VIAD CORP, 10-Q filed on 6/22/2020
Quarterly Report
v3.20.1
Document and Entity Information - shares
3 Months Ended
Mar. 31, 2020
Jun. 15, 2020
Document Information [Line Items]    
Entity Registrant Name Viad Corp  
Entity Central Index Key 0000884219  
Document Type 10-Q  
Document Period End Date Mar. 31, 2020  
Amendment Flag false  
Document Fiscal Year Focus 2020  
Document Fiscal Period Focus Q1  
Current Fiscal Year End Date --12-31  
Entity Incorporation, State or Country Code DE  
Entity Current Reporting Status Yes  
Entity Interactive Data Current Yes  
Entity Filer Category Large Accelerated Filer  
Entity Shell Company false  
Entity Small Business false  
Entity Emerging Growth Company false  
Entity File Number 001-11015  
Entity Tax Identification Number 36-1169950  
Entity Address, Address Line One 1850 North Central Avenue  
Entity Address, Address Line Two Suite 1900  
Entity Address, City or Town Phoenix  
Entity Address, State or Province AZ  
Entity Address, Postal Zip Code 85004-4565  
City Area Code 602  
Local Phone Number 207-1000  
Entity Common Stock, Shares Outstanding   20,408,428
Document Quarterly Report true  
Document Transition Report false  
Common Stock    
Document Information [Line Items]    
Trading Symbol VVI  
Title of 12(b) Security Common Stock, $1.50 Par Value  
Security Exchange Name NYSE  
Junior Participating Preferred Stock    
Document Information [Line Items]    
No Trading Symbol Flag true  
Title of 12(b) Security Junior Participating Preferred Stock, par value $0.01 per share  
v3.20.1
CONDENSED CONSOLIDATED BALANCE SHEETS (Unaudited) - USD ($)
$ in Thousands
Mar. 31, 2020
Dec. 31, 2019
Current assets    
Cash and cash equivalents $ 130,528 $ 61,999
Accounts receivable, net of allowances for doubtful accounts of $10,154 and $1,200, respectively 112,081 126,246
Inventories 17,528 17,269
Current contract costs 14,999 24,535
Other current assets 37,377 30,854
Total current assets 312,513 260,903
Property and equipment, net 481,622 500,901
Other investments and assets 45,544 45,119
Operating lease right-of-use assets 96,719 103,314
Deferred income taxes 37,228 26,163
Goodwill 204,613 287,983
Other intangible assets, net 69,222 94,308
Total Assets 1,247,461 1,318,691
Current liabilities    
Accounts payable 86,050 86,660
Contract liabilities 36,750 50,671
Accrued compensation 12,652 32,658
Operating lease obligations 20,708 22,180
Other current liabilities 46,750 39,824
Current portion of debt and finance lease obligations [1],[2] 420,830 5,330
Total current liabilities 623,740 237,323
Long-term debt and finance lease obligations 18,016 335,162
Pension and postretirement benefits 25,921 26,247
Long-term operating lease obligations 78,685 82,851
Other deferred items and liabilities 75,743 83,707
Total liabilities 822,105 765,290
Commitments and contingencies
Redeemable noncontrolling interest 4,908 6,172
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 570,859 574,473
Retained earnings 34,347 122,971
Accumulated other comprehensive loss (63,543) (35,699)
Common stock in treasury, at cost, 4,544,371 and 4,588,084 shares, respectively (229,770) (231,649)
Total Viad stockholders’ equity 349,295 467,498
Non-redeemable noncontrolling interest 71,153 79,731
Total stockholders’ equity 420,448 547,229
Total Liabilities and Stockholders’ Equity $ 1,247,461 $ 1,318,691
[1] As discussed below, in May 2020, we entered into an amendment to our 2018 Credit Agreement (as defined below), which waived our financial covenants for the quarter ending June 30, 2020. However, we expect to be unable to meet our financial covenants beginning with the quarter ending September 30, 2020, and as a result, the entire $412.6 million balance outstanding under the 2018 Credit Facility as of March 31, 2020 has been classified as a current liability. We are actively negotiating with our lenders to further amend our 2018 Credit Agreement; however, we cannot provide any assurance regarding our ability to obtain further amendments to the 2018 Credit Agreement in a timely manner, or on acceptable terms, if at all. If we are unable to obtain a waiver to our financial covenants, our lenders may exercise remedies against us, including the acceleration of our outstanding indebtedness We also expect to be unable to meet our financial covenants under our FlyOver Iceland Credit Facility beginning with the quarter ending September 30, 2020, and as a result, the $5.3 million balance outstanding as of March 31, 2020 has been classified as a current liability.
[2] Subsequent to the filing of our 2019 Form 10-K, we identified a correction related to the classification of the 2018 Credit Facility (as defined below) from current to long-term given that the 2018 Credit Facility’s contractual maturity is not within 12 months of the balance sheet date, and we were in compliance with all applicable covenants as of December 31, 2019. As a result, we corrected the classification of the debt on the accompanying condensed consolidated balance sheet and the disclosure related to classification of debt in the table above as of December 31, 2019 to present the 2018 Credit Facility as long-term. Except for this change, the correction had no impact upon this Quarterly Report on Form 10-Q. We determined that the error is not material to the previously issued financial statements.
v3.20.1
CONDENSED CONSOLIDATED BALANCE SHEETS (Parenthetical) (Unaudited) - USD ($)
$ in Thousands
Mar. 31, 2020
Dec. 31, 2019
Statement Of Financial Position [Abstract]    
Allowance for doubtful accounts $ 10,154 $ 1,200
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 4,544,371 4,588,084
v3.20.1
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (Unaudited) - USD ($)
shares in Thousands, $ in Thousands
3 Months Ended
Mar. 31, 2020
Mar. 31, 2019
Revenue:    
Total revenue $ 306,008 $ 285,594
Costs and expenses:    
Corporate activities 789 1,833
Interest income (79) (98)
Interest expense 4,018 2,915
Other expense 419 455
Restructuring charges 851 688
Legal settlement   8,500
Impairment charges 88,380  
Total costs and expenses 409,786 311,123
Loss from continuing operations before income taxes (103,778) (25,529)
Income tax benefit (15,797) (7,595)
Loss from continuing operations (87,981) (17,934)
Loss from discontinued operations (454) (287)
Net loss (88,435) (18,221)
Net loss attributable to non-redeemable noncontrolling interest 1,333 420
Net loss attributable to redeemable noncontrolling interest 517 24
Net loss attributable to Viad $ (86,585) $ (17,777)
Diluted loss per common share:    
Continuing operations attributable to Viad common stockholders $ (4.27) $ (0.88)
Discontinued operations attributable to Viad common stockholders (0.02) (0.01)
Net loss attributable to Viad common stockholders [1] $ (4.29) $ (0.89)
Weighted-average outstanding and potentially dilutive common shares 20,215 20,076
Basic loss per common share:    
Continuing operations attributable to Viad common stockholders $ (4.27) $ (0.88)
Discontinued operations attributable to Viad common stockholders (0.02) (0.01)
Net loss attributable to Viad common stockholders $ (4.29) $ (0.89)
Weighted-average outstanding common shares 20,215 20,076
Dividends declared per common share $ 0.10 $ 0.10
Amounts attributable to Viad common stockholders    
Loss from continuing operations $ (86,131) $ (17,490)
Loss from discontinued operations (454) (287)
Net loss attributable to Viad (86,585) (17,777)
Services    
Revenue:    
Total revenue 275,556 250,641
Costs and expenses:    
Costs and expenses 284,402 263,356
Products    
Revenue:    
Total revenue 30,452 34,953
Costs and expenses:    
Costs and expenses $ 31,006 $ 33,474
[1] Diluted loss per share amount cannot exceed basic loss per share.
v3.20.1
CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE LOSS (Unaudited) - USD ($)
$ in Thousands
3 Months Ended
Mar. 31, 2020
Mar. 31, 2019
Statement Of Income And Comprehensive Income [Abstract]    
Net loss $ (88,435) $ (18,221)
Other comprehensive income (loss):    
Unrealized foreign currency translation adjustments (28,158) 4,780
Change in net actuarial loss, net of tax [1] 341 120
Change in prior service cost, net of tax [1] (27) (35)
Comprehensive loss (116,279) (13,356)
Non-redeemable noncontrolling interest:    
Comprehensive loss attributable to non-redeemable noncontrolling interest 1,333 420
Unrealized foreign currency translation adjustments (5,719)  
Redeemable noncontrolling interest:    
Comprehensive loss attributable to redeemable noncontrolling interest 517 24
Comprehensive loss attributable to Viad $ (120,148) $ (12,912)
[1] The tax effect on other comprehensive income (loss) is not significant.
v3.20.1
CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY (Unaudited) - USD ($)
$ in Thousands
Total
Common Stock
Additional Capital
Retained Earnings
Accumulated Other Comprehensive Income (Loss)
Common Stock in Treasury
Total Viad Equity
Non-Redeemable Non-Controlling Interest
Unearned Employee Benefits and Other
Beginning Balance at Dec. 31, 2018 $ 450,555 $ 37,402 $ 575,339 $ 109,032 $ (47,975) $ (237,790) $ 436,207 $ 14,348 $ 199
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       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     1 41   24
Ending Balance at Mar. 31, 2019 434,331 37,402 571,833 89,227 (43,110) (235,172) 420,403 13,928 $ 223
Beginning Balance at Dec. 31, 2019 547,229 37,402 574,473 122,971 (35,699) (231,649) 467,498 79,731  
Increase (Decrease) in Stockholders' Equity [Roll Forward]                  
Net loss (87,918)     (86,585)     (86,585) (1,333)  
Dividends on common stock ($0.10 per share) (2,038)     (2,038)     (2,038)    
Distributions to noncontrolling interest (1,526)             (1,526)  
Payment of payroll taxes on stock-based compensation through shares withheld (1,059)         (1,059) (1,059)    
Common stock purchased for treasury (2,785)         (2,785) (2,785)    
Employee benefit plans 1,912   (3,810)     5,722 1,912    
Share-based compensation - equity awards 276   276       276    
Unrealized foreign currency translation adjustment, net of tax (33,877)       (28,158)   (28,158) (5,719)  
Amortization of net actuarial loss, net of tax 341 [1]       341   341    
Amortization of prior service cost, net of tax (27) [1]       (27)   (27)    
Other, net (80)   (80) (1)   1 (80)    
Ending Balance at Mar. 31, 2020 $ 420,448 $ 37,402 $ 570,859 $ 34,347 $ (63,543) $ (229,770) $ 349,295 $ 71,153  
[1] The tax effect on other comprehensive income (loss) is not significant.
v3.20.1
CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY (Parenthetical) (Unaudited) - $ / shares
3 Months Ended
Mar. 31, 2020
Mar. 31, 2019
Statement Of Stockholders Equity [Abstract]    
Dividends on common stock per share $ 0.10 $ 0.10
v3.20.1
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited) - USD ($)
$ in Thousands
3 Months Ended 12 Months Ended
Mar. 31, 2020
Mar. 31, 2019
Dec. 31, 2019
Cash flows from operating activities      
Net loss $ (88,435) $ (18,221)  
Adjustments to reconcile net loss to net cash provided by operating activities:      
Depreciation and amortization 15,285 13,188  
Deferred income taxes (15,799) (9,098)  
Loss from discontinued operations 454 287  
Restructuring charges 851 688  
Legal settlement   8,500  
Impairment charges 88,380    
Gains on dispositions of property and other assets (85) (551)  
Share-based compensation (benefit) expense (2,145) 2,206  
Other non-cash items, net 9,342 1,041  
Change in operating assets and liabilities:      
Receivables 15,651 (25,545)  
Inventories (711) (874)  
Current contract costs 8,970 (4,838)  
Accounts payable (1,109) 12,868  
Restructuring liabilities (1,293) (714)  
Accrued compensation (20,551) (7,490)  
Contract liabilities (12,602) 32,379  
Payments on operating lease obligations (6,529) (6,198)  
Income taxes payable 17,753 6  
Other assets and liabilities, net (12,146) 10,386  
Net cash (used in) provided by operating activities (4,719) 8,020  
Cash flows from investing activities      
Capital expenditures (23,246) (19,543)  
Proceeds from dispositions of property and other assets 85 611  
Net cash used in investing activities (23,161) (18,932)  
Cash flows from financing activities      
Proceeds from borrowings 160,755 28,347  
Payments on debt and finance lease obligations (56,077) (14,376)  
Dividends paid on common stock (2,038) (2,028)  
Distributions to noncontrolling interest (1,526)    
Payment of payroll taxes on stock-based compensation through shares withheld or repurchased (1,059) (2,905)  
Common stock purchased for treasury (2,785)    
Proceeds from exercise of stock options 2,077    
Net cash provided by financing activities 99,347 9,038  
Effect of exchange rate changes on cash and cash equivalents (2,938) 454  
Net change in cash and cash equivalents 68,529 (1,420)  
Cash and cash equivalents, beginning of year 61,999 44,893 $ 44,893
Cash and cash equivalents, end of period $ 130,528 $ 43,473 $ 61,999
v3.20.1
Overview and Basis of Presentation
3 Months Ended
Mar. 31, 2020
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 in the United States, Canada, the United Kingdom, continental Europe, the United Arab Emirates, and Iceland. 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 event organizers and corporate brand marketers. Event organizers schedule and run events from start to finish. Corporate brand marketers include exhibitors and domestic and international corporations that want to promote their brands, services and innovations, feature new products, and build business relationships. GES serves corporate brand marketers when they exhibit at shows and when GES is engaged to manage their global exhibit program or produce their proprietary corporate events.

Pursuit

Pursuit is a collection of inspiring and unforgettable travel experiences that include recreational attractions, unique hotels and lodges, food and beverage, retail, sightseeing, and ground transportation services. Pursuit comprises the Banff Jasper Collection, the Alaska Collection, the Glacier Park Collection, and FlyOver.

Impact of COVID-19 and Going Concern

On March 11, 2020, the World Health Organization declared COVID-19 a “pandemic.” COVID-19 has spread rapidly, with a high concentration of confirmed cases in the U.S. and other countries in which we operate. The rapid spread has resulted in authorities around the world implementing numerous measures to contain the virus, such as travel bans and restrictions, quarantines, shelter-in-place orders, and business shutdowns. The COVID-19 pandemic and these containment measures have had, and are expected to continue to have, a substantial negative impact on businesses around the world and on global, regional, and national economies.

The COVID-19 pandemic is having and will likely continue to have a significant and negative impact on our operations and financial performance, with live event and tourism activities largely shut down. As a result, we have taken the following measures to improve our liquidity position due to COVID-19:

 

On March 17, 2020, we borrowed $123 million under the revolving credit facility (the “2018 Credit Facility”) as a proactive measure to increase our cash position and preserve financial flexibility. At the end of March 2020, we repaid $32 million and in early April 2020, we borrowed $31 million under the 2018 Credit Facility. Refer to Note 12 – Debt and Finance Lease Obligations and Note 24 – Subsequent Events;

 

We implemented aggressive cost reduction actions, including furloughs, mandatory unpaid time off, or salary reductions for all employees;

 

Our executive management voluntarily reduced its base salaries by 20% to 50%;

 

The non-employee members of our Board of Directors agreed to reduce their annual cash retainer and committee retainers by 50% for payments typically made to them in the second quarter of 2020;

 

We have eliminated all non-essential capital expenditures and discretionary spending;

 

In March 2020, our Board of Directors suspended future dividend payments and share repurchases;

 

On April 20, 2020, we suspended our 401(k) Plan employer match contributions. Refer to Note 24 – Subsequent Events;

 

On May 8, 2020, we obtained a waiver of our financial covenants for the quarter ending June 30, 2020. Refer to Note 12 – Debt and Finance Lease Obligations and Note 24 – Subsequent Events;

 

We availed ourselves of governmental assistance programs for wages and tax relief; and

 

In May 2020, we terminated our legacy life insurance policies on former employees and received the cash proceeds of $24.8 million. Refer to Note 8 – Other Investments and Assets and Note 24 – Subsequent Events.

 

Although we were in compliance with the financial covenants of our Second Amended and Restated Credit Agreement (the “2018 Credit Agreement”) as of March 31, 2020, disruptions caused by the COVID-19 pandemic have had and are likely to continue to have

a significant and negative impact on our operations and financial performance. In May 2020, we entered into an amendment to our 2018 Credit Agreement, which waived our financial covenants for the quarter ending June 30, 2020 and added a new minimum liquidity requirement. However, we expect to be unable to meet our financial covenants beginning with the quarter ending September 30, 2020, and as a result, the entire $412.6 million balance outstanding under the 2018 Credit Facility as of March 31, 2020 has been classified as a current liabilityWe are actively negotiating with our lenders to further amend our 2018 Credit Agreement, and we are pursuing options to raise capital and enhance our liquidity position. We cannot provide any assurance regarding the likelihood, certainty, or exact timing of our ability to raise capital or our ability to obtain further amendments to the 2018 Credit Agreement in a timely manner, or on acceptable terms, if at all. If we are unable to raise capital or obtain a waiver to our financial covenants, our lenders may exercise remedies against us, including the acceleration of our outstanding indebtedness. We also expect to be unable to meet our financial covenants under our FlyOver Iceland Credit Facility beginning with the quarter ending September 30, 2020, and as a result, the $5.3 million balance outstanding as of March 31, 2020 has been classified as a current liability. We have concluded that the shut-down of live event and tourism activities resulting in substantial net losses and operating cash outflows and the expected inability to maintain compliance with debt covenants discussed above raise substantial doubt about our ability to continue as a going concern for a period through one year from the issuance of the financial statements. We have prepared the financial statements on a going concern basis, which do not include any adjustments that might result from the outcome of this uncertainty.

Due to the deteriorating macroeconomic environment, disruptions to our operations, and the sustained decline in our stock price caused by COVID-19, we determined an interim triggering event had occurred, which required us to assess the carrying values of goodwill and intangible assets in accordance with Accounting Standards Codification (“ASC”) No. 350, Intangibles – Goodwill and Other. Based on this assessment, we recorded a non-cash goodwill impairment charge of $72.7 million during the three months ended March 31, 2020 associated with the GES U.S., GES EMEA, and Pursuit’s Glacier Park Collection reporting units. Additionally, during the three months ended March 31, 2020, we recorded a non-cash impairment charge to other intangible assets of $15.7 million related to our U.S. audio-visual production business. The duration and impact of COVID-19 may result in additional future impairment charges as facts and circumstances evolve. Refer to Note 9 – Goodwill and Other Intangible Assets for additional information.

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, 2019, filed with the SEC on February 26, 2020 (“2019 Form 10-K”). We corrected the classification of debt as of December 31, 2019. Refer to Note 12 – Debt and Finance Lease Obligations.

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 2019-12, Income Taxes (Topic 740) Simplifying the Accounting for Income Taxes

 

The amendment enhances and simplifies various aspects of the income tax accounting guidance, including requirements such as ownership changes in investments, and interim-period accounting for enacted changes in tax law.

 

1/1/2021

 

We are currently evaluating the potential impact of the adoption of this new guidance on our consolidated financial statements. We do not expect this new guidance to have a material impact on our consolidated financial statements.

 

Standard

 

Description

 

Date of adoption

 

Effect on the financial statements

Standards Recently Adopted

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

 

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

 

1/1/2020

 

We adopted this new standard on a modified retrospective basis. The adoption of this new standard on January 1, 2020 did not have a material impact on our condensed consolidated financial statements. However, due to the significant economic impact of COVID-19, we recorded an increase of $2.8 million to the provision for credit losses during March 2020.

ASU 2020-04, Reference Rate Reform (Topic 848)

 

The amendment provides temporary optional guidance to ease the potential burden in accounting for reference rate reform. Topic 848 provides optional expedients and exceptions for applying U.S. GAAP to transactions affected by reference rate reform if certain criteria are met.

 

3/12/2020

 

Topic 848 was effective beginning on March 12, 2020, and we will apply the amendments prospectively through December 31, 2022. There was no impact to our condensed consolidated financial statements for the quarter ended March 31, 2020 as a result of adopting this amendment.

 

 

 

Significant Accounting Policies

Use of Estimates

The preparation of financial statements in conformity with U.S. 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: impairment testing of recorded goodwill and intangible assets; 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; pension and postretirement benefit costs and obligations; share-based compensation costs; the discount rates used to value lease obligations; the redemption value of redeemable noncontrolling interests; and the allocation of purchase price of acquired businesses. Actual results could differ from these and other estimates.

Revenue Recognition

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

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

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

Noncontrolling Interests – Non-redeemable and Redeemable

Non-redeemable noncontrolling interest represents the portion of equity in a subsidiary that is not attributable, directly or indirectly, to us. Our non-redeemable noncontrolling interest relates to the 20% equity ownership interest that we do not own in Glacier Park, Inc., the 40% equity interest that we do not own in the Mountain Park Lodges, and the 49% equity interest that we do not own in the new entity that will operate the Pursuit Sky Lagoon attraction. We report non-redeemable noncontrolling interest within stockholders’ equity in the Condensed Consolidated Balance Sheets. The amount of consolidated net income or loss attributable to Viad and the non-redeemable noncontrolling interest is presented in the Condensed Consolidated Statements of Operations.

We consider noncontrolling interests with redemption features that are not solely within our control to be redeemable noncontrolling interests. Our redeemable noncontrolling interest relates to our 54.5% equity ownership interest in Esja Attractions ehf. (“Esja”), which owns the FlyOver Iceland attraction. The Esja shareholders agreement contains a put option that gives the minority Esja

shareholders the right to sell (or “put”) their Esja shares to us based on a calculated formula within a predefined term. This redeemable noncontrolling interest is considered temporary equity and we report it between liabilities and stockholders’ equity in the Condensed Consolidated Balance Sheets. The amount of the net income or loss attributable to redeemable noncontrolling interests is recorded in the Condensed Consolidated Statements of Operations and the accretion of the redemption value is recorded as an adjustment to retained earnings and is included in our income per share. Refer to Note 21 – Redeemable Noncontrolling Interest for additional information.

Leases

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

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

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. We evaluate the reasonably certain threshold at lease commencement, and it is typically met if we identify substantial economic incentives or termination penalties. We do not include variable leases and variable non-lease components 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 we adjust to actual expense on a quarterly or annual basis depending on the underlying contract terms. We expense these variable lease payments as incurred. Our lease agreements do not contain any significant residual value guarantees or restrictive covenants.

Substantially all of our lease agreements do not specify an implicit borrowing rate, and as such, we utilize an incremental borrowing rate based on lease term and country, in order to calculate the present value of our future lease payments. The discount rate represents a risk-adjusted rate on a collateralized 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.

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. We record lease income from owned facilities as rental income and we record sublease income from leased facilities against lease expense in the Condensed Consolidated Statements of Operations. We classify all of our leases for which we are the lessor as operating leases.

v3.20.1
Revenue and Related Contract Costs and Contract Liabilities
3 Months Ended
Mar. 31, 2020
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 we often sign multi-year contracts 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. GES’ revenue is earned over time over the duration of the event, but as a practical expedient we recognize revenue when we have a right to invoice at the close of the exhibition, conference, or corporate event, which typically lasts one to three days or when a customer cancels a contract. We recognize revenue for consumer events over the duration of the event. We recognize revenue for products 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, or when a customer cancels a contract. If a customer cancels a contract, then GES is generally contractually able to invoice the customer for contract costs that have been incurred by GES in preparing for 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. We recognize revenue when the service has been provided or the product has been delivered. When we extend credit, 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. We record these deposits as a contract liability, which are recognized as revenue upon satisfaction of the related contract performance obligation(s). GES also provides customer rebates and volume discounts to certain event organizers that we recognize as a reduction of revenue. We include these amounts 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, 2019

 

$

50,796

 

Cash additions

 

 

53,284

 

Revenue recognized

 

 

(64,430

)

Foreign exchange translation adjustment

 

 

(1,482

)

Balance at March 31, 2020

 

$

38,168

 

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. We expense costs associated with preliminary contract activities (i.e. proposal activities) 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. We include the deferred incremental costs of obtaining and fulfilling contracts 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, 2019

 

$

28,496

 

Additions

 

 

11,672

 

Expenses

 

 

(17,679

)

Cancelled

 

 

(2,086

)

Foreign exchange translation adjustment

 

 

(644

)

Balance at March 31, 2020

 

$

19,759

 

As of March 31, 2020, capitalized contract costs consisted of $1.7 million to obtain contracts and $18.1 million to fulfill contracts. We did not recognize an impairment loss with respect to capitalized contract costs during the three months ended March 31, 2020 or 2019.

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, 2020

 

(in thousands)

 

GES North America

 

 

GES EMEA

 

 

Intersegment Eliminations

 

 

Total

 

Services:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Core services

 

$

210,183

 

 

$

26,503

 

 

$

 

 

$

236,686

 

Audio-visual

 

 

17,430

 

 

 

4,034

 

 

 

 

 

 

21,464

 

Event technology

 

 

5,554

 

 

 

2,861

 

 

 

 

 

 

8,415

 

Intersegment eliminations

 

 

 

 

 

 

 

 

(1,989

)

 

 

(1,989

)

Total services

 

 

233,167

 

 

 

33,398

 

 

 

(1,989

)

 

 

264,576

 

Products:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Core products

 

 

18,591

 

 

 

9,318

 

 

 

 

 

 

27,909

 

Total revenue

 

$

251,758

 

 

$

42,716

 

 

$

(1,989

)

 

$

292,485

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Timing of revenue recognition:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Services transferred over time

 

$

233,167

 

 

$

33,398

 

 

$

(1,989

)

 

$

264,576

 

Products transferred over time(1)

 

 

10,577

 

 

 

2,450

 

 

 

 

 

 

13,027

 

Products transferred at a point in time

 

 

8,014

 

 

 

6,868

 

 

 

 

 

 

14,882

 

Total revenue

 

$

251,758

 

 

$

42,716

 

 

$

(1,989

)

 

$

292,485

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Markets:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Exhibitions

 

$

184,358

 

 

$

32,547

 

 

$

 

 

$

216,905

 

Conferences

 

 

35,890

 

 

 

4,807

 

 

 

 

 

 

40,697

 

Corporate events

 

 

26,964

 

 

 

5,154

 

 

 

 

 

 

32,118

 

Consumer events

 

 

4,546

 

 

 

208

 

 

 

 

 

 

4,754

 

Intersegment eliminations

 

 

 

 

 

 

 

 

(1,989

)

 

 

(1,989

)

Total revenue

 

$

251,758

 

 

$

42,716

 

 

$

(1,989

)

 

$

292,485

 

 

(1)

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

 

 

 

 

Three Months Ended March 31, 2019

 

(in thousands)

 

GES North America

 

 

GES EMEA

 

 

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(1)

 

 

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)

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

 

Pursuit

 

 

 

Three Months Ended

 

 

 

March 31,

 

(in thousands)

 

2020

 

 

2019

 

Services:

 

 

 

 

 

 

 

 

Admissions

 

$

4,102

 

 

$

3,525

 

Accommodations

 

 

4,517

 

 

 

2,418

 

Transportation

 

 

2,056

 

 

 

1,995

 

Travel planning

 

 

416

 

 

 

632

 

Intersegment eliminations

 

 

(111

)

 

 

(185

)

Total services revenue

 

 

10,980

 

 

 

8,385

 

Products:

 

 

 

 

 

 

 

 

Food and beverage

 

 

1,649

 

 

 

1,364

 

Retail operations

 

 

894

 

 

 

918

 

Total products revenue

 

 

2,543

 

 

 

2,282

 

Total revenue

 

$

13,523

 

 

$

10,667

 

 

 

 

 

 

 

 

 

 

Timing of revenue recognition:

 

 

 

 

 

 

 

 

Services transferred over time

 

$

10,980

 

 

$

8,385

 

Products transferred at a point in time

 

 

2,543

 

 

 

2,282

 

Total revenue

 

$

13,523

 

 

$

10,667

 

 

 

 

 

 

 

 

 

 

Markets:

 

 

 

 

 

 

 

 

Banff Jasper Collection

 

$

9,799

 

 

$

7,870

 

Alaska Collection

 

 

151

 

 

 

180

 

Glacier Park Collection

 

 

723

 

 

 

823

 

FlyOver

 

 

2,850

 

 

 

1,794

 

Total revenue

 

$

13,523

 

 

$

10,667

 

 

v3.20.1
Share-Based Compensation
3 Months Ended
Mar. 31, 2020
Disclosure Of Compensation Related Costs Sharebased Payments [Abstract]  
Share-Based Compensation

Note 3. Share-Based Compensation

The following table summarizes share-based compensation (income) expense:

 

 

 

Three Months Ended

 

 

 

March 31,

 

(in thousands)

 

2020

 

 

2019

 

Performance unit incentive plan (“PUP”)(1)

 

$

(2,635

)

 

$

1,423

 

Restricted stock

 

 

650

 

 

 

693

 

Restricted stock units

 

 

(160

)

 

 

90

 

Share-based compensation (income) expense before income tax benefit

 

 

(2,145

)

 

 

2,206

 

Income tax benefit

 

 

(109

)

 

 

(558

)

Share-based compensation (income) expense, net of income tax benefit

 

$

(2,254

)

 

$

1,648

 

(1)

PUP awards are liability-based awards that are tied to our stock price and the expected achievement of certain performance-based criteria. During the three months ended March 31, 2020, the value of the PUP awards decreased due to the reduction of our estimated performance achievement and the decline in our stock price as a result of COVID-19.

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, 2019