10-Q

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

(Mark One)

xQUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended June 30, 2013

OR

oTRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from            to           

Commission File Number: 1-11884

ROYAL CARIBBEAN CRUISES LTD.

(Exact name of registrant as specified in its charter)

Republic of Liberia	98-0081645
(State or other jurisdiction of incorporation or organization)	(I.R.S. Employer Identification No.)

1050 Caribbean Way, Miami, Florida 33132

(Address of principal executive offices) (zip code)

(305) 539-6000

(Registrant’s telephone number, including area code)

N/A

(Former name, former address and former fiscal year, if changed since last report)

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.  Yes  x  No  o

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).  Yes x  No  o

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company.  See the definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act.

Large accelerated filer x	Accelerated filer o	Non-accelerated filer o	Smaller reporting company o
(Do not check if a smaller reporting company)

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).  Yes  o  No  x

There were 219,637,201 shares of common stock outstanding as of July 17, 2013.

ROYAL CARIBBEAN CRUISES LTD.

TABLE OF CONTENTS

	Page
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements	1
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations	25
Item 3. Quantitative and Qualitative Disclosures About Market Risk	42
Item 4. Controls and Procedures	43
PART II. OTHER INFORMATION
Item 1. Legal Proceedings	44
Item 1A. Risk Factors	44
Item 6. Exhibits	45
SIGNATURES	46

PART I. FINANCIAL INFORMATION

Item 1. Financial Statements

ROYAL CARIBBEAN CRUISES LTD.

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS)

(unaudited; in thousands, except per share data)

	Quarter Ended
	June 30,
	2013			2012
Passenger ticket revenues	$	1,366,713		$	1,332,207
Onboard and other revenues	516,054			488,797
Total revenues	1,882,767			1,821,004
Cruise operating expenses:
Commissions, transportation and other	316,506			307,697
Onboard and other	140,710			130,981
Payroll and related	208,975			206,519
Food	112,530			109,300
Fuel	232,471			237,961
Other operating	312,427			303,556
Total cruise operating expenses	1,323,619			1,296,014
Marketing, selling and administrative expenses	259,626			247,571
Depreciation and amortization expenses	186,184			180,514
Operating Income	113,338			96,905
Other income (expense):
Interest income	3,405			4,972
Interest expense, net of interest capitalized	(86,877		)	(89,106		)
Other expense	(5,119		)	(16,424		)
	(88,591		)	(100,558		)
Net Income (Loss)	$	24,747		$	(3,653	)
Earnings (Loss) per Share:
Basic	$	0.11		$	(0.02	)
Diluted	$	0.11		$	(0.02	)
Weighted-Average Shares Outstanding:
Basic	219,502			217,866
Diluted	220,648			217,866
Comprehensive Income (Loss)
Net Income (Loss)	$	24,747		$	(3,653	)
Other comprehensive income (loss):
Foreign currency translation adjustments	(1,551		)	(12,361		)
Change in defined benefit plans	5,293			—
Gain (loss) on cash flow derivative hedges	17,542			(288,252		)
Total other comprehensive income (loss)	21,284			(300,613		)
Comprehensive Income (Loss)	$	46,031		$	(304,266	)

The accompanying notes are an integral part of these consolidated financial statements.

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ROYAL CARIBBEAN CRUISES LTD.

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS)

(unaudited; in thousands, except per share data)

	Six Months Ended
	June 30,
	2013			2012
Passenger ticket revenues	$	2,760,491		$	2,684,445
Onboard and other revenues	1,033,496			971,039
Total revenues	3,793,987			3,655,484
Cruise operating expenses:
Commissions, transportation and other	639,443			628,435
Onboard and other	262,197			238,576
Payroll and related	418,898			416,633
Food	232,013			222,925
Fuel	474,123			466,955
Other operating	579,135			577,602
Total cruise operating expenses	2,605,809			2,551,126
Marketing, selling and administrative expenses	533,660			512,172
Depreciation and amortization expenses	375,548			359,906
Operating Income	278,970			232,280
Other income (expense):
Interest income	7,152			11,318
Interest expense, net of interest capitalized	(177,059		)	(181,772		)
Other expense	(8,090		)	(18,515		)
	(177,997		)	(188,969		)
Net Income	$	100,973		$	43,311
Earnings per Share:
Basic	$	0.46		$	0.20
Diluted	$	0.46		$	0.20
Weighted-Average Shares Outstanding:
Basic	219,301			217,725
Diluted	220,596			219,217
Comprehensive Income (Loss)
Net Income	$	100,973		$	43,311
Other comprehensive income (loss):
Foreign currency translation adjustments	(5,795		)	(9,021		)
Change in defined benefit plans	5,293			—
Loss on cash flow derivative hedges	(5,058		)	(140,782		)
Total other comprehensive loss	(5,560		)	(149,803		)
Comprehensive Income (Loss)	$	95,413		$	(106,492	)

The accompanying notes are an integral part of these consolidated financial statements.

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ROYAL CARIBBEAN CRUISES LTD.

CONSOLIDATED BALANCE SHEETS

(in thousands, except share data)

	As of
	June 30,			December 31,
	2013			2012
	(unaudited)
Assets
Current assets
Cash and cash equivalents	$	205,174		$	194,855
Trade and other receivables, net	310,051			281,421
Inventories	141,440			146,295
Prepaid expenses and other assets	270,392			207,662
Derivative financial instruments	26,037			57,827
Total current assets	953,094			888,060
Property and equipment, net	17,511,913			17,451,034
Goodwill	430,666			432,975
Other assets	1,055,121			1,055,861
	$	19,950,794		$	19,827,930
Liabilities and Shareholders’ Equity
Current liabilities
Current portion of long-term debt	$	1,906,468		$	1,519,483
Accounts payable	314,197			351,587
Accrued interest	75,107			106,366
Accrued expenses and other liabilities	541,699			541,722
Customer deposits	1,874,704			1,546,993
Total current liabilities	4,712,175			4,066,151
Long-term debt	6,347,640			6,970,464
Other long-term liabilities	524,720			482,566
Commitments and contingencies (Note 7)
Shareholders’ equity
Preferred stock ($0.01 par value; 20,000,000 shares authorized; none outstanding)	—			—
Common stock ($0.01 par value; 500,000,000 shares authorized; 229,919,883 and 229,080,109 shares issued, June 30, 2013 and December 31, 2012, respectively)	2,299			2,291
Paid-in capital	3,125,172			3,109,887
Retained earnings	5,792,568			5,744,791
Accumulated other comprehensive loss	(140,076		)	(134,516		)
Treasury stock (10,308,683 common shares at cost, June 30, 2013 and December 31, 2012)	(413,704		)	(413,704		)
Total shareholders’ equity	8,366,259			8,308,749
	$	19,950,794		$	19,827,930

The accompanying notes are an integral part of these consolidated financial statements.

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ROYAL CARIBBEAN CRUISES LTD.

CONSOLIDATED STATEMENTS OF CASH FLOWS

(unaudited, in thousands)

	Six Months Ended
	June 30,
	2013			2012
Operating Activities	$	100,973		$	43,311
Net income
Adjustments:
Depreciation and amortization	375,548			359,906
Loss on derivative instruments not designated as hedges	25,494			3,278
Changes in operating assets and liabilities:
Decrease in trade and other receivables, net	21,084			56,651
Decrease (increase) in inventories	4,679			(2,451		)
Increase in prepaid expenses and other assets	(53,555		)	(58,495		)
(Decrease) increase in accounts payable	(36,265		)	12,348
Decrease in accrued interest	(31,259		)	(37,377		)
Decrease in accrued expenses and other liabilities	(6,513		)	(28,505		)
Increase in customer deposits	272,329			224,873
Other, net	273			9,980
Net cash provided by operating activities	672,788			583,519
Investing Activities
Purchases of property and equipment	(396,073		)	(322,751		)
Cash (paid) received on settlement of derivative financial instruments	(25,843		)	4,646
Equity contribution to unconsolidated affiliate	(35,757		)	—
Cash payments received on loan to unconsolidated affiliate	11,993			11,813
Other, net	781			(6,877		)
Net cash used in investing activities	(444,899		)	(313,169		)
Financing Activities
Debt proceeds	1,519,464			345,000
Debt issuance costs	(20,554		)	(21,730		)
Repayments of debt	(1,670,248		)	(575,585		)
Dividends paid	(54,098		)	(65,293		)
Proceeds from exercise of common stock options	6,918			1,768
Other, net	742			774
Net cash used in financing activities	(217,776		)	(315,066		)
Effect of exchange rate changes on cash	206			(5,261		)
Net increase (decrease) in cash and cash equivalents	10,319			(49,977		)
Cash and cash equivalents at beginning of period	194,855			262,186
Cash and cash equivalents at end of period	$	205,174		$	212,209
Supplemental Disclosure
Cash paid during the period for:
Interest, net of amount capitalized	$	199,288		$	194,341
Non cash Investing Activities
Purchases of property and equipment through asset trade in	$	46,375		$	—

The accompanying notes are an integral part of these consolidated financial statements.

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ROYAL CARIBBEAN CRUISES LTD.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

(unaudited)

As used in this Quarterly Report on Form 10-Q, the terms “Royal Caribbean,” the “Company,” “we,” “our” and “us” refer to Royal Caribbean Cruises Ltd. and, depending on the context, Royal Caribbean Cruises Ltd.’s consolidated subsidiaries and/or affiliates. The terms “Royal Caribbean International,” “Celebrity Cruises,” “Pullmantur,” “Azamara Club Cruises,” “CDF Croisières de France,” and “TUI Cruises” refer to our cruise brands. However, because TUI Cruises is an unconsolidated investment, our operating results and other disclosures herein do not include TUI Cruises unless otherwise specified.  In accordance with cruise vacation industry practice, the term “berths” is determined based on double occupancy per cabin even though many cabins can accommodate three or more passengers. This report should be read in conjunction with our Annual Report on Form 10-K for the year ended December 31, 2012, including the audited consolidated financial statements and related notes included therein.

This Quarterly Report on Form 10-Q also includes trademarks, trade names and service marks of other companies.  Use or display by us of other parties’ trademarks, trade names or service marks is not intended to and does not imply a relationship with, or endorsement or sponsorship of us by, these other parties other than as described herein.

Note 1. General

Description of Business

We are a global cruise company.  We own Royal Caribbean International, Celebrity Cruises, Pullmantur, Azamara Club Cruises, CDF Croisières de France and a 50% joint venture interest in TUI Cruises.

Basis for Preparation of Consolidated Financial Statements

The unaudited consolidated financial statements are prepared in accordance with accounting principles generally accepted in the United States of America (“GAAP”).  Estimates are required for the preparation of financial statements in accordance with these principles.  Actual results could differ from these estimates.  See Note 2. Summary of Significant Accounting Policies in this Quarterly Report on Form 10-Q and in our Annual Report on Form 10-K for the year ended December 31, 2012 for a discussion of our significant accounting policies.

All significant intercompany accounts and transactions are eliminated in consolidation. We consolidate entities over which we have control, usually evidenced by a direct ownership interest of greater than 50%, and variable interest entities where we are determined to be the primary beneficiary. See Note 6. Goodwill and Other Assets for further information regarding our variable interest entities. For affiliates we do not control but over which we have significant influence on financial and operating policies, usually evidenced by a direct ownership interest from 20% to 50%, the investment is accounted for using the equity method.  We consolidate the operating results of Pullmantur and CDF Croisières de France on a two-month lag to allow for more timely preparation of our consolidated financial statements.  No material events or transactions affecting Pullmantur or CDF Croisières de France have occurred during the two-month lag period of May and June 2013 that would require disclosure or adjustment to our consolidated financial statements as of and for the quarter ended June 30, 2013.

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We believe the accompanying unaudited consolidated financial statements contain all normal recurring accruals necessary for a fair statement.  Our revenues are seasonal and results for interim periods are not necessarily indicative of results for the entire year.

Note 2. Summary of Significant Accounting Policies

Property and Equipment

During the first quarter of 2013, we performed a review of the estimated useful lives and associated residual values of ships in our fleet approaching the last third of their estimated useful lives.  As a result, effective January 1, 2013, we revised the estimated useful lives of five ships from 30 years with a 15% associated residual value, to 35 years with a 10% associated residual value.  The change in the estimated useful lives and associated residual value was accounted for prospectively as a change in accounting estimate.  The 35-year useful life with a 10% associated residual value is based on revised estimates of the weighted-average useful life of all major ship components for these ships.  The change in estimate is consistent with our recent investments in and future plans to continue to invest in the revitalization of these ships and the use of certain ship components longer than originally estimated. The change allows us to better match depreciation expense with the periods these assets are expected to be in use.  For the second quarter of 2013, the effect of this change on operating income and net income is an increase of $3.0 million and the impact on earnings per share is $0.01 per share on a basic and diluted basis.  For the six months ended June 30, 2013, the effect of this change on operating income and net income is an increase of $3.9 million and the impact on earnings per share is $0.02 per share on a basic and diluted basis.  For the full year 2013, the effect of this change on operating income and net income is estimated to be an increase of approximately $11.0 million and the impact on earnings per share is estimated to be $0.05 per share on a basic and diluted basis.  For further information on our significant accounting policies, refer to Note 2. Summary of Significant Accounting Policies in our Annual Report on Form 10-K for the year ended December 31, 2012.

Recently Adopted Accounting Standards

In January 2013, we adopted authoritative guidance issued in 2012 regarding the periodic impairment testing of indefinite-lived intangible assets.  The new guidance allows an entity to assess qualitative factors to determine if it is more-likely-than-not that indefinite-lived intangible assets might be impaired and, based on this assessment, to determine whether it is necessary to perform the quantitative impairment tests.  The adoption of this guidance did not have an impact on our consolidated financial statements.

In March 2013, we adopted authoritative guidance regarding the presentation of amounts reclassified from accumulated other comprehensive income to net income.  The new guidance requires an entity to present, either in a single note or parenthetically on the face of the financial statements, the effect of significant amounts reclassified from each component of accumulated other comprehensive income based on its source (e.g., the release due to cash flow hedges from interest rate contracts) and the income statement line items affected by the reclassification (e.g., interest income or interest expense).  We elected to present this information in a single note. See Note 9. Changes in Accumulated Other Comprehensive Loss for our disclosures required under this guidance.

Recent Accounting Pronouncements

In March 2013, amended guidance was issued regarding the release of cumulative translation adjustments into net income.  The new guidance provides clarification of when to release the cumulative

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translation adjustment into net income when a parent either sells a part or all of its investment in a foreign entity or no longer holds a controlling financial interest in a subsidiary or group of assets within a foreign entity.  This guidance will be effective for our interim and annual reporting periods beginning after December 15, 2013.  The adoption of this newly issued guidance is not expected to have a material impact on our consolidated financial statements, but will have an impact on the accounting for future sales of investments or changes in control of foreign entities.

In July 2013, amended guidance was issued regarding the inclusion of the Fed Funds Effective Swap Rate as a benchmark interest rate for hedge accounting purposes. The proposed guidance would permit the use of the Fed Funds Effective Swap Rate (OIS) to be included as an acceptable U.S. benchmark and removes the restriction on using different benchmark rates for similar hedges. This guidance will be effective prospectively for qualifying new or redesignated hedging relationships entered into on or after July 17, 2013. The adoption of this newly issued guidance is not expected to have an impact on our consolidated financial statements.

Reclassifications

For the six months ended June 30, 2012, $11.8 million has been reclassified in the consolidated statement of cash flows from other, net to cash payments received on loan to unconsolidated affiliate within net cash flows used in investing activities in order to conform to the current year presentation.

For the six months ended June 30, 2012, $(4.2) million has been reclassified in the consolidated statement of cash flows from other, net to loss on derivative instruments not designated as hedges within net cash flows provided by operating activities in order to conform to the current year presentation.

Other

Revenues and expenses include port costs that vary with guest head counts.  The amounts of such port costs included in passenger ticket revenues on a gross basis were $117.0 million and $103.8 million for the second quarters of 2013 and 2012, respectively, and $232.7 million and $216.9 million for the six months ended June 30, 2013 and 2012, respectively.

During the second quarter of 2013, we recorded an out-of-period adjustment of approximately $15.2 million to correct an error in the calculation of our liability for our credit card rewards program which understated the liability and overstated income during the fiscal years 2003 through 2013. Because the adjustment, both individually and in the aggregate, was not material to any of the prior years’ financial statements, and the impact of correcting the error in the current year is not expected to be material to the full year 2013 financial statements, we recorded the correction in the financial statements in the second quarter of 2013. This amount reduced onboard and other revenues in our consolidated statements of comprehensive income (loss).

Note 3. Earnings Per Share

A reconciliation between basic and diluted earnings per share is as follows (in thousands, except per share data):

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	Quarter Ended					Six Months Ended
	June 30,					June 30,
	2013		2012			2013		2012
Net income (loss) for basic and diluted earnings per share	$	24,747	$	(3,653	)	$	100,973	$	43,311
Weighted-average common shares outstanding	219,502		217,866			219,301		217,725
Dilutive effect of stock options, performance share awards and restricted stock awards	1,146		—			1,295		1,492
Diluted weighted-average shares outstanding	220,648		217,866			220,596		219,217
Basic earnings (loss) per share	$	0.11	$	(0.02	)	$	0.46	$	0.20
Diluted earnings (loss) per share	$	0.11	$	(0.02	)	$	0.46	$	0.20

Diluted earnings per share for the quarter and six months ended June 30, 2013 did not reflect options to purchase an aggregate of 2.4 million shares because the effect of including them would have been antidilutive.  Diluted earnings per share for the quarter and six months ended June 30, 2012 did not reflect options to purchase an aggregate of 5.1 million and 3.1 million shares, respectively, because the effect of including them would have been antidilutive.

Note 4. Long-Term Debt

In March 2013, we increased the capacity of our revolving credit facility due July 2016 by $20.0 million, bringing our total capacity under this facility to $1.1 billion. As of June 30, 2013, we have an aggregate revolving borrowing capacity of $1.7 billion.

In June 2013, we borrowed €365.0 million, or approximately $474.5 million based on the exchange rate at June 30, 2013, under a previously committed unsecured term loan facility.  The loan is due and payable at maturity in July 2017.  Interest on the loan accrues at a floating rate based on EURIBOR plus the applicable margin.  The applicable margin varies with our debt rating and was 3.0% as of June 30, 2013.  The proceeds of this loan were used to repay amounts outstanding under our unsecured revolving credit facilities. The borrowing was part of our refinancing strategy for our remaining maturities in 2013 and 2014.

In July 2013, we entered into a credit agreement for the financing of the third Oasis-class ship, which is scheduled for delivery in the second quarter of 2016.  The credit agreement makes available to us an unsecured term loan in an amount of €892.2 million, or approximately $1.2 billion, based on the exchange rate at June 30, 2013.  Compagnie Francaise d’Assurance pour le Commerce Extérieur (“COFACE”), the official export credit agency of France, has agreed to guarantee to the lenders payment of 100% of the financing.  The loan amortizes semi-annually and will mature 12 years following delivery of the ship.  Interest on the loan will accrue at our election at either a fixed rate of 2.6% or a floating rate at EURIBOR plus a margin of 1.15%.

Note 5.  Property and Equipment

In March 2013, our conditional agreement with STX France S.A. to build the third Oasis-class ship for Royal Caribbean International became effective.  The ship will have a capacity of approximately 5,400 berths and is expected to enter service in the second quarter of 2016.  Pullmantur’s Atlantic Star, which has been out of operation since 2009, was transferred to an affiliate of STX France S.A. as part of the consideration.  The Atlantic Star was transferred at carrying value, which approximated its fair value on the

8

date of its transfer.  The transfer did not result in a gain or a loss.

Note 6. Goodwill and Other Assets

We believe no events or circumstances have occurred subsequent to our annual impairment evaluation that would require us to perform interim testing of our goodwill, trademarks or trade names as of June 30, 2013.

Variable Interest Entities

A Variable Interest Entity (“VIE”) is an entity in which the equity investors have not provided enough equity to finance the entity’s activities or the equity investors (1) cannot directly or indirectly make decisions about the entity’s activities through their voting rights or similar rights; (2) do not have the obligation to absorb the expected losses of the entity; (3) do not have the right to receive the expected residual returns of the entity; or (4) have voting rights that are not proportionate to their economic interests and the entity’s activities involve or are conducted on behalf of an investor with a disproportionately small voting interest.

We have determined that Grand Bahama Shipyard Ltd. (“Grand Bahama”), a ship repair and maintenance facility in which we have a 40% noncontrolling interest, is a VIE. The facility serves cruise and cargo ships, oil and gas tankers, and offshore units.  We utilize this facility, among other ship repair facilities, for our regularly scheduled drydocks and certain emergency repairs as may be required.  We have determined that we are not the primary beneficiary of this facility, as we do not have the power to direct the activities that most significantly impact the facility’s economic performance. Accordingly, we do not consolidate this entity and we account for this investment under the equity method of accounting. As of June 30, 2013 and December 31, 2012, the net book value of our investment in Grand Bahama, including equity and loans, was approximately $59.5 million and $59.3 million, respectively, which is also our maximum exposure to loss as we are not contractually required to provide any financial or other support to the facility.  The majority of our loans to Grand Bahama are in non-accrual status and the majority of this amount is included within other assets in our consolidated balance sheets.  During the first six months of 2013, we received approximately $2.5 million in principal and interest payments related to loans that are in accrual status from Grand Bahama and recorded income associated with our investment in Grand Bahama.  We monitor credit risk associated with these loans through our participation on Grand Bahama’s board of directors along with our review of Grand Bahama’s financial statements and projected cash flows.  Based on this review, we believe the risk of loss associated with these loans was not probable as of June 30, 2013.

In conjunction with our acquisition of Pullmantur in 2006, we obtained a 49% noncontrolling interest in Pullmantur Air, S.A. (“Pullmantur Air”), a small air business that operates four aircraft in support of Pullmantur’s operations. We have determined Pullmantur Air is a VIE for which we are the primary beneficiary as we have the power to direct the activities that most significantly impact its economic performance and we are obligated to absorb its losses. In accordance with authoritative guidance, we have consolidated the assets and liabilities of Pullmantur Air.  We do not separately disclose the assets and liabilities of Pullmantur Air as they are immaterial to our June 30, 2013 and December 31, 2012 consolidated financial statements.

We have determined that TUI Cruises GmbH, our 50%-owned joint venture, which operates the brand TUI Cruises, is a VIE. As of June 30, 2013 and December 31, 2012, our investment in TUI Cruises, including equity and loans, was approximately $313.8 million and $287.0 million, respectively,

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and the majority of this amount was included within other assets in our consolidated balance sheets.  In addition, in conjunction with our sale of Celebrity Mercury to TUI Cruises in 2011, we and TUI AG each guaranteed the repayment of 50% of an €180.0 million 5-year bank loan provided to TUI Cruises (refer to further details below).  Our investment amount and the potential obligations under this guarantee are substantially our maximum exposure to loss.  We have determined that we are not the primary beneficiary of TUI Cruises.  We believe that the power to direct the activities that most significantly impact TUI Cruises’ economic performance are shared between ourselves and our joint venture partner, TUI AG.  All the significant operating and financial decisions of TUI Cruises require the consent of both parties which we believe creates shared power over TUI Cruises.  Accordingly, we do not consolidate this entity and account for this investment under the equity method of accounting.

In connection with our sale of Celebrity Mercury to TUI Cruises in 2011, we provided a debt facility to TUI Cruises in the amount of up to €90.0 million.  The outstanding principal amount of the facility as of June 30, 2013 was €62.9 million, or $81.7 million based on the exchange rate at June 30, 2013.  The loan bears interest at the rate of 9.54% per annum, is payable over seven years, is 50% guaranteed by TUI AG (our joint venture partner) and is secured by second mortgages on both of TUI Cruises’ ships, Mein Schiff 1 and Mein Schiff 2.  As of June 30, 2013, TUI Cruises’ 5-year bank loan discussed above had a remaining balance of €144.0 million, or approximately $187.2 million based on the exchange rate at June 30, 2013.  The bank loan amortizes quarterly and is secured by first mortgages on both Mein Schiff 1 and Mein Schiff 2. Based on current facts and circumstances, we do not believe potential obligations under our guarantee of TUI Cruises’ bank loan are probable.

During 2011 and 2012, TUI Cruises entered into construction agreements with STX Finland to build its first and second newbuild ships, scheduled for delivery in the second quarter of 2014 and the second quarter of 2015, respectively.  TUI Cruises has entered into credit agreements for the financing of up to 80% of the contract price of each ship. The remaining portion of the contract price of the ships will be funded through either TUI Cruises’ cash flows from operations or loans and/or equity contributions from us and TUI AG.  The construction agreements for the ships include certain restrictions on each of our and TUI AG’s ability to reduce our current ownership interest in TUI Cruises below 37.5% through the construction periods.  In addition, the credit agreements extend this restriction through 2019.

Note 7. Commitments and Contingencies

Capital Expenditures

In May 2013, we reached an agreement, subject to satisfaction of financing conditions, with Meyer Werft to build the third Quantum-class ship for Royal Caribbean International.  The agreement is expected to become effective in the third quarter of 2013.  The ship will have a capacity of approximately 4,150 berths and is expected to enter service in the second quarter of 2016.

As of June 30, 2013, the aggregate cost of our ships on order, including the conditional agreement for the third Quantum-class ship described above, was approximately $4.5 billion, of which we had deposited $288.8 million as of such date. Approximately 56.4% of the aggregate cost was exposed to fluctuations in the euro exchange rate at June 30, 2013.  (See Note 10. Fair Value Measurements and Derivative Instruments).

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Our brands, including our 50% joint venture, TUI Cruises, have six ships on order.  As of June 30, 2013, the expected dates that our ships on order will enter service and their approximate berths are as follows:

Ship	Expected to Enter Service	Approximate Berths
Royal Caribbean International –
Quantum-class:
Quantum of the Seas	4th Quarter 2014	4,150
Anthem of the Seas	2nd Quarter 2015	4,150
Unnamed	2nd Quarter 2016	4,150
Oasis-class:
Unnamed	2nd Quarter 2016	5,400
TUI Cruises –
Mein Schiff 3	2nd Quarter 2014	2,500
Mein Schiff 4	2nd Quarter 2015	2,500
	Total Berths	22,850

Litigation

Between August 1, 2011 and September 8, 2011, three similar purported class action lawsuits were filed against us and certain of our current and former officers in the United States District Court of the Southern District of Florida.  The cases have since been consolidated and a consolidated amended complaint was filed on February 17, 2012.  The consolidated amended complaint was filed on behalf of a purported class of purchasers of our common stock during the period from October 26, 2010 through July 27, 2011 and names the Company, our Chairman and CEO, our Vice Chairman, the President and CEO of our Royal Caribbean International brand and the former President and CEO of our Celebrity Cruises brand as defendants.  The consolidated amended complaint alleges violations of Section 10(b) of the Securities Exchange Act of 1934 and SEC Rule 10b-5 as well as, in the case of the individual defendants, the control person provisions of the Securities Exchange Act.  The complaint principally alleges that the defendants knowingly made incorrect statements concerning the Company’s outlook.  The consolidated amended complaint seeks unspecified damages, interest, and attorneys’ fees. We filed a motion to dismiss the complaint for failure to state a claim on April 9, 2012.  On April 18, 2013, the district judge granted our motion and ordered the case dismissed with prejudice.  Plaintiffs have the right to file a notice to appeal within thirty days from the date an appealable order is entered.

A class action complaint was filed in June 2011 against Royal Caribbean Cruises Ltd. in the United States District Court for the Southern District of Florida on behalf of a purported class of stateroom attendants employed onboard Royal Caribbean International cruise vessels alleging that they were required to pay other crew members to help with their duties in violation of the U.S. Seaman’s Wage Act. The lawsuit also alleges that certain stateroom attendants were required to work back of house assignments without the ability to earn gratuities in violation of the U.S. Seaman’s Wage Act. Plaintiffs seek judgment for damages, wage penalties and interest in an indeterminate amount. In May 2012, the Court granted our motion to dismiss the complaint on the basis that the applicable collective bargaining agreement requires any such claims to be arbitrated. Plaintiffs have appealed this decision to the United States Court of Appeals, 11th Circuit. We believe the appeal is without merit as are the underlying claims made against us and we intend to vigorously defend ourselves against them.

Because of the inherent uncertainty as to the outcome of the proceedings described above, we are unable at this time to estimate the possible impact of these matters on us.

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We are routinely involved in other claims typical within the cruise vacation industry. The majority of these claims are covered by insurance. We believe the outcome of such claims, net of expected insurance recoveries, will not have a material adverse impact on our financial condition or results of operations and cash flows.

Other

In July 2002, we entered into an operating lease denominated in British pound sterling for the Brilliance of the Seas.  The lease payments vary based on sterling LIBOR and are included in other operating expenses in our consolidated statements of comprehensive income (loss). Brilliance of the Seas lease expense amounts were approximately £3.1 million and £4.1 million, or approximately $4.8 million and $6.5 million, for the quarter ended June 30, 2013 and June 30, 2012, respectively, and were approximately £6.1 million and £8.1 million, or approximately $9.3 million and $12.8 million for the six months ended June 30, 2013 and June 30, 2012, respectively.  The lease has a contractual life of 25 years; however, both the lessor and we have certain rights to cancel the lease at year 18 (i.e. 2020) upon advance notice given approximately one year prior to cancellation.  In the event of early termination at year 18, we have the option to cause the sale of the vessel at its fair value and to use the proceeds towards the applicable termination payment.  Alternatively, we could opt at such time to make a termination payment of approximately £65.4 million, or approximately $99.2 million based on the exchange rate at June 30, 2013, and relinquish our right to cause the sale of the vessel. Under current circumstances we do not believe early termination of this lease is probable.

Under the Brilliance of the Seas operating lease, we have agreed to indemnify the lessor to the extent its after-tax return is negatively impacted by unfavorable changes in corporate tax rates, capital allowance deductions and certain unfavorable determinations which may be made by the United Kingdom tax authorities. These indemnifications could result in an increase in our lease payments.  We are unable to estimate the maximum potential increase in our lease payments due to the various circumstances, timing or a combination of events that could trigger such indemnifications. The United Kingdom tax authorities are disputing the lessor’s accounting treatment of the lease and the lessor and tax authorities are in discussions on the matter.  If the characterization of the lease by the lessor is ultimately determined to be incorrect, we could be required to indemnify the lessor under certain circumstances.  The lessor has advised us that they believe their characterization of the lease is correct. Based on the foregoing and our review of available information, we do not believe an indemnification payment is probable.  However, if the lessor loses its dispute and we are required to indemnify the lessor, we cannot at this time predict the impact that such an occurrence would have on our financial condition and results of operations.

Some of the contracts that we enter into include indemnification provisions that obligate us to make payments to the counterparty if certain events occur.  These contingencies generally relate to changes in taxes, increased lender capital costs and other similar costs.  The indemnification clauses are often standard contractual terms and are entered into in the normal course of business.  There are no stated or notional amounts included in the indemnification clauses and we are not able to estimate the maximum potential amount of future payments, if any, under these indemnification clauses.  We have not been required to make any payments under such indemnification clauses in the past and, under current

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circumstances, we do not believe an indemnification in any material amount is probable.

If (i) any person other than A. Wilhelmsen AS. and Cruise Associates and their respective affiliates (the “Applicable Group”) acquires ownership of more than 33% of our common stock and the Applicable Group owns less of our common stock than such person, or (ii) subject to certain exceptions, during any 24-month period, a majority of the Board is no longer comprised of individuals who were members of the Board on the first day of such period, we may be obligated to prepay indebtedness outstanding under the majority of our credit facilities, which we may be unable to replace on similar terms.  Certain of our outstanding debt securities also contain change of control provisions that would be triggered by the acquisition of greater than 50% of our common stock by a person other than a member of the Applicable Group coupled with a ratings downgrade. If this were to occur, it would have an adverse impact on our liquidity and operations.

Note 8. Shareholders’ Equity

During the first and second quarters of 2013, we declared and paid a cash dividend on our common stock of $0.12 per share. During the first and second quarters of 2012, we declared and paid a cash dividend on our common stock of $0.10 per share. During the first quarter of 2012, we also paid a cash dividend on our common stock of $0.10 per share which was declared during the fourth quarter of 2011.

Note 9. Changes in Accumulated Other Comprehensive Loss

The following table presents the changes in accumulated other comprehensive loss by component for the six months ended June 30, 2013 (in thousands):

	Changes related to cash flow derivative hedges			Changes in defined benefit plans			Foreign currency translation adjustments			Accumulated other comprehensive loss
Accumulated comprehensive loss at beginning of the year	$	(84,505	)	$	(34,823	)	$	(15,188	)	$	(134,516	)
Other comprehensive income (loss) before reclassifications	18,046			3,999			(5,795		)	16,250
Amounts reclassified from accumulated other comprehensive loss	(23,104		)	1,294			—			(21,810		)
Net current-period other comprehensive (loss) income	(5,058		)	5,293			(5,795		)	(5,560		)
Ending balance	$	(89,563	)	$	(29,530	)	$	(20,983	)	$	(140,076	)

The following table presents reclassifications out of accumulated other comprehensive loss for the quarter and six months ended June 30, 2013 (in thousands):

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	Amount of Gain (Loss) Reclassified from Accumulated OCl into Income
Details about Accumulated Other Comprehensive Income Components	Quarter Ended June 30, 2013			Six Months Ended June 30, 2013			Affected Line Item in Statements of Comprehensive Income (Loss)
Gain (loss) on cash flow derivative hedges:
Cross currency swaps	$	(880	)	$	(1,751	)	Interest expense, net of interest capitalized
Foreign currency forward contracts	(450		)	(899		)	Depreciation and amortization expenses
Foreign currency forward contracts	(239		)	(477		)	Other income (expense)
Foreign currency forward contracts	(5		)	(5		)	Interest expense, net of interest capitalized
Fuel swaps	9,408			26,236			Fuel
	$	7,834		$	23,104
Amortization of defined benefit plans:
Actuarial loss	$	(876	)	$	(876	)	Payroll and related
Prior service costs	(418		)	(418		)	Payroll and related
	$	(1,294	)	$	(1,294	)
Total reclassifications for the period	$	6,540		$	21,810

Note 10. Fair Value Measurements and Derivative Instruments

Fair Value Measurements

The estimated fair value of our financial instruments that are not measured at fair value on a recurring basis, categorized based upon the fair value hierarchy, are as follows (in thousands):

	Fair Value Measurementsat June 30, 2013 Using								Fair Value Measurementsat December 31, 2012 Using
Description	Total		Level 1(1)		Level 2(2)		Level 3(3)		Total		Level 1(1)		Level 2(2)		Level 3(3)
Assets:
Cash and cash equivalents(4)	$	205,174	205,174		—		—		$	194,855	194,855		—		—
Total Assets	$	205,174	$	205,174	$	—	$	—	$	194,855	$	194,855	$	—	$	—
Liabilities:
Long-term debt (including current portion of long-term debt)(5)	$	8,571,141	3,215,109		5,356,032		—		$	8,859,310	3,917,398		4,941,912		—
Total Liabilities	$	8,571,141	$	3,215,109	$	5,356,032	$	—	$	8,859,310	$	3,917,398	$	4,941,912	$	—

(1)Inputs based on quoted prices (unadjusted) in active markets for identical assets or liabilities that we have the ability to access.  Valuation of these items does not entail a significant amount of judgment.

(2)Inputs other than quoted prices included within Level 1 that are observable for the liability, either directly or indirectly.  For unsecured revolving credit facilities and unsecured term loans, fair value is determined utilizing the income valuation approach.  This valuation model takes into account the contract terms of our debt such as the debt maturity and the interest rate on the debt.  The valuation model also takes into account our creditworthiness based on publicly available credit default swap rates.

(3)Inputs that are unobservable.  The Company did not use any Level 3 inputs as of June 30, 2013 and December 31, 2012.

(4)Consists of cash and marketable securities with original maturities of less than 90 days.

(5)Consists of unsecured revolving credit facilities, unsecured senior notes, senior debentures and unsecured term loans.  Does not include our capital lease obligations.

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Other Financial Instruments

The carrying amounts of accounts receivable, accounts payable, accrued interest and accrued expenses approximate fair value at June 30, 2013 and December 31, 2012.

Assets and liabilities that are recorded at fair value have been categorized based upon the fair value hierarchy.  The following table presents information about the Company’s financial instruments recorded at fair value on a recurring basis (in thousands):

	Fair Value Measurementsat June 30, 2013 Using								Fair Value Measurementsat December 31, 2012 Using
Description	Total		Level 1(1)		Level 2(2)		Level 3(3)		Total		Level 1(1)		Level 2(2)		Level 3(3)
Assets:
Derivative financial instruments(4)	$	81,561	—		81,561		—		$	96,489	—		96,489		—
Investments(5)	$	6,255	6,255		—		—		$	6,231	6,231		—		—
Total Assets	$	87,816	$	6,255	$	81,561	$	—	$	102,720	$	6,231	$	96,489	$	—
Liabilities:
Derivative financial instruments(6)	$	141,307	—		141,307		—		$	85,119	—		85,119		—
Total Liabilities	$	141,307	$	—	$	141,307	$	—	$	85,119	$	—	$	85,119	$	—

(1)Inputs based on quoted prices (unadjusted) in active markets for identical assets or liabilities that we have the ability to access.  Valuation of these items does not entail a significant amount of judgment.

(2)Inputs other than quoted prices included within Level 1 that are observable for the asset or liability, either directly or indirectly.  For foreign currency forward contracts, interest rate swaps, cross currency swaps and fuel swaps, fair value is derived using valuation models that utilize the income valuation approach.  These valuation models take into account the contract terms, such as maturity, as well as other inputs, such as foreign exchange rates and curves, fuel types, fuel curves and interest rate yield curves.  For fuel call options, fair value is determined by using the prevailing market price for the instruments consisting of published price quotes for similar assets based on recent transactions in an active market. Fair value for foreign currency collar options is determined by using standard option pricing models with inputs based on the options’ contract terms, such as exercise price and maturity, and readily available public market data, such as foreign exchange curves, foreign exchange volatility levels and discount rates. All derivative instrument fair values take into account the creditworthiness of the counterparty and the Company.

(3)Inputs that are unobservable.  The Company did not use any Level 3 inputs as of June 30, 2013 and December 31, 2012.

(4)Consists of foreign currency forward contracts, foreign currency collar options, interest rate swaps, fuel swaps and purchased fuel call options.  Please refer to the “Fair Value of Derivative Instruments” table for breakdown by instrument type.

(5)Consists of exchange-traded equity securities and mutual funds.

(6)Consists of interest rate swaps, fuel swaps, foreign currency forward contracts, foreign currency collar options and sold fuel call options.  Please refer to the “Fair Value of Derivative Instruments” table for breakdown by instrument type.

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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 June 30, 2013 or December 31, 2012, or that will be realized in the future, and do not include expenses that could be incurred in an actual sale or settlement.

Concentrations of Credit Risk

We monitor our credit risk associated with financial and other institutions with which we conduct significant business and, to minimize these risks, we select counterparties with credit risks acceptable to us and we seek to limit our exposure to an individual counterparty.  Credit risk, including but not limited to counterparty nonperformance under derivative instruments, our credit facilities and new ship progress payment guarantees, is not considered significant, as we primarily conduct business with large, well-established financial institutions, insurance companies and export credit agencies with which we have long-term relationships and which have credit risks acceptable to us or where the credit risk is spread out among a large number of counterparties. In addition, our exposure under foreign currency forward contracts, foreign currency collar options, fuel call options, interest rate and fuel swap agreements was approximately $16.1 million and $60.8 million as of June 30, 2013 and December 31, 2012, respectively, and was limited to the cost of replacing the contracts in the event of non-performance by the counterparties to the contracts, all of which are currently our lending banks.  We do not anticipate nonperformance by any of our significant counterparties. In addition, we have established guidelines regarding credit ratings and instrument maturities that we follow to maintain safety and liquidity. We do not normally require collateral or other security to support credit relationships; however, in certain circumstances this option is available to us.

Derivative Instruments

We are exposed to market risk attributable to changes in interest rates, foreign currency exchange rates and fuel prices.  We manage these risks through a combination of our normal operating and financing activities and through the use of derivative financial instruments pursuant to our hedging practices and policies.  The financial impact of these hedging instruments is primarily offset by corresponding changes in the underlying exposures being hedged.  We achieve this by closely matching the amount, term and conditions of the derivative instrument with the underlying risk being hedged.  Although certain of our derivative financial instruments do not qualify or are not accounted for under hedge accounting, we do not hold or issue derivative financial instruments for trading or other speculative purposes.  We monitor our derivative positions using techniques including market valuations and sensitivity analyses.

We enter into various forward, swap and option contracts to manage our interest rate exposure and to limit our exposure to fluctuations in foreign currency exchange rates and fuel prices. These instruments are recorded on the balance sheet at their fair value and the vast majority are designated as hedges.  We also have non-derivative financial instruments designated as hedges of our net investment in our foreign operations and investments.

At inception of the hedge relationship, a derivative instrument that hedges the exposure to changes in the fair value of a firm commitment or a recognized asset or liability is designated as a fair value hedge.  A derivative instrument that hedges a forecasted transaction or the variability of cash flows related to a recognized asset or liability is designated as a cash flow hedge.

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Changes in the fair value of derivatives that are designated as fair value hedges are offset against changes in the fair value of the underlying hedged assets, liabilities or firm commitments.  Gains and losses on derivatives that are designated as cash flow hedges are recorded as a component of accumulated other comprehensive loss until the underlying hedged transactions are recognized in earnings.  The foreign currency transaction gain or loss of our non-derivative financial instruments designated as hedges of our net investment in foreign operations and investments are recognized as a component of accumulated other comprehensive loss along with the associated foreign currency translation adjustment of the foreign operation.

On an ongoing basis, we assess whether derivatives used in hedging transactions are “highly effective” in offsetting changes in the fair value or cash flow of hedged items.  We use the long-haul method to assess hedge effectiveness using regression analysis for each hedge relationship under our interest rate, foreign currency and fuel hedging programs.  We apply the same methodology on a consistent basis for assessing hedge effectiveness to all hedges within each hedging program (i.e. interest rate, foreign currency and fuel). We perform regression analyses over an observation period commensurate with the contractual life of the derivative instrument, up to three years for interest rate and foreign currency relationships and four years for fuel relationships.  High effectiveness is achieved when a statistically valid relationship reflects a high degree of offset and correlation between the changes in the fair values of the derivative instrument and the hedged item. The determination of ineffectiveness is based on the amount of dollar offset between the change in fair value of the derivative instrument and the change in fair value of the hedged item at the end of the reporting period.  If it is determined that a derivative is not highly effective as a hedge or hedge accounting is discontinued, any change in fair value of the derivative since the last date at which it was determined to be effective is recognized in earnings. In addition, the ineffective portion of our highly effective hedges is recognized in earnings immediately and reported in other income (expense) in our consolidated statements of comprehensive income (loss).

Cash flows from derivative instruments that are designated as fair value or cash flow hedges are classified in the same category as the cash flows from the underlying hedged items. In the event that hedge accounting is discontinued, cash flows subsequent to the date of discontinuance are classified within investing activities.  Cash flows from derivative instruments not designated as hedging instruments are classified as investing activities.

We consider the classification of the underlying hedged item’s cash flows in determining the classification for the designated derivative instrument’s cash flows. We classify derivative instrument cash flows from hedges of benchmark interest rate or hedges of fuel expense as operating activities due to the nature of the hedged item. Likewise, we classify derivative instrument cash flows from hedges of foreign currency risk on our newbuild ship payments as investing activities. Cash flows from derivative instruments not designated under hedge accounting, such as our fuel call options, are reported as investing activities.

Interest Rate Risk

Our exposure to market risk for changes in interest rates relates to our long-term debt obligations including future interest payments.  At June 30, 2013, approximately 38.6% of our long-term debt was effectively fixed as compared to 45.8% as of December 31, 2012.  We use interest rate swap agreements to modify our exposure to interest rate movements and to manage our interest expense.

Market risk associated with our long-term fixed rate debt is the potential increase in fair value resulting from a decrease in interest rates.  We use interest rate swap agreements that effectively convert

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a portion of our fixed-rate debt to a floating-rate basis to manage this risk.  At June 30, 2013 and December 31, 2012, we maintained interest rate swap agreements on the $420.0 million fixed rate portion of our Oasis of the Seas unsecured amortizing term loan.  The interest rate swap agreements effectively changed the interest rate on the balance of the unsecured term loan, which was $297.5 million as of June 30, 2013, from a fixed rate of 5.41% to a LIBOR-based floating rate equal to LIBOR plus 3.87%, currently approximately 4.30%. These interest rate swap agreements are accounted for as fair value hedges.

During the second quarter of 2013, we entered into interest rate swap agreements that effectively changed the interest rate on the $650.0 million unsecured senior notes due 2022, from a fixed rate of 5.25% to a LIBOR-based floating rate equal to LIBOR plus 3.63%, currently approximately 3.91%.  These interest rate swap agreements are accounted for as fair value hedges.

Market risk associated with our long-term floating rate debt is the potential increase in interest expense from an increase in interest rates.  We use interest rate swap agreements that effectively convert a portion of our floating-rate debt to a fixed-rate basis to manage this risk.  At June 30, 2013 and December 31, 2012, we maintained forward-starting interest rate swap agreements that hedge the anticipated unsecured amortizing term loans that will finance our purchase of Quantum of the Seas and Anthem of the Seas. Forward-starting interest rate swaps hedging the Quantum of the Seas loan will effectively convert the interest rate for $735.0 million of the anticipated loan balance from LIBOR plus 1.30% to a fixed rate of 3.74% (inclusive of margin) beginning in October 2014. Forward-starting interest rate swaps hedging the Anthem of the Seas loan will effectively convert the interest rate for $725.0 million of the anticipated loan balance from LIBOR plus 1.30% to a fixed rate of 3.86% (inclusive of margin) beginning in April 2015.  These interest rate swap agreements are accounted for as cash flow hedges.

In addition, at June 30, 2013 and December 31, 2012, we maintained interest rate swap agreements that effectively converted the interest rate on a portion of the Celebrity Reflection unsecured amortizing term loan balance of approximately $627.2 million from LIBOR plus 0.40% to a fixed rate (including applicable margin) of 2.85% through the term of the loan.  These interest rate swap agreements are accounted for as cash flow hedges.

The notional amount of interest rate swap agreements related to outstanding debt and on our current unfunded financing arrangements as of June 30, 2013 and December 31, 2012 was $3.0 billion and $2.4 billion, respectively.

Foreign Currency Exchange Rate Risk

Derivative Instruments

Our primary exposure to foreign currency exchange rate risk relates to our ship construction contracts denominated in euros, our foreign currency denominated debt and our growing international business operations.  We enter into foreign currency forward contracts, collar options and cross currency swap agreements to manage portions of the exposure to movements in foreign currency exchange rates.  As of June 30, 2013, the aggregate cost of our ships on order, including the conditional agreement for a third Quantum-class ship, was approximately $4.5 billion, of which we had deposited $288.8 million as of such date.  Approximately 56.4% and 49.7% of the aggregate cost of the ships under construction was exposed to fluctuations in the euro exchange rate at June 30, 2013 and December 31, 2012, respectively.  The majority of our foreign currency forward contracts, collar options and cross currency swap agreements are accounted for as cash flow or fair value hedges depending on

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the designation of the related hedge.

During the second quarter of 2013, we entered into foreign currency forward contracts to hedge €365.0 million of our €745.0 million 5.625% unsecured senior notes due January 2014. These foreign currency forward contracts are accounted for as cash flow hedges and mature January 2014.

On a regular basis, we enter into foreign currency forward contracts to minimize the volatility resulting from the remeasurement of net monetary assets and liabilities denominated in a currency other than our functional currency or the functional currencies of our foreign subsidiaries. During the second quarter of 2013, we maintained an average of approximately $360.0 million of these foreign currency forward contracts.  These instruments are not designated as hedging instruments.   Changes in the fair value of the foreign currency forward contracts, of approximately $(16.9) million and $(4.1) million, during the quarter ended June 30, 2013 and June 30, 2012, respectively, and approximately $(25.5) million and $4.2 million, during the six months ended June 30, 2013 and June 30, 2012, respectively, were recognized in earnings within other income (expense) in our consolidated statements of comprehensive income (loss).

The notional amount of outstanding foreign exchange contracts including our forward contracts and collar options as of June 30, 2013 and December 31, 2012 was $1.6 billion and $1.2 billion, respectively.

Non-Derivative Instruments

We consider our investments in our foreign operations to be denominated in relatively stable currencies and of a long-term nature.  We partially address the exposure of our investments in foreign operations by denominating a portion of our debt in our subsidiaries’ and investments’ functional currencies and designating it as a hedge of these subsidiaries and investments.  We had designated debt as a hedge of our net investments in Pullmantur and TUI Cruises of approximately €501.5 million and €481.7 million, or approximately $651.9 million and $635.1 million, as of June 30, 2013 and December 31, 2012, respectively.

Fuel Price Risk

Our exposure to market risk for changes in fuel prices relates primarily to the consumption of fuel on our ships.  We use fuel swap agreements and fuel call options to mitigate the financial impact of fluctuations in fuel prices.

Our fuel swap agreements are accounted for as cash flow hedges.  At June 30, 2013, we have hedged the variability in future cash flows for certain forecasted fuel transactions occurring through 2017.  As of June 30, 2013 and December 31, 2012, we had entered into the following fuel swap agreements:

	Fuel Swap Agreements
	As ofJune 30,2013	As of December 31, 2012
	(metric tons)
2013	402,000	755,000
2014	768,000	635,000
2015	581,000	363,000
2016	296,000	104,000
2017	74,000	—

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	Fuel Swap Agreements
Projected fuel purchases for year:	As ofJune 30,2013		As of December 31, 2012
	(% hedged)
2013	60	%	55	%
2014	55	%	45	%
2015	39	%	25	%
2016	20	%	7	%
2017	5	%	—

At June 30, 2013 and December 31, 2012, $4.4 million and $47.2 million, respectively, of estimated unrealized net gains associated with our cash flow hedges pertaining to fuel swap agreements were expected to be reclassified to earnings from accumulated other comprehensive loss within the next twelve months.  Reclassification is expected to occur as a result of fuel consumption associated with our hedged forecasted fuel purchases.

The fair value and line item caption of derivative instruments recorded within our consolidated balance sheets were as follows:

	Fair Value of Derivative Instruments
	Asset Derivatives					Liability Derivatives
	Balance Sheet	As of June 30, 2013		As of December 31, 2012		Balance Sheet	As of June 30, 2013		As of December 31, 2012
	Location	Fair Value		Fair Value		Location	Fair Value		Fair Value
In thousands
Derivatives designated as hedging instruments under ASC 815-20(1)
Interest rate swaps	Other Assets	$	44,639	$	5,099	Other long-term liabilities	$	61,424	$	55,471
Foreign currency forward contracts	Derivative Financial Instruments	—		951		Accrued expenses and other liabilities	3,304		338
Foreign currency forward contracts	Other Assets	8,024		11,564		Other long-term liabilities	4,099		1,000
Foreign currency collar options	Other Assets	—		8,974		Other long-term liabilities	2,273		—
Fuel swaps	Derivative Financial Instruments	14,823		48,624		Accrued expenses and other liabilities	12,144		1,761
Fuel swaps	Other Assets	128		8,585		Other long-term liabilities	36,995		6,369
Total derivatives designated as hedging instruments under 815-20		$	67,614	$	83,797		$	120,239	$	64,939
Derivatives not designated as hedging instruments under ASC 815-20
Foreign currency forward contracts	Derivative Financial Instruments	$	7,559	$	—	Accrued expenses and other liabilities	$	4,611	$	—
Foreign currency forward contracts	Other Assets	2,733		4,440		Other long-term liabilities	12,809		11,475
Fuel swaps	Derivative Financial Instruments	6		—		Accrued expenses and other liabilities	59		475
Fuel call options	Derivative Financial Instruments	3,649		8,252		Accrued expenses and other liabilities	3,589		8,230
Total derivatives not designated as hedging instruments under 815-20		13,947		12,692			21,068		20,180
Total derivatives		$	81,561	$	96,489		$	141,307	$	85,119

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(1) Accounting Standard Codification 815-20 “Derivatives and Hedging”.

The carrying value and line item caption of non-derivative instruments designated as hedging instruments recorded within our consolidated balance sheets were as follows:

Non-derivative instrument designated as hedging		Carrying Value
instrument under ASC 815-20	Balance Sheet Location	As of June 30, 2013		As of December 31, 2012
In thousands
Foreign currency debt	Current portion of long-term debt	$	522,343	$	17,516
Foreign currency debt	Long-term debt	129,526		617,593
		$	651,869	$	635,109

The effect of derivative instruments qualifying and designated as hedging instruments and the related hedged items in fair value hedges on the consolidated statements of comprehensive income (loss) was as follows:

Derivatives and	Location of	Amount of Gain (Loss) Recognized in Income on Derivative										Amount of Gain (Loss) Recognized in Income on Hedged Item
related Hedged Items under ASC 815-20 Fair Value Hedging Relationships	Gain (Loss) Recognized in Income on Derivative and Hedged Item	Quarter Ended June 30, 2013			Quarter Ended June 30, 2012		Six Months Ended June 30, 2013			Six Months Ended June 30, 2012		Quarter Ended June 30, 2013		Quarter Ended June 30, 2012			Six Months Ended June 30, 2013		Six Months Ended June 30, 2012
In thousands
Interest rate swaps	Interest expense, net of interest capitalized	$	2,498		$	4,880	$	3,277		$	9,862	$	9,323	$	7,107		$	18,599	$	14,367
Interest rate swaps	Other income (expense)	(57,675		)	5,959		(59,244		)	1,416		54,761		(5,616		)	56,173		(1,902		)
		$	(55,177	)	$	10,839	$	(55,967	)	$	11,278	$	64,084	$	1,491		$	74,772	$	12,465

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The effect of derivative instruments qualifying and designated as cash flow hedging instruments on the consolidated financial statements was as follows:

	Amount of Gain (Loss) Recognized in OCI on Derivative (Effective Portion)												Location of Gain (Loss) Reclassified from	Amount of Gain (Loss) Reclassified from Accumulated OCI into Income (Effective Portion)
Derivatives under ASC 815-20 Cash Flow Hedging Relationships	Quarter Ended June 30, 2013			Quarter Ended June 30, 2012			Six Months Ended June 30, 2013			Six Months Ended June 30, 2012			Accumulated OCI into Income (Effective Portion)	Quarter Ended June 30, 2013			Quarter Ended June 30, 2012			Six Months Ended June 30, 2013			Six Months Ended June 30, 2012
In thousands
Cross currency swaps	$	—		$	—		$	—		$	—		Interest expense, net of interest capitalized	$	(880	)	$	—		$	(1,751	)	$	—
Cross currency swaps	—			(8,783		)	—			(12,370		)	Other income (expense)	—			(9,800		)	—			(12,721		)
Interest rate swaps	80,800			(35,478		)	93,488			(30,924		)	Other income (expense)	—			—			—			—
Foreign currency forward contracts	6,087			(47,758		)	(8,995		)	(30,050		)	Depreciation and amortization expenses	(450		)	(196		)	(899		)	(392		)
Foreign currency forward contracts	—			—			—			—			Other income (expense)	(239		)	(239		)	(477		)	(477		)
Foreign currency forward contracts	—			—			—			—			Interest expense, net of interest capitalized	(5		)	—			(5		)	—
Foreign currency collar options	3,714			(12,564		)	(11,247		)	(12,564		)	Depreciation and amortization expenses	—			—			—			—
Fuel swaps	(65,225		)	(165,746		)	(55,200		)	(4,479		)	Fuel	9,408			28,158			26,236			63,985
	$	25,376		$	(270,329	)	$	18,046		$	(90,387	)		$	7,834		$	17,923		$	23,104		$	50,395

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Derivatives under ASC	Location of Gain (Loss) Recognized in Income on Derivative (Ineffective Portion and	Amount of Gain (Loss) Recognized in Income on Derivative (Ineffective Portion and Amount Excluded from Effectiveness testing)
815-20 Cash Flow Hedging Relationships	Amount Excluded from Effectiveness Testing)	Quarter Ended June 30, 2013			Quarter Ended June 30, 2012			Six Months Ended June 30, 2013			Six Months Ended June 30, 2012
In thousands
Cross currency swaps	Other income (expense)	$	—		$	—		$	—		$	—
Cross currency swaps	Other income (expense)	—			(234		)	—			(234		)
Interest rate swaps	Other income (expense)	373			(71		)	427			(70		)
Foreign currency forward contracts	Other income (expense)	(5		)	(16		)	(10		)	(9		)
Foreign currency forward contracts	Other income (expense)	—			—			—			—
Foreign currency forward contracts	Other income (expense)	—			—			—			—
Foreign currency collar options	Other income (expense)	—			—			—			—
Fuel swaps	Other income (expense)	(3,649		)	(4,418		)	(4,369		)	(3,889		)
		$	(3,281	)	$	(4,739	)	$	(3,952	)	$	(4,202	)

The effect of non-derivative instruments qualifying and designated as net investment hedging instruments on the consolidated financial statements was as follows:

Non-derivative	Amount of Gain (Loss) Recognized in OCI (Effective Portion)									Location of Gain (Loss) in Income (Ineffective Portion and	Amount of Gain (Loss) Recognized in Income (Ineffective Portion and Amount Excluded from Effectiveness Testing)
instruments under ASC 815-20 Net Investment Hedging Relationships	Quarter Ended June 30, 2013			Quarter Ended June 30, 2012		Six Months Ended June 30, 2013		Six Months Ended June 30, 2012		Amount Excluded from Effectiveness Testing)	Quarter Ended June 30, 2013		Quarter Ended June 30, 2012		Six Months Ended June 30, 2013		Six Months Ended June 30, 2012
In thousands
Foreign Currency Debt	$	(7,978	)	$	35,888	$	4,754	$	15,118	Other income (expense)	$	—	$	—	$	—	$	—
	$	(7,978	)	$	35,888	$	4,754	$	15,118		$	—	$	—	$	—	$	—

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The effect of derivatives not designated as hedging instruments on the consolidated financial statements was as follows:

Derivatives Not Designated as Hedging	Location of Gain	Amount of Gain (Loss) Recognized in Income on Derivative
Instruments under ASC 815-20	(Loss) Recognized in Income on Derivative	Quarter Ended June 30, 2013			Quarter Ended June 30, 2012			Six Months Ended June 30, 2013			Six Months Ended June 30, 2012
In thousands
Foreign currency forward contracts	Other income (expense)	$	(18,669	)	$	(3,876	)	$	(27,280	)	$	4,497
Fuel swaps	Other income (expense)	(61		)	(1,763		)	48			(1,763		)
Fuel call options	Other income (expense)	(121		)	(10,152		)	37			(7,470		)
		$	(18,851	)	$	(15,791	)	$	(27,195	)	$	(4,736	)

Credit Related Contingent Features

Our current interest rate derivative instruments may require us to post collateral if our Standard & Poor’s and Moody’s credit ratings remain below specified levels. Specifically, if on the fifth anniversary of entering into a derivative transaction or on any succeeding fifth-year anniversary our credit ratings for our senior unsecured debt were to be below BBB- by Standard & Poor’s and Baa3 by Moody’s, then each counterparty to such derivative transaction with whom we are in a net liability position that exceeds the applicable minimum call amount may demand that we post collateral in an amount equal to the net liability position.  The amount of collateral required to be posted following such event will change each time our net liability position increases or decreases by more than the applicable minimum call amount.  If our credit rating for our senior unsecured debt is subsequently equal to, or above BBB- by Standard & Poor’s or Baa3 by Moody’s, then any collateral posted at such time will be released to us and we will no longer be required to post collateral unless we meet the collateral trigger requirement at the next fifth-year anniversary.  Currently, our senior unsecured debt credit rating is BB with a stable outlook by Standard & Poor’s and Ba1 with a stable outlook by Moody’s.  We currently have five interest rate derivative hedges that have a term of at least five years.  The aggregate fair values of all derivative instruments with such credit-related contingent features in net liability positions as of June 30, 2013 and December 31, 2012 were $61.4 million and $55.5 million, respectively, which do not include the impact of any such derivatives in net asset positions.  The earliest that any of the five interest rate derivative hedges will reach their fifth anniversary is November 2016.  Therefore, as of June 30, 2013, we were not required to post collateral for any of our derivative transactions.

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Item 2.  Management’s Discussion and Analysis of Financial Condition and Results of Operations

Cautionary Note Concerning Forward-Looking Statements

The discussion under this caption “Management’s Discussion and Analysis of Financial Condition and Results of Operations” and elsewhere in this document includes “forward-looking statements” within the meaning of the Private Securities Litigation Reform Act of 1995.  All statements other than statements of historical fact, including statements regarding guidance (including our expectations for the third quarter and full year of 2013 set forth under the heading “Outlook” below), business and industry prospects or future results of operations or financial position, made in this Quarterly Report on Form 10-Q are forward-looking.  Words such as “anticipate,” “believe,” “could,” “estimate,” “expect,” “goal,” “intend,” “may,” “plan,” “project,” “seek,” “should,” “will,” and similar expressions are intended to further identify any of these forward-looking statements.  Forward-looking statements reflect management’s current expectations but they are based on judgments and are inherently uncertain.  Furthermore, they are subject to risks, uncertainties and other factors, that could cause our actual results, performance or achievements to differ materially from the future results, performance or achievements expressed or implied in those forward-looking statements.  Examples of these risks, uncertainties and other factors include, but are not limited to, the following:

·the impact of the worldwide economic and geopolitical environment or other conditions on the demand for cruises;

·the impact of the worldwide economic environment on our ability to generate cash flows from operations, satisfy the financial covenants required by our credit facilities, or obtain new borrowings from the credit or capital markets;

·the impact of disruptions in the global financial markets on the ability of our counterparties and others to perform their obligations to us including those associated with our loan agreements and derivative contracts;

·negative incidents concerning the Company and the cruise vacation industry, or adverse publicity, including those involving the health, safety and security of guests, accidents, unusual weather conditions or natural disasters or disruptions;

·our ability to appropriately balance our cost management strategy with our goal of satisfying guest expectations;

·failure to keep pace with developments in technology which could impair our operations or competitive position;

·our ability to successfully manage the increased costs and risks of conducting business globally and to realize the intended benefits of our investments in new markets;

·changes in operating and financing costs, including changes in foreign exchange rates, interest rates, fuel, food, payroll, airfare, insurance and security costs;

·vacation industry competition and industry overcapacity in certain markets;

·the cost of or changes in tax, environmental, labor, health, safety, security and other laws and regulations affecting our business;

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·pending or threatened litigation, enforcement actions, fines or penalties;

·emergency ship repairs, including the related lost revenue;

·the impact of ship construction, repair or refurbishment delays, ship cancellations or ship construction price increases brought about by construction faults, mechanical problems or financial difficulties encountered by shipyards or their subcontractors;

·the global political climate, fears of terrorist and pirate attacks, armed conflict, the unavailability or cost of air service and the resulting concerns over safety and security aspects of traveling;

·the spread of contagious diseases;

·disruptions to our shoreside business related to actual or threatened natural disasters, information systems failure or similar events;

·our ability to differentiate our products;

·our ability to manage our business activities that involve our co-investment with third parties;

·our inability to adequately incentivize our travel agents or changes and/or disruptions to the travel agency industry;

·the loss of key personnel, strained employee relations and/or our inability to retain or recruit qualified personnel;

·changes in our principal shareholders;

·uncertainties of a foreign legal system as we are not incorporated in the United States;

·the unavailability of ports of call; and

·weather.

The above examples are not exhaustive and, in addition, new risks emerge from time to time.  All forward-looking statements made in this Quarterly Report on Form 10-Q speak only as of the date of this document.  Given these risks and uncertainties, readers are cautioned not to place undue reliance on such forward-looking statements. We undertake no obligation to publicly update or revise any forward-looking statements, whether as a result of new information, future events or otherwise. You should consider the areas of risk described above, as well as set forth under the heading “Risk Factors” in Part I, Item 1A. Risk Factors in our Annual Report on Form 10-K for the year ended December 31, 2012.

Overview

The discussion and analysis of our financial condition and results of operations has been organized to present the following:

·a review of our financial presentation, including discussion of certain operational and financial metrics we utilize to assist us in managing our business;

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·a discussion of our results of operations for the quarter and six months ended June 30, 2013 compared to the same period in 2012;

·a discussion of our business outlook, including our expectations for selected financial items for the third quarter and full year of 2013; and

·a discussion of our liquidity and capital resources, including our future capital and contractual commitments and potential funding sources.

Critical Accounting Policies

Ship Accounting

During the first quarter of 2013, we performed a review of the estimated useful lives and associated residual values of ships in our fleet approaching the last third of their estimated useful lives.  As a result, effective January 1, 2013, we revised the estimated useful lives of five ships from 30 years with a 15% associated residual value, to 35 years with a 10% associated residual value.  The change in the estimated useful lives and associated residual value was accounted for prospectively as a change in accounting estimate.  The 35-year useful life with a 10% associated residual value is based on revised estimates of the weighted-average useful life of all major ship components for these ships.  The change in estimate is consistent with our recent investments in and future plans to continue to invest in the revitalization of these ships and the use of certain ship components longer than originally estimated. The change allows us to better match depreciation expense with the periods these assets are expected to be in use.  Refer to Note 2. Summary of Significant Accounting Policies to our consolidated financial statements for further information.

For a discussion of our critical accounting policies, refer to Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations within our Annual Report on Form 10-K for the year ended December 31, 2012.

Seasonality

Our revenues are seasonal based on demand for cruises.  Demand is strongest for cruises during the Northern Hemisphere’s summer months and holidays. In order to mitigate the impact of the winter weather in the Northern Hemisphere and to capitalize on the summer season in the Southern Hemisphere, our brands have increased deployment to South America and Australia during the Northern Hemisphere winter months.

Financial Presentation

Description of Certain Line Items

Revenues

Our revenues are comprised of the following:

·Passenger ticket revenues, which consist of revenue recognized from the sale of passenger tickets and the sale of air transportation to and from our ships; and

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·Onboard and other revenues, which consist primarily of revenues from the sale of goods and/or services onboard our ships not included in passenger ticket prices, cancellation fees, sales of vacation protection insurance, pre- and post-cruise tours, Pullmantur’s land-based tours and hotel and air packages including Pullmantur Air’s charter business to third parties.

Onboard and other revenues also include revenues we receive from independent third party concessionaires that pay us a percentage of their revenues in exchange for the right to provide selected goods and/or services onboard our ships.

Cruise Operating Expenses

Our cruise operating expenses are comprised of the following:

·Commissions, transportation and other expenses, which consist of those costs directly associated with passenger ticket revenues, including travel agent commissions, air and other transportation expenses, port costs that vary with passenger head counts and related credit card fees;

·Onboard and other expenses, which consist of the direct costs associated with onboard and other revenues, including the costs of products sold onboard our ships, vacation protection insurance premiums, costs associated with pre- and post-cruise tours and related credit card fees as well as the minimal costs associated with concession revenues, as the costs are mostly incurred by third-party concessionaires;

·Payroll and related expenses, which consist of costs for shipboard personnel (costs associated with our shoreside personnel are included in marketing, selling and administrative expenses);

·Food expenses, which include food costs for both guests and crew;

·Fuel expenses, which include fuel and related delivery and storage costs, including the financial impact of fuel swap agreements; and

·Other operating expenses, which consist primarily of operating costs such as repairs and maintenance, port costs that do not vary with passenger head counts, vessel operating lease costs, costs associated with Pullmantur’s land-based tours and Pullmantur Air’s charter business to third parties, vessel related insurance and entertainment.

We do not allocate payroll and related expenses, food expenses, fuel expenses or other operating expenses to the expense categories attributable to passenger ticket revenues or onboard and other revenues since they are incurred to provide the total cruise vacation experience.

Selected Operational and Financial Metrics

We utilize a variety of operational and financial metrics which are defined below to evaluate our performance and financial condition.  As discussed in more detail herein, certain of these metrics are non-GAAP financial measures, which we believe provide useful information to investors as a supplement to our consolidated financial statements, which are prepared and presented in accordance with GAAP.  The presentation of non-GAAP financial information is not intended to be considered in isolation or as a substitute for, or superior to, the financial information prepared and presented in accordance with GAAP.

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Available Passenger Cruise Days (“APCD”) is our measurement of capacity and represents double occupancy per cabin multiplied by the number of cruise days for the period.  We use this measure to perform capacity and rate analysis to identify our main non-capacity drivers that cause our cruise revenue and expenses to vary.

Gross Cruise Costs represent the sum of total cruise operating expenses plus marketing, selling and administrative expenses.

Gross Yields represent total revenues per APCD.

Net Cruise Costs and Net Cruise Costs Excluding Fuel represent Gross Cruise Costs excluding commissions, transportation and other expenses and onboard and other expenses and, in the case of Net Cruise Costs Excluding Fuel, fuel expenses (each of which is described above under the Description of Certain Line Items heading).  In measuring our ability to control costs in a manner that positively impacts net income, we believe changes in Net Cruise Costs and Net Cruise Costs Excluding Fuel to be the most relevant indicators of our performance.  A reconciliation of historical Gross Cruise Costs to Net Cruise Costs and Net Cruise Costs Excluding Fuel is provided below under Results of Operations.  We have not provided a quantitative reconciliation of projected Gross Cruise Costs to projected Net Cruise Costs and projected Net Cruise Costs Excluding Fuel due to the significant uncertainty in projecting the costs deducted to arrive at these measures.  Accordingly, we do not believe that reconciling information for such projected figures would be meaningful.

Net Debt-to-Capital is a ratio which represents total long-term debt, including the current portion of long-term debt, less cash and cash equivalents (“Net Debt”) divided by the sum of Net Debt and total shareholders’ equity.  We believe Net Debt and Net Debt-to-Capital, along with total long-term debt and shareholders’ equity are useful measures of our capital structure.  A reconciliation of historical Debt-to-Capital to Net Debt-to-Capital is provided below under Results of Operations.

Net Revenues represent total revenues less commissions, transportation and other expenses and onboard and other expenses (each of which is described above under the Description of Certain Line Items heading).

Net Yields represent Net Revenues per APCD.  We utilize Net Revenues and Net Yields to manage our business on a day-to-day basis as we believe that it is the most relevant measure of our pricing performance because it reflects the cruise revenues earned by us net of our most significant variable costs, which are commissions, transportation and other expenses and onboard and other expenses.  A reconciliation of historical Gross Yields to Net Yields is provided below under Results of Operations.  We have not provided a quantitative reconciliation of projected Gross Yields to projected Net Yields due to the significant uncertainty in projecting the costs deducted to arrive at this measure.  Accordingly, we do not believe that reconciling information for such projected figures would be meaningful.

Occupancy, in accordance with cruise vacation industry practice, is calculated by dividing Passenger Cruise Days by APCD.  A percentage in excess of 100% indicates that three or more passengers occupied some cabins.

Passenger Cruise Days represent the number of passengers carried for the period multiplied by the number of days of their respective cruises.

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We believe Net Yields, Net Cruise Costs and Net Cruise Costs Excluding Fuel are our most relevant non-GAAP financial measures. However, a significant portion of our revenue and expenses are denominated in currencies other than the United States dollar. Because our reporting currency is the United States dollar, the value of these revenues and expenses can be affected by changes in currency exchange rates.  Although such changes in local currency prices is just one of many elements impacting our revenues and expenses, it can be an important element.  For this reason, we also monitor Net Yields, Net Cruise Costs and Net Cruise Costs Excluding Fuel as if the current periods’ currency exchange rates had remained constant with the comparable prior periods’ rates, or on a “Constant Currency” basis.

It should be emphasized that Constant Currency is primarily used for comparing short-term changes and/or projections.  Over the longer term, changes in guest sourcing and shifting the amount of purchases between currencies can significantly change the impact of the purely currency-based fluctuations.

The use of certain significant non-GAAP measures, such as Net Yields, Net Cruise Costs and Net Cruise Costs Excluding Fuel, allow us to perform capacity and rate analysis to separate the impact of known capacity changes from other less predictable changes which affect our business.  We believe these non-GAAP measures provide expanded insight to measure revenue and cost performance in addition to the standard United States GAAP based financial measures.  There are no specific rules or regulations for determining non-GAAP and Constant Currency measures, and as such, there exists the possibility that they may not be comparable to other companies within the industry.

Results of Operations

Summary

Our results of operations for the quarter and six months ended June 30, 2013 were influenced by an unscheduled drydock for Grandeur of the Seas due to an incident experienced onboard in May 2013.  This incident resulted in additional ship refurbishment expenses and costs related to cancelled sailings. The direct financial impact of this incident, net of insurance, is a reduction of $0.05 per diluted share for the quarter ended June 30, 2013 and we estimate the impact to be $0.10 per diluted share for the year ended December 31, 2013. Grandeur of the Seas returned to service in July 2013.

Our net income for the second quarter of 2013 was $24.7 million or $0.11 per share on a diluted basis as compared to a net loss of $3.7 million or $(0.02) per share on a diluted basis for the second quarter of 2012.

Other significant items for the second quarter of 2013 include:

·Total revenues increased 3.4% from 2012 primarily due to an increase in ticket prices, onboard spending and capacity.

·Cruise operating expenses increased 2.1% from 2012 primarily due to an increase in vessel maintenance, onboard and other expense, crew expenses and to a lesser extent an increase in

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capacity.

·We reached an agreement, subject to satisfaction of financing conditions, with Meyer Werft to build the third Quantum-class ship for Royal Caribbean International. The agreement is expected to become effective in the third quarter of 2013. The ship will have a capacity of approximately 4,150 berths and is expected to enter service in the second quarter of 2016.

Other Items:

·Monarch of the Seas was redeployed from Royal Caribbean International to Pullmantur.

Operating results for the quarter and six months ended June 30, 2013 compared to the same period in 2012 are shown in the following table (in thousands, except per share data):

	Quarter Ended June 30,										Six Months Ended June 30,
	2013					2012					2013					2012
				% of Total Revenues					% of Total Revenues					% of Total Revenues					% of Total Revenues
Passenger ticket revenues	$	1,366,713		72.6	%	$	1,332,207		73.2	%	$	2,760,491		72.8	%	$	2,684,445		73.4	%
Onboard and other revenues	516,054			27.4	%	488,797			26.8	%	1,033,496			27.2	%	971,039			26.6	%
Total revenues	1,882,767			100.0	%	1,821,004			100.0	%	3,793,987			100.0	%	3,655,484			100.0	%
Cruise operating expenses:
Commissions, transportation and other	316,506			16.8	%	307,697			16.9	%	639,443			16.9	%	628,435			17.2	%
Onboard and other	140,710			7.5	%	130,981			7.2	%	262,197			6.9	%	238,576			6.5	%
Payroll and related	208,975			11.1	%	206,519			11.3	%	418,898			11.0	%	416,633			11.4	%
Food	112,530			6.0	%	109,300			6.0	%	232,013			6.1	%	222,925			6.1	%
Fuel	232,471			12.3	%	237,961			13.1	%	474,123			12.5	%	466,955			12.8	%
Other operating	312,427			16.6	%	303,556			16.7	%	579,135			15.3	%	577,602			15.8	%
Total cruise operating expenses	1,323,619			70.3	%	1,296,014			71.2	%	2,605,809			68.7	%	2,551,126			69.8	%
Marketing, selling and administrative expenses	259,626			13.8	%	247,571			13.6	%	533,660			14.1	%	512,172			14.0	%
Depreciation and amortization expenses	186,184			9.9	%	180,514			9.9	%	375,548			9.9	%	359,906			9.8	%
Operating Income	113,338			6.0	%	96,905			5.3	%	278,970			7.4	%	232,280			6.4	%
Other income (expense):
Interest income	3,405			0.2	%	4,972			0.3	%	7,152			0.2	%	11,318			0.3	%
Interest expense, net of interest capitalized	(86,877		)	(4.6	)%	(89,106		)	(4.9	)%	(177,059		)	(4.7	)%	(181,772		)	(5.0	)%
Other expense	(5,119		)	(0.3	)%	(16,424		)	(0.9	)%	(8,090		)	(0.2	)%	(18,515		)	(0.5	)%
	(88,591		)	(4.7	)%	(100,558		)	(5.5	)%	(177,997		)	(4.7	)%	(188,969		)	(5.2	)%
Net Income (Loss)	$	24,747		1.3	%	$	(3,653	)	(0.2	)%	$	100,973		2.7	%	$	43,311		1.2	%
Diluted Earnings (Loss) Per Share	$	0.11				$	(0.02	)			$	0.46				$	0.20

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Selected statistical information is shown in the following table:

	Quarter Ended June 30,				Six Months Ended June 30,
	2013		2012		2013		2012
Passengers Carried	1,174,397		1,183,122		2,435,689		2,460,693
Passenger Cruise Days	8,485,968		8,514,124		17,330,559		17,197,327
APCD	8,238,182		8,180,898		16,666,292		16,480,698
Occupancy	103.0	%	104.1	%	104.0	%	104.3	%

Gross Yields and Net Yields were calculated as follows (in thousands, except APCD and Yields):

	Quarter Ended June 30,						Six Months Ended June 30,
	2013		2013 On a Constant Currency basis		2012		2013		2013 On a Constant Currency basis		2012
Passenger ticket revenues	$	1,366,713	$	1,373,476	$	1,332,207	$	2,760,491	$	2,783,218	$	2,684,445
Onboard and other revenues	516,054		515,807		488,797		1,033,496		1,035,640		971,039
Total revenues	1,882,767		1,889,283		1,821,004		3,793,987		3,818,858		3,655,484
Less:
Commissions, transportation and other	316,506		317,956		307,697		639,443		645,024		628,435
Onboard and other	140,710		140,440		130,981		262,197		261,811		238,576
Net revenues	$	1,425,551	$	1,430,887	$	1,382,326	$	2,892,347	$	2,912,023	$	2,788,473
APCD	8,238,182		8,238,182		8,180,898		16,666,292		16,666,292		16,480,698
Gross Yields	$	228.54	$	229.33	$	222.59	$	227.64	$	229.14	$	221.80
Net Yields	$	173.04	$	173.69	$	168.97	$	173.54	$	174.73	$	169.20

Gross Cruise Costs, Net Cruise Costs and Net Cruise Costs Excluding Fuel were calculated as follows (in thousands, except APCD and costs per APCD):

	Quarter Ended June 30,						Six Months Ended June 30,
	2013		2013 On a Constant Currency basis		2012		2013		2013 On a Constant Currency basis		2012
Total cruise operating expenses	$	1,323,619	$	1,325,896	$	1,296,014	$	2,605,809	$	2,613,358	$	2,551,126
Marketing, selling and administrative expenses	259,626		259,071		247,571		533,660		533,608		512,172
Gross Cruise Costs	1,583,245		1,584,967		1,543,585		3,139,469		3,146,966		3,063,298
Less:
Commissions, transportation and other	316,506		317,956		307,697		639,443		645,024		628,435
Onboard and other	140,710		140,440		130,981		262,197		261,811		238,576
Net Cruise Costs	$	1,126,029	$	1,126,571	$	1,104,907	$	2,237,829	$	2,240,131	$	2,196,287
Less:
Fuel	232,471		233,754		237,961		474,123		476,609		466,955
Net Cruise Costs Excluding Fuel	$	893,558	$	892,817	$	866,946	$	1,763,706	$	1,763,522	$	1,729,332
APCD	8,238,182		8,238,182		8,180,898		16,666,292		16,666,292		16,480,698
Gross Cruise Costs per APCD	$	192.18	$	192.39	$	188.68	$	188.37	$	188.82	$	185.87
Net Cruise Costs per APCD	$	136.68	$	136.75	$	135.06	$	134.27	$	134.41	$	133.26
Net Cruise Costs Excluding Fuel per APCD	$	108.47	$	108.38	$	105.97	$	105.82	$	105.81	$	104.93

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Net Debt-to-Capital was calculated as follows (in thousands):

	As of
	June 30,			December 31,
	2013			2012
Long-term debt, net of current portion	$	6,347,640		$	6,970,464
Current portion of long-term debt	1,906,468			1,519,483
Total debt	8,254,108			8,489,947
Less: Cash and cash equivalents	205,174			194,855
Net Debt	$	8,048,934		$	8,295,092
Total shareholders’ equity	$	8,366,259		$	8,308,749
Total debt	8,254,108			8,489,947
Total debt and shareholders’ equity	16,620,367			16,798,696
Debt-to-Capital	49.7		%	50.5		%
Net Debt	8,048,934			8,295,092
Net Debt and shareholders’ equity	$	16,415,193		$	16,603,841
Net Debt-to-Capital	49.0		%	50.0		%

Outlook

The Company’s guidance for a Full Year 2013 Constant Currency Net Yields increase of approximately 3% (excluding the credit card rewards liability adjustment), is essentially unchanged from the midpoint of the Company’s prior guidance issued on April 25, 2013.  For the Third Quarter 2013, the Company’s Constant Currency Net Yields guidance of +1% to +2% anticipates yield accretion in all markets except for China (as a result of the island dispute between China and Japan) and Pullmantur Caribbean (as a result of the timing of the two-month accounting lag related to the transfer of the Monarch of the Seas).

Full Year 2013

	As Reported	Constant Currency
Net Yields	Approx. 2%	2% to 3%
Net Cruise Costs per APCD	1% to 2%	1% to 2%
Net Cruise Costs per APCD, excluding Fuel	1% to 2%	1% to 2%
Capacity Increase	1%
Depreciation and Amortization	$750 to $770 million
Interest Expense, net	$315 to $335 million
Fuel Consumption (metric tons)	1,346,000
Fuel Expenses	$923 million
Percent Hedged (fwd consumption)	60%
Impact of 10% change in fuel prices	$16 million
EPS	$2.20 to $2.30

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Third Quarter 2013

	As Reported	Constant Currency
Net Yields	Approx. 1%	1% to 2%
Net Cruise Costs per APCD	Approx. 4%	3% to 4%
Net Cruise Costs per APCD, excluding Fuel	4% to 5%	Approx. 4%
Capacity Increase	1.8%
Depreciation and Amortization	$183 to $193 million
Interest Expense, net	$75 to $85 million
Fuel Consumption (metric tons)	329,000
Fuel Expenses	$219 million
Percent Hedged (fwd consumption)	56%
Impact of 10% change in fuel prices	$9 million
EPS	$1.60 to $1.70

We are in the early stages of a broad profitability improvement program. The initiatives are aimed at increasing revenues and reducing expenses with a goal of improving our returns on invested capital. While it is still early in the operating plan process, our objective is to generate yield improvements and at least flat Net Cruise Costs Excluding Fuel per APCD in 2014. Two of the planned initiatives relate to Pullmantur and to our international operations, as follows:

·Firstly, over the last few years, Pullmantur has systematically increased its emphasis on Latin America which now generates over 50% of its revenues. In recognition of this, Pullmantur will shortly be opening a head office in Latin America to place the operating management closer to its largest and fastest growing market and to help reduce overhead.

·Secondly, the broader organization has grown its international footprint meaningfully over the past several years and has now achieved significant scale in both global deployment and sourcing. As part of our profitability initiatives, we are working on opportunities to improve our global sales, marketing and general and administrative cost structure to further leverage economies of scale.

We expect to incur some restructuring charges during 2013 related to these actions.

Quarter Ended June 30, 2013 Compared to Quarter Ended June 30, 2012

In this section, references to 2013 refer to the quarter ended June 30, 2013 and references to 2012 refer to the quarter ended June 30, 2012.

Revenues

Total revenues for 2013 increased $61.8 million or 3.4% to $1.9 billion from $1.8 billion in 2012.  Approximately $55.5 million of the increase was attributable to an increase in per passenger revenues primarily in passenger ticket revenues and onboard spending.  The increase in passenger ticket revenues was primarily due to an increase in ticket prices and itinerary changes.  The increase in onboard spending was primarily related to an increase in gaming revenues, an increase in shore excursion revenues attributable to certain deployment initiatives particularly in Asia and Alaska and an increase in beverage revenues. The increase in onboard spending is also attributable to the addition of specialty restaurants and other onboard activities as a result of our ship revitalization projects.  The increase in total revenues was partially offset by an out-of-period adjustment of approximately $15.2 million to correct the calculation of our liability for our credit card rewards program.  In addition, the increase was partially offset by the unfavorable effect of changes in foreign currency exchange rates related to our revenue transactions denominated in currencies other than the United States dollar of approximately $6.5 million.

Approximately $12.8 million of the increase in total revenues was attributable to a 0.7% increase in capacity, primarily due to the addition of Celebrity Reflection which entered service in October 2012.  This increase in capacity was partially offset by the transfer of Monarch of the Seas to Pullmantur in April 2013.  As disclosed in Note 1. General, we consolidate the operating results of Pullmantur and CDF Croisières de France on a two-month lag, which resulted in a two month reduction of capacity on a consolidated basis compared to the same period in 2012.

Concession revenues included in onboard and other revenues was $72.0 million in 2013 compared to $67.1 million for the same period in 2012.  The increase in concession revenues was primarily due to an increase in spending on a per passenger basis.

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Cruise Operating Expenses

Total cruise operating expenses of $1.3 billion in 2013 increased $27.6 million or 2.1% from 2012.  Approximately $20.8 million of this increase was primarily attributable to an increase in expenses associated with vessel maintenance, onboard and other expenses, and to a lesser extent an increase in crew expenses.  The increase in vessel maintenance was primarily due to an unscheduled drydock for Grandeur of the Seas as a result of an incident experienced onboard in May 2013.  The increase in onboard and other expenses was primarily due to increased expenses associated with shore excursions. The increase in crew expenses was attributable to an increase in crew movement expenses related to deployment changes.  In addition, $9.1 million of the increase was due to the 0.7% increase in capacity mentioned above.  The increase in total cruise operating expenses was partially offset by the favorable effect of changes in foreign currency exchange rates related to our cruise operating expenses denominated in currencies other than the United States dollar of approximately $2.3 million.

Marketing, Selling and Administrative Expenses

Marketing, selling and administrative expenses for 2013 increased $12.1 million or 4.9% to $259.6 million from $247.6 million for 2012.  The increase was primarily due to an increase in advertising expenses.

Depreciation and Amortization Expenses

Depreciation and amortization expenses for 2013 increased $5.7 million or 3.1% to $186.2 million from $180.5 million for 2012.  The increase was primarily due to the addition of Celebrity Reflection which entered service in October 2012.  The increase was partially offset by the favorable effect of changes in estimated useful lives and associated residual values for five ships which occurred during the first quarter of 2013 of approximately $3.0 million.

Other Income (Expense)

Interest expense, net of interest capitalized, decreased to $86.9 million in 2013 from $89.1 million in 2012.  The decrease was primarily due to lower interest rates.

Other expense decreased $11.3 million or 68.8% to $5.1 million in 2013 compared to $16.4 million for the same period in 2012.  The change in other expense was primarily due to the following:

·No fuel call option gain or loss in 2013 due to their effective termination in 2012, compared to a $10.1 million loss recorded in 2012; and

·Income of $5.0 million from our equity method investment in 2013 as compared to income of $2.7 million in 2012, for a net change of $2.3 million.

Net Yields

Net Yields increased 2.4% in 2013 compared to 2012 primarily due to an increase in ticket revenues and onboard spending.  Net Yields increased 2.8% in 2013 compared to 2012 on a Constant Currency basis.

Net Cruise Costs

Net Cruise Costs increased 1.9% in 2013 compared to 2012 primarily due to the increase in advertising expenses, vessel maintenance and crew expenses noted above.  Net Cruise Costs per APCD increased 1.2% in 2013 compared to 2012.  Net Cruise Costs per APCD increased 1.3% in 2013

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compared to 2012 on a Constant Currency basis.  Net Cruise Costs Excluding Fuel per APCD increased 2.4% in 2013 compared to 2012.  Net Cruise Costs Excluding Fuel per APCD increased 2.3% in 2013 compared to 2012 on a Constant Currency basis.

Six Months Ended June 30, 2013 Compared to Six Months Ended June 30, 2012

In this section, references to 2013 refer to the six months ended June 30, 2013 and references to 2012 refer to the six months ended June 30, 2012.

Revenues

Total revenues for 2013 increased $138.5 million or 3.8% to $3.8 billion from $3.7 billion in 2012.  Approximately $122.2 million of the increase was attributable to an increase in per passenger revenues primarily in passenger ticket revenues, onboard spending and air revenues.  The increase in passenger ticket revenues and air revenues was primarily due to an increase in ticket prices and itinerary changes.  The increase in onboard spending was primarily related to an increase in shore excursion revenues attributable to certain deployment initiatives particularly in Asia.  The increase in onboard spending is also attributable to the addition of other onboard activities and specialty restaurants as a result of our ship revitalization projects and other revenue enhancing initiatives.  The increase in total revenues was partially offset by an out-of-period adjustment of approximately $13.9 million to correct the calculation of our liability for our credit card rewards program.  In addition, the increase was partially offset by the unfavorable effect of changes in foreign currency exchange rates related to our revenue transactions denominated in currencies other than the United States dollar of approximately $24.9 million.

Approximately $41.2 million of the increase in total revenues was attributable to a 1.1% increase in capacity, primarily due to the addition of Celebrity Reflection which entered service in October 2012.  The increase in capacity was partially offset by the transfer of Ocean Dream to an unrelated third party in April 2012 as part of a six year bareboat charter agreement and the transfer of Monarch of the Seas to Pullmantur in April 2013.  As disclosed in Note 1. General, we consolidate the operating results of Pullmantur and CDF Croisières de France on a two-month lag, which resulted in a two month reduction of capacity on a consolidated basis compared to the same period in 2012.

Concession revenues included in onboard and other revenues was $151.7 million in 2013 compared to $140.4 million for the same period in 2012.  The increase in concession revenues was primarily due to an increase in spending on a per passenger basis.

Cruise Operating Expenses

Total cruise operating expenses of $2.6 billion in 2013 increased $54.7 million or 2.1% from 2012.  Approximately $33.5 million of the increase was attributable to an increase in air expense on a per passenger basis and onboard and other expenses.  The increase in air expense was primarily due to itinerary changes.  The increase in onboard and other expenses was primarily due to increased expenses associated with shore excursions.  In addition, $28.7 million of this increase was attributable to the 1.1%

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increase in capacity mentioned above.  The increase in total cruise operating expenses was partially offset by the favorable effect of changes in foreign currency exchange rates related to our cruise operating expenses denominated in currencies other than the United States dollar of approximately $7.5 million.

Marketing, Selling and Administrative Expenses

Marketing, selling and administrative expenses for 2013 increased $21.5 million or 4.2% to $533.7 million from $512.2 million for 2012.  The increase was primarily due to an increase in advertising expenses.

Depreciation and Amortization Expenses

Depreciation and amortization expenses for 2013 increased $15.6 million or 4.3% to $375.5 million from $360.0 million for 2012.  The increase was primarily due to the addition of Celebrity Reflection which entered service in October 2012 and, to a lesser extent, new shipboard and shoreside additions associated with our ship revitalization projects and investments in technology.  The increase was partially offset by the favorable effect of changes in estimated useful lives and associated residual values for five ships which occurred during the first quarter of 2013 of approximately $3.9 million.

Other Income (Expense)

Interest expense, net of interest capitalized, decreased to $177.1 million in 2013 from $181.8 million in 2012.  The decrease was primarily due to lower interest rates.

Other expense decreased $10.4 million or 56.3% to $8.1 million in 2013 compared to $18.5 million for the same period in 2012.  The change in other expense was primarily due to the following:

·No fuel call option gain or loss in 2013 due to their effective termination in 2012, compared to a $7.5 million loss recorded in 2012; and

·Income of $7.3 million from our equity method investment in 2013 as compared to income of $3.1 million in 2012, for a net change of $4.2 million.

Net Yields

Net Yields increased 2.6% in 2013 compared to 2012 primarily due to an increase in ticket revenues, air revenues and onboard spending.  Net Yields increased 3.3% in 2013 compared to 2012 on a Constant Currency basis.

Net Cruise Costs

Net Cruise Costs increased 1.9% in 2013 compared to 2012 primarily due to the increase in advertising expenses. Net Cruise Costs per APCD increased 0.8% in 2013 compared to 2012.  Net Cruise Costs Excluding Fuel per APCD increased 0.9% in 2013 compared to 2012.  Net Cruise Costs per APCD increased 0.9% compared to 2012 on a Constant Currency basis. Net Cruise Costs Excluding Fuel per APCD increased 0.8% in 2013 compared to 2012 on a Constant Currency basis.

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Recently Adopted, and Future Application of, Accounting Standards

Refer to Note 2. Summary of Significant Accounting Policies to our consolidated financial statements for further information on Recently Adopted Accounting Standards and Recent Accounting Pronouncements.

Liquidity and Capital Resources

Sources and Uses of Cash

Cash flow generated from operations provides us with a significant source of liquidity. Net cash provided by operating activities increased $89.3 million to $672.8 million for the first six months of 2013 compared to $583.5 million for the same period in 2012. The change in cash provided by operating activities was primarily attributable to a $229.8 million increase in cash receipts from customer deposits and an increase of approximately $46.2 million in cash receipts from onboard spending, partially offset by the timing of payments to vendors in 2013 as compared to 2012.

Net cash used in investing activities was $444.9 million for the first six months of 2013 compared to $313.2 million for the same period in 2012. During the first six months of 2013, our use of cash was primarily related to capital expenditures of $396.1 million, up from $322.8 million for the same period in 2012. We also provided equity contributions to an unconsolidated affiliate of $35.8 million during 2013 that did not occur in 2012. In addition, during 2013 we paid $25.8 million on settlements on our foreign currency forward contracts, compared to proceeds of $4.6 million during 2012.

Net cash used in financing activities was $217.8 million for the first six months of 2013 compared to $315.1 million for the same period in 2012. This change was primarily due to an increase of $1.2 billion in debt proceeds offset by an increase of $1.1 billion in repayments of debt. The increase in debt proceeds was primarily due to borrowings of $1.0 billion on our revolving credit facilities during the first six months of 2013 as compared to $345.0 million in the same period in 2012. In addition, we borrowed €365.0 million, or approximately $474.5 million based on the exchange rate at June 30, 2013, under a previously committed unsecured term loan facility, during the first six months of 2013 that did not occur in 2012. The increase in repayments of debt were primarily due to a repayment of $550.0 million in unsecured senior notes in the first six months of 2013 that did not occur in 2012 and an increase of $545.0 million in repayments on our unsecured revolving credit facilities.

Future Capital Commitments

Our future capital commitments consist primarily of new ship orders.  As of June 30, 2013, we had three Quantum-class ships and one Oasis-class ship on order for our Royal Caribbean International brand with an aggregate capacity of approximately 17,850 berths.

As of June 30, 2013, the aggregate cost of our ships on order, including the conditional agreement for the third Quantum-class ship, was approximately $4.5 billion, of which we had deposited $288.8 million as of such date.  Approximately 56.4% of the aggregate cost was exposed to fluctuations in the euro exchange rate at June 30, 2013.  (See Note 7. Commitments and Contingencies and Note 10. Fair Value Measurements and Derivative Instruments to our consolidated financial statements under Item 1. Financial Statements).

As of June 30, 2013, we anticipated overall capital expenditures will be approximately $0.7 billion for 2013, $1.2 billion for 2014, $1.2 billion for 2015 and $2.0 billion for 2016.

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Contractual Obligations

As of June 30, 2013, our contractual obligations were as follows (in thousands):

	Payments due by period
			Less than		1-3		3-5		More than
	Total		1 year		years		years		5 years
Operating Activities:
Operating lease obligations(1)(2)	$	592,436	$	62,890	$	112,681	$	101,035	$	315,830
Interest on long-term debt(3)	1,154,983		251,170		342,336		184,299		377,178
Other(4)	731,007		198,439		254,651		181,480		96,437
Investing Activities:
Ship purchase obligations(5)	3,595,238		230,570		3,364,668		—		—
Financing Activities:
Long-term debt obligations (6)	8,202,573		1,899,214		2,263,907		1,906,302		2,133,150
Capital lease obligations (7)	51,535		7,254		8,964		5,474		29,843
Other (8)	83,103		29,306		39,709		11,329		2,759
Total	$	14,410,875	$	2,678,843	$	6,386,916	$	2,389,919	$	2,955,197

(1)We are obligated under noncancelable operating leases primarily for a ship, offices, warehouses and motor vehicles.

(2)Under the Brilliance of the Seas lease agreement, we may be required to make a termination payment of approximately £65.4 million, or approximately $99.2 million based on the exchange rate at June 30, 2013, if the lease is canceled in 2020.  This amount is included in the more than 5 years column.

(3)Long-term debt obligations mature at various dates through fiscal year 2027 and bear interest at fixed and variable rates. Interest on variable-rate debt is calculated based on forecasted debt balances, including interest swapped using the applicable rate at June 30, 2013.  Debt denominated in other currencies is calculated based on the applicable exchange rate at June 30, 2013.

(4)Amounts represent future commitments with remaining terms in excess of one year to pay for our usage of certain port facilities, marine consumables, services and maintenance contracts.

(5)Amounts represent contractual obligations with initial terms in excess of one year.  Amounts include the conditional agreement for our third Quantum-class ship.

(6)Amounts represent debt obligations with initial terms in excess of one year.

(7)Amounts represent capital lease obligations with initial terms in excess of one year.

(8)Amounts represent fees payable to sovereign guarantors in connection with certain of our export credit debt facilities and facility fees on our revolving credit facilities.

As a normal part of our business, depending on market conditions, pricing and our overall growth strategy, we continuously consider opportunities to enter into contracts for the building of additional ships.  We may also consider the sale of ships or the purchase of existing ships.  We continuously consider potential acquisitions and strategic alliances.  If any of these were to occur, they would be financed through the incurrence of additional indebtedness, the issuance of additional shares of equity securities or through cash flows from operations.

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Off-Balance Sheet Arrangements

In July 2002, we entered into an operating lease denominated in British pound sterling for the Brilliance of the Seas.  The lease payments vary based on sterling LIBOR and are included in other operating expenses in our consolidated statements of comprehensive income (loss). Brilliance of the Seas lease expense amounts were approximately £3.1 million and £4.1 million, or approximately $4.8 million and $6.5 million, for the quarter ended June 30, 2013 and June 30, 2012, respectively, and were approximately £6.1 million and £8.1 million, or approximately $9.3 million and $12.8 million for the six months ended June 30, 2013 and June 30, 2012, respectively.  The lease has a contractual life of 25 years; however, both the lessor and we have certain rights to cancel the lease at year 18 (i.e. 2020) upon advance notice given approximately one year prior to cancellation.  In the event of early termination at year 18, we have the option to cause the sale of the vessel at its fair value and to use the proceeds towards the applicable termination payment.  Alternatively, we could opt at such time to make a termination payment of approximately £65.4 million, or approximately $99.2 million based on the exchange rate at June 30, 2013 and relinquish our right to cause the sale of the vessel.  Under current circumstances we do not believe early termination of this lease is probable.

Under the Brilliance of the Seas operating lease, we have agreed to indemnify the lessor to the extent its after-tax return is negatively impacted by unfavorable changes in corporate tax rates, capital allowance deductions and certain unfavorable determinations which may be made by United Kingdom tax authorities. These indemnifications could result in an increase in our lease payments.  We are unable to estimate the maximum potential increase in our lease payments due to the various circumstances, timing or a combination of events that could trigger such indemnifications. The United Kingdom tax authorities are disputing the lessor’s accounting treatment of the lease and the lessor and tax authorities are in discussions on the matter.  If the characterization of the lease is ultimately determined to be incorrect, we could be required to indemnify the lessor under certain circumstances.  The lessor has advised us that they believe their characterization of the lease is correct. Based on the foregoing and our review of available information, we do not believe an indemnification payment is probable.  However, if the lessor loses its dispute and we are required to indemnify the lessor, we cannot at this time predict the impact that such an occurrence would have on our financial condition and results of operations.

In connection with the sale of Celebrity Mercury in February 2011, we and TUI AG each guaranteed repayment of 50% of an €180.0 million 5-year amortizing bank loan provided to TUI Cruises.  As of June 30, 2013, €144.0 million, or approximately $187.2 million based on the exchange rate at June 30, 2013, remains outstanding.  Based on current facts and circumstances, we do not believe potential obligations under this guarantee are probable.

TUI Cruises entered into construction agreements with STX Finland that include certain restrictions on each of our and TUI AG’s ability to reduce our current ownership interest in TUI Cruises below 37.5% through the construction periods for the first and second TUI newbuild vessels.  In addition, the credit agreements for the financing of the ships extend this restriction through 2019.

Some of the contracts that we enter into include indemnification provisions that obligate us to make payments to the counterparty if certain events occur.  These contingencies generally relate to changes in taxes, increased lender capital costs and other similar costs.  The indemnification clauses are often standard contractual terms and are entered into in the normal course of business.  There are no stated or notional amounts included in the indemnification clauses and we are not able to estimate the maximum potential amount of future payments, if any, under these indemnification clauses.  We have not been required to make any payments under such indemnification clauses in the past and, under current circumstances, we do not believe an indemnification obligation is probable.

Other than the items described above, we are not party to any other off-balance sheet arrangements, including guarantee contracts, retained or contingent interest, certain derivative instruments and variable interest entities, that either have, or are reasonably likely to have, a current or future material effect on our financial position.

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Funding Needs and Sources

We have significant contractual obligations of which the capital expenditures associated with our ship purchases and our debt service obligations represent our largest funding needs.  We have historically relied on a combination of cash flows provided by operations, drawdowns under our available credit facilities, the incurrence of additional debt and/or the refinancing of our existing debt and the issuance of additional shares of equity securities to fund these obligations.

We had a working capital deficit of $3.8 billion as of June 30, 2013 as compared to a working capital deficit of $3.2 billion as of December 31, 2012.  Included within our working capital deficit is $1.9 billion and $1.5 billion of current portion of long-term debt as of June 30, 2013 and December 31, 2012, respectively.  The increase in working capital deficit was due to the increase in current maturities of long-term debt.  Similar to others in our industry, we operate with a substantial working capital deficit.  This deficit is mainly attributable to the fact that, under our business model, a vast majority of our passenger ticket receipts are collected in advance of the applicable sailing date. These advance passenger receipts remain a current liability until the sailing date. The cash generated from these advance receipts is used interchangeably with cash on hand from other sources, such as our revolving credit facilities and other cash from operations. The cash received as advanced receipts can be used to fund operating expenses for the applicable future sailing or otherwise, pay down our revolving credit facilities, invest in long term investments or any other use of cash. In addition, we have a relatively low-level of accounts receivable and rapid turnover results in a limited investment in inventories.  We generate substantial cash flows from operations and our business model, along with our unsecured revolving credit facilities, has historically allowed us to maintain this working capital deficit and still meet our operating, investing and financing needs. We expect that we will continue to have working capital deficits in the future.

As of June 30, 2013, we have approximately $8.3 billion in long-term debt obligations, of which approximately $1.9 billion is due through June 30, 2014.  Also, we have approximately $772.4 million in contractual obligations, other than long-term debt, due through June 30, 2014.  We expect to fund these obligations through our existing liquidity, future financing arrangements and cash flows from operations.  As of June 30, 2013, our liquidity was $1.5 billion, consisting of approximately $205.2 million in cash and cash equivalents and $1.3 billion available under our unsecured credit facilities.  During 2013, it is likely we will secure additional liquidity in the capital and/or credit markets as part of our refinancing strategy for our remaining 2013 and 2014 maturities.  In addition, we may elect to fund our contractual obligations through other means if opportunities arise.

As of June 30, 2013, we have on order three Quantum-class ships and one Oasis-class ship.  The first and second Quantum-class ships and the Oasis-class ship have committed unsecured bank financing arrangements which include sovereign financing guarantees. We anticipate obtaining financing commitments for the third Quantum-class ship during the third quarter of 2013.

We anticipate that our cash flows from operations, our current available credit facilities and our current and anticipated financing arrangements, as described above, will be adequate to meet our capital expenditures and debt repayments over the next twelve-month period.

We continue our focus on ensuring adequate cash and liquidity.  We are focused on cost efficiency and continue to implement cost containment initiatives including a number of initiatives to reduce energy consumption and, by extension, fuel costs.  These include the design of more fuel efficient ships and the implementation of other hardware and energy efficiencies.

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If (i) any person other than A. Wilhelmsen AS. and Cruise Associates and their respective affiliates (the “Applicable Group”) acquires ownership of more than 33% of our common stock and the Applicable Group owns less of our common stock than such person, or (ii) subject to certain exceptions, during any 24-month period, a majority of the Board is no longer comprised of individuals who were members of the Board on the first day of such period, we may be obligated to prepay indebtedness outstanding under the majority of our credit facilities, which we may be unable to replace on similar terms.  Certain of our outstanding debt securities also contain change of control provisions that would be triggered by the acquisition of greater than 50% of our common stock by a person other than a member of the Applicable Group coupled with a ratings downgrade.  If this were to occur, it would have an adverse impact on our liquidity and operations.

Debt Covenants

Certain of our financing agreements contain covenants that require us, among other things, to maintain minimum net worth of at least $5.7 billion, a fixed charge coverage ratio of at least 1.25x and limit our net debt-to-capital ratio to no more than 62.5%.  The fixed charge coverage ratio is calculated by dividing net cash from operations for the past four quarters by the sum of dividend payments plus scheduled principal debt payments in excess of any new financings for the past four quarters.  Our minimum net worth and maximum net debt-to-capital calculations exclude the impact of accumulated other comprehensive loss on total shareholders’ equity. We are well in excess of all debt covenant requirements as of June 30, 2013.  The specific covenants and related definitions can be found in the applicable debt agreements, the majority of which have been previously filed with the Securities and Exchange Commission.

Item 3. Quantitative and Qualitative Disclosures About Market Risk

Interest Rate Risk

During the second quarter of 2013, we entered into interest rate swap agreements that effectively changed the interest rate on the $650.0 million unsecured senior notes due 2022, from a fixed rate of 5.25% to a LIBOR-based floating rate equal to LIBOR plus 3.63%, currently approximately 3.91%.  These interest rate swap agreements are accounted for as fair value hedges.

The notional amount of interest rate swap agreements related to outstanding debt and on our current unfunded financing arrangements as of June 30, 2013 and December 31, 2012 was $3.0 billion and $2.4 billion, respectively.

Foreign Currency Exchange Rate Risk

During the second quarter of 2013, we entered into foreign currency forward contracts to hedge €365.0 million of our €745.0 million 5.625% unsecured senior notes due January 2014. These foreign currency forward contracts are accounted for as cash flow hedges and mature in January 2014.

The notional amount of outstanding foreign exchange contracts including our forward contracts, cross currency swap agreements and collar options as of June 30, 2013 and December 31, 2012 was $1.6 billion and $1.2 billion, respectively.

Other than the aforementioned changes, there have been no significant developments or material changes with respect to our exposure to market risks previously reported in our Annual Report on Form 10-K

42

for the year ended December 31, 2012.  For a further discussion of our market risks, refer to Part II, Item 7A. Quantitative and Qualitative Disclosures About Market Risk in our Annual Report on Form 10-K for the year ended December 31, 2012.

Item 4. Controls and Procedures

Evaluation of Disclosure Controls and Procedures

Our management, with the participation of our Chairman and Chief Executive Officer and Senior Vice President, Chief Financial Officer, conducted an evaluation of the effectiveness of our disclosure controls and procedures, as such term is defined in Exchange Act Rule 13a-15(e), as of the end of the period covered by this report.  Based upon such evaluation, our Chairman and Chief Executive Officer and Senior Vice President, Chief Financial Officer concluded that those controls and procedures are effective to provide reasonable assurance that information required to be disclosed by us in the reports that we file or submit under the Exchange Act is accumulated and communicated to management, including our Chairman and Chief Executive Officer and our Senior Vice President, Chief Financial Officer, as appropriate, to allow timely decisions regarding required disclosure and are effective to provide reasonable assurance that such information is recorded, processed, summarized and reported within the time periods specified by the SEC’s rules and forms.

Changes in Internal Control Over Financial Reporting

There were no changes in our internal control over financial reporting identified in connection with the evaluation required by paragraph (d) of Exchange Act Rule 13a-15 during the quarter ended June 30, 2013 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

Inherent Limitations on Effectiveness of Controls

It should be noted that any system of controls, however well designed and operated, can provide only reasonable, and not absolute, assurance that the objectives of the system will be met. In addition, the design of any control system is based in part upon certain assumptions about the likelihood of future events. Because of these and other inherent limitations of control systems, there is only reasonable assurance that our controls will succeed in achieving their goals under all potential future conditions.

43

PART II. OTHER INFORMATION

Item 1. Legal Proceedings

As previously reported in our Annual Report on Form 10-K for the year ended December 31, 2012, a consolidated amended complaint was filed in the U.S. District Court of the Southern District of Florida on behalf of a purported class of purchasers of our common stock during the period from October 26, 2010 through July 27, 2011 against the Company and certain of our current and former officers.  The complaint alleged violations of Section 10(b) of the Securities Exchange Act of 1934 and SEC Rule 10b-5 as well as, in the case of the individual defendants, the control person provisions of the Securities Exchange Act.  We filed a motion to dismiss the complaint for failure to state a claim on April 9, 2012.  On April 18, 2013, the district judge granted our motion and ordered the case dismissed with prejudice.  Plaintiffs have the right to file a notice to appeal within thirty days from the date an appealable order is entered.

As previously reported in our Annual Report on Form 10-K for the year ended December 31, 2012, a class action complaint was filed in June 2011 against Royal Caribbean Cruises Ltd. in the United States District Court for the Southern District of Florida on behalf of a purported class of stateroom attendants employed onboard Royal Caribbean International cruise vessels alleging that they were required to pay other crew members to help with their duties in violation of the U.S. Seaman’s Wage Act.  In May 2012, the Court granted our motion to dismiss the complaint on the basis that the applicable collective bargaining agreement requires any such claims to be arbitrated. Plaintiffs have appealed this decision to the United States Court of Appeals, 11th Circuit. We believe the appeal is without merit as are the underlying claims made against us and we intend to vigorously defend ourselves against them.

Item 1A. Risk Factors

The risk factors that affect our business and financial results are discussed in “Item 1A. Risk Factors” in the 2012 Annual Report on Form 10-K and there has been no material change to these risk factors since previously disclosed.  We wish to caution the reader that the risk factors discussed in “Item 1A. Risk Factors” in our 2012 Annual Report on Form 10-K, and those described elsewhere in this report or other Securities and Exchange Commission filings, could cause future results to differ materially from those stated in any forward-looking statements.

44

Item 6. Exhibits

10.1	Facility Agreement, dated as of July 9, 2013, between Royal Caribbean Cruises Ltd., as the Borrower, the Lenders from time to time party thereto, Société Générale, as Facility Agent and Mandated Lead Arranger, BNP Paribas, as Documentation Bank and Mandated Lead Arranger, and HSBC France, as Mandated Lead Arranger (incorporated by reference to Exhibit 10.1 to the Company’s Current Report on Form 8-K filed with the Securities and Exchange Commission on July 12, 2013).
10.2	Employment Agreement dated May 20, 2013 between Royal Caribbean Cruises Ltd. and Jason T. Liberty. *
31.1	Certification of the Chairman and Chief Executive Officer pursuant to Rule 13a-14(a) of the Securities Exchange Act of 1934*
31.2	Certification of the Senior Vice President, Chief Financial Officer pursuant to Rule 13a-14(a) of the Securities Exchange Act of 1934*
32.1	Certifications of the Chairman and Chief Executive Officer and the Senior Vice President, Chief Financial Officer pursuant to Rule 13a-14(b) of the Securities Exchange Act of 1934 and Section 1350 of Chapter 63 of Title 18 of the United States Code**

*	Filed herewith
**	Furnished herewith

Interactive Data File

101	The following financial statements from Royal Caribbean Cruises Ltd.’s Quarterly Report on Form 10-Q for the quarter ended June 30, 2013, as filed with the SEC on July 26, 2013, formatted in XBRL, as follows:
	(i)	the Consolidated Statements of Comprehensive Income (Loss) for the quarter ended June 30, 2013 and 2012;
	(ii)	the Consolidated Statements of Comprehensive Income (Loss) for the six months ended June 30, 2013 and 2012;
	(iii)	the Consolidated Balance Sheets at June 30, 2013 and December 31, 2012;
	(iv)	the Consolidated Statements of Cash Flows for the six months ended June 30, 2013 and 2012; and
	(v)	the Notes to the Consolidated Financial Statements, tagged in summary and detail.

45

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)
	/s/ JASON T. LIBERTY
	Jason T. Liberty
	Senior Vice President,
	Chief Financial Officer
Date: July 26, 2013	(Principal Financial Officer and duly authorized signatory)

46

EX-31.1

Exhibit 31.1

CERTIFICATIONS

I, Richard D. Fain, certify that:

1.I have reviewed this quarterly report on Form 10-Q of Royal Caribbean Cruises Ltd.;

2.Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3.Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4.The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

a)Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

b)Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

c)Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

d)Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

5.The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):

a)All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

b)Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

Date:  July 26, 2013

/s/ RICHARD D. FAIN

Richard D. Fain

Chairman and

Chief Executive Officer

(Principal Executive Officer)

1

EX-31.2

Exhibit 31.2

CERTIFICATIONS

I, Jason T. Liberty, certify that:

1.I have reviewed this quarterly report on Form 10-Q of Royal Caribbean Cruises Ltd.;

2.Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3.Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4.The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

a)Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

b)Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

c)Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

d)Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

5.The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):

a)All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

b)Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

Date:  July 26, 2013

/s/ JASON T. LIBERTY

Jason T. Liberty

Senior Vice President,

Chief Financial Officer

(Principal Financial Officer)

1

EX-32.1

Exhibit 32.1

In connection with the quarterly report on Form 10-Q for the quarterly period ended June 30, 2013 as filed by Royal Caribbean Cruises Ltd. with the Securities and Exchange Commission on the date hereof (the “Report”), Richard D. Fain, Chairman and Chief Executive Officer, and Jason T. Liberty, Senior Vice President, Chief Financial Officer, each hereby certifies pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that to his knowledge:

1.the Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934, and

2.the information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of Royal Caribbean Cruises Ltd.

Date:  July 26, 2013

By:	/s/ RICHARD D. FAIN
	Richard D. Fain
	Chairman and
	Chief Executive Officer
	(Principal Executive Officer)
By:	/s/ JASON T. LIBERTY
	Jason T. Liberty
	Senior Vice President,
	Chief Financial Officer
	(Principal Financial Officer)

1

XML

Earnings Per Share (Tables)

6 Months Ended

Jun. 30, 2013

Earnings Per Share

Reconciliation Between Basic and Diluted Earnings Per Share

A reconciliation between basic and diluted earnings per share is as follows (in thousands, except per share data):

	Quarter Ended					Six Months Ended
	June 30,					June 30,
	2013		2012			2013		2012
Net income (loss) for basic and diluted earnings per share	$	24,747	$	(3,653	)	$	100,973	$	43,311
Weighted-average common shares outstanding	219,502		217,866			219,301		217,725
Dilutive effect of stock options, performance share awards and restricted stock awards	1,146		—			1,295		1,492
Diluted weighted-average shares outstanding	220,648		217,866			220,596		219,217
Basic earnings (loss) per share	$	0.11	$	(0.02	)	$	0.46	$	0.20
Diluted earnings (loss) per share	$	0.11	$	(0.02	)	$	0.46	$	0.20

XML

CONSOLIDATED BALANCE SHEETS (Parenthetical) (USD $)	Jun. 30, 2013	Dec. 31, 2012
CONSOLIDATED BALANCE SHEETS
Preferred stock, par value (in dollars per share)	$ 0.01	$ 0.01
Preferred stock, shares authorized	20,000,000	20,000,000
Preferred stock, shares outstanding	0	0
Common stock, par value (in dollars per share)	$ 0.01	$ 0.01
Common stock, shares authorized	500,000,000	500,000,000
Common stock, shares issued	229,919,883	229,080,109
Treasury stock, common shares	10,308,683	10,308,683

XML

Property and Equipment

6 Months Ended

Jun. 30, 2013

Property and Equipment

Property and Equipment

Note 5.  Property and Equipment

In March 2013, our conditional agreement with STX France S.A. to build the third Oasis-class ship for Royal Caribbean International became effective.  The ship will have a capacity of approximately 5,400 berths and is expected to enter service in the second quarter of 2016.  Pullmantur’s Atlantic Star, which has been out of operation since 2009, was transferred to an affiliate of STX France S.A. as part of the consideration.  The Atlantic Star was transferred at carrying value, which approximated its fair value on the date of its transfer.  The transfer did not result in a gain or a loss.

XML

Earnings Per Share (Details 2) (Options and performance shares) In Millions, unless otherwise specified	3 Months Ended		6 Months Ended
	Jun. 30, 2013	Jun. 30, 2012	Jun. 30, 2013	Jun. 30, 2012
Options and performance shares
Antidilutive securities excluded from computation of earnings per share
Shares not included in diluted earnings per share	2.4	5.1	2.4	3.1

XML

Commitments and Contingencies (Tables)

6 Months Ended

Jun. 30, 2013

Commitments and Contingencies

Expected Dates Ships on Order Will Enter Service and Their Approximate Berths

Ship	Expected to Enter Service	Approximate Berths
Royal Caribbean International –
Quantum-class:
Quantum of the Seas	4th Quarter 2014	4,150
Anthem of the Seas	2nd Quarter 2015	4,150
Unnamed	2nd Quarter 2016	4,150
Oasis-class:
Unnamed	2nd Quarter 2016	5,400
TUI Cruises –
Mein Schiff 3	2nd Quarter 2014	2,500
Mein Schiff 4	2nd Quarter 2015	2,500
	Total Berths	22,850

XML

Fair Value Measurements and Derivative Instruments (Details 4)	6 Months Ended			3 Months Ended		6 Months Ended
	Jun. 30, 2013 USD ($)	Dec. 31, 2012 USD ($)	Jun. 30, 2013 Unsecured senior notes 5.625% due 2014 EUR (€)	Jun. 30, 2013 Forward Contracts USD ($)	Jun. 30, 2012 Forward Contracts USD ($)	Jun. 30, 2013 Forward Contracts USD ($)	Jun. 30, 2012 Forward Contracts USD ($)	Jun. 30, 2013 Foreign currency forward EUR (€)
Gains and losses from derivatives involved in hedging relationships
Aggregate cost of ships on order, including the conditional agreement for a third Quantum - class ship	$ 4,500,000,000
Amount deposited for cost of ships on order, including the conditional agreement for a third Quantum - class ship	288,800,000
Percentage of aggregate cost exposed to fluctuations in the euro exchange rate	56.40%	49.70%
Amount of foreign currency forward contracts designated as cash flow hedge								365,000,000
Long term debt, principal amount			745,000,000
Interest rate on debt instrument (as a percent)			5.625%
Amount of foreign currency forward contracts not designated as hedging instruments				360,000,000		360,000,000
Change in fair value of foreign currency forward contracts recognized in earnings				(16,900,000)	(4,100,000)	(25,500,000)	4,200,000
Notional amount of outstanding foreign exchange contracts	$ 1,600,000,000	$ 1,200,000,000

XML

Goodwill and Other Assets (Details)	6 Months Ended			6 Months Ended		6 Months Ended
	Jun. 30, 2013 USD ($)	Jun. 30, 2012 USD ($)	Jun. 30, 2013 Pullmantur Air item	Jun. 30, 2013 Grand Bahamas Shipyard Ltd. USD ($)	Dec. 31, 2012 Grand Bahamas Shipyard Ltd. USD ($)	Jun. 30, 2013 TUI Cruises GmbH joint venture USD ($)	Jun. 30, 2013 TUI Cruises GmbH joint venture EUR (€)	Dec. 31, 2012 TUI Cruises GmbH joint venture USD ($)	Dec. 31, 2011 TUI Cruises GmbH joint venture EUR (€)
Goodwill and Other Assets
Percentage of ownership interest				40.00%		50.00%	50.00%
Investments in entity				$ 59,500,000	$ 59,300,000	$ 313,800,000		$ 287,000,000
Principal and interest payments received	11,993,000	11,813,000		2,500,000
Non controlling interest percentage			49.00%
Number of aircraft			4
Unsecured term loan							180,000,000
Debt, guaranteed percentage						50.00%	50.00%
Bank loan term						5 years	5 years
Line of credit provided to TUI Cruises									90,000,000
Amount outstanding under line of credit provided to TUI Cruises						81,700,000	62,900,000
Interest rate on line of credit provided to TUI Cruises (as a percent)						9.54%	9.54%
Term of loan provided to TUI Cruises						7 years	7 years
Amount outstanding on bank loan						$ 187,200,000	€ 144,000,000
Bank financing commitment percentage						80.00%	80.00%
Reduction of current ownership interest (as a percent)						37.50%	37.50%

XML

Property and Equipment (Details)	Jun. 30, 2013 item	Mar. 31, 2013 Oasis-class ship third item
Property and Equipment
Approximate Berths	22,850	5,400

XML

Fair Value Measurements and Derivative Instruments (Details 12) (USD $) In Millions, unless otherwise specified	6 Months Ended
	Jun. 30, 2013 Standard & Poor's, BBB- Rating Lower Limit	Jun. 30, 2013 Moody's, Baa3 Rating	Jun. 30, 2013 Standard & Poor's, BB Rating	Jun. 30, 2013 Moody's, Ba1 Rating	Jun. 30, 2013 Maturity of at least five years Lower Limit	Jun. 30, 2013 Interest rate contracts item	Dec. 31, 2012 Interest rate contracts
Derivative instruments disclosure
Credit ratings for senior debt	BBB-	Baa3	BB	Ba1
Number of derivative instruments						5
Interest rate instrument term					5 years
Aggregate fair value of all derivative instruments with credit-related contingent features in net liability positions						$ 61.4	$ 55.5

XML

Changes in Accumulated Other Comprehensive Loss (Details 2) (USD $) In Thousands, unless otherwise specified	3 Months Ended		6 Months Ended
	Jun. 30, 2013	Jun. 30, 2012	Jun. 30, 2013	Jun. 30, 2012
Amortization of unrecognized net periodic benefit costs:
Depreciation and amortization	$ 186,184	$ 180,514	$ 375,548	$ 359,906
Other income (expense)	(5,119)	(16,424)	(8,090)	(18,515)
Interest expense, net of interest capitalized	86,877	89,106	177,059	181,772
Fuel	232,471	237,961	474,123	466,955
Net Income (Loss)	24,747	(3,653)	100,973	43,311
Amount of Gain (Loss) Reclassified from Accumulated OCI into Income
Amortization of unrecognized net periodic benefit costs:
Net Income (Loss)	6,540		21,810
Gain (loss) on cash flow derivative hedges: | Amount of Gain (Loss) Reclassified from Accumulated OCI into Income
Amortization of unrecognized net periodic benefit costs:
Net Income (Loss)	7,834		23,104
Gain (loss) on cash flow derivative hedges: | Amount of Gain (Loss) Reclassified from Accumulated OCI into Income | Cross currency swaps
Amortization of unrecognized net periodic benefit costs:
Interest expense, net of interest capitalized	(880)		(1,751)
Gain (loss) on cash flow derivative hedges: | Amount of Gain (Loss) Reclassified from Accumulated OCI into Income | Foreign currency forward contracts
Amortization of unrecognized net periodic benefit costs:
Depreciation and amortization	(450)		(899)
Other income (expense)	(239)		(477)
Interest expense, net of interest capitalized	(5)		(5)
Gain (loss) on cash flow derivative hedges: | Amount of Gain (Loss) Reclassified from Accumulated OCI into Income | Fuel swaps
Amortization of unrecognized net periodic benefit costs:
Fuel	9,408		26,236
Amortization of defined benefit plans | Amount of Gain (Loss) Reclassified from Accumulated OCI into Income
Amortization of unrecognized net periodic benefit costs:
Actuarial loss	(876)		(876)
Prior service costs	(418)		(418)
Net Income (Loss)	$ (1,294)		$ (1,294)

XML

Fair Value Measurements and Derivative Instruments (Details 6) (USD $) In Thousands, unless otherwise specified	Jun. 30, 2013	Dec. 31, 2012
Asset Derivatives
Asset Derivatives	$ 81,561	$ 96,489
Liability Derivatives
Liability Derivatives	141,307	85,119
Designated as Hedging Instrument
Asset Derivatives
Asset Derivatives	67,614	83,797
Liability Derivatives
Liability Derivatives	120,239	64,939
Designated as Hedging Instrument | Collars | Other Assets
Asset Derivatives
Asset Derivatives		8,974
Designated as Hedging Instrument | Collars | Other long-term Liabilities
Liability Derivatives
Liability Derivatives	2,273
Not Designated as Hedging Instrument
Asset Derivatives
Asset Derivatives	13,947	12,692
Liability Derivatives
Liability Derivatives	21,068	20,180
Interest rate swaps | Designated as Hedging Instrument | Other Assets
Asset Derivatives
Asset Derivatives	44,639	5,099
Interest rate swaps | Designated as Hedging Instrument | Other long-term Liabilities
Liability Derivatives
Liability Derivatives	61,424	55,471
Foreign currency forward contracts | Designated as Hedging Instrument | Other Assets
Asset Derivatives
Asset Derivatives	8,024	11,564
Foreign currency forward contracts | Designated as Hedging Instrument | Derivative Financial Instruments
Asset Derivatives
Asset Derivatives		951
Foreign currency forward contracts | Designated as Hedging Instrument | Other long-term Liabilities
Liability Derivatives
Liability Derivatives	4,099	1,000
Foreign currency forward contracts | Designated as Hedging Instrument | Accrued expenses and other liabilities
Liability Derivatives
Liability Derivatives	3,304	338
Foreign currency forward contracts | Not Designated as Hedging Instrument | Other Assets
Asset Derivatives
Asset Derivatives	2,733	4,440
Foreign currency forward contracts | Not Designated as Hedging Instrument | Derivative Financial Instruments
Asset Derivatives
Asset Derivatives	7,559
Foreign currency forward contracts | Not Designated as Hedging Instrument | Other long-term Liabilities
Liability Derivatives
Liability Derivatives	12,809	11,475
Foreign currency forward contracts | Not Designated as Hedging Instrument | Accrued expenses and other liabilities
Liability Derivatives
Liability Derivatives	4,611
Fuel contracts | Designated as Hedging Instrument | Swaps | Other Assets
Asset Derivatives
Asset Derivatives	128	8,585
Fuel contracts | Designated as Hedging Instrument | Swaps | Derivative Financial Instruments
Asset Derivatives
Asset Derivatives	14,823	48,624
Fuel contracts | Designated as Hedging Instrument | Swaps | Other long-term Liabilities
Liability Derivatives
Liability Derivatives	36,995	6,369
Fuel contracts | Designated as Hedging Instrument | Swaps | Accrued expenses and other liabilities
Liability Derivatives
Liability Derivatives	12,144	1,761
Fuel contracts | Not Designated as Hedging Instrument | Swaps | Derivative Financial Instruments
Asset Derivatives
Asset Derivatives	6
Fuel contracts | Not Designated as Hedging Instrument | Swaps | Accrued expenses and other liabilities
Liability Derivatives
Liability Derivatives	59	475
Fuel contracts | Not Designated as Hedging Instrument | Options | Derivative Financial Instruments
Asset Derivatives
Asset Derivatives	3,649	8,252
Fuel contracts | Not Designated as Hedging Instrument | Options | Accrued expenses and other liabilities
Liability Derivatives
Liability Derivatives	$ 3,589	$ 8,230

XML

Commitments and Contingencies (Details 4) (USD $)	6 Months Ended
	Jun. 30, 2013
Commitments and Contingencies Disclosure
Stated or notional amounts included in the indemnification clauses	$ 0
Change of control provisions in debt covenants
Number of months considered to determine requirement of prepayment of debts	24 months
Line of Credit | Minimum
Change of control provisions in debt covenants
Debt instrument covenant, minimum percentage of ownership by a person	33.00%
Debt Securities | Minimum
Change of control provisions in debt covenants
Debt instrument covenant, minimum percentage of ownership by a person	50.00%

XML

Fair Value Measurements and Derivative Instruments (Details 9) (Cash flow hedge, USD $) In Thousands, unless otherwise specified	3 Months Ended		6 Months Ended
	Jun. 30, 2013	Jun. 30, 2012	Jun. 30, 2013	Jun. 30, 2012
Effect of derivative instruments involved in cash flow hedging on the consolidated financial statements
Amount of Gain (Loss) Recognized in OCI on Derivative (Effective Portion)	$ 25,376	$ (270,329)	$ 18,046	$ (90,387)
Amount of Gain (Loss) Reclassified from Accumulated OCI into Income (Effective Portion)	7,834	17,923	23,104	50,395
Amount of Gain (Loss) Recognized in Income on Derivative (Ineffective Portion and Amount Excluded from Effectiveness testing)	(3,281)	(4,739)	(3,952)	(4,202)
Cross currency swaps | Other income (expense)
Effect of derivative instruments involved in cash flow hedging on the consolidated financial statements
Amount of Gain (Loss) Recognized in OCI on Derivative (Effective Portion)		(8,783)		(12,370)
Amount of Gain (Loss) Reclassified from Accumulated OCI into Income (Effective Portion)		(9,800)		(12,721)
Amount of Gain (Loss) Recognized in Income on Derivative (Ineffective Portion and Amount Excluded from Effectiveness testing)		(234)		(234)
Cross currency swaps | Interest expense, net of interest capitalized
Effect of derivative instruments involved in cash flow hedging on the consolidated financial statements
Amount of Gain (Loss) Reclassified from Accumulated OCI into Income (Effective Portion)	(880)		(1,751)
Interest rate swaps | Other income (expense)
Effect of derivative instruments involved in cash flow hedging on the consolidated financial statements
Amount of Gain (Loss) Recognized in OCI on Derivative (Effective Portion)	80,800	(35,478)	93,488	(30,924)
Amount of Gain (Loss) Recognized in Income on Derivative (Ineffective Portion and Amount Excluded from Effectiveness testing)	373	(71)	427	(70)
Foreign currency forward contracts | Other income (expense)
Effect of derivative instruments involved in cash flow hedging on the consolidated financial statements
Amount of Gain (Loss) Reclassified from Accumulated OCI into Income (Effective Portion)	(239)	(239)	(477)	(477)
Amount of Gain (Loss) Recognized in Income on Derivative (Ineffective Portion and Amount Excluded from Effectiveness testing)	(5)	(16)	(10)	(9)
Foreign currency forward contracts | Depreciation and amortization expenses
Effect of derivative instruments involved in cash flow hedging on the consolidated financial statements
Amount of Gain (Loss) Recognized in OCI on Derivative (Effective Portion)	6,087	(47,758)	(8,995)	(30,050)
Amount of Gain (Loss) Reclassified from Accumulated OCI into Income (Effective Portion)	(450)	(196)	(899)	(392)
Foreign currency forward contracts | Interest expense, net of interest capitalized
Effect of derivative instruments involved in cash flow hedging on the consolidated financial statements
Amount of Gain (Loss) Reclassified from Accumulated OCI into Income (Effective Portion)	(5)		(5)
Foreign currency collar options | Depreciation and amortization expenses
Effect of derivative instruments involved in cash flow hedging on the consolidated financial statements
Amount of Gain (Loss) Recognized in OCI on Derivative (Effective Portion)	3,714	(12,564)	(11,247)	(12,564)
Fuel contracts | Swaps | Other income (expense)
Effect of derivative instruments involved in cash flow hedging on the consolidated financial statements
Amount of Gain (Loss) Recognized in Income on Derivative (Ineffective Portion and Amount Excluded from Effectiveness testing)	(3,649)	(4,418)	(4,369)	(3,889)
Fuel contracts | Swaps | Fuel cost
Effect of derivative instruments involved in cash flow hedging on the consolidated financial statements
Amount of Gain (Loss) Recognized in OCI on Derivative (Effective Portion)	(65,225)	(165,746)	(55,200)	(4,479)
Amount of Gain (Loss) Reclassified from Accumulated OCI into Income (Effective Portion)	$ 9,408	$ 28,158	$ 26,236	$ 63,985

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Long-Term Debt (Details) In Millions, unless otherwise specified		1 Months Ended			6 Months Ended
	Jun. 30, 2013 Credit agreement USD ($)	Mar. 31, 2013 Revolving credit facility due July 2016 USD ($)	Jul. 31, 2013 Unsecured term loan Oasis-class ship third USD ($)	Jul. 31, 2013 Unsecured term loan Oasis-class ship third EUR (€)	Jun. 30, 2013 Unsecured Euro-denominated term loan facility USD ($)	Jun. 30, 2013 Unsecured Euro-denominated term loan facility EUR (€)
Long-Term Debt
Borrowing capacity	$ 1,700.0	$ 1,100.0	$ 1,200.0	€ 892.2
Increase in capacity		20.0
Floating rate base			EURIBOR	EURIBOR	EURIBOR	EURIBOR
Long-term debt					$ 474.5	€ 365.0
Margin on floating rate base (as a percent)			1.15%	1.15%	3.00%	3.00%
Percentage of unsecured term loan guaranteed			100.00%	100.00%
Unsecured term loan, amortization period			12 years	12 years
Interest rate on debt instrument (as a percent)			2.60%	2.60%

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General

6 Months Ended

Jun. 30, 2013

General

General

Note 1. General

Description of Business

We are a global cruise company.  We own Royal Caribbean International, Celebrity Cruises, Pullmantur, Azamara Club Cruises, CDF Croisières de France and a 50% joint venture interest in TUI Cruises.

Basis for Preparation of Consolidated Financial Statements

The unaudited consolidated financial statements are prepared in accordance with accounting principles generally accepted in the United States of America (“GAAP”).  Estimates are required for the preparation of financial statements in accordance with these principles.  Actual results could differ from these estimates.  See Note 2. Summary of Significant Accounting Policies in this Quarterly Report on Form 10-Q and in our Annual Report on Form 10-K for the year ended December 31, 2012 for a discussion of our significant accounting policies.

All significant intercompany accounts and transactions are eliminated in consolidation. We consolidate entities over which we have control, usually evidenced by a direct ownership interest of greater than 50%, and variable interest entities where we are determined to be the primary beneficiary. See Note 6. Goodwill and Other Assets for further information regarding our variable interest entities. For affiliates we do not control but over which we have significant influence on financial and operating policies, usually evidenced by a direct ownership interest from 20% to 50%, the investment is accounted for using the equity method.  We consolidate the operating results of Pullmantur and CDF Croisières de France on a two-month lag to allow for more timely preparation of our consolidated financial statements.  No material events or transactions affecting Pullmantur or CDF Croisières de France have occurred during the two-month lag period of May and June 2013 that would require disclosure or adjustment to our consolidated financial statements as of and for the quarter ended June 30, 2013.

We believe the accompanying unaudited consolidated financial statements contain all normal recurring accruals necessary for a fair statement.  Our revenues are seasonal and results for interim periods are not necessarily indicative of results for the entire year

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Earnings Per Share

6 Months Ended

Jun. 30, 2013

Earnings Per Share

Earnings Per Share

Note 3. Earnings Per Share

A reconciliation between basic and diluted earnings per share is as follows (in thousands, except per share data):

	Quarter Ended					Six Months Ended
	June 30,					June 30,
	2013		2012			2013		2012
Net income (loss) for basic and diluted earnings per share	$	24,747	$	(3,653	)	$	100,973	$	43,311
Weighted-average common shares outstanding	219,502		217,866			219,301		217,725
Dilutive effect of stock options, performance share awards and restricted stock awards	1,146		—			1,295		1,492
Diluted weighted-average shares outstanding	220,648		217,866			220,596		219,217
Basic earnings (loss) per share	$	0.11	$	(0.02	)	$	0.46	$	0.20
Diluted earnings (loss) per share	$	0.11	$	(0.02	)	$	0.46	$	0.20

Diluted earnings per share for the quarter and six months ended June 30, 2013 did not reflect options to purchase an aggregate of 2.4 million shares because the effect of including them would have been antidilutive.  Diluted earnings per share for the quarter and six months ended June 30, 2012 did not reflect options to purchase an aggregate of 5.1 million and 3.1 million shares, respectively, because the effect of including them would have been antidilutive.

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Goodwill and Other Assets

6 Months Ended

Jun. 30, 2013

Goodwill and Other Assets

Goodwill and Other Assets

Note 6. Goodwill and Other Assets

We believe no events or circumstances have occurred subsequent to our annual impairment evaluation that would require us to perform interim testing of our goodwill, trademarks or trade names as of June 30, 2013.

Variable Interest Entities

A Variable Interest Entity (“VIE”) is an entity in which the equity investors have not provided enough equity to finance the entity’s activities or the equity investors (1) cannot directly or indirectly make decisions about the entity’s activities through their voting rights or similar rights; (2) do not have the obligation to absorb the expected losses of the entity; (3) do not have the right to receive the expected residual returns of the entity; or (4) have voting rights that are not proportionate to their economic interests and the entity’s activities involve or are conducted on behalf of an investor with a disproportionately small voting interest.

We have determined that Grand Bahama Shipyard Ltd. (“Grand Bahama”), a ship repair and maintenance facility in which we have a 40% noncontrolling interest, is a VIE. The facility serves cruise and cargo ships, oil and gas tankers, and offshore units.  We utilize this facility, among other ship repair facilities, for our regularly scheduled drydocks and certain emergency repairs as may be required.  We have determined that we are not the primary beneficiary of this facility, as we do not have the power to direct the activities that most significantly impact the facility’s economic performance. Accordingly, we do not consolidate this entity and we account for this investment under the equity method of accounting. As of June 30, 2013 and December 31, 2012, the net book value of our investment in Grand Bahama, including equity and loans, was approximately $59.5 million and $59.3 million, respectively, which is also our maximum exposure to loss as we are not contractually required to provide any financial or other support to the facility.  The majority of our loans to Grand Bahama are in non-accrual status and the majority of this amount is included within other assets in our consolidated balance sheets.  During the first six months of 2013, we received approximately $2.5 million in principal and interest payments related to loans that are in accrual status from Grand Bahama and recorded income associated with our investment in Grand Bahama.  We monitor credit risk associated with these loans through our participation on Grand Bahama’s board of directors along with our review of Grand Bahama’s financial statements and projected cash flows.  Based on this review, we believe the risk of loss associated with these loans was not probable as of June 30, 2013.

In conjunction with our acquisition of Pullmantur in 2006, we obtained a 49% noncontrolling interest in Pullmantur Air, S.A. (“Pullmantur Air”), a small air business that operates four aircraft in support of Pullmantur’s operations. We have determined Pullmantur Air is a VIE for which we are the primary beneficiary as we have the power to direct the activities that most significantly impact its economic performance and we are obligated to absorb its losses. In accordance with authoritative guidance, we have consolidated the assets and liabilities of Pullmantur Air.  We do not separately disclose the assets and liabilities of Pullmantur Air as they are immaterial to our June 30, 2013 and December 31, 2012 consolidated financial statements.

We have determined that TUI Cruises GmbH, our 50%-owned joint venture, which operates the brand TUI Cruises, is a VIE. As of June 30, 2013 and December 31, 2012, our investment in TUI Cruises, including equity and loans, was approximately $313.8 million and $287.0 million, respectively, and the majority of this amount was included within other assets in our consolidated balance sheets.  In addition, in conjunction with our sale of Celebrity Mercury to TUI Cruises in 2011, we and TUI AG each guaranteed the repayment of 50% of an €180.0 million 5-year bank loan provided to TUI Cruises (refer to further details below).  Our investment amount and the potential obligations under this guarantee are substantially our maximum exposure to loss.  We have determined that we are not the primary beneficiary of TUI Cruises.  We believe that the power to direct the activities that most significantly impact TUI Cruises’ economic performance are shared between ourselves and our joint venture partner, TUI AG.  All the significant operating and financial decisions of TUI Cruises require the consent of both parties which we believe creates shared power over TUI Cruises.  Accordingly, we do not consolidate this entity and account for this investment under the equity method of accounting.

In connection with our sale of Celebrity Mercury to TUI Cruises in 2011, we provided a debt facility to TUI Cruises in the amount of up to €90.0 million.  The outstanding principal amount of the facility as of June 30, 2013 was €62.9 million, or $81.7 million based on the exchange rate at June 30, 2013.  The loan bears interest at the rate of 9.54% per annum, is payable over seven years, is 50% guaranteed by TUI AG (our joint venture partner) and is secured by second mortgages on both of TUI Cruises’ ships, Mein Schiff 1 and Mein Schiff 2.  As of June 30, 2013, TUI Cruises’ 5-year bank loan discussed above had a remaining balance of €144.0 million, or approximately $187.2 million based on the exchange rate at June 30, 2013.  The bank loan amortizes quarterly and is secured by first mortgages on both Mein Schiff 1 and Mein Schiff 2. Based on current facts and circumstances, we do not believe potential obligations under our guarantee of TUI Cruises’ bank loan are probable.

During 2011 and 2012, TUI Cruises entered into construction agreements with STX Finland to build its first and second newbuild ships, scheduled for delivery in the second quarter of 2014 and the second quarter of 2015, respectively.  TUI Cruises has entered into credit agreements for the financing of up to 80% of the contract price of each ship. The remaining portion of the contract price of the ships will be funded through either TUI Cruises’ cash flows from operations or loans and/or equity contributions from us and TUI AG.  The construction agreements for the ships include certain restrictions on each of our and TUI AG’s ability to reduce our current ownership interest in TUI Cruises below 37.5% through the construction periods.  In addition, the credit agreements extend this restriction through 2019.

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Long-Term Debt

6 Months Ended

Jun. 30, 2013

Long-Term Debt

Long-Term Debt

Note 4. Long-Term Debt

In March 2013, we increased the capacity of our revolving credit facility due July 2016 by $20.0 million, bringing our total capacity under this facility to $1.1 billion. As of June 30, 2013, we have an aggregate revolving borrowing capacity of $1.7 billion.

In June 2013, we borrowed €365.0 million, or approximately $474.5 million based on the exchange rate at June 30, 2013, under a previously committed unsecured term loan facility.  The loan is due and payable at maturity in July 2017.  Interest on the loan accrues at a floating rate based on EURIBOR plus the applicable margin.  The applicable margin varies with our debt rating and was 3.0% as of June 30, 2013.  The proceeds of this loan were used to repay amounts outstanding under our unsecured revolving credit facilities. The borrowing was part of our refinancing strategy for our remaining maturities in 2013 and 2014.

In July 2013, we entered into a credit agreement for the financing of the third Oasis-class ship, which is scheduled for delivery in the second quarter of 2016.  The credit agreement makes available to us an unsecured term loan in an amount of €892.2 million, or approximately $1.2 billion, based on the exchange rate at June 30, 2013.  Compagnie Francaise d’Assurance pour le Commerce Extérieur (“COFACE”), the official export credit agency of France, has agreed to guarantee to the lenders payment of 100% of the financing.  The loan amortizes semi-annually and will mature 12 years following delivery of the ship.  Interest on the loan will accrue at our election at either a fixed rate of 2.6% or a floating rate at EURIBOR plus a margin of 1.15%.

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Fair Value Measurements and Derivative Instruments (Details 7) (Foreign currency debt, Pullmantur and TUI Cruises) In Thousands, unless otherwise specified	Jun. 30, 2013 USD ($)	Jun. 30, 2013 EUR (€)	Dec. 31, 2012 USD ($)	Dec. 31, 2012 EUR (€)	Jun. 30, 2013 Current portion of long-term debt USD ($)	Dec. 31, 2012 Current portion of long-term debt USD ($)	Jun. 30, 2013 Long-term debt USD ($)	Dec. 31, 2012 Long-term debt USD ($)
Net investment hedge
Carrying Value of Non-derivative instrument Designated as hedging instrument	$ 651,869	€ 501,500	$ 635,109	€ 481,700	$ 522,343	$ 17,516	$ 129,526	$ 617,593

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Commitments and Contingencies (Details) (USD $)	6 Months Ended
	Jun. 30, 2013 item	Dec. 31, 2012
Commitments and Contingencies
Aggregate cost of ships expected to enter service	$ 4,500,000,000
Deposit for the purchase of ships expected to enter service	288,800,000
Percentage of aggregate cost exposed to fluctuations in the euro exchange rate	56.40%	49.70%
Approximate Berths	22,850
Quantum of the Seas facility
Commitments and Contingencies
Approximate Berths	4,150
Anthem of the Seas facility
Commitments and Contingencies
Approximate Berths	4,150
Quantum-class ship: Unnamed
Commitments and Contingencies
Approximate Berths	4,150
Oasis-class: Unnamed
Commitments and Contingencies
Approximate Berths	5,400
TUI Cruises - Mein Schiff 3
Commitments and Contingencies
Approximate Berths	2,500
TUI Cruises - Mein Schiff 4
Commitments and Contingencies
Approximate Berths	2,500
TUI Cruises
Commitments and Contingencies
Percentage of ownership interest	50.00%
Number of ships on order	6
Cruise ships on order
Commitments and Contingencies
Aggregate cost of ships expected to enter service	4,500,000,000
Deposit for the purchase of ships expected to enter service	$ 288,800,000
Percentage of aggregate cost exposed to fluctuations in the euro exchange rate	56.40%

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Shareholders' Equity (Details) (USD $)	3 Months Ended
	Jun. 30, 2013	Mar. 31, 2013	Jun. 30, 2012	Mar. 31, 2012
Shareholders' Equity
Declared and paid cash dividend on common stock (in dollars per share)	$ 0.12	$ 0.12	$ 0.10	$ 0.10
Prior quarter dividend paid (in dollars per share)				$ 0.10

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Fair Value Measurements and Derivative Instruments (Details 3) (USD $)			6 Months Ended	3 Months Ended	6 Months Ended	12 Months Ended	3 Months Ended	6 Months Ended	12 Months Ended	6 Months Ended		6 Months Ended		6 Months Ended
	Jun. 30, 2013	Dec. 31, 2012	Jun. 30, 2013 Interest rate swaps	Jun. 30, 2013 Interest rate swaps Unsecured senior notes 5.25% due 2022	Jun. 30, 2013 Interest rate swaps Fair Value Hedging 5.41% Fixed rate debt	Dec. 31, 2012 Interest rate swaps Fair Value Hedging 5.41% Fixed rate debt	Jun. 30, 2013 Interest rate swaps Fair Value Hedging Unsecured senior notes 5.25% due 2022	Jun. 30, 2013 Interest rate swaps Cash flow hedge Celebrity Reflection floating rate debt	Dec. 31, 2012 Interest rate swaps Cash flow hedge Celebrity Reflection floating rate debt	Jun. 30, 2013 Interest rate swaps Cash flow hedge Quantum of the Seas facility	Jun. 30, 2013 Interest rate swaps Cash flow hedge Quantum of the Seas facility Scenario forecast	Jun. 30, 2013 Interest rate swaps Cash flow hedge Anthem of the Seas facility	Jun. 30, 2013 Interest rate swaps Cash flow hedge Anthem of the Seas facility Scenario forecast	Jun. 30, 2013 Foreign exchange contracts	Jun. 30, 2013 Fuel contracts
Derivative instruments disclosure
Exposure under foreign currency forward contracts, foreign currency collar options, fuel call options, interest rate and fuel swap agreements	$ 16,100,000	$ 60,800,000
Derivative instrument, contractual life			3 years											3 years	4 years
Percentage of long-term debt with fixed interest rate	38.60%	45.80%
Unsecured term loan					420,000,000	420,000,000	650,000,000
Debt amount					297,500,000
Interest rate on hedged debt (as a percent)					5.41%	5.41%	5.25%
Derivative floating rate base					LIBOR	LIBOR	LIBOR
Derivative variable rate of interest (as a percent)					4.30%		3.91%
Anticipated loan balance								627,200,000	627,200,000	735,000,000		725,000,000
Additional interest above LIBOR rate (as a percent)							3.63%	0.40%	0.40%	1.30%		1.30%
Debt floating rate base				LIBOR				LIBOR	LIBOR	LIBOR		LIBOR
Additional interest above LIBOR rate (as a percent)					3.87%	3.87%
Fixed rate on converted debt (as a percent)								2.85%	2.85%		3.74%		3.86%
Notional amount of outstanding debt related to interest rate swap	$ 3,000,000,000	$ 2,400,000,000

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Fair Value Measurements and Derivative Instruments (Details 11) (USD $) In Thousands, unless otherwise specified	3 Months Ended		6 Months Ended
	Jun. 30, 2013	Jun. 30, 2012	Jun. 30, 2013	Jun. 30, 2012
Derivative Instruments
Amount of Gain (Loss) Recognized in Income on Derivative	$ (18,851)	$ (15,791)	$ (27,195)	$ (4,736)
Foreign exchange contracts | Other income (expense)
Derivative Instruments
Amount of Gain (Loss) Recognized in Income on Derivative	(18,669)	(3,876)	(27,280)	4,497
Fuel contracts | Fuel swaps | Other income (expense)
Derivative Instruments
Amount of Gain (Loss) Recognized in Income on Derivative	(61)	(1,763)	48	(1,763)
Fuel contracts | Options | Other income (expense)
Derivative Instruments
Amount of Gain (Loss) Recognized in Income on Derivative	$ (121)	$ (10,152)	$ 37	$ (7,470)

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CONSOLIDATED BALANCE SHEETS (USD $) In Thousands, unless otherwise specified	Jun. 30, 2013	Dec. 31, 2012
Current assets
Cash and cash equivalents	$ 205,174	$ 194,855
Trade and other receivables, net	310,051	281,421
Inventories	141,440	146,295
Prepaid expenses and other assets	270,392	207,662
Derivative financial instruments	26,037	57,827
Total current assets	953,094	888,060
Property and equipment, net	17,511,913	17,451,034
Goodwill	430,666	432,975
Other assets	1,055,121	1,055,861
Total assets	19,950,794	19,827,930
Current liabilities
Current portion of long-term debt	1,906,468	1,519,483
Accounts payable	314,197	351,587
Accrued interest	75,107	106,366
Accrued expenses and other liabilities	541,699	541,722
Customer deposits	1,874,704	1,546,993
Total current liabilities	4,712,175	4,066,151
Long-term debt	6,347,640	6,970,464
Other long-term liabilities	524,720	482,566
Commitments and contingencies (Note 7)
Shareholders' equity
Preferred stock ($0.01 par value; 20,000,000 shares authorized; none outstanding)
Common stock ($0.01 par value; 500,000,000 shares authorized; 229,919,883 and 229,080,109 shares issued, June 30, 2013 and December 31, 2012, respectively)	2,299	2,291
Paid-in capital	3,125,172	3,109,887
Retained earnings	5,792,568	5,744,791
Accumulated other comprehensive loss	(140,076)	(134,516)
Treasury stock (10,308,683 common shares at cost, June 30, 2013 and December 31, 2012)	(413,704)	(413,704)
Total shareholders' equity	8,366,259	8,308,749
Total liabilities and shareholders' equity	$ 19,950,794	$ 19,827,930

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Changes in Accumulated Other Comprehensive Loss

6 Months Ended

Jun. 30, 2013

Changes in Accumulated Other Comprehensive Loss

Changes in Accumulated Other Comprehensive Loss

Note 9. Changes in Accumulated Other Comprehensive Loss

The following table presents the changes in accumulated other comprehensive loss by component for the six months ended June 30, 2013 (in thousands):

	Changes related to cash flow derivative hedges			Changes in defined benefit plans			Foreign currency translation adjustments			Accumulated other comprehensive loss
Accumulated comprehensive loss at beginning of the year	$	(84,505	)	$	(34,823	)	$	(15,188	)	$	(134,516	)
Other comprehensive income (loss) before reclassifications	18,046			3,999			(5,795		)	16,250
Amounts reclassified from accumulated other comprehensive loss	(23,104		)	1,294			—			(21,810		)
Net current-period other comprehensive (loss) income	(5,058		)	5,293			(5,795		)	(5,560		)
Ending balance	$	(89,563	)	$	(29,530	)	$	(20,983	)	$	(140,076	)

The following table presents reclassifications out of accumulated other comprehensive loss for the quarter and six months ended June 30, 2013 (in thousands):

	Amount of Gain (Loss) Reclassified from Accumulated OCl into Income
Details about Accumulated Other Comprehensive Income Components	Quarter Ended June 30, 2013			Six Months Ended June 30, 2013			Affected Line Item in Statements of Comprehensive Income (Loss)
Gain (loss) on cash flow derivative hedges:
Cross currency swaps	$	(880	)	$	(1,751	)	Interest expense, net of interest capitalized
Foreign currency forward contracts	(450		)	(899		)	Depreciation and amortization expenses
Foreign currency forward contracts	(239		)	(477		)	Other income (expense)
Foreign currency forward contracts	(5		)	(5		)	Interest expense, net of interest capitalized
Fuel swaps	9,408			26,236			Fuel
	$	7,834		$	23,104
Amortization of defined benefit plans:
Actuarial loss	$	(876	)	$	(876	)	Payroll and related
Prior service costs	(418		)	(418		)	Payroll and related
	$	(1,294	)	$	(1,294	)
Total reclassifications for the period	$	6,540		$	21,810

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CONSOLIDATED STATEMENTS OF CASH FLOWS (USD $) In Thousands, unless otherwise specified	6 Months Ended
	Jun. 30, 2013	Jun. 30, 2012
Operating Activities
Net income	$ 100,973	$ 43,311
Adjustments:
Depreciation and amortization	375,548	359,906
Loss on derivative instruments not designated as hedges	25,494	3,278
Changes in operating assets and liabilities:
Decrease in trade and other receivables, net	21,084	56,651
Decrease (increase) in inventories	4,679	(2,451)
Increase in prepaid expenses and other assets	(53,555)	(58,495)
(Decrease) increase in accounts payable	(36,265)	12,348
Decrease in accrued interest	(31,259)	(37,377)
Decrease in accrued expenses and other liabilities	(6,513)	(28,505)
Increase in customer deposits	272,329	224,873
Other, net	273	9,980
Net cash provided by operating activities	672,788	583,519
Investing Activities
Purchases of property and equipment	(396,073)	(322,751)
Cash (paid) received on settlement of derivative financial instruments	(25,843)	4,646
Equity contribution to unconsolidated affiliate	(35,757)
Cash payments received on loan to unconsolidated affiliate	11,993	11,813
Other, net	781	(6,877)
Net cash used in investing activities	(444,899)	(313,169)
Financing Activities
Debt proceeds	1,519,464	345,000
Debt issuance costs	(20,554)	(21,730)
Repayments of debt	(1,670,248)	(575,585)
Dividends paid	(54,098)	(65,293)
Proceeds from exercise of common stock options	6,918	1,768
Other, net	742	774
Net cash used in financing activities	(217,776)	(315,066)
Effect of exchange rate changes on cash	206	(5,261)
Net increase (decrease) in cash and cash equivalents	10,319	(49,977)
Cash and cash equivalents at beginning of period	194,855	262,186
Cash and cash equivalents at end of period	205,174	212,209
Cash paid during the period for:
Interest, net of amount capitalized	199,288	194,341
Non cash Investing Activities
Purchases of property and equipment through asset trade in	$ 46,375

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CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS) (USD $) In Thousands, except Per Share data, unless otherwise specified	3 Months Ended		6 Months Ended
	Jun. 30, 2013	Jun. 30, 2012	Jun. 30, 2013	Jun. 30, 2012
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS)
Passenger ticket revenues	$ 1,366,713	$ 1,332,207	$ 2,760,491	$ 2,684,445
Onboard and other revenues	516,054	488,797	1,033,496	971,039
Total revenues	1,882,767	1,821,004	3,793,987	3,655,484
Cruise operating expenses:
Commissions, transportation and other	316,506	307,697	639,443	628,435
Onboard and other	140,710	130,981	262,197	238,576
Payroll and related	208,975	206,519	418,898	416,633
Food	112,530	109,300	232,013	222,925
Fuel	232,471	237,961	474,123	466,955
Other operating	312,427	303,556	579,135	577,602
Total cruise operating expenses	1,323,619	1,296,014	2,605,809	2,551,126
Marketing, selling and administrative expenses	259,626	247,571	533,660	512,172
Depreciation and amortization expenses	186,184	180,514	375,548	359,906
Operating Income	113,338	96,905	278,970	232,280
Other income (expense):
Interest income	3,405	4,972	7,152	11,318
Interest expense, net of interest capitalized	(86,877)	(89,106)	(177,059)	(181,772)
Other expense	(5,119)	(16,424)	(8,090)	(18,515)
Total other income (expense)	(88,591)	(100,558)	(177,997)	(188,969)
Net Income (Loss)	24,747	(3,653)	100,973	43,311
Earnings (Loss) per Share:
Basic (in dollars per share)	$ 0.11	$ (0.02)	$ 0.46	$ 0.20
Diluted (in dollars per share)	$ 0.11	$ (0.02)	$ 0.46	$ 0.20
Weighted-Average Shares Outstanding:
Basic (in shares)	219,502	217,866	219,301	217,725
Diluted (in shares)	220,648	217,866	220,596	219,217
Comprehensive Income (Loss)
Net Income (Loss)	24,747	(3,653)	100,973	43,311
Other comprehensive income (loss):
Foreign currency translation adjustments	(1,551)	(12,361)	(5,795)	(9,021)
Change in defined benefit plans	5,293		5,293
Gain (loss) on cash flow derivative hedges	17,542	(288,252)	(5,058)	(140,782)
Total other comprehensive income (loss)	21,284	(300,613)	(5,560)	(149,803)
Comprehensive Income (Loss)	$ 46,031	$ (304,266)	$ 95,413	$ (106,492)

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Commitments and Contingencies (Details 2)	6 Months Ended	1 Months Ended
	Jun. 30, 2013	Sep. 08, 2011 Alleged Securities Exchange Act violations item
Commitments and Contingencies
Number of purported class action lawsuits filed		3
Minimum period of right to file a notice to appeal	30 days

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Earnings Per Share (Details) (USD $) In Thousands, except Per Share data, unless otherwise specified	3 Months Ended		6 Months Ended
	Jun. 30, 2013	Jun. 30, 2012	Jun. 30, 2013	Jun. 30, 2012
Earnings Per Share
Net income (loss) for basic and diluted earnings per share (in dollars)	$ 24,747	$ (3,653)	$ 100,973	$ 43,311
Weighted-average common shares outstanding	219,502	217,866	219,301	217,725
Dilutive effect of stock options, performance share awards and restricted stock awards (in shares)	1,146		1,295	1,492
Diluted weighted-average shares outstanding	220,648	217,866	220,596	219,217
Basic earnings (loss) per share (in dollars per share)	$ 0.11	$ (0.02)	$ 0.46	$ 0.20
Diluted earnings (loss) per share (in dollars per share)	$ 0.11	$ (0.02)	$ 0.46	$ 0.20

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Fair Value Measurements and Derivative Instruments (Details 10) (Foreign currency debt, USD $) In Thousands, unless otherwise specified	3 Months Ended		6 Months Ended
	Jun. 30, 2013	Jun. 30, 2012	Jun. 30, 2013	Jun. 30, 2012
Net investment hedge
Amount of Gain (Loss) Recognized in OCI (Effective Portion)	$ (7,978)	$ 35,888	$ 4,754	$ 15,118
Other income (expense)
Net investment hedge
Amount of Gain (Loss) Recognized in OCI (Effective Portion)	$ (7,978)	$ 35,888	$ 4,754	$ 15,118

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Fair Value Measurements and Derivative Instruments (Details 5) (Fuel Price Risk, USD $) In Millions, unless otherwise specified	Jun. 30, 2013	Dec. 31, 2012
Derivative disclosures
Estimated unrealized net gains associated with cash flow hedges pertaining to fuel swap agreements expected to be reclassified to earnings from accumulated other comprehensive income loss	$ 4.4	$ 47.2
Swaps | 2013
Derivative disclosures
Fuel Swap Agreements (metric tons)	402,000	755,000
Percentage of projected requirements	60.00%	55.00%
Swaps | 2014
Derivative disclosures
Fuel Swap Agreements (metric tons)	768,000	635,000
Percentage of projected requirements	55.00%	45.00%
Swaps | 2015
Derivative disclosures
Fuel Swap Agreements (metric tons)	581,000	363,000
Percentage of projected requirements	39.00%	25.00%
Swaps | 2016
Derivative disclosures
Fuel Swap Agreements (metric tons)	296,000	104,000
Percentage of projected requirements	20.00%	7.00%
Swaps | 2017
Derivative disclosures
Fuel Swap Agreements (metric tons)	74,000
Percentage of projected requirements	5.00%

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Fair Value Measurements and Derivative Instruments (Details) (USD $) In Thousands, unless otherwise specified	Jun. 30, 2013	Dec. 31, 2012	Jun. 30, 2012	Dec. 31, 2011
Assets:
Cash and cash equivalents	$ 205,174	$ 194,855	$ 212,209	$ 262,186
Fair Value, Measurements, Nonrecurring | Total
Assets:
Cash and cash equivalents	205,174	194,855
Total Assets	205,174	194,855
Liabilities:
Long-term debt (including current portion of long-term debt)	8,571,141	8,859,310
Total Liabilities	8,571,141	8,859,310
Fair Value, Measurements, Nonrecurring | Level 1
Assets:
Cash and cash equivalents	205,174	194,855
Total Assets	205,174	194,855
Liabilities:
Long-term debt (including current portion of long-term debt)	3,215,109	3,917,398
Total Liabilities	3,215,109	3,917,398
Fair Value, Measurements, Nonrecurring | Level 2
Liabilities:
Long-term debt (including current portion of long-term debt)	5,356,032	4,941,912
Total Liabilities	$ 5,356,032	$ 4,941,912

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Fair Value Measurements and Derivative Instruments (Details 2) (Fair Value, Measurements, Recurring, USD $) In Thousands, unless otherwise specified	Jun. 30, 2013	Dec. 31, 2012
Total
Assets:
Derivative financial instruments	$ 81,561	$ 96,489
Investments	6,255	6,231
Total Assets	87,816	102,720
Liabilities:
Derivative financial instruments	141,307	85,119
Total Liabilities	141,307	85,119
Level 1
Assets:
Investments	6,255	6,231
Total Assets	6,255	6,231
Level 2
Assets:
Derivative financial instruments	81,561	96,489
Total Assets	81,561	96,489
Liabilities:
Derivative financial instruments	141,307	85,119
Total Liabilities	$ 141,307	$ 85,119

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Shareholders' Equity

6 Months Ended

Jun. 30, 2013

Shareholders' Equity

Shareholders' Equity

Note 8. Shareholders’ Equity

During the first and second quarters of 2013, we declared and paid a cash dividend on our common stock of $0.12 per share. During the first and second quarters of 2012, we declared and paid a cash dividend on our common stock of $0.10 per share. During the first quarter of 2012, we also paid a cash dividend on our common stock of $0.10 per share which was declared during the fourth quarter of 2011.

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Commitments and Contingencies (Details 3) (Brilliance of the Seas) In Millions, unless otherwise specified	1 Months Ended		3 Months Ended				6 Months Ended
	Jul. 31, 2002 USD ($)	Jul. 31, 2002 GBP (£)	Jun. 30, 2013 USD ($)	Jun. 30, 2013 GBP (£)	Jun. 30, 2012 USD ($)	Jun. 30, 2012 GBP (£)	Jun. 30, 2013 USD ($)	Jun. 30, 2013 GBP (£)	Jun. 30, 2012 USD ($)	Jun. 30, 2012 GBP (£)
Commitments and Contingencies
Initial lease contractual life	25 years	25 years
Optional lease cancellation period	18 years	18 years
Minimum period of prior notice to cancel lease	1 year	1 year
Future payment if lease terminated	$ 99.2	£ 65.4
Operating Lease			$ 4.8	£ 3.1	$ 6.5	£ 4.1	$ 9.3	£ 6.1	$ 12.8	£ 8.1

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Fair Value Measurements and Derivative Instruments (Details 8) (Fair Value Hedging, USD $) In Thousands, unless otherwise specified	3 Months Ended		6 Months Ended
	Jun. 30, 2013	Jun. 30, 2012	Jun. 30, 2013	Jun. 30, 2012
Effect of derivative instruments involved in fair value hedging on the consolidated financial statements
Amount of Gain (Loss) Recognized in Income on Derivative	$ (55,177)	$ 10,839	$ (55,967)	$ 11,278
Amount of Gain (Loss) Recognized in Income on Hedged Item	64,084	1,491	74,772	12,465
Interest rate swaps | Interest expense, net of interest capitalized
Effect of derivative instruments involved in fair value hedging on the consolidated financial statements
Amount of Gain (Loss) Recognized in Income on Derivative	2,498	4,880	3,277	9,862
Amount of Gain (Loss) Recognized in Income on Hedged Item	9,323	7,107	18,599	14,367
Interest rate swaps | Other income (expense)
Effect of derivative instruments involved in fair value hedging on the consolidated financial statements
Amount of Gain (Loss) Recognized in Income on Derivative	(57,675)	5,959	(59,244)	1,416
Amount of Gain (Loss) Recognized in Income on Hedged Item	$ 54,761	$ (5,616)	$ 56,173	$ (1,902)

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Summary of Significant Accounting Policies (Policies)

6 Months Ended

Jun. 30, 2013

Summary of Significant Accounting Policies

Basis for Preparation of Consolidated Financial Statements

Basis for Preparation of Consolidated Financial Statements

The unaudited consolidated financial statements are prepared in accordance with accounting principles generally accepted in the United States of America (“GAAP”).  Estimates are required for the preparation of financial statements in accordance with these principles.  Actual results could differ from these estimates.  See Note 2. Summary of Significant Accounting Policies in this Quarterly Report on Form 10-Q and in our Annual Report on Form 10-K for the year ended December 31, 2012 for a discussion of our significant accounting policies.

All significant intercompany accounts and transactions are eliminated in consolidation. We consolidate entities over which we have control, usually evidenced by a direct ownership interest of greater than 50%, and variable interest entities where we are determined to be the primary beneficiary. See Note 6. Goodwill and Other Assets for further information regarding our variable interest entities. For affiliates we do not control but over which we have significant influence on financial and operating policies, usually evidenced by a direct ownership interest from 20% to 50%, the investment is accounted for using the equity method.  We consolidate the operating results of Pullmantur and CDF Croisières de France on a two-month lag to allow for more timely preparation of our consolidated financial statements.  No material events or transactions affecting Pullmantur or CDF Croisières de France have occurred during the two-month lag period of May and June 2013 that would require disclosure or adjustment to our consolidated financial statements as of and for the quarter ended June 30, 2013.

We believe the accompanying unaudited consolidated financial statements contain all normal recurring accruals necessary for a fair statement.  Our revenues are seasonal and results for interim periods are not necessarily indicative of results for the entire year.

Property and Equipment

Property and Equipment

During the first quarter of 2013, we performed a review of the estimated useful lives and associated residual values of ships in our fleet approaching the last third of their estimated useful lives.  As a result, effective January 1, 2013, we revised the estimated useful lives of five ships from 30 years with a 15% associated residual value, to 35 years with a 10% associated residual value.  The change in the estimated useful lives and associated residual value was accounted for prospectively as a change in accounting estimate.  The 35-year useful life with a 10% associated residual value is based on revised estimates of the weighted-average useful life of all major ship components for these ships.  The change in estimate is consistent with our recent investments in and future plans to continue to invest in the revitalization of these ships and the use of certain ship components longer than originally estimated. The change allows us to better match depreciation expense with the periods these assets are expected to be in use.  For the second quarter of 2013, the effect of this change on operating income and net income is an increase of $3.0 million and the impact on earnings per share is $0.01 per share on a basic and diluted basis.  For the six months ended June 30, 2013, the effect of this change on operating income and net income is an increase of $3.9 million and the impact on earnings per share is $0.02 per share on a basic and diluted basis.  For the full year 2013, the effect of this change on operating income and net income is estimated to be an increase of approximately $11.0 million and the impact on earnings per share is estimated to be $0.05 per share on a basic and diluted basis.  For further information on our significant accounting policies, refer to Note 2. Summary of Significant Accounting Policies in our Annual Report on Form 10-K for the year ended December 31, 2012.

Recently Adopted Accounting Standards

Recently Adopted Accounting Standards

In January 2013, we adopted authoritative guidance issued in 2012 regarding the periodic impairment testing of indefinite-lived intangible assets.  The new guidance allows an entity to assess qualitative factors to determine if it is more-likely-than-not that indefinite-lived intangible assets might be impaired and, based on this assessment, to determine whether it is necessary to perform the quantitative impairment tests.  The adoption of this guidance did not have an impact on our consolidated financial statements.

In March 2013, we adopted authoritative guidance regarding the presentation of amounts reclassified from accumulated other comprehensive income to net income.  The new guidance requires an entity to present, either in a single note or parenthetically on the face of the financial statements, the effect of significant amounts reclassified from each component of accumulated other comprehensive income based on its source (e.g., the release due to cash flow hedges from interest rate contracts) and the income statement line items affected by the reclassification (e.g., interest income or interest expense).  We elected to present this information in a single note. See Note 9. Changes in Accumulated Other Comprehensive Loss for our disclosures required under this guidance.

Recent Accounting Pronouncements

Recent Accounting Pronouncements

In March 2013, amended guidance was issued regarding the release of cumulative translation adjustments into net income.  The new guidance provides clarification of when to release the cumulative translation adjustment into net income when a parent either sells a part or all of its investment in a foreign entity or no longer holds a controlling financial interest in a subsidiary or group of assets within a foreign entity.  This guidance will be effective for our interim and annual reporting periods beginning after December 15, 2013.  The adoption of this newly issued guidance is not expected to have a material impact on our consolidated financial statements, but will have an impact on the accounting for future sales of investments or changes in control of foreign entities.

In July 2013, amended guidance was issued regarding the inclusion of the Fed Funds Effective Swap Rate as a benchmark interest rate for hedge accounting purposes. The proposed guidance would permit the use of the Fed Funds Effective Swap Rate (OIS) to be included as an acceptable U.S. benchmark and removes the restriction on using different benchmark rates for similar hedges. This guidance will be effective prospectively for qualifying new or redesignated hedging relationships entered into on or after July 17, 2013. The adoption of this newly issued guidance is not expected to have an impact on our consolidated financial statements

Reclassifications

Reclassifications

For the six months ended June 30, 2012, $11.8 million has been reclassified in the consolidated statement of cash flows from other, net to cash payments received on loan to unconsolidated affiliate within net cash flows used in investing activities in order to conform to the current year presentation.

For the six months ended June 30, 2012, $(4.2) million has been reclassified in the consolidated statement of cash flows from other, net to loss on derivative instruments not designated as hedges within net cash flows provided by operating activities in order to conform to the current year presentation.

Other

Other

Revenues and expenses include port costs that vary with guest head counts.  The amounts of such port costs included in passenger ticket revenues on a gross basis were $117.0 million and $103.8 million for the second quarters of 2013 and 2012, respectively, and $232.7 million and $216.9 million for the six months ended June 30, 2013 and 2012, respectively.

During the second quarter of 2013, we recorded an out-of-period adjustment of approximately $15.2 million to correct an error in the calculation of our liability for our credit card rewards program which understated the liability and overstated income during the fiscal years 2003 through 2013. Because the adjustment, both individually and in the aggregate, was not material to any of the prior years’ financial statements, and the impact of correcting the error in the current year is not expected to be material to the full year 2013 financial statements, we recorded the correction in the financial statements in the second quarter of 2013. This amount reduced onboard and other revenues in our consolidated statements of comprehensive income (loss).

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Commitments and Contingencies

6 Months Ended

Jun. 30, 2013

Commitments and Contingencies

Commitments and Contingencies

Note 7. Commitments and Contingencies

Capital Expenditures

In May 2013, we reached an agreement, subject to satisfaction of financing conditions, with Meyer Werft to build the third Quantum-class ship for Royal Caribbean International.  The agreement is expected to become effective in the third quarter of 2013.  The ship will have a capacity of approximately 4,150 berths and is expected to enter service in the second quarter of 2016.

As of June 30, 2013, the aggregate cost of our ships on order, including the conditional agreement for the third Quantum-class ship described above, was approximately $4.5 billion, of which we had deposited $288.8 million as of such date. Approximately 56.4% of the aggregate cost was exposed to fluctuations in the euro exchange rate at June 30, 2013.  (See Note 10. Fair Value Measurements and Derivative Instruments).

Our brands, including our 50% joint venture, TUI Cruises, have six ships on order.  As of June 30, 2013, the expected dates that our ships on order will enter service and their approximate berths are as follows:

Ship	Expected to Enter Service	Approximate Berths
Royal Caribbean International –
Quantum-class:
Quantum of the Seas	4th Quarter 2014	4,150
Anthem of the Seas	2nd Quarter 2015	4,150
Unnamed	2nd Quarter 2016	4,150
Oasis-class:
Unnamed	2nd Quarter 2016	5,400
TUI Cruises –
Mein Schiff 3	2nd Quarter 2014	2,500
Mein Schiff 4	2nd Quarter 2015	2,500
	Total Berths	22,850

Litigation

Between August 1, 2011 and September 8, 2011, three similar purported class action lawsuits were filed against us and certain of our current and former officers in the United States District Court of the Southern District of Florida.  The cases have since been consolidated and a consolidated amended complaint was filed on February 17, 2012.  The consolidated amended complaint was filed on behalf of a purported class of purchasers of our common stock during the period from October 26, 2010 through July 27, 2011 and names the Company, our Chairman and CEO, our Vice Chairman, the President and CEO of our Royal Caribbean International brand and the former President and CEO of our Celebrity Cruises brand as defendants.  The consolidated amended complaint alleges violations of Section 10(b) of the Securities Exchange Act of 1934 and SEC Rule 10b-5 as well as, in the case of the individual defendants, the control person provisions of the Securities Exchange Act.  The complaint principally alleges that the defendants knowingly made incorrect statements concerning the Company’s outlook.  The consolidated amended complaint seeks unspecified damages, interest, and attorneys’ fees. We filed a motion to dismiss the complaint for failure to state a claim on April 9, 2012.  On April 18, 2013, the district judge granted our motion and ordered the case dismissed with prejudice.  Plaintiffs have the right to file a notice to appeal within thirty days from the date an appealable order is entered.

A class action complaint was filed in June 2011 against Royal Caribbean Cruises Ltd. in the United States District Court for the Southern District of Florida on behalf of a purported class of stateroom attendants employed onboard Royal Caribbean International cruise vessels alleging that they were required to pay other crew members to help with their duties in violation of the U.S. Seaman’s Wage Act. The lawsuit also alleges that certain stateroom attendants were required to work back of house assignments without the ability to earn gratuities in violation of the U.S. Seaman’s Wage Act. Plaintiffs seek judgment for damages, wage penalties and interest in an indeterminate amount. In May 2012, the Court granted our motion to dismiss the complaint on the basis that the applicable collective bargaining agreement requires any such claims to be arbitrated. Plaintiffs have appealed this decision to the United States Court of Appeals, 11th Circuit. We believe the appeal is without merit as are the underlying claims made against us and we intend to vigorously defend ourselves against them.

Because of the inherent uncertainty as to the outcome of the proceedings described above, we are unable at this time to estimate the possible impact of these matters on us.

We are routinely involved in other claims typical within the cruise vacation industry. The majority of these claims are covered by insurance. We believe the outcome of such claims, net of expected insurance recoveries, will not have a material adverse impact on our financial condition or results of operations and cash flows.

Other

In July 2002, we entered into an operating lease denominated in British pound sterling for the Brilliance of the Seas.  The lease payments vary based on sterling LIBOR and are included in other operating expenses in our consolidated statements of comprehensive income (loss). Brilliance of the Seas lease expense amounts were approximately ₤3.1 million and ₤4.1 million, or approximately $4.8 million and $6.5 million, for the quarter ended June 30, 2013 and June 30, 2012, respectively, and were approximately ₤6.1 million and ₤8.1 million, or approximately $9.3 million and $12.8 million for the six months ended June 30, 2013 and June 30, 2012, respectively.  The lease has a contractual life of 25 years; however, both the lessor and we have certain rights to cancel the lease at year 18 (i.e. 2020) upon advance notice given approximately one year prior to cancellation.  In the event of early termination at year 18, we have the option to cause the sale of the vessel at its fair value and to use the proceeds towards the applicable termination payment.  Alternatively, we could opt at such time to make a termination payment of approximately £65.4 million, or approximately $99.2 million based on the exchange rate at June 30, 2013, and relinquish our right to cause the sale of the vessel. Under current circumstances we do not believe early termination of this lease is probable.

Under the Brilliance of the Seas operating lease, we have agreed to indemnify the lessor to the extent its after-tax return is negatively impacted by unfavorable changes in corporate tax rates, capital allowance deductions and certain unfavorable determinations which may be made by the United Kingdom tax authorities. These indemnifications could result in an increase in our lease payments.  We are unable to estimate the maximum potential increase in our lease payments due to the various circumstances, timing or a combination of events that could trigger such indemnifications. The United Kingdom tax authorities are disputing the lessor’s accounting treatment of the lease and the lessor and tax authorities are in discussions on the matter.  If the characterization of the lease by the lessor is ultimately determined to be incorrect, we could be required to indemnify the lessor under certain circumstances.  The lessor has advised us that they believe their characterization of the lease is correct. Based on the foregoing and our review of available information, we do not believe an indemnification payment is probable.  However, if the lessor loses its dispute and we are required to indemnify the lessor, we cannot at this time predict the impact that such an occurrence would have on our financial condition and results of operations.

Some of the contracts that we enter into include indemnification provisions that obligate us to make payments to the counterparty if certain events occur.  These contingencies generally relate to changes in taxes, increased lender capital costs and other similar costs.  The indemnification clauses are often standard contractual terms and are entered into in the normal course of business.  There are no stated or notional amounts included in the indemnification clauses and we are not able to estimate the maximum potential amount of future payments, if any, under these indemnification clauses.  We have not been required to make any payments under such indemnification clauses in the past and, under current circumstances, we do not believe an indemnification in any material amount is probable.

If (i) any person other than A. Wilhelmsen AS. and Cruise Associates and their respective affiliates (the “Applicable Group”) acquires ownership of more than 33% of our common stock and the Applicable Group owns less of our common stock than such person, or (ii) subject to certain exceptions, during any 24-month period, a majority of the Board is no longer comprised of individuals who were members of the Board on the first day of such period, we may be obligated to prepay indebtedness outstanding under the majority of our credit facilities, which we may be unable to replace on similar terms.  Certain of our outstanding debt securities also contain change of control provisions that would be triggered by the acquisition of greater than 50% of our common stock by a person other than a member of the Applicable Group coupled with a ratings downgrade. If this were to occur, it would have an adverse impact on our liquidity and operations.

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Summary of Significant Accounting Policies

6 Months Ended

Jun. 30, 2013

Summary of Significant Accounting Policies

Summary of Significant Accounting Policies

Note 2. Summary of Significant Accounting Policies

Property and Equipment

During the first quarter of 2013, we performed a review of the estimated useful lives and associated residual values of ships in our fleet approaching the last third of their estimated useful lives.  As a result, effective January 1, 2013, we revised the estimated useful lives of five ships from 30 years with a 15% associated residual value, to 35 years with a 10% associated residual value.  The change in the estimated useful lives and associated residual value was accounted for prospectively as a change in accounting estimate.  The 35-year useful life with a 10% associated residual value is based on revised estimates of the weighted-average useful life of all major ship components for these ships.  The change in estimate is consistent with our recent investments in and future plans to continue to invest in the revitalization of these ships and the use of certain ship components longer than originally estimated. The change allows us to better match depreciation expense with the periods these assets are expected to be in use.  For the second quarter of 2013, the effect of this change on operating income and net income is an increase of $3.0 million and the impact on earnings per share is $0.01 per share on a basic and diluted basis.  For the six months ended June 30, 2013, the effect of this change on operating income and net income is an increase of $3.9 million and the impact on earnings per share is $0.02 per share on a basic and diluted basis.  For the full year 2013, the effect of this change on operating income and net income is estimated to be an increase of approximately $11.0 million and the impact on earnings per share is estimated to be $0.05 per share on a basic and diluted basis.  For further information on our significant accounting policies, refer to Note 2. Summary of Significant Accounting Policies in our Annual Report on Form 10-K for the year ended December 31, 2012.

Recently Adopted Accounting Standards

In January 2013, we adopted authoritative guidance issued in 2012 regarding the periodic impairment testing of indefinite-lived intangible assets.  The new guidance allows an entity to assess qualitative factors to determine if it is more-likely-than-not that indefinite-lived intangible assets might be impaired and, based on this assessment, to determine whether it is necessary to perform the quantitative impairment tests.  The adoption of this guidance did not have an impact on our consolidated financial statements.

In March 2013, we adopted authoritative guidance regarding the presentation of amounts reclassified from accumulated other comprehensive income to net income.  The new guidance requires an entity to present, either in a single note or parenthetically on the face of the financial statements, the effect of significant amounts reclassified from each component of accumulated other comprehensive income based on its source (e.g., the release due to cash flow hedges from interest rate contracts) and the income statement line items affected by the reclassification (e.g., interest income or interest expense).  We elected to present this information in a single note. See Note 9. Changes in Accumulated Other Comprehensive Loss for our disclosures required under this guidance.

Recent Accounting Pronouncements

In March 2013, amended guidance was issued regarding the release of cumulative translation adjustments into net income.  The new guidance provides clarification of when to release the cumulative translation adjustment into net income when a parent either sells a part or all of its investment in a foreign entity or no longer holds a controlling financial interest in a subsidiary or group of assets within a foreign entity.  This guidance will be effective for our interim and annual reporting periods beginning after December 15, 2013.  The adoption of this newly issued guidance is not expected to have a material impact on our consolidated financial statements, but will have an impact on the accounting for future sales of investments or changes in control of foreign entities.

In July 2013, amended guidance was issued regarding the inclusion of the Fed Funds Effective Swap Rate as a benchmark interest rate for hedge accounting purposes. The proposed guidance would permit the use of the Fed Funds Effective Swap Rate (OIS) to be included as an acceptable U.S. benchmark and removes the restriction on using different benchmark rates for similar hedges. This guidance will be effective prospectively for qualifying new or redesignated hedging relationships entered into on or after July 17, 2013. The adoption of this newly issued guidance is not expected to have an impact on our consolidated financial statements.

Reclassifications

For the six months ended June 30, 2012, $11.8 million has been reclassified in the consolidated statement of cash flows from other, net to cash payments received on loan to unconsolidated affiliate within net cash flows used in investing activities in order to conform to the current year presentation.

For the six months ended June 30, 2012, $(4.2) million has been reclassified in the consolidated statement of cash flows from other, net to loss on derivative instruments not designated as hedges within net cash flows provided by operating activities in order to conform to the current year presentation.

Other

Revenues and expenses include port costs that vary with guest head counts.  The amounts of such port costs included in passenger ticket revenues on a gross basis were $117.0 million and $103.8 million for the second quarters of 2013 and 2012, respectively, and $232.7 million and $216.9 million for the six months ended June 30, 2013 and 2012, respectively.

During the second quarter of 2013, we recorded an out-of-period adjustment of approximately $15.2 million to correct an error in the calculation of our liability for our credit card rewards program which understated the liability and overstated income during the fiscal years 2003 through 2013. Because the adjustment, both individually and in the aggregate, was not material to any of the prior years’ financial statements, and the impact of correcting the error in the current year is not expected to be material to the full year 2013 financial statements, we recorded the correction in the financial statements in the second quarter of 2013. This amount reduced onboard and other revenues in our consolidated statements of comprehensive income (loss).

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Changes in Accumulated Other Comprehensive Loss (Details) (USD $) In Thousands, unless otherwise specified	3 Months Ended		6 Months Ended
	Jun. 30, 2013	Jun. 30, 2012	Jun. 30, 2013	Jun. 30, 2012
Changes in accumulated other comprehensive loss by component
Accumulated comprehensive loss at beginning of the year			$ (134,516)
Other comprehensive income (loss) before reclassifications			16,250
Amounts reclassified from accumulated other comprehensive loss			(21,810)
Net current-period other comprehensive (loss) income	21,284	(300,613)	(5,560)	(149,803)
Ending balance	(140,076)		(140,076)
Changes related to cash flow derivative hedges
Changes in accumulated other comprehensive loss by component
Accumulated comprehensive loss at beginning of the year			(84,505)
Other comprehensive income (loss) before reclassifications			18,046
Amounts reclassified from accumulated other comprehensive loss			(23,104)
Net current-period other comprehensive (loss) income			(5,058)
Ending balance	(89,563)		(89,563)
Changes in defined benefit plans
Changes in accumulated other comprehensive loss by component
Accumulated comprehensive loss at beginning of the year			(34,823)
Other comprehensive income (loss) before reclassifications			3,999
Amounts reclassified from accumulated other comprehensive loss			1,294
Net current-period other comprehensive (loss) income			5,293
Ending balance	(29,530)		(29,530)
Foreign currency translation adjustments
Changes in accumulated other comprehensive loss by component
Accumulated comprehensive loss at beginning of the year			(15,188)
Other comprehensive income (loss) before reclassifications			(5,795)
Net current-period other comprehensive (loss) income			(5,795)
Ending balance	$ (20,983)		$ (20,983)

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Changes in Accumulated Other Comprehensive Loss (Tables)

6 Months Ended

Jun. 30, 2013

Changes in Accumulated Other Comprehensive Loss

Schedule of changes in accumulated other comprehensive loss, net of tax, by component

The following table presents the changes in accumulated other comprehensive loss by component for the six months ended June 30, 2013 (in thousands):

	Changes related to cash flow derivative hedges			Changes in defined benefit plans			Foreign currency translation adjustments			Accumulated other comprehensive loss
Accumulated comprehensive loss at beginning of the year	$	(84,505	)	$	(34,823	)	$	(15,188	)	$	(134,516	)
Other comprehensive income (loss) before reclassifications	18,046			3,999			(5,795		)	16,250
Amounts reclassified from accumulated other comprehensive loss	(23,104		)	1,294			—			(21,810		)
Net current-period other comprehensive (loss) income	(5,058		)	5,293			(5,795		)	(5,560		)
Ending balance	$	(89,563	)	$	(29,530	)	$	(20,983	)	$	(140,076	)

Schedule of the significant reclassifications out of accumulated other comprehensive loss by component

The following table presents reclassifications out of accumulated other comprehensive loss for the quarter and six months ended June 30, 2013 (in thousands):

	Amount of Gain (Loss) Reclassified from Accumulated OCl into Income
Details about Accumulated Other Comprehensive Income Components	Quarter Ended June 30, 2013			Six Months Ended June 30, 2013			Affected Line Item in Statements of Comprehensive Income (Loss)
Gain (loss) on cash flow derivative hedges:
Cross currency swaps	$	(880	)	$	(1,751	)	Interest expense, net of interest capitalized
Foreign currency forward contracts	(450		)	(899		)	Depreciation and amortization expenses
Foreign currency forward contracts	(239		)	(477		)	Other income (expense)
Foreign currency forward contracts	(5		)	(5		)	Interest expense, net of interest capitalized
Fuel swaps	9,408			26,236			Fuel
	$	7,834		$	23,104
Amortization of defined benefit plans:
Actuarial loss	$	(876	)	$	(876	)	Payroll and related
Prior service costs	(418		)	(418		)	Payroll and related
	$	(1,294	)	$	(1,294	)
Total reclassifications for the period	$	6,540		$	21,810

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Fair Value Measurements and Derivative Instruments

6 Months Ended

Jun. 30, 2013

Fair Value Measurements and Derivative Instruments

Fair Value Measurements and Derivative Instruments

Note 10. Fair Value Measurements and Derivative Instruments

Fair Value Measurements

The estimated fair value of our financial instruments that are not measured at fair value on a recurring basis, categorized based upon the fair value hierarchy, are as follows (in thousands):

	Fair Value Measurementsat June 30, 2013 Using								Fair Value Measurementsat December 31, 2012 Using
Description	Total		Level 1(1)		Level 2(2)		Level 3(3)		Total		Level 1(1)		Level 2(2)		Level 3(3)
Assets:
Cash and cash equivalents(4)	$	205,174	205,174		—		—		$	194,855	194,855		—		—
Total Assets	$	205,174	$	205,174	$	—	$	—	$	194,855	$	194,855	$	—	$	—
Liabilities:
Long-term debt (including current portion of long-term debt)(5)	$	8,571,141	3,215,109		5,356,032		—		$	8,859,310	3,917,398		4,941,912		—
Total Liabilities	$	8,571,141	$	3,215,109	$	5,356,032	$	—	$	8,859,310	$	3,917,398	$	4,941,912	$	—

(1) Inputs based on quoted prices (unadjusted) in active markets for identical assets or liabilities that we have the ability to access.  Valuation of these items does not entail a significant amount of judgment.

(2) Inputs other than quoted prices included within Level 1 that are observable for the liability, either directly or indirectly.  For unsecured revolving credit facilities and unsecured term loans, fair value is determined utilizing the income valuation approach.  This valuation model takes into account the contract terms of our debt such as the debt maturity and the interest rate on the debt.  The valuation model also takes into account our creditworthiness based on publicly available credit default swap rates.

(3) Inputs that are unobservable.  The Company did not use any Level 3 inputs as of June 30, 2013 and December 31, 2012.

(4) Consists of cash and marketable securities with original maturities of less than 90 days.

(5) Consists of unsecured revolving credit facilities, unsecured senior notes, senior debentures and unsecured term loans.  Does not include our capital lease obligations.

Other Financial Instruments

The carrying amounts of accounts receivable, accounts payable, accrued interest and accrued expenses approximate fair value at June 30, 2013 and December 31, 2012.

Assets and liabilities that are recorded at fair value have been categorized based upon the fair value hierarchy.  The following table presents information about the Company’s financial instruments recorded at fair value on a recurring basis (in thousands):

	Fair Value Measurementsat June 30, 2013 Using								Fair Value Measurementsat December 31, 2012 Using
Description	Total		Level 1(1)		Level 2(2)		Level 3(3)		Total		Level 1(1)		Level 2(2)		Level 3(3)
Assets:
Derivative financial instruments(4)	$	81,561	—		81,561		—		$	96,489	—		96,489		—
Investments(5)	$	6,255	6,255		—		—		$	6,231	6,231		—		—
Total Assets	$	87,816	$	6,255	$	81,561	$	—	$	102,720	$	6,231	$	96,489	$	—
Liabilities:
Derivative financial instruments(6)	$	141,307	—		141,307		—		$	85,119	—		85,119		—
Total Liabilities	$	141,307	$	—	$	141,307	$	—	$	85,119	$	—	$	85,119	$	—

(1) Inputs based on quoted prices (unadjusted) in active markets for identical assets or liabilities that we have the ability to access.  Valuation of these items does not entail a significant amount of judgment.

(2) Inputs other than quoted prices included within Level 1 that are observable for the asset or liability, either directly or indirectly.  For foreign currency forward contracts, interest rate swaps, cross currency swaps and fuel swaps, fair value is derived using valuation models that utilize the income valuation approach.  These valuation models take into account the contract terms, such as maturity, as well as other inputs, such as foreign exchange rates and curves, fuel types, fuel curves and interest rate yield curves.  For fuel call options, fair value is determined by using the prevailing market price for the instruments consisting of published price quotes for similar assets based on recent transactions in an active market. Fair value for foreign currency collar options is determined by using standard option pricing models with inputs based on the options’ contract terms, such as exercise price and maturity, and readily available public market data, such as foreign exchange curves, foreign exchange volatility levels and discount rates. All derivative instrument fair values take into account the creditworthiness of the counterparty and the Company.

(3) Inputs that are unobservable.  The Company did not use any Level 3 inputs as of June 30, 2013 and December 31, 2012.

(4) Consists of foreign currency forward contracts, foreign currency collar options, interest rate swaps, fuel swaps and purchased fuel call options.  Please refer to the “Fair Value of Derivative Instruments” table for breakdown by instrument type.

(5) Consists of exchange-traded equity securities and mutual funds.

(6) Consists of interest rate swaps, fuel swaps, foreign currency forward contracts, foreign currency collar options and sold fuel call options.  Please refer to the “Fair Value of Derivative Instruments” table for breakdown by instrument type.

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 June 30, 2013 or December 31, 2012, or that will be realized in the future, and do not include expenses that could be incurred in an actual sale or settlement.

Concentrations of Credit Risk

We monitor our credit risk associated with financial and other institutions with which we conduct significant business and, to minimize these risks, we select counterparties with credit risks acceptable to us and we seek to limit our exposure to an individual counterparty.  Credit risk, including but not limited to counterparty nonperformance under derivative instruments, our credit facilities and new ship progress payment guarantees, is not considered significant, as we primarily conduct business with large, well-established financial institutions, insurance companies and export credit agencies with which we have long-term relationships and which have credit risks acceptable to us or where the credit risk is spread out among a large number of counterparties. In addition, our exposure under foreign currency forward contracts, foreign currency collar options, fuel call options, interest rate and fuel swap agreements was approximately $16.1 million and $60.8 million as of June 30, 2013 and December 31, 2012, respectively, and was limited to the cost of replacing the contracts in the event of non-performance by the counterparties to the contracts, all of which are currently our lending banks.  We do not anticipate nonperformance by any of our significant counterparties. In addition, we have established guidelines regarding credit ratings and instrument maturities that we follow to maintain safety and liquidity. We do not normally require collateral or other security to support credit relationships; however, in certain circumstances this option is available to us.

Derivative Instruments

We are exposed to market risk attributable to changes in interest rates, foreign currency exchange rates and fuel prices.  We manage these risks through a combination of our normal operating and financing activities and through the use of derivative financial instruments pursuant to our hedging practices and policies.  The financial impact of these hedging instruments is primarily offset by corresponding changes in the underlying exposures being hedged.  We achieve this by closely matching the amount, term and conditions of the derivative instrument with the underlying risk being hedged.  Although certain of our derivative financial instruments do not qualify or are not accounted for under hedge accounting, we do not hold or issue derivative financial instruments for trading or other speculative purposes.  We monitor our derivative positions using techniques including market valuations and sensitivity analyses.

We enter into various forward, swap and option contracts to manage our interest rate exposure and to limit our exposure to fluctuations in foreign currency exchange rates and fuel prices. These instruments are recorded on the balance sheet at their fair value and the vast majority are designated as hedges.  We also have non-derivative financial instruments designated as hedges of our net investment in our foreign operations and investments.

At inception of the hedge relationship, a derivative instrument that hedges the exposure to changes in the fair value of a firm commitment or a recognized asset or liability is designated as a fair value hedge.  A derivative instrument that hedges a forecasted transaction or the variability of cash flows related to a recognized asset or liability is designated as a cash flow hedge.

Changes in the fair value of derivatives that are designated as fair value hedges are offset against changes in the fair value of the underlying hedged assets, liabilities or firm commitments.  Gains and losses on derivatives that are designated as cash flow hedges are recorded as a component of accumulated other comprehensive loss until the underlying hedged transactions are recognized in earnings.  The foreign currency transaction gain or loss of our non-derivative financial instruments designated as hedges of our net investment in foreign operations and investments are recognized as a component of accumulated other comprehensive loss along with the associated foreign currency translation adjustment of the foreign operation.

On an ongoing basis, we assess whether derivatives used in hedging transactions are “highly effective” in offsetting changes in the fair value or cash flow of hedged items.  We use the long-haul method to assess hedge effectiveness using regression analysis for each hedge relationship under our interest rate, foreign currency and fuel hedging programs.  We apply the same methodology on a consistent basis for assessing hedge effectiveness to all hedges within each hedging program (i.e. interest rate, foreign currency and fuel). We perform regression analyses over an observation period commensurate with the contractual life of the derivative instrument, up to three years for interest rate and foreign currency relationships and four years for fuel relationships.  High effectiveness is achieved when a statistically valid relationship reflects a high degree of offset and correlation between the changes in the fair values of the derivative instrument and the hedged item. The determination of ineffectiveness is based on the amount of dollar offset between the change in fair value of the derivative instrument and the change in fair value of the hedged item at the end of the reporting period.  If it is determined that a derivative is not highly effective as a hedge or hedge accounting is discontinued, any change in fair value of the derivative since the last date at which it was determined to be effective is recognized in earnings. In addition, the ineffective portion of our highly effective hedges is recognized in earnings immediately and reported in other income (expense) in our consolidated statements of comprehensive income (loss).

Cash flows from derivative instruments that are designated as fair value or cash flow hedges are classified in the same category as the cash flows from the underlying hedged items. In the event that hedge accounting is discontinued, cash flows subsequent to the date of discontinuance are classified within investing activities.  Cash flows from derivative instruments not designated as hedging instruments are classified as investing activities.

We consider the classification of the underlying hedged item’s cash flows in determining the classification for the designated derivative instrument’s cash flows. We classify derivative instrument cash flows from hedges of benchmark interest rate or hedges of fuel expense as operating activities due to the nature of the hedged item. Likewise, we classify derivative instrument cash flows from hedges of foreign currency risk on our newbuild ship payments as investing activities. Cash flows from derivative instruments not designated under hedge accounting, such as our fuel call options, are reported as investing activities.

Interest Rate Risk

Our exposure to market risk for changes in interest rates relates to our long-term debt obligations including future interest payments.  At June 30, 2013, approximately 38.6% of our long-term debt was effectively fixed as compared to 45.8% as of December 31, 2012.  We use interest rate swap agreements to modify our exposure to interest rate movements and to manage our interest expense.

Market risk associated with our long-term fixed rate debt is the potential increase in fair value resulting from a decrease in interest rates.  We use interest rate swap agreements that effectively convert a portion of our fixed-rate debt to a floating-rate basis to manage this risk.  At June 30, 2013 and December 31, 2012, we maintained interest rate swap agreements on the $420.0 million fixed rate portion of our Oasis of the Seas unsecured amortizing term loan.  The interest rate swap agreements effectively changed the interest rate on the balance of the unsecured term loan, which was $297.5 million as of June 30, 2013, from a fixed rate of 5.41% to a LIBOR-based floating rate equal to LIBOR plus 3.87%, currently approximately 4.30%. These interest rate swap agreements are accounted for as fair value hedges.

During the second quarter of 2013, we entered into interest rate swap agreements that effectively changed the interest rate on the $650.0 million unsecured senior notes due 2022, from a fixed rate of 5.25% to a LIBOR-based floating rate equal to LIBOR plus 3.63%, currently approximately 3.91%.  These interest rate swap agreements are accounted for as fair value hedges.

Market risk associated with our long-term floating rate debt is the potential increase in interest expense from an increase in interest rates.  We use interest rate swap agreements that effectively convert a portion of our floating-rate debt to a fixed-rate basis to manage this risk.  At June 30, 2013 and December 31, 2012, we maintained forward-starting interest rate swap agreements that hedge the anticipated unsecured amortizing term loans that will finance our purchase of Quantum of the Seas and Anthem of the Seas. Forward-starting interest rate swaps hedging the Quantum of the Seas loan will effectively convert the interest rate for $735.0 million of the anticipated loan balance from LIBOR plus 1.30% to a fixed rate of 3.74% (inclusive of margin) beginning in October 2014. Forward-starting interest rate swaps hedging the Anthem of the Seas loan will effectively convert the interest rate for $725.0 million of the anticipated loan balance from LIBOR plus 1.30% to a fixed rate of 3.86% (inclusive of margin) beginning in April 2015.  These interest rate swap agreements are accounted for as cash flow hedges.

In addition, at June 30, 2013 and December 31, 2012, we maintained interest rate swap agreements that effectively converted the interest rate on a portion of the Celebrity Reflection unsecured amortizing term loan balance of approximately $627.2 million from LIBOR plus 0.40% to a fixed rate (including applicable margin) of 2.85% through the term of the loan.  These interest rate swap agreements are accounted for as cash flow hedges.

The notional amount of interest rate swap agreements related to outstanding debt and on our current unfunded financing arrangements as of June 30, 2013 and December 31, 2012 was $3.0 billion and $2.4 billion, respectively.

Foreign Currency Exchange Rate Risk

Derivative Instruments

Our primary exposure to foreign currency exchange rate risk relates to our ship construction contracts denominated in euros, our foreign currency denominated debt and our growing international business operations.  We enter into foreign currency forward contracts, collar options and cross currency swap agreements to manage portions of the exposure to movements in foreign currency exchange rates.  As of June 30, 2013, the aggregate cost of our ships on order, including the conditional agreement for a third Quantum-class ship, was approximately $4.5 billion, of which we had deposited $288.8 million as of such date.  Approximately 56.4% and 49.7% of the aggregate cost of the ships under construction was exposed to fluctuations in the euro exchange rate at June 30, 2013 and December 31, 2012, respectively.  The majority of our foreign currency forward contracts, collar options and cross currency swap agreements are accounted for as cash flow or fair value hedges depending on the designation of the related hedge.

During the second quarter of 2013, we entered into foreign currency forward contracts to hedge €365.0 million of our €745.0 million 5.625% unsecured senior notes due January 2014. These foreign currency forward contracts are accounted for as cash flow hedges and mature January 2014.

On a regular basis, we enter into foreign currency forward contracts to minimize the volatility resulting from the remeasurement of net monetary assets and liabilities denominated in a currency other than our functional currency or the functional currencies of our foreign subsidiaries. During the second quarter of 2013, we maintained an average of approximately $360.0 million of these foreign currency forward contracts.  These instruments are not designated as hedging instruments.   Changes in the fair value of the foreign currency forward contracts, of approximately $(16.9) million and $(4.1) million, during the quarter ended June 30, 2013 and June 30, 2012, respectively, and approximately $(25.5) million and $4.2 million, during the six months ended June 30, 2013 and June 30, 2012, respectively, were recognized in earnings within other income (expense) in our consolidated statements of comprehensive income (loss).

The notional amount of outstanding foreign exchange contracts including our forward contracts and collar options as of June 30, 2013 and December 31, 2012 was $1.6 billion and $1.2 billion, respectively.

Non-Derivative Instruments

We consider our investments in our foreign operations to be denominated in relatively stable currencies and of a long-term nature.  We partially address the exposure of our investments in foreign operations by denominating a portion of our debt in our subsidiaries’ and investments’ functional currencies and designating it as a hedge of these subsidiaries and investments.  We had designated debt as a hedge of our net investments in Pullmantur and TUI Cruises of approximately €501.5 million and €481.7 million, or approximately $651.9 million and $635.1 million, as of June 30, 2013 and December 31, 2012, respectively.

Fuel Price Risk

Our exposure to market risk for changes in fuel prices relates primarily to the consumption of fuel on our ships.  We use fuel swap agreements and fuel call options to mitigate the financial impact of fluctuations in fuel prices.

Our fuel swap agreements are accounted for as cash flow hedges.  At June 30, 2013, we have hedged the variability in future cash flows for certain forecasted fuel transactions occurring through 2017.  As of June 30, 2013 and December 31, 2012, we had entered into the following fuel swap agreements:

	Fuel Swap Agreements
	As ofJune 30,2013	As of December 31, 2012
	(metric tons)
2013	402,000	755,000
2014	768,000	635,000
2015	581,000	363,000
2016	296,000	104,000
2017	74,000	—

	Fuel Swap Agreements
Projected fuel purchases for year:	As ofJune 30,2013		As of December 31, 2012
	(% hedged)
2013	60	%	55	%
2014	55	%	45	%
2015	39	%	25	%
2016	20	%	7	%
2017	5	%	—

At June 30, 2013 and December 31, 2012, $4.4 million and $47.2 million, respectively, of estimated unrealized net gains associated with our cash flow hedges pertaining to fuel swap agreements were expected to be reclassified to earnings from accumulated other comprehensive loss within the next twelve months.  Reclassification is expected to occur as a result of fuel consumption associated with our hedged forecasted fuel purchases.

The fair value and line item caption of derivative instruments recorded within our consolidated balance sheets were as follows:

	Fair Value of Derivative Instruments
	Asset Derivatives					Liability Derivatives
	Balance Sheet	As of June 30, 2013		As of December 31, 2012		Balance Sheet	As of June 30, 2013		As of December 31, 2012
	Location	Fair Value		Fair Value		Location	Fair Value		Fair Value
In thousands
Derivatives designated as hedging instruments under ASC 815-20(1)
Interest rate swaps	Other Assets	$	44,639	$	5,099	Other long-term liabilities	$	61,424	$	55,471
Foreign currency forward contracts	Derivative Financial Instruments	—		951		Accrued expenses and other liabilities	3,304		338
Foreign currency forward contracts	Other Assets	8,024		11,564		Other long-term liabilities	4,099		1,000
Foreign currency collar options	Other Assets	—		8,974		Other long-term liabilities	2,273		—
Fuel swaps	Derivative Financial Instruments	14,823		48,624		Accrued expenses and other liabilities	12,144		1,761
Fuel swaps	Other Assets	128		8,585		Other long-term liabilities	36,995		6,369
Total derivatives designated as hedging instruments under 815-20		$	67,614	$	83,797		$	120,239	$	64,939
Derivatives not designated as hedging instruments under ASC 815-20
Foreign currency forward contracts	Derivative Financial Instruments	$	7,559	$	—	Accrued expenses and other liabilities	$	4,611	$	—
Foreign currency forward contracts	Other Assets	2,733		4,440		Other long-term liabilities	12,809		11,475
Fuel swaps	Derivative Financial Instruments	6		—		Accrued expenses and other liabilities	59		475
Fuel call options	Derivative Financial Instruments	3,649		8,252		Accrued expenses and other liabilities	3,589		8,230
Total derivatives not designated as hedging instruments under 815-20		13,947		12,692			21,068		20,180
Total derivatives		$	81,561	$	96,489		$	141,307	$	85,119

(1) Accounting Standard Codification 815-20 “Derivatives and Hedging”.

The carrying value and line item caption of non-derivative instruments designated as hedging instruments recorded within our consolidated balance sheets were as follows:

Non-derivative instrument designated as hedging		Carrying Value
instrument under ASC 815-20	Balance Sheet Location	As of June 30, 2013		As of December 31, 2012
In thousands
Foreign currency debt	Current portion of long-term debt	$	522,343	$	17,516
Foreign currency debt	Long-term debt	129,526		617,593
		$	651,869	$	635,109

The effect of derivative instruments qualifying and designated as hedging instruments and the related hedged items in fair value hedges on the consolidated statements of comprehensive income (loss) was as follows:

Derivatives and	Location of	Amount of Gain (Loss) Recognized in Income on Derivative										Amount of Gain (Loss) Recognized in Income on Hedged Item
related Hedged Items under ASC 815-20 Fair Value Hedging Relationships	Gain (Loss) Recognized in Income on Derivative and Hedged Item	Quarter Ended June 30, 2013			Quarter Ended June 30, 2012		Six Months Ended June 30, 2013			Six Months Ended June 30, 2012		Quarter Ended June 30, 2013		Quarter Ended June 30, 2012			Six Months Ended June 30, 2013		Six Months Ended June 30, 2012
In thousands
Interest rate swaps	Interest expense, net of interest capitalized	$	2,498		$	4,880	$	3,277		$	9,862	$	9,323	$	7,107		$	18,599	$	14,367
Interest rate swaps	Other income (expense)	(57,675		)	5,959		(59,244		)	1,416		54,761		(5,616		)	56,173		(1,902		)
		$	(55,177	)	$	10,839	$	(55,967	)	$	11,278	$	64,084	$	1,491		$	74,772	$	12,465

The effect of derivative instruments qualifying and designated as cash flow hedging instruments on the consolidated financial statements was as follows:

	Amount of Gain (Loss) Recognized in OCI on Derivative (Effective Portion)												Location of Gain (Loss) Reclassified from	Amount of Gain (Loss) Reclassified from Accumulated OCI into Income (Effective Portion)
Derivatives under ASC 815-20 Cash Flow Hedging Relationships	Quarter Ended June 30, 2013			Quarter Ended June 30, 2012			Six Months Ended June 30, 2013			Six Months Ended June 30, 2012			Accumulated OCI into Income (Effective Portion)	Quarter Ended June 30, 2013			Quarter Ended June 30, 2012			Six Months Ended June 30, 2013			Six Months Ended June 30, 2012
In thousands
Cross currency swaps	$	—		$	—		$	—		$	—		Interest expense, net of interest capitalized	$	(880	)	$	—		$	(1,751	)	$	—
Cross currency swaps	—			(8,783		)	—			(12,370		)	Other income (expense)	—			(9,800		)	—			(12,721		)
Interest rate swaps	80,800			(35,478		)	93,488			(30,924		)	Other income (expense)	—			—			—			—
Foreign currency forward contracts	6,087			(47,758		)	(8,995		)	(30,050		)	Depreciation and amortization expenses	(450		)	(196		)	(899		)	(392		)
Foreign currency forward contracts	—			—			—			—			Other income (expense)	(239		)	(239		)	(477		)	(477		)
Foreign currency forward contracts	—			—			—			—			Interest expense, net of interest capitalized	(5		)	—			(5		)	—
Foreign currency collar options	3,714			(12,564		)	(11,247		)	(12,564		)	Depreciation and amortization expenses	—			—			—			—
Fuel swaps	(65,225		)	(165,746		)	(55,200		)	(4,479		)	Fuel	9,408			28,158			26,236			63,985
	$	25,376		$	(270,329	)	$	18,046		$	(90,387	)		$	7,834		$	17,923		$	23,104		$	50,395

Derivatives under ASC	Location of Gain (Loss) Recognized in Income on Derivative (Ineffective Portion and	Amount of Gain (Loss) Recognized in Income on Derivative (Ineffective Portion and Amount Excluded from Effectiveness testing)
815-20 Cash Flow Hedging Relationships	Amount Excluded from Effectiveness Testing)	Quarter Ended June 30, 2013			Quarter Ended June 30, 2012			Six Months Ended June 30, 2013			Six Months Ended June 30, 2012
In thousands
Cross currency swaps	Other income (expense)	$	—		$	—		$	—		$	—
Cross currency swaps	Other income (expense)	—			(234		)	—			(234		)
Interest rate swaps	Other income (expense)	373			(71		)	427			(70		)
Foreign currency forward contracts	Other income (expense)	(5		)	(16		)	(10		)	(9		)
Foreign currency forward contracts	Other income (expense)	—			—			—			—
Foreign currency forward contracts	Other income (expense)	—			—			—			—
Foreign currency collar options	Other income (expense)	—			—			—			—
Fuel swaps	Other income (expense)	(3,649		)	(4,418		)	(4,369		)	(3,889		)
		$	(3,281	)	$	(4,739	)	$	(3,952	)	$	(4,202	)

The effect of non-derivative instruments qualifying and designated as net investment hedging instruments on the consolidated financial statements was as follows:

Non-derivative	Amount of Gain (Loss) Recognized in OCI (Effective Portion)									Location of Gain (Loss) in Income (Ineffective Portion and	Amount of Gain (Loss) Recognized in Income (Ineffective Portion and Amount Excluded from Effectiveness Testing)
instruments under ASC 815-20 Net Investment Hedging Relationships	Quarter Ended June 30, 2013			Quarter Ended June 30, 2012		Six Months Ended June 30, 2013		Six Months Ended June 30, 2012		Amount Excluded from Effectiveness Testing)	Quarter Ended June 30, 2013		Quarter Ended June 30, 2012		Six Months Ended June 30, 2013		Six Months Ended June 30, 2012
In thousands
Foreign Currency Debt	$	(7,978	)	$	35,888	$	4,754	$	15,118	Other income (expense)	$	—	$	—	$	—	$	—
	$	(7,978	)	$	35,888	$	4,754	$	15,118		$	—	$	—	$	—	$	—

The effect of derivatives not designated as hedging instruments on the consolidated financial statements was as follows:

Derivatives Not Designated as Hedging	Location of Gain	Amount of Gain (Loss) Recognized in Income on Derivative
Instruments under ASC 815-20	(Loss) Recognized in Income on Derivative	Quarter Ended June 30, 2013			Quarter Ended June 30, 2012			Six Months Ended June 30, 2013			Six Months Ended June 30, 2012
In thousands
Foreign currency forward contracts	Other income (expense)	$	(18,669	)	$	(3,876	)	$	(27,280	)	$	4,497
Fuel swaps	Other income (expense)	(61		)	(1,763		)	48			(1,763		)
Fuel call options	Other income (expense)	(121		)	(10,152		)	37			(7,470		)
		$	(18,851	)	$	(15,791	)	$	(27,195	)	$	(4,736	)

Credit Related Contingent Features

Our current interest rate derivative instruments may require us to post collateral if our Standard & Poor’s and Moody’s credit ratings remain below specified levels. Specifically, if on the fifth anniversary of entering into a derivative transaction or on any succeeding fifth-year anniversary our credit ratings for our senior unsecured debt were to be below BBB- by Standard & Poor’s and Baa3 by Moody’s, then each counterparty to such derivative transaction with whom we are in a net liability position that exceeds the applicable minimum call amount may demand that we post collateral in an amount equal to the net liability position.  The amount of collateral required to be posted following such event will change each time our net liability position increases or decreases by more than the applicable minimum call amount.  If our credit rating for our senior unsecured debt is subsequently equal to, or above BBB- by Standard & Poor’s or Baa3 by Moody’s, then any collateral posted at such time will be released to us and we will no longer be required to post collateral unless we meet the collateral trigger requirement at the next fifth-year anniversary.  Currently, our senior unsecured debt credit rating is BB with a stable outlook by Standard & Poor’s and Ba1 with a stable outlook by Moody’s.  We currently have five interest rate derivative hedges that have a term of at least five years.  The aggregate fair values of all derivative instruments with such credit-related contingent features in net liability positions as of June 30, 2013 and December 31, 2012 were $61.4 million and $55.5 million, respectively, which do not include the impact of any such derivatives in net asset positions.  The earliest that any of the five interest rate derivative hedges will reach their fifth anniversary is November 2016.  Therefore, as of June 30, 2013, we were not required to post collateral for any of our derivative transactions.

XML

Summary of Significant Accounting Policies (Details) (USD $)	3 Months Ended		6 Months Ended		3 Months Ended	6 Months Ended	3 Months Ended	12 Months Ended	3 Months Ended	6 Months Ended	12 Months Ended
	Jun. 30, 2013	Jun. 30, 2012	Jun. 30, 2013	Jun. 30, 2012	Jun. 30, 2013 Out of period adjustment	Jun. 30, 2012 Forward Contracts	Mar. 31, 2013 Fleet	Dec. 31, 2012 Fleet	Jun. 30, 2013 Fleet Change in accounting estimate for useful lives and associated residual value	Jun. 30, 2013 Fleet Change in accounting estimate for useful lives and associated residual value	Dec. 31, 2013 Fleet Change in accounting estimate for useful lives and associated residual value	Mar. 31, 2013 Fleet Change in accounting estimate for useful lives and associated residual value item
Property, Plant and Equipment
Number Of Cruise Ships												5
Property plant equipment, useful life							35 years	30 years
Projected residual value (as a percentage)							10.00%	15.00%
Effect of change in accounting estimate on operating income	$ 113,338,000	$ 96,905,000	$ 278,970,000	$ 232,280,000					$ 3,000,000	$ 3,900,000	$ 11,000,000
Effect of change in accounting estimate on net income	24,747,000	(3,653,000)	100,973,000	43,311,000					3,000,000	3,900,000	11,000,000
Effect of change in accounting estimate on basic earnings per share (in dollars per share)	$ 0.11	$ (0.02)	$ 0.46	$ 0.20					$ 0.01	$ 0.02	$ 0.05
Effect of a change in accounting principle on diluted earnings per share (in dollars per share)	$ 0.11	$ (0.02)	$ 0.46	$ 0.20					$ 0.01	$ 0.02	$ 0.05
Onboard and Other revenues
Gross amount of port costs included in passenger ticket revenues	117,000,000	103,800,000	232,700,000	216,900,000
Onboard and other revenues	516,054,000	488,797,000	1,033,496,000	971,039,000	(15,200,000)
Reclassifications
Amount reclassified in the consolidated statement of cash flows from other, net to cash payments received on loan to unconsolidated affiliate			11,993,000	11,813,000
Amount reclassified in the consolidated statement of cash flows from other, net to loss on derivative instruments not designated as hedges			$ 25,494,000	$ 3,278,000		$ 4,200,000

XML

Fair Value Measurements and Derivative Instruments (Tables)

6 Months Ended

Jun. 30, 2013

Fair Value Measurements and Derivative Instruments

Estimated Fair Value of Financial Instruments that are not Measured at Fair Value on Recurring Basis

The estimated fair value of our financial instruments that are not measured at fair value on a recurring basis, categorized based upon the fair value hierarchy, are as follows (in thousands):

	Fair Value Measurementsat June 30, 2013 Using								Fair Value Measurementsat December 31, 2012 Using
Description	Total		Level 1(1)		Level 2(2)		Level 3(3)		Total		Level 1(1)		Level 2(2)		Level 3(3)
Assets:
Cash and cash equivalents(4)	$	205,174	205,174		—		—		$	194,855	194,855		—		—
Total Assets	$	205,174	$	205,174	$	—	$	—	$	194,855	$	194,855	$	—	$	—
Liabilities:
Long-term debt (including current portion of long-term debt)(5)	$	8,571,141	3,215,109		5,356,032		—		$	8,859,310	3,917,398		4,941,912		—
Total Liabilities	$	8,571,141	$	3,215,109	$	5,356,032	$	—	$	8,859,310	$	3,917,398	$	4,941,912	$	—

(1) Inputs based on quoted prices (unadjusted) in active markets for identical assets or liabilities that we have the ability to access.  Valuation of these items does not entail a significant amount of judgment.

(2) Inputs other than quoted prices included within Level 1 that are observable for the liability, either directly or indirectly.  For unsecured revolving credit facilities and unsecured term loans, fair value is determined utilizing the income valuation approach.  This valuation model takes into account the contract terms of our debt such as the debt maturity and the interest rate on the debt.  The valuation model also takes into account our creditworthiness based on publicly available credit default swap rates.

(3) Inputs that are unobservable.  The Company did not use any Level 3 inputs as of June 30, 2013 and December 31, 2012.

(4) Consists of cash and marketable securities with original maturities of less than 90 days.

(5) Consists of unsecured revolving credit facilities, unsecured senior notes, senior debentures and unsecured term loans.  Does not include our capital lease obligations.

Company's Financial Instruments Recorded at Fair Value on Recurring Basis

The following table presents information about the Company’s financial instruments recorded at fair value on a recurring basis (in thousands):

	Fair Value Measurementsat June 30, 2013 Using								Fair Value Measurementsat December 31, 2012 Using
Description	Total		Level 1(1)		Level 2(2)		Level 3(3)		Total		Level 1(1)		Level 2(2)		Level 3(3)
Assets:
Derivative financial instruments(4)	$	81,561	—		81,561		—		$	96,489	—		96,489		—
Investments(5)	$	6,255	6,255		—		—		$	6,231	6,231		—		—
Total Assets	$	87,816	$	6,255	$	81,561	$	—	$	102,720	$	6,231	$	96,489	$	—
Liabilities:
Derivative financial instruments(6)	$	141,307	—		141,307		—		$	85,119	—		85,119		—
Total Liabilities	$	141,307	$	—	$	141,307	$	—	$	85,119	$	—	$	85,119	$	—

(1) Inputs based on quoted prices (unadjusted) in active markets for identical assets or liabilities that we have the ability to access.  Valuation of these items does not entail a significant amount of judgment.

(2) Inputs other than quoted prices included within Level 1 that are observable for the asset or liability, either directly or indirectly.  For foreign currency forward contracts, interest rate swaps, cross currency swaps and fuel swaps, fair value is derived using valuation models that utilize the income valuation approach.  These valuation models take into account the contract terms, such as maturity, as well as other inputs, such as foreign exchange rates and curves, fuel types, fuel curves and interest rate yield curves.  For fuel call options, fair value is determined by using the prevailing market price for the instruments consisting of published price quotes for similar assets based on recent transactions in an active market. Fair value for foreign currency collar options is determined by using standard option pricing models with inputs based on the options’ contract terms, such as exercise price and maturity, and readily available public market data, such as foreign exchange curves, foreign exchange volatility levels and discount rates. All derivative instrument fair values take into account the creditworthiness of the counterparty and the Company.

(3) Inputs that are unobservable.  The Company did not use any Level 3 inputs as of June 30, 2013 and December 31, 2012.

(4) Consists of foreign currency forward contracts, foreign currency collar options, interest rate swaps, fuel swaps and purchased fuel call options.  Please refer to the “Fair Value of Derivative Instruments” table for breakdown by instrument type.

(5) Consists of exchange-traded equity securities and mutual funds.

(6) Consists of interest rate swaps, fuel swaps, foreign currency forward contracts, foreign currency collar options and sold fuel call options.  Please refer to the “Fair Value of Derivative Instruments” table for breakdown by instrument type.

Fuel Swap Agreements

	Fuel Swap Agreements
	As ofJune 30,2013	As of December 31, 2012
	(metric tons)
2013	402,000	755,000
2014	768,000	635,000
2015	581,000	363,000
2016	296,000	104,000
2017	74,000	—

	Fuel Swap Agreements
Projected fuel purchases for year:	As ofJune 30,2013		As of December 31, 2012
	(% hedged)
2013	60	%	55	%
2014	55	%	45	%
2015	39	%	25	%
2016	20	%	7	%
2017	5	%	—

Fair Value And Line item Caption of Derivative Instruments

	Fair Value of Derivative Instruments
	Asset Derivatives					Liability Derivatives
	Balance Sheet	As of June 30, 2013		As of December 31, 2012		Balance Sheet	As of June 30, 2013		As of December 31, 2012
	Location	Fair Value		Fair Value		Location	Fair Value		Fair Value
In thousands
Derivatives designated as hedging instruments under ASC 815-20(1)
Interest rate swaps	Other Assets	$	44,639	$	5,099	Other long-term liabilities	$	61,424	$	55,471
Foreign currency forward contracts	Derivative Financial Instruments	—		951		Accrued expenses and other liabilities	3,304		338
Foreign currency forward contracts	Other Assets	8,024		11,564		Other long-term liabilities	4,099		1,000
Foreign currency collar options	Other Assets	—		8,974		Other long-term liabilities	2,273		—
Fuel swaps	Derivative Financial Instruments	14,823		48,624		Accrued expenses and other liabilities	12,144		1,761
Fuel swaps	Other Assets	128		8,585		Other long-term liabilities	36,995		6,369
Total derivatives designated as hedging instruments under 815-20		$	67,614	$	83,797		$	120,239	$	64,939
Derivatives not designated as hedging instruments under ASC 815-20
Foreign currency forward contracts	Derivative Financial Instruments	$	7,559	$	—	Accrued expenses and other liabilities	$	4,611	$	—
Foreign currency forward contracts	Other Assets	2,733		4,440		Other long-term liabilities	12,809		11,475
Fuel swaps	Derivative Financial Instruments	6		—		Accrued expenses and other liabilities	59		475
Fuel call options	Derivative Financial Instruments	3,649		8,252		Accrued expenses and other liabilities	3,589		8,230
Total derivatives not designated as hedging instruments under 815-20		13,947		12,692			21,068		20,180
Total derivatives		$	81,561	$	96,489		$	141,307	$	85,119

(1) Accounting Standard Codification 815-20 “Derivatives and Hedging”.

Carrying Value and Line Item Caption of Non-derivative Instruments designated as hedging instruments

Non-derivative instrument designated as hedging		Carrying Value
instrument under ASC 815-20	Balance Sheet Location	As of June 30, 2013		As of December 31, 2012
In thousands
Foreign currency debt	Current portion of long-term debt	$	522,343	$	17,516
Foreign currency debt	Long-term debt	129,526		617,593
		$	651,869	$	635,109

Effect of Non-derivative Instruments Qualifying and Designated as net investment Hedging Instruments on Consolidated Financial Statements

Non-derivative	Amount of Gain (Loss) Recognized in OCI (Effective Portion)									Location of Gain (Loss) in Income (Ineffective Portion and	Amount of Gain (Loss) Recognized in Income (Ineffective Portion and Amount Excluded from Effectiveness Testing)
instruments under ASC 815-20 Net Investment Hedging Relationships	Quarter Ended June 30, 2013			Quarter Ended June 30, 2012		Six Months Ended June 30, 2013		Six Months Ended June 30, 2012		Amount Excluded from Effectiveness Testing)	Quarter Ended June 30, 2013		Quarter Ended June 30, 2012		Six Months Ended June 30, 2013		Six Months Ended June 30, 2012
In thousands
Foreign Currency Debt	$	(7,978	)	$	35,888	$	4,754	$	15,118	Other income (expense)	$	—	$	—	$	—	$	—
	$	(7,978	)	$	35,888	$	4,754	$	15,118		$	—	$	—	$	—	$	—

Not Designated as Hedging Instrument

Derivative Instruments

Schedule of Derivative Instruments, Gain (Loss) in Statement of Financial Performance

Derivatives Not Designated as Hedging	Location of Gain	Amount of Gain (Loss) Recognized in Income on Derivative
Instruments under ASC 815-20	(Loss) Recognized in Income on Derivative	Quarter Ended June 30, 2013			Quarter Ended June 30, 2012			Six Months Ended June 30, 2013			Six Months Ended June 30, 2012
In thousands
Foreign currency forward contracts	Other income (expense)	$	(18,669	)	$	(3,876	)	$	(27,280	)	$	4,497
Fuel swaps	Other income (expense)	(61		)	(1,763		)	48			(1,763		)
Fuel call options	Other income (expense)	(121		)	(10,152		)	37			(7,470		)
		$	(18,851	)	$	(15,791	)	$	(27,195	)	$	(4,736	)

Fair Value Hedging

Derivative Instruments

Schedule of Derivative Instruments, Gain (Loss) in Statement of Financial Performance

Derivatives and	Location of	Amount of Gain (Loss) Recognized in Income on Derivative										Amount of Gain (Loss) Recognized in Income on Hedged Item
related Hedged Items under ASC 815-20 Fair Value Hedging Relationships	Gain (Loss) Recognized in Income on Derivative and Hedged Item	Quarter Ended June 30, 2013			Quarter Ended June 30, 2012		Six Months Ended June 30, 2013			Six Months Ended June 30, 2012		Quarter Ended June 30, 2013		Quarter Ended June 30, 2012			Six Months Ended June 30, 2013		Six Months Ended June 30, 2012
In thousands
Interest rate swaps	Interest expense, net of interest capitalized	$	2,498		$	4,880	$	3,277		$	9,862	$	9,323	$	7,107		$	18,599	$	14,367
Interest rate swaps	Other income (expense)	(57,675		)	5,959		(59,244		)	1,416		54,761		(5,616		)	56,173		(1,902		)
		$	(55,177	)	$	10,839	$	(55,967	)	$	11,278	$	64,084	$	1,491		$	74,772	$	12,465

Cash flow hedge

Derivative Instruments

Schedule of Derivative Instruments, Gain (Loss) in Statement of Financial Performance

	Amount of Gain (Loss) Recognized in OCI on Derivative (Effective Portion)												Location of Gain (Loss) Reclassified from	Amount of Gain (Loss) Reclassified from Accumulated OCI into Income (Effective Portion)
Derivatives under ASC 815-20 Cash Flow Hedging Relationships	Quarter Ended June 30, 2013			Quarter Ended June 30, 2012			Six Months Ended June 30, 2013			Six Months Ended June 30, 2012			Accumulated OCI into Income (Effective Portion)	Quarter Ended June 30, 2013			Quarter Ended June 30, 2012			Six Months Ended June 30, 2013			Six Months Ended June 30, 2012
In thousands
Cross currency swaps	$	—		$	—		$	—		$	—		Interest expense, net of interest capitalized	$	(880	)	$	—		$	(1,751	)	$	—
Cross currency swaps	—			(8,783		)	—			(12,370		)	Other income (expense)	—			(9,800		)	—			(12,721		)
Interest rate swaps	80,800			(35,478		)	93,488			(30,924		)	Other income (expense)	—			—			—			—
Foreign currency forward contracts	6,087			(47,758		)	(8,995		)	(30,050		)	Depreciation and amortization expenses	(450		)	(196		)	(899		)	(392		)
Foreign currency forward contracts	—			—			—			—			Other income (expense)	(239		)	(239		)	(477		)	(477		)
Foreign currency forward contracts	—			—			—			—			Interest expense, net of interest capitalized	(5		)	—			(5		)	—
Foreign currency collar options	3,714			(12,564		)	(11,247		)	(12,564		)	Depreciation and amortization expenses	—			—			—			—
Fuel swaps	(65,225		)	(165,746		)	(55,200		)	(4,479		)	Fuel	9,408			28,158			26,236			63,985
	$	25,376		$	(270,329	)	$	18,046		$	(90,387	)		$	7,834		$	17,923		$	23,104		$	50,395

Derivatives under ASC	Location of Gain (Loss) Recognized in Income on Derivative (Ineffective Portion and	Amount of Gain (Loss) Recognized in Income on Derivative (Ineffective Portion and Amount Excluded from Effectiveness testing)
815-20 Cash Flow Hedging Relationships	Amount Excluded from Effectiveness Testing)	Quarter Ended June 30, 2013			Quarter Ended June 30, 2012			Six Months Ended June 30, 2013			Six Months Ended June 30, 2012
In thousands
Cross currency swaps	Other income (expense)	$	—		$	—		$	—		$	—
Cross currency swaps	Other income (expense)	—			(234		)	—			(234		)
Interest rate swaps	Other income (expense)	373			(71		)	427			(70		)
Foreign currency forward contracts	Other income (expense)	(5		)	(16		)	(10		)	(9		)
Foreign currency forward contracts	Other income (expense)	—			—			—			—
Foreign currency forward contracts	Other income (expense)	—			—			—			—
Foreign currency collar options	Other income (expense)	—			—			—			—
Fuel swaps	Other income (expense)	(3,649		)	(4,418		)	(4,369		)	(3,889		)
		$	(3,281	)	$	(4,739	)	$	(3,952	)	$	(4,202	)

XML

Document and Entity Information	6 Months Ended
	Jun. 30, 2013	Jul. 17, 2013
Document and Entity Information
Entity Registrant Name	ROYAL CARIBBEAN CRUISES LTD
Entity Central Index Key	0000884887
Document Type	10-Q
Document Period End Date	Jun. 30, 2013
Amendment Flag	false
Current Fiscal Year End Date	--12-31
Entity Current Reporting Status	Yes
Entity Filer Category	Large Accelerated Filer
Entity Common Stock, Shares Outstanding		219,637,201
Document Fiscal Year Focus	2013
Document Fiscal Period Focus	Q2

XML

General (Details)	6 Months Ended
	Jun. 30, 2013
Minimum
General
Investment in a joint venture, percentage of interest	20.00%
Maximum
General
Investment in a joint venture, percentage of interest	50.00%
TUI Cruises
General
Investment in a joint venture, percentage of interest	50.00%
Pullmantur and CDF Croisieres de France
General
Time lag in consolidation	2 months