VIAD CORP, 10-Q filed on 5/3/2019
Quarterly Report
v3.19.1
Document and Entity Information - shares
3 Months Ended
Mar. 31, 2019
Apr. 26, 2019
Document And Entity Information [Abstract]    
Entity Registrant Name VIAD CORP  
Entity Central Index Key 0000884219  
Document Type 10-Q  
Document Period End Date Mar. 31, 2019  
Amendment Flag false  
Document Fiscal Year Focus 2019  
Document Fiscal Period Focus Q1  
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   20,283,639
v3.19.1
CONDENSED CONSOLIDATED BALANCE SHEETS (Unaudited) - USD ($)
$ in Thousands
Mar. 31, 2019
Dec. 31, 2018
Current assets    
Cash and cash equivalents $ 43,473 $ 44,893
Accounts receivable, net of allowances for doubtful accounts of $1,366 and $1,288, respectively 134,513 108,936
Inventories 17,601 16,629
Current contract costs 22,987 18,017
Other current assets 32,745 25,486
Total current assets 251,319 213,961
Property and equipment, net 348,723 333,847
Other investments and assets 43,888 42,910
Operating lease right-of-use assets 59,671  
Deferred income taxes 28,934 19,199
Goodwill 262,912 261,330
Other intangible assets, net 49,161 51,294
Total Assets 1,044,608 922,541
Current liabilities    
Accounts payable 83,635 71,927
Contract liabilities 66,094 33,476
Accrued compensation 17,224 22,668
Operating lease obligations 21,080  
Other current liabilities 53,731 32,258
Current portion of debt and finance lease obligations [1] 242,069 229,416
Total current liabilities 483,833 389,745
Long-term debt and finance lease obligations 6,795 705
Pension and postretirement benefits 26,528 26,636
Long-term operating lease obligations 42,098  
Other deferred items and liabilities 45,361 48,991
Total liabilities 604,615 466,077
Commitments and contingencies
Redeemable noncontrolling interest 5,662 5,909
Viad Corp stockholders’ equity:    
Common stock, $1.50 par value, 200,000,000 shares authorized, 24,934,981 shares issued and outstanding 37,402 37,402
Additional capital 571,833 575,339
Retained earnings 89,227 109,032
Unearned employee benefits and other 223 199
Accumulated other comprehensive loss (43,110) (47,975)
Common stock in treasury, at cost, 4,657,471 and 4,741,638 shares, respectively (235,172) (237,790)
Total Viad stockholders’ equity 420,403 436,207
Non-redeemable noncontrolling interest 13,928 14,348
Total stockholders’ equity 434,331 450,555
Total Liabilities and Stockholders’ Equity $ 1,044,608 $ 922,541
[1] Borrowings under the credit facility are classified as current because all borrowed amounts are due within one year.
v3.19.1
CONDENSED CONSOLIDATED BALANCE SHEETS (Parenthetical) (Unaudited) - USD ($)
$ in Thousands
Mar. 31, 2019
Dec. 31, 2018
Statement Of Financial Position [Abstract]    
Allowance for doubtful accounts $ 1,366 $ 1,288
Common stock, par value $ 1.50 $ 1.50
Common stock, shares authorized 200,000,000 200,000,000
Common stock, shares issued 24,934,981 24,934,981
Common stock, shares outstanding 24,934,981 24,934,981
Treasury stock, shares 4,657,471 4,741,638
v3.19.1
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (Unaudited) - USD ($)
shares in Thousands, $ in Thousands
3 Months Ended
Mar. 31, 2019
Mar. 31, 2018
Revenue:    
Total revenue $ 285,594 $ 277,428
Costs and expenses:    
Business interruption gain   (190)
Corporate activities 1,833 2,217
Interest income (98) (84)
Interest expense 2,915 2,069
Other expense 455 238
Restructuring charges 688 162
Legal settlement 8,500  
Total costs and expenses 311,123 292,829
Loss from continuing operations before income taxes (25,529) (15,401)
Income tax benefit (7,595) (4,638)
Loss from continuing operations (17,934) (10,763)
Income (loss) from discontinued operations (287) 928
Net loss (18,221) (9,835)
Net loss attributable to non-redeemable noncontrolling interest 420 364
Net loss attributable to redeemable noncontrolling interest 24 84
Net loss attributable to Viad $ (17,777) $ (9,387)
Diluted loss per common share:    
Continuing operations attributable to Viad common stockholders $ (0.88) $ (0.51)
Discontinued operations attributable to Viad common stockholders (0.01) 0.04
Net loss attributable to Viad common stockholders [1] $ (0.89) $ (0.47)
Weighted-average outstanding and potentially dilutive common shares 20,076 20,207
Basic loss per common share:    
Continuing operations attributable to Viad common stockholders $ (0.88) $ (0.51)
Discontinued operations attributable to Viad common stockholders (0.01) 0.04
Net loss attributable to Viad common stockholders $ (0.89) $ (0.47)
Weighted-average outstanding common shares 20,076 20,207
Dividends declared per common share $ 0.10 $ 0.10
Amounts attributable to Viad common stockholders    
Loss from continuing operations $ (17,490) $ (10,315)
Income (loss) from discontinued operations (287) 928
Net loss attributable to Viad (17,777) (9,387)
Services    
Revenue:    
Total revenue 250,641 245,548
Costs and expenses:    
Costs and expenses 263,356 257,295
Products    
Revenue:    
Total revenue 34,953 31,880
Costs and expenses:    
Costs and expenses $ 33,474 $ 31,122
[1] Diluted income (loss) per share amount cannot exceed basic income (loss) per share.
v3.19.1
CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS) (Unaudited) - USD ($)
$ in Thousands
3 Months Ended
Mar. 31, 2019
Mar. 31, 2018
Statement Of Income And Comprehensive Income [Abstract]    
Net loss $ (18,221) $ (9,835)
Other comprehensive income (loss):    
Unrealized foreign currency translation adjustments, net of tax [1] 4,780 (3,109)
Change in net actuarial loss, net of tax [1] 120 629
Change in prior service cost, net of tax [1] (35) (184)
Comprehensive loss (13,356) (12,499)
Comprehensive loss attributable to non-redeemable noncontrolling interest 420 364
Comprehensive loss attributable to redeemable noncontrolling interest 24 84
Comprehensive loss attributable to Viad $ (12,912) $ (12,051)
[1] The tax effect on other comprehensive income (loss) is not significant.
v3.19.1
CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY (Unaudited) - USD ($)
$ in Thousands
Total
Common Stock
Additional Capital
Retained Earnings
Unearned Employee Benefits and Other
Accumulated Other Comprehensive Income (Loss)
Common Stock in Treasury
Total Viad Equity
Non-Redeemable Non-Controlling Interest
Beginning Balance at Dec. 31, 2017 $ 442,937 $ 37,402 $ 574,458 $ 65,836 $ 218 $ (22,568) $ (226,215) $ 429,131 $ 13,806
Increase (Decrease) in Stockholders' Equity [Roll Forward]                  
Net loss (9,751)     (9,387)       (9,387) (364)
Dividends on common stock ($0.10 per share) (2,046)     (2,046)       (2,046)  
Payment of payroll taxes on stock-based compensation through shares withheld (868)           (868) (868)  
Employee benefit plans 1,123   (2,014)       3,137 1,123  
Share-based compensation - equity awards 815   815         815  
Unrealized foreign currency translation adjustment, net of tax (3,109) [1]         (3,109)   (3,109)  
Amortization of net actuarial loss, net of tax 629 [1]         629   629  
Amortization of prior service cost, net of tax (184) [1]         (184)   (184)  
Adoption of ASU | ASU 2016-01       616   (616) [2]      
Other, net (67)   (36) (19) (11)   (1) (67)  
Ending Balance at Mar. 31, 2018 429,479 37,402 573,223 55,000 207 (25,848) (223,947) 416,037 13,442
Beginning Balance at Dec. 31, 2018 450,555 37,402 575,339 109,032 199 (47,975) (237,790) 436,207 14,348
Increase (Decrease) in Stockholders' Equity [Roll Forward]                  
Net loss (18,197)     (17,777)       (17,777) (420)
Dividends on common stock ($0.10 per share) (2,028)     (2,028)       (2,028)  
Payment of payroll taxes on stock-based compensation through shares withheld (2,905)           (2,905) (2,905)  
Employee benefit plans 1,220   (4,302)       5,522 1,220  
Share-based compensation - equity awards 780   780         780  
Unrealized foreign currency translation adjustment, net of tax 4,780 [1]         4,780   4,780  
Amortization of net actuarial loss, net of tax 120 [1]         120   120  
Amortization of prior service cost, net of tax (35) [1]         (35)   (35)  
Other, net 41   16   24   1 41  
Ending Balance at Mar. 31, 2019 $ 434,331 $ 37,402 $ 571,833 $ 89,227 $ 223 $ (43,110) $ (235,172) $ 420,403 $ 13,928
[1] The tax effect on other comprehensive income (loss) is not significant.
[2] Upon the adoption of ASU 2016-01, Financial Instruments – Overall: Recognition and Measurement of Financial Assets and Financial Liabilities, we recorded a cumulative-effect adjustment from unrealized gains on investments to beginning retained earnings.
v3.19.1
CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY (Parenthetical) (Unaudited) - $ / shares
3 Months Ended
Mar. 31, 2019
Mar. 31, 2018
Statement Of Stockholders Equity [Abstract]    
Dividends on common stock per share $ 0.10 $ 0.10
v3.19.1
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited) - USD ($)
$ in Thousands
3 Months Ended
Mar. 31, 2019
Mar. 31, 2018
Cash flows from operating activities    
Net loss $ (18,221) $ (9,835)
Adjustments to reconcile net loss to net cash provided by (used in) operating activities:    
Depreciation and amortization 13,188 13,063
Deferred income taxes (9,098) (4,507)
(Income) loss from discontinued operations 287 (928)
Restructuring charges 688 162
Legal settlement 8,500  
Gains on dispositions of property and other assets (551) (73)
Share-based compensation expense 2,206 717
Other non-cash items, net 1,041 1,803
Change in operating assets and liabilities (excluding the impact of acquisitions):    
Receivables (25,545) (13,255)
Inventories (874) 70
Current contract costs (4,838) (9,211)
Accounts payable 12,868 5,354
Restructuring liabilities (714) (359)
Accrued compensation (7,490) (16,149)
Contract liabilities 32,379 20,888
Income taxes payable 6 (7,475)
Other assets and liabilities, net 4,188 16,316
Net cash provided by (used in) operating activities 8,020 (3,419)
Cash flows from investing activities    
Capital expenditures (19,543) (26,586)
Proceeds from dispositions of property and other assets 611 1,139
Net cash used in investing activities (18,932) (25,447)
Cash flows from financing activities    
Proceeds from borrowings 28,347 36,038
Payments on debt and finance lease obligations (14,376) (15,348)
Dividends paid on common stock (2,028) (2,046)
Payment of payroll taxes on stock-based compensation through shares withheld (2,905) (868)
Proceeds from exercise of stock options   84
Net cash provided by financing activities 9,038 17,860
Effect of exchange rate changes on cash and cash equivalents 454 (377)
Net change in cash and cash equivalents (1,420) (11,383)
Cash and cash equivalents, beginning of year 44,893 53,723
Cash and cash equivalents, end of period $ 43,473 $ 42,340
v3.19.1
Overview and Basis of Presentation
3 Months Ended
Mar. 31, 2019
Organization Consolidation And Presentation Of Financial Statements [Abstract]  
Overview and Basis of Presentation

Note 1. Overview and Basis of Presentation

Nature of Business

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

GES

GES is a global, full-service live events company offering a comprehensive range of services to the world’s leading brands and event organizers. GES’ clients include event organizers and corporate brand marketers. Event organizers schedule and run 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 provides a full suite of services and products for event organizers and corporate brand marketers through the following lines of business:

 

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

 

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

 

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

 

Markets Served

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

 

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

 

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

 

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

 

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

Pursuit

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

Services and Products Offered

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

Markets Served

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

 

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

 

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

 

The Glacier Park Collection is an operator of 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 the Glacier Park 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 currently being built 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 technology effects of wind, scents, and mist as FlyOver Canada. We are scheduled to open our new attraction in July 2019.

 

o

FlyOver Las Vegas is a newly announced expansion of our virtual flight ride theater concept into Las Vegas, Nevada. This new attraction will provide guests an exhilarating virtual flight experience over some of the most spectacular scenery and natural wonders of the American Southwest. We expect to open our new attraction in 2021.

Basis of Presentation

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

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

Impact of Recent Accounting Pronouncements

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

 

Standard

 

Description

 

Date of adoption

 

Effect on the financial statements

Standards Not Yet Adopted

ASU 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 2016-02, Leases (Topic 842)

 

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

 

January 1, 2019

 

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

 

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

 

 

 

Significant Accounting Policies

Use of Estimates

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

Revenue Recognition

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

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

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

Noncontrolling Interests

Non-redeemable 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 21 – Redeemable Noncontrolling Interest for additional information.

Leases

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

Our operating and finance leases are primarily facility and equipment leases. Our facility leases are comprised mainly of manufacturing facilities, sales and design facilities, offices, storage and/or warehouses, and truck marshaling yards. These facility leases generally have lease terms ranging up to 42 years. Our equipment leases are comprised mainly of vehicles, hardware, and office equipment, each with various lease terms.

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

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

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

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

v3.19.1
Revenue and Related Contract Costs and Contract Liabilities
3 Months Ended
Mar. 31, 2019
Revenue From Contract With Customer [Abstract]  
Revenue and Related Contract Costs and Contract Liabilities

Note 2. Revenue and Related Contract Costs and Contract Liabilities

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

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

Contract Liabilities

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

Changes to contract liabilities are as follows:

(in thousands)

 

 

 

 

Balance at December 31, 2018

 

$

35,600

 

Cash additions

 

 

45,450

 

Revenue recognized

 

 

(14,945

)

Foreign exchange translation adjustment

 

 

236

 

Balance at March 31, 2019

 

$

66,341

 

Contract Costs

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

 

Changes to contract costs are as follows:

(in thousands)

 

 

 

 

Balance at December 31, 2018

 

$

21,478

 

Additions

 

 

18,484

 

Expenses

 

 

(13,295

)

Cancelled

 

 

(3

)

Foreign exchange translation adjustment

 

 

92

 

Balance at March 31, 2019

 

$

26,756

 

As of March 31, 2019, capitalized contract costs consisted of $2.2 million to obtain contracts and $24.6 million to fulfill contracts. We did not recognize an impairment loss with respect to capitalized contract costs for the three months ended March 31, 2019 or 2018.

Disaggregation of Revenue

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

GES

 

 

Three Months Ended March 31, 2019

 

(in thousands)

 

GES North America(1)

 

 

GES EMEA(1)

 

 

Intersegment Eliminations

 

 

Total

 

Services:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Core services

 

$

179,873

 

 

$

31,063

 

 

$

 

 

$

210,936

 

Audio-visual

 

 

18,406

 

 

 

3,888

 

 

 

 

 

 

22,294

 

Event technology

 

 

8,763

 

 

 

2,953

 

 

 

 

 

 

11,716

 

Intersegment eliminations

 

 

 

 

 

 

 

 

(2,690

)

 

 

(2,690

)

Total services

 

 

207,042

 

 

 

37,904

 

 

 

(2,690

)

 

 

242,256

 

Products:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Core products

 

 

16,199

 

 

 

16,472

 

 

 

 

 

 

32,671

 

Total revenue

 

$

223,241

 

 

$

54,376

 

 

$

(2,690

)

 

$

274,927

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Timing of revenue recognition:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Services transferred over time

 

$

207,042

 

 

$

37,904

 

 

$

(2,690

)

 

$

242,256

 

Products transferred over time(2)

 

 

11,269

 

 

 

3,479

 

 

 

 

 

 

14,748

 

Products transferred at a point in time

 

 

4,930

 

 

 

12,993

 

 

 

 

 

 

17,923

 

Total revenue

 

$

223,241

 

 

$

54,376

 

 

$

(2,690

)

 

$

274,927

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Markets:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Exhibitions

 

$

136,429

 

 

$

45,655

 

 

$

 

 

$

182,084

 

Conferences

 

 

47,862

 

 

 

2,982

 

 

 

 

 

 

50,844

 

Corporate events

 

 

32,787

 

 

 

5,545

 

 

 

 

 

 

38,332

 

Consumer events

 

 

6,163

 

 

 

194

 

 

 

 

 

 

6,357

 

Intersegment eliminations

 

 

 

 

 

 

 

 

(2,690

)

 

 

(2,690

)

Total revenue

 

$

223,241

 

 

$

54,376

 

 

$

(2,690

)

 

$

274,927

 

 

(1)

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

(2)

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

 

 

Three Months Ended March 31, 2018

 

(in thousands)

 

GES North America(1)

 

 

GES EMEA(1)

 

 

Intersegment Eliminations

 

 

Total

 

Services:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Core services

 

$

180,525

 

 

$

28,985

 

 

$

 

 

$

209,510

 

Audio-visual

 

 

17,084

 

 

 

3,168

 

 

 

 

 

 

20,252

 

Event technology

 

 

8,035

 

 

 

3,274

 

 

 

 

 

 

11,309

 

Intersegment eliminations

 

 

 

 

 

 

 

 

(3,278

)

 

 

(3,278

)

Total services

 

 

205,644

 

 

 

35,427

 

 

 

(3,278

)

 

 

237,793

 

Products:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Core products

 

 

16,420

 

 

 

13,493

 

 

 

 

 

 

29,913

 

Total revenue

 

$

222,064

 

 

$

48,920

 

 

$

(3,278

)

 

$

267,706

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Timing of revenue recognition:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Services transferred over time

 

$

205,644

 

 

$

35,427

 

 

$

(3,278

)

 

$

237,793

 

Products transferred over time(2)

 

 

11,369

 

 

 

3,329

 

 

 

 

 

 

14,698

 

Products transferred at a point in time

 

 

5,051

 

 

 

10,164

 

 

 

 

 

 

15,215

 

Total revenue

 

$

222,064

 

 

$

48,920

 

 

$

(3,278

)

 

$

267,706

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Markets:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Exhibitions

 

$

145,818

 

 

$

39,935

 

 

$

 

 

$

185,753

 

Conferences

 

 

39,089

 

 

 

5,388

 

 

 

 

 

 

44,477

 

Corporate events

 

 

30,903

 

 

 

3,402

 

 

 

 

 

 

34,305

 

Consumer events

 

 

6,254

 

 

 

195

 

 

 

 

 

 

6,449

 

Intersegment eliminations

 

 

 

 

 

 

 

 

(3,278

)

 

 

(3,278

)

Total revenue

 

$

222,064

 

 

$

48,920

 

 

$

(3,278

)

 

$

267,706

 

 

(1)

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

(2)

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

 

Pursuit

 

 

 

Three Months Ended

 

 

 

March 31,

 

(in thousands)

 

2019

 

 

2018

 

Services:

 

 

 

 

 

 

 

 

Admissions

 

$

3,525

 

 

$

3,579

 

Accommodations

 

 

2,418

 

 

 

1,705

 

Transportation

 

 

1,995

 

 

 

2,369

 

Travel planning

 

 

632

 

 

 

308

 

Intersegment eliminations

 

 

(185

)

 

 

(206

)

Total services revenue

 

 

8,385

 

 

 

7,755

 

Products:

 

 

 

 

 

 

 

 

Food and beverage

 

 

1,364

 

 

 

1,219

 

Retail operations

 

 

918

 

 

 

748

 

Total products revenue

 

 

2,282

 

 

 

1,967

 

Total revenue

 

$

10,667

 

 

$

9,722

 

 

 

 

 

 

 

 

 

 

Timing of revenue recognition:

 

 

 

 

 

 

 

 

Services transferred over time

 

$

8,385

 

 

$

7,755

 

Products transferred at a point in time

 

 

2,282

 

 

 

1,967

 

Total revenue

 

$

10,667

 

 

$

9,722

 

 

 

 

 

 

 

 

 

 

Markets:

 

 

 

 

 

 

 

 

Banff Jasper Collection

 

$

7,870

 

 

$

7,089

 

Alaska Collection

 

 

180

 

 

 

213

 

Glacier Park Collection

 

 

823

 

 

 

626

 

FlyOver

 

 

1,794

 

 

 

1,794

 

Total revenue

 

$

10,667

 

 

$

9,722

 

 

v3.19.1
Share-Based Compensation
3 Months Ended
Mar. 31, 2019
Disclosure Of Compensation Related Costs Sharebased Payments [Abstract]  
Share-Based Compensation

Note 3. Share-Based Compensation

The following table summarizes share-based compensation expense:

 

 

 

Three Months Ended

 

 

 

March 31,

 

(in thousands)

 

2019

 

 

2018

 

Performance unit incentive plan (“PUP”)

 

$

1,423

 

 

$

194

 

Restricted stock

 

 

693

 

 

 

503

 

Restricted stock units

 

 

90

 

 

 

20

 

Share-based compensation before income tax benefit

 

 

2,206

 

 

 

717

 

Income tax benefit

 

 

(558

)

 

 

(181

)

Share-based compensation, net of income tax benefit

 

$

1,648

 

 

$

536

 

We did not record any share-based compensation expense through restructuring charges during the three months ended March 31, 2019 or 2018.

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

 

 

 

PUP Awards

 

 

Restricted Stock

 

 

Restricted Stock Units

 

 

 

Shares

 

 

Weighted-Average

Grant Date

Fair Value

 

 

Shares

 

 

Weighted-Average

Grant Date

Fair Value

 

 

Shares

 

 

Weighted-Average

Grant Date

Fair Value

 

Balance at December 31, 2018

 

 

239,809

 

 

$

40.65

 

 

 

176,769

 

 

$

40.87

 

 

 

12,090

 

 

$

39.04

 

Granted

 

 

73,020

 

 

$

58.25

 

 

 

54,475

 

 

$

57.80

 

 

 

5,025

 

 

$

56.81

 

Vested

 

 

(95,309

)

 

$

26.98

 

 

 

(80,859

)

 

$

31.78

 

 

 

(5,377

)

 

$

26.98

 

Forfeited

 

 

 

 

$

 

 

 

(936

)

 

$

43.75

 

 

 

 

 

$

 

Balance at March 31, 2019

 

 

217,520

 

 

$

52.55

 

 

 

149,449

 

 

$

51.93

 

 

 

11,738

 

 

$

52.17

 

Viad Corp Omnibus Incentive Plan

We grant share-based compensation awards to our officers, directors, and certain key employees pursuant to the 2017 Viad Corp Omnibus Incentive Plan (the “2017 Plan”). The 2017 Plan has a 10-year life and provides for the following types of awards: (a) incentive and non-qualified stock options; (b) restricted stock and restricted stock units; (c) performance units or performance shares; (d) stock appreciation rights; (e) cash-based awards; and (f) certain other stock-based awards. In June 2017, we registered 1,750,000 shares of common stock issuable under the 2017 Plan. As of March 31, 2019, there were 1,580,999 shares available for future grant under the 2017 Plan.

PUP Awards

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

During the three months ended March 31, 2019, we granted PUP awards with a grant date fair value of $4.3 million of which $1.7 million are payable in shares. Liabilities related to PUP awards were $2.7 million as of March 31, 2019 and $7.0 million as of December 31, 2018. In 2019, PUP awards granted in 2016 vested and we paid $5.6 million in cash and $3.4 million in shares. In 2019, we withheld 25,771 shares for $1.5 million related to tax withholding requirements on vested PUP awards paid in shares. In 2018, PUP awards granted in 2015 vested and we distributed cash payouts of $5.9 million.

Restricted Stock

As of March 31, 2019, the unamortized cost of outstanding restricted stock awards was $4.9 million, which we expect to recognize over a weighted-average period of approximately 1.7 years. We repurchased 24,067 shares for $1.4 million during the three months ended March 31, 2019 and 16,362 shares for $0.9 million during the three months ended March 31, 2018 related to tax withholding requirements on vested share-based awards.

Restricted Stock Units

Aggregate liabilities related to restricted stock units were $0.2 million as of March 31, 2019 and $0.4 million as of December 31, 2018. In February 2019, the 2016 restricted stock units vested and we distributed $0.3 million in cash payouts. In February 2018, the 2015 restricted stock units vested and we distributed $0.2 million in cash payouts.

Stock Options

The following table summarizes stock option activity:

 

 

 

Shares

 

 

Weighted-Average

Exercise Price

 

Options outstanding and exercisable at December 31, 2018

 

 

58,689

 

 

$

16.62

 

Exercised

 

 

 

 

$

 

Options outstanding and exercisable at March 31, 2019