-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, Np7DoDKmm8HxRcn4ii01Z4gPQjrtW+4EolBixwwLA5dEGwgPVQbGVhDQyHeKIrLM T/4T64Cd31M1KggAHsXxIw== 0000950114-97-000167.txt : 19970329 0000950114-97-000167.hdr.sgml : 19970329 ACCESSION NUMBER: 0000950114-97-000167 CONFORMED SUBMISSION TYPE: 10-K405 PUBLIC DOCUMENT COUNT: 6 CONFORMED PERIOD OF REPORT: 19961231 FILED AS OF DATE: 19970328 SROS: NASD FILER: COMPANY DATA: COMPANY CONFORMED NAME: INTRAV INC CENTRAL INDEX KEY: 0000942317 STANDARD INDUSTRIAL CLASSIFICATION: TRANSPORTATION SERVICES [4700] IRS NUMBER: 431323155 STATE OF INCORPORATION: MO FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-K405 SEC ACT: 1934 Act SEC FILE NUMBER: 000-25990 FILM NUMBER: 97566072 BUSINESS ADDRESS: STREET 1: 7711 BONHOMME AVE CITY: ST LOUIS STATE: MO ZIP: 63105 BUSINESS PHONE: 3147270500 MAIL ADDRESS: STREET 1: 7711 BONHOMME AVE CITY: ST LOUIS STATE: MO ZIP: 63105-1961 10-K405 1 FORM 10-K OF INTRAV, INC. 1 UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 10-K [X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES AND EXCHANGE ACT OF 1934 FOR THE FISCAL YEAR ENDED DECEMBER 31, 1996 OR [ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 Commission file number 0-25990 INTRAV, INC. (Exact name of registrant as specified in its charter) Missouri 43-1323155 (State or other jurisdiction (I.R.S. Employer of incorporation or organization) Identification No.) 7711 Bonhomme, St. Louis, Missouri 63105 (Address of principal executive offices) (314) 727-0500 Registrant's telephone number, including area code Securities registered pursuant of Section 12(b) of the Act: None Securities registered pursuant to Section 12(g) of the Act: Title of each class ------------------- Common Stock, par value $.01 per share Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities and Exchange Act of 1934 during the preceding 12 months (or for shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes [ X ] No [ ] Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of registrants knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K. [ X ] The aggregate market value of the voting stock held by non affiliates of the registrant as of February 28, 1997 was approximatley $11.3 million. The amount shown is based on the closing price of $8.75 per share of Common Stock on the NASDAQ Stock Market on February 28, 1997. As of February 28, 1997, there were 5,151,600 shares of the registrants Common Stock outstanding. DOCUMENTS INCORPORATED BY REFERENCE Parts I, II and IV of this Form 10-K incorporate by reference certain information from the registrant's 1996 Annual Report to Shareholders. Part III of this Form 10-K incorporates by reference certain information from the registrant's Proxy Statement for its Annual Meeting of Shareholders to be held on May 21, 1997. 2 PART I Item 1. BUSINESS Intrav, Inc. ("INTRAV") is a leading designer, organizer, marketer and operator of deluxe, escorted, international travel programs. It's programs are designed to appeal to higher income individuals desiring first-class travel experiences. In 1996, INTRAV offered and operated 48 travel programs covering 194 departures, with average revenue per traveler of $5,388. These programs included tours ranging from an eight day adventure in the Southern Caribbean, sold for $1,748 per person, to the 24-day "Around the World by Supersonic Concorde" tour, sold for $50,800 per person. The 1996 program offerings included itineraries traveling to Africa, Asia, Europe, Australia, and North and South America. Since 1959, nearly 400,000 travelers have participated in the INTRAV's travel programs. The packaged tour and travel industry is comprised primarily of wholesalers which package a product and retailers which sell the packaged product. Unlike travel agencies, which generate commission income by retailing travel products packaged by third party wholesalers, INTRAV has adopted a structure in which it operates both as a wholesaler and a retailer of its own products, and its business is not dependent upon commissions from selling products. This structure allows the INTRAV to maintain control over the supply of, and access to the demand for, its product. Consequently, the INTRAV believes that trends in the travel industry towards ticketless airline travel and the reduction in commissions paid to travel agents by airlines and others have not had a material adverse effect on the INTRAV's operations. Furthermore, because of the it's involvement from the development of each program through its execution, the INTRAV has been able to respond effectively to changes in traveler demand, adjust travel itineraries as international conditions may warrant, and successfully estimate the traveler demand for its programs. The INTRAV believes that the variety of its travel programs, its experienced management and its wholesale/retail operating structure, distinguish the INTRAV from other travel and tour companies. INTRAV markets substantially all of its programs via direct mail through sponsoring "affinity groups," or directly to the traveler. In 1996, travelers from approximately 220 associations, such as alumni organizations, traveled on INTRAV programs. 75% of the travelers in 1996 traveled with an affinity group. INTRAV maintains detailed traveler information in its proprietary database, WISDM, a customized software application designed to facilitate targeted marketing, customer service, program design and profitability analysis. Data on every customer traveling with INTRAV is maintained within the database. Acquisition of Clipper Cruise Line On December 31, 1996, INTRAV acquired all the outstanding common stock of Clipper Cruise Line, Inc. ("CCL"), Clipper Adventure Cruises, Inc. ("CAC"), Republic Cruise Line, Inc. ("RCL"), and Liberty Cruise Line ("LCL") unless otherwise indicated, such companies are referred to herein as "Clipper". CCL and CAC are leading designers, organizers, marketers, and operators of deluxe, escorted, domestic and international cruises and tours. The companies market substantially all of their programs via direct mail through sponsoring affinity groups, or directly to the traveler. CCL charters cruise ships exclusively from its affiliated ship owning companies, RCL and LCL. Clipper designs and operates unique cruise programs aboard its two ships, the 138-passenger Yorktown Clipper and the 100-passenger Nantucket Clipper. Similar to INTRAV, the programs are designed to appeal to higher income individuals desiring first-class travel experiences. In 1997, Clipper is offering 24 programs, ranging in length from six to 15 days, encompassing destinations along the coastal waterways of North America and the Caribbean. These programs are being offered from $1,150 to $5,700 per traveler. As used herein, the term "Company" refers to both Intrav, Inc. and Clipper. 3 Company Background Throughout its history, INTRAV has been a leader in creating unique tours for travelers. From inception until 1967, INTRAV operated a regional group tour business. INTRAV was a pioneer in the field of comprehensive international air charter leisure holidays, launching a back-to-back (multiple charters of the same tour) charter series of nine Boeing 707 flights to Tokyo and Hong Kong in 1967. After the successful operation to the Orient, INTRAV expanded the concept of back-to-back air charter operations to South America, Africa, the South Pacific, Scandinavia, and Europe. In 1971, INTRAV introduced its "air/sea cruise" travel concept. All inclusive travel package tours were developed, offering a combination of round trip charter flights plus a two week cruise in the Mediterranean Sea. In 1977, INTRAV again expanded the concept of back-to-back charter operations when it operated a series of five Boeing 707 back-to-back charter flights around the world. With deregulation of the airline industry in the late 1970's, INTRAV converted all of its travel programs to scheduled air carriers utilizing its strength in itinerary planning, customer base, strong financial condition, and high service reputation. INTRAV also adopted and further developed the "river cruise" concept. These programs included cruising on the inland waterways of Europe, Russia, and China, including the Danube River/Black Sea Cruise operated since 1979. In 1987, INTRAV developed the first "Around the World by Supersonic Concorde" travel program. For this program, customers are flown on a chartered supersonic Concorde jet to various attractive locations while circumnavigating the globe. Since 1987, INTRAV has operated 20 of these tours, and is again offering two departures of this travel opportunity in 1997. INTRAV continues to develop new concepts in leisure travel, and in 1997 is offering 25-day tours to the South Pacific and Around the World aboard an all first-class privately chartered jet aircraft. Business Strategy The Company, including Clipper, operates its business as follows: IDENTIFICATION OF CUSTOMER BASE. INTRAV's sales force operates nationally and in Canada to solicit sponsorship of the Company's travel programs by professional associations and "affinity" groups. Regional Vice President of Sales and other personnel, have the responsibility of managing the sales to a group of existing client associations and affinity groups and of soliciting business from targeted new groups. Working with a Director or Assistant Director of an association or affinity group, the Regional Vice Presidents of Sales analyze the demographics of an association's or affinity group's membership to selecting the INTRAV travel programs most appropriate for that association or affinity group and to determine the members to whom an offering will be mailed. Each of the Regional Vice Presidents of Sales are compensated based on territory profitability, with a higher commission paid on sales to associations or affinity groups sponsoring INTRAV programs for the first time. The Company attempts to increase its direct marketing efforts by expanding and increasing the utilization of its database. The Company evaluates marketing arrangements with groups and organizations outside of its traditional affinity groups, such as other direct marketing organizations. The Company also uses its internal database of past and prospective travelers to reach new potential customers. INTRAV maintains detailed traveler information in its proprietary database, WISDM, a customized software application designed to facilitate targeted marketing, customer service, program design and profitability analysis. Data on every customer traveling with INTRAV is maintained within the database. In addition, with a client association's permission, the Company contacts past travelers through its marketing services department to secure referrals of individuals who may also be interested in traveling on deluxe international travel programs. This referral system results in a high quality mailing list of potential new customers to which the Company markets its travel programs. DEVELOPMENT OF TRAVEL PROGRAMS. The Company believes that new markets are opening for the travel industry. The widespread fall of Communism, the increasing number of democracies throughout the world, and the development of infrastructures in underdeveloped lands are lowering barriers and providing more opportunities for international travel. To service these new markets, the Company intends to continue developing and offering travel programs not available from other travel providers. INTRAV designs, organizes and executes each of its travel programs, although to varying degrees it may purchase certain components of a program from another travel provider. The Company's travel planners and operations personnel select and design each travel program, make all of the travel and accommodation arrangements from the point of departure and arrange for exclusive parties, sightseeing opportunities and other special events. During the program design process, the Company may charter ships or aircraft and commit to purchase large blocks of hotel 4 rooms and other accommodations. The Company believes its ability to make "bulk" purchases and commitments, as well as its established industry position, results in suppliers providing the best available rates for these services and allows the Company to provide its customers with travel programs with good value and competitive prices. CUSTOMER SERVICE. A high level of customer satisfaction is critical to the Company's business, and at least one-third of the travelers from 1993 through 1996 were repeat customers. The Company's operations department is responsible for implementing its quality control program. The Company inspects each hotel at which customers will be staying, as well as the ship or other means of transportation being utilized on each program. An INTRAV travel director accompanies each tour throughout its duration to provide customer service and attempting to ensure that quality is maintained. At each destination, the Company hires local hosts and the best available professional guides. In certain geographic areas the Company employs destination managers to assist with service and quality control as needed. Travel arrangements are also monitored by a team of experienced travel planners under the supervision of senior management. At the conclusion of each travel program the Company distributes questionnaires to its travelers to solicit their input on the quality of the program and responds to concerns identified. The Company has experienced a response rate of over 90% of questionnaires distributed, which the Company believes is important in order to respond to traveler needs. Results of responses to the questionnaires show that on average travelers rate their INTRAV travel tour experience between "good" and "excellent." Travel Programs The Company attempts to develop exclusive travel programs not available from other travel providers. In order to achieve its goal of offering exclusive programs, INTRAV coordinates three elements in planning its travel programs: choosing unique and attractive destinations; planning the day-to-day itinerary; and determining which travel components will be included in the travel program. The Company's program planning personnel stay current with consumer demand trends in the travel industry by researching trade journals, travel brochures, consumer publications, attending trade shows, consulting with overseas suppliers, responding to sponsoring associations and by reviewing the responses to the questionnaires distributed by the Company at the conclusion of each travel program. As destinations are selected, INTRAV's program planning personnel work closely with local experts to develop the itinerary for the specific destination. INTRAV oversees all aspects of ground operations, including the inspection of ships, trains, hotels and other services. Based on industry standards, location, value, availability, past customer ratings and other relevant criteria, the Company negotiates with suppliers, including commercial airlines and other commercial carriers, and then selects hotels, ships, trains, aircraft and other components of its travel programs. Once a travel program has been developed, INTRAV personnel systematically visit each proposed destination to ensure that all accommodations and services meet the Company's standards for an INTRAV travel program. The Clipper operation offers unique exploration cruises which can not be provided by large cruise ships. Marketing and Sales The Company's travel programs are targeted to upper-income travelers. Substantially all of the Company's marketing is done through direct mail solicitation of these travelers. In 1996 the Company distributed approximately 25 million copies of four color sales brochures and catalogs. The Company's primary sales channel is through "affinity" groups such as medical, university alumni, dental, legal, banking, museum, fraternal and private club groups. Affinity groups sponsor INTRAV travel programs and offer trips to their members. The groups do not guarantee a minimum level of participation on the part of their members, nor do they assume the costs of marketing travel programs to their members. INTRAV also maintains a database of the names of approximately 180,000 past and prospective customers to which it directly markets its travel programs. Although some of the Company's mailings are handled through a sponsoring association or affinity group, the majority of the Company's mailings are done through a third party mailing facility. The Company's proprietary software, and software licensed from third parties, allows the Company to avoid duplication of addresses and to standardize addresses according to postal requirements to obtain savings on mailing costs. By barcoding the mailings and complying with other postal regulations, the Company believes, based upon surveys it performs, that it has been able to achieve a high delivery rate on low cost 3rd class bulk mailings. Marketing materials are generally mailed nine to fifteen months in advance of a scheduled departure date. Travelers generally book their INTRAV travel programs six to twelve months in advance of the scheduled departure date. Final payment for the program is generally due 70 days in advance of the scheduled departure date. This process allows the Company to monitor closely the booking patterns of each program and successfully estimate the traveler demand for its programs. Concurrently, the Company reviews the accommodation/service commitments it has made with each supplier to ensure they are adequate. 5 Periodically, adjustments are made to the allotments which allows the Company's suppliers to maximize the utilization of their resources. As a result, the Company is able to negotiate generally favorable prices and cancellation provisions for the space it reserves. Cancellation penalties can include payment of 100% of the full charter price if the charter is canceled within 150 days of the scheduled departure. Competition The travel industry is highly competitive. The Company believes that the principal competitive factors are (i) the uniqueness of the travel programs offered, (ii) the quality of the travel programs offered, and (iii) customer service. Although its competition is highly fragmented, the Company recognizes four direct competitors that compete with INTRAV in the affinity group travel market. INTRAV's programs also compete against a wide range of vacation alternatives, including cruises, destination resorts and other travel programs. Certain companies which engage in the travel business, but which are not necessarily the direct competitors of the Company, have greater financial, marketing and sales resources than the Company. There can be no assurance that INTRAV's present competitors or competitors that choose to enter the marketplace in the future will not exert significant competitive pressures on INTRAV. The Company competes with travel agencies in the marketing and sale of travel products to prospective travelers. However, unlike travel agencies, which generate commission income by retailing travel products packaged by third party wholesalers, INTRAV has adopted a structure in which it operates both as a wholesaler and a retailer of its own products. This structure allows the Company to maintain control over the supply of, and access to the demand for its product. Seasonality Demand for INTRAV's travel programs is subject to seasonal fluctuations. Higher activity generally is experienced in the summer, early fall, and winter months. Demand is typically lower during April, May, November and December due to decreased international travel during these periods. Clipper offers various cruises throughout the year with scheduled maintenance occurring in the fourth quarter, resulting in reduced operations. Government Regulation The Company's operations are affected by laws and regulations relating to public charters, principally regulations issued by the United States Department of Transportation. Among other requirements, such regulations require the Company to file and receive approval of a charter prospectus and other materials prior to the Company's selling or offering to sell travel programs which utilize chartered aircraft originating or terminating in the United States. Such regulations also require the Company to maintain financial protection for traveler advance payments for Company operated charters originating or terminating in the United States. The Company has established escrow arrangements to comply with the regulations. Under the arrangements, monies received from travelers are held in escrow accounts until the travel program has been completed. Management believes that the Company is in material compliance with these laws and regulations and does not believe that future compliance with such laws and regulations will have a material adverse impact on the Company's financial condition or results of operations. U.S. law requires CCL and CAC to maintain financial protection for passenger advance payments for Company-operated cruises embarking in U.S. ports. Clipper has established escrow arrangements to comply with the law and has voluntarily extended the escrow protection to all advance passenger payments for Clipper cruises. Under the arrangements, monies received from passengers for cruises are held in escrow accounts until the respective cruises have been completed. Both the Nantucket Clipper and Yorktown Clipper are classified +A1 Passenger Vessels+AMS by the American Bureau of Shipping. They are certified for coastwise and international service by the United States Coast Guard. They carry Passenger Ship Safety Certificates issued under the provisions of the International convention for the Safety of Life at Sea (SOLAS), as well as Certificates of Sanitary Construction issued by the FDA. Employees As of February 28, 1997, the Company, including Clipper Cruise Line, had approximately 300 employees. None of the Company's employees is represented by a labor union. Management believes that its employee relations are good. 6 Item 2. PROPERTIES The headquarters and principal operations of INTRAV and Clipper are located in St. Louis, Missouri, where the Company leases from Windsor Management Corporation, as agent for Windsor Real Estate Inc., approximately 36,400 square feet of office space under three leases, each expiring December 31, 2001. Each lease provides an option to renew, at the Company's discretion, for an additional five year period. Amounts paid in 1996 totaled $499,000. The leases provide for annual rentals totaling $664,000 in 1997, subject to certain adjustments for taxes, insurance, operating expenses and utilities. Management believes that the Company's facilities are adequate for its current needs and that suitable additional space would be available as required. Item 3. LEGAL PROCEEDINGS The Company currently is not a party to any pending legal proceedings, other than ordinary routine litigation incidental to its business. Item 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS No matters were submitted to a vote of the Company's shareholders during the fourth quarter of its fiscal year ended December 31, 1996. Executive Officers of the Registrant Information regarding executive officers is contained in Item 10 Part III of this Report (General Instruction G) and is incorporated herein by reference. PART II Item 5. MARKET FOR REGISTRANT'S COMMON STOCK AND RELATED STOCKHOLDER MATTERS The information required by this Item is set forth under the caption "General and Corporate Information" of the Company's 1996 Annual Report to Shareholders and is incorporated herein by reference. Item 6. SELECTED FINANCIAL DATA The information required by this item is set forth under the caption "Five-Year Financial Summary" of the Company's 1996 Annual Report to Shareholders and is incorporated herein by reference. Item 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS The information required by this Item is set forth under the caption "Management's Discussion and Analysis" of the Company's 1996 Annual Report to Shareholders and is incorporated herein by reference. Item 8. CONSOLIDATED FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA The information required by this Item is set forth in the Company's 1996 Annual Report to Shareholders and is incorporated herein by reference. Item 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE None. 7 PART III Item 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT The information required by this Item is set forth under the headings" Election of Directors-Information Concerning Director Nominees" of the Company's Proxy Statement for the 1997 Annual Meeting of Shareholders and is incorporated herein by reference. The following information with respect to the executive officers of the Company on February 28, 1997, is included pusuant to Instruction 3 of Item 401 (b) of Regulation S-K. MANAGEMENT Executive Officers The following table sets forth certain information regarding the Company's executive officers, including their respective ages.
NAME AGE POSITION Paul H. Duynhouwer 62 President and Chief Executive Officer and Director Michael A. DiRaimondo 39 Senior Vice President and Chief Financial Officer Richard L. Burkemper 48 Senior Vice President, Sales/Marketing Brenda J. Stehle 51 Senior Vice President, Operations
PAUL H. DUYNHOUWER became President, Chief Executive Officer, and a Director of INTRAV in January 1997. He has served as President of Clipper Cruise Line since 1989 and will retain this position in addition to his responsibilities at INTRAV. Prior to joining Clipper as Vice President of Marketing and Sales in 1992, Mr. Duynhouwer held executive positions at Holland-America in New York, Creative World Travel and Royal Cruise Line in San Francisco and Costa Line in New York. MICHAEL A. DIRAIMONDO has served as Senior Vice President and Chief Financial Officer since March 1995. Mr. DiRaimondo's primary responsibility as Senior Vice President and Chief Financial Officer is to coordinate and supervise the provision of information and administrative support to INTRAV personnel, to improve service to travelers and to maximize use of Company resources. Mr. DiRaimondo served as Controller of the Company from June 1987 to May 1990, as Vice President, Finance from May 1990 to June 1993, and as Senior Vice President, Finance and Administration from June 1993 to March 1995. Mr. DiRaimondo joined the Company in April 1985 as Accounting Manager. Prior to joining the Company, Mr. DiRaimondo was employed by Ernst & Young (formerly Ernst & Whinney) for approximately six years, where his last position was Audit Manager. RICHARD L. BURKEMPER has served as Senior Vice President, Sales/Marketing since March 1985. Mr. Burkemper's primary responsibility as Senior Vice President, Sales/Marketing is to coordinate and supervise the sales and promotion of the Company's travel programs. Mr. Burkemper joined the Company in June 1983 as a Regional Vice President of Sales, was promoted to Vice President, Marketing in July 1984 and served in that capacity until his appointment as Senior Vice President, Sales/Marketing. Prior to joining the Company, Mr. Burkemper was employed by Creative Data Services and served as its Vice President, Marketing from August 1978 to June 1983. BRENDA J. STEHLE has served as Senior Vice President, Operations since April 1990. Ms. Stehle's primary responsibility as Senior Vice President, Operations is to supervise and direct the design, development and operation of the Company's travel programs. Ms. Stehle served as Vice President, Transportation of the Company from October 1980 to April 1990. Ms. Stehle joined the Company in October 1979 as Director, Transportation, was promoted to Vice President, Transportation in October 1980 and served in that capacity until her appointment as Senior Vice President, Operations. Prior to joining the Company, Ms. Stehle was employed by Maritz Travel Company for approximately ten years, where her last position was as Director, Transportation, and by Delta Airlines for approximately four years. Item 11. EXECUTIVE COMPENSATION The information contained in the Proxy Statement for the 1997 Annual Meeting of Shareholders under the caption "Executive Compensation" except for the information contained in the sub-captions "Compensation Committee Report on Executive Compensation" and "Stock Price Performance Graph" is incorporated herein by reference. 8 Item 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT The information required by this Item is set forth under the heading, "Holdings of Principal Shareholders and Management," of the Company's Proxy Statement for the 1997 Annual Meeting of Shareholders and is incorporated herein by reference. Item 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS The information required by this Item is set forth under the heading, "Compensation Committee Interlock and Insider Participation," of the Company's Proxy Statement for the 1997 Annual Meeting of Shareholders and is incorporated herein by reference. PART IV Item 14. EXHIBITS, FINANCIAL STATEMENTS, SCHEDULES AND REPORTS ON 8-K The following is an index of the financial statements, schedules and exhibits including this Report or incorporated herein by reference.
(a) 1. Financial Statements: Page ---- Consolidated Balance Sheets -- December 31, 1996 and December 31, 1995 Consolidated Statements of Income -- For the years 1996, 1995 and 1994 Consolidated Statements of Cash Flows -- For the years 1996, 1995 and 1994 Consolidated Statements of Shareholders' Equity -- For the years 1996, 1995 and 1994 Notes to Consolidated Financial Statements Incorporated in this Report by reference to the Company's 1996 Annual Report to Shareholders.
2. Financial Statement Schedules: Schedule II-Valuation and Qualifying Accounts for the Year ended December 31, 1996 Schedules not included have been omitted because they are not applicable or because the required information is included in the consolidated financial statements or notes thereto. 3. Exhibits -- see the following Exhibit Index of this report. The following exhibits listed in the Exhibit Index are filed with this report: 13 Annual Report to Shareholders for the Fiscal Year Ended December 31, 1996 21 Subsidiaries of the registrant 23 Consent of Deloitte & Touche LLP (b) Reports on Form 8-K during the quarter ended December 31, 1996 The Company filed a Form 8-K, dated November 13, 1996, announcing the Company's intention to acquire Clipper Cruise Line. 9 (c) Exhibits -- see the exhibits attached hereto: Management Contracts and Compensatory Plans -- the following exhibits listed in the Exhibit Index are listed below pursuant to item 14(a)-3 of Form 10-K. Employment Agreement by and between Intrav, Inc. and Larry R. Nolan Employment Agreement by and between Intrav, Inc. and Richard L. Burkemper Employment Agreement by and between Intrav, Inc. and Brenda J. Stehle Employment Agreement by and between Intrav, Inc. and Michael A. DiRaimondo Intrav, Inc. 1995 Incentive Stock Plan Form of Option Agreement for Awards uner 1995 Stock Plan Deferred Compensation Agreement between Clipper Cruise Line and Paul H. Duynhouwer 10 SIGNATURES Pursuant to the requirements of section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized. INTRAV, Inc. Date March 28 , 1997 By: /s/ Paul H. Duynhouwer ------ ---------------------------------------------- Paul H. Duynhouwer President, Chief Executive Officer and Director POWER OF ATTORNEY KNOW ALL MEN BY THESE PRESENTS, that each person whose signature appears below constitutes and appoints Barney A. Ebsworth, Paul H. Duynhouwer and Michael A. DiRaimondo, and each of them (with full power to each of them to act alone), his true and lawful attorney-in-fact and agent, with full power of substitution and resubstitution, for him and in his name, place and stead, in any and all capacities, to sign any or all amendments to this report on Form 10-K for the fiscal year ended December 31, 1996, and to file the same, with all exhibits thereto and other documents in connection therewith, with the Securities and Exchange Commission, granting unto said attorneys-in-fact and agents, and each of them, full power and authority to do and perform each and every act and thing requisite and necessary to be done in and about the premises, as fully to all intents and purposes as he might or could do in person, hereby ratifying and confirming all that said attorneys-in-fact and agents, or any of them, or their substitutes, may lawfully do or cause to be done by virtue hereof. Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below on the 28th day of March, 1997, by the following persons on behalf of the registrant and in the capacities indicated. SIGNATURE TITLE /s/ Paul H. Duynhouwer President, Chief Executive - -------------------------------- Officer and Director Paul H. Duynhouwer (Principal Executive Officer) /s/ Michael A. DiRaimondo Senior Vice President and - -------------------------------- Chief Financial Officer Michael A. DiRaimondo (Principal Financial and Accounting Officer) /s/ Barney A. Ebsworth Chairman of the Board - -------------------------------- Barney A. Ebsworth /s/ William H.T. Bush Director - -------------------------------- William H.T. Bush /s/ Frederic V. Malek Director - -------------------------------- Frederic V. Malek /s/ John B. Biggs, Jr. Director - -------------------------------- John B. Biggs, Jr. 11 EXHIBIT INDEX These Exhibits are numbered in accordance with the Exhibit Table of Item 601 of Regulation S-K.
Exhibit Number Description - ------- ----------- 3(i) Restated Articles of Incorporation of Intrav, Inc. (Incorporated by reference to Exhibit 3(i) of the Company's Form S-1 Registration Statement No. 33-90444) 3(ii) Amended and Restated Bylaws of Intrav, Inc., as amended (Incorporated by reference to Exhibit 3(ii) of the Company's Form 10-K for the year ended December 31, 1995) 4 Revolving Credit Agreement dated December 31, 1996, between the Registrant and Boatmen's National Bank of St. Louis (Incorporated by reference to Exhibit 4 to the Registrant's Form 8-K dated January 14, 1996) 9 Omitted -- Inapplicable 10(i) Agreement for Purchase and Sale of Stock by and among Intrav, Inc., Clipper Cruise Line, Inc., Republic Cruise Line, Inc., Liberty Cruise Line, Inc., Clipper Adventure Cruises, Inc. and Windsor, Inc. dated November 13, 1996, as amended by that certain First Amendment, dated December 18, 1996 (Incorporated by reference to Exhibit 10 to the Registrant's Form 8-K dated January 14, 1996) 10(ii)(D)(1) Lease between Windsor Management Corporation, as agent for Windsor Real Estate, Inc., and Intrav, Inc. dated June 25, 1993 (Incorporated by reference to Exhibit 10(ii)(D)(1) of the Company's Form S-1 Registration Statement No. 33-90444) 10(ii)(D)(2) Lease between Windsor Management Corporation, as agent for Windsor Real Estate Inc., and Windsor, Inc. dated June 23, 1993; assigned to Intrav, Inc. by assignment dated March 17, 1995 between Windsor, Inc. and Intrav, Inc. (Incorporated by reference to Exhibit 10(ii)(D)(2) of the Company's Form S-1 Registration Statement No. 33-90444) 10(iii)(A)(1) Employment Agreement by and between Intrav, Inc. and Larry R. Nolan (Incorporated by reference to Exhibit 10(iii)(A)(1) of the Company's Form S-1 Registration Statement No. 33-90444) 10(iii)(A)(2) Employment Agreement by and between Intrav, Inc. and Richard L. Burkemper (Incorporated by reference to Exhibit 10(iii)(A)(2) of the Company's Form S-1 Registration Statement No. 33-90444) 10(iii)(A)(3) Employment Agreement by and between Intrav, Inc. and Brenda J. Stehle (Incorporated by reference to Exhibit 10(iii)(A)(3) of the Company's Form S-1 Registration Statement No. 33-90444) 10(iii)(A)(4) Employment Agreement by and between Intrav, Inc. and Michael A. DiRaimondo (Incorporated by reference to Exhibit 10(iii)(A)(4) of the Company's Form S-1 Registration Statement No. 33-90444) 12 Exhibit Number Description - ------- ----------- 10(iii)(A)(5) Intrav, Inc. 1995 Incentive Stock Plan (Incorporated by reference to Exhibit 10(iii)(A)(5) of Amendment No. 1 to the Company's Form S-1 Registration Statement No. 33-90444) 10(iii)(A)(6) Form of Option Agreement for Awards of Options under 1995 Incentive Stock Plan (Incorporated by reference to Exhibit 10(iii)(A)(6) of Amendment No. 1 to the Company's Form S-1 Registration Statement No. 33-90444) 10(iii)(A)(7) Deferred Compensation Agreement by and between Clipper Cruise Line, Inc. and Paul H. Duynhouwer dated December 23, 1996 11 Omitted -- Inapplicable 12 Omitted -- Inapplicable 13 The Registrant's Annual Report to Shareholders for the Fiscal Year Ended December 31, 1996. Only those portions expressly incorporated by reference into this Form 10-K are deemed filed. 16 Omitted -- Inapplicable 18 Omitted -- Inapplicable 19 Omitted -- Inapplicable 22 Subsidiaries of the Registrant 23 Omitted -- Inapplicable 24 Consent of Deloitte & Touche LLP 25 Power of Attorney, contained in the Company's Annual Report on Form 10-K filed with the Securities and Exchange Commission on March 28, 1997 28 Omitted -- Inapplicable 29 Omitted -- Inapplicable
EX-10.(III)(A)(7) 2 DEFERRED COMPENSATION AGREEMENT 1 Exhibit 10(iii)(A)(7) DEFERRED COMPENSATION AGREEMENT ------------------------------- THIS AGREEMENT is made on the 23rd day of December ---- 1996, by and between CLIPPER CRUISE LINE, INC., a Delaware corporation (hereinafter referred to as the "Corporation"), on behalf of and with the authority of the Combined Clipper Group as hereinafter identified and defined, and PAUL H. DUYNHOUWER, an individual, residing in the County of St. Louis, State of Missouri (hereinafter referred to as "Employee"). WHEREAS, Employee has been employed by the Corporation since August 1, 1989; WHEREAS, Employee has been and is interested in reducing his compensation in exchange for potential benefits to be received at a later point in time; WHEREAS, the Corporation and Employee entered into a deferred incentive bonus arrangement on March 8, 1991, effective January 1, 1990, entitled Memorandum of Agreement, which has been subsequently amended on October 1, 1994 (hereinafter collectively "Memorandum of Agreement"); WHEREAS, the Corporation wishes to continue to offer Employee the opportunity of future benefits as encouragement for continued performance; and WHEREAS, except for the effective date, the Corporation and Employee wish to revise and restate in its entirety the Memorandum of Agreement as hereinafter provided. NOW, THEREFORE, for and in consideration of the above premises and the mutual promises and covenants contained herein the parties agree as follows: 1. The Corporation agrees to continue to employ Employee and Employee agrees to continue to serve the Corporation in such capacity as the Board of Directors of the Corporation 2 (hereinafter "Board") may designate from time to time, as has been the arrangement since August 1, 1989, and continuing to the present and continuing in the future until terminated by either party on at least one hundred eighty (180) days advance written notice to the other party. 2. Employee will devote such an amount of his time, attention, skill and efforts as may be reasonably necessary to the performance of his duties for the Corporation during the term of his employment with the Corporation. 3. In addition to such regular salary (which salary shall increase by 5% on August 1, 1997, August 1, 1998, and August 1, 1999) and other compensation as may be agreed to between the Corporation and Employee from time to time independent of this Agreement, the Corporation agrees that Employee will be eligible to receive a bonus in an amount determined below: (a) Subject to the provisions hereof and to the vesting schedule and other provisions of paragraph 4 hereof, Employee will accrue a bonus for each full calendar year during which he is employed by the Corporation between 1990 and 1999. The parties agree that Exhibit 1 hereto properly calculates this bonus for the years 1990 through 1995. For each full calendar year that the Employee is employed by the Corporation between 1996 and 1999, the bonus shall be calculated as follows: (i) Fifty Thousand Dollars ($50,000.00); plus (ii) Five percent (5%) of the first One Million Dollars ($1,000,000.00) of the Pre-Tax Earnings (as defined in subparagraph (b) hereof), of the Combined Clipper Group (as defined in subparagraphs (d) hereof); plus (iii) Ten percent (10%) of the Pre-Tax Earnings of the Combined Clipper Group in excess of One Million Dollars ($1,000,000.00). -2- 3 (b) For purposes of this Agreement, Pre-Tax Earnings shall mean the net income or loss before taxes of the Combined Clipper Group as shown on the audited financial statements of the Combined Clipper Group, adjusted: (i) to exclude any interest expense charged to the Combined Clipper Group by Windsor, Inc., or Intrav, Inc., or any other affiliate of Windsor, Inc., or Intrav, Inc., as long as any such company is the sole shareholder of the companies in the Combined Clipper Group; (ii) to exclude any corporate management charges or allocations of corporate expenses in excess of One Hundred Twenty-Five Thousand Dollars ($125,000.00), as indexed for years subsequent to 1991 by the Consumer Price Index; provided, however, the exclusion created by this subparagraph (iii) shall not apply to expenses apportioned among the Combined Clipper Group for the proportionate share of items billed in total for the Corporation and other Windsor, Inc., or Intrav, Inc., subsidiaries or affiliates, including Windsor Building rent, insurance costs, and employee benefit program administrative costs; (iii) to exclude, for the year in which it is made, the payment to Employee set forth in paragraph 6 below; and (iv) to exclude depreciation and interest expenses related to the Yorktown Clipper and the Nantucket Clipper (including but not limited to expenses related to the early retirement of the debt on said vessels); provided, however, that in lieu of the actual depreciation and interest expenses for the Yorktown Clipper and the -3- 4 Nantucket Clipper, the following amounts will be charged as the combined depreciation and interest expenses for the year specified: -4- 5 1996 $2,300,000 1997 $2,214,000 1998 $2,118,000 1999 $2,011,000
The Corporation will provide to Employee a statement outlining the manner of the Pre-Tax Earnings calculation and the results of the calculation no later than sixty (60) days subsequent to the end of each calendar year from 1996 to 1999. (a) If the Pre-Tax Earnings of the Combined Clipper Group for any calendar year covered by this Agreement are a loss, such negative amount will be carried forward to reduce any Pre-Tax Earnings of subsequent years for purposes of computing the annual bonus amount referenced in subparagraph (a) above. Notwithstanding the foregoing if any Pre-Tax Earnings loss is due to loss of revenue arising from damage to ships and therefore the inability of said ships to make any journeys (an example of such an event is the Alaskan Rock Incident in 1993 where the Yorktown Clipper, after an accident, could not be used for a substantial period of time and many booked trips had to be canceled creating a loss of revenue) then the Pre-Tax Earnings loss to the extent it arises from such unusual incident will not be carried forward to future years and therefore will not reduce Pre-Tax Earnings in subsequent years. Any unapplied loss carry-forwards at the end of the term of this Agreement will expire without effect on prior years' annual bonus computations. (b) For purposes of this Agreement, the Combined Clipper Group consists of the Corporation, Republic Cruise Line, Inc., a Delaware corporation, Liberty Cruise Line, Inc., a Delaware corporation, Clipper Adventure Cruises, Inc., a Delaware corporation, and any successors thereto. -5- 6 (c) The bonus amounts as defined and calculated hereunder, as vested, will accrue ten percent (10%) interest per year compounded annually for each year from the first day of the year following the year for which the bonus was earned. 2. The annual bonus accumulated from year to year is hereinafter referred to as the Deferred Compensation Amount which shall be administered as follows: (a) Yearly, as of December 31, of each year, the Corporation shall credit to a book reserve (hereinafter referred to as the "Deferred Compensation Account") established for this purpose, the vested portion of the bonus amount as described in this Agreement (including the vested portion of any interest thereon), until said amount is paid to Employee or his designated beneficiary(ies). (b) Title to and beneficial ownership of the Deferred Compensation Account and all funds, if any, contained therein shall at all times remain the sole property of the Corporation. Employee and his designated beneficiary(ies) shall not have any property interest whatsoever in said investment vehicle or in any other specific assets of the Corporation. (c) The Employee shall be vested in the Deferred Compensation Amount pursuant to the following schedule:
Year of Service Percentage --------------- ---------- 1990 10% 1991 20% 1992 30% 1993 40% 1994 50% 1995 60% 1996 70% 1997 80% -6- 7 1998 90% 1999 100%
Credit toward vesting shall be given for all years where the Employee is employed on January 1 of such year and continues to be employed through at least July 2 of such year; provided, however, that credit shall not be given for any year during which or after the year in which the Employee gives notice of his intent to resign his employment. If Employee's employment terminates due to death or disability, then the Employee shall become one hundred percent (100%) vested in the Deferred Compensation Amount. 1. The Employee shall be entitled to the vested balance of the Deferred Compensation Amount, paid on the date and in the manner specified below: (a) Except as provided in subparagraph (b), the Employee shall be entitled to the vested portion of the Deferred Compensation Amount payable in a lump sum on April 1, 2000. (b) Notwithstanding the provisions of subparagraph (a), if Employee's employment with the Corporation terminates prior to January 1, 2000, the vested portion of the Deferred Compensation Amount shall be paid to the Employee or the Employee's beneficiary within ninety (90) days of the termination. -7- 8 1. The parties acknowledge that it is presently anticipated that the stock of the Combined Clipper Group will be sold by Windsor, Inc., to Intrav, Inc., effective December 31, 1996. In lieu of any other consideration to which Employee might be entitled due to this transaction, including but not limited to consideration that might be due to him under the Memorandum of Agreement, Employee will be paid a lump sum of One Million Dollars ($1,000,000), from which all applicable payroll taxes and other deductions will be made, on the later of December 31, 1996, or the date that the stock of the Combined Clipper Group is sold by Windsor, Inc., to Intrav, Inc. Assuming that the payment called for in this Paragraph 6 is made, the parties agree that nothing in this Deferred Compensation Agreement or in any other contract in existence between them gives Employee a right to any monies as a result of any subsequent or other change of control of the Corporation or of the Combined Clipper Group, and that if any such right does exist, it is hereby superseded and extinguished. In the event that the payment called for in this Paragraph 6 is not made on or before January 31, 1997, the parties agree that they will negotiate in good faith to clarify the change of control provision in the Memorandum of Agreement. 2. Employee shall have the right to designate a beneficiary or beneficiaries to receive benefits hereunder in the case of Employee's death. The beneficiary(ies) referred to in this Paragraph may be designated or changed by Employee (without the consent of any prior beneficiary or the Corporation) on a form provided by the Corporation and delivered to the Corporation before Employee's death. If no such beneficiary shall have been designated or no designated beneficiary shall survive Employee, the payments payable under paragraph 3 shall be payable to Employee's probate estate. -8- 9 3. Nothing contained in this Agreement and no action taken pursuant to the provisions of this Agreement shall create or be construed to create a trust of any kind, or a fiduciary relationship between the Corporation and Employee, his designated beneficiary(ies) or any other person. Any funds which may be invested under the provisions of this Agreement shall continue for all purposes to be a part of the general funds of the Corporation and no person other than the Corporation shall, by virtue of the provisions of this Agreement, have any interest in such funds or in any assets in which said funds are invested. To the extent that any person acquires a right to receive payments from the Corporation under this Agreement, said rights shall be no greater than the rights of any unsecured general creditor of the Corporation. -9- 9 4. The right of Employee or any other person to the payment of deferred compensation or other benefits under this Agreement shall not be assigned, transferred, pledged, or encumbered except by Will or by the laws of descent and distribution. 5. Nothing contained in this Agreement shall be construed to alter Employee's status as an at-will employee of the Corporation. 6. Any deferred compensation payable under this Agreement shall not be deemed salary or other compensation to Employee for the purpose of computing benefits to which Employee may be entitled under any pension plan or other arrangements of the Corporation for the benefit of its employees. Furthermore, the Corporation agrees not to treat the amount of any deferred compensation payable under this Agreement as salary for purposes of deducting said amount on its corporate income tax return or making any withholding on said amount for Employee's benefit or for the purposes of Social Security until said amount is received by Employee (except for Medicare tax withholdings or any other taxes required to be withheld by law). 7. The Corporation agrees to file all necessary returns and reports by the laws of the United States or the State of Missouri in regard to this Deferred Compensation Agreement or any fund created under this Agreement. 8. Any notice required to be sent pursuant to the terms of this Agreement shall be deemed delivered if sent to the other party by first class, U.S. Mail, postage prepaid to the following address: To the Corporation: Clipper Cruise Line, Inc. 7711 Bonhomme Avenue St. Louis, Missouri 63105 Employee: Paul H. Duynhouwer -10- 11 10603 Greywick Lane St. Louis, Missouri 63141 Any party may change their address listed herein by sending the other party notice of such change in the same manner as all other notices under this Agreement. 1. This Agreement shall be binding upon and inure to the benefit of the Corporation and its successors, subsidiaries and assigns, and the Employee and his heirs, executors, administrators and legal representatives. 2. This Agreement shall be construed in accordance and governed by the laws of the State of Missouri. IN WITNESS WHEREOF, the Corporation has caused this Agreement to be executed by its duly authorized officer and the Employee has hereunto set his hand as of the day and year first above written. CORPORATION: CLIPPER CRUISE LINE, INC. By: /s/ Wayne L. Smith ------------------------------ Title: Director --------------------------- EMPLOYEE: /s/ Paul H. Duynhouwer --------------------------------- PAUL H. DUYNHOUWER -11- EX-13 3 1996 ANNUAL REPORT 1 Exhibit 13 INTRAV 1996 Annual Report 2 Five-Year Financial Summary (Amounts in thousands except share and traveler data)
Year Ended December 31, -------------------------------------------------------- 1996 1995 1994 1993 1992 INCOME STATEMENT DATA: Program revenues $126,081 $114,845 $108,876 $ 85,900 $ 98,318 Cost of operations 101,651 91,035 83,934 69,712 79,631 -------------------------------------------------------- Gross profit 24,430 23,810 24,942 16,188 18,687 Operating income 5,657 6,888 7,502 2,132 3,886 Net income (loss) 3,165 4,147 4,379 (2) 1,043 Net income per common share 0.61 0.80 0.88 - 0.21 Dividends per common share 0.60 0.25 0.90 - - OPERATING DATA: Number of travelers 27,334 24,569 22,826 19,354 21,390 Average revenue per traveler $ 4,613 $ 4,674 $ 4,770 $ 4,438 $ 4,596 Average gross profit per traveler 894 969 1,093 836 874 BALANCE SHEET DATA: Cash, cash equivalents and marketable securities $ 14,114 $ 31,224 $ 28,180 $ 18,932 $ 16,039 Total current assets 26,323 41,495 37,280 29,887 27,036 Total assets 52,594 68,966 62,285 57,711 54,582 Total current liabilities 39,738 47,730 46,557 33,466 29,689 Total long-term debt 3,000 10,317 11,019 11,731 12,443 Shareholders' equity (deficit) 3,781 4,970 (265) (389) (424) Operations conducted as a division of Windsor through September 30,1992. Per share data is calculated using 5,195,000 shares outstanding for 1996; 5,200,000 shares outstanding for 1995; and 5,000,000 shares outstanding for years 1994 and 1993.
3 1996 was a significant year for our company. Revenues from INTRAV program operations reached $99.5 million, a record in the company's 38-year history. The increase was due to 2,304 more travelers participating on INTRAV programs in 1996. This is an increase of 14.2%, from 16,192 in 1995 to 18,496 in 1996. [PHOTO] This increase was partially offset by a decrease in the average revenue per traveler, from $5,495 in 1995 to $5,388 in 1996. INTRAV also experienced an increase of 14.1% in the cost of operations, from $73.9 million in 1995 to $84.3 million in 1996. This increase was due to the growth in sales level, higher costs of promoting programs, and higher relative costs associated with the operation of certain cruise programs. Gross profit as a percentage of program revenue decreased from 16.9% in 1995 to 15.4% in 1996, and net income declined from $3.5 million in 1995 to $3.0 million in 1996. INTRAV has taken significant steps to improve the outlook for our company's performance in the future. On December 31, 1996, we completed the acquisition of Clipper Cruise Line. Clipper Cruise Line operates unique cruise itineraries aboard its two ships, M/V Yorktown Clipper and M/V Nantucket Clipper, along the coastal waters of the United States and Canada, and in the Caribbean. These North American itineraries substantially diversify the travel programs currently offered by INTRAV. The acquisition of Clipper Cruise Line enhances the overall value and earnings potential of INTRAV. The profile of Clipper's travelers is consistent with that of INTRAV, and the cash flow characteristics of Clipper's operations will enhance INTRAV's cash generation capabilities and strong balance sheet. The historical financial statements of Intrav, Inc. contained in this annual report have been restated for all periods prior to the acquisition to reflect the combined financial position and results from operations of Intrav, Inc. and Clipper Cruise Line on a pooling-of-interest basis. INTRAV's management remains committed to the excellent service and company performance upon which our 38-year reputation is based. To position INTRAV for the future, the Board of Directors appointed Paul H. Duynhouwer President and Chief Executive Officer of INTRAV in January 1997. Paul has served as President of Clipper Cruise Line since 1989. The cash flow characteristics of INTRAV remain strong as evidenced by the $.50 per share dividend paid in 1996. In addition, the acquisition of Clipper Cruise Line was financed primarily with cash generated from our operations. With the dedicated efforts of our employees, the support of our valued industry partners and our steadfast commitment to customer service, INTRAV and Clipper Cruise Line look forward to the challenges of the future. /s/ Barney A. Ebsworth Barney A. Ebsworth Chairman of the Board INTRAV - 1996 Annual Report [1] 4 Management's Discussion and Analysis Overview INTRAV is a leading designer, organizer, marketer, and operator of deluxe, escorted, international travel programs. These programs are designed to appeal to higher-income individuals desiring first-class travel experiences. Since 1959, nearly 400,000 travelers have participated in the Company's travel programs. On December 31, 1996, INTRAV acquired all the outstanding common stock of Clipper Cruise Line from Windsor, Inc., a company controlled by Barney A. Ebsworth, INTRAV's Chairman of the Board and majority stockholder. The Stock Purchase Agreement included an initial payment of approximately $9.9 million and the assumption of indebtedness of $5.5 million owed by Clipper to Windsor, with an additional $0.2 million to be paid on or before March 31, 1997. Additional consideration of up to $3.0 million may be paid to the extent the cumulative net cruise revenues of Clipper exceed $70.0 million in the period January 1, 1997, through December 31, 2000. Due to the common ownership and control of Mr. Ebsworth over both INTRAV and Clipper, the acquisition has been accounted for in a manner similar to the pooling-of-interests method and, accordingly, all financial data has been restated to include the accounts and results of operations of Clipper for all periods prior to the acquisition. Clipper is a leading designer, organizer, marketer and operator of deluxe, escorted, domestic and international travel cruises. Similar to INTRAV, its programs are designed to appeal to higher income individuals desiring first-class travel experiences and are primarily marketed via direct mail through sponsoring "affinity groups," or directly to the ultimate traveler. Clipper's travelers cruise primarily on its two cruise ships, the M/V Yorktown Clipper and the M/V Nantucket Clipper. For the three years ended December 31, 1996, the Company recorded an average gross profit of $24.4 million and average income before income taxes of $6.2 million, representing 20.9% and 5.2% of average program revenue, respectively. Except for the historical information contained herein, the matters discussed herein are forward-looking statements that involve certain risks and uncertainties that could cause actual results to differ materially from those in the forward looking statements. Potential risks and uncertainties include such factors as the Company's ability to successfully integrate the operations of Clipper; overall economic conditions; reduced demand for the Company's travel programs due to periods of widespread international unrest or other factors; fluctuations in travel program costs after the Company has established the selling prices of such programs; competitors' actions and other risks described in the Company's filings with the Securities and Exchange Commission. In addition, the forward-looking statements assume the continued operation of the two Clipper Cruise Line ships consistent with their recent capacity and cruise price levels. These forward-looking statements represent the Company's judgment as of the date hereof. Results of Operations The following table sets forth for the periods indicated the actual percentages which certain items in the Consolidated Statements of Income bear to program revenues: Percentage of Program Revenues
Year Ended December 31, 1996 1995 1994 ----------------------------- Program revenues 100.0% 100.0% 100.0% Cost of operations 80.6 79.3 77.1 ----------------------------- Gross profit 19.4 20.7 22.9 Selling, general and administrative 13.4 13.2 14.3 Depreciation and amortization 1.5 1.5 1.7 ----------------------------- Operating income 4.5 6.0 6.9 Investment income 1.3 1.6 1.2 Interest expense (1.8) (2.0) (1.9) ----------------------------- Income before income taxes 4.0 5.6 6.2 Income taxes 1.5 2.0 2.2 ----------------------------- Net income 2.5% 3.6% 4.0% =============================
Program Revenues Program revenues in 1996 were $126.1 million, compared to $114.8 million and $108.9 million in 1995 and 1994, respectively. The 9.8% increase in 1996 from 1995 was due to 2,765 more travelers, an increase of 11.3%, from 24,569 travelers in 1995 to 27,334 in 1996. The increase in travelers was partially offset by a decrease in the average revenue per traveler, from $4,674 in 1995 to $4,613 in 1996 due to a greater percentage of travelers participating on lower-priced trips. [2] INTRAV - 1996 Annual Report 5 The 5.5% increase in 1995 from 1994 was primarily due to 1,743 additional travelers, representing a 7.6% increase from 22,826 travelers in 1994 to 24,569 travelers in 1995. The average revenue per traveler decreased from $4,770 in 1994 to $4,674 in 1995. Cost of Operations Cost of operations includes the costs of airfare, ship, hotel and other accommodations and services included in the base program, as well as costs of optional products and services including sightseeing, program extensions, additional airfare, and medical and educational seminars. Also included are the costs of creating and distributing promotional materials and other promotional expenses for each program. Cost of operations totaled $101.7 million in 1996, compared to $91.0 million in 1995 and $83.9 million in 1994. The increases were primarily due to the increased sales levels. In 1996, the Company experienced increases in the costs of promoting and operating the programs compared to the 1995 and 1994 operations. The increased promotional expenses resulted from higher paper costs and a greater number of brochures mailed. Gross Profit Gross profit totaled $24.4 million, or 19.4% of program revenue in 1996. This compares to $23.8 million, or 20.7% of program revenue in 1995 and $24.9 million, or 22.9% of program revenue in 1994, respectively. The increase in 1996 was due to the increased sales level. This increase was partially offset by the increased cost of promoting the programs and higher operating costs associated with certain cruise programs. The 1995 decrease from 1994 was primarily due to the increased costs of promoting the Around the World departures in 1995 compared to 1994. The Company completed three Around the World departures in 1996 and is currently offering two departures of this program in 1997. Assuming the Company does not operate a third departure in 1997 or recognize significant increases in other program activity, the Company would expect its gross profit to be less than the 1996 level. Selling, General and Administrative Expenses Selling, general and administrative expenses, consisting primarily of compensation and related expenses, and office operating expenses, totaled $16.9 million, $15.1 million and $15.6 million in 1996, 1995 and 1994, respectively. These amounts represented 13.4%, 13.2% and 14.3% of program revenues. The 1996 amount included approximately $1.0 million paid to a key employee, pursuant to an existing employment agreement, prior to INTRAV's acquisition of Clipper. Depreciation and Amortization Depreciation and amortization, primarily relating to the cruise ships and internally developed software, totaled $1.9 million, $1.8 million and $1.9 million in 1996, 1995 and 1994, respectively. These amounts represented 1.5%, 1.5% and 1.7% of program revenues. Investment Income Investment income totaled $1.6 million, $1.9 million and $1.3 million in 1996, 1995 and 1994, respectively. The reduced level of investment income in 1996 was due to decreased levels of investable cash generated from operations. In 1996, the Company's average monthly balance of cash and marketable securities was $29.3 million, earning a 5.6% rate of return. The anticipated level of investment income for 1997 will be less than historical amounts due to the reduced level of investable cash and marketable securities resulting from the use of available amounts at December 31, 1996 in the acquisition of Clipper Cruise Line. INTRAV - 1996 Annual Report [3] 6 Management's Discussion and Analysis Interest Expense Interest expense, consisting of amounts paid on the U.S. Government Guaranteed Financing Bonds, relating to the cruise ships and the outstanding loan balance owed Windsor, totaled $1.9 million, $2.4 million and $2.1 million in 1996, 1995 and 1994, respectively. The anticipated level of interest expense for 1997 is expected to be significantly reduced since the U.S. Government Bonds and a major portion of the outstanding loan to Windsor were retired prior to INTRAV acquiring Clipper. Interest expense in 1997 is expected to consist of amounts paid for draws made on the Company's $10.0 million revolving credit facility. Income Taxes The Company's effective tax rates were 35.0%, 35.2% and 34.7% for 1996, 1995 and 1994, respectively. The inclusion of nontaxable interest income and effects of state taxes are the primary factors for the effective tax rate to differ from the statutory federal income tax rate. Liquidity and Capital Resources During 1996, INTRAV continued to fund its operations, capital expenditures and dividend payments through cash flows generated from operations and from retained earnings. Net cash provided by operations before working capital items was $5.5 million, $7.0 million and $6.6 million in 1996, 1995 and 1994, respectively. Due to the timing of certain payments for program costs and the receipt of customer deposits associated with future tours, net cash provided by operations, including working capital items, was $1.8 million, $5.2 million and $16.2 million in 1996, 1995 and 1994, respectively. Deferred revenue, representing payments received from travelers for tour departures that have not been completed, amounted to $29.1 million at December 31, 1996, representing a 9.0% decrease from $32.0 million at December 31, 1995. This decrease is due to the reduced number of travelers expected to participate on the Trans-Panama Canal program in 1997 compared to 1996. Of this amount, 80.8%, or $23.5 million, relates to tour departures that will be completed by March 31, 1997. The remaining balance relates to tour departures that will be completed from April 1, 1997, through March 31, 1998. The Company paid dividends of $3.2 million, $2.8 million and $3.0 million during 1996, 1995 and 1994, respectively. During 1996, the Company repurchased 173,600 shares in the open market for an aggregate of $1.4 million. INTRAV completed the acquisition of Clipper Cruise Line on December 31, 1996. In connection with this transaction, INTRAV entered into a $10.0 million revolving credit facility agreement. INTRAV financed the acquisition primarily from its working capital, which had the effect of significantly reducing cash and marketable securities at December 31, 1996, and included a $3.0 million draw on the credit facility. Foreign Currency Hedging Program Many of the Company's travel programs necessitate the purchase of services from suppliers located outside the United States and certain of its arrangements with suppliers are denominated in foreign currencies. As a result, the Company is exposed to the risk of fluctuating currency values. To protect the U.S. dollar value of its foreign currency transactions, the Company may enter into "forward contracts" which are commitments to buy foreign currencies in the future at a contracted rate. The Company does not believe that fluctuations in the value of the U.S. dollar in relation to the currency of its suppliers has had a material adverse effect on the Company's results of operations. Inflation Inflation affects the costs incurred by the Company in its purchases of program components from its suppliers and in certain portions of its selling, general and administrative expenses. The Company has offset the effects of inflation through price increases and controlling its expenses. The Company's ability to increase prices is limited by competitive factors as well as the need to maintain acceptable pricing for the markets to which it sells its programs. In management's opinion, inflation has not had a significant impact on the operations in the three years ended December 31, 1996. [4] INTRAV - 1996 Annual Report 7 Consolidated Statements of Income (Amounts in thousands except share data)
Years Ended December 31, ---------------------------------------------- 1996 1995 1994 Program revenues $ 126,081 $ 114,845 $ 108,876 Cost of operations 101,651 91,035 83,934 ---------------------------------------------- Gross profit 24,430 23,810 24,942 Selling, general and administrative (including related party expenses of $985, $1,199, and $947) (Notes 9 and 11) 16,924 15,135 15,587 Depreciation and amortization 1,849 1,787 1,853 ---------------------------------------------- Operating income 5,657 6,888 7,502 Investment income 1,643 1,883 1,265 Interest expense (including related party expenses of $813, $1,086, $728) (1,904) (2,370) (2,058) ---------------------------------------------- Income before provision for income taxes and extraordinary item 5,396 6,401 6,709 Provision for income taxes (Note 6) 1,887 2,254 2,330 ---------------------------------------------- Net income before extraordinary item 3,509 4,147 4,379 Extraordinary item-loss related to early extinguishment of debt (net of tax benefit of $194,000) (Note 10) (344) -- -- ---------------------------------------------- Net income $ 3,165 $ 4,147 $ 4,379 ============================================== Net income per common share: Income before extraordinary item $ 0.68 $ 0.80 $ 0.88 Extraordinary item (0.07) -- -- ---------------------------------------------- Net income per common share $ 0.61 $ 0.80 $ 0.88 ---------------------------------------------- Weighted average number of common shares outstanding 5,195,000 5,200,000 5,000,000 ============================================== See accompanying notes to consolidated financial statements.
INTRAV - 1996 Annual Report [5] 8 Consolidated Balance Sheets (Amounts in thousands except share data)
December 31, ----------------------- 1996 1995 ASSETS: Current assets: Cash and cash equivalents $ 6,670 $12,178 Restricted cash (Note 3) 1,917 2,283 Marketable securities (Notes 7 and 8) 776 12,234 Restricted marketable securities (Notes 3 and 8) 4,751 4,529 Prepaid program costs 9,821 8,153 Prepaid expenses 868 532 Other current assets 1,520 1,586 ----------------------- Total current assets 26,323 41,495 Property and equipment - net (Note 4) 17,569 18,271 Prepaid promotion costs and other assets 8,702 9,200 ----------------------- Total $52,594 $68,966 ======================= LIABILITIES AND SHAREHOLDERS' EQUITY: Current liabilities: Accounts payable $ 3,298 $ 2,869 Accrued expenses 3,897 3,368 Deferred revenue 29,096 31,976 Income taxes payable 616 536 Payable to Windsor, Inc. (Notes 1 and 11) 427 5,628 Current maturities of long term debt - 702 Deferred income taxes (Note 6) 2,404 2,651 ----------------------- Total current liabilities 39,738 47,730 Deferred compensation (Note 9) 1,012 673 Deferred income taxes (Note 6) 5,063 5,276 Long term debt - less current maturities (Note 10) 3,000 10,317 Commitments and contingencies (Note 7) -- -- Shareholders' equity: Preferred stock, $.01 par value - authorized, 5,000,000 shares; issued and outstanding, none -- -- Common stock, $.01 par value - authorized, 20,000,000 shares; issued 5,325,000 shares; outstanding, 5,151,600 shares in 1996 and 5,325,000 in 1995 53 53 Additional paid-in capital 22,189 11,940 Retained earnings (accumulated deficit) (17,055) (7,099) Unrealized gain (loss) on marketable securities (Note 8) (2) 76 ----------------------- 5,185 4,970 Less cost of common stock in treasury, 173,400 shares in 1996 (1,404) - ----------------------- Total shareholders' equity 3,781 4,970 ----------------------- Total $52,594 $68,966 ======================= See accompanying notes to consolidated financial statements.
[6] INTRAV - 1996 Annual Report 9 Consolidated Statements of Cash Flow (Amounts in thousands)
Years Ended December 31, ------------------------------------------ 1996 1995 1994 CASH FLOWS FROM OPERATING ACTIVITIES: Net income $ 3,165 $ 4,147 $ 4,379 Adjustments to reconcile net income to net cash provided by operating activities: Extraordinary item 122 -- -- Depreciation and amortization 1,849 1,787 1,853 Amortization of bond premium 68 53 78 Amortization of deferred financing costs 15 18 18 Gain on sale of marketable securities (62) (248) - Loss on disposal of equipment - 35 34 Deferred income taxes (415) 1,181 239 Changes in assets and liabilities which provided (used) cash: Restricted cash 366 2,810 (527) Prepaid expenses and other assets (1,864) (5,522) 1,132 Other current assets 66 169 332 Accounts payable and accrued expenses 958 (1,105) 1,625 Deferred revenue (2,880) 1,632 6,358 Deferred compensation 340 285 154 Income taxes payable 80 (6) 542 ------------------------------------------ Net cash provided by operating activities 1,808 5,236 16,217 ------------------------------------------ CASH FLOWS FROM INVESTING ACTIVITIES: Purchases of property and equipment (1,120) (944) (530) Sales of marketable securities 28,200 17,052 6,187 Purchases of marketable securities (17,093) (19,737) (8,736) ------------------------------------------ Net cash provided by (used in) investing activities 9,987 (3,629) (3,079) ------------------------------------------ CASH FLOWS FROM FINANCING ACTIVITIES: Payments of long term debt (11,019) (712) (712) Proceeds from revolving line of credit 3,000 -- -- Net proceeds from issuance of common stock -- 2,669 -- Dividends paid (3,182) (2,831) (3,000) Purchase of treasury stock (1,404) -- -- Proceeds from short-term borrowings -- 3,000 683 Payments on short-term borrowings -- (3,000) (2,617) Distribution to Windsor, Inc. for acquisition of Clipper Cruise Line (9,727) -- -- Net cash received from (paid to) Windsor, Inc. 5,029 1,337 (400) ------------------------------------------ Net cash provided by (used in) financing activities (17,303) 463 (6,046) ------------------------------------------ NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS (5,508) 2,070 7,092 CASH AND CASH EQUIVALENTS, BEGINNING OF PERIOD 12,178 10,108 3,016 ------------------------------------------ CASH AND CASH EQUIVALENTS, END OF PERIOD $ 6,670 $ 12,178 $ 10,108 ========================================== SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION: Cash paid for taxes $ 1,582 $ 580 $ 1,198 Noncash contribution of capital 10,249 -- -- Cash paid for interest 1,847 2,317 1,861 See accompanying notes to consolidated financial statements.
INTRAV - 1996 Annual Report [7] 10 Consolidated Statements of Shareholders' Equity (Amounts in thousands except share data)
Common Stock ------------ Unrealized Retained Gain Total Number of Additional Earnings (Loss) on Share- Outstanding Paid-In (Accumulated Investment Treasury holders' Shares Amount Capital Deficit) Securities Stock Equity ----------------------------------------------------------------------------- BALANCES AT JANUARY 1, 1994, as previously reported 5,000,000 $50 $ 351 $ 1,787 $ 36 $ -- $ 2,224 Acquisition of Clipper Cruise Line, treated as a pooling-of-interest (Note 1) -- -- 8,923 (11,581) -- -- (2,658) ---------------------------------------------------------------------------- BALANCES AT JANUARY 1, 1994, as restated 5,000,000 50 9,274 (9,794) 36 -- (434) Net income -- -- -- 4,379 -- -- 4,379 Dividends -- -- -- (4,500) -- -- (4,500) Unrealized loss on investment securities (Note 8) -- -- -- -- (538) -- (538) ---------------------------------------------------------------------------- BALANCES AT DECEMBER 31, 1994 5,000,000 50 9,274 (9,915) (502) -- (1,093) Issuance of common stock 325,000 3 2,666 -- -- -- 2,669 Net income -- -- -- 4,147 -- -- 4,147 Dividends -- -- -- (1,331) -- -- (1,331) Unrealized gain on investment securities (Note 8) -- -- -- -- 578 -- 578 ---------------------------------------------------------------------------- BALANCES AT DECEMBER 31, 1995 5,325,000 53 11,940 (7,099) 76 -- 4,970 Contributed capital (Note 1) -- -- 10,249 -- -- -- 10,249 Acquisition of Clipper Cruise Line (Note 1) -- -- -- (9,939) -- -- (9,939) Net income -- -- -- 3,165 -- -- 3,165 Dividends paid to INTRAV, Inc. shareholders -- -- -- (2,596) -- -- (2,596) Dividends paid to Windsor, Inc. -- -- -- (586) -- -- (586) Unrealized loss on investment securities (Note 8) -- -- -- -- (78) -- (78) Purchase of 173,400 shares of common stock for treasury -- -- -- -- -- (1,404) (1,404) ---------------------------------------------------------------------------- BALANCES AT DECEMBER 31, 1996 5,325,000 $53 $22,189 $(17,055) $ (2) $(1,404) $ 3,781 ============================================================================ See accompanying notes to consolidated financial statements.
[8] INTRAV - 1996 Annual Report 11 Notes to Consolidated Financial Statements YEARS ENDED DECEMBER 31, 1996, 1995 AND 1994 (Amounts in thousands except share data) 1. Description of Business and Basis of presentation Intrav, Inc. ("INTRAV" or the "Company") is a leading designer, organizer, marketer and operator of deluxe, escorted, international travel programs. The Company's programs are designed to appeal to higher-income individuals desiring first-class travel experiences. The Company markets substantially all of its programs via direct mail through sponsoring "affinity groups," or directly to the ultimate traveler. On December 31, 1996, the Company acquired all the outstanding common stock of Clipper Cruise Line ("Clipper") consisting of Clipper Cruise Line, Inc. ("CCL"), Clipper Adventure Cruises, Inc. ("CAC"), Republic Cruise Line, Inc. ("RCL") and Liberty Cruise Line, Inc. ("LCL") from Windsor, Inc. ("Windsor"), a company controlled by Barney A. Ebsworth, the Company's Chairman of the Board and majority stockholder. The Stock Purchase Agreement included an initial payment of approximately $9,900 and the assumption of indebtedness of $5,500 owed by Clipper to Windsor, with an additional $213 to be paid on or before March 31, 1997. Additional consideration of up to $3,000 may be paid to the extent the cumulative net cruise revenues ("as defined") of Clipper exceed $70,000 in the period January 1, 1997, through December 31, 2000. Due to the common ownership and control of Mr. Ebsworth over both INTRAV and Clipper, the acquisition has been accounted for in a manner similar to the pooling-of-interests method and, accordingly, all financial data has been restated to include the accounts and results of operations of Clipper for all periods prior to the acquisition. Clipper is a leading designer, organizer, marketer and operator of deluxe, escorted, domestic and international travel cruises. Similar to INTRAV, its programs are designed to appeal to higher-income individuals desiring first-class travel experiences and are primarily marketed via direct mail through sponsoring "affinity groups," or directly to the ultimate traveler. Clipper's travelers cruise primarily on its two cruise ships from RCL and LCL, and in the past, Clipper has chartered an additional ship from Discoverer Reederei. As used herein, the term "Company" refers to both Intrav, Inc. and Clipper. The consolidated financial information does not contain any material adjustments to conform the accounting policies of Clipper to that of the Company. All intercompany transactions have been eliminated. Separate net sales, net income and related per share amounts of the separate entities are presented in the following table:
1996 1995 1994 ------------------------------------------ PROGRAM REVENUES: INTRAV $ 99,525 $ 88,967 $ 80,355 Clipper 26,556 25,878 28,521 ------------------------------------------ Total $126,081 $114,845 $108,876 ========================================== NET INCOME: INTRAV $ 3,053 $ 3,543 $ 4,072 Clipper 112 604 307 ------------------------------------------ Total $ 3,165 $ 4,147 $ 4,379 ========================================== NET INCOME PER COMMON SHARE: INTRAV $ 0.59 $ 0.68 $ 0.81 Clipper 0.02 0.12 0.07 ------------------------------------------ Total $ 0.61 $ 0.80 $ 0.88 ==========================================
2. Summary of Significant Accounting Policies PRINCIPLES OF CONSOLIDATION -- The consolidated financial statements of the Company include the accounts of INTRAV and its wholly owned subsidiaries CCL, CAC, RCL and LCL. All significant intercompany accounts and transactions have been eliminated. REVENUE RECOGNITION -- Program revenues are recognized as income upon completion of each tour. Deferred revenue consists of amounts received for tours which have not yet been completed. PROMOTION AND PROGRAM COSTS -- The Company expenses promotion costs as incurred, except for direct-response advertising. Direct-response advertising and program costs are deferred until the revenue from the related program is recognized. Promotion expenses were $17,712, $13,770 and $13,880 for 1996, 1995 and 1994, respectively. CURRENCY HEDGES -- The Company may enter into contracts to buy foreign currencies in the future to protect the U.S. dollar value of certain foreign currency transactions. Except in the infrequent instance of cancellation of non-U.S. currency cost commitments, the Company's practices relating to these contracts do not expose the Company to currency risk from exchange-rate movements because the gains and losses on them offset losses and gains INTRAV - 1996 Annual Report [9] 12 Notes to Consolidated Financial Statements on the cost commitments being hedged. Gains and losses on currency forward contracts are deferred and recognized in the same period as the hedged transactions (see Note 7). CASH EQUIVALENTS -- For purposes of reporting cash flows, the Company considers all highly liquid debt instruments purchased with an original maturity of three months or less to be cash equivalents. MARKETABLE SECURITIES -- The Company's marketable securities, including restricted amounts, have been classified as available-for-sale. Available-for-sale securities are carried at fair value, with the unrealized holding gains and losses, net of taxes, reported as a separate component of shareholders' equity. PROPERTY, AMORTIZATION AND DEPRECIATION -- Property and equipment is recorded at cost. Amortization and depreciation are computed using accelerated and straight-line methods over the estimated useful lives of the individual assets. Capitalized software costs are amortized over 5 to 8 years, office furniture and equipment is depreciated over 5 to 7 years, and leasehold improvements are amortized over the life of the related lease. The cruise ships are depreciated over 25 years and cruise ship equipment over 5 to 7 years. The Company adopted Statement of Financial Accounting Standards ("SFAS") No. 121, Accounting for the Impairment of Long-Lived Assets and for Long-Lived Assets to Be Disposed of, for 1996. SFAS No. 121 requires that long-lived assets and certain identifiable intangibles to be held and used by an entity be reviewed for impairment whenever events or changes in circumstances indicate that the carrying value of an asset may not be recoverable. SFAS No. 121 also requires that long-lived assets and certain identifiable intangibles to be disposed of be reported at the lower of carrying amount or fair value less cost to sell. Adoption of this standard had no material impact on the Company's financial condition or results of operations. INCOME TAXES -- Deferred income taxes reflect the tax consequences on future years of differences between tax and financial reporting amounts. Under this method, deferred tax assets and liabilities are determined based on temporary differences between the financial statement and tax bases of assets and liabilities by applying enacted tax rates applicable to future years in which the differences are expected to reverse. Prior to the acquisition discussed in Note 1, Clipper's results of operations were included in the consolidated U.S. Corporate income tax return of Windsor. Clipper's provision for income taxes is computed as if it filed an annual return on a separate company basis. The current portion of the income tax provision is satisfied via a charge or credit to "Payable to Windsor" account. In the future, Clipper will file a consolidated return with INTRAV. USE OF MANAGEMENT ESTIMATES -- The preparation of financial statements in conformity with generally accepted accounting principles requires that management make certain estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements. The reported amounts of revenues and expenses during the reporting period may also be affected by the estimates and assumptions management is required to make. Actual results may differ from those estimates. COMPUTATION OF NET INCOME PER COMMON SHARE -- Net income per common share is computed by dividing net income by the weighted average number of shares outstanding. Common share equivalents, in the form of stock options, are excluded from the calculations as they have no materially dilutive effect on the per share amounts. 3. Restricted Cash and Marketable Securities U.S. law requires Clipper to maintain financial protection for passenger advance payments for Company-operated cruises embarking in U.S. ports. The Company has established escrow arrangements to comply with the law and has voluntarily extended the escrow protection to all advance passenger payments for such cruises. Under the arrangements, monies received from passengers for cruises are held in escrow accounts until the respective cruises have been completed. At December 31, 1996 and 1995, cash equivalents and marketable securities amounting to $6,668 and $6,812, respectively, were held in escrow. [10] INTRAV - 1996 Annual Report 13 4. Property and Equipment Property and equipment at December 31, 1996 and 1995, consist of the following:
1996 1995 ---------------------------- Cruise ships $ 26,885 $ 26,227 Computer hardware and software 3,642 3,340 Office furniture and equipment 2,542 2,456 Cruise ship equipment 559 507 Leasehold improvements 107 107 Warehouse facilities 46 46 ---------------------------- 33,781 32,683 Less accumulated depreciation (16,212) (14,412) ---------------------------- Total $ 17,569 $ 18,271 ============================
5. Operating Leases The Company leases various office facilities and equipment under noncancellable operating leases. At December 31, 1996, future minimum payments under these leases with initial or remaining terms of one year or more were:
Office Space Other Total ------------------------------------ 1997 $ 664 $247 $ 911 1998 672 52 724 1999 697 34 731 2000 710 17 727 2001 and thereafter 725 3 728 ------------------------------------ Total $3,468 $353 $3,821 ====================================
Windsor Management Corporation, as agent for Windsor Real Estate Inc., an affiliated entity, is the lessor of the office space (see Note 11). Rental expense for the years ended December 31, 1996, 1995 and 1994, was $866, $955 and $902, respectively. 6. Income Taxes Provisions for income taxes consist of the following:
Years Ended December 31, 1996 1995 1994 ------------------------------------ Current: Federal $2,174 $1,005 $2,019 State 128 68 72 Deferred: Federal (393) 1,087 237 State (22) 94 2 ------------------------------------ Total $1,887 $2,254 $2,330 ====================================
Factors causing the effective tax rate to differ from the statutory federal income tax rate were:
Years Ended December 31, 1996 1995 1994 ---------------------------------- Statutory rate 34.0% 34.0% 34.0% Nontaxable interest income (0.1) (1.4) (1.0) State and local income taxes, net of U.S. federal income tax benefit 1.1 2.6 1.7 ---------------------------------- Effective rate 35.0% 35.2% 34.7% ==================================
INTRAV - 1996 Annual Report [11] 14 The Company's current and noncurrent deferred taxes included in the balance sheets as of December 31, 1996, and 1995, consisted of the following deferred tax assets and liabilities:
1996 ------------------------------- Deferred Deferred Tax Tax Net Assets Liabilities Liability ------------------------------- Property and equipment $ -- $4,919 $4,919 Promotional costs -- 2,912 2,912 Accruals 221 -- (221) Deferred compensation 311 -- (311) Unrealized loss on marketable securities 1 -- (1) Other -- 169 169 ------------------------------- Total $533 $8,000 $7,467 =============================== Current $222 $2,626 $2,404 Noncurrent 311 5,374 5,063 ------------------------------- Total $533 $8,000 $7,467 =============================== 1995 ------------------------------- Deferred Deferred Tax Tax Net Assets Liabilities Liability ------------------------------- Property and equipment $ -- $5,025 $5,025 Promotional costs -- 3,278 3,278 Accruals 242 -- (242) Deferred Compensation 211 -- (211) Unrealized gain on marketable securities -- 44 44 Other -- 33 33 ------------------------------- Total $453 $8,380 $7,927 =============================== Current $242 $2,893 $2,651 Noncurrent 211 5,487 5,276 ------------------------------- Total $453 $8,380 $7,927 ===============================
7. Commitments and Contingencies CHARTER AGREEMENTS --- As of December 31, 1996, the Company had agreements to charter cruise ships and aircraft for its group travel programs in 1997 and 1998 amounting to $10,317. Commitments generally may be canceled with penalties from 10 percent to 100 percent. PROFIT-SHARING PLAN --- INTRAV sponsors a profit-sharing plan covering substantially all employees. Clipper participates in a multi-employer profit-sharing plan sponsored by Windsor, Inc., an affiliated company, covering substantially all employees. At their discretion, each Company may match a percentage of the employees' before-tax contributions and may also make nonmatching contributions. An employee is not required to make before-tax contributions in order to receive a company nonmatching contribution. Company contributions, for both companies, which are subject to the discretion of the Board of Directors, amounted to approximately $372, $482 and $820 for 1996, 1995 and 1994, respectively. STANDBY LETTERS OF CREDIT --- As of December 31, 1996, the Company had standby letters of credit in place totaling approximately $550. The Company expects that none of its standby letters of credit will be drawn on. CURRENCY CONTRACTS --- The Company utilizes foreign currency forward contracts to hedge against fluctuations in the costs of the currencies used for its international travel programs. At December 31, 1996, the Company had contracts to purchase $1,850 (U.S. equivalent) of non-U.S. currencies for 1997 program operations. 8. Marketable Securities At December 31, 1996, and 1995, the Company's investments in marketable securities (including restricted amounts) are classified as available-for-sale and include the following:
1996 --------------------------------------------- Amortized Unrealized Unrealized Fair Cost Gains Losses Value --------------------------------------------- U.S. Treasury and agency securities $4,759 $ -- $ (7) $4,752 State and local government debt securities 772 4 -- 776 --------------------------------------------- Total $5,531 $ 4 $ (7) $5,528 ============================================= [12] INTRAV - 1996 Annual Report 15 1995 ------------------------------------------- Amortized Unrealized Unrealized Fair Cost Gains Losses Value ------------------------------------------- U.S. Treasury and agency securities $14,683 $104 $ -- $14,787 State and local government debt securities 1,961 15 -- 1,976 ------------------------------------------- Total $16,644 $119 $ -- $16,763 ===========================================
The contractual maturities of debt securities as of December 31, 1996, are as follows:
Amortized Fair Cost Value -------------------- Less than one year $3,260 $3,248 One to five years 2,271 2,280 -------------------- Total $5,531 $5,528 ====================
The proceeds from sales of securities were $28,200, $17,052 and $6,187 for 1996, 1995 and 1994, respectively. The gross realized gains and (losses) were $67 and $(4) for 1996, $279 and $(30) for 1995, and $51 and $(97) for have been included in shareholders' equity were $(123), $905 and $(84) for 1996, 1995 and 1994, respectively. For the purposes of determining gross realized gains and losses, the cost of securities sold is based upon specific identification. 9. Deferred Compensation Clipper entered into an Incentive Bonus Agreement with one of its key employees on January 1, 1990 (as amended in December 1996), continuing for each full calendar year of empolyment through December 31, 1999. Under the agreement, the empolyee earns a minimum annual deffered bonus of $50 plus 5% of the first $1,000 of annual pre-tax earnings of Clipper (as defined in the agreement) and 10% of any annual pre-tax earnings of Clipper in excess of $1,000. The cumulative bonus amount vests at 10% per year, with vested bonus amount earning interest at 10% per year. The Company recognized expense under this agreement of $340, $285 and $154 for 1996, 1995 and 1994, respectively. The agreement also provided for an additional bonus upon the sale of Clipper based on a percentage of the net sales price (as defined). In connection with the acquisition discussed in Note 1, the employee received a bonus of approximately $1,000. 10. Long-term Debt At December 31, 1995, long-term debt consisted of two series of United States Government Guaranteed Financing Bonds with an aggregate outstanding balance of $11,019, due in installments through 2012, which carried interest rates from 9.85% to 10.20%. The Company had pledged the cruise ships as collateral under the terms of the agreements. In December 1996, the Company prepaid $10,518 to retire the outstanding principal of both series of bonds. As required under the bond agreements, the Company paid an additional $416 prepayment premium for the early retirement of the bonds. Accordingly, the Company recorded an extraordinary loss of $538 ($344 net of taxes) consisting of the prepayment premium and the write-off of deferred financing costs related to the early extinguishment of the debt. On December 31, 1996, the Company entered into a $10,000 revolving credit facility agreement with Boatmen's National Bank of St. Louis. The agreement includes a provision for a $1,250 reduction of the available amount on the first anniversary date of the agreement and expires on December 31, 1999. The Company had outstanding borrowings of $3,000 at December 31, 1996. The agreement provides that the Company may select among various draw arrangements with varying maturities and interest rates. At December 31, 1996, the interest rate was 8.25%. The Company has pledged its personal property, including the cruise ships, as collateral and must comply with certain financial covenants, under the terms of the agreement. INTRAV - 1996 Annual Report [13] 16 Notes to Consolidated Financial Statements 11. Related Party Transactions The Company leases its principal offices from Windsor Management Corporation, as agent for Windsor Real Estate, Inc. Windsor Management Corporation and Windsor Real Estate, Inc. are wholly owned subsidiaries of Windsor. The lease expires at December 31, 2001, and includes a renewal option for one additional five-year period. Annual rent under the lease is $664, plus various escalation payments. Windsor also provides certain administrative services, principally for employee benefits, legal, tax and insurance matters, for which it charges a fee. Fees paid to Windsor for these services totaled $67, $352 and $110 in 1996, 1995 and 1994, respectively. The payable to Windsor is primarily interest-bearing and results from the various transactions between the Company and Windsor. The Company paid interest at rates of 7%, 10.25% and 7% for 1996, 1995 and 1994, respectively. 12. Incentive Stock Plan The Company has an incentive stock plan, whereby incentive stock options, nonqualifying stock options, restricted stock and stock appreciation rights may be granted to officers, key employees and outside directors to purchase a specified number of shares of common stock at a price not less than the fair market value at the date of grant and for a term not to exceed 10 years. The maximum number of shares available under the plan is 500,000. During 1995, the Company issued options to purchase an aggregate of 300,000 shares of common stock at an exercise price of $10.50 per share. Each such option vests over a five-year period with 20% vesting each year. During 1997, options to purchase 88,000 shares were forfeited. The Company has adopted the disclosure-only provisions of Statement of Financial Accounting Standards No. 123, Accounting for Stock-Based Compensation. Accordingly, no compensation cost has been recognized for the stock option plan. Had compensation cost for the Company's stock option plan been determined based on the fair value at the grant date for awards in 1995 consistent with the provisions of SFAS No. 123, the Company's net income per share would have been reduced to the pro forma amounts indicated below:
1995 Net income - as reported $4,147 ====== Net income - pro forma $3,709 ====== Net income per common share - as reported $ 0.80 ====== Net income earnings per common share - pro forma $ 0.71 ======
The fair value of each option grant is estimated on the date of grant using the Black-Scholer option-pricing model with the following assumptions for stock options granted in 1995; dividend yield of 4.76%; expected volatility of 0.37501%; risk-free interest rate of 6.5%; and expected lives of 10 years. 13. Quarterly Results of Operations (Unaudited) The results of operations for 1996 and 1995 were as follows: (Amounts in thousands except share data)
Quarter Ended 1996 ------------------------------------------- March 31 June 30 Sept. 30 Dec. 31 ------------------------------------------- Program revenues $31,363 $16,449 $42,181 $36,088 Cost of operations 25,369 13,126 34,230 28,926 ------------------------------------------- Gross profit $ 5,994 $ 3,323 $ 7,951 $ 7,162 =========================================== Net income (loss) $ 1,023 $ (751) $ 2,310 $ 582 =========================================== Net income (loss) per share $ 0.20 $ (0.15) $ 0.44 $ 0.12 =========================================== 1995 ------------------------------------------- March 31 June 30 Sept. 30 Dec. 31 ------------------------------------------- Program revenues $27,810 $17,415 $34,343 $35,276 Cost of operations 22,431 13,511 27,342 27,750 ------------------------------------------- Gross profit $ 5,379 $ 3,904 $ 7,001 $ 7,526 =========================================== Net income $ 783 $ 141 $ 1,696 $ 1,527 =========================================== Net income per share $ 0.16 $ 0.02 $ 0.32 $ 0.28 ===========================================
[14] INTRAV - 1996 Annual Report 17 Independent Auditors' Report To the Board of Directors and Shareholders Intrav, Inc. We have audited the accompanying consolidated balance sheets of Intrav, Inc. as of December 31, 1996 and 1995, and the related consolidated statements of income, shareholders' equity and cash flows for each of the three years in the period ended December 31, 1996. These financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on these financial statements based on our audits. We conducted our audits in accordance with generally accepted auditing standards. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion. In our opinion, such consolidated financial statements present fairly, in all material respects, the financial position of Intrav, Inc. at December 31, 1996 and 1995, and the results of its operations and its cash flows for each of the three years in the period ended December 31, 1996, in conformity with generally accepted accounting principles. /s/ Deloitte & Touche LLP St. Louis, Missouri February 14, 1997 INTRAV - 1996 Annual Report [15] 18 General Corporate Information EXECUTIVE OFFICERS Paul H. Duynhouwer President and Chief Executive Officer Michael A. DiRaimondo Senior Vice President and Chief Financial Officer Richard L. Burkemper Senior Vice President --- Sales and Marketing Brenda J. Stehle Senior Vice President --- Operations DIRECTORS Barney A. Ebsworth Chairman of the Board Intrav, Inc. Paul H. Duynhouwer President and Chief Executive Officer Intrav, Inc. John B. Biggs Senior Vice President --- Wealth Management Boatmen's Trust Company William H.T. Bush Chairman of the Board Bush, O'Donnell & Co., Inc. Frederic V. Malek Chairman Thayer Capital Partners TRANSFER AGENT AND REGISTRAR Boatmen's Trust Company 510 Locust Street St. Louis, MO 63101 Telephone: (314) 456-1373 INDEPENDENT AUDITORS Deloitte & Touche LLP One City Centre St. Louis, MO 63101 GENERAL COUNSEL Peper, Martin, Jensen, Maichel and Hetlage 720 Olive Street St. Louis, MO 63101 INVESTOR RELATIONS Shareholders may obtain, without charge, a copy of the Company's 1996 Annual Report on Form 10-K, as filed with the Securities and Exchange Commission, by directing inquiries to: Intrav, Inc. Investor Relations 7711 Bonhomme Avenue St. Louis, MO 63105-1961 Telephone: (314) 727-0500, extension 328 NOTICE OF ANNUAL MEETING The 1997 Annual Meeting of Shareholders will be held at the Ritz-Carlton Hotel, St. Louis, located at 100 Carondelet Plaza, St. Louis, MO, at 11:00 a.m. on Wednesday, May 21, 1997. STOCK LISTING The common shares of Intrav, Inc. are traded on the NASDAQ Stock Market under the trading symbol "TRAV." As of February 28, 1997, there were 144 shareholders of record, and approximately 1,700 beneficial shareholders. MARKET PRICE RANGE
1996 1995 ---------------------------------------------- HIGH LOW HIGH LOW First Quarter 8 19/32 6 17/32 Second Quarter 8 7/8 7 1/4 11 7 1/2 Third Quarter 8 1/2 6 3/4 8 3/8 7 21/32 Fourth Quarter 8 11/32 5 3/4 8 1/8 6 11/32 Company commenced trading on NASDAQ Stock Market on May 18, 1995.
DIVIDENDS PAID PER SHARE (to Intrav, Inc. shareholders)
1996 1995 ------------------ First Quarter $0.125 $ -- Second Quarter 0.125 -- Third Quarter 0.125 0.125 Fourth Quarter 0.125 0.125 ------------------ Year $0.50 $0.25 ==================
[16] INTRAV - 1996 Annual Report EX-22 4 SUBSIDIARIES OF THE REGISTRANT 1 Exhibit 22 SUBSIDIARIES OF THE REGISTRANT Name Jurisdiction of Organization ---- ---------------------------- 1. Clipper Cruise Line, Inc. Delaware 2. Republic Cruise Line, Inc. Delaware 3. Liberty Cruise Line, Inc. Delaware 4. Clipper Adventure Cruises, Inc. Delaware EX-24 5 INDEPENDENT AUDITORS' CONSENT 1 Exhibit 24 INDEPENDENT AUDITORS' CONSENT We consent to the incorporation by reference in Registration Statement No. 333-05361 of Intrav, Inc. on Form S-8 of our reports dated February 14, 1997 appearing in this Form 10-K of Intrav, Inc. for the year ended December 31, 1996. DELOITTE & TOUCHE LLP St. Louis, Missouri March 28, 1997 EX-27 6 FINANCIAL DATA SCHEDULE
5 1,000 12-MOS DEC-31-1996 JAN-01-1996 DEC-31-1996 8,587 5,527 0 0 0 26,323 33,781 16,212 52,594 39,738 3,000 53 0 0 3,728 52,594 126,081 127,724 101,651 101,651 18,773 0 1,904 5,396 1,887 3,509 0 (344) 0 3,165 0.61 0.61
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