VIAD CORP, 10-Q filed on 5/9/2018
Quarterly Report
v3.8.0.1
Document and Entity Information - shares
3 Months Ended
Mar. 31, 2018
May 07, 2018
Document And Entity Information [Abstract]    
Entity Registrant Name VIAD CORP  
Entity Central Index Key 0000884219  
Document Type 10-Q  
Document Period End Date Mar. 31, 2018  
Amendment Flag false  
Document Fiscal Year Focus 2018  
Document Fiscal Period Focus Q1  
Current Fiscal Year End Date --12-31  
Trading Symbol VVI  
Entity Filer Category Large Accelerated Filer  
Entity Common Stock, Shares Outstanding   20,479,453
v3.8.0.1
CONDENSED CONSOLIDATED BALANCE SHEETS (Unaudited) - USD ($)
$ in Thousands
Mar. 31, 2018
Dec. 31, 2017
Current assets    
Cash and cash equivalents $ 42,340 $ 53,723
Accounts receivable, net of allowances for doubtful accounts of $1,953 and $2,023, respectively 118,284 104,811
Inventories 17,514 17,550 [1]
Current contract costs 22,620 13,436 [1]
Other current assets 23,077 19,741 [1]
Total current assets 223,835 209,261
Property and equipment, net 316,879 305,571
Other investments and assets 48,789 48,187 [1]
Deferred income taxes 28,055 23,548
Goodwill 269,794 270,551
Other intangible assets, net 60,795 62,781
Total Assets 948,147 919,899
Current liabilities    
Accounts payable 82,019 77,380
Contract liabilities 51,891 31,981 [2]
Accrued compensation 18,734 30,614
Other current liabilities 50,817 40,154 [2]
Current portion of debt and capital lease obligations [3] 178,252 152,599
Total current liabilities 381,713 332,728
Long-term debt and capital lease obligations 53,066 56,593
Pension and postretirement benefits 28,153 28,135
Other deferred items and liabilities 48,786 52,858
Total liabilities 511,718 470,314
Commitments and contingencies
Redeemable noncontrolling interest 6,950 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 573,223 574,458
Retained earnings 55,000 65,836
Unearned employee benefits and other 207 218
Accumulated other comprehensive loss (25,848) (22,568)
Common stock in treasury, at cost, 4,468,334 and 4,518,099 shares, respectively (223,947) (226,215)
Total Viad stockholders’ equity 416,037 429,131
Non-redeemable noncontrolling interest 13,442 13,806
Total stockholders’ equity 429,479 442,937 [4]
Total Liabilities and Stockholders’ Equity $ 948,147 $ 919,899
[1] Contract costs primarily consist of deferred core services costs (including labor and vendor purchases) required to service future exhibitions, conferences and other events, and commission expenses incurred to obtain contracts. All such costs were previously included in “Inventories” and in other certain assets. As a result of the changes noted above, deferred core services costs related to exhibitions and events that are scheduled to occur longer than one year in the future are currently included in “Other investments and assets”. The impact of this change reduced total current assets at December 31, 2017 by $0.7 million. The amount of deferred core services costs included in “Other investments and assets” at March 31, 2018 was $4.6 million.
[2] In connection with the adoption of Topic 606, we elected to more prominently present contract liabilities on the Consolidated Balance Sheets. Consequently, customer deposits of $33.4 million as of December 31, 2017, have been reclassified to “Contract liabilities” and to other certain current liabilities to conform to the current period presentation.
[3] Borrowings under the revolving credit facilities are classified as current because all borrowed amounts are due within one year.
[4] The cumulative effect of initially applying Topic 606 as an adjustment to the opening balance of retained earnings was determined to be immaterial and therefore no adjustment was made.
v3.8.0.1
CONDENSED CONSOLIDATED BALANCE SHEETS (Parenthetical) (Unaudited) - USD ($)
$ in Thousands
Mar. 31, 2018
Dec. 31, 2017
Statement Of Financial Position [Abstract]    
Allowance for doubtful accounts $ 1,953 $ 2,023
Common stock, par value $ 1.50 $ 1.50
Common stock, shares authorized 200,000,000 200,000,000
Common stock, shares issued 24,934,981 24,934,981
Common stock, shares outstanding 24,934,981 24,934,981
Treasury stock, shares 4,468,334 4,518,099
v3.8.0.1
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (Unaudited) - USD ($)
shares in Thousands, $ in Thousands
3 Months Ended
Mar. 31, 2018
Mar. 31, 2017
Revenue:    
Services $ 245,548 $ 290,643
Products 31,880 35,164
Total revenue 277,428 325,807
Costs and expenses:    
Costs of services 257,295 280,638
Costs of products 31,122 32,102
Business interruption gain (190) (53)
Corporate activities 2,217 2,541
Interest income (84) (58)
Interest expense 2,069 2,105
Other expense [1] 238 452
Restructuring charges 162 394
Impairment recoveries   (2,384)
Total costs and expenses 292,829 315,737
Income (loss) from continuing operations before income taxes (15,401) 10,070
Income tax expense (benefit) (4,638) 2,741
Income (loss) from continuing operations (10,763) 7,329
Income (loss) from discontinued operations 928 (816)
Net income (loss) (9,835) 6,513
Net loss attributable to non-redeemable noncontrolling interest 364 264
Net loss attributable to redeemable noncontrolling interest 84  
Net income (loss) attributable to Viad $ (9,387) $ 6,777
Diluted income (loss) per common share:    
Continuing operations attributable to Viad common stockholders $ (0.51) $ 0.37
Discontinued operations attributable to Viad common stockholders 0.04 (0.04)
Net income (loss) attributable to Viad common stockholders [2] $ (0.47) $ 0.33
Weighted-average outstanding and potentially dilutive common shares 20,207 20,346
Basic income (loss) per common share:    
Continuing operations attributable to Viad common stockholders $ (0.51) $ 0.37
Discontinued operations attributable to Viad common stockholders 0.04 (0.04)
Net income (loss) attributable to Viad common stockholders $ (0.47) $ 0.33
Weighted-average outstanding common shares 20,207 20,083
Dividends declared per common share $ 0.10 $ 0.10
Amounts attributable to Viad common stockholders    
Income (loss) from continuing operations $ (10,315) $ 7,593
Loss from discontinued operations 928 (816)
Net income (loss) attributable to Viad $ (9,387) $ 6,777
[1] We adopted ASU 2017-07 on January 1, 2018, which requires retrospective adoption. As a result, we recorded the nonservice cost component of net periodic benefit cost within other expense for the three months ended March 31, 2018, and we reclassified $0.5 million from operating expenses to other expense for the three months ended March 31, 2017 to conform with current period presentation. Refer to Note 1 – Overview and Basis of Presentation for additional details on the impact of this adoption on our Condensed Consolidated Statements of Operations.
[2] Diluted income (loss) per share amount cannot exceed basic income (loss) per share.
v3.8.0.1
CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS) (Unaudited) - USD ($)
$ in Thousands
3 Months Ended
Mar. 31, 2018
Mar. 31, 2017
Statement Of Income And Comprehensive Income [Abstract]    
Net income (loss) $ (9,835) $ 6,513
Other comprehensive income (loss):    
Unrealized gains (losses) on investments, net of tax [1]   62
Unrealized foreign currency translation adjustments, net of tax [1] (3,109) 2,345
Change in net actuarial gain, net of tax [1] 629 111
Change in prior service cost, net of tax [1] (184) (78)
Adoption of ASU 2016-01 (616)  
Comprehensive income (loss) (13,115) 8,953
Comprehensive loss attributable to non-redeemable noncontrolling interest 364 264
Comprehensive loss attributable to redeemable noncontrolling interest 84  
Comprehensive income (loss) attributable to Viad $ (12,667) $ 9,217
[1] The tax effect on other comprehensive income (loss) is not significant.
v3.8.0.1
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited) - USD ($)
$ in Thousands
3 Months Ended
Mar. 31, 2018
Mar. 31, 2017
Cash flows from operating activities    
Net income (loss) $ (9,835) $ 6,513
Adjustments to reconcile net income (loss) to net cash provided by (used in) operating activities:    
Depreciation and amortization 13,063 12,144
Deferred income taxes (4,507) 374
Loss (income) from discontinued operations (928) 816
Restructuring charges 162 394
Impairment recoveries   (2,384)
Gains on dispositions of property and other assets (73) (50)
Share-based compensation expense 717 1,999
Other non-cash items, net 1,803 1,287
Change in operating assets and liabilities (excluding the impact of acquisitions):    
Receivables (13,255) (26,219)
Inventories 70 (770)
Current contract costs (9,211) (3,739)
Accounts payable 5,354 29,437
Restructuring liabilities (359) (1,137)
Accrued compensation (16,149) (16,027)
Contract liabilities 20,888 13,505
Income taxes payable (7,475) (3,206)
Other assets and liabilities, net 16,316 19,301
Net cash provided by (used in) operating activities (3,419) 32,238
Cash flows from investing activities    
Capital expenditures (26,586) (14,662)
Proceeds from insurance   4,583
Cash paid for acquired businesses, net   (1,661)
Proceeds from dispositions of property and other assets 1,139 550
Net cash used in investing activities (25,447) (11,190)
Cash flows from financing activities    
Proceeds from borrowings 36,038 17,574
Payments on debt and capital lease obligations (15,348) (30,985)
Dividends paid on common stock (2,046) (2,038)
Common stock purchased for treasury (868) (1,204)
Proceeds from exercise of stock options 84  
Net cash provided by (used in) financing activities 17,860 (16,653)
Effect of exchange rate changes on cash and cash equivalents (377) 139
Net change in cash and cash equivalents (11,383) 4,534
Cash and cash equivalents, beginning of year 53,723 20,900
Cash and cash equivalents, end of period $ 42,340 $ 25,434
v3.8.0.1
Overview and Basis of Presentation
3 Months Ended
Mar. 31, 2018
Organization Consolidation And Presentation Of Financial Statements [Abstract]  
Overview and Basis of Presentation

Note 1. Overview and Basis of Presentation

Nature of Business

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

GES

GES is a global, full-service provider for live 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.

Services and Products Offered

GES offers a full suite of services and products for event organizers and corporate brand marketers through three main lines of business:

 

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

 

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

 

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

 

Markets Served

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

 

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

 

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

 

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

 

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

Pursuit

Pursuit is a collection of iconic natural and cultural destination travel experiences that enjoy perennial demand. Pursuit offers guests distinctive and world renowned experiences through its collection of unique hotels, lodges, recreational attractions, and transportation services.

Services and Products Offered

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

Markets Served

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

 

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

 

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

 

Glacier Park Collection. The Glacier Park Collection is an operator of seven lodging properties, 12 retail shops, and 11 dining outlets in and around Glacier National Park in Montana, and Waterton Lakes National Park in Alberta, Canada, with a leading share of rooms in that market.

 

FlyOver.  

 

o

FlyOver Canada, located in Vancouver, British Columbia, is a recreational attraction that provides a virtual flight ride experience that combines motion seating, spectacular media, and visual effects including wind, scents, and mist to give the unforgettable experience of flying across Canada.

 

o

FlyOver Iceland is a recreational attraction under construction in Reykjavik, Iceland that will provide a virtual flight ride experience over some of Iceland’s most spectacular scenery and natural wonders with the same effects as FlyOver Canada. The new attraction is expected to open in 2019.

Basis of Presentation

Viad’s accompanying unaudited condensed consolidated financial statements have been 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. We have recast certain prior period amounts to conform to the current period presentation due to the adoption of new accounting standards. 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, 2017, filed with the SEC on February 28, 2018 (“2017 Form 10-K”).

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

Impact of Recent Accounting Pronouncements

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

 

Standard

 

Description

 

Date of adoption

 

Effect on the financial statements

Standards Not Yet Adopted

ASU 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 as we will be required to record right-of-use assets and lease liabilities for our leases. Our Consolidated Statement of Operations 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 2018-02, Income Statement—Reporting Comprehensive Income (Topic 220): Reclassification of Certain Tax Effects from Accumulated Other Comprehensive Income

 

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

 

January 1, 2019

 

We are currently evaluating the impact of the adoption of this new guidance on our consolidated financial statements and related disclosures. Refer to Note 16 – Income Taxes for additional information.

 

Standard

 

Description

 

Date of adoption

 

Effect on the financial statements

Standards Recently Adopted

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

 

The standard established a new recognition model that requires revenue to be recognized in a manner to depict the transfer of goods or services to a customer at an amount that reflects the consideration expected to be received in exchange for those goods or services.

 

January 1, 2018

 

We adopted ASU 2014-09 and its related amendments (collectively, “Topic 606”) on January 1, 2018 using the modified retrospective transition method. The cumulative effect of initially applying the new standard as an adjustment to the opening balance of retained earnings was determined to be immaterial (less than $0.2 million) and, therefore, no adjustment was made.

 

The adoption of this standard did not have a material impact on our consolidated financial statements. The impact primarily related to the deferral of certain commissions which were previously expensed as incurred but are now capitalized and amortized over the period of contract performance, and the deferral of certain costs incurred in connection with trade shows which were previously expensed as incurred but are now capitalized and expensed upon the completion of the show. The new guidance resulted in expanded disclosures and processes to identify performance obligations. Refer to Note 2 – Revenue and Related Contract Costs and Contract Liabilities for additional transition disclosures.

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

 

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

 

January 1, 2018

 

We adopted this guidance prospectively in the first quarter of 2018 and recorded a cumulative-effect adjustment of $0.6 million to beginning retained earnings.

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

 

The amendment eliminates the requirement to estimate the implied fair value of goodwill if it is determined that the carrying amount of a reporting unit exceeds its fair value. Goodwill impairment will now be recognized by the amount by which a reporting unit’s carrying value exceeds its fair value, not to exceed the carrying amount of goodwill. 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, 2018

 

We early adopted this new guidance on January 1, 2018 on a prospective basis. As a result, we expect the adoption to reduce the complexity surrounding the analysis of goodwill impairment during our annual goodwill impairment tests as of October 31, 2018, or 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.

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

Cost and Net Periodic Postretirement Benefit Cost

 

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

 

January 1, 2018

 

We adopted this new standard retrospectively. As a result, we recorded the nonservice cost component of net periodic benefit cost within other expense and $0.5 million was reclassified from operating expenses to other expense for the three months ended March 31, 2017, to conform to current period presentation. See below for additional details on the impact of this adoption on our results of operations.

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

 

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

 

Upon issuance

 

We recognized the provisional tax impacts of the Tax Act in the fourth quarter of 2017. During the first quarter of 2018, we did not receive any additional information regarding these provisional calculations. As a result, we continue to anticipate finalizing our analysis in connection with the completion of our tax return for 2017 to be filed in 2018. Refer to Note 16 – Income Taxes for additional information.

 

 

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

 

 

 

Three Months Ended

 

(in thousands)

 

March 31, 2017

 

Revenue:

 

 

 

 

Exhibition and event services

 

$

275,948

 

Exhibits and environments

 

 

41,923

 

Pursuit services

 

 

7,936

 

Total revenue

 

$

325,807

 

 

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

 

 

 

Three Months Ended

 

(in thousands)

 

March 31, 2017

 

Revenue:

 

 

 

 

Services

 

$

290,643

 

Products

 

 

35,164

 

Total revenue

 

$

325,807

 

 

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

 

 

 

Three Months Ended March 31, 2017

 

(in thousands)

 

As Previously

Reported

 

 

Reclassifications to Conform with Revenue Presentation

 

 

ASU 2017-07

 

 

As Newly Reported

 

Cost of services

 

$

273,609

 

 

$

7,412

 

 

$

(383

)

 

$

280,638

 

Cost of products

 

$

39,514

 

 

$

(7,412

)

 

$

 

 

$

32,102

 

Corporate activities

 

$

2,610

 

 

$

 

 

$

(69

)

 

$

2,541

 

Other expense

 

$

 

 

$

 

 

$

452

 

 

$

452

 

 

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.

Revenue Recognition

Beginning January 1, 2018, 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, Audio-Visual, and Event Technology. GES’ service revenue is recognized when we have a right to invoice, net of commissions paid to customers, at the close of the event. GES’ product revenue is derived from the build of exhibits and environments and graphics. GES’ product revenue from the build of exhibits is recognized upon delivery of the product while graphics is recognized at the close of the event when we have the right to invoice. GES’ service revenue and graphics product revenue are recognized over time as they are considered part of a single performance obligation satisfied over time. GES’ product revenue from the build of exhibits is recognized at a point in time.

Pursuit’s service revenue is derived through its accommodations, admissions, 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.

The following table summarizes the impact of adopting Topic 606 on our unaudited Condensed Consolidated Statement of Operations for the three months ended March 31, 2018:

 

 

 

Three Months Ended March 31, 2018

 

(in thousands)

 

Balances without Adoption of

Topic 606

 

 

Effect of Change

 

 

As Reported

 

Revenue:

 

 

 

 

 

 

 

 

 

 

 

 

GES services

 

$

237,793

 

 

$

-

 

 

$

237,793

 

GES products

 

$

29,913

 

 

$

-

 

 

$

29,913

 

Pursuit services

 

$

7,755

 

 

$

-

 

 

$

7,755

 

Pursuit products

 

$

1,967

 

 

$

-

 

 

$

1,967

 

Costs and expenses:

 

 

 

 

 

 

 

 

 

 

 

 

Costs of services

 

$

258,142

 

 

$

(847

)

 

$

257,295

 

Costs of products

 

$

31,122

 

 

$

-

 

 

$

31,122

 

Income tax benefit

 

$

(4,852

)

 

$

214

 

 

$

(4,638

)

Net loss

 

$

(10,468

)

 

$

(633

)

 

$

(9,835

)

Noncontrolling Interests

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

Noncontrolling interests with redemption features that are not solely within our control are considered redeemable noncontrolling interests. The Esja Attractions ehf. (“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 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 earnings (loss) per share. Refer to Note 20 – Redeemable Noncontrolling Interest for additional information.

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.

v3.8.0.1
Revenue and Related Contract Costs and Contract Liabilities
3 Months Ended
Mar. 31, 2018
Revenue From Contract With Customer [Abstract]  
Revenue and Related Contract Costs and Contract Liabilities

Note 2. Revenue and Related Contract Costs and Contract Liabilities

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

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

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

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 incentives and commissions incurred upon contract signing. Costs associated with preliminary contract activities (i.e. proposal activities) are expensed as incurred. Capitalized contract costs are expensed upon the transfer of the related goods or services and are included in cost of services or cost of products sold, as applicable. The deferred incremental costs of obtaining and fulfilling contracts are included in the Condensed Consolidated Balance Sheets under the captions “Current contract costs” and “Other investments and assets.” These amounts were previously reported in inventories under “Work in process.”

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

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

Contract Liabilities

Changes to contract liabilities are as follows:

 

(in thousands)

 

 

 

 

Balance at January 1, 2018

 

$

31,981

 

Cash additions

 

 

38,241

 

Revenue recognized

 

 

(18,526

)

Foreign exchange translation adjustment

 

 

195

 

Balance at March 31, 2018

 

$

51,891

 

Contract Costs

Capitalized contract costs were $27.2 million as of March 31, 2018 and $16.9 million as of December 31, 2017. The contract costs as of March 31, 2018 consisted of $3.7 million to obtain contracts and $23.5 million to fulfill contracts. During the three months ended March 31, 2018, $8.6 million of the December 31, 2017 balance was recognized in cost of services or products and $18.6 million of costs remained deferred.  We did not recognize an impairment loss with respect to capitalized contract costs.

Disaggregation of Revenue

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

GES

 

 

 

Three Months Ended March 31, 2018

 

(in thousands)

 

GES U.S.

 

 

GES International

 

 

Intersegment Eliminations

 

 

Total

 

Services:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Core services

 

$

163,367

 

 

$

46,213

 

 

$

 

 

$

209,580

 

Audio-visual

 

 

17,084

 

 

 

3,168

 

 

 

 

 

 

20,252

 

Event technology

 

 

8,035

 

 

 

3,274

 

 

 

 

 

 

11,309

 

Intersegment eliminations

 

 

 

 

 

 

 

 

(3,348

)

 

 

(3,348

)

Total services

 

 

188,486

 

 

 

52,655

 

 

 

(3,348

)

 

 

237,793

 

Products:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Core products

 

 

15,382

 

 

 

14,531

 

 

 

 

 

 

29,913

 

Total revenue

 

$

203,868

 

 

$

67,186

 

 

$

(3,348

)

 

$

267,706

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Timing of revenue recognition:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Services transferred over time

 

$

188,486

 

 

$

52,654

 

 

$

 

 

$

241,140

 

Products transferred over time

 

 

10,592

 

 

 

4,107

 

 

 

 

 

 

14,699

 

Products transferred at a point in time

 

 

4,790

 

 

 

10,425

 

 

 

 

 

 

15,215

 

Intersegment eliminations

 

 

 

 

 

 

 

 

(3,348

)

 

 

(3,348

)

Total revenue

 

$

203,868

 

 

$

67,186

 

 

$

(3,348

)

 

$

267,706

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Markets:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Exhibitions

 

$

130,494

 

 

$

55,330

 

 

$

 

 

$

185,824

 

Conferences

 

 

37,816

 

 

 

6,661

 

 

 

 

 

 

44,477

 

Corporate events

 

 

29,444

 

 

 

4,860

 

 

 

 

 

 

34,304

 

Consumer events

 

 

6,114

 

 

 

335

 

 

 

 

 

 

6,449

 

Intersegment eliminations

 

 

 

 

 

 

 

 

(3,348

)

 

 

(3,348

)

Total revenue

 

$

203,868

 

 

$

67,186

 

 

$

(3,348

)

 

$

267,706

 

 

Pursuit

 

 

 

Three Months Ended

 

(in thousands)

 

March 31, 2018

 

Services:

 

 

 

 

Accommodations

 

$

1,705

 

Admissions

 

 

3,579

 

Transportation

 

 

2,369

 

Travel planning

 

 

308

 

Intersegment eliminations

 

 

(206

)

Total services revenue

 

 

7,755

 

Products:

 

 

 

 

Food and beverage

 

 

1,219

 

Retail operations

 

 

748

 

Total products revenue

 

 

1,967

 

Total revenue

 

$

9,722

 

 

 

 

 

 

Timing of revenue recognition:

 

 

 

 

Services transferred over time

 

$

7,755

 

Products transferred at a point in time

 

 

1,967

 

Total revenue

 

$

9,722

 

 

 

 

 

 

Markets:

 

 

 

 

Banff Jasper Collection

 

$

7,089

 

Alaska Collection

 

 

213

 

Glacier Park Collection

 

 

626

 

FlyOver

 

 

1,794

 

Total revenue

 

$

9,722

 

 

Balance Sheet Reclassifications

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

 

 

 

December 31, 2017

 

(in thousands)

 

As Previously Reported

 

 

Reclassifications

 

 

As Adjusted

 

Cash and cash equivalents

 

$

53,723

 

 

 

 

 

$

53,723

 

Accounts receivable, net

 

 

104,811

 

 

 

 

 

 

104,811

 

Inventories (1)

 

 

30,372

 

 

 

(12,822

)

 

 

17,550

 

Current contract costs (1)

 

 

 

 

 

13,436

 

 

 

13,436

 

Other current assets (1)

 

 

21,030

 

 

 

(1,289

)

 

 

19,741

 

Property and equipment, net

 

 

305,571

 

 

 

 

 

 

305,571

 

Other investments and assets (1)

 

 

47,512

 

 

 

675

 

 

 

48,187

 

Deferred income taxes

 

 

23,548

 

 

 

 

 

 

23,548

 

Goodwill

 

 

270,551

 

 

 

 

 

 

270,551

 

Other intangible assets, net

 

 

62,781

 

 

 

 

 

 

62,781

 

Total assets

 

$

919,899

 

 

 

 

 

$

919,899

 

Accounts payable

 

$

77,380

 

 

 

 

 

$

77,380

 

Customer deposits (2)

 

 

33,415

 

 

 

(33,415

)

 

 

 

Contract liabilities (2)

 

 

 

 

 

31,981

 

 

 

31,981

 

Accrued compensation

 

 

30,614

 

 

 

 

 

 

30,614

 

Other current liabilities (2)

 

 

38,720

 

 

 

1,434

 

 

 

40,154

 

Debt and capital lease obligations, current and long-term

 

 

209,192

 

 

 

 

 

 

209,192

 

Pension and postretirement benefits

 

 

28,135

 

 

 

 

 

 

28,135

 

Other deferred items and liabilities

 

 

52,858

 

 

 

 

 

 

52,858

 

Total liabilities

 

 

470,314

 

 

 

 

 

 

470,314

 

Redeemable noncontrolling interest

 

 

6,648

 

 

 

 

 

 

6,648

 

Total stockholders' equity (3)

 

 

442,937

 

 

 

 

 

 

442,937

 

Total liabilities and stockholders' equity

 

$

919,899

 

 

 

 

 

$

919,899

 

 

(1)

Contract costs primarily consist of deferred core services costs (including labor and vendor purchases) required to service future exhibitions, conferences and other events, and commission expenses incurred to obtain contracts. All such costs were previously included in “Inventories” and in other certain assets. As a result of the changes noted above, deferred core services costs related to exhibitions and events that are scheduled to occur longer than one year in the future are currently included in “Other investments and assets”. The impact of this change reduced total current assets at December 31, 2017 by $0.7 million. The amount of deferred core services costs included in “Other investments and assets” at March 31, 2018 was $4.6 million.

(2)

In connection with the adoption of Topic 606, we elected to more prominently present contract liabilities on the Consolidated Balance Sheets. Consequently, customer deposits of $33.4 million as of December 31, 2017, have been reclassified to “Contract liabilities” and to other certain current liabilities to conform to the current period presentation.

(3)

The cumulative effect of initially applying Topic 606 as an adjustment to the opening balance of retained earnings was determined to be immaterial and therefore no adjustment was made.

v3.8.0.1
Share-Based Compensation
3 Months Ended
Mar. 31, 2018
Disclosure Of Compensation Related Costs Sharebased Payments [Abstract]  
Share-Based Compensation

Note 3. Share-Based Compensation

The following table summarizes share-based compensation expense:

 

 

 

Three Months Ended

 

 

 

March 31,

 

(in thousands)

 

2018

 

 

2017

 

Performance unit incentive plan (“PUP”)

 

$

194

 

 

$

1,316

 

Restricted stock

 

 

503

 

 

 

623

 

Restricted stock units

 

 

20

 

 

 

60

 

Share-based compensation before income tax benefit

 

 

717

 

 

 

1,999

 

Income tax benefit

 

 

(181

)

 

 

(744

)

Share-based compensation, net of income tax benefit

 

$

536

 

 

$

1,255

 

We did not record any share-based compensation expense through restructuring expense during the three months ended March 31, 2018 or 2017.

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, 2017

 

 

239,338

 

 

$

32.80

 

 

 

206,899

 

 

$

33.16

 

 

 

12,750

 

 

$

30.94

 

Granted

 

 

71,625

 

 

$

52.15

 

 

 

41,457

 

 

$

52.15

 

 

 

3,669

 

 

$

52.28

 

Vested

 

 

(75,761

)

 

$

27.29

 

 

 

(54,458

)

 

$

27.35

 

 

 

(4,300

)

 

$

27.35

 

Forfeited

 

 

 

 

$

 

 

 

(1,156

)

 

$

36.37

 

 

 

(258

)

 

$

37.69

 

Balance at March 31, 2018

 

 

235,202

 

 

$

40.46

 

 

 

192,742

 

 

$

38.87

 

 

 

11,861

 

 

$

38.70

 

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 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 March 31, 2018, there were 1,672,566 shares available for future grant under the 2017 Plan.

PUP Awards

The vesting of PUP award shares is based upon achievement of certain performance-based criteria. The performance period of the shares is three years.

During the three months ended March 31, 2018, we granted $3.7 million PUP awards of which $1.6 million are payable in shares. Liabilities related to PUP awards were $5.1 million as of March 31, 2018 and $11.0 million as of December 31, 2017. In March 2018, PUP awards granted in 2015 vested and we distributed cash payouts of $5.9 million. In March 2017, PUP awards granted in 2014 vested and we distributed cash payouts of $3.7 million.

Restricted Stock

As of March 31, 2018, the unamortized cost of outstanding restricted stock awards was $4.1 million, which we expect to recognize over a weighted-average period of approximately 1.5 years. We repurchased 16,362 shares for $0.9 million during the three months ended March 31, 2018 and 25,642 shares for $1.2 million during the three months ended March 31, 2017 related to tax withholding requirements on vested share-based awards.

Restricted Stock Units

Aggregate liabilities related to restricted stock units were $0.3 million as of March 31, 2018 and $0.5 million as of December 31, 2017. In February 2018, the 2015 restricted stock units vested and we distributed cash payouts of $0.2 million. In February 2017, portions of the 2012 and 2014 restricted stock units vested and we distributed cash payouts of $0.3 million.

Stock Options

The following table summarizes stock option activity:

 

 

 

Shares

 

 

Weighted-Average

Exercise Price

 

Options outstanding and exercisable at December 31, 2017

 

 

63,773

 

 

$

16.62

 

Exercised

 

 

(5,084

)

 

$

16.62

 

Options outstanding and exercisable at March 31, 2018

 

 

58,689

 

 

$

16.62

 

 

v3.8.0.1
Acquisition of Business
3 Months Ended
Mar. 31, 2018
Business Combinations [Abstract]  
Acquisition of Business

Note 4. Acquisition of Business

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 interest’s 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. The fair value of the noncontrolling interest was finalized as of March 31, 2018 with no adjustments. Refer to Note 20 – 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. Goodwill is deductible for tax purposes. Transaction costs associated with the acquisition of Esja were $0.1 million in 2018 and 2017, which are included in corporate activities in the Condensed Consolidated Statements of Operations.

The Esja results of operations have been included in the condensed consolidated financial statements from the date of acquisition. During the three months ended March 31, 2018, Esja had an operating loss of $0.2 million, representing start-up costs.