Note 12 - Commitments and Contingencies

9 Months Ended

Sep. 30, 2022

Notes to Financial Statements

Commitments and Contingencies Disclosure [Text Block]

NOTE 12—COMMITMENTS AND CONTINGENCIES

Redeemable Non-Controlling Interest

The Company has controlling interests in its Natural Habitat, Off the Beaten Path, DuVine and Classic Journeys consolidated subsidiaries. The noncontrolling interests are subject to put/call agreements. The put options enable the minority holders, but do not obligate them, to sell the remaining interests to the Company. The Company has call options which enable it, but does not obligate it, to acquire the remaining interests in the subsidiaries, subject to certain dates, expirations and similar redemption value purchase measurements as the put options.

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 redemption value of the noncontrolling interest, are classified to retained earnings. Adjustments in excess of the redemption value of the noncontrolling interest, are treated as a decrease to net income available to common stockholders.

The redemption 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 September 30,					For the nine months ended September 30,
(In thousands)	2022		2021			2022		2021
	(unaudited)					(unaudited)
Beginning balance	$	19,595	$	10,036		$	10,626	$	7,494
Net income (loss) attributable to noncontrolling interest		3,228		1,039			3,000		(17	)
Redemption value adjustment of put option		8,760		-			17,957		-
Acquired businesses' noncontrolling interest		-		(941	)		-		2,657
Ending balance	$	31,583	$	10,134		$	31,583	$	10,134

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 fee is calculated based upon a percentage of certain ticket revenues less travel agent commission, including the revenues received from cancellation fees and any revenues received from the sale of pre- and post-expedition extensions. Royalty expense for the three and nine months ended September 30, 2022 was $1.9 million and $4.5 million, respectively, and was $0.7 million and $0.9 million for the three and nine months ended September 30, 2021, respectively.

The royalty balance payable to National Geographic as of September 30, 2022 and December 31, 2021 was $1.8 million and $0.9 million, respectively, and are included in accounts payable and accrued expenses on the accompanying condensed consolidated balance sheets.

Royalty Agreement – World Wildlife Fund

Natural Habitat has a license agreement with WWF, which allows it to use the WWF name and logo. In return for these rights, Natural Habitat is charged a royalty fee and a fee based on annual gross sales. The fees are included within selling and marketing expense on the accompanying condensed consolidated statements of operations. This royalty fee expense was $0.4 million and $1.0 million for the three and nine months ended September 30, 2022, respectively, and $0.2 million and $0.3 million for the three and nine months ended September 30, 2021, 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 September 30, 2022 are as follows:

For the years ended December 31,	Amount
(In thousands)	(unaudited)
2022 (three months)	$	3,130
2023		12,188
Total	$	15,318