Carnival Cruises 2010 Annual Report Download - page 44

Our total costs and expenses as a percentage of total revenues decreased to 84.0% in 2010 from 84.8% in 2009.
EAA Brands
Operating costs and expenses increased $357 million, or 11.1%, to $3.6 billion in 2010 from $3.2 billion in
2009. This increase was caused by our 14.0% capacity increase in ALBDs, which accounted for $451 million and
higher fuel prices, which accounted for $157 million. These increases were partially offset by the benefits from
cost reduction programs and economies of scale, lower air transportation costs due to fewer guests purchasing
their air travel through us and $61 million of gains recognized from the sale of P&O Cruises (UK)’s Artemis and
Cunard’s litigation settlement.
Selling and administrative expenses of $584 million were flat in 2010 compared to 2009 despite our 14.0%
capacity increase in ALBDs. The impact from the increase in capacity, which accounted for $80 million was
offset by the benefits from cost reduction programs and economies of scale.
Depreciation and amortization expense increased $47 million, or 10.3%, to $505 million in 2010 from $458
million in 2009, caused by $64 million from our 14.0% capacity increase in ALBDs through the addition of new
ships, and additional ship and other improvement expenditures, net of disposals.
Our total costs and expenses as a percentage of total revenues increased to 81.3% in 2010 from 80.4% in 2009.
Operating Income
Our consolidated operating income increased $193 million, or 9.0%, to $2.3 billion in 2010 from $2.2 billion in
2009. Our North America brands’ operating income increased $156 million, or 13.2%, to $1.3 billion in 2010
from $1.2 billion in 2009, and our EAA brands’ operating income increased $35 million, or 3.4%, to $1.1 billion
in 2010 from $1.0 billion in 2009. These increases were primarily due to the reasons discussed above.
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”), net cruise costs per ALBD and net cruise costs
excluding fuel 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 an expanded
insight to measure our revenue and cost performance in addition to the standard U.S. GAAP-based financial
measures.
Net revenue yields are commonly used in the cruise industry to measure a company’s cruise segment revenue
performance and for revenue management purposes. We use “net cruise revenues” rather than “gross cruise
revenues” to calculate net revenue yields. We believe that net cruise revenues is a more meaningful measure in
determining revenue yield than gross cruise revenues because it reflects the cruise revenues earned net of our
most significant variable costs, which are travel agent commissions, cost of air and other transportation, certain
other costs that are directly associated with onboard and other revenues and credit card fees. Substantially all of
our remaining cruise costs are largely fixed, except for the impact of changing prices, once our ship capacity
levels have been determined.
43