VIAD CORP, 10-Q filed on 5/6/2016
Quarterly Report
Document and Entity Information
3 Months Ended
Mar. 31, 2016
Apr. 30, 2016
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, 2016 
 
Amendment Flag
false 
 
Document Fiscal Year Focus
2016 
 
Document Fiscal Period Focus
Q1 
 
Current Fiscal Year End Date
--12-31 
 
Trading Symbol
VVI 
 
Entity Filer Category
Accelerated Filer 
 
Entity Common Stock, Shares Outstanding
 
20,251,313 
Consolidated Balance Sheets (USD $)
In Thousands, unless otherwise specified
Mar. 31, 2016
Dec. 31, 2015
Current assets
 
 
Cash and cash equivalents
$ 41,335 
$ 56,531 
Accounts receivable, net of allowances for doubtful accounts of $1,532 and $1,593, respectively
100,529 
93,800 
Inventories
38,515 
27,529 
Other current assets
25,149 
17,311 
Total current assets
205,528 
195,171 
Property and equipment, net
243,381 
189,239 
Other investments and assets
38,404 
37,631 
Deferred income taxes
52,506 
50,137 
Goodwill
189,266 
185,223 
Other intangible assets, net
42,563 
33,322 
Total Assets
771,648 
690,723 
Current liabilities
 
 
Accounts payable
87,701 
65,497 
Customer deposits
61,780 
33,128 
Accrued compensation
18,169 
23,154 
Other current liabilities
32,396 
29,238 
Current portion of debt and capital lease obligations
74,640 
34,554 
Total current liabilities
274,686 
185,571 
Long-term debt and capital lease obligations
88,057 
92,849 
Pension and postretirement benefits
29,471 
29,629 
Other deferred items and liabilities
44,349 
47,336 
Total liabilities
436,563 
355,385 
Commitments and contingencies
   
   
Viad Corp stockholders’ equity:
 
 
Common stock, $1.50 par value, 200,000,000 shares authorized, 24,934,981 shares issued
37,402 
37,402 
Additional capital
572,910 
576,523 
Retained deficit
(26,875)
(17,866)
Unearned employee benefits and other
113 
109 
Accumulated other comprehensive income (loss):
 
 
Unrealized gain on investments
345 
346 
Cumulative foreign currency translation adjustments
(15,215)
(23,257)
Unrecognized net actuarial loss and prior service credit, net
(11,192)
(11,265)
Common stock in treasury, at cost, 4,694,065 and 4,771,443 shares, respectively
(234,998)
(239,411)
Total Viad stockholders’ equity
322,490 
322,581 
Noncontrolling interest
12,595 
12,757 
Total stockholders’ equity
335,085 
335,338 
Total Liabilities and Stockholders’ Equity
$ 771,648 
$ 690,723 
Consolidated Balance Sheets (Parenthetical) (USD $)
In Thousands, except Share data, unless otherwise specified
Mar. 31, 2016
Dec. 31, 2015
Statement Of Financial Position [Abstract]
 
 
Allowance for doubtful accounts
$ 1,532 
$ 1,593 
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 
Treasury stock, shares
4,694,065 
4,771,443 
Consolidated Statements of Operations (USD $)
In Thousands, except Per Share data, unless otherwise specified
3 Months Ended
Mar. 31, 2016
Mar. 31, 2015
Revenue:
 
 
Exhibition and event services
$ 201,286 
$ 213,252 
Exhibits and environments
34,850 
43,676 
Travel and recreation services
5,226 
7,468 
Total revenue
241,362 
264,396 
Costs and expenses:
 
 
Costs of services
214,227 
225,261 
Costs of products sold
33,415 
40,260 
Corporate activities
1,911 
2,810 
Interest income
(56)
(63)
Interest expense
1,284 
1,151 
Restructuring charges
992 
216 
Total costs and expenses
251,773 
269,635 
Loss from continuing operations before income taxes
(10,411)
(5,239)
Income tax benefit
(3,452)
(3,267)
Loss from continuing operations
(6,959)
(1,972)
Loss from discontinued operations
(186)
(148)
Net loss
(7,145)
(2,120)
Net loss attributable to noncontrolling interest
162 
64 
Net loss attributable to Viad
(6,983)
(2,056)
Diluted loss per common share:
 
 
Continuing operations attributable to Viad common stockholders
$ (0.34)
$ (0.10)
Discontinued operations attributable to Viad common stockholders
$ (0.01)
 
Net loss attributable to Viad common stockholders
$ (0.35)1
$ (0.10)1
Weighted-average outstanding and potentially dilutive common shares
19,914 
19,736 
Basic loss per common share:
 
 
Continuing operations attributable to Viad common stockholders
$ (0.34)
$ (0.10)
Discontinued operations attributable to Viad common stockholders
$ (0.01)
 
Net loss attributable to Viad common stockholders
$ (0.35)
$ (0.10)
Weighted-average outstanding common shares
19,914 
19,736 
Dividends declared per common share
$ 0.10 
$ 0.10 
Amounts attributable to Viad common stockholders
 
 
Loss from continuing operations
(6,797)
(1,908)
Loss from discontinued operations
(186)
(148)
Net loss attributable to Viad
$ (6,983)
$ (2,056)
Consolidated Statements of Comprehensive Income (Loss) (USD $)
In Thousands, unless otherwise specified
3 Months Ended
Mar. 31, 2016
Mar. 31, 2015
Statement Of Income And Comprehensive Income [Abstract]
 
 
Net loss
$ (7,145)
$ (2,120)
Other comprehensive income (loss):
 
 
Unrealized gains (losses) on investments, net of tax
(1)1
159 1
Unrealized foreign currency translation adjustments, net of tax
8,042 1
(17,579)1
Change in net actuarial gain, net of tax
158 1
168 1
Change in prior service cost, net of tax
(85)1
(86)1
Comprehensive income (loss)
969 
(19,458)
Comprehensive loss attributable to noncontrolling interest
162 
64 
Comprehensive income (loss) attributable to Viad
$ 1,131 
$ (19,394)
Consolidated Statements of Cash Flows (USD $)
In Thousands, unless otherwise specified
3 Months Ended
Mar. 31, 2016
Mar. 31, 2015
Cash flows from operating activities
 
 
Net loss
$ (7,145)
$ (2,120)
Adjustments to reconcile net loss to net cash provided by operating activities:
 
 
Depreciation and amortization
8,370 
8,708 
Deferred income taxes
(1,380)
(955)
Loss from discontinued operations
186 
148 
Restructuring charges
992 
216 
Gains on dispositions of property and other assets
(150)
(37)
Share-based compensation expense
1,066 
1,231 
Excess tax benefit from share-based compensation arrangements
(28)
(283)
Other non-cash items, net
937 
964 
Change in operating assets and liabilities (excluding the impact of acquisitions):
 
 
Receivables
(6,942)
(21,807)
Inventories
(9,807)
(3,150)
Accounts payable
21,366 
20,067 
Restructuring liabilities
(1,314)
(603)
Accrued compensation
(7,147)
(4,141)
Customer deposits
26,684 
20,542 
Income taxes payable
(2,080)
(281)
Other assets and liabilities, net
(6,569)
(235)
Net cash provided by operating activities
17,039 
18,264 
Cash flows from investing activities
 
 
Capital expenditures
(7,323)
(5,300)
Cash received (paid) for acquired businesses
(57,766)
279 
Proceeds from dispositions of property and other assets
229 
36 
Net cash used in investing activities
(64,860)
(4,985)
Cash flows from financing activities
 
 
Proceeds from borrowings
50,000 
20,000 
Payments on debt and capital lease obligations
(15,029)
(23,279)
Dividends paid on common stock
(2,024)
(2,000)
Debt issuance costs
(339)
 
Common stock purchased for treasury
(651)
(4,702)
Excess tax benefit from share-based compensation arrangements
28 
283 
Proceeds from exercise of stock options
 
225 
Net cash provided by (used in) financing activities
31,985 
(9,473)
Effect of exchange rate changes on cash and cash equivalents
640 
(2,943)
Net change in cash and cash equivalents
(15,196)
863 
Cash and cash equivalents, beginning of year
56,531 
56,990 
Cash and cash equivalents, end of period
41,335 
57,853 
Supplemental disclosure of cash flow information
 
 
Cash paid for income taxes
3,497 
2,203 
Cash paid for interest
1,089 
908 
Property and equipment acquired under capital leases
515 
 
Property and equipment purchases in accounts payable and accrued liabilities
$ 3,105 
$ 223 
Basis of Presentation and Principles of Consolidation
Basis of Presentation and Principles of Consolidation

Note 1. Basis of Presentation and Principles of Consolidation

The accompanying unaudited condensed consolidated financial statements of Viad Corp (“Viad” or the “Company”) 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 Securities and Exchange Commission (“SEC”) rules and regulations for complete financial statements. In the opinion of management, 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 Viad’s Annual Report on Form 10-K for the year ended December 31, 2015, filed with the SEC on March 11, 2016.

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.

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 Viad’s 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, and allocation of purchase price of acquired businesses. Actual results could differ from these and other estimates.

Nature of Business

Viad is an international experiential services company with operations in the United States, Canada, the United Kingdom, continental Europe, and the United Arab Emirates. Viad is committed to providing best in class experiences to its clients, customers, and guests by offering products and services designed to meet their current and future needs. Viad operates through three reportable business segments: the Marketing & Events U.S. Segment (the “U.S. Segment”), the Marketing & Events International Segment (the “International Segment”) (collectively, the “Marketing & Events Group”), and the Travel & Recreation Group.

Marketing & Events Group

The Marketing & Events Group, comprised of Global Experience Specialists, Inc. and affiliates (“GES”), is a global, full-service provider for live events that produces exhibitions, congresses and conferences, corporate events, consumer events, exhibits, and entertainment experiences. GES provides a comprehensive range of live event services, including official show services, audio-visual services, cutting-edge creative and design, strategic marketing and measurement services, registration, and event accommodations – all with a global reach.

GES’ clients include event organizers and corporate brand marketers. 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.

Travel & Recreation Group

The Travel & Recreation Group offers guests distinctive and world renowned experiences in iconic natural and cultural destinations in North America through its collection of unique hotels, lodges, recreational attractions, and transportation services. The Travel & Recreation Group is composed of four lines of business: (i) Hospitality; (ii) Attractions; (iii) Package Tours; and (iv) Transportation. These four lines of business work together, driving economies of scope and meaningful scale in and around the iconic destinations of Banff, Jasper, and Waterton Lakes National Parks in Canada, and Glacier, Denali, and Kenai Fjords National Parks in the United States. The Travel & Recreation Group is composed of Brewster Inc. (“Brewster”), Glacier Park, Inc. (“Glacier Park”), and Alaskan Park Properties, Inc. (“Alaska Denali Travel”).

Impact of Recent Accounting Pronouncements

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

 

Standard

 

Description

 

Date of adoption

 

Effect on the financial statements

Standards Not Yet Adopted

 

 

 

 

 

 

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

ASU 2016-08, Revenue from Contracts with Customers (Topic 606): Principal versus Agent Considerations (Reporting Revenue Gross versus Net)

 

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

 

ASU 2016-08 improves the operability and understandability of the implementation guidance on principal versus agent considerations.

 

January 1, 2018

 

The Company is currently evaluating the potential impact of the adoption of this new guidance on its financial position or results of operations, including the method of adoption to be used.

ASU 2015-11, Inventory (Topic 330) - Simplifying the Measurement of Inventory

 

The amendment applies to inventory measures using first-in, first-out or average cost and will require entities to measure inventory at the lower of cost or net realizable value. Net realizable value is the estimated selling price in the normal course of business, minus the cost of completion, disposal and transportation. Replacement cost and net realizable value less a normal profit margin will no longer be considered.

 

January 1, 2017

 

The adoption of this guidance is not expected to have a significant effect on Viad's consolidated financial statements.

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

 

The Company is currently evaluating the potential impact of the adoption of this new guidance on its financial position or results of operations.

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

 

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

 

January 1, 2017

 

The Company is currently evaluating the potential impact of the adoption of this new guidance on its financial position or results of operations.

 

 

 

 

 

 

 

Standards Recently Adopted

ASU 2014-12, Compensation - Stock Compensation (Topic 718) - Accounting for Share-Based Payments When the Terms of an Award Provide that a Performance Target Could be Achieved after the Requisite Service Period

 

The amendment requires that a performance target that affects vesting, and that could be achieved after the requisite service period, be treated as a performance condition. As such, the performance target should not be reflected in estimating the grant date fair value of the award.

 

January 1, 2016

 

The Company adopted this guidance prospectively to all awards granted after the effective date. The adoption of this guidance did not have a material impact on the consolidated financial statements.

ASU 2015-03, Interest - Imputation of Interest Simplifying the Presentation of Debt Issuance Costs

ASU 2015-15, Presentation and Subsequent Measurement of Debt Issuance Costs Associated with Line-of-Credit Arrangements

 

The amendments require debt issuance costs related to a recognized debt liability to be presented in the balance sheet as a direct deduction from the carrying amount of that debt liability. For line-of-credit arrangements, an entity may defer and present debt issuance costs as an asset and subsequently amortize the deferred debt issuance costs ratably over the term of the line-of-credit arrangement.

 

January 1, 2016

 

The adoption of this guidance resulted in the reclassification of unamortized debt issuance costs of $1.6 million from other long-term assets to a reduction in long-term debt on the December 31, 2015 consolidated balance sheet.

ASU 2015-16, Business Combinations (Topic 805) - Simplifying the Accounting for Measurement-Period Adjustments

 

The amendment requires an acquirer to recognize adjustments to provisional amounts that are identified during the measurement period in the reporting period in which the adjustment amounts are determined.

 

January 1, 2016

 

The adoption of this guidance did not have a material impact on the consolidated financial statements.

 

Share-Based Compensation
Share-Based Compensation

Note 2. Share-Based Compensation

The following table summarizes share-based compensation expense:

 

 

Three Months Ended March 31,

 

(in thousands)

 

2016

 

 

2015

 

Restricted stock

 

$

498

 

 

$

594

 

Performance unit incentive plan (“PUP”)

 

 

535

 

 

 

612

 

Restricted stock units

 

 

33

 

 

 

25

 

Share-based compensation before income tax benefit

 

 

1,066

 

 

 

1,231

 

Income tax benefit

 

 

(398

)

 

 

(462

)

Share-based compensation, net of income tax benefit

 

$

668

 

 

$

769

 

 

Viad recorded $0.2 million of share-based compensation expense through restructuring expense for the three months ended March 31, 2016 and none for the three months ended March 31, 2015. The 2016 amount was related to PUP awards.

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

 

 

 

Restricted Stock

 

 

PUP Awards

 

 

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, 2015

 

 

279,217

 

 

$

25.65

 

 

 

231,165

 

 

$

26.15

 

 

 

16,447

 

 

$

25.69

 

Granted

 

 

73,800

 

 

$

26.98

 

 

 

137,784

 

 

$

26.34

 

 

 

5,500

 

 

$

26.98

 

Vested

 

 

(70,675

)

 

$

26.92

 

 

 

(73,188

)

 

$

27.35

 

 

 

(5,965

)

 

$

27.18

 

Forfeited

 

 

(5,424

)

 

$

25.35

 

 

 

(6,556

)

 

$

25.85

 

 

 

 

 

$

 

Balance at March 31, 2016

 

 

276,918

 

 

$

25.69

 

 

 

289,205

 

 

$

25.94

 

 

 

15,982

 

 

$

25.58

 

 

Restricted Stock

As of March 31, 2016, the unamortized cost of all outstanding restricted stock awards was $4.1 million, which Viad expects to recognize in the consolidated financial statements over a weighted-average period of approximately 1.9 years. During the three months ended March 31, 2016 and 2015, the Company repurchased 23,625 shares for $0.7 million and 32,806 shares for $0.9 million, respectively, related to tax withholding requirements on vested share-based awards. As of March 31, 2016, there were 890,954 total shares available for future grant in accordance with the provisions of the 2007 Viad Corp Omnibus Incentive Plan (the “2007 Plan”).

PUP Awards

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

During the three months ended March 31, 2016, Viad granted $3.6 million PUP awards of which $0.9 million are payable in shares. As of March 31, 2016 and December 31, 2015, Viad had recorded liabilities of $2.7 million and $2.4 million, respectively, related to PUP awards. In March 2016, the PUP awards granted in 2013 vested and cash payouts of $0.2 million were distributed. In March 2015, the PUP awards granted in 2012 vested and cash payouts of $2.4 million were distributed.

Restricted Stock Units

As of March 31, 2016 and December 31, 2015, Viad had aggregate liabilities recorded of $0.2 million and $0.3 million, respectively, related to restricted stock units. In February 2016, portions of the 2011, 2012, and 2013 restricted stock units vested and cash payouts of $0.2 million were distributed. Similarly, in February 2015, portions of the 2010, 2011, and 2012 restricted stock units vested and cash payouts of $0.3 million were distributed.

Stock Options

During the three months ended March 31, 2016, there was no stock option activity. As of both March 31, 2016 and December 31, 2015 there were 63,773 stock options outstanding and exercisable with a weighted-average exercise price of $16.62. As of March 31, 2016, there were no unrecognized costs related to non-vested stock option awards.

Acquisition of Businesses
Acquisition of Businesses

Note 3. Acquisition of Businesses

Maligne Lake Tours

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

The following table summarizes the preliminary recording of the fair values of the assets acquired and liabilities assumed as of the acquisition date. Due to the recent timing of the acquisition, the purchase price allocation is not yet finalized and is subject to change within the measurement period (up to one year from the acquisition date) as the assessment of property and equipment, intangible assets, and working capital is finalized.

 

(in thousands)

 

 

 

 

 

 

 

 

Purchase price paid as:

 

 

 

 

 

 

 

 

Cash

 

 

 

 

 

$

14,962

 

 

 

 

 

 

 

 

 

 

Fair value of net assets acquired:

 

 

 

 

 

 

 

 

Inventories

 

$

246

 

 

 

 

 

Prepaid expenses

 

 

2

 

 

 

 

 

Property and equipment

 

 

4,133

 

 

 

 

 

Intangible assets

 

 

9,244

 

 

 

 

 

Total assets acquired

 

 

13,625

 

 

 

 

 

Customer deposits

 

 

15

 

 

 

 

 

Total liabilities assumed

 

 

15

 

 

 

 

 

Total fair value of net assets acquired

 

 

 

 

 

 

13,610

 

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

 

 

 

 

 

$

1,352

 

Under the acquisition method of accounting, the purchase price as shown in the table above is allocated to the tangible and identifiable intangible assets acquired and liabilities assumed based on their estimated fair values. The excess purchase price over the fair value of net assets acquired was recorded as goodwill. Goodwill is included in the Travel & Recreation Group and the primary factor that contributed to the purchase price resulting in the recognition of goodwill relates to future growth opportunities when combined with the Company’s other businesses. Goodwill is expected to be deductible for tax purposes pursuant to Canadian tax regulations. The estimated values of current assets and liabilities were based upon their historical costs on the date of acquisition due to their short-term nature. Transaction costs associated with the acquisition of Maligne Lake Tours were $0.1 million in 2016 and $0.2 million in 2015, and were included in corporate activities in Viad’s condensed consolidated statements of operations.

Identified intangible assets acquired in the Maligne Lake Tours acquisition totaled $9.2 million and consist of operating licenses, customer relationships, and trade names. The weighted-average amortization period related to the intangible assets is 26.7 years, largely attributable to operating licenses amortized over the remaining Parks Canada lease of 29 years.

The results of operations of Maligne Lake Tours have been included in Viad’s condensed consolidated financial statements from the date of acquisition. During the three months ended March 31, 2016, revenue of $7,000 and an operating loss of $0.1 million, related to Maligne Lake Tours, were included in Viad’s condensed consolidated statements of operations.

CATC

On March 11, 2016, the Company acquired 100 percent of the equity interest in CIRI Alaska Tourism Corporation (“CATC”), the operator of an Alaskan tourism business that includes a marine sightseeing tour business, three lodges, and a package tour business. The purchase price was $45.0 million in cash, subject to certain adjustments.

The following table summarizes the preliminary recording of the fair values of the assets acquired and liabilities assumed as of the acquisition date. Due to the recent timing of the acquisition, the purchase price allocation is not yet finalized and is subject to change within the measurement period (up to one year from the acquisition date) as the assessment of property and equipment, intangible assets, and working capital is finalized.  

 

(in thousands)

 

 

 

 

 

 

 

 

Purchase price paid as:

 

 

 

 

 

 

 

 

Cash

 

 

 

 

 

$

45,000

 

Estimated working capital adjustment

 

 

 

 

 

 

54

 

Cash acquired

 

 

 

 

 

 

(2,196

)

Purchase price, net of cash acquired

 

 

 

 

 

 

42,858

 

 

 

 

 

 

 

 

 

 

Fair value of net assets acquired:

 

 

 

 

 

 

 

 

Accounts receivable

 

$

8

 

 

 

 

 

Inventories

 

 

921

 

 

 

 

 

Prepaid expenses

 

 

82

 

 

 

 

 

Property and equipment

 

 

43,470

 

 

 

 

 

Intangible assets

 

 

980

 

 

 

 

 

Total assets acquired

 

 

45,461

 

 

 

 

 

Accounts payable

 

 

201

 

 

 

 

 

Accrued liabilities

 

 

450

 

 

 

 

 

Customer deposits

 

 

1,952

 

 

 

 

 

Total liabilities assumed

 

 

2,603

 

 

 

 

 

Total fair value of net assets acquired

 

 

 

 

 

 

42,858

 

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

 

 

 

 

 

$

 

Under the acquisition method of accounting, the purchase price as shown in the table above is allocated to the tangible and identifiable intangible assets acquired and liabilities assumed based on their estimated fair values. The estimated values of current assets and liabilities were based upon their historical costs on the date of acquisition due to their short-term nature. Transaction costs associated with the acquisition of CATC were $0.1 million in 2016 and $0.6 million in 2015 and were included in corporate activities in Viad’s condensed consolidated statements of operations.

Identified intangible assets acquired in the CATC acquisition totaled $1.0 million and consist of customer relationships and trade names. The weighted-average amortization period related to the intangible assets is 5.8 years.

The results of operations of CATC have been included in Viad’s condensed consolidated financial statements from the date of acquisition. During the three months ended March 31, 2016, revenue of $45,000 and an operating loss of $0.6 million, related to CATC, were included in Viad’s condensed consolidated statements of operations.

Supplementary pro forma financial information

The following table summarizes the unaudited pro forma results of operations attributable to Viad, assuming the above acquisitions had each been completed on January 1, 2015:

 

 

 

Three Months Ended March 31,

 

(in thousands, except per share data)

 

2016

 

 

2015

 

Revenue

 

$

241,441

 

 

$

264,528

 

Depreciation and amortization

 

$

8,898

 

 

$

9,314

 

Loss from continuing operations

 

$

(8,352

)

 

$

(4,709

)

Net loss attributable to Viad

 

$

(8,376

)

 

$

(4,793

)

Diluted loss per share

 

$

(0.41

)

 

$

(0.24

)

Basic loss per share

 

$

(0.41

)

 

$

(0.24

)

 

Inventories
Inventories

Note 4. Inventories

The components of inventories consisted of the following:

 

 

 

March 31,

 

 

December 31,

 

(in thousands)

 

2016

 

 

2015

 

Raw materials

 

$

16,047

 

 

$

14,383

 

Work in process

 

 

22,468

 

 

 

13,146

 

Inventories

 

$

38,515

 

 

$

27,529

 

 

Other Current Assets
Other Current Assets

Note 5. Other Current Assets

Other current assets consisted of the following:

 

 

 

March 31,

 

 

December 31,

 

(in thousands)

 

2016

 

 

2015

 

Income tax receivable

 

$

6,699

 

 

$

4,643

 

Prepaid vendor payments

 

 

5,894

 

 

 

2,140

 

Prepaid insurance

 

 

1,985

 

 

 

2,024

 

Prepaid software maintenance

 

 

1,640

 

 

 

2,026

 

Prepaid rent

 

 

1,639

 

 

 

1,406

 

Prepaid taxes

 

 

1,142

 

 

 

1,261

 

Prepaid other

 

 

4,664

 

 

 

2,777

 

Other

 

 

1,486

 

 

 

1,034

 

Other current assets

 

$

25,149

 

 

$

17,311

 

 

Property and Equipment
Property and Equipment

Note 6. Property and Equipment

Property and equipment consisted of the following:

 

 

 

March 31,

 

 

December 31,

 

(in thousands)

 

2016

 

 

2015

 

Land and land interests

 

$

29,525

 

 

$

29,032

 

Buildings and leasehold improvements

 

 

189,251

 

 

 

135,381

 

Equipment and other

 

 

279,620

 

 

 

270,957

 

Gross property and equipment

 

 

498,396

 

 

 

435,370

 

Accumulated depreciation

 

 

(255,015

)

 

 

(246,131

)

Property and equipment, net

 

$

243,381

 

 

$

189,239

 

 

Depreciation expense was $6.7 million for both of the three months ended March 31, 2016 and 2015.

Other Investments and Assets
Other Investments and Assets

Note 7. Other Investments and Assets

Other investments and assets consisted of the following:

 

 

 

March 31,

 

 

December 31,

 

(in thousands)

 

2016

 

 

2015 (1)

 

Cash surrender value of life insurance

 

$

22,028

 

 

$

21,970

 

Self-insured liability receivable

 

 

5,979

 

 

 

5,979

 

Workers’ compensation insurance security deposits

 

 

4,250

 

 

 

4,250

 

Other mutual funds

 

 

2,395

 

 

 

2,192

 

Other

 

 

3,752

 

 

 

3,240

 

Other investments and assets

 

$

38,404

 

 

$

37,631

 

 

(1)

In accordance with ASU 2015-03, unamortized debt issuance costs are reflected as a direct deduction from the carrying amount of the related debt. The Company adopted the new guidance retrospectively to all prior periods presented in the condensed consolidated financial statements. As a result, $1.6 million of unamortized debt issuance costs were reclassified from other investments and assets to a reduction of long-term debt on the December 31, 2015 condensed consolidated balance sheet.

 

Goodwill and Other Intangible Assets
Goodwill and Other Intangible Assets

Note 8. Goodwill and Other Intangible Assets

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

 

(in thousands)

 

Marketing &

Events U.S. Segment

 

 

Marketing &

Events

International Segment

 

 

Travel &

Recreation

Group

 

 

Total

 

Balance at December 31, 2015

 

$

112,300

 

 

$

38,635

 

 

$

34,288

 

 

$

185,223

 

Business acquisitions

 

 

 

 

 

 

 

 

1,352

 

 

 

1,352

 

Foreign currency translation adjustments

 

 

 

 

 

211

 

 

 

2,480

 

 

 

2,691

 

Balance at March 31, 2016

 

$

112,300

 

 

$

38,846

 

 

$

38,120

 

 

$

189,266

 

Intangible assets consisted of the following:

 

 

 

March 31, 2016

 

 

December 31, 2015

 

(in thousands)

 

Gross Carrying

Value

 

 

Accumulated

Amortization

 

 

Net Carrying Value

 

 

Gross Carrying

Value

 

 

Accumulated

Amortization

 

 

Net Carrying Value

 

Amortized intangible assets:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Customer contracts and relationships

 

$

40,143

 

 

$

(9,399

)

 

$

30,744

 

 

$

38,342

 

 

$

(7,814

)

 

$

30,528

 

Operating contracts and licenses

 

 

9,628

 

 

 

(309

)

 

 

9,319

 

 

 

665

 

 

 

(272

)

 

 

393

 

Other

 

 

4,883

 

 

 

(2,843

)

 

 

2,040

 

 

 

3,736

 

 

 

(1,795

)

 

 

1,941

 

Total amortized intangible assets

 

 

54,654

 

 

 

(12,551

)

 

 

42,103

 

 

 

42,743

 

 

 

(9,881

)

 

 

32,862

 

Unamortized intangible assets:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Business licenses

 

 

460

 

 

 

 

 

 

460

 

 

 

460

 

 

 

 

 

 

460

 

Total

 

$

55,114

 

 

$

(12,551

)

 

$

42,563

 

 

$

43,203

 

 

$

(9,881

)

 

$

33,322

 

Intangible asset amortization expense was $1.7 million and $2.0 million for the three months ended March 31, 2016 and 2015, respectively. The weighted-average amortization period of customer contracts and relationships, operating contracts and licenses, and other amortizable intangible assets is approximately 7.9 years, 27.7 years, and 2.5 years, respectively. The estimated future amortization expense related to amortized intangible assets held at March 31, 2016 is as follows:

 

(in thousands)

 

 

 

 

Year ending December 31,

 

 

 

 

Remainder of 2016

 

$

5,443

 

2017

 

 

6,159

 

2018

 

 

5,174

 

2019

 

 

4,794

 

2020

 

 

4,240

 

Thereafter

 

 

16,293

 

Total

 

$

42,103

 

 

Other Current Liabilities
Other Current Liabilities

 

Note 9. Other Current Liabilities

Other current liabilities consisted of the following:

 

 

 

March 31,

 

 

December 31,

 

(in thousands)

 

2016

 

 

2015

 

Continuing operations:

 

 

 

 

 

 

 

 

Self-insured liability accrual

 

$

5,835

 

 

$

6,891

 

Accrued employee benefit costs

 

 

5,516

 

 

 

3,892

 

Accrued sales and use taxes

 

 

4,545

 

 

 

4,772

 

Accrued dividends

 

 

2,108

 

 

 

2,103

 

Current portion of pension liability

 

 

1,767

 

 

 

1,768

 

Accrued restructuring

 

 

1,630

 

 

 

1,757

 

Accrued rebates

 

 

1,162

 

 

 

752

 

Accrued professional fees

 

 

1,027

 

 

 

751

 

Deferred rent

 

 

965

 

 

 

548

 

Other taxes

 

 

4,256

 

 

 

1,465

 

Other

 

 

2,629

 

 

 

3,523

 

Total continuing operations

 

 

31,440

 

 

 

28,222

 

Discontinued operations:

 

 

 

 

 

 

 

 

Environmental remediation liabilities

 

 

302

 

 

 

295

 

Self-insured liability accrual

 

 

141

 

 

 

200

 

Other

 

 

513

 

 

 

521

 

Total discontinued operations

 

 

956

 

 

 

1,016

 

Total other current liabilities

 

$

32,396

 

 

$

29,238

 

 

Other Deferred Items and Liabilities
Other Deferred Liabilities

Note 10. Other Deferred Items and Liabilities

Other deferred items and liabilities consisted of the following:

 

 

 

March 31,

 

 

December 31,

 

(in thousands)

 

2016

 

 

2015

 

Continuing operations:

 

 

 

 

 

 

 

 

Self-insured liability

 

$

13,179

 

 

$

13,662

 

Accrued compensation

 

 

6,018

 

 

 

7,612

 

Self-insured excess liability

 

 

5,979

 

 

 

5,979

 

Deferred rent

 

 

5,903

 

 

 

5,607

 

Foreign deferred tax liability

 

 

1,394

 

 

 

2,384

 

Accrued restructuring

 

 

566

 

 

 

519

 

Other

 

 

1,149

 

 

 

1,262

 

Total continuing operations

 

 

34,188

 

 

 

37,025

 

Discontinued operations:

 

 

 

 

 

 

 

 

Environmental remediation liabilities

 

 

4,092

 

 

 

4,177

 

Self-insured liability

 

 

3,915

 

 

 

3,986

 

Accrued income taxes

 

 

1,160

 

 

 

1,151

 

Other

 

 

994

 

 

 

997

 

Total discontinued operations

 

 

10,161

 

 

 

10,311

 

Total other deferred items and liabilities

 

$

44,349

 

 

$

47,336

 

 

Debt and Capital Lease Obligations
Debt Capital Lease Obligation

Note 11. Debt and Capital Lease Obligations

The components of long-term debt and capital lease obligations consisted of the following:

 

 

 

March 31,

 

 

December 31,

 

(in thousands)

 

2016

 

 

2015

 

Revolving credit facility and term loan 2.5% and 2.4% weighted-average interest rate at

   March 31, 2016 and December 31, 2015, respectively, due through 2019 (1)

 

$

162,813

 

 

$

127,500

 

Less unamortized debt issuance costs (2)

 

 

(1,788

)

 

 

(1,572

)

Total debt

 

 

161,025

 

 

 

125,928

 

Capital lease obligations, 6.1% and 6.1% weighted-average interest rate at March 31,

   2016 and December 31, 2015, respectively, due through 2018

 

 

1,672

 

 

 

1,475

 

Total debt and capital lease obligations

 

 

162,697

 

 

 

127,403

 

Current portion

 

 

(74,640

)

 

 

(34,554

)

Long-term debt and capital lease obligations

 

$

88,057

 

 

$

92,849

 

(1)

Represents the weighted-average interest rate in effect at the respective periods for the revolving credit facility and term loan borrowings, including any applicable margin. The interest rates do not include amortization of debt issuance costs or commitment fees.

(2)

In accordance with ASU 2015-03, unamortized debt issuance costs are reflected as a direct deduction from the carrying amount of the related debt. The Company applied the new guidance retrospectively to all prior periods presented in the condensed consolidated financial statements. As a result, $1.6 million of unamortized debt issuance costs were reclassified from other investments and assets to a reduction in long-term debt on the December 31, 2015 condensed consolidated balance sheet.

Effective December 22, 2014, Viad entered into a $300 million Amended and Restated Credit Agreement (the “Credit Agreement”). The Credit Agreement provides for a senior credit facility in the aggregate amount of $300 million, which consists of a $175 million revolving credit facility (the “Revolving Credit Facility”) and a $125 million term loan (the “Term Loan”). Loans under the Credit Agreement have a maturity date of December 22, 2019. Proceeds from the loans made under the Credit Agreement were used to refinance certain outstanding debt of the Company and will be used for the Company’s general corporate purposes in the ordinary course of its business. Under the Credit Agreement, the Revolving Credit Facility and/or the Term Loan may be increased up to an additional $100 million under certain circumstances. If such circumstances are met, the Company may obtain the additional borrowings under the Revolving Credit Facility, the Term Loan, or a combination of the two. The Revolving Credit Facility has a $40 million sublimit for letters of credit. Borrowings and letters of credit can be denominated in U.S. dollars, Euros, Canadian dollars, or British pounds. Viad’s lenders under the Credit Agreement have a first perfected security interest in all of the personal property of Viad, GES, and GES Event Intelligence Services, Inc., including 65 percent of the capital stock of top-tier foreign subsidiaries.

Effective February 24, 2016, Viad executed an amendment (the “Credit Agreement Amendment”) to the Credit Agreement. The Credit Agreement Amendment modified the terms of the financial covenants and the negative covenants related to acquisitions, restricted payments, and indebtedness. The overall maximum leverage ratio and minimum fixed charge coverage ratio are 3.50 to 1.00 and 1.75 to 1.00, respectively, and will remain at those levels for the entire remaining term of the Credit Agreement. Acquisitions in substantially the same or related lines of business are permitted under the Credit Agreement Amendment, as long as the pro forma leverage ratio is less than or equal to 3.00 to 1.00. Viad can make dividends, distributions, and repurchases of its common stock up to $20 million per calendar year. Stock dividends, distributions, and repurchases above the $20 million limit are not subject to a liquidity covenant, and are permitted as long as the Company’s pro forma leverage ratio is less than or equal to 2.50 to 1.00 and no default or unmatured default, as defined in the Credit Agreement, exists. Unsecured debt is allowed as long as the Company’s pro forma leverage ratio is less than or equal to 3.00 to 1.00. Significant other covenants under the Credit Agreement that remain unchanged by the Credit Agreement Amendment include limitations on investments, sales/leases of assets, consolidations or mergers, and liens on property. As of March 31, 2016, the fixed charge coverage ratio was 2.19 to 1.00, the leverage ratio was 2.00 to 1.00, and Viad was in compliance with all covenants under the Credit Agreement.

As of March 31, 2016, Viad’s total debt and capital lease obligations were $162.7 million, consisting of outstanding borrowings under the Term Loan of $107.8 million, under the Revolving Credit Facility of $55.0 million, and capital lease obligations of $1.7 million, offset in part by unamortized debt issuance costs of $1.8 million. As of March 31, 2016, Viad had $118.7 million of capacity remaining under its Credit Facility, reflecting borrowings of $55.0 million under the Revolving Credit Facility and $1.3 million in outstanding letters of credit.

Borrowings under the Revolving Credit Facility (of which GES and GES Event Intelligence Services, Inc. are guarantors) are indexed to the prime rate or the London Interbank Offered Rate, plus appropriate spreads tied to Viad’s leverage ratio. Commitment fees and letters of credit fees are also tied to Viad’s leverage ratio. The fees on the unused portion of the Credit Facility are currently 0.35 percent annually.

As of March 31, 2016, Viad had certain obligations under guarantees to third parties on behalf of its subsidiaries. These guarantees are not subject to liability recognition in the consolidated financial statements and relate to leased facilities entered into by the Company’s subsidiary operations. The Company would generally be required to make payments to the respective third parties under these guarantees in the event that the related subsidiary could not meet its own payment obligations. The maximum potential amount of future payments that Viad would be required to make under all guarantees existing as of March 31, 2016 would be $9.9 million. These guarantees relate to leased facilities and expire through March 2021. There are no recourse provisions that would enable Viad to recover from third parties any payments made under the guarantees. Furthermore, there are no collateral or similar arrangements whereby Viad could recover payments.

The estimated fair value of total debt was $151.7 million and $113.9 million as of March 31, 2016 and December 31, 2015, respectively. The fair value of debt was estimated by discounting the future cash flows using rates currently available for debt of similar terms and maturity.

Fair Value Measurements
Fair Value Measurements

Note 12. Fair Value Measurements

The fair value of an asset or liability is defined as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. The fair value guidance requires an entity to maximize the use of quoted prices and other observable inputs and minimize the use of unobservable inputs when measuring fair value, and also establishes a fair value hierarchy which prioritizes the inputs to valuation techniques used to measure fair value as follows:

Level 1 - Quoted prices in active markets for identical assets or liabilities.

Level 2 - Observable inputs other than quoted prices included within Level 1 that are observable for the asset or liability, either directly or indirectly.

Level 3 - Unobservable inputs to the valuation methodology that are significant to the measurement of fair value.

Viad measures its money market mutual funds and certain other mutual fund investments at fair value on a recurring basis using Level 1 inputs. The fair value information related to these assets is summarized in the following tables:

 

 

 

 

 

 

 

Fair Value Measurements at Reporting Date Using

 

(in thousands)

 

March 31, 2016

 

 

Quoted Prices in

Active

Markets

(Level 1)

 

 

Significant

Other

Observable

Inputs

(Level 2)

 

 

Significant

Unobserved

Inputs

(Level 3)

 

Assets:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Money market funds

 

$

2,118

 

 

$

2,118

 

 

$

 

 

$

 

Other mutual funds

 

 

2,395

 

 

 

2,395

 

 

 

 

 

 

 

Total assets at fair value on a recurring basis

 

$

4,513

 

 

$

4,513

 

 

$

 

 

$

 

 

 

 

 

 

 

 

Fair Value Measurements at Reporting Date Using

 

(in thousands)

 

December 31, 2015

 

 

Quoted Prices

in Active

Markets

(Level 1)

 

 

Significant

Other

Observable

Inputs

(Level 2)

 

 

Significant

Unobserved

Inputs

(Level 3)

 

Assets:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Money market funds

 

$

118

 

 

$

118

 

 

$

 

 

$

 

Other mutual funds

 

 

2,192

 

 

 

2,192

 

 

 

 

 

 

 

Total assets at fair value on a recurring basis

 

$

2,310

 

 

$

2,310

 

 

$

 

 

$

 

 

As of March 31, 2016 and December 31, 2015, Viad had investments in money market mutual funds of $2.1 million and $0.1 million, respectively, which are included in the condensed consolidated balance sheets under the caption “Cash and cash equivalents.” These investments are classified as available-for-sale and were recorded at fair value. There have been no realized gains or losses related to these investments and the Company has not experienced any redemption restrictions with respect to any of the money market mutual funds.

As of March 31, 2016 and December 31, 2015, Viad had investments in other mutual funds of $2.4 million and $2.2 million, respectively, which are included in the condensed consolidated balance sheets under the caption “Other investments and assets.” These investments were classified as available-for-sale and were recorded at fair value. As of March 31, 2016 and December 31, 2015, there were unrealized gains of $0.6 million ($0.3 million after-tax), which were included in the condensed consolidated balance sheets under the caption “Accumulated other comprehensive income (loss)” (“AOCI”).

The carrying values of cash and cash equivalents, receivables, and accounts payable approximate fair value due to the short-term maturities of these instruments. The estimated fair value of debt obligations is disclosed in Note 11 - Debt and Capital Lease Obligations.

Stockholders' Equity
Stockholders' Equity

Note 13. Stockholders’ Equity

The following represents a reconciliation of the carrying amounts of stockholders’ equity attributable to Viad and the noncontrolling interest for the three months ended March 31, 2016 and 2015:

 

(in thousands)

 

Total Viad

Stockholders’

Equity

 

 

Noncontrolling

Interest

 

 

Total

Stockholders’

Equity

 

Balance at December 31, 2015

 

$

322,581

 

 

$

12,757

 

 

$

335,338

 

Net loss

 

 

(6,983

)

 

 

(162

)

 

 

(7,145

)

Dividends on common stock ($0.10 per share)

 

 

(2,024

)

 

 

 

 

 

(2,024

)

Common stock purchased for treasury

 

 

(651

)

 

 

 

 

 

(651

)

Employee benefit plans

 

 

1,449

 

 

 

 

 

 

1,449

 

Unrealized foreign currency translation adjustment

 

 

8,042

 

 

 

 

 

 

8,042

 

Tax benefits from share-based compensation

 

 

28

 

 

 

 

 

 

28

 

Other changes to AOCI

 

 

72

 

 

 

 

 

 

72

 

Other

 

 

(24

)

 

 

 

 

 

(24

)

Balance at March 31, 2016

 

$

322,490

 

 

$

12,595

 

 

$

335,085

 

 

(in thousands)

 

Total Viad

Stockholders’

Equity

 

 

Noncontrolling

Interest

 

 

Total

Stockholders’

Equity