Royal Caribbean Cruises Ltd. (NYSE:RCL)

The data reveals several notable trends in the financial leverage and coverage ratios over the five-year period. From 2017 to 2021, there was a clear increase in leverage ratios, indicating a growing use of debt relative to equity, capital, and assets.

Debt to Equity Ratios

The debt to equity ratio rose from 0.7 in 2017 to 4.15 by 2021, showing a marked increase in the company’s reliance on debt financing compared to shareholders' equity. When including operating lease liabilities, the ratio follows a similar pattern, increasing from 0.7 to 4.27 over the same period. The sharpest rise occurred between 2019 and 2021, particularly in 2020, reflecting a substantial shift towards debt.

Debt to Capital Ratios

Debt to capital ratios increased from 0.41 in 2017 to 0.81 in 2021. Including operating lease liabilities, the ratio also moved upward from 0.41 to 0.81. This indicates that debt made up an increasingly larger portion of the total capital structure over time, with the highest growth between 2019 and 2021.

Debt to Assets Ratios

Debt to assets showed a similar ascending trend, rising from 0.34 in 2017 to 0.65 in 2021, and slightly higher when operating leases were included, reaching 0.67. The rise in these ratios highlights increased leverage relative to the company's total assets.

Financial Leverage

Financial leverage grew consistently from 2.08 in 2017 to 6.34 in 2021, suggesting a more aggressive capital structure with higher dependency on debt. This more than tripling of the leverage ratio within five years is significant and indicative of increased financial risk.

Interest Coverage Ratios

Interest coverage declined markedly over the period. In 2017 and 2018, the ratios were relatively strong at approximately 6.5, indicating the company had ample earnings to cover interest expenses. However, in 2020 and 2021, the ratios became negative (-5.86 and -3.11 respectively), signaling an inability to cover interest costs from earnings and reflecting potential financial distress or losses in those years.

Fixed Charge Coverage Ratios

Fixed charge coverage ratios show a similar pattern to interest coverage, starting at about 6 in 2017-2018, then decreasing significantly to negative values in 2020 (-5.19) and 2021 (-2.92). This trend further underscores difficulties in meeting fixed financial obligations during the most recent periods.

Overall, the data indicates a substantial increase in financial leverage, driven by increased debt usage relative to equity, capital, and assets. This leverage growth corresponds with a decline in coverage ratios, particularly after 2019, suggesting strained financial conditions and a reduced ability to service debt obligations from operating earnings. The sharp changes from 2019 onwards may reflect significant operational challenges affecting profitability and cash flows.

Total Debt

The total debt increased consistently over the five-year period. Starting from approximately 7.54 billion USD in 2017, it rose significantly to about 21.09 billion USD by the end of 2021. The most pronounced growth occurred between 2019 and 2020, where the debt nearly doubled, indicating a substantial increase in financial leverage or borrowing during that period.

Shareholders’ Equity

Shareholders' equity initially showed moderate growth from 10.7 billion USD in 2017 to around 12.16 billion USD in 2019. However, beginning in 2020, it experienced a sharp decline, dropping to approximately 8.76 billion USD and further declining to just over 5.08 billion USD by the end of 2021. This decline likely reflects significant losses or capital reductions in recent years.

Debt to Equity Ratio

The debt to equity ratio exhibited an increasing trend across the years. It rose from a moderate level of 0.7 in 2017 to 0.97 in 2018, then slightly decreased to 0.91 in 2019. However, from 2020 onwards, there was a dramatic increase, with the ratio reaching 2.21 in 2020 and peaking at 4.15 in 2021. This indicates the company assumed much more debt relative to its equity, reflecting increased financial risk and leverage.

The financial data reveals notable changes in the company's capital structure and financial leverage over the five-year period examined.

Total Debt (including operating lease liability)

The total debt increased steadily from approximately $7.54 billion in 2017 to about $21.69 billion in 2021. The most significant surge occurred between 2019 and 2020, with debt rising from roughly $11.73 billion to nearly $20.00 billion. This upward trend indicates an increasing reliance on borrowed funds and lease liabilities over time.

Shareholders’ Equity

Shareholders’ equity followed an opposite trajectory compared to debt, growing modestly from about $10.70 billion in 2017 to around $12.16 billion in 2019. However, a sharp decline was observed thereafter, with equity falling to approximately $8.76 billion in 2020 and further deteriorating to $5.09 billion by 2021. This decline suggests a reduction in net assets attributable to shareholders, possibly due to operational losses, dividends, or other equity impacts.

Debt to Equity Ratio (including operating lease liability)

The debt to equity ratio, reflecting financial leverage, rose from a relatively moderate level of 0.7 in 2017 to 0.96 in 2019, indicating a balanced capital structure. A pronounced increase occurred in 2020, with the ratio climbing to 2.28, and it reached a substantially high 4.27 by the end of 2021. This sharp escalation underscores increased financial risk, driven by higher debt levels combined with declining equity.

Overall, the company’s financial position has shifted toward greater leverage, with increased borrowing and lease liabilities alongside shrinking equity. This trend points to heightened financial risk and potential challenges in maintaining capital adequacy if the trends persist. The period from 2020 onwards is particularly critical, reflecting significant changes likely influenced by external factors impacting operations and capital structure.

Total Debt

There is a clear upward trend in total debt over the observed periods. Starting at approximately 7.54 billion USD in 2017, the total debt increased steadily, reaching over 21 billion USD by the end of 2021. This represents nearly a threefold increase in total debt within the five-year span.

Total Capital

Total capital also exhibited growth from 2017 through 2020, increasing from around 18.24 billion USD to nearly 28.1 billion USD. However, in 2021, a decline occurred, with total capital decreasing to approximately 26.18 billion USD. This indicates a contraction in capital after a period of consistent expansion.

Debt to Capital Ratio

The debt to capital ratio showed an increasing trend throughout most of the period. Initially, the ratio was 0.41 in 2017, indicating that debt constituted 41% of the total capital. This ratio rose steadily, peaking at 0.69 in 2020, and then further increased to 0.81 in 2021. The upward movement signifies an increasing reliance on debt financing relative to total capital, particularly pronounced in 2020 and 2021.

Overall Insights

Over the five-year period, the company significantly increased its leverage, as evidenced by the rising total debt and the debt to capital ratio. The pronounced jump in debt in 2020 and 2021 coincides with a reduction in total capital in 2021, suggesting possible financial stress or strategic financing decisions that have increased financial risk. This pattern indicates a heavier dependence on debt financing in recent years, which may affect the company's financial stability and cost of capital moving forward.

Total debt (including operating lease liability)

The total debt has shown a consistent upward trend over the five-year period. Beginning at approximately $7.54 billion in 2017, it increased moderately to around $11.73 billion by the end of 2019. A significant rise occurred in 2020, with total debt surging to nearly $20 billion, continuing to grow in 2021 to approximately $21.69 billion. This marked increase in debt during and after 2020 indicates a substantial reliance on financing, possibly linked to expanding operational financing or responses to external challenges affecting liquidity needs.

Total capital (including operating lease liability)

Total capital also increased steadily from about $18.24 billion in 2017 to nearly $23.9 billion in 2019. There was a sharp increase in total capital to nearly $28.76 billion in 2020, followed by a slight decline to approximately $26.78 billion in 2021. This pattern suggests an overall growth in the company's capital base until 2020, with a minor contraction in the subsequent year that may reflect adjustments in capital structure or asset base.

Debt to capital (including operating lease liability) ratio

The debt to capital ratio indicates the proportion of capital financed through debt. The ratio rose from 0.41 in 2017 to 0.49 in both 2018 and 2019, showing a moderate increase in leverage. A notable escalation occurred in 2020, with the ratio jumping to 0.7, and further increasing to 0.81 in 2021. This upward trend reflects a significant increase in financial leverage over the period, particularly in the last two years, implying greater dependency on debt financing relative to the overall capital structure.

Total Debt

Over the five-year period, total debt exhibited a pronounced upward trend. Starting at approximately $7.5 billion at the end of 2017, the debt level increased steadily each year, reaching over $21 billion by the end of 2021. This represents nearly a threefold increase, with particularly sharp increments observed in 2020 and 2021.

Total Assets

Total assets grew consistently from 2017 through 2020, rising from roughly $22.3 billion to about $32.5 billion. However, in 2021, assets slightly declined to approximately $32.3 billion. Despite this minor contraction, overall asset levels remained significantly higher compared to the 2017 baseline.

Debt to Assets Ratio

The debt to assets ratio demonstrates a notable shift in the company's financial structure. Initially, the ratio fluctuated moderately between 0.34 and 0.39 up to 2018. In 2019, it dipped to 0.36, indicating a relatively stable leverage position. From 2020 onwards, the ratio sharply increased to 0.60 and then to 0.65, reflecting a substantial increase in financial leverage and greater reliance on debt financing relative to asset base.

Summary Insights

The data indicates a considerable escalation in total debt, especially post-2019, which contrasts with the more gradual growth and eventual slight decrease in total assets by 2021. The heightened debt to assets ratio suggests increased financial risk, as the company significantly leveraged its balance sheet during this period. This trend may reflect strategic borrowing, possibly to navigate challenging market conditions or support operational needs, but it draws attention to the company's increased exposure to debt-related obligations.

Total Debt (including operating lease liability)

The total debt of the company exhibited a consistent upward trend from 2017 through 2021. Beginning at approximately 7.54 billion US dollars in 2017, it increased significantly in the subsequent years, reaching over 21.69 billion US dollars by the end of 2021. Notably, the most substantial increment occurred between 2019 and 2020, where the total debt nearly doubled, indicating a marked increase in leverage or financing activities during this period.

Total Assets

Total assets showed a steady increase over the five-year period, rising from around 22.30 billion US dollars in 2017 to approximately 32.26 billion US dollars in 2021. Despite this growth, the pace of increase was relatively moderate compared to the rise in total debt. The asset base grew consistently year over year, with a slight deceleration in growth observed between 2020 and 2021.

Debt to Assets Ratio (including operating lease liability)

The debt to assets ratio illustrates a clear increase in financial leverage over time. Starting at 0.34 in 2017, the ratio remained stable at 0.39 in both 2018 and 2019. However, there was a sharp rise to 0.62 in 2020, followed by a further increase to 0.67 in 2021. This escalation indicates a growing reliance on debt relative to asset size, particularly from 2019 onward, suggesting a substantial shift in the company's capital structure towards increased financial risk.

Summary

Overall, the data reveals a significant escalation in the company’s indebtedness relative to its asset base during the period analyzed. While total assets have grown steadily, the rate of debt accumulation has outpaced asset growth, especially starting in 2020. Consequently, the debt to assets ratio has increased markedly, reflecting heightened leverage and potential exposure to financial risk. This trend may warrant attention regarding the company's ability to manage its debt obligations in relation to asset coverage.

The analysis of the financial data over the five-year period reveals several notable trends in the company's financial position and capital structure.

Total Assets

Total assets increased steadily from 22,296,317 thousand US dollars at the end of 2017 to a peak of 32,465,187 thousand US dollars in 2020, before a slight decline to 32,258,355 thousand US dollars in 2021. This represents an overall upward trend, with an approximate 45% growth over the five years, indicating ongoing asset accumulation or valuation increases until 2020, followed by stabilization or minor contraction thereafter.

Shareholders' Equity

Shareholders’ equity exhibited growth from 10,702,303 thousand US dollars in 2017 to 12,163,846 thousand US dollars in 2019. This was succeeded by a significant decline to 8,760,669 thousand US dollars in 2020 and a further substantial decrease to 5,085,556 thousand US dollars in 2021. The sharp reductions in equity from 2019 onwards suggest considerable losses, dividend distributions, or equity restructuring impacting the net asset value attributable to shareholders.

Financial Leverage (Ratio)

Financial leverage rose from 2.08 in 2017 to 2.49 in 2018 and remained stable at 2.49 in 2019. In 2020, leverage increased markedly to 3.71 and surged further to 6.34 in 2021. The rising trend indicates increased use of debt financing relative to equity, particularly in the last two years, which corresponds with the decline in shareholders’ equity and points to a higher risk profile due to potentially greater financial obligations.

In summary, the company’s total assets grew steadily until 2020, followed by a marginal decrease in 2021. However, the equity base suffered significant erosion after 2019, leading to a pronounced increase in financial leverage. These changes could reflect challenging economic conditions or operational difficulties impacting profitability and equity, consequently resulting in higher reliance on debt financing and an elevated financial risk level.

Earnings before interest and tax (EBIT)

The EBIT figures demonstrate a growing trend from 2017 through 2019, rising from approximately 1.94 billion USD to nearly 2.35 billion USD. However, beginning in 2020, there is a sharp and significant decline, with EBIT turning negative and reaching values around -4.95 billion USD in 2020 and -4.01 billion USD in 2021. This reversal indicates a severe operational downturn or extraordinary losses during these years.

Interest expense, net of interest capitalized

Interest expense exhibited an increasing trend over the period analyzed. Starting at roughly 300 million USD in 2017, this expense gradually climbed to over 408 million USD in 2019. The increase became more pronounced in 2020 and 2021, with interest expenses nearly doubling to approximately 844 million USD and further rising to about 1.29 billion USD, respectively. This suggests elevated borrowing costs or increased debt levels during these years.

Interest coverage ratio

The interest coverage ratio showed stability and healthy coverage in the years 2017 to 2019, maintaining values between 5.75 and 6.5, indicating that earnings were sufficient to cover interest expenses multiple times over. However, in 2020, the ratio turned negative to -5.86 and remained negative at -3.11 in 2021. This negative coverage ratio reflects an inability to cover interest obligations from earnings, corresponding with the negative EBIT figures observed and signaling financial distress or operational challenges during this period.

Earnings before fixed charges and tax

The earnings before fixed charges and tax showed an increasing trend from 2017 to 2019, rising from approximately 1.97 billion USD to about 2.47 billion USD. However, there was a significant decline in 2020 and 2021, with values turning negative, reaching approximately -4.85 billion USD in 2020 and -3.95 billion USD in 2021. This indicates a severe deterioration in operating profitability during these years.

Fixed charges

Fixed charges increased steadily during the period under review. Starting at roughly 329 million USD in 2017, fixed charges rose to about 531 million USD by the end of 2019. The increase accelerated in 2020 and 2021, reaching approximately 936 million USD and 1.35 billion USD respectively. This suggests growing financial obligations or costs related to fixed expenditures during these years.

Fixed charge coverage ratio

The fixed charge coverage ratio remained stable and strong in the years 2017 through 2019, with values above 4.5 and peaking just above 6 in 2018. However, there was a marked deterioration in 2020 and 2021, with the ratio turning negative (-5.19 in 2020 and -2.92 in 2021). This negative coverage ratio reflects the company's inability to cover its fixed charges with earnings before fixed charges and tax in these years, indicating financial strain and potential solvency concerns.