VIAD CORP, 10-K filed on 3/11/2016
Annual Report
Document and Entity Information (USD $)
In Millions, except Share data, unless otherwise specified
12 Months Ended
Dec. 31, 2015
Jan. 31, 2016
Jun. 30, 2015
Document And Entity Information [Abstract]
 
 
 
Entity Registrant Name
VIAD CORP 
 
 
Entity Central Index Key
0000884219 
 
 
Document Type
10-K 
 
 
Document Period End Date
Dec. 31, 2015 
 
 
Amendment Flag
false 
 
 
Document Fiscal Year Focus
2015 
 
 
Document Fiscal Period Focus
FY 
 
 
Current Fiscal Year End Date
--12-31 
 
 
Trading Symbol
VVI 
 
 
Entity Well-known Seasoned Issuer
Yes 
 
 
Entity Voluntary Filers
No 
 
 
Entity Current Reporting Status
Yes 
 
 
Entity Filer Category
Accelerated Filer 
 
 
Entity Public Float
 
 
$ 534 
Entity Common Stock, Shares Outstanding
 
20,173,803 
 
Consolidated Balance Sheets (USD $)
In Thousands, unless otherwise specified
Dec. 31, 2015
Dec. 31, 2014
Current assets
 
 
Cash and cash equivalents
$ 56,531 
$ 56,990 
Accounts receivable, net of allowances for doubtful accounts of $1,593 and $1,258, respectively
93,800 
78,121 
Inventories
27,529 
32,401 
Other current assets
17,311 
17,440 
Total current assets
195,171 
184,952 
Property and equipment, net
189,239 
199,571 
Other investments and assets
39,203 
40,674 
Deferred income taxes
50,137 
52,582 
Goodwill
185,223 
194,197 
Other intangible assets, net
33,322 
42,967 
Total Assets
692,295 
714,943 
Current liabilities
 
 
Accounts payable
65,497 
61,789 
Customer deposits
33,128 
32,720 
Accrued compensation
23,154 
20,736 
Other current liabilities
29,238 
27,787 
Current portion of debt and capital lease obligations
34,554 
27,856 
Total current liabilities
185,571 
170,888 
Long-term debt and capital lease obligations
94,421 
113,164 
Pension and postretirement benefits
29,629 
33,427 
Other deferred items and liabilities
47,336 
49,762 
Total liabilities
356,957 
367,241 
Commitments and contingencies
   
   
Viad Corp stockholders’ equity:
 
 
Common stock, $1.50 par value, 200,000,000 shares authorized, 24,934,981 shares issued
37,402 
37,402 
Additional capital
576,523 
582,066 
Retained deficit
(17,866)
(36,427)
Unearned employee benefits and other
109 
23 
Accumulated other comprehensive income (loss):
 
 
Unrealized gain on investments
346 
471 
Cumulative foreign currency translation adjustments
(23,257)
12,416 
Unrecognized net actuarial loss and prior service credit, net
(11,265)
(13,476)
Common stock in treasury, at cost, 4,771,443 and 4,842,621 shares, respectively
(239,411)
(247,088)
Total Viad stockholders’ equity
322,581 
335,387 
Noncontrolling interest
12,757 
12,315 
Total stockholders’ equity
335,338 
347,702 
Total Liabilities and Stockholders’ Equity
$ 692,295 
$ 714,943 
Consolidated Balance Sheets (Parenthetical) (USD $)
In Thousands, except Share data, unless otherwise specified
Dec. 31, 2015
Dec. 31, 2014
Statement Of Financial Position [Abstract]
 
 
Allowance for doubtful accounts
$ 1,593 
$ 1,258 
Common stock, par value
$ 1.50 
$ 1.50 
Common stock, shares authorized
200,000,000 
200,000,000 
Common stock, shares issued
24,934,981 
24,934,981 
Treasury stock, shares
4,771,443 
4,842,621 
Consolidated Statements of Operations (USD $)
In Thousands, except Per Share data, unless otherwise specified
12 Months Ended
Dec. 31, 2015
Dec. 31, 2014
Dec. 31, 2013
Revenue:
 
 
 
Exhibition and event services
$ 799,752 
$ 772,770 
$ 685,350 
Exhibits and environments
177,126 
171,698 
159,554 
Travel and recreation services
112,170 
120,519 
108,443 
Total revenue
1,089,048 
1,064,987 
953,347 
Costs and expenses:
 
 
 
Costs of services
868,369 
843,652 
758,466 
Costs of products sold
166,095 
161,469 
157,745 
Gain on sale of facility and related land
(4,775)
Corporate activities
9,720 
14,348 
6,755 
Interest income
(658)
(305)
(550)
Interest expense
4,535 
2,015 
1,234 
Restructuring charges
2,956 
1,637 
3,793 
Goodwill impairment charge
 
 
2,097 
Other impairment charges
96 
884 
952 
Total costs and expenses
1,051,113 
1,023,700 
925,717 
Income from continuing operations before income taxes
37,935 
41,287 
27,630 
Income tax expense
10,493 
109 
8,310 
Income from continuing operations
27,442 
41,178 
19,320 
Income (loss) from discontinued operations
(394)
14,389 
2,366 
Net income
27,048 
55,567 
21,686 
Net income attributable to noncontrolling interest
(442)
(3,213)
(131)
Net income attributable to Viad
26,606 
52,354 
21,555 
Diluted income (loss) per common share:
 
 
 
Continuing operations attributable to Viad common stockholders
$ 1.34 
$ 2.02 
$ 0.96 
Discontinued operations attributable to Viad common stockholders
$ (0.02)
$ 0.57 
$ 0.10 
Net income attributable to Viad common stockholders
$ 1.32 1
$ 2.59 1
$ 1.06 1
Weighted-average outstanding and potentially dilutive common shares
19,981 
20,133 
20,265 
Basic income (loss) per common share:
 
 
 
Continuing operations attributable to Viad common stockholders
$ 1.34 
$ 2.02 
$ 0.96 
Discontinued operations attributable to Viad common stockholders
$ (0.02)
$ 0.57 
$ 0.10 
Net income attributable to Viad common stockholders
$ 1.32 
$ 2.59 
$ 1.06 
Weighted-average outstanding common shares
19,797 
19,804 
19,850 
Dividends declared per common share
$ 0.40 
$ 1.90 
$ 2.90 
Amounts attributable to Viad common stockholders
 
 
 
Income from continuing operations
27,000 
40,790 
19,437 
Income (loss) from discontinued operations
(394)
11,564 
2,118 
Net income attributable to Viad
$ 26,606 
$ 52,354 
$ 21,555 
Consolidated Statements of Comprehensive Income (USD $)
In Thousands, unless otherwise specified
12 Months Ended
Dec. 31, 2015
Dec. 31, 2014
Dec. 31, 2013
Statement Of Income And Comprehensive Income [Abstract]
 
 
 
Net income
$ 27,048 
$ 55,567 
$ 21,686 
Other comprehensive income:
 
 
 
Unrealized gains (losses) on investments, net of tax effects of $(78), $26, and $96
(125)
42 
154 
Unrealized foreign currency translation losses net of tax
(35,673)
(18,431)
(11,311)
Change in net actuarial gain (loss), net of tax effects of $653, $(1,538), and $2,380
2,556 
(2,568)
4,244 
Change in prior service credit (cost), net of tax effects of $(210), $339, and $(327)
(345)
351 
(535)
Comprehensive income (loss)
(6,539)
34,961 
14,238 
Comprehensive income attributable to noncontrolling interest
(442)
(3,213)
(131)
Comprehensive income (loss) attributable to Viad
$ (6,981)
$ 31,748 
$ 14,107 
Consolidated Statements of Comprehensive Income (Parenthetical) (USD $)
In Thousands, unless otherwise specified
12 Months Ended
Dec. 31, 2015
Dec. 31, 2014
Dec. 31, 2013
Statement Of Income And Comprehensive Income [Abstract]
 
 
 
Unrealized investment gains (losses) arising during the period, tax effects
$ (78)
$ 26 
$ 96 
Amortization of net actuarial gain (loss), tax effects
653 
(1,538)
2,380 
Amortization of prior service credit (cost), tax effects
$ (210)
$ 339 
$ (327)
Consolidated Statements of Stockholders' Equity (USD $)
In Thousands, unless otherwise specified
Total
Common Stock
Additional Capital
Retained Deficit
Unearned Employee Benefits and Other
Accumulated Other Comprehensive Income
Common Stock in Treasury
Total Viad Equity
Non-Controlling Interest
Beginning Balance at Dec. 31, 2012
$ 397,032 
$ 37,402 
$ 593,862 
$ (13,034)
$ (1,301)
$ 27,465 
$ (256,333)
$ 388,061 
$ 8,971 
Increase (Decrease) in Stockholders' Equity [Roll Forward]
 
 
 
 
 
 
 
 
 
Net income
21,686 
 
 
21,555 
 
 
 
21,555 
131 
Dividends on common stock
(58,914)
 
 
(58,914)
 
 
 
(58,914)
 
Common stock purchased for treasury
(1,328)
 
 
 
 
 
(1,328)
(1,328)
 
Employee benefit plans
778 
 
(6,456)
 
 
 
7,234 
778 
 
ESOP allocation adjustment
1,280 
 
 
 
1,280 
 
 
1,280 
 
Share-based compensation—equity awards
3,053 
 
3,053 
 
 
 
 
3,053 
 
Tax benefits (expenses) from share-based compensation
404 
 
404 
 
 
 
 
404 
 
Unrealized foreign currency translation adjustment
(11,311)
 
 
 
 
(11,311)
 
(11,311)
 
Unrealized gain (loss) on investments
154 
 
 
 
 
154 
 
154 
 
Amortization of net actuarial gain (loss)
4,244 
 
 
 
 
4,244 
 
4,244 
 
Amortization of prior service (cost) credit
(535)
 
 
 
 
(535)
 
(535)
 
Other, net
 
 
(1)
 
 
 
 
 
Ending Balance at Dec. 31, 2013
356,543 
37,402 
590,862 
(50,393)
(21)
20,017 
(250,426)
347,441 
9,102 
Increase (Decrease) in Stockholders' Equity [Roll Forward]
 
 
 
 
 
 
 
 
 
Net income
55,567 
 
 
52,354 
 
 
 
52,354 
3,213 
Dividends on common stock
(38,387)
 
 
(38,387)
 
 
 
(38,387)
 
Common stock purchased for treasury
(12,321)
 
 
 
 
 
(12,321)
(12,321)
 
Employee benefit plans
4,324 
 
(11,334)
 
 
 
15,658 
4,324 
 
ESOP allocation adjustment
44 
 
 
 
44 
 
 
44 
 
Share-based compensation—equity awards
2,319 
 
2,319 
 
 
 
 
2,319 
 
Tax benefits (expenses) from share-based compensation
217 
 
217 
 
 
 
 
217 
 
Unrealized foreign currency translation adjustment
(18,431)
 
 
 
 
(18,431)
 
(18,431)
 
Unrealized gain (loss) on investments
42 
 
 
 
 
42 
 
42 
 
Amortization of net actuarial gain (loss)
(2,568)
 
 
 
 
(2,568)
 
(2,568)
 
Amortization of prior service (cost) credit
351 
 
 
 
 
351 
 
351 
 
Other, net
 
(1)
 
 
 
Ending Balance at Dec. 31, 2014
347,702 
37,402 
582,066 
(36,427)
23 
(589)
(247,088)
335,387 
12,315 
Increase (Decrease) in Stockholders' Equity [Roll Forward]
 
 
 
 
 
 
 
 
 
Net income
27,048 
 
 
26,606 
 
 
 
26,606 
442 
Dividends on common stock
(8,036)
 
 
(8,036)
 
 
 
(8,036)
 
Common stock purchased for treasury
(4,816)
 
 
 
 
 
(4,816)
(4,816)
 
Employee benefit plans
4,536 
 
(7,957)
 
 
 
12,493 
4,536 
 
Share-based compensation—equity awards
2,156 
 
2,156 
 
 
 
 
2,156 
 
Tax benefits (expenses) from share-based compensation
360 
 
360 
 
 
 
 
360 
 
Unrealized foreign currency translation adjustment
(35,673)
 
 
 
 
(35,673)
 
(35,673)
 
Unrealized gain (loss) on investments
(125)
 
 
 
 
(125)
 
(125)
 
Amortization of net actuarial gain (loss)
2,556 
 
 
 
 
2,556 
 
2,556 
 
Amortization of prior service (cost) credit
(345)
 
 
 
 
(345)
 
(345)
 
Other, net
(25)
 
(102)
(9)
86 
 
 
(25)
 
Ending Balance at Dec. 31, 2015
$ 335,338 
$ 37,402 
$ 576,523 
$ (17,866)
$ 109 
$ (34,176)
$ (239,411)
$ 322,581 
$ 12,757 
Consolidated Statements of Stockholders' Equity (Parenthetical)
12 Months Ended
Dec. 31, 2015
Dec. 31, 2014
Dec. 31, 2013
Statement Of Stockholders Equity [Abstract]
 
 
 
Dividends on common stock per share
$ 0.40 
$ 1.90 
$ 2.90 
Consolidated Statements of Cash Flows (USD $)
In Thousands, unless otherwise specified
12 Months Ended
Dec. 31, 2015
Dec. 31, 2014
Dec. 31, 2013
Cash flows from operating activities
 
 
 
Net income
$ 27,048 
$ 55,567 
$ 21,686 
Adjustments to reconcile net income to net cash provided by operating activities:
 
 
 
Depreciation and amortization
35,231 
30,792 
27,967 
Deferred income taxes
469 
(9,731)
2,298 
(Income) loss from discontinued operations
394 
(14,389)
(2,366)
Restructuring charges
2,956 
1,637 
3,793 
Impairment charges
96 
884 
3,049 
Gain on sale of facility and related land
(4,775)
Gains on dispositions of property and other assets
(690)
(958)
(265)
Share-based compensation expense
3,848 
2,930 
5,221 
Excess tax benefit from share-based compensation arrangements
(418)
(114)
(422)
Other non-cash items, net
5,394 
5,386 
4,870 
Change in operating assets and liabilities (excluding the impact of acquisitions):
 
 
 
Receivables
(16,665)
(10,441)
1,246 
Inventories
4,872 
(2,555)
7,663 
Accounts payable
(2,619)
18,128 
(15,436)
Restructuring liabilities
(2,572)
(5,276)
(4,841)
Accrued compensation
1,469 
3,663 
(11,707)
Customer deposits
408 
(6,406)
(20,965)
Income taxes payable
67 
1,543 
218 
Other assets and liabilities, net
989 
(12,570)
(11,179)
Net cash provided by operating activities
60,277 
58,090 
6,055 
Cash flows from investing activities
 
 
 
Capital expenditures
(29,839)
(29,389)
(36,119)
Cash paid for acquired businesses
(430)
(120,251)
(647)
Proceeds from dispositions of property and other assets
1,542 
1,109 
464 
Proceeds from possessory interest and personal property - discontinued operations
28,000 
Proceeds from sale of facility and related land
12,696 
Proceeds from sale of land—discontinued operations
1,645 
Net cash used in investing activities
(28,727)
(120,531)
(21,961)
Cash flows from financing activities
 
 
 
Proceeds from borrowings
50,000 
189,512 
20,000 
Payments on debt and capital lease obligations
(62,969)
(61,461)
(11,362)
Acquisition of business - deferred consideration
(896)
Dividends paid on common stock
(8,036)
(38,387)
(58,914)
Common stock purchased for treasury
(4,816)
(12,321)
(1,328)
Debt issuance costs
(1,671)
Excess tax benefit from share-based compensation arrangements
418 
114 
422 
Proceeds from exercise of stock options
1,041 
1,155 
777 
Net cash provided by (used in) financing activities
(25,258)
76,941 
(50,405)
Effect of exchange rate changes on cash and cash equivalents
(6,751)
(3,331)
(2,039)
Net change in cash and cash equivalents
(459)
11,169 
(68,350)
Cash and cash equivalents, beginning of year
56,990 
45,821 
114,171 
Cash and cash equivalents, end of year
56,531 
56,990 
45,821 
Supplemental disclosure of cash flow information
 
 
 
Cash paid for income taxes
10,114 
8,389 
8,498 
Cash paid for interest
4,199 
1,703 
1,006 
Property and equipment acquired under capital leases
1,008 
881 
832 
Property and equipment purchases in accounts payable and accrued liabilities
$ 2,320 
$ 780 
$ 3,204 
Summary of Significant Accounting Policies
Summary of Significant Accounting Policies

Note 1. Summary of Significant Accounting Policies

Basis of Presentation and Principles of Consolidation

The accompanying consolidated financial statements of Viad Corp (“Viad” or the “Company”) have been prepared in accordance with accounting principles generally accepted in the United States of America (“GAAP”) and include the accounts of Viad and its subsidiaries. All significant intercompany account balances and transactions have been eliminated in consolidation.

Nature of Business

Viad’s reportable segments consist of Marketing & Events U.S. Segment, Marketing & Events International Segment (collectively, the “Marketing & Events Group”) and the Travel & Recreation Group.

Marketing & Events Group

The Marketing & Events Group produces exhibitions, events, exhibits, and services some of the most visible and influential events. The Marketing & Events Group, comprised of Global Experience Specialists, Inc. and affiliates (“GES”), is a global, full-service provider for live events that helps clients gain more awareness, more engagement, and a greater return at their events. GES offers a complete range of services and products, from design and production of immersive environments and brand-based experiences, to audio-visual services, event accommodations, and registration and data services to material handling, rigging, electrical, furnishings, and other on-site services for clients. In addition, GES offers clients a full suite of online tools and new technologies to help them more easily manage the complexities of their events.

GES’ clients include event organizers and corporate brand marketers. Corporate brand marketers include exhibitors and domestic and international corporations that want to promote their brands, services and innovations, feature new products, and build business relationships. GES serves its clients when they exhibit at shows or when GES is hired to manage their global exhibit program or corporate event.

Travel & Recreation Group

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

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 Viad’s reporting units used to perform annual impairment testing of recorded goodwill; allowances for uncollectible accounts receivable; provisions for income taxes, including uncertain tax positions; valuation allowances related to deferred tax assets; liabilities for losses related to self-insured liability claims; liabilities for losses related to environmental remediation obligations; sublease income associated with restructuring liabilities; assumptions used to measure pension and postretirement benefit costs and obligations; assumptions used to determine share-based compensation costs under the fair value method; and allocation of purchase price of acquired businesses. Actual results could differ from these and other estimates.

Cash and Cash Equivalents

Viad considers all highly-liquid investments with remaining maturities when purchased of three months or less to be cash equivalents. Viad’s cash and cash equivalents consist of cash and bank demand deposits and money market mutual funds. The Company’s investments in money market mutual funds are classified as available-for-sale and carried at fair value.

Allowances for Doubtful Accounts

Viad maintains allowances for doubtful accounts to reflect the best estimate of probable losses inherent in the accounts receivable balance. The allowances for doubtful accounts, including a sales allowance for discounts at the time of sale, is based upon an evaluation of the aging of receivables, historical trends, and the current economic environment.

Inventories

Inventories, which consist primarily of exhibit design and construction materials and supplies, as well as deferred show costs, including labor, show purchases, and commissions used in providing convention show services, are stated at the lower of cost (first-in, first-out and specific identification methods) or market.

Property and Equipment

Property and equipment are stated at cost, net of accumulated depreciation. Property and equipment are depreciated using the straight-line method over the estimated useful lives of the assets: buildings, 15 to 40 years; equipment, 3 to 12 years; and leasehold improvements, over the shorter of the lease term or useful life. Property and equipment are tested for potential impairment whenever events or changes in circumstances indicate that the carrying amount of the long-lived asset may not be recoverable through undiscounted cash flows.

Capitalized Software

Viad capitalizes certain internal and external costs incurred in developing or obtaining internal use software. Capitalized costs principally relate to costs incurred to purchase software from third parties, external direct costs of materials and services, and certain payroll-related costs for employees directly associated with software projects once application development begins. Costs associated with preliminary project activities, training, and other post-implementation activities are expensed as incurred. Capitalized software costs are amortized using the straight-line method over the estimated useful lives of the software, ranging from three to ten years. These costs are included in the consolidated balance sheets under the caption “Property and equipment, net.”

Goodwill

Goodwill is tested for impairment at the reporting unit level on an annual basis as of October 31, and between annual tests 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. Viad uses a discounted expected future cash flow methodology (income approach) in order to estimate the fair value of its reporting units for purposes of goodwill impairment testing. The estimates and assumptions regarding expected future cash flows, discount rates, and terminal values require considerable judgment and are based on market conditions, financial forecasts, industry trends, and historical experience. These estimates, however, have inherent uncertainties and different assumptions could lead to materially different results.

Cash Surrender Value of Life Insurance

Viad has Company-owned life insurance contracts which are intended to fund the cost of certain employee compensation and benefit programs. These contracts are carried at cash surrender value, net of outstanding policy loans. The cash surrender value represents the amount of cash the Company could receive if the policies were discontinued before maturity. The changes in the cash surrender value of the policies, net of insurance premiums, are included as a component of “Costs of Services” in the consolidated statements of operations.

Self-Insurance Liabilities

Viad is self-insured up to certain limits for workers’ compensation, automobile, product and general liability, property loss, and medical claims. Viad has also retained certain liabilities related to workers’ compensation and general liability insurance claims in conjunction with previously sold operations. Provisions for losses for claims incurred, including estimated claims incurred but not yet reported, are made based on Viad’s prior historical experience, claims frequency, insurance coverage, and other factors. Viad has purchased insurance for amounts in excess of the self-insured levels.

Environmental Remediation Liabilities

Viad has retained certain liabilities representing the estimated cost of environmental remediation obligations primarily associated with previously sold operations. The amounts accrued primarily consist of the estimated direct incremental costs, on an undiscounted basis, for contractor and other services related to remedial actions and post-remediation site monitoring. Environmental remediation liabilities are recorded when the specific obligation is considered probable and the costs are reasonably estimable. Subsequent recoveries from third parties, if any, are recorded through discontinued operations when realized. The Company maintains environmental insurance that provides coverage for new and undiscovered pre-existing conditions at both its continuing and discontinued operations.

Fair Value of Financial Instruments

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

Foreign Currency Translation

Viad conducts its foreign operations primarily in Canada, the United Kingdom, Germany, and to a lesser extent, in certain other countries. The functional currency of Viad’s foreign subsidiaries is their local currency. Accordingly, for purposes of consolidation, Viad translates the assets and liabilities of its foreign subsidiaries into U.S. dollars at the foreign exchange rates in effect at the balance sheet date. The unrealized gains or losses resulting from the translation of these foreign denominated assets and liabilities are included as a component of accumulated other comprehensive income in Viad’s consolidated balance sheets. For purposes of consolidation, revenue, expenses, gains, and losses related to Viad’s foreign operations are translated into U.S. dollars at the average foreign exchange rates for the period.

Revenue Recognition

Viad recognizes revenue when persuasive evidence of an arrangement exists, delivery has occurred or services have been rendered, the sales price is fixed or determinable, and collectability is reasonably assured. GES derives revenue primarily by providing show services to exhibitors participating in exhibitions and events and from the design, construction, and refurbishment of exhibit booths. Service revenue is recognized at the time services are completed. Service revenue from event accommodations services is recorded when services are completed and is net of commissions. Exhibits and environments revenue is accounted for using the completed-contract method. The Travel & Recreation Group generates revenue through its attractions, hotels, transportation, and sightseeing services. Revenue is recognized at the time services are performed.

Share-Based Compensation

Viad recognizes and measures compensation costs related to all share-based payment awards using the fair value method of accounting. These awards generally include restricted stock, stock options, and liability-based awards (including performance units and restricted stock units). These awards contain forfeiture and non-compete provisions.

The fair value of restricted stock awards is based on Viad’s stock price on the date of grant. Viad issues restricted stock awards from shares held in treasury. Future vesting of restricted stock is generally subject to continued employment with Viad or its subsidiaries. Holders of restricted stock have the right to receive dividends and vote the shares, but may not sell, assign, transfer, pledge, or otherwise encumber the stock, except to the extent restrictions have lapsed.

Restricted stock awards vest between three and five years from the date of grant. Share-based compensation expense related to restricted stock is recognized using the straight-line method over the requisite service period of approximately three years except for certain awards with a five-year vesting period whereby expense is recognized based on an accelerated multiple-award approach over a five-year period. For these awards, 40 percent of the shares vest on the third anniversary of the grant and the remaining shares vest in 30 percent increments over the subsequent two anniversary dates.

Liability-based awards (including performance units and restricted stock units) are recorded at estimated fair value, based on the number of units expected to vest and the level of achievement of predefined performance goals, where applicable, and are remeasured on each balance sheet date based on Viad’s stock price, or the Monte Carlo simulation model, until the time of settlement. A Monte Carlo simulation requires the use of a number of assumptions, including historical volatility and correlation of the price of Viad’s stock and the price of the common shares of a comparator group, a risk-free rate of return, and an expected term. To the extent earned, liability-based awards are settled in cash based on Viad’s stock price. Compensation expense related to liability-based awards is recognized ratably over the requisite service period of approximately three years.

The fair value of each stock option grant is estimated on the date of grant using the Black-Scholes option pricing model. Share-based compensation expense related to stock option awards is recognized using the straight-line method over the requisite service period of approximately five years. The exercise price of stock options is based on the market value of Viad’s common stock at the date of grant.

Common Stock in Treasury

Common stock purchased for treasury is recorded at historical cost. Subsequent share reissuances are primarily related to share-based compensation programs and recorded at weighted-average cost.

Income Per Common Share

Viad applies the two-class method in calculating income per common share as unvested share-based payment awards that contain nonforfeitable rights to dividends are considered participating securities. Accordingly, such securities are included in the earnings allocation in calculating income per share. Historically, Viad has funded its matching contributions to employees’ 401(k) accounts through the Company’s leveraged Employee Stock Ownership Plan (“ESOP”) feature of the Company’s 401(k) defined contribution plan. ESOP shares are treated as outstanding for income per share calculations. During 2014, the Company depleted these shares and matching contributions are now funded from shares of Viad common stock held in treasury.

Impact of Recent Accounting Pronouncements

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

Standard

 

Description

 

Date of adoption

 

Effect on the financial statements

Standards Not Yet Adopted

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

 

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

 

January 1, 2018

 

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

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

 

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

 

January 1, 2016

 

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

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

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

 

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

 

January 1, 2016

 

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

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

 

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

 

January 1, 2017

 

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

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

 

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

 

January 1, 2016

 

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

ASU 2016-02, Leases (Topic 842)

 

The amendment requires lessees to recognize on their balance sheet a right-of-use asset and a lease liability for leases with lease terms greater than one year. The amendment requires additional disclosures about leasing arrangements, and requires a modified retrospective approach to adoption. Early adoption is permitted.

 

January 1, 2019

 

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

 

 

 

 

 

 

 

Standards Recently Adopted

ASU 2015-17, Balance Sheet Classification of Deferred Taxes

 

The amendment simplifies the presentation of deferred taxes by requiring all deferred tax assets and liabilities to be classified as noncurrent on the balance sheet.

 

December 31, 2015

 

Early adopted on a retrospective basis. As a result, current deferred tax assets of $22.9 million were reclassified to non-current on the December 31, 2014 consolidated balance sheet.

 

Share-Based Compensation
Share-Based Compensation

Note 2. Share-Based Compensation

Viad grants share-based compensation awards to officers, directors, and certain key employees pursuant to the 2007 Viad Corp Omnibus Incentive Plan (the “2007 Plan”). The 2007 Plan has a 10-year life and provides for the following types of awards: (a) incentive and non-qualified stock options; (b) restricted stock and restricted stock units; (c) performance units or performance shares; (d) stock appreciation rights; (e) cash-based awards; and (f) certain other stock-based awards. The number of shares of common stock available for grant under the 2007 Plan is limited to 1.7 million shares plus shares awarded under the 1997 Viad Corp Omnibus Incentive Plan (which terminated in May 2007) (the “1997 Plan”) that subsequently cease for any reason to be subject to such awards (other than by reason of exercise or settlement of the awards to the extent the shares are exercised for, or settled in, vested and non-forfeited shares) up to an aggregate maximum of 1.5 million shares. As of December 31, 2015, there were 959,330 total shares available for future grant.

The following table summarizes share-based compensation expense:

 

 

 

Year Ended December 31,

 

(in thousands)

 

2015

 

 

2014

 

 

2013

 

Restricted stock

 

$

2,111

 

 

$

2,495

 

 

$

3,073

 

Performance unit incentive plan (“PUP”)

 

 

1,692

 

 

 

359

 

 

 

1,864

 

Restricted stock units

 

 

45

 

 

 

76

 

 

 

177

 

Stock options

 

 

 

 

 

 

 

 

107

 

Share-based compensation before income tax benefit

 

 

3,848

 

 

 

2,930

 

 

 

5,221

 

Income tax benefit

 

 

(1,454

)

 

 

(1,102

)

 

 

(1,936

)

Share-based compensation, net of income tax benefit

 

$

2,394

 

 

$

1,828

 

 

$

3,285

 

 

In addition, $45,000 of costs, $0.1 million of benefits, and $0.7 million of costs associated with share-based compensation were included in restructuring expense in 2015, 2014 and 2013, respectively. The 2015 amount of $45,000 related to restricted stock units. The 2014 amount of $0.1 million related to the reversal of expense of PUP awards. Of the 2013 amount, $0.3 million related to the restricted stock units and PUP awards. No share-based compensation costs were capitalized during 2015, 2014, or 2013.

On January 24, 2014 and October 25, 2013, Viad’s Board of Directors declared special cash dividends of $1.50 and $2.50 per share, respectively, to shareholders of record at the close of business on February 7, 2014 and November 7, 2013, respectively. In accordance with the mandatory provisions of the 2007 Plan and the 1997 Plan, the Human Resources Committee of Viad’s Board of Directors approved equitable adjustments to outstanding long-term incentive awards of stock options and PUP awards issued pursuant to those plans in order to prevent the special dividends from diluting the rights of participants under those plans. The equitable adjustments to the outstanding stock options reduced the exercise price and increased the number of shares of common stock underlying such options. The equitable adjustment to the PUP awards reflects the effect of the special dividends, but will be paid only if certain performance goals are met at the end of the three-year performance period.

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

 

 

 

Restricted Stock

 

 

PUP Awards

 

 

Restricted Stock Units

 

 

 

Shares

 

 

Weighted-Average

Grant Date

Fair Value

 

 

Shares

 

 

Weighted-Average

Grant Date

Fair Value

 

 

Shares

 

 

Weighted-Average

Grant Date

Fair Value

 

Balance, December 31, 2014

 

 

328,602

 

 

$

23.30

 

 

 

267,120

 

 

$

23.51

 

 

 

25,370

 

 

$

23.17

 

Granted

 

 

92,850

 

 

$

27.52

 

 

 

92,100

 

 

$

27.30

 

 

 

4,800

 

 

$

27.35

 

Vested

 

 

(109,050

)

 

$

20.51

 

 

 

(103,555

)

 

$

20.60

 

 

 

(11,623

)

 

$

20.91

 

Forfeited

 

 

(33,185

)

 

$

24.51

 

 

 

(24,500

)

 

$

25.23

 

 

 

(2,100

)

 

$

25.46

 

Balance, December 31, 2015

 

 

279,217

 

 

$

25.65

 

 

 

231,165

 

 

$

26.15

 

 

 

16,447

 

 

$

25.69

 

 

The grant date fair value of restricted stock which vested during 2015, 2014, and 2013 was $2.2 million, $4.5 million, and $3.5 million, respectively. As of December 31, 2015, the unamortized cost of all outstanding restricted stock awards was $2.7 million, which Viad expects to recognize in the consolidated financial statements over a weighted-average period of approximately 1.4 years. During 2015, 2014, and 2013, the Company repurchased 35,649 shares for $1.0 million, 72,996 shares for $1.8 million and 50,156 shares for $1.3 million, respectively, related to tax withholding requirements on vested share-based awards.

As of December 31, 2015 and 2014, Viad had liabilities recorded of $2.4 million and $3.5 million, respectively, related to PUP awards. In March 2015, the PUP units granted in 2012 vested and cash payouts totaling $2.5 million were distributed. In March 2014, the PUP units granted in 2011 vested and cash payouts totaling $2.9 million were distributed. There were no cash settlements of PUP awards during 2013. As of December 31, 2015 and 2014, Viad had aggregate liabilities recorded of $0.3 million and $0.5 million, respectively, related to restricted stock unit liability awards. In February 2015, portions of the 2010, 2011, and 2012 restricted stock unit awards vested and cash payouts totaling $0.3 million were distributed. Similarly, in February 2014 and 2013, portions of the 2010 and 2011 restricted stock unit awards vested and cash payouts of $0.2 million and $0.3 million were distributed, respectively. As discussed above, the equitable adjustment to the PUP awards reflects the effect of the special dividends, but would be paid only if certain performance goals are met at the end of the three-year performance period. This adjustment to the PUP awards did not impact the compensation expense recognized by the Company for the years ended December 31, 2015 and 2014, or the unrecognized cost.

The following table summarizes stock option activity:

 

 

 

Shares

 

 

Weighted-

Average

Exercise Price

 

 

Options

Exercisable

 

Options outstanding at December 31, 2014

 

 

247,590

 

 

$

17.82

 

 

 

247,590

 

Exercised

 

 

(54,076

)

 

$

16.62

 

 

 

 

 

Forfeited or expired

 

 

(129,741

)

 

$

18.91

 

 

 

 

 

Options outstanding at December 31, 2015

 

 

63,773

 

 

$

16.62

 

 

 

63,773

 

 

As of December 31, 2015, there were no unrecognized costs related to non-vested stock option awards. No stock options were granted in 2015, 2014, or 2013. As discussed above, the equitable adjustments to the outstanding stock options resulting from the special cash dividends paid on February 14, 2014 and November 14, 2013 reduced the exercise price and increased the number of shares of common stock underlying such options. This adjustment to the exercise price and the number of shares did not impact the compensation expense recognized by the Company for the years ended December 31, 2015 and 2014, or the unrecognized cost.

As of December 31, 2015, there were 63,773 stock options outstanding and exercisable with a weighted-average exercise price of $16.62 and a weighted-average remaining contractual life of 3.2 years.

Additional information pertaining to stock options is provided in the table below:

 

 

 

December 31,

 

(in thousands)

 

2015

 

 

2014

 

 

2013

 

Total intrinsic value of stock options outstanding

 

$

740

 

 

$

2,251

 

 

$

2,723

 

Total intrinsic value of stock options exercised

 

$

1,474

 

 

$

1,616

 

 

$

1,611

 

Fair value of stock options vested

 

$

 

 

$

 

 

$

532

 

Cash received from the exercise of stock options

 

$

898

 

 

$

1,155

 

 

$

777

 

Tax benefits realized for tax deductions related to stock option exercises

 

$

104

 

 

$

461

 

 

$

404

 

 

The aggregate intrinsic value of stock options outstanding in the table above represents the difference between Viad’s closing stock price on December 31 of each year and the exercise price, multiplied by the number of in-the-money options. The intrinsic value of stock options outstanding therefore changes based on changes in the fair market value of Viad’s common stock.

Acquisition of Businesses
Acquisition of Businesses

Note 3. Acquisition of Businesses

West Glacier Properties

In July 2014, the Company acquired the West Glacier Motel & Cabins, the Apgar Village Lodge and related land, food and beverage services, and retail operations (collectively, the “West Glacier Properties”). The purchase price was $16.5 million in cash with a working capital adjustment of $0.3 million related to certain current assets and liabilities. The allocation of the purchase price was completed as of September 30, 2015.

The following table summarizes the purchase price and opening balance sheet for the West Glacier Properties acquisition as of the acquisition date:

 

(in thousands)

 

 

 

 

 

 

 

 

Purchase price paid as:

 

 

 

 

 

 

 

 

Cash

 

 

 

 

 

$

16,544

 

Working capital adjustment payable

 

 

 

 

 

 

320

 

Total purchase price

 

 

 

 

 

 

16,864

 

 

 

 

 

 

 

 

 

 

Fair value of net assets acquired:

 

 

 

 

 

 

 

 

Prepaid expenses

 

$

24

 

 

 

 

 

Inventory

 

 

1,374

 

 

 

 

 

Property and equipment

 

 

14,510

 

 

 

 

 

Intangible assets

 

 

189

 

 

 

 

 

Total assets acquired

 

 

16,097

 

 

 

 

 

Accrued liabilities

 

 

35

 

 

 

 

 

Customer deposits

 

 

402

 

 

 

 

 

Other liabilities

 

 

64

 

 

 

 

 

Total liabilities acquired

 

 

501

 

 

 

 

 

Total fair value of net assets acquired

 

 

 

 

 

 

15,596

 

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

 

 

 

 

 

$

1,268

 

 

 

 

 

 

 

 

 

 

 

Under the acquisition method of accounting, the purchase price as shown in the table above is allocated to the tangible and identifiable intangible assets acquired and liabilities assumed based on their estimated fair values. The excess purchase price over fair value of net assets acquired was recorded as goodwill. Goodwill is included in the Travel & Recreation Group and the primary factor that contributed to the purchase price resulting in the recognition of goodwill relates to future growth opportunities when combined with the Company’s other businesses. Goodwill is deductible for tax purposes over a period of 15 years. The estimated values of current assets and liabilities were based upon their historical costs on the date of acquisition due to their short-term nature. Transaction costs associated with the acquisition of the West Glacier Properties were $0.2 million in 2014 and were included in corporate activities in Viad’s Consolidated Statements of Operations.

Identified intangible assets acquired in the West Glacier Properties acquisition totaled $0.2 million and consist primarily of favorable lease contracts. The weighted-average amortization period related to the definite lived intangible assets is 3.5 years.

The results of operations of the West Glacier Properties have been included in Viad’s consolidated financial statements from the date of acquisition. During 2014, revenue of $4.6 million and operating income of $1.5 million related to the West Glacier Properties were included in Viad’s Consolidated Statements of Operations.

Blitz

In September 2014, the Company acquired Blitz Communications Group Limited and its affiliates (collectively, “Blitz”), which has offices in the United Kingdom and is a leading audio-visual staging and creative services provider for the live events industry in the United Kingdom and continental Europe. The purchase price was £15 million (approximately $24.4 million) in cash.

The following table summarizes the updated allocation of the aggregate purchase price paid and amounts of assets acquired and liabilities assumed based upon the estimated fair value at the date of acquisition. During 2015, the Company made certain purchase accounting measurement period adjustments based on refinements to assumptions used in the preliminary valuation of approximately $49,000 to property and equipment, $16,000 from intangible assets, $0.2 million from accrued lease obligations, $0.2 million to deferred taxes and $22,000 to goodwill. These adjustments did not have a significant impact on the Company’s consolidated statements of operations, balance sheet, or cash flows for all periods presented, and therefore, were not retrospectively adjusted in the 2014 financial statements. Other than the line items mentioned previously, the balances in the table below as of December 31, 2015 remain unchanged from the balances reflected in the Consolidated Balance Sheets in the Company’s Annual Report on Form 10-K for the year ended December 31, 2014. The allocation of the purchase price was completed as of September 30, 2015.

 

(in thousands)

 

 

 

 

 

 

 

 

Purchase price paid as:

 

 

 

 

 

 

 

 

Cash

 

 

 

 

 

$

24,416

 

Cash acquired

 

 

 

 

 

 

(190

)

Purchase price, net of cash acquired

 

 

 

 

 

 

24,226

 

 

 

 

 

 

 

 

 

 

Fair value of net assets acquired:

 

 

 

 

 

 

 

 

Accounts receivable

 

$

264

 

 

 

 

 

Inventory

 

 

433

 

 

 

 

 

Prepaid expenses

 

 

410

 

 

 

 

 

Property and equipment

 

 

5,951

 

 

 

 

 

Intangible assets

 

 

8,692

 

 

 

 

 

Total assets acquired

 

 

15,750

 

 

 

 

 

Accounts payable

 

 

1,232

 

 

 

 

 

Accrued liabilities

 

 

2,246

 

 

 

 

 

Customer deposits

 

 

199

 

 

 

 

 

Deferred tax liability

 

 

468

 

 

 

 

 

Revolving credit facility

 

 

488

 

 

 

 

 

Accrued dilapidations

 

 

417

 

 

 

 

 

Total liabilities acquired

 

 

5,050

 

 

 

 

 

Total fair value of net assets acquired

 

 

 

 

 

 

10,700

 

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

 

 

 

 

 

$

13,526

 

 

Under the acquisition method of accounting, the purchase price as shown in the table above is allocated to the tangible and identifiable intangible assets acquired and liabilities assumed based on their estimated fair values. The excess purchase price over fair value of net assets acquired was recorded as goodwill. Goodwill is included in the Marketing & Events International Segment and the primary factor that contributed to a purchase price resulting in the recognition of goodwill relates to future growth opportunities when combined with the Company’s other businesses. The estimated values of current assets and liabilities were based upon their historical costs on the date of acquisition due to their short-term nature. Transaction costs associated with the acquisition of Blitz were $0.8 million in 2014 and $0.1 million in 2015 and are included in corporate activities in Viad’s Consolidated Statements of Operations.

Identified intangible assets acquired in the Blitz acquisition totaled $8.7 million and consist of customer relationships, non-compete agreements, and trade name. The weighted-average amortization period related to the intangible assets is approximately 6.9 years.

The results of operations of Blitz have been included in Viad’s consolidated financial statements from the date of acquisition. During 2014, revenue of $10.1 million and operating income of $0.4 million related to Blitz have been included in Viad’s Consolidated Statements of Operations.

onPeak LLC

In October 2014, the Company acquired onPeak LLC for a purchase price of $43.0 million in cash. Of the initial purchase price, $4.1 million was deposited at closing into escrow to secure post-closing purchase price adjustments, resolution of certain tax matters and other indemnity claims. onPeak LLC provides event accommodations services in North America to the live events industry.

The following table summarizes the updated allocation of the aggregate purchase price paid and amounts of assets acquired and liabilities assumed based upon the estimated fair value at the date of acquisition. During 2015, the Company made certain purchase accounting measurement period adjustments based on refinements to assumptions used in the preliminary valuation of approximately $0.2 million from other non-current assets, $0.2 million from intangible assets, $1.4 million to deferred taxes, $0.2 million from other liabilities, and $1.6 million to goodwill. These adjustments did not have a significant impact on the Company’s consolidated statements of operations, balance sheet, or cash flows for all periods presented, and therefore, were not retrospectively adjusted in the 2014 financial statements. Other than the line items mentioned previously, as of December 31, 2015, the balances in the table below remain unchanged from the balances reflected in the Consolidated Balance Sheets in the Company’s Annual Report on Form 10-K for the year ended December 31, 2014. The allocation of the purchase price was completed as of December 31, 2015.

 

(in thousands)

 

 

 

 

 

 

 

 

Purchase price paid as:

 

 

 

 

 

 

 

 

Cash

 

 

 

 

 

$

42,950

 

Cash acquired

 

 

 

 

 

 

(4,064

)

Purchase price, net of cash acquired

 

 

 

 

 

 

38,886

 

 

 

 

 

 

 

 

 

 

Fair value of net assets acquired:

 

 

 

 

 

 

 

 

Accounts receivable

 

$

4,008

 

 

 

 

 

Prepaid expenses

 

 

640

 

 

 

 

 

Property and equipment

 

 

2,450

 

 

 

 

 

Other non-current assets

 

 

129

 

 

 

 

 

Intangible assets

 

 

14,100

 

 

 

 

 

Total assets acquired

 

 

21,327

 

 

 

 

 

Accounts payable

 

 

738

 

 

 

 

 

Accrued liabilities

 

 

3,341

 

 

 

 

 

Customer deposits

 

 

4,225

 

 

 

 

 

Deferred tax liability

 

 

3,028

 

 

 

 

 

Other liabilities

 

 

129

 

 

 

 

 

Total liabilities acquired

 

 

11,461

 

 

 

 

 

Total fair value of net assets acquired

 

 

 

 

 

 

9,866

 

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

 

 

 

 

 

$

29,020

 

 

Under the acquisition method of accounting, the purchase price as shown in the table above is allocated to the tangible and identifiable intangible assets acquired and liabilities assumed based on their estimated fair values. The excess purchase price over fair value of net assets acquired was recorded as goodwill. Goodwill is included in the Marketing & Events U.S. Segment and the primary factor that contributed to a purchase price resulting in the recognition of goodwill relates to future growth opportunities when combined with the Company’s other businesses. Goodwill of $9.9 million is deductible for tax purposes over a period of 15 years. The estimated values of current assets and liabilities were based upon their historical costs on the date of acquisition due to their short-term nature. Transaction costs associated with the acquisition of onPeak LLC were $0.5 million in 2014 and $0.2 million in 2015 and are included in corporate activities in Viad’s Consolidated Statements of Operations.

Identified intangible assets acquired in the onPeak LLC acquisition totaled $14.1 million and consist primarily of customer relationships and trade name. The weighted-average amortization period related to the definite lived intangible assets is 9.9 years.

The results of operations of onPeak LLC have been included in Viad’s consolidated financial statements from the date of acquisition. During 2014, revenue of $2.7 million and an operating loss of $0.7 million related to onPeak LLC have been included in Viad’s Consolidated Statements of Operations.

Travel Planners, Inc.

In October 2014, the Company acquired Travel Planners, Inc. for a purchase price of $33.7 million in cash less a working capital adjustment of $0.3 million. Of the purchase price, $8.8 million was deposited at closing into escrow to secure post-closing purchase price adjustments, resolution of certain tax matters, and other indemnity claims. An additional amount of $0.9 million was paid during the third quarter of 2015 to Travel Planners, Inc. as a result of an election made by the Company to treat the purchase as an asset acquisition for tax purposes. Travel Planners, Inc. provides event accommodations services in North America to the live events industry. Travel Planners, Inc. was merged into onPeak LLC in January 2015.

The following table summarizes the updated allocation of the aggregate purchase price paid and amounts of assets acquired and liabilities assumed based upon the estimated fair value at the date of acquisition. During 2015, the Company made certain purchase accounting measurement period adjustments based on refinements to assumptions used in the preliminary valuation of $0.6 million from intangible assets, $0.4 million from additional purchase price payable upon tax election and $0.1 million from other accrued liabilities. These adjustments did not have a significant impact on the Company’s consolidated statements of operations, balance sheet, or cash flows for all periods presented, and therefore, were not retrospectively adjusted in the 2014 financial statements. Other than the line items mentioned previously, the balances in the table below as of December 31, 2015 remain unchanged from the balances reflected in the Consolidated Balance Sheets in the Company’s Annual Report on Form 10-K for the year ended December 31, 2014. The allocation of the purchase price was completed as of December 31, 2015.

 

(in thousands)

 

 

 

 

 

 

 

 

Purchase price paid as:

 

 

 

 

 

 

 

 

Cash

 

 

 

 

 

$

33,674

 

Additional purchase price paid for tax election

 

 

 

 

 

 

896

 

Working capital adjustment

 

 

 

 

 

 

(279

)

Cash acquired

 

 

 

 

 

 

(4,204

)

Purchase price, net of cash acquired

 

 

 

 

 

 

30,087

 

 

 

 

 

 

 

 

 

 

Fair value of net assets acquired:

 

 

 

 

 

 

 

 

Accounts receivable

 

$

1,450

 

 

 

 

 

Prepaid expenses

 

 

120

 

 

 

 

 

Property and equipment

 

 

93

 

 

 

 

 

Intangible assets

 

 

14,400

 

 

 

 

 

Total assets acquired

 

 

16,063

 

 

 

 

 

Accounts payable

 

 

488

 

 

 

 

 

Accrued liabilities

 

 

1,557

 

 

 

 

 

Customer deposits

 

 

4,525

 

 

 

 

 

Total liabilities acquired

 

 

6,570

 

 

 

 

 

Total fair value of net assets acquired

 

 

 

 

 

 

9,493

 

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

 

 

 

 

 

$

20,594

 

 

Under the acquisition method of accounting, the purchase price as shown in the table above is allocated to the tangible and identifiable intangible assets acquired and liabilities assumed based on their estimated fair values. The excess purchase price over fair value of net assets acquired was recorded as goodwill. The goodwill is included in the Marketing & Events U.S. Segment and the primary factor that contributed to a purchase price resulting in the recognition of goodwill relates to future growth opportunities when combined with the Company’s other businesses. The goodwill is deductible for tax purposes over a period of 15 years. The estimated values of current assets and liabilities were based upon their historical costs on the date of acquisition due to their short-term nature. Transaction costs associated with the acquisition of Travel Planners, Inc. were $0.5 million in 2014 and $0.2 million in 2015 and are included in corporate activities in Viad’s Consolidated Statements of Operations.

Identified intangible assets acquired in the Travel Planners, Inc. acquisition totaled $14.4 million and consist primarily of customer relationships, favorable lease contracts and trade name. The weighted-average amortization period related to the definite lived intangible assets is 9.8 years.

The results of operations of Travel Planners, Inc. have been included in Viad’s consolidated financial statements from the date of acquisition. During 2014, revenue of $3.4 million and operating income of $0.5 million related to Travel Planners, Inc. have been included in Viad’s Consolidated Statements of Operations.

N200

In November 2014, the Company acquired N200 Limited and its affiliates (collectively, “N200”) for €9.7 million (approximately $12.1 million) in cash, plus an earnout payment (the “Earnout”) of up to €1.0 million. The amount of the Earnout was based on N200’s achievement of established financial targets for the twelve-month period ended June 30, 2015. N200 exceeded those financial targets and, consequently, on October 5, 2015, the Company paid the full €1.0 million (approximately $1.1 million) Earnout to the former owners of N200. N200, which has offices in the United Kingdom and the Netherlands, is a leading event registration and data intelligence services provider for the live events industry in continental Europe.

The following table summarizes the updated allocation of the aggregate purchase price paid and amounts of assets acquired and liabilities assumed based upon the estimated fair value at the date of acquisition. During 2015, the Company made certain purchase accounting measurement period adjustments based on refinements to assumptions used in the preliminary valuation of $0.1 million from contingent consideration, $0.5 million to working capital adjustment, $15,000 from accounts receivable, $0.1 million to intangible assets, $0.1 million to accrued liabilities, $0.1 million to deferred taxes and $0.4 million to goodwill. These adjustments did not have a significant impact on the Company’s consolidated statements of operations, balance sheet, or cash flows for all periods presented, and therefore, were not retrospectively adjusted in the 2014 financial statements. Other than the line items mentioned previously, the balances in the table below as of December 31, 2015 remain unchanged from the balances reflected in the Consolidated Balance Sheets in the Company’s Annual Report on Form 10-K for the year ended December 31, 2014. The allocation of the purchase price was completed as of December 31, 2015.

 

(in thousands)

 

 

 

 

 

 

 

 

Purchase price paid as:

 

 

 

 

 

 

 

 

Cash

 

 

 

 

 

$

12,068

 

Working capital adjustment

 

 

 

 

 

 

458

 

Contingent consideration

 

 

 

 

 

 

1,145

 

Cash acquired

 

 

 

 

 

 

(943

)

Purchase price, net of cash acquired

 

 

 

 

 

 

12,728

 

 

 

 

 

 

 

 

 

 

Fair value of net assets acquired:

 

 

 

 

 

 

 

 

Accounts receivable

 

$

1,732

 

 

 

 

 

Inventory

 

 

46

 

 

 

 

 

Prepaid expenses

 

 

115

 

 

 

 

 

Property and equipment

 

 

1,280

 

 

 

 

 

Intangible assets

 

 

3,682

 

 

 

 

 

Total assets acquired

 

 

6,855

 

 

 

 

 

Accounts payable

 

 

421

 

 

 

 

 

Accrued liabilities

 

 

1,057

 

 

 

 

 

Customer deposits

 

 

569

 

 

 

 

 

Deferred tax liability

 

 

986

 

 

 

 

 

Other liabilities

 

 

106

 

 

 

 

 

Total liabilities acquired

 

 

3,139

 

 

 

 

 

Total fair value of net assets acquired

 

 

 

 

 

 

3,716

 

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

 

 

 

 

 

$

9,012

 

 

Under the acquisition method of accounting, the purchase price as shown in the table above is allocated to the tangible and identifiable intangible assets acquired and liabilities assumed based on their estimated fair values. The excess purchase price over fair value of net assets acquired was recorded as goodwill. Goodwill is included in the Marketing & Events International Segment and the primary factor that contributed to a purchase price resulting in the recognition of goodwill relates to future growth opportunities when combined with the Company’s other businesses. The estimated values of current assets and liabilities were based upon their historical costs on the date of acquisition due to their short-term nature. Transaction costs associated with the acquisition of N200 were $1.0 million in 2014 and $0.2 million in 2015 and are included in corporate activities in Viad’s Consolidated Statements of Operations.

Identified intangible assets acquired in the N200 acquisition totaled $3.7 million and consist primarily of customer relationships. The weighted-average amortization period related to the definite lived intangible assets is 7.4 years.

The results of operations of N200 have been included in Viad’s consolidated financial statements from the date of acquisition. During 2014, revenue of $0.4 million and an operating loss of $0.2 million related to N200 have been included in Viad’s Consolidated Statements of Operations.

Resource Creative Limited

In February 2013, Viad acquired the assets of Resource Creative Limited (“RCL”) for $0.6 million in cash. RCL is a United Kingdom-based company specializing in providing creative graphic services to the exhibition, events, and retail markets throughout the United Kingdom and continental Europe. The purchase price was subject to certain adjustments, plus a deferred payment of up to approximately £0.2 million, which was contingent upon RCL’s achievement of certain net revenue targets between the acquisition date and December 31, 2014. RCL exceeded the net revenue targets for the period ended December 31, 2014 and 2013 and, consequently, deferred payment installments in the amount of $0.1 million (£0.1 million) and $0.2 million (£0.1 million), respectively, were paid in January 2015 and March 2014, respectively.

Supplementary pro forma financial information

The following table summarizes the unaudited pro forma results of operations attributable to Viad, assuming the above acquisitions had each been completed on January 1, 2013: 

 

 

 

Year Ended December 31,

 

(in thousands, except per share data)

 

2014

 

 

2013

 

Revenue

 

$

1,109,629

 

 

$

1,015,275

 

Depreciation and amortization

 

$

38,014

 

 

$

38,981

 

Income from continuing operations

 

$

44,636

 

 

$

15,317

 

Net income attributable to Viad

 

$

55,833

 

 

$

17,510

 

Diluted net income per share

 

$

2.77

 

 

$

0.86

 

Basic net income per share

 

$

2.77

 

 

$

0.86

 

 

Pro forma net income for the year ended December 31, 2014 was adjusted to exclude transaction costs associated with the acquisitions of Blitz, the West Glacier Properties, onPeak LLC, Travel Planners, Inc., and N200, which totaled $3.0 million in 2014 and $0.6 million in 2015. These costs were included in the pro forma net income for the year ended December 31, 2013.

Inventories
Inventories

Note 4. Inventories

The components of inventories consisted of the following:

 

 

 

December 31,

 

(in thousands)

 

2015

 

 

2014

 

Raw materials

 

$

14,383

 

 

$

16,749

 

Work in process

 

 

13,146

 

 

 

15,652

 

Inventories

 

$

27,529

 

 

$

32,401

 

 

Other Current Assets
Other Current Assets

Note 5. Other Current Assets

Other current assets consisted of the following:

 

 

 

December 31,

 

(in thousands)

 

2015

 

 

2014

 

Income tax receivable

 

$

4,643

 

 

$

1,869

 

Prepaid vendor payments

 

 

2,140

 

 

 

2,689

 

Prepaid software maintenance

 

 

2,026

 

 

 

1,934

 

Prepaid insurance

 

 

2,024

 

 

 

2,170

 

Prepaid rent

 

 

1,406

 

 

 

186

 

Prepaid taxes

 

 

1,261

 

 

 

1,416

 

Prepaid other