Note 1. General

Description of Business

We are a global cruise company. We own five cruise brands, Royal Caribbean International, Celebrity Cruises, Pullmantur, Azamara Club Cruises, and CDF Croisières de France with a combined total of 39 ships in operation at December 31, 2011. Our ships operate on a selection of worldwide itineraries that call on approximately 460 destinations. In addition, we have a 50% investment in a joint venture which operates the brand TUI Cruises with TUI AG, a German-based multinational travel and tourism company.

Basis for Preparation of Consolidated Financial Statements

The 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.

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. 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 its wholly-owned subsidiary, 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 November 2011 and December 2011 that would require disclosure or adjustment to our consolidated financial statements as of December 31, 2011.

Revision of Prior Period Financial Statements

In connection with the preparation of our consolidated financial statements for the second quarter of 2011, we identified and corrected errors in the manner in which we were amortizing guarantee fees related to three outstanding export credit agency guaranteed loans, and to a much lesser extent, fees associated with our revolving credit facilities. Previously, these fees were amortized on a straight-line basis over the life of the respective loan. Following identification of the errors, in the second quarter of 2011 we corrected our method of amortizing these guarantee fees based on the timing of their payment, which payments are made semi-annually and vary in amount depending on a number of factors, including the relevant outstanding loan balance and our credit rating. In accordance with accounting guidance found in ASC 250-10 (SEC Staff Accounting Bulletin No. 99, Materiality), we assessed the materiality of the errors and concluded that the errors were not material to any of our previously issued financial statements. In accordance with accounting guidance found in ASC 250-10 (SEC Staff Accounting Bulletin No. 108, Considering the Effects of Prior Year Misstatements when Quantifying Misstatements in Current Year Financial Statements), we have revised all affected periods. These non-cash errors did not impact our operating income or cash flows for any prior period.

The following table presents the effects of the revision on the Company’s Consolidated Statements of Operations for the respective annual periods. Please refer to Note 16. Quarterly Selected Financial Data (Unaudited) for the respective quarterly periods.


	Year Ended December 31, 2010									Year Ended December 31, 2009
	(in thousands, except per share data)
	As Previously Reported			Adjustment			As Revised			As Previously Reported			Adjustment			As Revised
Interest expense, net of interest capitalized	$	(339,393	)	$	(31,814	)	$	(371,207	)	$	(300,012	)	$	(9,936	)	$	(309,948	)
Total other expense		(255,166	)		(31,814	)		(286,980	)		(326,090	)		(9,936	)		(336,026	)
Net Income		547,467			(31,814	)		515,653			162,421			(9,936	)		152,485
Earnings per Share:
Basic	$	2.55		$	(0.15	)	$	2.40		$	0.76		$	(0.05	)	$	0.71
Diluted	$	2.51		$	(0.15	)	$	2.37		$	0.75		$	(0.05	)	$	0.71

The following table presents the effect the revision had on the Consolidated Balance Sheet at December 31, 2010:


	As of December 31, 2010
	(in thousands)
	As Previously Reported		Adjustment			As Revised
Property and equipment, net	$	16,769,181	$	2,496		$	16,771,677
Other assets		1,151,324		(43,571	)		1,107,753
Total assets		19,694,904		(41,075	)		19,653,829
Accrued expenses and other liabilities		552,543		675			553,218
Total current liabilities		3,444,498		675			3,445,173
Retained earnings		5,301,748		(41,750	)		5,259,998
Total shareholders’ equity		7,942,502		(41,750	)		7,900,752
Total liabilities and shareholders’ equity		19,694,904		(41,075	)		19,653,829

The correction did not have an effect on the Company’s total operating cash flows. The following table presents the effect on the individual line items within operating cash flows on the Company’s Consolidated Statement of Cash Flows for December 31, 2010 and 2009:


	Year Ended December 31, 2010											Year Ended December 31, 2009
	(in thousands)
	As Previously Reported			Adjustment			Reclassification¹			As Revised		As Previously Reported		Adjustment			Reclassification¹			As Revised
Net Income	$	547,467		$	(31,814	)	$	—		$	515,653	$	162,421	$	(9,936	)	$	—		$	152,485
Increase in accrued expenses and other liabilities		72,161			(192	)		—			71,969		15,391		867			—			16,258
Other, net		(22,415	)		32,006			(2,826	)		6,765		49,738		9,069			(2,538	)		56,269

¹	Please refer to Note 2. Summary of Significant Accounting Policies for discussion.