Business context and reporting period
Royal Caribbean Cruises Ltd. filed this Form 10-K for the fiscal year ended December 31, 2021—not a standalone fourth-quarter report. The company operates Royal Caribbean International, Celebrity Cruises and Silversea Cruises, and owns a 50% interest in TUI Cruises. Global cruise operations resumed gradually after the March 2020 suspension; by year-end 2021, 50 ships representing more than 85% of fleet capacity were operating.
Financial performance and position
| Metric | 2021 | 2020 | 2019 |
|---|---|---|---|
| Total revenue | $1.53 billion | $2.21 billion | $10.95 billion |
| Operating loss | $3.87 billion | $4.60 billion | Operating income $2.08 billion |
| Net loss attributable to RCL | $5.26 billion | $5.80 billion | Net income $1.88 billion |
| Adjusted net loss attributable to RCL | $4.83 billion | $3.92 billion | Adjusted net income $2.00 billion |
| Operating cash flow | $(1.88) billion | $(3.73) billion | $3.72 billion |
| Cash and cash equivalents at year-end | $2.70 billion | $3.68 billion | $0.24 billion |
- Revenue and operations: 2021 revenue fell 30.6% from 2020. Passenger ticket revenue was $941 million and onboard and other revenue was $591 million. Occupancy was 49.3%, versus 101.9% in 2020 and 108.1% in 2019; passengers carried were 1.03 million.
- Margins and costs: Operating margin was negative 252.6% in 2021, compared with negative 208.3% in 2020. Operating expenses remained high relative to limited revenue during the fleet ramp-up. Fourth-quarter total revenue per passenger cruise day was 10% above 2019 levels, supported by onboard spending.
- Interest and unusual charges: Net interest expense rose to $1.29 billion from $844 million in 2020. Impairment and credit losses were $82 million in 2021, versus $1.57 billion in 2020. The 2021 net loss included a $62.6 million charge from eliminating Silversea’s three-month reporting lag and a $138.8 million loss on extinguishment of debt.
- Cash flow and liquidity: Investing cash outflow was $2.14 billion and financing cash inflow was $3.04 billion. Reported year-end liquidity was approximately $3.5 billion, including cash, $0.1 billion of undrawn revolving capacity and a $0.7 billion term-loan commitment. A January 2022 notes offering subsequently increased undrawn revolver capacity to $1.1 billion.
- Debt and obligations: Debt net of issuance costs was approximately $21.1 billion, including finance leases. Current liabilities were $7.29 billion, including $3.16 billion of customer deposits. Scheduled 2022 debt maturities were approximately $2.2 billion; the filing also identifies approximately $3.2 billion of debt requiring refinancing in June 2023. Contractual ship-purchase obligations were approximately $10.0 billion.
Material changes versus prior periods
- Revenue declined from 2020 as the 2021 recovery was gradual, though 2020 had operated most of the fleet until the March suspension. Occupancy and passenger volumes remained far below 2019 levels.
- Operating cash outflow improved by approximately $1.9 billion from 2020, aided by a $1.4 billion increase in customer deposits, but remained negative.
- Net loss narrowed versus 2020, largely as impairment charges fell substantially; adjusted net loss worsened from $3.92 billion to $4.83 billion.
- Interest expense increased, while the company raised debt and equity and amended facilities to defer principal, extend maturities and secure covenant relief. It issued 16.9 million shares for approximately $1.5 billion net proceeds in 2021.
- Azamara was sold in March 2021 for $201 million before closing adjustments. Silversea’s reporting lag was eliminated effective October 2021; the filing says the resulting $62.6 million net loss was included in 2021 results.
Outlook, risks and contingencies
- Management outlook: The company expected losses for the first quarter and first half of 2022, with a return to profitability in the second half. It anticipated first-quarter core-itinerary occupancy of approximately 60%, positive cash flow from ships in operation, 53 of 62 ships back in service by quarter-end, and the rest of the fleet operating before summer. Management expected load factors to reach pre-COVID levels in the third quarter. These are forward-looking expectations, not guarantees.
- Bookings and COVID-19: Omicron caused cancellations and weaker near-term bookings; management reported bookings improving to pre-Omicron levels as cancellations subsided. The filing warns that COVID-19, variants, health protocols, travel restrictions and operating disruptions could continue to materially affect demand, revenue, cash flow and liquidity.
- Funding and capital spending: Expected 2022 capital expenditures were approximately $3.1 billion, excluding Partner Brand newbuilds. Dividend and share repurchase restrictions applied through the third quarter of 2022, and certain deferred export-credit principal becomes payable if distributions or repurchases occur. Management said liquidity assumptions were uncertain, despite its expectation that resources would cover obligations for at least 12 months from issuance.
- Other risks and contingencies: High leverage, refinancing and covenant compliance, variable interest rates, fuel and foreign-exchange exposure, inflation, shipyard delays, and further asset impairments are material risks. A Havana Docks Helms-Burton lawsuit sought statutory damages including treble damages; trial was scheduled for May 2022. The company said the outcome could be material and was not predictable.
- Audit and controls: PwC issued unqualified opinions on the financial statements and internal control over financial reporting, while identifying liquidity estimates affected by COVID-19 and Silversea impairment assessments as critical audit matters.
Important facts for investors to verify
- Whether the fleet ramp-up, occupancy recovery and second-half 2022 profitability outlook were achieved, and how subsequent results compared with management’s assumptions.
- Available liquidity after facility commitments, restrictions, collateral requirements and customer refunds; also review the timing and terms of 2022–2024 maturities and the 2023 refinancing backstop.
- Customer-deposit and future-cruise-credit redemption or refund trends, including the filing’s stated $3.16 billion year-end deposit liability and approximately $600 million of unredeemed credits.
- Whether ship-delivery plans, approximately $3.1 billion of 2022 capital expenditures and related committed financing changed.
- Developments in the Havana Docks litigation, covenant compliance, and any additional impairments or material changes in COVID-19, fuel, interest-rate or foreign-exchange exposures.