Carnival Cruises 2011 Annual Report Download - page 39

– our decisions to self-insure against various risks or our inability to obtain insurance for certain risks at
reasonable rates;
– fluctuations in foreign currency exchange rates;
– whether our future operating cash flow will be sufficient to fund future obligations and whether we will be
able to obtain financing, if necessary, in sufficient amounts and on terms that are favorable or consistent
with our expectations;
– risks associated with the DLC arrangement; and
– uncertainties of a foreign legal system as we are not incorporated in the U.S.
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 2011 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.
2011 Executive Overview
Overall, in fiscal 2011 (“2011”) our brands performed very well, mitigating the impact of geo-political events in
the Middle East and North Africa (“MENA”), the earthquake and resulting nuclear disaster in Japan, which
together resulted in over 300 itinerary changes, the European debt crisis, recessionary fears and stock market
volatility. We generated $1.9 billion of net income in 2011 despite all of these unexpected challenges. This is a
testament to the quality of our management teams, the power of our brands, the exceptional value proposition of
a cruise vacation and the other favorable characteristic of the cruise business.
Our cash flow from operations was $3.8 billion in 2011, which was more than enough to fund our $2.7 billion
capital investment program and enabled us to return excess cash to our shareholders. Earlier this year, our
quarterly dividend was increased from $0.10 to $0.25 per share resulting in $671 million of dividend
distributions in 2011. In addition, in 2011 we repurchased 14.8 million of Carnival Corporation common stock
and Carnival plc ordinary shares in the open market at a cost of $454 million. During 2011, the dividend
distributions and the repurchases of shares totaled $1.1 billion, which represented all of our 2011 free cash flow.
During 2011, our North American brands performed well, achieving an almost four percent net revenue yield
increase in comparison to fiscal 2010 (“2010”). Our EAA brands net revenue yields on a constant dollar basis
were in line with 2010 despite all of their challenges, including MENA, the earthquake and resulting nuclear
disaster in Japan and the European debt crisis. During 2011, we took delivery of four ships, which drove an over
5% increase in our passenger capacity. We had a 9% increase in our EAA cruise segment passenger capacity,
while our North America cruise segment passenger capacity grew by almost 3%.
Our net income decreased $66 million in 2011 compared to 2010 as a result of higher fuel prices, which cost an
additional $535 million. The higher fuel prices were partially offset by an over 2% increase in constant dollar net
revenue yields, which accounted for $253 million, an almost 5% capacity increase in ALBDs, which accounted
for $121 million, and a weaker U.S. dollar compared to other currencies, which accounted for $113 million. As
always, we worked diligently throughout 2011 to improve our cost structure benefitting from our ongoing cost
containment programs and leveraging our size to reduce costs, thus offsetting some of the inflationary pressures
we experienced during the year. As a result of our ongoing efforts to reduce fuel usage, our consumption per
ALBD declined by almost 3%, continuing our multiple-year savings trend. In total, this represents a 15% savings
in our fuel consumption per ALBD since 2005.
We recently implemented a fuel derivatives program to mitigate a portion of our economic risk attributable to
potentially significant fuel price increases. We designed our fuel derivatives program to maximize operational
flexibility by utilizing derivative markets with significant trading liquidity. As part of our fuel derivatives
program, we will evaluate various derivative products and strategies. To date under this program, we have bought
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