挪威郵輪 (NCLH) 2013 Q1 法說會逐字稿

Good morning, and welcome could the Norwegian Cruise Lines first quarter 2013 earnings conference call. At this time, all participants are in a listen-only mode. Later, we will conduct a question-and-answer session and instructions will follow at that time.

(Operator Instructions)

This conference is being recorded. I would like now to turn the conference over to your host, Ms. Andrea DeMarco, Director of Investor Relations. Ms. DeMarco, please proceed.

Thank you, Tyrone.

Good morning and thank you all for joining us for our first quarter earnings call. I'm joined today by Kevin Sheehan, our President and Chief Executive Officer, and Wendy Beck, our Executive Vice President and Chief Financial Officer. Kevin will begin the call with opening commentary and Wendy will follow with more detail regarding the quarter. We will then open the call for your questions. As a reminder, this conference call is being simultaneously webcast on our Investor Relations website at www.investor.ncl.com and will be available for replay for 30 days following today's call.

Before I discuss our results, I would like to cover a few items. First, our press release for our first quarter 2013 results was issued yesterday and is available on our Investor Relations website. Second, I would like to review information about forward-looking statements and the use of non-GAAP information as a part of this call. Some of our comments today may include forward-looking statements about our expectations for the future. Those expectations are subject to known and unknown risks, uncertainties, and other factors that may cause the Company's actual results and performance in future periods to be materially different from any future results or performance suggested by these expectations.

We cannot guarantee the accuracy of any forecast or estimates and we undertake no obligation to update any forward-looking statements during the quarter. If you would like more information on the risks involved in forward-looking statements, please our SEC filings. In addition, some of our comments may reference non-GAAP financial measures. A reconciliation of the most directly comparable GAAP financial measures and other associated disclosures are contained in our earnings release and on our website.

With that I'd like to turn the call over to Kevin Sheehan. Kevin?

Thanks. Andrea.

Good morning, everyone. 2013 has already been, to say the least, an exciting year at Norwegian and we're not even halfway through. We kicked off the year with a successful IPO followed by a notes offerings. We reported a great results for 2012 and we come to you today to report the same for the first quarter of 2013. But while strong results are always a great story in and of themselves, today is a little different and it's very special to us. Not only are we reporting results for our first quarter as a publicly traded company, we've also gone to remote with this earnings calls. Today, instead of coming to you from our headquarters in Miami, we're here in New York City, welcoming our newest ship, Norwegian Breakaway, to her hometown.

I know there are many New Yorkers on the call today, and hopefully those of you that got to work bright and early witnessed the terrific sight of the Norwegian Breakaway sailing up the Hudson for the first time. In fact, many of you can probably look out your window and see her dock at the Manhattan Cruise Terminal. As the largest cruise ship to home port year-round in New York City, and with the distinctive hull art by Peter Max, she should be pretty easy to spot. She'll be sailing from New York to Bermuda throughout the summer and then switching to the Bahamas and Caribbean itineraries in the winter.

Norwegian Breakaway's arrival in New York is a moment every team member here at Norwegian has been look forward to since October of 2010, when we announced the order for the Breakaway and her sister ship, Norwegian Getaway. I have to say it's been an incredible experience to see the evolution of these ships from concept, to design, to construction, and finally to operation.

My thanks go out to everyone involved from the team members at Norwegian and especially our dedicated site team to, of course, our travel partners who were, and continue to be, instrumental in educating guests to the unique elements and experiences on board. But most importantly, my thanks go out to our officers and our crew of Norwegian Breakaway. While the ship may house the state-of-the-art accommodations and entertainment venues, it is our team members on board that give the ship her personality. I couldn't think of a better group to represent Norwegian year-round in my hometown. I'll talk a little bit more about Norwegian Breakaway and Getaway later in the call.

Today we're here to discuss a strong first quarter, one that marks our 19th consecutive quarter of adjusted EBITDA growth, which is made even more impressive, given this quarter was driven by organic growth and included a partial dry dock and elevated fuel costs. As in 2012, demand coming into 2013's wave season was robust, with strong pricing on the majority of the itineraries, which along with improved on board spend, resulted in a healthy increase in our net yield.

Caribbean itineraries performed well in the quarter, as did our unique inter-island Hawaii product. Our European deployment for the first quarter of '13 increased from one to two ships, adding sailings from Rome in addition to Barcelona, giving both Europeans and other guest options to sail western and eastern itineraries during the winter months. Regarding costs, excluding those costs related to our IPO and notes offerings, our razor focus on optimizing every process, executing on every initiative, and managing every controllable expense resulted in improved performance and exceeded our guidance.

Now with that, let me turn the call over to Wendy.

Thanks, Kevin, and good morning, everyone.

Like Kevin, I'm very excited to welcome Norwegian Breakaway to New York. When I joined the Company in 2010, we were right on the cusp of ordering our Breakaway-class specials, and the excitement of everyone working on the project was contagious. It was an ideal time to join Norwegian as the Company prepared to make a giant leap in our journey from good to great. The years of planning, dedication, and hard work by literally thousands of team members are embodied in this incredible vessel and I'm proud to have been able to be part of the team that has brought this vision to fruition.

Before going into our results, I would like to take a moment to go over the note-worthy transactions in the first quarter. In January, we completed our successful initial public offering, raising net proceeds of $477.6 million. We followed in February with a notes offering, issuing $300 million in senior unsecured notes. The aggregate net proceeds of the IPO and notes offering were used to pre-pay certain credit facilities, repay amounts pursuant to the Norwegian Sky purchase agreement, fully redeem our $450 million 11.75% senior secured notes due 2016, and partially redeem our $350 million 9.5% senior notes due in 2018. These pre-payments and redemptions triggered redemption premium, the write-off of deferred financing fees, and other expenses totaling $90.5 million, which ran through the interest expense line items.

These transactions also resulted in certain non-cash compensation expense and tax expense items which, when added to the aforementioned fees from debt pre-payments and redemptions, totaled $110.4 million in the period. Excluding the one-time expense impact of these resulted in adjusted net income for first quarter of 2013 of $12.9 million, with adjusted earnings per share of $0.06, compared to $3.3 million and $0.02 in the first quarter 2012, and above our first quarter guidance of $0.02 to $0.05.

Now, looking at the top line, higher net yield in the quarter drove a 2.4% increase in revenue to $527.6 million, despite a slight decrease in capacity days, which included the planned dry dock of Pride of America. Coming in at the higher end of our guidance, the 3.3% increase in net yield can be attributed to improvements in both passenger tickets and on-board revenue. Net yield from passenger ticket revenue increased 3.4% from improved overall pricing that was a result of strong demand going into wave season. Net yield from on-board and other revenue grew 3.2%, from improved on-board spend, particularly in the bar and short excursion areas.

Switching over to expenses, adjusted net cruise costs, excluding fuel, per capacity day decreased 1.5%. This compares to our first quarter guidance of flat to up 1%, with the difference attributable to the timing of certain expenses between quarters. Timing has a meaningful impact on the expense side of the Business and is thus best viewed on an annual basis. As anticipated in our guidance, fuel expense in the period increased from a 13% rise in the price of fuel, net of hedges, to $673 per metric ton from $598 in 2012.

As mentioned earlier, the quarter included the first days of a dry dock for Pride of America, our US flagged vessel based in Honolulu, that sails exclusive seven-days inter-island itineraries in Hawaii. She's truly a unique ship and her itinerary is one of the a kind in the industry. As we do with all of our ships when planning for a dry dock, we took a detailed look from top to bottom and considered what we could do to enhance our offerings, enrich the guest experience, and increase returns. During her two-week dry dock, we commenced a project which converted the space previously housing an under-utilized conference center into 32 state rooms, including 24 luxury suites, and 4 studio state rooms, allowing more families, and now solo travellers, to experience this unique product. Completion of this project is expected to be in early September, if not sooner.

Behind the scenes, we undertook an even more ambitious project. As mention, Pride of America runs seven-day voyages in the Hawaii Islands, which puts her entire itinerary wholly within the North American Emission Control Area, or ECA. With ECA's own fuel standards at more stringent levels than those outside the zone, it was imperative that we look at ways to comply with the regulations in a cost-effective manner that would not affect the product offering. After much research and exploration, we opted to invest in the installation of exhaust gas scrubber technology which, in essence, allows vessels to burn lower grade fuel and filters the emissions to a level that complies with ECA requirements. Installation of the four scrubbers began during dry dock and should be operational by year-end.

These projects demonstrate our focus on maximizing returns on our vessels, while at the same time maintaining or even enhancing the guest experience. In this instance, both projects, the addition of the new suites and the installation of scrubbers, each have a payback of approximately two years or less.

Lastly, we continued our initiative bringing back successful learnings and concepts from Norwegian Epic and our other ships to the rest of the fleet. In the case of Pride of America, we brought over the successful studio state rooms, as well as one of our most popular signature dining venues, Moderno Churrascaria.

Looking below the line, interest expense net in the quarter increased due to the aforementioned premiums, writing off deferred financing fees, and other expenses related to pre-payment of certain facilities, and the redemption of certain senior notes. Excluding these costs, interest expense was lower than prior year, mainly due to reduced overall interest rates in the period. As Kevin mentioned earlier, the quarter marks our 19th consecutive quarter year-over-year growth in adjusted EBITDA. In the quarter, adjusted EBITDA rose 7% to $99.8 million from $93.5 million in 2012. The growth is even more impressive when taking into account the increase in fuel prices and the foregone revenue generating days due to our scheduled dry dock.

So to summarize our results in the quarter, top-line revenue was strong, on both the passenger ticket and on-board revenue fronts. Net cruise costs, excluding fuel and one-time charges related to our IPO, were better than expected partially due to the timing of certain expense items, while below the line expenses, excluding expenses related to debt pre-payment and note redemptions, were lower than prior year. The ultimate result was strong improvements in adjusted EBITDA, adjusted net income, and adjusted EPS.

Looking ahead, we have provided guidance along with associated sensitivity for both the second quarter and full year 2013 in our earnings release. Of note in the second quarter, is the addition of Norwegian Breakaway to the fleet, whose benefit in the quarter is partially offset by the completion of the dry dock for Pride of America, as well as a planned dry dock for Norwegian Pearl, both occurring in April.

The following guidance metrics are both on an as-reported and constant-currency basis. For the second quarter, we anticipate net yield growth of 3% to 4%, adjusted net cruise cost excluding fuel per capacity day is expected to increase 5% to 6%, namely due to inaugural activities for Norwegian Breakaway and the timing of certain expenses, including dry dock expenses. Overall, we expect adjusted EPS to be in the range of $0.24 to $0.28. For the full year, we are reiterating our adjusted EPS guidance of $1.20 to $1.40. Net yield is expected to increase 3.5% to 5.5%, and adjusted net cruise cost excluding fuel per capacity day is expected to increase 4% to 6%.

Lastly, regarding deployment, itineraries for the second quarter are as follows, 26% in the Caribbean, 23% in the Mediterranean, and 7% in Baltic and Canary Island itineraries, 7% in Hawaii, and approximately 12% each for Alaska, Bermuda, and other itineraries including repositioning cruises.

With that, I'll turn the call over to Kevin for closing comments. Kevin?

Thanks, Wendy. While the first quarter was significant for Norwegian with a successful IPO and notes offerings, these are the things you can't really see and touch. The second quarter, however, we have a large and very tangible expression of our evolution. On our last call, we went over many initiatives that we have undertaken since my arrival here five years ago to get Norwegian back on the path to success, everything from rationalizing our capacity in Hawaii, to implementing a continuous improvement mindset across the Company. I want to highlight one of these initiatives because today we reached a very important chapter.

As part of our disciplined new build program, we took delivery of the ground-breaking, Norwegian Epic in mid-2010. She was the most innovative ship Norwegian had ever designed and like every innovation there were successes and learnings. The successes were many, including Moderno Churrascaria, a Brazillian steakhouse concept, which proved so popular we have quickly taken it across the fleet. But the grand slam on the Norwegian Epic was her design where we took the freedom and flexibility of free-style cruising to next level. We expanded our entertainment offerings from one or two venues, to a number of smaller, more intimate ones and spread them throughout the ship. Whether they were specialized venues like Fat Cats jazz and blues clubs, to nightclubs like Bliss and Spice H2O, to shows like Cirque Dreams and Dinner, Epic's design encourages guests to stay out later and to get the most out of their vacation experience.

On the heels of the Norwegian Epic success, we took her incredible design and used it as the blueprint for our Breakaway class. The first of those vessels, the Norwegian Breakaway, is everything we imagined and more. A proven, successful design was elevated and enhanced to include new and exciting features and elements. One feature that makes Norwegian Breakaway unique was our decision to dedicate her to the New York market. Our committee to New York is long-standing and it only seems natural to create a ship whose persona was an extension of the Big Apple. From dining to entertainment, Breakaway will offer the best of New York while sailing to destinations like Bermuda and the Caribbean.

As a native of the City, I personally know how demanding New Yorkers can be, so it was critical that Breakaway deliver a premium experience. After inaugural activities in Europe and taking her across the Atlantic, I can personally attest that Norwegian Breakaway is ready to compete head on against any premium ship in the market.

No other vessel offers elements like the Waterfront, a quarter-mile long promenade with restaurants and lounges that allow guests to feel an even greater connection with the ocean. No other ship has offerings by New York's own Iron Chef, Geoffrey Zakarian, and a branch of Buddy Valastro's world famous Carlo's Bakeshop. And no other ship can count three Broadway shows, Rock of Ages, Burn the Floor, Cirque Dreams Jungle Fantasy, performing on every cruise.

Norwegian Breakaway's mix of innovative public areas, world class dining, and Broadway caliber entertainment immediately places her at the top of the premium cruise line category. Add to that The Haven, an all-suites enclave with private keycard access, dedicated concierge, private pool lounges, and Norwegian Breakaway becomes a luxury cruise experience for guests seeking an intimate ship feel combined with the amenities and activities only a large ship can deliver.

So with nothing more I'd like to do than to get back to the ship and greet the Radio City Rockettes, who will open the call up for some questions. Operator?

Thank you, Mr. Sheehan

(Operator Instructions)

Our first question is from Felicia Hendrix of Barclays.

Good morning. And congratulations on the delivery of the Breakaway. Can you guys hear me?

Yes. Thanks a lot, Felicia. We're really excited. I can't tell you how successful it was, sailing across the Atlantic.

Fantastic. I'm just remote so I didn't hear anything. I got nervous for a moment. Kevin, just wondering, could you just discuss if, at all, you saw any surprises in the quarter or, if anything in particular has changed since you gave your last guidance in February? I know you reiterated your prior guidance, but there's been some incidents in the industry which might have affected your business on the margin, specifically asking about any aftereffects of the Carnival Triumph, perhaps in the quarter, as you're thinking about the remainder of the year? And also, just how your ships in Europe have been fairing? Thank you.

Sure. Of course, it would be unrealistic to say that there was no impact from all of the news that came out in the last couple of months. I was say it was on the margin, though, and just made us work a little bit harder. As you see, we came out with a solid quarter for quarter one. We're confident with our guidance in the second quarter and the full year. I think the affirmation of that tells you that, as a Company, and I believe as an industry, we've been able to work through that and hopefully get people more focused on the wonderful vacation experience that we offer in the cruise industry and what a value that is. What was the other part of the question?

How your itineraries in Europe have been fairing?

Yes, as you could imagine, the events from last year impacted the European, as well as the economic situation, as well as the high air fares in 2012. That seeped over a little bit into the beginning of 2013. As we look at it today, we're starting to see some real momentum going with our booking activity in Europe through the season, so we're pretty happy about that. The pricing has come back to be more moderate, to where we were hoping it would be. So check the box on that one. I would say, we're confident with the itineraries that we have around the globe. I guess confirmation of that is seeing our guidance for the rest of the year being right in the same sweet spot.

Great. Thank you.

The next question is from Robin Farley of UBS.

Great. Thanks. Two questions on the booking outlook. First is, I wonder if you could talk about, one of the other cruise operators talked about March Caribbean bookings being a little bit soft and then April, seeing a pick up. Did you see a similar pattern and what have you seen? That was a comment, I think, after the first two weeks of April. Did you see that as well? And what have you seen since then? Also, when you look out to the rest of the year, can you give us some color on your booking volume and price versus the same time same last year? You'd need to it look at it without Breakaway, on a same-ship basis?

Sure. So on the margin, the Caribbean, there was just a short period there that it wasn't as strong as we would have liked it. It's back to booking well. I would say that over the last 10 weeks, as an example, we've had very strong bookings, other than one week where it was still almost double-digit booking levels. I probably said too much there. The booking period has extended as well. So we're happy about all of those indications. We think now, with the Breakaway and all the excitement around the ship, which by the way is phenomenal, we expect to get a lot of eyes looking at the Norwegian product and we expect to see hopefully further acceleration from here.

Then as far as the bookings year-over-year, we're pretty much where we were hoping to be from a booking volume, excluding the Breakaway. The Breakaway is booking very well. I would say for the most part, the ships have booked a little bit different, according to the time of the year. But right now, we're right in the zone of where we were hoping to be, again, which is why we have the confidence with our guidance for the rest of the year. To be honest, I'm doing a lot of work right now to make sure that we roll into 2014 very strong and let's get through each of these quarters in '13 and make sure we're positioned really well for '14.

When you said -- where you were hoping to be, you also mentioned people booking closer in, does that mean you're maybe behind, in terms of volume of bookings, but you're comfortable with that because pricing is up? I'm just trying to get a sense.

No, I would say that we're very comfortable with the level of bookings right now. The way I would look at it, I look at the fourth quarter as being an important part of the equation here. When I go back two years, we had a fourth quarter that was pretty solidly booked at this particular point. Then, as you know, there was a hurricane, and then last year, we again were very solidly booked for the fourth quarter. Then we had the trifecta hurricane. We're in very solid position for the fourth quarter, vis-a-vis the history of the Company so I'm confident about that. The third quarter is looking well. I don't see anything in our way to worry us about any of the quarters through the rest of this year.

Okay. Thank you.

Your next question is from Steven Kent of Goldman Sachs.

Hi, good morning. A couple things. Kevin, when you said you had to work harder, given the Carnival incidents, could you give us a little bit of specifically what you're able to do, how you're able to market more effectively, or price more effectively, or whatever it was you were referring to. Then, I just want to understand it. You came in better on Q1 on net yield but you kept the estimates essentially the same for net yield. Does that imply a slowdown in the second half from what you were expecting, just because of the math?

Yes, let me take the second part first. Yes, I've got to tell you, the Breakaway just landed in New York so I would like to see, as far as the yields and where we feel we are for the rest of the year, let's see how that performs. We're very confident based on the Transatlantic. We're exceeding the level we expected on-board. I think when we get into New York, it's going to be a very interesting situation, given the way I see the pulse of the ship. We've got three levels of public space. On the Epic, as an example, it got quiet on two of the decks toward the latter part of the evening and the way we've designed this ship, the activity just stays really intense throughout the evening. So we're expecting this to be a much more enriching on-board experience. Let's stay tuned and I think after we get through the second quarter, we'll be able to provide a little bit more color on the guidance. I've got to tell you, I would rather be comfortable and not misleading anybody. As we get further into the year, we'll be as clear with everybody as we possibly can. We're just in our first quarter as a public company and we want to be careful here.

As far as the working harder, with a little bit of rallying the troops and getting everybody to think about the opportunities, and which ships we need to put additional focus on. I would say we added a week of sail that we didn't intend to do, to just keep the momentum going. I would say it was quick. It was a couple of weeks and then went right back to the levels that we were hoping for. I would suggest that the last number of weeks, we've actually exceeded the booking levels of what we were expecting. I'd say we're on a very healthy pace right now. As I said, with the Breakaway and all the publicity around that ship, I think that's going to boost us a little bit better as we get further into the second quarter.

Okay. Thanks.

(Operator Instructions)

Our next question is from Tim Conder of Wells Fargo.

Thank you. Kevin, just to stay on that vein of a question, could you give us anything at this point -- and I know it's out there and there's not a lot on the books at this point -- but early into '14 and especially with Getaway here, any color that you can give us there? Then at this point -- I apologize if I missed this -- but could you give us where you are as a percent of your available capacity booked, what you have booked now versus last year, on a year-to-date basis?

Yes. I don't know if we'll get into that level of detail, but I can tell you that when we look at the booking volume for '14, the first quarter is booked. We have a higher booked position and at a higher price. Some of that is the benefit of the [six-man] transaction. One of the things that I think we were very smart about is the Pearl will be operating in Miami. A good chunk of that first quarter will be charters so that will take inventory away from the market as we bring in and launch the Getaway into the first quarter. I think it's performing exactly how we were hoping it would perform, when we acquired it. And it's accelerated from what it had done in the first quarter of 2013. So that's helping us as well. We actually have some pretty decent visibility on '14 and we're feeling pretty confident with it right now.

Okay. The percent booked of available capacity, now year-to-date versus last year? Anything you can give us there?

It's up, mid- to high-single digits, just as a percentage, without getting too specific.

Okay. And then lastly, any color you can give us. You said in the prior question or so about you had to work a little bit harder and then you commented that the bookings have picked up and you feel pretty good about it. For what itineraries, would you say, was that due to the Triumph fallout, or what itineraries or source market? A little more expand on that color, where you had to run a little bit harder to get things caught up.

Yes. I think it was [call] volume throughout North America, was predominantly where it was. But as I said, it was a hiccup and just heightened our visibility to just really jump in to make sure we were continuing the pace well. And it doesn't last a long period.

Okay. Great. We'll see you tomorrow, sir.

Okay. I'll see you walking the plank.

Thank you, I guess.

Our next question is from Kelly Knybel of Deutsche Bank.

Hi, guys, thanks for taking my call. I'll probably focus on a line item here. Great job on the expenses this is quarter. I know you guys talked about some shifting of the expenses between the quarters. Could you give a little bit more color on that? Was that related to some of the dry dock expenses, or are there other things moving around there?

Yes, it was substantially the dry dock. You never know exactly how the work is going to get done. Actually, we don't normally have dry docks that go in between quarters, something that we learned a little bit about when we closed the books. It was two weeks. It was the last week of March and the first week of April. When we accumulated the cost, it was probably maybe $0.015 of costs that will swing into the second quarter. But when you look at the net cruise cost for the remainder of the year, I think it's important what Wendy had said earlier is that in 2012, we did not have any dry docks. We accelerated one into '11 and just because of the timing we didn't have any in '12.

Now in '13, you've got three, the one that we had the first week with Pride of America. And then the second, in the first week of April, we have the Pearl. And then later in the year, we have the Sky. When you take those three dry docks and lay those into the cost structure, and then you add in the inaugural costs that we are having this quarter with the successful launch of the Breakaway, that gets us into that zone of what we have out there as the guidance. The important point, though, is that when you get past '13 and you go into '14 and '15, we have a very consistent number of dry docks each year. This is a one-time thing, which makes it look like the costs are going up, but they really aren't. When you pull out those incremental costs, we continue to do a fantastic job of process improvements.

The interesting thing, too, and you can see so these people all over the ship, we have the entire Six Sigma team on the ship, on the Breakaway. They were working with the crew and in the dining venues, in the restaurants, making sure we come out of the box with this engineering the way that makes them so efficient, to enable the crew complement that we have, but also enable our crew to interact with the guests. Which is the reason why we have 38 straight months of record guest satisfaction.

Just one side bar, I got nailed because all the guests on the ship wanted to hear from me. They set up a meeting in the theater, which I thought was going to be a couple of people going into the theater to listen to Kevin pontificate. And I walk into the theater and it's completely packed. There was 300 or 400 people, on all of the steps going down to the front and the back, and we spent an hour. I can't tell you how nice the people were and how impressed they were with the ship and they noticed all of the nuances of this ship versus some of our older ships. It was very encouraging to me and I'm very excited for you guys to come on the ship and see it. It's just spectacular.

Great. Maybe one last follow-up. Could you give a little bit of color, how are the booking trends on the same-store existing fleet trending, versus what your expectations were with the new Breakaway coming on board?

Of course, that's why our guidance is unchanged because we also don't have the Breakaway out through a couple of sailings. I would say everything is pretty much on the target of what we expected. When you look at individual ships, there's always things that someone, looking in a microscope may say, oh, this one's a little bit different. But it's consistent with the way we built our budget. I think we talked about we added a ship up in Alaska and that booking is a little bit different than the other two ships that had been there. We did that with the understanding that sometimes it takes a little bit longer for the travel agents to understand that you do have that ship up there. It's all going according to plan. We're happy with the first quarter.

We really think we got through a quarter very solidly. We're well-positioned for the second quarter and excited about the prospects for the year. As I said, I'm really focused on '14. I want to make sure that I'm always at least a year out to make sure we continue to build the blocks for the great success that we're going to have with this Company.

Good. That's really good information. Thanks a lot guys.

Your next question is from [Althea Jojiba] of Infiniti Research.

Good morning and congratulations as well on the quarter and the Breakaway. I had a couple of questions, more on Q3, where you have a lot of capacity in Europe. Again, we are experiencing still some macro head winds there. In addition to that, Kevin, you just briefly touched on this, but could you discuss Alaska pricing, given the almost 50% capacity addition there? It seems to have come down a little bit. Is it just the capacity coming in or are we going through the seasonality, where some years Alaska is not as strong? And we have had a couple of good years in the last two years, so maybe that's part of the reason?

The Alaska market is very strong. And you're right, it's absorbing a lot of new capacities for the industry. But we understood what was happening when we went into it. It's pretty much operating the way we had expected it in our budget. The Europe market is interesting because the booking volume has really accelerated in the last number of weeks. We're very encouraged about where we are with Europe, vis-a-vis our budget anyway, for the rest of the season.

Okay. Europe is probably a little bit of a highlight more recently? I would think that over the course of the next six weeks, you may have more visibility, given that the booking curve, especially for European-sourced passengers, is typically shorter.

You're spot on, on that. And the other point I would say, and I saw this in our numbers, when we went through the Rotterdam inaugural, which we did first once we took delivery of the ship. We had a big travel agent event in Rotterdam and we took them on a two-night sailing and we had another event in Southampton. It's interesting, you say, okay, Breakaway's going to takeoff from the inaugurals. But the reality was, for the European market, it just reminded everybody of how great a success the Norwegian Epic is, as you guys know, it won the Travel Weekly best ship in the industry for two years in a row. It just reminded people. The booking activity on the Epic started to take off, as we gotten through these inaugurals. I would suggest that now, with all of the focus on the Breakaway over here in New York, you're going to see the same take off for the Breakaway. We're pretty confident with that.

Great. Thank you, Kevin.

Operator, we have time for one more question.

The final question is from Robin Farley of UBS.

Great. Thanks. Just a follow-up. Kevin, if I understood your comment earlier in the Q&A, it sounded like you were saying that booking volume's up mid-single digits or mid- to high-single digits, in terms of volume for the remainder of 2013. Can you give any color on where pricing is, if you can, excluding Breakaway, just thinking about the same-ship basis? So, volume up mid- to single-digits, but where pricing is? Just to clarify, you made a comment about how you'd know more after a few more Breakaway sailings. Are you specifically talking about the on-board levels?

Yes. As far as the Breakaway, we just want to make sure that the on-board plays. We're expecting it to be way ahead of what we were -- I shouldn't say this probably. I'm getting a dirty look. But we're expecting to see the on-board experience and I'm the guy that's confident about that. The financial team is looking at me like I shouldn't have said that. But let's go through a few sailings. You guys are going to see this when you come on the ship. I had to roll into bed at two o'clock in the morning and everybody was out. This is a Transatlantic. As you would know, it's typically an older crowd. I just can't wait to get into a couple of sailings in Bermuda.

As far as the organic side, we have extremely strong pricing on the Pride of America so we're very satisfied with that. I would say on the other itineraries, we're holding our own. Europe is starting to come back in the right direction. I would say it's still an environment where we want to keep driving for the load factor because we want to make sure we're in a great position. As we navigate through this important second and third quarter, you start to tweak the pricing.

We have an art to the way we're doing it and we're pretty confident. Last year about this time, we started to reduce our prices, as I think I had mentioned on earlier calls. We had held our pricing very long after the incident in Italy last year, and probably a little bit too long, which hurt us a little bit toward the end of the year. We're feeling pretty confident now with the booked position that we have, there's going to be an interesting scenario because we're strengthening price as the prior year starts to weaken a bit.

Okay. Great. Thank you.

So I hope we answered everybody's questions perfectly. And if we didn't, we're all around. Certainly Andrea and Wendy are available for your questions. And I will see you guys on the ship, if you're around.

And remember, we'll be preparing for the inaugural activities for Breakaway so your patience will be appreciated. We've got CNBC is coming over in about an hour and then CNN and a bunch of other things. In fact, tomorrow we'll be ringing the open bell at NASDAQ at 9.30 to celebrate the homecoming of Norwegian Breakaway. You can visit the NASDAQ website or the Investor Relations website for details. We look forward to seeing everyone tune in.

Thanks for your participation and support. We look forward to talking with you guys all, either on the inaugural or next quarter. Thanks.

Ladies and gentlemen, this concludes today's conference call. You may now disconnect. Have a wonderful day.