<PAGE> 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.
<PAGE> 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.
<PAGE> 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
<PAGE> 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.
<PAGE> 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.
<PAGE> 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.
<PAGE> 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.
<TABLE>
<CAPTION>
NAME AGE POSITION
<S> <C> <C>
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
</TABLE>
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.
<PAGE> 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.
<TABLE>
<CAPTION>
(a) 1. Financial Statements: Page
----
<S> <C>
Consolidated Balance Sheets -- December 31, 1996 and December 31, 1995 <F*>
Consolidated Statements of Income -- For the years 1996, 1995 and 1994 <F*>
Consolidated Statements of Cash Flows -- For the years 1996, 1995 and 1994 <F*>
Consolidated Statements of Shareholders' Equity -- For the years 1996, 1995 and 1994 <F*>
Notes to Consolidated Financial Statements <F*>
<FN>
<F*> Incorporated in this Report by reference to the Company's 1996 Annual Report to Shareholders.
</TABLE>
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.
<PAGE> 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
<PAGE> 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.
<PAGE> 11
EXHIBIT INDEX
These Exhibits are numbered in accordance with the Exhibit Table of Item 601 of
Regulation S-K.
<TABLE>
<CAPTION>
Exhibit
Number Description
- ------- -----------
<C> <S>
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)
<PAGE> 12
<CAPTION>
Exhibit
Number Description
- ------- -----------
<C> <S>
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
</TABLE>
<PAGE> 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
<PAGE> 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-
<PAGE> 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-
<PAGE> 4
Nantucket Clipper, the following amounts will
be charged as the combined depreciation and interest
expenses for the year specified:
-4-
<PAGE> 5
<TABLE>
<C> <S>
1996 $2,300,000
1997 $2,214,000
1998 $2,118,000
1999 $2,011,000
</TABLE>
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-
<PAGE> 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:
<TABLE>
<CAPTION>
Year of Service Percentage
--------------- ----------
<S> <C>
1990 10%
1991 20%
1992 30%
1993 40%
1994 50%
1995 60%
1996 70%
1997 80%
-6-
<PAGE> 7
1998 90%
1999 100%
</TABLE>
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-
<PAGE> 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-
<PAGE> 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-
<PAGE> 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-
<PAGE> 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-
<PAGE> 1
Exhibit 13
INTRAV
1996
Annual Report
<PAGE> 2
Five-Year Financial Summary
(Amounts in thousands except share and traveler data)
<TABLE>
<CAPTION>
Year Ended December 31,
--------------------------------------------------------
1996 1995 1994 1993 1992<F*>
<S> <C> <C> <C> <C> <C>
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<F**> 0.61 0.80 0.88 - 0.21
Dividends per common share<F**> 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)
<FN>
<F*> Operations conducted as a division of Windsor through September 30,1992.
<F**> 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.
</TABLE>
<PAGE> 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]
<PAGE> 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
<TABLE>
<CAPTION>
Year Ended December 31,
1996 1995 1994
-----------------------------
<S> <C> <C> <C>
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%
=============================
</TABLE>
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
<PAGE> 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]
<PAGE> 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
<PAGE> 7
Consolidated Statements of Income
(Amounts in thousands except share data)
<TABLE>
<CAPTION>
Years Ended December 31,
----------------------------------------------
1996 1995 1994
<S> <C> <C> <C>
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.
</TABLE>
INTRAV - 1996 Annual Report [5]
<PAGE> 8
Consolidated Balance Sheets
(Amounts in thousands except share data)
<TABLE>
<CAPTION>
December 31,
-----------------------
1996 1995
<S> <C> <C>
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.
</TABLE>
[6] INTRAV - 1996 Annual Report
<PAGE> 9
Consolidated Statements of Cash Flow
(Amounts in thousands)
<TABLE>
<CAPTION>
Years Ended December 31,
------------------------------------------
1996 1995 1994
<S> <C> <C> <C>
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.
</TABLE>
INTRAV - 1996 Annual Report [7]
<PAGE> 10
Consolidated Statements of Shareholders' Equity
(Amounts in thousands except share data)
<TABLE>
<CAPTION>
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
-----------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
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.
</TABLE>
[8] INTRAV - 1996 Annual Report
<PAGE> 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:
<TABLE>
<CAPTION>
1996 1995 1994
------------------------------------------
<S> <C> <C> <C>
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
==========================================
</TABLE>
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]
<PAGE> 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
<PAGE> 13
4. Property and Equipment
Property and equipment at December 31, 1996 and 1995, consist of the
following:
<TABLE>
<CAPTION>
1996 1995
----------------------------
<S> <C> <C>
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
============================
</TABLE>
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:
<TABLE>
<CAPTION>
Office
Space Other Total
------------------------------------
<S> <C> <C> <C>
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
====================================
</TABLE>
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:
<TABLE>
<CAPTION>
Years Ended December 31,
1996 1995 1994
------------------------------------
<S> <C> <C> <C>
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
====================================
</TABLE>
Factors causing the effective tax rate to differ from the statutory
federal income tax rate were:
<TABLE>
<CAPTION>
Years Ended December 31,
1996 1995 1994
----------------------------------
<S> <C> <C> <C>
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%
==================================
</TABLE>
INTRAV - 1996 Annual Report [11]
<PAGE> 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:
<TABLE>
<CAPTION>
1996
-------------------------------
Deferred Deferred
Tax Tax Net
Assets Liabilities Liability
-------------------------------
<S> <C> <C> <C>
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
===============================
<CAPTION>
1995
-------------------------------
Deferred Deferred
Tax Tax Net
Assets Liabilities Liability
-------------------------------
<S> <C> <C> <C>
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
===============================
</TABLE>
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:
<TABLE>
<CAPTION>
1996
---------------------------------------------
Amortized Unrealized Unrealized Fair
Cost Gains Losses Value
---------------------------------------------
<S> <C> <C> <C> <C>
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
<PAGE> 15
<CAPTION>
1995
-------------------------------------------
Amortized Unrealized Unrealized Fair
Cost Gains Losses Value
-------------------------------------------
<S> <C> <C> <C> <C>
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
===========================================
</TABLE>
The contractual maturities of debt securities as of December 31, 1996,
are as follows:
<TABLE>
<CAPTION>
Amortized Fair
Cost Value
--------------------
<S> <C> <C>
Less than one year $3,260 $3,248
One to five years 2,271 2,280
--------------------
Total $5,531 $5,528
====================
</TABLE>
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]
<PAGE> 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:
<TABLE>
<CAPTION>
1995
<S> <C>
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
======
</TABLE>
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:
<TABLE>
(Amounts in thousands except share data)
<CAPTION>
Quarter Ended
1996
-------------------------------------------
March 31 June 30 Sept. 30 Dec. 31
-------------------------------------------
<S> <C> <C> <C> <C>
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
===========================================
<CAPTION>
1995
-------------------------------------------
March 31 June 30 Sept. 30 Dec. 31
-------------------------------------------
<S> <C> <C> <C> <C>
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
===========================================
</TABLE>
[14] INTRAV - 1996 Annual Report
<PAGE> 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]
<PAGE> 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
<TABLE>
<CAPTION>
1996 1995
----------------------------------------------
HIGH LOW HIGH LOW
<S> <C> <C> <C> <C>
First Quarter 8 19/32 6 17/32 <F*> <F*>
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
<FN>
<F*> Company commenced trading on NASDAQ Stock Market on May 18, 1995.
</TABLE>
DIVIDENDS PAID PER SHARE
(to Intrav, Inc. shareholders)
<TABLE>
<CAPTION>
1996 1995
------------------
<S> <C> <C>
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
==================
</TABLE>
[16] INTRAV - 1996 Annual Report
<PAGE> 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
<PAGE> 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
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-START> JAN-01-1996
<PERIOD-END> DEC-31-1996
<CASH> 8,587
<SECURITIES> 5,527
<RECEIVABLES> 0
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 26,323
<PP&E> 33,781
<DEPRECIATION> 16,212
<TOTAL-ASSETS> 52,594
<CURRENT-LIABILITIES> 39,738
<BONDS> 3,000
<COMMON> 53
0
0
<OTHER-SE> 3,728
<TOTAL-LIABILITY-AND-EQUITY> 52,594
<SALES> 126,081
<TOTAL-REVENUES> 127,724
<CGS> 101,651
<TOTAL-COSTS> 101,651
<OTHER-EXPENSES> 18,773
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 1,904
<INCOME-PRETAX> 5,396
<INCOME-TAX> 1,887
<INCOME-CONTINUING> 3,509
<DISCONTINUED> 0
<EXTRAORDINARY> (344)
<CHANGES> 0
<NET-INCOME> 3,165
<EPS-PRIMARY> 0.61
<EPS-DILUTED> 0.61
</TABLE>
