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 November, 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 Third Quarters
and Nine Months Ended September 30, 2002 and 2001 .................... 1
Consolidated Balance Sheets as of September 30, 2002
and December 31, 2001 ................................................ 2
Consolidated Statements of Cash Flows for the Nine Months Ended
September 30, 2002 and 2001 .......................................... 3
Notes to the Consolidated Financial Statements ....................... 4
Management's Discussion and Analysis of Financial Condition and
Results of Operations ................................................ 9
Signatures ........................................................... 15
Certifications ....................................................... 15
Attachment: Chief Executive Officer and Chief Financial
Officer Certification ................................................ 18
ROYAL CARIBBEAN CRUISES LTD.
CONSOLIDATED STATEMENTS OF OPERATIONS
(unaudited, in thousands, except per share data)
Third Quarter Ended Nine Months Ended
September 30, September 30,
---------------------- ----------------------
2002 2001 2002 2001
---------- --------- ---------- ----------
Revenues $1,031,660 $ 940,721 $2,653,417 $2,489,273
---------- --------- ---------- ----------
Expenses
Operating 601,640 529,156 1,603,143 1,489,498
Marketing, selling and administrative 102,885 123,489 312,232 343,748
Depreciation and amortization 85,538 76,819 253,513 219,411
---------- --------- ---------- ----------
790,063 729,464 2,168,888 2,052,657
---------- --------- ---------- ----------
Operating Income 241,597 211,257 484,529 436,616
---------- --------- ---------- ----------
Other Income (Expense)
Interest income 3,696 7,960 10,408 19,702
Interest expense, net of capitalized interest (67,755) (63,212) (203,031) (185,746)
Other income (expense) 15,956 3,207 21,101 22,850
---------- --------- ---------- ----------
(48,103) (52,045) (171,522) (143,194)
---------- --------- ---------- ----------
Net Income $ 193,494 $ 159,212 $ 313,007 $ 293,422
========== ========= ========== ==========
Earnings Per Share:
Basic $ 1.01 $ 0.83 $ 1.63 $ 1.53
========== ========= ========== ==========
Diluted $ 0.99 $ 0.82 $ 1.60 $ 1.52
========== ========= ========== ==========
Weighted average shares outstanding:
Basic 192,463 192,254 192,399 192,208
========== ========= ========== ==========
Diluted 195,341 193,139 195,755 193,435
========== ========= ========== ==========
The accompanying notes are an integral part of these financial statements.
1
ROYAL CARIBBEAN CRUISES LTD.
CONSOLIDATED BALANCE SHEETS
(in thousands, except share data)
September 30, December 31,
ASSETS 2002 2001
-------------- ------------
(unaudited)
Current Assets
Cash and cash equivalents $ 641,808 $ 727,178
Trade and other receivables, net 82,358 72,196
Inventories 34,849 33,493
Prepaid expenses and other assets 82,416 53,247
-------------- ------------
Total current assets 841,431 886,114
Property and Equipment - at cost less accumulated
depreciation and amortization 8,824,156 8,605,448
Goodwill, net 278,561 278,561
Other Assets 568,992 598,659
-------------- ------------
$10,513,140 $ 10,368,782
============== ============
LIABILITIES AND SHAREHOLDERS' EQUITY
Current Liabilities
Current portion of long-term debt $ 122,412 $ 238,581
Accounts payable 174,991 144,070
Accrued expenses and other liabilities 262,862 283,913
Customer deposits 578,946 446,085
-------------- ------------
Total current liabilities 1,139,211 1,112,649
Long-Term Debt 5,351,779 5,407,531
Other Long-Term Liabilities 2,818 92,018
Commitments and Contingencies (Note 6)
Shareholders' Equity
Common stock ($.01 par value; 500,000,000 shares authorized;
192,485,759 and 192,310,198 shares issued) 1,925 1,923
Paid-in capital 2,048,632 2,045,904
Retained earnings 1,969,389 1,731,423
Accumulated other comprehensive income (loss) 6,404 (16,068)
Treasury stock (505,782 and 475,524 common shares at cost) (7,018) (6,598)
-------------- ------------
Total shareholders' equity 4,019,332 3,756,584
-------------- ------------
$ 10,513,140 $ 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)
Nine Months Ended
September 30,
----------------------
2002 2001
---------- ----------
Operating Activities
Net income $ 313,007 $ 293,422
Adjustments:
Depreciation and amortization 253,513 219,411
Accretion of original issue discount 34,882 24,726
Changes in operating assets and liabilities:
Increase in trade and other receivables, net (10,162) (12,900)
Increase in inventories (1,356) (4,076)
Increase in prepaid expenses and other assets (18,396) (6,462)
Increase (decrease) in accounts payable 30,921 (478)
(Decrease) increase in accrued expenses and other liabilities (31,823) 65,100
Increase in customer deposits 132,861 5,208
Other, net 12,973 (10,171)
---------- ----------
Net cash provided by operating activities 716,420 573,780
---------- ----------
Investing Activities
Purchases of property and equipment (152,125) (1,162,736)
Other, net (21,755) (30,262)
---------- ----------
Net cash used in investing activities (173,880) (1,192,998)
---------- ----------
Financing Activities
Proceeds from issuance of long-term debt - 1,574,643
Repayments of long-term debt, net (576,896) (298,128)
Dividends (75,041) (74,969)
Other, net 24,027 4,452
---------- ----------
Net cash (used in) provided by financing activities (627,910) 1,205,998
---------- ----------
Net (decrease) increase in cash and cash equivalents (85,370) 586,780
Cash and cash equivalents at beginning of period 727,178 177,810
---------- ----------
Cash and cash equivalents at end of period $ 641,808 $ 764,590
========== ==========
Supplemental Disclosures
Cash paid during the year for:
Interest, net of amount capitalized $ 187,595 $ 118,600
========== ==========
Noncash investing and financing activities:
Acquisition of vessel through debt $ 319,951 $ 326,738
========== ==========
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. For the third quarter and nine
months ended September 30, 2001, net income excluding the amortization of
goodwill, would have been $161.8 million and $301.2 million, respectively. Basic
earnings per share would have been $0.84 and $1.57, respectively and diluted
earnings per share would have been $0.84 and $1.56, 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 nine months ended September 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
4
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
No. 145 did not have a material impact on our results of operations or financial
position at adoption or during the nine months ended September 30, 2002.
Note 3--Earnings Per Share
Below is a reconciliation between basic and diluted earnings per share (in
thousands, except per share data):
Third Quarter Ended Nine Months Ended
September 30, September 30,
-------------------- --------------------
2002 2001 2002 2001
--------- -------- --------- --------
Net Income $193,494 $159,212 $313,007 $293,422
========= ======== ========= ========
Weighted-average common
shares outstanding 192,463 192,254 192,399 192,208
Dilutive effect of stock
options 2,878 885 3,356 1,227
--------- -------- --------- --------
Diluted weighted-average
shares outstanding 195,341 193,139 195,755 193,435
Basic earnings per share $ 1.01 $ 0.83 $ 1.63 $ 1.53
========= ======== ========= ========
Diluted earnings per share $ 0.99 $ 0.82 $ 1.60 $ 1.52
========= ======== ========= ========
Our diluted earnings per share computation for the third quarter and nine
months ended September 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
Option TM 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. In September 2002, our $150.0 million 7.125% senior notes
matured and were paid in full.
Note 5--Shareholders' Equity
During each of the quarters ended March 31, June 30, and September 30, of
both 2002 and 2001, we declared cash dividends on common shares of $0.13 per
share.
5
Note 6--Commitments and Contingencies
Capital Expenditures. As of September 30, 2002, we had 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 $285.0
million as of September 30, 2002. Additional deposits are due prior to delivery
of $49.4 million in 2002 and $1.0 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. In September 2002, we moved the delivery date of
Serenade of the Seas from the fourth quarter of 2003 to the third quarter of
2003 and Mariner of the Seas from the first quarter of 2004 to the fourth
quarter of 2003. As of September 30, 2002, we anticipated that overall capital
expenditures would be approximately $1.1 billion, $1.1 billion and $0.5 billion
for 2002, 2003 and 2004, respectively. (See Operating Leases below.) 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.
We agreed with P&O Princess Cruises plc to terminate the joint venture effective
January 1, 2003 provided that there has been no change of control of either P&O
Princess Cruises plc or us prior to that date, in which case, the two ships will
remain with our fleet.
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. In October 2002, we entered into settlement
agreements in connection with both lawsuits. The settlement agreement relating
to the lawsuit brought on behalf of individual crew members resolves the claims
of most of these individuals. The settlement agreement relating to the purported
class action lawsuit is subject to court approval and there can be no assurance
that such approval will be obtained. Under the terms of the settlement
agreements, we are to make aggregate payments of $20.0 million, which were
recorded as of September 30, 2002.
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.
Operating Leases. On July 5, 2002, we added Brilliance of the Seas to Royal
Caribbean International's 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
cancelable by either party at years 10 and 18. In connection with the novation
of the contract, we received $77.7 million for reimbursement of shipyard
deposits previously made, which were offset against purchases of property and
equipment. The lease payments vary based on sterling LIBOR. We have other
noncancelable operating leases primarily for office and warehouse facilities,
computer equipment and motor vehicles.
6
As of September 30, 2002, future minimum lease payments for operating
leases were as follows (in thousands):
Year
2002 $ 11,100
2003 44,184
2004 44,177
2005 41,442
2006 39,329
Thereafter 231,263
--------
$411,495
========
Total expense for all operating leases amounted to $8.7 million and $2.4
million for the third quarters 2002 and 2001, respectively and $14.1 million and
$7.3 million for the nine months ended 2002 and 2001, respectively.
Other. At September 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 $ 7,203
2003 26,770
2004 27,725
2005 22,765
2006 20,301
Thereafter 126,063
--------
$230,827
========
Note 7--Comprehensive Income
Comprehensive income was as follows (in thousands):
Third Quarter Ended Nine Months Ended
September 30, September 30,
-------------------- --------------------
2002 2001 2002 2001
--------- -------- --------- ---------
Net income $193,494 $159,212 $313,007 $293,422
Transition adjustment
SFAS No. 133 - - - 7,775
Changes related to cash
flow derivative hedges 638 (4,309) 22,472 (11,092)
--------- -------- -------- ---------
Total comprehensive income $194,132 $154,903 $335,479 $290,105
========= ======== ======== =========
7
Note 8--Subsequent Events
On October 25, 2002, the board of directors of P&O Princess Cruises plc
withdrew its support of the proposed combination of P&O Princess Cruises plc and
us as a merger of equals under a dual-listed company structure, and we
terminated our agreement with P&O Princess Cruises plc providing for such
combination. In connection with the termination of that agreement, we received
an agreed break fee of $62.5 million which will be recorded in the fourth
quarter. We will offset against this amount approximately $30.0 million of
merger related costs. We also agreed with P&O Princess Cruises plc to terminate
the joint venture to target customers in southern Europe effective January 1,
2003 provided that there has been no change of control of either P&O Princess
Cruises plc or us prior to that date.
8
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 are not 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.
9
Results of Operations
Summary
Net income for the third quarter of 2002 was $193.5 million or $0.99 per
share on a diluted basis compared to $159.2 million or $0.82 per share for the
third quarter of 2001. Included in the third quarter of 2002 is a charge of
$20.0 million or $0.10 per share recorded in connection with a litigation
settlement. Third quarter 2001 net income was negatively impacted by $36.7
million or $0.19 per share due to lost revenues and costs associated with the
September 11 terrorist attacks. Adjusted for these charges, third quarter net
income for 2002 was $213.5 million or $1.09 per share compared to $195.9 million
or $1.01 per share for the third quarter of 2001.
The following table presents operating data as a percentage of revenues:
Third Quarter Ended Nine Months Ended
September 30, September 30,
-------------------- --------------------
2002 2001 2002 2001
--------- --------- --------- ---------
Revenues 100.0% 100.0% 100.0% 100.0%
Expenses:
Operating 58.3 56.2 60.4 59.8
Marketing, selling
and administrative 10.0 13.1 11.8 13.8
Depreciation and amortization 8.3 8.2 9.6 8.9
--------- --------- --------- ---------
Operating Income 23.4 22.5 18.2 17.5
Other Income (Expense) (4.6) (5.6) (6.4) (5.7)
--------- --------- --------- ---------
Net Income 18.8% 16.9% 11.8% 11.8%
========= ========= ========= =========
Our revenues are seasonal based on the demand for cruises. Demand is
strongest for cruises during the summer months.
Revenues
Revenues for the third quarter of 2002 were a record high at $1.0 billion,
up 9.7% from $940.7 million for the same period in 2001. The increase in revenue
was driven by an increase in capacity of 15.9%, partially offset by a 5.4%
decline in gross revenue per available passenger cruise day. The increase in
capacity was associated with the addition of Summit and Adventure of the Seas
during 2001 and Constellation and Brilliance of the Seas in 2002, partially
offset by the transfer of Viking Serenade to Island Cruises, our joint venture
with First Choice Holidays PLC. The decline in gross revenue per available
passenger cruise day was primarily associated with a lower percentage of guests
who chose to book their air passage through us, a general softness in the U.S.
economy, lower cruise ticket prices following the events of September 11, 2001
and an increase in industry capacity. The percentage of guests booking air
passage through us decreased from 20.6% in the third quarter of 2001 to 11.4% in
the third quarter of 2002. Net revenue per available passenger cruise day for
10
the third quarter of 2002 declined 1.7% from the same period in 2001. Occupancy
for the third quarter of 2002 was 108.4% compared to 105.7% for the same period
in 2001.
Revenues for the first nine months of 2002 increased 6.6% to $2.7 billion
from $2.5 billion for the same period in 2001. The increase in revenue was
primarily due to a 16.1% increase in capacity, partially offset by an 8.2%
decline in gross revenue per available passenger cruise day. 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. Net revenue
per available passenger cruise day for the nine months of 2002 declined 3.9%
from the same period in 200l. Occupancy for the first nine months of 2002 was
105.6% compared to 104.0% for the same period in 2001.
On October 23, 2002, we announced net revenues per available passenger
cruise day for the fourth quarter are expected to be up 7% to 9% from the same
quarter in 2001. For the full year 2002, net revenues per available passenger
cruise day are expected to be down 1% to 2% from 2001.
Expenses
Operating expenses increased 13.7% to $601.6 million for the third quarter
of 2002 compared to $529.2 million for the same period in 2001 and increased
7.6% to $1.6 billion for the first nine months of 2002 from $1.5 billion in
2001. Included in operating expenses for the third quarter and nine months ended
September 30, 2002 is a charge of $20.0 million recorded in connection with a
litigation settlement. (See Note 6--Commitments and Contingencies.) The increase
for the third quarter was primarily due to an increase in capacity of 15.9%,
partially offset by a decrease in air transportation costs associated with fewer
guests purchasing air passage through us. The increase for the nine months ended
September 30, 2002 was primarily due to a 16.1% increase in capacity, partially
offset by a decrease in air expenses. Operating costs per available passenger
cruise day for the third quarter and nine months ended September 30, 2002
declined 1.9% and 7.3%, respectively.
Marketing, selling and administrative expenses decreased 16.7% to $102.9
million for the third quarter of 2002 from $123.5 million for the same period in
2001, and decreased 9.2% to $312.2 million for the first nine months of 2002
from $343.7 million in 2001. The decrease for the third quarter and nine months
ended September 30, 2002 was due primarily to cost reduction initiatives and the
timing of marketing activities and advertising costs. Marketing, selling and
administrative expenses as a percentage of revenues were 10.0% and 13.1% for the
third quarters of 2002 and 2001, respectively, and 11.8% and 13.8% for the first
nine months ended 2002 and 2001, respectively. For the full year 2002, we expect
SG&A expenses to be between $430 million and $440 million, or down from 2001 in
excess of 15% on a per available passenger cruise day basis.
For the quarter, running expenses (those expenses directly associated with
shipboard operations) and SG&A expenses, excluding fuel, the impact of September
11, litigation charges and Brilliance of the Seas lease payment, were down 4.7%
on an available passenger cruise day basis.
11
Depreciation and amortization increased 11.4% to $85.5 million for the
third quarter of 2002 from $76.8 million for the same period in 2001 and
increased 15.5% to $253.5 million for the nine months ended September 30, 2002
from $219.4 million for the same period in 2001. The increases were primarily
due to incremental depreciation associated with the addition of new ships,
partially offset by the elimination of $2.6 million and $7.8 million of goodwill
amortization for the third quarter and nine months ended, respectively. (See
Note 2--Summary of Significant Accounting Policies.)
Other Income (Expense)
Gross interest expense, excluding capitalized interest, decreased to $72.6
million for the third quarter of 2002 compared to $74.0 million in 2001, and
increased to $220.3 million for the nine months ended September 30, 2002
compared to $214.6 million for the same period in 2001. The decrease for the
third quarter was due primarily to a decrease in interest rates partially offset
by an increase in the average debt level associated with our fleet expansion
program. The increase for the nine months ended September 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 $4.8 million for the third quarter of 2002 from $10.8 million for
the same period in 2001, and decreased to $17.3 million for the nine months
ended September 2002 from $28.8 million for the same period in 2001, due to a
lower average level of investment in ships under construction and lower interest
rates.
The increase in Other income (expense) for the third quarter ended
September 30, 2002 compared to the same period in 2001 was primarily due to $9.8
million of compensation from a shipyard related to a late ship delivery.
On October 25, 2002, the board of directors of P&O Princess Cruises plc
withdrew its support of the proposed combination of P&O Princess Cruises plc and
us as a merger of equals under a dual-listed company structure, and we
terminated our agreement with P&O Princess Cruises plc providing for such
combination. In connection with the termination of that agreement, we received
an agreed break fee of $62.5 million which will be recorded in the fourth
quarter. We will offset against this amount approximately $30.0 million of
merger related costs. We also agreed with P&O Princess Cruises plc to terminate
the joint venture to target customers in southern Europe effective January 1,
2003 provided that there has been no change of control of either P& O Princess
Cruises plc or us prior to that date.
Liquidity and Capital Resources
Sources and Uses of Cash
Net cash provided by operating activities was $716.4 million for the first
nine months of 2002 compared to $573.8 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 $472.1 million for the first nine months of
2002 compared to $1.5 billion for the same period in 2001. Capital expenditures
for the first nine months of 2002 were primarily related to the delivery of
Constellation and ships under construction. Capital expenditures for the first
nine months of 2001 were primarily related to the deliveries of Infinity,
Radiance of the Seas, and Summit and deposits for ships under construction.
12
In July 2002, we financed the addition of Brilliance of the Seas to our
fleet by novating our original ship building contract and entering into an
operating lease denominated in British pounds sterling. The total lease term is
25 years cancelable by either party at years 10 and 18. In connection with the
novation of the contract, we received $77.7 million for reimbursement of
shipyard deposits previously made, which were offset against purchases of
property and equipment.
During the first nine months of 2002, we paid quarterly cash dividends on
our common stock of $75.0 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. In September 2002, our $150.0 million 7.125% senior notes matured and
were paid in full. (See Note 4--Long-Term Debt.)
Capitalized interest decreased to $17.3 million for the first nine months
of 2002 from $28.8 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 $285.0 million as of September 30, 2002.
Additional deposits are due prior to delivery of $49.4 million in 2002 and $1.0
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. We agreed with P&O Princess Cruises plc to
terminate the joint venture effective January 1, 2003 provided that there has
been no change of control of either P&O Princess Cruises plc or us prior to that
date, in which case, the two ships will remain with our fleet.
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. In September 2002, we moved
the delivery date of Serenade of the Seas from the fourth quarter of 2003 to the
third quarter of 2003 and Mariner of the Seas from the first quarter of 2004 to
the fourth quarter of 2003. We anticipate that overall capital expenditures will
be approximately $1.1 billion, $1.1 billion and $0.5 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 January 10, 2003.
As of September 30, 2002, we had $5.5 billion of long-term debt of which
$122.4 million is due during the 12-month period ending September 30, 2003.
13
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 September 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 up to 80% of the contract price of two
ships on order, Serenade of the Seas and Jewel of the Seas, not to exceed $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. Continued fear of terrorism, potential armed conflict and current
market volatility 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
September 30, 2002.
Controls and Procedures
Within the 90-day period prior to the filing of this report, we carried out
under the supervision and with the participation of our management, including
our Chief Executive Officer and Chief Financial Officer, an evaluation of the
effectiveness of our disclosure controls and procedures and concluded that those
controls and procedures were effective.
There were no significant changes in our internal controls or in other
factors that could significantly affect these controls subsequent to the date
the controls were evaluated.
14
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: November 8, 2002
CERTIFICATIONS
I, Richard D. Fain, certify that:
1. I have reviewed this report on Form 6-K of Royal Caribbean Cruises Ltd.;
2. Based on my knowledge, this report does not contain any untrue statement of
a material fact or omit to state a material fact necessary to make the
statements made, in light of the circumstances under which such statements
were made, not misleading with respect to the period covered by this
report;
3. Based on my knowledge, the financial statements, and other financial
information included in this report, fairly present in all material
respects the financial condition, results of operations and cash flows of
the registrant as of, and for, the periods presented in this report;
4. The registrant's other certifying officers and I are responsible for
establishing and maintaining disclosure controls and procedures (as defined
in Exchange Act Rules 13a-14 and 15d-14) for the registrant and we have:
a) designed such disclosure controls and procedures to ensure that
material information relating to the registrant, including its
consolidated subsidiaries, is made known to us by others within those
entities, particularly during the period in which this report is being
prepared;
15
b) evaluated the effectiveness of the registrant's disclosure controls
and procedures as of a date within 90 days prior to filing date of
this report (the "Evaluation Date"); and
c) presented in this report our conclusions about the effectiveness of
the disclosure controls and procedures based on our evaluation as of
the Evaluation Date;
5. The registrant's other certifying officers and I have disclosed, based on
our most recent evaluation, to the registrant's auditors and the audit
committee of registrant's board of directors (or persons performing the
equivalent function):
a) all significant deficiencies in the design or operation of internal
controls which could adversely affect the registrant's ability to
record, process, summarize and report financial data and have
identified for the registrant's auditors any material weaknesses in
internal controls; and
b) any fraud, whether or not material, that involves management or other
employees who have a significant role in the registrant's internal
controls; and
6. The registrant's other certifying officers and I have indicated in this
report whether or not there were significant changes in internal controls
or in other factors that could significantly affect internal controls
subsequent to the date of our most recent evaluation, including any
corrective actions with regard to significant deficiencies and material
weaknesses.
Date: November 8, 2002
By: /s/ Richard D. Fain
--------------------------
Richard D. Fain,
Chief Executive Officer
I, Bonnie S. Biumi, certify that:
1. I have reviewed this report on Form 6-K of Royal Caribbean Cruises Ltd.;
2. Based on my knowledge, this report does not contain any untrue statement of
a material fact or omit to state a material fact necessary to make the
statements made, in light of the circumstances under which such statements
were made, not misleading with respect to the period covered by this
report;
3. Based on my knowledge, the financial statements, and other financial
information included in this report, fairly present in all material
respects the financial condition, results of operations and cash flows of
the registrant as of, and for, the periods presented in this report;
4. The registrant's other certifying officers and I are responsible for
establishing and maintaining disclosure controls and procedures (as defined
in Exchange Act Rules 13a-14 and 15d-14) for the registrant and we have:
16
a) designed such disclosure controls and procedures to ensure that
material information relating to the registrant, including its
consolidated subsidiaries, is made known to us by others within those
entities, particularly during the period in which this report is being
prepared;
b) evaluated the effectiveness of the registrant's disclosure controls
and procedures as of a date within 90 days prior to filing date of
this report (the "Evaluation Date"); and
c) presented in this report our conclusions about the effectiveness of
the disclosure controls and procedures based on our evaluation as of
the Evaluation Date;
5. The registrant's other certifying officers and I have disclosed, based on
our most recent evaluation, to the registrant's auditors and the audit
committee of registrant's board of directors (or persons performing the
equivalent function):
a) all significant deficiencies in the design or operation of internal
controls which could adversely affect the registrant's ability to
record, process, summarize and report financial data and have
identified for the registrant's auditors any material weaknesses in
internal controls; and
b) any fraud, whether or not material, that involves management or other
employees who have a significant role in the registrant's internal
controls; and
6. The registrant's other certifying officers and I have indicated in this
report whether or not there were significant changes in internal controls
or in other factors that could significantly affect internal controls
subsequent to the date of our most recent evaluation, including any
corrective actions with regard to significant deficiencies and material
weaknesses.
Date: November 8, 2002
By: /s/ Bonnie S. Biumi
---------------------------
Bonnie S. Biumi
Chief Financial Officer
17
November 8, 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 to his or her knowledge as follows with respect to the Company's
Quarterly Financial Report for the Third Quarter of 2002 to which this letter is
attached (the "Report"):
1. the Report fully complies with the applicable reporting requirements
of Section 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 respect the financial condition and results of operations of
the Company.
By: /s/ Richard D. Fain
-----------------------
Richard D. Fain,
Chief Executive Officer
By: /s/ Bonnie S. Biumi
-----------------------
Bonnie S. Biumi,
Chief Financial Officer
18