Carnival Cruises 2013 Annual Report Download - page 107

Table of Contents
EAA Brands
Operating costs and expenses decreased $234 million, or 5.5%, to $4.0 billion in 2012 from $4.2 billion in 2011.
This decrease was caused by:
• $172 million – 2012 net currency impact;
• $103 million – decrease in commissions, transportation and other costs primarily as a result of our lower cruise ticket pricing, the change in our UK
brands’ commission structure and a decrease in air transportation costs related to guests who purchased their tickets from us;
• $45 million – lower fuel consumption per ALBD;
• $36 million – 2.1 percentage point decrease in occupancy;
• $34 million – Costa’s excess insurance proceeds and Cunard’s litigation settlement and
• $28 million – nonrecurrence in 2012 of ship impairment charges recognized in 2011 related to the sale of Costa Marina and Pacific Sun.
These decreases were partially offset by:
• $87 million – 2.0% capacity increase in ALBDs;
• $67 million – higher fuel prices;
• $51 million – Costa Allegra ship impairment charge and incident-related expenses and
• $29 million – 2012 Ship Incident related expenses.
Ibero goodwill and trademark impairment charges of $173 million were recorded in 2012.
Our total costs and expenses as a percentage of total revenues increased to 93% in 2012 from 84% in 2011.
Operating Income
Our consolidated operating income decreased $613 million, or 27%, to $1.6 billion in 2012 from $2.3 billion in 2011. Our North America brands’ operating
income increased slightly by $11 million and remained at $1.3 billion in both 2012 and 2011, and our EAA brands’ operating income decreased $593
million, or 58%, to $433 million in 2012 from $1.0 billion in 2011. These changes were primarily due to the reasons discussed above.
Key Performance Non-GAAP Financial Indicators
Net cruise revenues decreased $227 million, or 1.8%, to $12.3 billion in 2012 from $12.5 billion in 2011. This was caused by a 2.5% decrease in constant
dollar net revenue yields, which accounted for $321 million, and the 2012 net currency impact, which accounted for $267 million, partially offset by our
2.9% capacity increase in ALBDs, which accounted for $361 million. The 2.5% decrease in net revenue yields on a constant dollar basis was comprised of a
3.9% decrease in net passenger ticket revenue yields, partially offset by a 2.4% increase in net onboard and other revenue yields. The 3.9% decrease in net
passenger ticket revenue yields was principally due to our EAA brands with a 7.6% yield decrease, which was affected by the direct and indirect
consequences of the 2012 Ship Incident and the challenging economic environment in Europe. The 2.4% increase in net onboard and other revenue yields was
primarily due to higher onboard spending by guests from our North America brands, partially offset by lower yields from certain of our EAA brands, driven
by lower occupancy, principally at Costa. Gross cruise revenues decreased $344 million, or 2.2%, to $15.2 billion in 2012 from $15.5 billion in 2011 for
largely the same reasons as discussed above.
Net cruise costs excluding fuel decreased slightly by $4 million and remained at $6.6 billion in both 2012 and 2011. Our 2.9% capacity increase in ALBDs,
which accounted for $190 million, was offset by the 2012 net currency impact, which accounted for $135 million, and a slight decrease in constant dollar
net cruise costs excluding fuel per ALBD, which accounted for $38 million.
Fuel costs increased $188 million, or 8.6%, to $2.4 billion in 2012 from $2.2 billion in 2011. This was caused by higher fuel prices, which accounted for
$214 million, and a 2.9% capacity increase in ALBDs, which accounted for $63 million, partially offset by a 3.9% decrease in fuel consumption per ALBD,
which accounted for $89 million.
Gross cruise costs increased $88 million, or 0.7% to $11.9 billion in 2012 from $11.8 billion in 2011 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 thus increasing our return on invested capital, while maintaining a strong balance sheet.
Our ability to generate significant operating cash flows allows us to internally fund all of our capital investments. Over time, we expect to have higher levels of
free cash flow, which we intend to return to shareholders in the form of additional dividends and opportune share buybacks. We are also committed to
maintaining our strong investment grade credit ratings. Other objectives of our capital structure policy are to maintain a sufficient 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.
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