Carnival Cruises 2008 Annual Report Download - page 96

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yields increased in 2007 primarily due to the weaker U.S. dollar relative to the euro and
sterling and higher onboard guest spending, partially offset by slightly lower occupancy. Net
revenue yields as measured on a constant dollar basis decreased 0.7% in 2007 compared to 2006,
which was comprised of a 1.8% decrease in passenger ticket yields partially offset by a 3.0%
increase in onboard and other yields. This decrease in constant dollar net revenue yields was
primarily driven by the softer cruise ticket pricing from North American-sourced contemporary
Caribbean cruises especially in the first half of 2007. We believe this decrease in yields
was primarily the result of a weaker U.S. economy, including the impact of higher fuel costs
and interest rates which impacted demand and the lingering effects of the 2005 hurricane
season, which was partially offset by the higher prices we achieved from our European brands,
also mostly in the first half of 2007. Gross cruise revenues increased $1.2 billion, or
10.7%, to $12.6 billion in 2007 from $11.4 billion in 2006 for largely the same reasons as
discussed above for net cruise revenues.
Net cruise costs increased $763 million, or 13.4%, to $6.4 billion in 2007 from $5.7
billion in 2006. The 8.4% increase in ALBDs between 2007 and 2006 accounted for $476 million
of the increase. The balance of $287 million was from increased net cruise costs per ALBD,
which increased 4.7% in 2007 compared to 2006 (gross cruise costs per ALBD increased 3.9%).
Net cruise costs per ALBD increased in 2007 primarily due to a weaker U.S. dollar relative to
the euro and sterling, a $27 per metric ton increase in fuel cost to $361 per metric ton in
2007, which resulted in an increase in fuel expense of $82 million compared to 2006, a $20
million Merchant Navy Officers Pension Fund expense and higher repair costs from ship
incidents. These increases were partially offset by $21 million of lower dry-dock costs as
fewer ships went into dry-dock in 2007 compared to 2006. Net cruise costs per ALBD as
measured on a constant dollar basis increased 1.7% in 2007 compared to 2006. On a constant
dollar basis, net cruise costs per ALBD, excluding fuel increased 1.0%. Gross cruise costs
increased $997 million, or 12.6%, in 2007 to $8.9 billion from $7.9 billion in 2006 for
largely the same reasons as discussed above for net cruise costs.
Liquidity and Capital Resources
As discussed in our Executive Overview, we believe preserving cash and liquidity at this
point in time is a prudent step which will further strengthen our balance sheet and enhance
our financial flexibility. Accordingly in October 2008, the Board of Directors voted to
suspend our quarterly dividend beginning March 2009. We intend to maintain the dividend
suspension throughout 2009. Our cash from operations and committed financing facilities for
2009 along with our available cash and cash equivalent balances are forecasted to be
sufficient to fund our expected 2009 cash requirements. Therefore, we believe we will not be
required to obtain new debt during 2009; however, we may do so opportunistically to enhance
our liquidity. Our immediate objective is to ensure we have sufficient liquidity available
with a high degree of certainty throughout 2009 despite current market conditions.
Our overall strategy is to maintain an acceptable level of liquidity with cash and cash
equivalents and with committed credit facilities for immediate and future liquidity needs and
a reasonable debt maturity profile that is spread out over a number of years. To date,
although our costs of borrowing have increased in certain cases and the availability of
funding is not as widespread as it has been in the past, we continue to opportunistically put
in place committed credit facilities. Given the decision by our Board of Directors to suspend
the quarterly dividend and our current financial position, we do not expect the current
highly volatile state of the financial markets will have a significant adverse impact on our
ability to maintain an acceptable level of liquidity during 2009.
Sources and Uses of Cash
Our business provided $3.4 billion of net cash from operations during fiscal 2008, a
decrease of $678 million, or 16.7%, compared to fiscal 2007. The majority of this decrease
resulted from a $506 million year-over-year decrease in cash received from customers'
deposits. This decrease resulted primarily from guests booking cruises and paying their
deposits closer to the sailing dates and cruises being purchased for lower ticket prices
compared to the comparable prior period when guests booked their cruises and paid their
deposits further in advance of the sailing dates and cruises were purchased for higher ticket
prices.