LINDBLAD EXPEDITIONS HOLDINGS, INC. - Quarter Report: 2020 June (Form 10-Q)

LINDBLAD EXPEDITIONS HOLDINGS, INC. AND SUBSIDIARIES

Condensed Consolidated Balance Sheets

(In thousands, except share and per share data)

The accompanying notes are an integral part of these condensed consolidated financial statements.

LINDBLAD EXPEDITIONS HOLDINGS, INC. AND SUBSIDIARIES

Condensed Consolidated Statements of Operations

(In thousands, except share and per share data)

(unaudited)

The accompanying notes are an integral part of these condensed consolidated financial statements.

LINDBLAD EXPEDITIONS HOLDINGS, INC. AND SUBSIDIARIES

Condensed Consolidated Statements of Comprehensive Income (Loss)

(In thousands)

(unaudited)

The accompanying notes are an integral part of these condensed consolidated financial statements.

LINDBLAD EXPEDITIONS HOLDINGS, INC. AND SUBSIDIARIES

Condensed Consolidated Statements of Stockholders’ Equity

(In thousands, except share data)

(unaudited)

The accompanying notes are an integral part of these condensed consolidated financial statements.

LINDBLAD EXPEDITIONS HOLDINGS, INC. AND SUBSIDIARIES

Condensed Consolidated Statements of Stockholders’ Equity (continued)

(In thousands, except share data)

(unaudited)

The accompanying notes are an integral part of these condensed consolidated financial statements.

LINDBLAD EXPEDITIONS HOLDINGS, INC. AND SUBSIDIARIES

Condensed Consolidated Statements of Cash Flows

(In thousands)

(unaudited)

The accompanying notes are an integral part of these condensed consolidated financial statements.

Lindblad Expeditions Holdings, Inc.

Notes to the Condensed Consolidated Financial Statements

(Unaudited)

NOTE 1 – BUSINESS AND BASIS OF PRESENTATION

Business

Lindblad Expeditions Holdings, Inc. and its consolidated subsidiaries (the “Company” or “Lindblad”) mission is offering life-changing adventures around the world and pioneering innovative ways to allow its guests to connect with exotic and remote places. The Company currently operates a fleet of nine owned expedition ships and five seasonal charter vessels under the Lindblad brand and operates eco-conscious expeditions and nature-focused, small-group tours under the Natural Habitat, Inc. (“Natural Habitat”) brand.

The Company operates the following reportable business segments:

Lindblad – Offers primarily ship-based expeditions aboard customized, nimble and intimately-scaled vessels that are able to venture where larger cruise ships cannot, thereby 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 National Geographic Partners (“National Geographic”), which provides for lecturers and National Geographic experts, including photographers, writers, marine biologists, naturalists, field researchers and film crews, to join many of the Company’s expeditions.

Natural Habitat – Offers over 100 different expedition itineraries of primarily land-based nature adventures in more than 45 countries spanning all seven continents. The expeditions focus on small groups led by award-winning naturalists to achieve close-up wildlife and nature experiences. Examples of expeditions offered include safaris in Botswana, grizzly bear adventures in Alaska, polar bear tours in Canada and small-group Galápagos tours. Many of the expeditions feature access to private wildlife reserves, remote corners of national parks and distinctive lodges and camps for the best wildlife viewing. Natural Habitat has partnered with World Wildlife Fund (“WWF”) to offer conservation travel, which is sustainable travel that contributes to the protection of nature and wildlife.

The Company’s common stock is listed on the NASDAQ Capital Market under the symbol “LIND”.

Basis of Presentation

The accompanying unaudited condensed consolidated financial statements and footnotes have been prepared in accordance with accounting principles generally accepted in the United States of America (“GAAP”) and applicable rules and regulations of the Securities and Exchange Commission (the “SEC”) regarding unaudited interim financial information and include the accounts and transactions of the Company. In the opinion of management, the accompanying unaudited condensed consolidated financial statements reflect all adjustments, consisting only of normal recurring adjustments, necessary for a fair presentation of the Company’s financial statements for the periods presented. Operating results for the 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 consolidated financial statements in accordance with U.S. GAAP have been omitted in accordance with the rules and regulations of the SEC for interim reporting. All intercompany balances and transactions have been eliminated in these unaudited condensed consolidated financial statements. These unaudited 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, 2019 contained in the Company’s Annual Report on Form 10-K filed with the SEC on February 26, 2020 (the “2019 Annual Report”).

The presentation of certain items in the condensed consolidated statements of cash flows have been reclassified to conform to the 2020 presentation. The reclassification had no effect on previously reported results of net cash provided by operating activities.

There have been no significant changes to the Company’s accounting policies from those disclosed in the 2019 Annual Report.

COVID-19 Business Update 

Due to the spread of the COVID-19 virus and the effects of travel restrictions around the world, the Company has suspended or rescheduled the majority of its expeditions departing March 16, 2020 through September 30, 2020 and has been working with guests to reschedule travel plans and refund payments, as applicable. The Company’s ships are currently being maintained with minimally required crew on-board to ensure they comply with all necessary regulations and can be fully put back into service quickly as needed. In accordance with local regulations, the Company closed its offices and most employees are working remotely to maintain general business operations, to provide assistance to existing and potential guests and to maintain information technology systems. 

The Company moved quickly to implement a comprehensive plan to mitigate the impact of COVID-19 and preserve and enhance its liquidity position. The Company is employing a variety of cost reduction and cash preservation measures, while accessing available capital under its existing debt facilities and exploring additional sources of capital and liquidity. These measures include the following operating expense and capital expenditure reductions:

Bookings Trends

The Company was off to a strong start to the year with Lindblad segment bookings at the end of February up 25% for the full year 2020 as compared to the same point a year ago for 2019, and had sold 86% of its originally projected guest ticket revenues for the year. Since that point, the Company has experienced a substantial impact from the COVID-19 virus including elevated cancellations and softness in near-term demand. As of July 28, 2020, Lindblad segment bookings for travel in 2020 are now 62% below the same point a year ago for 2019 due primarily to the cancelled and rescheduled voyages, as well as cancellations for travel later this year. The Company has substantial advanced bookings for travel in 2021, including 6% more bookings as compared with bookings for 2020 as of the same date a year ago and 35% higher bookings as of the same date in 2018 for 2019. The Company continues to see new bookings for future travel including over $30.0 million since March 1, 2020, and it is receiving deposits and final payments for future travel.

For 2020 voyages that have been cancelled or rescheduled, the Company is providing future travel credits with incremental value or full refunds, as applicable, to its fully paid guests. As of July 28, 2020, the majority of guests have opted for future travel credits.

Balance Sheet and Liquidity

As of June 30, 2020, the Company had $80.9 million in unrestricted cash and $21.3 million in restricted cash primarily related to deposits on future travel originating from U.S. ports. During the first quarter of 2020 the Company drew down $45.0 million under its revolving credit facility as a precautionary measure for working capital and general corporate purposes given the uncertainty related to the COVID-19 pandemic and borrowed $107.7 million under its first export credit agreement in conjunction with final payment on delivery of the National Geographic Endurance in March 2020. During April 2020, the Company drew down $30.6 million under its second export credit agreement in conjunction with its third installment payment on the National Geographic Resolution, scheduled for delivery in the fourth quarter of 2021. 

During May 2020, the Company amended its $2.5 million promissory note, changing the maturity date of the principal payments to be due in three equal installments, with the first payment due on December 22, 2020, the second due on December 22, 2021 and the final payment due on December 22, 2022.

The Company has also amended both its export credit agreements and term loan and revolving credit facilities.  During June 2020, the Company amended its export credit agreements to defer approximately $9.0 million in aggregate scheduled amortization payments from June 2020 through March 2021 and to suspend the total net leverage ratio covenant from June 2020 through June 2021.  On August 7, 2020, the Company amended its term loan and revolving credit facilities to waive the application of the total net leverage ratio covenant through June 2021. In connection with the amendment, the interest rate of the term loan has been increased by 125bps, to be paid-in-kind at maturity, a LIBOR floor of 75bps has been added to each facility and certain covenants have been amended to be more restrictive.

 As of June 30, 2020, the Company had a total debt position of $412.3 million and was in compliance with all of its debt covenants currently in effect. The Company has no material debt maturities until 2023.

The Company estimates its monthly cash usage while its vessels are not in operations to be approximately $10-15 million including ship and office operating expenses, necessary capital expenditures and interest and principal payments. This excludes guest payments for future travel and cash refunds requested on previously made guest payments.

The Company is currently evaluating several additional strategies to enhance its liquidity position. These strategies may include, but are not limited to, pursuing additional financing from both the public and private markets through the issuance of equity and/or debt. The timing and structure of any transaction, if completed, will depend on market conditions.

In April 2020, the Company received a U.S. Small Business Administration Loan related to the COVID-19 crisis in the amount of $6.6 million. The Company subsequently returned the funds received from this loan and, as a result, has made additional adjustments to its cost structure.

The Company has not previously experienced a complete cessation of its operations and, as a consequence, its ability to predict the impact of such cessation on its costs and future prospects is limited. Given the dynamic nature of this situation, the Company cannot reasonably estimate the impacts of the COVID-19 virus on its financial condition, results of operations, cash flows, plans and growth for the foreseeable future. It is unknown when travel restrictions and various border closures will be lifted and what the demand for expedition travel will be once these restrictions are no longer in place. The estimates for monthly cash usage reflect the Company’s current forecast for operating costs, capital expenditures and expected debt and interest payments. Based on current liquidity, the actions taken to date and its current forecast, which assumes reduced operations during 2020 with a ramp up in operations throughout 2021, the Company believes that its liquidity should be adequate to meet its obligations for the next 12 months from August 10, 2020, the date of this Quarterly Report on Form 10-Q. 

Return to Operations

The Company already has a robust set of operating protocols and, in preparation for the resumption of operations, has been proactively working in close cooperation with various medical policy experts and public health authorities to further augment its procedures and protocols for health and safety onboard its vessels to mitigate the potential impacts of the COVID-19 virus. These protocols encompass, but are not limited to, medical care, screening, testing, social distancing, personal protective equipment, and sanitization during all aspects of the expedition.

While it is uncertain when the Company will return to operations, it believes there are a variety of strategic advantages that should enable it to deploy its ships safely and quickly once travel restrictions have been lifted. The most notable is the size of its owned and operated vessels which range from 48 to 148 passengers, allowing for a highly controlled environment that includes stringent cleaning protocols. The small nature of the Company’s ships should also allow it to efficiently and effectively test its guests and crew prior to boarding. On average, the Company estimates it will only take a few thousand tests a month to ensure all guests and crew across its entire fleet have been tested. Additionally, the majority of its expeditions take place in remote locations where human interactions are limited, so there is less opportunity for external influence. The Company also has the ability to be flexible with regards to existing itineraries and is actively investigating additional itinerary opportunities both internationally and domestically. Lastly, the Company’s guests are explorers by nature, eager to travel and have historically been very resilient following periods of uncertainty. 

Valuation of Goodwill

The effects of COVID-19 on the Company’s expected future operating cash flows was an indicator of potential impairment, so the Company performed a discounted cash flow analysis of its reporting unit to estimate its fair value compared to the reporting unit’s carrying value as of June 30, 2020. Based on this analysis, it was determined that there was no impairment of goodwill.

Valuation of Long-lived Assets

The effects of COVID-19 on the Company’s expected future operating cash flows was a potential indicator that the carrying value of the Company's long-lived assets may not be recoverable. The Company performed an undiscounted cash flow analysis of its long-lived assets for potential impairment as of June 30, 2020, and based on the analysis, it was determined that there was no impairment to the Company's long-lived assets.

Recent Accounting Pronouncements

In December 2019, the FASB issued ASU 2019-12, Income Taxes (Topic 740)–Simplifying the Accounting for Income Taxes. The amendments of this ASU are intended to simplify the accounting for income taxes by removing certain exceptions to the general principles in Topic 740. The amendments also improve consistent application of and simplify GAAP for other areas of Topic 740 by clarifying and amending existing guidance. This ASU is effective for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2020, and early adoption is permitted. The Company will adopt this ASU as required and does not expect it to have a material impact to the Company’s financial statements.

In March 2020, the FASB issued ASU 2020-4, Reference Rate Reform (Topic 848) –Facilitation of the Effects of Reference Rate Reform on Financial Reporting. The guidance of this ASU is designed to provide relief from the accounting analysis and impacts that may otherwise be required for modifications to agreements (e.g., loans, debt securities, derivatives, borrowings) necessitated by reference rate reform. It also provides optional expedients to enable companies to continue to apply hedge accounting to certain hedging relationships impacted by reference rate reform. Application of the guidance is optional, is only available in certain situations, and is only available for companies to apply until December 31, 2022. The Company is currently reviewing its agreements impacted by the reference rate reform and does not expect this ASU to have a material impact to the Company’s financial statements.

NOTE 2 – EARNINGS PER SHARE

Earnings per Common Share

Earnings per common share is computed by dividing net income available to common stockholders by the weighted average number of common shares outstanding during the period. Diluted earnings per share is computed using the weighted average number of common shares outstanding and, if dilutive, potential common shares outstanding during the period. Potential common shares consist of the dilutive incremental common shares associated with restricted stock awards, shares issuable upon the exercise of stock options and previously outstanding warrants, using the treasury stock method. 

For the three and six months ended June 30, 2020 and 2019, the Company calculated earnings per share as follows:
 

For the three and six months ended June 30, 2020, the Company incurred a net loss from operations, therefore 0.3 million restricted shares and 0.2 million options were excluded from dilutive potential common shares for the periods as they are anti-dilutive, and basic and diluted net loss per share are the same for the periods. For the three and six months ended June 30, 2019, 0.1 million restricted shares are excluded from dilutive potential common shares as they were anti-dilutive.

NOTE 3 – REVENUES

Customer Deposits and Contract Liabilities

The Company’s guests remit deposits in advance of tour embarkation. Guest deposits consist of guest ticket revenues as well as revenues from the sale of pre- and post-expedition excursions, hotel accommodations, land-based expeditions and air transportation to and from the ships. Guest deposits represent unearned revenues and are reported as unearned passenger revenues in the condensed consolidated balance sheets when received and are subsequently recognized as tour revenue over the duration of the expedition. Accounting Standards Codification, Revenue from Contracts with Customers (Topic 606) defines a “contract liability” as an entity’s obligation to transfer goods or services to a customer for which the entity has received consideration from the customer. The Company does not consider guest deposits to be a contract liability until the guest no longer has the right, resulting from the passage of time, to cancel their reservation and receive a full refund. The change in contract liabilities within unearned passenger revenues presented in our condensed consolidated balance sheets are as follows:

The following table disaggregates our tour revenues by the sales channel it was derived from:

NOTE 4 – FINANCIAL STATEMENT DETAILS

The following is a reconciliation of cash, cash equivalents and restricted cash to the statement of cash flows: 

Restricted cash consist of the following: 

The Company’s prepaid expenses and other current assets consist of the following: 

The Company’s accounts payable and accrued expenses consist of the following: 

Loan Receivable

The Company’s loan receivable is recorded at amortized cost within other long-term assets. The Company reviewed its loan receivable for credit losses in connection with the preparation of its condensed consolidated financial statements for the period ended June 30, 2020. In evaluating the allowance for loan losses, the Company considered factors such as historical loss experience, the type and amount of loan, adverse situations that may affect the borrower’s ability to repay and prevailing economic conditions. Based on these credit loss estimation and experience factors, the Company realized no allowance for loan loss for the three or six months ended June 30, 2020. The roll-forward of the loan receivable balance is as follows:

NOTE 5 – LONG-TERM DEBT

For the three and six months ended June 30, 2020, deferred financing costs charged to interest expense were $0.5 million and $1.0 million, respectively. For the three and six months ended June 30, 2019, deferred financing costs charged to interest expense was $0.5 million and $0.9 million, respectively. 

Credit Facility

In March 2018, the Company entered into the Third Amended and Restated Credit Agreement (the “Amended Credit Agreement”), providing for a $200.0 million senior secured first lien term loan facility (the “Term Facility”), maturing March 2025, and a $45.0 million senior secured incremental revolving credit facility (the “Revolving Facility”), which includes a $5.0 million letter of credit sub-facility. The Term Facility bears interest at an adjusted Intercontinental Exchange (“ICE”) Benchmark administration LIBOR plus a spread of 3.25%, for an aggregated rate of 3.41% as of June 30, 2020. 

During March 2020, the Company drew $45.0 million against the Revolving Facility as a reserve for general corporate purposes and other expense needs due to the uncertainty related to the COVID-19 pandemic. Borrowings under the Revolving Facility mature  March 27, 2023 and bear interest at an adjusted ICE Benchmark administration LIBOR plus a spread of 3.00%, for an aggregated rate of 3.16% as of June 30, 2020.

Senior Secured Credit Agreements

In January 2018, the Company entered into a senior secured credit agreement (the “Export Credit Agreement”) with Citibank, N.A., London Branch and Eksportkreditt Norge AS, which made available to the Company a loan in an aggregate principal amount not to exceed $107.7 million for the purpose of providing financing for up to 80% of the purchase price of the Company’s new ice class vessel, the National Geographic Endurance. During March 2020, the Company took possession of the National Geographic Endurance and borrowed $107.7 million under the Export Credit Agreement for final payment. The Export Credit Agreement bears interest at a floating interest rate equal to three-month LIBOR plus a margin of 3.00% per annum, for an aggregated rate of 3.31% over the borrowing period covering June 30, 2020. 

In April 2019, the Company entered into a senior secured credit agreement (the “Second Export Credit Agreement”) with the Lenders. Pursuant to the Second Export Credit Agreement, the Lenders have agreed to make available to the Company, at the Company's option and subject to certain conditions, a loan in an aggregate principal amount not to exceed $122.8 million for the purpose of providing pre- and post-delivery financing for up to 80% of the purchase price of the Company’s new expedition ice-class vessel, the National Geographic Resolution, scheduled to be delivered in the fourth quarter of 2021. 30% of the borrowing will mature over five years from the final drawdown, and 70% of the borrowing will mature over twelve years from the final drawdown. Additionally, 70% percent of the loan will be guaranteed by Garantiinstituttet for Eksportkreditt, the official export credit agency of Norway. In September 2019 and April 2020, the Company drew approximately $30.5 million and $30.6 million, respectively, under the Second Export Credit Agreement for contracted installment payments on the National Geographic Resolution. 

The Second Export Credit Agreement bears a variable interest rate equal to three-month LIBOR plus a margin of 3.00% per annum, or 3.31% over the borrowing period covering June 30, 2020. After completion of the vessel, the Second Export Credit Agreement, at the Company’s option, will bear an interest rate of either a fixed rate of 6.36% or a variable rate equal to three-month LIBOR plus a margin of 3.00% per annum.

The Company has also amended both its export credit agreements and term loan and revolving credit facilities.  During June 2020, the Company amended its export credit agreements to defer approximately $9.0 million in aggregate scheduled amortization payments from June 2020 through March 2021 and to suspend the total net leverage ratio covenant from June 2020 through June 2021.  On August 7, 2020, the Company amended its term loan and revolving credit facilities to waive the application of the total net leverage ratio covenant through June 2021. In connection with the amendment, the interest rate of the term loan has been increased by 125bps, to be paid-in-kind at maturity, a LIBOR floor of 75bps has been added to each facility and certain covenants have been amended to be more restrictive.

Note Payable

In connection with the Natural Habitat acquisition in May 2016, Natural Habitat issued an unsecured promissory note to Benjamin L. Bressler, the founder of Natural Habitat, with an outstanding principal amount of $2.5 million. The promissory note accrues interest at a rate of 1.44% annually, with interest payable every six months. On May 1, 2020, the promissory note was amended, changing the maturity date of the principal payments to be due in three equal installments with the first payment due on December 22, 2020, the second on December 22, 2021 and the final payment on December 22, 2022.

Other

On April 10, 2020, the Company received a U.S. Small Business Administration Loan related to the COVID-19 crisis in the amount of $6.6 million. The Company subsequently returned the funds received from this loan.

Covenants

The Company’s Amended Credit Agreement, Export Credit Agreement and Second Export Credit Agreement contain financial and restrictive covenants that include among others, net leverage ratios, minimum liquidity, limits on additional indebtedness and limits on certain investments. As of June 30, 2020, the Company was in compliance with its covenants.

NOTE 6 – FINANCIAL INSTRUMENTS AND FAIR VALUE MEASUREMENTS

Derivative Instruments and Hedging Activities

The Company’s derivative assets and liabilities consist principally of foreign exchange forward contracts and interest rate caps and are carried at fair value based on significant observable inputs (Level 2 inputs). Derivatives entered into by the Company are typically executed over-the-counter and are valued using internal valuation techniques, as quoted market prices are not readily available. The valuation technique and inputs depend on the type of derivative and the nature of the underlying exposure. The Company principally uses discounted cash flows along with fair value models that primarily use market observable inputs. These models take into account a variety of factors including, where applicable, maturity, currency exchange rates, interest rate yield curves and counterparty credit risks.

Currency Risk. The Company uses currency exchange contracts to manage its exposure to changes in currency exchange rates associated with certain of its non-U.S.-dollar denominated receivables and payables. The Company primarily hedges a portion of its current-year currency exposure to several currencies, which normally include, but are not limited to, the Canadian and New Zealand dollars, the Brazilian Real, the South African Rand, the Euro and the British pound sterling. The fluctuations in the value of these forward contracts largely offset the impact of changes in the value of the underlying risk they economically hedge.

In March 2019, the Company entered into foreign exchange forward contracts, designated as cash flow hedges, to hedge its exposure to Norwegian Kroner ("NOK"), related to the Company’s contract to purchase the new polar ice-class vessel (see Note 11 – Commitments and Contingencies). The cost of the foreign exchange forward contracts will be amortized to interest expense over their lives, from the effective date through settlement dates.

Interest Rate Risk. The Company uses interest rate caps, designated as cash flow hedges, to manage the risk related to its floating rate corporate debt.

The Company records the effective portion of changes in the fair value of its cash flow hedges to other comprehensive income (loss), net of tax, and subsequently reclassifies these amounts into earnings in the period during which the hedged transaction is recognized. Any changes in fair values of hedges that are determined to be ineffective are immediately reclassified from accumulated other comprehensive income (loss) into earnings. No gains or losses of the Company’s cash flow hedges were considered to be ineffective for the period ended June 30, 2020. The Company reclassified $5.3 million from other comprehensive income (loss) to earnings for the period ended June 30, 2020 due to the maturity of a cash flow hedge and the hedged item. The Company estimates that approximately $2.1 million of losses currently recorded in accumulated other comprehensive income (loss) will be recognized in earnings over the next 12 months due to maturity of the cash flow hedge and the hedged item. The Company will continue to assess the effectiveness of the hedges on an ongoing basis.

The Company held the following derivative instruments with absolute notional values as of June 30, 2020:

Estimated fair values (Level 2) of derivative instruments were as follows:

 Changes in the fair value of the Company’s hedging instruments are recorded in accumulated other comprehensive income, pursuant to the guidelines of cash flow hedge accounting as outlined in ASC 815.

The effects of derivatives recognized in the Company’s condensed consolidated financial statements were as follows:

Fair Value Measurements

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, 2020. As of June 30, 2020 and December 31, 2019, the Company had no other significant liabilities that were measured at fair value on a recurring basis.

NOTE 7 – STOCKHOLDERS’ EQUITY

Stock and Warrant Repurchase Plan

The Company’s Board of Directors approved a stock and warrant repurchase plan (“Repurchase Plan”) in November 2015 and increased the repurchase plan to $35.0 million in November 2016. The Repurchase Plan authorizes the Company to purchase, from time to time, the Company’s outstanding common stock. Any shares 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. These repurchases exclude shares repurchased to settle statutory employee tax withholding related to the exercise of stock options and vesting of stock awards. All repurchases were made using cash resources. During the three months ended March 31, 2020, the Company repurchased 8,517 shares of common stock for approximately $127,000. The Company has cumulatively repurchased 875,218 shares of common stock for $8.3 million and 6,011,926 warrants for $14.7 million, since plan inception. The remaining balance for the Repurchase Plan was $12.0 million as of June 30, 2020. During March 2020, the Repurchase Plan was suspended due to the uncertain impact of the COVID-19 virus. 

NOTE 8 – STOCK-BASED COMPENSATION

The Company is authorized to issue up to 2.5 million shares of common stock under the 2015 Long-Term Incentive Plan to directors and key employees, and as of June 30, 2020, approximately 1.1 million shares were available to be granted.

As of June 30, 2020 and December 31, 2019, options to purchase an aggregate of 200,000 shares of the Company’s common stock, with a weighted average exercise price of $9.47, were outstanding. As of June 30, 2020, 150,000 options were exercisable.

The Company recorded stock-based compensation expense of $0.7 million and $1.6 million during the three and six months ended  June 30, 2020, respectively, and $1.0 million and $1.8 million during the three and six months ended June 30, 2019.

2020 Long-Term Incentive Compensation

During the six months ended June 30, 2020, the Company granted 150,575 restricted stock units ("RSUs") with a weighted average grant price of $5.41. The RSUs will vest, dependent on the grant, either on the first anniversary of the grant date or in equal installments over a three-year period, subject to the recipient’s continued employment or service with the Company on the applicable vesting date. The number of shares were determined based upon the closing price of our common stock on the date of the award. The RSUs granted during the six months ended  June 30, 2020 represent 50% of the 2020 long-term incentive compensation RSU awards. Due to the circumstances related to the impact of the COVID-19 virus, the compensation committee of the Company's Board of Directors approved the deferral of a portion of the RSU awards, and determined that the remaining 50% of the grants shall be made in equal portions on September 30, 2020 and December 31, 2020.

During the six months ended June 30, 2020, the Company awarded 86,783 targeted performance stock units ("PSUs") with a weighted average grant price of $5.42. The PSUs are performance-vesting equity incentive awards that will be earned based on our performance against metrics relating to annual Adjusted EBITDA and annual revenue. 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. The number of shares were determined based upon the closing price of our common stock on the date of the award. The PSUs granted during the six months ended June 30, 2020 represent 50% of the 2020 long-term incentive compensation PSU awards. Due to the circumstances related to the impact of the COVID-19 virus, the compensation committee of the Company's Board of Directors approved the deferral of a portion of the PSU awards, and determined that the remaining 50% of the grants shall be made in equal portions on September 30, 2020 and December 31, 2020.

Natural Habitat Contingent Arrangement

In connection with the acquisition of Natural Habitat, Mr. Bressler, the founder of Natural Habitat, has an equity incentive opportunity to earn an award of options based on the future financial performance of Natural Habitat, where if the Final Year Equity Value of Natural Habitat, as defined in Mr. Bressler's amended employment agreement, exceeds $25.0 million, effective as of December 31, 2023, Mr. Bressler will be granted options with a fair value equal to 10.1% of such excess, subject to certain conditions.

NOTE 9 – RELATED PARTY TRANSACTIONS

In May 2016, in connection with the Company's acquisition of Natural Habitat, Natural Habitat issued an unsecured promissory note to Mr. Bressler, the founder of Natural Habitat, with an outstanding principal amount of $2.5 million. The promissory note was amended during May 2020, see Note 5 – Long-term Debt for more information.

NOTE 10 – 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, 2020, and December 31, 2019, the Company had a liability for unrecognized tax benefits of $0.0 million. The Company’s policy is to record interest and penalties on uncertain tax positions as a component of income tax expense. During the three and six months ended June 30, 2020 and 2019, interest and penalties related to uncertain tax positions included in income tax expense are not significant. The Company's effective tax rate for the three and six months ended June 30, 2020 was a benefit of 6.9% and 10.1%, respectively, versus an expense of 39.4% and a benefit of 18.7% for the three and six months ended June 30, 2019, respectively, primarily due to the timing of losses in the first quarter and the expected amount of losses for the full year 2020 due to the impact of COVID-19 on the Company's operations.

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 three prior years remain subject to examination by tax authorities and the Company’s foreign tax returns for the current year and four prior years remain subject to examination by tax authorities.

NOTE 11 – COMMITMENTS AND CONTINGENCIES

Fleet Expansion

In February 2019, the Company entered into an agreement, which was amended in December 2019, with Ulstein Verft, to construct a second polar ice class vessel, the National Geographic Resolution, with a total purchase price of 1,291.0 million NOK. The purchase price is subject to potential adjustments from contract specifications for variations in speed, dead weight, fuel consumption and delivery date. In March 2019, the Company entered into foreign exchange forward contracts to lock in a purchase price for the second polar ice class vessel of $153.5 million, subject to potential contract specification adjustments. The purchase price is due in installments, with 20% paid shortly after execution of the agreement, 20% in September 2019, 20% in April 2020 and 10% due in April 2021. The final 30% is due upon delivery and acceptance of the vessel. The vessel is scheduled to be delivered in the fourth quarter of 2021. 

Royalty Agreement – National Geographic

The Company is party to 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 the accompanying condensed consolidated statements of operations. The amount is calculated based upon a percentage of certain ticket revenues less travel agent commission, including the revenues received from cancellation fees and any revenues received from the sale of pre- and post-expedition extensions. Royalty expense for the three and six months ended June 30, 2020 was $0.1 million and $1.3 million, respectively, and for the three and six months ended June 30, 2019, was $1.8 million and $3.3 million, respectively.

The royalty balances outstanding to National Geographic as of June 30, 2020 and December 31, 2019 were $0.0 million and $2.2 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 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 condensed consolidated statements of operations. This royalty fee expense was $0.1 million and $0.2 million for the three and six months ended June 30, 2020, respectively, and $0.2 million and $0.4 million for the three and six months ended June 30, 2019, respectively. 

Charter Commitments

From time to time, the Company enters into agreements to charter vessels onto which it holds its tours and expeditions. Future minimum payments on its charter agreements as of June 30, 2020 are as follows:

Natural Habitat Redeemable Non-Controlling Interest  

Mr. Bressler, founder of Natural Habitat, retains a 19.9% noncontrolling interest in Natural Habitat, which is subject to a put/call arrangement. The arrangement between the Company and Mr. Bressler was established in order to provide a formal exit opportunity for Mr. Bressler and a path to 100% ownership for the Company. Mr. Bressler has a put option, amended in May 2020, that under certain conditions and subject to providing notice by January 31, 2024, that enables him, but does not obligate him, to sell his remaining interest in Natural Habitat to the Company, valued as of December 31, 2023. The Company has a call option, but not an obligation, with an expiration of March 31, 2029, under which it can buy Mr. Bressler’s remaining interest at a similar fair value measure as Mr. Bressler’s put option, subject to a call purchase price minimum.

Since the redemption of the noncontrolling interest is not solely in the Company’s control, the Company is required to record the redeemable noncontrolling interest outside of stockholders’ equity but after its total liabilities. In addition, if it is probable that the instrument will become redeemable, as such solely due to the passage of time, the redeemable noncontrollable interest should be adjusted to the redemption value via one of two measurement methods.

The Company elected the income classification-excess adjustment and accretion methods for recognizing changes in the redemption value of Mr. Bressler’s put option. Under this methodology, a calculation of the present value of the redemption value is compared to the carrying value of the redeemable noncontrolling interest and the carrying value of the redeemable noncontrolling interest is adjusted to the redemption value’s present value. Any adjustments to the carrying value of the redeemable noncontrolling interest, up to the fair value of the noncontrolling interest, are classified to retained earnings. Adjustments in excess of the fair value of the noncontrolling interest, are treated as a decrease to net income available to common stockholders.

The fair value of Mr. Bressler’s put option was determined using a discounted cash flow model. The redemption value was adjusted to its present value using the Company’s weighted average cost of capital.

The following is a rollforward of redeemable non-controlling interest:

Legal Proceedings



From time to time, the Company is party to litigation and regulatory matters and claims. The Company expenses legal fees as incurred. The Company records a provision for contingent losses when it is both probable that a liability will be incurred and the amount or range of the loss can be reasonably estimated. The results of complex proceedings and reviews are difficult to predict and the Company’s view of these matters may change in the future as events related thereto unfold. An unfavorable outcome to any legal or regulatory matter, if material, could have an adverse effect on the Company’s operations or its financial position, liquidity or results of operations.

NOTE 12 – SEGMENT INFORMATION

The Company is primarily a specialty cruise and adventure expedition operator with operations in two segments, Lindblad and Natural Habitat. The Company evaluates the performance of the business based largely on the results of its operating segments. 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. The reports provided to the Board of Directors are at a consolidated level and also contain information regarding the separate results of both segments. While both segments have similar characteristics, the two operating and reporting segments cannot be aggregated because they fail to meet the requirements for aggregation.

The Company evaluates the performance of its business segments based largely on tour revenues and operating income, without allocating other income and expenses, net, income taxes and interest expense, net. For the three and six months ended June 30, 2020 and 2019, operating results were as follows:

Depreciation and amortization are included in segment operating income as shown below:

The following table presents our total assets, intangibles, net and goodwill by segment: 

For the three and six months ended June 30, 2020, there were $0.0 million and $2.2 million in intercompany tour revenues between the Lindblad and Natural Habitat segments eliminated in consolidation, respectively. For the three and six months ended June 30, 2019 there were $0.7 million and $2.5 million in intercompany tour revenues between the Lindblad and Natural Habitat segments eliminated in consolidation, respectively.

NOTE 13 – SUBSEQUENT EVENT

The Company has rescheduled or rebooked all expedition voyages scheduled to sail through September 30, 2020 due to continued travel restrictions from the global spread of the COVID-19 virus.

On August 7, 2020, the Company amended its term loan and revolving credit facilities to waive the application of the total net leverage ratio covenant through June 2021. In connection with the amendment, the interest rate of the term loan has been increased by 125bps, to be paid-in-kind at maturity, a LIBOR floor of 75bps has been added to each facility and certain covenants have been amended to be more restrictive.

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 the unaudited condensed consolidated financial statements and related notes included in this Quarterly Report on Form 10-Q (“Form 10-Q”), as well as the audited consolidated financial statements and related notes included in the Company’s Annual Report on Form 10-K filed with the Securities and Exchange Commission (“SEC”) on February 26, 2020.

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:

We urge you not to place undue reliance on these forward-looking statements, which speak only as of the date of this Form 10-Q. 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

We provide expedition cruising and land-based adventure travel experiences, using itineraries that feature up-close encounters with wildlife, nature, history and culture, and promote guest empowerment and interactivity. Our mission is to offer life-changing adventures around the world and pioneer innovative ways to allow our guests to connect with exotic and remote places. Many of these expeditions involve travel to remote places, such as the Arctic, Antarctica, the Galápagos, Alaska, Baja's Sea of Cortez, Costa Rica, Panama, Churchill and Africa. We operate a fleet of nine owned expedition ships and have contracted for a new polar ice class vessel, the National Geographic Resolution, scheduled to be delivered in the fourth quarter of 2021.

In addition, we operate five seasonal charter vessels under the Lindblad brand. 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 to test demand for certain areas and seasons to understand the potential for longer term deployments and additional vessel needs. 

We have a longstanding relationship with the National Geographic Society dating back to 2004, which is based on a shared interest in exploration, research, technology and conservation. This relationship includes co-selling, co-marketing and branding arrangements with National Geographic Partners, LLC (“National Geographic”) whereby our owned vessels carry the National Geographic name and National Geographic sells our expeditions through their internal travel divisions. We collaborate with National Geographic on expedition 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 expedition.

COVID-19 Business Update 

Due to the spread of the COVID-19 virus and the effects of travel restrictions around the world, we have suspended or rescheduled the majority of our expeditions departing March 16, 2020 through September 30, 2020 and have been working with guests to reschedule travel plans and refund payments, as applicable. The Company’s ships are currently being maintained with minimally required crew on-board to ensure they comply with all necessary regulations and can be fully put back into service quickly as needed. In accordance with local regulations, we closed our offices and most employees are working remotely to maintain general business operations, to provide assistance to existing and potential guests and to maintain information technology systems. 

We moved quickly to implement a comprehensive plan to mitigate the impact of COVID-19 and preserve and enhance our liquidity position. We are employing a variety of cost reduction and cash preservation measures, while accessing available capital under our existing debt facilities and exploring additional sources of capital and liquidity. These measures include the following operating expense and capital expenditure reductions:

Bookings Trends

We were off to a strong start to the year with Lindblad segment bookings at the end of February up 25% for the full year 2020 as compared to the same point a year ago for 2019, and had sold 86% of its originally projected guest ticket revenues for the year. Since that point, we have experienced a substantial impact from the COVID-19 virus including elevated cancellations and softness in near-term demand. As of July 28, 2020, Lindblad segment bookings for travel in 2020 are now 62% below the same point a year ago for 2019 due primarily to the cancelled and rescheduled voyages, as well as cancellations for travel later this year. We have substantial advanced bookings for travel in 2021, including 6% more bookings as compared with bookings for 2020 as of the same date a year ago and 35% higher bookings as of the same date in 2018 for 2019. We continue to see new bookings for future travel including over $30.0 million since March 1, 2020, and we are receiving deposits and final payments for future travel.

For 2020 voyages that have been cancelled or rescheduled, we are providing future travel credits with incremental value or full refunds, as applicable, to our fully paid guests. As of July 28, 2020, the majority of guests have opted for future travel credits. 

Balance Sheet and Liquidity

As of June 30, 2020, we had $80.9 million in unrestricted cash and $21.3 million in restricted cash primarily related to deposits on future travel originating from U.S. ports. During the first quarter of 2020 we drew down $45.0 million under our revolving credit facility as a precautionary measure for working capital and general corporate purposes given the uncertainty related to the COVID-19 pandemic and borrowed $107.7 million under our first export credit agreement in conjunction with final payment on delivery of the National Geographic Endurance in March 2020. During April 2020, we drew down $30.6 million under our second export credit agreement in conjunction with the third installment payment on the National Geographic Resolution, scheduled for delivery in the fourth quarter of 2021. 

During May 2020, we amended our $2.5 million promissory note, changing the maturity date of the principal payments to be due in three equal installments, with the first payment of due on December 22, 2020, the second due on December 22, 2021 and the final payment due on December 22, 2022.

The Company has also amended both its export credit agreements and term loan and revolving credit facilities.  During June 2020, the Company amended its export credit agreements to defer approximately $9.0 million in aggregate scheduled amortization payments from June 2020 through March 2021 and to suspend the total net leverage ratio covenant from June 2020 through June 2021.  On August 7, 2020, the Company amended its term loan and revolving credit facilities to waive the application of the total net leverage ratio covenant through June 2021. In connection with the amendment, the interest rate of the term loan has been increased by 125bps, to be paid-in-kind at maturity, a LIBOR floor of 75bps has been added to each facility and certain covenants have been amended to be more restrictive.

 As of June 30, 2020, we had a total debt position of $412.3 million and were in compliance with all of our debt covenants currently in effect. We have no material debt maturities until 2023.

We estimate our monthly cash usage while our vessels are not in operations is approximately $10-15 million including ship and office operating expenses, necessary capital expenditures and interest and principal payments. This excludes guest payments for future travel and cash refunds requested on previously made guest payments.

We are currently evaluating several additional strategies to enhance our liquidity position. These strategies may include, but are not limited to, pursuing additional financing from both the public and private markets through the issuance of equity and/or debt. The timing and structure of any transaction, if completed, will depend on market conditions.

In April 2020, we received a U.S. Small Business Administration Loan related to the COVID-19 crisis in the amount of $6.6 million. We subsequently returned the funds received from this loan and, as a result, have made additional adjustments to our cost structure.

We have not previously experienced a complete cessation of our operations and, as a consequence, our ability to predict the impact of such cessation on our costs and future prospects is limited. Given the dynamic nature of this situation, we cannot reasonably estimate the impacts of the COVID-19 virus on our financial condition, results of operations, cash flows, plans and growth for the foreseeable future. It is unknown when travel restrictions and various border closures will be lifted and what the demand for expedition travel will be once these restrictions are no longer in place. The estimates for monthly cash usage reflect our current forecast for operating costs, capital expenditures and expected debt and interest payments. Based on current liquidity, the actions taken to date and our current forecast, which assumes reduced operations during 2020 with a ramp up in operations throughout 2021, we believe that our liquidity should be adequate to meet our obligations for the next 12 months from August 10, 2020, the date of this Quarterly Report on Form 10-Q. 

Return to Operations

We already have a robust set of operating protocols and, in preparation for the resumption of operations, have been proactively working in close cooperation with various medical policy experts and public health authorities to further augment our procedures and protocols for health and safety onboard our vessels to mitigate the potential impacts of the COVID-19 virus. These protocols encompass, but are not limited to, medical care, screening, testing, social distancing, personal protective equipment, and sanitization during all aspects of the expedition.

While it is uncertain when we will return to operations, we believe there are a variety of strategic advantages that should enable us to deploy our ships safely and quickly once travel restrictions have been lifted. The most notable is the size of our owned and operated vessels which range from 48 to 148 passengers, allowing for a highly controlled environment that includes stringent cleaning protocols. The small nature of our ships should also allow us to efficiently and effectively test our guests and crew prior to boarding. On average, we estimate it will only take a few thousand tests a month to ensure all guests and crew across our entire fleet have been tested. Additionally, the majority of our expeditions take place in remote locations where human interactions are limited, so there is less opportunity for external influence. We also have the ability to be flexible with regards to existing itineraries and are actively investigating additional itinerary opportunities both internationally and domestically. Lastly, our guests are explorers by nature, eager to travel and have historically been very resilient following periods of uncertainty. 

The discussion and analysis of our results of operations and financial condition are organized as follows:

Financial Presentation

Description of Certain Line Items

Tour revenues

Tour revenues consist of the following:

Cost of tours

Cost of tours includes the following:

Selling and marketing

Selling and marketing expenses include commissions, royalties and a broad range of advertising and promotional expenses.

General and administrative

General and administrative expenses include the cost of shoreside vessel support, reservations and other administrative functions, including salaries and related benefits, credit card commissions, professional fees and rent.

Operational and Financial Metrics

We use a variety of operational and financial metrics, including non-GAAP financial measures, such as Adjusted EBITDA, Net Yields, Occupancy 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 (expense) benefit, (gain) loss on foreign currency, (gain) loss on transfer of assets, reorganization costs, and other supplemental adjustments. Other supplemental adjustments include certain non-operating items such as stock-based compensation, executive severance costs, the National Geographic fee amortization, debt refinancing costs, acquisition-related expenses and other non-recurring charges. 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 helps 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. 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.

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, and acquisition-related expenses.