VIAD CORP, 10-Q filed on 11/6/2020
Quarterly Report
v3.20.2
Document and Entity Information - shares
9 Months Ended
Sep. 30, 2020
Oct. 30, 2020
Document Information [Line Items]    
Entity Registrant Name Viad Corp  
Entity Central Index Key 0000884219  
Document Type 10-Q  
Document Period End Date Sep. 30, 2020  
Amendment Flag false  
Document Fiscal Year Focus 2020  
Document Fiscal Period Focus Q3  
Current Fiscal Year End Date --12-31  
Entity Incorporation, State or Country Code DE  
Entity Current Reporting Status Yes  
Entity Interactive Data Current 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 36-1169950  
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 AZ  
Entity Address, Postal Zip Code 85004-4565  
City Area Code 602  
Local Phone Number 207-1000  
Entity Common Stock, Shares Outstanding   20,428,448
Document Quarterly Report true  
Document Transition Report false  
Common Stock    
Document Information [Line Items]    
Trading Symbol VVI  
Title of 12(b) Security Common Stock, $1.50 Par Value  
Security Exchange Name NYSE  
Junior Participating Preferred Stock    
Document Information [Line Items]    
No Trading Symbol Flag true  
Title of 12(b) Security Preferred Stock Purchase Rights  
v3.20.2
CONDENSED CONSOLIDATED BALANCE SHEETS (Unaudited) - USD ($)
$ in Thousands
Sep. 30, 2020
Dec. 31, 2019
Current assets    
Cash and cash equivalents $ 56,452 $ 61,999
Accounts receivable, net of allowances for doubtful accounts of $10,105 and $1,200, respectively 21,154 126,246
Inventories 16,296 17,269
Current contract costs 7,649 24,535
Other current assets 16,196 30,854
Total current assets 117,747 260,903
Property and equipment, net 477,445 500,901
Other investments and assets 19,937 45,119
Operating lease right-of-use assets 88,394 103,314
Deferred income taxes   26,163
Goodwill 96,931 287,983
Other intangible assets, net 68,638 94,308
Total Assets 869,092 1,318,691
Current liabilities    
Accounts payable 22,069 86,660
Contract liabilities 17,153 50,671
Accrued compensation 8,392 32,658
Operating lease obligations 17,872 22,180
Other current liabilities 30,127 39,824
Current portion of debt and finance lease obligations [1] 4,040 5,330
Total current liabilities 99,653 237,323
Long-term debt and finance lease obligations 252,152 335,162
Pension and postretirement benefits 25,789 26,247
Long-term operating lease obligations 73,688 82,851
Other deferred items and liabilities 75,174 83,707
Total liabilities 526,456 765,290
Commitments and contingencies
Redeemable noncontrolling interest 5,271 6,172
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 570,447 574,473
Retained earnings (deficit) (202,691) 122,971
Accumulated other comprehensive loss (42,687) (35,699)
Common stock in treasury, at cost, 4,507,957 and 4,588,084 shares, respectively (227,623) (231,649)
Total Viad stockholders’ equity 134,848 467,498
Non-redeemable noncontrolling interest 75,620 79,731
Total stockholders’ equity 210,468 547,229
Total Liabilities, Mezzanine Equity, and Stockholders’ Equity 869,092 $ 1,318,691
Convertible Series A Preferred Stock    
Current liabilities    
Convertible Series A Preferred Stock, $0.01 par value, 180,000 shares authorized, 135,000 shares issued and outstanding at September 30, 2020 $ 126,897  
[1] Subsequent to the filing of our 2019 Form 10-K, we identified a correction related to the classification of the 2018 Credit Facility (as defined below) from current to long-term given that the 2018 Credit Facility’s contractual maturity was not within 12 months of the balance sheet date, and we were in compliance with all applicable covenants as of December 31, 2019. As a result, we corrected the classification of the debt on the accompanying condensed consolidated balance sheet and the disclosure related to classification of debt in the table above as of December 31, 2019 to present the 2018 Credit Facility as long-term. Except for this change, the correction had no impact upon this Quarterly Report on Form 10-Q. We determined that the error is not material to the previously issued financial statements.
v3.20.2
CONDENSED CONSOLIDATED BALANCE SHEETS (Parenthetical) (Unaudited) - USD ($)
$ in Thousands
Sep. 30, 2020
Dec. 31, 2019
Allowance for doubtful accounts $ 10,105 $ 1,200
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 4,507,957 4,588,084
Convertible Series A Preferred Stock    
Preferred Stock, Par value $ 0.01 $ 0.01
Preferred Stock, Shares Authorized 180,000 180,000
Preferred Stock, Shares Issued 135,000 135,000
Preferred Stock, Shares Outstanding 135,000 135,000
v3.20.2
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (Unaudited) - USD ($)
shares in Thousands, $ in Thousands
3 Months Ended 9 Months Ended
Sep. 30, 2020
Sep. 30, 2019
Sep. 30, 2020
Sep. 30, 2019
Revenue:        
Total revenue $ 63,072 $ 353,743 $ 389,863 $ 1,009,686
Costs and expenses:        
Business interruption gain       (141)
Corporate activities 2,645 2,680 5,902 7,795
Interest income (58) (79) (313) (260)
Interest expense 5,508 3,740 14,712 9,612
Multi-employer pension plan withdrawal     462 15,508
Other expense 210 281 894 1,192
Restructuring charges 11,259 1,702 12,370 6,845
Legal settlement       8,500
Impairment charges 676   203,076  
Total costs and expenses 90,077 307,245 692,867 968,709
Income (loss) from continuing operations before income taxes (27,005) 46,498 (303,004) 40,977
Income tax expense 735 11,891 20,454 10,861
Income (loss) from continuing operations (27,740) 34,607 (323,458) 30,116
Income (loss) from discontinued operations (989) (141) (1,822) 32
Net income (loss) (28,729) 34,466 (325,280) 30,148
Net (income) loss attributable to non-redeemable noncontrolling interest (2,331) (3,418) 636 (3,329)
Net loss attributable to redeemable noncontrolling interest 302 368 1,023 644
Net income (loss) attributable to Viad $ (30,758) $ 31,416 $ (323,621) $ 27,463
Diluted income (loss) per common share:        
Continuing operations attributable to Viad common stockholders $ (1.54) $ 1.54 $ (15.98) $ 1.33
Discontinued operations attributable to Viad common stockholders (0.05) (0.01) (0.09)  
Net income (loss) attributable to Viad common stockholders [1] $ (1.59) $ 1.53 $ (16.07) $ 1.33
Weighted-average outstanding and potentially dilutive common shares 20,293 20,311 20,263 20,267
Basic income (loss) per common share:        
Continuing operations attributable to Viad common stockholders $ (1.54) $ 1.54 $ (15.98) $ 1.33
Discontinued operations attributable to Viad common stockholders (0.05) (0.01) (0.09)  
Net income (loss) attributable to Viad common stockholders $ (1.59) $ 1.53 $ (16.07) $ 1.33
Weighted-average outstanding common shares 20,293 20,168 20,263 20,129
Dividends declared per common share   $ 0.10 $ 0.10 $ 0.30
Amounts attributable to Viad common stockholders        
Income (loss) from continuing operations $ (29,769) $ 31,557 $ (321,799) $ 27,431
Income (loss) from discontinued operations (989) (141) (1,822) 32
Net income (loss) attributable to Viad (30,758) 31,416 (323,621) 27,463
Services        
Revenue:        
Total revenue 43,702 291,701 335,383 858,071
Costs and expenses:        
Costs and expenses 51,730 247,551 395,432 785,131
Products        
Revenue:        
Total revenue 19,370 62,042 54,480 151,615
Costs and expenses:        
Costs and expenses $ 18,107 $ 51,370 $ 60,332 $ 134,527
[1]

Diluted loss per share amount cannot exceed basic loss per share.

v3.20.2
CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS) (Unaudited) - USD ($)
$ in Thousands
3 Months Ended 9 Months Ended
Sep. 30, 2020
Sep. 30, 2019
Sep. 30, 2020
Sep. 30, 2019
Statement Of Income And Comprehensive Income [Abstract]        
Net income (loss) $ (28,729) $ 34,466 $ (325,280) $ 30,148
Other comprehensive income (loss):        
Unrealized foreign currency translation adjustments 11,032 (5,229) (7,342) 3,868
Change in net actuarial loss, net of tax [1] 70 83 436 302
Change in prior service cost, net of tax [1] (27) (35) (82) (106)
Comprehensive income (loss) (17,654) 29,285 (332,268) 34,212
Non-redeemable noncontrolling interest:        
Net (income) loss attributable to non-redeemable noncontrolling interest (2,331) (3,418) 636 (3,329)
Unrealized foreign currency translation adjustments 1,837 (682) (1,949) 94
Redeemable noncontrolling interest:        
Comprehensive loss attributable to redeemable noncontrolling interest 302 368 1,023 644
Comprehensive income (loss) attributable to Viad $ (17,846) $ 25,553 $ (332,558) $ 31,621
[1] The tax effect on other comprehensive income (loss) is not significant.
v3.20.2
CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY AND MEZZANINE EQUITY (Unaudited) - USD ($)
$ in Thousands
Total
Mountain Park Lodges
Common Stock
Additional Capital
Retained Earnings (Deficit)
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
Mezzanine Equity Redeemable Non Controlling Interest
Convertible Series A Preferred Stock
Unearned Employee Benefits and Other
Beginning Balance at Dec. 31, 2018 $ 450,555   $ 37,402 $ 575,339 $ 109,032 $ (47,975) $ (237,790) $ 436,207 $ 14,348   $ 5,909   $ 199
Increase Decrease In Stockholders' Equity Roll Forward                          
Net income (loss) (18,197)       (17,777)     (17,777) (420)   (24)    
Dividends on common stock ($0.10 per share) (2,028)       (2,028)     (2,028)          
Payment of payroll taxes on stock-based compensation through shares withheld (2,905)           (2,905) (2,905)          
Employee benefit plans 1,220     (4,302)     5,522 1,220          
Share-based compensation - equity awards 780     780       780          
Unrealized foreign currency translation adjustment 4,780         4,780   4,780     (310)    
Amortization of net actuarial loss, net of tax 120         120   120          
Amortization of prior service cost, net of tax (35)         (35)   (35)          
Other, net 41     16     1 41     87   24
Ending Balance at Mar. 31, 2019 434,331   37,402 571,833 89,227 (43,110) (235,172) 420,403 13,928   5,662   223
Beginning Balance at Dec. 31, 2018 450,555   37,402 575,339 109,032 (47,975) (237,790) 436,207 14,348   5,909   199
Increase Decrease In Stockholders' Equity Roll Forward                          
Amortization of net actuarial loss, net of tax [1] 302                        
Amortization of prior service cost, net of tax [1] (106)                        
Ending Balance at Sep. 30, 2019 532,527   37,402 574,039 130,435 (43,911) (232,928) 465,037 67,490   5,431    
Beginning Balance at Mar. 31, 2019 434,331   37,402 571,833 89,227 (43,110) (235,172) 420,403 13,928   5,662   223
Increase Decrease In Stockholders' Equity Roll Forward                          
Net income (loss) 14,155       13,824     13,824 331   (252)    
Dividends on common stock ($0.10 per share) (2,006)       (2,006)     (2,006)          
Payment of payroll taxes on stock-based compensation through shares withheld (89)           (89) (89)          
Employee benefit plans 1,602     301     1,301 1,602          
Share-based compensation - equity awards 781     781       781          
Unrealized foreign currency translation adjustment 5,093         4,317   4,317 776   (81)    
Amortization of net actuarial loss, net of tax 99         99   99          
Amortization of prior service cost, net of tax (36)         (36)   (36)          
Acquisition   $ 49,711               $ 49,711      
Other, net 14     16     221 14     179   $ (223)
Ending Balance at Jun. 30, 2019 503,655   37,402 572,931 101,045 (38,730) (233,739) 438,909 64,746   5,508    
Increase Decrease In Stockholders' Equity Roll Forward                          
Net income (loss) 34,834       31,416     31,416 3,418   (368)    
Dividends on common stock ($0.10 per share) (2,026)       (2,026)     (2,026)          
Payment of payroll taxes on stock-based compensation through shares withheld (25)           (25) (25)          
Employee benefit plans 1,271     212     1,059 1,271          
Share-based compensation - equity awards 938     938       938          
Unrealized foreign currency translation adjustment (5,911)         (5,229)   (5,229) (682)   27    
Amortization of net actuarial loss, net of tax 83 [1]         83   83          
Amortization of prior service cost, net of tax (35) [1]         (35)   (35)          
Acquisition   $ 8               $ 8      
Other, net (265)     (42)     (223) (265)     264    
Ending Balance at Sep. 30, 2019 532,527   37,402 574,039 130,435 (43,911) (232,928) 465,037 67,490   5,431    
Beginning Balance at Dec. 31, 2019 547,229   37,402 574,473 122,971 (35,699) (231,649) 467,498 79,731   6,172    
Increase Decrease In Stockholders' Equity Roll Forward                          
Net income (loss) (87,918)       (86,585)     (86,585) (1,333)   (517)    
Dividends on common stock ($0.10 per share) (2,038)       (2,038)     (2,038)          
Distributions to noncontrolling interest (1,526)               (1,526)        
Payment of payroll taxes on stock-based compensation through shares withheld (1,059)           (1,059) (1,059)          
Common stock purchased for treasury (2,785)           (2,785) (2,785)          
Employee benefit plans 1,912     (3,810)     5,722 1,912          
Share-based compensation - equity awards 276     276       276          
Unrealized foreign currency translation adjustment (33,877)         (28,158)   (28,158) (5,719)   (873)    
Amortization of net actuarial loss, net of tax 341         341   341          
Amortization of prior service cost, net of tax (27)         (27)   (27)          
Other, net (82)     (80) (3)   1 (82)     126    
Ending Balance at Mar. 31, 2020 420,446   37,402 570,859 34,345 (63,543) (229,770) 349,293 71,153   4,908    
Beginning Balance at Dec. 31, 2019 547,229   37,402 574,473 122,971 (35,699) (231,649) 467,498 79,731   6,172    
Increase Decrease In Stockholders' Equity Roll Forward                          
Dividends on convertible preferred stock (1,134)                        
Amortization of net actuarial loss, net of tax [1] 436                        
Amortization of prior service cost, net of tax [1] (82)                        
Ending Balance at Sep. 30, 2020 210,468   37,402 570,447 (202,691) (42,687) (227,623) 134,848 75,620   5,271 $ 126,897  
Beginning Balance at Mar. 31, 2020 420,446   37,402 570,859 34,345 (63,543) (229,770) 349,293 71,153   4,908    
Increase Decrease In Stockholders' Equity Roll Forward                          
Net income (loss) (207,912)       (206,278)     (206,278) (1,634)   (204)    
Payment of payroll taxes on stock-based compensation through shares withheld (3)           (3) (3)          
Employee benefit plans 330     48     282 330          
Share-based compensation - equity awards 602     602       602          
Unrealized foreign currency translation adjustment 11,717         9,784   9,784 1,933   102    
Amortization of net actuarial loss, net of tax 25         25   25          
Amortization of prior service cost, net of tax (28)         (28)   (28)          
Other, net 45     46     (1) 45     332    
Ending Balance at Jun. 30, 2020 225,222   37,402 571,555 (171,933) (53,762) (229,492) 153,770 71,452   5,138    
Increase Decrease In Stockholders' Equity Roll Forward                          
Net income (loss) (28,427)       (30,758)     (30,758) 2,331   (302)    
Issuance of Series A convertible preferred stock                       125,763  
Dividends on convertible preferred stock (1,134)     (1,134)       (1,134)       1,134  
Employee benefit plans (253)     (2,123)     1,870 (253)          
Share-based compensation - equity awards 2,135     2,135       2,135          
Unrealized foreign currency translation adjustment 12,869         11,032   11,032 1,837   (33)    
Amortization of net actuarial loss, net of tax 70 [1]         70   70          
Amortization of prior service cost, net of tax (27) [1]         (27)   (27)          
Other, net 13     14     (1) 13     468    
Ending Balance at Sep. 30, 2020 $ 210,468   $ 37,402 $ 570,447 $ (202,691) $ (42,687) $ (227,623) $ 134,848 $ 75,620   $ 5,271 $ 126,897  
[1] The tax effect on other comprehensive income (loss) is not significant.
v3.20.2
CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY AND MEZZANINE EQUITY (Parenthetical) (Unaudited) - $ / shares
3 Months Ended
Mar. 31, 2020
Sep. 30, 2019
Jun. 30, 2019
Mar. 31, 2019
Statement Of Stockholders Equity [Abstract]        
Dividends on common stock per share $ 0.10 $ 0.10 $ 0.10 $ 0.10
v3.20.2
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited) - USD ($)
$ in Thousands
3 Months Ended 9 Months Ended 12 Months Ended
Sep. 30, 2020
Sep. 30, 2019
Sep. 30, 2020
Sep. 30, 2019
Dec. 31, 2019
Cash flows from operating activities          
Net income (loss) $ (28,729) $ 34,466 $ (325,280) $ 30,148  
Adjustments to reconcile net loss to net cash provided by operating activities:          
Depreciation and amortization     43,051 44,061  
Deferred income taxes     20,428 5,261  
(Income) loss from discontinued operations 989 141 1,822 (32)  
Restructuring charges 11,259 1,702 12,370 6,845  
Legal settlement       8,500  
Impairment charges     203,076    
Gains on dispositions of property and other assets     (14,935) (938)  
Share-based compensation expense 1,937 1,831 649 6,448  
Multi-employer pension plan withdrawal     462 15,508  
Other non-cash items, net     10,371 2,772  
Change in operating assets and liabilities:          
Receivables     104,722 (37,028)  
Inventories     833 389  
Current contract costs     16,418 (13,929)  
Accounts payable     (76,355) 20,121  
Restructuring liabilities     (4,606) (5,012)  
Accrued compensation     (25,268) 2,308  
Contract liabilities     (32,650) 29,177  
Income taxes payable     1,290 3,777  
Other assets and liabilities, net     17,696 (17,236)  
Net cash (used in) provided by operating activities     (45,906) 101,140  
Cash flows from investing activities          
Capital expenditures     (40,057) (60,868)  
Cash surrender value of life insurance policies     24,767    
Cash paid for acquisitions, net       (90,992)  
Proceeds from dispositions of property and other assets     21,788 1,022  
Net cash provided by (used in) investing activities     6,498 (150,838)  
Cash flows from financing activities          
Proceeds from borrowings     191,733 170,459  
Payments on debt and finance lease obligations     (273,663) (99,340)  
Dividends paid on common stock     (4,064) (6,060)  
Distributions to noncontrolling interest     (1,526)    
Debt issuance costs     (1,585)    
Payment of payroll taxes on stock-based compensation through shares withheld or repurchased     (1,062) (3,019)  
Common stock purchased for treasury     (2,785)    
Proceeds from issuance of Convertible Series A Preferred Stock, net of issuance costs     125,763    
Proceeds from exercise of stock options     2,077 92  
Net cash provided by financing activities     34,888 62,132  
Effect of exchange rate changes on cash and cash equivalents     (1,027) (689)  
Net change in cash and cash equivalents     (5,547) 11,745  
Cash and cash equivalents, beginning of year     61,999 44,893 $ 44,893
Cash and cash equivalents, end of period $ 56,452 $ 56,638 $ 56,452 $ 56,638 $ 61,999
v3.20.2
Overview and Basis of Presentation
9 Months Ended
Sep. 30, 2020
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 in the United States, Canada, the United Kingdom, continental Europe, the United Arab Emirates, and Iceland. We are committed to providing unforgettable experiences to our clients and guests. We operate through three reportable business segments: GES 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 event organizers and corporate brand marketers. Event organizers schedule and run events from start to finish. Corporate brand marketers include exhibitors and domestic and international corporations that want to promote their brands, services and innovations, feature new products, and build business relationships. GES serves corporate brand marketers when they exhibit at shows and when GES is engaged to manage their global exhibit program or produce their proprietary corporate events.

Pursuit

Pursuit is a collection of inspiring and unforgettable travel experiences that include recreational attractions, unique hotels and lodges, food and beverage, retail, sightseeing, and ground transportation services. Pursuit comprises the Banff Jasper Collection, the Alaska Collection, the Glacier Park Collection, and FlyOver.

Impact of COVID-19

On March 11, 2020, the World Health Organization declared COVID-19 a “pandemic.” COVID-19 has spread rapidly, with a high concentration of confirmed cases in the U.S. and other countries in which we operate. The rapid spread has resulted in authorities around the world implementing numerous measures to contain the virus, such as travel bans and restrictions, quarantines, shelter-in-place orders, and business shutdowns. The COVID-19 pandemic and these containment measures have had, and are expected to continue to have, a substantial negative impact on businesses around the world and on global, regional, and national economies.

The COVID-19 pandemic is having and will likely continue to have a significant and negative impact on our operations and financial performance, with live events largely shut down and tourism activity disruptions. In response to the COVID-19 pandemic, we implemented aggressive cost reduction measures to preserve cash, including furloughs, layoffs, mandatory unpaid time off, or salary reductions for all employees, and the elimination of discretionary spending. We continue to implement measures to successfully adapt for the long-term impact of COVID-19. During the third quarter of 2020, we secured additional capital to strengthen our liquidity position and amended our Second Amended and Restated Credit Agreement (the “2018 Credit Agreement”) to provide financial flexibility.

Investment Agreement

On August 5, 2020, we entered into an investment agreement with funds managed by private equity firm Crestview Partners (the “Investment Agreement”) who made an initial investment of $135 million, offset in part by $9.2 million in fees, in newly issued perpetual convertible preferred stock that carries a 5.5% cumulative quarterly dividend, which is payable in cash or in-kind at Viad’s option (the “Convertible Preferred Stock”). The Convertible Preferred Stock is convertible into shares of our common stock at a conversion price of $21.25 per share. The Investment Agreement also includes a delayed draw commitment of up to $45 million in additional Convertible Preferred Stock, which we may access during the 12 months following the August 5, 2020 closing date on the same terms and conditions as the initial investment. The proceeds from Crestview’s initial investment were used to repay a portion of our 2018 Credit Facility, will provide additional short-term liquidity, will fund capital expenditures, and will support general corporate purposes. Pursuant to the Investment Agreement, two Crestview Partners’ designees joined our Board of Directors, increasing the size of our board from seven to nine directors.

Credit Agreement Amendment

On August 5, 2020, we entered into an amendment to our 2018 Credit Agreement, which, among other things, (i) waives our financial covenants until September 30, 2022 (the “Covenant Waiver Period”) and (ii) requires us to maintain minimum liquidity of $125 million with a step down to $100 million at December 31, 2020. The interest rate on the borrowings is equal to the London Interbank

Offered Rate (“LIBOR”) plus 350 basis points, with a LIBOR floor of one percent during the Covenant Waiver Period. The LIBOR floor continues until the end of the 2018 Credit Agreement. Viad pledged 100% of the capital stock of its wholly-owned domestic subsidiaries and its top-tier foreign subsidiaries (other than Esja Attractions ehf.). Fees related to the amendment were approximately $1.7 million.

Management anticipates that the initial cash proceeds from Crestview Partners, existing cash and cash equivalents, and the amendment to waive financial covenants within the 2018 Credit Agreement until September 30, 2022 will be sufficient to fund operations for at least the next 12 months.

Goodwill Impairment

Due to the deteriorating macroeconomic environment, disruptions to our operations, and the sustained decline in our stock price caused by COVID-19, we determined an interim triggering event had occurred in the first and second quarters of 2020, which required us to assess the carrying values of goodwill and intangible assets in accordance with Accounting Standards Codification (“ASC”) No. 350, Intangibles – Goodwill and Other. Based on this assessment, we recorded non-cash goodwill impairment charges of $186.1 million during the first half of 2020, including a full impairment charge to the remaining GES goodwill balance of $113.1 million in the second quarter of 2020. Our remaining goodwill balance as of September 30, 2020 of $96.9 million pertains to our Pursuit business. The duration and impact of COVID-19 may result in additional future impairment charges as facts and circumstances evolve. Refer to Note 9 – Goodwill and Other Intangible Assets for additional information.

Basis of Presentation

The accompanying unaudited condensed consolidated financial statements 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, 2019, filed with the SEC on February 26, 2020 (“2019 Form 10-K”). Subsequent to the filing of the 2019 Form 10-K, we corrected the classification of debt as of December 31, 2019. Refer to Note 12 – Debt and Finance Lease Obligations.

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

Correction to Prior Period Financial Statements

During the third quarter of 2020, we identified a prior period error related to the recognition of revenue of our GES’ Corporate Accounts’ third-party services. Revenue from these services should have been recorded on a net basis to reflect only the fees we receive from arranging these services. Previously, we recorded this revenue on a gross basis, thus overstating revenue and cost of services by the same amount. As a result, we corrected the accompanying Condensed Consolidated Statements of Operations for the three and nine months ended September 30, 2019 related to this gross-to-net adjustment. We determined that the error is not material to the previously issued financial statements. Note 2 – Revenue and Related Contract Costs and Contract Liabilities and Note 22 – Segment Information reflects this change.

 

 

 

Three Months Ended September 30, 2019

 

 

Nine Months Ended September 30, 2019

 

(in thousands)

 

Services Revenue

 

 

Cost of Services

 

 

Services Revenue

 

 

Cost of Services

 

As previously reported

 

$

300,446

 

 

$

256,296

 

 

$

898,746

 

 

$

825,806

 

Gross to net correction for GES North America

 

 

(6,859

)

 

 

(6,859

)

 

 

(32,081

)

 

 

(32,081

)

Gross to net correction for GES EMEA

 

 

(1,886

)

 

 

(1,886

)

 

 

(8,594

)

 

 

(8,594

)

Total as corrected

 

$

291,701

 

 

$

247,551

 

 

$

858,071

 

 

$

785,131

 

 

Impact of Recent Accounting Pronouncements

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

 

Standard

 

Description

 

Date of adoption

 

Effect on the financial statements

Standards Not Yet Adopted

ASU 2019-12, Income Taxes (Topic 740) Simplifying the Accounting for Income Taxes

 

The amendment enhances and simplifies various aspects of the income tax accounting guidance, including requirements such as ownership changes in investments, and interim-period accounting for enacted changes in tax law.

 

1/1/2021

 

We are currently evaluating the potential impact of the adoption of this new guidance on our consolidated financial statements. We do not expect this new guidance to have a material impact on our consolidated financial statements.

ASU 2020-06, Debt - Debt with Conversion and Other Options (Subtopic 470-20) and Derivatives and Hedging - Contracts in Entity’s Own Equity (Subtopic 815-40)

 

The amendment simplifies the accounting for convertible instruments by reducing the number of accounting models available for convertible debt instruments and convertible preferred stock. The amendment also requires expanded disclosures about the terms and features of convertible instruments. Early adoption is permitted, but no earlier than fiscal years beginning after December 15, 2020.

 

1/1/2022

 

We are currently evaluating the potential impact of the adoption of this new guidance on our consolidated financial statements and if there are applicable provisions that will simplify our accounting or reporting we will likely pursue early adoption.

 

Standard

 

Description

 

Date of adoption

 

Effect on the financial statements

Standards Recently Adopted

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

 

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

 

1/1/2020

 

We adopted this new standard on a modified retrospective basis. The adoption of this new standard on January 1, 2020 did not have a material impact on our condensed consolidated financial statements.

ASU 2020-04, Reference Rate Reform (Topic 848)

 

The amendment provides temporary optional guidance to ease the potential burden in accounting for reference rate reform. Topic 848 provides optional expedients and exceptions for applying U.S. GAAP to transactions affected by reference rate reform if certain criteria are met.

 

3/12/2020

 

Topic 848 was effective beginning on March 12, 2020, and we will apply the amendments prospectively through December 31, 2022. There was no impact to our condensed consolidated financial statements as a result of adopting this amendment.

 

 

 

Significant Accounting Policies

Use of Estimates

The preparation of financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities at the date of the financial statements and the reported amounts of revenue and expenses during the reported period. Estimates and assumptions are used in accounting for, among other things: impairment testing of recorded goodwill and intangible assets and long-lived assets; allowances for uncollectible accounts receivable; sales reserve allowances; provisions for income taxes, including uncertain tax positions; valuation allowances related to deferred tax assets; liabilities for losses related to self-insured liability claims; liabilities for losses related to environmental remediation obligations; sublease income associated with restructuring liabilities; pension and postretirement benefit costs and obligations; share-based compensation costs; the discount rates used to value lease obligations; 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. 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., the 40% equity interest that we do not own in the Mountain Park Lodges, and the 49% equity interest that we do not own in the new entity that will operate the Pursuit Sky Lagoon attraction. We report non-redeemable noncontrolling interest within stockholders’ equity in the Condensed Consolidated Balance Sheets. The amount of consolidated net income or loss attributable to Viad and the non-redeemable noncontrolling interest is presented in the Condensed Consolidated Statements of Operations.

We consider noncontrolling interests with redemption features that are not solely within our control to be redeemable noncontrolling interests. Our redeemable noncontrolling interest relates to our 54.5% equity ownership interest in Esja Attractions ehf. (“Esja”), which owns the FlyOver Iceland attraction. The Esja shareholders agreement contains a put option that gives the minority Esja shareholders the right to sell (or “put”) their 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 per share. Refer to Note 21 – Redeemable Noncontrolling Interest for additional information.

Convertible Preferred Stock

We record shares of convertible preferred stock at fair value on the date of issuance, net of issuance costs. Redeemable preferred stock (including preferred stock that features redemption rights that are either within the control of the holder or subject to redemption upon the occurrence of uncertain events not solely within our control) is classified as temporary equity and is reported between liabilities and stockholders’ equity on the Condensed Consolidated Balance Sheets.

Leases

We recognize a right-of-use (“ROU”) asset and lease liability on the balance sheet and classify leases as either finance or operating leases. The classification of the lease determines whether we recognize the lease expense on an effective interest method basis (finance lease) or on a straight-line basis (operating lease) over the lease term. In determining whether an agreement contains a lease, we consider if we have a right to control the use of the underlying asset during the lease term in exchange for an obligation to make lease payments arising from the lease. We recognize ROU assets and lease liabilities at commencement date, which is when 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 23 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 are located and have lease terms ranging up to 47 years.

If a lease contains a renewal option that is reasonably certain to be exercised, then the lease term includes the optional periods in measuring a ROU asset and lease liability. We evaluate the reasonably certain threshold at lease commencement, and it is typically met if we identify substantial economic incentives or termination penalties. We do not include variable leases and variable non-lease components in the 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 we adjust to actual expense on a quarterly or annual basis depending on the underlying contract terms. We expense these variable lease payments as incurred. Our lease agreements do not contain any significant residual value guarantees or restrictive covenants.

Substantially all of our lease agreements do not specify an implicit borrowing rate, and as such, we utilize an incremental borrowing rate based on lease term and country, in order to calculate the present value of our future lease payments. The discount rate represents a risk-adjusted rate on a collateralized basis and is 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.

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. We record lease income from owned facilities as rental income and we record sublease income from leased facilities against lease expense in the Condensed Consolidated Statements of Operations. We classify all of our leases for which we are the lessor as operating leases.

v3.20.2
Revenue and Related Contract Costs and Contract Liabilities
9 Months Ended
Sep. 30, 2020
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 we often sign multi-year contracts for recurring events, the obligations for each occurrence are well defined and conclude upon the occurrence of each event. The obligations are typically the provision of services and/or sale of a product in connection with an exhibition, conference, or other event. GES’ revenue is earned over time over the duration of the event, but as a practical expedient we recognize revenue when we have a right to invoice at the close of the exhibition, conference, or corporate event, which typically lasts one to three days, or when a customer cancels a contract. We recognize revenue for consumer events over the duration of the event. We recognize revenue for products either upon delivery to the customer’s location, upon delivery to an event that we are serving, or when we have the right to invoice, generally at the close of the exhibition, conference, or corporate event, or when a customer cancels a contract. If a customer cancels a contract, then GES is generally contractually able to invoice the customer for contract costs that have been incurred by GES in preparing for the exhibition, conference, or corporate event. Payment terms are generally within 30-60 days and contain no significant financing components.

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

Contract Liabilities

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

Changes to contract liabilities are as follows:

(in thousands)

 

 

 

 

Balance at December 31, 2019

 

$

50,796

 

Cash additions

 

 

130,018

 

Revenue recognized

 

 

(162,954

)

Foreign exchange translation adjustment

 

 

(84

)

Balance at September 30, 2020

 

$

17,776

 

Contract Costs

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

Changes to contract costs are as follows:

(in thousands)

 

 

 

 

Balance at December 31, 2019

 

$

28,496

 

Additions

 

 

16,710

 

Expenses

 

 

(22,774

)

Cancelled

 

 

(9,840

)

Foreign exchange translation adjustment

 

 

(479

)

Balance at September 30, 2020

 

$

12,113

 

As of September 30, 2020, capitalized contract costs consisted of $1.2 million to obtain contracts and $10.9 million to fulfill contracts. We did not recognize an impairment loss with respect to capitalized contract costs during the three and nine months ended September 30, 2020 or 2019.

Disaggregation of Revenue

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

GES

 

 

Three Months Ended September 30, 2020

 

(in thousands)

 

GES North America

 

 

GES EMEA

 

 

Intersegment Eliminations

 

 

Total

 

Services:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Core services

 

$

7,987

 

 

$

2,003

 

 

$

 

 

$

9,990

 

Audio-visual

 

 

933

 

 

 

(40

)

 

 

 

 

 

893

 

Event technology

 

 

1,283

 

 

 

414

 

 

 

 

 

 

1,697

 

Intersegment eliminations

 

 

 

 

 

 

 

 

(284

)

 

 

(284

)

Total services

 

 

10,203

 

 

 

2,377

 

 

 

(284

)

 

 

12,296

 

Products:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Core products

 

 

1,564

 

 

 

397

 

 

 

 

 

 

1,961

 

Total revenue

 

$

11,767

 

 

$

2,774

 

 

$

(284

)

 

$

14,257

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Timing of revenue recognition:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Services transferred over time

 

$

10,203

 

 

$

2,377

 

 

$

(284

)

 

$

12,296

 

Products transferred over time(1)

 

 

232

 

 

 

15

 

 

 

 

 

 

247

 

Products transferred at a point in time

 

 

1,332

 

 

 

382

 

 

 

 

 

 

1,714

 

Total revenue

 

$

11,767

 

 

$

2,774

 

 

$

(284

)

 

$

14,257

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Markets:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Exhibitions

 

$

4,890

 

 

$

2,323

 

 

$

 

 

$

7,213

 

Conferences

 

 

1,099

 

 

 

367

 

 

 

 

 

 

1,466

 

Corporate events

 

 

4,537

 

 

 

67

 

 

 

 

 

 

4,604

 

Consumer events

 

 

1,241

 

 

 

17

 

 

 

 

 

 

1,258

 

Intersegment eliminations

 

 

 

 

 

 

 

 

(284

)

 

 

(284

)

Total revenue

 

$

11,767

 

 

$

2,774

 

 

$

(284

)

 

$

14,257

 

(1)

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

 

 

 

Nine Months Ended September 30, 2020

 

(in thousands)

 

GES North America

 

 

GES EMEA

 

 

Intersegment Eliminations

 

 

Total

 

Services:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Core services

 

$

225,414

 

 

$

33,350

 

 

$

 

 

$

258,764

 

Audio-visual

 

 

18,661

 

 

 

3,549

 

 

 

 

 

 

22,210

 

Event technology

 

 

7,946

 

 

 

4,126

 

 

 

 

 

 

12,072

 

Intersegment eliminations

 

 

 

 

 

 

 

 

(3,258

)

 

 

(3,258

)

Total services

 

 

252,021

 

 

 

41,025

 

 

 

(3,258

)

 

 

289,788

 

Products:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Core products

 

 

21,402

 

 

 

11,071

 

 

 

 

 

 

32,473

 

Total revenue

 

$

273,423

 

 

$

52,096

 

 

$

(3,258

)

 

$

322,261

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Timing of revenue recognition:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Services transferred over time

 

$

252,021

 

 

$

41,025

 

 

$

(3,258

)

 

$

289,788

 

Products transferred over time(1)

 

 

11,035

 

 

 

2,407

 

 

 

 

 

 

13,442

 

Products transferred at a point in time

 

 

10,367

 

 

 

8,664

 

 

 

 

 

 

19,031

 

Total revenue

 

$

273,423

 

 

$

52,096

 

 

$

(3,258

)

 

$

322,261

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Markets: