UNITED
STATES
SECURITIES
AND EXCHANGE COMMISSION
Washington,
D.C. 20549
FORM
10-Q
☒
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For
the period ended September 30, 2015
☐
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For
the transition period from to
Commission
file number: 001-35898
LINDBLAD
EXPEDITIONS HOLDINGS, INC.
(Exact
Name of Registrant as Specified in Its Charter)
Delaware |
|
27-4749725 |
(State
or other jurisdiction of
incorporation
or organization) |
|
(I.R.S.
Employer
Identification
No.) |
96
Morton Street, 9th Floor, New York, New York, 10014
(Address
of principal executive offices)
(212)
261-9000
(Issuer’s
telephone number)
Check
whether the issuer (1) filed all reports required to be filed by Section 13 or 15(d) of the Exchange Act during the past 12 months
(or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements
for the past 90 days. Yes ☒ No ☐
Indicate
by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive
Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the
preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). Yes ☒ No
☐
Indicate
by check mark whether the Registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller
reporting company. See the definitions of “large accelerated filer,” “accelerated filer” and “smaller
reporting company” in Rule 12b-2 of the Exchange Act.
Large
accelerated filer |
☐ |
Accelerated
filer |
☒ |
|
|
|
|
Non-accelerated
filer |
☐ |
Smaller reporting
company |
☐ |
(Do
not check if smaller reporting company) |
|
|
Indicate
by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No ☒
As of
November 4, 2015, 45,224,881 shares of common stock, par value $0.0001 per share, were issued and outstanding.
LINDBLAD
EXPEDITIONS HOLDINGS, INC.
Quarterly
Report On Form 10-Q
For
The Quarter Ended September 30, 2015
Table
of Contents
|
|
Page(s) |
|
|
PART I FINANCIAL INFORMATION |
|
|
|
ITEM 1. |
Financial Statements (unaudited) |
1 |
|
Condensed
Consolidated Balance Sheets as of September 30, 2015 (unaudited) and December 31, 2014 |
1 |
|
Condensed Consolidated Statements of Income for the
Three and Nine Months Ended
September 30, 2015 and 2014 (unaudited) |
2 |
|
Condensed Consolidated Statements of Cash Flows for the Nine
Months Ended
September 30, 2015 and 2014 (unaudited) |
3 |
|
Condensed Consolidated Statement of Stockholders’ Equity for the Nine Months Ended
September 30, 2015 (unaudited) |
4 |
|
Notes to the Condensed Consolidated Financial Statements (unaudited) |
5 |
|
|
|
ITEM 2. |
Management’s Discussion and Analysis of Financial Condition and Results of Operations |
19 |
ITEM 3. |
Quantitative and Qualitative Disclosures about Market Risk |
29 |
ITEM 4. |
Controls and Procedures |
29 |
|
|
|
PART II OTHER INFORMATION |
|
|
|
ITEM 1. |
Legal Proceedings |
30 |
ITEM 1A. |
Risk Factors |
30 |
ITEM 2. |
Unregistered Sale of Equity Securities and Use of Proceeds |
30 |
ITEM 3. |
Defaults Upon Senior Securities |
30 |
ITEM 4. |
Mine Safety Disclosures |
30 |
ITEM 5. |
Other Information |
30 |
ITEM 6. |
Exhibits |
31 |
|
|
|
SIGNATURES |
32 |
PART
1: FINANCIAL INFORMATION
Item
1: Financial Statements
Lindblad
Expeditions Holdings, Inc.
Condensed
Consolidated Balance Sheets
| |
As of | |
| |
September 30,
2015 | | |
December 31,
2014 | |
| |
(unaudited) | | |
| |
ASSETS | |
| | |
| |
Current Assets: | |
| | |
| |
Cash and cash equivalents | |
$ | 208,751,533 | | |
$ | 39,678,720 | |
Restricted cash and marketable securities | |
| 9,284,500 | | |
| 8,334,632 | |
Inventories | |
| 1,835,325 | | |
| 1,700,226 | |
Marine operating supplies | |
| 4,178,662 | | |
| 5,078,552 | |
Prepaid expenses and other current assets | |
| 10,153,283 | | |
| 11,320,698 | |
Total current assets | |
| 234,203,303 | | |
| 66,112,828 | |
| |
| | | |
| | |
Property and equipment, net | |
| 122,027,393 | | |
| 121,873,440 | |
Due from shareholder | |
| - | | |
| 1,500,926 | |
Other long-term assets
| |
| 13,081,755 | | |
| 2,019,503 | |
Operating rights | |
| 6,528,949 | | |
| 6,528,949 | |
Deferred tax assets | |
| 121,330 | | |
| 101,860 | |
Investment in CFMF | |
| - | | |
| 47,787,835 | |
Total assets | |
$ | 375,962,730 | | |
$ | 245,925,341 | |
| |
| | | |
| | |
LIABILITIES | |
| | | |
| | |
Current Liabilities: | |
| | | |
| | |
Unearned passenger revenues | |
$ | 72,946,189 | | |
$ | 73,195,195 | |
Accounts payable and accrued expenses | |
| 18,629,236 | | |
| 20,028,315 | |
Long-term debt - current | |
| 1,750,000 | | |
| 4,934,030 | |
Obligation to repurchase shares of common stock | |
| - | | |
| 4,965,792 | |
Due to CFMF | |
| - | | |
| 22,733,000 | |
Total current liabilities | |
| 93,325,425 | | |
| 125,856,332 | |
| |
| | | |
| | |
Long-term debt, less current portion | |
| 162,697,005 | | |
| 51,755,608 | |
Other long-term liabilities
| |
| 638,862 | | |
| 447,145 | |
Deferred income taxes – long-term
| |
| 703,506 | | |
| 299,035 | |
Total liabilities | |
| 257,364,798 | | |
| 178,358,120 | |
| |
| | | |
| | |
COMMITMENTS AND CONTINGENCIES | |
| | | |
| | |
| |
| | | |
| | |
SHAREHOLDERS’ EQUITY | |
| | | |
| | |
Preferred stock, $0.0001 par value, 1,000,000 shares authorized; 0 shares issued and outstanding | |
| - | | |
| - | |
Common stock, $0.0001 par value, 200,000,000 shares authorized; 45,224,881 and 44,717,759 issued and outstanding as of September 30, 2015 and December 31, 2014, respectively | |
| 4,522 | | |
| - | |
Additional paid-in capital | |
| 52,308,452 | | |
| 21,466,308 | |
Retained earnings | |
| 66,284,958 | | |
| 46,100,913 | |
Total shareholders' equity | |
| 118,597,932 | | |
| 67,567,221 | |
Total liabilities and shareholders' equity | |
$ | 375,962,730 | | |
$ | 245,925,341 | |
The
accompanying notes are an integral part of these condensed consolidated financial statements.
Lindblad
Expeditions Holdings, Inc.
Condensed Consolidated Statements
of Income
(unaudited)
| |
For the Three Months Ended
September 30, | | |
For the Nine
Months Ended September 30, | |
| |
2015 | | |
2014 | | |
2015 | | |
2014 | |
| |
| | |
| | |
| | |
| |
Tour
revenues | |
$ | 58,561,323 | | |
$ | 51,540,429 | | |
$ | 163,512,874 | | |
$ | 153,706,109 | |
| |
| | | |
| | | |
| | | |
| | |
Cost
of tours | |
| 25,443,716 | | |
| 22,594,085 | | |
| 71,330,704 | | |
| 68,671,913 | |
Gross
profit | |
| 33,117,607 | | |
| 28,946,344 | | |
| 92,182,170 | | |
| 85,034,196 | |
| |
| | | |
| | | |
| | | |
| | |
Operating
expenses: | |
| | | |
| | | |
| | | |
| | |
General
and administrative | |
| 9,709,100 | | |
| 7,551,316 | | |
| 27,620,640 | | |
| 22,794,039 | |
Selling
and marketing | |
| 9,464,802 | | |
| 7,778,325 | | |
| 26,816,447 | | |
| 23,624,748 | |
Merger related expenses | |
| 5,494,975 | | |
| - | | |
| 13,265,866 | | |
| - | |
Depreciation
and amortization | |
| 2,688,894 | | |
| 2,937,883 | | |
| 8,335,719 | | |
| 8,685,677 | |
Total
operating expenses | |
| 27,357,771 | | |
| 18,267,524 | | |
| 76,038,672 | | |
| 55,104,464 | |
| |
| | | |
| | | |
| | | |
| | |
Operating
income | |
| 5,759,836 | | |
| 10,678,820 | | |
| 16,143,498 | | |
| 29,929,732 | |
| |
| | | |
| | | |
| | | |
| | |
Other
(expense) income: | |
| | | |
| | | |
| | | |
| | |
Change
in fair value of obligation to repurchase shares of common stock | |
| - | | |
| (2,463,336 | ) | |
| - | | |
| (3,035,767 | ) |
Gain (loss) on foreign currency
| |
| 147,833 | | |
| 718,620 | | |
| (46,533 | ) | |
| 499,334 | |
Gain
on transfer of assets | |
| - | | |
| - | | |
| 7,501,948 | | |
| - | |
Other
(expense) income, net | |
| (23,978 | ) | |
| - | | |
| 5,000,000 | | |
| - | |
Interest
expense, net | |
| (2,948,312 | ) | |
| (1,320,050 | ) | |
| (8,025,939 | ) | |
| (3,977,549 | ) |
Total other (expense) income
| |
| (2,824,457 | ) | |
| (3,064,766 | ) | |
| 4,429,476 | | |
| (6,513,982 | ) |
| |
| | | |
| | | |
| | | |
| | |
Income before
income taxes | |
| 2,935,379 | | |
| 7,614,054 | | |
| 20,572,974 | | |
| 23,415,750 | |
| |
| | | |
| | | |
| | | |
| | |
Income
tax (benefit) expense | |
| (1,480,899 | ) | |
| 333,518 | | |
| 388,933 | | |
| 2,576,010 | |
| |
| | | |
| | | |
| | | |
| | |
Net
income | |
$ | 4,416,278 | | |
$ | 7,280,536 | | |
$ | 20,184,041 | | |
$ | 20,839,740 | |
| |
| | | |
| | | |
| | | |
| | |
Common
stock | |
| | | |
| | | |
| | | |
| | |
Net
income available to common stockholders | |
$ | 4,416,278 | | |
$ | 6,370,416 | | |
$ | 20,184,041 | | |
$ | 18,234,621 | |
| |
| | | |
| | | |
| | | |
| | |
Weighted
average shares outstanding | |
| | | |
| | | |
| | | |
| | |
Basic | |
| 45,004,393 | | |
| 44,717,759 | | |
| 44,814,354 | | |
| 44,717,759 | |
Diluted | |
| 46,456,315 | | |
| 44,717,759 | | |
| 45,544,382 | | |
| 44,717,759 | |
| |
| | | |
| | | |
| | | |
| | |
Earnings
per share | |
| | | |
| | | |
| | | |
| | |
Basic | |
$ | 0.10 | | |
$ | 0.14 | | |
$ | 0.45 | | |
$ | 0.41 | |
Diluted | |
$ | 0.10 | | |
$ | 0.14 | | |
$ | 0.44 | | |
$ | 0.41 | |
| |
| | | |
| | | |
| | | |
| | |
Class
B common stock | |
| | | |
| | | |
| | | |
| | |
Net
income available to Class B common stockholders | |
$ | - | | |
$ | 910,120 | | |
$ | - | | |
$ | 2,605,119 | |
| |
| | | |
| | | |
| | | |
| | |
Weighted
average shares outstanding | |
| | | |
| | | |
| | | |
| | |
Basic | |
| - | | |
| 6,388,677 | | |
| - | | |
| 6,388,677 | |
Diluted | |
| - | | |
| 6,388,677 | | |
| - | | |
| 6,388,677 | |
| |
| | | |
| | | |
| | | |
| | |
Earnings
per share | |
| | | |
| | | |
| | | |
| | |
Basic | |
$ | - | | |
$ | 0.14 | | |
$ | - | | |
$ | 0.41 | |
Diluted | |
$ | - | | |
$ | 0.14 | | |
$ | - | | |
$ | 0.41 | |
The
accompanying notes are an integral part of these condensed consolidated financial statements.
Lindblad
Expeditions Holdings, Inc.
Condensed
Consolidated Statements of Cash Flows
(unaudited)
|
|
For the Nine Months Ended
September 30, |
|
|
|
2015 |
|
|
2014 |
|
Cash Flows From Operating Activities |
|
|
|
|
|
|
Net income |
|
$ |
20,184,041 |
|
|
$ |
20,839,740 |
|
Adjustments to reconcile net income to net cash provided by operating activities: |
|
|
|
|
|
|
|
|
Depreciation and amortization |
|
|
8,335,719 |
|
|
|
8,685,677 |
|
Amortization of National Geographic fee |
|
|
670,239 |
|
|
|
- |
|
Amortization of debt discount and deferred financing costs |
|
|
2,733,447 |
|
|
|
553,047 |
|
Stock-based compensation |
|
|
3,641,169 |
|
|
|
- |
|
Deferred income taxes |
|
|
385,001 |
|
|
|
309,450 |
|
Gain
on currency translation
|
|
|
(46,533 |
) |
|
|
(499,334 |
) |
Gain on transfer of assets |
|
|
(7,502,668 |
) |
|
|
- |
|
Changes in operating assets and liabilities |
|
|
|
|
|
|
|
|
Inventories and marine operating supplies |
|
|
761,051 |
|
|
|
(194,805 |
) |
Prepaid expenses and other current assets |
|
|
1,091,353 |
|
|
|
(776,311 |
) |
Unearned passenger revenues |
|
|
538,435 |
|
|
|
(2,251,189 |
) |
Other
long-term liabilities
|
|
|
191,717 |
|
|
|
165,180 |
|
Accounts payable and accrued expenses |
|
|
(715,919 |
) |
|
|
149,112 |
|
|
|
|
|
|
|
|
|
|
Net cash provided by operating activities |
|
|
30,267,052 |
|
|
|
26,980,567 |
|
|
|
|
|
|
|
|
|
|
Cash Flows From Investing Activities |
|
|
|
|
|
|
|
|
Purchase of investment in CFMF |
|
|
(68,087,953 |
) |
|
|
- |
|
Purchase of property and equipment, net |
|
|
(8,142,821 |
) |
|
|
(3,382,893 |
) |
Advance from (to) shareholder |
|
|
1,500,926 |
|
|
|
(70,745 |
) |
(Redemption) purchase of restricted cash and marketable securities |
|
|
(949,868 |
) |
|
|
246,384 |
|
|
|
|
|
|
|
|
|
|
Net cash used in investing activities |
|
|
(75,679,716 |
) |
|
|
(3,207,254 |
) |
|
|
|
|
|
|
|
|
|
Cash Flows From Financing Activities |
|
|
|
|
|
|
|
|
Proceeds from long-term debt |
|
|
175,000,000 |
|
|
|
- |
|
Net proceeds from merger |
|
|
96,806,055 |
|
|
|
- |
|
Deferred financing costs |
|
|
(10,943,676 |
) |
|
|
- |
|
Repayments of long-term debt |
|
|
(41,440,732 |
) |
|
|
(2,985,406 |
) |
Proceeds used in exchange of option shares |
|
|
(4,850,437 |
) |
|
|
- |
|
Repurchase of stock from common shareholders |
|
|
- |
|
|
|
3,035,766 |
|
|
|
|
|
|
|
|
|
|
Net cash provided by financing activities |
|
|
214,571,210 |
|
|
|
50,360 |
|
|
|
|
|
|
|
|
|
|
Effect of exchange rate changes on cash |
|
|
(85,733 |
) |
|
|
119,785 |
|
|
|
|
|
|
|
|
|
|
Net increase in cash and cash equivalents |
|
|
169,072,813 |
|
|
|
23,943,458 |
|
|
|
|
|
|
|
|
|
|
Cash and cash equivalents as of
beginning of period |
|
|
39,678,720 |
|
|
|
44,353,563 |
|
|
|
|
|
|
|
|
|
|
Cash and cash equivalents as of end of
period |
|
$ |
208,751,533 |
|
|
$ |
68,297,021 |
|
|
|
|
|
|
|
|
|
|
Supplemental disclosures of cash flow information: |
|
|
|
|
|
|
|
|
Cash paid during period for: |
|
|
|
|
|
|
|
|
Interest |
|
$ |
4,549,829 |
|
|
$ |
3,193,037 |
|
|
|
|
|
|
|
|
|
|
Income taxes |
|
$ |
386,765 |
|
|
$ |
1,326,561 |
|
|
|
|
|
|
|
|
|
|
Non-cash investing and financing activities: |
|
|
|
|
|
|
|
|
Investment in CFMF liquidation of Junior debt asset, warrant |
|
$ |
84,903,567 |
|
|
|
- |
|
CFMF
liquidation of Junior debt long-term debt, additional paid-in capital
|
|
|
(84,903,567 |
) |
|
|
- |
|
Transfer from inventories and marine operating supplies |
|
|
(413,593 |
) |
|
|
- |
|
Transfer to property and equipment, net |
|
|
413,593 |
|
|
|
- |
|
Additional paid-in capital exercise proceeds of option shares |
|
|
2,239,820 |
|
|
|
- |
|
Additional paid-in capital exchange proceeds used for option shares |
|
|
(2,239,820 |
) |
|
|
- |
|
The
accompanying notes are an integral part of these condensed consolidated financial statements.
Lindblad Expeditions Holdings, Inc.
Condensed Consolidated Statement of
Stockholders’ Equity
(unaudited)
| |
| | |
Additional | | |
| | |
Total | |
| |
Common Stock | | |
Paid-In | | |
Retained | | |
Stockholders' | |
| |
Shares | | |
Amount | | |
Capital | | |
Earnings | | |
Equity | |
Balance as of January 1, 2015 | |
| 44,717,719 | | |
$ | - | | |
$ | 21,466,308 | | |
$ | 46,100,913 | | |
$ | 67,567,221 | |
| |
| | | |
| | | |
| | | |
| | | |
| | |
Stock based compensation - option shares | |
| - | | |
| - | | |
| 3,641,169 | | |
| - | | |
| 3,641,169 | |
CFMF transaction cancellation of warrant | |
| - | | |
| - | | |
| (83,467,907 | ) | |
| - | | |
| (83,467,907 | ) |
Obligation to repurchase shares of common stock | |
| - | | |
| - | | |
| 4,965,792 | | |
| - | | |
| 4,965,792 | |
Merger recapitalization | |
| - | | |
| 4,472 | | |
| 110,553,577 | | |
| | | |
| 110,558,049 | |
Option shares exercise and exchange | |
| 507,122 | | |
| 50 | | |
| (4,850,487 | ) | |
| - | | |
| (4,850,437 | ) |
Other | |
| - | | |
| - | | |
| - | | |
| 4 | | |
| 4 | |
Net income | |
| - | | |
| - | | |
| - | | |
| 20,184,041 | | |
| 20,184,041 | |
| |
| | | |
| | | |
| | | |
| | | |
| | |
Balance as of September 30, 2015 | |
| 45,224,841 | | |
$ | 4,522 | | |
$ | 52,308,452 | | |
$ | 66,284,958 | | |
$ | 118,597,932 | |
The
accompanying notes are an integral part of these condensed consolidated financial statements.
Lindblad
Expeditions Holdings, Inc.
Notes
to the Condensed Consolidated Financial Statements (unaudited)
NOTE
1 – BUSINESS
Organization
Lindblad Expeditions Holdings,
Inc. and its wholly-owned subsidiaries (the “Company” or “LEX”) currently operate a fleet of six expedition
ships owned by its subsidiaries and four seasonal charter vessels. LEX’s mission is offering life-changing adventures on
all seven continents, and pioneering innovative ways to allow its guests to connect with exotic and remote places. LEX’s
expedition ships are customized, nimble and intimately-scaled vessels that are able to venture where larger cruise ships cannot,
thus allowing LEX to offer up-close experiences in the planet’s wild and remote places and capitals of culture. Many of these
expeditions involve travel to remote places with limited infrastructure and ports (such as Antarctica and the Arctic) or places
that are best accessed by a ship (such as the Galapagos, Alaska, Baja’s Sea of Cortez, Costa Rica and Panama), and foster
active engagement by guests. Each expedition ship is designed to be comfortable and inviting, while being fully equipped with state-of-the-art
tools for in-depth exploration. The Company also has an alliance with the National Geographic Society (“National Geographic”),
who often provides lecturers and National Geographic experts, including photographers, writers, marine biologists, naturalists,
field researchers and film crews.
Lindblad
Expeditions, Inc. (“Lindblad”) was founded in 1979 by Sven-Olof Lindblad (“Mr. Lindblad”), whose father,
adventure-travel pioneer Lars-Eric Lindblad, led some of the first non-scientific groups of travelers to Antarctica in 1966 and
the Galapagos in 1967. Mr. Lindblad founded Lindblad in order to offer innovative and educational travel expeditions to the world’s
most remarkable places.
Completion
of Merger with Capitol
Capitol
Acquisition Corp. II (“Capitol”) was originally incorporated in Delaware on August 9, 2010 as a blank check company
to acquire, through a merger, share exchange, asset acquisition, stock purchase, plan of arrangement, recapitalization, reorganization
or other similar business combination, one or more businesses or entities.
On July 8, 2015, Capitol completed a series of mergers whereby Lindblad Expeditions, Inc., a New York corporation,
became Capitol’s wholly-owned subsidiary. As consideration for the mergers, the total purchase price consisted of an aggregate
of (i) $90.0 million in cash (a portion of which was paid as transaction bonuses) and (ii) 20,017,787 shares of Capitol common
stock. Capitol also assumed outstanding Lindblad stock options and converted such options into options to purchase an aggregate
of 3,821,696 shares of Capitol common stock with an exercise price of $1.76 per share. The Company has not completed an analysis
whether the ownership change occurred under Internal Revenue Code Section 382, which, if it did occur, it would substantially limit
the ability to utilize Capitol’s net operating losses and other tax attributes.
As
a result of the mergers, Lindblad became a direct wholly-owned subsidiary of Capitol. Immediately following the mergers, Capitol,
which was a blank check company with no operations, changed its name to Lindblad Expeditions Holdings, Inc. and therefore we have
presented Lindblad’s information as that of the Company.
Upon
the closing of the mergers, Mr. Lindblad, Mark D. Ein, L. Dyson Dryden, John M. Fahey and Paul J. Brown were elected or re-elected,
as the case may be, as directors of the Company, with Mr. Ein being designated as Chairman. In addition, Mr. Ein resigned as the
Company’s Chief Executive Officer, Treasurer and Secretary and Mr. Dryden resigned as the Company’s Chief Financial
Officer. The following executive officers were appointed: Mr. Lindblad, as Chief Executive Officer and President; Ian Rogers,
as Chief Operating Officer, Chief Financial Officer and Vice President; Trey Byus, as Chief Expedition Officer; Richard Fontaine,
as Chief Marketing Officer; and Pete Miller, as Senior Vice President, Fleet Operations. (Mr. Miller subsequently resigned and
has left the Company to pursue interests outside the cruise industry.) On August 4, 2015, the Company appointed Bernard W. Aronson
to serve as an independent director of the Company. On October 28, 2015, the Company announced that it had appointed John T. McClain
to serve as Chief Financial Officer effective as of November 10, 2015.
The
Company’s common stock and warrants are listed on The NASDAQ Capital Market under the symbols “LIND” and “LINDW,”
respectively.
Capitol
Initial Public Offering and Warrants
In
connection with its initial public offering, on May 15, 2013, Capitol sold 20,000,000 units at $10.00 per unit, including 2,000,000
units under the underwriters’ over-allotment option, generating gross proceeds of $200,000,000. Each unit consisted of one
share of Capitol’s common stock, $0.0001 par value, and one half of one redeemable warrant to purchase one share of common
stock. The shares of common stock and the warrants included in the units traded as a unit until July 1, 2013 when separate trading
of common stock and warrants began. In connection with the consummation of the merger with Lindblad, Capitol forced the separation
of the units into the separate components of common stock and warrants. Each whole warrant entitles its holder, upon exercise,
to purchase one share of common stock for $11.50 subject to certain adjustments, during the period that commenced thirty days
after the completion by the Company of the Business Combination with Lindblad and terminating on the five-year anniversary of
the completion by the Company of the Business Combination with Lindblad. At September 30, 2015, there were 16,100,000 warrants
outstanding, which include 5,600,000 sponsor’s warrants purchased by the initial stockholders in a private placement, 500,000
note conversion warrants issued in connection with the conversion of promissory notes and 10,000,000 warrants purchased in connection
with the sale of units related to the initial public offering of Capitol.
The
warrants may be redeemed by the Company, at its option, in whole and not in part, at a price of $0.01 per warrant at any time
the warrants are exercisable, upon a minimum of 30 days’ prior written notice of redemption, if, and only if, the last sales
price of the Company’s shares of common stock equals or exceeds $24.00 per share (as adjusted for stock splits, stock dividends,
reorganizations and recapitalizations) for any 20 trading days within a 30 trading day period ending three business days before
the Company sends the redemption notice; and if, and only if, there is a current registration statement in effect with respect
to the shares of common stock underlying such warrants.
If
the Company calls the warrants for redemption as described above, the Company’s management will have the option to require
all holders that wish to exercise warrants to do so on a “cashless basis.” In such event, each holder would pay the
exercise price by surrendering the warrants for that number of shares of common stock equal to the quotient obtained by dividing
(x) the product of the number of shares of common stock underlying the warrants, multiplied by the difference between the exercise
price of the warrants and the fair market value by (y) the fair market value. The fair market value shall mean the average reported
last sale price of the shares of common stock for the 5 trading days ending on the third trading day prior to the date on which
the notice of redemption is sent to the holders of warrants.
The
sponsor’s warrants and note conversion warrants are identical to the warrants included in the units sold in the offering
except that such warrants: (i) are not be redeemable by the Company and (ii) may be exercised for cash or on a cashless basis,
in each case so long as they are held by the initial purchasers or any of their permitted transferees.
New
Credit Agreement
On
May 8, 2015, Lindblad entered into a new credit agreement with Credit Suisse A.G. (“Credit Suisse”) as Administrative
Agent and Collateral Agent (“Credit Agreement”) for a $150.0 million facility in the form of a $130.0 million U.S.
term loan (the “U.S. Term Loan”) and a $20.0 million Cayman term loan for the benefit of Lindblad’s foreign
subsidiaries (the “Cayman Loan,” and together with the U.S. Term Loan, the “Loans”). On July 8, 2015,
the Company entered into a larger and syndicated amended and restated credit agreement with Credit Suisse (“Amended Credit
Agreement”), increasing the facility by $25.0 million, resulting in a $155.0 million U.S. Term Loan (see Note 3 –
Long-Term Debt).
Stock and Warrant Repurchase Plan
On November 9, 2015, the
Company announced that its Board of Directors has approved a $20 million stock and warrant repurchase plan. This plan authorizes
the Company to purchase from time to time the Company’s outstanding common stock and warrants through open market repurchases
in compliance with Rule 10b-18 of the Securities Exchange Act of 1934, as amended, and/or in privately negotiated transactions
discretion based on market and business conditions, applicable legal requirements and other factors. Any shares and warrants purchased
will be retired. The plan has no time deadline and will continue until otherwise modified or terminated at the sole discretion
of the Company’s Board of Directors at any time.
NOTE
2 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Basis
of Presentation
The accompanying unaudited
interim condensed consolidated financial statements and footnotes have been prepared in accordance with accounting principles
generally accepted in the United States of America (“U.S. GAAP”) and applicable rules and regulations of the Securities
and Exchange Commission (the “SEC”) regarding unaudited interim financial information. In the opinion of management,
the accompanying unaudited interim condensed consolidated financial statements reflect all adjustments, consisting only of normal
recurring adjustments, necessary for a fair presentation of the Company’s Condensed Consolidated Balance Sheets, Statements
of Income, Cash Flows, and Stockholders’ Equity for the interim periods presented. Operating results for the interim periods
presented are not necessarily indicative of the results of operations to be expected for the full year due to seasonal and other
factors. Certain information and footnote disclosures normally included in the consolidated financial statements in accordance
with U.S. GAAP have been omitted in accordance with the rules and regulations of the SEC. Accordingly, these unaudited interim
condensed consolidated financial statements and footnotes should be read in conjunction with the audited consolidated financial
statements and accompanying notes thereto for the year ended December 31, 2014 contained in the Company’s Definitive Proxy
Statement filed with the SEC on June 24, 2015.
The merger with Lindblad
has been accounted for as a reverse acquisition in accordance with U.S. GAAP, Financial Accounting Standards Board (“FASB”),
Accounting Standards Codification (“ASC”) 805-40-45. Under this method of accounting, Capitol has been treated as the
“acquired” company for financial reporting purposes. This determination was primarily based on Lindblad comprising
the ongoing operations and assets of the combined entity and Lindblad senior management comprising the senior management of the
combined company. In accordance with guidance applicable to these circumstances, the merger has been considered to be a capital
transaction in substance. Accordingly, for accounting purposes, the merger has been treated as the equivalent of Lindblad issuing
shares for the net assets of Capitol, accompanied by a recapitalization. The net assets of Capitol have been stated at historical
cost, with no goodwill or other intangible assets recorded. Operations prior to the merger are those of Lindblad.
Principles
of Consolidation
The
condensed consolidated financial statements of the Company as of September 30, 2015 included Lindblad Expeditions Holdings, Inc.
and it wholly-owned subsidiaries. The condensed consolidated financial statements of the Company as of December 31, 2014 included
Lindblad, its wholly-owned subsidiary, Lindblad Maritime Enterprises, Ltd (“LME”), a Cayman Islands corporation, as
well as the subsidiaries of LME, and Sea Lion and Sea Bird as variable interest entities (“VIEs”). Lindblad controlled
the activities which most significantly impacted the economic performance of Sea Lion and Sea Bird. Lindblad determined itself
to be the primary beneficiary and accordingly, these entities were determined to be VIEs. All significant inter-company accounts
and transactions have been eliminated in consolidation. The VIEs were transferred to Lindblad and became wholly-owned subsidiaries
of the Company at the merger date, July 8, 2015.
Reclassifications
Certain
items in the condensed consolidated financial statements of the Company have been reclassified to conform to the 2015 classification.
Use
of Estimates
The
preparation of condensed consolidated financial statements in conformity with U.S. GAAP requires management to make estimates
and assumptions that affect the reported amounts of assets and liabilities and the disclosure of contingent assets and liabilities
as of the date of the condensed consolidated financial statements, and also affect the amounts of revenues and expenses reported
for each period. Actual results could differ from those which result from using such estimates. Management utilizes various estimates,
including but not limited to determining the estimated lives of long-lived assets, determining the fair value of assets acquired
and liabilities assumed in business combinations, the fair value of the Company’s common stock and related warrants, the
valuation of securities underlying stock-based compensation, income tax expense, the valuation of deferred tax assets, the value
of contingent consideration and to assess its litigation, other legal claims and contingencies. The results of any changes in
accounting estimates are reflected in the condensed consolidated financial statements in the period in which the changes become
evident. Estimates and assumptions are reviewed periodically and the effects of revisions are reflected in the period that they
are determined to be necessary.
Earnings
per Common Share
Earnings per common
share are computed by dividing net income by the weighted average number of common shares outstanding during the period. Diluted
earnings per share are computed using the weighted average number of common shares and, if dilutive, potential common shares outstanding
during the period. Potential common shares consist of the dilutive incremental common shares issuable upon the exercise of stock
options (if such option is an equity instrument, using the treasury stock method). For the three and nine months ended September
30, 2015, the Company determined, using the treasury method, there were 1.5 million and 0.7 million dilutive common shares related
to stock options. For the three and nine months ended September 30 2014, the Company determined there were no dilutive potential
common shares.
In
2014, the two-class method was used in the calculation of basic and diluted earnings per share. Under the two-class method, earnings
per common share were allocated to the Class A (common as a result of the merger) and Class B common shareholders of Lindblad
based on the weighted average shares outstanding.
On July 8, 2015, as a result
of the mergers, in accordance with FASB ASC 805-40-45 and related to the reverse merger treatment and recapitalization, all historical
weighted average common shares were adjusted by the exchange ratios established by the merger agreement.
Weighted average
shares outstanding after the mergers excluded the shares underlying the 16,100,000 warrants. The shares underlying these warrants
have an exercise price of $11.50 per share and were anti-dilutive.
Basic weighted average
shares outstanding prior to the mergers included the shares underlying a warrant to purchase 60% of the outstanding common shares.
As the shares underlying this warrant could have been issued for little consideration (an aggregate exercise price of $10), these
shares were formerly deemed to be issued for purposes of basic earnings per share. Effective May 8, 2015, in connection with Lindblad
closing on a transaction to purchase 100% of Cruise/Ferry Master Fund I, N.V. (“CFMF”), the warrant was cancelled.
On July 8, 2015, as a result of the merger agreement, and the reverse merger treatment and recapitalization, these shares were
not considered part of the recapitalization and therefore not included in basic or dilutive weighted average shares outstanding.
For
the three and nine months ended September 30, 2015 and 2014, the Company calculated earnings per share in accordance with FASB
ASC 260 and 805-40-45 as follows:
| |
For the Three Months Ended
September 30, | | |
For the Nine Months Ended September 30, | |
| |
2015 | | |
2014 | | |
2015 | | |
2014 | |
Net income for basic and diluted earnings per share | |
$ | 4,416,278 | | |
$ | 7,280,536 | | |
$ | 20,184,041 | | |
$ | 20,839,740 | |
| |
| | | |
| | | |
| | | |
| | |
Weighted average shares outstanding: | |
| | | |
| | | |
| | | |
| | |
Shares outstanding, weighted for time outstanding | |
| 45,004,393 | | |
| 51,106,436 | | |
| 44,814,354 | | |
| 51,106,436 | |
Total weighted average shares outstanding, basic | |
| 45,004,393 | | |
| 51,106,436 | | |
| 44,814,354 | | |
| 51,106,436 | |
| |
| | | |
| | | |
| | | |
| | |
Effect of dilutive securities: | |
| | | |
| | | |
| | | |
| | |
Assumed exercise of option shares, treasury method
| |
| 1,451,922 | | |
| - | | |
| 730,028 | | |
| - | |
Dilutive potential common shares | |
| 1,451,922 | | |
| - | | |
| 730,028 | | |
| - | |
Total weighted average shares outstanding, diluted | |
| 46,456,315 | | |
| 51,106,436 | | |
| 45,544,382 | | |
| 51,106,436 | |
| |
| | | |
| | | |
| | | |
| | |
Common stock | |
| | | |
| | | |
| | | |
| | |
Net income available to common stockholders | |
$ | 4,416,278 | | |
$ | 6,370,416 | | |
$ | 20,184,041 | | |
$ | 18,234,621 | |
| |
| | | |
| | | |
| | | |
| | |
Weighted average shares outstanding | |
| | | |
| | | |
| | | |
| | |
Basic | |
| 45,004,393 | | |
| 44,717,759 | | |
| 44,814,354 | | |
| 44,717,759 | |
Diluted | |
| 46,456,315 | | |
| 44,717,759 | | |
| 45,544,382 | | |
| 44,717,759 | |
| |
| | | |
| | | |
| | | |
| | |
Earnings per share | |
| | | |
| | | |
| | | |
| | |
Basic | |
$ | 0.10 | | |
$ | 0.14 | | |
$ | 0.45 | | |
$ | 0.41 | |
Diluted | |
$ | 0.10 | | |
$ | 0.14 | | |
$ | 0.44 | | |
$ | 0.41 | |
| |
| | | |
| | | |
| | | |
| | |
Class B common stock | |
| | | |
| | | |
| | | |
| | |
Net income available to Class B common stockholders | |
$ | - | | |
$ | 910,120 | | |
$ | - | | |
$ | 2,605,119 | |
| |
| | | |
| | | |
| | | |
| | |
Weighted average shares outstanding | |
| | | |
| | | |
| | | |
| | |
Basic | |
| - | | |
| 6,388,677 | | |
| - | | |
| 6,388,677 | |
Diluted | |
| - | | |
| 6,388,677 | | |
| - | | |
| 6,388,677 | |
| |
| | | |
| | | |
| | | |
| | |
Earnings per share | |
| | | |
| | | |
| | | |
| | |
Basic | |
$ | - | | |
$ | 0.14 | | |
$ | - | | |
$ | 0.41 | |
Diluted | |
$ | - | | |
$ | 0.14 | | |
$ | - | | |
$ | 0.41 | |
For
the three and nine months ended September 30, 2015, the Company excluded 1,912,833 (converted from 6,747 shares as a result of
the merger) shares of common stock as these shares were subject to the warrants described above.
As
of September 30, 2015, there were 45,224,881 shares outstanding. Upon completion of the mergers on July 8, 2015, the Company had
44,717,759 shares of common stock outstanding. The Company is authorized to issue 200,000,000 shares of common stock, par value
$0.0001, and 1,000,000 shares of preferred stock, par value $0.0001. The Company’s board of directors and stockholders approved
a 2015 Long-Term Incentive Plan (the “2015 Plan”), which includes the authority to issue up to 2,500,000 shares of
LEX’s common stock under the 2015 Plan. In connection with the mergers with Lindblad, certain stock options previously granted
by Lindblad under the Lindblad Expeditions, Inc. 2012 Stock Incentive Plan (the “Lindblad Plan”) were assumed and
converted into options to purchase shares of the Company’s common stock. As of September 30, 2015, options to purchase an
aggregate of 2,549,071 shares of the Company’s common stock with an exercise price of $1.76 per share were outstanding.
As of September 30, 2015, 16,100,000 warrants to purchase common stock at a price of $11.50 per share were outstanding, consisting
of 10,000,000 public warrants, 5,600,000 sponsor warrants and 500,000 conversion warrants.
Restricted
Cash and Marketable Securities
Included
in “Restricted cash and marketable securities” on the accompanying condensed consolidated balance sheets are restricted
cash and marketable securities, consisting of six-month certificates of deposit and short-term investments. Restricted cash and
marketable securities consist of the following:
| |
| As
of | |
| |
| September 30, 2015 | | |
| December 31, 2014 | |
| |
| (unaudited) | | |
| | |
Restricted cash and marketable securities: | |
| | | |
| | |
Credit negotiation and credit card processor reserves | |
$ | 5,030,000 | | |
$ | 5,030,000 | |
Federal Maritime Commission escrow | |
| 3,061,691 | | |
| 2,115,158 | |
Certificates of deposit and other restricted securities | |
| 1,192,809 | | |
| 1,189,474 | |
Total restricted cash and marketable securities | |
$ | 9,284,500 | | |
$ | 8,334,632 | |
The amounts held
in restricted cash and marketable securities represent principally funds required to be held in certificates of deposit by certain
vendors and regulatory agencies and are classified as restricted assets since such amounts cannot be used by the Company until
the restrictions are removed by those vendors and regulatory agencies. Interest income is recognized when earned.
The Company
has classified marketable securities, principally money market funds, as trading securities which are recorded at market
value. Unrealized gains and losses are included in current operations. Gains and losses on the disposition of securities are
recognized by the specific identification method in the period in which they occur.
In order to operate
guest tour expedition vessels from U.S. ports, the Company is required to post a performance bond with the Federal Maritime Commission
or escrow all unearned guest deposits in restricted accounts. To satisfy this requirement, the Company entered into an agreement
with a financial institution to escrow all unearned guest revenues collected for sailings from U.S. ports.
A $5,030,000 cash
reserve, at September 30, 2015 and December 31, 2014, is required for credit card deposits by third-party credit card processors.
The above arrangements are included in restricted cash and marketable securities on the accompanying condensed consolidated balance
sheets.
Amounts in the escrow
accounts include cash, certificates of deposit, and marketable securities. Cost of these short-term investments approximates fair
value.
Inventories and Marine Operating Supplies
Inventories consist
primarily of gift shop merchandise and other items for resale and are stated at the lower of cost or net realizable value. Cost
is determined using the first-in, first-out method.
Marine operating
supplies consist primarily of fuel, provisions, spare parts, items required for maintenance, and supplies used in the operation
of marine expeditions. Marine operating supplies are stated at the lower of cost or net realizable value. Cost is determined using
the first-in first-out method.
In the third quarter
of 2015, the Company adjusted cost of tours by $321,011 due to a change in application of accounting procedures, and reclassified
$413,593 in items from inventories and marine operating supplies to property and equipment, net. The change in application of
accounting procedures was a result of the Company’s review of its inventory process during the third quarter which found
the counting of certain small supply items a disruption to operations, impractical and expensive and discontinued the count of
these items in the third quarter and in the future.
Revenue Recognition
Tour revenue consists
of guest ticket revenue recognized from the sale of guest tickets, and other revenues from the sale of pre- and post-expedition
excursions, hotel accommodations, land-based expeditions, air transportation to and from the ships, goods and services rendered
onboard that are not included in guest ticket prices, trip insurance, and cancellation fees. Revenue from the sale of guest tickets
and other revenue are recognized gross, as the Company has the primary obligation in the arrangement, has discretion in supplier
selection, and is involved in the determination of the service specifications.
The
Company’s tour guests remit deposits in advance of tour embarkation. Guest tour deposits consist of guest ticket revenue
as well as revenues from the sale of pre- and post-expedition excursions, hotel accommodations, land-based expeditions, air transportation
to and from the ships and trip insurance. Guest tour deposits represent unearned revenues and are initially included in unearned
passenger revenue when received. Guest deposits are subsequently recognized as tour revenues on the date of embarkation. Tour
expeditions average ten days in duration. For tours in excess of ten days, the Company recognizes revenue based upon expeditions
days earned. Guest cancellation fees are recognized as tour revenues at the time of the cancellation. Revenues from the sale of
additional goods and services rendered onboard are recognized upon purchase.
Concentration
of Credit Risk
The
Company maintains cash in several financial institutions in the U.S. and other countries which, at times, may exceed the federally
insured limits. Accounts held in the U.S. are guaranteed by the Federal Deposit Insurance Corporation up to certain limits. The
Company has not experienced any losses in such accounts. As of September 30, 2015 and December 31, 2014, the Company’s cash
held in financial institutions outside of the U.S. amounted to $2,307,065 and $2,504,064, respectively.
Investment
in CFMF and Additional Paid-In Capital
The
Company uses the equity method of accounting for business investments when it has active involvement, but not control, in the
venture. In 2015, the Company changed its accounting treatment for the investment in CFMF to the cost method and derecognized
any earnings previously reported in the current year and adjusted the treatment of the CFMF transaction.
On
March 3, 2009, Lindblad issued a note payable to Cruise/Ferry Master Fund I, N.V. (see Note 3 – Long-Term Debt). On December
11, 2014, Lindblad entered into a Profit Participation Loan Purchase Agreement with DVB Bank America, N.V. (“DVB”),
a Profit Participation Rights Purchase Agreement with Buss Kreuzfahrtfonds 1 GmbH & Co. KG and Buss Kreuzfahrtfonds 2 GmbH
& Co. KG, and a Stock Purchase Agreement with Cruise/Ferry Finance Partners Private Foundation. These three agreements enabled
Lindblad to purchase the financial and equity interests in CFMF in order to recapture and extinguish an outstanding warrant to
purchase 60% of the outstanding equity of Lindblad on a fully diluted basis. On December 11, 2014, the date of the purchase agreements,
an initial payment of $25,000,000 was made to DVB under the Profit Participation Loan Purchase Agreement. The remaining payments
of (i) $22,733,000 to DVB, (ii) $48,440,000 to Buss Kreuzfahrtfonds 1 GmbH & Co. KG and Buss Kreuzfahrtfonds 2 GmbH &
Co. KG, as increased by $339,100 per month from December 31, 2014 until the close of the transaction, and (iii) $1.00 to Cruise/Ferry
Financing Partners Private Foundation were made on May 8, 2015 (“CFMF Closing”). In connection with the CFMF Closing,
the 60% warrant was cancelled; the junior debt note receivable was cancelled; and the related junior debt facility offset by the
outstanding unamortized balance of the debt discount was cancelled, resulting in a gain on the transfer of assets, and Lindblad
commenced liquidation procedures on CFMF. Utilizing the proceeds from the new loans, Lindblad also paid in full its preexisting
senior debt facility in the amount of $39.8 million held by DVB.
The
investment in CFMF was liquidated subsequent to the purchase of CFMF on May 8, 2015. The CFMF assets acquired were the junior
mortgage note receivable and warrant and both were cancelled and resulted in the removal of the junior mortgage note receivable,
which had a relative fair value of $8.5 million, and related junior debt, which had a fair value of $16.0 million (a face value
of $20.0 million less the debt discount of $4.0 million). This resulted in a $7.5 million gain on the transfer of assets and an
$83.7 million adjustment to additional paid-in capital for the cancellation of the warrant.
Assignment
and Assumption Agreement
In
connection with Lindblad’s agreement to purchase CFMF, Mr. Lindblad earned a success fee of $5,000,000 from DVB for the
purchase of CFMF (DVB was a partner in CFMF and the lender of Lindblad’s preexisting senior debt facility).
On
March 9, 2015, Mr. Lindblad and Lindblad entered into an Assignment and Assumption Agreement pursuant to which Mr. Lindblad (i)
assigned and transferred to Lindblad his right to receive a $5,000,000 fee payable to Mr. Lindblad personally by DVB and (ii)
exercised his outstanding option to purchase 809,984 shares (converted from 2,857 shares at the merger date) of Lindblad’s
stock for $92,538 in aggregate exercise proceeds. In exchange for the assignment to Lindblad of the fee payable by DVB, all of
Mr. Lindblad’s obligations under his loan agreement with Lindblad (the “Mr. Lindblad Loan Agreement”), which
had a balance of principal and accrued interest of $2,830,447 as of March 9, 2015, were deemed satisfied in full, the Mr. Lindblad
Loan Agreement and related promissory note were terminated, and Mr. Lindblad’s obligation to pay the aggregate exercise
price for the exercise of the option described above was satisfied in full. On May 8, 2015, Lindblad received the $5,000,000 fee
from DVB and compensated Mr. Lindblad $4,956,160 (success fee compensation expense), which was paid by settling the $2,830,447
outstanding amount of principal and interest owed and the aggregate exercise proceeds of $92,538 payable in connection with the
exercise of the option (above), and also offset by $2,033,175 in required withholding taxes.
Fair
Value Measurements and Disclosure
The
Company applies ASC 820, “Fair Value Measurements and Disclosures,” which expands disclosures for assets and liabilities
that are measured and reported at fair value on a recurring basis. Fair value is defined as an exit price, representing the amount
that would be received upon the sale of an asset or payment to transfer a liability in an orderly transaction between market participants.
Fair value is a market-based measurement that is determined based on assumptions that market participants would use in pricing
an asset or liability. A three-tier fair value hierarchy is used to prioritize the inputs in measuring fair value as follows:
Level
1 |
Quoted
market prices (unadjusted) in active markets for identical assets or liabilities that the reporting entity has the ability
to access at measurement date. |
|
|
Level
2 |
Quoted
market prices for similar assets or liabilities in active markets, quoted prices for identical or similar assets or liabilities
in markets that are not active, or other inputs that are observable, either directly or indirectly. Fair value is determined
through the use of models or other valuation methodologies. |
|
|
Level
3 |
Significant
unobservable inputs for assets or liabilities that cannot be corroborated by market data. Fair value is determined by the
reporting entity’s own assumptions utilizing the best information available, and includes situations where there is
little market activity for the investment. |
The
carrying amounts of cash and cash equivalents, accounts payable and accrued expenses, approximate fair value due to the short-term
nature of these instruments.
The
asset’s or liability’s fair value measurement within the fair value hierarchy is based upon the lowest level of any
input that is significant to the fair value measurement. The following table provides a summary of the liabilities that were measured
at fair value on a recurring basis as of December 31, 2014. As of September 30, 2015, the Company had no liabilities that were
measured at fair value on a recurring basis.
| |
Total | | |
Quoted
Prices in Active Markets for Identical Assets or Liabilities
(Level 1) | | |
Quoted
Prices for Similar Assets or Liabilities in Active Markets
(Level 2) | | |
Significant
Unobservable Inputs
(Level 3) | |
December 31, 2014 | |
| | |
| | |
| | |
| |
Obligation for the repurchase of common shares subject to put | |
$ | 4,965,792 | | |
$ | - | | |
$ | - | | |
$ | 4,965,792 | |
Lindblad
and certain of its stockholders who acquired shares through the exercise of stock options, entered into agreements providing for
the redemption of outstanding shares at any time by the holder. Accordingly, these shares were subject to repurchase under the
terms of these agreements. As of December 31, 2014, there were 1,912,833 (converted from 6,747 shares as a result of the merger)
shares outstanding subject to such redemption.
The
obligation for the repurchase of common shares was cancelled as a result of the merger on July 8, 2015.
Level
3 liabilities are valued using unobservable inputs to the valuation methodology that are significant to the measurement of fair
value. For fair value measurements categorized within Level 3 of the fair value hierarchy, the Company’s Chief Financial
Officer determined its valuation policies and procedures. The development and determination of the unobservable inputs for Level
3 fair value measurements and fair value calculations are the responsibility of the Company’s Chief Financial Officer with
support from the Company’s consultants and which are approved by the Chief Financial Officer.
Level
3 financial liabilities consist of obligations for which there is no current market for these securities such that the determination
of fair value requires significant judgment or estimation. Changes in fair value measurements categorized within Level 3 of the
fair value hierarchy are analyzed each period based on changes in estimates or assumptions and recorded as appropriate.
The
fair value of the Company’s common stock was determined by the Company and was derived from a valuation prepared by the
Company’s Chief Financial Officer using a weighted analysis of peer multiples of earnings before interest, taxes, depreciation
and amortization (“EBITDA”) and discounted cash flows.
Income
Taxes
Deferred
tax assets and liabilities are recognized for the estimated future tax consequences attributable to differences between the financial
statement carrying amounts of existing assets and liabilities and their respective tax bases, and operating loss and tax credit
carryforwards. Deferred tax assets and liabilities are measured using enacted tax rates in effect for the year in which those
temporary differences are expected to be recovered or settled. The measurement of net deferred tax assets is reduced by the amount
of any tax benefit that, based on available evidence, is not expected to be realized, and a corresponding valuation allowance
is established. The determination of the required valuation allowance against net deferred tax assets was made without taking
into account the deferred tax liabilities created from the book and tax differences on indefinite-lived assets.
The
Company accounts for income taxes using the asset and liability method, under which it recognizes deferred income taxes for the
tax consequences attributable to differences between the financial statement carrying amounts and the tax bases of existing assets
and liabilities, as well as for tax loss carryforwards and tax credit carryforwards. The Company measures deferred tax assets
and liabilities using enacted tax rates expected to apply to taxable income in the years in which those temporary differences
are expected to be recoverable or settled. The Company recognizes the effect on deferred taxes of a change in tax rates in income
in the period that includes the enactment date. The Company provides a valuation allowance against deferred tax assets if, based
upon the weight of available evidence, the Company does not believe it is “more-likely-than-not” that some or all
of the deferred tax assets will be realized. The Company will continue to evaluate the deferred tax asset valuation allowance
balances in all of our foreign and U.S. companies to determine the appropriate level of valuation allowances.
The
Company is subject to income taxes in both the U.S. and the non-U.S. jurisdictions in which it operates. The Company regularly
assesses the potential outcome of current and future examinations in each of the taxing jurisdictions when determining the adequacy
of the provision for income taxes. The Company has only recorded financial statement benefits for tax positions which it believes
reflect the “more-likely-than-not” criteria of FASB’s authoritative guidance on accounting for uncertainty in
income taxes, and it has established income tax reserves in accordance with this guidance where necessary. Once a financial statement
benefit for a tax position is recorded or a tax reserve is established, the Company adjusts it only when there is more information
available or when an event occurs necessitating a change. While the Company believes that the amount of the recorded financial
statement benefits and tax reserves reflect the more-likely-than-not criteria, it is possible that the ultimate outcome of current
or future examinations may result in a reduction to the tax benefits previously recorded on its condensed consolidated financial
statements or may exceed the current income tax reserves in amounts that could be material. As of September 30, 2015 and December
31, 2014, the Company had a liability for unrecognized tax benefits of $638,862 and $447,145, respectively, which was included
in other long-term liabilities on the Company’s condensed consolidated balance sheets. The guidance also discusses the classification
of related interest and penalties on income taxes. The Company’s policy is to record interest and penalties on uncertain
tax positions as a component of income tax expense. During the three months ended September 30, 2015 and 2014, included in income
tax expense was $15,727 and $10,462, respectively, representing interest and penalties on uncertain tax positions. During the
nine months ended September 30, 2015 and 2014, included in income tax expense was $22,217 and $31,386, respectively, representing
interest and penalties on uncertain tax positions.
The Company is
subject to tax audits in all jurisdictions for which it files tax returns. Tax audits by their very nature are often complex and
can require several years to complete. Currently, there is a U.S. federal tax audit pending for 2013, and no state or foreign
jurisdiction tax audits pending. The Company’s corporate U.S. federal and state tax returns from 2009 to 2014 remain subject
to examination by tax authorities and the Company’s foreign tax returns from 2009 to 2014 remain subject to examination
by tax authorities.
Management’s Evaluation of Subsequent Events
Management evaluated events
that have occurred after the balance sheet date through the date the financial statements are issued. Based upon the evaluation,
other than as described in Note 1 – Business, management did not identify any recognized or nonrecognized subsequent events
that would have required adjustment or disclosure in the condensed consolidated financial statements.
Recent
Accounting Pronouncements
In
August 2015, FASB issued Accounting Standards Update (“ASU”) No. 2015-15, “Interest-Imputation of Interest”
(Subtopic 835-30). This ASU adds SEC paragraphs pursuant to the SEC Staff Announcement at the June 18, 2015 Emerging Issues Task
Force meeting about the presentation and subsequent measurement of debt issuance costs associated with line-of-credit arrangements.
Given the absence of authoritative guidance within ASU No. 2015-03, “Interest—Imputation of Interest” (Subtopic
835-30): Simplifying the Presentation of Debt Issuance Costs, related to line-of-credit arrangements, the SEC staff would not
object to an entity deferring and presenting debt issuance costs as an asset and subsequently amortizing the deferred debt issuance
costs ratably over the term of the line-of-credit arrangement, regardless of whether there are any outstanding borrowings on the
line-of-credit arrangement. The Company adopted this ASU in the third quarter of 2015 and its adoption did not have a material
impact to the Company’s condensed consolidated financial statements.
In
August 2015, FASB issued ASU No. 2015-14, “Revenue from Contracts with Customers – Deferral of the Effective Date”
(Topic 606). The amendments in this ASU defer the effective date of ASU No. 2014-09, “Revenue from Contracts with Customers,”
for all entities by one year. Public business entities, certain not-for-profit entities, and certain employee benefit plans should
apply the guidance in Update 2014-09 to annual reporting periods beginning after December 15, 2017, including interim reporting
periods within that reporting period. Earlier application is permitted only as of annual reporting periods beginning after December
15, 2016, including interim reporting periods within that reporting period. The Company will evaluate the effects, if any, that
adoption of this ASU will have on its condensed consolidated financial statements.
In
May 2014, FASB issued ASU No. 2014-09, “Revenue from Contracts with Customers” (Topic 606), which supersedes the revenue
recognition requirements in ASC Topic 605, “Revenue Recognition,” and most industry-specific guidance. This ASU is
based on the principle that revenue is recognized to depict the transfer of goods or services to customers in an amount that reflects
the consideration to which the entity expects to be entitled in exchange for those goods or services. The ASU also requires additional
disclosure about the nature, amount, timing and uncertainty of revenue and cash flows arising from customer contracts, including
significant judgments and changes in judgments, and assets recognized from costs incurred to obtain or fulfill a contract. The
amendments in the ASU must be applied using one of two retrospective methods and are effective for annual and interim periods
beginning after December 15, 2016. Early adoption is not permitted. The Company will evaluate the effects, if any, that adoption
of this ASU will have on its condensed consolidated financial statements.
In
July 2015, FASB issued ASU No. 2015-11, “Simplifying the Measurement of Inventory” (Topic 330). This ASU requires
entities using the first-in, first-out method or average cost method to value the inventory based on the lower of cost or net
realizable value. Net realizable value is defined in this ASU as the “estimated selling price in the ordinary course of
business, less reasonably predictable costs of completion, disposal and transportation (selling costs).” For public business
entities, the amendments in this ASU are effective for financial statements issued for fiscal years beginning after December 15,
2015, and interim periods within those fiscal years. The Company adopted this ASU in the third quarter of 2015 and its adoption
did not have a material impact to the Company’s condensed consolidated financial statements.
Management
does not believe that any other recently issued, but not yet effective, accounting standards upon adoption would have a material
effect on the accompanying condensed consolidated financial statements.
NOTE
3 – LONG-TERM DEBT
New
Credit Facility
On
May 8, 2015, Lindblad entered into a Credit Agreement with Credit Suisse as Administrative Agent and Collateral Agent for a $150.0
million facility in the form of a $130.0 million U.S. Term Loan and a $20.0 million Cayman Loan for the benefit of Lindblad’s
foreign subsidiaries. The gross proceeds from the Loans, net of discounts, fees and expenses, were $139.5 million. The loans incurred
interest at a rate based on an adjusted ICE Benchmark administration LIBO Rate (subject to a floor of 1.00%) plus a spread of
5.50%. The net proceeds from the term loan advances were used to repay Lindblad’s existing debt, fund a portion of the purchase
consideration paid in connection with Lindblad’s purchase of the financial and equity interests owned by CFMF and for general
corporate purposes.
On July 8, 2015, the Company
entered into an amended and restated credit agreement with Credit Suisse as Administrative Agent and Collateral Agent increasing
by $25.0 million the U.S. Term Loan to a $155.0 million facility (total facility of $175.0 million excludes $10.9 million in deferred
financing costs). The gross proceeds net of discounts, fees and expenses from the larger Amended Credit Agreement were $24.7 million,
which will be used for general corporate purposes. The Loans bear interest at a rate based on an adjusted ICE Benchmark administration
LIBO Rate (subject to a floor of 1.00%) plus a spread of 4.50%. The Credit Agreement (i) requires the Company to satisfy certain
financial covenants as set forth in the Amended Credit Agreement; (ii) limits the amount of indebtedness the Company may incur;
(iii) limits the amount the Company may spend in connection with certain types of investments; and (iv) requires the delivery
of certain periodic financial statements and an operating budget and (v) requires the mortgaged vessels to be maintained in good
working condition.. The U.S. Term Loan and the Cayman Loan both mature on May 8, 2021.
Senior
Credit Facility
On
October 16, 2007, Lindblad entered into a senior secured term loan (the “Original Senior Credit Facility”) with DVB
for up to the maximum of the lesser of $35,000,000 or an amount equal to 60% of the fair market value of Lindblad’s vessels.
On July 19, 2012 and April 12, 2013, Lindblad amended and restated the Original Senior Credit Facility (“Senior Credit Facility”).
On
May 8, 2015, using the proceeds from the loans (as discussed above), Lindblad paid off the Senior Credit Facility in full. The
outstanding principal and accrued interest balance on the Senior Credit Facility was $39,778,117 and $212,103, respectively.
Junior
Credit Facility
On
October 16, 2007, Lindblad entered into a junior secured term loan (the “Original Junior Credit Facility”) with DVB
for up to the maximum of the lesser of $11,000,000 or an amount equal to 76% of the fair market value of Lindblad’s vessels.
On March 9, 2009, Lindblad entered into an amendment to its Original Junior Credit Facility (the “Amended Junior Credit
Facility”). The amendment (a) named DVB as agent for new lenders – Cruise Ferry Master Fund I N.V., (b) increased
the facility to a term loan of $15,000,000 and a revolving loan of $10,000,000, and (c) extended the maturity of the junior facility
to January 18, 2014. In consideration for this amendment and certain other accommodations under the terms of the Original Junior
Credit Facility, Lindblad issued a warrant for the purchase of 60% of the fully diluted shares of Lindblad to CFMF. On January
19, 2010 and on July 19, 2012, Lindblad amended its Amended Junior Credit Facility.
On
May 8, 2015, using the proceeds from the loans (as discussed above), Lindblad paid off the Amended Junior Credit Facility in full.
The outstanding principal balance and accrued interest on the Junior Credit Facility was $20,000,000 and $1,222,222.
For
the three months ended September 30, 2015 and 2014, total debt discount and deferred financing costs charged to amortization and
interest expense was $524,499 and $188,612, respectively. For the nine months ended September 30, 2015 and 2014, total debt discount
and deferred financing costs charged to amortization and interest expense was $2,733,447 and $553,047, respectively.
Long-Term
Debt Outstanding
As
of September 30, 2015 and December 31, 2014, the following long-term debt instruments were outstanding:
| |
As
of | |
| |
September
30, 2015 | | |
December
31, 2014 | |
| |
Principal | | |
(unaudited)
Discount and Deferred Financing Costs, net | | |
Balance,
net of discount | | |
Principal | | |
Discount | | |
Balance,
net of discount | |
Credit
Facility | |
$ | 174,562,500 | | |
$ | 10,115,495 | | |
$ | 164,447,005 | | |
$ | - | | |
$ | - | | |
$ | - | |
Senior
Credit Facility | |
| - | | |
| - | | |
| - | | |
| 41,003,232 | | |
| - | | |
| 41,003,232 | |
Junior
Credit Facility | |
| - | | |
| - | | |
| - | | |
| 20,000,000 | | |
| 4,313,594 | | |
| 15,686,406 | |
Total
long-term debt | |
| 174,562,500 | | |
| 10,115,495 | | |
| 164,447,005 | | |
| 61,003,232 | | |
| 4,313,594 | | |
| 56,689,638 | |
Less
current portion | |
| 1,750,000 | | |
| - | | |
| 1,750,000 | | |
| 4,934,030 | | |
| - | | |
| 4,934,030 | |
Total
long-term debt, non-current | |
$ | 172,812,500 | | |
$ | 10,115,495 | | |
$ | 162,697,005 | | |
$ | 56,069,202 | | |
$ | 4,313,594 | | |
$ | 51,755,608 | |
Future
minimum principal payments of long-term debt as of September 30, 2015 are as follows:
Year | |
| Amount | |
2015 (three months) | |
$ | 437,500 | |
2016 | |
| 1,750,000 | |
2017 | |
| 1,750,000 | |
2018 | |
| 1,750,000 | |
2019 | |
| 1,750,000 | |
2020 | |
| 1,750,000 | |
2021 | |
| 165,375,000 | |
| |
$ | 174,562,500 | |
NOTE
4 – COMMITMENTS AND CONTINGENCIES
Lease
Commitments
The
Company leases office space and equipment under long-term leases, which are classified as operating leases.
Rent expense was approximately
$223,558 and $681,937 for the three and nine months ended September 30, 2015, respectively, and $210,957 and $626,029 for the
three and nine months ended September 30, 2014, respectively. These amounts are recorded within general and administrative expenses
on the accompanying condensed consolidated statements of income.
Fleet Expansion
During the third
quarter of 2015, the Company signed a non-binding letter of intent to build two new coastal vessels with expected deliveries on
target for the second quarter of 2017 and 2018. The Company paid a $4 million non-refundable slot fee to preserve a shipyard’s
capacity for the purpose of these builds.
Royalty
Agreement – National Geographic
The Company is engaged
in an alliance and license agreement with National Geographic, which allows the Company to use the National Geographic name and
logo. In return for these rights, the Company is charged a royalty fee. The royalty fee is included within selling and marketing
expense on accompanying condensed consolidated statements of income. The amount is calculated based upon a percentage of ticket
revenue less travel agent commission, including the revenue received from cancellation fees and any revenue received from the
sale of voyage extensions. A voyage extension occurs when a guest extends their trip with pre- or post-voyage hotel nights and
is included within tour revenues on the accompanying condensed consolidated statements of income. The royalty expense is recognized
at the time of revenue recognition. See Note 2 for a description of the Company’s revenue recognition policy. Royalty expense
for the three and nine months ended September 30, 2015 was $1,290,561 and $3,677,200, respectively, and for the three and nine
months ended September 30, 2014 was $1,078,381 and $3,201,099, respectively.
The
balances outstanding to National Geographic as of September 30, 2015 and December 31, 2014, are $1,397,054 and $999,064, respectively,
and are included in accounts payable and accrued expenses on the accompanying condensed consolidated balance sheets.
In
March 2015, Lindblad and National Geographic extended their alliance and license agreement until the year 2025. Payment of royalties
earned during the extension period will be valued and recorded in the Company’s condensed consolidated financial statements
in a manner consistent with the foregoing disclosure.
In connection with the merger on July 8, 2015, the Company, Mr. Lindblad and National Geographic entered into
a Call Option agreement where Mr. Lindblad agreed to grant National Geographic 2,387,499 option shares as consideration for the
assumption of the alliance and license agreements and the tour operator agreement. The Company recorded a $13,751,994 long-term
asset using a fair value of $5.76 per option share. The Company is amortizing the cost until March 31, 2020. For the three and
nine months ended September 30, 2015, the Company recorded in selling and marketing expense on the condensed consolidated statements
of income, $670,329 in amortization of the National Geographic fee. The asset was valued using a Black-Scholes valuation method
with the following assumptions:
Stock price: | |
$ | 10.75 at 7/9/15
| |
Exercise
price: | |
$ | 10.00 | |
Expected
term: | |
| 5
years | |
Volatility: | |
| 60 | % |
Risk
free rate: | |
| 1.58 | % |
Dividend
rate: | |
| 0 | % |
Charter
Commitments
From
time to time, the Company enters into agreements to charter vessels onto which it holds its tours and expeditions. Future minimum
payments on its charter agreements are as follows:
For the years ended December 31, | |
Amount | |
2015 (three months) | |
$ | 1,424,395 | |
2016 | |
| 6,127,050 | |
2017 | |
| 3,687,718 | |
Total | |
$ | 11,239,163 | |
Legal
Proceedings
The
Company is involved in various claims, legal actions and regulatory proceedings arising from time to time in the ordinary course
of business.
NOTE
5 – EMPLOYEE BENEFIT PLAN
The Company has a 401(k)
profit sharing plan and trust for its employees. The Company matches 25% of employee contributions up to annual maximum of $1,800
and $1,500 for 2015 and 2014, respectively. For the three months ended September 30, 2015 and 2014, the Company’s benefit
plan contribution amounted to $35,725 and $24,120, respectively. For the nine months ended September 30, 2015 and 2014, the Company’s
benefit plan contribution amounted to $149,366 and $123,064, respectively. The benefit plan contribution is recorded within general
and administrative expenses on the accompanying condensed consolidated statements of income.
NOTE
6 – STOCK-BASED COMPENSATION
Stock Options
The fair value of
stock options is amortized on a straight line basis over the requisite service periods of the respective awards. Stock-based compensation
expense related to stock options was $1,213,722 and $0 for the three months ended September 30, 2015 and 2014, respectively. Stock-based
compensation expense related to stock options was $3,641,169 and $0 for the nine months ended September 30, 2015 and 2014, respectively.
Stock compensation expense is included in general and administrative expenses on the accompanying condensed consolidated statements
of income. As of September 30, 2015, the unamortized value of options was $10,649,435, and is expected to be expensed over a period
of 2.2 years.
At the merger date,
the Company assumed the 13,480 outstanding Lindblad stock options and converted such options into options to purchase an aggregate
of 3,821,696 shares of common stock of LEX with an exercise price of $1.76 per share. Under the assumption agreement, the exercise
proceeds, service period and other terms remained the same, except for the vesting dates and option term. There were
no incremental costs resulting from the modification of the equity awards and the requisite service is expected to be rendered
with no change in the service period. Therefore, the total recognized compensation cost for the equity awards remains the fair
value at the original grant date (ASC 718-20).
During September
2015, 1,272,625 option shares vested and were exercised during the period. The option shares were issued using cashless transactions,
approved by management, and were used in exchange for the required exercise proceeds and payment of any related payroll withholding
taxes. Using a fair value of $9.30 per share and an exercise price of $1.76 per share, 240,841 shares were transferred to provide
the $2.2 million in exercise proceeds required for the transactions. Using a fair value of $9.30 per share, 524,662 shares were
transferred to provide the $4.9 million in proceeds required to pay the payroll withholding taxes for the transactions. The balance
of the option shares of 507,122 shares were issued as a result of the transactions.
The following table
is a summary of activity under the Company’s 2012 Incentive Stock Plan:
|
|
* Shares |
|
|
Weighted Average Exercise
* Price |
|
|
Weighted Average Grant Date * Fair Value |
|
|
Weighted Average Contractual Life (Years) |
|
|
Aggregate Intrinsic
* Value |
|
Options outstanding as of January 1, 2015 |
|
|
4,631,680 |
|
|
$ |
1.47 |
|
|
$ |
3.72 |
|
|
|
9.7 |
|
|
$ |
16,315,198 |
|
Granted |
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
|
|
|
|
|
|
Exercised |
|
|
(2,082,609 |
) |
|
|
1.12 |
|
|
|
3.27 |
|
|
|
|
|
|
|
|
|
Forfeited |
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
|
|
|
|
|
|
Options outstanding as of September 30, 2015 |
|
|
2,549,071 |
|
|
|
1.76 |
|
|
|
3.81 |
|
|
|
3.3 |
|
|
|
20,418,059 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Exercisable as of January 1, 2015 |
|
|
809,984 |
|
|
|
0.11 |
|
|
|
3.27 |
|
|
|
8.0 |
|
|
|
3,950,802 |
|
Vested |
|
|
1,272,625 |
|
|
|
1.76 |
|
|
|
3.81 |
|
|
|
1.0 |
|
|
|
9,595,593 |
|
Exercised |
|
|
(2,082,609 |
) |
|
|
1.12 |
|
|
|
3.60 |
|
|
|
3.7 |
|
|
|
(13,546,395 |
) |
Forfeited |
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
|
|
|
|
|
|
Exercisable as of September 30, 2015 |
|
|
- |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
*Option shares and values were adjusted
for conversion as of the merger date July 8, 2015.
The Company’s
board of directors and stockholders approved the 2015 Plan providing the Company with the ability to issue up to 2,500,000 shares
of common stock to employees, consultants and non-employee directors. The 2015 Plan provides for the grant of stock options, including
incentive stock options and nonqualified stock options, stock appreciation rights, restricted stock, restricted stock units, and
other stock or cash-based awards. As of September 30, 2015, no awards had been made under the 2015 Plan.
Item
2: |
MANAGEMENT’S
DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS |
The
following discussion and analysis addresses material changes in the financial condition and results of operations of the Company
for the periods presented. This discussion and analysis should be read in conjunction with its unaudited condensed consolidated
financial statements and related notes included in this Form 10-Q, as well as its audited consolidated financial statements and
related notes included in the Company’s Definitive Proxy Statement, filed with the Securities and Exchange Commission on
June 24, 2015.
Cautionary
Note Regarding Forward-Looking Statements
Any
statements in this Quarterly Report on Form 10-Q about our expectations, beliefs, plans, objectives, prospects, financial condition,
assumptions or future events or performance are not historical facts and are “forward-looking statements” as that
term is defined under the federal securities laws. These statements are often, but not always, made through the use of words or
phrases such as “believe,” “anticipate,” “should,” “intend,” “plan,”
“will,” “expects,” “estimates,” “projects,” “positioned,” “strategy,”
“outlook” and similar words. You should read the statements that contain these types of words carefully. Such forward-looking
statements are subject to a number of risks, uncertainties and other factors that could cause actual results to differ materially
from what is expressed or implied in such forward-looking statements. There may be events in the future that we are not able to
predict accurately or over which we have no control. Potential risks and uncertainties include, but are not limited to:
|
● |
changes
adversely affecting the business in which we are engaged; |
|
|
|
|
● |
management
of our growth and our ability to execute on our planned growth; |
|
|
|
|
● |
general
economic conditions; |
|
|
|
|
● |
our
business strategy and plans; |
|
|
|
|
● |
our
compliance with laws and regulations, |
|
|
|
|
● |
compliance
with the financial and/or operating covenants in our Amended Credit Agreement; |
|
|
|
|
● |
adverse
publicity regarding the cruise industry in general; |
|
|
|
|
● |
loss
of business due to competition; |
|
|
|
|
● |
the
result of future financing efforts; and |
|
|
|
|
● |
those
risks discussed in our Annual Report on Form 10-K for the year ended December 31, 2014 and in our subsequently filed quarterly
reports on Form 10-Q. |
We
urge you not to place undue reliance on these forward-looking statements, which speak only as of the date of this report. We do
not undertake any obligation to release publicly any revisions to such forward-looking statements to reflect events or uncertainties
after the date hereof or to reflect the occurrence of unanticipated events.
Unless the context otherwise
requires, in this Form 10-Q, (i) “Capitol” refers Capitol Acquisition Corp. II and its subsidiaries prior to the mergers
with Lindblad; (ii) “Lindblad” refers to Lindblad Expeditions, Inc., a New York corporation, and its subsidiaries
prior to the mergers with Capitol and (iii) “Company,” “LEX,” “we,” “us,” “our,”
and “ours” refer to Lindblad Expeditions Holdings, Inc., the combined company and its subsidiaries following the mergers.
Business
Overview
We currently operate a
fleet of six expedition ships owned by our subsidiaries and four seasonal charter vessels. Our mission is offering
life-changing adventures on all seven continents, and pioneering innovative ways to allow our guests to connect with exotic
and remote places. Our expedition ships are customized, nimble and intimately-scaled vessels that are able to venture where
larger cruise ships cannot, thus allowing us to offer up-close experiences in the planet’s wild and remote places and
capitals of culture. Many of these expeditions involve travel to remote places with limited infrastructure and ports (such as
Antarctica and the Arctic) or places that are best accessed by a ship (such as the Galapagos, Alaska, Baja’s Sea of
Cortez, Costa Rica and Panama), and foster active engagement by guests. Each expedition ship is designed to be comfortable
and inviting, while being fully equipped with state-of-the-art tools for in-depth exploration. We also have an alliance with
the National Geographic Society (“National Geographic”), who often provides lecturers and National Geographic
experts, including photographers, writers, marine biologists, naturalists, field researchers and film crews.
The
key components of our business strategy are to deliver exceptional guest experiences, maximize occupancy levels, continually optimize
pricing methodologies, effectively manage itinerary offerings to meet guest demand, maximize and grow net yields, elevate brand
awareness and loyalty, and expand and operate the business in a safe, prudent and disciplined manner.
In the three months
ended September 30, 2015, we generated revenues of $58.6 million compared to revenues of $51.5 million for the three months ended
September 30, 2014, which represents an increase of $7.1 million, or 13.8%. Net income was $4.4 million and $7.3 million for the
three months ended September 30, 2015 and 2014, respectively. For the three months ended September 30, 2015, the Company generated
Adjusted EBITDA (as defined below) of $15.8 million compared to $13.6 million for the three months ended September 30, 2014.
In the nine months
ended September 30, 2015, we generated revenues of $163.5 million, which represented an increase of $9.8 million or 6.4% from revenues
of $153.7 million for the nine months ended September 30, 2014. Net income was $20.2 million and $20.8 million for the nine months
ended September 30, 2015 and 2014, respectively. For the nine months ended September 30, 2015, the Company generated Adjusted EBITDA
(as defined below) of $42.1 million compared to $38.7 million for the nine months ended September 30, 2014.
The
Company continues to focus on its core objectives of maximizing occupancy and optimizing pricing to drive strong net yield levels
across the Company. In 2014, Lindblad began the process of redeploying the National Geographic Orion, which came under
Lindblad management in 2013. This included adding departures from the Antarctic Peninsula and extensive travel across the Pacific
Ocean as well as marketing the vessel’s 2014 offerings in the U.S., a core marketing region where the Company commands strong
pricing. In 2016, the Company will further reposition the National Geographic Orion when the ship will be redeployed from
serving the Western Australian geographies to voyages in Europe for the northern hemisphere summer. The Company deploys chartered
vessels for various seasonal offerings and continually seeks to optimize its charter fleet to balance its inventory with demand
and maximized yields. The Company uses its charter inventory as a mechanism to both increase travel options of its existing and
prospective guests and also to test demand for certain areas and seasons to understand the potential for longer term deployments
and additional vessel needs.
The
Company has evaluated a range of strategies for expansion of guest capacity. The Company considers closely the expected return
on invested capital and the range of possibilities, such as new build programs, adding selected charters, and the acquisition
of existing ships or small operators, such as the acquisition of the National Geographic Orion. As the Company announced
in previous statements related to the merger, the Company is in discussions for the construction of two new coastal vessels for
delivery targeted in 2017 and 2018. These vessels are expected to have capacity of approximately 100 guests each and management
considers this investment to be an important step to meet increasing demand for the Company’s offerings. The new build process
will expose the Company to certain risks typically associated with new ship construction, which the Company is prepared to manage
through detailed planning and close monitoring by its internal marine team. The purchase of the ships will be funded through a
combination of cash available on the Company’s balance sheet and excess cash flow generated by the Company’s existing
operations.
Due
to the specific geographies in which the Company operates and the cost of providing access to fuel in its remote destinations,
the Company has historically not experienced significant fluctuations in fuel costs with changes in world fuel commodity prices.
However, the continued downward pressure is now becoming evident on fuel prices in all areas of the world in which the Company
operates. Fuel costs represented 3.6% and 4.2% of tour revenue for the three months and nine months ended September 30, 2015,
respectively, and 5.3% and 5.9% of tour revenue for the three and nine months ended September 30, 2014, respectively. The Company
has not hedged its fuel purchases historically.
The
Company maintains its fleet in accordance with applicable regulations, international conventions and insurance requirements. This
includes regularly scheduled, periodic inspections, dry docking, and overhaul. In addition, renovations and replacements of various
vessel elements are part of the ongoing process of maintaining the vessels to a high standard. Following the acquisition of the
National Geographic Orion, the vessel underwent an extensive dry dock process during which the Company added its own specific
modifications in order for the ship to meet its operational requirements. Although the age of the Company’s owned vessels
varies, to date, the age itself has not been a material factor in the annual maintenance expense incurred by the Company. On a
year-to-year basis, increases in maintenance expense for the current owned fleet are anticipated to grow in line with inflation.
Similar to others
in the industry, the Company has historically operated with a meaningful working capital deficit. This deficit is mainly attributable
to the fact that, under the Company’s business model, a vast majority of guest ticket receipts are collected in advance of
the applicable sailing date. These advance passenger receipts remain a current liability until the sailing date and the cash generated
from them is used interchangeably with cash on hand from other cash from operations. As a result of the Amended Credit Agreement,
and the merger proceeds the Company had net working capital of $140.9 million as of September 30, 2015 as compared to a working
capital deficit of $59.7 million as of December 31, 2014.
The
discussion and analysis of the Company’s financial condition and results of operations has been organized to present the
following:
|
● |
a
review of its financial presentation, including the descriptions of certain line items and key operational and financial metrics; |
|
|
|
|
● |
a
discussion of its results of operations for the three and nine months ended September 30, 2015 compared to the same periods
in 2014; and |
|
|
|
|
● |
a
discussion of liquidity and capital resources, including future capital and potential funding sources. |
Financial
Presentation
Description
of Certain Line Items
Tour
revenue
Tour
revenue consists of the following:
|
● |
Guest
ticket revenue recognized from the sale of guest tickets; and |
|
|
|
|
● |
Other
revenues from the sale of pre- or post-expedition excursions, hotel accommodations, and land-based expeditions; air transportation
to and from the ships, goods and services rendered onboard that are not included in guest ticket prices, trip insurance, and
cancellation fees. |
Cost
of tours
Cost
of tours includes the following:
|
● |
Direct
costs associated with revenues, including cost of pre- or post-expedition excursions, hotel accommodations, and land-based
expeditions, air and other transportation expenses, and cost of goods and services rendered onboard; |
|
● |
Payroll
costs and related expenses for shipboard personnel; |
|
● |
Food
costs for guests and crew, including complimentary food and beverage amenities for guests; |
|
● |
Fuel
costs and related costs of delivery, storage and safe disposal of waste; and |
|
● |
Other
expenses, such as land costs, port costs, repairs and maintenance, equipment expense, dry dock, ship insurance, and charter
hire costs. |
Selling
and marketing
Selling
and marketing expenses include commissions and a broad range of advertising and promotional expenses.
General
and administrative
General
and administrative expenses include the cost of shoreside vessel support, reservations and other administrative functions, including
salaries and related benefits, credit card commissions, professional fees and rent.
Key
Operational and Financial Metrics
The
Company uses a variety of operational and financial metrics, which are defined below, to evaluate its performance and financial
condition. The Company uses certain non-GAAP financial measures, such as EBITDA, Adjusted EBITDA, Net Yields and Net Cruise Costs,
to enable the Company to analyze its performance and financial condition. The Company utilizes these financial measures to manage
its business on a day-to-day basis and believes that they are the most relevant measures of performance. Some of these measures
are commonly used in the cruise industry to measure performance. The Company believes these non-GAAP measures provide expanded
insight to measure revenue and cost performance, in addition to the standard GAAP-based financial measures. There are no specific
rules or regulations for determining non-GAAP measures, and as such, they may not be comparable to measures used by other companies
within the industry. The presentation of non-GAAP financial information should not be considered in isolation or as a substitute
for, or superior to, the financial information prepared and presented in accordance with GAAP. You should read this discussion
and analysis of the Company’s financial condition and results of operations together with the condensed consolidated financial
statements and the related notes thereto also included within.
EBITDA
is net income (loss) excluding depreciation and amortization, net interest expense and income tax benefit (expense).
Adjusted
EBITDA is net income (loss) excluding depreciation and amortization, net interest expense, other income (expense), and income
tax benefit (expense), and other supplemental adjustments. The Company believes Adjusted EBITDA, when considered along with other
performance measures, is a useful measure as it reflects certain operating drivers of the business, such as sales growth, operating
costs, selling and administrative expense and other operating income and expense. The Company believes Adjusted EBITDA can provide
a more complete understanding of the underlying operating results and trends and an enhanced overall understanding of the Company’s
financial performance and prospects for the future. While Adjusted EBITDA is not a recognized measure under GAAP, management uses
this financial measure to evaluate and forecast business performance. Adjusted EBITDA is not intended to be a measure of liquidity
or cash flows from operations or a measure comparable to net income as it does not take into account certain requirements such
as unearned passenger revenue, capital expenditures and related depreciation, principal and interest payments, and tax payments.
The Company’s use of Adjusted EBITDA may not be comparable to other companies within the industry. Management compensates
for these limitations by using Adjusted EBITDA as only one of several measures for evaluating its business performance. In addition,
capital expenditures, which impact depreciation and amortization, interest expense, and income tax benefit (expense), are reviewed
separately by management.
Available
Guest Nights is a measurement of capacity and represents double occupancy per cabin (except single occupancy for a single
capacity cabin) multiplied by the number of cruise days for the period. The Company also records the number of guest nights available
on its limited land programs in this definition. The Company uses this measure to perform capacity and rate analysis to identify
the main non-capacity drivers that cause revenue and expense to vary.
Gross
Cruise Cost represents the sum of cost of tours plus selling and marketing expense and general and administrative expense.
Gross
Yield represents tour revenue divided by Available Guest Nights.
Guest
Nights Sold represents the number of guests carried for the period multiplied by the number of nights sailed within the period.
Maximum
Guests is a measure of capacity and represents the maximum number of guests in a period and is based on double occupancy per
cabin (except single occupancy for a single capacity cabin).
Net
Cruise Cost represents Gross Cruise Cost excluding commissions and certain other direct costs of guest ticket revenue and
other revenue.
Net
Cruise Cost excluding Fuel represents Net Cruise Cost excluding fuel costs.
Net
Revenue represents tour revenue less commissions and direct costs of other revenue.
Net
Yield represents Net Revenue divided by Available Guest Nights.
Number
of Guests represents the number of guests that travel with the Company in a period.
Occupancy
is calculated by dividing Guest Nights Sold by Available Guest Nights.
Foreign
Currency Translation
The Company translates
the assets and liabilities of its foreign operations that have functional currencies other than the U.S. dollar at exchange rates
in effect at the balance sheet date. Revenues and expenses of these foreign operations are translated at weighted-average exchange
rates for the period. Where the U.S. dollar is the functional currency, remeasurement adjustments and gains or losses resulting
from foreign currency transactions are recorded as foreign exchange gains or losses in the condensed consolidated statements of
income.
The
Company became subject to foreign currency translation in connection with Lindblad’s acquisition of Fillmore Pearl Holdings
Ltd., which operates partially in Australia and whose functional currency is the U.S. dollar.
Results
of Operations for the Three and Nine Months Ended September 30, 2015 and 2014
The
Company reported tour revenue, cost of tours, operating expenses, operating income and net income for the three and nine months
ended September 30, 2015 and 2014 as shown in the following table:
| |
Three Months Ended September 30, | | |
Nine Months Ended
September 30, | |
| |
2015 | | |
2014 | | |
2015 | | |
2014 | |
Tour revenues | |
$ | 58,561,323 | | |
$ | 51,540,429 | | |
$ | 163,512,874 | | |
$ | 153,706,109 | |
Cost of tours | |
| 25,443,716 | | |
| 22,594,085 | | |
| 71,330,704 | | |
| 68,671,913 | |
Operating expenses | |
| 27,357,771 | | |
| 18,267,524 | | |
| 76,038,672 | | |
| 55,104,464 | |
Operating income | |
| 5,759,836 | | |
| 10,678,820 | | |
| 16,143,498 | | |
| 29,929,732 | |
Net income | |
| 4,416,278 | | |
| 7,280,536 | | |
| 20,184,041 | | |
| 20,839,740 | |
Earnings per share –Common | |
| | | |
| | | |
| | | |
| | |
Basic | |
$ | 0.10 | | |
$ | 0.14 | | |
$ | 0.45 | | |
$ | 0.41 | |
Diluted | |
| 0.10 | | |
| 0.14 | | |
| 0.44 | | |
| 0.41 | |
Earnings per share – Class B | |
| | | |
| | | |
| | | |
| | |
Basic | |
$ | - | | |
$ | 0.14 | | |
$ | - | | |
$ | 0.41 | |
Diluted | |
| - | | |
| 0.14 | | |
| - | | |
| 0.41 | |
The
following table sets forth the Company’s operating data as a percentage of total revenue:
| |
For the Three Months Ended September 30, | | |
For the Nine Months Ended September 30, | |
| |
2015 | | |
2014 | | |
2015 | | |
2014 | |
| |
| | |
| | |
| | |
| |
Tour revenues | |
| 100.0 | % | |
| 100.0 | % | |
| 100.0 | % | |
| 100.0 | % |
| |
| | | |
| | | |
| | | |
| | |
Cost of tours | |
| 43.4 | % | |
| 43.8 | % | |
| 43.6 | % | |
| 44.7 | % |
Gross profit | |
| 56.6 | % | |
| 56.2 | % | |
| 56.4 | % | |
| 55.3 | % |
| |
| | | |
| | | |
| | | |
| | |
Operating expenses: | |
| | | |
| | | |
| | | |
| | |
General and administrative | |
| 16.6 | % | |
| 14.7 | % | |
| 16.9 | % | |
| 14.8 | % |
Selling and marketing | |
| 16.2 | % | |
| 15.1 | % | |
| 16.4 | % | |
| 15.4 | % |
Merger related expenses | |
| 9.4 | % | |
| 0.0 | % | |
| 8.1 | % | |
| 0.0 | % |
Depreciation and amortization | |
| 4.6 | % | |
| 5.7 | % | |
| 5.1 | % | |
| 5.6 | % |
Total operating expenses | |
| 46.8 | % | |
| 35.5 | % | |
| 46.5 | % | |
| 35.8 | % |
| |
| | | |
| | | |
| | | |
| | |
Operating income | |
| 9.8 | % | |
| 20.7 | % | |
| 9.9 | % | |
| 19.5 | % |
| |
| | | |
| | | |
| | | |
| | |
Other (expense) income: | |
| | | |
| | | |
| | | |
| | |
Change in fair value of obligation to repurchase shares of common stock | |
| 0.0 | % | |
| (4.8 | %) | |
| 0.0 | % | |
| (1.9 | %) |
Gain (loss) on foreign currency | |
| 0.2 | % | |
| 1.4 | % | |
| (0.0 | %) | |
| 0.3 | % |
Gain on transfer of assets | |
| 0.0 | % | |
| 0.0 | % | |
| 4.6 | % | |
| 0.0 | % |
Other (expense) income, net | |
| (0.0 | %) | |
| 0.0 | % | |
| 3.0 | % | |
| 0.0 | % |
Interest expense, net | |
| (5.0 | %) | |
| (2.5 | %) | |
| (4.9 | %) | |
| (2.6 | %) |
Total other (expense) income | |
| (4.8 | %) | |
| (5.9 | %) | |
| 2.7 | % | |
| (4.2 | %) |
| |
| | | |
| | | |
| | | |
| | |
Income before income taxes | |
| 5.0 | % | |
| 14.8 | % | |
| 12.6 | % | |
| 15.3 | % |
| |
| | | |
| | | |
| | | |
| | |
Income tax (benefit) expense | |
| (2.5 | %) | |
| 0.7 | % | |
| 0.3 | % | |
| 1.7 | % |
| |
| | | |
| | | |
| | | |
| | |
Net income | |
| 7.5 | % | |
| 14.1 | % | |
| 12.3 | % | |
| 13.6 | % |
The
following table sets forth the Company’s Available Guest Nights, Guest Nights Sold, Occupancy, Maximum Guests and Number
of Guests for the three and nine months ended September 30, 2015 and 2014:
| |
Three
Months Ended September 30, | | |
Nine
Months Ended September 30, | |
| |
2015 | | |
2014 | | |
2015 | | |
2014 | |
Available Guest Nights | |
| 53,235 | | |
| 47,047 | | |
| 144,399 | | |
| 137,827 | |
Guest Nights Sold | |
| 48,200 | | |
| 43,744 | | |
| 132,007 | | |
| 130,166 | |
Occupancy | |
| 90.5 | % | |
| 93.0 | % | |
| 91.4 | % | |
| 94.4 | % |
Maximum Guests | |
| 6,391 | | |
| 5,415 | | |
| 17,001 | | |
| 15,683 | |
Number of Guests | |
| 5,817 | | |
| 5,047 | | |
| 15,623 | | |
| 14,851 | |
The
following table shows the calculations of Gross Yield and Net Yield for the three and nine months ended September 30, 2015 and
2014. Gross Yield is calculated by dividing tour revenue by Available Guest Nights, and Net Yield is calculated by dividing Net
Revenue by Available Guest Nights.
| |
Three
Months Ended September 30, | | |
Nine Months
Ended September 30, | |
| |
2015 | | |
2014 | | |
2015 | | |
2014 | |
Guest ticket revenue | |
$ | 51,427,298 | | |
$ | 45,664,781 | | |
$ | 142,380,845 | | |
$ | 135,169,451 | |
Other revenues | |
| 7,134,025 | | |
| 5,875,648 | | |
| 21,132,029 | | |
| 18,536,658 | |
Tour Revenues | |
| 58,561,323 | | |
| 51,540,429 | | |
| 163,512,874 | | |
| 153,706,109 | |
Less: Commissions | |
| (4,205,456 | ) | |
| (3,449,808 | ) | |
| (11,328,554 | ) | |
| (10,141,819 | ) |
Less: Other expense | |
| (4,569,747 | ) | |
| (3,394,797 | ) | |
| (12,682,042 | ) | |
| (10,614,594 | ) |
Net
Revenue | |
$ | 49,786,120 | | |
$ | 44,695,824 | | |
$ | 139,502,278 | | |
$ | 132,949,696 | |
Available Guest Nights | |
| 53,235 | | |
| 47,047 | | |
| 144,399 | | |
| 137,827 | |
Gross Yield | |
$ | 1,100.05 | | |
$ | 1,095.51 | | |
$ | 1,132.37 | | |
$ | 1,115.21 | |
Net Yield | |
$ | 935.21 | | |
$ | 950.02 | | |
$ | 966.09 | | |
$ | 964.61 | |
The
following table shows the calculations of Gross Cruise Cost per Available Guest Night and Net Cruise Costs per Available Guest
Night for the three and nine months ended September 30, 2015 and 2014.
| |
Three
Months Ended September 30, | | |
Nine Months
Ended September 30, | |
| |
2015 | | |
2014 | | |
2015 | | |
2014 | |
Cost of tours | |
$ | 25,443,716 | | |
$ | 22,594,085 | | |
$ | 71,330,704 | | |
$ | 68,671,913 | |
Plus: Merger related expenses | |
| 5,494,975 | | |
| - | | |
| 13,265,866 | | |
| - | |
Plus: Selling and marketing | |
| 9,464,802 | | |
| 7,778,325 | | |
| 26,816,447 | | |
| 23,624,748 | |
Plus: General
and administrative | |
| 9,709,100 | | |
| 7,551,316 | | |
| 27,620,640 | | |
| 22,794,039 | |
Gross Cruise Cost | |
$ | 50,112,593 | | |
$ | 37,923,726 | | |
$ | 139,033,657 | | |
$ | 115,090,700 | |
Less: Commission expense | |
| (4,205,456 | ) | |
| (3,449,808 | ) | |
| (11,328,554 | ) | |
| (10,141,819 | ) |
Less: Other expenses | |
| (4,569,747 | ) | |
| (3,394,797 | ) | |
| (12,682,042 | ) | |
| (10,614,594 | ) |
Net Cruise Cost | |
$ | 41,337,390 | | |
$ | 31,079,121 | | |
$ | 115,023,061 | | |
$ | 94,334,287 | |
Less: Fuel expense | |
| (2,106,725 | ) | |
| (2,730,916 | ) | |
| (6,831,311 | ) | |
| (9,092,437 | ) |
Net Cruise Cost Excluding
Fuel | |
$ | 39,230,665 | | |
$ | 28,348,205 | | |
$ | 108,191,750 | | |
$ | 85,241,850 | |
Non-GAAP Adjustments: | |
| | | |
| | | |
| | | |
| | |
Stock-based compensation | |
| (1,213,722 | ) | |
| - | | |
| (3,641,169 | ) | |
| - | |
National Geographic fee amortization | |
| (670,239 | ) | |
| - | | |
| (670,239 | ) | |
| - | |
Merger related expenses | |
| (5,494,975 | ) | |
| - | | |
| (13,265,866 | ) | |
| - | |
Acquisition related
expenses | |
| - | | |
| - | | |
| - | | |
| (112,000 | ) |
Adjusted
Net Cruise Cost Excluding Fuel | |
$ | 31,851,729 | | |
$ | 28,348,205 | | |
$ | 90,614,476 | | |
$ | 85,129,850 | |
Available Guest Nights | |
| 53,235 | | |
| 47,047 | | |
| 144,399 | | |
| 137,827 | |
Gross Cruise Cost per Available Guest
Night | |
$ | 941.35 | | |
$ | 806.08 | | |
$ | 962.84 | | |
$ | 835.04 | |
Net Cruise Cost per Available Guest
Night | |
$ | 776.51 | | |
$ | 660.60 | | |
$ | 796.56 | | |
$ | 684.44 | |
Net Cruise Cost Excluding Fuel per Available
Guest Night | |
$ | 736.93 | | |
$ | 602.55 | | |
$ | 749.26 | | |
$ | 618.47 | |
Adjusted Net Cruise
Cost per Available Guest Night | |
$ | 637.90 | | |
$ | 660.60 | | |
$ | 674.84 | | |
$ | 683.63 | |
Adjusted Net Cruise Cost Excl. Fuel
per Available Guest Night | |
$ | 598.32 | | |
$ | 602.55 | | |
$ | 627.53 | | |
$ | 617.66 | |
The
following outlines the calculation of EBITDA and Adjusted EBITDA for the periods presented.
|
|
Three Months Ended
September 30, |
|
|
Nine Months Ended
September 30, |
|
|
|
2015 |
|
|
2014 |
|
|
2015 |
|
|
2014 |
|
Net income |
|
$ |
4,416,278 |
|
|
$ |
7,280,536 |
|
|
$ |
20,184,041 |
|
|
$ |
20,839,740 |
|
Income tax (benefit) expense |
|
|
(1,480,899 |
) |
|
|
333,518 |
|
|
|
388,933 |
|
|
|
2,576,010 |
|
Interest expense, net |
|
|
2,948,312 |
|
|
|
1,320,050 |
|
|
|
8,025,939 |
|
|
|
3,977,549 |
|
Depreciation and amortization expense |
|
|
2,688,894 |
|
|
|
2,937,883 |
|
|
|
8,335,719 |
|
|
|
8,685,677 |
|
EBITDA |
|
|
8,572,585 |
|
|
|
11,871,987 |
|
|
|
36,934,632 |
|
|
|
36,078,976 |
|
Change in fair value of obligation to |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
repurchase shares of common stock |
|
|
- |
|
|
|
2,463,336 |
|
|
|
- |
|
|
|
3,035,767 |
|
(Gain) loss on foreign currency translation |
|
|
(147,833 |
) |
|
|
(718,620 |
) |
|
|
46,533 |
|
|
|
(499,334 |
) |
Stock-based compensation |
|
|
1,213,722 |
|
|
|
- |
|
|
|
3,641,169 |
|
|
|
- |
|
Loss (gain) on transfer of assets |
|
|
23,978 |
|
|
|
- |
|
|
|
(7,501,948 |
) |
|
|
- |
|
Other non-cash income |
|
|
- |
|
|
|
- |
|
|
|
(5,000,000 |
) |
|
|
- |
|
National Geographic fee amortization
– non-cash |
|
|
670,239 |
|
|
|
- |
|
|
|
670,239 |
|
|
|
- |
|
Merger related expenses |
|
|
5,494,975 |
|
|
|
- |
|
|
|
13,265,866 |
|
|
|
- |
|
Acquisition related expenses |
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
112,000 |
|
Adjusted EBITDA |
|
$ |
15,827,666 |
|
|
$ |
13,616,703 |
|
|
$ |
42,056,491 |
|
|
$ |
38,727,409 |
|
Comparison
of Three and Nine Months Ended September 30, 2015 to Three and Nine Months Ended September 30, 2014
Tour
Revenues
In
the three months ended September 30, 2015, the Company generated revenues of $58.6 million compared to revenues of $51.5 million
for the three months ended September 30, 2014, which represents an increase of $7.1 million, or 13.8%. The change was primarily
the result of an increase of $5.7 million in guest ticket revenue to $51.4 million for the three months ended September 30, 2015
from $45.7 million for the three months ended September 30, 2014, brought about by an increase in both charter and owned ship
voyages, as well as the timing of drydocking in 2014, offset by a decrease in occupancy. Net Yield for the three months ended
September 30, 2015 decreased 1.6% to $935.21 compared to $950.02 for the three months ended September 30, 2014. The decrease was
primarily related to the decrease in occupancy in the quarter.
Tour
revenues for the nine months ended September 30, 2015 increased $9.8 million, or 6.4%, to $163.5 million from $153.7 million for
the nine months ended September 30, 2014. The increase in revenue was primarily the result of a $7.2 million increase in guest
ticket revenue from additional chartered and owned vessel voyages and an increase in tour prices, offset by a decrease in occupancy.
In addition, a strong demand for pre- and post-extensions and increased air ticket sales increased other revenue by $2.6 million.
Net Yield for the nine months ended September 30, 2015 amounted to $966.09 compared to $964.61 for the nine months ended September
30, 2014.
Cost
of Tours
Total
cost of tours increased $2.8 million, or 12.4%, to $25.4 million for the three months ended September 30, 2015 from $22.6 million
for the three months ended September 30, 2014. This increase was primarily related to a greater number of voyages offered, offset
by a decrease in the cost of fuel, dry dock and maintenance for the owned fleet. Adjusted Net Cruise Cost per Available Guest
Night decreased 3.4% to $637.90 for the three months ended September 30, 2015 compared to $660.60 for the three months ended September
30, 2014, with the decline primarily related to lower fuel costs.
Total
cost of tours increased $2.6 million, or 3.8%, to $71.3 million from $68.7 million for the nine months ended September 30, 2014.
This was primarily due to higher charter costs, land costs and air expense related to additional voyages offered, offset by decreases
in fuel and maintenance expenditures for the owned fleet. Adjusted Net Cruise Cost per Available Guest Night decreased 1.3% to
$674.84 for the nine months ended September 30, 2015 compared to $683.63 for the nine months ended September 30, 2014, with the
decline primarily related to lower fuel costs.
General
and Administrative Expenses
General and administrative
expenses for the three months ended September 30, 2015 increased by $2.2 million to $9.7 million compared to $7.5 million for
the three months ended September 30, 2014. This increase was primarily due to $1.2 million in stock options incentive compensation
expense and $0.5 million in increased professional fees for staffing changes and executive searches.
General and administrative
expenses for the nine months ended September 30, 2015 increased by $4.8 million to $27.6 million compared to $22.8 million for
the nine months ended September 30, 2014. This increase was primarily due $3.6 million in stock options incentive compensation
expense recorded in the first nine months of 2015 and $0.6 million in increased professional fees for staffing changes and executive
searches.
Selling
and Marketing Expenses
Selling
and marketing expenses for the three months ended September 30, 2015 increased $1.7 million, or 21.8%, to $9.5 million from $7.8
million for the three months ended September 30, 2014. This increase was due to $0.8 million higher commission expense related
to additional voyages offered and a $0.7 million National Geographic fee amortization incurred in connection with the merger.
Selling
and marketing expenses for the nine months ended September 30, 2015 increased $3.2 million, or 13.6%, to $26.8 million from $23.6
million for the nine months ended September 30, 2014. This increase was due to $1.2 million higher commission expense related
to additional voyages offered, $1.0 million higher expense related to advertising, collateral printing and postage to ensure high
yields for the remainder of 2015 and $0.7 million in National Geographic fee amortization in connection with the merger.
Merger Related Expenses
Merger related
expenses for one-time professional fees associated with the merger transaction between Lindblad and Capitol for the three months
ended September 30, 2015 was $5.5 million.
Merger related
expenses for the nine months ended September 30, 2015 was $13.3 million, which included $8.3 million of one-time professional fees
associated with the merger transaction between Lindblad and Capitol and $5.0 million in success fee compensation expense.
Depreciation
and Amortization Expenses
Depreciation
and amortization expenses for the three months ended September 30, 2015 and 2014 were $2.7 million and $2.9 million, respectively.
Depreciation
and amortization expenses for the nine months ended September 30, 2015 decreased $0.4 million to $8.3 million from $8.7 million
for the nine months ended September 30, 2014.
Other
(Expense) Income
Other
expense was $2.8 million for the three months ended September 30, 2015 compared to $3.1 million for the three months ended September
30, 2014, which represents a $0.3 million decrease. This change was primarily due to the following factors.
|
● |
Interest
expense, net, increased $1.6 million to $2.9 million for the three months ended September 30, 2015 from $1.3 million for the
three months ended September 30, 2014. The increase was primarily related to higher debt levels in 2015. |
|
● |
For
the three months ended September 30, 2015 and 2014, the Company recorded foreign currency translation gains of $0.1 million
and $0.7 million, respectively. The $0.6 million net decrease was primarily related to the strengthening of the Australian
dollar compared to the U.S. dollar. |
|
● |
The
Company incurred a loss in fair value of obligation to repurchase common shares of $2.5 million for the three months ended
September 30, 2014. |
Other
income was $4.4 million for the nine months ended September 30, 2015 compared to a $6.5 million expense for the nine months ended
September 30, 2014, which represents a $10.9 million increase in other income, net. This change was primarily due to the following
factors.
|
● |
Interest
expense, net, increased $4.0 million, to $8.0 million for the nine months ended September 30, 2015 from $4.0 million for the
nine months ended September 30, 2014. The increase was primarily the result of accelerated amortization of deferred finance
costs of $1.9 million related to the repayment of our senior debt in May 2015, as well as higher debt levels in 2015 following
the entry into the new credit agreement on May 8, 2015, amended on July 8, 2015. |
|
● |
Additional
income of $12.5 million in the nine months ended September 30, 2015 related to the $5.0 million success fee income for the
new debt financing in May 2015 and the gain on the disposal of assets of $7.5 million related to the junior debt in the CFMF
transaction. |
|
● |
For
the nine months ended September 30, 2015, the Company recorded $0.1 million in foreign currency translation losses compared
to $0.5 million in foreign currency translation gains for the nine months ended September 30, 2014. The $0.6 million net change
was primarily related to the strengthening of the Australian dollar compared to the U.S. dollar. |
|
● |
The
Company incurred a loss in fair value of obligation to repurchase common shares of $3.0 million for the nine months ended
September 30, 2014. |
Liquidity
and Capital Resources
Sources
and Uses of Cash for the Nine Months Ended September 30, 2015 and 2014
Net cash provided
by operating activities increased by $3.3 million for the nine months ended September 30, 2015 to $30.3 million from $27.0
million for the nine months ended September 30, 2014, primarily due to decreases in the liability for unearned passenger revenue
in 2014, stock compensation expense, and amortization of deferred financing costs offset by the gain on the transfer of assets
related to the CFMF transaction.
Net
cash used in investing activities was $75.7 million for the nine months ended September 30, 2015 compared to $3.2 million
for the nine months ended September 30, 2014. The $72.5 million increase in cash used in investing activities was primarily related
to the purchase in May 2015 of our investment in CFMF and a $4.8 million increase in purchases of property and equipment related
to growth capital expenditures. The $4.8 million includes a $4.0
million non-refundable slot fee to preserve a shipyard’s capacity for the Company’s plan to build two new coastal
vessels.
Net cash provided
by financing activities was $214.6 million for the nine months ended September 30, 2015 compared to $0.1 million for the nine
months ended September 30, 2014. The $214.5 million difference was primarily related to the $175.0 million in proceeds from the
new debt and $96.8 million in net proceeds from the merger partially offset by an increase of $38.5 million in repayments of long-term
debt and the addition of $10.9 million in deferred financing costs.
Funding
Needs and Sources
The Company has historically relied on a combination of cash flows provided by operations and the incurrence
of additional debt and/or the refinancing of existing debt to fund obligations. As of September 30, 2015, the Company had liquidity
of $208.8 million in cash and cash equivalents, excluding restricted cash. As a result of the Amended Credit Agreement, the Company
had net working capital of $140.9 million as of September 30, 2015 as compared to a working capital deficit of $59.7 million as
of December 31, 2014. Similar to others in the industry, Lindblad historically operated with a meaningful working capital deficit.
The deficit as of December 31, 2014 was mainly attributable to the fact that, under Lindblad’s business model, a vast majority
of guest ticket receipts are collected in advance of the applicable sailing date. These advance passenger receipts remain a current
liability until the sailing date. The cash generated from these advance receipts is used interchangeably with cash on hand from
other cash from operations. The cash received as advanced receipts can be used to fund operating expenses for the applicable future
sailing or otherwise, pay down credit facilities, invest in long-term investments or any other use of cash.
As
of September 30, 2015, the Company had approximately $164.4 million in long-term debt obligations, including the current portion
of long-term debt offset by debt discounts and deferred financing costs. The Company believes that its cash on hand, expected
future operating cash inflows and the Amended Credit Agreement will be sufficient to fund operations, debt service requirements,
capital expenditures, and to maintain compliance with financial covenants under the agreements governing the Company’s indebtedness
for the foreseeable future. There can be no assurance, however, that cash flows from operations and additional funding will be
available in the future to fund future obligations.
Debt
Covenants
On
May 8, 2015, Lindblad entered into a new credit agreement with Credit Suisse A.G. as Administrative Agent and Collateral Agent
(“Credit Agreement”) for a $150.0 million facility, which was subsequently increased to $175.0 million upon syndication
on July 8, 2015 (“Amended Credit Agreement”), in the form of a $155.0 million U.S. term loan (the “U.S. Term
Loan”) and a $20.0 million Cayman term loan for the benefit of Lindblad’s foreign subsidiaries (the “Cayman
Loan,” and together with the U.S. Term Loan, the “Loans”). The net proceeds from the Loans, net of discounts,
fees and expenses, were approximately $164.1 million. The Loans bear interest at a rate based on an adjusted ICE Benchmark Administration
LIBO Rate (subject to a floor of 1.00%) plus a spread of 4.50%. The U.S. Term Loan and the Cayman Loan both mature on May 8, 2021.
The net proceeds from the term loan advances were used to repay Lindblad’s existing debt, fund a portion of the purchase
consideration paid in connection with Lindblad’s purchase of the financial and equity interests in CFMF and for general
corporate purposes.
The
Amended Credit Agreement contains financial covenants that, among other things, (i) requires the Company to maintain a total net
leverage ratio of 4.75 to 1.00 initially, with 0.25 equal reductions annually thereafter until March 31, 2020, when the total
net leverage ratio shall be 3.50 to 1.00 thereafter; (ii) limits the amount of indebtedness the Company may incur generally and
specifically for intercompany debt, debt incurred to finance acquisitions and improvements, for capital and synthetic lease obligations,
for standby letters of credit, and in connection with refinancings; (iii) limits the amount the Company may spend in connection
with certain types of investments; and (iv) requires the delivery of certain periodic financial statements and an operating budget.
As of September 30, 2015, the Company was in compliance with the financial covenants.
Critical
Accounting Policies
For
a detailed discussion of the Critical Accounting Policies, please see Note 2 to the audited financial statements included in the
Company’s Definitive Proxy Statement filed on June 24, 2015 with the Securities and Exchange Commission.
Off-Balance
Sheet Arrangements
The
Company did not have any off-balance sheet arrangements as of September 30, 2015 and December 31, 2014.
Item
3: |
| QUANTITATIVE
AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK |
Our
exposure to market risk was discussed in the “Quantitative and Qualitative Disclosures About Market Risk” sections
contained in the Company’s Annual Report on Form 10-K and subsequently filed Form 10-Qs.
Item 4: |
| Controls
and Procedures |
Evaluation
of Disclosure Controls and Procedures
Under
the supervision and with the participation of our management, including our principal executive officer and principal financial
and accounting officer, we conducted an evaluation of the effectiveness of our disclosure controls and procedures as of the end
of the fiscal quarter ended September 30, 2015, as such term is defined in Rules 13a-15(e) and 15d-15(e) under the Securities
Exchange Act of 1934, as amended (the “Exchange Act”). Based on this evaluation, our principal executive officer and
principal financial and accounting officer have concluded that during the period covered by this report, our disclosure controls
and procedures were effective.
Disclosure
controls and procedures are designed to ensure that information required to be disclosed by us in our Exchange Act reports is
recorded, processed, summarized, and reported within the time periods specified in the SEC’s rules and forms, and that such
information is accumulated and communicated to our management, including our principal executive officer and principal financial
officer or persons performing similar functions, as appropriate to allow timely decisions regarding required disclosure.
Changes
in Internal Control over Financial Reporting
There
was no change in our internal control over financial reporting that occurred during the fiscal quarter covered by this Quarterly
Report on Form 10-Q that has materially affected, or is reasonably likely to materially affect, our internal control over financial
reporting.
Part 2: |
| OTHER
INFORMATION |
Item 1: |
| LEGAL
PROCEEDINGS |
The
Company is involved in various claims, legal actions and regulatory proceedings arising from time to time in the ordinary course
of business. We have protection and indemnity insurance that would be expected to cover any damages.
We operate in a rapidly
changing environment that involves a number of risks that could materially affect our business, financial condition or future
results, some of which are beyond our control. The risks and uncertainties that we believe are most important for you to consider
are discussed under the heading “Risk Factors” in the Company’s Annual Report on Form 10-K for the fiscal year
ended December 31, 2014 and subsequently filed quarterly reports on Form 10-Q.
Item 2: |
| UNREGISTERED
SALES OF EQUITY SECURITIES AND USE OF PROCEEDS |
Not
applicable.
Item 3: |
| DEfaults
upon senior securities |
Not
applicable.
Item 4: |
| MINE
SAFETY DISCLOSURES |
Not
applicable.
Item 5: |
| Other
information |
Not
applicable.
Number |
|
Description |
|
Included |
|
Form |
|
Filing
Date |
31.1 |
|
Certification
of Chief Executive Officer of Lindblad Expeditions Holdings, Inc. pursuant to Rule 13a-14(a) or Rule 15d-14(a) promulgated
under the Securities Exchange Act of 1934, as amended. |
|
Herewith |
|
|
|
|
31.2 |
|
Certification
of Chief Financial Officer of Lindblad Expeditions Holdings, Inc. pursuant to Rule 13a-14(a) or Rule 15d-14(a) promulgated
under the Securities Exchange Act of 1934, as amended. |
|
Herewith |
|
|
|
|
32.1 |
|
Certification
of Chief Executive Officer of Lindblad Expeditions Holdings, Inc. pursuant to Rule 13a-14(b) promulgated under the Securities
Exchange Act of 1934, as amended, and 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act
of 2002. |
|
Herewith |
|
|
|
|
32.2 |
|
Certification
of Chief Financial Officer of Lindblad Expeditions Holdings, Inc. pursuant to Rule 13a-14(b) promulgated under the Securities
Exchange Act of 1934, as amended, and 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act
of 2002. |
|
Herewith |
|
|
|
|
101.INS |
|
XBRL
Instance Document |
|
Herewith |
|
|
|
|
101.SCH |
|
Taxonomy
extension schema document |
|
Herewith |
|
|
|
|
101.CAL |
|
Taxonomy
extension calculation linkbase document |
|
Herewith |
|
|
|
|
101.LAB |
|
Taxonomy
extension label linkbase document |
|
Herewith |
|
|
|
|
101.PRE |
|
Taxonomy
extension presentation linkbase document |
|
Herewith |
|
|
|
|
SIGNATURE
Pursuant
to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf
by the undersigned, thereunto duly authorized, on November 9, 2015.
|
LINDBLAD
EXPEDITIONS HOLDINGS, INC. |
|
(Registrant) |
|
|
|
|
By |
/s/ Sven-Olof Lindblad |
|
|
Sven-Olof Lindblad |
|
|
Chief Executive
Officer and President |
32
Exhibit
31.1
Certification
I,
Sven-Olof Lindblad, certify that:
| 1. | I
have reviewed this Quarterly Report on Form 10-Q of Lindblad Expeditions Holdings, Inc.
(the “Registrant”); |
| | |
| 2. | Based
on my knowledge, this report does not contain any untrue statement of a material fact
or omit to state a material fact necessary to make the statements made, in light of the
circumstances under which such statements were made, not misleading with respect to the
period covered by this report; |
| | |
| 3. | Based
on my knowledge, the financial statements, and other financial information included in
this report, fairly present in all material respects the financial condition, results
of operations and cash flows of the Registrant as of, and for, the periods presented
in this report; |
| | |
| 4. | The
Registrant’s other certifying officer and I are responsible for establishing and
maintaining disclosure controls and procedures (as identified in Exchange Act Rules 13a-15(e)
and 15d-15(e)) and internal control over financial reporting (as defined in Exchange
Act Rules 13a-15(f) and 15d-15(f)) for the Registrant and have: |
| | |
| a) | designed
such disclosure controls and procedures, or caused such disclosure controls and procedures
to be designed under our supervision, to ensure that material information relating to
the Registrant, including its consolidated subsidiaries, is made known to us by others
within those entities, particularly during the period in which this report is being prepared; |
| | |
| b) | designed
such internal control over financial reporting, or caused such internal control over
financial reporting to be designed under our supervision, to provide reasonable assurance
regarding the reliability of financial reporting and the preparation of financial statements
for external purposes in accordance with generally accepted accounting principles; |
| | |
| c) | evaluated
the effectiveness of the Registrant’s disclosure controls and procedures and presented
in this report our conclusions about the effectiveness of the disclosure controls and
procedures, as of the end of the period covered by this report based on such evaluation;
and |
| | |
| d) | disclosed
in this report any change in the Registrant’s internal control over financial reporting
that occurred during the Registrant’s most recent fiscal quarter (the Registrant’s
fourth fiscal quarter in the case of an annual report) that has materially affected,
or is reasonably likely to materially affect, the Registrant’s internal control
over financial reporting; and |
| | |
| 5. | The
Registrant’s other certifying officer and I have disclosed, based on our most recent
evaluation of internal control over financial reporting, to the Registrant’s auditors
and the audit committee of the Registrant’s board of directors (or persons performing
the equivalent functions): |
| | |
| a) | all
significant deficiencies and material weaknesses in the design or operation of internal
control over financial reporting which are reasonably likely to adversely affect the
Registrant’s ability to record, process, summarize and report financial information;
and |
| | |
| b) | any
fraud, whether or not material, that involves management or other employees who have
a significant role in the Registrant’s internal control over financial reporting. |
Date:
November 9, 2015
|
/s/ Sven-Olof
Lindblad |
|
Sven-Olof
Lindblad |
|
Chief
Executive Officer and President |
Exhibit
31.2
Certification
I,
Ian Rogers, certify that:
| 1. | I
have reviewed this Quarterly Report on Form 10-Q of Lindblad Expeditions Holdings, Inc.
(the “Registrant”); |
| | |
| 2. | Based
on my knowledge, this report does not contain any untrue statement of a material fact
or omit to state a material fact necessary to make the statements made, in light of the
circumstances under which such statements were made, not misleading with respect to the
period covered by this report; |
| | |
| 3. | Based
on my knowledge, the financial statements, and other financial information included in
this report, fairly present in all material respects the financial condition, results
of operations and cash flows of the Registrant as of, and for, the periods presented
in this report; |
| | |
| 4. | The
Registrant’s other certifying officer and I are responsible for establishing and
maintaining disclosure controls and procedures (as identified in Exchange Act Rules 13a-15(e)
and 15d-15(e)) and internal control over financial reporting (as defined in Exchange
Act Rules 13a-15(f) and 15d-15(f)) for the Registrant and have: |
| | |
| a) | designed
such disclosure controls and procedures, or caused such disclosure controls and procedures
to be designed under our supervision, to ensure that material information relating to
the Registrant, including its consolidated subsidiaries, is made known to us by others
within those entities, particularly during the period in which this report is being prepared; |
| | |
| b) | designed
such internal control over financial reporting, or caused such internal control over
financial reporting to be designed under our supervision, to provide reasonable assurance
regarding the reliability of financial reporting and the preparation of financial statements
for external purposes in accordance with generally accepted accounting principles; |
| | |
| c) | evaluated
the effectiveness of the Registrant’s disclosure controls and procedures and presented
in this report our conclusions about the effectiveness of the disclosure controls and
procedures, as of the end of the period covered by this report based on such evaluation;
and |
| | |
| d) | disclosed
in this report any change in the Registrant’s internal control over financial reporting
that occurred during the Registrant’s most recent fiscal quarter (the Registrant’s
fourth fiscal quarter in the case of an annual report) that has materially affected,
or is reasonably likely to materially affect, the Registrant’s internal control
over financial reporting; and |
| | |
| 5. | The
Registrant’s other certifying officer and I have disclosed, based on our most recent
evaluation of internal control over financial reporting, to the Registrant’s auditors
and the audit committee of the Registrant’s board of directors (or persons performing
the equivalent functions): |
| | |
| a) | all
significant deficiencies and material weaknesses in the design or operation of internal
control over financial reporting which are reasonably likely to adversely affect the
Registrant’s ability to record, process, summarize and report financial information;
and |
| | |
| b) | any
fraud, whether or not material, that involves management or other employees who have
a significant role in the Registrant’s internal control over financial reporting. |
Date:
November 9, 2015
|
/s/ Ian
Rogers |
|
Ian
Rogers |
|
Chief
Financial Officer, Chief Operating Officer and
Vice President |
Exhibit
32.1
Certification
of CEO Pursuant To
18
U.S.C. Section 1350,
As
Adopted Pursuant To
Section
906 Of The Sarbanes-Oxley Act of 2002
In
connection with the Quarterly Report of Lindblad Expeditions Holdings, Inc., a Delaware corporation (the “Company”),
on Form 10-Q for the period ended September 30, 2015, as filed with the Securities and Exchange commission on the date hereof
(the “Report”), I, Sven-Olof Lindblad, Chief Executive Officer of the Company, certify, pursuant to 18 U.S.C. 1350,
as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that, based on my knowledge:
| 1) | the
Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities
Exchange Act of 1934; and |
| | |
| 2) | the
information contained in the Report fairly presents, in all material respects, the financial
condition and results of operations of the Company. |
|
Date:
November 9, 2015 |
|
|
|
/s/
Sven-Olof Lindblad |
|
Sven-Olof
Lindblad |
|
Chief
Executive Officer and President |
A
signed original of this written statement required by Section 906 has been provided to the Company and will be retained by the
Company and furnished to the Securities and Exchange Commission or its staff upon request.
Exhibit
32.2
Certification
of CFO Pursuant To
18
U.S.C. Section 1350,
As
Adopted Pursuant To
Section
906 Of The Sarbanes-Oxley Act of 2002
In
connection with the Quarterly Report of Lindblad Expeditions Holdings, Inc., a Delaware corporation (the “Company”),
on Form 10-Q for the period ended September 30, 2015, as filed with the Securities and Exchange commission on the date hereof
(the “Report”), I, Ian Rogers, Chief Financial Officer of the Company, certify, pursuant to 18 U.S.C. 1350, as adopted
pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that, based on my knowledge:
| 1) | the
Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities
Exchange Act of 1934; and |
| | |
| 2) | the
information contained in the Report fairly presents, in all material respects, the financial
condition and results of operations of the Company. |
|
Date:
November 9, 2015 |
|
|
|
/s/ Ian
Rogers |
|
Ian
Rogers |
|
Chief
Financial Officer,
Chief Operating Officer and Vice President |
A
signed original of this written statement required by Section 906 has been provided to the Company and will be retained by the
Company and furnished to the Securities and Exchange Commission or its staff upon request.
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