Note 12 - Commitments and Contingencies

3 Months Ended

Mar. 31, 2021

Notes to Financial Statements

Commitments and Contingencies Disclosure [Text Block]

NOTE 12 — COMMITMENTS AND CONTINGENCIES

Fleet Expansion

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

Redeemable Non-Controlling Interest  

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

Mr. Lawrence, in a combination of his minority interest and profit interest units, retains a 19.9% noncontrolling interest in Off the Beaten Path, which is subject to a put/call arrangement. The arrangement between the Company and Mr. Lawrence was established in order to provide a formal exit opportunity for Mr. Lawrence and a path to 100% ownership for the Company. Mr. Lawrence has a put option, that under certain conditions and subject to providing notice by October 31, 2025, that enables him, but does not obligate him, to sell his remaining interest in Off the Beaten Path to the Company on December 31, 2025. The Company has a call option, but not an obligation, with an expiration of December 31, 2030, under which it can buy Mr. Lawrence’s remaining interest at a similar fair value measure as Mr. Lawrence’s put option.

Mr. Levine, founder of DuVine, retains a 30% noncontrolling interest in DuVine, which is subject to a put/call arrangement. The arrangement between the Company and Mr. Levine was established in order to provide a formal exit opportunity for Mr. Levine and a path to 100% ownership for the Company. Mr. Levine has a put option, that under certain conditions and subject to providing notice by January 31, 2026, that enables him, but does not obligate him, to sell his remaining interest in DuVine to the Company as of December 31, 2025. The Company has call options, but not an obligation, with a first call option to on or after December 31, 2023, expiring December 31, 2025, to acquire an additional 10% of DuVine from Mr. Levine, and a second call option with an expiration of December 31, 2030, under which it can buy Mr. Levine’s remaining interest at a similar fair value measure as Mr. Levine’s put option, subject to a call purchase price minimum.

Since the redemption of the noncontrolling interests are not solely in the Company’s control, the Company is required to record the redeemable noncontrolling interest outside of stockholders’ equity but after its total liabilities. In addition, if it is probable that the instrument will become redeemable, as such solely due to the passage of time, the redeemable noncontrollable interest should be adjusted to the redemption value via one of two measurement methods. The Company elected the income classification-excess adjustment and accretion methods for recognizing changes in the redemption value of the put options. Under this methodology, a calculation of the present value of the redemption value is compared to the carrying value of the redeemable noncontrolling interest and the carrying value of the redeemable noncontrolling interest is adjusted to the redemption value’s present value. Any adjustments to the carrying value of the redeemable noncontrolling interest, up to the fair value of the noncontrolling interest, are classified to retained earnings. Adjustments in excess of the fair value of the noncontrolling interest, are treated as a decrease to net income available to common stockholders.

The fair value of the put options were determined using a discounted cash flow model. The redemption values were adjusted to their present value using the Company’s weighted average cost of capital.

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

	For the three months ended March 31,
(In thousands)	2021			2020
	(unaudited)
Beginning balance	$	7,494		$	16,112
Net loss attributable to noncontrolling interest		(619	)		(537	)
Acquired businesses' noncontrolling interest		3,598			-
Fair value adjustment of put option		-			901
Balance March 31,	$	10,473		$	16,476

Royalty Agreement – National Geographic

The Company is party to an alliance and license agreement with National Geographic, which allows the Company to use the National Geographic name and logo. In return for these rights, the Company is charged a royalty fee. The royalty fee is included within selling and marketing expense on the accompanying condensed consolidated statements of operations. The amount is calculated based upon a percentage of certain ticket revenues less travel agent commission, including the revenues received from cancellation fees and any revenues received from the sale of pre- and post-expedition extensions. Royalty expense for the three months ended March 31, 2021 and 2020 was $0.0 million and $1.2 million, respectively.

The royalty balances payable to National Geographic as of March 31, 2021 and December 31, 2020 were each $0.0 million. If there were any royalty balances they would have been included in accounts payable and accrued expenses on the accompanying condensed consolidated balance sheets.

Royalty Agreement – World Wildlife Fund

Natural Habitat has a license agreement with WWF, which allows it to use the WWF name and logo. In return for these rights, Natural Habitat is charged a royalty fee and a fee based on annual gross sales. The fees are included within selling and marketing expense on the accompanying condensed consolidated statements of operations. This royalty fee expense was $0.0 million and $0.2 million for the three months ended March 31, 2021 and 2020, respectively.

Charter Commitments

From time to time, the Company enters into agreements to charter vessels onto which it holds its tours and expeditions. Future minimum payments on its charter agreements as of March 31, 2021 are as follows:

For the years ended December 31,	Amount
(In thousands)
2021	$	5,421
2022		3,984
Total	$	9,405

Legal Proceedings

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