Restructuring Charges

Pullmantur Right-sizing Strategy

Pullmantur's strategy over the last several years had focused both on its core cruise market in Spain and on expansion throughout Latin America, especially Brazil. However, due to significant and increased challenges facing Pullmantur's Latin American operations, in 2015, we decided to significantly change our strategy from growing the brand through vessel transfers to a right-sizing strategy. This right-sizing strategy included reducing our exposure to Latin America, refocusing on the brand’s core market of Spain and, consequently, reducing the size of Pullmantur’s fleet.

The right-sizing strategy activities included the closing of Pullmantur's regional head office in Brazil, the redeployment of Pullmantur’s Empress to the Royal Caribbean International brand and personnel reorganization in Pullmantur's headquarters and CDF's office in France. The closure of the Brazil office and the personnel reorganization resulted in the recognition of a liability for one-time termination benefits during the nine months ended September 30, 2016. We also incurred contract termination costs related to the closure of the Brazil office.

As a result of these actions, we incurred restructuring exit costs of $0.3 million and $2.5 million for the quarter and nine months ended September 30, 2016, respectively, which are reported within Restructuring charges in our consolidated statements of comprehensive income (loss).

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



	Beginning Balance January 1, 2016		Accruals		Payments		Ending Balance September 30, 2016		Cumulative Charges Incurred
Termination benefits	$	—	$	2,416	$	2,416	$	—	$	2,416
Contract termination costs		—		68		68		—		68
Total	$	—	$	2,484	$	2,484	$	—	$	2,484

In connection with this strategy, we incurred approximately $3.6 million of other costs during the nine months ended September 30, 2016, respectively, that primarily consisted of costs associated with the redeployment of Pullmantur's Empress to the Royal Caribbean International brand that were reported within Cruise operating expenses, Depreciation and amortization expenses and Marketing, selling and administrative expenses in our consolidated statements of comprehensive income (loss).

In July 2016, we sold 51% of our interest in RCHE, the parent company of the Pullmantur and CDF brands. In connection with the sale, we incurred approximately $3.3 million of other costs during the quarter and nine months ended September 30, 2016 that were reported within Cruise operating expenses and Marketing, selling and administrative expenses in our consolidated statements of comprehensive income (loss). Refer to Note 1. General for further information regarding this sale transaction.

Other Restructuring Initiatives

During the second and third quarters of 2016, we moved forward with certain other initiatives, including the closing of an international office in Brazil related to the Royal Caribbean International brand and personnel reorganization in our corporate offices. These initiatives resulted in restructuring costs of $1.5 million and $4.1 million for the quarter and nine months ended September 30, 2016, respectively. The restructuring costs are mainly due to the recognition of a liability for one-time termination benefits. Through the remainder of 2016, we may incur additional immaterial costs as it relates to the restructuring at our corporate and international offices.

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



	Beginning Balance January 1, 2016		Accruals		Payments		Ending Balance September 30, 2016		Cumulative Charges Incurred
Termination benefits	$	—	$	4,128	$	1,584	$	2,544	$	4,128
Contract termination costs		—		15		15		—		15
Total	$	—	$	4,143	$	1,599	$	2,544	$	4,143