History

We were originally incorporated in Delaware on August 9, 2010 with the name Capitol Acquisition Corp. II as a blank check company to acquire, through a merger, share exchange, asset acquisition, stock purchase, plan of arrangement, recapitalization, reorganization or other similar business combination, one or more businesses or entities.

On July 8, 2015, we completed a series of mergers whereby Lindblad Expeditions, Inc., a New York corporation, became our wholly-owned subsidiary. As consideration for the mergers, the total purchase price consisted of an aggregate of (i) $90.0 million in cash (a portion of which was paid as transaction bonuses) and (ii) 20,017,787 shares of our common stock. We also assumed outstanding stock options and converted such options into options to purchase an aggregate of 3,821,696 shares of our common stock with an exercise price of $1.76 per share.

Immediately following the mergers, we changed our name to Lindblad Expeditions Holdings, Inc.

Overview

We provide expedition cruising and adventure travel experiences. We provide itineraries that feature up-close encounters with wildlife and nature, history and culture and promote guest empowerment and interactivity. Our mission is offering life-changing adventures on all seven continents, and pioneering innovative ways to allow our guests to connect with exotic and remote places.

We currently operate a fleet of six expedition ships owned by our subsidiaries and four seasonal charter vessels. We also have two new 236-foot, 100-passenger cruise vessels being constructed with delivery expected in the second quarter of 2017 and the second quarter of 2018, respectively, as well as a definitive purchase agreement to acquire a vessel to replace one of our six owned expedition ships. Our expedition ships are customized, nimble and intimately-scaled vessels that are able to venture where larger cruise ships cannot, thus allowing us to offer truly authentic, 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.

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 offerings appeal to a wide range of travelers, both individuals and families, but affluent individuals in the U.S. aged 50 years or older represent our largest segment. By providing such offerings, which we work continuously to innovate and further elevate, we have been able to achieve and maintain premium pricing in the market instead of pursuing the type of discounting in which most large cruise lines that are focused on the broader market engage. Our product offering, value proposition and differentiated pricing approach support our high net yields and occupancy rates.

Our business benefits from significant visibility into future revenues, as our guests generally plan and book their voyages far in advance of their departure dates. As of March 7, 2016, 85% of Lindblad’s expected guest ticket revenues for 2016 had been booked.

Expedition Heritage

Our leadership and expertise today is built on the Lindblad family’s decades of experience in expedition adventure travel. Sven-Olof Lindblad, the founder, President and Chief Executive Officer of the Company, comes from a rich expedition heritage. The International Association of Antarctica Tour Operators, which was established in 1991, believes that the concept of expedition cruising, coupled with education as a major theme, began when Lars-Eric Lindblad, Mr. Lindblad’s father, led the first traveler’s expedition to Antarctica in 1966. Lars-Eric Lindblad has also been recognized by The New York Times , Travel + Leisure Magazine and other publications for his vision and leadership in developing what is today known as expedition travel. Believing that educated people who saw things with their own eyes would be a potent force for the preservation of the places they visited, Lars-Eric Lindblad worked to promote conservation and restoration projects worldwide. Mr. Lindblad founded Lindblad in 1979, expanding the legacy of his father by providing expanded marine experiences around the world.

Under Mr. Lindblad’s leadership, we have led innovation in the expedition adventure travel industry. We pioneered expeditions in the High Arctic and Baja California’s Sea of Cortez and created what we view as the most innovative and in-depth expedition program in Alaska. We initiated the use of kayaks for active exploration in the Polar Regions and in the Galápagos, a feature which is now available on all of our expeditions to enable personal, water-level encounters with nature. We were also one of the first to develop an undersea exploration program as part of a small ship expedition utilizing state-of-the-art equipment and technology.

Competitive Strengths

Our management team believes the following characteristics of our business model will enable us to successfully execute our strategy:

Expertise and Name Recognition

For over 35 years, we have been offering expedition cruising, known for facilitating guests’ access to interpersonal educational experiences in remote places. As a pioneer in the sector, we have established deep expertise and knowledge of operating expedition cruises in extreme locations. We have earned awards and honors from various representatives of the travel industry, including recognition for the quality of our offerings and our support for conservation and sustainable tourism.

In 2015, we were awarded the Legacy in Travel Philanthropy Award by Tourism Cares, the charitable arm of the travel and tourism industry, recognizing our longstanding commitment to environmental conservation. We were also named the 2015 World’s Leading Green Cruise Line by the World Travel Awards.

Also in 2015, Conde Nast Traveler rated us as one of the Top Small Ship Cruise Lines for the second consecutive year. We have also been named to the Travel + Leisure World’s Best List for Small-Ship Cruise Lines six times since 2008.

In 2013, we won the Travel + Leisure Global Vision Award for Leadership. This award recognized travel operators with a focus on extraordinary ways that travelers can give back to the places they visit.

Virtuoso awarded us our Sustainable Tourism Leadership Supplier Award in 2013, an award honoring outstanding leadership and commitment to sustainable tourism principles and practices among Virtuoso suppliers.

When customers select an expedition provider for the types of journeys that we offer, we believe that being known as a trusted brand in the market is a significant competitive strength.

Compelling Expedition Offerings

Our brand is known for delivering voyages that offer in-depth exploration opportunities in locations around the world. Expeditions are operated on intimately-scaled ships with capacities ranging between 28 and 148 guests, fostering a friendly atmosphere on board and extensive interaction between guests, crew and the teams of world class scientists, naturalists, researchers, and photographers that participate in the expeditions. The vessels are nimble and can access locations that are unattainable for large cruise ships, allowing for in-depth exploration itineraries and viewpoints. The ships are customized to provide our signature adventure experiences and activities, such as kayaking among Antarctic icebergs to view penguins or traveling on a Zodiac for an up-close encounter with a whale. We are continuously focused on maintaining and elevating the guest experience and identifying new opportunities to help people discover the wonders of the world. We believe that our expedition offerings and our track record of innovation represent significant competitive advantages for us.

Strong Financial Profile

Our business model allows us to generate consistent free cash flow with high revenue visibility. Our guests plan and book their voyages on average nine months in advance, with a deposit due upon booking, providing us insight into future revenue and a source of cash flow. Based on our product offerings, we are able to support premium pricing with minimal discounting, and benefit from low requirements for maintenance capital expenditures, minimal working capital needs and favorable tax attributes. For the years ended December 31, 2015, 2014 and 2013, we achieved an Adjusted EBITDA of $46.8 million, $44.6 million and $36.5 million, respectively, which represents a compounded annual growth rate of 13.2% since 2013.

We also have a strong cash position, providing us with ample financial flexibility to pursue growth opportunities through investment in new vessels, new charters, tactical land-based products or potential acquisitions of ships or other operators, while still maintaining a prudent capital structure.

Significant Growth Opportunities

We believe affluent Americans aged 50 and above define their retirement as “a time to travel and explore new places,” favoring travel experiences such as expedition cruising. This has led to strong growth in the specialty cruise segment and we believe these trends will continue. We plan to expand the number of ships in our fleet, including chartered vessels, from 10 to 13 over the next several years, and have signed a construction agreement to build two new coastal vessels with expected deliveries on target for the second quarter of 2017 and 2018, respectively. Additionally, we believe that our platform will be well positioned to opportunistically seek accretive purchases of operators that lack scale and capital, further extending our growth prospects.

Experienced Management Team

We are led by a management team comprised of individuals drawing on a diverse knowledge base and skill sets acquired through extensive experience in expedition cruising and adventure travel. Mr. Lindblad, our founder, President and Chief Executive Officer, who has decades of experience in the sector, built the Company up to our current fleet of six owned and four chartered vessels while carefully establishing the values and brand for which we are now known. Ian T. Rogers, our Chief Operating Officer, joined us in 2009 and has over 25 years of hospitality and cruise experience. John T. McClain, our Chief Financial Officer, joined us in 2015 and brings a long history of leadership positions in a wide range of public companies. Overall, the members of our senior management team have many years of experience in the maritime, adventure, marketing and hospitality sectors.

Sven-Olof Lindblad founded Lindblad and has been its President and Chief Executive Officer since its inception. Mr. Lindblad’s travel background and familiarity with adventure-travel and wildlife dates back to his childhood and his extensive travels with his father, Lars-Eric Lindblad. Mr. Lindblad founded Lindblad in order to offer innovative and educational travel expeditions to the world’s most remarkable places, capturing the true spirit of adventure. In May 2006, Mr. Lindblad received international recognition for his model of tourism in a ceremony hosted by HRH, Grand Duke Henri of Luxembourg at the Grand-Ducal Palace. In addition, a newly discovered endemic species of moth in the Galápagos Islands, Undulambia lindbladi, has been named in honor of Mr. Lindblad. Mr. Lindblad is an honorary member of the General Assembly of the Charles Darwin Foundation for the Galápagos Islands; serves on the Board of The Safina Center and on the National Geographic Council of Advisors; is commissioner of the Aspen Institute’s Commission on Arctic Climate Change; is a founding member of the non-profit organization, Ocean Elders, which brings together global leaders to pursue the protection of the ocean’s habitat and wildlife; and serves on the Board of Advisors for Pristine Seas.

Ian T. Rogers joined Lindblad in the spring of 2009 as its Chief Financial Officer and Treasurer and in 2014 his role expanded to also include the positions of Vice President and Chief Operating Officer. In connection with the appointment of John T. McClain as our Chief Financial Officer in November 2015, Mr. Rogers ceased serving as our Chief Financial Officer at such time. During 2008, Mr. Rogers served as an independent financial consultant to Lindblad. Mr. Rogers served as Chief Financial Officer for E Suites Hotels, LLC from 2007 to 2008 and was Chief Financial Officer of Tauck World Discovery from 2006 to 2007. From 1992 to 2006 Mr. Rogers was Senior Director of Finance, Vice President of Finance and Divisional CFO of Carlson Hotels Worldwide (Carlson Companies). Mr. Rogers has broad experience in hotel, travel, leisure and cruise businesses in the U.S., Eastern Europe, the Caribbean and the Middle East. Mr. Rogers holds an M.B.A. from the University of Minnesota and a B.S. in Hospitality Management from the University of Bournemouth, UK. 

John T. McClain joined us as Chief Financial Officer in November 2015. Mr. McClain previously served as the Chief Financial Officer of The Jones Group Inc., a leading global designer, marketer and wholesaler of over 25 brands, from July 2007 until the sale of the company to Sycamore Partners in April 2014. From April 2014 to August 2014, he continued to provide Senior Advisor services related to financial operations to The Jones Group Inc. Mr. McClain has served on the board of Nine West Holdings from April 2014 through October 2015, the board and audit committee of Lands’ End since May 2014 and as a trustee of Seritage Growth Properties since June 2015. Mr. McClain has also held a number of roles at Avis Budget Group, Inc. formerly Cendant Corporation. He joined Cendant Corporation in September 1999, serving as the Senior Vice President, Finance & Corporate Controller until 2006. From July 2006 to 2007, Mr. McClain served as the Chief Accounting Officer of Avis and Chief Operating Officer of Cendant Finance Holdings. Mr. McClain previously held leadership roles at Sirius Satellite Radio Inc. and ITT Corporation. Mr. McClain holds a B.S. in Accounting from Lehigh University.

Dean (Trey) Byus III joined Lindblad in 1993 as an Expedition Leader and since 2009 has served as Lindblad’s Chief Expedition Officer, overseeing programming for Lindblad’s vessels. Prior to 2009, Mr. Byus served as Lindblad’s Vice President of Operations and Program Development, Director of Field Staff & Expedition Technology, Director of Field Staff and Expedition Leader. Mr. Byus has worked in regions around the world and has extensive experience in managing Lindblad’s naturalists, historians, Expedition Leaders, vessel itineraries and business development, including working with National Geographic. Mr. Byus holds a B.A. from the University of Washington .

Richard P. Fontaine joined Lindblad as Chief Marketing Officer in July 2013, and oversees all marketing and sales initiatives, including public relations, communications and corporate brand positioning efforts. Mr. Fontaine brings more than 25 years of experience in consumer-direct marketing for highly-regarded lifestyle media and merchandising brands. From February 1997 until July 2013, Mr. Fontaine served as SVP, Consumer Marketing for Martha Stewart Living Omnimedia, Inc. (MSLO). Previously, Mr. Fontaine served in product management/marketing roles at Time Inc./Sports Illustrated, and MBI, Inc./The Danbury Mint. Mr. Fontaine holds a B.A. in Economics from Cornell University.

J. Tyler Skarda joined us as Senior Vice President, Marine Operations in January 2016 and oversees our marine operations and marine fixed assets. Mr. Skarda brings over two decades of maritime industry experience, focused on strategy, capital equipment procurement cost reduction, and shipbuilding/ship operations process improvement for global maritime companies and their suppliers. Prior to joining us, Mr. Skarda served as a consultant with the leading global management consulting firm, A.T. Kearney. Mr. Skarda started his career in the United States Navy and later worked in the Office of the Secretary of Defense as a senior maritime industry analyst prior to leaving the service. Mr. Skarda holds a B.S. in electrical engineering from California State University, Sacramento and an M.B.A. from the Fuqua School of Business at Duke University.

Industry and Market

We believe the specialty and small ship cruising segment of the cruise industry demonstrates the following positive fundamentals:

Favorable Characteristics of Cruise Industry

Cruising is a vacation alternative with broad appeal, as it offers a wide range of products, destinations and experiences to suit the preferences of vacationing consumers of all ages, wealth levels and nationalities. The multi-night global cruise industry is predominantly made up of large ships of over 1,000 berths with per diem pricing of $100 to $250 per person, which is designed to reach a mass market audience. This market segment has grown significantly but still remains relatively small compared to the broader global vacation industry, reflecting significant room for growth. According to the Global Economic Contribution of Cruise Tourism 2014 by Business Research & Economic Advisors, published in October 2015, the cruise industry has experienced steady growth over the past 30 years. Between 2004 and 2014, demand for cruising worldwide increased from 13.1 million passengers to 22.0 million passengers, an increase of 68%, whereas over a similar period, global tourism has only risen by 45%. According to a Cruise Lines International Association (“CLIA”) 2015 State of the Cruise Industry Report and a STR Global census database, there were about 482,000 beds in the global cruise industry in 2014, which is less than 4% of the number of worldwide hotel rooms as of December 2015. Cruising is considered a well-established vacation sector in the North American market, a growing sector over the long-term in the European market and a developing but promising sector in several other markets.

Strong Growth in Specialty and Small Ship Cruising Segment

The specialty and small ship cruising segment of the cruise industry is characterized by the smallest vessel size, itineraries, active adventures, gourmet culinary programs, highly personalized service, and a more inclusive offering. These exclusive attributes, combined with limited supply growth and a growing worldwide target population, provide specialty and small ship cruising operators with significant pricing leverage as compared to the other segments of the cruise industry.

The specialty cruise segment has demonstrated strong growth as consumers increasingly prefer experiences over other forms of discretionary spending. According to CLIA, specialty cruises grew by 21% annually from 2009 to 2014. In a December 2015 survey of CLIA-member travel agents, 83% expect increased bookings in 2016 from the prior year, with 40% of the agents anticipating growth of 10% or greater. Despite this consistent growth, we believe the specialty cruise industry still has low penetration levels compared to similar land-based vacations, which we believe highlights the continued growth potential for the specialty cruise market.

The specialty cruise segment includes expeditions to destinations around the world, such as those included in our itineraries. This sub-segment also benefits from positive growth of the broader adventure travel industry. Adventure travel grew 65% year-over-year from 2009 to 2012 into a $263 billion industry, according to the 2013 Adventure Tourism Market Study conducted by George Washington University and the Adventure Travel Trade Association. This growth was partly attributed to a 59% increase in the appeal of adventure trips, and a 60% increase in average spending per adventure trip, driven partly by an increase in the average trip length from seven days in 2009 to nine days in 2012.

Attractive Target Market Demographics

Our offerings appeal to a wide range of travelers, both individuals and families, but affluent individuals in the U.S. aged 50 years or older represent our largest segment. We believe that our small ship expedition offerings, with itineraries that promote up-close encounters with wildlife, nature and culture, have significant appeal to this target market. These individuals are also generally near-retirement or retired and have the leisure time and disposable income available to pursue the type of activities that we provide. Based on the U.S. Census Bureau’s 2014 National Projections, the age group of 45 years and older numbered approximately 130 million individuals in 2014, or approximately 41% of the U.S. population, and is expected to grow to approximately 140 million in 2020, an increase of approximately 8%. In comparison, over the same time period the age group of 18 years and younger is projected to increase by approximately 1% and the age group of 18 year to 44 years is projected to increase by approximately 4%.

High Barriers to Entry

The adventure travel and specialty cruise industries in which we operate are characterized by high barriers to entry, which include the expertise and experience required to operate safely and effectively in remote locations, the existence of well-established and trusted brands, the time and personal relationships required to develop strong networks of experts to lead and support expeditions, the cost and time required to build the strong travel agent network partnerships necessary for success, local permits or licenses required to operate in a diverse range of geographies, large capital expenditures, and operational insight required to build new and sophisticated ships suited for such specialized activities.

The growth of the cruise industry depends, however, on consumers’ discretionary spending, and in the event that consumers’ disposable income or consumer confidence decreases as a result of an economic downturn or other factors, demand for cruises could decrease. See “ Risk Factors – Risks Related to Our Business and Operations – Adverse worldwide economic, geopolitical or other conditions could reduce the demand for expedition cruises and adversely impact our operating results, cash flows and financial condition, including potentially impairing the value of our fleet and other assets .”

Business and Growth Strategies

The following are the key components of our business strategy:

Deliver Exceptional Guest Experiences

Our chief governing principle throughout the organization is to ensure that everything adds value to the guest experience. This applies to every step of the process from the first engagement with a potential guest, through the booking process and travel preparations, the actual expedition, whether onboard the vessel or off on explorations, and once back at home.

We believe that our guests do not want to be passive tourists, so our expeditions foster active engagement. Our ships are equipped with tools for exploration to get our guests out in the open for up-close forays, or to let guests see deeper into the marine or terrestrial environments surrounding them. It is our goal to provide guests with differentiated opportunities such as watching a killer whale circling a seal on an ice flow, while standing next to a marine biologist and an experienced nature photographer from National Geographic. An experienced expedition team adds to the guests’ understanding and appreciation, through dedicated observation, insightful commentary and engaging presentations that weave the expedition into a cohesive narrative. This intense focus on seeking to elevate the overall experience and engaging with guests has resulted in highly favorable customer feedback, as collected by us and as reflected in the numerous industry honors we have received. We believe that by consistently delivering exceptional experiences to our guests, we have built a highly valuable and trusted brand in the expedition cruising market which attracts a growing number of customers, and in particular, discerning and affluent guests who are prepared to pay a premium for our offerings.

High Visibility and Differentiated Revenue Management Strategy

Given the nature of our expeditions and the expectation that our guests will seek to plan such trips with substantial notice, we begin to market our voyages approximately 12 to 18 months in advance of the departure date, depending on the destination. Guests book their trips, on average, nine months prior to sail date, paying a deposit at booking and the final payment 60 to 120 days within the date of travel, dependent upon selected voyage. Unlike the large cruise line operators that serve the broader market, our product offering is inclusive of most costs and therefore the advance customer payments provide us strong visibility into future revenues and the associated cash flows. By having such visibility of future business, we can more effectively manage any additional sales and marketing efforts that may be required to ensure that the programs reach their targeted occupancy levels. We do not believe in driving participation through discounting and do not generally pursue such strategies. Instead, we focus on voyage enhancements that add significant value to the product without much incremental cost, as well as targeted marketing efforts in order to strengthen occupancy rates, if required. Based on our offerings, the targeted audience and premium pricing, our guests are generally older, more affluent and do not travel with three or four individuals in one cabin. As it is industry convention to base 100% occupancy on two persons per cabin, we may report occupancy levels that are somewhat lower than the large cruise lines serving the broader market. However, the occupancy statistics nevertheless reflect appropriately that we are operating close to full occupancy. We have achieved strong occupancy rates in the last three years (based on two persons per cabin), specifically 91.8% in 2015, 92.9% in 2014 and 92.4% in 2013. As of March 7, 2016, 85% of our expected guest ticket revenues for 2016 had been booked.

Maximize and Grow Net Yields

We have historically achieved high net yields and continue to see opportunities for growth. Net yield is a frequently referenced metric used in the cruise industry and refers to tour revenues net of commissions and certain direct costs in a specific period divided by the number of available guest nights. Our net yields are driven by our offerings, premium pricing and ancillary guest revenue, such as pre- or post-voyage trip extensions, add-on optional activities, trip insurance, and onboard spend, including spa services and alcoholic beverages. Our net yields were $971, $950 and $931 in 2015, 2014 and 2013, respectively. These net yield amounts reflect annual growth rates of 2.2% from 2014 to 2015 and 2.0% from 2013 to 2014. Furthermore, while our use of net yield may not be comparable to companies in the industry, our net yield in 2015 was significantly higher than the large scale cruise line operators. We expect to be able to continue our track record of maintaining strong pricing and growing ancillary guest revenues through increased sales focus and marketing efforts, particularly of pre- and post-voyage extensions on which we have not historically placed significant emphasis.

Elevate Brand Awareness and Loyalty

Our brand is recognizable by our guests primarily due to our heritage, decades of sales and marketing investment and long-standing strategic alliance with National Geographic. We believe we have fostered strong guest and brand loyalty, which is evidenced by our high levels of repeat guests. In 2015, 37% of guests booked through our U.S. office were past guests. We have closely aligned our marketing efforts with National Geographic to maximize impact in the marketplace and have engaged in a co-branding strategy with respect to our owned vessels. In addition, we are recognized as a leader in promoting the issue of conservation of the planet and encourage our guests to become engaged through the Lindblad Expeditions – National Geographic Joint Fund for Exploration and Conservation (“LEX-NG Fund”). In the past, we have organized high level meetings in the Arctic, Antarctic, Galápagos, and Baja California to put a spotlight on key environmental issues in conjunction with organizations such as the Aspen Institute, TED and the World Wildlife Fund. These efforts help to build our brand and network of relationships and enhance our thought leadership. We will continue to focus on ensuring that each of our guests associates our brand with high-quality overseas adventure vacation experiences.

Disciplined Expansion

We are focused on growing our business in a prudent and disciplined manner. When evaluating various strategies for expansion of guest capacity, we consider closely the expected return on invested capital and the range of possibilities, such as a newbuild program, adding selected charters and the acquisitions of existing ships or small operators, such as the 2013 acquisition of Fillmore Pearl Holdings Ltd. and its subsidiaries, including the owner of the vessel that was subsequently named National Geographic Orion . We currently have two new coastal vessels on order for delivery in 2017 and 2018, respectively. We believe that we have ample capital and financial flexibility to fund this investment and management considers it to be an important step to meet increasing demand for our offerings.

Strategic Alliance with National Geographic

We benefit from a strategic alliance with National Geographic, one of the world’s leading proponents of eco-tourism and natural history. The strategic alliance, which began in 2004, is built on our shared interest in exploration, research, technology, and conservation. Since 1888, National Geographic has enabled people to explore the world through its magazines and, more recently, its television programs, website and social media. It is one of the largest non-profit scientific and educational institutions in the world with interests ranging from geography, archaeology and natural science, to the promotion of environmental and historical conservation. Working to inspire, illuminate and teach, National Geographic reaches more than 600 million people a month through a wide range of media, including print, TV and digital. The National Geographic name has significant value for use in connection with travel-related goods and services. The Lindblad/National Geographic alliance includes a co-selling and co-marketing arrangement through which National Geographic promotes our offerings in its marketing campaigns across web-based, email, print, and other marketing platforms and sells our expeditions through its internal travel division. The National Geographic sales channel represents approximately 24% of our guest ticket revenues. We believe that the alliance with National Geographic provides us with a substantial competitive advantage in the expedition market based on the brand enhancement, expanded marketing reach and the relationship with National Geographic’s naturalists and photographers.

Through this alliance, we collaborate with National Geographic on exploration, research, technology, and conservation in order to provide travel experiences and disseminate geographic knowledge around the globe. The Lindblad/National Geographic alliance is set forth in (i) an Alliance and License Agreement and (ii) a Tour Operator Agreement.

Alliance and License Agreement . Pursuant to the Alliance and License Agreement, we and National Geographic have agreed to collaborate to identify key destinations and program enhancements as well as to develop marketing strategies, joint loyalty programs and materials for our expeditions in exchange for royalty payments from us. The royalty amount is calculated based upon a percentage of ticket revenue less travel agent commission, including the revenue received from cancellation fees and any revenue received for the sale of voyage extensions. As part of the agreement, National Geographic has granted us a (i) non-exclusive license to use certain licensed property (including licensed content and licensed marks, which include but are not limited to National Geographic’s name and images) for the advertising and promotion of certain expeditions in the U.S., its territories and possessions, Australia and New Zealand (the “Territory”) and (ii) a non-exclusive license to use the licensed property in association with our name, trademarks, services marks, and logos in connection with promotional and public relations communications in the Territory relating to certain expeditions to destinations worldwide. The agreement also provides us with a non-exclusive, non-transferable right and license to use the National Geographic marketing database for the purpose of promoting the sale of such expeditions.

The agreement includes a branding arrangement whereby our six owned and operated expedition cruise ships carry the National Geographic name. The names of the National Geographic branded vessels are National Geographic Orion, National Geographic Explorer, National Geographic Endeavour, National Geographic Islander, National Geographic Sea Lion, and National Geographic Sea Bird . We have the right to brand each future vessel we acquire under the name “ National Geographic .” In addition, the agreement provides for us to use co-branded materials to showcase National Geographic as an institution on all of our National Geographic branded ships and on certain other Lindblad ships.

The agreement also provides us with access to the experts affiliated with National Geographic, including world-renowned scientists, researchers, explorers, and photographers, who participate in our voyages and provide guests, while onboard, with lectures, excursions and informal interactions. We are required to pay a stipend to National Geographic experts on a Lindblad expedition. The agreement also requires us to designate one of our employees as the National Geographic representative and to pay National Geographic 50% and 25%, respectively, of the total compensation for two employees of National Geographic that manage our relationship. Pursuant to the agreement, we are responsible for the development, administration and operation of all voyages as well as all associated expenses, including but not limited to hiring, managing and paying qualified staff.

As part of the agreement, we agreed not to enter into any agreements with Discovery Communications, Inc. or their affiliates other than with respect to the purchase of advertising media or the license of film, video or other items and National Geographic agreed not to license its marks or content to competitive cruise ships marketed within the U.S. Each party also agreed to a standard indemnification clause for negligent acts or breaches of representations and warranties in the agreement.

Each party may terminate the agreement for breaches that are not cured timely. In addition, each party may terminate the agreement if the year-on-year net revenue growth realized by us for our cruise expeditions is less than a specified percentage, provided that any exercise of such termination right is limited to the 30-day period following delivery of year-end results and is subject to 18 months prior notice. National Geographic also has the right to terminate the agreement in the event of a change of control of our company.

The agreement further provides for the support of the LEX-NG Fund administered by National Geographic. The LEX-NG Fund identifies and articulates to our guests regional issues in conservation, education, research, and community development that require financial support. In 2015, nine key areas were supported with an aggregate amount of $1.4 million. The majority of funds were donated by guests traveling aboard our fleet; National Geographic also contributed 10% of royalty payments we made to National Geographic. In some instances, matching funds have been negotiated with third parties. In connection with the merger of Lindblad and Capitol, the stockholders of Capitol prior to its initial public offering – Capitol Acquisition Management 2 LLC, L. Dyson Dryden, Lawrence Calcano, Richard C. Donaldson, and Piyush Sodha – collectively made a charitable contribution of an aggregate of 500,000 founder’s shares in Capitol to the LEX-NG Fund for no additional consideration. The LEX-NG Fund is managed jointly by one of our staff members and a National Geographic staff member, and the Board is currently comprised of four members, including Sven-Olof Lindblad, the founder, President and Chief Executive Officer of Lindblad Expeditions Holdings, Inc., and Terry Garcia, Chief Science and Exploration Officer of National Geographic Society.

Tour Operator Agreement . Pursuant to the Tour Operator Agreement, we are the exclusive provider of ocean-going ships to National Geographic marketed in the U.S., its territories and possessions, including Puerto Rico, subject to certain exceptions. For National Geographic trips that we operate, National Geographic will market the trips under the “National Geographic Expeditions” mark and, at its own cost, is responsible for product selection, marketing and providing its own experts while we, at our own cost, are responsible for the trip itinerary and operations, marketing support, staffing, customer service, administrative operations, fare collections, and other operations on the trip. As part of the agreement, we are required to pay fees to National Geographic as a percentage of the price charged to guests. Pursuant to the agreement, National Geographic granted us a license to use its trademarks in connection with the marketing of National Geographic trips. Each party may terminate the agreement for breaches of the agreement that are not cured timely. Each party also agreed to a standard indemnification clause for negligent acts.

Amendments to Alliance and License Agreements and Tour Operator Agreement in connection with the Mergers . We entered into amendments with National Geographic dated as of March 9, 2015 to each of the agreements to extend the expiration date of each agreement from December 31, 2017 until December 31, 2025 and reaffirm the continued effectiveness of the agreements notwithstanding the mergers with Capitol. The amendment to the Alliance and License Agreement also provides that we have the right to brand each vessel acquired in the future under the name “ National Geographic. ”

In connection with the merger on July 8, 2015, the Company, Mr. Lindblad and National Geographic entered into a Call Option agreement where Mr. Lindblad agreed to grant National Geographic an option to purchase 2,387,499 of Mr. Lindblad’s shares in the Company as consideration for the assumption of the Alliance and License agreements and the Tour Operator agreement (see Note 10 – Commitments and Contingencies for more details).

Mr. Lindblad also serves on National Geographic’s International Council of Advisors, which is composed of individuals identified by National Geographic as visionary leaders from a range of professions and industries across the globe that exemplify the intellectual curiosity and quest for adventure that has driven National Geographic’s mission since 1888. Mr. John M. Fahey, Jr., one of our directors, previously served as the Chairman and Chief Executive Officer of National Geographic.

Expedition Ships and Voyages

Itineraries

As of March 7 , 2016, we operated a fleet of six expedition vessels owned through our subsidiaries and four chartered ships to provide our signature marine-based adventures to over 40 destinations along all seven continents of the world. We have extensive experience operating in the Galápagos Islands, Antarctica and the Arctic, with the Lindblad family having been among the first to bring non-scientist travelers to these regions. We currently operate two vessels in the Galápagos, providing week-long itineraries throughout the year. We operate two pole-to-pole vessels that serve in Antarctica during the northern hemisphere winter, in the Arctic during the summer and various destinations during the intermediate months, offering itineraries that last from five to 24 days. We also run two ships in Alaska during the summer months that travel south along the U.S. coastline to the Sea of Cortez and to Costa Rica and Panama for the winter. In addition, we charter four vessels for seasonal itineraries in the Amazon, Scotland, the Caribbean, the Mediterranean, Cambodia, and Vietnam.

We place a strong focus on innovation, which we seek to achieve by introducing new expedition options and continuously making improvements to our fleet and voyage experiences as new technology or operating procedures are developed. We make deployment decisions with the goal of optimizing the overall profitability of our portfolio, with these decisions generally made 18 to 24 months in advance. We have operated at a 91.8% occupancy rate in the year ended December 31, 2015, 92.9% in 2014 and 92.4% in 2013, indicating strong consumer interest in our offerings. Adding new capacity will allow us to expand our inventory of existing itineraries and expand into new markets and destinations. The following table presents summary information concerning the ships we currently operate and their geographic areas of operation based on 2016 itineraries:

The following table presents summary information concerning the two new passenger cruise vessels being constructed with delivery expected in the second quarter of 2017 and the second quarter of 2018, respectively, as well as the Via Australis that we expect to take possession of in the second quarter of 2016, renovate and deploy as a replacement of the National Geographic Endeavour in the fourth quarter of 2016 .

*The Via Australis is flagged by its current owner in Chile. Registration and flagging in Ecuador will take place upon completion of the acquisition and the vessel is put in service.

Owned Vessels

National Geographic Explorer , our flagship vessel, joined the fleet in 2008 as our ultimate expedition ship. The Explorer is equipped with an ice-strengthened hull, advanced navigation equipment for polar expeditions and a well-appointed interior with numerous windows for viewing nature. Accordingly, the Explorer is equipped to visit some of the most remote and extreme areas on the planet. The Explorer accommodates 148 guests in 81 cabins, including 13 cabins with private balconies and six suites. The Explorer is spacious and modern, with a variety of public areas that offer views of the passing landscape, including a window-lined library and observation lounge located at the top of the ship, several observation decks and a forward-facing chart room.

National Geographic Orion was designed and built in Germany in 2003 and was substantially enhanced in 2013 upon joining our fleet. The Orion is designed to be self-sufficient for expedition travel with operations focused in Antarctica, Europe and the Arctic. Engineered with comfort and safety in mind, the Orion is a blue water, ice class vessel equipped with advanced technology, including large retractable stabilizers, sonar, radar and an ice-strengthened hull. A shallow draft as well as bow and stern thrusters allow for maneuvering close to shore. The Orion accommodates 102 guests in 53 cabins, including several with balconies and a variety of public spaces that offer panoramic views of the passing landscape. The public rooms include a window-lined main lounge, as well as an observation lounge and library at the top of the ship, with numerous observation decks.

National Geographic Endeavour operates year-round in the Galápagos. Prior to its post to warm equatorial waters, the Endeavour voyaged from pole-to-pole with extensive periods in the icy waters of the Arctic and Antarctic. The Endeavour accommodates 95 guests in 56 outside cabins, including two suites, and offers comfortable public areas and extensive open deck space. The Via Australis is expected to join the fleet in the second quarter of 2016 and, following a significant renovation, is expected to be deployed during the fourth quarter of 2016. The Via Australis will replace the National Geographic Endeavour and will operate in the Galápagos. The Via Australis accommodates 95 guests in 50 cabins and offers public areas designed for maximum viewing with quick, easy access to decks to respond to bridge announcements of phenomenal sightings of nature and wildlife.

National Geographic Islander is a twin-hulled, yacht-scale ship designed for active exploration. The Islander was originally built for service in the Caribbean, and then later used for expeditions in the Scottish Highlands. Since 2004, the Islander has been sailing year-round in the Galápagos, which it is ideally suited for as its trim design and maneuvering abilities enable it to visit areas larger vessels cannot, allowing guests to experience the islands from a more up-close perspective. The Islander accommodates 47 guests in 24 outside cabins, including two suites. On board there are open decks that are complete with hammocks as well as a large dining room and large lounges that form part of the social hub of the ship.

National Geographic Sea Bird is the twin ship of the Sea Lion and offers expedition cruises in Alaska, the Pacific Northwest, Baja California and the Sea of Cortez. The Sea Bird has a shallow draft and small size and can reach places inaccessible to larger ships. The Sea Bird accommodates 62 guests in 31 outside cabins.

National Geographic Sea Lion is the twin ship of the Sea Bird and operates in Alaska, the Pacific Northwest, Baja California, the Sea of Cortez, Costa Rica, and Panama. The Sea Lion has a shallow draft and a small size so that it can reach places inaccessible to larger ships. The Sea Lion accommodates 62 guests in 31 outside cabins and has an open bow that provides for shared wildlife viewing experiences.

Chartered Vessels

Delfin II is a riverboat recently built to explore the Peruvian Amazon. Delfin II accommodates 28 guests in 10 suites and four master suites. The entire third deck is open-air, offering a view of the river and the rainforest. Furnishings are made of harvested local rain forest wood and the ship is decorated with handicrafts from the ribereños, native people of the wildlife preserves.

Jahan is a riverboat built in 2011 for exploring Vietnam and Cambodia. Jahan accommodates 48 guests in 24 cabins, including two suites. Every cabin has a private balcony and the suites each have a private jacuzzi. Jahan has four decks and has several public areas where the expedition community can gather to watch life along the riverbank. The public spaces include a covered, open-air observatory, open bow and a pool on the top deck.

Lord of the Glens is specifically sized to be able to sail through the Caledonian Canal in Scotland, which connects the North Sea to the Atlantic, and can also navigate the coastline and venture to the islands of the Inner Hebrides. Lord of the Glens accommodates 48 guests in 26 outside cabins.

Sea Cloud offers the experience of sailing aboard a fully-rigged ship in the Caribbean and Mediterranean and accommodates 58 guests in 28 outside cabins, including two original owner’s suites that still feature original marble baths and fireplaces. The Sea Cloud has extensive public spaces on the top deck, a dining room that can accommodate all guests at once for single seating and a lounge.

Ship Maintenance

In addition to routine repairs and maintenance performed on an ongoing basis and in accordance with applicable requirements, each of our expedition ships is taken out of service for a scheduled deeper maintenance period to conduct repairs and improvements. We maintain our fleet in accordance with applicable regulations, international conventions and insurance requirements. This includes regularly scheduled maintenance, periodic inspections, drydocking, wetdocking, and overhaul. In addition, renovations and replacements of various vessel elements are part of the ongoing process of maintaining the vessels to a high standard. On a year-to-year basis, increases in maintenance expense for the current owned fleet are anticipated to grow in line with inflation. 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. Drydock interval and required inspections are statutory requirements controlled under chapters of the International Convention of the Safety of Life at Seas (“SOLAS”) and Classification Society instructions. Under these regulations, passenger ships must be inspected in drydock twice in five years, with the maximum duration between each drydock inspection not to exceed three years, and an underwater hull inspection is required annually. To the extent practical, each ship’s crew, catering and hotel staff remain with the ship during docking periods and assist in performing repair and maintenance work. We do not earn revenue while ships are in dock. Accordingly, dockings are typically planned during non-peak demand periods to minimize the adverse effect on revenue that results from ships being out of service.

Guest Activities and Services

We provide our guests the opportunity and the tools to be active and engaged explorers.

Vessels include a variety of equipment for exploration which, depending on the ship and destination, may include Zodiacs for water-level activities and quick transfers to shore, kayaks for personal exploration, motorized skiffs, an underwater camera, a remotely operated vehicle capable of reaching depths of 1,000 feet, a video microscope to study some of the smallest organisms of the marine ecosystem, a crow’s nest camera atop a ship’s mast, hydrophones for listening to vocalizations of marine mammals, snorkeling gear, scuba gear, and wetsuits. An experienced and knowledgeable expedition staff leads guests in exploration while hiking onshore, paddling on the water or observing wildlife from onboard the ship. All voyages feature a certified photo instructor onboard and many include photographers from National Geographic.

Our ships allow guests to be close to wild nature, but at the same time, enjoy a high level of comfort and convenience. High quality dining is an integral part of our expedition experience with influences and flavors that reflect the regions being explored, along with traditional fare. All food prepared aboard is sourced locally whenever practicable from sustainable providers. Seating is open and the atmosphere is relaxed. Our ships offer a range of services and amenities which allow our guests to travel in comfort. Depending on the ship, these may include a fitness center, a spa offering a variety of treatments, a photo kiosk for photographers to edit and sort photos, a pool, 24-hour beverage service, internet connection, laundry facilities, and a doctor on call.

We offer to handle virtually all travel aspects related to guest reservations and transportation, simplifying the planning and booking process for our guests. We also provide guests the opportunity to purchase pre- and post-expedition extensions or services that may include additional hotel nights, air travel, private transfers, excursions, land travel packages, and travel protection insurance.

Operations

Sales and Marketing

We place a strong emphasis on identifying the needs of our guests and creating expedition opportunities and products that guests value. We use communication strategies and marketing campaigns designed to strengthen brand awareness and to emphasize the distinctive qualities of each expedition we offer. Marketing strategies include the use of traditional media, social media, brand websites, and travel agencies.

We source our business through a combination of direct selling, travel agency networks and our strategic alliance with National Geographic. We believe in the value of the travel agency network distribution channel and invest in maintaining strong relationships with our key travel agency network partners and seek to maintain commission rates and incentive structures that are competitive within the marketplace.

Historically, our focus has been to primarily source guests for our expeditions from the U.S. Expedition cruise guests sourced from the U.S. represented approximately 87%, 84% and 92% of our total global expedition cruise guests in 2015, 2014 and 2013, respectively. Guest ticket revenues generated by sales originating in countries outside of the U.S. were approximately 15%, 19% and 8% of total tour revenues in 2015, 2014 and 2013, respectively.

Our largest channel for guest bookings is direct contact, either by guests calling our toll-free number (1-800-EXPEDITION) and speaking with our expedition specialists, or requesting a reservation online at our website, expeditions.com. The direct channel represented nearly 43%, 49% and 46% of guest ticket revenues for 2015, 2014 and 2013, respectively.

Our second largest channel is bookings from travel agents and wholesalers, representing approximately 28%, 28% and 26% of guest ticket revenues for 2015, 2014 and 2013, respectively. Agent outreach efforts are focused primarily on consortiums, or travel agent networks, which target affluent travelers. The four consortiums with which we have preferred partner agreements are Virtuoso, Signature, American Express, and Ensemble. Preferred status provides their agents with financial incentives to book their customers on our expeditions and provides us the opportunity for enhanced marketing to their agents and end-user customers. Our agent and affinity sales team meet with hundreds of highly-targeted agents annually, at consortium conferences and training seminars, and in-person at agency offices to provide hands-on training, support and product knowledge. In addition, a very select group of highly-productive and motivated agents can earn incremental commissions as part of the LEX Leaders incentive program.

The National Geographic relationship also serves as a channel for bookings. Our alliance with National Geographic includes a co-selling and co-marketing arrangement through which National Geographic promotes our offerings in its marketing campaigns across web-based, email, print, and other marketing platforms and sells our expeditions through its internal travel division. The National Geographic channel represented approximately 24%, 20% and 22% of guest ticket revenues for 2015, 2014 and 2013, respectively. The remainder of bookings, 5%, 3% and 6% of guest ticket revenues for 2015, 2014 and 2013, respectively, comes from affinity groups and charters. Affinity groups are predominantly college and university alumni associations, and other travel organizations targeting specific market niches.

We have a broad and diverse marketing mix across multiple media platforms and channels, allowing us to effectively communicate our product offerings to past guests and prospective guests. We continually optimize our media mix to reach our target demographic. The majority of our annual global marketing spend is focused on consumer-direct channels, with direct mail being the largest segment of our marketing expenditures. Our detailed brochures present our expedition offerings comprehensively, providing guests with all the information needed to make an informed travel decision. We also execute direct mail campaigns with the primary purpose of generating qualified leads, upon which we will fulfill requests with the appropriate product brochure and/or DVD. We also promote our expeditions across a variety of print media, primarily magazines targeting affluent travelers, as well as nature and photography enthusiasts.

Our website, expeditions.com, is supported internally by a dynamic content management system, allowing frequent updates, a visually-impactful design, large photos, and video display with simple, straightforward navigation. We also send weekly mobile-optimized emails to our database of opt-in email subscribers, which link back to key areas on expeditions.com. In addition, we routinely offer webinars to offer greater insights into our expeditions, hosted by members of the expedition teams with intimate knowledge of the geographies featured.

We maintain an active presence on numerous social media platforms, focusing primarily on those with the greatest reach to our target demographic: Facebook, Instagram, Twitter, and YouTube. In addition, we routinely feed content to National Geographic’s social media platforms, which extend the reach of our brand significantly.

Our marketing and sales team is based in the U.S. and Sydney, Australia. The marketing team encompasses broad and diverse skill sets including product and channel marketing, digital marketing, database marketing, copywriting and creative, video production, and research and analytics.

Expedition Cruise Pricing

Our voyage prices include accommodations and all expedition activities and meals, other than items of a personal nature, such as alcohol, airfare to and from an expedition, spa treatments, and certain other specialized events or activities. Prices vary depending on many factors, including the destination, number of guest berths available, expedition length, cabin category selected, and time of year during which the expedition takes place. Payment terms generally require an upfront deposit to confirm a reservation, with the balance due prior to departure.

We focus on maintaining list pricing of our offerings and any discounting that we pursue is tactical, targeted and infrequent. In addition to our standard expedition packages, we may be able to offer a complete vessel for charter and may provide incentives for this type of arrangement. Group and multi-generational family travel may also be eligible for additional incentives based upon the voyage, duration and number of guests travelling. From time to time, we may incentivize guests to book with us with a variety of offers, including free or reduced price air transportation, hotel nights or other value added items. We offer rewards to our guests through our loyalty program, Friends for Life, to encourage repeat business.

Lindblad Expeditions – National Geographic Joint Fund for Exploration and Conservation

We seek to inspire people to explore and care about the planet. One of our governing principles is to positively impact the areas we explore and in which we work. To this end, we, along with National Geographic, created the LEX-NG Fund to support projects at the global, regional and local level. The objective of the LEX-NG Fund is to protect the last wild places in the ocean, support innovative local projects and facilitate conservation, research, educational, and community development projects in the places we explore. Together with our guests, we have raised more than $11.0 million since 1997, along with the 500,000 shares in Capitol contributed by the founders of Capitol in connection with the merger with Lindblad, to support the regions that we visit. Since we and National Geographic together cover the LEX-NG Fund’s operating costs, 100% of guest contributions go directly to on-the-ground projects.

Environmental Stewardship

Our staff is involved in organizations such as the International Association of Antarctic Tour Operators and the Association of Arctic Expedition Cruise Operators, which seek to lead the tourism industry with management best practices for visiting places such as Antarctica, the Arctic and the Galápagos Islands. Our staff also works with the MarViva Foundation (a non-governmental organization focused on promoting the conservation and sustainable use of coastal and marine ecosystems in the eastern tropical Pacific) to provide a consumer market for sustainably caught fish from the first designated responsible fishing area of Costa Rica. We also work with the Charles Darwin Research Station and Charles Darwin Foundation on conservation initiatives geared toward preserving the Galápagos Islands.

Seasonality

We choose to visit geographic areas based upon many factors, including weather, marine conditions, migration patterns, and various natural phenomena. In the northern hemisphere summer months, we visit the High Arctic regions of the world, the Canadian Maritimes, Europe, and Alaska. In the northern hemisphere winter months, we travel to Antarctica, South America, Costa Rica, Baja California, and the Caribbean. The Galápagos Islands are a year-round destination offering a diverse variety of marine, land and airborne wildlife.

Suppliers

Our largest capital expenditures are for ship maintenance and acquisition, and our largest operating expenditures are for payroll, fuel, food and beverage, travel agent services, and advertising and marketing. Most of the supplies that we require are available from numerous sources at competitive prices.

Insurance

We maintain comprehensive insurance coverage at commercially reasonable rates and believe that our current coverage is at appropriate levels to protect against most of the risk involved in the conduct of our business.

We maintain insurance on the hull and machinery of each of our ships that includes additional coverage for disbursements, earnings and increased value. We also maintain protection and indemnity insurance for each of our owned ships. In addition, we maintain war risk insurance on each ship, which covers damage due to acts of war, including invasion, insurrection, terrorism, rebellion, piracy and hijacking. This coverage includes coverage for physical damage to the ship which is not covered under the hull policies as a result of war exclusion clauses in such hull policies. We also maintain protection and indemnity war risk coverage. Consistent with most marine war risk policies, under the terms of the war risk insurance coverage, underwriters can give notice that the policy will be canceled and reinstated at higher premium rates. We also maintain insurance coverage for shoreside property, shipboard inventory and marine and non-marine general liability risks, as well as business interruption insurance for our owned ships based on the evaluation of the financial exposure per vessel for net income and fixed overhead expenses. In addition, we maintain workers compensation, directors and officers’ liability and other insurance coverage.

We historically have been able to obtain insurance coverage in amounts and at premiums we have deemed to be commercially acceptable. No assurance can be given that affordable and secure insurance markets will be available in the future, particularly for war risk insurance. All of our insurance coverage is subject to certain limitations, exclusions and deductible levels.

Regulation

Our ships are regulated by various international, national, state and local laws, regulations, and treaties in force in the jurisdictions in which they operate. In addition, certain ships are registered in the U.S., the Bahamas or Ecuador, as applicable. Each ship is subject to regulations issued by its country of registry, including regulations issued pursuant to international treaties governing the safety of the ships, guests and crew as well as environmental protection. Each country of registry conducts periodic inspections to verify compliance with these regulations. Ships operating out of U.S. ports are subject to inspection by the U.S. Coast Guard for compliance with international treaties and by the United States Public Health Service for sanitary and health conditions. Ships are also subject to similar inspections pursuant to the laws and regulations of various other countries visited. We consider ourselves to be in material compliance with all the regulations applicable to our ships and that we have all licenses necessary to conduct our business. Health, safety, security, environmental, and financial responsibility issues are, and will continue to be, an area of focus by the relevant government authorities in the U.S. and internationally. From time to time, various regulatory and legislative changes may be proposed that could impact operations and subject us to increasing compliance costs in the future.

Safety and Security Regulations

Our ships are required to comply with international safety standards defined in the International Convention for Safety of Life at Sea, which among other things, establishes requirements for ship design, structural features, materials, construction, life-saving equipment and safe management, and operation of ships to ensure guest and crew safety. The SOLAS standards are revised from time to time and the most recent modifications were phased in through 2010. SOLAS incorporates the International Safety Management Code (“ISM Code”), which provides an international standard for the safe management and operation of ships and for pollution prevention. The ISM Code is mandatory for all vessels, including passenger vessel operators. All of our operations and ships are regularly audited by various national authorities and maintain the required certificates of compliance with the ISM Code.

The ships are also subject to various security requirements, including the International Ship and Port Facility Security Code (“ISPS Code”), which is part of SOLAS, and the U.S. Maritime Transportation Security Act of 2002 (“MTSA”), which applies to ships that operate in U.S. ports. In order to satisfy these security requirements, we implement security measures, conduct vessel security assessments and develop security plans. The security plans for all of the ships have been submitted to, and approved by, the respective countries of registry for compliance with the ISPS Code and the MTSA.

The Cruise Vessel Security and Safety Act of 2010, which applies to passenger vessels that embark passengers from or include port stops within the U.S., requires the implementation of certain safety design features as well the establishment of practices for the reporting of and dealing with allegations of crime.

Environmental Regulations

We are subject to various U.S. and international laws and regulations relating to environmental protection. Under such laws and regulations, we are prohibited from, among other things, discharging certain materials, such as petrochemicals and plastics, into the waterways. From time to time, environmental and other regulators may consider more stringent regulations, which may affect our operations and increase compliance costs.

The ships are subject to the International Maritime Organization’s regulations under the International Convention for the Prevention of Pollution from Ships (the ‘‘MARPOL Regulations’’), which includes requirements designed to minimize pollution by oil, sewage, garbage, and air emissions. We have obtained the relevant international compliance certificates relating to oil, sewage and air pollution prevention for all of our ships.

The MARPOL Regulations impose global limitations on the sulfur content of fuel used by ships operating worldwide and also establish special Emission Control Areas (‘‘ECAs’’) with stringent limitations on sulfur and nitrogen oxide emissions in these areas. As of February 2014, there were four established ECAs: the Baltic Sea, the North Sea/English Channel, certain of the waters surrounding the North American coast, and the waters surrounding Puerto Rico and the U.S. Virgin Islands. Since July 1, 2010, ships operating in ECAs are required to operate on fuel with a sulfur content of 1.0%, which was reduced to 0.1% effective January 1, 2015. By January 1, 2020, the MARPOL Regulations will require the worldwide limitations on sulfur content of fuel to be further reduced to 0.5%.

In July 2011, new MARPOL Regulations introduced mandatory measures to reduce greenhouse gas emissions. These include the utilization of an energy efficiency design index (“EEDI”) for new ships as well as the establishment of an energy efficient management plan for all ships. The EEDI is a performance-based mechanism that requires a certain minimum energy efficiency in new ships. These regulations apply to new vessels commissioned after January 1, 2013. In June 2013, the European Commission proposed legislation which would require cruise ship operators using ports in the European Union to monitor and report on the vessels’ annual carbon dioxide emissions starting in 2018.

The Jones Act

As U.S. flag vessels, the National Geographic Sea Lion and the National Geographic Sea Bird are subject to the U.S. laws relating to the transport of passengers and cargo between U.S. ports in the U.S. coastwise trade. Our two newbuild coastal vessels currently under construction will also be U.S. flagged.

These laws relating to vessels are principally contained in 46 U.S.C. Chapter 551 and 46 U.S.C. §50501 and the federal regulations promulgated thereunder and are commonly referred to collectively as the “Jones Act.” Subject to limited exceptions, the Jones Act requires, among other things, that vessels engaged in U.S. coastwise trade be owned and operated by “citizens of the United States” within the meaning of the Jones Act. For purposes of the Jones Act, a corporation, for example, must satisfy at least the following requirements to be deemed a U.S. citizen: (i) the corporation must be organized under the laws of the U.S. or of a state, territory or possession thereof; (ii) each of the chief executive officer and the chairman of the board of directors of such corporation, and each person authorized to act in the absence or disability of such persons, must be a U.S. citizen; (iii) no more than a minority of the number of directors of such corporation necessary to constitute a quorum for the transaction of business can be non-U.S. citizens; and (iv) at least 75% of each class or series of stock in such corporation must be beneficially owned by U.S. citizens within the meaning of the Jones Act.

Labor Regulations

The International Labour Organization, an agency of the United Nations that develops worldwide employment standards, adopted a Consolidated Maritime Labour Convention (the “Convention”) in 2006, which became effective in August 2013. The Convention reflects a broad range of standards and conditions governing all aspects of crew management for ships in international commerce, including additional requirements not previously in effect relating to the health, safety, repatriation, entitlements and status of crewmembers and crew recruitment practices. Each of our ships, except for our two ships operating in Ecuador (not a signatory to the Convention), has received its certification of compliance with the requirements of the Convention.

Consumer Financial Responsibility Regulations

U.S. law requires the operators of passenger vessels embarking passengers at U.S. ports to be certified by the United States Federal Maritime Commission as to their ability to satisfy obligations with respect to unearned passenger revenue in case of non-performance, and for liability in case of casualty or personal injury. We satisfy these requirements with respect to our operation of the National Geographic Sea Bird and National Geographic Sea Lion through an escrow account for passenger deposits and through our liability insurers.

Certain jurisdictions require that we establish financial responsibility to our guests resulting from the non-performance of our obligations; however, the related amounts do not have a material effect on our costs.

In Australia and parts of Europe, we are obligated to honor guests’ cruise payments made by them to their travel agents regardless of whether we receive such payments.

Regulations Regarding Protection of Disabled Persons

In June 2013, the U.S. Architectural and Transportation Barriers Compliance Board proposed guidelines for the construction and alteration of passenger vessels to ensure that the vessels are readily accessible to and usable by passengers with disabilities. If and when finalized, these guidelines will be used by the U.S. Department of Transportation and U.S. Department of Justice to implement mandatory and enforceable standards for passenger vessels covered by the Americans with Disabilities Act. While we believe our vessels have been designed and outfitted to meet the needs of guests with disabilities, we cannot, at this time, accurately predict whether we will be required to make material modifications or incur significant additional expenses given the status of the proposed guidelines.

United States Income Taxation

The following is a discussion of the application of the U.S. federal and state income tax laws to us and is based on the current provisions of the United States Internal Revenue Code, Treasury Department regulations, administrative rulings, court decisions and the relevant state tax laws, regulations, rulings and court decisions of the states where we have business operations. All of the foregoing is subject to change, and any such change could affect the accuracy of this discussion.

At the present time, our subsidiaries that are foreign corporations do not derive any significant income from sources within the U.S., and are not subject to significant U.S. federal income taxes. Any income earned by these subsidiaries from sources within the U.S. generally is subject to U.S. federal income tax at a top rate of 35% (and to U.S. branch profits tax at a rate of 30% on effectively connected earnings and profits, subject to certain adjustments) unless the requirements of the exemption under Section 883 of the Internal Revenue Code are met. In general, any U.S. source income earned by one of our subsidiaries that is a foreign corporation qualifies for exemption under Section 883 if this income is derived from or incidental to the international operation of ships, and if the subsidiary is incorporated in a country that grants an equivalent exemption to U.S. corporations. The countries in which our subsidiaries that are foreign corporations are incorporated do grant equivalent exemptions to U.S. corporations. The income of our foreign subsidiaries that is treated as being derived from or incidental to the international operation of ships generally does not include any capital gains recognized upon a disposal of a vessel, or income from the sale of air and land transportation, shore excursions, and pre- and post-cruise tours. If one of our foreign subsidiaries recognizes a capital gain upon a disposal of a vessel, this capital gain will generally constitute income from sources within the U.S. and will generally not be entitled to exemption under Section 883.

Our subsidiaries that are U.S. corporations are subject to U.S. federal income tax at a top rate of 35% on all their income, and are subject to income tax in the various States within the U.S. in which they have operations. At the present time, the only State in which our U.S. subsidiaries are expected to pay significant amounts of state income taxes is Alaska.

We also pay income taxes in Australia, Ecuador and other countries within which we operate. In addition to, or instead of, income taxation, virtually all jurisdictions where our ships call impose some tax or fee, or both, based on guest headcount, tonnage or some other measure.

Competition

We compete with a number of cruise lines with competition varying by destination. The market is fragmented and primarily comprised of private operators. The primary competitors which operate in the geographic regions we serve include Silversea Expeditions, Compagnie du Ponant, Hurtigruten, and Un-Cruise Adventures. We also compete with other vacation alternatives such as land-based resort hotels and sightseeing destinations for guests’ leisure time. Demand for such activities is influenced by political and general economic conditions. Companies within the vacation market are dependent on consumer discretionary spending.

Our principal competitive strengths, particularly our established reputation, experienced management team, product offerings, and association with National Geographic, provide us with a competitive advantage in the specialty cruise segment of the market.

The cruise industry in general and the expedition cruise industry specifically are characterized by high barriers to entry, including the existence of several established and recognizable brands, the large investment required to build a new, sophisticated cruise or expedition ship, the long lead time necessary to construct new ships, and limited newbuild shipyard capacity.

Employees

As of December 31, 2015, we had approximately 368 employees, including 231 shipboard employees, 134 full-time employees and three part-time employees in our shoreside operations.

Business Segments

We are a specialty cruise operator with operations in one segment. We evaluate the performance of our business based largely on the results of our single operating segment. 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. Our reports provided to the Board of Directors are at a consolidated level. Management performance and related compensation is based on total results. Based on this assessment, we concluded that we have one single operating segment and therefore one reportable segment.

Corporate Information

We are a Delaware corporation and our corporate headquarters are located at 96 Morton Street, 9 ^th Floor, New York, New York 10014. Our telephone number is (212) 261-9000. Our Internet website address is www.expeditions.com . Our corporate filings, including our Annual Report on Form 10-K, our Quarterly Reports on Form 10-Q, our Current Reports on Form 8-K, our proxy statements and reports filed by our officers and directors under Section 16 (a) of the Securities Exchange Act, and any amendments to those filings, are available, free of charge, on our website as soon as reasonably practicable after we electronically file such material with the Securities and Exchange Commission. We do not intend for information contained on our website to be a part of this Annual Report on Form 10-K.