UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K
(Mark One)
☒ | ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
For the fiscal year ended December 31, 20172019
or
☐ | TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
For the transition period from ____________ to ____________
Commission file number: 001-11015
Viad Corp
(Exact name of registrant as specified in its charter)
Delaware |
| 36-1169950 | ||
State or other jurisdiction of incorporation or organization |
| (I.R.S. Employer Identification No.) | ||
1850 North Central Avenue, Suite 1900 Phoenix, Arizona |
| 85004-4565 | ||
(Address of principal executive offices) |
| (Zip Code) |
(602) 207-1000
(Registrant’s telephone number, including area code)
Securities registered pursuant to Section 12(b) of the Act:
Title of each class |
| Trading Symbol(s) | Name of each exchange on which registered | |||||||
Common Stock, $1.50 | VVI |
| New York Stock Exchange | |||||||
Securities registered pursuant to Section 12(g) of the Act: None
Indicate by check mark if the registrant is a well-known seasoned issuer, as defined by Rule 405 of the Securities Act. Yes ☒ No ☐
Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or 15(d) of the Act. Yes ☐ No ☒
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 Exchange Act of 1934 during the preceding 12 months (or for such 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 ☒ No ☐
Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Website, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§ 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files.) Yes ☒ No ☐
Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K (§ 229.405) is not contained herein, and will not be contained, to the best of registrant’s 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. ☒
Indicate by check mark whether registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act. (Check One):
Large accelerated filer |
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| Accelerated filer |
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Non-accelerated filer |
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| Smaller reporting company |
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| Emerging growth company |
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If an emerging growth company, indicatedindicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Act). Yes ☐ No ☒
The aggregate market value of the Common Stock (based on its closing price per share on such date) held by non-affiliates on the last business day of the registrant’s most recently completed second fiscal quarter (June 30, 2017)29, 2019) was approximately $948 million.$1.3 billion.
Registrant had 20,422,76220,350,597 shares of Common Stock ($1.50 par value) outstanding as of January 31, 2018.2020.
Documents Incorporated by Reference
A portion of the Proxy Statement for the Viad Corp Annual Meeting of Shareholders of Viad Corp, which is scheduled to be held onfor May 17, 2018,19, 2020, is incorporated by reference into Part III of this Annual Report.
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Item 7. | Management’s Discussion and Analysis of Financial Condition and Results of Operations | 24 |
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Item 9. | Changes in and Disagreements With Accountants on Accounting and Financial Disclosure |
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Item 12. | Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters |
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Item 13. | Certain Relationships and Related Transactions, and Director Independence |
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In this report, for periods presented, “we,” “us,” “our,” “the Company,” and “Viad Corp” refer to Viad Corp and its subsidiaries and affiliates.subsidiaries.
Forward-Looking Statements
This Annual Report on Form 10-K (“2019 Form 10-K”) contains a number of forward-looking statements.statements within the meaning of the Private Securities Litigation Reform Act of 1995. Forward-looking statements may appear throughout this 2019 Form 10-K, including the following sections: “Business” (Part I, Item 1), “Risk Factors” (Part I, Item 1A), “Management’s Discussion and Analysis of Financial Condition and Results of Operations” (Part II, Item 7), and “Quantitative and Qualitative Disclosures About Market Risk” (Part II, Item 7A). Words, and variations of words, such as “will,” “may,” “expect,” “would,” “could,” “might,” “intend,” “plan,” “believe,” “estimate,” “anticipate,” “deliver,” “seek,” “aim,” “potential,” “target,” “outlook,” and similar expressions are intended to identify our forward-looking statements. Similarly, statements that describe our business strategy, outlook, objectives, plans, initiatives, intentions or goals also are forward-looking statements. These forward-looking statements are not historical facts but reflect our current estimates, projections, expectations, or trends concerning future growth, operating cash flows, availability of short-term borrowings, consumer demand, new or renewal business, investment policies, productivity improvements, ongoing cost reduction efforts, efficiency, competitiveness, strategic actions, acquisitions, the timing of new and damaged attractions openings, the sufficiency of our legal services, projections of 2018 revenue, show rotation, same-show rotation, segment operating income, attraction start-up costs, the realization of deferred tax assets, contributionsare subject to pension and postretirement benefit plans, legal expenses, tax rates and other tax matters, and foreign exchange rates. Actual results could differ materially from those discussed in the forward-looking statements. Viad’s businesses can be affected by a host of risks and uncertainties, many of which are beyond our control. control, which could cause actual results to differ materially from those in the forward-looking statements.
Important factors that could cause actual results to differ materially from those described in our forward lookingforward-looking statements include, but are not limited to, the following:
• | our ability to successfully integrate and achieve established financial and strategic goals from acquisitions; |
• | fluctuations in general economic conditions; |
• | our dependence on large exhibition event clients; |
• | the importance of key members of our account teams to our business relationships; |
• | the competitive nature of the industries in which we operate; |
• | travel industry disruptions; |
• | unanticipated delays and cost overruns of our capital projects, and our ability to achieve established financial and strategic goals for such projects; |
• | seasonality of our businesses; |
• | transportation disruptions and increases in transportation costs; |
• | natural disasters, weather conditions, and other catastrophic events; |
• | our multi-employer pension plan funding obligations; |
• | our exposure to labor cost increases and work stoppages related to unionized employees; |
• | liabilities relating to prior and discontinued operations; |
• | adverse effects of show rotation on our periodic results and operating margins; |
• | our exposure to currency exchange rate fluctuations; |
• | our exposure to cybersecurity attacks and threats; |
• | compliance with laws governing the storage, collection, handling, and transfer of personal data and our exposure to legal claims and fines for data breaches or improper handling of such data; |
• | the effects of the United Kingdom’s exit from the European Union; and |
• | changes affecting the LIBOR. |
For a more complete discussion of the risks discussed inand uncertainties that may affect our business or financial results, refer to “Risk Factors” (Part I, Item 1A “Risk Factors,” included inof this Annual Report on2019 Form 10-K for the year ended December 31, 2017 (“2017 Form 10-K”)10-K). We disclaim and do not undertake any obligation to update or revise any forward-looking statement in this 20172019 Form 10-K except as required by applicable law or regulation.
We are an international experiential services company with operations principally in the United States, Canada, the United Kingdom, continental Europe, and the United Arab Emirates.Emirates, and Iceland. We are committed to providing unforgettable experiences to our clients and guests.
We operate through two main business groups:
GES is a world-class live event service provider to some of the most visible and influential events and global brands.
Pursuit is a collection of iconic natural and cultural destination travel experiences that enjoy perennial demand.
GES accounted for 87% of our 2017 consolidated revenue and 51% of our 2017 consolidated segment operating income(1). Pursuit accounted for 13% of our 2017 consolidated revenue and 49% of our 2017 consolidated segment operating income(1).
• | GES is a global, full-service live events company offering a comprehensive range of services to the world’s leading brands and event organizers. |
• | Pursuit is an attractions and hospitality company that provides a collection of inspiring and unforgettable experiences in iconic destinations. |
(1) | We define segment operating income as net income attributable to Viad before income (loss) from discontinued operations, corporate activities and eliminations, interest expense and interest income, income taxes, restructuring charges, impairment charges and recoveries, the reduction for income attributable to non-redeemable noncontrolling interest, and the addition |
GES is a global, full-service provider for live events that produces exhibitions, conferences, corporate events,partners with show organizers, exhibitors, and consumerbrand marketers to create high-value, face-to-face events. GES offers a comprehensive range of live event services, from the design and production of compelling, immersive experiences that engage audiences and build brand awareness, to material handling, rigging, electrical, and other on-site event services. In addition, GES offers clients a full suite of audio-visual services from creative and technology to content and design, along with registration, data analytics, engagement, and online tools powered by next generation technologies that help clients easily manage the complexities of their events.event. For nineeleven years, GES’ National Servicenter® has been certified under the J.D. Power and Associates Certified Call Center ProgramSM, and this past year also received certification for eightChat Channel communication. For ten consecutive years, Ad Age has recognized GES as one of the nation’s largest experiential/event marketing agency networks. For the sixth year in a row, GES is included in Event Marketer magazine’s IT List as oneFab 50 list of the top 100 event agencies in the industry.exhibit builders.
GES’ clients include event organizers and corporate brand marketers. Event organizers schedule and run the event from start to finish. Corporate brand marketers include exhibitors and domestic and international corporations that want to promote their brands, services and innovations, feature new products, and build business relationships. GES serves corporate brand marketers when they exhibit at shows and when GES is engaged to manage their global exhibit program or produce their proprietary corporate events.
GES operates through two reportable business segments based on geography:
GES U.S. has a leading position in the U.S. with full-service operations in every major exhibition market, including Las Vegas, Nevada; Chicago, Illinois; Orlando, Florida; New York, New York; and Los Angeles, California.
Angeles. Additionally, GES International has operating facilities at many of the most active and popular international event destinations and venues including seven cities in Canada, seven cities in the United Kingdom, two cities inCanada, Germany, two cities in the United Arab Emirates, two cities in the Netherlands, one city in Hong Kong, Switzerland, and Romania, and through these facilities offers full-service event operations across the United Kingdom, Europe, and the Middle East.Netherlands.
Markets Served
GES provides a full suite of services for event organizers and corporate brand marketers across four live event markets: Exhibitions, Conferences, Corporate Events, and Consumer Events (collectively, “Live Events”).
| PRIMARY PURPOSE |
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Exhibitions
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| Facilitates business-to-business and business-to-consumer sales and marketing.
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Conferences
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| Facilitates attendee education. May also include an expo or trade show to further facilitate attendee education and to facilitate business-to-business and business-to-consumer sales and marketing.
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Corporate Events
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| Facilitates attendee education of sponsoring company’s products or product ecosystem.
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Consumer Events
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| Entertains, educates, or creates an experience, typically around a specific genre. |
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GES offers a comprehensive range of services and innovative technology, including Core Services, Event Technology, and Audio-Visual, to event organizers and corporate brand marketers.
Core Services |
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Under various agreements with Live Event organizers, GES |
In general, GES provides the following exclusive and discretionary services and products to Live Event organizers and corporate brand marketers:
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| productionLook and feel designLayout and floor plan designs Furnishings and carpetShow traffic analysisMarketing and strategyElectrical distributionCleaningPlumbingOverhead riggingBooth rigging Material | handlingElectrical distributionCleaningPlumbingOverhead riggingBooth rigging Creative design and | |||
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| carpetInstallation and dismantling laborTradeshow program management Exclusive Products Discretionary ProductsEvent OrganizersCorporate Brand MarketersSignageCommon area structures Custom exhibit design/constructionPortable/modular exhibits and designGraphics and signage
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Under various agreements with Live Events organizers, GES is the official services contractor with the exclusive right to provide certain services to exhibitors participating in a Live Event. This gives exhibitors a single point of contact to facilitate a timely, safe, and efficient move-in/out of a Live Event and to facilitate an organized, professional, during-show experience. GES also competes with other service providers to sell discretionary services to exhibitors. Discretionary services include complete event program management, such as creative design, strategy, and planning to corporate brand marketers across all Live Events in which they participate.
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•Researching and selection of local hotels •Negotiating and contracting •Room block management •Group reservation management •Rate integrity and monitoring •Marketing services •On-site services •Post-event reporting Registration and data analytics •Registration and ticketing •Lead management •Reporting and analytics •Web-based enterprise-wide application •Software-as-a-service model or partial and fully managed options
Event management •Online ordering capabilities •Sponsorship management •Content management systems •Live Event tracking
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Audio-Visual |
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• •Digital studio services •Entertainment services and talent coordination •Projection mapping •Computer rental and support
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GES’ exhibition and event activity can vary significantly from quarter to quarter and year to year depending on the frequency and timing of shows: someshows. Some shows are not held annually and some shift between quarters. During 2017,2019 and 2018, GES U.S. reported its highest revenue during the first and second quarters. During 2016, GES U.S. reported its highest revenue during the second and third quarters. GES International generally reports its highest revenue during the second and fourth quarters. The following show rotation revenue metric refers to the net change in revenue from 20162018 to 20172019 due to show movement between quarters and years. Show rotation refers to shows that occur less frequently than annually, as well as annual shows that shift quarters from one year to the next.
Competition
In the Live Events industry, GES generally competes across all classes of services and all markets on the basis of discernible differences, value, quality, price, convenience, and service. GES has a competitive advantage through its worldwide network of resources, history of serving as an extension of clients’ teams, experienced and knowledgeable personnel, client-focus,client focus, creativity, reliable execution, proprietary technology platforms, and financial strength. All known U.S. competitors and most international competitors are privately held companies that provide limited public information regarding their operations. GES’ primary competitor within its Core Services is The Freeman Company (aa privately-held, U.S.-headquartered company);company; however, there is substantial competition from a large number of service providers in GES’ other service offerings.
Growth Strategy
GES is committed to becomebecoming the preferred global, full-service provider for Live Events. GES holds a leading market position in Exhibitions and is pursuing a focused and disciplined growth strategy with the goal of expanding its market share in the currently under-penetrated Conferences, Corporate Events, and Consumer Events markets. GES has uniquely combined the art of high-impact creativity, service, and expertise with the science of easy-to-use technology, strategy, and worldwide logistics to help clients gain a greater return from their events and enhance the exhibitor experience.
Global Reach. Leverage global capabilities and large customer base to drive continuedattendee experience. GES holds leading market positions in Exhibitions and Conferences and is pursuing a focused and disciplined growth in new services and other Live Events.
Full-Service Provider. Growthstrategy with the goal of adjacent services to create a unique and integrated offering to deepen client relationships, expand client base, and increaseexpanding its market share of total event spend.
Live Events. Penetration into other live events to extend industry leadership and leverage capabilities.
With our recent acquisitions, GES made significant progress toward creating the most comprehensive suite of services for the Live Events industry, which enhanced overall competitiveness, facilitated growth in under-penetrated areas, and formed a basis for a data platform. We continue to pursue opportunities to acquire businesses with proven products and services that complement, enhance, or expand current businesses or offer growth opportunities.
Poken Acquisition. In March 2017, we completed the acquisition of the Poken event engagement technology,a leading cloud-based visitor engagement and measurement platform. The Poken platform offers a seamless ecosystem of tools that enable digital document collection (through its patented “Touch and Glow” technology), visitor-to-visitor engagement, gamification, and metrics reporting.
Cross-selling opportunities. GES is effectively positioned to cross-sell an increasingly comprehensive suite of service offerings with a convenient approach to service delivery that differentiates GES from its competition.
Registration and data analytic services entrance in the Asia markets. In early 2017, GES officially launched registrationcurrently under-penetrated Corporate Events market. We expect to accomplish this by acquiring businesses and data analytic services incapitalizing on organic opportunities that further the Asia market with a Hong Kong office.following goals:
• | Global Reach. Leverage global capabilities and large customer base to drive continued growth in new services and other Live Events. |
• | Full-Service Provider. Growth of adjacent services to create a unique and integrated offering to deepen client relationships, expand client base, and increase share of total event spend. |
• | Live Events. Penetration into other Live Events to leverage our existing capabilities and gain more corporate clients. |
Pursuit is an attractions and hospitality company that provides a collection of iconic naturalinspiring and cultural destinationunforgettable travel experiences in North America that showcase the best of Banff, Jasper, Waterton Lakes, Glacier, Denali,iconic destinations. From world-class attractions, distinctive lodges, and Kenai Fjords National Parks,engaging tours in stunning national parks and Vancouver, Canada. Through Pursuit’srenowned global travel locations, to our growing collection of unique hotelsFlyOver flight ride experiences in the vibrant cities of Vancouver, Reykjavik, Las Vegas (anticipated opening in 2021), and lodges, world-class recreational attractions,Toronto (anticipated opening in 2022), Pursuit’s elevated hospitality experiences enable visitors to discover and ground transportation services, it connects guestsconnect with these iconic destinations. With a strategic direction to iconicbuild an expanding portfolio of extraordinary experiences, Pursuit remains focused on refreshing, improving, and growing its collection in outstanding places through unforgettable, inspiring experiences.around the globe. Pursuit draws its guests from major markets, including Canada, the United States, Canada, China, the United Kingdom, Australia/New Zealand, Asia Pacific, and Europe. Pursuit markets directly to consumers, as well as through distribution channels that include tour operators, tour wholesalers, destination management companies, and retail travel agencies and organizations.agencies. Pursuit comprises the following collections:
Banff Jasper Collection |
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Alaska Collection |
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Glacier Park Collection
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FlyOver Attractions |
Pursuit’s FlyOver
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Pursuit comprisesPursuit’s collection of experiences focuses on four distinct lines of business: Hospitality,business. These include attractions, including food and beverage services and retail operations; Attractions,hospitality, including food and beverage services and retail operations; Transportation;transportation; and Travel Planning. These four lines of business work together, driving economies of scope and meaningful scale in and around the iconic destinations of Banff, Jasper, and Waterton Lakes National Parks and Vancouver in Canada, and Glacier, Denali, and Kenai Fjords National Parks in the United States.
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travel planning.
Attractions |
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Banff Gondola transports visitors to an elevation of over 7,000 feet above sea level to the top of Sulphur Mountain in Banff, Alberta, Canada offering an unobstructed view of the Canadian Rockies and overlooking the town of Banff and the Bow Valley. The Banff Gondola has been honored with two Top Project Awards from Alberta Construction Magazine. The Banff Gondola’s winning categories include the People’s Choice Award in 2016 and the Commercial Award (Under $50 Million) in 2016. The Banff Gondola
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| Maligne Lake Cruise provides interpretive boat tours at Maligne Lake, the largest lake in Jasper National Park, Alberta, Canada. In addition to boat tours, Maligne Lake has a
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Kenai Fjords Tours is a leading Alaska wildlife and glacier day cruise, offering guests unforgettable sights of towering glaciers, humpback and grey whales, orcas, arctic birdlife, sea lions, seals, and porpoises of Kenai Fjords National Park. Tours range from a few hours to full days, with some tours including a full meal of wild
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Sky Lagoon | ||
Sky Lagoon In July 2019, Pursuit announced plans to expand its collection of travel experiences in Iceland with the development of a premium oceanfront geothermal lagoon. Located in Kársnes Harbour, Kópavogur, just minutes from Reykjavik’s vibrant city centre and iconic urban landmarks, the sky lagoon will showcase expansive ocean vistas punctuated by awe-inspiring sunsets, Northern Lights and dark sky views. Development of the new sky lagoon kicked off in 2019, with the anticipated opening in 2021. | ||
FlyOver Attractions | ||
FlyOver Canada Since opening in June 2013 along Vancouver’s widely recognized waterfront in the heart of downtown, over two million riders have experienced FlyOver Canada. The flight ride attraction utilizes state-of-the-art technology to reveal some of Canada’s most awe-inspiring sights as guests hang suspended, feet dangling, before a 65-foot spherical screen while the film whisks guests away on an exhilarating journey across the country. The flight ride, complemented by an immersive pre-show experience, has received the TripAdvisor Certificate of Excellence. |
Hospitality | Banff Jasper Collection | |
•Elk + Avenue Hotel (164 rooms) •Mount Royal Hotel (133 rooms) •Glacier View Lodge (32 rooms) •Sawridge Inn & Conference Centre (152 rooms) •Lobstick Lodge (139 rooms) •Chateau Jasper Hotel (119 rooms) •Marmot Lodge (107 rooms) •The Crimson Hotel (99 rooms) •Pyramid Lake Resort (62 rooms) •Pocahontas Cabins (56 rooms) |
Hospitality | Alaska Collection | |
•Denali Backcountry Lodge (42 rooms) •Denali Cabins (46 rooms) •Talkeetna Alaskan Lodge (212 rooms) •Windsong Lodge (216 rooms) •Kenai Fjords Wilderness Lodge (8 rooms) | ||
Glacier Park Collection | ||
•Glacier Park Lodge (162 rooms) •Grouse Mountain Lodge (145 rooms) •St. Mary Lodge (116 rooms) •Prince of Wales Hotel (86 rooms) •Apgar Village Lodge (48 rooms) •West Glacier Motel & Cabins (32 rooms) •Belton Chalet (27 rooms) •Motel Lake McDonald (27 rooms) •West Glacier RV Park & Cabins (20 rooms) |
Transportation
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| The Banff Jasper Transportation operations include sightseeing tours, airport shuttle services, and seasonal charter motorcoach services. The sightseeing services include seasonal half- and full-day tours from Calgary, Banff, Lake Louise, and Jasper, Canada and bring guests to the Alaska Collection Transportation includes a Denali Backcountry Adventure, which is a unique
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Travel Planning
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| The Banff Jasper Collection Travel planning services include a full suite of corporate and event management services for meetings, conferences, incentive travel, sports, and special events. Event-related service offerings include staffing, off-site events, tours/activities, team building, accommodations, event management, theme development, production, and audio-visual services. The Banff Jasper Collection also owns and operates eight Alaska Collection Travel planning services provide complete travel planning services throughout Alaska. |
Seasonality
Pursuit experiences peak activity during the summer months. During 2017, 87%2019, 85% of Pursuit’s revenue was earned in the second and third quarters.
Competition
Pursuit generally competes on the basis of location, uniqueness of facilities, service, quality, and price. Competition exists both locally and regionally across all four lines of business. The hospitality businessindustry has a large number of competitors and competes for leisure travelers (both individual and tour groups) across the United States and Canada. Pursuit’s competitive advantage is its distinctive attractions, iconic destinations, and iconic destinations.strong culture of hospitality and guest services.
Pursuit remains focused on delivering inspiring and unforgettable experiences in iconic locations while growing and enhancing its unique portfolio of integrated tourism assetsPursuit’s growth strategy is to become a leading attractions hospitality company through its Refresh-Build-Buy growth initiatives.initiatives:
Refresh. Refresh assets and processes to optimize market position and maximize returns.
• | Refresh. Refreshing our existing assets and processes to optimize guest experience, market position, and maximize returns |
Build. Build new assets that create new revenue streams with economies of scale and scope.
• | Build. Building new assets that create new guest experiences and additional revenue streams with economies of scale and scope |
Buy. Buy strategic assets that drive economies of scale and scope with strong returns.
• | Buy. Buying strategic assets that drive guest experience, economies of scale and scope, and improving financial performance |
We continue to search for opportunities to acquire or to build high return tourism assets in iconic natural and cultural destinations that enjoy perennial demand, bring meaningful scale and market share, and offer cross-selling advantages with a combination of attractions and hotels.
Recent Pursuit Developments
Banff Jasper Collection:
Mount Royal Hotel. On December 29, 2016, the Mount Royal Hotel was damaged by fire and closed. In July 2017, we resolved our property and business interruption insurance claims related to the fire for $36.3 million. We allocated $2.2 million to an insurance receivable, $29.3 million was recorded as an impairment recovery (partially offset by impairment charges of $0.2 million) related to construction costs to re-open the hotel, $2.5 million was recorded as a business interruption gain for the recovery of lost profits, $1.3 million was recorded as contra-expense to offset non-capitalizable costs incurred, and the remaining $1.0 million was recorded as deferred revenue that will be recognized over the periods the business interruption losses are actually incurred. Restorations and improvements will provide an elevated guest experience to room finishes and furnishings, lobby and lounge areas, exterior appearance, heating/cooling, sound insulation, and building systems. We anticipate re-opening the hotel in mid-year 2018.
• | Acquisition of Mountain Park Lodges – On June 8, 2019, we acquired a 60% equity interest in Mountain Park Lodges’ group of seven hotels and an undeveloped land parcel located in Jasper National Park. The seven hotels include: Sawridge Inn and Conference Centre; Pyramid Lake Resort; The Crimson Hotel; Chateau Jasper; Pocahontas Cabins; Marmot Lodge; and Lobstick Lodge. |
Expansion of FlyOver Concept. On November 3, 2017, we acquired the controlling interest (54.5% of the common stock) in Esja Attractions ehf. (“Esja”). Esja, a private Iceland corporation is developing and will operate Pursuit’s new FlyOver Iceland attraction. This attraction expands our virtual flight ride theater concept into Iceland’s capital city of Reykjavik. Modeled after our highly successful FlyOver Canada attraction, FlyOver Iceland will provide guests an exhilarating virtual flight experience over some of Iceland’s most spectacular scenery and natural wonders. The new attraction is expected to open in 2019.
• Renovation of Glacier View Lodge – In June 2019, we completed the renovation of our 32-room Glacier View Lodge in Jasper National Park. The renovation includes an elevated lodging experience that matches its incredible views of the majestic Columbia Icefield. The Glacier View Lodge has been included in Fodor’s 100 most incredible hotels in the world and top five hotels in Canada.Tiny Home Village. On July 15, 2017, we added ten tiny homes to the St. Mary Lodge property as part
Alaska Collection:
• | Expansion of the Windsong Lodge – In June 2019, we completed the expansion of the Windsong Lodge, one of our hospitality properties located in Seward, Alaska, near Kenai Fjords National Park. This expansion features 36 new guestrooms, six of which are suites. |
Glacier Park Collection. The tiny home’s design embraces a number of eco-forward elements, such as a fresh water/gray water system and pint-sized, energy-efficient appliances. Elements of luxury are woven into the design. Homes can accommodate up to four guests, with a sliding barn-style door separating a compact sleeping area from the cozy living area. Collection:
• | Acquisition of Belton Chalet – On May 16, 2019, we acquired the historic Belton Chalet, which is located just outside the west entrance to Glacier National Park and includes 27 rooms and dining. |
RV and Cabin Park Development. In 2017, we began developing approximately 100 acres of undeveloped land adjacent to Glacier National Park that we acquired in connection with our 2014 purchase of the West Glacier properties. The new development will include a new RV and cabin park with 102 RV slips, 20 guest cabins, five employee housing cabins, guest registration, and a laundromat. Our site is ideally located at the Glacier Park entrance. We expect half of the new RV and Cabin Park to open during the 2019 season with the remainder opening for the 2020 season.
• | RV and Cabin Park Development – On July 1, 2019, we opened our new RV and cabin park located at the Glacier National Park entrance. These fully equipped RV sites and cabins include 102 RV slips, 20 guest cabins, five employee housing cabins, guest registration, and a laundromat. |
Financial information for our reportable segments and geographic areas is included in Note 22 – Segment Information of the Notes to Financial Statements (Part II, Item 8 of this 2017 Form 10-K).Sky Lagoon:
• | Development of Sky Lagoon – On July 25, 2019, we announced plans for a new geothermal lagoon attraction that will be located on an oceanfront lot just outside downtown Reykjavik, Iceland. We expect to open our new attraction in 2021. |
FlyOver Attractions:
• | Expansion of FlyOver Concept in Las Vegas – On February 26, 2019, we announced the expansion of our flight ride theater concept into Las Vegas, Nevada, which is scheduled to open in 2021. |
• | Expansion of FlyOver in Toronto, Canada – On July 25, 2019, we announced plans for the expansion of our flight ride theater concept into Toronto, Canada. We were awarded the right to construct the new attraction near the base of Canada’s CN Tower in the Entertainment District. We expect construction to begin in 2020, and the new attraction to open in 2022. |
• | Opening of FlyOver Iceland. We opened our flight ride theater concept in Iceland’s capital city of Reykjavik in August 2019. |
• | Improvements to FlyOver Canada Exterior Structure – In September 2019, we completed the construction and development of a new guest experience building that includes an expanded retail store, new café, and an enhanced post-show. |
Intellectual Property
Our intellectual property rights (including trademarks, patents, copyrights, registered designs, technology, and know-how) are material to our business.
We own or have the right to use numerous trademarks and patents in many countries. Depending on the country, trademarks remain valid for as long as we use them, or as long as we maintain their registration status. Trademark registrations are generally for renewable, fixed terms. We also have patents for current and potential products. Our patents cover inventions ranging from a modular structure having a load-bearing surface that we use in our event and exhibition services, to a surface-covering installation tool and method that reduces our labor costs and improves worker safety. Our U.S. issued utility patents extend for 20 years from the patent application filing date;date, and our U.S. issued design patents are currently granted for 14 years from the grant date. We also have an extensive design library. Many of the designs have copyright protection and we
have also registered many of the copyrights. In the U.S., copyright protection is for 95 years from the date of publication or 120 years from creation, whichever is shorter. While we believe that certain of our patents, trademarks, and copyrights have substantial value, the loss of any one of them would not have a material adverse effect on our financial condition or results of operations.
Our Trademarks
Our U.S. registered trademarks and trademarks pending registration include Global Experience Specialists & design®, GES®, GES Servicenter®, GES National Servicenter®, GES MarketWorks®, GES Measurement & Insight®, GES Project Central, The Art and Science of Engagement®, Trade Show Rigging TSR®, TSE Trade Show Electrical & design®, Earth Explorers®, Compass Direct®, ethnoMetrics®, eXPRESSO®, FIT®, ON Services, a GES Company & design®, ON Site Audio Visual & design®, FLYOVER® & design, FLYOVER®, eco-sense®, ONPEAK®, Mount Royal, Above Banff®, Alaska Denali Travel®, Alaska Denali Escapes®, Alaska Heritage Tours®, by Pursuit, Kenai Fjords Tours & design®, Kenai Fjords
Wilderness Lodge®, & design, Seward Windsong Lodge & design®, Talkeetna Alaskan Lodge®, Explore Rockies®, Denali Backcountry Adventure®, Denali Backcountry Lodge®, and Denali Cabins®Cabins & design®.
We also own or have the right to use many registered trademarks and trademarks pending registration outside of the United States, including GES®, ShowTech®, Poken®, Visit®, Visit by GES®, Blitz, a GES Company & design®, Brewster Inc. & design®, Brewster Attractions Explore & design®, Brewster Hospitality Refresh & design®, Glacier Skywalk®, Above Banff®, Explore Rockies®, FLYOVER®FLYOVER & design®, FLYOVER ICELAND & design, FLYOVER Canada & design, GES Event Intelligence AG®, Pursuit®, by Pursuit®, Soaring Over Canada®, Elk + Avenue Hotel®, Brewster Epic Summer Pass®, and escape.connect.refresh.explore®.
Government Regulation and Compliance
Compliance with legal requirements and government regulations represents a normal cost of doing business. The principal rules and regulations affecting our day-to-day business relate to transportation (such as regulations promulgated by the U.S. Department of Transportation and its state counterparts), our employees (such as regulations implemented by the Occupational Safety and Health Administration, equal employment opportunity laws, guidelines implemented pursuant to the Americans with Disabilities Act, and general federal and state employment laws), unionized labor (such as guidelines imposed by the National Labor Relations Act), and U.S. and Canadian regulations relating to national parks (such as regulations established by Parks Canada, the U.S. Department of the Interior, and the U.S. National Park Service), and U.S. and Canadian regulations relating to boating (such as regulations implemented by the U.S. and Canadian Coast Guard and state boating laws).
Some of our current and former businesses are subject to U.S. federal and state environmental regulations, including laws enacted under the Comprehensive Environmental Response, Compensation and Liability Act, or our state law counterparts. Compliance with federal, state, and local environmental, health and safety provisions, including, but not limited to, those regulating the discharge of materials into the environment and other actions relating to the environment, have not had, and arewe do not expectedexpect them to have, a material effect on our capital expenditures, competitive position, financial condition, or results of operations.
Employees
We had the following number of employees as of December 31, 2017:2019:
|
| Number of Employees |
|
| Regular Full-Time Employees Covered by Collective Bargaining Agreements |
| ||
GES |
|
| 3,092 |
|
|
| 1,142 |
|
Pursuit |
|
| 365 |
|
|
| 41 |
|
Viad Corporate |
|
| 64 |
|
|
| — |
|
Total |
|
| 3,521 |
|
|
| 1,183 |
|
Number of Employees (1) | ||||
GES | 4,223 | |||
Pursuit | 1,085 | |||
Viad Corporate | 53 | |||
Total | 5,361 |
(1) | Includes 1,109 employees covered by collective bargaining agreements. |
We believe that relations with our employees are good and that collective-bargainingcollective bargaining agreements expiring in 20182020 will be renegotiated in the ordinary course of business without a material adverse effect on our operations.
We are governed by a Board of Directors comprised ofcomprising seven non-employee directors and one employee director, and we have an executive management team consisting of fourwith eight executive officers.
Financial Information about Segments and Geographic Areas
Refer to Note 22 – Segment Information of the Notes to Consolidated Financial Statements (Part II, Item 8 of this 2017 Form 10-K) for segment financial information.
We were incorporated in Delaware in 1991. Our common stock trades on the New York Stock Exchange under the symbol “VVI.”
Our website address is www.viad.com. All of our SEC filings, including our Annual Reports on Form 10-K, quarterly reports on Form 10-Q, current reports on Form 8-K, and amendments to those reports, are available free of charge on our website as soon as reasonably practicable after we electronically file that material with, or furnishedfurnish it to, the SEC. The information contained on our website is neither a part of, nor incorporated by reference into, this 20172019 Form 10-K. The SEC’s website, www.sec.gov, contains reports, proxy and information statements, and other information regarding issuers that file electronically with the SEC.
Our investor relations website is www.viad.com/investors/investor-center/default.aspx and includes key information about our corporate governance initiatives, including our Corporate Governance Guidelines, our Board of Directors committee charters, our Code of Ethics, and information concerning our Board members and how to communicate with them.
Our operations and financial results are subject to known and unknown risks. As a result, past financial performance and historical trends may not be reliable indicators of our future performance.
Completed acquisitions may not perform as anticipated or be integrated as planned. We regularly evaluate and pursue opportunities to acquire businesses that complement, enhance, or expand our current business, or offer growth opportunities. Our acquired businesses might not meet our financial and non-financial expectations or yield anticipated benefits. Our success depends, in part, on our ability to conform controls, policies and procedures, and business cultures; consolidate and streamline operations and infrastructures; identify and eliminate redundant and underperforming operations and assets; manage inefficiencies associated with the integration of operations; and retain the acquired business’business’s key personnel and customers. Moreover, our acquisition activity potentially increases our debt, subjectsmay subject us to new regulatory requirements, distractsdistract our senior management and employees, and exposesexpose us to unknown liabilities or contingencies that we may fail to, or are unable to identify prior to closing. If our acquisitions cause us to make changes to our business strategy or if external conditions adversely affect our business operations, we may also be required to record an impairment charge to goodwill or intangible assets. Additionally, we may borrow funds to finance strategic acquisitions. Debt leverage resulting from future acquisitions would reduce our debt capacity, increase our interest expense, and limit our ability to capitalize on future business opportunities. Suchborrowings may also be subject to fluctuations in interest rates. Any of these risks could materially and adversely affect our business, product and service sales, financial condition, and results of operations.
We are vulnerable to deterioration in general economic conditions. Our business is sensitive to fluctuations in general economic conditions in the U.S. and other global markets in which we operate. A decline in global or regional economic conditions, or consumers’ fears that economic conditions will decline, could cause declining consumer confidence, unemployment, fluctuations in stock markets and interest rates, contraction of credit availability, or other dynamic factors affecting economic conditions generally. The success of our GES business largely depends on the number of exhibitions held, the size of exhibitors’ marketing expenditures, and on the strength of particular industries in which exhibitors operate. The number and size of exhibitions generally decrease when the economy weakens. We also could suffer from reduced spending for our services because many exhibitors’ marketing budgets are partly discretionary and are frequently among the first expenditures reduced when economic conditions deteriorate. In addition, revenue from our Pursuit operations depends largely on the amount of disposable income that consumers have available for travel and vacations, which decreases during periods of weak general economic conditions. As a result, any deterioration in general economic conditions could materially and adversely affect our business, product sales, financial condition, and results of operations.
We depend on our large exhibition event clients to renew their service contracts and on our exclusive right to provide those services. During 2017, no single client accounted for more than 6% of our consolidated revenue. However, GES has a number of large exhibition event organizers and large customer accounts. If any of these large clients do not renew their service contracts, our results of operations could be materially and adversely affected.
Moreover, when event organizers hire GES as the official services contractor, they usually also grant GES an exclusive right to perform material handling, electrical, plumbing services,rigging, and other services (the “Event Services”) at the exhibition facility. However, some exhibition facilities are under increasing financial pressurehave taken certain steps to in-source Event Servicescertain event services (either by performing the services themselves or by hiring a separate service provider) as a result of conditions generally affecting their industry, such as an increased supply of exhibition space. If a large number of exhibition facilities choose to in-source Event Services,certain event services, GES will lose the ability to provide Event Services despite being hired as the officialcertain event services, contractor, and our results of operations could be materially and adversely affected.
Our business is relationship driven. Our GES business is heavily focused on client relationships, and, specifically, on having close collaboration and interaction with our clients. To be successful, our account teamteams must be able to understand a client’sclients’ desires and expectations in order to provide top-quality service. If we lose aare unable to maintain our client relationships, including due to the loss of key membermembers of our account team,teams, we could also lose customers and our results of operations could be materially and adversely affected.
We operate in highly competitive and dynamic industries. We are engaged in a number of highly competitive industries. Competition in the Live Events industry and the exhibits and experiential environments industriesmarkets is driven by price and service quality, among other factors. To the extent competitors seek to gain or retain their market presence through aggressive underpricing strategies, we may be required to lower our prices and rates to avoid the loss of related business, thereby adversely affectingbusiness. Moreover, recent customer consolidations and other actions have caused downward pricing pressure for our results of operations. In addition, ifproducts and services and could affect our ability to negotiate favorable terms with our customers. If we are unable to anticipate and respond as effectively as our competitors to changing business conditions, including new technologies and business models, we could
lose market share to our competitors.share. Our inability to meet the challenges presented by the competitive and dynamic environment of our industry could materially and adversely affect our results of operations.
Travel industry disruptions, particularly those affecting the hotel and airline industries, could adversely affect our business. Our business depends largely on the ability and willingness of people, whether exhibitors, exhibition attendees, tourists, or others, to travel. Factors adversely affecting the travel industry, and particularly the airline and hotel industries, generally also adversely affect our business and results of operations. Factors that could adversely affect the travel industry include high or rising fuel prices, increased security and passport requirements, weather conditions, health epidemics and pandemics, airline accidents, acts of terrorism, and international political instability and hostilities. For example, the recent outbreak of respiratory illness caused by a new coronavirus that surfaced in the Hubei Province of China, resulted in (i) major U.S. airlines canceling all flights into and out of China, (ii) the U.S. limiting the airports at which China flights may enter the U.S., and (iii) the U.S. imposing the first federally mandated quarantine in more than 50 years for passengers who had traveled to the Hubei Province. Any of these factors, or other unexpected events that affect the availability and pricing of air travel and accommodations, could materially and adversely affect our business and results of operations.
New capital projects may not be commercially successful. From time to time, we pursue capital projects, such as our current construction of FlyOver Las Vegas, FlyOver Canada Toronto, the Sky Lagoon, and other efforts to upgrade some of our Pursuit offerings, in order to enhance and expand our business. Capital projects are subject to a number of risks, including unanticipated delays, cost overruns, and the failure to achieve established financial and strategic goals, as well as additional project-specific risks. The occurrence of any of these events could prevent a new capital project from performing in accordance with our commercial expectations and could materially and adversely affect our business and results of operations.
The seasonality of our business makes us particularly sensitive to adverse events during peak periods. The peak activity for our Pursuit business is during the summer months, as 85% of Pursuit’s 2019 revenue was earned in the second and third quarters. Our GES exhibition and event activity varies significantly because it is based on the frequency and timing of shows, many of which are not held each year, and which may shift between quarters. If adverse events or conditions occur during these peak periods, our results of operations could be materially and adversely affected.
Transportation disruptions and increases in transportation costs could adversely affect our business and results of operations. GES relies on independent transportation carriers to send materials and exhibits to and from exhibition, warehouse, and customer facilities. If our customers and suppliers are unable to secure the services of those independent transportation carriers at favorable rates, it could materially and adversely affect our business and results of operations. In addition, disruption of transportation services due to weather-related problems, labor strikes, lockouts, or other events could adversely affect our ability to supply services to customers and could cause the cancellation of exhibitions, which could materially and adversely affect our business and results of operations.
The seasonality of our business makes us particularly sensitive to adverse events during peak periods. Our GES exhibitionNatural disasters, weather conditions, and event activity varies significantly because it is based on the frequency and timing of shows, many of which are not held each year and which may shift between quarters. The peak activity for our Pursuit business is during the summer months. Consequently, during 2017, 87% of Pursuit’s revenue was earned in the second and third quarters. If adverse events or conditions occur during these peak periods our results of operations could be materially and adversely affected.
Terrorist attacks, natural disasters, or other catastrophic events could negatively affect our business. The occurrence of catastrophic events ranging from natural disasters (such as hurricanes, fires, floods, and floods)earthquakes), health epidemics or pandemics, acts of war or terrorism, accidents involving our travel offerings or experiences, the effects of climate change, including any impact of global warming, or the prospect of these events could disrupt our business. Changes in climates may increase the frequency and intensity of adverse weather patterns and make certain destinations less desirable. Such catastrophic events have, and could have, an adverse impact on Pursuit, which is heavily dependent on the ability and willingness of its guests to travel and/or visit our attractions. Pursuit guests tend to delay or postpone vacations if natural conditions differ from those that typically prevail at competing lodges, resorts, and attractions, and catastrophic events and heightened travel security measures instituted in response to such events could impede the guests’ ability to travel, and interrupt our business operations, including damaging our properties. Such catastrophic events could also have a negative impact on GES’ production facilities, preventing us from timely completing exhibit fabrication and other projects for customers. They could also causeGES, causing a cancellation of exhibitions and other events held in public venues or disrupt the services we provide to our customers at convention centers, exhibition halls, hotels, and other public venues. Such catastrophic events could also have an adversea negative impact on Pursuit, which is heavily dependent on the abilityGES’ production facilities, preventing us from timely completing exhibit fabrication and willingness of its guests to travel. Pursuit guests tend to delay or postpone vacations if natural conditions differ from those that typically prevail at competing lodges, resorts and attractions, and catastrophic events could impede the guests’ ability to travel, interrupt our business operations, and/or cause damage to our properties.other projects for customers. In addition, unfavorable media attention, or negative publicity, in the wake of a catastrophic event could damage our reputation or reduce the demand for our services. If the conditions arising from such events persist or worsen, they could materially and adversely affect our results of operations and financial condition.
Our participation in multi-employer pension plans could substantially increase our pension costs. We sponsor a number of defined benefit plans for our U.S. and Canada-based employees. In addition, we are vulnerableobligated to deteriorationcontribute to multi-employer pension plans under collective bargaining agreements covering our union-represented employees. We contributed $27.3 million in general economic conditions. Our business is sensitive2019, $26.4 million in 2018, and $26.6 million in 2017 to fluctuations in general economic conditionsthose multi-employer pension plans. Third-party boards of trustees manage these multi-employer plans. Based upon the information we receive from plan administrators, we believe that affectseveral of those multi-employer plans are underfunded. The Pension Protection Act of 2006 requires us to reduce the cost of materials and operating supplies. The success
underfunded status over defined time periods. Moreover, we would be required to make additional payments of our GES business largely depends onproportionate share of a plan’s unfunded vested liabilities if a plan terminates, or other contributing employers withdraw, due to insolvency or other reasons, or if we voluntarily withdraw from a plan. In 2019, we finalized the numberterms of exhibitions held,a new collective bargaining agreement with the sizeTeamsters Local 727 union. The terms included a withdrawal from the underfunded Central States Pension Plan. Accordingly, we recorded a charge of exhibitors’ marketing expenditures,$15.5 million, which represents the estimated present value of future contributions we will be required to make as a result of the union’s withdrawal and on the strength$0.2 million of particular industries inother withdrawal costs. At this time, we do not anticipate triggering any withdrawal from any other multi-employer pension plan to which exhibitors operate. The number and size of exhibitions generally decrease when the economy weakens. We also suffer from reduced spending for our services because many exhibitors’ marketing budgets are partly discretionary, and are frequently among the first expenditures reduced when economic conditions deteriorate. Consequently, marketing expenditures often are not increased until economic conditions improve. Revenue from our Pursuit operation depends largely on the amount of disposable income that consumers have available for travel and vacations. This amount decreases during periods of weak general economic conditions. Any of these riskswe currently contribute. However, significant plan contribution increases could materially and adversely affect our business, product sales, financial condition, and results of operations.
Recent U.S. tax legislation may materially and adversely affect ourconsolidated financial condition, results of operations, and cash flows. The Tax CutsRefer to Note 18 – Pension and Jobs Act (the “Tax Act”), enacted in late 2017, makes significant changesPostretirement Benefits of the Notes to U.S. tax lawsConsolidated Financial Statements (Part II, Item 8 of this 2019 Form 10-K) for further information.
Union-represented labor increases our risk of higher labor costs and includes numerous provisions that could affectwork stoppages. Significant portions of our business. For instance,employees are unionized. We have approximately 100 collective bargaining agreements, and we are required to renegotiate approximately one-third of those each year. If we increase wages or benefits as a result of lower corporate tax rates,labor negotiations, either our operating margins will suffer, or we could increase the Tax Act tendscost of our services to reduce both the value of deferred tax assets and the amount of deferred tax liabilities. It also limits interest rate deductions and the amount of net operating losses that can be used each year and alters the expensing of capital expenditures. Other provisions have tax consequences for our international operations. The Tax Act is unclear in certain respects and will require interpretations and implementing regulations by the Internal Revenue Service, as well as state tax authorities. The Tax Act could also be subject to amendments and technical corrections, any ofcustomers, which could lessen or increase the adverse impacts on our business operations. The accounting treatment of these tax law changes is complex,lead those customers to turn to other vendors with lower prices. Either event could materially and some of the changes may affect both current and future periods. Others will primarily affect future periods. As we have discussed elsewhere in this Report on Form 10-K, we believe our analysis and computations of the tax effects of the Tax Act on financial results is substantially, but not entirely, complete. Consistent with guidance from the SEC, our financial statements reflect our estimates of the tax effects of the Tax Act on our business. Although we believe these estimates are reasonable, they are
provisional and may be adjusted prior to the end of 2018. Any such adjustments could affect our current or future financial statements, or both.We continue to examine the impact of this tax reform legislation, and as its overall impact is uncertain, we note that the Tax Act could adversely affect our business and financial condition.results of operations.
Additionally, if we are unable to reach an agreement with a union during the collective bargaining process, the union may strike or carry out other types of work stoppages. If that happens, we might be unable to find substitute workers with the necessary skills to perform many of the services, or we may incur additional costs to do so, both of which could materially and adversely affect our business and results of operations.
Liabilities relating to prior and discontinued operations may adversely affect our results of operations. We and our predecessors have a corporate history spanning decades and involving diverse businesses. Some of those businesses owned properties and used raw materials that have been, and may continue to be, subject to litigation. Moreover, some of the raw materials used and the waste produced by those businesses have been and are the subject of U.S. federal and state environmental regulations, including laws enacted under the Comprehensive Environmental Response, Compensation and Liability Act, or its state law counterparts. In addition, we may incur other liabilities resulting from indemnification claims involving previously sold properties and subsidiaries, or obligations under defined benefit plans or other employee plans, as well as claims from past operations of predecessors or their subsidiaries. Although we believe we have adequate reserves and sufficient insurance coverage to cover those future liabilities, future events or proceedings could render our reserves or insurance protections inadequate, any of which could materially and adversely affect our business and results of operations.
Show rotation affects our profitability and makes comparisons between periods difficult. GES results are largely dependent upon the frequency, timing, and location of exhibitions and events. Some large exhibitions are not held annually (they may be held once every two, three, or four years) or may be held at different times of the year from when they were previously held. In addition, the same exhibition may change locations from year to year resulting in lower margins if the exhibition shifts to a higher-cost location. Any of these factors could cause our results of operations to fluctuate significantly from quarter to quarter or from year to year, making periodic comparisons difficult.
We are subject to currency exchange rate fluctuations.We have operations outside of the U.S. primarily in Canada, the United Kingdom, Iceland, the Netherlands, Germany, and to a lesser extent, in certain other countries.Germany. During 2017,2019, GES InternationalEMEA, GES Canada, and Pursuit’s international operations accounted for approximately 30%33% of our consolidated revenue and 58%66% of our segment operating income. Consequently, a significant portion of our business is exposed to currency exchange rate fluctuations. We do not currently hedge equity risk arising from the translation of non-U.S. denominated assets and liabilities. Our financial results and capital ratios are sensitive to movements in currency exchange rates because a large portion of our assets, liabilities, revenue, and expenses must be translated into U.S. dollars for reporting purposes. The unrealized gains or losses resulting from the currency translation are included as a component of accumulated other comprehensive income (loss) in our consolidated balance sheets. As a result, significant fluctuations in currency exchange rates could result in material changes to the net equity position we report in our consolidated balance sheets. We do not currently hedge equity risk arising from the translation of non-U.S. denominated assets and liabilities.
Our participation in multi-employer pension plans could substantially increase our pension costs. We sponsor a number of defined benefit plans for our U.S. and Canada-based employees. We are obligated to contribute to multi-employer pension plans under collective-bargaining agreements covering our union-represented employees. We contributed $26.6 million in 2017 and $25.8 million in 2016 to those multi-employer pension plans. These multi-employer plans are managed by third-party boards of trustees. Based upon the information we receive from plan administrators, we believe that several of those multi-employer plans are underfunded. The Pension Protection Act of 2006 requires us to reduce the underfunded status over defined time periods. Moreover, we would be required to make additional payments of our proportionate share of a plan’s unfunded vested liabilities if a plan terminates, or other contributing employers withdraw, due to insolvency or other reasons, or if we voluntarily withdraw from a plan. At this time, we cannot determine with any certainty the amount of additional funding, if any, we could be required to make to those plans. However, significant plan contribution increases, could materially and adversely affect our consolidated financial condition, results of operations, and cash flows. Refer to Note 17 – Pension and Postretirement Benefits of the Notes to Consolidated Financial Statements (Part II, Item 8 of this 2017 Form 10-K) for further information.
Union-represented labor increases our risk of higher labor costs and work stoppages. A significant portion of our employees are unionized. We have approximately 100 collective-bargaining agreements, and we are required to renegotiate approximately one-third of those each year. If we increase wages or benefits as a result of labor negotiations, either our operating margins will suffer, or we could increase the cost of our services to our customers, which could lead those customers to turn to other vendors with lower prices. Either event could materially and adversely affect our business and results of operations.
Additionally, if we are unable to reach an agreement with a union during the collective-bargaining process, the union may strike or carry out other types of work stoppages. If that happens, we might be unable to find substitute workers with the necessary skills to perform many of the services, or we may incur additional costs to do so, both of which could materially and adversely affect our business and results of operations.
We are vulnerable to cybersecurity attacks and threats. We regularly collect and process credit, financial, and other personal sensitive, and confidential information from individuals and entities who attend or participate in events and exhibitions that we produce, or who visit our attractions and other offerings. In addition, our devices, servers, computer systems, and business systems are vulnerable to cybersecurity risk, including cyberattacks, or we may be the target of email scams that attempt to acquire personal information and company assets. Despite our efforts to protect ourselves with insurance, and create security barriers to such threats, including regularly reviewing our systems for vulnerabilities and continually updating our protections, we might not be able to entirely mitigate these risks. Our failure to effectively prevent, detect, and recover from the increasing number and sophistication of information security threats could lead to business interruptions, delays or loss of
critical data, misuse, modification, or destruction of information, including trade secrets and confidential business information, reputational damage, and third-party claims, any of which could adverselymaterially and materiallyadversely affect our results of operations.
Laws and regulations relating to the handling of personal data are evolving and could result in increased costs, legal claims, or fines. We store and process the personally identifiable information fromof our customers, employees, and third parties with whom we have business relationships. LegalThe legal requirements relating torestricting the collection, storage, handling,way we store, collect, handle, and transfer of personal data continue to evolve, and could lead to burdensome or inconsistent requirements affecting the locationthere are an increasing number of authorities issuing privacy laws and movement of our customerregulations. These data privacy laws and internal employee data as well as the management of the data. For example, in July 2016, the EU and the U.S. agreed on a mechanism for companies to transfer data from EU member states to the U.S. This framework, called the Privacy Shield, is intended to address shortcomingsidentified by the European Court of Justice in a predecessor mechanism.
The Privacy Shield and other mechanismsregulations are currently subject to challenges in European courts, which may lead todiffering interpretations, creating uncertainty about the legal basis for data transfersand inconsistency across the Atlantic. Also, in May 2018, the EU’s new General Data Protection Regulation (GDPR) will replace the existing EU Data Protection Directive, and it will have a significant impact on how businesses can collect and process the personal data of EU individuals. The GDPR includes a requirement for businesses to self-report personal data breaches to the relevant supervisory authority and, under certain circumstances, to the affected data subjects. It also gives additional rights to individuals whose data are processed, including the “right to erasure” (also commonly known as the right to be forgotten) by having their records erased and the right to data portability. Compliancejurisdictions. Our compliance with thethese myriad requirements could involve making changes in our services, business practices, or internal systems, thatany of which could likely increase our costs, lower revenue, or reduce efficiency, or make it more difficult to compete with Non-U.S.-based firms.efficiency. Our failure to comply with existing or new rules could result in significant penalties or orders to stop the alleged noncompliant activity, litigation, adverse publicity, or could cause our customers to lose trust in our services.services. In addition, if the third parties we work with violate applicable laws, contractual obligations, or suffer a security breach, those violations could also put us in breach of our obligations under privacy laws and regulations. In addition, the costs of maintaining adequate protection, including insurance protection against such threats, as they develop in the future (or as legal requirements related to data security increase) are expected to increase and could be material. Any of these risks could materially and adversely affect our business and results of operations.
New capital projects may not be commercially successful. From time to time, we pursue capital projects, such as our current efforts to upgrade some of our Pursuit offerings in order to seize opportunities that complement, enhance, and expand our business. Capital projects are subject to a number of risks, including unanticipated delays, cost overruns, and the failure to achieve established financial and strategic goals, as well as additional risks specific to a project. The occurrence of any of these events could prevent a new capital project from performing in accordance with our commercial expectations and could materially and adversely affect our business and results of operations.
Show rotation affects our profitability and makes comparisons between periods difficult. GES results are largely dependent upon the frequency, timing, and location of exhibitions and events. Some large exhibitions are not held annually (they may be held once every two or three years or longer) or may be held at different times of year from when they were previously held. In addition, the same exhibition may change locations from year to year resulting in lower margins if the exhibition shifts to a higher-cost location. Any of these factors could cause our results of operations to fluctuate significantly from quarter to quarter or from year to year, making periodic comparisons difficult.
The United Kingdom’s exit from the European Union could adversely affect our business.We operate substantial parts of our EU businesses from U.K-basedU.K.-based entities. The June 23, 2016 U.K. referendum resulted in a determination thatOn January 31, 2020, the U.K. should exitofficially withdrew from the EU. In March 2017, the U.K. government initiated the exit process under Article 50 of the Treaty of the EU, commencing a period of up to two years for the United Kingdom and the other EU member states to negotiate theThe final terms of the withdrawal.withdrawal are being negotiated with the transition period ending on December 31, 2020. The uncertainty surroundingwithdrawal could disrupt the timing, termsfree movement of goods, services, and consequences of the U.K.’s exit could adversely impact customer and investor confidence, result in additional market volatility and adversely affect our businesses and our results of operations and financial condition. Oncepeople between the U.K. exits fromand the EU,EU. Moreover, the regulatory and legal environment that would thenwill govern our U.K. operations will depend on, in certain respects, the nature of theis uncertain. Any new arrangements agreedmay require us to between the U.K., the EU, and other trading partners. It is likely thatmake changes to our legal entity structure and operations in Europe, will be required as a result of these arrangements, which mightcould result in a higher cost and less efficient operating model across our European legal entities.
Liabilities relating to prior and discontinued operations maybusiness. These new arrangements could adversely affect our business and results of operations.We, and our predecessors, have a corporate history spanning over eight decades and involving approximately 2,400 previous subsidiaries in diverse businesses, such as
Changes affecting the manufacturing of locomotives, buses, industrial chemicals, fertilizers, pharmaceuticals, leather, textiles, food, and fresh meats. Some of those businesses used raw materials that have been, and may continue to be, subject to litigation. Moreover, someavailability of the raw materials used andLondon Inter-bank Offered Rate (“LIBOR”) or increases in interest rates may have consequences for us that cannot yet be reasonably predicted. Viad has outstanding debt with variable interest rates based on LIBOR. Borrowings under the waste produced by those businesses have2018 Credit Facility are indexed to the prime rate or LIBOR, plus appropriate spreads tied to our leverage ratio. The LIBOR benchmark has been and are the subject of U.S. federalnational, international, and state environmental regulations, including laws enactedother regulatory guidance and proposals to reform. In July 2017, the United Kingdom Financial Conduct Authority (the authority that regulates LIBOR) announced that it intends to stop compelling banks to submit rates for the calculation of LIBOR after 2021. These reforms may cause LIBOR to perform differently than in the past and LIBOR may ultimately cease to exist after 2021. Our 2018 Credit Facility includes a method for determining an alternative or successor rate of interest that gives consideration to the new prevailing market convention. The alternative rate could affect the Company's debt and debt payments. At this time, it is not possible to predict the effect of any changes to LIBOR, any phase out of LIBOR or any establishment of alternative benchmark rates. Any new benchmark rate will likely not replicate LIBOR exactly, which could impact our contracts which terminate after 2021. There is uncertainty about how applicable law, the courts or the Company will address the replacement of LIBOR with alternative rates. If LIBOR ceases to exist after 2021, the interest rates under our revolving credit facility and the Comprehensive Environmental Response, Compensationdiscount rates we apply to finance lease obligations will be based on the alternative rate, which may result in higher interest rates and Liability Act, or its state law counterparts.debt obligations. In addition, we may incur other liabilities, resulting from indemnification claims involving previously sold subsidiaries, as well as from past operationsany increases to our benchmark interest rates could have an uncertain impact on our cost of predecessors or their subsidiaries. Although we believe we have adequate reservesfunds and sufficient insurance coverageour access to cover those future liabilities, future events or proceedings could contradict with current assumptions,the capital markets, which could cause reserves or insurance to become inadequate and, ultimately, materially and adversely affectimpact our results of operations.operations and cash flows. Uncertainty as to the nature of such potential changes may also adversely affect the trading market for our securities.
Item 1B. Unresolved Staff Comments
None.
We operate servicelease our corporate headquarters in Phoenix, Arizona. Our other principal properties are owned or productionleased by GES and Pursuit.
GES primarily leases its properties, both domestically and internationally. GES properties consist of offices and multi-use facilities. Multi-use facilities and maintaininclude manufacturing, sales and service officesdesign, office, storage and/or warehouse, and truck marshaling yards. Multi-use facilities vary in size up to approximately 677,800 square feet in the U.S. and approximately 136,000 square feet in the United States,Kingdom.
Pursuit primarily owns its properties, both domestically and internationally. Pursuit’s properties mainly include attractions, hotels and lodges, retail stores, and offices. Properties located in Canada and Iceland are subject to multiple long-term ground leases with their respective governments. For further information on Pursuit’s attractions and hospitality assets, refer to the United Kingdom, Germany, the United Arab Emirates, the Netherlands, Switzerland, Romania, and Hong Kong. Our principal properties are operated by GES, Pursuit, and Viad Corporate.
GES
|
| Offices |
|
| Multi-use Facilities(1) |
| ||||||||||
|
| Owned |
|
| Leased |
|
| Owned |
|
| Leased |
| ||||
GES U.S. |
|
| — |
|
|
| 19 |
|
|
| 2 |
|
|
| 30 |
|
GES International: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Canada |
|
| — |
|
|
| 4 |
|
|
| — |
|
|
| 7 |
|
United Kingdom |
|
| — |
|
|
| 3 |
|
|
| — |
|
|
| 6 |
|
Germany |
|
| — |
|
|
| 1 |
|
|
| — |
|
|
| 2 |
|
United Arab Emirates |
|
| — |
|
|
| 1 |
|
|
| — |
|
|
| 2 |
|
Netherlands |
|
| — |
|
|
| 1 |
|
|
| — |
|
|
| 2 |
|
Switzerland |
|
| — |
|
|
| 1 |
|
|
| — |
|
|
| — |
|
Romania |
|
| — |
|
|
| — |
|
|
| — |
|
|
| 1 |
|
Hong Kong |
|
| — |
|
|
| 1 |
|
|
| — |
|
|
| — |
|
Total GES International |
|
| — |
|
|
| 12 |
|
|
| — |
|
|
| 20 |
|
Total GES |
|
| — |
|
|
| 31 |
|
|
| 2 |
|
|
| 50 |
|
|
|
Pursuit
|
| Owned |
|
| Leased |
| ||
Offices(1) |
|
| 2 |
|
|
| 5 |
|
Retail stores |
|
| 23 |
|
|
| 1 |
|
Bus terminal |
|
| 1 |
|
|
| — |
|
Garages(1) |
|
| 4 |
|
|
| 2 |
|
Attractions(1) |
|
| 7 |
|
|
| — |
|
Hotels/Lodges(1)(2) |
|
| 15 |
|
|
| — |
|
Total Pursuit |
|
| 52 |
|
|
| 8 |
|
|
|
|
|
Viad Headquarters
Our headquarters is leased and approximates 19,900 square feet, and is located at 1850 North Central Avenue, Suite 1900 in Phoenix, Arizona 85004-4565.Business Section (Part I, Item 1 of this 2019 Form 10-K).
We believe our facilitiesowned and leased properties are adequate and suitable for our business operations and that capacity is sufficient for current needs. For additional information related to our lease obligations, refer to Note 1112 – Debt and CapitalFinance Lease Obligations and Note 1920 – Leases and Other of the Notes to Consolidated Financial Statements (Part II, Item 8 of this 20172019 Form 10-K).
Refer to Note 2021– Litigation, Claims, Contingencies, and Other of the Notes to Consolidated Financial Statements (Part II, Item 8 of this 20172019 Form 10-K) for information regarding legal proceedings forin which we are involved.
Item 4. Mine SafetySafety Disclosures
Not applicable.
Other.ExecutiveInformation about our executive Officers of the Registrant
Our executive officers as of December 31, 2017the date of this 2019 Form 10-K were as follows:
Name |
| Age |
| Business Experience During the Past Five Years and Other Information |
Steven W. Moster |
|
|
| President and Chief Executive Officer of Viad since 2014; President of GES |
|
|
|
|
|
Ellen M. Ingersoll |
|
|
| Chief Financial Officer since July 2002; prior thereto, Vice President-Controller or similar position since 2002; prior thereto, Controller of CashX, Inc., a service provider of stored value internet cards, from June 2001 through October 2001; prior thereto, Operations Finance Director of LeapSource, Inc., a provider of business process outsourcing, |
|
|
|
|
|
David W. Barry |
|
|
| President of Pursuit since June 2015; prior thereto, Chief Executive Officer and President of Trust Company of America, |
Derek P. Linde | 44 | General Counsel and Corporate Secretary since 2018; prior thereto, Deputy General Counsel and Assistant Secretary at Illinois Tool Works Inc. (NYSE: ITW), a diversified manufacturer of specialized industrial equipment, from 2014 to 2018, and Associate General Counsel and Assistant Secretary from 2011 to 2014; prior thereto, a partner at the law firm of Winston & Strawn LLP, from 2008 to 2011, and an Associate from 2000 to 2008. | ||
Trisha L. Fox | 50 | Chief Human Resources Officer since 2018; prior thereto, Executive Vice President, Human Resources, from 2016 to 2018; prior thereto, Senior Vice President at Fifth Third Bank Chicago, (NASDAQ: FITB), a diversified financial services company, from 2011 to 2016; prior thereto, Director, then Senior Director, Human Resources at Dean Foods Company (NYSE:DF), a food and beverage company, from 2009 to 2011; prior thereto, various roles of increasing responsibility in Human Resources at PepsiCo, Inc. (NASDAQ: PEP), a global food and beverage company from 1999 to 2009. | ||
Jay A. Altizer | 49 | President of GES since October 2019; prior thereto, President, GES North America; prior thereto, Managing Director of Falling Branch Advisors LLC, a management advisory firm, from May 2015 to May 2018; prior thereto, Sr. Vice President and General Manager of Saputo Inc. (TSX: SAP), a global dairy producer, from September 2007 to April 2015; prior thereto, General Manager at Morningstar Foods, a Dean Foods Company (NYSE:DF), a food and beverage company, from September 2010 to January 2013, and Vice President of Strategy from September 2007 to September 2010; prior thereto, Sr. Manager of Strategy and Business Development of PepsiCo, Inc. (NASDAQ: PEP), a global food and beverage company from July 2005 to August 2007; prior thereto, General Manager at Exhibitgroup/Giltspur, a former Viad marketing and events division, from May 2004 to June 2005; and prior thereto, Manager at Bain & Company from August 2000 to May 2004. Mr. Altizer has been a Director of the following two non-profits: On the Road Lending, since May 2013, and Chairman since 2017; and Champion Impact Capital, where he is also Treasurer, since May 2013. | ||
Richard A. Britton | 59 | Chief Information Officer since 2018; prior thereto, Executive Vice President, Information Technology, from 2015 to 2018; prior thereto, 16 years in various roles of increasing responsibility in the Healthcare and Reinsurance divisions of General Electric Company (NYSE:GE), a global digital industrial company, including Executive IT Leader at GE Healthcare from 2007 to October 2015. | ||
|
|
|
|
|
Leslie S. Striedel
|
|
|
| Chief Accounting Officer since 2014; prior thereto, Vice President of Finance from March 2014 to April 2014; prior thereto, Vice President of Finance and Administration or similar positions with Colt Defense LLC, a |
Our executive officers’ term of office is until our next Board of Directors annual organization meeting to be held on May 17, 2018.19, 2020.
Item 5. Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities
Market Information
Our common stock is traded on the New York Stock Exchange under the symbol VVI. The high and low common stock market prices per share were as follows:
|
| 2017 |
|
| 2016 |
| ||||||||||
|
| High |
|
| Low |
|
| High |
|
| Low |
| ||||
First Quarter |
| $ | 48.30 |
|
| $ | 42.40 |
|
| $ | 29.84 |
|
| $ | 25.90 |
|
Second Quarter |
| $ | 48.85 |
|
| $ | 42.05 |
|
| $ | 32.29 |
|
| $ | 27.96 |
|
Third Quarter |
| $ | 61.65 |
|
| $ | 46.05 |
|
| $ | 37.85 |
|
| $ | 30.21 |
|
Fourth Quarter |
| $ | 61.85 |
|
| $ | 53.65 |
|
| $ | 47.40 |
|
| $ | 34.40 |
|
Holders
As of January 31, 2018,2020, there were 5,6004,969 shareholders of record of our common stock, including 293223 shareholders that had not converted their shares following a reverse stock split effective on July 1, 2004.
Dividends
For the year ended December 31, 2017, our Board of Directors declared the following dividends:
Declaration Date |
| Dividend Per Share |
|
| Record Date |
| Payable Date | |
November 29, 2017 |
| $ | 0.10 |
|
| December 15, 2017 |
| January 2, 2018 |
August 16, 2017 |
| $ | 0.10 |
|
| September 8, 2017 |
| October 2, 2017 |
May 18, 2017 |
| $ | 0.10 |
|
| June 2, 2017 |
| July 3, 2017 |
February 22, 2017 |
| $ | 0.10 |
|
| March 10, 2017 |
| April 3, 2017 |
For the year ended December 31, 2016, our Board of Directors declared the following dividends:
Declaration Date |
| Dividend Per Share |
|
| Record Date |
| Payable Date | |
December 1, 2016 |
| $ | 0.10 |
|
| December 16, 2016 |
| January 3, 2017 |
August 24, 2016 |
| $ | 0.10 |
|
| September 9, 2016 |
| October 3, 2016 |
May 19, 2016 |
| $ | 0.10 |
|
| June 3, 2016 |
| July 1, 2016 |
February 24, 2016 |
| $ | 0.10 |
|
| March 11, 2016 |
| April 1, 2016 |
Issuer Purchases of Equity Securities
Period |
| Total Number of Shares Purchased |
|
| Average Price Paid Per Share |
|
| Total Number of Shares Purchased as Part of Publicly Announced Plans or Programs |
|
| Maximum Number of Shares That May Yet Be Purchased Under the Plans or Programs |
| ||||
October 1, 2019 - October 31, 2019 |
|
| 409 |
|
| $ | 67.41 |
|
|
| — |
|
|
| 600,067 |
|
November 1, 2019 - November 30, 2019 |
|
| — |
|
| $ | — |
|
|
| — |
|
|
| 600,067 |
|
December 1, 2019 - December 31, 2019 |
|
| — |
|
| $ | — |
|
|
| — |
|
|
| 600,067 |
|
Total |
|
| 409 |
|
| $ | 67.41 |
|
|
| — |
|
|
| 600,067 |
|
Pursuant to previously announced authorizations, our Board of Directors has authorized us to repurchase shares of our common stock from time to time at prevailing market prices. Effective February 7, 2019, our Board of Directors approved an additional 500,000 shares to repurchase. No shares were repurchased on the open market during the three months ended December 31, 2019. The Board’s authorization has no expiration date. During the fourth quarter of 2017,2019, certain previously owned shares of common stock were surrendered by employees, former employees, and non-employee directors for tax withholding requirements on vested share-based awards.
Period |
| Total Number of Shares Purchased |
|
| Average Price Paid Per Share |
|
| Total Number of Shares Purchased as Part of Publicly Announced Plans or Programs |
|
| Maximum Number of Shares That May Yet Be Purchased Under the Plans or Programs |
| ||||
October 1, 2017 - October 31, 2017 |
|
| 2,968 |
|
| $ | 59.83 |
|
|
| — |
|
|
| 440,540 |
|
November 1, 2017 - November 30, 2017 |
|
| 497 |
|
| $ | 55.55 |
|
|
| — |
|
|
| 440,540 |
|
December 1, 2017 - December 31, 2017 |
|
| 11,151 |
|
| $ | 57.60 |
|
|
| — |
|
|
| 440,540 |
|
Total |
|
| 14,616 |
|
| $ | 57.98 |
|
|
| — |
|
|
| 440,540 |
|
Our Board We returned $2.0 million to shareholders during the fourth quarter of Directors has authorized us2019 in the form of dividends. We expect to repurchase shares of our common stock from time to time at prevailing market prices. As of December 31, 2017, 440,540 shares remain available for repurchase. The Board’s authorization has no expiration date. Duringpay comparable dividends in the three months ended December 31, 2017, no shares were repurchased on the open market.future.
The following graph compares the change in the cumulative total shareholder return, from December 31, 20122014 to December 31, 2017,2019, on our common stock, the Standard & Poor’s SmallCap 600 Media Index, the Standard & Poor’s SmallCap 600 Commercial Services & Supplies Index, the Standard & Poor’s SmallCap 600 Index, the Russell 2000 Index, and Standard & Poor’s 500 Index (assuming reinvestment of dividends, as applicable). The graph assumes $100 was invested on December 31, 2012.2014.
|
| Year Ended December 31, |
|
| Year Ended December 31, |
| ||||||||||||||||||||||||||||||||||||||||||
|
| 2012 |
|
| 2013 |
|
| 2014 |
|
| 2015 |
|
| 2016 |
|
| 2017 |
|
| 2014 |
|
| 2015 |
|
| 2016 |
|
| 2017 |
|
| 2018 |
|
| 2019 |
| ||||||||||||
Viad Corp |
| $ | 100.00 |
|
| $ | 114.17 |
|
| $ | 118.43 |
|
| $ | 127.22 |
|
| $ | 201.04 |
|
| $ | 254.60 |
|
| $ | 100.00 |
|
| $ | 107.42 |
|
| $ | 169.75 |
|
| $ | 214.96 |
|
| $ | 195.81 |
|
| $ | 265.57 |
|
S&P 500 |
| $ | 100.00 |
|
| $ | 132.38 |
|
| $ | 150.47 |
|
| $ | 152.53 |
|
| $ | 170.76 |
|
| $ | 208.02 |
|
| $ | 100.00 |
|
| $ | 101.37 |
|
| $ | 113.49 |
|
| $ | 138.26 |
|
| $ | 132.19 |
|
| $ | 173.80 |
|
Russell 2000 |
| $ | 100.00 |
|
| $ | 138.82 |
|
| $ | 145.64 |
|
| $ | 139.21 |
|
| $ | 168.84 |
|
| $ | 193.54 |
|
| $ | 100.00 |
|
| $ | 95.59 |
|
| $ | 115.93 |
|
| $ | 132.88 |
|
| $ | 118.23 |
|
| $ | 148.36 |
|
S&P SmallCap 600 |
| $ | 100.00 |
|
| $ | 141.31 |
|
| $ | 149.42 |
|
| $ | 146.42 |
|
| $ | 185.16 |
|
| $ | 209.51 |
|
| $ | 100.00 |
|
| $ | 97.99 |
|
| $ | 123.92 |
|
| $ | 140.22 |
|
| $ | 128.27 |
|
| $ | 157.44 |
|
S&P 600 Comm. Services & Supplies |
| $ | 100.00 |
|
| $ | 143.41 |
|
| $ | 142.43 |
|
| $ | 139.00 |
|
| $ | 177.43 |
|
| $ | 189.99 |
| ||||||||||||||||||||||||
S&P 600 Media Index |
| $ | 100.00 |
|
| $ | 162.65 |
|
| $ | 190.80 |
|
| $ | 201.03 |
|
| $ | 180.37 |
|
| $ | 207.93 |
| ||||||||||||||||||||||||
S&P SmallCap 600 Comm. Services & Supplies |
| $ | 100.00 |
|
| $ | 97.59 |
|
| $ | 124.58 |
|
| $ | 133.40 |
|
| $ | 119.47 |
|
| $ | 147.53 |
| ||||||||||||||||||||||||
S&P SmallCap 600 Media |
| $ | 100.00 |
|
| $ | 105.36 |
|
| $ | 94.53 |
|
| $ | 108.97 |
|
| $ | 127.33 |
|
| $ | 136.73 |
|
Item 6. Selected Financial Data
|
| Year Ended December 31, |
|
| Year Ended December 31, |
| ||||||||||||||||||||||||||||||||||
(in thousands, except per share data) |
| 2017 |
|
| 2016 |
|
| 2015 |
|
| 2014 |
|
| 2013 |
|
| 2019 |
|
| 2018 |
|
| 2017 |
|
| 2016 |
|
| 2015 |
| ||||||||||
Summary Statement of Operations Data |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Revenue (1) : |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||||||||||||||||
Exhibition and event services |
| $ | 967,352 |
|
| $ | 881,137 |
|
| $ | 799,752 |
|
| $ | 772,770 |
|
| $ | 685,350 |
| ||||||||||||||||||||
Exhibits and environments |
|
| 165,745 |
|
|
| 170,469 |
|
|
| 177,126 |
|
|
| 171,698 |
|
|
| 159,554 |
| ||||||||||||||||||||
Pursuit services |
|
| 173,868 |
|
|
| 153,364 |
|
|
| 112,170 |
|
|
| 120,519 |
|
|
| 108,443 |
| ||||||||||||||||||||
Total revenue |
| $ | 1,306,965 |
|
| $ | 1,204,970 |
|
| $ | 1,089,048 |
|
| $ | 1,064,987 |
|
| $ | 953,347 |
| ||||||||||||||||||||
Revenue (1) |
| $ | 1,371,695 |
|
| $ | 1,296,184 |
|
| $ | 1,306,965 |
|
| $ | 1,204,970 |
|
| $ | 1,089,048 |
| ||||||||||||||||||||
Income from continuing operations (2) |
| $ | 58,452 |
|
| $ | 43,479 |
|
| $ | 27,442 |
|
| $ | 41,178 |
|
| $ | 19,320 |
|
| $ | 23,604 |
|
| $ | 47,914 |
|
| $ | 58,452 |
|
| $ | 43,479 |
|
| $ | 27,442 |
|
Income from continuing operations attributable to Viad common stockholders |
| $ | 57,975 |
|
| $ | 42,953 |
|
| $ | 27,000 |
|
| $ | 40,790 |
|
| $ | 19,437 |
|
| $ | 22,116 |
|
| $ | 47,689 |
|
| $ | 57,975 |
|
| $ | 42,953 |
|
| $ | 27,000 |
|
Basic and diluted income from continuing operations attributable to Viad common stockholders per share (2) |
| $ | 2.84 |
|
| $ | 2.12 |
|
| $ | 1.34 |
|
| $ | 2.02 |
|
| $ | 0.96 |
| ||||||||||||||||||||
Basic and diluted income from continuing operations attributable to Viad common stockholders per share |
| $ | 1.02 |
|
| $ | 2.33 |
|
| $ | 2.84 |
|
| $ | 2.12 |
|
| $ | 1.34 |
| ||||||||||||||||||||
Dividends declared per common share |
| $ | 0.40 |
|
| $ | 0.40 |
|
| $ | 0.40 |
|
| $ | 1.90 |
|
| $ | 2.90 |
|
| $ | 0.40 |
|
| $ | 0.40 |
|
| $ | 0.40 |
|
| $ | 0.40 |
|
| $ | 0.40 |
|
Other Data |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||||||||||||||||
Adjusted EBITDA (3) |
| $ | 137,550 |
|
| $ | 112,428 |
|
| $ | 76,801 |
|
| $ | 73,954 |
|
| $ | 59,157 |
| ||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| December 31, |
|
| December 31, |
| ||||||||||||||||||||||||||||||||||
(in thousands) |
| 2017 |
|
| 2016 |
|
| 2015 |
|
| 2014 |
|
| 2013 |
|
| 2019 |
|
| 2018 |
|
| 2017 |
|
| 2016 |
|
| 2015 |
| ||||||||||
Summary Balance Sheet Data |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash and cash equivalents |
| $ | 53,723 |
|
| $ | 20,900 |
|
| $ | 56,531 |
|
| $ | 56,990 |
|
| $ | 45,821 |
|
| $ | 61,999 |
|
| $ | 44,893 |
|
| $ | 53,723 |
|
| $ | 20,900 |
|
| $ | 56,531 |
|
Total assets |
| $ | 919,899 |
|
| $ | 869,816 |
|
| $ | 690,723 |
|
| $ | 712,979 |
|
| $ | 561,424 |
|
| $ | 1,318,691 |
|
| $ | 922,541 |
|
| $ | 919,899 |
|
| $ | 869,816 |
|
| $ | 690,723 |
|
Total debt and capital lease obligations |
| $ | 209,192 |
|
| $ | 249,211 |
|
| $ | 127,403 |
|
| $ | 139,056 |
|
| $ | 11,160 |
| ||||||||||||||||||||
Redeemable noncontrolling interest (4) |
| $ | 6,648 |
|
| $ | — |
|
| $ | — |
|
| $ | — |
|
| $ | — |
| ||||||||||||||||||||
Total debt and finance lease obligations |
| $ | 340,492 |
|
| $ | 230,121 |
|
| $ | 209,192 |
|
| $ | 249,211 |
|
| $ | 127,403 |
| ||||||||||||||||||||
Redeemable noncontrolling interest (3) |
| $ | 6,172 |
|
| $ | 5,909 |
|
| $ | 6,648 |
|
| $ | — |
|
| $ | — |
| ||||||||||||||||||||
Total stockholders’ equity |
| $ | 442,937 |
|
| $ | 370,638 |
|
| $ | 335,338 |
|
| $ | 347,702 |
|
| $ | 356,543 |
|
| $ | 547,229 |
|
| $ | 450,555 |
|
| $ | 442,937 |
|
| $ | 370,638 |
|
| $ | 335,338 |
|
Non-redeemable noncontrolling interest |
| $ | 13,806 |
|
| $ | 13,283 |
|
| $ | 12,757 |
|
| $ | 12,315 |
|
| $ | 9,102 |
|
| $ | 79,731 |
|
| $ | 14,348 |
|
| $ | 13,806 |
|
| $ | 13,283 |
|
| $ | 12,757 |
|
(1) | The 2019 amounts include an aggregate of $19.9 million in revenue from the Mountain Park Lodges and the Belton Chalet acquisitions. The 2017 amounts include $1.4 million in revenue from our Poken acquisition. The 2016 amounts include an aggregate $55.7 million in revenue from our acquisitions of ON Event Services, LLC, CATC Alaska Tourism Corporation, |
(2) | Income from continuing operations includes the following items: |
Restructuring charges, pre-tax, of $1.0 million in 2017, $5.2 million in 2016, $3.0 million in 2015, $1.6 million in 2014, and $3.8 million in 2013. Refer to Note 18 – Restructuring Charges
• | Multi-employer pension plan withdrawal, pre-tax, of $15.7 million in 2019. Refer to Note 18 – Pension and Postretirement Benefits of the Notes to Consolidated Financial Statements
Item 7. The following Management’s Discussion and Analysis (“MD&A”) should be read in conjunction with the consolidated financial statements and related notes. The MD&A is intended to assist Overview We are an international experiential services company with operations in the United States, Canada, the United Kingdom, continental Europe, GES is a global, full-service Pursuit is an attraction and hospitality company that provides a collection of
A discussion related to our results of operations for 2019 compared to 2018 is presented below. A discussion related to our results of operations for 2018 compared to 2017 can be found under Part II, Item 7 of our Annual Report on Form 10-K for the year ended December 31, 2018, filed with the SEC on February 27, 2019, and is incorporated herein by reference. Financial Highlights
Foreign Exchange Rate Variances We conduct our foreign operations primarily in Canada, the United Kingdom, the Netherlands, Germany, and to a lesser extent, in certain other countries.
The following table summarizes the foreign exchange rate variance effects (or “FX Impact”) on revenue and segment operating
Analysis of Revenue and Operating Results by Reportable Segment GES
The following table presents a comparison of GES’ reported revenue and segment operating
GES GES GES GES EMEA GES
GES * Refer to footnote
The following table
Pursuit revenue increased Pursuit segment operating income increased $5.4 million or 11.0%, primarily due to incremental segment operating income of $5.7 million from the Mountain Park Lodges and Belton Chalet acquisitions and an increase in revenue from our existing assets, offset in part by additional costs to support the continued expansion of the business, including an increase of $4.5 million in depreciation and amortization expense and an unfavorable FX impact of $0.2 million. Organic operating income* decreased $0.1 million or 0.2%. * Refer to footnote
Performance Measures We use the following key business metrics to evaluate the performance of Pursuit’s attractions business:
We use the following key business metrics, common in the hospitality industry, to evaluate Pursuit’s hospitality business:
The following table provides Pursuit’s same-store key performance
from select long-haul markets at certain attractions. Revenue per Hospitality.The increase in RevPAR was primarily due to higher ADR driven by our During Other Expenses
** Change is greater than +/- 100%.
Interest Expense – The increase in interest expense relative to
Multi-Employer Pension Plan Withdrawal – During 2019, we finalized the Other Expense – Other expense primarily represents the nonservice cost component of net periodic benefit cost. Restructuring Charges – Restructuring charges during 2019 were primarily related to Legal Settlement – During 2019, we recorded a charge to resolve a legal dispute at GES involving a former industry contractor. Impairment Charges (Recoveries) – We recorded asset impairment charges of $5.3 million during the fourth quarter of 2019 primarily related to our audio-visual production business in the Income Tax Expense – Our effective income tax Income (Loss) from Discontinued Operations – Loss from discontinued operations during 2019 was primarily related to Liquidity and Capital Resources Cash and cash equivalents were As of December 31, Cash Flows Operating Activities
Net cash provided by operating activities increased
Net cash used in investing activities increased Financing Activities
The change in net cash provided by (used in) financing activities
Debt and Refer to Note Guarantees Refer to Note Our Board of Directors has authorized us to repurchase shares of our common stock from time to time at prevailing market prices. Effective February 7, 2019, our Board of Directors authorized the repurchase of an additional 500,000 shares. No shares were repurchased on the open market during Additionally, we repurchased Contractual Obligations The following table presents our contractual obligations as of December 31,
We are plaintiffs or defendants to various actions, proceedings, and pending claims, some of which involve, or may involve, compensatory, punitive, or other damages. Additionally, our business contributes to various multi-employer pension plans based on obligations arising under Off-Balance Sheet Arrangements We have not entered into any off-balance sheet arrangements with unconsolidated special-purpose or other entities that would materially affect our financial position, results of operations, liquidity, or capital resources. Furthermore, we do not have any relationships with special-purpose or other entities that provide off-balance sheet financing; liquidity, market risk, or credit risk support; or engage in leasing or other services that may expose us to liability or risks of loss that are not reflected in the consolidated financial statements and related notes. Refer to Note Critical Accounting Policies and Estimates The consolidated financial statements are prepared in accordance with U.S. GAAP. We are required to make estimates and assumptions that affect our reported amounts of assets, liabilities, revenue, and expenses. Critical accounting policies are those policies that are most important to the portrayal of our financial position and results of operations, and that require us to make the most difficult and subjective judgments, often as a result of the need to make estimates of matters that are inherently uncertain. We identified and discussed with our audit committee the following critical accounting policies and estimates and the methodology and disclosures related to those estimates: Revenue recognition — Revenue is measured based on a specified amount of consideration in a contract with a customer, net of commissions paid to customers and amounts collected on behalf of third parties. We recognize revenue when a performance obligation is satisfied by transferring control of a product or service to a customer. GES’ service revenue is primarily derived through its comprehensive range of services to event organizers and corporate brand marketers including Core Services, Audio-Visual, and Event Technology. GES’ service revenue is earned over time over the duration of the exhibition, conference or corporate event, which generally lasts one to three days; however, we use the practical expedient of recognizing service revenue at the close of the event when we have the right to invoice. GES’ product revenue is derived from the build of exhibits and environments and graphics. GES’ product revenue is recognized at a point in time upon delivery of the product. Pursuit’s service revenue is derived through its accommodations, admissions, transportation, and travel planning services. Pursuit’s product revenue is derived through food and beverage and retail sales. Pursuit’s revenue is recognized at the time services are performed or upon delivery of the product. Pursuit’s service revenue is recognized over time as the customer simultaneously receives and consumes the benefits. Pursuit’s product revenue is recognized at a point in time. Goodwill and Other Intangible Assets— Goodwill and other intangible assets with indefinite useful lives are not amortized, but instead are tested for impairment at least annually. Intangible assets with finite lives are amortized over their respective estimated useful lives and are reviewed for impairment if an event occurs or circumstances change that would indicate the intangible asset’s carrying value may not be recoverable. Goodwill is tested for impairment at the reporting unit level on an annual basis as of October 31, and between annual tests if an event occurs or circumstances change that would more-likely-than-not reduce the fair value of a reporting unit below its carrying value. Our reporting units are defined, and goodwill is tested, at either an operating segment level or at the component level of an operating segment, depending on various factors including the internal reporting structure of the operating segment, the level of integration among components, the sharing of assets and other resources among components, and the benefits and likely recoverability of goodwill by the component’s operations. GES For purposes of goodwill impairment testing, we use a discounted expected future cash flow methodology (income approach) to estimate the fair value of our reporting units. The estimates and assumptions regarding expected future cash flows, discount rates, and terminal values require considerable judgment and are based on market conditions, financial forecasts, industry trends, and historical experience. The most critical assumptions and estimates in determining the estimated fair value of our reporting units relate to the amounts and timing of expected future cash flows for each reporting unit and the reporting unit cost of capital (discount rate) applied to those cash flows. We estimate the assumed reporting unit cost of capital rates (discount rates) using a build-up method based on the perceived risk associated with the cash flows pertaining to the specific reporting unit. In order to assess the reasonableness of our fair value estimates, we perform a reconciliation of the aggregate fair values of our reporting units to our market capitalization. As noted above, the estimates and assumptions regarding expected future cash flows, discount rates, and terminal values require considerable judgment and are based on market conditions, financial forecasts, industry trends, and historical experience. These estimates have inherent uncertainties, and different assumptions could lead to materially different results. As of December 31, If an impairment indicator related to intangible assets is identified, or if other circumstances indicate an impairment may exist, we perform an assessment to determine if an impairment loss should be recognized. This assessment includes a recoverability test to identify if the expected future undiscounted cash flows are less than the carrying value of the related assets. If the results of the recoverability test indicate that expected future undiscounted cash flows are less than the carrying value of the related assets, we perform a measurement of impairment and we recognize any carrying amount in excess of fair value as an impairment. We periodically evaluate the continued recoverability of intangible assets which were previously evaluated due to an impairment indicator to determine if remeasurement is necessary. During the fourth quarter of 2019, there were indicators of impairment of our intangible and other long-lived assets at our audio-visual production business in the United Kingdom, Blitz. As a result, we recorded an asset impairment charge to equipment of $3.5 million and to our intangible asset of $1.5 million. Income taxes — We are required to estimate and record provisions for income taxes in each of the jurisdictions in which we operate. Accordingly, we must estimate our actual current income tax liability, and assess temporary differences arising from the treatment of items for tax purposes, as compared to the treatment for accounting purposes. These differences result in deferred tax assets and liabilities which are included in the Consolidated Balance Sheets. We use significant judgment in forming conclusions regarding the recoverability of our deferred tax assets and evaluate all available positive and negative evidence to determine if it is more-likely-than-not that the deferred tax assets will be realized. To the extent recovery does not appear likely, a valuation allowance must be recorded. We had gross deferred tax assets of While we believe that the deferred tax assets, net of existing valuation allowances, will be utilized in future periods, there are inherent uncertainties regarding the ultimate realization of these assets. It is possible that the relative weight of positive and negative evidence regarding the realization of deferred tax assets may change, which could result in a material increase or decrease in our valuation allowance. Such a change could result in a material increase or decrease to income tax expense in the period the assessment was made.
We record uncertain tax positions on the basis of a two-step process: first we determine whether it is more-likely-than-not that the tax positions will be sustained on the basis of the technical merits of the position; and, if so, we recognize the largest amount of tax benefit that is more than 50% likely to be realized upon ultimate settlement with the related tax authority. Pension and postretirement benefits — Our pension plans use traditional defined benefit formulas based on years of service and final average compensation. Funding policies provide that payments to defined benefit pension trusts shall be at least equal to the minimum funding required by applicable regulations. We presently anticipate contributing We have defined benefit postretirement plans that provide medical and life insurance for certain eligible employees, retirees, and dependents. The related postretirement benefit liabilities are recognized over the employees’ service period. In addition, we retain the obligations for these benefits for retirees of certain sold businesses. While the plans have no funding requirements, we expect to contribute The discount rates used in determining future pension and postretirement benefit obligations are based on rates determined by actuarial analysis and management review and reflect the estimated rates of return on a high-quality, hypothetical bond portfolio whose cash flows match the timing and amounts of expected benefit payments. Refer to Note Share-based compensation — We grant share-based compensation awards to our officers, directors, and certain key employees Share-based compensation expense recognized in the consolidated financial statements was $7.2 million in 2019, $4.9 million in 2018, and $11.0 million in 2017, The fair value of restricted stock awards is based on our stock price on the Self-Insurance Liabilities — We are self-insured up to certain limits for workers’ compensation and general liabilities, which includes automobile, product general liability, and client property loss claims. We have also retained and provided for certain workers’ compensation insurance liabilities in conjunction with previously sold businesses. We are also self-insured for certain employee health benefits. Provisions for losses for claims incurred, including actuarially derived estimated claims incurred but not yet reported, are made based on historical experience, claims frequency, and other factors. We have purchased insurance for amounts in excess of the self-insured levels. Impact of Recent Accounting Pronouncements Refer to Note 1 – Overview and Summary of Significant Accounting Policies of the Notes to Consolidated Financial Statements (Part II, Item 8 of this In addition to disclosing financial results that are determined in accordance with U.S. generally accepted accounting principles (“GAAP”), we also disclose the following non-GAAP financial
• “Organic revenue” and “organic segment operating income” are revenue and segment operating income (as defined above), respectively, without the impact of exchange rate variances and acquisitions, if any, until such acquisitions are included in the entirety of both comparable periods. The impact of exchange rate variances is calculated as the difference between current period activity translated at the current period’s exchange rates and the comparable prior period’s exchange rates. We believe the presentation of “organic” results permits investors to better understand our performance without the effects of exchange rate variances or acquisitions and to facilitate period-to-period comparisons and analysis of our operating performance. Refer to the “Results of Operations” section of this MD&A for reconciliations of organic revenue and organic segment operating income to the most directly comparable GAAP measures. We believe
operations.
Item 7A. Quantitative and Qualitative Disclosures About Market Risk Our market risk exposure relates to fluctuations in foreign exchange rates and interest Our foreign operations are primarily in Canada, the United Kingdom, Iceland, the Netherlands, For purposes of consolidation, revenue, expenses, gains, and losses related to our foreign operations are translated into U.S. dollars at the average foreign exchange rates for the period. As a result, our consolidated results of operations are exposed to fluctuations in foreign exchange rates as revenue and segment operating A hypothetical change of 10% in the Canadian dollar exchange rate would result in a change to We are exposed to foreign exchange transaction risk, as our foreign subsidiaries have certain revenue transactions denominated in currencies other than the functional currency of the respective subsidiary. From time to time, we utilize forward contracts to mitigate the impact on earnings related to these transactions due to fluctuations in foreign exchange rates. As of December 31, We are exposed to short-term and long-term interest rate risk on certain of our debt obligations. We do not currently use derivative financial instruments to hedge cash flows for such obligations.
Item 8. Financial Statements and Supplementary Data
INDEX TO FINANCIAL STATEMENTS
Refer to Notes to Consolidated Financial Statements. CONSOLIDATED STATEMENTS OF OPERATIONS
Refer to Notes to Consolidated Financial Statements. CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
Refer to Notes to Consolidated Financial Statements.
CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY
Refer to Notes to Consolidated Financial Statements.
CONSOLIDATED STATEMENTS OF CASH FLOWS
Refer to Notes to Consolidated Financial Statements.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Note 1. Overview and Summary of Significant Accounting Policies Basis of Presentation and Principles of Consolidation The accompanying consolidated financial statements Nature of Business We are an international experiential services company with operations principally in the United States, Canada, the United Kingdom, continental Europe, and the United Arab GES GES is a global, full-service
Pursuit Pursuit is a collection of Significant Accounting Policies Use of Estimates The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities at the date of the financial statements and the reported amounts of revenue and expenses during the reported period. Estimates and assumptions are used in accounting for, among other Cash equivalents are highly-liquid investments with remaining maturities when purchased of three months or less. Cash and cash equivalents consist of cash and bank demand deposits and money market Allowances for Doubtful Accounts Allowances for doubtful accounts reflect the best estimate of probable losses inherent in the accounts receivable balance. The allowances for doubtful accounts, including a sales allowance for discounts at the time of sale, are based upon an evaluation of the aging of receivables, historical trends, and the current economic environment. Inventories Inventories, which consist primarily of exhibit design and construction materials and supplies, as well as Property and Equipment Property and equipment are stated at cost, net of accumulated depreciation. Property and equipment are depreciated using the straight-line method over the estimated useful lives of the assets: buildings, 15 to 40 years; equipment, 3 to 12 years; and leasehold improvements, over the shorter of the lease term or useful life. Property and equipment are tested for potential impairment whenever events or changes in circumstances indicate that the carrying amount of the long-lived asset may not be recoverable through undiscounted cash flows.
Our operating and finance leases are primarily facility, equipment, and land leases. Our facility leases comprise mainly manufacturing facilities, sales and design facilities, offices, storage and/or warehouses, and truck marshaling yards. These facility leases generally have lease terms ranging up to 25 years. Our equipment leases comprise mainly vehicles, hardware, and office equipment, each with various lease terms. Our land leases comprise mainly leases in Canada and Iceland on which our hotels or attractions are located and have lease terms ranging up to 42 years. We made the accounting policy election not to recognize ROU assets and lease liabilities for leases with a term of twelve months or less. We elected to apply the package of practical expedients permitted under Topic 842 transition guidance, which, among other things, allows us to carry forward our historical lease classifications. We also elected the practical expedient to not separate non-lease components from lease components for all asset classes, and payments associated with fixed non-lease components are included in measuring the ROU asset and lease liability. If a lease contains a renewal option that is reasonably certain to be exercised, then the lease term includes the optional periods in measuring a ROU asset and lease liability. The reasonably certain threshold is evaluated at lease commencement and is typically met if substantial economic incentives or termination penalties are identified. Variable leases and variable lease and non-lease components are not included in the calculation of the ROU asset and corresponding lease liability. For facility leases, variable lease costs Substantially all of our lease agreements do not specify an implicit borrowing rate, and as such, we utilize an incremental borrowing rate based on lease term and country, in order to calculate the present value of our future lease payments. The discount rate represents a risk-adjusted rate on a collateralized basis and is the expected rate at which we would borrow funds to satisfy the scheduled lease liability payment streams commensurate with the lease term and the country. On January 1, 2019, the discount rate used to value existing leases was based on the remaining lease term and the country interest rates. For new or renewed leases starting in 2019, the discount rate is determined using available data at lease commencement and based on the We are also a lessor to third party tenants who either lease certain portions of facilities that we own or sublease certain portions of facilities that we lease. Lease income from Goodwill Goodwill is tested for impairment at the reporting unit level on an annual basis as of October 31, and between annual tests if an event occurs or circumstances change that would more-likely-than-not reduce the fair value of a reporting unit below its carrying value. We use a discounted expected future cash flow methodology (income approach) in order to estimate the fair value of our reporting units for purposes of goodwill impairment testing. The estimates and assumptions regarding expected future cash flows, discount rates, and terminal values require considerable judgment and are based on market conditions, financial forecasts, industry trends, and historical experience. These estimates, however, have inherent uncertainties and different assumptions could lead to materially different results. Cash Surrender Value of Life Insurance We have Company-owned life insurance contracts Self-Insurance Liabilities We are self-insured up to certain limits for workers’ compensation and general liabilities, which includes automobile, product Environmental Remediation Liabilities Environmental remediation liabilities represent the estimated cost of environmental remediation obligations primarily associated with previously sold operations. The amounts accrued primarily consist of the estimated direct incremental costs, on an undiscounted basis, for contractor and other services related to remedial actions and post-remediation site monitoring. Environmental remediation liabilities are recorded when the specific obligation is considered probable and the costs are reasonably estimable. Subsequent recoveries from third parties, if any, are recorded through discontinued operations when realized. Environmental insurance is maintained that provides coverage for new and undiscovered pre-existing conditions at both our continuing and discontinued operations. Fair Value of Financial Instruments The carrying value of cash and cash equivalents, receivables, and accounts payable approximate fair value due to the short-term maturities of these instruments. Refer to Note
Non-redeemable noncontrolling interest represents the portion of equity in a subsidiary that is not attributable, directly or indirectly, to us. Our non-redeemable noncontrolling interest relates to the 20% equity ownership interest that we do not own in Glacier Park, Inc. Noncontrolling interests with redemption features that are not solely within our control are considered redeemable noncontrolling interests. Our redeemable noncontrolling interest relates to our 54.5% equity ownership interest in Esja Attractions ehf. (“Esja”). The Esja to retained earnings and is included in our Foreign Currency Translation Our foreign operations are primarily in Canada, the United Kingdom, Iceland, the Netherlands, Germany, and to a lesser extent, in certain other countries. The functional currency of our foreign subsidiaries is their local currency. Accordingly, for purposes of consolidation, we translate the assets and liabilities of our foreign subsidiaries into U.S. dollars at the foreign exchange rates in effect at the balance sheet date. The unrealized gains or losses resulting from the translation of these foreign denominated assets and liabilities are included as a component of accumulated other comprehensive income (loss) in the Consolidated Balance Sheets. For purposes of consolidation, revenue, expenses, gains, and losses related to our foreign operations are translated into U.S. dollars at the average foreign exchange rates for the period. Revenue Recognition We adopted Accounting Standard Update 2014-09, Revenue from Contracts with Customers (“Topic 606”) on January 1, 2018. Upon the adoption of Topic 606, revenue is GES’ service revenue is Pursuit’s service revenue is Insurance Recoveries Receipts from insurance up to the amount of the recognized losses are considered recoveries and are accounted for when they are probable of receipt. Anticipated proceeds in excess of the recognized loss are considered a gain contingency. A contingency gain for anticipated insurance proceeds in excess of losses already recognized is not recognized until all contingencies relating to the insurance claim have been resolved. Insurance proceeds allocated to business interruption gains are reported as cash flows from operating activities, and proceeds allocated to impairment recoveries are reported as cash flows from investing activities. Insurance proceeds used for capitalizable costs are classified as cash flows from investing activities, and proceeds used for non-capitalizable costs are classified as operating activities. On December 29, 2016, the Mount Royal Hotel was damaged by a fire and closed. During the fourth quarter of 2016, we recorded an asset impairment loss of $2.2 million and an offsetting impairment recovery (and related insurance receivable) as the losses related to the fire were covered by our property and business interruption insurance. During July 2017, we resolved our property and business interruption insurance claims for a total of $36.3 million. We allocated $2.2 million to an insurance receivable, $29.3 million was recorded as an impairment recovery (partially offset by impairment charges of $0.2 million) related to construction costs to re-open the hotel, $2.5 million was recorded as a business interruption gain for the recovery of lost profits, $1.3 million was recorded as contra-expense to offset non-capitalizable costs incurred, and the remaining $1.0 million was Share-Based Compensation Share-based compensation costs related to all share-based payment awards are recognized and measured using the fair value method of accounting. These awards generally include restricted stock, liability-based awards (including performance units and restricted stock units), and stock options, and contain forfeiture and non-compete provisions. The fair value of restricted stock awards is based on our closing stock price on the date of grant. We issue restricted stock awards from shares held in treasury. Future vesting of restricted stock is generally subject to continued employment. Holders of restricted stock have the right to receive dividends and vote the shares, but may not sell, assign, transfer, pledge, or otherwise encumber the stock, except to the extent restrictions have lapsed and in accordance with our stock trading policy. Restricted stock awards vest Liability-based awards (including performance units and restricted stock units) are recorded at estimated fair value, based on the number of units expected to vest and, where applicable, the level of achievement of predefined performance goals. These awards are remeasured on each balance sheet date based on our stock price, and the Monte Carlo simulation model, until the time of settlement. A Monte Carlo simulation requires the use of Equity-based awards (including performance units) are recorded at estimated fair value, based on the number of units expected to vest and the level of achievement of predefined performance goals, until the time of settlement. To the extent earned, equity-based awards are settled in our common stock. Compensation expense related to equity-based awards is recognized ratably over the requisite service period of approximately three years. The fair value of stock option grants is estimated on the date of grant using the Black-Scholes option pricing model. Share-based compensation expense related to stock option awards is recognized using the straight-line method over the requisite service period of approximately five years. The exercise price of stock options is based on the market value of our common stock at the date of grant. We have not granted stock options since 2010. Common Stock in Treasury Common stock purchased for treasury is recorded at historical cost. Subsequent share reissuances are primarily related to share-based compensation programs and recorded at weighted-average cost. Income Per Common Share We apply the two-class method in calculating income per common share as unvested share-based payment awards that contain nonforfeitable rights to dividends are considered participating securities. Accordingly, such securities are included in the earnings allocation in calculating income per share. The adjustment to the carrying value of the redeemable noncontrolling interest is reflected in income per common share. Impact of Recent Accounting Pronouncements The following table provides a brief description of recent accounting pronouncements:
Note 2. Revenue and Related Contract Costs and Contract Liabilities GES’ performance obligations consist of services or product(s) outlined in a contract. While multi-year contracts are often signed for recurring events, the obligations for each occurrence are well defined and conclude upon the occurrence of each event. The obligations are typically the provision of services and/or sale of a product in connection with an exhibition, conference, or other event. Revenue for services is recognized when we have a right to invoice at the close of the exhibition, conference, or corporate event, which typically lasts one to three days. Revenue for consumer events is recognized over the duration of the event. Revenue for products is recognized either upon delivery to the customer’s location, upon delivery to an event that we are serving, or when we have the right to invoice, generally at the close of the exhibition, conference, or corporate event. Payment terms are generally within 30-60 days and contain no significant financing components. Pursuit’s performance obligations are short-term in nature. They include the provision of a hotel room, an attraction admission, a chartered or ticketed bus or van ride, the fulfillment of travel planning itineraries, and/or the sale of food, beverage, or retail products. Revenue is recognized when the service has been provided or the product has been delivered. When credit is extended, payment terms are generally within 30 days and contain no significant financing components. Contract Liabilities GES and Pursuit typically receive customer deposits prior to transferring the related product or service to the customer. These deposits are recorded as a contract liability and are recognized as revenue upon satisfaction of the related contract performance obligation(s). GES also provides customer rebates and volume discounts to certain event organizers that are recognized as a reduction of revenue. These amounts are included in the Consolidated Balance Sheets under the captions “Contract liabilities” and “Other deferred items and liabilities.” Changes to contract liabilities are as follows:
Contract Costs GES capitalizes certain incremental costs incurred in obtaining and fulfilling contracts. Capitalized costs principally relate to direct costs of materials and services incurred in fulfilling services of future exhibitions, conferences, and events, and also include up-front incentives and commissions incurred upon contract signing. Costs associated with preliminary contract activities (i.e. proposal activities) are expensed as incurred. Capitalized contract costs are expensed upon the transfer of the related goods or services and are included in cost of services or cost of products, as applicable. The deferred incremental costs of obtaining and fulfilling contracts are included in the Consolidated Balance Sheets under the captions “Current contract costs” and “Other investments and assets.” Changes to contract costs are as follows:
As of December 31, 2019, capitalized contract costs consisted of $1.9 million to obtain contracts and $26.6 million to fulfill contracts. We did 0t recognize an impairment loss with respect to capitalized contract costs during the years ended December 31, 2019 or 2018. Disaggregation of Revenue The following tables disaggregate GES and Pursuit revenue by major product line, timing of revenue recognition, and markets served: GES
Pursuit
Note The following table summarizes share-based compensation expense:
We recorded share-based compensation expense through restructuring The following table summarizes the activity of the outstanding share-based compensation awards:
Viad Corp Omnibus Incentive Plan We grant share-based compensation awards to our officers, directors, and certain key employees pursuant to the 2017 Viad Corp Omnibus Incentive Plan (the “2017 Plan”). The 2017 Plan PUP Awards
During the year ended December 31, Restricted Stock The grant date fair value of vested restricted stock was $2.8 million in 2019, $2.1 million in 2018, and $2.7 million in Restricted Stock Units Aggregate liabilities related to restricted stock units Stock Options The following table summarizes stock option activity:
The weighted-average remaining contractual life of stock options outstanding is less than one year. The total intrinsic value of stock options outstanding was $2.1 million in 2019, $2.0 million in 2018, and $2.5 million in 2017. The intrinsic value of stock options outstanding represents the difference between our closing stock price on December 31 of each year and the exercise price, multiplied by the number of in-the-money stock options. Note 4. Acquisitions 2019 Acquisitions Belton Chalet On May 16, 2019, we acquired the Belton Chalet in Glacier National Park for total cash consideration of $3.2 million. Transaction costs associated with the acquisition were $0.3 million, which are included in “Cost of services” in the Consolidated Statements of Operations. These assets have been included in the consolidated financial statements from the date of acquisition. Mountain Park Lodges On June 8, 2019, we acquired a 60% equity interest in Mountain Park Lodges’ group of 7 hotels and an undeveloped land parcel located in Jasper National Park for total consideration of $100.6 million Canadian dollars (approximately $76 million U.S. dollars). The seven Mountain Park Lodges properties include: Sawridge Inn and Conference Centre (152 guest rooms); Pyramid Lake Resort (62 guest rooms); The Crimson Hotel (99 guest rooms); Chateau Jasper (119 guest rooms); Pocahontas Cabins (57 guest rooms); Marmot Lodge (107 guest rooms); and Lobstick Lodge (139 guest rooms). As the majority owner of these properties, we consolidate 100% of the results of operations in our consolidated financial statements and record the 40% owners’ share of the income or loss attributable to non-redeemable noncontrolling interest. The following table summarizes the preliminary recording of the fair value allocation of the assets acquired and liabilities assumed as of the date of acquisition. During the year ended December 31,
Under the acquisition method of accounting, the purchase price as shown in the table above is allocated to the tangible and identifiable intangible assets acquired and liabilities assumed based on their estimated fair value. The excess purchase price over the fair value of net assets acquired was recorded as “Goodwill.” Goodwill is included in the Pursuit business group. The primary factor that contributed to the purchase price resulting in the recognition of goodwill related to opportunities when combined with our other businesses. Goodwill is not deductible for tax purposes. The estimated values of current assets and liabilities were based upon their historical costs on the acquisition date due to their short-term nature. Transaction costs associated with the Mountain Park Lodges were $0.9 million in 2019 and $0.1 million in 2018, which are included in “Corporate activities” in the Consolidated Statements of Operations. We included these assets and results of operations in the consolidated financial statements from the date of acquisition. During the year ended December 31, 2019, revenue related to the Mountain Park Lodges was $18.8 million and operating income was $5.5 million. Identifiable intangible assets acquired in the Mountain Park Lodges acquisition were $20.2 million and consist primarily of in-place leases, customer relationships, and trade names. The weighted average amortization period related to the intangible assets is approximately 30.8 years. Supplementary pro forma financial information The following table
Pursuit – Sky Lagoon Attraction On July 25, 2019, we announced plans for a new geothermal lagoon attraction that will be located on an oceanfront lot just outside downtown Reykjavik, Iceland. We acquired a 51% controlling interest for $13.2 million in the new entity that will manage the sky lagoon attraction, which we will operate in partnership with Geothermal Lagoon ehf., the Icelandic entity that owns the lagoon assets. The noncontrolling interest’s carrying value was determined by the fair value of the noncontrolling interest as of the acquisition date and the noncontrolling interest’s share of the subsequent net income or loss. The amortization of the resulting operating contract intangible is not deductible for tax purposes. We expect to open our new attraction in 2021. Refer to Note 9 – Goodwill and Other Intangible Assets for additional
Maligne Canyon Restaurant In March 2018, we acquired the Maligne Canyon Restaurant and Gift Shop for total cash consideration of 2017 Acquisitions Poken In March 2017, we acquired Poken event engagement technology for total cash consideration of $1.7 million. Transaction costs associated with the acquisition of Poken were $0.3 million in 2017, which are included in Esja On November 3, 2017, we acquired the controlling interest (54.5% of the common stock) in Esja, a private corporation in Reykjavik, Iceland. Through Esja Under the acquisition method of accounting, the purchase price is allocated to the assets acquired and liabilities assumed based on their estimated fair values. The excess purchase price over the fair value of net assets acquired is recorded as goodwill. Goodwill is included in the Pursuit business group and the primary factor that contributed to the purchase price resulting in the recognition of goodwill relates to future expected income from
Transaction costs associated with the
Note The components of inventories consisted of the following:
Note Other current assets consisted of the following:
Note Property and equipment consisted of the following:
Depreciation expense was $45.6 million during 2019, $45.8 million during 2018, and $42.7 million
We recorded asset impairment charges to equipment of $3.8 million On December 29, 2016, the Mount Royal Hotel in Banff, Canada was damaged by a fire and
Note Other investments and assets consisted of the following:
Note The changes in the carrying amount of goodwill are as follows:
The following table summarizes goodwill by reporting unit and segment:
Goodwill is tested for impairment at the reporting unit level on an annual basis as of October 31, and between annual tests if an event occurs or circumstances change that would more-likely-than-not reduce the fair value of a reporting unit below its carrying value. GES North America’s goodwill is assigned to, and tested at, the operating segment level (GES U.S. and GES Canada, collectively “GES North America”). GES EMEA’s goodwill is assigned to and tested at the operating segment level.
Our accumulated goodwill impairment as of both December 31, Other intangible assets consisted of the following:
Intangible asset amortization expense was $10.6 million during 2019, $11.0 million during 2018, and $12.4 million during At December 31, 2019, the estimated future amortization expense related to
Note Other current liabilities consisted of the following:
Note Other deferred items and liabilities consisted of the following:
Note The components of long-term debt and
2018 Credit Agreement Effective
Effective
Borrowings under the to our leverage ratio. The fees on the unused portion of the As of December 31, FlyOver Iceland Credit Facility Effective February 15, 2019, FlyOver Iceland ehf., a wholly-owned subsidiary of Esja, entered into Aggregate annual maturities of long-term debt
Note The fair value of an asset or liability is defined as the price that would be received Level 1 - Quoted prices in active markets for identical assets or liabilities. Level 2 - Observable inputs other than quoted prices included within Level 1 that are observable for the asset or liability, either directly or indirectly. Level 3 - Unobservable inputs to the valuation methodology that are significant to the measurement of fair value. Money market mutual funds and certain other mutual fund investments are measured at fair value on a recurring basis using Level 1 inputs. The fair value information related to these assets is summarized in the following tables:
The carrying values of cash and cash equivalents, receivables, and accounts payable approximate fair value due to the short-term The components of basic and diluted income per share are as follows:
Options to purchase 8,000 shares of common stock during Note We authorized Note Changes in
Amounts reclassified that relate to our defined benefit pension and postretirement plans include the amortization of prior service costs and actuarial net losses recognized during each period presented. These costs are recorded as components of net periodic cost for each period presented. Refer to Note Note 17. Income Taxes We record current income tax expense for the amounts that we expect to report and pay on our income tax returns and deferred income tax expense for the change in the deferred tax assets and liabilities. On December 22, 2017, the
Income from continuing operations before income taxes consisted of the following:
Significant components of the income tax provision from continuing operations are as follows:
We are subject to income tax in jurisdictions in which we operate. A reconciliation of the statutory federal income tax rate to the effective tax rate is as follows:
*
The components of deferred income tax assets and liabilities included in the Consolidated Balance Sheets are as follows:
We use significant judgment in forming conclusions regarding the recoverability of our deferred tax assets and evaluate all available positive and negative evidence to determine if it is more-likely-than-not that the deferred tax assets will be realized. To the extent recovery does not appear likely, a valuation allowance must be recorded. We had gross deferred tax assets of As of December 31, We had gross state and foreign net operating loss carryforwards of
While we believe that the deferred tax assets, net of existing valuation allowances, will be utilized in future periods, there are inherent uncertainties regarding the ultimate realization of these tax assets. It is possible that the relative weight of positive and negative evidence regarding the realization of deferred tax assets may change, which could result in a material increase or decrease in our valuation allowance. Such a change could result in a material increase or decrease to income tax expense in the period the assessment was made. We have not recorded deferred taxes for We exercise judgment in determining the income tax provision for positions taken on prior returns when the ultimate tax determination is uncertain. We classify liabilities associated with uncertain tax positions as liabilities” in the Consolidated Balance Sheets unless expected to be paid or released within one year. We had liabilities associated with uncertain tax positions, including interest and penalties, of During
A reconciliation of the liabilities associated with uncertain tax positions (excluding interest and penalties) is as follows:
We are subject to Our Cash paid for income taxes was $17.2 million during 2019, $27.3 million during 2018, and $14.6 million during Note Domestic Plans We have frozen defined benefit pension plans held in trust for certain employees which we funded. We also maintain certain unfunded defined benefit pension plans, which provide supplemental benefits to select management employees. These plans use traditional defined benefit formulas based on years of service and final average compensation. Funding policies provide that payments to defined benefit pension trusts shall be at least equal to the minimum funding required by applicable regulations. We also have certain defined benefit postretirement plans that provide medical and life insurance for certain eligible employees, retirees, and dependents. The related postretirement benefit liabilities are recognized over the period that services are provided by employees. In addition, we retained the obligations for these benefits for retirees of certain sold businesses. While the plans have no funding requirements, we may fund the plans. The components of net periodic benefit cost and other amounts recognized in other comprehensive income (loss) of our pension plans consist of the following:
The components of net periodic benefit cost and other amounts recognized in other comprehensive income (loss) of our postretirement benefit plans consist of the following:
The following table indicates the funded status of the plans as of December 31:
The net amounts recognized in the Consolidated Balance Sheets under the caption “Pension and postretirement benefits” as of December 31 are as follows:
Amounts recognized in AOCI as of December 31 are as follows:
The fair value of the domestic plans’ assets by asset class are as follows:
We employ a total return investment approach whereby a mix of equities and fixed income securities is used to maximize the long-term return of plan assets for a prudent level of risk. Risk tolerance is established through careful consideration of plan liabilities, plan funded status, and corporate financial condition. The investment portfolio contains a diversified blend of equity and fixed income securities. Furthermore, equity securities are diversified across U.S. and non-U.S. stocks, as well as growth and value. Investment risk is measured and monitored on an ongoing basis through quarterly investment portfolio reviews and annual liability measurements. We utilize a building-block approach in determining the long-term expected rate of return on plan assets. Historical markets are studied and long-term historical relationships between equity securities and fixed income securities are preserved consistent with the widely accepted capital market principle that assets with higher volatility generate a greater return over the long run. Current market factors such as inflation and interest rates are evaluated before long-term capital market assumptions are determined. The long-term portfolio return also considers diversification and rebalancing. Peer data and historical returns are reviewed relative to our assumed rates for reasonableness and appropriateness. The following pension and postretirement benefit payments, which reflect expected future service, as appropriate, are expected to be paid:
Foreign Pension Plans Certain of our foreign operations also maintain defined benefit pension plans held in trust for certain employees which are funded by the companies, and unfunded defined benefit pension plans providing supplemental benefits to select management employees. These plans use traditional defined benefit formulas based on years of service and final average compensation. Funding policies provide that payments to defined benefit pension trusts shall be at least equal to the minimum funding required by applicable regulations. The components of net periodic benefit cost and other amounts recognized in other comprehensive income (loss) included the following:
The following table represents the funded status of the plans as of December 31:
The net amounts recognized in the Consolidated Balance Sheets under the caption “Pension and postretirement benefits” as of December 31 were as follows:
Net actuarial losses for the foreign funded plans recognized in AOCI were The fair value information related to the foreign pension plans’ assets is summarized in the following tables:
The following payments, which reflect expected future service, as appropriate, are expected to be paid:
Information for Pension Plans with an Accumulated Benefit Obligation in Excess of Plan Assets The accumulated benefit obligations in excess of plan assets as of December 31 were as follows:
Contributions In aggregate for both the domestic and foreign plans, we anticipate contributing Weighted-average assumptions used to determine benefit obligations as of December 31 were as follows:
Weighted-average assumptions used to determine net periodic benefit costs as of December 31 were as follows:
Multi-employer Plans We contribute to various defined benefit pension plans under the terms of Our participation in multi-employer pension plans for
We match U.S. employee contributions to the 401(k) plan with shares of our common stock held in treasury up to 100% of the first 3% of a participant’s salary plus 50% of the next 2%. The expense associated with our match was $5.0 million for 2019, $4.8 million for 2018, and $4.2 million for
Note GES
Other Restructurings We recorded restructuring charges in connection with the consolidation of certain support functions at our corporate headquarters and certain reorganization activities within Pursuit. These charges primarily consist of severance and related benefits due to headcount reductions and charges related to the downsizing of facilities. Changes to the restructuring liability by major restructuring activity are as follows:
As of December 31,
The components of lease expense consisted of the following:
Other information related to
As of December 31,
As of December 31, 2019, the estimated future minimum rentals under non-cancellable leases, which includes rental income from facilities that we own and sublease income from facilities that we lease, are as follows:
Leases Not Yet Commenced As of December 31, 2019, we had certain facility and land leases that were executed but for which we did not have control of the underlying assets. Accordingly, we did not record the lease liabilities and right-of-use assets on our Consolidated Balance Sheets. These leases include future planned attractions for Pursuit that are currently in the planning or development phase and that we expect the lease commencement dates to begin between fiscal years 2020 and 2022 with lease terms of 15 to 47 years. Leases Under Previous Lease Accounting Standard As previously disclosed in our 2018 Form 10-K and under the previous lease accounting standard, our future minimum rental payments and related sublease rentals receivable with respect to non-cancelable operating leases with terms in excess of one year
Note We are plaintiffs or defendants to various actions, proceedings, and pending claims, some of which involve, or may involve, compensatory, punitive, or other damages. Litigation is subject to many uncertainties and it is possible that some of the legal actions, proceedings, or claims could be decided against us. During the year ended December 31, 2019, we recorded an $8.5 million charge to resolve a legal dispute at GES involving a former industry contractor. Although the amount of liability as of December 31, We are subject to various U.S. federal, state, and foreign laws and regulations governing the prevention of pollution and the protection of the environment in the jurisdictions in which we have or had operations. If we fail to comply with these environmental laws and regulations, civil and criminal penalties could be imposed, and we could become subject to regulatory enforcement actions in the form of injunctions and cease and desist orders. As is the case with many companies, we also face exposure to actual or potential claims and lawsuits involving environmental matters relating to our past operations. As of December 31, As of December 31, A significant number of our employees are unionized and we are a party to approximately 100
We are self-insured up to certain limits for workers’ compensation In addition, as of December 31, Note On November 3, 2017, we acquired the controlling interest (54.5% of the common stock) in Esja, a private corporation in Reykjavik, The The noncontrolling
Changes in the redeemable noncontrolling
Note We measure the profit and performance of our operations on the basis of segment operating income which excludes restructuring charges and recoveries and impairment charges and recoveries. Intersegment sales are eliminated in consolidation and intersegment transfers are not significant. Corporate activities include expenses not allocated to operations. Depreciation and amortization and share-based compensation expense are the only significant non-cash items for the reportable segments. During the first quarter of 2019, we realigned GES’ organizational structure. As a result, we changed GES’ reportable segments to reflect how our chief operating decision maker regularly reviews and makes decisions regarding the allocation of resources. Accordingly, GES’ new reportable segments are GES North America and GES EMEA. We made no changes to the Pursuit reportable segment. Our reportable segments, with reconciliations to consolidated totals, are as follows:
Geographic Areas Our foreign operations are
Note We previously announced our Board of Directors’ authorization to repurchase shares of our common stock from time to time at prevailing market prices. NaN shares were repurchased on the open market shares remain available for repurchase.
Note The following table sets forth selected unaudited consolidated quarterly financial information:
REPORT OF INDEPENDENT To the Board of Directors and Stockholders of Viad Corp Opinion on the Financial Statements We have audited the accompanying consolidated balance sheets of Viad Corp and subsidiaries (the “Company”) as of December 31, We have also audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (PCAOB), the Company’s internal control over financial reporting as of December 31, Change in Accounting Principle As discussed in Note 1 to the financial statements, effective January 1, 2019, the Company adopted FASB Accounting Standards Update 2016-02, Leases, using the modified retrospective approach. Basis for Opinion These We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the Critical Audit Matter The critical audit matter communicated below is a matter arising from the current-period audit of the financial statements that was communicated or required to be communicated to the audit committee and that (1) relates to accounts or disclosures that are material to the financial statements and (2) involved our especially challenging, subjective, or complex judgments. The communication of critical audit matters does not alter in any way our opinion on the financial statements, taken as a whole, and we are not, by communicating the critical audit matter below, providing a separate opinion on the critical audit matter or on the accounts or disclosures to which it relates. Litigation, Claims, Contingencies, and Other—Self Insurance Reserves —Refer to Notes 1 and 21 to the financial statements Critical Audit Matter Description The Company is self-insured up to certain limits for workers’ compensation, automobile, product and general liability claims. Reserves for losses for claims incurred, including actuarially derived estimated claims incurred but not reported, are made by the Company based on historical experience, claims frequency, insurance coverage, and other factors. The Company purchases insurance for amounts in excess of self-insured levels. The aggregate amount of these insurance liabilities related to continuing operations was $24.3 million as of December 31, 2019. Given the subjectivity of estimating the projected settlement value of reported and unreported claims, auditing the self- insurance reserves involved especially subjective auditor judgment and an increased extent of effort, including the need to involve our actuarial specialist when auditing the self-insurance reserve, and therefore we have identified this as a critical audit matter. How the Critical Audit Matter Was Addressed in the Audit Our audit procedures related to the self-insurance reserves included the following, among others:
/s/ Deloitte & Touche LLP
Phoenix, Arizona February
We have served as the Company’s auditor since at least
Item 9. Changes in and Disagreements With None. Item 9A. Controls and Procedures We have established disclosure controls and procedures that are designed to ensure that information required to be disclosed in our reports filed or submitted under the Securities Exchange Act of 1934, as amended (the “Exchange Act”) is recorded, processed, summarized, and reported within the time periods specified in SEC rules and forms, and such information is accumulated and communicated to our management, including our Chief Executive Officer (“CEO”) and Chief Financial Officer (“CFO”), as appropriate to allow timely decisions regarding required disclosure. Management, together with our CEO and CFO, evaluated the effectiveness of our disclosure controls and procedures as of December 31, There were no changes in our internal control over financial reporting during the fourth quarter of MANAGEMENT’S REPORT ON INTERNAL CONTROL OVER FINANCIAL REPORTING
Because of inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate. All internal control systems, no matter how well designed, have inherent limitations. Therefore, even those systems determined to be effective can provide only reasonable assurance with respect to financial statement preparation and presentation. Because of the inherent limitations of internal control, there is a risk that material misstatements may not be prevented or detected on a timely basis by internal control over financial reporting. However, these inherent limitations are known features of the financial reporting process. Therefore, it is possible to design into the process safeguards to reduce, though not eliminate, this risk.
In accordance with the SEC’s published guidance, our management has excluded from its assessment the internal control over financial reporting for Mountain Park Lodges, which we acquired on June 8, 2019 and whose financial statements constitute 9.8% of total assets and 1.4% of revenue of our consolidated financial statement amounts as of and for the year ended December 31, 2019. Based on our assessment, we concluded that, as of December 31, Our independent registered public accounting firm, Deloitte & Touche LLP, has issued a report relating to our audit of the effectiveness of our internal control over financial reporting, which appears on the following page of this
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM To the Board of Directors and Stockholders of Viad Corp Opinion on Internal Control over Financial Reporting We have audited the internal control over financial reporting of Viad Corp and subsidiaries (the “Company”) as of December 31, We have also audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (PCAOB), the consolidated financial statements As described in Management’s Report on Internal Control over Financial Reporting, management excluded from its assessment the internal control over financial reporting at Mountain Park Lodges, Inc., which was acquired on June 8, 2019, and whose financial statements constitute 9.8% of total assets and 1.4% of revenues of the consolidated financial statement amounts as of and for the year ended December 31, 2019. Accordingly, our audit did not include the internal control over financial reporting at Mountain Park Lodges, Inc. Basis for Opinion The Company’s management is responsible for maintaining effective internal control over financial reporting and for its assessment of the effectiveness of internal control over financial reporting, included in the accompanying Management’s Report on Internal Control over Financial Reporting. Our responsibility is to express an opinion on the Company’s internal control over financial reporting based on our audit. We are a public accounting firm registered with the PCAOB and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB. We conducted our audit in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether effective internal control over financial reporting was maintained in all material respects. Our audit included obtaining an understanding of internal control over financial reporting, assessing the risk that a material weakness exists, testing and evaluating the design and operating effectiveness of internal control based on the assessed risk, and performing such other procedures as we considered necessary in the circumstances. We believe that our audit provides a reasonable basis for our opinion. Definition and Limitations of Internal Control over Financial Reporting A company’s internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. A company’s internal control over financial reporting includes those policies and procedures that (1) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company; (2) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are being made only in accordance with authorizations of management and directors of the company; and (3) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the company’s assets that could have a material effect on the financial statements. Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate. /s/ Deloitte & Touche LLP
Phoenix, Arizona February 26, 2020
Not applicable.
Item 10. Directors, Executive Officers and Corporate Governance Information regarding our directors, director nomination procedures, and the Audit Committee of our Board of Directors We adopted a Code of Ethics for all of our directors, officers and employees. A copy of our Code of Ethics is available at our website at www.viad.com/about-us/corporate-governance/documents-and-charters/default.aspx and is also available without charge to any shareholder upon written request to: Viad Corp, 1850 North Central Avenue, Suite 1900, Phoenix, Arizona 85004-4565, Attention: Corporate Secretary. Item 11. Executive Compensation Information in the Proxy Statement under the captions “Compensation Discussion and Analysis,” “Board of Directors and Corporate Governance,” and “Executive Compensation” is incorporated herein by reference. Item 12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters Information in the Proxy Statement under the captions “Executive Compensation” and Item 13. Certain Relationships and Related Transactions, and Director Independence Information in the Proxy Statement under the caption “Board of Directors and Corporate Governance” is incorporated herein by reference. Item 14. Principal Accounting Fees and Services Information regarding principal accounting fees and services and the pre-approval policies and procedures for such fees and services, as adopted by the Audit Committee of the Board of Directors, is contained in the Proxy Statement under the caption “Ratification of the Item 15.Exhibits AND Financial Statement Schedule
See Index to Financial Statements and Financial Statement Schedule at Item 8 of this
None.
SCHEDULE II – VALUATION AND QUALIFYING ACCOUNTS
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,
Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of
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