VIAD CORP, 10-Q filed on 11/1/2019
Quarterly Report
v3.19.3
Document and Entity Information - shares
9 Months Ended
Sep. 30, 2019
Oct. 25, 2019
Cover [Abstract]    
Entity Registrant Name VIAD CORP  
Entity Central Index Key 0000884219  
Document Type 10-Q  
Document Period End Date Sep. 30, 2019  
Amendment Flag false  
Document Fiscal Year Focus 2019  
Document Fiscal Period Focus Q3  
Current Fiscal Year End Date --12-31  
Entity Incorporation, State or Country Code DE  
Trading Symbol VVI  
Title of 12(b) Security Common Stock, $1.50 Par Value  
Security Exchange Name NYSE  
Entity Current Reporting Status Yes  
Entity Interactive Data Current Yes  
Entity Filer Category Large Accelerated Filer  
Entity Shell Company false  
Entity Small Business false  
Entity Emerging Growth Company false  
Entity File Number 001-11015  
Entity Tax Identification Number 36-1169950  
Entity Address, Address Line One 1850 North Central Avenue  
Entity Address, Address Line Two Suite 1900  
Entity Address, City or Town Phoenix  
Entity Address, State or Province AZ  
Entity Address, Postal Zip Code 85004-4565  
City Area Code 602  
Local Phone Number 207-1000  
Entity Common Stock, Shares Outstanding   20,326,404
Document Quarterly Report true  
Document Transition Report false  
v3.19.3
CONDENSED CONSOLIDATED BALANCE SHEETS (Unaudited) - USD ($)
$ in Thousands
Sep. 30, 2019
Dec. 31, 2018
Current assets    
Cash and cash equivalents $ 56,638 $ 44,893
Accounts receivable, net of allowances for doubtful accounts of $1,216 and $1,288, respectively 144,711 108,936
Inventories 16,323 16,629
Current contract costs 31,659 18,017
Other current assets 26,583 25,486
Total current assets 275,914 213,961
Property and equipment, net 486,533 333,847
Other investments and assets 42,503 42,910
Operating lease right-of-use assets 103,403  
Deferred income taxes 22,424 19,199
Goodwill 275,568 261,330
Other intangible assets, net 80,029 51,294
Total Assets 1,286,374 922,541
Current liabilities    
Accounts payable 89,389 71,927
Contract liabilities 62,260 33,476
Accrued compensation 27,996 22,668
Operating lease obligations 22,526  
Other current liabilities 44,597 32,258
Current portion of debt and finance lease obligations [1] 298,940 229,416
Total current liabilities 545,708 389,745
Long-term debt and finance lease obligations 25,295 705
Pension and postretirement benefits 25,574 26,636
Long-term operating lease obligations 82,630  
Other deferred items and liabilities 69,209 48,991
Total liabilities 748,416 466,077
Commitments and contingencies
Redeemable noncontrolling interest 5,431 5,909
Viad Corp stockholders’ equity:    
Common stock, $1.50 par value, 200,000,000 shares authorized, 24,934,981 shares issued and outstanding 37,402 37,402
Additional capital 574,039 575,339
Retained earnings 130,435 109,032
Unearned employee benefits and other   199
Accumulated other comprehensive loss (43,911) (47,975)
Common stock in treasury, at cost, 4,613,463 and 4,741,638 shares, respectively (232,928) (237,790)
Total Viad stockholders’ equity 465,037 436,207
Non-redeemable noncontrolling interest 67,490 14,348
Total stockholders’ equity 532,527 450,555
Total Liabilities and Stockholders’ Equity $ 1,286,374 $ 922,541
[1] Borrowings under the 2018 Credit Facility are classified as current because all borrowed amounts are due within one year
v3.19.3
CONDENSED CONSOLIDATED BALANCE SHEETS (Parenthetical) (Unaudited) - USD ($)
$ in Thousands
Sep. 30, 2019
Dec. 31, 2018
Statement Of Financial Position [Abstract]    
Allowance for doubtful accounts $ 1,216 $ 1,288
Common stock, par value $ 1.50 $ 1.50
Common stock, shares authorized 200,000,000 200,000,000
Common stock, shares issued 24,934,981 24,934,981
Common stock, shares outstanding 24,934,981 24,934,981
Treasury stock, shares 4,613,463 4,741,638
v3.19.3
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (Unaudited) - USD ($)
shares in Thousands, $ in Thousands
3 Months Ended 9 Months Ended
Sep. 30, 2019
Sep. 30, 2018
Sep. 30, 2019
Sep. 30, 2018
Revenue:        
Total revenue $ 362,488 $ 358,163 $ 1,050,361 $ 999,268
Costs and expenses:        
Business interruption gain   (35) (141) (602)
Corporate activities 2,680 3,777 7,795 8,529
Interest income (79) (101) (260) (238)
Interest expense 3,740 2,608 9,612 7,031
Multi-employer pension plan withdrawal     15,508  
Other expense 281 527 1,192 1,308
Restructuring charges 1,702 175 6,845 999
Legal settlement     8,500  
Impairment recoveries       (35)
Total costs and expenses 315,990 308,563 1,009,384 932,296
Income from continuing operations before income taxes 46,498 49,600 40,977 66,972
Income tax expense 11,891 10,806 10,861 15,282
Income from continuing operations 34,607 38,794 30,116 51,690
Income (loss) from discontinued operations (141) (246) 32 403
Net income 34,466 38,548 30,148 52,093
Net income attributable to non-redeemable noncontrolling interest (3,418) (1,287) (3,329) (890)
Net loss attributable to redeemable noncontrolling interest 368 128 644 289
Net income attributable to Viad $ 31,416 $ 37,389 $ 27,463 $ 51,492
Diluted income per common share:        
Continuing operations attributable to Viad common stockholders $ 1.54 $ 1.84 $ 1.33 $ 2.49
Discontinued operations attributable to Viad common stockholders (0.01) (0.01)   0.02
Net income attributable to Viad common stockholders $ 1.53 $ 1.83 $ 1.33 $ 2.51
Weighted-average outstanding and potentially dilutive common shares 20,311 20,387 20,267 20,427
Basic income per common share:        
Continuing operations attributable to Viad common stockholders $ 1.54 $ 1.85 $ 1.33 $ 2.50
Discontinued operations attributable to Viad common stockholders (0.01) (0.01)   0.02
Net income attributable to Viad common stockholders $ 1.53 $ 1.84 $ 1.33 $ 2.52
Weighted-average outstanding common shares 20,168 20,145 20,129 20,187
Dividends declared per common share $ 0.10 $ 0.10 $ 0.30 $ 0.30
Amounts attributable to Viad common stockholders        
Income from continuing operations $ 31,557 $ 37,635 $ 27,431 $ 51,089
Income (loss) from discontinued operations (141) (246) 32 403
Net income attributable to Viad 31,416 37,389 27,463 51,492
Services        
Revenue:        
Total revenue 300,446 300,087 898,746 860,358
Costs and expenses:        
Costs and expenses 256,296 254,638 825,806 792,775
Products        
Revenue:        
Total revenue 62,042 58,076 151,615 138,910
Costs and expenses:        
Costs and expenses $ 51,370 $ 46,974 $ 134,527 $ 122,529
v3.19.3
CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (Unaudited) - USD ($)
$ in Thousands
3 Months Ended 9 Months Ended
Sep. 30, 2019
Sep. 30, 2018
Sep. 30, 2019
Sep. 30, 2018
Statement Of Income And Comprehensive Income [Abstract]        
Net income $ 34,466 $ 38,548 $ 30,148 $ 52,093
Other comprehensive income (loss):        
Unrealized foreign currency translation adjustments (5,229) 3,340 3,868 (7,864)
Change in net actuarial loss, net of tax [1] 83 (1,570) 302 (721)
Change in prior service cost, net of tax [1] (35) 186 (106) 6
Comprehensive income 29,285 40,504 34,212 43,514
Non-redeemable noncontrolling interest:        
Comprehensive income attributable to non-redeemable noncontrolling interest (3,418) (1,287) (3,329) (890)
Unrealized foreign currency translation adjustments (682)   94  
Redeemable noncontrolling interest:        
Comprehensive loss attributable to redeemable noncontrolling interest 368 128 644 289
Comprehensive income attributable to Viad $ 25,553 $ 39,345 $ 31,621 $ 42,913
[1] The tax effect on other comprehensive income (loss) is not significant.
v3.19.3
CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY (Unaudited) - USD ($)
$ in Thousands
Total
Mountain Park Lodges
Common Stock
Additional Capital
Retained Earnings
Unearned Employee Benefits and Other
Accumulated Other Comprehensive Income (Loss)
Common Stock in Treasury
Total Viad Equity
Non-Redeemable Non-Controlling Interest
Non-Redeemable Non-Controlling Interest
Mountain Park Lodges
Beginning Balance at Dec. 31, 2017 $ 442,937   $ 37,402 $ 574,458 $ 65,836 $ 218 $ (22,568) $ (226,215) $ 429,131 $ 13,806  
Increase (Decrease) in Stockholders' Equity [Roll Forward]                      
Net income (loss) (9,751)       (9,387)       (9,387) (364)  
Dividends on common stock ($0.10 per share) (2,046)       (2,046)       (2,046)    
Payment of payroll taxes on stock-based compensation through shares withheld (868)             (868) (868)    
Employee benefit plans 1,123     (2,014)       3,137 1,123    
Share-based compensation - equity awards 815     815         815    
Unrealized foreign currency translation adjustment, net of tax (3,109)           (3,109)   (3,109)    
Amortization of net actuarial loss, net of tax 629           629   629    
Amortization of prior service cost, net of tax (184)           (184)   (184)    
Adoption of ASU | ASU 2016-01         616   (616)        
Other, net (67)     (36) (19) (11)   (1) (67)    
Ending Balance at Mar. 31, 2018 429,479   37,402 573,223 55,000 207 (25,848) (223,947) 416,037 13,442  
Beginning Balance at Dec. 31, 2017 442,937   37,402 574,458 65,836 218 (22,568) (226,215) 429,131 13,806  
Increase (Decrease) in Stockholders' Equity [Roll Forward]                      
Amortization of net actuarial loss, net of tax [1] (721)                    
Amortization of prior service cost, net of tax [1] 6                    
Adoption of ASU | ASU 2016-01 [2]             (616)        
Ending Balance at Sep. 30, 2018 478,064   37,402 575,058 113,381 234 (31,763) (230,944) 463,368 14,696  
Beginning Balance at Mar. 31, 2018 429,479   37,402 573,223 55,000 207 (25,848) (223,947) 416,037 13,442  
Increase (Decrease) in Stockholders' Equity [Roll Forward]                      
Net income (loss) 23,457       23,490       23,490 (33)  
Dividends on common stock ($0.10 per share) (2,049)       (2,049)       (2,049)    
Payment of payroll taxes on stock-based compensation through shares withheld (156)             (156) (156)    
Common stock purchased for treasury (9,061)             (9,061) (9,061)    
Employee benefit plans 1,405     (71)       1,476 1,405    
Share-based compensation - equity awards 952     952         952    
Unrealized foreign currency translation adjustment, net of tax (8,095)           (8,095)   (8,095)    
Amortization of net actuarial loss, net of tax 220           220   220    
Amortization of prior service cost, net of tax 4           4   4    
Other, net 25       17 7   1 25    
Ending Balance at Jun. 30, 2018 436,181   37,402 574,104 76,458 214 (33,719) (231,687) 422,772 13,409  
Increase (Decrease) in Stockholders' Equity [Roll Forward]                      
Net income (loss) 38,676       37,389       37,389 1,287  
Dividends on common stock ($0.10 per share) (2,033)       (2,033)       (2,033)    
Payment of payroll taxes on stock-based compensation through shares withheld (155)             (155) (155)    
Employee benefit plans 1,156     259       897 1,156    
Share-based compensation - equity awards 679     679         679    
Unrealized foreign currency translation adjustment, net of tax 3,340           3,340   3,340    
Amortization of net actuarial loss, net of tax (1,570) [1]           (1,570)   (1,570)    
Amortization of prior service cost, net of tax 186 [1]           186   186    
Adoption of ASU | Accounting Standards Update 2018-02 1,680       1,680       1,680    
Other, net (76)     16 (113) 20   1 (76)    
Ending Balance at Sep. 30, 2018 478,064   37,402 575,058 113,381 234 (31,763) (230,944) 463,368 14,696  
Beginning Balance at Dec. 31, 2018 450,555   37,402 575,339 109,032 199 (47,975) (237,790) 436,207 14,348  
Increase (Decrease) in Stockholders' Equity [Roll Forward]                      
Net income (loss) (18,197)       (17,777)       (17,777) (420)  
Dividends on common stock ($0.10 per share) (2,028)       (2,028)       (2,028)    
Payment of payroll taxes on stock-based compensation through shares withheld (2,905)             (2,905) (2,905)    
Employee benefit plans 1,220     (4,302)       5,522 1,220    
Share-based compensation - equity awards 780     780         780    
Unrealized foreign currency translation adjustment, net of tax 4,780           4,780   4,780    
Amortization of net actuarial loss, net of tax 120           120   120    
Amortization of prior service cost, net of tax (35)           (35)   (35)    
Other, net 41     16   24   1 41    
Ending Balance at Mar. 31, 2019 434,331   37,402 571,833 89,227 223 (43,110) (235,172) 420,403 13,928  
Beginning Balance at Dec. 31, 2018 450,555   37,402 575,339 109,032 199 (47,975) (237,790) 436,207 14,348  
Increase (Decrease) in Stockholders' Equity [Roll Forward]                      
Amortization of net actuarial loss, net of tax [1] 302                    
Amortization of prior service cost, net of tax [1] (106)                    
Ending Balance at Sep. 30, 2019 532,527   37,402 574,039 130,435   (43,911) (232,928) 465,037 67,490  
Beginning Balance at Mar. 31, 2019 434,331   37,402 571,833 89,227 223 (43,110) (235,172) 420,403 13,928  
Increase (Decrease) in Stockholders' Equity [Roll Forward]                      
Net income (loss) 14,155       13,824       13,824 331  
Dividends on common stock ($0.10 per share) (2,006)       (2,006)       (2,006)    
Payment of payroll taxes on stock-based compensation through shares withheld (89)             (89) (89)    
Employee benefit plans 1,602     301       1,301 1,602    
Share-based compensation - equity awards 781     781         781    
Unrealized foreign currency translation adjustment, net of tax 5,093           4,317   4,317 776  
Amortization of net actuarial loss, net of tax 99           99   99    
Amortization of prior service cost, net of tax (36)           (36)   (36)    
Acquisition of Mountain Park Lodges   $ 49,711                 $ 49,711
Other, net 14     16   $ (223)   221 14    
Ending Balance at Jun. 30, 2019 503,655   37,402 572,931 101,045   (38,730) (233,739) 438,909 64,746  
Increase (Decrease) in Stockholders' Equity [Roll Forward]                      
Net income (loss) 34,834       31,416       31,416 3,418  
Dividends on common stock ($0.10 per share) (2,026)       (2,026)       (2,026)    
Payment of payroll taxes on stock-based compensation through shares withheld (25)             (25) (25)    
Employee benefit plans 1,271     212       1,059 1,271    
Share-based compensation - equity awards 938     938         938    
Unrealized foreign currency translation adjustment, net of tax (5,911)           (5,229)   (5,229) (682)  
Amortization of net actuarial loss, net of tax 83 [1]           83   83    
Amortization of prior service cost, net of tax (35) [1]           (35)   (35)    
Acquisition of Mountain Park Lodges   $ 8                 $ 8
Other, net (265)     (42)       (223) (265)    
Ending Balance at Sep. 30, 2019 $ 532,527   $ 37,402 $ 574,039 $ 130,435   $ (43,911) $ (232,928) $ 465,037 $ 67,490  
[1] The tax effect on other comprehensive income (loss) is not significant.
[2] Upon the adoption of ASU 2016-01, Financial Instruments – Overall: Recognition and Measurement of Financial Assets and Financial Liabilities, we recorded a cumulative-effect adjustment from unrealized gains on investments to beginning retained earnings.
v3.19.3
CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY (Parenthetical) (Unaudited) - $ / shares
3 Months Ended
Sep. 30, 2019
Jun. 30, 2019
Mar. 31, 2019
Sep. 30, 2018
Jun. 30, 2018
Mar. 31, 2018
Statement Of Stockholders Equity [Abstract]            
Dividends on common stock per share $ 0.10 $ 0.10 $ 0.10 $ 0.10 $ 0.10 $ 0.10
v3.19.3
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited) - USD ($)
$ in Thousands
9 Months Ended
Sep. 30, 2019
Sep. 30, 2018
Cash flows from operating activities    
Net income $ 30,148 $ 52,093
Adjustments to reconcile net income to net cash provided by operating activities:    
Depreciation and amortization 44,061 44,364
Deferred income taxes 5,261 3,182
Income from discontinued operations (32) (403)
Restructuring charges 6,845 999
Legal settlement 8,500  
Impairment recoveries   (35)
Gains on dispositions of property and other assets (938) (135)
Share-based compensation expense 6,448 5,056
Multi-employer pension plan withdrawal 15,508  
Other non-cash items, net 2,772 3,553
Change in operating assets and liabilities (excluding the impact of acquisitions):    
Receivables (37,028) (21,289)
Inventories 389 (2,792)
Current contract costs (13,929) (11,928)
Accounts payable 20,121 12,972
Accrued compensation 2,308 (12,275)
Contract liabilities 29,177 28,045
Payments on operating lease obligations (20,853)  
Other assets and liabilities, net 2,382 203
Net cash provided by operating activities 101,140 101,610
Cash flows from investing activities    
Capital expenditures (60,868) (64,968)
Cash paid for acquired businesses, net (90,992) (4,628)
Proceeds from dispositions of property and other assets 1,022 1,320
Net cash used in investing activities (150,838) (68,276)
Cash flows from financing activities    
Proceeds from borrowings 170,459 101,336
Payments on debt and finance lease obligations (99,340) (113,429)
Dividends paid on common stock (6,060) (6,128)
Payment of payroll taxes on stock-based compensation through shares withheld or repurchased (3,019) (1,179)
Common stock purchased for treasury   (9,061)
Proceeds from exercise of stock options 92 84
Net cash provided by (used in) financing activities 62,132 (28,377)
Effect of exchange rate changes on cash and cash equivalents (689) (3,210)
Net change in cash and cash equivalents 11,745 1,747
Cash and cash equivalents, beginning of year 44,893 53,723
Cash and cash equivalents, end of period $ 56,638 $ 55,470
v3.19.3
Overview and Basis of Presentation
9 Months Ended
Sep. 30, 2019
Organization Consolidation And Presentation Of Financial Statements [Abstract]  
Overview and Basis of Presentation

Note 1. Overview and Basis of Presentation

Nature of Business

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

GES

GES is a global, full-service live events company offering a comprehensive range of services to the world’s leading brands and event organizers. GES’ clients include event organizers and corporate brand marketers. Event organizers schedule and run events from start to finish. Corporate brand marketers include exhibitors and domestic and international corporations that want to promote their brands, services and innovations, feature new products, and build business relationships. GES serves corporate brand marketers when they exhibit at shows and when GES is engaged to manage their global exhibit program or produce their proprietary corporate events.

Services and Products Offered

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

 

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

 

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

 

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

 

Markets Served

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

 

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

 

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

 

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

 

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

Pursuit

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

Services and Products Offered

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

 

Markets Served

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

 

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

 

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

 

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

 

FlyOver is a recreational attraction that provides a virtual flight ride experience that combines motion seating, audio-visual media, and special effects including wind, scents, and mist to provide a true flying experience for guests. Our FlyOver attractions include: FlyOver Canada; FlyOver Iceland (Opened August 2019); FlyOver Las Vegas (expected opening in 2021); and FlyOver Toronto (expected opening in 2022).

 

Pursuit announced a plan for a new geothermal lagoon attraction in Iceland. It will be located on an oceanfront lot just outside downtown Reykjavik. We expect to open this new attraction in 2021.

Basis of Presentation

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

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

Impact of Recent Accounting Pronouncements

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

 

Standard

 

Description

 

Date of adoption

 

Effect on the financial statements

Standards Not Yet Adopted

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

 

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

 

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

 

January 1, 2020

 

We are currently evaluating the potential impact of the adoption of this new guidance on our consolidated financial statements. We will be required to use a forward-looking expected credit loss model for trade receivables. Adoption of this new standard will be applied using the modified retrospective approach through a cumulative-effect adjustment to retained earnings as of the effective date in an amount necessary to adjust our current credit loss methodology to equal the current estimate of expected losses on financial assets held at that date. We do not expect this new guidance to have a material impact on our consolidated financial statements.

 

Standard

 

Description

 

Date of adoption

 

Effect on the financial statements

Standards Recently Adopted

ASU 2018-15, Intangibles – Goodwill and Other – Internal-Use Software (Subtopic 350-40) Customer’s Accounting for Implementation Costs Incurred in a Cloud Computing Arrangement That Is a Service Contract

 

The amendment aligns the requirements for capitalizing implementation costs incurred in a hosting arrangement that is a service contract with the requirements for capitalizing implementation costs incurred to develop or obtain internal-use software. The amendment also requires an entity to expense the capitalized implementation costs of a hosting arrangement that is a service contract over the term of the hosting arrangement. Early adoption is permitted and may be applied on either a retrospective or prospective basis.

 

September 30, 2019

 

We early adopted this new guidance on a retrospective basis and determined it did not have a material impact on our consolidated financial statements.

ASU 2016-02, Leases (Topic 842)

 

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

 

January 1, 2019

 

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

 

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

 

 

 

Significant Accounting Policies

Use of Estimates

The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities at the date of the financial statements and the reported amounts of revenue and expenses during the reported period. Estimates and assumptions are used in accounting for, among other things: the fair value of our reporting units used to perform annual impairment testing of recorded goodwill; allowances for uncollectible accounts receivable; provisions for income taxes, including uncertain tax positions; valuation allowances related to deferred tax assets; liabilities for losses related to self-insured liability claims; liabilities for losses related to environmental remediation obligations; sublease income associated with restructuring liabilities; assumptions used to measure pension and postretirement benefit costs and obligations; assumptions used to determine share-based compensation costs under the fair value method; assumptions used to determine the redemption value of redeemable noncontrolling interests; and the allocation of purchase price of acquired businesses. Actual results could differ from these and other estimates.

Revenue Recognition

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

GES’ service revenue is primarily derived through its comprehensive range of services to event organizers and corporate brand marketers including Core Services, Event Technology, and Audio-Visual. GES’ service revenue is earned over time over the duration of the exhibition, conference, or corporate event, which generally lasts one to three days; however, we recognize service revenue at the close of the event when we have the right to invoice. GES’ product revenue is derived from the build of exhibits and environments and graphics. GES’ product revenue is recognized at a point in time upon delivery of the product.

Pursuit’s service revenue is derived through its admissions, accommodations, transportation, and travel planning services. Pursuit’s product revenue is derived through food and beverage and retail sales. Pursuit’s revenue is recognized at the time services are performed or upon delivery of the product. Pursuit’s service revenue is recognized over time as the customer simultaneously receives and consumes the benefits. Pursuit’s product revenue is recognized at a point in time.

Noncontrolling Interests – Non-redeemable and Redeemable

Non-redeemable noncontrolling interest represents the portion of equity in a subsidiary that is not attributable, directly or indirectly, to us. Our non-redeemable noncontrolling interest relates to the 20% equity ownership interest that we do not own in Glacier Park, Inc. and the 40% equity interest that we do not own in the recently acquired Mountain Park Lodges. We report non-redeemable noncontrolling interest within stockholders’ equity in the Condensed Consolidated Balance Sheets. The amount of consolidated net income or loss attributable to Viad and the non-redeemable noncontrolling interest is presented in the Condensed Consolidated Statements of Operations.  

Noncontrolling interests with redemption features that are not solely within our control are considered redeemable noncontrolling interests. Our redeemable noncontrolling interest relates to our 54.5% equity ownership interest in Esja Attractions ehf. (“Esja”). The Esja shareholders agreement contains a put option that gives the minority Esja shareholders the right to sell (or “put”) their Esja shares to us based on a calculated formula within a predefined term. This redeemable noncontrolling interest is considered temporary equity and we report it between liabilities and stockholders’ equity in the Condensed Consolidated Balance Sheets. The amount of the net income or loss attributable to redeemable noncontrolling interests is recorded in the Condensed Consolidated Statements of Operations and the accretion of the redemption value is recorded as an adjustment to retained earnings and is included in our income per share. Refer to Note 21 – Redeemable Noncontrolling Interest for additional information.

Leases

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

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

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

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

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

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

v3.19.3
Revenue and Related Contract Costs and Contract Liabilities
9 Months Ended
Sep. 30, 2019
Revenue From Contract With Customer [Abstract]  
Revenue and Related Contract Costs and Contract Liabilities

Note 2. Revenue and Related Contract Costs and Contract Liabilities

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

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

Contract Liabilities

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

Changes to contract liabilities are as follows:

(in thousands)

 

 

 

 

Balance at December 31, 2018

 

$

35,600

 

Cash additions

 

 

150,566

 

Revenue recognized

 

 

(123,330

)

Foreign exchange translation adjustment

 

 

(451

)

Balance at September 30, 2019

 

$

62,385

 

Contract Costs

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

 

Changes to contract costs are as follows:

(in thousands)

 

 

 

 

Balance at December 31, 2018

 

$

21,478

 

Additions

 

 

58,330

 

Expenses

 

 

(44,666

)

Cancelled

 

 

(45

)

Foreign exchange translation adjustment

 

 

(263

)

Balance at September 30, 2019

 

$

34,834

 

As of September 30, 2019, capitalized contract costs consisted of $2.4 million to obtain contracts and $32.4 million to fulfill contracts. We did not recognize an impairment loss with respect to capitalized contract costs during the three and nine months ended September 30, 2019 or 2018.

Disaggregation of Revenue

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

GES

 

 

Three Months Ended September 30, 2019

 

(in thousands)

 

GES North America(1)

 

 

GES EMEA(1)

 

 

Intersegment Eliminations

 

 

Total

 

Services:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Core services

 

$

155,581

 

 

$

22,425

 

 

$

 

 

$

178,006

 

Audio-visual

 

 

18,742

 

 

 

4,402

 

 

 

 

 

 

23,144

 

Event technology

 

 

4,760

 

 

 

1,414

 

 

 

 

 

 

6,174

 

Intersegment eliminations

 

 

 

 

 

 

 

 

(5,724

)

 

 

(5,724

)

Total services

 

 

179,083

 

 

 

28,241

 

 

 

(5,724

)

 

 

201,600

 

Products:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Core products

 

 

12,900

 

 

 

12,945

 

 

 

 

 

 

25,845

 

Total revenue

 

$

191,983

 

 

$

41,186

 

 

$

(5,724

)

 

$

227,445

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Timing of revenue recognition:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Services transferred over time

 

$

179,083

 

 

$

28,241

 

 

$

(5,724

)

 

$

201,600

 

Products transferred over time(2)

 

 

10,558

 

 

 

2,305

 

 

 

 

 

 

12,863

 

Products transferred at a point in time

 

 

2,342

 

 

 

10,640

 

 

 

 

 

 

12,982

 

Total revenue

 

$

191,983

 

 

$

41,186

 

 

$

(5,724

)

 

$

227,445

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Markets:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Exhibitions

 

$

89,088

 

 

$

29,519

 

 

$

 

 

$

118,607

 

Conferences

 

 

56,205

 

 

 

6,320

 

 

 

 

 

 

62,525

 

Corporate events

 

 

41,205

 

 

 

5,147

 

 

 

 

 

 

46,352

 

Consumer events

 

 

5,485

 

 

 

200

 

 

 

 

 

 

5,685

 

Intersegment eliminations

 

 

 

 

 

 

 

 

(5,724

)

 

 

(5,724

)

Total revenue

 

$

191,983

 

 

$

41,186

 

 

$

(5,724

)

 

$

227,445

 

(1)

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

(2)

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

 

 

 

Nine Months Ended September 30, 2019

 

(in thousands)

 

GES North America(1)

 

 

GES EMEA(1)

 

 

Intersegment Eliminations

 

 

Total

 

Services:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Core services

 

$

563,566

 

 

$

95,309

 

 

$

 

 

$

658,875

 

Audio-visual

 

 

61,323

 

 

 

15,171

 

 

 

 

 

 

76,494

 

Event technology

 

 

23,368

 

 

 

6,501

 

 

 

 

 

 

29,869

 

Intersegment eliminations

 

 

 

 

 

 

 

 

(14,731

)

 

 

(14,731

)

Total services

 

 

648,257

 

 

 

116,981

 

 

 

(14,731

)

 

 

750,507

 

Products:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Core products

 

 

50,649

 

 

 

48,086

 

 

 

 

 

 

98,735

 

Total revenue

 

$

698,906

 

 

$

165,067

 

 

$

(14,731

)

 

$

849,242

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Timing of revenue recognition:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Services transferred over time

 

$

648,257

 

 

$

116,981

 

 

$

(14,731

)

 

$

750,507

 

Products transferred over time(2)

 

 

33,601

 

 

 

10,595

 

 

 

 

 

 

44,196

 

Products transferred at a point in time

 

 

17,048

 

 

 

37,491

 

 

 

 

 

 

54,539

 

Total revenue

 

$

698,906

 

 

$

165,067

 

 

$

(14,731

)

 

$

849,242

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Markets:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Exhibitions

 

$

364,404

 

 

$

124,467

 

 

$

 

 

$

488,871

 

Conferences

 

 

209,522

 

 

 

20,172

 

 

 

 

 

 

229,694

 

Corporate events

 

 

103,860

 

 

 

19,464

 

 

 

 

 

 

123,324

 

Consumer events

 

 

21,120

 

 

 

964

 

 

 

 

 

 

22,084

 

Intersegment eliminations

 

 

 

 

 

 

 

 

(14,731

)

 

 

(14,731

)

Total revenue

 

$

698,906

 

 

$

165,067

 

 

$

(14,731

)

 

$

849,242

 

 

(1)

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

(2)

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

 

 

 

 

Three Months Ended September 30, 2018

 

(in thousands)

 

GES North America(1)

 

 

GES EMEA(1)

 

 

Intersegment Eliminations

 

 

Total

 

Services:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Core services

 

$

162,967

 

 

$

27,511

 

 

$

 

 

$

190,478

 

Audio-visual

 

 

17,309

 

 

 

4,423

 

 

 

 

 

 

21,732

 

Event technology

 

 

4,874

 

 

 

1,745

 

 

 

 

 

 

6,619

 

Intersegment eliminations

 

 

 

 

 

 

 

 

(2,379

)

 

 

(2,379

)

Total services

 

 

185,150

 

 

 

33,679

 

 

 

(2,379

)

 

 

216,450

 

Products:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Core products

 

 

15,705

 

 

 

13,955

 

 

 

 

 

 

29,660

 

Total revenue

 

$

200,855

 

 

$

47,634

 

 

$

(2,379

)

 

$

246,110

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Timing of revenue recognition: