Carnival Cruises 2009 Annual Report Download - page 43

Costs and Expenses
Operating costs decreased $935 million, or 10.3%, to $8.1 billion in 2009 from $9.0 billion in 2008. This
decrease was primarily due to lower fuel prices of $621 million, the impact of the stronger U.S. dollar against the
euro and sterling, decreased commissions as a result of our lower ticket revenues and lower fuel consumption, as
a result of fuel saving initiatives compared to 2008. This decrease was partially offset by $323 million as a result
of increased capacity driven by our 5.4% increase in ALBDs.
Selling and administrative expenses decreased $39 million, or 2.4%, to $1.6 billion in 2009. The decrease
was primarily caused by the stronger U.S. dollar against the euro and sterling and the impact of cost containment
initiatives, partially offset by $87 million from our 5.4% increase in ALBDs.
Depreciation and amortization expense increased $60 million, or 4.8%, to $1.3 billion in 2009 from
$1.2 billion in 2008, caused by $67 million from our 5.4% increase in ALBDs through the addition of new ships,
and additional ship improvement expenditures, partially offset by the impact of the stronger U.S. dollar against
the euro and sterling.
Our total costs and expenses as a percentage of revenues increased to 83.6% in 2009 from 81.4% in 2008.
Operating Income
Our operating income decreased $575 million to $2.2 billion in 2009 from $2.7 billion in 2008 primarily
because of the reasons discussed above.
Nonoperating (Expense) Income
Net interest expense, excluding capitalized interest, decreased $27 million to $403 million in 2009 from
$430 million in 2008. On a constant dollar basis, as defined below, this decrease was due to a $76 million
decrease in interest expense from lower average interest rates on average borrowings, partially offset by a
$39 million increase from a higher level of average borrowings and a $21 million decrease in interest income due
to lower average interest rates on lower invested balances compared to 2008. In addition, net interest expense
decreased by $11 million as a result of the stronger U.S. dollar against the euro and sterling compared to
2008. Capitalized interest decreased $15 million during 2009 compared to 2008 primarily due to lower average
levels of investment in ship construction projects.
Income Taxes
Income tax expense decreased $31 million to $16 million in 2009 from $47 million in 2008, primarily
because of an increase in the release of uncertain income tax position liabilities, which were no longer required.
Key Performance Non-GAAP Financial Indicators
ALBDs is a standard measure of passenger capacity for the period, which we use to perform rate and
capacity variance analyses to determine the main non-capacity driven factors that cause our cruise revenues and
expenses to vary. ALBDs assume that each cabin we offer for sale accommodates two passengers and is
computed by multiplying passenger capacity by revenue-producing ship operating days in the period.
We use net cruise revenues per ALBD (“net revenue yields”) and net cruise costs per ALBD as significant
non-GAAP financial measures of our cruise segment financial performance. These measures enable us to
separate the impact of predictable capacity changes from the more unpredictable rate changes that affect our
business. We believe these non-GAAP measures provide a better gauge to measure our revenue and cost
performance instead of the standard U.S. GAAP-based financial measures. There are no specific rules for
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