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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 March, 1999
ROYAL CARIBBEAN CRUISES LTD.
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(Translation of registrant's name into English)
1050 CARIBBEAN WAY, MIAMI, FLORIDA 33132
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(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
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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
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(ROYAL CARIBBEAN CRUISES LTD. LOGO)
(Photo of ship flag)
(LOGO) Royal Caribbean Cruises Ltd.
1998 Annual Report
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Jay Pritzker -- In Memoriam
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Jay Pritzker served as an advisor and director of Royal Caribbean
Cruises Ltd. from 1988 until his death in 1999. Not coincidentally, his
tenure with the Company corresponds with a period in our history of
unparalleled growth and expansion. Much of that growth is attributable
to Jay Pritzker, a man of extraordinary vision and uncommon leadership.
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Our vision is to empower and enable our
EMPLOYEES
to deliver the best vacation experience for our
GUESTS
thereby generating superior returns for our
SHAREHOLDERS
and enhancing the well-being of our
COMMUNITIES.
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(Photo of anchor on an
officer's uniform)
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(GRAPH) (GRAPH) (GRAPH)
Revenues Net Income Shareholders' Equity
($ millions) ($ millions) ($ millions)
2
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highlights
<TABLE>
<CAPTION>
In thousands, except per share amounts 1998 1997 1996
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<S> <C> <C> <C>
Revenues $2,636,291 $1,939,007 $1,357,325
Operating Income 488,735 303,555 217,033
Income Before Extraordinary Item 330,770 182,685 150,866
Net Income 330,770 175,127 150,866
Diluted Earnings Per Share:
Income Before Extraordinary Item $ 1.83 $ 1.20 $ 1.17
Net Income 1.83 1.15 1.17
Shareholders' Equity $2,454,758 $2,018,721 $1,084,934
</TABLE>
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(Photo of Richard D. Fain
Chairman and CEO)
Dear Shareholders:
1998 was certainly an eventful year. Market conditions and our
financial results were terrific. Net income grew approximately
90 percent from a revenue growth of 36 percent. The Celebrity
Cruises and Royal Caribbean International brands experienced
exceptional growth and acceptance. But the bigger story is the
efforts of the many individuals who drove those superlatives.
In 1998, we formalized a new vision statement designed to help
all our employees share a vision of excellence. This vision
statement (see page one) articulates the principles we have
tried to follow. It emphasizes the importance of -- and the
interplay between -- our four key constituencies: employees,
guests, shareholders and communities. Each contributes --
symbiotically -- to our overall success.
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AGGRESSIVE GROWTH Continuing a trajectory of growth begun in 1995, for the
fourth year in a row, we took delivery of a new ship -- Vision of the Seas, the
namesake and the capstone of the very successful Vision-class series of vessels
built for Royal Caribbean International. We've just put a toe in the water,
however.
We now have close to $4 billion committed to new-ship development, with
nine new ships on order. Two of the new ships -- Explorer of the Seas and
Adventure of the Seas -- will top off the Eagle-class series for Royal Caribbean
International, the first of which, Voyager of the Seas, will set sail this fall.
Four of the newbuilds will be Millennium-class vessels built for Celebrity
Cruises, and two of the new vessels will be Vantage-class ships for Royal
Caribbean International. Together, these ships will expand our capacity by 64
percent by the end of 2002.
These works in progress are already shaping up to be the most
technologically advanced, environmentally responsible, amenity-laden vessels
ever to ply the oceans. Our Millennium and Vantage vessels, for example, will be
powered by gas turbine engines, similar to those used on modern aircraft, which
will reduce exhaust emissions by 80 to 90 percent, while providing a quieter and
vibration-free environment for our guests. These vessels also will have more
outside cabins and more private balconies than any ship afloat.
The big news -- literally -- is the 142,000 ton Voyager of the Seas. We
have watched it take form, with a fair degree of parental pride, block by block,
and now, interior by interior. For those of us counting, Voyager will debut in
230 days. The ship will premiere some of the most extraordinary features found
at sea: a Royal Promenade of shops, restaurants and entertainment spots;
staterooms overlooking the promenade, as well as the ocean; a five-story
Broadway-style theater; a television studio that doubles as an ice rink; a
wedding chapel; a 7,400-gallon aquarium; and a rock-climbing wall. Well, why
not?
Voyager will join a fleet of 16 -- 11 bearing the Royal Caribbean
International and five displaying the Celebrity Cruises. Our combined fleet
carried more than 1.8 million guests in 1998 -- almost as many guests as we
carried in our first 20 years of operation -- and achieved occupancy levels
averaging 105 percent. Not only did we continue to draw first-time cruisers, we
continued to attract our past guests with new offerings such as Royal Journeys
voyages and new equipment.
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FINANCING GROWTH We continue to rely heavily on the public
capital markets to finance our growth and expansion. During
1998, we expanded our equity base by completing a public
offering of 13.8 million shares of common stock, 6.1 million
of which were new shares. We also issued two series of
unsecured debt securities totaling $300 million. As we take
delivery of our nine new ships, we expect our strong cash
flow, coupled with public markets, to be our primary funding
sources.
"...our company has been a leader in innovating technology."
SUPPORTING GROWTH For many years now, our company has been a
leader in innovating technology. In 1998, we continued that
emphasis, with four areas dominating our focus -- internal
communications, sales management, booking capabilities and
product enhancement. Starting with the basics, we upgraded
shipboard and shoreside computer systems, speeding
communications throughout our operation. We developed new
software for our sales force, providing them with new
analytical tools to better manage their sales territories. And
we revamped our Celebrity Web site, which re-emerged with
CruiseMatch 2000(SM) and CruiseMatch 2000 On-line(SM)
capabilities. Even our ships got CruiseMatch 2000 On-line(SM),
with several crew members serving as reservationists, booking
close to $5 million in sales of future cruises. That number is
expected to climb to $10 million next year.
Working with our travel partners, who often give us our best
ideas, we also developed a new state-of-the-art desktop
publishing system -- CruiseWriter -- enabling agents to
produce custom brochures for their clients and more easily
close the sale.
Other projects, such as streamlined boarding processes, are
nearing completion, which will ease guests' passage from the
pier to the ship. Other initiatives, such as a greatly
expanded European sales and marketing presence, will position
us to tap into emerging markets in Europe and Latin America.
CHALLENGES 1998 was not without its challenges. In particular,
we pled guilty in federal court to charges relating to the
improper disposal of oily bilge water and efforts to conceal
it in past years. There is and can be no excuse for these
violations. They were wrong, and we are truly sorry for these
lapses. We are firmly resolved to learn from our mistakes and
to operate our environmental program above and beyond
compliance -- and
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As I look back over 1998, I am ever mindful that the year's successes
are due to the efforts of our 20,000 employees, who every day provide
exceptional service in ordinary ways.
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above and beyond reproach. Two examples are our use of environmentally
friendly gas turbines, mentioned above, and our sponsorship of a new
technology for treating bilge water. The latter allows us to purify
bilge water to a level three times as clean as the law stipulates.
In that spirit, we have sought out -- and successfully met --
two additional well-established voluntary standards to ensure
environmental protection -- ISO 9002 certification for excellence in
quality marine management and ISO 14000 for environmental quality
management. We are committed to doing even more in the future.
In December, the Monarch of the Seas grounded off St. Maarten
and had to evacuate 2,500 guests. Fortunately, there were no injuries,
and predictably, there were many heroes: from the officers and crew who
conducted a safe and orderly evacuation to the hundreds of shoreside
employees who worked nonstop to return guests to their homes.
IN TRIBUTE The company lost a standard-bearer of the highest caliber
this year, when longtime friend and board member, Jay Pritzker,
suffered a fatal heart attack. Jay was instrumental in the shaping of
this company, and much of our current growth and success can be traced
back to his vision and encouragement. He will be sorely missed.
As I look back over 1998, I am ever mindful that the year's
successes are due to the efforts of our 20,000 employees, who every day
provide exceptional service in ordinary ways. They, along with our
Board of Directors, are indeed anchored in excellence and are leading
us swiftly toward an even more successful future.
/s/ Richard D. Fain
Richard D. Fain
Chairman and CEO
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(Photo of a Celebrity Cruises ship)
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Merging with Celebrity Cruises in July 1997,
Royal Caribbean Cruises Ltd. completed its
first full year of combined operations in
1998. The year-end results -- over a 90
percent increase in comparable earnings --
confirm what many are saying: financially,
philosophically and operationally, the
merger is one of the most successful in
modern cruise history.
(Photo of a Captain)
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1
20,000 employees
provided exceptional
service for guests.
If there was one factor that swung the year from successful to spectacular, it
was the extraordinary efforts of the Company's 20,000 employees, who labored
every day to provide exceptional service. Not atypical were the cabin steward
who found a young guest's broken toy and repaired it for him, or the housekeeper
who donated two-weeks' pay to help hurricane victims in Nicaragua and Honduras.
Across the fleet, employees enthusiastically embraced our customer-service credo
called "Anchored in Excellence." Not surprisingly, guest-satisfaction ratings
were the highest in years.
(Photo of a shipboard staff member)
Employees embrace "Anchored in Excellence" service credo.
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(Photo of a waiter with a birthday cake)
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(Photo of two children)
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(Photo of a massage being performed)
1.8 million smiles and counting
2
Nearly 1.8 million guests
sailed on Royal Caribbean
International and Celebrity
Cruises in 1998.
Royal Caribbean International and Celebrity Cruises dominated America Online's
1998 poll of 11,000 cruisers, with six of their ships capturing AOL's top nine
slots. Celebrity Cruises swept the food ratings, and Royal Caribbean
International topped the entertainment rankings. The poll results parallel many
of the letters and comments received from guests.
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Revenues increased
36.0 percent to
$2.6 billion in 1998.
3
Shareholders were rewarded with strong financial results in 1998. Market
conditions and brand acceptance led to improved pricing and greater operating
margins, which contributed to a record showing. New ships and new construction
orders will continue the trajectory of rapid growth begun in 1995.
(Photo of a man lifting weights)
1998 produced a record showing.
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(Photo of financial traders)
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(Photo of two employees painting in a community project)
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Serving neighbors and friends
(Photo of a little girl painting)
4
Hundreds of employees
volunteered their time
and effort.
Employees at Royal Caribbean International and Celebrity Cruises not only served
people as guests, but also as friends and neighbors in local communities.
Hundreds volunteered countless hours, including 800 who donated more than 3,200
hours -- pulling weeds, planting trees and painting buildings -- through the
Company's G.I.V.E. (Get Involved -- Volunteer Everywhere) program. The Company
also contributed financial support to marine conservation, children and
families, and education.
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(Photo of a young boy saluting)
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Youngest fleet of any major cruise line
Royal Caribbean International and Celebrity Cruises have created the
most modern fleet operated by any major cruise line. By the end of
1999, with the introduction of Voyager of the Seas, 15 of the Company's
ships will have been built in the 1990s. Ten will have been launched
since 1995.
(GRAPH)
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(Photo of gambling chips and cards) (Photo of a dancer during a festival)
(Photo of children hanging (Photo of a waiter carrying a
out at the pool) swan sculpture)
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financial table of contents
<TABLE>
<S> <C>
management's discussion and analysis of
financial condition and results of operations 22
consolidated statements of operations 28
consolidated balance sheets 29
consolidated statements of cash flows 30
notes to the consolidated financial statements 31
report of independent certified public accountants 41
board of directors and executive officers 42
shareholder information 43
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</TABLE>
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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," may constitute "forward-looking
statements" under the Private Securities Litigation Reform Act of 1995. Such
forward-looking statements are not guarantees of future performance and involve
known and unknown risks, uncertainties and other factors, which may cause the
actual results, performance or achievements to differ materially from the future
results, performance or achievements expressed or implied in such
forward-looking statements. Such factors include inter alia general economic and
business conditions, cruise industry competition, the impact of tax laws and
regulations affecting the Company and its principal shareholders, changes in
other laws and regulations affecting the Company, delivery schedule of new
vessels, emergency ship repairs, incidents involving cruise vessels at sea,
changes in interest rates, Year 2000 compliance and weather.
GENERAL
SUMMARY
Royal Caribbean Cruises Ltd. (the "Company") reported improved revenues,
operating income, net income and earnings per share for the year ended December
31, 1998 as shown in the table below. The improvements were driven primarily by
capacity increases resulting from the acquisition of Celebrity Cruise Lines Inc.
("Celebrity") in July 1997 and additions to the Royal Caribbean International
brand as well as improved revenue per available lower berth ("Yield"). Net
income for 1998 included a $9.0 million charge related to a plea agreement with
the U.S. Department of Justice in the second quarter and a reduction in earnings
of approximately $9.0 million related to the grounding of Monarch of the Seas in
the fourth quarter. Also included in net income for 1998 is a $31.0 million gain
on the sale of Song of America and a $32.0 million write-down of Viking Serenade
to reflect its estimated fair value. Net income for 1997 included an
extraordinary loss of $7.6 million resulting from the early extinguishment of
debt as well as a gain of $4.0 million from the sale of Sun Viking. Accordingly,
on a comparable basis, before these items, earnings increased to $349.8 million
or $1.93 per share in 1998, from $178.7 million or $1.17 per share in 1997.
<TABLE>
<CAPTION>
(in thousands, except
per share amounts) 1998 1997 1996
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<S> <C> <C> <C>
Revenues $2,636,291 $1,939,007 $1,357,325
Operating Income 488,735 303,555 217,033
Net Income 330,770 175,127 150,866
Basic Earnings Per Share $ 1.90 $ 1.17 $ 1.19
Diluted Earnings Per Share $ 1.83 $ 1.15 $ 1.17
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</TABLE>
SELECTED STATISTICAL INFORMATION
<TABLE>
<CAPTION>
1998 1997 1996
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<S> <C> <C> <C>
Passengers Carried 1,841,152 1,465,450 973,602
Passenger Cruise Days 11,607,906 8,759,651 6,055,068
Occupancy Percentage 105.2% 104.2% 101.3%
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</TABLE>
FLEET EXPANSION
The Company's fleet expansion continued in 1998 with the delivery of the last of
the six Vision-class vessels in the Royal Caribbean International fleet, Vision
of the Seas, in April 1998. With the delivery of these six ships and the
acquisition of Celebrity in 1997, the Company's capacity has increased
approximately 119.3% from 14,228 berths at December 31, 1994 to 31,200 at
December 31,1998.
The Company has nine ships on order. The planned passenger capacity and expected
delivery dates of the ships on order are as follows:
<TABLE>
<CAPTION>
Expected
Delivery Passenger
Vessel Dates Capacity(1)
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<S> <C> <C>
ROYAL CARIBBEAN INTERNATIONAL
Eagle-class
Voyager of the Seas 4th Quarter 1999 3,100
Explorer of the Seas 3rd Quarter 2000 3,100
Adventure of the Seas 2nd Quarter 2002 3,100
Vantage-class
Radiance of the Seas 1st Quarter 2001 2,100
Brilliance of the Seas 2nd Quarter 2002 2,100
CELEBRITY CRUISES
Millennium-class
Unnamed 2nd Quarter 2000 2,000
Unnamed 1st Quarter 2001 2,000
Unnamed 3rd Quarter 2001 2,000
Unnamed 2nd Quarter 2002 2,000
-----------------------------------------
</TABLE>
(1) Based on double occupancy per cabin.
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The Eagle-class vessels will be the largest passenger cruise ships built to
date. The Vantage-class vessels are a progression from Royal Caribbean
International's Vision-class vessels, while the Millennium-class vessels are a
progression from Celebrity Cruises' Century-class vessels.
Between 1998 and 2002, the Company's year-end berth capacity is expected to
increase 64.4% from 31,200 to 51,300 berths.
In May 1998, the Company sold Song of America for $94.5 million and recognized a
gain on the sale of $31.0 million. The Company will continue to operate Song of
America under a charter agreement until March 1999.
RESULTS OF OPERATIONS
The following table presents operating data as a percentage of revenues:
<TABLE>
<CAPTION>
1998 1997 1996
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<S> <C> <C> <C>
Revenues 100.0% 100.0% 100.0%
Expenses:
Operating 60.5 62.9 63.0
Marketing, selling
and administrative 13.6 14.0 14.3
Depreciation and amortization 7.4 7.4 6.7
---------------------------------------
Operating Income 18.5 15.7 16.0
Other Income (Expense) (6.0) (6.3) (4.9)
---------------------------------------
Income Before Extraordinary Item 12.5% 9.4% 11.1%
=======================================
</TABLE>
YEAR ENDED DECEMBER 31, 1998 COMPARED
TO YEAR ENDED DECEMBER 31, 1997
REVENUES
Revenues increased 36.0% to $2.6 billion compared to $1.9 billion in 1997. The
increase in revenues was primarily due to a 31.2% increase in capacity and a
3.6% increase in Yield. The acquisition of Celebrity (which occurred in July
1997) accounted for approximately two-thirds of the capacity increase, while
additions to the Royal Caribbean International fleet accounted for the balance
of the increase. The increase in Yield was due to an increase in occupancy
levels to 105.2% as compared to 104.2% in 1997 as well as an increase in cruise
ticket per diems, partially offset by a reduction in shipboard revenue per
diems. The reduction in shipboard revenue per diems is due to the inclusion of
Celebrity's results for the full year 1998 as compared to six months in 1997.
Celebrity derives a higher percentage of its shipboard revenue from
concessionaires than does Royal Caribbean International, resulting in a dilutive
effect on the per diem. Concessionaires pay a net commission to the Company
which is recorded as revenue, in contrast to in-house operations, where
shipboard revenues and related cost of sales are recorded on a gross basis.
EXPENSES
Operating expenses increased 30.7% in 1998 to $1.6 billion as compared to $1.2
billion in 1997. The increase in operating expenses was primarily due to the
increase in capacity. Included in operating expenses is a $9.0 million charge
related to the plea agreement with the U.S. Department of Justice. As a
percentage of revenues, operating expenses decreased 2.4% in 1998 primarily due
to improved ticket pricing as well as the inclusion of Celebrity results for the
full year of 1998 versus six months of 1997. Celebrity's operating expenses as a
percentage of revenues were lower than Royal Caribbean International's due to
lower shipboard cost of sales as a result of the higher use of concessionaires
onboard Celebrity vessels as discussed above.
Marketing, selling and administrative expenses increased 31.9% in 1998 to $359.2
million from $272.4 million in 1997. The increase was primarily due to the
acquisition of Celebrity as well as higher advertising and staffing costs. As a
percentage of revenues, marketing, selling and administrative expenses
decreased to 13.6% in 1998 as a result of economies of scale.
Depreciation and amortization increased to $194.6 million in 1998 from $143.8
million in 1997. The increase was primarily due to the acquisition of Celebrity
as well as additions to the Royal Caribbean International fleet.
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MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
(continued)
OTHER INCOME (EXPENSE)
Interest expense, net of capitalized interest, increased to $167.9 million in
1998 as compared to $128.5 million in 1997. The increase is due to the increase
in the average debt level as a result of the Company's fleet expansion program
as well as the acquisition of Celebrity in July 1997.
Included in Other income (expense) in 1998 is a $31.0 million gain from the sale
of Song of America as well as a $32.0 million charge related to the write-down
to fair market value of Viking Serenade. Based on the Company's strategic
objective to maintain a modernized fleet, the unique circumstances of this
vessel and indications of the current value of Viking Serenade, the Company
recorded a write-down of the carrying value to its current estimated fair market
value. The Company continues to operate and depreciate the vessel which is
classified as part of Property and Equipment on the balance sheet.
On December 15, 1998, Monarch of the Seas experienced significant damage to the
ship's hull and equipment, resulting in the ship being out of service until
mid-March 1999. The incident resulted in a net reduction in earnings of
approximately $9.0 million or $0.05 per share in the fourth quarter of 1998.
This reduction is comprised of lost revenue, net of related variable expenses,
of $5.2 million, and costs associated with repairs to the ship, passenger
transportation and lodging, commissions and various other costs, net of
estimated insurance recoveries, of $3.8 million. The costs of $3.8 million were
included in Other income (expense) for the quarter and year ended December 31,
1998.
Included in Other income (expense) in 1997 is a $4.0 million gain from the sale
of Sun Viking.
EXTRAORDINARY ITEM
Included in 1997 is an extraordinary charge of $7.6 million or $0.05 per share
related to the early extinguishment of debt.
YEAR ENDED DECEMBER 31, 1997 COMPARED
TO YEAR ENDED DECEMBER 31, 1996
REVENUES
Revenues increased 42.9% in 1997 to $1.9 billion compared to $1.4 billion in
1996 as a result of a 40.7% increase in capacity as well as an increase in
Yield. The acquisition of Celebrity contributed 22.1% of the capacity increase
while additions to the Royal Caribbean International fleet accounted for 18.6%
of the increase. Yield for the year increased 1.5% over 1996 as a result of an
increase in occupancy. Occupancy levels increased to 104.2% in 1997 as compared
to 101.3% in 1996.
EXPENSES
Operating expenses increased 42.7% to $1.2 billion in 1997 as compared to $854.5
million in 1996. This increase in operating expenses was primarily due to the
40.7% increase in capacity and higher variable costs associated with the
increased occupancy.
Marketing, selling and administrative expenses increased 39.9% in 1997 to $272.4
million versus $194.6 million in 1996. The increase was primarily due to the
acquisition of Celebrity, an increase in staffing and additional advertising
costs. These expenses decreased as a percentage of revenues in 1997 as a result
of the economies of scale achieved with the increase in capacity.
Depreciation and amortization increased to $143.8 million in 1997 from $91.2
million in 1996. The increase was primarily due to the acquisition of Celebrity
as well as additions to the Royal Caribbean International fleet.
OTHER INCOME (EXPENSE)
Interest expense, net of capitalized interest, increased to $128.5 million in
1997 from $76.5 million in 1996. The increase was a result of an increase in the
average debt level associated with the Company's fleet expansion program and
from the acquisition of Celebrity in July 1997.
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Other income (expense) in 1997 includes a gain of $4.0 million from the sale of
Sun Viking as compared to 1996 which includes a gain of $10.3 million from the
sale of Song of Norway.
EXTRAORDINARY ITEM
In May 1997, the Company redeemed the remaining $104.5 million of 11 3/8% Senior
Subordinated Notes and incurred an extraordinary charge of $7.6 million or $0.05
per share on the early extinguishment of debt.
LIQUIDITY AND CAPITAL RESOURCES
SOURCES AND USES OF CASH
The Company generated substantial cash flows resulting in net cash provided by
operating activities of $526.9 million in 1998 as compared to $434.1 million
in 1997 and $299.5 million in 1996. The increase was primarily due to higher net
income as well as timing differences in cash payments relating to operating
assets and liabilities.
In March 1998, the Company issued $150.0 million of 6.75% Senior Notes due 2008
and $150.0 million of 7.25% Senior Debentures due 2018. The net proceeds to the
Company were approximately $296.1 million.
In March 1998, the Company issued 6,100,690 shares of common stock. The net
proceeds to the Company were approximately $165.5 million. (See Note
7--Shareholders' Equity.)
During the year ended December 31, 1998, the Company's capital expenditures were
approximately $557.0 million as compared to $1.1 billion during 1997 and $722.4
million during 1996. The largest portion of capital expenditures related to the
delivery of Vision of the Seas in 1998, delivery of Rhapsody of the Seas,
Enchantment of the Seas and Mercury in 1997, delivery of Splendor of the Seas
and Grandeur of the Seas in 1996, as well as progress payments for ships under
construction during 1998, 1997 and 1996. Also included in capital expenditures
are shoreside capital expenditures and costs for vessel refurbishing to
maintain consistent fleet standards.
The Company received proceeds of $94.5 and $100.0 million from the sale of
vessels during 1998 and 1997, respectively.
Capitalized interest decreased to $15.0 million in 1998 from $15.8 million in
1997 and $15.9 million in 1996. The decrease during 1998 was due to a reduction
in the level of construction-in-progress expenditures associated with the
Company's fleet expansion program.
During 1998, the Company paid quarterly cash dividends on its common stock
totaling $55.2 million as well as quarterly cash dividends on its preferred
stock, totaling $12.5 million. During 1997, the Company paid quarterly cash
dividends totaling $40.8 and $9.2 million on its common stock and preferred
stock, respectively.
The Company made principal payments totaling approximately $335.1 and $245.4
million under various term loans and capital leases during 1998 and 1997,
respectively.
FUTURE COMMITMENTS
The Company currently has nine ships on order for an additional capacity of
21,500 berths. The aggregate contract price of the nine ships, which excludes
capitalized interest and other ancillary costs, is approximately $3.6 billion,
of which the Company deposited $144.6 million during 1998 and $74.3 million
during 1997. Additional deposits are due prior to the dates of delivery of
$237.4 million in 1999, $88.1 million in 2000 and $25.0 million in 2001. The
Company anticipates that overall capital expenditures will be approximately
$997, $1,196 and $1,368 million for 1999, 2000 and 2001, respectively.
The Company has $2.5 billion of long-term debt of which $127.9 million is due
during the 12-month period ending December 31, 1999. (See Note 6--Long-Term
Debt.)
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MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS (continued)
In addition, the Company continuously considers potential acquisitions,
strategic alliances and adjustments to its fleet composition, including the
acquisition or disposition of vessels. If any such acquisitions, strategic
alliances and adjustments to its fleet composition were to occur, they would be
financed through the issuance of additional shares of equity securities, by the
incurrence of additional indebtedness or from cash flows from operations.
FUNDING SOURCES
As of December 31, 1998, the Company's liquidity was $1.2 billion consisting of
$172.9 million in cash and cash equivalents and $1.0 billion available under its
$1.0 billion unsecured revolving credit facility (the "$1 Billion Revolving
Credit Facility"). The capital expenditures and scheduled debt payments will be
funded through a combination of cash flows provided by operations, drawdowns
under the $1 Billion Revolving Credit Facility, and sales of securities in
private or public securities markets. In addition, the agreements related to the
ships scheduled for delivery subsequent to 1999 require the shipyards to make
available export financing for up to 80% of the contract price of the vessels.
The Company's cash management practice is to utilize excess cash to reduce
outstanding balances on the $1 Billion Revolving Credit Facility, and to the
extent the cash balances exceed the amounts drawn under the $1 Billion Revolving
Credit Facility, the Company invests in short-term securities.
OTHER
The Company enters into interest rate swap agreements to manage interest costs
as part of its liability risk management program. The differential in interest
rates to be paid or received under these agreements is recognized in income as
part of interest expense over the life of the contracts. The objective of the
program is to modify the Company's exposure to interest rate movements. The
Company continuously evaluates its debt portfolio, including its interest rate
swap agreements, and makes periodic adjustments to the mix of fixed rate and
floating rate debt based on its view of interest rate movements. (See
Note 12--Financial Instruments.)
IMPACT OF YEAR 2000
The "Year 2000 issue" is the result of computer programs that were written using
two digits rather than four to define the applicable year. If the Company's
computer programs with date-sensitive functions are not Year 2000 compliant,
they may recognize a date using "00" as the year 1900 rather than the year 2000.
This could result in a system failure or miscalculations causing disruptions to
operations.
STATE OF READINESS
The Company continuously upgrades its computer systems. In 1992, the Company
implemented a new computer reservation and passenger services system which was
designed to be Year 2000 compliant. Since then, the Company has sought to fix
Year 2000 issues as an indirect part of its efforts to upgrade many of its
internally developed computer systems. Prior to 1998, the Company did not
separately track associated Year 2000 software compliant costs.
In 1997, the Company engaged a third-party consultant to assess the status of
the Company relative to the Year 2000 issue. The assessment was completed in
early 1998. The Company then formed an internally staffed program management
office that is conducting a comprehensive review of computer programs to address
the impact of the Year 2000 issue on its operations and otherwise address the
Year 2000 issues identified by the third-party consultant (the "Year 2000
Project"). Employees in various departments throughout the Company are assisting
the program management office by addressing Year 2000 issues applicable to their
departments.
The Company has identified three major categories of Year 2000 risk:
(1) internally developed software systems--these include the Company's
reservation, accounting, remote reservation booking and revenue
management systems;
(2) third-party supplied software systems and equipment with embedded chip
technology--these include the Company's computer hardware equipment,
building facilities control systems and shipboard equipment and control
systems (e.g., navigation, engine, and bridge control systems, fire
alarm and safety systems); and
(3) external vendors and suppliers--these include key suppliers (e.g.,
suppliers of air travel, hotel accommodations, food and other on-board
provisions), travel agents, on-board concessionaires and other third
parties whose system failures potentially could have a significant
impact on the Company's operations.
26
<PAGE> 31
The general phases common to all three categories are (1) inventorying Year 2000
items, (2) assessing the Year 2000 compliance of key items, (3) repairing or
replacing key internally developed and third-party supplied non-compliant items,
(4) testing and certifying key internally developed and third-party supplied
items, and (5) designing and implementing contingency plans as needed.
The Company has substantially completed its inventory of all internally
developed and third-party supplied software systems and equipment and has
identified external vendors and suppliers whose system failures potentially
could have a significant impact on the Company's operations ("Key External
Vendors").
The Company has completed its assessment of its internally developed software
systems. Through the use of questionnaires and other communications, the Company
has contacted substantially all third-party suppliers of critical software and
equipment and Key External Vendors to ascertain whether their systems and/or
equipment are Year 2000 compliant. The Company has been receiving responses from
these third parties and is evaluating them as they are received.
The Company has repaired substantially all internally developed software systems
that were determined non-compliant. By mid-1999, the Company plans to complete
testing and certification of these systems, at which time it expects that its
key internally developed software systems will be Year 2000 compliant.
As the Company identifies non-compliant systems and equipment supplied by third
parties or used by Key External Vendors, it will request that they be
remediated. If a party's response is unsatisfactory, the Company will implement
appropriate contingency plans, including, when possible, the repair or
replacement of supplied systems or equipment or the replacement of a vendor.
The Company's objective is to complete all assessment, remediation and
certification of third-party supplied software systems and equipment in the
third quarter of 1999. Over the next few months, as the Company receives more
information on the extent of the Year 2000 compliance by third-party suppliers
and Key External Vendors, the nature of any contingency plans that may be needed
will evolve.
The Company is currently preparing contingency plans to identify and determine
how to handle its most reasonably likely worst-case scenarios. It expects to
complete these plans in the third quarter of 1999 in conjunction with completion
of its assessment, remediation, testing and certification phases.
The Company has not retained third-party consultants to assist it in the
remediation, testing or certification phases, although it may choose to do so in
the future.
RISKS
Based on its current assessment efforts, the Company does not believe that Year
2000 issues will have a material adverse effect on the results of its
operations, liquidity or financial condition. However, this assessment is
dependent on the ability of third party suppliers and others whose system
failures potentially could have a significant impact on the Company's operations
to be Year 2000 compliant. For instance, the operations of the Company could be
impacted by disruptions in airlines, port authorities, travel agents or others
in the transportation or sales distribution channels whose systems are not Year
2000 compliant. Although the Company cannot control the conduct of these third
parties, the Year 2000 Project is expected to reduce the Company's level of
uncertainty and the adverse effect that any such failures may have.
COSTS
The total cost associated with required modifications to become Year 2000
compliant are not expected to be material to the company's financial position.
The Company estimates that it will incur approximately $6.0 million in expense
on efforts directly related to fixing the Year 2000 issue, as well as an
additional $5.0 million of capital expenditures related to the accelerated
replacement of noncompliant systems. The Company has incurred approximately $2.0
million in expense since January 1, 1998, and spent an additional $2.0 million
for capital expenditures related to the accelerated replacement of non-compliant
systems. Estimated costs do not include costs that may be incurred by the
Company as a result of the failure of any third parties to become Year 2000
compliant or costs to implement any contingency plans.
The information contained in this "Impact of Year 2000" section is a Year 2000
Readiness Disclosure pursuant to the Year 2000 Information and Disclosure Act.
27
<PAGE> 32
CONSOLIDATED STATEMENTS OF OPERATIONS
<TABLE>
<CAPTION>
(in thousands, except per share amounts)
Year Ended December 31, 1998 1997 1996
- -------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
INCOME STATEMENT
REVENUES $ 2,636,291 $ 1,939,007 $ 1,357,325
---------------------------------------------------
EXPENSES
Operating 1,593,728 1,219,268 854,478
Marketing, selling and administrative 359,214 272,368 194,629
Depreciation and amortization 194,614 143,816 91,185
---------------------------------------------------
2,147,556 1,635,452 1,140,292
---------------------------------------------------
OPERATING INCOME 488,735 303,555 217,033
---------------------------------------------------
OTHER INCOME (EXPENSE)
Interest income 15,912 4,666 2,278
Interest expense, net of capitalized interest (167,869) (128,531) (76,540)
Other income (expense) (6,008) 2,995 8,095
---------------------------------------------------
(157,965) (120,870) (66,167)
---------------------------------------------------
INCOME BEFORE EXTRAORDINARY ITEM 330,770 182,685 150,866
EXTRAORDINARY ITEM -- (7,558) --
---------------------------------------------------
NET INCOME $ 330,770 $ 175,127 $ 150,866
===================================================
EARNINGS PER SHARE
BASIC EARNINGS PER SHARE
Income before extraordinary item $ 1.90 $ 1.22 $ 1.19
Extraordinary item -- (0.05) --
---------------------------------------------------
Net income $ 1.90 $ 1.17 $ 1.19
===================================================
DILUTED EARNINGS PER SHARE
Income before extraordinary item $ 1.83 $ 1.20 $ 1.17
Extraordinary item -- (0.05) --
---------------------------------------------------
Net income $ 1.83 $ 1.15 $ 1.17
===================================================
</TABLE>
The accompanying notes are an integral part of these financial statements.
28
<PAGE> 33
CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
(in thousands, except share amounts) As of December 31, 1998 1997
- --------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
ASSETS
CURRENT ASSETS
Cash and cash equivalents $ 172,921 $ 110,793
Trade and other receivables, net 36,532 22,628
Inventories 31,834 37,274
Prepaid expenses 45,044 40,450
------------------------------
Total current assets 286,331 211,145
PROPERTY AND EQUIPMENT--at cost less accumulated depreciation and amortization 5,073,008 4,785,291
GOODWILL--less accumulated amortization of $107,365 and $96,952, respectively 309,801 320,214
OTHER ASSETS 16,936 23,098
------------------------------
$5,686,076 $5,339,748
==============================
LIABILITIES
CURRENT LIABILITIES
Current portion of long-term debt $ 127,919 $ 141,013
Accounts payable 115,833 108,474
Accrued liabilities 243,477 210,454
Customer deposits 402,926 429,403
------------------------------
Total current liabilities 890,155 889,344
LONG-TERM DEBT 2,341,163 2,431,683
COMMITMENTS AND CONTINGENCIES (NOTE 13)
SHAREHOLDERS' EQUITY
PREFERRED STOCK ($.01 par value; 20,000,000 shares authorized;
cumulative convertible preferred shares issued and outstanding,
3,450,000 shares stated at liquidation value) 172,500 172,500
COMMON STOCK ($.01 par value; 500,000,000 shares authorized
168,945,222 and 162,128,974 shares issued) 1,690 1,621
PAID-IN CAPITAL 1,361,796 1,188,304
RETAINED EARNINGS 923,691 660,655
TREASURY STOCK (354,492 and 314,148 common shares at cost) (4,919) (4,359)
------------------------------
Total shareholders' equity 2,454,758 2,018,721
------------------------------
$5,686,076 $5,339,748
==============================
</TABLE>
The accompanying notes are an integral part of these financial statements.
29
<PAGE> 34
CONSOLIDATED STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
(in thousands) Year Ended December 31, 1998 1997 1996
- ----------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
OPERATING ACTIVITIES
NET INCOME $ 330,770 $ 175,127 $ 150,866
ADJUSTMENTS:
Depreciation and amortization 194,614 143,816 91,185
Gain on sale of assets (31,031) (4,000) (10,306)
Write-down of vessel to fair value 32,035 -- --
Extraordinary item -- 2,387 --
CHANGES IN OPERATING ASSETS AND LIABILITIES:
(Increase) decrease in trade and other receivables, net (13,904) 145 (3,364)
Decrease (increase) in inventories 5,440 (1,885) (5,835)
(Increase) in prepaid expenses (3,600) (6,206) (7,065)
Increase (decrease) in accounts payable 7,359 2,010 (2,437)
Increase in accrued liabilities 27,722 31,299 22,451
(Decrease) increase in customer deposits (26,477) 89,896 61,408
Other, net 3,930 1,532 2,611
-------------------------------------------
Net cash provided by operating activities 526,858 434,121 299,514
-------------------------------------------
INVESTING ACTIVITIES
Purchase of property and equipment (556,953) (1,106,214) (722,389)
Proceeds from sale of assets 94,500 99,966 40,000
Acquisition of Celebrity Cruise Lines Inc., net of cash,
cash equivalents and short-term investments acquired -- (152,423) --
Other, net 247 (11,802) (6,039)
-------------------------------------------
Net cash used in investing activities (462,206) (1,170,473) (688,428)
-------------------------------------------
FINANCING ACTIVITIES
Proceeds from issuance of long-term debt 296,141 695,189 452,668
Repayment of long-term debt (395,144) (367,353) (22,025)
Dividends (67,734) (49,984) (34,384)
Proceeds from issuance of common stock 165,532 364,631 --
Proceeds from issuance of preferred stock -- 167,030 --
Other, net (1,319) (2,787) 1,818
-------------------------------------------
Net cash (used in) provided by financing activities (2,524) 806,726 398,077
-------------------------------------------
NET INCREASE IN CASH AND CASH EQUIVALENTS 62,128 70,374 9,163
CASH AND CASH EQUIVALENTS, BEGINNING OF YEAR 110,793 40,419 31,256
-------------------------------------------
CASH AND CASH EQUIVALENTS, END OF YEAR $ 172,921 $ 110,793 $ 40,419
===========================================
SUPPLEMENTAL DISCLOSURE
Interest paid, net of amount capitalized $ 170,278 $ 127,457 $ 65,110
===========================================
Capital stock issued for acquisition $ -- $ 270,000 $ --
===========================================
</TABLE>
The accompanying notes are an integral part of these financial statements.
30
<PAGE> 35
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
NOTE 1. GENERAL
DESCRIPTION OF BUSINESS
Royal Caribbean Cruises Ltd., a Liberian corporation, and its subsidiaries (the
"Company"), is a global cruise company. In July 1997, the Company acquired 100%
of the outstanding stock of Celebrity Cruise Lines Inc. ("Celebrity"). (See Note
4-Acquisition.) The Company operates two cruise brands, Royal Caribbean
International, which operates 12 cruise ships (one of which has been sold and
will operate under a charter agreement until March 1999), and Celebrity Cruises,
which operates five cruise ships. The Company's ships call on destinations in
Alaska, the Bahamas, Bermuda, the Caribbean, Canada, Europe, Hawaii, Mexico, New
England, the Panama Canal and Scandinavia.
BASIS FOR PREPARATION OF
CONSOLIDATED FINANCIAL STATEMENTS
The consolidated financial statements are prepared in accordance with
U.S. generally accepted accounting principles and are presented in U.S. dollars.
Management estimates are required for the preparation of financial statements in
accordance with generally accepted accounting principles. Actual results could
differ from these estimates. All significant intercompany accounts and
transactions are eliminated in consolidation.
NOTE 2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
CRUISE REVENUES AND EXPENSES
Deposits received on sales of passenger cruises are recorded as customer
deposits and are recognized, together with revenues from shipboard activities
and all associated direct costs of a voyage, upon completion of voyages with
durations of 10 days or less and on a pro rata basis for voyages in excess of 10
days. Certain revenues and expenses for pro rata voyages are estimated.
CASH AND CASH EQUIVALENTS
Cash and cash equivalents include cash and marketable securities with original
maturities of less than 90 days.
INVENTORIES
Inventories consist of provisions, supplies, fuel and gift shop merchandise
carried at the lower of cost (weighted-average) or market.
PROPERTY AND EQUIPMENT
Property and equipment are stated at cost. Significant vessel refurbishing costs
are capitalized as additions to the vessel, while costs of repairs and
maintenance are charged to expense as incurred. The Company capitalizes interest
as part of the cost of construction. The Company reviews long-lived assets,
identifiable intangibles and goodwill and reserves for impairment whenever
events or changes in circumstances indicate, based on estimated future cash
flows, the carrying amount of the assets will not be fully recoverable.
Depreciation of property and equipment, which includes amortization of vessels
under capital lease, is computed using the straight-line method over useful
lives of primarily 30 years for vessels and three to 10 years for other property
and equipment. (See Note 5--Property and Equipment.)
GOODWILL
Goodwill represents the excess of cost over the fair value of net assets
acquired and is being amortized over 40 years using the straight-line method.
31
<PAGE> 36
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (continued)
ADVERTISING COSTS
Advertising costs are expensed as incurred except those costs which result in
tangible assets, such as brochures, are treated as prepaid supplies and charged
to operations as consumed. Advertising expense consists of media advertising as
well as brochure, production and direct mail costs. Media advertising was $76.7,
$62.5 and $46.6 million, and brochure, production and direct mail costs were
$63.2, $33.7 and $29.2 million for the years 1998, 1997 and 1996, respectively.
DRYDOCKING
Drydocking costs are accrued evenly over the period to the next scheduled
drydocking and are included in accrued liabilities.
FINANCIAL INSTRUMENTS
The Company enters into various forward, option and swap contracts to limit its
exposure to fluctuations in foreign currency exchange rates and oil prices, to
modify its exposure to interest rate movements and to manage its interest costs.
The differential in interest rates and oil prices to be paid or received under
these agreements is recognized in income over the life of the contracts as part
of interest expense and fuel expense, respectively. Foreign exchange forward
and/or option contracts are revalued as of the balance sheet date based on
forward and/or option contracts with comparable characteristics, and resulting
gains and losses are recognized in income currently.
FOREIGN CURRENCY TRANSACTIONS
The majority of the Company's transactions are settled in U.S. dollars. Gains or
losses resulting from transactions denominated in other currencies and
remeasurements of other currencies are recognized in income currently.
EARNINGS PER SHARE
Basic earnings per share is computed by dividing net income, after deducting
preferred stock dividends accumulated during the period, by the weighted-average
number of shares of common stock outstanding during each period. Diluted
earnings per share is computed by dividing net income by the weighted-average
number of shares of common stock, common stock equivalents and other potentially
dilutive securities outstanding during each period.
STOCK-BASED COMPENSATION
The Company accounts for stock-based compensation using the intrinsic value
method and discloses certain fair market value information with respect to its
stock option activity in the notes to the financial statements.
SEGMENT REPORTING
The Company adopted Statement of Financial Accounting Standards
No. 131--Disclosures About Segments of an Enterprise and Related Information for
the year ended December 31,1998. Although the Company operates two brands, Royal
Caribbean International and Celebrity Cruises, the brands have been aggregated
as a single operating segment based on the similarity of their economic
characteristics as well as product and services provided.
Information about geographic areas is shown in the table below. Revenues are
attributed to geographic areas based on the source of the customer.
<TABLE>
<CAPTION>
1998 1997 1996
- -------------------------------------------------------------------
<S> <C> <C> <C>
Revenues:
United States 84% 85% 85%
All Other Countries 16% 15% 15%
------------------------------
</TABLE>
NOTE 3. STOCK SPLIT
On June 23,1998, the Company authorized a two-for-one split of its common stock
effected in the form of a stock dividend. The additional shares were distributed
on July 31, 1998 to shareholders of record on July 10, 1998. All share and per
share information has been retroactively restated to reflect this stock split.
32
<PAGE> 37
NOTE 4. ACQUISITION
In July 1997, the Company acquired all of the outstanding stock of Celebrity, a
provider of cruises to the North American market. The purchase price was $515.0
million, payable in cash of $245.0 million and 14,896,552 shares of the
Company's common stock. This acquisition has been accounted for under the
purchase method, and the results of the operations of Celebrity have been
included in the consolidated financial statements since July 1, 1997. The total
cost of the acquisition was allocated to the tangible assets acquired and
liabilities assumed based on their respective fair values.
The following unaudited pro forma information presents a summary of consolidated
results of operations of the Company, including Celebrity, as if the acquisition
had occurred January 1, 1996.
<TABLE>
<CAPTION>
(in thousands, except per share amounts) 1997 1996
- ---------------------------------------------------------------------------
<S> <C> <C>
Revenue $2,196,571 $1,769,216
Income before extraordinary item $ 174,406 $ 136,498
Net income $ 166,848 $ 136,498
Earnings per share
Income before extraordinary item
Basic $ 1.10 $ 0.96
Diluted $ 1.10 $ 0.95
Net income
Basic $ 1.05 $ 0.96
Diluted $ 1.05 $ 0.95
-----------------------------
</TABLE>
The unaudited pro forma results have been prepared for comparative purposes only
and include certain adjustments, such as additional depreciation expense as a
result of a step-up in the basis of fixed assets and increased interest expense
on acquisition debt. They do not purport to be indicative of the results which
would actually have been achieved if this acquisition had been effected on the
date indicated or of those results which may be obtained in the future.
NOTE 5. PROPERTY AND EQUIPMENT
Property and equipment consists of the following (in thousands):
<TABLE>
<CAPTION>
1998 1997
- ----------------------------------------------------------------
<S> <C> <C>
Land $ 5,320 $ 5,320
Vessels 4,457,070 4,201,443
Vessels under capital lease 763,350 760,941
Vessels under construction 285,243 160,771
Other 170,290 139,281
-----------------------------
5,681,273 5,267,756
Less--accumulated depreciation
and amortization (608,265) (482,465)
-----------------------------
$ 5,073,008 $ 4,785,291
=============================
</TABLE>
Vessels under construction includes progress payments for the construction of
new vessels as well as planning, design, interest, commitment fees and other
associated costs. The Company capitalized interest costs of $15.0, $15.8 and
$15.9 million for the years 1998, 1997 and 1996, respectively. Accumulated
amortization related to vessels under capital lease was $67.9 and $45.8 million
at December 31, 1998 and 1997, respectively.
In May 1998, the Company sold Song of America for $94.5 million and recognized a
gain on the sale of $31.0 million which is included in Other income (expense).
In the second quarter of 1998, the Company incurred a $32.0 million charge
related to the write-down to fair market value of Viking Serenade. Based on the
Company's strategic objective to maintain a modernized fleet, the unique
circumstances of this vessel and indications of the current value of Viking
Serenade, the Company recorded a write-down of the carrying value to its current
estimated fair market value which is included in Other income (expense). The
Company continues to operate and depreciate the vessel which is classified as
part of Property and Equipment on the balance sheet.
In October 1997, the Company sold Sun Viking for $30.0 million and recognized a
gain on the sale of $4.0 million. In September 1997, the Company sold Meridian.
The sale price
33
<PAGE> 38
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (continued)
was $62.1 million and there was no gain or loss recognized in the transaction.
In October 1996, the Company sold Song of Norway for $40.0 million and
recognized a gain on the sale of $10.3 million. The Company has recorded the
gains in Other income (expense).
NOTE 6. LONG-TERM DEBT
Long-term debt consists of the following (in thousands):
<TABLE>
<CAPTION>
1998 1997
- ----------------------------------------------------------------------------
<S> <C> <C>
$1 billion revolving credit facility,
LIBOR plus 0.30% interest rate
on balances outstanding,
0.15% facility fee, due 2003 $ -- $ 60,000
Senior Notes and Senior Debentures
bearing interest at rates ranging
from 6.75% to 8.25%, due 2002
through 2008, 2018 and 2027 1,390,006 1,090,443
Unsecured fixed rate loan bearing
interest at 8.0%, due 2006 185,277 211,075
Fixed rate loans bearing interest
at rates ranging from 6.7% to
8.0%, due through 2005, secured
by certain Celebrity vessels 403,560 595,147
Variable rate loans bearing interest
at 6.5% through Nov. 2001,
LIBOR plus 0.45% through 2004,
due through 2004, secured by
certain Celebrity vessels 30,978 142,670
Capital lease obligations,
implicit interest rates ranging
from 7.0% to 7.2%,
due through 2011 459,261 473,361
----------- -----------
2,469,082 2,572,696
Less--current portion (127,919) (141,013)
----------- -----------
Long-term portion $ 2,341,163 $ 2,431,683
=========== ===========
</TABLE>
Under the Company's $1.0 billion unsecured revolving credit facility (the
"$1 Billion Revolving Credit Facility"), the contractual interest rate on
balances outstanding varies with the Company's debt rating. In addition, the
$1 Billion Revolving Credit Facility contains a competitive bid provision which
may allow the Company to borrow funds at less than the contractual interest
rate.
In March 1998, the Company issued $150.0 million of 6.75% Senior Notes due 2008
and $150.0 million of 7.25% Senior Debentures due 2018. Net proceeds to the
Company were approximately $296.1 million.
In May 1997, the Company redeemed the remaining $104.5 million of 11 3/8% Senior
Subordinated Notes and incurred an extraordinary charge of approximately $7.6
million, or $0.05 per share on the early extinguishment of debt.
The Senior Notes and Senior Debentures are unsecured and are not redeemable
prior to maturity.
The Company entered into a $264.0 million capital lease to finance Splendour of
the Seas and a $260.0 million capital lease to finance Legend of the Seas in
1996 and 1995, respectively. The capital leases each have semi-annual payments
of $12.0 million over 15 years with final payments of $99.0 and $97.5 million,
respectively.
The Company's debt agreements contain covenants that require the Company, among
other things, to maintain minimum liquidity amounts, net worth and fixed charge
coverage ratios and limit debt to capital ratios. The Company is in compliance
with all covenants as of December 31,1998. Following is a schedule of principal
repayments on long-term debt (in thousands):
<TABLE>
<CAPTION>
Year
- --------------------------------------------------------------
<S> <C>
1999 $ 127,919
2000 128,086
2001 109,982
2002 259,853
2003 110,948
Thereafter 1,732,294
----------
$2,469,082
==========
</TABLE>
34
<PAGE> 39
NOTE 7. SHAREHOLDERS' EQUITY
The following represents an analysis of the changes in shareholders' equity for
the years 1998, 1997 and 1996 (in thousands):
<TABLE>
<CAPTION>
Preferred Common Paid-in Retained Treasury
Stock Stock Capital Earnings Stock Total
- ---------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Balance, January 1, 1996 $ -- $1,270 $ 548,339 $419,030 $(3,551) $ 965,088
Issuance under Employee Related Plans -- 6 3,606 -- (248) 3,364
Common stock dividends -- -- -- (34,384) -- (34,384)
Net Income -- -- -- 150,866 -- 150,866
-------------------------------------------------------------------------------------
Balance, December 31, 1996 -- 1,276 551,945 535,512 (3,799) 1,084,934
Issuance of Convertible Preferred Stock 172,500 -- (5,470) -- -- 167,030
Acquisition of Celebrity -- 148 269,852 -- -- 270,000
Issuance of Common Stock -- 187 364,444 -- -- 364,631
Issuance under Employee Related Plans -- 10 7,533 -- (560) 6,983
Preferred stock dividends -- -- -- (9,201) -- (9,201)
Common stock dividends -- -- -- (40,783) -- (40,783)
Net Income -- -- -- 175,127 -- 175,127
-------------------------------------------------------------------------------------
Balance, December 31, 1997 172,500 1,621 1,188,304 660,655 (4,359) 2,018,721
Issuance of Common Stock -- 61 165,471 -- -- 165,532
Issuance under Employee Related Plans -- 8 8,021 -- (560) 7,469
Preferred stock dividends -- -- -- (12,506) -- (12,506)
Common stock dividends -- -- -- (55,228) -- (55,228)
Net Income -- -- -- 330,770 -- 330,770
-------------------------------------------------------------------------------------
Balance, December 31, 1998 $172,500 $1,690 $1,361,796 $923,691 $(4,919) $2,454,758
=====================================================================================
</TABLE>
In March 1998, the Company completed a public offering of 13,800,000 shares of
common stock at a price of $28.25 per share. Of the total shares sold, 7,699,310
shares were sold by selling shareholders, and the balance of 6,100,690 shares
were sold by the Company. After deduction of the underwriting discount and other
estimated expenses of the offering, net proceeds to the Company were
approximately $165.5 million.
In February 1997, the Company issued 3,450,000 shares of $3.625 Series A
Convertible Preferred Stock (the "Convertible Preferred Stock"). The Convertible
Preferred Stock has a liquidation preference of $50 per share and is convertible
by the holder at any time into shares of common stock at a conversion price of
$16.20 per share of common stock (equivalent to a conversion rate of 3.0864
shares of common stock for each share of Convertible Preferred Stock). The
shares of Convertible Preferred Stock are redeemable, at the option of the
Company, subsequent to February 16, 2000 at pre-established redemption prices.
35
<PAGE> 40
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (continued)
The Company's Employee Stock Purchase Plan facilitates the purchase by employees
of up to 800,000 shares of common stock commencing January 1, 1994. The purchase
price is derived from a formula based on 90% of the fair market value of the
common stock during the quarterly purchase period, subject to certain
restrictions. Shares of common stock of 35,546, 33,276 and 49,560 were issued
under the Employee Stock Purchase Plan at an average price of $28.33, $16.48 and
$11.50 during 1998, 1997 and 1996, respectively.
Under an executive compensation program approved in 1994, the Company will award
to a trust 10,086 shares of common stock per quarter, up to a maximum of 806,880
shares. The Company issued 40,344 shares each year under the program
during 1998, 1997 and 1996.
The Company has an Employee Stock Option Plan and an Incentive Stock Option Plan
which provide for awards to officers, directors and key employees of the Company
up to an aggregate 6,703,000 shares and 2,700,000 shares of common stock,
respectively. Options are granted at a price not less than the fair value of the
shares on the date of grant and expire not later than 10 years after the date
of grant. Options under the Employee Stock Option Plan generally become
exercisable as to 40% of the amount granted two years after the grant date and
20% of the amount granted at the end of each of the three succeeding years.
Options under the Incentive Stock Option Plan generally become exercisable as to
25% of the amount granted two years after the grant date and 25% of the amount
granted at the end of each of the three succeeding years.
Stock option activity and information about stock options are summarized in the
following tables.
STOCK OPTION ACTIVITY
<TABLE>
<CAPTION>
Number of Average
Options Price
- ---------------------------------------------------------------
<S> <C> <C>
Balance at January 1, 1996 4,243,928 $ 9.74
Granted 1,706,094 $12.62
Exercised (425,778) $ 6.56
Canceled (202,544) $12.48
---------
Balance at December 31, 1996 5,321,700 $10.81
Granted 1,080,000 $19.49
Exercised (831,608) $ 7.87
Canceled (95,776) $13.16
---------
Balance at December 31, 1997 5,474,316 $12.92
Granted 2,013,000 $25.07
Exercised (652,474) $ 9.90
Canceled (342,452) $16.74
---------
Balance at December 31, 1998 6,492,390 $16.78
=========
Available for Future Grants,
End of the Year 1,274,360
</TABLE>
STOCK OPTIONS OUTSTANDING
<TABLE>
<CAPTION>
As of December 31,1998 Outstanding Exercisable
--------------------------------------------------------------------------------------
Average Average Average
Exercise Remaining Exercise Exercise
Price Range Shares Life Price Shares Price
- -----------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
$ 6.28-$12.16 1,641,816 4.4 years $ 9.00 1,188,494 $ 8.08
$13.16-$13.78 1,814,474 6.6 years $13.49 983,322 $13.49
$14.03-$22.31 1,860,100 8.9 years $20.45 81,930 $14.24
$25.59-$32.84 1,176,000 9.2 years $26.95 -- --
--------- ---------
6,492,390 7.2 years $16.78 2,253,746 $10.66
========= =========
</TABLE>
36
<PAGE> 41
The Company uses the intrinsic value method of accounting for stock-based
compensation. Had the fair value based method been used to account for such
compensation, compensation costs would have reduced net income by $8.2, $4.0 and
$2.6 million or $0.05, $0.03 and $0.02 per share in 1998, 1997 and 1996,
respectively. The weighted-average fair value of options granted during 1998,
1997 and 1996 was $10.49, $7.80 and $5.42, respectively. Fair market value
information for the Company's stock options for 1998, 1997 and 1996 was
estimated using the Black-Scholes Model assuming an expected dividend rate of
1.5%, an estimated term of six years, a risk-free rate of return of
approximately 5% in 1998 and 6% in 1997 and 1996 and an expected volatility of
35.0% in 1998 and 28.0% in 1997 and 1996.
Effective January 1, 1998, the Company instituted a program to award stock to
employees up to a maximum of 1,400,000 shares of common stock. Employees are
awarded five shares of the Company's stock at the end of each year of employment
over a 10-year period. Employees can elect to receive cash equal to the fair
market value of the stock upon vesting. Compensation expense was $3.6 million in
1998 related to this program.
NOTE 8. Earnings Per Share
Below is a reconciliation between basic and diluted earnings per share before
extraordinary item for the years ended December 31, 1998, 1997 and 1996 (in
thousands, except per share amounts).
<TABLE>
<CAPTION>
1998 1997 1996
-----------------------------------------------------------------------------------------------
Per Per Per
For the Years Ended December 31, Income Shares Share Income Shares Share Income Shares Share
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Income before extraordinary item $330,770 $182,685 $150,866
Less: Preferred stock dividend (12,506) (10,765) --
-------- --------- --------
Basic earnings per share 318,264 167,577 $1.90 171,920 141,010 $1.22 150,866 127,295 $1.19
===== ===== =====
Effect of Dilutive Securities
Stock options 2,940 1,978 1,132
Convertible preferred stock 12,506 10,648 10,765 9,186 -- --
--------------------- ------------------ -------------------
Diluted earnings per share $330,770 181,165 $1.83 $182,685 152,174 $1.20 $150,866 128,427 $1.17
===============================================================================================
</TABLE>
Extraordinary loss per share for the year ended 1997 for basic and diluted
earnings per share was ($0.05).
37
<PAGE> 42
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (continued)
NOTE 9. Retirement Plans
The Company maintains a defined contribution pension plan covering all of its
full-time shoreside employees who have completed the minimum period of
continuous service. Annual contributions to the plan are based on fixed
percentages of participants' salaries and years of service, not to exceed
certain maximums. Pension cost was $6.9, $4.9 and $4.3 million for the years
1998, 1997 and 1996, respectively.
NOTE 10. Operating Leases
The Company is obligated under noncancelable operating leases for various
facilities, primarily office and warehouse space. As of December 31, 1998,
future minimum lease payments under noncancelable operating leases were as
follows (in thousands):
<TABLE>
<CAPTION>
Year
- -------------------------------------------------------------
<S> <C>
1999 $ 5,134
2000 4,444
2001 4,205
2002 4,110
2003 4,023
Thereafter 26,017
-------
$47,933
=======
</TABLE>
Total rent expense for all operating leases amounted to $6.9, $5.7 and $4.9
million for the years 1998, 1997 and 1996, respectively.
NOTE 11. Income Taxes
The Company and the majority of its subsidiaries are not subject to U.S.
corporate income tax on income generated from the international operation of
ships pursuant to Section 883 of the Internal Revenue Code, provided that they
meet certain tests related to country of incorporation and composition of
shareholders. The Company believes that it and a majority of its subsidiaries
meet these tests. Income tax expense related to the Company's remaining
subsidiaries is not significant.
NOTE 12. Financial Instruments
The estimated fair values of the Company's financial instruments are as follows
(in thousands):
<TABLE>
<CAPTION>
1998 1997
--------------------------------------------------------------
Carrying Fair Carrying Fair
Amount Value Amount Value
- --------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Cash and Cash
Equivalents $ 172,921 $ 172,921 $ 110,793 $ 110,793
Long-Term Debt
(including
current
portion of
long-term
debt) (2,469,082) (2,564,985) (2,572,696) (2,668,447)
Interest Rate
Swap
Agreements
in a net
receivable
position 2,370 48,558 1,567 21,372
--------------------------------------------------------------
</TABLE>
The carrying amounts shown are the amounts reported in the consolidated balance
sheets. The reported fair values are based on a variety of factors and
assumptions. Accordingly, the fair values may not represent actual values of the
financial instruments that could have been realized as of December 31, 1998 or
1997 or that will be realized in the future and do not include expenses that
could be incurred in an actual sale or settlement. The following methods were
used to estimate the fair values of the Company's financial instruments, none of
which are held for trading or speculative purposes:
CASH AND CASH EQUIVALENTS
The carrying amount approximates fair value because of the short maturity of
those instruments.
LONG-TERM DEBT
The fair values of the $1 Billion Revolving Credit Facility, the capital leases,
the secured fixed and variable rate loans and the unsecured fixed rate loan were
estimated based on the market rates available to the Company for similar debt
with the same remaining maturities. The fair values of the Senior Notes and
Senior Debentures were estimated by obtaining quoted market prices.
38
<PAGE> 43
INTEREST RATE SWAP AGREEMENTS
The fair value of interest rate swap agreements was estimated based on quoted
market prices for similar or identical financial instruments to those held by
the Company. The Company's exposure to market risk for changes in interest rates
relates to its long-term debt obligations. Market risk associated with the
Company's long-term debt is the potential increase in fair value resulting from
a decrease in interest rates. The Company uses interest rate swaps to modify its
exposure to interest rate movements and manage its interest expense. As
of December 31, 1998, the Company had agreements in effect which exchanged
floating interest rates for fixed interest rates in a notional amount of $100.0
million maturing in 1999 and fixed interest rates for floating interest rates in
a notional amount of $668.8 million maturing in 2002 through 2008.
The Company has exposure under these interest rate swap agreements for the cost
of replacing the contracts in the event of nonperformance by the counterparties,
all of which are currently the Company's lending banks. To minimize that risk,
the Company limits its exposure to any individual counterparty and selects
counterparties with credit risks acceptable to the Company.
In June 1998, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standards No. 133 - Accounting for Derivative Instruments
and Hedging Activities ("FAS 133") which requires all derivative instruments to
be carried at fair market value on the balance sheet with changes in fair value
recognized in income in the period they occur. FAS 133 is effective for fiscal
quarters of all fiscal years beginning after June 15, 1999 (January 1, 2000 for
the Company). The Company has not yet determined the impact that the adoption of
FAS 133 will have on its earnings or statement of financial position.
NOTE 13. COMMITMENTS AND CONTINGENCIES
The Company has nine ships on order. Three are Eagle-class vessels designated
for the Royal Caribbean International fleet, the first of which, Voyager of the
Seas is scheduled for delivery in the fourth quarter of 1999, followed by two
sister vessels scheduled for delivery in the third quarter of 2000 and second
quarter of 2002. The Company also has two Vantage-class vessels designated for
the Royal Caribbean International fleet scheduled for delivery in the first
quarter of 2001 and second quarter of 2002 and four Millennium-class vessels
designated for the Celebrity Cruises fleet, scheduled for delivery in the second
quarter of 2000, first quarter of 2001, third quarter of 2001 and second quarter
of 2002. The aggregate contract price of the nine ships, which excludes
capitalized interest and other ancillary costs, is approximately $3.6 billion,
of which the Company deposited $144.6 million during 1998 and $74.3 million
during 1997. Additional deposits are due prior to the dates of delivery of
$237.4 million in 1999, $88.1 million in 2000 and $25.0 million in 2001.
In June 1998, the Company entered into a plea agreement with the U.S. Department
of Justice settling previously filed charges contained in two indictments
pending in the U.S. District of Puerto Rico and the Southern District of
Florida, respectively. The indictments, which pertained to events that occurred
in 1994 and prior years, contained a total of 11 felony counts related to
improper disposal of oil-contaminated bilge water and attempts to conceal such
activities from the U.S. Coast Guard. Under the plea agreement, the Company pled
guilty to eight of the 11 counts and agreed to pay $9.0 million. The U.S.
government is continuing its investigation of the Company's bilge water and
other waste disposal practices through federal grand jury proceedings in
Anchorage, Alaska, Los Angeles, California, Miami, Florida and New York, New
York. In February 1999, the Company was indicted by the grand jury in Los
Angeles on charges that it presented false oil record books for one of its
vessels to the U.S. Coast Guard three times during 1994. Each of the three
counts in the indictment carries a maximum fine of $500,000, subject to increase
under certain circumstances. Although the Company is not able at this time to
estimate the timing or impact of the continuing investigations, the Company may
be subject to additional charges for violations of U.S. law.
Beginning in December 1995, several purported class action suits were filed
alleging that Royal Caribbean International and Celebrity misrepresented to its
passengers the amount of its port charge expenses. The suits seek declaratory
relief and damages in an unspecified amount. Beginning in August 1996,
39
<PAGE> 44
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (continued)
several purported class-action suits were filed alleging that Royal Caribbean
International and Celebrity should have paid commissions to travel agents on
port charges included in the price of cruise fares. The suit seeks damages in an
unspecified amount. Similar suits are pending against other companies in the
cruise industry. In February 1997, Royal Caribbean International, Celebrity and
certain other cruise lines entered into an Assurance of Voluntary Compliance
with the Florida Attorney General's office. Under the Assurance of Voluntary
Compliance, Royal Caribbean International and Celebrity agreed to include all
components of the cruise ticket price, other than governmental taxes and fees,
in the advertised price. In January 1999, Royal Caribbean International entered
into an agreement to settle certain of the class-action suits filed on behalf of
its passengers. Celebrity entered into a similar settlement agreement. Under the
terms of the settlement agreements, each of Royal Caribbean International and
Celebrity will issue travel vouchers having face amounts ranging from $8 to $30,
in the case of Royal Caribbean International, and from $20 to $45 in the case of
Celebrity, to passengers who are U.S. residents and who sailed on Royal
Caribbean International or Celebrity, as the case may be, between April 1992 and
April 1997. Such vouchers may be applied to reduce the cruise fare of a future
cruise on Royal Caribbean International or Celebrity, as the case may be, and
are valid for up to three years from the date of issuance. The settlements have
received preliminary court approval but are subject to final court approval.
Since the amount and timing of the vouchers to be redeemed and the effect of
redemption on revenues is not reasonably determinable, the Company has not
established a liability for the vouchers and will account for their redemption
as a reduction of future revenues. In December 1998, a Florida state court judge
dismissed one of the class-action suits filed on behalf of travel agents for
failure to state a claim under Florida law. The plaintiff in that case has filed
an appeal of that decision. The Company is not able at this time to estimate the
timing or impact of the travel agent proceedings on the Company.
The Company is routinely involved in other claims typical to the cruise
industry. The majority of these claims are covered by insurance. Management
believes the outcome of such other claims which are not covered by insurance
would not have a material adverse effect upon the Company's financial condition
or results of operations.
NOTE 14. QUARTERLY DATA (UNAUDITED)
<TABLE>
<CAPTION>
First Quarter Second Quarter Third Quarter Fourth Quarter
(in thousands, except ---------------------------------------------------------------------------------------------
per share amounts) 1998 1997 1998 1997 1998 1997 1998 1997
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Revenues $659,777 $394,590 $656,456 $403,467 $744,910 $612,542 $575,148 $528,408
Operating Income 119,461 60,637 121,533 67,397 183,592 116,911 64,149 58,610
Income Before Extraordinary Item 77,537 38,481 79,770 45,918 150,038 75,931 23,425 22,355
Extraordinary Item -- -- -- (7,558) -- -- -- --
---------------------------------------------------------------------------------------------
Net Income $ 77,537 $ 38,481 $ 79,770 $ 38,360 $150,038 $ 75,931 $ 23,425 $ 22,355
=============================================================================================
Basic Earnings Per Share(1):
Income before extraordinary item $ 0.45 $ 0.29 $ 0.45 $ 0.33 $ 0.87 $ 0.50 $ 0.12 $ 0.12
Extraordinary item -- -- -- (0.05) -- -- -- --
---------------------------------------------------------------------------------------------
Net income $ 0.45 $ 0.29 $ 0.45 $ 0.28 $ 0.87 $ 0.50 $ 0.12 $ 0.12
=============================================================================================
Diluted Earnings Per Share(1):
Income before extraordinary item $ 0.44 $ 0.29 $ 0.44 $ 0.32 $ 0.82 $ 0.48 $ 0.12 $ 0.12
Extraordinary item -- -- -- (0.05) -- -- -- --
---------------------------------------------------------------------------------------------
Net Income $ 0.44 $ 0.29 $ 0.44 $ 0.27 $ 0.82 $ 0.48 $ 0.12 $ 0.12
=============================================================================================
Dividends Declared Per Share $ 0.08 $ 0.07 $ 0.08 $ 0.07 $ 0.09 $ 0.08 $ 0.09 $ 0.08
=============================================================================================
</TABLE>
(1) Earnings per share is computed after giving effect to the two-for-one
stock split effective July 31, 1998. Prior year amounts have been
restated.
40
<PAGE> 45
REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
(PRICEWATERHOUSECOOPERS LOGO)
TO THE SHAREHOLDERS AND DIRECTORS
OF ROYAL CARIBBEAN CRUISES LTD.:
In our opinion, the accompanying consolidated balance sheets and the related
consolidated statements of operations and of cash flows present fairly, in all
material respects, the financial position of Royal Caribbean Cruises Ltd. and
its subsidiaries at December 31, 1998 and 1997, and the results of their
operations and their cash flows for each of the three years in the period ended
December 31, 1998, in conformity with generally accepted accounting principles.
These financial statements are the responsibility of the Company's management;
our responsibility is to express an opinion on these financial statements based
on our audits. We conducted our audits of these statements in accordance with
generally accepted auditing standards which require that we plan and perform the
audit to obtain reasonable assurance about whether the financial statements are
free of material misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the financial statements,
assessing the accounting principles used and significant estimates made by
management, and evaluating the overall financial statement presentation. We
believe that our audits provide a reasonable basis for the opinion expressed
above.
/s/ PricewaterhouseCoopers LLP
PricewaterhouseCoopers LLP
Miami, Florida
February 5, 1999, except for the second paragraph of
Note 13, which is as of February 24, 1999
41
<PAGE> 46
(Photo of the Board of Directors)
BOARD OF DIRECTORS
<TABLE>
<S> <C> <C> <C>
(from left to right) EXECUTIVE OFFICERS
Richard D. Fain John Chandris Richard D. Fain Richard Glasier
Chairman and CEO Chandris (UK) Limited Chairman and CEO Executive Vice President and
Chief Financial Officer
Edwin W. Stephan Tor Arneberg Richard E. Sasso
Royal Caribbean Cruises Ltd.* Nightingale & Associates, Inc. President, Celebrity Cruises Kenneth D. Dubbin
Vice President and Treasurer
Eyal Ofer Kaspar K. Kielland Jack L. Williams
Carlyle Properties, Limited L.M. Ericsson A/S President, Royal Caribbean Michael J. Smith
International Vice President,
Arne Wilhelmsen William K. Reilly General Counsel and Secretary
Anders Wilhelmsen & Co. A/S Aqua International Partners
Jay A. Pritzker Laura Laviada
Pritzker & Pritzker Editorial Televisa
Dr. Peter Lorange Bernard W. Aronson
International Institute for Acon Investments, LLC
Management Development
*Vice Chairman
</TABLE>
42
<PAGE> 47
Shareholder Information
CORPORATE OFFICE
Royal Caribbean Cruises Ltd.
1050 Caribbean Way
Miami, Florida 33132
Telephone (305)539-6000
Telecommunications Display Device
(305)539-4440
Internet http://www.royalcaribbean.com
http://www.celebrity-cruises.com
INDEPENDENT AUDITORS
PricewaterhouseCoopers LLP
700 First Union Financial Center
200 South Biscayne Boulevard
Miami, Florida 33131-2330
COMMON STOCK TRANSFER
AGENT & REGISTRAR
ChaseMellon Shareholder Services, L.L.C.
Overpeck Centre
85 Challenger Road
Ridgefield Park, New Jersey 07660
Internet http://www.chasemellon.com
COMMON STOCK
Common stock of Royal Caribbean
Cruises Ltd. trades on the New York
Stock Exchange (NYSE) and the Oslo
Stock Exchange (OSE) under the
symbol "RCL."
The table below sets forth the quarterly high and low prices of the common stock
on the New York Stock Exchange:
<TABLE>
<CAPTION>
1998 High Low
- --------------------------------------------------------------------
<S> <C> <C>
First Quarter $35 7/16 $24 3/4
Second Quarter 40 3/8 32 5/8
Third Quarter 43 29/32 23 1/8
Fourth Quarter 37 1/8 17
</TABLE>
<TABLE>
<CAPTION>
1997 High Low
- --------------------------------------------------------------------
<S> <C> <C>
First Quarter $16 7/16 $11 5/8
Second Quarter 19 11/16 14 15/16
Third Quarter 22 15/16 17 7/32
Fourth Quarter 26 13/16 20 13/16
</TABLE>
ANNUAL MEETING
The annual meeting will be held on Wednesday, May 12, 1999 at 9 a.m. at the
Hyatt Regency, Miami, Florida.
AVAILABILITY OF FORM 20-F
A copy of the Company's annual report on Form 20-F will be provided without
charge upon written request to the Company.
Design by Critt Graham + Associates, Atlanta: Principal photography by
Marc Norberg.(C) Royal Caribbean Cruises Ltd.
This report is printed on recycled paper using linseed-based inks.
inside back cover
<PAGE> 48
(LOGO) Royal Caribbean
(LOGO) Celebrity Cruises
Royal Caribbean Cruises Ltd., 1050 Caribbean Way, Miami, Florida 33132
back cover
<PAGE> 49
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)
Date: March 19, 1999 By /s/ Kenneth D. Dubbin
-----------------------------------
Kenneth D. Dubbin
Vice President and Treasurer
