Item 16. Form 10-K Summary

None.

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

ROYAL CARIBBEAN CRUISES LTD. (Registrant)
By:	/s/ JASON T. LIBERTY
	Jason T. Liberty Chief Financial Officer (Principal Financial Officer and duly authorized signatory)

February 23, 2017

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)
/s/ JASON T. LIBERTY
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
*
William L. Kimsey Director
*
Maritza G. Montiel Director
*
Ann S. Moore Director
*
Eyal M. Ofer Director
*
Thomas J. Pritzker Director
*
William K. Reilly Director
*
Bernt Reitan Director
*
Vagn O. Sørensen Director
*
Donald Thompson Director
*
Arne Alexander Wilhelmsen Director

*By:	/s/ JASON T. LIBERTY
	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
Exhibit Number		Exhibit Description		Form		Exhibit		Filing Date/ Period End Date
3.1		Restated Articles of Incorporation of the Company, as amended (composite)		S-3		3.1		3/23/2009
3.2		Amended and Restated By-Laws of the Company		8-K		3.1		9/11/2013
4.1		Indenture dated as of July 15, 1994, by and between the Company, as issuer, and The Bank of New York Trust Company, N.A., successor to NationsBank of Georgia, National Association, as Trustee		20-F		2.4		12/31/1994
4.2		Sixth Supplemental Indenture dated as of October 14, 1997, to the Indenture, dated as of July 15, 1994, by and between the Company, as issuer, and The Bank of New York Trust Company, N.A., as Trustee		20-F		2.11		12/31/1997
4.3		Eighth Supplemental Indenture dated as of March 16, 1998, to the Indenture, dated as of July 15, 1994, by and between the Company, as issuer, and The Bank of New York Trust Company, N.A., as Trustee		20-F		2.13		12/31/1997
4.4		Form of Indenture, dated as of July 31, 2006, by and between the Company, as issuer, and The Bank of New York Trust Company, N.A., as Trustee		S-3		4.1		7/31/2006
4.5		Second Supplemental Indenture dated as of November 7, 2012 between the Company, as issuer, and The Bank of New York Mellon Trust Company, N.A., as Trustee		8-K		4.1		11/7/2012
10.1		Amended and Restated Registration Rights Agreement dated as of July 30, 1997, by and among the Company, A. Wilhelmsen AS., Cruise Associates, Monument Capital Corporation, Archinav Holdings, Ltd. and Overseas Cruiseship, Inc.		20-F		2.20		12/31/1997
10.2		Amendment to the Amended and Restated Credit Agreement, dated as of June 15, 2015, by and among the Company, The Bank of Nova Scotia, as administrative agent for the lender parties and the lender parties		8-K		10.1		6/19/2015
10.3		Assignment and Amendment to the Credit Agreement, dated as of August 23, 2013, by and among the Company, Nordea Bank Finland plc, New York Branch, as administrative agent for the lender parties and the lender parties		8-K		10.1		8/26/2013
10.4		Amendment No. 1 to the Amended and Restated Credit Agreement, dated as of July 10, 2015, by and among the Company Nordea Bank Finland Plc, New York Branch, as administrative agent for the lender parties and the lender parties		10-Q		10.2		6/30/2015
10.5		Amendment No. 4 to Hull No. S-697 Credit Agreement, dated as of February 2, 2016, by and between the Company, the Lenders from time to time party thereto, the Mandated Lead Arrangers and KfW-IPEX-Bank GmbH, as Hermes Agent and Facility Agent		10-K		10.7		12/31/2015
10.6		Amendment No. 4 to Hull No. S-698 Credit Agreement, dated as of February 3, 2016, by and between the Company, the Lenders from time to time party thereto, the Mandated Lead Arrangers and KfW-IPEX-Bank GmbH, as Hermes Agent and Facility Agent		10-K		10.8		12/31/2015
10.7		Amendment No. 1 to Hull No. S-699 Credit Agreement, dated as of March 31, 2016, by and between the Company, the Lenders from time to time party thereto, the Mandated Lead Arrangers and KfW-IPEX-Bank GmbH, as Hermes Agent and Facility Agent		10-Q		10.1		3/31/2016
10.8		Amendment and Restatement Agreement, dated as of January 15, 2016, in respect of a Facility Agreement dated, as of July 9, 2013, by and between the Company, the Lenders from time to time party thereto, Société Générale, as Facility Agent and Mandated Lead Arranger, BNP Paribas, as Documentation Bank and Mandated Lead Arranger, and HSBC France, as Mandated Lead Arranger		10-K		10.10		12/31/2015
10.9		Novation Agreement, dated as of January 30, 2015, by and between Frosaitomi Finance Ltd. the Company, Citibank International Limited, Citicorp Trustee Company Limited, Citibank N.A., London Branch and the banks and financial institutions as a lender parties thereto		8-K		10.1		2/5/2015

				Incorporated By Reference
Exhibit Number		Exhibit Description		Form		Exhibit		Filing Date/ Period End Date
10.10		Form of Hull No. B34 Novated Credit Agreement (as amended and restated on February 8, 2017)*
10.11		Hull No. S-700 Credit Agreement, dated as of November 13, 2015, by and among the Company, the Lenders from time to time party thereto and KfW IPEX-Bank GmbH, as Hermes Agent, Facility Agent and Initial Mandated Lead Arranger.		8-K		10.1		11/19/2015
10.12		Hull No. S-713 Credit Agreement, dated as of November 13, 2015, by and among the Company, the Lenders from time to time party thereto and KfW IPEX-Bank GmbH, as Hermes Agent, Facility Agent and Initial Mandated Lead Arranger.		8-K		10.2		11/19/2015
10.13		Novation Agreement, dated as of June 22, 2016, by and between Saintiami Finance Ltd., Royal Caribbean Cruises Ltd., Citibank Europe Plc, UK Branch, Citicorp Trustee Company Limited, Citibank N.A., London Branch, HSBC France, Sumitomo Mitsui Banking Corporation Europe Limited, Paris Branch and the banks and financial institutions as lender parties thereto		8-K		10.1		6/28/2016
10.14		Novation Agreement, dated as of June 22, 2016, by and between Azairemia Finance Ltd., Royal Caribbean Cruises Ltd., Citibank Europe Plc, UK Branch, Citicorp Trustee Company Limited, Citibank N.A., London Branch, HSBC France, Sumitomo Mitsui Banking Corporation Europe Limited, Paris Branch and the banks and financial institutions as lender parties thereto		8-K		10.2		6/28/2016
10.15		Royal Caribbean Cruises Ltd. 2000 Stock Award Plan		8-K		10.1		12/8/2005
10.16		Amendment No. 1 to 2000 Stock Award Plan		8-K		10.1		9/22/2006
10.17		Royal Caribbean Cruises Ltd. 2008 Equity Incentive Plan (as amended)*
10.18		Form of 2008 Equity Incentive Plan Stock Option Award Agreement—Incentive Options		10-Q		10.3		9/30/2008
10.19		Form of 2008 Equity Incentive Plan Stock Option Award Agreement—Nonqualified Options		10-Q		10.4		9/30/2008
10.20		Form of 2008 Equity Incentive Plan Restricted Stock Unit Agreement - Executive Officer Grants		10-K		10.2		12/31/2013
10.22		Form of 2008 Equity Incentive Plan Restricted Stock Unit Agreement—Director Grants		10-K		10.31		12/31/2010
10.23		Form of 2008 Equity Incentive Plan Performance Shares Agreement		10-K		10.27		12/31/2014
10.24		Form of 2008 Equity Incentive Plan Performance-Based Restricted Shares Agreement		10-K		10.26		12/31/2015
10.25		Employment Agreement, dated as of December 31, 2012, by and between the Company and Richard D. Fain		10-K		10.22		12/31/2012
10.26		Employment Agreement, dated as of December 31, 2012, by and between the Company and Adam M. Goldstein		10-K		10.23		12/31/2012
10.27		Employment Agreement, dated as of December 31, 2012, by and between the Company and Harri U. Kulovaara		10-K		10.26		12/31/2012
10.28		Employment Agreement, dated as of May 20, 2013, by and between the Company and Jason T. Liberty		10-Q		10.20		6/30/2013
10.29		Employment Agreement, dated as of July 16, 2015, by and between the Company and Michael W. Bayley		10-Q		10.3		6/30/2015
10.30		Form of First Amendment to Employment Agreement, dated as of February 6, 2015 (entered into between the Company and each of Messrs. Fain, Goldstein, Kulovaara and Liberty)		10-K		10.3		12/31/2014
10.31		Employment Agreement dated as of August 3, 2015, by and between Celebrity Cruises Inc. and Lisa Lutoff-Perlo*

				Incorporated By Reference
Exhibit Number		Exhibit Description		Form		Exhibit		Filing Date/ Period End Date
10.32		Royal Caribbean Cruises Ltd. Executive Short-Term Bonus Plan		10-Q		10.4		6/30/2015
10.33		Royal Caribbean Cruises Ltd. et. al. Non Qualified 401(k) Plan		8-K		10.2		12/8/2005
10.34		Amendment to Royal Caribbean Cruises Ltd. et. al. Non Qualified 401(k) Plan		10-K		10.29		12/31/2006
10.35		Amendment to Royal Caribbean Cruises Ltd. et. al. Non Qualified 401(k) Plan		10-K		10.28		12/31/2007
10.36		Amendment to Royal Caribbean Cruises Ltd. et. al. Non Qualified 401(k) Plan		10-K		10.36		12/31/2008
10.37		Royal Caribbean Cruises Ltd. Supplemental Executive Retirement Plan		8-K		10.3		12/8/2005
10.38		Amendment to Royal Caribbean Cruises Ltd. Supplemental Executive Retirement Plan		10-K		10.31		12/31/2006
10.39		Amendment to Royal Caribbean Cruises Ltd. Supplemental Executive Retirement Plan		10-K		10.31		12/31/2007
10.40		Amendment to Royal Caribbean Cruises Ltd. Supplemental Executive Retirement Plan		10-Q		10.1		9/30/2008
10.41		Amendment to Royal Caribbean Cruises Ltd. Supplemental Executive Retirement Plan		10-K		10.38		12/31/2008
10.42		Summary of Royal Caribbean Cruises Ltd. Board of Directors Compensation*
10.43		Cruise Policy for Members of the Board of Directors of the Company		10-K		10.35		12/31/2013
12.1		Statement regarding computation of fixed charge coverage ratio*
18.1		Preferability Letter Regarding Change in Accounting Principle*
21.1		List of Subsidiaries*
23.1		Consent of PricewaterhouseCoopers LLP, an independent registered certified public accounting firm*
23.2		Consent of Drinker Biddle & Reath LLP*
24.1		Power of Attorney*
31.1		Certification of Richard D. Fain required by Rule 13a-14(a) or Rule 15d-14(a) of the Securities Exchange Act of 1934*
31.2		Certification of Jason T. Liberty required by Rule 13a-14(a) or Rule 15d-14(a) of the Securities Exchange Act of 1934*
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**

*	Filed herewith

**	Furnished herewith

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;
	(ii)	the Consolidated Balance Sheets at December 31, 2016 and 2015;
	(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.

ROYAL CARIBBEAN CRUISES LTD.

INDEX TO CONSOLIDATED FINANCIAL STATEMENTS

	Page
Report of Independent Registered Certified Public Accounting Firm	F-2
Consolidated Statements of Comprehensive Income (Loss)	F-3
Consolidated Balance Sheets	F-4
Consolidated Statements of Cash Flows	F-5
Consolidated Statements of Shareholders' Equity	F-7
Notes to the Consolidated Financial Statements	F-8

F-1

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

F-2

ROYAL CARIBBEAN CRUISES LTD.

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS)

	Year Ended December 31,
	2016				2015				2014
	(in thousands, except per share data)
Passenger ticket revenues	$	6,149,323			$	6,058,821			$	5,893,847
Onboard and other revenues	2,347,078				2,240,253				2,180,008
Total revenues	8,496,401				8,299,074				8,073,855
Cruise operating expenses:
Commissions, transportation and other	1,349,677				1,400,778				1,372,785
Onboard and other	493,558				553,104				582,750
Payroll and related	882,891				861,775				847,641
Food	485,673				480,009				478,130
Fuel	713,676				795,801				947,391
Other operating	1,090,064				1,007,926				1,077,584
Total cruise operating expenses	5,015,539				5,099,393				5,306,281
Marketing, selling and administrative expenses	1,100,290				1,086,504				1,048,952
Depreciation and amortization expenses	894,915				827,008				772,445
Impairment of Pullmantur related assets	—				411,267				—
Restructuring charges	8,452				—				4,318
	7,019,196				7,424,172				7,131,996
Operating Income	1,477,205				874,902				941,859
Other income (expense):
Interest income	20,856				12,025				10,344
Interest expense, net of interest capitalized	(307,370		)		(277,725		)		(258,299		)
Equity investment income	128,350				81,026				51,640
Other (expense) income(1)	(35,653		)		(24,445		)		18,602
	(193,817		)		(209,119		)		(177,713		)
Net Income	$	1,283,388			$	665,783			$	764,146
Basic Earnings per Share:
Net income	$	5.96			$	3.03			$	3.45
Diluted Earnings per Share:
Net income	$	5.93			$	3.02			$	3.43
Comprehensive Income (Loss)
Net Income	$	1,283,388			$	665,783			$	764,146
Other comprehensive income (loss):
Foreign currency translation adjustments	2,362				(30,152		)		(26,102		)
Change in defined benefit plans	(1,636		)		4,760				(7,213		)
Gain (loss) on cash flow derivative hedges	411,223				(406,047		)		(869,350		)
Total other comprehensive income (loss)	411,949				(431,439		)		(902,665		)
Comprehensive Income (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.

F-3

ROYAL CARIBBEAN CRUISES LTD.

CONSOLIDATED BALANCE SHEETS

	As of December 31,
	2016				2015
	(in thousands, except share data)
Assets
Current assets
Cash and cash equivalents	$	132,603			$	121,565
Trade and other receivables, net	291,899				238,972
Inventories	114,087				121,332
Prepaid expenses and other assets	209,716				220,579
Derivative financial instruments	—				134,574
Total current assets	748,305				837,022
Property and equipment, net	20,161,427				18,777,778
Goodwill	288,386				286,764
Other assets	1,112,206				880,479
	$	22,310,324			$	20,782,043
Liabilities and Shareholders' Equity
Current liabilities
Current portion of long-term debt	$	1,285,735			$	899,542
Accounts payable	305,313				302,072
Accrued interest	46,166				38,325
Accrued expenses and other liabilities	692,322				658,601
Derivative financial instruments	146,592				651,866
Customer deposits	1,965,473				1,742,286
Total current liabilities	4,441,601				4,292,692
Long-term debt	8,101,701				7,627,701
Other long-term liabilities	645,610				798,611
Commitments and contingencies (Note 15)
Shareholders' equity
Preferred stock ($0.01 par value; 20,000,000 shares authorized; none outstanding)	—				—
Common stock ($0.01 par value; 500,000,000 shares authorized; 234,613,486 and 233,905,166 shares issued, December 31, 2016 and December 31, 2015, respectively)	2,346				2,339
Paid-in capital	3,328,517				3,297,619
Retained earnings	7,860,341				6,944,862
Accumulated other comprehensive loss	(916,484		)		(1,328,433		)
Treasury stock (20,019,237 and 15,911,971 common shares at cost, December 31, 2016 and December 31, 2015, respectively)	(1,153,308		)		(853,348		)
Total shareholders' equity	9,121,412				8,063,039
	$	22,310,324			$	20,782,043

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

F-4

ROYAL CARIBBEAN CRUISES LTD.

CONSOLIDATED STATEMENTS OF CASH FLOWS

	Year Ended December 31,
	2016				2015				2014
	(in thousands)
Operating Activities
Net income	$	1,283,388			$	665,783			$	764,146
Adjustments:
Depreciation and amortization	894,915				827,008				772,445
Impairment of Pullmantur related assets	—				411,267				—
Net deferred income tax expense (benefit)	2,608				(10,001		)		(41,003		)
Share-based compensation expense	32,659				36,073				26,116
Equity investment income	(128,350		)		(81,026		)		(51,640		)
Amortization of debt issuance costs	52,795				52,153				54,993
Loss on sale of property and equipment	—				—				17,401
Loss on derivative instruments not designated as hedges	45,670				59,162				48,637
Changes in operating assets and liabilities:
Decrease in trade and other receivables, net	4,759				63,102				100,095
(Increase) decrease in inventories	(1,679		)		1,197				26,254
Decrease (increase) in prepaid expenses and other assets	11,519				(2,262		)		21,234
Increase (decrease) in accounts payable	29,564				(25,278		)		(40,651		)
Increase (decrease) in accrued interest	7,841				(10,749		)		(53,951		)
Increase in accrued expenses and other liabilities	20,718				33,859				62,019
Increase (decrease) in customer deposits	188,632				(92,849		)		14,885
Dividends received from unconsolidated affiliates	75,942				33,338				5,814
Other, net	(4,291		)		(14,411		)		16,965
Net cash provided by operating activities	2,516,690				1,946,366				1,743,759
Investing Activities
Purchases of property and equipment	(2,494,363		)		(1,613,340		)		(1,811,398		)
Cash paid on settlement of derivative financial instruments	(213,202		)		(178,597		)		(68,098		)
Investments in and loans to unconsolidated affiliates	(9,155		)		(56,163		)		(188,595		)
Cash received on loans to unconsolidated affiliates	38,213				124,253				76,167
Proceeds from sale of property and equipment	—				—				220,000
Other, net (1)	(46,385		)		(19,128		)		1,546
Net cash used in investing activities	(2,724,892		)		(1,742,975		)		(1,770,378		)
Financing Activities
Debt proceeds	7,338,560				4,399,501				4,153,958
Debt issuance costs	(88,241		)		(68,020		)		(72,974		)
Repayments of debt	(6,365,570		)		(4,118,553		)		(3,724,218		)
Purchase of treasury stock	(299,960		)		(200,000		)		(236,074		)
Dividends paid	(346,487		)		(280,212		)		(198,952		)
Proceeds from exercise of common stock options	2,258				11,252				70,879
Cash received on settlement of derivative financial instruments	—				—				22,835
Other, net	3,249				2,520				2,026
Net cash provided by (used in) financing activities	243,809				(253,512		)		17,480
Effect of exchange rate changes on cash	(24,569		)		(17,555		)		(6,307		)

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

F-5

Net increase (decrease) in cash and cash equivalents	11,038				(67,676		)		(15,446		)
Cash and cash equivalents at beginning of year	121,565				189,241				204,687
Cash and cash equivalents at end of year	$	132,603			$	121,565			$	189,241
Supplemental Disclosures
Cash paid during the year for:
Interest, net of amount capitalized	$	256,775			$	248,611			$	276,933
Non-Cash Investing Activities
Notes receivable issued upon sale of property and equipment	$	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).

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

F-6

ROYAL CARIBBEAN CRUISES LTD.

CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY

	Common Stock				Paid-in Capital				Retained Earnings				Accumulated Other Comprehensive Income (Loss)				Treasury Stock				Total Shareholders' Equity
	(in thousands)
Balances at January 1, 2014	$	2,308			$	3,159,038			$	6,054,952			$	5,671			$	(413,704	)		$	8,808,265
Issuance under employee related plans	23				94,514				—				—				—				94,537
Common Stock dividends	—				—				(243,550		)		—				—				(243,550		)
Dividends declared by non-controlling interest(1)	—				—				(300		)		—				—				(300		)
Changes related to cash flow derivative hedges	—				—				—				(869,350		)		—				(869,350		)
Change in defined benefit plans	—				—				—				(7,213		)		—				(7,213		)
Foreign currency translation adjustments	—				—				—				(26,102		)		—				(26,102		)
Purchase of Treasury Stock																	(236,074		)		(236,074		)
Net income	—				—				764,146				—				—				764,146
Balances at December 31, 2014	2,331				3,253,552				6,575,248				(896,994		)		(649,778		)		8,284,359
Issuance under employee related plans	8				40,497				—				—				—				40,505
Common Stock dividends	—				—				(296,169		)		—				—				(296,169		)
Changes related to cash flow derivative hedges	—				—				—				(406,047		)		—				(406,047		)
Change in defined benefit plans	—				—				—				4,760				—				4,760
Foreign currency translation adjustments	—				—				—				(30,152		)		—				(30,152		)
Purchases of Treasury Stock	—				3,570				—				—				(203,570		)		(200,000		)
Net income	—				—				665,783				—				—				665,783
Balances at December 31, 2015	2,339				3,297,619				6,944,862				(1,328,433		)		(853,348		)		8,063,039
Issuance under employee related plans	7				30,898				—				—				—				30,905
Common Stock dividends	—				—				(367,909		)		—				—				(367,909		)
Changes related to cash flow derivative hedges	—				—				—				411,223				—				411,223
Change in defined benefit plans	—				—				—				(1,636		)		—				(1,636		)
Foreign currency translation adjustments	—				—				—				2,362				—				2,362
Purchases of Treasury Stock	—				—				—				—				(299,960		)		(299,960		)
Net income	—				—				1,283,388				—				—				1,283,388
Balances at December 31, 2016	$	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.

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

F-7

ROYAL CARIBBEAN CRUISES LTD.

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.

F-8

ROYAL CARIBBEAN CRUISES LTD.

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:

F-9

ROYAL CARIBBEAN CRUISES LTD.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued)

	Years
Ships	generally 30
Ship improvements	3-20
Buildings and improvements	10-40
Computer hardware and software	3-10
Transportation equipment and other	3-30
Leasehold improvements	Shorter of remaining lease term or useful life 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.

F-10

ROYAL CARIBBEAN CRUISES LTD.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued)

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.

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.

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.

Media advertising was $240.3 million, $242.8 million and $205.2 million, and brochure, production and direct mail costs were $120.8 million, $127.1 million and $136.7 million for the years 2016, 2015 and 2014, respectively.

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.

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.

F-11

ROYAL CARIBBEAN CRUISES LTD.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued)

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.

F-12

ROYAL CARIBBEAN CRUISES LTD.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued)

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.

Segment Reporting

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 ticket revenues:
United States	55%		55%		53%
All other countries	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

F-13

ROYAL CARIBBEAN CRUISES LTD.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued)

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

F-14

ROYAL CARIBBEAN CRUISES LTD.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued)

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 Caribbean International			Celebrity Cruises			Total
Balance at December 31, 2014	$	286,958		$	—		$	286,958
Foreign currency translation adjustment	(194		)	—			(194		)
Balance at December 31, 2015	286,764			—			286,764
Goodwill attributable to purchase of Ocean Adventures(1)	—			1,600			1,600
Foreign currency translation adjustment	(10		)	32			22
Balance at December 31, 2016	$	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):

	Pullmantur
Balance at December 31, 2014	$	133,584
Impairment charge	(123,814		)
Foreign currency translation adjustment	(9,770		)
Balance at December 31, 2015	$	—

F-15

ROYAL CARIBBEAN CRUISES LTD.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued)

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.

F-16

ROYAL CARIBBEAN CRUISES LTD.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued)

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):

	2015
Indefinite-life intangible asset—Pullmantur trademarks and trade names	$	188,038
Impairment charge	(174,285		)
Foreign currency translation adjustment	(13,753		)
Total	$	—

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 improvements	2,359,639				2,019,294
Ships under construction	354,425				734,998
Land, buildings and improvements, including leasehold improvements and port facilities	341,605				337,109
Computer hardware and software, transportation equipment and other	1,108,301				1,025,264
Total property and equipment	28,142,792				26,218,690
Less—accumulated depreciation and amortization	(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.

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NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued)

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.

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 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.

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NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued)

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

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NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued)

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 of equity income from investments		$	128,350			$	81,026			$	51,640
Dividends received		$	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):

		For the period ended December 31,
		2016				2015				2014
Revenues		$	30,517			$	20,217			$	8,465
Expenses		$	12,795			$	15,669			$	3,960

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

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NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued)

		As of December 31,
		2016				2015
Current Assets		$	382,529			$	315,264
Non Current Assets		2,922,471				2,246,809
Total Assets		$	3,305,000			$	2,562,073
Current Liabilities		$	761,331			$	585,887
Non Current Liabilities		1,693,941				1,231,262
Total Liabilities		$	2,455,272			$	1,817,149
Equity Attributable to:
Noncontrolling Interest		$	1,544			$	1,683

		For the period ended December 31,
		2016				2015				2014
Total Revenues		$	1,232,191			$	990,172			$	797,441
Total Expenses		(972,454		)		(830,898		)		(682,430		)
Net Income		$	259,737			$	159,274			$	115,011

Note 7. Long-Term Debt

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

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NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued)

	2016				2015
$1.4 billion unsecured revolving credit facility, LIBOR plus 1.50%, currently 2.26% and a facility fee of 0.25%, due 2020	$	925,000			$	945,000
$1.2 billion unsecured revolving credit facility, LIBOR plus 1.50%, currently 2.24% and a facility fee of 0.25%, due 2018	805,000				895,000
Unsecured senior notes and senior debentures, 5.25% to 7.50%, due 2018, 2022 and 2027	1,073,261				1,434,542
$200 million unsecured term loan, LIBOR plus 1.30%, currently 2.06% due 2017	200,000				—
$841.8 million unsecured term loan, LIBOR plus 1.00%, currently 2.26% due through 2028	806,756				—
$226.1 million unsecured term loan, 2.53%, due through 2028	216,677				—
€700.7 million unsecured term loan, EURIBOR plus 1.15% currently 1.15%, due through 2028	708,417				—
$742.1 million unsecured term loan, LIBOR plus 1.30%, currently 2.56%, due through 2027	649,338				711,180
$273.2 million unsecured term loan, LIBOR plus 1.75%, currently 2.52%, due 2017	273,166				—
$519 million unsecured term loan, LIBOR plus 0.45%, currently 1.71%, due through 2020	173,049				216,311
$420 million unsecured term loan, 5.41%, due through 2021	171,444				207,223
$420 million unsecured term loan, LIBOR plus 1.65%, currently 2.91%, due through 2021	175,000				210,000
€159.4 million unsecured term loan, EURIBOR plus 1.58%, currently 1.58%, due through 2021	70,082				86,650
$524.5 million unsecured term loan, LIBOR plus 0.50%, currently 1.48%, due through 2021	218,542				262,250
$566.1 million unsecured term loan, LIBOR plus 0.37%, currently 1.63%, due through 2022	259,448				306,621
$1.1 billion unsecured term loan, LIBOR plus 1.65%, currently 2.91%, due through 2022	460,652				537,426
$632.0 million unsecured term loan, LIBOR plus 0.40%, currently 1.38%, due through 2023	368,643				421,306
$673.5 million unsecured term loan, LIBOR plus 0.40%, currently 1.66%, due through 2024	448,983				505,106
$65.0 million unsecured term loan, LIBOR plus 1.75%, currently 2.52%, due through 2019	67,027				71,500
$380.0 million unsecured term loan, LIBOR plus 1.75%, currently 2.52%, due 2018	380,000				380,000
$791.1 million unsecured term loan, LIBOR plus 1.30%, currently 2.56%, due through 2026	659,256				725,182
$290.0 million unsecured term loan, LIBOR plus 1.75%, currently 2.52%, due 2018	290,000				290,000
€365 million unsecured term loan, EURIBOR plus 1.75%, currently 1.75%, due 2017	123,963				396,755
$7.3 million unsecured term loan, LIBOR plus 2.5%, currently 3.76%, due through 2023	3,964				4,440
$30.3 million unsecured term loan, LIBOR plus 3.75%, currently 4.70%, due through 2021	6,597				11,793
Capital lease obligations	40,385				48,770
Total debt	9,574,650				8,667,055
Less: unamortized debt issuance costs	(187,214		)		(139,812		)
Total debt, net of unamortized debt issuance costs	9,387,436				8,527,243
Less: current portion	(1,285,735		)		(899,542		)
Long-term portion	$	8,101,701			$	7,627,701

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

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NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued)

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):

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NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued)

Year
2017	$	1,285,735
2018	2,309,952
2019	754,496
2020	1,608,187
2021	632,920
Thereafter	2,796,146
	$	9,387,436

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

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NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued)

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:

	Employee Stock-Based Compensation
Classification of expense	2016				2015				2014
(In thousands)
Marketing, selling and administrative expenses	$	32,659			$	36,073			$	26,116
Total compensation expense	$	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.

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NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued)

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

Stock Option Activity	Number of Options			Weighted- Average Exercise Price				Weighted- Average Remaining Contractual Term			Aggregate Intrinsic Value(1)
								(years)			(in thousands)
Outstanding at January 1, 2016	411,809			$	33.69			3.12			$	28,111
Granted	—			—				—			—
Exercised	(61,014	)		$	37.87			—			—
Canceled	(4,485	)		$	44.72			—			—
Outstanding at December 31, 2016	346,310			$	32.82			2.39			$	17,221
Vested and expected to vest at December 31, 2016	346,310			$	32.82			2.39			$	17,221
Options Exercisable at December 31, 2016	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 Awards			Weighted- Average Grant Date Fair Value
Non-vested share units at January 1, 2016	820,649			$	54.98
Granted	376,744			$	64.51
Vested	(333,733	)		$	48.91
Canceled	(115,144	)		$	58.45
Non-vested share units expected to vest as of December 31, 2016	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

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ROYAL CARIBBEAN CRUISES LTD.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued)

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 Awards			Weighted- Average Grant Date Fair Value
Non-vested share units at January 1, 2016	504,211			$	53.57
Granted	182,464			$	65.83
Vested	(253,509	)		$	52.25
Canceled	(91,014	)		$	50.99
Non-vested share units expected to vest as of December 31, 2016	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 Awards			Weighted- Average Grant Date Fair Value
Non-vested share units at January 1, 2016	—			$	—
Granted	132,228			$	66.93
Vested	—			$	—
Canceled	—			$	—
Non-vested share units expected to vest as of December 31, 2016	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):

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ROYAL CARIBBEAN CRUISES LTD.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued)

	Year Ended December 31,
	2016				2015				2014
Net income for basic and diluted earnings per share	$	1,283,388			$	665,783			$	764,146
Weighted-average common shares outstanding	215,393				219,537				221,658
Dilutive effect of stock options, performance share awards and restricted stock awards	923				1,152				1,386
Diluted weighted-average shares outstanding	216,316				220,689				223,044
Basic earnings per share:
Net income	$	5.96			$	3.03			$	3.45
Diluted earnings per share:
Net income	$	5.93			$	3.02			$	3.43

There were no antidilutive shares for the year ended December 31, 2016, 2015 and 2014.

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.

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NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued)

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):

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NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued)

		Changes related to cash flow derivative hedges				Changes in defined benefit plans				Foreign currency translation adjustments				Accumulated other comprehensive income (loss)
Accumulated comprehensive income (loss) at January 1, 2014		$	43,324			$	(23,994	)		$	(13,659	)		$	5,671
Other comprehensive loss before reclassifications		(919,094		)		(8,937		)		(28,099		)		(956,130		)
Amounts reclassified from accumulated other comprehensive income (loss)		49,744				1,724				1,997				53,465
Net current-period other comprehensive loss		(869,350		)		(7,213		)		(26,102		)		(902,665		)
Accumulated comprehensive loss at January 1, 2015		(826,026		)		(31,207		)		(39,761		)		(896,994		)
Other comprehensive (loss) income before reclassifications		(697,671		)		3,053				(25,952		)		(720,570		)
Amounts reclassified from accumulated other comprehensive loss		291,624				1,707				(4,200		)		289,131
Net current-period other comprehensive (loss) income		(406,047		)		4,760				(30,152		)		(431,439		)
Accumulated comprehensive loss at January 1, 2015		(1,232,073		)		(26,447		)		(69,913		)		(1,328,433		)
Other comprehensive income (loss) before reclassifications		73,973				(2,777		)		2,362				73,558
Amounts reclassified from accumulated other comprehensive income (loss)		337,250				1,141				—				338,391
Net current-period other comprehensive income (loss)		411,223				(1,636		)		2,362				411,949
Accumulated comprehensive loss at December 31, 2016		$	(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):

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NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued)

		Amount of Loss Reclassified from Accumulated Other Comprehensive Income (Loss) into Income
Details about Accumulated Other Comprehensive Income (Loss) Components		Year Ended December 31, 2016				Year Ended December 31, 2015				Year Ended December 31, 2014				Affected Line Item in Statements of Comprehensive Income (Loss)
Loss on cash flow derivative hedges:
Cross currency swaps		$	—			$	—			$	(261	)		Interest expense, net of interest capitalized
Interest rate swaps		(41,480		)		(36,401		)		(15,264		)		Interest expense, net of interest capitalized
Foreign currency forward contracts		(8,114		)		(2,871		)		(1,887		)		Depreciation and amortization expenses
Foreign currency forward contracts		(14,342		)		7,580				(4,291		)		Other income (expense)
Foreign currency forward contracts		—				—				(57		)		Interest expense, net of interest capitalized
Foreign currency forward contracts		(207		)		—				—				Other indirect operating expenses
Foreign currency collar options		(2,408		)		(1,605		)		—				Depreciation and amortization expenses
Fuel swaps		13,685				(9,583		)		—				Other income (expense)
Fuel swaps		(284,384		)		(248,744		)		(27,984		)		Fuel
		(337,250		)		(291,624		)		(49,744		)
Amortization of defined benefit plans:
Actuarial loss		(1,141		)		(1,414		)		(888		)		Payroll and related
Prior service costs		—				(293		)		(836		)		Payroll and related
		(1,141		)		(1,707		)		(1,724		)
Release of foreign cumulative translation due to sale or liquidation of businesses:
Foreign cumulative translation		—				4,200				(1,997		)		Other operating
Total reclassifications for the period		$	(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, 2015 Using
Description	Total Carrying Amount				Total Fair Value				Level 1(1)				Level 2(2)				Level 3(3)				Total Carrying Amount				Total Fair Value				Level 1(1)				Level 2(2)				Level 3(3)
Assets:
Cash and cash equivalents(4)	$	132,603			$	132,603			$	132,603			$	—			$	—			$	121,565			$	121,565			$	121,565			$	—			$	—
Total Assets	$	132,603			$	132,603			$	132,603			$	—			$	—			$	121,565			$	121,565			$	121,565			$	—			$	—
Liabilities:
Long-term debt (including current portion of long-term debt)(5)	$	9,347,051			$	9,859,266			$	—			$	9,859,266			$	—			$	8,478,473			$	8,895,009			$	—			$	8,895,009			$	—
Total Liabilities	$	9,347,051			$	9,859,266			$	—			$	9,859,266			$	—			$	8,478,473			$	8,895,009			$	—			$	8,895,009			$	—

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ROYAL CARIBBEAN CRUISES LTD.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(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, 2015 Using
Description	Total Fair Value				Level 1(1)				Level 2(2)				Level 3(3)				Total Fair Value				Level 1(1)				Level 2(2)				Level 3(3)
Assets:
Derivative financial instruments(4)	$	19,397			$	—			$	19,397			$	—			$	134,574			$	—			$	134,574			$	—
Investments(5)	$	3,576			3,576				—				—				$	3,965			3,965				—				—
Total Assets	$	22,973			$	3,576			$	19,397			$	—			$	138,539			$	3,965			$	134,574			$	—
Liabilities:
Derivative financial instruments(6)	$	373,497			$	—			$	373,497			$	—			$	1,044,292			$	—			$	1,044,292			$	—
Total Liabilities	$	373,497			$	—			$	373,497			$	—			$	1,044,292			$	—			$	1,044,292			$	—

---

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

(2)

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

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

(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.

(6)	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.

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.

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ROYAL CARIBBEAN CRUISES LTD.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued)

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):

		Fair Value Measurements at December 31, 2015 Using
Description		Total Carrying Amount				Total Fair Value				Level 3				Total Impairment
Pullmantur Goodwill (1)		$	—			$	—			—				$	123,814
Indefinite-life intangible asset-Pullmantur trademarks and trade names (2)		$	—			$	—			—				$	174,285
Long-lived assets — Pullmantur aircraft and vessels (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:

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ROYAL CARIBBEAN CRUISES LTD.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued)

		Gross Amounts not Offset in the Consolidated Balance Sheet that are Subject to Master Netting Agreements
		As of December 31, 2016																As of December 31, 2015
		Gross Amount of Derivative Assets Presented in the Consolidated Balance Sheet				Gross Amount of Eligible Offsetting Recognized Derivative Liabilities				Cash Collateral Received				Net Amount of Derivative Assets				Gross Amount of Derivative Assets Presented in the Consolidated Balance Sheet				Gross Amount of Eligible Offsetting Recognized Derivative Assets				Cash Collateral Received				Net Amount of Derivative Assets
(In thousands)
Derivatives subject to master netting 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 Amounts not Offset in the Consolidated Balance Sheet that are Subject to Master Netting Agreements
		As of December 31, 2016																As of December 31, 2015
		Gross Amount of Derivative Liabilities Presented in the Consolidated Balance Sheet				Gross Amount of Eligible Offsetting Recognized Derivative Assets				Cash Collateral Pledged				Net Amount of Derivative Liabilities				Gross Amount of Derivative Liabilities Presented in the Consolidated Balance Sheet				Gross Amount of Eligible Offsetting Recognized Derivative Liabilities				Cash Collateral Pledged				Net Amount of Derivative Liabilities
(In thousands)
Derivatives subject to master netting agreements		$	(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	)

Derivative Instruments

We are exposed to market risk attributable to changes in interest rates, foreign currency exchange rates and fuel prices. We manage these risks through a combination of our normal operating and financing activities and through the use of derivative financial instruments pursuant to our hedging practices and policies. The financial impact of these hedging instruments is primarily offset by corresponding changes in the underlying exposures being hedged. We achieve this by closely matching the 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.

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 and the changes

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NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued)

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.

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.

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.

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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:

Debt Instrument	Swap Notional as of December 31, 2016 (In thousands)			Maturity	Debt Fixed Rate	Swap Floating Rate: LIBOR plus	All-in Swap Floating Rate as of December 31, 2016
Oasis of the Seas term loan	$	175,000		October 2021	5.41%	3.87%	5.13%
Unsecured senior notes	650,000			November 2022	5.25%	3.63%	4.54%
	$	825,000

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

Market risk associated with our long-term floating rate debt is the potential increase in interest expense from an increase in interest rates. We use interest rate swap agreements that effectively convert a portion of our floating-rate debt to a fixed-rate basis to manage this risk. At December 31, 2016 and December 31, 2015, we maintained interest rate swap agreements on the following floating-rate debt instruments:

Debt Instrument	Swap Notional as of December 31, 2016 (In thousands)			Maturity	Debt Floating Rate		All-in Swap Fixed Rate
Celebrity Reflection term loan		$436,333		October 2024	LIBOR plus	0.40%	2.85%
Quantum of the Seas term loan	612,500			October 2026	LIBOR plus	1.30%	3.74%
Anthem of the Seas term loan	634,375			April 2027	LIBOR plus	1.30%	3.86%
Ovation of the Seas term loan	795,417			April 2028	LIBOR plus	1.00%	3.16%
Harmony of the Seas term loan (1)	701,056			May 2028	EURIBOR plus	1.15%	2.26%
	$	3,179,681

(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 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.

Foreign Currency Exchange Rate Risk

Derivative Instruments

Our primary exposure to foreign currency exchange rate risk relates to our ship construction contracts denominated in Euros, our foreign currency denominated debt and our 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

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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.

Fuel Price Risk

Our exposure to market risk for changes in fuel prices relates primarily to the consumption of fuel on our ships. We use fuel swap agreements 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:

	Fuel Swap Agreements
	As of December 31, 2016			As of December 31, 2015
	(metric tons)
2016	—			930,000
2017	799,065			854,000
2018	616,300			583,000
2019	521,000			231,000
2020	306,500			—

	Fuel Swap Agreements
	As of December 31, 2016			As of December 31, 2015
	(% hedged)
Projected fuel purchases for year:
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.

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

	Fair Value of Derivative Instruments
	Asset Derivatives										Liability Derivatives
	Balance Sheet Location		As of December 31, 2016				As of December 31, 2015				Balance Sheet Location		As of December 31, 2016				As of December 31, 2015
		Fair Value				Fair Value					Fair Value				Fair Value
(In thousands)
Derivatives designated as hedging instruments under ASC 815-20(1)
Interest rate swaps	Other assets		$	5,246			$	—			Other long-term liabilities		$	57,679			$	67,371
Foreign currency forward contracts	Derivative financial instruments		—				93,996				Derivative financial instruments		5,574				320,873
Foreign currency forward contracts	Other assets		—				—				Other long-term liabilities		68,165				—
Fuel swaps	Derivative financial instruments		—				—				Derivative financial instruments		129,486				307,475
Fuel swaps	Other assets		13,608				—				Other long-term liabilities		95,125				325,055
Total derivatives designated as hedging instruments under ASC 815-20			18,854				93,996						356,029				1,020,774
Derivatives not designated as hedging instruments under ASC 815-20
Foreign currency forward contracts	Derivative Financial Instruments		—				32,339				Derivative financial instruments		—				—
Fuel swaps	Derivative financial instruments		—				8,239				Derivative financial instruments		11,532				23,518
Fuel swaps	Other assets		543				—				Other long-term liabilities		5,936				—
Total derivatives not designated as hedging instruments under ASC 815-20			543				40,578						17,468				23,518
Total derivatives			$	19,397			$	134,574					$	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:

				Carrying Value
Non-derivative instrument designated as hedging instrument under ASC 815-20		Balance Sheet Location		As of December 31, 2016				As of December 31, 2015
(In thousands)
Foreign currency debt		Current portion of long-term debt		$	61,601			$	—
Foreign currency debt		Long-term debt		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:

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		Location of Gain (Loss) Recognized in Income on Derivative and Hedged Item		Amount of Gain (Loss) Recognized in Income on Derivative								Amount of Gain (Loss) Recognized in Income on Hedged Item
Derivatives and Related Hedged Items under ASC 815-20 Fair Value Hedging Relationships		Year Ended December 31, 2016				Year Ended December 31, 2015				Year Ended December 31, 2016				Year Ended December 31, 2015
(In thousands)
Interest rate swaps		Interest expense, net of interest capitalized		$	7,448			$	11,276			$	7,203			$	15,743
Interest rate swaps		Other income (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:

		Amount of Gain (Loss) Recognized in Other Comprehensive Income on Derivatives (Effective Portion)								Location of Gain (Loss) Reclassified from Accumulated OCI into Income (Effective Portion)		Amount of Gain (Loss) Reclassified from Accumulated Other Comprehensive Income into Income (Effective Portion)								Location of Gain (Loss) Recognized in Income on Derivative (Ineffective Portion and Amount Excluded from Effectiveness Testing)		Amount of Gain (Loss) Recognized in Income on Derivative (Ineffective Portion and Amount Excluded from Effectiveness testing)
Derivatives under ASC 815-20 Cash Flow Hedging Relationships		Year Ended December 31, 2016				Year Ended December 31, 2015					Year Ended December 31, 2016				Year Ended December 31, 2015					Year Ended December 31, 2016				Year Ended December 31, 2015
(In thousands)
Interest rate swaps		(31,049		)		(52,602		)		Interest expense		(41,480		)		(36,401		)		Other income (expense)		—				38
Foreign currency forward contracts		(51,092		)		(141,470		)		Depreciation and amortization expenses		(8,114		)		(2,871		)		Other income (expense)		—				—
Foreign currency forward contracts		—				—				Other income (expense)		(14,342		)		7,580				Other income (expense)		(59		)		—
Foreign currency forward contracts		—				—				Other indirect operating expenses		(207		)		—				Other income (expense)		—				—
Foreign currency collar options		—				(64,559		)		Depreciation and amortization expenses		(2,408		)		(1,605		)		Other income (expense)		—				—
Fuel swaps		—				—				Other income (expense)		13,685				(9,583		)		Other income (expense)		—				—
Fuel swaps		156,139				(439,040		)		Fuel		(284,384		)		(248,744		)		Other income (expense)		(751		)		(487		)
		$	73,998			$	(697,671	)				$	(337,250	)		$	(291,624	)				$	(810	)		$	(449	)

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NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued)

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

		Amount of Gain (Loss) Recognized in Other Comprehensive Income (Effective Portion)								Location of Gain (Loss) in Income (Ineffective Portion and Amount Excluded from Effectiveness Testing)		Amount of Gain (Loss) Recognized in Income (Ineffective Portion and Amount Excluded from Effectiveness Testing)
Non-derivative instruments under ASC 815-20 Net Investment Hedging Relationships		Year Ended December 31, 2016				Year Ended December 31, 2015					Year Ended December 31, 2016				Year Ended December 31, 2015
(In thousands)
Foreign Currency Debt		$	20,295			$	8,955			Other income (expense)		$	—			$	—
		$	20,295			$	8,955					$	—			$	—

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

				Amount of Gain (Loss) Recognized in Income on Derivatives
Derivatives Not Designated as Hedging Instruments under ASC 815-20		Location of Gain (Loss) Recognized in Income on Derivatives		Year Ended December 31, 2016				Year Ended December 31, 2015
(In thousands)
Foreign currency forward contracts		Other income (expense)		$	(51,029	)		$	(55,489	)
Fuel swaps		Other income (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.

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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.

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.

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-

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NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued)

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

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.

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):

Year
2017	$	20,749
2018	17,422
2019	15,603
2020	14,365
2021	9,770
Thereafter	231,888
	$	309,797

Total expense for all operating leases amounted to $29.0 million, $29.7 million and $52.0 million for the years 2016, 2015 and 2014, respectively.

Other

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

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capital costs and other similar costs. The indemnification clauses are often standard contractual terms and are entered into in the normal course of business. There are no stated or notional amounts included in the indemnification clauses and we are not able to estimate the maximum potential amount of future payments, if any, under these indemnification clauses. We have not been required to make any payments under such indemnification clauses in the past and, under current circumstances, we do not believe an indemnification in any material amount is probable.

If 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.

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
	$	795,247

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.

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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 Balance January 1, 2016				Accruals				Payments				Ending Balance December 31, 2016				Cumulative Charges Incurred
Termination benefits		$	—			$	2,587			$	2,587			$	—			$	2,587
Contract termination costs			—				68				68				—				68
Other related costs			—				—				—				—				—
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 Balance January 1, 2016				Accruals				Payments				Ending Balance December 31, 2016				Cumulative Charges Incurred
Termination benefits		$	—			$	5,612			$	2,851			$	2,761			$	5,612
Contract termination costs			—				15				15				—				15
Other related costs			—				170				3				167				170
Total		$	—			$	5,797			$	2,869			$	2,928			$	5,797

2014 Profitability Initiatives:

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

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ROYAL CARIBBEAN CRUISES LTD.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued)

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.

As a result of these actions, we incurred restructuring exit costs of $3.2 million for the year ended December 31, 2014 which are reported within Restructuring charges in our consolidated statements of comprehensive income (loss).

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.

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ROYAL CARIBBEAN CRUISES LTD.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued)

Note 17. Quarterly Selected Financial Data (Unaudited)

	(In thousands, except per share data)
	First Quarter								Second Quarter								Third Quarter								Fourth Quarter
	2016				2015				2016				2015				2016				2015				2016				2015
Total revenues(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 income(2)	$	163,127			$	105,682			$	282,273			$	261,297			$	734,963			$	258,005			$	296,842			$	249,918
Net income(2)(3)(4)	$	99,140			$	45,230			$	229,905			$	184,967			$	693,257			$	228,787			$	261,086			$	206,799
Earnings per share:
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 declared per share	$	0.375			$	0.30			$	0.375			$	0.30			$	0.48			$	0.375			$	0.48			$	0.375

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(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.

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