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 – 19.77% × 26,323,667 = -9,165,327
The financial trajectory from 2017 through 2021 is characterized by a persistent inability to generate positive economic value, with a severe intensification of economic losses during the 2020-2021 period.
- Net Operating Profit After Taxes (NOPAT)
- An initial growth trend was observed between 2017 and 2019, with NOPAT increasing from US$ 1,898,873 thousand to US$ 2,326,210 thousand. This progress was abruptly reversed in 2020, when NOPAT fell to a deficit of US$ 4,923,029 thousand. A slight recovery in operational performance occurred in 2021, although NOPAT remained negative at US$ 3,961,280 thousand.
- Cost of Capital
- A consistent downward trend is observed in the cost of capital over the five-year period. The rate decreased annually, moving from 29.94% in 2017 to 19.77% by December 31, 2021, indicating a reduction in the weighted average cost of financing the company's assets.
- Invested Capital
- Invested capital experienced a sustained increase from 2017 to 2020, rising from US$ 18,110,618 thousand to a peak of US$ 28,435,034 thousand. This expansion of the capital base was followed by a moderate contraction in 2021, with invested capital decreasing to US$ 26,323,667 thousand.
- Economic Profit
- Economic profit remained negative throughout the entire analysis period, signaling that the company failed to generate returns in excess of its cost of capital. Between 2017 and 2019, economic losses were relatively stable, fluctuating between US$ 3,523,519 thousand and US$ 4,022,044 thousand. However, the economic loss expanded significantly in 2020, reaching US$ 11,111,174 thousand, before moderating to US$ 9,165,327 thousand in 2021.
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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 $3.96 billion respectively, signaling severe operational challenges impacting the company’s profitability after tax obligations.
Overall, the data indicates a period of strong financial performance up until 2019, followed by a sharp deterioration in both net income and operational profitability in the subsequent two years. The magnitude of losses recorded in 2020 and 2021 suggests substantial adverse impacts on the company's financial health during this period.
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Cash Operating Taxes
Royal Caribbean Cruises Ltd., cash operating taxes calculation
US$ 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.
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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 $26.3 billion. This pattern indicates ongoing investment or capital deployment, particularly between 2019 and 2020, with a slight contraction observed in the final period.
- Overall Insights
-
The data reveals a pronounced increase in total debt and leases, especially during 2020 and 2021, suggesting increased borrowing or lease commitments, possibly to support operations or capital expenditures during challenging periods. Meanwhile, shareholders’ equity experienced a marked decline after 2019, which could signal operational difficulties, impairments, or significant distributions. Invested capital's growth until 2020 suggests increased resource commitment, with a slight reduction in 2021 potentially reflecting asset disposals or changes in capital structure. The combination of rising debt and falling equity points to increased financial leverage and potential risk in the company’s capital structure.
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Cost of Capital
Royal Caribbean Cruises Ltd., cost of capital calculations
| Capital (fair value)1 | Weights | Cost of capital | |||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| Equity2 | 18,786,054) | 18,786,054) | ÷ | 42,238,457) | = | 0.44 | 0.44 | × | 37.65% | = | 16.74% | ||
| Debt3 | 22,848,755) | 22,848,755) | ÷ | 42,238,457) | = | 0.54 | 0.54 | × | 5.47% × (1 – 0.85%) | = | 2.93% | ||
| Operating lease liability4 | 603,648) | 603,648) | ÷ | 42,238,457) | = | 0.01 | 0.01 | × | 6.52% × (1 – 0.85%) | = | 0.09% | ||
| Total: | 42,238,457) | 1.00 | 19.77% | ||||||||||
Based on: 10-K (reporting date: 2021-12-31).
1 US$ 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 | × | 37.65% | = | 18.77% | ||
| 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 | 21.76% | ||||||||||
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 | × | 37.65% | = | 22.63% | ||
| 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 | 24.21% | ||||||||||
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 | × | 37.65% | = | 25.76% | ||
| 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 | 27.05% | ||||||||||
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 | × | 37.65% | = | 29.06% | ||
| 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 | 29.94% | ||||||||||
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 | (9,165,327) | (11,111,174) | (3,523,519) | (4,022,044) | (3,523,674) | |
| Invested capital2 | 26,323,667) | 28,435,034) | 24,165,583) | 22,762,454) | 18,110,618) | |
| Performance Ratio | ||||||
| Economic spread ratio3 | -34.82% | -39.08% | -14.58% | -17.67% | -19.46% | |
| Benchmarks | ||||||
| Economic Spread Ratio, Competitors4 | ||||||
| Airbnb Inc. | -11.04% | — | — | — | — | |
| Booking Holdings Inc. | -13.61% | — | — | — | — | |
| Chipotle Mexican Grill Inc. | -1.58% | — | — | — | — | |
| DoorDash, Inc. | -39.82% | — | — | — | — | |
| McDonald’s Corp. | 8.43% | — | — | — | — | |
| Starbucks Corp. | 4.13% | -8.42% | — | — | — | |
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 × -9,165,327 ÷ 26,323,667 = -34.82%
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, resulting in a consistent negative economic spread ratio. This indicates that the returns on invested capital remained below the company's cost of capital throughout the analyzed period, leading to a continuous destruction of economic value.
- Economic Profit Trends
- Economic profit remained negative for all five years, showing relative stability between 2017 and 2019 with losses ranging from approximately 3.5 billion to 4.0 billion USD. A severe deterioration occurred in 2020, where economic profit plummeted to negative 11.1 billion USD, before showing a slight recovery to negative 9.1 billion USD in 2021.
- Invested Capital Dynamics
- Invested capital exhibited a steady upward trajectory from 2017 to 2020, increasing from 18.1 billion USD to a peak of 28.4 billion USD. This expansion represents a significant increase in the capital base during a period of negative economic returns. A slight contraction in invested capital was observed in 2021, descending to 26.3 billion USD.
- Economic Spread Ratio Analysis
- The economic spread ratio mirrored the trend of economic profit, remaining negative throughout the period. A gradual improvement was noted from 2017 (-19.46%) to 2019 (-14.58%), suggesting a narrowing gap between the return on capital and its cost. However, this trend reversed sharply in 2020, with the ratio dropping to -39.08%, reflecting a drastic decline in capital efficiency. A marginal recovery was recorded in 2021, with the ratio improving to -34.82%.
Overall, the data demonstrates a significant volatility in value creation, with the 2020 fiscal year representing a critical point of financial stress. The simultaneous increase in invested capital through 2020, coupled with deepening economic losses, intensified the negative economic spread during the latter part of the analyzed period.
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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 | (9,165,327) | (11,111,174) | (3,523,519) | (4,022,044) | (3,523,674) | |
| Revenues | 1,532,133) | 2,208,805) | 10,950,661) | 9,493,849) | 8,777,845) | |
| Performance Ratio | ||||||
| Economic profit margin2 | -598.21% | -503.04% | -32.18% | -42.36% | -40.14% | |
| Benchmarks | ||||||
| Economic Profit Margin, Competitors3 | ||||||
| Airbnb Inc. | -9.98% | — | — | — | — | |
| Booking Holdings Inc. | -18.64% | — | — | — | — | |
| Chipotle Mexican Grill Inc. | -1.15% | — | — | — | — | |
| DoorDash, Inc. | -25.90% | — | — | — | — | |
| McDonald’s Corp. | 17.31% | — | — | — | — | |
| Starbucks Corp. | 3.37% | -8.21% | — | — | — | |
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 × -9,165,327 ÷ 1,532,133 = -598.21%
3 Click competitor name to see calculations.
The financial performance from 2017 to 2021 is characterized by a persistent inability to generate positive economic value, culminating in a severe deterioration of the economic profit margin. While the initial period showed relative stability in losses, the subsequent years reflect a critical collapse in revenue paired with widening economic losses, leading to an exponential increase in the negative economic profit margin.
- Economic Profit Trend
- Economic profit remained negative throughout the five-year period. Between 2017 and 2019, losses were relatively contained, fluctuating between approximately 3.5 billion and 4.0 billion US dollars. However, a sharp decline occurred in 2020, with economic profit dropping to negative 11.1 billion US dollars. A slight recovery was observed in 2021, where losses narrowed to negative 9.1 billion US dollars, though the figure remained substantially higher than pre-2020 levels.
- Revenue Trajectory
- A growth trend in revenues was observed from 2017 to 2019, with figures rising from 8.78 billion US dollars to a peak of 10.95 billion US dollars. This positive trajectory reversed abruptly in 2020, as revenues plummeted to 2.21 billion US dollars. This decline continued into 2021, with revenues further contracting to 1.53 billion US dollars, representing a significant loss of top-line earning capacity compared to the 2019 peak.
- Economic Profit Margin Analysis
- The economic profit margin exhibited extreme volatility and deterioration. From 2017 to 2019, the margin remained between -32.18% and -42.36%, indicating a consistent failure to cover the cost of capital relative to revenue. In 2020, the margin collapsed to -503.04%, a result of the simultaneous increase in economic losses and the precipitous drop in revenue. By 2021, the margin worsened further to -598.21%, demonstrating that the decline in revenue outpaced the marginal improvement in economic profit, thereby intensifying the negative value creation per dollar of revenue generated.
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