional
deposits are due prior to the dates of delivery of $223.1 million, $121.8
million, and $27.8 million in 2001, 2002 and 2003, respectively. We anticipate
that overall capital expenditures will be approximately $2.2 billion, $1.7
billion, and $1.2 billion for 2001, 2002 and 2003, respectively.
We also have options to purchase two additional Radiance-class vessels with
delivery dates in the third quarters of 2005 and 2006. The options have an
aggregate contract price of $804.6 million. We have the right to cancel the
options on or before June 27, 2001.
We have $3.4 billion of long-term debt of which $109.9 million is due
during the 12-month period ending December 31, 2001.
20
As a normal part of our business, depending on market conditions, pricing
and our overall growth strategy, we continuously consider opportunities to
contract for the building of additional ships. We may also consider the sale of
ships. In addition, 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.
Additional information on our debt and commitments may be found in Notes 6
and 12 of our Consolidated Financial Statements.
Funding Sources
As of December 31, 2000, our liquidity was $907.8 million consisting of
$177.8 million in cash and cash equivalents and $730.0 million available under
our $1.0 billion unsecured revolving credit facility. In December 2000, we also
entered into a $360.0 million, five year, unsecured term loan that can be
utilized during 2001. No amounts are currently outstanding under this facility.
In February 2001, we received net proceeds of $1.1 billion from the issuance of
Senior Notes and Liquid Yield Option(TM) Notes due in 2011 and 2021,
respectively. Capital expenditures and scheduled debt payments will be funded
through a combination of cash flows provided by operations, drawdowns under our
available credit facilities, the incurrence of additional indebtedness and sales
of securities in private or public securities markets. In addition, the
agreements related to five of the eight ships currently on order require the
shipyards to make available export financing for up to 80% of the contract price
of the vessels.
QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
General
We are exposed to market risk attributable to changes in interest rates,
currency exchange rates and commodity prices. As a result, we enter into various
derivative transactions to manage a portion of these exposures to market risk
pursuant to our hedging practices and policies. The impacts of these hedging
instruments are offset by corresponding changes in the underlying exposures
being hedged. We achieve this by closely matching the amount, term and
conditions of the derivative instrument with the underlying risk being hedged.
We do not hold or issue derivative financial instruments for trading or other
speculative purposes. Derivative positions are monitored using techniques
including market valuations and sensitivity analysis.
Interest Rate Risk
Our exposure to market risk for changes in interest rates relates to our
long-term debt obligations. At December 31, 2000, the fair value of our
long-term fixed rate debt was estimated at $3,332.5 million using quoted market
prices where available for our debt or similar debt with the same remaining
maturities or discounted cash flow analyses. Market risk associated with our
long-term debt is the potential increase in fair value resulting from a decrease
in interest rates. We use interest rate swaps to modify our exposure to interest
rate movements and manage our interest expense. Our interest rate swaps are
floating rate instruments that are tied to LIBOR. The fair values of our
interest rate swaps were estimated at $24.6 million as of December 31, 2000
based on quoted market prices for similar or identical financial instruments to
those we hold. A 10% decrease in assumed interest rates would increase the fair
value of our long-term debt by approximately $62.5 million. This increase would
be partially offset by an increase in the fair values of our interest rate swaps
of approximately $28.0 million.
Foreign Currency Exchange Rate Risk
We are exposed to foreign currency exchange rate fluctuations on the U.S.
dollar value of foreign currency denominated firm commitments related to vessel
construction contracts and forecasted transactions. To manage the volatility
relating to currency exchange rates, we net revenue and expense exposures to
take advantage of natural offsets and enter into forward purchase contracts
and/or option contracts for a portion of the remaining exposures. Our principal
net currency exposures relate to the Norwegian kroner and the euro. The fair
values of these financial instruments are estimated based on quoted market
prices for equivalent
21
instruments with the same remaining maturities. The fair values of such
contracts were approximately ($5.6) million at December 31, 2000. The potential
decrease in the fair values of these contracts due to a 10% strengthening of the
U.S. dollar would be approximately $138.8 million. This decrease in fair values
would be offset by a gain generated from the realization of the firm commitment
or forecasted transactions being hedged.
ITEM 6. DIRECTORS, SENIOR MANAGEMENT AND EMPLOYEES
DIRECTORS AND SENIOR MANAGEMENT
Our directors and senior management are listed below. Officers are
appointed by the Board of Directors and serve at their discretion.
The Board of Directors is divided into three classes. The current term of
office of directors in Class II expires at the 2001 Annual Meeting. The current
term of office of directors in Class III expires at the 2002 Annual Meeting, and
the current term of office of directors in Class I expires at the 2003 Annual
Meeting. Each newly elected director will serve three years from the date of his
or her election. For a description of the arrangements between the major
shareholders regarding the nomination and election of directors, see Item 7.
Major Shareholders and Related Party Transactions.
[Enlarge/Download Table]
NAME AGE POSITION
---- --- --------
Richard D. Fain(1)........................ 53 Chairman, Chief Executive Officer and Director
Jack L. Williams.......................... 51 President, Royal Caribbean International
Richard E. Sasso.......................... 51 President, Celebrity Cruises
Richard J. Glasier........................ 55 Executive Vice President and Chief Financial Officer
Edwin W. Stephan(2)....................... 69 Director and Vice Chairman
Tor Arneberg(2)........................... 72 Director
Bernard W. Aronson(1)..................... 54 Director
John D. Chandris(1)....................... 50 Director
Arvid Grundekjoen(1)...................... 45 Director
Laura Laviada(3).......................... 50 Director
Jannik Lindbaek(2)........................ 62 Director
Eyal Ofer(3).............................. 50 Director
Thomas J. Pritzker(2)..................... 50 Director
William K. Reilly(3)...................... 61 Director
Arne Wilhelmsen(3)........................ 71 Director
---------------
(1) Class I director
(2) Class II director
(3) Class III director
Richard D. Fain has served as a Director since 1981 and as our Chairman and
Chief Executive Officer since 1988. Mr. Fain is Chairman of the International
Council of Cruise Lines, an industry trade organization. Mr. Fain has been
involved in the shipping industry for 25 years.
Jack L. Williams has served as President of Royal Caribbean International
since January 1997. Formerly Vice President and General Sales Manager for
American Airlines, Mr. Williams had been employed at American Airlines for 23
years in a variety of positions in finance, marketing and operations. In his
most recent assignment, Mr. Williams was responsible for American Airlines'
sales programs and promotions worldwide.
Richard E. Sasso has served as President of Celebrity Cruises since January
1996. From the founding of Celebrity in 1990 through January 1996, Mr. Sasso
served as its Senior Vice President Sales and Marketing. Mr. Sasso has been
involved in the cruise industry for over 29 years.
22
Richard J. Glasier has served as our Executive Vice President and Chief
Financial Officer since June 1996 and as our Senior Vice President and Chief
Financial Officer since 1985. Mr. Glasier has held various senior financial
positions in the hotel, gaming and cruise industry for over 20 years.
Edwin W. Stephan has served as a Director since January 1996. From our
inception in 1968 through 1995, Mr. Stephan served as President or General
Manager of the Company. Mr. Stephan has been involved in the cruise industry for
over 30 years.
Tor Arneberg has served as a Director since November 1988. Mr. Arneberg is
a senior advisor and has served as an Executive Vice President of Nightingale &
Associates, a management consulting company, since 1982. From 1975 until 1982,
Mr. Arneberg co-founded and operated AgTek International, a company involved in
the commercial fishing industry. Prior to that, Mr. Arneberg was director of
marketing for Xerox Corporation. He is an executive trustee and vice president
of the American Scandinavian Foundation and received a silver medal in the 1952
Summer Olympics in Helsinki, Finland as a member of the Norwegian Olympic
Yachting Team.
Bernard W. Aronson has served as a Director since July 1993. Mr. Aronson is
currently Managing Partner of ACON Investments, LLC. Prior to that he served as
international advisor to Goldman, Sachs & Co. From June 1989 to July 1993, Mr.
Aronson served as Assistant Secretary of State for Inter-American Affairs. Prior
to that, Mr. Aronson served in various positions in the private and government
sectors. Mr. Aronson is a member of the Council on Foreign Relations. Since
January, 1998, Mr. Aronson has served as a Director of Liz Claiborne, Inc.
John D. Chandris has served as a Director since July 1997. Mr. Chandris is
Chairman of Chandris (UK) Limited, a shipbrokering office based in London,
England. Until September 1997, Mr. Chandris also served as Chairman of Celebrity
Cruise Lines Inc. Mr. Chandris is a director of Leathbond Limited, a U.K. real
estate company, and serves on the Board of the classification society, Lloyd's
Register.
Arvid Grundekjoen has served as a Director since November 2000. Mr.
Grundekjoen has served as Chief Executive Officer of Awilco ASA, a public
shipping company, since 1992. He is also Managing Director of Anders Wilhelmsen
& Co. AS. and serves as Chairman of the supervisory boards of Linstow ASA, AS.
Investa, IT Fornebu Eiendom AS. and Creati AS. Mr. Gundekjoen has previously
served as President of Teamco, a data processing and information technology
company.
Laura Laviada has served as a Director since July 1997. From 1995 through
2000, Ms. Laviada was the President and Chief Executive Officer of Editorial
Televisa, the largest Spanish language magazine publisher in the world with 40
titles distributed throughout 19 countries. In October 2000, Ms. Laviada sold
her equity interest in the company and is currently starting a non-profit
organization to provide credit and micro-enterprise training for women in
Mexico.
Jannik Lindbaek has served as a Director since May 1999. From 1994 until
1999, Mr. Lindbaek served as Executive Vice President of International Finance
Corp., Washington, D.C. International Finance Corp. is the private sector arm of
the World Bank Group and makes equity investments and loans to private sector
projects in developing countries. From 1986 until 1994, Mr. Lindbaek served as
President and Chief Executive Officer of Nordic Investment Bank, Helsinki,
Finland, a multilateral financial institution owned by the five Nordic
countries. From 1976 through 1985, Mr. Lindbaek served as President and Chief
Executive Officer of Storebrand Insurance Co., Oslo, Norway, the largest
insurance group in Norway. Mr. Lindbaek is a director of Vital Life Insurance
Co., Anders Wilhelmsen & Co. AS. and Chairman of the Board (non-executive) of
Den norske Bank. Mr. Lindbaek also serves on the International Advisory Boards
of The Chubb Corporation and the East African Development Bank and is Chairman
of the Bergen Festival of Music and Drama, Bergen, Norway.
Eyal Ofer has served as a Director since May 1995. Mr. Ofer has served as
the Chief Executive Officer of Carlyle M.G. Limited since May 1991.
Thomas J. Pritzker has served as a Director since February 1999. Mr.
Pritzker is Chairman and CEO of The Pritzker Organization and a partner in the
law firm of Pritzker & Pritzker. He is Chairman and CEO of
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Hyatt Corporation and Hyatt International. Mr. Pritzker is also a founder and
Director of First Health Corporation where he is also Chairman of the Executive
Committee. First Health Corporation is a publicly traded company engaged in the
managed care industry. Mr. Pritzker is a member of the Board of Trustees of the
University of Chicago and the Art Institute of Chicago where he is Chairman of
the Committee on Asian Art.
William K. Reilly has served as a Director since January 1998. Mr. Reilly
is the chief executive officer of Aqua International Partners, an investment
group that finances water purification in developing countries. From 1989 to
1993, Mr. Reilly served as the Administrator of the U.S. Environmental
Protection Agency. He has also previously served as the Payne Visiting Professor
at Stanford University's Institute of International Studies, president of World
Wildlife Fund and of The Conservation Foundation, executive director of the
Rockefeller Task Force on Land Use and Urban Growth and Chairman of the Natural
Resources Council of America. He is Chairman of the Board of Directors of World
Wildlife Fund and serves on the Board of Trustees of the American Academy in
Rome, the National Geographic Society, the Packard Foundation and the Presidio
Trust. He also serves as a director of Dupont, Conoco and Evergreen Holdings.
Arne Wilhelmsen has served as a Director since 1968. Mr. Wilhelmsen, one of
our founders, is a principal and Chairman of the Board of A. Wilhelmsen AS. and
board member in Anders Wilhelmsen & Co. AS. Mr. Wilhelmsen has been involved in
the shipping industry for over 40 years.
COMPENSATION
Cash Compensation
Our executive planning committee consists of Messrs. Fain, Sasso, Williams,
Glasier and Thomas F. Murrill, Vice President, Chief Human Resources Officer. We
paid our directors and members of our executive planning committee (16 persons)
aggregate cash compensation of $5.7 million during the year ended December 31,
2000.
Executive Bonus Plan
Our Executive Bonus Plan provides a means of rewarding key executives who
contribute to our profitable growth. Annual bonuses under the Executive Bonus
Plan are paid to eligible executives based upon (i) the extent to which our
financial performance during the year meets certain established objectives and
(ii) the extent to which the executive attains established individual and
corporate performance objectives. The Executive Bonus Plan is administered by
the Compensation Committee of the Board of Directors.
Retirement Plan and Other Executive Compensation Plans
All eligible shoreside officers and employees are participants in our
Retirement Plan. Contributions ranging from 8% to 12% of the participant's
compensation (as defined in the plan), depending on the length of such
participant's employment, are made on an annual basis to the participant's
account. Benefits under the Retirement Plan are payable on the later of the date
the participant attains the age of 65 or the date the participant actually
retires, but in no event later than April 1st following the calendar year in
which the participant attains the age of 70 1/2. Benefits are payable as
follows: (i) in a single lump sum, payable upon termination of employment; (ii)
as a life annuity, payable monthly upon retirement during the lifetime of the
employee; (iii) in installments payable upon retirement for a period not to
exceed 120 months; or (iv) a joint and 50% surviving spouse annuity, payable
monthly upon retirement during the lifetime of the employee and spouse.
We also have a Supplemental Executive Retirement Plan. Under the
Supplemental Executive Retirement Plan, we accrue, but do not fund, an annual
amount for the account of each of our executives equal to the reduction in our
contribution under the Retirement Plan in accordance with Section 401(a)(17) of
the Internal Revenue Code. Other terms and benefits of the Supplemental
Executive Retirement Plan are the same as those of the Retirement Plan.
24
Richard D. Fain is entitled to receive upon his cessation of employment by
us for any reason the assets of a grantor trust established by us for the
benefit of Mr. Fain. We make quarterly contributions of 10,086 shares of common
stock to the grantor trust and will continue to do so until the earlier of the
cessation of Mr. Fain's employment or June 2014. In addition, Mr. Fain is
entitled to receive upon his cessation of employment by us for certain reasons,
an amount equal to his then current annual base salary.
The aggregate amount set aside or accrued during 2000 to provide pension,
retirement or other executive compensation benefits for the directors and
members of the executive planning committee, as a group, was $0.7 million.
We have stock option plans under which we issue options to our directors,
officers and key employees to purchase shares of our common stock. The plans
consist of a 1990 Employee Stock Option Plan, a 1995 Incentive Stock Option Plan
and a 2000 Stock Option Plan. The 1995 Incentive Stock Option Plan provides for
the issuance of up to 3,700,000 shares of our common stock and, subject to
approval by our shareholders at our 2001 Annual Meeting, will be increased to
6,700,000 shares. The 2000 Stock Option Plan provides for the issuance of up to
8,000,000 shares of our common stock and, subject to approval by our
shareholders at our 2001 Annual Meeting, will be increased to 13,000,000 shares.
The 1990 Employee Stock Option Plan terminated by its terms in March 2000,
although all options that had been outstanding at the time of termination remain
in effect. All options terminate on the earlier of the option expiration date
(which is generally ten years from the date of grant), or within a specified
period following the recipient's cessation of employment or service as a
director.
In connection with our initial public offering in April 1993, we issued
379,714 stock options at an exercise price of $9.00 per share to one of our
officers. The options, which vested immediately, will generally expire upon
termination of the officer's employment. As of March 1, 2001, 354,714 options
were outstanding.
Options covering a total of 1,095,000 shares of common stock were issued
during 2000 to our directors and members of our executive planning committee at
exercise prices of $48.00, $28.78, $28.88 and $20.30. The options expire on
February 4, 2010, March 3, 2010, March 31, 2010 and December 4, 2010,
respectively.
The preceding options include the following options which were granted on
December 4, 2000 to the following persons at an exercise price of $20.30 per
share:
[Download Table]
NAME OPTIONS
---- -------
Tor Arneberg................................................ 10,000
Bernard W. Aronson.......................................... 10,000
John D. Chandris............................................ 10,000
Richard D. Fain............................................. 150,000
Arvid Grundekjoen........................................... 10,000
Laura Laviada............................................... 10,000
Jannik Lindbaek............................................. 10,000
Eyal Ofer................................................... 10,000
Thomas J. Pritzker.......................................... 10,000
William K. Reilly........................................... 10,000
Edwin W. Stephan............................................ 10,000
Arne Wilhelmsen............................................. 10,000
Richard E. Sasso............................................ 65,000
Jack L. Williams............................................ 100,000
Richard J. Glasier.......................................... 75,000
Our 1994 Employee Stock Purchase Plan provides for the grant of rights to
eligible employees to purchase a maximum of 800,000 shares of common stock. The
1994 Employee Stock Purchase Plan is generally available to all of our employees
who have been employed for at least one year and who customarily work at least
five months per calendar year. Offerings to employees under the 1994 Employee
Stock Purchase Plan are made on a quarterly basis. Subject to certain
limitations, the purchase price for each share of common stock under the 1994
Employee Stock Purchase Plan is equal to 90% of the average of the market
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prices of the common stock as reported on the NYSE on the first business day of
the purchase period and the last business day of each month of the purchase
period.
Effective January 1, 1998, we instituted a program, "Taking Stock in
Employees," to award stock to employees up to a maximum of 1,400,000 shares of
common stock. Employees are awarded five shares of our common stock at the end
of each year of employment through December 31, 2007. Employees can elect to
receive cash equal to the fair market value of the stock upon vesting.
BOARD PRACTICES
Our Compensation Committee consists of not less than two directors who are
not salaried officers of our company. The purpose of the Compensation Committee
is to review the compensation of our executives and to make determinations
relative to that. The current members of the Compensation Committee are Mr.
Arneberg and Mr. Aronson. The Compensation Committee operates under the
authority of our Board of Directors as provided by the terms of our By-Laws.
The Audit Committee consists of three independent directors. The purpose of
the Audit Committee is to provide general oversight of audit, legal compliance
and potential conflict of interest matters. The current members of the Audit
Committee are Messrs. Arneberg, Aronson and Lindbaek. The Audit Committee
operates under the authority of our Board of Directors as provided by the terms
of our By-Laws. The Audit Committee has adopted a charter that provides specific
guidance to the Committee as to their role, responsibility and compliance with
the Securities and Exchange Commission's Audit Committee Rules.
For the term of our Board of Directors, see the Directors and Senior
Management section of this Item 6.
EMPLOYEES
As of December 31, 2000, we employed approximately 2,700 full-time and 500
part-time employees in our shoreside operations worldwide. We also employed
approximately 23,000 crew and staff for our vessels. As of December 31, 2000,
approximately 70% of our shipboard employees were covered by collective
bargaining agreements. We believe that our relationship with our employees is
good.
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SHARE OWNERSHIP
As of March 1, 2001, Richard D. Fain beneficially owned 2,195,019 shares of
common stock, representing 1.1% of our issued and outstanding shares of common
stock.(1)
As of March 1, 2001, Arne Wilhelmsen beneficially owned 46,357,830 shares
of common stock, representing 24.1% of our issued and outstanding shares of
common stock.(2)
Each other director and member of the executive planning committee owns
less than 1% of the issued and outstanding shares of our common stock. Set forth
below is additional information concerning the shareholdings of such other
directors and certain members of our executive planning committee as of February
2, 2001 as reported to the Oslo Stock Exchange. Total holdings include vested
and unvested stock options:
[Download Table]
TOTAL HOLDINGS
(INCLUDING VESTED AND
NAME UNVESTED STOCK OPTIONS)
---- -----------------------
Tor Arneberg................................................ 70,000
Bernard W. Aronson.......................................... 70,000
John D. Chandris............................................ 45,000
Richard J. Glasier.......................................... 410,551
Arvid Grundekjoen........................................... 12,000
Laura Laviada............................................... 45,000
Jannik Lindbaek............................................. 25,000
Eyal Ofer................................................... 70,000(3)
Thomas J. Pritzker.......................................... 30,000(3)
William K. Reilly........................................... 30,000
Richard E. Sasso............................................ 235,000
Edwin W. Stephan............................................ 85,000
Jack L. Williams............................................ 418,435
---------------
(1) This amount includes (i) 663,500 shares of common stock covered by vested
options exercisable on or before May 1, 2001; (ii) 1,071,412 shares of
common stock held by Monument Capital Corporation, a Liberian Corporation as
nominee for various trusts primarily for the benefit of certain members of
the Fain family; (iii) 455,352 shares of common stock issued to a trust for
the benefit of Mr. Fain; and (iv) 247 shares of common stock held by Mr.
Fain's minor daughter. Mr. Fain disclaims beneficial ownership of some or
all of the shares of common stock referred to in (ii), (iii) and (iv) above.
Of the 663,500 shares of common stock covered by the foregoing vested
options; (A) 354,714 are exercisable at $9.00 per share and will generally
expire on the termination of Mr. Fain's employment; (B) 50,000 are
exercisable at $13.78 per share and expire on February 3, 2005; (C) 20,286
are exercisable at $11.19 per share and expire on January 2, 2006; (D)
80,000 are exercisable at $13.31 per share and expire on October 15, 2006;
(E) 120,000 are exercisable at $25.59 per share and expire on January 27,
2008; and (F) 38,500 are exercisable at $35.09 per share and expire on
February 5, 2009. Amount does not include 536,500 unvested stock options
held by Mr. Fain.
(2) Includes (i) 46,329,330 shares held by A. Wilhelmsen AS., a Norwegian
corporation, and (ii) 28,500 shares of common stock covered by vested
options exercisable on or before May 1, 2001. See Item 7. Major Shareholders
and Related Party Transactions. Of the 28,500 options, (A) 15,000 shares are
exercisable at $14.16 per share and expire on May 20, 2004; (B) 7,500 shares
are exercisable at $14.38 per share and expire on June 13, 2006; and (C)
6,000 shares are exercisable at $26.75 per share and expire on September 24,
1998. Amount does not include 41,500 unvested stock options held by Mr.
Wilhelmsen.
(3) Does not include 48,281,900 shares owned by Cruise Associates. See Item 7.
Major Shareholders and Related Party Transactions.
27
ITEM 7. MAJOR SHAREHOLDERS AND RELATED PARTY TRANSACTIONS
The following table sets forth certain information regarding the beneficial
ownership of our common stock as of March 1, 2001 by each person who is known by
us to own beneficially more than 5% of the outstanding common stock.
[Download Table]
NUMBER OF
SHARES
OF
COMMON PERCENTAGE
NAME STOCK OWNERSHIP
---- --------- ----------
A. Wilhelmsen AS.(1)........................................ 46,329,330 24.1%
Cruise Associates(2)........................................ 48,281,900 25.1%
---------------
(1) A. Wilhelmsen AS. is a Norwegian corporation, the indirect beneficial owners
of which are members of the Wilhelmsen family of Norway.
(2) Cruise Associates is a Bahamian general partnership, the indirect beneficial
owners of which are various trusts primarily for the benefit of certain
members of the Pritzker family of Chicago, Illinois, and various trusts
primarily for the benefit of certain members of the Ofer family.
A. Wilhelmsen AS. and Cruise Associates are parties to a shareholders
agreement on certain matters relative to our organization and operation and
certain matters concerning their respective ownership of our voting stock.
During the term of the shareholders agreement, A. Wilhelmsen AS. and Cruise
Associates have agreed to vote their shares of common stock in favor of the
following individuals as our directors: (i) up to four nominees of A. Wilhelmsen
AS. (at least one of whom must be independent); (ii) up to four nominees of
Cruise Associates (at least one of whom must be independent); and (iii) one
nominee who must be Richard D. Fain or such other individual who is then
employed as our chief executive officer. In connection with our acquisition of
Celebrity, A. Wilhelmsen AS. and Cruise Associates have agreed to vote their
shares of common stock in favor of the election of one additional director to be
nominated by Archinav Holdings, Ltd., for a specified period until 2004. In
addition, until either of them should decide otherwise, A. Wilhelmsen AS. and
Cruise Associates have agreed to vote their shares of common stock in favor of
Edwin W. Stephen and William K. Reilly as directors of our Company.
Of the current directors, A. Wilhelmsen AS. nominated Tor Arneberg, Arvid
Grundekjoen, Jannick Lindbaek and Arne Wilhelmsen, and Cruise Associates
nominated Bernard W. Aronson, Laura Laviada, Eyal Ofer and Thomas J. Pritzker.
Archinav Holdings, Ltd. nominated John D. Chandris.
The shareholders agreement provides that A. Wilhelmsen AS. and Cruise
Associates will from time to time consider our dividend policy with due regard
for the interests of the shareholders in maximizing the return on their
investment and our ability to pay such dividends. The declaration of dividends
shall at all times be subject to the final determination of our Board of
Directors that a dividend is prudent at that time in consideration of the needs
of the business. The shareholders agreement also provides that payment of
dividends will depend, among other factors, upon our earnings, financial
condition and capital requirements and the income and other tax liabilities of
A. Wilhelmsen AS., Cruise Associates and their respective affiliates relating to
their ownership of common stock.
As of March 1, 2001, there were 1,062 record holders of our common stock in
the United States, holding 51,713,151 shares or approximately 26.9% of the total
outstanding common stock.
ITEM 8. FINANCIAL INFORMATION
CONSOLIDATED STATEMENTS AND OTHER FINANCIAL INFORMATION
Our Consolidated Financial Statements have been prepared in accordance with
Item 18 and are included beginning on page F-1 of this report.
28
LITIGATION
Beginning in August 1996, several purported class action suits were filed
alleging that Royal Caribbean International and Celebrity should have paid
commissions to travel agents on a portion of the port charges that were included
in the price of cruise fares. In December 1998, a Florida state court dismissed
one of the suits for failure to state a claim under Florida law and in May 2000,
the Florida Circuit Court of Appeals upheld the dismissal. In December 2000, the
remaining suit was dismissed.
In April 1999, a lawsuit was filed in the United States District Court for
the Southern District of New York on behalf of current and former crew members
alleging that we failed to pay the plaintiffs their full wages. The suit seeks
payment of (i) the wages alleged to be owed, (ii) penalty wages under U.S. law
and (iii) punitive damages. In November 1999, a purported class action suit was
filed in the same court alleging a similar cause of action. We are not able at
this time to estimate the impact of these proceedings on us; there can be no
assurance that such proceedings, if decided adversely, would not have a material
adverse effect on our results of operations.
We are routinely involved in other claims typical to the cruise industry.
The majority of these claims are covered by insurance. We believe the outcome of
such other claims which are not covered by insurance are not expected to have a
material adverse effect upon our financial condition or results of operations.
POLICY ON DIVIDEND DISTRIBUTIONS
For our policy on dividend distributions, see Item 7. Major Shareholders
and Related Party Transactions.
SIGNIFICANT CHANGES
In February 2001, we received net proceeds of $1.1 billion from the
issuance of Senior Notes and Liquid Yield Option(TM) Notes. Also in February
2001, we took delivery of Infinity, a Millennium-class vessel and in March 2001,
we took delivery of Radiance of the Seas, a Radiance-class vessel. For further
information on these significant changes, see Note 14 of our Consolidated
Financial Statements.
29
ITEM 9. THE OFFER AND LISTING
MARKETS
Our common stock is listed on the New York Stock Exchange ("NYSE") and the
Oslo Stock Exchange ("OSE") under the symbol "RCL".
The table below sets forth the intra-day high and low prices of our common
stock for the five most recent fiscal years, the two most recent years by
quarter, and the most recent six months:
[Enlarge/Download Table]
NYSE OSE
COMMON STOCK COMMON STOCK(1)
--------------- ---------------
HIGH LOW HIGH LOW
---- --- ---- ---
PREVIOUS FIVE YEARS:
2000.............................................. $56 3/8 $16 1/8 446 152
1999.............................................. 58 7/8 31 3/8 450 246
1998.............................................. 43 29/32 17 327 1/2 137
1997.............................................. 53 5/8 23 1/4 370 280
1996.............................................. 29 1/8 21 1/2 -- --
PREVIOUS TWO YEARS (BY QUARTER):
2001
First Quarter.................................. 30 1/4 19 87/100 266 184 1/2
2000
Fourth Quarter................................. 27 4/5 18 5/32 246 1/2 173
Third Quarter.................................. 25 5/16 18 9/16 236 161
Second Quarter................................. 28 5/16 16 1/8 242 152
First Quarter.................................. 56 3/8 25 5/16 446 215
1999
Fourth Quarter................................. 58 7/8 42 5/8 450 338
Third Quarter.................................. 51 5/8 41 1/16 401 328
Second Quarter................................. 44 1/2 31 7/8 350 266 1/2
First Quarter.................................. 40 1/4 31 3/8 302 1/2 246
PREVIOUS SIX MONTHS:
March 2001..................................... 28 9/100 19 87/100 251 1/2 184 1/2
February 2001.................................. 30 1/4 25 3/10 266 220
January 2001................................... 29 11/50 23 7/50 256 202
December 2000.................................. 27 4/5 19 3/5 241 177
November 2000.................................. 22 1/2 18 5/32 209 173
October 2000................................... 26 89/100 19 41/50 246 1/2 189
---------------
(1) Denominated in Norwegian kroner.
ITEM 10. ADDITIONAL INFORMATION
ARTICLES OF INCORPORATION AND BY-LAWS
Article Third of our Restated Articles of Incorporation provides that we
may engage in any lawful act or activity for which companies may be organized
under the Business Corporation Act of Liberia. However, we are restricted from
doing business in Liberia within the meaning of the Business Corporation Act of
Liberia.
In accordance with our By-Laws, our Board of Directors has the authority to
fix the compensation of our directors. There is no requirement that a person own
any shares in our company in order to qualify as a director.
Holders of our common stock have an equal right to share in our profits in
the form of dividends when declared by our Board of Directors out of funds
legally available for the distribution of dividends. If declared,
30
there are no relevant time limits under Liberian law pursuant to which the
entitlement to the dividend would lapse. Holders of our common stock have no
rights to any sinking fund.
For additional information about our Articles of Incorporation and By-Laws,
and a description of the rights attaching to our shares of stock, see
"Description of Capital Stock" contained in our Registration Statement on Form
F-3 as filed with the Securities and Exchange Commission, File No. 333-56058.
MATERIAL CONTRACTS
The following is a summary of our material contracts:
First Supplemental Indenture dated as of July 28, 1994 between us, as
Issuer, and The Bank of New York, as Trustee. We issued $125 million
aggregate principal amount of 8 1/8% Senior Notes due 2004 at a price of
97.871%, net of underwriting discount. The notes are unsecured and are not
redeemable prior to maturity.
Second Supplemental Indenture dated as of March 29, 1995 between us,
as Issuer, and The Bank of New York, as Trustee. We issued $150 million
aggregate principal amount of 8 1/4% Senior Notes due 2005 at a price of
98.579%, net of underwriting discount. The notes are unsecured and are not
redeemable prior to maturity.
Third Supplemental Indenture dated as of September 18, 1995 between
us, as Issuer, and The Bank of New York, as Trustee. We issued $150 million
aggregate principal amount of 7 1/8% Senior Notes due 2002 at a price of
98.644%, net of underwriting discount. The notes are unsecured and are not
redeemable prior to maturity.
Fourth Supplemental Indenture dated as of August 12, 1996 between us,
as Issuer, and The Bank of New York, as Trustee. We issued $175 million
aggregate principal amount of 7 1/4% Senior Notes due 2006 at a price of
98.017%, net of underwriting. The notes are unsecured and are not
redeemable prior to maturity.
Fifth Supplemental Indenture dated as of October 14, 1997 between us,
as Issuer, and The Bank of New York, as Trustee. We issued $200 million
aggregate principal amount of 7% Senior Notes due 2007 at a price of
99.058%, net of underwriting. The notes are unsecured and are not
redeemable prior to maturity.
Sixth Supplemental Indenture dated as of October 14, 1997 between us,
as Issuer, and The Bank of New York, as Trustee. We issued $300 million
aggregate principal amount of 7 1/2% Senior Debentures due 2027 at a price
of 97.716%, net of underwriting. The debentures are unsecured and are not
redeemable prior to maturity.
Seventh Supplemental Indenture dated as of March 16, 1998 between us,
as Issuer, and The Bank of New York, as Trustee. We issued $150 million
aggregate principal amount of 6 3/4 % Senior Notes due 2008 at a price of
99.718%, net of underwriting. The notes are unsecured and are not
redeemable prior to maturity.
Eighth Supplemental Indenture dated as of March 16, 1998 between us,
as Issuer, and The Bank of New York, as Trustee. We issued $150 million
aggregate principal amount of 7 1/4% Senior Debentures due 2018 at a price
of 98.749%, net of underwriting. The debentures are unsecured and are not
redeemable prior to maturity.
Ninth Supplemental Indenture dated as of February 2, 2001 between us,
as Issuer, and The Bank of New York, as Trustee. We issued $500 million
aggregate principal amount of 8 3/4% Senior Notes due 2011 at a price of
99.015%. The notes are unsecured and are not redeemable prior to maturity.
Tenth Supplemental Indenture dated as of February 2, 2001 between us,
as Issuer, and The Bank of New York, as Trustee. We issued $1,310,174,000
aggregate principal amount of Liquid Yield Option(TM) Notes (LYONs) due
2021. The LYONs are unsecured zero coupon bonds with a yield to maturity of
31
4.875%. The LYONs are convertible into 17.7 million shares of common stock
if certain conditions are met.
Amended and Restated Credit Agreement dated as of June 28, 1996 amongst us
and various financial institutions and the Bank of Nova Scotia as Administrative
Agent. Under our unsecured revolving credit facility, we can have outstanding up
to $1 billion until June 2003. The unsecured revolving credit facility bears
interest at LIBOR plus .30% on balances outstanding and a .15% facility fee. The
contractual interest rate on balances outstanding varies with our debt rating.
The unsecured revolving credit facility contains covenants that require us,
among other things, to maintain minimum liquidity, net worth, and fixed charge
coverage and limit our debt to capital ratio.
Credit Agreement dated as of December 16, 1999 between us and Kreditanstalt
fur Wiederaufbau. We entered into a $300 million unsecured term loan bearing
interest at LIBOR plus 0.80%, of which $150 million is due in 2009 and $150
million is due in 2010. The term loan contains covenants that require us, among
other things, to maintain minimum liquidity, net worth, and fixed charge
coverage and limit our debt to capital ratio.
Credit Agreement dated as of June 9, 2000 between us and various financial
institutions and Bank of America, N.A. as Administrative Agent. We entered into
a $625 million unsecured term loan bearing interest at LIBOR plus 1.0%, which is
due in 2005. The contractual interest rate on balances outstanding varies with
our debt rating. The term loan contains covenants that require us, among other
things, to maintain minimum net worth and fixed charge coverage and limit our
debt to capital ratio.
Credit Agreement dated as of December 20, 2000 between us and various
financial institutions and Kreditanstalt fur Wiederaufbau as Administrative
Agent. We entered into a $360 million unsecured term loan. The loan can be
utilized during 2001, bears interest at LIBOR plus 1.0% and is due in 2006. The
term loan contains covenants that require us, among other things, to maintain
minimum net worth and fixed charge coverage and limit our debt to capital ratio.
New Credit Agreement dated December 12, 1997 between Seabrook Maritime Inc.
and Kreditanstalt fur Wiederaufbau. Seabrook Maritime Inc. entered into a $200
million unsecured term loan to finance the purchase of Mercury. The loan bears
interest at 8% and is due in 2006. We guarantee the loan.
Loan Facility Agreement dated November 29, 1993 between Esker Marine
Shipping Inc. and Kreditanstalt fur Wiederaufbau. Esker Marine Shipping Inc.
entered into a $308.7 million term loan to finance the purchase of Galaxy. The
remaining fixed rate loan bears interest at 7.12% and is due in 2005. The loan
is secured by the vessel. The loan agreement provides for a limited amount of
additional borrowings to service principal payments.
Loan Facility Agreement dated November 29, 1993 between Blue Sapphire
Marine Inc. and Kreditanstalt fur Wiederaufbau. Blue Sapphire Marine Inc.
entered into a $301.7 million term loan to finance the purchase of Century. The
fixed rate portion of the loan bears interest at 6.73% and the variable rate
portions of the loan bear interest at 6.5% through November 2001 and LIBOR plus
.45% thereafter. The loan is secured by the vessel and is due in 2004. The loan
agreement provides for a limited amount of additional borrowings to service
principal payments.
Loan Facility Agreement dated June 21, 1990 between Zenith Shipping
Corporation and Kreditanstalt fur Wiederaufbau. Zenith Shipping Corporation
entered into a $169.4 million term loan to finance the purchase of Zenith. The
fixed rate portion of the loan had bore interest at 8.0%. The loan, which had
been secured by the vessel, was repaid in full in September 2000.
Amended and Restated Registration Rights Agreement dated as of July 30,
1997 among us, A. Wilhelmsen AS., Cruise Associates, Monument Capital
Corporation, Archinav Holdings, Ltd. and Overseas Cruiseship, Inc. Pursuant to
this agreement, A. Wilhelmsen AS. and Cruise Associates have the right on a
specified number of occasions to require, subject to certain qualifications and
limitations, that we effect the registration under the U.S. Securities Act of
1933 of all or a specified number of shares of common stock. Each of A.
Wilhelmsen AS. and Cruise Associates has certain additional registration rights
at such time or times as we publicly offer securities. Monument Capital
Corporation and Archinav Holdings, Ltd. are also
32
parties to the registration rights agreement and may exercise such rights as
provided by the registration rights agreement.
Lease Agreement dated March 3, 1993 between us and G.I.E. Cruise Vision
One. In April 1995, we entered into a $260 million capital lease to finance
Legend of the Seas. The capital lease has an implicit interest rate of 7.8% over
15 years.
Lease Agreement dated March 3, 1993 between us and G.I.E. Cruise Vision
Two. In March 1996,we entered into a $264 million capital lease to finance
Splendour of the Seas. The capital lease has an implicit interest rate of 7.8%
over 15 years.
Office Building Lease Agreement dated July 25, 1989 between us and
Miami-Dade County, Florida. We entered into a 20-year lease of an office
building of approximately 162,500 square feet at the Port of Miami, Florida for
use as part of our principal offices. The lease term expires in 2011. Base rent
payable under the lease is equal to the amount necessary to satisfy the debt
service of the construction costs of $16,500,000 over the lease term. The lease
has two five-year renewals.
Office Building Lease Agreement dated January 18, 1994 between us and
Miami-Dade County, Florida. We entered into a 20-year lease of an office
building of approximately 180,000 square feet at the Port of Miami, Florida for
use as part of our principal offices. The Lease term expires in 2015. Base rent
payable under the lease is equal to the amount necessary to satisfy the
construction costs of $16,650,000 over the lease term. The lease has two
five-year renewals.
EXCHANGE CONTROLS
There are now no exchange control restrictions on remittances of dividends
on our common stock or on the conduct of our operations in Liberia by reason of
our incorporation in Liberia.
TAXATION
Since (1) we are and intend to maintain our status as a "non-resident
corporation" under the Internal Revenue Code of Liberia and (2) our
vessel-owning subsidiaries are not now engaged, and are not in the future
expected to engage, in any business in Liberia, including voyages exclusively
within the territorial waters of the Republic of Liberia, we have been advised
by Watson, Farley & Williams, our special Liberian counsel, that under current
Liberian law, no Liberian taxes or withholding will be imposed on payments to
holders of our securities other than a holder that is a resident Liberian entity
or a resident individual or entity or a citizen of Liberia.
DOCUMENTS ON DISPLAY
Our Restated Articles of Incorporation, By-Laws, and material contracts are
filed as exhibits to this Annual Report on Form 20-F.
ITEM 11. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
Our quantitative and qualitative disclosures about market risk have been
prepared in accordance with Item 5. Operating and Financial Review and
Prospects.
ITEM 12. DESCRIPTION OF SECURITIES OTHER THAN EQUITY SECURITIES
Not applicable.
33
PART II
ITEM 13. DEFAULTS, DIVIDEND ARREARAGES AND DELINQUENCIES
None.
ITEM 14. MATERIAL MODIFICATIONS TO THE RIGHTS OF SECURITY HOLDERS AND USE OF
PROCEEDS
On April 14, 2000, we redeemed all outstanding shares of our Series A
Convertible Preferred Stock.
In May 2000, we amended our Articles of Incorporation to prohibit any
person, other than our two existing largest shareholders, from holding in the
aggregate more than 4.9% of our shares of common stock. However, under Liberian
law, this amendment may not be enforceable with respect to shares of common
stock that voted against the provision or abstained from the vote.
ITEM 15. RESERVED
ITEM 16. RESERVED
PART III
ITEM 17. FINANCIAL STATEMENTS
Our Consolidated Financial Statements have been prepared in accordance with
Item 18.
ITEM 18. FINANCIAL STATEMENTS
Our Consolidated Financial Statements are included beginning at page F-1 of
this Annual Report on Form 20-F.
ITEM 19. EXHIBITS
The exhibits listed on the accompanying Index to Exhibits are filed and
incorporated by reference as part of this Annual Report on Form 20-F.
34
SIGNATURES
The registrant hereby certifies that it meets all of the requirements for
filing on Form 20-F and that it has duly caused and authorized the undersigned
to sign this annual report on its behalf.
ROYAL CARIBBEAN CRUISES LTD.
--------------------------------------
(Registrant)
Date: [April 6, 2001]
By: /s/ Richard J. Glasier
------------------------------------
Richard J. Glasier
Executive Vice President and
Chief Financial Officer
35
ROYAL CARIBBEAN CRUISES LTD.
INDEX TO CONSOLIDATED FINANCIAL STATEMENTS
[Download Table]
Report of Independent Public Accountants.................... F-2
Consolidated Statements of Operations....................... F-3
Consolidated Statements of Balance Sheets................... F-4
Consolidated Statements of Cash Flows....................... F-5
Notes to the Consolidated Financial Statements.............. F-6
F-1
REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
To the Shareholders and
Directors of Royal Caribbean Cruises Ltd.:
In our opinion, the accompanying consolidated balance sheets and the
related consolidated statements of operations and of cash flows present fairly,
in all material respects, the financial position of Royal Caribbean Cruises Ltd.
and its subsidiaries at December 31, 2000 and 1999, and the results of their
operations and their cash flows for each of the three years in the period ended
December 31, 2000, in conformity with accounting principles generally accepted
in the United States of America. These financial statements are the
responsibility of the Company's management; our responsibility is to express an
opinion on these financial statements based on our audits. We conducted our
audits of these statements in accordance with auditing standards generally
accepted in the United States of America, which require that we plan and perform
the audit to obtain reasonable assurance about whether the financial statements
are free of material misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the financial statements,
assessing the accounting principles used and significant estimates made by
management, and evaluating the overall financial statement presentation. We
believe that our audits provide a reasonable basis for our opinion.
PricewaterhouseCoopers LLP
Miami, Florida
January 26, 2001, except for Note 14 which is as of March 9, 2001
F-2
ROYAL CARIBBEAN CRUISES LTD.
CONSOLIDATED STATEMENTS OF OPERATIONS
(IN THOUSANDS, EXCEPT PER SHARE DATA)
[Enlarge/Download Table]
YEAR ENDED DECEMBER 31,
------------------------------------
2000 1999 1998
---------- ---------- ----------
INCOME STATEMENT
Revenues................................................... $2,865,846 $2,546,152 $2,636,291
---------- ---------- ----------
Expenses
Operating................................................ 1,652,459 1,496,252 1,593,728
Marketing, selling and administrative.................... 412,799 371,817 359,214
Depreciation and amortization............................ 231,048 197,909 194,614
---------- ---------- ----------
2,296,306 2,065,978 2,147,556
---------- ---------- ----------
Operating Income........................................... 569,540 480,174 488,735
---------- ---------- ----------
Other Income (Expense)
Interest income.......................................... 7,922 8,182 15,912
Interest expense, net of capitalized interest............ (154,328) (130,625) (167,869)
Other income (expense)................................... 22,229 26,122 (6,008)
---------- ---------- ----------
(124,177) (96,321) (157,965)
---------- ---------- ----------
Net Income................................................. $ 445,363 $ 383,853 $ 330,770
========== ========== ==========
EARNINGS PER SHARE:
Basic.................................................... $ 2.34 $ 2.15 $ 1.90
========== ========== ==========
Diluted.................................................. $ 2.31 $ 2.06 $ 1.83
========== ========== ==========
The accompanying notes are an integral part of these financial statements.
F-3
ROYAL CARIBBEAN CRUISES LTD.
CONSOLIDATED BALANCE SHEETS
(IN THOUSANDS, EXCEPT PER SHARE DATA)
[Enlarge/Download Table]
AS OF DECEMBER 31,
------------------------
2000 1999
---------- ----------
ASSETS
Current Assets
Cash and cash equivalents................................. $ 177,810 $ 63,470
Trade and other receivables, net.......................... 53,609 53,459
Inventories............................................... 30,115 26,398
Prepaid expenses.......................................... 49,185 51,050
---------- ----------
Total current assets............................... 310,719 194,377
Property and Equipment-at cost less accumulated depreciation
and amortization.......................................... 6,831,809 5,858,185
Goodwill -- less accumulated amortization of $128,192 and
$117,778, respectively.................................... 288,974 299,388
Other Assets................................................ 396,963 28,561
---------- ----------
$7,828,465 $6,380,511
========== ==========
LIABILITIES AND SHAREHOLDERS' EQUITY
Current Liabilities
Current portion of long-term debt......................... $ 109,926 $ 128,086
Accounts payable.......................................... 158,143 103,041
Accrued liabilities....................................... 200,900 209,104
Customer deposits......................................... 443,411 465,033
---------- ----------
Total current liabilities.......................... 912,380 905,264
Long-Term Debt.............................................. 3,300,170 2,214,091
Commitments and Contingencies (Note 12)
SHAREHOLDERS' EQUITY
Preferred stock ($.01 par value; 20,000,000 shares
authorized; 3,450,000 cumulative convertible preferred
shares issued; 0 and 3,444,000 shares stated at
liquidation value)........................................ -- 172,200
Common stock ($.01 par value; 500,000,000 shares authorized;
192,122,088 and 181,217,378 shares issued)................ 1,921 1,812
Paid-in capital............................................. 2,043,111 1,866,647
Retained earnings........................................... 1,576,921 1,225,976
Treasury stock (435,180 and 394,836 common shares at
cost)..................................................... (6,038) (5,479)
========== ==========
Total shareholders' equity......................... 3,615,915 3,261,156
---------- ----------
$7,828,465 $6,380,511
========== ==========
The accompanying notes are an integral part of these financial statements.
F-4
ROYAL CARIBBEAN CRUISES LTD.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(IN THOUSANDS)
[Enlarge/Download Table]
YEAR ENDED DECEMBER 31,
---------------------------------
2000 1999 1998
----------- -------- --------
OPERATING ACTIVITIES
Net income.................................................. $ 445,363 $383,853 $330,770
Adjustments:
Depreciation and amortization............................. 231,048 197,909 194,614
Gain on sale of asset..................................... -- -- (31,031)
Write-down of vessel to fair value........................ -- -- 32,035
Changes in operating assets and liabilities:
(Increase) in trade and other receivables, net............ (150) (16,927) (13,904)
(Increase) decrease in inventories........................ (3,717) 5,436 5,440
Decrease (increase) in prepaid expenses................... 1,865 (6,006) (3,600)
Increase (decrease) in accounts payable................... 55,102 (12,792) 7,359
(Decrease) increase in accrued liabilities................ (8,204) (34,373) 27,722
(Decrease) increase in customer deposits.................. (21,622) 62,107 (26,477)
Other, net................................................ 3,631 4,151 3,930
----------- -------- --------
Net cash provided by operating activities................... 703,316 583,358 526,858
----------- -------- --------
INVESTING ACTIVITIES
Purchases of property and equipment......................... (1,285,649) (972,481) (556,953)
Proceeds from sale of asset................................. -- -- 94,500
Investment in convertible preferred stock................... (305,044) -- --
Net proceeds from vessel transfer to joint venture.......... 47,680 -- --
Other, net.................................................. (21,417) (14,963) 247
----------- -------- --------
Net cash used in investing activities....................... (1,564,430) (987,444) (462,206)
----------- -------- --------
FINANCING ACTIVITIES
Proceeds from issuance of long-term debt.................... 1,195,000 -- 296,141
Repayments of long-term debt................................ (128,086) (127,919) (403,178)
Dividends................................................... (94,418) (81,568) (67,734)
Proceeds from issuance of common stock...................... -- 487,399 165,532
Other, net.................................................. 2,958 16,723 6,715
----------- -------- --------
Net cash provided by (used in) financing activities......... 975,454 294,635 (2,524)
----------- -------- --------
Net Increase (Decrease) in Cash and Cash Equivalents........ 114,340 (109,451) 62,128
Cash and Cash Equivalents, Beginning of Year................ 63,470 172,921 110,793
----------- -------- --------
Cash and Cash Equivalents, End of Year...................... $ 177,810 $ 63,470 $172,921
=========== ======== ========
SUPPLEMENTAL DISCLOSURE
Interest paid............................................... $ 146,434 $133,925 $170,278
=========== ======== ========
The accompanying notes are an integral part of these financial statements.
F-5
ROYAL CARIBBEAN CRUISES LTD.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
NOTE 1. GENERAL
Description of Business
We are a global cruise company. We operate two cruise brands, Royal
Caribbean International and Celebrity Cruises, with 13 cruise ships and six
cruise ships, respectively at December 31, 2000. Our ships operate on a
selection of worldwide itineraries that call on approximately 200 destinations.
(See Note 14 -- Subsequent Events.)
Basis for Preparation of Consolidated Financial Statements
The consolidated financial statements are prepared in accordance with U.S.
generally accepted accounting principles and are presented in U.S. dollars.
Estimates are required for the preparation of financial statements in accordance
with generally accepted accounting principles. Actual results could differ from
these estimates. All significant intercompany accounts and transactions are
eliminated in consolidation.
NOTE 2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Cruise Revenues and Expenses
Deposits received on sales of guest cruises are recorded as customer
deposits and are recognized, together with revenues from shipboard activities
and all associated direct costs of a voyage, upon completion of voyages with
durations of 10 days or less and on a pro rata basis for voyages in excess of 10
days. Certain revenues and expenses from pro rata voyages are estimated.
Cash and Cash Equivalents
Cash and cash equivalents include cash and marketable securities with
original maturities of less than 90 days.
Inventories
Inventories consist of provisions, supplies and fuel carried at the lower
of cost (weighted-average) or market.
Property and Equipment
Property and equipment are stated at cost. Significant vessel improvement
costs are capitalized as additions to the vessel, while costs of repairs and
maintenance are charged to expense as incurred. We capitalize interest as part
of the cost of construction. We review long-lived assets for impairment whenever
events or changes in circumstances indicate, based on estimated future cash
flows, that the carrying amount of these assets may not be fully recoverable.
Depreciation of property and equipment, which includes amortization of
vessels under capital lease, is computed using the straight-line method over
useful lives of primarily 30 years for vessels and three to 10 years for other
property and equipment. (See Note 4 -- Property and Equipment.)
Goodwill
Goodwill represents the excess of cost over the fair value of net assets
acquired and is being amortized over 40 years using the straight-line method. We
review goodwill and other intangible assets for impairment whenever events or
changes in circumstances indicate that the carrying amount of these assets may
not be fully recoverable.
F-6
ROYAL CARIBBEAN CRUISES LTD.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
Advertising Costs
Advertising costs are expensed as incurred except those costs which result
in tangible assets, such as brochures, are treated as prepaid expenses and
charged to expense as consumed. Advertising expenses consist of media
advertising as well as brochure, production and direct mail costs. Media
advertising was $98.9 million, $93.1 million and $76.7 million, and brochure,
production and direct mail costs were $79.2 million, $57.4 million and $63.2
million for the years 2000, 1999 and 1998, respectively.
Drydocking
Drydocking costs are accrued evenly over the period to the next scheduled
drydocking and are included in accrued liabilities.
Financial Instruments
We enter into various forward, option and swap contracts to limit our
exposure to fluctuations in foreign currency exchange rates and oil prices, to
modify our exposure to interest rate movements, and to manage our interest
costs. The differential in interest rates and oil prices to be paid or received
under these agreements is recognized in income over the life of the contracts as
part of interest expense and fuel expense, respectively. Gains and losses on
foreign currency forward contracts that hedge foreign currency denominated firm
commitments related to vessels under construction are included in the basis of
the vessels. Gains and losses on foreign currency forward contracts of
anticipated transactions are recognized in income currently.
Foreign Currency Transactions
The majority of our transactions are settled in U.S. dollars. Gains or
losses resulting from transactions denominated in other currencies and
remeasurements of other currencies are recognized in income currently.
Earnings Per Share
Basic earnings per share is computed by dividing net income, after
deducting preferred stock dividends accumulated during the period, by the
weighted-average number of shares of common stock outstanding during each
period. Diluted earnings per share is computed by dividing net income by the
weighted-average number of shares of common stock, common stock equivalents and
other potentially dilutive securities outstanding during each period.
Stock-Based Compensation
We account for stock-based compensation using the intrinsic value method
and disclose certain fair market value information with respect to our
stock-based compensation activity. (See Note 7 -- Shareholders' Equity.)
Segment Reporting
We operate two cruise brands, Royal Caribbean International and Celebrity
Cruises. The brands have been aggregated as a single operating segment based on
the similarity of their economic characteristics as well as product and services
provided.
F-7
ROYAL CARIBBEAN CRUISES LTD.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
Information by geographic area is shown in the table below. Revenues are
attributed to geographic areas based on the source of the guest.
[Download Table]
2000 1999 1998
---- ---- ----
Revenues:
United States........................................... 82% 83% 84%
All Other Countries..................................... 18% 17% 16%
NOTE 3. STOCK SPLIT
On June 23, 1998, we authorized a two-for-one split of our common stock
effected in the form of a stock dividend. The additional shares were distributed
on July 31, 1998 to shareholders of record on July 10, 1998. All share and per
share information has been retroactively restated to reflect this stock split.
NOTE 4. PROPERTY AND EQUIPMENT
Property and equipment consists of the following (in thousands):
[Enlarge/Download Table]
2000 1999
---------- ----------
Land........................................................ $ 7,056 $ 7,549
Vessels..................................................... 6,168,383 5,158,278
Vessels under capital lease................................. 768,474 766,826
Vessels under construction.................................. 508,954 495,483
Other....................................................... 313,689 223,920
---------- ----------
7,766,556 6,652,056
Less -- accumulated depreciation and amortization........... (934,747) (793,871)
---------- ----------
$6,831,809 $5,858,185
========== ==========
Vessels under construction include progress payments for the construction
of new vessels as well as planning, design, interest, commitment fees and other
associated costs. We capitalized interest costs of $44.2 million, $34.6 million
and $15.0 million for the years 2000, 1999 and 1998, respectively. Accumulated
amortization related to vessels under capital lease was $112.9 million and $90.2
million at December 31, 2000 and 1999, respectively.
NOTE 5. OTHER ASSETS
In July 2000, we purchased a new issue of convertible preferred stock,
denominated in British pound sterling, for approximately $300 million from First
Choice Holidays PLC. The convertible preferred stock carries a 6.75% coupon.
Dividends of $9.2 million were received in 2000 and recorded in Other income
(expense). If fully converted, our holding would represent less than a 20%
interest in First Choice Holidays PLC.
Independently, we entered into a joint venture with First Choice Holidays
PLC to launch a new European cruise line. As part of the transaction, ownership
of Viking Serenade was transferred from our fleet to the new joint venture at a
valuation of approximately $95.4 million. The contribution of Viking Serenade
represents our 50% investment in the joint venture as well as approximately
$47.7 million in proceeds towards the purchase price of the convertible
preferred stock. The contribution of Viking Serenade resulted in a deferred gain
of approximately $3.8 million which is being recognized over the estimated
remaining useful life of the vessel. Royal Caribbean International will continue
to operate Viking Serenade under a charter agreement until early 2002.
F-8
ROYAL CARIBBEAN CRUISES LTD.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
NOTE 6. LONG-TERM DEBT
Long-term debt consists of the following (in thousands):
[Enlarge/Download Table]
2000 1999
---------- ----------
$625 million term loan bearing interest at LIBOR plus
0.875%, due 2005.......................................... $ 625,000 $ --
$300 million term loan bearing interest at LIBOR plus 0.8%,
due 2009 through 2010..................................... 300,000 --
$1 billion revolving credit facility bearing interest at
LIBOR plus 0.275% on balances outstanding, 0.125% facility
fee, due 2003............................................. 270,000 --
Senior Notes and Senior Debentures bearing interest at rates
ranging from 6.75% to 8.25%, due 2002 through 2008, 2018
and 2027.................................................. 1,392,017 1,391,012
Term loan bearing interest at 8.0%, due 2006................ 134,332 159,703
Term loans bearing interest at rates ranging from 6.7% to
7.1%, due through 2005, secured by certain Celebrity
vessels................................................... 241,452 322,084
Term loans bearing interest at 6.5% through Nov. 2001 and at
LIBOR plus 0.45% through 2004, due through 2004, secured
by certain Celebrity vessels.............................. 19,697 25,342
Capital lease obligations with implicit interest rates
ranging from 7.0% to 7.2%, due through 2011............... 427,598 444,036
---------- ----------
3,410,096 2,342,177
Less -- current portion..................................... (109,926) (128,086)
---------- ----------
Long-term portion........................................... $3,300,170 $2,214,091
========== ==========
In December 2000, we entered into a $360.0 million unsecured term loan. The
loan can be utilized during 2001 and bears interest at LIBOR plus 1.0%, due
2006.
In June 2000, we entered into a $625.0 million unsecured term loan bearing
interest at LIBOR plus 0.875%, due 2005.
In December 1999, we entered into a $300.0 million unsecured term loan
bearing interest at LIBOR plus 0.8%, of which $150.0 million is due in 2009 and
$150.0 million is due in 2010.
The contractual interest rates on balances outstanding under our $1.0
billion unsecured revolving credit facility and the $625.0 million unsecured
term loan vary with our debt rating. Effective January 2001, the margin and
facility fee on the $1.0 billion unsecured revolving credit facility were 0.3%
and 0.15%, respectively, and the margin on the $625.0 million unsecured term
loan was 1.0%.
In March 1998, we issued $150.0 million of 6.75% Senior Notes due 2008 and
$150.0 million of 7.25% Senior Debentures due 2018. Net proceeds were
approximately $296.1 million.
The Senior Notes and Senior Debentures are unsecured and are not redeemable
prior to maturity.
We entered into a $264.0 million capital lease to finance Splendour of the
Seas and a $260.0 million capital lease to finance Legend of the Seas in 1996
and 1995, respectively.
The capital leases each have semi-annual payments of $12.0 million over 15
years with final payments of $99.0 million and $97.5 million, respectively.
Our debt agreements contain covenants that require us, among other things,
to maintain minimum liquidity, net worth, and fixed charge coverage and limit
our debt to capital ratio. We are in compliance with
F-9
ROYAL CARIBBEAN CRUISES LTD.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
all covenants as of December 31, 2000. Following is a schedule of principal
repayments on long-term debt (in thousands):
[Download Table]
YEAR
----
2001........................................................ $ 109,926
2002........................................................ 260,440
2003........................................................ 380,948
2004........................................................ 218,780
2005........................................................ 837,526
Thereafter.................................................. 1,602,476
----------
$3,410,096
==========
NOTE 7. SHAREHOLDERS' EQUITY
The following represents an analysis of the changes in shareholders' equity
for the years 2000, 1999 and 1998 (in thousands):
[Enlarge/Download Table]
PREFERRED COMMON PAID-IN RETAINED TREASURY
STOCK STOCK CAPITAL EARNINGS STOCK TOTAL
--------- ------- ---------- ---------- -------- ----------
Balances at January 1, 1998.............. $172,500 $1,621 $1,188,304 $ 660,655 $(4,359) $2,018,721
Issuance of common stock................. -- 61 165,471 -- -- 165,532
Issuance under employee related plans.... -- 8 8,021 -- (560) 7,469
Preferred stock dividends................ -- -- -- (12,506) -- (12,506)
Common stock dividends................... -- -- -- (55,228) -- (55,228)
Net income............................... -- -- -- 330,770 -- 330,770
-------- ------ ---------- ---------- ------- ----------
Balances at December 31, 1998............ 172,500 1,690 1,361,796 923,691 (4,919) 2,454,758
Issuance of common stock................. -- 108 487,291 -- -- 487,399
Issuance under preferred stock
conversion............................. (300) -- 300 -- -- --
Issuance under employee related plans.... -- 14 17,260 -- (560) 16,714
Preferred stock dividends................ -- -- -- (12,506) -- (12,506)
Common stock dividends................... -- -- -- (69,062) -- (69,062)
Net income............................... -- -- -- 383,853 -- 383,853
-------- ------ ---------- ---------- ------- ----------
Balances at December 31, 1999............ 172,200 1,812 1,866,647 1,225,976 (5,479) 3,261,156
Issuance under preferred stock
conversion............................. (172,200) 106 172,094 -- -- --
Issuance under employee related plans.... -- 3 4,370 -- (559) 3,814
Preferred stock dividends................ -- -- -- (3,121) -- (3,121)
Common stock dividends................... -- -- -- (91,297) -- (91,297)
Net income............................... -- -- -- 445,363 -- 445,363
-------- ------ ---------- ---------- ------- ----------
Balances at December 31, 2000............ $ -- $1,921 $2,043,111 $1,576,921 $(6,038) $3,615,915
======== ====== ========== ========== ======= ==========
On April 14, 2000, we redeemed all outstanding shares of the convertible
preferred stock and dividends ceased to accrue.
In 1999, we completed a public offering of 11,625,000 shares of common
stock at a price of $46.69 per share. Of the total shares sold, 10,825,000
shares were sold by us, and the balance of 800,000 shares were sold
F-10
ROYAL CARIBBEAN CRUISES LTD.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
by a selling shareholder. After deduction of the underwriting discount and other
estimated expenses of the offering, our net proceeds were approximately $487.4
million.
In March 1998, we completed a public offering of 13,800,000 shares of
common stock at a price of $28.25 per share. Of the total shares sold, 6,100,690
shares were sold by us and the balance of 7,699,310 shares were sold by selling
shareholders. After deduction of the underwriting discount and other estimated
expenses of the offering, our net proceeds were approximately $165.5 million.
Our Employee Stock Purchase Plan facilitates the purchase by employees of
up to 800,000 shares of common stock commencing January 1, 1994. The purchase
price is derived from a formula based on 90% of the fair market value of the
common stock during the quarterly purchase period, subject to certain
restrictions. Shares of common stock of 40,838, 35,263 and 35,546 were issued
under the Employee Stock Purchase Plan at an average price of $23.09, $37.81 and
$28.33 during 2000, 1999 and 1998, respectively.
Under an executive compensation program approved in 1994, we will award to
a trust 10,086 shares of common stock per quarter, up to a maximum of 806,880
shares. We issued 40,344 shares each year under the program during 2000, 1999
and 1998.
We have an Employee Stock Option Plan and an Incentive Stock Option Plan,
which provide for awards to our officers, directors and key employees up to an
aggregate of 14,703,000 shares and 3,700,000 shares of common stock,
respectively. Options are granted at a price not less than the fair value of the
shares on the date of grant and expire not later than 10 years after the date of
grant. Options under the Employee Stock Option Plan generally become exercisable
as to 40% of the amount granted two years after the grant date and 20% of the
amount granted at the end of each of the three succeeding years. Options under
the Incentive Stock Option Plan generally become exercisable as to 25% of the
amount granted two years after the grant date and 25% of the amount granted at
the end of each of the three succeeding years.
F-11
ROYAL CARIBBEAN CRUISES LTD.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
Stock option activity and information about stock options outstanding are
summarized in the following tables.
[Enlarge/Download Table]
2000 1999 1998
----------------------------- ----------------------------- ----------------------------
NUMBER OF WEIGHTED AVERAGE NUMBER OF WEIGHTED AVERAGE NUMBER OF WEIGHTED AVERAGE
STOCK OPTION ACTIVITY OPTIONS EXERCISE PRICE OPTIONS EXERCISE PRICE OPTIONS EXERCISE PRICE
--------------------- ---------- ---------------- ---------- ---------------- --------- ----------------
Outstanding options at
January 1................. 6,894,172 $24.82 6,492,390 $16.78 5,474,316 $12.92
Granted..................... 5,036,100 $30.21 2,285,500 $39.23 2,013,000 $25.07
Exercised................... (186,436) $12.68 (1,318,714) $11.01 (652,474) $ 9.90
Canceled.................... (452,052) $30.65 (565,004) $23.03 (342,452) $16.74
---------- ---------- ---------
Outstanding options at
December 31............... 11,291,784 $27.17 6,894,172 $24.82 6,492,390 $16.78
========== ========== =========
Options exercisable at
December 31............... 2,707,234 $16.02 1,649,180 $12.53 2,253,746 $10.66
========== ========== =========
Available for future grants
at December 31............ 3,839,246 8,553,864 1,274,360
========== ========== =========
STOCK OPTIONS OUTSTANDING
-------------------------
AS OF DECEMBER 31, 2000
[Enlarge/Download Table]
OPTIONS OUTSTANDING OPTIONS EXERCISABLE
---------------------------------- ----------------------
WEIGHTED WEIGHTED WEIGHTED
AVERAGE AVERAGE AVERAGE
NUMBER REMAINING EXERCISE NUMBER EXERCISE
EXERCISE PRICE RANGE OUTSTANDING LIFE PRICE EXERCISABLE PRICE
-------------------- ----------- --------- -------- ----------- --------
$ 7.24 - $18.06........................................ 2,289,784 4.5 years $12.75 1,862,859 $12.37
$18.81 - $20.30........................................ 2,215,600 9.9 years $20.29 28,000 $19.97
$21.92 - $27.34........................................ 2,169,900 7.5 years $24.17 800,375 $24.05
$28.78 - $35.09........................................ 2,257,500 8.7 years $31.65 16,000 $32.84
$41.63 - $48.00........................................ 2,359,000 8.9 years $46.12 -- --
---------- ---------
11,291,784 7.9 years $27.17 2,707,234 $16.02
========== =========
We use the intrinsic value method of accounting for stock-based
compensation. Had the fair value based method been used to account for such
compensation, compensation costs would have reduced net income by $28.8 million,
$15.0 million and $8.2 million or $0.15, $0.08 and $0.05 per share in 2000, 1999
and 1998, respectively. The weighted-average fair value of options granted
during 2000, 1999 and 1998 was $12.43, $15.52 and $10.49, respectively. Fair
market value information for our stock options was estimated using the
Black-Scholes option-pricing model assuming expected dividend rates of 2.0%,
1.0% and 1.5% in 2000, 1999 and 1998, respectively; estimated terms of six years
in 2000, 1999 and 1998; risk-free rates of return of approximately 6% in 2000
and 5% in 1999 and 1998; and expected volatility of 38.4%, 35.6% and 35.0% in
2000, 1999 and 1998, respectively.
Effective January 1, 1998, we instituted a program, "Taking Stock in
Employees," to award stock to employees up to a maximum of 1,400,000 shares of
common stock. Employees are awarded five shares of our stock at the end of each
year of employment through December 31, 2007. Employees can elect to receive
cash equal to the fair market value of the stock upon vesting. Compensation
expense related to this program was $2.1 million, $3.3 million and $3.6 million
in 2000, 1999 and 1998, respectively.
F-12
ROYAL CARIBBEAN CRUISES LTD.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
NOTE 8. EARNINGS PER SHARE
Below is a reconciliation between basic and diluted earnings per share for
the years ended December 31, 2000, 1999 and 1998 (in thousands, except per share
data).
[Enlarge/Download Table]
FOR THE YEARS ENDED DECEMBER 31,
------------------------------------------------------------------------------------
2000 1999 1998
-------------------------- -------------------------- --------------------------
PER PER PER
INCOME SHARES SHARE INCOME SHARES SHARE INCOME SHARES SHARE
-------- ------- ----- -------- ------- ----- -------- ------- -----
Net income............................... $445,363 $383,853 $330,770
Less: preferred stock dividends.......... (1,933) (12,506) (12,506)
-------- -------- --------
Basic earnings per share................. 443,430 189,397 $2.34 371,347 172,319 $2.15 318,264 167,577 $1.90
===== ===== =====
Effect of dilutive securities:
Stock options.......................... 1,428 3,508 2,940
Convertible preferred stock............ 1,933 2,110 12,506 10,629 12,506 10,648
-------- ------- -------- ------- -------- -------
Diluted earnings per share............... $445,363 192,935 $2.31 $383,853 186,456 $2.06 $330,770 181,165 $1.83
======== ======= ===== ======== ======= ===== ======== ======= =====
NOTE 9. RETIREMENT PLANS
We maintain a defined contribution pension plan covering all of our
full-time shoreside employees who have completed the minimum period of
continuous service. Annual contributions to the plan are based on fixed
percentages of participants' salaries and years of service, not to exceed
certain maximums. Pension cost was $7.3 million, $7.2 million and $6.9 million
for the years 2000, 1999 and 1998, respectively.
Effective January 1, 2000, we instituted a defined benefit pension plan to
cover all of our shipboard employees not covered under another pension plan.
Benefits to eligible employees are accrued based on the employee's years of
service. We fund the plan based on actuarial valuations and contributed
approximately $2.0 million in 2000.
NOTE 10. INCOME TAXES
We and the majority of our subsidiaries are not subject to U.S. corporate
income tax on income generated from the international operation of ships
pursuant to Section 883 of the Internal Revenue Code, provided that we meet
certain tests related to country of incorporation and composition of
shareholders. We believe that we and a majority of our subsidiaries meet these
tests. Income tax expense related to our remaining subsidiaries is not
significant.
NOTE 11. FINANCIAL INSTRUMENTS
The estimated fair values of our financial instruments are as follows (in
thousands):
[Enlarge/Download Table]
2000 1999
------------------------- -------------------------
CARRYING FAIR CARRYING FAIR
AMOUNT VALUE AMOUNT VALUE
----------- ----------- ----------- -----------
Cash and Cash Equivalents..................... $ 177,810 $ 177,810 $ 63,470 $ 63,470
Long-Term Debt (including current portion of
long-term debt)............................. (3,410,096) (3,332,475) (2,342,177) (2,339,960)
Off-Balance Sheet Financial Instruments:
Interest Rate Swap Agreements in a net
(payable) receivable position............. (300) 24,583 2,130 (13,661)
Foreign Currency Forward Contracts
(losses).................................. (5,624) (5,624) (6,894) (6,894)
----------- ----------- ----------- -----------
F-13
ROYAL CARIBBEAN CRUISES LTD.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
The carrying amounts shown are the amounts reported in the consolidated
balance sheets. The reported fair values are based on a variety of factors and
assumptions. Accordingly, the fair values may not represent actual values of the
financial instruments that could have been realized as of December 31, 2000 or
1999 or that will be realized in the future and do not include expenses that
could be incurred in an actual sale or settlement. The following methods were
used to estimate the fair values of our financial instruments, none of which are
held for trading or speculative purposes:
Cash and Cash Equivalents
The carrying amounts of cash and cash equivalents approximate their fair
values due to the short maturity of these instruments.
Long-Term Debt
The fair values of the Senior Notes and Senior Debentures were estimated by
obtaining quoted market prices. The fair values of all other debt were estimated
based on the market rates available to us for similar debt with the same
remaining maturities.
Interest Rate Swap Agreements
The fair values of interest rate swap agreements were estimated based on
quoted market prices for similar or identical financial instruments to those we
hold. Our exposure to market risk for changes in interest rates relates to our
long-term debt obligations. Market risk associated with our long-term debt is
the potential increase in fair value resulting from a decrease in interest
rates. We use interest rate swaps to modify our exposure to interest rate
movements and manage our interest expense. As of December 31, 2000, we had
agreements in effect which exchanged fixed interest rates for floating interest
rates in a notional amount of $0.9 billion, maturing 2002 through 2008.
We have exposure under these interest rate swap agreements for the cost of
replacing the contracts in the event of nonperformance by the counterparties,
all of which are currently our lending banks. To minimize this risk, we limit
our exposure to any individual counterparty and select counterparties with
credit risks acceptable to us.
Foreign Currency Contracts
Foreign currency forward exchange contracts are used to mitigate the impact
of fluctuations in foreign currency exchange rates. We hedge foreign currency
denominated firm commitments related to vessel construction contracts and
forecasted transactions. The fair values of these financial instruments are
estimated based on quoted market prices for similar instruments.
As of December 31, 2000, we had foreign currency forward contracts in a
notional amount of $1.2 billion maturing through 2002. Gains and losses on
foreign currency forward contracts that hedge foreign currency denominated firm
commitments related to vessels under construction are included in the basis of
the vessels. Gains and losses on foreign currency forward contracts of
anticipated transactions are recognized in income currently.
Our exposure under these financial instruments is limited to the cost of
replacing the contracts in the event of non-performance by the counterparties to
the contracts. To minimize this risk, we select counterparties with credit risks
acceptable to us and we limit our exposure to any individual counterparty.
Furthermore, all foreign currency contracts are denominated in primary
currencies.
F-14
ROYAL CARIBBEAN CRUISES LTD.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
New Accounting Guidance
In June 1998, the Financial Accounting Standards Board issued SFAS No. 133,
"Accounting for Derivative Instruments and Hedging Activities," as amended by
SFAS No. 137 and SFAS No. 138, which deferred the effective date of SFAS No. 133
until January 1, 2001. SFAS No. 133 requires that all derivative instruments be
recorded on the balance sheet at their fair value. Changes in the fair value of
derivatives will either be recognized in earnings as offsets to the changes in
fair value of related hedged items or, for forecasted transactions, deferred and
recorded as a component of other comprehensive income until the hedged
transactions occur and are recognized in earnings. The ineffective portion of a
hedging derivative's change in fair value will be immediately recognized in
earnings. The adoption of SFAS No. 133 is not expected to have a material effect
on our results of operations or financial position.
NOTE 12. COMMITMENTS AND CONTINGENCIES
Capital Expenditures
As of December 31, 2000, we had 10 ships on order. Three are Voyager-class
vessels designated for the Royal Caribbean International fleet scheduled for
delivery in the fourth quarters of 2001, 2002 and 2003. We also have four
Radiance-class vessels designated for the Royal Caribbean International fleet
scheduled for delivery in the first quarter of 2001, the second quarters of 2002
and 2003 and the first quarter of 2004. Three Millennium-class vessels are
designated for the Celebrity Cruises fleet and are scheduled for delivery in the
first quarter of 2001, third quarter of 2001 and second quarter of 2002. The
aggregate contract price of the 10 ships, which excludes capitalized interest
and other ancillary costs, is approximately $4.1 billion, of which we deposited
$88.1 million during 2000, $205.8 million during 1999 and $60.5 million during
1998. Additional deposits are due prior to the dates of delivery of $223.1
million in 2001, $121.8 million in 2002 and $27.8 million in 2003. (See Note
14-Subsequent Events.)
Litigation
Beginning in August 1996, several purported class action suits were filed
alleging that Royal Caribbean International and Celebrity should have paid
commissions to travel agents on a portion of the port charges that were included
in the price of cruise fares. In December 1998, a Florida state court dismissed
one of the suits for failure to state a claim under Florida law and in May 2000,
the Florida Circuit Court of Appeals upheld the dismissal. In December 2000, the
remaining suit was dismissed.
In April 1999, a lawsuit was filed in the United States District Court for
the Southern District of New York on behalf of current and former crew members
alleging that we failed to pay the plaintiffs their full wages. The suit seeks
payment of (i) the wages alleged to be owed, (ii) penalty wages under U.S. law
and (iii) punitive damages. In November 1999, a purported class action suit was
filed in the same court alleging a similar cause of action. We are not able at
this time to estimate the impact of these proceedings on us; there can be no
assurance that such proceedings, if decided adversely, would not have a material
adverse effect on our results of operations.
We are routinely involved in other claims typical to the cruise industry.
The majority of these claims are covered by insurance. We believe the outcome of
such other claims which are not covered by insurance are not expected to have a
material adverse effect upon our financial condition or results of operations.
F-15
ROYAL CARIBBEAN CRUISES LTD.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
Operating Leases
We are obligated under noncancelable operating leases for various
facilities, primarily office and warehouse space. As of December 31, 2000,
future minimum lease payments under noncancelable operating leases were as
follows (in thousands):
[Download Table]
YEAR
----
2001........................................................ $ 6,616
2002........................................................ 5,679
2003........................................................ 5,016
2004........................................................ 4,560
2005........................................................ 3,895
Thereafter.................................................. 17,936
-------
$43,702
=======
Total rent expense for all operating leases amounted to $6.7 million, $5.1
million and $6.9 million for the years 2000, 1999 and 1998, respectively.
Other
At December 31, 2000, we have commitments through 2014 to pay a minimum
amount for our annual usage of certain port facilities as follows (in
thousands):
[Download Table]
YEAR
----
2001........................................................ $ 12,669
2002........................................................ 15,681
2003........................................................ 15,193
2004........................................................ 16,010
2005........................................................ 15,715
Thereafter.................................................. 128,784
--------
$204,052
========
We are currently operating Viking Serenade under a charter agreement until
early 2002 from our joint venture with First Choice Holidays PLC at an
annualized rate of $6.4 million.
NOTE 13. QUARTERLY DATA (UNAUDITED)
[Enlarge/Download Table]
FIRST QUARTER SECOND QUARTER THIRD QUARTER FOURTH QUARTER
------------------- ------------------- ------------------- -------------------
2000 1999 2000 1999 2000 1999 2000 1999
-------- -------- -------- -------- -------- -------- -------- --------
(IN THOUSANDS, EXCEPT PER SHARE DATA)
Revenues.............................. $707,786 $610,046 $680,731 $617,664 $835,210 $734,460 $642,118 $583,982
Operating Income...................... $139,636 $108,390 $131,196 $108,110 $236,166 $198,225 $ 62,541 $ 65,449
-------- -------- -------- -------- -------- -------- -------- --------
Net Income............................ $105,528 $ 90,196 $108,258 $ 85,347 $201,497 $169,972 $ 30,080 $ 38,338
======== ======== ======== ======== ======== ======== ======== ========
Earnings Per Share:
Basic............................... $ 0.57 $ 0.52 $ 0.57 $ 0.49 $ 1.05 $ 0.98 $ 0.16 $ 0.19
-------- -------- -------- -------- -------- -------- -------- --------
Diluted............................. $ 0.55 $ 0.49 $ 0.56 $ 0.47 $ 1.04 $ 0.92 $ 0.16 $ 0.19
-------- -------- -------- -------- -------- -------- -------- --------
Dividends Declared Per Share.......... $ 0.11 $ 0.09 $ 0.11 $ 0.09 $ 0.13 $ 0.11 $ 0.13 $ 0.11
-------- -------- -------- -------- -------- -------- -------- --------
F-16
ROYAL CARIBBEAN CRUISES LTD.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
NOTE 14. SUBSEQUENT EVENTS
In February 2001, we received net proceeds of $1.1 billion from the
issuance of 8.75% Senior Notes and Liquid Yield Option(TM) Notes (LYONs), due
2011 and 2021, respectively. The LYONs are zero coupon bonds with a yield to
maturity of 4.875%. The LYONs are convertible into 17.7 million shares of common
stock if certain conditions are met.
In February 2001, we took delivery of Infinity, a Millennium-class vessel
with 2,000 berths, designated for the Celebrity Cruises fleet. In March 2001, we
took delivery of Radiance of the Seas, a Radiance-class vessel with 2,100
berths, designated for the Royal Caribbean International fleet.
F-17
INDEX TO EXHIBITS
[Download Table]
EXHIBIT DESCRIPTION
------- -----------
1.1 -- Restated Articles of Incorporation of the Company, as
amended (incorporated by reference to Exhibit 3.1 to the
Company's Registration Statement on Form F-1, File No.
33-59304, filed with the Securities and Exchange Commission
(the "Commission"); Exhibit 2.2 to the Company's 1996 Annual
Report on Form 20-F filed with the Commission; Document No.
1 in the Company's Form 6-K filed with the Commission on
October 14, 1999; Document No. 1 in the Company's Form 6-K
filed with the Commission on May 18, 1999; and Document No.
1 in the Company's Form 6-K filed with the Commission on
August 28, 2000).
1.2 -- Restated By-Laws of the Company (incorporated by reference
to Document No. 2 to the Company's Form 6-K filed with the
Commission on May 18, 1999).
2.1 -- Indenture dated as of July 15, 1994 between the Company, as
issuer, and The Bank of New York, successor to NationsBank
of Georgia, National Association, as Trustee (incorporated
by reference to Exhibit 2.4 to the Company's 1994 Annual
Report on Form 20-F filed with the Commission).
2.2 -- First Supplemental Indenture dated as of July 28, 1994 to
Indenture dated as of July 15, 1994 between the Company, as
issuer, and The Bank of New York, successor to NationsBank
of Georgia, National Association, as Trustee (incorporated
by reference to Exhibit 2.5 to the Company's 1994 Annual
Report on Form 20-F filed with the Commission).
2.3 -- Second Supplemental Indenture dated as of March 29, 1995 to
Indenture dated as of July 15, 1994 between the Company, as
issuer, and The Bank of New York, successor to NationsBank
of Georgia, National Association, as Trustee (incorporated
by reference to Exhibit 2.5 to the Company's 1995 Annual
Report on Form 20-F filed with the Commission).
2.4 -- Third Supplemental Indenture dated as of September 18, 1995
to Indenture dated as of July 15, 1994 between the Company,
as issuer, and The Bank of New York, successor to
NationsBank of Georgia, National Association, as Trustee
(incorporated by reference to Exhibit 2.6 to the Company's
1995 Annual Report on Form 20-F filed with the Commission).
2.5 -- Fourth Supplemental Indenture dated as of August 12, 1996 to
Indenture dated as of July 15, 1994 between the Company, as
issuer, and The Bank of New York, as Trustee (incorporated
by reference to Document No. 2 in the Company's Form 6-K
filed with the Commission on February 10, 1997).
2.6 -- Fifth Supplemental Indenture dated as of October 14, 1997 to
Indenture dated as of July 15, 1994 between the Company, as
issuer, and The Bank of New York, as Trustee (incorporated
by reference to Exhibit 2.10 to the Company's 1997 Annual
Report on Form 20-F filed with the Commission).
2.7 -- Sixth Supplemental Indenture dated as of October 14, 1997 to
Indenture dated as of July 15, 1994 between the Company, as
issuer and The Bank of New York, as Trustee (incorporated by
reference to Exhibit 2.11 to the Company's 1997 Annual
Report on Form 20-F filed with the Commission).
2.8 -- Seventh Supplemental Indenture dated as of March 16, 1998 to
Indenture dated as of July 15, 1994 between the Company, as
issuer, and The Bank of New York, as Trustee (incorporated
by reference to Exhibit 2.12 to the Company's 1997 Annual
Report on Form 20-F filed with the Commission).
2.9 -- Eighth Supplemental Indenture dated as of March 16, 1998 to
Indenture dated as of July 15, 1994 between the Company, as
issuer, and The Bank of New York, as Trustee (incorporated
by reference to Exhibit 2.13 to the Company's 1997 Annual
Report on Form 20-F filed with the Commission).
2.10 -- Ninth Supplemental Indenture dated as of February 2, 2001 to
Indenture dated as of July 15, 1994 between the Company, as
issuer, and the Bank of New York, as Trustee.
[Download Table]
EXHIBIT DESCRIPTION
------- -----------
2.11 -- Tenth Supplemental Indenture dated as of February 2, 2001 to
Indenture dated as of July 15, 1994 between the Company, as
issuer, and the Bank of New York, as Trustee.
2.12 -- Amended and Restated Credit Agreement dated as of June 28,
1996 among the Company and various financial institutions
and The Bank of Nova Scotia as Administrative Agent and
Amendment No. 1 thereto (incorporated by reference to
Document No. 3 in the Company's Form 6-K filed with the
Commission on February 10, 1997 and Exhibit 1.1 to the
Company's 1997 Annual Report on Form 20-F filed with the
Commission).
2.13 -- Credit Agreement dated as of December 16, 1999 between the
Company and Kreditanstalt fur Wiederaufbau ("KfW")
(incorporated by reference to Exhibit 2.14 to the Company's
1999 Annual Report on Form 20-F filed with the Commission).
2.14 -- Credit Agreement dated as of June 9, 2000 among the Company
and various financial institutions and Bank of America, N.A.
as Administrative Agent.
2.15 -- Credit Agreement dated as of December 20, 2000 among the
Company and various financial institutions and KfW as
Administrative Agent.
2.16 -- New Credit Agreement dated December 12, 1997 between
Seabrook Maritime Inc. and KfW (incorporated by reference to
Exhibit 2.13 to the Company's 1997 Annual Report on Form
20-F filed with the Commission).
2.17 -- Loan Facility Agreement dated November 29, 1993 between
Esker Marine Shipping Inc. and KfW, together with
supplemental agreements thereto (incorporated by reference
to Exhibit 2.16 to the Company's 1997 Annual Report on Form
20-F filed with the Commission, Exhibit 1.8 to the Company's
1998 Annual Report on Form 20-F filed with the Commission,
and Exhibit 1.1 to the Company's 1999 Annual Report on Form
20-F filed with the Commission).
2.18 -- Loan Facility Agreement dated November 29, 1993 between Blue
Sapphire Marine Inc. and KfW, together with supplemental
agreements thereto (incorporated by reference to Exhibit
2.17 to the Company's 1997 Annual Report on Form 20-F filed
with the Commission, Exhibit 1.9 to the Company's 1998
Annual Report on Form 20-F filed with the Commission, and
Exhibit 1.2 to the Company's 1999 Annual Report on Form 20-F
filed with the Commission).
2.19 -- Loan Facility Agreement dated June 21, 1990 between Zenith
Shipping Corporation and KfW, together with supplemental
agreements thereto (incorporated by reference to Exhibit
2.18 to the Company's 1997 Annual Report on Form 20-F filed
with the Commission and to Exhibit 1.10 to the Company's
1998 Annual Report on Form 20-F filed with the Commission).
4.1 -- Amended and Restated Registration Rights Agreement dated as
of July 30, 1997 among the Company, A. Wilhelmsen AS.,
Cruise Associates, Monument Capital Corporation, Archinav
Holdings, Ltd. and Overseas Cruiseship, Inc. (incorporated
by reference to Exhibit 2.20 to the Company's 1997 Annual
Report on Form 20-F filed with the Commission).
4.2 -- Lease Agreement dated March 3, 1993 between the Company and
G.I.E. Cruise Vision One and Amendment Nos. 1, 2 and 3
thereto (incorporated by reference to Exhibit 2.9 to the
Company's 1994 Annual Report on Form 20-F filed with the
Commission; Exhibit 1.4 to the Company's 1995 Annual Report
on Form 20-F filed with the Commission; and to Exhibit 1.3
to the Company's 1998 Annual Report on Form 20-F filed with
the Commission).
4.3 -- Lease Agreement dated March 3, 1993 between the Company and
G.I.E. Cruise Vision Two and Amendment Nos. 1, 2, 3 and 4
thereto (incorporated by reference to Exhibit 2.11 to the
Company's 1995 Annual Report on Form 20-F filed with the
Commission and to Exhibit 1.4 to the Company's 1998 Annual
Report on Form 20-F filed with the Commission).
4.4 -- Office Building Lease Agreement dated July 25, 1989 between
Miami-Dade County and the Company, as amended (incorporated
by reference to Exhibits 10.116 and 10.117 to the Company's
Registration Statement on Form F-1, File No. 33-46157, filed
with the Commission).
[Download Table]
EXHIBIT DESCRIPTION
------- -----------
4.5 -- Office Building Lease Agreement dated January 18, 1994
between Miami-Dade County and the Company (incorporated by
reference to Exhibit 2.13 to the Company's 1993 Annual
Report on Form 20-F filed with the Commission).
4.6 -- 1990 Stock Option Plan of the Company, as amended
(incorporated by reference to Exhibit 4 to the Company's
Registration Statement on Form S-8, File No. 333-7290, filed
with the Commission).
4.7 -- 1995 Incentive Stock Option Plan of the Company, as amended
(incorporated by reference to Exhibit 4 to the Company's
Registration Statement on Form S-8, File No. 333-42072,
filed with the Commission).
4.8 -- 2000 Stock Option Plan of the Company (incorporated by
reference to Exhibit 4 to the Company's Registration
Statement on Form S-8, File No. 333-42070, filed with the
Commission).
8.1 -- List of Subsidiaries.
10.1 -- Consent of PricewaterhouseCoopers LLP, independent certified
public accountants.
Dates Referenced Herein and Documents Incorporated by Reference
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