Lindblad Expeditions Holdings, Inc. — 2015 Form 10-K
Reporting period: Fiscal year ended December 31, 2015. The filing also reports unaudited fourth-quarter results. Lindblad completed its merger with Capitol Acquisition Corp. II on July 8, 2015; the transaction included $90.0 million cash consideration and 20.0 million shares. The merger is accounted for as a reverse acquisition, with Lindblad’s historical results presented as the company’s results.
Business context and financial performance
Lindblad operates expedition cruises and adventure travel, with six owned ships and four seasonal charter vessels at year-end. Its National Geographic alliance supports co-marketing, branding, and expedition programming. The company operates as one reportable segment.
| Metric | 2015 | 2014 | Change |
|---|---|---|---|
| Tour revenue | $210.0 million | $198.5 million | +5.8% |
| Gross profit / margin | $114.6 million / 54.6% | $108.5 million / 54.6% | Margin unchanged |
| Operating income / margin | $15.5 million / 7.4% | $30.4 million / 15.3% | Down 49.0% |
| Net income / margin | $19.7 million / 9.4% | $22.2 million / 11.2% | Down 11.3% |
| Diluted earnings per share | $0.43 | $0.44 | Down $0.01 |
| Adjusted EBITDA | $46.8 million | $44.6 million | +5.0% |
| Occupancy | 91.8% | 92.9% | Down 1.1 percentage points |
| Net yield | $971 | $950 | +2.2% |
Fourth-quarter 2015 revenue was $46.5 million, gross profit was $22.4 million, and net loss was $0.4 million, or $0.01 per diluted share. The comparable fourth-quarter 2014 figures were revenue of $44.8 million, gross profit of $23.4 million, and net income of $1.4 million, or $0.03 per diluted share.
Cash flow, debt, and liquidity
- Operating cash flow was $40.3 million, versus $43.1 million in 2014. Investing activities used $81.5 million, including $68.1 million related to CFMF and $14.8 million of property and equipment purchases. Financing activities provided $208.5 million, reflecting $175.0 million of new debt and $186.8 million of net merger proceeds, partly offset by merger payments, debt repayment, financing costs, and warrant repurchases.
- Year-end cash and cash equivalents were $206.9 million, compared with $39.7 million a year earlier; restricted cash and marketable securities were another $8.5 million. Net working capital was $130.0 million, compared with a $59.7 million deficit in 2014.
- Debt principal was $174.1 million, or $164.4 million net of discounts and deferred financing costs. The term loans mature May 8, 2021, bear interest at a floating benchmark rate plus 4.50%, and had a 5.50% rate at year-end. Debt is secured by substantially all company assets. The company reported covenant compliance at December 31, 2015.
- On March 7, 2016, the company amended its facility to add a $45.0 million revolving credit facility, with a $5.0 million letter-of-credit subfacility; there were no revolver borrowings as of that date.
- The filing estimates that a 100-basis-point rise in interest rates would reduce annual pretax earnings by approximately $1.7 million, based on year-end debt outstanding.
Material changes, outlook, and risks
- Revenue growth reflected higher guest ticket revenue from additional owned and chartered voyages and increased pricing, partly offset by slightly lower occupancy. Cost of tours rose 6.0%; adjusted net cruise cost per available guest night increased 2.1% to $717.
- Operating income fell as operating expenses increased to $99.1 million from $78.0 million. These included $13.3 million of merger-related costs, including transaction fees and success-fee compensation, and higher stock-based compensation, selling and marketing costs, and professional fees.
- Net income included a $7.5 million gain on transfer of assets and $5.0 million of other income, alongside a $2.6 million income tax benefit. Net interest expense rose to $10.9 million from $5.3 million, partly because of higher debt and accelerated amortization of financing costs.
- Management reported that 85% of expected 2016 guest ticket revenue had been booked as of March 7, 2016. It planned two 100-guest coastal vessels, priced at $48.0 million and $46.8 million, for delivery in the second quarters of 2017 and 2018. It also agreed to acquire the Via Australis for $18.0 million, with up to $10.0 million planned for renovation; the vessel was intended to replace the National Geographic Endeavour in the Galápagos.
- Principal risks include discretionary travel demand and geopolitical disruption; vessel construction, maintenance, and operating-cost exposure; floating-rate debt and covenant compliance; currency and fuel-price changes; regulatory restrictions on destinations, including Galápagos permits; and dependence on the National Geographic alliance. The alliance agreements were extended through 2025; National Geographic accounted for approximately 24% of guest ticket revenue in 2015.
- The company had $118.8 million of fleet-expansion purchase obligations at year-end. Its $20.0 million repurchase plan included 2.1 million warrants repurchased during fourth-quarter 2015 for $5.5 million. No cash dividends were planned for the foreseeable future.
- A former-employee injury lawsuit was settled, pending funding by the company’s protection and indemnity insurer; management stated it had no material operating impact. The filing reported effective disclosure controls, but the auditor did not audit internal control over financial reporting.
Important facts for investors to verify
- Review whether revenue growth, net yield, occupancy, and advance bookings support the planned capacity expansion and its expected returns.
- Assess debt service, floating-rate exposure, leverage-covenant headroom, and the availability and terms of the new revolver.
- Track actual construction costs and delivery timing for both newbuilds, and the acquisition, refurbishment, and replacement schedule for the Via Australis.
- Reconcile reported net income with one-time merger expenses, asset-transfer gains, other income, and the tax benefit; consider the company’s non-GAAP Adjusted EBITDA adjustments.
- Monitor National Geographic relationship terms and revenue-channel dependence, as well as Galápagos permit renewal and other destination-access risks.