Jason Liberty - SVP and CFO Richard Fain - Chairman and CEO Adam Goldstein - President and COO Michael Bayley - President and CEO of Celebrity Cruises Laura Hodges - VP of IR :

Tim Conder - Wells Fargo Securities Steve Wieczynski - Stifel Felicia Hendrix - Barclays Capital Robin Farley - UBS James Hardiman - Longbow Research Steven Kent - Goldman Sachs Greg Badishkanian - Citigroup

Good morning and welcome to the Royal Caribbean Cruises Limited 2014 Second Quarter Earnings Conference Call. All lines have been placed on mute to prevent any background noise. After the speakers’ remarks, there will be a question-and-answer session. (Operator Instructions). I will now hand today’s call over to Jason Liberty. Please go ahead.

Good morning and thank you for joining us today for our second quarter earnings call. Joining me here in Miami are Richard Fain, our Chairman and Chief Executive Officer; Adam Goldstein, our President and Chief Operating Officer; Michael Bayley, President and CEO of Celebrity Cruises; and Laura Hodges, our Vice President of Investor Relations. During this call, we will be referring to a few slides, which have been posted on our Investor Web site www.rclinvestor.com. Before we get started, I would like to refer you to our notice about forward-looking statements, which is on our first slide. During this call, we will be making comments that are forward looking. These statements do not guarantee future performance and do involve risks and uncertainties. Examples are described in our SEC filings and other disclosures. Additionally, we will be discussing certain non-GAAP financial measures, which are adjusted as defined. And a reconciliation of these items can be found on our Web site. We are changing the format up a bit today instead of each of us providing commentary on the selected details within our operations, Richard is going to provide a slightly longer strategic overview explaining the Double-Double program and how we plan to get there, I will then follow-up with a recap of our second quarter results, provide an update on the business environment, and give our outlook for the third quarter and full year. We will then open up the call for your questions. Richard?

Thanks, Jason and good morning everybody. As always, we appreciate the opportunity to provide more color on the earnings release and to talk about our progress. As Jason said, we are changing our usual format today to focus on our strategic opportunities and I would like to first start by providing a full description of what we are trying to accomplish with our Double-Double program and why we believe it’s a right thing to do. As you know we have been dissatisfied with an unacceptably low level of ROIC and we have been working hard to bring our returns to more realistic levels. Fortunately, we believe we are now on the verge of some dramatic breakthroughs in this regard and this is time to push us over the top. To achieve a dramatic change in performance, it’s important where possible to articulate clear and measurable goals. The Double-Double program is intended to do precisely that. Obviously these are aggressive goals especially since our starting point will be record earnings this year. And obviously there are more risks and uncertainties inherent in any such program. Nevertheless, we have been putting in place aggressive measures that we expect will enable us to achieve both of these two important goals. There is always a danger in publicly announcing such an ambitious program but we feel that publicly disclosing these goals actually helps us drive the organizational initiatives that are still important to accomplishing them. It also provides what we hope is useful information to you our shareholders. As you know we have for sometime pointed to the underlying strength of our business model. It is enormously gratifying now to see that strength beginning to prove itself. The difficulties over the last few years really have obscured the very strong power of our business…

Thank you, Richard. I will begin by taking you through our results for the second quarter unless I state differently all metrics will be on a constant currency basis. We have summarized our second quarter results on slide 2. For the quarter, we generated adjusted net income of $0.66 per share which was $0.16 above the midpoint of our guidance. Net revenue yields were up 2.6 for the quarter which was 60 basis points better than a midpoint of our guidance. Better than expected pricing on close-in business for Europe and Asia, sailings drove this outperformance. As anticipated the environment in Caribbean has remained highly promotional and ticket revenue yields for the product were down year-over-year. However, this was more than offset by continued strength on European and Asian itineraries where we had double-digit yield improvements for the quarter. On-board revenue initiatives continue to deliver positive results with a second quarter increase of 3%, making it the 10th consecutive quarter of our on-board revenue growth. Better load factor and a continued success of initiatives such as beverage packages as well as Internet services drove this positive increase. Net cruise cost excluding fuel decreased 4.7% for the quarter which was 220 basis points better than the midpoint of our guidance. All of these savings are timely related and are expected to be spent during the balance of the year. So, below the line was favorable by $0.06 per share driven mainly by the continued success of equity investments like TUI Cruises and a portion of the change and value of our derivative entry. Now, I would like to update you on what you’re seeing on the booking environment. Since our last call, booking volumes have been significantly higher during the same period in last year and the booking window continues to…

(Operator Instructions). Your first question comes from the line of Tim Conder with Wells Fargo Securities.

Thank you for the multi-year benchmarks and the accountability that it implies. A couple of things here, Jason or Richard whoever wants to take this. Just maybe a little more color on what you’re seeing early in ‘15 and as it relates to that I know again your global deployment is great and that’s yielding fabulous benefits here. But the Caribbean, where do you see at this point a potential turning point for the industry and you guys are outperforming there. But where do you see that at this point?

As it relates to 2015, it really is very early in the process, and the positive trends that’s what I talked about really things that we’re seeing across the products at this point in time. But I didn’t give any more detail would not provide you better information that will be just communicated. As it relates to the Caribbean, I think, overall I think we’re really kind of getting close to that inflection point. We’re seeing a very consistent environment in there and it’s been actually quite consistent to what we saw on our April call. So I think it’s quite predictable at this point in time.

And from an inflection point, are you thinking here with over the next by the end of the year. Is that fair for the industry from what you’re implying?

I think what I am implying, I think again going into, again it’s very early on we’re seeing a positive outlook on demand for the Caribbean going into ‘15.

I think Tim one comment we can make, one of the issues in the Caribbean has been the fact that has been so much capacity there. And we always over compensate for these things I am afraid. And that situation carries on through the first quarter of 2015. So I think just to gage it in terms of where the turning point would come. The first quarter is obviously going to be more difficult than the second quarter, third quarter and fourth quarter as we’re looking ahead to next year. But I think our process is that we look very much on a way bookings are coming in. And we’re not sure that, we don’t see enough bookings yet this early in the period to start being much more specific than we’re being.

And if I may one more question for Mr. Bayley. Michael again great progress in the brand. When you came into the position here and where we stand now. How would you characterize I guess the low hanging fruit that you saw coming in granted that your predecessor has done a lot of work before that. Where we started the job where did you see low hanging fruit from your perspective and where would say we are, if you want to say an inning to the ballgame so to speak?

I think when I came into the position, I was fortunate in many ways because literally the brand was just about to take delivery of the fifth of the Solstice-class ships. And really so there have been a transformation in the brand as it relates to the hardware and so much of the energy and resources of the organization was so focused on taking delivery of all of these beautiful ships that I was in a position where, because we have finalized the delivery of the final ship that we could really focus our energy on delivering against the strategy that we created. So, I think it’s a journey as you pointed out. We started that journey in late 2012 early 2013 and I feel we are probably about 30% of our way through that journey. We have got a lot more to get done and we have got fairly clear plans for the future, so that’s kind of where we are.

Your next question is from the line of Brian Dobson with Nomura. Brian your line is open. There is no response from that line. We will go to the next question. Your next question is from the line of Steve Wieczynski with Stifel.

Good morning guys. So, Richard I guess the first question is with basically your EPS goal now, have you kind of projected out the 2017 you are linking almost $7 a share in earnings and that basically implying 25% earnings growth basically for the next three years or so. So, I guess from a capital standpoint, you guys start to think about the way you are going to deploy capital to shareholders, I mean does a share repurchase program makes sense at this point?

Well, I do think you are right, Steve, as you say we get to a point with this kind of profitability where the cash generation becomes a new problem to have. It’s not a problem that we are that familiar with to be honest or to be blunt but it’s a nice problem to have and I do think we are beginning to talk about that. And we have said in the past that over time we think returning cash to shareholders is an appropriate thing for us to be reviewing. We did double our dividend just under a year ago and so either higher dividends or cash repurchase seems to me as the success is coming through and the cash flows are coming through is very much of an issue that we should we discussing. It’s very much of an issue that is the Board is discussing and does discuss and I think it’s not necessarily appropriate for me to preempt them but you are right it’s a new problem for us to have but it’s a good one and we will be addressing it.

Okay, got you and then second question, I don’t know who wants to take this may be you Richard as well but broader question with China. And I know there is a lot of hype out there about the opportunity in China over the long term but how do you guys decide what’s the appropriate type of investment to put in that market? And then may be help us think about where the investments will fall in that market as well?

I will start and then Jason or Adam they want to chime-in. It’s proven to be a very successful market for us but it’s still young and we are still investing in two ways. First of all, the capital investment I think the move of Quantum was a pretty bold move now and looking back at it, it was a pretty obvious one but I feel these things are always obvious after the fact. I think that reflects our commitment to the market. It will of course, I think we mentioned this earlier that it requires some, not only capital investment with the ships that we have put in and very high growth rate that we have been having there and also requires an investment in infrastructure and in operating cost and that has challenged us this year and will be a challenge next year. We look at the bottom-line impact and see it’s very positive but there is some clear investment needed whenever you are developing any market but particularly one that is so fundamentally different than the other markets that we have penetrated

Steve, I will add on a little bit. If I continue with the sports analogy that Tim used earlier, we are certainly pleased with its how gone so far. I would say it’s something like we have scored a couple of runs in the first inning but there is a lot more innings play in that game. We have a tremendous work ahead of us to do in terms of developing the consumer awareness of our products and services. We have a significant undertaking in terms of developing the kind of distribution and loyalty of distribution that we have achieved in North American and European theaters. We have a program next year with four different ships, operating out of four different homeports in China that’s something that we could not have envisioned even a few years ago really to reach the targets that we have will take a lot of work. But we’re excited about it, definitely as the momentum and we feel like we created a leadership position for the Royal Caribbean international brand and we certainly want to see where can go with the momentum that we have.

Your next question is from the line of Felicia Hendrix with Barclays.

I have a question regarding the Double-Double program. I was wondering can you talk about how management incentives might be aligned with achieving those goals.

Yes, I think that to accomplish something like this, sometimes it helps to -- we have to shift the mindset. We’ve been working on this for a while here, I do want to emphasize that this is not something that’s starting today, obviously this is something we’ve been working on and you think you know that. But to make the kind of shift that you want, I think one of the things that Royal Caribbean has been so successful at is that to get the whole organization to move in a certain direction. And yes we’re using our incentives to accomplish that and we have put in and expect to put in some special incentives to make sure that everybody is focused first on the beginning of that period but also although it hasn’t been finalized it is likely that as we’re looking at our longer term incentive programs like our performance space share things that we will be considering making the Double-Double targets which is a three year goal, the measuring stick for those. So we think when an organization works everything has to work together and that includes the compensation, the incentive compensation. And I think we’re seeing its working.

And Richard also you talked in the beginning of your prepared remarks about cost and you now have a cultured cost control. Just regarding cost expected to be flat slightly down this year. For next year would you expect to continue that kind of flat to slightly down trend particularly given the delivery of these two new ships. And I know you’re not ready to give guidance but I guess what I am trying to figure out is there anything that you can foresee coming up that would cost net cruise costs excluding fuel to be up next year?

I think in terms of its early on for us as we’re going through our planning cycle to be thinking about costs. But I think our general commitment to our cost culture really remains unchanged. But there will clearly be inflationary pressures, new investments as well as cost efficiencies that will be kind of considered in that equation. But I would just say our overall commitments sustain but those pressures are really now we’re beginning to take into consideration.

And I think I would Felicia emphasize as I did before that the focus is on getting the total profitability and so if we’d love to keep having zero rose costs. I think we see that our real objective is the bottom line. And so for example coming back to the question Steve asked, the cost in China, if we’re to include those costs and take us slightly over what we would like to be but it generates more in revenue than we would do that. So it’s really question of the balance in our minds rather than a bring line on the page.

And then Jason you sounded in response to another question kind of get into the granularity about the Caribbean. But I think a lot of us on the call are just trying to figure out how that’s looking right now in the third quarter. And so given we all know that the environment is promotional. So if you can give us any kind of color at all that would be helpful.

I think in terms of just general color to start off with is that really is a very similar environment to what we were experiencing three months ago. I wish I could tell you that something had dramatically changed but it’s been actually quite similar. But the volumes have been pretty steady; it’s just that this required the promotional technique. The other color that I had said in my remarks is there is a little bit more pressure on the Caribbean and seven nights -- on the seven nights and on the shore Caribbean product. But that’s generally kind of being balanced out. So it’s a very similar picture.

And I think in fairness we’ve made it clear it actually got quite a bit worse between the first quarter and the second quarters. And I think we conveyed that in the second quarter call. As Jason says I think it’s more or less stabilized since then. But actually that’s partially because we brought to bear more yield management techniques and systems that we’ve talked about before coming online. And that it helped us offset what otherwise might have been three quarters in the Caribbean.

Your next question is from the line of Robin Farley with UBS.

Great, thanks. Looking at your Double-Double program and your ambitious earnings target, I know you talked about some of the qualitative ways that you will get there and I totally understand that there will be different moving pieces contributing to it. But just too sort of think about it quantitatively because your capacity increases are pretty fixed right between now and 2017, so it has to be set in stone. And if we assume may be some load expense growth per unit given the investments you are making, is it kind of implying yield growth like compound annual yield growth north of 4%. Is that sort of in the ballpark of what you are thinking?

So, I think that I would probably answer it that obviously there will be some add inflows in terms of how it plays out in each year but I think what we really look at is what our commitment on the cost side and then the others just look at how our yields have grown over the past five years. So, I think we really see moderate gross, I think 4% on average would be on the higher side on average but that’s kind of how we kind of came to that basic math.

Okay, so maybe there is actually expense reduction kind of per unit.

I think Robin, we are really uncomfortable in trying to get too much into the details of this, I think we all have our models. As you say the capacity number is fixed, I think we are pressing on cost but I think if I heard your last comment correctly, I don’t think we are thinking that there is going to be a dramatic improvement in cost. We just think that is a very strong underlying business model, particularly on the revenue side and when we extrapolate it out we think that it makes these targets doable. And we are determined to work towards that goal and make it happen.

Great, thanks and then just lastly you talked about how some of the factors affecting one quarter don’t necessarily when you shift into the next quarter an itineraries change. So, I wonder if you could just give us a little color on Q4 but because there is now kind of an implied Q4 guidance since you have guidance through Q3 included guidance.

That always makes us happy here because we implicitly end up giving two quarter rather than just one, Jason.

And then so that still you are implying a pretty healthy guidance in Q4 and it’s in line with our expectation but I just wanted to hear since you won’t have as much European capacity, just hear a little bit about what’s driving the growth in Q4?

I think in terms of the general growth in Q4, it is relatively consistent for us in terms of having some upside happening from Europe and Asia because we do have some of those sailings come in and that we are dealing with a very similar environment, actually very similar booking environment for Q4 on the Caribbean side. But I don’t think again there has been a big change on the guidance side. I think on the cost side, as we said some of the savings that we had identified in Q2 was actually realized in Q2 that will shift into the future quarters and Q3 and Q4 would be included in those comments.

Your next question is from the line of Harry Curtis with Nomura. Your line is open. The next question is from the line of Robert Hagenbach (ph) with SunTrust.

Thanks. This is Robert in for Patrick Scholes. So, you obviously put up some pretty strong guidance for net yields in the third quarter and we have actually been expecting that given us some strength we have seen in our own pricing work, that same pricing work really shows you guys are pretty big outlier to the industry, meaning seem to be outperforming your peers. May be you could give us just some incremental color in terms of why you think that is and how you expect to sustain that?

I think I am not sure on how we can describe it in more detail. We focus on how our performance is going and the steps we are taking both on the marketing side, the yield management side and managing the demand. I know its little better than may be we were expecting before but basically the yield has just been holding up and I think we are very proud of the revenue management people who we have internally who predict these things and they have been remarkably accurate. Obviously some luck goes into that but also we spent a lot of time and money developing these systems. We have continued to invest in these systems; by the way I would refer you back to some commentary we made over the last couple of years that we’ve invested a great deal in building these systems and building the capabilities. And I think that our people have tried to come up with good models and they have been remarkably accurate. So we actually haven’t ended up changing our yields forecast as we’ve gone through the year and I would congratulate them in being able to do that. Obviously we can’t always be this accurate but they have been pretty good and I think we will continue to invest in these systems, because we think they do help us.

And a quick follow up, forgive me if you mentioned this before. But I believe you recently launched a new pre-onboard planning tool. Could you give us any sense of what the usage of that has been and if you’ve seen any visible uptick in spending from that?

It’s too soon to associate the use of cruise planner with the onboard revenue outcomes, because that will be something that unfolds over these next few quarters. It was important to us, it is important to us that cruise planner tool will be used particularly by the people who have booked Quantum of the Seas for its first few months, and in fact the derivation of cruise planner was very much inspired by all the different features in many different Quantum and then applying that opportunity for the rest of the fleet. So for Quantum its run very well, we’re very pleased with the usage of the cruise planner tool for that purpose. While we’re at it not that you ask, but we have a lot of upcoming developments that we think will be beneficial for onboard revenue on top of beverage packages which we’ve mentioned and internet services which has already been very positive for us. But we’re now just about two months away from having the O3b expanded Internet capabilities that we’ve really been working hard on for a long time behind the scenes with this O3b Company that used satellite technology specifically for the purpose of beaming LAN speed bandwidth down to earth. And although they didn’t think of cruise ships when they created that technology we end up being a perfect solution for it. And we will bring that out on Allure of the Seas this fall and then Quantum and Oasis and this will be a revolutionary breakthrough and the capability of cruise ships to receive significant bandwidth at great speeds. And we’re very excited about that and how we’ll be very interesting addition to our other onboard revenue capabilities which have been performing very well for actually all of our brands in recent past.

Since you mentioned on that new capability. Is the plan set to monetize that in any way marketing in other words competitive advantage in terms of ticket pricing that you charge is it in uptick or is it increase in pricing that you’ll charge for Internet service or would you expect there to just be higher usage of that service?

I think the Millennials are an enormous market for us and to be able to offer them home like coverage at sea is an enormous advantage and I don’t think we’ve talked enough about it when we will have more bandwidth on one ship than every other ship in the industry combined. You are talking about something that we think will help us bring in more customers, raise our prices and this is the sort of thing that we’ve been doing to try and raise our yields. And it’s the kind of thing that underlies the Double-Double program.

Your next question is from the line of James Hardiman with Longbow Research.

Just a quick question here on the yield guidance and you may have touched on this maybe just quantify it for us. The midpoint of your second quarter guidance by 60 bps, you didn’t really raise the full year at all. Is that just rounding and is it safe to assume we’re at least further into that range for the yield guidance for the year?

Yes that’s exactly right James. It’s rounding related, only slight negativity would take on the back half of the Black Sea sailing but as I said in my commentary that we’ve been offset by further strength in Mediterranean.

And then on the Double-Double program, since we’re sort of thinking about three year outlook here. Can you give us at least ballpark sort of capacity growth assumptions over the next few years. And I guess bigger picture, how should we think about the dominator of the ROIC over the next three years, you talked about 3.5% CAGR. In general is that maybe a decent assumption for the invested capital piece between this year and 2017, I guess at least for next few years seems like a much bigger number than that at least in terms of capacity. How should we think about the puts and takes there?

Yes I think James the best thing I can do Laura can certainly send it to you. But in the press release especially through 2017 it defines our capacity increases each year and it also provide our CapEx and really at this point especially through ‘17, there is very little, that anybody can do the change.

Yes, it’s actually there through ‘18 as well.

Got it, that’s really helpful. And then I guess just last question in terms of Quantum of the Seas. May be talk a little bit about sort of the pricing you are seeing early on, what the occupancy assumptions are and I think you talked about in the past the costs are going to go up a little bit but may be sort of a Caribbean itinerary versus a Chinese itinerary for the same ship. Can you may be talk through some of the puts and takes and overall as I think about may be EBITDA and EBITDA margin, how do the two compare?

Yes, so as it relates to just the latter half of that. On our last call basically we said that economically we expected this ship to perform at least as well in China as it was expected to do in New York post at moving on to China. And so I think economically that’s the way I will look at it. It will probably require a little bit more cost but we are also expecting a little bit more on the revenue side especially with the strength on the on-board element within China. As it relates to bookings, also what we have constantly said is that for what’s open to sail which effectively is the Northeast products which goes through the middle of May and also the repositioning of the ship from New York to Shanghai, the pricing and load factors on that are doing exceptionally well. And as you said in the past it’s in line in terms of how it’s booking relatively to when always this in the lower came out.

Due to the allotted time for the question-and-answer session, we ask that you only ask one question. Your next question is from the line of Steven Kent with Goldman Sachs.

Hi, I know the last person asked the question on ROIC the Double-Double goal, asked about could you do something on the denominator and I am not sure you answered that but I just would like to understand that a little bit better. I know Felicia and Robin both asked about reducing expenses, boosting revenues but what about the capital side of it and may be just think about that more broadly? And then just one final thing, Richard, how about new ships going out a little bit further, any sense for how you are going to think about that over the next five years or so?

Sure, thanks Steve. So, first of all the denominator, I think the point we were trying to make is that the denominator is largely immutable at this point. There is very little that we would do that would change our capital base. As you know we have ships on order and our capital program we think we have given pretty good indications of what that is, so don’t really see a dramatic change in that one way or the other that would have a huge impact on our calculation of ROIC. So, we do think that it will be the numerator, the profitability that will drive the change. And we have previously said that we are not contemplating any ship orders for wholly-owned brands for 2017. And in terms of what we are looking at going forward, I think we have previously said that we thought the right range for us was to grow at a rate of 3% to 5% and as we are looking forward we think that’s still the right number. I think as you know it gets difficult because of the ship deliveries in December one year or in January the next and enormous difference in and every ship delivery is a big lump in the curve of growth. But over any significant period of time we think that we will continue that average of 3% to 5%.

Your next question is from the line of [Indiscernible] Research.

Good morning, congratulations on the great numbers. Jason, one question for you, on-board spend was nicely up, do you expect that to continue given the capacity deployments in Q3 and especially the change into Q4 from the European source market?

Thank you, yes, so obviously this have marked our 10th quarter in a row of on-board revenue improvement and last year we were up over 7%. So, the comparability gets more and more difficult but I think that the focus we are putting on the on-board revenue line and also as sourcing, as we have more capacity for example in Asia next year, we do continue to expect a positive performance on the on-board. We haven’t come out of any specific guidance on that obviously but expectations for us internally are to continue to improve

And you mentioned beverage has done very well. And I imagine that in Asia retailers probably the driver. How about the shore excursions, spa, et cetera?

In Asia specifically or just overall?

Just overall.

No I think overall I mean really on all of our line items on onboard revenue, we have also kind of doubled our efforts on the shore excursion side as we try to create a more destination experience feeling across our brands.

Your final question comes from the line of Greg Badishkanian with Citigroup.

Just wanted to follow up on the European strike that you have been seeing in. Two part question, just first comparing locally sourced business versus the North American sourced. And then also have you seen any recent impact on demand just from kind of the latest geopolitical headlines that we’re seeing on particularly from maybe U.S. and North American cruisers travelling abroad?

So just a comment I think as it relates to some of these geopolitical. Our exposure this year really have a handful of sailings left that touched the Mediterranean region that’s out risk and also on the Black Sea side. So we haven’t seen a lot of changes in the demand pattern outside of -- well there has been change in sense, has been more challenging for us, bookings for the recent sailings and that’s been incorporated into our guidance. As it relates on to Europe, really the trends are actually quite positive on a local level on for both North American and European consumers whether they’re travelling on European sailing or on the Caribbean. So it really is a good new story for both. Well thank you for your assistance Tamika. With the call today -- and we thank you all for your participation and interest in the Company. Laura will be available for any follow up on question you might have and I wish you all a great day.

: