UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
(Mark One)
☒ | QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
For the quarterly period ended September 30, 20172020
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.) |
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| |
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)
Not Applicable
(Former name, former address, and former fiscal year, if changed since last report)
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 Par Value | VVI | New York Stock Exchange | ||
Preferred Stock Purchase Rights | -- | New York Stock Exchange |
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 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.
Large accelerated filer |
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| Accelerated filer |
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Non-accelerated filer |
| ☐ |
| Smaller reporting company |
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Emerging growth company | ☐ |
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If an emerging growth company, indicate 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 Exchange Act). Yes ☐ No ☒
As of October 27, 2017,30, 2020, there were 20,411,48020,428,448 shares of Common Stock ($1.50 par value) outstanding.
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1 | ||
| Condensed Consolidated Balance Sheets as of September 30, | 1 |
| 2 | |
| 3 | |
| 4 | |
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Management’s Discussion and Analysis of Financial Condition and Results of Operations |
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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.
PART I - FINANCIALFINANCIAL INFORMATION
VIAD CORP
CONDENSED CONSOLIDATED BALANCE SHEETS
(Unaudited)
|
| September 30, |
|
| December 31, |
|
| September 30, |
|
| December 31, |
| ||||
(in thousands, except share data) |
| 2017 |
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| 2016 |
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| 2020 |
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| 2019 |
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Assets |
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Current assets |
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Cash and cash equivalents |
| $ | 53,481 |
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| $ | 20,900 |
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| $ | 56,452 |
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| $ | 61,999 |
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Accounts receivable, net of allowances for doubtful accounts of $1,897 and $1,342, respectively |
|
| 129,105 |
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| 104,648 |
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Accounts receivable, net of allowances for doubtful accounts of $10,105 and $1,200, respectively |
|
| 21,154 |
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| 126,246 |
| ||||||||
Inventories |
|
| 39,753 |
|
|
| 31,420 |
|
|
| 16,296 |
|
|
| 17,269 |
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Current contract costs |
|
| 7,649 |
|
|
| 24,535 |
| ||||||||
Other current assets |
|
| 23,973 |
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|
| 18,449 |
|
|
| 16,196 |
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|
| 30,854 |
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Total current assets |
|
| 246,312 |
|
|
| 175,417 |
|
|
| 117,747 |
|
|
| 260,903 |
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Property and equipment, net |
|
| 295,757 |
|
|
| 279,858 |
|
|
| 477,445 |
|
|
| 500,901 |
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Other investments and assets |
|
| 46,745 |
|
|
| 44,297 |
|
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| 19,937 |
|
|
| 45,119 |
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Operating lease right-of-use assets |
|
| 88,394 |
|
|
| 103,314 |
| ||||||||
Deferred income taxes |
|
| 34,391 |
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|
| 42,549 |
|
|
| — |
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|
| 26,163 |
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Goodwill |
|
| 263,919 |
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| 254,022 |
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| 96,931 |
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| 287,983 |
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Other intangible assets, net |
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| 65,672 |
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| 73,673 |
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| 68,638 |
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| 94,308 |
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Total Assets |
| $ | 952,796 |
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| $ | 869,816 |
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| $ | 869,092 |
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| $ | 1,318,691 |
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Liabilities and Stockholders’ Equity |
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Liabilities, Mezzanine Equity, and Stockholders’ Equity |
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Current liabilities |
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Accounts payable |
| $ | 88,510 |
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| $ | 67,596 |
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| $ | 22,069 |
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| $ | 86,660 |
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Customer deposits |
|
| 53,093 |
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| 42,723 |
| ||||||||
Contract liabilities |
|
| 17,153 |
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|
| 50,671 |
| ||||||||
Accrued compensation |
|
| 28,094 |
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| 29,913 |
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| 8,392 |
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| 32,658 |
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Operating lease obligations |
|
| 17,872 |
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| 22,180 |
| ||||||||
Other current liabilities |
|
| 52,318 |
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| 30,390 |
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| 30,127 |
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| 39,824 |
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Current portion of debt and capital lease obligations |
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| 124,574 |
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| 174,968 |
| ||||||||
Current portion of debt and finance lease obligations |
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| 4,040 |
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| 5,330 |
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Total current liabilities |
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| 346,589 |
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| 345,590 |
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| 99,653 |
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| 237,323 |
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Long-term debt and capital lease obligations |
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| 60,627 |
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| 74,243 |
| ||||||||
Long-term debt and finance lease obligations |
|
| 252,152 |
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| 335,162 |
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Pension and postretirement benefits |
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| 26,826 |
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| 28,611 |
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| 25,789 |
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| 26,247 |
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Long-term operating lease obligations |
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| 73,688 |
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| 82,851 |
| ||||||||
Other deferred items and liabilities |
|
| 50,260 |
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| 50,734 |
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| 75,174 |
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| 83,707 |
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Total liabilities |
|
| 484,302 |
|
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| 499,178 |
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| 526,456 |
|
|
| 765,290 |
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Commitments and contingencies |
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Convertible Series A Preferred Stock, $0.01 par value, 180,000 shares authorized, 135,000 shares issued and outstanding at September 30, 2020 |
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| 126,897 |
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|
| — |
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Redeemable noncontrolling interest |
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| 5,271 |
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| 6,172 |
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Stockholders’ equity |
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Viad Corp stockholders’ equity: |
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Common stock, $1.50 par value, 200,000,000 shares authorized, 24,934,981 shares issued and outstanding |
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| 37,402 |
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| 37,402 |
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| 37,402 |
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| 37,402 |
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Additional capital |
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| 573,660 |
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| 573,841 |
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| 570,447 |
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| 574,473 |
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Retained earnings |
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| 89,552 |
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| 16,291 |
| ||||||||
Unearned employee benefits and other |
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| 239 |
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| 172 |
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Accumulated other comprehensive income (loss): |
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Unrealized gain on investments |
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| 564 |
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| 421 |
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Cumulative foreign currency translation adjustments |
|
| (10,264 | ) |
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| (29,084 | ) | ||||||||
Unrecognized net actuarial loss and prior service credit, net |
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| (10,544 | ) |
|
| (10,728 | ) | ||||||||
Common stock in treasury, at cost, 4,519,023 and 4,613,520 shares, respectively |
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| (226,145 | ) |
|
| (230,960 | ) | ||||||||
Total Viad Corp stockholders’ equity |
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| 454,464 |
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| 357,355 |
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Noncontrolling interest |
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| 14,030 |
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| 13,283 |
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Retained earnings (deficit) |
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| (202,691 | ) |
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| 122,971 |
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Accumulated other comprehensive loss |
|
| (42,687 | ) |
|
| (35,699 | ) | ||||||||
Common stock in treasury, at cost, 4,507,957 and 4,588,084 shares, respectively |
|
| (227,623 | ) |
|
| (231,649 | ) | ||||||||
Total Viad stockholders’ equity |
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| 134,848 |
|
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| 467,498 |
| ||||||||
Non-redeemable noncontrolling interest |
|
| 75,620 |
|
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| 79,731 |
| ||||||||
Total stockholders’ equity |
|
| 468,494 |
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| 370,638 |
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| 210,468 |
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| 547,229 |
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Total Liabilities and Stockholders’ Equity |
| $ | 952,796 |
|
| $ | 869,816 |
| ||||||||
Total Liabilities, Mezzanine Equity, and Stockholders’ Equity |
| $ | 869,092 |
|
| $ | 1,318,691 |
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Refer to Notes to Condensed Consolidated Financial Statements.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)
|
| Three Months Ended |
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| Nine Months Ended |
|
| Three Months Ended |
|
| Nine Months Ended |
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|
| September 30, |
|
| September 30, |
|
| September 30, |
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| September 30, |
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(in thousands, except per share data) |
| 2017 |
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| 2016 |
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| 2017 |
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| 2016 |
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| 2020 |
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| 2019 |
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| 2020 |
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| 2019 |
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Revenue: |
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Exhibition and event services |
| $ | 198,868 |
|
| $ | 240,278 |
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| $ | 750,111 |
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| $ | 681,592 |
| ||||||||||||||||
Exhibits and environments |
|
| 33,251 |
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| 44,785 |
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| 119,988 |
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| 123,871 |
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Pursuit services |
|
| 106,980 |
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|
| 97,402 |
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| 159,581 |
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|
| 143,111 |
| ||||||||||||||||
Services |
| $ | 43,702 |
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| $ | 291,701 |
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| $ | 335,383 |
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| $ | 858,071 |
| ||||||||||||||||
Products |
|
| 19,370 |
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| 62,042 |
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| 54,480 |
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| 151,615 |
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Total revenue |
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| 339,099 |
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| 382,465 |
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| 1,029,680 |
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|
| 948,574 |
|
|
| 63,072 |
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| 353,743 |
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| 389,863 |
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|
| 1,009,686 |
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Costs and expenses: |
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|
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|
|
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Costs of services |
|
| 254,963 |
|
|
| 278,764 |
|
|
| 813,456 |
|
|
| 743,032 |
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|
| 51,730 |
|
|
| 247,551 |
|
|
| 395,432 |
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|
| 785,131 |
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Costs of products sold |
|
| 37,070 |
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| 44,784 |
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| 117,072 |
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|
| 118,891 |
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Costs of products |
|
| 18,107 |
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| 51,370 |
|
|
| 60,332 |
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| 134,527 |
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Business interruption gain |
|
| (1,091 | ) |
|
| — |
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|
| (2,231 | ) |
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| (141 | ) |
Corporate activities |
|
| 4,474 |
|
|
| 2,772 |
|
|
| 10,092 |
|
|
| 7,390 |
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|
| 2,645 |
|
|
| 2,680 |
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|
| 5,902 |
|
|
| 7,795 |
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Interest income |
|
| (74 | ) |
|
| (44 | ) |
|
| (174 | ) |
|
| (138 | ) |
|
| (58 | ) |
|
| (79 | ) |
|
| (313 | ) |
|
| (260 | ) |
Interest expense |
|
| 2,117 |
|
|
| 1,489 |
|
|
| 6,281 |
|
|
| 4,109 |
|
|
| 5,508 |
|
|
| 3,740 |
|
|
| 14,712 |
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|
| 9,612 |
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Multi-employer pension plan withdrawal |
|
| — |
|
|
| — |
|
|
| 462 |
|
|
| 15,508 |
| ||||||||||||||||
Other expense |
|
| 210 |
|
|
| 281 |
|
|
| 894 |
|
|
| 1,192 |
| ||||||||||||||||
Restructuring charges |
|
| 255 |
|
|
| 1,697 |
|
|
| 817 |
|
|
| 3,664 |
|
|
| 11,259 |
|
|
| 1,702 |
|
|
| 12,370 |
|
|
| 6,845 |
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Impairment charges (recoveries) |
|
| (24,467 | ) |
|
| 120 |
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|
| (29,098 | ) |
|
| 120 |
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Legal settlement |
|
| — |
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|
| — |
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|
| — |
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| 8,500 |
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Impairment charges |
|
| 676 |
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|
| — |
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|
| 203,076 |
|
|
| — |
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Total costs and expenses |
|
| 273,247 |
|
|
| 329,582 |
|
|
| 916,215 |
|
|
| 877,068 |
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|
| 90,077 |
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|
| 307,245 |
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|
| 692,867 |
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|
| 968,709 |
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Income from continuing operations before income taxes |
|
| 65,852 |
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|
| 52,883 |
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|
| 113,465 |
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|
| 71,506 |
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Income (loss) from continuing operations before income taxes |
|
| (27,005 | ) |
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| 46,498 |
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|
| (303,004 | ) |
|
| 40,977 |
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Income tax expense |
|
| 20,010 |
|
|
| 17,878 |
|
|
| 32,929 |
|
|
| 23,652 |
|
|
| 735 |
|
|
| 11,891 |
|
|
| 20,454 |
|
|
| 10,861 |
|
Income from continuing operations |
|
| 45,842 |
|
|
| 35,005 |
|
|
| 80,536 |
|
|
| 47,854 |
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Loss from discontinued operations |
|
| (101 | ) |
|
| (221 | ) |
|
| (408 | ) |
|
| (771 | ) | ||||||||||||||||
Net income |
|
| 45,741 |
|
|
| 34,784 |
|
|
| 80,128 |
|
|
| 47,083 |
| ||||||||||||||||
Net income attributable to noncontrolling interest |
|
| (1,084 | ) |
|
| (992 | ) |
|
| (747 | ) |
|
| (765 | ) | ||||||||||||||||
Net income attributable to Viad |
| $ | 44,657 |
|
| $ | 33,792 |
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| $ | 79,381 |
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| $ | 46,318 |
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Diluted income per common share: |
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|
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Income (loss) from continuing operations |
|
| (27,740 | ) |
|
| 34,607 |
|
|
| (323,458 | ) |
|
| 30,116 |
| ||||||||||||||||
Income (loss) from discontinued operations |
|
| (989 | ) |
|
| (141 | ) |
|
| (1,822 | ) |
|
| 32 |
| ||||||||||||||||
Net income (loss) |
|
| (28,729 | ) |
|
| 34,466 |
|
|
| (325,280 | ) |
|
| 30,148 |
| ||||||||||||||||
Net (income) loss attributable to non-redeemable noncontrolling interest |
|
| (2,331 | ) |
|
| (3,418 | ) |
|
| 636 |
|
|
| (3,329 | ) | ||||||||||||||||
Net loss attributable to redeemable noncontrolling interest |
|
| 302 |
|
|
| 368 |
|
|
| 1,023 |
|
|
| 644 |
| ||||||||||||||||
Net income (loss) attributable to Viad |
| $ | (30,758 | ) |
| $ | 31,416 |
|
| $ | (323,621 | ) |
| $ | 27,463 |
| ||||||||||||||||
Diluted income (loss) per common share: |
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Continuing operations attributable to Viad common stockholders |
| $ | 2.19 |
|
| $ | 1.68 |
|
| $ | 3.91 |
|
| $ | 2.33 |
|
| $ | (1.54 | ) |
| $ | 1.54 |
|
| $ | (15.98 | ) |
| $ | 1.33 |
|
Discontinued operations attributable to Viad common stockholders |
|
| — |
|
|
| (0.01 | ) |
|
| (0.02 | ) |
|
| (0.04 | ) |
|
| (0.05 | ) |
|
| (0.01 | ) |
|
| (0.09 | ) |
|
| — |
|
Net income attributable to Viad common stockholders |
| $ | 2.19 |
|
| $ | 1.67 |
|
| $ | 3.89 |
|
| $ | 2.29 |
| ||||||||||||||||
Net income (loss) attributable to Viad common stockholders |
| $ | (1.59 | ) |
| $ | 1.53 |
|
| $ | (16.07 | ) |
| $ | 1.33 |
| ||||||||||||||||
Weighted-average outstanding and potentially dilutive common shares |
|
| 20,436 |
|
|
| 20,207 |
|
|
| 20,382 |
|
|
| 20,150 |
|
|
| 20,293 |
|
|
| 20,311 |
|
|
| 20,263 |
|
|
| 20,267 |
|
Basic income per common share: |
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|
|
|
|
|
|
|
|
|
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|
|
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Basic income (loss) per common share: |
|
|
|
|
|
|
|
|
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|
|
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|
|
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| ||||||||||||||||
Continuing operations attributable to Viad common stockholders |
| $ | 2.19 |
|
| $ | 1.68 |
|
| $ | 3.91 |
|
| $ | 2.33 |
|
| $ | (1.54 | ) |
| $ | 1.54 |
|
| $ | (15.98 | ) |
| $ | 1.33 |
|
Discontinued operations attributable to Viad common stockholders |
|
| — |
|
|
| (0.01 | ) |
|
| (0.02 | ) |
|
| (0.04 | ) |
|
| (0.05 | ) |
|
| (0.01 | ) |
|
| (0.09 | ) |
|
| — |
|
Net income attributable to Viad common stockholders |
| $ | 2.19 |
|
| $ | 1.67 |
|
| $ | 3.89 |
|
| $ | 2.29 |
| ||||||||||||||||
Net income (loss) attributable to Viad common stockholders |
| $ | (1.59 | ) |
| $ | 1.53 |
|
| $ | (16.07 | ) |
| $ | 1.33 |
| ||||||||||||||||
Weighted-average outstanding common shares |
|
| 20,166 |
|
|
| 20,017 |
|
|
| 20,130 |
|
|
| 19,972 |
|
|
| 20,293 |
|
|
| 20,168 |
|
|
| 20,263 |
|
|
| 20,129 |
|
Dividends declared per common share |
| $ | 0.10 |
|
| $ | 0.10 |
|
| $ | 0.30 |
|
| $ | 0.30 |
|
| $ | — |
|
| $ | 0.10 |
|
| $ | 0.10 |
|
| $ | 0.30 |
|
Amounts attributable to Viad common stockholders |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income from continuing operations |
| $ | 44,758 |
|
| $ | 34,013 |
|
| $ | 79,789 |
|
| $ | 47,089 |
| ||||||||||||||||
Loss from discontinued operations |
|
| (101 | ) |
|
| (221 | ) |
|
| (408 | ) |
|
| (771 | ) | ||||||||||||||||
Net income |
| $ | 44,657 |
|
| $ | 33,792 |
|
| $ | 79,381 |
|
| $ | 46,318 |
| ||||||||||||||||
Income (loss) from continuing operations |
| $ | (29,769 | ) |
| $ | 31,557 |
|
| $ | (321,799 | ) |
| $ | 27,431 |
| ||||||||||||||||
Income (loss) from discontinued operations |
|
| (989 | ) |
|
| (141 | ) |
|
| (1,822 | ) |
|
| 32 |
| ||||||||||||||||
Net income (loss) |
| $ | (30,758 | ) |
| $ | 31,416 |
|
| $ | (323,621 | ) |
| $ | 27,463 |
|
Refer to Notes to Condensed Consolidated Financial Statements.
CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS)
(Unaudited)
|
| Three Months Ended |
|
| Nine Months Ended |
| ||||||||||
|
| September 30, |
|
| September 30, |
| ||||||||||
(in thousands) |
| 2017 |
|
| 2016 |
|
| 2017 |
|
| 2016 |
| ||||
Net income |
| $ | 45,741 |
|
| $ | 34,784 |
|
| $ | 80,128 |
|
| $ | 47,083 |
|
Other comprehensive income (loss): |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Unrealized gains on investments, net of tax(1) |
|
| 48 |
|
|
| 42 |
|
|
| 143 |
|
|
| 62 |
|
Unrealized foreign currency translation adjustments, net of tax(1) |
|
| 9,115 |
|
|
| (3,849 | ) |
|
| 18,820 |
|
|
| 723 |
|
Change in net actuarial gain, net of tax(1) |
|
| 103 |
|
|
| 93 |
|
|
| 385 |
|
|
| 334 |
|
Change in prior service cost, net of tax(1) |
|
| (67 | ) |
|
| (78 | ) |
|
| (201 | ) |
|
| (234 | ) |
Comprehensive income |
|
| 54,940 |
|
|
| 30,992 |
|
|
| 99,275 |
|
|
| 47,968 |
|
Comprehensive income attributable to noncontrolling interest |
|
| (1,084 | ) |
|
| (992 | ) |
|
| (747 | ) |
|
| (765 | ) |
Comprehensive income attributable to Viad |
| $ | 53,856 |
|
| $ | 30,000 |
|
| $ | 98,528 |
|
| $ | 47,203 |
|
|
| Three Months Ended |
|
| Nine Months Ended |
| ||||||||||
|
| September 30, |
|
| September 30, |
| ||||||||||
(in thousands) |
| 2020 |
|
| 2019 |
|
| 2020 |
|
| 2019 |
| ||||
Net income (loss) |
| $ | (28,729 | ) |
| $ | 34,466 |
|
| $ | (325,280 | ) |
| $ | 30,148 |
|
Other comprehensive income (loss): |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Unrealized foreign currency translation adjustments |
|
| 11,032 |
|
|
| (5,229 | ) |
|
| (7,342 | ) |
|
| 3,868 |
|
Change in net actuarial loss, net of tax (1) |
|
| 70 |
|
|
| 83 |
|
|
| 436 |
|
|
| 302 |
|
Change in prior service cost, net of tax (1) |
|
| (27 | ) |
|
| (35 | ) |
|
| (82 | ) |
|
| (106 | ) |
Comprehensive income (loss) |
|
| (17,654 | ) |
|
| 29,285 |
|
|
| (332,268 | ) |
|
| 34,212 |
|
Non-redeemable noncontrolling interest: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Comprehensive (income) loss attributable to non-redeemable noncontrolling interest |
|
| (2,331 | ) |
|
| (3,418 | ) |
|
| 636 |
|
|
| (3,329 | ) |
Unrealized foreign currency translation adjustments |
|
| 1,837 |
|
|
| (682 | ) |
|
| (1,949 | ) |
|
| 94 |
|
Redeemable noncontrolling interest: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Comprehensive loss attributable to redeemable noncontrolling interest |
|
| 302 |
|
|
| 368 |
|
|
| 1,023 |
|
|
| 644 |
|
Comprehensive income (loss) attributable to Viad |
| $ | (17,846 | ) |
| $ | 25,553 |
|
| $ | (332,558 | ) |
| $ | 31,621 |
|
(1) | The tax effect on other comprehensive income (loss) is not significant. |
Refer to Notes to Condensed Consolidated Financial Statements.
CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY AND MEZZANINE EQUITY
(Unaudited)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Mezzanine Equity |
| |||||
(in thousands) |
| Common Stock |
|
| Additional Capital |
|
| Retained Earnings (Deficit) |
|
| Accumulated Other Comprehensive Income (Loss) |
|
| Common Stock in Treasury |
|
| Total Viad Equity |
|
| Non-Redeemable Non-Controlling Interest |
|
| Total Stockholders’ Equity |
|
|
|
|
| Redeemable Non-Controlling Interest |
|
| Convertible Series A Preferred Stock |
| ||||||||||
Balance, December 31, 2019 |
| $ | 37,402 |
|
| $ | 574,473 |
|
| $ | 122,971 |
|
| $ | (35,699 | ) |
| $ | (231,649 | ) |
| $ | 467,498 |
|
| $ | 79,731 |
|
| $ | 547,229 |
|
|
|
|
| $ | 6,172 |
|
| $ | — |
|
Net loss |
|
| — |
|
|
| — |
|
|
| (86,585 | ) |
|
| — |
|
|
| — |
|
|
| (86,585 | ) |
|
| (1,333 | ) |
|
| (87,918 | ) |
|
|
|
|
| (517 | ) |
|
| — |
|
Dividends on common stock ($0.10 per share) |
|
| — |
|
|
| — |
|
|
| (2,038 | ) |
|
| — |
|
|
| — |
|
|
| (2,038 | ) |
|
| — |
|
|
| (2,038 | ) |
|
|
|
|
| — |
|
|
| — |
|
Distributions to noncontrolling interest |
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| (1,526 | ) |
|
| (1,526 | ) |
|
|
|
|
| — |
|
|
| — |
|
Payment of payroll taxes on stock-based compensation through shares withheld |
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| (1,059 | ) |
|
| (1,059 | ) |
|
| — |
|
|
| (1,059 | ) |
|
|
|
|
| — |
|
|
| — |
|
Common stock purchased for treasury |
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| (2,785 | ) |
|
| (2,785 | ) |
|
| — |
|
|
| (2,785 | ) |
|
|
|
|
| — |
|
|
| — |
|
Employee benefit plans |
|
| — |
|
|
| (3,810 | ) |
|
| — |
|
|
| — |
|
|
| 5,722 |
|
|
| 1,912 |
|
|
| — |
|
|
| 1,912 |
|
|
|
|
|
| — |
|
|
| — |
|
Share-based compensation - equity awards |
|
| — |
|
|
| 276 |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| 276 |
|
|
| — |
|
|
| 276 |
|
|
|
|
|
| — |
|
|
| — |
|
Unrealized foreign currency translation adjustment |
|
| — |
|
|
| — |
|
|
| — |
|
|
| (28,158 | ) |
|
| — |
|
|
| (28,158 | ) |
|
| (5,719 | ) |
|
| (33,877 | ) |
|
|
|
|
| (873 | ) |
|
| — |
|
Amortization of net actuarial loss, net of tax |
|
| — |
|
|
| — |
|
|
| — |
|
|
| 341 |
|
|
| — |
|
|
| 341 |
|
|
| — |
|
|
| 341 |
|
|
|
|
|
| — |
|
|
| — |
|
Amortization of prior service cost, net of tax |
|
| — |
|
|
| — |
|
|
| — |
|
|
| (27 | ) |
|
| — |
|
|
| (27 | ) |
|
| — |
|
|
| (27 | ) |
|
|
|
|
| — |
|
|
| — |
|
Other, net |
|
| — |
|
|
| (80 | ) |
|
| (3 | ) |
|
| — |
|
|
| 1 |
|
|
| (82 | ) |
|
| — |
|
|
| (82 | ) |
|
|
|
|
| 126 |
|
|
| — |
|
Balance, March 31, 2020 |
| $ | 37,402 |
|
| $ | 570,859 |
|
| $ | 34,345 |
|
| $ | (63,543 | ) |
| $ | (229,770 | ) |
| $ | 349,293 |
|
| $ | 71,153 |
|
| $ | 420,446 |
|
|
|
|
| $ | 4,908 |
|
| $ | — |
|
Net loss |
|
| — |
|
|
| — |
|
|
| (206,278 | ) |
|
| — |
|
|
| — |
|
|
| (206,278 | ) |
|
| (1,634 | ) |
|
| (207,912 | ) |
|
|
|
|
| (204 | ) |
|
| — |
|
Payment of payroll taxes on stock-based compensation through shares withheld |
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| (3 | ) |
|
| (3 | ) |
|
| — |
|
|
| (3 | ) |
|
|
|
|
| — |
|
|
| — |
|
Employee benefit plans |
|
| — |
|
|
| 48 |
|
|
| — |
|
|
| — |
|
|
| 282 |
|
|
| 330 |
|
|
| — |
|
|
| 330 |
|
|
|
|
|
| — |
|
|
| — |
|
Share-based compensation - equity awards |
|
| — |
|
|
| 602 |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| 602 |
|
|
| — |
|
|
| 602 |
|
|
|
|
|
| — |
|
|
| — |
|
Unrealized foreign currency translation adjustment |
|
| — |
|
|
| — |
|
|
| — |
|
|
| 9,784 |
|
|
| — |
|
|
| 9,784 |
|
|
| 1,933 |
|
|
| 11,717 |
|
|
|
|
|
| 102 |
|
|
| — |
|
Amortization of net actuarial loss, net of tax |
|
| — |
|
|
| — |
|
|
| — |
|
|
| 25 |
|
|
| — |
|
|
| 25 |
|
|
| — |
|
|
| 25 |
|
|
|
|
|
| — |
|
|
| — |
|
Amortization of prior service cost, net of tax |
|
| — |
|
|
| — |
|
|
| — |
|
|
| (28 | ) |
|
| — |
|
|
| (28 | ) |
|
| — |
|
|
| (28 | ) |
|
|
|
|
| — |
|
|
| — |
|
Other, net |
|
| — |
|
|
| 46 |
|
|
| — |
|
|
| — |
|
|
| (1 | ) |
|
| 45 |
|
|
| — |
|
|
| 45 |
|
|
|
|
|
| 332 |
|
|
| — |
|
Balance, June 30, 2020 |
| $ | 37,402 |
|
| $ | 571,555 |
|
| $ | (171,933 | ) |
| $ | (53,762 | ) |
| $ | (229,492 | ) |
| $ | 153,770 |
|
| $ | 71,452 |
|
| $ | 225,222 |
|
|
|
|
| $ | 5,138 |
|
| $ | — |
|
Net loss |
|
| — |
|
|
| — |
|
|
| (30,758 | ) |
|
| — |
|
|
| — |
|
|
| (30,758 | ) |
|
| 2,331 |
|
|
| (28,427 | ) |
|
|
|
|
| (302 | ) |
|
| — |
|
Issuance of Series A convertible preferred stock |
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| - |
|
|
|
|
|
| — |
|
|
| 125,763 |
|
Dividends on convertible preferred stock |
|
| — |
|
|
| (1,134 | ) |
|
| — |
|
|
| — |
|
|
| — |
|
|
| (1,134 | ) |
|
| — |
|
|
| (1,134 | ) |
|
|
|
|
| — |
|
|
| 1,134 |
|
Employee benefit plans |
|
| — |
|
|
| (2,123 | ) |
|
| — |
|
|
| — |
|
|
| 1,870 |
|
|
| (253 | ) |
|
| — |
|
|
| (253 | ) |
|
|
|
|
| — |
|
|
| — |
|
Share-based compensation - equity awards |
|
| — |
|
|
| 2,135 |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| 2,135 |
|
|
| — |
|
|
| 2,135 |
|
|
|
|
|
| — |
|
|
| — |
|
Unrealized foreign currency translation adjustment |
|
| — |
|
|
| — |
|
|
| — |
|
|
| 11,032 |
|
|
| — |
|
|
| 11,032 |
|
|
| 1,837 |
|
|
| 12,869 |
|
|
|
|
|
| (33 | ) |
|
| — |
|
Amortization of net actuarial loss, net of tax |
|
| — |
|
|
| — |
|
|
| — |
|
|
| 70 |
|
|
| — |
|
|
| 70 |
|
|
| — |
|
|
| 70 |
|
|
|
|
|
| — |
|
|
| — |
|
Amortization of prior service cost, net of tax |
|
| — |
|
|
| — |
|
|
| — |
|
|
| (27 | ) |
|
| — |
|
|
| (27 | ) |
|
| — |
|
|
| (27 | ) |
|
|
|
|
| — |
|
|
| — |
|
Other, net |
|
| — |
|
|
| 14 |
|
|
| — |
|
|
| — |
|
|
| (1 | ) |
|
| 13 |
|
|
| — |
|
|
| 13 |
|
|
|
|
|
| 468 |
|
|
| — |
|
Balance, September 30, 2020 |
| $ | 37,402 |
|
| $ | 570,447 |
|
| $ | (202,691 | ) |
| $ | (42,687 | ) |
| $ | (227,623 | ) |
| $ | 134,848 |
|
| $ | 75,620 |
|
| $ | 210,468 |
|
|
|
|
| $ | 5,271 |
|
| $ | 126,897 |
|
Refer to Notes to Condensed Consolidated Financial Statements.
VIAD CORP
CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY AND MEZZANINE EQUITY (Continued)
(Unaudited)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Mezzanine Equity |
| |
(in thousands) |
| Common Stock |
|
| Additional Capital |
|
| Retained Earnings |
|
| Unearned Employee Benefits and Other |
|
| Accumulated Other Comprehensive Income (Loss) |
|
| Common Stock in Treasury |
|
| Total Viad Equity |
|
| Non-Redeemable Non-Controlling Interest |
|
| Total Stockholders’ Equity |
|
|
|
|
| Redeemable Non-Controlling Interest |
| ||||||||||
Balance, December 31, 2018 |
| $ | 37,402 |
|
| $ | 575,339 |
|
| $ | 109,032 |
|
| $ | 199 |
|
| $ | (47,975 | ) |
| $ | (237,790 | ) |
| $ | 436,207 |
|
| $ | 14,348 |
|
| $ | 450,555 |
|
|
|
|
| $ | 5,909 |
|
Net loss |
|
| — |
|
|
| — |
|
|
| (17,777 | ) |
|
| — |
|
|
| — |
|
|
| — |
|
|
| (17,777 | ) |
|
| (420 | ) |
|
| (18,197 | ) |
|
|
|
|
| (24 | ) |
Dividends on common stock ($0.10 per share) |
|
| — |
|
|
| — |
|
|
| (2,028 | ) |
|
| — |
|
|
| — |
|
|
| — |
|
|
| (2,028 | ) |
|
| — |
|
|
| (2,028 | ) |
|
|
|
|
| — |
|
Payment of payroll taxes on stock-based compensation through shares withheld |
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| (2,905 | ) |
|
| (2,905 | ) |
|
| — |
|
|
| (2,905 | ) |
|
|
|
|
| — |
|
Employee benefit plans |
|
| — |
|
|
| (4,302 | ) |
|
| — |
|
|
| — |
|
|
| — |
|
|
| 5,522 |
|
|
| 1,220 |
|
|
| — |
|
|
| 1,220 |
|
|
|
|
|
| — |
|
Share-based compensation - equity awards |
|
| — |
|
|
| 780 |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| 780 |
|
|
| — |
|
|
| 780 |
|
|
|
|
|
| — |
|
Unrealized foreign currency translation adjustment |
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| 4,780 |
|
|
| — |
|
|
| 4,780 |
|
|
| — |
|
|
| 4,780 |
|
|
|
|
|
| (310 | ) |
Amortization of net actuarial loss, net of tax |
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| 120 |
|
|
| — |
|
|
| 120 |
|
|
| — |
|
|
| 120 |
|
|
|
|
|
| — |
|
Amortization of prior service cost, net of tax |
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| (35 | ) |
|
| — |
|
|
| (35 | ) |
|
| — |
|
|
| (35 | ) |
|
|
|
|
| — |
|
Other, net |
|
| — |
|
|
| 16 |
|
|
| — |
|
|
| 24 |
|
|
| — |
|
|
| 1 |
|
|
| 41 |
|
|
| — |
|
|
| 41 |
|
|
|
|
|
| 87 |
|
Balance, March 31, 2019 |
| $ | 37,402 |
|
| $ | 571,833 |
|
| $ | 89,227 |
|
| $ | 223 |
|
| $ | (43,110 | ) |
| $ | (235,172 | ) |
| $ | 420,403 |
|
| $ | 13,928 |
|
| $ | 434,331 |
|
|
|
|
| $ | 5,662 |
|
Net income |
|
| — |
|
|
| — |
|
|
| 13,824 |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| 13,824 |
|
|
| 331 |
|
|
| 14,155 |
|
|
|
|
|
| (252 | ) |
Dividends on common stock ($0.10 per share) |
|
| — |
|
|
| — |
|
|
| (2,006 | ) |
|
| — |
|
|
| — |
|
|
| — |
|
|
| (2,006 | ) |
|
| — |
|
|
| (2,006 | ) |
|
|
|
|
| — |
|
Payment of payroll taxes on stock-based compensation through shares withheld |
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| (89 | ) |
|
| (89 | ) |
|
| — |
|
|
| (89 | ) |
|
|
|
|
| — |
|
Employee benefit plans |
|
| — |
|
|
| 301 |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| 1,301 |
|
|
| 1,602 |
|
|
| — |
|
|
| 1,602 |
|
|
|
|
|
| — |
|
Share-based compensation - equity awards |
|
| — |
|
|
| 781 |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| 781 |
|
|
| — |
|
|
| 781 |
|
|
|
|
|
| — |
|
Unrealized foreign currency translation adjustment |
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| 4,317 |
|
|
| — |
|
|
| 4,317 |
|
|
| 776 |
|
|
| 5,093 |
|
|
|
|
|
| (81 | ) |
Amortization of net actuarial loss, net of tax |
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| 99 |
|
|
| — |
|
|
| 99 |
|
|
| — |
|
|
| 99 |
|
|
|
|
|
| — |
|
Amortization of prior service cost, net of tax |
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| (36 | ) |
|
| — |
|
|
| (36 | ) |
|
| — |
|
|
| (36 | ) |
|
|
|
|
| — |
|
Acquisition of Mountain Park Lodges |
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| 49,711 |
|
|
| 49,711 |
|
|
|
|
|
| — |
|
Other, net |
|
| — |
|
|
| 16 |
|
|
| — |
|
|
| (223 | ) |
|
| — |
|
|
| 221 |
|
|
| 14 |
|
|
| — |
|
|
| 14 |
|
|
|
|
|
| 179 |
|
Balance, June 30, 2019 |
| $ | 37,402 |
|
| $ | 572,931 |
|
| $ | 101,045 |
|
| $ | — |
|
| $ | (38,730 | ) |
| $ | (233,739 | ) |
| $ | 438,909 |
|
| $ | 64,746 |
|
| $ | 503,655 |
|
|
|
|
| $ | 5,508 |
|
Net income |
|
| — |
|
|
| — |
|
|
| 31,416 |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| 31,416 |
|
|
| 3,418 |
|
|
| 34,834 |
|
|
|
|
|
| (368 | ) |
Dividends on common stock ($0.10 per share) |
|
| — |
|
|
| — |
|
|
| (2,026 | ) |
|
| — |
|
|
| — |
|
|
| — |
|
|
| (2,026 | ) |
|
| — |
|
|
| (2,026 | ) |
|
|
|
|
| — |
|
Payment of payroll taxes on stock-based compensation through shares withheld |
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| (25 | ) |
|
| (25 | ) |
|
| — |
|
|
| (25 | ) |
|
|
|
|
| — |
|
Employee benefit plans |
|
| — |
|
|
| 212 |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| 1,059 |
|
|
| 1,271 |
|
|
| — |
|
|
| 1,271 |
|
|
|
|
|
| — |
|
Share-based compensation - equity awards |
|
| — |
|
|
| 938 |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| 938 |
|
|
| — |
|
|
| 938 |
|
|
|
|
|
| — |
|
Unrealized foreign currency translation adjustment |
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| (5,229 | ) |
|
| — |
|
|
| (5,229 | ) |
|
| (682 | ) |
|
| (5,911 | ) |
|
|
|
|
| 27 |
|
Amortization of net actuarial loss, net of tax |
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| 83 |
|
|
| — |
|
|
| 83 |
|
|
| — |
|
|
| 83 |
|
|
|
|
|
| — |
|
Amortization of prior service cost, net of tax |
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| (35 | ) |
|
| — |
|
|
| (35 | ) |
|
| — |
|
|
| (35 | ) |
|
|
|
|
| — |
|
Acquisition of Mountain Park Lodges |
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| - |
|
|
| 8 |
|
|
| 8 |
|
|
|
|
|
| — |
|
Other, net |
|
| — |
|
|
| (42 | ) |
|
| — |
|
|
| — |
|
|
| — |
|
|
| (223 | ) |
|
| (265 | ) |
|
| — |
|
|
| (265 | ) |
|
|
|
|
| 264 |
|
Balance, September 30, 2019 |
| $ | 37,402 |
|
| $ | 574,039 |
|
| $ | 130,435 |
|
| $ | — |
|
| $ | (43,911 | ) |
| $ | (232,928 | ) |
| $ | 465,037 |
|
| $ | 67,490 |
|
| $ | 532,527 |
|
|
|
|
| $ | 5,431 |
|
Refer to Notes to Condensed Consolidated Financial Statements.
VIAD CORP
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
|
| Nine Months Ended |
|
| Nine Months Ended |
| ||||||||||
|
| September 30, |
|
| September 30, |
| ||||||||||
(in thousands) |
| 2017 |
|
| 2016 |
|
| 2020 |
|
| 2019 |
| ||||
Cash flows from operating activities |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income |
| $ | 80,128 |
|
| $ | 47,083 |
| ||||||||
Adjustments to reconcile net income to net cash provided by operating activities: |
|
|
|
|
|
|
|
| ||||||||
Net income (loss) |
| $ | (325,280 | ) |
| $ | 30,148 |
| ||||||||
Adjustments to reconcile net loss to net cash provided by operating activities: |
|
|
|
|
|
|
|
| ||||||||
Depreciation and amortization |
|
| 42,499 |
|
|
| 31,206 |
|
|
| 43,051 |
|
|
| 44,061 |
|
Deferred income taxes |
|
| 318 |
|
|
| (3,549 | ) |
|
| 20,428 |
|
|
| 5,261 |
|
Loss from discontinued operations |
|
| 408 |
|
|
| 771 |
| ||||||||
(Income) loss from discontinued operations |
|
| 1,822 |
|
|
| (32 | ) | ||||||||
Restructuring charges |
|
| 817 |
|
|
| 3,664 |
|
|
| 12,370 |
|
|
| 6,845 |
|
Impairment charges (recoveries) |
|
| (29,098 | ) |
|
| 120 |
| ||||||||
Legal settlement |
|
| — |
|
|
| 8,500 |
| ||||||||
Impairment charges |
|
| 203,076 |
|
|
| — |
| ||||||||
Gains on dispositions of property and other assets |
|
| 465 |
|
|
| 126 |
|
|
| (14,935 | ) |
|
| (938 | ) |
Share-based compensation expense |
|
| 9,484 |
|
|
| 4,709 |
|
|
| 649 |
|
|
| 6,448 |
|
Excess tax benefit from share-based compensation arrangements |
|
| — |
|
|
| (60 | ) | ||||||||
Multi-employer pension plan withdrawal |
|
| 462 |
|
|
| 15,508 |
| ||||||||
Other non-cash items, net |
|
| 3,603 |
|
|
| 4,644 |
|
|
| 10,371 |
|
|
| 2,772 |
|
Change in operating assets and liabilities (excluding the impact of acquisitions): |
|
|
|
|
|
|
|
| ||||||||
Change in operating assets and liabilities: |
|
|
|
|
|
|
|
| ||||||||
Receivables |
|
| (25,966 | ) |
|
| (41,510 | ) |
|
| 104,722 |
|
|
| (37,028 | ) |
Inventories |
|
| (6,839 | ) |
|
| (12,903 | ) |
|
| 833 |
|
|
| 389 |
|
Current contract costs |
|
| 16,418 |
|
|
| (13,929 | ) | ||||||||
Accounts payable |
|
| 18,998 |
|
|
| 38,522 |
|
|
| (76,355 | ) |
|
| 20,121 |
|
Restructuring liabilities |
|
| (1,748 | ) |
|
| (2,518 | ) |
|
| (4,606 | ) |
|
| (5,012 | ) |
Accrued compensation |
|
| (7,455 | ) |
|
| (620 | ) |
|
| (25,268 | ) |
|
| 2,308 |
|
Customer deposits |
|
| 9,076 |
|
|
| 26,954 |
| ||||||||
Contract liabilities |
|
| (32,650 | ) |
|
| 29,177 |
| ||||||||
Income taxes payable |
|
| 16,058 |
|
|
| 5,280 |
|
|
| 1,290 |
|
|
| 3,777 |
|
Other assets and liabilities, net |
|
| 3,895 |
|
|
| 13,503 |
|
|
| 17,696 |
|
|
| (17,236 | ) |
Net cash provided by operating activities |
|
| 114,643 |
|
|
| 115,422 |
| ||||||||
Net cash (used in) provided by operating activities |
|
| (45,906 | ) |
|
| 101,140 |
| ||||||||
Cash flows from investing activities |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Capital expenditures |
|
| (39,493 | ) |
|
| (32,582 | ) |
|
| (40,057 | ) |
|
| (60,868 | ) |
Proceeds from insurance |
|
| 31,570 |
|
|
| — |
| ||||||||
Cash paid for acquired businesses, net |
|
| (1,661 | ) |
|
| (145,735 | ) | ||||||||
Cash surrender value of life insurance policies |
|
| 24,767 |
|
|
| — |
| ||||||||
Cash paid for acquisitions, net |
|
| — |
|
|
| (90,992 | ) | ||||||||
Proceeds from dispositions of property and other assets |
|
| 734 |
|
|
| 774 |
|
|
| 21,788 |
|
|
| 1,022 |
|
Net cash used in investing activities |
|
| (8,850 | ) |
|
| (177,543 | ) | ||||||||
Net cash provided by (used in) investing activities |
|
| 6,498 |
|
|
| (150,838 | ) | ||||||||
Cash flows from financing activities |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Proceeds from borrowings |
|
| 60,574 |
|
|
| 153,000 |
|
|
| 191,733 |
|
|
| 170,459 |
|
Payments on debt and capital lease obligations |
|
| (128,808 | ) |
|
| (86,989 | ) | ||||||||
Payments on debt and finance lease obligations |
|
| (273,663 | ) |
|
| (99,340 | ) | ||||||||
Dividends paid on common stock |
|
| (6,119 | ) |
|
| (6,079 | ) |
|
| (4,064 | ) |
|
| (6,060 | ) |
Distributions to noncontrolling interest |
|
| (1,526 | ) |
|
| — |
| ||||||||
Debt issuance costs |
|
| (5 | ) |
|
| (340 | ) |
|
| (1,585 | ) |
|
| — |
|
Payment of payroll taxes on stock-based compensation through shares withheld or repurchased |
|
| (1,062 | ) |
|
| (3,019 | ) | ||||||||
Common stock purchased for treasury |
|
| (1,272 | ) |
|
| (679 | ) |
|
| (2,785 | ) |
|
| — |
|
Excess tax benefit from share-based compensation arrangements |
|
| — |
|
|
| 60 |
| ||||||||
Net cash provided by (used in) financing activities |
|
| (75,630 | ) |
|
| 58,973 |
| ||||||||
Proceeds from issuance of Convertible Series A Preferred Stock, net of issuance costs |
|
| 125,763 |
|
|
| — |
| ||||||||
Proceeds from exercise of stock options |
|
| 2,077 |
|
|
| 92 |
| ||||||||
Net cash provided by financing activities |
|
| 34,888 |
|
|
| 62,132 |
| ||||||||
Effect of exchange rate changes on cash and cash equivalents |
|
| 2,418 |
|
|
| (702 | ) |
|
| (1,027 | ) |
|
| (689 | ) |
Net change in cash and cash equivalents |
|
| 32,581 |
|
|
| (3,850 | ) |
|
| (5,547 | ) |
|
| 11,745 |
|
Cash and cash equivalents, beginning of year |
|
| 20,900 |
|
|
| 56,531 |
|
|
| 61,999 |
|
|
| 44,893 |
|
Cash and cash equivalents, end of period |
| $ | 53,481 |
|
| $ | 52,681 |
|
| $ | 56,452 |
|
| $ | 56,638 |
|
Refer to Notes to Condensed Consolidated Financial Statements.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
Note 1. Overview and Basis of Presentation
Nature of Business
We are an international experiential services company with operations in the United States, Canada, the United Kingdom, continental Europe, the United Arab Emirates, and PrinciplesIceland. We are committed to providing unforgettable experiences to our clients and guests. We operate through 3 reportable business segments: GES North America, GES EMEA (collectively, “GES”), and Pursuit.
GES
GES is a global, full-service live events company offering a comprehensive range of Consolidationservices to event organizers and corporate brand marketers. Event organizers schedule and run events 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.
Pursuit
Pursuit is a collection of inspiring and unforgettable travel experiences that include recreational attractions, unique hotels and lodges, food and beverage, retail, sightseeing, and ground transportation services. Pursuit comprises the Banff Jasper Collection, the Alaska Collection, the Glacier Park Collection, and FlyOver.
Impact of COVID-19
On March 11, 2020, the World Health Organization declared COVID-19 a “pandemic.” COVID-19 has spread rapidly, with a high concentration of confirmed cases in the U.S. and other countries in which we operate. The rapid spread has resulted in authorities around the world implementing numerous measures to contain the virus, such as travel bans and restrictions, quarantines, shelter-in-place orders, and business shutdowns. The COVID-19 pandemic and these containment measures have had, and are expected to continue to have, a substantial negative impact on businesses around the world and on global, regional, and national economies.
The COVID-19 pandemic is having and will likely continue to have a significant and negative impact on our operations and financial performance, with live events largely shut down and tourism activity disruptions. In response to the COVID-19 pandemic, we implemented aggressive cost reduction measures to preserve cash, including furloughs, layoffs, mandatory unpaid time off, or salary reductions for all employees, and the elimination of discretionary spending. We continue to implement measures to successfully adapt for the long-term impact of COVID-19. During the third quarter of 2020, we secured additional capital to strengthen our liquidity position and amended our Second Amended and Restated Credit Agreement (the “2018 Credit Agreement”) to provide financial flexibility.
Investment Agreement
On August 5, 2020, we entered into an investment agreement with funds managed by private equity firm Crestview Partners (the “Investment Agreement”) who made an initial investment of $135 million, offset in part by $9.2 million in fees, in newly issued perpetual convertible preferred stock that carries a 5.5% cumulative quarterly dividend, which is payable in cash or in-kind at Viad’s option (the “Convertible Preferred Stock”). The Convertible Preferred Stock is convertible into shares of our common stock at a conversion price of $21.25 per share. The Investment Agreement also includes a delayed draw commitment of up to $45 million in additional Convertible Preferred Stock, which we may access during the 12 months following the August 5, 2020 closing date on the same terms and conditions as the initial investment. The proceeds from Crestview’s initial investment were used to repay a portion of our 2018 Credit Facility, will provide additional short-term liquidity, will fund capital expenditures, and will support general corporate purposes. Pursuant to the Investment Agreement, two Crestview Partners’ designees joined our Board of Directors, increasing the size of our board from seven to nine directors.
Credit Agreement Amendment
On August 5, 2020, we entered into an amendment to our 2018 Credit Agreement, which, among other things, (i) waives our financial covenants until September 30, 2022 (the “Covenant Waiver Period”) and (ii) requires us to maintain minimum liquidity of $125 million with a step down to $100 million at December 31, 2020. The interest rate on the borrowings is equal to the London Interbank
Offered Rate (“LIBOR”) plus 350 basis points, with a LIBOR floor of one percent during the Covenant Waiver Period. The LIBOR floor continues until the end of the 2018 Credit Agreement. Viad pledged 100% of the capital stock of its wholly-owned domestic subsidiaries and its top-tier foreign subsidiaries (other than Esja Attractions ehf.). Fees related to the amendment were approximately $1.7 million.
Management anticipates that the initial cash proceeds from Crestview Partners, existing cash and cash equivalents, and the amendment to waive financial covenants within the 2018 Credit Agreement until September 30, 2022 will be sufficient to fund operations for at least the next 12 months.
Goodwill Impairment
Due to the deteriorating macroeconomic environment, disruptions to our operations, and the sustained decline in our stock price caused by COVID-19, we determined an interim triggering event had occurred in the first and second quarters of 2020, which required us to assess the carrying values of goodwill and intangible assets in accordance with Accounting Standards Codification (“ASC”) No. 350, Intangibles – Goodwill and Other. Based on this assessment, we recorded non-cash goodwill impairment charges of $186.1 million during the first half of 2020, including a full impairment charge to the remaining GES goodwill balance of $113.1 million in the second quarter of 2020. Our remaining goodwill balance as of September 30, 2020 of $96.9 million pertains to our Pursuit business. The duration and impact of COVID-19 may result in additional future impairment charges as facts and circumstances evolve. Refer to Note 9 – Goodwill and Other Intangible Assets for additional information.
Basis of Presentation
The accompanying unaudited condensed consolidated financial statements of Viad Corp (“Viad” or the “Company”) have beenwere prepared in accordance with accounting principles generally accepted in the United States of America (“GAAP”) and with the instructions to Form 10-Q and Article 10 of Regulation S-X for interim financial information. Accordingly, these financial statements do not include all of the information required by GAAP or Securities and Exchange Commission (“SEC”)SEC rules and regulations for complete financial statements. In the opinion of management, theseThese financial statements reflect all adjustments (consisting of normal recurring adjustments) necessary for a fair presentation of the results for the interim periods presented. Interim results are not necessarily indicative of the results for the full year. These unaudited condensed consolidated financial statements should be read in conjunction with Viad’sour Annual Report on Form 10-K for the year ended December 31, 2016,2019, filed with the SEC on March 6, 2017.February 26, 2020 (“2019 Form 10-K”). Subsequent to the filing of the 2019 Form 10-K, we corrected the classification of debt as of December 31, 2019. Refer to Note 12 – Debt and Finance Lease Obligations.
The condensed consolidated financial statements include the accounts of Viad and its subsidiaries. AllWe have eliminated all significant intercompany account balances and transactions in consolidation.
Correction to Prior Period Financial Statements
During the third quarter of 2020, we identified a prior period error related to the recognition of revenue of our GES’ Corporate Accounts’ third-party services. Revenue from these services should have been eliminated in consolidation.recorded on a net basis to reflect only the fees we receive from arranging these services. Previously, we recorded this revenue on a gross basis, thus overstating revenue and cost of services by the same amount. As a result, we corrected the accompanying Condensed Consolidated Statements of Operations for the three and nine months ended September 30, 2019 related to this gross-to-net adjustment. We determined that the error is not material to the previously issued financial statements. Note 2 – Revenue and Related Contract Costs and Contract Liabilities and Note 22 – Segment Information reflects this change.
|
| Three Months Ended September 30, 2019 |
|
| Nine Months Ended September 30, 2019 |
| ||||||||||
(in thousands) |
| Services Revenue |
|
| Cost of Services |
|
| Services Revenue |
|
| Cost of Services |
| ||||
As previously reported |
| $ | 300,446 |
|
| $ | 256,296 |
|
| $ | 898,746 |
|
| $ | 825,806 |
|
Gross to net correction for GES North America |
|
| (6,859 | ) |
|
| (6,859 | ) |
|
| (32,081 | ) |
|
| (32,081 | ) |
Gross to net correction for GES EMEA |
|
| (1,886 | ) |
|
| (1,886 | ) |
|
| (8,594 | ) |
|
| (8,594 | ) |
Total as corrected |
| $ | 291,701 |
|
| $ | 247,551 |
|
| $ | 858,071 |
|
| $ | 785,131 |
|
Impact of Recent Accounting Pronouncements
The following table provides a brief description of recent accounting pronouncements:
Standard | Description | Date of adoption | Effect on the financial statements | |||
Standards Not Yet Adopted | ||||||
ASU 2019-12, Income Taxes (Topic 740) Simplifying the Accounting for Income Taxes | The amendment enhances and simplifies various aspects of the income tax accounting guidance, including requirements such as ownership changes in investments, and interim-period accounting for enacted changes in tax law. | 1/1/2021 | We are currently evaluating the potential impact of the adoption of this new guidance on our consolidated financial statements. We do not expect this new guidance to have a material impact on our consolidated financial statements. | |||
ASU 2020-06, Debt - Debt with Conversion and Other Options (Subtopic 470-20) and Derivatives and Hedging - Contracts in Entity’s Own Equity (Subtopic 815-40) | The amendment simplifies the accounting for convertible instruments by reducing the number of accounting models available for convertible debt instruments and convertible preferred stock. The amendment also requires expanded disclosures about the terms and features of convertible instruments. Early adoption is permitted, but no earlier than fiscal years beginning after December 15, 2020. | 1/1/2022 | We are currently evaluating the potential impact of the adoption of this new guidance on our consolidated financial statements and if there are applicable provisions that will simplify our accounting or reporting we will likely pursue early adoption. |
Standard | Description | Date of adoption | Effect on the financial statements | |||
Standards Recently Adopted | ||||||
ASU 2016-13, Financial Instruments – Credit Losses (Topic 326) - Measurement of Credit Losses on Financial Instruments | The amendment eliminates the incurred credit loss impairment methodology and replaces it with an expected credit loss concept based on historical experience, current conditions, and reasonable and supportable forecasts. | 1/1/2020 | We adopted this new standard on a modified retrospective basis. The adoption of this new standard on January 1, 2020 did not have a material impact on our condensed consolidated financial statements. | |||
ASU 2020-04, Reference Rate Reform (Topic 848) | The amendment provides temporary optional guidance to ease the potential burden in accounting for reference rate reform. Topic 848 provides optional expedients and exceptions for applying U.S. GAAP to transactions affected by reference rate reform if certain criteria are met. | 3/12/2020 | Topic 848 was effective beginning on March 12, 2020, and we will apply the amendments prospectively through December 31, 2022. There was no impact to our condensed consolidated financial statements as a result of adopting this amendment. |
Significant Accounting Policies
Use of Estimates
The preparation of financial statements in conformity with U.S. 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 things, the fair value of Viad’s reporting units used to perform annualthings: impairment testing of recorded goodwill;goodwill and intangible assets and long-lived assets; allowances for uncollectible accounts receivable; sales reserve allowances; provisions for income taxes, including uncertain tax positions; valuation allowances related to deferred tax assets; liabilities for losses related to self-insured liability claims; liabilities for losses related to environmental remediation obligations; sublease income associated with restructuring liabilities; assumptions used to measure pension and postretirement benefit costs and obligations; assumptionsshare-based compensation costs; the discount rates used to determine share-based compensation costs undervalue lease obligations; the fairredemption value method;of redeemable noncontrolling interests; and the allocation of purchase price of acquired businesses. Actual results could differ from these and other estimates.
Insurance RecoveriesRevenue Recognition
Receipts from insurance up to theRevenue is measured based on a specified amount of the recognized losses are considered recoveriesconsideration in a contract with a customer, net of commissions paid to customers and are accounted foramounts collected on behalf of third parties. We recognize revenue when they are probablea performance obligation is satisfied by transferring control 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 recognizedproduct or service to a customer.
GES’ service revenue is not recognized until all contingencies relating to the insurance claim have been resolved.
On December 29, 2016, the Mount Royal Hotel was damaged by a fire and closed. During the fourth quarter of 2016, the Company 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 Viad’s property and business interruption insurance. During July 2017, Viad resolvedprimarily derived through its property and business interruption insurance claims for a total of $36.3 million, of which $9.0 million was received during the first six months of 2017 with the remainder received during the third quarter. The Company 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, $2.2 million was recorded as a business interruption gain for the recovery of lost profits, $1.1 million was recorded as contra-expense to offset non-capitalizable costs incurred by the Company, and the remaining $1.5 million was recorded as deferred revenue, which will be recognized over the periods when the business interruption losses are actually incurred.
Nature of Business
Viad is an international experiential services company with operations in the United States, Canada, the United Kingdom, continental Europe, the United Arab Emirates, and Hong Kong. Viad is committed to providing unforgettable experiences to its clients and guests. Viad operates through three reportable business segments: GES U.S., GES International (collectively, “GES”), and Pursuit.
GES
GES is a global, full-service provider for live events that produces exhibitions, conferences, corporate events, and consumer events. GES offers a comprehensive range of live event services and a full suite of audio-visual services from creative and technology to content and design, along with online tools powered by next generation technologies that help clients easily manage the complexities of their events.
GES’ clients include event organizers and corporate brand marketers. Corporate brand marketers include exhibitorsincluding Core Services, Event Technology, and domesticAudio-Visual. GES’ service revenue is earned over time over the duration
of the exhibition, conference, or corporate event, which generally lasts one to three days. GES’ product revenue is derived from the build of exhibits and international corporationsenvironments 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 admissions, accommodations, 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.
Noncontrolling Interests – Non-redeemable and Redeemable
Non-redeemable noncontrolling interest represents the portion of equity in a subsidiary that wantis not attributable, directly or indirectly, to promoteus. Our non-redeemable noncontrolling interest relates to the 20% equity ownership interest that we do not own in Glacier Park, Inc., the 40% equity interest that we do not own in the Mountain Park Lodges, and the 49% equity interest that we do not own in the new entity that will operate the Pursuit Sky Lagoon attraction. We report non-redeemable noncontrolling interest within stockholders’ equity in the Condensed Consolidated Balance Sheets. The amount of consolidated net income or loss attributable to Viad and the non-redeemable noncontrolling interest is presented in the Condensed Consolidated Statements of Operations.
We consider noncontrolling interests with redemption features that are not solely within our control to be redeemable noncontrolling interests. Our redeemable noncontrolling interest relates to our 54.5% equity ownership interest in Esja Attractions ehf. (“Esja”), which owns the FlyOver Iceland attraction. The Esja shareholders agreement contains a put option that gives the minority Esja shareholders the right to sell (or “put”) their brands, servicesEsja shares to us based on a calculated formula within a predefined term. This redeemable noncontrolling interest is considered temporary equity and innovations, feature new products,we report it between liabilities and build business relationships. GES serves corporate brand marketersstockholders’ equity in the Condensed Consolidated Balance Sheets. The amount of the net income or loss attributable to redeemable noncontrolling interests is recorded in the Condensed Consolidated Statements of Operations and the accretion of the redemption value is recorded as an adjustment to retained earnings and is included in our income per share. Refer to Note 21 – Redeemable Noncontrolling Interest for additional information.
Convertible Preferred Stock
We record shares of convertible preferred stock at fair value on the date of issuance, net of issuance costs. Redeemable preferred stock (including preferred stock that features redemption rights that are either within the control of the holder or subject to redemption upon the occurrence of uncertain events not solely within our control) is classified as temporary equity and is reported between liabilities and stockholders’ equity on the Condensed Consolidated Balance Sheets.
Leases
We recognize a right-of-use (“ROU”) asset and lease liability on the balance sheet and classify leases as either finance or operating leases. The classification of the lease determines whether we recognize the lease expense on an effective interest method basis (finance lease) or on a straight-line basis (operating lease) over the lease term. In determining whether an agreement contains a lease, we consider if we have a right to control the use of the underlying asset during the lease term in exchange for an obligation to make lease payments arising from the lease. We recognize ROU assets and lease liabilities at commencement date, which is when they exhibit at showsthe underlying asset is available for use to a lessee, based on the present value of lease payments over the lease term.
Our operating and when GES is engagedfinance 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 manage their global exhibit program or produce their proprietary corporate events.
Pursuit
Pursuit is a collection of iconic natural23 years. Our equipment leases comprise mainly vehicles, hardware, and cultural destination travel experiences that enjoy perennial demand. Pursuit offers guests distinctive and world renowned experiences through its collection of unique hotels, lodges, recreational attractions, and transportation services. Pursuit is composed of four lines of business: (i) Hospitality; (ii) Attractions; (iii) Transportation, and (iv) 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 Vancouveroffice equipment, each with various lease terms. Our land leases comprise mainly leases in Canada and Glacier, Denali,Iceland on which our hotels or attractions are located and Kenai Fjords National Parkshave lease terms ranging up to 47 years.
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. We evaluate the reasonably certain threshold at lease commencement, and it is typically met if we identify substantial economic incentives or termination penalties. We do not include variable leases and variable non-lease components in the United States. Pursuitcalculation of the ROU asset and corresponding lease liability. For facility leases, variable lease costs include the costs of common area maintenance, taxes, and insurance for which we pay our lessors an estimate that we adjust to actual expense on a quarterly or annual basis depending on the underlying contract terms. We expense these variable lease payments as incurred. Our lease agreements do not contain any significant residual value guarantees or restrictive covenants.
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 composed of Brewster Travel Canada, the Alaska Collection, Glacier Park, Inc.,expected rate at which we would borrow funds to satisfy the scheduled lease liability payment streams commensurate with the lease term and FlyOver Canada.
the country.
ImpactWe are also a lessor to third party tenants who either lease certain portions of Recent Accounting Pronouncementsfacilities that we own or sublease certain portions of facilities that we lease. We record lease income from owned facilities as rental income and we record sublease income from leased facilities against lease expense in the Condensed Consolidated Statements of Operations. We classify all of our leases for which we are the lessor as operating leases.
Note 2. Revenue and Related Contract Costs and Contract Liabilities
GES’ performance obligations consist of services or product(s) outlined in a contract. While we often sign multi-year contracts 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. GES’ revenue is earned over time over the duration of the event, but as a practical expedient we recognize revenue when we have a right to invoice at the close of the exhibition, conference, or corporate event, which typically lasts one to three days, or when a customer cancels a contract. We recognize revenue for consumer events over the duration of the event. We recognize revenue for products 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, or when a customer cancels a contract. If a customer cancels a contract, then GES is generally contractually able to invoice the customer for contract costs that have been incurred by GES in preparing for 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. We recognize revenue when the service has been provided or the product has been delivered. When we extend credit, 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. We record these deposits as a contract liability, which 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 we recognize as a reduction of revenue. We include these amounts in the Condensed Consolidated Balance Sheets under the captions “Contract liabilities” and “Other deferred items and liabilities.”
Changes to contract liabilities are as follows:
(in thousands) |
|
|
|
|
Balance at December 31, 2019 |
| $ | 50,796 |
|
Cash additions |
|
| 130,018 |
|
Revenue recognized |
|
| (162,954 | ) |
Foreign exchange translation adjustment |
|
| (84 | ) |
Balance at September 30, 2020 |
| $ | 17,776 |
|
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. We expense costs associated with preliminary contract activities (i.e. proposal activities) 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. We include the deferred incremental costs of obtaining and fulfilling contracts in the Condensed Consolidated Balance Sheets under the captions “Current contract costs” and “Other investments and assets.”
Changes to contract costs are as follows:
(in thousands) |
|
|
|
|
Balance at December 31, 2019 |
| $ | 28,496 |
|
Additions |
|
| 16,710 |
|
Expenses |
|
| (22,774 | ) |
Cancelled |
|
| (9,840 | ) |
Foreign exchange translation adjustment |
|
| (479 | ) |
Balance at September 30, 2020 |
| $ | 12,113 |
|
As of September 30, 2020, capitalized contract costs consisted of $1.2 million to obtain contracts and $10.9 million to fulfill contracts. We did 0t recognize an impairment loss with respect to capitalized contract costs during the three and nine months ended September 30, 2020 or 2019.
Disaggregation of Revenue
The following table provides a brief descriptiontables disaggregate GES and Pursuit revenue by major product line, timing of recent accounting pronouncements:revenue recognition, and markets served:
GES
|
| Three Months Ended September 30, 2020 |
| |||||||||||||
(in thousands) |
| GES North America |
|
| GES EMEA |
|
| Intersegment Eliminations |
|
| Total |
| ||||
Services: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Core services |
| $ | 7,987 |
|
| $ | 2,003 |
|
| $ | — |
|
| $ | 9,990 |
|
Audio-visual |
|
| 933 |
|
|
| (40 | ) |
|
| — |
|
|
| 893 |
|
Event technology |
|
| 1,283 |
|
|
| 414 |
|
|
| — |
|
|
| 1,697 |
|
Intersegment eliminations |
|
| — |
|
|
| — |
|
|
| (284 | ) |
|
| (284 | ) |
Total services |
|
| 10,203 |
|
|
| 2,377 |
|
|
| (284 | ) |
|
| 12,296 |
|
Products: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Core products |
|
| 1,564 |
|
|
| 397 |
|
|
| — |
|
|
| 1,961 |
|
Total revenue |
| $ | 11,767 |
|
| $ | 2,774 |
|
| $ | (284 | ) |
| $ | 14,257 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Timing of revenue recognition: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Services transferred over time |
| $ | 10,203 |
|
| $ | 2,377 |
|
| $ | (284 | ) |
| $ | 12,296 |
|
Products transferred over time(1) |
|
| 232 |
|
|
| 15 |
|
|
| — |
|
|
| 247 |
|
Products transferred at a point in time |
|
| 1,332 |
|
|
| 382 |
|
|
| — |
|
|
| 1,714 |
|
Total revenue |
| $ | 11,767 |
|
| $ | 2,774 |
|
| $ | (284 | ) |
| $ | 14,257 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Markets: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Exhibitions |
| $ | 4,890 |
|
| $ | 2,323 |
|
| $ | — |
|
| $ | 7,213 |
|
Conferences |
|
| 1,099 |
|
|
| 367 |
|
|
| — |
|
|
| 1,466 |
|
Corporate events |
|
| 4,537 |
|
|
| 67 |
|
|
| — |
|
|
| 4,604 |
|
Consumer events |
|
| 1,241 |
|
|
| 17 |
|
|
| — |
|
|
| 1,258 |
|
Intersegment eliminations |
|
| — |
|
|
| — |
|
|
| (284 | ) |
|
| (284 | ) |
Total revenue |
| $ | 11,767 |
|
| $ | 2,774 |
|
| $ | (284 | ) |
| $ | 14,257 |
|
(1) | GES’ graphics product revenue is earned over time over the duration of the event as it is considered a part of the single performance obligation satisfied over time. |
|
| Nine Months Ended September 30, 2020 |
| |||||||||||||
(in thousands) |
| GES North America |
|
| GES EMEA |
|
| Intersegment Eliminations |
|
| Total |
| ||||
Services: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Core services |
| $ | 225,414 |
|
| $ | 33,350 |
|
| $ | — |
|
| $ | 258,764 |
|
Audio-visual |
|
| 18,661 |
|
|
| 3,549 |
|
|
| — |
|
|
| 22,210 |
|
Event technology |
|
| 7,946 |
|
|
| 4,126 |
|
|
| — |
|
|
| 12,072 |
|
Intersegment eliminations |
|
| — |
|
|
| — |
|
|
| (3,258 | ) |
|
| (3,258 | ) |
Total services |
|
| 252,021 |
|
|
| 41,025 |
|
|
| (3,258 | ) |
|
| 289,788 |
|
Products: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Core products |
|
| 21,402 |
|
|
| 11,071 |
|
|
| — |
|
|
| 32,473 |
|
Total revenue |
| $ | 273,423 |
|
| $ | 52,096 |
|
| $ | (3,258 | ) |
| $ | 322,261 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Timing of revenue recognition: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Services transferred over time |
| $ | 252,021 |
|
| $ | 41,025 |
|
| $ | (3,258 | ) |
| $ | 289,788 |
|
Products transferred over time(1) |
|
| 11,035 |
|
|
| 2,407 |
|
|
| — |
|
|
| 13,442 |
|
Products transferred at a point in time |
|
| 10,367 |
|
|
| 8,664 |
|
|
| — |
|
|
| 19,031 |
|
Total revenue |
| $ | 273,423 |
|
| $ | 52,096 |
|
| $ | (3,258 | ) |
| $ | 322,261 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Markets: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Exhibitions |
| $ | 203,671 |
|
| $ | 39,001 |
|
| $ | — |
|
| $ | 242,672 |
|
Conferences |
|
| 39,626 |
|
|
| 7,618 |
|
|
| — |
|
|
| 47,244 |
|
Corporate events |
|
| 24,012 |
|
|
| 5,308 |
|
|
| — |
|
|
| 29,320 |
|
Consumer events |
|
| 6,114 |
|
|
| 169 |
|
|
| — |
|
|
| 6,283 |
|
Intersegment eliminations |
|
| — |
|
|
| — |
|
|
| (3,258 | ) |
|
| (3,258 | ) |
Total revenue |
| $ | 273,423 |
|
| $ | 52,096 |
|
| $ | (3,258 | ) |
| $ | 322,261 |
|
| GES’ graphics product revenue is earned over time over the duration of the event as it is considered a part of the single performance obligation satisfied over time. |
|
| Three Months Ended September 30, 2019 |
| |||||||||||||
(in thousands) |
| GES North America |
|
| GES EMEA |
|
| Intersegment Eliminations |
|
| Total |
| ||||
Services: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Core services |
| $ | 148,722 |
|
| $ | 20,539 |
|
| $ | — |
|
| $ | 169,261 |
|
Audio-visual |
|
| 18,742 |
|
|
| 4,402 |
|
|
| — |
|
|
| 23,144 |
|
Event technology |
|
| 4,760 |
|
|
| 1,414 |
|
|
| — |
|
|
| 6,174 |
|
Intersegment eliminations |
|
| — |
|
|
| — |
|
|
| (5,724 | ) |
|
| (5,724 | ) |
Total services |
|
| 172,224 |
|
|
| 26,355 |
|
|
| (5,724 | ) |
|
| 192,855 |
|
Products: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Core products |
|
| 12,900 |
|
|
| 12,945 |
|
|
| — |
|
|
| 25,845 |
|
Total revenue |
| $ | 185,124 |
|
| $ | 39,300 |
|
| $ | (5,724 | ) |
| $ | 218,700 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Timing of revenue recognition: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Services transferred over time |
| $ | 172,224 |
|
| $ | 26,355 |
|
| $ | (5,724 | ) |
| $ | 192,855 |
|
Products transferred over time(1) |
|
| 10,558 |
|
|
| 2,305 |
|
|
| — |
|
|
| 12,863 |
|
Products transferred at a point in time |
|
| 2,342 |
|
|
| 10,640 |
|
|
| — |
|
|
| 12,982 |
|
Total revenue |
| $ | 185,124 |
|
| $ | 39,300 |
|
| $ | (5,724 | ) |
| $ | 218,700 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Markets: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Exhibitions |
| $ | 79,589 |
|
| $ | 29,140 |
|
| $ | — |
|
| $ | 108,729 |
|
Conferences |
|
| 60,537 |
|
|
| 4,938 |
|
|
| — |
|
|
| 65,475 |
|
Corporate events |
|
| 39,370 |
|
|
| 5,020 |
|
|
| — |
|
|
| 44,390 |
|
Consumer events |
|
| 5,628 |
|
|
| 202 |
|
|
| — |
|
|
| 5,830 |
|
Intersegment eliminations |
|
| — |
|
|
| — |
|
|
| (5,724 | ) |
|
| (5,724 | ) |
Total revenue |
| $ | 185,124 |
|
| $ | 39,300 |
|
| $ | (5,724 | ) |
| $ | 218,700 |
|
(1) |
|
|
| |||
| ||||||
|
|
|
| |||
|
|
|
| |||
|
|
|
| |||
|
|
|
|
|
| Nine Months Ended September 30, 2019 |
| |||||||||||||
(in thousands) |
| GES North America |
|
| GES EMEA |
|
| Intersegment Eliminations |
|
| Total |
| ||||
Services: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Core services |
| $ | 531,485 |
|
| $ | 86,715 |
|
| $ | — |
|
| $ | 618,200 |
|
Audio-visual |
|
| 61,323 |
|
|
| 15,171 |
|
|
| — |
|
|
| 76,494 |
|
Event technology |
|
| 23,368 |
|
|
| 6,501 |
|
|
| — |
|
|
| 29,869 |
|
Intersegment eliminations |
|
| — |
|
|
| — |
|
|
| (14,731 | ) |
|
| (14,731 | ) |
Total services |
|
| 616,176 |
|
|
| 108,387 |
|
|
| (14,731 | ) |
|
| 709,832 |
|
Products: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Core products |
|
| 50,649 |
|
|
| 48,086 |
|
|
| — |
|
|
| 98,735 |
|
Total revenue |
| $ | 666,825 |
|
| $ | 156,473 |
|
| $ | (14,731 | ) |
| $ | 808,567 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Timing of revenue recognition: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Services transferred over time |
| $ | 616,176 |
|
| $ | 108,387 |
|
| $ | (14,731 | ) |
| $ | 709,832 |
|
Products transferred over time(1) |
|
| 33,601 |
|
|
| 10,595 |
|
|
| — |
|
|
| 44,196 |
|
Products transferred at a point in time |
|
| 17,048 |
|
|
| 37,491 |
|
|
| — |
|
|
| 54,539 |
|
Total revenue |
| $ | 666,825 |
|
| $ | 156,473 |
|
| $ | (14,731 | ) |
| $ | 808,567 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Markets: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Exhibitions |
| $ | 349,106 |
|
| $ | 119,189 |
|
| $ | — |
|
| $ | 468,295 |
|
Conferences |
|
| 195,635 |
|
|
| 17,170 |
|
|
| — |
|
|
| 212,805 |
|
Corporate events |
|
| 102,525 |
|
|
| 19,165 |
|
|
| — |
|
|
| 121,690 |
|
Consumer events |
|
| 19,559 |
|
|
| 949 |
|
|
| — |
|
|
| 20,508 |
|
Intersegment eliminations |
|
| — |
|
|
| — |
|
|
| (14,731 | ) |
|
| (14,731 | ) |
Total revenue |
| $ | 666,825 |
|
| $ | 156,473 |
|
| $ | (14,731 | ) |
| $ | 808,567 |
|
|
|
| ||||
| ||||||
|
|
|
| |||
|
|
|
| |||
|
|
|
| |||
|
|
|
| |||
| ||||||
|
|
|
| |||
|
|
|
|
|
| Three Months Ended |
|
| Nine Months Ended |
| ||||||||||
|
| September 30, |
|
| September 30, |
| ||||||||||
(in thousands) |
| 2020 |
|
| 2019 |
|
| 2020 |
|
| 2019 |
| ||||
Services: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Admissions |
| $ | 12,229 |
|
| $ | 49,353 |
|
| $ | 17,865 |
|
| $ | 76,034 |
|
Accommodations |
|
| 18,021 |
|
|
| 41,292 |
|
|
| 23,994 |
|
|
| 56,636 |
|
Transportation |
|
| 445 |
|
|
| 6,868 |
|
|
| 2,513 |
|
|
| 12,817 |
|
Travel planning |
|
| 855 |
|
|
| 2,004 |
|
|
| 1,484 |
|
|
| 4,107 |
|
Intersegment eliminations |
|
| (144 | ) |
|
| (671 | ) |
|
| (261 | ) |
|
| (1,355 | ) |
Total services revenue |
|
| 31,406 |
|
|
| 98,846 |
|
|
| 45,595 |
|
|
| 148,239 |
|
Products: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Food and beverage |
|
| 6,783 |
|
|
| 19,333 |
|
|
| 9,047 |
|
|
| 28,903 |
|
Retail operations |
|
| 10,626 |
|
|
| 16,864 |
|
|
| 12,960 |
|
|
| 23,977 |
|
Total products revenue |
|
| 17,409 |
|
|
| 36,197 |
|
|
| 22,007 |
|
|
| 52,880 |
|
Total revenue |
| $ | 48,815 |
|
| $ | 135,043 |
|
| $ | 67,602 |
|
| $ | 201,119 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Timing of revenue recognition: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Services transferred over time |
| $ | 31,406 |
|
| $ | 98,846 |
|
| $ | 45,595 |
|
| $ | 148,239 |
|
Products transferred at a point in time |
|
| 17,409 |
|
|
| 36,197 |
|
|
| 22,007 |
|
|
| 52,880 |
|
Total revenue |
| $ | 48,815 |
|
| $ | 135,043 |
|
| $ | 67,602 |
|
| $ | 201,119 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Markets: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Banff Jasper Collection |
| $ | 26,395 |
|
| $ | 75,337 |
|
| $ | 39,234 |
|
| $ | 116,433 |
|
Alaska Collection |
|
| 5,436 |
|
|
| 26,909 |
|
|
| 6,167 |
|
|
| 39,287 |
|
Glacier Park Collection |
|
| 14,929 |
|
|
| 28,098 |
|
|
| 16,813 |
|
|
| 36,296 |
|
FlyOver |
|
| 2,055 |
|
|
| 4,699 |
|
|
| 5,388 |
|
|
| 9,103 |
|
Total revenue |
| $ | 48,815 |
|
| $ | 135,043 |
|
| $ | 67,602 |
|
| $ | 201,119 |
|
Note 2. 3. Share-Based Compensation
The following table summarizesWe grant share-based compensation expense:
|
| Three Months Ended |
|
| Nine Months Ended |
| ||||||||||
|
| September 30, |
|
| September 30, |
| ||||||||||
(in thousands) |
| 2017 |
|
| 2016 |
|
| 2017 |
|
| 2016 |
| ||||
Performance unit incentive plan (“PUP”) |
| $ | 3,941 |
|
| $ | 1,601 |
|
| $ | 7,184 |
|
| $ | 2,952 |
|
Restricted stock |
|
| 672 |
|
|
| 523 |
|
|
| 2,069 |
|
|
| 1,597 |
|
Restricted stock units |
|
| 124 |
|
|
| 86 |
|
|
| 231 |
|
|
| 160 |
|
Share-based compensation before income tax benefit |
|
| 4,737 |
|
|
| 2,210 |
|
|
| 9,484 |
|
|
| 4,709 |
|
Income tax benefit |
|
| (1,752 | ) |
|
| (812 | ) |
|
| (3,524 | ) |
|
| (1,750 | ) |
Share-based compensation, net of income tax benefit |
| $ | 2,985 |
|
| $ | 1,398 |
|
| $ | 5,960 |
|
| $ | 2,959 |
|
Viad did not record any share-based compensation expense through restructuring expense duringawards to our officers, directors, and certain key employees pursuant to the three months ended September 30, 2017 or 2016, and recorded zero and $0.2 million for the nine months ended September 30, 2017 and 2016, respectively.
The following table summarizes the activity of the outstanding share-based compensation awards:
|
| PUP Awards |
|
| Restricted Stock |
|
| Restricted Stock Units |
| |||||||||||||||
|
| Shares |
|
| Weighted-Average Grant Date Fair Value |
|
| Shares |
|
| Weighted-Average Grant Date Fair Value |
|
| Shares |
|
| Weighted-Average Grant Date Fair Value |
| ||||||
Balance at December 31, 2016 |
|
| 255,505 |
|
| $ | 26.11 |
|
|
| 267,051 |
|
| $ | 25.96 |
|
|
| 15,982 |
|
| $ | 25.58 |
|
Granted |
|
| 73,557 |
|
| $ | 47.44 |
|
|
| 64,648 |
|
| $ | 46.64 |
|
|
| 2,950 |
|
| $ | 47.45 |
|
Vested |
|
| (76,082 | ) |
| $ | 23.66 |
|
|
| (79,104 | ) |
| $ | 24.01 |
|
|
| (6,182 | ) |
| $ | 25.05 |
|
Forfeited |
|
| (5,911 | ) |
| $ | 30.64 |
|
|
| (9,807 | ) |
| $ | 33.84 |
|
|
| — |
|
| $ | — |
|
Balance at September 30, 2017 |
|
| 247,069 |
|
| $ | 33.10 |
|
|
| 242,788 |
|
| $ | 31.79 |
|
|
| 12,750 |
|
| $ | 30.90 |
|
Viad Corp Omnibus Incentive Plan
The 2017 Viad Corp Omnibus Incentive Plan (the “2017 Plan”) was approved by Viad stockholders and was effective May 18, 2017. The 2017 Plan replaced the Company’s 2007 Viad Corp Omnibus Stock Plan (the “2007 Plan”). No further awards may be made under the 2007 Plan, although awards previously granted under the 2007 Plan will remain outstanding in accordance with their respective terms. The 2017 Plan has a 10-year lifeterm and provides for the following types of awards: (a) incentive and non-qualified stock options,options; (b) restricted stock awards and restricted stock units,units; (c) performance units or performance shares,shares; (d) stock appreciation rights,rights; (e) cash-based awards,awards; and (f) certain other stock-based awards. In June 2017, Viadwe registered 1,750,000 shares of common stock issuable under the 2017 Plan. As of September 30, 2017,2020, there were 1,746,9271,077,197 shares available for future grant under the 2017 Plan.
The following table summarizes share-based compensation (income) expense:
|
| Three Months Ended |
|
| Nine Months Ended |
| ||||||||||
|
| September 30, |
|
| September 30, |
| ||||||||||
(in thousands) |
| 2020 |
|
| 2019 |
|
| 2020 |
|
| 2019 |
| ||||
Performance unit incentive plan (“PUP”) |
| $ | 149 |
|
| $ | 1,033 |
|
| $ | (2,596 | ) |
| $ | 4,013 |
|
Restricted stock awards and restricted stock units |
|
| 1,698 |
|
|
| 798 |
|
|
| 3,155 |
|
|
| 2,435 |
|
Stock options |
|
| 90 |
|
|
| — |
|
|
| 90 |
|
|
| — |
|
Share-based compensation expense before income tax |
|
| 1,937 |
|
|
| 1,831 |
|
|
| 649 |
|
|
| 6,448 |
|
Income tax benefit(1) |
|
| — |
|
|
| (460 | ) |
|
| — |
|
|
| (1,625 | ) |
Share-based compensation expense, net of income tax |
| $ | 1,937 |
|
| $ | 1,371 |
|
| $ | 649 |
|
| $ | 4,823 |
|
(1) | There was no income tax benefit for the three and nine months ended September 30, 2020 due to the valuation allowance on our deferred tax assets. Refer to Note 16 – Income Taxes. |
PUP Awards
In February 2016, the PUP Plan was amended to provide that PUP awards earned underare performance-based restricted stock units that are tied to our stock price and the 2007 Plan may be payable in the form of cash or in shares of Viad common stock (or a combination of both). Previously, payouts could only be made in cash. The vesting of shares is based uponexpected achievement of certain performance-based criteria. The performance periodvesting of PUP award shares is based upon the achievement of the performance-based criteria over a three-year period. We account for PUP awards that will be settled in shares of our common stock as equity-based awards. We measure share-based compensation expense of equity-based awards at fair value on the grant date on a straight-line basis over the vesting period. The estimated number of shares to be achieved is three years.updated each reporting period. We account for PUP awards that will be settled in cash as liability-based awards. We measure share-based compensation expense of liability-based awards at fair value at each reporting date until the date of settlement. Forfeitures are accounted for as they occur.
During the nine months ended September 30, 2017, Viad2020, we granted $3.5PUP awards with a grant date fair value of $4.8 million of PUP awards of which $1.4$1.8 million are payable in shares. AsLiabilities related to PUP awards were $0.4 million as of September 30, 20172020 and $5.3 million as of December 31, 2016, Viad had recorded liabilities2019. During the nine months ended September 30, 2020, the value of $10.3 millionthe PUP awards decreased due to the reduction of our estimated performance achievement and $7.6 million, respectively, related to PUP awards. the decline in our stock price as a result of the COVID-19 pandemic.
In March 2017, the2020, PUP awards granted in 20142017 vested and cash payouts of $3.7we paid $2.6 million in cash. NaN PUP awards were distributed.paid in shares in 2020. In March 2016, the2019, PUP awards granted in 20132016 vested and we paid $5.6 million in cash payoutsand $3.4 million in shares. In 2019, we withheld 25,771 shares for $1.5 million related to tax withholding requirements on vested PUP awards paid in shares.
The following table summarizes the activity of $0.2 million were distributed.the outstanding PUP awards:
|
| Equity-Based PUP Awards |
|
| Liability-Based PUP Awards |
| ||||||||||
|
| Shares |
|
| Weighted-Average Grant Date Fair Value |
|
| Shares |
|
| Weighted-Average Grant Date Fair Value |
| ||||
Balance at December 31, 2019 |
|
| 59,714 |
|
| $ | 52.10 |
|
|
| 155,190 |
|
| $ | 52.53 |
|
Granted |
|
| 32,367 |
|
| $ | 56.23 |
|
|
| 52,531 |
|
| $ | 56.10 |
|
Vested |
|
| — |
|
| $ | — |
|
|
| (67,866 | ) |
| $ | 47.43 |
|
Forfeited |
|
| — |
|
| $ | — |
|
|
| (18,370 | ) |
| $ | 56.40 |
|
Balance at September 30, 2020 |
|
| 92,081 |
|
| $ | 55.49 |
|
|
| 121,485 |
|
| $ | 55.08 |
|
Restricted Stock Awards and Restricted Stock Units
Restricted Stockstock awards and restricted stock units are service-based awards. We account for restricted stock awards and restricted stock units that will be settled in shares of our common stock as equity-based awards. We measure share-based compensation expense of equity-based awards at fair value on the grant date on a straight-line basis over the vesting period.
We account for restricted stock units that will be settled in cash as liability-based awards. We measure share-based compensation expense of liability-based awards at fair value at each reporting date until the date of settlement. Forfeitures are accounted for as they occur.
As of September 30, 2017,2020, the unamortized cost of all outstanding equity-based restricted stock awards and restricted stock units was $3.1$2.6 million, which Viad expectswe expect to recognize in the consolidated financial statements over a weighted-average period of approximately 1.2 years. DuringWe repurchased 17,961 shares for $1.1 million during the nine months ended September 30, 20172020 and 2016, the Company repurchased 26,91624,586 shares for $1.3$1.4 million and 24,432 shares for $0.7 million, respectively,during the nine months ended September 30, 2019 related to tax withholding requirements on vested share-based awards.
AsAggregate liabilities related to liability-based restricted stock units were $0.8 million as of both September 30, 20172020 and $0.4 million as of December 31, 2016, Viad had aggregate liabilities recorded of $0.4 million related to restricted stock units. In February 2017, portions of2019. During the 2012 and 2014nine months ended September 30, 2020, restricted stock units vested, and we paid $0.2 million in cash payouts of $0.3and $0.8 million were distributed. In February 2016, portions ofin shares. During the 2011, 2012, and 2013nine months ended September 30, 2019, restricted stock units vested, and we paid $0.3 million in cash payouts ofand $0.2 million were distributed.in shares.
The following table summarizes the activity of the outstanding restricted stock awards and restricted stock units:
|
| Equity-Based Restricted Stock Awards |
|
| Equity-Based Restricted Stock Units |
|
| Liability-Based Restricted Stock Units |
| |||||||||||||||
|
| Shares |
|
| Weighted-Average Grant Date Fair Value |
|
| Shares |
|
| Weighted-Average Grant Date Fair Value |
|
| Shares |
|
| Weighted-Average Grant Date Fair Value |
| ||||||
Balance at December 31, 2019 |
|
| 136,123 |
|
| $ | 52.66 |
|
|
| — |
|
| $ | — |
|
|
| 11,623 |
|
| $ | 52.17 |
|
Granted |
|
| 55,171 |
|
| $ | 51.06 |
|
|
| 232,435 |
|
| $ | 19.44 |
|
|
| 3,952 |
|
| $ | 50.43 |
|
Vested |
|
| (64,684 | ) |
| $ | 49.85 |
|
|
| (38,982 | ) |
| $ | 19.30 |
|
|
| (2,815 | ) |
| $ | 47.45 |
|
Forfeited |
|
| (15,192 | ) |
| $ | 56.54 |
|
|
| (2,183 | ) |
| $ | 19.30 |
|
|
| (1,634 | ) |
| $ | 56.59 |
|
Balance at September 30, 2020 |
|
| 111,418 |
|
| $ | 52.97 |
|
|
| 191,270 |
|
| $ | 19.47 |
|
|
| 11,126 |
|
| $ | 52.10 |
|
Stock Options
DuringWe grant non-qualified stock options that are performance-based, as well as non-qualified options that are service-based. The performance-based awards are recognized on a straight-line basis over the performance period ranging from 1.4 to 3.4 years, and the underlying shares expected to be settled are adjusted each reporting period based on estimated future achievement of the respective performance metrics. The service-based awards are recognized on a straight-line basis over the requisite service period on a graded-vesting schedule over three and nine months ended September 30, 2017, there was noyears.
The following table summarizes stock option activity. As of both September 30, 2017 and December 31, 2016, there were 63,773activity:
|
| Shares |
|
| Weighted-Average Exercise Price |
|
| Aggregate Intrinsic Value(1) |
| |||
Options outstanding and exercisable at December 31, 2019 |
|
| 41,143 |
|
| $ | 16.62 |
|
|
|
|
|
Granted |
|
| 204,150 |
|
| $ | 19.98 |
|
|
|
|
|
Exercised |
|
| (41,143 | ) |
| $ | 16.62 |
|
|
|
|
|
Options outstanding at September 30, 2020 |
|
| 204,150 |
|
| $ | 19.98 |
|
| $ | 229,500 |
|
Options exercisable at September 30, 2020 |
|
| — |
|
| $ | — |
|
| $ | — |
|
(1) | The aggregate intrinsic value of stock options outstanding represents the difference between our closing stock price at the end of the reporting period and the exercise price, multiplied by the number of in-the-money stock options. |
The following table summarizes stock options outstanding and exercisable with a weighted-average exercise priceas of $16.62. September 30, 2020:
|
|
|
| Options Outstanding |
|
| Options Exercisable |
| ||||||||||||||
Range of exercise prices |
|
| Shares |
|
| Weighted-Average Remaining Contractual Life (in years) |
|
| Weighted-Average Exercise Price |
|
| Shares |
|
| Weighted-Average Exercise Price |
| ||||||
$ | 19.30 |
|
|
| 150,000 |
|
|
| 8.25 |
|
| $ | 19.30 |
|
|
| — |
|
| $ | — |
|
$ | 21.85 |
|
|
| 54,150 |
|
|
| 6.91 |
|
| $ | 21.85 |
|
|
| — |
|
| $ | — |
|
$19.30 - $21.85 |
|
|
| 204,150 |
|
|
| 7.89 |
|
| $ | 19.98 |
|
|
| — |
|
| $ | — |
|
The fair value of stock options granted in 2020 was estimated on the date of grant using the Black-Scholes option pricing model. Following is additional information on stock options and the underlying assumptions used in assessing fair value:
|
| Nine Months Ended |
| |
|
| September 30, 2020 |
| |
Assumptions used to estimate fair value of stock options granted: |
|
|
|
|
Risk-free interest rate |
| 0.27% - 0.31% |
| |
Expected life |
| 4.3 - 5.4 years |
| |
Expected volatility |
| 46.9% - 52.2% |
| |
Expected dividend yield |
|
| — |
|
Weighted average grant-date fair value per share of options granted |
| $ | 8.38 |
|
Cash received from exercise of options (in thousands) |
| $ | 2,077 |
|
As of September 30, 2017, there were no2020, the total unrecognized costscompensation cost related to non-vested stock option awards.awards was $1.6 million. We expect to recognize such costs over a weighted-average period of approximately 2.5 years. NaN stock options were granted in 2019.
Note 3. Acquisition of Businesses4. Acquisitions
FlyOver Canada2019 Acquisitions
Belton Chalet
On December 29, 2016, the CompanyMay 16, 2019, we acquired the assets and operationsBelton Chalet in Glacier National Park for total cash consideration of FlyOver Canada, a recreational attraction that provides a virtual flight ride experience with a combination of motion seating, spectacular media, and visual effects including wind, scents, and mist. The purchase price was $68.8 million Canadian dollars (approximately $50.9 million U.S. dollars) in cash, subject to certain adjustments.
The following table summarizes the allocation of the aggregate purchase price paid and the amounts of assets acquired and liabilities assumed based on the estimated fair value as of the acquisition date. The allocation of the purchase price was completed as of March 31, 2017.
(in thousands) |
|
|
|
|
|
|
|
|
Purchase price paid as: |
|
|
|
|
|
|
|
|
Cash |
|
|
|
|
| $ | 50,920 |
|
Cash acquired |
|
|
|
|
|
| (6 | ) |
Purchase price, net of cash acquired |
|
|
|
|
|
| 50,914 |
|
|
|
|
|
|
|
|
|
|
Fair value of net assets acquired: |
|
|
|
|
|
|
|
|
Inventories |
| $ | 11 |
|
|
|
|
|
Prepaid expenses |
|
| 37 |
|
|
|
|
|
Property and equipment |
|
| 10,867 |
|
|
|
|
|
Intangible assets |
|
| 6,028 |
|
|
|
|
|
Total assets acquired |
|
| 16,943 |
|
|
|
|
|
Accrued liabilities |
|
| 118 |
|
|
|
|
|
Total liabilities assumed |
|
| 118 |
|
|
|
|
|
Total fair value of net assets acquired |
|
|
|
|
|
| 16,825 |
|
Excess purchase price over fair value of net assets acquired (“goodwill”) |
|
|
|
|
| $ | 34,089 |
|
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 values. The excess purchase price over the fair value of net assets acquired was recorded as goodwill. Goodwill of FlyOver Canada is included in the Pursuit business group and is a separate reporting unit. The primary factor that contributed to the purchase price resulting in the recognition of goodwill relates to future growth opportunities and the expansion of the FlyOver concept. Goodwill is expected to be deductible for tax purposes pursuant to Canadian tax regulations. The estimated values of current assets and liabilities were based upon their historical costs on the date of acquisition due to their short-term nature.$3.2 million. Transaction costs associated with the acquisition of FlyOver Canada were $0.1$0.3 million in 2017 and $0.5 million in 2016 andduring 2019, which are included in cost“Cost of services in Viad’s condensed consolidated statements of operations.
Identified intangible assets acquiredservices” in the FlyOver Canada acquisition totaled $6.0Consolidated Statements of Operations. We included these assets 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 and consistedCanadian dollars (approximately $76 million U.S. dollars).
As the majority owner of trade namesthese properties, we consolidate 100% of $3.7 million, customer relationships of $1.6 million, and non-compete agreements of $0.7 million. The weighted-average amortization period related to the intangible assets is 9.4 years.
The results of operations in our consolidated financial statements and record the 40% owners’ share of FlyOver Canada have beenthe income or loss attributable to non-redeemable noncontrolling interest.
Transaction costs associated with the Mountain Park Lodges were $0.9 million in 2019, which are included in Viad’s condensed“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 three months ended September 30, 2020, revenue and operating income related to the Mountain Park Lodges were $8.9 million and $4.4 million, respectively. During the nine months ended September 30, 2017,2020, revenue related to FlyOver Canada was $4.2 million and $8.0 million, respectively, and operating income was $2.2related to the Mountain Park Lodges were $12.9 million and $2.5$0.2 million, respectively.
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 was approximately 30.8 years.
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.
In March 2017, the Company completed the acquisition of the Poken event engagement technology for total cash consideration of $1.7 million, subject to certain adjustments. These assets have been included in Viad’s condensed consolidated financial statements from the date of acquisition.
Supplementary pro forma financial information
The following table summarizes the unaudited pro forma results of operations attributable to Viad, assuming the 2016 acquisitionscompletion of CATC Alaska Tourism Corporation (“CATC”) (acquired March 2016), the business of ON Event Services, LLC (“ON Services”) (acquired August 2016), and FlyOver Canada (acquired December 2016) had been completedMountain Park Lodges acquisition was on January 1, 2016:2019. We do not consider the Sky Lagoon attraction or the Belton Chalet significant acquisitions and accordingly, they are not included in the following pro forma results of operations:
|
| Three Months Ended |
|
| Nine Months Ended |
|
| Three Months Ended |
|
| Nine Months Ended |
| ||||
(in thousands, except per share data) |
| September 30, 2016 |
|
| September 30, 2016 |
|
| September 30, 2019 |
|
| September 30, 2019 |
| ||||
Revenue |
| $ | 389,877 |
|
| $ | 991,818 |
|
| $ | 362,488 |
|
| $ | 1,058,622 |
|
Depreciation and amortization |
| $ | 14,427 |
|
| $ | 39,565 |
|
| $ | 16,347 |
|
| $ | 46,695 |
|
Income from continuing operations |
| $ | 35,047 |
|
| $ | 47,734 |
|
| $ | 34,607 |
|
| $ | 28,709 |
|
Net income attributable to Viad |
| $ | 33,834 |
|
| $ | 46,198 |
|
| $ | 31,416 |
|
| $ | 26,765 |
|
Diluted income per share |
| $ | 1.67 |
|
| $ | 2.28 |
|
| $ | 1.53 |
|
| $ | 1.29 |
|
Basic income per share |
| $ | 1.67 |
|
| $ | 2.28 |
|
| $ | 1.53 |
|
| $ | 1.29 |
|
Note 4. 5. Inventories
We state inventories, which consist primarily of exhibit design and construction materials and supplies, as well as retail inventory, at the lower of cost (first-in, first-out and specific identification methods) or net realizable value.
The components of inventories consisted of the following:
|
| September 30, |
|
| December 31, |
|
| September 30, |
|
| December 31, |
| ||||
(in thousands) |
| 2017 |
|
| 2016 |
|
| 2020 |
|
| 2019 |
| ||||
Raw materials |
| $ | 18,455 |
|
| $ | 16,846 |
|
| $ | 10,796 |
|
| $ | 11,788 |
|
Work in process |
|
| 21,298 |
|
|
| 14,574 |
| ||||||||
Finished goods |
|
| 5,500 |
|
|
| 5,481 |
| ||||||||
Inventories |
| $ | 39,753 |
|
| $ | 31,420 |
|
| $ | 16,296 |
|
| $ | 17,269 |
|
Note 5. 6. Other Current Assets
Other current assets consisted of the following:
|
| September 30, |
|
| December 31, |
|
| September 30, |
|
| December 31, |
| ||||
(in thousands) |
| 2017 |
|
| 2016 |
|
| 2020 |
|
| 2019 |
| ||||
Prepaid vendor payments |
| $ | 6,407 |
|
| $ | 3,633 |
| ||||||||
Income tax receivable |
|
| 4,282 |
|
|
| 3,614 |
| ||||||||
Prepaid software maintenance |
|
| 3,435 |
|
|
| 2,804 |
|
| $ | 4,045 |
|
| $ | 3,875 |
|
Prepaid insurance |
|
| 3,030 |
|
|
| 2,479 |
|
|
| 2,565 |
|
|
| 5,573 |
|
Prepaid vendor payments |
|
| 2,106 |
|
|
| 4,698 |
| ||||||||
Prepaid taxes |
|
| 1,038 |
|
|
| 850 |
|
|
| 1,087 |
|
|
| 917 |
|
Prepaid rent |
|
| 769 |
|
|
| 327 |
| ||||||||
Income tax receivable |
|
| 162 |
|
|
| 13,250 |
| ||||||||
Prepaid other |
|
| 3,273 |
|
|
| 731 |
|
|
| 2,097 |
|
|
| 1,904 |
|
Other |
|
| 1,739 |
|
|
| 4,011 |
|
|
| 4,134 |
|
|
| 637 |
|
Other current assets |
| $ | 23,973 |
|
| $ | 18,449 |
|
| $ | 16,196 |
|
| $ | 30,854 |
|
Note 6. 7. Property and Equipment
Property and equipment consisted of the following:
|
| September 30, |
|
| December 31, |
|
| September 30, |
|
| December 31, |
| ||||
(in thousands) |
| 2017 |
|
| 2016 |
|
| 2020 |
|
| 2019 |
| ||||
Land and land interests |
| $ | 32,599 |
|
| $ | 31,670 |
|
| $ | 32,481 |
|
| $ | 34,532 |
|
Buildings and leasehold improvements |
|
| 214,844 |
|
|
| 185,987 |
|
|
| 374,549 |
|
|
| 377,754 |
|
Equipment and other |
|
| 347,461 |
|
|
| 326,868 |
|
|
| 400,085 |
|
|
| 417,239 |
|
Gross property and equipment |
|
| 594,904 |
|
|
| 544,525 |
|
|
| 807,115 |
|
|
| 829,525 |
|
Accumulated depreciation |
|
| (299,147 | ) |
|
| (264,667 | ) |
|
| (352,456 | ) |
|
| (353,974 | ) |
Property and equipment, net (excluding finance leases) |
|
| 454,659 |
|
|
| 475,551 |
| ||||||||
Finance lease right-of-use assets, net |
|
| 22,786 |
|
|
| 25,350 |
| ||||||||
Property and equipment, net |
| $ | 295,757 |
|
| $ | 279,858 |
|
| $ | 477,445 |
|
| $ | 500,901 |
|
Depreciation expense was $12.5 million and $10.0$11.5 million for the three months ended September 30, 20172020 and 2016, respectively, and $32.9 million and $25.1$35.1 million for the nine months ended September 30, 20172020. Depreciation expense was $12.7 million for the three months ended September 30, 2019 and 2016, respectively.
Non-cash increases to property and equipment related to assets acquired under capital leases were $1.1 million and $1.0$34.0 million for the nine months ended September 30, 20172019.
Amortization expense on finance lease assets was $0.9 million for the three months ended September 30, 2020 and 2016, respectively. Non-cash increases to property and equipment purchases in accounts payable and accrued liabilities were $0.8 million and $5.6$2.8 million for the nine months ended September 30, 20172020. Amortization expense on finance lease assets was $0.7 million for the three months ended September 30, 2019 and 2016, respectively.$1.9 million for the nine months ended September 30, 2019.
Property and equipment purchased through accounts payable and accrued liabilities decreased $6.3 million during the nine months ended September 30, 2020 and increased $2.0 million during the nine months ended September 30, 2019.
We recorded fixed asset impairment charges primarily related to capitalized software of $0.7 million during the three months ended September 30, 2020.
Note 7. 8. Other Investments and Assets
Other investments and assets consisted of the following:
|
| September 30, |
|
| December 31, |
|
| September 30, |
|
| December 31, |
| ||||
(in thousands) |
| 2017 |
|
| 2016 |
|
| 2020 |
|
| 2019 |
| ||||
Self-insured liability receivable |
| $ | 9,982 |
|
| $ | 9,982 |
| ||||||||
Contract costs |
|
| 4,464 |
|
|
| 3,961 |
| ||||||||
Other mutual funds |
|
| 3,136 |
|
|
| 3,107 |
| ||||||||
Cash surrender value of life insurance |
| $ | 23,167 |
|
| $ | 23,197 |
|
|
| — |
|
|
| 24,873 |
|
Self-insured liability receivable |
|
| 10,463 |
|
|
| 10,463 |
| ||||||||
Workers’ compensation insurance security deposits |
|
| 3,550 |
|
|
| 4,050 |
| ||||||||
Other mutual funds |
|
| 2,560 |
|
|
| 2,062 |
| ||||||||
Other |
|
| 7,005 |
|
|
| 4,525 |
|
|
| 2,355 |
|
|
| 3,196 |
|
Other investments and assets |
| $ | 46,745 |
|
| $ | 44,297 |
|
| $ | 19,937 |
|
| $ | 45,119 |
|
Note 8. 9. Goodwill and Other Intangible Assets
The changes in the carrying amount of goodwill wereare as follows:
(in thousands) |
| GES U.S. |
|
| GES International |
|
| Pursuit |
|
| Total |
| ||||
Balance at December 31, 2016 |
| $ | 148,277 |
|
| $ | 34,460 |
|
| $ | 71,285 |
|
| $ | 254,022 |
|
Business acquisitions |
|
| — |
|
|
| 1,060 |
|
|
| — |
|
|
| 1,060 |
|
Foreign currency translation adjustments |
|
| — |
|
|
| 3,084 |
|
|
| 5,753 |
|
|
| 8,837 |
|
Balance at September 30, 2017 |
| $ | 148,277 |
|
| $ | 38,604 |
|
| $ | 77,038 |
|
| $ | 263,919 |
|
(in thousands) |
| GES North America |
|
| GES EMEA |
|
| Pursuit |
|
| Total |
| ||||
Balance at December 31, 2019 |
| $ | 155,276 |
|
| $ | 30,829 |
|
| $ | 101,878 |
|
| $ | 287,983 |
|
Goodwill impairment |
|
| (155,276 | ) |
|
| (29,042 | ) |
|
| (1,757 | ) |
|
| (186,075 | ) |
Foreign currency translation adjustments |
|
| — |
|
|
| (1,787 | ) |
|
| (3,190 | ) |
|
| (4,977 | ) |
Balance at September 30, 2020 |
| $ | — |
|
| $ | — |
|
| $ | 96,931 |
|
| $ | 96,931 |
|
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.
In early March 2020, as a result of COVID-19 concerns, we began to see event postponements and cancellations at GES, as well as cancelled bookings at Pursuit. This quickly escalated into the shut-down of event activity and tourism as government mandated closures and stay-at-home orders went more broadly into effect around the world. As demand halted, we essentially placed our businesses into a state of hibernation to preserve cash. As government mandated closures and stay-at-home orders started to be lifted, we began to restart our business with enhanced health and safety protocols in place. We phased in most of Pursuit’s attractions and lodging operations starting in May and continuing into July. However, exhibition and event activity remain largely closed. For GES, we believe that as governments continue to lift restrictions, events in certain geographies will gradually increase.
During the three months ended March 31, 2020, we determined that an interim triggering event had occurred due to the deteriorating macroeconomic environment, disruptions to our operations, and the sustained decline in our stock price caused by COVID-19. As such, we performed an interim evaluation of goodwill as of March 31, 2020. As a result, we recorded non-cash goodwill impairment charges of $41.9 million associated with GES U.S., $29.0 million associated with GES EMEA, and $1.8 million associated with Pursuit’s Glacier Park Collection. We recorded an income tax benefit of $12.4 million during the three months ended March 31, 2020 related to these goodwill impairment charges. This income tax benefit was reversed during the second quarter of 2020 due to the recording of a valuation allowance. Refer to Note 16 – Income Taxes.
During the three months ended June 30, 2020, GES continued to experience event postponements and cancellations and we experienced further declines in our stock price. There had also been an increased spread of the COVID-19 virus throughout the United States, which resulted in further closures and government orders that we believed had increased the uncertainty regarding when the live event industry would re-commence and how long it would take to get back to similar pre-COVID-19 business levels. The uncertainty regarding the duration of the current domestic and global economic conditions and whether further deterioration in the macroeconomic environment would continue as a result of the COVID-19 pandemic was factored into our second quarter goodwill impairment analysis. As a result, we recorded a full impairment charge to the remaining GES goodwill balance of $113.1 million during the three months ended June 30, 2020. Our remaining goodwill balance as of September 30, 2020 of $96.9 million pertains to our Pursuit business.
During the three months ended September 30, 2020, the travel and hospitality industry continued to be negatively impacted by the COVID-19 pandemic. Although Pursuit’s reporting units continued to operate at a loss due to travel restrictions, as there were no significant changes to our outlook for the future years and the risk profile of the reporting units had not changed, we did not record any additional impairment charges during the third quarter. Additionally, we experienced a slight increase in our stock price during the three months ended September 30, 2020.
Given the evolving, uncertain nature of COVID-19, and the uncertain government and consumer reactions, the estimates and assumptions regarding expected future cash flows, discount rates, and terminal values used in our goodwill impairment analysis require considerable judgment and are based on our current estimates of market conditions, financial forecasts, and industry trends. These estimates, however, have inherent uncertainties and different assumptions could lead to materially different results including additional impairment charges in the future.
Other intangible assets consisted of the following:
|
| September 30, 2017 |
|
| December 31, 2016 |
|
|
|
| September 30, 2020 |
|
| December 31, 2019 |
| ||||||||||||||||||||||||||||||||||||
(in thousands) |
| Gross Carrying Value |
|
| Accumulated Amortization |
|
| Net Carrying Value |
|
| Gross Carrying Value |
|
| Accumulated Amortization |
|
| Net Carrying Value |
|
| Useful Life (Years) |
| Gross Carrying Value |
|
| Accumulated Amortization |
|
| Net Carrying Value |
|
| Gross Carrying Value |
|
| Accumulated Amortization |
|
| Net Carrying Value |
| ||||||||||||
Amortized intangible assets: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||||||||||||||||||||||
Intangible assets subject to amortization: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||||||||||||||||||||
Customer contracts and relationships |
| $ | 68,739 |
|
| $ | (21,505 | ) |
| $ | 47,234 |
|
| $ | 67,762 |
|
| $ | (14,345 | ) |
| $ | 53,417 |
|
| 6.4 |
| $ | 40,006 |
|
| $ | (27,381 | ) |
| $ | 12,625 |
|
| $ | 72,219 |
|
| $ | (40,866 | ) |
| $ | 31,353 |
|
Operating contracts and licenses |
|
| 10,038 |
|
|
| (1,083 | ) |
|
| 8,955 |
|
|
| 9,315 |
|
|
| (652 | ) |
|
| 8,663 |
|
| 36.8 |
|
| 39,156 |
|
|
| (2,258 | ) |
|
| 36,898 |
|
|
| 43,329 |
|
|
| (1,881 | ) |
|
| 41,448 |
|
In-place lease |
| 13.8 |
|
| 14,670 |
|
|
| (532 | ) |
|
| 14,138 |
|
|
| 15,044 |
|
|
| (231 | ) |
|
| 14,813 |
| ||||||||||||||||||||||||
Tradenames |
|
| 8,665 |
|
|
| (2,613 | ) |
|
| 6,052 |
|
|
| 8,324 |
|
|
| (1,440 | ) |
|
| 6,884 |
|
| 5.5 |
|
| 5,687 |
|
|
| (2,155 | ) |
|
| 3,532 |
|
|
| 9,423 |
|
|
| (4,338 | ) |
|
| 5,085 |
|
Non-compete agreements |
|
| 5,358 |
|
|
| (2,682 | ) |
|
| 2,676 |
|
|
| 5,190 |
|
|
| (1,369 | ) |
|
| 3,821 |
|
| 1.3 |
|
| 736 |
|
|
| (552 | ) |
|
| 184 |
|
|
| 2,077 |
|
|
| (1,775 | ) |
|
| 302 |
|
Other |
|
| 896 |
|
|
| (601 | ) |
|
| 295 |
|
|
| 886 |
|
|
| (458 | ) |
|
| 428 |
|
| 7.4 |
|
| 783 |
|
|
| (90 | ) |
|
| 693 |
|
|
| 802 |
|
|
| (66 | ) |
|
| 736 |
|
Total amortized intangible assets |
|
| 93,696 |
|
|
| (28,484 | ) |
|
| 65,212 |
|
|
| 91,477 |
|
|
| (18,264 | ) |
|
| 73,213 |
|
|
|
|
| 101,038 |
|
|
| (32,968 | ) |
|
| 68,070 |
|
|
| 142,894 |
|
|
| (49,157 | ) |
|
| 93,737 |
|
Unamortized intangible assets: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||||||||||||||||||||||
Indefinite-lived intangible assets: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||||||||||||||||||||
Business licenses |
|
| 460 |
|
|
| — |
|
|
| 460 |
|
|
| 460 |
|
|
| — |
|
|
| 460 |
|
|
|
|
| 568 |
|
|
| — |
|
|
| 568 |
|
|
| 571 |
|
|
| — |
|
|
| 571 |
|
Other intangible assets |
| $ | 94,156 |
|
| $ | (28,484 | ) |
| $ | 65,672 |
|
| $ | 91,937 |
|
| $ | (18,264 | ) |
| $ | 73,673 |
|
|
|
| $ | 101,606 |
|
| $ | (32,968 | ) |
| $ | 68,638 |
|
| $ | 143,465 |
|
| $ | (49,157 | ) |
| $ | 94,308 |
|
Intangible asset amortization expense was $3.3 million and $2.7$1.5 million for the three months ended September 30, 20172020 and 2016, respectively, and $9.6 million and $6.1$5.2 million for the nine months ended September 30, 20172020. Intangible asset amortization expense was $2.9 million for the three months ended September 30, 2019 and 2016, respectively. The weighted-average amortization period of customer contracts and relationships is approximately 8.8 years, operating contracts and licenses is approximately 26.5 years, tradenames is approximately 7.2 years, non-compete agreements is approximately 2.5 years, and other amortizable$8.2 million for the nine months ended September 30, 2019. We recorded an impairment charge to intangible assets is approximately 2.6 years.of $15.7 million during the nine months ended September 30, 2020 related to our U.S. audio-visual production business. The duration and impact of COVID-19 may result in additional future impairment charges as facts and circumstances evolve.
At September 30, 2020, the estimated future amortization expense related to amortized intangible assets held at September 30, 2017subject to amortization is as follows:
(in thousands) |
|
|
|
|
|
|
|
|
Year ending December 31, |
|
|
|
|
|
|
|
|
Remainder of 2017 |
| $ | 2,812 |
| ||||
2018 |
|
| 11,014 |
| ||||
2019 |
|
| 9,946 |
| ||||
2020 |
|
| 8,446 |
| ||||
Remainder of 2020 |
| $ | 1,278 |
| ||||
2021 |
|
| 7,450 |
|
|
| 5,089 |
|
2022 |
|
| 4,968 |
| ||||
2023 |
|
| 4,322 |
| ||||
2024 |
|
| 3,383 |
| ||||
Thereafter |
|
| 25,544 |
|
|
| 49,030 |
|
Total |
| $ | 65,212 |
|
| $ | 68,070 |
|
Note 9. 10. Other Current Liabilities
Other current liabilities consisted of the following:
|
| September 30, |
|
| December 31, |
|
| September 30, |
|
| December 31, |
| ||||
(in thousands) |
| 2017 |
|
| 2016 |
|
| 2020 |
|
| 2019 |
| ||||
Continuing operations: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Accrued income tax payable |
| $ | 16,673 |
|
| $ | 758 |
| ||||||||
Self-insured liability |
| $ | 6,227 |
|
| $ | 5,668 |
| ||||||||
Accrued restructuring |
|
| 4,574 |
|
|
| 2,130 |
| ||||||||
Accrued sales and use taxes |
|
| 2,914 |
|
|
| 5,451 |
| ||||||||
Commissions payable |
|
| 2,541 |
|
|
| 8,274 |
| ||||||||
Accrued employee benefit costs |
|
| 5,935 |
|
|
| 2,624 |
|
|
| 2,108 |
|
|
| 3,564 |
|
Self-insured liability accrual |
|
| 5,690 |
|
|
| 5,941 |
| ||||||||
Commissions payable |
|
| 3,777 |
|
|
| 639 |
| ||||||||
Accrued sales and use taxes |
|
| 2,623 |
|
|
| 4,279 |
| ||||||||
Current portion of pension and postretirement liabilities |
|
| 1,722 |
|
|
| 1,899 |
| ||||||||
Accrued professional fees |
|
| 1,137 |
|
|
| 1,248 |
| ||||||||
Accrued legal settlement |
|
| — |
|
|
| 2,500 |
| ||||||||
Accrued dividends |
|
| 2,116 |
|
|
| 2,119 |
|
|
| — |
|
|
| 2,019 |
|
Current portion of pension liability |
|
| 1,793 |
|
|
| 1,963 |
| ||||||||
Deferred rent |
|
| 1,656 |
|
|
| 1,535 |
| ||||||||
Accrued rebates |
|
| 1,061 |
|
|
| 1,078 |
| ||||||||
Accrued professional fees |
|
| 924 |
|
|
| 794 |
| ||||||||
Accrued restructuring |
|
| 750 |
|
|
| 1,924 |
| ||||||||
Other taxes |
|
| 3,315 |
|
|
| 4,210 |
|
|
| 1,655 |
|
|
| 278 |
|
Accommodation services deposits |
|
| 506 |
|
|
| 959 |
| ||||||||
Other |
|
| 4,909 |
|
|
| 1,774 |
|
|
| 6,204 |
|
|
| 5,187 |
|
Total continuing operations |
|
| 51,222 |
|
|
| 29,638 |
|
|
| 29,588 |
|
|
| 39,177 |
|
Discontinued operations: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Self-insured liability |
|
| 422 |
|
|
| 260 |
| ||||||||
Environmental remediation liabilities |
|
| 661 |
|
|
| 492 |
|
|
| 60 |
|
|
| 311 |
|
Self-insured liability accrual |
|
| 332 |
|
|
| 162 |
| ||||||||
Other |
|
| 103 |
|
|
| 98 |
|
|
| 57 |
|
|
| 76 |
|
Total discontinued operations |
|
| 1,096 |
|
|
| 752 |
|
|
| 539 |
|
|
| 647 |
|
Total other current liabilities |
| $ | 52,318 |
|
| $ | 30,390 |
|
| $ | 30,127 |
|
| $ | 39,824 |
|
Note 10. 11. Other Deferred Items and Liabilities
Other deferred items and liabilities consisted of the following:
|
| September 30, |
|
| December 31, |
|
| September 30, |
|
| December 31, |
| ||||
(in thousands) |
| 2017 |
|
| 2016 |
|
| 2020 |
|
| 2019 |
| ||||
Continuing operations: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Foreign deferred tax liability |
| $ | 25,127 |
|
| $ | 32,570 |
| ||||||||
Multi-employer pension plan withdrawal liability |
|
| 15,970 |
|
|
| 15,693 |
| ||||||||
Self-insured excess liability |
|
| 9,982 |
|
|
| 9,982 |
| ||||||||
Self-insured liability |
| $ | 14,644 |
|
| $ | 12,981 |
|
|
| 8,046 |
|
|
| 8,682 |
|
Self-insured excess liability |
|
| 10,463 |
|
|
| 10,463 |
| ||||||||
Accrued compensation |
|
| 9,402 |
|
|
| 8,514 |
|
|
| 4,806 |
|
|
| 7,485 |
|
Deferred rent |
|
| 4,076 |
|
|
| 5,271 |
| ||||||||
Foreign deferred tax liability |
|
| 2,264 |
|
|
| 2,264 |
| ||||||||
Accrued restructuring |
|
| 1,903 |
|
|
| 1,858 |
|
|
| 2,447 |
|
|
| 2,383 |
|
Contract liabilities |
|
| 623 |
|
|
| 125 |
| ||||||||
Other |
|
| 2,655 |
|
|
| 1,300 |
|
|
| 3,487 |
|
|
| 2,423 |
|
Total continuing operations |
|
| 45,407 |
|
|
| 42,651 |
|
|
| 70,488 |
|
|
| 79,343 |
|
Discontinued operations: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Environmental remediation liabilities |
|
| 2,186 |
|
|
| 1,964 |
| ||||||||
Self-insured liability |
|
| 3,011 |
|
|
| 3,748 |
|
|
| 1,824 |
|
|
| 2,018 |
|
Environmental remediation liabilities |
|
| 1,716 |
|
|
| 3,091 |
| ||||||||
Accrued income taxes |
|
| — |
|
|
| 1,045 |
| ||||||||
Other |
|
| 126 |
|
|
| 199 |
|
|
| 676 |
|
|
| 382 |
|
Total discontinued operations |
|
| 4,853 |
|
|
| 8,083 |
|
|
| 4,686 |
|
|
| 4,364 |
|
Total other deferred items and liabilities |
| $ | 50,260 |
|
| $ | 50,734 |
|
| $ | 75,174 |
|
| $ | 83,707 |
|
Note 11. 12. Debt and CapitalFinance Lease Obligations
The components of long-term debt and capitalfinance lease obligations consisted of the following:
|
| September 30, |
|
| December 31, |
| ||
(in thousands, except interest rates) |
| 2017 |
|
| 2016 |
| ||
Revolving credit facility and term loan 3.3% and 2.6% weighted-average interest rate at September 30, 2017 and December 31, 2016, respectively, due through 2019 (1) |
| $ | 184,688 |
|
| $ | 212,750 |
|
Brewster Inc. revolving credit facility 2.7% weighted-average interest rate at December 31, 2016 (1) |
|
| — |
|
|
| 36,456 |
|
Less unamortized debt issuance costs |
|
| (1,071 | ) |
|
| (1,464 | ) |
Total debt |
|
| 183,617 |
|
|
| 247,742 |
|
Capital lease obligations 4.2% and 4.9% weighted-average interest rate at September 30, 2017 and December 31, 2016, respectively, due through 2021 |
|
| 1,584 |
|
|
| 1,469 |
|
Total debt and capital lease obligations |
|
| 185,201 |
|
|
| 249,211 |
|
Current portion (2) |
|
| (124,574 | ) |
|
| (174,968 | ) |
Long-term debt and capital lease obligations |
| $ | 60,627 |
|
| $ | 74,243 |
|
|
| September 30, |
|
| December 31, |
| |||
(in thousands, except interest rates) |
| 2020 |
|
| 2019 |
| |||
2018 Credit Facility, 4.6% weighted-average interest rate at September 30, 2020 and 3.9% at December 31, 2019, due through 2023(1) |
| $ | 230,543 |
|
| $ | 311,464 |
| |
FlyOver Iceland Credit Facility, 4.9% weighted-average interest rate at September 30, 2020 and December 31, 2019, due through 2022(1) |
|
| 5,584 |
|
|
| 5,607 |
| |
Less unamortized debt issuance costs |
|
| (2,953 | ) |
|
| (1,836 | ) | |
Total debt (2) |
|
| 233,174 |
|
|
| 315,235 |
| |
Finance lease obligations, 7.9% weighted-average interest rate at September 30, 2020 and 7.7% at December 31, 2019, due through 2039 |
|
| 23,018 |
|
|
| 25,257 |
| |
Total debt and finance lease obligations (3) |
|
| 256,192 |
|
|
| 340,492 |
| |
Current portion (4) |
|
| (4,040 | ) |
|
| (5,330 | ) | |
Long-term debt and finance lease obligations |
| $ | 252,152 |
|
| $ | 335,162 |
|
(1) | Represents the weighted-average interest rate in effect at the respective periods, |
(2) |
|
(3) | Cash paid for interest on debt was $12.1 million for the nine months ended September 30, 2020 and $8.8 million for the nine months ended September 30, 2019. |
(4) | Subsequent to the filing of our 2019 Form 10-K, we identified a correction related to the classification of the 2018 Credit Facility (as defined below) from current to long-term given that the 2018 Credit Facility’s contractual maturity was not within 12 months of the balance sheet date, and we were in compliance with all applicable covenants as of December 31, 2019. As a result, we corrected the classification of the debt on the accompanying condensed consolidated balance sheet and the disclosure related to classification of debt in the table above as of December 31, 2019 to present the 2018 Credit Facility as long-term. Except for this change, the correction had no impact upon this Quarterly Report on Form 10-Q. We determined that the error is not material to the previously issued financial statements. |
2018 Credit Agreement
Effective December 22, 2014, ViadOctober 24, 2018, we entered into a $300 millionSecond Amended and Restated Credit Agreement (the “Credit“2018 Credit Agreement”). The 2018 Credit Agreement has a maturity date of October 24, 2023 and provides for a senior credit facility in the aggregate amount of $300 million, which consists of a $175$450 million revolving credit facility (the “Revolving(“2018 Credit Facility”) and a $125 million term loan (the “Term Loan”). Loans under the Credit Agreement have a maturity date of December 22, 2019. Proceeds from the loans made under the Credit Agreement were used to refinance certain outstanding debt of the Company and will be used for the Company’s general corporate purposes in the ordinary course of its business. Under the Credit Agreement, the Revolving Credit Facility and/or the Term Loan may be increased up to an additional $100 million under certain circumstances. If such circumstances are met, the Company may obtain the additional borrowings under the Revolving Credit Facility, the Term Loan, or a combination of the two. The Revolving Credit Facility has a $40 million sublimit for letters of credit. Borrowings and letters of credit can be denominated in U.S. dollars, Euros, Canadian dollars, or British pounds. Viad’s lenders underUnder the 2018 Credit Agreement, our lenders have a first perfected security interest in all of our personal property. As of September 30, 2020, we were not in compliance with our financial covenants, however, we obtained financial covenant relief until September 30, 2022 pursuant to the personal property of Viad, GES, GES Event Intelligence Services, Inc., CATC, and ON Services including 65 percent ofamendment to the capital stock of top-tier foreign subsidiaries.2018 Credit Agreement described below.
Effective February 24, 2016, Viad executedAugust 5, 2020, we entered into an amendment (the “Credit Agreement Amendment”) to the Credit Agreement. The2018 Credit Agreement, Amendment modified the terms of thewhich, among other things, (i) waives our financial covenants until September 30, 2022 (the “Covenant Waiver Period”) and (ii) requires us to maintain minimum liquidity of $125 million with a step down to $100 million at December 31, 2020. The Covenant Waiver Period will be in effect until the negative covenants related to acquisitions, restricted payments, and indebtedness. The overall maximum leverage ratio and minimum fixed charge coverage ratio are 3.50 to 1.00 and 1.75 to 1.00, respectively, and will remain at those levels forearlier of September 30, 2022 or the entire remaining term of the Credit Agreement. Acquisitions in substantially the same or related lines of business are permitted under the Credit Agreement Amendment, as long as the pro formafiscal quarter when our leverage ratio is less than or equal to 3.004.00 to 1.00. Viad can make dividends, distributions, and repurchases of its common stock up to $20 million per calendar year. Stock dividends, distributions, and repurchases abovePost Covenant Waiver Period, the $20 million limit are not subject to a liquidity covenant, and are permitted as long as the Company’s pro formamaximum leverage ratio iswill be less than or equal to 2.504.50 to 1.00 and there is no default or unmatured default, as defined in the Credit Agreement. Unsecured debt is allowed as long as the Company’s pro forma leverage ratio isat September 30, 2022 with a step down to less than or equal to 3.004.00 to 1.00. Significant other covenants1.00 at December 31, 2022 and thereafter until the maturity date. The minimum interest coverage ratio will be greater than or equal to 2.00 to 1.00 post Covenant Waiver Period and until maturity of the facility. The interest rate on the borrowings is equal to LIBOR plus 350 basis points, with a LIBOR floor of one percent during the Covenant Waiver Period. The LIBOR floor continues until the end of the 2018 Credit Agreement. A revised pricing grid goes into effect after the Covenant Waiver Period ends. Additionally, we are precluded from paying cash dividends, from issuing unsecured debt, and from accessing the $250 million expansion feature during the Covenant Waiver Period. The amendment allows us to make acquisitions under certain conditions. Viad pledged 100% of the capital stock of its wholly-owned domestic subsidiaries and it top-tier foreign subsidiaries (other than Esja). Fees related to the amendment were approximately $1.7 million. Refer to Note 1 – Overview and Basis of Presentation (Impact of COVID-19) for additional information.
During the three months ended September 30, 2020, we repaid approximately $217 million of principal on our outstanding 2018 Credit Agreement that remain unchanged by the Credit Agreement Amendment include limitations on investments, sales/leases of assets, consolidations or mergers, and liens on property.Facility. As of September 30, 2017, the fixed charge coverage ratio was 3.18 to 1.00, the leverage ratio was 1.26 to 1.00, and Viad was in compliance with all covenants under the Credit Agreement.
Effective December 28, 2016, Brewster Inc., part of Pursuit, entered into a credit agreement (the “Brewster Credit Agreement”) with a $38 million revolving credit facility (the “Brewster Revolving Credit Facility”). The Brewster Credit Agreement was used in connection with the Company’s acquisition of FlyOver Canada and has a maturity date of December 28, 2017. The Company intends to amend and extend the Brewster Revolving Credit Facility for one year. Additional loan proceeds will be used for potential future acquisitions in Canada and other general corporate purposes of Brewster Inc. Brewster Inc.’s lender has a first perfected security interest in all of the personal property of Brewster Inc. under the Brewster Revolving Credit Facility and a guaranty from Brewster Travel Canada Inc., the immediate parent of Brewster Inc., (secured by its present and future personal property), Viad, and all current or future subsidiaries of Viad that are required to be guarantors under Viad’s Credit Agreement.
As of September 30, 2017, Viad’s total debt and capital lease obligations were $185.2 million, consisting of outstanding borrowings under the Term Loan of $79.7 million, the Revolving Credit Facility of $105.0 million, and capital lease obligations of $1.6 million, offset in part by unamortized debt issuance costs of $1.1 million. As of September 30, 2017, Viad had $68.7 million of2020, capacity remaining under the Revolving2018 Credit Facility was $209.8 million, reflecting borrowings of $105.0$230.5 million and $1.3$9.7 million in outstanding letters of credit. As of September 30, 2017, Brewster Inc. had $38.0 million of capacity remaining
We index borrowings under the Brewster Revolving2018 Credit Facility.
Borrowings under the Revolving Credit Facility (of which GES, GES Event Intelligence Services, Inc., CATC, and ON Services are guarantors) are indexed to the prime rate or the London Interbank Offered Rate,LIBOR, plus appropriate spreads tied to Viad’sour leverage ratio. As LIBOR will be phased out in 2021, our 2018 Credit Facility includes a method for determining an alternative or successor rate of interest that considers the new prevailing market convention. The vast majority of our borrowings under the 2018 Credit Facility are indexed to LIBOR. Commitment fees and letters of credit fees are also tied to Viad’sour leverage ratio. The fees on the unused portion of the 2018 Credit Facility are currently 0.35 percent annually.
As of September 30, 2017, Viad, on behalf of its subsidiaries, had certain obligations under guarantees to third parties. These guarantees are not subject to liability recognition in the condensed consolidated financial statements and relate to leased facilities entered into by Viad’s subsidiary operations. The Company would generally be required to make payments to the respective third parties under these guarantees in the event that the related subsidiary could not meet its own payment obligations. The maximum potential amount of future payments that Viad would be required to make under all guarantees existingwere 0.50% annually as of September 30, 2017 would be $7.5 million. These guarantees relate to facilities leased by the Company through September 2021. There are no recourse provisions that would enable Viad to recover from third parties any payments made2020. We index only our borrowings under the guarantees. Furthermore, there are2018 Credit Facility and the discount rates we use to account for some leases to LIBOR. We do not expect the alternative or successor rate to LIBOR to have a material impact on either our 2018 Credit Facility or the accounting for our leases.
FlyOver Iceland Credit Facility
Effective February 15, 2019, FlyOver Iceland ehf., a wholly-owned subsidiary of Esja, entered into a credit agreement with a €5.0 million (approximately $5.6 million U.S. dollars) credit facility (the “FlyOver Iceland Credit Facility”) with a maturity date of March 1, 2022. We used the loan proceeds to complete the development of the FlyOver Iceland attraction. In response to COVID-19, we entered into an addendum to the FlyOver Iceland Credit Facility effective May 14, 2020 wherein the principal and interest payments were deferred for six months beginning June 1, 2020, with the first payment due December 1, 2020. The addendum also extended the maturity date to September 1, 2022. There were no collateral or similar arrangements whereby Viad could recover payments.
The estimated fair valueother changes to the terms of total debt was $179.8 million and $252.8 million asthe FlyOver Iceland Credit Facility. Effective July 31, 2020, we obtained a waiver of September 30, 2017 and December 31, 2016, respectively. The fair value of debt was estimated by discountingcertain covenants to the future cash flows using rates currently available for debt of similar terms and maturity.FlyOver Iceland Credit Facility through 2021.
Cash paid for interest on debt was $5.5 million and $3.7 million for the nine months ended September 30, 2017 and 2016, respectively.
Note 12. 13. Fair Value Measurements
The fair value of an asset or liability is defined as the price that would be received to sellby selling an asset or paidpaying to transfer a liability in an orderly transaction between market participants at the measurement date. The fair value guidance requires an entity to maximize the use of quoted prices and other observable inputs and minimize the use of unobservable inputs when measuring fair value, and also establishes a fair value hierarchy, which prioritizes the inputs to valuation techniques used to measure fair value as follows:
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.
Viad measures its moneyMoney 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:
|
|
|
|
|
| Fair Value Measurements at Reporting Date Using |
|
|
|
|
|
| Fair Value Measurements at Reporting Date Using |
| ||||||||||||||||||
(in thousands) |
| September 30, 2017 |
|
| Quoted Prices in Active Markets (Level 1) |
|
| Significant Other Observable Inputs (Level 2) |
|
| Significant Unobservable Inputs (Level 3) |
|
| September 30, 2020 |
|
| Quoted Prices in Active Markets (Level 1) |
|
| Significant Other Observable Inputs (Level 2) |
|
| Significant Unobservable Inputs (Level 3) |
| ||||||||
Assets: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Money market funds(1) |
| $ | 119 |
|
| $ | 119 |
|
| $ | — |
|
| $ | — |
|
| $ | 2 |
|
| $ | 2 |
|
| $ | — |
|
| $ | — |
|
Other mutual funds(2) |
|
| 2,560 |
|
|
| 2,560 |
|
|
| — |
|
|
| — |
|
|
| 3,136 |
|
|
| 3,136 |
|
|
| — |
|
|
| — |
|
Total assets at fair value on a recurring basis |
| $ | 2,679 |
|
| $ | 2,679 |
|
| $ | — |
|
| $ | — |
|
| $ | 3,138 |
|
| $ | 3,138 |
|
| $ | — |
|
| $ | — |
|
|
|
|
|
|
| Fair Value Measurements at Reporting Date Using |
|
|
|
|
|
| Fair Value Measurements at Reporting Date Using |
| ||||||||||||||||||
(in thousands) |
| December 31, 2016 |
|
| Quoted Prices in Active Markets (Level 1) |
|
| Significant Other Observable Inputs (Level 2) |
|
| Significant Unobservable Inputs (Level 3) |
|
| December 31, 2019 |
|
| Quoted Prices in Active Markets (Level 1) |
|
| Significant Other Observable Inputs (Level 2) |
|
| Significant Unobservable Inputs (Level 3) |
| ||||||||
Assets: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Money market funds(1) |
| $ | 118 |
|
| $ | 118 |
|
| $ | — |
|
| $ | — |
|
| $ | 123 |
|
| $ | 123 |
|
| $ | — |
|
| $ | — |
|
Other mutual funds(2) |
|
| 2,062 |
|
|
| 2,062 |
|
|
| — |
|
|
| — |
|
|
| 3,107 |
|
|
| 3,107 |
|
|
| — |
|
|
| — |
|
Total assets at fair value on a recurring basis |
| $ | 2,180 |
|
| $ | 2,180 |
|
| $ | — |
|
| $ | — |
|
| $ | 3,230 |
|
| $ | 3,230 |
|
| $ | — |
|
| $ | — |
|
(1) |
|
(2) |
|
The carrying values of cash and cash equivalents, receivables, and accounts payable approximate fair value due to the short-term maturitiesnature of these instruments. Refer to Note 11 12 – Debt and CapitalFinance Lease Obligations for the estimated fair value of debt obligations.
Note 13. Stockholders’ Equity14. Accumulated Other Comprehensive Income (Loss)
The following represents a reconciliation of the carrying amounts of stockholders’ equity attributable to Viad and the noncontrolling interest for the nine months ended September 30, 2017 and 2016:
(in thousands) |
| Total Viad Stockholders’ Equity |
|
| Noncontrolling Interest |
|
| Total Stockholders’ Equity |
| |||
Balance at December 31, 2016 |
| $ | 357,355 |
|
| $ | 13,283 |
|
| $ | 370,638 |
|
Net income |
|
| 79,381 |
|
|
| 747 |
|
|
| 80,128 |
|
Dividends on common stock ($0.30 per share) |
|
| (6,119 | ) |
|
| — |
|
|
| (6,119 | ) |
Common stock purchased for treasury |
|
| (1,272 | ) |
|
| — |
|
|
| (1,272 | ) |
Employee benefit plans |
|
| 5,916 |
|
|
| — |
|
|
| 5,916 |
|
Unrealized foreign currency translation adjustment |
|
| 18,820 |
|
|
| — |
|
|
| 18,820 |
|
Other changes to AOCI |
|
| 327 |
|
|
|
|
|
|
| 327 |
|
Other |
|
| 56 |
|
|
| — |
|
|
| 56 |
|
Balance at September 30, 2017 |
| $ | 454,464 |
|
| $ | 14,030 |
|
| $ | 468,494 |
|
| Total Viad Stockholders’ Equity |
|
| Noncontrolling Interest |
|
| Total Stockholders’ Equity |
| ||||
Balance at December 31, 2015 |
| $ | 322,581 |
|
| $ | 12,757 |
|
| $ | 335,338 |
|
Net income |
|
| 46,318 |
|
|
| 765 |
|
|
| 47,083 |
|
Dividends on common stock ($0.30 per share) |
|
| (6,079 | ) |
|
| — |
|
|
| (6,079 | ) |
Common stock purchased for treasury |
|
| (679 | ) |
|
| — |
|
|
| (679 | ) |
Employee benefit plans |
|
| 4,693 |
|
|
| — |
|
|
| 4,693 |
|
Unrealized foreign currency translation adjustment |
|
| 723 |
|
|
| — |
|
|
| 723 |
|
Tax benefits from share-based compensation |
|
| 60 |
|
|
| — |
|
|
| 60 |
|
Other changes to AOCI |
|
| 162 |
|
|
| — |
|
|
| 162 |
|
Other |
|
| 28 |
|
|
| — |
|
|
| 28 |
|
Balance at September 30, 2016 |
| $ | 367,807 |
|
| $ | 13,522 |
|
| $ | 381,329 |
|
Changes in AOCIaccumulated other comprehensive income (“AOCI”) by component are as follows:
(in thousands) |
| Unrealized Gains on Investments |
|
| Cumulative Foreign Currency Translation Adjustments |
|
| Unrecognized Net Actuarial Loss and Prior Service Credit, Net |
|
| Accumulated Other Comprehensive Income (Loss) |
| ||||
Balance at December 31, 2016 |
| $ | 421 |
|
| $ | (29,084 | ) |
| $ | (10,728 | ) |
| $ | (39,391 | ) |
Other comprehensive income before reclassifications |
|
| 188 |
|
|
| 18,820 |
|
|
| — |
|
|
| 19,008 |
|
Amounts reclassified from AOCI, net of tax |
|
| (45 | ) |
|
| — |
|
|
| 184 |
|
|
| 139 |
|
Net other comprehensive income |
|
| 143 |
|
|
| 18,820 |
|
|
| 184 |
|
|
| 19,147 |
|
Balance at September 30, 2017 |
| $ | 564 |
|
| $ | (10,264 | ) |
| $ | (10,544 | ) |
| $ | (20,244 | ) |
(in thousands) |
| Cumulative Foreign Currency Translation Adjustments |
|
| Unrecognized Net Actuarial Loss and Prior Service Credit, Net |
|
| Accumulated Other Comprehensive Income (Loss) |
| |||
Balance at December 31, 2019 |
| $ | (23,799 | ) |
| $ | (11,900 | ) |
| $ | (35,699 | ) |
Other comprehensive loss before reclassifications |
|
| (7,342 | ) |
|
| — |
|
|
| (7,342 | ) |
Amounts reclassified from AOCI, net of tax |
|
| — |
|
|
| 354 |
|
|
| 354 |
|
Net other comprehensive income (loss) |
|
| (7,342 | ) |
|
| 354 |
|
|
| (6,988 | ) |
Balance at September 30, 2020 |
| $ | (31,141 | ) |
| $ | (11,546 | ) |
| $ | (42,687 | ) |
(in thousands) |
| Cumulative Foreign Currency Translation Adjustments |
|
| Unrecognized Net Actuarial Loss and Prior Service Credit, Net |
|
| Accumulated Other Comprehensive Income (Loss) |
| |||
Balance at December 31, 2018 |
| $ | (36,332 | ) |
| $ | (11,643 | ) |
| $ | (47,975 | ) |
Other comprehensive income before reclassifications |
|
| 3,868 |
|
|
| — |
|
|
| 3,868 |
|
Amounts reclassified from AOCI, net of tax |
|
| — |
|
|
| 196 |
|
|
| 196 |
|
Net other comprehensive income |
|
| 3,868 |
|
|
| 196 |
|
|
| 4,064 |
|
Balance at September 30, 2019 |
| $ | (32,464 | ) |
| $ | (11,447 | ) |
| $ | (43,911 | ) |
The following table presents information about reclassification adjustments outAmounts reclassified that relate to our defined benefit pension and postretirement plans include the amortization of AOCI:prior service costs and actuarial net losses recognized during each period presented. We recorded these costs as components of net periodic cost for each period presented. Refer to Note 17 – Pension and Postretirement Benefits for additional information.
|
| Nine Months Ended September 30, |
|
| Affected Line Item in the Statement Where Net Income is Presented | |||||
(in thousands) |
| 2017 |
|
| 2016 |
|
|
| ||
Unrealized gains on investments |
| $ | (72 | ) |
| $ | (67 | ) |
| Interest income |
Tax effect |
|
| 27 |
|
|
| 25 |
|
| Income taxes |
|
| $ | (45 | ) |
| $ | (42 | ) |
|
|
|
|
|
|
|
|
|
|
|
|
|
Recognized net actuarial loss(1) |
| $ | 596 |
|
| $ | 538 |
|
|
|
Amortization of prior service credit(1) |
|
| (323 | ) |
|
| (377 | ) |
|
|
Tax effect |
|
| (89 | ) |
|
| (61 | ) |
| Income taxes |
|
| $ | 184 |
|
| $ | 100 |
|
|
|
|
|
Note 14. 15. Income (Loss) Per Share
The components of basic and diluted income per share are as follows:
|
| Three Months Ended |
|
| Nine Months Ended |
|
| Three Months Ended |
|
| Nine Months Ended |
| ||||||||||||||||||||
|
| September 30, |
|
| September 30, |
|
| September 30, |
|
| September 30, |
| ||||||||||||||||||||
(in thousands, except per share data) |
| 2017 |
|
| 2016 |
|
| 2017 |
|
| 2016 |
|
| 2020 |
|
| 2019 |
|
| 2020 |
|
| 2019 |
| ||||||||
Net income attributable to Viad (diluted) |
| $ | 44,657 |
|
| $ | 33,792 |
|
| $ | 79,381 |
|
| $ | 46,318 |
| ||||||||||||||||
Net income (loss) attributable to Viad (diluted) |
| $ | (30,758 | ) |
| $ | 31,416 |
|
| $ | (323,621 | ) |
| $ | 27,463 |
| ||||||||||||||||
Less: Allocation to non-vested shares |
|
| (539 | ) |
|
| (454 | ) |
|
| (993 | ) |
|
| (629 | ) |
|
| — |
|
|
| (226 | ) |
|
| — |
|
|
| (196 | ) |
Net income allocated to Viad common stockholders (basic) |
| $ | 44,118 |
|
| $ | 33,338 |
|
| $ | 78,388 |
|
| $ | 45,689 |
| ||||||||||||||||
Convertible preferred stock dividends |
|
| (1,134 | ) |
|
| — |
|
|
| (1,134 | ) |
|
| — |
| ||||||||||||||||
Adjustment to the redemption value of redeemable noncontrolling interest |
|
| (468 | ) |
|
| (264 | ) |
|
| (926 | ) |
|
| (530 | ) | ||||||||||||||||
Net income (loss) allocated to Viad common stockholders (basic) |
| $ | (32,360 | ) |
| $ | 30,926 |
|
| $ | (325,681 | ) |
| $ | 26,737 |
| ||||||||||||||||
Basic weighted-average outstanding common shares |
|
| 20,166 |
|
|
| 20,017 |
|
|
| 20,130 |
|
|
| 19,972 |
|
|
| 20,293 |
|
|
| 20,168 |
|
|
| 20,263 |
|
|
| 20,129 |
|
Additional dilutive shares related to share-based compensation |
|
| 270 |
|
|
| 190 |
|
|
| 252 |
|
|
| 178 |
|
|
| — |
|
|
| 143 |
|
|
| — |
|
|
| 138 |
|
Diluted weighted-average outstanding shares |
|
| 20,436 |
|
|
| 20,207 |
|
|
| 20,382 |
|
|
| 20,150 |
|
|
| 20,293 |
|
|
| 20,311 |
|
|
| 20,263 |
|
|
| 20,267 |
|
Income per share: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||||||||||||
Basic income attributable to Viad common stockholders |
| $ | 2.19 |
|
| $ | 1.67 |
|
| $ | 3.89 |
|
| $ | 2.29 |
| ||||||||||||||||
Diluted income attributable to Viad common stockholders |
| $ | 2.19 |
|
| $ | 1.67 |
|
| $ | 3.89 |
|
| $ | 2.29 |
| ||||||||||||||||
Income (loss) per share: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||||||||||||
Basic income (loss) attributable to Viad common stockholders |
| $ | (1.59 | ) |
| $ | 1.53 |
|
| $ | (16.07 | ) |
| $ | 1.33 |
| ||||||||||||||||
Diluted income (loss) attributable to Viad common stockholders(1) |
| $ | (1.59 | ) |
| $ | 1.53 |
|
| $ | (16.07 | ) |
| $ | 1.33 |
|
(1) | Diluted loss per share amount cannot exceed basic loss per share. |
DuringThe dilutive effect of the nine months ended September 30, 2017, 11,000outstanding common shares, excluding the Convertible Series A Preferred Stock, is reflected in diluted loss per share by application of share-based awards were not includedthe treasury stock method. The dilutive effect of the Convertible Series A Preferred Stock is reflected in the computationdiluted loss per share by application of dilutive shares outstanding because the effect would be anti-dilutive.if-converted method.
Note 15. 16. Income Taxes
The effective tax ratesrate was a negative 2.7% for the three months ended September 30, 20172020 and 2016 were 30.4 percent and 33.8 percent, respectively.25.6% for the three months ended September 30, 2019. The effective tax ratesrate was a negative 6.8% for the nine months ended September 30, 20172020 and 2016 were 29.0 percent and 33.1 percent, respectively.
The income tax provision was computed based on the Company’s estimated effective tax rate and forecasted income by jurisdiction expected for the full year, including the impact of any unusual, infrequent, or non-recurring items. The effective tax rate26.5% for the nine months ended September 30, 2017 was less than the federal statutory rate of 35.0 percent primarily due to foreign income taxed at lower rates, the release of the valuation allowance against certain foreign net operating losses, and the adoption of new accounting guidance, which requires the excess tax benefit on share-based compensation to be recorded to income tax expense rather than equity. 2019.
The negative effective tax raterates for the three and nine months ended September 30, 2016 was less than the federal statutory rate primarily2020 were due to foreignno tax benefits being recorded on our U.S., United Kingdom, and other European jurisdictions as a result of recording a valuation allowance during the second quarter of 2020 against our net deferred tax assets in these jurisdictions due to our belief that it is more likely than not that we will not realize the tax benefits from the current year losses realized in these jurisdictions.
In response to the COVID-19 pandemic, many governments have enacted or are contemplating measures to provide aid and economic stimulus. These measures may include deferring the due dates of tax payments or other changes to income taxed at lower rates.and non-income-based tax
Duringlaws. For the three and nine months ended September 30, 20172020, there were no material tax impacts to our condensed consolidated financial statements as they relate to COVID-19 measures.
We received $6.8 million and 2016,$14.7 million of tax refunds in excess of payments for the three and nine months ended September 30, 2020, respectively. Net cash paid for income taxes was $10.9$4.1 million and $8.4$12.1 million for the three and nine months ended September 30, 2019, respectively.
Note 16. 17. Pension and Postretirement Benefits
The components of net periodic benefit cost of Viad’sour pension and postretirement benefit plans for the three months ended September 30, 20172020 and 2016 included2019 consist of the following:
|
| Domestic Plans |
|
|
|
|
|
|
|
|
|
| Domestic Plans |
|
|
|
|
|
|
|
|
| ||||||||||||||||||||||||||
|
| Pension Plans |
|
| Postretirement Benefit Plans |
|
| Foreign Pension Plans |
|
| Pension Plans |
|
| Postretirement Benefit Plans |
|
| Foreign Pension Plans |
| ||||||||||||||||||||||||||||||
(in thousands) |
| 2017 |
|
| 2016 |
|
| 2017 |
|
| 2016 |
|
| 2017 |
|
| 2016 |
|
| 2020 |
|
| 2019 |
|
| 2020 |
|
| 2019 |
|
| 2020 |
|
| 2019 |
| ||||||||||||
Service cost |
| $ | 8 |
|
| $ | 54 |
|
| $ | 22 |
|
| $ | 5 |
|
| $ | 138 |
|
| $ | 123 |
|
| $ | — |
|
| $ | 15 |
|
| $ | 7 |
|
| $ | 13 |
|
| $ | 112 |
|
| $ | 101 |
|
Interest cost |
|
| 197 |
|
|
| 257 |
|
|
| 92 |
|
|
| 126 |
|
|
| 120 |
|
|
| 124 |
|
|
| 162 |
|
|
| 209 |
|
|
| 64 |
|
|
| 93 |
|
|
| 87 |
|
|
| 92 |
|
Expected return on plan assets |
|
| (55 | ) |
|
| (62 | ) |
|
| — |
|
|
| — |
|
|
| (156 | ) |
|
| (142 | ) |
|
| (74 | ) |
|
| (35 | ) |
|
| — |
|
|
| — |
|
|
| (134 | ) |
|
| (122 | ) |
Amortization of prior service credit |
|
| — |
|
|
| — |
|
|
| (107 | ) |
|
| (125 | ) |
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| (36 | ) |
|
| (47 | ) |
|
| — |
|
|
| — |
|
Recognized net actuarial loss |
|
| 106 |
|
|
| 105 |
|
|
| 3 |
|
|
| 46 |
|
|
| 48 |
|
|
| 1 |
|
|
| 130 |
|
|
| 96 |
|
|
| (26 | ) |
|
| (43 | ) |
|
| 48 |
|
|
| 37 |
|
Net periodic benefit cost |
| $ | 256 |
|
| $ | 354 |
|
| $ | 10 |
|
| $ | 52 |
|
| $ | 150 |
|
| $ | 106 |
|
| $ | 218 |
|
| $ | 285 |
|
| $ | 9 |
|
| $ | 16 |
|
| $ | 113 |
|
| $ | 108 |
|
The components of net periodic benefit cost of Viad’sour pension and postretirement benefit plans for the nine months ended September 30, 20172020 and 2016 included2019 consist of the following:
|
| Domestic Plans |
|
|
|
|
|
|
|
|
|
| Domestic Plans |
|
|
|
|
|
|
|
|
| ||||||||||||||||||||||||||
|
| Pension Plans |
|
| Postretirement Benefit Plans |
|
| Foreign Pension Plans |
|
| Pension Plans |
|
| Postretirement Benefit Plans |
|
| Foreign Pension Plans |
| ||||||||||||||||||||||||||||||
(in thousands) |
| 2017 |
|
| 2016 |
|
| 2017 |
|
| 2016 |
|
| 2017 |
|
| 2016 |
|
| 2020 |
|
| 2019 |
|
| 2020 |
|
| 2019 |
|
| 2020 |
|
| 2019 |
| ||||||||||||
Service cost |
| $ | 56 |
|
| $ | 74 |
|
| $ | 69 |
|
| $ | 74 |
|
| $ | 396 |
|
| $ | 368 |
|
| $ | — |
|
| $ | 46 |
|
| $ | 38 |
|
| $ | 48 |
|
| $ | 330 |
|
| $ | 303 |
|
Interest cost |
|
| 604 |
|
|
| 774 |
|
|
| 311 |
|
|
| 429 |
|
|
| 348 |
|
|
| 368 |
|
|
| 490 |
|
|
| 646 |
|
|
| 222 |
|
|
| 343 |
|
|
| 254 |
|
|
| 281 |
|
Expected return on plan assets |
|
| (162 | ) |
|
| (192 | ) |
|
| — |
|
|
| — |
|
|
| (450 | ) |
|
| (421 | ) |
|
| (109 | ) |
|
| (74 | ) |
|
| — |
|
|
| — |
|
|
| (394 | ) |
|
| (364 | ) |
Amortization of prior service credit |
|
| — |
|
|
| — |
|
|
| (323 | ) |
|
| (377 | ) |
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| (109 | ) |
|
| (141 | ) |
|
| — |
|
|
| — |
|
Recognized net actuarial loss |
|
| 336 |
|
|
| 318 |
|
|
| 123 |
|
|
| 221 |
|
|
| 137 |
|
|
| 2 |
|
|
| 395 |
|
|
| 302 |
|
|
| 13 |
|
|
| 84 |
|
|
| 138 |
|
|
| 111 |
|
Net periodic benefit cost |
| $ | 834 |
|
| $ | 974 |
|
| $ | 180 |
|
| $ | 347 |
|
| $ | 431 |
|
| $ | 317 |
|
| $ | 776 |
|
| $ | 920 |
|
| $ | 164 |
|
| $ | 334 |
|
| $ | 328 |
|
| $ | 331 |
|
Viad expects
We expect to contribute $1.6$1.3 million to itsour funded pension plans, $0.9 million to itsour unfunded pension plans, and $1.1$1.0 million to itsour postretirement benefit plans in 2017.2020. During the nine months ended September 30, 2017, Viad2020, we contributed $1.4$0.2 million to itsour funded pension plans, $0.5$0.7 million to itsour unfunded pension plans, and $1.1$0.6 million to itsour postretirement benefit plans.
Note 17. 18. Restructuring Charges
The Company has takenGES
As part of our efforts to drive efficiencies and simplify our business operations, we took certain restructuring actions designed to simplify and transform GES for greater profitability. In response to the COVID-19 pandemic in 2020, we accelerated our transformation and streamlining efforts at GES to significantly reduce the Company’scosts and create a lower and more flexible cost structure primarily withinfocused on servicing our more profitable market segments. These initiatives included recording restructuring charges related to the elimination of positions and facility closures at GES, U.S. and GES International, as well as charges related to the eliminationclosure and liquidation of certain positions at the corporate office. As a result, the CompanyGES’ United Kingdom-based audio-visual services business.
Other Restructurings
We recorded restructuring charges in connection with the consolidation of certain support functions at our corporate headquarters. These charges primarily consistingconsist of severance and related benefits as a result of workforcedue to headcount reductions and charges related to the consolidation and downsizing of facilities representing the remaining operating lease obligations (net of estimated sublease income) and related costs.facilities.
Changes to the restructuring liability by major restructuring activity are as follows:
|
| GES |
|
| Other Restructurings |
|
|
|
|
|
| GES |
|
| Other Restructurings |
|
|
|
|
| ||||||||||||
(in thousands) |
| Severance & Employee Benefits |
|
| Facilities |
|
| Severance & Employee Benefits |
|
| Total |
|
| Severance & Employee Benefits |
|
| Facilities |
|
| Severance & Employee Benefits |
|
| Total |
| ||||||||
Balance at December 31, 2016 |
| $ | 2,274 |
|
| $ | 1,092 |
|
| $ | 416 |
|
| $ | 3,782 |
| ||||||||||||||||
Balance at December 31, 2019 |
| $ | 2,935 |
|
| $ | 1,339 |
|
| $ | 239 |
|
| $ | 4,513 |
| ||||||||||||||||
Restructuring charges |
|
| 442 |
|
|
| 237 |
|
|
| 138 |
|
|
| 817 |
|
|
| 5,332 |
|
|
| 6,039 |
|
|
| 999 |
|
|
| 12,370 |
|
Cash payments |
|
| (1,048 | ) |
|
| (449 | ) |
|
| (451 | ) |
|
| (1,948 | ) |
|
| (3,261 | ) |
|
| (197 | ) |
|
| (569 | ) |
|
| (4,027 | ) |
Non-cash items(1) |
|
| — |
|
|
| (5,152 | ) |
|
| — |
|
|
| (5,152 | ) | ||||||||||||||||
Adjustment to liability |
|
| — |
|
|
| — |
|
|
| 2 |
|
|
| 2 |
|
|
| (54 | ) |
|
| (17 | ) |
|
| (612 | ) |
|
| (683 | ) |
Balance at September 30, 2017 |
| $ | 1,668 |
|
| $ | 880 |
|
| $ | 105 |
|
| $ | 2,653 |
| ||||||||||||||||
Balance at September 30, 2020 |
| $ | 4,952 |
|
| $ | 2,012 |
|
| $ | 57 |
|
| $ | 7,021 |
|
(1) | Represents the FX impact related to the closure and liquidation of GES’ United Kingdom-based audio-visual services business during the three months ended September 30, 2020. |
As of September 30, 2017,2020, we expect to pay all but $1.5 million of the liabilities related to severance and employee benefits are expected to be paid by the end of 2018. Additionally, the2020. The liability related to future lease payments will be paid over the remaining lease terms for GES.terms. Refer to Note 19 22 – Segment Information, for information regarding restructuring charges by segment.
Note 18. 19. Leases and Other
The balance sheet presentation of our operating and finance leases is as follows:
|
|
|
| September 30, |
|
| December 31, |
| ||
(in thousands) |
| Classification on the Condensed Consolidated Balance Sheet |
| 2020 |
|
| 2019 |
| ||
Assets: |
|
|
|
|
|
|
|
|
|
|
Operating lease assets |
| Operating lease right-of-use assets |
| $ | 88,394 |
|
| $ | 103,314 |
|
Finance lease assets |
| Property and equipment, net |
|
| 22,786 |
|
|
| 25,350 |
|
Total lease assets |
|
|
| $ | 111,180 |
|
| $ | 128,664 |
|
|
|
|
|
|
|
|
|
|
|
|
Liabilities: |
|
|
|
|
|
|
|
|
|
|
Current: |
|
|
|
|
|
|
|
|
|
|
Operating lease obligations |
| Operating lease obligations |
| $ | 17,872 |
|
| $ | 22,180 |
|
Finance lease obligations |
| Current portion of debt and finance lease obligations |
|
| 2,895 |
|
|
| 3,386 |
|
Noncurrent: |
|
|
|
|
|
|
|
|
|
|
Operating lease obligations |
| Long-term operating lease obligations |
|
| 73,688 |
|
|
| 82,851 |
|
Finance lease obligations |
| Long-term debt and finance lease obligations |
|
| 20,123 |
|
|
| 21,871 |
|
Total lease liabilities |
|
|
| $ | 114,578 |
|
| $ | 130,288 |
|
The components of lease expense consisted of the following:
|
| Three Months Ended |
|
| Nine Months Ended |
| ||||||||||
|
| September 30, |
|
| September 30, |
| ||||||||||
(in thousands) |
| 2020 |
|
| 2019 |
|
| 2020 |
|
| 2019 |
| ||||
Finance lease cost: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Amortization of right-of-use assets |
| $ | 926 |
|
| $ | 697 |
|
| $ | 2,767 |
|
| $ | 1,895 |
|
Interest on lease liabilities |
|
| 429 |
|
|
| 130 |
|
|
| 1,258 |
|
|
| 379 |
|
Operating lease cost |
|
| 6,596 |
|
|
| 6,625 |
|
|
| 20,235 |
|
|
| 19,456 |
|
Short-term lease cost |
|
| 123 |
|
|
| 571 |
|
|
| 465 |
|
|
| 1,348 |
|
Variable lease cost |
|
| 1,557 |
|
|
| 1,478 |
|
|
| 4,615 |
|
|
| 4,695 |
|
Sublease income(1) |
|
| — |
|
|
| 226 |
|
|
| — |
|
|
| — |
|
Total lease cost, net |
| $ | 9,631 |
|
| $ | 9,727 |
|
| $ | 29,340 |
|
| $ | 27,773 |
|
(1)Sublease income excludes rental income from owned assets, which is recorded in revenue.
Other information related to operating and finance leases are as follows:
|
| Three Months Ended |
|
| Nine Months Ended |
| ||||||||||
|
| September 30, |
|
| September 30, |
| ||||||||||
(in thousands) |
| 2020 |
|
| 2019 |
|
| 2020 |
|
| 2019 |
| ||||
Cash paid for amounts included in the measurement of lease liabilities: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating cash flows from operating leases |
| $ | 5,644 |
|
| $ | 7,250 |
|
| $ | 18,268 |
|
| $ | 20,853 |
|
Operating cash flows from finance leases |
| $ | 839 |
|
| $ | 210 |
|
| $ | 1,705 |
|
| $ | 459 |
|
Financing cash flows from finance leases |
| $ | 665 |
|
| $ | 525 |
|
| $ | 2,235 |
|
| $ | 1,537 |
|
Right-of-use assets obtained in exchange for lease obligations: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating leases |
| $ | (3,059 | ) |
| $ | 49,123 |
|
| $ | 1,018 |
|
| $ | 62,375 |
|
Finance leases |
| $ | 126 |
|
| $ | 14,893 |
|
| $ | 1,894 |
|
| $ | 35,844 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| September 30, |
|
| December 31, |
| ||
|
|
|
|
|
|
|
|
|
| 2020 |
|
| 2019 |
| ||
Weighted-average remaining lease term (years): |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating leases |
|
|
|
|
|
|
|
|
|
| 8.30 |
|
|
| 8.17 |
|
Finance leases |
|
|
|
|
|
|
|
|
|
| 13.58 |
|
|
| 14.01 |
|
Weighted-average discount rate: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating leases |
|
|
|
|
|
|
|
|
|
| 5.89 | % |
|
| 5.77 | % |
Finance leases |
|
|
|
|
|
|
|
|
|
| 7.91 | % |
|
| 7.73 | % |
As of September 30, 2020, the estimated future minimum lease payments under non-cancellable leases, excluding variable leases and variable non-lease components, are as follows:
(in thousands) |
| Operating Leases |
|
| Finance Leases |
|
| Total |
| |||
Remainder of 2020 |
| $ | 6,188 |
|
| $ | 1,458 |
|
| $ | 7,646 |
|
2021 |
|
| 20,043 |
|
|
| 4,284 |
|
|
| 24,327 |
|
2022 |
|
| 15,844 |
|
|
| 3,796 |
|
|
| 19,640 |
|
2023 |
|
| 13,407 |
|
|
| 3,276 |
|
|
| 16,683 |
|
2024 |
|
| 10,265 |
|
|
| 2,609 |
|
|
| 12,874 |
|
Thereafter |
|
| 54,410 |
|
|
| 23,556 |
|
|
| 77,966 |
|
Total future lease payments |
|
| 120,157 |
|
|
| 38,979 |
|
|
| 159,136 |
|
Less: Amount representing interest |
|
| (28,597 | ) |
|
| (15,961 | ) |
|
| (44,558 | ) |
Present value of minimum lease payments |
|
| 91,560 |
|
|
| 23,018 |
|
|
| 114,578 |
|
Current portion |
|
| 17,872 |
|
|
| 2,895 |
|
|
| 20,767 |
|
Long-term portion |
| $ | 73,688 |
|
| $ | 20,123 |
|
| $ | 93,811 |
|
As of September 30, 2020, the estimated future minimum rentals under non-cancellable leases, which includes rental income from facilities that we own, are as follows:
(in thousands) |
|
|
|
|
Remainder of 2020 |
| $ | 431 |
|
2021 |
|
| 1,499 |
|
2022 |
|
| 1,046 |
|
2023 |
|
| 830 |
|
2024 |
|
| 612 |
|
Thereafter |
|
| 1,765 |
|
Total minimum rents |
| $ | 6,183 |
|
Leases Not Yet Commenced
As of September 30, 2020, we had executed certain facility and land leases 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 Condensed 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 2021 and 2022 with lease terms of 15 to 47 years.
Note 20. Litigation, Claims, Contingencies, and Other
Viad and certain of its subsidiariesWe 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 Viad.us. During the three months ended March 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 September 30, 20172020 with respect to theseunresolved legal matters is not ascertainable, Viad believeswe believe that any resulting liability, after taking into consideration amounts already provided for and insurance coverage, will not have a material effect on Viad’sour business, financial position, or results of operations.
ViadOn July 18, 2020, an off-road Ice Explorer operated by our Pursuit business was involved in an accident enroute with 27 people to the Athabasca Glacier, resulting in three fatalities and multiple other serious injuries. We continue to support the victims and their families, and we are fully cooperating with the applicable regulatory authorities to investigate this accident. We immediately reported the accident to our relevant insurance carriers, who are also supporting the investigation. Subject to customary deductibles, we believe that our insurance coverage is sufficient to cover potential claims related to this accident.
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 Viad haswe have or had operations. If the Company failswe fail to comply with these environmental laws and regulations, civil and criminal penalties could be imposed, and Viadwe could become subject to regulatory enforcement actions in the form of injunctions and cease and desist orders. As is the case with many companies, Viadwe also facesface exposure to actual or potential claims and lawsuits involving environmental matters relating to itsour past operations. As of September 30, 2017, Viad2020, we had recorded environmental remediation liabilities of $2.4$2.2 million related to previously sold operations. Although it iswe are a party to certain environmental disputes, Viad believeswe believe that any resulting liabilities, after taking into consideration amounts already provided for and insurance coverage, will not have a material effect on the Company’sour financial position or results of operations.
As of September 30, 2017, Viad,2020, on behalf of itsour subsidiaries, we had certain obligations under guarantees to third parties. These guarantees are not subject to liability recognition in the condensed consolidated financial statements and relate to leased facilities and equipment leases entered into by Viad’sour subsidiary operations. The CompanyWe would generally be required to make payments to the respective third parties under these guarantees in the event that the related subsidiary could not meet its own payment obligations. The maximum potential amount of future payments that Viadwe would be required to make under all guarantees existing as of September 30, 20172020 would be $7.5$75.5 million. These guarantees relate to our leased equipment and facilities leased by the Company through September 2021.January 2040. There are no0 recourse provisions that would enable Viadus to recover from third parties any payments made under the guarantees. Furthermore, there are no collateral or similar arrangements whereby Viadpursuant to which we could recover payments.
A significant portionnumber of Viad’sour employees are unionized and the Company iswe are a party to approximately 100 collective-bargaining agreements, with approximately one-third requiring renegotiation each year. If the Company waswe are unable to reach an agreement with a union during the collective-bargaining process, the union may call for a strike or work stoppage, which may, under certain circumstances, adversely impact the Company’s businessesour business and results of operations. Viad believesWe believe that relations with itsour employees are satisfactory and that collective-bargaining agreements expiring in 20172020 will be renegotiated in the ordinary course of business without having a material adverse effect on Viad’s operations. The Company entered into showsite and warehouse agreements with the Chicago Teamsters Local 727, effective January 1, 2014, and those agreements contain provisions that allow the parties to re-open negotiation of the agreements on pension-related issues. The Company is in informal discussions regarding those issues with all relevant parties to resolve those issues in a manner that will be reasonable and equitable to employees, customers, and stockholders.business. Although the Company’sour labor relations are currently stable, disruptions pending the outcome of the Chicago Teamsters Local 727 negotiations could occur, as they could with any collective-bargaining agreement negotiation, with the possibility of an adverse impact on the operating results of GES.
Viad’s businesses contribute to various multi-employer pension plans based on obligations arising under During the three months ended June 30, 2019, we finalized the terms of a new collective-bargaining agreements covering its union-represented employees. Based uponagreement with the information available to ViadTeamsters Local 727 union. The terms included a withdrawal from plan administrators, management believes that several of these multi-employer plans are underfunded. The Pension Protection Act of 2006 requires pension plans underfunded at certain levels to reduce, over defined time periods, the underfunded status. In addition, under current laws,Central States Pension Plan. Accordingly, we recorded a charge of $15.5 million, which represents the terminationestimated present value of a plan, or a voluntary withdrawal from a plan by Viad, or a shrinking contribution basefuture contributions we will be required to amake to the plan as a result of the insolvency orthis withdrawal and $0.2 million of other contributing employers to such plan, would require Viad to make payments to such plan for its proportionate share of the plan’s unfunded vested liabilities. As of September 30, 2017, the amount of additional funding, if any, that Viad would be required to make related to multi-employer pension plans is not ascertainable.withdrawal costs.
Viad isWe are self-insured up to certain limits for workers’ compensation employee health benefits,and general liabilities, which includes automobile, product and general liability, and client property loss claims. The aggregate amount of insurance liabilities (up to the Company’sour retention limit) related to Viad’sour continuing operations was $20.2$14.3 million as of September 30, 20172020, which includes $14.3$9.8 million related to workers’ compensation liabilities, and $5.9$4.5 million related to general/autogeneral liability claims. Viad hasWe have also retained and provided for certain workers’ compensation insurance liabilities in conjunction with previously sold businesses of $3.3$2.2 million as of September 30, 2017, related to workers’ compensation liabilities.2020. We are also self-insured for certain employee health benefits and the estimated employee health benefit claims incurred but not yet reported was $1.5 million as of September 30, 2020. Provisions for losses for claims incurred, including actuarially derived estimated claims incurred but not yet reported, are made based on Viad’sour historical experience, claims frequency, and other factors. A change in the assumptions used could result in an adjustment to recorded liabilities. Viad hasWe have purchased insurance for amounts in excess of the self-insured levels, which generally range from $0.2 million to $0.5 million on a per claim basis. Viad doesWe do not maintain a self-insured retention pool fund as claims are paid from current cash resources at the time of settlement. Viad’sOur net cash payments in connection with these insurance liabilities were $1.3 million and $1.5$1.6 million for the three months ended September 30, 20172020 and 2016, respectively, and $3.8 million and $3.9$4.4 million for the nine months ended September 30, 20172020 and 2016, respectively.$2.0 million for the three months ended September 30, 2019 and $5.3 million for the nine months ended September 30, 2019.
In addition, as of September 30, 2017, Viad2020, we have recorded insurance liabilities of $10.5$10.0 million related to continuing operations, which represents the amount for which Viad remainswe remain the primary obligor after self-insured insurance limits, without taking into consideration
the above-referenced insurance coverage. Of this total, $6.9$6.5 million related to workers’ compensation liabilities and $3.6$3.5 million related to general/auto liability claims, which are recorded in other deferred items and liabilities in Viad’s condensed consolidated balance sheetsthe Condensed Consolidated Balance Sheets with a corresponding receivable in other investments.
Note 21. Redeemable Noncontrolling Interest
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 and its wholly-owned subsidiary, we are operating a new FlyOver Iceland attraction.
The minority Esja shareholders have the right to sell (or “put”) their Esja shares to us based on a multiple of 5.0x EBITDA as calculated on the trailing 12 months from the most recently completed quarter before the put option exercise. The put option is only exercisable after 36 months of business operation (the “Reference Date”) and if the FlyOver Iceland attraction has earned a minimum of €3.25 million in unadjusted EBITDA during the most recent fiscal year and during the trailing 12-month period prior to exercise (the “Put Option Condition”). The put option is exercisable during a period of 12 months following the Reference Date (the “Option Period”) if the Put Option Condition has been met. If the Put Option Condition has not been met during the first Option Period, the Reference Date will be extended for an additional 12 months up to three times. If after 72 months, the FlyOver Iceland attraction has not achieved the Put Option Condition, the put option expires. If the Put Option Condition is met during any of the Option Periods, yet the shares are not exercised prior to the end of the 12-month Option Period, the put option will expire.
The noncontrolling interest’s carrying value is 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. This value is benchmarked against the redemption value of the sellers’ put option. The carrying value is adjusted to the redemption value, provided that it does not fall below the initial carrying value, as determined by the purchase price allocation. We have made a policy election to reflect any changes caused by such an adjustment to retained earnings, rather than to current earnings.
Changes in the redeemable noncontrolling interest are as follows:
(in thousands) |
|
|
|
|
Balance at December 31, 2019 |
| $ | 6,172 |
|
Net loss attributable to redeemable noncontrolling interest |
|
| (1,023 | ) |
Adjustment to the redemption value |
|
| 926 |
|
Foreign currency translation adjustment |
|
| (804 | ) |
Balance at September 30, 2020 |
| $ | 5,271 |
|
Note 19. 22. Segment Information
Viad measuresWe measure the profit and performance of itsour operations on the basis of segment operating income (loss), which excludes restructuring charges and recoveries and impairment charges and recoveries.charges. 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.
Viad’sOur reportable segments, with reconciliations to consolidated totals, are as follows:
|
| Three Months Ended |
|
| Nine Months Ended |
|
| Three Months Ended |
|
| Nine Months Ended |
| ||||||||||||||||||||
|
| September 30, |
|
| September 30, |
|
| September 30, |
|
| September 30, |
| ||||||||||||||||||||
(in thousands) |
| 2017 |
|
| 2016 |
|
| 2017 |
|
| 2016 |
|
| 2020 |
|
| 2019 |
|
| 2020 |
|
| 2019 |
| ||||||||
Revenue: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
GES: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
U.S. |
| $ | 184,761 |
|
| $ | 232,484 |
|
| $ | 684,003 |
|
| $ | 636,299 |
| ||||||||||||||||
International |
|
| 54,040 |
|
|
| 60,926 |
|
|
| 203,222 |
|
|
| 187,689 |
| ||||||||||||||||
GES North America |
| $ | 11,767 |
|
| $ | 185,124 |
|
| $ | 273,423 |
|
| $ | 666,825 |
| ||||||||||||||||
GES EMEA |
|
| 2,774 |
|
|
| 39,300 |
|
|
| 52,096 |
|
|
| 156,473 |
| ||||||||||||||||
Intersegment eliminations |
|
| (6,682 | ) |
|
| (6,425 | ) |
|
| (17,126 | ) |
|
| (15,439 | ) |
|
| (284 | ) |
|
| (5,724 | ) |
|
| (3,258 | ) |
|
| (14,731 | ) |
Total GES |
|
| 232,119 |
|
|
| 286,985 |
|
|
| 870,099 |
|
|
| 808,549 |
|
|
| 14,257 |
|
|
| 218,700 |
|
|
| 322,261 |
|
|
| 808,567 |
|
Pursuit |
|
| 106,980 |
|
|
| 97,402 |
|
|
| 159,581 |
|
|
| 143,111 |
|
|
| 48,815 |
|
|
| 135,043 |
|
|
| 67,602 |
|
|
| 201,119 |
|
Corporate eliminations (1) |
|
| — |
|
|
| (1,922 | ) |
|
| — |
|
|
| (3,086 | ) | ||||||||||||||||
Total revenue |
| $ | 339,099 |
|
| $ | 382,465 |
|
| $ | 1,029,680 |
|
| $ | 948,574 |
|
| $ | 63,072 |
|
| $ | 353,743 |
|
| $ | 389,863 |
|
| $ | 1,009,686 |
|
Segment operating income (loss): |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
GES: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
U.S. |
| $ | (2,851 | ) |
| $ | 14,543 |
|
| $ | 39,319 |
|
| $ | 37,907 |
| ||||||||||||||||
International |
|
| (2,870 | ) |
|
| 644 |
|
|
| 8,491 |
|
|
| 4,951 |
| ||||||||||||||||
GES North America |
| $ | (10,986 | ) |
| $ | (8,562 | ) |
| $ | (28,194 | ) |
| $ | 22,635 |
| ||||||||||||||||
GES EMEA |
|
| (7,262 | ) |
|
| (3,024 | ) |
|
| (11,256 | ) |
|
| 2,775 |
| ||||||||||||||||
Total GES |
|
| (5,721 | ) |
|
| 15,187 |
|
|
| 47,810 |
|
|
| 42,858 |
|
|
| (18,248 | ) |
|
| (11,586 | ) |
|
| (39,450 | ) |
|
| 25,410 |
|
Pursuit |
|
| 53,860 |
|
|
| 44,248 |
|
|
| 53,523 |
|
|
| 44,733 |
|
|
| 11,467 |
|
|
| 66,392 |
|
|
| (26,499 | ) |
|
| 64,710 |
|
Segment operating income |
|
| 48,139 |
|
|
| 59,435 |
|
|
| 101,333 |
|
|
| 87,591 |
| ||||||||||||||||
Segment operating income (loss) |
|
| (6,781 | ) |
|
| 54,806 |
|
|
| (65,949 | ) |
|
| 90,120 |
| ||||||||||||||||
Corporate eliminations (1) |
|
| 18 |
|
|
| (518 | ) |
|
| 50 |
|
|
| (940 | ) |
|
| 16 |
|
|
| 16 |
|
|
| 48 |
|
|
| 49 |
|
Corporate activities |
|
| (4,474 | ) |
|
| (2,772 | ) |
|
| (10,092 | ) |
|
| (7,390 | ) |
|
| (2,645 | ) |
|
| (2,680 | ) |
|
| (5,902 | ) |
|
| (7,795 | ) |
Operating income |
|
| 43,683 |
|
|
| 56,145 |
|
|
| 91,291 |
|
|
| 79,261 |
| ||||||||||||||||
Operating income (loss) |
|
| (9,410 | ) |
|
| 52,142 |
|
|
| (71,803 | ) |
|
| 82,374 |
| ||||||||||||||||
Interest income |
|
| 74 |
|
|
| 44 |
|
|
| 174 |
|
|
| 138 |
|
|
| 58 |
|
|
| 79 |
|
|
| 313 |
|
|
| 260 |
|
Interest expense |
|
| (2,117 | ) |
|
| (1,489 | ) |
|
| (6,281 | ) |
|
| (4,109 | ) |
|
| (5,508 | ) |
|
| (3,740 | ) |
|
| (14,712 | ) |
|
| (9,612 | ) |
Restructuring charges: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||||||||||||
GES U.S. |
|
| 435 |
|
|
| (1,498 | ) |
|
| 364 |
|
|
| (1,791 | ) | ||||||||||||||||
GES International |
|
| (689 | ) |
|
| (203 | ) |
|
| (1,043 | ) |
|
| (1,374 | ) | ||||||||||||||||
Multi-employer pension plan withdrawal |
|
| — |
|
|
| — |
|
|
| (462 | ) |
|
| (15,508 | ) | ||||||||||||||||
Other expense |
|
| (210 | ) |
|
| (281 | ) |
|
| (894 | ) |
|
| (1,192 | ) | ||||||||||||||||
Restructuring recoveries (charges): |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||||||||||||
GES North America |
|
| (2,310 | ) |
|
| (881 | ) |
|
| (2,277 | ) |
|
| (5,139 | ) | ||||||||||||||||
GES EMEA |
|
| (8,376 | ) |
|
| (759 | ) |
|
| (9,094 | ) |
|
| (1,501 | ) | ||||||||||||||||
Pursuit |
|
| — |
|
|
| — |
|
|
| — |
|
|
| (93 | ) |
|
| 12 |
|
|
| — |
|
|
| (45 | ) |
|
| — |
|
Corporate |
|
| (1 | ) |
|
| 4 |
|
|
| (138 | ) |
|
| (406 | ) |
|
| (585 | ) |
|
| (62 | ) |
|
| (954 | ) |
|
| (205 | ) |
Impairment recoveries (charges): |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||||||||||||
Impairment charges: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||||||||||||
GES North America |
|
| — |
|
|
| — |
|
|
| (171,094 | ) |
|
| — |
| ||||||||||||||||
GES EMEA |
|
| (676 | ) |
|
| — |
|
|
| (30,225 | ) |
|
| — |
| ||||||||||||||||
Pursuit |
|
| 24,467 |
|
|
| (120 | ) |
|
| 29,098 |
|
|
| (120 | ) |
|
| — |
|
|
| — |
|
|
| (1,757 | ) |
|
| — |
|
Income from continuing operations before income taxes |
| $ | 65,852 |
|
| $ | 52,883 |
|
| $ | 113,465 |
|
| $ | 71,506 |
| ||||||||||||||||
Legal settlement: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||||||||||||
GES |
|
| — |
|
|
| — |
|
|
| — |
|
|
| (8,500 | ) | ||||||||||||||||
Income (loss) from continuing operations before income taxes |
| $ | (27,005 | ) |
| $ | 46,498 |
|
| $ | (303,004 | ) |
| $ | 40,977 |
|
(1) | Corporate eliminations |
Note 20. Discontinued Operations23. Common and Preferred Stock
Discontinued operations in 2017 includes reserves to resolve certain environmental matters and legal fees related to previously sold operations. During 2016, Viad recorded liability reserve adjustments and legal fees related to previously sold operations.
Note 21. Subsequent EventConvertible Series A Preferred Stock
On November 3, 2017,August 5, 2020, we entered into an Investment Agreement with funds managed by private equity firm Crestview Partners, relating to the Company acquired the controlling interest (54.5%issuance of the common stock) in Esja Attractions ehf. (“Esja”),135,000 shares of newly issued Convertible Series A Preferred Stock, par value $0.01 per share, for aan aggregate purchase price of €8.2$135 million (approximately $9.5 million)or $1,000 per share. The $135 million issuance was offset in cash. Esja,part by $9.2 million of expenses related to the capital raise. The Investment Agreement also includes a private corporationdelayed draw commitment of up to $45 million in Reykjavik, Iceland,additional Convertible Series A Preferred Stock, which we may access during the 12 months following the August 5, 2020 closing date on the same terms and conditions as the initial investment. We have classified the convertible preferred stock as temporary equity in our consolidated balance sheet due to the existence of certain change in control provisions that are not solely within our control.
The Convertible Series A Preferred Stock carries a 5.5% cumulative quarterly dividend, which is developingpayable in cash or in-kind at Viad’s option and is convertible at the option of the holders into shares of our common stock at a conversion price of $21.25 per share. Upon the occurrence of a change in control event, the holders have a right to require Viad to repurchase such preferred stock. During the three months ended September 30, 2020, $1.1 million of dividends were deemed declared and paid in-kind.
Holders of the Convertible Series A Preferred Stock are entitled to vote with holders of Viad’s common stock on an as-converted basis.
Common Stock Repurchases
We previously announced our Board of Directors’ authorization 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.
During the nine months ended September 30, 2020, we repurchased 53,784 shares on the open market for $2.8 million. As of September 30, 2020, 546,283 shares remain available for repurchase. NaN shares were purchased on the open market during the nine months ended September 30, 2019. Additionally, we repurchase shares related to tax withholding requirements on vested restricted stock awards. Refer to Note 3 – Share-Based Compensation.
In March 2020, our Board of Directors suspended our share repurchase program for the foreseeable future.
Stockholder Rights Plan
On March 29, 2020, our Board of Directors adopted a short-term stockholder rights plan and declared a dividend payable to stockholders of record on April 13, 2020 of one preferred stock purchase right per each outstanding share of Viad common stock to purchase one one-hundredth of a share of Viad’s Junior Participating Preferred Stock at an exercise price of $115.00. Our Board of Directors will be able to redeem the rights at $0.01 per right at any time before a person or group acquired 10% (20% in the case of a passive institutional investor) or more of the outstanding common stock. On August 5, 2020, the stockholder rights plan was amended, whereby Crestview and affiliated parties were designated as exempt persons, and as such the issuance of preferred stock to Crestview did not result in a triggering event. The rights otherwise expire on February 28, 2021, subject to our right to extend the date, unless we redeem, exchange, or terminate the rights earlier.
Subject to limited exceptions, if a person or group acquires 10% (20% in the case of a passive institutional investor) or more of our common stock (including shares that are synthetically owned pursuant to derivative transactions or ownership of derivative securities) or announces a tender offer, and the consummation of that offer would result in such ownership (we refer to such a person or group as an “acquiring person”), each right will entitle its holder to purchase, at the right’s then-current exercise price, a number of shares of common stock having a market value at that time of twice the right’s exercise price. Rights held by the acquiring person will become void and will operatenot be exercisable. If the new FlyOver Iceland attraction. The FlyOver Iceland attractionCompany is expectedacquired in a merger or other business combination transaction that has not been approved by our Board of Directors after the rights become exercisable, each right will entitle its holder to open in 2019.purchase, at the right’s then-current exercise price, a number of shares of the acquiring company’s common stock having a market value at that time of twice the right’s exercise price.
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations
Forward-Looking Statements
This Form 10-Q contains a number of forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. 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. Forward-looking statements in this Form 10-Q include, among others, statements about our plans, business strategies, initiatives, intentions, goals and the outlook related to the effects of the COVID-19 pandemic, including on the demand for travel, event business and travel experiences, the timing of event and attraction re-openings, financial performance, prospects or future events. There are a number of risks, uncertainties and other important factors, many of which are beyond our control, that could cause our actual results to differ materially from the forward-looking statements contained in this Quarterly Report on Form 10-Q. Such risks, uncertainties and other important factors include, among others: the factors set forth under “Risk Factors” (Part I, Item 1A) and “Management’s Discussion and Analysis of Financial Condition and Results of Operations” (Part II, Item 7) in our Annual Report on Form 10-K filed with the U.S. Securities and Exchange Commission (the “SEC”), as may be updated elsewhere in this report; and the information set forth in other Quarterly Reports on Form 10-Q and Current Reports on Form 8-K that we have filed or will file with the SEC; the short- and longer-term effects of the COVID-19 pandemic, including on the demand for travel, event business and travel experiences, and levels of consumer confidence; actions that governments, businesses, and individuals take in response to the COVID-19 pandemic or any future resurgence, including limiting or banning travel; the impact of the COVID-19 pandemic, and actions taken in response to the COVID-19 pandemic or any future resurgence, on global and regional economies, travel, and economic activity, including the duration and magnitude of its impact on unemployment rates and consumer discretionary spending; the pace of recovery following the COVID-19 pandemic or any future resurgence; COVID-19 may cause us to incur additional expenses. These forward-looking statements are not historical facts and are subject to a host of risks and uncertainties, many of which are beyond our control, which could cause actual results to differ materially from those in the forward-looking statements. We disclaim and do not undertake any obligation to update or revise any forward-looking statement except as required by applicable law or regulation.
The following Management’s Discussion and Analysis (“MD&A”) should be read in conjunction with the Annual Report onour 2019 Form 10-K of Viad Corp (“Viad” or the “Company”) for the year ended December 31, 2016 and the condensed consolidated financial statements and accompanyingrelated notes included in this Form 10-Q. The MD&A is intended to assist in providing an understanding of the Company’sour financial condition and results of operations. This discussion contains forward-looking statements that involve risks and uncertainties. Viad’s actual results could differ materially from those anticipated due to various factors discussed under “Forward-Looking Statements” and elsewhere in this Form 10-Q.
Overview
Viad operatesWe are an international experiential services company with operations in the United States, Canada, the United Kingdom, continental Europe, the United Arab Emirates, and Iceland. We are committed to providing unforgettable experiences to our clients and guests. We operate through three reportable business segments: GES U.S.,North America, GES InternationalEMEA, (collectively, “GES”), and Pursuit.
GES
GES is a global, full-service provider for live events that produces exhibitions, conferences, corporate events, and consumer events. GES offerscompany offering a comprehensive range of live event services and a full suite of audio-visual services from creative and technology to content and design, along with online tools powered by next generation technologies that help clients easily manage the complexities of their events.
GES’ clients include event organizers and corporate brand marketers. Event organizers schedule and run events from start to finish. Corporate brand marketers include exhibitors and domestic and international corporations that want to promote their brands, services and innovations,innovation, 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.
Markets ServedPursuit
GESPursuit is a collection of inspiring and unforgettable travel experiences that include recreational attractions, unique hotels and lodges, food and beverage, retail, sightseeing, and ground transportation services.
Impact of COVID-19
On March 11, 2020, the World Health Organization declared COVID-19 a “pandemic.” COVID-19 has spread rapidly, with a high concentration of confirmed cases in the U.S. and GES International both offerother countries in which we operate. The rapid spread has resulted in authorities around the world implementing numerous measures to contain the virus, such as travel bans and restrictions, quarantines, shelter-in-place orders, and business shutdowns. The COVID-19 pandemic and these containment measures have had, and are expected to continue to have, a substantial negative impact on businesses around the world and on global, regional, and national economies.
The COVID-19 pandemic is having and will likely continue to have a significant and negative impact on our operations and financial performance, with live events largely shut down and tourism activity disruptions. In response to the COVID-19 pandemic, we implemented aggressive cost reduction measures to preserve cash, including furloughs, layoffs, mandatory unpaid time off, or salary
reductions for all employees and the elimination of discretionary spending. We continue to implement measures to successfully adapt for the long-term impact of COVID-19. During the third quarter of 2020, we secured additional capital to strengthen our liquidity position and amended our Second Amended and Restated Credit Agreement (the “2018 Credit Agreement”) to provide financial flexibility.
Investment Agreement
On August 5, 2020, we entered into an investment agreement with funds managed by private equity firm Crestview Partners (the “Investment Agreement”) who made an initial investment of $135 million, offset in part by $9.2 million in fees, in newly issued perpetual convertible preferred stock that carries a 5.5% cumulative quarterly dividend, which is payable in cash or in-kind at Viad’s option (the “Convertible Preferred Stock”). The Convertible Preferred Stock is convertible into shares of our common stock at a conversion price of $21.25 per share. The Investment Agreement also includes a delayed draw commitment of up to $45 million in additional Convertible Preferred Stock, which we may access during the 12 months following the August 5, 2020 closing date on the same terms and conditions as the initial investment. The proceeds from Crestview’s initial investment were used to repay a portion of our 2018 Credit Facility, will provide additional short-term liquidity, will fund capital expenditures, and will support general corporate purposes. Pursuant to the Investment Agreement, two Crestview Partners’ designees joined our Board of Directors, increasing the size of our board from seven to nine directors.
Credit Agreement Amendment
On August 5, 2020, we entered into an amendment to our 2018 Credit Agreement, which, among other things, (i) waives our financial covenants until September 30, 2022 (the “Covenant Waiver Period”) and (ii) requires us to maintain minimum liquidity of $125 million with a step down to $100 million at December 31, 2020. The interest rate on the borrowings is equal to the London Interbank Offered Rate (“LIBOR”) plus 350 basis points, with a LIBOR floor of one percent during the Covenant Waiver Period. The LIBOR floor continues until the end of the 2018 Credit Agreement. Viad pledged 100% of the capital stock of its wholly-owned domestic subsidiaries and its top-tier foreign subsidiaries (other than Esja Attractions ehf.). Fees related to the amendment were approximately $1.7 million.
Goodwill Impairment
Due to the deteriorating macroeconomic environment, disruptions to our operations, and the sustained decline in our stock price caused by COVID-19, we determined an interim triggering event had occurred in the first and second quarters of 2020, which required us to assess the carrying values of goodwill and intangible assets in accordance with Accounting Standards Codification (“ASC”) No. 350, Intangibles – Goodwill and Other. Based on this assessment, we recorded non-cash goodwill impairment charges of $186.1 million during the first half of 2020, including a full suiteimpairment charge to the remaining GES goodwill balance of services for event organizers$113.1 million in the second quarter of 2020. Our remaining goodwill balance as of September 30, 2020 of $96.9 million pertains to our Pursuit business. The duration and corporate brand marketers across four live event markets: (i) Exhibitions; (ii) Conferences; (iii) Corporate Events,impact of COVID-19 may result in additional future impairment charges as facts and (iv) Consumer Events (collectively, “Live Events”).circumstances evolve.
Services Offered
GES offers a comprehensive range of services and innovative technology to event organizers and corporate brand marketers including (i) Core Services; (ii) Event Technology, and (iii) Audio-Visual:
Core Services. GES provides official contracting services and products to event organizers and corporate brand marketers for Live Events. Contracting services and products are provided primarily to Exhibitions and to a lesser degree to Conferences, Corporate Events, and Consumer Events.
Event Technology. GES offers a comprehensive range of event technology services including event accommodation solutions, registration and data analytics, and event management tools.
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Audio-Visual. GES U.S. and GES International offer a variety of audio-visual and digital services for Live Events and corporate brand marketers. GES combines the science of innovative digital solutions with the latest audio-visual technology and superior service to create award-winning attendee engagements. Services provided include digital design and content, media production, content testing, equipment rental, staging, and creative services.
Seasonality
GES U.S. and GES InternationalGES’ exhibition and event activity can vary significantly from quarter to quarter and year to year depending on the frequency and timing of shows, as someshows. Some shows are not held each yearannually, and some may shift between quarters.
Pursuit is a collection of iconic natural During 2019, GES reported its highest revenue during the second and cultural destination travel experiences that enjoy perennial demand. Pursuit offers guests distinctive and world renowned experiences through its collection of unique hotels, lodges, recreational attractions, and transportation services. Pursuit is composed of the following collections:
Brewster Travel Canada is a leading travel and tourism provider in the Canadian Rockies in Alberta, Canada with two lodging properties in Banff National Park, one lodging property in Jasper National Park, five world-class recreational attractions, food and beverage services, retail operations, sightseeing and transportation services.
Alaska Collection is a leading travel and tourism provider in Alaska with two lodging properties and a sightseeing excursion in Denali National Park and Preserve, a lodge in Talkeetna, Alaska’s top-rated wildlife and glacier cruise, and two lodging properties located near Kenai Fjords National Park. The Alaska Collection also provides food and beverage services and retail operations with respect to those properties.
Glacier Park, Inc. is an operator of seven lodging properties, 12 retail shops, and 11 dining outlets in and around Glacier National Park in Montana, one of the most visited national parks in the United States, and Waterton Lakes National Park in Alberta, Canada, with a leading share of rooms in that market. Glacier Park, Inc. is an 80 percent owned subsidiary of Viad.
FlyOver Canada is a recreational attraction that provides a virtual flight ride experience located in Vancouver, Canada that combines motion seating, spectacular media, and visual effects including wind, scents, and mist to give the unforgettable experience of flying across Canada.
Pursuit is composed of four lines of business: (i) Hospitality (including food and beverage services and retail operations); (ii) Attractions (including food and beverage services and retail operations); (iii) Transportation; and (iv) 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.
Seasonalityfourth quarters.
Pursuit experiences peak activity during the summer months. During 2016, 90 percent2019, 85% of Pursuit’s revenue was earned in the second and third quarters.
As a result of COVID-19 concerns, we continue to see event postponements and cancellations at GES, as well as some cancelled bookings at Pursuit. To help reduce the spread of COVID-19, Pursuit’s year-round attractions and lodging properties were closed temporarily starting in mid-March and remained closed during most of the second quarter of 2020. As government mandated closures and stay-at-home orders were lifted, we began to restart our business with enhanced health and safety protocols in place. We phased in most of Pursuit’s attractions and lodging operations starting in May with most open and operational during the third quarter of 2020. However, exhibition and event activity remain largely closed. For GES, we believe that, as governments continue to lift restrictions, events in certain geographies will gradually increase and we stand ready to reactivate areas of that business when it makes sense to do so. Additionally, in the event of a future resurgence of the virus, we may be required to re-close certain attractions or events based on local or governmental restrictions implemented.
The extent of the COVID-19 pandemic’s effect on our operational and financial performance will depend on future developments including the duration, spread, and intensity of the virus, all of which are uncertain and difficult to predict. Due to the evolving and uncertain nature of COVID-19, we are not able at this time to fully estimate the effect of these factors on our business, however, the
adverse impact on our business, results of operations, and cash flows has been material. We will continue to evaluate and implement additional cost-cutting measures as are necessary to mitigate the negative financial and operational impact of COVID-19 on our business. For a discussion of the risks and uncertainties that may affect our business or financial results, refer to “Risk Factors” (Part II, Item 1A of this Form 10-Q).
Results of Operations
Financial Highlights
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| Three Months Ended |
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| Nine Months Ended |
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| ||||||||||
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| September 30, |
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| September 30, |
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| ||||||||||
(in thousands, except per share data) |
| 2017 |
|
| 2016 |
|
| Percentage Change |
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| 2017 |
|
| 2016 |
|
| Percentage Change |
| ||||||
Revenue |
| $ | 339,099 |
|
| $ | 382,465 |
|
|
| (11.3 | )% |
| $ | 1,029,680 |
|
| $ | 948,574 |
|
|
| 8.6 | % |
Net income attributable to Viad |
| $ | 44,657 |
|
| $ | 33,792 |
|
|
| 32.2 | % |
| $ | 79,381 |
|
| $ | 46,318 |
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|
| 71.4 | % |
Segment operating income (1) |
| $ | 48,139 |
|
| $ | 59,435 |
|
|
| (19.0 | )% |
| $ | 101,333 |
|
| $ | 87,591 |
|
|
| 15.7 | % |
Diluted income per common share from continuing operations attributable to Viad common stockholders |
| $ | 2.19 |
|
| $ | 1.68 |
|
|
| 30.4 | % |
| $ | 3.91 |
|
| $ | 2.33 |
|
|
| 67.8 | % |
Three months ended September 30, 2017 compared with the three months ended September 30, 2016
Total revenue decreased $43.4 million or 11.3 percent, primarily due to negative show rotation of approximately $75 million at GES. This decrease was offset in part by underlying growth at both GES and Pursuit, incremental revenue from the acquisitions of the business of ON Event Services, LLC (“ON Services”), FlyOver Canada, and the Poken event engagement technology (“Poken”) of $13.1 million, and a favorable foreign exchange impact of $3.4 million. Management defines base same-show revenue as revenue derived from shows that the Company produced out of the same city during the same quarter in each year.
Net income attributable to Viad increased $10.9 million, primarily due to impairment recoveries related to the Mount Royal Hotel fire and higher segment operating income from Pursuit, offset in part by decreased segment operating income at GES primarily due to negative show rotation.
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| Three Months Ended |
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| Nine Months Ended |
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|
| September 30, |
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|
| September 30, |
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| ||||||||||
(in thousands, except per share data) |
| 2020 |
|
| 2019 |
|
| % Change |
|
| 2020 |
|
| 2019 |
|
| % Change |
| ||||||
Total revenue (1) |
| $ | 63,072 |
|
| $ | 353,743 |
|
|
| (82.2 | )% |
| $ | 389,863 |
|
| $ | 1,009,686 |
|
|
| (61.4 | )% |
Net income (loss) attributable to Viad |
| $ | (30,758 | ) |
| $ | 31,416 |
|
| ** |
|
| $ | (323,621 | ) |
| $ | 27,463 |
|
| ** |
| ||
Segment operating income (loss) (2) |
| $ | (6,781 | ) |
| $ | 54,806 |
|
| ** |
|
| $ | (65,949 | ) |
| $ | 90,120 |
|
| ** |
| ||
Diluted income (loss) per common share from continuing operations attributable to Viad common stockholders |
| $ | (1.54 | ) |
| $ | 1.54 |
|
| ** |
|
| $ | (15.98 | ) |
| $ | 1.33 |
|
| ** |
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(1) |
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|
Nine months ended September 30, 2017 compared with the nine months ended September 30, 2016
Total revenue increased $81.1 million or 8.6 percent, primarily due to incremental revenue from the acquisitions of ON Services, FlyOver Canada, and Poken of $49.8 million and underlying growth at both GES and Pursuit. This increase was offset in part by an unfavorable foreign exchange impact of $10.6 million and negative show rotation of approximately $6 million.
Net income attributable to Viad increased $33.1 million, primarily due to impairment recoveries related to the Mount Royal Hotel fire, increased segment operating income at Pursuit and GES, and a decrease in restructuring charges, offset in part by higher corporate activities expense due to an increase in performance-based compensation driven by the Company’s stock price appreciation, and higher interest expense.
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| Refer to Note |
** Change is greater than +/- 100%
• | Total revenue decreased $290.7 million or 82.2%, during the three months ended September 30, 2020 and decreased $619.8 million or 61.4% during the nine months ended September 30, 2020. These decreases are primarily due to the impact of the COVID-19 pandemic as GES experienced show postponements and cancellations and Pursuit temporarily closed its properties in mid-March through most of the second quarter of 2020 and driven by lower visitation due to continued border closures and other travel restrictions. |
• | Net loss attributable to Viad was $30.8 million during the three months ended September 30, 2020 as compared to income of $31.4 million during the three months ended September 30, 2019. Net loss attributable to Viad was $323.6 million during the nine months ended September 30, 2020 as compared to income of $27.5 million during the nine months ended September 30, 2019. The 2020 net losses are primarily due to lower revenue and impairment charges of $0.7 million and $203.1 million during the three and nine months ended September 30, 2020, respectively, restructuring charges of $11.3 million and $12.4 million during the three and nine months ended September 30, 2020, respectively, related to transformation efforts at GES to significantly reduce costs and create a lower and more flexible cost structure, offset in part by lower performance-based compensation expense as we reduced our estimated performance achievement to zero as a result of COVID-19. |
• | Total segment operating loss(1)was $6.8 million during the three months ended September 30, 2020 as compared to income of $54.8 million during the three months ended September 30, 2019. Segment operating loss was $65.9 million during the nine months ended September 30, 2020 as compared to income of $90.1 million during the nine months ended September 30, 2019. The 2020 losses are primarily due to lower revenue at GES and Pursuit as a result of the COVID-19 pandemic, offset in part by the elimination of performance-based incentives. |
(1) | Refer to Note 22 – Segment Information of the Notes to Condensed Consolidated Financial Statements for a reconciliation of the non-GAAP financial measure, segment operating income (loss), to the most directly comparable GAAP measure. |
Foreign Exchange Rate Variances
Viad conducts itsWe conduct our foreign operations primarily in Canada, the United Kingdom, Iceland, the Netherlands, Germany, and to a lesser extent, in certain other countries.
The following tables summarizetable summarizes the effects of foreign exchange rate variancesvariance effects (or “FX Impact”) on revenue and segment operating results (or “FX Impact”)income (loss) from Viad’sour significant international operations for the three and nine months ended September 30, 20172020 and 2016, excluding the effect of acquisitions completed during 2017 and 2016:2019:
Three months ended September 30, 20172020 compared with the three months ended September 30, 20162019
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GES: |
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GES North America: |
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Canada (CAD) |
| $ | 0.80 |
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| $ | 0.77 |
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| $ | 680 |
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| $ | 0.80 |
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| $ | 0.77 |
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| $ | 44 |
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| $ | 0.75 |
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| $ | 0.76 |
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| $ | (2 | ) |
| $ | 0.75 |
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| $ | 0.76 |
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| $ | 12 |
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GES EMEA: |
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|
|
|
|
| ||||||||||||||||||||||||
United Kingdom (GBP) |
| $ | 1.32 |
|
| $ | 1.31 |
|
|
| 235 |
|
| $ | 1.31 |
|
| $ | 1.32 |
|
|
| 115 |
|
| $ | 1.30 |
|
| $ | 1.24 |
|
| $ | 101 |
|
| $ | 1.29 |
|
| $ | 1.23 |
|
| $ | (233 | ) |
Europe (EUR) |
| $ | 1.19 |
|
| $ | 1.12 |
|
|
| 382 |
|
| $ | 1.18 |
|
| $ | 1.14 |
|
|
| 13 |
|
| $ | 1.17 |
|
| $ | 1.10 |
|
|
| 27 |
|
| $ | 1.17 |
|
| $ | 1.11 |
|
|
| (39 | ) |
|
|
|
|
|
|
|
|
|
|
| 1,297 |
|
|
|
|
|
|
|
|
|
|
| 172 |
|
|
|
|
|
|
|
|
|
| $ | 128 |
|
|
|
|
|
|
|
|
|
| $ | (272 | ) |
Pursuit |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||||||||||||||||||||
Pursuit: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||||||||||||||||||||
Canada (CAD) |
| $ | 0.80 |
|
| $ | 0.77 |
|
|
| 2,119 |
|
| $ | 0.80 |
|
| $ | 0.77 |
|
|
| 1,218 |
|
| $ | 0.75 |
|
| $ | 0.76 |
|
| $ | (232 | ) |
| $ | 0.75 |
|
| $ | 0.76 |
|
| $ | (48 | ) |
Iceland (ISK) |
| $ | 0.01 |
|
| $ | 0.01 |
|
|
| (25 | ) |
| $ | 0.01 |
|
| $ | 0.01 |
|
|
| 46 |
| ||||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
| $ | 3,416 |
|
|
|
|
|
|
|
|
|
| $ | 1,390 |
|
|
|
|
|
|
|
|
|
| $ | (257 | ) |
|
|
|
|
|
|
|
|
| $ | (2 | ) |
Total |
|
|
|
|
|
|
|
|
| $ | (131 | ) |
|
|
|
|
|
|
|
|
| $ | (262 | ) |
Nine months ended September 30, 20172020 compared with the nine months ended September 30, 20162019
|
| Revenue |
|
| Segment Operating Results |
|
| Revenue |
|
| Segment Operating Income (Loss) |
| ||||||||||||||||||||||||||||||||||||
|
| Weighted-Average Exchange Rates |
|
| FX Impact |
|
| Weighted-Average Exchange Rates |
|
| FX Impact |
|
| Weighted-Average Exchange Rates |
|
| FX Impact |
|
| Weighted-Average Exchange Rates |
|
| FX Impact |
| ||||||||||||||||||||||||
|
| 2017 |
|
| 2016 |
|
| (in thousands) |
|
| 2017 |
|
| 2016 |
|
| (in thousands) |
|
| 2020 |
|
| 2019 |
|
| (in thousands) |
|
| 2020 |
|
| 2019 |
|
| (in thousands) |
| ||||||||||||
GES: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||||||||||||||||||||
GES North America: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||||||||||||||||||||
Canada (CAD) |
| $ | 0.76 |
|
| $ | 0.76 |
|
| $ | (202 | ) |
| $ | 0.76 |
|
| $ | 0.78 |
|
| $ | (221 | ) |
| $ | 0.73 |
|
| $ | 0.75 |
|
| $ | (366 | ) |
| $ | 0.73 |
|
| $ | 0.75 |
|
| $ | (19 | ) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||||||||||||||||||||
GES EMEA: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||||||||||||||||||||
United Kingdom (GBP) |
| $ | 1.28 |
|
| $ | 1.38 |
|
|
| (11,395 | ) |
| $ | 1.28 |
|
| $ | 1.25 |
|
|
| (210 | ) |
| $ | 1.28 |
|
| $ | 1.27 |
|
| $ | (711 | ) |
| $ | 1.27 |
|
| $ | 1.26 |
|
| $ | (323 | ) |
Europe (EUR) |
| $ | 1.11 |
|
| $ | 1.12 |
|
|
| (100 | ) |
| $ | 1.12 |
|
| $ | 1.13 |
|
|
| (39 | ) |
| $ | 1.11 |
|
| $ | 1.12 |
|
|
| (168 | ) |
| $ | 1.11 |
|
| $ | 1.12 |
|
|
| (12 | ) |
|
|
|
|
|
|
|
|
|
|
| (11,697 | ) |
|
|
|
|
|
|
|
|
|
| (470 | ) |
|
|
|
|
|
|
|
|
|
| (879 | ) |
|
|
|
|
|
|
|
|
|
| (335 | ) |
Pursuit |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||||||||||||||||||||
Pursuit: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||||||||||||||||||||
Canada (CAD) |
| $ | 0.78 |
|
| $ | 0.77 |
|
|
| 1,134 |
|
| $ | 0.78 |
|
| $ | 0.77 |
|
|
| 762 |
|
| $ | 0.75 |
|
| $ | 0.75 |
|
| $ | (317 | ) |
| $ | 0.74 |
|
| $ | 0.76 |
|
| $ | 332 |
|
Iceland (ISK) |
| $ | 0.01 |
|
| $ | 0.01 |
|
|
| (25 | ) |
| $ | 0.01 |
|
| $ | 0.01 |
|
|
| 46 |
| ||||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
| $ | (10,563 | ) |
|
|
|
|
|
|
|
|
| $ | 292 |
|
|
|
|
|
|
|
|
|
| $ | (342 | ) |
|
|
|
|
|
|
|
|
| $ | 378 |
|
|
|
|
|
|
|
|
|
|
| $ | (1,587 | ) |
|
|
|
|
|
|
|
|
| $ | 24 |
|
Viad’s three months ended September 30, 2017 revenueRevenue and segment operating resultsincome (loss) were primarily impacted by the strengthening of the Canadian dollar relative to the U.S. dollar. Viad’s nine months ended September 30, 2017 revenue and segment operating results were primarily impacted by the weakeningvariances of the British pound, and the strengthening of the Canadian dollar, and the Euro relative to the U.S. dollar. Future changes in the exchange rates may impact overall expected profitability and historical period-to-period comparisons when revenue and segment operating resultsincome (loss) are translated into U.S. dollars.
Analysis of Revenue and Operating Results by Reportable Segment
GES
The following tables providetable presents a comparison of GES’ reported revenue and segment operating resultsincome (loss) to organic revenue(3)(1) and organic segment operating resultsincome (loss)(3)(1) for the three and nine months ended September 30, 20172020 and 2016 in order to better understand the underlying performance of the segment without the effects of acquisitions or FX Impact.2019.
|
| Three Months Ended |
|
| Three Months Ended |
|
|
|
|
| Three Months Ended |
|
| Three Months Ended |
|
|
|
| ||||||||||||||||||||||||||||||||||||||||||||||||||||||
|
| September 30, 2017 |
|
| September 30, 2016 |
|
| Change |
|
| September 30, 2020 |
|
| September 30, 2019 |
|
| Change vs. 2019 |
| ||||||||||||||||||||||||||||||||||||||||||||||||||||||
(in thousands) |
| As Reported |
|
| Acquisitions(1) |
|
| FX Impact |
|
| Organic(3) |
|
| As Reported |
|
| Acquisitions(2) |
|
| Organic(3) |
|
| As Reported |
|
| Organic(3) |
|
| As Reported |
|
| Acquisitions |
|
| FX Impact |
|
| Organic(2) |
|
| As Reported |
|
| Acquisitions |
|
| Organic(1) |
|
| As Reported |
|
| Organic(2) |
| ||||||||||||||||||
Revenue: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
GES: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||||||||||||||||||||||||||||||||
U.S. |
| $ | 184,761 |
|
| $ | 19,063 |
|
| $ | — |
|
| $ | 165,698 |
|
| $ | 232,484 |
|
| $ | 10,354 |
|
| $ | 222,130 |
|
|
| (20.5 | )% |
|
| (25.4 | )% | ||||||||||||||||||||||||||||||||||||
International |
|
| 54,040 |
|
|
| 152 |
|
|
| 1,297 |
|
|
| 52,591 |
|
|
| 60,926 |
|
|
| — |
|
|
| 60,926 |
|
|
| (11.3 | )% |
|
| (13.7 | )% | ||||||||||||||||||||||||||||||||||||
GES(1): |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||||||||||||||||||||||||||||||||
North America |
| $ | 11,767 |
|
| $ | — |
|
| $ | (2 | ) |
| $ | 11,769 |
|
| $ | 185,124 |
|
| $ | — |
|
| $ | 185,124 |
|
|
| (93.6 | )% |
|
| (93.6 | )% | ||||||||||||||||||||||||||||||||||||
EMEA |
|
| 2,774 |
|
|
| — |
|
|
| 128 |
|
|
| 2,646 |
|
|
| 39,300 |
|
|
| — |
|
|
| 39,300 |
|
|
| (92.9 | )% |
|
| (93.3 | )% | ||||||||||||||||||||||||||||||||||||
Intersegment eliminations |
|
| (6,682 | ) |
|
| — |
|
|
| — |
|
|
| (6,682 | ) |
|
| (6,425 | ) |
|
| — |
|
|
| (6,425 | ) |
|
| (4.0 | )% |
|
| (4.0 | )% |
|
| (284 | ) |
|
| — |
|
|
| — |
|
|
| (284 | ) |
|
| (5,724 | ) |
|
| — |
|
|
| (5,724 | ) |
|
| 95.0 | % |
|
| 95.0 | % |
Total GES |
| $ | 232,119 |
|
| $ | 19,215 |
|
| $ | 1,297 |
|
| $ | 211,607 |
|
| $ | 286,985 |
|
| $ | 10,354 |
|
| $ | 276,631 |
|
|
| (19.1 | )% |
|
| (23.5 | )% |
| $ | 14,257 |
|
| $ | — |
|
| $ | 126 |
|
| $ | 14,131 |
|
| $ | 218,700 |
|
| $ | — |
|
| $ | 218,700 |
|
|
| (93.5 | )% |
|
| (93.5 | )% |
Segment operating income (loss) (4): |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||||||||||||||||||||||||||||||||
Segment operating income (loss)(3): |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||||||||||||||||||||||||||||||||
GES: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
U.S. |
| $ | (2,851 | ) |
| $ | (1,080 | ) |
| $ | — |
|
| $ | (1,771 | ) |
| $ | 14,543 |
|
| $ | 458 |
|
| $ | 14,085 |
|
| ** |
|
| ** |
| ||||||||||||||||||||||||||||||||||||||
International |
|
| (2,870 | ) |
|
| (269 | ) |
|
| 172 |
|
|
| (2,773 | ) |
|
| 644 |
|
|
| — |
|
|
| 644 |
|
| ** |
|
| ** |
| ||||||||||||||||||||||||||||||||||||||
North America |
| $ | (10,986 | ) |
| $ | — |
|
| $ | 12 |
|
| $ | (10,998 | ) |
| $ | (8,562 | ) |
| $ | — |
|
| $ | (8,562 | ) |
|
| (28.3 | )% |
|
| (28.5 | )% | ||||||||||||||||||||||||||||||||||||
EMEA |
|
| (7,262 | ) |
|
| — |
|
|
| (272 | ) |
|
| (6,990 | ) |
|
| (3,024 | ) |
|
| — |
|
|
| (3,024 | ) |
| ** |
|
| ** |
| ||||||||||||||||||||||||||||||||||||||
Total GES |
| $ | (5,721 | ) |
| $ | (1,349 | ) |
| $ | 172 |
|
| $ | (4,544 | ) |
| $ | 15,187 |
|
| $ | 458 |
|
| $ | 14,729 |
|
| ** |
|
| ** |
|
| $ | (18,248 | ) |
| $ | — |
|
| $ | (260 | ) |
| $ | (17,988 | ) |
| $ | (11,586 | ) |
| $ | — |
|
| $ | (11,586 | ) |
|
| (57.5 | )% |
|
| (55.3 | )% |
|
| Nine Months Ended |
|
| Nine Months Ended |
|
|
|
|
| Nine Months Ended |
|
| Nine Months Ended |
|
|
|
| ||||||||||||||||||||||||||||||||||||||||||||||||||||||
|
| September 30, 2017 |
|
| September 30, 2016 |
|
| Change |
|
| September 30, 2020 |
|
| September 30, 2019 |
|
| Change vs. 2019 |
| ||||||||||||||||||||||||||||||||||||||||||||||||||||||
(in thousands) |
| As Reported |
|
| Acquisitions(1) |
|
| FX Impact |
|
| Organic(3) |
|
| As Reported |
|
| Acquisitions(2) |
|
| Organic(3) |
|
| As Reported |
|
| Organic(3) |
|
| As Reported |
|
| Acquisitions |
|
| FX Impact |
|
| Organic(2) |
|
| As Reported |
|
| Acquisitions |
|
| Organic(1) |
|
| As Reported |
|
| Organic(2) |
| ||||||||||||||||||
Revenue: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
GES: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||||||||||||||||||||||||||||||||
U.S. |
| $ | 684,003 |
|
| $ | 56,544 |
|
| $ | — |
|
| $ | 627,459 |
|
| $ | 636,299 |
|
| $ | 15,398 |
|
| $ | 620,901 |
|
|
| 7.5 | % |
|
| 1.1 | % | ||||||||||||||||||||||||||||||||||||
International |
|
| 203,222 |
|
|
| 738 |
|
|
| (11,697 | ) |
|
| 214,181 |
|
|
| 187,689 |
|
|
| — |
|
|
| 187,689 |
|
|
| 8.3 | % |
|
| 14.1 | % | ||||||||||||||||||||||||||||||||||||
GES(1): |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||||||||||||||||||||||||||||||||
North America |
| $ | 273,423 |
|
| $ | — |
|
| $ | (366 | ) |
| $ | 273,789 |
|
| $ | 666,825 |
|
| $ | — |
|
| $ | 666,825 |
|
|
| (59.0 | )% |
|
| (58.9 | )% | ||||||||||||||||||||||||||||||||||||
EMEA |
|
| 52,096 |
|
|
| — |
|
|
| (879 | ) |
|
| 52,975 |
|
|
| 156,473 |
|
|
| — |
|
|
| 156,473 |
|
|
| (66.7 | )% |
|
| (66.1 | )% | ||||||||||||||||||||||||||||||||||||
Intersegment eliminations |
|
| (17,126 | ) |
|
| — |
|
|
| — |
|
|
| (17,126 | ) |
|
| (15,439 | ) |
|
| — |
|
|
| (15,439 | ) |
|
| (10.9 | )% |
|
| (10.9 | )% |
|
| (3,258 | ) |
|
| — |
|
|
| — |
|
|
| (3,258 | ) |
|
| (14,731 | ) |
|
| — |
|
|
| (14,731 | ) |
|
| 77.9 | % |
|
| 77.9 | % |
Total GES |
| $ | 870,099 |
|
| $ | 57,282 |
|
| $ | (11,697 | ) |
| $ | 824,514 |
|
| $ | 808,549 |
|
| $ | 15,398 |
|
| $ | 793,151 |
|
|
| 7.6 | % |
|
| 4.0 | % |
| $ | 322,261 |
|
| $ | — |
|
| $ | (1,245 | ) |
| $ | 323,506 |
|
| $ | 808,567 |
|
| $ | — |
|
| $ | 808,567 |
|
|
| (60.1 | )% |
|
| (60.0 | )% |
Segment operating income (loss)(4): |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||||||||||||||||||||||||||||||||
Segment operating income (loss)(3): |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||||||||||||||||||||||||||||||||
GES: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
U.S. |
| $ | 39,319 |
|
| $ | (913 | ) |
| $ | — |
|
| $ | 40,232 |
|
| $ | 37,907 |
|
| $ | 543 |
|
| $ | 37,364 |
|
|
| 3.7 | % |
|
| 7.7 | % | ||||||||||||||||||||||||||||||||||||
International |
|
| 8,491 |
|
|
| (463 | ) |
|
| (470 | ) |
|
| 9,424 |
|
|
| 4,951 |
|
|
| — |
|
|
| 4,951 |
|
|
| 71.5 | % |
|
| 90.3 | % | ||||||||||||||||||||||||||||||||||||
North America |
| $ | (28,194 | ) |
| $ | — |
|
| $ | (19 | ) |
| $ | (28,175 | ) |
| $ | 22,635 |
|
| $ | — |
|
| $ | 22,635 |
|
| ** |
|
| ** |
| ||||||||||||||||||||||||||||||||||||||
EMEA |
|
| (11,256 | ) |
|
| — |
|
|
| (335 | ) |
|
| (10,921 | ) |
|
| 2,775 |
|
|
| — |
|
|
| 2,775 |
|
| ** |
|
| ** |
| ||||||||||||||||||||||||||||||||||||||
Total GES |
| $ | 47,810 |
|
| $ | (1,376 | ) |
| $ | (470 | ) |
| $ | 49,656 |
|
| $ | 42,858 |
|
| $ | 543 |
|
| $ | 42,315 |
|
|
| 11.6 | % |
|
| 17.3 | % |
| $ | (39,450 | ) |
| $ | — |
|
| $ | (354 | ) |
| $ | (39,096 | ) |
| $ | 25,410 |
|
| $ | — |
|
| $ | 25,410 |
|
| ** |
|
| ** |
|
** Change is greater than +/- 100 percent100%
|
|
(2) |
|
| Organic revenue and organic segment operating |
| Refer to Note |
Three months ended September 30, 2017 compared withGES North America
GES North America revenue decreased $173.4 million or 93.6% during the three months ended September 30, 2016
GES U.S.
GES U.S. revenue decreased $47.72020 and $393.4 million or 20.5 percent,59.0% during the nine months ended September 30, 2020, primarily due to show postponements and cancellations due to the COVID-19 pandemic as well as negative show rotation of approximately $63$23 million during the three months ended September 30, 2020. Revenue earned during 2020 was primarily driven by shows completed during Q1 2020, compensation for work completed on cancelled shows, storage, the conversion of convention centers into temporary hospitals in early April, and other non-recurring business invirtual and hybrid events completed during the comparable prior period, offset in part by incremental revenue of $8.7 million from the acquisitions of ON Services and Poken, new business wins, and U.S. base same-show revenue growth of 1.6 percent. U.S. base same-show revenue growth was lower due to one event with a reduced scope of service as result of a venue change. Base same-shows represented 37.0 percent of GES’ U.S. organic revenue*.third quarter. Organic revenue* decreased $56.4$173.4 million or 25.4 percent.93.6% during the three months ended September 30, 2020 and $393.0 million or 58.9% during the nine months ended September 30, 2020.
GES U.S. operating results decreased $17.4 million to anNorth America segment operating loss was $11.0 million during the three months ended September 30, 2020 as compared to a loss of $2.9 million. This decrease$8.6 million during the three months ended September 30, 2019. Segment operating loss was $28.2 million during the nine months ended September 30, 2020 as compared to income of $22.6 million during the nine months ended September 30, 2019. The 2020 losses are primarily due to the decrease in revenue, driven by negative show rotation, offset in part by lowerthe elimination of performance-based compensation expenseincentives and by the reduction in operating costs by eliminating wages and discretionary costs. Organic segment operating loss* was $11.0 million during the three months ended September 30, 2020 as compared to a loss of $8.6 million during the three months ended September 30, 2019. Organic segment operating loss* was $28.2 million during the nine months ended September 30, 2020 as compared to income of $2.8$22.6 million from a contract settlement. Organic operating income* decreased $15.9 million.during the nine months ended September 30, 2019.
GES EMEA
GES International
GES InternationalEMEA revenue decreased $6.9$36.5 million or 11.3 percent,92.9% during the three months ended September 30, 2020 and $104.4 million or 66.7% during the nine months ended September 30, 2020, primarily due to show postponements and cancellations due to the COVID-19 pandemic as well as negative show rotation of approximately $12$7 million offset in partand $32 million during the three and nine months ended September 30, 2020, respectively. Revenue earned during 2020 was primarily driven by new business winsshows completed during Q1 2020, compensation for work completed on cancelled shows, and a favorable FX Impact of $1.3 million.virtual events and hybrid events completed during the third quarter. Organic revenue* decreased $8.3$36.7 million or 13.7 percent.93.3% during the three months ended September 30, 2020 and $103.5 million or 66.1% during the nine months ended September 30, 2020.
GES International operating results decreased $3.5 million to anEMEA segment operating loss was $7.3 million during the three months ended September 30, 2020 as compared to a loss of $2.9 million. This decrease$3.0 million during the three months ended September 30, 2019. Segment operating loss was $11.3 million during the nine months ended September 30, 2020 as compared to income of $2.8 million during the nine months ended September 30, 2019. The 2020 losses are primarily due to the decrease in revenue, drivenoffset in part by negative show rotation.the reduction in operating costs by eliminating wages and discretionary costs. Organic segment operating income* decreased $3.4 million.
Nineloss* was $7.0 million during the three months ended September 30, 20172020 as compared withto a loss of $3.0 million during the three months ended September 30, 2019. Organic segment operating loss* was $10.9 million during the nine months ended September 30, 2016
GES U.S.
GES U.S. revenue increased $47.72020 as compared to income of $2.8 million or 7.5 percent, primarily due to incremental revenue of $41.1 million fromduring the acquisitions of ON Services and Poken and U.S. base same-show revenue growth of 4.4 percent, offset in part by negative show rotation of approximately $7 million. Base same-shows represented 35.4 percent of GES’ U.S. organic revenue*. Organic revenue* increased $6.6 million or 1.1 percent.
GES U.S. operating income increased $1.4 million or 3.7 percent, primarily due to higher revenue, offset in part by a $7.5 million increase in depreciation and amortization expense primarily due to the acquisition of ON Services. Organic operating income* increased $2.9 million or 7.7 percent.
GES International
GES International revenue increased $15.5 million or 8.3 percent, primarily due to new business wins, offset in part by an unfavorable FX Impact of $11.7 million. GES International had positive show rotation of approximately $1.0 million. Organic revenue* increased $26.5 million or 14.1 percent.
GES International operating income increased $3.5 million or 71.5 percent, primarily due to higher revenue. Organic operating income* increased $4.5 million or 90.3 percent.nine months ended September 30, 2019.
* Refer to footnote (3)(1) in the above tablestable for more information about the non-GAAP financial measures of organic revenue and organic segment operating results.
2017 Outlook
Although GES has a diversified revenue base and long-term contracts for future shows, its revenue is affected by general economic and industry-specific conditions. The prospects for individual shows tend to be driven by the success of the industry related to those shows. In general, the exhibition and event industry is experiencing modest growth.
For the 2017 full year, management expects GES’ revenue to increase 6 percent to 7 percent versus 2016. The August 2016 acquisition of ON Services and the March 2017 acquisition of Poken are expected to provide incremental revenue of $43 million to $45 million and incremental Adjusted Segment EBITDA of $5 million to $7 million. Show rotation is expected to have a net negative impact on GES’ revenue of approximately $10 million compared to 2016. GES U.S. base same-show revenue is expected to increase at a mid-single digit rate. Management anticipates an unfavorable FX Impact on GES’ 2017 full year revenue and segment operating income of approximately $7 million and $0.2 million, respectively. The expected FX Impact reflects the assumption that the U.S. dollar to the British pound exchange rate will be $1.31 and the U.S. dollar to the Canadian dollar exchange rate will be $0.81 during the fourth quarter of 2017. For more information about Adjusted Segment EBITDA and segment operating income, see the “Non-GAAP Measures” section of this MD&A.(loss).
Management is executing a strategic growth plan to position GES as the preferred global, full-service provider for Live Events, with further reach to corporate events, consumer events, conferences, and exhibitions. In support of this strategy, the Company has acquired two leading audio-visual production businesses and four leading event technology businesses since 2014 that complement, enhance, and expand the current business and offer higher-margin growth opportunities. Management continues to pursue additional opportunities to acquire businesses with proven products and services to create the most comprehensive suite of services for the Live Events industry. During 2017, management intends to make selective investments in additional resources to capitalize on continued growth opportunities in under-penetrated categories of Live Events, such as corporate events and consumer events, and in cross-selling new services.
Additionally, management remains focused on improving the profitability of GES through continued efforts to more effectively manage labor costs by driving productivity gains through rigorous and strategic pre-show planning that reduces the ratio of labor costs to revenue. Improving this metric is a top priority of management and the Company continues to develop and enhance tools to support and systematize show site labor planning, measurement, and benchmarking.
Pursuit
The following tables providetable presents a comparison of Pursuit’s reported revenue and segment operating resultsincome (loss) to organic revenue(2)(3) and organic segment operating resultsloss(2)(3) for the three and nine months ended September 30, 20172020 and 2016 in order to better understand the underlying performance of the segment without the effects of acquisitions or FX Impact.2019.
|
| Three Months Ended |
|
| Three Months Ended |
|
|
|
|
| Three Months Ended |
|
| Three Months Ended |
|
|
|
| ||||||||||||||||||||||||||||||||||||||||||||||||||||||
|
| September 30, 2017 |
|
| September 30, 2016 |
|
| Change |
|
| September 30, 2020 |
|
| September 30, 2019 |
|
| Change vs. 2019 |
| ||||||||||||||||||||||||||||||||||||||||||||||||||||||
(in thousands) |
| As Reported |
|
| Acquisitions(1) |
|
| FX Impact |
|
| Organic(2) |
|
| As Reported |
|
| Acquisitions |
|
| Organic(2) |
|
| As Reported |
|
| Organic(2) |
|
| As Reported |
|
| Acquisitions |
|
| FX Impact |
|
| Organic(3) |
|
| As Reported |
|
| Acquisitions |
|
| Organic(3) |
|
| As Reported |
|
| Organic(3) |
| ||||||||||||||||||
Revenue: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||||||||||||||||||||||||||||||||
Revenue(1): |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||||||||||||||||||||||||||||||||
Pursuit: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Attractions |
| $ | 17,699 |
|
| $ | — |
|
| $ | (145 | ) |
| $ | 17,844 |
|
| $ | 63,581 |
|
| $ | — |
|
| $ | 63,581 |
|
|
| (72.2 | )% |
|
| (71.9 | )% | ||||||||||||||||||||||||||||||||||||
Hospitality |
| $ | 39,577 |
|
| $ | — |
|
| $ | 236 |
|
| $ | 39,341 |
|
| $ | 39,664 |
|
| $ | — |
|
| $ | 39,664 |
|
|
| (0.2 | )% |
|
| (0.8 | )% |
|
| 30,403 |
|
|
| — |
|
|
| (107 | ) |
|
| 30,510 |
|
|
| 62,522 |
|
|
| — |
|
|
| 62,522 |
|
|
| (51.4 | )% |
|
| (51.2 | )% |
Attractions |
|
| 59,059 |
|
|
| 4,227 |
|
|
| 1,700 |
|
|
| 53,132 |
|
|
| 42,883 |
|
|
| — |
|
|
| 42,883 |
|
|
| 37.7 | % |
|
| 23.9 | % | ||||||||||||||||||||||||||||||||||||
Transportation |
|
| 6,252 |
|
|
| — |
|
|
| 201 |
|
|
| 6,051 |
|
|
| 5,097 |
|
|
| — |
|
|
| 5,097 |
|
|
| 22.7 | % |
|
| 18.7 | % |
|
| 444 |
|
|
| — |
|
|
| — |
|
|
| 444 |
|
|
| 6,861 |
|
|
| — |
|
|
| 6,861 |
|
|
| (93.5 | )% |
|
| (93.5 | )% |
Travel Planning |
|
| 2,874 |
|
|
| — |
|
|
| 29 |
|
|
| 2,845 |
|
|
| 10,908 |
|
|
| — |
|
|
| 10,908 |
|
|
| (73.7 | )% |
|
| (73.9 | )% |
|
| 160 |
|
|
| — |
|
|
| (1 | ) |
|
| 161 |
|
|
| 2,388 |
|
|
| — |
|
|
| 2,388 |
|
|
| (93.3 | )% |
|
| (93.3 | )% |
Intra-Segment Eliminations & Other |
|
| (782 | ) |
|
| — |
|
|
| (47 | ) |
|
| (735 | ) |
|
| (1,150 | ) |
|
| — |
|
|
| (1,150 | ) |
|
| 32.0 | % |
|
| 36.1 | % |
|
| 109 |
|
|
| — |
|
|
| (4 | ) |
|
| 113 |
|
|
| (309 | ) |
|
| — |
|
|
| (309 | ) |
| ** |
|
| ** |
| ||
Total Pursuit |
| $ | 106,980 |
|
| $ | 4,227 |
|
| $ | 2,119 |
|
| $ | 100,634 |
|
| $ | 97,402 |
|
| $ | — |
|
| $ | 97,402 |
|
|
| 9.8 | % |
|
| 3.3 | % |
| $ | 48,815 |
|
| $ | — |
|
| $ | (257 | ) |
| $ | 49,072 |
|
| $ | 135,043 |
|
| $ | — |
|
| $ | 135,043 |
|
|
| (63.9 | )% |
|
| (63.7 | )% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Segment operating income (3): |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||||||||||||||||||||||||||||||||
Segment operating income (4): |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||||||||||||||||||||||||||||||||
Total Pursuit |
| $ | 53,860 |
|
| $ | 2,227 |
|
| $ | 1,218 |
|
| $ | 50,415 |
|
| $ | 44,248 |
|
| $ | — |
|
| $ | 44,248 |
|
|
| 21.7 | % |
|
| 13.9 | % |
| $ | 11,467 |
|
| $ | — |
|
| $ | (2 | ) |
| $ | 11,469 |
|
| $ | 66,392 |
|
| $ | — |
|
| $ | 66,392 |
|
|
| (82.7 | )% |
|
| (82.7 | )% |
|
| Nine Months Ended |
|
| Nine Months Ended |
|
|
|
| |||||||||||||||||||||||||||
|
| September 30, 2020 |
|
| September 30, 2019 |
|
| Change vs. 2019 |
| |||||||||||||||||||||||||||
(in thousands) |
| As Reported |
|
| Acquisitions(2) |
|
| FX Impact |
|
| Organic(3) |
|
| As Reported |
|
| Acquisitions(2) |
|
| Organic(3) |
|
| As Reported |
|
| Organic(3) |
| |||||||||
Revenue(1): |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Pursuit: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Attractions |
| $ | 25,141 |
|
| $ | — |
|
| $ | (189 | ) |
| $ | 25,330 |
|
| $ | 98,085 |
|
| $ | — |
|
| $ | 98,085 |
|
|
| (74.4 | )% |
|
| (74.2 | )% |
Hospitality |
|
| 39,382 |
|
|
| 13,600 |
|
|
| (135 | ) |
|
| 25,917 |
|
|
| 86,773 |
|
|
| 16,068 |
|
|
| 70,705 |
|
|
| (54.6 | )% |
|
| (63.3 | )% |
Transportation |
|
| 2,604 |
|
|
| — |
|
|
| (11 | ) |
|
| 2,615 |
|
|
| 13,018 |
|
|
| — |
|
|
| 13,018 |
|
|
| (80.0 | )% |
|
| (79.9 | )% |
Travel Planning |
|
| 361 |
|
|
| — |
|
|
| (3 | ) |
|
| 364 |
|
|
| 3,985 |
|
|
| — |
|
|
| 3,985 |
|
|
| (90.9 | )% |
|
| (90.9 | )% |
Intra-Segment Eliminations & Other |
|
| 114 |
|
|
| — |
|
|
| (4 | ) |
|
| 118 |
|
|
| (742 | ) |
|
| — |
|
|
| (742 | ) |
| ** |
|
| ** |
| ||
Total Pursuit |
| $ | 67,602 |
|
| $ | 13,600 |
|
| $ | (342 | ) |
| $ | 54,344 |
|
| $ | 201,119 |
|
| $ | 16,068 |
|
| $ | 185,051 |
|
|
| (66.4 | )% |
|
| (70.6 | )% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Segment operating income (loss)(4): |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total Pursuit |
| $ | (26,499 | ) |
| $ | 567 |
|
| $ | 378 |
|
| $ | (27,444 | ) |
| $ | 64,710 |
|
| $ | 7,419 |
|
| $ | 57,291 |
|
| ** |
|
| ** |
|
|
| Nine Months Ended |
|
| Nine Months Ended |
|
|
|
| |||||||||||||||||||||||||||
|
| September 30, 2017 |
|
| September 30, 2016 |
|
| Change |
| |||||||||||||||||||||||||||
(in thousands) |
| As Reported |
|
| Acquisitions(1) |
|
| FX Impact |
|
| Organic(2) |
|
| As Reported |
|
| Acquisitions(1) |
|
| Organic(2) |
|
| As Reported |
|
| Organic(2) |
| |||||||||
Revenue: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Pursuit: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Hospitality |
| $ | 55,279 |
|
| $ | 13,440 |
|
| $ | 145 |
|
| $ | 41,694 |
|
| $ | 56,791 |
|
| $ | 12,935 |
|
| $ | 43,856 |
|
|
| (2.7 | )% |
|
| (4.9 | )% |
Attractions |
|
| 88,910 |
|
|
| 21,256 |
|
|
| 910 |
|
|
| 66,744 |
|
|
| 61,056 |
|
|
| 13,597 |
|
|
| 47,459 |
|
|
| 45.6 | % |
|
| 40.6 | % |
Transportation |
|
| 11,906 |
|
|
| — |
|
|
| 120 |
|
|
| 11,786 |
|
|
| 10,150 |
|
|
| — |
|
|
| 10,150 |
|
|
| 17.3 | % |
|
| 16.1 | % |
Travel Planning |
|
| 4,334 |
|
|
| 1,268 |
|
|
| 9 |
|
|
| 3,057 |
|
|
| 16,861 |
|
|
| 1,529 |
|
|
| 15,332 |
|
|
| (74.3 | )% |
|
| (80.1 | )% |
Intra-Segment Eliminations & Other |
|
| (848 | ) |
|
| — |
|
|
| (50 | ) |
|
| (798 | ) |
|
| (1,747 | ) |
|
| — |
|
|
| (1,747 | ) |
|
| 51.5 | % |
|
| 54.3 | % |
Total Pursuit |
| $ | 159,581 |
|
| $ | 35,964 |
|
| $ | 1,134 |
|
| $ | 122,483 |
|
| $ | 143,111 |
|
| $ | 28,061 |
|
| $ | 115,050 |
|
|
| 11.5 | % |
|
| 6.5 | % |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Segment operating income (3): |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total Pursuit |
| $ | 53,523 |
|
| $ | 8,431 |
|
| $ | 762 |
|
| $ | 44,330 |
|
| $ | 44,733 |
|
| $ | 8,870 |
|
| $ | 35,863 |
|
|
| 19.6 | % |
|
| 23.6 | % |
| Revenue by line of business does not agree to Note 2 – Revenue and Related Contract Costs and Contract Liabilities in the Notes to Condensed Consolidated Financial Statements (Part I, Item 1 of this Form 10-Q) as the amounts in the above table include product revenue from food and beverage and retail operations within each line of business. |
(2) | Acquisitions |
| Organic revenue and organic segment operating |
| Refer to Note |
Three months ended September 30, 2017 compared withPursuit revenue decreased $86.2 million or 63.9% during the three months ended September 30, 2016
Pursuit revenue increased $9.62020 and $133.5 million or 9.8 percent, due to strong growth from attractions, primarily the Banff Gondola and Columbia Icefield Glacier Adventure attractions, incremental revenue of $4.2 million from the acquisition of FlyOver Canada, and a favorable FX Impact of $2.1 million. This increase was offset in part by a reduction in travel planning as the Company completes the previously announced downsizing of Brewster Travel Canada’s package tours line of business and a revenue decline of $2.1 million due to the fire-related closure of the Mount Royal Hotel. Organic revenue* increased $3.2 million or 3.3 percent.
Pursuit operating income increased $9.6 million or 21.7 percent, primarily due to the increase in revenue from high-margin attractions. Operating income included a $1.1 million business interruption gain for the recovery of lost profits from the Mount Royal Hotel. Organic operating income* increased $6.2 million or 13.9 percent.
Nine months ended September 30, 2017 compared with66.4% during the nine months ended September 30, 20162020, primarily due to the impact of the COVID-19 pandemic as Pursuit temporarily closed its properties in mid-March through most of the second quarter of 2020. We phased in most of Pursuit’s attractions and lodging operations starting in May with most open and operational during the third quarter of 2020. However, the travel and hospitality
industry continue to be negatively impacted by the COVID-19 pandemic as travel restrictions and border closures largely remain in place. Organic revenue* decreased $86.0 million or 63.7% during the three months ended September 30, 2020 and $130.7 million or 70.6% during the nine months ended September 30, 2020.
Pursuit revenue increased $16.5segment operating income was $11.5 million or 11.5 percent,during the three months ended September 30, 2020 as compared to income of $66.4 million during the three months ended September 30, 2019. Segment operating loss was $26.5 million during the nine months ended September 30, 2020 as compared to income of $64.7 million during the nine months ended September 30, 2019. The 2020 declines are primarily due to strong growth from attractions primarily driven by the re-opening of the Banff Gondola (which was closed for renovations from October 2015 through April 2016), incrementaldecrease in revenue, of $7.9 million from the acquisitions of FlyOver Canada and CATC, and a favorable FX Impact of $1.1 million. This increase was offset in part by athe reduction in travel planning as the Company completes the previously announced downsizing of Brewster Travel Canada’s package tours line of business and a revenue decline of $4.6 million dueoperating costs through efforts to the fire-related closure of the Mount Royal Hotel.maximize profitability. Organic revenue* increased $7.4 million or 6.5 percent.
Pursuit operating income increased $8.8 million or 19.6 percent, primarily due to the increase in revenue from high-margin attractions. Operating income included a $2.2 million business interruption gain for the recovery of lost profits from the Mount Royal Hotel. Organicsegment operating income* increased $8.5was $11.5 million or 23.6 percent.during the three months ended September 30, 2020 as compared to income of $66.4 million during the three months ended September 30, 2019. Organic segment operating loss* was $27.4 million during the nine months ended September 30, 2020 as compared to income of $57.3 million during the nine months ended September 30, 2019.
* Refer to footnote (2)(3) in the above tablestable for more information about the non-GAAP financial measures of organic revenue and organic segment operating results.loss.
Management usesWe use the following key business metrics to evaluate the performance of Pursuit’s hospitalityattractions business: revenue per available room (“RevPAR”), average daily rate (“ADR”), and occupancy. These
• | Number of visitors. The number of visitors allows us to assess the volume of tickets sold at each attraction during the period. |
• | Revenue per attraction visitor. Revenue per attraction visitor is calculated as total attractions revenue divided by the total number of visitors at all Pursuit attractions during the period. Total attractions revenue includes ticket sales and ancillary revenue generated by attractions, such as food and beverage and retail revenue. Total attractions revenue per visitor measures the total spend per visitor that attraction properties are able to capture, which is important to the profitability of the attractions business. |
• | Effective ticket price. Effective ticket price is calculated as revenue from the sale of attraction tickets divided by the total number of visitors at all comparable Pursuit attractions during the period. |
We use the following key business metrics, are commonly usedcommon in the hospitality industry, to measure performance.evaluate Pursuit’s hospitality business:
Revenue per Available Room. RevPAR is calculated as total rooms revenue divided by the total number of room nights available for all comparable Pursuit hospitality properties during the period. Total rooms revenue does not include non-rooms revenue, which consists of ancillary revenue generated by hospitality properties, such as food and beverage and retail revenue. RevPAR measures the period-over-period change in rooms revenue for comparable hospitality properties. RevPAR is affected by average daily rate and occupancy, which have different implications on profitability.
• | Revenue per Available Room. RevPAR is calculated as total rooms revenue divided by the total number of room nights available for all comparable Pursuit hospitality properties during the period. Total rooms revenue does not include non-rooms revenue, which consists of ancillary revenue generated by hospitality properties, such as food and beverage and retail revenue. RevPAR measures the period-over-period change in rooms revenue per available room for comparable hospitality properties. RevPAR is affected by average daily rate and occupancy, which have different implications on profitability. |
Average Daily Rate. ADR is calculated as total rooms revenue divided by the total number of room nights sold for all comparable Pursuit hospitality properties during the period. ADR is used to assess the pricing levels that the hospitality properties are able to generate. Increases in ADR at hospitality properties lead to increases in rooms revenue with no substantial effect on variable costs, therefore having a greater impact on margins than increases in occupancy.
• | Average Daily Rate. ADR is calculated as total rooms revenue divided by the total number of room nights sold for all comparable Pursuit hospitality properties during the period. ADR is used to assess the pricing levels that the hospitality properties are able to realize. Increases in ADR lead to increases in rooms revenue with no substantial effect on variable costs, therefore having a greater impact on margins than increases in occupancy. |
Occupancy. Occupancy is calculated as the total number of room nights sold divided by the total number of room nights available for all comparable Pursuit hospitality properties during the period. Occupancy measures the utilization of the available capacity at the hospitality properties. Increases in occupancy result in increases in rooms revenue and additional variable operating costs (including housekeeping services, utilities, and room amenity costs), as well as increased ancillary non-rooms revenue (including food and beverage and retail revenue).
• | Occupancy. Occupancy is calculated as the total number of room nights sold divided by the total number of room nights available for all comparable Pursuit hospitality properties during the period. Occupancy measures the utilization of the available capacity at the hospitality properties. Increases in occupancy result in increases in rooms revenue and additional variable operating costs (including housekeeping services, utilities, and room amenity costs), as well as increases in ancillary non-rooms revenue (including food and beverage and retail revenue). |
Management evaluates the performance of Pursuit’s attractions business utilizing the number of passengers and total attractions revenue per passenger. The number of passengers allows management to assess the volume of visitor activity at each attraction during the period. Total attractions revenue per passenger is calculated as total attractions revenue divided by the total number of passengers at all Pursuit attractions during the period. Total attractions revenue includes ticket sales and ancillary revenue generated by attractions, such as food and beverage and retail revenue. Total attractions revenue per passenger measures the total spend per visitor that attraction properties are able to capture, which is important to the profitability of the attractions business.
The following table provides Pursuit’s same-store key performance indicators for the three and nine months ended September 30, 2017 and 2016.indicators. The same-store metrics below indicate the performance of all PursuitPursuit’s properties and attractions that werewe owned by Viad and operatingoperated at full capacity, considering seasonal closures, for the entirety of both periods presented. For Pursuit properties and attractions located in Canada,outside of the U.S., comparisons to the prior year are on a constant U.S. dollar basis, using the current year quarterly average exchange rates for previous periods, to eliminate the FX Impact. Management believes thatWe believe this same-store constant currency basis provides better comparability between reporting periods.
|
| Three Months Ended |
|
| Nine Months Ended |
| ||||||||||||||||||
|
| September 30, |
|
| September 30, |
| ||||||||||||||||||
|
| 2017 |
|
| 2016 |
|
| % Change |
|
| 2017 |
|
| 2016 |
|
| % Change |
| ||||||
Same-Store Key Performance Indicators (1) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Hospitality: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Room nights available |
|
| 108,015 |
|
|
| 107,635 |
|
|
| 0.4 | % |
|
| 152,366 |
|
|
| 150,604 |
|
|
| 1.2 | % |
RevPAR |
| $ | 200 |
|
| $ | 192 |
|
|
| 4.2 | % |
| $ | 140 |
|
| $ | 133 |
|
|
| 5.3 | % |
ADR |
| $ | 227 |
|
| $ | 213 |
|
|
| 6.6 | % |
| $ | 187 |
|
| $ | 178 |
|
|
| 5.1 | % |
Occupancy |
|
| 87.9 | % |
|
| 90.1 | % |
|
| (2.2 | )% |
|
| 75.2 | % |
|
| 74.8 | % |
|
| 0.4 | % |
Attractions: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Passengers |
|
| 1,139,516 |
|
|
| 1,092,356 |
|
|
| 4.3 | % |
|
| 1,626,121 |
|
|
| 1,453,899 |
|
|
| 11.8 | % |
Revenue per passenger |
| $ | 48 |
|
| $ | 40 |
|
|
| 20.0 | % |
| $ | 42 |
|
| $ | 33 |
|
|
| 27.3 | % |
|
| Three Months Ended |
|
| Nine Months Ended |
| ||||||||||||||||||
|
| September 30, |
|
| September 30, |
| ||||||||||||||||||
|
| 2020 |
|
| 2019 |
|
| % Change |
|
| 2020 |
|
| 2019 |
|
| Change vs. 2019 |
| ||||||
Same-Store Key Performance Indicators (1) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Attractions: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Number of visitors |
|
| 343,000 |
|
|
| 1,274,808 |
|
|
| (73.1 | )% |
|
| 485,996 |
|
|
| 2,076,698 |
|
|
| (76.6 | )% |
Revenue per attraction visitor |
| $ | 48 |
|
| $ | 49 |
|
|
| (2.0 | )% |
| $ | 45 |
|
| $ | 47 |
|
|
| (4.3 | )% |
Effective ticket price |
| $ | 33 |
|
| $ | 38 |
|
|
| (13.2 | )% |
| $ | 31 |
|
| $ | 36 |
|
|
| (13.9 | )% |
Hospitality: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Room nights available (2) |
|
| 156,444 |
|
|
| 195,715 |
|
|
| (20.1 | )% |
|
| 135,357 |
|
|
| 242,435 |
|
|
| (44.2 | )% |
RevPAR (2) |
| $ | 106 |
|
| $ | 195 |
|
|
| (45.6 | )% |
| $ | 77 |
|
| $ | 159 |
|
|
| (51.6 | )% |
ADR |
| $ | 177 |
|
| $ | 216 |
|
|
| (18.1 | )% |
| $ | 155 |
|
| $ | 215 |
|
|
| (27.9 | )% |
Occupancy (2) |
|
| 59.7 | % |
|
| 90.4 | % |
|
| (30.7 | )% |
|
| 49.8 | % |
|
| 73.8 | % |
|
| (24.0 | )% |
(1) |
|
(2) | The rooms that were out of service as a result of property closures due to the COVID-19 pandemic were excluded from room nights available when calculating hospitality RevPAR and occupancy. |
Hospitality. Room nights available increasedFor the health and well-being of our employees, guests, and community, Pursuit’s year-round attractions and lodging properties were closed temporarily starting in mid-March and remained closed during most of the second quarter of 2020. The majority of Pursuit’s properties were open and operational during the nine months ended September 30, 2017 primarilythird quarter of 2020. St. Mary Lodge and Glacier Park Lodge remained closed during the third quarter of 2020 due to changes ina government-imposed closure at the opening dates for certain seasonal properties. RevPAR increased during the three months ended September 30, 2017 primarily due to an increase in ADR driven by management’s focus on yield management, offset in part by lower occupancy primarily due to forest fires in theEast Glacier entrance at Glacier National Park area. RevPAR increased duringPark. In order to mitigate the nine months ended September 30, 2017 primarily due to an increase in occupancynegative financial and an increase in ADR driven by management’s focus on yield management, as well as an increase in occupancy reflecting strong park visitationoperational impacts, we eliminated all non-essential capital expenditures during the first nine monthsand second quarters of 2017.2020 resulting in the delay of the opening of FlyOver Canada Toronto, which is now anticipated to open in 2023. We resumed important growth investments in September of 2020, and we are on track to open FlyOver Las Vegas in the third quarter of 2021 and the Sky Lagoon in the second quarter of 2021.
Attractions. The increasedecrease in same-store visitors and revenue per attraction was driven by the numbertemporary closure of passengers during the three months ended September 30, 2017 was primarily due to management’s efforts to enhance the guest experienceour attractions and its focus on yield management, combined with strong parklower visitation in Canada. The increase in the number of passengers during the nine months ended September 30, 2017 was primarily due to the Banff Gondola being closed for renovations during the first four monthscontinued border closures and travel restrictions as a result of 2016. Excluding the Banff Gondola passengers, total same-store attraction passengers for the nine month period would have increased 36,158COVID-19.
Hospitality. The decrease in 2017RevPAR and ADR was driven by management’s efforts to enhance the guest experience and its focus on yield management, combined with strong park visitation in Canada.
Revenue per passenger increased during 2017 primarily due to higher effective ticket prices driven by management’s focus on yield management, and higher revenue from ancillary food and beverage and retail services primarily resulting from management’s recent renovationslower demand as a result of the retail and food and beverage operations at the Banff Gondola and the food and beverage operations at the Columbia Icefield Glacier Discovery Center.COVID-19.
During 2016,2019, Pursuit derived approximately 59 percent66% of its revenue and 74 percent88% of its segment operating income from its Canadian operations, which are largely dependent on foreign customer visitation. Accordingly, the timing of reopening of borders and the strengthening or weakening of the Canadian dollar, relative to other currencies, couldwould affect customer volumes and the results of operations. Additionally, Pursuit
Other Expenses
|
| Three Months Ended |
|
|
|
|
|
| Nine Months Ended |
|
|
|
|
| ||||||||||
|
| September 30, |
|
|
|
|
|
| September 30, |
|
|
|
|
| ||||||||||
(in thousands) |
| 2020 |
|
| 2019 |
|
| % Change |
|
| 2020 |
|
| 2019 |
|
| Change vs. 2019 |
| ||||||
Corporate activities |
| $ | 2,645 |
|
| $ | 2,680 |
|
|
| (1.3 | )% |
| $ | 5,902 |
|
| $ | 7,795 |
|
|
| (24.3 | )% |
Interest expense |
| $ | 5,508 |
|
| $ | 3,740 |
|
|
| 47.3 | % |
| $ | 14,712 |
|
| $ | 9,612 |
|
|
| 53.1 | % |
Multi-employer pension plan withdrawal |
| $ | — |
|
| $ | — |
|
| ** |
|
| $ | 462 |
|
| $ | 15,508 |
|
|
| (97.0 | )% | |
Restructuring charges |
| $ | 11,259 |
|
| $ | 1,702 |
|
| ** |
|
| $ | 12,370 |
|
| $ | 6,845 |
|
|
| 80.7 | % | |
Legal settlement |
| $ | — |
|
| $ | — |
|
| ** |
|
| $ | — |
|
| $ | 8,500 |
|
|
| (100.0 | )% | |
Impairment charges |
| $ | 676 |
|
| $ | — |
|
| ** |
|
| $ | 203,076 |
|
| $ | — |
|
| ** |
| ||
Income tax expense |
| $ | 735 |
|
| $ | 11,891 |
|
|
| (93.8 | )% |
| $ | 20,454 |
|
| $ | 10,861 |
|
|
| 88.3 | % |
Income (loss) from discontinued operations |
| $ | (989 | ) |
| $ | (141 | ) |
| ** |
|
| $ | (1,822 | ) |
| $ | 32 |
|
| ** |
|
** Change is affected by consumer discretionary spending on tourism activities.greater than +/- 100%
2017 Outlook
For the 2017 full year, management expects Pursuit’s revenue to increase 12 percent to 14 percent.Corporate Activities – The December 2016 acquisition of FlyOver Canada and the March 2016 acquisition of CATC, combined, are expected to provide incremental revenue of $10 million to $11 million and incremental Adjusted Segment EBITDA of $2 million to $3.5 million, which includes an incremental first quarter seasonal operating loss of approximately $2.3 million from CATC.
Additionally, management expects Pursuit’s revenue to be negatively impacted by approximately $13 million as the Company completes the previously announced downsizing of Brewster Travel Canada’s package tours line of business. The fire-related closure of the Mount Royal Hotel is expected to negatively impact revenue by approximately $5 million. Management anticipates a favorable FX Impact on Pursuit’s 2017 full year revenue and segment operating income of approximately $2 million and $0.7 million, respectively. Management expects these factors will be more than offset by organic growth across the rest of Pursuit’s lines of business.
In July 2017, Viad resolved its property and business interruption insurance claims related to the Mount Royal Hotel fire for a total of $36.3 million, inclusive of $9.0 million received during the first and second quarters of 2017. Viad recorded an additional impairment recovery of approximately $24.7 million related to construction costs to re-open the hotel, $1.1 million was recorded as a business interruption gain for the recovery of lost profits, and the remaining $1.5 million was recorded as deferred income that will be recognized over the periods the business interruption losses are actually incurred. Management anticipates recognizing approximately $0.5 million of the business interruption recovery during the remainder of 2017 with approximately $1 million being deferred to the first half of 2018.
The Pursuit guidance ranges include approximately $1 million in revenue and approximately $3 million in adjusted segment EBITDA related to the Mount Royal Hotel, which reflects the 2017 portion of business interruption insurance recoveries (including both business interruption gains for lost profits and contra-expense for on-going operating costs) and the re-opening of most of the property’s retail tenants and one of its dining operations. The hotel itself is expected to remain closed until mid-2018. For more information about Adjusted Segment EBITDA and segment operating income, see the “Non-GAAP Measures” section of this MD&A.
Corporate Activities
|
| Three Months Ended |
|
|
|
|
|
| Nine Months Ended |
|
|
|
|
| ||||||||||
|
| September 30, |
|
|
|
|
|
| September 30, |
|
|
|
|
| ||||||||||
(in thousands) |
| 2017 |
|
| 2016 |
|
| Percentage Change 2017 vs. 2016 |
|
| 2017 |
|
| 2016 |
|
| Percentage Change 2017 vs. 2016 |
| ||||||
Corporate activities |
| $ | 4,474 |
|
| $ | 2,772 |
|
|
| 61.4 | % |
| $ | 10,092 |
|
| $ | 7,390 |
|
|
| 36.6 | % |
The increasedecrease in corporate activities expense forduring the nine months ended September 30, 2020 relative to 2019 was primarily due to lower headcount, lower performance-based compensation expense as we reduced our estimated performance achievement to zero as a result of COVID-19, and higher acquisition transaction-related costs in 2019, offset in part by fees and expenses related to the equity raise and credit facility amendment.
Interest Expense – The increase in interest expense during the three and nine months ended September 30, 2017 was primarily due to an increase in performance-based compensation expense driven by Viad’s common stock price appreciation.
|
| Three Months Ended |
|
|
|
|
|
| Nine Months Ended |
|
|
|
|
| ||||||||||
|
| September 30, |
|
|
|
|
|
| September 30, |
|
|
|
|
| ||||||||||
(in thousands) |
| 2017 |
|
| 2016 |
|
| Percentage Change 2017 vs. 2016 |
|
| 2017 |
|
| 2016 |
|
| Percentage Change 2017 vs. 2016 |
| ||||||
Interest expense |
| $ | 2,117 |
|
| $ | 1,489 |
|
|
| 42.2 | % |
| $ | 6,281 |
|
| $ | 4,109 |
|
|
| 52.9 | % |
The increase in interest expense for the three and nine months ended September 30, 20172020 was primarily due to higher debt balances in 2017 resulting2020.
Multi-employer pension plan withdrawal – During 2019, we finalized the terms of a new collective-bargaining agreement with the Teamsters 727 union. The terms included a withdrawal from acquisitions completed during August and Decemberthe under-funded Central States Pension Plan. Accordingly, we recorded a charge of 2016.$15.5 million, which represented the estimated present value of future contributions we will be required to make to the plan as a result of this withdrawal from the plan. Additionally, in 2020 we recorded $0.5 million related to the withdrawal from one of our multi-employer plans.
Restructuring Charges
|
| Three Months Ended |
|
|
|
|
|
| Nine Months Ended |
|
|
|
|
| ||||||||||
|
| September 30, |
|
|
|
|
|
| September 30, |
|
|
|
|
| ||||||||||
(in thousands) |
| 2017 |
|
| 2016 |
|
| Percentage Change 2017 vs. 2016 |
|
| 2017 |
|
| 2016 |
|
| Percentage Change 2017 vs. 2016 |
| ||||||
Restructuring charges |
| $ | 255 |
|
| $ | 1,697 |
|
|
| (85.0 | )% |
| $ | 817 |
|
| $ | 3,664 |
|
|
| (77.7 | )% |
– Restructuring charges during the three and nine months ended September 30, 20172020 and 20162019 were primarily related to the elimination of certain positions and facility consolidations in GES.
Impairment Charges (Recoveries)
|
| Three Months Ended |
|
|
|
| Nine Months Ended |
|
|
| ||||||||||
|
| September 30, |
|
|
|
| September 30, |
|
|
| ||||||||||
(in thousands) |
| 2017 |
|
| 2016 |
|
| Percentage Change 2017 vs. 2016 |
| 2017 |
|
| 2016 |
|
| Percentage Change 2017 vs. 2016 | ||||
Impairment charges (recoveries) |
| $ | (24,467 | ) |
| $ | 120 |
|
| ** |
| $ | (29,098 | ) |
| $ | 120 |
|
| ** |
** Change is greater than +/- 100 percent
On December 29, 2016, the Mount Royal Hotel was damaged by a fire and closed. During July 2017, the Company resolved its property and business interruption insurance claimsclosures at GES, as well as charges related to the fireclosure and liquidation of GES’ United Kingdom-based audio-visual services business during the third quarter of 2020. The 2019 actions arose in connection with our ongoing efforts to simplify and transform GES for greater profitability. In response to the COVID-19 pandemic in 2020, we accelerated our transformation and streamlining efforts at GES to significantly reduce costs and create a totallower and more flexible cost structure focused on servicing our more profitable market segments. The 2020 charges also included amounts related to the elimination of $36.3 million.positions at our corporate office in response to the pandemic.
Legal Settlement – During the nine months ended September 30, 2019, we recorded a charge to resolve a legal dispute at GES involving a former industry contractor.
Impairment Charges – During the three months ended September 30, 2017, the Company received insurance proceeds2020, we recorded a fixed asset impairment charge of $27.3 million, of which $24.7 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, $1.1 million was recorded as a business interruption gain for the recovery of lost profits, and the remaining $1.5 million was recorded as deferred income, which will be recognized over the periods the business interruption losses are actually incurred.$0.7 million. During the nine months ended September 30, 2017, the Company received $36.32020, we recorded non-cash goodwill impairments of $185.8 million, in insurance proceeds,a non-cash impairment charge to intangible assets of which $2.2$15.7 million, was allocated to an insurance receivable, $29.3 million was recorded as an impairment recovery (partially offset byand fixed asset impairment charges of $0.2 million) related to construction costs to re-open the hotel, $2.2 million was recorded as a business interruption gain for the recovery of lost profits, $1.1 million was recorded as contra-expense to offset non-capitalizable costs incurred by the Company, and the remaining $1.5 million was recorded as deferred income, which will be recognized over the periods the business interruption losses are actually incurred.$1.6 million.
Income Taxes
Tax Benefit – The effective tax ratesrate was a negative 2.7% for the three months ended September 30, 20172020 and 2016 were 30.4 percent and 33.8 percent, respectively.25.6% for the three months ended September 30, 2019. The effective tax ratesrate was a negative 6.8% for the nine months ended September 30, 20172020 and 2016 were 29.0 percent and 33.1 percent, respectively. The decrease for the three months was primarily due to higher foreign income taxed at lower rates. The decrease26.5% for the nine months was primarilyended September 30, 2019. The negative effective tax rates for the three and nine months ended September 30, 2020 were due to higher foreign income taxed at lower rates, the releaseno tax benefits being recorded in our U.S., United Kingdom, and other European jurisdictions as a result of recording a valuation allowance related to foreign net operating losses, andduring the adoption of new accounting guidance, effective in the firstsecond quarter of 2017, which requires2020 against our net deferred tax assets in these jurisdictions due to our belief that it is more likely than not that we will be unable to realize the excess tax benefit on share-based compensation to be recorded to income tax expense rather than equity.benefits from our current year losses in these jurisdictions.
Income (Loss) from Discontinued Operations
|
| Three Months Ended |
|
|
|
|
|
| Nine Months Ended |
|
|
|
|
| ||||||||||
|
| September 30, |
|
|
|
|
|
| September 30, |
|
|
|
|
| ||||||||||
(in thousands) |
| 2017 |
|
| 2016 |
|
| Percentage Change 2017 vs. 2016 |
|
| 2017 |
|
| 2016 |
|
| Percentage Change 2017 vs. 2016 |
| ||||||
Loss from discontinued operations |
| $ | (101 | ) |
| $ | (221 | ) |
|
| 54.3 | % |
| $ | (408 | ) |
| $ | (771 | ) |
|
| 47.1 | % |
The loss – Loss from discontinued operations during the three and nine months ended September 30, 2017,2020 was primarily relateddue to a settlement and legal expenses associated withrelated to previously sold operations. The lossIncome from discontinued operations duringfor the nine months ended September 30, 2017,2019 was primarily related to a favorable legal expenses associated withsettlement related to previously sold operations partially offset in part by a reduction in an uncertain tax position due to the lapse of a statute.legal expenses.
Liquidity and Capital Resources
Cash and cash equivalents were $53.5$56.5 million as of September 30, 2017,2020, as compared to $20.9$62.0 million as of December 31, 2016.2019. Our total available liquidity was $311.3 million, including the available capacity on our 2018 Credit Facility of $209.8 million, and an additional $45 million available through the delayed draw commitment from Crestview Partners. During the nine months ended September 30, 2017, the Company generated2020, we used net cash flow from operating activities of $114.6$45.9 million.
On August 5, 2020, we entered into an investment agreement with funds managed by private equity firm Crestview Partners (the “Investment Agreement”) who made an initial investment of $135 million, primarilyoffset in part by $9.2 million in fees, in newly issued perpetual convertible preferred stock that carries a 5.5% cumulative quarterly dividend, which is payable in cash or in-kind at Viad’s option (the “Convertible Preferred Stock”). The Convertible Preferred Stock is convertible into shares of our common stock at a conversion price of $21.25 per share. The Investment Agreement also includes a delayed draw commitment of up to $45 million in additional Convertible Preferred Stock, which we may access during the 12 months following the August 5, 2020 closing date on the same terms and conditions as the initial investment. The proceeds from resultsCrestview’s initial investment were used to repay a portion of operations. Management believes that Viad’s existing sources ofour 2018 Credit Facility, will provide additional short-term liquidity, will be sufficientfund capital expenditures, and will support general corporate purposes. On August 5, 2020, we entered into an amendment to fund operationsour 2018 Credit Agreement, which, among other things, (i) waives our financial covenants until September 30, 2022 (the “Covenant Waiver Period”) and (ii) requires us to maintain minimum liquidity of
$125 million with a step down to $100 million at December 31, 2020. The interest rate on the borrowings is equal to the London Interbank Offered Rate (“LIBOR”) plus 350 basis points, with a LIBOR floor of one percent during the Covenant Waiver Period. The LIBOR floor continues until the end of the 2018 Credit Agreement. Viad pledged 100% of the capital commitments for at leaststock of its wholly-owned domestic subsidiaries and its top-tier foreign subsidiaries (other than Esja Attractions ehf.). Fees related to the next 12 months.amendment were approximately $1.7 million.
As of September 30, 2017, the Company had2020, we held approximately $49.0$53.7 million of itsour cash and cash equivalents held outside of the United States, consisting of $31.9$25.3 million in Canada, $7.8 million in the Netherlands, $7.0$9.9 million in the United Kingdom, $1.2 million in Germany, $0.9$8.1 million in the United Arab Emirates, $6.8 million in the Netherlands, and $0.2$3.6 million in certain other countries. There are certain earnings related to the Company’s Canadian and Netherlands operations that have historically been deemed permanently reinvested. As of September 30, 2017, the incremental tax associated with these earnings if the cash balances were repatriated to the United States would approximate $1.6 million.
Cash Flows
Operating Activities
|
| Nine Months Ended |
|
| Nine Months Ended |
| ||||||||||
|
| September 30, |
|
| September 30, |
| ||||||||||
(in thousands) |
| 2017 |
|
| 2016 |
|
| 2020 |
|
| 2019 |
| ||||
Net income |
| $ | 80,128 |
|
| $ | 47,083 |
| ||||||||
Net income (loss) |
| $ | (325,280 | ) |
| $ | 30,148 |
| ||||||||
Depreciation and amortization |
|
| 42,499 |
|
|
| 31,206 |
|
|
| 43,051 |
|
|
| 44,061 |
|
Deferred income taxes |
|
| 318 |
|
|
| (3,549 | ) |
|
| 20,428 |
|
|
| 5,261 |
|
Loss from discontinued operations |
|
| 408 |
|
|
| 771 |
| ||||||||
Impairment charges (recoveries) |
|
| (29,098 | ) |
|
| 120 |
| ||||||||
(Income) loss from discontinued operations |
|
| 1,822 |
|
|
| (32 | ) | ||||||||
Restructuring charges |
|
| 12,370 |
|
|
| 6,845 |
| ||||||||
Legal settlement |
|
| — |
|
|
| 8,500 |
| ||||||||
Impairment charges |
|
| 203,076 |
|
|
| — |
| ||||||||
Gains on dispositions of property and other assets |
|
| (14,935 | ) |
|
| (938 | ) | ||||||||
Share-based compensation expense |
|
| 649 |
|
|
| 6,448 |
| ||||||||
Multi-employer pension plan withdrawal |
|
| 462 |
|
|
| 15,508 |
| ||||||||
Other non-cash items |
|
| 14,369 |
|
|
| 13,083 |
|
|
| 10,371 |
|
|
| 2,772 |
|
Changes in assets and liabilities |
|
| 6,019 |
|
|
| 26,708 |
|
|
| 2,080 |
|
|
| (17,433 | ) |
Net cash provided by operating activities |
| $ | 114,643 |
|
| $ | 115,422 |
| ||||||||
Net cash (used in) provided by operating activities |
| $ | (45,906 | ) |
| $ | 101,140 |
|
NetThe change in net cash (used in) provided by operating activities decreased $0.8of $147.0 million primarilywas due to changes in working capital,net losses at GES and Pursuit due to the COVID-19 pandemic, offset in part by an increasea favorable change in results of operations.working capital primarily driven by a focus on working capital management.
Investing Activities
|
| Nine Months Ended |
|
| Nine Months Ended |
| ||||||||||
|
| September 30, |
|
| September 30, |
| ||||||||||
(in thousands) |
| 2017 |
|
| 2016 |
|
| 2020 |
|
| 2019 |
| ||||
Capital expenditures |
| $ | (39,493 | ) |
| $ | (32,582 | ) |
| $ | (40,057 | ) |
| $ | (60,868 | ) |
Proceeds from insurance |
|
| 31,570 |
|
|
| — |
| ||||||||
Cash paid for acquired businesses, net |
|
| (1,661 | ) |
|
| (145,735 | ) | ||||||||
Cash surrender value of life insurance policies |
|
| 24,767 |
|
|
| — |
| ||||||||
Cash paid for acquisitions, net |
|
| — |
|
|
| (90,992 | ) | ||||||||
Proceeds from dispositions of property and other assets |
|
| 734 |
|
|
| 774 |
|
|
| 21,788 |
|
|
| 1,022 |
|
Net cash used in investing activities |
| $ | (8,850 | ) |
| $ | (177,543 | ) | ||||||||
Net cash provided by (used in) investing activities |
| $ | 6,498 |
|
| $ | (150,838 | ) |
NetThe change in net cash used inprovided by (used in) investing activities decreased $168.7of $157.3 million was primarily due to proceeds from the termination of our life insurance policies, proceeds from dispositions of property and other assets in 2020, including $17.1 million from the sale of the GES warehouse in San Diego, cash payments, net of cash acquired, of $145.7 millionpaid for the 2016 acquisitions of ON Services, CATC,in 2019, and the business of Maligne Lake Tours Ltd., and the Mount Royal Hotel fire-related insurance proceeds received in 2017, offset in part by an increasea decrease in capital expenditures.
|
| Nine Months Ended |
|
| Nine Months Ended |
| ||||||||||
|
| September 30, |
|
| September 30, |
| ||||||||||
(in thousands) |
| 2017 |
|
| 2016 |
|
| 2020 |
|
| 2019 |
| ||||
Proceeds from borrowings |
| $ | 60,574 |
|
| $ | 153,000 |
|
| $ | 191,733 |
|
| $ | 170,459 |
|
Payments on debt and capital lease obligations |
|
| (128,808 | ) |
|
| (86,989 | ) | ||||||||
Payments on debt and finance lease obligations |
|
| (273,663 | ) |
|
| (99,340 | ) | ||||||||
Dividends paid on common stock |
|
| (6,119 | ) |
|
| (6,079 | ) |
|
| (4,064 | ) |
|
| (6,060 | ) |
Distributions to noncontrolling interest |
|
| (1,526 | ) |
|
| — |
| ||||||||
Debt issuance costs |
|
| (5 | ) |
|
| (340 | ) |
|
| (1,585 | ) |
|
| — |
|
Payment of payroll taxes on stock-based compensation through shares withheld or repurchased |
|
| (1,062 | ) |
|
| (3,019 | ) | ||||||||
Common stock purchased for treasury |
|
| (1,272 | ) |
|
| (679 | ) |
|
| (2,785 | ) |
|
| — |
|
Other |
|
| — |
|
|
| 60 |
| ||||||||
Net cash provided by (used in) financing activities |
| $ | (75,630 | ) |
| $ | 58,973 |
| ||||||||
Proceeds from issuance of Convertible Series A Preferred Stock, net of issuance costs |
|
| 125,763 |
|
|
| — |
| ||||||||
Proceeds from exercise of stock options |
|
| 2,077 |
|
|
| 92 |
| ||||||||
Net cash provided by financing activities |
| $ | 34,888 |
|
| $ | 62,132 |
|
NetThe decrease in cash used inprovided by financing activities increased $134.6of $27.2 million was primarily due to net debt payments of $68.2$81.9 million during the nine months ended September 30, 20172020 compared to net debt proceeds of $66.0$71.1 million duringunder the nine months ended September 30, 2016.2018 Credit Facility, offset in part by proceeds from the issuance of Convertible Series A Preferred Stock.
Debt and CapitalFinance Lease Obligations
Refer to Note 1112 – Debt and CapitalFinance Lease Obligations of the Notes to Condensed Consolidated Financial Statements for further discussion.discussion, all of which is incorporated by reference herein.
Share Repurchases
TheOur Board of Directors previously authorized the Companyus to repurchase shares of itsour common stock from time to time at prevailing market prices. NoEffective February 7, 2019, our Board of Directors authorized the repurchase of an additional 500,000 shares. During the nine months ended September 30, 2020, we repurchased 53,784 shares on the open market repurchasesfor $2.8 million. No shares were maderepurchased on the open market during the nine months ended September 30, 2017 or 2016.2019. As of September 30, 2017, 440,5402020, 546,283 shares remained available for repurchase. The authorization of the Board of DirectorsDirectors’ authorization does not have an expiration date. In addition, during the nine months ended September 30, 2017 and 2016, the Company
Additionally, we repurchased 26,916 shares for $1.3 million and 24,432 shares for $0.7 million, respectively, related to tax withholding requirements on vested restricted share-based awards.
In March 2020, our Board of Directors suspended our share repurchase program for the foreseeable future.
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 condensed consolidated financial statements and related notes. Refer to Note 12 – Debt and Finance Lease Obligations, Note 19 – Leases and Other, and Note 20 – Litigation, Claims, Contingencies, and Other of the Notes to Condensed Consolidated Financial Statements (Part I, Item 1 of this quarterly report on Form 10-Q) for further information, which information is incorporated by reference herein.
Critical Accounting Policies and Estimates
Refer to “Management’s Discussion and Analysis of Financial Condition and Results of Operations” (Part II, Item 7) of Viad’s Annual Report onour 2019 Form 10-K, for the year ended December 31, 2016, for a discussion of our critical accounting policies and estimates.
Impact of Recent Accounting Pronouncements
Refer to Note 1 – Overview and Basis of Presentation and Principles of Consolidation of the Notes to Condensed Consolidated Financial Statements for further information.
As provided by the safe harbor provision under the Private Securities Litigation Reform Act of 1995, Viad cautions readers that, in addition to historical information contained herein, this quarterly report includes certain information, assumptions, and discussions that may constitute forward-looking statements. These forward-looking statements are not historical facts, but reflect 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, legal expenses, tax rates and other tax matters, foreign exchange rates, and the realization of restructuring cost savings. 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. Among other things, natural disasters, gains and losses of customers, consumer demand patterns, labor relations, purchasing decisions related to customer demand for exhibition and event services, existing and new competition, industry alliances, consolidation and growth patterns within the industries in which Viad competes, acquisitions, capital allocations, adverse developments in liabilities associated with discontinued operations, changes in the levels of interest rates, and any deterioration in the economy, may individually or in combination impact future results. In addition to factors mentioned elsewhere, economic, competitive, governmental, technological, capital marketplace, and other factors, including terrorist activities or war, a pandemic health crisis, and international conditions, could affect the forward-looking statements in this quarterly report. Additional information concerning business and other risk factors that could cause actual results to materially differ from those in the forward looking statements are discussed in the “Risk Factors” section in Viad’s 2016 Annual Report.
Information about Viad obtained from sources other than the Company may be out-of-date or incorrect. Please rely only on Company press releases, SEC filings, and other information provided by the Company, keeping in mind that forward-looking statements speak only as of the date made. Viad undertakes no obligation to update any forward-looking statements, including prior forward-looking statements, to reflect events or circumstances arising after the date as of which the forward-looking statements were made.
Non-GAAP Measures
In addition to disclosing financial results that are determined in accordance with U.S. generally accepted accounting principles (“GAAP”), we also disclose the Company also disclosesfollowing non-GAAP financial measures of Adjusted EBITDA,measures: Segment operating income Adjusted Segment EBITDA,(loss), organic revenue, and organic segment operating income (loss) (collectively, the “Non-GAAP Measures”). The presentationOur use of the Non-GAAP Measures is supplemental to, but not as a substitute for, other measures of financial performance reported in accordance with GAAP. As not all companies use identical calculations, theour Non-GAAP Measures may not be comparable to similarly titled measures used by other companies. Management believesWe believe that the presentationour use of the Non-GAAP Measures provides useful information to investors regarding Viad’sour results of operations for trending, analyzing, and benchmarking theour performance and the value of Viad’sour business.
“Adjusted EBITDA” is defined by Viad as net income attributable to Viad before the Company’s portion of interest expense, income taxes, depreciation and amortization, impairment charges and recoveries, changes in accounting principles, and the effects of discontinued operations. Adjusted EBITDA is utilized by management to measure the profit and performance of Viad’s operations and to facilitate period-to-period comparisons. Refer to the table below for a reconciliation of Adjusted EBITDA to the most directly comparable GAAP measure.
“Segment operating income” is defined by Viad as net income attributable to Viad before income (loss) from discontinued operations, corporate activities, interest expense and interest income, income taxes, restructuring charges, impairment losses and recoveries, and the reduction for income attributable to noncontrolling interest. Segment operating income is utilized by management to measure the profit and performance of Viad’s operating segments to facilitate period-to-period comparisons.
“Adjusted Segment EBITDA” is defined by Viad as segment operating income (as defined above) before non-cash depreciation and amortization and acquisition integration costs, if any. Adjusted Segment EBITDA is utilized by management to measure the profit and performance of Viad’s operating segments and acquisitions to facilitate period-to-period comparisons. For a discussion of how this metric is used in connection with 2017 full year acquisition performance expectations, refer to the “Forward-Looking Non-GAAP Financial Measures” section of this MD&A. Management believes that Adjusted Segment EBITDA for acquisitions enables investors to assess how effectively management is investing capital into major corporate development projects, both from a valuation and return perspective.
• | “Segment operating income (loss)” is net loss attributable to Viad before loss from discontinued operations, corporate activities, interest expense and interest income, income taxes, restructuring charges, impairment charges, and the reduction for income attributable to noncontrolling interest. Segment operating income (loss) is used to measure the profit and performance of our operating segments to facilitate period-to-period comparisons. Refer to Note 22 – Segment Information of the Notes to Condensed Consolidated Financial Statements for a reconciliation of segment operating income (loss) to loss from continuing operations before income taxes. |
|
The Non-GAAPWe believe non-GAAP Measures are considered useful operating metrics as they eliminate potential variations arising from taxes, depreciation and amortization, debt service costs, impairment charges, and recoveries, changes in accounting principles, and the effects of discontinued operations, are eliminated, thus resulting in additional measures considered to be indicative of Viad’sour ongoing operations and segment performance. Although thewe use Non-GAAP Measures are used as financial measures to assess the performance of theour business, the use of these measures is limited because these measures do not consider material costs, expenses, and other items necessary to operate theour business. These items include debt service costs, non-cash depreciation and amortization expense associated with long-lived assets, expenses related to U.S. federal, state, local and foreign income taxes, impairment charges, or recoveries, and the effects of accounting changes and discontinued operations. SinceAs the Non-GAAP Measures do not consider the abovethese items, a user of Viad’s financial informationyou should consider net income attributable to Viad as an important measure of financial performance because it provides a more complete measure of the Company’sour performance.
A reconciliation of net income attributable to Viad to Adjusted EBITDA is as follows:
|
| Three Months Ended |
|
| Nine Months Ended |
| ||||||||||
|
| September 30, |
|
| September 30, |
| ||||||||||
(in thousands) |
| 2017 |
|
| 2016 |
|
| 2017 |
|
| 2016 |
| ||||
Net income attributable to Viad |
| $ | 44,657 |
|
| $ | 33,792 |
|
| $ | 79,381 |
|
| $ | 46,318 |
|
Depreciation and amortization |
|
| 15,833 |
|
|
| 12,649 |
|
|
| 42,499 |
|
|
| 31,206 |
|
Interest expense |
|
| 2,117 |
|
|
| 1,489 |
|
|
| 6,281 |
|
|
| 4,109 |
|
Income tax expense |
|
| 20,010 |
|
|
| 17,878 |
|
|
| 32,929 |
|
|
| 23,652 |
|
Impairment charges (recoveries) |
|
| (24,467 | ) |
|
| 120 |
|
|
| (29,098 | ) |
|
| 120 |
|
Loss from discontinued operations |
|
| 101 |
|
|
| 221 |
|
|
| 408 |
|
|
| 771 |
|
Other noncontrolling interest |
|
| (739 | ) |
|
| (661 | ) |
|
| (697 | ) |
|
| (691 | ) |
Adjusted EBITDA |
| $ | 57,512 |
|
| $ | 65,488 |
|
| $ | 131,703 |
|
| $ | 105,485 |
|
The decrease in Adjusted EBITDA for the three months ended September 30, 2017 was primarily due to lower segment operating income at GES. The increase in Adjusted EBITDA for the nine months ended September 30, 2017 was primarily due to higher segment operating income at GES and Pursuit. Refer to the “Results of Operations” section of this MD&A for a discussion of fluctuations.
Forward-Looking Non-GAAP Financial Measures
The Company has also provided Adjusted Segment EBITDA and segment operating income as forward-looking Non-GAAP Measures within the “Results of Operations” section of this MD&A. The Company does not provide reconciliations of these forward-looking Non-GAAP Measures to the most directly comparable GAAP financial measures because, due to variability and difficulty in making accurate forecasts and projections and/or certain information not being ascertainable or accessible, not all of the information necessary for quantitative reconciliations of these forward-looking Non-GAAP Measures to the most directly comparable GAAP financial measures is available to the Company without unreasonable efforts. Consequently, any attempt to disclose such reconciliations would imply a degree of precision that could be confusing or misleading to investors. It is probable that these forward-looking Non-GAAP Measures may be materially different from the corresponding GAAP Measures.
Item 3. Quantitative and Qualitative Disclosures About Market Risk
Viad’sOur market risk exposures relateexposure relates to fluctuations in foreign exchange rates and interest rates, and certain commodity prices.rates. Foreign exchange risk is the risk that fluctuating exchange rates will adversely affect Viad’sour financial condition or results of operations. Interest rate risk is the risk that changing interest rates will adversely affect the earnings of Viad. Commodity risk is the risk that changing prices will adversely affectour financial position or results of operations.
Viad conducts itsOur foreign operations are primarily in Canada, the United Kingdom, Iceland, the Netherlands, Germany, and to a lesser extent, in certain other countries.Germany. The functional currency of Viad’sour foreign subsidiaries is their local currency. Accordingly, for purposes of consolidation, Viad translateswe translate the assets and liabilities of itsour 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 incomeloss in Viad’s condensed consolidated balance sheets.the Condensed Consolidated Balance Sheets. As a result, significant fluctuations in foreign exchange rates relative to the U.S. dollar may result in material changes to Viad’sour net equity position reported in its condensed consolidated balance sheets. Viad doesthe Condensed Consolidated Balance Sheets. We do not currently hedge itsour equity risk
arising from the translation of foreign denominated assets and liabilities. Viad hadWe recorded cumulative unrealized foreign currency translation losses recorded in stockholders’ equity of $10.3 million and $29.1$31.1 million as of September 30, 20172020 and $23.8 million as of December 31, 2016, respectively. During2019. We recorded unrealized foreign currency translation losses in other comprehensive income of $7.3 million during the three and nine months ended September 30, 2017,2020 and unrealized foreign currency translation gains of $9.1$3.9 million and $18.8 million, respectively, were recorded in other comprehensive income. Duringduring the three and nine months ended September 30, 2016 an unrealized foreign currency translation loss of $3.8 million and a gain of $0.7 million, respectively, were recorded in other comprehensive income.2019.
For purposes of consolidation, revenue, expenses, gains, and losses related to Viad’sour foreign operations are translated into U.S. dollars at the average foreign exchange rates for the period. As a result, Viad’sour consolidated results of operations are exposed to fluctuations in foreign exchange rates as revenue and segment operating resultsincome (loss) of itsour foreign operations, when translated, may vary from period to period, even when the functional currency amounts have not changed. Such fluctuations may adversely impact overall expected profitability and historical period-to-period comparisons. Viad doesWe do not currently hedge itsour net earnings exposure arising from the translation of itsour foreign revenue and segment operating results.income (loss). Refer to “Management’s Discussion and Analysis of Financial Condition and Results of Operations” for a discussion on the “Foreign Exchange Rate Variances.”Variances” section of this MD&A.
Viad isWe are exposed to foreign exchange transaction risk, as itsour foreign subsidiaries have certain revenue transactions denominated in currencies other than the functional currency of the respective subsidiary. From time to time, Viad utilizeswe utilize forward contracts to mitigate the impact on earnings related to these transactions due to fluctuations in foreign exchange rates. As of September 30, 2017, Viad2020 and December 31, 2019, we did not have any outstanding foreign currency forward contracts outstanding.contracts.
Viad isWe are exposed to short-term and long-term interest rate risk on certain of itsour debt obligations. ViadWe do not currently does not use derivative financial instruments to hedge cash flows for such obligations.
Item 4. Controls and Procedures
Under the supervision and with the participation of management, including the Chief Executive Officer and Chief Financial Officer of Viad, the effectiveness of the design and operation ofWe have established disclosure controls and procedures has been evaluated as of September 30, 2017, and, based on that evaluation, the Chief Executive Officer and Chief Financial Officer have concluded that these disclosure controls and procedures are effective as of September 30, 2017. Disclosure controls and procedures are designed to ensure that information required to be disclosed in theour 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 the SEC’sSEC rules and forms. Disclosure controlsforms, and procedures include, without limitation, controls and procedures designed to ensure thatsuch information required to be disclosed in such reports is accumulated and communicated to our management, including theour Chief Executive Officer (“CEO”) and Chief Financial Officer (“CFO”), as appropriate to allow for timely decisions regarding required disclosure. Management, together with our CEO and CFO, evaluated the effectiveness of our disclosure controls and procedures as of September 30, 2020. Based on this evaluation, the CEO and CFO concluded that our disclosure controls and procedures were effective as of September 30, 2020.
There were no changes in the Company’sour internal control over financial reporting during the three months ended September 30, 20172020 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.
PART II - OTHEROTHER INFORMATION
Refer to Note 1820 – Litigation, Claims, Contingencies, and Other of the Notes to Condensed Consolidated Financial Statements (Part I, Item 1 of this Form 10-Q) for information regarding our legal proceedings involving the Company.that is incorporated by reference herein.
ThereOur 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.
The COVID-19 pandemic and related responsive actions have adversely affected our financial condition, liquidity and cash flow, and may continue to do so in the future. The COVID-19 pandemic forced the cancellation of many of our events and the temporary closure of substantially all of our attractions, hotels, and other operations. The substantial reduction in our operations will result in near-term losses and negative cash flow from operations. The full impact of the pandemic on our longer-term operational and financial performance is highly uncertain and will depend on future developments that we cannot predict, including the duration and spread of the pandemic, any future resurgence of COVID-19, and related social-distancing orders, travel restrictions, and/or government limitations on group gatherings. Our GES business depends on exhibitions, conferences, and other live events and the size of marketing expenditures relating to those events. The continuation of government orders prohibiting large group gatherings will continue to significantly and adversely affect our revenue and results of operations. Even if exhibitions or other live events do occur, 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, and people may be unwilling to attend large group events. In addition, the attractions and hospitality operations within our Pursuit business may be subject to government closure orders designed to limit the spread of COVID-19, which adversely affects our profitability and cash flow. Future revenue from our Pursuit operations will depend on any further spread of the pandemic, our ability to keep our operations open, the willingness of people to travel to our locations, and the amount of disposable income that consumers have available for travel and vacations, which decreases during periods of weak general economic conditions. Both our GES and Pursuit businesses may also experience increased costs in order to supply our customers or guests with personal protection equipment, conduct comprehensive cleaning regiments, and other measures that we determine are in the best interests of our employees, customers, guests, and/or event participants. Even with additional personal protection measures in place, there can be no assurance that employees, customers, guests, and/or event participants will not contact COVID-19. Any such occurrence could result in litigation, legal costs, and reputational risk. The prolonged recovery from the COVID-19 pandemic or a resurgence in cases of COVID-19 could further materially and adversely affect our business, financial condition, and results of operations.
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’s key personnel and customers. Moreover, our acquisition activity may subject us to new regulatory requirements, distract our senior management and employees, and expose us to unknown liabilities or contingencies that we may fail to identify prior to closing. If we are forced to make changes to our business strategy or if external conditions adversely affect our business operations, including the duration and impact of COVID-19, we may be required to record additional future impairment charges, as we did in the first and second quarters of 2020. 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, including as a result of the effects caused by the COVID-19 pandemic. The recent decline in global and regional economic conditions, and consumers’ fears that economic conditions will further decline, has caused declining consumer confidence, unemployment, fluctuations in stock markets and interest rates, contraction of credit availability, and 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, which our business has experienced in 2020 due to the COVID-19 pandemic. 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 further 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. 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, rigging, and other services at the exhibition facility. However, some exhibition facilities have taken certain steps to in-source certain 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 exhibition facilities choose to in-source certain event services, GES will lose the ability to provide certain event services, 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 teams must be able to understand clients’ desires and expectations in order to provide top-quality service. If we are unable to maintain our client relationships, including due to the loss of key members of our account 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. Competition in the Live Events markets is driven by price and service quality, among other factors. To the extent competitors seek to gain or retain market presence through aggressive underpricing strategies, we may be required to lower our prices and rates to avoid the loss of related business. Moreover, customer consolidations and other actions have caused downward pricing pressure for our products 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. 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 COVID-19 pandemic and social distancing orders resulted in severe global travel restrictions, mandatory shutdowns of show and event venues, hotels, attractions and other operations, and limitations on large gatherings of people. These circumstances had severe effects on our businesses. The occurrence of additional disruptions, a prolonged recovery from the COVID-19 pandemic or a spike or resurgence in cases of COVID-19, or other unexpected events that affect the availability and pricing of air travel and accommodations, could further 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. A prolonged delay in these capital projects could prevent them from performing in accordance with our commercial expectations and could materially and adversely affect our future success, 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, such as the COVID-19 pandemic, 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.
Natural disasters, weather conditions, and other catastrophic events could negatively affect our business. The occurrence of catastrophic events ranging from natural disasters (such as hurricanes, fires, floods, and earthquakes), 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, 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 events could also have a negative impact on GES’ production facilities, preventing us from timely completing exhibit fabrication and other projects for customers. In addition, unfavorable media attention, or negative publicity, in the wake of any catastrophic event or accident 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 obligated to contribute to multi-employer pension plans under collective bargaining agreements covering our union-represented employees. We contributed $27.3 million in 2019, $26.4 million in 2018, and $26.6 million in 2017 to those 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 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. In 2019, we finalized the terms of a new collective bargaining agreement with the Teamsters Local 727 union. The terms included a withdrawal from the underfunded Central States Pension Plan. Accordingly, we recorded a charge of $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 $0.2 million of other withdrawal costs. At this time, we do not anticipate triggering any withdrawal from any other multi-employer pension plan to which we currently contribute. However, significant plan contribution increases could materially and adversely affect our consolidated financial condition, results of operations, and cash flows. Refer to Note 18 – Pension and Postretirement Benefits of the Notes to Consolidated Financial Statements (Part II, Item 8 of the 2019 Form 10-K) for further information.
Union-represented labor increases our risk of higher labor costs and work stoppages. Significant portions 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.
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 nopreviously 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, and Germany. During 2019, GES EMEA, GES Canada, and Pursuit’s international operations accounted for approximately 33% of our consolidated revenue and 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 are vulnerable to cybersecurity attacks and threats. We regularly collect and process credit, financial, and other personal 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, factors disclosedincluding 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 materially and adversely affect our results of operations.
Laws and regulations relating to the handling of personal data are evolving and could result in Viad’s Annual Reportincreased costs, legal claims, or fines. We store and process the personally identifiable information of our customers, employees, and third parties with whom we have business relationships. The legal requirements restricting the way we store, collect, handle, and transfer personal data continue to evolve, and there are an increasing number of authorities issuing privacy laws and regulations. These data privacy laws and regulations are subject to differing interpretations, creating uncertainty and inconsistency across jurisdictions. Our compliance with these myriad requirements could involve making changes in our services, business practices, or internal systems, any of which could increase our costs, lower revenue, or reduce 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. 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.
The United Kingdom’s exit from the European Union (“EU”) could adversely affect our business.We operate substantial parts of our EU businesses from U.K.-based entities. On January 31, 2020, the U.K. officially withdrew from the EU. The final terms of the withdrawal are being negotiated with the transition period ending on Form 10-KDecember 31, 2020. The withdrawal could disrupt the free movement of goods, services, and people between the U.K. and the EU. Moreover, the regulatory and legal environment that will govern our U.K. operations is uncertain. Any new arrangements may require us to make changes to our operations in Europe, which could result in a higher cost and less efficient operating model across our European business. These new arrangements could adversely affect our business and results of operations.
Changes affecting the availability of the London Inter-bank Offered Rate (“LIBOR”) or increases in interest rates may have consequences for us that cannot yet be reasonably predicted. We have outstanding debt with variable interest rates based on LIBOR. Borrowings under the 2018 Credit Facility are indexed to the prime rate or LIBOR, plus appropriate spreads tied to our leverage ratio. The LIBOR benchmark has been the subject of national, international, and other 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 year ended December 31, 2016,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 our 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 discount rates we apply to finance lease obligations will be based on the alternative rate, which may result in higher interest rates and debt obligations. In addition, any increases to our Form 10-Qbenchmark interest rates could have an uncertain impact on our cost of funds and our access to the capital markets, which could impact our results of operations and cash flows. Uncertainty as to the nature of such potential changes may also adversely affect the trading market for the quarter ended March 31, 2017.our securities.
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds
The following table summarizes the total number of shares of Viad’sour common stock that were repurchased during the three months ended September 30, 2017 by Viad2020 pursuant to publicly announced plans or programs, as well as fromcertain previously owned shares of common stock that were surrendered by employees, former employees, and non-employee directors surrendering previously owned Viad common stock (outstanding shares) to pay the taxes in connection with the vesting of restricted stockfor tax withholding requirements on vested share-based awards.
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 |
| ||||
July 1, 2017 - July 31, 2017 |
|
| — |
|
| $ | — |
|
|
| — |
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| 440,540 |
|
August 1, 2017 - August 31, 2017 |
|
| 1,120 |
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| $ | 52.80 |
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| — |
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| 440,540 |
|
September 1, 2017 - September 30, 2017 |
|
| 154 |
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| $ | 56.05 |
|
|
| — |
|
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| 440,540 |
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Total |
|
| 1,274 |
|
| $ | 53.19 |
|
|
| — |
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|
| 440,540 |
|
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 |
| ||||
July 1, 2020 - July 31, 2020 |
|
| 50 |
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| $ | 14.46 |
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|
| — |
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| 546,283 |
|
August 1, 2020 - August 31, 2020 |
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| 30 |
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| $ | 18.28 |
|
|
| — |
|
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| 546,283 |
|
September 1, 2020 - September 30, 2020 |
|
| — |
|
| $ | — |
|
|
| — |
|
|
| 546,283 |
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Total |
|
| 80 |
|
| $ | 15.89 |
|
|
| — |
|
|
| 546,283 |
|
ThePursuant to previously announced authorizations, our Board of Directors has authorized the Companyus to repurchase shares of itsour common stock from time to time at prevailing market prices. NoEffective February 7, 2019, our Board of Directors approved an additional 500,000 shares were repurchased onto repurchase. During the open market during the three and nine months ended September 30, 2017. As of September 30, 2017, 440,5402020 we repurchased 53,784 shares remain availableon the open market for repurchase.$2.8 million. The Board’s authorization of thehas no expiration date. In March 2020, our Board of Directors does not have an expiration date.
Not applicable.suspended our share repurchase program for the foreseeable future.
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| Incorporated by Reference | ||||||
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3.1 |
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| Certificate of Designations of 5.5% Series A Convertible Preferred Stock. |
| 8-K |
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| 8/5/2020 |
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4.1 |
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4.2 |
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| Amendment No. 2 to $450 million Second Amended and Restated Credit Agreement, dated May 8, 2020. |
| 8-K |
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| 5/11/2020 |
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4.3 |
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10.1 |
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10.2 |
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10.3 |
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| 8/5/2020 | |
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10.4 |
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| 8/5/2020 | |
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10.5 |
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10.6 |
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10.7 |
| * |
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31.1 |
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| * |
| XBRL Instance Document |
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101.SCH |
| **** |
| XBRL Taxonomy Extension Schema | ||||||||
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101.CAL |
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| XBRL Taxonomy Extension Calculation Linkbase |
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101.LAB |
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101.PRE |
| **** |
| XBRL Taxonomy Extension Presentation Linkbase Document |
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101.DEF | **** | XBRL Taxonomy Extension Definition Linkbase Document. | ||||||||||
104 | *** | Cover Page Interactive Data File |
* | Filed herewith. |
** | Furnished herewith. |
*** | The XBRL Instance Document and Cover Page Interactive Data File do not appear in the Interactive Data File because their XBRL tags are embedded within the Inline XBRL document. |
**** | Submitted electronically herewith. |
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.
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| VIAD CORP | ||
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| (Registrant) | ||
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November 6, |
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| By: |
| /s/ Leslie S. Striedel |
(Date) |
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| Leslie S. Striedel |
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| Chief Accounting Officer (Duly Authorized Officer) |
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4056