VIAD CORP - Annual Report: 2020 (Form 10-K)

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-K

(Mark One)

For the fiscal year ended December 31, 2020

or

For the transition period from ____________ to ____________

Commission file number: 001-11015

Viad Corp

(Exact name of registrant as specified in its charter)

(602) 207-1000

(Registrant’s telephone number, including area code)

Securities registered pursuant to Section 12(b) of the Act:

Securities registered pursuant to Section 12(g) of the Act: None

Indicate by check mark if the registrant is a well-known seasoned issuer, as defined by Rule 405 of the Securities Act.    Yes  ☒    No  ☐

Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or 15(d) of the Act.    Yes  ☐    No  ☒

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.    Yes  ☒    No  ☐

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§ 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files.)    Yes  ☒    No  ☐

Indicate by check mark whether registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐    

Indicate by check mark whether the registrant has filed a report on and attestation to its management’s assessment of the effectiveness of its internal control over financial reporting under Section 404(b) of the Sarbanes-Oxley Act (15 U.S.C. 7262(b)) by the registered public accounting firm that prepared or issued its audit report.  ☒

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Act).    Yes  ☐    No  ☒

The aggregate market value of the Common Stock (based on its closing price per share on such date) held by non-affiliates on the last business day of the registrant’s most recently completed second fiscal quarter (June 30, 2020) was approximately $381.0 million.

Registrant had 20,464,515 shares of Common Stock ($1.50 par value) outstanding as of February 15, 2021.

Documents Incorporated by Reference

A portion of the Proxy Statement for the Viad Corp Annual Meeting of Shareholders scheduled for May 14, 2021, is incorporated by reference into Part III of this Annual Report.

INDEX

In this report, for periods presented, “we,” “us,” “our,” “the Company,” and “Viad Corp” refer to Viad Corp and its subsidiaries.

PART I

Forward-Looking Statements

This Annual Report on Form 10-K (“2020 Form 10-K”) contains a number of forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. Forward-looking statements may appear throughout this 2020 Form 10-K, including the following sections: “Business” (Part I, Item 1), “Risk Factors” (Part I, Item 1A), “Management’s Discussion and Analysis of Financial Condition and Results of Operations” (Part II, Item 7), and “Quantitative and Qualitative Disclosures About Market Risk” (Part II, Item 7A). Words, and variations of words, such as “will,” “may,” “expect,” “would,” “could,” “might,” “intend,” “plan,” “believe,” “estimate,” “anticipate,” “deliver,” “seek,” “aim,” “potential,” “target,” “outlook,” and similar expressions are intended to identify our forward-looking statements. Similarly, statements that describe our business strategy, outlook, objectives, plans, initiatives, intentions, or goals also are forward-looking statements. These forward-looking statements are not historical facts and are subject to a host of risks and uncertainties, many of which are beyond our control, which could cause actual results to differ materially from those in the forward-looking statements. Such risks, uncertainties, and other important factors include, among others: the short- and longer-term effects of the COVID-19 pandemic, including the demand for travel, event business and travel experiences, and levels of consumer confidence; actions that governments, businesses, and individuals take in response to the COVID-19 pandemic or any future resurgence, including limiting or banning travel; the impact of the COVID-19 pandemic, or any future resurgence, on global and regional economies, travel, and economic activity, including the duration and magnitude of its impact on unemployment rates and consumer discretionary spending; and the pace of recovery following the COVID-19 pandemic or any future resurgence.

Important factors that could cause actual results to differ materially from those described in our forward-looking statements include, but are not limited to, the following:

For a more complete discussion of the risks and uncertainties that may affect our business or financial results, refer to “Risk Factors” (Part I, Item 1A of this 2020 Form 10-K). We disclaim and do not undertake any obligation to update or revise any forward-looking statement in this 2020 Form 10-K except as required by applicable law or regulation.

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Item 1. Business

We are a leading provider of experiential leisure travel and face-to-face events and marketing experiences 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:

COVID-19 Pandemic

In March 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, social distancing, 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.

In early March 2020, we began to see event postponements and cancellations at GES, as well as cancelled bookings at Pursuit. This quickly escalated into the shutdown of event activity and tourism as government mandated closures and stay-at-home orders went more broadly into effect around the world. As demand halted, we essentially placed our businesses into a state of hibernation to preserve cash. As government mandated closures and stay-at-home orders started to be lifted, we began to restart our business with enhanced health and safety protocols in place. We phased in most of Pursuit’s attractions and lodging operations starting in May 2020, with most open during the second half of 2020, although generally at reduced capacities. However, exhibition and event activity remained largely dormant. As the pandemic persists, we have been and may be required to re-close certain attractions or events based on local or governmental restrictions.

The extent of the COVID-19 pandemic’s effect on our operational and financial performance will depend on future developments including the duration, spread, and intensity of the virus as well as the success of vaccination efforts, all of which are uncertain and difficult to predict. Due to the evolving and uncertain nature of COVID-19, we are not able at this time to fully estimate the effect of these factors on our business; however, the adverse impact on our business, results of operations, and cash flows has been material. Refer to Management’s Discussion and Analysis of Financial Condition and Results of Operations (Part II, Item 7 of this 2020 Form 10-K) for further discussion regarding the impact of COVID-19 on our 2020 financial results. Refer to Risk Factors (Part I. Item 1A of this 2020 Form 10-K) for a discussion of risks and uncertainties that may affect our business.

GES is a global, full-service provider for live events that partners with show organizers, exhibitors, and brand marketers to create high-value, face-to-face events. GES offers a comprehensive range of live event services, from the design and production of compelling, immersive experiences that engage audiences and build brand awareness, to material handling, rigging, electrical, and other on-site event services. In addition, GES offers clients a full suite of audio-visual services from creative and technology to content and design, along with registration, data analytics, engagement, and online tools powered by next generation technologies that help clients easily manage the complexities of their event.

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.

GES has a leading position in the U.S., serving every major exhibition market, including Las Vegas, Chicago, and Orlando. Additionally, GES produces events at many of the most active and popular international event destinations and venues in the United Kingdom, Canada, Germany, the United Arab Emirates, and the Netherlands.

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Markets Served

GES provides a full suite of services for event organizers and corporate brand marketers across four live event markets: Exhibitions, Conferences, Corporate Events, and Consumer Events (collectively, “Live Events”).

During 2020, many of our corporate clients transitioned to virtual and hybrid events largely as a result of face-to-face event cancellations and postponements during the COVID-19 pandemic.

Services Offered

GES offers a comprehensive range of services and innovative technology to event organizers and corporate brand marketers, including Core Services, Event Technology, and Audio-visual.

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Seasonality and Show Rotation

GES’ exhibition and event activity can vary significantly from quarter to quarter and year to year depending on the frequency and timing of shows. Some shows are not held annually and some shift between quarters. Show rotation refers to shows that occur less frequently than annually, as well as annual shows that shift quarters from one year to the next. During 2019, GES reported its highest revenue during second and fourth quarters. During 2020, exhibition and event activity was largely cancelled or postponed after mid-March due to the COVID-19 pandemic.

Competition

In the Live Events industry, GES generally competes across all classes of services and all markets on the basis of discernible differences, value, quality, price, convenience, and service. GES has a competitive advantage through its worldwide network of resources, history of serving as an extension of clients’ teams, experienced and knowledgeable personnel, client focus, creativity, reliable execution, proprietary technology platforms, and financial strength. All known U.S. competitors and most international competitors are privately held companies that provide limited public information regarding their operations. GES’ primary competitor within its Core Services is a privately-held, U.S.-headquartered company; however, there is substantial competition from a large number of service providers in GES’ other service offerings.

Transformation Strategy

GES recently made structural changes to transform and streamline efforts to significantly free up capital, reduce costs, and create a lower and more variable cost structure focused on servicing GES’ more profitable market segments. In 2020, GES exited 21 leased facilities across its warehouse and office network and sold its San Diego area production warehouse. As additional leases come to an end at other facilities, GES will continue to evaluate its physical presence and potentially find additional opportunities to improve its cost structure. Additionally, GES outsourced capital-intensive services by closing its United Kingdom-based audio-visual services business, which will now be serviced by third parties in the United Kingdom, and outsourced the management, cleaning, and storage of aisle carpet in the U.S. As GES anticipates the gradual return of face-to-face Live Events, the company has partnered with a third-party staffing agency to roll out an industry-wide Flex Talent Pool program. Through this program, GES can offer flexible and temporary work opportunities for exhibition professionals as business operations return, while managing its costs.

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Pursuit is an attractions and hospitality company that provides a collection of inspiring and unforgettable travel experiences in iconic destinations. From world-class attractions, distinctive lodges, and engaging tours in stunning national parks and renowned global travel locations, Pursuit’s elevated attraction and hospitality experiences enable visitors to discover and connect with these iconic destinations. With a strategic direction to build an expanding portfolio of extraordinary experiences, Pursuit remains focused on refreshing, improving, and growing its collection in outstanding places around the globe. Pursuit draws its guests from major markets, including the U.S., Canada, China, the United Kingdom, Australia/New Zealand, Asia Pacific, and Europe. Pursuit markets directly to consumers, as well as through distribution channels that include tour operators, tour wholesalers, destination management companies, and retail travel agencies. Pursuit comprises the following collections:

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Pursuit’s collection of experiences focuses on four distinct lines of business. These include attractions, including food and beverage services and retail operations; hospitality, including food and beverage services and retail operations; transportation; and travel planning.

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Seasonality

Pursuit experiences peak activity during the summer months. During 2019, 85% of Pursuit’s revenue was earned in the second and third quarters. During 2020, we experienced lower visitation to Pursuit’s properties due to the COVID-19 pandemic as travel restrictions and border closures largely remained in place. To help reduce the spread of COVID-19, Pursuit’s year-round attractions (the Banff Gondola, FlyOver Canada, and FlyOver Iceland) and year-round lodging properties (Elk + Avenue Hotel, the Mount Royal Hotel, the Mountain Park Lodges, Grouse Mountain Lodge, and Glacier Basecamp Lodge) were closed temporarily starting in mid-March and remained closed during most of the second quarter of 2020. We phased in most of Pursuit’s attractions and lodging operations starting in May 2020 with the majority of properties open and operational during the third quarter of 2020, although at reduced capacities. We seasonally closed our non-year-round properties during the fourth quarter of 2020; however, temporary government mandated closures occurred at FlyOver Canada and FlyOver Iceland during the fourth quarter.

Competition

Pursuit generally competes based on location, uniqueness of facilities, service, quality, and price. Competition exists both locally and regionally across all four lines of business. The hospitality industry has a large number of competitors and competes for leisure travelers (both individual and tour groups) across the U.S. and Canada. Pursuit’s competitive advantage is its distinctive attractions, iconic destinations, and strong culture of hospitality and guest services.

Growth Strategy

Pursuit’s growth strategy is to become a leading attractions hospitality company through its Refresh-Build-Buy initiatives:

We continue to search for opportunities to acquire or to build high return tourism assets in iconic natural and cultural destinations that enjoy perennial demand, bring meaningful scale and market share, and offer cross-selling advantages with a combination of attractions and hotels.

Recent Pursuit Developments

In order to mitigate the negative financial and operational impacts due to the COVID-19 pandemic, we reduced all non-essential capital expenditures during most of 2020 resulting in the delay of the opening of FlyOver Canada Toronto, which is now anticipated to open near the end of 2023. We resumed important growth investments in September of 2020, and we now anticipate opening the Sky Lagoon in the second quarter of 2021 and FlyOver Las Vegas in the third quarter of 2021.

In January 2020, we purchased the Glacier Basecamp Lodge, which is located in Columbia Falls, Montana just 15 miles from the west entrance to Glacier National Park and includes 32 rooms and cabins.

In September 2020, we opened Pursuit’s newest attraction, Open Top Touring. It is a guided scenic tour of Banff in Alberta, Canada and guests ride in a fully open roof of a vintage-style 1930s coach.

Intellectual Property

Our intellectual property rights (including trademarks, patents, copyrights, registered designs, technology, and know-how) are material to our business.

We own or have the right to use numerous trademarks and patents in many countries. Depending on the country, trademarks remain valid for as long as we use them, or as long as we maintain their registration status. Trademark registrations are generally for renewable, fixed terms. We also have patents for current and potential products. Our patents cover inventions ranging from a modular structure having a load-bearing surface that we use in our event and exhibition services, to a surface-covering installation tool and method that reduces our labor costs and improves worker safety. Our U.S. issued utility patents extend for 20 years from the patent application filing date, and our U.S. issued design patents are currently granted for 14 years from the grant date. We also have an extensive design library. Many of the designs have copyright protection and we have also registered many of the copyrights. In the U.S., copyright protection is for 95 years from the date of publication or 120 years from creation, whichever is shorter. While we believe that certain of our patents, trademarks, and copyrights have substantial value, the loss of any one of them would not have a material adverse effect on our financial condition or results of operations.

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Our Trademarks

Our U.S. registered trademarks and trademarks pending registration include Global Experience Specialists & design®, GES®, GES Servicenter®, GES National Servicenter®, GES MarketWorks®, GES Measurement & Insight®, GES Project Central, The Art and Science of Engagement®, Trade Show Rigging TSR®, TSE Trade Show Electrical & design®, Earth Explorers®, Compass Direct®, ethnoMetrics®, eXPRESSO®, FIT®, ON Services, a GES Company & design®, ON Site Audio Visual & design®, FLYOVER® & design, FLYOVER Canada & design®, FLYOVER Iceland & design®, eco-sense®, ONPEAK®, Mount Royal, Above Banff®, Alaska Denali Travel®, Alaska Denali Escapes®, Alaska Heritage Tours®, by Pursuit, Kenai Fjords Tours & design®, Kenai Fjords Wilderness Lodge® & design, Seward Windsong Lodge & design®, Talkeetna Alaskan Lodge®, Explore Rockies®, Denali Backcountry Adventure®, Denali Backcountry Lodge®, and Denali Cabins & design®.

We also own or have the right to use many registered trademarks and trademarks pending registration outside of the U.S., including GES®, ShowTech®, Poken®, Visit®, Visit by GES®, Blitz, a GES Company & design®, Brewster Inc. & design®, Brewster Attractions Explore & design®, Brewster Hospitality Refresh & design®, Glacier Skywalk®, Above Banff®, Explore Rockies®, FLYOVER & design®, FLYOVER ICELAND & design, FLYOVER Canada & design, GES Event Intelligence AG®, Pursuit®, by Pursuit®, Ský Lagoon®, Soaring Over Canada®, Elk + Avenue Hotel®, Brewster Epic Summer Pass®, and escape.connect.refresh.explore®.

Government Regulation and Compliance

The principal rules and regulations affecting our day-to-day business relate to transportation (such as regulations promulgated by the U.S. Department of Transportation and its state counterparts), our employees (such as regulations implemented by the Occupational Safety and Health Administration, equal employment opportunity laws, guidelines implemented pursuant to the Americans with Disabilities Act, and general federal and state employment laws), unionized labor (such as guidelines imposed by the National Labor Relations Act), U.S. and Canadian regulations relating to national parks (such as regulations established by Parks Canada, the U.S. Department of the Interior, and the U.S. National Park Service), and U.S. and Canadian regulations relating to boating (such as regulations implemented by the U.S. and Canadian Coast Guard and state boating laws).

Our current and former businesses are subject to federal and state environmental regulations. Compliance with these provisions, and environmental stewardship generally, is key to our ongoing operations. To date, these provisions have not had, and we do not expect them to have, a material effect on our results of current and discontinued operations.

On July 18, 2020, an off-road Ice Explorer operated by our Pursuit business was involved in an accident while enroute to the Athabasca Glacier, resulting in three fatalities and multiple other serious injuries. We continue to support the victims and their families, and we are fully cooperating with the applicable regulatory authorities to investigate this accident.

Human Capital

Our business strategy focuses on providing superior experiential services to our customers to generate financial results that create attractive returns on invested capital to our shareholders. We employ the highest quality individuals who embody our values, provide innovative leadership, and deliver superior guest experiences and client services. We are committed to providing great places to work that are diverse and inclusive, creating safe and environmentally conscious experiential services, and giving back to our communities.

We had the following number of employees as of December 31, 2020:

GES hires temporary employees on a show-by-show basis, including operations and exhibitor service positions. The number of temporary employees fluctuates depending on the size and location of the exhibition or event. Pursuit hires approximately 2,000 seasonal employees, or 70% of its total workforce, during the peak summer months to help operate its attractions and hospitality properties.

We are governed by a Board of Directors comprising eight non-employee directors and one employee director, and we have an executive management team with five executive officers.

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Safety and well-being:

The safety and well-being of team members and guests is a leading core value. We believe that maintaining strong standards of health and safety improves employee productivity and operational efficiency and enhances employee well-being. Our employees have a responsibility to maintain a safe and healthy work environment. We take prompt action to correct unsafe or hazardous conditions; we promptly report work-related accidents and injuries in accordance with established procedures; we follow all established work rules related to safety; we ensure that our workers understand the risks, know how to handle hazardous products safely, and are familiar with available information for all hazardous materials used. In response to mitigating the spread of the COVID-19 virus, we implemented enhanced health and safety protocols including employees working from home and additional safety measures for employees continuing critical on-site work. Our Experience Modification Rating assigned by the National Council on Compensation Insurance was 0.77 as of December 31, 2020 and 0.87 as of December 31, 2019, which is considered a rating of better than average.

Compliance and Ethics

As leaders in the live event and adventure travel industries, we uphold and are dedicated to being a responsible corporate citizen and a good steward of our environment. This is reinforced every day in our businesses through our Always Honest Compliance and Ethics Program. Our Always Honest Program was established in 1994 and is our guide to operating with integrity. The Always Honest Program guides our employees in conducting themselves on behalf of the Company, with each other, and with everyone the Company partners with. It guides employees to act honestly, ethically, and always in compliance with the law. We believe that maintaining a culture of high ethical standards gives us a distinct advantage in recruiting and retaining top talent, driving the best value for our customers, and attracting shareholders. 

Community involvement:

Giving back to the community is very important to us. We are committed to making a positive impact within the communities we serve through educational programs such as GES’ Exhibition Sponsorships, volunteer services, and environmental/economic sustainable efforts in the community. Many of our offices pull together to volunteer and support local and national organizations. For example, Pursuit was the first corporate donor to Banff Canmore Community Foundation’s “Funding the Future” campaign reinforcing our commitment to the Bow Valley community. Also, in response to the COVID-19 pandemic and the temporary closure of Pursuit’s operations, Pursuit quickly developed an at-cost, ready-made meal program for its staff and community members in Banff and Jasper. Led by Pursuit’s food and beverage team and staffed by volunteers from across its operations, more than 20,000 takeaway meals were served to the communities.

Diversity, equity, and inclusion:

Our team includes people from different backgrounds, all of whom contribute to our continued success. We do not discriminate against employees or applicants based on race, color, age, disability, ethnicity, citizenship, religion, sex, national origin, sexual orientation, genetics or genetic information, or any other categories protected by law. Our emphasis on equality permeates throughout the organization and helps drive our success. For example, Pursuit conducted its first diversity, equity, and inclusion survey in 2020. Pursuit’s Promise to People census was designed to help us understand, recognize, and respect the diversity we have within our team. The key learnings from this voluntary survey are shaping our training and development plans for 2021 and beyond.

Rewards and Performance Management:

Beyond a competitive salary, we offer a range of healthcare benefits to full-time employees, their spouses, and dependents. We encourage our employees to grow professionally, with perks like tuition reimbursement, ongoing training, and internal career opportunities. We utilize a Performance Management Cycle, which provides a framework of six continuous steps designed to maximize performance and cultivate talent consisting of: SMART Goals (Specific, Measurable, Achievable, Realistic/Relevant, and Time-bound); Coaching and Recognition; Learning and Development; Quarterly Checkpoints; Annual Performance Appraisal; and Performance and Rewards Alignment. Salary increases are based on merit. Short- and long-term incentive compensation for senior managers and executives is based on the Company’s and/or stock performance.

Available Information

We were incorporated in Delaware in 1991. Our common stock trades on the New York Stock Exchange under the symbol “VVI.”

Our website address is www.viad.com. All of our SEC filings, including our Annual Reports on Form 10-K, quarterly reports on Form 10-Q, current reports on Form 8-K, and amendments to those reports, are available free of charge on our website as soon as reasonably practicable after we electronically file that material with, or furnish it to, the SEC. The information contained on our website is neither a part of, nor incorporated by reference into, this 2020 Form 10-K.

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Our investor relations website is www.viad.com/investors/investor-center/default.aspx and includes key information about our corporate governance initiatives, including our Corporate Governance Guidelines, our Board of Directors committee charters, our Code of Ethics, and information concerning our Board members and how to communicate with them.

Item 1A. Risk Factors

Our operations and financial results are subject to known and unknown risks. As a result, past financial performance and historical trends may not be reliable indicators of our future performance.

Macroeconomic Risks

The COVID-19 pandemic and related responsive actions have adversely affected our financial condition, liquidity, and cash flow, and may continue to do so in the future. The COVID-19 pandemic forced the cancellation of many of our events and the temporary closure of substantially all of our attractions, hotels, and other operations. The substantial reduction in our operations has and will result in near-term losses and negative cash flow from operations. The full impact of the pandemic on our longer-term operational and financial performance is highly uncertain and will depend on future developments that we cannot predict, including the duration and spread of the pandemic, any future resurgences of COVID-19, and related social-distancing orders, travel restrictions, and/or government limitations on group gatherings. Our GES business depends on exhibitions, conferences, and other live events and the size of marketing expenditures relating to those events. The continuation of government orders prohibiting large group gatherings will continue to significantly and adversely affect our revenue and results of operations. Even if exhibitions or other live events do occur, we also could suffer from reduced spending for our services because many exhibitors’ marketing budgets are partly discretionary and are frequently among the first expenditures reduced when economic conditions deteriorate, and people may be unwilling to attend large group events.

In addition, the attractions and hospitality operations within our Pursuit business may be subject to government closure orders designed to limit the spread of COVID-19, which adversely affects our profitability and cash flow. Future revenue from our Pursuit operations will depend on any further spread of the virus, our ability to keep our operations open, the willingness of people to travel to our locations, and the amount of disposable income that consumers have available for travel and vacations, which decreases during periods of weak general economic conditions. Both our GES and Pursuit businesses may also experience increased costs in order to supply our customers or guests with personal protection equipment, conduct comprehensive cleaning regimens, and other measures that we determine are in the best interests of our employees, customers, guests, and/or event participants. Even with additional personal protection measures in place, there can be no assurance that employees, customers, guests, and/or event participants will not contract COVID-19. Any such occurrence could result in litigation, legal costs, and reputational risk. The potential adverse COVID-19 impacts to our businesses could have a correspondingly negative effect on our overall liquidity. Our revolving credit facility contains a minimum liquidity requirement that requires us to maintain a minimum level of cash and cash equivalents plus available debt capacity. If we are unable to maintain compliance with this minimum liquidity requirement, our lenders may exercise remedies against us, including the acceleration of our outstanding indebtedness. A prolonged recovery from the COVID-19 pandemic or a resurgence in cases of COVID-19 could further materially and adversely affect our business, financial condition, and results of operations.

Our businesses will face new challenges presented by the ramifications of the COVID-19 pandemic. In addition to the direct economic impacts of the pandemic, it is clear that as our businesses recover, they will be operating in new environments in light of societal, regulatory, and industry changes that have occurred since March 2020. Our ability to adjust to these changes and deliver expected business results may be hampered by ongoing uncertainty presented by the pandemic in terms of proper safety protocols, social norms, and a potential of uneven demand for our services. In addition, our ability to deliver such services and otherwise execute against our recovery and growth strategies may be impacted by the extreme reduction of our workforce over the past year and the resulting loss of knowledge of and experience in our businesses. Moreover, our go-forward strategy includes a heightened use of temporary employees in the delivery of our services, and while those employees will likely include those who were previously employed by us on a full-time basis, the level of execution may not be consistent with previous performance. Taken together, our ability to anticipate and adjust to these changes and new conditions may lead to additional costs, which may materially and adversely impact our business and results of operations.

We are vulnerable to deterioration in general economic conditions. Our business is particularly sensitive to fluctuations in general economic conditions in the U.S. and other global markets in which we operate, including as a result of the economic uncertainty caused by the COVID-19 pandemic. The success of our GES business largely depends on the number of exhibitions or other live events held, the size of marketing expenditures at those events, and on the strength of particular industries that support those events. The number and size of exhibitions generally decrease when the economy weakens, which our business has experienced due to the COVID-19 pandemic. We also could suffer from reduced spending for our services because many live event marketing budgets are partly discretionary and are frequently among the first expenditures reduced when economic conditions deteriorate. In addition, revenue from our Pursuit operations depends largely on the amount of disposable income that consumers have available for travel and vacations, which decreases during periods of weak general economic conditions. As a result, any deterioration in general economic conditions could further materially and adversely affect our business, product sales, financial condition, and results of operations.

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Travel industry disruptions, particularly those affecting the hotel and airline industries, could adversely affect our business. Our business depends largely on the ability and willingness of people, whether exhibitors, event attendees, tourists, or others, to travel. Factors adversely affecting the travel industry, and particularly the airline and hotel industries, generally also adversely affect our business and results of operations. Factors that could adversely affect the travel industry include high or rising fuel prices, increased security and passport requirements, weather conditions, health epidemics and pandemics, airline accidents, acts of terrorism, and international political instability and hostilities. For example, the COVID-19 pandemic and social distancing orders resulted in severe global travel restrictions, mandatory shutdowns of event venues, hotels, attractions and other operations, and limitations on large gatherings of people. These circumstances had severe effects on our businesses. The occurrence of additional disruptions, a prolonged recovery from the COVID-19 pandemic or a spike or resurgence in cases of COVID-19, or other unexpected events that affect the availability and pricing of air travel and accommodations, could further materially and adversely affect our business and results of operations.

Transportation disruptions and increases in transportation costs could adversely affect our business and results of operations. GES relies on independent transportation carriers to send materials and exhibits to and from exhibition, warehouse, and customer facilities. If our customers and suppliers are unable to secure the services of those independent transportation carriers at favorable rates, it could materially and adversely affect our business and results of operations. In addition, disruption of transportation services due to weather-related problems, labor strikes, lockouts, or other events could adversely affect our ability to supply services to customers and could cause the cancellation of exhibitions, which could materially and adversely affect our business and results of operations.

Natural disasters, weather conditions, accidents, and other catastrophic events could negatively affect our business. The occurrence of catastrophic events ranging from natural disasters (such as hurricanes, fires, floods, and earthquakes), acts of war or terrorism, accidents involving our travel offerings or experiences, the effects of climate change, including any impact of global warming, or the prospect of these events could disrupt our business. Changes in climates may increase the frequency and intensity of adverse weather patterns and make certain destinations less desirable.

Such catastrophic events have, and could have, an adverse impact on Pursuit, which is heavily dependent on the ability and willingness of its guests to travel and/or visit our attractions. Pursuit guests tend to delay or postpone vacations if natural conditions differ from those that typically prevail at competing lodges, resorts, and attractions, and catastrophic events and heightened travel security measures instituted in response to such events could impede the guests’ ability to travel, and interrupt our business operations, including damaging our properties. For example, the accident on July 18, 2020, at Pursuit’s Columbia Icefield attraction, which involved one of our off-road Ice Explorers and resulted in three fatalities and other serious injuries, may have a negative impact on our reputation and traveler willingness to visit that attraction in the future. We continue to support the victims and their families, and we are fully cooperating with applicable regulatory authorities to investigate the accident. This accident has affected the results of operations of Pursuit, and future developments relating to that incident could continue to impact us negatively.

Such catastrophic events could also have a negative impact on GES, causing a cancellation of exhibitions and other events held in public venues or disrupt the services we provide to our customers at convention centers, exhibition halls, hotels, and other public venues. Such events could also have a negative impact on GES’ production facilities, preventing us from timely completing exhibit fabrication and other projects for customers. In addition, unfavorable media attention, or negative publicity, in the wake of any catastrophic event or accident could damage our reputation or reduce the demand for our services. If the conditions arising from such events persist or worsen, they could materially and adversely affect our results of operations and financial condition.

Strategic, Business, and Operational Risks

Completed acquisitions may not perform as anticipated or be integrated as planned. We regularly evaluate and pursue opportunities to acquire businesses that complement, enhance, or expand our current business, or offer growth opportunities. Our acquired businesses might not meet our financial and non-financial expectations or yield anticipated benefits. Our success depends, in part, on our ability to conform controls, policies and procedures, and business cultures; consolidate and streamline operations and infrastructures; identify and eliminate redundant and underperforming operations and assets; manage inefficiencies associated with the integration of operations; and retain the acquired business’s key personnel and customers. Moreover, our acquisition activity may subject us to new regulatory requirements, distract our senior management and employees, and expose us to unknown liabilities or contingencies that we may fail to identify prior to closing. If we are forced to make changes to our business strategy or if external conditions adversely affect our business operations, including the duration and impact of COVID-19, we may be required to record additional future impairment charges, as we did in the first and second quarters of 2020. Additionally, we may borrow funds to finance strategic acquisitions. Debt leverage resulting from future acquisitions would reduce our debt capacity, increase our interest expense, and limit our ability to capitalize on future business opportunities. Such borrowings may also be subject to fluctuations in interest rates. Any of these risks could materially and adversely affect our business, product and service sales, financial condition, and results of operations.

We depend on our large exhibition event clients to renew their service contracts and on our exclusive right to provide those services. GES has a number of large exhibition event organizers and large customer accounts. If any of these large clients do not renew their service contracts, our results of operations could be materially and adversely affected.

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Moreover, when event organizers hire GES as the official services contractor, they usually also grant GES an exclusive right to perform material handling, electrical, rigging, and other services at the exhibition facility. However, some exhibition facilities have taken certain steps to in-source certain event services (either by performing the services themselves or by hiring a separate service provider) as a result of conditions generally affecting their industry, such as an increased supply of or reduced demand for exhibition space. If exhibition facilities choose to in-source certain event services, GES will lose the ability to provide certain event services, and our results of operations could be materially and adversely affected.

We operate in highly competitive and dynamic industries. Competition in the Live Events markets is driven by price and service quality, among other factors. To the extent competitors seek to gain or retain market presence through aggressive underpricing strategies, we may be required to lower our prices and rates to avoid the loss of related business. Moreover, customer consolidations and other actions have caused downward pricing pressure for our products and services and could affect our ability to negotiate favorable terms with our customers. If we are unable to anticipate and respond as effectively as our competitors to changing business conditions, including new technologies and business models, we could lose market share. Our inability to meet the challenges presented by the competitive and dynamic environment of our industry could materially and adversely affect our results of operations.

New capital projects may not be commercially successful. From time to time, we pursue capital projects, such as our current construction of FlyOver Las Vegas, FlyOver Canada Toronto, the Sky Lagoon, and other efforts to upgrade some of our Pursuit offerings, in order to enhance and expand our business. Capital projects are subject to a number of risks, including unanticipated delays, cost overruns, and the failure to achieve established financial and strategic goals, as well as additional project-specific risks. For example, we recently had to delay FlyOver Canada Toronto due to poor market conditions as a result of the COVID-19 pandemic and a need to preserve capital. Some of our other capital projects, such as Sky Lagoon and FlyOver Las Vegas, have also been impacted by the COVID-19 pandemic. Although Sky Lagoon and FlyOver Las Vegas are on track to open in 2021, and FlyOver Canada Toronto’s opening is planned for 2023, these attractions may be further delayed by market conditions as a result of the COVID-19 pandemic. A prolonged delay in these capital projects, or our failure to accurately predict the revenue or profit that will be generated from these projects, could prevent them from performing in accordance with our commercial expectations and could materially and adversely affect our future success, business, and results of operations.

The seasonality of our business makes us particularly sensitive to adverse events during peak periods. The peak activity for our Pursuit business is during the summer months, as the vast majority of Pursuit’s revenue is earned in the second and third quarters. Our GES exhibition and event activity varies significantly because it is based on the frequency and timing of shows, many of which are not held each year, and which may shift between quarters. If adverse events or conditions occur during these peak periods, such as the COVID-19 pandemic or natural disasters such as forest fires, our results of operations could continue to be materially and adversely affected.

Liabilities relating to prior and discontinued operations may adversely affect our results of operations. We and our predecessors have a corporate history spanning decades and involving diverse businesses. Some of those businesses owned properties and used raw materials that have been, and may continue to be, subject to litigation. Moreover, some of the raw materials used and the waste produced by those businesses have been and are the subject of U.S. federal and state environmental regulations, including laws enacted under the Comprehensive Environmental Response, Compensation and Liability Act, or its state law counterparts. In addition, we may incur other liabilities resulting from indemnification claims involving previously sold properties and subsidiaries, or obligations under defined benefit plans or other employee plans, as well as claims from past operations of predecessors or their subsidiaries. Although we believe we have adequate reserves and sufficient insurance coverage to cover those potential liabilities, future events or proceedings could render our reserves or insurance protections inadequate, any of which could materially and adversely affect our business and results of operations.

Show rotation affects our profitability and makes comparisons between periods difficult. GES results are largely dependent upon the frequency, timing, and location of exhibitions and events. Some large exhibitions are not held annually (they may be held once every two, three, or four years) or may be held at different times of the year from when they were previously held. In addition, the same exhibition may change locations from year to year resulting in lower margins if the exhibition shifts to a higher-cost location. Any of these factors could cause our results of operations to fluctuate significantly from quarter to quarter or from year to year, making periodic comparisons difficult.

We are subject to currency exchange rate fluctuations. We have operations outside of the U.S. primarily in Canada, the United Kingdom, Iceland, the Netherlands, and Germany. During 2020 and 2019, GES EMEA, GES Canada, and Pursuit’s international operations accounted for approximately 30% and 33% of our consolidated revenue, respectively, and 36% and 66% of our segment operating income and loss, respectively. Consequently, a significant portion of our business is exposed to currency exchange rate fluctuations. We do not currently hedge equity risk arising from the translation of non-U.S. denominated assets and liabilities. Our financial results and capital ratios are sensitive to movements in currency exchange rates because a large portion of our assets, liabilities, revenue, and expenses must be translated into U.S. dollars for reporting purposes. The unrealized gains or losses resulting from the currency translation are included as a component of accumulated other comprehensive income (loss) in our Consolidated Balance Sheets. We also have certain loans in currencies other than the entity’s functional currency, which results in gains or losses as exchange rates

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fluctuate. As a result, significant fluctuations in currency exchange rates could result in material changes to the net equity position we report in our Consolidated Balance Sheets and could adversely affect our results of operations.

Changes affecting the availability of the London Inter-bank Offered Rate (“LIBOR”) and the Canadian Dollar Offered Rate (“CDOR”) or increases in interest rates may have consequences for us that cannot yet be reasonably predicted. We have outstanding debt with variable interest rates based on LIBOR and CDOR. Borrowings under the 2018 Credit Facility are indexed to the prime rate or LIBOR, plus appropriate spreads tied to our leverage ratio. The LIBOR benchmark has been the subject of national, international, and other regulatory guidance and proposals to reform. In July 2017, the United Kingdom Financial Conduct Authority (the authority that regulates LIBOR) announced that it intends to stop compelling banks to submit rates for the calculation of LIBOR after 2021. These reforms may cause LIBOR to perform differently than in the past and LIBOR may ultimately cease to exist after 2021.

However, on November 30, 2020, the ICE Benchmark Administration, the administrator of LIBOR, announced plans to consult on ceasing publication of U.S. dollar LIBOR tenors on December 31, 2021 for only the one-week and two-month U.S. dollar LIBOR tenors, and on June 30, 2023 for all other U.S. dollar LIBOR tenors. In 2017, the Alternative Reference Rates Committee announced that the Secured Overnight Financing Rate (“SOFR”), a broad measure of the cost of borrowing cash overnight collateralized by Treasury securities, as its preferred alternative to LIBOR. In November 2020, Refinitiv, the administrator of the CDOR, announced that it will abandon the six-month and 12-month CDOR tenors effective May 17, 2021. All other CDOR tenors will be available for the foreseeable future. The Canadian Alternative Reference Rate Committee is promoting the use of the Canadian Overnight Repo Rate Average (“CORRA”) as the preferred alternative to the CDOR. Our 2018 Credit Facility includes a method for determining an alternative or successor rate of interest that gives consideration to the new prevailing market convention. The alternative rate could affect our debt and debt payments. At this time, it is not possible to predict the effect of any changes to LIBOR or CDOR, any phase out of LIBOR or CDOR or any establishment of alternative benchmark rates. Any new benchmark rate will likely not replicate LIBOR or CDOR exactly, which could impact our contracts which terminate after 2021. There is uncertainty about how applicable law, the courts, or the Company will address the replacement of LIBOR or CDOR with alternative rates. When U.S. LIBOR ceases to exist after June 30, 2023, the interest rates under our revolving credit facility and the discount rates we apply to finance lease obligations will be based on the alternative rate, which may result in higher interest rates and debt obligations. In addition, any increases to our benchmark interest rates could have an uncertain impact on our cost of funds and our access to the capital markets, which could impact our results of operations and cash flows. Uncertainty as to the nature of such potential changes may also adversely affect the trading market for our securities.

Labor and Employment Risks

Our business is relationship driven. Our GES business is heavily focused on client relationships, and, specifically, on having close collaboration and interaction with our clients. To be successful, our account teams must be able to understand clients’ desires and expectations in order to provide top-quality service. If we are unable to maintain our client relationships, including due to the loss of key members of our account teams, we could also lose customers and our results of operations could be materially and adversely affected.

Our participation in multi-employer pension plans could substantially increase our pension costs. We sponsor a number of defined benefit plans for our U.S. and Canada-based employees. In addition, we are obligated to contribute to multi-employer pension plans under collective bargaining agreements covering our union-represented employees. We contributed $8.6 million in 2020, $27.3 million in 2019, and $26.4 million in 2018 to those multi-employer pension plans. Third-party boards of trustees manage these multi-employer plans. Based upon the information we receive from plan administrators, we believe that several of those multi-employer plans are underfunded. The Pension Protection Act of 2006 requires us to reduce the underfunded status over defined time periods. Moreover, we would be required to make additional payments of our proportionate share of a plan’s unfunded vested liabilities if a plan terminates, or other contributing employers withdraw, due to insolvency or other reasons, or if we voluntarily withdraw from a plan. In 2019, we withdrew from the underfunded Central States Pension Plan and accordingly, we recorded a charge of $15.5 million, which represents the estimated present value of future contributions we will be required to make as a result of the union’s withdrawal. At this time, we do not anticipate triggering any significant withdrawal from any other multi-employer pension plan to which we currently contribute. However, significant plan contribution increases could materially and adversely affect our consolidated financial condition, results of operations, and cash flows. Refer to Note 18 – Pension and Postretirement Benefits of the Notes to Consolidated Financial Statements (Part II, Item 8 of this 2020 Form 10-K) for further information.

Union-represented labor increases our risk of higher labor costs and work stoppages. Significant portions of our employees are unionized. We have approximately 100 collective bargaining agreements, and we are required to renegotiate approximately one-third of those each year. If we increase wages or benefits as a result of labor negotiations, either our operating margins will suffer, or we could increase the cost of our services to our customers, which could lead those customers to turn to other vendors with lower prices. Either event could materially and adversely affect our business and results of operations.

Additionally, if we are unable to reach an agreement with a union during the collective bargaining process, the union may strike or carry out other types of work stoppages. If that happens, we might be unable to find substitute workers with the necessary skills to perform many of the services, or we may incur additional costs to do so, both of which could materially and adversely affect our business and results of operations.

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Cybersecurity and Data Privacy Risks

We are vulnerable to cybersecurity attacks and threats. We regularly collect and process credit, financial, and other personal and confidential information from individuals and entities who attend or participate in events and exhibitions that we produce, or who visit our attractions and other offerings. In addition, our devices, servers, computer systems, and business systems are vulnerable to cybersecurity risk, including cyberattacks, or we may be the target of email scams that attempt to acquire personal information and company assets. Despite our efforts to protect ourselves with insurance, and create security barriers to such threats, including regularly reviewing our systems for vulnerabilities and continually updating our protections, we might not be able to entirely mitigate these risks. Our failure to effectively prevent, detect, and recover from the increasing number and sophistication of information security threats could lead to business interruptions, delays or loss of critical data, misuse, modification, or destruction of information, including trade secrets and confidential business information, reputational damage, and third-party claims, any of which could materially and adversely affect our results of operations.

Laws and regulations relating to the handling of personal data are evolving and could result in increased costs, legal claims, or fines. We store and process the personally identifiable information of our customers, employees, and third parties with whom we have business relationships. The legal requirements restricting the way we store, collect, handle, and transfer personal data continue to evolve, and there are an increasing number of authorities issuing privacy laws and regulations. These data privacy laws and regulations are subject to differing interpretations, creating uncertainty and inconsistency across jurisdictions. Our compliance with these myriad requirements could involve making changes in our services, business practices, or internal systems, any of which could increase our costs, lower revenue, or reduce efficiency. Our failure to comply with existing or new rules could result in significant penalties or orders to stop the alleged noncompliant activity, litigation, adverse publicity, or could cause our customers to lose trust in our services. In addition, if the third parties we work with violate applicable laws, contractual obligations, or suffer a security breach, those violations could also put us in breach of our obligations under privacy laws and regulations. In addition, the costs of maintaining adequate protection, including insurance protection against such threats, as they develop in the future (or as legal requirements related to data security increase) are expected to increase and could be material. Any of these risks could materially and adversely affect our business and results of operations.

Item 1B. Unresolved Staff Comments

None.

Item 2. Properties

We lease our corporate headquarters in Phoenix, Arizona. Our other principal properties are owned or leased by GES and Pursuit.

GES primarily leases its properties, both domestically and internationally. GES properties consist of offices and multi-use facilities. Multi-use facilities include manufacturing, sales and design, office, storage and/or warehouse, and truck marshaling yards. Multi-use facilities vary in size up to approximately 677,800 square feet in the U.S. and approximately 136,000 square feet in the United Kingdom.

Pursuit primarily owns its properties, both domestically and internationally, and leases its properties related to the FlyOver attractions. Pursuit’s properties mainly include attractions, hotels and lodges, retail stores, and offices. Properties located in Canada and Iceland are subject to multiple long-term ground leases with their respective governments. For further information on Pursuit’s attractions and hospitality assets, refer to the Business Section (Part I, Item 1 of this 2020 Form 10-K).

We believe our owned and leased properties are adequate and suitable for our business operations and that capacity is sufficient for current needs. For additional information related to our lease obligations, refer to Note 12 – Debt and Finance Lease Obligations and Note 20 – Leases and Other of the Notes to Consolidated Financial Statements (Part II, Item 8 of this 2020 Form 10-K).

Item 3. Legal Proceedings

Refer to Note 21 – Litigation, Claims, Contingencies, and Other of the Notes to Consolidated Financial Statements (Part II, Item 8 of this 2020 Form 10-K) for information regarding legal proceedings in which we are involved, which information is incorporated by reference herein.

Item 4. Mine Safety Disclosures

Not applicable.

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Other. Information about our executive Officers

Our executive officers as of the date of this 2020 Form 10-K were as follows:

Our executive officers’ term of office is until our next Board of Directors annual organization meeting to be held on May 14, 2021.

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PART II

Item 5. Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities

Market Information

Our common stock is traded on the New York Stock Exchange under the symbol VVI.

Holders

As of February 15, 2021, there were 4,772 shareholders of record of our common stock, including 154 shareholders that had not converted their shares following a reverse stock split effective on July 1, 2004.

Issuer Purchases of Equity Securities

Pursuant to previously announced authorizations, our Board of Directors authorized us to repurchase shares of our common stock from time to time at prevailing market prices. Effective February 7, 2019, our Board of Directors authorized the repurchase of an additional 500,000 shares. No shares were repurchased on the open market during the three months ended December 31, 2020. The Board of Directors’ authorization does not have an expiration date. During the fourth quarter of 2020, certain previously owned shares of common stock were surrendered by employees, former employees, and non-employee directors for tax withholding requirements on vested share-based awards. In March 2020, our Board of Directors suspended future dividend payments and our share repurchase program for the foreseeable future.

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Performance Graph

The following graph compares the change in the cumulative total shareholder return, from December 31, 2015 to December 31, 2020, on our common stock, the Standard & Poor’s SmallCap 600 Hotels, Restaurants & Leisure, the Standard & Poor’s SmallCap 600 Media Index, the Standard & Poor’s SmallCap 600 Commercial Services & Supplies Index, the Standard & Poor’s SmallCap 600 Index, the Russell 2000 Index, and Standard & Poor’s 500 Index (assuming reinvestment of dividends, as applicable). The graph assumes $100 was invested on December 31, 2015.

Item 6. RESERVED

Not applicable.

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Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations

The following Management’s Discussion and Analysis (“MD&A”) should be read in conjunction with the consolidated financial statements and related notes. The MD&A is intended to assist in understanding our financial condition and results of operations. This discussion contains forward-looking statements that involve risks and uncertainties. Our actual results could differ materially from those anticipated due to various factors discussed under “Risk Factors,” “Forward-Looking Statements,” and elsewhere in this 2020 Form 10-K.

Overview

We are a leading provider of experiential leisure travel and face-to-face events and marketing experiences company with operations in the U.S., 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.

Impact of COVID-19

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 events largely shut down and tourism activity significantly disrupted. In response to the COVID-19 pandemic, we implemented aggressive cost reduction measures to preserve cash, including furloughs, layoffs, mandatory unpaid time off, or salary reductions for all employees, and the reduction of discretionary spending. We also suspended future dividend payments and share repurchases, and we availed ourselves of governmental assistance programs for wages and tax relief. As event activity essentially halted, GES partnered with other members in the event trade business to convert convention centers into temporary hospitals in early April 2020. GES also completed virtual and hybrid events during the second half of 2020. We continue to implement measures to successfully adapt for the long-term impact of COVID-19. In August 2020, we secured additional capital to strengthen our liquidity position by entering into an investment agreement with funds managed by private equity firm Crestview Partners who made an initial investment of $135 million, offset in part by $9.2 million in fees, in newly issued perpetual convertible preferred stock. Refer to Note 15 – Common and Preferred Stock of the Notes to Consolidated Financial Statements (Part II, Item 8 of this 2020 Form 10-K) for further information. In August 2020, we also amended our Second Amended and Restated Credit Agreement (the “2018 Credit Agreement”) to provide financial flexibility, which, among other things waives our financial covenants until September 30, 2022. Refer to Note 12 – Debt and Finance Lease Obligations of the Notes to Consolidated Financial Statements (Part II, Item 8 of this 2020 Form 10-K) for further information.

Due to the deteriorating macroeconomic environment related to the COVID-19 pandemic, resulting in disruptions to our operations and the decline in our stock price, we determined interim triggering events occurred in the first and second quarters of 2020, which required us to assess the carrying values of goodwill and intangible assets. Based on this assessment, we recorded non-cash goodwill impairment charges of $185.8 million during 2020, which included a full impairment charge to the remaining GES goodwill balance. Our remaining goodwill balance as of December 31, 2020 of $99.8 million pertains to our Pursuit business. We also recorded a non-cash impairment charge to intangible assets of $15.7 million during 2020 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 of the Notes to Consolidated Financial Statements (Part II, Item 8 of this 2020 Form 10-K) for further information.

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Results of Operations

A discussion related to our results of operations for 2020 compared to 2019 is presented below. A discussion related to our results of operations for 2019 compared to 2018 can be found under Part II, Item 7 of our Annual Report on Form 10-K for the year ended December 31, 2019, filed with the SEC on February 26, 2020, and is incorporated herein by reference.

Financial Highlights

** Change is greater than +/- 100%

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Foreign Exchange Rate Variances

We conduct our foreign operations primarily in Canada, the United Kingdom, Iceland, the Netherlands, Germany, and to a lesser extent, in certain other countries.

The following table summarizes the foreign exchange rate variance effects (or “FX Impact”) on revenue and segment operating income (loss) from our significant international operations:

Revenue and segment operating income (loss) were primarily impacted by variances of the British pound, the Canadian dollar, the Euro, and the Icelandic krona relative to the U.S. dollar. Future changes in exchange rates may impact overall expected profitability and historical period-to-period comparisons when revenue and segment operating income (loss) are translated into U.S. dollars.

Analysis of Revenue and Operating Results by Reportable Segment

GES

The following table presents a comparison of GES’ reported revenue and segment operating income (loss) to organic revenue⁽²⁾ and organic segment operating income (loss)⁽²⁾ for the years ended December 31, 2020 and 2019.

** Change is greater than +/- 100%

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GES North America

GES North America revenue decreased $595.2 million or 67.3%, primarily due to show postponements and cancellations due to the COVID-19 pandemic. Revenue earned during 2020 was primarily driven by shows completed during the first quarter of 2020, compensation for work completed on cancelled shows, storage, and the conversion of convention centers into temporary hospitals in early April 2020, as well as virtual and hybrid events completed during the second half of 2020. Organic revenue* decreased $594.8 million or 67.3%.

GES North America segment operating loss was $56.4 million during 2020 as compared to income of $27.7 million during 2019. The 2020 losses are primarily due to the decrease in revenue, offset in part by the elimination of performance-based incentives and by the reduction in operating costs by reducing wages and discretionary costs. Organic segment operating loss* was $56.4 million during 2020 as compared to income of $27.7 million during 2019.

GES EMEA

GES EMEA revenue decreased $163.2 million or 75.3%, primarily due to show postponements and cancellations due to the COVID-19 pandemic. Revenue earned during 2020 was primarily driven by shows completed during the first quarter of 2020, compensation for work completed on cancelled shows, and the conversion of convention centers into temporary hospitals in early April 2020, as well as virtual and hybrid events completed during the second half of 2020. Organic revenue* decreased $162.5 million or 75.0%.

GES EMEA segment operating loss was $17.5 million during 2020 as compared to income of $8.3 million during 2019. The 2020 losses are primarily due to the decrease in revenue, offset in part by the elimination of performance-based incentives and by the reduction in operating costs by reducing wages and discretionary costs. Organic segment operating loss* was $16.9 million during 2020 as compared to income of $8.3 million during 2019.

* Refer to footnote (2) in the above table for more information about the non-GAAP financial measures of organic revenue and organic segment operating income (loss).

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Pursuit

The following table presents a comparison of Pursuit’s reported revenue and segment operating income (loss) to organic revenue⁽³⁾ and organic segment operating income (loss)⁽³⁾ for the years ended December 31, 2020 and 2019.

Pursuit revenue decreased $146.0 million or 65.5%, primarily due to the impact of the COVID-19 pandemic as Pursuit temporarily closed its properties in mid-March through most of the second quarter of 2020. We phased in most of Pursuit’s attractions and lodging operations starting in May 2020 with most open and operational during the third quarter of 2020, although at reduced capacities. The travel and hospitality industry continues to be negatively impacted by the COVID-19 pandemic as travel restrictions and border closures largely remain in place. Organic revenue* decreased $142.9 million or 70.4%.

Pursuit segment operating loss was $42.3 million during 2020 as compared to income of $54.3 million during 2019. The 2020 declines are primarily due to the decrease in revenue, offset in part by the reduction in operating costs through efforts to maximize profitability. Organic segment operating loss* was $43.4 million during 2020 as compared to income of $48.6 million during 2019.

* Refer to footnote (3) in the above table for more information about the non-GAAP financial measures of organic revenue and organic segment operating income (loss).

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Performance Measures

We use the following key business metrics to evaluate the performance of Pursuit’s attractions business:

We use the following key business metrics, common in the hospitality industry, to evaluate Pursuit’s hospitality business:

The following table provides Pursuit’s same-store key performance indicators. The same-store metrics indicate the performance of all Pursuit’s properties and attractions that we owned and operated at full capacity, considering seasonal closures, for the entirety of both periods presented. For Pursuit properties and attractions located outside of the U.S., comparisons to the prior year are on a constant U.S. dollar basis, using the current year quarterly average exchange rates for previous periods, to eliminate the FX Impact. We believe this same-store constant currency basis provides better comparability between reporting periods.

On July 18, 2020, one of our off-road Ice Explorers was involved in an accident while enroute to the Athabasca Glacier, resulting in three fatalities and multiple other serious injuries. We continue to support the victims and their families, and we are fully cooperating

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with the applicable regulatory authorities to investigate this accident. The Columbia Icefield Adventure attraction remained closed through the rest of the season while the investigation was underway.

For the health and well-being of our employees, guests, and community, Pursuit’s year-round attractions and lodging properties were closed temporarily starting in mid-March and remained closed during most of the second quarter of 2020. The majority of Pursuit’s properties were open and operational during the third quarter of 2020, although at reduced capacities. St. Mary Lodge and Glacier Park Lodge remained closed due to a government-imposed closure at the East Glacier entrance at Glacier National Park. We seasonally closed our non-year-round properties during the fourth quarter of 2020. Additionally, temporary government mandated closures occurred at FlyOver Canada and FlyOver Iceland during the fourth quarter of 2020. In order to mitigate the negative financial and operational impacts, we reduced all non-essential capital expenditures during the first and second quarters of 2020 resulting in the delay of the opening of FlyOver Canada Toronto, which is now anticipated to open near the end of 2023. We resumed important growth investments in September of 2020, and now anticipate opening FlyOver Las Vegas in the third quarter of 2021 and the Sky Lagoon in the second quarter of 2021.

Attractions. The decrease in same-store visitors and revenue per attraction was driven by the temporary closure of our attractions and lower visitation due to the continued border closures and travel restrictions as a result of the COVID-19 pandemic. Pursuit’s attractions were open during the third quarter of 2020, although at reduced capacities.

Hospitality. The decrease in RevPAR and ADR was driven by lower demand as a result of the COVID-19 pandemic.

During 2020 and 2019, Pursuit derived approximately 67% and 66% of its revenue, respectively, and 44% and 88% of its segment operating loss and income, respectively, from its Canadian operations. Accordingly, the strengthening or weakening of the Canadian dollar, relative to other currencies, could affect customer volumes and the results of operations. The 2020 results were negatively impacted by travel restrictions and border closures, which affected long-haul travelers to Canada that is largely dependent on foreign customer visitation.

Other Expenses

** Change is greater than +/- 100%.

Corporate Activities – The decrease in corporate activities expense during 2020 relative to 2019 was primarily due to lower headcount, lower performance-based compensation expense as we reduced our estimated performance achievement to zero as a result of the COVID-19 pandemic, and higher acquisition transaction-related costs in 2019, offset in part by fees and expenses related to the equity raise and credit facility amendment in 2020.

Interest Expense – The increase in interest expense relative to 2019 was primarily due to higher debt balances during the first half of 2020.

Multi-Employer Pension Plan Withdrawal – During 2019, we finalized the terms of a new collective bargaining agreement with the Teamsters 727 union. The terms included a withdrawal from the underfunded Central States Pension Plan. Accordingly, we recorded a charge of $15.5 million, which represented the estimated present value of future contributions we will be required to make to the plan as a result of this withdrawal from the plan and $0.2 million of other withdrawal costs. Additionally, we recorded $0.5 million in 2020 related to the withdrawal from one of our multi-employer plans.

Restructuring Charges – Restructuring charges during 2020 and 2019 were primarily related to the elimination of certain positions and facility closures at GES, as well as charges related to the closure and liquidation of GES’ United Kingdom-based audio-visual services business during 2020. The 2019 actions arose in connection with our ongoing efforts to simplify and transform GES for greater profitability. In response to the COVID-19 pandemic in 2020, we accelerated our transformation and streamlining efforts at GES to significantly reduce costs and create a lower and more flexible cost structure focused on servicing our more profitable market segments.

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The 2020 charges also included amounts related to the elimination of certain positions at our corporate office in response to the COVID-19 pandemic.

Legal Settlement – During 2019, we recorded a charge to resolve a legal dispute at GES involving a former industry contractor.

Impairment Charges – During 2020, due to the deteriorating macroeconomic environment related to the COVID-19 pandemic, resulting in disruptions to our operations and the decline in our stock price, we recorded non-cash goodwill impairment charges of $185.8 million primarily related to the write-off of GES’ goodwill, a non-cash impairment charge to intangible assets of $15.7 million related to our audio-visual production business in the U.S., and fixed asset impairment charges of $1.6 million. During 2019, we recorded asset impairment charges of $5.3 million related to our audio-visual production business in the United Kingdom.

Income Tax Expense – Our effective income tax rate was negative 3.9% for 2020 as compared to 9.6% for 2019. The negative effective tax rate for 2020 was due to no tax benefits being recorded in our U.S., United Kingdom, and other European jurisdictions as a result of recording a valuation allowance during the second quarter of 2020 against our net deferred tax assets in these jurisdictions due to our belief that it is more likely than not that we will be unable to realize the tax benefits from our current year losses in these jurisdictions. The 9.6% effective rate for 2019 was low primarily due a $4.5 million benefit resulting from the remeasurement of our Alberta deferred tax assets due to a statutory rate reduction.

Loss from Discontinued Operations – Loss from discontinued operations during 2020 was primarily due to settlement and legal expenses related to previously sold operations. Loss from discontinued operations for 2019 was primarily related to legal expenses, offset in part by a favorable legal settlement related to previously sold operations.

Liquidity and Capital Resources

In early March 2020, we began to see event postponements and cancellations at GES, as well as cancelled bookings at Pursuit as a result of the COVID-19 pandemic. Although we were in compliance with the financial covenants of our 2018 Credit Agreement as of March 31, 2020, we entered into an amendment to our 2018 Credit Agreement in May 2020, which waived our financial covenants for the quarter ending June 30, 2020. As the shut-down of live events and tourism activities escalated, we expected to be unable to meet our financial covenants beginning with the quarter ending September 30, 2020. During the third quarter of 2020, we secured additional capital to strengthen our liquidity position and amended our 2018 Credit Agreement to provide financial covenant relief and financial flexibility as described below.

On August 5, 2020, we entered into an investment agreement with funds managed by private equity firm Crestview Partners (the “Investment Agreement”) who made an initial investment of $135 million, offset in part by $9.2 million in fees, in newly issued perpetual convertible preferred stock that carries a 5.5% cumulative quarterly dividend, which is payable in cash or in-kind at Viad’s option (the “Convertible Preferred Stock”). The Convertible Preferred Stock is convertible into shares of our common stock at a conversion price of $21.25 per share. The Investment Agreement also includes a delayed draw commitment of up to $45 million in additional Convertible Preferred Stock, which we may access during the 12 months following the August 5, 2020 closing date on the same terms and conditions as the initial investment. The proceeds from Crestview’s initial investment were used to repay a portion of our 2018 Credit Facility, will provide additional short-term liquidity, will fund capital expenditures, and will support general corporate purposes. On August 5, 2020, we entered into an amendment to our 2018 Credit Agreement, which, among other things, (i) waives our financial covenants until September 30, 2022 (the “Covenant Waiver Period”) and (ii) requires us to maintain minimum liquidity of $100 million, with liquidity defined as unrestricted cash and available capacity on our 2018 Credit Facility. The interest rate on the borrowings is equal to the London Interbank Offered Rate (“LIBOR”) plus 350 basis points, with a LIBOR floor of one percent during the Covenant Waiver Period. The LIBOR floor continues until the end of the 2018 Credit Agreement. Viad pledged 100% of the capital stock of its wholly-owned domestic subsidiaries and its top-tier foreign subsidiaries (other than Esja Attractions ehf.). Fees related to the amendment were approximately $1.7 million.

Cash, cash equivalents, and restricted cash were $42.0 million as of December 31, 2020, as compared to $62.0 million as of December 31, 2019. Our total available liquidity was $258.0 million, including the available capacity on our 2018 Credit Facility of $173.5 million, unrestricted cash of $39.5 million, and an additional $45 million available through the delayed draw commitment from Crestview Partners. During the year ended December 31, 2020, we used net cash from operating activities of $80.2 million. We believe that our existing sources of liquidity will be sufficient to fund operations and capital commitments, including approximately $60 million in capital expenditures in select growth investments, for at least the next 12 months.

As of December 31, 2020, we held approximately $36.1 million of our cash and cash equivalents outside of the U.S., consisting of $15.6 million in Canada, $9.8 million in the United Kingdom, $7.2 million in the Netherlands, $1.8 million in Iceland, $1.2 million in the United Arab Emirates, and $0.5 million in other countries.

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Cash Flows

Operating Activities

The change in net cash (used in) provided by operating activities of $188.4 million was due to net losses at GES and Pursuit due to the COVID-19 pandemic, offset in part by a reduction in the working capital needed to support lower business volumes and active working capital management.

Investing Activities

The decrease in net cash used in investing activities of $158.8 million was primarily due to proceeds from the termination of our life insurance policies, proceeds from dispositions of property and other assets in 2020, including $17.1 million from the sale of the GES warehouse in San Diego, cash paid for acquisitions in 2019, and a decrease in capital expenditures as we reduced all non-essential capital expenditures during most of 2020 in response to the COVID-19 pandemic.

Financing Activities

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The decrease in net cash provided by financing activities of $7.2 million was primarily due to net debt payments of $49.9 million during 2020 compared to net debt proceeds of $84.8 million during 2019 under the 2018 Credit Facility, offset substantially in part by the proceeds from the issuance of Convertible Series A Preferred Stock.

Debt and Finance Lease Obligations

Refer to Note 12 – Debt and Finance Lease Obligations of the Notes to Consolidated Financial Statements (Part II, Item 8 of this 2020 Form 10-K) for further discussion.

Guarantees

Refer to Note 21 – Litigation, Claims, Contingencies, and Other of the Notes to Consolidated Financial Statements (Part II, Item 8 of this 2020 Form 10-K) for further discussion.

Share Repurchases

Our Board of Directors previously authorized us to repurchase shares of our common stock from time to time at prevailing market prices. Effective February 7, 2019, our Board of Directors authorized the repurchase of an additional 500,000 shares.  In March 2020, our Board of Directors suspended our share repurchase program for the foreseeable future. Prior to the suspension, we repurchased 53,784 shares on the open market for $2.8 million in 2020. No shares were repurchased on the open market during 2019. As of December 31, 2020, 546,283 shares remained available for repurchase. The Board of Directors’ authorization does not have an expiration date.

Additionally, we repurchased shares related to tax withholding requirements on vested restricted share-based awards.

Critical Accounting Policies and Estimates

The consolidated financial statements are prepared in accordance with U.S. GAAP. We are required to make estimates and assumptions that affect our reported amounts of assets, liabilities, revenue, and expenses. Critical accounting policies are those policies that are most important to the portrayal of our financial position and results of operations, and that require us to make the most difficult and subjective judgments, often as a result of the need to make estimates of matters that are inherently uncertain. We identified and discussed with our audit committee the following critical accounting policies and estimates and the methodology and disclosures related to those 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. Revenue for goods and services provided for which we do not have control of the goods or services before that good or service is transferred to a customer is recorded on a net basis to reflect only the fees received for arranging these services.

GES’ service revenue is primarily derived through its comprehensive range of services to event organizers and corporate brand marketers including Core Services, Audio-visual, and Event Technology. GES’ service revenue is earned over time over the duration of the exhibition, conference or corporate event, which generally lasts one to three days; however, we use the practical expedient of recognizing service revenue at the close of the event when we have the right to invoice, or when a customer cancels a contract. 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, or when a customer cancels a contract. 

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

Goodwill and Other Intangible Assets — Goodwill and other intangible assets with indefinite useful lives are not amortized, but instead are tested for impairment at least annually. Intangible assets with finite lives are amortized over their respective estimated useful lives and are reviewed for impairment if an event occurs or circumstances change that would indicate the intangible asset’s carrying value may not be recoverable. Our reporting units are defined, and goodwill is tested, at either an operating segment level or at the component level of an operating segment, depending on various factors including the internal reporting structure of the operating segment, the level of integration among components, the sharing of assets and other resources among components, and the benefits and likely recoverability of goodwill by the component’s operations.

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. Due to the deteriorating macroeconomic environment related to the COVID-19 pandemic, resulting in disruptions to our operations and the decline in our stock price, we determined interim triggering events occurred in the first and second quarters of 2020, which required us

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to assess the carrying values of goodwill and intangible assets. Based on this assessment, we recorded non-cash goodwill impairment charges of $185.8 million during 2020, which included a full impairment charge to the remaining GES goodwill balance. We also recorded a non-cash impairment charge to intangible assets of $15.7 million during 2020 related to our U.S. audio-visual production business.

GES North America’s goodwill was assigned to, and tested at, the operating segment level (GES U.S. and GES Canada (collectively “GES North America”). GES EMEA’s goodwill was assigned to and tested at the operating segment level. Pursuit’s goodwill impairment testing is performed at the reporting unit level (Banff Jasper Collection, the Alaska Collection, the Glacier Park Collection, and FlyOver).

For purposes of goodwill impairment testing, we use a discounted expected future cash flow methodology (income approach) to estimate the fair value of our reporting units. The estimates and assumptions regarding expected future cash flows (the most significant being revenue and EBITDA margins), discount rates, and terminal values require considerable judgment and are based on market conditions, financial forecasts, industry trends, and historical experience.

The most critical assumptions and estimates in determining the estimated fair value of our reporting units relate to the amounts and timing of expected future cash flows for each reporting unit and the reporting unit cost of capital (discount rate) applied to those cash flows. We estimate the assumed reporting unit cost of capital rates (discount rates) using a build-up method based on the perceived risk associated with the cash flows pertaining to the specific reporting unit. In order to assess the reasonableness of our fair value estimates, we perform a reconciliation of the aggregate fair values of our reporting units to our market capitalization.

As noted above, 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 have inherent uncertainties, and different assumptions could lead to materially different results. As of December 31, 2020, our aggregate goodwill was $99.8 million. As a result of our most recent impairment analysis performed as of October 31, 2020, the excess of the estimated fair value over the carrying value for our reporting units with reported goodwill (expressed as a percentage of the carrying amounts) under step one of the impairment test for the Banff Jasper Collection and the Alaska Collection was significant, and FlyOver was 6%. Significant reductions in FlyOver and our other reporting unit’s expected future revenue, operating income, or cash flow forecasts and projections, or an increase in a reporting unit’s cost of capital, could trigger additional goodwill impairment testing, which may result in impairment charges.

If an impairment indicator related to intangible assets is identified, or if other circumstances indicate an impairment may exist, we perform an assessment to determine if an impairment loss should be recognized. This assessment includes a recoverability test to identify if the expected future undiscounted cash flows are less than the carrying value of the related assets. If the results of the recoverability test indicate that expected future undiscounted cash flows are less than the carrying value of the related assets, we perform a measurement of impairment and we recognize any carrying amount in excess of fair value as an impairment. We periodically evaluate the continued recoverability of intangible assets which were previously evaluated due to an impairment indicator to determine if remeasurement is necessary.  

Income taxes — We are required to estimate and record provisions for income taxes in each of the jurisdictions in which we operate. Accordingly, we must estimate our actual current income tax liability, and assess temporary differences arising from the treatment of items for tax purposes, as compared to the treatment for accounting purposes. These differences result in deferred tax assets and liabilities, which are included in the Consolidated Balance Sheets. We use significant judgment in forming conclusions regarding the recoverability of our deferred tax assets and evaluate all available positive and negative evidence to determine if it is more-likely-than-not that the deferred tax assets will be realized. To the extent recovery does not appear likely, a valuation allowance must be recorded. We had gross deferred tax assets of $99.2 million as of December 31, 2020 and $40.5 million as of December 31, 2019. We had a valuation allowance against gross deferred tax assets of $81.8 million as of December 31, 2020 and $4.3 million as of December 31, 2019.

While we believe that the deferred tax assets, net of existing valuation allowances, will be utilized in future periods, there are inherent uncertainties regarding the ultimate realization of these assets. It is possible that the relative weight of positive and negative evidence regarding the realization of deferred tax assets may change, which could result in a material increase or decrease in our valuation allowance. Such a change could result in a material increase or decrease to income tax expense in the period the assessment was made.

We record uncertain tax positions on the basis of a two-step process: first we determine whether it is more-likely-than-not that the tax positions will be sustained on the basis of the technical merits of the position; and, if so, we recognize the largest amount of tax benefit that is more than 50% likely to be realized upon ultimate settlement with the related tax authority.

Pension and postretirement benefits — Our pension plans use traditional defined benefit formulas based on years of service and final average compensation. Funding policies provide that payments to defined benefit pension trusts shall be at least equal to the minimum

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funding required by applicable regulations. We presently anticipate contributing $0.8 million to our funded pension plans and $0.9 million to our unfunded pension plans in 2021.

We have defined benefit postretirement plans that provide medical and life insurance for certain eligible employees, retirees, and dependents. The related postretirement benefit liabilities are recognized over the employees’ service period. In addition, we retain the obligations for these benefits for retirees of certain sold businesses. While the plans have no funding requirements, we expect to contribute $0.9 million to the plans in 2021.

The discount rates used in determining future pension and postretirement benefit obligations are based on rates determined by actuarial analysis and management review and reflect the estimated rates of return on a high-quality, hypothetical bond portfolio whose cash flows match the timing and amounts of expected benefit payments. Refer to Note 18 – Pension and Postretirement Benefits of the Notes to Consolidated Financial Statements (Part II, Item 8 of this 2020 Form 10-K) for further information.

Share-based compensation — We grant share-based compensation awards to our officers, directors, and certain key employees pursuant to the 2017 Viad Corp Omnibus Incentive Plan, which has a 10-year term and provides for the following types of awards: (a) incentive and non-qualified stock options; (b) restricted stock awards 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.

Share-based compensation expense recognized in the consolidated financial statements was $2.7 million in 2020, $7.2 million in 2019, and $4.9 million in 2018. There was no income tax benefit related to such cost in 2020 due to the valuation allowance on our deferred tax assets. We recorded total tax benefits related to such costs of $2.2 million in 2019 and $1.2 million in 2018. No share-based compensation costs were capitalized during 2020, 2019, or 2018.

We account for share-based payment awards that will be settled in cash as liability-based awards. We measure share-based compensation expense of liability-based awards at fair value at each reporting date until the date of settlement based on the number of units expected to vest and, where applicable, the level of achievement of predefined performance goals. These awards are remeasured on each reporting date based on our stock price and the Monte Carlo simulation model. A Monte Carlo simulation requires the use of several assumptions, including historical volatility and correlation between our stock price and the price of the common shares of a comparator group, a risk-free rate of return, and an expected term. We account for share-based awards that will be settled in shares of our common stock as equity-based awards. We measure share-based compensation expense of equity-based awards at fair value on the grant date on a straight-line basis over the vesting period. The estimated number of shares to be achieved is updated each reporting period based on the number of units expected to vest and, where applicable, the level of achievement of predefined performance goals, until the date of settlement. The fair value of stock option grants is estimated on the date of grant using the Black-Scholes stock option pricing model. The Black-Scholes model requires the use of several assumptions, including expected volatility, a risk-free interest rate, a forfeiture rate, and expected life. We measure share-based compensation for performance-based options on a straight-line basis over the performance period and the underlying shares expected to be settled are adjusted each reporting period based on estimated future achievement of the respective performance metrics. Service-based options are recognized on a straight-line basis over the requisite service period on a graded-vesting schedule. Refer to Note 3 – Share-Based Compensation of the Notes to Consolidated Financial Statements (Part II, Item 8 of this 2020 Form 10-K) for further information.

Self-Insurance Liabilities — We are self-insured up to certain limits for workers’ compensation and general liabilities, which includes automobile, product general liability, and client property loss claims. We have also retained and provided for certain workers’ compensation insurance liabilities in conjunction with previously sold businesses. We are also self-insured for certain employee health benefits. Provisions for losses for claims incurred, including actuarially derived estimated claims incurred but not yet reported, are made based on historical experience, claims frequency, and other factors. We have purchased insurance for amounts in excess of the self-insured levels.

Impact of Recent Accounting Pronouncements

Refer to Note 1 – Overview and Summary of Significant Accounting Policies of the Notes to Consolidated Financial Statements (Part II, Item 8 of this 2020 Form 10-K) for further information.

Non-GAAP Measures

In addition to disclosing financial results that are determined in accordance with U.S. generally accepted accounting principles (“GAAP”), we also disclose the following non-GAAP financial measures: Segment operating income (loss), organic revenue, and organic segment operating income (loss) (collectively, the “Non-GAAP Measures”). Our use of Non-GAAP Measures is supplemental to, but not as a substitute for, other measures of financial performance reported in accordance with GAAP. As not all companies use identical calculations, our Non-GAAP Measures may not be comparable to similarly titled measures used by other companies. We believe that our use of Non-GAAP Measures provides useful information to investors regarding our results of operations for trending, analyzing, and benchmarking our performance and the value of our business.

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We believe non-GAAP Measures are useful operating metrics as they eliminate potential variations arising from taxes, debt service costs, impairment charges and recoveries, and the effects of discontinued operations, resulting in additional measures considered to be indicative of our ongoing operations and segment performance. Although we use Non-GAAP Measures to assess the performance of our business, the use of these measures is limited because these measures do not consider material costs, expenses, and other items necessary to operate our business. These items include debt service costs, expenses related to U.S. federal, state, local and foreign income taxes, impairment charges and recoveries, and the effects of discontinued operations. As the Non-GAAP Measures do not consider these items, net income (loss) attributable to Viad should be considered as an important measure of financial performance because it provides a more complete measure of our performance.

Item 7A. Quantitative and Qualitative Disclosures About Market Risk

Our market risk exposure relates to fluctuations in foreign exchange rates and interest rates. Foreign exchange risk is the risk that fluctuating exchange rates will adversely affect our financial condition or results of operations. Interest rate risk is the risk that changing interest rates will adversely affect our financial position or results of operations.

Our foreign operations are primarily in Canada, the United Kingdom, Iceland, the Netherlands, and Germany. The functional currency of our foreign subsidiaries is their local currency. Accordingly, for purposes of consolidation, we translate the assets and liabilities of our 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 (loss) in the Consolidated Balance Sheets. As a result, significant fluctuations in foreign exchange rates relative to the U.S. dollar may result in material changes to our net equity position reported in the Consolidated Balance Sheets. We do not currently hedge our equity risk arising from the translation of foreign denominated assets and liabilities. We recorded cumulative unrealized foreign currency translation losses in stockholders’ equity of $16.7 million as of December 31, 2020 and $23.8 million as of December 31, 2019. We recorded unrealized foreign currency translation gains in other comprehensive income of $7.1 million during the year ended December 31, 2020 and $12.5 million during the year ended December 31, 2019.

For purposes of consolidation, revenue, expenses, gains, and losses related to our foreign operations are translated into U.S. dollars at the average foreign exchange rates for the period. As a result, our consolidated results of operations are exposed to fluctuations in foreign exchange rates as revenue and segment operating income (loss) of our foreign operations, when translated, may vary from period to period, even when the functional currency amounts have not changed. Such fluctuations may adversely impact overall expected profitability and historical period-to-period comparisons. We do not currently hedge our net earnings exposure arising from the translation of our foreign revenue and segment operating income (loss). Refer to “Management’s Discussion and Analysis of Financial Condition and Results of Operations – Foreign Exchange Rate Variances” (Part II, Item 7 of this 2020 Form 10-K) for a further discussion.

A hypothetical change of 10% in the Canadian dollar exchange rate would result in a change to 2020 operating loss of approximately $2.1 million. A hypothetical change of 10% in the British pound exchange rate would result in a change to 2020 operating loss of approximately $1.0 million. A hypothetical change of 10% in the Euro exchange rate would result in a change to 2020 operating loss of approximately $0.4 million.

We are exposed to foreign exchange transaction risk, as our foreign subsidiaries have certain revenue transactions denominated in currencies other than the functional currency of the respective subsidiary. From time to time, we utilize forward contracts to mitigate the impact on earnings related to these transactions due to fluctuations in foreign exchange rates. As of December 31, 2020 and 2019, we did not have any outstanding foreign currency forward contracts.

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We are exposed to short-term and long-term interest rate risk on certain of our debt obligations. A hypothetical change of 10% in interest rates would result in a change to 2020 interest expense of approximately $2 million.

We do not currently use derivative financial instruments to hedge cash flows for such obligations.

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Item 8. Financial Statements and Supplementary Data

INDEX TO FINANCIAL STATEMENTS

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VIAD CORP

CONSOLIDATED BALANCE SHEETS