[Audio Gap] Fourth Quarter 2015 Earnings Conference Call. This is Arnold Donald, President and CEO of Carnival Corporation & plc. Thank you all for joining us this morning. Today, I am joined by our Chairman, Micky Arison, David Bernstein, our Chief Financial Officer; and Beth Roberts, our Vice President of Investor Relations. Now before I begin, please note that some of our remarks on this call will be forward-looking. I must refer you to the cautionary statement in today's press release. 2015 was a great year for our company. In fact, one of our strongest ever, all thanks to the dedication and enthusiasm of our 120,000 team members who delivered nearly 11 million joyful vacation experiences. And due to the vital support from our tens of thousands of travel agent partners around the globe. Despite a $0.10 drag from currency and fuel, despite macro economic and geopolitical challenges, despite MERS and despite the usual weather and other one-off events, we were able to exceed the high end of our full year guidance that we provided last December, delivering over 4% higher revenue yields, 40% growth in earnings and that's after a 25% earnings increase last year and well over $4 billion of cash from operations. Our strong cash flow was more than enough to fund our capital commitments and return value to shareholders through our 20% increase in the dividend to over $900 million annually and the recent repurchase of more than $400 million of Carnival stock. I am very proud of our team's many accomplishments this year, particularly the successful efforts to increase awareness and consideration for our great cruise vacations. , including our multi-faceted campaigns, those around the Super Bowl, that generated over 10 billion positive media impressions during the height of wave season. P&O Cruises delivery of…

Thank you, Arnold. Before I begin, please note all of my references to revenue, ticket prices and cost metrics will be in constant currency unless otherwise stated. I'll start today with a summary of our 2015 fourth quarter and full-year results. Then I will provide some insights on current booking trends and finish up with some color on our 2016 December guidance. Our adjusted EPS for the fourth quarter was $0.50. This was $0.12 above the midpoint of our September guidance. The improvement was essentially driven by two things, $0.04 from net revenue yields, which benefited from improved pricing on last minute bookings, as well as strong onboard spending, and $0.05 from lower fuel prices and currency. I am pleased to report that we still would have been significantly higher than guidance even without the benefit of lower fuel prices and currency. Now let's turn to the fourth-quarter operating results versus the prior year. Our capacity increased 2%. The North American brands were essentially flat, while the European, Australian and Asian brands, also known as our EAA brands, were up close to 6%. Our total net revenue yields in the fourth quarter were up just over 4%. Let's break apart the two components of net revenue yield. Net ticket yields were up almost 4% driven by our North American brands from improvement in the Caribbean and late season Alaska programs. Net onboard and other yield increased just over 4.5%, mainly related to bar, casino and communications as our initiatives in those areas continue to pay dividends. Net cruise cost per ALBD, excluding fuel, were up just over 3%, which was in line with September guidance. In summary, the fourth quarter adjusted EPS was $0.23 higher than the prior year driven by operational improvements worth $0.13 and favorable net impact of…

Thank you, David. Operator, now let's open it up for questions, please.

Thank you. [Operator Instructions] As a reminder, this question-and-answer session is being recorded Friday, December 18, 2015. One moment please for the first question. Our first question comes from the line of Harry Curtis with Nomura. Please proceed with your question.

Good morning, everyone. First with a revenue related question. You talked about the inventory left to sell. If you could put that in percentage terms, do you have 50% of your inventory left to sell through the first three quarters? I'm just trying to get a sense of how much is left to sell.

Generally speaking when we talk about where we are at this point in time for the whole year, we are about half sold, far more sold than the first and second quarter than the back half of the year, but we are about 50% sold on average.

Okay. Very good. And then my second question is related to fuel. Do you have any interest in changing the way that you are approaching your hedges given the extremely low level of bunker fuel and the impact that it could have should the price of Brent for whatever reason increase significantly?

Hi, Harry. Good morning. We review that constantly, but so far, with forward pricing, we haven't seen an opportunity to do anything that we think makes sense. Obviously, nobody really knows, as is evidenced by what happened the last couple of years. But we constantly review it. But at this time, we see no reason to do anything different.

Keep in mind that given the collars and given the fact that the bottom of the collars are roughly $78 to $80, if fuel does go up, we are very well protected up until the $80 and then we get back into the collars. So we are well protected at the bottom end.

Okay. My concern is not the bottom end; it's the top end.

We do have the high end in the collars, but, as Arnold said, we are not changing, given our point of view and given the amount of collars we have out there, we feel that we are well-protected for the next three years.

All right. Perhaps I'll give you a shout later on to get into more detail on that. Thanks.

Okay, you bet. And just one last comment, the last time we almost pulled the trigger on that, we would have taken all the losses and then a couple of days later, we would have been back in a loss situation again. So we constantly look at it though.

Our next question comes from the line of Felicia Hendrix with Barclays. Please proceed.

Good morning. Thank you for taking my question. So you guys have both said in your prepared remarks in the guidance in your yield guidance, you built in some cautious outlook. One point was caution regarding Europe and the geopolitical events. Just wondering how much that's weighing on your yield forecast for 2016?

At this time, overall, we are being - we hope we are being conservative. If you look at the high end of our guidance, that would be a 4% yield improvement. So definitely it's factored in along with a host of other things. But we feel confident we are going to see yield improvement next year. At this point in time, we've done what we think is prudent and makes the most sense. We are pre wave. We've got a lot of information yet to see.

And that 4% is inclusive of the reclassification?

Yes, on the high end of the guidance.

Yes. Okay, just wanted to make sure. And then just moving to Asia where you are also being cautious because of the capacity increases there, when you look at China specifically for next year, what's the trajectory of pricing that you have baked into your forecasts?

In the end, we expect overall our returns in China to be above the fleet average again next year. We have a significant capacity increase, 60% plus and around 60%. And so we - it's a unit growth story for us in China. So we are anticipating that while yields may come down a bit on balance, our returns are going to be better than the fleet average and overall, we are very, very positive on the China market.

Okay. Great. Thanks so much.

Our next question comes from the line of Robin Farley with UBS. Please proceed.

Great, thanks. I wonder if you could, on the China question, give us a sense just kind of ballpark of what you think China maybe contributed to your yields in '15 and what part of your guidance for next year is driven by China?

In 2015, keep in mind, we did have about a 50% increase in capacity in China. And also with the impact of MERS, we did see yields down just a little bit in China in 2015. And as Arnold indicated, we are looking at a 60% increase in China capacity in 2016. And so - but it is a unit growth story and China is still getting yields, particularly on the ticket side way above other parts of our business and it's an excellent market and it's gotten a very promising increase. Keep in mind though that China is still in 2016 just 5% of our business and so it's a very small piece of the total. But, as Arnold said, it's a unit growth story and over time, we do expect it to be very promising.

Okay. Great. And my other question is I know your commentary about volume and pricing better than the guidance that you had talked about in September. But I'm just thinking about in the last month or the last five weeks, there's been a few incidents in the world. Can you give us a sense of maybe how - I would assume there's some volume reduction initially after a disruption and then are volumes back to normal levels now versus a couple of weeks ago?

We saw some impact from the events and the media associated with it and obviously saw the European activity was particularly impacted. We saw some movement for North America brands - for itineraries that had that as a destination. All that's been factored into our guidance going forward. It's reflected in our projections and we feel confident about the projections at this point in time.

Overall, I mean, as Arnold indicated, we see the blip, but it has started to improve and we feel very good about the overall trend and where we are today. So - and we built all of that into our current guidance.

Great. That's helpful. Thank you.

Our next question comes from the line of Steve Wieczynski with Stifel. Please proceed.

Good morning, guys. So, David, you kind of glanced over the accounting reclassification, I guess. Could you go into a little bit more detail as to what exactly it is and I guess why, at this point, why is this being done now?

Steve, it relates, as I said, to the EAA brand and it simply is a re-class between revenue and cost and there is no impact on operating – I am sorry, operating income. It really benefited internal management reporting and really this change, it's not material. We weren't even required to disclose it, but we just wanted to be transparent so that everybody understood where the revenue yields were and that the 3% did benefit by about a point of the accounting reclassification.

So I guess another way to say it too is that if you look at your yield guidance for next year, it's essentially 2% and then I think Arnold noted on the top end of that could be more like 3%. Is that the right way to think about it?

That's the right way to think about it, yes.

Okay. And then second question, I guess, just a little bit bigger picture question with China. I guess, Arnold, how do you think about the market in terms of you guys are taking a bunch of different brands in that market, AIDA and Costa and some other brands like that. Do you think an AIDA brand will resonate well in that market, and is it something that along the lines down the road you could create a little bit more confusion with the tour agencies over there?

I think, first of all, as you are well aware, there are over 100 million outbound tourists in China already and today, cruise is capturing less than a million of those tourists and that number is going to grow dramatically in terms of the total number of outbound tourists and the fit for cruise is far greater than, less than 1%. So there's plenty of demand. And then the Chinese are not that different than Americans or Europeans or anyone else. There's a huge distribution curve of different interests and appetites. For some, a German product is going to be something they are very excited about; for others, an Italian product; for others, an American product and so on. And so we see the opportunity in China to introduce a number of brands to take advantage of the pent-up demand there and to fit the various appetites and desires and different types of cruising experiences that the Chinese will want, similar to other people around the world. So that's it in a nutshell. So yes, we are launching AIDA and Carnival brands in 2017. We already have Princess and Costa there today. We have the joint venture with CSSC and CIC for a domestic brand launch sometime in that kind of timeframe. And so we are very excited about China. It is today only 5% of our capacity. There may be discontinuities at times as you try to get distribution lined up with that pent up demand, but it's all, from our perspective, very manageable. But a very great market, a strong future market, a contributing market today to the bottom line and to our whole approach on developing relative scarcity around the world. So the capacity growth that you see for us, a lot of that goes to China and therefore - and similar for some of the other companies in the industry as well. And so that constrains the capacity growth in the other markets.

Thanks for that, Arnold. Could I add one more question onto the end of that I guess, when you look at China next year and your yields there next year, will there be a significant impact from your change in terms of port mix and also some colder itineraries as well?

We've been sailing year round in China for a while. As you know, we are number one in China in terms of home port activity and so we've been season-long. So you won't see a lot of seasonality in our business. You won't see a lot of port differentiation at this point either between Shanghai and Tianjin and the mix of our business either in China. So we are expecting again good yields in China, better than the fleet average next year. But with capacity expansion, we do recognize it's more of a unit volume growth play than a pure yield play.

Thanks, guys. Appreciate it.

Thank you.

Our next question comes from the line of Steven Kent with Goldman Sachs. Please proceed with your question.

Hi, good morning. Two questions. First, we saw a news story that Costa will be selling direct in the UK. Is that something we could see in other markets or for other brands in the UK? So that's my first question. And then, second, look, your guidance has been very conservative the last few quarters. This quarter, $0.50 was $0.10 above the high end of the range. I guess what I'm trying to understand from an operating perspective is where is that upside coming from quarter after quarter since so much of your bookings are on the books, they are pre-sold. So I'm trying to see where the variability is when you look back over the past few quarters to the upside?

Okay, first of all, concerning the Costa comment, travel agents are absolutely essential to our business. They are a critical part of our business. And something got lost in translation or whatever, but the bottom line is we are not moving away from travel agents. The reality in the UK for Costa is that they have very little business there and they are choosing to concentrate elsewhere. However, travel agents in the UK who choose to book on Costa can still do that. The existing travel agents who are approved travel agents, they can still do that and they can do it through Genoa and the mechanism is in place. So something got lost in translation there, but Costa is not going direct in the UK.

And your second question, Steve, there's a lot of moving pieces to our guidance. I guess I would categorize them into four categories that affect our ability to get the accuracy correct. First of all, the net ticket revenue. I mean, yes, we always say 85% to 95% of our bookings are on the books when we give the conference call, but we are trying to project that last 10% or 15% and like this time in the fourth quarter, we got better last-minute pricing on those bookings and that positively impacted the results. Second is onboard. We have no advanced bookings for onboard revenue and it gets very difficult to project the exact amount of money that 2.5 million or 3 million people are going to spend each quarter on our ships, and so this quarter, we were a couple of cents better on onboard revenue. Third is net cruise costs. And I think, as I've said in the past, while we are pretty good at the full year, it's very difficult to predict every single month and every single quarter the exact split. So we do occasionally talk about the seasonality or the timing between the quarters. And really the fourth is fuel and currency. I mean, if you've got a crystal ball that we could use, I would love to have it, but I will tell you, we take the current spot price of fuel and the current currency rates and we bake them in and they do change. In fact, in the fourth quarter, as I indicated, we saw a $0.05 improvement from the net impact of fuel and currency. So those are the four things that vary and we are doing the best we can.

Obviously, we've beaten the high side estimate for a number of quarters in a row and beaten guidance at minimum a number of quarters in a row. We're going to work like crazy to keep doing that. Having said that, it's not always going to be smooth sailing and certainly quarter-to-quarter not, and maybe not even year-to-year. And so we do the best we can in the forecast. But fundamentally we are on a path to get to the double-digit return on invested capital. And that's the ultimate goal, and we celebrate the mileposts along the way and we work like crazy to accelerate achieving that and we will continue to do that. But we are trying to be as transparent as we can.

Okay. Thank you.

Thank you.

Our next question comes from the line of Jared Sajan [ph] with Wolfe Resources. Please proceed.

Hi. Thanks for taking my questions. So you said advanced bookings are well ahead of last year, but does that apply to advanced book load factors as well more on an occupancy basis? And if so, how do you arrive at just 2% yield guidance with higher bookings and higher prices? Thanks.

When we say bookings are ahead, we are talking about booked load factors or occupancy onboard the ship. So you can say it's sort of like a, let's call it a capacity-adjusted metric. So we are definitely looking at occupancy and we are looking at cabin occupancy. Now prices are ahead. We talked about that, but we have only recently seen pricing turn positive, as Arnold had discussed. And so overall we had indicated we are slightly ahead and so we do have to see a continuation of this improvement for us to achieve our overall 2% yield guidance in the net ticket yield basis. So with that in mind and also tempered by the macroeconomic and geopolitical issues, we think we gave you our best guess it's a 2% yield guidance, but we hope we are being conservative and do better.

3% yield guidance.

3%, sorry. Forgot about the accounting re-class, apologize.

Right, okay. Thanks. And then just as a follow-up, separate question here, are you comfortable taking on incremental debt to fund the buyback? And assuming you have $4 billion in CapEx for next year, correct me if that's not the right number, plus about $1 billion for the dividend. It would seem like you would have to take on more debt if you want to buy back stock. So can you just help us understand how you are thinking about that? Thanks, guys.

Sure. Okay, well, it's a couple of factors that we are putting here. First of all, if you go back to 2015 and you look at what we did, we had, in 2015 about $2 billion of free cash flow. We returned $800 million in the form of dividends. By the end of the year, we had only returned $300 million in the form of share buyback. So we still - we returned $1.1 billion and we still, as of year end, have $900 million of free cash flow that we are expecting to return in 2016. so we've got end - we also have significant free cash flow expected in 2017. So we have plenty of opportunity to return free cash flow to shareholders. And on top of that, I think I've said this before, over the long run, if all we do is return free cash flow to shareholders because of the earnings over time, we would delever. So overall debt levels over the extended period of time can increase and we can maintain the same leverage ratios and return that cash flow to shareholders as well.

Okay. Thank you.

Our next question comes from the line of Jamie Katz with Morningstar. Please proceed.

Hi, everybody. Good morning. I have a couple questions. First, can you talk a little bit about the CSSC relationship and how you are preliminarily thinking about building out that relationship, whether there's an opportunity to move some older ships into capacity there or if you are thinking about maybe newbuilds despite putting so much new capacity into China, or maybe you haven't gotten to that point yet?

Yes, so, first of all, we had an original memorandum of understanding agreement that basically covered everything, port development, shipbuilding, domestic cruise company ship-owning, etc. And we now have, from that agreement, executed a joint venture agreement around establishing a domestic brand together there. So we're concepting that out with them. Over time, that brand, whatever form it takes, would include both ships transferred in, existing ships, as well as newbuilds over time. And clearly, CSSC being a shipbuilding entity is clearly interested eventually in building cruise ships. And they also have an agreement with Fan Cantiere [ph] in development around shipbuilding. So ultimately, it would involve new ships and just keep in mind that the China market over time will, probably like it is in almost every other consuming activity, be the largest market in the world just from sheer numbers. So over time, China will be able to absorb many, many, many cruise ships. So we are excited about it. We are looking forward to developing it. We are excited that that agreement is now reflected in China's national five-year plan showing their commitment to development of a cruise industry and to working with us, and so we are really looking forward to the partnership.

Okay. And then on some of the cost savings that you've talked about, I know in the past you guys have talked about things like air. But I'm curious if the next $75 million in cost savings that you mentioned earlier on the call are coming from new opportunities and maybe what those opportunities are.

We have efforts going on an ongoing basis, so it's important for me with the organization that these aren't one-off projects. Its ongoing underlying behavior, communicating, collaborating, coordinating, and so airlines, we definitely have realized benefits from that and we'll continue to going forward. In the area of food and beverage, we are beginning to pick up momentum in that area across the brands as they collaborate with each other. And it's not only on the cost savings side, which was your question, but it's also on the revenue-generating side in terms of how they package beverage packages, how they are presented to the guests, who presents them to the guests, the incentives involved, the timing and learning’s from that that actually help drive onboard revenue as well. Other areas include technical, which we are at the very beginning of. There's huge opportunity in that area and we are not even - we've barely begun that one. And there are a host of other areas as well.

Yes, things like media buying and marketing, port shore excursions. I mean, there's a long list of things. We are working through them in a variety of phases because you can't accomplish everything at one time. So we did a point last year, $75 million to $80 million last year. We are doing another $75 million this year and we hope to continue to be able to produce additional savings in 2017 and beyond.

And again, it's not just a one-shot deal. These are ongoing behaviors that constantly drive savings in the areas. So it's not a one and done in the various areas, but we are very excited about them, especially excited about seeing the behavior and the enthusiasm of our various team members who are engaged in this and working together.

Okay. And then, lastly, would you guys be kind enough to offer just capacity growth by quarter if you have it?

It is 3.9% for the first quarter, 1.8% for the second, 3.9% for the third, 4.3% for the fourth for a total of 3.5% on the year.

Excellent. Thank you, guys, so much.

Thank you.

Our next question comes from the line of Tim Conder with Wells Fargo Securities. Please proceed with your question.

Thank you. Just a couple here. Arnold, you had mentioned when you sort of started laying out your vision for the Company here of it's much easier to generate incremental revenue from your existing customer base. Can you maybe give us an update as to where repeaters stand right now, maybe just in North America and Europe? I know a lot of the new customers are coming from Asia, but just in North America and Europe, your customer base repeaters versus first-timers? And then as it relates to China, how should we think about comps sitting net yields versus as you expand into new sourcing areas from China versus capacity? I guess if we had to break down your net yield outlook, it sounds like it's going to be down a little bit given multiple factors, are comps sitting at yields still looking pretty good? And then I guess do you have to lower a price for somebody that's a first-timer in China?

Okay. Well, let me answer your first question with regards to just onboard revenue generation. Could you repeat that again - the first part of your question?

It relates mostly to…

Oh, first-timers…

In US and Europe in particular.

Yes, two disruptions for first-timers. First, there was a lot of capacity last year in the Caribbean, a lot of capacity and to fill that capacity, we had to have last year a lot of first-timers to fill out that capacity last year. It was a major increase and I'm talking now 2014, okay, in the Caribbean. And so that expanded the base for the Caribbean. You mentioned China already as being the other component. Outside of those two dynamics, the trends are pretty much the same as they have been in the past, which is a smaller and smaller percentage of new to cruise only because the base is getting larger and that base grows and capacity isn't expanding dramatically. So there's always a slight downward trend in number of new to cruise required if you don't have significant capacity increase in any other market. So it's just an artifact of the numbers. If you look at our total business though, that's a little bit different because we have approaching 11 million individual guests a year and probably 3.4 million of those are new to cruise. A large portion of that number - it used to be 2.7 million. A large portion of that number is driven by China and as I mentioned, that big expansion in 2014 of capacity in the Caribbean. In regards to China, we don't have like same city, if that was what you were asking. Our sourcing -- we expand the sourcing as we expand ships, but the ports that they are selling from are the same and so Shanghai and basically Tianjin. And so we are expanding the sourcing, we are reaching further out into the China market for guests, but in terms of -- the ports are pretty much the same.

Yes, and Tim, when you look at it, same port year-over-year, we are actually hoping to do better year-over-year in the yields, but keep in mind, as Arnold indicated, we are looking at approximately a 50%, 60% capacity increase in China. So we are being cautious, as I indicated, in our guidance as we move forward into next year. But, remember, overall that China yields are better than the fleet average. It is only 5% of our overall business and it is a great market. And so it's a unit growth story and the operating income in China is improving quite dramatically from 2015 to 2016.

Okay. I guess with the questioning on China, I was just trying to understand, as the industry has entered the market, you get the great prices and if you are growing penetration, should you still get that same price because everybody is coming from the same base of not knowing what a cruise is. So - or is it just trying to put a lot of capacity through a very tight funnel? Is that what's pulling the yields down? But I do get the thing that overall from a global mix standpoint, this is still very, very positive for yourselves and the industry.

Again, there are some discontinuities potentially in the market because of the way the distribution channel operates and where we are chartering ships and what have you. But philosophically, our intent is for strong pricing in China and China is a place where we are profitable. We intend to be profitable and if things started moving a different direction or prices plummeted too far, then we would pace the growth and we would change destinations for the ships. We don't have any interest in creating a market in China, that's a big discount market or anything like that.

Okay, great. Thanks for the clarification.

But it's still above the fleet average.

Okay. Thank you for the clarification and great year.

Okay. Thank you.

[Operator Instructions] Our next question comes from the line of Kevin Milota with JPMorgan. Please proceed with your question.

Hey, good morning, everyone. Two model-related questions here. Within your guidance, have you assumed any buybacks and if so, could you give us a dollar amount that's pegged there? And then secondly, on the income statement, what in the 3.10 to 3.40 EPS guidance, what are you factoring in for the fuel derivative net impact to EPS? Thank you.

Sure. We did not include any - we did not assume any additional buybacks in our guidance. We had bought back a little over 8 million shares as of yesterday. We did assume that in our guidance, but we have not assumed any additional. And as I did mention, we probably still have another $900 million or $800 million from this point forward of free cash flow from last year that we can return to shareholders. As far as the 3.10 to 3.40, the fuel derivative, I think it was…

It looks like about 200…

No, no, no, in 2016, it was $336 million of losses.

And that's on a net basis?

Realized losses, yes.

Okay. And could you just confirm the dollar amount? So you did $300 million in buybacks in the fourth quarter and about $100 million or so here in the first quarter of '16?

Yes, something close to that.

Okay. Very good. Thank you.

Thank you.

Our next question comes from the line of Dan McKenzie with Buckingham Research. Please proceed with your question.

Hey, thanks. Good morning, guys. Congrats on the quarter. I am wondering if you can talk a little bit or just update us a little bit on your port expansion in Asia just in general and when any potential new ports might come online. And just tied to that, how you would expect that to benefit the China part of your business.

Over time, there's no question there's going to have to be additional ports in China and obviously, there are a number of local entities in China working on that if we are focused on China. To handle the volume in China, there's actually going to have to be expansion in ports surrounding China as well, so Taiwan, Korea, Japan. It will be necessary to expand the capacity of those ports to handle the Chinese guests. So that's all in discussion and under analysis and development and it is definitely going to be required as is expanding the cruise terminals in Shanghai and in Tianjin and points nearby there. Basically those same cities but different locations for the terminals. So all of that is underway. It's all going to take some time, but with the pace of things, keep in mind we can only build so many ships a year because there's only so many shipyards. There's demand right now everywhere in the world for cruising, so you are only going to move so many ships from other markets into the China market. So there is a natural pace to this that exists because again of the artifacts of the construct with shipyards and demand elsewhere in the world. So we are working diligently and I'm sure others are too and looking at different ports in China, as well as working with ports in Asia, throughout Asia, where the Chinese would want to sail to.

I guess kind of what I'm wondering is if the ports would represent a capacity constraint to that part of the world because, as you think about outbound travel of China doubling by 2020, just given the macro volatility, that statistic is perhaps something less than that, but I'm guessing cruise ports aren't going to double by 2020. I'm just wondering if you can just…

They probably won't. You are absolutely right. There is a bit of a constraint. But the other thing to think about is fly cruise for the Chinese, which helps demand in all the rest of the world markets. So the bulk of those 100 million tourists today are flying out to somewhere and so fly cruise for the Chinese to Europe, to North America, to Alaska, to the Caribbean, they become a huge source market for existing itineraries and that will be part of the opportunity as well.

I see. Thanks for the color.

Thank you.

Our next question comes from the line of Assia Georgieva with Affinity Research. Please proceed with your question.

Good morning and congratulations on the great results. I had a couple of quick questions. Q1 is going to be probably a little bit stronger then Q2 and that's probably because you have much more of an exposure to the Caribbean in Q2, Europe may be somewhat weaker. We probably are still close to the Paris events and is it fair to assume that it's not going to be a bell curve sequentially Q1 through the rest of the year and that Q2 might be a slight downward blip?

The reason that Q1 was better has a lot to do with the comparison to the prior year. It's got more favorable comparisons because the second, third and fourth quarter of last year were up more than the first quarter. So it's a little bit on the prior-year comparison. But your point is well taken. We talked about the Caribbean doing very well, talked about it being booked well-ahead. It's at nicely higher prices and as a result of that, the first quarter we do expect to be a little bit better than the remainder of the year in terms of the net revenue yield.

Thank you, David. And the second question is more of a philosophical question, if you will. It seems that a lot of the newbuilds that are going to be headed to China in 2016 and 2017 and that's on an industry-wide basis are going to spend if they can the European summer season in Europe. Is that because you are trying to take advantage of that strong season despite the very good yields that you are getting in China?

We can't speak for others. We can only speak for ourselves and for us, our first newbuild going into China will be the Majestic Princess in 2017 with our Princess Cruise Lines. And our focus is to get her into China, she's purpose-built for China.

She does do a little bit in Med.

And she does a little bit of Med, but the ships are built in Europe and have to be trans located over to their destination market. So in our case, she will do some inaugural stuff in Europe simply as a way to make her way over to China.

Okay. Take care and again congratulations.

Okay. Thank you. Thank you very much. David…

Operator, I guess we'll take one more question at this point.

Thank you. Our final question comes from the line of Brian Egger with Bloomberg. Please proceed with your question.

Good morning. I just wanted to parse the language a little bit on your 2016 yield outlook. So in September, you had said that first-half cumulative bookings were well-ahead on lower constant dollar prices and now I think are saying first three quarters, they are well-ahead on slightly higher constant currency prices. So I just wanted to know if that generalization would be the same if you had revised that in constant dollar terms – just make there's no change in significance there.

Yes, the most important thing, if I go back, we were behind in constant currency and as we said, for the last three quarters, prices were up and now we are ahead. And so it's been a good booking quarter for us, good volumes, higher prices, as Arnold indicated, an improving pricing trend and that's why we are forecasting the yield improvement. It was something we had expected would occur and it has occurred over the last 13 weeks.

But the difference isn't in the terminology -- or in the metric of constant dollar versus constant currency. The difference is actually in the bookings.

Okay. Thank you.