Economic Value Added (EVA)
EVA is registered trademark of Stern Stewart.
Economic value added or economic profit is the difference between revenues and costs,where costs include not only expenses, but also cost of capital.
Economic Profit
Royal Caribbean Cruises Ltd., economic profit calculation
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).
1 NOPAT. See details »
2 Cost of capital. See details »
3 Invested capital. See details »
4 2021 Calculation
Economic profit = NOPAT – Cost of capital × Invested capital
= -3,961,280 – 19.70% × 26,323,667 = -9,146,038
An analysis of the economic profit from 2017 to 2021 reveals a persistent failure to generate value above the cost of capital, as indicated by negative economic profit across the entire five-year period. While operating profits showed growth in the early years, a severe downturn in 2020 and 2021 substantially exacerbated the economic losses.
- Net Operating Profit After Taxes (NOPAT)
- NOPAT followed a growth trajectory from 2017 to 2019, increasing from 1.89 billion to 2.33 billion. This trend reversed sharply in 2020, with NOPAT falling to a loss of 4.92 billion. A partial recovery was observed in 2021, though the figure remained negative at 3.96 billion.
- Cost of Capital
- A consistent downward trend in the cost of capital is observed, declining steadily from 29.81% in 2017 to 19.70% in 2021. This indicates a reduction in the percentage return required to cover the cost of the company's funding over the period.
- Invested Capital
- Invested capital increased consistently from 18.11 billion in 2017 to a peak of 28.44 billion in 2020. A slight reduction to 26.32 billion occurred in 2021, but the total capital employed remained significantly higher than the 2017 baseline.
- Economic Profit
- Economic profit remained negative throughout the period, signifying that operating returns were insufficient to cover the cost of invested capital. Initial losses ranged between 3.50 billion and 4.00 billion from 2017 to 2019. The economic deficit widened drastically in 2020 to 11.09 billion, before moderating slightly to 9.15 billion in 2021.
The combination of increasing invested capital and the collapse of NOPAT in 2020 created a significant divergence between operating performance and the cost of capital, leading to a peak in value destruction during that year. Despite the continuous decline in the cost of capital percentage, the magnitude of operating losses in the latter years outweighed these gains.
AI Ask an analyst for more
Net Operating Profit after Taxes (NOPAT)
Royal Caribbean Cruises Ltd., NOPAT calculation
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).
1 Elimination of deferred tax expense. See details »
2 Addition of increase (decrease) in credit loss allowance.
3 Addition of increase (decrease) in restructuring.
4 Addition of increase (decrease) in equity equivalents to net income (loss) attributable to Royal Caribbean Cruises Ltd..
5 2021 Calculation
Interest expense on capitalized operating leases = Operating lease liability × Discount rate
= 603,648 × 6.52% = 39,358
6 2021 Calculation
Tax benefit of interest expense, net of interest capitalized = Adjusted interest expense, net of interest capitalized × Statutory income tax rate
= 1,331,111 × 0.85% = 11,314
7 Addition of after taxes interest expense to net income (loss) attributable to Royal Caribbean Cruises Ltd..
8 2021 Calculation
Tax expense (benefit) of investment income = Investment income, before tax × Statutory income tax rate
= 16,773 × 0.85% = 143
9 Elimination of after taxes investment income.
The financial data reveals significant fluctuations in the company's profitability over the five-year period.
- Net income (loss) attributable to Royal Caribbean Cruises Ltd.
- From 2017 to 2019, net income exhibited a steady increase, rising from approximately $1.63 billion to nearly $1.88 billion. However, the years 2020 and 2021 show a drastic reversal to substantial net losses, amounting to negative $5.80 billion and negative $5.26 billion respectively. This sharp decline reflects a critical downturn in net profitability during these latter years.
- Net operating profit after taxes (NOPAT)
- Similarly, NOPAT increased consistently from about $1.90 billion in 2017 to approximately $2.33 billion in 2019, demonstrating a positive operational performance before taxes. In contrast, 2020 and 2021 recorded significant negative NOPAT values, at nearly negative $4.92 billion and negative $3.96 billion respectively, signaling severe operational challenges impacting the company’s profitability after tax obligations.
Overall, the data indicates a period of strong financial performance up until 2019, followed by a sharp deterioration in both net income and operational profitability in the subsequent two years. The magnitude of losses recorded in 2020 and 2021 suggests substantial adverse impacts on the company's financial health during this period.
AI Ask an analyst for more
Cash Operating Taxes
Royal Caribbean Cruises Ltd., cash operating taxes calculation
US$ 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).
- Income Tax (Expense) Benefit
- The income tax benefit showed an increasing trend from 2017 to 2019, rising from 18,300 thousand US dollars in 2017 to 32,600 thousand US dollars in 2019. However, there was a significant reversal in 2020 and 2021, with the figures turning into expenses of 15,000 thousand and 45,200 thousand US dollars respectively. This indicates a shift from tax benefits to tax expenses in these two years, suggesting a possible change in profitability, tax regulations, or financial strategy.
- Cash Operating Taxes
- Cash operating taxes followed a similar pattern to the income tax benefit, increasing steadily from 21,373 thousand US dollars in 2017 to 39,556 thousand US dollars in 2019. In 2020 and 2021, there was a sharp decline turning into negative values of 12,780 thousand and 34,028 thousand US dollars respectively. This negative value implies possible tax refunds, credits, or adjustments during these years, which aligns with the shift observed in income tax figures.
- Overall Insight
- The data reflects a period of consistent growth in tax-related expenses and benefits until 2019, followed by a sudden and marked change in 2020 and 2021. The switch from positive to negative figures likely indicates an unusual financial situation or external impact affecting taxable income and tax payments during the latter years, possibly linked to broader economic factors or company-specific events.
AI Ask an analyst for more
Invested Capital
Royal Caribbean Cruises Ltd., invested capital calculation (financing approach)
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).
1 Addition of capitalized operating leases.
2 Elimination of deferred taxes from assets and liabilities. See details »
3 Addition of allowance for doubtful accounts receivable.
4 Addition of restructuring.
5 Addition of equity equivalents to shareholders’ equity.
6 Removal of accumulated other comprehensive income.
7 Subtraction of ships under construction.
- Total Reported Debt & Leases
-
The total reported debt and leases increased significantly over the period analyzed. Starting from approximately $7.7 billion at the end of 2017, it rose markedly to about $11.3 billion by the end of 2018. The upward trend continued with a smaller increase to $11.7 billion by the end of 2019, followed by a very sharp rise to nearly $20.0 billion at the end of 2020. By the end of 2021, the figure further increased to around $21.7 billion. This reflects a consistent and steep growth in the company's leverage position over the five-year period.
- Shareholders’ Equity
-
Shareholders’ equity showed a fluctuating and ultimately declining trend. Starting at approximately $10.7 billion at the end of 2017, it rose slightly to about $11.1 billion in 2018, and then further increased to $12.2 billion at the end of 2019, marking the highest level within the timeframe. However, by the end of 2020, equity decreased sharply to around $8.8 billion. This downward trajectory continued in 2021, with equity dropping significantly to approximately $5.1 billion. The decline suggests a reduction in net asset value, possibly indicating losses, dividend payments, or other factors reducing equity.
- Invested Capital
-
Invested capital demonstrated an overall upward trend with some volatility. It increased from about $18.1 billion at the end of 2017 to approximately $22.8 billion in 2018, continuing to climb to $24.2 billion at the end of 2019. A notable increase occurred by the end of 2020, reaching about $28.4 billion. However, by the end of 2021, invested capital decreased to roughly $26.3 billion. This pattern indicates ongoing investment or capital deployment, particularly between 2019 and 2020, with a slight contraction observed in the final period.
- Overall Insights
-
The data reveals a pronounced increase in total debt and leases, especially during 2020 and 2021, suggesting increased borrowing or lease commitments, possibly to support operations or capital expenditures during challenging periods. Meanwhile, shareholders’ equity experienced a marked decline after 2019, which could signal operational difficulties, impairments, or significant distributions. Invested capital's growth until 2020 suggests increased resource commitment, with a slight reduction in 2021 potentially reflecting asset disposals or changes in capital structure. The combination of rising debt and falling equity points to increased financial leverage and potential risk in the company’s capital structure.
AI Ask an analyst for more
Cost of Capital
Royal Caribbean Cruises Ltd., cost of capital calculations
| Capital (fair value)1 | Weights | Cost of capital | |||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| Equity2 | 18,786,054) | 18,786,054) | ÷ | 42,238,457) | = | 0.44 | 0.44 | × | 37.48% | = | 16.67% | ||
| Debt3 | 22,848,755) | 22,848,755) | ÷ | 42,238,457) | = | 0.54 | 0.54 | × | 5.47% × (1 – 0.85%) | = | 2.93% | ||
| Operating lease liability4 | 603,648) | 603,648) | ÷ | 42,238,457) | = | 0.01 | 0.01 | × | 6.52% × (1 – 0.85%) | = | 0.09% | ||
| Total: | 42,238,457) | 1.00 | 19.70% | ||||||||||
Based on: 10-K (reporting date: 2021-12-31).
1 US$ in thousands
2 Equity. See details »
3 Debt. See details »
4 Operating lease liability. See details »
| Capital (fair value)1 | Weights | Cost of capital | |||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| Equity2 | 22,154,902) | 22,154,902) | ÷ | 44,425,179) | = | 0.50 | 0.50 | × | 37.48% | = | 18.69% | ||
| Debt3 | 21,603,724) | 21,603,724) | ÷ | 44,425,179) | = | 0.49 | 0.49 | × | 6.02% × (1 – 0.26%) | = | 2.92% | ||
| Operating lease liability4 | 666,553) | 666,553) | ÷ | 44,425,179) | = | 0.02 | 0.02 | × | 4.59% × (1 – 0.26%) | = | 0.07% | ||
| Total: | 44,425,179) | 1.00 | 21.68% | ||||||||||
Based on: 10-K (reporting date: 2020-12-31).
1 US$ in thousands
2 Equity. See details »
3 Debt. See details »
4 Operating lease liability. See details »
| Capital (fair value)1 | Weights | Cost of capital | |||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| Equity2 | 18,715,951) | 18,715,951) | ÷ | 31,138,061) | = | 0.60 | 0.60 | × | 37.48% | = | 22.53% | ||
| Debt3 | 11,723,493) | 11,723,493) | ÷ | 31,138,061) | = | 0.38 | 0.38 | × | 3.99% × (1 – 1.68%) | = | 1.48% | ||
| Operating lease liability4 | 698,617) | 698,617) | ÷ | 31,138,061) | = | 0.02 | 0.02 | × | 4.65% × (1 – 1.68%) | = | 0.10% | ||
| Total: | 31,138,061) | 1.00 | 24.11% | ||||||||||
Based on: 10-K (reporting date: 2019-12-31).
1 US$ in thousands
2 Equity. See details »
3 Debt. See details »
4 Operating lease liability. See details »
| Capital (fair value)1 | Weights | Cost of capital | |||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| Equity2 | 25,296,935) | 25,296,935) | ÷ | 36,974,922) | = | 0.68 | 0.68 | × | 37.48% | = | 25.64% | ||
| Debt3 | 11,150,646) | 11,150,646) | ÷ | 36,974,922) | = | 0.30 | 0.30 | × | 4.14% × (1 – 1.14%) | = | 1.23% | ||
| Operating lease liability4 | 527,340) | 527,340) | ÷ | 36,974,922) | = | 0.01 | 0.01 | × | 4.14% × (1 – 1.14%) | = | 0.06% | ||
| Total: | 36,974,922) | 1.00 | 26.94% | ||||||||||
Based on: 10-K (reporting date: 2018-12-31).
1 US$ in thousands
2 Equity. See details »
3 Debt. See details »
4 Operating lease liability. See details »
| Capital (fair value)1 | Weights | Cost of capital | |||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| Equity2 | 27,904,933) | 27,904,933) | ÷ | 36,152,998) | = | 0.77 | 0.77 | × | 37.48% | = | 28.93% | ||
| Debt3 | 8,071,231) | 8,071,231) | ÷ | 36,152,998) | = | 0.22 | 0.22 | × | 3.92% × (1 – 1.11%) | = | 0.87% | ||
| Operating lease liability4 | 176,834) | 176,834) | ÷ | 36,152,998) | = | 0.00 | 0.00 | × | 3.92% × (1 – 1.11%) | = | 0.02% | ||
| Total: | 36,152,998) | 1.00 | 29.81% | ||||||||||
Based on: 10-K (reporting date: 2017-12-31).
1 US$ in thousands
2 Equity. See details »
3 Debt. See details »
4 Operating lease liability. See details »
Economic Spread Ratio
Royal Caribbean Cruises Ltd., economic spread ratio calculation, comparison to benchmarks
| Dec 31, 2021 | Dec 31, 2020 | Dec 31, 2019 | Dec 31, 2018 | Dec 31, 2017 | ||
|---|---|---|---|---|---|---|
| Selected Financial Data (US$ in thousands) | ||||||
| Economic profit1 | (9,146,038) | (11,087,811) | (3,499,589) | (3,996,386) | (3,500,644) | |
| Invested capital2 | 26,323,667) | 28,435,034) | 24,165,583) | 22,762,454) | 18,110,618) | |
| Performance Ratio | ||||||
| Economic spread ratio3 | -34.74% | -38.99% | -14.48% | -17.56% | -19.33% | |
| Benchmarks | ||||||
| Economic Spread Ratio, Competitors4 | ||||||
| Airbnb Inc. | -11.10% | — | — | — | — | |
| Booking Holdings Inc. | -13.66% | — | — | — | — | |
| Chipotle Mexican Grill Inc. | -1.67% | — | — | — | — | |
| DoorDash, Inc. | -39.79% | — | — | — | — | |
| McDonald’s Corp. | 8.30% | — | — | — | — | |
| Starbucks Corp. | 4.06% | -8.49% | — | — | — | |
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).
1 Economic profit. See details »
2 Invested capital. See details »
3 2021 Calculation
Economic spread ratio = 100 × Economic profit ÷ Invested capital
= 100 × -9,146,038 ÷ 26,323,667 = -34.74%
4 Click competitor name to see calculations.
The financial performance from 2017 to 2021 is characterized by a persistent inability to generate positive economic profit, with a severe deterioration in value creation during the 2020-2021 period.
- Economic Profit
- Economic profit remained negative throughout the analyzed five-year period. Losses were relatively stable between 2017 and 2019, fluctuating between -3.5 billion and -4.0 billion US dollars. A significant collapse occurred in 2020, with economic profit dropping to -11.1 billion US dollars, representing the lowest point in the series. A partial recovery was noted in 2021, as losses narrowed to -9.1 billion US dollars.
- Invested Capital
- Invested capital demonstrated a consistent growth trend from 2017 through 2020, increasing from 18.1 billion US dollars to a peak of 28.4 billion US dollars. This expansion of the capital base occurred despite the negative economic profit. In 2021, a slight contraction in invested capital was observed, with the figure decreasing to 26.3 billion US dollars.
- Economic Spread Ratio
- The economic spread ratio remained negative for the entire duration, confirming that the returns on invested capital were consistently below the cost of capital. An improving trend was evident from 2017 to 2019, as the ratio moved from -19.33% to -14.48%. This progress was abruptly reversed in 2020, when the ratio fell to -38.99%, indicating a substantial widening of the gap between actual returns and the required rate of return. The ratio saw a marginal improvement to -34.74% in 2021.
AI Ask an analyst for more
Economic Profit Margin
Royal Caribbean Cruises Ltd., economic profit margin calculation, comparison to benchmarks
| Dec 31, 2021 | Dec 31, 2020 | Dec 31, 2019 | Dec 31, 2018 | Dec 31, 2017 | ||
|---|---|---|---|---|---|---|
| Selected Financial Data (US$ in thousands) | ||||||
| Economic profit1 | (9,146,038) | (11,087,811) | (3,499,589) | (3,996,386) | (3,500,644) | |
| Revenues | 1,532,133) | 2,208,805) | 10,950,661) | 9,493,849) | 8,777,845) | |
| Performance Ratio | ||||||
| Economic profit margin2 | -596.95% | -501.98% | -31.96% | -42.09% | -39.88% | |
| Benchmarks | ||||||
| Economic Profit Margin, Competitors3 | ||||||
| Airbnb Inc. | -10.04% | — | — | — | — | |
| Booking Holdings Inc. | -18.71% | — | — | — | — | |
| Chipotle Mexican Grill Inc. | -1.21% | — | — | — | — | |
| DoorDash, Inc. | -25.88% | — | — | — | — | |
| McDonald’s Corp. | 17.04% | — | — | — | — | |
| Starbucks Corp. | 3.31% | -8.28% | — | — | — | |
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).
1 Economic profit. See details »
2 2021 Calculation
Economic profit margin = 100 × Economic profit ÷ Revenues
= 100 × -9,146,038 ÷ 1,532,133 = -596.95%
3 Click competitor name to see calculations.
The financial performance from 2017 to 2021 demonstrates a significant decline in economic value creation, characterized by consistently negative economic profit and a dramatic collapse in revenue during the latter two years of the period.
- Revenue Trends
- Revenues exhibited steady growth between 2017 and 2019, peaking at 10,950,661 thousand US dollars. However, a precipitous decline occurred in 2020, with revenues falling to 2,208,805 thousand US dollars, followed by a further decrease to 1,532,133 thousand US dollars by the end of 2021.
- Economic Profit Analysis
- Economic profit remained negative throughout the five-year period, indicating that the entity did not generate returns sufficient to cover its cost of capital. Losses remained relatively stable between 2017 and 2019, ranging from 3,499,589 to 3,996,386 thousand US dollars. A sharp escalation in economic losses was recorded in 2020, reaching 11,087,811 thousand US dollars, with a slight moderation to 9,146,038 thousand US dollars in 2021.
- Economic Profit Margin Deterioration
- The economic profit margin reflects a severe destabilization of value creation. Between 2017 and 2019, the margin fluctuated within a range of -31.96% to -42.09%. The combination of crashing revenues and expanding economic losses led to an exponential deterioration of this ratio, which plummeted to -501.98% in 2020 and further declined to -596.95% in 2021.
AI Ask an analyst for more