Analysis of Solvency Ratios
Solvency ratios also known as long-term debt ratios measure a company ability to meet long-term obligations.
Solvency Ratios (Summary)
Debt Ratios
Coverage Ratios
Royal Caribbean Cruises Ltd., solvency ratios
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 solvency profile of the entity transitioned from a state of relative stability between 2017 and 2019 to a period of significant financial distress beginning in 2020. This shift is characterized by a rapid increase in leverage and a total collapse in the ability to cover fixed financial obligations from operating earnings.
- Leverage and Equity Ratios
- A sharp escalation in leverage is evident, with the debt to equity ratio rising from 0.70 in 2017 to 4.15 by 2021. This upward trajectory accelerated significantly after 2019, indicating a substantial increase in borrowed funds relative to shareholder equity. Similarly, financial leverage increased from 2.08 in 2017 to 6.34 in 2021, reflecting a heightened reliance on debt to finance assets.
- Capital and Asset Structure
- The proportion of debt within the overall capital and asset base expanded markedly. The debt to assets ratio climbed from 0.34 in 2017 to 0.65 in 2021, suggesting that by the end of the period, approximately 65% of the assets were financed through debt. A parallel trend is observed in the debt to capital ratio, which grew from 0.41 in 2017 to 0.81 in 2021, confirming a shift toward a more aggressive and risk-prone capital structure.
- Debt Service Coverage
- Coverage ratios exhibit a dramatic reversal. Interest coverage remained robust between 2017 and 2019, peaking at 6.50 in 2018, before plummeting to -5.86 in 2020 and -3.11 in 2021. Fixed charge coverage followed a nearly identical pattern, dropping from 6.02 in 2018 to -2.92 in 2021. These negative values indicate that the entity's earnings were insufficient to meet its interest and fixed obligations during the final two years of the analyzed period.
In summary, the data indicates a severe deterioration of the solvency position. The simultaneous surge in debt-to-equity and debt-to-asset ratios, coupled with the transition to negative coverage ratios, points to a period of extreme financial volatility and an increased risk of insolvency.
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Debt to Equity
Royal Caribbean Cruises Ltd., debt to equity 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) | ||||||
| Current portion of long-term debt | 2,243,131) | 961,768) | 1,186,586) | 1,646,841) | 1,188,514) | |
| Commercial paper | —) | 409,319) | 1,434,180) | 775,488) | —) | |
| Long-term debt, excluding current portion | 18,847,209) | 17,957,956) | 8,414,110) | 8,355,370) | 6,350,937) | |
| Total debt | 21,090,340) | 19,329,043) | 11,034,876) | 10,777,699) | 7,539,451) | |
| Shareholders’ equity | 5,085,556) | 8,760,669) | 12,163,846) | 11,105,461) | 10,702,303) | |
| Solvency Ratio | ||||||
| Debt to equity1 | 4.15 | 2.21 | 0.91 | 0.97 | 0.70 | |
| Benchmarks | ||||||
| Debt to Equity, Competitors2 | ||||||
| Airbnb Inc. | 0.42 | — | — | — | — | |
| Booking Holdings Inc. | 1.77 | — | — | — | — | |
| Chipotle Mexican Grill Inc. | 0.00 | — | — | — | — | |
| DoorDash, Inc. | 0.00 | — | — | — | — | |
| McDonald’s Corp. | — | — | — | — | — | |
| Starbucks Corp. | — | — | — | — | — | |
| Debt to Equity, Sector | ||||||
| Consumer Services | 7.90 | — | — | — | — | |
| Debt to Equity, Industry | ||||||
| Consumer Discretionary | 1.50 | — | — | — | — | |
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 2021 Calculation
Debt to equity = Total debt ÷ Shareholders’ equity
= 21,090,340 ÷ 5,085,556 = 4.15
2 Click competitor name to see calculations.
The solvency profile of the organization underwent a significant transformation between 2017 and 2021, characterized by a substantial increase in total leverage and a corresponding depletion of shareholders' equity.
- Total Debt Accumulation
- A consistent upward trend in total debt is observed, with obligations rising from $7,539,451 thousand in 2017 to $21,090,340 thousand by the end of 2021. The most aggressive expansion occurred between 2019 and 2020, during which total debt increased by approximately 75%.
- Shareholders' Equity Erosion
- Equity levels exhibited stability and modest growth from 2017 through 2019, peaking at $12,163,846 thousand. Subsequently, a sharp contraction occurred, with equity falling to $8,760,669 thousand in 2020 and further declining to $5,085,556 thousand by 2021, representing a cumulative decrease of approximately 58% from the 2019 peak.
- Debt to Equity Ratio Progression
- The debt-to-equity ratio reflects a severe shift in the capital structure. The ratio remained relatively conservative between 2017 and 2019, fluctuating between 0.70 and 0.97. However, a critical inflection point is noted in 2020 as the ratio jumped to 2.21, ultimately reaching 4.15 by the end of 2021. This indicates that by the conclusion of the analyzed period, the company's debt obligations were more than four times the value of its equity, signaling a heightened solvency risk.
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Debt to Equity (including Operating Lease Liability)
Royal Caribbean Cruises Ltd., debt to equity (including operating lease liability) calculation, comparison to benchmarks
| Dec 31, 2021 | Dec 31, 2020 | Dec 31, 2019 | Dec 31, 2018 | Dec 31, 2017 | ||
|---|---|---|---|---|---|---|
| Selected Financial Data (US$ in thousands) | ||||||
| Current portion of long-term debt | 2,243,131) | 961,768) | 1,186,586) | 1,646,841) | 1,188,514) | |
| Commercial paper | —) | 409,319) | 1,434,180) | 775,488) | —) | |
| Long-term debt, excluding current portion | 18,847,209) | 17,957,956) | 8,414,110) | 8,355,370) | 6,350,937) | |
| Total debt | 21,090,340) | 19,329,043) | 11,034,876) | 10,777,699) | 7,539,451) | |
| Current portion of operating lease liabilities | 68,922) | 102,677) | 96,976) | —) | —) | |
| Long-term operating lease liabilities | 534,726) | 563,876) | 601,641) | —) | —) | |
| Total debt (including operating lease liability) | 21,693,988) | 19,995,596) | 11,733,493) | 10,777,699) | 7,539,451) | |
| Shareholders’ equity | 5,085,556) | 8,760,669) | 12,163,846) | 11,105,461) | 10,702,303) | |
| Solvency Ratio | ||||||
| Debt to equity (including operating lease liability)1 | 4.27 | 2.28 | 0.96 | 0.97 | 0.70 | |
| Benchmarks | ||||||
| Debt to Equity (including Operating Lease Liability), Competitors2 | ||||||
| Airbnb Inc. | 0.51 | — | — | — | — | |
| Booking Holdings Inc. | 1.85 | — | — | — | — | |
| Chipotle Mexican Grill Inc. | 1.53 | — | — | — | — | |
| DoorDash, Inc. | 0.09 | — | — | — | — | |
| McDonald’s Corp. | — | — | — | — | — | |
| Starbucks Corp. | — | — | — | — | — | |
| Debt to Equity (including Operating Lease Liability), Sector | ||||||
| Consumer Services | 11.35 | — | — | — | — | |
| Debt to Equity (including Operating Lease Liability), Industry | ||||||
| Consumer Discretionary | 1.87 | — | — | — | — | |
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 2021 Calculation
Debt to equity (including operating lease liability) = Total debt (including operating lease liability) ÷ Shareholders’ equity
= 21,693,988 ÷ 5,085,556 = 4.27
2 Click competitor name to see calculations.
Between 2017 and 2021, a significant deterioration in the solvency position is observed. The period is characterized by a simultaneous increase in total liabilities and a sharp contraction in shareholders' equity, resulting in a steep upward trajectory for the debt-to-equity ratio.
- Total Debt Trends
- Total debt, including operating lease liabilities, grew consistently from US$ 7,539,451 thousand in 2017 to US$ 21,693,988 thousand by 2021. The most aggressive expansion occurred between 2019 and 2020, where total debt increased by approximately 70%, rising from US$ 11,733,493 thousand to US$ 19,995,596 thousand.
- Shareholders' Equity Trends
- Equity levels showed modest growth from 2017 to 2019, peaking at US$ 12,163,846 thousand. However, a severe downward trend emerged thereafter, with equity falling to US$ 8,760,669 thousand in 2020 and further declining to US$ 5,085,556 thousand by the end of 2021. This represents a reduction of approximately 58% from the 2019 peak.
- Debt to Equity Ratio Analysis
- The debt-to-equity ratio remained relatively stable and below 1.0 between 2017 and 2019, ending 2019 at 0.96. A pivot occurred in 2020, as the ratio surged to 2.28, and it continued to climb sharply to 4.27 in 2021. This escalation indicates a fundamental shift in the capital structure, moving from a balanced position to one heavily leveraged by debt, thereby increasing the overall financial risk profile.
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Debt to Capital
Royal Caribbean Cruises Ltd., debt to capital 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) | ||||||
| Current portion of long-term debt | 2,243,131) | 961,768) | 1,186,586) | 1,646,841) | 1,188,514) | |
| Commercial paper | —) | 409,319) | 1,434,180) | 775,488) | —) | |
| Long-term debt, excluding current portion | 18,847,209) | 17,957,956) | 8,414,110) | 8,355,370) | 6,350,937) | |
| Total debt | 21,090,340) | 19,329,043) | 11,034,876) | 10,777,699) | 7,539,451) | |
| Shareholders’ equity | 5,085,556) | 8,760,669) | 12,163,846) | 11,105,461) | 10,702,303) | |
| Total capital | 26,175,896) | 28,089,712) | 23,198,722) | 21,883,160) | 18,241,754) | |
| Solvency Ratio | ||||||
| Debt to capital1 | 0.81 | 0.69 | 0.48 | 0.49 | 0.41 | |
| Benchmarks | ||||||
| Debt to Capital, Competitors2 | ||||||
| Airbnb Inc. | 0.29 | — | — | — | — | |
| Booking Holdings Inc. | 0.64 | — | — | — | — | |
| Chipotle Mexican Grill Inc. | 0.00 | — | — | — | — | |
| DoorDash, Inc. | 0.00 | — | — | — | — | |
| McDonald’s Corp. | 1.15 | — | — | — | — | |
| Starbucks Corp. | 1.57 | 1.96 | — | — | — | |
| Debt to Capital, Sector | ||||||
| Consumer Services | 0.89 | — | — | — | — | |
| Debt to Capital, Industry | ||||||
| Consumer Discretionary | 0.60 | — | — | — | — | |
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 2021 Calculation
Debt to capital = Total debt ÷ Total capital
= 21,090,340 ÷ 26,175,896 = 0.81
2 Click competitor name to see calculations.
An analysis of solvency metrics from 2017 to 2021 reveals a substantial increase in financial leverage. The company experienced a steady rise in total debt during the initial period, followed by an aggressive expansion of liabilities between 2019 and 2021, which fundamentally shifted the capital structure.
- Total Debt Progression
- Total debt increased from 7.54 billion USD in 2017 to 21.09 billion USD by 2021. A critical acceleration is observed between 2019 and 2020, during which debt grew from 11.03 billion USD to 19.33 billion USD, marking a sharp increase in borrowed capital.
- Total Capital Fluctuations
- Total capital exhibited an upward trend from 2017 through 2020, peaking at 28.09 billion USD. However, a reversal occurred in 2021, where total capital declined to 26.18 billion USD, occurring simultaneously with a further increase in total debt.
- Debt to Capital Ratio Interpretation
- The debt to capital ratio nearly doubled over the five-year period, rising from 0.41 in 2017 to 0.81 in 2021. The ratio remained relatively stable between 2018 and 2019, fluctuating between 0.48 and 0.49. A significant upward shift began in 2020, reaching 0.69, and culminated in 0.81 by 2021. This trend indicates that debt now comprises a dominant portion of the total capital, reflecting a heightened reliance on debt financing and an increased solvency risk profile.
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Debt to Capital (including Operating Lease Liability)
Royal Caribbean Cruises Ltd., debt to capital (including operating lease liability) 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) | ||||||
| Current portion of long-term debt | 2,243,131) | 961,768) | 1,186,586) | 1,646,841) | 1,188,514) | |
| Commercial paper | —) | 409,319) | 1,434,180) | 775,488) | —) | |
| Long-term debt, excluding current portion | 18,847,209) | 17,957,956) | 8,414,110) | 8,355,370) | 6,350,937) | |
| Total debt | 21,090,340) | 19,329,043) | 11,034,876) | 10,777,699) | 7,539,451) | |
| Current portion of operating lease liabilities | 68,922) | 102,677) | 96,976) | —) | —) | |
| Long-term operating lease liabilities | 534,726) | 563,876) | 601,641) | —) | —) | |
| Total debt (including operating lease liability) | 21,693,988) | 19,995,596) | 11,733,493) | 10,777,699) | 7,539,451) | |
| Shareholders’ equity | 5,085,556) | 8,760,669) | 12,163,846) | 11,105,461) | 10,702,303) | |
| Total capital (including operating lease liability) | 26,779,544) | 28,756,265) | 23,897,339) | 21,883,160) | 18,241,754) | |
| Solvency Ratio | ||||||
| Debt to capital (including operating lease liability)1 | 0.81 | 0.70 | 0.49 | 0.49 | 0.41 | |
| Benchmarks | ||||||
| Debt to Capital (including Operating Lease Liability), Competitors2 | ||||||
| Airbnb Inc. | 0.34 | — | — | — | — | |
| Booking Holdings Inc. | 0.65 | — | — | — | — | |
| Chipotle Mexican Grill Inc. | 0.61 | — | — | — | — | |
| DoorDash, Inc. | 0.08 | — | — | — | — | |
| McDonald’s Corp. | 1.10 | — | — | — | — | |
| Starbucks Corp. | 1.29 | 1.46 | — | — | — | |
| Debt to Capital (including Operating Lease Liability), Sector | ||||||
| Consumer Services | 0.92 | — | — | — | — | |
| Debt to Capital (including Operating Lease Liability), Industry | ||||||
| Consumer Discretionary | 0.65 | — | — | — | — | |
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 2021 Calculation
Debt to capital (including operating lease liability) = Total debt (including operating lease liability) ÷ Total capital (including operating lease liability)
= 21,693,988 ÷ 26,779,544 = 0.81
2 Click competitor name to see calculations.
The solvency profile demonstrates a significant and accelerating increase in financial leverage from 2017 through 2021. A consistent upward trajectory in total debt is observed, coinciding with a substantial shift in the overall capital structure toward debt-heavy financing.
- Total Debt Evolution
- Total debt, including operating lease liabilities, increased from US$ 7,539,451 thousand in 2017 to US$ 21,693,988 thousand by the end of 2021. The most pronounced escalation occurred between 2019 and 2020, where debt levels rose from US$ 11,733,493 thousand to US$ 19,995,596 thousand, representing an increase of approximately 70% in a single fiscal year.
- Total Capital Dynamics
- Total capital showed a general upward trend from 2017 to 2020, peaking at US$ 28,756,265 thousand. However, a contraction was noted in 2021, as total capital decreased to US$ 26,779,544 thousand. This reduction in the total capital base, occurring simultaneously with a continued increase in total debt, intensified the company's leverage position.
- Debt to Capital Ratio Analysis
- The debt to capital ratio exhibits a strong upward trend, rising from 0.41 in 2017 to 0.81 in 2021. While the ratio remained stable at 0.49 during the 2018 and 2019 periods, it surged to 0.70 in 2020 and reached 0.81 by 2021. This indicates that by the end of the period, debt accounted for 81% of the total capital structure, reflecting a diminished proportion of equity relative to total liabilities.
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Debt to Assets
Royal Caribbean Cruises Ltd., debt to assets 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) | ||||||
| Current portion of long-term debt | 2,243,131) | 961,768) | 1,186,586) | 1,646,841) | 1,188,514) | |
| Commercial paper | —) | 409,319) | 1,434,180) | 775,488) | —) | |
| Long-term debt, excluding current portion | 18,847,209) | 17,957,956) | 8,414,110) | 8,355,370) | 6,350,937) | |
| Total debt | 21,090,340) | 19,329,043) | 11,034,876) | 10,777,699) | 7,539,451) | |
| Total assets | 32,258,355) | 32,465,187) | 30,320,284) | 27,698,270) | 22,296,317) | |
| Solvency Ratio | ||||||
| Debt to assets1 | 0.65 | 0.60 | 0.36 | 0.39 | 0.34 | |
| Benchmarks | ||||||
| Debt to Assets, Competitors2 | ||||||
| Airbnb Inc. | 0.14 | — | — | — | — | |
| Booking Holdings Inc. | 0.46 | — | — | — | — | |
| Chipotle Mexican Grill Inc. | 0.00 | — | — | — | — | |
| DoorDash, Inc. | 0.00 | — | — | — | — | |
| McDonald’s Corp. | 0.66 | — | — | — | — | |
| Starbucks Corp. | 0.47 | 0.54 | — | — | — | |
| Debt to Assets, Sector | ||||||
| Consumer Services | 0.46 | — | — | — | — | |
| Debt to Assets, Industry | ||||||
| Consumer Discretionary | 0.36 | — | — | — | — | |
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 2021 Calculation
Debt to assets = Total debt ÷ Total assets
= 21,090,340 ÷ 32,258,355 = 0.65
2 Click competitor name to see calculations.
The solvency profile of the entity underwent a significant transformation between 2017 and 2021, characterized by a substantial increase in financial leverage. While the period from 2017 to 2019 exhibited moderate growth in both debt and assets with a stable leverage ratio, a sharp inflection point occurred in 2020, resulting in a markedly higher reliance on debt financing relative to the total asset base.
- Debt to Assets Ratio Trend
- The ratio remained relatively stable during the first three years of the analyzed period, fluctuating between 0.34 in 2017 and 0.36 in 2019. A significant escalation is observed beginning in 2020, where the ratio rose to 0.60, eventually reaching 0.65 by December 31, 2021. This indicates that by the end of 2021, approximately 65% of the total assets were financed through debt, compared to only 34% in 2017.
- Total Debt Expansion
- Total debt increased from US$ 7.5 billion in 2017 to US$ 21.1 billion in 2021. The most aggressive expansion occurred between 2019 and 2020, when debt obligations rose from US$ 11.0 billion to US$ 19.3 billion. This rapid increase in liabilities suggests a period of intensive borrowing to support liquidity or operational requirements.
- Asset Base Dynamics
- Total assets grew steadily from US$ 22.3 billion in 2017 to a peak of US$ 32.5 billion in 2020. However, a slight contraction in the asset base occurred in 2021, with total assets declining to US$ 32.3 billion. The convergence of increasing total debt and a slightly declining asset base in the final year contributed to the continued upward trajectory of the debt to assets ratio.
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Debt to Assets (including Operating Lease Liability)
Royal Caribbean Cruises Ltd., debt to assets (including operating lease liability) 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) | ||||||
| Current portion of long-term debt | 2,243,131) | 961,768) | 1,186,586) | 1,646,841) | 1,188,514) | |
| Commercial paper | —) | 409,319) | 1,434,180) | 775,488) | —) | |
| Long-term debt, excluding current portion | 18,847,209) | 17,957,956) | 8,414,110) | 8,355,370) | 6,350,937) | |
| Total debt | 21,090,340) | 19,329,043) | 11,034,876) | 10,777,699) | 7,539,451) | |
| Current portion of operating lease liabilities | 68,922) | 102,677) | 96,976) | —) | —) | |
| Long-term operating lease liabilities | 534,726) | 563,876) | 601,641) | —) | —) | |
| Total debt (including operating lease liability) | 21,693,988) | 19,995,596) | 11,733,493) | 10,777,699) | 7,539,451) | |
| Total assets | 32,258,355) | 32,465,187) | 30,320,284) | 27,698,270) | 22,296,317) | |
| Solvency Ratio | ||||||
| Debt to assets (including operating lease liability)1 | 0.67 | 0.62 | 0.39 | 0.39 | 0.34 | |
| Benchmarks | ||||||
| Debt to Assets (including Operating Lease Liability), Competitors2 | ||||||
| Airbnb Inc. | 0.18 | — | — | — | — | |
| Booking Holdings Inc. | 0.48 | — | — | — | — | |
| Chipotle Mexican Grill Inc. | 0.53 | — | — | — | — | |
| DoorDash, Inc. | 0.06 | — | — | — | — | |
| McDonald’s Corp. | 0.92 | — | — | — | — | |
| Starbucks Corp. | 0.75 | 0.84 | — | — | — | |
| Debt to Assets (including Operating Lease Liability), Sector | ||||||
| Consumer Services | 0.67 | — | — | — | — | |
| Debt to Assets (including Operating Lease Liability), Industry | ||||||
| Consumer Discretionary | 0.44 | — | — | — | — | |
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 2021 Calculation
Debt to assets (including operating lease liability) = Total debt (including operating lease liability) ÷ Total assets
= 21,693,988 ÷ 32,258,355 = 0.67
2 Click competitor name to see calculations.
A significant increase in leverage is observed between 2017 and 2021, characterized by a substantial rise in the debt-to-assets ratio. The overall trend indicates a shift toward a more aggressive capital structure, with a marked increase in the proportion of assets financed through debt, including operating lease liabilities.
- Total Debt Trajectory
- Total debt exhibited a consistent upward trend throughout the analyzed period. From 2017 to 2019, debt grew moderately from US$ 7.54 billion to US$ 11.73 billion. A sharp acceleration occurred between 2019 and 2021, with total debt increasing to US$ 21.70 billion, representing a nearly threefold increase over the five-year span.
- Asset Base Development
- Total assets grew steadily from US$ 22.30 billion in 2017 to a peak of US$ 32.47 billion in 2020. In 2021, a slight contraction was observed, with assets declining to US$ 32.26 billion. The growth in the asset base was significantly outpaced by the growth in liabilities, particularly after 2019.
- Solvency Ratio Analysis
- The debt-to-assets ratio remained relatively stable between 2018 and 2019 at 0.39. However, a significant inflection point occurred in 2020, where the ratio climbed to 0.62, and further increased to 0.67 by the end of 2021. This indicates that by 2021, approximately 67% of the company's assets were financed by debt, reflecting a diminished solvency margin compared to the 34% observed in 2017.
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Financial Leverage
Royal Caribbean Cruises Ltd., financial leverage 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) | ||||||
| Total assets | 32,258,355) | 32,465,187) | 30,320,284) | 27,698,270) | 22,296,317) | |
| Shareholders’ equity | 5,085,556) | 8,760,669) | 12,163,846) | 11,105,461) | 10,702,303) | |
| Solvency Ratio | ||||||
| Financial leverage1 | 6.34 | 3.71 | 2.49 | 2.49 | 2.08 | |
| Benchmarks | ||||||
| Financial Leverage, Competitors2 | ||||||
| Airbnb Inc. | 2.87 | — | — | — | — | |
| Booking Holdings Inc. | 3.83 | — | — | — | — | |
| Chipotle Mexican Grill Inc. | 2.90 | — | — | — | — | |
| DoorDash, Inc. | 1.46 | — | — | — | — | |
| McDonald’s Corp. | — | — | — | — | — | |
| Starbucks Corp. | — | — | — | — | — | |
| Financial Leverage, Sector | ||||||
| Consumer Services | 17.02 | — | — | — | — | |
| Financial Leverage, Industry | ||||||
| Consumer Discretionary | 4.22 | — | — | — | — | |
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 2021 Calculation
Financial leverage = Total assets ÷ Shareholders’ equity
= 32,258,355 ÷ 5,085,556 = 6.34
2 Click competitor name to see calculations.
An examination of the solvency metrics between 2017 and 2021 reveals a significant escalation in financial leverage, reflecting a deteriorating equity position relative to the total asset base.
- Total Asset Trajectory
- Total assets exhibited a consistent upward trend from 2017 through 2020, increasing from US$ 22.3 billion to a peak of US$ 32.5 billion. A marginal contraction occurred in 2021, with assets settling at US$ 32.3 billion.
- Shareholders' Equity Trends
- Equity levels experienced moderate growth between 2017 and 2019, reaching a maximum of US$ 12.2 billion. This trend reversed sharply starting in 2020, with equity falling to US$ 8.8 billion, followed by a further substantial decrease to US$ 5.1 billion by December 31, 2021.
- Financial Leverage Analysis
- The financial leverage ratio remained relatively stable between 2.08 and 2.49 from 2017 to 2019. However, the period between 2020 and 2021 was marked by a rapid acceleration in leverage, with the ratio climbing to 3.71 in 2020 and reaching 6.34 in 2021.
The divergence between the sustained asset levels and the precipitous decline in shareholders' equity has resulted in a heightened risk profile. The nearly threefold increase in the leverage ratio from 2019 to 2021 indicates a significant shift in the capital structure and an increased reliance on external financing.
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Interest Coverage
Royal Caribbean Cruises Ltd., interest coverage 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) | ||||||
| Net income (loss) attributable to Royal Caribbean Cruises Ltd. | (5,260,499) | (5,797,462) | 1,878,887) | 1,811,042) | 1,625,133) | |
| Add: Net income attributable to noncontrolling interest | —) | 22,332) | 28,713) | 4,750) | —) | |
| Add: Income tax expense | (45,200) | (15,000) | 32,600) | 20,900) | 18,300) | |
| Add: Interest expense, net of interest capitalized | 1,291,753) | 844,238) | 408,513) | 333,672) | 299,982) | |
| Earnings before interest and tax (EBIT) | (4,013,946) | (4,945,892) | 2,348,713) | 2,170,364) | 1,943,415) | |
| Solvency Ratio | ||||||
| Interest coverage1 | -3.11 | -5.86 | 5.75 | 6.50 | 6.48 | |
| Benchmarks | ||||||
| Interest Coverage, Competitors2 | ||||||
| Airbnb Inc. | 0.31 | — | — | — | — | |
| Booking Holdings Inc. | 5.39 | — | — | — | — | |
| Chipotle Mexican Grill Inc. | — | — | — | — | — | |
| DoorDash, Inc. | -32.07 | — | — | — | — | |
| McDonald’s Corp. | 8.70 | — | — | — | — | |
| Starbucks Corp. | 12.40 | 3.66 | — | — | — | |
| Interest Coverage, Sector | ||||||
| Consumer Services | 7.55 | — | — | — | — | |
| Interest Coverage, Industry | ||||||
| Consumer Discretionary | 13.23 | — | — | — | — | |
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 2021 Calculation
Interest coverage = EBIT ÷ Interest expense
= -4,013,946 ÷ 1,291,753 = -3.11
2 Click competitor name to see calculations.
The financial period from 2017 to 2021 is characterized by a stark transition from strong operational solvency to significant financial distress. A healthy capacity to service debt was maintained through 2019, followed by a severe deterioration in solvency metrics during the 2020 and 2021 fiscal years.
- Earnings Before Interest and Tax (EBIT)
- Operational profitability exhibited a positive trajectory between 2017 and 2019, peaking at US$ 2,348.7 million. A drastic reversal occurred in 2020, with EBIT falling to a deficit of US$ 4,945.9 million, followed by a marginal improvement to a deficit of US$ 4,013.9 million in 2021. This shift indicates a total loss of operational capacity to generate positive earnings during the latter two years of the analyzed period.
- Interest Expense
- A consistent upward trend in interest obligations is observed throughout the period. Expenses rose moderately from US$ 299.9 million in 2017 to US$ 408.5 million in 2019, before escalating sharply to US$ 844.2 million in 2020 and US$ 1,291.8 million in 2021. This acceleration in interest costs occurs concurrently with the collapse in EBIT, suggesting an increase in total debt or higher borrowing costs to sustain operations.
- Interest Coverage Ratio
- The interest coverage ratio remained robust from 2017 to 2019, ranging from 6.48 to 5.75, which signifies that operating earnings were more than five times the cost of debt service. In 2020, the ratio turned sharply negative to -5.86, reflecting a state where operating losses combined with interest obligations created severe solvency pressure. Although the ratio improved to -3.11 in 2021, the continued negative value confirms that the company was unable to cover its interest expenses through operational earnings.
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Fixed Charge Coverage
Royal Caribbean Cruises Ltd., fixed charge coverage 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) | ||||||
| Net income (loss) attributable to Royal Caribbean Cruises Ltd. | (5,260,499) | (5,797,462) | 1,878,887) | 1,811,042) | 1,625,133) | |
| Add: Net income attributable to noncontrolling interest | —) | 22,332) | 28,713) | 4,750) | —) | |
| Add: Income tax expense | (45,200) | (15,000) | 32,600) | 20,900) | 18,300) | |
| Add: Interest expense, net of interest capitalized | 1,291,753) | 844,238) | 408,513) | 333,672) | 299,982) | |
| Earnings before interest and tax (EBIT) | (4,013,946) | (4,945,892) | 2,348,713) | 2,170,364) | 1,943,415) | |
| Add: Operating lease costs | 60,148) | 91,275) | 122,931) | 32,200) | 29,300) | |
| Earnings before fixed charges and tax | (3,953,798) | (4,854,617) | 2,471,644) | 2,202,564) | 1,972,715) | |
| Interest expense, net of interest capitalized | 1,291,753) | 844,238) | 408,513) | 333,672) | 299,982) | |
| Operating lease costs | 60,148) | 91,275) | 122,931) | 32,200) | 29,300) | |
| Fixed charges | 1,351,901) | 935,513) | 531,444) | 365,872) | 329,282) | |
| Solvency Ratio | ||||||
| Fixed charge coverage1 | -2.92 | -5.19 | 4.65 | 6.02 | 5.99 | |
| Benchmarks | ||||||
| Fixed Charge Coverage, Competitors2 | ||||||
| Airbnb Inc. | 0.42 | — | — | — | — | |
| Booking Holdings Inc. | 3.82 | — | — | — | — | |
| Chipotle Mexican Grill Inc. | 3.23 | — | — | — | — | |
| DoorDash, Inc. | -6.02 | — | — | — | — | |
| McDonald’s Corp. | 4.32 | — | — | — | — | |
| Starbucks Corp. | 3.61 | 1.58 | — | — | — | |
| Fixed Charge Coverage, Sector | ||||||
| Consumer Services | 3.55 | — | — | — | — | |
| Fixed Charge Coverage, Industry | ||||||
| Consumer Discretionary | 5.60 | — | — | — | — | |
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 2021 Calculation
Fixed charge coverage = Earnings before fixed charges and tax ÷ Fixed charges
= -3,953,798 ÷ 1,351,901 = -2.92
2 Click competitor name to see calculations.
The financial trajectory between 2017 and 2021 demonstrates a significant transition from strong solvency and operational growth to severe financial distress. While the initial three-year period was characterized by increasing earnings and manageable obligations, the subsequent two years show a complete reversal in the ability to cover fixed costs from operating income.
- Earnings Before Fixed Charges and Tax
- A positive growth trend was maintained from 2017 to 2019, with earnings rising from US$ 1.97 billion to US$ 2.47 billion. However, a precipitous decline occurred in 2020, resulting in a loss of US$ 4.85 billion. Although the loss narrowed slightly to US$ 3.95 billion in 2021, the figures remained deeply negative, indicating a total absence of operational earnings to service obligations during this period.
- Fixed Charges
- Fixed obligations experienced a consistent and accelerating upward trend throughout the five-year period. Charges increased from US$ 329.28 million in 2017 to US$ 1.35 billion by 2021. The most substantial increases occurred after 2019, with the total fixed charges more than doubling between 2019 and 2021, suggesting a significant increase in debt-servicing requirements or lease obligations.
- Fixed Charge Coverage Ratio
- The coverage ratio remained robust between 2017 and 2018, peaking at 6.02. A moderate decline to 4.65 in 2019 signaled the beginning of a narrowing margin between earnings and fixed costs. By 2020 and 2021, the ratio turned negative, reaching -5.19 and -2.92 respectively. These negative values confirm that earnings were insufficient to cover fixed charges, necessitating the use of cash reserves or additional financing to meet these mandatory payments.
The convergence of plummeting earnings and escalating fixed charges created a critical solvency gap. The shift from a ratio of 4.65 in 2019 to negative values in 2020 and 2021 represents a fundamental breakdown in the company's internal capacity to sustain its fixed financial commitments through its primary operations.
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