General Company Information
This feature was added to many of the future ships in Royal Caribbean's line (Polsson). In 1998, Royal Caribbean launched Sovereign of the Seas, which was the first large modern cruise ship. The following year, Royal Caribbean International's Independence of the Seas cruise ship made its first public appearance in Southampton, England.
Strategy within Industry and Geographical Analysis
Royal Caribbean has the second largest stake in the industry above all the shipping companies (Soshkin). Because Royal Caribbean and Carnival have established brand loyalty in the United States, Norwegian focuses more on European markets. It is much larger than the next largest ship in the market, which is also owned by Royal Caribbean (Soshkin).
Financial Statement Analysis Part 1
Goodwill is calculated separately for Pullmantur from the rest of Royal Caribbean's holdings each year. However, this particular condition is not a concern at Royal Caribbean as shown by this chart. Royal Caribbean's strategy is to increase revenue by investing in new ships and remodeling older ships.
Financial Statement Analysis Part 2
This chart uses all sales instead of credit sales because they don't report only credit sales. You might speculate that customers will have more stable incomes after coming out of the recession. This amount has decreased, which could indicate that Royal Caribbean has been purchasing too much inventory.
Less inventory means they have less holding costs and can use that space for more profitable purposes. Royal Caribbean uses cost less accumulated depreciation to account for their largest assets and the straight-line method to depreciate them. Both useful life and salvage value are based on the weighted average of the vessel's major components.
Improvements are also activated as additions, but their lifespan is limited by the lifespan of the ship. Based on our updated cash flow projections, we determined that the implied fair value of the goodwill is $145.5 million and recorded an impairment charge of $319.2 million. Similarly, we determined that the fair value of Pullmantur's trademarks and trade names no longer exceeded their carrying values.
To positively manipulate this information, a manager can increase accumulated depreciation and decrease depreciation expense.
Financial Statement Analysis Part 3
In connection with this initiative, we incurred approx. $7.4 million of other costs during 2014, which consisted primarily of call center transition costs and accelerated depreciation of leasehold improvements and were classified within Marketing, selling and administrative expenses and Depreciation and amortization expense, respectively, in our consolidated statement of comprehensive income (loss)," (Form 10-K). In the fourth quarter of 2013, RCL began an initiative to sell Pullmantur's non-core businesses. As a result of these actions, we have incurred restructuring costs of $3.2 million and $5.3 million for the year ended December 31, 2014 and December 31, 2013, respectively, which are reported under Restructuring and related impairment charges in our consolidated statement of comprehensive income (loss)", (Form 10-K).
In connection with this initiative, we incurred approximately $8.9 million of other costs during 2014 related to the location of operations management closer to the Latin American market which is classified under Marketing, selling and administrative expenses in our consolidated statements of comprehensive income ( loss). They now own 19 percent stake in each of the non-core businesses, with 100 percent of the aircraft business (which is leased to Pullmantur Air). During 2013, the company entered into foreign currency forward contracts to hedge €365.0 million of our €745.0 million.
In and 2012, changes in the fair value of the foreign exchange forward contracts (losses) were gains of approximately $(48.6) million, $(19.3) million and $7.7 million, respectively, which offset gains (losses) resulting from the remeasurement of monetary . assets and liabilities denominated in foreign currency in those same years of $49.5 million, $13.4 million and $(11.8) million, respectively,” which were recognized in other income in the statement of comprehensive income (Form 10-K). Debt of approximately €139.4 million and €544.9 million, or approximately $168.7 million and $750.8 million, is designated as a hedge in their investments in Pullmantur and TUI Cruises, respectively, until December 2014 and 2013. The Board of Directors makes the final decisions on all declarations based on consideration of the business needs and how a dividend can support and influence the company.
Royal Caribbean spent a total of $236.1 million to repurchase these shares and record them as treasury stock (Form 10-K).
Financial Statement Analysis Part 4
Line items on the balance sheet and income statement can be divided into operating and non-operating groups. Royal Caribbean's NOPAT is the same as their net operating profit before tax because they have not been charged material income tax in the last five years. However, non-operating expenses are often necessary for financing and investment, so they should not be minimized.
Net Operating Assets Turnover, or NOAT, measures the productivity of a company's net operating assets. This calculation reveals the level of sales a company generates with each dollar invested in net operating assets. Royal Caribbean's NOAT has been steadily increasing, meaning revenue is growing faster than average net operating assets (NOA).
This calculation means that for every dollar of net operating assets, RCL has realized between 40 and 47 cents in sales. In general, you want NNO to be lower because it is non-operating liabilities minus non-operating assets. It represents the amount of net non-operating liabilities that have been realized as expenses in the current year.
This means that the expense ratio was higher than the return ratio for non-operating activities.
Accounting Quality
Gross domestic product (GDP) is generally considered by economists to be the most important measure of the current health of the economy. Because cruises are almost always booked with disposable income, this is crucial for Royal Caribbean's growing revenue. Inflation is then determined by the average higher costs of the total package of goods over a certain period.
The unemployment rate measures the number of people looking for a job out of everyone in the US who is eligible to work. Managers should be wary of managers who take large discounts on merchandise near the end of the period. Using only one ratio would be ineffective sampling, so we can use the gross margin index in When the GMI is greater than one, the company's gross margins have deteriorated and management is motivated to show better numbers.
In the first and second quarters, foreign exchange moved in the company's favor, and the company increased the midpoint of its guidance to $3.45, largely to reflect this improvement. Our supplier, Zacks Investment Research, may revise this date in the future when the company announces the actual earnings date. Royal Caribbean estimates earnings per share this quarter to match analysts' forecasts of 14 cents.
Taxes are not material enough to motivate Royal Caribbean management to manipulate profits to be lower.
Equity Valuation
A capital lease differs from an operating lease because the corresponding lease asset and liability are reported on the balance sheet. Additionally, “during the first years of the lease term, the rental expense reported for an operating lease is less than the depreciation and interest expense reported for a capital lease. This means that the net profit is higher in those first years with a business lease.
Furthermore, if the company grows and continuously adds operating lease assets, the level of profits will continue to be higher during the growth period” (Dickinson). Determine the discount rate, calculate the present value of future operating lease payments, and adjust financial reporting to include the present value of the lease asset and liability. In this case, capital leases are more favorable to ratios and balances, but managers try to avoid recognizing more expenses and liabilities.
WACC is the weighted average of the cost of equity capital and the cost of debt capital Weight of Equity = Shareholders' Equity/(Shareholders' Equity + Total Debt). However, using this formula, there will never be positive cash flows if you start with negative cash flows. Using common sense, it can be determined that these investments should increase future cash flows and sales.
A new investor should not trust these models, and should accept that share price is actually rising in a healthy way.
Audit and Tax Recommendations
For example, some contingent liabilities must be explained in the notes to the financial statements. Value adjustments should be assessed to reduce receivables to the amount that will actually be paid. These physical items must be counted to make sure they all exist off the balance sheet.
Economic conditions, restrictions on capital, changes in forecasts, fuel prices and foreign exchange rates must be included in the determination of fair value. Payables are obligations that must be paid by a specified date listed in the sales contract. The notes to the financial statements should detail which accounts contribute to this balance and how they are valued.
All unsecured revolving credit facilities, senior notes, senior bonds and term loans must be included. Both assets and liabilities must be disclosed on the balance sheet because it is a capital lease. Changing ship sizes would require the involvement of multiple managers and executives, but smaller matters would require less bureaucratic approval.
They should be very conscious when making public statements and avoid drawing attention to their low, almost non-existent tax expenditure.
Advisory Recommendations
All areas of the Balanced Scorecard are intended to assess how well the company is adhering to its strategy and increasing shareholder value. Any inconsistent measurement will negatively impact every area of the business because of their causal relationships. Price is much less of a factor, so technological innovation is a top priority for Royal Caribbean.
In their newest class of ships, RCL included "Wayfinder". Wayfinder is a guest interface that loads on screens in every room and in various locations on Oasis of the Seas and Allure of the Seas. Guests pay hundreds to thousands of. the ship must help them achieve everything they can. The fish that people like to interact with while snorkeling will not stay around loud noises.
Royal Caribbean and other cruise lines are aware of the improving economic conditions in China. They are entering this market with their newest ship Quantum of the Seas (Royal Caribbean International). The island is about 5,000 hectares, so Royal Caribbean has a lot of potential for future development (Ambil Island).
34; Shale gas and tight oil are produced commercially in only four countries." Fairfield Sun Times.
