Notes
to the Condensed Consolidated Financial Statements
(Unaudited)
NOTE
1 – BUSINESS
Organization
As of June 30, 2017, Lindblad
Expeditions Holdings, Inc. and its consolidated subsidiaries (the “Company” or “Lindblad”) operated a
fleet of six owned expedition ships and five seasonal charter vessels under the Lindblad brand. A new coastal vessel, the
National
Geographic Quest,
joined the fleet in the third quarter of 2017 and the Company has contracted for another coastal vessel,
expected to be completed in the second quarter of 2018.
Lindblad’s
mission is to offer life-changing adventures on all seven continents and to pioneer innovative ways to allow its guests to connect
with exotic and remote places. The Company’s expedition ships are customized, nimble and intimately-scaled vessels that
are able to venture where larger cruise ships cannot, thus allowing Lindblad 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 Galápagos, 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 has
an alliance with the National Geographic Society (“National Geographic”), which often provides lecturers and National
Geographic experts, including photographers, writers, marine biologists, naturalists, field researchers, and film crews. The arrangement
with National Geographic extends through 2025.
Natural
Habitat Acquisition
On
May 4, 2016, the Company acquired an 80.1% ownership interest in Natural Habitat, Inc. (“Natural Habitat”), an adventure
travel and ecotourism company based in Colorado. Natural Habitat was founded by Benjamin L. Bressler, who retains a 19.9% noncontrolling
interest in Natural Habitat. With the acquisition of Natural Habitat, the Company expanded its itineraries to include land- based
offerings around the globe. Natural Habitat’s expeditions include polar bear tours in Churchill, Canada, Alaskan grizzly
bear adventures, small-group Galápagos tours and African safaris. In addition to its land offerings, Natural Habitat offers
select itineraries on seven small chartered vessels for parts of the year. Natural Habitat has partnered with World Wildlife Fund
(“WWF”) to offer conservation and sustainable travel that directly protects nature. This agreement with WWF extends
through 2023.
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, Condensed
Consolidated Statements of Operations, Condensed Consolidated Statements of Redeemable Noncontrolling Interest and Stockholders’
Equity, and Condensed Consolidated Statements of Cash Flows 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 seasonality
and other factors. Certain information and footnote disclosures normally included in the condensed consolidated financial statements
in accordance with U.S. GAAP have been omitted in accordance with the rules and regulations of the SEC. All intercompany balances
and transactions have been eliminated in the accompanying unaudited condensed consolidated financial statements. 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, 2016 contained in the Annual
Report on Form 10-K filed with the SEC on March 7, 2017.
Principles
of Consolidation
The
condensed consolidated financial statements of the Company as of June 30, 2017 and December 31, 2016 included Lindblad Expeditions
Holdings, Inc. and its consolidated subsidiaries.
Reclassifications
Certain
items in the condensed consolidated financial statements of the Company have been reclassified to conform to the 2017 classification.
The reclassifications had no effect on previously reported results of operations or retained earnings.
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.
Revenue
Recognition
Tour
revenue consists of guest ticket revenue recognized from the sale of guest tickets and other tour 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 revenues
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 in the condensed consolidated balance sheet 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.
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,
which may include options, warrants and vesting of restricted stock, which was accounted for utilizing the treasury stock method.
For
the three and six months ended June 30, 2017 and 2016, the Company calculated earnings per share in accordance with Financial
Accounting Standards Board (“FASB”) Accounting Standards Codification (“ASC”) 260 and 805-40-45 as follows:
|
|
For the Three Months Ended
June 30,
|
|
|
For
the Six Months Ended
June 30,
|
|
(In thousands,
except share and per share data)
|
|
2017
|
|
|
2016
|
|
|
2017
|
|
|
2016
|
|
Net
(loss) income attributable to Lindblad for basic and diluted earnings per share
|
|
$
|
(2,533
|
)
|
|
$
|
(4,346
|
)
|
|
$
|
(1,936
|
)
|
|
$
|
6,121
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted average
shares outstanding:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
weighted average shares outstanding, basic
|
|
|
44,428,947
|
|
|
|
45,670,721
|
|
|
|
44,567,588
|
|
|
|
45,570,438
|
|
Dilutive
potential common shares
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
728,751
|
|
Total
weighted average shares outstanding, diluted
|
|
|
44,428,947
|
|
|
|
45,670,721
|
|
|
|
44,567,588
|
|
|
|
46,299,189
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Common
stock
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net (loss) income available to common stockholders
|
|
$
|
(2,533
|
)
|
|
$
|
(4,346
|
)
|
|
$
|
(1,936
|
)
|
|
$
|
6,121
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted average
shares outstanding
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic
|
|
|
44,428,947
|
|
|
|
45,670,721
|
|
|
|
44,567,588
|
|
|
|
45,570,438
|
|
Diluted
|
|
|
44,428,947
|
|
|
|
45,670,721
|
|
|
|
44,567,588
|
|
|
|
46,299,189
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Earnings
per share attributable to Lindblad
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic
|
|
$
|
(0.06
|
)
|
|
$
|
(0.10
|
)
|
|
$
|
(0.04
|
)
|
|
$
|
0.13
|
|
Diluted
|
|
$
|
(0.06
|
)
|
|
$
|
(0.10
|
)
|
|
$
|
(0.04
|
)
|
|
$
|
0.13
|
|
The Company incurred
net losses for the three and six months ended June 30, 2017 and therefore the impact of potentially dilutive common shares
from outstanding stock options, restricted shares and warrants, totaling 13,354,908 shares as of June 30, 2017, were excluded
from the computation of loss per share as their impact would have been anti-dilutive. For the three month period ending June 30,
2016, the Company incurred a net loss and therefore excluded potential common shares from outstanding stock options, restricted
shares and warrants totaling 14,307,771 shares as of June 30, 2016 as their effect would have been anti-dilutive. For the six
month period ending June 30, 2016, 728,751 stock options were deemed to be dilutive and were included in the dilutive earnings
per share calculation. Unvested restricted shares totaling 125,164 and warrants totaling 12,040,937 were deemed to be anti-dilutive
for the six month period ending June 30, 2016.
Cash
and Cash Equivalents
The
Company considers all highly liquid instruments with an original maturity of three months or less, as well as deposits in financial
institutions, to be cash and cash equivalents.
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 June 30, 2017 and December 31, 2016, the Company’s cash held
in financial institutions outside of the U.S. amounted $4.0 million and $2.7 million, respectively.
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 as follows:
|
|
As
of
|
|
|
June
30,
2017
|
|
|
December 31,
2016
|
|
(In thousands)
|
|
(Unaudited)
|
|
|
|
|
Restricted cash and marketable securities:
|
|
|
|
|
|
|
Credit negotiation and credit
card processor reserves
|
|
$
|
1,530
|
|
|
$
|
5,030
|
|
Federal Maritime Commission escrow
|
|
|
18,371
|
|
|
|
2,571
|
|
Certificates
of deposit and other restricted securities
|
|
|
1,360
|
|
|
|
1,414
|
|
Total restricted
cash and marketable securities
|
|
$
|
21,261
|
|
|
$
|
9,015
|
|
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.
During
the first quarter of 2017, our required credit card reserves were permanently decreased by $3.5 million to $1.5 million for credit
card deposits for our third-party credit card processors.
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 plus an additional 10% 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. 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.
Prepaid
Expenses and Other Current Assets
The
Company records prepaid expenses and other current assets at cost and expenses them in the period the services are provided or
the goods are delivered. The Company’s prepaid expenses and other current assets consist of the following:
|
|
As
of
June 30,
|
|
|
As
of December 31,
|
|
|
|
2017
|
|
|
2016
|
|
(In thousands)
|
|
(Unaudited)
|
|
|
|
|
Prepaid tour expenses
|
|
$
|
13,506
|
|
|
$
|
11,593
|
|
Prepaid client insurance
|
|
|
2,671
|
|
|
|
2,141
|
|
Prepaid air expense
|
|
|
2,726
|
|
|
|
2,432
|
|
Prepaid port agent fees
|
|
|
858
|
|
|
|
1,038
|
|
Prepaid income taxes
|
|
|
827
|
|
|
|
824
|
|
Prepaid corporate insurance
|
|
|
1,721
|
|
|
|
931
|
|
Prepaid marketing,
commissions and other expenses
|
|
|
3,253
|
|
|
|
1,823
|
|
Total
prepaid expenses
|
|
$
|
25,562
|
|
|
$
|
20,782
|
|
Property
and Equipment, Net
Property
and equipment are stated at cost less accumulated depreciation and amortization. Depreciation and amortization were computed using
the straight line method over the estimated useful lives of the assets, as follows:
|
|
Years
|
|
Vessels and vessel improvements
|
|
15-25
|
|
Furniture, vehicles and
equipment
|
|
5
|
|
Computer hardware and software
|
|
5
|
|
Leasehold improvements, including port
facilities
|
|
Shorter of lease
term or related asset life
|
|
As of June 30, 2017 and
December 31, 2016, the Company owned and operated six vessels. A new coastal vessel, the
National Geographic Quest,
joined
the fleet in the third quarter of 2017 and the Company has contracted for another coastal vessel, expected to be completed in
the second quarter of 2018. The Company has a capital program for the improvement of its vessels and for asset replacements in
order to enhance the effectiveness and efficiency of its operations; comply with, or exceed all relevant legal and statutory requirements
related to health, environment, safety, security and sustainability; and gain strategic benefits or provide newer improved product
innovations to its guests.
Vessel
improvement costs that add value to the Company’s vessels, such as those discussed above, are capitalized to the vessels
and depreciated over the shorter of the improvements or the vessel’s estimated remaining useful life, while costs of repairs
and maintenance, including minor improvement costs and drydock expenses, are charged to expense as incurred and included in cost
of tours. Drydock costs primarily represent planned maintenance activities that are incurred when a vessel is taken out of service.
For U.S. flagged ships, the statutory requirement is an annual docking and U.S. Coast Guard inspections, normally conducted in
drydock. Internationally flagged ships have scheduled dockings approximately every 12 months, for a period of up to three to six
weeks.
The
Company began to capitalize interest in January 2016 for its two new build coastal vessels under accounting guidance in ASC 835-20,
which requires companies to capitalize interest cost incurred during the construction of assets. The capitalized interest has
been and will continue to be added to the historical cost of the asset, and depreciate over its useful life. For the six months
ended June 30, 2017, and the year ended December 31, 2016, the Company recognized $1.7 million and $1.5 million, respectively,
in capitalized interest in property and equipment on the condensed consolidated balance sheet.
Goodwill
Goodwill
includes the cost of the acquired business in excess of the fair value of the tangible net assets recorded in connection with
the acquisition of Natural Habitat (see Note 1 – Business). Accounting Standards Codification 350, “
Intangibles
– Goodwill and Other
” (“ASC 350”), requires the Company to assess goodwill for impairment annually
or more frequently if a triggering event occurs. Due to the acquisition of Natural Habitat on May 4, 2016, the Company recorded
goodwill in the amount of $22.1 million, in Natural Habitat’s reporting unit. The Company’s policy is to first perform
a qualitative assessment to determine if Natural Habitat’s reporting unit’s carrying value is less than the fair value
of the reporting unit, indicating the potential for goodwill impairment. The quantitative two step goodwill impairment calculation
is then performed if the reporting unit fails the qualitative test. The Company performed a qualitative assessment for goodwill
impairment as of September 30, 2016 for Natural Habitat’s reporting unit with no indication of goodwill impairment.
Intangibles,
net
Intangibles,
net include tradenames, customer lists and operating rights. Tradenames are words, symbols, or other devices used in trade or
business to indicate the source of products and to distinguish it from other products and are registered with government agencies
and are protected legally by continuous use in commerce. Customer lists are established relationships with existing customers
that resulted in repeat purchases and customer loyalty. Based on the Company’s analysis, amortization of the tradenames
and customer lists was computed using the estimated useful lives of 15 and 5 years, respectively.
The
Company operates two vessels year-round in the Galápagos National Park in Ecuador: the
National Geographic Endeavour
II
with 95 berths and the
National Geographic Islander
with 47 berths. In order to operate these vessels within the
park, the Company is required to have in its possession cupos (licenses) sufficient to cover the total available berths on each
vessel.
In
June 2015, a new Ecuadorian Special Law for Protected Areas was approved, and was updated in November 2015. A Presidential Decree
issued by President Correa of Ecuador in November 2015 established that cupos, which were in effect as of July 2015, will have
a validity of nine years. The Company’s operating rights are up for renewal in July 2024 and based on the new law, the Company
will begin the renewal process in 2020. The current “owners” of the cupos will have the opportunity to re-apply for
them, but any other enterprise or individual will have the opportunity to bid for the cupos. All bidders must present proof that
they fulfill the conditions to properly utilize the license (access to a vessel, experience in tourism, proven environmental behavior,
marketing, etc.). While the Company believes that, based on the expected criteria to retain cupos and its past operating history
in the Galápagos, there is a strong possibility that the Company will retain its cupos, from an accounting perspective,
it will assume they retain no value after July 2024. Once the renewal process has begun and if it can be determined that the Company
will be successful in its bid, then the Company will adjust its amortization prospectively.
Upon
the occurrence of a triggering event, the assessment of possible impairment of the Company’s intangibles, net will be based
on the Company’s ability to recover the carrying value of its asset, which is determined by using the asset’s estimated
undiscounted future cash flows. If these estimated undiscounted future cash flows are less than the carrying value of the asset,
an impairment charge is recognized for the excess, if any, of the asset’s carrying value over its estimated fair value.
A significant amount of judgment is required in estimating the future cash flows and fair values of its tradenames, customer lists
and operating rights. As of June 30, 2017 and December 31, 2016, there was no triggering event and the Company did not record
an impairment for intangible assets.
Long-Lived
Assets
The
Company reviews its long-lived assets, principally its vessels and operating rights, for impairment whenever events or changes
in circumstances indicate that the carrying amounts of these assets may not be fully recoverable. Upon the occurrence of a triggering
event, the assessment of possible impairment is based on the Company’s ability to recover the carrying value of its asset,
which is determined by using the asset’s estimated undiscounted future cash flows. If these estimated undiscounted future
cash flows are less than the carrying value of the asset, an impairment charge is recognized for the excess, if any, of the asset’s
carrying value over its estimated fair value. A significant amount of judgment is required in estimating the future cash flows
and fair values of its vessels and operating rights. As of June 30, 2017 and December 31, 2016, there was no triggering event
and the Company did not record an impairment of its long-lived assets.
Accounts
Payable and Accrued Expenses
The
Company records accounts payable and accrued expenses for the cost of such items when the service is provided or when the related
product is delivered. The Company’s accounts payable and accrued expenses consist of the following:
|
|
As
of
June 30,
|
|
|
As
of
December 31,
|
|
|
|
2017
|
|
|
2016
|
|
(In thousands)
|
|
(Unaudited)
|
|
|
|
|
Accounts payable
|
|
$
|
5,147
|
|
|
$
|
7,573
|
|
Accrued other expense
|
|
|
4,281
|
|
|
|
5,999
|
|
Bonus compensation liabilty
|
|
|
2,064
|
|
|
|
4,186
|
|
Employee liability
|
|
|
2,529
|
|
|
|
3,494
|
|
Income tax liabilities
|
|
|
900
|
|
|
|
884
|
|
New build liability
|
|
|
2,649
|
|
|
|
4,011
|
|
Travel certificate liability
|
|
|
1,251
|
|
|
|
1,218
|
|
Refunds and commissions payable
|
|
|
997
|
|
|
|
1,454
|
|
Royalty payable
|
|
|
1,298
|
|
|
|
1,468
|
|
Accrued travel
insurance expense
|
|
|
385
|
|
|
|
375
|
|
Total
accounts payable and accrued expenses
|
|
$
|
21,501
|
|
|
$
|
30,662
|
|
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
carrying value of long-term debt approximates fair value given that the terms of the agreement were comparable to the market as
of June 30, 2017 and December 31, 2016. As of June 30, 2017 and December 31, 2016, the Company had no other liabilities that were
measured at fair value on a recurring basis.
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.
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.
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 June 30, 2017 and December 31,
2016, the Company had a liability for unrecognized tax benefits of $0.4 million, 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 six months ended June 30, 2017 and 2016, interest and penalties related to uncertain tax positions
included in income tax expense are immaterial.
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 are no U.S. federal, state or foreign jurisdiction tax audits
pending. The Company’s corporate U.S. federal and state tax returns for the current year and the three prior years remain
subject to examination by tax authorities and the Company’s foreign tax returns for the current year and the four prior
years remain subject to examination by tax authorities.
Stock-Based
Compensation
The
Company accounts for equity instruments issued to employees, non-employee Directors or other service providers in accordance with
accounting guidance that requires that awards are recorded at their fair value on the date of grant and are amortized over the
service period of the award. The Company recognizes compensation costs on a straight-line basis over the requisite service period
of the award, which is generally the vesting term of the equity instrument issued. To the extent that an equity award later becomes
eligible to be put back to the Company, then the fair value of that award or those exercised shares are transferred out of additional
paid-in-capital to a liability account and is thereafter marked-to-market annually to fair value.
Segment
Reporting
We
are an expedition and adventure travel operator with operations in two segments, Lindblad and Natural Habitat. We evaluate the
performance of our business based largely on the results of our operating segments. We provide discrete financial information
in total, by ship and type of ship. The chief operating decision maker, or CODM, and management review operating results monthly,
and base operating decisions on the total results at a consolidated level, as well as at a segment level. Our reports provided
to the Board of Directors are at a consolidated level and also contain information regarding the separate results of both segments.
Management performance and related compensation is primarily based on total results. While both segments have similar characteristics,
the two operating and reporting segments cannot be aggregated because they fail to meet the ASC 280 requirements for aggregation.
Recent
Accounting Pronouncements
In May 2017, Financial
Accounting Standards Board (“FASB”), issued Accounting Standards Update ASU No. 2017-09, Compensation-Stock Compensation
(Topic 718) Scope of Modification Accounting. An entity may change the terms or conditions of a share-based payment award for
many different reasons, and the nature and effect of the change can vary significantly. The FASB Accounting Standards Codification
currently defines the term modification as “a change in any of the terms or conditions of a share-based payment award.”
The broad definition has led to inconsistencies in practice. Under the new guidance, modification accounting treatment will be
utilized unless all three of the following criteria have been met; the fair value of the original award is the same as the fair
value of the modified award; vesting period did not change; and the classification of the award has not changed. Public business
entities should apply this update prospectively for all new awards after annual reporting periods beginning December 15, 2017.
The Company plans to adopt this ASU in the first quarter of 2018 as per guidance and does not expect the prospective application
to have a material impact to the Company’s condensed consolidated financial statements.
In
January 2017, FASB issued Accounting Standards Update ASU No. 2017-04, Intangibles and Other (Topic 350): Simplifying the Test
for Goodwill Impairment. The amendment was issued in response from stakeholders’ regarding the cost and complexity of the
goodwill impairment test. To simplify the subsequent measurement of goodwill, the FASB eliminated Step 2 from the goodwill impairment
test. In computing the implied fair value of goodwill under Step 2, an entity had to perform procedures to determine the fair
value at the impairment testing date of its assets and liabilities (including unrecognized assets and liabilities). Now the entity
compares the fair value of the reporting unit with its carrying amount. Public business entities should apply the guidance to
annual reporting periods beginning after December 15, 2019. Early adoption is permitted for interim or annual impairment tests
after January 1, 2017. The Company does not believe the adoption of this ASU will have a material impact prospectively, to the
Company’s condensed consolidated financial statements.
In
January 2017, FASB issued Accounting Standards Update ASU No. 2017-01, “Business Combinations (Topic 805): Clarifying the
Definition of a Business”. The amendment was issued to clarify the definition of a business with the objective of adding
guidance to assist entities with evaluating whether transactions should be accounted for as acquisitions (or disposals) of assets
or businesses. The amendments in this ASU provide a screen to determine when a set (inputs and processes that produce an output)
is not a business. The screen requires that when substantially all of the fair value of the gross assets acquired (or disposed
of) is concentrated in a single identifiable asset or a group of similar identifiable assets, the set is not a business. This
screen reduces the number of transactions that need to be further evaluated. Public business entities should apply the guidance
to annual reporting periods beginning after December 15, 2017. The Company does not believe the adoption of this ASU will have
a material impact prospectively, to the Company’s condensed consolidated financial statements.
NOTE
3 – LONG-TERM DEBT
|
|
As
of June 30, 2017
|
|
|
As
of December 31, 2016
|
|
|
|
(Unaudited)
|
|
|
|
(In thousands)
|
|
Principal
|
|
|
Discount
and Deferred Financing Costs, net
|
|
|
Balance,
net of discount
|
|
|
Principal
|
|
|
Discount
and Deferred Financing Costs, net
|
|
|
Balance,
net of discount
|
|
Note payable
|
|
$
|
2,525
|
|
|
$
|
-
|
|
|
$
|
2,525
|
|
|
$
|
2,525
|
|
|
$
|
-
|
|
|
$
|
2,525
|
|
Credit Facility
|
|
|
171,500
|
|
|
|
(8,224
|
)
|
|
|
163,276
|
|
|
|
172,375
|
|
|
|
(9,022
|
)
|
|
|
163,353
|
|
Total long-term debt
|
|
|
174,025
|
|
|
|
(8,224
|
)
|
|
|
165,801
|
|
|
|
174,900
|
|
|
|
(9,022
|
)
|
|
|
165,878
|
|
Less current
portion
|
|
|
(1,750
|
)
|
|
|
-
|
|
|
|
(1,750
|
)
|
|
|
(1,750
|
)
|
|
|
-
|
|
|
|
(1,750
|
)
|
Total long-term
debt, non-current
|
|
$
|
172,275
|
|
|
$
|
(8,224
|
)
|
|
$
|
164,051
|
|
|
$
|
173,150
|
|
|
$
|
(9,022
|
)
|
|
$
|
164,128
|
|
Note
Payable
On
May 4, 2016, in connection with the Natural Habitat acquisition, Natural Habitat issued an unsecured promissory note to Mr. Bressler
with an outstanding principal amount of $2.5 million due at maturity on December 31, 2020. The promissory note accrues interest
at a rate of 1.44% annually, with interest payable every six months.
Credit
Facility
On
March 7, 2016, the Company entered into a second amended and restated credit agreement with Credit Suisse (“Restated Credit
Agreement”), amending its senior secured credit facility with Credit Suisse (“Restated Credit Facility”). The
Restated Credit Facility provides for $175.0 million senior secured first lien term loan facility (consisting 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 the Company’s
foreign subsidiaries (the “Cayman Loan”, and together with the U.S. Term Loan, (the “Loans”)) and a $45.0
million senior secured incremental revolving credit facility (“Revolving Credit Facility”), which includes a $5.0
million letter of credit subfacility. The Company’s obligations under the Restated Credit Facility are secured by substantially
all the assets of the Company.
Borrowings
under the Loans bear interest at an adjusted ICE Benchmark Administration LIBO Rate (subject to a floor of 1.00%) plus a spread
of 4.50%. As of June 30, 2017, the interest rate was 5.82%. The U.S. Term Loan and the Cayman Loan both mature on May 8, 2021.
Borrowings under the Revolving Credit Facility bear interest at an adjusted ICE Benchmark Administration LIBO Rate plus a spread
of 4.00%, or, at the option of the Company, an alternative base rate plus a spread of 3.00%. The Company is also required to pay
a 0.50% annual commitment fee on undrawn amounts under the Revolving Credit Facility, which matures on May 8, 2020. As of June
30, 2017, the Company had no borrowings under the Revolving Credit Facility.
The
Restated Credit Agreement (i) requires the Company to satisfy certain financial covenants; (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; (iv) requires
the delivery of certain periodic financial statements and an operating budget and (v) requires the mortgaged vessels and related
inventory to be maintained in good working condition. As of June 30, 2017, the Company was in compliance with the financial covenants.
For
the three months ended June 30, 2017 and 2016, total debt discount and deferred financing costs charged to amortization and interest
expense was $0.6 million. For the six months ended June 30, 2017 and 2016, total debt discount and deferred financing costs charged
to amortization and interest expense was $1.1 million.
NOTE
4 – ACQUISTION
On May 4, 2016, the Company
acquired an 80.1% ownership interest in Natural Habitat, an adventure travel and ecotourism company based in Colorado. The acquisition
provided the Company with a platform to expand our land-based expeditions with a strong, trusted brand complementary to Lindblad.
In 2016, the Company incurred $1.0 million of acquisition costs related to the acquisition of Natural Habitat, which is included
in general and administrative expenses in the Company’s condensed consolidated statements of operations for the three and
six months ended June 30, 2016.
The
Company recorded this transaction using the acquisition method for business combinations. The Company measured the identifiable
assets, liabilities and non-controlling interest of Natural Habitat at their fair market value as of the acquisition date and
separately measured goodwill at its fair market value as of the acquisition date. Goodwill is an intangible asset arising as a
result of name, reputation, customer loyalty, location, products, and similar factors not separately identified. The recorded
goodwill has no tax basis and is therefore not tax deductible.
Mr.
Bressler’s noncontrolling interest in the remaining 19.9% interest in Natural Habitat is subject to a put/call arrangement.
Mr. Bressler has a put option under certain conditions and subject to providing notice by October 31, 2020, that enables him,
but does not obligate him, to sell his remaining interest in Natural Habitat on December 31, 2020. The Company has a call option,
but not an obligation, with an expiration of December 31, 2025, for which it can buy Mr. Bressler’s remaining interest at
a similar fair value measure as Mr. Bressler’s put option.
Acquisition
of Natural Habitat, Inc.:
(In
thousands)
|
|
As of Acquisition
Date
|
|
Cash consideration
|
|
$
|
14,850
|
|
Long-term debt - non-cash
|
|
|
2,525
|
|
Lindblad restricted shares (264,208 shares) - non-cash
|
|
|
2,650
|
|
Total purchase price
|
|
$
|
20,025
|
|
|
|
|
|
|
Assets acquired:
|
|
|
|
|
Cash and cash equivalents
|
|
$
|
4,904
|
|
Prepaid expenses and other current assets
|
|
|
9,623
|
|
Property and equipment
|
|
|
2,068
|
|
Goodwill and other intangibles
|
|
|
28,305
|
|
Total assets
|
|
$
|
44,900
|
|
|
|
|
|
|
L
iabilities assumed:
|
|
|
|
|
Accounts payable and accrued expenses
|
|
$
|
2,472
|
|
Unearned passenger revenues
|
|
|
15,000
|
|
Deferred tax liability
|
|
|
2,428
|
|
Noncontrolling interest in consolidated subsidiaries
|
|
|
4,975
|
|
Total liabilities
|
|
$
|
24,875
|
|
|
|
|
|
|
Total cash price paid upon acquisition and fair value of existing equity interest
|
|
$
|
20,025
|
|
The
acquired business contributed revenues of $8.3 million and operating loss of $0.7 million to Lindblad Expeditions for the three
months ended June 30, 2017. For six months ended June 30, 2017 the acquired business contributed revenues of $18.3 million and
operating loss of $0.6 million. For the acquisition period beginning May 5, 2016 to June 30, 2016, Natural Habitat contributed
revenues of $5.7 million and operating loss of $0.8 million.
The
following unaudited pro forma summary presents consolidated information of Lindblad Expeditions as if the business combination
had occurred on January 1, 2016:
|
|
Pro
Forma for Three Month Period Ended
|
|
|
Pro
Forma for Six Month Period Ended
|
|
|
|
June
30,
2016
|
|
|
June
30,
2016
|
|
|
|
Unaudited
|
|
|
Unaudited
|
|
(In thousands)
|
|
|
|
|
|
|
Revenues
|
|
$
|
56,778
|
|
|
$
|
127,072
|
|
Operating (loss) income
|
|
$
|
(2,500
|
)
|
|
$
|
8,431
|
|
These
pro forma amounts have been calculated after applying the Company’s accounting policies and adjusting the results of Natural
Habitat to reflect the additional depreciation and amortization that would have been charged assuming the fair value adjustments
to property, plant and equipment and intangible assets had been applied from January 1, 2016, with tax effects.
NOTE
5 – EMPLOYEE BENEFIT PLAN
The Company has a 401(k)
profit sharing plan and trust for its employees. The Company matches 30% of employee contributions up to the annual maximum of
$2,100 and $1,800 as of June 30, 2017 and 2016, respectively. For the three months ended June 30, 2017 and 2016, the Company’s
benefit plan contribution amounted to $0.1million. For the six months ended June 30, 2017 and 2016, the Company’s benefit
plan contribution amounted to $0.2 million and $0.1 million, respectively. The benefit plan contribution is recorded within general
and administrative expenses on the accompanying condensed consolidated statements of operations.
NOTE
6 – STOCKHOLDERS’ EQUITY
The
Company’s common stock and warrants are listed on the NASDAQ Capital Market under the symbols “LIND” and “LINDW,”
respectively. As of June 30, 2017 and December 31, 2016, there were 45,066,058 and 45,659,762 shares of common stock outstanding,
respectively, and 10,673,015 and 11,186,387 warrants outstanding (inclusive of certain warrants issued to the Company’s
founders on substantially the same terms as all other warrants), respectively.
Capital
Stock
The
Company has a total of 201,000,000 authorized shares of capital stock, consisting of 1,000,000 shares of preferred stock, $0.0001
par value and 200,000,000 shares of common stock, $0.0001 par value.
Stock
and Warrant Repurchase Plan
In November 2015, the
Company’s Board of Directors approved a $20.0 million stock and warrant repurchase plan and in November 2016, increased
the authorization by $15.0 million to a total of $35.0 million. This Repurchase 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 based on market and business conditions,
applicable legal requirements and other factors. Any shares and warrants purchased will be retired. The Repurchase 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. For the three months ended June 30, 2017, the Company purchased 66,194 shares of common stock for $0.6
million and for the six months ended June 30, 2017 the Company purchased 547,058 shares of common stock for $5.1 million and 513,372
warrants for $1.1 million. The Company has cumulatively purchased 5,426,985 warrants for $13.9 million and 855,776 shares of common
stock for $8.1 million, since plan inception.
2017
Long-Term Incentive Compensation
In
March 2017, the Company’s compensation committee (or a subcommittee thereof) approved awards of restricted stock units (“RSUs”)
and performance share units (“PSUs”) to key employees under the Company’s 2015 Long-Term Incentive Plan.
The
Company granted 171,393 RSUs on April 3, 2017 at a grant price of $8.98. The RSU’s will vest in three equal annual installments
following the April 2017 grant date, subject to the recipient’s continued employment or service with us or our subsidiaries
on the applicable vesting date.
The PSUs are performance-vesting
equity incentive awards that will be earned based on our performance against metrics relating to annual Adjusted EBITDA, annual
revenue, and guest satisfaction. Awards will vest after a three-year performance period and may be earned at a level ranging from
0%-200% of the number of PSUs granted, depending on performance. On April 3, 2017, the Company awarded 126,953 of targeted PSUs
with the number of shares determined based upon the closing price of our common stock on March 31, 2017 of $8.96. Based on the
financial statements as of June 30, 2017, the Company assessed the applicable metrics related to the PSU grants, determined the
blended probability of achieving the performance metrics and valued the awards based on the fair value at the date of grant with
the amount of stock compensation expense determined based on the number PSU’s expected to vest.
2016
CEO Share Allocation Plan
In
April 2016, the Company’s Board of Directors adopted the 2016 CEO Share Allocation Plan and in June 2016, the Company’s
stockholders approved the 2016 CEO Share Allocation Plan, pursuant to which the Company may grant awards covering up to 1,000,000
shares of the Company’s common stock in the form of restricted stock, restricted stock units, and/or other stock- or cash-
based awards to eligible employees and other service providers of the Company. The 2016 CEO Share Allocation Plan was adopted
in connection with a contribution agreement that the Company entered into with Sven-Olof Lindblad, Chief Executive Officer and
President of the Company, pursuant to which Mr. Lindblad is authorized to transfer up to 1,000,000 shares from his holdings of
the Company’s common stock (i.e., an equivalent number of shares as is reserved for issuance under the 2016 CEO Share Allocation
Plan) (the “Contribution Shares”) to the Company as a contribution to the capital of the Company. Mr. Lindblad will
not receive any consideration in exchange for the Contribution Shares. However, as a condition to the contribution of any Contribution
Shares, the Company must grant awards under the 2016 CEO Share Allocation Plan, such that the number of Contribution Shares that
Mr. Lindblad actually contributes to the Company will equal the number of shares corresponding to awards granted under the plan.
The contribution of the Contribution Shares by Mr. Lindblad to the Company will effectively reduce the number of shares of the
Company’s common stock that are outstanding by the same number of shares that are issued under the 2016 CEO Share Allocation
Plan (or a lesser number in the event awards are settled in cash). Such contributions will be effective as of the date the Company
grants corresponding awards under the 2016 CEO Share Allocation Plan. The administrator may amend, suspend or terminate the 2016
CEO Share Allocation Plan at any time.
On
January 10, 2017, Mr. Lindblad contributed to the Company and the Company thereafter granted, 716,550 restricted shares at a grant
price of $9.65. The grants vest in three equal installments with the first vesting date of January 10, 2017 and the remaining
two vesting dates of January 10, 2018 and 2019, respectively. On January 10, 2017, 238,850 restricted shares vested, with 93,320
of such shares withheld and retired by the Company in order to pay the payroll withholdings to cover the transactions.
Stock
Options
During
March 2017, 95,542 options were exercised. Using the market price at the date of exercise of $8.72 per share and the grant price
of $1.76 per share, 19,284 shares were transferred to provide the $0.2 million required to exercise the options. In addition,
23,145 of such shares were withheld by the Company in order to pay the payroll withholding taxes for the transactions. The balance
of the option shares of 53,113 shares were issued as a result of the transaction.
NOTE
7 – COMMITMENTS AND CONTINGENCIES
Fleet
Expansion
On
December 2, 2015, the Company entered into two separate Vessel Construction Agreements, (collectively, the “Agreements”)
with Ice Floe, LLC, a Washington limited liability company doing business as Nichols Brothers Boat Builders (the “Builder”).
The Agreements provide for the Builder to construct two new 236-foot 100-passenger cruise vessels at a purchase price of $48.0
million and $48.6 million, respectively, subject to change orders.
The
builder was contracted to deliver the first vessel,
National Geographic Quest
, in the second quarter of 2017, subject to
extension for certain events such as change orders. As of June 30, 2017 the Company has paid Ice Flo, LLC $51.6 million related
to the
National Geographic Quest
and the vessel was delivered in July of 2017. The second vessel, the
National Geographic
Venture
, is contracted to be delivered in the second quarter of 2018 subject to extension for certain events, such as change
orders. The Company may terminate the applicable Agreement in the event the Builder fails to deliver the vessel within one hundred
eighty days of the applicable due date or the Builder becomes insolvent or otherwise bankrupt. The Agreement also contains customary
representations, warranties, covenants and indemnities. As of June 30, 2017 the Company has paid Ice Flo, LLC $14.9 million related
to
National Geographic Venture
.
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 operations. 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 operations. 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 six months ended June 30, 2017 totaled $1.1 million and $2.3 million, respectively, and for the three and six
months ended June 30, 2016 totaled $1.2 million and $2.4 million, respectively.
The
balances outstanding to National Geographic as of June 30, 2017 and December 31, 2016 are $1.3 million and $1.5 million, respectively,
and are included in accounts payable and accrued expenses on the accompanying condensed consolidated balance sheets.
Royalty
Agreement – World Wildlife Fund
Natural
Habitat has a license agreement with World Wildlife Fund (“WWF”), which allows it to use the WWF name and logo. In
return for these rights, Natural Habitat is charged a royalty fee and a fee based on annual gross sales. The fees are included
within selling and marketing expense on the accompanying consolidated statements of operations. For the three and six months ended
June 30, 2017, these fees totaled $0.1 million and $0.2 million, respectively.
Charter
Commitments
From
time to time, the Company enters into agreements to charter vessels on which it holds its tours and expeditions. Future minimum
payments on its charter agreements are as follows:
For
the Years Ended December 31,
|
|
Amount
|
|
(Unaudited)
|
|
(In thousands)
|
|
2017 (Six Months)
|
|
|
3,632
|
|
2018
|
|
|
9,755
|
|
2019
|
|
|
2,849
|
|
2020
|
|
|
272
|
|
Total
|
|
$
|
16,508
|
|
Insurance
Revenue
During
the first quarter, the Company recorded $1.9 million of insurance revenue related to cancelled voyages on the
National Geographic
Orion
. Recorded revenue does not include any contested claims, and the amount recognized is recorded in tour revenues in the
Company’s condensed consolidated statements of operations.
NOTE
8 – SEGMENT INFORMATION
During
the second quarter of 2016, the Company completed its acquisition of Natural Habitat. As a result of the acquisition, the Company
updated its reporting information and its operating segments to add Natural Habitat as a separate operating and reporting segment.
The
Company evaluates the performance of its business segments based largely on operating income results of the segments without allocating
other income and expenses, net, income taxes, and interest expense, net. For the three and six months ended June 30, 2017 and
2016, the operating results were as follows:
|
|
For the Three Months Ended
|
|
|
For the Six Months Ended
|
|
|
|
June 30,
|
|
|
June 30,
|
|
(In thousands)
|
|
2017
|
|
|
2016
|
|
|
Change
|
|
|
%
|
|
|
2017
|
|
|
2016
|
|
|
Change
|
|
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Tour revenues:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Lindblad
|
|
$
|
47,238
|
|
|
$
|
48,187
|
|
|
$
|
(949
|
)
|
|
|
(2
|
%)
|
|
$
|
100,440
|
|
|
$
|
109,761
|
|
|
$
|
(9,321
|
)
|
|
|
(8
|
%)
|
Natural Habitat *
|
|
|
8,333
|
|
|
|
5,684
|
|
|
|
2,649
|
|
|
|
47
|
%
|
|
|
18,259
|
|
|
|
5,684
|
|
|
|
12,575
|
|
|
|
221
|
%
|
Total tour revenues
|
|
$
|
55,571
|
|
|
$
|
53,871
|
|
|
$
|
1,700
|
|
|
|
3
|
%
|
|
$
|
118,699
|
|
|
$
|
115,445
|
|
|
$
|
3,254
|
|
|
|
3
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating (loss) income:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Lindblad
|
|
$
|
(948
|
)
|
|
$
|
(1,744
|
)
|
|
$
|
796
|
|
|
|
(46
|
%)
|
|
$
|
316
|
|
|
$
|
9,175
|
|
|
$
|
(8,859
|
)
|
|
|
(97
|
%)
|
Natural Habitat*
|
|
|
(705
|
)
|
|
|
(793
|
)
|
|
|
88
|
|
|
|
(11
|
%)
|
|
|
(605
|
)
|
|
|
(793
|
)
|
|
|
188
|
|
|
|
(24
|
%)
|
Total operating income
|
|
|
(1,653
|
)
|
|
|
(2,537
|
)
|
|
|
884
|
|
|
|
(35
|
%)
|
|
|
(289
|
)
|
|
|
8,382
|
|
|
|
(8,671
|
)
|
|
|
(103
|
%)
|
* 2016 results represents activity
from acquisition date of May 5, 2016 - June 30, 2016.
Amortization expense related to tradename and customer list amortization for the three months ended June
30, 2017 and 2016 is $0.2 million and $0.1 million in the Natural Habitat segment. For the six months ended June 30, 2017 and 2016
amortization expense in Natural Habitat segment related to the same acquisition related intangibles is $0.4 million and $0.1 million,
respectively. For more information, see note-2 regarding the Company’s policy regarding amortization of intangible assets.
(in millions)
|
|
As of
June 30,
2017
|
|
|
As of December 31,
2016
|
|
Total Assets
|
|
|
|
|
|
|
Lindblad Segment
|
|
$
|
373.1
|
|
|
$
|
366.0
|
|
Natural Habitat Segment
|
|
|
49.9
|
|
|
|
41.7
|
|
Total Assets
|
|
$
|
423.0
|
|
|
$
|
407.7
|
|
|
|
|
|
|
|
|
|
|
Goodwill
|
|
|
|
|
|
|
|
|
Natural Habitat Segment
|
|
$
|
22.1
|
|
|
$
|
22.1
|
|
Total Goodwill
|
|
$
|
22.1
|
|
|
$
|
22.1
|
|
|
|
|
|
|
|
|
|
|
Intangibles, net
|
|
|
|
|
|
|
|
|
Lindblad Segment
|
|
$
|
5.1
|
|
|
$
|
5.5
|
|
Natural Habitat Segment
|
|
|
5.2
|
|
|
|
5.6
|
|
Total Intangibles, net
|
|
$
|
10.3
|
|
|
$
|
11.1
|
|
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 Quarterly Report on Form 10-Q (“Form 10-Q”), as well as its
audited consolidated financial statements and related notes included in the Company’s Annual Report for the year ended December
31, 2016 on Form 10-K filed with the Securities and Exchange Commission on March 7, 2017.
Cautionary
Note Regarding Forward-Looking Statements
Any
statements in this 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:
|
●
|
general
economic conditions;
|
|
●
|
unscheduled
disruptions in our business due to weather events, mechanical failures, or other events;
|
|
●
|
changes
adversely affecting the business in which we are engaged;
|
|
●
|
management
of our growth and our ability to execute on our planned growth;
|
|
●
|
delays
in construction of initial voyages of new vessels;
|
|
|
|
|
●
|
unexpected loss of voyages;
|
|
●
|
our
business strategy and plans;
|
|
●
|
compliance
with laws and regulations;
|
|
●
|
compliance
with the financial and/or operating covenants in our Second Amended & Restated Credit Agreement (“Restated Credit
Agreement”);
|
|
●
|
adverse
publicity regarding the cruise industry in general;
|
|
●
|
loss
of business due to competition;
|
|
●
|
the
result of future financing efforts;
|
|
●
|
the
inability to meet revenue and Adjusted EBITDA projections; and
|
|
●
|
those
risks discussed in Item 1A. Risk Factors in our Annual Report on Form 10-K for the year ended December 31, 2016.
|
Given
these risks readers are cautioned 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, “Company,” “Lindblad,” “we,” “us,”
“our,” and “ours” refer to Lindblad Expeditions Holdings, Inc. and its subsidiaries.
Business
Overview
Lindblad
provides expedition cruising and adventure travel experiences that include itineraries that feature up-close encounters with wildlife
and nature, history and culture and promote guest empowerment and interactivity. 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.
As of June 30, 2017,
we operate a fleet of six owned expedition ships and five seasonal charter vessels under the Lindblad brand. A new coastal vessel
the
National Geographic Quest
joined the fleet in the third quarter of 2017 and the Company has contracted for another
coastal vessel expected to be completed in the second quarter of 2018. We have a strategic business alliance with the National
Geographic Society (“National Geographic”) founded on a shared interest in exploration, research, technology, and
conservation. This relationship includes a co-selling, co-marketing and branding arrangement whereby our owned vessels carry the
National Geographic name and National Geographic sells our expeditions through its internal travel division. We collaborate with
National Geographic on voyage planning to enhance the guest experience by having National Geographic experts, including photographers,
writers, marine biologists, naturalists, field researchers, and film crews, join our expeditions. Guests have the ability to interface
with these experts through lectures, excursions, dining, and other experiences throughout their voyage. Our arrangement with National
Geographic extends through 2025.
We
deploy chartered vessels for various seasonal offerings and continually seek to optimize our charter fleet to balance our inventory
with demand and maximize yields. We use our charter inventory as a mechanism to both increase travel options for our 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.
Due
to the specific geographies in which we operate and the cost of providing access to fuel in our remote destinations, we have historically
not experienced significant fluctuations in fuel costs with changes in world fuel commodity prices. Fuel costs were 2% of tour
revenue for three months ended June 30, 2017 and 2016 at the Lindblad segment. For the six months ended June 30, 2017 and 2016
fuel costs were 2% and 3% of tour revenue at the Lindblad segment.
On May 4, 2016, we expanded our land-based offerings by acquiring an 80.1% ownership interest in Natural
Habitat, Inc. (“Natural Habitat”), an adventure travel and ecotourism company based in Colorado. Natural Habitat was
founded by Benjamin L. Bressler, who retains a 19.9% noncontrolling interest in Natural Habitat. Examples of Natural Habitat’s
expeditions include African safaris in Botswana, grizzly bear adventures in Alaska and polar bear tours in Canada. Since 2003,
Natural Habitat has partnered with the World Wildlife Fund (“WWF”) to offer conservation travel, sustainable travel
that directly protects nature. This agreement with WWF extends through 2023.
In
December 2015, we entered into two separate contracts with Ice Floe LLC, to build the
National Geographic Quest
and the
National Geographic Venture
. Management considers this investment to be an important step to meet increasing demand for
our expedition cruise offerings.
National Geographic Quest
launched in the third quarter of 2017 and will sail in Alaska
and British Columbia during the summer of 2017 before voyaging to Costa Rica and Panama to provide expeditions for the Northern
Hemisphere winter season. There were four voyages cancelled due to delayed delivery of the vessel that will impact full year tour
revenue by approximately $3.6 million and Adjusted EBITDA by approximately $3.0 million. The
National Geographic Venture
is expected to launch in June of 2018.
In
the fourth quarter of 2016, the
National Geographic Orion
experienced an issue with its main engine and as a result we
cancelled four voyages during the first quarter of 2017 for necessary engine repairs. In addition, in the first quarter of 2017,
the
National Geographic Sea Lion
cancelled two voyages to repair the onboard air conditioning system. The impact of the
cancellations during the first quarter was approximately $9.1 million in tour revenues, which included lost ticket revenues of
approximately $11.0 million, offset by $1.9 million in insurance revenues related to the
National Geographic Orion
cancellations.
The Adjusted EBITDA impact due to the voyage cancellations was approximately $6.5 million.
Our
Annual Report on Form 10-K for the year ended December 31, 2016 provides additional information about our business operations
and financial condition.
The
discussion and analysis of our financial condition and results of operations are organized as follows:
|
●
|
a
description of certain line items and operational and financial metrics we utilize to assist us in managing our business;
|
|
●
|
results
and a comparable discussion of our consolidated and segment results of operations for the three and six months ended June
30, 2017 and 2016;
|
|
●
|
a
discussion of our liquidity and capital resources, including future capital and contractual commitments and potential funding
sources; and
|
|
●
|
a
review of our critical accounting policies.
|
Financial
Presentation
Description
of Certain Line Items
Tour
revenues
Tour
revenues consist of the following:
|
●
|
Guest
ticket revenues recognized from the sale of guest tickets; and
|
|
●
|
Other
tour 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 and expedition 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
tour expenses, such as land costs, port costs, repairs and maintenance, equipment expense, drydock, 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 shore side vessel support, reservations and other administrative functions, including
salaries and related benefits, credit card commissions, professional fees and rent.
Operational and Financial Metrics
We
use a variety of operational and financial metrics, including non-GAAP financial measures, such as Adjusted EBITDA, Net Yields,
and Net Cruise Costs, to enable us to analyze our performance and financial condition. We utilize these financial measures to
manage our business on a day-to-day basis and believe that they are the most relevant measures of performance. Some of these measures
are commonly used in the cruise and tourism industry to evaluate performance. We believe these non-GAAP measures provide expanded
insight to assess 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 our financial
condition and results of operations together with the condensed consolidated financial statements and the related notes thereto
also included within.
Adjusted
EBITDA
is net income (loss) excluding depreciation and amortization, net interest expense, other income (expense), income
tax benefit (expense), and other supplemental adjustments. Other supplemental adjustments include certain non-operating items
such as stock-based compensation, the National Geographic fee amortization, merger-related expenses, and acquisition-related expenses.
We believe 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. We believe Adjusted EBITDA, when considered along with other performance measures, is a useful measure as
it reflects certain drivers of the business, such as sales growth and operating costs. We believe Adjusted EBITDA can provide
a more complete understanding of the underlying operating results and trends and an enhanced overall understanding of our 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 revenues, capital expenditures and related depreciation, principal and interest payments, and tax payments. Our 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 our business performance.
The
following metrics apply to our Lindblad segment:
Adjusted
Net Cruise Cost
represents Net Cruise Cost adjusted for Non-GAAP other supplemental adjustments which include certain
non-operating items such as stock-based compensation, the National Geographic fee amortization, merger-related expenses, and acquisition-related
expenses.
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. We also record the number of guest nights available on
our limited land programs in this definition.
Gross
Cruise Cost
represents the sum of cost of tours plus merger-related expenses, selling and marketing expenses, and general
and administrative expenses.
Gross
Yield
represents tour revenues less insurance proceeds 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 revenues
and other tour revenues.
Net
Cruise Cost Excluding Fuel
represents Net Cruise Cost excluding fuel costs.
Net
Revenue
represents tour revenues less insurance proceeds, commissions and direct costs of other tour revenues.
Net
Yield
represents Net Revenue divided by Available Guest Nights.
Number
of Guests
represents the number of guests that travel with us in a period.
Occupancy
is calculated by dividing Guest Nights Sold by Available Guest Nights.
Voyages
represent the number of ship expeditions completed during the period.
Foreign
Currency Translation
The U.S. dollar is the
functional currency in our foreign operations and re-measurement adjustments and gains or losses resulting from foreign currency
transactions are recorded as foreign exchange gains or losses in the condensed consolidated statements of operations.
Seasonality
Lindblad
tour revenues from the sale of guest tickets are mildly seasonal, historically larger in the first and third quarters. The seasonality
of our operating results increases due to our vessels being taken out of service for scheduled maintenance or drydocking, which
is typically during non-peak demand periods, in the second and fourth quarters. Our drydock schedules are subject to cost and
timing differences from year to year due to the availability of shipyards for certain work, drydock locations based on ship itineraries,
operating conditions experienced especially in the polar regions, and the applicable regulations of class societies in the maritime
industry, which require more extensive reviews periodically. Drydocking impacts operating results by reducing tour revenues and
increasing cost of tours. Natural Habitat is a seasonal business, with the majority of its tour revenue recorded in the fourth
quarter from polar bear tours.
Results
of Operations – Consolidated
We
reported consolidated tour revenues, cost of tours, operating expenses, operating income, and net (loss) income for the three
and six months ended June 30, 2017 and 2016 as shown in the following table:
|
|
For
the Three Months Ended
June 30,
|
|
|
For
the Six Months Ended
June 30,
|
|
(In thousands, except
per share data)
|
|
2017
|
|
|
2016
|
|
|
Change
|
|
|
%
|
|
|
2017
|
|
|
2016
|
|
|
Change
|
|
|
%
|
|
Tour
revenues
|
|
$
|
55,571
|
|
|
$
|
53,871
|
|
|
$
|
1,700
|
|
|
|
3
|
%
|
|
$
|
118,699
|
|
|
$
|
115,445
|
|
|
$
|
3,254
|
|
|
|
3
|
%
|
Cost
of tours
|
|
|
28,697
|
|
|
|
29,390
|
|
|
|
(693
|
)
|
|
|
(2
|
%)
|
|
|
61,300
|
|
|
|
54,665
|
|
|
|
6,635
|
|
|
|
12
|
%
|
Gross
profit
|
|
|
26,874
|
|
|
|
24,481
|
|
|
|
2,393
|
|
|
|
10
|
%
|
|
|
57,399
|
|
|
|
60,780
|
|
|
|
(3,381
|
)
|
|
|
(6
|
%)
|
General
and administrative
|
|
|
15,082
|
|
|
|
12,637
|
|
|
|
2,445
|
|
|
|
19
|
%
|
|
|
30,184
|
|
|
|
23,825
|
|
|
|
6,359
|
|
|
|
27
|
%
|
Selling
and marketing
|
|
|
9,550
|
|
|
|
9,512
|
|
|
|
38
|
|
|
|
0
|
%
|
|
|
19,846
|
|
|
|
19,130
|
|
|
|
716
|
|
|
|
4
|
%
|
Depreciation
and amortization
|
|
|
3,895
|
|
|
|
4,869
|
|
|
|
(974
|
)
|
|
|
(20
|
%)
|
|
|
7,658
|
|
|
|
9,443
|
|
|
|
(1,785
|
)
|
|
|
(19
|
%)
|
Operating
(loss) income
|
|
$
|
(1,653
|
)
|
|
$
|
(2,537
|
)
|
|
$
|
884
|
|
|
|
(35
|
%)
|
|
|
(289
|
)
|
|
|
8,382
|
|
|
$
|
(8,671
|
)
|
|
|
(103
|
%)
|
Net
(loss) income
|
|
|
(2,578
|
)
|
|
|
(4,494
|
)
|
|
|
1,916
|
|
|
|
(43
|
%)
|
|
$
|
(1,952
|
)
|
|
$
|
5,973
|
|
|
|
(7,925
|
)
|
|
|
(133
|
%)
|
Earnings
per share attributable to Lindblad
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic
|
|
$
|
(0.06
|
)
|
|
$
|
(0.10
|
)
|
|
|
|
|
|
|
|
|
|
$
|
(0.04
|
)
|
|
$
|
0.13
|
|
|
|
|
|
|
|
|
|
Diluted
|
|
|
(0.06
|
)
|
|
|
(0.10
|
)
|
|
|
|
|
|
|
|
|
|
|
(0.04
|
)
|
|
|
0.13
|
|
|
|
|
|
|
|
|
|
Comparison
of Three and Six Months Ended June 30, 2017 to Three and Six Months Ended June 30, 2016 – Consolidated
Tour
Revenues
Tour
revenues for the three months ended June 30, 2017 increased $1.7 million, or 3%, to $55.6 million compared to $53.9 million for
the three months ended June 30, 2016. The increase was primarily a result of $2.6 million in added tour revenues from the Natural
Habitat segment, which was acquired in the second quarter of 2016, partially offset by $0.9 million of lower revenues at the Lindblad
segment primarily due to lower occupancy.
Tour
revenues for the six months ended June 30, 2017 increased $3.3 million, or 3%, to $118.7 million compared to $115.4 million for
the six months ended June 30, 2016. The increase was primarily a result of $12.6 million in added tour revenues from the Natural
Habitat segment, partially offset by a decrease of $9.3 million at the Lindblad segment due largely to the cancellation of four
highly booked voyages of the
National Geographic Orion
and two highly booked voyages of the
National Geographic Sea
Lion
in the first quarter of 2017. Excluding these voyage cancellations, it is estimated tour revenues would have increased
approximately $12.4 million or 11% to $127.8 million.
Cost
of Tours
Total cost of tours for
the three months ended June 30, 2017 decreased $0.7 million, or 2%, to $28.7 million compared to $29.4 million for the three months
ended June 30, 2016. The Lindblad segment declined by $2.0 million, primarily driven by lower drydock expenses, partially offset
by an increase of $1.3 million from the Natural Habitat segment due to a full quarter of results.
Total
cost of tours for the six months ended June 30, 2017 increased $6.6 million, or 12%, to $61.3 million compared to $54.7 million
for the six months ended June 30, 2016. The increase was primarily a result of a $7.5 million increase at the Natural Habitat
segment due to a full six months of results for 2017, partially offset by a $0.9 million decline at the Lindblad segment. Lower
cost of tours at the Lindblad segment were driven by a decrease in drydock and fuel expenses, which were partially offset by additional
charter expeditions and costs associated with the cancelled voyages during the first quarter.
General
and Administrative Expenses
General
and administrative expenses for the three months ended June 30, 2017 increased by $2.5 million to $15.1 million compared to $12.6
million for the three months ended June 30, 2016. The increase was driven by $1.4 million in added general and administrative
expenses at the Lindblad segment due to higher stock based compensation associated with the CEO Allocation grant and $1.1 million
at the Natural Habitat segment due to a full quarter of results for the second quarter of 2017.
General
and administrative expenses for the six months ended June 30, 2017 increased by $6.4 million to $30.2 million compared to $23.8
million for the six months ended June 30, 2016. The increase was primarily a result of $3.0 million in added general and administrative
costs at the Lindblad segment due to higher stock based compensation associated with the CEO Allocation grant and $3.3 million
at the Natural Habitat segment due to a full six months of results in 2017.
Selling and Marketing Expenses
Selling
and marketing expenses for the three months ended June 30, 2017 was $9.5 million compared to $9.5 million for the three months
ended June 30, 2016 as a $0.1 million decrease at the Lindblad segment was offset by a $0.1 million increase at the Natural Habitat
segment.
Selling
and marketing expenses for the six months ended June 30, 2017 increased $0.7 million, or 4%, to $19.8 million compared to $19.1
million for the six months ended June 30, 2016. The increase was primarily a result of $1.1 million in added selling and marketing
expenses from the Natural Habitat segment due to a full six months of results in 2017, offset by a decrease of $0.4 million in
the Lindblad segment.
Depreciation
and Amortization Expenses
Depreciation
and amortization expenses for the three months ended June 30, 2017 and 2016 were $3.9 million and $4.9 million, respectively.
Depreciation and amortization expenses for the six months ended June 30, 2017 and 2016 were $7.7 million and $9.4 million, respectively.
The $1.0 million and $1.8 million decreases were primarily related to the accelerated depreciation for the
National Geographic
Endeavour
, recorded in 2016 and described in Note 2 –Summary of Significant Accounting Policies.
Other
Expense (Income)
Other
expenses were $1.4 million for the three months ended June 30, 2017 compared to $3.0 million for the three months ended June 30,
2016. The $1.6 million decrease was due to higher capitalized interest related to the construction of the
National Geographic
Quest
and
National Geographic Venture
and gains on foreign currency translation.
Other
expenses were $3.7 million for the six months ended June 30, 2017 compared to $5.7 million in 2016. The $2.0 million decrease
was due to higher capitalized interest related to the construction of the
National Geographic Quest
and
National Geographic
Venture
and gains on foreign currency translation.
Results
of Operations – Segments
Selected
information for our segments is below.
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.
|
|
For
the Three Months Ended
|
|
|
For
the Six Months Ended
|
|
|
|
June
30,
|
|
|
June
30,
|
|
(In
thousands)
|
|
2017
|
|
|
2016
|
|
|
Change
|
|
|
%
|
|
|
2017
|
|
|
2016
|
|
|
Change
|
|
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Tour
revenues:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Lindblad
|
|
$
|
47,238
|
|
|
$
|
48,187
|
|
|
$
|
(949
|
)
|
|
|
(2
|
%)
|
|
$
|
100,440
|
|
|
$
|
109,761
|
|
|
$
|
(9,321
|
)
|
|
|
(8
|
%)
|
Natural
Habitat *
|
|
|
8,333
|
|
|
|
5,684
|
|
|
|
2,649
|
|
|
|
47
|
%
|
|
|
18,259
|
|
|
|
5,684
|
|
|
|
12,575
|
|
|
|
221
|
%
|
Total
tour revenues
|
|
$
|
55,571
|
|
|
$
|
53,871
|
|
|
$
|
1,700
|
|
|
|
3
|
%
|
|
$
|
118,699
|
|
|
$
|
115,445
|
|
|
$
|
3,254
|
|
|
|
3
|
%
|
Impact
of voyage cancellations
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
NA
|
|
|
|
9,140
|
|
|
|
-
|
|
|
|
9,140
|
|
|
|
100
|
%
|
Total
tour revenues excluding voyage cancellations
|
|
$
|
55,571
|
|
|
$
|
53,871
|
|
|
$
|
1,700
|
|
|
|
3
|
%
|
|
$
|
127,839
|
|
|
$
|
115,445
|
|
|
$
|
12,394
|
|
|
|
11
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating
(loss) income:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Lindblad
|
|
$
|
(948
|
)
|
|
$
|
(1,744
|
)
|
|
$
|
796
|
|
|
|
(46
|
%)
|
|
$
|
316
|
|
|
$
|
9,175
|
|
|
$
|
(8,859
|
)
|
|
|
(97
|
%)
|
Natural
Habitat*
|
|
|
(705
|
)
|
|
|
(793
|
)
|
|
|
88
|
|
|
|
(11
|
%)
|
|
|
(605
|
)
|
|
|
(793
|
)
|
|
|
188
|
|
|
|
(24
|
%)
|
Total
operating income
|
|
|
(1,653
|
)
|
|
|
(2,537
|
)
|
|
|
884
|
|
|
|
(35
|
%)
|
|
|
(289
|
)
|
|
|
8,382
|
|
|
|
(8,671
|
)
|
|
|
(103
|
%)
|
Impact
of voyage cancellations
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
NA
|
|
|
|
6,464
|
|
|
|
-
|
|
|
|
6,464
|
|
|
|
100
|
%
|
Total
operating income excluding voyage cancellations
|
|
$
|
(1,653
|
)
|
|
$
|
(2,537
|
)
|
|
$
|
884
|
|
|
|
(35
|
%)
|
|
$
|
6,175
|
|
|
$
|
8,382
|
|
|
$
|
(2,207
|
)
|
|
|
(26
|
%)
|
*
2016 results represents activity from acquisition date of May 5, 2016 - June 30, 2016.
The impact of the cancelled
voyages on tour revenues was calculated as booked tour revenue at the time of cancellation less insurance proceeds. The impact
of the cancelled voyages on operating income was calculated as booked tour revenue at the time of cancellation less insurance
proceeds and estimated operating costs. The cancellation of the June 26, 2017 voyage of the
National Geographic Quest
due
to its delayed launch is not material to the results for the three and six months ended June 30, 2017.
Results
of Operations – Lindblad Segment
The
following tables set forth our Guest Metrics for the Lindblad segment. Please refer to our
Description of Certain Line Items
above for the specific definition by line item and segment.
The
following table sets forth our Available Guest Nights, Guest Nights Sold, Occupancy, Maximum Guests, Number of Guests and Voyages
for the three and six months ended June 30, 2017 and 2016:
Guest
Metrics - Lindblad Segment
|
|
For the Three Months Ended
June 30,
|
|
|
For the Six Months Ended
June 30,
|
|
|
|
2017
|
|
|
2016
|
|
|
2017
|
|
|
2016
|
|
Available
Guest Nights
|
|
|
43,171
|
|
|
|
41,213
|
|
|
|
85,893
|
|
|
|
93,070
|
|
Guest Nights Sold
|
|
|
36,765
|
|
|
|
37,903
|
|
|
|
73,829
|
|
|
|
85,522
|
|
Occupancy
|
|
|
85.2
|
%
|
|
|
92.0
|
%
|
|
|
86.0
|
%
|
|
|
91.9
|
%
|
Maximum Guests
|
|
|
4,941
|
|
|
|
5,233
|
|
|
|
10,209
|
|
|
|
10,941
|
|
Number of Guests
|
|
|
4,311
|
|
|
|
4,830
|
|
|
|
8,912
|
|
|
|
10,114
|
|
Voyages
|
|
|
66
|
|
|
|
68
|
|
|
|
147
|
|
|
|
147
|
|
The
following table shows the calculations of Gross Yield and Net Yield for the three and six months ended June 30, 2017 and 2016.
Gross Yield is calculated by dividing tour revenues less insurance proceeds, by Available Guest Nights. Net Yield is calculated
by dividing Net Revenue by Available Guest Nights:
Lindblad
Segment
Calculation
of Gross Yield and Net Yield - Lindblad Segment
(In
thousands, except for Available
|
|
For the Three Months Ended
June 30,
|
|
|
For the Six Months Ended
June 30,
|
|
Guest
Nights, Gross and Net Yield)
|
|
2017
|
|
|
2016
|
|
|
2017
|
|
|
2016
|
|
Guest
ticket revenues
|
|
$
|
40,745
|
|
|
$
|
42,610
|
|
|
$
|
85,790
|
|
|
$
|
96,524
|
|
Other
tour revenues
|
|
|
6,493
|
|
|
|
5,577
|
|
|
|
14,650
|
|
|
|
13,237
|
|
Tour
Revenues
|
|
|
47,238
|
|
|
|
48,187
|
|
|
|
100,440
|
|
|
|
109,761
|
|
Less:
Orion Insurance Proceeds
|
|
|
-
|
|
|
|
-
|
|
|
|
1,900
|
|
|
|
-
|
|
Adjusted
Tour Revenues
|
|
|
47,238
|
|
|
|
48,187
|
|
|
|
98,540
|
|
|
|
109,761
|
|
Less:
Commissions
|
|
|
(3,659
|
)
|
|
|
(3,480
|
)
|
|
|
(7,761
|
)
|
|
|
(7,768
|
)
|
Less:
Other tour expenses
|
|
|
(2,972
|
)
|
|
|
(3,536
|
)
|
|
|
(7,090
|
)
|
|
|
(8,546
|
)
|
Net
Revenue
|
|
$
|
40,607
|
|
|
$
|
41,171
|
|
|
$
|
83,689
|
|
|
$
|
93,447
|
|
Available
Guest Nights
|
|
|
43,171
|
|
|
|
41,213
|
|
|
|
85,893
|
|
|
|
93,070
|
|
Gross
Yield
|
|
$
|
1,094
|
|
|
$
|
1,169
|
|
|
$
|
1,147
|
|
|
$
|
1,179
|
|
Net
Yield
|
|
|
941
|
|
|
|
999
|
|
|
|
974
|
|
|
|
1,004
|
|
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 six months ended June 30, 2017 and 2016:
Calculation
of Net Cruise Cost Metrics - Lindblad Segment
(In thousands, except for Available
Guest Nights,
Gross and Net Cruise Cost)
|
|
For the Three Months Ended
June 30,
|
|
|
For the Six Months Ended
June 30,
|
|
|
|
2017
|
|
|
2016
|
|
|
2017
|
|
|
2016
|
|
Cost of tours
|
|
$
|
23,168
|
|
|
$
|
25,118
|
|
|
$
|
49,541
|
|
|
$
|
50,393
|
|
Plus: Selling and marketing
|
|
|
8,960
|
|
|
|
9,045
|
|
|
|
18,272
|
|
|
|
18,663
|
|
Plus: General
and administrative
|
|
|
12,503
|
|
|
|
11,110
|
|
|
|
25,316
|
|
|
|
22,298
|
|
Gross Cruise Cost
|
|
|
44,631
|
|
|
|
45,273
|
|
|
|
93,129
|
|
|
|
91,354
|
|
Less: Commission expense
|
|
|
(3,659
|
)
|
|
|
(3,480
|
)
|
|
|
(7,761
|
)
|
|
|
(7,768
|
)
|
Less: Other tour
expenses
|
|
|
(2,972
|
)
|
|
|
(3,536
|
)
|
|
|
(7,090
|
)
|
|
|
(8,546
|
)
|
Net Cruise Cost
|
|
|
38,000
|
|
|
|
38,257
|
|
|
|
78,278
|
|
|
|
75,040
|
|
Less: Fuel expense
|
|
|
(1,296
|
)
|
|
|
(1,132
|
)
|
|
|
(2,964
|
)
|
|
|
(3,662
|
)
|
Net Cruise Cost
Excluding Fuel
|
|
|
36,704
|
|
|
|
37,125
|
|
|
|
75,314
|
|
|
|
71,378
|
|
Non-GAAP Adjustments:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Stock-based compensation
|
|
|
(2,205
|
)
|
|
|
(1,287
|
)
|
|
|
(6,407
|
)
|
|
|
(2,622
|
)
|
National Geographic fee amortization
|
|
|
(727
|
)
|
|
|
(727
|
)
|
|
|
(1,454
|
)
|
|
|
(1,454
|
)
|
Acquisition-related
expenses
|
|
|
-
|
|
|
|
(892
|
)
|
|
|
-
|
|
|
|
(892
|
)
|
Adjusted
Net Cruise Cost Excluding Fuel
|
|
$
|
33,772
|
|
|
$
|
34,219
|
|
|
$
|
67,453
|
|
|
$
|
66,410
|
|
Adjusted
Net Cruise Cost
|
|
$
|
35,068
|
|
|
$
|
35,351
|
|
|
$
|
70,417
|
|
|
$
|
70,072
|
|
Available Guest Nights
|
|
|
43,171
|
|
|
|
41,213
|
|
|
|
85,893
|
|
|
|
93,070
|
|
Gross Cruise Cost per Available Guest
Night
|
|
$
|
1,034
|
|
|
$
|
1,099
|
|
|
$
|
1,084
|
|
|
$
|
982
|
|
Net Cruise Cost per Available Guest
Night
|
|
|
880
|
|
|
|
928
|
|
|
|
911
|
|
|
|
806
|
|
Net Cruise Cost Excl. Fuel per Available
Guest Night
|
|
|
850
|
|
|
|
901
|
|
|
|
877
|
|
|
|
767
|
|
Adj. Net Cruise Cost Excl. Fuel per
Avail. Guest Night
|
|
|
782
|
|
|
|
830
|
|
|
|
785
|
|
|
|
714
|
|
Adjusted Net Cruise
Cost per Available Guest Night
|
|
|
812
|
|
|
|
858
|
|
|
|
820
|
|
|
|
753
|
|
Comparison
of Three and Six Months Ended June 30, 2017 to Three and Six Months Ended June 30, 2016 – Lindblad Segment
Tour
Revenues
Tour
revenues for the three months ended June 30, 2017 decreased $0.9 million, or 2%, to $47.2 million compared to $48.2 million for
the three months ended June 30, 2016. The change was primarily related to a $1.9 million decrease in guest ticket revenues primarily
due to lower occupancy, partially offset by $0.9 million increase in other tour revenues.
Tour
revenues for the six months ended June 30, 2017 decreased $9.3 million, or 8%, to $100.4 million compared to $109.8 million for
the six months ended June 30, 2016. The change was primarily the result of a $10.7 million decrease in guest ticket revenues primarily
due voyage cancellations on the
National Geographic Orion
and
National Geographic Sea Lion
during the first quarter
of 2017 and to lower occupancy. Excluding these voyage cancellations, it is estimated tour revenues would have increased approximately
$12.4 million or 11% to $127.8 million.
Operating
(Loss) Income
Operating loss for the
three months ended June 30, 2017 improved $0.8 million, to an operating loss of $0.9 million compared to an operating loss of
$1.7 million for the three months ended June 30, 2016. This improvement was primarily related to a $1.9 million reduction in cost
of tours mostly due to lower drydock costs of $1.5 million and a decrease in depreciation and amortization as a result of the
accelerated depreciation related to the retirement of the
National Geographic Endeavor
of $1.1 million during the prior
year, partially offset by an increase in general and administrative costs driven by stock compensation associated with the 2016
CEO Allocation Plan of $1.4 million.
Operating
income for the six months ended June 30, 2017 decreased $8.9 million to $0.3 million compared to operating income of $9.2 million
for the six months ended June 30, 2016. This decrease was primarily related to the voyage cancellations on the
National Geographic
Orion
and
National Geographic Sea Lion
during the first quarter of 2017, an increase in stock based compensation due
to the 2016 CEO Allocation Plan and additional charter costs, partially offset by lower drydock and fuel expenses. Excluding the
impact of cancelled voyages it is estimated that operating income would have decreased approximately $2.4 million or 19% to $6.8
million.
Results
of Operations – Natural Habitat Segment
As
a result of the acquisition of Natural Habitat, we began to include the results of operations for Natural Habitat as a separate
segment on May 5, 2016. For the period beginning May 5, 2016 and ending on June 30, 2016, Natural Habitat reported $5.7 million
in tour revenues and an operating loss of $0.8 million for three and six months ending June 30, 2016. For the three and six months
ended June 30, 2017, Natural Habitat segment reported tour revenues of $8.3 million and $18.3 million and operating losses of
$0.7 million and $0.6 million, respectively.
Adjusted
EBITDA – Consolidated
The
following table outlines the reconciliation to Net income and calculation of consolidated Adjusted EBITDA for the three and six
months ended June 30, 2017 and 2016.
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
.
Reconciliation
of Net Income to Adjusted EBITDA
Consolidated
(In
thousands)
|
|
For the Three Months Ended
June 30,
|
|
|
For the Six Months Ended
June 30,
|
|
|
|
2017
|
|
|
2016
|
|
|
2017
|
|
|
2016
|
|
Net
(loss) income
|
|
$
|
(2,578
|
)
|
|
$
|
(4,494
|
)
|
|
$
|
(1,952
|
)
|
|
$
|
5,973
|
|
Income
tax (benefit) expense
|
|
|
(467
|
)
|
|
|
(1,090
|
)
|
|
|
(2,060
|
)
|
|
|
(3,315
|
)
|
Interest
expense, net
|
|
|
2,075
|
|
|
|
2,690
|
|
|
|
4,390
|
|
|
|
5,438
|
|
Depreciation
and amortization
|
|
|
3,895
|
|
|
|
4,869
|
|
|
|
7,658
|
|
|
|
9,443
|
|
Gain
(loss) on foreign currency
|
|
|
(577
|
)
|
|
|
357
|
|
|
|
(823
|
)
|
|
|
286
|
|
Other
(income) expense, net
|
|
|
(107
|
)
|
|
|
-
|
|
|
|
156
|
|
|
|
-
|
|
Stock-based
compensation
|
|
|
2,205
|
|
|
|
1,287
|
|
|
|
6,407
|
|
|
|
2,622
|
|
National
Geographic fee amortization
|
|
|
727
|
|
|
|
727
|
|
|
|
1,454
|
|
|
|
1,454
|
|
Reorganization
costs
|
|
|
112
|
|
|
|
-
|
|
|
|
318
|
|
|
|
-
|
|
Acquisition-related
expenses
|
|
|
-
|
|
|
|
892
|
|
|
|
-
|
|
|
|
892
|
|
Adjusted
EBITDA - Consolidated
|
|
|
5,285
|
|
|
|
5,238
|
|
|
|
15,548
|
|
|
|
22,793
|
|
Impact
of voyage cancellations
|
|
|
-
|
|
|
|
-
|
|
|
|
6,464
|
|
|
|
-
|
|
Adjusted
EBITDA - Consolidated excluding impact of voyage cancellations
|
|
$
|
5,285
|
|
|
$
|
5,238
|
|
|
$
|
22,012
|
|
|
$
|
22,793
|
|
The following tables outline the reconciliation for each segment
from operating income to Adjusted EBITDA for the three and six months ended June 30, 2017 and 2016.
Reconciliation
of Operating Income to Adjusted EBITDA
Lindblad
Segment
(In thousands)
|
|
For the Three Months Ended
June 30,
|
|
|
For the Six Months Ended
June 30,
|
|
|
|
2017
|
|
|
2016
|
|
|
2017
|
|
|
2016
|
|
Operating (loss) income
|
|
$
|
(948
|
)
|
|
$
|
(1,744
|
)
|
|
$
|
316
|
|
|
$
|
9,175
|
|
Depreciation and amortization
|
|
|
3,555
|
|
|
|
4,658
|
|
|
|
6,995
|
|
|
|
9,232
|
|
Stock-based compensation
|
|
|
2,205
|
|
|
|
1,287
|
|
|
|
6,407
|
|
|
|
2,622
|
|
National Geographic fee amortization
|
|
|
727
|
|
|
|
727
|
|
|
|
1,454
|
|
|
|
1,454
|
|
Reorganization costs
|
|
|
112
|
|
|
|
-
|
|
|
|
318
|
|
|
|
-
|
|
Acquisition-related
expenses
|
|
|
-
|
|
|
|
892
|
|
|
|
-
|
|
|
|
892
|
|
Adjusted EBITDA -
Lindblad segment
|
|
|
5,651
|
|
|
|
5,820
|
|
|
|
15,490
|
|
|
|
23,375
|
|
Impact of voyage
cancellations
|
|
|
-
|
|
|
|
-
|
|
|
|
6,464
|
|
|
|
-
|
|
Adjusted
EBITDA - Lindblad segment excluding impact of voyage cancellations
|
|
$
|
5,651
|
|
|
$
|
5,820
|
|
|
$
|
21,954
|
|
|
$
|
23,375
|
|
The impact of the cancelled voyages on tour revenues was calculated as booked tour revenue at the time
of cancellation less insurance proceeds. The impact of the cancelled voyages on operating income and Adjusted EBITDA was calculated
as booked tour revenue at the time of cancellation less insurance proceeds and estimated operating costs. The cancellation of the
June 26, 2017 voyage of the
National Geographic Quest
due to its delayed launch is not material to the results for the three
and six months ended June 30, 2017.
Reconciliation
of Operating Income to Adjusted EBITDA
Natural
Habitat Segment
(In thousands)
|
|
For the Three Months Ended
June 30,
|
|
|
For the Six Months Ended
June 30,
|
|
|
|
2017
|
|
|
2016*
|
|
|
2017
|
|
|
2016*
|
|
Operating loss
|
|
$
|
(706
|
)
|
|
$
|
(793
|
)
|
|
$
|
(605
|
)
|
|
$
|
(793
|
)
|
Depreciation
and amortization
|
|
|
340
|
|
|
|
211
|
|
|
|
663
|
|
|
|
211
|
|
Adjusted
EBITDA - Natural Habitat segment
|
|
$
|
(366
|
)
|
|
$
|
(582
|
)
|
|
$
|
58
|
|
|
$
|
(582
|
)
|
*
2016
results represents activity from acquisition date of May 5, 2016 - June 30, 2016.
Liquidity
and Capital Resources
Sources
and Uses of Cash for the Six Months Ended June 30, 2017 and 2016
Net
cash provided by operating activities
was $23.2 million in the six months ended June 30, 2017 compared to $6.8 million
in the comparable period in 2016. The $16.4 million increase was primarily due to a $26.4 million increase in unearned passenger
revenues as a result of higher year over year bookings partially offset by an increase in prepaid expenses.
Net
cash used in investing activities
was $51.0 million in the six months ended June 30, 2017 compared to $52.0 million in
the comparable period in 2016. The improvement was a result of the acquisition of Natural Habitat in the prior year, mostly offset
by an increase in capital expenditures of $5.8 million and purchases of restricted cash reserves and marketable securities of
$3.1 million.
Net
cash used in financing activities
was $8.5 million in the six months ended June 30, 2017 compared to net cash used in
financing activities of $10.6 million in the comparable period in 2016. The $2.1 million decrease is primarily the result of lower
deferred financing costs and equity purchases.
Funding
Needs and Sources
We have 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. Similar to others in the industry, we have historically operated with a meaningful working capital deficit.
This historical deficit is mainly attributable to the fact that, under our 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 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 a result of the proceeds from
the Restated Credit Agreement and the merger, we had net working capital of $11.7 million and $47.1 million as of June 30, 2017
and December 31, 2016, respectively. As of June 30, 2017, we had $99.3 million in cash and cash equivalents, excluding restricted
cash.
In November 2015, the
Company’s Board of Directors approved a $20.0 million stock and warrant repurchase plan and in November 2016, increased
the authorization by $15.0 million to a total of $35.0 million. This Repurchase 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 based on market and business conditions,
applicable legal requirements and other factors. Any shares and warrants purchased will be retired. The Repurchase 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. For the three months ended June 30, 2017, the Company purchased 66,194 shares of common stock for $0.6
million and for the six months ended June 30, 2017 we purchased 547,058 shares of common stock for $5.1 million and 513,372 warrants
for $1.1 million. We have cumulatively purchased 5,426,985 warrants for $13.9 million and 855,776 shares of common stock for $8.1
million, since plan inception.
In December 2015, we executed
definitive agreements for the construction of two new coastal vessels for delivery targeted in 2017 and 2018 at a purchase price
of $48.0 million and $46.8 million, respectively subject to change orders. As of June 30, 2017, we paid $51.6 million and $14.9
million related to these contracts for the construction of the
National Geographic Quest
and the
National Geographic
Venture
, respectively. The new build process exposes us to certain risks typically associated with new ship construction,
which we manage through detailed planning and close monitoring by our internal marine team. The purchase of the ships has been
funded through a combination of cash available on our balance sheet, our revolving credit facility and excess cash flows generated
by our existing operations.
As
of June 30, 2017, we had approximately $165.8 million in long-term debt obligations, including the current portion of long-term
debt offset by debt discounts and deferred financing costs. We believe that our cash on hand, our revolving credit facility and
expected future operating cash inflows will be sufficient to fund operations, debt service requirements, capital expenditures
for our new builds and other assets, acquisitions, and our Repurchase Plan. However, there can be no assurance that cash flows
from operations will be available in the future to fund future obligations.
Debt
Covenants
On
March 7, 2016, we entered into a second amended and restated credit agreement with Credit Suisse as Administrative Agent and Collateral
Agent (“Restated Credit Agreement”), amending our existing senior secured credit facility with Credit Suisse (“Restated
Credit Facility”). The Restated Credit Facility provides for our existing $175.0 million senior secured first lien term
loan facility and a $45.0 million senior secured incremental revolving credit facility, which includes a $5.0 million letter of
credit subfacility. Borrowings under the term loan facility bear interest at an adjusted ICE Benchmark Administration LIBO Rate
(subject to a floor of 1%) plus a spread of 4.50% and mature on May 8, 2021. Borrowings under the revolving credit facility will
bear interest at an adjusted ICE Benchmark administration LIBO Rate plus a spread of 4.00%, or, at our option, an alternative
base rate plus a spread of 3.00%. We are also required to pay a 0.50% annual commitment fee on undrawn amounts under the revolving
credit facility, which matures on May 8, 2020. Our obligations under the Restated Credit Facility are secured by substantially
all of our assets. As of June 30, 2017, the Company had no borrowings under the revolving credit facility.
The
Restated Credit Agreement contains financial covenants that, among other things, (i) require us to maintain a total net leverage
ratio (defined as on any date of determination, the ratio of total debt on such date, less up to $25.0 million of the unrestricted
cash and cash equivalents to Adjusted EBITDA (as defined in the Restated Credit Agreement) for the trailing 12-month period) 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) limit the amount of indebtedness we 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) limit the amount we may spend in connection with certain types of investments;
and (iv) require the delivery of certain periodic financial statements and an operating budget. As of June 30, 2017, the net leverage
ratio was 4.25 to 1 and we were in compliance with the financial covenants.
Critical
Accounting Policies
For
a detailed discussion of the Critical Accounting Policies, please see the Company’s Annual Report on Form 10-K filed on
March 7, 2017 with the Securities and Exchange Commission.
Off-Balance
Sheet Arrangements
The
Company did not have any off-balance sheet arrangements as of June 30, 2017 and December 31, 2016.
Item
3:
|
QUANTITATIVE
AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
|
There
have been no material changes in our exposure to market risk from the information set forth in the “Quantitative and Qualitative
Disclosures About Market Risk” sections contained in the Company’s Annual Report on Form 10-K.
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 June 30, 2017, 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. In the opinion of management, there are no outstanding proceedings that are expected to have a material adverse effect
on our financial position, results of operations or cash flows.
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, 2016, filed on March 7, 2017.
Item
2:
|
UNREGISTERED
SALES OF EQUITY SECURITIES AND USE OF PROCEEDS
|
Recent
Sales by the Company of Unregistered Securities
There
were no unregistered sales of equity securities during the quarter ended June 30, 2017.
Repurchases
of Securities
On
November 2, 2016, our Board of Directors approved a $15.0 million increase to the original $20.0 million Repurchase Plan, announced
in November 2015, to a total of $35.0 million. This Repurchase Plan authorizes us to purchase from time to time our 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 based on market and business conditions, applicable legal requirements
and other factors. Any shares and warrants purchased will be retired. The Repurchase Plan has no time deadline and will continue
until otherwise modified or terminated at the sole discretion of our Board of Directors at any time.
The following table represents information with respect to purchases by us of our common stock during
the three months ended June 30, 2017.
Period
|
|
Total number of shares purchased
|
|
|
Average price paid per share
|
|
|
Total number of shares purchased as part of publicly announced plans or programs
|
|
|
Balance from above
|
|
|
|
|
|
|
|
|
|
|
|
|
18,176,958
|
|
April 1-30, 2017
|
|
|
40,800
|
|
|
$
|
8.97
|
|
|
|
366,172
|
|
|
|
17,810,786
|
|
May 1-31, 2017
|
|
|
25,394
|
|
|
|
8.98
|
|
|
|
228,103
|
|
|
|
17,582,683
|
|
June 1-30, 2017
|
|
|
-
|
|
|
|
|
|
|
|
-
|
|
|
|
17,582,683
|
|
Total shares 2017
|
|
|
66,194
|
|
|
$
|
8.98
|
|
|
|
594,275
|
|
|
|
|
|
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 August 3, 2017
|
LINDBLAD
EXPEDITIONS HOLDINGS, INC.
|
|
(Registrant)
|
|
|
|
|
By
|
/s/
Sven-Olof Lindblad
|
|
|
Sven-Olof
Lindblad
|
|
|
Chief
Executive Officer and President
|
35