VIAD CORP, 10-Q filed on 8/2/2019
Quarterly Report
v3.19.2
Document and Entity Information - shares
6 Months Ended
Jun. 30, 2019
Jul. 26, 2019
Document And Entity Information [Abstract]    
Entity Registrant Name VIAD CORP  
Entity Central Index Key 0000884219  
Document Type 10-Q  
Document Period End Date Jun. 30, 2019  
Amendment Flag false  
Document Fiscal Year Focus 2019  
Document Fiscal Period Focus Q2  
Current Fiscal Year End Date --12-31  
Trading Symbol VVI  
Entity Current Reporting Status Yes  
Entity Filer Category Large Accelerated Filer  
Entity Shell Company false  
Entity Small Business false  
Entity Emerging Growth Company false  
Entity File Number 001-11015  
Entity Tax Identification Number 361169950  
Entity Address, Address Line One 1850 North Central Avenue  
Entity Address, Address Line Two Suite 1900  
Entity Address, City or Town Phoenix  
Entity Address, State or Province Arizona  
Entity Address, Postal Zip Code 85004-4565  
City Area Code (602)  
Local Phone Number 207-1000  
Entity Common Stock, Shares Outstanding   20,311,857
v3.19.2
CONDENSED CONSOLIDATED BALANCE SHEETS (Unaudited) - USD ($)
$ in Thousands
Jun. 30, 2019
Dec. 31, 2018
Current assets    
Cash and cash equivalents $ 45,578 $ 44,893
Accounts receivable, net of allowances for doubtful accounts of $1,565 and $1,288, respectively 159,769 108,936
Inventories 21,304 16,629
Current contract costs 19,858 18,017
Other current assets 27,598 25,486
Total current assets 274,107 213,961
Property and equipment, net 487,410 333,847
Other investments and assets 43,288 42,910
Operating lease right-of-use assets 59,123  
Deferred income taxes 24,731 19,199
Goodwill 276,163 261,330
Other intangible assets, net 57,359 51,294
Total Assets 1,222,181 922,541
Current liabilities    
Accounts payable 100,312 71,927
Contract liabilities 50,622 33,476
Accrued compensation 29,283 22,668
Operating lease obligations 22,149  
Other current liabilities 48,808 32,258
Current portion of debt and finance lease obligations [1] 313,937 229,416
Total current liabilities 565,111 389,745
Long-term debt and finance lease obligations 10,588 705
Pension and postretirement benefits 26,317 26,636
Long-term operating lease obligations 39,607  
Other deferred items and liabilities 71,395 48,991
Total liabilities 713,018 466,077
Commitments and contingencies
Redeemable noncontrolling interest 5,508 5,909
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 572,931 575,339
Retained earnings 101,045 109,032
Unearned employee benefits and other   199
Accumulated other comprehensive loss (38,730) (47,975)
Common stock in treasury, at cost, 4,628,501 and 4,741,638 shares, respectively (233,739) (237,790)
Total Viad stockholders’ equity 438,909 436,207
Non-redeemable noncontrolling interest 64,746 14,348
Total stockholders’ equity 503,655 450,555
Total Liabilities and Stockholders’ Equity $ 1,222,181 $ 922,541
[1] Borrowings under the credit facilities are classified as current because all borrowed amounts are due within one year
v3.19.2
CONDENSED CONSOLIDATED BALANCE SHEETS (Parenthetical) (Unaudited) - USD ($)
$ in Thousands
Jun. 30, 2019
Dec. 31, 2018
Statement Of Financial Position [Abstract]    
Allowance for doubtful accounts $ 1,565 $ 1,288
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 4,628,501 4,741,638
v3.19.2
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (Unaudited) - USD ($)
shares in Thousands, $ in Thousands
3 Months Ended 6 Months Ended
Jun. 30, 2019
Jun. 30, 2018
Jun. 30, 2019
Jun. 30, 2018
Revenue:        
Total revenue $ 402,279 $ 363,677 $ 687,873 $ 641,105
Costs and expenses:        
Business interruption gain (141) (377) (141) (567)
Corporate activities 3,282 2,535 5,115 4,752
Interest income (83) (53) (181) (137)
Interest expense 2,957 2,354 5,872 4,423
Multi-employer pension plan withdrawal 15,508   15,508  
Other expense 456 543 911 781
Restructuring charges 4,455 662 5,143 824
Legal settlement     8,500  
Impairment recoveries   (35)   (35)
Total costs and expenses 382,271 330,904 693,394 623,733
Income (loss) from continuing operations before income taxes 20,008 32,773 (5,521) 17,372
Income tax expense (benefit) 6,565 9,114 (1,030) 4,476
Income (loss) from continuing operations 13,443 23,659 (4,491) 12,896
Income (loss) from discontinued operations 460 (279) 173 649
Net income (loss) 13,903 23,380 (4,318) 13,545
Net loss (income) attributable to non-redeemable noncontrolling interest (331) 33 89 397
Net loss attributable to redeemable noncontrolling interest 252 77 276 161
Net income (loss) attributable to Viad $ 13,824 $ 23,490 $ (3,953) $ 14,103
Diluted income (loss) per common share:        
Continuing operations attributable to Viad common stockholders $ 0.65 $ 1.16 $ (0.22) $ 0.65
Discontinued operations attributable to Viad common stockholders 0.02 (0.01) 0.01 0.04
Net income (loss) attributable to Viad common stockholders [1] $ 0.67 $ 1.15 $ (0.21) $ 0.69
Weighted-average outstanding and potentially dilutive common shares 20,266 20,436 20,110 20,446
Basic income (loss) per common share:        
Continuing operations attributable to Viad common stockholders $ 0.65 $ 1.16 $ (0.22) $ 0.65
Discontinued operations attributable to Viad common stockholders 0.02 (0.01) 0.01 0.04
Net income (loss) attributable to Viad common stockholders $ 0.67 $ 1.15 $ (0.21) $ 0.69
Weighted-average outstanding common shares 20,143 20,209 20,110 20,208
Dividends declared per common share $ 0.10 $ 0.10 $ 0.20 $ 0.20
Amounts attributable to Viad common stockholders        
Income (loss) from continuing operations $ 13,364 $ 23,769 $ (4,126) $ 13,454
Income (loss) from discontinued operations 460 (279) 173 649
Net income (loss) attributable to Viad 13,824 23,490 (3,953) 14,103
Services        
Revenue:        
Total revenue 347,659 314,723 598,300 560,271
Costs and expenses:        
Costs and expenses 306,154 280,842 569,510 538,137
Products        
Revenue:        
Total revenue 54,620 48,954 89,573 80,834
Costs and expenses:        
Costs and expenses $ 49,683 $ 44,433 $ 83,157 $ 75,555
[1] Diluted income (loss) per share amount cannot exceed basic income (loss) per share.
v3.19.2
CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS) (Unaudited) - USD ($)
$ in Thousands
3 Months Ended 6 Months Ended
Jun. 30, 2019
Jun. 30, 2018
Jun. 30, 2019
Jun. 30, 2018
Statement Of Income And Comprehensive Income [Abstract]        
Net income (loss) $ 13,903 $ 23,380 $ (4,318) $ 13,545
Other comprehensive income (loss):        
Unrealized foreign currency translation adjustments 4,317 (8,095) 9,097 (11,204)
Change in net actuarial loss, net of tax [1] 99 220 219 849
Change in prior service cost, net of tax [1] (36) 4 (71) (180)
Comprehensive income 18,283 15,509 4,927 3,010
Non-redeemable noncontrolling interest:        
Comprehensive (income) loss attributable to non-redeemable noncontrolling interest (331) 33 89 397
Unrealized foreign currency translation adjustments 776   776  
Redeemable noncontrolling interest:        
Comprehensive loss attributable to redeemable noncontrolling interest 252 77 276 161
Comprehensive income attributable to Viad $ 18,728 $ 15,542 $ 5,792 $ 3,407
[1] The tax effect on other comprehensive income (loss) is not significant.
v3.19.2
CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY (Unaudited) - USD ($)
$ in Thousands
Total
Mountain Park Lodges
Common Stock
Additional Capital
Retained Earnings
Unearned Employee Benefits and Other
Accumulated Other Comprehensive Income (Loss)
Common Stock in Treasury
Total Viad Equity
Non-Redeemable Non-Controlling Interest
Non-Redeemable Non-Controlling Interest
Mountain Park Lodges
Beginning Balance at Dec. 31, 2017 $ 442,937   $ 37,402 $ 574,458 $ 65,836 $ 218 $ (22,568) $ (226,215) $ 429,131 $ 13,806  
Increase (Decrease) in Stockholders' Equity [Roll Forward]                      
Net income (loss) (9,751)       (9,387)       (9,387) (364)  
Dividends on common stock ($0.10 per share) (2,046)       (2,046)       (2,046)    
Payment of payroll taxes on stock-based compensation through shares withheld (868)             (868) (868)    
Employee benefit plans 1,123     (2,014)       3,137 1,123    
Share-based compensation - equity awards 815     815         815    
Unrealized foreign currency translation adjustment, net of tax (3,109)           (3,109)   (3,109)    
Amortization of net actuarial loss, net of tax 629           629   629    
Amortization of prior service cost, net of tax (184)           (184)   (184)    
Adoption of ASU | ASU 2016-01         616   (616)        
Other, net (67)     (36) (19) (11)   (1) (67)    
Ending Balance at Mar. 31, 2018 429,479   37,402 573,223 55,000 207 (25,848) (223,947) 416,037 13,442  
Beginning Balance at Dec. 31, 2017 442,937   37,402 574,458 65,836 218 (22,568) (226,215) 429,131 13,806  
Increase (Decrease) in Stockholders' Equity [Roll Forward]                      
Amortization of net actuarial loss, net of tax [1] 849                    
Amortization of prior service cost, net of tax [1] (180)                    
Adoption of ASU | ASU 2016-01 [2]             (616)        
Ending Balance at Jun. 30, 2018 436,181   37,402 574,104 76,458 214 (33,719) (231,687) 422,772 13,409  
Beginning Balance at Mar. 31, 2018 429,479   37,402 573,223 55,000 207 (25,848) (223,947) 416,037 13,442  
Increase (Decrease) in Stockholders' Equity [Roll Forward]                      
Net income (loss) 23,457       23,490       23,490 (33)  
Dividends on common stock ($0.10 per share) (2,049)       (2,049)       (2,049)    
Payment of payroll taxes on stock-based compensation through shares withheld (156)             (156) (156)    
Common stock purchased for treasury (9,061)             (9,061) (9,061)    
Employee benefit plans 1,405     (71)       1,476 1,405    
Share-based compensation - equity awards 952     952         952    
Unrealized foreign currency translation adjustment, net of tax (8,095)           (8,095)   (8,095)    
Amortization of net actuarial loss, net of tax 220 [1]           220   220    
Amortization of prior service cost, net of tax 4 [1]           4   4    
Other, net 25       17 7   1 25    
Ending Balance at Jun. 30, 2018 436,181   37,402 574,104 76,458 214 (33,719) (231,687) 422,772 13,409  
Beginning Balance at Dec. 31, 2018 450,555   37,402 575,339 109,032 199 (47,975) (237,790) 436,207 14,348  
Increase (Decrease) in Stockholders' Equity [Roll Forward]                      
Net income (loss) (18,197)       (17,777)       (17,777) (420)  
Dividends on common stock ($0.10 per share) (2,028)       (2,028)       (2,028)    
Payment of payroll taxes on stock-based compensation through shares withheld (2,905)             (2,905) (2,905)    
Employee benefit plans 1,220     (4,302)       5,522 1,220    
Share-based compensation - equity awards 780     780         780    
Unrealized foreign currency translation adjustment, net of tax 4,780           4,780   4,780    
Amortization of net actuarial loss, net of tax 120           120   120    
Amortization of prior service cost, net of tax (35)           (35)   (35)    
Other, net 41     16   24   1 41    
Ending Balance at Mar. 31, 2019 434,331   37,402 571,833 89,227 223 (43,110) (235,172) 420,403 13,928  
Beginning Balance at Dec. 31, 2018 450,555   37,402 575,339 109,032 199 (47,975) (237,790) 436,207 14,348  
Increase (Decrease) in Stockholders' Equity [Roll Forward]                      
Amortization of net actuarial loss, net of tax [1] 219                    
Amortization of prior service cost, net of tax [1] (71)                    
Ending Balance at Jun. 30, 2019 503,655   37,402 572,931 101,045   (38,730) (233,739) 438,909 64,746  
Beginning Balance at Mar. 31, 2019 434,331   37,402 571,833 89,227 223 (43,110) (235,172) 420,403 13,928  
Increase (Decrease) in Stockholders' Equity [Roll Forward]                      
Net income (loss) 14,155       13,824       13,824 331  
Dividends on common stock ($0.10 per share) (2,006)       (2,006)       (2,006)    
Payment of payroll taxes on stock-based compensation through shares withheld (89)             (89) (89)    
Employee benefit plans 1,602     301       1,301 1,602    
Share-based compensation - equity awards 781     781         781    
Unrealized foreign currency translation adjustment, net of tax 5,093           4,317   4,317 776  
Amortization of net actuarial loss, net of tax 99 [1]           99   99    
Amortization of prior service cost, net of tax (36) [1]           (36)   (36)    
Acquisition of Mountain Park Lodges   $ 49,711                 $ 49,711
Other, net 14     16   $ (223)   221 14    
Ending Balance at Jun. 30, 2019 $ 503,655   $ 37,402 $ 572,931 $ 101,045   $ (38,730) $ (233,739) $ 438,909 $ 64,746  
[1] The tax effect on other comprehensive income (loss) is not significant.
[2] Upon the adoption of ASU 2016-01, Financial Instruments – Overall: Recognition and Measurement of Financial Assets and Financial Liabilities, we recorded a cumulative-effect adjustment from unrealized gains on investments to beginning retained earnings.
v3.19.2
CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY (Parenthetical) (Unaudited) - $ / shares
3 Months Ended 6 Months Ended
Mar. 31, 2019
Mar. 31, 2018
Jun. 30, 2019
Jun. 30, 2018
Statement Of Stockholders Equity [Abstract]        
Dividends on common stock per share $ 0.10 $ 0.10 $ 0.10 $ 0.10
v3.19.2
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited) - USD ($)
$ in Thousands
6 Months Ended
Jun. 30, 2019
Jun. 30, 2018
Cash flows from operating activities    
Net income (loss) $ (4,318) $ 13,545
Adjustments to reconcile net income (loss) to net cash provided by operating activities:    
Depreciation and amortization 27,715 28,178
Deferred income taxes 6,215 2,727
Income from discontinued operations (173) (649)
Restructuring charges 5,143 824
Legal settlement 8,500  
Impairment recoveries   (35)
Gains on dispositions of property and other assets (731) (113)
Share-based compensation expense 4,617 2,762
Multi-employer pension plan withdrawal 15,508  
Other non-cash items, net 2,227 2,681
Change in operating assets and liabilities (excluding the impact of acquisitions):    
Receivables (51,293) (37,594)
Inventories (4,518) (3,043)
Current contract costs (2,000) (8,637)
Accounts payable 31,303 20,140
Accrued compensation 3,647 (5,753)
Contract liabilities 17,259 20,266
Payments on operating lease obligations (13,603)  
Other assets and liabilities, net (5,961) (3,839)
Net cash provided by operating activities 39,537 31,460
Cash flows from investing activities    
Capital expenditures (46,517) (43,429)
Cash paid for acquired businesses, net (72,918) (4,628)
Proceeds from dispositions of property and other assets 768 1,292
Net cash used in investing activities (118,667) (46,765)
Cash flows from financing activities    
Proceeds from borrowings 133,827 80,051
Payments on debt and finance lease obligations (47,862) (51,607)
Dividends paid on common stock (4,034) (4,095)
Payment of payroll taxes on stock-based compensation through shares withheld or repurchased (2,994) (1,024)
Common stock purchased for treasury   (9,061)
Proceeds from exercise of stock options 92 84
Net cash provided by financing activities 79,029 14,348
Effect of exchange rate changes on cash and cash equivalents 786 (3,380)
Net change in cash and cash equivalents 685 (4,337)
Cash and cash equivalents, beginning of year 44,893 53,723
Cash and cash equivalents, end of period $ 45,578 $ 49,386
v3.19.2
Overview and Basis of Presentation
6 Months Ended
Jun. 30, 2019
Organization Consolidation And Presentation Of Financial Statements [Abstract]  
Overview and Basis of Presentation

Note 1. Overview and Basis of Presentation

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 North America, GES EMEA (collectively, “GES”), and Pursuit.

GES

GES is a global, full-service live events company offering a comprehensive range of services to the world’s leading brands and event organizers. 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.

Services and Products Offered

GES provides a full suite of services and products for event organizers and corporate brand marketers through the following lines of business:

 

Core Services. GES provides official contracting services and products, including the design and production of experiences, material handling, rigging, electrical, and other on-site event services.

 

Event Technology. GES offers a comprehensive range of event technology services, including event accommodation solutions, registration and data analytics, and event management tools.

 

Audio-Visual. GES offers a variety of high-impact multi-media services and technology, including video production, lighting design, digital studio services, entertainment services and talent coordination, projection mapping, and computer rental and support.

 

Markets Served

GES provides the above services and products across four live event markets: Exhibitions, Conferences, Corporate Events, and Consumer Events (collectively, “Live Events”).

 

Exhibitions facilitate business-to-business and business-to-consumer sales and marketing.

 

Conferences facilitate attendee education and may also include an expo or trade show to further facilitate attendee education and to facilitate business-to-business and business-to-consumer sales and marketing.  

 

Corporate events facilitate attendee education of the sponsoring company’s products or product ecosystem.  

 

Consumer events entertain, educate, or create an experience, typically around a specific genre.

Pursuit

Pursuit is a collection of inspiring and unforgettable travel experiences that include world-class recreational attractions, unique hotels and lodges, food and beverage, retail, sightseeing, and ground transportation services.

Services and Products Offered

Pursuit comprises four lines of business: Attractions, including food and beverage services and retail operations; Hospitality, including food and beverage services and retail operations; Transportation; and Travel Planning. Services offered by these lines of business (or a subset of these) include admissions, accommodations, transportation, and travel planning. Products offered include food and beverage and retail operations.

 

Markets Served

Pursuit provides the above services and products across the following geographic markets:

 

The Banff Jasper Collection is a leading travel and tourism provider in the Canadian Rockies in Alberta, Canada with two lodging properties in Banff National Park, eight lodging properties in Jasper National Park, including the recently acquired Mountain Park Lodges, five world-class recreational attractions, food and beverage services, retail operations, sightseeing and transportation services.

 

The Alaska Collection is a leading travel and tourism provider in Alaska with two lodging properties and a sightseeing excursion in Denali National Park and Preserve, a lodge in Talkeetna, Alaska’s top-rated wildlife and glacier cruise, and two lodging properties located near Kenai Fjords National Park. The Alaska Collection also provides food and beverage services and retail operations.

 

The Glacier Park Collection is an operator of nine lodging properties, food and beverage services, and retail operations in and around Glacier National Park in Montana and Waterton Lakes National Park in Alberta, Canada, with a leading share of rooms in the Glacier Park market.

 

FlyOver is a recreational attraction that provides a virtual flight ride experience that combines motion seating, spectacular audio-visual media, and special effects including wind, scents, and mist to provide a true flying experience for guests.  

 

o

FlyOver Canada is located in Vancouver, British Columbia that provides an unforgettable experience of flying across Canada.

 

o

FlyOver Iceland is currently being built in Reykjavik, Iceland that will provide an experience of flying over some of Iceland’s most spectacular scenery and natural wonders. We are scheduled to open this new attraction in August 2019.

 

o

FlyOver Las Vegas is currently being built in Las Vegas, Nevada that will provide an experience of flying over some of the most spectacular scenery and natural wonders of the American Southwest. We expect to open this new attraction in 2021.

 

o

FlyOver Toronto is a newly announced expansion into Toronto, Canada. This new attraction will showcase Canada’s most awe-inspiring sights. It will be located in Toronto’s Entertainment District. We expect to open this new attraction in 2022. Refer to Note 24 – Subsequent Events for additional information.

 

Pursuit recently announced a plan for a new geothermal lagoon attraction in Iceland. It will be located on an oceanfront lot just outside downtown Reykjavik. We expect to open this new attraction in 2021. Refer to Note 24 – Subsequent Events for additional information.

Basis of Presentation

The accompanying unaudited condensed consolidated financial statements were prepared in accordance with accounting principles generally accepted in the United States of America (“GAAP”) and with the instructions to Form 10-Q and Article 10 of Regulation S-X for interim financial information. Accordingly, these financial statements do not include all of the information required by GAAP or SEC rules and regulations for complete financial statements. These financial statements reflect all adjustments (consisting of normal recurring adjustments) necessary for a fair presentation of the results for the interim periods presented. Interim results are not necessarily indicative of the results for the full year. These unaudited condensed consolidated financial statements should be read in conjunction with our Annual Report on Form 10-K for the year ended December 31, 2018, filed with the SEC on February 27, 2019 (“2018 Form 10-K”).

The condensed consolidated financial statements include the accounts of Viad and its subsidiaries. We have eliminated all significant intercompany account balances and transactions in consolidation.

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 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.

ASU 2016-13, Financial Instruments – Credit Losses (Topic 326) - Measurement of Credit Losses on Financial Instruments

 

The amendment eliminates the incurred credit loss impairment methodology in current GAAP and replaces it with an expected credit loss concept based on historical experience, current conditions, and reasonable and supportable forecasts.

 

Subsequent to the issuance of ASU 2016-13, the FASB issued additional amendments which do not change the core principle of the guidance stated in ASU 2016-13. Rather, they are intended to clarify and improve understanding of certain topics included within the credit losses standard.

 

January 1, 2020

 

We are currently evaluating the potential impact of the adoption of this new guidance on our consolidated financial statements. We will be required to use a forward-looking expected credit loss model for trade receivables. Adoption of this new standard will be applied using the modified retrospective approach through a cumulative-effect adjustment to retained earnings as of the effective date in an amount necessary to adjust our current credit loss methodology to equal the current estimate of expected losses on financial assets held at that date.

 

Standard

 

Description

 

Date of adoption

 

Effect on the financial statements

Standards Recently Adopted

ASU 2016-02, Leases (Topic 842)

 

The amendment increases transparency and comparability by requiring the recognition of a right-of-use asset and a lease liability on the balance sheet. The standard also requires more detailed disclosures to enable users of financial statements to understand the nature, amount, timing, and uncertainty of cash flows arising from leases.

 

January 1, 2019

 

We adopted ASU 2016-02 and its related amendments (collectively, “Topic 842”) on January 1, 2019 using the optional transition method. Under this method, a cumulative adjustment to retained earnings is recorded, if any, and prior periods are not restated. We determined there was no cumulative effect adjustment to retained earnings on January 1, 2019.

 

The adoption of Topic 842 did not have a material impact on our Consolidated Statement of Operations. The most significant impact related to facility and equipment leases, which were previously recorded as operating leases. Upon adoption as of January 1, 2019, we recognized an additional right-of-use asset and lease liability of $59 million on the balance sheet. The existing deferred rent liabilities balance, resulting from historical straight-lining of operating leases, was reclassified upon adoption to reduce the measurement of leased assets. Refer to our Leases Significant Accounting Policy immediately following this table and Note 19 - Leases and Other for additional information.

 

 

 

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 the allocation of purchase price of acquired businesses. Actual results could differ from these and other estimates.

Revenue Recognition

Revenue is measured based on a specified amount of consideration in a contract with a customer, net of commissions paid to customers and amounts collected on behalf of third parties. We recognize revenue when a performance obligation is satisfied by transferring control of a product or service to a customer.

GES’ service revenue is primarily derived through its comprehensive range of services to event organizers and corporate brand marketers including Core Services, 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 recognize 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.

Noncontrolling Interests – Non-redeemable and Redeemable

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. and the 40% equity interest that we do not own in the recently acquired Mountain Park Lodges. We report non-redeemable noncontrolling interest within stockholders’ equity in the Condensed Consolidated Balance Sheets. The amount of consolidated net income or loss attributable to Viad and the non-redeemable noncontrolling interest is presented in the Condensed Consolidated Statements of Operations.  

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 Condensed Consolidated Balance Sheets. The amount of the net income or loss attributable to redeemable noncontrolling interests is recorded in the Condensed Consolidated Statements of Operations and the accretion of the redemption value is recorded as an adjustment to retained earnings and is included in our income (loss) per share. Refer to Note 21 – Redeemable Noncontrolling Interest for additional information.

Leases

We adopted Topic 842 on January 1, 2019, which requires the recognition of a right-of-use (“ROU”) asset and lease liability on the balance sheet, and requires lessees to classify leases as either finance or operating leases. The classification of the lease determines whether the lease expense is recognized on an effective interest method basis (finance lease) or on a straight-line basis (operating lease) over the lease term. In determining whether an agreement contains a lease, we consider if we have a right to control the use of the underlying asset during the lease term in exchange for an obligation to make lease payments arising from the lease. We recognize

ROU assets and lease liabilities at commencement date, which is when the underlying asset is available for use to a lessee, based on the present value of lease payments over the lease term.

Our operating and finance leases are primarily facility, equipment, and land leases. Our facility leases comprise mainly manufacturing facilities, sales and design facilities, offices, storage and/or warehouses, and truck marshaling yards. These facility leases generally have lease terms ranging up to 25 years. Our equipment leases comprise mainly vehicles, hardware, and office equipment, each with various lease terms. Our land leases comprise mainly leases in Canada and Iceland on which our hotels or attractions reside and have lease terms ranging up to 42 years.

We made the accounting policy election not to recognize ROU assets and lease liabilities for leases with a term of twelve months or less. We elected to apply the package of practical expedients permitted under Topic 842 transition guidance, which among other things, allows us to carry forward our historical lease classifications. We also elected the practical expedient to not separate non-lease components from lease components for all asset classes, and payments associated with fixed non-lease components are included in measuring the ROU asset and lease liability.

If a lease contains a renewal option that is reasonably certain to be exercised, then the lease term includes the optional periods in measuring a ROU asset and lease liability. Variable leases and variable non-lease components are not included in the calculation of the ROU asset and corresponding lease liability. For facility leases, variable lease costs include the costs of common area maintenance, taxes, and insurance for which we pay our lessors an estimate that is adjusted to actual expense on a quarterly or annual basis depending on the underlying contract terms. These variable lease payments are expensed as incurred. Upon the adoption of Topic 842, our accounting for finance leases, previously referred to as capital leases, remains substantially unchanged from prior guidance. Our lease agreements do not contain any significant residual value guarantees or restrictive covenants.

Substantially all of our lease agreements do not specify an implicit borrowing rate, and as such, we utilize an incremental borrowing rate based on lease term and country, in order to calculate the present value of our future lease payments. The discount rate represents a risk-adjusted rate on a secured basis, and is the expected rate at which we would borrow funds to satisfy the scheduled lease liability payment streams commensurate with the lease term and the country. On January 1, 2019, the discount rate used on existing leases at adoption was extrapolated based on the remaining lease term and the country using available data as of that date.  For new or renewed leases starting in 2019, the discount rate is determined using available data at lease commencement and based on the lease term and country including any reasonably certain renewal periods.

We are also a lessor to third party tenants who either lease certain portions of facilities that we own or sublease certain portions of facilities that we lease. Lease income from owned facilities is recorded as rental income and sublease income from leased facilities is recorded against lease expense in the Condensed Consolidated Statements of Operations. All of our leases for which we are the lessor are classified as operating leases under Topic 842.

v3.19.2
Revenue and Related Contract Costs and Contract Liabilities
6 Months Ended
Jun. 30, 2019
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 Condensed Consolidated Balance Sheets under the captions “Contract liabilities” and “Other deferred items and liabilities.”

Changes to contract liabilities are as follows:

(in thousands)

 

 

 

 

Balance at December 31, 2018

 

$

35,600

 

Cash additions

 

 

77,448

 

Revenue recognized

 

 

(62,147

)

Foreign exchange translation adjustment

 

 

87

 

Balance at June 30, 2019

 

$

50,988

 

Contract Costs

GES capitalizes certain incremental costs incurred in obtaining and fulfilling contracts. Capitalized costs principally relate to direct costs of materials and services incurred in fulfilling services of future exhibitions, conferences, and events, and also include up-front incentives and commissions incurred upon contract signing. Costs associated with preliminary contract activities (i.e. proposal activities) are expensed as incurred. Capitalized contract costs are expensed upon the transfer of the related goods or services and are included in cost of services or cost of products, as applicable. The deferred incremental costs of obtaining and fulfilling contracts are included in the Condensed Consolidated Balance Sheets under the captions “Current contract costs” and “Other investments and assets.”

 

Changes to contract costs are as follows:

(in thousands)

 

 

 

 

Balance at December 31, 2018

 

$

21,478

 

Additions

 

 

35,627

 

Expenses

 

 

(32,721

)

Cancelled

 

 

(13

)

Foreign exchange translation adjustment

 

 

(137

)

Balance at June 30, 2019

 

$

24,234

 

As of June 30, 2019, capitalized contract costs consisted of $2.1 million to obtain contracts and $22.1 million to fulfill contracts. We did not recognize an impairment loss with respect to capitalized contract costs during the three and six months ended June 30, 2019 or 2018.

Disaggregation of Revenue

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

GES

 

 

Three Months Ended June 30, 2019

 

(in thousands)

 

GES North America(1)

 

 

GES EMEA(1)

 

 

Intersegment Eliminations

 

 

Total

 

Services:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Core services

 

$

228,112

 

 

$

41,821

 

 

$

 

 

$

269,933

 

Audio-visual

 

 

24,175

 

 

 

6,881

 

 

 

 

 

 

31,056

 

Event technology

 

 

9,845

 

 

 

2,134

 

 

 

 

 

 

11,979

 

Intersegment eliminations

 

 

 

 

 

 

 

 

(6,317

)

 

 

(6,317

)

Total services

 

 

262,132

 

 

 

50,836

 

 

 

(6,317

)

 

 

306,651

 

Products:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Core products

 

 

21,550

 

 

 

18,669

 

 

 

 

 

 

40,219

 

Total revenue

 

$

283,682

 

 

$

69,505

 

 

$

(6,317

)

 

$

346,870

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Timing of revenue recognition:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Services transferred over time

 

$

262,132

 

 

$

50,836

 

 

$

(6,317

)

 

$

306,651

 

Products transferred over time(2)

 

 

11,774

 

 

 

4,811

 

 

 

 

 

 

16,585

 

Products transferred at a point in time

 

 

9,776

 

 

 

13,858

 

 

 

 

 

 

23,634

 

Total revenue

 

$

283,682

 

 

$

69,505

 

 

$

(6,317

)

 

$

346,870

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Markets:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Exhibitions

 

$

138,887

 

 

$

49,293

 

 

$

 

 

$

188,180

 

Conferences

 

 

105,455

 

 

 

10,870

 

 

 

 

 

 

116,325

 

Corporate events

 

 

29,868

 

 

 

8,772

 

 

 

 

 

 

38,640

 

Consumer events

 

 

9,472

 

 

 

570

 

 

 

 

 

 

10,042

 

Intersegment eliminations

 

 

 

 

 

 

 

 

(6,317

)

 

 

(6,317

)

Total revenue

 

$

283,682

 

 

$

69,505

 

 

$

(6,317

)

 

$

346,870

 

(1)

During the first quarter of 2019, we realigned GES’ organizational structure. As a result, we changed GES’ reportable segments to reflect how our chief operating decision maker regularly reviews and makes decisions regarding the allocation of resources. Accordingly, GES’ new reportable segments are GES North America and GES EMEA.

(2)

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

 

 

 

Six Months Ended June 30, 2019

 

(in thousands)

 

GES North America(1)

 

 

GES EMEA(1)

 

 

Intersegment Eliminations

 

 

Total

 

Services:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Core services

 

$

407,985

 

 

$

72,884

 

 

$

 

 

$

480,869

 

Audio-visual

 

 

42,581

 

 

 

10,769

 

 

 

 

 

 

53,350

 

Event technology

 

 

18,608

 

 

 

5,087

 

 

 

 

 

 

23,695

 

Intersegment eliminations

 

 

 

 

 

 

 

 

(9,007

)

 

 

(9,007

)

Total services

 

 

469,174

 

 

 

88,740

 

 

 

(9,007

)

 

 

548,907

 

Products:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Core products

 

 

37,749

 

 

 

35,141

 

 

 

 

 

 

72,890

 

Total revenue

 

$

506,923

 

 

$

123,881

 

 

$

(9,007

)

 

$

621,797

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Timing of revenue recognition:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Services transferred over time

 

$

469,174

 

 

$

88,740

 

 

$

(9,007

)

 

$

548,907

 

Products transferred over time(2)

 

 

23,043

 

 

 

8,290

 

 

 

 

 

 

31,333

 

Products transferred at a point in time

 

 

14,706

 

 

 

26,851

 

 

 

 

 

 

41,557

 

Total revenue

 

$

506,923

 

 

$

123,881

 

 

$

(9,007

)

 

$

621,797

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Markets:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Exhibitions

 

$

275,316

 

 

$

94,948

 

 

$

 

 

$

370,264

 

Conferences

 

 

153,317

 

 

 

13,852

 

 

 

 

 

 

167,169

 

Corporate events

 

 

62,655

 

 

 

14,317

 

 

 

 

 

 

76,972

 

Consumer events

 

 

15,635

 

 

 

764

 

 

 

 

 

 

16,399

 

Intersegment eliminations

 

 

 

 

 

 

 

 

(9,007

)

 

 

(9,007

)

Total revenue

 

$

506,923

 

 

$

123,881

 

 

$

(9,007

)

 

$

621,797

 

 

(1)

During the first quarter of 2019, we realigned GES’ organizational structure. As a result, we changed GES’ reportable segments to reflect how our chief operating decision maker regularly reviews and makes decisions regarding the allocation of resources. Accordingly, GES’ new reportable segments are GES North America and GES EMEA.

(2)

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

 

 

 

 

Three Months Ended June 30, 2018

 

(in thousands)

 

GES North America(1)

 

 

GES EMEA(1)

 

 

Intersegment Eliminations

 

 

Total

 

Services:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Core services

 

$

211,683

 

 

$

31,774

 

 

$

 

 

$

243,457

 

Audio-visual

 

 

20,741

 

 

 

6,553

 

 

 

 

 

 

27,294

 

Event technology

 

 

10,534

 

 

 

2,847

 

 

 

 

 

 

13,381

 

Intersegment eliminations

 

 

 

 

 

 

 

 

(6,231

)

 

 

(6,231

)

Total services

 

 

242,958

 

 

 

41,174

 

 

 

(6,231

)

 

 

277,901

 

Products:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Core products

 

 

17,933

 

 

 

19,488

 

 

 

 

 

 

37,421

 

Total revenue

 

$

260,891

 

 

$

60,662

 

 

$

(6,231

)

 

$

315,322

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Timing of revenue recognition:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Services transferred over time

 

$

242,958

 

 

$

41,174

 

 

$

(6,231

)

 

$

277,901

 

Products transferred over time(2)

 

 

10,968

 

 

 

4,827

 

 

 

 

 

 

15,795

 

Products transferred at a point in time

 

 

6,965

 

 

 

14,661

 

 

 

 

 

 

21,626

 

Total revenue

 

$

260,891