Carnival Cruises 2014 Annual Report Download - page 47

– loss of key personnel or our ability to recruit or retain qualified personnel;
– union disputes and other employee relationship issues;
– disruptions in the global financial markets or other events that may negatively affect the ability of our
counterparties and others to perform their obligations to us;
– the continued strength of our cruise brands and our ability to implement our strategies;
– additional risks to our international operations not generally applicable to our U.S. operations;
– our decisions to self-insure against various risks or our inability to obtain insurance for certain risks at
reasonable rates;
– litigation, enforcement actions, fines or penalties;
– 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 our DLC arrangement;
– uncertainties of a foreign legal system as Carnival Corporation and Carnival plc are not U.S. corporations
and
– the ability of a small group of shareholders to effectively control the outcome of shareholder voting.
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 2014 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.
2014 Executive Overview
Overall, 2014 was a strong year as we turned the corner with improved earnings and positive net revenue yields,
despite the loss of attractive itineraries due to geopolitical factors and large cruise industry capacity increases in
the Caribbean. We continued to gain momentum and achieved about a 1 percentage point increase in ROIC, as
we move towards our goal of double digit ROIC in the next three to four years, while maintaining a strong
balance sheet. (We define ROIC as the twelve-month non-GAAP earnings before interest divided by the monthly
average of debt plus equity minus construction-in-progress.)
Non-GAAP net income for 2014 increased 24% to $1.5 billion ($1.2 billion U.S. GAAP). We saw strong profit
improvement at both our Carnival Cruise Line and Costa brands and enjoyed several early wins from our cross-
brand collaboration efforts that contributed to our improved 2014 results, particularly in the area of onboard
revenues. The increase in our non-GAAP net income was driven by slightly higher net revenue yields (constant
dollar), an increase in capacity and lower fuel prices and fuel consumption per ALBD (“available lower berth
day”), partially offset by slightly higher net cruise costs excluding fuel per ALBD (constant dollar).
Our slightly higher net revenue yield (constant dollar) was due to a more than 3% increase in net onboard and
other revenue yields, partially offset by slightly lower net passenger ticket revenue yields. The growth in net
onboard and other revenue yields was driven by increases in primarily all the net onboard revenue categories on
both sides of the Atlantic. The slight decrease in net passenger ticket revenue yields was driven by our North
America brands’ facing a promotional pricing environment in the Caribbean resulting from the large increase in
cruise industry capacity, partially offset by improvements at our continental European brands.
Our moderate capacity growth was driven by our new ship deliveries, partially offset by our ship sales. During
2014, we introduced Princess Cruises’ 3,560-passenger Regal Princess and Costa Cruises’ 3,692-passenger
Costa Diadema. We are building new, innovative, purpose-built ships that are larger and more efficient and have
a wider range of onboard amenities and features, which enable us to better compete for consumers’ vacation
spend. These larger ships enable us to obtain greater economies of scale. In addition, we continue to make
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