LINDBLAD EXPEDITIONS HOLDINGS, INC. - Quarter Report: 2020 March (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 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)

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.

First Quarter Highlights

On March 16, 2020, we took possession of the National Geographic Endurance. The final balance due on the vessel, at the time of delivery, was primarily paid by borrowing $107.7 million under our senior secured credit agreement.

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 June 30, 2020 and have been working with guests to reschedule travel plans and refund payments, as applicable. To date, we have had no reported cases of COVID-19 across our fleet and all guests have safely disembarked our vessels. The majority of our 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 have 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 we had sold 86% of our original 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. Lindblad segment bookings for travel in 2020 are now 27% 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 still have substantial advanced bookings for future travel in 2020, including 8% more bookings for the second half of 2020 as compared with the second half of 2019 as of the same date a year ago. Additionally, we continue to see new bookings for travel in 2020, 2021 and 2022, including over $15 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 offering future travel credits with incremental value or full refunds to its fully paid guests. As of April 24, 2020, the majority of guests have opted for future travel credits.   

Balance Sheet and Liquidity

As of March 31, 2020, we had $137.0 million in unrestricted cash and $22.8 million in restricted cash primarily related to deposits on future travel originating from U.S. ports. The unrestricted cash included $45.0 million drawn under our revolving credit facility during the first quarter as a precautionary measure for working capital and general corporate purposes given the uncertainty related to the COVID-19 pandemic. Additionally, during the quarter, we borrowed $107.7 million under our first senior secured credit agreement in conjunction with final payment on delivery of the National Geographic Endurance in March 2020. As of March 31, 2020, we had a total debt position of $382.2 million and were in compliance with all of our debt covenants. Following the quarter, we drew down an additional $30.6 million under our second senior secured credit agreement in conjunction with our third installment payment on the National Geographic Resolution scheduled for delivery in the fourth quarter of 2021.  

Export credit agencies, in conjunction with export credit lenders, are working to finalize an industrywide initiative to grant a 12-month debt holiday to provide interim debt service relief for amortization payments and financial covenants. We have approximately $9.0 million of export credit agency backed amortization payments due over the next 12-months on our first senior secured credit agreement. 

Considering the cost reduction measures and the potential deferral of near-term export credit agreement amortization, 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 also 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 will depend on market conditions.

Following the first quarter, we received a U.S. Small Business Administration Loan related to the COVID-19 crisis in the amount of $6.6 million. We have subsequently returned the funds received from this loan and, as a result, will pursue 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. Our estimates for monthly cash usage reflect our current forecast for operating costs, capital expenditures and expected debt and interest payments. Based on the actions we have taken to date, our planned and anticipated actions and our current forecast, we believe that we can meet our obligations for the next 12 months from May 5, 2020, the date of this Quarterly Report on Form 10-Q.

Return to Operations

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. 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.

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, 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

Traditionally, our 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 fluctuates due to our vessels being taken out of service for scheduled maintenance or drydocking, which is typically during nonpeak 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 third and fourth quarters from its summer season departures and polar bear tours.

Results of Operations - Consolidated

Comparison of the Three Months Ended March 31, 2020 to Three Months Ended March 31, 2019 - Consolidated

Tour Revenues

Tour revenues for the three months ended March 31, 2020 decreased $8.4 million, or 9%, to $81.2 million compared to $89.7 million for the three months ended March 31, 2019. The Lindblad segment tour revenues decreased by $6.5 million and the Natural Habitat segment decreased $1.9 million, primarily as a result of cancelled, disrupted and rescheduled expeditions due to COVID-19. 

Cost of Tours

Total cost of tours for the three months ended March 31, 2020 increased $3.2 million, or 8%, to $42.2 million compared to $39.0 million for the three months ended March 31, 2019. At the Lindblad segment, cost of tours increased $4.2 million, primarily due to costs incurred in connection with cancelled, disrupted and rescheduled voyages due to COVID-19, costs incurred ahead of the launch of the National Geographic Endurance and higher drydock expense. At the Natural Habitat segment, cost of tours decreased $1.0 million, due to cancelled, disrupted and rescheduled trips directly related to COVID-19.

General and Administrative

General and administrative expenses for the three months ended March 31, 2020 increased $1.1 million, or 7%, to $17.2 million compared to $16.1 million for the three months ended March 31, 2019. At the Lindblad segment, general and administrative expenses increased $0.9 million over the prior year period due to increased personnel costs. At the Natural Habitat segment, general and administrative expenses increased $0.2 million, primarily due to an increase in personnel costs.

Selling and Marketing

Selling and marketing expenses for the three months ended March 31, 2020 decreased $1.1 million, or 8%, to $12.9 million compared to $14.0 million for the three months ended March 31, 2019. At the Lindblad segment, selling and marketing expenses decreased $0.7 million, primarily due to lower commission expenses related to the impact of COVID-19 on revenue. At the Natural Habitat segment, selling and marketing expenses decreased $0.4 million, primarily driven by a decrease in advertising expenditures.

Depreciation and Amortization

Depreciation and amortization expenses for the three months ended March 31, 2020 increased $0.5 million, or 8%, to $6.7 million, compared to $6.2 million for the three months ended March 31, 2019.

Other Expense

Other expenses, for the three months ended March 31, 2020, increased $4.2 million to $6.6 million from $2.4 million for the three months ended March 31, 2019, primarily due to the following:

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.

Results of Operations – Lindblad Segment

The following table sets forth our Available Guest Nights, Guest Nights Sold, Occupancy, Maximum Guests, Number of Guests and Voyages for the three months ended March 31, 2020 and 2019:

The following table shows the calculations of Gross Yield and Net Yield for the three months ended March 31, 2020 and 2019. Gross Yield is calculated by dividing Tour Revenues by Available Guest Nights and Net Yield is calculated by dividing Net Revenue by Available Guest Nights:

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 months ended March 31, 2020 and 2019:

Comparison of Three Months Ended March 31, 2020 to Three Months Ended March 31, 2019 at the Lindblad Segment

Tour Revenues

Tour revenues for the three months ended March 31, 2020 decreased $6.5 million, or 9%, to $69.5 million compared to $76.0 million for the three months ended March 31, 2019. The decrease was driven by lower guest ticket revenue primarily from a 12% decrease in Available Guest Nights as a result of cancelled, disrupted and rescheduled voyages due to COVID-19. Net Yields increased 3% to $1,130 for the three months ended March 31, 2020 compared to $1,099 for the three months ended March 31, 2019 due primarily to price increases and itinerary changes. Occupancy rates decreased slightly to 89% for the three months ended March 31, 2020 compared to same period a year ago.

Operating Income

Operating income decreased $11.5 million to $2.2 million for the three months ended March 31, 2020 compared to $13.6 million for the three months ended March 31, 2019. The decrease was primarily a result of the lower revenue and additional costs from cancelled, disrupted and rescheduled voyages due to COVID-19, costs incurred ahead of the launch of the National Geographic Endurance and higher drydock and personnel expense.

Results of Operations – Natural Habitat Segment

Comparison of Three Months Ended March 31, 2020 to Three Months Ended March 31, 2019

Tour Revenues

Tour revenues for the three months ended March 31, 2020 decreased $1.9 million, or 14%, to $11.7 million compared to $13.6 million for the three months ended March 31, 2019, due to cancelled, disrupted and rescheduled trips due to COVID-19.

Operating Income

Operating income for the three months ended March 31, 2020 decreased $0.7 million to $0.1 million compared to $0.7 million for the three months ended March 31, 2019. The decrease was primarily a result of lower revenue and additional costs due to COVID-19.

Adjusted EBITDA – Consolidated

The following table outlines the reconciliation to net income and calculation of consolidated Adjusted EBITDA for the three months ended March 31, 2020 and 2019. 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.

The following tables outline the reconciliation for each segment from operating income to Adjusted EBITDA for the three months ended March 31, 2020 and 2019.

Liquidity and Capital Resources

Due to the spread of the COVID-19 virus and the effects of travel restrictions around the world, we suspended or rescheduled the majority of expeditions and fleet operations departing March 16, 2020 through June 30, 2020 and have been working with guests to reschedule travel plans and refund payments, as applicable. The COVID-19 pandemic has already had a material negative impact on our operations and financial results and we expect the evolving pandemic to have ongoing material negative effects on operations, financial results and liquidity. 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.

As of March 31, 2020, we had approximately $382.2 million in long-term debt obligations, including the current portion of long-term debt. We believe that our cash on hand, our Second Export Credit Agreement and expected future operating cash inflows will be sufficient to fund operations, debt service requirements, and necessary capital expenditures. However, there can be no assurance that cash flows from operations will be available to fund future obligations. We estimate our monthly cash usage while our vessels are not in operations is approximately $10-15 million with the ultimate net cash outflow partially dependent on the level of cash refunds requested on previously made guest payments, as well as the amount of new guest payments for future travel. To date, the majority of guests on rescheduled voyages have requested future travel credits. Additionally, we continue to see deposits for travel in 2020, 2021 and 2022, however, there is no assurance as to when we may resume travel.

Sources and Uses of Cash for the Three Months Ended March 31, 2020 and 2019

Net cash provided by operating activities was $15.4 million in 2020 compared to $15.3 million in 2019.

Net cash used in investing activities was $116.7 million in 2020 compared to $35.1 million in 2019. The $81.6 million increase was primarily due to payments for the completion of the National Geographic Endurance during the current quarter, partially offset by the initial down-payment for the National Geographic Resolution in the first quarter of 2019.  

Net cash provided by financing activities was $151.9 million in 2020 compared to net cash used in financing activities of $1.7 million in 2019. The $153.6 million increase in cash provided was primarily due to borrowing $107.7 million under the senior secured credit agreement for the final contracted payment of the National Geographic Endurance and a $45.0 million drawdown of our revolving credit facility.

Funding Sources

Debt Facilities 

Revolving Credit Facility

Our Third Amended and Restated Credit Agreement (the “Amended Credit Agreement”), provides 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%, or 4.24% as of March 31, 2020, and the Revolving Facility bears interest at ICE LIBOR plus a spread of 3.00%, or 3.99% as of March 31, 2020. In 2018, we entered into interest rate cap agreements to hedge our exposure to interest rate movements and manage our interest rate expense related to the Term Facility. During March 2020, we drew $45.0 million on our Revolving Facility.

Senior Secured Credit Agreements

Our senior secured credit agreement (the “Export Credit Agreement”) makes available 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 our new polar ice class vessel, the National Geographic Endurance. During March 2020, we borrowed the $107.7 million under the Export Credit Agreement for the final contracted payment of the National Geographic Endurance. The Export Credit Agreement bears interest at a floating interest rate equal to three-month LIBOR plus a margin of 3.00% per annum, or 4.45% as of March 31, 2020, with interest and principal payments due every 90 days from borrowing date, with final principal due January 2032.

Our senior secured credit agreement (the “Second Export Credit Agreement”) makes available to us 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 National Geographic Resolution, scheduled to be delivered in the fourth quarter of 2021. The Second Export Credit Agreement bears a variable interest rate equal to three-month LIBOR plus a margin of 3.00% per annum, or 4.45% as of March 31, 2020. After completion of the vessel, the Second Export Credit Agreement, at our 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. In September 2019, we drew approximately $30.5 million against the Second Export Credit Agreement for the third contracted payment on the National Geographic Resolution. 

The Amended Credit Agreement, the Export Credit Agreement and the Second Export Credit Agreement contain financial and restrictive covenants. As of March 31, 2020, we were in compliance with our covenants.

U.S. Small Business Administration Loan

During 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 have subsequently returned the funds received from this loan and, as a result, will pursue additional adjustments to our cost structure.

Funding Needs

We generally rely on a combination of cash flows provided by operations and the incurrence of additional debt to fund obligations. A vast majority of guest ticket receipts are collected in advance of the applicable expedition date. These advance passenger receipts remain a current liability until the expedition 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 expeditions or otherwise, pay down credit facilities, make long-term investments or any other use of cash. As of March 31, 2020 and December 31, 2019, we had a working capital deficit of $7.7 million and $36.3 million, respectively. As of March 31, 2020 and December 31, 2019, we had $137.0 million and $101.6 million, respectively, in cash and cash equivalents, excluding restricted cash.

Our 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 us to purchase from time to time our outstanding common stock and warrants. 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. 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, we repurchased 8,517 shares of common stock for approximately $127,000. We have 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 balance for the Repurchase Plan was $12.0 million as of March 31, 2020. During March 2020, the Repurchase Plan was suspended due to the uncertain impact of the COVID-19 virus. 

In February 2019, we entered into an agreement with Ulstein Verft to construct a polar ice-class vessel, the National Geographic Resolution, with a total purchase price of 1,291.0 million Norwegian Kroner (NOK). In March 2019, we entered into foreign exchange forward contract hedges to lock in a purchase price of $153.5 million, including hedging costs. The purchase price is subject to potential adjustments from contract specifications for variations in speed, deadweight, fuel consumption and delivery date. The purchase price is due in installments, with the first 20% paid shortly after execution of the agreement, 50% to be paid over the duration of the build and the final 30% due upon delivery and acceptance of the vessel. The vessel is scheduled to be delivered in the fourth quarter of 2021. In September 2019, we drew approximately $30.5 million against the Second Export Credit Agreement for the contracted installment payment on the National Geographic Resolution. The remaining purchase price of the vessel is expected to be funded through a combination of cash available on our balance sheet, our Second Export Credit Agreement and excess cash flows generated by our existing operations.

During March 2020, we borrowed the $107.7 million under the Export Credit Agreement for the final contracted payment of the National Geographic Endurance, drew $45.0 million on our Revolver Facility and amended the maturity dates of the note payable, which created material changes in our future obligations from those reported in our 2019 Annual Report. The additional related obligations as of March 31, 2020 are as follows:

Off-Balance Sheet Arrangements

In 2019, we entered into a Second Export Credit Agreement as described above.

Critical Accounting Policies

For a detailed discussion of the Critical Accounting Policies, please see our 2019 Annual Report.

There have been no material changes in our exposure to market risks from the information set forth in the “Quantitative and Qualitative Disclosures About Market Risk” sections contained in our 2019 Annual Report.

We are exposed to a market risk for interest rates related to our variable rate debt. We assess our market risks based on changes in interest rates utilizing a sensitivity analysis that measures the potential impact on earnings and cash flows based on a hypothetical 1.0% change in interest rates. For additional information regarding our long-term borrowings see Note 5 to our Condensed Consolidated Financial Statements. As of March 31, 2020, we had interest rate cap agreements to hedge a portion of our exposure to interest rate movements of our variable rate debt and to manage our interest expense. The notional amount of outstanding debt associated with interest rate cap agreements as of March 31, 2020 was $100.0 million. Based on our March 31, 2020 outstanding variable rate debt balance, a hypothetical 1.0% change in the six-month LIBOR interest rates would impact our annual interest expense by approximately $1.0 million.

As of March 31, 2020, we had foreign currency forward contracts to hedge our exposure to foreign currency exchange rate risk related to our ship construction contracts denominated in NOK. For the three months ended March 31, 2020, we recorded a loss of approximately $13.3 million in other comprehensive income related to these foreign exchange derivatives. The strengthening of the NOK at March 31, 2020 by a hypothetical 10%, would result in an approximately $8.3 million gain being recorded in other comprehensive income. The weakening of the NOK at March 31, 2020 by a hypothetical 10%, would result in an approximately $6.8 million loss being recorded in other comprehensive income.

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 quarter ended March 31, 2020, 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 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.

The Company is involved in various claims, legal actions and regulatory proceedings arising from time to time in the ordinary course of business. We have protection and indemnity insurance that would be expected to cover any damages.

We operate in a rapidly changing environment that involves a number of risks that could materially affect our business, financial condition or future results, some of which are beyond our control. The risks and uncertainties that we believe are most important for you to consider are discussed under the heading “Risk Factors” in the 2019 Annual Report filed on February 26, 2020, and those noted below.

Restrictions or extended restrictions, on expedition sailing or travel in general, has materially adversely affected our business and could materially adversely affect our financial condition and liquidity.

There can be no assurance when travel restrictions may be lifted, and such restrictions may extend in whole or in part beyond current government guidance or into next year. Any cases of COVID-19 on one of our vessels when we are able to resume sailing could result in a subsequent suspension of travel or limit our ability to disembark guests from our vessels. There can be no assurance that our guests will be able to travel to embarkation or from disembarkation destinations, or that such locations will continue to have travel restrictions in place which would impact our ability to sail scheduled itineraries. In addition, even following the ease of travel restrictions, there is no assurance that guests will immediately recommence travel to prior levels. The current travel restrictions have materially adversely impacted our business and operations and prolonged travel restrictions (or general reluctance to travel by our guests) would have a material adverse impact on our results of operations, financial condition and liquidity.

COVID-19 has had, and is expected to continue to have, a significant impact on our financial condition and operations, which may impact our ability to obtain acceptable financing to fund the necessary cash needed for operations. The current, and uncertain future, impact of the COVID-19 pandemic, including its effect on the ability or desire of people to travel, is expected to continue to impact our results, operations, outlooks, plans, goals, growth, cash flows and liquidity.

The spread of the COVID-19 virus and the recent developments surrounding the global pandemic are having material negative impacts on all aspects of our business. We have voluntary suspended and rescheduled, as applicable, all of our expedition operations and such pause may be required to be extended. In addition, we have been, and will continue to be further, negatively impacted by related developments, including heightened governmental regulations and travel advisories, recommendations by the U.S. Department of State and the Centers for Disease Control and Prevention, and travel bans and restrictions, each of which has impacted, and is expected to continue to significantly impact our access to various embarkation, disembarkation and expedition destinations.

We will continue to incur COVID-19 related costs as we implement additional health and hygiene-related protocols to our ships. In addition, the industry may be subject to enhanced health and hygiene requirements in attempts to counteract future outbreaks, which requirements may be costly and take a significant amount of time to implement across our expedition fleet and operations.

We cannot predict with certainty when any of our ships will begin expedition sailings again and embarkation and disembarkation locations will reopen to our ships. Additionally, once travel advisories and restrictions are lifted, demand for expedition travel may remain weak for a significant length of time, and we cannot predict if and when we will return to previously expected levels of occupancy. Our bookings may be negatively impacted by the adverse changes in the perceived or actual economic climate, including higher unemployment rates, declines in income levels and loss of personal wealth resulting from the impact of the COVID-19 virus. In addition, we cannot predict the impact COVID-19 will have on our partners, such as ship-yards for new builds, travel agencies, suppliers and other vendors. We may be adversely impacted as a result of the adverse impact our partners suffer.

We have never previously experienced a complete cessation of our expedition operations and, as a consequence, given the dynamic nature of this situation, we cannot reasonably estimate or predict the impact of such a cessation on our costs and future prospects. In particular, we cannot predict the impact on our financial performance and our cash flows required for cash refunds of deposits as a result of the suspension and rescheduling, as applicable, of our expeditions, which may be further extended, and the public’s concern regarding the health and safety of travel, especially by ship, and related decreases in demand for travel. Moreover, our ability to attract and retain guests and crew depends, in part, upon the perception and reputation of our Company, our expedition destinations and offerings and the public’s concerns regarding the health and safety of travel generally, as well as regarding the industry and our ships specifically. 

In addition, the COVID-19 outbreak has significantly increased economic and demand uncertainty. The current outbreak and continued spread of COVID-19 could cause a global recession, which would have a further adverse impact on our financial condition and operations. In past recessions, demand for our expeditionary travel offerings has been significantly negatively impacted which has resulted in lower occupancy rates and adverse pricing. Current economic forecasts for significant increases in unemployment in the U.S. and other regions due to the adoption of social distancing and other policies to slow the spread of the virus is likely to have a negative impact on demand for our expeditionary travel once our sailings resume, and these impacts could exist for an extensive period of time.

Our debt could adversely affect our financial health and operating flexibility.

Our debt could:

We will require a significant amount of cash to service our debt and sustain our operations. Our ability to generate cash depends on many factors beyond our control, and we may not be able to generate cash required to service our debt.

Our ability to meet our other debt service obligations or refinance our debt depends on our future operating and financial performance and ability to generate cash. This will be affected by our ability to successfully implement our business strategy, as well as general economic, financial, competitive, regulatory and other factors beyond our control, such as the disruption caused by the COVID-19 pandemic. If we cannot generate sufficient cash to meet our debt service obligations or fund our other business needs, we may, among other things, need to refinance all or a portion of our debt, obtain additional financing, delay planned capital expenditures or sell assets. We cannot be assured that we will be able to generate sufficient cash through any of the foregoing. If we are not able to refinance any of our debt, obtain additional financing or sell assets on commercially reasonable terms or at all, we may not be able to satisfy our obligations with respect to our debt. 

The impact of volatility and disruptions in the global credit and financial markets may adversely affect our ability to borrow and could increase our counterparty credit risks, including those under our credit facilities, derivatives, contingent obligations, insurance contracts and new ship contractual payments.

There can be no assurance that we will be able to access additional debt and/or credit facilities on terms as favorable as our current debt, on commercially acceptable terms, or at all. Economic downturns, including failures of financial institutions and any related liquidity crisis, can disrupt the capital and credit markets. Such disruptions could cause counterparties under our credit facilities, derivatives, contingent obligations and insurance contracts to be unable to perform their obligations or to breach their obligations to us under our contracts with them, which could include failures of financial institutions to fund required borrowings under our loan agreements and to pay us amounts that may become due under our derivative contracts and other agreements. Also, we may be limited in obtaining funds to pay amounts due to our counterparties under our derivative contracts and to pay amounts that may become due under other agreements. If we were to elect to replace any counterparty for their failure to perform their obligations under such instruments, we would likely incur significant costs to replace the counterparty. Any failure to replace any counterparties under these circumstances may result in additional costs to us or an ineffective instrument.

Recent Sales by the Company of Unregistered Securities

There were no unregistered sales of equity securities during the quarter ended March 31, 2020.

Repurchases of Securities

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 and warrants. 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. During the three months ended March 31, 2020, we repurchased 8,517 shares of common stock for approximately $127,000. We have 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 March 31, 2020. During March 2020, the Repurchase Plan was suspended due to the uncertain impact of the COVID-19 virus. 

The following table represents information with respect to shares of common stock repurchased under the Repurchase Plan as well as shares withheld from vesting of stock-based compensation awards for employee income taxes, for the periods indicated: