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 May, 2003
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 First Quarters
Ended March 31, 2003 and 2002 ........................................... 1
Consolidated Balance Sheets as of March 31, 2003 and December 31, 2002 ... 2
Consolidated Statements of Cash Flows for the First Quarters Ended
March 31, 2003 and 2002 ................................................. 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 Acting Chief Financial Officer
Certification ........................................................... 18
ROYAL CARIBBEAN CRUISES LTD.
CONSOLIDATED STATEMENTS OF OPERATIONS
(unaudited, in thousands, except per share data)
First Quarter Ended
March 31,
--------------------
2003 2002
-------- --------
Revenues ............................................ $880,164 $799,953
-------- --------
Expenses
Operating .......................................... 552,569 502,638
Marketing, selling and administrative .............. 123,984 102,076
Depreciation and amortization ...................... 88,669 82,827
-------- --------
765,222 687,541
-------- --------
Operating Income .................................... 114,942 112,412
-------- --------
Other Income (Expense)
Interest income .................................... 1,105 4,227
Interest expense, net of capitalized interest ...... (64,884) (68,268)
Other income (expense) ............................. 2,011 4,442
-------- --------
(61,768) (59,599)
-------- --------
Net Income .......................................... $ 53,174 $ 52,813
======== ========
Earnings Per Share:
Basic ............................................. $ 0.28 $ 0.27
======== ========
Diluted ........................................... $ 0.27 $ 0.27
======== ========
Weighted-average shares outstanding:
Basic ............................................. 193,029 192,325
======== ========
Diluted ........................................... 194,905 195,509
======== ========
The accompanying notes are an integral part of these financial statements.
1
ROYAL CARIBBEAN CRUISES LTD.
CONSOLIDATED BALANCE SHEETS
(in thousands, except share data)
As of
-----------------------------
March 31, December 31,
2003 2002
----------- ------------
(unaudited)
ASSETS
Current Assets
Cash and cash equivalents .................................. $ 150,813 $ 242,584
Trade and other receivables, net ........................... 103,058 79,535
Inventories ................................................ 44,673 37,299
Prepaid expenses and other assets .......................... 128,963 88,325
----------- -----------
Total current assets ............................... 427,507 447,743
Property and Equipment - at cost less accumulated
depreciation and amortization .............................. 9,230,133 9,276,484
Goodwill, net ................................................ 278,561 278,561
Other Assets ................................................. 540,159 535,743
----------- -----------
$10,476,360 $10,538,531
=========== ===========
LIABILITIES AND SHAREHOLDERS' EQUITY
Current Liabilities
Current portion of long-term debt .......................... $ 122,740 $ 122,544
Accounts payable ........................................... 164,993 171,153
Accrued expenses and other liabilities ..................... 315,571 308,281
Customer deposits .......................................... 600,412 567,955
----------- -----------
Total current liabilities .......................... 1,203,716 1,169,933
Long-Term Debt ............................................... 5,197,013 5,322,294
Other Long-Term Liabilities .................................. 13,679 11,610
Commitments and Contingencies (Note 6)
Shareholders' Equity
Common stock ($.01 par value; 500,000,000 shares authorized;
193,078,935 and 192,982,513 shares issued) ................ 1,931 1,930
Paid-in capital ............................................ 2,054,764 2,053,649
Retained earnings .......................................... 2,010,659 1,982,580
Accumulated other comprehensive income ..................... 1,896 3,693
Treasury stock (525,954 and 515,868 common shares at cost) . (7,298) (7,158)
----------- -----------
Total shareholders' equity ............................ 4,061,952 4,034,694
----------- -----------
$10,476,360 $10,538,531
=========== ===========
The accompanying notes are an integral part of these financial statements.
2
ROYAL CARIBBEAN CRUISES LTD.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(unaudited, in thousands)
First Quarter Ended
March 31,
---------------------
2003 2002
-------- --------
OPERATING ACTIVITIES
Net income ................................................. $ 53,174 $ 52,813
Adjustments:
Depreciation and amortization ............................ 88,669 82,827
Accretion of original issue discount ..................... 11,941 11,361
Changes in operating assets and liabilities:
Increase in trade and other receivables, net ............. (14,132) (2,324)
Increase in inventories .................................. (7,374) (787)
Increase in prepaid expenses and other assets ............ (16,778) (21,413)
(Decrease) increase in accounts payable .................. (6,160) 10,250
Decrease in accrued expenses and other liabilities ....... (16,571) (40,865)
Increase in customer deposits ............................ 32,457 84,868
Other, net ............................................... 1,175 322
-------- --------
Net cash provided by operating activities .................. 126,401 177,052
-------- --------
INVESTING ACTIVITIES
Purchases of property and equipment ........................ (42,269) (84,322)
Other, net ................................................. (10,131) (2,897)
-------- --------
Net cash used in investing activities ...................... (52,400) (87,219)
-------- --------
FINANCING ACTIVITIES
Repayments of long-term debt ............................... (133,266) (178,014)
Dividends .................................................. (25,095) (25,004)
Other, net ................................................. (7,411) 15,824
-------- --------
Net cash used in financing activities ...................... (165,772) (187,194)
-------- --------
Net Decrease in Cash and Cash Equivalents .................. (91,771) (97,361)
Cash and Cash Equivalents at Beginning of Period ........... 242,584 727,178
-------- --------
Cash and Cash Equivalents at End of Period ................. $150,813 $629,817
======== ========
Supplemental Disclosure
Cash paid during the year for:
Interest, net of amount capitalized ...................... $ 63,851 $ 71,846
======== ========
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 many 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 2002.
Note 2--Summary of Significant Accounting Policies
Accounting Pronouncements
In November 2002, the Financial Accounting Standards Board issued
Interpretation ("FIN") No. 45, "Guarantor's Accounting and Disclosure
Requirements for Guarantors, Including Indirect Guarantees of Indebtedness of
Others." FIN No. 45 requires recognition of an initial liability for the fair
value of the guarantor's obligation upon issuance of certain guarantees.
Disclosure requirements have been expanded to include information about each
guarantee, even if the likelihood of any required payment is remote. We adopted
the disclosure requirements of FIN No. 45 as of December 31, 2002. On January 1,
2003, we adopted the initial recognition and measurement provisions which are
effective on a prospective basis for guarantees issued or modified after
December 31, 2002. The implementation of FIN No. 45 had no impact on our results
of operation or financial position at adoption or during the three months ended
March 31, 2003.
In January 2003, the Financial Accounting Standards Board issued FIN No.
46, "Consolidation of Variable Interest Entities, an Interpretation of ARB No.
51." FIN No. 46 requires certain variable interest entities to be consolidated
by the primary beneficiary of the entity if specific criteria are met. FIN No.
46 is effective for all new variable interest entities created or acquired after
January 31, 2003. For variable interest entities created or acquired prior to
February 1, 2003, the provisions of FIN No. 46 must be applied for the first
interim or annual period beginning after June 15, 2003. We are currently
evaluating the effect that the adoption of FIN No. 46 will have on our results
of operations and financial position for any transactions entered into prior to
February 1, 2003. For transactions entered into after January 31, 2003, FIN No.
46 did not have an impact on our results of operations or financial position for
the three months ended March 31, 2003.
4
In April 2003, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standards ("SFAS") No. 149, "Amendment of Statement 133 on
Derivative Instruments and Hedging Activities." SFAS No. 149 amends and
clarifies accounting and reporting for derivative instruments. In particular,
this statement amends certain other pronouncements and clarifies a) the
circumstances under which a contract with an initial net investment meets the
characteristics of a derivative and b) when a derivative contains a financing
component. The provisions of SFAS No. 149 are effective for contracts entered
into or modified after June 30, 2003. We are currently evaluating the effect of
SFAS No. 149 but we do not expect it to have a material impact on our results of
operations or financial position.
Stock-Based Compensation
In December 2002, the Financial Accounting Standards Board issued SFAS No.
148, "Accounting for Stock-Based Compensation - Transition and Disclosure - an
Amendment of SFAS No. 123." It requires disclosures in the annual and interim
financial statements of the method used to account for stock-based employee
compensation and the effect of the method on reported results. We continue to
use the intrinsic value method and, as a result, the implementation of SFAS No.
148 had no impact on our results of operations or financial position at adoption
or during the three months ended March 31, 2003.
The following table illustrates the effect on net income and earnings per
share as if we had applied the fair value recognition provisions of SFAS No.123,
"Accounting for Stock-Based Compensation," to such compensation (in thousands,
except per share data):
First Quarter Ended
March 31,
----------------------
2003 2002
--------- ---------
Net income, as reported ................................. $53,174 $52,813
Deduct: Total stock-based employee compensation expense
determined under fair value method for all awards ...... (3,748) (6,135)
--------- ----------
Pro forma net income .................................... $49,426 $46,678
========= =========
Earnings per share:
Basic - as reported ..................................... $0.28 $0.27
Basic - pro forma ....................................... $0.26 $0.24
Diluted - as reported ................................... $0.27 $0.27
Diluted - pro forma ..................................... $0.25 $0.24
5
Note 3--Earnings Per Share
Below is a reconciliation between basic and diluted earnings per share (in
thousands, except per share data):
First Quarter Ended
March 31,
----------------------
2003 2002
--------- ---------
Net income ................................ $53,174 $52,813
========= =========
Weighted-average common shares outstanding 193,029 192,325
Dilutive effect of stock options .......... 1,876 3,184
--------- ---------
Diluted weighted-average shares outstanding 194,905 195,509
========= =========
Basic earnings per share .................. $0.28 $0.27
========= =========
Diluted earnings per share ................ $0.27 $0.27
========= =========
Our diluted earnings per share computation for the first quarters ended
March 31, 2003 and 2002 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.
Options to purchase 8.8 million and 8.9 million shares in the first quarters of
2003 and 2002, respectively, were not included in the computation of diluted
earnings per share because the effect of including them would have been
antidilutive.
Note 4--Long-Term Debt
In March 2003, we replaced our $1.0 billion unsecured revolving credit
facility due June 2003 with a $500.0 million unsecured revolving credit facility
bearing interest at a variable rate of LIBOR plus 1.75% due in March 2008. The
commitment fee is 0.6% on the undrawn portion of the credit facility. The
interest rate and the commitment fee vary with our debt rating. The covenants
are substantially the same as our previous revolving credit facility. The
proceeds of the credit facility may be used for general corporate purposes,
including capital expenditures.
Note 5--Shareholders' Equity
During the quarters ended March 31, 2003 and 2002, we declared cash
dividends on common shares of $0.13 per share.
6
Note 6--Commitments and Contingencies
Capital Expenditures. As of March 31, 2003, we had three ships on order for
an additional capacity of 7,266 berths. The aggregate contract price of the
three ships, which excludes capitalized interest and other ancillary costs, is
approximately $1.3 billion, of which we have deposited $0.2 billion as of March
31, 2003. We anticipate that overall capital expenditures will be approximately
$1.1 billion, $0.5 billion and $0.1 billion for 2003, 2004 and 2005,
respectively.
Litigation. We are routinely involved in claims typical within the cruise
industry. The majority of these claims is covered by insurance. We believe the
outcome of such claims, net of expected insurance recoveries, is not expected to
have a material adverse effect upon our financial condition or results of
operations.
Other. Some of the contracts that we enter into include indemnification
provisions that obligate us to make payments to the counterparty if certain
events occur. These contingencies generally relate to changes in taxes,
increased lender capital costs and other similar costs. The indemnification
clauses are often standard contractual terms and were entered into in the normal
course of business. There are no stated or notional amounts included in the
indemnification clauses and we are not able to estimate the maximum potential
amount of future payments, if any, under these indemnification clauses. We have
not been required to make any payments under such indemnification clauses in the
past and, under current circumstances, we do not believe an indemnification is
probable.
In addition, under the Brilliance of the Seas long-term operating lease, we
have agreed to indemnify the lessor to the extent its after-tax return is
negatively impacted by unfavorable changes in corporate tax rates and capital
allowance deductions. These indemnifications could result in an increase in our
lease payments. We are unable to estimate the maximum potential increase in such
lease payments due to the various circumstances, timing or combination of events
that could trigger such indemnifications. Under current circumstances we do not
believe an indemnification is probable.
As of March 31, 2003, we have future commitments to pay for our usage of
certain port facilities, maintenance contracts and communication services as
follows (in thousands):
Year
----
2003 ................. $ 31,203
2004 ................. 41,676
2005 ................. 31,519
2006 ................. 30,114
2007 ................. 28,516
Thereafter ........... 163,095
-------
$326,123
========
7
Note 7--Comprehensive Income
Comprehensive income was as follows (in thousands):
First Quarter Ended
March 31,
----------------------
2003 2002
--------- ---------
Net income ................................... $53,174 $52,813
Changes related to cash flow derivative hedges (1,797) 15,053
--------- ---------
Total comprehensive income .............. $51,377 $67,866
======== =========
Note 8--Subsequent Events
In May 2003, we completed a public offering of $250.0 million senior
unsecured notes, due 2010, bearing interest at 8.0%. The net proceeds of $244.7
million will be used for general corporate purposes, including capital
expenditures.
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,
- vacation industry competition, including 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 ships,
- emergency ship repairs,
- incidents involving cruise ships at sea or in port,
- reduced consumer demand for cruises as a result of any number of
reasons, including armed conflict, terrorist attacks, geo-political
and economic uncertainties 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, 2002.
9
Results of Operations
The following table presents operating data as a percentage of revenues:
First Quarter Ended
March 31,
----------------------
2003 2002
--------- ---------
Revenues ...................................... 100.0% 100.0%
Expenses:
Operating ................................. 62.8 62.8
Marketing, selling and administrative ..... 14.1 12.8
Depreciation and amortization ............. 10.1 10.3
--------- ---------
Operating Income .............................. 13.0 14.1
Other Income (Expense) ........................ (7.0) (7.5)
--------- ---------
Net Income .................................... 6.0% 6.6%
========= =========
Our revenues are seasonal based on the demand for cruises. Demand is
strongest for cruises during the summer months.
Unaudited selected statistical information is shown in the following table:
First Quarter Ended
March 31,
----------------------
2003 2002
--------- ---------
Passengers Carried ......................... 696,170 674,171
Passenger Cruise Days ...................... 4,743,164 4,344,802
Available Passenger Cruise Days ............ 4,663,592 4,182,320
Occupancy Percentage ....................... 101.7% 103.9%
Revenues
Revenues for the first quarter of 2003 were $880.2 million, up 10.0% from
$800.0 million for the same period in 2002. The increase in revenues was
primarily due to an increase in capacity of 11.5%, partially offset by a 1.3%
decline in gross revenue per available passenger cruise day. The increase in
capacity was associated with the additions of Constellation, Brilliance of the
Seas and Navigator of the Seas in 2002 partially offset by the transfer of
Viking Serenade to Island Cruises, our joint venture with First Choice Holidays
PLC, in 2002 and the cancellation of five weeks of sailings due to the
unanticipated drydock of a ship in the first quarter of 2003. The decrease 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 and
lower occupancy levels, partially offset by an increase in cruise ticket prices
and shipboard revenues. Occupancy for the first quarter of 2003 was 101.7%
compared to 103.9% for the same period in 2002.
10
Net yields for the first quarter of 2003 increased 3.9% from the same
period in 2002 primarily due to the bookings lost after the events of September
11, 2001 which lowered first quarter 2002 revenues. Net yields represent
revenues less costs of air transportation, travel agent commissions and certain
other direct costs (all of which are included in operating expenses) per
available passenger cruise day. Such costs were $188.6 million and $202.9
million for the first quarters of 2003 and 2002, respectively. We utilize net
yields for revenue management purposes and believe that it is the most relevant
measurement of our pricing performance.
As a result of the war with Iraq and economic uncertainty, we anticipate
that net yields for the second quarter will be down in the range of 6% to 9%
from the same period in 2002. While we have started to see some improvement in
bookings, not enough time has passed since the end of the war to determine if
booking levels and pricing will return to pre-war levels. Because of the
disruption related to the war in Iraq and the fact that bookings continue to
come closer to the sailing date, it is difficult to provide net yield guidance
for the remainder of the year.
We have not provided a quantitative reconciliation of projected gross
revenue per available passenger cruise day to projected net yield. This
information has not been provided due to the significant uncertainty in
projecting the costs deducted to arrive at this measure. We utilize net yields
to manage our business on a day-to-day basis and believe net yields is the more
relevant measure of our performance. As such, we do not believe that this
reconciling information is meaningful.
Expenses
Operating expenses increased 9.9% to $552.6 million for the first quarter
of 2003 compared to $502.6 million for the same period in 2002. The increase was
primarily due to increases in capacity and fuel costs, partially offset by a
decrease in air transportation costs associated with a 4.7% decline in the
percentage of guests who chose to book their air passage through us. Fuel costs
as a percentage of revenues were 5.8% and 3.9% for the first quarters of 2003
and 2002, respectively. Operating costs per available passenger cruise day for
the first quarter of 2003 declined 1.4% from the same period in 2002.
Marketing, selling and administrative expenses increased 21.5% to $124.0
million for the first quarter of 2003 from $102.1 million for the same period in
2002. The first quarter of 2002 reflected lower spending levels as a result of
business decisions taken subsequent to the events of September 11, 2001.
Marketing, selling and administrative expenses as a percentage of revenues were
14.1% and 12.8% for the first quarters of 2003 and 2002, respectively. On a per
available passenger cruise day basis, marketing, selling and administrative
expenses in the first quarter of 2003 increased 8.9% from the same period in
2002.
Running expenses (i.e., those expenses directly associated with ship
operations, defined as operating expenses less costs deducted to arrive at net
yields) and marketing, selling and administrative expenses increased 8.9% on a
per available passenger cruise day basis in the first quarter of 2003 compared
to the same period in 2002. The increase is primarily attributed to higher fuel
costs and the Brilliance of the Seas lease payments.
11
We believe changes in running expenses and marketing, selling and
administrative expenses to be the most relevant measure of our ability to
control costs in a manner that positively impacts the bottom line. We estimate
running expenses and marketing, selling and administrative expenses for the
second quarter will increase from the comparable period in 2002 but expect that
these costs will decrease slightly in the second half of the year when compared
to the second half of 2002. For the full year 2003, we estimate that running
expenses and marketing, selling and administrative expenses will increase in the
range of 2% to 3%, on a per available passenger cruise day basis.
We have not provided a quantitative reconciliation of projected operating
costs to projected running expenses. This information has not been provided due
to the significant uncertainty in projecting the costs deducted to arrive at
this measure. We utilize running expenses to manage our business on a day-to-day
basis and believe running expenses is the more relevant measure of our
performance. As such, we do not believe that this reconciling information is
meaningful.
Depreciation and amortization increased 7.1% to $88.7 million for the first
quarter of 2003 from $82.8 million for the same period in 2002 primarily due to
incremental depreciation associated with the addition of new ships.
Other Income (Expense)
Gross interest expense, excluding capitalized interest, was $68.7 million
in the first quarter of 2003, compared to $74.2 million for the same period in
2002. The decrease in gross interest expense is attributed to lower interest
rates and a lower average debt level. Capitalized interest decreased to $3.8
million in the first quarter of 2003 from $6.0 million in 2002 due to a lower
average level of investment in ships under construction and lower interest
rates.
Included in Other income (expense) in the first quarters of 2003 and 2002
were $5.1 million and $4.7 million, respectively, of dividend income from our
investment in convertible preferred stock of First Choice Holidays PLC,
partially offset by $2.3 million and $0.6 million, respectively, of losses from
affiliated operations as well as other miscellaneous items.
Liquidity and Capital Resources
Sources and Uses of Cash
Net cash provided by operating activities was $126.4 million for the first
quarter of 2003 compared to $177.1 million for the same period in 2002. The
decrease was primarily due to the timing of cash receipts related to customer
deposits.
Our capital expenditures were $42.3 million for the first quarter of 2003
compared to $84.3 million for the same period in 2002. Capital expenditures for
the first quarters of 2003 and 2002 were primarily related to ships under
construction.
During the first quarter of 2003, we paid quarterly cash dividends on our
common stock of $25.1 million.
12
Capitalized interest decreased to $3.8 million in the first quarter of 2003
from $6.0 million in 2002 due to a lower average level of investment in ships
under construction and lower interest rates.
Future Commitments
We currently have three ships on order for an additional capacity of 7,266
berths. The aggregate contract price of the three ships, which excludes
capitalized interest and other ancillary costs, is approximately $1.3 billion,
of which we have deposited $0.2 billion as of March 31, 2003. We anticipate that
overall capital expenditures will be approximately $1.1 billion, $0.5 billion
and $0.1 billion for 2003, 2004 and 2005, respectively.
We have options to purchase two additional Radiance-class ships with
delivery dates in the fourth quarters of 2005 and 2006. The options have an
aggregate contract price of $0.8 billion and expire on September 19, 2003. Under
the terms of the options, the shipyard has the ability to terminate them upon
providing us advance notice.
As of March 31, 2003, we had $5.3 billion of long-term debt of which $0.1
billion is due during the 12-month period ending March 31, 2004.
We have future commitments to pay for our usage of certain port facilities,
maintenance contracts and communication services aggregating to $326.1 million,
due through 2029. (See Note 6 - Commitments and Contingencies.)
Some of the contracts that we enter into include indemnification provisions
that obligate us to make payments to the counterparty if certain events occur.
These contingencies generally relate to changes in taxes, increased lender
capital costs and other similar costs. The indemnification clauses are often
standard contractual terms and were entered into in the normal course of
business. There are no stated or notional amounts included in the
indemnification clauses and we are not able to estimate the maximum potential
amount of future payments, if any, under these indemnification clauses. We have
not been required to make any payments under such indemnification clauses in the
past and, under current circumstances, we do not believe an indemnification is
probable.
In addition, under the Brilliance of the Seas long-term operating lease, we
have agreed to indemnify the lessor to the extent its after-tax return is
negatively impacted by unfavorable changes in corporate tax rates and capital
allowance deductions. These indemnifications could result in an increase in our
lease payments. We are unable to estimate the maximum potential increase in such
lease payments due to the various circumstances, timing or combination of events
that could trigger such indemnifications. Under current circumstances we do not
believe an indemnification is probable.
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.
13
Funding Sources
As of March 31, 2003, our liquidity was $650.8 million consisting of
approximately $150.8 million in cash and cash equivalents and $500.0 million
available under our $500.0 million unsecured revolving credit facility. (See
Note 4 - Long-Term Debt.) 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, not to exceed $624.0 million in aggregate. Capital
expenditures and scheduled debt payments will be funded through a combination of
cash flows from operations, drawdowns under our available credit facilities, the
incurrence of additional indebtedness and the sales of equity or debt securities
in private or public securities markets. Geo-political and economic
uncertainties coupled with 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 financing from external sources will
be available in accordance with our expectations.
Our financing 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 March 31, 2003.
We believe our availability under current existing credit facilities, cash
flows from operations and our ability to obtain new borrowings and/or raise new
capital will be sufficient to fund operations, debt payment requirements and
capital expenditures over the next 12-month period.
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 Acting 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.
It should be noted that any system of controls, however well designed and
operated, can provide only reasonable, and not absolute, assurance that the
objectives of the system will be met. In addition, the design of any control
system is based in part upon certain assumptions about the likelihood of future
events. Because of these and other inherent limitations of control systems,
there can be no assurance that our controls will succeed in achieving their
stated goals under all possible future conditions.
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
Acting Chief Financial Officer
Date: May 15, 2003
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 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;
b) evaluated the effectiveness of the registrant's disclosure controls
and procedures as of a date within 90 days prior to the filing date of
this report (the "Evaluation Date"); and
15
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: May 15, 2003
/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 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;
16
b) evaluated the effectiveness of the registrant's disclosure controls
and procedures as of a date within 90 days prior to the 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: May 15, 2003
/s/ BONNIE S. BIUMI
-------------------------------
Bonnie S. Biumi
Acting Chief Financial Officer
17
May 15, 2003
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, Acting
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 First Quarter of 2003 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 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,
Acting Chief Financial Officer
18