挪威郵輪 (NCLH) 2014 Q1 法說會逐字稿

Good morning and welcome to the Norwegian Cruise Line first-quarter 2014 earnings conference call.

(Operator Instructions)

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

Thank you, Kate. 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. The call will then return to Kevin for some final comments after which we will open up the call for your questions.

As a reminder this conference call is being simultaneously webcast on our investors relations website at www.investor.NCL.com and will be available for replay for 30 days following today's call. Before we discuss our results, I would like to cover a few items.

Our press release with first-quarter 2014 results was issued earlier today and is available on our investor relations website. I would also 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 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 forecasts 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 see 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 and good morning everyone. The first quarter of 2014 was one that we at Norwegian have looked forward to ever since my executive team and I began laying the foundation for reestablishing our share in the marketplace.

Back in 2010 when we placed the order for our two Breakaway class vessels we looked ahead to this quarter knowing it would mark the beginning of a fundamental shift in our earnings from not one but two of the largest, most innovative, most efficient and most profitable ships in our fleet. The resulting 23% increase in capacity in the quarter translated into a fourfold increase in adjusted EPS, a 40% increase in adjusted EBITDA and a commensurate 200-basis point expansion in margin.

Along with strong results, the highlight of the quarter was without a doubt the introduction of the Norwegian Getaway into our fleet. Our latest ship joined the fleet in January as the second vessel in our Breakaway class.

Our new build team worked diligently to have the ship ready a full month ahead of schedule. The additional preparation time resulted in an incredibly smooth launch with a crew that before a single guest had stepped on board was ready to deliver a level of service commensurate with a ship that had been sailing for months and today leads the fleet in guest satisfaction.

This additional investment in crew time was extremely valuable as Norwegian Getaway embarked on one of the busiest and most successful set of inaugural sailings in our history. These events included European inaugural ceremonies in Rotterdam and South Hampton and the Bud Light Hotel in New York, where an extremely important in gaining exposure for our new ship.

I've been told many times how Norwegian has such an outsized reach and reputation for our size. We do this by consistently finding new and innovative ways to gain exposure for our brand.

We did this in South Hampton by having travel partners bring aboard some of their best clients who had either never cruised on Norwegian or perhaps never cruised at all. These clients were able to get a taste of our freestyle cruising offering of freedom and flexibility which either exposed experienced cruisers to our unique proposition or set the expectation for non-cruisers of an enhanced experience versus a traditional cruise.

We also gained exposure by chartering Norwegian Getaway as the event venue for the Bud Light Hotel during Super Bowl XLVIII, an event that garnered 1 billion impressions worldwide. If there was such a metric as return on exposure in the cruise industry, this event would have set the bar.

This kind of out of the box thinking expands to our partnership strategy where we have aligned Norwegian with equally well established, like minded brands such as the Radio City Rockettes, the Miami Dolphins, the New York Knicks. These partnerships also extend to our ships to help deliver an even better guest experience. Our guest programming received an instant boost after the launching of our partnership with Nickelodeon, with the initial launch on the Norwegian Epic in 2010, while our most recent partnership with the Michael Mondavi family estate will elevate our fine wine offerings throughout the fleet with the help of California's first family of wine makings.

We have also taken advantage of expanding brands that we have cultivated in house. Moderno Churrascaria began as a venue on the Norwegian Epic where it was the first Brazilian style steakhouse at sea. The concept proved extremely popular from the start which made it a natural choice to introduce to our other ships.

Another example is the recently announced expansion of the popular O'Sheehan's Bar and Grill throughout the fleet with conversions beginning in May. Whether on Norwegian Epic where the concept debuted or on the Norwegian Breakaway or Getaway, O'Sheehan's is constantly a hub of activity and a relaxed meeting place for guests of all ages. Adding the concept to the new vessels will provide the same central meeting place experience while offering guests an additional complimentary dining option on board.

While Norwegian has been a leading industry innovator since our founding in 1966, we took our biggest and boldest step in the year 2000 with the introduction of Freestyle Cruising. While some may find the idea of doing away with a single main dining room, assigned dining times and nightly dress codes in favor of various dining venues with no set times or dress codes a new concept, we at Norwegian have been doing it for close to 15 years. Our entire fleet is purpose-built for Freestyle Cruising and offer a variety of dining venues to choose from, allowing our guests the freedom and flexibility to tailor their vacation experience to their liking.

Since our debut we have been honing this Freestyle Cruising concept not just by expanding the number of dining venues, but also by extending choice to the entertainment experience, eliminating the traditional large theater format in favor of a variety of intimate entertainment venues throughout the ship. This ultimate expression of Freestyle Cruising can be found on Norwegian Breakaway and Getaway, whose performance in the pricing, on board revenue and efficiency fronts to an improvement in the core fleet to help deliver the strong result in the quarter and accelerate our best-in-class operating metrics.

While Wendy will go through these metrics in more detail, I will steal a little bit of her thunder to reiterate this quarter included an almost fourfold increase in adjusted EPS, an approximately 4% increase in net yield that is running over very strong comps in 2013 of 3.3% and a 40% increase in adjusted EBITDA with a 200-basis point expansion in margin. These results are impressive regardless of the industry, but they are more so given the quarter and the environment that turned more promotional than we had anticipated.

As we have repeatedly stated we are focused on driving for our rightful prices and entered the quarter driving for price, in this instance at the expense of some occupancy. As the quarter progressed we made adjustments in pricing where needed to get to the finish line and in the end we are pleased with how the quarter turned out.

Our first-quarter net yield increase was driven by higher ticket pricing, a great accomplishment given the first quarter of 2013 had the dual advantage of building on strong bookings leading into wave and avoiding the direct impact from industry disruptions that began in the latter part of the wave season of 2013.

Strong bookings going to the wave prior to the industry disruption was also the story in 2012. Now after two years of unusually strong booking positions going into wave it was only natural that 2014 return to a more normal pattern. This normalization was in no doubt exacerbated by the most brutal winters on record, one that included unusual weather phenomena like the polar vortex that had the dampening effect on consumer spending throughout the economy.

To contend with these headwinds has required an increased level of promotion compared to prior years which has resulted in adjustment to our view of the net yield for the remainder of the year. But as I have stated time and again, our main financial objectives at Norwegian are to deliver consistent, orderly earnings growth and to drive up the return to our shareholders.

We have demonstrated our adherence to these objectives quarter in and quarter out. Our expectation for a 60% earnings growth in the year once again demonstrates our commitment to these objectives which are based on our young modern fleet, the passion of our crew to deliver a great vacation experience and our strategy to obtain a rightful price for our differentiated product offering.

Looking ahead we remain optimistic that our incredible assets, passionate crew and disciplined strategies will allow us to take an advantage of the early signs of improvement in the marketplace going forward. Now let me turn the call over to Wendy to review the results of the quarter along with our guidance in a little more detail.

Thanks Kevin and good morning everyone. The following commentary, unless otherwise noted, compares first quarter 2014 and 2013 on an as reported basis. As Kevin stated earlier, strong results from the quarter were boosted by the earnings power delivered by our newest vessel as well as strength in the core fleet, the combination of which led to an increase in top line revenue by 26%.

Revenue in the period increased 27.8% to $499.3 million from $390.7 million on a 23.2% increase in capacity day coupled with a 3.8% increase in net yield. Capacity days increased as a result of a full quarter of sailings from Norwegian Breakaway which entered the fleet in April 2013, along with a partial quarter of sailing from our newest ship Norwegian Getaway, partially offset by a dry dock for Norwegian Spirit.

Looking at net yield, the improvement of 3.8%, or 3.9% on a constant currency basis, came primarily from an increase in net ticket yield of 4.9% coupled with a 1.3% increase in net on board yield. Turning to costs, adjusted net cruise cost per capacity day, excluding fuel, increased 3.7% or 3.4% on a constant currency basis.

As a result of a few factors, including launch and inaugural costs for Norwegian Getaway which included inaugural events in Rotterdam, South Hampton, New York and Miami that brought significant exposure to the ship on both sides of the Atlantic. There were also incremental dry dock expenses in the period.

You will recall that the first quarter of last year included the first few days of a dry dock For Pride of America that extended into Q2. This year Norwegian Spirit underwent an almost three-week dry dock which was fully in the period resulting in incremental expense for those additional days.

In addition after carrying out planned projects, we took the opportunity to invest an additional $2 million in system upgrades on board which were not contained in our previous guidance. Lastly there were some additional expenses related to enhanced security during the Norwegian Jade charter in Sochi during the Winter Olympics.

Fuel expense for the quarter benefited from both lower prices and consumption. Fuel price per metric ton net of hedges in the period decreased to $643 from $673 in 2013. In addition fuel consumption per capacity day decreased 6.8% excluding the month-long dockside charter in Sochi for Norwegian Jade and charter events for Norwegian Getaway which contributed another 0.7%.

The benefits from our capital structure optimization initiative carried out in 2013 are apparent in our interest expense line items. Interest expense net in the first quarter of 2014 was $31.2 million compared to $37.2 million in 2013 after adjusting for $90.5 million in charges related to the prepayment of certain credit facilities and a redemption of our high rate senior notes.

The reduction in our weighted average cost of debt in the quarter to 3.8% from 5.4% in 2013 more than offset the incremental debt related to the financing for Norwegian Breakaway and Getaway. Looking ahead with all else being equal, our weighted average cost of debt should only improve as Norwegian Escape and Bliss enter the fleet with financing at extremely attractive interest rates.

The quarter also included an income tax benefit of $9.4 million compared to an expense of $2.2 million in the prior year. The income tax benefit in 2014 is primarily related to a change in our corporate entity structure that was completed in 2013.

For the year ended December 31, 2013 the tax provision reflected an interest expense deduction based on a method supported by the information available at the time. During the first quarter of 2014 we received additional information which allowed us to elect an alternative acceptable tax method resulting in a tax benefit of which $6.7 million is excluded in our adjusted EPS.

The impact of increased capacity, stronger net yield and lower interest expense, partially offset by higher net cruise costs per capacity day, resulted in strong bottom line improvement in the quarter, including an increase in adjusted earnings per share to $0.23 from $0.06, a 40% increase in adjusted EBITDA and a 200-basis point improvement in adjusted EBITDA margin. Looking further out in 2014 we have provided guidance along with associated sensitivities for the second quarter and full year 2014 in our earnings release.

Unless otherwise noted, the following guidance metrics are both on an as reported and constant currency basis. It is important to keep the following commentary in mind while reviewing guidance for the second quarter. We are lowering our strong net yield comps from 2013 as a result of two factors.

First, while industry disruptions last year eventually necessitated pricing actions to close out voyages, our initial view underestimated the duration of the impacts from the disruption and we maintained a higher pricing position for a longer period. Second, with Norwegian Breakaway's debut in the second quarter of last year, we are rolling over the extremely favorable yields that a first in class ship typically delivers on its first handful voyages.

That said, even when rolling over strong comps and working in a promotional environment, we are anticipating a net yield increase between 3% and 3.5%. We forecast net cruise costs, excluding fuel for capacity day to decrease between 2% to 3% while adjusted EPS in the quarter is expected to be in the range of $0.55 to $0.60.

For the full year 2014 net yield is forecast to increase between 3% and 3.5% while we anticipate net cruise costs, excluding fuels per capacity day, to decline 1% to 2%. In addition current projected fuel prices, along with consumption efficiencies, including better than expected fuel performance from Norwegian Getaway, will benefit the bottom line. As a result, we are reiterating adjusted EPS guidance for the full year of $2.20 to $2.35.

Now looking at deployment for the second quarter, 38% of our capacity is in the Caribbean with 23% in Europe, 11% in Bermuda and 10% in Alaska. The balance of our deployment is in other itineraries including Hawaii and repositioning voyages.

Highlighting some markets in our deployment, we are seeing the benefits of our strategy of consistent deployment and commitment to the European market in the form of improved pricing and occupancy as we go into the third consecutive year of our four ship seasonal deployment from Europe.

Also of note is Alaska, particularly our open jaws 7-day voyages on Norwegian Sun. You will recall that we introduced this unique, new itinerary last year and as expected it took some time for both travel partners and guests to absorb the new offering. The product has found its footing and is showing stronger pricing and booked position versus last year, demonstrating that our strategy of keeping consistent offerings, while it may include some time for awareness to grow during their introduction, results in these products being successfully absorbed by the marketplace and contributing to overall yield growth.

Before turning the call back to Kevin, I would just like to recap. We posted strong net yield performance for the first quarter versus tougher year-over-year comps. Net cruise costs, excluding fuel per capacity to day, grew slightly more than anticipated due to opportunistic work completed on the dry dock for the Norwegian Spirit.

Fuel benefited from lower prices as well as improved consumption while interest benefited from the various initiatives to optimize our capital structure. The final result is earnings growth of almost 300% on an adjusted basis.

Looking ahead we are reiterating our full-year adjusted EPS guidance which translates to 60% earnings growth and reinforces our objective of delivering the consistent, orderly earnings growth that we have become known for. With that I'll turn over the call to Kevin for some closing comments. Kevin?

Thanks Wendy. With both Norwegian Breakaway and Getaway in the fleet together for the first time, it is worth noting that this quarter's capacity increase marks the largest single quarter capacity increase in our current new build program. It is quite a task to absorb a 23% increase in capacity in a single quarter, but our results demonstrate that this mission was successfully accomplished.

Looking ahead to later years, we have announced our itineraries for the winter season of 2015 and 2016. One of the highlights of the season is Norwegian Epic's move from seasonal to year-round sailing in Europe from Barcelona. This move demonstrates our commitment to enhancing our presence in Europe, allowing us to reap more of the benefits of this market by deploying one of the world's largest and most innovative premium ships to the region year round.

In addition, this year-round deployment removes almost a month of low yielding trans-Atlantic voyages per year further enhancing overall yields. Another benefit of Norwegian Epic's move to Europe is that it allows for Norwegian Escape to enter the Miami market in November of 2015 with minimal incremental capacity in the Caribbean.

The addition of Norwegian Escape to the fleet provides the opportunity to grow our global footprint. This expansion includes a return of seasonal voyages in South America along with the addition of Port Canaveral as a new seasonal home port. We have a lot to look forward to at Norwegian in the coming years as this exciting new deployment not only adds fuel to the growth that will come from the addition of the state-of-the-art Breakaway plus class of our fleet.

Before going into Q&A I would like to announce the recent approval from our Board which authorizes a three-year, 500 million share repurchase program. This program allows us to be opportunistic to repurchase shares at attractive levels and return value to our shareholders. With that we'd like to open the call up for questions.

(Operator Instructions)

Steven Kent, Goldman Sachs.

Hi. Good morning or good afternoon for all of you on -- from management. A couple of issues.

One, could you just talk more about the timing of share buyback? And also -- can you also, Kevin, maybe speak to something which is a broader issue. And although I think we're seeing it in this quarter or in this guidance, is the ability for Norwegian to offset some of the broader industry trends.

When do you think NCLH can start to stand out relative to the competition on pricing in particular? It seems at least to us like Disney can do this. So that's the second question and the first one is timing of share buyback and how to think about it.

Yes. So as you know, Steve, we've been talking about the cash flow of the business and I think what I had been saying in the past was that as we looked into the second half of the year our cash flow was at the point where our shareholders would be saying hey, what are we doing with the cash? I would expect you wouldn't want us paying back 2% debt as an example.

So the stock price and where it is today accelerated that process. We feel that the stock is not reflective of the potential of our business and the earnings that we've achieved. So you can expect that we'll step into this in this quarter and then continue along and, you know, who knows what happens as we get into the next couple of years as our cash flow really starts to accelerate.

And as far as your second question, I've got to tell you I really feel like we have stood out significantly from the industry. We compete with two great competitors who have a lot of brands. But if you take a look at the pricing in the first quarter we are probably, from a pricing standpoint, 800 or 900 basis points different than the other players. I'm not sure why you don't think that's stepping out.

The industry has been impacted with a variety of things, as you understand the market. But in that given environment we're producing some significant positive pricing in an environment where the, as I said, the other players have not. If you look at the ticket pricing in the first quarter,, I think we do stand out quite a bit.

I was more focused on net yield, Kevin. But I guess you've answered it.

Yes. I think the -- when you take the ticket and the on board and you look at the fact that we did give a little bit on the load this quarter because we are driving for price as everyone knows. We will be relentless on that.

But at the end of the day we had to be cognizant of filling the ships to draw the on board revenue as well. But I do think when you look at our performance we've stepped up significantly over the last number of years from where we were, a distant third to being best-in-class.

Thank you.

Robin Farley, UBS.

Great. Thanks. Two questions.

One is it seems like China is getting more important as a source market. And I wonder if you could comment on any discussions you may have with Genting about doing something jointly there? And then also just sort of any indication when their share sale, kind of the timing for their share sale to be resolved?

Okay. Yes, so as far as Asia, that's been on our radar. It will continue to be.

I would suspect that over the next year or so you will see some action from us as far as moving our footprints as we want to be a global player. But right now the reality is with 13 ships we are able -- and one being in Hawaii and one being in the three a port a day itinerary, we have plenty of opportunities in the markets we know with certainty that we can perform.

As we get bigger we will look to those other markets in Asia. It's an important piece of the future strategy and we are eyes wide open on that.

As far as the Genting ownership, there's really no new news on that. What they've done is just cleared the requirement with the Hong Kong stock exchange. They didn't want to go back and do it a second time, et cetera, et cetera.

So this way they have done what they needed to do and we'll see what happens. But they are, just informally the Kevin view of things, they do understand the business model. They see the earnings growth as coming no different than the private equity guys who are, just again from the Kevin view of things, are seeing that the stock price is not where they would like it to be and are I suspect taking a wait and see attitude on selling their shares.

Greg Badishkanian, Citigroup.

Great. Could you walk us through how the Caribbean -- how Caribbean trends have developed over the last three months? And in particular since the industry lapping the Triumph incident in mid-February. Both from a booking and a pricing perspective, just how things have been progressing for you.

That's a good question. Because as we had the year-end call, the wave season started out not as stellar as we were hoping for as an industry. I suspect that's what we've heard from the other players as well.

But as we got into it and we did get to that mid-February point, we've seen the booking trends -- and some of it is the promotional stuff that's still going on. But you sense that the booking levels have started to take hold and that we're beginning to feel that things could start to improve.

We've had significant positive bookings every week for the last ten weeks, I would say, and -- which has put us into a very good book position. When you're in that position you then have better control over your pricing and so on.

It's a little early to be saying with certainty. But I'm starting to feel a little better about the landscape and I do think when we are all back to filling our ships consistently that that brings that -- the whole revenue management back into play and enables us to really start to move things again.

I think we just took a little bit of a soft spot because of the Caribbean. And, remember, the Caribbean, a couple years ago was -- we looked at it as a great market and the whole industry did. It's the lemming theory.

We all sat in our rooms and we did our itinerary planning on our own, of course, and then we all concluded that it makes sense to go into the Caribbean. Low and behold we all announce at pretty much the same time and it's like you show your hand and then everybody is in the Caribbean and the capacity being up 20%.

It's no different than what we went through I think in Alaska last year where we threw another ship in there. We had a little bit of a growing pain in Alaska and now the ship that's the new ship in that itinerary is booking the best of our three. So I'm confident that what we've gone through as an industry in 2014 becomes hopefully the opportunity to be realized for 2015.

Very helpful color. And then just finally Europe, which seems to be strong for all of the major players. What are you seeing there?

And then I think next year there's going to be some additional capacity. How you see -- what's your expectation for next year?

I think we're feeling quite confident that Europe has gotten back to being in the right trend for the foreseeable future. I expect, based on what we have been hearing as well as what we are seeing in our Company, we are doing very well from a yield standpoint in Europe.

Remember, that was off of the very low comps. So the proof will be in the pudding as we get into next year to continue the -- I think you're going to see a couple more years of nice growth as the market continues to improve, as Americans continue to get back to Europe and the once in a lifetime type vacation experiences. We're feeling pretty confident about Europe and we think our timing with bringing the Epic back as a full-year ship over there and winning the World Travel Holdings award of Best Ship in the Industry -- Best Ship in Europe, excuse me, we feel pretty confident with that.

Great. Thank you.

Felicia Hendrix, Barclays.

Good afternoon.

Hi Felicia, how are you doing?

Good. Kevin, your comments that things are feeling better at the end of your prepared remarks. Then in response to the prior question were encouraging. Just wondering if you could help us understand if things are feeling better? And also in light of the strong yields you saw in the quarter, can you just help frame the new net yield guidance for the year?

Yes. I would say the early part of the wave season and what we went through in the early part of this -- so we did have good bookings to get back on the right booking curve, which we've gone through I think as an industry. As I said now I feel like we are in a better position as an industry to start to navigate some real pricing as we move forward.

But having said that, as you know the bookings for the second, third and fourth quarter are, -- there's substantially for the second quarter a little bit less for the third quarter. Fourth quarter I think is still an opportunity, but it's too early to tell.

I think when we get on the second quarter, I would love to have some positive news. We're working like mad to try to drive our pricing as you know, it's the biggest focus on this Company.

And we understand completely that the top line is critical to get a multiple that we deserve. And I think given what we've been able to accomplish in the spectrum of what you've seen in the industry, I think we've done that. And I think it becomes clearer as the market moves forward.

And this is such an underpriced industry and such an underpriced vacation experience. As consumers get back to it and you feel like there was a whole range of things.

It was an unusual winter that delayed people calling to make their bookings. So that is now starting to feel like it's -- with a bunch of weeks of very solid booking activity, I think we have a shot to actually start to move in the right direction.

Okay. That's great. So the revision is more driven by price than something you might be seeing in on board.

Yes. I think we're pretty solid with our on board as we move through the rest of the year. There's so much stuff that's going on that's a positive. I just hope everybody understands.

We have -- if you remember on the fourth quarter call I alluded to that we were seeing this very encouraging sign of the fuel efficiency on the Getaway. Do you know when we go through the quarter now, we're ten weeks into it, we're projecting a $5 million-plus improvement in our fuel based on now that we're in the itinerary, we're running it, we see the fuel utilization.

Wendy's comment on a 6.8% improvement in fuel costs consumption per capacity, that's incredible. I hope everybody understands how powerful that is.

And the on board experience, as you know, these ships are built for profit. And it's now, as I said getting the right customers back on these ships and we're on that booking curve that enable us to start to get back with the right people on the ships that will drive that on-board experience.

We're pretty confident with where we're going. We think the O'Sheehan's concept on all of the other ships will keep people out and spending money.

We also think it has the side benefits of getting people more variety in the complimentary dining venues. We really do feel like the Company is on a roll now and we're excited about every day that's coming.

Great. Final one, just housekeeping.

Could you give us the color on your deployment? What percentage of your deployment will now be in the Caribbean next year in Europe?

In Europe for the full year in 2015 it will be 21% and 45% for the Caribbean on a full-year basis.

Thank you so much.

Thanks.

Steve Wieczynski, Stifel Nicolaus.

Good morning. So Kevin I guess first question. You talked about reducing or sacrificing occupancy for price at this point.

Can you just maybe dig into that a little bit more? Do you plan on using that same type of approach going forward for the foreseeable future?

No I think the reality is, and you saw it with one of our competitors that I think had the right intention of trying to hold price. At the end of the day remember we have to be cognizant of the fact that we have 30% of our revenue coming on board. So there's only so much you can do.

And within 100 basis points or whatever the range is, you want to navigate as best you can. But I don't think we would ever be reckless in holding price and have a lot of empty cabins. That has a double edged sword there.

Got you. And then second, with Escape can you talk a little about how you guys came to the decision in terms of putting -- deciding on putting Escape in home port in Miami? I guess we get a lot of questions about having that side-by-side there with Getaway. And is it, especially given all the concerns with the Caribbean, is it fair to say that Getaway could potentially be redeployed at some point?

No, I think what happens is the Epic is being redeployed and we moved a ship to South America. When you look at our capacity in the Caribbean, it's almost flat when we move into 2015 and 2016.

It's not a big spike. It's really just putting the right assets in there so we now have a year-round eastern Caribbean and a year-round western Caribbean ship. And remember the Pearl that's been down there is almost completely chartered for the fringe period.

Yes, the Epic moves to Europe. I just said that. And another ship moves to South America.

Great. Thanks.

Harry Curtis, Nomura.

Hey, Harry.

Good morning. Going back to the share repo. The stock is not exactly liquid. How excited are you to actually remove some liquidity from a less liquid stock?

The bigger issue is, at least for the stock, the overhang on the stock has been the 60-day lockups that's been created. To what degree do you communicate with your sponsors about a more significant length to the lockup which would allow your value, the value of your company to better reflect your earnings growth?

I can't really get into too much based on the -- on them with the lockups, as you know. That's kind of like the private equity world of what they do.

But I can tell you by the eye contact in our Board meeting this morning that these guys are not looking to be running for the doors. They -- they're not happy with the stock price. They're comfortable sitting and waiting.

But I don't think they would be entertaining changing what they have done as a game plan from their standpoint over the years, but I certainly can suggest that.

Yes, you're right. It's a good point on the liquidity. I think the only opportunity there is when the stock is weak that opportunistically we could be in the marketplace. And then as we move out into the future, we could have a marriage of some blocks with private equity guys when they're selling or with the Genting guys.

So we're going to do what the shareholders would want us to do and we'll be smart about it. I don't want to give away anything too detailed.

I guess what I'm getting at is do you think that they really appreciate that it's the short duration of the lockup that is actually impeding the stock price from getting to value that it might normally get?

They've done this 1,000 times at both Apollo and TPG. I'm not sure that they -- it's almost like saying to them would you entertain doing a different type of transaction? They have a game plan the way they do it.

The only thing I can suggest is they're not happy with the stock price and they're not looking to do anything, from my eye contact with them, at the moment they think the stock has a long way to run. But I will talk to them about the 60-day lockup. I'm not sure what they would say to that.

Fair enough. I just wanted to get that out there. Thanks.

Thank you.

Tim Conder, Wells Fargo Securities.

Thank you. Anything, Kevin, that you can give additional color? I appreciate what you've given so far.

But your book load factors as they stand now, looking over the balance of the year, the remaining three quarters of the year, and then also that and pricing by region, whether you're equal or behind, if you could just -- you talked about Europe being strong, Alaska being strong. Just overall your book load factors and the pricing; again, up, down, on a year over year basis.

Sure. And I'd be careful to be too specific given the fact that we're one brand and we're competing with two huge companies. But I would say that starting with the load situation, we're significantly favorable in our load position right now. We are as well in Europe across the Baltic, the Canaries and the Med, all of which are significantly booked better than last year.

We're on par pretty much with Hawaii. And then we're -- we are also heavily booked into Canada and New England, which is a good thing so you can get that done, get it out of the way. And then the Caribbean still has opportunities to improve on our -- on our booking.

But that is a major focus. We are in the market up in New York and we are in the market in Miami. So we're seeing some momentum from that. And so that will hopefully help the load.

And the pricing across Europe is very healthy, double digits. Alaska is in the zone of being low single-digit positive.

Hawaii is doing well as it has been for years now. Canada, New England is priced well and the Caribbean is still a little bit behind where we would like it to be.

Great. Okay. And then along the comment that Harry was making. We agree with that and also heard from some clients.

If there would be any way to encourage Genting to make some type of public statement, either a press release or via the press one way or the other, press interview or something, just, hey, here's regulatory filing. We've got to have it out there for Hong Kong regulations but it is not our intent to sell everything within this 12-month period.

I think that also would give some confidence into the market and at the end of the day maximize that value. Everybody should be happy. Genting, Apollo, TPG, everyone. But I think just maybe a little bit of additional comfort from some of the larger holders might be helpful from a public statement standpoint.

Yes. I -- and I've jotted down both your and Harry's comments. We appreciate them.

Thank you.

James Hardiman, Longbow Research.

Thanks for taking my call. A lot of my questions have been answered. I did wanted to ask the yield question a slightly different way.

You lowered yield guidance, it was a pretty small reduction. And what I feel like I'm hearing is that maybe since the last time you talked to us things got a little bit better and then -- or a little bit worse and then they got a little better over the last handful of weeks.

Can you talk about where that yield guidance stands today? I guess along two dimensions. First by geography. I'm assuming that the reduction is primarily Caribbean. Were there some offsets to that in some other regions?

Secondarily, core fleet versus the two new ships. How you historically talked about the premiums that you'd get. You made a note of underscoring the double digit premiums of Getaway and Breakaway.

That those still hold, how should I think about pricing on the core fleet? Has that relationship held and everything's come down? Or how should I think about that?

That's a great question. That is actually what has happened. So remember you're in an environment. When you see it contract a little bit for the overall industry, that has taken place.

And -- but the Getaway and the Breakaway within that span of business still has its double-digit premium. We expect that to be.

As I had mentioned earlier on an earlier call, the Epic is about to enter its fifth year and continues to command that premium. So we don't expect that to change. But what you have is the industry dynamics that you have to work your way through. And it affects the entire thing.

The core fleet is a little bit lower than we thought when we came into the year. And that's why you see the revision. But it still has got that same relationship to the new ships.

Great.

And it's really the Caribbean is for the most part the situation that's the yields for 2014 for the industry.

Very helpful. And then I guess just staying on the Caribbean. You talk about in your prepared remarks that given some reallocation of some deployments that your own capacity was only going to be up slightly in the Caribbean next year.

I think Royal said something very similar to that. How should I think about industry-wide capacity in the Caribbean next year? It seems like it's going to be very reasonable.

How do you guys think about pricing? And I guess, especially in the wake of the news that Royal is moving a very significant ship over to China, how should we think about 2015 and the price dynamics?

Yes. We're cautiously optimistic here, to be honest with you. By the way, it's 45% going down to 42% next year for us.

I don't know if you saw recently the news that MSC is returning to Europe for a part of the year with their new ship. That was a big part of the situation that happened this year.

So I'm feeling that the market size in the Caribbean is getting back to where it needs to be for 2015. It should move -- and it's the way it is. As I've said that several times.

As the industry has proven repeatedly that it has periods where they -- too much stuff goes into one market and then it recalibrates or you get the travel agent's attention on that market and the consumer and then the business builds. So I think it's looking to me like it's going to be a better environment in 2015 and we have similarly continued to grow our charter business in the -- in that part of the market with our Norwegian Pearl.

Excellent. Thank you.

Patrick Scholes, SunTrust.

Just two quick questions here. Just a clarification on the share repurchases. Those are not -- any assumptions of share repurchases are not included in your earnings guidance. Is that correct?

You are correct.

Okay. Fantastic. And then just wanted a little clarification here. It looks like you raised -- excuse me, you removed about $0.08 of fuel cost from the full-year guidance but you're hedging really is unchanged from the last quarter.

And I guess I think about that in relation to royal raised their fuel cost expectations for the year. How should I think about what's different? Is it your expectation for your newer ships will just be more efficient than you had previously thought?

Yes. Let me take that. I think what we're seeing here is the realization of the hard work we've been doing over the last couple of years.

I joke with Wendy that she goes on ad nauseam about all the initiatives. We have a group of things that we've done on fuel efficiency over the last two or three years that goes on for pages.

And we're seeing that benefit in the organic fleet, we are seeing the benefits of about $2.5 million-plus for the remainder of the year in our fuel consumption. We're also seeing, as I said the Getaway is $5 million to $6 million better than what we had budgeted, what we expected and I gave you that early indication on the fourth quarter call.

And we are, given our hedge position, actually benefiting from the pricing for the remainder of that. So I'm not sure how theirs is done and we can't really be looking at theirs and saying gee, why are we different.

But I'm very proud of what we've been able to do from a fuel standpoint on all the fronts that we've been working on. It just shows that you've got a team that's working on every single line item like we've been doing since we got here six years ago.

Great.

So we have time for one more question then.

Assia Georgieva, Infinity Research.

Good afternoon. Congratulations, Kevin, on your new directorship. That seems like a full plate. And especially congratulations to the whole team on the 5% ticket increase. I think that was quite spectacular and hasn't been pointed out enough, I believe.

Quick question on Q3. Kevin, you mentioned that Q4 might provide an opportunity. But it seems that Q3 pricing is very stable at this point and given that a significant percentage of your capacity is in Europe, which is doing so well, Q3 is going to be a good quarter. Does that sound like a fair statement?

I think it's good relative to the yield guidance that we've given -- given where we are and where we expect to finish. We could use you in our revenue management team, by the way.

I would love to work for you for free for a month. Could I? (laughter) I'm only an hour away so it's going to be an easy commute.

And I'm very optimistic. I shouldn't say very optimistic, cautiously optimistic about the fourth quarter.

We have enough time here to be as smart as possible. We're solidly booked. The environment looks pretty good.

It's just a matter of -- it's been three years in a row I thought we had a good situation as we rode into the fourth quarter only to have stuff that slowed us down. So again, I'm cautiously optimistic if the industry continues to not have any noise in it, I think we have a good shot as we move forward.

And Kevin, my question was more about Q3. Because I think it's still too early for Q4.

Yes. No. I tried to cover that by saying that our yield guidance accounts for all of that.

So we're going to have a great Q3, right? Okay. I appreciate that.

I know you guys are tired so I will let you go. Thank you so much for all the color that you've provided throughout the call.

Hey, thanks, everyone for your time and support. Just know that we're here working around the clock always to optimize the result.

And we look forward to our next quarter and we're available to answer any questions that you guys may have at any point. And I know Andrea's got a bunch of calls set up already. Thanks so much for your time.

This concludes today's conference call. You may now disconnect.