VIAD CORP, 10-K filed on 3/6/2017
Annual Report
Document and Entity Information (USD $)
In Millions, except Share data, unless otherwise specified
12 Months Ended
Dec. 31, 2016
Jan. 31, 2017
Jun. 30, 2016
Document And Entity Information [Abstract]
 
 
 
Entity Registrant Name
VIAD CORP 
 
 
Entity Central Index Key
0000884219 
 
 
Document Type
10-K 
 
 
Document Period End Date
Dec. 31, 2016 
 
 
Amendment Flag
false 
 
 
Document Fiscal Year Focus
2016 
 
 
Document Fiscal Period Focus
FY 
 
 
Current Fiscal Year End Date
--12-31 
 
 
Trading Symbol
VVI 
 
 
Entity Well-known Seasoned Issuer
Yes 
 
 
Entity Voluntary Filers
No 
 
 
Entity Current Reporting Status
Yes 
 
 
Entity Filer Category
Accelerated Filer 
 
 
Entity Public Float
 
 
$ 618 
Entity Common Stock, Shares Outstanding
 
20,327,636 
 
CONSOLIDATED BALANCE SHEETS (USD $)
In Thousands, unless otherwise specified
Dec. 31, 2016
Dec. 31, 2015
Current assets
 
 
Cash and cash equivalents
$ 20,900 
$ 56,531 
Accounts receivable, net of allowances for doubtful accounts of $1,342 and $1,593, respectively
104,648 
93,800 
Inventories
31,420 
27,529 
Other current assets
18,449 
17,311 
Total current assets
175,417 
195,171 
Property and equipment, net
279,858 
189,239 
Other investments and assets
44,297 
37,631 1
Deferred income taxes
42,549 
50,137 
Goodwill
254,022 
185,223 
Other intangible assets, net
73,673 
33,322 
Total Assets
869,816 2
690,723 2
Current liabilities
 
 
Accounts payable
67,596 
65,497 
Customer deposits
42,723 
33,128 
Accrued compensation
29,913 
23,154 
Other current liabilities
30,390 
29,238 
Current portion of debt and capital lease obligations
174,968 3
34,554 3
Total current liabilities
345,590 
185,571 
Long-term debt and capital lease obligations
74,243 
92,849 
Pension and postretirement benefits
28,611 
29,629 
Other deferred items and liabilities
50,734 
47,336 
Total liabilities
499,178 
355,385 
Commitments and contingencies
   
   
Viad Corp stockholders’ equity:
 
 
Common stock, $1.50 par value, 200,000,000 shares authorized, 24,934,981 shares issued and outstanding
37,402 
37,402 
Additional capital
573,841 
576,523 
Retained earnings (deficit)
16,291 
(17,866)
Unearned employee benefits and other
172 
109 
Accumulated other comprehensive income (loss):
 
 
Unrealized gain on investments
421 
346 
Cumulative foreign currency translation adjustments
(29,084)
(23,257)
Unrecognized net actuarial loss and prior service credit, net
(10,728)
(11,265)
Common stock in treasury, at cost, 4,613,520 and 4,771,443 shares, respectively
(230,960)
(239,411)
Total Viad stockholders’ equity
357,355 
322,581 
Noncontrolling interest
13,283 
12,757 
Total stockholders’ equity
370,638 
335,338 
Total Liabilities and Stockholders’ Equity
$ 869,816 
$ 690,723 
CONSOLIDATED BALANCE SHEETS (Parenthetical) (USD $)
In Thousands, except Share data, unless otherwise specified
Dec. 31, 2016
Dec. 31, 2015
Statement Of Financial Position [Abstract]
 
 
Allowance for doubtful accounts
$ 1,342 
$ 1,593 
Common stock, par value
$ 1.50 
$ 1.50 
Common stock, shares authorized
200,000,000 
200,000,000 
Common stock, shares issued
24,934,981 
24,934,981 
Common stock, shares outstanding
24,934,981 
24,934,981 
Treasury stock, shares
4,613,520 
4,771,443 
CONSOLIDATED STATEMENTS OF OPERATIONS (USD $)
In Thousands, except Per Share data, unless otherwise specified
12 Months Ended
Dec. 31, 2016
Dec. 31, 2015
Dec. 31, 2014
Revenue:
 
 
 
Exhibition and event services
$ 881,137 
$ 799,752 
$ 772,770 
Exhibits and environments
170,469 
177,126 
171,698 
Pursuit services
153,364 
112,170 
120,519 
Total revenue
1,204,970 
1,089,048 
1,064,987 
Costs and expenses:
 
 
 
Costs of services
954,667 
868,369 
843,652 
Costs of products sold
165,118 
166,095 
161,469 
Corporate activities
10,322 
9,720 
14,348 
Interest income
(1,165)
(658)
(305)
Interest expense
5,898 
4,535 
2,015 
Restructuring charges
5,183 
2,956 
1,637 
Impairment charges
218 
96 
884 
Total costs and expenses
1,140,241 
1,051,113 
1,023,700 
Income from continuing operations before income taxes
64,729 
37,935 
41,287 
Income tax expense
21,250 
10,493 
109 
Income from continuing operations
43,479 
27,442 
41,178 
Income (loss) from discontinued operations
(684)
(394)
14,389 
Net income
42,795 
27,048 
55,567 
Net income attributable to noncontrolling interest
(526)
(442)
(3,213)
Net income attributable to Viad
42,269 
26,606 
52,354 
Diluted income per common share:
 
 
 
Continuing operations attributable to Viad common stockholders
$ 2.12 
$ 1.34 
$ 2.02 
Discontinued operations attributable to Viad common stockholders
$ (0.03)
$ (0.02)
$ 0.57 
Net income attributable to Viad common stockholders
$ 2.09 1
$ 1.32 1
$ 2.59 1
Weighted-average outstanding and potentially dilutive common shares
20,177 
19,981 
20,133 
Basic income per common share:
 
 
 
Continuing operations attributable to Viad common stockholders
$ 2.12 
$ 1.34 
$ 2.02 
Discontinued operations attributable to Viad common stockholders
$ (0.03)
$ (0.02)
$ 0.57 
Net income attributable to Viad common stockholders
$ 2.09 
$ 1.32 
$ 2.59 
Weighted-average outstanding common shares
19,990 
19,797 
19,804 
Dividends declared per common share
$ 0.40 
$ 0.40 
$ 1.90 
Amounts attributable to Viad common stockholders
 
 
 
Income from continuing operations
42,953 
27,000 
40,790 
Income (loss) from discontinued operations
(684)
(394)
11,564 
Net income attributable to Viad
$ 42,269 
$ 26,606 
$ 52,354 
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (USD $)
In Thousands, unless otherwise specified
12 Months Ended
Dec. 31, 2016
Dec. 31, 2015
Dec. 31, 2014
Statement Of Income And Comprehensive Income [Abstract]
 
 
 
Net income
$ 42,795 
$ 27,048 
$ 55,567 
Other comprehensive income (loss):
 
 
 
Unrealized gains (losses) on investments, net of tax effects of $47, $(78), and $26
75 
(125)
42 
Unrealized foreign currency translation adjustments, net of tax
(5,827)
(35,673)
(18,431)
Change in net actuarial gain (loss), net of tax effects of $617, 653, and $(1,538)
894 
2,556 
(2,568)
Change in prior service credit (cost), net of tax effects of $(219), $(210), and $339
(357)
(345)
351 
Comprehensive income (loss)
37,580 
(6,539)
34,961 
Comprehensive income attributable to noncontrolling interest
(526)
(442)
(3,213)
Comprehensive income (loss) attributable to Viad
$ 37,054 
$ (6,981)
$ 31,748 
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (Parenthetical) (USD $)
In Thousands, unless otherwise specified
12 Months Ended
Dec. 31, 2016
Dec. 31, 2015
Dec. 31, 2014
Statement Of Income And Comprehensive Income [Abstract]
 
 
 
Unrealized investment gains (losses) arising during the period, tax effects
$ 47 
$ (78)
$ 26 
Amortization of net actuarial gain (loss), tax effects
617 
653 
(1,538)
Amortization of prior service credit (cost), tax effects
$ (219)
$ (210)
$ 339 
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY (USD $)
In Thousands, unless otherwise specified
Total
Common Stock
Additional Capital
Retained Earnings (Deficit)
Unearned Employee Benefits and Other
Accumulated Other Comprehensive Income
Common Stock in Treasury
Total Viad Equity
Non-Controlling Interest
Beginning Balance at Dec. 31, 2013
$ 356,543 
$ 37,402 
$ 590,862 
$ (50,393)
$ (21)
$ 20,017 
$ (250,426)
$ 347,441 
$ 9,102 
Increase (Decrease) in Stockholders' Equity [Roll Forward]
 
 
 
 
 
 
 
 
 
Net income
55,567 
 
 
52,354 
 
 
 
52,354 
3,213 
Dividends on common stock
(38,387)
 
 
(38,387)
 
 
 
(38,387)
 
Common stock purchased for treasury
(12,321)
 
 
 
 
 
(12,321)
(12,321)
 
Employee benefit plans
4,324 
 
(11,334)
 
 
 
15,658 
4,324 
 
ESOP allocation adjustment
44 
 
 
 
44 
 
 
44 
 
Share-based compensation—equity awards
2,319 
 
2,319 
 
 
 
 
2,319 
 
Tax benefits (expenses) from share-based compensation
217 
 
217 
 
 
 
 
217 
 
Unrealized foreign currency translation adjustment
(18,431)
 
 
 
 
(18,431)
 
(18,431)
 
Unrealized gain (loss) on investments
42 
 
 
 
 
42 
 
42 
 
Amortization of net actuarial gain (loss)
(2,568)
 
 
 
 
(2,568)
 
(2,568)
 
Amortization of prior service (cost) credit
351 
 
 
 
 
351 
 
351 
 
Other, net
 
(1)
 
 
 
Ending Balance at Dec. 31, 2014
347,702 
37,402 
582,066 
(36,427)
23 
(589)
(247,088)
335,387 
12,315 
Increase (Decrease) in Stockholders' Equity [Roll Forward]
 
 
 
 
 
 
 
 
 
Net income
27,048 
 
 
26,606 
 
 
 
26,606 
442 
Dividends on common stock
(8,036)
 
 
(8,036)
 
 
 
(8,036)
 
Common stock purchased for treasury
(4,816)
 
 
 
 
 
(4,816)
(4,816)
 
Employee benefit plans
4,536 
 
(7,957)
 
 
 
12,493 
4,536 
 
Share-based compensation—equity awards
2,156 
 
2,156 
 
 
 
 
2,156 
 
Tax benefits (expenses) from share-based compensation
360 
 
360 
 
 
 
 
360 
 
Unrealized foreign currency translation adjustment
(35,673)
 
 
 
 
(35,673)
 
(35,673)
 
Unrealized gain (loss) on investments
(125)
 
 
 
 
(125)
 
(125)
 
Amortization of net actuarial gain (loss)
2,556 
 
 
 
 
2,556 
 
2,556 
 
Amortization of prior service (cost) credit
(345)
 
 
 
 
(345)
 
(345)
 
Other, net
(25)
 
(102)
(9)
86 
 
 
(25)
 
Ending Balance at Dec. 31, 2015
335,338 
37,402 
576,523 
(17,866)
109 
(34,176)
(239,411)
322,581 
12,757 
Increase (Decrease) in Stockholders' Equity [Roll Forward]
 
 
 
 
 
 
 
 
 
Net income
42,795 
 
 
42,269 
 
 
 
42,269 
526 
Dividends on common stock
(8,111)
 
 
(8,111)
 
 
 
(8,111)
 
Common stock purchased for treasury
(722)
 
 
 
 
 
(722)
(722)
 
Employee benefit plans
3,921 
 
(5,251)
 
 
 
9,172 
3,921 
 
Share-based compensation—equity awards
2,525 
 
2,525 
 
 
 
 
2,525 
 
Tax benefits (expenses) from share-based compensation
95 
 
95 
 
 
 
 
95 
 
Unrealized foreign currency translation adjustment
(5,827)
 
 
 
 
(5,827)
 
(5,827)
 
Unrealized gain (loss) on investments
75 
 
 
 
 
75 
 
75 
 
Amortization of net actuarial gain (loss)
894 
 
 
 
 
894 
 
894 
 
Amortization of prior service (cost) credit
(357)
 
 
 
 
(357)
 
(357)
 
Other, net
12 
 
(51)
(1)
63 
 
12 
 
Ending Balance at Dec. 31, 2016
$ 370,638 
$ 37,402 
$ 573,841 
$ 16,291 
$ 172 
$ (39,391)
$ (230,960)
$ 357,355 
$ 13,283 
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY (Parenthetical)
12 Months Ended
Dec. 31, 2016
Dec. 31, 2015
Dec. 31, 2014
Statement Of Stockholders Equity [Abstract]
 
 
 
Dividends on common stock per share
$ 0.40 
$ 0.40 
$ 1.90 
CONSOLIDATED STATEMENTS OF CASH FLOWS (USD $)
In Thousands, unless otherwise specified
12 Months Ended
Dec. 31, 2016
Dec. 31, 2015
Dec. 31, 2014
Cash flows from operating activities
 
 
 
Net income
$ 42,795 
$ 27,048 
$ 55,567 
Adjustments to reconcile net income to net cash provided by operating activities:
 
 
 
Depreciation and amortization
42,743 
35,231 
30,792 
Deferred income taxes
7,672 
469 
(9,731)
(Income) loss from discontinued operations
684 
394 
(14,389)
Restructuring charges
5,183 
2,956 
1,637 
Impairment charges
218 
96 
884 
(Gains) losses on dispositions of property and other assets
(54)
(690)
(958)
Share-based compensation expense
8,038 
3,848 
2,930 
Excess tax benefit from share-based compensation arrangements
(95)
(418)
(114)
Other non-cash items, net
6,167 
5,394 
5,386 
Change in operating assets and liabilities (excluding the impact of acquisitions):
 
 
 
Receivables
(9,358)
(16,665)
(10,441)
Inventories
(2,646)
4,872 
(2,555)
Accounts payable
1,770 
(2,619)
18,128 
Restructuring liabilities
(3,866)
(2,572)
(5,276)
Accrued compensation
(353)
1,469 
3,663 
Customer deposits
8,429 
408 
(6,406)
Income taxes payable
(4,630)
67 
1,543 
Other assets and liabilities, net
(2,379)
989 
(12,570)
Net cash provided by operating activities
100,318 
60,277 
58,090 
Cash flows from investing activities
 
 
 
Capital expenditures
(49,815)
(29,839)
(29,389)
Cash paid for acquired businesses, net
(195,989)
(430)
(120,251)
Proceeds from dispositions of property and other assets
1,166 
1,542 
1,109 
Proceeds from possessory interest and personal property - discontinued operations
 
 
28,000 
Net cash used in investing activities
(244,638)
(28,727)
(120,531)
Cash flows from financing activities
 
 
 
Proceeds from borrowings
229,701 
50,000 
189,512 
Payments on debt and capital lease obligations
(108,915)
(62,969)
(61,461)
Dividends paid on common stock
(8,111)
(8,036)
(38,387)
Debt issuance costs
(336)
 
(1,671)
Common stock purchased for treasury
(722)
(4,816)
(12,321)
Excess tax benefit from share-based compensation arrangements
95 
418 
114 
Acquisition of business - deferred consideration
(130)
(896)
 
Proceeds from exercise of stock options
 
1,041 
1,155 
Net cash provided by (used in) financing activities
111,582 
(25,258)
76,941 
Effect of exchange rate changes on cash and cash equivalents
(2,893)
(6,751)
(3,331)
Net change in cash and cash equivalents
(35,631)
(459)
11,169 
Cash and cash equivalents, beginning of year
56,531 
56,990 
45,821 
Cash and cash equivalents, end of period
$ 20,900 
$ 56,531 
$ 56,990 
Summary of Significant Accounting Policies
Summary of Significant Accounting Policies

Note 1. Summary of Significant Accounting Policies

Basis of Presentation and Principles of Consolidation

The accompanying consolidated financial statements of Viad Corp (“Viad” or the “Company”) have been prepared in accordance with accounting principles generally accepted in the United States of America (“GAAP”) and include the accounts of Viad and its subsidiaries. All significant intercompany account balances and transactions have been eliminated in consolidation.

Nature of Business

Viad is an international experiential services company with operations in the United States, Canada, the United Kingdom, continental Europe, and the United Arab Emirates. Viad is committed to providing best in class experiences to its clients, customers, and guests by offering products and services designed to meet their current and future needs. Viad operates through three reportable business segments: GES U.S., GES International, (collectively, “GES”), and Pursuit.

GES

GES, previously referred to as the Marketing & Events Group, 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 innovative technology to event organizers and exhibitors including core services, event technology, and audio-visual services – all with a global reach.

GES’ clients include event organizers and corporate brand marketers. 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, previously referred to as the Travel & Recreation Group, offers guests distinctive and world renowned experiences in iconic natural and cultural destinations in North America 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 Vancouver in Canada, and Glacier, Denali, and Kenai Fjords National Parks in the United States. Pursuit is composed of Brewster Travel Canada, the Alaska Collection, Glacier Park, Inc., and FlyOver Canada.

Significant Accounting Policies

Use of Estimates

The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities at the date of the financial statements and the reported amounts of revenue and expenses during the reported period. Estimates and assumptions are used in accounting for, among other things, the fair value of Viad’s reporting units used to perform annual impairment testing of recorded goodwill; allowances for uncollectible accounts receivable; 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; assumptions used to determine share-based compensation costs under the fair value method; and allocation of purchase price of acquired businesses. Actual results could differ from these and other estimates.

Cash and Cash Equivalents

Viad considers all highly-liquid investments with remaining maturities when purchased of three months or less to be cash equivalents. Viad’s cash and cash equivalents consist of cash and bank demand deposits and money market mutual funds. The Company’s investments in money market mutual funds are classified as available-for-sale and carried at fair value.

Allowances for Doubtful Accounts

Viad maintains allowances for doubtful accounts to reflect the best estimate of probable losses inherent in the accounts receivable balance. The allowances for doubtful accounts, including a sales allowance for discounts at the time of sale, are based upon an evaluation of the aging of receivables, historical trends, and the current economic environment.

Inventories

Inventories, which consist primarily of exhibit design and construction materials and supplies, as well as deferred show costs, including labor, show purchases, and commissions used in providing convention show services, are stated at the lower of cost (first-in, first-out and specific identification methods) or market.

Property and Equipment

Property and equipment are stated at cost, net of accumulated depreciation. Property and equipment are depreciated using the straight-line method over the estimated useful lives of the assets: buildings, 15 to 40 years; equipment, 3 to 12 years; and leasehold improvements, over the shorter of the lease term or useful life. Property and equipment are tested for potential impairment whenever events or changes in circumstances indicate that the carrying amount of the long-lived asset may not be recoverable through undiscounted cash flows.

Capitalized Software

Viad capitalizes certain internal and external costs incurred in developing or obtaining internal use software. Capitalized costs principally relate to costs incurred to purchase software from third parties, external direct costs of materials and services, and certain payroll-related costs for employees directly associated with software projects once application development begins. Costs associated with preliminary project activities, training, and other post-implementation activities are expensed as incurred. Capitalized software costs are amortized using the straight-line method over the estimated useful lives of the software, ranging from three to ten years. These costs are included in the consolidated balance sheets under the caption “Property and equipment, net.”

Goodwill

Goodwill is tested for impairment at the reporting unit level on an annual basis as of October 31, and between annual tests if an event occurs or circumstances change that would more-likely-than-not reduce the fair value of a reporting unit below its carrying value. Viad uses a discounted expected future cash flow methodology (income approach) in order to estimate the fair value of its reporting units for purposes of goodwill impairment testing. The estimates and assumptions regarding expected future cash flows, discount rates, and terminal values require considerable judgment and are based on market conditions, financial forecasts, industry trends, and historical experience. These estimates, however, have inherent uncertainties and different assumptions could lead to materially different results.

Cash Surrender Value of Life Insurance

Viad has Company-owned life insurance contracts which are intended to fund the cost of certain employee compensation and benefit programs. These contracts are carried at cash surrender value, net of outstanding policy loans. The cash surrender value represents the amount of cash the Company could receive if the policies were discontinued before maturity. The changes in the cash surrender value of the policies, net of insurance premiums, are included as a component of “Costs of Services” in Viad’s Consolidated Statements of Operations.

Self-Insurance Liabilities

Viad is self-insured up to certain limits for workers’ compensation, automobile, product and general liability, property loss, and medical claims. Viad has also retained certain liabilities related to workers’ compensation and general liability insurance claims in conjunction with previously sold operations. Provisions for losses for claims incurred, including estimated claims incurred but not yet reported, are made based on Viad’s prior historical experience, claims frequency, insurance coverage, and other factors. Viad has purchased insurance for amounts in excess of the self-insured levels.

Environmental Remediation Liabilities

Viad has retained certain liabilities representing the estimated cost of environmental remediation obligations primarily associated with previously sold operations. The amounts accrued primarily consist of the estimated direct incremental costs, on an undiscounted basis, for contractor and other services related to remedial actions and post-remediation site monitoring. Environmental remediation liabilities are recorded when the specific obligation is considered probable and the costs are reasonably estimable. Subsequent recoveries from third parties, if any, are recorded through discontinued operations when realized. The Company maintains environmental insurance that provides coverage for new and undiscovered pre-existing conditions at both its continuing and discontinued operations.

Fair Value of Financial Instruments

The carrying value of cash and cash equivalents, receivables, and accounts payable approximate fair value due to the short-term maturities of these instruments. Refer to Note 11 – Debt and Capital Lease Obligations for the estimated fair value of debt obligations.

Foreign Currency Translation

Viad conducts its foreign operations primarily in Canada, the United Kingdom, the Netherlands, Germany, and to a lesser extent, in certain other countries. The functional currency of Viad’s foreign subsidiaries is their local currency. Accordingly, for purposes of consolidation, Viad translates the assets and liabilities of its foreign subsidiaries into U.S. dollars at the foreign exchange rates in effect at the balance sheet date. The unrealized gains or losses resulting from the translation of these foreign denominated assets and liabilities are included as a component of accumulated other comprehensive income in Viad’s consolidated balance sheets. For purposes of consolidation, revenue, expenses, gains, and losses related to Viad’s foreign operations are translated into U.S. dollars at the average foreign exchange rates for the period.

Revenue Recognition

Viad recognizes revenue when persuasive evidence of an arrangement exists, delivery has occurred or services have been rendered, the sales price is fixed or determinable, and collectability is reasonably assured. GES derives revenue primarily by providing core services, event technology services, and audio-visual services to event organizers and exhibitors participating in live events. GES derives revenue from consumer events by charging visitors to view the touring exhibitions. Exhibition and event service’s revenue is recognized when services are completed, net of commissions. Exhibits and environments revenue is accounted for using the completed-contract method. Pursuit generates revenue through its hospitality, attractions, transportation, and travel planning services. Pursuit’s revenue is recognized at the time services are performed.

Share-Based Compensation

Viad recognizes and measures compensation costs related to all share-based payment awards using the fair value method of accounting. These awards generally include restricted stock, liability-based awards (including performance units and restricted stock units), and stock options. These awards contain forfeiture and non-compete provisions.

The fair value of restricted stock awards is based on Viad’s closing stock price on the date of grant. Viad issues restricted stock awards from shares held in treasury. Future vesting of restricted stock is generally subject to continued employment with Viad or its subsidiaries. Holders of restricted stock have the right to receive dividends and vote the shares, but may not sell, assign, transfer, pledge, or otherwise encumber the stock, except to the extent restrictions have lapsed.

Restricted stock awards vest between three and five years from the date of grant. Share-based compensation expense related to restricted stock is recognized using the straight-line method over the requisite service period of approximately three years except for certain awards with a five-year vesting period whereby expense is recognized based on an accelerated multiple-award approach over a five-year period. For these awards, 40 percent of the shares vest on the third anniversary of the grant and the remaining shares vest in 30 percent increments over the subsequent two anniversary dates.

Liability-based awards (including performance units and restricted stock units) are recorded at estimated fair value, based on the number of units expected to vest and the level of achievement of predefined performance goals, where applicable, and are remeasured on each balance sheet date based on Viad’s stock price, and the Monte Carlo simulation model, until the time of settlement. A Monte Carlo simulation requires the use of a number of assumptions, including historical volatility and correlation of the price of Viad’s stock and the price of the common shares of a comparator group, a risk-free rate of return, and an expected term. To the extent earned, liability-based awards are settled in cash based on Viad’s stock price. Compensation expense related to liability-based awards is recognized ratably over the requisite service period of approximately three years.

Equity-based awards (including performance units) are recorded at estimated fair value, based on the number of units expected to vest and the level of achievement of predefined performance goals, until the time of settlement. To the extent earned, equity-based awards are settled in Viad’s comment stock. Compensation expense related to equity-based awards is recognized ratably over the requisite service period of approximately three years.

The fair value of each stock option grant is estimated on the date of grant using the Black-Scholes option pricing model. Share-based compensation expense related to stock option awards is recognized using the straight-line method over the requisite service period of approximately five years. The exercise price of stock options is based on the market value of Viad’s common stock at the date of grant. The Company has not granted stock options since 2010.

Common Stock in Treasury

Common stock purchased for treasury is recorded at historical cost. Subsequent share reissuances are primarily related to share-based compensation programs and recorded at weighted-average cost.

Income Per Common Share

Viad applies the two-class method in calculating income per common share as unvested share-based payment awards that contain nonforfeitable rights to dividends are considered participating securities. Accordingly, such securities are included in the earnings allocation in calculating income per share.

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 2014-09, Revenue from Contracts with Customers (Topic 606)

 

The standard establishes a new recognition model that requires revenue to be recognized in a manner to depict the transfer of goods or services to a customer at an amount that reflects the consideration expected to be received in exchange for those goods or services. The Company may adopt either retrospectively to each prior period presented with the option to elect certain practical expedients or with the cumulative effect recognized at the date of initial application and providing certain disclosures.

 

Subsequent to the issuance of ASU 2014-09, the FASB issued several amendments in 2016 which do not change the core principle of the guidance stated in ASU 2014-09. Rather, they are intended to clarify and improve understanding of certain topics included within the revenue standard.

 

January 1, 2018

 

The Company is currently evaluating the impact of the adoption of this new guidance on its financial position or results of operations including analyzing its current portfolio of customer contracts. The Company has assigned internal resources in addition to the engagement of a third-party service provider to assist in the evaluation of the impact on its accounting policies, processes, and system requirements. Based on the Company’s preliminary assessment, the adoption of this standard will not have a material impact on Viad’s consolidated financial statements. The Company expects the immaterial impact to primarily relate to the deferral of certain commissions which were previously expensed as incurred but will generally be capitalized and amortized over the period of contract performance, and the deferral of certain costs incurred in connection with trade shows which were previously expensed as incurred but will generally be capitalized and expensed upon the completion of the show. The Company is not planning to early adopt the standard and has not determined which transition method it will use. Additionally, the new guidance requires enhanced disclosures, including revenue recognition policies to identify performance obligations to customers and significant judgments in measurement and recognition. The Company is continuing its assessment, which may identify other impacts.

ASU 2015-11, Inventory (Topic 330) - Simplifying the Measurement of Inventory

 

The amendment applies to inventory measures using first-in, first-out or average cost and will require entities to measure inventory at the lower of cost or net realizable value. Net realizable value is the estimated selling price in the normal course of business, minus the cost of completion, disposal and transportation. Replacement cost and net realizable value less a normal profit margin will no longer be considered.

 

January 1, 2017

 

The adoption of this new guidance is not expected to have a significant effect on Viad’s consolidated financial statements.

ASU 2016-02, Leases (Topic 842)

 

The amendment requires lessees to recognize on their balance sheet a right-of-use asset and a lease liability for leases with lease terms greater than one year. The amendment requires additional disclosures about leasing arrangements, and requires a modified retrospective approach to adoption. Early adoption is permitted.

 

January 1, 2019

 

The Company is currently evaluating the potential impact of the adoption of this new guidance on its financial position or results of operations including analyzing its existing operating leases. Based on the Company’s preliminary assessment, the adoption of this standard will have a material impact on Viad’s consolidated balance sheets, but the income statement is not expected to be materially impacted. The Company expects the most significant impact will relate to identifying facility and equipment leases and embedded lease arrangements. The Company has not determined in which period it will adopt the new guidance. Adoption is dependent on the Company’s analysis on information necessary to restate prior periods. The Company is continuing its assessment, which may identify other impacts.

 

Standard

 

Description

 

Date of adoption

 

Effect on the financial statements

Standards Not Yet Adopted (Continued)

ASU 2016-09, Compensation - Stock Compensation (Topic 718) - Improvements to Employee Share-Based Payment Accounting

 

The amendment identifies areas for simplification involving several aspects of accounting for share-based payment transactions, including the income tax consequences, classification of awards as either equity or liabilities, an option to recognize gross stock compensation expense with actual forfeitures recognized as they occur, as well as certain classifications on the statement of cash flows. Early adoption is permitted.

 

January 1, 2017

 

The impact of the adoption of this new guidance will be dependent on the timing of when share-based awards vest or options are exercised, the Company’s tax rate, and the intrinsic value at the time share-based awards vest or options are exercised.

ASU 2016-15, Statement of Cash Flows (Topic 230) - Classification of Certain Cash Receipts and Cash Payments

 

The amendment provides guidance on eight specific cash flow issues with the objective of reducing the existing diversity in practice in how certain cash receipts and cash payments are presented and classified in the statement of cash flows. Early adoption is permitted.

 

January 1, 2018

 

The Company is currently evaluating the potential impact of the adoption of this new guidance on its financial position or results of operations.

ASU 2016-16, Income Taxes (Topic 740) - Intra-Entity Transfers of Assets Other Than Inventory

 

The amendment eliminates an exception in ASC 740 which prohibits the recognition of current and deferred income tax effects for intra-entity transfers of assets other than inventory until the asset has been sold to an outside party. The amendment requires an entity to recognize the income tax consequences of intra-entity transfers of assets other than inventory at the time that the transfer occurs.

 

January 1, 2018

 

The Company is currently evaluating the potential impact of the adoption of this new guidance on its financial position or results of operations.

ASU 2017-01, Business Combination (Topic 805) - Clarifying the Definition of a Business

 

The amendment provides guidance on evaluating whether transactions should be accounted for as acquisitions (or disposals) of assets or businesses.

 

January 1, 2018

 

The Company is currently evaluating the potential impact of the adoption of this new guidance on its financial position or results of operations.

ASU 2017-04, Intangibles - Goodwill and Other (Topic 350) - Simplifying the Test for Goodwill Impairment

 

The amendment eliminates the requirement to estimate the implied fair value of goodwill if it was determined that the carrying amount of a reporting unit exceeded its fair value. Goodwill impairment will now be recognized by the amount by which a reporting unit’s carrying value exceeds its fair value, not to exceed the carrying amount of goodwill. The amendment should be applied prospectively and is effective for annual or any interim goodwill impairment tests in fiscal years beginning after December 15, 2019. Early adoption is permitted for interim or annual goodwill impairment tests performed on testing dates after January 1, 2017.

 

January 1, 2020

 

The adoption of this new guidance is not expected to have a significant effect on Viad’s consolidated financial statements and the Company expects the adoption to reduce the complexity surrounding the analysis of goodwill impairment.

 

Standard

 

Description

 

Date of adoption

 

Effect on the financial statements

Standards Recently Adopted

ASU 2014-12, Compensation - Stock Compensation (Topic 718) - Accounting for Share-Based Payments When the Terms of an Award Provide that a Performance Target Could be Achieved after the Requisite Service Period

 

The amendment requires that a performance target that affects vesting, and that could be achieved after the requisite service period, be treated as a performance condition. As such, the performance target should not be reflected in estimating the grant date fair value of the award.

 

January 1, 2016

 

The Company adopted this guidance prospectively to all awards granted after the effective date. The adoption of this guidance did not have a material impact on the consolidated financial statements.

ASU 2015-03, Interest - Imputation of Interest Simplifying the Presentation of Debt Issuance Costs

ASU 2015-15, Presentation and Subsequent Measurement of Debt Issuance Costs Associated with Line-of-Credit Arrangements

 

The amendments require debt issuance costs related to a recognized debt liability to be presented in the balance sheet as a direct deduction from the carrying amount of that debt liability. For line-of-credit arrangements, an entity may defer and present debt issuance costs as an asset and subsequently amortize the deferred debt issuance costs ratably over the term of the line-of-credit arrangement.

 

January 1, 2016

 

The Company adopted this guidance on a retrospective basis which resulted in the reclassification of unamortized debt issuance costs of $1.6 million from other long-term assets to a reduction in long-term debt on the December 31, 2015 consolidated balance sheet.

ASU 2015-16, Business Combinations (Topic 805) - Simplifying the Accounting for Measurement-Period Adjustments

 

The amendment requires an acquirer to recognize adjustments to provisional amounts that are identified during the measurement period in the reporting period in which the adjustment amounts are determined.

 

January 1, 2016

 

The adoption of this guidance did not have a material impact on the consolidated financial statements.

 

Share-Based Compensation
Share-Based Compensation

Note 2. Share-Based Compensation

Viad grants share-based compensation awards to officers, directors, and certain key employees pursuant to the 2007 Viad Corp Omnibus Incentive Plan (the “2007 Plan”). The 2007 Plan has a 10-year life and provides for the following types of awards: (a) incentive and non-qualified stock options; (b) restricted stock and restricted stock units; (c) performance units or performance shares; (d) stock appreciation rights; (e) cash-based awards; and (f) certain other stock-based awards. The number of shares of common stock available for grant under the 2007 Plan is limited to 1.7 million shares plus shares awarded under the 1997 Viad Corp Omnibus Incentive Plan (which terminated in May 2007) (the “1997 Plan”) that subsequently cease for any reason to be subject to such awards (other than by reason of exercise or settlement of the awards to the extent the shares are exercised for, or settled in, vested and non-forfeited shares) up to an aggregate maximum of 1.5 million shares. As of December 31, 2016, there were 861,561 total shares available for future grant.

The following table summarizes share-based compensation expense:

 

 

Year Ended December 31,

 

(in thousands)

 

2016

 

 

2015

 

 

2014

 

Performance unit incentive plan (“PUP”)

 

$

5,703

 

 

$

1,692

 

 

$

359

 

Restricted stock

 

 

2,073

 

 

 

2,111

 

 

 

2,495

 

Restricted stock units

 

 

262

 

 

 

45

 

 

 

76

 

Share-based compensation before income tax benefit

 

 

8,038

 

 

 

3,848

 

 

 

2,930

 

Income tax benefit

 

 

(2,988

)

 

 

(1,454

)

 

 

(1,102

)

Share-based compensation, net of income tax benefit

 

$

5,050

 

 

$

2,394

 

 

$

1,828

 

In addition, $0.2 million of costs, $45,000 of costs, and $0.1 million of benefits associated with share-based compensation were included in restructuring expense in 2016, 2015 and 2014, respectively. The 2016 amount of $0.2 million related primarily to PUP and restricted stock units. The 2015 amount of $45,000 related to restricted stock units. The 2014 amount of $0.1 million related to the reversal of expense of PUP awards. No share-based compensation costs were capitalized during 2016, 2015, or 2014.

On January 24, 2014 and October 25, 2013, Viad’s Board of Directors declared special cash dividends of $1.50 and $2.50 per share, respectively, to shareholders of record at the close of business on February 7, 2014 and November 7, 2013, respectively. In accordance with the mandatory provisions of the 2007 Plan and the 1997 Plan, the Human Resources Committee of Viad’s Board of Directors approved equitable adjustments to outstanding long-term incentive awards of stock options and PUP awards issued pursuant to those plans in order to prevent the special dividends from diluting the rights of participants under those plans. The equitable adjustments to the outstanding stock options reduced the exercise price and increased the number of shares of common stock underlying such options.

The following table summarizes the activity of the outstanding share-based compensation awards:

 

 

Restricted Stock

 

 

PUP Awards

 

 

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, 2015

 

 

279,217

 

 

$

25.65

 

 

 

231,165

 

 

$

26.15

 

 

 

16,447

 

 

$

25.69

 

Granted

 

 

78,039

 

 

$

27.45

 

 

 

104,084

 

 

$

26.88

 

 

 

5,500

 

 

$

26.98

 

Vested

 

 

(76,235

)

 

$

26.52

 

 

 

(73,188

)

 

$

27.35

 

 

 

(5,965

)

 

$

27.18

 

Forfeited

 

 

(13,970

)

 

$

25.03

 

 

 

(6,556

)

 

$

25.84

 

 

 

 

 

$

 

Balance at December 31, 2016

 

 

267,051

 

 

$

25.96

 

 

 

255,505

 

 

$

26.11

 

 

 

15,982

 

 

$

25.58

 

Restricted Stock

The grant date fair value of restricted stock which vested during 2016, 2015, and 2014 was $2.0 million, $2.2 million, and $4.5 million, respectively. As of December 31, 2016, the unamortized cost of all outstanding restricted stock awards was $2.5 million, which Viad expects to recognize in the consolidated financial statements over a weighted-average period of approximately 1.2 years. During the years ended December 31, 2016, 2015, and 2014, the Company repurchased 25,432 shares for $0.7 million, 35,649 shares for $1.0 million, and 72,996 shares for $1.8 million, respectively, related to tax withholding requirements on vested share-based awards. As of December 31, 2016, there were 861,561 total shares available for future grant in accordance with the provisions of the 2007 Plan.

PUP Awards

In February 2016, the PUP Plan was amended to provide that PUP awards earned under 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 upon achievement of certain performance-based criteria. The performance period of the shares is three years.

During the year ended December 31, 2016, Viad granted $2.7 million of PUP awards of which $0.9 million are payable in shares. As of December 31, 2016 and 2015, Viad had recorded liabilities of $7.6 million and $2.4 million, respectively, related to PUP awards. In March 2016, the PUP awards granted in 2013 vested and cash payouts of $0.2 million were distributed. In March 2015, the PUP awards granted in 2012 vested and cash payouts of $2.4 million were distributed. In March 2014, the PUP awards granted in 2011 vested and cash payouts totaling $2.9 million were distributed.

Restricted Stock Units

As of December 31, 2016 and December 31, 2015, Viad had aggregate liabilities recorded of $0.4 million and $0.3 million, respectively, related to restricted stock units. In February 2016, portions of the 2011, 2012, and 2013 restricted stock units vested and cash payouts of $0.2 million were distributed. In February 2015, portions of the 2010, 2011, and 2012 restricted stock units vested and cash payouts of $0.3 million were distributed. In February 2014, portions of the 2010 and 2011 restricted stock units vested and cash payouts of $0.2 million were distributed.

Stock Options

During the year ended December 31, 2016, there was no stock option activity. As of both December 31, 2016 and 2015 there were 63,773 stock options outstanding and exercisable with a weighted-average exercise price of $16.62 and a weighted-average remaining contractual life of 3.2 years.

As of December 31, 2016, there were no unrecognized costs related to non-vested stock option awards. As discussed above, the equitable adjustments to the outstanding stock options resulting from the special cash dividends paid on February 14, 2014 and November 7, 2013 reduced the exercise price and increased the number of shares of common stock underlying such options. This adjustment to the exercise price and the number of shares did not impact the compensation expense recognized by the Company for the years ended December 31, 2016 and 2015, or the unrecognized cost.

Additional information pertaining to stock options is provided in the table below:

 

 

December 31,

 

(in thousands)

 

2016

 

 

2015

 

 

2014

 

Total intrinsic value of stock options outstanding(1)

 

$

1,753

 

 

$

740

 

 

$

2,251

 

Total intrinsic value of stock options exercised

 

$

 

 

$

1,474

 

 

$

1,616

 

Cash received from the exercise of stock options

 

$

 

 

$

898

 

 

$

1,155

 

Tax benefits realized for tax deductions related to stock option exercises

 

$

 

 

$

104

 

 

$

461

 

(1)

The aggregate intrinsic value of stock options outstanding represents the difference between Viad’s closing stock price on December 31 of each year and the exercise price, multiplied by the number of in-the-money options and therefore changes based on changes in the fair market value of Viad’s common stock.

Acquisition of Businesses
Acquisition of Businesses

Note 3. Acquisition of Businesses

2016 Acquisitions

Maligne Lake Tours

On January 4, 2016, the Company acquired the assets and operations of Maligne Tours Ltd. (“Maligne Lake Tours”), which provides interpretive boat tours and related services at Maligne Lake, the largest lake in Jasper National Park. The purchase price was $20.9 million Canadian dollars (approximately $15.0 million U.S. dollars) in cash, subject to certain adjustments.

The following table summarizes the updated 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. During 2016, the Company made a purchase accounting measurement period adjustment of approximately $240,000 to other liabilities based on refinements to assumptions used in the preliminary valuation. The allocation of the purchase price was completed as of December 31, 2016.  

 

(in thousands)

 

 

 

 

 

 

 

 

Purchase price paid as:

 

 

 

 

 

 

 

 

Cash

 

 

 

 

 

$

14,962

 

 

 

 

 

 

 

 

 

 

Fair value of net assets acquired:

 

 

 

 

 

 

 

 

Inventories

 

$

246

 

 

 

 

 

Prepaid expenses

 

 

2

 

 

 

 

 

Property and equipment

 

 

4,133

 

 

 

 

 

Intangible assets

 

 

9,244

 

 

 

 

 

Total assets acquired

 

 

13,625

 

 

 

 

 

Customer deposits

 

 

15

 

 

 

 

 

Other liabilities

 

 

240

 

 

 

 

 

Total liabilities assumed

 

 

255

 

 

 

 

 

Total fair value of net assets acquired

 

 

 

 

 

 

13,370

 

Excess purchase price over fair value of net assets acquired (“goodwill”)

 

 

 

 

 

$

1,592

 

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 is included in the Pursuit business group and the primary factor that contributed to the purchase price resulting in the recognition of goodwill relates to future growth opportunities when combined with Pursuit’s other businesses. 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. Transaction costs associated with the acquisition of Maligne Lake Tours were $0.1 million in 2016 which are included in cost of services in Viad’s Consolidated Statements of Operations and $0.2 million in 2015 which are included in corporate activities in Viad’s Consolidated Statements of Operations.

Identified intangible assets acquired in the Maligne Lake Tours acquisition totaled $9.2 million and consist of operating licenses of $8.3 million, customer relationships of $0.8 million, and trade name of $0.1 million. The weighted-average amortization period related to the intangible assets is 26.7 years, largely attributable to operating licenses amortized over the remaining Parks Canada lease of 29 years.

The results of operations of Maligne Lake Tours have been included in Viad’s consolidated financial statements from the date of acquisition. During 2016, revenue and operating income related to Maligne Lake Tours were $6.3 million and $1.9 million, respectively.

CATC

On March 11, 2016, the Company acquired 100 percent of the equity interests in CATC Alaska Tourism Corporation, formerly known as CIRI Alaska Tourism Corporation (“CATC”), the operator of an Alaskan tourism business that includes a marine sightseeing tour business, three lodges, and a package tour business. The purchase price was $45.0 million in cash, subject to certain adjustments.

The following table summarizes the updated 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. During 2016, the Company made certain purchase accounting measurement period adjustments based on refinements to assumptions used in the preliminary valuation of approximately $89,000 from working capital receivable, $105,000 to accounts payable, and $16,000 from accrued liabilities. The allocation of the purchase price was completed as of December 31, 2016.

 

(in thousands)

 

 

 

 

 

 

 

 

Purchase price paid as:

 

 

 

 

 

 

 

 

Cash

 

 

 

 

 

$

45,000

 

Working capital

 

 

 

 

 

 

(35

)

Cash acquired

 

 

 

 

 

 

(2,196

)

Purchase price, net of cash acquired

 

 

 

 

 

 

42,769

 

 

 

 

 

 

 

 

 

 

Fair value of net assets acquired:

 

 

 

 

 

 

 

 

Accounts receivable

 

$

8

 

 

 

 

 

Inventories

 

 

921

 

 

 

 

 

Prepaid expenses

 

 

82

 

 

 

 

 

Property and equipment

 

 

43,470

 

 

 

 

 

Intangible assets

 

 

980

 

 

 

 

 

Total assets acquired

 

 

45,461

 

 

 

 

 

Accounts payable

 

 

306

 

 

 

 

 

Accrued liabilities

 

 

434

 

 

 

 

 

Customer deposits

 

 

1,952

 

 

 

 

 

Total liabilities assumed

 

 

2,692

 

 

 

 

 

Total fair value of net assets acquired

 

 

 

 

 

 

42,769

 

Excess purchase price over fair value of net assets acquired (“goodwill”)

 

 

 

 

 

$

 

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 estimated values of current assets and liabilities were based upon their historical costs on the date of acquisition due to their short-term nature. Transaction costs associated with the acquisition of CATC were $0.1 million in 2016, $0.6 million in 2015, and $0.1 million in 2014 and are included in corporate activities in Viad’s Consolidated Statements of Operations.

Identified intangible assets acquired in the CATC acquisition totaled $1.0 million and consist of customer relationships of $0.8 million and trade names of $0.2 million. The weighted-average amortization period related to the intangible assets is 5.8 years.

The results of operations of CATC have been included in Viad’s consolidated financial statements from the date of acquisition. During 2016, revenue and operating income related to CATC were $28.0 million and $6.0 million, respectively.

ON Services

On August 11, 2016, the Company acquired the assets and operations of ON Event Services, LLC (“ON Services”), a leading provider of audio-visual production services for live events in the United States. The aggregate purchase price was up to $92.5 million in cash, subject to certain adjustments, which included an earnout payment (the “Earnout”) of up to $5.5 million. The fair value of the Earnout was valued on the date of acquisition and was remeasured based on the financial performance of ON Services for 2016. As of the transaction date, the fair value of the Earnout was estimated to be $540,000. As of December 31, 2016, the Company determined the fair value of the Earnout was zero as ON Services did not meet its 2016 financial target. Refer to Note 12 – Fair Value Measurements for the estimated fair value of the Earnout as of December 31, 2016.

The following table summarizes the updated 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. During 2016, the Company made certain purchase accounting measurement period adjustments based on refinements to assumptions used in the preliminary valuation of approximately $628,000 from working capital receivable, $170,000 from accounts receivable, $14,000 from inventories, $102,000 from prepaid expenses, $650,000 to intangible assets, $113,000 to accounts payable, and $92,000 to accrued liabilities. The allocation of the purchase price was completed as of December 31, 2016.  

 

(in thousands)

 

 

 

 

 

 

 

 

Purchase price paid as:

 

 

 

 

 

 

 

 

Cash

 

 

 

 

 

$

87,000

 

Working capital adjustment

 

 

 

 

 

 

344

 

Contingent consideration

 

 

 

 

 

 

540

 

Purchase price

 

 

 

 

 

 

87,884

 

 

 

 

 

 

 

 

 

 

Fair value of net assets acquired:

 

 

 

 

 

 

 

 

Accounts receivable

 

$

4,643

 

 

 

 

 

Inventories

 

 

256

 

 

 

 

 

Prepaid expenses

 

 

872

 

 

 

 

 

Property and equipment

 

 

14,827

 

 

 

 

 

Intangible assets

 

 

33,990

 

 

 

 

 

Total assets acquired

 

 

54,588

 

 

 

 

 

Accounts payable

 

 

992

 

 

 

 

 

Accrued liabilities

 

 

564

 

 

 

 

 

Customer deposits

 

 

851

 

 

 

 

 

Other liabilities

 

 

274

 

 

 

 

 

Total liabilities assumed

 

 

2,681

 

 

 

 

 

Total fair value of net assets acquired

 

 

 

 

 

 

51,907

 

Excess purchase price over fair value of net assets acquired (“goodwill”)

 

 

 

 

 

$

35,977

 

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 is included in the GES business group and the primary factor that contributed to the purchase price resulting in the recognition of goodwill primarily relates to future growth opportunities when combined with GES’ other businesses. Goodwill is expected to be deductible for tax purposes over 15 years. 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. Transaction costs associated with the acquisition of ON Services were $0.9 million in 2016 and were included in corporate activities in Viad’s consolidated statement of operations.

Identified intangible assets acquired in the ON Services acquisition totaled $34.0 million and consist of customer relationships of $27.6 million, trade names of $3.2 million, and non-compete agreements of $3.2 million. The weighted-average amortization period related to the intangible assets is 10.5 years.

The results of operations of ON Services have been included in Viad’s consolidated financial statements from the date of acquisition. During 2016, revenue and operating loss related to ON Services were $21.3 million and $0.8 million, respectively.

FlyOver Canada

On December 29, 2016, the Company acquired the assets and operations of FlyOver Canada, a recreational attraction that provides a virtual flight ride experience with a combination of motion seating, a four-story movie screen, and media and visual effects. 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 preliminary recording of the fair value of the assets acquired and liabilities assumed as of the acquisition date. Due to the recent timing of the acquisition, the purchase price allocation is not yet finalized and is subject to change within the measurement period (up to one year from the acquisition date) as the assessment of property and equipment and intangible assets is finalized.

 

(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 acquired

 

 

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 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. Transaction costs associated with the acquisition of FlyOver Canada were $0.5 million in 2016 and are included in cost of services in Viad’s Consolidated Statements of Operations.

Identified intangible assets acquired in the FlyOver Canada acquisition totaled $6.0 million and consist of trade names 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 of FlyOver Canada have been included in Viad’s consolidated financial statements from the date of acquisition. During 2016, revenue and operating income related to FlyOver Canada were $72,000 and $5,000, respectively.

2014 Acquisitions

West Glacier Properties

In July 2014, the Company acquired the West Glacier Motel & Cabins, the Apgar Village Lodge and related land, food and beverage services, and retail operations (collectively, the “West Glacier Properties”). The purchase price was $16.5 million in cash with a working capital adjustment of $0.3 million related to certain current assets and liabilities.

Transaction costs associated with the acquisition of the West Glacier Properties were $0.2 million in 2014 and were included in corporate activities in Viad’s Consolidated Statements of Operations. The results of operations of the West Glacier Properties have been included in Viad’s consolidated financial statements from the date of acquisition. During 2014, revenue of $4.6 million and operating income of $1.5 million related to the West Glacier Properties were included in Viad’s Consolidated Statements of Operations.

Blitz

In September 2014, the Company acquired Blitz Communications Group Limited and its affiliates (collectively, “Blitz”), which has offices in the United Kingdom and is a leading audio-visual staging and creative services provider for the live events industry in the United Kingdom and continental Europe. The purchase price was £15 million (approximately $24.4 million) in cash.

Transaction costs associated with the acquisition of Blitz were $0.1 million in 2015 and $0.8 million in 2014 and are included in corporate activities in Viad’s Consolidated Statements of Operations. The results of operations of Blitz have been included in Viad’s consolidated financial statements from the date of acquisition. During 2014, revenue of $10.1 million and operating income of $0.4 million related to Blitz have been included in Viad’s Consolidated Statements of Operations.

onPeak LLC

In October 2014, the Company acquired onPeak LLC for a purchase price of $43.0 million in cash. Of the initial purchase price, $4.1 million was deposited at closing into escrow to secure post-closing purchase price adjustments, resolution of certain tax matters and other indemnity claims. onPeak LLC provides event accommodations services in North America to the live events industry.

Transaction costs associated with the acquisition of onPeak LLC were $0.2 million in 2015 and $0.5 million in 2014 and are included in corporate activities in Viad’s Consolidated Statements of Operations. The results of operations of onPeak LLC have been included in Viad’s consolidated financial statements from the date of acquisition. During 2014, revenue of $2.7 million and an operating loss of $0.7 million related to onPeak LLC have been included in Viad’s Consolidated Statements of Operations.

Travel Planners, Inc.

In October 2014, the Company acquired Travel Planners, Inc. for a purchase price of $33.7 million in cash less a working capital adjustment of $0.3 million. Of the purchase price, $8.8 million was deposited at closing into escrow to secure post-closing purchase price adjustments, resolution of certain tax matters, and other indemnity claims. An additional amount of $0.9 million was paid during 2015 to Travel Planners, Inc. as a result of an election made by the Company to treat the purchase as an asset acquisition for tax purposes. Travel Planners, Inc. provides event accommodations services in North America to the live events industry. Travel Planners, Inc. was merged into onPeak LLC in January 2015 and is collectively referred to as “onPeak.”

Transaction costs associated with the acquisition of Travel Planners, Inc. were $0.2 million in 2015 and $0.5 million in 2014 and are included in corporate activities in Viad’s Consolidated Statements of Operations. The results of operations of Travel Planners, Inc. have been included in Viad’s consolidated financial statements from the date of acquisition. During 2014, revenue of $3.4 million and operating income of $0.5 million related to Travel Planners, Inc. have been included in Viad’s Consolidated Statements of Operations.

N200

In November 2014, the Company acquired N200 Limited and its affiliates (collectively, “N200”) for €9.7 million (approximately $12.1 million) in cash, plus an earnout payment (the “Earnout”) of up to €1.0 million. The amount of the Earnout was based on N200’s achievement of established financial targets for the twelve-month period ended June 30, 2015. N200 exceeded those financial targets and, consequently, on October 5, 2015, the Company paid the full €1.0 million (approximately $1.1 million) Earnout to the former owners of N200. N200, which has offices in the United Kingdom and the Netherlands, is a leading event registration and data intelligence services provider for the live events industry in continental Europe.

Transaction costs associated with the acquisition of N200 were $0.2 million in 2015 and $1.0 million in 2014 and are included in corporate activities in Viad’s Consolidated Statements of Operations. The results of operations of N200 have been included in Viad’s consolidated financial statements from the date of acquisition. During 2014, revenue of $0.4 million and an operating loss of $0.2 million related to N200 have been included in Viad’s Consolidated Statements of Operations.

The following table summarizes the final allocation of the aggregate purchase price paid and amounts of assets acquired and liabilities assumed based upon the estimated fair value at the date of acquisitions. The balances in the table below remain unchanged from the balances reflected in the Consolidated Balance Sheets in the Company’s Annual Report on Form 10-K for the year ended December 31, 2015.

 

 

 

West Glacier Properties

 

 

Blitz

 

 

onPeak LLC

 

 

Travel Planners, Inc.

 

 

N200

 

(in thousands)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Purchase price paid as:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Cash

 

$

16,544

 

 

$

24,416

 

 

$

42,950

 

 

$

33,674

 

 

$

12,068

 

Additional purchase price paid for tax election

 

 

 

 

 

 

 

 

 

 

 

896

 

 

 

 

Working capital adjustment

 

 

 

 

 

 

 

 

 

 

 

(279

)

 

 

458

 

Working capital adjustment payable

 

 

320

 

 

 

 

 

 

 

 

 

 

 

 

 

Contingent consideration

 

 

 

 

 

 

 

 

 

 

 

 

 

 

1,145

 

Cash acquired

 

 

 

 

 

(190

)

 

 

(4,064

)

 

 

(4,204

)

 

 

(943

)

Total purchase price

 

 

16,864

 

 

 

24,226

 

 

 

38,886

 

 

 

30,087

 

 

 

12,728

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Fair value of net assets acquired:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Accounts receivable

 

 

 

 

 

264

 

 

 

4,008

 

 

 

1,450

 

 

 

1,732

 

Prepaid expenses

 

 

24

 

 

 

410

 

 

 

640

 

 

 

120

 

 

 

115

 

Inventories

 

 

1,374

 

 

 

433

 

 

 

 

 

 

 

 

 

46

 

Property and equipment

 

 

14,510

 

 

 

5,951

 

 

 

2,450

 

 

 

93

 

 

 

1,280

 

Intangible assets

 

 

189

 

 

 

8,692

 

 

 

14,100

 

 

 

14,400

 

 

 

3,682

 

Other non-current assets

 

 

 

 

 

 

 

 

129

 

 

 

 

 

 

 

Total assets acquired

 

 

16,097

 

 

 

15,750

 

 

 

21,327

 

 

 

16,063

 

 

 

6,855

 

Accounts payable

 

 

 

 

 

1,232

 

 

 

738

 

 

 

488

 

 

 

421

 

Accrued liabilities

 

 

35

 

 

 

2,246

 

 

 

3,341

 

 

 

1,557

 

 

 

1,057

 

Customer deposits

 

 

402

 

 

 

199

 

 

 

4,225

 

 

 

4,525

 

 

 

569

 

Deferred tax liability

 

 

 

 

 

468

 

 

 

3,028

 

 

 

 

 

 

986

 

Revolving credit facility

 

 

 

 

 

488

 

 

 

 

 

 

 

 

 

 

Accrued dilapidations

 

 

 

 

 

417

 

 

 

 

 

 

 

 

 

 

Other liabilities

 

 

64