VIAD CORP, 10-Q filed on 11/2/2018
Quarterly Report
v3.10.0.1
Document and Entity Information - shares
9 Months Ended
Sep. 30, 2018
Oct. 26, 2018
Document And Entity Information [Abstract]    
Entity Registrant Name VIAD CORP  
Entity Central Index Key 0000884219  
Document Type 10-Q  
Document Period End Date Sep. 30, 2018  
Amendment Flag false  
Document Fiscal Year Focus 2018  
Document Fiscal Period Focus Q3  
Current Fiscal Year End Date --12-31  
Trading Symbol VVI  
Entity Filer Category Large Accelerated Filer  
Entity Small Business false  
Entity Emerging Growth Company false  
Entity Common Stock, Shares Outstanding   20,340,530
v3.10.0.1
CONDENSED CONSOLIDATED BALANCE SHEETS (Unaudited) - USD ($)
$ in Thousands
Sep. 30, 2018
Dec. 31, 2017
Current assets    
Cash and cash equivalents $ 55,470 $ 53,723
Accounts receivable, net of allowances for doubtful accounts of $1,561 and $2,023, respectively 124,905 104,811
Inventories 18,703 17,550 [1]
Current contract costs 24,796 13,436 [1]
Other current assets 25,707 19,741 [1]
Total current assets 249,581 209,261
Property and equipment, net 332,005 305,571
Other investments and assets 44,527 48,187 [1]
Deferred income taxes 20,641 23,548
Goodwill 266,731 270,551
Other intangible assets, net 54,705 62,781
Total Assets 968,190 919,899
Current liabilities    
Accounts payable 84,910 77,380
Contract liabilities 58,260 31,981 [2]
Accrued compensation 23,527 30,614
Other current liabilities 40,132 40,154 [2]
Current portion of debt and capital lease obligations [3] 155,756 152,599
Total current liabilities 362,585 332,728
Long-term debt and capital lease obligations 44,418 56,593
Pension and postretirement benefits 27,170 28,135
Other deferred items and liabilities 49,825 52,858
Total liabilities 483,998 470,314
Commitments and contingencies
Redeemable noncontrolling interest 6,128 6,648
Viad Corp stockholders’ equity:    
Common stock, $1.50 par value, 200,000,000 shares authorized, 24,934,981 shares issued and outstanding 37,402 37,402
Additional capital 575,058 574,458
Retained earnings 113,381 65,836
Unearned employee benefits and other 234 218
Accumulated other comprehensive loss (31,763) (22,568)
Common stock in treasury, at cost, 4,601,494 and 4,518,099 shares, respectively (230,944) (226,215)
Total Viad stockholders’ equity 463,368 429,131
Non-redeemable noncontrolling interest 14,696 13,806
Total stockholders’ equity 478,064 442,937 [4]
Total Liabilities and Stockholders’ Equity $ 968,190 $ 919,899
[1] Contract costs primarily consist of deferred core services costs (including labor and vendor purchases) required to service future exhibitions, conferences and other events, and commission expenses incurred to obtain contracts. All such costs were previously included in “Inventories” and in certain other assets. As a result of the changes noted above, deferred core services costs related to exhibitions and events that are scheduled to occur longer than one year in the future are currently included in “Other investments and assets”. The impact of this change reduced total current assets at December 31, 2017 by $0.7 million. The amount of deferred core services costs included in “Other investments and assets” at September 30, 2018 was $4.4 million.
[2] In connection with the adoption of Topic 606, we elected to more prominently present contract liabilities on the Consolidated Balance Sheets. Consequently, customer deposits of $33.4 million as of December 31, 2017, have been reclassified to “Contract liabilities” and to other certain current liabilities to conform to the current period presentation.
[3] Borrowings under the revolving credit facilities are classified as current because all borrowed amounts are due within one year.
[4] We determined that the cumulative effect of initially applying Topic 606 as an adjustment to the opening balance of retained earnings was not material, and therefore we made no adjustment.
v3.10.0.1
CONDENSED CONSOLIDATED BALANCE SHEETS (Parenthetical) (Unaudited) - USD ($)
$ in Thousands
Sep. 30, 2018
Dec. 31, 2017
Statement Of Financial Position [Abstract]    
Allowance for doubtful accounts $ 1,561 $ 2,023
Common stock, par value $ 1.50 $ 1.50
Common stock, shares authorized 200,000,000 200,000,000
Common stock, shares issued 24,934,981 24,934,981
Common stock, shares outstanding 24,934,981 24,934,981
Treasury stock, shares 4,601,494 4,518,099
v3.10.0.1
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (Unaudited) - USD ($)
shares in Thousands, $ in Thousands
3 Months Ended 9 Months Ended
Sep. 30, 2018
Sep. 30, 2017
Sep. 30, 2018
Sep. 30, 2017
Revenue:        
Total revenue $ 358,163 $ 339,099 $ 999,268 $ 1,029,680
Costs and expenses:        
Business interruption gain (35) (1,091) (602) (2,231)
Corporate activities 3,777 4,425 8,529 9,886
Interest income (101) (74) (238) (174)
Interest expense 2,608 2,117 7,031 6,281
Other expense [1] 527 248 1,308 922
Restructuring charges 175 255 999 817
Impairment recoveries   (24,467) (35) (29,098)
Total costs and expenses 308,563 273,247 932,296 916,215
Income from continuing operations before income taxes 49,600 65,852 66,972 113,465
Income tax expense 10,806 20,010 15,282 32,929
Income from continuing operations 38,794 45,842 51,690 80,536
Income (loss) from discontinued operations (246) (101) 403 (408)
Net income 38,548 45,741 52,093 80,128
Net income attributable to non-redeemable noncontrolling interest (1,287) (1,084) (890) (747)
Net loss attributable to redeemable noncontrolling interest 128   289  
Net income attributable to Viad $ 37,389 $ 44,657 $ 51,492 $ 79,381
Diluted income (loss) per common share:        
Continuing operations attributable to Viad common stockholders $ 1.84 $ 2.19 $ 2.49 $ 3.91
Discontinued operations attributable to Viad common stockholders (0.01)   0.02 (0.02)
Net income attributable to Viad common stockholders [2] $ 1.83 $ 2.19 $ 2.51 $ 3.89
Weighted-average outstanding and potentially dilutive common shares 20,387 20,436 20,427 20,382
Basic income (loss) per common share:        
Continuing operations attributable to Viad common stockholders $ 1.85 $ 2.19 $ 2.50 $ 3.91
Discontinued operations attributable to Viad common stockholders (0.01)   0.02 (0.02)
Net income attributable to Viad common stockholders $ 1.84 $ 2.19 $ 2.52 $ 3.89
Weighted-average outstanding common shares 20,145 20,166 20,187 20,130
Dividends declared per common share $ 0.10 $ 0.10 $ 0.30 $ 0.30
Amounts attributable to Viad common stockholders        
Income from continuing operations $ 37,635 $ 44,758 $ 51,089 $ 79,789
Income (loss) from discontinued operations (246) (101) 403 (408)
Net income attributable to Viad 37,389 44,657 51,492 79,381
Services        
Revenue:        
Total revenue 300,087 286,752 860,358 896,574
Costs and expenses:        
Costs and expenses 254,638 245,757 792,775 808,304
Products        
Revenue:        
Total revenue 58,076 52,347 138,910 133,106
Costs and expenses:        
Costs and expenses $ 46,974 $ 46,077 $ 122,529 $ 121,508
[1] We adopted ASU 2017-07 on January 1, 2018, which requires retrospective adoption. As a result, we recorded the nonservice cost component of net periodic benefit cost within other expense for the three and nine months ended September 30, 2018, and we reclassified $0.2 million from operating expenses to other expense for the three months ended September 30, 2017 and $0.9 million for the nine months ended September 30, 2017 to conform with current period presentation. Refer to Note 1 – Overview and Basis of Presentation for additional details on the impact of this adoption on our Condensed Consolidated Statements of Operations.
[2] Diluted income (loss) per share amount cannot exceed basic income (loss) per share.
v3.10.0.1
CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (Unaudited) - USD ($)
$ in Thousands
3 Months Ended 9 Months Ended
Sep. 30, 2018
Sep. 30, 2017
Sep. 30, 2018
Sep. 30, 2017
Statement Of Income And Comprehensive Income [Abstract]        
Net income $ 38,548 $ 45,741 $ 52,093 $ 80,128
Other comprehensive income (loss):        
Unrealized gains on investments, net of tax [1]   48   143
Unrealized foreign currency translation adjustments, net of tax [1] 3,340 9,115 (7,864) 18,820
Change in net actuarial gain, net of tax [1] (1,570) 103 (721) 385
Change in prior service cost, net of tax [1] 186 (67) 6 (201)
Adoption of ASU 2016-01     (616)  
Comprehensive income 40,504 54,940 42,898 99,275
Comprehensive income attributable to non-redeemable noncontrolling interest (1,287) (1,084) (890) (747)
Comprehensive loss attributable to redeemable noncontrolling interest 128   289  
Comprehensive income attributable to Viad $ 39,345 $ 53,856 $ 42,297 $ 98,528
[1] The tax effect on other comprehensive income (loss) is not significant.
v3.10.0.1
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited) - USD ($)
$ in Thousands
9 Months Ended
Sep. 30, 2018
Sep. 30, 2017
Cash flows from operating activities    
Net income $ 52,093 $ 80,128
Adjustments to reconcile net income to net cash provided by operating activities:    
Depreciation and amortization 44,364 42,499
Deferred income taxes 3,182 318
(Income) loss from discontinued operations (403) 408
Restructuring charges 999 817
Impairment recoveries (35) (29,098)
(Gains) losses on dispositions of property and other assets (135) 465
Share-based compensation expense 5,056 9,484
Other non-cash items, net 3,553 3,603
Change in operating assets and liabilities (excluding the impact of acquisitions):    
Receivables (21,289) (25,966)
Inventories (2,792) (726)
Current contract costs (11,928) (6,122)
Accounts payable 12,972 18,998
Restructuring liabilities (1,330) (1,748)
Accrued compensation (12,275) (7,455)
Contract liabilities 28,045 9,742
Income taxes payable (9,580) 16,058
Other assets and liabilities, net 11,113 3,238
Net cash provided by operating activities 101,610 114,643
Cash flows from investing activities    
Capital expenditures (69,596) (39,493)
Proceeds from insurance   31,570
Cash paid for acquired businesses, net   (1,661)
Proceeds from dispositions of property and other assets 1,320 734
Net cash used in investing activities (68,276) (8,850)
Cash flows from financing activities    
Proceeds from borrowings 101,336 60,574
Payments on debt and capital lease obligations (113,429) (128,808)
Dividends paid on common stock (6,128) (6,119)
Debt issuance costs   (5)
Common stock purchased for treasury (10,240) (1,272)
Proceeds from exercise of stock options 84  
Net cash used in financing activities (28,377) (75,630)
Effect of exchange rate changes on cash and cash equivalents (3,210) 2,418
Net change in cash and cash equivalents 1,747 32,581
Cash and cash equivalents, beginning of year 53,723 20,900
Cash and cash equivalents, end of period $ 55,470 $ 53,481
v3.10.0.1
Overview and Basis of Presentation
9 Months Ended
Sep. 30, 2018
Organization Consolidation And Presentation Of Financial Statements [Abstract]  
Overview and Basis of Presentation

Note 1. Overview and Basis of Presentation

Nature of Business

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

GES

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

Services and Products Offered

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

 

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

 

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

 

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

 

Markets Served

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

 

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

 

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

 

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

 

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

Pursuit

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

Services and Products Offered

Pursuit 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 accommodations, admissions, transportation, and travel planning. Products offered include food and beverage and retail.

Markets Served

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

 

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

 

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

 

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

 

FlyOver:  

 

o

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

 

o

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

Basis of Presentation

Viad’s accompanying unaudited condensed consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America (“GAAP”) and with the instructions to Form 10-Q and Article 10 of Regulation S-X for interim financial information. Accordingly, these financial statements do not include all of the information required by GAAP or SEC rules and regulations for complete financial statements. These financial statements reflect all adjustments (consisting of normal recurring adjustments) necessary for a fair presentation of the results for the interim periods presented. Interim results are not necessarily indicative of the results for the full year. We have recast certain prior period amounts to conform to the current period presentation due to the adoption of new accounting standards. These unaudited condensed consolidated financial statements should be read in conjunction with our Annual Report on Form 10-K for the year ended December 31, 2017, filed with the SEC on February 28, 2018 (“2017 Form 10-K”).

The condensed consolidated financial statements include the accounts of Viad and its subsidiaries. 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 2016-02, 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 previously allowed for only a modified retrospective approach to adoption.

 

Subsequent to the issuance of ASU 2016-02, the FASB issued additional updates, which do not change the core principle of the guidance stated in ASU 2016-02. Rather, the updates provide additional (and optional) transition methods including the election under ASU 2018-11, which allows companies to not restate comparative periods when initially applying the transition requirements. Early adoption is permitted.

 

January 1, 2019

 

We are currently evaluating the potential impact the adoption of this new guidance will have on our financial position or results of operations including analyzing our existing operating leases. We do not expect our Consolidated Statement of Operations to be materially impacted. We expect the most significant impact will relate to facility and equipment leases, which are currently recorded as operating leases. Based on our leases in place as of September 30, 2018, we currently anticipate recognizing an additional right-of-use asset and lease liability on the balance sheet of approximately $60 million upon adoption of the standard on January 1, 2019. We expect to adopt ASU 2018-11, which allows companies to use an optional transition method under which a cumulative adjustment to retained earnings is recorded in the period of adoption and prior periods are not restated. We are continuing our assessment, which may identify other impacts.

ASU 2018-14, Compensation – Retirement Benefits – Defined Benefit Plans – General (Topic 715-20) Disclosure Framework – Changes to the Disclosure Requirements for Defined Benefit Plans

 

The amendment modifies and clarifies the disclosure requirements for employers that sponsor defined benefit pension or other postretirement plans. Early adoption is permitted and is to be applied on a retrospective basis to all periods presented.

 

January 1, 2021

 

We are currently evaluating the potential impact of the adoption of this new guidance on our disclosures.

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.

 

January 1, 2020

 

We are currently evaluating the potential impact of the adoption of this new guidance on our consolidated financial statements and related disclosures.

 

Standard

 

Description

 

Date of adoption

 

Effect on the financial statements

Standards Recently Adopted

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

 

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

 

January 1, 2018

 

We adopted ASU 2014-09 and its related amendments (collectively, “Topic 606”) on January 1, 2018 using the modified retrospective transition method. We determined that the cumulative effect of initially applying the new standard as an adjustment to the opening balance of retained earnings was not material (less than $0.2 million) and, therefore, we made no adjustment.

 

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

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

 

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

 

January 1, 2018

 

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

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

 

The amendment eliminates the requirement to estimate the implied fair value of goodwill if it is determined that the carrying amount of a reporting unit exceeds its fair value. Goodwill impairment will now be recognized by the amount by which a reporting unit’s carrying value exceeds its fair value, not to exceed the carrying amount of goodwill. Early adoption was permitted for interim or annual goodwill impairment tests performed on testing dates after January 1, 2017.

 

January 1, 2018

 

We early adopted this new guidance on January 1, 2018 on a prospective basis. As a result, we expect the adoption to reduce the complexity surrounding the analysis of goodwill impairment during our annual goodwill impairment tests as of October 31, 2018, or if an event occurs or circumstances change that would more-likely-than-not reduce the fair value of a reporting unit below its carrying value.

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

Cost and Net Periodic Postretirement Benefit Cost

 

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

 

January 1, 2018

 

We adopted this new standard retrospectively on January 1, 2018. As a result, we recorded the nonservice cost component of net periodic benefit cost within other expense and reclassified from operating expenses (cost of services and corporate activities) to other expense $0.2 million for the three months ended September 30, 2017 and $0.9 million for the nine months ended September 30, 2017 to conform to current period presentation. For additional details on the impact this adoption had on our results of operations, see the disclosures immediately following this table.

ASU 2018-02, Income Statement – Reporting Comprehensive Income (Topic 220): Reclassification of Certain Tax Effects from Accumulated Other Comprehensive Income

 

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

 

September 30, 2018

 

We early adopted this new standard during the third quarter of 2018. As a result, we reclassified the income tax effects of the Tax Act of $1.6 million from AOCI to retained earnings, with no net effect to total stockholders' equity. Refer to Note 16 – Income Taxes for additional information.

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

 

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

 

Upon issuance

 

We recognized the provisional tax impacts of the Tax Act in the fourth quarter of 2017. During the three months ended September 30, 2018, we recorded a tax benefit of $3.1 million to the provisional estimate included in the financial statements as of December 31, 2017 for the impact of the Tax Act. This amount is comprised of a reduction to our estimated taxes for the deemed mandatory repatriation of post-1986 undistributed foreign subsidiary earnings and profits and for the corporate tax rate reduction attributable to the return to provision adjustment for deferred taxes. We continue to anticipate finalizing our analysis during the fourth quarter of 2018. Refer to Note 16 – Income Taxes for additional information.

 

 

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

 

 

 

Three Months Ended

 

 

Nine Months Ended

 

(in thousands)

 

September 30, 2017

 

 

September 30, 2017

 

Revenue:

 

 

 

 

 

 

 

 

Exhibition and event services

 

$

198,868

 

 

$

750,111

 

Exhibits and environments

 

 

33,251

 

 

 

119,988

 

Pursuit services

 

 

106,980

 

 

 

159,581

 

Total revenue

 

$

339,099

 

 

$

1,029,680

 

 

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

 

 

 

Three Months Ended

 

 

Nine Months Ended

 

(in thousands)

 

September 30, 2017

 

 

September 30, 2017

 

Revenue:

 

 

 

 

 

 

 

 

Services

 

$

286,752

 

 

$

896,574

 

Products

 

 

52,347

 

 

 

133,106

 

Total revenue

 

$

339,099

 

 

$

1,029,680

 

 

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

 

 

 

Three Months Ended September 30, 2017

 

(in thousands)

 

As Previously

Reported

 

 

Reclassifications to Conform with Revenue Presentation

 

 

ASU 2017-07

 

 

As Newly Reported

 

Cost of services

 

$

254,963

 

 

$

(9,007

)

 

$

(199

)

 

$

245,757

 

Cost of products

 

$

37,070

 

 

$

9,007

 

 

$

 

 

$

46,077

 

Corporate activities

 

$

4,474

 

 

$

 

 

$

(49

)

 

$

4,425

 

Other expense

 

$

 

 

$

 

 

$

248

 

 

$

248

 

 

 

 

Nine Months Ended September 30, 2017

 

(in thousands)

 

As Previously

Reported

 

 

Reclassifications to Conform with Revenue Presentation

 

 

ASU 2017-07

 

 

As Newly Reported

 

Cost of services

 

$

813,456

 

 

$

(4,436

)

 

$

(716

)

 

$

808,304

 

Cost of products

 

$

117,072

 

 

$

4,436

 

 

$

 

 

$

121,508

 

Corporate activities

 

$

10,092

 

 

$

 

 

$

(206

)

 

$

9,886

 

Other expense

 

$

 

 

$

 

 

$

922

 

 

$

922

 

 

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

Revenue Recognition

Beginning January 1, 2018, revenue is measured based on a specified amount of consideration in a contract with a customer, net of commissions paid to customers and amounts collected on behalf of third parties. We recognize revenue when a performance obligation is satisfied by transferring control of a product or service to a customer.

GES’ service revenue is primarily derived through its comprehensive range of services to event organizers and corporate brand marketers including Core Services, Audio-Visual, and Event Technology. GES’ service revenue is earned over time over the duration of the exhibition, conference or corporate event, which generally lasts one to three days; however we use the practical expedient of recognizing 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 accommodations, admissions, transportation, and travel planning services. Pursuit’s product revenue is derived through food and beverage and retail sales. Pursuit’s revenue is recognized at the time services are performed or upon delivery of the product. Pursuit’s service revenue is recognized over time as the customer simultaneously receives and consumes the benefits. Pursuit’s product revenue is recognized at a point in time.

The impact of adopting Topic 606 on our unaudited Condensed Consolidated Statement of Operations was $1.0 million reduction to cost of services and $0.7 million increase to net income for the three months ended September 30, 2018 and $2.6 million reduction to cost of services and $1.9 million increase to net income for the nine months ended September 30, 2018.

Noncontrolling Interests

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

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

Insurance Recoveries

Receipts from insurance up to the amount of the recognized losses are considered recoveries and are accounted for when they are probable of receipt. Anticipated proceeds in excess of the recognized loss are considered a gain contingency. A contingency gain for anticipated insurance proceeds in excess of losses already recognized is not recognized until all contingencies relating to the insurance claim have been resolved.

Insurance proceeds allocated to business interruption gains are reported as cash flows from operating activities, and proceeds allocated to impairment recoveries are reported as cash flows from investing activities. Insurance proceeds used for capitalizable costs are classified as cash flows from investing activities, and proceeds used for non-capitalizable costs are classified as operating activities.

v3.10.0.1
Revenue and Related Contract Costs and Contract Liabilities
9 Months Ended
Sep. 30, 2018
Revenue From Contract With Customer [Abstract]  
Revenue and Related Contract Costs and Contract Liabilities

Note 2. Revenue and Related Contract Costs and Contract Liabilities

GES’ performance obligations consist of services or product(s) outlined in a contract. While multi-year contracts are often signed for recurring events, the obligations for each occurrence are well defined and conclude upon the occurrence of each event. The obligations are typically the provision of services 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, 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

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

Changes to contract liabilities are as follows:

(in thousands)

 

 

 

 

Balance at January 1, 2018

 

$

31,981

 

Cash additions

 

 

147,231

 

Revenue recognized

 

 

(120,477

)

Foreign exchange translation adjustment

 

 

(475

)

Balance at September 30, 2018

 

$

58,260

 

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.” These amounts were previously reported in inventories under “Work in process.”

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

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

 

Changes to contract costs are as follows:

(in thousands)

 

 

 

 

Balance at January 1, 2018

 

$

16,878

 

Additions

 

 

53,580

 

Expenses

 

 

(40,641

)

Cancelled

 

 

(109

)

Foreign exchange translation adjustment

 

 

(539

)

Balance at September 30, 2018

 

$

29,169

 

As of September 30, 2018, capitalized contract costs consisted of $1.8 million to obtain contracts and $27.4 million to fulfill contracts. We did not recognize an impairment loss with respect to capitalized contract costs for the nine months ended September 30, 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, 2018

 

(in thousands)

 

GES U.S.

 

 

GES International

 

 

Intersegment Eliminations

 

 

Total

 

Services:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Core services

 

$

154,640

 

 

$

35,937

 

 

$

 

 

$

190,577

 

Audio-visual

 

 

17,309

 

 

 

4,423

 

 

 

 

 

 

21,732

 

Event technology

 

 

4,874

 

 

 

1,745

 

 

 

 

 

 

6,619

 

Intersegment eliminations

 

 

 

 

 

 

 

 

(2,479

)

 

 

(2,479

)

Total services

 

 

176,823

 

 

 

42,105

 

 

 

(2,479

)

 

 

216,449

 

Products:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Core products

 

 

14,876

 

 

 

14,785

 

 

 

 

 

 

29,661

 

Total revenue

 

$

191,699

 

 

$

56,890

 

 

$

(2,479

)

 

$

246,110

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Timing of revenue recognition:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Services transferred over time

 

$

176,823

 

 

$

42,106

 

 

$

(2,479

)

 

$

216,450

 

Products transferred over time(1)

 

 

10,281

 

 

 

3,226

 

 

 

 

 

 

13,507

 

Products transferred at a point in time

 

 

4,595

 

 

 

11,558

 

 

 

 

 

 

16,153

 

Total revenue

 

$

191,699

 

 

$

56,890

 

 

$

(2,479

)

 

$

246,110

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Markets:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Exhibitions

 

$

108,348

 

 

$

41,925

 

 

$

 

 

$

150,273

 

Conferences

 

 

41,367

 

 

 

4,918

 

 

 

 

 

 

46,285

 

Corporate events

 

 

34,093

 

 

 

8,190

 

 

 

 

 

 

42,283

 

Consumer events

 

 

7,891

 

 

 

1,857

 

 

 

 

 

 

9,748

 

Intersegment eliminations

 

 

 

 

 

 

 

 

(2,479

)

 

 

(2,479

)

Total revenue

 

$

191,699

 

 

$

56,890

 

 

$

(2,479

)

 

$

246,110

 

 

(1)

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, 2018

 

(in thousands)

 

GES U.S.

 

 

GES International

 

 

Intersegment Eliminations

 

 

Total

 

Services:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Core services

 

$

511,322

 

 

$

132,407

 

 

$

 

 

$

643,729

 

Audio-visual

 

 

55,134

 

 

 

14,144

 

 

 

 

 

 

69,278

 

Event technology

 

 

23,443

 

 

 

7,866

 

 

 

 

 

 

31,309

 

Intersegment eliminations

 

 

 

 

 

 

 

 

(12,173

)

 

 

(12,173

)

Total services

 

 

589,899

 

 

 

154,417

 

 

 

(12,173

)

 

 

732,143

 

Products:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Core products

 

 

46,907

 

 

 

50,088

 

 

 

 

 

 

96,995

 

Total revenue

 

$

636,806

 

 

$

204,505

 

 

$

(12,173

)

 

$

829,138

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Timing of revenue recognition:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Services transferred over time

 

$

589,899

 

 

$

154,418

 

 

$

(12,173

)

 

$

732,144

 

Products transferred over time(1)

 

 

30,957

 

 

 

13,043

 

 

 

 

 

 

44,000

 

Products transferred at a point in time

 

 

15,950

 

 

 

37,044

 

 

 

 

 

 

52,994

 

Total revenue

 

$

636,806

 

 

$

204,505

 

 

$

(12,173

)

 

$

829,138

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Markets:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Exhibitions

 

$

364,016

 

 

$

150,623

 

 

$

 

 

$

514,639

 

Conferences

 

 

163,782

 

 

 

28,805

 

 

 

 

 

 

192,587

 

Corporate events

 

 

89,347

 

 

 

21,620

 

 

 

 

 

 

110,967

 

Consumer events

 

 

19,661

 

 

 

3,457

 

 

 

 

 

 

23,118

 

Intersegment eliminations

 

 

 

 

 

 

 

 

(12,173

)

 

 

(12,173

)

Total revenue

 

$

636,806

 

 

$

204,505

 

 

$

(12,173

)

 

$

829,138

 

 

(1)

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

Pursuit

 

 

 

Three Months Ended

 

 

Nine Months Ended

 

(in thousands)

 

September 30, 2018

 

 

September 30, 2018

 

Services:

 

 

 

 

 

 

 

 

Accommodations

 

$

24,623

 

 

$

35,358

 

Admissions

 

 

51,316

 

 

 

78,375

 

Transportation

 

 

7,602

 

 

 

14,292

 

Travel planning

 

 

651

 

 

 

1,450

 

Intersegment eliminations

 

 

(554

)

 

 

(1,260

)

Total services revenue

 

 

83,638

 

 

 

128,215

 

Products:

 

 

 

 

 

 

 

 

Food and beverage

 

 

16,074

 

 

 

23,998

 

Retail operations

 

 

12,341

 

 

 

17,917

 

Total products revenue

 

 

28,415

 

 

 

41,915

 

Total revenue

 

$

112,053

 

 

$

170,130

 

 

 

 

 

 

 

 

 

 

Timing of revenue recognition:

 

 

 

 

 

 

 

 

Services transferred over time

 

$

83,638

 

 

$

128,215

 

Products transferred at a point in time

 

 

28,415

 

 

 

41,915

 

Total revenue

 

$

112,053

 

 

$

170,130

 

 

 

 

 

 

 

 

 

 

Markets:

 

 

 

 

 

 

 

 

Banff Jasper Collection

 

$

58,525

 

 

$

94,133

 

Alaska Collection

 

 

25,546

 

 

 

36,373

 

Glacier Park Collection

 

 

23,418

 

 

 

30,684

 

FlyOver

 

 

4,564

 

 

 

8,940

 

Total revenue

 

$

112,053

 

 

$

170,130

 

 

Balance Sheet Reclassifications

In connection with the adoption of Topic 606, effective January 1, 2018, we made the following reclassifications to separately present contract costs and contract liabilities on the Condensed Consolidated Balance Sheet as of December 31, 2017:

 

 

 

December 31, 2017

 

(in thousands)

 

As Previously Reported

 

 

Reclassifications

 

 

As Adjusted

 

Cash and cash equivalents

 

$

53,723

 

 

 

 

 

$

53,723

 

Accounts receivable, net

 

 

104,811