UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Form 6-K
REPORT OF FOREIGN ISSUER PURSUANT TO RULES 13a-16 OR 15d-16
UNDER THE SECURITIES EXCHANGE ACT OF 1934
For the month of August, 2002
ROYAL CARIBBEAN CRUISES LTD.
----------------------------
(Translation of registrant's name into English)
1050 Caribbean Way, Miami, Florida 33132
----------------------------------------
(Address of principal executive offices)
Indicate by check mark whether the registrant files or will file annual
reports under cover Form 20-F or Form 40-F.
Form 20-F x Form 40-F
Indicate by check mark whether the registrant by furnishing the information
contained in this Form is also thereby furnishing the information to the
Commission pursuant to Rule 12g3-2(b) under the Securities Exchange Act of 1934.
Yes No x
ROYAL CARIBBEAN CRUISES LTD.
INDEX TO QUARTERLY FINANCIAL REPORT
Page
----
Consolidated Statements of Operations for the Second Quarters and Six Months Ended June 30,
2002 and 2001 ............................................................................. 1
Consolidated Balance Sheets as of June 30, 2002 and December 31, 2001 ..................... 2
Consolidated Statements of Cash Flows for the Six Months Ended June 30, 2002 and 2001 ..... 3
Notes to the Consolidated Financial Statements ............................................ 4
Management's Discussion and Analysis of Financial Condition and Results of Operations ..... 8
Signatures ................................................................................ 14
Attachment: Chief Executive Officer and Chief Financial Officer Certification ............ 15
ROYAL CARIBBEAN CRUISES LTD.
CONSOLIDATED STATEMENTS OF OPERATIONS
(unaudited, in thousands, except per share data)
Second Quarter Ended June 30, Six Months Ended June 30,
----------------------------- --------------------------
2002 2001 2002 2001
------------ ----------- ----------- -----------
Revenues $ 821,804 $ 821,674 $ 1,621,757 $ 1,548,552
------------ ----------- ----------- -----------
Expenses
Operating 498,865 504,003 1,001,503 960,342
Marketing, selling and administrative 107,271 107,469 209,347 220,259
Depreciation and amortization 85,148 74,927 167,975 142,592
------------ ----------- ----------- -----------
691,284 686,399 1,378,825 1,323,193
------------ ----------- ----------- -----------
Operating Income 130,520 135,275 242,932 225,359
------------ ----------- ----------- -----------
Other Income (Expense)
Interest income 2,485 4,945 6,712 11,742
Interest expense, net of capitalized interest (67,008) (63,279) (135,276) (122,534)
Other income (expense) 703 4,772 5,145 19,643
------------ ----------- ----------- -----------
(63,820) (53,562) (123,419) (91,149)
------------ ----------- ----------- -----------
Net Income $ 66,700 $ 81,713 $ 119,513 $ 134,210
============ =========== =========== ===========
Earnings Per Share:
Basic $ 0.35 $ 0.43 $ 0.62 $ 0.70
============ ============ =========== ===========
Diluted $ 0.34 $ 0.42 $ 0.61 $ 0.69
============ ============ =========== ===========
Weighted average shares outstanding:
Basic 192,406 192,209 192,366 192,185
============ ============ =========== ===========
Diluted 196,413 193,093 195,962 193,304
============ ============ =========== ===========
The accompanying notes are an integral part of these financial statements.
1
ROYAL CARIBBEAN CRUISES LTD.
CONSOLIDATED BALANCE SHEETS
(in thousands, except share data)
June 30, December 31,
ASSETS 2002 2001
------------ -------------
(unaudited)
Current Assets
Cash and cash equivalents $ 593,864 $ 727,178
Trade and other receivables, net 87,514 72,196
Inventories 33,423 33,493
Prepaid expenses and other assets 89,229 53,247
------------ -------------
Total current assets 804,030 886,114
Property and Equipment - at cost less accumulated
depreciation and amortization 8,958,187 8,605,448
Goodwill, net 278,561 278,561
Other Assets 540,547 598,659
------------ -------------
$ 10,581,325 $ 10,368,782
============ =============
LIABILITIES AND SHAREHOLDERS' EQUITY
Current Liabilities
Current portion of long-term debt $ 273,595 $ 238,581
Accounts payable 160,213 144,070
Accrued expenses and other liabilities 266,349 283,913
Customer deposits 679,410 446,085
------------ -------------
Total current liabilities 1,379,567 1,112,649
Long-Term Debt 5,336,756 5,407,531
Other Long-Term Liabilities 15,306 92,018
Commitments and Contingencies (Note 6)
Shareholders' Equity
Common stock ($.01 par value; 500,000,000 shares authorized;
192,437,255 and 192,310,198 shares issued) 1,924 1,923
Paid-in capital 2,047,966 2,045,904
Retained earnings 1,800,918 1,731,423
Accumulated other comprehensive income (loss) 5,766 (16,068)
Treasury stock (495,696 and 475,524 common shares at cost) (6,878) (6,598)
------------ -------------
Total shareholders' equity 3,849,696 3,756,584
------------ -------------
$ 10,581,325 $ 10,368,782
============ =============
The accompanying notes are an integral part of these financial statements.
2
ROYAL CARIBBEAN CRUISES LTD.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(unaudited, in thousands)
Six Months Ended June 30,
--------------------------
2002 2001
----------- -----------
Operating Activities
Net income $ 119,513 $ 134,210
Adjustments:
Depreciation and amortization 167,975 142,592
Accretion of original issue discount 23,071 13,625
Changes in operating assets and liabilities:
Increase in trade and other receivables, net (15,318) (24,653)
Decrease (increase) in inventories 70 (2,798)
Increase in prepaid expenses and other assets (24,303) (8,773)
Increase in accounts payable 16,143 8,785
(Decrease) increase in accrued expenses and other liabilities (29,242) 17,034
Increase in customer deposits 233,325 187,224
Other, net 7,627 (11,980)
----------- -----------
Net cash provided by operating activities 498,861 455,266
----------- -----------
Investing Activities
Purchases of property and equipment (200,666) (1,021,839)
Other, net (5,265) (25,262)
----------- -----------
Net cash used in investing activities (205,931) (1,047,101)
----------- -----------
Financing Activities
Proceeds from issuance of long-term debt - 1,574,643
Repayments of long-term debt, net (398,824) (292,604)
Dividends (50,018) (49,972)
Other, net 22,598 1,045
----------- -----------
Net cash (used in) provided by financing activities (426,244) 1,233,112
----------- -----------
Net (decrease) increase in cash and cash equivalents (133,314) 641,277
Cash and cash equivalents at beginning of period 727,178 177,810
----------- -----------
Cash and cash equivalents at end of period $ 593,864 $ 819,087
=========== ===========
Supplemental Disclosures
Cash paid during the year for:
Interest, net of amount capitalized $ 117,978 $ 102,037
=========== ===========
Noncash investing and financing activities:
Acquisition of vessel through debt $ 319,951 $ -
=========== ===========
The accompanying notes are an integral part of these financial statements.
3
ROYAL CARIBBEAN CRUISES LTD.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
As used in this document, the terms "Royal Caribbean," "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 more guests.
Note 1--Basis for Preparation of Consolidated Financial Statements
We believe the accompanying unaudited consolidated financial statements
contain all normal recurring accruals necessary for a fair presentation. Our
revenues are seasonal and results for interim periods are not necessarily
indicative of results for the entire year.
The interim unaudited consolidated financial statements should be read in
conjunction with the audited consolidated financial statements and notes thereto
for 2001.
Note 2--Summary of Significant Accounting Policies
On January 1, 2002, we adopted Statement of Financial Accounting Standards
No. 142, "Goodwill and Other Intangible Assets," which requires us to cease
amortization of goodwill and perform an impairment review of goodwill upon
adoption, annually thereafter and whenever events or changes in circumstances
indicate that the carrying amount of these assets may not be fully recoverable.
We completed our initial impairment test of goodwill as of January 1, 2002 and
determined that our goodwill was not impaired. Net income, excluding the
amortization of goodwill, would have been $84.3 million and $139.4 million in
the second quarter and six months ended June 30, 2001, respectively. Basic
earnings per share would have been $0.44 and $0.73, respectively and diluted
earnings per share would have been $0.44 and $0.72, respectively.
On January 1, 2002, we adopted Statement of Financial Accounting Standards
No. 144, "Accounting for the Impairment or Disposal of Long-Lived Assets," which
requires the measurement and recognition of the impairment of (i) long-lived
assets to be held and used and (ii) long-lived assets to be held for sale. The
implementation of Statement of Financial Accounting Standards No. 144 did not
have a material impact on our results of operations or financial position at
adoption or during the six months ended June 30, 2002.
In April 2002, the Financial Accounting Standards Board issued, and we
adopted, Statement of Financial Accounting Standards No. 145, "Rescission of
FASB Statements No. 4, 44, and 64, Amendment of FASB Statement No. 13, and
Technical Corrections". Statement of Financial Accounting Standards No. 4
required all gains and losses from extinguishment of debt to be aggregated and,
if material, classified as an extraordinary item, net of related income tax
effect. It was replaced by the criteria in Accounting Principles Board Opinion
No. 30 for classification requirements of extraordinary items. Statement of
Financial Accounting Standards No. 13 was amended to require that certain lease
modifications, which have economic effects similar to sale-leaseback
transactions, be accounted for in the same manner as sale-leaseback
transactions. The implementation of Statement of Financial Accounting Standards
4
No. 145 did not have an impact on our results of operations or financial
position at adoption or during the six months ended June 30, 2002.
Note 3--Earnings Per Share
Below is a reconciliation between basic and diluted earnings per share (in
thousands, except per share data):
Second Quarter Ended Six Months Ended
June 30, June 30,
-------------------- ------------------
2002 2001 2002 2001
--------- -------- -------- --------
Net Income $ 66,700 $ 81,713 $119,513 $134,210
========= ======== ======== ========
Weighted-average common shares outstanding 192,406 192,209 192,366 192,185
Dilutive effect of stock options 4,007 884 3,596 1,119
--------- -------- -------- --------
Diluted weighted-average shares outstanding 196,413 193,093 195,962 193,304
========= ======== ======== ========
Basic earnings per share $ 0.35 $ 0.43 $ 0.62 $ 0.70
========= ======== ======== ========
Diluted earnings per share $ 0.34 $ 0.42 $ 0.61 $ 0.69
========= ======== ======== ========
Our diluted earnings per share computation for the second quarter and six
months ended June 30, 2002 and 2001 did not include 17.7 million and 13.8
million shares of our common stock issuable upon conversion of our Liquid Yield
OptionTM Notes and Zero Coupon Convertible Notes, respectively, as our common
stock was not issuable under the contingent conversion provisions of these debt
instruments.
Note 4--Long-Term Debt
In May 2002, we entered into a $320.0 million term loan bearing interest
at a variable rate of six month LIBOR plus 1.535%, due through 2010 and secured
by a Celebrity vessel.
Note 5--Shareholders' Equity
During each of the quarters ended March 31, 2002 and 2001 and June 30, 2002
and 2001, we declared cash dividends on common shares of $0.13 per share.
Note 6--Commitments and Contingencies
Capital Expenditures. As of June 30, 2002, we had five ships on order with
an aggregate capacity of 12,528 berths. The aggregate contract price of the five
ships, which excludes capitalized interest and other ancillary costs, is
5
approximately $2.3 billion, against which we have made deposits of $319.6
million as of June 30, 2002. Additional deposits are due prior to delivery of
$69.3 million in 2002 and $5.2 million in 2003. In May 2002, we moved the
delivery date of Navigator of the Seas from the first quarter of 2003 to the
fourth quarter of 2002. As of June 30, 2002, we anticipated that overall capital
expenditures would be approximately $1.6 billion, $0.6 billion and $1.0 billion
for 2002, 2003 and 2004, respectively. (See Note 8--Subsequent Events.) Two of
the ships on order, with an aggregate capacity of 4,200 berths, are committed to
the joint venture with P&O Princess Cruises plc. The aggregate contract price of
these two ships, excluding capitalized interest and other ancillary costs, is
approximately $0.8 billion and is included in our projected capital costs above.
Merger Costs. We continue to incur costs in connection with the proposed
dual-listed company merger with P&O Princess Cruises plc which are being
deferred. In the event the transaction is not consummated, we will write off
these costs, resulting in a charge to earnings. We expect to incur approximately
$25 million of merger related costs through September 2002. If the dual-listed
company merger is completed, these deferred costs, together with additional
success costs, will be capitalized as part of the transaction.
Litigation. 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 46 U.S.C. Section 10313 of 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 upon
our financial condition or results of operations. We are engaged in settlement
discussions which, if concluded, would result in a charge to earnings of
approximately $0.09 to $0.10 per share, although there can be no assurance that
a settlement agreement will be reached.
We are routinely involved in other claims typical within the cruise
industry. The majority of these claims is covered by insurance. We believe the
outcome of such other claims, net of expected insurance recoveries, will not
have a material adverse effect upon our financial condition or results of
operations.
6
Other. At June 30, 2002, we have future commitments to pay for our usage of
certain port facilities, maintenance contracts and communication services as
follows (in thousands):
Year
--------------------------------
2002 $ 28,677
2003 27,022
2004 27,809
2005 22,765
2006 20,301
Thereafter 125,563
-----------
$252,137
===========
Note 7--Comprehensive Income
Comprehensive income was as follows (in thousands):
Second Quarter Ended Six Months Ended
June 30, June 30,
--------------------- ---------------------
2002 2001 2002 2001
--------- --------- --------- ---------
Net income $ 66,700 $ 81,713 $ 119,513 $ 134,210
Transition adjustment SFAS No. 133 - - - 7,775
Changes related to cash flow derivative hedges 6,781 (881) 21,834 (6,783)
--------- --------- --------- ---------
Total comprehensive income $ 73,481 $ 80,832 $ 141,347 $ 135,202
========= ========= ========= =========
Note 8--Subsequent Events
On July 5, 2002, Royal Caribbean International added Brilliance of the Seas
to its fleet. In connection with this addition, we novated our original ship
building contract and entered into a long-term operating lease denominated in
British pounds sterling. The total lease term is 25 years with cancellation
provisions at years 10 and 18. The lease payments vary based on actual sterling
LIBOR. Assuming sterling LIBOR averages 5.75% over the term of the lease, the
effective interest rate would be approximately 5.75%. As a result of this
transaction, our capital expenditures will be approximately $1.1 billion for
2002.
7
ROYAL CARIBBEAN CRUISES LTD.
MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
Certain statements under this caption "Management's Discussion and Analysis
of Financial Condition and Results of Operations," 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,
but are not limited to:
- general economic and business conditions,
- cruise industry competition,
- changes in vacation industry capacity, including cruise 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 of scheduled 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, political instability, or
the unavailability of air service,
- changes in interest rates or oil prices, and
- weather.
The above examples may not be exhaustive and new risks emerge from time to
time. We undertake no obligation to publicly update or revise any
forward-looking statements, whether as a result of new information, future
events or otherwise.
This report should be read in conjunction with our annual report on Form
20-F for the year ended December 31, 2001.
8
Results of Operations
Summary
Revenues for the second quarter of 2002 were $821.8 million, essentially
unchanged from $821.7 million for the same period in 2001. The increase in
capacity for the period was offset by a decline in gross revenue per available
passenger cruise day. Net income for the second quarter of 2002 was $66.7
million or $0.34 per share on a diluted basis compared to $81.7 million or $0.42
per share for the second quarter of 2001. Second quarters of 2002 and 2001 were
positively affected by $3.0 million of compensation from the shipyard related to
the late delivery of Constellation and $14.0 million related to insurance
claims, respectively. The impact to the second quarters of 2002 and 2001 for
ships out of service, net of compensation from the shipyard and insurance
claims, was a decrease in earnings of $0.04 and $0.06 per share, respectively.
Net revenue per available passenger cruise day for the second quarter of 2002
declined 3.3% from the same period in 2001. Net revenue represents gross
revenues less costs of air transportation, travel agent commissions and other
direct costs of sales.
The following table presents operating data as a percentage of revenues:
Second Quarter Ended Six Months Ended
June 30, June 30,
--------------------- --------------------
2002 2001 2002 2001
--------- --------- --------- ---------
Revenues 100.0% 100.0% 100.0% 100.0%
Expenses:
Operating 60.7 61.3 61.8 62.0
Marketing, selling and administrative 13.0 13.1 12.9 14.2
Depreciation and amortization 10.4 9.1 10.3 9.2
--------- --------- --------- ---------
Operating Income 15.9 16.5 15.0 14.6
Other Income (Expense) (7.8) (6.6) (7.6) (5.9)
--------- --------- --------- ---------
Net Income 8.1% 9.9% 7.4% 8.7%
========== ========= ========= =========
Our revenues are seasonal based on the demand for cruises. Demand is
strongest for cruises during the summer months.
Revenues
Revenues for the second quarter of 2002 were $821.8 million, essentially
unchanged from $821.7 million for the same period in 2001. The increase in
capacity of 9.8% was offset by an 8.9% decline in gross revenue per available
passenger cruise day. The increase in capacity was associated with the addition
9
of Summit and Adventure of the Seas during 2001 and Constellation in 2002. The
increase in capacity was partially offset by the transfer of Viking Serenade to
Island Cruises, our joint venture with First Choice Holidays PLC, and the
cancellation of four weeks of sailings due to unanticipated drydocks of two
ships. The decrease in gross revenue per available passenger cruise day was
primarily associated with lower cruise ticket prices following the events of
September 11, 2001, a lower percentage of guests who chose to book their air
passage through us, a general softness in the U.S. economy and an increase in
industry capacity. The percentage of guests booking air travel through us
decreased from 26.7% in the second quarter of 2001 to 14.5% in 2002. Net revenue
per available passenger cruise day for the second quarter of 2002 declined 3.3%
from the same period in 2001. Occupancy for the second quarter of 2002 was
104.4% compared to 103.0% for the same period in 2001.
Revenues for the first six months of 2002 increased 4.7% to $1.6 billion
from $1.5 billion for the same period in 2001. The increase in revenues was
primarily due to a 16.2% increase in capacity, partially offset by a 9.9%
decline in gross revenue per available passenger cruise day. Occupancy for the
first six months of 2002 was 104.1% compared to 103.0% for the same period in
2001.
On July 25, 2002, we announced net revenues per available passenger cruise
day for the third quarter of 2002 are expected to be down 2% to 4%, while in the
fourth quarter they are expected to be up 4% to 6% from the same quarters in
2001. For the full year 2002, net revenues per available passenger cruise day
are expected to be down 2% to 3% from 2001.
Expenses
Operating expenses decreased 1.0% to $498.9 million for the second quarter
of 2002 compared to $504.0 million for the same period in 2001 and increased
4.3% to $1.0 billion for the first six months of 2002 from $960.3 million in
2001. The decrease for the second quarter was primarily due to lower air
transportation costs associated with fewer guests purchasing air passage through
us and lower travel agent commissions as a result of lower cruise ticket
pricing, partially offset by an increase in capacity of 9.8%. The increase for
the six months ended June 30, 2002 was primarily due to a 16.2% increase in
capacity, partially offset by a decrease in air and commission expenses.
Included in operating expenses for the first six months of 2002 was
approximately $5.0 million in guest and travel agent expenses resulting from the
cancellation of four weeks of sailings related to unanticipated drydocks for two
ships. Operating costs per available passenger cruise day for the second quarter
and six months ended June 30, 2002 declined 9.8% and 10.3%, respectively.
Marketing, selling and administrative expenses decreased 0.2% to $107.3
million for the second quarter of 2002 from $107.5 million for the same period
in 2001, and decreased 5.0% to $209.3 million for the first six months of 2002
from $220.3 million in 2001. The decrease for the six months ended June 30, 2002
was due primarily to the timing of marketing activities and advertising costs as
well as cost reduction initiatives. Marketing, selling and administrative
expenses as a percentage of revenues were 13.0% and 13.1% for the second
quarters of 2002 and 2001, respectively, and 12.9% and 14.2% for the first six
months ended 2002 and 2001, respectively.
10
Operating costs and marketing, selling and administrative expenses on a per
available passenger cruise day basis, excluding fuel costs and prior year
insurance claims, declined 13.2% and 14.0% for the second quarter and six months
ended June 30, 2002, respectively, compared to 2001. For the full year 2002, we
expect these costs to be down 5% per available passenger cruise day on a
year-over-year basis. For the quarter, running expenses (i.e., those expenses
directly associated with shipboard operations) and SG&A expenses excluding fuel
were down 6.9% on a per available passenger cruise day basis. For the full year
2002, we expect these costs to be down 3.5% to 4.0% on the same basis.
Depreciation and amortization increased 13.6% to $85.1 million for the
second quarter of 2002 from $74.9 million for the same period in 2001 and
increased 17.8% to $168.0 million for the six months ended June 30, 2002 from
$142.6 million for the same period in 2001. The increase was primarily due to
incremental depreciation associated with the addition of new ships, partially
offset by the elimination of $5.2 million of goodwill amortization resulting
from the implementation of Statement of Financial Accounting Standards No. 142,
"Goodwill and Other Intangible Assets," in 2002.
Other Income (Expense)
Gross interest expense, excluding capitalized interest, increased to $73.5
million for the second quarter of 2002 compared to $70.8 million in 2001, and to
$147.7 million for the six months ended June 30, 2002 compared to $140.6 million
for the same period in 2001. The increase for the second quarter and the six
months ended June 30, 2002 was due primarily to an increase in the average debt
level associated with our fleet expansion program partially offset by lower
interest rates. Capitalized interest decreased to $6.5 million for the second
quarter of 2002 from $7.5 million for the same period in 2001, and decreased to
$12.5 million for the six months ended June 2002 from $18.1 million for the same
period in 2001, due to a lower average level of investment in ships under
construction and lower interest rates.
The decrease in Other income (expense) for the six months ended June 30,
2002 compared to the same period in 2001 was primarily due to $4.5 million of
losses from affiliated operations, partially offset by $3.0 million of
compensation from the shipyard related to the late delivery of Constellation.
Included in the same period in 2001 was $7.2 million of compensation from the
shipyard related to the late delivery of a ship.
Liquidity and Capital Resources
Sources and Uses of Cash
Net cash provided by operating activities was $498.9 million for the first
six months of 2002 compared to $455.3 million for the same period in 2001. The
increase was primarily due to the timing of cash receipts related to customer
deposits.
Our capital expenditures were $520.6 million for the first six months of
2002 compared to $1.0 billion for the same period in 2001. Capital expenditures
for the first six months of 2002 were primarily related to the delivery of
Constellation and ships under construction. Capital expenditures for the first
11
six months of 2001 were primarily related to the deliveries of Infinity and
Radiance of the Seas, and deposits for ships under construction.
During the first six months of 2002, we paid quarterly cash dividends on
our common stock of $50.0 million. We had net repayments of $350.0 million on
our $1.0 billion revolving credit facility. In May 2002, we partially financed
the acquisition of Constellation with a $320.0 million secured variable rate
term loan. (See Note 4--Long-Term Debt.)
Capitalized interest decreased to $12.5 million for the first six months of
2002 from $18.1 million for the same period in 2001. The decrease was primarily
due to a lower average level of investment in ships under construction and lower
interest rates.
Future Commitments
We currently have four ships on order with an aggregate capacity of 10,428
berths. The aggregate contract price of the four ships, which excludes
capitalized interest and other ancillary costs, is approximately $1.9 billion,
against which we have made deposits of $265.2 million as of June 30, 2002.
Additional deposits are due prior to the dates of delivery of $69.3 million in
2002 and $5.2 million in 2003. Two of the ships on order, with an aggregate
capacity of 4,200 berths, are committed to the joint venture with P&O Princess
Cruises plc. The aggregate contract price of these two ships, excluding
capitalized interest and other ancillary costs, is approximately $0.8 billion
and is included in our projected capital costs below.
In May 2002, we moved the delivery date of Navigator of the Seas from the
first quarter of 2003 to the fourth quarter of 2002. On July 5, 2002, Royal
Caribbean International added Brilliance of the Seas to its fleet. In connection
with this addition, we novated our original ship building contract and entered
into a long-term operating lease denominated in British pounds sterling. The
total lease term is 25 years with cancellation provisions at years 10 and 18.
Our British pounds sterling receipts from business operations will provide a
natural hedge to the foreign exchange exposure from the lease payments. The
lease payments vary based on actual sterling LIBOR. Assuming sterling LIBOR
averages 5.75% over the term of the lease, the effective interest rate would be
approximately 5.75%. As a result, we anticipate that overall capital
expenditures will be approximately $1.1 billion, $0.6 billion and $1.0 billion
for 2002, 2003, and 2004, respectively.
We 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 $0.8 billion and we have extended the expiration
date on these options to September 20, 2002.
As of June 30, 2002, we had $5.6 billion of long-term debt of which $273.6
million is due during the 12-month period ending June 30, 2003.
We continue to incur costs in connection with the proposed dual-listed
company merger with P&O Princess Cruises plc which are being deferred. In the
event the transaction is not consummated, we will write off these costs,
resulting in a charge to earnings. We expect to incur approximately $25 million
12
of merger related costs through September 2002. If the dual-listed company
merger is completed, these deferred costs, together with additional success
costs, will be capitalized as part of the transaction.
As a normal part of our business, depending on market conditions, pricing
and our overall growth strategy, we continuously consider opportunities to enter
into contracts for the building of additional ships. We may also consider the
sale of ships. We continuously consider potential acquisitions and strategic
alliances. If any of these were to occur, they would be financed through the
incurrence of additional indebtedness, the issuance of additional shares of
equity securities or through cash flows from operations.
Funding Sources
As of June 30, 2002, our liquidity was $1.6 billion consisting of
approximately $0.6 billion in cash and cash equivalents and $1.0 billion
available under our $1.0 billion unsecured revolving credit facility. Our $1.0
billion revolving credit facility expires June 2003. Any amounts outstanding at
that time will be payable immediately if the facility is not renewed. We intend
to renew or replace this facility prior to its expiration date. In addition, we
have commitments for export financing for up to 80% of the contract price of two
ships on order, Serenade of the Seas and Jewel of the Seas, or for up to $624.0
million in aggregate. Capital expenditures and scheduled debt payments will be
funded through a combination of cash flows provided by operations, drawdowns
under our available credit facility, the incurrence of additional indebtedness
and the sales of equity or debt securities in private or public securities
markets. The events of September 11, 2001, current market volatility and the
lowering of our credit ratings by Standard & Poors and Moody's have adversely
impacted terms and availability of financing in the financial markets, and it is
indeterminable how long this situation will continue. Therefore, there can be no
assurances that cash flows from operations and additional financings from
external sources will be available in accordance with our expectations.
Our debt agreements contain covenants that require us, among other things,
to maintain minimum liquidity, net worth, and fixed charge coverage ratio and
limit our debt to capital ratio. We are in compliance with all covenants as of
June 30, 2002.
Other
On July 25, 2002, we announced that we believed the consensus of analyst
estimates for 2002 full year earnings per share of $1.38 was reasonable. We are
engaged in settlement discussions with respect to certain litigation which, if
concluded, would result in a charge to earnings of approximately $0.09 to $0.10
per share, although there can be no assurance that a settlement agreement will
be reached. Based upon the current booking trends, in the event the settlement
mentioned above is reached, we still believe the consensus of analyst estimates
remains reasonable.
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INCORPORATION BY REFERENCE
This report on Form 6-K is hereby incorporated by reference in registrant's
Registration Statement on Form F-3 (File No. 333-56058) filed with the
Securities and Exchange Commission.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned, thereunto duly authorized.
ROYAL CARIBBEAN CRUISES LTD.
----------------------------
(Registrant)
By: /s/ Bonnie S. Biumi
-----------------------
Bonnie S. Biumi
Chief Financial Officer
Date: August 14, 2002
14
August 14, 2002
Securities and Exchange Commission
450 Fifth Street, NW
Washington, DC 20549
Dear Ladies and Gentlemen:
Richard D. Fain, the Chief Executive Officer, and Bonnie S. Biumi, Chief
Financial Officer, of Royal Caribbean Cruises Ltd. (the "Company") each
certifies as follows with respect to the Company's Quarterly Financial Report
for the Second Quarter of 2002 to which this letter is attached (the "Report"):
1. the Report fully complies with the applicable reporting requirements
of Sections 13(a) or 15(d) of the Securities Exchange Act of 1934; and
2. the information contained in the Report fairly presents in all
material respects the financial condition and results of operations of
the Company.
/s/ RICHARD D. FAIN
-------------------
Richard D. Fain
Chief Executive Officer
/s/ BONNIE S. BIUMI
-------------------
Bonnie S. Biumi
Chief Financial Officer
15