UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

☒ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended ~~September~~June 30, ~~2017~~2020

☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from to

Commission file number 001-35898

LINDBLAD EXPEDITIONS HOLDINGS, INC.

(Exact name of registrant as specified in its charter)

Delaware

~~Delaware~~

27-4749725

(State or other jurisdiction of

incorporation or organization)

(I.R.S. Employer

Identification No.)

96 Morton Street, 9th Floor, New York, New York, 10014

(Address of principal executive offices) (Zip Code)

(212) 261-9000

(Registrant’s telephone number, including area code)

~~NOT APPLICABLE~~Securities registered pursuant to Section 12(b) of the Act:

Title of each class	Trading Symbol(s)	Name of each exchange on which registered

Common Stock, par value $0.0001 per share	LIND	The NASDAQ Stock Market LLC

~~(Former name, former address and former fiscal year, if changed since last report)~~Securities registered pursuant to Section 12(g) of the Act:

None

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. ☒ Yes ☐ No

Indicate by check mark whether the registrant has submitted electronically ~~and posted on its corporate Web site, if any,~~ every Interactive Data File required to be submitted ~~and posted~~ pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit ~~and post~~ such files). ☒ Yes ☐ No

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

Large accelerated filer	☐	Accelerated filer	☒
Non-accelerated filer	☐~~(Do not check if a smaller reporting company)~~	Smaller reporting company	☐
		Emerging growth company	☒ ☐

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☒

☐

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).

☐ Yes ☒ No

Indicate the number of shares outstanding of each of the issuer’s classes of common stock, as of the latest practicable date.

As of ~~November 3, 2017, 45,433,152~~July 31, 2020, 49,823,199 shares of common stock, par value $0.0001 per share, were issued and outstanding.

Table of Contents

LINDBLAD EXPEDITIONS HOLDINGS, INC.

Quarterly Report On Form 10-Q

For The Quarter Ended ~~September~~June 30 ~~2017~~, 2020

Table of Contents

		Page(s)

PART II. FINANCIAL INFORMATION

ITEM 1.	Financial Statements (Unaudited)	1
	Condensed Consolidated Balance Sheets as of ~~September~~June 30, ~~2017~~2020 (Unaudited) and December 31, ~~2016~~2019	1
	Condensed Consolidated Statements of ~~Income~~Operations for the Three and ~~Nine~~Six Months Ended ~~September~~June 30, ~~2017~~2020 and ~~202016~~2019 (Unaudited)	2
	Condensed Consolidated Statements of ~~Redeemable Noncontrolling Interest~~Comprehensive Income (Loss) for the Three and Six Months Ended June 30, 2020 and 2019 (Unaudited)	3
	Condensed Consolidated Statements of Stockholders’ Equity for the ~~Nine~~Three and Six Months Ended ~~September~~June 30, ~~2017~~2020 and 2019 (Unaudited)	3 4
	Condensed Consolidated Statements of Cash Flows for the ~~Nine~~Six Months Ended ~~September~~June 30, ~~2017~~2020 and ~~2016~~2019 (Unaudited)	4 5
	Notes to the Condensed Consolidated Financial Statements (Unaudited)	5 7

ITEM 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	1921
ITEM 3.	Quantitative and Qualitative Disclosures about Market Risk	3034
ITEM 4.	Controls and Procedures	30 34

PART IIII. OTHER INFORMATION

ITEM 1.	Legal Proceedings	31 34
ITEM 1A.	Risk Factors	31 34
ITEM 2.	Unregistered Sale of Equity Securities and Use of Proceeds	31 35
ITEM 3.	Defaults Upon Senior Securities	31 35
ITEM 4.	Mine Safety Disclosures	31 35
ITEM 5.	Other Information	31 35
ITEM 6.	Exhibits	31 36

SIGNATURES		32

~~PART 1: FINANCIAL INFORMATION~~

~~Item 1:~~

~~Financial Statements~~37

Table of Contents

PART I.	FINANCIAL INFORMATION
Item 1.	FINANCIAL STATEMENTS

LINDBLAD EXPEDITIONS HOLDINGS, INC. AND SUBSIDIARIES

Condensed Consolidated Balance Sheets

(In thousands, except share and per share data)

	*As of June 30, 2020*			*As of December 31, 2019*
ASSETS	(unaudited)
Current Assets:
Cash and cash equivalents	$	80,897		$	101,579
Restricted cash		21,333			7,679
Marine operating supplies		6,759			6,299
Inventories		1,824			2,027
Prepaid expenses and other current assets		23,753			29,055
Total current assets		134,566			146,639

Property and equipment, net		495,370			357,790
Goodwill		22,105			22,105
Intangibles, net		5,607			6,396
Deferred tax asset		639			218
Right-to-use lease assets		5,601			6,105
Other long-term assets		8,401			9,405
Total assets	$	672,289		$	548,658

LIABILITIES
Current Liabilities:
Unearned passenger revenues	$	120,788		$	138,825
Accounts payable and accrued expenses		43,443			38,231
Lease liabilities - current		1,394			1,335
Long-term debt - current		5,646			4,525
Total current liabilities		171,271			182,916

Long-term debt, less current portion		395,637			213,543
Deferred tax liabilities		136			4,491
Lease liabilities		4,567			5,029
Other long-term liabilities		6,730			3,317
Total liabilities		578,341			409,296

COMMITMENTS AND CONTINGENCIES

REDEEMABLE NONCONTROLLING INTEREST		9,970			16,112

STOCKHOLDERS’ EQUITY
Preferred stock, $0.0001 par value, 1,000,000 shares authorized; no shares issued and outstanding		-			-
Common stock, $0.0001 par value, 200,000,000 shares authorized; 49,822,955 and 49,717,522 issued, 49,754,431 and 49,626,498 outstanding as of June 30, 2020 and December 31, 2019, respectively		5			5
Additional paid-in capital		47,394			46,271
Retained earnings		45,403			81,655
Accumulated other comprehensive loss		(8,824	)		(4,681	)
Total stockholders' equity		83,978			123,250
Total liabilities, stockholders' equity and redeemable noncontrolling interest	$	672,289		$	548,658

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

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LINDBLAD EXPEDITIONS HOLDINGS, INC. AND SUBSIDIARIES

Condensed Consolidated Statements of Operations

(In thousands, except share and per share data)

(unaudited)

	*For the three months ended June 30,*						*For the six months ended June 30,*
	*2020*			*2019*			*2020*			*2019*

Tour revenues	$	(268	)	$	76,658		$	80,971		$	166,311

Operating expenses:
Cost of tours		12,721			37,520			54,913			76,537
General and administrative		9,798			16,268			27,025			32,350
Selling and marketing		3,406			12,567			16,285			26,569
Depreciation and amortization		8,553			6,182			15,243			12,370
Total operating expenses		34,478			72,537			113,466			147,826

Operating (loss) income		(34,746	)		4,121			(32,495	)		18,485

Other (expense) income:
Interest expense, net		(4,179	)		(3,188	)		(7,234	)		(6,176	)
(Loss) gain on foreign currency		(3,879	)		501			(7,322	)		1,157
Other expense		(62	)		(30	)		(113	)		(49	)
Total other expense		(8,120	)		(2,717	)		(14,669	)		(5,068	)

(Loss) income before income taxes		(42,866	)		1,404			(47,164	)		13,417
Income tax (benefit) expense		(2,943	)		553			(4,770	)		(2,513	)

Net (loss) income		(39,923	)		851			(42,394	)		15,930
Net (loss) income attributable to noncontrolling interest		(265	)		(137	)		(801	)		269
Net (loss) income available to common stockholders	$	(39,658	)	$	988		$	(41,593	)	$	15,661

Weighted average shares outstanding
Basic		49,741,635			46,155,981			49,683,381			45,607,307
Diluted		49,741,635			49,485,004			49,683,381			48,281,002

Net (loss) income per share available to common stockholders
Basic	$	(0.80	)	$	0.02		$	(0.84	)	$	0.34
Diluted	$	(0.80	)	$	0.02		$	(0.84	)	$	0.32

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

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LINDBLAD EXPEDITIONS HOLDINGS, INC. AND SUBSIDIARIES

Condensed Consolidated Statements of Comprehensive Income (Loss)

(In thousands)

(unaudited)

	*For the three months ended June 30,*						*For the six months ended June 30,*
	*2020*			*2019*			*2020*			*2019*

Net (loss) income	$	(39,923	)	$	851		$	(42,394	)	$	15,930
Other comprehensive income (loss):
Cash flow hedges:
Net unrealized gain (loss)		3,930			377			(9,469	)		(1,261	)
Reclassification adjustment, net of tax		5,326			-			5,326			-
Total other comprehensive income (loss)		9,256			377			(4,143	)		(1,261	)
Total comprehensive (loss) income		(30,667	)		1,228			(46,537	)		14,669
Less: comprehensive (loss) income attributive to non-controlling interest		(265	)		(137	)		(801	)		269
Comprehensive (loss) income attributable to common shareholders	$	(30,402	)	$	1,365		$	(45,736	)	$	14,400

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

Table of Contents

LINDBLAD EXPEDITIONS HOLDINGS, INC. AND SUBSIDIARIES

Condensed Consolidated Statements of Stockholders’ Equity

(In thousands, except share data)

(unaudited)

As of
September 30,
2017 December 31,
2016
(Unaudited)
ASSETS
Current Assets:
Cash and cash equivalents $ 112,316 $ 135,416
Restricted cash and marketable securities 8,704 9,015
Inventories 1,783 1,665
Marine operating supplies 4,539 4,142
Prepaid expenses and other current assets 22,887 20,782
Total current assets 150,229 171,020

Property and equipment, net 219,498 186,236
Goodwill 22,105 22,105
Intangibles, net 9,948 11,132
Other long-term assets 10,831 13,090
Deferred tax assets 7,916 4,118
Total assets $ 420,527 $ 407,701

LIABILITIES
Current Liabilities:
Unearned passenger revenues $ 99,740 $ 91,501
Accounts payable and accrued expenses 23,810 �� 30,662
Long-term debt - current 1,750 1,750
Total current liabilities 125,300 123,913

Long-term debt, less current portion 164,165 164,128
Other long-term liabilities 703 681
Total liabilities 290,168 288,722

COMMITMENTS AND CONTINGENCIES

REDEEMABLE NONCONTROLLING INTEREST 5,319 5,170

STOCKHOLDERS’ EQUITY
Preferred stock, $0.0001 par value, 1,000,000 shares authorized;
0 shares issued and outstanding - -
Common stock, $0.0001 par value, 200,000,000 shares authorized;
45,155,621 and 45,659,762 issued and outstanding as of September 30, 2017, and December 31, 2016, respectively 5 5
Additional paid-in capital 45,213 43,097
Retained earnings 79,822 70,707
Total stockholders' equity 125,040 113,809
Total liabilities, redeemable noncontrolling interest and stockholders' equity $ 420,527 $ 407,701

	*Common Stock*					*Additional Paid-In*			*Retained*			*Accumulated Other Comprehensive*			*Total Stockholders'*
	*Shares*			*Amount*		*Capital*			*Earnings*			*Loss*			*Equity*
Balance as of March 31, 2020		49,758,787		$	5	$	46,908		$	78,820		$	(18,080	)	$	107,653
Stock-based compensation		-			-		703			-			-			703
Issuance of stock for equity compensation plans, net		64,168			-		(217	)		-			-			(217	)
Repurchase of shares and warrants		-			-		-			-			-			-
Other comprehensive income, net		-			-		-			-			9,256			9,256
Redeemable noncontrolling interest		-			-		-			6,241			-			6,241
Net loss available to common stockholders		-			-		-			(39,658	)		-			(39,658	)
Balance as of June 30, 2020		49,822,955		$	5	$	47,394		$	45,403		$	(8,824	)	$	83,978

	*Common Stock*					*Additional Paid-In*			*Retained*			*Accumulated Other Comprehensive*			*Total Stockholders'*
	*Shares*			*Amount*		*Capital*			*Earnings*			*Loss*			*Equity*
Balance as of January 1, 2020		49,717,522		$	5	$	46,271		$	81,655		$	(4,681	)	$	123,250
Stock-based compensation		-			-		1,601			-			-			1,601
Issuance of stock for equity compensation plans, net		113,950			-		(351	)		-			-			(351	)
Repurchase of shares and warrants		(8,517	)		-		(127	)		-			-			(127	)
Other comprehensive loss, net		-			-		-			-			(4,143	)		(4,143	)
Redeemable noncontrolling interest		-			-		-			5,341			-			5,341
Net loss available to common stockholders		-			-		-			(41,593	)		-			(41,593	)
Balance as of June 30, 2020		49,822,955		$	5	$	47,394		$	45,403		$	(8,824	)	$	83,978

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

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LINDBLAD EXPEDITIONS HOLDINGS, INC. AND SUBSIDIARIES

Condensed Consolidated Statements of Stockholders’ Equity (continued)

(In thousands, except share data)

(unaudited)

	*Common Stock*					*Additional Paid-In*			*Retained*		*Accumulated Other Comprehensive*			*Total Stockholders'*
	*Shares*			*Amount*		*Capital*			*Earnings*		*Loss*			*Equity*
Balance as of March 31, 2019		45,768,715		$	5	$	41,102		$	89,844		(2,309	)	$	128,642
Stock-based compensation		-			-		1,001			-		-			1,001
Issuance of stock for equity compensation plans, net		32,310			-		(486	)		-		-			(486	)
Repurchase of shares and warrants		-			-		-			-		-			-
Other comprehensive income, net		-			-		-			-		377			377
Net income available to common stockholders		-			-		-			988		-			988
Balance as of June 30, 2019		45,801,025		$	5	$	41,617		$	90,832	$	(1,932	)	$	130,522

	*Common Stock*					*Additional Paid-In*			*Retained*		*Accumulated Other Comprehensive*			*Total Stockholders'*
	*Shares*			*Amount*		*Capital*			*Earnings*		*Loss*			*Equity*
Balance as of January 1, 2019		45,814,925		$	5	$	41,539		$	75,171		(671	)	$	116,044
Stock-based compensation		-			-		1,754			-		-			1,754
Issuance of stock for equity compensation plans, net		(12,005	)		-		(1,653	)		-		-			(1,653	)
Repurchase of shares and warrants		(1,895	)		-		(23	)		-		-			(23	)
Other comprehensive loss, net		-			-		-			-		(1,261	)		(1,261	)
Net income available to common stockholders		-			-		-			15,661		-			15,661
Balance as of June 30, 2019		45,801,025		$	5	$	41,617		$	90,832	$	(1,932	)	$	130,522

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

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LINDBLAD EXPEDITIONS HOLDINGS, INC. AND SUBSIDIARIES

Condensed Consolidated Statements of ~~Income~~Cash Flows

(In ~~thousands, except share and per share data)~~thousands)

~~(Unaudited)~~(unaudited)

For the Three Months Ended September 30, For the Nine Months Ended September 30,
2017 2016 2017 2016

Tour revenues $ 84,584 $ 70,774 $ 203,283 $ 186,218

Cost of tours 38,480 32,446 99,780 87,111
Gross profit 46,104 38,328 103,503 99,107

Operating expenses:
General and administrative 16,526 12,915 46,710 36,740
Selling and marketing 11,676 10,164 31,521 29,294
Depreciation and amortization 4,354 5,080 12,012 14,523
Total operating expenses 32,556 28,159 90,243 80,557

Operating income 13,548 10,169 13,260 18,550

Other income (expense):
Gain (loss) on foreign currency 224 (5 ) 1,047 (291 )
Other income (expense) 59 (38 ) (97 ) (38 )
Interest expense, net (2,802 ) (2,476 ) (7,192 ) (7,914 )
Total other expense (2,519 ) (2,519 ) (6,242 ) (8,243 )

Income before income taxes 11,029 7,650 7,018 10,307

Income tax expense (benefit) 1,586 203 (473 ) (3,113 )

Net income 9,443 7,447 7,491 13,420

Net income (loss) attributable to noncontrolling interest 165 29 149 (119 )

Net income attributable to Lindblad $ 9,278 $ 7,418 $ 7,342 $ 13,539

Common stock
Net income available to common stockholders $ 9,278 $ 7,418 $ 7,342 $ 13,539

Weighted average shares outstanding
Basic 44,457,656 45,776,443 44,528,878 45,639,608
Diluted
45,718,513
46,541,257
45,609,560
46,329,880

Net income per share attributable to Lindblad
Basic $ 0.21 $ 0.16 $ 0.16 $ 0.30
Diluted $ 0.20 $ 0.16 $ 0.16 $ 0.29

	*For the six months ended June 30,*
	*2020*			*2019*
Cash Flows From Operating Activities
Net (loss) income	$	(42,394	)	$	15,930
Adjustments to reconcile net (loss) income to net cash (used by) provided by operating activities:
Depreciation and amortization		15,243			12,370
Amortization of National Geographic fee		727			1,454
Amortization of deferred financing costs and other, net		972			911
Amortization of right-to-use lease assets		101			185
Stock-based compensation		1,601			1,754
Deferred income taxes		(4,817	)		(4,106	)
Loss (gain) on foreign currency		7,322			(1,157	)
Changes in operating assets and liabilities
Marine operating supplies and inventories		(257	)		(32	)
Prepaid expenses and other current assets		5,342			(10,033	)
Unearned passenger revenues		(18,037	)		21,600
Other long-term assets		277			(767	)
Other long-term liabilities		(730	)		706
Accounts payable and accrued expenses		(2,112	)		(1,587	)
Net cash (used in) provided by operating activities		(36,762	)		37,228

Cash Flows From Investing Activities
Purchases of property and equipment		(152,031	)		(42,311	)
Net cash used in investing activities		(152,031	)		(42,311	)

Cash Flows From Financing Activities
Proceeds from long-term debt		183,339			-
Repayments of long-term debt		(1,000	)		(1,000	)
Payment of deferred financing costs		(96	)		(2,340	)
Repurchase under stock-based compensation plans and related tax impacts		(351	)		(1,653	)
Repurchase of warrants and common stock		(127	)		(23	)
Net cash provided by (used in) financing activities		181,765			(5,016	)
Net decrease in cash, cash equivalents and restricted cash		(7,028	)		(10,099	)
Cash, cash equivalents and restricted cash at beginning of period		109,258			122,150

Cash, cash equivalents and restricted cash at end of period	$	102,230		$	112,051

Supplemental disclosures of cash flow information:
Cash paid during the period:
Interest	$	7,971		$	6,999
Income taxes	$	60		$	564
Non-cash investing and financing activities:
Additional paid-in capital exercise proceeds of option shares	$	-		$	225
Additional paid-in capital exchange proceeds used for option shares	$	-		$	(225	)

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

Table of Contents

~~LINDBLAD EXPEDITIONS HOLDINGS, INC. AND SUBSIDIARIES~~

~~Condensed Consolidated Statements of Redeemable Noncontrolling Interest and Stockholders’ Equity~~

~~(In thousands, except share data)~~

Common Stock Additional Paid-In Retained Total Stockholders’ Redeemable Noncontrolling
Shares Amount Capital Earnings Equity Interest
Balance as of December 31, 2016 45,659,762 $ 5 $ 43,097 $ 70,707 $ 113,809 $ 5,170
Stock-based compensation - - 9,464 - 9,464 -
Option shares exercised and exchanged 103,233 - (202 ) - (202 ) -
Issuance of shares to board of directors 45,019 -
Repurchase of shares and warrants (547,058 ) - (6,166 ) - (6,166 ) -
Retirement of shares for employee taxes on vested shares/options (105,335 ) - (980 ) - (980 ) -
Retroactiveapplication of ASU 2016-09 - - - 1,773 1,773 -
Net income - - - 7,342 7,342 149
Balance as of September 30, 2017 45,155,621 $ 5 $ 45,213 $ 79,822 $ 125,040 $ 5,319

~~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)~~

For the Nine Months Ended
September 30,
2017 2016
Cash Flows From Operating Activities
Net income $ 7,491 $ 13,420
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization 12,012 14,523
Amortization of National Geographic fee 2,180 2,180
Amortization of debt discount, deferred financing and other, net 1,662 2,582
Stock-based compensation 9,464 3,982
Deferred income taxes (2,017 ) (3,709 )
(Gain) loss on currency translation (1,047 ) 291
Changes in operating assets and liabilities
Inventories and marine operating supplies (516 ) 1,505
Prepaid expenses and other current assets (1,087 ) 1,098
Unearned passenger revenues 8,062 (8,620 )
Other long-term assets 192 (3,159 )
Other long-term liabilities 14 22
Accounts payable and accrued expenses (6,964 ) (8,430 )
Net cash provided by operating activities 29,446 15,685

Cash Flows From Investing Activities
Acquisition of Natural Habitat, Inc., net of $4,904 cash acquired - (9,946 )
Purchases of property and equipment (44,089 ) (50,598 )
Redemption (purchase) of restricted cash and marketable securities 311 (1,907 )
Net cash used in investing activities (43,778 ) (62,451 )

Cash Flows From Financing Activities
Payment of deferred financing costs (312 ) (1,565 )
Repayments of long-term debt (1,312 ) (1,312 )
Repurchase of employee shares as part of cashless exercise of options or vesting of restricted shares for tax purposes (1,182 ) (2,695 )
Repurchase of warrants and common shares (6,166 ) (5,420 )
Net cash used in financing activities (8,972 ) (10,992 )
Effect of exchange rate changes on cash 204 (128 )

Net decrease in cash and cash equivalents (23,100 ) (57,886 )

Cash and cash equivalents as of beginning of period 135,416 206,903

Cash and cash equivalents as of end of period $ 112,316 $ 149,017

Supplemental disclosures of cash flow information:
Cash paid during the period for:
Interest $ 7,841 $ 7,427
Income taxes $ 965 $ 992

Non-cash investing and financing activities:
Additional paid-in capital exercise proceeds of option shares $ 168 $ 1,123
Additional paid-in capital exchange proceeds used for option shares (168 ) (1,123 )

~~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

~~NOTE 1 – BUSINESS~~Business

~~Organization~~

Lindblad Expeditions Holdings, Inc. and its consolidated subsidiaries (the “Company” or “Lindblad”) ~~operate a fleet of seven owned expedition ships and five seasonal charter vessels under the Lindblad brand. A new coastal vessel, the~~~~National Geographic Quest,~~ ~~joined the fleet in the third quarter of 2017. The Company has contracted for two additional vessels, the~~~~National Geographic Venture~~, a coastal vessel, is expected to be completed in the fourth quarter of 2018, and a polar ice class vessel, targeted to be completed in January 2020, with potential accelerated delivery to November 2019.

~~Lindblad’s~~ mission is ~~to offer~~offering life-changing adventures ~~on all seven continents~~around the world and ~~to pioneer~~pioneering innovative ways to allow its guests to connect with exotic and remote places. The ~~Company’s~~Company currently operates a fleet of nine owned expedition ships ~~are~~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, ~~thus~~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 ~~the~~ National Geographic ~~Society~~Partners (“National Geographic”), which ~~often~~ provides for lecturers and National Geographic experts, including photographers, writers, marine biologists, naturalists, field researchers and film ~~crews. The arrangement with National Geographic extends through 2025.~~crews, to join many of the Company’s expeditions.

Natural Habitat ~~Acquisition~~

~~On May 4, 2016, the Company acquired an 80.1% ownership interest~~ – Offers over 100 different expedition itineraries of primarily land-based nature adventures in ~~Natural Habitat, Inc. (“Natural Habitat”), an adventure travel~~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 ~~ecotourism company based~~nature experiences. Examples of expeditions offered include safaris in ~~Colorado. Natural Habitat was founded by Benjamin L. Bressler, who retains a 19.9% noncontrolling interest~~Botswana, grizzly bear adventures in ~~Natural Habitat. With the acquisition of Natural Habitat, the Company expanded its land-based offerings around the globe. Natural Habitat’s expeditions include~~Alaska, polar bear tours in ~~Churchill,~~ Canada ~~Alaskan grizzly bear adventures,~~and small-group Galápagos ~~tours and African safaris. In addition to its land offerings, Natural Habitat offers select itineraries on seven small chartered vessels for parts~~tours. Many of the ~~year.~~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 ~~and~~travel, which is sustainable travel that ~~directly protects nature. This agreement with WWF extends through 2023.~~contributes to the protection of nature and wildlife.

~~NOTE 2 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES~~The Company’s common stock is listed on the NASDAQ Capital Market under the symbol “LIND”.

Basis of Presentation

The accompanying unaudited ~~interim~~ condensed consolidated financial statements and footnotes have been prepared in accordance with accounting principles generally accepted in the United States of America (“~~U.S.~~ GAAP”) and applicable rules and regulations of the Securities and Exchange Commission (the “SEC”) regarding unaudited interim financial ~~information.~~information and include the accounts and transactions of the Company. In the opinion of management, the accompanying unaudited ~~interim~~ condensed consolidated financial statements reflect all adjustments, consisting only of normal recurring adjustments, necessary for a fair presentation of the Company’s Condensed Consolidated Balance Sheets, Condensed Consolidated Statements of Income, Condensed Consolidated Statements of Redeemable Noncontrolling Interest and Stockholders’ Equity, and Condensed Consolidated Statements of Cash Flowsfinancial statements for the ~~interim~~ periods presented. Operating results for the ~~interim~~ periods presented are not necessarily indicative of the results of operations to be expected for the full year due to seasonality and other factors. Certain information and footnote disclosures normally included in the ~~condensed~~ consolidated financial statements in accordance with U.S. GAAP have been omitted in accordance with the rules and regulations of the ~~SEC.~~SEC for interim reporting. All intercompany balances and transactions have been eliminated in ~~the accompanying~~these unaudited condensed consolidated financial statements. ~~Accordingly, these~~These unaudited ~~interim~~ condensed consolidated financial statements and footnotes should be read in conjunction with the audited consolidated financial statements and accompanying notes thereto for the year ended December 31, ~~2016~~ 2019 contained in the Company’s Annual Report on Form ~~10-K~~10-K filed with the SEC on ~~March 7, 2017.~~ February 26, 2020 (the “2019 Annual Report”).

~~Principles~~The presentation of ~~Consolidation~~

The condensed consolidated financial statements of the Company as of September 30, 2017 and December 31, 2016 included Lindblad Expeditions Holdings, Inc. and its consolidated subsidiaries All significant intercompany accounts and transactions have been eliminated in consolidation.

~~Reclassifications~~

~~Certain~~certain items in the condensed consolidated ~~financial~~ statements of ~~the Company~~cash flows have been reclassified to conform to the ~~2017 classification.~~2020 presentation. The ~~reclassifications~~reclassification had no effect on previously reported results of ~~operations or retained earnings.~~net cash provided by operating activities.

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

~~The preparation of condensed consolidated financial statements in conformity with U.S. GAAP requires management~~

COVID-19 Business Update

Due to ~~make estimates and assumptions that affect~~ the ~~reported amounts of assets and liabilities and the disclosure of contingent assets and liabilities as~~spread of the date of the condensed consolidated financial statements, and also affect the amounts of revenues and expenses reported for each period. Actual results could differ from those which result from using such estimates. Management utilizes various estimates, including but not limited to determining the estimated lives of long-lived assets, determining the fair value of assets acquired and liabilities assumed in business combinations, the fair value of the Company’s common stock and related warrants, the valuation of securities underlying stock-based compensation, income tax expense, the valuation of deferred tax assets, the value of contingent consideration, and to assess its litigation, other legal claims and contingencies. The results of any changes in accounting estimates are reflected in the condensed consolidated financial statements in the period in which the changes become evident. Estimates and assumptions are reviewed periodicallyCOVID-19 virus and the effects of ~~revisions are reflected in~~travel restrictions around the ~~period that they are determined to be necessary.~~

~~Revenue Recognition~~

Tour revenue consists of guest ticket revenue recognized from the sale of guest tickets and other tour revenues from the sale of pre- and post-expedition excursions, hotel accommodations, land-based expeditions, air transportation to and from the ships, goods and services rendered onboard that are not included in guest ticket prices, trip insurance, and cancellation fees. Revenue from the sale of guest tickets and other revenue are recognized gross, asworld, the Company has suspended or rescheduled the ~~primary obligation~~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.

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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:
●
Significantly reduced ship and land-based expedition costs including crew payroll, land costs, fuel and food. All ships have been safely laid up.
●
Lowered expected annual maintenance capital expenditures by over $10 million, savings of more than 50% from originally planned levels.
●
Meaningfully reduced general and administrative expenses through staff furloughs, payroll reductions and the elimination of all non-essential travel, office expenses and discretionary spending.
●
Suspended the majority of planned advertising and marketing spend.
●
Deferred payment of the majority of bonuses earned for 2019 performance, as well as cash compensation for the Board of Directors.
●
Suspended all repurchases of common stock under the stock repurchase plan.
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 ~~arrangement,~~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 ~~discretion~~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 ~~supplier selection~~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.
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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 ~~involved in~~actively investigating additional itinerary opportunities both internationally and domestically. Lastly, the ~~determination~~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 ~~service specifications.~~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.
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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 months ended June 30,

For the six months ended June 30,

2020

2019

2020

2019

(In thousands, except share and per share data) (unaudited) (unaudited) (unaudited) (unaudited)
Net (loss) income available to common stockholders
$ (39,658 ) $ 988 $ (41,593 ) $ 15,661

Weighted average shares outstanding:

Total weighted average shares outstanding, basic
49,741,635 46,155,981 49,683,381 45,607,307
Dilutive potential common shares
- 237,813 - 251,131
Dilutive potential options
- 70,164 - 55,183
Dilutive potential warrants
- 3,021,046 - 2,367,381
Total weighted average shares outstanding, diluted
49,741,635 49,485,004 49,683,381 48,281,002

Net (loss) income per share available to common stockholders

Basic
$ (0.80 ) $ 0.02 $ (0.84 ) $ 0.34
Diluted
$ (0.80 ) $ 0.02 $ (0.84 ) $ 0.32
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 ~~tour~~ guests remit deposits in advance of tour embarkation. Guest ~~tour~~ deposits consist of guest ticket revenues as well as revenues from the sale of pre- and post-expedition excursions, hotel accommodations, land-based expeditions and air transportation to and from the ~~ships, and trip insurance.~~ships. Guest ~~tour~~ deposits represent unearned revenues and are ~~initially included in~~reported as unearned passenger ~~revenue~~revenues in the condensed consolidated balance ~~sheet~~sheets when ~~received. Guest deposits~~received and are subsequently recognized as tour ~~revenues on~~revenue over the date of embarkation. Tour expeditions average ten days in duration. For tours in excess of ten days, the Company recognizes revenue based upon expeditions days earned. Guest cancellation fees are recognized as tour revenues at the timeduration of the ~~cancellation. Revenues from the sale of additional goods and services rendered onboard are recognized upon purchase.~~
~~Earnings per Common Share~~
Earnings per common share are computed by dividing net income by the weighted average number of common shares outstanding during the period. Diluted earnings per share are computed using the weighted average number of common shares and, if dilutive, potential common shares outstanding during the period. Potential common shares consist of the dilutive incremental common shares issuable upon the exercise of stock, which may include options, warrants and vesting of restricted stock, which was accounted for utilizing the treasury stock method.
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~~For the three and nine months ended September 30, 2017 and 2016, the Company calculated earnings per share in accordance with Financial Accounting Standards Board (“FASB”)~~expedition. Accounting Standards Codification, ~~(“ASC”~~Revenue from Contracts with Customers (Topic 606) ~~260 and 805-40-45~~defines a “contract liability” as ~~follows:~~
For the Three Months Ended September 30, For the Nine Months Ended September 30,
(In thousands, except share and per share data) 2017 2016 2017 2016
Net income attributable to Lindblad for basic and diluted earnings per share $ 9,278 $ 7,418 $ 7,342 $ 13,539

Weighted average shares outstanding:
Total weighted average shares outstanding, basic 44,457,656 45,776,443 44,528,878 45,639,608
Effect of dilutive securities:
Assumed exercise of stock options, treasury method 1,260,857 764,814 1,080,682 690,272
Total weighted average shares outstanding, diluted 45,718,513 46,541,257 45,609,560 46,329,880

Common stock
Net income available to common stockholders $ 9,278 $ 7,418 $ 7,342 $ 13,539

Weighted average shares outstanding
Basic 44,457,656 45,776,443 44,528,878 45,639,608
Diluted 45,329,487 46,541,257 45,369,017 46,329,880

Earnings per share attributable to Lindblad
Basic $ 0.21 $ 0.16 $ 0.16 $ 0.30
Diluted $ 0.20 $ 0.16 $ 0.16 $ 0.29
~~For~~an entity’s obligation to transfer goods or services to a customer for which the ~~three and nine months ended September 30, 2017,~~entity has received consideration from the Company determined, using the treasury stock method, there were 1,260,857 and 1,080,682 dilutive common shares, respectively, related to stock options. For the three and nine months ended September 30, 2016 the Company determined, using the treasury stock method, there were 764,814 and 690,272 dilutive common shares, respectively, related to stock options.
~~As of September 30, 2017 and 2016 there were 10,673,015 and 12,040,937, respectively, warrants outstanding to purchase common stock at a price of $11.50 per share.~~customer. The Company ~~determined these warrants were anti-dilutive and were~~ does not ~~considered in the calculation of diluted weighted average shares outstanding.~~
~~Cash and Cash Equivalents~~
~~The Company considers all highly liquid instruments with an original maturity of three months or less, as well as~~ consider guest deposits ~~in financial institutions,~~ to be ~~cash~~a contract liability until the guest no longer has the right, resulting from the passage of time, to cancel their reservation and ~~cash equivalents.~~
~~Concentration of Credit Risk~~
receive a full refund. The ~~Company maintains cash~~change in ~~several financial institutions~~contract liabilities within unearned passenger revenues presented in the U.S. and other countries which, at times, may exceed the federally insured limits. Accounts held in the U.S. are guaranteed by the Federal Deposit Insurance Corporation up to certain limits. The Company has not experienced any losses in such accounts. As of September 30, 2017 and December 31, 2016, the Company’s cash held in financial institutions outside of the U.S. amounted $4.5 million and $2.7 million, respectively.
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~~Restricted Cash and Marketable Securities~~
~~“Restricted cash and marketable securities” on the accompanying~~our condensed consolidated balance sheets ~~consists of:~~are as follows:

As of
(In thousands) September 30, 2017 December 31, 2016
(Unaudited)
Credit negotiation and credit card processor reserves $ 1,530 $ 5,030
Federal Maritime Commission escrow 5,823 2,571
Certificates of deposit and other restricted securities 1,351 1,414
Total restricted cash and marketable securities $ 8,704 $ 9,015
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Contract Liabilities

(In thousands)

(unaudited)

Balance as of January 1, 2020
$ 72,051
Recognized in tour revenues during the period
(68,182 )
Additional contract liabilities in period
66,706
Balance as of June 30, 2020
$ 70,575

The amounts held in restricted cash and marketable securities represent principally funds required to be held in certificates of deposit by certain vendors and regulatory agencies and are classified as restricted assets since such amounts cannot be usedfollowing table disaggregates our tour revenues by the ~~Company until the restrictions are removed by those vendors and regulatory agencies. Interest income is recognized when earned.~~sales channel it was derived from:

For the three months ended June 30,

For the six months ended June 30,

2020

2019

2020

2019

Guest ticket revenue: (unaudited) (unaudited) (unaudited) (unaudited)
Direct
0 % 43 % 42 % 42 %
National Geographic
0 % 17 % 18 % 19 %
Agencies
0 % 24 % 24 % 24 %
Affinity
0 % 7 % 5 % 6 %
Guest ticket revenue
0 % 91 % 89 % 91 %
Other tour revenue
0 % 9 % 11 % 9 %
Tour revenues
0 % 100 % 100 % 100 %
NOTE 4 – FINANCIAL STATEMENT DETAILS

The ~~Company has classified marketable securities, principally money market funds, as trading securities which are recorded at market value. Unrealized gains~~following is a reconciliation of cash, cash equivalents and ~~losses are included in current operations. Gains and losses on~~restricted cash to the ~~disposition~~statement of ~~securities are recognized by the specific identification method in the period in which they occur.~~cash flows:

For the six months ended June 30,

2020

2019

(In thousands)

(unaudited)

(unaudited)

Cash and cash equivalents
$ 80,897 $ 78,746
Restricted cash
21,333 33,305
Total cash, cash equivalents and restricted cash as presented in the statement of cash flows
$ 102,230 $ 112,051
~~During~~
Restricted cash consist of the ~~first quarter of 2017, our required credit card reserves were permanently decreased by $3.5 million to $1.5 million for credit card deposits for our third-party credit card processors.~~following:

As of June 30, 2020

As of December 31, 2019

(In thousands)

(unaudited)

Federal Maritime Commission escrow
$ 19,692 $ 6,104
Certificates of deposit and other restricted securities
1,321 1,575
Credit card processor reserves 320 -
Total restricted cash
$ 21,333 $ 7,679
In order to operate guest tour expedition vessels from U.S. ports, the Company is required to post a performance bond with the Federal Maritime Commission or escrow all unearned guest deposits plus an additional 10% in restricted accounts. To satisfy this requirement, the Company entered into an agreement with a financial institution to escrow all unearned guest revenues collected for sailings from U.S. ports. Amounts in the escrow accounts include cash, certificates
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Table of ~~deposit and marketable securities. Cost of these short-term investments approximates fair value.~~
Contents
~~Inventories and Marine Operating Supplies~~
~~Inventories consist primarily of gift shop merchandise and other items for resale and are stated at the lower of cost or net realizable value. Cost is determined using the first-in, first-out method.~~
Marine operating supplies consist primarily of fuel, provisions, spare parts, items required for maintenance, and supplies used in the operation of marine expeditions. Marine operating supplies are stated at the lower of cost or net realizable value. Cost is determined using the first-in first-out method.
~~Prepaid Expenses and Other Current Assets~~
~~The Company records prepaid expenses and other current assets at cost and expenses them in the period the services are provided or the goods are delivered.~~ The Company’s prepaid expenses and other current assets consist of the following:

As of
September 30, As of
December 31,
As of June 30, 2020

As of December 31, 2019

(In thousands) 2017 2016
(unaudited)

(Unaudited)
Prepaid tour expenses $ 10,334 $ 11,593 $ 14,973 $ 15,630
Prepaid client insurance 2,167 2,141 2,396 3,064
Prepaid air expense 3,074 2,432 3,069 4,415
Prepaid marketing, commissions and other expenses
2,175 4,026
Prepaid corporate insurance
712 1,376
Prepaid port agent fees 1,457 1,038 288 491
Prepaid income taxes 929 824 140 53
Prepaid corporate insurance 1,748 931
Prepaid marketing, commissions and other expenses 3,178 1,823
Total prepaid expenses $ 22,887 $ 20,782 $ 23,753 $ 29,055

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~~Property and Equipment, Net~~
Property and equipment are stated at cost less accumulated depreciation and amortization. Depreciation and amortization were computed using the straight line method over the estimated useful lives of the assets, as follows:
~~Years~~
~~Vessels and vessel improvements~~ ~~15-25~~
~~Furniture, vehicles and equipment~~ 5
~~Computer hardware and software~~ 5
~~Leasehold improvements, including port facilities~~ ~~Shorter of lease term or related asset life~~
~~As of September 30, 2017, the Company owned and operated seven vessels. A new coastal vessel, the~~~~National Geographic Quest,~~ ~~joined the fleet in the third quarter of 2017. The Company has contracted for two additional vessels, the~~~~National Geographic Venture,~~a coastal vessel, is expected to be completed in the fourth quarter of 2018, and a polar ice class vessel, which is targeted to be completed in January 2020, with potential accelerated delivery to November 2019. The polar ice class contract includes options to build two additional ice class vessels, the first for delivery twelve months after the initial vessel and the second for delivery twelve months thereafter. The Company has a capital program for the improvement of its vessels and for asset replacements in order to enhance the effectiveness and efficiency of its operations; comply with, or exceed all relevant legal and statutory requirements related to health, environment, safety, security and sustainability; and gain strategic benefits or provide newer improved product innovations to its guests.
Vessel improvement costs that add value to the Company’s vessels, such as those discussed above, are capitalized to the vessels and depreciated over the shorter of the improvements or the vessel’s estimated remaining useful life, while costs of repairs and maintenance, including minor improvement costs and drydock expenses, are charged to expense as incurred and included in cost of tours. Drydock costs primarily represent planned maintenance activities that are incurred when a vessel is taken out of service. For U.S. flagged ships, the statutory requirement is an annual docking and U.S. Coast Guard inspections, normally conducted in drydock. Internationally flagged ships have scheduled dockings approximately every 12 months, for a period of up to three to six weeks.
The Company began to capitalize interest in January 2016 for its two new build coastal vessels under accounting guidance in ASC 835-20, which requires companies to capitalize interest cost incurred during the construction of assets. The capitalized interest has been and will continue to be added to the historical cost of the asset, and depreciate over its useful life. For the nine months ended September 30, 2017, and the year ended December 31, 2016, the Company recognized $2.0 million and $1.5 million, respectively, in capitalized interest in property and equipment on the condensed consolidated balance sheet.
~~Goodwill~~
Goodwill includes the cost of the acquired business in excess of the fair value of the tangible net assets recorded in connection with the acquisition of Natural Habitat (see Note 1 – Business). Accounting Standards Codification 350, “~~Intangibles – Goodwill and Other~~” (“ASC 350”), requires the Company to assess goodwill for impairment annually or more frequently if a triggering event occurs. Due to the acquisition of Natural Habitat on May 4, 2016, the Company recorded goodwill in the amount of $22.1 million, in Natural Habitat’s reporting unit. The Company’s policy is to first perform a qualitative assessment to determine if that it was more likely or not if Natural Habitat’s reporting unit’s carrying value is less than the fair value of the reporting unit, indicating the potential for goodwill impairment. If the reporting unit fails the qualitative test then the Company proceeds with the quantitative two step goodwill impairment calculation. During the third quarter of 2017, the Company performed a qualitative assessment of Natural Habitat’s fair value which included assessing the impact of certain factors such as general economic conditions, limitations on accessing capital, changes in forecasted operating results, and fluctuations in foreign exchange rates. Based on our qualitative assessment, we concluded that it was more-likely-than-not that the estimated fair value of Natural Habitat’s reporting unit exceeded its carrying value and thus, we did not proceed to the two-step goodwill impairment test.
~~Intangibles, net~~
Intangibles, net include tradenames, customer lists and operating rights. Tradenames are words, symbols, or other devices used in trade or business to indicate the source of products and to distinguish it from other products and are registered with government agencies and are protected legally by continuous use in commerce. Customer lists are established relationships with existing customers that resulted in repeat purchases and customer loyalty. Based on the Company’s analysis, amortization of the tradenames and customer lists was computed using the estimated useful lives of 15 and 5 years, respectively.
~~The Company operates two vessels year-round in the Galápagos National Park in Ecuador: the~~~~National Geographic Endeavour II~~~~with 95 berths and the~~~~National Geographic Islander~~~~with 47 berths. In order to operate these vessels within the park, the Company is required to have in its possession cupos (licenses) sufficient to cover the total available berths on each vessel.~~
9
In June 2015, a new Ecuadorian Special Law for Protected Areas was approved, and was updated in November 2015. A Presidential Decree issued by President Correa of Ecuador in November 2015 established that cupos, which were in effect as of July 2015, will have a validity of nine years so the Company’s operating rights are up for renewal in July 2024. The current “owners” of the cupos will have the opportunity to re-apply for them, but any other enterprise or individual will have the opportunity to bid for the cupos. All bidders must present proof that they fulfill the conditions to properly utilize the license (access to a vessel, experience in tourism, proven environmental behavior, marketing, etc.). While the Company believes that, based on the expected criteria to retain cupos and its past operating history in the Galápagos, there is a strong possibility that the Company will retain its cupos, from an accounting perspective, it will assume they retain no value after July 2024. Once the renewal process has begun and if it can be determined that the Company will be successful in its bid, then the Company will adjust its amortization prospectively.
Upon the occurrence of a triggering event, the assessment of possible impairment of the Company’s intangibles, net will be based on the Company’s ability to recover the carrying value of its asset, which is determined by using the asset’s estimated undiscounted future cash flows. If these estimated undiscounted future cash flows are less than the carrying value of the asset, an impairment charge is recognized for the excess, if any, of the asset’s carrying value over its estimated fair value. A significant amount of judgment is required in estimating the future cash flows and fair values of its tradenames, customer lists and operating rights. As of September 30, 2017 and December 31, 2016, there was no triggering event and the Company did not record an impairment for intangible assets.
~~Long-Lived Assets~~
The Company reviews its long-lived assets, principally its vessels, for impairment whenever events or changes in circumstances indicate that the carrying amounts of these assets may not be fully recoverable. Upon the occurrence of a triggering event, the assessment of possible impairment is based on the Company’s ability to recover the carrying value of its asset, which is determined by using the asset’s estimated undiscounted future cash flows. If these estimated undiscounted future cash flows are less than the carrying value of the asset, an impairment charge is recognized for the excess, if any, of the asset’s carrying value over its estimated fair value. A significant amount of judgment is required in estimating the future cash flows and fair values of its vessels. As of September 30, 2017 and December 31, 2016, there was no triggering event that caused, nor did the Company record, an impairment of its long-lived assets.
~~Accounts Payable and Accrued Expenses~~
~~The Company records accounts payable and accrued expenses for the cost of such items when the service is provided or when the related product is delivered.~~ The Company’s accounts payable and accrued expenses consist of the following:

As of
September 30, As of
December 31,
As of June 30, 2020

As of December 31, 2019

(In thousands) 2017 2016
(unaudited)

(Unaudited)
Refunds and commissions payable
$ 13,876 $ 1,873
Accounts payable $ 5,341 $ 7,573 9,869 14,633
Accrued other expense 6,152 5,999 7,841 8,348
Bonus compensation liability 3,451 4,186 4,724 5,322
Employee liability 3,089 3,494 3,856 3,712
Foreign currency forward contract liability
2,083 1,300
Travel certificate liability
870 888
Accrued travel insurance expense
322 477
Income tax liabilities 1,554 884 2 603
New build liability - 4,011
Travel certificate liability 1,147 1,218
Refunds and commissions payable 841 1,454
Royalty payable 1,881 1,468 - 1,075
Accrued travel insurance expense 354 375
Total accounts payable and accrued expenses $ 23,810 $ 30,662 $ 43,443 $ 38,231
~~Fair Value Measurements and Disclosure~~Loan Receivable
The Company’s loan receivable is recorded at amortized cost within other long-term assets. The Company ~~applies ASC 820, “Fair Value Measurements~~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 ~~Disclosures,” which expands disclosures~~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 ~~assets and liabilities that are measured and reported at fair value on a recurring basis. Fair value~~loan loss for the three or six months ended June 30, 2020. The roll-forward of the loan receivable balance is defined as an exit price, representing the amount that would be received upon the sale of an asset or payment to transfer a liability in an orderly transaction between market participants. Fair value is a market-based measurement that is determined based on assumptions that market participants would use in pricing an asset or liability. A three-tier fair value hierarchy is used to prioritize the inputs in measuring fair value as follows:

Loan Receivable

(In thousands)

(unaudited)

Balance as of January 1, 2020

$
4,084

Accrued interest

79

Amortization of deferred costs

(12
)
Balance as of June 30, 2020

$
4,151

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NOTE 5 – LONG-TERM DEBT

As of June 30, 2020

As of December 31, 2019

(unaudited)

(In thousands)

Principal

Deferred Financing Costs, net

Balance

Principal

Deferred Financing Costs, net

Balance

Note payable
$ 2,525 $ - $ 2,525 $ 2,525 $ - $ 2,525
Revolving Facility
45,000 (417 ) 44,583 - - -
Credit Facility
196,000 (6,558 ) 189,442 197,000 (9,704 ) 187,296
1st Senior Secured Credit Agreement
107,695 (1,883 ) 105,812 - - -
2nd Senior Secured Credit Agreement
61,120 (2,199 ) 58,921 30,476 (2,229 ) 28,247
Total long-term debt
412,340 (11,057 ) 401,283 230,001 (11,933 ) 218,068
Less current portion
(5,646 ) - (5,646 ) (4,525 ) - (4,525 )
Total long-term debt, non-current
$ 406,694 $ (11,057 ) $ 395,637 $ 225,476 $ (11,933 ) $ 213,543
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.
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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.
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The Company held the following derivative instruments with absolute notional values as of June 30, 2020:
(in thousands)

Absolute Notional Value

Interest rate caps
$ 100,000
Foreign exchange contracts
96,097
Estimated fair values (Level 2) of derivative instruments were as follows:

As of June 30, 2020

As of December 31, 2019

(unaudited)

(In thousands)

Fair Value, Asset Derivatives

Fair Value, Liability Derivatives

Fair Value, Asset Derivatives

Fair Value, Liability Derivatives

Derivative instruments designated as cash flow hedging instruments:

Foreign exchange forward ^(a)
$ - $ 8,464 $ - $ 4,459
Interest rate cap ^(b)
- - 138 -
Total
$ - $ 8,464 $ 138 $ 4,459
Derivative instruments not designated as cash flow hedging instruments:

Foreign exchange forward ^(c)
$ - $ 1,607 $ 459 $ 70
Total
$ - $ 1,607 $ 459 $ 70
__________
~~Level 1~~
(a)
~~Quoted market prices (unadjusted)~~
Recorded in ~~active markets for identical~~accounts payable and accrued expenses, and other long-term liabilities.
(b)
Recorded in prepaid expenses and other current assets, ~~or liabilities that the reporting entity has the ability to access at measurement date.~~and other long-term assets.
(c)
Recorded in prepaid expenses and other current assets, and accounts payable and accrued expenses.

~~Level 2~~ Quoted market prices for similar assets or liabilities in active markets, quoted prices for identical or similar assets or liabilities in markets that are not active, or other inputs that are observable, either directly or indirectly. Fair value is determined through the use of models or other valuation methodologies.
~~Level 3~~ Significant unobservable inputs for assets or liabilities that cannot be corroborated by market data. Fair value is determined by the reporting entity’s own assumptions utilizing the best information available, and includes situations where there is little market activity for the investment.
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:
10

For the three months ended June 30,

For the six months ended June 30,

(In thousands)

2020

2019

2020

2019

Derivative instruments designated as cash flow hedging instruments:

(unaudited)

(unaudited)

(unaudited)

(unaudited)

Foreign exchange forward ^(a)
$ (9,272 ) $ (516 ) $ 4,005 $ 972
Interest rate cap ^(b)
16 140 138 289

Derivative instruments not designated as cash flow hedging instruments:

Foreign exchange forward ^(c)
1,447 501 (1,996 ) 1,157
Total
$ (7,809 ) $ 125 $ 2,147 $ 2,418
(a)
For the three and six months ended June 30, 2020, $5.3 million was recognized as a loss on foreign currency in the condensed consolidated statements of income, and a $3.9 million gain and a $9.3 million loss, respectively, was recognized, net of tax, as a component of other comprehensive income (loss) within stockholders’ equity.
(b)
Recognized, net of tax, as a component of other comprehensive income (loss) within stockholders’ equity
(c)
Gains (losses) related to derivative instruments are expected to be largely offset by (losses) gains on the underlying exposures being hedged. During the three and six months ended June 30, 2020, a gain of $1.4 million and a loss of $2.0 million was recognized in gain (loss) on foreign currency. During the three and six months ended June 30, 2019, a gain of $0.5 million and $1.2 million, respectively, was recognized in gain (loss) on foreign currency.
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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 ~~September~~June 30, ~~2017~~ 2020. As of June 30, 2020 and December 31, ~~2016. As of September 30, 2017 and December 31, 2016,~~ 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 ~~asset’s~~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 ~~liability’s fair value measurement within~~terminated at the ~~fair value hierarchy~~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 ~~lowest level~~closing price of ~~any input that is significant~~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 ~~fair value measurement.~~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.
~~Income Taxes~~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.
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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”~~“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”~~“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~~more-likely-than-not criteria, it is possible that the ultimate outcome of current or future examinations may result in a reduction to the tax benefits previously recorded on its condensed consolidated financial statements or may exceed the current income tax reserves in amounts that could be material. As of ~~September~~June 30, ~~2017,~~ 2020, and December 31, ~~2016,~~ 2019, the Company had a liability for unrecognized tax benefits of $0.4 million, included in other long-term liabilities on the Company’s condensed consolidated balance sheets. The guidance also discusses the classification of related interest and penalties on income taxes.$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 ~~nine~~three and six months ended ~~September~~June 30, ~~2017~~ 2020 and ~~2016,~~2019, interest and penalties related to uncertain tax positions included in income tax expense are ~~immaterial.~~ 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 ~~the~~ three prior years remain subject to examination by tax authorities and the Company’s foreign tax returns for the current year and ~~the~~ four prior years remain subject to examination by tax authorities.
11

NOTE 11 – COMMITMENTS AND CONTINGENCIES
~~Stock-Based Compensation~~

The Company accounts for equity instruments issued to employees, non-employee Directors or other service providers in accordance with accounting guidance that requires that awards are recorded at their fair value on the date of grant and are amortized over the service period of the award. The Company recognizes compensation costs on a straight-line basis over the requisite service period of the award, which is generally the vesting term of the equity instrument issued. To the extent that an equity award later becomes eligible to be put back to the Company, then the fair value of that award or those exercised shares are transferred out of additional paid-in-capital to a liability account and is thereafter marked-to-market annually to fair value.
Fleet Expansion
~~Segment Reporting~~
We are an expedition and adventure travel operator with operations in two segments, Lindblad and Natural Habitat. We evaluate the performance of our business based largely on the results of our operating segments. We provide discrete financial information in total, by ship and type of ship. The chief operating decision maker, or CODM, and management review operating results monthly, and base operating decisions on the total results at a consolidated level, as well as at a segment level. Our reports provided to the Board of Directors are at a consolidated level and also contain information regarding the separate results of both segments. Management performance and related compensation is primarily based on total results. While both segments have similar characteristics, the two operating and reporting segments cannot be aggregated because they fail to meet the ASC 280 requirements for aggregation.
~~Recent Accounting Pronouncements~~

In August 2017, FASB issued accounting Standards Update ASU No. 2017-12, Derivatives and Hedging (Topic 815) Targeted Improvements to Accounting for Hedging Activities. The FASB’s new guidance will make more financial and nonfinancial hedging strategies eligible for hedge accounting. It also amends the presentation and disclosure requirements and changes how companies assess effectiveness. It is intended to more closely align hedge accounting with companies’ risk management strategies, simplify the application of hedge accounting, and increase transparency as to the scope and results of hedging programs. The requirement is for public business entities to apply this update prospectively for all new awards after annual reporting periods beginning December 15, 2018 with early adoption permitted, including in current period. Management is currently assessing the impact this guidance will have on the condensed consolidated financial statements of the Company.
In May 2017, FASB, issued Accounting Standards Update ASU No. 2017-09, Compensation-Stock Compensation (Topic 718) Scope of Modification Accounting. An entity may change the terms or conditions of a share-based payment award for many different reasons, and the nature and effect of the change can vary significantly. The FASB Accounting Standards Codification currently defines the term modification as “a change in any of the terms or conditions of a share-based payment award”. Under the new guidance, modification accounting treatment will be utilized unless all three of the following criteria have been met; the fair value of the original award is the same as the fair value of the modified award; vesting period did not change; and the classification of the award has not changed. The requirement is for public business entities to apply this update prospectively for all new awards after annual reporting periods beginning December 15, 2017. The Company plans to adopt this ASU in the first quarter of 2018 as per guidance and does not expect the prospective application to have a material impact to the Company’s condensed consolidated financial statements.
In January 2017, FASB issued Accounting Standards Update ASU No. 2017-04, Intangibles and Other (Topic 350): Simplifying the Test for Goodwill Impairment. The pronouncement eliminates Step 2 from the goodwill impairment test. In computing the implied fair value of goodwill under Step 2, an entity had to perform procedures to determine the fair value at the impairment testing date of its assets and liabilities (including unrecognized assets and liabilities). Now the entity compares the fair value of the reporting unit with its carrying amount. The requirement is for public business entities to apply the guidance to annual reporting periods beginning after December 15, 2019. Early adoption is permitted for interim or annual impairment tests after January 1, 2017. The Company does not believe the adoption of this ASU will have a material impact prospectively, to the Company’s condensed consolidated financial statements.
In January 2017, FASB issued Accounting Standards Update ASU No. 2017-01, “Business Combinations (Topic 805): Clarifying the Definition of a Business”. The amendment was issued to clarify the definition of a business with the objective of adding guidance to assist entities with evaluating whether transactions should be accounted for as acquisitions (or disposals) of assets or businesses. The amendments in this ASU provide a screen to determine when a set (inputs and processes that produce an output) is not a business. The screen requires that when substantially all of the fair value of the gross assets acquired (or disposed of) is concentrated in a single identifiable asset or a group of similar identifiable assets, the set is not a business. This screen reduces the number of transactions that need to be further evaluated. The requirement is for public business entities to apply the guidance to annual reporting periods beginning after December 15, 2017. The Company does not believe the adoption of this ASU will have a material impact prospectively, to the Company’s condensed consolidated financial statements.
12
~~NOTE 3 – LONG-TERM DEBT~~
As of September 30, 2017 As of December 31, 2016
(Unaudited)
(In thousands) Principal Discount and Deferred Financing Costs, net Balance, net of discount Principal Discount and Deferred Financing Costs, net Balance, net of discount
Note payable $ 2,525 $ - $ 2,525 $ 2,525 $ - $ 2,525
Credit Facility 171,063 (7,673 ) 163,390 172,375 (9,022 ) 163,353
Total long-term debt 173,588 (7,673 ) 165,915 174,900 (9,022 ) 165,878
Less current portion (1,750 ) - (1,750 ) (1,750 ) - (1,750 )
Total long-term debt, non-current $ 171,838 $ (7,673 ) $ 164,165 $ 173,150 $ (9,022 ) $ 164,128
~~Note Payable~~
On May 4, 2016, in connection with the Natural Habitat acquisition, Natural Habitat issued an unsecured promissory note to Mr. Bressler with an outstanding principal amount of $2.5 million due at maturity on December 31, 2020. The promissory note accrues interest at a rate of 1.44% annually, with interest payable every six months.
~~Credit Facility~~
On March 7, 2016, the Company entered into a second amended and restated credit agreement with Credit Suisse (“Restated Credit Agreement”), amending its senior secured credit facility with Credit Suisse (“Restated Credit Facility”). The Restated Credit Facility provides for $175.0 million senior secured first lien term loan facility (consisting of a $155.0 million U.S. term loan (the “U.S. Term Loan”) and a $20.0 million Cayman term loan for the benefit of the Company’s foreign subsidiaries (the “Cayman Loan”, and together with the U.S. Term Loan, (the “Loans”)) and a $45.0 million senior secured incremental revolving credit facility (“Revolving Credit Facility”), which includes a $5.0 million letter of credit subfacility. The Company’s obligations under the Restated Credit Facility are secured by substantially all the assets of the Company.
Borrowings under the Loans bear interest at an adjusted ICE Benchmark Administration LIBO Rate (subject to a floor of 1.00%) plus a spread of 4.50%. As of September 30, 2017, the interest rate was 5.95%. The U.S. Term Loan and the Cayman Loan both mature on May 8, 2021. Borrowings under the Revolving Credit Facility bear interest at an adjusted ICE Benchmark Administration LIBO Rate plus a spread of 4.00%, or, at the option of the Company, an alternative base rate plus a spread of 3.00%. The Company is also required to pay a 0.50% annual commitment fee on undrawn amounts under the Revolving Credit Facility, which matures on May 8, 2020. As of September 30, 2017, the Company had no borrowings under the Revolving Credit Facility.
The Restated Credit Agreement (i) requires the Company to satisfy certain financial covenants; (ii) limits the amount of indebtedness the Company may incur; (iii) limits the amount the Company may spend in connection with certain types of investments; (iv) requires the delivery of certain periodic financial statements and an operating budget and (v) requires the mortgaged vessels and related inventory to be maintained in good working condition. As of September 30, 2017, the Company was in compliance with the financial covenants.
For the three months ended September 30, 2017 and 2016, total debt discount and deferred financing costs charged to interest expense was $0.6 million and $0.5 million, respectively. For the nine months ended September 30, 2017 and 2016, total debt discount and deferred financing costs charged to amortization and interest expense was $1.7 million and $1.7 million.
13
~~NOTE 4 – ACQUISTION~~
On May 4, 2016, the Company acquired an 80.1% ownership interest in Natural Habitat, an adventure travel and ecotourism company based in Colorado. The acquisition provided the Company with a platform to expand our land-based expeditions with a strong, trusted brand complementary to Lindblad. In 2016, the Company incurred $1.0 million of acquisition costs related to the acquisition of Natural Habitat, which is included in general and administrative expenses in the Company’s condensed consolidated statements of income for the nine months ended September 30, 2016.
The Company recorded this transaction using the acquisition method for business combinations. The Company measured the identifiable assets, liabilities and non-controlling interest of Natural Habitat at their fair market value as of the acquisition date and separately measured goodwill at its fair market value as of the acquisition date. Goodwill is an intangible asset arising as a result of name, reputation, customer loyalty, location, products, and similar factors not separately identified. The recorded goodwill has no tax basis and is therefore not tax deductible.
Mr. Bressler’s noncontrolling interest in the remaining 19.9% interest in Natural Habitat is subject to a put/call arrangement. Mr. Bressler has a put option under certain conditions and subject to providing notice by October 31, 2020, that enables him, but does not obligate him, to sell his remaining interest in Natural Habitat to the Company on December 31, 2020. The Company has a call option, but not an obligation, with an expiration of December 31, 2025, for which it can buy Mr. Bressler’s remaining interest at a similar fair value measure as Mr. Bressler’s put option.
~~Acquisition of Natural Habitat, Inc.:~~
~~(In thousands)~~
As of Acquisition
Date
Cash consideration $ 14,850
Long-term debt - non-cash 2,525
Lindblad restricted shares (264,208 shares) - non-cash 2,650
Total purchase price $ 20,025

Assets acquired:
Cash and cash equivalents $ 4,904
Prepaid expenses and other current assets 9,623
Property and equipment 2,068
Goodwill and other intangibles 28,305
Total assets $ 44,900

Liabilities assumed:
Accounts payable and accrued expenses $ 2,472
Unearned passenger revenues 15,000
Deferred tax liability 2,428
Noncontrolling interest in consolidated subsidiaries 4,975
Total liabilities $ 24,875

Total cash price paid upon acquisition and fair value of existing equity interest $ 20,025
Natural Habitat contributed revenues of $17.1 million and operating income of $1.5 million to Lindblad Expeditions for the three months ended September 30, 2017, and revenues of $35.4 million and operating income of $0.8 million for the nine months ended September 30, 2017. For the three months ended September 30, 2016, Natural Habitat contributed revenues of $14.6 million and operating income of $0.3 million and revenues of $20.3 million and operating loss of $0.5 million for the acquisition period beginning May 5, 2016 to September 30, 2016.
14
The following unaudited pro forma summary presents consolidated information of Lindblad Expeditions for the nine period ended September 30, 2016 as if the business combination with Natural Habitat had occurred on January 1, 2016:
Pro Forma for Nine Month Period Ended

September 30,
2016

(In thousands) Unaudited

Revenues $ 197,845
Operating income $ 19,915
These pro forma amounts have been calculated after applying the Company’s accounting policies and adjusting the results of Natural Habitat to reflect the additional depreciation and amortization that would have been charged assuming the fair value adjustments to property, plant and equipment and intangible assets had been applied from January 1, 2016, with tax effects.
~~NOTE 5 – EMPLOYEE BENEFIT PLAN~~
The Company has a 401(k) profit sharing plan and trust for its employees. The Company matches 30% of employee contributions up to the annual maximum of $2,100 and $1,800 as of September 30, 2017 and 2016, respectively. For the three months ended September 30, 2017 and 2016, the Company’s benefit plan contribution amounted to $0.1 million. For the nine months ended September 30, 2017 and 2016, the Company’s benefit plan contribution amounted to $0.3 million and $0.2 million, respectively. The benefit plan contribution is recorded within general and administrative expenses on the accompanying condensed consolidated statements of income.
~~NOTE 6 – STOCKHOLDERS’ EQUITY~~
The Company’s common stock and warrants are listed on the NASDAQ Capital Market under the symbols “LIND” and “LINDW,” respectively. As of September 30, 2017 and December 31, 2016, there were 45,155,621 and 45,659,762 shares of common stock outstanding, respectively, and 10,673,015 and 11,186,387 warrants outstanding (inclusive of certain warrants issued to the Company’s founders on substantially the same terms as all other warrants), respectively.
~~Capital Stock~~
The Company has a total of 201,000,000 authorized shares of capital stock, consisting of 1,000,000 shares of preferred stock, $0.0001 par value and 200,000,000 shares of common stock, $0.0001 par value.
~~Stock and Warrant Repurchase Plan~~
In November 2015, the Company’s Board of Directors approved a $20.0 million stock and warrant repurchase plan and in November 2016, increased the authorization by $15.0 million to a total of $35.0 million. This Repurchase Plan authorizes the Company to purchase from time to time the Company’s outstanding common stock and warrants through open market repurchases in compliance with Rule 10b-18 of the Securities Exchange Act of 1934, as amended, and/or in privately negotiated transactions based on market and business conditions, applicable legal requirements and other factors. Any shares and warrants repurchased will be retired. The Repurchase Plan has no time deadline and will continue until otherwise modified or terminated at the sole discretion of the Company’s Board of Directors at any time. During the three months ended September 30, 2017, the Company did not repurchase shares of common stock or warrants. During the nine months ended September 30, 2017 the Company repurchased 547,058 shares of common stock for $5.1 million and 513,372 warrants for $1.1 million. The Company has cumulatively repurchased 855,776 shares of common stock for $8.1 million and 5,426,985 warrants for $13.9 million, since plan inception.
~~2017 Long-Term Incentive Compensation~~
In March 2017, the Company’s compensation committee (or a subcommittee thereof) approved awards of restricted stock units (“RSUs”) and performance share units (“PSUs”) to key employees under the Company’s 2015 Long-Term Incentive Plan.
The Company granted 171,393 RSUs on April 3, 2017 at a grant price of $8.98. The RSU’s will vest in three equal annual installments following the April 2017 grant date, subject to the recipient’s continued employment or service with us or our subsidiaries on the applicable vesting date.
The PSUs are performance-vesting equity incentive awards that will be earned based on our performance against metrics relating to annual Adjusted EBITDA, annual revenue, and guest satisfaction. Awards will vest after a three-year performance period and may be earned at a level ranging from 0%-200% of the number of PSUs granted, depending on performance. On April 3, 2017, the Company awarded 126,953 of targeted PSUs with the number of shares determined based upon the closing price of our common stock on March 31, 2017 of $8.96. Based on the financial statements as of September 30, 2017, the Company assessed the applicable metrics related to the PSU grants, determined the blended probability of achieving the performance metrics and valued the awards based on the fair value at the date of grant with the amount of stock compensation expense determined based on the number PSU’s expected to vest.
15
~~2016 CEO Share Allocation Plan~~
In April 2016, the Company’s Board of Directors adopted the 2016 CEO Share Allocation Plan and in June 2016, the Company’s stockholders approved the 2016 CEO Share Allocation Plan, pursuant to which the Company may grant awards covering up to 1,000,000 shares of the Company’s common stock in the form of restricted stock, restricted stock units, and/or other stock- or cash- based awards to eligible employees and other service providers of the Company. The 2016 CEO Share Allocation Plan was adopted in connection with a contribution agreement that the Company entered into with Sven-Olof Lindblad, Chief Executive Officer and President of the Company, pursuant to which Mr. Lindblad is authorized to transfer up to 1,000,000 shares from his holdings of the Company’s common stock (i.e., an equivalent number of shares as is reserved for issuance under the 2016 CEO Share Allocation Plan) (the “Contribution Shares”) to the Company as a contribution to the capital of the Company. Mr. Lindblad will not receive any consideration in exchange for the Contribution Shares. However, as a condition to the contribution of any Contribution Shares, the Company must grant awards under the 2016 CEO Share Allocation Plan, such that the number of Contribution Shares that Mr. Lindblad actually contributes to the Company will equal the number of shares corresponding to awards granted under the plan. The contribution of the Contribution Shares by Mr. Lindblad to the Company will effectively reduce the number of shares of the Company’s common stock that are outstanding by the same number of shares that are issued under the 2016 CEO Share Allocation Plan (or a lesser number in the event awards are settled in cash). Such contributions will be effective as of the date the Company grants corresponding awards under the 2016 CEO Share Allocation Plan. The administrator may amend, suspend or terminate the 2016 CEO Share Allocation Plan at any time.
On January 10, 2017, Mr. Lindblad contributed to the Company and the Company thereafter granted, 716,550 restricted shares at a grant price of $9.65. The grants vest in three equal installments with the first vesting date of January 10, 2017 and the remaining two vesting dates of January 10, 2018 andFebruary 2019, ~~respectively. On January 10, 2017, 238,850 restricted shares vested, with 93,320 of such shares withheld and retired by the Company in order to pay the payroll withholdings to cover the transactions.~~
~~Stock Options~~
On August 2, 2017, 95,542 options were exercised at a market price on the date of exercise of $9.76 per share and a grant price of $1.76 per share, 17,229 shares were withheld by the Company to provide the $0.2 million required to exercise the options. In addition, 28,192 shares were withheld by the Company in order to pay the payroll withholding taxes for the transactions. The balance of 50,121 option shares were issued as a result of the transaction.
During March 2017, an additional 95,542 options were exercised. Using the market price at the date of exercise of $8.72 per share and the grant price of $1.76 per share, 19,284 shares were withheld by the Company to provide the $0.2 million required to exercise the options. In addition, 23,145 of such shares were withheld by the Company in order to pay the payroll withholding taxes for the transactions. The balance of 53,113 option shares were issued as a result of the transaction.
~~NOTE 7 – COMMITMENTS AND CONTINGENCIES~~
~~Fleet Expansion~~
On December 2, 2015, the Company entered into two separate Vessel Construction Agreements, (collectively, the “Agreements”) with Ice Floe, LLC, a Washington limited liability company doing business as Nichols Brothers Boat Builders (the “Builder”). The Agreements provide for the Builder to construct two new 236-foot 100-passenger cruise vessels.
~~The company paid Ice Floe $53.6 million related to the~~~~National Geographic Quest~~ ~~and the vessel was delivered in July of 2017. The Company amended the agreement for the second vessel, the~~~~National Geographic Venture~~, in October 2017. The current contract price is $57.0 million and the vessel is scheduled to be completed in the fourth quarter of 2018, subject to extension for certain events, such as change orders. As of September 30, 2017, the Company has paid Ice Floe, LLC $18.1 million related to the~~National Geographic Venture.~~ The Company may terminate the applicable Agreement in the event the Builder fails to deliver the vessel within one hundred eighty days of the applicable due date or the Builder becomes insolvent or otherwise bankrupt. The Agreement also contains customary representations, warranties, covenants and indemnities.
16
~~In November 2017,~~ the Company entered into an agreement, which was amended in December 2019, with Ulstein Verft, to construct a secondpolar ice class vessel, the National Geographic Resolution, with a total purchase price of ~~1,066.0~~1,291.0 million ~~Norwegian Kroner (NOK). Subsequently, LME exercised its right to make payments in United States Dollars, which resulted in a purchase price of $134.6 million, including hedging costs.~~NOK. The purchase price is subject to potential adjustments from contract specifications for variations in speed, ~~deadweight,~~dead weight, fuel consumption and delivery ~~date, and~~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. The first twenty percent of the purchase price is to be~~installments, with 20% paid shortly after execution of the ~~Agreement with the remaining eighty percent~~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 ~~targeted~~scheduled to be delivered in ~~January 2020, with potential accelerated delivery to November 2019. The contract also includes options to build two additional ice class vessels,~~ the ~~first for delivery twelve months after the initial vessel and the second for delivery twelve months thereafter.~~
fourth quarter of 2021.

17
Table of Contents
Royalty Agreement – National Geographic

The Company is ~~engaged in~~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 ~~income.~~operations. The amount is calculated based upon a percentage of certain ticket ~~revenue~~revenues less travel agent commission, including the ~~revenue~~revenues received from cancellation fees and any ~~revenue~~revenues received from the sale of ~~voyage~~pre- and post-expedition extensions. A voyage extension occurs when a guest extends their trip with pre- or post-voyage hotel nights and is included within tour revenues on the accompanying condensed consolidated statements of income. The royalty expense is recognized at the time of revenue recognition. See Note 2 for a description of the Company’s revenue recognition policy. Royalty expense for the three and ~~nine~~six months ended ~~September~~June 30, ~~2017 totaled $1.6~~2020 was $0.1 million and ~~$3.9~~$1.3 million, respectively, and for the three and ~~nine~~six months ended ~~September~~ June 30, ~~2016 totaled $1.2~~2019, was $1.8 million and ~~$3.6~~$3.3 million, respectively.

The royalty balances outstanding to National Geographic as of ~~September~~June 30, ~~2017~~ 2020 and December 31, ~~2016 are $1.9~~2019 were $0.0 million and ~~$1.5~~$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 ~~income. For~~operations. This royalty fee expense was $0.1 million and $0.2 million for the three and ~~nine~~six months ended ~~September~~ June 30, ~~2017, these fees totaled $0.2~~2020, respectively, and $0.2 million and $0.4 million ~~respectively.For~~for the three and six months ended ~~September~~ June 30, ~~2016 and the acquisition period beginning May 5, 2016 to September 30, 2016, these fees totaled $0.2 million and $0.3 million,~~2019, respectively.
Charter Commitments

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

For the Years Ended December 31, Amount
(Unaudited) (In thousands)
2017 (Three Months) 1,946
2018 10,450
2019 6,570
2020 272
Total $ 19,238
For the years ended December 31,

Amount

(In thousands)

(unaudited)

2020
$ 3,520
2021
9,536
2022
1,850
Total
$ 14,906

~~Insurance Revenue~~Natural Habitat Redeemable Non-Controlling Interest

~~During the first quarter,~~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 ~~recorded $1.9 million~~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 ~~insurance revenue related~~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 ~~cancelled voyages on~~a call purchase price minimum.
Since the~~National Geographic Orion. During~~ redemption of the ~~three months ended September 30, 2017 an additional $0.2 million~~noncontrolling interest is not solely in the Company’s control, the Company is required to record the redeemable noncontrolling interest outside of ~~insurance claims were received~~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 ~~recorded~~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 ~~insurance revenue related~~a decrease to ~~those cancelled voyages from~~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.
18

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

Three Months Ended June 30,

Six Months Ended June 30,

(unaudited)

(unaudited)

(In thousands)

2020

2019

2020

2019

Beginning balance
$ 16,476 $ 6,908 $ 16,112 $ 6,502
Net income attributable to noncontrolling interest
(265 ) (137
)
(801
)
269
Fair value adjustment of put option
(6,241
)
- (5,341
)
-
Balance June 30,
$ 9,970 $ 6,771 $ 9,970 $ 6,771
~~National Geographic Orion~~Legal Proceedings~~. Recorded revenue does not include any contested claims,~~
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 ~~recognized is recorded in tour revenues~~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 ~~condensed consolidated statements~~operations or its financial position, liquidity or results of ~~income.~~ operations.
NOTE 12 – SEGMENT INFORMATION

17
~~NOTE 8 – SEGMENT INFORMATION~~
~~During the second quarter of 2016, the~~The Company ~~completed its acquisition of~~is primarily a specialty cruise and adventure expedition operator with operations in two segments, Lindblad and Natural Habitat. ~~As a result~~The Company evaluates the performance of the ~~acquisition,~~business based largely on the ~~Company updated its reporting information and~~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 ~~to add Natural Habitat as a separate~~have similar characteristics, the two operating and reporting ~~segment.~~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, ~~results of the segments~~ without allocating other income and expenses, net, income taxes and interest expense, net. For the three and ~~nine~~six months ended ~~September~~June 30, ~~2017~~ 2020 and ~~2016, the~~2019, operating results were as follows:

For the Three Months Ended For the Nine Months Ended
For the three months ended June 30,

For the six months ended June 30,

September 30, September 30,
2020

2019

Change
%
2020

2019

Change
%
(In thousands) 2017 2016 Change % 2017 2016* Change %
(unaudited)

(unaudited)

(unaudited)

(unaudited)

Tour revenues:
Lindblad $ 67,451 $ 56,175 $ 11,276 20 % $ 167,891 $ 165,936 $ 1,955 1 % $ (22 ) $ 64,930 $ (64,952 ) NM $ 69,517 $ 140,968 $ (71,451 ) (51 %)
Natural Habitat 17,133 14,599 2,534 17 % 35,392 20,282 15,110 74 % (246 ) 11,728 (11,974 ) NM 11,454 25,343 (13,889 ) (55 %)
Total tour revenues $ 84,584 $ 70,774 $ 13,810 20 % $ 203,283 $ 186,218 $ 17,065 9 % $ (268 ) $ 76,658 $ (76,926 ) NM $ 80,971 $ 166,311 $ (85,340 ) (51 %)
Operating (loss) income:
Lindblad $ 12,070 $ 9,863 $ 2,207 22 % $ 12,386 $ 19,038 $ (6,652 ) (35 %) $ (31,641 ) $ 5,302 $ (36,943 ) NM $ (29,452 ) $ 18,943 $ (48,395 ) NM
Natural Habitat 1,479 306 1,173 383 % 873 (488 ) 1,361 (279 %) (3,105 ) (1,181 ) (1,924 ) NM (3,043 ) (458 ) (2,585 ) NM
Total operating income 13,549 10,169 3,380 33 % 13,259 18,550 (5,291 ) (29 %)
Total operating (loss) income
$ (34,746 ) $ 4,121 $ (38,867 ) NM $ (32,495 ) $ 18,485 $ (50,980 ) NM

* 2016 results forDepreciation and amortization are included in segment operating income as shown below:

For the three months ended June 30,

For the six months ended June 30,

2020

2019

Change
%
2020

2019

Change
%
(In thousands)

(unaudited)

(unaudited)

(unaudited)

(unaudited)

Depreciation and amortization:

Lindblad
$ 7,939 $ 5,774 $ 2,165 37 % $ 14,188 $ 11,568 $ 2,620 23 %
Natural Habitat
614 408 206 50 % 1,055 802 253 32 %
Total depreciation and amortization
$ 8,553 $ 6,182 $ 2,371 38 % $ 15,243 $ 12,370 $ 2,873 23 %
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Table of Contents
The following table presents our total assets, intangibles, net and goodwill by segment:
(In thousands)

As of June 30, 2020

As of December 31, 2019

Total Assets:

(unaudited)

Lindblad
$ 600,062 $ 471,499
Natural Habitat
72,227 77,159
Total assets
$ 672,289 $ 548,658

Intangibles, net:

Lindblad
$ 2,962 $ 3,325
Natural Habitat
2,645 3,071
Total intangibles, net
$ 5,607 $ 6,396

Goodwill:

Lindblad
$ - $ -
Natural Habitat
22,105 22,105
Total goodwill
$ 22,105 $ 22,105
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 ~~represent activity from~~segments eliminated in consolidation, respectively. For the ~~acquisition date of May 2016 through September~~three and six months ended June 30, ~~2016.~~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

~~Amortization expense related~~The Company has rescheduled or rebooked all expedition voyages scheduled to ~~tradename and customer list amortization for the three months ended~~ sail through September 30, ~~2017 and 2016 is $0.2 million in~~2020 due to continued travel restrictions from the ~~Natural Habitat segment. For~~global spread of the nine months ended September 30, 2017 and the acquisition period from May 5, 2016 through September 30, 2016, amortization expense in Natural Habitat segment related to the same acquisition related intangibles is $0.6 million and $0.3 million, respectively. For more information, see Note-2 regarding the Company’s policy regarding amortization of intangible assets.COVID-19 virus.

(In millions) As of September 30, 2017 As of December 31, 2016
Total Assets
Lindblad Segment $ 372 $ 366
Natural Habitat Segment $ 49 $ 42
Total Assets $ 421 $ 408

Goodwill
Natural Habitat Segment $ 22 $ 22
Total Goodwill $ 22 $ 22

Intangibles, net
Lindblad Segment $ 5 $ 5
Natural Habitat Segment $ 5 $ 6
Total Intangibles, net $ 10 $ 11
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.

20
Table of Contents
Item 2.
18
~~Item 2:~~
MANAGEMENT’S DISCUSSION AND ANALYSIS OF ~~FINANCIAL CONDITION AND~~THE RESULTS OF OPERATIONS AND FINANCIAL CONDITION

The following discussion and analysis addresses material changes in the financial condition and results of operations of the Company for the periods presented. This discussion and analysis should be read in conjunction with ~~its~~the unaudited condensed consolidated financial statements and related notes included in this Quarterly Report on Form 10-Q (“Form 10-Q”), as well as ~~its~~the audited consolidated financial statements and related notes included in the Company’s Annual Report ~~for the year ended December 31, 2016~~ on Form 10-K filed with the Securities and Exchange Commission (“SEC”) on ~~March 7, 2017.~~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:

● ~~general economic conditions;~~

●
suspended operations and disruptions to our business and operations related to COVID-19;
●
●
the impacts of COVID-19 on our financial condition, liquidity, results of operations, cash flows, employees, plans and growth;
●
the impacts of COVID-19 on future travel and the cruise and airline industries in general;
●
unscheduled disruptions in our business due to travel restrictions, weather events, mechanical failures, pandemics or other events;


	●	changes adversely affecting the business in which we are engaged;


	●	management of our growth and our ability to execute on our planned growth;

	●	~~delays in construction of initial voyages of new vessels;~~

	●	~~unexpected loss of voyages;~~

●

our business strategy and plans;


	●	our ability to maintain our relationship with National Geographic;

	●	compliance with new and existing laws and ~~regulations;~~regulations, including environmental regulations and travel advisories and restrictions;


	●	compliance with the financial and/or operating covenants in our ~~Second Amended & Restated Credit Agreement (“Restated Credit Agreement”);~~debt arrangements;


	●	adverse publicity regarding the cruise industry in general;


	●	loss of business due to competition;


	●	the result of future financing efforts;


	●	delays and costs overruns with respect to the construction and delivery of newly constructed vessels;

	●	the inability to meet revenue and Adjusted EBITDA projections; and


	●	those risks discussed herein, in Item 1A. Risk Factors in our Annual Report on Form 10-K for the year ended December 31, ~~2016.~~2019, as filed with the SEC on February 26, 2020 (the “2019 Annual Report”) and in Item 1A. Risk Factors in our Quarterly Report on Form 10-Q for the period ended March 31, 2020, as filed with the SEC on May 6, 2020.

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~~Given these risks readers are cautioned~~

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

~~Lindblad provides~~We provide expedition cruising and land-based adventure travel experiences, ~~that include~~using itineraries that feature up-close encounters with wildlife, ~~and~~ nature, history and culture, and promote guest empowerment and interactivity. Our mission is ~~offering~~to offer life-changing adventures ~~on all seven continents~~around the world and ~~pioneering~~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 ~~seven~~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. ~~A new coastal vessel the~~~~National Geographic Quest~~~~joined the fleet in the third quarter of 2017. The Company has contracted for two additional vessels, the~~~~National Geographic Venture~~, a coastal vessel, expected to be completed in the fourth quarter of 2018, and a polar ice class vessel targeted to be competed in January 2020, with potential accelerated delivery to November 2019. The polar ice class contract includes options to build two additional ice class vessels, the first for delivery twelve months after the initial vessel and the second for delivery twelve months thereafter. We have a strategic business alliance with the National Geographic Society (“National Geographic”) founded on a shared interest in exploration, research, technology, and conservation. This relationship includes a co-selling, co-marketing and branding arrangement whereby our owned vessels carry the National Geographic name and National Geographic sells our expeditions through its internal travel division. We collaborate with National Geographic on voyage planning to enhance the guest experience by having National Geographic experts, including photographers, writers, marine biologists, naturalists, field researchers, and film crews, join our expeditions. Guests have the ability to interface with these experts through lectures, excursions, dining, and other experiences throughout their voyage. Our arrangement with National Geographic extends through 2025.

We deploy chartered vessels for various seasonal offerings and continually seek to optimize our charter fleet to balance our inventory with demand and maximize yields. We use our charter inventory as a mechanism to both increase travel options for our existing and prospective guests and ~~also~~ to test demand for certain areas and seasons to understand the potential for longer term deployments and additional vessel needs.

~~On May 4, 2016, we expanded our land-based offerings by acquiring an 80.1% ownership~~We have a longstanding relationship with the National Geographic Society dating back to 2004, which is based on a shared interest in ~~Natural Habitat, Inc.~~exploration, research, technology and conservation. This relationship includes co-selling, co-marketing and branding arrangements with National Geographic Partners, LLC (“~~Natural Habitat”~~National Geographic”)~~, an adventure~~ 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 ecotourism company based in Colorado. Natural Habitat was founded by Benjamin L. Bressler, who retains a 19.9% noncontrolling interest in Natural Habitat. Examples of Natural Habitat’s expeditions include African safaris in Botswana, grizzly bear adventures in Alaskafilm crews, join our expeditions. Guests have the ability to interface with these experts through lectures, excursions, dining and polar bear tours in Canada. Since 2003, Natural Habitat has partnered with the World Wildlife Fund (“WWF”) to offer conservation and sustainable travel that directly protects nature. This agreement with WWF extends through 2023. other experiences throughout their expedition.

~~In December 2015, we entered into two separate contracts with Ice Floe LLC,~~COVID-19 Business Update

Due to ~~build~~ the~~National Geographic Quest~~ spread of the COVID-19 virus and the~~National Geographic Venture. Management considers~~ 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:

	●	Significantly reduced ship and land-based expedition costs including crew payroll, land costs, fuel and food. All ships have been safely laid up.

	●	Lowered expected annual maintenance capital expenditures by over $10 million, savings of more than 50% from originally planned levels.

	●	Meaningfully reduced general and administrative expenses through staff furloughs, payroll reductions and the elimination of all non-essential travel, office expenses and discretionary spending.

	●	Suspended the majority of planned advertising and marketing spend.

	●	Deferred payment of the majority of bonuses earned for 2019 performance, as well as cash compensation for the Board of Directors.

	●	Suspended all repurchases of common stock under the stock repurchase plan.

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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 ~~investment~~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 ~~be an important step~~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 ~~meet increasing demand~~our fully paid guests. As of July 28, 2020, the majority of guests have opted for ~~our expedition cruise offerings. The~~~~National Geographic Quest~~ ~~launched~~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 ~~third~~first quarter of ~~2017~~2020 we drew down $45.0 million under our revolving credit facility as a precautionary measure for working capital and ~~operates in Alaska and British Columbia during~~general corporate purposes given the ~~summer before voyaging to Costa Rica and Panama to provide expeditions for the Northern Hemisphere winter season. There were four highly booked voyages cancelled during 2017 due~~uncertainty related to the ~~delayed~~COVID-19 pandemic and borrowed $107.7 million under our first export credit agreement in conjunction with final payment on delivery of the ~~vessel. Excluding~~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 ~~impact of these voyage cancellations~~third installment payment on the ~~Company estimates that total tour revenues would have increased by approximately $3.6 million and Adjusted EBITDA by approximately $3.0 million.~~

InNational Geographic Resolution, scheduled for delivery in the fourth quarter of ~~2016,~~2021.

During May 2020, we amended our $2.5 million promissory note, changing the~~National Geographic Orion~~ ~~experienced an issue~~ 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 ~~main engine~~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, ~~we cancelled four voyages during the first quarter~~have made additional adjustments to our cost structure.

We have not previously experienced a complete cessation of ~~2017 for necessary engine repairs. In addition, in the first quarter of 2017, the~~~~National Geographic Sea Lion~~ ~~cancelled two voyages~~our operations and, as a consequence, our ability to ~~repair the onboard air conditioning system. It is estimated that~~predict the impact of such cessation on our costs and future prospects is limited. Given the ~~cancellations was approximately $8.9 million~~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 ~~tour revenues~~place. The estimates for monthly cash usage reflect our current forecast for operating costs, capital expenditures and ~~$6.5 million~~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 ~~Adjusted EBITDA.~~

~~Our Annual~~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-K~~10-Q.

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Return to Operations

We already have a robust set of operating protocols and, in preparation for the ~~year ended December 31, 2016 provides additional information about~~resumption of operations, have been proactively working in close cooperation with various medical policy experts and public health authorities to further augment our ~~business operations~~procedures and ~~financial condition.~~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 ~~financial condition and~~ results of operations and financial condition are organized as ~~follows:~~follows:

●

a description of certain line items and operational and financial metrics we utilize to assist us in managing our business;


	●	results and a comparable discussion of our consolidated and segment results of operations for the three ~~and nine~~ months ended ~~September~~June 30, ~~2017~~2020 and ~~2016;~~2019;


	●	a discussion of our liquidity and capital resources, including future capital and contractual commitments and potential funding sources; and


	●	a review of our critical accounting policies.

Financial Presentation

Description of Certain Line Items

Tour revenues

Tour revenues consist of the following:

●

Guest ticket revenues recognized from the sale of guest tickets; and


	●	Other tour revenues from the sale of pre- or post-expedition excursions, hotel accommodations, ~~and land-based expeditions;~~ air transportation to and from the ships, goods and services rendered onboard that are not included in guest ticket prices, trip insurance, and cancellation fees.

Cost of tours

Cost of tours includes the following:

●

Direct costs associated with revenues, including cost of pre- or post-expedition excursions, hotel accommodations, and land-based expeditions, air and other transportation expenses, and cost of goods and services rendered onboard;


	●	Payroll costs and related expenses for shipboard and expedition personnel;


	●	Food costs for guests and crew, including complimentary food and beverage amenities for guests;


	●	Fuel costs and related costs of delivery, storage and safe disposal of waste; and


	●	Other tour expenses, such as land costs, port costs, repairs and maintenance, equipment expense, drydock, ship insurance, and charter hire costs.

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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 ~~shore side~~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 EBITDAis net income (loss) excluding depreciation and amortization, net interest expense, other income (expense), income tax (expense) benefit, ~~(expense),~~(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, ~~merger-related~~debt refinancing costs, acquisition-related expenses and ~~acquisition-related expenses.~~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 ~~costs.~~income and expense. We believe Adjusted EBITDA ~~can~~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. ~~While Adjusted EBITDA is not a recognized measure under GAAP, management uses this financial measure to evaluate and forecast business performance.~~ Adjusted EBITDA is not intended to be a measure of liquidity or cash flows from operations or a measure comparable to net income as it does not take into account certain requirements, such as unearned passenger revenues, capital expenditures and related depreciation, principal and interest payments, and tax payments. Our use of Adjusted EBITDA may not be comparable to other companies within the industry. ~~Management compensates for these limitations by using Adjusted EBITDA as only one of several measures for evaluating our business performance.~~

The following metrics apply to our Lindblad segment:

Adjusted Net Cruise Costrepresents Net Cruise Cost adjusted for Non-GAAP other supplemental adjustments which include certain non-operating items such as stock-based compensation, the National Geographic fee amortization, ~~merger-related expenses,~~ and acquisition-related expenses.

Available Guest Nightsis a measurement of capacity and represents double occupancy per cabin (except single occupancy for a single capacity cabin) multiplied by the number of cruise days for the period. We also record the number of guest nights available on our limited land programs in this definition.

Gross Cruise Cost represents the sum of cost of tours plus, ~~merger-related expenses,~~ selling and marketing expenses, and general and administrative expenses.

Gross Yieldrepresents tour revenues less insurance proceeds divided by Available Guest Nights.

Guest Nights Soldrepresents the number of guests carried for the period multiplied by the number of nights sailed within the period.

Maximum Guestsis 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 Costrepresents Gross Cruise Cost excluding commissions and certain other direct costs of guest ticket revenues and other tour revenues.

Net Cruise Cost Excluding Fuelrepresents Net Cruise Cost excluding fuel costs.

Net Revenuerepresents tour revenues less insurance proceeds, commissions and direct costs of other tour revenues.

Net Yieldrepresents Net Revenue divided by Available Guest Nights.

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Number of Guestsrepresents the number of guests that travel with us in a period.

Occupancyis calculated by dividing Guest Nights Sold by Available Guest Nights.

Voyagesrepresent 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 ~~income.~~ operations.

Seasonality

~~Lindblad~~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 ~~increases~~fluctuates due to our vessels being taken out of service for scheduled maintenance or drydocking, which is typically during ~~non-peak~~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 ~~quarter~~quarters from its summer season departures and polar bear tours.

Results of Operations –- Consolidated

For the three months ended June 30,

For the six months ended June 30,

(In thousands)

2020

2019

Change

%

2020

2019

Change
%
Tour revenues
$ (268 ) $ 76,658 $ (76,926 ) NM $ 80,971 $ 166,311 $ (85,340 ) (51 %)

Cost of tours
12,721 37,520 (24,799 ) (66 )% 54,913 76,537 (21,624 ) (28 %)
General and administrative
9,798 16,268 (6,470 ) (40 )% 27,025 32,350 (5,325 ) (16 %)
Selling and marketing
3,406 12,567 (9,161 ) (73 )% 16,285 26,569 (10,284 ) (39 %)
Depreciation and amortization
8,553 6,182 2,371 38 % 15,243 12,370 2,873 23 %
Operating (loss) income
$ (34,746 ) $ 4,121 $ (38,867 ) NM $ (32,495 ) $ 18,485 $ (50,980 ) NM
Net (loss) income
$ (39,923 ) $ 851 $ (40,774 ) NM $ (42,394 ) $ 15,930 $ (58,324 ) NM
Net (loss) income per share available to common stockholders

Basic
$ (0.80 ) $ 0.02 $ (0.82 ) $ (0.84 ) $ 0.34 $ (1.18 )
Diluted
$ (0.80 ) $ 0.02 $ (0.82 ) $ (0.84 ) $ 0.32 $ (1.16 )
Comparison of the Three and Six Months Ended June 30, 2020 to Three and Six Months Ended June 30, 2019 - Consolidated

We reported consolidated tour revenues, cost of tours, operating expenses, operating income, and net (loss) income for the three and nine months ended September 30, 2017 and 2016 as shown in the following table:
(In thousands, except per share data) For the Three Months Ended
September 30, For the Nine Months Ended
September 30,
2017 2016 Change % 2017 2016 Change %
Tour revenues $ 84,584 $ 70,774 $ 13,810 20 % $ 203,283 $ 186,218 $ 17,065 9 %
Cost of tours 38,480 32,446 6,034 19 % 99,780 87,111 12,669 15 %
Gross profit 46,104 38,328 7,776 20 % 103,503 99,107 4,396 4 %
General and administrative 16,526 12,915 3,611 28 % 46,710 36,740 9,970 27 %
Selling and marketing 11,676 10,164 1,512 15 % 31,521 29,294 2,227 8 %
Depreciation and amortization 4,354 5,080 (726 ) (14 %) 12,012 14,523 (2,511 ) (17 %)
Operating income $ 13,548 $ 10,169 $ 3,379 33 % 13,260 18,550 $ (5,290 ) (29 %)
Net income 9,443 7,447 1,996 27 % $ 7,491 $ 13,420 (5,929 ) (44 %)
Earnings per share attributable to Lindblad
Basic $ 0.21 $ 0.16 $ 0.16 $ 0.30
Diluted 0.20 0.16 0.16 0.29
22
~~Comparison of Three and Nine Months Ended September 30, 2017 to Three and Nine Months Ended September 30, 2016 – Consolidated~~
Tour Revenues

Tour revenues for the three months ended ~~September~~June 30, ~~2017 increased $13.8~~2020 decreased $76.9 million, or ~~20%~~100%, as a result of rescheduling all expeditions due to COVID-19.
Tour revenues for the six months ended June 30, 2020 decreased $85.3 million, or 51%, to ~~$84.6~~$81.0 million, compared to ~~$70.8~~$166.3 million for the ~~three~~six months ended ~~September~~June 30, ~~2016.~~2019. The Lindblad segment ~~increased~~ tour revenues decreased by ~~$11.3~~$71.5 million, primarily ~~driven by guest ticket revenue from the launch~~as a result of ~~the~~~~National Geographic Quest~~~~in July 2017.~~cancelled, disrupted and rescheduled expeditions due to COVID-19. At the Natural Habitat segment, tour revenues ~~increased $2.5~~decreased $13.9 million ~~primarily due to additional guests. It is estimated that tour revenues would have increased approximately $16.7 million or 24%~~ over the prior year period, primarily related to ~~$87.4 million excluding the cancellation of four highly booked voyages of the~~~~National Geographic Quest~~cancelled, disrupted and rescheduled expeditions due to ~~its delayed launch and additional insurance proceeds received related to the~~~~National Geographic Orion~~. COVID-19.

Tour revenues for the nine months ended September 30, 2017 increased $17.1 million, or 9%, to $203.3 million compared to $186.2 million for the nine months ended September 30, 2016. The Lindblad segment increased tour revenues by $2.0 million driven primarily by the launch
26

Table of ~~the~~~~National Geographic Quest~~~~partially offset by the cancellation of four highly booked voyages on the~~~~National Geographic Orion~~ ~~and two highly booked voyages on the~~~~National Geographic Sea Lion~~. Tour revenues at the Natural Habitat segment, which was acquired in the second quarter of 2016, increased $15.1 million primarily as a result of a full nine months of results in 2017. It is estimated for the nine months ended September 30, 2017 that tour revenues would have increased approximately $29.5 million or 16% over the prior year period to $215.7 million excluding the voyage cancellations and additional insurance proceeds received related to the~~National Geographic Orion~~.
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Cost of Tours

Total cost of tours for the three months ended ~~September~~June 30, ~~2017 increased $6.0~~2020 decreased $24.8 million, or ~~19%~~66%, to ~~$38.5~~$12.7 million compared to ~~$32.5~~$37.5 million for the three months ended Se~~ptember~~June 30, ~~2016. The increase was primarily due to a $5.1 million increase at the Lindblad segment mainly from the launch of the~~~~National Geographic Quest~~ ~~and an increase of $0.9 million at the Natural Habitat segment due to additional departures.~~
~~Total cost of tours for the nine months ended September 30, 2017 increased $12.7 million, or 15%, to $99.8 million compared to $87.1 million for the nine months ended September 30, 2016.~~2019. At the Lindblad segment, cost of tours ~~increased $4.3~~decreased $17.9 million, primarily related to ~~the launch of the~~~~National Geographic Quest~~ ~~as well as additional charter~~rescheduled expeditions due to COVID-19, partially offset by ~~lower drydock~~costs incurred while ships are laid up and ~~fuel expense. The~~from the addition of the National Geographic Endurance to our fleet in March 2020. At the Natural Habitat segment, ~~increase~~cost of ~~$8.4~~tours decreased $6.9 million ~~was~~due to rescheduled trips directly related to COVID-19.
Total cost of tours for the six months ended June 30, 2020 decreased $21.6 million, or 28%, to $54.9 million, compared to $76.5 million for the six months ended June 30, 2019. At the Lindblad segment, cost of tours decreased $13.7 million, primarily related to cancelled, disrupted and rescheduled expeditions due to COVID-19, partially offset by costs incurred while ships are laid up, and from the addition of the National Geographic Endurance to our fleet in March 2020. At the Natural Habitat segment, cost of tours decreased $7.9 million, primarily due to ~~a full nine months of results in 2017.~~cancelled, disrupted and rescheduled trips directly related to COVID-19.

General and Administrative ~~Expenses~~

General and administrative expenses for the three months ended ~~September~~June 30, ~~2017 increased by $3.6~~2020 decreased $6.5 million, or ~~28%~~40%, to ~~$16.5~~$9.8 million compared to ~~$12.9~~$16.3 million for the three months ended ~~September~~June 30, ~~2016~~2019. At the Lindblad segment, general and administrative expenses decreased $4.1 million over the prior year period primarily due to ~~a $3.2 million increase at~~reduced personnel costs and credit card commissions related to the ~~Lindblad segment as a result~~disruption of ~~$1.7 million in higher stock based compensation, mainly associated with the CEO Allocation grant, as well as $1.4 million in executive severance costs.~~operations due to COVID-19. At the Natural Habitat segment, general and administrative expenses ~~increased $0.5~~decreased $2.4 million, primarily due to ~~an increase~~a decrease in personnel ~~costs.~~ costs related to the disruption of operations due to COVID-19.

General and administrative expenses for the ~~nine~~six months ended ~~September~~June 30, ~~2017 increased by $10.0~~2020 decreased $5.3 million, or ~~27%~~16%, to ~~$46.7~~$27.0 million, compared to ~~$36.7~~$32.4 million for the ~~nine~~six months ended ~~September~~June 30, ~~2016~~2019. At the Lindblad segment, general and administrative expenses decreased $3.1 million primarily due to ~~a $6.2 million increase at~~reduced personnel costs and credit card commissions related to the ~~Lindblad segment as a result~~disruption of ~~$5.5 million in higher stock based compensation mainly associated with the CEO Allocation grant, as well as $1.4 million in executive severance costs.~~operations due to COVID-19. At the Natural Habitat segment, general and administrative expenses ~~increased $3.8~~decreased $2.2 million, primarily due to a ~~full nine months~~decrease in personnel costs related to the disruption of ~~results in 2017.~~ operations due to COVID-19.

Selling and Marketing ~~Expenses~~

Selling and marketing expenses for the three months ended ~~September~~June 30, ~~2017 increased $1.5~~2020 decreased $9.2 million, or ~~15%~~73%, to ~~$11.7~~$3.4 million compared to ~~$10.2~~$12.6 million for the three months ended ~~September~~June 30, ~~2016~~2019. At the Lindblad segment, selling and marketing expenses decreased $8.1 million, primarily due to ~~a $1.5 million increase at~~lower commission expenses related to the ~~Lindblad segment due to increased commission~~impact of COVID-19 on revenue and ~~royalty expense associated with the higher tour revenues. Sales and marketing expense at~~decreased advertising expenditures. At the Natural Habitat segment, ~~was comparable to the prior year.~~selling and marketing expenses decreased $1.0 million, primarily driven by a decrease in advertising expenditures.

Selling and marketing expenses for the ~~nine~~six months ended ~~September~~June 30, ~~2017 increased $2.2~~2020 decreased $10.3 million, or 8%39%, to ~~$31.5~~$16.3 million, compared to ~~$29.3~~$26.6 million for the ~~nine~~six months ended ~~September~~June 30, ~~2016~~2019. At the Lindblad segment, selling and marketing expenses decreased $8.8 million, primarily due to ~~a $1.1 million increase at~~lower commission expenses related to the ~~Lindblad segment as result~~impact of ~~increased commission~~COVID-19 on revenue and ~~royalty expense associated with~~decreased advertising expenditures. At the ~~higher tour revenues. The~~ Natural Habitat segment, ~~increased $1.1 due to~~selling and marketing expenses decreased $1.5 million, primarily driven by a ~~full nine months of results~~decrease in ~~2017.~~ advertising expenditures.

23
Depreciation and Amortization ~~Expenses~~

Depreciation and amortization expenses for the three months ended ~~September~~June 30, ~~2017 was $4.4~~2020 increased $2.4 million, asor 38%, to $8.6 million, compared ~~with $5.1~~to $6.2 million for the three months ended ~~September~~June 30, ~~2016.~~ 2019, primarily due to the addition of the National Geographic Endurance to the fleet in March 2020.
Depreciation and amortization expenses for the ~~nine~~six months ended ~~September~~June 30, ~~2017 was $12.0~~2020 increased $2.9 million, asor 23%, to $15.2 million, compared ~~with $14.5~~to $12.4 million for the ~~nine~~six months ended ~~September~~June 30, ~~2016. The decreases in each period versus~~2019, primarily due to the ~~prior year period were primarily related to accelerated depreciation associated with~~addition of the ~~retirement of the~~National Geographic ~~Endeavour~~Endurance to the fleet in ~~2016.~~
March 2020.

27

Table of Contents
Other Expense ~~(Income)~~
Other expenses, ~~were $2.5~~for the three months ended June 30, 2020, increased $5.4 million to $8.1 million from $2.7 million for the three months ended ~~September~~June 30, ~~2017 compared~~2019, primarily due to ~~$2.5~~the following:
●
A $3.9 million loss in foreign currency translation in 2020 due primarily to $5.3 million loss on the maturity of a foreign currency hedge related to the installment payment for the National Geographic Resolution, compared to a $0.5 million gain in 2019.
●
A $1.0 million increase in interest expense, net to $4.2 million in 2020 primarily due to increased borrowings related to our new builds, and draw down under the revolving credit facility, partially offset by lower rates on the term loan facility.
Other expenses, for the six months ended June 30, 2020, increased $9.6 million to $14.7 million from $5.1 million for the ~~three~~six months ended ~~September~~June 30, ~~2016.~~
~~Other expenses were $6.3 million for the nine months ended September 30, 2017 as compared to $8.3 million for the nine months ended September 30, 2016. The decrease of $2.0 million was~~2019, primarily due to ~~a $1.3 million foreign currency translation gain due to~~ the ~~strength of the U.S dollar in relation to the Canadian dollar and the Euro. In addition, a decrease of $0.7 million in interest expense is due to capitalized interest related to the~~~~National Geographic Quest~~~~and the~~~~National Geographic Venture~~.following:

●
A $7.3 million loss in foreign currency translation in 2020 due primarily to a loss of $5.3 million on the maturity of a foreign currency hedge related to the installment payment for the National Geographic Resolution, and a $2.0 million loss related to the weakening of the U.S dollar primarily in relation to the Canadian dollar, South African Rand and British Pound Sterling, compared to a $1.2 million gain in 2019.
●
A $1.1 million increase in interest expense, net of $7.2 million in 2020, primarily due to increased borrowings related to our new builds, and the draw down under the revolving credit facility, partially offset by lower rates on the term loan facility.
Results of Operations – Segments

Selected information for our segments is below.The presentation of non-GAAP financial information should not be considered in isolation or as a substitute for, or superior to, the financial information prepared and presented in accordance with GAAP.

For the Three Months Ended For the Nine Months Ended
September 30, September 30,
For the three months ended June 30,

For the six months ended June 30,

(In thousands) 2017 2016 Change % 2017 2016* Change %
2020

2019

Change

%

2020

2019

Change

%

Tour revenues:
Lindblad $ 67,451 $ 56,175 $ 11,276 20 % $ 167,891 $ 165,936 $ 1,955 1 % $ (22 ) $ 64,930 $ (64,952 ) NM $ 69,517 $ 140,968 $ (71,451 ) (51 %)
Natural Habitat 17,133 14,599 2,534 17 % 35,392 20,282 15,110 74 % (246 ) 11,728 (11,974 ) NM 11,454 25,343 (13,889 ) (55 %)
Total tour revenues $ 84,584 $ 70,774 $ 13,810 20 % $ 203,283 $ 186,218 $ 17,065 9 % $ (268 ) $ 76,658 $ (76,926 ) NM $ 80,971 $ 166,311 $ (85,340 ) (51 %)
Impact of voyage cancellations 2,860 - 2,860 NA 12,478 - 12,478 NA
Total tour revenues excluding voyage cancellations $ 87,444 $ 70,774 $ 16,670 24 % $ 215,761 $ 186,218 $ 29,543 16 %
Operating (loss) income:
Lindblad $ 12,070 $ 9,863 $ 2,207 22 % $ 12,386 $ 19,038 $ (6,652 ) (35 %) $ (31,641 ) $ 5,302 $ (36,943 ) NM $ (29,452 ) $ 18,943 $ (48,395 ) NM
Natural Habitat 1,479 306 1,173 383 % 873 (488 ) 1,361 (279 %) (3,105 ) (1,181 ) (1,924 ) NM (3,043 ) (458 ) (2,585 ) NM
Total operating income 13,549 10,169 3,380 33 % 13,259 18,550 (5,291 ) (29 %)
Impact of voyage cancellations 1,981 - 1,981 NA 8,923 - 8,923 NA
Total operating income excluding voyage cancellations $ 15,530 $ 10,169 $ 5,360 53 % $ 22,182 $ 18,550 $ 3,632 20 %
Total operating (loss) income
$ (34,746 ) $ 4,121 $ (38,867 ) NM $ (32,495 ) $ 18,485 $ (50,980 ) NM
Adjusted EBITDA:

Lindblad
$ (22,986 ) $ 13,270 $ (36,256 ) NM $ (12,911 ) $ 34,200 $ (47,111 ) NM
Natural Habitat
(2,491 ) (773 ) (1,718 ) NM (1,988 ) 344 (2,332 ) NM
Total adjusted EBITDA
$ (25,477 ) $ 12,497 $ (37,974 ) NM $ (14,899 ) $ 34,544 $ (49,443 ) NM

* 2016 results for Natural Habitat represent activity from the acquisition date of May 2016 through September 30, 2016.
The impact of the cancelled voyages on tour revenues was calculated as booked tour revenue at the time of cancellation less insurance proceeds. The impact of the cancelled voyages on operating income was calculated as booked tour revenue at the time of cancellation less insurance proceeds and estimated operating costs.
24
Results of Operations – Lindblad Segment
~~The following tables set forth our Guest Metrics for the Lindblad segment. Please refer to our~~~~Description of Certain Line Items~~~~above for the specific definition by line item and segment.~~

The following table sets forth our Available Guest Nights, Guest Nights Sold, Occupancy, Maximum Guests, Number of Guests and Voyages for the three and ~~nine~~six months ended ~~September~~June 30, ~~2017~~2020 and ~~2016:~~2019:

For the three months ended June 30,

For the six months ended June 30,

2020

2019

2020

2019

Available Guest Nights
- 53,983 51,624 112,652
Guest Nights Sold
- 48,216 46,050 101,829
Occupancy
- 89 % 89 % 90 %
Maximum Guests
- 6,829 6,512 14,142
Number of Guests
- 6,269 5,564 12,801
Voyages
- 87 85 180
For the Three Months Ended
September 30, For the Nine Months Ended
September 30,
2017 2016 2017 2016
Available Guest Nights 56,398 48,595 142,291 141,665
Guest Nights Sold 51,122 44,139 124,951 129,633
Occupancy 90.6 % 90.8 % 87.8 % 91.5 %
Maximum Guests 7,518 6,177 17,727 17,118
Number of Guests 6,846 5,632 15,758 15,742
Voyages 97 84 244 231
28
Table of Contents

The following table shows the calculations of Gross Yield and Net Yield for the three and ~~nine~~six months ended ~~September~~June 30, ~~2017~~2020 and ~~2016.~~2019. Gross Yield is calculated by dividing ~~tour revenues less insurance proceeds,~~Tour Revenues by Available Guest ~~Nights.~~Nights and Net Yield is calculated by dividing Net Revenue by Available Guest Nights:

~~Lindblad Segment~~
~~Calculation of Gross Yield and Net Yield - Lindblad Segment~~

For the three months ended June 30,

For the six months ended June 30,

(In thousands, except for Available Guest Nights, Gross and Net Yield)

2020

2019

2020

2019

Guest ticket revenues
$ (11 ) $ 58,416 $ 60,351 $ 125,526
Other tour revenue
(11 ) 6,514 9,166 15,442
Tour Revenues
(22 ) 64,930 69,517 140,968
Less: Commissions
(1,835 ) (4,908 ) (7,262 ) (10,759 )
Less: Other tour expenses
(953 ) (4,418 ) (6,713 ) (10,104 )
Net Revenue
$ (2,810 ) $ 55,604 $ 55,542 $ 120,105
Available Guest Nights
- 53,983 51,624 112,652
Gross Yield

NM
$ 1,203 $ 1,347 $ 1,251
Net Yield

NM
1,030 1,076 1,066

(In thousands, except for Available Guest Nights,
Gross and Net Yield) For the Three Months Ended
September 30, For the Nine Months Ended
September 30,
2017 2016 2017 2016
Guest ticket revenues $ 61,715 $ 50,089 $ 147,504 $ 146,613
Other tour revenues 5,736 6,086 20,387 19,323
Tour Revenues 67,451 56,175 167,891 165,936
Less: Orion Insurance Proceeds (248 ) - (2,148 ) -
Adjusted Tour Revenues 67,203 56,175 165,743 165,936
Less: Commissions (4,559 ) (3,957 ) (12,321 ) (11,725 )
Less: Other tour expenses (3,532 ) (3,211 ) (10,622 ) (11,757 )
Net Revenue $ 59,112 $ 49,007 $ 142,800 $ 142,454
Available Guest Nights 56,398 48,595 142,291 141,665
Gross Yield $ 1,192 $ 1,156 $ 1,165 $ 1,171
Net Yield 1,048 1,008 1,004 1,006
25

The following table shows the calculations of Gross Cruise Cost per Available Guest Night and Net Cruise Costs per Available Guest Night for the three and ~~nine~~six months ended ~~September~~June 30, ~~2017~~2020 and ~~2016:~~2019:

(In thousands, except for Available Guest Nights,
Gross and Net Cruise Cost) For the Three Months Ended
September 30, For the Nine Months Ended
September 30,
2017 2016 2017 2016
Calculation of Gross Cruise Cost and Net Cruise Cost

For the three months ended June 30,

For the six months ended June 30,

(In thousands, except for Available Guest Nights, Gross and Net Cruise Cost per Avail. Guest Night)

2020

2019

2020

2019

Cost of tours $ 27,374 $ 22,239 $ 76,915 $ 72,632 $ 12,182 $ 30,118 $ 47,702 $ 61,439
Plus: Selling and marketing 10,358 8,848 28,629 27,511 3,201 11,321 15,184 23,962
Plus: General and administrative 13,656 10,464 38,972 32,762 8,297 12,415 21,895 25,054
Gross Cruise Cost 51,388 41,551 144,516 132,905 23,680 53,854 84,781 110,455
Less: Commission expense (4,559 ) (3,957 ) (12,321 ) (11,725 )
Less: Commissions
(1,835 ) (4,908 ) (7,262 ) (10,759 )
Less: Other tour expenses (3,532 ) (3,211 ) (10,622 ) (11,757 ) (953 ) (4,418 ) (6,713 ) (10,104 )
Net Cruise Cost 43,297 34,383 121,573 109,423 20,892 44,528 70,806 89,592
Less: Fuel expense (1,894 ) (1,645 ) (4,858 ) (5,307 )
Less: Fuel Expense
(931 ) (2,459 ) (3,323 ) (5,146 )
Net Cruise Cost Excluding Fuel 41,403 32,738 116,715 104,116 19,961 42,069 67,483 84,446
Non-GAAP Adjustments:
Stock-based compensation (3,057 ) (1,359 ) (9,464 ) (3,982 ) (703 ) (1,001 ) (1,601 ) (1,754 )
National Geographic fee amortization (727 ) (727 ) (2,180 ) (2,180 ) - (727 ) (727 ) (1,454 )
Acquisition-related expenses - (31 ) - (924 )
Executive severance costs
(1,400 ) - (1,400 ) -
Warrant exchange and debt refinancing costs - (466 ) - (466 )
Other
(13 ) - (25 ) (15 )
Adjusted Net Cruise Cost Excluding Fuel $ 36,220 $ 30,621 $ 103,671 $ 97,030 $ 19,245 $ 39,875 $ 65,130 $ 80,757
Adjusted Net Cruise Cost $ 38,114 $ 32,266 $ 108,529 $ 102,337 $ 20,176 $ 42,334 $ 68,453 $ 85,903
Available Guest Nights 56,398 48,595 142,291 141,665 - 53,983 51,624 112,652
Gross Cruise Cost per Available Guest Night $ 911 $ 855 $ 1,016 $ 938
NM
$ 998 $ 1,642 $ 980
Net Cruise Cost per Available Guest Night 768 708 854 772
NM
825 1,372 795
Net Cruise Cost Excl. Fuel per Available Guest Night 734 674 820 735
Adj. Net Cruise Cost Excl. Fuel per Avail. Guest Night 642 630 729 685
Net Cruise Cost Excluding Fuel per Available Guest Night

NM
779 1,307 750
Adjusted Net Cruise Cost Excluding Fuel per Available Guest Night

NM
739 1,262 717
Adjusted Net Cruise Cost per Available Guest Night 676 664 763 722
NM
784 1,326 763
29
Table of Contents

Comparison of Three and ~~Nine~~ Six Months Ended ~~September~~June 30 ~~2017~~, 2020 to Three and ~~Nine~~ Six Months Ended ~~September~~June 30 ~~2016 – Lindblad Segment~~, 2019

Tour Revenues

Tour revenues for the three months ended ~~September~~June 30, ~~2017 increased $11.3~~2020 decreased $64.9 million, or ~~20%~~100%, to ~~$67.5~~$0.0 million compared to ~~$56.2~~$64.9 million for the three months ended ~~September~~June 30, ~~2016.~~2019. The ~~change~~decrease was ~~primarily related to guest ticket revenue from the launch~~a result of ~~the~~~~National Geographic Quest~~ in July of 2017, as well as higher yields across the fleet. Net Yield for the three months ended September 30, 2017 increased to $1,048 compared to $1,008 for the three months ended September 30, 2016 primarily driven by price increases and changes in itineraries. It is estimated that tour revenues would have increased approximately $14.1 million or 25% over the prior year period to $70.3 million excluding the cancellation of four highly booked voyages of the~~National Geographic Quest~~rescheduling all expeditions due to ~~its delayed launch and additional insurance proceeds received on the~~~~National Geographic Orion~~.COVID-19.

Tour revenues for the ~~nine~~six months ended ~~September~~June 30, ~~2017 increased $2.0~~2020 decreased $71.5 million, or 1%51%, to ~~$167.9~~$69.5 million, compared to ~~$165.9~~$141.0 million for the ~~nine~~six months ended ~~September~~June 30, ~~2016~~2019. The decrease was primarily driven by cancelled, disrupted and rescheduled expeditions due to ~~guest ticket~~COVID-19.
Operating Income
Operating income decreased $36.9 million to a loss of $31.6 million for the three months ended June 30, 2020 compared to $5.3 million operating income for the three months ended June 30, 2019. The decrease was primarily a result of rescheduling all expeditions due to COVID-19.
Operating income decreased $48.4 million to a loss of $29.5 million for the six months ended June 30, 2020, compared to operating income of $18.9 million for the six months ended June 30, 2019. The decrease was primarily driven by lower revenue from cancelled, disrupted and rescheduled voyages due to COVID-19 and costs associated with adding the ~~launch of the~~National Geographic ~~Quest~~Endurance to the fleet in March 2020.
Results of Operations – Natural Habitat Segment
Comparison of Three and Six Months Ended June 30, 2020 to Three and Six Months Ended June 30, 2019
Tour Revenues
Tour revenues for the three months ended June 30, 2020 decreased $12.0 million, compared to $11.7 million for the three months ended June 30, 2019, as ~~well as from additional charter~~a result of rescheduled expeditions ~~partially offset by a decrease in guest ticket revenue~~ due to COVID-19.
Tour revenues for the ~~cancellation of four highly booked voyages of the~~~~National Geographic Orion~~ ~~and two highly booked voyages of the~~~~National Geographic Sea Lion~~~~. It is estimated tour revenues would have increased approximately $14.4~~six months ended June 30, 2020 decreased $13.9 million, or ~~9% over~~55%, to $11.5 million compared to $25.3 million for the ~~prior year period~~six months ended June 30, 2019, due primarily to ~~$180.4 million excluding the voyage cancellations.~~cancelled, disrupted and rescheduled expeditions due to COVID-19.
26

Operating Income

Operating income for the three months ended ~~September~~June 30, ~~2017 increased $2.2~~2020 decreased $1.9 million to ~~$12.1~~a loss of $3.1 million compared to ~~$9.9~~a $1.2 million loss for the three months ended ~~September~~June 30, ~~2016. This increase~~2019. The decrease was primarily a result of rescheduled expeditions due to ~~the higher revenues, partially offset by a $5.1 million increase in cost of tours primarily due to the launch of the~~~~National Geographic Quest~~ and a $3.2 million increase in general and administrative expenses mainly due to $1.7 million in higher stock based compensation primarily associated with the 2016 CEO Allocation Plan and $1.4 million in executive severance costs. COVID-19.

Operating income for the ~~nine~~six months ended ~~September~~June 30, ~~2017~~2020 decreased ~~$6.6~~$2.6 million to ~~$12.4 million compared to $19.0 million for the nine months ended September 30, 2016 primarily related to the voyage cancellations on the~~~~National Geographic Orion~~ ~~and~~~~National Geographic Sea Lion~~ ~~during the first quarter~~a loss of 2017. The operating income decrease also reflects higher general and administrative expenses of $6.2 million mainly due to $5.5 million in higher stock based compensation primarily associated with the 2016 CEO Allocation Plan, as well as $1.4 million in executive severance costs.~~The current year also included higher charter expenses, which were partially offset by lower drydock and fuel costs, as well as the impact from the launch of the~~~~National Geographic Quest~~ ~~in July 2017. Excluding the impact of cancelled voyages, it is estimated that operating income would have increased approximately $2.3 million or 12% over the prior year period to $21.3 million.~~
~~Comparison of Three and Nine Months Ended September 30, 2017 to Three Months Ended September 30, 2016 and the Acquisition Period of May 2016 through September 30, 2016 – Natural Habitat Segment~~

~~Tour Revenues~~
Tour revenues for the three months ended September 30, 2017 increased $2.5 million, or 17%, to $17.1 million compared to $14.6 million for the three months ended September 30, 2016 due to an increase in guests as compared to the same period in 2016.
Tour revenues for the nine months ended September 30, 2017 increased $15.1 million, or 74%, to $35.4 million compared to $20.3 million for the acquisition period ended September 30, 2016 due primarily to a full nine months of results in 2017.
~~Operating (Loss) Income~~
Operating income for the three months ended September 30, 2017 increased $1.1 million to $1.5 million compared to $0.3 million for the three months ended September 30, 2016 and for the nine months ended September 30, 2017 operating income increased $1.3 million to $0.8$3.0 million compared to a $0.4 million loss ~~of $0.5 million~~ for the ~~acquisition period~~six months ended ~~September~~June 30, ~~2016~~2019. The decrease was primarily a result of cancelled, disrupted and rescheduled expeditions due ~~primarily~~ to ~~the revenue growth partially offset by higher costs for additional guests.~~
COVID-19.

Adjusted EBITDA ~~– Consolidated~~

The following table outlines the reconciliation to ~~Net~~net income and calculation of consolidated Adjusted EBITDA for the three and ~~nine~~six months ended ~~September~~June 30, ~~2017~~2020 and ~~2016.~~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~~.GAAP.

~~Reconciliation of Net Income to Adjusted EBITDA~~
~~Consolidated~~
(In thousands) For the Three Months Ended
September 30, For the Nine Months Ended
September 30,
2017 2016 2017 2016*
Net income $ 9,443 $ 7,447 $ 7,491 $ 13,420
Income tax expense (benefit) 1,586 203 (473 ) (3,113 )
Interest expense, net 2,802 2,476 7,192 7,914
Depreciation and amortization 4,354 5,080 12,012 14,523
Gain (loss) on foreign currency (224 ) 5 (1,047 ) 291
Other (income) expense, net (59 ) 38 97 38
Stock-based compensation 3,057 1,359 9,464 3,982
National Geographic fee amortization 727 727 2,180 2,180
Reorganization costs 29 - 346 -
Acquisition-related expenses - 31 - 924
Executive severance costs
1,400 - 1,400 -
Adjusted EBITDA - Consolidated 23,114 17,366 38,662 40,159
Impact of voyage cancellations 2,230 - 9,172 -
Adjusted EBITDA - Consolidated excluding impact of voyage cancellations $ 25,344 $ 17,366 $ 47,834 $ 40,159
* 2016 results for Natural Habitat represent activity from the acquisition date of May 2016 through September 30, 2016.
Consolidated

For the three months ended June 30,

For the six months ended June 30,

(In thousands)

2020

2019

2020

2019

Net (loss) income
$ (39,923 ) $ 851 $ (42,394 ) $ 15,930
Interest expense, net
4,179 3,188 7,234 6,176
Income tax (benefit) expense
(2,943 ) 553 (4,770 ) (2,513 )
Depreciation and amortization
8,553 6,182 15,243 12,370
Loss (gain) on foreign currency
3,879 (501 ) 7,322 (1,157 )
Other expense
62 30 113 49
Stock-based compensation
703 1,001 1,601 1,754
National Geographic fee amortization
- 727 727 1,454
Warrant exchange and debt refinancing costs - 466 - 466
Other
13 - 25 15
Adjusted EBITDA
$ (25,477 ) $ 12,497 $ (14,899 ) $ 34,544

27
30
Table of Contents

The following tables outline the reconciliation for each segment from operating income to Adjusted EBITDA for the three and ~~nine~~six months ended ~~September~~June 30, ~~2017~~2020 and ~~2016.~~2019.
Lindblad Segment

For the three months ended June 30,

For the six months ended June 30,

(In thousands)

2020

2019

2020

2019

Operating (loss) income
$ (31,641 ) $ 5,302 $ (29,452 ) $ 18,943
Depreciation and amortization
7,939 5,774 14,188 11,568
Stock-based compensation
703 1,001 1,601 1,754
National Geographic fee amortization
- 727 727 1,454
Warrant exchange and debt refinancing costs - 466 - 466
Other
13 - 25 15
Adjusted EBITDA
$ (22,986 ) $ 13,270 $ (12,911 ) $ 34,200

Natural Habitat Segment

For the three months ended June 30,

For the six months ended June 30,

(In thousands)

2020

2019

2020

2019

Operating loss
$ (3,105 ) $ (1,181 ) $ (3,043 ) $ (458 )
Depreciation and amortization
614 408 1,055 802
Adjusted EBITDA
$ (2,491 ) $ (773 ) $ (1,988 ) $ 344
Liquidity and Capital Resources

~~Reconciliation of Operating Income~~Due to ~~Adjusted EBITDA~~
~~Lindblad Segment~~
(In thousands) For the Three Months Ended
September 30, For the Nine Months Ended
September 30,
2017 2016 2017 2016
Operating income $ 12,070 $ 9,863 $ 12,387 $ 19,038
Depreciation and amortization 3,994 4,761 10,989 13,993
Stock-based compensation 3,057 1,359 9,464 3,982
National Geographic fee amortization 727 727 2,180 2,180
Reorganization costs 29 - 346 -
Acquisition-related expenses - 31 - 924
Executive severance costs
1,400 - 1,400 -
Adjusted EBITDA - Lindblad segment 21,276 16,741 36,766 40,117
Impact of voyage cancellations 2,230 - 9,172 -
Adjusted EBITDA - Lindblad segment excluding impact of voyage cancellations $ 23,506 $ 16,741 $ 45,938 $ 40,117
~~The impact~~the spread of the ~~cancelled voyages on Adjusted EBITDA was calculated as booked tour revenue at~~COVID-19 virus and the ~~time~~effects of ~~cancellation less insurance proceeds~~travel restrictions around the world, we suspended or rescheduled the majority of expeditions and ~~estimated operating costs.~~
~~Reconciliation of Operating Income to Adjusted EBITDA~~
~~Natural Habitat Segment~~
(In thousands) For the Three Months Ended
September 30, For the Nine Months Ended September 30,
2017 2016 2017 2016*
Operating income (loss) $ 1,478 $ 306 $ 873 $ (488 )
Depreciation and amortization 360 319 1,023 530
Adjusted EBITDA - Natural Habitat segment $ 1,838 $ 625 $ 1,896 $ 42
* 2016 results for Natural Habitat represent activity from the acquisition date of May 2016fleet operations departing March 16, 2020 through September 30, ~~2016.~~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.

~~Liquidity~~As of June 30, 2020, we had approximately $412.3 million in long-term debt obligations, including the current portion of long-term debt. We estimate that our monthly cash usage while our vessels are not in operations is approximately $10-15 million, excluding guest payments for future travel and ~~Capital Resources~~cash refunds requested on previously made guest payments. To date, the majority of guests on rescheduled voyages have requested future travel credits. Additionally, we continue to see deposits for future travel. 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 we will commence operating in the near term or if we do commence operations, that the level of initial demand will generate cash flows from operations will be available to fund future obligations. 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. There can be no assurance that debt or equity financing will be available to us on favorable terms or at all.

Sources and Uses of Cash for the ~~Nine~~Six Months Ended ~~September~~June 30 ~~2017~~, 2020 and ~~2016~~2019

Net cash ~~provided~~used by operating activitieswas ~~$29.4~~$36.8 million in ~~the nine months ended September 30, 2017~~2020 compared to ~~$15.7~~$37.2 million provided by operations in 2019, primarily due to the rescheduling of expeditions due to COVID-19 pandemic.
Net cash used in investing activities was $152.0 million in ~~the comparable period~~2020 compared to $42.3 million in ~~2016.~~2019. The ~~$13.7~~$109.7 million increase was primarily due to ~~improved operating results~~the final payment for the completion of the National Geographic Endurance, and ~~an increase~~a $30.6 million contracted installment payment for the National Geographic Resolution during the current year, partially offset by the $30.2 million initial down-payment for the National Geographic Resolution in ~~collections~~the first quarter of ~~customer deposits recognized in unearned passenger revenues.~~2019 and other capital expenditures.
Net cash ~~used in investing~~provided by financing activities was ~~$43.7~~$181.8 million in ~~the nine months ended September 30, 2017~~2020 compared to $62.5 million in the comparable period in 2016. The improvement was a result of the acquisition of Natural Habitat in the prior year, as well as a decrease in capital expenditures of $6.5 million and a decrease in purchases of restricted cash reserves and marketable securities of $2.2 million.
28
~~Net~~net cash used in financing activities of $5.0 million in 2019. The $186.8 million increase in cash provided was primarily due to borrowing $107.7 million under the first senior secured credit agreement for the final contracted payment of the National Geographic Endurance, borrowing $30.6 million under the second senior secured credit agreement for contracted installment payment on the National Geographic Resolution, and a $45.0 million drawdown of our revolving credit facility.
31

Table of Contents
Funding Sources ~~was~~
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. During March 2020, we drew $45.0 million on our Revolving Facility, maturing March 2023. The Term Facility bears interest at an adjusted Intercontinental Exchange (“ICE”) Benchmark administration LIBOR plus a spread of 3.25%, or 3.41% as of June 30, 2020, and the Revolving Facility bears interest at ICE LIBOR plus a spread of 3.00%, or 3.16% as of June 30, 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.
Senior Secured Credit Agreements
Our senior secured credit agreement (the “Export Credit Agreement”) made 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 took possession of the National Geographic Endurance and borrowed the $107.7 million under the Export Credit Agreement for the 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, or 3.31% for the period covered as of June 30, 2020.
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 Company’s new expedition ice-class vessel, 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 3.31% for the period covered as of June 30, 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 and April 2020, we drew approximately $30.5 million and $30.6 million, respectively, under the Second Export Credit Agreement for the second and third contracted payments, respectively, on the National Geographic Resolution.
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 ~~nine months ended September 30, 2017 compared~~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 ~~$11.0 million in~~ the ~~comparable period in 2016. The $2.0 million difference is primarily~~total net leverage ratio covenant through June 2021. In connection with the ~~result~~amendment, the interest rate of ~~lower deferred financing costs~~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 ~~equity purchases.~~certain covenants have been amended to be more restrictive.

The Amended Credit Agreement, the Export Credit Agreement and the Second Export Credit Agreement contain financial and restrictive covenants. As of June 30, 2020, we were in compliance with our covenants.
Funding Needs ~~and Sources~~

We ~~have historically relied~~generally rely on a combination of cash flows provided by operations and the incurrence of additional debt ~~and/or the refinancing of existing debt~~ to fund obligations. ~~Similar to others in the industry, we have historically operated with a meaningful working capital deficit. This historical deficit is mainly attributable to the fact that, under our business model, a~~A vast majority of guest ticket receipts are collected in advance of the applicable ~~sailing~~expedition date. These advance passenger receipts remain a current liability until the ~~sailing~~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 ~~sailing~~expeditions or otherwise, pay down credit facilities, ~~invest in~~make long-term investments or any other use of cash. As ~~a result~~ of ~~the proceeds from the Restated Credit Agreement and the merger, we had net working capital of $24.9 million and $47.1 million as of September~~June 30, ~~2017~~2020 and December 31, ~~2016,~~2019, we had a working capital deficit of $36.7 million and $36.3 million, respectively. As of ~~September~~June 30, ~~2017,~~2020 and December 31, 2019, we had ~~$112.3~~$80.9 million and $101.6 million, respectively, in cash and cash equivalents, excluding restricted cash.

~~In November 2015, the Company’s~~Our Board of Directors approved a ~~$20.0 million~~ stock and warrant repurchase plan ~~and~~(“Repurchase Plan”) in November ~~2016,~~2015 and increased the ~~authorization by $15.0~~repurchase plan to $35.0 million ~~to a total of $35.0 million. This~~in November 2016. The Repurchase Plan authorizes ~~the Company~~us to ~~repurchase~~purchase from time to time ~~the Company’s~~our outstanding common stock and warrants through open market repurchases in compliance with Rule 10b-18 of the Securities Exchange Act of 1934, as amended, and/or in privately negotiated transactions based on market and business conditions, applicable legal requirements and other factors.warrants. Any shares and warrants ~~repurchased~~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~~our Board of ~~Directors at any time.~~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 ~~September~~June 30, ~~2017, the Company did not repurchase shares of common stock or warrants. During the nine months ended September 30, 2017 the Company~~2020, we repurchased ~~547,058~~8,517 shares of common stock for ~~$5.1 million and 513,372 warrants for $1.1 million. The Company has~~approximately $127,000. We have cumulatively repurchased ~~855,776~~875,218 shares of common stock for ~~$8.1~~$8.3 million and ~~5,426,985~~6,011,926 warrants for ~~$13.9~~$14.7 million, since plan inception. The 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.

32

Table of Contents
In ~~December 2015,~~February 2019, we ~~executed definitive agreements for~~entered into an agreement with Ulstein Verft to construct a polar ice-class vessel, the ~~construction of two new coastal vessels for delivery targeted in 2017 and 2018. The~~National Geographic ~~Quest~~Resolution ~~was delivered in July 2017 and the Company has paid $53.6 on the contract. The~~~~National Geographic Venture~~is expected to be completed by the fourth quarter of 2018 and as of September 30, 2017 we have paid approximately $18.1 million. In November 2017, the Company executed a contract to build a polar ice class vessel targeted to be competed in January 2020, with potential accelerated delivery to November 2019,, with a total purchase price of ~~1,066.0~~1,291.0 million Norwegian Kroner ~~(NOK)~~(NOK). ~~Subsequently, LME exercised its right~~In March 2019, we entered into foreign exchange forward contract hedges to ~~make payments in United States Dollars, which resulted~~lock in a purchase price of ~~$134.6~~$153.5 million, including hedging costs. The ~~first twenty percent of the~~ purchase price is subject to bepotential adjustments from contract specifications for variations in speed, deadweight, fuel consumption and delivery date. The purchase price is due in installments, with 20% paid shortly after execution of the ~~Agreement with~~agreement, 20% in September 2019, 20% in April 2020, 10% due in April 2021 and the ~~remaining eighty percent~~final 30% due upon delivery and acceptance of the vessel. The ~~polar ice class contract includes options~~vessel is scheduled to ~~build two additional ice class vessels,~~be delivered in the ~~first~~fourth quarter of 2021. In September 2019 and April 2020, we drew approximately $30.5 million and $30.6 million, respectively, under the Second Export Credit Agreement for ~~delivery twelve months after~~ the ~~initial vessel and the second for delivery twelve months thereafter.~~contracted installment payments. The new build process exposes us to certain risks typically associated with new ship construction, which we manage through detailed planning and close monitoring by our internal marine team. The repurchaseremaining purchase price of the ~~ships has been~~vessel is expected to be funded through a combination of cash available on our balance sheet, our ~~revolving credit facility~~Second Export Credit Agreement and excess cash flows generated by our existing operations.

AsDuring March 2020, we borrowed the $107.7 million under the Export Credit Agreement for the final contracted payment of ~~September~~the National Geographic Endurance and drew $45.0 million on our Revolver Facility. During April 2020, we drew $30.6 million under the Second Export Credit Agreement for a contracted installment payment on the National Geographic Resolution. During May 2020, we amended the maturity dates of the note payable and during June 2020, we amended the senior secured credit agreements. The additional borrowings and amendments created material changes in our future obligations from those reported in our 2019 Annual Report. The additional or amended related obligations as of June 30, 2017, we had $173.6 million in long-term debt obligations, including the current portion of long-term debt and excluding debt discounts and deferred financing costs. We believe that our cash on hand, our revolving credit facility (described below) and expected future operating cash inflows will be sufficient to fund operations, debt service requirements, capital expenditures for our newbuilds and other assets and acquisitions, and our Repurchase Plan. However, there can be no assurance that cash flows from operations will be available in the future to fund future obligations. 2020 are as follows:
(In thousands)

Total

Current

1-2 years

3-4 years

Thereafter

Export Credit Agreement

$
107,695

$
2,805

$
22,436

$
41,620

$
40,834

Second Export Credit Agreement

30,644

-

-
-
30,644

Revolver

45,000

-

45,000

-

-

Note Payable

2,525

842

1,683

-

-

Off-Balance Sheet Arrangements

~~Debt Covenants~~
~~On March 7, 2016,~~In 2019, we entered into a second amended and restated credit agreement with Credit Suisse as Administrative Agent and Collateral Agent (“Restated Credit Agreement”), amending our existing senior secured credit facility with Credit Suisse (“Restated Credit Facility”). The Restated Credit Facility provides for our existing $175.0 million senior secured first lien term loan facility and a $45.0 million senior secured incremental revolving credit facility, which includes a $5.0 million letter of credit sub facility. Borrowings under the term loan facility bear interest at an adjusted ICE Benchmark Administration LIBO Rate (subject to a floor of 1%) plus a spread of 4.50% and mature on May 8, 2021. Borrowings under the revolving credit facility will bear interest at an adjusted ICE Benchmark administration LIBO Rate plus a spread of 4.00%, or, at our option, an alternative base rate plus a spread of 3.00%. We are also required to pay a 0.50% annual commitment fee on undrawn amounts under the revolving credit facility, which matures on May 8, 2020. Our obligations under the Restated Credit Facility are secured by substantially all of our assets. As of September 30, 2017, the Company had no borrowings under the revolving credit facility.
29
~~The Restated~~Second Export Credit Agreement ~~contains financial covenants that, among other things, (i) require us to maintain a total net leverage ratio (defined~~ as on any date of determination, the ratio of total debt on such date, less up to $25.0 million of the unrestricted cash and cash equivalents to Adjusted EBITDA (as defined in the Restated Credit Agreement) for the trailing 12-month period) of 4.75 to 1.00 initially, with 0.25 equal reductions annually thereafter until March 31, 2020, when the total net leverage ratio shall be 3.50 to 1.00 thereafter; (ii) limit the amount of indebtedness we may incur generally and specifically for intercompany debt, debt incurred to finance acquisitions and improvements, for capital and synthetic lease obligations, for standby letters of credit, and in connection with refinancings; (iii) limit the amount we may spend in connection with certain types of investments; and (iv) require the delivery of certain periodic financial statements and an operating budget. As of September 30, 2017, the net leverage ratio was 4.25 to 1 and we were in compliance with the financial covenants. described above.

Critical Accounting Policies

For a detailed discussion of the Critical Accounting Policies, please see ~~the Company’s~~our 2019 Annual ~~Report on Form 10-K filed on March 7, 2017 with the Securities and Exchange Commission.~~Report.

~~Off-Balance Sheet Arrangements~~
~~The Company did not have any off-balance sheet arrangements as~~
33
Table of ~~September 30, 2017 and December 31, 2016.~~
Contents

Item 3:3.
QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

There have been no material changes in our exposure to market ~~risk~~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 ~~Company’s Annual Report~~potential impact on ~~Form 10-K.~~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 June 30, 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 June 30, 2020 was $100.0 million. Based on our June 30, 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 June 30, 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 six months ended June 30, 2020, we recorded a loss of approximately $3.9 million in other comprehensive income related to these foreign exchange derivatives. The strengthening of the NOK at June 30, 2020 by a hypothetical 10%, would result in an approximately $6.0 million gain being recorded in other comprehensive income. The weakening of the NOK at June 30, 2020 by a hypothetical 10%, would result in an approximately $4.9 million loss being recorded in other comprehensive income.

Item4: 4.
Controls and Procedures

Evaluation of Disclosure Controls and Procedures
Under the supervision and with the participation of our management, including our principal executive officer and principal financial and accounting officer, we conducted an evaluation of the effectiveness of our disclosure controls and procedures as of the end of the ~~fiscal~~ quarter ended ~~September~~June 30, ~~2017,~~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 ~~fiscal~~ quarter covered by this Quarterly Report on Form 10-Q that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.

Part II.
30
~~Part~~2:~~OTHER INFORMATION~~
OTHER INFORMATION

Item1: 1.

LEGAL PROCEEDINGS

The Company is involved in various claims, legal actions and regulatory proceedings arising from time to time in the ordinary course of business. ~~In the opinion of management, there are no outstanding proceedings~~We have protection and indemnity insurance that ~~are~~would be expected to ~~have a material adverse effect on our financial position, results of operations or cash flows.~~cover any damages.

ITEM ~~1A:~~1A.

RISK FACTORS

We operate in a rapidly changing environment that involves a number of risks that could materially affect our business, financial condition or future results, some of which are beyond our control. The risks and uncertainties that we believe are most important for you to consider are discussed under the heading “Risk Factors” in ~~the Company’s~~our 2019 Annual Report filed on February 26, 2020, and those discussed in Item 1A. Risk Factors in our Quarterly Report on Form ~~10-K~~10-Q for the ~~fiscal year~~period ended ~~December~~March 31, ~~2016,~~2020, as filed on ~~March 7, 2017.~~May 6, 2020.

Table of Contents

Item 2:2.

UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS

Recent Sales by the Company of Unregistered Securities

There were no unregistered sales of equity securities during the quarter ended ~~September~~June 30, ~~2017.~~2020.

Repurchases of Securities

~~There were no purchases by us~~The Company’s Board of ~~our~~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 June 30, 2020. In March 2020, the Repurchase Plan was suspended due to the uncertain impact of the COVID-19 virus.

No shares were repurchased under the Repurchase Plan during the three months ended ~~September~~June 30, ~~2017.~~2020. 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:

Period	Total number of shares purchased		Average price paid per share		Dollar value of shares purchased as part of publicly announced plans or programs		Maximum dollar value of warrants and shares that may be purchased under approved plans or programs
April 1 through April 30, 2020 ^(a)		39,269	$	3.80	$	-	$	11,974,787
May 1 through May 31, 2020 ^(a)		8,600		7.75		-		11,974,787
June 1 through June 30, 2020 ^(a)		93		10.23		-		11,974,787
Total		47,962			$	-

(a)	Amount relates to shares withheld from vesting's of stock-based compensation awards for employee income tax withholding.

Item3: 3.

~~DEfaults upon senior securities~~

DEFAULTS UPON SENIOR SECURITIES

Not applicable.

Item4: 4.

MINE SAFETY DISCLOSURES

Not applicable.

Item5: 5.

Other information

~~Not applicable.~~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.

Table of Contents

Item6: 6.

exhibits

Number

~~Number~~Description

Included

Form

Filing Date

10.1

~~Description~~Amendment No 2 to the Senior Secured Credit Agreement dated January 8, 2018 among the Company and LEX Endurance Ltd. with Citibank, N.A. and Eksportkreditt Norge AS.

~~Included~~Incorporated by reference

~~Form~~8-K

~~Filing Date~~June 15, 2020

~~31.1~~10.2

Amendment No 1 to the Senior Secured Credit Agreement dated April 8, 2019 among the Company and Bluewater II Limited with Citibank, N.A. and Eksportkreditt Norge AS.

Incorporated by reference

8-K

June 15, 2020

10.3

Amendment No. 1 to the Third Amended and Restated Credit Agreement dated March 27, 2018, among Lindblad Expeditions, LLC and Lindblad Maritime Enterprises, Ltd. as borrowers, the Company, the lenders party thereto, and Credit Suisse AG, as Administrative Agent and Collateral Agent, and Credit Suisse Securities (USA) LLC, JPMorgan Chase Bank, N.A. and Citibank, N.A. as Joint Bookrunners, Joint Lead Arrangers and Syndication Agents.

Herewith

31.1

Certification of Chief Executive Officer of Lindblad Expeditions Holdings, Inc. pursuant to Rule 13a-14(a) or Rule 15d-14(a) promulgated under the Securities Exchange Act of 1934, as amended.

Herewith

31.2

Certification of Chief Financial Officer of Lindblad Expeditions Holdings, Inc. pursuant to Rule 13a-14(a) or Rule 15d-14(a) promulgated under the Securities Exchange Act of 1934, as amended.

Herewith

32.1

Certification of Chief Executive Officer of Lindblad Expeditions Holdings, Inc. pursuant to Rule 13a-14(b) promulgated under the Securities Exchange Act of 1934, as amended, and 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.

Herewith

32.2

Certification of Chief Financial Officer of Lindblad Expeditions Holdings, Inc. pursuant to Rule 13a-14(b) promulgated under the Securities Exchange Act of 1934, as amended, and 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.

Herewith

101.INS

Inline XBRL Instance Document (the Instance Document does not appear in the Interactive Data File because its XBRL tags are embedded within the Inline XBRL document)

Herewith

101.SCH

Inline XBRL Taxonomy extension schema document

Herewith

101.CAL

Inline XBRL Taxonomy extension calculation ~~linkbase~~link base document

Herewith

101.DEF

Inline XBRL Taxonomy Extension Definition Link base

Herewith

101.LAB

Inline XBRL Taxonomy extension label link base document

Herewith

101.PRE

Inline XBRL Taxonomy extension presentation link base document

Herewith

104

~~Herewith~~Cover Page Interactive Data File (formatted as Inline XBRL and contained in Exhibit 101)

~~101.LAB~~

~~Taxonomy extension label linkbase document~~

~~Herewith~~

~~101.PRE~~

~~Taxonomy extension presentation linkbase document~~

~~Herewith~~

Table of Contents

SIGNATURE

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized, on ~~November 7, 2017.~~August 10, 2020.

	LINDBLAD EXPEDITIONS HOLDINGS, INC.
	(Registrant)

	By	/s/ Sven-Olof Lindblad
		Sven-Olof Lindblad
		Chief Executive Officer and President