VIAD CORP, 10-K filed on 2/27/2019
Annual Report
v3.10.0.1
Document and Entity Information - USD ($)
$ in Billions
12 Months Ended
Dec. 31, 2018
Jan. 31, 2019
Jun. 29, 2018
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, 2018    
Amendment Flag false    
Document Fiscal Year Focus 2018    
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 Large Accelerated Filer    
Entity Small Business false    
Entity Emerging Growth Company false    
Entity Shell Company false    
Entity Public Float     $ 1.1
Entity Common Stock, Shares Outstanding   20,201,497  
v3.10.0.1
CONSOLIDATED BALANCE SHEETS - USD ($)
$ in Thousands
Dec. 31, 2018
Dec. 31, 2017
Current assets    
Cash and cash equivalents $ 44,893 $ 53,723
Accounts receivable, net of allowances for doubtful accounts of $1,288 and $2,023, respectively 108,936 104,811
Inventories 16,629 17,550 [1]
Current contract costs 18,017 13,436 [1]
Other current assets 25,486 19,741 [1]
Total current assets 213,961 209,261
Property and equipment, net 333,847 305,571
Other investments and assets 42,910 48,187 [1]
Deferred income taxes 19,199 23,548
Goodwill 261,330 270,551
Other intangible assets, net 51,294 62,781
Total Assets 922,541 919,899
Current liabilities    
Accounts payable 71,927 77,380
Contract liabilities 33,476 31,981 [2]
Accrued compensation 22,668 30,614
Other current liabilities 32,258 40,154 [2]
Current portion of debt and capital lease obligations [3] 229,416 152,599
Total current liabilities 389,745 332,728
Long-term debt and capital lease obligations 705 56,593
Pension and postretirement benefits 26,636 28,135
Other deferred items and liabilities 48,991 52,858
Total liabilities 466,077 470,314
Commitments and contingencies
Redeemable noncontrolling interest 5,909 6,648
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 575,339 574,458
Retained earnings 109,032 65,836
Unearned employee benefits and other 199 218
Accumulated other comprehensive loss (47,975) (22,568)
Common stock in treasury, at cost, 4,741,638 and 4,518,099 shares, respectively (237,790) (226,215)
Total Viad stockholders’ equity 436,207 429,131
Non-redeemable noncontrolling interest 14,348 13,806
Total stockholders’ equity 450,555 442,937 [4]
Total Liabilities and Stockholders’ Equity $ 922,541 $ 919,899
[1] Contract costs primarily consist of deferred core services costs (including labor and vendor purchases) required to service future exhibitions, conferences and other events, and commission expenses incurred to obtain contracts. All such costs were previously included in “Inventories” and in certain other assets. As a result of the changes noted above, deferred core services costs related to exhibitions and events that are scheduled to occur longer than one year in the future are currently included in “Other investments and assets”. The impact of this change reduced total current assets at December 31, 2017 by $0.7 million. The amount of deferred core services costs included in “Other investments and assets” at December 31, 2018 was $3.5 million.
[2] In connection with the adoption of Topic 606, we elected to more prominently present contract liabilities on the Consolidated Balance Sheets. Consequently, customer deposits of $33.4 million as of December 31, 2017, have been reclassified to “Contract liabilities” and to other certain current liabilities to conform to the current period presentation.
[3] Borrowings under the revolving credit facilities are classified as current because all borrowed amounts are due within one year.
[4] We determined that the cumulative effect of initially applying Topic 606 as an adjustment to the opening balance of retained earnings was not material, and therefore we made no adjustment.
v3.10.0.1
CONSOLIDATED BALANCE SHEETS (Parenthetical) - USD ($)
$ in Thousands
Dec. 31, 2018
Dec. 31, 2017
Statement Of Financial Position [Abstract]    
Allowance for doubtful accounts $ 1,288 $ 2,023
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 4,741,638 4,518,099
v3.10.0.1
CONSOLIDATED STATEMENTS OF OPERATIONS - USD ($)
shares in Thousands, $ in Thousands
12 Months Ended
Dec. 31, 2018
Dec. 31, 2017
Dec. 31, 2016
Revenue:      
Total revenue $ 1,296,184 $ 1,306,965 $ 1,204,970
Costs and expenses:      
Business interruption gain (602) (2,692)  
Corporate activities 10,993 12,396 9,592
Interest income (354) (319) (1,165)
Interest expense 9,640 8,304 5,898
Other expense [1] 1,744 2,028 1,656
Restructuring charges 1,587 1,004 5,183
Impairment charges (recoveries), net (35) (29,098) 218
Total costs and expenses 1,231,175 1,202,615 1,140,241
Income from continuing operations before income taxes 65,009 104,350 64,729
Income tax expense 17,095 45,898 21,250
Income from continuing operations 47,914 58,452 43,479
Income (loss) from discontinued operations 1,481 (268) (684)
Net income 49,395 58,184 42,795
Net income attributable to non-redeemable noncontrolling interest (542) (523) (526)
Net loss attributable to redeemable noncontrolling interest 317 46  
Net income attributable to Viad $ 49,170 $ 57,707 $ 42,269
Diluted income (loss) per common share:      
Continuing operations attributable to Viad common stockholders $ 2.33 $ 2.84 $ 2.12
Discontinued operations attributable to Viad common stockholders 0.07 (0.01) (0.03)
Net income attributable to Viad common stockholders $ 2.40 $ 2.83 $ 2.09
Weighted-average outstanding and potentially dilutive common shares 20,404 20,405 20,177
Basic income (loss) per common share:      
Continuing operations attributable to Viad common stockholders $ 2.33 $ 2.84 $ 2.12
Discontinued operations attributable to Viad common stockholders 0.07 (0.01) (0.03)
Net income attributable to Viad common stockholders $ 2.40 $ 2.83 $ 2.09
Weighted-average outstanding common shares 20,168 20,146 19,990
Dividends declared per common share $ 0.40 $ 0.40 $ 0.40
Amounts attributable to Viad common stockholders      
Income from continuing operations $ 47,689 $ 57,975 $ 42,953
Income (loss) from discontinued operations 1,481 (268) (684)
Net income attributable to Viad 49,170 57,707 42,269
Services      
Revenue:      
Total revenue 1,110,249 1,132,424 1,050,729
Costs and expenses:      
Costs and expenses 1,039,403 1,052,911 966,568
Products      
Revenue:      
Total revenue 185,935 174,541 154,241
Costs and expenses:      
Costs and expenses $ 168,799 $ 158,081 $ 152,291
[1] We adopted ASU 2017-07 on January 1, 2018, which requires retrospective adoption. As a result, we recorded the nonservice cost component of net periodic benefit cost within other expense for the year ended December 31, 2018, and we reclassified $2.0 million from operating expenses to other expense for 2017 and $1.7 million for 2016 to conform with current period presentation. Refer to Note 1 – Overview and Summary of Significant Accounting Policies for additional details on the impact of this adoption on our Consolidated Statements of Operations.
v3.10.0.1
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME - USD ($)
$ in Thousands
12 Months Ended
Dec. 31, 2018
Dec. 31, 2017
Dec. 31, 2016
Statement Of Income And Comprehensive Income [Abstract]      
Net income $ 49,395 $ 58,184 $ 42,795
Other comprehensive income (loss):      
Unrealized gains on investments, net of tax effects of $0, $121, and $47   195 75
Unrealized foreign currency translation adjustments, net of tax (24,306) 17,058 (5,827)
Change in net actuarial gain (loss), net of tax effects of $305, $163, and $617 1,236 344 894
Change in prior service cost, net of tax effects of $(52), $(473), and $(219) (153) (774) (357)
Comprehensive income 26,172 75,007 37,580
Comprehensive income attributable to non-redeemable noncontrolling interest (542) (523) (526)
Comprehensive loss attributable to redeemable noncontrolling interest 317 46  
Comprehensive income attributable to Viad $ 25,947 $ 74,530 $ 37,054
v3.10.0.1
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (Parenthetical) - USD ($)
$ in Thousands
12 Months Ended
Dec. 31, 2018
Dec. 31, 2017
Dec. 31, 2016
Statement Of Income And Comprehensive Income [Abstract]      
Unrealized investment gains arising during the period, tax effects $ 0 $ 121 $ 47
Amortization of net actuarial gain (loss), tax effects 305 163 617
Amortization of prior service cost, tax effects $ (52) $ (473) $ (219)
v3.10.0.1
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY - USD ($)
$ in Thousands
Total
Common Stock
Additional Capital
Retained Earnings (Deficit)
Unearned Employee Benefits and Other
Accumulated Other Comprehensive Income (Loss)
Common Stock in Treasury
Total Viad Equity
Non-Redeemable Non-Controlling Interest
Beginning 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 ($0.40 per share) (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 expense from share-based compensation 95   95         95  
Unrealized foreign currency translation adjustment, net of tax (5,827)         (5,827)   (5,827)  
Unrealized gain on investments, net of tax 75         75   75  
Amortization of net actuarial gain (loss), net of tax 894         894   894  
Amortization of prior service cost, net of tax (357)         (357)   (357)  
Other, net 12   (51) (1) 63   1 12  
Ending Balance at Dec. 31, 2016 370,638 37,402 573,841 16,291 172 (39,391) (230,960) 357,355 13,283
Increase (Decrease) in Stockholders' Equity [Roll Forward]                  
Net income 58,184                
Net income 58,230     57,707       57,707 523
Dividends on common stock ($0.40 per share) (8,160)     (8,160)       (8,160)  
Common stock purchased for treasury (2,119)           (2,119) (2,119)  
Employee benefit plans 4,177   (2,687)       6,864 4,177  
Share-based compensation - equity awards 3,623   3,623         3,623  
Unrealized foreign currency translation adjustment, net of tax 17,058         17,058   17,058  
Unrealized gain on investments, net of tax 195         195   195  
Amortization of net actuarial gain (loss), net of tax 344         344   344  
Amortization of prior service cost, net of tax (774)         (774)   (774)  
Other, net (275)   (319) (2) 46     (275)  
Ending Balance at Dec. 31, 2017 442,937 [1] 37,402 574,458 65,836 218 (22,568) (226,215) 429,131 13,806
Increase (Decrease) in Stockholders' Equity [Roll Forward]                  
Net income 49,395                
Net income 49,712     49,170       49,170 542
Dividends on common stock ($0.40 per share) (8,154)     (8,154)       (8,154)  
Common stock purchased for treasury (18,383)           (18,383) (18,383)  
Employee benefit plans 4,902   (1,905)       6,807 4,902  
Share-based compensation - equity awards 2,849   2,849         2,849  
Unrealized foreign currency translation adjustment, net of tax (24,306)         (24,306)   (24,306)  
Amortization of net actuarial gain (loss), net of tax 1,236         1,236   1,236  
Amortization of prior service cost, net of tax (153)         (153)   (153)  
Adoption of ASU | ASU 2016-01       616   (616) [2]      
Adoption of ASU | ASU 2018-02 [3]           (1,568)      
Adoption of ASU | ASU 2018-02       1,568   (1,568)      
Other, net (85)   (63) (4) (19)   1 (85)  
Ending Balance at Dec. 31, 2018 $ 450,555 $ 37,402 $ 575,339 $ 109,032 $ 199 $ (47,975) $ (237,790) $ 436,207 $ 14,348
[1] We determined that the cumulative effect of initially applying Topic 606 as an adjustment to the opening balance of retained earnings was not material, and therefore we made no adjustment.
[2] Upon the adoption of ASU 2016-01, we recorded a cumulative-effect adjustment from unrealized gains on investments to beginning retained earnings.
[3] Upon the adoption of ASU 2018-02, we recorded a cumulative-effect adjustment from AOCI to beginning retained earnings.
v3.10.0.1
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY (Parenthetical) - $ / shares
12 Months Ended
Dec. 31, 2018
Dec. 31, 2017
Dec. 31, 2016
Statement Of Stockholders Equity [Abstract]      
Dividends on common stock per share $ 0.40 $ 0.40 $ 0.40
v3.10.0.1
CONSOLIDATED STATEMENTS OF CASH FLOWS - USD ($)
$ in Thousands
12 Months Ended
Dec. 31, 2018
Dec. 31, 2017
Dec. 31, 2016
Cash flows from operating activities      
Net income $ 49,395 $ 58,184 $ 42,795
Adjustments to reconcile net income to net cash provided by operating activities:      
Depreciation and amortization 56,842 55,114 42,743
Deferred income taxes 5,350 26,049 7,672
(Income) loss from discontinued operations (1,481) 268 684
Restructuring charges 1,587 1,004 5,183
Impairment charges (recoveries) (35) (29,098) 218
(Gains) losses on dispositions of property and other assets 473 1,420 (54)
Share-based compensation expense 4,870 10,969 8,038
Excess tax benefit from share-based compensation arrangements     (95)
Other non-cash items, net 4,306 5,029 6,167
Change in operating assets and liabilities (excluding the impact of acquisitions):      
Receivables (6,200) (2,338) (9,358)
Inventories (1,573) 121 149
Current contract costs (4,976) 2,544 (2,795)
Accounts payable (1,645) 7,546 1,770
Restructuring liabilities (1,716) (1,954) (3,866)
Accrued compensation (12,818) (5,152) (353)
Contract liabilities 3,677 (11,314) 7,906
Income taxes payable (7,696) 5,820 (4,630)
Other assets and liabilities, net 2,235 (11,989) (1,856)
Net cash provided by operating activities 90,595 112,223 100,318
Cash flows from investing activities      
Capital expenditures (83,345) (56,621) (49,815)
Proceeds from insurance   31,570  
Cash paid for acquired businesses, net (4,628) (1,501) (195,989)
Proceeds from dispositions of property and other assets 925 947 1,166
Net cash used in investing activities (87,048) (25,605) (244,638)
Cash flows from financing activities      
Proceeds from borrowings 146,580 90,004 229,701
Payments on debt and capital lease obligations (128,211) (135,801) (108,915)
Dividends paid on common stock (8,154) (8,160) (8,111)
Debt issuance costs (1,823) (5) (336)
Common stock purchased for treasury (18,383) (2,119) (722)
Excess tax benefit from share-based compensation arrangements     95
Acquisition of business - deferred consideration     (130)
Proceeds from exercise of stock options 84    
Net cash provided by (used in) financing activities (9,907) (56,081) 111,582
Effect of exchange rate changes on cash and cash equivalents (2,470) 2,286 (2,893)
Net change in cash and cash equivalents (8,830) 32,823 (35,631)
Cash and cash equivalents, beginning of year 53,723 20,900 56,531
Cash and cash equivalents, end of year $ 44,893 $ 53,723 $ 20,900
v3.10.0.1
Overview and Summary of Significant Accounting Policies
12 Months Ended
Dec. 31, 2018
Organization Consolidation And Presentation Of Financial Statements [Abstract]  
Overview and Summary of Significant Accounting Policies

Note 1. Overview and Summary of Significant Accounting Policies

Basis of Presentation and Principles of Consolidation

The accompanying consolidated financial statements were 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

We are an international experiential services company with operations principally in the United States, Canada, the United Kingdom, continental Europe, and the United Arab Emirates. We are committed to providing unforgettable experiences to our clients and guests. We operate through three reportable business segments: GES U.S., GES International, (collectively, “GES”), and Pursuit.

GES

GES is a global, full-service live events company 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 registration, data analytics, engagement, and 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 the event from start to finish. Corporate brand marketers include exhibitors and domestic and international corporations that want to promote their brands, services and innovations, feature new products, and build business relationships. GES serves corporate brand marketers when they exhibit at shows and when GES is engaged to manage their global exhibit program or produce their proprietary corporate events.

Pursuit

Pursuit is a collection of inspiring and unforgettable travel experiences in Alaska and Montana in the United States and in Banff, Jasper, and Vancouver in Canada, and scheduled to open in July 2019, Reykjavik, Iceland. Pursuit’s collections include world-class 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.

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 our 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; assumptions used to determine the redemption value of redeemable noncontrolling interests; and allocation of purchase price of acquired businesses. Actual results could differ from these and other estimates.

Cash and Cash Equivalents

Cash equivalents are highly-liquid investments with remaining maturities when purchased of three months or less. Cash and cash equivalents consist of cash and bank demand deposits and money market funds. Investments in money market funds are classified as available-for-sale and carried at fair value.

Allowances for Doubtful Accounts

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

Inventories

Inventories, which consist primarily of exhibit design and construction materials and supplies, as well as retail inventory, are stated at the lower of cost (first-in, first-out and specific identification methods) or net realizable value.

Contract Costs

We adopted Accounting Standard Update (“ASU”) 2014-09, Revenue from Contracts with Customers (“Topic 606”) on January 1, 2018. Pursuant to Topic 606, GES capitalizes certain incremental costs incurred in obtaining and fulfilling contracts. Capitalized costs principally relate to direct costs of materials and services incurred in fulfilling services of future exhibitions, conferences, and events, and also include up-front incentives and commissions incurred upon contract signing. Costs associated with preliminary contract activities (i.e. proposal activities) are expensed as incurred. Capitalized contract costs are expensed upon the transfer of the related goods or services and are included in cost of services or cost of products sold, as applicable. The deferred incremental costs of obtaining and fulfilling contracts are included in the Consolidated Balance Sheets under the captions “Current contract costs” and “Other investments and assets.”  Prior to the adoption of Topic 606, these amounts were reported in inventories under “Work in process.”

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.

Goodwill

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

Cash Surrender Value of Life Insurance

We have Company-owned life insurance contracts that 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 we 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 the Consolidated Statements of Operations.

Self-Insurance Liabilities

We are self-insured up to certain limits for workers’ compensation, automobile, product and general liability, property loss, and medical claims. We 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 historical experience, claims frequency, insurance coverage, and other factors. We purchased insurance for amounts in excess of the self-insured levels.

Environmental Remediation Liabilities

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

Fair Value of Financial Instruments

The carrying value of cash and cash equivalents, receivables, and accounts payable approximate fair value due to the short-term maturities of these instruments. Refer to Note 12 – Debt and Capital Lease Obligations for the estimated fair value of debt obligations.

Noncontrolling Interest

Non-redeemable noncontrolling interest represents the portion of equity in a subsidiary that is not attributable, directly or indirectly, to us. Our non-redeemable noncontrolling interest relates to the 20% equity ownership interest that we do not own in Glacier Park, Inc. We report non-redeemable noncontrolling interest within stockholders’ equity in the Consolidated Balance Sheets. The amount of consolidated net income attributable to Viad and the non-redeemable noncontrolling interest is presented in the Consolidated Statements of Operations.  

Noncontrolling interests with redemption features that are not solely within our control are considered redeemable noncontrolling interests. Our redeemable noncontrolling interest relates to our 54.5% equity ownership interest in Esja Attractions ehf. (“Esja”). The Esja shareholders agreement contains a put option that gives the minority Esja shareholders the right to sell (or “put”) their Esja shares to us based on a calculated formula within a predefined term. This redeemable noncontrolling interest is considered temporary equity and we report it between liabilities and stockholders’ equity in the Consolidated Balance Sheets. The amount of the net income or loss attributable to redeemable noncontrolling interests is recorded in the Consolidated Statements of Operations and the accretion of the redemption value is recorded as an adjustment to retained earnings and is included in our earnings per share. Refer to Note 22 – Redeemable Noncontrolling Interest for additional information.

Foreign Currency Translation

Our foreign operations are primarily in Canada, the United Kingdom, the Netherlands, Germany, and to a lesser extent, in certain other countries. The functional currency of our foreign subsidiaries is their local currency. Accordingly, for purposes of consolidation, we translate the assets and liabilities of our foreign subsidiaries into U.S. dollars at the foreign exchange rates in effect at the balance sheet date. The unrealized gains or losses resulting from the translation of these foreign denominated assets and liabilities are included as a component of accumulated other comprehensive income (loss) in the Consolidated Balance Sheets. For purposes of consolidation, revenue, expenses, gains, and losses related to our foreign operations are translated into U.S. dollars at the average foreign exchange rates for the period.

Revenue Recognition

We adopted Accounting Standard Update 2014-09, Revenue from Contracts with Customers (“Topic 606”) on January 1, 2018. Upon the adoption of Topic 606, revenue is measured based on a specified amount of consideration in a contract with a customer, net of commissions paid to customers and amounts collected on behalf of third parties. We recognize revenue when a performance obligation is satisfied by transferring control of a product or service to a customer.

GES’ service revenue is primarily derived through its comprehensive range of services to event organizers and corporate brand marketers including Core Services, Event Technology, and Audio-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; however, we use the practical expedient in Topic 606 of recognizing service revenue at the close of the event when we have the right to invoice. GES’ product revenue is derived from the build of exhibits and environments and graphics. GES’ product revenue is recognized at a point in time upon delivery of the product.

Pursuit’s service revenue is derived through its 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.

Insurance Recoveries

Receipts from insurance up to the amount of the recognized losses are considered recoveries and are accounted for when they are probable of receipt. Anticipated proceeds in excess of the recognized loss are considered a gain contingency. A contingency gain for anticipated insurance proceeds in excess of losses already recognized is not recognized until all contingencies relating to the insurance claim have been resolved.

Insurance proceeds allocated to business interruption gains are reported as cash flows from operating activities, and proceeds allocated to impairment recoveries are reported as cash flows from investing activities. Insurance proceeds used for capitalizable costs are classified as cash flows from investing activities, and proceeds used for non-capitalizable costs are classified as operating activities.

On December 29, 2016, the Mount Royal Hotel was damaged by a fire and closed. During the fourth quarter of 2016, we recorded an asset impairment loss of $2.2 million and an offsetting impairment recovery (and related insurance receivable) as the losses related to the fire were covered by our property and business interruption insurance. During July 2017, we resolved our property and business interruption insurance claims for a total of $36.3 million. We allocated $2.2 million to an insurance receivable, $29.3 million was recorded as an impairment recovery (partially offset by impairment charges of $0.2 million) related to construction costs to re-open the hotel, $2.5 million was recorded as a business interruption gain for the recovery of lost profits, $1.3 million was recorded as contra-expense to offset non-capitalizable costs incurred, and the remaining $1.0 million was deferred and recognized during the first half of 2018 when the business interruption losses were actually incurred.

Share-Based Compensation

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

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

Restricted stock awards vest three years from the date of grant. Share-based compensation expense is recognized using the straight-line method over the requisite service period of approximately three years.

Liability-based awards (including performance units and restricted stock units) are recorded at estimated fair value, based on the number of units expected to vest and where applicable, the level of achievement of predefined performance goals. These awards are remeasured on each balance sheet date based on our stock price, and the Monte Carlo simulation model, until the time of settlement. A Monte Carlo simulation requires the use of a number of assumptions, including historical volatility and correlation between our stock price 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 our 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 our common stock. Compensation expense related to equity-based awards is recognized ratably over the requisite service period of approximately three years.

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

Common Stock in Treasury

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

Income Per Common Share

We apply the two-class method in calculating income per common share as unvested share-based payment awards that contain nonforfeitable rights to dividends are considered participating securities. Accordingly, such securities are included in the earnings allocation in calculating income per share. The adjustment to the carrying value of the redeemable noncontrolling interest is reflected in income per common share.

Impact of Recent Accounting Pronouncements

The following table provides a brief description of recent accounting pronouncements:

 

Standard

 

Description

 

Date of adoption

 

Effect on the financial statements

Standards Not Yet Adopted

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 previously allowed for only a modified retrospective approach to adoption.

 

Subsequent to the issuance of ASU 2016-02, the FASB issued additional updates, which do not change the core principle of the guidance stated in ASU 2016-02. Rather, the updates provide additional (and optional) transition methods including the election under ASU 2018-11, which allows companies to not restate comparative periods when initially applying the transition requirements.

 

January 1, 2019

 

We do not expect our Consolidated Statement of Operations to be materially impacted. The most significant impact will relate to facility and equipment leases, which are currently recorded as operating leases. Based on our leases in place as of December 31, 2018, we anticipate recognizing an additional right-of-use asset and lease liability on the balance sheet of approximately $72 million upon adoption of the standard effective January 1, 2019. We will adopt ASU 2018-11 using the optional transition method under which a cumulative adjustment to retained earnings is recorded in the period of adoption and prior periods are not restated.

ASU 2018-15, Intangibles – Goodwill and Other – Internal-Use Software (Subtopic 350-40) Customer’s Accounting for Implementation Costs Incurred in a Cloud Computing Arrangement That Is a Service Contract

 

The amendment aligns the requirements for capitalizing implementation costs incurred in a hosting arrangement that is a service contract with the requirements for capitalizing implementation costs incurred to develop or obtain internal-use software. The amendment also requires an entity to expense the capitalized implementation costs of a hosting arrangement that is a service contract over the term of the hosting arrangement. Early adoption is permitted and may be applied on either a retrospective or prospective basis.

 

January 1, 2020

 

We are currently evaluating the potential impact of the adoption of this new guidance on our consolidated financial statements and related disclosures.

 

Standard

 

Description

 

Date of adoption

 

Effect on the financial statements

Standards Recently Adopted

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

 

The standard established 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.

 

January 1, 2018

 

We adopted ASU 2014-09 and its related amendments (collectively, “Topic 606”) on January 1, 2018 using the modified retrospective transition method. We determined that the cumulative effect of initially applying the new standard as an adjustment to the opening balance of retained earnings was not material (less than $0.2 million) and, therefore, we made no adjustment.

 

The adoption of this standard did not have a material impact on our consolidated financial statements. The impact primarily related to the deferral of certain commissions which were previously expensed as incurred but are now 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 are now capitalized and expensed upon the completion of the show. The new guidance resulted in expanded disclosures and processes to identify performance obligations. See additional transition disclosures immediately following this table and Note 2 – Revenue and Related Contract Costs and Contract Liabilities.

ASU 2016-01, Financial Instruments – Overall: Recognition and Measurement of Financial Assets and Financial Liabilities

 

The amendment includes a requirement for equity investments (except those accounted for under the equity method of accounting or those that result in consolidation of the investee) to be measured at fair value with changes in fair value recognized in net income.

 

January 1, 2018

 

We adopted this guidance prospectively in the first quarter of 2018 and recorded a cumulative-effect adjustment of $0.6 million from accumulated other comprehensive income (“AOCI”) to beginning retained earnings.

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 is determined that the carrying amount of a reporting unit exceeds 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. Early adoption was permitted for interim or annual goodwill impairment tests performed on testing dates after January 1, 2017.

 

January 1, 2018

 

We early adopted this new guidance on January 1, 2018 on a prospective basis. As a result, the adoption reduced the complexity surrounding the analysis of goodwill impairment during our annual goodwill impairment test.

ASU 2017-07, Compensation - Retirement Benefits (Topic 715) – Improving the Presentation of Net Periodic Pension

Cost and Net Periodic Postretirement Benefit Cost

 

The amendment requires an employer to disaggregate the service cost components from the other components of net benefit cost. The service cost components are required to be presented in operating income and the other components of net benefit cost are required to be presented outside of operating income.

 

January 1, 2018

 

We adopted this new standard retrospectively on January 1, 2018. As a result, we recorded the nonservice cost component of net periodic benefit cost within other expense and reclassified from operating expenses (cost of services and corporate activities) to other expense $2.0 million for the year ended December 31, 2017 and $1.7 million for the year ended December 31, 2016 to conform to current period presentation. For additional details on the impact this adoption had on our results of operations, see the disclosures immediately following this table.

 

 

Standard

 

Description

 

Date of adoption

 

Effect on the financial statements

Standards Recently Adopted

ASU 2018-02, Income Statement – Reporting Comprehensive Income (Topic 220): Reclassification of Certain Tax Effects from Accumulated Other Comprehensive Income

 

The amendment addresses the effect of the Tax Cuts and Jobs Act (the “Tax Act”) on items within AOCI. Under current GAAP, the effects of changes in tax rates and laws on deferred tax balances are recorded as a component of income tax expense in the period in which the law was enacted. When deferred tax balances related to items originally recorded in AOCI are adjusted, certain tax effects become stranded in AOCI. This amendment allows a reclassification from AOCI to retained earnings for stranded tax effects. Early adoption was permitted.

 

September 30, 2018

 

We early adopted this new standard. As a result, we reclassified the income tax effects of the Tax Act of $1.6 million from AOCI to retained earnings, with no net effect to total stockholders' equity. Refer to Note 17 – Income Taxes for additional information.

ASU 2018-05, Income Taxes (Topic 740) – Amendments to SEC paragraphs pursuant to SEC Staff Accounting Bulletin No. 118

 

This statement amends ASC 740 to incorporate the requirements of SEC Staff Accounting Bulletin No. 118, which provides guidance on accounting for the tax effects of the Tax Act for SEC registrants who do not have the necessary information available, prepared, or analyzed in reasonable detail to complete the accounting for certain income tax effects of the Tax Act.

 

Upon issuance

 

In 2018, we finalized our analysis of the tax impacts of the Tax Act. We recorded a $3.1 million tax benefit during the third quarter of 2018 related to the impact of the Tax Act. This amount comprises a reduction to our estimated taxes for the deemed mandatory repatriation of post-1986 undistributed foreign subsidiary earnings and profits and for the corporate tax rate reduction attributable to the return to provision adjustment for deferred taxes. Refer to Note 17 – Income Taxes for additional information.

ASU 2018-14, Compensation – Retirement Benefits – Defined Benefit Plans – General (Topic 715-20) Disclosure Framework – Changes to the Disclosure Requirements for Defined Benefit Plans

 

The amendment modifies and clarifies the disclosure requirements for employers that sponsor defined benefit pension or other postretirement plans.

 

December 31, 2018

 

We early adopted this new standard. The adoption of this new standard did not have a material impact on our consolidated financial statements and related disclosures.

 

Prior to January 1, 2018, we presented revenue in our Consolidated Statements of Operations in three separate line items as follows:

 

 

 

Year Ended December 31,

 

(in thousands)

 

2017

 

 

2016

 

Revenue:

 

 

 

 

 

 

 

 

Exhibition and event services

 

$

967,352

 

 

$

881,137

 

Exhibits and environments

 

 

165,745

 

 

 

170,469

 

Pursuit services

 

 

173,868

 

 

 

153,364

 

Total revenue

 

$

1,306,965

 

 

$

1,204,970

 

 

In connection with the adoption of Topic 606, we changed the presentation of revenue in our Consolidated Statements of Operations and now present total services revenue and total products revenue. As a result, we changed the prior reporting period to conform to the current period presentation as follows:

 

 

 

Year Ended December 31,

 

(in thousands)

 

2017

 

 

2016

 

Revenue:

 

 

 

 

 

 

 

 

Services

 

$

1,132,424

 

 

$

1,050,729

 

Products

 

 

174,541

 

 

 

154,241

 

Total revenue

 

$

1,306,965

 

 

$

1,204,970

 

 

As a result of the change in presentation of revenue in the Consolidated Statements of Operations, we also made the following conforming changes to the presentation of cost of services and cost of products. The following table also summarizes the impact of adopting ASU 2017-07 on our Consolidated Statements of Operations:

 

 

 

Year Ended December 31, 2017

 

(in thousands)

 

As Previously

Reported

 

 

Reclassifications to Conform with Revenue Presentation

 

 

ASU 2017-07

 

 

As Newly Reported

 

Cost of services

 

$

1,050,547

 

 

$

3,911

 

 

$

(1,547

)

 

$

1,052,911

 

Cost of products

 

$

161,992

 

 

$

(3,911

)

 

$

 

 

$

158,081

 

Corporate activities

 

$

12,877

 

 

$

 

 

$

(481

)

 

$

12,396

 

Other expense

 

$

 

 

$

 

 

$

2,028

 

 

$

2,028

 

 

 

 

Year Ended December 31, 2016

 

(in thousands)

 

As Previously

Reported

 

 

Reclassifications to Conform with Revenue Presentation

 

 

ASU 2017-07

 

 

As Newly Reported

 

Cost of services

 

$

954,667

 

 

$

12,827

 

 

$

(926

)

 

$

966,568

 

Cost of products

 

$

165,118

 

 

$

(12,827

)

 

$

 

 

$

152,291

 

Corporate activities

 

$

10,322

 

 

$

 

 

$

(730

)

 

$

9,592

 

Other expense

 

$

 

 

$

 

 

$

1,656

 

 

$

1,656

 

 

 

v3.10.0.1
Revenue and Related Contract Costs and Contract Liabilities
12 Months Ended
Dec. 31, 2018
Revenue From Contract With Customer [Abstract]  
Revenue and Related Contract Costs and Contract Liabilities

Note 2. Revenue and Related Contract Costs and Contract Liabilities

GES’ performance obligations consist of services or product(s) outlined in a contract. While multi-year contracts are often signed for recurring events, the obligations for each occurrence are well defined and conclude upon the occurrence of each event. The obligations are typically the provision of services and/or sale of a product in connection with an exhibition, conference, or other event. Revenue for services is recognized when we have a right to invoice at the close of the exhibition, conference, or corporate event, which typically lasts one to three days. Revenue for consumer events is recognized over the duration of the event. Revenue for products is recognized either upon delivery to the customer’s location, upon delivery to an event that we are serving, or when we have the right to invoice, generally at the close of the exhibition, conference, or corporate event. Payment terms are generally within 30-60 days and contain no significant financing components.

Pursuit’s performance obligations are short-term in nature. They include the provision of a hotel room, an attraction admission, a chartered or ticketed bus or van ride, the fulfillment of travel planning itineraries, and/or the sale of food, beverage, or retail products. Revenue is recognized when the service has been provided or the product has been delivered. When credit is extended, payment terms are generally within 30 days and contain no significant financing components.

Contract Liabilities

GES and Pursuit typically receive customer deposits prior to transferring the related product or service to the customer. These deposits are recorded as a contract liability and recognized as revenue upon satisfaction of the related contract performance obligation(s). GES also provides customer rebates and volume discounts to certain event organizers that are recorded as contract liabilities and are recognized as a reduction of revenue. These amounts are included in the Consolidated Balance Sheets under the captions “Contract liabilities” and “Other deferred items and liabilities.”

We elected to apply the following practical expedients in Topic 606 related to performance obligations:

Not to disclose (i) the amount of consideration allocated to the remaining performance obligations (ii) an explanation of when we expect to recognize that amount as revenue as of December 31, 2017 and (iii) the value of unsatisfied performance obligations for contracts with an original duration of one year or less because the vast majority of our contract liabilities relate to future exhibitions and events that will occur within the next 12 months.

Changes to contract liabilities are as follows:

 

(in thousands)

 

 

 

 

Balance at January 1, 2018

 

$

31,981

 

Cash additions

 

 

179,238

 

Revenue recognized

 

 

(174,620

)

Foreign exchange translation adjustment

 

 

(999

)

Balance at December 31, 2018

 

$

35,600

 

Contract Costs

Changes to contract costs are as follows:

(in thousands)

 

 

 

 

Balance at January 1, 2018

 

$

16,878

 

Additions

 

 

65,147

 

Expenses

 

 

(59,601

)

Cancelled

 

 

(136

)

Foreign exchange translation adjustment

 

 

(810

)

Balance at December 31, 2018

 

$

21,478

 

As of December 31, 2018, capitalized contract costs consisted of $2.5 million to obtain contracts and $19.0 million to fulfill contracts. We did not recognize any impairment loss with respect to capitalized contract costs for the year ended December 31, 2018.

As a result of adopting Topic 606, there was $1.7 million of additional capitalized contract costs recorded at December 31, 2018 resulting in a $1.3 million increase to “Net income” in the Consolidated Statement of Operations for the year ended December 31, 2018.

Disaggregation of Revenue

The following tables disaggregate GES and Pursuit revenue by major product line, timing of revenue recognition, and markets served:

GES

 

 

Year Ended December 31, 2018

 

(in thousands)

 

GES U.S.

 

 

GES International

 

 

Intersegment Eliminations

 

 

Total

 

Services:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Core services

 

$

675,368

 

 

$

178,758

 

 

$

 

 

$

854,126

 

Audio-visual

 

 

73,331

 

 

 

22,011

 

 

 

 

 

 

95,342

 

Event technology

 

 

30,208

 

 

 

10,658

 

 

 

 

 

 

40,866

 

Intersegment eliminations

 

 

 

 

 

 

 

 

(17,489

)

 

 

(17,489

)

Total services

 

 

778,907

 

 

 

211,427

 

 

 

(17,489

)

 

 

972,845

 

Products:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Core products

 

 

68,334

 

 

 

69,718

 

 

 

 

 

 

138,052

 

Total revenue

 

$

847,241

 

 

$

281,145

 

 

$

(17,489

)

 

$

1,110,897

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Timing of revenue recognition:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Services transferred over time

 

$

778,908

 

 

$

211,427

 

 

$

(17,489

)

 

$

972,846

 

Products transferred over time(1)

 

 

41,448

 

 

 

18,745

 

 

 

 

 

 

60,193

 

Products transferred at a point in time

 

 

26,885

 

 

 

50,973

 

 

 

 

 

 

77,858

 

Total revenue

 

$

847,241

 

 

$

281,145

 

 

$

(17,489

)

 

$

1,110,897

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Markets:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Exhibitions

 

$

455,561

 

 

$

206,073

 

 

$

 

 

$

661,634

 

Conferences

 

 

241,494

 

 

 

37,613

 

 

 

 

 

 

279,107

 

Corporate events

 

 

121,552

 

 

 

33,360

 

 

 

 

 

 

154,912

 

Consumer events

 

 

28,634

 

 

 

4,099

 

 

 

 

 

 

32,733

 

Intersegment eliminations

 

 

 

 

 

 

 

 

(17,489

)

 

 

(17,489

)

Total revenue

 

$

847,241

 

 

$

281,145

 

 

$

(17,489

)

 

$

1,110,897

 

 

(1)

GES’ graphics product revenue is recognized over time as it is considered a part of the single performance obligation satisfied over time.

Pursuit

 

 

 

Year Ended

 

(in thousands)

 

December 31, 2018

 

Services:

 

 

 

 

Admissions

 

$

83,000

 

Accommodations

 

 

37,470

 

Transportation

 

 

13,956

 

Travel planning

 

 

4,529

 

Intersegment eliminations

 

 

(1,551

)

Total services revenue

 

 

137,404

 

Products:

 

 

 

 

Food and beverage

 

 

25,962

 

Retail operations

 

 

21,921

 

Total products revenue

 

 

47,883

 

Total revenue

 

$

185,287

 

 

 

 

 

 

Timing of revenue recognition:

 

 

 

 

Services transferred over time

 

$

137,404

 

Products transferred at a point in time

 

 

47,883

 

Total revenue

 

$

185,287

 

 

 

 

 

 

Markets:

 

 

 

 

Banff Jasper Collection

 

$

106,106

 

Alaska Collection

 

 

36,451

 

Glacier Park Collection

 

 

31,465

 

FlyOver

 

 

11,265

 

Total revenue

 

$

185,287

 

 

 

 

Balance Sheet Reclassifications

In connection with the adoption of Topic 606, effective January 1, 2018, we made the following reclassifications to separately present contract costs and contract liabilities on the Consolidated Balance Sheet as of December 31, 2017:

 

 

 

December 31, 2017

 

(in thousands)

 

As Previously Reported

 

 

Reclassifications

 

 

As Adjusted

 

Cash and cash equivalents

 

$

53,723

 

 

 

 

 

$

53,723

 

Accounts receivable, net

 

 

104,811

 

 

 

 

 

 

104,811

 

Inventories (1)

 

 

30,372

 

 

 

(12,822

)

 

 

17,550

 

Current contract costs (1)

 

 

 

 

 

13,436

 

 

 

13,436

 

Other current assets (1)

 

 

21,030

 

 

 

(1,289

)

 

 

19,741

 

Property and equipment, net

 

 

305,571

 

 

 

 

 

 

305,571

 

Other investments and assets (1)

 

 

47,512

 

 

 

675

 

 

 

48,187

 

Deferred income taxes

 

 

23,548

 

 

 

 

 

 

23,548

 

Goodwill

 

 

270,551

 

 

 

 

 

 

270,551

 

Other intangible assets, net

 

 

62,781

 

 

 

 

 

 

62,781

 

Total assets

 

$

919,899

 

 

 

 

 

$

919,899

 

Accounts payable

 

$

77,380

 

 

 

 

 

$

77,380

 

Customer deposits (2)

 

 

33,415

 

 

 

(33,415

)

 

 

 

Contract liabilities (2)

 

 

 

 

 

31,981

 

 

 

31,981

 

Accrued compensation

 

 

30,614

 

 

 

 

 

 

30,614

 

Other current liabilities (2)

 

 

38,720

 

 

 

1,434

 

 

 

40,154

 

Debt and capital lease obligations, current and long-term

 

 

209,192

 

 

 

 

 

 

209,192

 

Pension and postretirement benefits

 

 

28,135

 

 

 

 

 

 

28,135

 

Other deferred items and liabilities

 

 

52,858

 

 

 

 

 

 

52,858

 

Total liabilities

 

 

470,314

 

 

 

 

 

 

470,314

 

Redeemable noncontrolling interest

 

 

6,648

 

 

 

 

 

 

6,648

 

Total stockholders' equity (3)

 

 

442,937

 

 

 

 

 

 

442,937

 

Total liabilities and stockholders' equity

 

$

919,899

 

 

 

 

 

$

919,899