Carnival Cruises 2010 Annual Report Download - page 38

– loss of key personnel or our ability to recruit or retain qualified personnel;
– union disputes and other employee relation issues;
– lack of continuing availability of attractive, convenient and safe port destinations; and
– risks associated with the DLC structure.
Forward-looking statements should not be relied upon as a prediction of actual results. Subject to any continuing
obligations under applicable law or any relevant stock exchange rules, we expressly disclaim any obligation to
disseminate, after the date of this 2010 Annual Report, any updates or revisions to any such forward-looking
statements to reflect any change in expectations or events, conditions or circumstances on which any such
statements are based.
Executive Overview
We generated $2.0 billion of net income and $3.8 billion of cash from operations in fiscal 2010 (“2010”) as
business trends improved from a gradually recovering economy. Overall, 2010 was an encouraging year, as
revenue yields increased, in comparison to fiscal 2009 (“2009”), which was the most challenging economic
environment in our history. We believe that our improved revenue performance in 2010 was due, in part, to our
guests’ understanding of the exceptional value proposition of a cruise vacation and other favorable characteristics
of the cruise industry. During 2010 we took delivery of six ships, which increased our passenger capacity 7.1%.
We had a 14.0% increase in our Europe, Australia & Asia (“EAA”) cruise segment passenger capacity, while our
North America cruise segment passenger capacity grew by 3.4%.
Our net income increased $188 million in 2010 compared to 2009. This increase was caused by a 2.7% increase
in net revenue yields measured on a constant dollar basis, which accounted for $308 million, a 7.1% capacity
increase in ALBDs, which accounted for $155 million, and a 3.1% reduction in constant dollar net cruise costs
excluding fuel per ALBD, which accounted for $196 million. These favorable impacts were partially offset by
higher fuel prices, which accounted for $417 million and the strengthening of the U.S. dollar compared to other
currencies, which accounted for $79 million. As always, we worked diligently throughout 2010 to improve our
cost structure benefitting from our ongoing cost containment programs and leveraging our size to reduce costs. In
addition, our focus on reducing fuel consumption continued, and we achieved a 2.7% reduction in fuel
consumption per ALBD.
The cruise industry is characterized by relatively low market penetration levels and other favorable
characteristics and, accordingly, we believe it still has growth potential. As of January 31, 2011 we have
contracts with three shipyards providing for the construction of 10 additional cruise ships (see Note 6 in the
accompanying consolidated financial statements). These new ships, together with future newbuilds and the
continuing investments we make in our existing fleet, will strengthen the leadership position of each of our cruise
brands as well as our overall industry leadership position. Our current intention is to have an average of two to
three cruise ships enter service annually in 2012 and beyond. Since we have slowed down the pace of our
newbuilding program, we currently believe this will lead to increasing free cash flows in 2011 and beyond. These
and other factors were considered at the January 2011 Boards of Directors meetings and it was decided to
increase our March 2011 quarterly dividend to $0.25 per share from $0.10 per share.
Based primarily on these contracted new ships, the year-over-year percentage increase in our ALBD capacity for
fiscal 2011, 2012 and 2013 is currently expected to be 5.3%, 4.7% and 3.9%, respectively. These percentages
exclude any unannounced future ship orders, acquisitions, retirements, charters and sales. However, the announced
withdrawal from service of P&O Cruises’ Artemis in April 2011 has been reflected in these percentages.
Outlook For Fiscal 2011
On December 21, 2010, we said that we expected our fully diluted earnings per share for the 2011 full year and
first quarter would be in the ranges of $2.90 to $3.10 and $0.15 to $0.19, respectively. Our guidance was based
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