Restructuring Charges

For the quarter ended June 30, 2014 and June 30, 2013, we incurred $(0.1) million and $1.7 million, respectively, and for both of the six months ended June 30, 2014 and June 30, 2013, we incurred $1.7 million of restructuring charges in connection with our broad profitability improvement program. The following are the profitability initiatives that are at different stages of implementation.

Consolidation of Global Sales, Marketing, General and Administrative Structure

One of our profitability initiatives relates to restructuring and consolidation of our global sales, marketing and general and administrative structure. Activities related to this initiative include the consolidation of most of our call centers located outside of the United States and the establishment of brand dedicated sales, marketing and revenue management teams in key priority markets. This resulted in the elimination of approximately 500 shore-side positions in 2013, primarily from our international markets, resulting in recognition of a liability for one-time termination benefits during the year ended December 31, 2013. Additionally, we incurred contract termination costs and other related costs consisting of legal and consulting fees to implement this initiative.

For the quarter and six months ended June 30, 2014, we did not incur significant restructuring exit costs associated with this initiative. For both the quarter and six months ended June 30, 2013, we incurred $1.7 million of restructuring exit costs associated with this initiative.

The following table summarizes our restructuring exit costs related to the above initiative (in thousands):



	Beginning Balance January 1, 2014		Accruals			Payments		Ending Balance June 30, 2014		Cumulative Charges Incurred		Expected Additional Expenses to be Incurred
Termination benefits	$	8,315	$	(577	)	$	4,984	$	2,754	$	9,061	$	—
Contract termination costs	126		5			59		$	72	4,147		—
Other related costs	1,397		150			244		$	1,303	4,529		—
Total	$	9,838	$	(422	)	$	5,287	$	4,129	$	17,737	$	—

In connection with this initiative, we incurred approximately $1.7 million and $7.4 million of other costs during the quarter and six months ended June 30, 2014, respectively, that primarily consisted of call center transition costs and accelerated depreciation on leasehold improvements and were classified within Marketing, selling and administrative expenses and Depreciation and amortization expenses in our consolidated statements of comprehensive income (loss).

During the second quarter of 2014, we completed activities related to this initiative and do not expect to incur any restructuring exit or other additional costs.

Pullmantur Restructuring

Restructuring Exit Costs

A second initiative relates to Pullmantur’s focus on its cruise business and its expansion in Latin America. Activities related to this initiative include the sale of Pullmantur's non-core businesses and placing operating management closer to the Latin American market. This resulted in the elimination of approximately 100 Pullmantur shore-side positions and recognition of a liability for one-time termination benefits during the year ended December 31, 2013. In the second quarter of 2014, we elected not to execute the dismissal of approximately 30 of the positions which resulted in a partial reversal of the liability. Additionally, we incurred contract termination costs and other related costs consisting of legal and consulting fees to implement this initiative. During the second quarter of 2014, we continued with activities related to this initiative.

As a result of these actions, we incurred restructuring exit costs of $0.3 million and $2.1 million for the quarter and six months ended June 30, 2014, which are reported within Restructuring charges in our consolidated statements of comprehensive income (loss). Included in these amounts is a $0.7 million reversal of termination benefits due to the reinstatement of certain Pullmantur shore-side positions. We do not expect to incur additional restructuring exit costs to complete this initiative.

The following table summarizes our restructuring exit costs related to the above initiative (in thousands):



	Beginning Balance January 1, 2014		Accruals		Payments		Ending Balance June 30, 2014		Cumulative Charges Incurred		Expected Additional Expenses to be Incurred⁽¹⁾
Termination benefits	$	3,910	$	1,362	$	1,224	$	4,048	$	5,272	$	103
Contract termination costs	847		—		—		$	847	847		(845		)
Other related costs	516		710		626		$	600	1,226		—
Total	$	5,273	$	2,072	$	1,850	$	5,495	$	7,345	$	(742	)


(1)	These amounts relate to restructuring exit costs associated with our Pullmantur restructuring.

In connection with this initiative, we incurred approximately $5.3 million and $6.5 million of other costs during the quarter and six months ended June 30, 2014, respectively, associated with placing operating management closer to the Latin American market that was classified within Marketing, selling and administrative expenses in our consolidated statements of comprehensive income (loss). We expect to incur an additional amount for such costs of approximately $6.0 million through the end of 2014.

Sale of Pullmantur Non-core Businesses

As part of our Pullmantur related initiatives, on March 31, 2014, Pullmantur sold the majority of its interest in its non-core businesses. These non-core businesses included Pullmantur’s land-based tour operations, travel agency and 49% interest in its air business. In connection with the sale agreement, we retained a 19% interest in each of the non-core businesses as well as 100% ownership of the aircraft which are being dry leased to Pullmantur Air. Consistent with our Pullmantur two-month lag reporting period, we reported the impact of the sale in the second quarter of 2014. See Note 1. General for information on the basis on which we prepare our consolidated financial statements and Note 5. Goodwill and Other Assets for the accounting of our 19% retained interest.

The sale resulted in a $0.8 million gain reported in the second quarter of 2014, inclusive of the release of cumulative translation adjustment losses, which is classified within Other operating expenses in our consolidated statements of comprehensive income (loss). As part of the sale, we agreed to maintain commercial and bank guarantees on behalf of the buyer for a maximum period of twelve months and extended a term loan facility to Nautalia due June 30, 2016. In addition, as of June 30, 2014, we recorded the fair value of the guarantees and a loss reserve for the loan amount drawn, offsetting the gain recognized by $2.9 million. See Note 8. Changes in Accumulated Other Comprehensive Income (Loss) for further information on the release of the foreign currency translation losses.

The non-core businesses met the accounting criteria to be classified as held for sale during the fourth quarter of 2013 which resulted in restructuring related impairment charges of $20.0 million in 2013 to adjust the carrying value of assets held for sale to their fair value, less cost to sell. As of December 31, 2013, assets and liabilities held for sale were not material to our consolidated balance sheet and no longer exist as of June 30, 2014. The businesses did not meet the criteria for discontinued operations reporting as a result of our significant continuing involvement.