Analysis of Debt
Total Debt (Carrying Amount)
Royal Caribbean Cruises Ltd., balance sheet: debt
US$ in thousands
Based on: 10-K (reporting date: 2021-12-31), 10-K (reporting date: 2020-12-31), 10-K (reporting date: 2019-12-31), 10-K (reporting date: 2018-12-31), 10-K (reporting date: 2017-12-31).
The analysis of the reported debt data reveals distinct trends in different components of the company's liabilities over the five-year period ending in December 2021.
- Current Portion of Long-Term Debt
- This category experienced fluctuations throughout the period. Beginning at approximately US$1.19 billion in 2017, it increased notably to US$1.65 billion in 2018, then declined to about US$1.19 billion in 2019. A further reduction was observed in 2020, with the figure dropping to roughly US$0.96 billion, followed by a substantial increase to over US$2.24 billion in 2021.
- Commercial Paper
- Data for this variable is incomplete, with no value reported for 2017 and 2021. The values reported between 2018 and 2020 show marked volatility, increasing from US$0.78 billion in 2018 to a peak of approximately US$1.43 billion in 2019, then declining sharply to around US$0.41 billion in 2020.
- Long-Term Debt, Excluding Current Portion
- This component demonstrates a pronounced upward trend over the timeframe. Starting at around US$6.35 billion in 2017, it climbed steadily each year to reach nearly US$8.36 billion in 2018 and US$8.41 billion in 2019. A significant surge occurred in 2020, with debt more than doubling to about US$17.96 billion, followed by a further increase to approximately US$18.85 billion in 2021.
- Total Debt (Carrying Amount)
- Total debt figures reflect a similar pattern to long-term debt. Beginning at roughly US$7.54 billion in 2017, total debt rose sharply over the five years, reaching approximately US$10.78 billion in 2018 and US$11.03 billion in 2019. A pronounced jump is evident in 2020, with total debt nearly doubling to about US$19.33 billion, and further increasing to around US$21.09 billion in 2021.
Overall, the data indicates a general increase in total debt carried by the company during the period analyzed, with particularly rapid expansion observed beginning in 2020. The significant rise in long-term debt excluding the current portion is a major contributor to this increase. The current portion of long-term debt exhibited variable movements, including a notable surge in 2021. The commercial paper amounts fluctuated considerably but are incomplete, limiting full assessment of trends related to this short-term borrowing instrument.
Total Debt (Fair Value)
| Dec 31, 2021 | |
|---|---|
| Selected Financial Data (US$ in thousands) | |
| Commercial paper | —) |
| Long-term debt, including current portion of long-term debt | 22,376,480) |
| Finance lease liabilities | 472,275) |
| Total debt (fair value) | 22,848,755) |
| Financial Ratio | |
| Debt, fair value to carrying amount ratio | 1.08 |
Based on: 10-K (reporting date: 2021-12-31).
Weighted-average Interest Rate on Debt
Weighted-average interest rate on debt: 5.47%
| Interest rate | Debt amount1 | Interest rate × Debt amount | Weighted-average interest rate2 |
|---|---|---|---|
| 5.47% | 21,453,872) | 1,173,527) | |
| Total | 21,453,872) | 1,173,527) | |
| 5.47% | |||
Based on: 10-K (reporting date: 2021-12-31).
1 US$ in thousands
2 Weighted-average interest rate = 100 × 1,173,527 ÷ 21,453,872 = 5.47%
Interest Costs Incurred
Royal Caribbean Cruises Ltd., interest costs incurred
US$ in thousands
Based on: 10-K (reporting date: 2021-12-31), 10-K (reporting date: 2020-12-31), 10-K (reporting date: 2019-12-31), 10-K (reporting date: 2018-12-31), 10-K (reporting date: 2017-12-31).
- Interest expense, net of interest capitalized
- The interest expense, excluding capitalized interest, shows a consistent upward trend over the examined periods. Starting at approximately $299.98 million in 2017, it increased to $333.67 million in 2018 and further rose to $408.51 million in 2019. There is a marked acceleration in 2020, with expenses more than doubling from the previous year to $844.24 million, followed by a continued increase to $1.29 billion in 2021. This indicates a significant growth in the company's net interest costs over the five years.
- Capitalized interest costs
- Capitalized interest costs show relatively stable values compared to net interest expenses. Beginning at $24.2 million in 2017, these costs approximately doubled to $49.6 million in 2018. Subsequently, they increased slightly to $56.5 million in 2019 and remained fairly consistent during 2020 and 2021, recorded at $59.1 million and $58.8 million respectively. The relatively steady capitalized interest costs suggest that the company’s level of capital projects or capitalization policies remained stable in recent years.
- Interest costs incurred
- The total interest costs incurred, which combine net interest expense and capitalized interest, reflect a steady rise throughout the period. Figures grew from around $324.18 million in 2017 to $383.27 million in 2018 and further to $465.01 million in 2019. A pronounced surge is also apparent in 2020, nearly doubling to $903.34 million, continuing upwards to $1.35 billion in 2021. This trend suggests a substantial increase in borrowing or changes in financing strategy, potentially linked to external economic factors or company expansion.
- Overall observations
- The data highlights a sharp increase in annual interest-related expenses starting in 2020, which may be attributed to increased debt levels or higher interest rates. While capitalized interest costs have remained relatively stable, the net interest expense has grown dramatically, influencing the total interest costs incurred. This suggests that the company has faced increasing financing costs, which could impact profitability and cash flow management if the trend continues.
Adjusted Interest Coverage Ratio
Based on: 10-K (reporting date: 2021-12-31), 10-K (reporting date: 2020-12-31), 10-K (reporting date: 2019-12-31), 10-K (reporting date: 2018-12-31), 10-K (reporting date: 2017-12-31).
2021 Calculations
1 Interest coverage ratio (without capitalized interest) = EBIT ÷ Interest expense, net of interest capitalized
= -4,013,946 ÷ 1,291,753 = -3.11
2 Adjusted interest coverage ratio (with capitalized interest) = EBIT ÷ Interest costs incurred
= -4,013,946 ÷ 1,350,553 = -2.97
- Interest Coverage Ratio (without capitalized interest)
- The interest coverage ratio showed a stable and healthy performance from 2017 to 2019, with values close to 6.5 in the first two years and a slight decline to 5.75 in 2019. However, there was a marked deterioration in 2020, where the ratio turned negative to -5.86, indicating significant challenges in covering interest expenses from operating earnings. The negative trend continued in 2021 but improved somewhat to -3.11, still reflecting financial distress relative to earlier years.
- Adjusted Interest Coverage Ratio (with capitalized interest)
- The adjusted interest coverage ratio mirrored the overall trend of the unadjusted ratio, displaying a gradual decline from 5.99 in 2017 to 5.05 in 2019. A sharp transition to negative territory occurred in 2020, with a ratio of -5.48, signaling insufficient earnings to meet interest obligations even after accounting for capitalized interest. In 2021, the ratio improved slightly but remained deeply negative at -2.97, suggesting ongoing financial strain despite the slight recovery.
- Overall Analysis
- From 2017 through 2019, the company maintained a relatively solid capacity to cover interest expenses, although the ratios showed a mild downward tendency. The substantial drop in both ratios in 2020 and 2021 highlights a period of significant operational or financial distress, likely driven by external or internal challenges. While a partial recovery is seen in 2021, the persistently negative adjusted and unadjusted interest coverage ratios indicate that the company continued to face difficulties in achieving sufficient earnings relative to its interest expenses. This situation may have implications for liquidity and credit risk going forward.