Norwegian Cruise Line Holdings Ltd. (NCLH) Q4 2014 Earnings Report, Transcript and Summary

Good morning, and welcome to the Norwegian Cruise Line Holdings’ Fourth Quarter 2014 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 for this session will follow at that time. [Operator Instructions] As a reminder to all participants, this conference call is being recorded. I would now like to turn the conference over to your host Ms. Wendy Beck, Executive Vice President and Chief Financial Officer. Ms. Beck, please proceed.

Thank you, Amanda. Good morning, everyone, and thank you, for joining us for our fourth quarter earnings call. I am joined today by Frank Del Rio, President and Chief Executive Officer of Norwegian Cruise Line Holdings; Drew Madsen, President and Chief Operating Officer of Norwegian Cruise Line; and Jason Montague, President and Chief Operating Officer of Prestige Cruise Holdings. Frank will begin the call with opening commentary, followed by our brand presidents, Drew and Jason, who will go into little more color for their respective areas. I will follow with commentary on the results for the fourth quarter and full-year ’14, as well as provide guidance for 2015, before turning the call back to Frank for closing words. He will then open up the call for your questions. As a reminder, this conference call is being simultaneously webcast on the company’s Investor Relations website at www.nclhltdinvestor.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 fourth quarter and full-year ’14 results was issued last night, 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. The company’s comments today may include statements about 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. The company cannot guarantee the accuracy of any forecasts or estimates, and we undertake no obligation to update any forward-looking statements. If you would like more information on the risks involved in forward-looking statements, please see the company’s SEC filings. In addition, some of our comments may reference non-GAAP financial measures. A reconciliation of the most directly comparable GAAP financial measure and other associated disclosures are contained in the company’s earnings release. Now with that, I’d like to turn the call over to Frank Del Rio. Frank?

Thank you, Wendy, and good morning, everyone. Before going into my commentary, I’d like to start off by saying how excited I am at being able to lead the most dynamic cruise operating company in the industry. My experience in the cruise industry goes back 20-plus years, and I am more eager and passionate about this opportunity than perhaps any other in my career. As the founder of Oceania Cruises, I understand the entrepreneurs mindset and what it takes to build a brand from scratch, which is why I have the utmost admiration for those pioneers that founded Norwegian Cruise Line close to 50 years ago, with one ship sailing round trip voyages of the vent nascent Port of Miami, these trailblazers did what no one had done before, and in the process not only founded a vendible brand, but they also laid the groundwork for the cruise industry as we know it today. To be able to lead the organization that includes the pioneering Norwegian brand, along with two brands that are leaders in their respective market segments, in synonymous with upscale travel is a once in a lifetime opportunity that I truly relish. The recent histories of Norwegian Cruise Line and Prestige, particularly the Oceania Cruises brand, have run along similar path. Both brands are innovators, with Norwegian introducing a slew of industry-first from the development of a private island destination to the roll-out of its signature freestyle cruising. Meanwhile, Oceania Cruises carved a niche by defining the upper premium segment, with an offering that includes unparalleled cuisines, personalized service and exciting itineraries. Their unique business models and the significant potential of both brands, attracted private equities, who made substantial investments in each during 2007 and 2008. Both brands also embarked on disciplined newbuild programs, which resulted in a successful introduction of Marina and Rivera for Oceania Cruises and Norwegian Epic, Breakaway and Getaway for Norwegian Cruise Line. Their paths diverged slightly though, as Norwegian focused on internal operations to resurrect the brand, while the shareholders of Oceania Cruises combined with Regent Seven Seas Cruises, the former Prestige Cruise Holdings, which I’ve had the privilege of leading since its inception in 2008. So with all these fitting then that the next step in Norwegian’s growth strategy was to look for acquisition opportunities to grow and diversify. Finding the perfect partner was as easily as looking out of Norwegian’s corporate headquarters window and just down the street to Prestige. The experience gleaned from uniting Oceania Cruises and Regent into Prestige, which quickly became the leading operator in the upscale market segment turned out to be the perfect precursor to the opportunity of combining Norwegian Cruise Line and the Prestige brands into a new diversified cruise operator. It’s an opportunity quite frankly that I, along with 30,000 team members under the Prestige and Norwegian banners have thoroughly embraced. Norwegian’s diversification into the upper premium markets was one of two similar vents for the company in 2014, and I’ll return to talk about this employee acquisition later in the call. Just as important, 2014 will be remembered as a year of solid growth for Norwegian Cruise Line in the form of both, fleet expansion and organic growth. The brand welcomed Norwegian Getaway to the fleet in January in a boisterous cushioning that captured that energy and vibrancy of her year around home port in Miami. Since then, her contributions to the brand have been numerous. First, she marks Norwegian’s return to year around seven-day cruising from Miami after a decade long absence. And not only does a Norwegian brand now have a flagship in Miami, she continues to be lines highest rated ship in terms of guest satisfaction. And this is no small feat given the logistics of managing 4,000-plus guests, 20,000-plus dining areas and a host of entertainment venues and lounges. My congratulations go up to Getaways’ offices, crew and staff for tremendous accomplishments. In addition to Norwegian Getaway, the brand had the benefit of a full-year of sailings of Norwegian Breakaway, which was introduced in April 2013. Lastly, strength in Europe and Alaska itineraries drove organic pricing growth and helped offset pronounced promotional environment for Caribbean itineraries. The second significant event of 2014 was Norwegian’s expansion and diversification into the upper end of the cruise market, with the acquisition of Prestige Cruise Holdings. Due to the timing of the transaction late in the year, the result of the acquisition will be more apparent in the coming year, however the long-term benefit of such a transaction are abundantly clear to anyone who follow the industry, and I will discuss synergies later in the call. So putting that topic aside for now, the strategic fit of Norwegian and Prestige is highly complementary. Combining our three brand results indication offerings that run the gamut from an entry-level three-day cruise to the Bahamas, for those who want to test the waters, what a cruise experiences is like, to wait 180-day around the world voyage geared to the most adventurous travelers. In between is a rich diverse portfolio of 21 ships ranging in size from 500 to 4,100 berths, year around in seasonal offerings from home ports worldwide to over 350 ports around the globe. These ships accommodate groups of size from singles to couples to large families and offer experiences ranging from contemporary to ultra-luxury. When you combine the Norwegian, Oceania Cruises and Regent Seven Seas brands, the number of offerings we can provide our guest growth exponentially and we believe it is unmatched in the industry. In addition to the best-in-class assets, the new Norwegian organization, both an exceptional management team with a depth and breadth of experience, both from within and outside of the cruise industry. These leaders fit well into an organizational structure that I personally developed to ensure two things. First, that the market integrity product, characteristics and brand attributes of each brand will remain intact and unaffected by the combination. In other words, each brand will continue to deliver the guest experience that they are known for and any changes likely to be the adoption of best practices going across the fleet will be invisible to the guests. And second that a culture of collaboration, knowledge sharing and team work exists, to not only maximize cost and revenue synergies, but also to share best practices in order to enhance the guest experience in cruise operations throughout the three fleets. We have designed this organization to take the best from each brand and craft ways to extend those concept and ideas across the organizations, which in turn elevates the entire company. Three distinct brands and one incredible organization is my mantra. And it provides a direction going forward of how best the organization operates. One of the specific functions of this new org structure that epitomizes this philosophy is dedicated to identifying, quantifying and implementing synergies throughout the organization. This synergy function is headed by seasoned Senior Vice President who I’ve appointed Chief Integration Officer reporting directly to me, and includes resources and expertise from both the Prestige and the Norwegian organization. At the time of the acquisition, we promised synergies in the $25 million range, but we are certain we will achieve that figure this year. In addition, we are well on our way to getting out additional expense synergies and revenue opportunities, which we will share with you in future calls. At the time of the acquisition, we promised cost synergies in the $25 million range, and we are reiterating this level for 2015, having identified synergies in the consolidation of office operations, insurance cost, port fees and shore excursion concessionaire contracts. In addition, I am pleased to report we have also identified revenue synergies of $15 million, exclusively from opportunities in onboard revenue, for a first year synergy of at least $40 million. And that is embedded in our guidance. These same line items that constitute $40 million synergy savings in 2015 equates to some $50 million in 2016 based on full-year. The overall strategic plan that had been put in place by Kevin remains substantially unchanged. My leadership team and I will focus on stimulating organic growth, much of which will come from the learnings that the three brands will share and then creating a culture of flawless execution, which together we expect, will accelerate net yield growth, suppress costs and lead to increased earnings per share. In addition, we will tap our collective experience in developing leading brands and cultivating a loyal past guest space that we know we’re willing to pay a premium for great vacation experiences. Many of these initiatives will focus on investments to drive demand and bolster the top line, as evidenced by the recent expansion of Norwegian’s North American sales team and the creation of a corporate level Chief of International Operations with responsibility over the three brands. Lastly, we are investing in marketing initiatives to stimulate demand and promote upcoming capacity additions. This additional marketing which was already planned is already bearing fruit, as demonstrated by Norwegian Escape, which is booking better than two our Breakaway class predecessors. We are also investing and expanding Norwegian’s presence in the Canadian market, a rich market for the Prestige brands in which Norwegian has historically lagged. Turning to our results, while Wendy will go over them in detail, I’d be remised to not give them the spotlight they deserve. The benefit from Norwegian’s fleet expansion and organic growth are brought about strong results. Adjusted earnings per share for 2014 grew an impressive 61% over the prior year and come on the heels of a 45% increase in 2013. Excluding the consolidation of Prestige’s results, adjusted earnings per share for 2014 grew by 65%. Adjusted net yield for the year increased 4.8%, including Prestige and 3.3% on our Norwegian stand-alone basis. These results demonstrate the ongoing strength of the Norwegian brand. Now, there is a lot to cover this morning on this call, so I’ll hand it over to Drew now to discuss the Norwegian brand in more detail. Drew?

Thank you, Frank, and good morning, everyone. Since this is my first opportunity to speak with all of you, I thought I would start with a very brief summary of my background before joining Norwegian. I spent the first half of my career in the consumer products industry, primarily at General Mills, in various marketing and general management roles. Most recently, I spent the last 15 years with Darden Restaurants, which used to be part of General Mills and had the opportunity to serve as President and Chief Operating Officer and a member of the Board of Directors for the last nine years. Now while at Darden, I learned that the ability to earn a competitive superior total shareholder return over a sustained period in the restaurant business was driven by three critical dynamics. First, you need to create a compelling experience that your guests just can't get anywhere else. Second, you need to build a culture that embraces both executional excellence and innovation, so that you can earn superior guest loyalty by consistently exceeding your expectations in the near-term, while evolving your experience to stay relevant over the long-term. And third, you need to maintain a strong business model for both existing units and newly build units, to ensure the sales growth driven by improving guest loyalty ultimately produces the appropriate amount of cash flow and value creation for investors. Now while there are clearly differences between restaurants and crew ships, there are also meaningful similarities in important areas, and I was attracted to Norwegian because of their tremendous performance since 2008 and each dynamic that I just described, as well as by their significant growth potential going forward. And that strong performance certainly continued during 2014. One incremental quarter sailings from Norwegian Breakaway, which came into service in April of 2013, and close to full-year of operation from Norwegian Getaway, which came into service in February of 2014, help produce another year of record results. First, we carried a record number of guests during 2014, breaking the two million guest mark for the first time in Norwegian’s history. In addition, the business achieved 3.3% net revenue yield growth during 2014. And with the net revenue yield of $189.69, we have now surpassed our 2008 record net yield by 11.5%. And a continued strong focus on disciplined cost management and profitability, ensured that our returns remained strong as well, as evidenced by our record adjusted EBITDA margin of 28.5%. So in summary, our foundation remains strong. The strategy that’s been in place for several years is working, and the business is well positioned for continued profitable growth. Looking ahead in 2015, Norwegian will open the first of our Breakaway Plus Class ships, Norwegian Escape. She is built on the proven platform of our Breakaway class predecessors with additional staterooms in public areas, enhancing not only our ROI but also the experience for our guests. Norwegian Escape will have a largest haven complex on our fleet; two new dining experiences from James Beard Award-winner, Jose Garces; the first snow room spa treatment at sea and will also debut venues tied to our new partnerships with Margaritaville and the Michael Mondavi Family winery. Further arrival will establish Norwegian as the premier brands sailing from Miami with the newest and most innovative hardware deployed in the cruise capital. Now along with our Norwegian Escape will also debut our newest destination in the Caribbean, Harvest Caye. This unique island destination offers guests a relaxing beach experience, with the usual activities, while also taking full advantage of the surrounding natural attractions. Our guests will also have the opportunity to explore the architectural, cultural and natural riches of Southern Belize’s mainland. Harvest Caye will serve as an anchor for our Western Caribbean itineraries beginning in the fall. As Frank already mentioned, our plan for 2015 also includes incremental marketing investment in television during the Wave season that we did not have at this time last year, as well as more support for the launch of Escape than we had for the introduction of Getaway last year. And to-date bookings on Escape are in line with our expectations and well ahead of where they were for Getaway at a similar period last year. In addition, given the importance of the North American travel agent distribution channel to our business, we also regionally announced the substantial expansion to our North American sales team, almost doubling the number of business development managers in the field and increasing the overall sales group by more than 40%. Building on our partners search philosophy, this investment signifies our commitment to have been the most engaged, empowered and responsive sales team in the cruise industry, in order to promote the long-term success of our value travel partners. We believe this investment will more than pay for itself by providing the organization capability required to effectively sell our growing capacity, and to more fully penetrate underdeveloped markets where we already do business. I’ll now hand the call over to my colleague, Jason Montague, to give some commentary on Oceania and Regent. Jason?

Thanks, Drew, and good morning, everyone. As this is the first earnings call including the Prestige brand, I thought I would start with a quick background on myself, as well as both Oceania and Regent. I personally had the good fortune of working with Frank since we launched Oceania back in 2002. In addition to assisting with the launch of Oceania, I also headed up the integration efforts when Regent was acquired back in 2008, and for the last five years I served as Prestige’s Chief Financial Officer. My experience with both brands has allowed me to have a deep understanding of the entire operational for each, and I couldn’t be more excited to lead both brands moving forward. The Oceania Cruises’ brand is a market leader in the upper premium segment and was a pioneer of this segment. Oceania is focused on providing affluent and mature cruises with a gourmet culinary experience, elegant accommodations, personalized service and worldwide destinations, all at a compelling value. With five mid-sized ships, Oceania visits approximately 330 ports around the globe, is ranked as one of the world’s best cruise lines by Condé Nast Traveler, and Travel & Leisure. The fleet includes three 684-passenger R-class ships and two 1,250-passenger O-class ships, which were introduced in 2011 and 2012. In 2014, Oceania reached an important milestone in recording its one millionth booking, which is a testament for brand that was established a little over a decade ago. The Regent Seven Seas Cruises brand is a market leader in luxury segment of the industry. Regent, established in 1992, provides the cruise industry’s most inclusive vacation experience, which includes free air transportation, free unlimited shore excursions, dining in all specialty restaurants, all gratuities, premium wines experience. And for the concierge suites, free pre-cruise hotel night and free internet. The brand operates three award-winning, all-suite ships totaling 1,890 berths that include itineraries to approximately 300 ports worldwide. The Regent brand focuses on providing the highest level of personal service, inviting shore excursions, world-class accommodations and top-rated cuisine. Both brands target customers who are 55 years of age or older, have a net worth of over $1 million, is well educated and is a seasoned world traveler. This target audience has reached an age and wealth status with the convenience, comfort and luxury amenities of an upscale cruise product are extremely appealing. Oceania-Regent have also built loyal and repeat customer bases, whereby 44% and 51% respectively of the 2014 passengers were repeat guests. Also in 2014, approximately 59% of Prestige’s total guests responded to Prestige’s customer satisfaction survey, of which, 97% of respondents reported that their cruise experience met or exceeded their expectations and 93% reported they would likely return. Both brands have also implemented a differentiated price enhancing revenue management strategy that encourages our target market to book early to obtain the most attractive value offering, with bookings made up to 21 months in advance of sale date. When we launch new itineraries, we clearly articulate to potential customers that travel agents and travel agents that the prices are subject to increase as the cruise date approaches, as well as the specific dates on which those price increases may occur. We believe the travel agent community favors our pricing strategy as it allows them to provide value to their customers in a completely transparent manner, resulting in early bookings. This early booking cycle allows us to make more informed decisions about pricing, inventory management and marketing efforts. We also have new capacity additions at both brands coming in 2016. Oceania has purchased an additional R-class ship, that is a sister ship to Regatta, Insignia and Nautica. This 684-passenger ship will be named Sirena, and will undergo a $40 million dry dock in March of next year and will join the fleet in April 2016. These R-class ships are extremely popular with the loyal Oceania customer base, and the yields of these original Oceania vessels continue to increase despite Oceania adding additional 2,500 in new berth capacity in 2011 and 2012, with the introduction of the Marina and Rivera O-class ships. The inaugural season for Sirena will open for bookings next month and we couldn’t be more excited to have this fourth R-class ship join the next year. Regent’s newest ship, the Seven Seas Explorer is being built by Fincantieri in Italy, and is set to launch in July 2016. At 56,000 gross registered tons and carrying just 750 guests, the all-suite, all balcony ship will boast among the highest space ratio in the cruise industry. It is designed to be the most luxurious ship ever built, with every inch of the vessel evoking elegance and grace. With a one-of-a-kind opulent 3,875 square-foot suite, extravagantly designed lounges and showplaces and lavish gourmet restaurants, Regent is setting a new standard for luxury vacations with the launch of Explorer. Explorer has been met with unprecedented demand setting the single-day and single-week records for bookings when she opened sales exclusively to our Seven Seas society members, demonstrating the strong loyalty and pent up demand from our guests. In regards to current business trends, regional and geopolitical issues impacting booking levels include Ebola, which had a negative impact on our exotic sailings, as well as the Putin-Ukraine conflict, which did not start to impact prior year numbers for the Black Sea and Baltic sailings until later this quarter last year. Specific to the Regent brand, we are also seeing significant increased booking activity in 2016 with the excitement over Explorer, and I believe this has had a slight negative impact as it relates to 2015 bookings. Based on the voluminous feedback from the travel agent community and from our past guests, I also believe that booking velocity was negatively impacted during fourth quarter by the announcement in closing under the Prestige transaction with Norwegian. Continued feedback we received indicated that travel agents and guests were concerned that the overall Oceania and Regent experience maybe negatively impacted by the acquisition and that they were going to take a wait and see approach before booking either brand. We have made a concerted effort at both brands to reassure our partners and guests that our focus is to maintain and improve on the existing outstanding vacation experiences that each brand delivers to every guest. The combination of this communication effort, as well as the announcement of Frank assuming the role of President and CEO of Norwegian Cruise Line Holdings, has had a positive impact. And since the Frank announcement, we have seen positive year-over-year booking velocity at both brands. I’ll now hand the call back over to Wendy Beck. Wendy?

Great. Thank you, Jason. I’ll begin the commentary on full-year results, which unless otherwise noted, compares full-year 2014 and 2013 on an as-reported basis. These results include a partial period of Prestige, the acquisition of which closed on November 19, 2014. To better demonstrate results excluding this sub-period, we have also included certain metrics that exclude the results of Prestige and the impact in the acquisition which we will refer to Norwegian’s stand-alone. For the full-year 2014, the company generated adjusted earnings per share of $2.27 on an as-reported basis, which is 61% improvement from prior year. And as Frank mentioned earlier, it comes off of a 45% increase in 2013. On a stand-alone basis, Norwegian generated adjusted EPS of $2.32, a 64.5% increase from last year and at the upper end of our guidance. Adjusted net yield on as-reported basis increased 4.8%. Net yield on the Norwegian stand-alone basis increased 3.3% or 3.2% on a constant currency basis, on both improved ticket and onboard net yields, with strong pricing in Europe and a strong Alaska which offset the promotional year that we experienced in the Caribbean. Adjusted net cruise costs excluding fuel per capacity day increased 3.5% on an as-reported basis and 1% on the Norwegian stand-alone basis, driven by investments in our Norwegian next fleet enhancement programs and increased marketing expenses to stimulate demand in the fourth quarter and into Wave season. We present net cruise cost metrics excluding fuel expense, as we feel it better reflects the underlying earnings power of our companies. While we utilized hedges to mitigate fluctuations with fuel prices and provide predictability of our future fuel expenses, the recent sharp reduction in fuel prices has proved steeper than in the past, resulting in a significant impact from our hedge portfolio. In 2014, our fuel price per metric ton excluding the impact of hedges was $605 compared to $686 in 2013. We experienced a negative impact in 2014 of $10.3 million or $0.05 per share on our hedge portfolio, due to recent reductions in fuel prices, compared to a benefit of $4.7 million or $0.02 per share in 2013. Net of hedges, fuel price per metric ton decreased to $625, compared to $675 in 2013. In order to facilitate the calculation of future impact of the fuel prices, we have included annual hedge percentages along with the average price per metric ton as the hedge portfolio in the Guidance Section of our earnings release. Interest expense net was $151.8 million versus $282.6 million in 2013. 2014, it was $15.4 million related to financing transactions in connection with the acquisition of Prestige, while 2013 includes a $160.6 million in expenses associated with debt repayments. The increase in interest expense was a result of higher overall borrowings attributable to the addition of Norwegian Getaways to our fleet and the acquisition of Prestige. As planned, pro forma leverage for the year ticked upward to approximately 5x as a result of the result of the Prestige acquisition, and we continued to anticipate we will be below 4x within the next 18 months. The impact of the Prestige acquisition are more evident in results for the fourth quarter, for approximately half of the period includes Prestige’s results. On an as-reported basis, adjusted earnings per share was $0.36 or $0.40 on a Norwegian stand-alone basis. Adjusted net yields increased to 11.1% in the periods, driven by a 3.9% increase in Norwegian stand-alone net yields and the addition of the premium-priced Oceania and Regent fleets. Adjusted net cruise costs excluding fuels per capacity day increased 9.9% on an as-reported basis, while it was essentially flat on a Norwegian stand-alone basis. As with full-year results the impact on our hedge portfolio as a result of lower fuel prices was primarily felt in the fourth quarter. Fuel price per metric ton net of hedges was $599 in 2014, down from $649 in 2013. Excluding hedges, prices were $529 and $656 in each of these periods. The impact on our hedge portfolio for the fourth quarter of 2014 was $10.5 million or about $0.05 per share, while 2013 experienced a negligible benefit. Interest expense net increased to $56.4 million from $24.6 million, primarily due to the aforementioned charges related to financing transactions and incremental interest expense from additional debt incurred in relation to the acquisition of Prestige. Now looking to 2015, we have provided guidance along with associated sensitivities for the first quarter and the full-year 2015 in our earnings release. In addition to providing guidance on an as-reported basis for net yield and net cruise costs, we are also providing guidance on these metrics against 2014 combined company results as the basis with which to compare 2015 expectations. These combined company results assume the consolidated results of Norwegian and Prestige to the first quarter and full-year 2014 as of the beginning of that year. As discussed in our prior comments, we are expecting tougher comps in the Norwegian brands in the first quarter of 2015, due to a strong first quarter of 2014, which saw net yields rise 3.8% as resulted in extended charter of Norwegian Jade for the Sochi Olympics, and a charter of Norwegian Getaway during the 2014 Super Bowl in New York, as well as an increase in the number of six-manned charters in 2014 which level off in 2015. In addition in January, the Norwegian brand will lap the first year of Norwegian Getaway to the year around trading itinerary was impacted by the promotional environment in Norwegian which we see continuing into Q1. Later in the year, Norwegian Escape reaches Miami to a Caribbean environment where capacity growth will have stabilized. The impact of Norwegian Getaway’s operation during promotional Q1 and the benefit of Norwegian Escape entry in less promotional Q4, in essence offset each other, resulting in a year of organic growth for the Norwegian brands in the Caribbean sailings [ph]. Turning to the Oceania-Regent brand, as Jason previously mentioned, by virtue of the more intricate product offering and early base-loading strategy, those brands have the benefit of expanded booking windows, which provides greater visibility into our future revenues. With this backdrop, we present the following guidance for first quarter 2015. On an as-reported basis, as a result of the combination with the premium priced Prestige brands, we expect adjusted net yields to be in the range of 17% to 18%. On a combined company basis, we expect to be down 1% to 2%, and flat to down 1% on a constant currency basis as a result of the promotional environment for Caribbean itinerary, which we will see extending into the first quarter. Adjusted net cruise costs excluding fuel per capacity day, on an as-reported basis, is expected to increase between 27% and 28% due to the consolidation with Prestige. However, on a combined company basis, we expect an increase of 4.5% to 5.5% or 5% to 6% on a constant currency basis due to incremental marketing expense that includes the return to television advertising for the Norwegian brands. And lastly, adjusted earnings per share in the quarter is expected to be in a range of $0.20 to $0.24. While the first quarter is still experiencing the challenges of a promotional Caribbean environment, there is optimism for the balance of the year as demonstrated by following full-year 2015 expectations. Adjusted net yield is expected to increase approximately 17.5% on an as-reported basis on a combined company basis. We expect yield improvement of approximately 1.5% or approximately 3% on a constant currency basis. The spread between as-reported and constant currency is wider than normal, as a result of recent strengthening of the U.S. dollar. Adjusted net cruise cost, excluding fuel, is expected to increase approximately 23.5% on an as-reported basis, while on a combined company basis, we expect an increase of approximately 2.75% to 3.25% on a constant currency basis. Due to increased investment in marketing, including return to television for the Norwegian brand and incremental marketing, leading up to the introductions of Norwegian Escape, Seven Seas Explorer and Oceania Sirena and incremental dry dock expense compared to prior year. As I previously stated, we felt it would be useful to investors to isolate the impact of fluctuation in few places as it relates to our hedged portfolio in order to provide a better picture of the underlying performance of the business. We have included projected fuel prices per metric ton for the first quarter and full-year 2015, both excluding and including the impact of our hedge portfolio. The negative impact on results due to the average costs of our hedges versus current market prices is approximately $35 million or $0.15 per share in the first quarter, and $120 million or $0.52 per share in the full-year 2015. Regarding depreciation and amortization, we have guided a full-year depreciation expense of between $335 million and $345 million, which is on an adjusted basis, but excludes the amortization of intangibles related to the acquisition. And lastly in a year that is substantially organic growth-driven, adjusted EPS is expected to be in the range of $2.70 to $2.90, which represents an approximately 23% increase from 2014 combined company adjusted EPS. Turning to deployment. The addition of Oceania-Regent has diversified our deployments to include destinations outside of those covered by the Norwegian brands. To demonstrate the benefits of this diversification, the following compares 2015 deployment on a combined basis to 2014 on a Norwegian stand-alone basis. Caribbean capacity in 2015 is down to 40.4% compared to 47.9% in 2014. This includes the partial periods of Norwegian Getaway and Norwegian Escape, both sailing year around Caribbean. And as a point of reference, Norwegian Caribbean deployment for 2015 is 45.5%. Europe itineraries are up 22.8% of our deployment compared to 20.7% in 2014. Bermuda and Alaska itineraries remain about the same at approximately 7.5% each, while the share of Hawaii deployment dipped to 5.3% from 6.4% in 2014. Up from negligible amounts in 2014, Asia, Africa, Pacific now accounts for 3.3% of our itineraries while South America will account for 1.6%. For the first quarter of 2015, deployment is as follows; 67.9% of capacity is in the Caribbean in 2015 compared to 72.1% in 2014, with the Norwegian brand applying 74.1% of the capacity in Norwegian in 2015. Europe deployment was essentially flat at 11%, while Asia, Africa, Pacific and South America, those increased from negligible amounts in 2014 to 7.4% and 1.9% respectively in 2015. This diversified in global deployment embodies the future of the new Norwegian organization more diverse and more excited and higher yielding theaters of operations and with the potential to do even more. This year marks my 50 year at Norwegian, and I can say that right now as the most excited and eager as I have ever been about the opportunities that lie ahead for this organization. With that, I’ll turn over the call to Frank for some closing comments. Frank?

Thanks, Wendy. And while my six week tenure in Norwegian is just a little bit shorter than yours, I too sharing the excitement of opportunities that lay before us. The timing of the Prestige acquisition was such that it allowed us to begin 2015 with strong momentum, generated by the potential and opportunities of this combination. Our unified and passionate team is hard at worked to ensure that we build upon Norwegian’s strong foundation to grow our three brands and improve upon their already industry-leading financial performance. I know that some of you are expecting some sort of revolutionary announcement regarding Norwegian’s future. But it is simply too early in the game to make any definitive declarations regarding expansion into new markets, orders for new ships or any other major strategic announcements. These things may happen in time, and if they do happen, it will be after intense study and careful consideration. I have a proven track record in building leading brands with award-winning product offerings supported by loyal customers, while driving significant revenue and profit growth. Couple this with a Norwegian brand that has delivered five years of consistent earnings growth and best-in-class metrics, and I believe that by pulling our talent and exploding the opportunities that lie ahead will result in a most dynamic, the most innovative, and quite simply, the best cruise operating company in the industry. Thank you all for your continued support. We’d like to go ahead and open up the call for questions.

Thank you, Mr. Del Rio. [Operator Instructions] Our first question comes from Harry Curtis with Nomura. Your line is open.

Hi, good morning, everyone. Frank, I had a quick question, and it’s really just looking for a bit more detail about what you’re really excited about given - putting the two companies together. Can you talk a little bit more about the combined companies or the advantages of the combined companies, scale, the age of its fleet, topics like that, that give you some enthusiasm for the next three to five years?

Harry, it gives me a lot of enthusiasm. And I think you hit a couple of major points, the scale opportunity is tremendous. Coming from 6,500 beds to over 40,000 beds and 18,000 more on the way are certainly exciting and it just gives us so much more room to be able to apply the known basis business principles that led to outsize returns and great growth in both revenue and profits at the Prestige brands and to bring those concepts over to the Norwegian brand. Like I said earlier, I’ve been here six weeks, but I can tell you that this management team is excited. They’re engaged. They understand what we’re trying to do. They agree what the philosophies that we’re trying to incorporate across the organization, and it’s going to yield wonderful results, if you’re going to see in time both in the revenue section of the P&L and the cost section of the P&L. In terms of the fleet, Norwegian has got a heck of a fleet with more fantastic ships coming. Escape is just a groundbreaker for us, a game changer, if you will. And I think that our customers are agreeing with us. As Drew mentioned, the sales of Escape are really off the charge. We’re really happy with both the velocity, volume of bookings and their pricing. The trends are incredibly strong, and we’ll be looking to raise prices on Escape, because quite frankly, the load factors are just remarkable. Getaway, Breakaway, Epic, all fantastic ships in their own right, still generating double-digit yields of premiums over the rest of the fleet, excluding part of America, which is a one-time or is a unique product in and of itself. The Prestige fleet is a heck of a fleet. The Marina and Rivera were greatly - they were very well accepted I should say by the Oceania people and now being able to bring, to the fleet a four R-class ship. Those ships are timeless. The level of support evidenced by the strong per diems that those ship generates is just mind boggling. And so been able to purchase the vessel and refurbish for an all-in cost of some $180,000 per bed against the backdrop of the per diems that she generates is an incredible ROI story. And then there is Explorer, the Regent newbuild. Regent hasn’t had a newbuild since 2003. So we may accelerate the next Regent ship a little bit faster than every 13 years. And it was excited. And as Jason mentioned, the overwhelming outpoured of support by the past guests is off the charts. It actually will be the most luxurious crew ship ever built, and I think that kind of products, commitment by the Regent brand is really resonating with these ultra-high-net worth individuals who are the ones who take these cruises.

Frank, just a quick follow-up on that. In the third quarter conference call, trying to boil this down to Norwegian’s combined earning power with Prestige. Kevin mentioned the potential for the organization to double earnings through 2017. You’ve only been there a number of weeks, but do you think that he was heading down the right path?

I do. If you look back to the actual performance of the company since its IPO in 2013, the company generated $1.41 in earnings per share in ’13. In 2015, if you take the midpoint of the guidance that Wendy laid out, will be at $2.80. So we will have doubled earnings per share in two years. And we believe that $5 is certainly or slightly above $5 is the target for ’17, which would be another 79% increase over where we are for 2015. And of course, if you have those kind of earnings per share improvements over time, by definition, your ROIC is also going to improve. And as you may recall in 2013, when the IPO took place, the ROIC for Norwegian was 7%. We believe we will break into double-digits next year. And in ’14 - in 2018, excuse me, we will double our ROIC from the 2013 starting point of 7%. So, some 14% in 2018. So it’s a strong financial performance.

Frank, thank you.

Thank you. [Operator Instructions] Our next question comes from Robin Farley with UBS. Your line is now open.

Great. Thanks. I have a question a little bit more near-term focus. I was interested in the line in the release that talked about the acceleration in bookings in wave season in the last three weeks, and I wonder if you could give a little color around that? Do you think that volume was kind of like independent of specific marketing spend or was it driven by specific promotions or it’s just broadly across the board you’re seeing that hasn’t worked yet.

We are seeing it across all brands, although the Norwegian brand probably saw the most pronounced spike during the last three weeks. And it’s continued through this week. So we have a chat on Friday, I would tell you that it’s going to be four weeks and not just three. So the trend continues. You know what? You never know why one business is good or one business is bad. It’s never one single factor. It’s always the combination of factors, but we do have a compelling promotion in the marketplace, especially for the Norwegian brand that seen the highest spike. As you know, we come from a mindset at the Prestige brands where we market to fill as opposed to discount to fill. And while I’m not suggesting that that strategy will work exactly the same way that Norwegian as it does it for Prestige, I think it’s a work pursuing, and see how much we can convert this idea that the only leverage that our company - the only leverage that the company has to simulate demand is lower pricing. And so we introduced a promotion at Norwegian that didn’t focused on lower prices but focused instead on more value. And that’s something that we have over time perfected at the Prestige brands. And as you know, the Prestige brands have the highest per diems in their classes of any one in the company - in the industry. So look, we’re fixated on yield increases. We’re fixated on earnings per share improvements. I know the old accountant that you have to have a balance attack, so it’s not going to be judged on the heels of yield improvements that we’re going to get our earnings per share up, but also on cost control and cost consciousness. To give you an example on that, one of my direct reports in our new orchard will be to head of purchasing. I want the entire organization to understand that effective purchasing keeping costs down is important, and that’s why the head of purchasing reports directly to the CEO. But you lead with revenue, you can't save your way to success over the long-term, but you can't ignore it, you can't be sloppy with costs. You got be very crisp. When you operate a company that has 17, 18 million bed days a year, every dollar you find is another 17 or 18 million or $0.08 or $0.09 earnings per share to the bottom line. And an organization of this size, I will tell you that there are plenty of these $1 nuggets of opportunities to reduce costs. We’ve already found some after five weeks and there are just as many of those opportunities to perhaps in the revenue side, of which, we’ve also find some very exciting opportunities. So it’s going to be a balanced attack. We’re going to strike at both, finding costs - and that’s just six months synergy that everyone will focus on. This will be an ongoing operation. If you look at numbers that we were able to generate at Prestige is only 6,500 beds and able to control our costs year-after-year, even with the introduction of new ships. You’ll know that our management team has that mindset of keeping costs down. It’s not just about revenue growth.

That’s great. And then just the other thing I would ask is looking at the difference between growth and net yield. That looks like it’s been a driver of net yield for lower commissions line. Is that something that was sort of anniversaried in Q2 if that also seem to help in Q2 and Q3 last year? Is that something you’ll anniversary in Q2 this year or do you think that can actually continue to drive incremental net yields?

Hi Robin, it’s Wendy. I’ll take that. So as we had mentioned on those, the Q2 and the Q3 call, we did have some fundamental changes in our cost of sales structure. We worked very hard to really leverage our overall scale by expanding casino partnerships, renegotiating agreements, particularly port agreements, credit card processing fees and then in addition lowering our air subsidies, we’re - this is going to carry on. This is not a one-time benefit that we’ve reset the bar on an ongoing basis. So with that said, when you bring in the Prestige brands, their costs fell significantly higher being in all-inclusive type business or a lot of it’s all inclusive.

Yes, to give you an example that the businesses are little bit different. Do you recall, Robin at Prestige just about every booking includes air. We marketed it as free air, but it’s felt in the price of the product, whereas at Norwegian, given all the deployments of the vessels out of home ports, we now have ships in New York, in Miami, in Tampa, in New Orleans, Houston. People drive to the ships a lot more. And so at Norwegian, the air participation of our guests buying air to take a cruise is below 2%. And so you basically have two different worlds, wherein at Oceania and Regent it’s almost 100% and in Norwegian it’s negligible. My guess is that as we tinker with the Norwegian itineraries and reposition vessels away from the Western Caribbean primarily which is the lowest yielding itineraries in the marketplace and the glut that has been - the glut that we’ve seen over the years is to perhaps higher yielding itineraries. I think the air participation at Norwegian will tend to increase because customers simply cannot drive to the places that we may put the ships.

And I just wanted to tag in there. So we had kind of reset the bar that are commissioned transportation and other line was running ongoing at about 15% cliff. But that again was not from lowering travel agent commissions, it was the other thing that I mentioned. PCH on the other hand is more around the 30% mark. So on a consolidated basis, you should anticipate somewhere in the upper 18% range.

Okay, thank you.

Our next question comes from Steven Kent with Goldman Sachs. Your line is open.

Hi, a couple of questions. Frank and Wendy, you mentioned a couple of times cost and revenue synergies, but how is it going to work if since Prestige used Apollo Chandler to do quite a bit of their operations. If you find something because you want to implement from Norwegian onto the Prestige brands, how will the shareholders see the benefits of that? And then you now mentioned a couple of times the potential for maybe some more shifts. Any thoughts Frank on Regent and Oceania brands supply growth, Norwegian is much, much further out as you started to hit some quotas to where you would go with the Regent and Oceania brands out into the ’17, ’18, ’19?.

Yes, regarding the new vessel additions, we’re - the Prestige brands historically have grown organically. As I mentioned earlier, the last new ship that Regent introduced was in 2003 when the Voyager came on line. So 13 years maybe a bit long, even for you Steve. But with the new vessel coming in 2016, we have no plans in the horizon to add another Regent vessel. My sense is that on an ongoing basis, assuming a stable marketplace with no outside major events influencing the overall markets, that a luxury line like Regent could take delivery of a vessel every five years or so. The Oceania brand perhaps can take a new vessel every 36 to 42 months, because these brands have one thing that many other brands don’t have and that is pricing power. Like most luxury goods, whether it’s in cruising or another consumer staples or having limited supply gives you pricing power. And so over the years, the CAGR of net yield growth per diems at, both the Oceania and the Regent brands, have outperformed the contemporary brands for the company. And so we think that kind of dynamic will continue and will add capacity when it makes sense, but it’s not the kind of business model that depends on new capacity to grow the bottom line. The Prestige brands have shown that you can do it without adding new capacity. On the other hand, Norwegian has got quite a bit of capacity already coming on line, four vessels to 2019. Give me a few more weeks and I’ll maybe give you an update, but after the first six weeks that I’m not pressed to announce the new order for delivery in 2020 or ‘21. I will tell you that I do want to start looking at ways to organically grow the Norwegian brand similar to what we did at Prestige if it can be worked out. There are differences between the products, differences between the market segments. But to give you an example, a new vessel generated $100 million of net income. Given the size at Norwegian has now reached, Norwegian, would have to generate net yields above and beyond the norm, but let's assume for a minute that the norm is 3%. So Norwegian would have to generate yields of - yield growth of 6%, 3% more, to generate the same net income that it would have to generate by ordering a new 4,000-plus passenger vessel. So the question will be, can you grow your top line and your bottom line in a manner other than ordering another vessel and levering up the balance sheet and waiting for years for the ship to come along? We’ve proven that we can do it at the Prestige brands, and we will try. We will investigate. We’re going to improve the product. We’re going to improve the delivery of the service onboard to see whether we can generate an extra 3%. When you look at in absolute terms a product like Norwegian, the average per diems are in the neighborhood of $130 a day. So an extra 3%, you’re talking $4. So you ask yourself, can you have a compelling enough product that people are willing to come to you and pay an extra $4 a day, an extra $28 a week, an extra $56 for Mr. and Ms. Who are coming onboard. And I look at myself and I say, I think we can. We’re not asking for the world. But you got to deliver a top notch world-class product and that’s what we aim to do. In terms of what you have said earlier about some of the product and services that are outsourced with third-party. They do a great job. The reason why Oceania and Regent generate the per diems they generate is because the product is worth it. And for the most part, this third-party is the one who delivers the onboard product experience. They’ve been partners for a long time and they’ve got a contract that lasts to 2020 that will be with us till then. But they are great partners and already were begun trying to figure out ways where both parties can leverage these buying power of each, the logistical problems that each one has, and Apollo is very good at logistics with the Prestige fleet scattered throughout the world. They have figured out how to get tomatoes and carrots and chicken and everything else to the ships in a very efficient manner and we think we can piggyback off of that what they do at Norwegian brands. So we think there are ways to negotiate with Apollo. Still keep them onboard on the Prestige brands, but be able to realize some savings on the Norwegian side.

Okay. Thank you.

Our next question comes from Jamie Katz with Morningstar. Your line is open.

Good morning. Thanks for taking my question. I’m curious about sourcing from other markets. I know the U.S. is still a very important, but how do you see increasing penetration overseas, especially in light of any sort of FX changes in the recent quarter?

Yes, FX, issues aside and those are - they come and go in cycles. I will tell you that one of the biggest opportunities that I see at the Norwegian brand is to expand their footprint internationally, especially with the four new ships coming. To give you an idea, if the Norwegian brand were to able to source the same percentage of guests internationally outside of North America that the Prestige brands generate, that would produce 210,000 new passengers a year, just about the number you need to fill one of the new Breakaway Plus class ships. Canada alone - if the Norwegian brand can penetrate the Canadian market to the same degree that the Prestige brand has penetrated the Canadian market is 100,000 new passengers a year. So we think there is a lot of opportunity relatively low-hanging fruit, to increase the business at Norwegian internationally. The fellow that I have tapped to head are international operation is one of the co-founders of Oceania. He has been with me since day one. A proven leader, a fellow named Bob Binder. He has been the one responsible for leading the rapid growth of the Prestige brands internationally. He has been growing the business 25%, 30% a year for the last four, five years. And I think he can do the same at Norwegian.

And then I think on the call you guys had mentioned identify, quantify and implement plans to reduce expenses above and beyond the $25 million in synergies. Is there any opportunity that has presented itself that maybe would be meaningful enough to talk about right now, or are you still in the process of really working through that?

Yes. We don’t want to get ahead of ourselves. We don’t want to promise what we can't deliver. We don’t even want to whisper a different number other than the ones we’ve already told you about. But after five weeks, have I exhausted every single opportunity that maybe out there? No, I haven't. Is there more? Probably. I don’t want to quantify what probably means, but it’s a big company. We spent over $3 billion a year, and so there is room to find more synergies. Likewise, I’m excited about revenue synergies. Lots of opportunities for the brands to learn from one another on revenue, on sourcing customers, on raising prices. And so you’ve already seen a bit of it in the release today. We’ve identified $15 million this year of solid revenue opportunities that combined up for the full-year of 2015 would combine with the cost is the run rate of $50 million. So we’re going to keep digging. The Chief Integration Officer is focused solely on that. He and his team are incentivized to find every nugget of gold that’s out there. And if I know, Harry Sommer, who is heading that up, he is going to do a hell of a job.

Excellent. Thank you.

Our next question comes from Steve Wieczynski with Stifel. Your line is open.

Hi guys, this is actually Brad in for Steve. So Frank, in our conversations with members of the trade and the Asian community, what we often hear high-praise for the way in which Prestige handle those relationships previously. Just curious beyond the expansion of the sales centers that you highlighted on the call, is there any opportunities you see on a combined company basis to improve relations with the travel agent community and perhaps educate them more on the cross-selling opportunities that exist between the two brands?

Yes, in terms of relations, I don’t think the relations need any improvement or patching up. I think Andy Stuart and his team are well respected, like loved if you will by the agency community. They know him well. Norwegian has always been a very strong supporter of the distribution system. So I think we’re in good step there with agents across all three brands. In terms of opportunities, one of the first things that we’ve done is to take a look to see what travel agents are booking one brands versus the others. And if we see gaps, we’re reaching out to say, look, you’re a big supporter of Norwegian, we love you for that, but you’re not selling much Oceania-Regent, how can we talk to you about that and vice-versa. And so that is a big opportunity. And the biggest opportunity is outside of North America, especially in Canada and in the U.K. and in Australia and in Germany, where we have relationships with the distribution system and those places that one brand may not be taking advantage over another. In terms of cross-selling opportunities, the Prestige brands rely heavily on direct marketing. When you’re selling products whose per diems are sometimes over $1,000, the shotgun approach doesn’t work very well. It had to be very, very targeted. So having direct mail, having the names, addresses, email addresses of known cruises is important. But to give you an example, at Oceania-Regent, each of those brands has a past guest file of some 150,000 households. And out of that, 150,000 households, roughly half the business adjacent had a moment ago comes from the past guests. So if we could find another couple of hundred thousand households of known cruisers that Oceania and Regent can market to, that would more than double their source of who we go market to. And guess what? We found 210,000 households in the Norwegian past guest database that have the psychographic demographic spending habits similar to the Oceania customers and Norwegian customers. So we’re going to be marketing heavily to them. And so we love the opportunity of cross-selling high-end Norwegian customers to Oceania and Regent. But the same token, we’ve got part of America out in Hawaii whose per diems are very similar to approaching the numbers that premium lines are getting and it’s sometimes exceeding the premium line. And we think that, that product in many cases behaves more like an Oceania product than it might the rest of Norwegian fleet. And so we’re going to be introducing some of the techniques in the Norwegian side, how we sell the Oceania brand. This idea that you book early because if not, prices are going to go up and you create a sense of scarcity of which they’ve already naturally is because part of American Hawaii is - it has no competition as you know. So we just think that the board is littered with opportunities to really perhaps more so than in a typical M&A situations to adopt best practices. So if you have a business that’s very similar in many ways but very different in some others.

Perfect. Thanks guys. I appreciate the color.

Our next question comes from Tim Conder with Wells Fargo Securities. Your line is open.

Thank you. Just wanted to circle back, if you could, Frank or Wendy. I appreciate the previous color on pricing on that, but if you could give a little bit more occupancy and pricing color by region across the quarters, if possible? And then secondly, Wendy on the fuel side, just maybe to understand a little bit of how the weighted average price of $525 a metric ton given that 60% or $520 [ph] and yet the pump you’re using is $350. So a little of that and if there - and how much of a typical lag if that do you see with your fuel? Is it two, three weeks, four weeks from that perspective? Thank you.

So, first off, we don’t actually - I would say that this is really two different story this year. I mean, Q1 is driven largely by the pressures that we have in the Caribbean versus Q2, Q3 and Q4, all shaping up very nicely by all the brands. There is not an area that we’re concerned about. Europe is shaping up, Alaska is shaping up. So we don’t give a detailed color by the different regions, but it’s looking good, and that’s reflected in our guidance of the approximately 3%. Regarding the fuel, Tim. So we’re at $350 for the full-year. Our fuel price per metric ton is approximately $350. And the net of hedges, it is $525. So we’re looking at this $175 per metric ton is also there. And that’s why we really wanted to carve this out. So you guys have clarity and color on the fact that, yes, we entered into the hedges and I probably should explain it, but as Norwegian stand-alone, we started out with a philosophy for hedging a minimum of 50%. But stand-alone, we tended to lean more towards hedging more and being opportunistic to have the certainty and the predictability within our earnings. Now with the addition of the Prestige brands, we will go back to a more classic strategy of probably 50% hedged. We are looking at hedges in the outer years right now. But we have a little bit more room instead of having to lock in that predictability on the financial side. So we also think it’s very important to look at the underlying business and that’s why we wanted to really get clarity here to say, okay, ex the hedges. The true operations is what we wanted to make sure you guys understood.

Okay, great. Thank you.

Our next question comes from Assia Georgieva with Infinity Resources. Your line is now open.

Good morning. I had kind of a follow-up I guess to Tim’s question. And Wendy maybe you can help me with this. I understand that for Q1, there are couple of effects; first of all the Caribbean and secondly maybe some hesitancy on the part of travel agents for the PCH brands. Do you think that this is a one-time item, or should we expect greater yield seasonality, weaker Q4 and Q1 in terms of both yield and DPS [ph], or should the Prestige brands actually help smooth out the weaker winter months that are typically the Caribbean for NCL?

Great. Hi Assia. So as we had actually talked about on our previous earnings calls, we’re rolling over a number of items in Q1. And we knew that it was going to be a tough lap in Q1. So on top of it being a promotional environment in the Caribbean, of course we hope that it would soften or strengthen I should say, it really hasn’t - I mean, Q1 has I think been a tough quarter for all of our competitors and ourselves. But we are rolling over the Sochi charter from last year and that really was a huge premium for the Jade for roughly a month versus the winter mad, which is not strong pricing. The other item is the Bud Light charter. And then last year we had the maximum amount of charters on our for six-man group. We almost had the entire quarter actually chartered out on the parole. And so we’re rolling over that this year. It’s consistent of ’15 to ’14. So long story short, I think this is a one-time anomaly on Q1. I don’t think that Q1 in general is going to be changes. It’s the things we’re rolling over. With Q4, we’re starting to see the - we have a reduction in capacity at the same time that we bring in the Escape, the Epic is going to stay year around in Europe. So again we’re feeling very optimistic and good about Q2, Q3 and Q4 including the Caribbean.

And relative to - I’m sorry, Frank.

No, go head and finish.

Okay. Relative to basically a year ago given that we saw a little bit of slowdown in bookings and some acceleration more recently, do you feel more confident in the Q2 and Q3 outlook?

Well, I was doing pretty confident last year about this time before we had the situation in the Ukraine that had a dampening effect on European business. That situation has not corrected itself, but there is hope that the ceasefire will stick. And so we’re seeing business pick up in the Baltic region and in the Northern Europe region a little bit. But yes, I am optimistic. I think businesses are booking well for Q2, Q3, Q4. And just as importantly in to ’16. It’s never too early to talk about the next year, and I will tell you that all three brands are better booked today for ’16 than they’ve ever been at this time of the year for the following year. And this in spite of the fact that we’ve got more capacity at all three bands with new ship introduction. So I’ve always believed that the cruise industry is a very strong leading economic indicator because of the long lead times, and the Prestige brands in particular, have much longer booking windows than what you see as the more contemporary brands like Norwegian. And so at this point, if I were an economist and a betting man, I would tell you that the outlook for 2016 and beyond is looking good right now. We have time for one more - thank you. We have time for one more question please.

Thank you. Our last question comes from Joel Simkins with Credit Suisse. Your line is now open.

Good morning, everyone. Glad I was able to sneak on this. In terms of, I guess for Frank, you mentioned you’re not really getting committed to anything on sort of capacity on this call, but could you just give us a sense of sort of how the cruise - the shipyards are communicating with you guys right now? Do you feel like there is an incremental capacity if you wanted to make more orders and are they - they seem to be a bit more hungry for orders, given what’s going on in the energy sector?

There is always room for gello [ph] and there is always room for one more ship to be built. But I don’t see the shipyards any more aggressive than they usually are. In fact, I will tell you that they are probably a little less aggressive in terms of pricing than they were in 2009, 2010 and the heels of the great recession. So it’s pretty much a normal environment for the newbuilds. There was some issues with what’s going to happen with the Finnish shipyard. It looks like it’s been acquired by Meyer Werft. So that’s good. We have a great relationship with Meyer Werft in Germany, who has been building the Norwegian ships for quite some time. We have a great relationship with Fincantieri who has built the two Oceania ships and is currently building Norwegian ship. So we have flexibility, and we will be able to drive a hard bargain when the time comes, because we do have these relationships with these two leading yards in the world. And of course, interest rates remain low. And for the time being at least the euro is low. So it is a good time to order ships if one was to be disposed to do that.

Thank you.

And we’re not right now.

Okay. Thank you.

Okay. Thanks everyone for your time and for your support. And as always, we’ll be available to answer your questions after this call. I will see many of you hopefully next Wednesday in New York for our Investor Conference. Until then, have a great day. Thank you.

Thank you everyone. This concludes today’s conference call. You may now disconnect.