# UNITED	STATES

# SECURITIES	AND	EXCHANGE	COMMISSION

# (Mark	One)

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

# For	the	fiscal	year	ended	December	31,	2016

# TRANSITION	REPORT	PURSUANT	TO	SECTION	13	OR	15(d)	OF	THE	SECURITIES	EXCHANGE	ACT

# ROYAL	CARIBBEAN	CRUISES	LTD.

(Exact	name	of	registrant	as	specified	in	its	charter)

Republic	of	Liberia

(State	or	other	jurisdiction	of

(I.R.S.	Employer	Identification	No.)

incorporation	or	organization)

(Address	of	principal	executive	offices)	(zip	code)

(Registrant's	telephone	number,	including	area	code)

Securities	registered	pursuant	to	Section	12(b)	of	the	Act:

# Title	of	each	class Name	of	each	exchange	on	which	registered

Securities	registered	pursuant	to	Section	12(g)	of	the	Act:	None

Indicate	by	check	mark	if	the	registrant	is	a	well-known	seasoned	issuer,	as	defined	in	Rule	405	of	the	Securities	Act.	Yes	 x				No	o

Indicate	by	check	mark	if	the	registrant	is	not	required	to	file	reports	pursuant	to	Section	13	or	Section	15(d)	of	the	Act.	Yes o				No	x

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	if	disclosure	of	delinquent	filers	pursuant	to	Item	405	of	Regulation	S-K	is	not	contained	herein,	and	will	not	be	contained,	to	the	best	of	registrant's	knowledge,	in definitive	proxy	or	information	statements	incorporated	by	reference	in	Part	III	of	this	Form	10-K	or	any	amendment	to	this	Form	10-K.	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	Act).	Yes	 o				No	x

The	aggregate	market	value	of	the	registrant's	common	stock	at	 June	30,	2016	(based	upon	the	closing	sale	price	of	the	common	stock	on	the	New	York	Stock	Exchange	on	 June	30,	2016)	held by	those	persons	deemed	by	the	registrant	to	be	non-affiliates	was	approximately	$12.1	billion.	Shares	of	the	registrant's	common	stock	held	by	each	executive	officer	and	director	and	by	each	entity or	person	that,	to	the	registrant's	knowledge,	owned	10%	or	more	of	the	registrant's	outstanding	common	stock	as	of	June	30,	2016	have	been	excluded	from	this	number	in	that	these	persons	may	be deemed	affiliates	of	the	registrant.	This	determination	of	possible	affiliate	status	is	not	necessarily	a	conclusive	determination	for	other	purposes.

# DOCUMENTS	INCORPORATED	BY	REFERENCE

Portions	of	the	registrant's	Definitive	Proxy	Statement	relating	to	its	 2017	Annual	Meeting	of	Shareholders	are	incorporated	by	reference	in	Part	III,	Items	10-14	of	this	Annual	Report	on Form	10-K	as	indicated	herein.

Table	of	Contents

|  | ROYAL	CARIBBEAN	CRUISES	LTD.<br>TABLE	OF	CONTENTS |  |
| :--- | :--- | :--- |
|  |  | Page |
| PART\tI |  |  |
| Item\t1. | \t Business | 1 |
| Item\t1A. | \t Risk\tFactors | 24 |
| Item\t1B. | \t Unresolved\tStaff\tComments | 33 |
| Item\t2. | Properties | 33 |
| Item\t3. | \t Legal\tProceedings | 33 |
| Item\t4. | \t Mine\tSafety\tDisclosures | 33 |
| PART\tII |  |  |
| Item\t5. | \t Market\tfor\tRegistrant's\tCommon\tEquity,\tRelated\tStockholder\tMatters\tand\tIssuer\tPurchases\tof\tEquity\tSecurities | 34 |
| Item\t6. | Selected\tFinancial\tData | 36 |
| Item\t7. | \t Management's\tDiscussion\tand\tAnalysis\tof\tFinancial\tCondition\tand\tResults\tof\tOperations | 37 |
| Item\t7A. | \t Quantitative\tand\tQualitative\tDisclosures\tAbout\tMarket\tRisk | 62 |
| Item\t8. | Financial\tStatements\tand\tSupplementary\tData | 64 |
| Item\t9. | \t Changes\tIn\tand\tDisagreements\tWith\tAccountants\ton\tAccounting\tand\tFinancial\tDisclosure | 65 |
| Item\t9A. | \t Controls\tand\tProcedures | 66 |
| Item\t9B. | \t Other\tInformation | 66 |
| PART\tIII |  |  |
| Item\t10. | \t Directors,\tExecutive\tOfficers\tand\tCorporate\tGovernance | 67 |
| Item\t11. | \t Executive\tCompensation | 67 |
| Item\t12. | Security\tOwnership\tof\tCertain\tBeneficial\tOwners\tand\tManagement\tand\tRelated\tStockholder\tMatters | 67 |
| Item\t13. | \t Certain\tRelationships\tand\tRelated\tTransactions,\tand\tDirector\tIndependence | 67 |
| Item\t14. | Principal\tAccounting\tFees\tand\tServices | 67 |
| PART\tIV |  |  |
| Item\t15. | \t Exhibits,\tFinancial\tStatement\tSchedules | 68 |
| Item\t16. | Form\t10-K\tSummary | 68 |
| Signatures |  | 68 |

# PART	I

As	used	 in	 this	Annual	Report	on	Form	10-K,	 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,"	 and	 "Azamara	 Club	 Cruises"	 refer	 to	 our	 wholly-owned	 global	 cruise	 brands. Throughout	this	report,	we	also	refer	to	regional	brands	in	which	we	hold	an	ownership	interest,	including	"TUI	Cruises,"	"Pullmantur"	and "SkySea	Cruises".	However,	because	these	regional	brands	are	unconsolidated	investments,	our	operating	results	and	other	disclosures	herein do	not	include	these	brands	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	Annual	Report	on	Form	10-K	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.

# Item	1.	Business.

# General

We	are	the	world's	second	largest	cruise	company.	We	own	and	operate	three	global	cruise	brands:	Royal	Caribbean	International,	Celebrity Cruises	and	Azamara	Club	Cruises	(our	"Global	Brands").	We	also	own	a	50%	joint	venture	interest	in	the	German	brand	TUI	Cruises,	a	49% interest	 in	 the	Spanish	brand	Pullmantur	and	a	minority	 interest	 in	 the	Chinese	brand	SkySea	Cruises	(collectively,	our	"Partner	Brands"). Together,	our	Global	Brands	and	our	Partner	Brands	operate	a	combined	total	of	49	ships	in	the	cruise	vacation	industry	with	an	aggregate capacity	of	approximately	123,270	berths	as	of	December	31,	2016.

Our	ships	operate	on	a	selection	of	worldwide	itineraries	that	call	on	approximately	535	destinations	on	all	seven	continents.	In	addition	to our	headquarters	in	Miami,	Florida,	we	have	offices	and	a	network	of	international	representatives	around	the	world	which	primarily	focus	on sales	and	market	development.

We	compete	principally	by	establishing	valued	brands	that	offer	exceptional	service	provided	by	our	crew	and	on	the	basis	of	innovation	and quality	of	ships,	variety	of	itineraries,	choice	of	destinations	and	price.	We	believe	that	our	commitment	to	build	state-of-the-art	ships	and	to	invest in	the	maintenance	and	upgrade	of	our	fleet	to,	among	other	things,	incorporate	our	latest	signature	innovations,	allows	us	to	continue	to	attract new	and	loyal	repeat	guests.

We	believe	cruising	continues	to	be	a	popular	vacation	choice	due	to	its	inherent	value,	extensive	itineraries	and	variety	of	shipboard	and shoreside	activities.	In	addition,	our	brands	are	well-positioned	globally	and	possess	the	ability	to	attract	a	wide	range	of	guests	by	appealing	to multiple	customer	bases	allowing	our	global	sourcing	to	be	well	diversified.

Royal	Caribbean	was	founded	in	1968	as	a	partnership.	Its	corporate	structure	has	evolved	over	the	years	and	the	current	parent	corporation, Royal	Caribbean	Cruises	Ltd.,	was	incorporated	on	July	23,	1985	in	the	Republic	of	Liberia	under	the	Business	Corporation	Act	of	Liberia.

# Our	Global	Brands

Our	Global	Brands	include	Royal	Caribbean	International,	Celebrity	Cruises	and	Azamara	Club	Cruises.

We	believe	our	Global	Brands	possess	the	versatility	to	enter	multiple	cruise	market	segments	within	the	cruise	vacation	industry.	Although each	of	our	Global	Brands	has	its	own	marketing	style	as	well	as	ships	and	crews	of	various	sizes,	the	nature	of	the	products	sold	and	services delivered	by	our	Global	Brands	share	a	common	base	(i.e.,	the	sale	and	provision	of	cruise	vacations).	Our	Global	Brands	also	have	similar itineraries	as	well	as	similar	cost	and	revenue	components.	In	addition,	our	brands	source	passengers	from	similar	markets	around	the	world	and operate

in	similar	economic	environments	with	a	significant	degree	of	commercial	overlap.	As	a	result,	we	strategically	manage	our	brands	as	a	single business	with	the	ultimate	objective	of	maximizing	long-term	shareholder	value.

# Royal	Caribbean	International

Royal	 Caribbean	 International	 is	 positioned	 at	 the	 upper	 end	 of	 the	 contemporary	 segment	 of	 the	 cruise	 vacation	 industry,	 generally characterized	by	cruises	that	are	seven	nights	or	shorter	and	feature	a	casual	ambiance	as	well	as	a	variety	of	activities	and	entertainment	venues. The	brand	appeals	to	families	with	children	of	all	ages,	as	well	as	both	older	and	younger	couples.	We	believe	that	the	quality	of	the	Royal Caribbean	International	brand	also	enables	it	to	attract	guests	from	the	premium	segment	allowing	Royal	Caribbean	International	to	achieve market	coverage	that	is	among	the	broadest	of	any	of	the	major	cruise	brands	in	the	cruise	vacation	industry.	Royal	Caribbean	International's strategy	is	to	attract	an	array	of	vacationing	guests	by	providing	a	wide	variety	of	itineraries	to	destinations	worldwide	including	Alaska,	Asia, Australia,	Bahamas,	Bermuda,	Canada,	the	Caribbean,	Europe,	the	Panama	Canal	and	New	Zealand	with	cruise	lengths	that	range	from	two	to	24 nights.	Royal	Caribbean	International	offers	multiple	innovative	options	for	onboard	dining,	entertainment	and	other	onboard	activities.	Because of	the	brand's	ability	to	deliver	extensive	and	innovative	product	offerings	at	an	excellent	value	to	consumers,	we	believe	Royal	Caribbean International	is	well	positioned	to	attract	new	consumers	to	cruising	and	to	continue	to	bring	loyal	repeat	guests	back	for	their	next	vacation.

We	currently	operate	25	ships	with	an	aggregate	capacity	of	approximately	78,150	berths	under	our	Royal	Caribbean	International	brand. This	count	includes	our	two	newest	ships,	the	5,450	berth	Harmony	of	the	Seas	and	the	4,100	berth	Ovation	of	the	Seas,	which	entered	our	fleet	in May	and	April	of	2016,	respectively.

We	have	four	ships	on	order	with	an	aggregate	capacity	of	approximately	19,200	berths.	These	ships	include	our	fourth	and	fifth	Quantum- class	ships,	which	are	scheduled	to	enter	service	in	the	second	quarter	of	2019	and	fourth	quarter	of	2020,	respectively,	and	the	fourth	and	fifth Oasis-class	ships,	which	are	scheduled	to	enter	service	in	the	first	quarter	of	2018	and	second	quarter	of	2021,	respectively.	Additionally,	we signed	a	memorandum	of	understanding	to	build	two	new	ships	of	a	new	generation	of	ships,	known	as	"Project	Icon,"	which	are	expected	to	enter service	in	the	second	quarters	of	2022	and	2024,	respectively.

# Celebrity	Cruises

Celebrity	Cruises	is	positioned	within	the	premium	segment	of	the	cruise	vacation	industry.	Celebrity	Cruises'	strategy	is	to	target	affluent consumers	by	delivering	a	"Modern	Luxury"	experience	that	includes	a	destination-rich	experience,	upscale	ships	that	offer,	among	other	things, luxurious	accommodations,	a	high	staff-to-guest	ratio,	fine	dining,	personalized	service	and	extensive	spa	facilities.	Celebrity	Cruises	offers	a variety	of	itineraries	to	popular	destinations,	including	Alaska,	Asia,	Australia,	Bermuda,	Canada,	the	Caribbean,	Europe,	the	Galapagos,	Hawaii, New	Zealand,	the	Panama	Canal	and	South	America	with	cruise	lengths	that	range	from	two	to	18	nights.

We	currently	operate	12	ships	with	an	aggregate	capacity	of	approximately	23,170	berths	under	our	Celebrity	Cruises	brand.	Additionally, we	have	four	ships	of	a	new	generation,	known	as	"Project	Edge,"	on	order	with	an	aggregate	capacity	of	approximately	11,600	berths	which	are expected	to	enter	service	in	the	fourth	quarter	of	2018,	the	first	quarter	of	2020	and	the	fourth	quarters	of	2021	and	2022,	respectively.

# Azamara	Club	Cruises

Azamara	Club	Cruises	is	designed	to	serve	the	up-market	segment	of	the	North	American,	United	Kingdom	and	Australian	markets.	The	up- market	segment	incorporates	elements	of	the	premium	segment	and	the	luxury	segment	which	is	generally	characterized	by	smaller	ships,	high standards	of	accommodation	and	service,	higher	prices	and	exotic	itineraries.	Azamara	Club	Cruises'	strategy	is	to	deliver	distinctive	destination experiences	through	unique	itineraries	with	more	overnights	and	longer	stays	as	well	as	comprehensive	tours	allowing	guests	to	experience	the destination	in	more	depth.	Azamara	Club	Cruises	offers	a	variety	of	itineraries	to	popular	destinations,	including	Asia,	Australia/New	Zealand, Northern	and	Western	Europe,	the	Mediterranean,	Central	and	North	America	and	the	less-

traveled	islands	of	the	Caribbean.	We	currently	operate	two	ships	with	an	aggregate	capacity	of	approximately	1,400	berths	under	our	Azamara Club	Cruises	brand,	offering	cruise	itineraries	that	range	from	three	to	21	nights.

# Our	Partner	Brands

Our	Global	Brands	are	complemented	by	our	50%	joint	venture	interest	in	TUI	Cruises,	which	is	specifically	tailored	for	the	German	market, our	49%	interest	in	the	Spanish	brand	Pullmantur,	which	is	primarily	focused	on	the	cruise	market	in	Spain	and	a	minority	interest	in	SkySea Cruises	specifically	tailored	for	the	Chinese	market.	We	account	for	our	investments	in	our	Partner	Brands	under	the	equity	method	of	accounting and,	accordingly,	the	operating	results	of	these	Partner	Brands	are	not	included	in	our	consolidated	results	of	operations.	Refer	to	Note	1.	General and	Note	6.	Other	Assets	to	our	consolidated	financial	statements	under	Item	8.	Financial	Statements	and	Supplementary	Data	for	further	details.

# TUI	Cruises

TUI	Cruises	is	a	joint	venture	owned	50%	by	us	and	50%	by	TUI	AG,	a	German	tourism	and	shipping	company,	which	is	designed	to	serve the	contemporary	and	premium	segments	of	the	German	cruise	market	by	offering	a	product	tailored	for	German	guests.	All	onboard	activities, services,	shore	excursions	and	menu	offerings	are	designed	to	suit	the	preferences	of	this	target	market.

TUI	Cruises	operates	five	ships,	with	an	aggregate	capacity	of	approximately	11,300	berths.	In	addition,	TUI	Cruises	currently	has	three newbuild	ships	on	order	which	are	scheduled	for	delivery	in	the	second	quarters	of	2017	and	2018	and	the	first	quarter	of	2019,	respectively.	TUI Cruises	plans	to	offset	this	additional	capacity	through	the	planned	transfer	of	the	their	first	two	ships,	Mein	 Schiff	 1	and	Mein	Schiff	2,	 to Thomson	Cruises,	an	affiliate	of	TUI	AG,	in	2018	and	2019,	respectively.

# Pullmantur

Prior	to	August	2016,	Pullmantur	Holdings	S.L.	("Pullmantur	Holdings"),	the	parent	company	of	the	Pullmantur	brand	(formerly	known	as Royal	Caribbean	Holdings	de	España	S.L.	or	"RCHE"),	was	wholly	owned	by	us.	Effective	July	31,	2016,	we	sold	51%	of	our	interest	in Pullmantur	Holdings.	We	retain	a	49%	interest	in	Pullmantur	Holdings	as	well	as	full	ownership	of	the	four	vessels	currently	operated	by	the Pullmantur	brand	under	bareboat	charter	arrangements.	Refer	to	Note	1.	General	to	our	consolidated	financial	statements	under	Item	8.	Financial Statements	and	Supplementary	Data	for	further	information	on	the	sale	transaction.

Pullmantur	operates	in	the	contemporary	segment	of	the	Spanish	cruise	market	and	is	designed	to	attract	Spanish-speaking	families	and couples	and	includes	a	Spanish-speaking	crew	as	well	as	tailored	food	and	entertainment	options.	Pullmantur	currently	operates	four	ships	with	an aggregate	capacity	of	approximately	7,450	berths.	Pullmantur	Holdings	also	previously	operated	the	small	French	regional	brand	CDF	Croisières de	France.

# SkySea	Cruises

We	have	a	strategic	partnership	with	Ctrip.com	International	Ltd.	("Ctrip"),	a	Chinese	travel	service	provider,	to	operate	the	cruise	brand known	as	SkySea	Cruises.	We	and	Ctrip	each	own	35%	of	the	venture,	with	the	remaining	equity	held	by	the	venture's	management	and	a	private equity	fund.	SkySea	Cruises	commenced	operations	during	the	second	quarter	of	2015	and	operates	one	ship,	SkySea	Golden	Era,	 which	 it purchased	from	us	in	2014.	SkySea	Cruises	offers	a	custom-tailored	product	for	Chinese	cruise	guests.	All	onboard	activities,	services,	shore excursions	and	menu	offerings	are	designed	to	suit	the	preferences	of	this	target	market.

# Industry

Cruising	is	considered	a	well-established	vacation	sector	in	the	North	American	and	European	markets	and	a	developing	but	promising sector	in	several	other	emerging	markets.	Industry	data	indicates	that	market	penetration

rates	are	still	low	and	that	a	significant	portion	of	cruise	guests	carried	are	first-time	cruisers.	We	believe	this	presents	an	opportunity	for	long-term growth	and	a	potential	for	increased	profitability.

The	following	table	details	industry	market	penetration	rates	for	North	America,	Europe	and	Asia/Pacific	computed	based	on	the	number	of annual	cruise	guests	as	a	percentage	of	the	total	population:

| Year | North	America(1)(2) | Europe(1)(3) | Asia/Pacific(1)(4) |
| :--- | :--- | :--- | :--- |
| 2012 | 3.33% | 1.21% | 0.04% |
| 2013 | 3.32% | 1.24% | 0.05% |
| 2014 | 3.46% | 1.23% | 0.06% |
| 2015 | 3.36% | 1.25% | 0.08% |
| 2016 | 3.49% | 1.24% | 0.09% |

(1) Source:	Our	estimates	are	based	on	a	combination	of	data	obtained	from	publicly	available	sources	including	the	International	Monetary	Fund,	United	Nations,	Department of	Economic	and	Social	Affairs,	Cruise	Lines	International	Association	("CLIA")	and	G.P.	Wild.

(2) Our	estimates	include	the	United	States	and	Canada.

(3) Our	estimates	include	European	countries	relevant	to	the	industry	(e.g.,	Nordics,	Germany,	France,	Italy,	Spain	and	the	United	Kingdom).

(4) Our	estimates	include	the	Southeast	Asia	(e.g.,	Singapore,	Thailand	and	the	Philippines),	East	Asia	(e.g.,	China	and	Japan),	South	Asia	(e.g.	India	and	Pakistan)	and Oceanian	(e.g.,	Australia	and	Fiji	Islands)	regions.

We	estimate	that	the	global	cruise	fleet	was	served	by	approximately	503,000	berths	on	approximately	298	ships	at	the	end	of	2016.	There are	approximately	60	ships	with	an	estimated	173,000	berths	that	are	expected	to	be	placed	in	service	in	the	global	cruise	market	between	 2017 and	2021,	although	it	is	also	possible	that	additional	ships	could	be	ordered	or	taken	out	of	service	during	these	periods.	We	estimate	that	the global	cruise	industry	carried	24.0	million	cruise	guests	in	2016	compared	to	23.0	million	cruise	guests	carried	in	2015	and	22.0	million	cruise guests	carried	in	2014.

The	following	table	details	the	growth	in	global	weighted	average	berths	and	the	global,	North	American,	European	and	Asia/Pacific	cruise guests	over	the	past	five	years	(in	thousands,	except	berth	data):

| Year | Weighted-Average<br>Supply	of<br>Berths<br>Marketed<br>Globally(1) | Royal	Caribbean<br>Cruises	Ltd.	Total<br>Berths(2) | Global<br>Cruise<br>Guests(1) | North	American<br>Cruise	Guests(1)(3) | European	Cruise<br>Guests(1)(4) | Asia/Pacific<br>Cruise	Guests(1)(5) |
| :--- | :--- | :--- | :--- | :--- | :--- | :--- |
| 2012 | 425,000 | 98,650 | 20,813 | 11,641 | 6,225 | 1,474 |
| 2013 | 432,000 | 98,750 | 21,343 | 11,710 | 6,430 | 2,045 |
| 2014 | 448,000 | 105,750 | 22,039 | 12,269 | 6,387 | 2,382 |
| 2015 | 469,000 | 112,700 | 23,000 | 12,004 | 6,587 | 3,129 |
| 2016 | 493,000 | 123,270 | 24,000 | 12,581 | 6,542 | 3,636 |

(1) Source:	Our	estimates	of	the	number	of	global	cruise	guests	and	the	weighted-average	supply	of	berths	marketed	globally	are	based	on	a	combination	of	data	that	we	obtain from	various	publicly	available	cruise	industry	trade	information	sources.	We	use	data	obtained	from	Seatrade	Insider,	Cruise	Industry	News	and	company	press	releases	to estimate	weighted-average	supply	of	berths	and	CLIA	and	G.P.	Wild	to	estimate	cruise	guest	information.	In	addition,	our	estimates	incorporate	our	own	statistical	analysis utilizing	the	same	publicly	available	cruise	industry	data	as	a	base.

(2) Total	berths	include	our	berths	related	to	our	Global	Brands	and	Partner	Brands.

# North	America

The	majority	of	industry	cruise	guests	are	sourced	from	North	America,	which	represented	approximately	 52%	of	global	cruise	guests	in 2016.	The	compound	annual	growth	rate	in	cruise	guests	sourced	from	this	market	was	approximately	 2%	from	2012	to	2016.

# Europe

Industry	cruise	guests	sourced	from	Europe	represented	approximately	27%	of	global	cruise	guests	in	2016.	The	compound	annual	growth rate	in	cruise	guests	sourced	from	this	market	was	approximately	1%	from	2012	to	2016.

# Asia/Pacific

Industry	cruise	guests	sourced	from	the	Asia/Pacific	region	represented	approximately	15%	of	global	cruise	guests	in	2016.	The	compound annual	growth	rate	in	cruise	guests	sourced	from	this	market	was	approximately	25%	from	2012	to	2016.	The	Asia/Pacific	region	is	experiencing the	highest	growth	rate	of	the	major	regions,	although	it	will	continue	to	represent	a	relatively	small	sector	compared	to	North	America.

# Competition

We	compete	with	a	number	of	cruise	lines.	Our	principal	competitors	are	Carnival	Corporation	&	plc,	which	owns,	among	others,	Aida Cruises,	Carnival	Cruise	Line,	Costa	Cruises,	Cunard	Line,	Holland	America	Line,	P&O	Cruises,	Princess	Cruises	and	Seabourn;	Disney	Cruise Line;	MSC	Cruises;	and	Norwegian	Cruise	Line	Holdings	Ltd,	which	owns	Norwegian	Cruise	Line,	Oceania	Cruises	and	Regent	Seven	Seas Cruises.	Cruise	lines	compete	with

other	vacation	alternatives	such	as	land-based	resort	hotels,	internet-based	alternative	lodging	sites	and	sightseeing	destinations	for	consumers' leisure	time.	Demand	for	such	activities	is	influenced	by	political	and	general	economic	conditions.	Companies	within	the	vacation	market	are dependent	on	consumer	discretionary	spending.

# Operating	Strategies

Our	principal	operating	strategies	are	to:

•protect	the	health,	safety	and	security	of	our	guests	and	employees	and	protect	the	environment	in	which	our	vessels	and	organization operate,

•strengthen	and	support	our	human	capital	in	order	to	better	serve	our	global	guest	base	and	grow	our	business,

•further	strengthen	our	consumer	engagement	in	order	to	enhance	our	revenues,

•increase	the	awareness	and	market	penetration	of	our	brands	globally,

•focus	on	cost	efficiency,	manage	our	operating	expenditures	and	ensure	adequate	cash	and	liquidity,	with	the	overall	goal	of	maximizing our	return	on	invested	capital	and	long-term	shareholder	value,

•strategically	invest	in	our	fleet	through	the	upgrade	and	maintenance	of	existing	ships	and	the	transfer	of	key	innovations	across	each brand,	while	prudently	expanding	our	fleet	with	new	state-of-the-art	cruise	ships,

•capitalize	on	the	portability	and	flexibility	of	our	ships	by	deploying	them	into	those	markets	and	itineraries	that	provide	opportunities	to optimize	returns,	while	continuing	our	focus	on	existing	key	markets,

•further	enhance	our	technological	capabilities	to	service	customer	preferences	and	expectations	in	an	innovative	manner,	while	supporting our	strategic	focus	on	profitability,	and

•maintain	strong	relationships	with	travel	agencies,	which	continue	to	be	the	principal	industry	distribution	channel,	while	enhancing	our consumer	outreach	programs.

# Safety,	environment	and	health	policies

We	are	committed	to	protecting	the	safety,	environment	and	health	of	our	guests,	employees	and	others	working	on	our	behalf.	We	are	also committed	to	protecting	the	marine	environment	and	communities	in	which	we	operate.	Our	efforts	in	these	areas	are	guided	by	a	Maritime Advisory	Board	of	experts,	overseen	by	the	Safety,	Environment	and	Health	Committee	of	our	Board	of	Directors	and	managed	by	our	dedicated Safety,	Environment	and	Health	Department	which	is	responsible	for	all	of	our	maritime	safety,	global	security,	environmental	stewardship	and medical/public	health	activities.

We	believe	in	transparent	reporting	on	our	safety,	environment	and	health	performance	as	well	as	our	corporate	responsibility	efforts	and annually	publish	a	Sustainability	Report	in	accordance	with	the	guidelines	of	the	Global	Reporting	Initiative.	This	report,	which	is	accessible	on our	corporate	website,	highlights	our	progress	with	regards	to	those	environmental	and	social	aspects	of	our	business	that	we	believe	are	most significant	to	our	organization	and	stakeholders.	Our	corporate	website	also	provides	information	about	our	environmental	performance	goals	and our	voluntary	reporting	of	onboard	security	incidents.	The	foregoing	information	contained	on	our	website	is	not	a	part	of	any	of	these	reports	and is	not	incorporated	by	reference	herein	or	in	any	other	report	or	document	we	file	with	the	Securities	and	Exchange	Commission.

# Human	capital

We	believe	that	our	employees,	both	shipboard	and	shoreside,	are	a	critical	success	factor	for	our	business.	We	strive	to	identify,	hire, develop,	motivate	and	retain	the	best	employees,	who	provide	our	guests	with	extraordinary	vacations.	Attracting,	engaging,	and	retaining	key employees	has	been	and	will	remain	critical	to	our	success.

We	focus	on	providing	our	employees	with	a	competitive	compensation	structure	and	development	and	other	personal	and	professional growth	opportunities	in	order	to	strengthen	and	support	our	human	capital.	We	also	select,	develop	and	have	strategies	to	retain	high	performing leaders	to	advance	the	enterprise	now	and	in	the	future.	To	that	end,	we	pay	special	attention	to	identifying	high	performing	potential	leaders	and developing	 deep	 bench	 strength	 so	 these	 leaders	 can	 assume	 leadership	 roles	 throughout	 the	 organization.	 We	 strive	 to	 maintain	 a	 work environment	 that	 reinforces	 collaboration,	 motivation	 and	 innovation,	 and	 believe	 that	 maintaining	 our	 strong	 employee-focused	 culture	 is beneficial	to	the	growth	and	expansion	of	our	business.

# Consumer	engagement

We	place	a	strong	focus	on	identifying	the	needs	of	our	guests	and	creating	product	features	and	innovations	that	our	customers	value.	We are	focused	on	targeting	high-value	guests	by	better	understanding	consumer	data	and	insights	to	create	communication	strategies	that	resonate with	our	target	audiences.

We	target	customers	across	all	touch	points	and	identify	underlying	needs	for	which	guests	are	willing	to	pay	a	premium.	We	rely	on	various programs	during	the	cruise-planning,	cruising	and	after-cruise	periods	aimed	at	increasing	ticket	prices,	onboard	revenues	and	occupancy.	We have	and	continue	to	strategically	invest	in	onboard	projects	on	our	ships	that	we	believe	drive	profitability	and	improve	the	guest	experience.

# Global	awareness	and	market	penetration

We	increase	brand	awareness	and	market	penetration	of	our	cruise	brands	in	various	ways,	including	the	use	of	communication	strategies	and marketing	campaigns	designed	to	emphasize	the	qualities	of	each	brand	and	to	broaden	the	awareness	of	the	brand,	especially	among	target groups.	Our	marketing	strategies	include	the	use	of	traditional	media,	mobile	and	digital	media,	as	well	as	social	media	and	influencers,	brand websites	 and	 travel	 agencies.	 Our	 brands	 engage	 past	 and	 potential	 guests	 by	 collaborating	 with	 travel	 partners	 and	 through	 call	 centers, international	offices	and	international	representatives.	In	addition,	our	Global	Brands	target	repeat	guests	with	exclusive	benefits	offered	through their	respective	loyalty	programs.

We	sell	and	market	our	Global	Brands,	Royal	Caribbean	International,	Celebrity	Cruises	and	Azamara	Club	Cruises,	to	guests	outside	of	the United	States	and	Canada	through	our	offices	in	the	United	Kingdom,	France,	Germany,	Norway,	Italy,	Spain,	Singapore,	China,	Australia,	New Zealand	and	Mexico.	We	believe	that	having	a	local	presence	in	these	markets	provides	us	with	the	ability	to	react	more	quickly	to	local	market conditions	and	better	understand	our	consumer	base	in	each	market.	We	further	extend	our	geographic	reach	with	a	network	of	61	independent international	representatives	located	throughout	the	world	covering	113	countries.	Historically,	our	focus	has	been	to	primarily	source	guests	for our	Global	Brands	from	North	America.	We	continue	to	expand	our	focus	on	selling	and	marketing	our	cruise	brands	to	guests	in	countries outside	of	North	America	by	tailoring	itineraries	and	onboard	product	offerings	to	the	cultural	characteristics	and	preferences	of	our	international guests.	In	addition,	we	explore	opportunities	that	may	arise	to	acquire	or	develop	brands	tailored	to	specific	markets.

Passenger	ticket	revenues	generated	by	sales	originating	in	countries	outside	of	the	United	States	were	approximately	 45%	of	total	passenger ticket	revenues	in	2016	and	45%	and	47%	in	2015	and	2014,	respectively.	International	guests	have	grown	from	approximately	2.2	million	in	2012 to	approximately	2.7	million in	2016.	Refer	to	Item	1A.	Risk	Factors	-"Conducting	business	globally	may	result	in	increased	costs	and	other risks"	for	a	discussion	of	the	risks	associated	with	our	international	operations.

Cost	efficiency,	operating	expenditures	and	adequate	cash	and	liquidity

We	continue	our	commitment	to	identify	and	implement	cost	containment	initiatives.	In	2016,	we	implemented	initiatives,	such	as	the closing	of	one	of	our	international	offices	and	personnel	reorganization	in	our	corporate	offices,	aimed	at	improving	operating	efficiencies	and economies	of	scale.	We	will	continue	to	focus	on	and	evaluate	cost	containment	initiatives	in	2017.

We	also	continue	our	initiatives	to	reduce	energy	consumption	and,	by	extension,	fuel	costs.	These	include	the	design	of	more	energy- efficient	ships	as	well	as	the	implementation	of	more	efficient	hardware,	including	improvements	in	operations	and	voyage	planning	as	well	as improvements	to	the	propulsion,	machinery,	HVAC	and	lighting	systems.	The	overall	impact	of	these	efforts	has	resulted	in	an	approximate	25% improvement	in	energy	efficiency	from	2005	through	2015	and	we	believe	that	our	energy	consumption	per	guest	is	currently	the	lowest	in	the cruise	industry.

We	are	focused	on	maintaining	a	strong	liquidity	position,	reducing	our	debt	and	improving	our	credit	metrics.	In	addition,	we	continue	to pursue	our	objective	of	returning	our	credit	ratings	to	investment	grade.	We	believe	these	strategies	enhance	our	ability	to	achieve	our	overall goal	of	maximizing	our	return	on	invested	capital	and	long-term	shareholder	value.

# Fleet	upgrade,	maintenance	and	expansion

We	place	a	strong	focus	on	innovation,	which	we	seek	to	achieve	by	introducing	new	concepts	on	our	new	ships	and	continuously	making improvements	to	our	fleet.	Several	of	these	innovations	have	become	signature	elements	of	our	brands,	such	as	the	"Royal	Promenade"	(a boulevard	with	shopping,	dining	and	entertainment	venues)	for	the	Royal	Caribbean	International	brand	and	enhanced	design	features	found	on our	Solstice-class	ships	for	the	Celebrity	Cruises	brand.

Our	upgrade	and	maintenance	programs	enable	us	to	incorporate	many	of	our	latest	signature	innovations	throughout	the	brand	fleet	and allow	us	to	benefit	from	economies	of	scale	by	leveraging	our	suppliers.	Ensuring	consistency	across	our	fleet	provides	us	with	the	flexibility	to redeploy	our	ships	among	our	brand	portfolio.

We	are	committed	to	building	state-of-the-art	ships	at	a	moderate	growth	rate	and	we	believe	our	success	in	this	area	provides	us	with	a competitive	advantage.	Our	new	vessels	traditionally	generate	higher	revenue	yield	premiums	and	are	more	efficient	to	operate	than	existing vessels.

Our	Global	Brands	currently	have	nine	ships	expected	to	be	delivered	between	2018	and	the	end	of	2022.	These	consist	of	 two	Quantum- class	ships,	which	are	scheduled	to	enter	service	in	the	second	quarter	of	2019	and	fourth	quarter	of	2020,	respectively,	two	Oasis-class	ships, which	are	scheduled	to	enter	service	in	the	first	quarter	of	2018	and	second	quarter	of	2021,	respectively,	four	ships	of	a	new	generation	for Celebrity	Cruises,	which	are	scheduled	to	enter	service	in	the	fourth	quarter	of	2018,	the	first	quarter	of	2020	and	the	fourth	quarters	of	2021	and 2022,	respectively,	and	the	first	of	two	ships	of	a	new	generation	for	Royal	Caribbean	International,	which	is	scheduled	to	enter	service	in	the second	quarter	of	2022.	The	addition	of	these	ships,	net	of	Legend	of	the	Seas	departing	the	fleet	in	2017,	is	expected	to	increase	passenger capacity	of	our	Global	Brands	by	approximately	34,000	berths	by	the	end	of	2022,	which	represents	an	estimated	compound	annual	growth	rate	of 4.4%	from	2016	to	December	31,	2022.	Additionally,	TUI	Cruises,	our	50%	joint	venture,	currently	has	agreements	for	the	construction	of	three new	ships.	These	ships	are	scheduled	to	enter	service	in	the	second	quarters	of	2017	and	2018	and	the	first	quarter	of	2019,	respectively,	with	an expected	total	capacity	of	8,200	berths.

In	addition,	we	regularly	evaluate	opportunities	to	order	new	ships,	purchase	existing	ships	or	sell	ships	in	our	current	fleet.	In	the	current environment	 of	 high	 industry	 demand,	 we	 recently	 have	 placed	 new	 ship	 orders	 earlier	 than	 we	 have	 historically	 done	 as	 well	 as	 more aggressively	sought	to	sell	older	capacity.

# Markets	and	itineraries

In	 an	 effort	 to	 penetrate	 untapped	 markets,	 diversify	 our	 consumer	 base	 and	 respond	 to	 changing	 economic	 and	 geopolitical	 market conditions,	we	continue	to	seek	opportunities	to	optimally	deploy	ships	to	new	and	stronger	markets	and	itineraries	throughout	the	world.	The portability	of	our	ships	allows	us	to	readily	deploy	our	ships	to	meet	demand	within	our	existing	cruise	markets.	We	make	deployment	decisions generally	12	to	18	months	in	advance,	with	the	goal	of	optimizing	the	overall	profitability	of	our	portfolio.	Additionally,	the	infrastructure investments	we	have	made	to	create	a	flexible	global	sourcing	model	has	made	our	brands	relevant	in	a	number	of	markets	around	the	world, which	allows	us	to	be	opportunistic	and	source	the	highest	yielding	guests	for	our	itineraries.

Our	ships	offer	a	wide	selection	of	itineraries	that	call	on	approximately	535	destinations	in	105	countries,	spanning	all	seven	continents.	We are	focused	on	obtaining	the	best	possible	long-term	shareholder	returns	by	operating	in	established	markets	while	growing	our	presence	in developing	markets.	New	capacity	allows	us	to	expand	into	new	markets	and	itineraries.	Our	brands	have	expanded	their	mix	of	itineraries	while strengthening	our	ability	to	further	penetrate	the	Asian	and	Australian	markets.	Additionally,	in	order	to	capitalize	on	the	summer	season	in	the Southern	Hemisphere	and	mitigate	the	impact	of	the	winter	weather	in	the	Northern	Hemisphere,	our	brands	have	focused	on	deployment	in	the Caribbean,	Asia	and	Australia	during	that	period.

In	an	effort	to	secure	desirable	berthing	facilities	for	our	ships,	and	to	provide	new	or	enhanced	cruise	destinations	for	our	guests,	we	actively assist	or	invest	in	the	development	or	enhancement	of	certain	port	facilities	and	infrastructure,	including	mixed-use	commercial	properties,	located in	 strategic	 ports	 of	 call.	 Generally,	 we	 collaborate	 with	 local,	 private	 or	 governmental	 entities	 by	 providing	 management	 and/or	 financial assistance	and	often	enter	into	long-term	port	usage	arrangements.	Our	participation	in	these	efforts	is	generally	accomplished	via	investments with	the	relevant	government	authority	and/or	various	other	strategic	partnerships	established	to	develop	and/or	operate	the	port	facilities,	by providing	direct	development	and	management	expertise	or	in	certain	limited	circumstances,	by	providing	direct	or	indirect	financial	support.	In exchange	for	our	involvement,	we	generally	secure	preferential	berthing	rights	for	our	ships.

# Technological	capabilities

The	need	to	develop	and	use	innovative	technology	is	increasingly	important.	Technology	is	a	pervasive	part	of	virtually	every	business process	we	use	to	support	our	strategic	focus	and	provide	a	quality	experience	to	our	customers	before,	during	and	after	their	cruise.	In	the	last	few years,	we	introduced	RFID	WOW	bands	on	some	of	our	ships	to	make	many	onboard	processes	easier	and	more	comfortable	for	our	guests. Moreover,	as	the	use	of	our	various	websites	and	social	media	platforms	continue	to	increase	along	with	the	use	of	technology	onboard	our	ships by	both	our	guests	and	crew,	we	continually	need	to	upgrade	our	systems,	infrastructure	and	technologies	to	facilitate	this	growth.	For	instance,	in 2016,	we	continued	to	advance	our	onboard	technology	in	areas	such	as	internet	connectivity	at	sea,	guest	check-in	and	dining.	Additionally,	we have	introduced	and	continue	to	improve	our	mobile-friendly	websites	for	our	travel	partners	and	direct	customers	and	to	invest	in	mobile	apps that	enhance	the	guest	experience	onboard	our	ships.	Cyber	security	and	data	privacy	are	a	continued	focus	and	we	have	made	and	will	continue	to make	significant	investments	to	protect	our	customer	data,	intellectual	property	and	global	operations.

Additionally,	as	we	expand	into	new	markets,	we	must	ensure	that	we	have	the	proper	technology	in	place	to	support	the	market.	For instance,	our	capabilities	need	to	adapt	to	each	of	our	markets'	languages	and	regulations.	As	we	expand	our	business,	this	has	been	an	increased focus	for	us.

# Travel	agency	support	and	direct	business

Travel	agencies	continue	to	be	the	primary	source	of	ticket	sales	for	our	ships.	We	believe	in	the	value	of	this	distribution	channel	and	invest heavily	in	maintaining	strong	relationships	with	our	travel	partners.	To	accomplish	this	goal,	we	seek	to	ensure	that	our	commission	rates	and incentive	structures	remain	competitive	with	the	marketplace.	We	provide	brand	dedicated	sales	representatives	who	serve	as	advisors	to	our travel	partners.	We	also	provide	trained	customer	service	representatives,	call	centers	and	online	training	tools.

To	support	our	sales	 initiatives,	we	have	established	a	Consumer	Outreach	department	which	allows	consumers	24-hour	access	 to	our vacation	planners,	group	vacation	planners	and	customer	service	agents	in	our	call	centers.	In	addition,	we	maintain	and	invest	in	our	websites, including	mobile	applications	and	mobile	websites,	which	allow	guests	to	directly	plan,	book	and	customize	their	cruise,	as	well	as	encourage guests	to	book	their	next	cruise	vacations	onboard	our	ships.

# Guest	Services

We	offer	to	handle	virtually	all	travel	aspects	related	to	guest	reservations	and	transportation,	including	arranging	guest	pre-	and	post-hotel stay	arrangements	and	air	transportation.

Royal	Caribbean	International,	Celebrity	Cruises	and	Azamara	Club	Cruises	offer	rewards	to	their	guests	through	their	loyalty	programs, Crown	 &	Anchor	 Society,	 Captain's	 Club	 and	 Le	 Club	Voyage,	 respectively,	 to	 encourage	 repeat	 business.	 Crown	 &	Anchor	 Society	 has approximately	10.4	million	members	worldwide.	Captain's	Club	and	Le	Club	Voyage	have	 3.4	million	members	combined	worldwide.	Members earn	increasing	membership	status	by	accumulating	cruise	points	or	credits,	depending	on	the	brand,	which	may	be	redeemed	on	future	sailings. Members	are	awarded	points	or	credits	in	proportion	to	the	number	of	cruise	days	and	stateroom	category.	The	loyalty	programs	provide	certain tiers	of	membership	benefits	which	can	be	redeemed	by	guests	after	accumulating	the	number	of	cruise	points	or	credits	specified	for	each	tier.	In addition,	upon	achieving	a	certain	level	of	cruise	points	or	credits,	members	benefit	from	reciprocal	membership	benefits	across	all	of	our	loyalty programs.	Examples	of	the	rewards	available	under	our	loyalty	programs	include,	but	are	not	limited	to,	priority	ship	embarkation,	priority	waitlist for	 shore	 excursions,	 complimentary	 laundry	 service,	 complimentary	 internet,	 booklets	 with	 onboard	 discount	 offers,	 upgraded	 bathroom amenities,	private	seating	on	the	pool	deck,	ship	tours	and,	in	the	case	of	our	most	loyal	guests	who	have	achieved	the	highest	levels	of	cruise points	or	credits,	complimentary	cruise	days.	We	regularly	work	to	enhance	each	of	our	loyalty	programs	by	adding	new	features	and	amenities	in order	to	reward	our	repeat	guests.

# Operations

# Cruise	Ships	and	Itineraries

As	of	December	31,	2016,	our	Global	Brands	and	Partner	Brands	collectively	operated	49	ships	with	a	selection	of	worldwide	itineraries ranging	from	two	to	24	nights	that	call	on	approximately	535	destinations.

The	following	table	presents	summary	information	concerning	the	ships	we	will	operate	in	2017	under	our	Global	Brands	and	Partner	Brands and	their	geographic	areas	of	operation	based	on	current	2017	itineraries	(subject	to	change).

(1) The	year	a	ship	entered	service	refers	to	the	year	in	which	the	ship	commenced	cruise	revenue	operations	for	the	brand.

(2) In	June	2016,	we	entered	into	an	agreement	to	sell	Legend	of	the	Seas	to	Thomson	Cruises,	an	affiliate	of	TUI	AG,	our	joint	venture	partner,	which	is	scheduled	to	be completed	in	March	2017.

Our	Global	Brands	and	our	Partner	Brands	have	eleven	ships	on	order.	Two	ships	on	order	are	being	built	in	Germany	by	Meyer	Werft GmbH,	three	are	being	built	in	Finland	by	Meyer	Turku	shipyard	and	six	are	being	built	in	France	by	STX	France.	The	expected	dates	that	the ships	on	order	will	enter	service	and	their	approximate	berths	are	as	follows:

| Ship | Expected	to<br>Enter	Service | Approximate<br>Berths |
| :--- | :--- | :--- |
| Royal\tCaribbean\tInternational— |  |  |
| Quantum-class: |  |  |
| Unnamed | 2nd\tQuarter\t2019 | 4,150 |
| Unnamed | 4th\tQuarter\t2020 | 4,150 |
| Oasis-class: |  |  |
| Unnamed | 1st\tQuarter\t2018 | 5,450 |
| Unnamed | 2nd\tQuarter\t2021 | 5,450 |
| Celebrity\tCruises\t—\tProject\tEdge |  |  |
| Celebrity\tEdge | 4th\tQuarter\t2018 | 2,900 |
| Celebrity\tBeyond | 1st\tQuarter\t2020 | 2,900 |
| Unnamed | 4th\tQuarter\t2021 | 2,900 |
| Unnamed | 4th\tQuarter\t2022 | 2,900 |
| TUI\tCruises\t(50%\tjoint\tventure)\t(1)— |  |  |
| Mein\tSchiff\t6 | 2nd\tQuarter\t2017 | 2,500 |
| Unnamed | 2nd\tQuarter\t2018 | 2,850 |
| Unnamed | 1st\tQuarter\t2019 | 2,850 |
| Total\tBerths | Total\tBerths | 39,000 |

(1) TUI	Cruises	plans	to	offset	this	additional	capacity	through	the	planned	transfer	of	the	their	first	two	ships,	Mein	Schiff	1	and	Mein	Schiff	2,	to	Thomson	Cruises	in	2018	and 2019,	respectively.

In	October	2016,	we	signed	a	memorandum	of	understanding	with	Meyer	Turku	to	build	two	ships	of	a	new	generation	of	ships	for	Royal Caribbean	International,	known	as	"Project	Icon,"	which	are	expected	to	enter	service	in	the	second	quarters	of	2022	and	2024,	respectively.	While the	design	is	still	being	finalized,	each	ship	will	likely	accommodate	approximately	5,000	guests.	These	orders	are	contingent	upon	completion	of conditions	precedent,	including	documentation	and	financing.

# Seasonality

Our	revenues	are	seasonal	based	on	the	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	focused	on	deployment	in	the	Caribbean,	Asia	and	Australia	during	that	period.

# Passengers	and	Capacity

Selected	statistical	information	is	shown	in	the	following	table	(see	Financial	Presentation-	Description	of	Certain	Line	Items	and	Selected Operational	and	Financial	Metrics	under	Item	7.	Management's	Discussion	and	Analysis	of	Financial	Condition	and	Results	of	Operations ,	for definitions):

|  |  | Year	Ended	December	31, | Year	Ended	December	31, |  |  |
| :--- | :--- | :--- | :--- | :--- | :--- |
|  | 2016\t(1) | 2015 | 2014 | 2013 | 2012 |
| Passengers\tCarried | 5,754,747 | 5,401,899 | 5,149,952 | 4,884,763 | 4,852,079 |
| Passenger\tCruise\tDays | 40,250,557 | 38,523,060 | 36,710,966 | 35,561,772 | 35,197,783 |
| Available\tPassenger\tCruise\tDays\t(APCD) | 37,844,644 | 36,646,639 | 34,773,915 | 33,974,852 | 33,705,584 |
| Occupancy | 106.4% | 105.1% | 105.6% | 104.7% | 104.4% |

(1)	Does	not	include	November	and	December	2015	amounts	related	to	the	elimination	of	the	Pullmantur	reporting	lag	since	the	impact	is	included	within	 Other	(expense)	income	in our	consolidated	statements	of	comprehensive	income	(loss)	for	the	year	ended	December	31,	2016.	Additionally,	effective	August	2016,	we	no	longer	include	Pullmantur	Holdings in	these	amounts.

# Cruise	Pricing

Our	cruise	ticket	prices	include	accommodations	and	a	wide	variety	of	activities	and	amenities,	including	meals	and	entertainment.	Prices vary	depending	on	many	factors	including	the	destination,	cruise	length,	stateroom	category	selected	and	the	time	of	year	the	cruise	takes	place. Although	we	grant	credit	terms	in	select	markets	mainly	outside	of	the	United	States,	our	payment	terms	generally	require	an	upfront	deposit	to confirm	a	reservation,	with	the	balance	due	prior	to	the	sailing.	Our	cruises	are	generally	available	for	sale	at	least	one	year	in	advance	and	often	as much	as	two	years	in	advance	of	sailing.	During	the	selling	period	of	a	cruise,	we	continually	monitor	and	adjust	our	cruise	ticket	prices	for available	guest	staterooms	based	on	demand,	with	the	objective	of	maximizing	net	yields.	In	early	2015,	in	an	effort	to	preserve	the	integrity	of our	cruise	pricing,	we	implemented	a	new	policy	against	introducing	incremental	discounting	on	our	ticket	prices	in	certain	markets	within	30 days	of	the	sailing	date.	Through	2016,	we	continue	to	follow	this	policy.

As	we	grow	our	business	globally,	our	sale	arrangements	with	travel	agents	may	vary.	For	instance,	our	sale	arrangements	in	the	mainland Chinese	market	are	primarily	composed	of	travel	agent	charter	and	group	sales	with	full	payment	due	close-in	to	sailing,	and	to	a	lesser	extent, retail	agency	and	direct	sales.

We	have	developed	and	 implemented	enhancements	 to	our	reservations	system	 that	provide	us	and	our	 travel	partners	with	additional capabilities.	The	enhancements	also	allow	us	to	better	understand	and	react	to	the	current	demand	and	pricing	environment	and	implement	a variety	of	promotions.

We	offer	air	transportation	to	our	guests	through	our	air	transportation	program	available	in	major	cities	around	the	world.	Generally,	air tickets	are	sold	to	guests	at	prices	close	to	cost	which	vary	by	gateway	and	destination.

Passenger	ticket	revenues	accounted	for	approximately	72%,	73%	and	73%	of	total	revenues	in	2016,	2015	and	2014,	respectively.

# Onboard	Activities	and	Other	Revenues

Our	cruise	brands	offer	modern	fleets	with	a	wide	array	of	onboard	services,	amenities	and	activities	which	vary	by	brand	and	ship.	While many	onboard	activities	are	included	in	the	base	price	of	a	cruise,	we	realize	additional	revenues	from,	among	other	things,	gaming,	the	sale	of alcoholic	and	other	beverages,	internet	and	other	telecommunication	services,	gift	shop	items,	shore	excursions,	photography,	spa/salon	and fitness	services,	art	auctions,	catalogue	gifts	for	guests	and	a	wide	variety	of	specialty	restaurants	and	dining	options.	Many	of	these	services	are available	 for	 pre-booking	 on	 the	 internet	 prior	 to	 embarkation.	 These	 activities	 are	 provided	 either	 directly	 by	 us	 or	 by	 independent concessionaires	from	which	we	receive	a	percentage	of	their	revenues.

In	conjunction	with	our	cruise	vacations,	we	offer	pre-	and	post-cruise	hotel	packages	 to	our	Royal	Caribbean	International,	Celebrity Cruises	and	Azamara	Club	Cruises	guests.	We	also	offer	cruise	vacation	protection	coverage	to	guests	in	a	number	of	markets,	which	provides guests	with	coverage	for	trip	cancellation,	medical	protection	and

baggage	protection.	Onboard	and	other	revenues	accounted	for	approximately	28%,	27%	 and	27%	of	total	revenues	in	2016,	2015	 and	2014, respectively.

# Segment	Reporting

We	operate	three	wholly-owned	cruise	brands,	Royal	Caribbean	International,	Celebrity	Cruises	and	Azamara	Club	Cruises.	In	addition,	we have	a	50%	investment	in	a	joint	venture	with	TUI	AG	which	operates	the	German	brand	TUI	Cruises,	a	49%	interest	in	the	Spanish	brand Pullmantur	and	have	a	minority	interest	in	the	Chinese	brand	SkySea	Cruises.	We	believe	our	brands	possess	the	versatility	to	enter	multiple cruise	market	segments	within	the	cruise	vacation	industry.	Although	each	of	our	brands	has	its	own	marketing	style	as	well	as	ships	and	crews	of various	sizes,	the	nature	of	the	products	sold	and	services	delivered	by	our	brands	share	a	common	base	(i.e.,	the	sale	and	provision	of	cruise vacations).	Our	brands	also	have	similar	itineraries	as	well	as	similar	cost	and	revenue	components.	In	addition,	our	brands	source	passengers from	similar	markets	around	the	world	and	operate	in	similar	economic	environments	with	a	significant	degree	of	commercial	overlap.	As	a	result, our	brands	have	been	aggregated	as	a	single	reportable	segment	based	on	the	similarity	of	their	economic	characteristics,	types	of	consumers, regulatory	environment,	maintenance	requirements,	supporting	systems	and	processes	as	well	as	products	and	services	provided.	Our	Chairman and	Chief	Executive	Officer	has	been	 identified	as	 the	chief	operating	decision-maker	and	all	significant	operating	decisions	 including	 the allocation	of	resources	are	based	upon	the	analyses	of	the	Company	as	one	segment.	(For	financial	information	see	Item	8.	Financial	Statements and	Supplementary	Data.)

# Employees

As	of	December	31,	2016,	our	Global	Brands	employed	over	66,000	employees,	including	60,000	shipboard	employees	as	well	as	6,000	full- time	and	100	part-time	employees	in	our	shoreside	operations.	As	of	 December	31,	2016,	approximately	85%	of	our	shipboard	employees	were covered	by	collective	bargaining	agreements.

# Insurance

We	maintain	insurance	on	the	hull	and	machinery	of	our	ships,	with	insured	values	generally	equal	to	the	net	book	value	of	each	ship.	This coverage	is	maintained	with	financially	sound	insurance	underwriters	from	the	British,	Scandinavian,	French,	United	States	and	other	reputable international	insurance	markets.

We	maintain	protection	and	indemnity	liability	insurance,	which	provides	coverage	for	liabilities,	costs	and	expenses	for	illness	and	injury	to crew,	guest	injury,	pollution	and	other	third-party	claims	that	arise	out	of,	or	are	the	result	of,	our	cruise	operations.	Our	vessels	are	insured through	 either	 the	 United	 Kingdom	 Mutual	 Steam	 Ship	 Assurance	 Association	 (Bermuda)	 Limited,	 the	 Steamship	 Mutual	 Underwriting Association	or	Gard	AS.	Our	protection	and	indemnity	liability	insurance	is	done	on	a	mutual	basis	and	we	are	subject	to	additional	premium	calls in	amounts	based	on	claim	records	of	all	members	of	the	mutual	protection	and	indemnity	association.	We	are	also	subject	to	additional	premium calls	based	on	investment	shortfalls	experienced	by	the	insurer.

We	maintain	war	risk	insurance	which	covers	damage	due	to	acts	of	war,	including	invasion,	insurrection,	terrorism,	rebellion,	piracy	and hijacking,	on	each	ship,	through	a	Norwegian	war	risk	insurance	organization.	This	coverage	includes	coverage	for	physical	damage	to	the	ship which	is	not	covered	under	the	hull	policies	as	a	result	of	war	exclusion	clauses	in	such	hull	policies.	We	also	maintain	protection	and	indemnity war	risk	coverage	for	risks	that	would	be	excluded	by	the	rules	of	the	indemnity	insurance	organizations,	subject	to	certain	limitations.	Consistent with	most	marine	war	risk	policies,	under	the	terms	of	our	war	risk	insurance	coverage,	in	the	event	of	a	change	in	risk,	underwriters	can	give seven	days'	notice	to	us	that	the	policy	will	be	canceled	and	reinstated	at	higher	premium	rates.

Insurance	coverage	for	shoreside	property	and	casualty	exposures,	shipboard	inventory,	off-vessel	liability,	directors	and	officers	and	other risks	are	maintained	with	insurance	underwriters	in	the	United	States	and	the	United	Kingdom.

We	do	not	carry	business	interruption	insurance	for	our	ships	based	on	our	evaluation	of	the	risks	involved	and	protective	measures	already in	place,	as	compared	to	the	cost	of	insurance.

All	insurance	coverage	is	subject	to	certain	limitations,	exclusions	and	deductible	levels.	In	addition,	in	certain	circumstances,	we	either	self- insure	or	co-insure	a	portion	of	these	risks.	Premiums	charged	by	insurance	carriers,	including	carriers	in	the	maritime	insurance	industry,	increase or	decrease	from	time	to	time	and	tend	to	be	cyclical	in	nature.	These	cycles	are	impacted	both	by	our	own	loss	experience	and	by	losses	incurred in	direct	and	reinsurance	markets.	We	historically	have	been	able	to	obtain	insurance	coverage	in	amounts	and	at	premiums	we	have	deemed	to	be commercially	acceptable.	No	assurance	can	be	given	that	affordable	and	secure	insurance	markets	will	be	available	to	us	in	the	future,	particularly for	war	risk	insurance.

# Trademarks

We	own	a	number	of	registered	trademarks	related	to	the	Royal	Caribbean	International,	Celebrity	Cruises	and	Azamara	Club	Cruises	cruise brands.	The	registered	trademarks	include	the	name	"Royal	Caribbean	International"	and	its	crown	and	anchor	logo,	the	name	"Celebrity	Cruises" and	its	"X"	logo,	the	name	"Azamara	Club	Cruises"	and	its	globe	with	an	"A"	logo,	and	the	names	of	various	cruise	ships,	as	well	as	loyalty program	names	and	other	marketing	programs.	We	believe	our	largest	brands'	trademarks	are	widely	recognized	throughout	the	world	and	have considerable	value.	The	duration	of	trademark	registrations	varies	from	country	to	country.	However,	trademarks	are	generally	valid	and	may	be renewed	indefinitely	as	long	as	they	are	in	use	and/or	their	registrations	are	properly	maintained.

# Regulation

Our	ships	are	regulated	by	various	international,	national,	state	and	local	laws,	regulations	and	treaties	in	force	in	the	jurisdictions	in	which they	operate.	In	addition,	our	ships	are	registered	in	the	Bahamas,	Malta	or	in	the	case	of	our	ships	operating	in	the	Galapagos	Islands,	Ecuador. Each	ship	is	subject	to	regulations	issued	by	its	country	of	registry,	including	regulations	issued	pursuant	to	international	treaties	governing	the safety	 of	 our	 ships,	 guests	 and	 crew	 as	 well	 as	 environmental	 protection.	 Each	 country	 of	 registry	 conducts	 periodic	 inspections	 to	 verify compliance	with	these	regulations	as	discussed	more	fully	below.	Ships	operating	out	of	United	States	ports	are	subject	to	inspection	by	the United	States	Coast	Guard	for	compliance	with	international	treaties	and	by	the	United	States	Public	Health	Service	for	sanitary	and	health conditions.	Our	ships	are	also	subject	to	similar	inspections	pursuant	to	the	laws	and	regulations	of	various	other	countries	our	ships	visit.

We	believe	that	we	are	in	material	compliance	with	all	the	regulations	applicable	to	our	ships	and	that	we	have	all	licenses	necessary	to conduct	our	business.	Health,	safety,	security,	environmental	and	financial	responsibility	issues	are,	and	we	believe	will	continue	to	be,	an	area	of focus	by	the	relevant	government	authorities	in	the	United	States	and	internationally.	From	time	to	time,	various	regulatory	and	legislative	changes may	be	proposed	that	could	impact	our	operations	and	subject	us	to	increasing	compliance	costs	in	the	future.

# Safety	and	Security	Regulations

Our	ships	are	required	 to	comply	with	 international	safety	standards	defined	 in	 the	International	Convention	for	Safety	of	Life	at	Sea ("SOLAS"),	which	among	other	things,	establishes	requirements	for	ship	design,	structural	features,	materials,	construction,	lifesaving	equipment and	safe	management	and	operation	of	ships	to	ensure	guest	and	crew	safety.	The	SOLAS	standards	are	revised	from	time	to	time	and	the	most recent	modifications	were	phased	in	through	2010.	Compliance	with	these	modified	standards	did	not	have	a	material	effect	on	our	operating costs.	SOLAS	incorporates	the	International	Safety	Management	Code	("ISM	Code"),	which	provides	an	international	standard	for	the	safe management	and	operation	of	ships	and	for	pollution	prevention.	The	ISM	Code	is	mandatory	for	all	vessels,	including	passenger	vessel	operators.

All	of	our	operations	and	ships	are	regularly	audited	by	various	national	authorities	and	maintain	the	required	certificates	of	compliance	with the	ISM	Code.

Our	ships	are	subject	to	various	security	requirements,	including	the	International	Ship	and	Port	Facility	Security	Code	("ISPS	Code"),	which is	part	of	SOLAS,	and	the	U.S.	Maritime	Transportation	Security	Act	of	2002	("MTSA"),	which	applies	to	ships	that	operate	in	U.S.	ports.	In order	to	satisfy	these	security	requirements,	we	implement	security	measures,	conduct	vessel	security	assessments,	and	develop	security	plans.	The security	plans	for	all	of	our	ships	have	been	submitted	to	and	approved	by	the	respective	countries	of	registry	for	our	ships	in	compliance	with	the ISPS	Code	and	the	MTSA.

The	Cruise	Vessel	Security	and	Safety	Act	of	2010,	which	applies	to	passenger	vessels	which	embark	or	include	port	stops	within	the	United States,	requires	the	implementation	of	certain	safety	design	features	as	well	as	the	establishment	of	practices	for	the	reporting	of	and	dealing	with allegations	of	crime.	The	cruise	industry	supported	this	legislation	and	we	believe	that	our	internal	standards	are	generally	as	strict	or	stricter	than the	law	requires.	A	few	provisions	of	the	law	call	for	regulations	which	have	not	yet	been	finalized;	however,	based	on	proposed	regulations	issued by	the	U.S.	Coast	Guard	in	January	2015,	we	do	not	expect	any	material	costs	due	to	implementing	these	regulations.

# Environmental	Regulations

We	 are	 subject	 to	 various	 international	 and	 national	 laws	 and	 regulations	 relating	 to	 environmental	 protection.	Under	 such	 laws	 and regulations,	we	are	generally	prohibited	from	discharging	materials	other	than	food	waste	into	the	waterways.	We	have	made,	and	will	continue	to make,	capital	and	other	expenditures	to	comply	with	environmental	laws	and	regulations.	From	time	to	time,	environmental	and	other	regulators consider	more	stringent	regulations,	which	may	affect	our	operations	and	increase	our	compliance	costs.	We	believe	that	the	impact	of	ships	on the	global	environment	will	continue	to	be	an	area	of	focus	by	the	relevant	authorities	throughout	the	world	and,	accordingly,	may	subject	us	to increasing	compliance	costs	in	the	future,	including	the	items	described	below.

Our	 ships	 are	 subject	 to	 the	 International	 Maritime	 Organization's	 (''IMO'')	 regulations	 under	 the	 International	 Convention	 for	 the Prevention	of	Pollution	from	Ships	(the	''MARPOL	Regulations'')	and	the	International	Convention	for	the	Control	and	Management	of	Ships Ballast	Water	and	Sediments	(Ballast	Water	Management	Convention),	which	includes	requirements	designed	to	minimize	pollution	by	oil, sewage,	garbage,	air	emissions	and	the	transfer	of	non-native/non-indigenous	species.	We	have	obtained	the	relevant	international	compliance certificates	relating	to	oil,	sewage	and	air	pollution	prevention	for	all	of	our	ships	and	have	begun	to	obtain	the	compliance	certificates	pertaining to	ballast	water	as	they	become	applicable	to	our	ships.

The	 MARPOL	 Regulations	 impose	 global	 limitations	 on	 the	 sulfur	 content	 of	 fuel	 used	 by	 ships	 operating	 worldwide	 to	 3.5%.	The MARPOL	Regulations	also	establish	special	Emission	Control	Areas	(''ECAs'')	with	stringent	limitations	on	sulfur	emissions	in	these	areas.	As of	February	2016,	there	are	four	established	ECAs	that	restrict	sulfur	emissions:	the	Baltic	Sea,	the	North	Sea/English	Channel,	certain	waters surrounding	the	North	American	coast,	and	the	waters	surrounding	Puerto	Rico	and	the	U.S.	Virgin	Islands	(the	"Caribbean	ECA").

Since	January	1,	2015,	ships	operating	in	these	sulfur	ECAs	have	been	required	to	reduce	their	fuel	sulfur	content	from	1.0%	to	0.1%.	This reduction	has	not	had	a	significant	impact	on	our	results	of	operations	to	date	largely	due	to	a	number	of	mitigating	steps	we	have	taken	over	the last	several	years,	including	equipping	all	of	our	new	ships	delivered	during	or	after	2014	with	advanced	emissions	purification	("AEP")	systems covering	all	engines	and	actively	developing	and	testing	AEP	systems	on	our	existing	fleet.

We	continue	to	implement	our	AEP	system	strategy	both	for	our	ships	on	order	and	for	our	existing	fleet.	As	our	new	ships	are	delivered, they	will	provide	us	with	additional	operational	and	deployment	flexibility.	We	currently	have	in	place	exemptions	for	19	of	our	existing	ships which	apply	while	they	are	sailing	in	the	North	American	and	Caribbean	ECAs.	These	exemptions	have	delayed	the	requirement	to	comply	with the	additional	sulfur	content	reduction	pending	our	continued	development	and	deployment	of	AEP	systems	on	these	ships.

In	addition,	we	believe	that	the	learning	from	our	existing	endeavors	as	well	as	our	further	efforts	with	regards	to	this	technology	will	allow us	to	complete	an	effective	AEP	system	retrofit	strategy	for	our	fleet.	As	a	result,	we	believe	the	cost	of	complying	with	the	2015	ECA	sulfur emission	requirement	will	not	be	significant	to	our	results	of	operations.

By	January	1,	2020,	the	MARPOL	regulations	will	require	the	worldwide	limitations	on	sulfur	content	of	fuel	to	be	reduced	from	3.5%	to 0.5%.	As	this	regulation	is	implemented	worldwide	and	if	we	have	not	been	able	to	successfully	execute	our	mitigation	strategies,	including	our AEP	system	retrofit	strategy,	our	fuel	costs	could	increase	significantly.

All	new	ships	that	began	construction	after	January	1,	2016	will	be	required	to	meet	more	stringent	nitrogen	oxide	emission	limits	when operating	within	the	North	American	and	U.S.	Caribbean	Sea	ECA.	We	have	been	 in	 the	process	of	evaluating	a	number	of	 technological alternatives	over	the	last	several	years	to	address	these	new	requirements	and	believe	that	we	will	be	able	to	comply	with	these	limits	without	a significant	impact	to	our	operations	or	fuel	costs.

Effective	July	1,	2015,	the	European	Commission	adopted	legislation	that	will	require	cruise	ship	operators	with	ships	visiting	ports	in	the European	Union	to	monitor	and	report	on	the	ship's	annual	carbon	dioxide	emissions	starting	in	2018.	While	we	do	not	expect	compliance	with this	 regulation	 to	 materially	 impact	 our	 costs	 or	 results	 of	 operations,	 the	 adopting	 legislation	 presents	 the	 new	 monitoring	 and	 reporting requirements	as	the	first	step	of	a	staged	approach	which	could	ultimately	result	in	additional	costs	or	charges	associated	with	carbon	dioxide emissions.

Effective	September	8,	2017,	the	IMO	Ballast	Water	Management	Convention	will	require	ships	that	carry	and	discharge	ballast	water	to meet	specific	discharge	standards	by	installing	Ballast	Water	Treatment	Systems	within	the	next	five	years.	We	do	not	expect	compliance	with this	regulation	to	have	a	material	effect	on	our	results	of	operations.

# Consumer	Financial	Responsibility	Regulations

We	are	required	to	obtain	certificates	from	the	United	States	Federal	Maritime	Commission	relating	to	our	ability	to	satisfy	liability	in	cases of	non-performance	of	obligations	to	guests,	as	well	as	casualty	and	personal	injury.	As	a	condition	to	obtaining	the	required	certificates,	we arrange	through	our	insurers	for	the	provision	of	surety	for	our	ship-operating	companies.	The	required	surety	amount	is	currently	$30.0	million per	operator	and	is	subject	to	additional	consumer	price	index	based	adjustments.

We	are	also	required	by	the	United	Kingdom,	Norway,	Finland,	and	the	Baltics	to	establish	our	financial	responsibility	for	any	liability resulting	from	the	non-performance	of	our	obligations	to	guests	from	these	jurisdictions.	In	the	United	Kingdom	we	are	currently	required	by	the Association	of	British	Travel	Agents	to	provide	performance	bonds	totaling	approximately	£27.4	million.	In	addition,	in	2016	we	were	required by	the	Civil	Aviation	Authority	to	provide	performance	bonds	totaling	approximately	 £10.1	million.	The	Norwegian	Travel	Guarantee	Fund requires	us	to	maintain	performance	bonds	in	varying	amounts	during	the	course	of	the	year	to	cover	our	financial	responsibility	in	Norway, Finland	and	the	Baltics.	These	amounts	ranged	from	NOK	3	million	to	NOK	33	million	during	2016.

Certain	other	jurisdictions	also	require	that	we	establish	financial	responsibility	to	our	guests	resulting	from	the	non-performance	of	our obligations;	however,	the	related	amounts	do	not	have	a	material	effect	on	our	costs.

# Regulations	Regarding	Protection	of	Disabled	Persons

In	June	2013,	the	U.S.	Architectural	and	Transportation	Barriers	Compliance	Board	proposed	guidelines	for	the	construction	and	alteration	of passenger	vessels	to	ensure	that	the	vessels	are	readily	accessible	to	and	usable	by	passengers	with	disabilities.	Once	finalized,	these	guidelines will	be	used	by	the	U.S.	Department	of	Transportation	and	U.S.	Department	of	Justice	to	implement	mandatory	and	enforceable	standards	for passenger	vessels	covered	by	the	Americans	with	Disabilities	Act.	While	we	believe	our	vessels	have	been	designed	and	outfitted	to	meet	the needs	of	our	guests	with	disabilities,	we	cannot	at	this	time	accurately	predict	whether	we	will	be	required	to	make	material	modifications	or	incur significant	additional	expenses	given	the	preliminary	status	of	the	proposed	guidelines.

# Taxation	of	the	Company

The	following	is	a	summary	of	our	principal	taxes,	exemptions	and	special	regimes.	In	addition	to	or	instead	of	income	taxation,	virtually	all jurisdictions	where	our	ships	call	impose	some	tax	or	fee,	or	both,	based	on	guest	headcount,	tonnage	or	some	other	measure.

Our	consolidated	operations	are	primarily	foreign	corporations	engaged	in	the	owning	and	operating	of	passenger	cruise	ships	in	international transportation.

# U.S.	Income	Taxation

The	following	is	a	discussion	of	the	application	of	the	U.S.	federal	and	state	income	tax	laws	to	us	and	is	based	on	the	current	provisions	of the	 U.S.	 Internal	 Revenue	 Code,	 Treasury	 Department	 regulations,	 administrative	 rulings,	 court	 decisions	 and	 the	 relevant	 state	 tax	 laws, regulations,	rulings	and	court	decisions	of	the	states	where	we	have	business	operations.	All	of	the	foregoing	is	subject	to	change,	and	any	such change	could	affect	the	accuracy	of	this	discussion.

# Application	of	Section	883	of	the	Internal	Revenue	Code

We	and	Celebrity	Cruises,	Inc.	are	engaged	in	a	trade	or	business	in	the	United	States,	and	many	of	our	ship-owning	subsidiaries,	depending upon	the	itineraries	of	their	ships,	receive	income	from	sources	within	the	United	States.	Additionally,	our	United	Kingdom	tonnage	tax	company is	a	ship-operating	company	classified	as	a	disregarded	entity	for	U.S.	federal	income	tax	purposes	that	may	earn	U.S.	source	income.	Under Section	883	of	the	Internal	Revenue	Code,	certain	foreign	corporations	may	exclude	from	gross	income	(and	effectively	from	branch	profits	tax	as such	earnings	do	not	give	rise	to	effectively	connected	earnings	and	profits)	U.S.	source	income	derived	from	or	incidental	to	the	international operation	of	a	ship	or	ships,	including	income	from	the	leasing	of	such	ships.

A	foreign	corporation	will	qualify	for	the	benefits	of	Section	883	if,	in	relevant	part:	(1)	the	foreign	country	in	which	the	foreign	corporation is	organized	grants	an	equivalent	exemption	to	corporations	organized	in	the	United	States;	and	(2)	the	stock	of	the	corporation	(or	the	direct	or indirect	corporate	parent	thereof)	is	"primarily	and	regularly	traded	on	an	established	securities	market"	in	the	United	States.	In	the	opinion	of	our U.S.	tax	counsel,	Drinker	Biddle	&	Reath	LLP,	based	on	the	representations	and	assumptions	set	forth	in	that	opinion,	we,	Celebrity	Cruises	Inc. and	our	ship-owning	subsidiaries	with	U.S.	source	shipping	 income	qualify	for	 the	benefits	of	Section	883	because	we	and	each	of	 those subsidiaries	are	incorporated	in	Liberia,	which	is	a	qualifying	country,	and	our	common	stock	is	primarily	and	regularly	traded	on	an	established securities	market	in	the	United	States	(i.e.,	we	are	a	"publicly	traded"	corporation).	If,	in	the	future,	(1)	Liberia	no	longer	qualifies	as	an	equivalent exemption	jurisdiction,	and	we	do	not	reincorporate	in	a	jurisdiction	that	does	qualify	for	the	exemption,	or	(2)	we	fail	to	qualify	as	a	publicly traded	corporation,	we	and	all	of	our	ship-owning	or	operating	subsidiaries	that	rely	on	Section	883	to	exclude	qualifying	income	from	gross income	would	be	subject	to	U.S.	federal	income	tax	on	their	U.S.	source	shipping	income	and	income	from	activities	incidental	thereto.

We	believe	that	most	of	our	income	and	the	income	of	our	ship-owning	subsidiaries,	including	our	U.K.	tonnage	tax	company	which	is considered	a	division	for	U.S.	tax	purposes,	is	derived	from	or	incidental	to	the	international	operation	of	a	ship	or	ships	and,	therefore,	is	exempt from	taxation	under	Section	883.

Regulations	under	Section	883	list	activities	that	are	not	considered	by	the	Internal	Revenue	Service	to	be	incidental	to	the	international operation	of	ships	including	the	sale	of	air	and	land	transportation,	shore	excursions	and	pre-	and	post-cruise	tours.	Our	income	from	these activities	that	is	earned	from	sources	within	the	United	States	will	be	subject	to	U.S.	taxation.

# Taxation	in	the	Absence	of	an	Exemption	Under	Section	883

If	we,	the	operator	of	our	vessels,	Celebrity	Cruises	Inc.,	or	our	ship-owning	subsidiaries	were	to	fail	to	meet

the	requirements	of	Section	883	of	the	Internal	Revenue	Code,	or	if	the	provision	was	repealed,	then,	as	explained	below,	such	companies	would be	subject	to	U.S.	income	taxation	on	a	portion	of	their	income	derived	from	or	incidental	to	the	international	operation	of	our	ships.

Because	we	and	Celebrity	Cruises	Inc.	conduct	a	trade	or	business	in	the	United	States,	we	and	Celebrity	Cruises	Inc.	would	be	taxable	at regular	corporate	rates	on	our	separate	company	taxable	income	(i.e.,	without	regard	to	the	income	of	our	ship-owning	subsidiaries)	on	income which	is	effectively	connected	with	our	U.S.	trade	or	business	(generally	only	income	from	U.S.	sources).	In	addition,	if	any	of	our	earnings	and profits	effectively	connected	with	our	U.S.	trade	or	business	were	withdrawn,	or	were	deemed	to	have	been	withdrawn,	from	our	U.S.	trade	or business,	those	withdrawn	amounts	would	be	subject	to	a	"branch	profits"	tax	at	the	rate	of	30%.	We	and	Celebrity	Cruises	Inc.	would	also	be potentially	subject	to	tax	on	portions	of	certain	interest	paid	by	us	at	rates	of	up	to	30%.

If	Section	883	were	not	available	to	our	ship-owning	subsidiaries,	each	such	subsidiary	would	be	subject	to	a	special	4%	tax	on	its	U.S. source	gross	transportation	income,	if	any,	each	year	because	it	does	not	have	a	fixed	place	of	business	in	the	United	States	and	its	income	is derived	from	the	leasing	of	a	ship.

# Other	United	States	Taxation

We	and	Celebrity	Cruises,	Inc.	earn	U.S.	source	income	from	activities	not	considered	incidental	to	international	shipping.	The	tax	on	such income	is	not	material	to	our	results	of	operation	for	all	years	presented.

# State	Taxation

We,	Celebrity	Cruises	Inc.	and	certain	of	our	subsidiaries	are	subject	to	various	U.S.	state	income	taxes	which	are	generally	imposed	on	each state's	portion	of	the	U.S.	source	income	subject	to	federal	income	taxes.	Additionally,	the	state	of	Alaska	subjects	an	allocated	portion	of	the	total income	of	companies	doing	business	in	Alaska	and	certain	other	affiliated	companies	to	Alaska	corporate	state	income	taxes	and	also	imposes	a 33%	tax	on	adjusted	gross	income	from	onboard	gambling	activities	conducted	in	Alaska	waters.	This	did	not	have	a	material	impact	to	our	results of	operations	for	all	years	presented.

# Maltese	and	Spanish	Income	Taxation

Effective	July	31,	2016,	we	sold	51%	of	our	interest	in	Pullmantur	Holdings.	We	account	for	our	retained	investment	under	the	equity method	of	accounting.	There	was	no	tax	impact	to	us	as	a	result	of	this	sale	transaction.	The	surviving	Pullmantur	company	continues	to	be	subject to	the	tax	laws	of	Spain	and	Malta.

Under the	sale	agreement,	we	remain	responsible	for	pre-sale tax	matters	with	respect to	years that	are	still	open	under the	statute	of limitations.

# United	Kingdom	Income	Taxation

We	operate	fourteen	ships	under	companies	which	have	elected	to	be	subject	to	the	United	Kingdom	tonnage	tax	regime	("U.K.	tonnage tax").

Companies	subject	to	U.K.	tonnage	tax	pay	a	corporate	tax	on	a	notional	profit	determined	with	reference	to	the	net	tonnage	of	qualifying vessels.	The	requirements	for	a	company	to	qualify	for	the	U.K.	tonnage	tax	regime	include	being	subject	to	U.K.	corporate	income	tax,	operating qualifying	ships,	which	are	strategically	and	commercially	managed	in	the	United	Kingdom,	and	fulfilling	a	seafarer	training	requirement.

Failure	to	meet	any	of	these	requirements	could	cause	us	to	lose	the	benefit	of	the	tonnage	tax	regime	which	could	have	a	material	effect	on our	results	of	operations.

Relevant	shipping	profits	include	income	from	the	operation	of	qualifying	ships	and	from	shipping	related	activities.	Our	U.K.	income	from non-shipping	activities	which	do	not	qualify	under	the	U.K.	tonnage	tax	regime	and

which	are	not	considered	significant,	remain	subject	to	U.K.	corporate	income	tax.

# Brazilian	Income	Taxation

Previously,	Pullmantur	and	our	U.K.	tonnage	tax	company	chartered	certain	ships	to	Brazilian	subsidiary	companies	for	operations	in	Brazil. Both	Pullmantur	and	Royal	Caribbean	International	ceased	charters	to	Brazil	in	January	2016	and	March	2016,	respectively.	While	Brazilian charters	took	place,	the	Brazilian	subsidiaries'	earnings	were	subject	to	Brazilian	taxation	which	was	not	considered	significant.	The	 charter payments	made	to	the	U.K.	tonnage	tax	company	and	to	Pullmantur	were	exempt	from	Brazilian	income	tax	under	Brazilian	domestic	law. Additionally,	remittances	of	revenue	from	sales	of	certain	cruises	in	the	Brazilian	market	are	subject	to	taxation.

# Chinese	Taxation

Our	U.K.	tonnage	tax	company	operates	ships	in	international	transportation	in	China.	The	income	earned	from	this	operation	is	exempt	from taxation	in	China	under	the	U.K./China	double	tax	treaty	and	other	circulars	addressing	indirect	taxes.	Changes	to	or	failure	to	qualify	for	the treaty	or	circular	could	cause	us	to	lose	the	benefits	provided	which	would	have	a	material	impact	on	our	results	of	operations.	Our	Chinese income	 from	 non-shipping	 activities	 or	 from	 shipping	 activities	 not	 qualifying	 for	 treaty	 or	 circular	 protection	 and	 which	 are	 considered insignificant,	remain	subject	to	Chinese	taxation.

# Other	Taxation

We	and	certain	of	our	subsidiaries	are	subject	to	value-added	and	other	indirect	taxes	most	of	which	are	reclaimable,	zero-rated	or	exempt. Changes	in	the	application	or	interpretation	of	applicable	indirect	tax	laws	or	changes	in	tax	legislation	could	have	a	material	impact	on	our	results of	operations.

# Website	Access	to	Reports

We	make	available,	free	of	charge,	access	to	our	Annual	Reports,	all	quarterly	and	current	reports	and	all	amendments	to	those	reports,	as soon	as	reasonably	practicable	after	such	reports	are	electronically	filed	with	or	furnished	to	the	Securities	and	Exchange	Commission	through	our website	 at	www.rclinvestor.com.	The	information	contained	on	our	website	is	not	a	part	of	any	of	these	reports	and	is	not	incorporated	by reference	herein.

# Executive	Officers	of	the	Company

As	of	February	23,	2017,	our	executive	officers	are:

Richard	D.	Fain	has	served	as	a	director	since	1979	and	as	our	Chairman	and	Chief	Executive	Officer	since	1988.	Mr.	Fain	is	a	recognized industry	leader,	having	participated	in	shipping	for	almost	40	years	and	having	held	a	number	of	prominent	industry	positions,	such	as	Chairman of	 the	Cruise	Lines	International	Association	(CLIA),	 the	 largest	cruise	 industry	 trade	association.	He	currently	serves	as	Chairman	of	 the University	of	Miami	Board	of	Trustees	as	well	as	on	the	National	Board	of	the	Posse	Foundation.	He	is	also	former	chairman	of	the	Miami Business	Forum,	the	Greater	Miami	Convention	and	Visitors	Bureau,	and	the	United	Way	of	Miami-Dade.

Adam	M.	Goldstein	has	served	as	President	and	Chief	Operating	Officer	since	April	2014.	Prior	to	this,	he	served	as	President	of	Royal Caribbean	International	since	February	2005	and	as	its	President	and	Chief	Executive	Officer	since	September	2007.	Mr.	Goldstein	has	been employed	with	Royal	Caribbean	since	1988	in	a	variety	of	positions,	including	Executive	Vice	President,	Brand	Operations	of	Royal	Caribbean International,	Senior	Vice	President,	Total	Guest	Satisfaction	and	Senior	Vice	President,	Marketing.	Mr.	Goldstein	served	as	National	Chair	of	the United	States	Travel	Association	(formerly,	Travel	Industry	Association	of	America)	in	2001	and	as	Chairman	of	CLIA	in	2015	and	2016.		Mr. Goldstein	began	a	two-year	term	as	Chairman	of	the	Florida-Caribbean	Cruise	Association	(FCCA)	in	January	2017.

Michael	W.	Bayley	has	served	as	President	and	Chief	Executive	Officer	of	Royal	Caribbean	International	since	December	2014.	Prior	to	this, he	served	as	President	and	Chief	Executive	Officer	of	Celebrity	Cruises	since	August	2012.	Mr.	Bayley	has	been	employed	by	Royal	Caribbean for	over	30	years,	having	started	as	an	Assistant	Purser	onboard	one	of	the	Company's	ships.	He	has	served	in	a	number	of	roles	including	as Executive	Vice	President,	Operations	from	February	2012	until	August	2012.	Other	positions	Mr.	Bayley	has	held	 include	Executive	Vice President,	International	from	May	2010	until	February	2012;	Senior	Vice	President,	International	from	December	2007	to	May	2010;	Senior	Vice President,	Hotel	Operations	for	Royal	Caribbean	International;	and	Chairman	and	Managing	Director	of	Island	Cruises.

Lisa	Lutoff-Perlo	has	served	as	President	and	Chief	Executive	Officer	of	Celebrity	Cruises	since	December	2014.	Prior	to	this,	she	served	as Executive	Vice	President,	Operations	for	Royal	Caribbean	International	from	September	2012	to	December	2014,	where	she	was	responsible	for all	of	Royal	Caribbean	International's	hotel,	marine	and	port	operations.	Ms.	Lutoff-Perlo	has	been	employed	with	the	Company	since	1985	in	a variety	of	positions	within	both	Celebrity	Cruises	and	Royal	Caribbean	International.		She	started	at	Royal	Caribbean	International	as	District Sales	Manager	for	New	England	and	from	August	2008	to	August	2012	she	was	responsible	for	Celebrity	Cruises'	hotel	operation.

Lawrence	Pimentel	has	served	as	President	and	Chief	Executive	Officer	of	Azamara	Club	Cruises	since	July	2009.	From	2001	until	January 2009,	Mr.	Pimentel	was	President,	Chief	Executive	Officer,	Director	and	co-owner	of	SeaDream	Yacht	Club,	a	privately	held	luxury	cruise	line located	in	Miami,	Florida	with	two	yacht-style	ships	that	sailed	primarily	in	the	Caribbean	and	Mediterranean.	From	April	1991	to	February	2001, Mr.	Pimentel	was	President

and	Chief	Executive	Officer	of	Carnival	Corp.'s	Seabourn	Cruise	Line	and	from	May	1998	to	February	2001,	he	was	President	and	Chief Executive	Officer	of	Carnival	Corp.'s	Cunard	Line.

Jason	T.	Liberty	has	been	employed	by	the	Company	since	2005	and	has	served	as	Chief	Financial	Officer	since	May	2013.	Mr.	Liberty previously	served	as	Senior	Vice	President,	Strategy	and	Finance	from	September	2012	through	May	2013,	overseeing	the	Company's	Corporate and	Strategic	Planning,	Treasury,	Investor	Relations	and	Deployment	functions.	Prior	to	this,	Mr.	Liberty	served,	from	2010	through	2012,	as Vice	President	of	Corporate	and	Revenue	Planning	and,	from	2008	to	2010,	as	Vice	President	of	Corporate	and	Strategic	Planning.	Before	joining Royal	Caribbean,	Mr.	Liberty	was	a	Senior	Manager	at	the	international	public	accounting	firm	of	KPMG	LLP.

Harri	U.	Kulovaara	has	served	as	Executive	Vice	President,	Maritime	since	January	2005.	Mr.	Kulovaara	is	responsible	for	fleet	design	and newbuild	operations.	Mr.	Kulovaara	also	chairs	our	Maritime	Safety	Advisory	Board.	Mr.	Kulovaara	has	been	employed	with	Royal	Caribbean since	1995	in	a	variety	of	positions,	including	Senior	Vice	President,	Marine	Operations,	and	Senior	Vice	President,	Quality	Assurance.	Mr. Kulovaara	is	a	naval	architect	and	engineer.

Bradley	 H.	 Stein	 has	 served	 as	 General	 Counsel	 of	 the	 Company	 since	 2006.	He	has	also	served	as	Senior	Vice	President	and	Chief Compliance	Officer	of	the	Company	since	February	2009	and	February	2011,	respectively.	Mr.	Stein	has	been	with	Royal	Caribbean	since	1992. Before	joining	Royal	Caribbean,	Mr.	Stein	worked	in	private	practice	in	New	York	and	Miami.

Henry	L.	Pujol	has	served	as	Senior	Vice	President,	Chief	Accounting	Officer	of	the	Company	since	May	2013.	Mr.	Pujol	originally	joined Royal	Caribbean	in	2004	as	Assistant	Controller	and	was	promoted	to	Corporate	Controller	in	May	2007.	Before	joining	Royal	Caribbean,	Mr. Pujol	was	a	Senior	Manager	at	the	international	public	accounting	firm	of	KPMG	LLP.

# Item	1A.	Risk	Factors

The	risk	factors	set	forth	below	and	elsewhere	in	this	Annual	Report	on	Form	10-K	are	important	factors	that	could	cause	actual	results	to differ	from	expected	or	historical	results.	It	is	not	possible	to	predict	or	identify	all	such	risks.	There	may	be	additional	risks	that	we	consider	not to	be	material,	or	which	are	not	known,	and	any	of	these	risks	could	have	the	effects	set	forth	below.	The	ordering	of	the	risk	factors	set	forth below	is	not	intended	to	reflect	any	Company	indication	of	priority	or	likelihood.	See	Item	7.	Management's	Discussion	and	Analysis	of	Financial Condition	and	Results	of	Operations	for	a	cautionary	note	regarding	forward-looking	statements.

# Adverse	worldwide	economic	or	other	conditions	could	reduce	the	demand	for	cruises	and	passenger	spending,	adversely	impacting	our operating	results,	cash	flows	and	financial	condition	including	potentially	impairing	the	value	of	our	ships	and	other	assets.

The	demand	for	cruises	is	affected	by	international,	national	and	local	economic	conditions.	Weak	or	uncertain	economic	conditions	impact consumer	confidence	and	pose	a	risk	as	vacationers	may	postpone	or	reduce	discretionary	spending.	This,	in	turn,	may	result	in	cruise	booking slowdowns,	decreased	cruise	prices	and	lower	onboard	revenues.	Given	the	global	nature	of	our	business,	we	are	exposed	to	many	different economies	and	our	business	could	be	hurt	by	challenging	conditions	in	any	of	our	markets.	Any	significant	deterioration	of	global,	national	or local	economic	conditions	could	result	in	a	prolonged	period	of	booking	slowdowns,	depressed	cruise	prices	and	reduced	onboard	revenues.

# Fears	of	terrorist	attacks,	war,	and	other	hostilities	could	have	a	negative	impact	on	our	results	of	operations.

Events	such	as	terrorist	attacks,	war	(or	war-like	conditions),	conflicts	(domestic	or	cross-border),	civil	unrest	and	other	hostilities,	including an	escalation	in	the	frequency	or	severity	of	incidents,	and	the	resulting	political	instability,	travel	restrictions	and	advisories,	and	concerns	over safety	and	security	aspects	of	traveling	or	the	fear	of	any	of	the	foregoing	have	had,	and	could	have	in	the	future,	a	significant	adverse	impact	on demand	and	pricing	in	the	travel	and	vacation	industry.	For	example,	the	series	of	terrorism	incidents	throughout	Europe	in	early	2016	negatively impacted	demand	for	European	cruises	in	2016,	particularly	as	it	relates	to	demand	for	these	cruises	from	North	American	guests.	In	view	of	our global	operations,	we	are	susceptible	to	a	wide	range	of	adverse	events.

# Our	operating	costs	could	increase	due	to	market	forces	and	economic	or	geo-political	factors	beyond	our	control.

Our	operating	costs,	including	fuel,	food,	payroll	and	benefits,	airfare,	taxes,	insurance	and	security	costs	are	all	subject	to	increases	due	to market	forces	and	economic	or	political	conditions	or	other	factors	beyond	our	control.	Increases	in	these	operating	costs	could	adversely	affect our	profitability.

# Fluctuations	in	foreign	currency	exchange	rates,	fuel	prices	and	interest	rates	could	affect	our	financial	results.

We	are	exposed	to	market	risk	attributable	to	changes	in	foreign	currency	exchange	rates,	fuel	prices	and	interest	rates.	Significant	changes	in any	of	the	foregoing	could	have	a	material	impact	on	our	financial	results,	net	of	the	impact	of	our	hedging	activities	and	natural	offsets.	Our operating	results	have	been	and	will	continue	to	be	impacted,	often	significantly,	by	changes	in	each	of	these	factors.	The	value	of	our	earnings	in foreign	currencies	is	adversely	impacted	by	a	strong	United	States	dollar.	In	addition,	any	significant	increase	in	fuel	prices	could	materially adversely	affect	our	business	as	fuel	prices	not	only	impact	our	fuel	costs,	but	also	some	of	our	other	expenses,	such	as	crew	travel,	freight	and commodity	prices.	Also,	while	interest	rates	have	been	near	historic	lows	for	several	years,	prevailing	rates	started	to	increase	at	the	end	of	2015 and	are	expected	to	continue	to	rise	in	2017,	which,	given	our	level	of	variable	rate	indebtedness,	would	adversely	impact	our	operating	results. See	 "Item	 7.	Management's	 Discussion	 and	Analysis	 of	 Financial	 Condition	 and	 Results	 of	 Operations "	 and	 "Item	 7A.	Quantitative	 and Qualitative	Disclosures	About	Market	Risk"	for	more	information.

# Conducting	business	globally	may	result	in	increased	costs	and	other	risks.

We	operate	our	business	globally.	Operating	internationally	exposes	us	to	a	number	of	risks,	including	increased	exposure	to	a	wider	range	of regional	and	 local	economic	conditions,	volatile	 local	political	conditions,	potential	changes	 in	duties	and	 taxes,	 including	changing	and/or uncertain	interpretations	of	existing	tax	laws	and	regulations,	required	compliance	with	additional	laws	and	policies	affecting	cruising,	vacation	or maritime	 businesses	 or	 governing	 the	 operations	 of	 foreign-based	 companies,	 currency	 fluctuations,	 interest	 rate	 movements,	 difficulties	 in operating	under	local	business	environments,	port	quality	and	availability	in	certain	regions,	U.S.	and	global	anti-bribery	laws	or	regulations, imposition	of	trade	barriers	and	restrictions	on	repatriation	of	earnings.

Our	future	growth	strategies	increasingly	depend	on	the	growth	and	sustained	profitability	of	certain	international	markets,	such	as	China. Some	factors	that	will	be	critical	to	our	success	in	developing	these	markets	may	be	different	than	those	affecting	our	more-established	North American	and	European	markets.	In	the	Chinese	market,	in	particular,	our	future	success	depends	on	our	ability	to	continue	to	raise	awareness	of our	products,	evolve	the	available	distribution	channels	and	adapt	our	offerings	to	best	suit	the	Chinese	consumer.	China's	economy	differs	from the	economies	of	other	developed	countries	in	many	respects	and,	as	the	legal	and	regulatory	system	in	China	continues	to	evolve,	there	may	be greater	uncertainty	as	to	the	interpretation	and	enforcement	of	applicable	laws	and	regulations.

Operating	globally	also	exposes	us	to	numerous	and	sometimes	conflicting	legal,	regulatory	and	tax	requirements.	In	many	parts	of	the	world, including	countries	in	which	we	operate,	practices	in	the	local	business	communities	might	not	conform	to	international	business	standards.	We must	adhere	to	policies	designed	to	promote	legal	and	regulatory	compliance	as	well	as	applicable	laws	and	regulations.	However,	we	might	not	be successful	in	ensuring	that	our	employees,	agents,	representatives	and	other	third	parties	with	whom	we	associate	throughout	the	world	properly adhere	to	them.	Failure	by	us,	our	employees	or	any	of	these	third	parties	to	adhere	to	our	policies	or	applicable	laws	or	regulations	could	result	in penalties,	sanctions,	damage	to	our	reputation	and	related	costs	which	in	turn	could	negatively	affect	our	results	of	operations	and	cash	flows.

We	have	operations	in	and	source	passengers	from	the	United	Kingdom	and	other	member	countries	of	the	European	Union.	On	June	23, 2016,	voters	in	the	United	Kingdom	approved	an	advisory	referendum	to	withdraw	from	the	European	Union.	The	proposed	withdrawal	has resulted	in	increased	volatility	in	the	global	financial	markets	and,	in	particular,	in	global	currency	exchange	rates.	The	proposed	withdrawal	could potentially	adversely	affect	tax,	legal	and	regulatory	regimes	to	which	our	business	in	the	region	is	subject.	The	withdrawal	could	also,	among other	potential	outcomes,	disrupt	the	free	movement	of	goods,	services	and	people	between	the	United	Kingdom	and	the	European	Union.	Further, uncertainty	around	these	issues	could	lead	to	adverse	effects	on	the	economy	of	the	United	Kingdom	and	the	other	economies	in	which	we operate,	making	it	more	difficult	to	source	passengers	from	these	regions.	These	risks	may	be	exacerbated	if	voters	of	other	countries	within	the European	Union	similarly	elect	to	exit	the	European	Union	in	future	referendums.

As	a	global	operator,	our	business	may	be	impacted	by	changes	in	U.S.	policy	in	areas	such	as	trade,	immigration	and/or	environmental	or labor	regulations,	among	others.	Depending	on	the	nature	and	scope	of	these	changes,	they	could	impact	our	domestic	and	international	business operations.	While	still	unclear,	these	changes,	and	any	international	response	to	them,	could	potentially	introduce	new	barriers	to	passenger	travel and/or	cross	border	transactions.

If	we	are	unable	to	address	these	risks	adequately,	our	financial	position	and	results	of	operations	could	be	adversely	affected,	including potentially	impairing	the	value	of	our	ships	and	other	assets.

Price	increases	for	commercial	airline	service	for	our	guests	or	major	changes	or	reduction	in	commercial	airline	service	and/or	availability could	adversely	impact	the	demand	for	cruises	and	undermine	our	ability	to	provide	reasonably	priced	vacation	packages	to	our	guests.

Many	of	our	guests	depend	on	scheduled	commercial	airline	services	to	transport	them	to	or	from	the	ports	where	our	cruises	embark	or disembark.	Increases	in	the	price	of	airfare	would	increase	the	overall	price	of	the	cruise	vacation	to	our	guests,	which	may	adversely	impact demand	for	our	cruises.	In	addition,	changes	in	the	availability	of	commercial	airline	services	could	adversely	affect	our	guests'	ability	to	obtain airfare,	as	well	as	our	ability	to	fly	our	guests	to	or	from	our	cruise	ships,	which	could	adversely	affect	our	results	of	operations.

# Incidents	or	adverse	publicity	concerning	our	ships	and/or	passengers	or	the	cruise	vacation	industry	in	general,	unusual	weather	conditions and	other	natural	disasters	or	disruptions	could	affect	our	reputation	as	well	as	impact	our	sales	and	results	of	operations.

The	ownership	and/or	operation	of	cruise	ships,	airplanes,	private	destinations,	port	facilities	and	shore	excursions	 involves	 the	risk	of accidents,	illnesses,	mechanical	failures,	environmental	incidents	and	other	incidents	which	may	bring	into	question	safety,	health,	security	and vacation	satisfaction	which	could	negatively	impact	our	reputation.	Incidents	involving	cruise	ships,	and,	in	particular	the	safety,	health	and security	of	guests	and	crew	and	media	coverage	thereof	have	impacted	and	could	in	the	future	impact	demand	for	our	cruises	and	pricing	in	the industry.	 Our	 reputation	 and	 our	 business	 could	 also	 be	 damaged	 by	 negative	 publicity	 regarding	 the	 cruise	 industry	 in	 general,	 including publicity	regarding	the	spread	of	contagious	disease	and	the	potentially	adverse	environmental	impacts	of	cruising.	The	considerable	expansion	in the	use	of	social	media	and	digital	marketing	over	recent	years	has	compounded	the	potential	scope	of	any	negative	publicity.	If	any	such	incident or	news	cycle	occurs	during	a	time	of	high	seasonal	demand,	the	effect	could	disproportionately	impact	our	results	of	operations	for	the	year.	In addition,	incidents	involving	cruise	ships	may	result	in	additional	costs	to	our	business,	increasing	government	or	other	regulatory	oversight	and, in	the	case	of	incidents	involving	our	ships,	potential	litigation.

Our	cruise	ships	and	port	facilities	may	also	be	adversely	impacted	by	unusual	weather	patterns	or	natural	disasters	or	disruptions,	such	as hurricanes.	We	are	often	forced	to	alter	itineraries	and	occasionally	to	cancel	a	cruise	or	a	series	of	cruises	due	to	these	or	other	factors,	which could	have	an	adverse	effect	on	our	sales	and	profitability.	Increases	in	the	frequency,	severity	or	duration	of	severe	weather	events,	including those	related	to	climate	change,	could	exacerbate	the	impact	and	cause	further	disruption	to	our	operations.	In	addition,	these	and	any	other	events which	impact	the	travel	industry	more	generally	may	negatively	impact	our	ability	to	deliver	guests	or	crew	to	our	cruises	and/or	interrupt	our ability	to	obtain	services	and	goods	from	key	vendors	in	our	supply	chain.	Any	of	the	foregoing	could	have	an	adverse	impact	on	our	results	of operations	and	on	industry	performance.

# An	increase	in	capacity	worldwide	or	excess	capacity	in	a	particular	market	could	adversely	impact	our	cruise	sales	and/or	pricing.

Although	our	ships	can	be	redeployed,	cruise	sales	and/or	pricing	may	be	impacted	by	the	introduction	of	new	ships	into	the	marketplace, reductions	in	cruise	capacity,	overall	market	growth	and	deployment	decisions	of	ourselves	and	our	competitors.	A	total	of	60	new	ships	with approximately	173,000	berths	are	on	order	for	delivery	through	2021	in	the	cruise	industry.	The	further	net	growth	in	capacity	from	these	new ships	and	future	orders,	without	an	increase	in	the	cruise	industry's	demand	and/or	share	of	the	vacation	market,	could	depress	cruise	prices	and impede	our	ability	to	achieve	yield	improvement.

In	addition,	to	the	extent	that	we	or	our	competitors	deploy	ships	to	a	particular	itinerary	and	the	resulting	capacity	in	that	region	exceeds	the demand,	we	may	lower	pricing	and	profitability	may	be	lower	than	anticipated.	This	risk	may	be	amplified	in	emerging	cruise	markets,	such	as China,	where	we	expect	continuing	increases	in	capacity	over	a	relatively	short	time	horizon.	Any	of	the	foregoing	could	have	an	adverse	impact on	our	results	of	operations,	cash	flows	and	financial	condition,	including	potentially	impairing	the	value	of	our	ships	and	other	assets.

# Unavailability	of	ports	of	call	may	adversely	affect	our	results	of	operations.

We	believe	that	port	destinations	are	a	major	reason	why	guests	choose	to	go	on	a	particular	cruise	or	on	a	cruise	vacation.	The	availability	of ports	 is	 affected	 by	 a	 number	 of	 factors,	 including	 existing	 capacity	 constraints,	 constraints	 related	 to	 the	 size	 of	 certain	 ships,	 security, environmental	 and	 health	 concerns,	 adverse	 weather	 conditions	 and	 natural	 disasters,	 financial	 limitations	 on	 port	 development,	 exclusivity arrangements	that	ports	may	have	with	our	competitors,	local	governmental	regulations	and	local	community	concerns	about	port	development and	other	adverse	impacts	on	their	communities	from	additional	tourists.	In	addition,	fuel	costs	may	adversely	impact	the	destinations	on	certain of	our	itineraries.	Any	limitations	on	the	availability	or	feasibility	of	our	ports	of	call	or	on	the	availability	of	shore	excursions	and	other	service providers	at	such	ports	could	adversely	affect	our	results	of	operations.

# Our	reliance	on	shipyards	and	their	subcontractors	to	implement	our	newbuild	and	ship	upgrade	programs	and	to	repair	and	maintain	our ships	exposes	us	to	risks	which,	if	realized,	could	adversely	impact	our	business.

We	rely	on	shipyards	and	their	subcontractors	to	effectively	construct	our	new	ships	and	to	repair,	maintain	and	upgrade	our	existing	ships	on a	timely	basis	and	in	a	cost	effective	manner.

There	are	a	limited	number	of	shipyards	with	the	capability	and	capacity	to	build	our	new	ships	and,	accordingly,	increased	demand	for available	new	construction	slots	and/or	continued	consolidation	 in	 the	cruise	shipyard	 industry	(including	completion	of	Italian	shipbuilder Fincantieri's	bid	for	STX	France)	could	impact	our	ability	to	construct	new	ships	when	and	as	planned,	cause	us	to	continue	to	commit	to	new	ship orders	earlier	than	we	have	historically	done	so	and/or	result	in	stronger	bargaining	power	on	the	part	of	the	shipyards	and	the	export	credit agencies	providing	financing	for	the	project.		Our	inability	to	timely	and	cost-effectively	procure	new	capacity	could	have	a	significant	negative impact	on	our	future	business	plans	and	results	of	operations.

Building,	repairing,	maintaining	and/or	upgrading	a	ship	is	sophisticated	work	that	involves	significant	risks,	and	shipyards	and/or	their subcontractors	may	encounter	financial,	technical	or	design	problems	when	doing	these	jobs.		If	materialized,	these	problems		could	impact	the timely	delivery	or	costs	of	new	ships	or	the	ability	of	shipyards	to	repair	and	upgrade	our	fleet	in	accordance	with	our	needs	or	expectations.		In addition,	delays	or	mechanical	faults	may	result	in	cancellation	of	cruises	or,	in	more	severe	situations,	new	ship	orders,	or	necessitate unscheduled	drydocks	and	repairs	of	ships.	These	events	and	any	related	adverse	publicity	could	result	in	lost	revenue,	increased	operating expenses,	or	both,	and	thus	adversely	affect	our	results	of	operations.

# We	may	lose	business	to	competitors	throughout	the	vacation	market.

We	operate	in	the	vacation	market	and	cruising	is	one	of	many	alternatives	for	people	choosing	a	vacation.	We	therefore	risk	losing	business not	only	to	other	cruise	lines,	but	also	to	other	vacation	operators,	which	provide	other	leisure	options	including	hotels,	resorts,	internet-based alternative	lodging	sites	and	package	holidays	and	tours.

We	face	significant	competition	from	other	cruise	lines	on	the	basis	of	cruise	pricing,	travel	agent	preference	and	also	in	terms	of	the	nature of	ships	and	services	we	offer	to	guests.	Our	principal	competitors	within	the	cruise	vacation	industry	include	Carnival	Corporation	&	plc,	which owns,	among	others,	Aida	Cruises,	Carnival	Cruise	Line,	Costa	Cruises,	Cunard	Line,	Holland	America	Line,	P&O	Cruises	and	Princess	Cruises; Disney	Cruise	Line;	MSC	Cruises;	and	Norwegian	Cruise	Line	Holdings	Ltd	which	owns	Norwegian	Cruise	Line,	Oceania	Cruises	and	Regent Seven	Seas	Cruises.	Our	revenues	are	sensitive	to	the	actions	of	other	cruise	lines	in	many	areas	including	pricing,	scheduling,	capacity	and promotions,	which	can	have	a	substantial	adverse	impact	not	only	on	our	revenues,	but	on	overall	industry	revenues.

In	the	event	that	we	do	not	effectively	market	or	differentiate	our	cruise	brands	from	our	competitors	or	otherwise	compete	effectively	with other	vacation	alternatives	and	new	or	existing	cruise	companies,	our	results	of	operations	and	financial	position	could	be	adversely	affected.

# We	may	not	be	able	to	obtain	sufficient	financing	or	capital	for	our	needs	or	may	not	be	able	to	do	so	on	terms	that	are	acceptable	or consistent	with	our	expectations.

To	fund	our	capital	expenditures	(including	new	ship	orders),	operations	and	scheduled	debt	payments,	we	have	historically	relied	on	a combination	of	cash	flows	provided	by	operations,	drawdowns	under	available	credit	facilities,	the	incurrence	of	additional	indebtedness	and	the sale	of	equity	or	debt	securities	in	private	or	public	securities	markets.	Any	circumstance	or	event	which	leads	to	a	decrease	in	consumer	cruise spending,	 such	 as	 worsening	 global	 economic	 conditions	 or	 significant	 incidents	 impacting	 the	 cruise	 industry,	 could	 negatively	 affect	 our operating	cash	flows.	See	"-Adverse	worldwide	economic,	geopolitical	or	other	conditions…"	and	"-Incidents	or	adverse	publicity	concerning	our ships	and/or	passengers	or	the	cruise	vacation	industry	…"	for	more	information.

Although	we	believe	we	can	access	sufficient	liquidity	to	fund	our	operations,	investments	and	obligations	as	expected,	there	can	be	no assurances	to	that	effect.	Our	ability	to	access	additional	funding	as	and	when	needed,	our

ability	to	timely	refinance	and/or	replace	our	outstanding	debt	securities	and	credit	facilities	on	acceptable	terms	and	our	cost	of	funding	will depend	upon	numerous	factors	including,	but	not	limited	to,	the	vibrancy	of	the	financial	markets,	our	financial	performance,	the	performance	of our	industry	in	general	and	the	size,	scope	and	timing	of	our	financial	needs.	In	addition,	even	where	financing	commitments	have	been	secured, significant	disruptions	in	the	capital	and	credit	markets	could	cause	our	banking	and	other	counterparties	to	breach	their	contractual	obligations	to us.	This	could	include	failures	of	banks	or	other	financial	service	companies	to	fund	required	borrowings	under	our	loan	agreements	or	to	pay	us amounts	that	may	become	due	or	return	collateral	that	is	refundable	under	our	derivative	contracts	for	hedging	of	fuel	prices,	interest	rates	and foreign	currencies	or	other	agreements.	If	any	of	the	foregoing	occurs	it	may	have	a	negative	impact	on	our	cash	flows,	including	our	ability	to meet	our	obligations,	our	results	of	operations	and	our	financial	condition.

# Our	liquidity	could	be	adversely	impacted	if	we	are	unable	to	satisfy	the	covenants	required	by	our	credit	facilities	or	if	we	are	required	to	post a	significant	amount	of	collateral	under	our	interest	rate	hedging	contracts.

Our	debt	agreements	contain	covenants,	including	covenants	restricting	our	ability	to	take	certain	actions	and	financial	covenants.	In	addition, our	ability	to	make	borrowings	under	our	available	credit	facilities	is	subject	to	the	absence	of	material	adverse	changes	in	our	business.	Our ability	to	maintain	our	credit	facilities	may	also	be	impacted	by	changes	in	our	ownership	base.	More	specifically,	we	may	be	required	to	prepay our	ship	financing	facilities	if	any	person	acquires	ownership	of	more	than	50%	of	our	common	stock	or,	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. 	Our	public	debt	securities	also	contain	change	of	control	provisions	that	would	be	triggered	by	a	third-party	acquisition	of	greater	than	50%	of	our common	stock	coupled	with	a	ratings	downgrade.

Our	failure	to	comply	with	the	terms	of	our	debt	facilities	could	result	in	an	event	of	default.	Generally,	if	an	event	of	default	under	any	debt agreement	occurs,	then	pursuant	to	cross	default	acceleration	clauses,	our	outstanding	debt	and	derivative	contract	payables	could	become	due and/or	terminated.	In	addition,	in	such	events,	our	credit	card	processors	could	hold	back	payments	to	create	a	reserve.	We	cannot	provide assurances	that	we	would	have	sufficient	liquidity	to	repay,	or	the	ability	to	refinance	the	debt	if	such	amounts	were	accelerated	upon	an	event	of default.

# If	we	are	unable	to	appropriately	balance	our	cost	management	and	capital	allocation	strategies	with	our	goal	of	satisfying	guest	expectations, it	may	adversely	impact	our	business	success.

Our	goals	call	for	us	to	provide	high	quality	products	and	deliver	high	quality	services.	There	can	be	no	assurance	that	we	can	successfully balance	these	goals	with	our	cost	management	and	capital	allocation	strategies.	Our	business	also	requires	us	to	make	capital	allocation	decisions, such	as	ordering	new	ships	and/or	upgrading	our	ships,	based	on	expected	market	preferences	and	projected	demand.	There	can	be	no	assurance that	our	strategies	will	be	successful,	which	could	adversely	impact	our	business,	financial	condition	and	results	of	operations.

# Our	attempts	to	expand	our	business	into	new	markets	and	new	ventures	may	not	be	successful.

We	 opportunistically	 seek	 to	 grow	 our	 business	 through,	 among	 other	 things,	 expansion	 into	 new	 destination	 or	 source	 markets	 and establishment	of	new	ventures	complementary	to	our	current	offerings.	These	attempts	to	expand	our	business	increase	the	complexity	of	our business,	require	significant	levels	of	investment	and	can	strain	our	management,	personnel,	operations	and	systems.	There	can	be	no	assurance that	these	business	expansion	efforts	will	develop	as	anticipated	or	that	we	will	succeed,	and	if	we	do	not,	we	may	be	unable	to	recover	our investment,	which	could	adversely	impact	our	business,	financial	condition	and	results	of	operations.

# Our	reliance	on	travel	agencies	to	sell	and	market	our	cruises	exposes	us	to	certain	risks	which,	if	realized,	could	adversely	impact	our business.

We	rely	on	travel	agencies	to	generate	the	majority	of	bookings	for	our	ships.	Accordingly,	we	must	ensure	that	our	commission	rates	and incentive	structures	remain	competitive.	If	we	fail	to	offer	competitive	compensation	packages,	these	agencies	may	be	incentivized	to	sell	cruises offered	by	our	competitors	to	our	detriment,	which	could	adversely	impact	our	operating	results.	Our	reliance	on	third-party	sellers	is	particularly pronounced	in	certain	markets,

such	as	China,	where	we	have	a	large	number	of	travel	agent	charter	and	group	sales	and	less	retail	agency	and	direct	booking.	In	addition,	the travel	 agent	 industry	 is	 sensitive	 to	 economic	 conditions	 that	 impact	 discretionary	 income.	 Significant	 disruptions,	 especially	 disruptions impacting	those	agencies	that	sell	a	high	volume	of	our	business,	or	contractions	in	the	industry	could	reduce	the	number	of	travel	agencies available	for	us	to	market	and	sell	our	cruises,	which	could	have	an	adverse	impact	on	our	financial	condition	and	results	of	operations.

# Disruptions	in	our	shoreside	operations	or	our	information	systems	may	adversely	affect	our	results	of	operations.

Our	principal	executive	office	and	principal	shoreside	operations	are	located	in	Florida	and	we	have	shoreside	offices	throughout	the	world.	Actual or	threatened	natural	disasters	(e.g.,	hurricanes/typhoons,	earthquakes,	tornadoes,	fires	or	floods)	or	similar	events	in	these	locations	may	have	a material	impact	on	our	business	continuity,	reputation	and	results	of	operations.	In	addition,	substantial	or	repeated	information	systems	failures, computer	viruses	or	cyber-attacks	impacting	our	shoreside	or	shipboard	operations	could	adversely	impact	our	business.	We	do	not	generally carry	business	interruption	insurance	for	our	shoreside	operations	or	our	information	systems.	As	such,	any	losses	or	damages	incurred	by	us could	have	an	adverse	impact	on	our	results	of	operations.

# The	loss	of	key	personnel,	our	inability	to	recruit	or	retain	qualified	personnel,	or	disruptions	among	our	shipboard	personnel	due	to	strained employee	relations	could	adversely	affect	our	results	of	operations.

Our	success	depends,	in	large	part,	on	the	skills	and	contributions	of	key	executives	and	other	employees,	and	on	our	ability	to	recruit	and retain	high	quality	personnel	in	key	markets.	We	must	continue	to	sufficiently	recruit,	retain,	train	and	motivate	our	employees	to	maintain	our current	business	and	support	our	projected	global	growth	both	shoreside	and	on	our	ships.	Furthermore,	as	of	December	31,	2016,	85%	of	our shipboard	employees	were	covered	by	collective	bargaining	agreements.	A	dispute	under	our	collective	bargaining	agreements	could	result	in	a work	stoppage	of	those	employees	covered	by	the	agreements.	We	may	not	be	able	to	satisfactorily	renegotiate	these	collective	bargaining agreements	when	they	expire.	In	addition,	existing	collective	bargaining	agreements	may	not	prevent	a	strike	or	work	stoppage	on	our	ships.	We may	also	be	subject	to	or	affected	by	work	stoppages	unrelated	to	our	business	or	collective	bargaining	agreements.	Any	such	work	stoppages	or potential	work	stoppages	could	have	a	material	adverse	effect	on	our	financial	results,	as	could	a	loss	of	key	employees,	our	inability	to	recruit	or retain	qualified	personnel	or	disruptions	among	our	personnel.

# Business	activities	that	involve	our	co-investment	with	third	parties	may	subject	us	to	additional	risks.

Partnerships,	joint	ventures,	and	other	business	structures	involving	our	co-investment	with	third	parties,	generally	include	some	form	of shared	control	over	the	operations	of	the	business	and	create	additional	risks,	including	the	possibility	that	other	investors	in	such	ventures	could become	bankrupt	or	otherwise	lack	the	financial	resources	to	meet	their	obligations,	or	could	have	or	develop	business	interests,	policies	or objectives	that	are	inconsistent	with	ours.	With	the	sale	of	51%	of	our	interest	in	Pullmantur	in	July	2016,	we	continue	to	expand	the	breadth	of our	co-investment	activities,	which	also	include	TUI	Cruises,	SkySea	Cruises,	Grand	Bahama	Shipyard	and	minority	ownership	investments	in various	 port	 development	 and	 other	 projects.	 In	 addition	 to	 financial	 risks,	 our	 co-investment	 activities	 may	 also	 present	 managerial	 and operational	risks	and	expose	us	to	reputational	or	legal	concerns.	These	or	other	issues	related	to	our	co-investment	with	third	parties	could adversely	impact	our	operations.

We	rely	on	supply	chain	vendors	and	third-party	service	providers	who	are	integral	to	the	operations	of	our	businesses.	These	vendors	and service	providers	may	be	unable	or	unwilling	to	deliver	on	their	commitments	or	may	act	in	ways	that	could	harm	our	business.

We	rely	on	supply	chain	vendors	to	deliver	key	products	to	the	operations	of	our	businesses	around	the	world.	Any	event	impacting	a vendor's	ability	to	deliver	goods	of	the	required	quality	at	the	location	and	time	needed	could	negatively	impact	our	ability	to	deliver	our	cruise experience.	Events	impacting	our	supply	chain	could	be	caused	by	factors	beyond	the	control	of	our	suppliers	or	us,	including	inclement	weather, natural	disasters,	increased	demand,	problems	in	production	or	distribution	and/or	disruptions	in	third	party	logistics	or	transportation	systems. Interruptions	to	our	supply	chain	could	increase	costs	and	could	limit	the	availability	of	products	critical	to	our	operations.

In	order	to	achieve	cost	and	operational	efficiencies,	we	outsource	to	third-party	vendors	certain	services	that	are	integral	to	the	operations	of our	global	businesses,	such	as	our	onboard	concessionaires,	certain	of	our	call	center	operations	and	operation	of	a	large	part	of	our	information technology	systems.	We	are	subject	to	the	risk	that	certain	decisions	are	subject	to	the	control	of	our	third-party	service	providers	and	that	these decisions	may	adversely	affect	our	activities.	A	failure	to	adequately	monitor	a	third-party	service	provider's	compliance	with	a	service	level agreement	 or	 regulatory	 or	 legal	 requirements	 could	 result	 in	 significant	 economic	 and	 reputational	 harm	 to	 us.	 There	 is	 also	 a	 risk	 the confidentiality,	privacy	and/or	security	of	data	held	by	 third	parties	or	communicated	over	 third-party	networks	or	platforms	could	become compromised.

# A	failure	to	keep	pace	with	developments	in	technology	or	technological	obsolescence	could	impair	our	operations	or	competitive	position.

Our	business	continues	to	demand	the	use	of	sophisticated	technology	and	systems.	These	technologies	and	systems	must	be	refined,	updated, and/or	replaced	with	more	advanced	systems	in	order	to	continue	to	meet	our	customers'	demands	and	expectations.	If	we	are	unable	to	do	so	in	a timely	manner	or	within	reasonable	cost	parameters	or	if	we	are	unable	to	appropriately	and	timely	train	our	employees	to	operate	any	of	these new	systems,	our	business	could	suffer.	We	also	may	not	achieve	the	benefits	that	we	anticipate	from	any	new	technology	or	system,	and	a	failure to	do	so	could	result	in	higher	than	anticipated	costs	or	could	impair	our	operating	results.

# We	may	be	exposed	to	risks	and	costs	associated	with	cyber	security,	including	protecting	the	integrity	and	security	of	our	guests',	employees' and	business	partners'	personal	information.

We	are	subject	to	various	risks	associated	with	the	collection,	handling,	storage	and	transmission	of	sensitive	information,	including	risks related	to	compliance	with	applicable	laws	and	other	contractual	obligations,	as	well	as	the	risk	that	our	systems	collecting	such	information	could be	compromised.	In	the	course	of	doing	business,	we	collect	large	volumes	of	internal	and	customer	data,	including	personally	identifiable information	for	various	business	purposes.	We	are	subject	to	federal,	state	and	international	laws	relating	to	the	collection,	use,	retention,	security and	transfer	of	personally	identifiable	information.	In	many	cases,	these	laws	apply	not	only	to	third-party	transactions,	but	also	to	transfers	of information	between	the	Company	and	its	subsidiaries,	and	among	the	Company,	its	subsidiaries	and	other	parties	with	which	the	Company	has commercial	relations.	Several	jurisdictions	have	passed	laws	in	this	area,	and	other	jurisdictions	are	considering	imposing	additional	restrictions. These	laws	continue	to	develop	and	may	be	inconsistent	from	jurisdiction	to	jurisdiction.	Complying	with	emerging	and	changing	international requirements	may	cause	us	 to	 incur	substantial	costs	or	require	us	 to	change	our	business	practices.	If	we	fail	 to	comply	with	 the	various applicable	data	collection	and	privacy	laws,	we	could	be	exposed	to	fines,	penalties,	restrictions,	litigation	or	other	expenses,	and	our	business could	be	adversely	impacted.

In	addition,	even	if	we	are	fully	compliant	with	legal	standards	and	contractual	requirements,	we	still	may	not	be	able	to	prevent	security	breaches involving	sensitive	data.	Any	breach,	theft,	loss,	or	fraudulent	use	of	guest,	employee	or	company	data	could	adversely	impact	our	reputation	and brand	and	our	ability	to	retain	or	attract	new	customers,	and	expose	us	to	risks	of	data	loss,	business	disruption,	governmental	investigation, litigation	and	other	liability,	any	of	which	could	adversely	affect	our	business.	Significant	capital	investments	and	other	expenditures	could	be required	to	remedy	the	problem	and	prevent	future	breaches,	including	costs	associated	with	additional	security	technologies,	personnel,	experts and	credit	monitoring	services	for	those	whose	data	has	been	breached.	Further,	if	we	or	our	vendors	experience	significant	data	security	breaches or	fail	to	detect	and	appropriately	respond	to	significant	data	security	breaches,	we	could	be	exposed	to	government	enforcement	actions	and private	litigation.	Additionally,	the	techniques	and	sophistication	used	to	conduct	cyber-attacks	and	breaches	of	information	technology	systems, as	well	as	the	sources	and	targets	of	these	attacks,	change	frequently	and	are	often	not	recognized	until	such	attacks	are	launched	or	have	been	in place	for	a	period	of	time.	Our	security	measures	cannot	provide	assurance	that	we	will	be	successful	in	preventing	or	identifying	such	breaches.

The	 potential	 unavailability	 of	 insurance	 coverage	 or	 an	 inability to	 obtain insurance	 coverage	 at	 commercially	 reasonable	 rates	 may adversely	affect	our	financial	condition	or	results	of	operations.

We	seek	to	maintain	appropriate	insurance	coverage	at	commercially	reasonable	rates.	We	normally	insure	based	on	the	cost	of	an	asset rather	than	replacement	value	and	we	also	elect	to	self-insure,	co-insure,	or	use	deductibles	in	certain	circumstances	for	certain	risks	such	as	loss of	use	of	a	ship	or	a	cyber-security	breach.	The	limits	of	insurance	coverage	we	purchase	are	based	on	the	availability	of	the	coverage,	evaluation of	our	risk	profile	and	cost	of	coverage.	Accordingly,	we	are	not	protected	against	all	risks	which	could	result	in	an	unexpected	decrease	in	our revenue	and	results	of	operations	in	the	event	of	an	incident.

Our	protection	and	indemnity	("P&I")	liability	insurance	is	placed	on	a	mutual	basis	and	we	are	subject	to	additional	premium	calls	in amounts	based	on	claim	records	of	all	members	of	the	P&I	Club.	We	are	also	subject	to	additional	premium	assessments	including,	but	not limited	to,	investment	or	underwriting	shortfalls	experienced	by	the	P&I	Club.

We	cannot	be	certain	that	insurance	and	reinsurance	coverage	will	be	available	to	us	and	at	commercially	reasonable	rates	in	the	future. Additionally,	if	we	or	other	insureds	sustain	significant	losses,	the	result	may	be	higher	insurance	premiums,	cancellation	of	coverage,	or	the inability	to	obtain	coverage.	Such	events	could	adversely	affect	our	financial	condition	or	results	of	operations.

# Environmental, labor,	 health	 and safety, financial responsibility	 and	 other	 maritime regulations	 could	 affect	 operations	 and increase operating	costs.

The	United	States	and	various	state	and	foreign	government	or	regulatory	agencies	have	enacted	or	may	enact	environmental	regulations	or policies,	such	as	requiring	the	use	of	low	sulfur	fuels,	that	could	increase	our	direct	cost	to	operate	in	certain	markets,	increase	our	cost	for	fuel, limit	the	supply	of	compliant	fuel,	cause	us	to	incur	significant	expenses	to	purchase	and/or	develop	new	equipment	and	adversely	impact	the cruise	vacation	industry.	While	we	have	taken	and	expect	to	continue	to	take	a	number	of	actions	to	mitigate	the	potential	impact	of	certain	of these	regulations,	there	can	be	no	assurances	that	these	efforts	will	be	successful	or	completed	on	a	timely	basis.

There	 is	 increasing	 global	 regulatory	 focus	 on	 climate	 change	 and	 greenhouse	 gas	 (GHG)	 emissions.	These	 regulatory	 efforts,	 both internationally	and	in	the	United	States	are	still	developing,	and	we	cannot	yet	determine	what	the	final	regulatory	programs	or	their	impact	will	be in	any	jurisdiction	where	we	do	business.	However,	such	climate	change-related	regulatory	activity	in	the	future	may	adversely	affect	our	business and	financial	results	by	requiring	us	to	reduce	our	emissions,	purchase	allowances	or	otherwise	pay	for	our	emissions.	Such	activity	may	also impact	us	by	increasing	our	operating	costs,	including	fuel	costs.

Some	environmental	groups	have	also	lobbied	for	more	stringent	regulation	of	cruise	ships	and	have	generated	negative	publicity	about	the cruise	vacation	industry	and	its	environmental	impact.	See	Item	1.	Business-Regulation-Environmental	Regulations.

In	addition,	we	are	subject	to	various	international,	national,	state	and	local	laws,	regulations	and	treaties	that	govern,	among	other	things, discharge	from	our	ships,	safety	standards	applicable	to	our	ships,	treatment	of	disabled	persons,	health	and	sanitary	standards	applicable	to	our guests,	security	standards	on	board	our	ships	and	at	the	ship/port	interface	areas,	and	financial	responsibilities	to	our	guests.	These	issues	are,	and we	believe	will	continue	to	be,	an	area	of	focus	by	the	relevant	authorities	throughout	the	world.	This	could	result	in	the	enactment	of	more stringent	regulation	of	cruise	ships	that	could	subject	us	to	increasing	compliance	costs	in	the	future.

A	change	in	our	tax	status	under	the	United	States	Internal	Revenue	Code,	or	other	jurisdictions,	may	have	adverse	effects	on	our	income

We	and	a	number	of	our	subsidiaries	are	foreign	corporations	that	derive	income	from	a	U.S.	trade	or	business	and/or	from	sources	within	the United	 States.	 Drinker	 Biddle	 &	 Reath	 LLP,	 our	 U.S.	 tax	 counsel,	 has	 delivered	 to	 us	 an	 opinion,	 based	 on	 certain	 representations	 and assumptions	set	forth	in	it,	to	the	effect	that	this	income,	to	the	extent	derived	from	or	incidental	to	the	international	operation	of	a	ship	or	ships,	is excluded	from	gross	income	for	U.S.	federal	income	tax	purposes	pursuant	to	Section	883	of	the	Internal	Revenue	Code.	We	believe	that	most	of our	income	(including	that	of	our	subsidiaries)	is	derived	from	or	incidental	to	the	international	operation	of	a	ship	or	ships.

Our	ability	to	rely	on	Section	883	could	be	challenged	or	could	change	in	the	future.	Provisions	of	the	Internal	Revenue	Code,	including Section	883,	are	subject	to	legislative	change	at	any	time.	Moreover,	changes	could	occur	in	the	future	with	respect	to	the	identity,	residence	or holdings	of	our	direct	or	indirect	shareholders,	trading	volume	or	trading	frequency	of	our	shares,	or	relevant	foreign	tax	laws	of	Liberia	such	that it	no	longer	qualifies	as	an	equivalent	exemption	jurisdiction,	that	could	affect	our	eligibility	for	the	Section	883	exemption.	Accordingly,	there can	be	no	assurance	that	we	will	continue	to	be	exempt	from	U.S.	income	tax	on	U.S.	source	shipping	income	in	the	future.	If	we	were	not	entitled to	the	benefit	of	Section	883,	we	and	our	subsidiaries	would	be	subject	to	U.S.	taxation	on	a	portion	of	the	income	derived	from	or	incidental	to the	international	operation	of	our	ships,	which	would	reduce	our	net	income.

Additionally,	portions	of	our	business	are	operated	by	companies	that	are	within	tonnage	tax	regimes	of	the	United	Kingdom	and	Malta. Further,	some	of	our	operations	are	conducted	in	jurisdictions	where	we	rely	on	tax	treaties	to	provide	exemption	from	taxation.	To	the	extent	the tonnage	tax	laws	of	these	countries	change	or	we	do	not	continue	to	meet	the	applicable	qualification	requirements	or	if	tax	treaties	are	changed	or revoked,	we	may	be	required	to	pay	higher	income	tax	in	these	jurisdictions,	adversely	impacting	our	results	of	operations.

As	budgetary	constraints	continue	to	adversely	impact	the	jurisdictions	in	which	we	operate,	increases	in	income	tax	regulations,	tax	audits	or tax	reform	affecting	our	operations	may	be	imposed.

# Litigation,	enforcement	actions,	fines	or	penalties	could	adversely	impact	our	financial	condition	or	results	of	operations	and/or	damage	our reputation.

Our	business	is	subject	to	various	United	States	and	international	laws	and	regulations	that	could	lead	to	enforcement	actions,	fines,	civil	or criminal	penalties	or	the	assertion	of	litigation	claims	and	damages.	In	addition,	improper	conduct	by	our	employees,	agents	or	joint	venture partners	could	damage	our	reputation	and/or	lead	to	litigation	or	legal	proceedings	that	could	result	in	civil	or	criminal	penalties,	including substantial	monetary	fines.	In	certain	circumstances	it	may	not	be	economical	to	defend	against	such	matters	and/or	a	legal	strategy	may	not ultimately	result	in	us	prevailing	in	a	matter.	Such	events	could	lead	to	an	adverse	impact	on	our	financial	condition	or	results	of	operations.

# We	are	not	a	United	States	corporation	and	our	shareholders	may	be	subject	to	the	uncertainties	of	a	foreign	legal	system	in	protecting	their interests.

Our	corporate	affairs	are	governed	by	our	Articles	of	Incorporation	and	By-Laws	and	by	the	Business	Corporation	Act	of	Liberia.	The provisions	of	the	Business	Corporation	Act	of	Liberia	resemble	provisions	of	the	corporation	laws	of	a	number	of	states	in	the	United	States. However,	while	most	states	have	a	fairly	well	developed	body	of	case	law	interpreting	their	respective	corporate	statutes,	there	are	very	few judicial	cases	in	Liberia	interpreting	the	Business	Corporation	Act	of	Liberia.	As	such,	the	rights	and	fiduciary	responsibilities	of	directors	under Liberian	law	are	not	as	clearly	established	as	the	rights	and	fiduciary	responsibilities	of	directors	under	statutes	or	judicial	precedent	in	certain United	States	jurisdictions.	For	example,	the	right	of	shareholders	to	bring	a	derivative	action	in	Liberian	courts	may	be	more	limited	than	in United	States	jurisdictions.	There	may	also	be	practical	difficulties	for	shareholders	attempting	to	bring	suit	in	Liberia	and	Liberian	courts	may	or may	not	recognize	and	enforce	foreign	judgments.	Thus,	our	public	shareholders	may	have	more	difficulty	in	protecting	their	interests	with respect	to	actions	by	management,	directors	or	controlling	shareholders	than	would	shareholders	of	a	corporation	incorporated	in	a	United	States jurisdiction.

# Provisions	of	our	Articles	of	Incorporation,	By-Laws	and	Liberian	law	could	inhibit	others	from	acquiring	us,	prevent	a	change	of	control, and	may	prevent	efforts	by	our	shareholders	to	change	our	management.

Certain	provisions	of	our	Articles	of	Incorporation	and	By-Laws	and	Liberian	law	may	inhibit	third	parties	from	effectuating	a	change	of control	of	the	Company	without	Board	approval	which	could	result	in	the	entrenchment	of	current	management.	These	include	provisions	in	our Articles	of	Incorporation	that	prevent	third	parties,	other	than	A.	Wilhelmsen	AS.	and	Cruise	Associates,	from	acquiring	beneficial	ownership	of more	than	4.9%	of	our	outstanding	shares	without	the	consent	of	our	Board	of	Directors.

# Item	1B.	Unresolved	Staff	Comments

# None.

# Item	2.	Properties

Information	about	our	cruise	ships,	including	their	size	and	primary	areas	of	operation,	may	be	found	within	the	 Operating	Strategies	-	Fleet upgrade,	maintenance	and	expansion	section	and	the	Operations	-	Cruise	Ships	and	Itineraries	sections	in	Item	1.	Business.	Information	regarding our	cruise	ships	under	construction,	estimated	expenditures	and	financing	may	be	found	within	the	Future	Capital	Commitments	and	Funding Needs	and	Sources	sections	of	Item	7.	Management's	Discussion	and	Analysis	of	Financial	Condition	and	Results	of	Operations.

Our	principal	executive	office	and	principal	shoreside	operations	are	located	in	leased	office	buildings	at	the	Port	of	Miami,	Florida.	We	also lease	a	number	of	other	offices	in	the	US	and	throughout	Europe,	Asia,	Mexico,	South	America	and	Australia	to	administer	our	brand	operations globally.

We	believe	that	our	facilities	are	adequate	for	our	current	needs	and	that	we	are	capable	of	obtaining	additional	facilities	as	necessary.

We	also	operate	two	private	destinations	which	we	utilize	as	ports-of-call	on	certain	of	our	itineraries:	(i)	an	island	we	own	in	the	Bahamas which	we	call	CocoCay;	and	(ii)	Labadee,	a	secluded	peninsula	we	lease	on	the	north	coast	of	Haiti.

# Item	3.				Legal	Proceedings

In	April	2015,	the	Alaska	Department	of	Environmental	Conservation	issued	Notices	of	Violation	to	Royal	Caribbean	International	and Celebrity	Cruises	seeking	monetary	penalties	for	alleged	violations	of	the	Alaska	Marine	Visible	Emission	Standards	that	occurred	over	the previous	five	years	on	certain	of	our	vessels.		In	February	2017,	we	settled	all	claims	pursuant	to	a	Compliance	Order	by	Consent	in	which	we agreed	to	pay	an	amount	and	perform	certain	remedial	actions	which,		individually	and	in	the	aggregate,	are	immaterial	to	our	financial	condition or	results	of	operations	and	cash	flows.

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.

# Item	4.				Mine	Safety	Disclosures

# PART	II

# Item	5.				Market	for	Registrant's	Common	Equity,	Related	Stockholder	Matters	and	Issuer	Purchases	of	Equity	Securities

# Market	Information

Our	common	stock	is	listed	on	the	New	York	Stock	Exchange	("NYSE")	under	the	symbol	"RCL."	The	table	below	sets	forth	the	high	and low	sales	prices	of	our	common	stock	as	reported	by	the	NYSE	for	the	two	most	recent	years	by	quarter:

|  | NYSE<br>Common	Stock<br>High | Low |
| :--- | :--- | :--- |
| 2016 |  |  |
| Fourth\tQuarter | $86.84 | $67.53 |
| Third\tQuarter | $75.72 | $65.10 |
| Second\tQuarter | $84.56 | $64.95 |
| First\tQuarter | $99.81 | $64.21 |
| 2015 |  |  |
| Fourth\tQuarter | $103.40 | $87.08 |
| Third\tQuarter | $97.60 | $77.74 |
| Second\tQuarter | $83.32 | $65.91 |
| First\tQuarter | $85.56 | $72.79 |

In	2015,	we	applied	for	and	received	approval	to	delist	from	the	Oslo	Stock	Exchange	("OSE").	Our	last	day	of	trading	on	the	OSE	was March	8,	2016.

# Holders

As	 of	February	9,	2017	there	were	1,874	record	holders	of	our	common	stock.	Since	certain	of	our	shares	are	held	by	brokers	and	other institutions	on	behalf	of	shareholders,	the	foregoing	number	is	not	representative	of	the	number	of	beneficial	owners.

# Dividends

In	2015,	we	declared	cash	dividends	on	our	common	stock	of	$0.30	per	share	during	the	first	and	second	quarters	of	2015.	We	increased	the dividend	amount	to	$0.375	per	share	for	the	dividends	declared	in	the	third	and	fourth	quarters	of	2015	and	the	first	and	second	quarters	of	2016. The	dividend	amount	was	increased	to	$0.48	per	share	for	the	dividends	declared	in	the	third	and	fourth	quarters	of	2016.

Holders	of	our	common	stock	have	an	equal	right	to	share	in	our	profits	in	the	form	of	dividends	when	and	if	declared	by	our	Board	of Directors	out	of	funds	legally	available.	Holders	of	our	common	stock	have	no	rights	to	any	sinking	fund.

There	are	no	exchange	control	restrictions	on	remittances	of	dividends	on	our	common	stock	since	(1)	we	are	and	intend	to	maintain	our status	as	a	nonresident	Liberian	entity	under	the	Liberia	Revenue	Code	of	2000	as	Amended	and	the	regulations	thereunder,	and	(2)	our	ship- owning	subsidiaries	are	not	now	engaged,	and	are	not	in	the	future	expected	to	engage,	in	any	business	in	Liberia,	including	voyages	exclusively within	the	territorial	waters	of	the	Republic	of	Liberia.	Under	current	Liberian	law,	no	Liberian	taxes	or	withholding	will	be	imposed	on	payments to	holders	of	our	securities	other	than	to	a	holder	that	is	a	resident	Liberian	entity	or	a	resident	individual	or	an	individual	or	entity	subject	to taxation	in	Liberia	as	a	result	of	having	a	permanent	establishment	within	the	meaning	of	the	Liberia	Revenue	Code	of	2000	as	Amended	in Liberia.

The	declaration	of	dividends	shall	at	all	times	be	subject	to	the	final	determination	of	our	Board	of	Directors	that	a	dividend	is	prudent	at	that time	in	consideration	of	the	needs	of	the	business.

# Performance	Graph

The	following	graph	compares	the	total	return,	assuming	reinvestment	of	dividends,	on	an	investment	in	the	Company,	based	on	performance of	the	Company's	common	stock,	with	the	total	return	of	the	Standard	&	Poor's	500	Composite	Stock	Index	and	the	Dow	Jones	United	States Travel	and	Leisure	Index	for	a	five	year	period	by	measuring	the	changes	in	common	stock	prices	from	December	31,	2011	to	December	31, 2016.

|  | 12/11 | 12/12 | 12/13 | 12/14 | 12/15 | 12/16 |
| :--- | :--- | :--- | :--- | :--- | :--- | :--- |
| Royal\tCaribbean\tCruises\tLtd. | 100.00 | 139.36 | 198.03 | 350.40 | 437.09 | 362.38 |
| S&amp;P\t500 | 100.00 | 116.00 | 153.58 | 174.60 | 177.01 | 198.18 |
| Dow\tJones\tUS\tTravel\t&amp;\tLeisure | 100.00 | 113.33 | 164.87 | 191.85 | 203.17 | 218.56 |

The	stock	performance	graph	assumes	for	comparison	that	the	value	of	the	Company's	common	stock	and	of	each	index	was	$100	 on December	31,	2011	and	that	all	dividends	were	reinvested.	Past	performance	is	not	necessarily	an	indicator	of	future	results.

# Item	6.				Selected	Financial	Data

The	selected	consolidated	financial	data	presented	below	for	the	years	2012	through	2016	and	as	of	the	end	of	each	such	year,	except	for Adjusted	Net	Income	amounts,	are	derived	from	our	audited	consolidated	financial	statements	and	should	be	read	in	conjunction	with	those financial	statements	and	the	related	notes	as	well	as	in	conjunction	with	Item	7.	Management's	Discussion	and	Analysis	of	Financial	Condition and	Results	of	Operations.

| Total	revenues | $8,496,401 | $8,299,074 | $8,073,855 | $7,959,894 | $7,688,024 |
| :--- | :--- | :--- | :--- | :--- | :--- |
| Operating\tincome | $1,477,205 | $874,902 | $941,859 | $798,148 | $403,110 |
| Net\tincome | $1,283,388 | $665,783 | $764,146 | $473,692 | $18,287 |
| Adjusted\tNet\tIncome(1)\t(2)\t(3) | $1,314,689 | $1,065,066 | $755,729 | $539,224 | $442,873 |
| Per\tShare\tData—Basic: |  |  |  |  |  |
| Net\tincome | $5.96 | $3.03 | $3.45 | $2.16 | $0.08 |
| Adjusted\tNet\tIncome | $6.10 | $4.85 | $3.41 | $2.46 | $2.03 |
| Weighted-average\tshares | 215,393 | 219,537 | 221,658 | 219,638 | 217,930 |
| Per\tShare\tData—Diluted: |  |  |  |  |  |
| Net\tincome | $5.93 | $3.02 | $3.43 | $2.14 | $0.08 |
| Adjusted\tNet\tIncome | $6.08 | $4.83 | $3.39 | $2.44 | $2.02 |
| Weighted-average\tshares\tand\tpotentially\tdilutive\tshares | 216,316 | 220,689 | 223,044 | 220,941 | 219,457 |
| Dividends\tdeclared\tper\tcommon\tshare | $1.71 | $1.35 | $1.10 | $0.74 | $0.44 |
| Balance\tSheet\tData: |  |  |  |  |  |
| Total\tassets | $22,310,324 | $20,782,043 | $20,524,060 | $19,915,003 | $19,670,401 |
| Total\tdebt,\tincluding\tcapital\tleases | $9,387,436 | $8,527,243 | $8,254,818 | $7,916,860 | $8,332,418 |
| Common\tstock | $2,346 | $2,339 | $2,331 | $2,308 | $2,291 |
| Total\tshareholders'\tequity | $9,121,412 | $8,063,039 | $8,284,359 | $8,808,265 | $8,308,749 |

(1) For	2016,	2015	and	2014,	refer	to	Financial	Presentation	 and	Results	of	Operations	under	Item	7.	Management's	Discussion	and	Analysis	of	Financial	Condition	and Results	of	Operations	for	definition	of	Adjusted	Net	Income	and	reconciliation	of	Adjusted	Net	Income	to	Net	income.

(2) Amount	for	2013	excludes	restructuring	and	related	impairment	charges	of	$56.9	million	and	an	$8.6	million	loss	related	to	the	estimated	impact	of	Pullmantur's	non-core businesses	that	were	sold	in	2014.

(3) Amount	for	2012	excludes	an	impairment	charge	of	$385.4	million,	to	write	down	Pullmantur's	goodwill	to	its	implied	fair	value	and	to	write	down	trademarks	and	trade names	and	certain	long-lived	assets,	consisting	of	aircraft	that	was	then	owned	and	operated	by	Pullmantur	Air,	to	their	fair	value,	and	a	net	deferred	tax	charge	of	$28.5 million.	The	net	deferred	tax	charge	includes	a	$33.7	million	charge	to	record	a	100%	valuation	allowance	related	to	our	deferred	tax	assets	for	Pullmantur	and	a	$5.2 million	tax	benefit	to	reduce	the	deferred	tax	liability	related	to	Pullmantur's	trademarks	and	trade	names.	Additionally,	the	amount	for	2012	excludes	a	$10.7	million	loss related	to	the	estimated	impact	of	Pullmantur's	non-core	businesses	that	were	sold	in	2014.

# Item	7.				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,	including,	for	example,	under	the	"Risk	Factors"	and	"Business"	captions,	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	first	quarter	and	full	year	of	2017,	our	earnings	and	yield	estimates	for	2017	set	forth	under the	heading	"Outlook"	below	and	expectations	regarding	the	timing	and	results	of	our	Double-Double	Program),	business	and	industry	prospects or	future	results	of	operations	or	financial	position,	made	in	this	Annual	Report	on	Form	10-K	are	forward-looking.	Words	such	as	"anticipate," "believe,"	"could,"	"estimate,"	"expect,"	"goal,"	"intend,"	"may,"	"plan,"	"project,"	"seek,"	"should,"	"will,"	"driving"	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,	those	discussed	in	this Annual	Report	on	Form	10-K	and,	in	particular,	the	risks	discussed	under	the	caption	"Risk	Factors"	in	Part	I,	Item	1A	of	this	report.

All	forward-looking	statements	made	in	this	Annual	Report	on	Form	10-K	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.

# Overview

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

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

•a	discussion	of	our	results	of	operations	for	the	year	ended	December	31,	2016	compared	to	the	same	period	in	2015	and	the	year ended	December	31,	2015	compared	to	the	same	period	in	2014;

•a	discussion	of	our	business	outlook,	including	our	expectations	for	selected	financial	items	for	the	first	quarter	and	full	year	of	2017; and

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

# Critical	Accounting	Policies

Our	consolidated	financial	statements	are	prepared	in	accordance	with	accounting	principles	generally	accepted	in	the	United	States	of America	("GAAP").	(Refer	to	Note	1.	General	and	Note	2.	Summary	of	Significant	Accounting	Policies	to	our	consolidated	financial	statements under	 Item	 8.	Financial	 Statements	 and	 Supplementary	 Data).	 Certain	 of	 our	 accounting	 policies	 are	 deemed	 "critical,"	 as	 they	 require management's	highest	degree	of	judgment,	estimates	and	assumptions.	We	have	discussed	these	accounting	policies	and	estimates	with	the	audit committee	of	our	board	of	directors.	We	believe	our	most	critical	accounting	policies	are	as	follows:

# Ship	Accounting

Our	ships	represent	our	most	significant	assets	and	are	stated	at	cost	less	accumulated	depreciation	and	amortization.	Depreciation	of	ships	is generally	computed	net	of	a	15%	projected	residual	value	using	the	straight-line	method	over	the	estimated	useful	life	of	the	asset,	which	is generally	30	years.	The	30-year	useful	life	of	our	newly	constructed	ships	and	15%	associated	residual	value	are	both	based	on	the	weighted- average	of	all	major	components

of	a	ship.	Our	useful	life	and	residual	value	estimates	take	into	consideration	the	impact	of	anticipated	technological	changes,	long-term	cruise	and vacation	 market	 conditions	 and	 historical	 useful	 lives	 of	 similarly-built	 ships.	 In	 addition,	 we	 take	 into	 consideration	 our	 estimates	 of	 the weighted-average	useful	lives	of	the	ships'	major	component	systems,	such	as	hull,	superstructure,	main	electric,	engines	and	cabins.	Given	the very	 large	and	complex	nature	of	our	ships,	our	accounting	estimates	related	 to	ships	and	determinations	of	ship	 improvement	costs	 to	be capitalized	 require	 considerable	 judgment	 and	 are	 inherently	 uncertain.	We	 do	 not	 have	 cost	 segregation	 studies	 performed	 to	 specifically componentize	our	ship	systems.	Therefore,	we	estimate	the	costs	of	component	systems	based	principally	on	general	and	technical	information known	about	major	ship	component	systems	and	their	lives	and	our	knowledge	of	the	cruise	vacation	industry.	We	do	not	identify	and	track depreciation	by	ship	component	systems,	but	instead	utilize	these	estimates	to	determine	the	net	cost	basis	of	assets	replaced	or	refurbished. Improvement	 costs	 that	 we	 believe	 add	 value	 to	 our	 ships	 are	 capitalized	 as	 additions	 to	 the	 ship	 and	 depreciated	 over	 the	 shorter	 of	 the improvements'	estimated	useful	lives	or	that	of	the	associated	ship.	The	estimated	cost	and	accumulated	depreciation	of	replaced	or	refurbished ship	components	are	written	off	and	any	resulting	losses	are	recognized	in	Cruise	operating	expenses.

We	use	the	deferral	method	to	account	for	drydocking	costs.	Under	the	deferral	method,	drydocking	costs	incurred	are	deferred	and	charged to	expense	on	a	straight-line	basis	over	the	period	to	the	next	scheduled	drydock,	which	we	estimate	to	be	a	period	of	thirty	to	sixty	months	based on	the	vessel's	age	as	required	by	Class.	Deferred	drydock	costs	consist	of	the	costs	to	drydock	the	vessel	and	other	costs	incurred	in	connection with	the	drydock	which	are	necessary	to	maintain	the	vessel's	Class	certification.	Class	certification	is	necessary	in	order	for	our	cruise	ships	to	be flagged	 in	 a	 specific	 country,	 obtain	 liability	 insurance	 and	 legally	 operate	 as	 passenger	 cruise	 ships.	 The	 activities	 associated	 with	 those drydocking	costs	cannot	be	performed	while	the	vessel	is	in	service	and,	as	such,	are	done	during	a	drydock	as	a	planned	major	maintenance activity.	The	significant	deferred	drydock	costs	consist	of	hauling	and	wharfage	services	provided	by	the	drydock	facility,	hull	inspection	and related	activities	(e.g.,	scraping,	pressure	cleaning,	bottom	painting),	maintenance	to	steering	propulsion,	thruster	equipment	and	ballast	tanks, port	services	such	as	tugs,	pilotage	and	line	handling,	and	freight	associated	with	these	items.	We	perform	a	detailed	analysis	of	the	various activities	performed	for	each	drydock	and	only	defer	those	costs	that	are	directly	related	to	planned	major	maintenance	activities	necessary	to maintain	Class.	The	costs	deferred	are	related	to	activities	not	otherwise	routinely	periodically	performed	to	maintain	a	vessel's	designed	and intended	operating	capability.	Repairs	and	maintenance	activities	are	charged	to	expense	as	incurred.

We	use	judgment	when	estimating	the	period	between	drydocks,	which	can	result	in	adjustments	to	the	estimated	amortization	of	drydock costs.	If	the	vessel	is	disposed	of	before	the	next	drydock,	the	remaining	balance	in	deferred	drydock	is	written-off	to	the	gain	or	loss	upon disposal	of	vessel	in	the	period	in	which	the	sale	takes	place.	We	also	use	judgment	when	identifying	costs	incurred	during	a	drydock	which	are necessary	to	maintain	the	vessel's	Class	certification	as	compared	to	those	costs	attributable	to	repairs	and	maintenance	which	are	expensed	as incurred.

We	believe	we	have	made	reasonable	estimates	for	ship	accounting	purposes.	However,	should	certain	factors	or	circumstances	cause	us	to revise	our	estimates	of	ship	useful	lives	or	projected	residual	values,	depreciation	expense	could	be	materially	higher	or	lower.	If	circumstances cause	us	to	change	our	assumptions	in	making	determinations	as	to	whether	ship	improvements	should	be	capitalized,	the	amounts	we	expense each	year	as	repairs	and	maintenance	costs	could	increase,	partially	offset	by	a	decrease	in	depreciation	expense.	If	we	had	reduced	our	estimated average	ship	useful	life	by	one	year,	depreciation	expense	for	2016	would	have	increased	by	approximately	$62.7	million.	If	our	ships	were estimated	to	have	no	residual	value,	depreciation	expense	for	2016	would	have	increased	by	approximately	$221.9	million.

# Valuation	of	Goodwill,	Indefinite-Lived	Intangible	Assets	and	Long-Lived	Assets

We	 review	 goodwill	 and	 indefinite-lived	 intangible	 assets	 for	 impairment	 at	 the	 reporting	 unit	 level	 annually	 or,	 when	 events	 or circumstances	dictate,	more	frequently.	The	impairment	review	for	goodwill	consists	of	a	qualitative	assessment	of	whether	it	is	more-likely-than- not	that	a	reporting	unit's	fair	value	is	less	than	its	carrying	amount,	and	if	necessary,	a	two-step	goodwill	impairment	test.	Factors	to	consider when	performing	the	qualitative	assessment	include	general	economic	conditions,	limitations	on	accessing	capital,	changes	in	forecasted	operating results,	changes	in	fuel	prices	and	fluctuations	in	foreign	exchange	rates.	If	the	qualitative	assessment	demonstrates	that	it	is	more-likely-than-not that	the	estimated	fair	value	of	the	reporting	unit	exceeds	its	carrying	value,	it	is	not	necessary	to	perform	the	two-step	goodwill	impairment	test. We	may	elect	to	bypass	the	qualitative	assessment	and	proceed	directly	to	step

one,	for	any	reporting	unit,	in	any	period.	On	a	periodic	basis,	we	elect	to	bypass	the	qualitative	assessment	and	proceed	to	step	one	to	corroborate the	results	of	recent	years'	qualitative	assessments.	We	can	resume	the	qualitative	assessment	for	any	reporting	unit	in	any	subsequent	period.

When	performing	the	two-step	goodwill	impairment	test,	the	fair	value	of	the	reporting	unit	is	determined	and	compared	to	the	carrying value	of	the	net	assets	allocated	to	the	reporting	unit.	We	estimate	the	fair	value	of	our	reporting	units	using	a	probability-weighted	discounted cash	flow	model.	The	estimation	of	fair	value	utilizing	discounted	expected	future	cash	flows	includes	numerous	uncertainties	which	require	our significant	judgment	when	making	assumptions	of	expected	revenues,	operating	costs,	marketing,	selling	and	administrative	expenses,	interest rates,	 ship	 additions	 and	 retirements	 as	 well	 as	 assumptions	 regarding	 the	 cruise	 vacation	 industry's	 competitive	 environment	 and	 general economic	and	business	conditions,	among	other	factors.	The	principal	assumptions	we	use	in	the	discounted	cash	flow	model	are	projected operating	results,	weighted-average	cost	of	capital,	and	terminal	value.	The	discounted	cash	flow	model	uses	the	most	current	projected	operating results	for	the	upcoming	fiscal	year	as	a	base.	To	that	base,	we	add	future	years'	cash	flows	assuming	multiple	revenue	and	expense	scenarios	that reflect	the	impact	of	different	global	economic	environments	beyond	the	base	year	on	the	reporting	unit.	We	discount	the	projected	cash	flows using	rates	specific	to	the	reporting	unit	based	on	its	weighted-average	cost	of	capital.	If	the	fair	value	of	the	reporting	unit	exceeds	its	carrying value,	no	further	analysis	or	write-down	of	goodwill	is	required.	If	the	fair	value	of	the	reporting	unit	is	less	than	the	carrying	value	of	its	net assets,	 the	 implied	 fair	 value	 of	 the	 reporting	 unit	 is	 allocated	 to	 all	 its	 underlying	 assets	 and	 liabilities,	 including	 both	 recognized	 and unrecognized	tangible	and	intangible	assets,	based	on	their	fair	value.	If	necessary,	goodwill	is	then	written	down	to	its	implied	fair	value.

The	impairment	review	for	indefinite-life	intangible	assets	consists	of	a	comparison	of	the	fair	value	of	the	asset	with	its	carrying	amount. We	estimate	the	fair	value	of	these	assets	using	a	discounted	cash	flow	model	and	various	valuation	methods	depending	on	the	nature	of	the intangible	 asset,	 such	 as	 the	 relief-from-royalty	 method	 for	 trademarks	 and	 tradenames.	 If	 the	 carrying	 amount	 exceeds	 its	 fair	 value,	 an impairment	loss	is	recognized	in	an	amount	equal	to	that	excess.	If	the	fair	value	exceeds	its	carrying	amount,	the	indefinite-life	intangible	asset	is not	considered	impaired.	As	of	December	31,	2016,	the	carrying	amount	of	indefinite-life	intangible	assets	was	not	material.	Other	intangible assets	assigned	finite	useful	lives	are	amortized	on	a	straight-line	basis	over	their	estimated	useful	lives.

We	review	our	ships,	aircraft	and	other	long-lived	assets	for	impairment	whenever	events	or	changes	in	circumstances	indicate,	based	on estimated	undiscounted	future	cash	flows,	that	the	carrying	amount	of	these	assets	may	not	be	fully	recoverable.	We	evaluate	asset	impairment	at the	lowest	level	for	which	identifiable	cash	flows	are	largely	independent	of	the	cash	flows	of	other	assets	and	liabilities.	The	lowest	level	for which	we	maintain	identifiable	cash	flows	that	are	independent	of	the	cash	flows	of	other	assets	and	liabilities	is	at	the	ship	level	for	our	ships	and at	the	aggregated	asset	group	level	for	our	aircraft.	If	estimated	future	cash	flows	are	less	than	the	carrying	value	of	an	asset,	an	impairment charge	is	recognized	to	the	extent	its	carrying	value	exceeds	fair	value.

We	estimate	fair	value	based	on	quoted	market	prices	in	active	markets,	if	available.	If	active	markets	are	not	available	we	base	fair	value	on independent	appraisals,	sales	price	negotiations	and	projected	future	cash	flows	discounted	at	a	rate	estimated	by	management	to	be	commensurate with	 the	 business	 risk.	 Quoted	 market	 prices	 are	 often	 not	 available	 for	 individual	 reporting	 units	 and	 for	 indefinite-life	 intangible	 assets. Accordingly,	we	estimate	the	fair	value	of	a	reporting	unit	and	an	indefinite-life	intangible	asset	using	an	expected	present	value	technique.

During	the	fourth	quarter	of	2016,	we	performed	a	qualitative	assessment	of	the	Royal	Caribbean	International	reporting	unit.	Based	on	our qualitative	assessment,	we	concluded	that	it	was	more-likely-than-not	that	the	estimated	fair	value	of	the	Royal	Caribbean	International	reporting unit	exceeded	its	carrying	value	and	thus,	we	did	not	proceed	 to	 the	 two-step	goodwill	 impairment	 test.	No	 indicators	of	 impairment	exist primarily	because	the	reporting	unit's	fair	value	has	consistently	exceeded	its	carrying	value	by	a	significant	margin,	its	financial	performance	has been	solid	in	the	face	of	mixed	economic	environments	and	forecasts	of	operating	results	generated	by	the	reporting	unit	appear	sufficient	to support	its	carrying	value.	As	of	December	31,	2016,	the	carrying	amount	of	goodwill	attributable	to	our	Royal	Caribbean	reporting	unit	was $286.8	million.

# 2015	Impairment	of	Pullmantur	Related	Assets

During	the	third	quarter	of	2015,	we	performed	an	interim	impairment	evaluation	of	Pullmantur's	goodwill	and	trademarks	and	trade	names in	connection	with	the	preparation	of	our	financial	statements.	As	a	result	of	this	analysis,	we	determined	that	the	carrying	value	of	the	Pullmantur reporting	unit	exceeded	its	fair	value.	Similarly,	we	determined	that	the	carrying	value	of	Pullmantur's	trademarks	and	trade	names	exceeded	their fair	value.	Accordingly,	upon	the	completion	of	the	relevant	impairment	tests	discussed	above,	we	recognized	impairment	charges	of	$123.8 million	and	$174.3	million	for	goodwill	and	 trademark	and	 trade	names,	respectively,	during	 the	quarter	ended	September	30,	2015.	These charges	reflected	the	full	carrying	amounts	of	the	goodwill	and	trademark	and	trade	names	leaving	Pullmantur	with	no	intangible	assets	on	its books.

# Derivative	Instruments

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	use	non-derivative	financial	instruments	designated	as	hedges	of	our	net	investment	in	our	foreign	operations	and investments.	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	 account	 for	 derivative	 financial	 instruments	 in accordance	with	authoritative	guidance.	Refer	to	Note	2.	Summary	of	Significant	Accounting	Policies	and	Note	14.	Fair	Value	Measurements	and Derivative	Instruments	to	our	consolidated	financial	statements	under	Item	8.	Financial	Statements	and	Supplementary	Data	for	more	information on	related	authoritative	guidance,	the	Company's	hedging	programs	and	derivative	financial	instruments.

We	enter	into	foreign	currency	forward	contracts	and	collars,	interest	rate,	cross-currency	and	fuel	swaps	and	options	with	third-party institutions	in	over-the-counter	markets.	We	estimate	the	fair	value	of	our	foreign	currency	forward	contracts	and	interest	rate	and	cross-currency swaps	using	expected	future	cash	flows	based	on	the	instruments'	contract	terms	and	published	forward	prices	for	foreign	currency	exchange	and interest	rates.	We	apply	present	value	techniques	and	LIBOR	or	EURIBOR-based	discount	rates	to	convert	the	expected	future	cash	flows	to	the current	fair	value	of	the	instruments.

We	estimate	the	fair	value	of	our	foreign	currency	collars	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	prices,	foreign	exchange	volatility levels	and	discount	rates.

We	estimate	the	fair	value	of	our	fuel	swaps	using	expected	future	cash	flows	based	on	the	swaps'	contract	terms	and	forward	prices.	We derive	forward	prices	from	forward	fuel	curves	based	on	pricing	inputs	provided	by	third-party	institutions	that	transact	in	the	fuel	indices	we hedge.	We	validate	these	pricing	inputs	against	actual	market	transactions	and	published	price	quotes	for	similar	assets.	We	apply	present	value techniques	and	LIBOR-based	discount	rates	to	convert	the	expected	future	cash	flows	to	the	current	fair	value	of	the	instruments.	We	also corroborate	our	fair	value	estimates	using	valuations	provided	by	our	counterparties.

We	adjust	the	valuation	of	our	derivative	financial	instruments	to	incorporate	credit	risk.

We	believe	it	is	unlikely	that	materially	different	estimates	for	the	fair	value	of	our	foreign	currency	forward	contracts	and	interest	rate, cross-currency	and	fuel	swaps	and	options	would	be	derived	from	other	appropriate	valuation	models	using	similar	assumptions,	 inputs	or conditions	suggested	by	actual	historical	experience.

# Contingencies—Litigation

On	an	ongoing	basis,	we	assess	the	potential	liabilities	related	to	any	lawsuits	or	claims	brought	against	us.	While	it	is	typically	very	difficult to	determine	the	timing	and	ultimate	outcome	of	such	actions,	we	use	our	best	judgment	to	determine	if	it	is	probable	that	we	will	incur	an expense	related	to	the	settlement	or	final	adjudication	of	such	matters	and	whether	a	reasonable	estimation	of	such	probable	loss,	if	any,	can	be made.	In	assessing	probable	losses,	we	take	into	consideration	estimates	of	the	amount	of	insurance	recoveries,	if	any,	which	are	recorded	as assets	when	recoverability	is	probable.	We	accrue	a	liability	when	we	believe	a	loss	is	probable	and	the	amount	of	loss	can	be	reasonably estimated.	Due	to	the	inherent	uncertainties	related	to	the	eventual	outcome	of	litigation	and	potential	insurance	recoveries,	it	is	possible	that certain	matters	may	be	resolved	for	amounts	materially	different	from	any	provisions	or	disclosures	that	we	have	previously	made.

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	focused	on	deployment	to	the	Caribbean,	Asia	and	Australia	during	that	period.

# 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

•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	 and	 pre-	 and	 post-cruise	 tours. Additionally,	revenue	related	to	Pullmantur's	travel	agency	network,	land-based	tours	and	air	charter	business	to	third	parties	are included	in	Onboard	and	other	revenues	through	March	31,	2014,	the	date	of	the	sale	of	Pullmantur's	non-core	businesses.	Onboard and	other	revenues	also	includes	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,	as	well	as	revenues	received	for	our bareboat	charters	to	and	procurement	and	management	related	services	we	perform	on	behalf	of	our	unconsolidated	affiliates.

# 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	and	costs	incurred	for	the	procurement	and	management	related	services	we	perform	on	behalf	of	our	unconsolidated affiliates;

•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,	storage	and	emission	consumable	costs	and	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	 related	 insurance,	 entertainment	 and	 gains	 and/or	 losses	 related	 to	 the	 sale	 of	 our	 ships,	 if	 any. Additionally,	costs	associated	with	Pullmantur's	travel	agency	network,	land-based	tours	and	air	charter	business	to	third	parties	are included	in	Other	operating	expenses	through	March	31,	2014,	the	date	of	the	sale	of	Pullmantur's	non-core	businesses.

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.

Adjusted	Earnings	per	Share	("Adjusted	EPS")	represents	Adjusted	Net	Income	divided	by	weighted	average	shares	outstanding	or	by diluted	 weighted	 average	 shares	 outstanding,	 as	 applicable.	We	 believe	 that	 this	 non-GAAP	 measure	 is	 meaningful	 when	 assessing	 our performance	on	a	comparative	basis.

Adjusted	 Net Income represents	 net	 income	 excluding	 certain	 items	 that	 we	 believe	 adjusting	 for	 is	 meaningful	 when	 assessing	 our performance	on	a	comparative	basis.	For	the	periods	presented,	these	items	included	the	impairment	of	the	Pullmantur	related	assets,	the	net	loss related	to	the	elimination	of	the	Pullmantur	reporting	lag,	the	net	gain	related	to	the	sale	of	the	Pullmantur	and	CDF	brands	and	related	costs, restructuring	charges	and	other	initiative	costs	related	to	our	Pullmantur	right-sizing	strategy	and	other	restructuring	initiatives,	the	estimated impact	of	the	divested	Pullmantur	non-core	businesses	for	periods	prior	to	the	sales	transaction,	the	loss	recognized	on	the	sale	of	Celebrity Century,	the	impact	of	the	change	in	our	voyage	proration	methodology	and	the	reversal	of	a	deferred	tax	asset	valuation	allowance	due	to	Spanish tax	reform.	The	estimated	impact	of	the	divested	Pullmantur	non-core	businesses	was	arrived	at	by	adjusting	the	net	income	(loss)	of	these businesses	for	the	ownership	percentage	we	retained,	as	well	as,	for	intercompany	transactions	that	are	no	longer	eliminated	in	our	consolidated statements	of	comprehensive	income	(loss)	subsequent	to	the	sales	transaction.	For	the	full	year	2014,	the	impact	of	the	voyage	proration	change represents	net	income	that	would	have	been	recognized	in	2013	had	we	recognized	revenues	and	cruise	operating	expenses	on	a	pro-rata	basis	for all	voyages.

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.

Double-Double	Program	refers	to	the	multi-year	Adjusted	EPS	and	Return	on	Invested	Capital	("ROIC")	goals	we	publicly	announced	in 2014	and	are	seeking	to	achieve	by	the	end	of	2017.	We	designed	this	program	to	help	us	better	execute	and	achieve	our	business	goals	by	clearly articulating	longer-term	financial	objectives.	Under	the	Double-Double	Program,	we	are	targeting	Adjusted	EPS	of	$6.78	by	the	end	of	2017, which	is	double	our	2014	Adjusted	EPS	of	$3.39.	We	are	also	targeting	ROIC	of	10%	by	the	end	of	2017	as	compared	to	ROIC	of	5.9%	in	2014.

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.	For	the	periods	prior	to	the	sale	of	the	Pullmantur	non-core	businesses,	Net	Cruise Costs	excludes	the	estimated	impact	of	these	divested	businesses.	Net	Cruise	Costs	also	excludes	the	net	gain	related	to	the	sale	of	the	Pullmantur and	CDF	brands	and	related	costs	and	initiative	costs	related	to	our	Pullmantur	right-sizing	strategy	and	other	restructuring	initiatives,	as	well	as the	loss	recognized	on	the	sale	of	Celebrity	Century.

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).	For	the	periods	prior	to	the	sale	of	the	Pullmantur	non-core	businesses,	we have	presented	Net	Revenues	excluding	the	estimated	impact	of	these	divested	businesses	in	the	financial	tables	under	Results	of	Operations.

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.	For	the	periods	prior	to	the	sale	of the	Pullmantur	non-core	businesses,	Net	Yields	excludes	the	estimated	impact	of	these	divested	businesses.	Net	Yields	also	excludes	initiative costs	related	to	the	sale	of	the	Pullmantur	and	CDF	brands.

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.

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	are	just	one	of	many	elements	impacting	our	revenues	and	expenses,	they	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.	Changes	in	guest sourcing	and	shifting	the	amount	of	purchases	between	currencies	can	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,	allows	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.

# Executive	Overview

The	year	2016	marked	 the	penultimate	year	of	our	Double-Double	program	("Double-Double"),	which	we	 implemented	 in	2014	 to challenge	our	employees	towards	a	true	step	change	in	performance.	As	part	of	this	effort,	we	set	two	multi-year	financial	targets,	including doubling	our	2014	Adjusted	Earnings	Per	Share	("Adjusted	EPS")	and	achieving	double-digit	Return	on	Invested	Capital	("ROIC")	by	the	end	of 2017.	By	communicating	these	goals	to	our	employees,	we	have	been	able	to	better	align	and	influence	internal	decision	making	and	energize	and focus	our	personnel	 towards	reaching	 these	 targets.	Our	 long-term	commitment	 to	grow	revenue	yields,	manage	costs	and	maintain	steady capacity	growth	continues	to	guide	us	towards	Double-Double.	While	our	Double-Double	goals	are	demanding,	they	are	consistent	with	and reflect	the	trajectory	of	our	business	over	the	last	several	years	in	which	we	have	experienced	annual	Adjusted	EPS	growth	of	approximately	39%, 42%	and	26%	and	annual	ROIC	growth	of	approximately	16%,	29%	and	17%	in	each	of		2014,	2015	and	2016,	respectively.

Additionally,	Net	Yields	on	a	Constant-Currency	basis	increased	for	the	seventh	consecutive	year.	For	the	year	ended	December	31, 2016,	our	Net	Yields	on	a	Constant-Currency	basis	increased	by	3.9%,	primarily	driven	by	increases	in	both	ticket	and	onboard	yields	and	by	a benefit	from	the	deconsolidation	of	the	Pullmantur	brand	from	the	rest	of	the	company	in	August.	The	success	of	North	American	based	sailings such	as	the	Caribbean,	Alaska,	and	Bermuda	were	largely	responsible	for	our	organic	revenue	growth.	Higher	yields	were	also	generated	by	the introductions	of	two	new	ships	in	2016	-	Ovation	of	the	Seas	in	April	and	Harmony	of	the	Seas	in	May.	Partly	offsetting	these	successes	was	softer than	anticipated	demand	from	the	China	market	and	the	continued	geopolitical	turmoil	in	Europe,	resulting	in	a	shift	of	sourcing	from	North American	guests	to	European	guests,	particularly	for	Mediterranean	sailings.

Net	onboard	revenue	yield	in	2016	grew	by	7.8%	year-over-year	on	a	Constant	Currency	basis,	despite	the	increasing	value	of	the	dollar relative	to	our	basket	of	foreign	currencies	which	created	an	unfavorable	impact	on	our	earnings	and	limited	the	spending	power	of	our	foreign guests.	Growth	came	from	a	variety	of	areas,	most	notably	from	beverage	package	sales	and	our	high	speed	onboard	internet	products.	We	expect to	continue	this	upward	onboard	yield	growth	trend	in	2017	and	expect	them	to	grow	by	slightly	more	than	the	average	net	revenue	yield	growth for	the	year.

We	remain	dedicated	to	finding	efficiencies,	identifying	synergies	and	reducing	costs,	while	at	the	same	time,	focusing	on	strategic investments	in	areas	that	will	boost	revenue.	In	2016,	our	Net	Cruise	Costs	excluding	fuel	increased	by	0.9%	on	a	Constant	Currency	basis compared	to	2015.	Going	into	2017,	we	expect	Net	Cruise	Costs	excluding	fuel	on	a	Constant	Currency	basis	to	be	flat	as	we	remain	intensely focused	on	cost	controls,	and	further	realize	economies	of	scale.

The	Company	remains	focused	on	improving	returns	for	our	shareholders.	In	2016,	we	bought	back	$300	million	shares	of	common	stock completing	our	$500	million	share	repurchase	program	that	was	announced	in	October	2015.	Additionally,	in	September	2016,	we	announced	a 28%	increase	to	our	common	stock	dividend.

For	the	year	2017,	our	capacity	in	the	Caribbean	will	increase	year-over-year	as	 Harmony	of	the	Seas	and	Celebrity	Equinox	will	remain in	the	Caribbean	year-round	rather	than	spending	the	summer	in	Europe.	While	Harmony	of	the	Seas	will	be	replaced	by	Freedom	of	the	Seas	in Europe,	we	will	not	be	replacing	Celebrity	Equinox	in	the	Eastern	Mediterranean.	The	combination	of	these	deployment	changes	result	in	a reduction	in	capacity	in	Europe.	Our	capacity	in	the	Asia	Pacific	region	is	expected	to	grow	5%	year-over-year	primarily	due	to	the	first	full	year of	deployment	for	Ovation	of	the	Seas.	Industry-wide	capacity	in	the	region	is	expected	to	grow	17%,	slowing	from	the	34%	growth	increase	the region	experienced	in	2016.

In	May	2016,	we	announced	the	order	of	our	fifth	Oasis-class	ship	for	delivery	in	the	spring	of	2021,	and	two	additional	Edge-class	ships scheduled	for	delivery	in	the	fall	of	each	of	2021	and	2022.	In	addition	to	investing	in	new	hardware,	we	opportunistically	evaluate	selling	or transferring	older	ships	to	further	optimize	our	fleet.	Since	2014,	we	have	sold	or	are	about	to	sell	four	ships	that	are	expected	to	improve	our ROIC	-	 the	sale	of	Celebrity	Century	to	a	subsidiary	of	Skysea	Holdings,	the	sale	of	Ocean	Dream	to	an	unrelated	third	party,	the	sale	of Splendour	of	the	Seas	to	TUI	Cruises,	and	most	recently,	the	pending	sale	of	Legend	of	the	Seas	to	Thomson	Cruises.

# Results	of	Operations

In	addition	to	the	items	discussed	above	under	"Executive	Overview,"	significant	items	for	2016	include:

•Both	our	net	income	and	Adjusted	Net	Income	for	the	year	ended	 December	31,	2016	was	$1.3	billion,	or	$5.93	and	$6.08	per	share on	a	diluted	basis,	respectively,	as	compared	to	net	income	and	Adjusted	Net	Income	of	$665.8	million	and	$1.1	billion,	or	$3.02	and $4.83	per	share	on	a	diluted	basis,	respectively,	for	the	year	ended	December	31,	2015.

•The	effect	of	changes	in	foreign	currency	exchange	rates	related	to	our	passenger	ticket	and	onboard	and	other	revenue	transactions and	cruise	operating	expenses	denominated	in	currencies	other	than	the	United	States	dollar	resulted	in	a	decrease	to	total	revenues	of $187.9	million	 for	 the	 year	 ended	December	31,	2016	compared	 to	 the	same	period	 in	2015	and	a	decrease	 to	cruise	operating expenses	of	$40.9	million	for	the	year	ended	December	31,	2016	compared	to	the	same	period	in	2015.

•Total	revenues,	excluding	the	unfavorable	effect	of	changes	in	foreign	currency	exchange	rates,	increased	by	 $385.2	million	for	the year	ended	December	31,	2016	compared	to	the	same	period	in	2015	primarily	due	to	an	increase	in	overall	capacity	and	ticket	prices, which	are	further	discussed	below.

•Total	Cruise	operating	expenses,	excluding	the	favorable	effect	of	changes	in	foreign	currency	exchange	rates,	decreased	by $41.9 million	for	the	year	ended	December	31,	2016	compared	to	the	same	period	in	2015,	primarily	due	to	a	decrease	in	fuel	expense, excluding	the	impact	of	the	increase	in	capacity,	which	is	further	discussed	below.

•Effective	January	1,	2016,	we	eliminated	Pullmantur	Holdings',	the	parent	company	of	the	Pullmantur	and	CDF	brands,	two-month reporting	lag	to	be	consistent	with	the	fiscal	calendar	of	the	Company.	As	a	result	of	this	change,	the	results	of	Pullmantur	Holdings for	November	and	December	2015	are	included	in	our	statement	of	comprehensive	income	(loss)	for	the	year	ended	December	31, 2016.	The	effect	of	this	change	was	a	decrease	to	net	income	of	$21.7	million	and	this	amount	is	reported	within	Other	income	in	our consolidated	statements	of	comprehensive	income	(loss)	for	the	year	ended	December	31,	2016.	Refer	to	Note	1.	General	to	our consolidated	 financial	 statements	 under Item	 8.	Financial	 Statements	 and	 Supplementary	 Data	for further	 information	 on	 the elimination	of	the	Pullmantur	reporting	lag.

•In	July	2016,	we	sold	51%	of	our	interest	in	Pullmantur	Holdings.	We	retain	a	49%	interest	in	Pullmantur	Holdings	as	well	as	full ownership	of	the	four	vessels	currently	operated	by	the	Pullmantur	brand	under	bareboat	charter	arrangements.	As	a	result	of	the	sale of	a	majority	interest	in	Pullmantur	Holdings,	we	recognized	an	immaterial	gain	and	no	longer	consolidate	these	businesses	in	our consolidated	financial	statements	effective	August	2016.	Refer	to	Note	1.	General	to	our	consolidated	financial	statements	under	Item 8.	Financial	Statements	and	Supplementary	Data	for	further	information.

# Other	items	for	2016	include:

•In	April	2016,	we	took	delivery	of	Ovation	of	the	Seas.	To	finance	the	purchase,	we	borrowed	$841.8	million	under	a	previously committed	12-year	unsecured	term	loan,	which	is	95%	guaranteed	by	Hermes.	Refer	to	Note	7.	Long-Term	Debt	to	our	consolidated financial	statements	under	Item	8.	Financial	Statements	and	Supplementary	Data	for	further	information.

•In	May	2016,	we	took	delivery	of	Harmony	of	the	Seas.	To	finance	the	purchase,	we	borrowed	€700.7	million,	or	$739.2	million based	on	the	exchange	rate	at	December	31,	2016,	and	$226.1	million	under	previously	committed	unsecured	term	loans.	Both	of	the facilities	are	100%	guaranteed	by	COFACE.	Refer	to	Note	7.	Long-Term	Debt	to	our	consolidated	financial	statements	under	Item	8. Financial	Statements	and	Supplementary	Data	for	further	information.

•In	May	2016,	TUI	Cruises,	our	50%	joint	venture,	took	delivery	of	Mein	Schiff	5.

•In	June	2016,	we	entered	into	an	agreement	to	sell	Legend	of	the	Seas	to	Thomson	Cruises.	The	sale	is	scheduled	to	be	completed	in March	2017	in	order	to	retain	the	future	revenues	to	be	generated	for	sailings	through	that	date.	We	expect	to	recognize	a	gain	on	the sale,	which	we	do	not	expect	will	have	a	material	effect	to	our	annual	consolidated	financial	statements.

•During	2016,	we	entered	into	agreements	with	STX	France	to	build	a	fifth	Oasis-class	ship	for	Royal	Caribbean	International	and	a third	and	fourth	"Project	Edge"	ship	for	Celebrity	Cruises.	Additionally	in	2016,	we	signed	a	memorandum	of	understanding	with Meyer	Turku	to	build	two	ships	of	a	new	generation	of	ships	for	Royal	Caribbean	International,	known	as	"Project	Icon."	Refer	to Note 15.	Commitments	 and	 Contingencies to	 our	 consolidated	 financial	 statements	 under	 Item 8.	Financial Statements and Supplementary	Data	for	further	information.

We	reported	net	income,	Adjusted	Net	Income,	earnings	per	share	and	Adjusted	Earnings	per	Share	as	shown	in	the	following	table	(in thousands,	except	per	share	data):

|  |  | Year	Ended	December	31, |  |
| :--- | :--- | :--- | :--- |
|  | 2016 | 2015 | 2014 |
| Net\tincome | $1,283,388 | $665,783 | $764,146 |
| Adjusted\tNet\tIncome | 1,314,689 | 1,065,066 | 755,729 |
| Net\tAdjustments\tto\tNet\tIncome\t-\tIncrease\t(Decrease) | $31,301 | $399,283 | $(8,417) |
| Adjustments\tto\tNet\tIncome: |  |  |  |
| Impairment\tof\tPullmantur\trelated\tassets\t(1) | $— | $399,283 | $— |
| Net\tloss\trelated\tto\tthe\telimination\tof\tthe\tPullmantur\treporting\tlag | 21,656 | — | — |
| Net\tgain\trelated\tto\tthe\tsale\tof\tthe\tPullmantur\tand\tCDF\tCroisières\tde\tFrance\tbrands | (3,834) | — | — |
| Restructuring\tcharges | 8,452 | — | 4,318 |
| Other\tinitiative\tcosts | 5,027 | — | 21,211 |
| Estimated\timpact\tof\tdivested\tbusinesses\tprior\tto\tsales\ttransaction | — | — | 11,013 |
| Loss\ton\tsale\tof\tship\tincluded\twithin\tother\toperating\texpenses | — | — | 17,401 |
| Impact\tof\tvoyage\tproration\tchange\t(2) | — | — | (28,877) |
| Reversal\tof\ta\tdeferred\ttax\tvaluation\tallowance | — | — | (33,483) |
| Net\tAdjustments\tto\tNet\tIncome\t-\tIncrease\t(Decrease) | $31,301 | $399,283 | $(8,417) |
| Basic: |  |  |  |
| \t\t\tEarnings\tper\tShare | $5.96 | $3.03 | $3.45 |
| \t\t\tAdjusted\tEarnings\tper\tShare | $6.10 | $4.85 | $3.41 |
| Diluted:\n\t\t\tEarnings\tper\tShare | $5.93 | $3.02 | $3.43 |
| \t\t\tAdjusted\tEarnings\tper\tShare | $6.08 | $4.83 | $3.39 |
| Weighted-Average\tShares\tOutstanding: |  |  |  |
| Basic | 215,393 | 219,537 | 221,658 |
| Diluted | 216,316 | 220,689 | 223,044 |

(1)	Includes	a	net	deferred	income	tax	benefit	of	$12.0	million	related	to	the	Pullmantur	impairment.

(2)	Represents	the	net	income	amount	that	would	have	been	recognized	in	2013	had	we	recognized	revenues	and	cruise	operating	expenses	on	a	pro-rata	basis	for	all	voyages.

# The	following	table	presents	operating	results	as	a	percentage	of	total	revenues	for	the	last	three	years:

|  |  | Year	Ended	December	31, |  |
| :--- | :--- | :--- | :--- |
|  | 2016 | 2015 | 2014 |
| Passenger\tticket\trevenues | 72.4\t% | 73.0\t% | 73.0\t% |
| Onboard\tand\tother\trevenues | 27.6\t% | 27.0\t% | 27.0\t% |
| Total\trevenues | 100.0\t% | 100.0\t% | 100.0\t% |
| Cruise\toperating\texpenses: |  |  |  |
| Commissions,\ttransportation\tand\tother | 15.9\t% | 16.9\t% | 17.0\t% |
| Onboard\tand\tother | 5.8\t% | 6.7\t% | 7.2\t% |
| Payroll\tand\trelated | 10.4\t% | 10.4\t% | 10.5\t% |
| Food | 5.7\t% | 5.8\t% | 5.9\t% |
| Fuel | 8.4\t% | 9.6\t% | 11.7\t% |
| Other\toperating | 12.8\t% | 12.1\t% | 13.3\t% |
| Total\tcruise\toperating\texpenses | 59.0\t% | 61.4\t% | 65.7\t% |
| Marketing,\tselling\tand\tadministrative\texpenses | 13.0\t% | 13.1\t% | 13.0\t% |
| Depreciation\tand\tamortization\texpenses | 10.5\t% | 10.0\t% | 9.6\t% |
| Impairment\tof\tPullmantur\trelated\tassets | —\t% | 5.0\t% | —\t% |
| Restructuring\tand\trelated\timpairment\tcharges | 0.1\t% | —\t% | 0.1\t% |
| Operating\tincome | 17.4\t% | 10.5\t% | 11.7\t% |
| Other\texpense | (2.3)% | (2.5)% | (2.2)% |
| Net\tincome | 15.1\t% | 8.0\t% | 9.5\t% |

Selected	statistical	information	is	shown	in	the	following	table:

|  | 2016	(1) | 2015 | 2014 |
| :--- | :--- | :--- | :--- |
| Passengers\tCarried | 5,754,747 | 5,401,899 | 5,149,952 |
| Passenger\tCruise\tDays | 40,250,557 | 38,523,060 | 36,710,966 |
| APCD | 37,844,644 | 36,646,639 | 34,773,915 |
| Occupancy | 106.4% | 105.1% | 105.6% |

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

|  | 2016 | basis | 2015 | 2014 |
| :--- | :--- | :--- | :--- | :--- |
| Passenger\tticket\trevenues | $6,149,323 | $6,320,827 | $6,058,821 | $5,893,847 |
| Onboard\tand\tother\trevenues | 2,347,078 | 2,363,497 | 2,240,253 | 2,180,008 |
| Total\trevenues | 8,496,401 | 8,684,324 | 8,299,074 | 8,073,855 |
| Less: |  |  |  |  |
| Commissions,\ttransportation\tand\tother | 1,349,677 | 1,382,295 | 1,400,778 | 1,372,785 |
| Onboard\tand\tother | 493,558 | 495,101 | 553,104 | 582,750 |
| Net\trevenues\tincluding\tother\tinitiative\tcosts\tand\tdivested\tbusinesses | 6,653,166 | 6,806,928 | 6,345,192 | 6,118,320 |
| Less: |  |  |  |  |
| Other\tinitiative\tcosts\tincluded\twithin\tNet\tRevenues | (2,230) | (2,129) | — | — |
| Net\trevenues\trelated\tto\tdivested\tbusinesses\tprior\tto\tsales\ttransaction | — | — |  | 35,656 |
| Net\tRevenues | $6,655,396 | $6,809,057 | $6,345,192 | $6,082,664 |
| APCD | 37,844,644 | 37,844,644 | 36,646,639 | 34,773,915 |
| Gross\tYields | $224.51 | $229.47 | $226.46 | $232.18 |
| Net\tYields | $175.86 | $179.92 | $173.15 | $174.92 |

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

# Year	Ended	December	31,

|  | 2016 | basis | 2015 | 2014 |
| :--- | :--- | :--- | :--- | :--- |
| Total\tcruise\toperating\texpenses | $5,015,539 | $5,056,533 | $5,099,393 | $5,306,281 |
| Marketing,\tselling\tand\tadministrative\texpenses | 1,100,290 | 1,114,855 | 1,086,504 | 1,048,952 |
| Gross\tCruise\tCosts | 6,115,829 | 6,171,388 | 6,185,897 | 6,355,233 |
| Less: |  |  |  |  |
| Commissions,\ttransportation\tand\tother | 1,349,677 | 1,382,295 | 1,400,778 | 1,372,785 |
| Onboard\tand\tother | 493,558 | 495,101 | 553,104 | 582,750 |
| Net\tCruise\tCosts\tincluding\tdivested\tbusinesses\tand\tother\tinitiative\tcosts | 4,272,594 | 4,293,992 | 4,232,015 | 4,399,698 |
| Less: |  |  |  |  |
| Net\tgain\trelated\tto\tthe\tsale\tof\tPullmantur\tand\tCDF\tCroisières\tde\tFrance\tbrands\nincluded\twithin\tother\toperating\texpenses | (3,834) | (3,834) | — | — |
| Net\tCruise\tCosts\trelated\tto\tdivested\tbusinesses\tprior\tto\tsales\ttransaction | — | — | — | 47,854 |
| Other\tinitiative\tcosts\tincluded\twithin\tcruise\toperating\texpenses\tand\tmarketing,\nselling\tand\tadministrative\texpenses | 2,433 | 2,525 | — | 18,972 |
| Loss\ton\tsale\tof\tship\tincluded\twithin\tother\toperating\texpenses | — | — | — | 17,401 |
| Net\tCruise\tCosts | 4,273,995 | 4,295,301 | 4,232,015 | 4,315,471 |
| Less: |  |  |  |  |
| Fuel\t(1) | 713,252 | 714,257 | 795,801 | 947,391 |
| Net\tCruise\tCosts\tExcluding\tFuel | $3,560,743 | $3,581,044 | $3,436,214 | $3,368,080 |
| APCD | 37,844,644 | 37,844,644 | 36,646,639 | 34,773,915 |
| Gross\tCruise\tCosts\tper\tAPCD | $161.60 | $163.07 | $168.80 | $182.76 |
| Net\tCruise\tCosts\tper\tAPCD | $112.94 | $113.50 | $115.48 | $124.10 |
| Net\tCruise\tCost\tExcluding\tFuel\tper\tAPCD | $94.09 | $94.62 | $93.77 | $96.86 |

(1)	For	the	year	ended	December	31,	2016,	amount	does	not	include	fuel	expense	of	$0.4	million	included	within	other	initiative	costs	associated	with	the	redeployment	of Pullmantur's	Empress	to	the	Royal	Caribbean	International	brand.

# Outlook

The	company	does	not	make	predictions	about	fuel	pricing,	interest	rates	or	currency	exchange	rates	but	does	provide	guidance	about	its future	business	activities.	On	January	26,	2017,	we	announced	the	following	initial	full	year	and	first	quarter	2017	guidance	based	on	the	then current	fuel	pricing,	interest	rates	and	currency	exchange	rates:

|  | As	Reported | Constant	Currency |
| :--- | :--- | :--- |
| Net\tYields | 3.3%\tto\t5.3% | 4.0%\tto\t6.0% |
| Net\tCruise\tCosts\tper\tAPCD | Better\tthan\tflat | Flat |
| Net\tCruise\tCosts\tper\tAPCD,\texcluding\tFuel | Flat\tto\t(1%) | Flat |
| Capacity\tIncrease | (1.7%) |  |
| Depreciation\tand\tAmortization | $935\tto\t$945\tmillion |  |
| Interest\tExpense,\tnet | $280\tto\t$290\tmillion |  |
| Fuel\tConsumption\t(metric\ttons) | 1,332,000 |  |
| Fuel\tExpenses | $704\tmillion |  |
| Percent\tHedged\t(fwd\tconsumption) | 60% |  |
| Impact\tof\t10%\tchange\tin\tfuel\tprices | $30\tmillion |  |
| 1%\tChange\tin\tCurrency | $17\tmillion |  |
| 1%\tChange\tin\tNet\tYield | $68\tmillion |  |
| 1%\tChange\tin\tNCC\tx\tFuel | $35\tmillion |  |
| 1%\tChange\tin\tLIBOR | $43\tmillion |  |

# First	Quarter	2017

|  | As	Reported | Constant	Currency |
| :--- | :--- | :--- |
| Net\tYields | Approx.\t5.0% | 4.5%\tto\t5.0% |
| Net\tCruise\tCosts\tper\tAPCD | Approx.\t(4.0%) | (3.5%)\tto\t(4.0%) |
| Net\tCruise\tCosts\tper\tAPCD,\texcluding\tFuel | Approx.\t(5.0%) | Approx.\t(4.5%) |
| Capacity\tIncrease | 1.0% |  |
| Depreciation\tand\tAmortization | $230\tmillion\tto\t$240\tmillion |  |
| Interest\tExpense,\tnet | $70\tto\t$80\tmillion |  |
| Fuel\tConsumption\t(metric\ttons) | 336,000 |  |
| Fuel\tExpenses | $178\tmillion |  |
| Percent\tHedged\t(fwd\tconsumption) | 59% |  |
| Impact\tof\t10%\tchange\tin\tfuel\tprices | $7\tmillion |  |
| 1%\tChange\tin\tCurrency | $3\tmillion |  |
| 1%\tChange\tin\tNet\tYield | $16\tmillion |  |
| 1%\tChange\tin\tNCC\tx\tFuel | $9\tmillion |  |
| 1%\tChange\tin\tLIBOR | $9\tmillion |  |

Since	 our	 earnings	 release	 on	January	 26,	 2017,	 bookings	 have remained	 encouraging	 and	 consistent	 with	 our	 previous	 expectations. Accordingly,	our	forecast	has	remained	essentially	unchanged.

Volatility	in	foreign	currency	exchange	rates	affects	the	United	States	dollar	value	of	our	earnings.	Based	on	our	highest	net	exposure	for	each quarter	and	the	full	year	2017,	the	top	five	foreign	currencies	are	ranked	below.	For	example,	the	Australian	Dollar	is	the	most	impactful	currency in	the	first	and	fourth	quarters	of	2017.	Rankings	are	based	on	estimated	net	exposures.

In	this	section,	references	to	2016	refer	to	the	year	ended	December	31,	2016	and	references	to	2015	refer	to	the	year	ended	December	31,	2015.

Passenger	ticket	revenues	comprised	72.4%	of	our	2016	total	revenues.	Passenger	ticket	revenues	increased	by	$90.5	million,	or	1.5%.	The increase	was	primarily	due	to:

•a	3.3%	increase	in	capacity,	which	increased	 passenger	ticket	revenues	by	$198.1	million,	net	of	the	capacity	decrease	resulting	from	the sale	of	our	majority	interest	in	Pullmantur	Holdings;	and

•an	increase	of	$63.9	million	in	ticket	prices	primarily	driven	by	our	newest	ships 	as	well	as	higher	pricing	on	Alaska	and	Caribbean sailings.	The	increase	in	ticket	prices	was	partially	offset	by	lower	pricing	on	Mediterranean	and	Asia	sailings.

The	increase	in	passenger	ticket	revenues	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	$171.5	million.

The	remaining	27.6%	of	2016	total	revenues	was	comprised	of	Onboard	and	other	revenues,	which	increased	$106.8	million,	or	4.8%.	The increase	in	Onboard	and	other	revenues	was	primarily	due	to:

•a	$70.5	million	increase	attributable	to	the	3.3%	increase	in	capacity	noted	above;	and

•an	$89.9	million	increase	in	onboard	revenue	attributable	to	higher	spending	on	a	per	passenger	basis	primarily	due	to	our	ship	upgrade programs	 and	 other	 revenue	 enhancing	 initiatives,	 including	 various	 beverage	 and	 gaming	 initiatives,	 the	 promotion	 of	 specialty restaurants	and	the	increased	revenue	associated	with	internet	and	other	telecommunication	services	partially	offset	by	a	decrease	in	port activities	revenue	mainly	due	to	itinerary	changes.

The	increase	was	partially	offset	by:

•an	approximate	$16.4	million	unfavorable	effect	of	changes	in	foreign	currency	exchange	rates	related	to	our	onboard	and	other	revenue transactions	denominated	in	currencies	other	than	the	United	States	dollar;	and

•a	$37.2	million	decrease	in	other	revenues	primarily	related	to	our	travel	agency	business	that	was	sold	in	2015	partially	offset	by	an increase	in	revenue	received	for	our	bareboat	charter	and	ship	management	services	associated	with	our	unconsolidated	affiliates.	The decrease	in	revenues	from	our	travel	agency	business	sold	is	mostly	offset	by	the	related	decrease	in	travel	agency	expenses	discussed below.

Onboard	and	other	revenues	included	concession	revenues	of	$316.9	million	in	2016	and	$327.1	million	in	2015.

•a	$114.4	million	decrease	in	fuel	expense,	excluding	the	impact	of	the	increase	in	capacity.	Our	cost	of	fuel	(net	of	the	financial	impact	of fuel	swap	agreements)	for	2016	decreased	10.3%	per	metric	ton	compared	to	2015;

•an	 approximate	$40.9	million	favorable	effect	of	changes	in	foreign	currency	exchange	rates	related	to	our	cruise	operating	expenses denominated	in	currencies	other	than	the	United	States	dollar;

•a	$41.2	million	decrease	in	other	expenses	primarily	related	to	our	travel	agency	business	that	was	sold	in	2015,	which	mostly	offsets	the related	decrease	in	travel	agency	revenues	discussed	above;

•a	$25.0	million	decrease	in	air	expense	primarily	due	to	the	decrease	in	air	transportation	sales	and	lower	costs;	and

•a	$20.2	million	decrease	in	shore	excursion	expense	attributable	to	lower	contractual	costs	incurred	and	the	decrease	in	port	activities revenue	discussed	above.

The	decrease	was	partially	offset	by	a	$164.7	million	increase	attributable	to	the	3.3%	increase	in	capacity	noted	above.

# Marketing,	Selling	and	Administrative	Expenses

Marketing,	selling	and	administrative	expenses	for	2016	remained	consistent	compared	to	2015.

# Depreciation	and	Amortization	Expenses

Depreciation	and	amortization	expenses	 for	2016 increased	$67.9	million,	 or	8.2%,	 to	$894.9	million	 from	$827.0	million	 in	2015.	The increase	was	primarily	due	to	the	addition	of	Harmony	of	the	Seas	and	Ovation	of	the	Seas	in	the	second	quarter	of	2016	into	our	fleet	and	the addition	of	Anthem	of	the	Seas	in	the	second	quarter	of	2015	and,	to	a	lesser	extent,	new	shipboard	additions	associated	with	our	ship	upgrade projects.	The	increase	was	partially	offset	by	the	sale	of	Splendour	of	the	Seas	in	April	2016.

# Impairment	of	Pullmantur	Related	Assets

During	2015,	we	recognized	an	impairment	charge	of	$411.3	million	to	write	down	Pullmantur's	goodwill	to	its	implied	fair	value	and	to write	down	trademarks	and	trade	names	and	certain	long-lived	assets,	consisting	of	three	aircraft	owned	and	operated	by	Pullmantur	Air	and	two ships	owned	and	operated	by	Pullmantur,	to	their	fair	value.

# Restructuring	Charges

We	incurred	restructuring	charges	of	approximately	 $8.5	million	in	2016.	Refer	to	Note	16.	Restructuring	Charges	to	our	consolidated financial	statements	under	Item	8.	Financial	Statements	and	Supplementary	Data	for	further	information	on	our	restructuring	initiatives.

# Other	Income	(Expense)

Interest	expense,	net	of	interest	capitalized,	increased	$29.6	million,	or	10.7%,	to	$307.4	million	in	2016	from	$277.7	million	in	2015.	The increase	was	due	to	a	higher	average	debt	level	attributable	to	the	financing	of	Ovation	of	the	Seas	and	Harmony	of	the	Seas,	partially	offset	by lower	pricing	on	debt	refinanced	in	2015.

Equity	investment	income	increased	$47.3	million,	or	58.4%,	to	$128.4	million	in	2016	from	$81.0	million	in	2015	mainly	due	to	the	increase in	income	from	TUI	Cruises,	one	of	our	equity	method	investments.

Other	expense	in	2016	was	$35.7	million	compared	to	$24.4	million	in	2015.	The	increase	in	expense	of	$11.2	million	was	primarily	due	to	a net	loss	of	$21.7	million	related	to	the	elimination	of	the	Pullmantur	reporting	lag	in	2016.	The	increase	in	other	expense	was	partially	offset	by	a decrease	of	$9.6	million	in	foreign	exchange	losses	from	the	remeasurement	of	monetary	assets	and	liabilities	denominated	in	foreign	currency.

# Net	Yields

Net	Yields	increased	1.6%	 in	2016	 compared	 to	2015	primarily	due	to	the	increase	in	passenger	ticket	and	onboard	and	other	revenues discussed	above.	Net	Yields	increased	3.9%	in	2016	compared	to	2015	on	a	Constant	Currency	basis.

# Net	Cruise	Costs

Net	Cruise	Costs	increased	1.0%	in	2016	compared	to	2015	primarily	due	to	the	increase	in	capacity,	partially	offset	by	the	decrease	in	fuel, which	are	further	discussed	above.	Net	Cruise	Costs	per	APCD	decreased	2.2%	in	2016	compared	to	2015	primarily	due	to	the	decrease	in	fuel. Net	Cruise	Costs	per	APCD	on	a	Constant	Currency	basis	decreased	1.7%	in	2016	compared	to	2015.

# Net	Cruise	Costs	Excluding	Fuel

Net	Cruise	Costs	Excluding	Fuel	per	APCD	remained	consistent	in	 2016	compared	to	2015	and	increased	0.9%	in	2016	compared	to	2015	on a	Constant	Currency	basis.

# Other	Comprehensive	Income

Other	comprehensive	income	in	2016	was	$411.9	million	compared	to	a	loss	of	$431.4	million	in	2015.	The	change	of	$843.4	million	was primarily	due	to	the	Gain	on	cash	flow	derivative	hedges	in	2016	of	$411.2	million	compared	to	the	Loss	on	cash	flow	derivative	hedges	of	$406.0 million	in	2015.	The	gain	in	2016	resulted	mostly	from	the	reclassification	of	losses	to	earnings	during	2016	from	fuel	cash	flow	hedges.	In addition,	there	was	an	increase	in	the	fair	value	of	our	fuel	swaps	in	2016	as	a	result	of	higher	forward	fuel	prices.	The	loss	in	2015	was	primarily due	to	the	decrease	in	the	fair	value	of	our	fuel	swaps	and	of	our	foreign	currency	forward	contracts	as	a	result	of	decreases	in	fuel	prices	and forward	currency	rates,	somewhat	offset	by	the	reclassification	of	losses	to	earnings	during	2015	from	fuel	cash	flow	hedges.

Passenger	ticket	revenues	comprised	73.0%	of	our	2015	total	revenues.	Passenger	ticket	revenues	increased	by	$165.0	million,	or	2.8%,	to $6.1	billion	in	2015	from	$5.9	billion	in	2014.	The	increase	was	primarily	due	to:

•a	5.4%	increase	in	capacity,	which	increased	 Passenger	ticket	revenues	by	$317.4	million,	net	of	the	unfavorable	impact	of	the	change	in our	voyage	proration.	The	increase	in	capacity	was	primarily	due	to	the	addition	of	Anthem	of	the	Seas	and	Quantum	of	the	Seas,	which entered	service	in	April	2015	and	October	2014,	respectively;	and

•an	increase	of	$181.1	million	in	ticket	prices	driven	by	higher	pricing	on	Anthem	of	the	Seas	and	Quantum	of	the	Seas	as	well	as	higher pricing	on	Europe,	Alaska	and	Caribbean	sailings.

The	remaining	27.0%	of	2015	total	revenues	was	comprised	of	Onboard	and	other	revenues,	which	increased	$60.2	million,	or	2.8%.	The increase	in	Onboard	and	other	revenues	was	primarily	due	to:

•a	$111.3	million	increase	attributable	to	the	5.4%	increase	in	capacity	noted	above,	net	of	the	unfavorable	impact	of	the	change	in	our voyage	proration;	and

•a	$35.5	million	increase	in	onboard	revenue	attributable	to	higher	spending	on	a	per	passenger	basis	primarily	due	to	our	ship	upgrade programs	 and	 other	 revenue	 enhancing	 initiatives,	 including	 various	 beverage	 initiatives,	 the	 addition	 and	 promotion	 of	 specialty restaurants,	the	increased	revenue	associated	with	internet	and	other	telecommunication	services	and	other	onboard	activities.

•an	approximate	$50.8	million	unfavorable	effect	of	changes	in	foreign	currency	exchange	rates	related	to	our	onboard	and	other	revenue transactions	denominated	in	currencies	other	than	the	United	States	dollar;	and

•a	$38.1	million	decrease	in	revenues	related	to	Pullmantur's	non-core	businesses	that	were	sold	in	2014.

•an	approximate	$157.6	million	favorable	effect	of	changes	in	foreign	currency	exchange	rates	related	to	our	cruise	operating	expenses denominated	in	currencies	other	than	the	United	States	dollar;

•a	$40.4	million	decrease	in	expenses	related	to	Pullmantur's	non-core	businesses	that	were	sold	in	2014;

•a	$24.6	million	decrease	in	shore	excursion	expense	attributable	to	lower	contractual	costs	incurred	and	itinerary	changes;

•a	$19.4	million	decrease	in	lease	expense	due	to	the	lease	termination	and	purchase	of	 Brilliance	of	the	Seas	in	2014;	and

•a	$17.4	million	loss	incurred	in	2014	due	to	the	sale	of	 Celebrity	Century	that	did	not	recur	in	2015.

The	decrease	was	partially	offset	by	a	$276.7	million	increase	attributable	to	a	5.4%	increase	in	capacity	noted	above,	net	of	the	favorable impact	of	the	change	in	our	voyage	proration.

Marketing,	selling	and	administrative	expenses	for	2015	increased	$37.6	million,	or	3.6%.	The	increase	was	primarily	due	to	an	increase	in advertising	spending	mainly	relating	to	our	initiatives	in	the	North	American,	Australian	and	Asian	markets,	an	increase	in	payroll	and	benefits primarily	due	to	an	increase	in	our	stock	price	over	the	past	year	related	to	our	performance	share	awards	and	higher	IT	labor	costs	resulting	from the	addition	of	projects	and	initiatives	in	2015.	The	increase	was	partially	offset	by	a	decrease	in	administrative	expenses	mainly	driven	by	the	sale of	Pullmantur's	non-core	businesses	in	2014	and	savings	realized	from	our	cost	containment	initiatives.

Depreciation	and	amortization	expenses	for	2015	increased	$54.6	million,	or	7.1%,	to	$827.0	million	from	$772.4	million	in	2014.	The increase	was	primarily	due	to	the	addition	of	Quantum	of	the	Seas	and	Anthem	of	the	Seas	into	our	fleet,	new	shipboard	additions	associated	with our	ship	upgrade	projects	and	the	acquisition	of	the	Brilliance	of	the	Seas,	which	was	previously	under	lease,	partially	offset	by	the	sale	of Celebrity	Century	in	September	2014.

During	2015,	we	recognized	an	impairment	charge	of	$411.3	million	to	write	down	Pullmantur's	goodwill	to	its	implied	fair	value	and	to write	down	trademarks	and	trade	names	and	certain	long-lived	assets,	consisting	of	three	aircraft	owned	by	Pullmantur	and	two	ships	owned	and operated	by	Pullmantur,	to	their	fair	value.	Refer	to	Note	3.	Goodwill	and	Note	4.	Intangible	Assets	to	our	consolidated	financial	statements	for further	information	on	the	impairment	of	these	assets.

We	incurred	restructuring	charges	of	approximately	$4.3	million	in	2014,	which	did	not	recur	in	2015.

Interest	expense,	net	of	interest	capitalized,	increased	$19.4	million,	or	7.5%,	to	$277.7	million	in	2015	from	$258.3	million	in	2014.	The increase	was	primarily	due	to	a	higher	average	debt	level	attributable	to	the	financing	of	Quantum	of	the	Seas	and	Anthem	of	the	Seas,	partially offset	by	lower	pricing	on	debt	refinanced	in	2015	and	2014.

Equity	investment	income	increased	$29.4	million,	or	56.9%,	to	$81.0	million	in	2015	from	$51.6	million	in	2014	mainly	due	to	the	increase in	income	from	TUI	Cruises,	one	of	our	equity	method	investments.

Other	expense	in	2015	was	$24.4	million	compared	to	Other	income	of	$18.6	million	in	2014.	The	increase	in	expense	of	$43.0	million	was primarily	due	to	a	$33.5	million	tax	benefit	related	to	the	reversal	of	a	deferred	tax	asset	valuation	allowance	resulting	from	Spanish	tax	reform	in 2014,	which	did	not	recur	in	2015	and	$20.9	million	in	foreign	exchange	losses	from	the	remeasurement	of	monetary	assets	and	liabilities denominated	in	foreign	currency	in	2015	compared	to	$0.9	million	in	gains	in	2014.	The	increase	in	other	expense	was	partially	offset	by	a	net deferred	tax

benefit	of	$12.0	million	resulting	from	the	impairment	of	the	Pullmantur	related	assets	in	2015,	which	did	not	occur	in	2014.

Net	Yields	decreased	1.0%	in	2015	compared	to	2014	primarily	due	to	the	unfavorable	effect	of	changes	in	foreign	currency	exchange	rates related	 to	our	passenger	 ticket	revenue	 transactions	denominated	 in	currencies	other	 than	 the	United	States	dollar	noted	above.	Net	Yields increased	3.5%	in	2015	compared	to	2014	on	a	Constant	Currency	basis	primarily	due	to	the	increase	in	passenger	ticket	and	onboard	and	other revenues	discussed	above.

Net	Cruise	Costs	decreased	1.9%	in	2015	compared	to	2014	primarily	due	to	the	decrease	in	fuel	and	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,	partially offset	by	an	increase	in	capacity.	Net	Cruise	Costs	per	APCD	decreased	6.9%	in	2015	compared	to	2014.	Net	Cruise	Costs	per	APCD	on	a Constant	Currency	basis	decreased	4.7%	in	2015	compared	to	2014.

Net	Cruise	Costs	Excluding	Fuel	per	APCD	decreased	3.2%	in	2015	compared	to	2014	and	remained	consistent	in	2015	compared	to	2014 on	a	Constant	Currency	basis.

# Other	Comprehensive	Loss

Other	comprehensive	loss	decreased	by	$471.2	million	in	2015	compared	to	2014	due	to	a	$463.3	million	decrease	in	losses	on	cash	flow derivative	hedges	resulting	mostly	from	the	reclassification	of	losses	to	earnings	during	2015	from	fuel	cash	flow	hedges.

# Future	Application	of	Accounting	Standards

Refer	to	Note	2.	Summary	of	Significant	Accounting	Policies	to	our	consolidated	financial	statements	under	Item	8.	Financial	Statements	and Supplementary	Data	for	further	information	on	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 $570.3	million	to	$2.5	billion	 for	2016	compared	to	$1.9	billion	 for	2015.	The	increase	in	cash	provided	by	operating	activities	was	primarily attributable	to	an	increase	in	proceeds	from	customer	deposits,	an	increase	in	cash	receipts	from	onboard	spending	and	a	decrease	in	fuel	costs	in 2016	compared	to	2015.	Additionally,	dividends	received	from	unconsolidated	affiliates	increased	by	 $42.6	million.

Net	cash	provided	by	operating	activities	increased	$202.6	million	to	$1.9	billion	for	2015	compared	to	$1.7	billion	for	2014.	The	increase	in cash	provided	by	operating	activities	was	primarily	attributable	to	an	increase	in	proceeds	from	customer	deposits,	an	increase	in	cash	receipts from	onboard	spending	and	a	decrease	in	fuel	costs	and	interest	paid	in	2015	compared	to	the	same	period	in	2014.

Net	cash	used	in	investing	activities	increased	$981.9	million	to	$2.7	billion	 in	2016	compared	to	$1.7	billion	 in	2015.	The	increase	was primarily	attributable	to	an	increase	in	capital	expenditures	of	$881.0	million	in	2016	compared	to	the	same	period	in	2015	primarily	due	to	the deliveries	 of	Ovation	of	the	Seas	 and	Harmony	of	the	Seas in	2016.	Additionally,	cash	repayments	received	on	loans	to	our	unconsolidated affiliates	decreased	$86.0	million	in	2016

compared	to	the	same	period	in	2015	mainly	due	to	TUI	Cruises	repaying	in	2015	the	outstanding	balance	of	the	debt	facility	we	originally provided	to	them	in	2011.

Net	cash	used	in	investing	activities	decreased	$27.4	million	in	2015	compared	to	2014.	During	2015,	our	use	of	cash	was	primarily	related to	 capital	 expenditures	 of	 $1.6	 billion,	 down	 from	 $1.8	 billion	 in	 2014.	 The	 decrease	 in	 capital	 expenditures	 during	 2015	 was	 primarily attributable	to	the	purchase	of	Brilliance	of	the	Seas	in	2014.	The	decrease	in	cash	used	in	investing	activities	was	also	due	to	a	decrease	in investments	in	and	loans	to	unconsolidated	affiliates	of	$132.4	million	in	2015	compared	to	2014	and	an	increase	in	cash	repayments	received	on loans	to	unconsolidated	affiliates	of	$48.1	million	in	2015	compared	to	2014.	The	decrease	was	partially	offset	by	$220.0	million	of	proceeds received	from	the	sale	of	Celebrity	Century	in	2014	that	did	not	recur	in	2015.	Additionally,	there	was	an	increase	in	cash	paid	on	the	settlement of	derivative	financial	instruments	of	$110.5	million.

Net	cash	provided	by	financing	activities	was	$243.8	million	for	2016	compared	to	Net	cash	used	in	financing	activities	of	$253.5	million	in 2015.	The	increase	was	primarily	attributable	to	an	increase	in	debt	proceeds	of	$2.9	billion	during	2016	compared	to	2015,	partially	offset	by	an increase	in	repayment	of	debt	of	$2.2	billion,	an	increase	in	stock	repurchases	of	$100.0	million	and	an	increase	in	dividends	paid	of	$66.3 million	during	2016	compared	to	2015.	The	increase	in	debt	proceeds	was	primarily	due	to	the	$841.8	million	unsecured	term	loan	borrowed	in April	2016	to	finance	Ovation	of	the	Seas,	the	€700.7	million	and	$226.1	million	unsecured	term	loans	borrowed	in	May	2016	to	finance	 Harmony of	the	Seas,	the	$200.0	million	unsecured	term	loan	borrowed	in	April	2016	and	higher	drawings	on	our	revolving	credit	facilities	during 2016 compared	to	the	$742.1	million	unsecured	term	loan	borrowed	in	April	2015	to	finance	Anthem	of	the	Seas.	The	increase	in	repayment	of	debt	was primarily	due	to	higher	payments	on	our	revolving	credit	facilities.

Net	cash	used	in	financing	activities	was	$253.5	million	for	2015	compared	to	Net	cash	provided	by	financing	activities	of	$17.5	million	in 2014.	This	change	was	primarily	due	to	an	increase	of	$394.3	million	in	repayment	of	debt,	an	increase	of	dividends	paid	of	$81.3	million	and	a decrease	in	the	proceeds	from	the	exercise	of	common	stock	options	of	$59.6	million.	The	increase	in	cash	used	in	financing	activities	was partially	offset	by	a	$245.5	million	increase	in	debt	proceeds	and	a	$36.1	million	decrease	in	the	repurchase	of	treasury	stock.	The	increase	in repayment	of	debt	was	due	to	higher	payments	of	$1.1	billion	on	our	revolving	credit	facilities	and	a	payment	at	maturity	of	$279.0	million	on	our 11.875%	unsecured	senior	notes	during	2015	compared	to	the	payment	at	maturity	of	our	€745.0	million	5.625%	unsecured	senior	notes	during 2014.	The	increase	in	debt	proceeds	was	primarily	due	to	the	$742.1	million	unsecured	term	loan	borrowed	to	finance	the	purchase	of	Anthem	of the	Seas	and	higher	drawings	of	$706.0	million	on	our	revolving	credit	facilities	in	2015	compared	to	proceeds	received	on	an	unsecured	term loan	of	$791.1	million	due	to	the	delivery	of	Quantum	of	the	Seas	and	proceeds	received	on	our	$380.0	million	unsecured	term	loan	facility during	2014.

# Future	Capital	Commitments

Our	future	capital	commitments	consist	primarily	of	new	ship	orders.	As	of	 December	31,	2016,	we	have	two	Quantum-class	ships	and	two Oasis-class	ships	on	order	for	our	Royal	Caribbean	International	brand	with	an	aggregate	capacity	of	approximately	19,200	berths.	Additionally, we	have	four	"Project	Edge"	ships	on	order	for	our	Celebrity	Cruises	brand	with	an	aggregate	capacity	of	approximately	11,600	berths.	For	each of	these	orders,	we	have	committed	unsecured	financing	arrangements	in	place	covering	80%	of	the	cost	of	the	ship,	each	of	which	include sovereign	financing	guarantees.

As	of	December	31,	2016,	the	aggregate	cost	of	our	ships	on	order,	not	including	the	TUI	Cruises'	ships	on	order	and	the	"Project	Icon"	ships which	remain	subject	to	conditions	of	effectiveness,	was	approximately	$8.4	billion,	of	which	we	had	deposited	$316.1	million	as	of	such	date. Approximately	66.7%	of	the	aggregate	cost	was	exposed	to	fluctuations	in	the	Euro	exchange	rate	at	December	31,	2016.	(Refer	to	Note	14.	Fair Value	Measurements	and	Derivative	Instruments	and	Note	15.	Commitments	and	Contingencies	to	our	consolidated	financial	statements	under Item	8.	Financial	Statements	and	Supplementary	Data).

# Contractual	Obligations

As	of	December	31,	2016,	our	contractual	obligations	were	as	follows	(in	thousands):

|  |  |  | Payments	due	by	period |  |  |
| :--- | :--- | :--- | :--- | :--- | :--- |
|  |  | Less\tthan | 1-3 | 3-5 | More\tthan |
|  | Total | 1\tyear | years | years | 5\tyears |
| Operating\tActivities: |  |  |  |  |  |
| Operating\tlease\tobligations(1) | $309,797 | $20,749 | $33,025 | $24,135 | $231,888 |
| Interest\ton\tlong-term\tdebt(2) | 1,294,426 | 281,066 | 416,711 | 277,028 | 319,621 |
| Other(3) | 795,247 | 232,055 | 292,353 | 160,520 | 110,319 |
| Investing\tActivities: | 0 |  |  |  |  |
| Ship\tpurchase\tobligations(4) | 6,454,147 | 108,084 | 2,746,358 | 3,005,993 | 593,712 |
| Financing\tActivities: | 0 |  |  |  |  |
| Long-term\tdebt\tobligations(5) | 9,147,052 | 1,078,719 | 3,057,417 | 2,233,047 | 2,777,869 |
| Capital\tlease\tobligations(6) | 40,384 | 7,016 | 7,031 | 8,060 | 18,277 |
| Other(7) | 51,744 | 18,364 | 25,286 | 7,805 | 289 |
| Total | $18,092,797 | $1,746,053 | $6,578,181 | $5,716,588 | $4,051,975 |

(1)					We	are	obligated	under	noncancelable	operating	leases	primarily	for	offices,	warehouses	and	motor	vehicles.	Amounts	represent	contractual	obligations	with	initial	terms	in excess	of	one	year.

(2)						Long-term	debt	obligations	mature	at	various	dates	through	fiscal	year	2028	and	bear	interest	at	fixed	and	variable	rates.	Interest	on	variable-rate	debt	is	calculated	based	on forecasted	debt	balances,	including	the	impact	of	interest	rate	swap	agreements,	using	the	applicable	rate	at	December	31,	2016.	Debt	denominated	in	other	currencies	is calculated	based	on	the	applicable	exchange	rate	at	December	31,	2016.

(3)						Amounts	primarily	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.	Amounts	do	not	include	the	PortMiami	lease	further	discussed	below	under	Off-Balance	Sheet	Arrangements.

(4)					Amounts	do	not	include	potential	obligations	which	remain	subject	to	cancellation	at	our	sole	discretion.	In	addition,	amounts	do	not	include	the	conditional	agreements	with Meyer	Turku	for	the	two	"Project	Icon"	ships.

(5)					Amounts	represent	debt	obligations	with	initial	terms	in	excess	of	one	year.	Debt	denominated	in	other	currencies	is	calculated	based	on	the	applicable	exchange	rate	at December	31,	2016.

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

(7)					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.

Please	refer	to	Funding	Needs	and	Sources	for	discussion	on	the	planned	funding	of	the	above	contractual	obligations.

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.

# Off-Balance	Sheet	Arrangements

We	and	TUI	AG	have	each	guaranteed	repayment	of	 50%	of	a	bank	loan	provided	to	TUI	Cruises	which	is	due	2022.	Notwithstanding	this, the	lenders	have	agreed	to	release	each	shareholder's	guarantee	in	2018.	As	of	December	31,	2016,	€116.3	million,	 or	 approximately	$122.7 million	based	on	the	exchange	rate	at	December	31,	2016,	remains	outstanding.	Based	on	current	facts	and	circumstances,	we	do	not	believe potential	obligations	under	this	guarantee	are	probable.

TUI	Cruises	has	entered	into	various	ship	construction	and	credit	agreements	that	include	certain	restrictions	on	each	of	our	and	TUI	AG's ability	to	reduce	our	current	ownership	interest	in	TUI	Cruises	below	37.55%	through	2021.

In	July	2016,	we	executed	an	agreement	with	Miami	Dade	County	("MDC"),	which	was	simultaneously	assigned	to	Sumitomo	Banking Corporation	("SMBC"),	to	lease	land	from	MDC	and	construct	a	new	cruise	terminal	at	PortMiami	in	Miami,	Florida.	The	terminal	is	expected	to be	approximately	170,000	square	feet	and	will	serve	as	a	homeport.	During	the	construction	period,	SMBC	will	fund	the	costs	of	the	terminal's construction	and	land	lease.	Upon	completion	of	the	terminal's	construction,	we	will	operate	and	lease	the	terminal	from	SMBC	for	a	five-year term.	We	determined	that	the	lease	arrangement	between	SMBC	and	us	should	be	accounted	for	as	an	operating	lease	upon	completion	of	the terminal.

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.

As	of	December	31,	2016,	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.

# Funding	Needs	and	Sources

We	have	significant	contractual	obligations	of	which	our	debt	service	obligations	and	the	capital	expenditures	associated	with	our	ship purchases	represent	our	largest	funding	needs.	As	of	December	31,	2016,	we	have	approximately	$1.7	billion	in	contractual	obligations	due through	December	31,	2017	of	which	approximately	$1.1	billion	relates	to	long-term	debt	maturities,	$108.1	million	relates	to	progress	payments on	 our	 ship	 purchases	 and	$281.1	million	relates	to	interest	on	long-term	debt.	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	 $3.7	billion	as	of	December	31,	2016	as	compared	to	a	working	capital	deficit	of	$3.5	billion	as	of December	31,	2015.	Included	within	our	working	capital	deficit	is	$1.3	billion	 and	$899.5	million	of	current	portion	of	debt,	including	capital leases,	as	of	December	31,	2016	and	December	31,	2015,	respectively.	The	increase	in	working	capital	deficit	was	primarily	due	to	the	increase	in current	liabilities	of	our	long-term	debt	and	customer	deposits.	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	December	31,	2016,	we	had	liquidity	of	$980.6	million,	consisting	of	approximately	$132.6	million	in	cash	and	cash	equivalents	and $848.0	million	available	under	our	unsecured	credit	facilities.	We	anticipate	 that	our	cash	flows	from	operations	and	our	current	financing arrangements,	as	described	above,	will	be	adequate	to	meet	our	capital	expenditures	and	debt	repayments	over	the	next	12-month	period.

In	October	2015,	our	board	of	directors	authorized	a	common	stock	repurchase	program	for	up	to	$500	million	that	was	completed	in	August 2016.	During	2016,	we	purchased	4.1	million	shares	for	a	total	of	$300.0	million	in	open	market	transactions.	These	transactions	were	recorded within	Treasury	stock	in	our	consolidated	balance	sheet.	Our	repurchases	under	this	program,	including	the	2.1	million	shares	repurchased	for $200.0	million	during	the	fourth	quarter	of	2015,	totaled	$500.0	million.

If	any	person	acquires	ownership	of	more	than	50%	of	our	common	stock	or,	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	our	credit	facilities,	which	we	may	be	unable	to	replace	on	similar	terms.	Our	public	debt	securities	also contain	change	of	control	provisions	that	would	be	triggered	by	a	third-party	acquisition	of	greater	than	50%	of	our	common	stock	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	financial	covenants	that	require	us,	among	other	things,	to	maintain	minimum	net	worth	of	at least	$7.2	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	financial covenant	requirements	as	of	December	31,	2016.	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.

In	December	2016,	we	declared	a	cash	dividend	on	our	common	stock	of	$0.48	per	share	which	was	paid	in	the	first	quarter	of	2017.	We declared	a	cash	dividend	on	our	common	stock	of	$0.48	per	share	during	the	third	quarter	of	2016	which	was	paid	in	the	fourth	quarter	of	2016. During	the	first	and	second	quarters	of	2016,	we	declared	and	paid	a	cash	dividend	on	our	common	stock	of	 $0.375	per	share.	During	the	first quarter	of	2016,	we	also	paid	a	cash	dividend	on	our	common	stock	of	$0.375	per	share	which	was	declared	during	the	fourth	quarter	of	2015.

# Item	7A.				Quantitative	and	Qualitative	Disclosures	About	Market	Risk

# Financial	Instruments	and	Other

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.	(Refer	to	Note	14.	Fair	Value	Measurements	and	Derivative	Instruments	to our	consolidated	financial	statements	under	Item	8.	Financial	Statements	and	Supplementary	Data.)

# 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 December	31,	2016,	approximately	40.5%	of	our	long-term	debt	was	effectively	fixed	as	compared	to	31.2%	as	of	December	31,	2015.	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 December	31,	2016	and	December	31,	2015,	we	maintained	interest	rate	swap	agreements	on	the	following	fixed-rate	debt	instruments:

| December	31,	2016	(In<br>thousands) | Maturity | Debt	Fixed<br>Rate | Swap	Floating	Rate:<br>LIBOR	plus | All-in	Swap	Floating	Rate	as<br>of	December	31,	2016 |
| :--- | :--- | :--- | :--- | :--- |
| $175,000 | October\t2021 | 5.41% | 3.87% | 5.13% |
| 650,000 | November\t2022 | 5.25% | 3.63% | 4.54% |

These	interest	rate	swap	agreements	are	accounted	for	as	fair	value	hedges.

The	 estimated	 fair	 value	 of	 our	 long-term	 fixed-rate	 debt	 at	December	 31,	 2016	 was	$1.6	 billion,	 using	 quoted	 market	 prices,	 where available,	or	using	the	present	value	of	expected	future	cash	flows	which	incorporates	risk	profile.	The	fair	value	of	our	fixed	to	floating	interest rate	swap	agreements	was	estimated	to	be	a	liability	of	$16.2	million	as	of	December	31,	2016,	based	on	the	present	value	of	expected	future	cash flows.	A	hypothetical	one	percentage	point	decrease	in	interest	rates	at	December	31,	2016	would	increase	the	fair	value	of	our	hedged	and unhedged	long-term	fixed-rate	debt	by	approximately	$83.4	million	and	would	increase	the	fair	value	of	our	fixed	to	floating	interest	rate	swap agreements	by	approximately	$39.8	million.

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.	A hypothetical	one	percentage	point	increase	in	interest	rates	would	increase	our	forecasted	2017	interest	expense	by	approximately	$42.7	million, assuming	no	change	in	foreign	currency	exchange	rates.

At	December	31,	2016	and	December	31,	2015,	we	maintained	interest	rate	swap	agreements	on	the	following	floating-rate	debt	instruments:

# Swap	Notional	as	of

(1)	Interest	rate	swap	agreements	hedging	the	Euro-denominated	term	loan	for	Harmony	of	the	Seas	include	EURIBOR	zero-floors	matching	the hedged	debt	EURIBOR	zero-floor.	Amount	presented	is	based	on	the	exchange	rate	as	of	December	31,	2016.

These	interest	rate	swap	agreements	are	accounted	for	as	cash	flow	hedges.

The	fair	value	of	our	floating	to	fixed	interest	rate	swap	agreements	was	estimated	to	be	a	liability	of	 $42.8	million	as	of	December	31,	2016 based	on	the	present	value	of	expected	future	cash	flows.	These	interest	rate	swap	agreements	are	accounted	for	as	cash	flow	hedges.

# Foreign	Currency	Exchange	Rate	Risk

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	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.

The	 estimated	 fair	 value,	 as	 of	December	 31,	 2016,	 of	 our	 Euro-denominated	 forward	 contracts	 associated	 with	 our	 ship	 construction contracts	was	a	liability	of	$73.7	million,	based	on	the	present	value	of	expected	future	cash	flows.	As	of	December	31,	2016,	the	aggregate	cost of	our	ships	on	order,	not	including	the	TUI	Cruises'	ships	on	order	and	those	subject	to	conditions	to	effectiveness,	was	approximately	$8.4 billion,	of	which	we	had	deposited	$316.1	million	as	of	such	date.	Approximately	66.7%	 and	58.2%	of	the	aggregate	cost	of	the	ships	under construction	was	exposed	to	fluctuations	in	the	Euro	exchange	rate	at	December	31,	2016	and	December	31,	2015,	respectively.	A	hypothetical 10%	strengthening	of	the	Euro	as	of	December	31,	2016,	assuming	no	changes	in	comparative	interest	rates,	would	result	in	a	 $558.0	million increase	in	the	United	States	dollar	cost	of	the	foreign	currency	denominated	ship	construction	contracts	exposed	to	fluctuations	in	the	Euro exchange	rate.	The	majority	of	our	foreign	currency	forward	contracts,	collar	options	and	cross-currency	swap	agreements	are	accounted	for	as cash	flow,	fair	value	or	net	investment	hedges	depending	on	the	designation	of	the	related	hedge.

Our	international	business	operations	subject	us	to	foreign	currency	exchange	risk.	We	transact	business	in	many	different	foreign	currencies and	maintain	investments	in	foreign	operations	which	may	expose	us	to	financial	market	risk	resulting	from	fluctuations	in	foreign	currency exchange	rates.	Movements	in	foreign	currency	exchange	rates	may	affect	the	value	of	our	earnings	in	foreign	currencies	and	cash	flows.	We manage	most	of	this	exposure	on	a	consolidated	basis,	which	allows	us	to	take	advantage	of	any	natural	offsets.	Therefore,	weakness	in	one particular	currency	might	be	offset	by	strengths	in	other	currencies	over	time.	The	extent	to	which	one	currency	is	effective	as	a	natural	offset	of another	currency	fluctuates	over	time.	In	addition,	some	foreign	currency	exposures	have	little	to	no	mitigating	natural	offsets	available.

We	consider	our	investments	in	our	foreign	operations	to	be	denominated	in	relatively	stable	currencies	and	of	a	long-term	nature.	We partially	 mitigate	 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	TUI	Cruises	of	approximately	€295.0

million,	or	approximately	$311.2	million,	through	December	31,	2016.	As	of	December	31,	2015,	no	debt	was	designated	as	a	hedge	of	our	net investments	in	Pullmantur	and	TUI	Cruises.	We	have	included	approximately	$114.0	million	and	$104.5	million	of	foreign-currency	transaction losses	 and	 of	 changes	 in	 the	 fair	 value	 of	 derivatives	 in	 the	 foreign	 currency	 translation	 adjustment	 component	 of	Accumulated other comprehensive	loss	at	December	31,	2016	and	December	31,	2015,	respectively.

Lastly,	on	a	regular	basis,	we	enter	into	foreign	currency	forward	contracts	and,	from	time	to	time,	we	utilize	cross-currency	swap	agreements 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	2016,	we	maintained	an	average	of	approximately	$642.4 million	of	 these	foreign	currency	forward	contracts.	These	 instruments	are	not	designated	as	hedging	 instruments.	In	2016,	2015	 and	2014 changes	in	the	fair	value	of	the	foreign	currency	forward	contracts	were	losses	of	approximately	$51.1	million,	$55.5	million	and	$48.6	million, respectively,	which	offset	gains	arising	from	the	remeasurement	of	monetary	assets	and	liabilities	denominated	in	foreign	currencies	in	those	same years	of	$39.8	million,	$34.6	million	and	$49.5	million,	respectively.	These	changes	were	recognized	in	earnings	within	Other	income	(expense)	in our	consolidated	statements	of	comprehensive	income	(loss).

# Fuel	Price	Risk

Our	exposure	to	market	risk	for	changes	in	fuel	prices	relates	primarily	to	the	consumption	of	fuel	on	our	ships.	Fuel	cost	(net	of	the	financial impact	of	fuel	swap	agreements),	as	a	percentage	of	our	total	revenues,	was	approximately	8.4%	in	2016,	9.6%	in	2015	and	11.7%	in	2014.	We use	fuel	swap	agreements	to	mitigate	the	financial	impact	of	fluctuations	in	fuel	prices.

As	of	December	31,	2016,	we	had	fuel	swap	agreements	to	pay	fixed	prices	for	fuel	with	an	aggregate	notional	amount	of	approximately	 $1.0 billion,	maturing	through	2020.	The	fuel	swap	agreements	represented	60%	of	our	projected	2017	fuel	requirements,	44%	of	our	projected	2018 fuel	requirements,	35%	of	our	projected	2019	fuel	requirements	and	20%	of	our	projected	2020	fuel	requirements.	These	fuel	swap	agreements are	generally	accounted	for	as	cash	flow	hedges.	The	estimated	fair	value	of	these	contracts	at	December	31,	2016	was	estimated	to	be	a	liability of	$227.9	million.	We	estimate	that	a	hypothetical	 10%	increase	in	our	weighted-average	fuel	price	from	that	experienced	during	the	year	ended December	31,	2016	would	increase	our	forecasted	2017	fuel	cost	by	approximately	$30.0	million,	net	of	the	impact	of	fuel	swap	agreements.

# Item	8.				Financial	Statements	and	Supplementary	Data

Our	Consolidated	Financial	Statements	and	Quarterly	Selected	Financial	Data	are	included	beginning	on	page	F-1	of	this	report.

# Item	9.				Changes	In	and	Disagreements	With	Accountants	on	Accounting	and	Financial	Disclosure

# Item	9A.				Controls	and	Procedures

# Evaluation	of	Disclosure	Controls	and	Procedures

Our	management,	with	the	participation	of	our	Chairman	and	Chief	Executive	Officer	and	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	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 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.

# Management's	Report	on	Internal	Control	Over	Financial	Reporting

Our	management	is	responsible	for	establishing	and	maintaining	adequate	internal	control	over	financial	reporting,	as	such	term	is	defined	in Exchange	Act	Rule	13a-15(f).	Our	management,	with	the	participation	of	our	Chairman	and	Chief	Executive	Officer	and	our	Chief	Financial Officer,	conducted	an	evaluation	of	the	effectiveness	of	our	internal	control	over	financial	reporting	based	on	the	Internal	Control-Integrated Framework	(2013)	issued	by	the	Committee	of	Sponsoring	Organizations	("COSO")	of	the	Treadway	Commission.	Based	on	this	evaluation, management	concluded	that	our	internal	control	over	financial	reporting	was	effective	as	of	December	31,	2016.	The	effectiveness	of	our	internal control	over	financial	reporting	as	of	December	31,	2016	has	been	audited	by	PricewaterhouseCoopers	LLP,	the	independent	registered	certified public	accounting	firm	that	audited	our	consolidated	financial	statements	included	in	this	Annual	Report	on	Form	10-K,	as	stated	in	its	report, which	is	included	herein	on	page	F-2.

# 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	Exchange	Act Rule	13a-15(d)	during	 the	quarter	ended	December	31,	2016	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.

# Item	9B.				Other	Information

# PART	III

# Items	10,	11,	12,	13	and	14.	Directors,	Executive	Officers	and	Corporate	Governance;	Executive	Compensation;	Security	Ownership	of

# Certain	Beneficial	Owners	and	Management	and	Related	Stockholder	Matters;	Certain	Relationships	and	Related	Transactions;	and

# Director	Independence	and	Principal	Accountant	Fees	and	Services.

Except	for	information	concerning	executive	officers	(called	for	by	Item	401(b)	of	Regulation	S-K),	which	is	included	in	Part	I	of	this Annual	Report	on	Form	10-K,	the	information	required	by	Items	10,	11,	12,	13	and	14	is	incorporated	herein	by	reference	to	the	Royal	Caribbean Cruises	Ltd.	Definitive	Proxy	Statement	relating	to	our	2017	Annual	Meeting	of	Shareholders	(the	"Proxy	Statement")	to	be	filed	with	the Securities	and	Exchange	Commission	no	later	than	120	days	after	the	close	of	the	fiscal	year.	Please	refer	to	the	following	sections	in	the	Proxy Statement	for	more	information	regarding	our	corporate	governance:	"Corporate	Governance";	"Proposal	1—Election	of	Directors";	and	"Certain Relationships	and	Related	Person	Transactions."	Copies	of	the	Proxy	Statement	will	become	available	when	filed	through	our	Investor	Relations website	at	www.rclinvestor.com	(please	see	"Financial	Reports"	under	"Financial	Information");	by	contacting	our	Investor	Relations	department at	1050	Caribbean	Way,	Miami,	Florida	33132—telephone	(305)	982-2625;	or	by	visiting	the	SEC's	website	at	www.sec.gov.

We	have	adopted	a	Code	of	Business	Conduct	and	Ethics	that	applies	to	all	of	our	employees,	including	our	executive	officers,	and	our directors.	 A	 copy	 of	 the	 Code	 of	 Business	 Conduct	 and	 Ethics	 is	 posted	 in	 the	 corporate	 governance	 section	 of	 our	 website	 at www.rclinvestor.com	and	is	available	in	print,	without	charge,	to	shareholders	upon	written	request	to	our	Corporate	Secretary	at	Royal	Caribbean Cruises,	Ltd.,	1050	Caribbean	Way,	Miami,	Florida	33132.	Any	amendments	to	the	code	or	any	waivers	from	any	provisions	of	the	code	granted to	executive	officers	or	directors	will	be	promptly	disclosed	to	investors	by	posting	on	our	website	at	www.rclinvestor.com.	None	of	the	websites referenced	in	this	Annual	Report	on	Form	10-K	or	the	information	contained	therein	is	incorporated	herein	by	reference.

# PART	IV

# Item	15.				Exhibits	and	Financial	Statement	Schedules

# (a)(1)		Financial	Statements

Our	Consolidated	Financial	Statements	have	been	prepared	in	accordance	with	Item	8.	Financial	Statements	and	Supplementary	Data	and	are included	beginning	on	page	F-1	of	this	report.

# (2) Financial	Statement	Schedules

# (3) Exhibits

The	exhibits	listed	on	the	accompanying	Index	to	Exhibits	are	filed	or	incorporated	by	reference	as	part	of	this	Annual	Report	on	Form	10-K and	such	Index	to	Exhibits	is	hereby	incorporated	herein	by	reference.

# 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.

(Registrant)

/s/	JASON	T.	LIBERTY

Jason	T.	Liberty		Chief	Financial	Officer

(Principal	Financial	Officer	and	duly	authorized	signatory)

Pursuant	to	the	requirements	of	the	Securities	Exchange	Act	of	1934,	this	report	has	been	signed	below	by	the	following	persons	on	behalf	of	the	registrant	and	in the	capacities	indicated	on	February	23,	2017.

/s/	RICHARD	D.	FAIN

Richard	D.	Fain

	Director,	Chairman	and	Chief	Executive	Officer

(Principal	Executive	Officer)

Jason	T.	Liberty 	Chief	Financial	Officer (Principal	Financial	Officer)

/s/	HENRY	L.	PUJOL

Henry	L.	Pujol

	Senior	Vice	President,	Chief	Accounting	Officer	(Principal	Accounting	Officer)

John	F.	Brock

Director

Thomas	J.	Pritzker

William	K.	Reilly

Jason	T.	Liberty,	as	Attorney-in-Fact

# INDEX	TO	EXHIBITS

Exhibits	10.15	through	10.43	represent	management	compensatory	plans	or	arrangements.

|  |  |  | Incorporated	By	Reference | Incorporated	By	Reference |
| :--- | :--- | :--- | :--- | :--- |
| Exhibit | Exhibit\tDescription | Form | Exhibit | Filing\tDate/\tPeriod |
| Number |  |  |  | End\tDate |
| 10.10 |  |  |  |  |
| 10.11 |  | 8-K | 10.1 | 11/19/2015 |
|  | Lenders\tfrom\ttime\tto\ttime\tparty\tthereto\tand\tKfW\tIPEX-Bank\tGmbH,\tas\tHermes\tAgent,\tFacility |  |  |  |
|  | Agent\tand\tInitial\tMandated\tLead\tArranger. |  |  |  |
| 10.12 |  | 8-K | 10.2 | 11/19/2015 |
|  | Lenders\tfrom\ttime\tto\ttime\tparty\tthereto\tand\tKfW\tIPEX-Bank\tGmbH,\tas\tHermes\tAgent,\tFacility |  |  |  |
|  | Agent\tand\tInitial\tMandated\tLead\tArranger. |  |  |  |
| 10.13 |  | 8-K | 10.1 | 6/28/2016 |
|  | Limited,\tParis\tBranch\tand\tthe\tbanks\tand\tfinancial\tinstitutions\tas\tlender\tparties\tthereto |  |  |  |
| 10.14 |  | 8-K | 10.2 | 6/28/2016 |
|  | Limited,\tParis\tBranch\tand\tthe\tbanks\tand\tfinancial\tinstitutions\tas\tlender\tparties\tthereto |  |  |  |
| 10.15 | Royal\tCaribbean\tCruises\tLtd.\t2000\tStock\tAward\tPlan | 8-K | 10.1 | 12/8/2005 |
| 10.16 | \t Amendment\tNo.\t1\tto\t2000\tStock\tAward\tPlan | 8-K | 10.1 | 9/22/2006 |
| 10.17 | Royal\tCaribbean\tCruises\tLtd.\t2008\tEquity\tIncentive\tPlan\t(as\tamended)* |  |  |  |
| 10.18 | Form\tof\t2008\tEquity\tIncentive\tPlan\tStock\tOption\tAward\tAgreement—Incentive\tOptions | 10-Q | 10.3 | 9/30/2008 |
| 10.19 | Form\tof\t2008\tEquity\tIncentive\tPlan\tStock\tOption\tAward\tAgreement—Nonqualified\tOptions | 10-Q | 10.4 | 9/30/2008 |
| 10.20 | Form\tof\t2008\tEquity\tIncentive\tPlan\tRestricted\tStock\tUnit\tAgreement\t-\tExecutive\tOfficer\tGrants | 10-K | 10.2 | 12/31/2013 |
| 10.22 | Form\tof\t2008\tEquity\tIncentive\tPlan\tRestricted\tStock\tUnit\tAgreement—Director\tGrants | 10-K | 10.31 | 12/31/2010 |
| 10.23 | Form\tof\t2008\tEquity\tIncentive\tPlan\tPerformance\tShares\tAgreement | 10-K | 10.27 | 12/31/2014 |
| 10.24 | Form\tof\t2008\tEquity\tIncentive\tPlan\tPerformance-Based\tRestricted\tShares\tAgreement | 10-K | 10.26 | 12/31/2015 |
| 10.25 | Employment\tAgreement,\tdated\tas\tof\tDecember\t31,\t2012,\tby\tand\tbetween\tthe\tCompany\tand\tRichard | 10-K | 10.22 | 12/31/2012 |
|  | D.\tFain |  |  |  |
| 10.26 |  | 10-K | 10.23 | 12/31/2012 |
|  | Goldstein |  |  |  |
| 10.27 |  | 10-K | 10.26 | 12/31/2012 |
|  | Kulovaara |  |  |  |
| 10.28 |  | 10-Q | 10.20 | 6/30/2013 |
|  | Liberty |  |  |  |
| 10.29 |  | 10-Q | 10.3 | 6/30/2015 |
|  | Bayley |  |  |  |
| 10.30 | Form\tof\tFirst\tAmendment\tto\tEmployment\tAgreement,\tdated\tas\tof\tFebruary\t6,\t2015\t(entered\tinto | 10-K | 10.3 | 12/31/2014 |

32.1 Certification	of	Richard	D.	Fain	and	Jason	T.	Liberty	pursuant	to	Section	1350	of	Chapter	63	of	Title 18	of	the	United	States	Code**

# Interactive	Data	File

101 —The	following	financial	statements	from	Royal	Caribbean	Cruises	Ltd.'s	Annual	Report	on	Form	10-K	for	the	year	ended	December	31,	2016,	as	filed	with the	SEC	on	February	23,	2017,	formatted	in	XBRL,	as	follows:

(i) the	Consolidated	Statements	of	Comprehensive	Income	(Loss)	for	the	years	ended	December	31,	2016,	2015	and	2014;

(iii) the	Consolidated	Statements	of	Cash	Flows	for	the	years	ended	December	31,	2016,	2015	and	2014;

(iv) the	Consolidated	Statements	of	Shareholders'	Equity	for	the	years	ended	December	31,	2016,	2015	and	2014;	and

(v) the	Notes	to	the	Consolidated	Financial	Statements,	tagged	in	summary	and	detail.

# INDEX	TO	CONSOLIDATED	FINANCIAL	STATEMENTS

# Report	of	Independent	Registered	Certified	Public	Accounting	Firm

# To	the	Board	of	Directors	and	Shareholders

of	Royal	Caribbean	Cruises	Ltd.

In	our	opinion,	the	accompanying	consolidated	balance	sheets	and	the	related	consolidated	statements	of	comprehensive	income	(loss),	of	shareholders'	equity	and of	cash	flows	present	fairly,	in	all	material	respects,	the	financial	position	of	Royal	Caribbean	Cruises	Ltd.	and	its	subsidiaries	at	December	31,	2016	and	2015,	and	the results	of	their	operations	and	their	cash	flows	for	each	of	the	three	years	in	the	period	ended	December	31,	2016	in	conformity	with	accounting	principles	generally accepted	in	the	United	States	of	America.	Also	in	our	opinion,	the	Company	maintained,	in	all	material	respects,	effective	internal	control	over	financial	reporting	as	of December	31,	2016,	based	on	criteria	established	in	Internal	Control	-	Integrated	Framework	(2013)	issued	by	the	Committee	of	Sponsoring	Organizations	of	the Treadway	Commission	(COSO).	The	Company's	management	is	responsible	for	these	financial	statements,	for	maintaining	effective	internal	control	over	financial reporting	and	for	its	assessment	of	the	effectiveness	of	internal	control	over	financial	reporting,	included	in	Management's	Report	on	Internal	Control	over	Financial Reporting	appearing	under	Item	9A.	Our	responsibility	is	to	express	opinions	on	these	financial	statements	and	on	the	Company's	internal	control	over	financial	reporting based	on	our	integrated	audits.	We	conducted	our	audits	in	accordance	with	the	standards	of	the	Public	Company	Accounting	Oversight	Board	(United	States).	Those standards	require	that	we	plan	and	perform	the	audits	to	obtain	reasonable	assurance	about	whether	the	financial	statements	are	free	of	material	misstatement	and whether	effective	internal	control	over	financial	reporting	was	maintained	in	all	material	respects.	Our	audits	of	the	financial	statements	included	examining,	on	a	test basis,	 evidence	 supporting	 the	 amounts	 and	 disclosures	 in	 the	 financial	 statements,	 assessing	 the	 accounting	 principles	 used	 and	 significant	 estimates	 made	 by management,	and	evaluating	the	overall	financial	statement	presentation.	Our	audit	of	internal	control	over	financial	reporting	included	obtaining	an	understanding	of internal	control	over	financial	reporting,	assessing	the	risk	that	a	material	weakness	exists,	and	testing	and	evaluating	the	design	and	operating	effectiveness	of	internal control	based	on	the	assessed	risk.	Our	audits	also	included	performing	such	other	procedures	as	we	considered	necessary	in	the	circumstances.	We	believe	that	our audits	provide	a	reasonable	basis	for	our	opinions.

As	discussed	in	Notes	1	and	2	to	the	consolidated	financial	statements,	the	Company	changed	the	manner	in	which	it	accounts	for	the	consolidation	of	Pullmantur Holdings	and	the	manner	in	which	it	classifies	debt	issuance	costs	in	2016.

A	company's	internal	control	over	financial	reporting	is	a	process	designed	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.	A	company's	internal	control	over	financial reporting	includes	those	policies	and	procedures	that	(i)	pertain	to	the	maintenance	of	records	that,	in	reasonable	detail,	accurately	and	fairly	reflect	the	transactions	and dispositions	of	the	assets	of	the	company;	(ii)	provide	reasonable	assurance	that	transactions	are	recorded	as	necessary	to	permit	preparation	of	financial	statements	in accordance	with	generally	accepted	accounting	principles,	and	that	receipts	and	expenditures	of	the	company	are	being	made	only	in	accordance	with	authorizations	of management	 and	 directors	 of	 the	 company;	 and	 (iii)	 provide	 reasonable	 assurance	 regarding	 prevention	 or	 timely	 detection	 of	 unauthorized	 acquisition,	 use,	 or disposition	of	the	company's	assets	that	could	have	a	material	effect	on	the	financial	statements.

Because	of	its	inherent	limitations,	internal	control	over	financial	reporting	may	not	prevent	or	detect	misstatements.	Also,	projections	of	any	evaluation	of effectiveness	to	future	periods	are	subject	to	the	risk	that	controls	may	become	inadequate	because	of	changes	in	conditions,	or	that	the	degree	of	compliance	with	the policies	or	procedures	may	deteriorate.

/s/	PricewaterhouseCoopers	LLP PricewaterhouseCoopers	LLP Miami,	Florida February	23,	2017

# CONSOLIDATED	STATEMENTS	OF	COMPREHENSIVE	INCOME	(LOSS)

|  | 2016 | 2015 | 2014 |
| :--- | :--- | :--- | :--- |
|  |  | (in\tthousands,\texcept\tper\tshare\tdata) |  |
| Passenger\tticket\trevenues | $6,149,323 | $6,058,821 | $5,893,847 |
| Onboard\tand\tother\trevenues | 2,347,078 | 2,240,253 | 2,180,008 |
| Total\trevenues | 8,496,401 | 8,299,074 | 8,073,855 |
| Cruise\toperating\texpenses: |  |  |  |
| Commissions,\ttransportation\tand\tother | 1,349,677 | 1,400,778 | 1,372,785 |
| Onboard\tand\tother | 493,558 | 553,104 | 582,750 |
| Payroll\tand\trelated | 882,891 | 861,775 | 847,641 |
| Food | 485,673 | 480,009 | 478,130 |
| Fuel | 713,676 | 795,801 | 947,391 |
| Other\toperating | 1,090,064 | 1,007,926 | 1,077,584 |
| Total\tcruise\toperating\texpenses | 5,015,539 | 5,099,393 | 5,306,281 |
| Marketing,\tselling\tand\tadministrative\texpenses | 1,100,290 | 1,086,504 | 1,048,952 |
| Depreciation\tand\tamortization\texpenses | 894,915 | 827,008 | 772,445 |
| Impairment\tof\tPullmantur\trelated\tassets | — | 411,267 | — |
| Restructuring\tcharges | 8,452 | — | 4,318 |
|  | 7,019,196 | 7,424,172 | 7,131,996 |
| Operating\tIncome | 1,477,205 | 874,902 | 941,859 |
| Other\tincome\t(expense): |  |  |  |
| Interest\tincome | 20,856 | 12,025 | 10,344 |
| Interest\texpense,\tnet\tof\tinterest\tcapitalized | (307,370) | (277,725) | (258,299) |
| Equity\tinvestment\tincome | 128,350 | 81,026 | 51,640 |
| Other\t(expense)\tincome(1) | (35,653) | (24,445) | 18,602 |
|  | (193,817) | (209,119) | (177,713) |
| Net\tIncome | $1,283,388 | $665,783 | $764,146 |
| Basic\tEarnings\tper\tShare: |  |  |  |
| Net\tincome | $5.96 | $3.03 | $3.45 |
| Diluted\tEarnings\tper\tShare: |  |  |  |
| Net\tincome | $5.93 | $3.02 | $3.43 |
| Comprehensive\tIncome\t(Loss) |  |  |  |
| Net\tIncome | $1,283,388 | $665,783 | $764,146 |
| Other\tcomprehensive\tincome\t(loss): |  |  |  |
| Foreign\tcurrency\ttranslation\tadjustments | 2,362 | (30,152) | (26,102) |
| Change\tin\tdefined\tbenefit\tplans | (1,636) | 4,760 | (7,213) |
| Gain\t(loss)\ton\tcash\tflow\tderivative\thedges | 411,223 | (406,047) | (869,350) |
| Total\tother\tcomprehensive\tincome\t(loss) | 411,949 | (431,439) | (902,665) |
| Comprehensive\tIncome\t(Loss) | $1,695,337 | $234,344 | $(138,519) |

(1) Including	a	$21.7	million	loss	related	to	the	2016	elimination	of	the	Pullmantur	reporting	lag,	a	net	deferred	tax	benefit	of	$12.0	million	related	to	the	2015	Pullmantur impairment	and	a	deferred	tax	benefit	of	$33.5	million	related	to	the	2014	reversal	of	a	valuation	allowance.

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

# CONSOLIDATED	BALANCE	SHEETS

| Cash	and	cash	equivalents | $132,603 | $121,565 |
| :--- | :--- | :--- |
| Trade\tand\tother\treceivables,\tnet | 291,899 | 238,972 |
| Inventories | 114,087 | 121,332 |
| Prepaid\texpenses\tand\tother\tassets | 209,716 | 220,579 |
| Derivative\tfinancial\tinstruments | — | 134,574 |
| Total\tcurrent\tassets | 748,305 | 837,022 |
| Property\tand\tequipment,\tnet | 20,161,427 | 18,777,778 |
| Goodwill | 288,386 | 286,764 |
| Other\tassets | 1,112,206 | 880,479 |
|  | $22,310,324 | $20,782,043 |
| Liabilities\tand\tShareholders'\tEquity |  |  |
| Current\tliabilities |  |  |
| Current\tportion\tof\tlong-term\tdebt | $1,285,735 | $899,542 |
| Accounts\tpayable | 305,313 | 302,072 |
| Accrued\tinterest | 46,166 | 38,325 |
| Accrued\texpenses\tand\tother\tliabilities | 692,322 | 658,601 |
| Derivative\tfinancial\tinstruments | 146,592 | 651,866 |
| Customer\tdeposits | 1,965,473 | 1,742,286 |
| Total\tcurrent\tliabilities | 4,441,601 | 4,292,692 |
| Long-term\tdebt | 8,101,701 | 7,627,701 |
| Other\tlong-term\tliabilities | 645,610 | 798,611 |
| Commitments\tand\tcontingencies\t(Note\t15) |  |  |
| Shareholders'\tequity |  |  |
| Preferred\tstock\t($0.01\tpar\tvalue;\t20,000,000\tshares\tauthorized;\tnone\toutstanding) | — | — |
| December\t31,\t2016\tand\tDecember\t31,\t2015,\trespectively) | 2,346 | 2,339 |
| Paid-in\tcapital | 3,328,517 | 3,297,619 |
| Retained\tearnings | 7,860,341 | 6,944,862 |
| Accumulated\tother\tcomprehensive\tloss | (916,484) | (1,328,433) |
| Treasury\tstock\t(20,019,237\tand\t15,911,971\tcommon\tshares\tat\tcost,\tDecember\t31,\t2016\tand\tDecember\t31,\t2015,\nrespectively) | (1,153,308) | (853,348) |
| Total\tshareholders'\tequity | 9,121,412 | 8,063,039 |
|  | $22,310,324 | $20,782,043 |

# CONSOLIDATED	STATEMENTS	OF	CASH	FLOWS

| Net	income | $1,283,388 | $665,783 | $764,146 |
| :--- | :--- | :--- | :--- |
| Adjustments: |  |  |  |
| Depreciation\tand\tamortization | 894,915 | 827,008 | 772,445 |
| Impairment\tof\tPullmantur\trelated\tassets | — | 411,267 | — |
| Net\tdeferred\tincome\ttax\texpense\t(benefit) | 2,608 | (10,001) | (41,003) |
| Share-based\tcompensation\texpense | 32,659 | 36,073 | 26,116 |
| Equity\tinvestment\tincome | (128,350) | (81,026) | (51,640) |
| Amortization\tof\tdebt\tissuance\tcosts | 52,795 | 52,153 | 54,993 |
| Loss\ton\tsale\tof\tproperty\tand\tequipment | — | — | 17,401 |
| Loss\ton\tderivative\tinstruments\tnot\tdesignated\tas\thedges | 45,670 | 59,162 | 48,637 |
| Changes\tin\toperating\tassets\tand\tliabilities: |  |  |  |
| Decrease\tin\ttrade\tand\tother\treceivables,\tnet | 4,759 | 63,102 | 100,095 |
| (Increase)\tdecrease\tin\tinventories | (1,679) | 1,197 | 26,254 |
| Decrease\t(increase)\tin\tprepaid\texpenses\tand\tother\tassets | 11,519 | (2,262) | 21,234 |
| Increase\t(decrease)\tin\taccounts\tpayable | 29,564 | (25,278) | (40,651) |
| Increase\t(decrease)\tin\taccrued\tinterest | 7,841 | (10,749) | (53,951) |
| Increase\tin\taccrued\texpenses\tand\tother\tliabilities | 20,718 | 33,859 | 62,019 |
| Increase\t(decrease)\tin\tcustomer\tdeposits | 188,632 | (92,849) | 14,885 |
| Dividends\treceived\tfrom\tunconsolidated\taffiliates | 75,942 | 33,338 | 5,814 |
| Other,\tnet | (4,291) | (14,411) | 16,965 |
| Net\tcash\tprovided\tby\toperating\tactivities | 2,516,690 | 1,946,366 | 1,743,759 |
| Investing\tActivities |  |  |  |
| Purchases\tof\tproperty\tand\tequipment | (2,494,363) | (1,613,340) | (1,811,398) |
| Cash\tpaid\ton\tsettlement\tof\tderivative\tfinancial\tinstruments | (213,202) | (178,597) | (68,098) |
| Investments\tin\tand\tloans\tto\tunconsolidated\taffiliates | (9,155) | (56,163) | (188,595) |
| Cash\treceived\ton\tloans\tto\tunconsolidated\taffiliates | 38,213 | 124,253 | 76,167 |
| Proceeds\tfrom\tsale\tof\tproperty\tand\tequipment | — | — | 220,000 |
| Other,\tnet\t(1) | (46,385) | (19,128) | 1,546 |
| Net\tcash\tused\tin\tinvesting\tactivities | (2,724,892) | (1,742,975) | (1,770,378) |
| Financing\tActivities |  |  |  |
| Debt\tproceeds | 7,338,560 | 4,399,501 | 4,153,958 |
| Debt\tissuance\tcosts | (88,241) | (68,020) | (72,974) |
| Repayments\tof\tdebt | (6,365,570) | (4,118,553) | (3,724,218) |
| Purchase\tof\ttreasury\tstock | (299,960) | (200,000) | (236,074) |
| Dividends\tpaid | (346,487) | (280,212) | (198,952) |
| Proceeds\tfrom\texercise\tof\tcommon\tstock\toptions | 2,258 | 11,252 | 70,879 |
| Cash\treceived\ton\tsettlement\tof\tderivative\tfinancial\tinstruments | — | — | 22,835 |
| Other,\tnet | 3,249 | 2,520 | 2,026 |
| Net\tcash\tprovided\tby\t(used\tin)\tfinancing\tactivities | 243,809 | (253,512) | 17,480 |
| Effect\tof\texchange\trate\tchanges\ton\tcash | (24,569) | (17,555) | (6,307) |

| Net	increase	(decrease)	in	cash	and	cash	equivalents | 11,038 | (67,676) | (15,446) |
| :--- | :--- | :--- | :--- |
| Cash\tand\tcash\tequivalents\tat\tbeginning\tof\tyear | 121,565 | 189,241 | 204,687 |
| Cash\tand\tcash\tequivalents\tat\tend\tof\tyear | $132,603 | $121,565 | $189,241 |
| Supplemental\tDisclosures |  |  |  |
| Cash\tpaid\tduring\tthe\tyear\tfor: |  |  |  |
| Interest,\tnet\tof\tamount\tcapitalized | $256,775 | $248,611 | $276,933 |
| Non-Cash\tInvesting\tActivities |  |  |  |
| \t\tNotes\treceivable\tissued\tupon\tsale\tof\tproperty\tand\tequipment | $213,042 | $— | $— |

(1)Amount	includes	$26.0	million	in	2016	related	to	cash	included	in	the	divestiture	of	Pullmantur	Holdings	(formerly	known	as	Royal	Caribbean	Holdings	de	España S.L.	or	RCHE).

# CONSOLIDATED	STATEMENTS	OF	SHAREHOLDERS'	EQUITY

|  | Common	Stock | Paid-in	Capital | Retained<br>Earnings | Accumulated	Other<br>Comprehensive<br>Income	(Loss) | Treasury	Stock | Total<br>Shareholders'<br>Equity |
| :--- | :--- | :--- | :--- | :--- | :--- | :--- |
|  |  |  | (in\tthousands) |  |  |  |
| Balances\tat\tJanuary\t1,\t2014 | $2,308 | $3,159,038 | $6,054,952 | $5,671 | $(413,704) | $8,808,265 |
| Issuance\tunder\temployee\trelated\tplans | 23 | 94,514 | — | — | — | 94,537 |
| Common\tStock\tdividends | — | — | (243,550) | — | — | (243,550) |
| Dividends\tdeclared\tby\tnon-controlling\tinterest(1) | — | — | (300) | — | — | (300) |
| Changes\trelated\tto\tcash\tflow\tderivative\thedges | — | — | — | (869,350) | — | (869,350) |
| Change\tin\tdefined\tbenefit\tplans | — | — | — | (7,213) | — | (7,213) |
| Foreign\tcurrency\ttranslation\tadjustments | — | — | — | (26,102) | — | (26,102) |
| Purchase\tof\tTreasury\tStock |  |  |  |  | (236,074) | (236,074) |
| Net\tincome | — | — | 764,146 | — | — | 764,146 |
| Balances\tat\tDecember\t31,\t2014 | 2,331 | 3,253,552 | 6,575,248 | (896,994) | (649,778) | 8,284,359 |
| Issuance\tunder\temployee\trelated\tplans | 8 | 40,497 | — | — | — | 40,505 |
| Common\tStock\tdividends | — | — | (296,169) | — | — | (296,169) |
| Changes\trelated\tto\tcash\tflow\tderivative\thedges | — | — | — | (406,047) | — | (406,047) |
| Change\tin\tdefined\tbenefit\tplans | — | — | — | 4,760 | — | 4,760 |
| Foreign\tcurrency\ttranslation\tadjustments | — | — | — | (30,152) | — | (30,152) |
| Purchases\tof\tTreasury\tStock | — | 3,570 | — | — | (203,570) | (200,000) |
| Net\tincome | — | — | 665,783 | — | — | 665,783 |
| Balances\tat\tDecember\t31,\t2015 | 2,339 | 3,297,619 | 6,944,862 | (1,328,433) | (853,348) | 8,063,039 |
| Issuance\tunder\temployee\trelated\tplans | 7 | 30,898 | — | — | — | 30,905 |
| Common\tStock\tdividends | — | — | (367,909) | — | — | (367,909) |
| Changes\trelated\tto\tcash\tflow\tderivative\thedges | — | — | — | 411,223 | — | 411,223 |
| Change\tin\tdefined\tbenefit\tplans | — | — | — | (1,636) | — | (1,636) |
| Foreign\tcurrency\ttranslation\tadjustments | — | — | — | 2,362 | — | 2,362 |
| Purchases\tof\tTreasury\tStock | — | — | — | — | (299,960) | (299,960) |
| Net\tincome | — | — | 1,283,388 | — | — | 1,283,388 |
| Balances\tat\tDecember\t31,\t2016 | $2,346 | $3,328,517 | $7,860,341 | $(916,484) | $(1,153,308) | $9,121,412 |

(1) Dividends	declared	by	Falmouth	Land	Company	Limited	to	its	non-controlling	shareholder.

# NOTES	TO	THE	CONSOLIDATED	FINANCIAL	STATEMENTS

# Note	1.	General

# Description	of	Business

We	are	a	global	cruise	company.	We	own	and	operate	 three	global	cruise	brands:	Royal	Caribbean	International,	Celebrity	Cruises	and Azamara	 Club	 Cruises.	We	 also	 own	 a	50%	 joint	 venture	 interest	 in	 the	 German	 brand	TUI	 Cruises,	 a	49%	 interest	 in	 the	Spanish	brand Pullmantur	and	have	a	minority	interest	in	the	Chinese	brand	SkySea	Cruises.	Together,	our	Global	Brands	and	our	Partner	Brands	operate	a combined	49	ships	as	of	December	31,	2016.	Our	ships	operate	on	a	selection	of	worldwide	itineraries	that	call	on	approximately	 535	destinations on	all	seven	continents.

Effective	July	31,	2016,	we	sold	51%	of	our	interest	in	Pullmantur	Holdings	(formerly	known	as	Royal	Caribbean	Holdings	de	España	S.L. or	"RCHE"),	the	parent	company	of	the	Pullmantur	brand.	We	retain	a	49%	interest	in	Pullmantur	Holdings	as	well	as	full	ownership	of	the	four vessels	currently	operated	by	the	Pullmantur	brand	under	bareboat	charter	arrangements.	We	account	for	the	bareboat	charters	of	the	vessels	to Pullmantur	 Holdings	 as	 operating	 leases.	 We	 also	 provide	 certain	 ship	 management	 services	 to	 Pullmantur	 Holdings.	 We	 recognized	 an immaterial	gain	on	the	sale	of	our	majority	interest	in	Pullmantur	Holdings.	In	addition,	we	also	continue	to	retain	full	ownership	of	the	aircraft, which	were	not	impacted	by	this	sale	transaction.	Effective	August	2016,	we	no	longer	consolidate	Pullmantur	Holdings	in	our	consolidated financial	statements	and	our	investment	in	the	company	is	accounted	for	under	the	equity	method	of	accounting.	Refer	to	Note	6.	Other	Assets	for further	information	on	our	retained	interest	in	Pullmantur	Holdings.	The	sale	did	not	represent	a	strategic	shift	that	will	have	a	major	effect	on	our operations	and	financial	results,	as	we	continue	to	provide	similar	itineraries	to	and	source	passengers	from	the	markets	served	by	the	Pullmantur business.	Therefore,	the	sale	of	Pullmantur	Holdings	did	not	meet	the	criteria	for	discontinued	operations	reporting.

# 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.	Refer	to	Note	2.	Summary	of	Significant	Accounting	Policies	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.	Refer	to	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.

Prior	to	January	1,	2016,	we	consolidated	the	operating	results	of	Pullmantur	Holdings	on	a two-month	reporting	lag	to	allow	for	more	timely preparation	of	our	consolidated	financial	statements.	Effective	January	1,	2016,	we	eliminated	the	two-month	reporting	lag	to	reflect	Pullmantur Holdings'	 financial	 position,	 results	 of	 operations	 and	 cash	 flows	 concurrently	 and	 consistently	 with	 the	 fiscal	 calendar	 of	 the	 Company ("elimination	of	the	Pullmantur	reporting	lag").	The	elimination	of	the	Pullmantur	reporting	lag	represented	a	change	in	accounting	principle which	we	believed	to	be	preferable	because	it	provided	more	current	information	to	the	users	of	our	financial	statements.	A	change	in	accounting principle	requires	retrospective	application,	if	material.	The	impact	of	the	elimination	of	the	reporting	lag	was	immaterial	to	prior	periods	and	is immaterial	 for	 our	 fiscal	 year	 ended	 December	 31,	 2016.	As	 a	 result,	 we	 have	 accounted	 for	 this	 change	 in	 accounting	 principle	 in	 our consolidated	results	for	the	year	ended	December	31,	2016.	Accordingly,	the	results	of	Pullmantur	Holdings	for	November	and	December	2015 are	included	in	our	statement	of	comprehensive	income	(loss)	for	the	year	ended	December	31,	2016.	The	effect	of	this	change	was	a	decrease	to net	income	of	$21.7	million,	which	has	been	reported	within	Other	income	in	our	consolidated	statements	of	comprehensive	income	(loss)	for	the year	ended	December	31,	2016.

# NOTES	TO	THE	CONSOLIDATED	FINANCIAL	STATEMENTS	(Continued)

# Note	2.	Summary	of	Significant	Accounting	Policies

# Revenues	and	Expenses

Deposits	received	on	sales	of	passenger	cruises	are	initially	recorded	as	customer	deposit	liabilities	on	our	balance	sheet.	Customer	deposits are	subsequently	recognized	as	passenger	ticket	revenues,	together	with	revenues	from	onboard	and	other	goods	and	services	and	all	associated cruise	operating	expenses	of	a	voyage.

Historically,	we	recognized	revenues	and	cruise	operating	expenses	for	our	shorter	voyages	(voyages	of	ten	days	or	less)	upon	voyage	completion while	we	recognized	revenues	and	cruise	operating	expenses	for	voyages	in	excess	of	ten	days	on	a	pro-rata	basis.	We	followed	this	completed voyage	recognition	approach	on	our	shorter	voyages	because	the	difference	between	prorating	revenue	from	such	voyages	and	recognizing	such revenue	at	the	completion	of	the	voyage	was	immaterial	to	our	consolidated	financial	statements.	As	of	September	30,	2014,	we	changed	our methodology	and	recognized	passenger	ticket	revenues,	revenues	from	onboard	and	other	goods	and	services	and	all	associated	cruise	operating expenses	for	all	of	our	uncompleted	voyages	on	a	pro-rata	basis.	We	believe	that	recognizing	revenues	and	cruise	operating	expenses	on	a	pro-rata basis	for	all	voyages	is	preferable	as	revenues	and	expenses	are	recorded	in	the	period	in	which	the	revenue	generating	activities	are	performed.

The	effect	of	this	change	was	an	increase	to	Passenger	ticket	revenues	 and	Onboard	and	other	revenues,	as	well	as	an	increase	to	our	Cruise operating	expenses.	The	change	was	not	 individually	material	 to	our	revenues	or	any	of	our	cruise	operating	expenses,	and	resulted	 in	an aggregate	increase	to	operating	income	and	net	income	of	$53.2	million	for	the	year	ended	December	31,	2014.	In	addition,	the	change	has	not been	retrospectively	applied	to	prior	periods,	as	the	impact	of	prorating	all	voyages	was	immaterial	to	the	respective	periods	presented.

Revenues	and	expenses	include	port	costs	that	vary	with	guest	head	counts.	The	amounts	of	such	port	costs	charged	to	our	guests	and	included within	Passenger	ticket	revenues	on	a	gross	basis	were	$570.3	million,	$561.1	million	 and	$546.6	million	for	the	years	2016,	2015	 and	2014, respectively.

# Cash	and	Cash	Equivalents

Cash	and	cash	equivalents	include	cash	and	marketable	securities	with	original	maturities	of	less	than	90	days.

# Inventories

Inventories	consist	of	provisions,	supplies	and	fuel	carried	at	the	lower	of	cost	(weighted-average)	or	market.

# Property	and	Equipment

Property	and	equipment	are	stated	at	cost	less	accumulated	depreciation	and	amortization.	We	capitalize	interest	as	part	of	the	cost	of acquiring	certain	assets.	Improvement	costs	that	we	believe	add	value	to	our	ships	are	capitalized	as	additions	to	the	ship	and	depreciated	over	the shorter	of	the	improvements'	estimated	useful	lives	or	that	of	the	associated	ship.	The	estimated	cost	and	accumulated	depreciation	of	replaced	or refurbished	ship	components	are	written	off	and	any	resulting	losses	are	recognized	in	Cruise	operating	expenses.	Liquidated	damages	received from	shipyards	as	a	result	of	the	late	delivery	of	a	new	ship	are	recorded	as	reductions	to	the	cost	basis	of	the	ship.

Depreciation	of	property	and	equipment	is	computed	using	the	straight-line	method	over	the	estimated	useful	life	of	the	asset.	The	useful lives	of	our	ships	are	generally	30	years,	net	of	a	15%	projected	residual	value.	The	30-year	useful	life	of	our	newly	constructed	ships	and	 15% associated	residual	value	are	both	based	on	the	weighted-average	of	all	major	components	of	a	ship.	Our	useful	life	and	residual	value	estimates take	into	consideration	the	impact	of	anticipated	technological	changes,	long-term	cruise	and	vacation	market	conditions	and	historical	useful lives	of	similarly-built	ships.	In	addition,	we	 take	 into	consideration	our	estimates	of	 the	weighted-average	useful	 lives	of	 the	ships'	major component	systems,	such	as	hull,	superstructure,	main	electric,	engines	and	cabins.	Depreciation	for	assets	under	capital	leases	is	computed	using the	shorter	of	the	lease	term	or	related	asset	life.

Depreciation	of	property	and	equipment	is	computed	utilizing	the	following	useful	lives:

|  | Years |
| :--- | :--- |
| Ships | generally\t30 |
| Ship\timprovements | 3-20 |
| Buildings\tand\timprovements | 10-40 |
| Computer\thardware\tand\tsoftware | 3-10 |
| Transportation\tequipment\tand\tother | 3-30 |

We	review	long-lived	assets	for	impairment	whenever	events	or	changes	in	circumstances	indicate,	based	on	estimated	undiscounted	future cash	flows,	that	the	carrying	amount	of	these	assets	may	not	be	fully	recoverable.	For	purposes	of	recognition	and	measurement	of	an	impairment loss,	long-lived	assets	are	grouped	with	other	assets	and	liabilities	at	the	lowest	level	for	which	identifiable	cash	flows	are	largely	independent	of the	cash	flows	of	other	assets	and	liabilities.	The	lowest	level	for	which	we	maintain	identifiable	cash	flows	that	are	independent	of	the	cash	flows of	other	assets	and	liabilities	is	at	the	ship	level	for	our	ships	and	at	the	aggregated	asset	group	level	for	our	aircraft.	If	estimated	future	cash	flows are	less	than	the	carrying	value	of	an	asset,	an	impairment	charge	is	recognized	to	the	extent	its	carrying	value	exceeds	fair	value.

We	use	the	deferral	method	to	account	for	drydocking	costs.	Under	the	deferral	method,	drydocking	costs	incurred	are	deferred	and	charged to	expense	on	a	straight-line	basis	over	the	period	to	the	next	scheduled	drydock,	which	we	estimate	to	be	a	period	of	thirty	to	sixty	months	based on	the	vessel's	age	as	required	by	Class.	Deferred	drydock	costs	consist	of	the	costs	to	drydock	the	vessel	and	other	costs	incurred	in	connection with	the	drydock	which	are	necessary	to	maintain	the	vessel's	Class	certification.	Class	certification	is	necessary	in	order	for	our	cruise	ships	to	be flagged	 in	 a	 specific	 country,	 obtain	 liability	 insurance	 and	 legally	 operate	 as	 passenger	 cruise	 ships.	 The	 activities	 associated	 with	 those drydocking	costs	cannot	be	performed	while	the	vessel	is	in	service	and,	as	such,	are	done	during	a	drydock	as	a	planned	major	maintenance activity.	The	significant	deferred	drydock	costs	consist	of	hauling	and	wharfage	services	provided	by	the	drydock	facility,	hull	inspection	and related	activities	(e.g.,	scraping,	pressure	cleaning,	bottom	painting),	maintenance	to	steering	propulsion,	thruster	equipment	and	ballast	tanks, port	services	such	as	tugs,	pilotage	and	line	handling,	and	freight	associated	with	these	items.	We	perform	a	detailed	analysis	of	the	various activities	performed	for	each	drydock	and	only	defer	those	costs	that	are	directly	related	to	planned	major	maintenance	activities	necessary	to maintain	Class.	The	costs	deferred	are	not	otherwise	routinely	periodically	performed	to	maintain	a	vessel's	designed	and	intended	operating capability.	Repairs	and	maintenance	activities	are	charged	to	expense	as	incurred.

# Goodwill

Goodwill	represents	the	excess	of	cost	over	the	fair	value	of	net	tangible	and	identifiable	intangible	assets	acquired.	We	review	goodwill	for impairment	at	the	reporting	unit	level	annually	or,	when	events	or	circumstances	dictate,	more	frequently.	The	impairment	review	for	goodwill consists	of	a	qualitative	assessment	of	whether	it	is	more-likely-than-not	that	a	reporting	unit's	fair	value	is	less	than	its	carrying	amount,	and	if necessary,	 a	 two-step	 goodwill	 impairment	 test.	 Factors	 to	 consider	 when	 performing	 the	 qualitative	 assessment	 include	 general	 economic conditions,	limitations	on	accessing	capital,	changes	in	forecasted	operating	results,	changes	in	fuel	prices	and	fluctuations	in	foreign	exchange rates.	If	the	qualitative	assessment	demonstrates	that	it	is	more-likely-than-not	that	the	estimated	fair	value	of	the	reporting	unit	exceeds	its carrying	value,	it	is	not	necessary	to	perform	the	two-step	goodwill	impairment	test.	We	may	elect	to	bypass	the	qualitative	assessment	and proceed	directly	to	step	one,	for	any	reporting	unit,	in	any	period.	On	a	periodic	basis,	we	elect	to	bypass	the	qualitative	assessment	and	proceed	to step	one	to	corroborate	the	results	of	recent	years'	qualitative	assessments.	We	can	resume	the	qualitative	assessment	for	any	reporting	unit	in	any subsequent	period.	When	performing	the	two-step	goodwill	impairment	test,	the	fair	value	of	the	reporting	unit	is	determined	and	compared	to	the carrying	value	of	the	net	assets	allocated	to	the	reporting	unit.	If	the	fair	value	of	the	reporting	unit	exceeds	its	carrying	value,	no	further	analysis or	write-down	of	goodwill	is	required.	If	the	fair	value	of	the	reporting	unit	is	less	than	the	carrying	value	of	its	net	assets,	the	implied	fair	value	of the	reporting	unit	is	allocated	to	all	its	underlying	assets	and	liabilities,	including	both	recognized	and	unrecognized	tangible	and	intangible	assets, based	on	their	fair	value.	If	necessary,	goodwill	is	then	written	down	to	its	implied	fair	value.

# Intangible	Assets

In	connection	with	our	acquisitions,	we	have	acquired	certain	intangible	assets	to	which	value	has	been	assigned	based	on	our	estimates. Intangible	assets	that	are	deemed	to	have	an	indefinite	life	are	not	amortized,	but	are	subject	to	an	annual	impairment	test,	or	when	events	or circumstances	dictate,	more	frequently.	The	indefinite-life	intangible	asset	impairment	test	consists	of	a	comparison	of	the	fair	value	of	the indefinite-life	intangible	asset	with	its	carrying	amount.	If	the	carrying	amount	exceeds	its	fair	value,	an	impairment	loss	is	recognized	in	an amount	equal	to	that	excess.	If	the	fair	value	exceeds	its	carrying	amount,	the	indefinite-life	intangible	asset	is	not	considered	impaired.

Other	intangible	assets	assigned	finite	useful	lives	are	amortized	on	a	straight-line	basis	over	their	estimated	useful	lives.

# Advertising	Costs

Advertising	costs	are	expensed	as	incurred	except	those	costs	which	result	in	tangible	assets,	such	as	brochures,	which	are	treated	as	prepaid expenses	and	charged	to	expense	as	consumed.	Advertising	costs	consist	of	media	advertising	as	well	as	brochure,	production	and	direct	mail costs.

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	use	non-derivative	financial	instruments	designated	as	hedges	of	our	net	investment	in	our	foreign	operations	and investments.	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.

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	of	up	to	three	years,	utilizing	market	data	relevant	to	the	hedge	horizon	of	each	hedge	relationship.	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	immediately recognized	in	earnings	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	and	derivative	instrument	cash	flows	from	hedges	of	foreign	currency	risk	on	debt payments	as	financing	activities.

# Foreign	Currency	Translations	and	Transactions

We	translate	assets	and	liabilities	of	our	foreign	subsidiaries	whose	functional	currency	is	the	local	currency,	at	exchange	rates	in	effect	at the	balance	sheet	date.	We	translate	revenues	and	expenses	at	weighted-average	exchange	rates	for	the	period.	Equity	is	translated	at	historical rates	and	the	resulting	foreign	currency	translation	adjustments	are	included	as	a	component	of	Accumulated	other	comprehensive	loss,	which	is reflected	as	a	separate	component	of	Shareholders'	equity.	Exchange	gains	or	losses	arising	from	the	remeasurement	of	monetary	assets	and liabilities	denominated	in	a	currency	other	than	the	functional	currency	of	the	entity	involved	are	immediately	included	in	our	earnings,	except	for certain	liabilities	that	have	been	designated	to	act	as	a	hedge	of	a	net	investment	in	a	foreign	operation	or	investment.	Exchange	gains	were	$39.8 million,	$34.6	million	and	$49.5	million	for	the	years	2016,	2015	and	2014,	respectively,	and	were	recorded	within	Other	income	(expense).	The majority	of	our	transactions	are	settled	in	United	States	dollars.	Gains	or	losses	resulting	from	transactions	denominated	in	other	currencies	are recognized	in	income	at	each	balance	sheet	date.

# 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	many	of	which	we	have	long-term	relationships	with	and	which	have	credit	risks	acceptable	to	us	or	where	the	credit risk	is	spread	out	among	a	large	number	of	counterparties.	As	of	December	31,	2016,	we	did	not	have	any	exposure	under	our	derivative instruments.	As	of	December	31,	2015,	we	had	counterparty	credit	risk	exposure	under	our	derivative	instruments	of	approximately	$4.8	million, which	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	we	follow	regarding credit	ratings	and	instrument	maturities	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.

# Earnings	Per	Share

Basic	earnings	per	share	is	computed	by	dividing	net	income	by	the	weighted-average	number	of	shares	of	common	stock	outstanding during	each	period.	Diluted	earnings	per	share	incorporates	the	incremental	shares	issuable	upon	the	assumed	exercise	of	stock	options	and conversion	of	potentially	dilutive	securities.

# Stock-Based	Employee	Compensation

We	measure	and	recognize	compensation	expense	at	the	estimated	fair	value	of	employee	stock	awards.	Compensation	expense	for	awards and	the	related	tax	effects	are	recognized	as	they	vest.	We	use	the	estimated	amount	of	expected	forfeitures	to	calculate	compensation	costs	for	all outstanding	awards.

We	own	and	operate	three	global	cruise	brands,	Royal	Caribbean	International,	Celebrity	Cruises	and	Azamara	Club	Cruises.	We	also	own	a 50%	joint	venture	interest	with	TUI	AG	which	operates	the	brand	TUI	Cruises,	a	 49%	interest	in	the	Spanish	brand	Pullmantur	and	have	a minority	interest	in	the	Chinese	brand	SkySea	Cruises.	We	believe	our	brands	possess	the	versatility	to	enter	multiple	cruise	market	segments within	the	cruise	vacation	industry.	Although	each	of	these	brands	have	its	own	marketing	style	as	well	as	ships	and	crews	of	various	sizes,	the nature	of	the	products	sold	and	services	delivered	by	these	brands	share	a	common	base	(i.e.,	the	sale	and	provision	of	cruise	vacations).	Our brands	also	have	similar	itineraries	as	well	as	similar	cost	and	revenue	components.	In	addition,	our	brands	source	passengers	from	similar markets	around	the	world	and	operate	in	similar	economic	environments	with	a	significant	degree	of	commercial	overlap.	As	a	result,	our	brands have	been	aggregated	as	a	single	reportable	segment	based	on	the	similarity	of	their	economic	characteristics,	types	of	consumers,	regulatory environment,	maintenance	requirements,	supporting	systems	and	processes	as	well	as	products	and	services	provided.	Our	Chairman	and	Chief Executive	Officer	has	been	identified	as	the	chief	operating	decision-maker	and	all	significant	operating	decisions	including	the	allocation	of resources	are	based	upon	the	analyses	of	the	Company	as	one	segment.

Information	by	geographic	area	is	shown	in	the	table	below.	Passenger	ticket	revenues	are	attributed	to	geographic	areas	based	on	where	the reservation	originates.

|  | 2016 | 2015 | 2014 |
| :--- | :--- | :--- | :--- |
| Passenger\tticket\trevenues: |  |  |  |
| United\tStates | 55% | 55% | 53% |
| All\tother\tcountries | 45% | 45% | 47% |

# Recent	Accounting	Pronouncements

# Revenue	from	Contracts	with	Customers

In	May	2014,	amended	GAAP	guidance	was	issued	to	clarify	the	principles	used	to	recognize	revenue	for	all	entities.	The	guidance	also requires	 more	 detailed	 disclosures	 and	 provides	 additional	 guidance	 for	 transactions	 that	 were	 not	 comprehensively	 addressed	 in	 the	 prior accounting	guidance.	This	guidance	must	be	applied	using	one	of	two	retrospective	application	methods	and	will	be	effective	for	our	annual reporting	period	beginning	after	December	15,	2017,	including	interim	periods	therein.	Early	adoption	is	permitted	for	our	annual	reporting	period beginning	after	December	15,	2016,	including	interim	periods	therein.	We	are	currently	evaluating	the	impact,	if	any,	of	the	adoption	of	the revenue	recognition	guidance	to	our	consolidated	financial	statements	and	intend	to	elect	the	modified	retrospective	method	to	all	contracts	on	the date	of	initial	application,	January	1,	2018.		This	will	involve	applying	the	guidance	retrospectively	only	to	the	most	current	period	presented	in the	financial	statements	and	recognizing	the

cumulative	effect	of	initially	applying	the	guidance	as	an	adjustment	to	the	January	1,	2018	opening	balance	of	retained	earnings	at	the	date	of initial	application.

# Leases

In	 February	 2016,	 amended	 GAAP	 guidance	 was	 issued	 to	 increase	 the	 transparency	 and	 comparability	 of	 lease	 accounting	 among organizations.	For	leases	with	a	term	greater	than	12	months,	the	amendments	require	the	lease	rights	and	obligations	arising	from	the	leasing arrangements,	including	operating	leases,	to	be	recognized	as	assets	and	liabilities	on	the	balance	sheet.	The	amendments	also	expand	the	required disclosures	surrounding	leasing	arrangements.	The	guidance	must	be	applied	using	a	retrospective	application	method	and	will	be	effective	for financial	statements	issued	for	fiscal	years	beginning	after	December	15,	2018	and	interim	periods	within	those	years.	Early	adoption	is	permitted. We	are	currently	evaluating	the	impact	of	the	adoption	of	this	newly	issued	guidance	to	our	consolidated	financial	statements.

# Effect	of	Derivative	Contract	Novations	on	Existing	Hedge	Accounting	Relationships

In	March	2016,	amended	GAAP	guidance	was	issued	addressing	the	effect	of	derivative	contract	novations	on	existing	hedge	accounting relationships.	The	 amendments	 clarify	 that	 a	 change	 in	 the	 counterparty	 to	 a	 derivative	 instrument	 that	 has	 been	 designated	 as	 a	 hedging instrument	does	not,	in	and	of	itself,	require	dedesignation	of	that	hedging	relationship	provided	that	all	other	hedge	accounting	criteria	continue	to be	met.	The	guidance	must	be	applied	using	a	prospective	or	modified	retrospective	application	method	and	will	be	effective	for	financial statements	issued	for	fiscal	years	beginning	after	December	15,	2016	and	interim	periods	within	those	fiscal	years.	Early	adoption	is	permitted, including	adoption	in	an	interim	period.	The	adoption	of	this	newly	issued	guidance	is	not	expected	to	have	a	material	impact	to	our	consolidated financial	statements.

# Classification	of	Certain	Cash	Receipts	and	Cash	Payments

In	August	2016,	amended	GAAP	guidance	was	issued	to	clarify	how	certain	cash	receipts	and	cash	payments	are	presented	and	classified	in the	statement	of	cash	flows.	The	amendments	are	aimed	at	reducing	the	existing	diversity	in	practice.	The	guidance	should	be	applied	using	a retrospective	transition	method	to	each	period	presented	and	will	be	effective	for	annual	periods	beginning	after	December	15,	2017	and	interim periods	within	those	annual	periods.	Early	adoption	is	permitted,	including	adoption	in	an	interim	period.	The	adoption	of	this	newly	issued guidance	is	not	expected	to	have	a	material	impact	to	our	consolidated	financial	statements.

# Intra-Entity	Transfers	of	Assets	Other	Than	Inventory

In	October	2016,	amended	GAAP	guidance	was	issued	that	requires	the	income	tax	consequences	of	an	intra-entity	transfer	of	an	asset,	other than	inventory,	to	be	recognized	at	the	time	that	the	transfer	occurs,	rather	than	when	the	asset	is	sold	to	an	outside	party.	The	new	guidance	is effective	for	annual	and	interim	reporting	periods	beginning	after	December	15,	2018.	Early	adoption	is	permitted	as	of	the	beginning	of	an	annual period	for	which	financial	statements	have	not	been	issued.	The	guidance	is	required	to	be	adopted	retrospectively	by	recording	a	cumulative- effect	adjustment	to	retained	earnings	as	of	the	beginning	of	the	adoption	period.	We	are	currently	evaluating	the	impact	of	the	adoption	of	this newly	issued	guidance	to	our	consolidated	financial	statements.

# Interests	held	through	Related	Parties	that	are	under	Common	Control

In	October	2016,	amended	GAAP	guidance	was	issued	related	to	Interests	held	through	Related	Parties	that	are	under	Common	Control, which	alters	how	a	decision	maker	needs	to	consider	indirect	interests	in	a	Variable	Interest	Entity	("VIE")	held	through	an	entity	under	common control.	The	amended	guidance	addresses	how	a	single	decision	maker	of	a	VIE	should	treat	indirect	interests	that	are	held	through	related	parties under	common	control,	when	determining	whether	it	is	the	primary	beneficiary	of	that	VIE.	The	amendments	in	this	update	are	effective	for	fiscal

years	beginning	after	December	15,	2016,	including	interim	periods	within	those	fiscal	years.	Early	adoption	is	permitted,	including	adoption	in	an interim	period.	We	are	currently	evaluating	the	impact	of	the	adoption	of	this	newly	issued	guidance	to	our	consolidated	financial	statements.

# Reclassifications

On	January	1,	2016,	we	adopted	Accounting	Standards	Codification	("ASC")	835,	Presentation	of	Debt	Issuance	Costs,	using	the	retrospective approach.	Due	to	the	adoption	of	ASC	835,	$139.8	million	of	debt	issuance	costs	have	been	reclassified	in	the	consolidated	balance	sheet,	as	of December	31,	2015,	from	Other	assets	to	either	Current	portion	of	long-term	debt	or	Long-term	 debt	in	order	to	conform	to	the	current	year presentation.

For	the	years	ended	December	31,	2015	and	December	31,	2014,	share-based	compensation	expense	of	 $36.1	million	 and	$26.1	million, equity	 investment	 income	 of	$81.0	million	 and	$51.6	million	 and	 amortization	 of	 debt	 issuance	 costs	 of	$27.1	 million	 and	$26.6	 million, respectively,	have	been	reclassified	in	the	consolidated	statements	of	cash	flows	from	Other,	net	to	Share-based	compensation	expense,	Equity investment	income	and	Amortization	of	debt	issuance	costs,	respectively,	within	Net	cash	provided	by	operating	activities	in	order	to	conform	to the	current	year	presentation.

Additionally,	for	the	years	ended	December	31,	2015	and	December	31,	2014,	amortization	of	debt	issuance	costs	of $17.2	million	and	$19.8 million,	respectively,	have	been	reclassified	from	Decrease	(increase)	in	prepaid	expenses	and	other	assets and	$7.9	million	and	$8.5	million, respectively,	have	been	reclassified	from	Increase in	accrued	expenses	and	other liabilities in	the	consolidated	statements	of	cash	flows	 to Amortization	of	debt	issuance	costs,	within	Net	cash	provided	by	operating	activities	in	order	to	conform	to	the	current	year	presentation.

# Note	3.	Goodwill

The	carrying	amount	of	goodwill	attributable	to	our	Royal	Caribbean	International	and	Celebrity	Cruises	reporting	units	and	the	changes	in such	balances	during	the	years	ended	December	31,	2016	and	December	31,	2015	were	as	follows	(in	thousands):

|  | Royal<br>Caribbean<br>International | Celebrity	Cruises | Total |
| :--- | :--- | :--- | :--- |
| Balance\tat\tDecember\t31,\t2014 | $286,958 | $— | $286,958 |
| Foreign\tcurrency\ttranslation\tadjustment | (194) | — | (194) |
| Balance\tat\tDecember\t31,\t2015 | 286,764 | — | 286,764 |
| Goodwill\tattributable\tto\tpurchase\tof\tOcean\tAdventures(1) | — | 1,600 | 1,600 |
| Foreign\tcurrency\ttranslation\tadjustment | (10) | 32 | 22 |
| Balance\tat\tDecember\t31,\t2016 | $286,754 | $1,632 | $288,386 |

(1) The	Ocean	Adventures	business	combination,	including	purchase	transaction	and	assets	acquired,	was	immaterial	to	our	consolidated	financial	statements.

The	carrying	amount	of	goodwill	attributable	to	our	Pullmantur	reporting	unit	and	the	changes	in	such	balances	during	the	year	ended December	31,	2015	were	as	follows	(in	thousands):

During	the	fourth	quarter	of	2016,	we	performed	a	qualitative	assessment	of	whether	it	was	more-likely-than-not	that	our	Royal	Caribbean International	reporting	unit's	fair	value	was	less	than	its	carrying	amount	before	applying	the	two-step	goodwill	impairment	test.	The	qualitative analysis	 included	 assessing	 the	 impact	 of	 certain	 factors	 such	 as	 general	 economic	 conditions,	 limitations	 on	 accessing	 capital,	 changes	 in forecasted	operating	results,	changes	in	fuel	prices	and	fluctuations	in	foreign	exchange	rates.	Based	on	our	qualitative	assessment,	we	concluded that	it	was	more-likely-than-not	that	the	estimated	fair	value	of	the	Royal	Caribbean	International	reporting	unit	exceeded	its	carrying	value	and thus,	we	did	not	proceed	to	the	two-step	goodwill	impairment	test.	No	indicators	of	impairment	exist	primarily	because	the	reporting	unit's	fair value	has	consistently	exceeded	its	carrying	value	by	a	significant	margin,	its	financial	performance	has	been	solid	in	the	face	of	mixed	economic environments	and	forecasts	of	operating	results	generated	by	the	reporting	unit	appear	sufficient	to	support	its	carrying	value.	As	a	result	of	our assessment,	we	did	not	record	an	impairment	of	goodwill	for	the	year	ended	December	31,	2016.

During	the	fourth	quarter	of	2015,	we	performed	our	annual	impairment	review	of	goodwill	for	the	Royal	Caribbean	International	reporting unit.	We	elected	to	bypass	the	qualitative	assessment	and	proceeded	directly	to	step	one	of	the	two-step	goodwill	impairment	test	to	corroborate the	results	of	prior	years'	qualitative	assessments.	As	a	result	of	the	test,	we	determined	the	fair	value	of	the	Royal	Caribbean	International reporting	unit	exceeded	its	carrying	value	by	approximately	90%	resulting	in	no	impairment	to	the	Royal	Caribbean	International	goodwill	for	the year	ended	December	31,	2015.

In	2015,	for	our	Pullmantur	reporting	unit,	we	reviewed	the	two-step	goodwill	impairment	test	based	on	our	cash	flow	projections.	As	a	result of	this	analysis,	we	determined	that	the	carrying	value	of	the	Pullmantur	reporting	unit	exceeded	its	fair	value.	Accordingly,	upon	the	completion of	the	two-step	impairment	test,	we	recognized	a	goodwill	impairment	charge	of	$123.8	million.	The	charge	reflected	the	full	carrying	amount	of the	goodwill	leaving	Pullmantur	with	no	goodwill	on	its	books.	This	impairment	charge	was	recognized	in	earnings	during	the	third	quarter	of 2015	and	is	reported	within	Impairment	of	Pullmantur	related	assets	within	our	consolidated	statements	of	comprehensive	income	(loss).	Refer	to Note	 14.	Fair	Value	Measurements	and	Derivative	Instruments for	further	information	regarding	the	Pullmantur	reporting	unit	estimated	fair value	calculation.

For	 the	year	ended	December	31,	2014,	we	did	not	record	an	 impairment	of	goodwill	for	our	reporting	units.	Accumulated	goodwill impairment	losses	as	of	December	31,	2016	were	$443.0	million	attributable	to	our	Pullmantur	reporting	unit.

# Note	4.	Intangible	Assets

Intangible	assets	are	reported	in	Other	assets	in	our	consolidated	balance	sheets.	The	carrying	amount	of	indefinite-life	intangible	assets	was not	material	as	of	December	31,	2016.	Indefinite-life	intangible	assets	consisted	of	the	following	as	of	December	31,	2015	(in	thousands):

During	the	third	quarter	of	2015,	we	performed	an	interim	impairment	evaluation	of	Pullmantur's	trademarks	and	trade	names	using	a discounted	cash	flow	model	and	the	relief-from-royalty	method	to	compare	the	fair	value	of	these	indefinite-lived	intangible	assets	to	its	carrying value.	We	used	a	discount	rate	comparable	to	the	rate	used	in	valuing	the	Pullmantur	reporting	unit	in	our	goodwill	impairment	test.	Based	on	our cash	flow	projections,	we	determined	that	the	fair	value	of	Pullmantur's	trademarks	and	trade	names	no	longer	exceeded	their	carrying	value. Accordingly,	we	recognized	an	impairment	charge	of	approximately	$174.3	million	to	write	down	trademarks	and	trade	names	to	their	fair	value. The	charge	reflected	the	full	carrying	amount	of	the	trademark	and	trade	names	leaving	Pullmantur	with	no	intangible	assets	on	its	books.	This impairment	charge	was	recognized	in	earnings	during	the	third	quarter	of	2015	and	is	reported	within	Impairment	of	Pullmantur	related	assets within	our	consolidated	statements	of	comprehensive	income	(loss).	Refer	to	Note	14.	Fair	Value	Measurements	and	Derivative	Instruments	 for further	information	regarding	the	estimated	fair	value	calculation	of	these	assets.

For	the	year	ended	December	31,	2014,	we	did	not	record	an	impairment	of	Pullmantur's	trademark	and	trade	names.

Finite-life	intangible	assets	had	a	gross	carrying	amount	and	accumulated	amortization	amount	of	 $8.4	million	and	$0.2	million,	respectively, as	of	December	31,	2016,	consisting	of	operating	licenses	to	operate	in	the	Galapagos	Islands.	As	of	December	31,	 2016,	the	remaining	weighted average	remaining	life	of	these	licenses	were	approximately	27.6	years.	Amortization	expense	for	finite-life	intangible	assets	was	immaterial	to our	consolidated	financial	statements.

# Note	5.	Property	and	Equipment

Property	and	equipment	consists	of	the	following	(in	thousands):

|  | 2016 | 2015 |
| :--- | :--- | :--- |
| Ships | $23,978,822 | $22,102,025 |
| Ship\timprovements | 2,359,639 | 2,019,294 |
| Ships\tunder\tconstruction | 354,425 | 734,998 |
| Land,\tbuildings\tand\timprovements,\tincluding\tleasehold\timprovements\tand\tport\tfacilities | 341,605 | 337,109 |
| Computer\thardware\tand\tsoftware,\ttransportation\tequipment\tand\tother | 1,108,301 | 1,025,264 |
| Total\tproperty\tand\tequipment | 28,142,792 | 26,218,690 |
| Less—accumulated\tdepreciation\tand\tamortization | (7,981,365) | (7,440,912) |
|  | $20,161,427 | $18,777,778 |

Ships	under	construction	include	progress	payments	for	the	construction	of	new	ships	as	well	as	planning,	design,	interest	and	other	associated costs.	We	capitalized	interest	costs	of	$25.3	million,	$26.5	million	and	$28.8	million	for	the	years	2016,	2015	and	2014,	respectively.

We	review	our	long-lived	assets	for	impairment	whenever	events	or	changes	in	circumstances	indicate	potential	impairment.	During	2016,	we sold	our	51%	interest	in	Pullmantur	Holdings.	For	further	information	on	the	sale	transaction,	refer	to	Note	1.	 General.	Due	to	this	sale	and	the resulting	change	in	the	nature	of	the	cash	flows	generated	by	the	vessels	that	are	owned	by	us	and	operated	by	Pullmantur	Holdings,	we	reviewed these	vessels	for	impairment.	We	determined	that	the	undiscounted	future	cash	flows	of	the	vessels	exceeded	their	carrying	value;	therefore,	no impairment	was	required.

During	2016,	we	entered	into	agreements	with	STX	France	to	build	a	fifth	Oasis-class	ship	and	a	third	and	fourth	"Project	Edge"	ship.	Refer	to Note	15.	Commitments	and	Contingencies	for	further	information.

In	April	2016,	we	completed	the	previously	announced	sale	of	Splendour	of	the	Seas	to	TUI	Cruises.	Concurrent	with	the	acquisition,	TUI Cruises	leased	the	ship	to	Thomson	Cruises,	an	affiliate	of	TUI	AG,	our	joint	venture	partner,	who	will	operate	the	ship.	The	gain	recognized	did not	have	a	material	effect	to	our	consolidated	financial	statements.

During	2015,	in	conjunction	with	performing	the	two-step	goodwill	impairment	test	for	the	Pullmantur	reporting	unit,	we	identified	that	the estimated	fair	value	of	certain	long-lived	assets,	consisting	of	two	ships	and	three	aircraft	were	less	than	their	carrying	values.	As	a	result	of	this determination,	we	evaluated	these	assets	pursuant	to	our	long-lived	asset	impairment	test,	resulting	in	an	impairment	charge	of	$113.2	million	to write	down	these	assets	to	their	estimated	fair	values.	This	impairment	charge	was	recognized	in	earnings	during	the	third	quarter	of	2015	and	is reported	within	Impairment	of	Pullmantur	related	assets	within	our	consolidated	statements	of	comprehensive	income	(loss).	Refer	to	Note	14. Fair	Value	Measurements	and	Derivative	Instruments	for	further	information	regarding	the	estimated	fair	value	calculation	of	these	assets.

During	 2015,	 Pullmantur	 sold	Ocean	Dream	 to	 an	 unrelated	 third	 party	 for	$34.6	 million.	The	 purchase	 price	 was	 paid	 via	 a	 secured promissory	note,	payable	over	a	nine-year	period.	The	buyer's	obligations	under	this	loan	accrue	interest	at	the	rate	of	 6.0%	per	annum	and	are secured	by	a	first	priority	mortgage	on	the	ship.	The	sale	resulted	in	an	immaterial	gain	that	was	deferred	and	is	expected	to	be	recognized	at	the end	of	the	nine-year	term.

# Note	6.	Other	Assets

A	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	 TUI	 Cruises	 GmbH,	 our	50%-owned	 joint	 venture	 which	 operates	 the	 brand	 TUI	 Cruises,	 is	 a	 VIE.	As	 of December	31,	2016,	the	net	book	value	of	our	investment	in	TUI	Cruises	was	approximately	 $515.9	million,	 consisting	 of	$323.5	million	in equity	and	a	loan	of	$192.4	million.	The	loan,	which	was	made	in	connection	with	the	sale	of	Splendour	of	the	Seas	in	April	2016,	accrues	interest at	a	rate	of	6.25%	per	annum	and	is	payable	over	a	 10-year	term.	This	loan	is	50%	guaranteed	by	TUI	AG,	our	joint	venture	partner,	and	is secured	by	a	first	priority	mortgage	on	the	ship.	Refer	to	Note	5.	Property	and	Equipment	for	further	information.	As	of	December	31,	2015,	the net	book	value	of	our	investment	in	TUI	Cruises	was	approximately	$293.8	million,	consisting	of	equity.	The	majority	of	these	amounts	were included	within	Other	assets	in	our	consolidated	balance	sheets.

In	addition,	we	and	TUI	AG	have	each	guaranteed	the	repayment	of	50%	of	a	bank	loan	borrowed	by	TUI	Cruises.	As	of	December	31,	2016, the	outstanding	principal	amount	of	the	loan	was	€116.3	million,	or	approximately	$122.7	million	based	on	the	exchange	rate	at	December	31, 2016.	While	this	loan	matures	in	May	2022,	the	lenders	have	agreed	to	release	each	shareholder's	guarantee	in	2018.	The	loan	amortizes	quarterly and	is	secured	by	first	mortgages	on	the	Mein	Schiff	1	and	Mein	Schiff	2	vessels.	Based	on	current	facts	and	circumstances,	we	do	not	believe potential	obligations	under	our	guarantee	of	this	bank	loan	are	probable.

Our	investment	amount,	outstanding	term	loan	and	the	potential	obligations	under	the	bank	loan	guarantee	are	substantially	our	maximum exposure	 to	 loss	 in	 connection	 with	 our	 investment	 in	TUI	 Cruises.	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	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.

TUI	Cruises	has	three	newbuild	ships	on	order	with	Meyer	Turku	scheduled	to	be	delivered	in	each	of	2017,	2018	and	2019.	TUI	Cruises has	in	place	agreements	for	the	secured	financing	of	each	of	the	ships	on	order	for	up	to	80%	of	the	contract	price.	The	remaining	portion	of	the contract	price	of	the	ships	is	expected	to	be	funded	through	an	existing	€150.0	million	bank	facility	and	TUI	Cruises'	cash	flows	from	operations. The	various	ship	construction	and	financing	agreements	include	certain	restrictions	on	each	of	our	and	TUI	AG's	ability	to	reduce	our	current ownership	interest	in	TUI	Cruises	below	37.55%	through	2021.

We	have	determined	that	Pullmantur	Holdings,	in	which	we	have	a	 49%	noncontrolling	interest,	is	a	VIE	for	which	we	are	not	the	primary beneficiary,	as	we	do	not	have	the	power	to	direct	the	activities	that	most	significantly	impact	the	entity's	economic	performance.	Accordingly, subsequent	to	the	sale	of	our	51%	interest	in	Pullmantur	Holdings	to	Springwater	Capital	LLC	("Springwater"),	we	do	not	consolidate	this	entity and	we	account	for	this	investment	under	the	equity	method	of	accounting.	As	of	December	31,	2016,	the	net	book	value	of	our	investment	in Pullmantur	Holdings	was	was	immaterial	to	our	consolidated	financial	statements.

In	conjunction	with	the	sale,	we	provided	a	non-revolving	working	capital	facility	to	a	Pullmantur	Holdings	subsidiary	in	the	amount	of	up	to €15.0	million	or	approximately	$15.8	million	based	on	the	exchange	rate	at	December	31,	2016.	Proceeds	of	the	facility,	which	may	be	drawn through	July	2018,	will	bear	interest	at	the	rate	of	6.5%	per	annum	and	are	payable	through	2022.	Springwater	has	guaranteed	repayment	of	 51% of	the	outstanding	amounts	under	the	facility.	As	of	December	31,	2016,	no	amounts	had	been	drawn	on	this	facility.	See	Note	1.	 General	for further	discussion	on	the	sales	transaction.

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.	This	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.	During	 the	year	ended December	31,	2016	and	December	31,	2015,	we	made	payments	of	$39.8	million	and	$21.7	million,	respectively,	to	Grand	Bahama	for	ship	repair and	maintenance	services.	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	December	31,	2016,	the	net	book	value	of	our	investment	in	Grand	Bahama	was approximately	$47.0	million,	consisting	of	$23.2	million	in	equity	and	a	loan	of	$23.8	million.	As	of	December	31,	2015,	the	net	book	value	of our	investment	in	Grand	Bahama	was	approximately	$51.2	million,	 consisting	 of	$12.6	million	in	equity	and	a	loan	of	$38.6	million.	These amounts	represent	our	maximum	exposure	to	loss	related	to	our	investment	in	Grand	Bahama.	During	2016,	our	debt	agreement	with	Grand Bahama	was	amended	to	extend	the	maturity	by	10	years	and	increase	the	applicable	interest	rate	to	the	lower	of	(i)	LIBOR	plus	3.50%	and	(ii) 5.50%.	Interest	payable	on	the	loan	is	due	on	a	semi-annual	basis.	We	continue	to	classify	the	loan,	as	modified,	as	non-accrual	status.	The	loan balance	is	included	within	Other	assets	in	our	consolidated	balance	sheets.	During	the	year	ended	December	31,	2016	and	2015,	we	received payments	of

approximately	$14.8	million	and	$4.4	million,	respectively.	We	monitor	credit	risk	associated	with	the	loan	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	the	outstanding	loan	is	not	probable	as	of	December	31,	2016.

We	have	determined	that	Skysea	Holding	International	Ltd.	("Skysea	Holding"),	in	which	we	have	a	 35%	noncontrolling	interest,	is	a	VIE	for which	we	are	not	the	primary	beneficiary,	as	we	do	not	have	the	power	to	direct	the	activities	that	most	significantly	impact	the	entity's	economic performance.	Accordingly,	we	do	not	consolidate	this	entity	and	we	account	for	this	investment	under	the	equity	method	of	accounting.	In December	2014,	we	and	Ctrip.com	International	Ltd,	which	also	owns	35%	of	Skysea	Holding,	each	provided	a	debt	facility	to	a	wholly	owned subsidiary	of	Skysea	Holding	in	the	amount	of	$80.0	million.	Interest	under	these	facilities,	which	mature	in	January	2030,	initially	accrues	at	a rate	of	3.0%	per	annum	with	an	increase	of	at	least	0.5%	every	two	years	through	maturity.	The	facilities,	which	are	pari	passu	to	each	other,	are each	100%	guaranteed	by	Skysea	Holding	and	are	secured	by	first	priority	mortgages	on	the	ship	SkySea	Golden	Era.	As	of	December	31,	2016, the	net	book	value	of	our	investment	in	Skysea	Holding	and	its	subsidiaries	was	approximately	$95.4	million,	consisting	of	$9.2	million	in	equity and	 loans	 of	$86.2	 million.	 As	 of	December	 31,	 2015,	 the	 net	 book	 value	 of	 our	 investment	 in	 Skysea	 Holding	 and	 its	 subsidiaries	 was approximately	$99.8	million,	consisting	of	$17.3	million	in	equity	and	a	loan	of	$82.5	million.	The	majority	of	these	amounts	were	included within	Other	assets	in	our	consolidated	balance	sheets	and	represent	our	maximum	exposure	to	loss	related	to	our	investment	in	Skysea	Holding.

The	following	table	sets	forth	information	regarding	our	investments	accounted	for	under	the	equity	method	of	accounting,	including	the entities	discussed	above,	(in	thousands):

|  |  | For	the	period	ended	December	31, |  |
| :--- | :--- | :--- | :--- |
|  | 2016 | 2015 | 2014 |
| Share\tof\tequity\tincome\tfrom\tinvestments | $128,350 | $81,026 | $51,640 |
| Dividends\treceived | $75,942 | $33,338 | $5,814 |

We	also	provide	ship	management	services	to	TUI	Cruises	GmbH,	Pullmantur	Holdings	and	Skysea	Holding.	Additionally,	we	bareboat charter	to	Pullmantur	the	vessels	currently	operated	by	its	brands,	which	were	retained	by	us	in	connection	with	the	sale	of	our	majority	interest. We	recorded	the	following	as	it	relates	to	these	services	in	our	operating	results	within	our	consolidated	statements	of	comprehensive	income (loss)	(in	thousands):

Summarized	financial	information	for	our	affiliates	accounted	for	under	the	equity	method	of	accounting	was	as	follows	(in	thousands):

|  | As	of	December	31, | As	of	December	31, |
| :--- | :--- | :--- |
|  | 2016 | 2015 |
| Current\tAssets | $382,529 | $315,264 |
| Non\tCurrent\tAssets | 2,922,471 | 2,246,809 |
| Total\tAssets | $3,305,000 | $2,562,073 |
| Current\tLiabilities | $761,331 | $585,887 |
| Non\tCurrent\tLiabilities | 1,693,941 | 1,231,262 |
| Total\tLiabilities | $2,455,272 | $1,817,149 |
| Equity\tAttributable\tto: |  |  |
| Noncontrolling\tInterest | $1,544 | $1,683 |

|  | For	the	period	ended	December	31, | For	the	period	ended	December	31, | For	the	period	ended	December	31, |
| :--- | :--- | :--- | :--- |
|  | 2016 | 2015 | 2014 |
| Total\tRevenues | $1,232,191 | $990,172 | $797,441 |
| Total\tExpenses | (972,454) | (830,898) | (682,430) |
| Net\tIncome | $259,737 | $159,274 | $115,011 |

# Note	7.	Long-Term	Debt

Long-term	debt	consists	of	the	following	(in	thousands):

In	February	2016,	we	amended	our	unsecured	term	loans	for	Oasis	of	the	Seas	and	Allure	of	the	Seas	to	reduce	the	margins	on	those	facilities and	incorporate	certain	covenant	improvements	included	in	our	more	recent	credit	facilities.	The	interest	rate	on	both	the	$420.0	million	floating rate	tranche	of	the	Oasis	of	the	Seas	term	loan	and	the	$1.1	billion	Allure	of	the	Seas	term	loan	was	reduced	from	LIBOR	plus	1.85%	to	LIBOR plus	1.65%.	These	amendments	did	not	result	in	the	extinguishment	of	debt.

In	February	2016,	we	agreed	with	the	lenders	on	our	€365.0	million	unsecured	term	loan	due	2017	to	convert	€247.5	million,	 or	$273.2 million,	of	the	outstanding	principal	balance	from	Euro	to	United	States	dollars.	Interest	on	the	new	United	States	dollar	tranche	accrues	at	a floating	rate	based	on	LIBOR	plus	the	applicable	margin.	The	balance	of	the	facility	of	€117.5	million	will	remain	outstanding	in	Euro	and	will continue	to	accrue	interest	at	a	floating	rate

based	on	EURIBOR,	subject	to	a	0%	floor,	plus	the	applicable	margin.	The	applicable	margin	varies	with	our	debt	rating	and	was 1.75%	as	of December	31,	2016.	The	amendment	did	not	result	in	the	extinguishment	of	debt.

In	April	2016,	we	took	delivery	of	Ovation	of	the	Seas.	To	finance	the	purchase,	we	borrowed	$841.8	million	under	a	previously	committed unsecured	term	loan	which	is	95%	guaranteed	by	Euler	Hermes	Deutschland	AG	("Hermes"),	the	official	export	credit	agency	of	Germany.	The loan	amortizes	semi-annually	over	12	years	and	bears	interest	at	LIBOR	plus	a	margin	of	 1.00%,	totaling	2.26%	as	of	December	31,	2016.	During 2015,	we	entered	into	forward-starting	interest	rate	swap	agreements	which	effectively	converted	$830.0	million	of	the	loan	from	the	floating	rate available	to	us	per	the	credit	agreement	to	a	fixed	rate,	including	the	applicable	margin,	of	3.16%	effective	from	April	2016	through	the	maturity of	the	loan.	See	Note	14.	Fair	Value	Measurements	and	Derivative	Instruments	for	further	information	regarding	these	agreements.

In	April	2016,	we	entered	into	and	drew	in	full	on	a	credit	agreement	which	provides	an	unsecured	term	loan	in	the	amount	of	 $200	million. The	loan	is	due	and	payable	at	maturity	in	April	2017.	Interest	on	the	loan	accrues	at	a	floating	rate	based	on	LIBOR	plus	a	margin	of	1.30%, totaling	2.06%	as	of	December	31,	2016.	The	proceeds	from	this	loan	were	used	to	repay	amounts	outstanding	under	our	unsecured	revolving credit	facilities.

In	May	2016,	we	took	delivery	of	Harmony	of	the	Seas.	To	finance	the	purchase,	we	borrowed	an	unsecured	Euro-denominated	term	loan	in the	 amount	 of	€700.7	million,	 or	$739.2	million	based	on	the	exchange	rate	at	December	31,	2016,	and	an	unsecured	United	States	dollar- denominated	term	loan	in	the	amount	of	$226.1	million	under	previously	committed	credit	agreements.	Both	of	the	facilities	are	100%	guaranteed by	 Compagnie	 Francaise	 d'Assurance	 pour	 le	 Commerce	 Extérieur	 ("COFACE"),	 the	 official	 export	 credit	 agency	 of	 France.	 The	 Euro- denominated	term	loan	amortizes	semi-annually	over	12	years	and	bears	interest	at	EURIBOR,	subject	to	a	 0%	floor,	plus	the	applicable	margin	of 1.15%, totaling	1.15%	as	of	December	31,	2016.	The	United	States	dollar-denominated	term	loan	amortizes	semi-annually	over	12	years	and bears	interest	at	a	fixed	rate	of	2.53%.	During	2015,	we	entered	into	forward-starting	interest	rate	swap	agreements	which	effectively	converted €693.4	million,	or	$731.5	million	based	on	the	exchange	rate	at	December	31,	2016,	of	the	Euro-denominated	term	loan	from	the	floating	rate	per the	credit	agreement	to	a	fixed	rate,	including	the	applicable	margin,	of	2.26%	effective	from	May	2016	through	the	maturity	of	the	loan.	See	Note 14.	Fair	Value	Measurements	and	Derivative	Instruments	for	further	information	regarding	these	agreements.

All	of	our	unsecured	ship	financing	term	loans	are	guaranteed	by	the	export	credit	agency	in	the	respective	country	in	which	the	ship	is constructed.	In	consideration	for	these	guarantees,	depending	on	the	financing	arrangement,	we	pay	to	the	applicable	export	credit	agency	(1)	fees from	1.48%	per	annum	based	on	the	outstanding	loan	balance	semi-annually	over	the	term	of	the	loan	(subject	to	adjustment	under	certain	of	our facilities	based	upon	our	credit	ratings)	or	(2)	an	upfront	fee	of	2.35%	to	2.37%	of	the	maximum	loan	amount.	We	amortize	the	fees	that	are	paid upfront	over	the	life	of	the	loan	and	those	that	are	paid	semi-annually	over	each	respective	payment	period.	We	classify	these	fees	within	Debt issuance	costs	in	our	consolidated	statements	of	cash	flows	and	within	Other	assets	in	our	consolidated	balance	sheets.

Under	certain	of	our	agreements,	the	contractual	interest	rate,	facility	fee	and/or	export	credit	agency	fee	vary	with	our	debt	rating.

The	unsecured	senior	notes	and	senior	debentures	are	not	redeemable	prior	to	maturity,	except	that	certain	series	may	be	redeemed	upon	the payment	of	a	make-whole	premium.

Following	is	a	schedule	of	annual	maturities	on	long-term	debt	including	capital	leases	as	of	 December	31,	2016	for	each	of	the	next	five years	(in	thousands):

| Year |  |
| :--- | :--- |
| 2017 | $1,285,735 |
| 2018 | 2,309,952 |
| 2019 | 754,496 |
| 2020 | 1,608,187 |
| 2021 | 632,920 |
| Thereafter | 2,796,146 |

# Note	8.	Shareholders'	Equity

During	the	fourth	and	third	quarters	of	2016,	we	declared	a	cash	dividend	on	our	common	stock	of	$0.48	per	share	which	was	paid	in	the	first quarter	of	2017	and	fourth	quarter	of	2016,	respectively.	We	also	declared	and	paid	a	cash	dividend	on	our	common	stock	of	 $0.375	per	share during	each	of	the	first	and	second	quarters	of	2016.

During	the	fourth	and	third	quarters	of	2015,	we	declared	a	cash	dividend	on	our	common	stock	of	$0.375	per	share	which	was	paid	in	the first	quarter	of	2016	and	fourth	quarter	of	2015,	respectively.	We	also	declared	and	paid	a	cash	dividend	on	our	common	stock	of	$0.30	per	share during	each	of	the	first	and	second	quarters	of	2015.	During	the	first	quarter	of	2015,	we	also	paid	a	cash	dividend	on	our	common	stock	of	$0.30 per	share	which	was	declared	during	the	fourth	quarter	of	2014.

During	the	fourth	quarter	of	2015,	our	board	of	directors	authorized	a	common	stock	repurchase	program	for	up	to	$500	million	that	was completed	 in	August	2016.	During	2016,	we	purchased	4.1	million	 shares	 for	 a	 total	 of	$300.0	million	 in	open	market	 transactions.	These transactions	were	recorded	within	Treasury	stock	in	our	consolidated	balance	sheet.	Our	repurchases	under	this	program,	including	the	2.1	million shares	repurchased	for	$200.0	million	during	the	fourth	quarter	of	2015,	totaled	$500.0	million.

# Note	9.	Stock-Based	Employee	Compensation

We	currently	have	awards	outstanding	under	two	stock-based	compensation	plans,	which	provide	for	awards	to	our	officers,	directors	and key	employees.	The	plans	consist	of	a	2000	Stock	Award	Plan	and	a	2008	Equity	Plan.	Our	ability	to	issue	new	awards	under	the	2000	Stock Award	Plan	terminated	in	accordance	with	the	terms	of	the	plan	in	September	2009.	The	2008	Equity	Plan,	as	amended,	provides	for	the	issuance of	up	to	14,000,000	shares	of	our	common	stock	pursuant	to	grants	of	(i)	incentive	and	non-qualified	stock	options,	(ii)	stock	appreciation	rights, (iii)	 stock	 awards	 (including	 time-based	 and/or	 performance-based	 stock	 awards)	 and	 (iv)	 restricted	 stock	 units	 (including	 time-based	 and performance-based	restricted	stock	units).	During	any	calendar	year,	no	one	individual	(other	than	non-employee	members	of	our	Board	of Directors)	may	be	granted	awards	of	more	than	500,000	shares	and	no	non-employee	member	of	our	Board	of	Directors	may	be	granted	awards with	a	value	in	excess	of	$500,000	at	the	grant	date.	Options	and	restricted	stock	units	outstanding	as	of	 December	31,	2016	generally	vest	in equal	installments	over	four	years	from	the	date	of	grant.	In	addition,	performance	shares	and	performance	share	units	generally	vest	in	 three years.	With	certain	limited	exceptions,	awards	are	forfeited	if	the	recipient	ceases	to	be	an	employee	before	the	shares	vest.	Options	are	granted	at a	price	not	less	than	the	fair	value	of	the	shares	on	the	date	of	grant	and	expire	not	later	than	ten	years	after	the	date	of	grant.

Prior	to	2012,	our	officers	received	a	combination	of	stock	options	and	restricted	stock	units.	Beginning	in	2012,	our	officers	instead	receive their	long-term	incentive	awards	through	a	combination	of	performance	share	units	and	restricted	stock	units.	Each	performance	share	unit	award is	expressed	as	a	target	number	of	performance	share	units	based	upon	the	fair	market	value	of	our	common	stock	on	the	date	the	award	is	issued. The	actual	number	of	shares	underlying	each	award	(not	to	exceed	200%	of	the	target	number	of	performance	share	units)	will	be	determined based	upon	the	Company's	achievement	of	a	specified	performance	target	range.	In	2016,	we	issued	a	target	number	of

182,464	performance	share	units,	which	will	vest	approximately	 three	years	following	the	award	issue	date.	The	performance	payout	of	these grants	will	be	based	on	return	on	our	invested	capital	("ROIC")	and	earnings	per	share	("EPS")	for	the	year	ended	December	31,	2018,	as	may	be adjusted	by	the	Talent	and	Compensation	Committee	of	our	Board	of	Directors	in	early	2019	for	events	that	are	outside	of	management's	control. In	2014,	we	also	issued	a	one-time	performance-based	equity	award	to	our	Chairman	&	Chief	Executive	Officer	in	a	target	amount	of	63,771 performance	share	units,	with	the	actual	number	of	shares	payable	under	the	grant	to	range	from	0%	to	200%	of	target	based	on	our	2015	ROIC performance.	In	February	2016,	the	Compensation	Committee	set	the	payout	level	for	this	grant	at	165%	of	target.	The	shares	issued	in	settlement of	this	award	vested	in	February	2016	but	remain	subject	to	restrictions	on	transfer	until	December	2017,	the	third	anniversary	of	the	award issuance	date.

Beginning	in	2016,	our	senior	officers	meeting	certain	minimum	age	and	service	criteria	receive	their	long-term	incentive	awards	through	a combination	of	restricted	stock	awards	and	restricted	stock	units.	The	restricted	stock	awards	are	subject	to	both	performance	and	time-based vesting	criteria	while	the	restricted	stock	units	are	subject	only	to	time-based	vesting	criteria.	Each	restricted	stock	award	is	issued	in	an	amount equal	to	200%	of	the	target	number	of	shares	underlying	the	award	based	upon	the	fair	market	value	of	our	common	stock	on	the	date	the	award	is issued.	Dividends	accrue	(but	do	not	get	paid)	on	the	restricted	stock	awards	during	the	vesting	period,	with	the	accrued	amounts	to	be	paid	out following	vesting	only	on	the	number	of	shares	underlying	the	award	which	actually	vest	based	on	satisfaction	of	the	performance	criteria.	The actual	number	of	shares	that	vest	(not	to	exceed	200%	of	the	shares)	will	be	determined	based	upon	the	Company's	achievement	of	a	specified performance	target	range.	In	2016,	we	issued	132,228	restricted	stock	awards,	representing	200%	of	the	target	number	of	shares	underlying	the award,	all	of	which	are	considered	issued	and	outstanding	from	the	date	of	issuance,	however;	grantees	will	only	retain	those	shares	earned	as	the result	of	the	Company	achieving	the	performance	goals	during	the	measurement	period.	The	performance	payout	of	the	2016	awards	will	be	based on	our	return	on	invested	capital	("ROIC")	and	earnings	per	share	("EPS")	for	the	year	ended	December	31,	2018,	as	may	be	adjusted	by	the Talent	and	Compensation	Committee	of	our	Board	of	Directors	in	early	2019	for	events	that	are	outside	of	management's	control.

We	also	provide	an	Employee	Stock	Purchase	Plan	("ESPP")	to	facilitate	the	purchase	by	employees	of	up	to	 1,300,000	shares	of	common stock	in	the	aggregate.	Offerings	to	employees	are	made	on	a	quarterly	basis.	Subject	to	certain	limitations,	the	purchase	price	for	each	share	of common	stock	is	equal	to	85%	of	the	average	of	the	market	prices	of	the	common	stock	as	reported	on	the	New	York	Stock	Exchange	on	the	first business	day	of	the	purchase	period	and	the	last	business	day	of	each	month	of	the	purchase	period.	During	2016,	2015	and	2014,	42,347,	28,724 and	26,921	shares	of	our	common	stock	were	purchased	under	the	ESPP	at	a	weighted-average	price	of	 $65.48,	$72.52	and	$52.08,	respectively.

In	1994,	we	granted	to	our	Chairman	and	Chief	Executive	Officer	an	award	of	common	stock,	issuable	in	quarterly	installments	of	10,086 shares	until	the	earlier	of	the	termination	of	his	employment	or	June	2014.	In	furtherance	of	this	grant,	we	issued	an	aggregate	of	20,172	shares	of common	stock	in	2014.

Total	compensation	expense	recognized	for	employee	stock-based	compensation	for	the	years	ended	 December	31,	2016,	2015	 and	2014 was	as	follows:

| Classification	of	expense | 2016 | 2015 | 2014 |
| :--- | :--- | :--- | :--- |
| (In\tthousands) |  |  |  |
| Marketing,\tselling\tand\tadministrative\texpenses | $32,659 | $36,073 | $26,116 |
| Total\tcompensation\texpense | $32,659 | $36,073 | $26,116 |

The	fair	value	of	each	stock	option	grant	is	estimated	on	the	date	of	grant	using	the	Black-Scholes	option	pricing	model.	The	estimated	fair value	of	stock	options,	less	estimated	forfeitures,	is	amortized	over	the	vesting	period	using	the	graded-vesting	method.	We	did	not	issue	any	stock options	during	the	years	ended	December	31,	2016,	2015	and	2014.

Stock	option	activity	and	information	about	stock	options	outstanding	are	summarized	in	the	following	table:

| Stock	Option	Activity | Number	of<br>Options | Weighted-<br>Average<br>Exercise<br>Price | Weighted-<br>Average<br>Remaining<br>Contractual<br>Term | Aggregate<br>Intrinsic<br>Value(1) |
| :--- | :--- | :--- | :--- | :--- |
|  |  |  | (years) | (in\tthousands) |
| Outstanding\tat\tJanuary\t1,\t2016 | 411,809 | $33.69 | 3.12 | $28,111 |
| Granted | — | — | — | — |
| Exercised | (61,014) | $37.87 | — | — |
| Canceled | (4,485) | $44.72 | — | — |
| Outstanding\tat\tDecember\t31,\t2016 | 346,310 | $32.82 | 2.39 | $17,221 |
| Vested\tand\texpected\tto\tvest\tat\tDecember\t31,\t2016 | 346,310 | $32.82 | 2.39 | $17,221 |
| Options\tExercisable\tat\tDecember\t31,\t2016 | 346,310 | $32.82 | 2.39 | $17,221 |

(1) The	intrinsic	value	represents	the	amount	by	which	the	fair	value	of	stock	exceeds	the	option	exercise	price	as	of	December	31,	2016.

The	total	intrinsic	value	of	stock	options	exercised	during	the	years	ended	December	31,	2016,	2015	 and	2014	 was	$17.2	million,	$13.8 million	and	$35.9	million,	respectively.	As	of	December	31,	2016,	there	was	no	unrecognized	compensation	cost,	net	of	estimated	forfeitures, related	to	stock	options	granted	under	our	stock	incentive	plan.

Restricted	stock	units	are	converted	into	shares	of	common	stock	upon	vesting	or,	if	applicable,	are	settled	on	a	one-for-one	basis.	The	cost of	these	awards	is	determined	using	the	fair	value	of	our	common	stock	on	the	date	of	the	grant,	and	compensation	expense	is	recognized	over	the vesting	period.	Restricted	stock	activity	is	summarized	in	the	following	table:

| Restricted	Stock	Units	Activity | Number	of<br>Awards | Weighted-<br>Average<br>Grant	Date<br>Fair	Value |
| :--- | :--- | :--- |
| Non-vested\tshare\tunits\tat\tJanuary\t1,\t2016 | 820,649 | $54.98 |
| Granted | 376,744 | $64.51 |
| Vested | (333,733) | $48.91 |
| Canceled | (115,144) | $58.45 |
| Non-vested\tshare\tunits\texpected\tto\tvest\tas\tof\tDecember\t31,\t2016 | 748,516 | $61.95 |

The	weighted-average	estimated	fair	value	of	restricted	stock	units	granted	during	the	year	ended	2015	and	2014	was	$73.98	 and	$54.60, respectively.	The	total	fair	value	of	shares	released	on	the	vesting	of	restricted	stock	units	during	the	years	ended	December	31,	2016,	2015	and 2014	was	$23.2	million,	$27.6	million	and	$20.7	million,	respectively.	As	of	December	31,	2016,	we	had	$13.7	million	of	total	unrecognized compensation	expense,	net	of	estimated	forfeitures,	related	to	restricted	stock	unit	grants,	which	will	be	recognized	over	the	weighted-average period	of	1.08	years.

Performance	share	units	are	converted	into	shares	of	common	stock	upon	vesting	on	a	one-for-one	basis.	We	estimate	the	fair	value	of	each performance	share	when	the	grant	is	authorized	and	the	related	service	period	has	commenced.	We	remeasure	the	fair	value	of	our	performance shares	in	each	subsequent	reporting	period	until	the	grant	date	has	occurred,	which	is	the	date	when	the	performance	conditions	are	satisfied.	We recognize	compensation	cost	over	the	vesting	period	based	on	the	probability	of	the	service	and	performance	conditions	being	achieved	adjusted for	each	subsequent	fair	value	measurement	until	the	grant	date.	If	the	specified	service	and	performance	conditions

are	not	met,	compensation	expense	will	not	be	recognized	and	any	previously	recognized	compensation	expense	will	be	reversed.	Performance share	units	activity	is	summarized	in	the	following	table:

| Performance	Share	Units	Activity | Number	of<br>Awards | Weighted-<br>Average<br>Grant	Date<br>Fair	Value |
| :--- | :--- | :--- |
| Non-vested\tshare\tunits\tat\tJanuary\t1,\t2016 | 504,211 | $53.57 |
| Granted | 182,464 | $65.83 |
| Vested | (253,509) | $52.25 |
| Canceled | (91,014) | $50.99 |
| Non-vested\tshare\tunits\texpected\tto\tvest\tas\tof\tDecember\t31,\t2016 | 342,152 | $61.78 |

The	weighted-average	estimated	fair	value	of	performance	share	units	granted	during	the	year	ended	2015	and	2014	was	$71.36	and	$56.72, respectively.	The	total	fair	value	of	shares	released	on	the	vesting	of	performance	share	units	during	the	years	ended	December	31,	2016,	2015	and 2014	 was	$16.9	million,	$18.3	million	 and	$0.4	million,	 respectively.	As	 of	December	31,	2016,	 we	 had	$7.9	million	of total	unrecognized compensation	expense,	net	of	estimated	forfeitures,	related	to	performance	share	unit	grants,	which	will	be	recognized	over	the	weighted-average period	of	1.06	years.

The	shares	underlying	our	restricted	stock	awards	to	age	and	service	eligible	senior	officers	are	issued	as	of	the	grant	date	in	an	amount	equal to	200%	of	the	target	number	of	shares.	Following	the	vesting	date,	the	restrictions	will	lift	with	respect	to	the	number	of	shares	for	which	the performance	criteria	was	met	and	any	excess	shares	will	be	cancelled.	Dividends	will	accrue	on	the	issued	restricted	shares	during	the	vesting period,	but	will	not	be	paid	to	the	recipient	until	the	awards	vest	and	the	final	number	of	shares	underlying	the	award	is	determined,	at	which point,	the	dividends	will	be	paid	in	cash	only	on	the	earned	shares.	We	estimate	the	fair	value	of	each	restricted	stock	award	when	the	grant	is authorized	and	the	related	service	period	has	commenced.	We	remeasure	the	fair	value	of	these	restricted	stock	awards	in	each	subsequent reporting	period	until	the	grant	date	has	occurred,	which	is	the	date	when	the	performance	conditions	are	satisfied.	We	recognize	compensation cost	over	the	vesting	period	based	on	the	probability	of	the	service	and	performance	conditions	being	achieved	adjusted	for	each	subsequent	fair value	measurement	until	the	grant	date.	If	the	specified	service	and	performance	conditions	are	not	met,	compensation	expense	will	not	be recognized,	 any	 previously	 recognized	 compensation	 expense	 will	 be	 reversed,	 and	 any	 unearned	 shares	 will	 be	 returned	 to	 the	 Company. Restricted	stock	awards	activity	is	summarized	in	the	following	table:

| Restricted	Stock	Awards	Activity | Number	of<br>Awards | Weighted-<br>Average<br>Grant	Date<br>Fair	Value |
| :--- | :--- | :--- |
| Non-vested\tshare\tunits\tat\tJanuary\t1,\t2016 | — | $— |
| Granted | 132,228 | $66.93 |
| Vested | — | $— |
| Canceled | — | $— |
| Non-vested\tshare\tunits\texpected\tto\tvest\tas\tof\tDecember\t31,\t2016 | 132,228 | $66.93 |

As	of	December	31,	2016,	we	had	$1.5	million	of	total	unrecognized	compensation	expense,	net	of	estimated	forfeitures,	related	to	restricted stock	award	grants,	which	will	be	recognized	over	the	weighted-average	period	of	0.18	years.

# Note	10.	Earnings	Per	Share

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

|  |  | Year	Ended	December	31, |  |
| :--- | :--- | :--- | :--- |
|  | 2016 | 2015 | 2014 |
| Net\tincome\tfor\tbasic\tand\tdiluted\tearnings\tper\tshare | $1,283,388 | $665,783 | $764,146 |
| Weighted-average\tcommon\tshares\toutstanding | 215,393 | 219,537 | 221,658 |
| Dilutive\teffect\tof\tstock\toptions,\tperformance\tshare\tawards\tand\trestricted\tstock\tawards | 923 | 1,152 | 1,386 |
| Diluted\tweighted-average\tshares\toutstanding | 216,316 | 220,689 | 223,044 |
| Basic\tearnings\tper\tshare: |  |  |  |
| Net\tincome | $5.96 | $3.03 | $3.45 |
| Diluted\tearnings\tper\tshare: |  |  |  |
| Net\tincome | $5.93 | $3.02 | $3.43 |

# Note	11.	Retirement	Plan

We	maintain	a	defined	contribution	plan	covering	full-time	shoreside	employees	who	have	completed	the	minimum	period	of	continuous service.	Annual	contributions	to	the	plan	are	discretionary	and	are	based	on	fixed	percentages	of	participants'	salaries	and	years	of	service,	not	to exceed	certain	maximums.	Contribution	expenses	were	$16.7	million,	$16.8	million	and	$15.4	million	for	the	years	ended	December	31,	2016, 2015	and	2014,	respectively.

# Note	12.	Income	Taxes

We	are	subject	to	corporate	income	taxes	in	countries	where	we	have	operations	or	subsidiaries.	We	and	the	majority	of	our	ship-operating and	vessel-owning	subsidiaries	are	currently	exempt	from	U.S.	corporate	tax	on	U.S.	source	income	from	the	international	operation	of	ships pursuant	 to	 Section	 883	 of	 the	 Internal	 Revenue	 Code.	 Regulations	 under	 Section	 883	 have	 limited	 the	 activities	 that	 are	 considered	 the international	operation	of	a	ship	or	incidental	thereto.	Accordingly,	our	provision	for	U.S.	federal	and	state	income	taxes	includes	taxes	on	certain activities	not	considered	incidental	to	the	international	operation	of	our	ships.

Additionally,	some	of	our	ship-operating	subsidiaries	are	subject	to	income	tax	under	the	tonnage	tax	regimes	of	Malta	or	the	United Kingdom.	Under	these	regimes,	income	from	qualifying	activities	is	subject	to	corporate	income	tax,	but	the	tax	is	computed	by	reference	to	the tonnage	of	the	ship	or	ships	registered	under	the	relevant	provisions	of	the	tax	regimes	(the	"relevant	shipping	profits"),	which	replaces	the	regular taxable	income	base.	Income	from	activities	not	considered	qualifying	activities,	which	we	do	not	consider	significant,	remains	subject	to	Maltese or	U.K.	corporate	income	tax.

Income	 tax	 expense	 (benefit)	 for	 items	 not	 qualifying	 under	 Section	 883,	 tonnage	 taxes	 and	 income	 taxes	 for	 the	 remainder	 of	 our subsidiaries	was	approximately	$20.1	million,	$11.1	million	and	$(20.9)	million	and	was	recorded	within	Other	income	(expense)	for	the	years ended	 December	 31,	2016,	2015	 and	2014,	respectively.	In	addition,	all	 interest	expense	and	penalties	related	 to	 income	 tax	 liabilities	are classified	as	income	tax	expense	within	Other	income	(expense).

For	a	majority	of	our	subsidiaries,	we	do	not	expect	to	incur	income	taxes	on	future	distributions	of	undistributed	earnings	of	foreign subsidiaries.	Accordingly,	no	deferred	income	taxes	have	been	provided	for	the	distribution	of	these	earnings.	Where	we	do	expect	to	incur income	taxes	on	future	distributions	of	undistributed	earnings,	we	have	provided	for	deferred	taxes,	which	we	do	not	consider	significant	to	our operations.

As	of	December	31,	2016,	the	Company	had	Net	Operating	Losses	("NOLs")	in	foreign	jurisdictions	of	 $67.6	million.	If	not	utilized,	$51.8 million	of	the	NOLs	are	subject	to	expiration	between	2017	and	2024.	The	Company	has	not	recognized	any	benefits	related	to	these	NOLs,	as	all NOLs	have	full	valuation	allowances.

Net	deferred	tax	assets	and	deferred	tax	liabilities	and	corresponding	valuation	allowances	related	to	our	operations	were	not	material	as	of December	31,	2016	and	2015.

We	regularly	review	deferred	tax	assets	for	recoverability	based	on	our	history	of	earnings,	expectations	of	future	earnings,	and	tax	planning strategies.	Realization	of	deferred	tax	assets	ultimately	depends	on	the	existence	of	sufficient	taxable	income	to	support	the	amount	of	deferred taxes.	A	valuation	allowance	is	recorded	in	those	circumstances	in	which	we	conclude	it	is	not	more-likely-than-not	we	will	recover	the	deferred tax	assets	prior	to	their	expiration.

During	the	fourth	quarter	of	2014,	Spain	adopted	tax	reform	legislation,	which	included	among	other	things,	a	reduction	of	the	corporate income	tax	rate	from	30%	to	28%	in	2015	and	a	further	reduction	to	 25%	in	2016.	As	a	result,	we	adjusted	our	deferred	tax	assets	and	deferred	tax liabilities	in	Spain	to	reflect	the	new	tax	rate	at	which	we	believe	they	will	be	realized.	This	change	resulted	in	a	net	deferred	income	tax	benefit	of $10.0	million.	The	tax	reform	also	amended	the	net	operating	loss	carryforward	rules	by	changing	the	carryforward	period	from	18	years	to unlimited	and	by	changing	the	annual	utilization	limitation	from	25%	of	taxable	income	to	70%	of	taxable	income	for	certain	taxpayers,	including Pullmantur.	As	a	result	of	the	change	of	the	net	operating	loss	carryforward	period,	we	reversed	a	portion	of	the	valuation	allowance	recorded	in 2012	to	the	extent	of	70%	of	the	rate-adjusted	deferred	tax	liability	recorded	for	the	basis	difference	between	the	tax	and	book	values	of	the trademarks	and	trade	names	recorded	at	the	time	of	the	Pullmantur	acquisition	and	other	indefinite	lived	assets	recorded.	The	amount	of	the valuation	allowance	reversed	in	the	fourth	quarter	of	2014	was	$33.5	million	which	was	recorded	as	a	deferred	tax	benefit.	These	deferred	tax adjustments	are	reported	within	Other	income	(expense)	in	our	consolidated	statements	of	comprehensive	income	(loss).

During	the	third	quarter	of	2015,	the	Pullmantur	trademark	and	trade	names	were	impaired.	As	a	result	of	the	impairment,	there	was	no longer	a	difference	between	the	book	and	tax	basis	of	the	trademark	and	trade	names.	During	the	third	quarter	of	2015,	we	reversed	the	deferred tax	liability	of	$43.4	million	and	increased	the	deferred	tax	asset	valuation	allowance	by	 $31.4	million,	 or	 to	100%	of	the	deferred	tax	asset balance.	The	resulting	net	$12.0	million	deferred	tax	benefit	was	recorded	as	part	of	our	income	tax	provision	and	was	reported	within	Other income	(expense) in	 our	 consolidated	 statements	 of	 comprehensive	 income	 (loss).	 Effective	 July	 31,	 2016,	 we	 sold	 51%	 of	 our	 interest	 in Pullmantur	Holdings.	For	further	information	on	the	sale	transaction,	refer	to	Note	1.	General.

# Note	13.	Changes	in	Accumulated	Other	Comprehensive	Income	(Loss)

The	following	table	presents	the	changes	in	accumulated	other	comprehensive	income	(loss)	by	component	for	the	years	ended	 December	31, 2016	and	2015	(in	thousands):

|  | Changes	related<br>to	cash	flow<br>derivative	hedges | Changes	in<br>defined<br>benefit	plans | Foreign	currency<br>translation<br>adjustments | Accumulated	other<br>comprehensive<br>income	(loss) |
| :--- | :--- | :--- | :--- | :--- |
| Accumulated\tcomprehensive\tincome\t(loss)\tat\tJanuary\t1,\t2014 | $43,324 | $(23,994) | $(13,659) | $5,671 |
| Other\tcomprehensive\tloss\tbefore\treclassifications | (919,094) | (8,937) | (28,099) | (956,130) |
| Amounts\treclassified\tfrom\taccumulated\tother\tcomprehensive\tincome\t(loss) | 49,744 | 1,724 | 1,997 | 53,465 |
| Net\tcurrent-period\tother\tcomprehensive\tloss | (869,350) | (7,213) | (26,102) | (902,665) |
| Accumulated\tcomprehensive\tloss\tat\tJanuary\t1,\t2015 | (826,026) | (31,207) | (39,761) | (896,994) |
| Other\tcomprehensive\t(loss)\tincome\tbefore\treclassifications | (697,671) | 3,053 | (25,952) | (720,570) |
| Amounts\treclassified\tfrom\taccumulated\tother\tcomprehensive\tloss | 291,624 | 1,707 | (4,200) | 289,131 |
| Net\tcurrent-period\tother\tcomprehensive\t(loss)\tincome | (406,047) | 4,760 | (30,152) | (431,439) |
| Accumulated\tcomprehensive\tloss\tat\tJanuary\t1,\t2015 | (1,232,073) | (26,447) | (69,913) | (1,328,433) |
| Other\tcomprehensive\tincome\t(loss)\tbefore\treclassifications | 73,973 | (2,777) | 2,362 | 73,558 |
| Amounts\treclassified\tfrom\taccumulated\tother\tcomprehensive\tincome\t(loss) | 337,250 | 1,141 | — | 338,391 |
| Net\tcurrent-period\tother\tcomprehensive\tincome\t(loss) | 411,223 | (1,636) | 2,362 | 411,949 |
| Accumulated\tcomprehensive\tloss\tat\tDecember\t31,\t2016 | $(820,850) | $(28,083) | $(67,551) | $(916,484) |

The	following	table	presents	reclassifications	out	of	accumulated	other	comprehensive	income	(loss)	for	the	years	ended	 December	31,	2016 and	2015	(in	thousands):

# Amount	of	Loss	Reclassified	from	Accumulated	Other	Comprehensive	Income	(Loss)	into	Income

|  | Amount	of	Loss	Reclassified	from	Accumulated	Other	Comprehensive	Income	(Loss)	into	Income | Amount	of	Loss	Reclassified	from	Accumulated	Other	Comprehensive	Income	(Loss)	into	Income | Amount	of	Loss	Reclassified	from	Accumulated	Other	Comprehensive	Income	(Loss)	into	Income | Amount	of	Loss	Reclassified	from	Accumulated	Other	Comprehensive	Income	(Loss)	into	Income |
| :--- | :--- | :--- | :--- | :--- |
| Details\tabout\tAccumulated\tOther\nComprehensive\tIncome\t(Loss)\tComponents | Year\tEnded\tDecember\t31,\n2016 | Year\tEnded\tDecember\t31,\n2015 | Year\tEnded\tDecember\t31,\n2014 | Affected\tLine\tItem\tin\tStatements\nof\tComprehensive\tIncome\t(Loss) |
| Loss\ton\tcash\tflow\tderivative\thedges: |  |  |  |  |
|  |  |  |  | Interest\texpense,\tnet\tof\tinterest |
| \t\t\t\t\tCross\tcurrency\tswaps | $— | $— | $(261) | capitalized |
|  |  |  |  | Interest\texpense,\tnet\tof\tinterest |
| \t\t\t\t\tInterest\trate\tswaps | (41,480) | (36,401) | (15,264) | capitalized |
|  |  |  |  | Depreciation\tand\tamortization |
| \t\t\t\t\tForeign\tcurrency\tforward\tcontracts | (8,114) | (2,871) | (1,887) | expenses |
| \t\t\t\t\tForeign\tcurrency\tforward\tcontracts | (14,342) | 7,580 | (4,291) | \t Other\tincome\t(expense) |
|  |  |  |  | Interest\texpense,\tnet\tof\tinterest |
| \t\t\t\t\tForeign\tcurrency\tforward\tcontracts | — | — | (57) | capitalized |
| \t\t\t\t\tForeign\tcurrency\tforward\tcontracts | (207) | — | — | \t Other\tindirect\toperating\texpenses |
|  |  |  |  | Depreciation\tand\tamortization |
| \t\t\t\t\tForeign\tcurrency\tcollar\toptions | (2,408) | (1,605) | — | expenses |
| \t\t\t\t\tFuel\tswaps | 13,685 | (9,583) | — | \t Other\tincome\t(expense) |
| \t\t\t\t\tFuel\tswaps | (284,384) | (248,744) | (27,984) | Fuel |
|  | (337,250) | (291,624) | (49,744) |  |
| Amortization\tof\tdefined\tbenefit\tplans:\n\t\t\t\tActuarial\tloss | (1,141) | (1,414) | (888) | Payroll\tand\trelated |
| Prior\tservice\tcosts | — | (293) | (836) | Payroll\tand\trelated |
|  | (1,141) | (1,707) | (1,724) |  |
| Release\tof\tforeign\tcumulative\ttranslation\tdue\tto\nsale\tor\tliquidation\tof\tbusinesses: |  |  |  |  |
| Foreign\tcumulative\ttranslation | — | 4,200 | (1,997) | \t Other\toperating |
| Total\treclassifications\tfor\tthe\tperiod | $(338,391) | $(289,131) | $(53,465) |  |

# Note	14.	Fair	Value	Measurements	and	Derivative	Instruments

# Fair	Value	Measurements

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

|  |  | Fair	Value	Measurements	at	December	31,	2016	Using | Fair	Value	Measurements	at	December	31,	2016	Using | Fair	Value	Measurements	at	December	31,	2016	Using |  |  | Fair	Value	Measurements	at	December	31,	2015	Using | Fair	Value	Measurements	at	December	31,	2015	Using | Fair	Value	Measurements	at	December	31,	2015	Using |  |
| :--- | :--- | :--- | :--- | :--- | :--- | :--- | :--- | :--- | :--- | :--- |
| Description | Total\nCarrying\nAmount | Total\tFair\nValue | Level\t1(1) | Level\t2(2) | Level\t3(3) | Total\nCarrying\nAmount | Total\tFair\nValue | Level\t1(1) | Level\t2(2) | Level\t3(3) |
| Assets: |  |  |  |  |  |  |  |  |  |  |
| Cash\tand\tcash\nequivalents(4) | $132,603 | $132,603 | $132,603 | $— | $— | $121,565 | $121,565 | $121,565 | $— | $— |
| Total\tAssets | $132,603 | $132,603 | $132,603 | $— | $— | $121,565 | $121,565 | $121,565 | $— | $— |
| Liabilities: |  |  |  |  |  |  |  |  |  |  |
| Long-term\tdebt |  |  |  |  |  |  |  |  |  |  |
| (including\tcurrent |  |  |  |  |  |  |  |  |  |  |
| portion\tof\tlong-term |  |  |  |  |  |  |  |  |  |  |
| debt)(5) | $9,347,051 | $9,859,266 | $— | $9,859,266 | $— | $8,478,473 | $8,895,009 | $— | $8,895,009 | $— |
| Total\tLiabilities | $9,347,051 | $9,859,266 | $— | $9,859,266 | $— | $8,478,473 | $8,895,009 | $— | $8,895,009 | $— |

(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	the	creditworthiness	of	the	Company.

(3) Inputs	that	are	unobservable.	The	Company	did	not	use	any	Level	3	inputs	as	of	December	31,	2016	and	December	31,	2015.

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

(5) Consists	of	unsecured	revolving	credit	facilities,	senior	notes,	senior	debentures	and	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 December	31,	2016	and	December	31,	2015.

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	Measurements	at	December	31,	2016	Using | Fair	Value	Measurements	at	December	31,	2016	Using | Fair	Value	Measurements	at	December	31,	2016	Using |  | Fair	Value	Measurements	at	December	31,	2015	Using | Fair	Value	Measurements	at	December	31,	2015	Using | Fair	Value	Measurements	at	December	31,	2015	Using |  |
| :--- | :--- | :--- | :--- | :--- | :--- | :--- | :--- | :--- |
| Description | Total\tFair\tValue | Level\t1(1) | Level\t2(2) | Level\t3(3) | Total\tFair\tValue | Level\t1(1) | Level\t2(2) | Level\t3(3) |
| Assets: |  |  |  |  |  |  |  |  |
| Derivative\tfinancial\tinstruments(4) | $19,397 | $— | $19,397 | $— | $134,574 | $— | $134,574 | $— |
| Investments(5) | $3,576 | 3,576 | — | — | $3,965 | 3,965 | — | — |
| Total\tAssets | $22,973 | $3,576 | $19,397 | $— | $138,539 | $3,965 | $134,574 | $— |
| Liabilities: |  |  |  |  |  |  |  |  |
| Derivative\tfinancial\tinstruments(6) | $373,497 | $— | $373,497 | $— | $1,044,292 | $— | $1,044,292 | $— |
| Total\tLiabilities | $373,497 | $— | $373,497 | $— | $1,044,292 | $— | $1,044,292 | $— |

(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. 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.

(4) Consists	of	foreign	currency	forward	contracts,	interest	rate	swaps	and	fuel	swaps.	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	reported	within	Other	assets	in	our	consolidated	balance	sheets.

The	reported	fair	values	are	based	on	a	variety	of	factors	and	assumptions.	Accordingly,	the	fair	values	may	not	represent	actual	values	of the	financial	instruments	that	could	have	been	realized	as	of	December	31,	2016	or	December	31,	2015,	or	that	will	be	realized	in	the	future,	and do	not	include	expenses	that	could	be	incurred	in	an	actual	sale	or	settlement.

In	2016,	we	purchased	Ocean	Adventures.	The	acquisition	was	accounted	for	as	a	business	purchase	combination	using	the	purchase	method of	accounting	which	requires	the	use	of	fair	value	measurements.	The	business	combination,	including	purchase	transaction	and	assets	acquired, was	immaterial	to	our	consolidated	financial	statements.	For	goodwill	attributable	to	the	purchase,	refer	to	Note	3.	Goodwill.

The	 following	 table	 presents	 information	 about	 the	 Company's	 goodwill,	 indefinite-life	 intangible	 assets	 and	 long-lived	 assets	 for	 our Pullmantur	reporting	unit,	further	discussed	in	Note	3.	Goodwill	and	Note	4.	Intangible	Assets,	recorded	at	fair	value	on	a	nonrecurring	basis	(in thousands):

| Description |  | Amount | Total	Fair	Value | Level	3 | Total	Impairment |
| :--- | :--- | :--- | :--- | :--- | :--- |
| Pullmantur\tGoodwill\t(1) | Pullmantur\tGoodwill\t(1) | $— | $— | — | $123,814 |
| Indefinite-life\tintangible\tasset-Pullmantur\ttrademarks\tand\ttrade\tnames\t^(2) | Indefinite-life\tintangible\tasset-Pullmantur\ttrademarks\tand\ttrade\tnames\t^(2) | $— | $— | — | $174,285 |
| Long-lived\tassets\t—\tPullmantur\taircraft\tand\tvessels | (3) | $140,846 | $140,846 | $140,846 | $113,168 |
| Total |  | $140,846 | $140,846 | $140,846 | $411,267 |

(1) We	estimated	the	fair	value	of	the	Pullmantur	reporting	unit	using	a	probability-weighted	discounted	cash	flow	model.	The	principal	assumptions	used	in	the	discounted cash	flow	model	are	projected	operating	results,	weighted-average	cost	of	capital	and	terminal	value.	Significantly	impacting	these	assumptions	was	the	decision	to	reduce the	size	of	Pullmantur's	fleet.	The	discounted	cash	flow	model	used	our	2016	projected	operating	results	as	a	base.	To	that	base	we	added	future	years'	cash	flows	through 2020	assuming	multiple	revenue	and	expense	scenarios	that	reflect	the	impact	of	different	global	economic	environments	for	this	period	on	Pullmantur's	reporting	unit.	We assigned	a	probability	to	each	revenue	and	expense	scenario.	We	discounted	the	projected	cash	flows	using	rates	specific	to	Pullmantur's	reporting	unit	based	on	its weighted-average	cost	of	capital,	which	was	determined	to	be	11%.	The	fair	value	of	Pullmantur's	goodwill	was	estimated	as	of	August	31,	2015,	the	date	of	the	last impairment	test,	at	which	point	it	was	fully	impaired.

(2) We	estimated	the	fair	value	of	our	indefinite-life	intangible	asset	using	a	discounted	cash	flow	model	and	the	relief-from-royalty	method.	These	trademarks	and	trade	names relate	to	Pullmantur	and	we	have	used	a	discount	rate	of	11.5%,	comparable	to	the	rate	used	in	valuing	the	Pullmantur	reporting	unit.	The	fair	value	of	these	assets	were estimated	as	of	August	31,	2015,	the	date	of	the	last	impairment	test,	at	which	point	they	were	fully	impaired.

(3) We	estimated	the	fair	value	of	our	long-lived	assets	using	the	market	approach	for	the	aircraft	and	a	blended	indication	from	the	cost	and	market	approaches	for	the	vessels as	of	August	31,	2015,	the	date	of	the	last	impairment	test,	including	depreciation	through	December	31,	2015.	We	believe	this	amount	estimates	fair	value	as	of	December 31,	2015.	A	significant	input	in	performing	the	fair	value	assessments	for	these	assets	was	comparable	market	transactions.

We	have	master	International	Swaps	and	Derivatives	Association	("ISDA")	agreements	in	place	with	our	derivative	instrument	counterparties. These	ISDA	agreements	provide	for	final	close	out	netting	with	our	counterparties	for	all	positions	in	the	case	of	default	or	termination	of	the ISDA	agreement.	We	have	determined	that	our	ISDA	agreements	provide	us	with	rights	of	setoff	on	the	fair	value	of	derivative	instruments	in	a gain	position	and	those	in	a	loss	position	with	the	same	counterparty.	We	have	elected	not	to	offset	such	derivative	instrument	fair	values	in	our consolidated	balance	sheets.

See	Credit	Related	Contingent	Features	for	further	discussion	on	contingent	collateral	requirements	for	our	derivative	instruments.

The	following	table	presents	information	about	the	Company's	offsetting	of	financial	assets	under	master	netting	agreements	with	derivative counterparties:

# Gross	Amounts	not	Offset	in	the	Consolidated	Balance	Sheet	that	are	Subject	to	Master	Netting	Agreements

|  | Gross	Amount	of<br>Derivative	Assets<br>Presented	in	the<br>Consolidated<br>Balance	Sheet | As	of	December	31,	2016<br>Gross	Amount	of<br>Eligible<br>Offsetting<br>Recognized<br>Derivative<br>Liabilities | Cash	Collateral<br>Received | Net	Amount	of<br>Derivative	Assets | Gross	Amount	of<br>Derivative	Assets<br>Presented	in	the<br>Consolidated<br>Balance	Sheet | As	of	December	31,	2015<br>Gross	Amount	of<br>Eligible<br>Offsetting<br>Recognized<br>Derivative<br>Assets | Cash	Collateral<br>Received | Net	Amount	of<br>Derivative	Assets |
| :--- | :--- | :--- | :--- | :--- | :--- | :--- | :--- | :--- |
| (In\tthousands) |  |  |  |  |  |  |  |  |
| Derivatives\tsubject |  |  |  |  |  |  |  |  |
| to\tmaster\tnetting |  |  |  |  |  |  |  |  |
| agreements | $19,397 | $(19,397) | $— | $— | $134,574 | $(129,815) | $— | $4,759 |
| Total | $19,397 | $(19,397) | $— | $— | $134,574 | $(129,815) | $— | $4,759 |

The	 following	 table	 presents information	 about the	 Company's	 offsetting	 of financial liabilities	 under	 master	 netting	 agreements	 with derivative	counterparties:

|  | Gross	Amount	of<br>Derivative<br>Liabilities<br>Presented	in	the<br>Consolidated<br>Balance	Sheet | As	of	December	31,	2016<br>Gross	Amount	of<br>Eligible<br>Offsetting<br>Recognized<br>Derivative	Assets | Cash	Collateral<br>Pledged | Net	Amount	of<br>Derivative<br>Liabilities | Gross	Amount	of<br>Derivative<br>Liabilities<br>Presented	in	the<br>Consolidated<br>Balance	Sheet | As	of	December	31,	2015<br>Gross	Amount	of<br>Eligible<br>Offsetting<br>Recognized<br>Derivative<br>Liabilities | Cash	Collateral<br>Pledged | Net	Amount	of<br>Derivative<br>Liabilities |
| :--- | :--- | :--- | :--- | :--- | :--- | :--- | :--- | :--- |
| (In\tthousands) |  |  |  |  |  |  |  |  |
| Derivatives\tsubject\tto\nmaster\tnetting\tagreements | $(373,497) | $19,397 | $7,213 | $(346,887) | $(1,044,292) | $129,815 | $— | $(914,477) |
| Total | $(373,497) | $19,397 | $7,213 | $(346,887) | $(1,044,292) | $129,815 | $— | $(914,477) |

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	notional	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	use	non-derivative	financial	instruments	designated	as	hedges	of	our	net	investment	in	our	foreign	operations	and investments.

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	and	the	changes

in	the	fair	value	of	derivatives	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.

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 December	31,	2016	and	December	31,	2015,	we	maintained	interest	rate	swap	agreements	on	the	following	floating-rate	debt	instruments:

The	notional	amount	of	interest	rate	swap	agreements	related	to	outstanding	debt	and	on	our	current	unfunded	financing	arrangements	as	of December	31,	2016	and	2015	was	$4.0	billion	and	$4.3	billion,	respectively.

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	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	December	31,	2016,	the aggregate	 cost	 of	 our	 ships	 on	 order,	 not	 including	 the	TUI	 Cruises'	 ships	 on	 order	 and	 those	 subject	 to	 conditions	 to	 effectiveness,	 was approximately	$8.4	billion,	of	which	we	had	deposited	$316.1	million	as	of	such	date.	Approximately	66.7%	and	58.2%	of	the	aggregate	cost	of the	ships	under	construction	was	exposed	to	fluctuations	in	the	Euro	exchange	rate	at	December	31,	2016	and	2015,	respectively.	The	majority	of our	foreign	currency	forward	contracts,	collar	options	and	cross	currency	swap	agreements	are	accounted	for	as	cash	flow,	fair	value	or	net investment	hedges	depending	on	the	designation	of	the	related	hedge.

On	a	regular	basis,	we	enter	into	foreign	currency	forward	contracts	and,	from	time	to	time,	we	utilize	cross-currency	swap	agreements	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	fourth	 quarter	 of	2016,	 we maintained	an	average	of	approximately	$642.4	million	of	these	foreign	currency	forward	contracts.	These	instruments	are	not	designated	as hedging	instruments.	In	2016,	2015	and	2014	changes	in	the	fair	value	of	the	foreign	currency	forward	contracts	were	losses	of	approximately $51.1	million,	$55.5	million	and	$48.6	million,	respectively,	which	offset	gains	arising	from	the	remeasurement	of	monetary	assets	and	liabilities denominated in	 foreign	 currencies in those	 same	 years	 of	$39.8	million,	$34.6	 million and	$49.5	 million,	 respectively.	These	 changes	 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	December	31,	2016 and	2015	was	$1.3	billion	and	$2.4	billion,	respectively.

# Non-Derivative	Instruments

We	also	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	TUI	Cruises	of	approximately	€295.0	million,	or	approximately	$311.2	million,	through	December	31,	2016.	As	of	December 31,	2015,	no	debt	was	designated	as	a	hedge	of	our	net	investments	in	Pullmantur	and	TUI	Cruises.

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	to	mitigate	the	financial	impact	of	fluctuations	in	fuel	prices.

Our	fuel	swap	agreements	are	accounted	for	as	cash	flow	hedges.	At	December	31,	2016,	we	have	hedged	the	variability	in	future	cash	flows for	certain	forecasted	fuel	transactions	occurring	through	2020.	As	of	December	31,	2016	and	2015,	we	had	the	following	outstanding	fuel	swap agreements:

|  | As	of	December	31,	2016 | As	of	December	31,	2015 |
| :--- | :--- | :--- |
|  | (metric\ttons) |  |
| 2016 | — | 930,000 |
| 2017 | 799,065 | 854,000 |
| 2018 | 616,300 | 583,000 |
| 2019 | 521,000 | 231,000 |
| 2020 | 306,500 | — |

|  | As	of	December	31,	2016 | As	of	December	31,	2015 |
| :--- | :--- | :--- |
|  | (%\thedged) |  |
| Projected\tfuel\tpurchases\tfor\tyear: |  |  |
| 2016 | — | 65% |
| 2017 | 60% | 59% |
| 2018 | 44% | 40% |
| 2019 | 35% | 15% |
| 2020 | 20% | —% |

At	December	31,	2016	and	2015,	$138.5	million	and	$321.0	million,	respectively,	of	estimated	unrealized	net	loss	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	12	months.	Reclassification	is	expected	to	occur	as	the	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:

|  | Asset	Derivatives | Asset	Derivatives |  | Liability	Derivatives | Liability	Derivatives |  |
| :--- | :--- | :--- | :--- | :--- | :--- | :--- |
|  |  |  |  | As\tof | As\tof | As\tof |
|  | Balance\tSheet\nLocation | As\tof\tDecember\n31,\t2016\nFair\tValue | As\tof\tDecember\n31,\t2015\nFair\tValue | Balance\tSheet\nLocation | December\t31,\n2016\nFair\tValue | December\t31,\n2015\nFair\tValue |
| (In\tthousands) |  |  |  |  |  |  |
| Derivatives\tdesignated\tas\thedging\ninstruments\tunder\tASC\t815-20(1) |  |  |  |  |  |  |
| Interest\trate\tswaps | Other\tassets | $5,246 | $— | Other\tlong-term\tliabilities | $57,679 | $67,371 |
| Foreign\tcurrency\tforward\tcontracts | Derivative\tfinancial\tinstruments | — | 93,996 | Derivative\tfinancial\tinstruments | 5,574 | 320,873 |
| Foreign\tcurrency\tforward\tcontracts | Other\tassets | — | — | Other\tlong-term\tliabilities | 68,165 | — |
| Fuel\tswaps | Derivative\tfinancial\tinstruments | — | — | Derivative\tfinancial\tinstruments | 129,486 | 307,475 |
| Fuel\tswaps | Other\tassets | 13,608 | — | Other\tlong-term\tliabilities | 95,125 | 325,055 |
| Total\tderivatives\tdesignated\tas\thedging\ninstruments\tunder\tASC\t815-20 | 18,854 | 18,854 | 93,996 | 356,029 | 356,029 | 1,020,774 |
| Derivatives\tnot\tdesignated\tas\thedging\ninstruments\tunder\tASC\t815-20 |  |  |  |  |  |  |
| Foreign\tcurrency\tforward\tcontracts | Derivative\tFinancial\tInstruments | — | 32,339 | Derivative\tfinancial\tinstruments | — | — |
| Fuel\tswaps | Derivative\tfinancial\tinstruments | — | 8,239 | Derivative\tfinancial\tinstruments | 11,532 | 23,518 |
| Fuel\tswaps | Other\tassets | 543 | — | Other\tlong-term\tliabilities | 5,936 | — |
| Total\tderivatives\tnot\tdesignated\tas\thedging\ninstruments\tunder\tASC\t815-20 | 543 | 543 | 40,578 | 17,468 | 17,468 | 23,518 |
| Total\tderivatives | $19,397 | $19,397 | $134,574 | $373,497 | $373,497 | $1,044,292 |

(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:

| hedging	instrument	under	ASC	815-20 | Balance	Sheet	Location | As	of	December	31,	2016 | As	of	December	31,	2015 |
| :--- | :--- | :--- | :--- |
| (In\tthousands) |  |  |  |
| Foreign\tcurrency\tdebt | Current\tportion\tof\tlong-term\tdebt | $61,601 | $— |
| Foreign\tcurrency\tdebt | Long-term\tdebt | 249,624 | — |
|  |  | $311,225 | $— |

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	Related	Hedged	Items<br>under	ASC	815-20	Fair	Value	Hedging<br>Relationships | Location	of	Gain<br>(Loss)<br>Recognized	in<br>Income	on<br>Derivative	and<br>Hedged	Item | Amount	of	Gain	(Loss)<br>Recognized	in<br>Income	on	Derivative<br>Year	Ended<br>December	31,<br>2016 | Year	Ended<br>December	31,<br>2015 | Amount	of	Gain	(Loss)<br>Recognized	in<br>Income	on	Hedged	Item<br>Year	Ended<br>December	31,<br>2016 | Year	Ended<br>December	31,<br>2015 |
| :--- | :--- | :--- | :--- | :--- | :--- |
| (In\tthousands) |  |  |  |  |  |
| Interest\trate\tswaps | Interest\texpense,\tnet\tof\tinterest\tcapitalized | $7,448 | $11,276 | $7,203 | $15,743 |
| Interest\trate\tswaps | Other\tincome\t(expense) | (3,625) | 10,779 | 5,072 | (7,533) |
|  |  | $3,823 | $22,055 | $12,275 | $8,210 |

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

|  |  |  |  |  |  |  | Recognized	in	Income | Recognized	in	Income |
| :--- | :--- | :--- | :--- | :--- | :--- | :--- | :--- | :--- |
|  | Amount\tof\tGain\t(Loss) | Amount\tof\tGain\t(Loss) |  | Amount\tof\tGain\t(Loss) | Amount\tof\tGain\t(Loss) |  | on\tDerivative\t(Ineffective | on\tDerivative\t(Ineffective |
|  | Recognized\tin\tOther | Recognized\tin\tOther |  | Reclassified\tfrom\tAccumulated | Reclassified\tfrom\tAccumulated | Location\tof\tGain | Portion\tand | Portion\tand |
| Derivatives\tunder\nASC\t815-20\tCash\nFlow\nHedging\nRelationships | Comprehensive\tIncome\non\tDerivatives\n(Effective\tPortion)\nYear\tEnded\nDecember\t31,\n2016 | Year\tEnded\nDecember\t31,\n2015 | Location\tof\tGain\n(Loss)\tReclassified\nfrom\tAccumulated\nOCI\tinto\tIncome\n(Effective\tPortion) | Other\tComprehensive\tIncome\ninto\tIncome\n(Effective\tPortion)\nYear\tEnded\nDecember\t31,\n2016 | Year\tEnded\nDecember\t31,\n2015 | (Loss)\tRecognized\nin\tIncome\ton\nDerivative\n(Ineffective\nPortion\tand\tAmount\nExcluded\tfrom\nEffectiveness\nTesting) | Amount\nExcluded\tfrom\nEffectiveness\ttesting)\nYear\tEnded\nDecember\t31,\n2016 | Year\tEnded\nDecember\t31,\n2015 |
| (In\tthousands) |  |  |  |  |  |  |  |  |
| Interest\trate\tswaps | (31,049) | (52,602) | Interest\texpense | (41,480) | (36,401) | \t Other\tincome\t(expense) | — | 38 |
| Foreign\tcurrency |  |  | Depreciation\tand |  |  |  |  |  |
| forward\tcontracts | (51,092) | (141,470) | amortization\texpenses | (8,114) | (2,871) | \t Other\tincome\t(expense) | — | — |
| Foreign\tcurrency\nforward\tcontracts | — | — | \t Other\tincome\t(expense) | (14,342) | 7,580 |  |  |  |
|  |  |  |  |  |  | \t Other\tincome\t(expense) | (59) | — |
| Foreign\tcurrency |  |  | Other\tindirect\toperating |  |  |  |  |  |
| forward\tcontracts | — | — | expenses | (207) | — | \t Other\tincome\t(expense) | — | — |
| Foreign\tcurrency\ncollar\toptions | — | (64,559) | Depreciation\tand |  |  | \t Other\tincome\t(expense) | — | — |
|  |  |  | amortization\texpenses | (2,408) | (1,605) |  |  |  |
| Fuel\tswaps | — | — | \t Other\tincome\t(expense) | 13,685 | (9,583) | \t Other\tincome\t(expense) | — | — |
| Fuel\tswaps | 156,139 | (439,040) | Fuel | (284,384) | (248,744) | \t Other\tincome\t(expense) | (751) | (487) |
|  | $73,998 | $(697,671) |  | $(337,250) | $(291,624) |  | $(810) | $(449) |

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

|  |  |  | Location	of	Gain | Amount	of	Gain	(Loss)	Recognized	in	Income | Amount	of	Gain	(Loss)	Recognized	in	Income |
| :--- | :--- | :--- | :--- | :--- | :--- |
|  | Amount\tof\tGain\t(Loss) | Amount\tof\tGain\t(Loss) | (Loss)\tin\tIncome | (Ineffective\tPortion\tand | (Ineffective\tPortion\tand |
|  | Recognized\tin\tOther\tComprehensive\tIncome | Recognized\tin\tOther\tComprehensive\tIncome | (Ineffective\tPortion | Amount\tExcluded\tfrom | Amount\tExcluded\tfrom |
| Non-derivative\tinstruments\tunder\tASC\t815-20\nNet\tInvestment\tHedging\tRelationships | (Effective\tPortion)\nYear\tEnded\nDecember\t31,\t2016 | Year\tEnded\nDecember\t31,\t2015 | and\tAmount\nExcluded\tfrom\nEffectiveness\tTesting) | Effectiveness\tTesting)\nYear\tEnded\tDecember\n31,\t2016 | Year\tEnded\tDecember\n31,\t2015 |
| (In\tthousands) |  |  |  |  |  |
| Foreign\tCurrency\tDebt | $20,295 | $8,955 | \t Other\tincome\t(expense) | $— | $— |
|  | $20,295 | $8,955 |  | $— | $— |

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

| Derivatives	Not	Designated	as	Hedging<br>Instruments	under	ASC	815-20 | Location	of	Gain	(Loss)<br>Recognized	in	Income<br>on	Derivatives | Year	Ended	December<br>31,	2016 | Year	Ended	December<br>31,	2015 |
| :--- | :--- | :--- | :--- |
| (In\tthousands) |  |  |  |
| Foreign\tcurrency\tforward\tcontracts | Other\tincome\t(expense) | $(51,029) | $(55,489) |
| Fuel\tswaps | Other\tincome\t(expense) | (1,000) | (175) |
|  |  | $(52,029) | $(55,664) |

# 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.	Generally,	if	on	the	fifth	anniversary	of	executing	a	derivative	instrument	or	on	any	succeeding	fifth-year	anniversary	our credit	ratings	for	our	senior	unsecured	debt	were	to	be	rated	below	BBB-	by	Standard	&	Poor's	and	Baa3	by	Moody's,	then	the	counterparty	may periodically	demand	that	we	post	collateral	in	an	amount	equal	to	the	difference	between	(i)	the	net	market	value	of	all	derivative	transactions	with such	counterparty	that	have	reached	their	fifth	year	anniversary,	to	the	extent	negative,	and	(ii)	the	applicable	minimum	call	amount.

The	amount	of	collateral	required	to	be	posted	following	such	event	will	change	as,	and	to	the	extent,	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	positive	outlook	by	Standard	&	Poor's	and	 Ba1	with	a	positive	outlook	by	Moody's.	We	currently	have	 seven	interest	rate derivative	hedges	that	have	a	term	of	at	least	five	years.	As	of	December	31,	2016,	two	of	these	instruments	had	reached	their	fifth	anniversary and,	accordingly,	we	posted	$7.2	million	in	collateral	as	of	such	date.

During	the	next	12	months,	two	more	of	our	interest	rate	derivative	hedges	will	reach	their	fifth	anniversary.	If	each	of	these	two	interest	rate hedges	had	already	reached	its	fifth	anniversary	as	of	December	31,	2016,	our	maximum	collateral	exposure	would	have	been	$22.8	million. Similarly,	our	maximum	collateral	exposure	as	of	December	31,	2015,	would	have	been	$14.6	million	if	all	hedges	scheduled	to	reach	their	fifth anniversary	date	within	one	year	had	instead	reached	their	fifth	anniversary	as	of	December	31,	2015.

# Note	15.	Commitments	and	Contingencies

# Capital	Expenditures

Our	future	capital	commitments	consist	primarily	of	new	ship	orders.	As	of	 December	31,	2016,	we	had	two	Quantum-class	ships	and	two Oasis-class	ships	on	order	for	our	Royal	Caribbean	International	brand	with	an	aggregate	capacity	of	approximately	19,200	berths.	Additionally, we	 have	four	"Project	Edge"	ships	on	order	for	our	Celebrity	Cruises	brand	with	an	aggregate	capacity	of	approximately	 11,600	berths.	The following	provides	further	information	on	our	ship	orders:

During	2016,	we	entered	into	credit	agreements	for	the	unsecured	financing	of	our	first	two	"Project	Edge"	ships	for	up	to	80%	of	each	ship's contract	price	through	facilities	to	be	guaranteed	100%	by	COFACE,	the	official	export	credit	agency	of	France.	The	ships	will	each	have	a capacity	of	approximately	2,900	berths	and	are	expected	to	enter	service	in	the	fourth	quarter	of	2018	and	the	first	half	of	2020,	respectively. Under	 these	financing	arrangements,	we	have	 the	right,	but	not	 the	obligation,	 to	satisfy	 the	obligations	 to	be	 incurred	upon	delivery	and acceptance	of	each	vessel	under	the	shipbuilding	contract	by	assuming,	at	delivery	and	acceptance,	the	debt	indirectly	incurred	by	the	shipbuilder during	the	construction	of	each	ship.	The	maximum	loan	amount	under	each	facility	is	not	to	exceed	the	United	States	dollar	equivalent	of	€622.6 million	and	€652.6	million,	or	approximately	$656.8	million	and	$688.5	million,	respectively,	based	on	the	exchange	rate	at	December	31,	2016, for	the	first	"Project	Edge"	ship	delivery	and	the	second	"Project	Edge"	ship	delivery,	respectively.	The	loans	will	amortize	semi-annually	and	will mature	12	years	following	delivery	of	each	ship.	Interest	on	the	loans	will	accrue	at	a	fixed	rate	of	3.23%.

During	2016,	we	entered	into	agreements	with	STX	France	to	build	the	fifth	Oasis-class	ship	for	Royal	Caribbean	International	and	a	third	and fourth	"Project	Edge"	ship	for	Celebrity	Cruises.	We	received	commitments	for	the	unsecured	financing	of	the	ships	for	up	to	80%	of	the	ship's contract	price	through	a	facility	to	be	guaranteed	100%	by	COFACE.	The	ships	are	expected	to	enter	service	during	the	second	quarter	of	2021, and	fourth	quarters	of	each	of	2021	and	2022,	respectively.

During	2015,	we	entered	into	a	credit	agreement	for	the	unsecured	financing	of	the	fourth	Oasis-class	ship	for	Royal	Caribbean	International for	up	to	80%	of	the	ship's	contract	price	through	a	facility	to	be	guaranteed	 100%	by	COFACE.	The	ship	will	have	a	capacity	of	approximately 5,450	berths	and	is	expected	to	enter	service	in	 the	first	quarter	of	2018.	Under	 the	financing	arrangement,	we	have	 the	right,	but	not	 the obligation,	to	satisfy	the	obligations	to	be	incurred	upon	delivery	and	acceptance	of	the	vessel	under	the	shipbuilding	contract	by	assuming,	at delivery	and	acceptance,	the	debt	indirectly	incurred	by	the	shipbuilder	during	the	construction	of	the	ship.	The	maximum	loan	amount	under	the facility	is	not	to	exceed	the	United	States	dollar	equivalent	of	€931.2	million,	or	approximately	$982.4	billion,	based	on	the	exchange	rate	at December	31,	2016.	The	loan	will	amortize	semi-annually	and	will	mature	12	years	following	delivery	of	the	ship.	Interest	on	the	loan	will	accrue at	a	fixed	rate	of	3.82%.	In	2017,	we	amended	the	€931.2	million	credit	agreement,	increasing	the	maximum	facility	amount	to	approximately €1.0	billion.

In	2015,	we	entered	into	agreements	with	Meyer	Werft	to	build	the	fourth	and	fifth	Quantum-class	ships	for	Royal	Caribbean	International.	In 2015,	we	received	credit	agreements	for	the	unsecured	financing	of	the	ships	for	up	to	80%	of	each	of	the	ship's	contract	price.	Hermes	has	agreed to	guarantee	to	the	lenders	payment	of	95%	of	the	financing.	The	ships	will	each	have	a	capacity	of	approximately	4,150	berths	and	is	expected	to enter	service	in	the	second	quarter	of	2019	and	the	fourth	quarter	of	2020,	respectively.	These	credit	agreements	make	available	to	us	unsecured term	loans	in	an	amount	up	to	the	US	dollar	equivalent	of	€762.9	million	and	€777.5	million,	or	approximately	$804.9	million	and	$820.3	million, respectively,	based	on	the	exchange	rate	at	December	31,	2016.	The	loan	amortizes	semi-

annually	and	will	mature	12	years	following	delivery	of	the	ship.	At	our	election,	prior	to	the	ship	delivery,	interest	on	the	loans	will	accrue	either (1)	at	a	fixed	rate	of	3.45%	(inclusive	of	the	applicable	margin)	or	(2)	at	a	floating	rate	equal	to	LIBOR	plus	0.95%.

As	of	December	31,	2016,	the	aggregate	cost	of	our	ships	on	order,	not	including	the	TUI	Cruises'	ships	on	order	and	the	"Project	Icon" ships	which	remain	subject	to	conditions	of	effectiveness,	was	approximately	$8.4	billion,	of	which	we	had	deposited	$316.1	million	as	of	such date.	Approximately	66.7%	of	the	aggregate	cost	was	exposed	to	fluctuations	in	the	Euro	exchange	rate	at	December	31,	2016.	(Refer	to	Note	14. Fair	Value	Measurements	and	Derivative	Instruments).

# Litigation

# Operating	Leases

We	are	obligated	under	other	noncancelable	operating	leases	primarily	for	offices,	warehouses	and	motor	vehicles.	As	of December	31, 2016,	future	minimum	lease	payments	under	noncancelable	operating	leases	were	as	follows	(in	thousands):

# Other

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.

At	December	31,	2016,	we	have	future	commitments	to	pay	for	our	usage	of	certain	port	facilities,	marine	consumables,	services	and maintenance	contracts	as	follows	(in	thousands):

| Year |  |
| :--- | :--- |
| 2017 | $232,055 |
| 2018 | 162,434 |
| 2019 | 129,920 |
| 2020 | 103,013 |
| 2021 | 57,506 |
| Thereafter | 110,319 |

# Note	16.	Restructuring	Charges

For	the	years	ended	December	31,	2016	and	December	31,	2014,	we	 incurred	restructuring	charges	of $8.5	million and	$4.3	 million, respectively,	in	connection	with	our	profitability	initiatives.	For	the	year	ended	December	31,	2015,	we	did	not	incur	restructuring	charges.

2016	Profitability	Initiatives:

# Pullmantur	Right-sizing	Strategy

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

The	right-sizing	strategy	activities	included	the	closing	of	Pullmantur's	regional	head	office	in	Brazil,	the	redeployment	of	Pullmantur's Empress	to	the	Royal	Caribbean	International	brand	and	personnel	reorganization	in	Pullmantur's	headquarters	and	CDF's	office	in	France.	The closure	of	the	Brazil	office	and	the	personnel	reorganization	resulted	in	the	recognition	of	a	liability	for	one-time	termination	benefits	during	the twelve	months	ended	December	31,	2016.	We	also	incurred	contract	termination	costs	related	to	the	closure	of	the	Brazil	office.

As	a	result	of	these	actions,	we	incurred	restructuring	exit	costs	of	$2.7	million	for	the	year	ended	December	31,	2016	which	are	reported within	Restructuring	charges	in	our	consolidated	statements	of	comprehensive	income	(loss).

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

|  | Beginning<br>Balance<br>January	1,	2016 | Accruals | Payments | Ending	Balance<br>December	31,	2016 | Cumulative<br>Charges<br>Incurred |
| :--- | :--- | :--- | :--- | :--- | :--- |
| Termination\tbenefits | $— | $2,587 | $2,587 | $— | $2,587 |
| Contract\ttermination\tcosts | — | 68 | 68 | — | 68 |
| Other\trelated\tcosts | — | — | — | — | — |
| Total | $— | $2,655 | $2,655 | $— | $2,655 |

In	connection	with	this	strategy,	we	incurred	approximately	 $3.6	million	of	other	costs	during	the	year	ended	December	31,	2016	 that primarily	 consisted	 of	 costs	 associated	 with	 the	 redeployment	 of	 Pullmantur's	Empress	 to	 the	Royal	Caribbean	International	brand	 that	are reported	within	Cruise	operating	expenses,	Depreciation	and	amortization	expenses	and	Marketing,	selling	and	administrative	expenses	in	our consolidated	statements	of	comprehensive	income	(loss).	During	2016,	we	completed	the	restructuring	activities	related	to	this	initiative.

In	July	2016,	we	sold	51%	of	our	interest	in	Pullmantur	Holdings.	In	connection	with	the	sale,	we	incurred	approximately	 $4.9	million	of other costs	 during	 the	 year	 ended	December	 31,	 2016	 that	 are reported	 within	Cruise	 operating expenses and	Marketing, selling and administrative	 expenses in	 our	 consolidated	 statements	 of	 comprehensive income (loss).	 Refer to	 Note	 1.	General for further information regarding	this	sale	transaction.

# Other	Restructuring	Initiatives

During	2016,	we	moved	forward	with	certain	other	initiatives,	including	the	closing	of	an	international	office	in	Brazil	related	to	the	Royal Caribbean	International	brand	and	personnel	reorganization	in	our	corporate	offices.	These	initiatives	resulted	in	restructuring	costs	of	$5.8	million for	the	year	ended	December	31,	2016.	The	restructuring	costs	are	mainly	due	to	the	recognition	of	a	liability	for	one-time	termination	benefits. During	2016,	we	completed	the	restructuring	activities	related	to	these	initiatives.

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

|  | Beginning<br>Balance<br>January	1,	2016 | Accruals | Payments | Ending	Balance<br>December	31,	2016 | Cumulative<br>Charges<br>Incurred |
| :--- | :--- | :--- | :--- | :--- | :--- |
| Termination\tbenefits | $— | $5,612 | $2,851 | $2,761 | $5,612 |
| Contract\ttermination\tcosts | — | 15 | 15 | — | 15 |
| Other\trelated\tcosts | — | 170 | 3 | 167 | 170 |
| Total | $— | $5,797 | $2,869 | $2,928 | $5,797 |

# Consolidation	of	Global	Sales,	Marketing,	General	and	Administrative	Structure

This	initiative	related	to	restructuring	and	consolidation	of	our	global	sales,	marketing	and	general	and	administrative	structure.	Activities related	to	this	initiative	include	the	consolidation	of	most	of	our	call	centers	located	outside	of	the	United	States	and	the	establishment	of	brand dedicated	sales,	marketing	and	revenue	management	teams	in	key	priority	markets.	Activities	related	to	this	initiative	commenced	in	2013.	For	the year	ended	December	31,	2014,	we	incurred	restructuring	exit	costs	of	$1.1	million	mainly	related	to	discretionary	bonus	payments	paid	to persons

whose	 positions	 were	 eliminated	 as	 part	 of	 our restructuring	 activities that	 are reported	 within	Restructuring	 charges in	 our	 consolidated statements	of	comprehensive	income	(loss).

In	connection	with	this	initiative,	we	incurred	approximately	$7.4	million	of	other	costs	during	2014	that	primarily	consisted	of	call	center transition	costs	and	accelerated	depreciation	on	lease	hold	improvements	and	are	reported	within	Marketing,	selling	and	administrative	expenses and	Depreciation	 and	 amortization	 expenses,	respectively,	in	our	consolidated	statements	of	comprehensive	income	(loss).	During	2014,	we completed	the	restructuring	activities	related	to	this	initiative.

# Pullmantur	Restructuring

# Restructuring	Exit	Costs

In	the	fourth	quarter	of	2013,	we	moved	forward	with	an	initiative	related	to	Pullmantur's	focus	on	its	cruise	business	and	its	expansion	in Latin	America.	Activities	related	to	this	initiative	included	the	sale	of	Pullmantur's	non-core	businesses.	This	resulted	in	the	recognition	of	a liability	for	one-time	termination	benefits	and	we	also	incurred	contract	termination	costs	and	other	related	costs	consisting	of	legal	and	consulting fees	to	implement	this	initiative.

In	connection	with	this	initiative,	we	incurred	approximately	$8.9	million	of	other	costs	during	2014,	associated	with	placing	operating management	closer	to	the	Latin	American	market	that	are	reported	within	Marketing,	selling	and	administrative	expenses	in	our	consolidated statements	of	comprehensive	income	(loss).	During	2014,	we	completed	the	restructuring	activities	related	to	this	initiative.

# Sale	of	Pullmantur	Non-core	Businesses

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

The	sale	resulted	in	a	gain	of	$0.6	million	recognized	during	 the	year	ended	December	31,	2014,	 inclusive	of	the	release	of	cumulative translation	adjustment	 losses,	which	was	reported	within	Other	operating	expenses	in	our	consolidated	statements	of	comprehensive	income (loss).	Refer	to	Note	13.	Changes	in	Accumulated	Other	Comprehensive	Income	(Loss)	for	further	information	on	the	release	of	the	foreign currency	translation	losses.

# Note	17.	Quarterly	Selected	Financial	Data	(Unaudited)

|  | First	Quarter | First	Quarter | Second	Quarter | Second	Quarter | Third	Quarter | Third	Quarter | Fourth	Quarter | Fourth	Quarter |
| :--- | :--- | :--- | :--- | :--- | :--- | :--- | :--- | :--- |
|  | 2016 | 2015 | 2016 | 2015 | 2016 | 2015 | 2016 | 2015 |
| Total\trevenues(1) | $1,917,795 | $1,815,599 | $2,105,262 | $2,058,322 | $2,563,741 | $2,523,100 | $1,909,603 | $1,902,053 |
| Operating\tincome(2) | $163,127 | $105,682 | $282,273 | $261,297 | $734,963 | $258,005 | $296,842 | $249,918 |
| Net\tincome(2)(3)(4) | $99,140 | $45,230 | $229,905 | $184,967 | $693,257 | $228,787 | $261,086 | $206,799 |
| Earnings\tper\tshare: |  |  |  |  |  |  |  |  |
| Basic | $0.46 | $0.21 | $1.07 | $0.84 | $1.04 | $1.04 | $1.22 | $0.94 |
| Diluted | $0.46 | $0.20 | $1.06 | $0.84 | $1.03 | $1.03 | $1.21 | $0.95 |
| Dividends\tdeclared\tper\tshare | $0.375 | $0.30 | $0.375 | $0.30 | $0.48 | $0.375 | $0.48 | $0.375 |

(1) Our	revenues	are	seasonal	based	on	the	demand	for	cruises.	Demand	is	strongest	for	cruises	during	the	Northern	Hemisphere's	summer	months	and	holidays.

(2) Amounts	for	the	third	quarter	of	2015	include	an	impairment	charge	of	$411.3	million	to	write	down	Pullmantur's	goodwill,	trademarks	and	trade	names	and	certain	long- lived	assets	to	their	fair	value.

(3) Amount	for	the	first	quarter	of	2016	includes	$21.7	million	net	loss	related	to	the	elimination	of	the	Pullmantur	reporting	lag.

(4) Amount	for	the	third	quarter	of	2015	includes	a	tax	benefit	of	$12.0	million	related	to	the	Pullmantur	impairment.	Refer	to	Note	12.	Income	Taxes	for	further	information.



Question: what was the anticipated percentage increase in the global cruise fleet berths from 2017 to 2021
Calculation: berths_2017 = 173000
berths_total = 503000
percent_increase = berths_2017 / berths_total
answer = percent_increase * 100
Answer: 34.4%