Operator: Ladies and gentlemen, thank you for standing by. Welcome to the Carnival First Quarter 2013 Earnings Conference Call. During the presentation, all participants will be in a listen-only mode. Afterwards, we will conduct a question-and-answer session. As a reminder, this conference is being recorded, Friday, March 15, 2013.
I would now like to turn the conference over to Howard Frank, Vice Chairman and Chief Operating Officer. Please go ahead, sir.
Howard S. Frank - Vice Chairman and COO: Thank you, Suzie. Good morning, everyone. First, apologies for the short notice on this call. We did, I think, in light of recent ship incident events we wanted to connect up to the investment community as soon as possible. So, we put out the press release and we've announced the call rather quickly and we wanted to get the information out there and to make sure everybody is up to date on the impact – the potential impact of these events on our business.
With me this morning is Micky Arison, our Chairman and Chief Executive Officer; David Bernstein, our Senior Vice President of Finance and Chief Financial Officer; and Beth Roberts, our Vice President of Investor Relations along with me.
To start off the call, I'll have David take you through the first quarter and then he'll send it back to me and I'll have some comments on the outlook for 2013 and also make a few comments about the recent ship incidents. David?
David Bernstein - SVP and CFO: Thank you, Howard. Before I began, please note that some of our remarks on this conference call will be forward looking. I will refer you to the cautionary statement in today's press release. Also all of my references to revenue and cost metrics will be in local currencies, unless otherwise noted as this is the more useful measure of business trend.
Our non-GAAP EPS for the first quarter was $0.08 per share. The first quarter came in $0.03 above the mid-point of our December guidance despite a $0.02 impact from Voyage disruptions and related repair cost which Howard will discuss later in his comments. The improvement was primarily driven by lower net cruise cost without fuel or $0.04 a share as a result of the timing for certain expenses primarily between the first and second quarter.
Now, let's take a look at the first quarter operating results versus the prior year. Our capacity increased 3.9%. The North American brands were up 3.1% while the Europe, Australia and Asia brands or as we call them our EAA brands were up 5.1% driven by a 17% increase in the AIDA. Our total net revenue yields in the first quarter declined 2.3% from last year strong Concordia yields that were up almost 3%.
Now let's take a look at the two components of net revenue yields. Our net ticket yields declined 3.3%. Our EAA brands were down 5.8% driven by declines in European, South American itineraries that were partially offset by increases in Caribbean itineraries.
And North American brands were down only 1.5% with two-thirds of their capacity in the Caribbean during the first quarter. For net onboard and other yields, the increase was 1% with increases in the North American brand that were partially offset by declines in the EAA brands driven by Costa.
On the cost side, net cruise cost per available lower berth day excluding fuel were down 3% versus the prior year. The decline was more than we expected in our December guidance. As I've said in the past, it's difficult to estimate the timing of many of the expenses by quarter and therefore the best measure of net cruise cost performance is on an annual basis.
As a result of our ongoing efforts to reduce fuel usage our consumption per ALBD declined almost 5% this quarter consistent with our full-year guidance. Something I don't often get to say fuel prices this quarter, were down over 4% versus the prior year which saved us $0.03 per share.
In summary the first quarter non-GAAP EPS was $0.06 higher than 2012 earnings of $0.02 per share. This was driven by lower net cruise cost, partially offset by lower net revenue yield.
Now, turning to our 2013 outlook, I will skip net revenue yields as Howard will discuss that shortly. For the full year, net cruise costs excluding fuel per ALBD are forecasted to be up 2.5% to 3.5% versus the prior year. This is about a percentage point higher than our December guidance driven by the voyage disruptions and related repair costs as well as additional expenses related to certain vessel enhancements for the remainder of the fleet that Howard will expand upon.
At this point, I will turn the call back over to Howard.
Howard S. Frank - Vice Chairman and COO: Thank you, David. I will have comments later when I talk about Triumph incident, but let me first start by brining you up-to-date on wave bookings. This is based on the nine weeks of booking activity from the 6th of January through March 10th, the latest booking data we have.
On a fleet-wide basis, bookings during the wave period have been running well ahead of last year and this includes Costa's bookings, which are also significantly higher year-over-year. But even taking Costa's bookings out of the data bookings for the rest of the fleet have still been running well ahead year-on-year. Fleet-wide pricing on wave bookings is slightly ahead year-over-year with and without Costa in the mix.
Breaking this down by major markets; North America bookings have been running higher during this period with slightly higher pricing. EAA bookings are substantially higher with or without Costa in the mix at slightly lower pricing. While the significantly higher EAA booking volumes are very encouraging, as I will comment on later with the exception of Costa, we're still well behind in EAA booking for the remainder of the year at the present time.
We have also gathered booking data since the Triumph incident, which covers the last three weeks through March 10. On a fleet-wide basis, taking Carnival Cruise Lines out of the mix, which I will comment on separately, booking volumes have continued to run significantly higher year-over-year. North America brand booking volume continued to run higher, although lower than for the period prior to the Triumph incident, with pricing higher year-over-year.
EAA booking volumes continued to be very strong year-over-year, with pricing running higher during this three-week period. Please keep in mind that we consider this latest three weeks of booking data as anecdotal, but we've decided to provide the information in anticipation of questions about booking trends after the incident.
For the Carnival Cruise Lines brand, booking volumes and pricing for the period of the wave prior to the incident were running nicely higher year-over-year. Carnival's booking volumes for the three-week period after the event were lower. However, with Carnival's introduction of new marketing promotions in recent weeks, the market has responded positively and booking volumes have significantly recovered. We expect Carnival's bookings to continue to improve and normalize over the next several weeks.
It's difficult to estimate the impact that the recent Carnival Dream event will have on bookings. Normally, a short or intermittent power outage in port would not have received media attention. However, given the media coverage of the event, it may have some effect on bookings, and we have factored that into our revenue yield and earnings guidance. Based on the foregoing trends in the booking patterns, we have lowered constant currency revenue yield estimates for the remainder – for the year by 1.5%.
As indicated in the press release, first quarter yields came in as expected. For the remainder of the year, continued softness in European brand pricing is driving some of the forecasted lower revenue yield outlook. Other contributing factors include slightly lower revenue yields for the Carnival Cruise Lines brand, resulting from current and anticipated price promotions. We have also reduced forecast at fleet-wide onboard revenue for the remainder of the year.
Turning to the current booking status for the remaining three quarters on a fleet-wide basis, bookings are behind last year at slightly lower pricing. North American brands bookings are behind at slightly higher pricing; for EAA brand booking are behind at lower pricing. On a quarter-by-quarter basis, the trends are also quite similar, so you won't see much difference if we provided – if we broke out this information by the second, third and fourth quarter, which we will not do on this call.
Breaking this down by major programs, for North American brand pricing for Caribbean and Alaska programs is slightly higher year-over-year on lower occupancies. Pricing for North America premium brand European cruises is higher at slightly higher year-over-year occupancies.
For EAA brand, the European cruises, which are the great majority of their itineraries for the next three quarters, pricing and occupancies are lower year-over-year. It's clear that continued softness in European economies and lower consumer confidence throughout Europe is the primary contributor to the closer-in booking pattern and lower prices we are experiencing.
However, as previously said, we are experiencing a significant uptick in European brand bookings, which is a very encouraging sign. Based on our latest forecast, on a fleet-wide basis, we are expecting revenue yields in the second quarter to be down slightly, and for the second half of the year to be slightly higher.
Full year earnings guidance has been revised to a range of $1.80 to $2.10 per share, or a midpoint of $1.95. $0.35 per share reduction from our original December guidance is comprised of $0.10 of cost for the Triumph incident, including repair cost and estimated revenue loss from cancelled sailings. Reduced fleet-wide ticket forecast for the remaining three quarters contributed $0.14 of the decline, approximately half of the revenue yield reductions for Europe brands, and half for North American brands including Carnival.
We have also reduced our onboard revenue yield forecast by $0.06, and we have added $0.05 per share for costs associated with modifications to ships this year to enhance ship operating system redundancies and improved emergency power. We also expect this work to continue on the fleet through 2014.
A few comments about the Carnival Triumph incident that I want to make. Although there are many lessons to be learned from the incident, it is important to understand that our fire suppression systems did work and our crew did a superb job. Ship systems and crew were able to quickly respond to the fire and extinguished it. So, there were no injuries to either passengers or crew. Although our emergency generator power was not adequate to provide effective passenger comfort, the emergency systems we had onboard are in accordance with, and in fact, go beyond the latest regulatory guidelines. But having said that, we will make the changes necessary to provide even greater redundancies to our shipboard systems, and in the event of a loss of power, we increase the emergency generator power to provide a more effective level of comfort to the passengers and crew on the ship.
An assessment of shipboard redundancies and emergency generator power will be carried out on a corporate-wide basis for our entire fleet and accordingly, enhancements will be implemented on all ships in fleet. In this regard, our corporate maritime policy department, together with the maritime executives at the brands, have already made preliminary assessments of the ships and the fleet and plans are underway to make appropriate modifications. This project, of course, will take some time to complete. But I want to assure you that we will address these issues as quickly as feasibly possible.
Having said all this, I want to emphatically state that all the ships in our fleet are safe and the work we are planning will add further enhancements to the safety systems already in place. Given all the misconceptions about the causes of the Triumph incident, let me make it perfectly clear. Our ships are built not just in compliance with regulations with our IMO, flag or classification society, but many instances go beyond regulatory requirements. Our corporate and brand management team will continue to focus on ship safety as their first priority.
And with that Suzy, I'm going to turn it back to you to take questions so we get some – take some questions from the listeners.
Operator: Felicia Hendrix, Barclays Capital.
Felicia Hendrix - Barclays Capital: Howard, thank you for the detail that you gave us and you did mention that your guidance does anticipate some impact from the Dream, but I wanted to talk more about just specific cost that you might have. You kind of just walk us through the detail behind your earnings, just wondering specifically. If there anything in there for the Dream is going to be out of service a little bit, anything in there. Today there was the incidence with the Legend and then also given these three events in such a short time period, just wondering what the cost –incremental cost impact might be from your marketing and your promotional activities. And more broadly how we should think about your marketing budget over the next 12 months?
David Bernstein - SVP and CFO: I'll take the first part on the cost on the Dream and also the Carnival Legend. We have factored in the cost of the Dream being out of service. They did refund a portion of this cruise and they also canceled one cruise. That is in our numbers, and as far as the Legend is concerned, they're very hopeful that it will sail its normal itinerary – on its next itinerary next week, and sales and marketing…
Howard S. Frank - Vice Chairman and COO: Yeah. I mean, I think sales and marketing, I don't think we're going to see a huge increment, any significant increment in sales and marketing that will not be easily absorbed in the numbers, and we have already budgeted a forecast for sales and marketing costs in what we gave you. I do think that there will be price promotions, but that we are using as the part of the marketing programs and – but that has been factored into the revenue yield forecast that we gave you. So, we think we've got the expense side of the ledger covered fairly easily by that right now.
Felicia Hendrix - Barclays Capital: For both of you, I guess just on maintenance CapEx, I think it's been running around $700 million to $750 million. Is that a number that we should see increase?
David Bernstein - SVP and CFO: Well, we've said at number of times in the past that historically, our maintenance CapEx had been in the $400 million to $500 million range and that we were increasing it. It was up more recently like $600 million plus, and all the forecast we've been giving you have been $800 million plus, and we were trying to factor in all the refurbishments and all of the things that we need to do to keep the ships up-to-date.
Howard S. Frank - Vice Chairman and COO: But there will be some incremental capital expenditures as we make these enhancements to – whatever enhancements need to be made to the redundancy – increased redundancy and for the expanded emergency generation power. I don't think we really have our arms around that number yet. That's what we're working on to get and hopefully in the next couple of weeks we'll have a full plan with estimated costs to doing all this work. But I don't see it as being enormous, but it will be some amount of money and it will be probably incurred during the next two years, '13 and '14.
Felicia Hendrix - Barclays Capital: Just to understand, David, you said the maintenance CapEx has more recently been running around $600 million, but you've been giving us a number around $800 million.
David Bernstein - SVP and CFO: Yeah, $800 million plus has been included in all future CapEx numbers that we've been giving you for probably the past year or so now.
Felicia Hendrix - Barclays Capital: So, is it possible that that kind of absorbs maybe the incremental costs you might see from refurbishing your fleet or will it be incremental over that?
David Bernstein - SVP and CFO: As Howard indicated, there might be some incremental that we might spend. But it should be manageable.
Howard S. Frank - Vice Chairman and COO: I know we've got a lot of (indiscernible), but most of it I would imagine will…
Micky Arison - Chairman and CEO: That $800 million number had a lot of cushion in there. So, we should be fine.
Operator: Harry Curtis, Nomura Securities.
Harry Curtis - Nomura Securities International: Of the $800 million that you mentioned, how much of that is pure refurbishment or pure maintenance CapEx versus sort of incremental refurbishment? What I'm trying to get at is, in other industries that we look at, we look at maintenance CapEx as a percentage of revenues to capture kind of the utilization and given your high occupancy, you're pushing these assets really hard and so what I'm trying to get at is, as a percentage of revenues are you spending as much as on the ships as you did 10 years ago.
David Bernstein - SVP and CFO: We're clearly spending more, but it's hard to look as a percentage of revenue unfortunately our yields are down since 2008, but overall, on a per berth basis, we've recognized that the fleet has gotten a little bit older than it was 10 or 15 years ago and we are spending more to properly maintain it. We don't have the detailed split between refurbishment and other types of maintenance. These are very high level numbers that we've worked with our various operating companies to put together, and each year we put together very detailed plans.
Howard S. Frank - Vice Chairman and COO: Much of the maintenance cost is period expensed even in the drydock, so we don't capitalize that. We only capitalize improvements that we make to the ship as part of a drydock. I think most of it is always other item, but the maintenance work is at expense side. We don't need to capitalize the drydock. That answers you questions.
Harry Curtis - Nomura Securities International: The follow-up is, if you could give us some sense of how many more days in drydock you built into your forecast this year and next, and how does that compare to the last two to three years?
David Bernstein - SVP and CFO: Hang on one second.
Harry Curtis - Nomura Securities International: I guess where I'm going with this is…
Howard S. Frank - Vice Chairman and COO: About incremental drydocks as a result of the additional work or just planned drydocks that we already have in place?
Harry Curtis - Nomura Securities International: What I'm trying to get at is planned drydocks, how that's likely to grow in 2013 and 2014?
David Bernstein - SVP and CFO: We don't – we haven't – we don't have the '14 and beyond schedule here. The drydock days between '12 and '13, I mean are ships going to drydock on a very routine basis on schedule, either twice every five years or once every three years, there is different rules we follow. So, it's scheduled out and we will keep looking at that and taking into consideration the enhancement that Howard had indicated will make changes as necessary. There maybe a few additional changes this year, but we don't know for sure yet, because as Howard said we are not done with the overall plans.
Howard S. Frank - Vice Chairman and COO: So, a lot of this additional work that we will carry out will depend on a number of factors that we don't necessarily have control of including the availability of drydock space in the various drydocks around the world, and the logistics of its equipment then needs to be made – new equipment needs to be made, the manufacture of that equipment as well as the installation of that equipment by the team that do this sort of stuff. And we still don't have a full story on that, so as soon as we get it, it will probably start – we will start to share that with people and we are not (indiscernible) on it yet.
Micky Arison - Chairman and CEO: At this stage we don't even know what work can be done in service versus what that needs to be drydocked. I mean it's just too early.
David Bernstein - SVP and CFO: To give you an idea in 2013, we had 425 drydock days planned in our overall guidance.
Harry Curtis - Nomura Securities International: So, I guess the last question is, based on your maintenance CapEx estimate, which you built in for drydock, you are pretty comfortable that there is plenty of room there for whatever else may happen to your fleet.
Howard S. Frank - Vice Chairman and COO: Actually, what I said is that as soon as we get – we get to put the plan – the fleet-wide plan into effect, we will have a better handle on what that amount is and know to what extent we've covered that in the $800 million.
David Bernstein - SVP and CFO: And the $0.05 that Howard mentioned, the vessel enhancements, that, we did our best to represent on a very preliminary basis what we think it could be for 2013. But it is very preliminary.
Howard S. Frank - Vice Chairman and COO: For future questions, can we limit it to two. I know there are lot of people out there that have questions, so let's limit the questions to two. And at the end, if there are more questions, we can take them. People who want to have third question.
Operator: Steven Wieczynski, Stifel.
Brad Boyer - Stifel Nicolaus: This is actually Brad in for Steve. You called out some onboard softness in your revised guidance. Just want to see if you were seeing that in any particular areas or if it was sort of widespread across all the onboard categories?
David Bernstein - SVP and CFO: Well, what we actually said is, is that we expect that – we still expect onboards to be up this year, just not as not much as we had anticipated in the December guidance. We saw the onboards were only up 1% in the first quarter, and so as a result, we just took on the second, third and fourth quarter a little bit from previous guidance, but all the major categories are still expected to be up for the year, just not as much as we had previously anticipated.
Brad Boyer - Stifel Nicolaus: Second one. Couldn't help but noticed that the guidance range is still at $0.30, the spread there. Just curious if you could give us some color as to kind of what gets you to $2.10 versus $1.80? And that's it for me. Thanks.
David Bernstein - SVP and CFO: Yeah, I think it's just a function of the yield guidance primarily and given the uncertainty, the economic uncertainty in Europe and all recent events, we thought the $0.30 range was appropriate.
Operator: Greg Badishkanian, Citigroup.
Greg Badishkanian - Citigroup: My two questions are; how aggressive do you think you will need to be over the next few weeks to next few months in terms of pricing to encourage bookings and have any of your competitors responded so far?
Micky Arison - Chairman and CEO: What tends to happen during waves period is, everybody is kind of on sale at some form or another to encourage sales during wave and just like past year all of our competitors have been on sale as we have. So, it's really hard to tell whether there is a response or not. I would say that we are encouraged that based on the fact that when Carnival Cruise Line did put price promotions in effect that the response was good and I don't have yesterday's data. But for this week through Wednesday Carnival Cruise Line booking levels were actually up 25% versus last year. Now, that was in response to a promotion. But we are not anticipating that promotions will be much deeper than they were last year.
Operator: Tim Conder, Wells Fargo Securities.
Tim Conder - Wells Fargo Securities: Howard and everyone, thanks for the color that you can give us on the outlook with the ships, but any quantification at this point or number of ships that will require major impact? You said you're reviewing the whole fleet, but any color especially in the Carnival and the Costa brands?
Howard S. Frank - Vice Chairman and COO: I think I prefer to have it all in front of me in a comprehensive way. I'll have a better sense of it. Our sense is that we're going to pull that together in the next couple of weeks and I'd rather provide it when I know exactly that's going to be. There are number of different ways also to make the modifications and it really depends on how they select the modifications to be made on the ships that will determine the cost associated with it. So, let's see what they come up with first. I don't want to jump ahead of it. I did mention that the Carnival ship that was affected, the Triumph, there are number of ships like that in the fleet and so that will probably be dealt with first, but there may be some less of modifications that we may have to make in the rest of the fleet. We'll see how that goes.
Tim Conder - Wells Fargo Securities: Then when you have a little bit more color over the next several weeks, do you anticipate doing another update type of call at that point in time?
Beth Roberts - VP, IR: If we have something to say, we will.
Howard S. Frank - Vice Chairman and COO: If we have something – I think if there is something material to say, we'll say it.
Tim Conder - Wells Fargo Securities: Shifting to for my second question, shifting to another question here on Europe, comparing to your commentary that you gave in December, can you maybe – can you give us a little bit more color on the U.K., Germany and then Italy and the Southern issues I guess for the overall continent?
Howard S. Frank - Vice Chairman and COO: Well, in the U.K. as well as in Germany, beginning last year, we started to see a fall back in bookings so that the booking curve started to come closer in. we didn't move pricing all of that much thinking that the booking come in later, that especially bookings (indiscernible) spring and summer and early fall. And while the bookings have been proved in those two countries, we are still seeing that. And pricing actions were taken in order to maintain some relative full occupancies on the ships. So, that caused some of the dislocation, we still see that but we are as I mentioned on my comments that we are recently seeing a dramatic catch up on bookings. Now whether we can catch up fully, quickly enough is another question to maintain better pricing as we get closer to the departure – ships departure.
Micky Arison - Chairman and CEO: I think we did say on the prior call that because of the closer end booking pattern in Europe that was making forecasting European yield is much more difficult.
Howard S. Frank - Vice Chairman and COO: Costa's bookings which primarily covers Italy, France, Germany and Spain, they were more – their strategy was to get out ahead of this a little bit and so their occupancies are more or less I think in lined with the prior year and maybe just trying to pull ahead. So, there is a potential that they may be able to start to move pricing up. So, they are in a little bit better shape relative to – from a booking curve standpoint relative to the rest of the group, but we are also struggling to be honest with you with the uncertainties in Italy right now which is their major most significant market. But the costa brand I must say, they haven't lost market share in Italy, they are doing – they maintain maybe even increased market share this past year. So, the business is getting back on track, we are very encouraged by what we see from the Costa organization and certainly that we have seen some significant rise in perceptions about the brand in Italy and Europe, and so we are starting to see a recovery happen. Probably, we'd like to see the recovery happen faster in terms of pricing, but we haven't – and that we'd have – we will have pricing improvement this year, perhaps not as much as we originally thought, and that's one of the factors that we took down some pricing for our European brand forecast on revenue yields for the remainder of the year.
Micky Arison - Chairman and CEO: Clearly, the uncertainty really helping isn't helping us with the situation with the government basically (indiscernible), that's not helping either.
David Bernstein - SVP and CFO: We anticipated the tough economic environment in December, but it's just turning out to be a little tougher than we has thought.
Howard S. Frank - Vice Chairman and COO: And Spain continues to be a challenge, but fortunately for us for us in Spain, we have a small Spanish cruise line Ibero, and actually they're going to do better this year we think than they did last year, because it is a small cruise line and we are finding ways to source business from the countries outside of Spain to help those ships, with Michael Thamm there. He's changed around the sourcing strategies, so that we're hopeful that that will change around quickly Spanish…
Tim Conder - Wells Fargo Securities: So, David, your comment is that Europe tougher than thought collectively or Italy, was that David, the comment that you made there?
David Bernstein - SVP and CFO: I think it was probably Southern Europe in general was tougher than we thought. But I think overall, it was a bit tougher than we thought.
Operator: Robin Farley, UBS.
Robin Farley - UBS: I just wanted to get a little more color. I know you talked about the change in yield being half due to European demand and half due to the Carnival brand, and so just when you're looking at your yield guidance for the second half of the year, you have that positive. Can you give us a little color on what your assumptions are for does the Carnival brand turn positive in the second half of the year and then also when you look in Europe, are the European sourcing brands positive in the second half of the year with or without Costa or is the positive in the second half of the year all just the strength of North American brands outside of the Carnival brand that is offsetting the declines? So, just trying to get a sense of what those pieces look like in the second half?
Howard S. Frank - Vice Chairman and COO: I don't know what Dave is about to say, but I hesitate to get into a brand by brand discussion of yields. I mean, clearly, we see Costa as having a positive year-over-year yield improvement and rest of the European brands having lower year-over-year improvement – lower year-over-year yields.
David Bernstein - SVP and CFO: Yeah, the yields for the back half in total are within our guidance or expected to be. We are expecting to see both North America and EAA up, but I will say that we have continued to say that EAA without Costa is a challenge because of the economic environment and EAA yields without Costa probably will be down a tad for the back half of the year.
Operator: Alexia Dogani, Liberum.
Alexia Dogani - Liberum Capital: I just had two questions as well. Just firstly, in terms of the maintenance CapEx spend of the $700 million to $800 million. I mean, I know that question has been answered, but I want to explore it in a different way. Can you split the spend between the hotel aspect, so how much you invest to bring the product up to the new shape and the core operational element? And following on from that, the $0.05 of the maintenance cost increase this year, you said this will continue for the next two years. So, year three should we expect that sort of spend to disappear, if you like? And then my –and second question is whether you can give us a bit of a feel on how emerging markets are performing and what percent of your capacity is allocated in 2013, and what trends you are seeing there, both from the revenue and the cost side?
Howard S. Frank - Vice Chairman and COO: That's more than two questions by the way. I think David said already that the $800 million is top line number. We don't do the detailed analysis of that until we get through the budget cycle. So, that is just a kind of over the top number.
David Bernstein - SVP and CFO: And it includes…
Beth Roberts - VP, IR: I would like to reiterate Howard's earlier comments that a lot of our R&M goes to operating expense because we do heavy refurbishment when the ship is in service. That is a big percentage of ship operating cost.
David Bernstein - SVP and CFO: As far the $0.05 is concerned; it was simply our preliminary best guess of additional expense this year. We don't have the plan, as Howard mentioned, for the all of the ships. Once we have that, we'll have a much better idea what kind of P&L impact. But I think, it's fair to say that the majority of what we expect to spend will be capital and give us some time to put that together, and if we have something material, let’s say, we’ll announce it once we get it.
Howard S. Frank - Vice Chairman and COO: I mean, to some degree if we're – we accelerate drydock work in order to get worked on more quickly. In a way it's just moving expense a little bit earlier and saving that later on, because it would be the timing of the drydock. Drydock on a ship that would – we might otherwise do in 2015, if we move it up to 2013, because it works in terms of the availability of the dock and the equipment we need. We won't have to do that drydock in 2015, we will have already done in 2000. So, there’s a little bit of movement of expenses and the timing of expenses that's going to happen in next couple of years. I think to try to give you a sense as to what's going to carryover from year-to-year very difficult right now, which is all very preliminary.
David Bernstein - SVP and CFO: And your question on the emerging markets sourcing, basically looking outside of North America and Western Europe, the emerging markets are about 14% of our guest source, and overall we are very pleased and it's doing very well around the world, all of those markets.
Operator: Lena Thakkar, HSBC.
Lena Thakkar - HSBC: I understand the comments around costs. I just wanted to get a feel of, given everything that's been said on the $0.10 impact from the Triumph and some of the one-offs that you outlined at the previous set of results, should we be thinking of net cruise costs actually going down next year, all things being equal from here, or is there anything else that we should be aware of going into the next financial year? Then just on the revenue guidance. I know you can't break it down by brand, but I wonder if you could tell us if your guidance still factors in positive yields in North America ex-Carnival.
Howard S. Frank - Vice Chairman and COO: Well, the answer to the second question is, yes, it does factor in all yields, positive and negative for the brands. So, yes, I mean, the revenue guidance has everything in it. In terms of costs going down in 2014, I think it's too early to say. I don't – I think, as I mentioned before, we really need to get the plan in place to understand it better and the associated cost to connect it with the plan for all of the ship work we are going to be doing, and then we'll have a better sense as to when it's going to happen. But my guess is we are going to see costs like this occur, because this work is going to be carried out mostly in 2013 and 2014. So I really don't see that aspect of our cost going down.
Lena Thakkar - HSBC: Just a follow-up on the yield question. I guess the question is more getting at how the recent issues caused an impact on just the Carnival brand or all of the North American brands. So, is this isolated to one brand, and therefore, does the guidance still assume yields up for everything else apart from Carnival in North America?
Howard S. Frank - Vice Chairman and COO: We did see – during the period of the incident itself and for a week or two thereafter, we saw a little bit of – some of the other brands felt a little bit of a hiccup I would call it, but not a major issue, and then it seems to have – now things seem to be back on-track. So, I hope that answers your question. But in terms of giving you specific guidance by brands, no, we're not prepared to do that. Thank you.
Operator: Jaime Katz, Morningstar.
Jaime Katz - Morningstar: Can you guys talk a little bit about how you might change your kind of marketing methods to comfort consumers maybe? And then also, I know you guys didn't offer any information on the immediate impact the week after the Triumph, but if you have any color on kind of the magnitude of impact on bookings, I know they've bounced back, that would be helpful.
Howard S. Frank - Vice Chairman and COO: Look, I think from the standpoint of marketing, they are making some modifications to their messaging and communications right now. I think the issue of safety onboard the ships is less of a marketing issue, but is more of a communications and public relations issue, and clearly, we've got advisors who are working with us on putting out the positive messages about the actions we're going to be taking to strengthen these areas of the ships and to improve further enhanced safety and so on, and I think those messages will be going out from Carnival Cruise Lines over the next couple of months.
Beth Roberts - VP, IR: But they are – my understanding is they are conducting consumer research right now to try to address the messaging appropriately.
Micky Arison - Chairman and CEO: I think what's important to understand is that, is the millions of people who come off the ship happy is our best marketing source, and Carnival Cruise Lines has millions, literally millions of people coming off the ships every year very, very happy. And two-thirds of the people are repeat passengers, who understand how safe and how comfortable the product is, and we expect them to continue to book and the last few weeks have been great examples of how strong Carnival Cruise Lines brand is. The repeat passengers particularly understand when a good promotion is put in place and they jump on it, and have a lot of confidence in the brand, and clearly, we saw that in the last two weeks, and hopefully, once the dust settles here, we'll see it again.
Jaime Katz - Morningstar: Then any comment on that immediate impact, like the week after the Triumph, or do you not want to speak to that?
Howard S. Frank - Vice Chairman and COO: We clearly felt an impact on Carnival Cruise Lines. Sure.
Jaime Katz - Morningstar: Any magnitude that you'd like to offer?
Micky Arison - Chairman and CEO: Not really.
Howard S. Frank - Vice Chairman and COO: I don't even know where you got that particular week in front of us, but Jaime it was…
Micky Arison - Chairman and CEO: It wasn't – let me put it this way. It wasn't anything like we've had in the past September 11 or other issues. We had nothing like that. It wasn't – we didn't go negative. We didn't have lots of cancelations. But we had a double digit decline in bookings.
Howard S. Frank - Vice Chairman and COO: Somebody signaled to us that it was double digit.
Micky Arison - Chairman and CEO: We had a double digit decline.
Howard S. Frank - Vice Chairman and COO: That can go away anywhere from…
Micky Arison - Chairman and CEO: It wasn't huge and it didn't last very long.
Howard S. Frank - Vice Chairman and COO: The remarkable thing is the resiliency of this brand. So, that when – it is amazing. So even with all of this negative media coverage, it still booked a lot of business and it will continue to book a lot of business. I think people understand the value of a Carnival vacation, the great vacations they have and that these things occasionally will happen. So as Micky said, our repeat passengers are still booking a lot of business. So, we're okay. It wasn't as dramatic if we told you the number. It will be a whole lot less than you think it is. But we're not – I don't have that number and probably wouldn't tell you if I had it. It's not that dramatic. On the other brands just a marginal, they felt it on a very marginal basis, as is my guess as the rest of the cruise industry did.
Micky Arison - Chairman and CEO: Just to give you a sense, the Triumph event affected 3,000 passengers unfortunately. The Dream event, which was a couple of hours of outage, it was really – I mean, on the Dream, everything has been operating fine. We had one closed public room toilet that got huge amount of publicity, but last night we had it – we brought in Jon Secada to do a concert for the passengers on the Dream. So, that was 3,000 passengers. The Dream was 4,000 passengers on a base of 4.4 million passengers that Carnival Cruise Line carries, and they come back 98%, 99% very happy. I mean, that's what's going to drive the strength of the brand.
Howard S. Frank - Vice Chairman and COO: Even on the Dream, the reports we're getting back, a lot of people have just fine – they are just – they are on the ship, they are in the port, all services are working – and fly back today, tomorrow and the next day.
Micky Arison - Chairman and CEO: There was few hours of power outages in port on Wednesday evening, but by midnight, everything was back to normal and has been back to normal ever since.
Operator: James Hardiman, Longbow Research.
James Hardiman - Longbow Research: My first question last year following the Concordia issue, your vocalized strategy seemed to be to try as much as possible to hold price and basically weather the storm on the occupancy side. And whether or not that, that's exactly what happened, I think the rationale was solid with the hopes to isolate the pricing fallout to the one brand. I was hoping you could maybe compare and contrast your strategy going forward this year, Concordia versus the Triumph and the subsequent incidence, pricing versus occupancy as well as sort of general marketing.
Micky Arison - Chairman and CEO: When we made that statement, based on the publicity and the situation in Italy and obviously that was a very tragic event. It was the belief that we couldn't fill the Costa ships particularly from Italy at any price. And so there was no point in doing price promotion. Here as I said with price stimulus that is not significantly different than last year. Carnival Cruise Lines bookings last week to the first three days was up 25%. That's a totally different set of circumstances.
David Bernstein - SVP and CFO: Let me just explain further. We made that statement – I think it was early March of last year. During that period, Costa was doing consumer studies to understand how people felt about the brands in cruising. Ultimately, I think it was right around the end of March, where it appeared that sentiment was changing and Costa did then change their strategy, came up with a price promotion approach, and starting I think it was early April and through the rest of the year. By the time we got to the fourth quarter, Costa had essentially filled their ships. So, early on, we followed that we held price as Micky said, but later on, we adapted to the environment and we filled the ships at lower prices.
James Hardiman - Longbow Research: Then, second, somewhat related question, given your localized brand strategy, sort of big picture, how many of your customers do you think actually make the connection between the brand that they use in umbrella Carnival brand. Obviously, you did a great job with Concordia last year, really isolating that fallout to Costa. Obviously, the Carnival line of ships is much bigger for starters, but is it going to be dramatically more difficult this year just given the brand associated with the various issues is also the overarching company brand?
Howard S. Frank - Vice Chairman and COO: I don't think so. I think that the consumer – from a consumer standpoint, I think that they look at each brand as a brand. I don't think they connect the overall connection at the corporate level. So, I mean, I'm sure there are some that do, but I think probably a very small percentage, but we haven't done any studies on it to be honest with you.
Micky Arison - Chairman and CEO: Honestly, anecdotally, when I ask – when people tell me they had a wonderful time, and I ask them which ship they were on or what company, half the time they don't know.
Operator: Assia Georgieva, Infinity Research.
Assia Georgieva - Infinity Research: My first question is, whether you expect any impact to your new-builds in terms of price or delivery date if you do need to do redundancies on those as well?
Howard S. Frank - Vice Chairman and COO: No, based on rule changes that occurred in 2010, all of this is already baked into the new-builds.
Assia Georgieva - Infinity Research: My second question is, given how many moving parts there are to the European booking picture, EAA brands ex-Costa and with Costa, could you give us a sense as to the level of bookings for Q3 given obviously the key quarter for Europe this year versus the same time last year and this is with Costa with everything?
Howard S. Frank - Vice Chairman and COO: Yeah, we haven't broken it down by quarter Assia. I think that what I said is that the overall occupancies and pricing for the nine months is really very consistent with what we're seeing quarter-by-quarter, especially for the third and first quarters. The second quarter, of course, occupancy has caught up significantly. But pricing is down a little bit in each of those quarters in Europe.
Operator: Jamie Rollo, Morgan Stanley.
Jamie Rollo - Morgan Stanley: The first question, it might be a hard one to answer because a few of these get reported I guess. In a normal year how many ship incidents do you normally have across the group please?
Howard S. Frank - Vice Chairman and COO: Let me – I don't think that – I don't think I know how to answer that question, but I will say this, that in over the last, we've taken a look at ship incidents that have received some relative media attention, let's say over the last 10 years. For our group of companies versus all other ships, all other cruise lines in the world fleet and the relative percentage of incidents for our cruise lines is almost the same. It was right on point with the relative percentage of incidents on other cruise line. So, there really is no difference. Unfortunately for us, the run, the last year or so since the Concordia incidence has been a little bit higher, but if you go back beyond that, it was considerably lower, and by the way these are the same people that have been running the same ships all these years. The ships haven't changed, so it's just sadly – we've just been hit by a run here that has been very unfortunate, and hopefully we'll get some reprieve from this going forward. I don't know if that answers your question, Jamie, right on point, but I don't have the data.
Jamie Rollo - Morgan Stanley: The other question was on the $0.05, I didn't fully understand exactly what that was. Was that your best estimates of the sort of revenue cost of the safety review and or does it include any loss revenue from more time in drydock? And I got the impression that number could go up a fair amount depending on your review, is that correct?
David Bernstein - SVP and CFO: It's a preliminary number and it tried to cover I'd say loss profit if we have to move a ship into drydock early as well as any additional R&M expense associate with the drydock. It's a very preliminary number. It could move up or down and if it's materially different we would let you guys know but at this point it's our best guess.
Jamie Rollo - Morgan Stanley: And just as an ancillary to that if I may, it's the last figure you could possibly give us to what you spend on sort of safety spend or safety checks, whether it's drydocks, repairs, or maintenance, I mean what's the annual sort of budget for that please?
David Bernstein - SVP and CFO: I don't have all of that detail with me, but there is millions and millions of dollars spent on those types of things as we go through, whether it would be capital, R&M, work done in drydock, and you know part of our payroll is associated with that. There is audit of the ships, routine maintenance, etcetera, all associated with safety…
Micky Arison - Chairman and CEO: Simulators that we built and man in Holland and in Germany, the train crew on deck and engine, that's in our numbers as well. And we don't isolate the number…
Howard S. Frank - Vice Chairman and COO: We don't isolate the number actually.
Micky Arison - Chairman and CEO: I don't know why you're asking the question.
Operator: James Hollins, Investec.
James Hollins - Investec: Three questions from me. The first on the strategy, I've heard a bit of industry chapter around Asia and just looking for an update that you could give on particularly out of your Singapore phase. The sort of demand you are seeing out of Asia, whether I should be expecting sort of a more aggressive needs if itineraries ships over to that market in the medium term or whether I should be waiting longer for that to happen. The second one was on commission and transport costs, those cost per ALBD I have down, it's about 11% per ALBD in the quarter. I think they've been down 10% or 11% in Q3, Q4 last year as well. Is there something particularly going on there? Is this a level that can continue given particularly the size in your cost structure?
Howard S. Frank - Vice Chairman and COO: James, this is Howard. Let me take the Asia strategy discussion. We have added a – Costa has added a second ship this spring to double the size of their ships in China and Southeast Asia for the coming years. So, that seems to be going quite well. The ships are profitable, the business is good, the pricing is good, and we are very encouraged. In addition, Princess has announced additional capacity to go into the Japanese market. They have one ship that's starting to sail I think in late April in Japan for I think 90-day period. That has done very well. So, they're adding – they've announced the addition of a second ship to Japan the following year. And we continue to work on the Asia strategy and it's likely that you'll see some continued increase in capacity in Asia for us in years beyond that. So, we're very encouraged by what we see. We think it is a – it seems to have rooted – trying to take real roots. The message that cruising is a good vacation alternative for the Chinese and other Asians is coming across. We spend a lot of time in the Asian markets and talking at different conferences and so on. We're getting a lot of support from all the Asian governments. They've all been supportive of us coming in and not just us, our competitors as well. So, we think it's a very viable market for us in the future. I'm going to let David talk about the commission and transportation volumes.
David Bernstein - SVP and CFO: Yeah, the line you're looking at in the P&L, keep in mind not only commission but also transportation which is primarily our air costs associated with our air/sea guests as well as a few other things. We have continued to see a tick-down in our air/sea mix and as a result of that there is less air cost, less guests are buying air from us. So, overall, that affects the number. And the other thing that has affected the number, particularly in the last three quarters that you mentioned has to do with the change that we had announced in the U.K. commission structure. So, for first quarter 2013, those were the two drivers that brought that number down.
James Hollins - Investec: Can you give also any guidance on what it might be down? Obviously, it depends on what level of air/sea passengers you have, what level it might be down, (assumed) down for full year '13 as a whole per ALBD?
David Bernstein - SVP and CFO: We don't forecast that because the way we look at it is we forecast on a net basis. So, the yield guidance we gave you is the revenue net of the transportation and commission costs. So, we've looked at it at that level.
James Hollins - Investec: I was just trying to get to sort of how aggressively negative you've been on gross yield given that is coming down, but sounds like you haven't been giving me that.
Micky Arison - Chairman and CEO: It's baked into the yields. So, it really doesn't matter.
David Bernstein - SVP and CFO: It's pretty consistent. There aren't any great movements between growth and net yields is the way we describe them.
Operator: Mr. Frank, there are no further questions at this time. I will now turn the call back to you.
Howard S. Frank - Vice Chairman and COO: Well, I think we can conclude the call right now and I think if there are any follow-on questions, Beth Roberts is around to handle them this afternoon. Thank you all for listening in. Apologies again for the short notice. We'll try to give you more notice for the next call. Thanks everybody and have a good day.
Operator: Ladies and gentlemen, that does conclude the conference call for today. We thank you for your participation and ask that you please disconnect your lines. Have a great day.