Carnival Cruises 2012 Annual Report Download - page 110

Table of Contents
Operating Income
Our consolidated operating income of $2.3 billion decreased slightly in 2011 compared to 2010. Our North America brands’ operating income of $1.3 billion
decreased $74 million, or 5.5%, in 2011 compared to 2010, and our EAA brands’ operating income of $1.0 billion decreased $43 million, or 4.0%, in 2011
compared to 2010. These decreases were principally due to the reasons discussed above.
Key Performance Non-GAAP Financial Indicators
Net cruise revenues increased $1.1 billion, or 9.7%, to $12.5 billion in 2011 from $11.4 billion in 2010. This was caused by a 5.1% capacity increase in
ALBDs, which accounted for $589 million, the currency impact, which accounted for $265 million, and a 2.1% increase in constant dollar net revenue
yields, which accounted for $253 million. The 2.1% increase in net revenue yields on a constant dollar basis was comprised of a 2.3% increase in net
passenger ticket revenue yields and a 1.4% increase in net onboard and other revenue yields. The 2.3% increase in net passenger ticket revenue yields was
driven by the continuing recovery in pricing at our North American brands as they achieved an almost four percent net revenue yield increase while our EAA
brands net revenue yields were in line with the prior year despite all of their challenges, including MENA, the earthquake and resulting nuclear disaster in
Japan and the European debt crisis. Gross cruise revenues increased $1.3 billion, or 9.4%, to $15.5 billion in 2011 from $14.2 billion in 2010 for largely the
same reasons as discussed above.
Net cruise costs excluding fuel increased $536 million, or 8.8%, to $6.6 billion in 2011 from $6.1 billion in 2010. This was caused by our 5.1% capacity
increase in ALBDs, which accounted for $314 million, the currency impact, which accounted for $122 million, and a 1.6% increase in constant dollar net
cruise costs excluding fuel per ALBD, which accounted for $100 million. The 1.6% increase in constant dollar net cruise costs excluding fuel per ALBD was
principally driven by inflationary pressures on crew travel, food, freight and other hotel operating expenses.
Fuel costs increased $571 million, or 35%, to $2.2 billion in 2011 from $1.6 billion in 2010. This was caused by higher fuel prices, which accounted for
$535 million, and a 5.1% capacity increase in ALBDs, which accounted for $83 million, partially offset by lower fuel consumption per ALBD, which
accounted for $46 million.
Gross cruise costs increased $1.3 billion, or 13% to $11.8 billion in 2011 from $10.5 billion in 2010 for principally the same reasons as discussed above.
Liquidity, Financial Condition and Capital Resources
Our primary financial goals are to profitably grow our cruise business, while maintaining a strong balance sheet. Our ability to generate significant operating
cash flows allows us to internally fund all of our capital investment program and still have a substantial amount of free cash flow, which we intend to return
to shareholders in the form of dividends and opportune share buybacks. During 2012, we generated $3.0 billion of cash from operations and used $1.8
billion to fund net capital expenditures, leaving us with $1.2 billion of free cash flow. All of this free cash flow was returned to shareholders through our
$0.25 per share regular quarterly dividend, our $0.50 per share special dividend and by repurchasing 2.6 million of Carnival Corporation common stock.
This is the second consecutive year that we returned all our free cash flow to shareholders. Other objectives of our capital structure policy are to maintain an
acceptable level of liquidity with our available cash and cash equivalents and committed financings for immediate and future liquidity needs, and a reasonable
debt maturity profile that is spread out over a number of years.
Based on our historical results, projections and financial condition, we believe that our future operating cash flows and liquidity will be sufficient to fund all
of our expected capital projects including shipbuilding commitments, debt service requirements, working capital needs and other firm commitments over the
next several years. However, as we intend to continue to return all of our free cash flow to shareholders, we expect to issue debt in the future to supplement our
committed ship financings in order to repay certain of our debt as it matures. We believe that our ability to generate significant operating cash flows and our
strong balance sheet as evidenced by our investment grade credit ratings provide us with the ability in most financial credit market environments to obtain
such debt financing. However, our future operating cash flows and our ability to issue debt can be adversely impacted by numerous factors outside our
control including, but not limited to, those noted under “Cautionary Note Concerning Factors That May Affect Future Results.” If our long-term senior
unsecured credit ratings were to be downgraded or assigned a negative outlook, our access to, and cost of, debt financing may also be negatively impacted.
At November 30, 2012, we had a working capital deficit of $5.5 billion. This deficit included $3.1 billion of customer deposits, which represent the
passenger revenues we collect in advance of sailing dates and, accordingly, are substantially more like deferred revenue balances rather than actual current
cash liabilities. Our November 30, 2012 working capital deficit also included $1.7 billion of current debt obligations, which are substantially related to our
export credit facilities, bank loans and other debt. We continue to generate substantial cash from operations and have a strong balance sheet. This strong
balance sheet provides us with the ability to refinance our current debt obligations before, or as they become due in most financial credit market
environments. We also have our revolving credit facility available to provide long-term rollover financing should the need arise, or if we choose to do so. After
excluding customer
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