VIAD CORP, 10-K filed on 2/28/2018
Annual Report
Document and Entity Information (USD $)
In Millions, except Share data, unless otherwise specified
12 Months Ended
Dec. 31, 2017
Jan. 31, 2018
Jun. 30, 2017
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, 2017 
 
 
Amendment Flag
false 
 
 
Document Fiscal Year Focus
2017 
 
 
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 Public Float
 
 
$ 948 
Entity Common Stock, Shares Outstanding
 
20,422,762 
 
CONSOLIDATED BALANCE SHEETS (USD $)
In Thousands, unless otherwise specified
Dec. 31, 2017
Dec. 31, 2016
Current assets
 
 
Cash and cash equivalents
$ 53,723 
$ 20,900 
Accounts receivable, net of allowances for doubtful accounts of $2,023 and $1,342, respectively
104,811 
104,648 
Inventories
30,372 
31,420 
Other current assets
21,030 
18,449 
Total current assets
209,936 
175,417 
Property and equipment, net
305,571 
279,858 
Other investments and assets
47,512 
44,297 
Deferred income taxes
23,548 
42,549 
Goodwill
270,551 
254,022 
Other intangible assets, net
62,781 
73,673 
Total Assets
919,899 
869,816 
Current liabilities
 
 
Accounts payable
77,380 
67,596 
Customer deposits
33,415 
42,723 
Accrued compensation
30,614 
29,913 
Other current liabilities
38,720 
30,390 
Current portion of debt and capital lease obligations
152,599 1
174,968 1
Total current liabilities
332,728 
345,590 
Long-term debt and capital lease obligations
56,593 
74,243 
Pension and postretirement benefits
28,135 
28,611 
Other deferred items and liabilities
52,858 
50,734 
Total liabilities
470,314 
499,178 
Commitments and contingencies
   
   
Redeemable noncontrolling interest
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
574,458 
573,841 
Retained earnings
65,836 
16,291 
Unearned employee benefits and other
218 
172 
Accumulated other comprehensive loss
(22,568)
(39,391)
Common stock in treasury, at cost, 4,518,099 and 4,613,520 shares, respectively
(226,215)
(230,960)
Total Viad stockholders’ equity
429,131 
357,355 
Non-redeemable noncontrolling interest
13,806 
13,283 
Total stockholders’ equity
442,937 
370,638 
Total Liabilities and Stockholders’ Equity
$ 919,899 
$ 869,816 
CONSOLIDATED BALANCE SHEETS (Parenthetical) (USD $)
In Thousands, except Share data, unless otherwise specified
Dec. 31, 2017
Dec. 31, 2016
Statement Of Financial Position [Abstract]
 
 
Allowance for doubtful accounts
$ 2,023 
$ 1,342 
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
4,518,099 
4,613,520 
CONSOLIDATED STATEMENTS OF OPERATIONS (USD $)
In Thousands, except Per Share data, unless otherwise specified
12 Months Ended
Dec. 31, 2017
Dec. 31, 2016
Dec. 31, 2015
Revenue:
 
 
 
Exhibition and event services
$ 967,352 
$ 881,137 
$ 799,752 
Exhibits and environments
165,745 
170,469 
177,126 
Pursuit services
173,868 
153,364 
112,170 
Total revenue
1,306,965 
1,204,970 
1,089,048 
Costs and expenses:
 
 
 
Costs of services
1,050,547 
954,667 
868,369 
Costs of products sold
161,992 
165,118 
166,095 
Business interruption gain
(2,692)
 
 
Corporate activities
12,877 
10,322 
9,720 
Interest income
(319)
(1,165)
(658)
Interest expense
8,304 
5,898 
4,535 
Restructuring charges
1,004 
5,183 
2,956 
Impairment charges (recoveries), net
(29,098)
218 
96 
Total costs and expenses
1,202,615 
1,140,241 
1,051,113 
Income from continuing operations before income taxes
104,350 
64,729 
37,935 
Income tax expense
45,898 
21,250 
10,493 
Income from continuing operations
58,452 
43,479 
27,442 
Loss from discontinued operations
(268)
(684)
(394)
Net income
58,184 
42,795 
27,048 
Net income attributable to non-redeemable noncontrolling interest
(523)
(526)
(442)
Net loss attributable to redeemable noncontrolling interest
46 
 
 
Net income attributable to Viad
57,707 
42,269 
26,606 
Diluted income (loss) per common share:
 
 
 
Continuing operations attributable to Viad common stockholders
$ 2.84 
$ 2.12 
$ 1.34 
Discontinued operations attributable to Viad common stockholders
$ (0.01)
$ (0.03)
$ (0.02)
Net income attributable to Viad common stockholders
$ 2.83 
$ 2.09 
$ 1.32 
Weighted-average outstanding and potentially dilutive common shares
20,405 
20,177 
19,981 
Basic income (loss) per common share:
 
 
 
Continuing operations attributable to Viad common stockholders
$ 2.84 
$ 2.12 
$ 1.34 
Discontinued operations attributable to Viad common stockholders
$ (0.01)
$ (0.03)
$ (0.02)
Net income attributable to Viad common stockholders
$ 2.83 
$ 2.09 
$ 1.32 
Weighted-average outstanding common shares
20,146 
19,990 
19,797 
Dividends declared per common share
$ 0.40 
$ 0.40 
$ 0.40 
Amounts attributable to Viad common stockholders
 
 
 
Income from continuing operations
57,975 
42,953 
27,000 
Loss from discontinued operations
(268)
(684)
(394)
Net income attributable to Viad
$ 57,707 
$ 42,269 
$ 26,606 
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS) (USD $)
In Thousands, unless otherwise specified
12 Months Ended
Dec. 31, 2017
Dec. 31, 2016
Dec. 31, 2015
Statement Of Income And Comprehensive Income [Abstract]
 
 
 
Net income
$ 58,184 
$ 42,795 
$ 27,048 
Other comprehensive income (loss):
 
 
 
Unrealized gains (losses) on investments, net of tax effects of $121, $47, and $(78)
195 
75 
(125)
Unrealized foreign currency translation adjustments, net of tax
17,058 
(5,827)
(35,673)
Change in net actuarial gain (loss), net of tax effects of $163, $617, and $653
344 
894 
2,556 
Change in prior service cost, net of tax effects of $(473), $(219), and $(210)
(774)
(357)
(345)
Comprehensive income (loss)
75,007 
37,580 
(6,539)
Net income attributable to non-redeemable noncontrolling interest
(523)
(526)
(442)
Net loss attributable to redeemable noncontrolling interest
46 
 
 
Comprehensive income (loss) attributable to Viad
$ 74,530 
$ 37,054 
$ (6,981)
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS) (Parenthetical) (USD $)
In Thousands, unless otherwise specified
12 Months Ended
Dec. 31, 2017
Dec. 31, 2016
Dec. 31, 2015
Statement Of Income And Comprehensive Income [Abstract]
 
 
 
Unrealized investment gains (losses) arising during the period, tax effects
$ 121 
$ 47 
$ (78)
Amortization of net actuarial gain (loss), tax effects
163 
617 
653 
Amortization of prior service cost, tax effects
$ (473)
$ (219)
$ (210)
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY (USD $)
In Thousands, unless otherwise specified
Total
Common Stock
Additional Capital
Retained Earnings (Deficit)
Unearned Employee Benefits and Other
Accumulated Other Comprehensive Income (Loss)
Common Stock in Treasury
Total Viad Equity
Non-Redeemable Non-Controlling Interest
Beginning Balance at Dec. 31, 2014
$ 347,702 
$ 37,402 
$ 582,066 
$ (36,427)
$ 23 
$ (589)
$ (247,088)
$ 335,387 
$ 12,315 
Increase (Decrease) in Stockholders' Equity [Roll Forward]
 
 
 
 
 
 
 
 
 
Net income
27,048 
 
 
26,606 
 
 
 
26,606 
442 
Dividends on common stock ($0.40 per share)
(8,036)
 
 
(8,036)
 
 
 
(8,036)
 
Common stock purchased for treasury
(4,816)
 
 
 
 
 
(4,816)
(4,816)
 
Employee benefit plans
4,536 
 
(7,957)
 
 
 
12,493 
4,536 
 
Share-based compensation—equity awards
2,156 
 
2,156 
 
 
 
 
2,156 
 
Tax expense from share-based compensation
360 
 
360 
 
 
 
 
360 
 
Unrealized foreign currency translation adjustment
(35,673)
 
 
 
 
(35,673)
 
(35,673)
 
Unrealized gain (loss) on investments
(125)
 
 
 
 
(125)
 
(125)
 
Amortization of net actuarial gain (loss)
2,556 
 
 
 
 
2,556 
 
2,556 
 
Amortization of prior service cost
(345)
 
 
 
 
(345)
 
(345)
 
Other, net
(25)
 
(102)
(9)
86 
 
 
(25)
 
Ending Balance at Dec. 31, 2015
335,338 
37,402 
576,523 
(17,866)
109 
(34,176)
(239,411)
322,581 
12,757 
Increase (Decrease) in Stockholders' Equity [Roll Forward]
 
 
 
 
 
 
 
 
 
Net income
42,795 
 
 
42,269 
 
 
 
42,269 
526 
Dividends on common stock ($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
(5,827)
 
 
 
 
(5,827)
 
(5,827)
 
Unrealized gain (loss) on investments
75 
 
 
 
 
75 
 
75 
 
Amortization of net actuarial gain (loss)
894 
 
 
 
 
894 
 
894 
 
Amortization of prior service cost
(357)
 
 
 
 
(357)
 
(357)
 
Other, net
12 
 
(51)
(1)
63 
 
12 
 
Ending Balance at Dec. 31, 2016
370,638 
37,402 
573,841 
16,291 
172 
(39,391)
(230,960)
357,355 
13,283 
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
17,058 
 
 
 
 
17,058 
 
17,058 
 
Unrealized gain (loss) on investments
195 
 
 
 
 
195 
 
195 
 
Amortization of net actuarial gain (loss)
344 
 
 
 
 
344 
 
344 
 
Amortization of prior service cost
(774)
 
 
 
 
(774)
 
(774)
 
Other, net
(275)
 
(319)
(2)
46 
 
 
(275)
 
Ending Balance at Dec. 31, 2017
$ 442,937 
$ 37,402 
$ 574,458 
$ 65,836 
$ 218 
$ (22,568)
$ (226,215)
$ 429,131 
$ 13,806 
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY (Parenthetical)
12 Months Ended
Dec. 31, 2017
Dec. 31, 2016
Dec. 31, 2015
Statement Of Stockholders Equity [Abstract]
 
 
 
Dividends on common stock per share
$ 0.40 
$ 0.40 
$ 0.40 
CONSOLIDATED STATEMENTS OF CASH FLOWS (USD $)
In Thousands, unless otherwise specified
12 Months Ended
Dec. 31, 2017
Dec. 31, 2016
Dec. 31, 2015
Cash flows from operating activities
 
 
 
Net income
$ 58,184 
$ 42,795 
$ 27,048 
Adjustments to reconcile net income to net cash provided by operating activities:
 
 
 
Depreciation and amortization
55,114 
42,743 
35,231 
Deferred income taxes
26,049 
7,672 
469 
Loss from discontinued operations
268 
684 
394 
Restructuring charges
1,004 
5,183 
2,956 
Impairment charges (recoveries)
(29,098)
218 
96 
(Gains) losses on dispositions of property and other assets
1,420 
(54)
(690)
Share-based compensation expense
10,969 
8,038 
3,848 
Excess tax benefit from share-based compensation arrangements
 
(95)
(418)
Other non-cash items, net
5,029 
6,167 
5,394 
Change in operating assets and liabilities (excluding the impact of acquisitions):
 
 
 
Receivables
(2,338)
(9,358)
(16,665)
Inventories
2,505 
(2,646)
4,872 
Accounts payable
7,546 
1,770 
(2,619)
Restructuring liabilities
(1,954)
(3,866)
(2,572)
Accrued compensation
(5,152)
(353)
1,469 
Customer deposits
(10,572)
8,429 
408 
Income taxes payable
5,820 
(4,630)
67 
Other assets and liabilities, net
(12,571)
(2,379)
989 
Net cash provided by operating activities
112,223 
100,318 
60,277 
Cash flows from investing activities
 
 
 
Capital expenditures
(56,621)
(49,815)
(29,839)
Proceeds from insurance
31,570 
 
 
Cash paid for acquired businesses, net
(1,501)
(195,989)
(430)
Proceeds from dispositions of property and other assets
947 
1,166 
1,542 
Net cash used in investing activities
(25,605)
(244,638)
(28,727)
Cash flows from financing activities
 
 
 
Proceeds from borrowings
90,004 
229,701 
50,000 
Payments on debt and capital lease obligations
(135,801)
(108,915)
(62,969)
Dividends paid on common stock
(8,160)
(8,111)
(8,036)
Debt issuance costs
(5)
(336)
 
Common stock purchased for treasury
(2,119)
(722)
(4,816)
Excess tax benefit from share-based compensation arrangements
 
95 
418 
Acquisition of business - deferred consideration
 
(130)
(896)
Proceeds from exercise of stock options
 
 
1,041 
Net cash provided by (used in) financing activities
(56,081)
111,582 
(25,258)
Effect of exchange rate changes on cash and cash equivalents
2,286 
(2,893)
(6,751)
Net change in cash and cash equivalents
32,823 
(35,631)
(459)
Cash and cash equivalents, beginning of year
20,900 
56,531 
56,990 
Cash and cash equivalents, end of period
$ 53,723 
$ 20,900 
$ 56,531 
Overview and Summary of Significant Accounting Policies
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 of Viad have been prepared in accordance with accounting principles generally accepted in the United States of America (“GAAP”) and include the accounts of Viad and its subsidiaries. All significant intercompany account balances and transactions have been eliminated in consolidation.

Nature of Business

We are an international experiential services company with operations principally in the United States, Canada, the United Kingdom, continental Europe, the United Arab Emirates, and Hong Kong. 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 provider for live events that produces exhibitions, conferences, corporate events, and consumer events. GES offers a comprehensive range of live event services and a full suite of audio-visual services from creative and technology to content and design, along with online tools powered by next generation technologies that help clients easily manage the complexities of their events.

GES’ clients include event organizers and corporate brand marketers. 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 iconic natural and cultural destination travel experiences that enjoy perennial demand. Pursuit is comprised of four lines of business: Hospitality, Attractions, Transportation, and Travel Planning. These four lines of business work together, driving economies of scope and meaningful scale in and around the iconic destinations of Banff, Jasper, and Waterton Lakes National Parks and Vancouver in Canada, and Glacier, Denali, and Kenai Fjords National Parks in the United States. Pursuit is comprised of Brewster Travel Canada, which is marketed as the Banff Jasper Collection; the Alaska Collection; Glacier Park, Inc., which is marketed as 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 in 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 mutual funds. Investments in money market mutual 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 deferred show costs, including labor, show purchases, and commissions used in providing convention show services, are stated at the lower of cost (first-in, first-out and specific identification methods) or net realizable value.

Property and Equipment

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

Capitalized Software

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

Goodwill

Goodwill is tested for impairment at the reporting unit level on an annual basis as of October 31, and between annual tests if an event occurs or circumstances change that would more-likely-than-not reduce the fair value of a reporting unit below its carrying value. 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 which are intended to fund the cost of certain employee compensation and benefit programs. These contracts are carried at cash surrender value, net of outstanding policy loans. The cash surrender value represents the amount of cash 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 11 – Debt and Capital Lease Obligations for the estimated fair value of debt obligations.

Non-redeemable Noncontrolling Interest and Redeemable Noncontrolling Interest

Non-redeemable noncontrolling interest represents the portion of equity in a subsidiary not attributable, directly or indirectly, to us. Our non-redeemable noncontrolling interest relates to the equity ownership that we do not own in Glacier Park, Inc. of 20%. 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. The Esja purchase 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 to retained earnings and is included in our earnings per share. Refer to Note 21 – 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

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

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 recorded as deferred revenue, which will be recognized over the periods when the business interruption losses are 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 between three and five years from the date of grant. Share-based compensation expense related to restricted stock is recognized using the straight-line method over the requisite service period of approximately three years. For awards with a five-year vesting period, expense is recognized based on an accelerated multiple-award approach over a five-year period. For these awards, 40% of the shares vest on the third anniversary of the grant and the remaining shares vest in 30% increments over the subsequent two anniversary dates.

Liability-based awards (including performance units and restricted stock units) are recorded at estimated fair value, based on the number of units expected to vest and 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 of 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 2014-09, Revenue from Contracts with Customers (Topic 606)

 

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

 

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

 

January 1, 2018

 

We assigned internal resources and engaged a third-party service provider to assist in evaluating the impact on our accounting policies, processes, and system requirements. Based on our assessment, the adoption of this standard will not have a material impact on our consolidated financial statements. The impact primarily relates to the deferral of certain commissions which were previously expensed as incurred but will generally be capitalized and amortized over the period of contract performance, and the deferral of certain costs incurred in connection with trade shows which were previously expensed as incurred but will generally be capitalized and expensed upon the completion of the show. We adopted the standard on January 1, 2018 and will be using the modified retrospective transition method. Additionally, the new guidance requires enhanced disclosures, including revenue recognition policies to identify performance obligations to customers and significant judgments in measurement and recognition.

ASU 2016-02, Leases (Topic 842)

 

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

 

January 1, 2019

 

We are currently evaluating the potential impact the adoption of this new guidance will have on our financial position or results of operations including analyzing our existing operating leases. Based on our current assessment, the adoption of this standard will have a material impact on our Consolidated Balance Sheets, however the income statement is not expected to be materially impacted. We expect the most significant impact will relate to facility and equipment leases, which are currently recorded as operating leases. We are continuing our assessment, which may identify other impacts. We will adopt the standard on January 1, 2019.

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

 

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

 

January 1, 2020

 

The adoption of this new guidance is not expected to have a significant effect on our consolidated financial statements and we expect the adoption to reduce the complexity surrounding the analysis of goodwill impairment.

 

Standard

 

Description

 

Date of adoption

 

Effect on the financial statements

Standards Recently Adopted

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

 

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

 

January 1, 2017

 

The adoption of this new guidance resulted in a decrease in tax expense of $1.1 million, or a 1.1% decrease in our effective tax rate, as compared to 2016.

 

Share-Based Compensation
Share-Based Compensation

Note 2. Share-Based Compensation

The following table summarizes share-based compensation expense:

 

 

Year Ended December 31,

 

(in thousands)

 

2017

 

 

2016

 

 

2015

 

Performance unit incentive plan (“PUP”)

 

$

8,088

 

 

$

5,703

 

 

$

1,692

 

Restricted stock

 

 

2,594

 

 

 

2,073

 

 

 

2,111

 

Restricted stock units

 

 

287

 

 

 

262

 

 

 

45

 

Share-based compensation before income tax benefit

 

 

10,969

 

 

 

8,038

 

 

 

3,848

 

Income tax benefit

 

 

(4,079

)

 

 

(2,988

)

 

 

(1,454

)

Share-based compensation, net of income tax benefit

 

$

6,890

 

 

$

5,050

 

 

$

2,394

 

We recorded share-based compensation expense through restructuring expense of $0.1 million during 2017, $0.2 million in 2016, and $45,000 in 2015. The 2017 and 2016 amounts relate to PUP and restricted stock units. The 2015 amount related to restricted stock units. No share-based compensation costs were capitalized during 2017, 2016, or 2015.

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

 

 

PUP Awards

 

 

Restricted Stock

 

 

Restricted Stock Units

 

 

 

Shares

 

 

Weighted-Average

Grant Date

Fair Value

 

 

Shares

 

 

Weighted-Average

Grant Date

Fair Value

 

 

Shares

 

 

Weighted-Average

Grant Date

Fair Value

 

Balance at December 31, 2016

 

 

255,505

 

 

$

26.11

 

 

 

267,051

 

 

$

25.96

 

 

 

15,982

 

 

$

25.58

 

Granted

 

 

73,557

 

 

$

47.44

 

 

 

67,029

 

 

$

46.99

 

 

 

2,950

 

 

$

47.45

 

Vested

 

 

(76,082

)

 

$

24.07

 

 

 

(112,548

)

 

$

24.04

 

 

 

(6,182

)

 

$

24.97

 

Forfeited

 

 

(13,642

)

 

$

34.99

 

 

 

(14,633

)

 

$

35.31

 

 

 

 

 

$

 

Balance at December 31, 2017

 

 

239,338

 

 

$

32.80

 

 

 

206,899

 

 

$

33.16

 

 

 

12,750

 

 

$

30.94

 

Viad Corp Omnibus Incentive Plan

We grant share-based compensation awards to our officers, directors, and certain key employees pursuant to the 2017 Viad Corp Omnibus Incentive Plan (the “2017 Plan”). The 2017 Plan was approved by our stockholders and was effective May 18, 2017. The 2017 Plan replaced the 2007 Viad Corp Omnibus Stock Plan (the “2007 Plan”). No further awards may be made under the 2007 Plan, although awards previously granted under the 2007 Plan will remain outstanding in accordance with their respective terms. The 2017 Plan has a 10-year life and provides for the following types of awards: (a) incentive and non-qualified stock options; (b) restricted stock and restricted stock units; (c) performance units or performance shares; (d) stock appreciation rights; (e) cash-based awards; and (f) certain other stock-based awards. In June 2017, we registered 1,750,000 shares of common stock issuable under the 2017 Plan. As of December 31, 2017, there were 1,744,546 shares available for future grant under the 2017 Plan.

PUP Awards

In February 2016, the PUP Plan was amended to provide that PUP awards earned under the 2007 Plan may be payable in the form of cash or in shares of our common stock (or a combination of both). Previously, payouts could only be made in cash. The vesting of shares is based upon achievement of certain performance-based criteria. The performance period of the shares is three years.

During the year ended December 31, 2017, we granted $3.5 million PUP awards of which $1.4 million are payable in shares. Liabilities related to PUP awards were $11.0 million as of December 31, 2017 and $7.6 million as of December 31, 2016. In March 2017, PUP awards granted in 2014 vested and we distributed cash payouts of $3.7 million. In March 2016, PUP awards granted in 2013 vested and we distributed cash payouts of $0.2 million. In March 2015, PUP awards granted in 2012 vested and we distributed cash payouts of $2.4 million.

Restricted Stock

The grant date fair value of vested restricted stock was $2.7 million in 2017, $2.0 million in 2016, and $2.2 million in 2015. As of December 31, 2017, the unamortized cost of outstanding restricted stock awards was $2.5 million, which we expect to recognize over a weighted-average period of approximately 1.2 years. We repurchased 41,532 shares for $2.1 million in 2017 and 25,432 shares for $0.7 million in 2016 related to tax withholding requirements on vested share-based awards. During 2015, we repurchased 141,462 shares on the open market for $3.8 million and 35,649 shares for $1.0 million related to tax withholding requirements on vested share-based awards.

Restricted Stock Units

Aggregate liabilities related to restricted stock units was $0.5 million as of December 31, 2017 and $0.4 million as of December 31, 2016. In February 2017, portions of the 2012 and 2014 restricted stock units vested and we distributed cash payouts of $0.3 million. In February 2016, portions of the 2011, 2012, and 2013 restricted stock units vested and we distributed cash payouts of $0.2 million. In February 2015, portions of the 2010, 2011, and 2012 restricted stock units vested and we distributed cash payouts of $0.3 million.

Stock Options

During the year ended December 31, 2017, there was no stock option activity. As of both December 31, 2017 and 2016, there were 63,773 stock options outstanding and exercisable with a weighted-average exercise price of $16.62 and a weighted-average remaining contractual life of 2 years. As of December 31, 2017, there were no unrecognized costs related to non-vested stock option awards.

The following table provides additional stock option information:

 

 

December 31,

 

(in thousands)

 

2017

 

 

2016

 

 

2015

 

Total intrinsic value of stock options outstanding(1)

 

$

2,473

 

 

$

1,753

 

 

$

740

 

Total intrinsic value of stock options exercised

 

$

 

 

$

 

 

$

1,474

 

Cash received from the exercise of stock options

 

$

 

 

$

 

 

$

898

 

Tax benefits realized for tax deductions related to stock option exercises

 

$

 

 

$

 

 

$

104

 

(1)

The intrinsic value of stock options outstanding represents the difference between our closing stock price on December 31 of each year and the exercise price, multiplied by the number of in-the-money stock options.

Acquisition of Businesses
Acquisition of Businesses

Note 3. Acquisition of Businesses

2017 Acquisitions

Poken

In March 2017, we acquired Poken event engagement technology for total cash consideration of $1.7 million. Transaction costs associated with the acquisition of Poken were $0.3 million in 2017, which are included in cost of services in the Consolidated Statements of Operations. These assets have been included in the consolidated financial statements from the date of acquisition.

Esja

On November 3, 2017, we acquired the controlling interest (54.5% of the common stock) in Esja, a private corporation in Reykjavik, Iceland. Esja is developing and will operate a new FlyOver Iceland attraction, which is expected to open in 2019. The purchase price was €8.2 million (approximately $9.5 million) in cash, which included 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. The noncontrolling interest’s carrying value is determined by the fair value of the noncontrolling interest as of the acquisition date, the noncontrolling interests’ share of the subsequent net income or loss, and the accretion of the redemption value of the put option. As of the transaction date, the fair value of the noncontrolling interest was estimated to be $6.7 million. Due to the recent timing of the acquisition, the fair value of the noncontrolling interest is not yet finalized and is subject to change within the measurement period (up to one year from the acquisition date). Refer to Note 21 – Redeemable Noncontrolling Interest for additional information.

Under the acquisition method of accounting, the purchase price is allocated to the assets acquired and liabilities assumed based on their estimated fair values. The excess purchase price over fair value of net assets acquired is recorded as goodwill. Goodwill is included in the Pursuit business group and the primary factor that contributed to the purchase price resulting in the recognition of goodwill relates to future income from operations after opening in 2019. Transaction costs associated with the acquisition of Esja were $0.1 million in 2017, which are included in cost of services in the Consolidated Statements of Operations.

The results of operations of Esja have been included in the consolidated financial statements from the date of acquisition. During 2017, Esja had an operating loss of $0.1 million.

2016 Acquisitions

Maligne Lake Tours

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

Transaction costs associated with the Maligne Lake Tours acquisition were $0.1 million in 2017 and $0.1 million in 2016, which are included in cost of services in the Consolidated Statements of Operations and $0.2 million in 2015, which are included in corporate activities in the Consolidated Statements of Operations. The results of operations of Maligne Lake Tours have been included in the consolidated financial statements from the date of acquisition.

CATC

On March 11, 2016, we acquired 100% of the equity interests in CATC Alaska Tourism Corporation (“CATC”), the operator of an Alaskan tourism business that includes a marine sightseeing tour business, three lodges, and a package tour business. The purchase price was $45.0 million in cash.

Transaction costs associated with the CATC acquisition were $0.1 million in 2017, $0.1 million in 2016, and $0.6 million in 2015, which are included in corporate activities in the Consolidated Statements of Operations. The results of operations of CATC have been included in the consolidated financial statements from the date of acquisition.

ON Services

On August 11, 2016, we acquired the assets and operations of ON Event Services, LLC (“ON Services”), a leading provider of audio-visual production services for live events in the United States. The aggregate purchase price was up to $92.5 million in cash, which included an earnout payment (the “Earnout”) of up to $5.5 million. The fair value of the Earnout was valued on the date of acquisition and was remeasured based on the financial performance of ON Services for 2016. As of the transaction date, the fair value of the Earnout was estimated to be $540,000.

Transaction costs associated with the ON Services acquisition were $0.1 million in 2017 and $0.9 million in 2016, which are included in corporate activities in the Consolidated Statement of Operations. The results of operations of ON Services have been included in the consolidated financial statements from the date of acquisition.

FlyOver Canada

On December 29, 2016, we acquired the assets and operations of FlyOver Canada, a recreational attraction that provides a virtual flight ride experience with a combination of motion seating, spectacular media, and visual effects including wind, scents, and mist. The purchase price was $68.8 million Canadian dollars (approximately $50.9 million U.S. dollars) in cash.

Transaction costs associated with the FlyOver Canada acquisition were $0.1 million in 2017 and $0.5 million in 2016, which are included in cost of services in the Consolidated Statements of Operations. The results of operations of FlyOver Canada have been included in the consolidated financial statements from the date of acquisition.

The following table summarizes the final allocation of the aggregate purchase price paid and amounts of assets acquired and liabilities assumed based upon the estimated fair value at the date of acquisitions. The balances in the table below remain unchanged from the balances reflected in the Consolidated Balance Sheets in our Annual Report on Form 10-K for the year ended December 31, 2016.

 

 

 

Maligne Lake Tours

 

 

CATC

 

 

ON Services

 

 

FlyOver Canada

 

(in thousands)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Purchase price paid as:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Cash

 

$

14,962

 

 

$

45,000

 

 

$

87,000

 

 

$

50,920

 

Working capital adjustment

 

 

 

 

 

(35

)

 

 

344

 

 

 

 

Contingent consideration

 

 

 

 

 

 

 

 

540

 

 

 

 

Cash acquired

 

 

 

 

 

(2,196

)

 

 

 

 

 

(6

)

Total purchase price, net of cash acquired

 

 

14,962

 

 

 

42,769

 

 

 

87,884

 

 

 

50,914

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Fair value of net assets acquired:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Accounts receivable

 

 

 

 

 

8

 

 

 

4,643

 

 

 

 

Inventories

 

 

246

 

 

 

921

 

 

 

256

 

 

 

11

 

Prepaid expenses

 

 

2

 

 

 

82

 

 

 

872

 

 

 

37

 

Property and equipment

 

 

4,133

 

 

 

43,470

 

 

 

14,827

 

 

 

10,867

 

Intangible assets

 

 

9,244

 

 

 

980

 

 

 

33,990

 

 

 

6,028

 

Total assets acquired

 

 

13,625

 

 

 

45,461

 

 

 

54,588

 

 

 

16,943

 

Accounts payable

 

 

 

 

 

306

 

 

 

992

 

 

 

 

Accrued liabilities

 

 

 

 

 

434

 

 

 

564

 

 

 

118

 

Customer deposits

 

 

15

 

 

 

1,952

 

 

 

851

 

 

 

 

Other liabilities

 

 

240

 

 

 

 

 

 

274

 

 

 

 

Total liabilities acquired

 

 

255

 

 

 

2,692

 

 

 

2,681

 

 

 

118

 

Total fair value of net assets acquired

 

 

13,370

 

 

 

42,769

 

 

 

51,907

 

 

 

16,825

 

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

 

$

1,592

 

 

$

 

 

$

35,977

 

 

$

34,089

 

Under the acquisition method of accounting, the purchase prices as shown in the table above are allocated to the tangible and identifiable intangible assets acquired and liabilities assumed based on their estimated fair values. The excess purchase price over fair value of net assets acquired is recorded as goodwill. Goodwill is included in the Pursuit business group for Maligne Lake Tours and FlyOver Canada and in the GES business group for ON Services. The primary factor that contributed to the purchase price resulting in the recognition of goodwill relates to future growth opportunities, and the expansion of the FlyOver concept for FlyOver Canada, when combined with our other businesses. All goodwill is deductible for tax purposes pursuant to Canadian tax regulations for Maligne Lake Tours and FlyOver Canada and over a period of 15 years for ON Services. The estimated values of current assets and liabilities were based upon their historical costs on the date of acquisition due to their short-term nature.

Following are the details of the purchase price allocated to the intangible assets acquired for the 2016 Acquisitions:

(in thousands, except weighted average life)

 

Maligne Lake Tours

 

 

CATC

 

 

ON Services

 

 

FlyOver Canada

 

Customer relationships

 

$

788

 

 

$

780

 

 

$

27,620

 

 

$

1,592

 

Operating licenses

 

 

8,313

 

 

 

 

 

 

 

 

 

 

Trade name

 

 

143

 

 

 

200

 

 

 

3,190

 

 

 

3,710

 

Non-compete agreements

 

 

 

 

 

 

 

 

3,180

 

 

 

726

 

Fair value of intangible assets acquired

 

$

9,244

 

 

$

980

 

 

$

33,990

 

 

$

6,028

 

Weighted average life

 

26.7 years(1)

 

 

5.8 years

 

 

10.5 years

 

 

9.4 years

 

(1)

Largely attributable to operating licenses amortized over the remaining Parks Canada lease of 29 years.

Supplementary pro forma financial information

The following table summarizes our unaudited pro forma results of operations assuming the 2016 Acquisitions had each been completed on January 1, 2015:

 

 

Year Ended December 31,

 

(in thousands, except per share data)

 

2016

 

 

2015

 

Revenue

 

$

1,250,290

 

 

$

1,183,656

 

Depreciation and amortization

 

$

52,074

 

 

$

52,631

 

Income from continuing operations

 

$

43,727

 

 

$

27,881

 

Net income attributable to Viad

 

$

42,517

 

 

$

27,045

 

Diluted income per share

 

$

2.10

 

 

$

1.35

 

Basic income per share

 

$

2.10

 

 

$

1.35

 

 

 

Inventories
Inventories

Note 4. Inventories

The components of inventories consisted of the following:

 

 

 

December 31,

 

(in thousands)

 

2017

 

 

2016

 

Raw materials

 

$

17,550

 

 

$

16,846

 

Work in process

 

 

12,822

 

 

 

14,574

 

Inventories

 

$

30,372

 

 

$

31,420

 

 

Other Current Assets
Other Current Assets

Note 5. Other Current Assets

Other current assets consisted of the following:

 

 

December 31,

 

(in thousands)

 

2017

 

 

2016

 

Prepaid vendor payments

 

$

5,048

 

 

$

3,633

 

Income tax receivable

 

 

4,237

 

 

 

3,614

 

Prepaid software maintenance

 

 

3,386

 

 

 

2,804

 

Prepaid insurance

 

 

2,610

 

 

 

2,479

 

Prepaid taxes

 

 

912

 

 

 

850

 

Prepaid rent

 

 

730

 

 

 

327

 

Prepaid other

 

 

2,172

 

 

 

731

 

Other

 

 

1,935

 

 

 

4,011

 

Other current assets

 

$

21,030

 

 

$

18,449

 

 

Property and Equipment
Property and Equipment

Note 6. Property and Equipment

Property and equipment consisted of the following:

 

 

 

December 31,

 

(in thousands)

 

2017

 

 

2016

 

Land and land interests(1)

 

$

32,544

 

 

$

31,670

 

Buildings and leasehold improvements

 

 

222,118

 

 

 

185,987

 

Equipment and other(2)

 

 

351,676

 

 

 

326,868

 

Gross property and equipment

 

 

606,338

 

 

 

544,525

 

Accumulated depreciation

 

 

(300,767

)

 

 

(264,667

)

Property and equipment, net

 

$

305,571

 

 

$

279,858

 

(1)

Land and land interests include certain leasehold interests in land within Pursuit for which we are considered to have perpetual use rights. The carrying amount of these leasehold interests was $8.4 million as of December 31, 2017 and $7.9 million as of December 31, 2016. These land interests are not subject to amortization.

(2)

Equipment and other includes capitalized costs incurred in developing or obtaining internal and external use software. The net carrying amount of capitalized software was $10.1 million as of December 31, 2017 and $11.9 million as of December 31, 2016.

Depreciation expense was $42.7 million for 2017, $33.6 million for 2016, and $28.1 million for 2015.

Non-cash increases to property and equipment related to assets acquired under capital leases were $2.5 million for 2017, $1.2 million for 2016, and $1.0 million for 2015. Non-cash increases to property and equipment purchases in accounts payable and accrued liabilities were $2.3 million for 2017, $0.9 million for 2016, and $2.3 million for 2015.

On December 29, 2016, the Mount Royal Hotel in Banff, Canada was damaged by a fire and closed. As a result of the fire, we recorded an impairment loss of $2.2 million against the net book value of the hotel assets. During 2017, we resolved our property and business interruption insurance claims related to the fire for a total of $36.3 million of which $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.

During 2016, we recorded impairment charges of $0.2 million related to the write-down of certain software and buses in Pursuit. During 2015, we recorded impairment charges of $0.1 million related to the write-off of certain software in Pursuit. Impairment charges (recoveries) are included in the Consolidated Statements of Operations.

Other Investments and Assets
Other Investments and Assets

Note 7. Other Investments and Assets

Other investments and assets consisted of the following:

 

 

December 31,

 

(in thousands)

 

2017

 

 

2016

 

Cash surrender value of life insurance

 

$

23,947

 

 

$

23,197

 

Self-insured liability receivable

 

 

10,442

 

 

 

10,463

 

Workers’ compensation insurance security deposits

 

 

3,550

 

 

 

4,050

 

Other mutual funds

 

 

2,637

 

 

 

2,062

 

Other

 

 

6,936

 

 

 

4,525

 

Other investments and assets

 

$

47,512

 

 

$

44,297

 

 

 

Goodwill and Other Intangible Assets
Goodwill and Other Intangible Assets

Note 8. Goodwill and Other Intangible Assets

The changes in the carrying amount of goodwill are as follows:

(in thousands)

 

GES U.S.

 

 

GES International

 

 

Pursuit

 

 

Total

 

Balance at December 31, 2015

 

$

112,300

 

 

$

38,635

 

 

$

34,288

 

 

$

185,223

 

Business acquisitions

 

 

35,977

 

 

 

 

 

 

35,681

 

 

 

71,658

 

Foreign currency translation adjustments

 

 

 

 

 

(4,175

)

 

 

1,316

 

 

 

(2,859

)

Balance at December 31, 2016

 

 

148,277

 

 

 

34,460

 

 

 

71,285

 

 

 

254,022

 

Business acquisitions

 

 

 

 

 

1,060

 

 

 

7,094

 

 

 

8,154

 

Foreign currency translation adjustments

 

 

 

 

 

3,320

 

 

 

5,055

 

 

 

8,375

 

Balance at December 31, 2017

 

$

148,277

 

 

$

38,840

 

 

$

83,434

 

 

$

270,551

 

The following table summarizes goodwill by reporting unit and segment:

 

 

December 31,

 

(in thousands)

 

2017

 

 

2016

 

GES:

 

 

 

 

 

 

 

 

U.S.

 

$

148,277

 

 

$

148,277

 

International:

 

 

 

 

 

 

 

 

GES EMEA

 

 

31,612

 

 

 

27,694

 

GES Canada

 

 

7,228

 

 

 

6,766

 

Total GES

 

 

187,117

 

 

 

182,737

 

Pursuit:

 

 

 

 

 

 

 

 

Banff Jasper Collection

 

 

35,305

 

 

 

32,587

 

Alaska Collection

 

 

3,184

 

 

 

3,184

 

Glacier Park Collection

 

 

1,268

 

 

 

1,268

 

FlyOver

 

 

43,677

 

 

 

34,246

 

Total Pursuit

 

 

83,434

 

 

 

71,285

 

Total Goodwill

 

$

270,551

 

 

$

254,022

 

Goodwill is tested for impairment at the reporting unit level on an annual basis as of October 31, and between annual tests if an event occurs or circumstances change that would more-likely-than-not reduce the fair value of a reporting unit below its carrying value.

GES U.S. goodwill is assigned to, and tested at, the operating segment level. GES International goodwill is assigned to and tested based on the segment’s geographical operations (GES Europe, Middle East, and Asia (“GES EMEA”) and GES Canada). Pursuit’s impairment testing is performed at the reporting unit level (Banff Jasper Collection, the Alaska Collection, Glacier Park Collection, and FlyOver).

As a result of our most recent impairment analysis performed as of October 31, 2017, the excess of the estimated fair value over the carrying value for each of our reporting units (expressed as a percentage of the carrying amounts) under step one of the impairment test for GES U.S. was 134%, GES EMEA was 214%, GES Canada was 164%, the Banff Jasper Collection was 147%, the Alaska Collection was 99%, the Glacier Park Collection was 16%, and FlyOver was 29%.

Our accumulated goodwill impairment as of both December 31, 2017 and 2016 was $229.7 million.

Other intangible assets consisted of the following:

 

 

December 31, 2017

 

 

December 31, 2016

 

(in thousands)

 

Gross Carrying

Value

 

 

Accumulated

Amortization

 

 

Net Carrying Value

 

 

Gross Carrying

Value

 

 

Accumulated

Amortization

 

 

Net Carrying Value

 

Amortized intangible assets:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Customer contracts and relationships

 

$

68,798

 

 

$

(23,696

)

 

$

45,102

 

 

$

67,762

 

 

$

(14,345

)

 

$

53,417

 

Operating contracts and licenses

 

 

9,951

 

 

 

(1,094

)

 

 

8,857

 

 

 

9,315

 

 

 

(652

)

 

 

8,663

 

Tradenames

 

 

8,633

 

 

 

(2,873

)

 

 

5,760

 

 

 

8,324

 

 

 

(1,440

)

 

 

6,884

 

Non-compete agreements

 

 

5,363

 

 

 

(3,007

)

 

 

2,356

 

 

 

5,190

 

 

 

(1,369

)

 

 

3,821