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VIAD CORP - Quarter Report: 2021 September (Form 10-Q)

 

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

 

FORM 10-Q

 

 

QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended September 30, 2021

or

 

TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from ____________ to

Commission file number: 001-11015

 

img213181511_0.jpg 

Viad Corp

(Exact name of registrant as specified in its charter)

 

 

Delaware

 

36-1169950

(State or other jurisdiction of

incorporation or organization)

 

(I.R.S. Employer

Identification No.)

 

 

7000 East 1st Avenue

Scottsdale, Arizona

 

85251-4304

(Address of principal executive offices)

 

(Zip Code)

(602) 207-1000

(Registrant’s telephone number, including area code)

Not Applicable

(Former name, former address, and former fiscal year, if changed since last report)

 

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

 

Title of each class

 

Trading Symbol(s)

 

Name of each exchange on which registered

Common Stock, $1.50 Par Value

 

VVI

 

New York Stock Exchange

Preferred Stock Purchase Rights

 

 

--

 

New York Stock Exchange

 

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.

 

Large accelerated filer

 

 

Accelerated filer

 

 

 

 

 

 

 

 

Non-accelerated filer

 

 

Smaller reporting company

 

 

 

 

 

 

 

 

Emerging growth company

 

 

 

 

 

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 is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes No ☒

As of November 2, 2021, there were 20,530,294 shares of Common Stock ($1.50 par value) outstanding.

 

 


 

INDEX

 

 

 

Page

PART I - FINANCIAL INFORMATION

Item 1.

Financial Statements

3

 

Condensed Consolidated Balance Sheets as of September 30, 2021 and December 31, 2020

3

 

Condensed Consolidated Statements of Operations for the Three and Nine Months Ended September 30, 2021 and 2020

4

 

Condensed Consolidated Statements of Comprehensive Income (Loss) for the Three and Nine Months Ended September 30, 2021 and 2020

5

 

Condensed Consolidated Statements of Stockholders’ Equity and Mezzanine Equity for the Three Months Ended March 31, June 30, and September 30, 2021 and 2020

6

 

Condensed Consolidated Statements of Cash Flows for the Nine Months Ended September 30, 2021 and 2020

8

 

Notes to Condensed Consolidated Financial Statements

9

Item 2.

Management’s Discussion and Analysis of Financial Condition and Results of Operations

33

Item 3.

Quantitative and Qualitative Disclosures About Market Risk

44

Item 4.

Controls and Procedures

45

PART II - OTHER INFORMATION

Item 1.

Legal Proceedings

46

Item 1A.

Risk Factors

46

Item 2.

Unregistered Sales of Equity Securities and Use of Proceeds

46

Item 6.

Exhibits

47

Items 3-5

Not applicable

 

 

 

 

SIGNATURES

48

 

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

 

 

 

 


 

PART I - FINANCIAL INFORMATION

Item 1. Financial Statements

VIAD CORP

CONDENSED CONSOLIDATED BALANCE SHEETS

(Unaudited)

 

 

 

September 30,

 

 

December 31,

 

(in thousands, except share data)

 

2021

 

 

2020

 

Assets

 

 

 

 

 

 

Current assets

 

 

 

 

 

 

Cash and cash equivalents

 

$

110,756

 

 

$

39,545

 

Accounts receivable, net of allowances for doubtful accounts of $2,714 and $5,310,
   respectively

 

 

72,005

 

 

 

17,837

 

Inventories

 

 

8,751

 

 

 

8,727

 

Current contract costs

 

 

17,961

 

 

 

7,923

 

Other current assets

 

 

20,380

 

 

 

17,225

 

Total current assets

 

 

229,853

 

 

 

91,257

 

Property and equipment, net

 

 

545,280

 

 

 

492,154

 

Other investments and assets

 

 

15,513

 

 

 

15,492

 

Operating lease right-of-use assets

 

 

87,935

 

 

 

82,739

 

Deferred income taxes

 

 

1,035

 

 

 

563

 

Goodwill

 

 

111,703

 

 

 

99,847

 

Other intangible assets, net

 

 

66,244

 

 

 

71,172

 

Total Assets

 

$

1,057,563

 

 

$

853,224

 

Liabilities, Mezzanine Equity, and Stockholders’ Equity

 

 

 

 

 

 

Current liabilities

 

 

 

 

 

 

Accounts payable

 

$

59,543

 

 

$

21,037

 

Contract liabilities

 

 

44,646

 

 

 

18,595

 

Accrued compensation

 

 

16,203

 

 

 

7,030

 

Operating lease obligations

 

 

11,058

 

 

 

15,697

 

Other current liabilities

 

 

36,861

 

 

 

27,039

 

Current portion of debt and finance lease obligations

 

 

8,218

 

 

 

8,335

 

Total current liabilities

 

 

176,529

 

 

 

97,733

 

Long-term debt and finance lease obligations

 

 

446,162

 

 

 

285,356

 

Pension and postretirement benefits

 

 

26,700

 

 

 

27,264

 

Long-term operating lease obligations

 

 

86,165

 

 

 

70,150

 

Other deferred items and liabilities

 

 

71,906

 

 

 

64,628

 

Total liabilities

 

 

807,462

 

 

 

545,131

 

Commitments and contingencies

 

 

 

 

 

 

Convertible Series A Preferred Stock, $0.01 par value, 180,000 shares authorized,
  
135,000 shares issued and outstanding

 

 

132,591

 

 

 

128,769

 

Redeemable noncontrolling interest

 

 

5,251

 

 

 

5,225

 

Stockholders’ equity

 

 

 

 

 

 

Viad Corp stockholders’ equity:

 

 

 

 

 

 

Common stock, $1.50 par value, 200,000,000 shares authorized, 24,934,981 shares
   issued and outstanding

 

 

37,402

 

 

 

37,402

 

Additional capital

 

 

567,051

 

 

 

568,100

 

Accumulated deficit

 

 

(325,226

)

 

 

(253,164

)

Accumulated other comprehensive loss

 

 

(31,416

)

 

 

(30,641

)

Common stock in treasury, at cost, 4,411,560 and 4,475,489 shares, respectively

 

 

(222,203

)

 

 

(225,742

)

Total Viad stockholders’ equity

 

 

25,608

 

 

 

95,955

 

Non-redeemable noncontrolling interest

 

 

86,651

 

 

 

78,144

 

Total stockholders’ equity

 

 

112,259

 

 

 

174,099

 

Total Liabilities, Mezzanine Equity, and Stockholders’ Equity

 

$

1,057,563

 

 

$

853,224

 

 

Refer to Notes to Condensed Consolidated Financial Statements.

3


 

VIAD CORP

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

(Unaudited)

 

 

 

Three Months Ended

 

 

Nine Months Ended

 

 

 

September 30,

 

 

September 30,

 

(in thousands, except per share data)

 

2021

 

 

2020

 

 

2021

 

 

2020

 

Revenue:

 

 

 

 

 

 

 

 

 

 

 

 

Services

 

$

182,964

 

 

$

43,437

 

 

$

254,170

 

 

$

333,052

 

Products

 

 

50,635

 

 

 

19,370

 

 

 

69,597

 

 

 

54,480

 

Total revenue

 

 

233,599

 

 

 

62,807

 

 

 

323,767

 

 

 

387,532

 

Costs and expenses:

 

 

 

 

 

 

 

 

 

 

 

 

Costs of services

 

 

150,983

 

 

 

51,465

 

 

 

283,403

 

 

 

393,101

 

Costs of products

 

 

42,497

 

 

 

18,107

 

 

 

73,429

 

 

 

60,332

 

Corporate activities

 

 

3,093

 

 

 

2,645

 

 

 

8,104

 

 

 

5,902

 

Interest expense, net

 

 

9,518

 

 

 

5,450

 

 

 

20,168

 

 

 

14,399

 

Multi-employer pension plan withdrawal

 

 

 

 

 

 

 

 

57

 

 

 

462

 

Other expense, net

 

 

466

 

 

 

210

 

 

 

1,506

 

 

 

894

 

Restructuring charges

 

 

2,186

 

 

 

11,259

 

 

 

5,799

 

 

 

12,370

 

Impairment charges

 

 

 

 

 

676

 

 

 

 

 

 

203,076

 

Total costs and expenses

 

 

208,743

 

 

 

89,812

 

 

 

392,466

 

 

 

690,536

 

Income (loss) from continuing operations before income taxes

 

 

24,856

 

 

 

(27,005

)

 

 

(68,699

)

 

 

(303,004

)

Income tax expense

 

 

5,329

 

 

 

735

 

 

 

118

 

 

 

20,454

 

Income (loss) from continuing operations

 

 

19,527

 

 

 

(27,740

)

 

 

(68,817

)

 

 

(323,458

)

Income (loss) from discontinued operations

 

 

248

 

 

 

(989

)

 

 

534

 

 

 

(1,822

)

Net income (loss)

 

 

19,775

 

 

 

(28,729

)

 

 

(68,283

)

 

 

(325,280

)

Net (income) loss attributable to non-redeemable noncontrolling
   interest

 

 

(5,004

)

 

 

(2,331

)

 

 

(3,049

)

 

 

636

 

Net loss attributable to redeemable noncontrolling interest

 

 

296

 

 

 

302

 

 

 

1,221

 

 

 

1,023

 

Net income (loss) attributable to Viad

 

$

15,067

 

 

$

(30,758

)

 

$

(70,111

)

 

$

(323,621

)

Diluted income (loss) per common share:

 

 

 

 

 

 

 

 

 

 

 

 

Continuing operations attributable to Viad common stockholders

 

$

0.45

 

 

$

(1.54

)

 

$

(3.80

)

 

$

(15.98

)

Discontinued operations attributable to Viad common stockholders

 

 

0.01

 

 

 

(0.05

)

 

 

0.03

 

 

 

(0.09

)

Net income (loss) attributable to Viad common stockholders

 

$

0.46

 

 

$

(1.59

)

 

$

(3.77

)

 

$

(16.07

)

Weighted-average outstanding and potentially dilutive common
   shares

 

 

20,742

 

 

 

20,293

 

 

 

20,396

 

 

 

20,263

 

Basic income (loss) per common share:

 

 

 

 

 

 

 

 

 

 

 

 

Continuing operations attributable to Viad common stockholders

 

$

0.45

 

 

$

(1.54

)

 

$

(3.80

)

 

$

(15.98

)

Discontinued operations attributable to Viad common stockholders

 

 

0.01

 

 

 

(0.05

)

 

 

0.03

 

 

 

(0.09

)

Net income (loss) attributable to Viad common stockholders

 

$

0.46

 

 

$

(1.59

)

 

$

(3.77

)

 

$

(16.07

)

Weighted-average outstanding common shares

 

 

20,420

 

 

 

20,293

 

 

 

20,396

 

 

 

20,263

 

Dividends declared per common share

 

$

 

 

$

 

 

$

 

 

$

0.10

 

Amounts attributable to Viad

 

 

 

 

 

 

 

 

 

 

 

 

Income (loss) from continuing operations

 

$

14,819

 

 

$

(29,769

)

 

$

(70,645

)

 

$

(321,799

)

Income (loss) from discontinued operations

 

 

248

 

 

 

(989

)

 

 

534

 

 

 

(1,822

)

Net income (loss)

 

$

15,067

 

 

$

(30,758

)

 

$

(70,111

)

 

$

(323,621

)

 

Refer to Notes to Condensed Consolidated Financial Statements.

4


 

VIAD CORP

CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS)

(Unaudited)

 

 

 

Three Months Ended

 

 

Nine Months Ended

 

 

 

September 30,

 

 

September 30,

 

(in thousands)

 

2021

 

 

2020

 

 

2021

 

 

2020

 

Net income (loss)

 

$

19,775

 

 

$

(28,729

)

 

$

(68,283

)

 

$

(325,280

)

Other comprehensive income (loss):

 

 

 

 

 

 

 

 

 

 

 

 

Unrealized foreign currency translation adjustments

 

 

(8,634

)

 

 

11,032

 

 

 

(980

)

 

 

(7,342

)

Change in net actuarial loss, net of tax (1)

 

 

83

 

 

 

70

 

 

 

261

 

 

 

436

 

Change in prior service cost, net of tax (1)

 

 

 

 

 

(27

)

 

 

(56

)

 

 

(82

)

Comprehensive income (loss)

 

 

11,224

 

 

 

(17,654

)

 

 

(69,058

)

 

 

(332,268

)

Non-redeemable noncontrolling interest:

 

 

 

 

 

 

 

 

 

 

 

 

Comprehensive (income) loss attributable to non-redeemable
   noncontrolling interest

 

 

(5,004

)

 

 

(2,331

)

 

 

(3,049

)

 

 

636

 

Unrealized foreign currency translation adjustments

 

 

(1,960

)

 

 

1,837

 

 

 

(141

)

 

 

(1,949

)

Redeemable noncontrolling interest:

 

 

 

 

 

 

 

 

 

 

 

 

Comprehensive loss attributable to redeemable noncontrolling interest

 

 

296

 

 

 

302

 

 

 

1,221

 

 

 

1,023

 

Comprehensive income (loss) attributable to Viad

 

$

4,556

 

 

$

(17,846

)

 

$

(71,027

)

 

$

(332,558

)

 

(1) The tax effect on other comprehensive income (loss) is not significant.

Refer to Notes to Condensed Consolidated Financial Statements.

5


 

VIAD CORP

CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY AND MEZZANINE EQUITY

(Unaudited)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Mezzanine Equity

 

(in thousands)

 

Common
Stock

 

 

Additional
Capital

 

 

Accumulated
Deficit

 

 

Accumulated
Other
Comprehensive
Income (Loss)

 

 

Common
Stock in
Treasury

 

 

Total
Viad
Equity

 

 

Non-Redeemable
 Non-Controlling
Interest

 

 

Total
Stockholders’
Equity

 

 

 

Redeemable
Non-Controlling
Interest

 

 

Convertible
 Series A
Preferred
 Stock

 

Balance, December 31, 2020

 

$

37,402

 

 

$

568,100

 

 

$

(253,164

)

 

$

(30,641

)

 

$

(225,742

)

 

$

95,955

 

 

$

78,144

 

 

$

174,099

 

 

 

$

5,225

 

 

$

128,769

 

Net loss

 

 

 

 

 

 

 

 

(43,152

)

 

 

 

 

 

 

 

 

(43,152

)

 

 

(1,445

)

 

 

(44,597

)

 

 

 

(494

)

 

 

 

Dividends on convertible preferred stock

 

 

 

 

 

(1,898

)

 

 

 

 

 

 

 

 

 

 

 

(1,898

)

 

 

 

 

 

(1,898

)

 

 

 

 

 

 

1,898

 

Capital contribution (distributions) to noncontrolling interest

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(951

)

 

 

(951

)

 

 

 

142

 

 

 

 

Payment of payroll taxes on stock-based compensation through shares withheld

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(519

)

 

 

(519

)

 

 

 

 

 

(519

)

 

 

 

 

 

 

 

Employee benefit plans

 

 

 

 

 

(1,198

)

 

 

 

 

 

 

 

 

1,578

 

 

 

380

 

 

 

 

 

 

380

 

 

 

 

 

 

 

 

Share-based compensation - equity awards

 

 

 

 

 

1,626

 

 

 

 

 

 

 

 

 

 

 

 

1,626

 

 

 

 

 

 

1,626

 

 

 

 

 

 

 

 

Unrealized foreign currency translation adjustment

 

 

 

 

 

 

 

 

 

 

 

3,977

 

 

 

 

 

 

3,977

 

 

 

750

 

 

 

4,727

 

 

 

 

77

 

 

 

 

Amortization of net actuarial loss, net of tax

 

 

 

 

 

 

 

 

 

 

 

177

 

 

 

 

 

 

177

 

 

 

 

 

 

177

 

 

 

 

 

 

 

 

Amortization of prior service cost, net of tax

 

 

 

 

 

 

 

 

 

 

 

(56

)

 

 

 

 

 

(56

)

 

 

 

 

 

(56

)

 

 

 

 

 

 

 

Acquisitions

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

6,759

 

 

 

6,759

 

 

 

 

 

 

 

 

Other, net

 

 

 

 

 

13

 

 

 

(1

)

 

 

 

 

 

 

 

 

12

 

 

 

 

 

 

12

 

 

 

 

56

 

 

 

 

Balance, March 31, 2021

 

$

37,402

 

 

$

566,643

 

 

$

(296,317

)

 

$

(26,543

)

 

$

(224,683

)

 

$

56,502

 

 

$

83,257

 

 

$

139,759

 

 

 

$

5,006

 

 

$

130,667

 

Net loss

 

 

 

 

 

 

 

 

(42,026

)

 

 

 

 

 

 

 

 

(42,026

)

 

 

(510

)

 

 

(42,536

)

 

 

 

(431

)

 

 

 

Dividends on convertible preferred stock

 

 

 

 

 

(1,923

)

 

 

 

 

 

 

 

 

 

 

 

(1,923

)

 

 

 

 

 

(1,923

)

 

 

 

 

 

 

1,923

 

Capital contribution to noncontrolling interest

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

7

 

 

 

7

 

 

 

 

124

 

 

 

 

Payment of payroll taxes on stock-based compensation through shares withheld

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(82

)

 

 

(82

)

 

 

 

 

 

(82

)

 

 

 

 

 

 

 

Employee benefit plans

 

 

 

 

 

(143

)

 

 

 

 

 

 

 

 

641

 

 

 

498

 

 

 

 

 

 

498

 

 

 

 

 

 

 

 

Share-based compensation - equity awards

 

 

 

 

 

2,071

 

 

 

 

 

 

 

 

 

 

 

 

2,071

 

 

 

 

 

 

2,071

 

 

 

 

 

 

 

 

Unrealized foreign currency translation adjustment

 

 

 

 

 

 

 

 

 

 

 

3,677

 

 

 

 

 

 

3,677

 

 

 

1,069

 

 

 

4,746

 

 

 

 

79

 

 

 

 

Amortization of net actuarial loss, net of tax

 

 

 

 

 

 

 

 

 

 

 

1

 

 

 

 

 

 

1

 

 

 

 

 

 

1

 

 

 

 

 

 

 

 

Other, net

 

 

 

 

 

10

 

 

 

 

 

 

 

 

 

23

 

 

 

33

 

 

 

(7

)

 

 

26

 

 

 

 

547

 

 

 

1

 

Balance, June 30, 2021

 

$

37,402

 

 

$

566,658

 

 

$

(338,343

)

 

$

(22,865

)

 

$

(224,101

)

 

$

18,751

 

 

$

83,816

 

 

$

102,567

 

 

 

$

5,325

 

 

$

132,591

 

Net income (loss)

 

 

 

 

 

 

 

 

15,067

 

 

 

 

 

 

 

 

 

15,067

 

 

 

5,004

 

 

 

20,071

 

 

 

 

(296

)

 

 

 

Dividends on convertible preferred stock

 

 

 

 

 

 

 

 

(1,950

)

 

 

 

 

 

 

 

 

(1,950

)

 

 

 

 

 

(1,950

)

 

 

 

 

 

 

 

Capital contributions (distributions) to (from) noncontrolling interest

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(216

)

 

 

(216

)

 

 

 

16

 

 

 

 

Payment of payroll taxes on stock-based compensation through shares withheld

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(29

)

 

 

(29

)

 

 

 

 

 

(29

)

 

 

 

 

 

 

 

Employee benefit plans

 

 

 

 

 

(1,751

)

 

 

 

 

 

 

 

 

1,950

 

 

 

199

 

 

 

 

 

 

199

 

 

 

 

 

 

 

 

Share-based compensation - equity awards

 

 

 

 

 

2,163

 

 

 

 

 

 

 

 

 

 

 

 

2,163

 

 

 

 

 

 

2,163

 

 

 

 

 

 

 

 

Unrealized foreign currency translation adjustment

 

 

 

 

 

 

 

 

 

 

 

(8,634

)

 

 

 

 

 

(8,634

)

 

 

(1,960

)

 

 

(10,594

)

 

 

 

(282

)

 

 

 

Amortization of net actuarial loss, net of tax

 

 

 

 

 

 

 

 

 

 

 

83

 

 

 

 

 

 

83

 

 

 

 

 

 

83

 

 

 

 

 

 

 

 

Other, net

 

 

 

 

 

(19

)

 

 

-

 

 

 

 

 

 

(23

)

 

 

(42

)

 

 

7

 

 

 

(35

)

 

 

 

488

 

 

 

 

Balance, September 30, 2021

 

$

37,402

 

 

$

567,051

 

 

$

(325,226

)

 

$

(31,416

)

 

$

(222,203

)

 

$

25,608

 

 

$

86,651

 

 

$

112,259

 

 

 

$

5,251

 

 

$

132,591

 

Refer to Notes to Condensed Consolidated Financial Statements.

 

6


 

VIAD CORP

CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY AND MEZZANINE EQUITY (Continued)

(Unaudited)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Mezzanine Equity

 

(in thousands)

 

Common
Stock

 

 

Additional
Capital

 

 

Retained
Earnings

 

 

Accumulated
Other
Comprehensive
 Income (Loss)

 

 

Common
Stock in
Treasury

 

 

Total
Viad
Equity

 

 

Non-Redeemable
Non-Controlling
Interest

 

 

Total
Stockholders’
Equity

 

 

 

Redeemable
 Non-Controlling
Interest

 

 

Convertible
Series A
Preferred
Stock

 

Balance, December 31, 2019

 

$

37,402

 

 

$

574,473

 

 

$

122,971

 

 

$

(35,699

)

 

$

(231,649

)

 

$

467,498

 

 

$

79,731

 

 

$

547,229

 

 

 

$

6,172

 

 

$

 

Net loss

 

 

 

 

 

 

 

 

(86,585

)

 

 

 

 

 

 

 

 

(86,585

)

 

 

(1,333

)

 

 

(87,918

)

 

 

 

(517

)

 

 

 

Dividends on common stock ($0.10 per share)

 

 

 

 

 

 

 

 

(2,038

)

 

 

 

 

 

 

 

 

(2,038

)

 

 

 

 

 

(2,038

)

 

 

 

 

 

 

 

Distributions to noncontrolling interest

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(1,526

)

 

 

(1,526

)

 

 

 

 

 

 

 

Payment of payroll taxes on stock-based compensation through shares withheld

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(1,059

)

 

 

(1,059

)

 

 

 

 

 

(1,059

)

 

 

 

 

 

 

 

Common stock purchased for treasury

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(2,785

)

 

 

(2,785

)

 

 

 

 

 

(2,785

)

 

 

 

 

 

 

 

Employee benefit plans

 

 

 

 

 

(3,810

)

 

 

 

 

 

 

 

 

5,722

 

 

 

1,912

 

 

 

 

 

 

1,912

 

 

 

 

 

 

 

 

Share-based compensation - equity awards

 

 

 

 

 

276

 

 

 

 

 

 

 

 

 

 

 

 

276

 

 

 

 

 

 

276

 

 

 

 

 

 

 

 

Unrealized foreign currency translation adjustment

 

 

 

 

 

 

 

 

 

 

 

(28,158

)

 

 

 

 

 

(28,158

)

 

 

(5,719

)

 

 

(33,877

)

 

 

 

(873

)

 

 

 

Amortization of net actuarial loss, net of tax

 

 

 

 

 

 

 

 

 

 

 

341

 

 

 

 

 

 

341

 

 

 

 

 

 

341

 

 

 

 

 

 

 

 

Amortization of prior service cost, net of tax

 

 

 

 

 

 

 

 

 

 

 

(27

)

 

 

 

 

 

(27

)

 

 

 

 

 

(27

)

 

 

 

 

 

 

 

Other, net

 

 

 

 

 

(80

)

 

 

(1

)

 

 

 

 

 

1

 

 

 

(80

)

 

 

 

 

 

(80

)

 

 

 

126

 

 

 

 

Balance, March 31, 2020

 

$

37,402

 

 

$

570,859

 

 

$

34,347

 

 

$

(63,543

)

 

$

(229,770

)

 

$

349,295

 

 

$

71,153

 

 

$

420,448

 

 

 

$

4,908

 

 

$

 

Net loss

 

 

 

 

 

 

 

 

(206,278

)

 

 

 

 

 

 

 

 

(206,278

)

 

 

(1,634

)

 

 

(207,912

)

 

 

 

(204

)

 

 

 

Payment of payroll taxes on stock-based compensation through shares withheld

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(3

)

 

 

(3

)

 

 

 

 

 

(3

)

 

 

 

 

 

 

 

Employee benefit plans

 

 

 

 

 

48

 

 

 

 

 

 

 

 

 

282

 

 

 

330

 

 

 

 

 

 

330

 

 

 

 

 

 

 

 

Share-based compensation - equity awards

 

 

 

 

 

602

 

 

 

 

 

 

 

 

 

 

 

 

602

 

 

 

 

 

 

602

 

 

 

 

 

 

 

 

Unrealized foreign currency translation adjustment

 

 

 

 

 

 

 

 

 

 

 

9,784

 

 

 

 

 

 

9,784

 

 

 

1,933

 

 

 

11,717

 

 

 

 

102

 

 

 

 

Amortization of net actuarial loss, net of tax

 

 

 

 

 

 

 

 

 

 

 

25

 

 

 

 

 

 

25

 

 

 

 

 

 

25

 

 

 

 

 

 

 

 

Amortization of prior service cost, net of tax

 

 

 

 

 

 

 

 

 

 

 

(28

)

 

 

 

 

 

(28

)

 

 

 

 

 

(28

)

 

 

 

 

 

 

 

Other, net

 

 

 

 

 

46

 

 

 

 

 

 

 

 

 

(1

)

 

 

45

 

 

 

 

 

 

45

 

 

 

 

332

 

 

 

 

Balance, June 30, 2020

 

$

37,402

 

 

$

571,555

 

 

$

(171,931

)

 

$

(53,762

)

 

$

(229,492

)

 

$

153,772

 

 

$

71,452

 

 

$

225,224

 

 

 

$

5,138

 

 

$

 

Net loss

 

 

 

 

 

 

 

 

(30,758

)

 

 

 

 

 

 

 

 

(30,758

)

 

 

2,331

 

 

 

(28,427

)

 

 

 

(302

)

 

 

-

 

Issuance of Series A convertible preferred stock

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

125,763

 

Dividends on convertible preferred stock

 

 

 

 

 

(1,134

)

 

 

 

 

 

 

 

 

 

 

 

(1,134

)

 

 

 

 

 

(1,134

)

 

 

 

 

 

 

1,134

 

Employee benefit plans

 

 

 

 

 

(2,123

)

 

 

 

 

 

 

 

 

1,870

 

 

 

(253

)

 

 

 

 

 

(253

)

 

 

 

 

 

 

 

Share-based compensation - equity awards

 

 

 

 

 

2,135

 

 

 

 

 

 

 

 

 

 

 

 

2,135

 

 

 

 

 

 

2,135

 

 

 

 

 

 

 

 

Unrealized foreign currency translation adjustment

 

 

 

 

 

 

 

 

 

 

 

11,032

 

 

 

 

 

 

11,032

 

 

 

1,837

 

 

 

12,869

 

 

 

 

(33

)

 

 

 

Amortization of net actuarial loss, net of tax

 

 

 

 

 

 

 

 

 

 

 

70

 

 

 

 

 

 

70

 

 

 

 

 

 

70

 

 

 

 

 

 

 

 

Amortization of prior service cost, net of tax

 

 

 

 

 

 

 

 

 

 

 

(27

)

 

 

 

 

 

(27

)

 

 

 

 

 

(27

)

 

 

 

 

 

 

 

Other, net

 

 

 

 

 

14

 

 

 

(2

)

 

 

 

 

 

(1

)

 

 

11

 

 

 

 

 

 

11

 

 

 

 

468

 

 

 

 

Balance, September 30, 2020

 

$

37,402

 

 

$

570,447

 

 

$

(202,691

)

 

$

(42,687

)

 

$

(227,623

)

 

$

134,848

 

 

$

75,620

 

 

$

210,468

 

 

 

$

5,271

 

 

$

126,897

 

Refer to Notes to Condensed Consolidated Financial Statements.

7


 

VIAD CORP

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(Unaudited)

 

 

 

Nine Months Ended

 

 

 

September 30,

 

(in thousands)

 

2021

 

 

2020

 

Cash flows from operating activities

 

 

 

 

 

 

Net loss

 

$

(68,283

)

 

$

(325,280

)

Adjustments to reconcile net loss to net cash used in operating activities:

 

 

 

 

 

 

Depreciation and amortization

 

 

39,986

 

 

 

43,051

 

Deferred income taxes

 

 

(131

)

 

 

20,428

 

(Income) loss from discontinued operations

 

 

(534

)

 

 

1,822

 

Restructuring charges

 

 

5,799

 

 

 

12,370

 

Impairment charges

 

 

 

 

 

203,076

 

Gains on dispositions of property and other assets

 

 

(9,345

)

 

 

(14,935

)

Share-based compensation expense

 

 

5,960

 

 

 

649

 

Multi-employer pension plan withdrawal

 

 

57

 

 

 

462

 

Other non-cash items, net

 

 

4,642

 

 

 

10,371

 

Change in operating assets and liabilities:

 

 

 

 

 

 

Receivables

 

 

(53,998

)

 

 

104,722

 

Inventories

 

 

(68

)

 

 

833

 

Current contract costs

 

 

(10,123

)

 

 

16,418

 

Accounts payable

 

 

39,204

 

 

 

(76,355

)

Restructuring liabilities

 

 

(4,413

)

 

 

(4,606

)

Accrued compensation

 

 

7,611

 

 

 

(25,268

)

Contract liabilities

 

 

26,386

 

 

 

(32,650

)

Income taxes payable

 

 

(181

)

 

 

1,290

 

Other assets and liabilities, net

 

 

14,718

 

 

 

20,083

 

Net cash used in operating activities

 

 

(2,713

)

 

 

(43,519

)

Cash flows from investing activities

 

 

 

 

 

 

Capital expenditures

 

 

(45,187

)

 

 

(40,057

)

Cash surrender value of life insurance policies

 

 

 

 

 

24,767

 

Cash paid for acquisitions, net

 

 

(7,704

)

 

 

 

Proceeds from dispositions of property and other assets

 

 

14,292

 

 

 

21,788

 

Net cash (used in) provided by investing activities

 

 

(38,599

)

 

 

6,498

 

Cash flows from financing activities

 

 

 

 

 

 

Proceeds from borrowings

 

 

451,350

 

 

 

191,733

 

Payments on debt and finance lease obligations

 

 

(335,665

)

 

 

(273,663

)

Dividends paid on common stock

 

 

 

 

 

(4,064

)

Dividends paid on preferred stock

 

 

(1,950

)

 

 

 

Distributions to noncontrolling interest, net of contributions from noncontrolling interest

 

 

(798

)

 

 

(1,526

)

Payments of debt issuance costs

 

 

(1,767

)

 

 

(1,585

)

Payment of payroll taxes on stock-based compensation through shares withheld or repurchased

 

 

(1,119

)

 

 

(1,062

)

Common stock purchased for treasury

 

 

 

 

 

(2,785

)

Proceeds from issuance of Convertible Series A Preferred Stock, net of issuance costs

 

 

 

 

 

125,763

 

Proceeds from exercise of stock options

 

 

 

 

 

2,077

 

Net cash provided by financing activities

 

 

110,051

 

 

 

34,888

 

Effect of exchange rate changes on cash, cash equivalents, and restricted cash

 

 

2,551

 

 

 

(1,027

)

Net change in cash, cash equivalents, and restricted cash

 

 

71,290

 

 

 

(3,160

)

Cash, cash equivalents, and restricted cash, beginning of year

 

 

41,971

 

 

 

62,004

 

Cash, cash equivalents, and restricted cash, end of period

 

$

113,261

 

 

$

58,844

 

 

Refer to Notes to Condensed Consolidated Financial Statements.

8


 

VIAD CORP

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

 

Note 1. Overview and Basis of Presentation

Basis of Presentation

The accompanying unaudited condensed consolidated financial statements were prepared in accordance with accounting principles generally accepted in the United States of America (“GAAP”) and with the instructions to Form 10-Q and Article 10 of Regulation S-X for interim financial information. Accordingly, these financial statements do not include all of the information required by GAAP or SEC rules and regulations for complete financial statements. These financial statements reflect all adjustments (consisting of normal recurring adjustments) necessary for a fair presentation of the results for the interim periods presented. Interim results are not necessarily indicative of the results for the full year. These unaudited condensed consolidated financial statements should be read in conjunction with our Annual Report on Form 10-K for the year ended December 31, 2020, filed with the SEC on March 2, 2021 (“2020 Form 10-K”).

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

Nature of Business

We are a leading provider of experiential leisure travel and live events and marketing experiences 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 two reportable business segments: GES and Pursuit.

GES

GES is a global, full-service provider for live events that partners with show organizers, exhibitors, and brand marketers to create high-value, live 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.

Pursuit

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

Impact of COVID-19

Starting in mid-March 2020, the COVID-19 pandemic had a significant and negative impact on our operations and financial performance, with severe disruptions in live event and tourism activity. In response, we implemented aggressive cost reduction measures in 2020 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 common stock dividend payments and share repurchases, and we availed ourselves of governmental assistance programs for wages and other expense relief. Additionally, in May and August 2020, we obtained waivers of the financial covenants under our then $450 million revolving credit facility (“the 2018 Credit Facility”), which we subsequently refinanced in July 2021 as discussed below, and 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 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 for further information.

During 2021, we continued to preserve cash and closely manage our costs as pandemic-related restrictions lessened. In connection with COVID-19 vaccination programs, we began to see signs of recovery in the travel and hospitality and live event sectors during early 2021 as people started to feel more comfortable traveling and gathering in larger groups. Pursuit’s operations in the United States experienced strong visitation primarily from domestic travelers, while tourism in Canada remained constrained by border closures. Canada reopened its border with the United States in early August 2021 to fully vaccinated travelers and to travelers from other countries

9


 

beginning in September 2021, which accelerated short-term bookings from long-haul travelers to our Pursuit operations in Canada. The live event markets also began to re-open in 2021 with smaller scale live events starting to take place during the first half of the year. Toward the end of the second quarter and into the third quarter, we began to see an acceleration in the recovery of in-person trade shows as event organizers began to hold larger scale face-to-face live events.

Effective July 30, 2021, we refinanced our 2018 Credit Facility, which was scheduled to mature on October 24, 2023, with a new $500 million senior secured credit facility (the “2021 Credit Facility”) to provide for financial flexibility to support our growth initiatives. The 2021 Credit Facility provides for a $400 million term loan with a maturity date of July 30, 2028 (“Term Loan B”) and a $100 million revolving credit facility with a maturity date of July 30, 2026. The loan proceeds of $400 million were offset in part by $14.8 million in fees. The proceeds from the Term Loan B were used to repay the 2018 Credit Facility and the remaining proceeds will be used to fund future acquisitions and growth initiatives and for general corporate purposes. Refer to Note 12 – Debt and Finance Lease Obligations for further information.

Although we have seen a recent acceleration in demand and bookings and early signs of recovery for travel and in-person live events, we remain cautious as variants of COVID-19, including the predominant Delta variant, have caused an increase in infections and hospitalizations across the United States and globally. Due to the evolving and uncertain nature of COVID-19, and depending on the success of ongoing vaccination and other mitigation efforts as well as the scope and magnitude of infections and hospitalizations, 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 significant. We will continue to evaluate and implement additional actions necessary to mitigate the negative financial and operational impact of COVID-19 on our business.

Reclassifications

During the first quarter of 2021, we reorganized GES’ operating segments to represent the changes in how our chief operating decision maker (“CODM”) reviews the financial performance of GES and makes decisions regarding the allocation of resources. As a result, we changed the presentation of certain items in GES’ disaggregation of revenue and reportable segments. Refer to Note 2 – Revenue and Related Contract Costs and Contract Liabilities and Note 23 – Segment Information for additional information. We reclassified certain prior-year amounts to conform to current-period presentation. Such reclassifications had no impact on our results of operations or cash flows.

Correction to Prior Period Financial Statements

As previously disclosed in our 2020 Form 10-K, and subsequent to the issuance of the Condensed Consolidated Financial Statements for the quarter ended September 30, 2020, we identified prior period errors related to the recognition of revenue of GES’ third-party services. Revenue from these services should have been recorded on a net basis to reflect only the fees received for arranging these services, whereas previously, we recorded this revenue on a gross basis, thus overstating revenue and cost of services by the same amount. As a result, we corrected the accompanying Condensed Consolidated Statements of Operations for the three and nine months ended September 30, 2020 related to this gross-to-net adjustment. We determined that these errors were not material to the previously issued financial statements. Note 2 – Revenue and Related Contract Costs and Contract Liabilities and Note 23 – Segment Information reflect this correction.

 

 

 

Three Months Ended September 30, 2020

 

 

Nine Months Ended September 30, 2020

 

(in thousands)

 

Services Revenue

 

 

Cost of Services

 

 

Services Revenue

 

 

Cost of Services

 

As previously reported

 

$

43,702

 

 

$

51,730

 

 

$

335,383

 

 

$

395,432

 

Gross to net correction for GES

 

 

(265

)

 

 

(265

)

 

 

(2,331

)

 

 

(2,331

)

Total as corrected

 

$

43,437

 

 

$

51,465

 

 

$

333,052

 

 

$

393,101

 

 

10


 

Impact of Recent Accounting Pronouncements

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

 

Standard

 

Description

 

Date of adoption

 

Effect on the financial statements

Standards Not Yet Adopted

ASU 2020-06, Debt - Debt with Conversion and Other Options (Subtopic 470-20) and Derivatives and Hedging - Contracts in Entity’s Own Equity (Subtopic 815-40)

 

The amendment simplifies the accounting for convertible instruments by reducing the number of accounting models available for convertible debt instruments and convertible preferred stock. The amendment also requires expanded disclosures about the terms and features of convertible instruments.

 

1/1/2022

 

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

 

Standard

 

Description

 

Date of adoption

 

Effect on the financial statements

Standards Recently Adopted

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

 

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

 

1/1/2021

 

The adoption of this new standard on January 1, 2021 did not have a material impact on our consolidated financial statements.

 

Significant Accounting Policies

Use of Estimates

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

Cash, Cash Equivalents, and Restricted Cash

Cash equivalents are highly-liquid investments with remaining maturities when purchased of three months or less. Cash and cash equivalents consist of cash and bank demand deposits and money market funds. Investments in money market funds are classified as available-for-sale and carried at fair value. Restricted cash represents collateral required for surety bonds, bank guarantees, and letters of credit.

Cash, cash equivalents, and restricted cash balances presented in the Condensed Consolidated Statements of Cash Flows consisted of the following:

 

 

 

September 30,

 

 

December 31,

 

(in thousands)

 

2021

 

 

2020

 

Cash and cash equivalents

 

$

110,756

 

 

$

39,545

 

Restricted cash included in other current assets

 

 

2,505

 

 

 

2,426

 

Cash, cash equivalents, and restricted cash shown in the statement of cash flows

 

$

113,261

 

 

$

41,971

 

 

11


 

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 delivering the service to a customer.

GES’ service revenue is primarily derived through its comprehensive range of marketing, event production, and other related services to event organizers and corporate brand marketers. GES’ service revenue is earned over time over the duration of the live event, which generally lasts one to three days. 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’ product revenue is derived from the build of exhibits and environments and graphics. GES’ product revenue is recognized at a point in time upon delivery of the product.

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

Noncontrolling Interests – Non-redeemable and Redeemable

Non-redeemable noncontrolling interest represents the portion of equity in a subsidiary that is not attributable, directly or indirectly, to us. We report non-redeemable noncontrolling interest within stockholders’ equity in the Condensed Consolidated Balance Sheets. The amount of consolidated net income or loss attributable to Viad and the non-redeemable noncontrolling interest is presented in the Condensed Consolidated Statements of Operations.

We consider noncontrolling interests with redemption features that are not solely within our control to be redeemable noncontrolling interests. Our redeemable noncontrolling interest relates to our 54.9% equity ownership interest in Esja Attractions ehf. (“Esja”), which owns the FlyOver Iceland attraction. The Esja shareholders agreement contains a put option that gives the minority Esja shareholders the right to sell (or “put”) their Esja shares to us based on a calculated formula within a predefined term. This redeemable noncontrolling interest is considered mezzanine equity and we report it between liabilities and stockholders’ equity in the Condensed Consolidated Balance Sheets. The amount of the net income or loss attributable to redeemable noncontrolling interests is recorded in the Condensed Consolidated Statements of Operations and the accretion of the redemption value is recorded as an adjustment to accumulated deficit and is included in our income (loss) per share.

Refer to Note 22 – Noncontrolling Interest – Redeemable and Non-redeemable for additional information.

Convertible Preferred Stock

We record shares of convertible preferred stock based on proceeds received net of costs on the date of issuance. Redeemable preferred stock (including preferred stock that features redemption rights that are either within the control of the holder or subject to redemption upon the occurrence of uncertain events not solely within our control) is classified as mezzanine equity and is reported between liabilities and stockholders’ equity in the Condensed Consolidated Balance Sheets.

Leases

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

Our operating and finance leases are primarily facility, equipment, and land leases. Our facility leases comprise mainly manufacturing facilities, sales and design facilities, offices, storage and/or warehouses, and truck marshaling yards. These facility leases generally have lease terms ranging up to 24 years. Our equipment leases comprise mainly vehicles, hardware, and office equipment, each with various lease terms. Our land leases comprise mainly leases in Canada and Iceland on which our hotels or attractions are located and have lease terms ranging up to 46 years.

If a lease contains a renewal option that is reasonably certain to be exercised, then the lease term includes the optional periods in measuring a ROU asset and lease liability. We evaluate the reasonably certain threshold at lease commencement, and it is typically met if we identify substantial economic incentives or termination penalties. We do not include variable leases and variable non-lease

12


 

components in the calculation of the ROU asset and corresponding lease liability. For facility leases, variable lease costs include the costs of common area maintenance, taxes, and insurance for which we pay our lessors an estimate that we adjust to actual expense on a quarterly or annual basis depending on the underlying contract terms. We expense these variable lease payments as incurred. Our lease agreements do not contain any significant residual value guarantees or restrictive covenants.

Substantially all of our lease agreements do not specify an implicit borrowing rate, and as such, we utilize an incremental borrowing rate based on lease term and country, in order to calculate the present value of our future lease payments. The discount rate represents a risk-adjusted rate on a collateralized basis and is the expected rate at which we would borrow funds to satisfy the scheduled lease liability payment streams commensurate with the lease term and the country.

We are also a lessor to third party tenants who either lease certain portions of facilities that we own or sublease certain portions of facilities that we lease. We record lease income from owned facilities as rental income and we record sublease income from leased facilities as an offset to lease expense in the Condensed Consolidated Statements of Operations. We classify all of our leases for which we are the lessor as operating leases. 

Note 2. Revenue and Related Contract Costs and Contract Liabilities

GES’ performance obligations consist of services or product(s) outlined in a contract. While we often sign multi-year contracts for recurring events, the obligations for each occurrence are well defined and conclude upon the occurrence of each event. The obligations are typically the provision of services and/or sale of a product in connection with a live event. 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. We recognize revenue for services generally at the close of the live event. We recognize revenue for products either upon delivery to the customer’s location, upon delivery to an event that we are serving, or when we have the right to invoice. In circumstances where a customer cancels a contract, we generally have the right to bill the customer for costs incurred to date. Payment terms are generally within 30-60 days and contain no significant financing components.

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

Contract Liabilities

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

Changes to contract liabilities are as follows:

 

(in thousands)

 

 

 

Balance at December 31, 2020

 

$

18,618

 

Cash additions

 

 

117,499

 

Revenue recognized

 

 

(90,638

)

Foreign exchange translation adjustment

 

 

(584

)

Balance at September 30, 2021

 

$

44,895

 

 

Contract Costs

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

13


 

Changes to contract costs are as follows:

 

(in thousands)

 

 

 

Balance at December 31, 2020

 

$

10,835

 

Additions

 

 

24,514

 

Expenses

 

 

(14,061

)

Cancelled

 

 

(709

)

Foreign exchange translation adjustment

 

 

(57

)

Balance at September 30, 2021

 

$

20,522

 

As of September 30, 2021, capitalized contract costs consisted of $0.6 million to obtain contracts and $19.9 million to fulfill contracts. We did not recognize an impairment loss with respect to capitalized contract costs during the three and nine months ended September 30, 2021 or 2020.

Disaggregation of Revenue

During the first quarter of 2021, we changed GES’ presentation of certain items in the following disaggregation of revenue table to depict how the nature, amount, timing, and uncertainty of revenue and cash flows are affected by economic factors. All prior periods have been reclassified to conform to this new reporting structure.

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

GES

 

 

Three Months Ended

 

 

Nine Months Ended

 

 

 

September 30,

 

 

September 30,

 

(in thousands)

 

2021

 

 

2020

 

 

2021

 

 

2020

 

Service lines:

 

 

 

 

 

 

 

 

 

 

 

 

Exhibitions and Conferences

 

$

81,029

 

 

$

4,625

 

 

$

96,881

 

 

$

222,038

 

Brand experiences

 

 

31,009

 

 

 

8,895

 

 

 

55,194

 

 

 

85,831

 

Venue services

 

 

4,006

 

 

 

472

 

 

 

8,034

 

 

 

12,061

 

Total revenue

 

$

116,044

 

 

$

13,992

 

 

$

160,109

 

 

$

319,930

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Timing of revenue recognition:

 

 

 

 

 

 

 

 

 

 

 

 

Services transferred over time

 

$

100,865

 

 

$

12,031

 

 

$

139,241

 

 

$

287,457

 

Products transferred over time(1)

 

 

6,509

 

 

 

247

 

 

 

7,659

 

 

 

13,442

 

Products transferred at a point in time

 

 

8,670

 

 

 

1,714

 

 

 

13,209

 

 

 

19,031

 

Total revenue

 

$

116,044

 

 

$

13,992

 

 

$

160,109

 

 

$

319,930

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Geographical markets:

 

 

 

 

 

 

 

 

 

 

 

 

North America

 

$

92,648

 

 

$

11,686

 

 

$

127,978

 

 

$

272,391

 

EMEA

 

 

24,084

 

 

 

2,590

 

 

 

34,061

 

 

 

50,797

 

Intersegment eliminations

 

 

(688

)

 

 

(284

)

 

 

(1,930

)

 

 

(3,258

)

Total revenue

 

$

116,044

 

 

$

13,992

 

 

$

160,109

 

 

$

319,930

 

 

(1)
GES’ graphics product revenue is earned over time over the duration of an event as it is considered a part of the single performance obligation satisfied over time.

 

14


 

Pursuit

 

 

 

Three Months Ended

 

 

Nine Months Ended

 

 

 

September 30,

 

 

September 30,

 

(in thousands)

 

2021

 

 

2020

 

 

2021

 

 

2020

 

Services:

 

 

 

 

 

 

 

 

 

 

 

 

Admissions

 

$

39,480

 

 

$

12,229

 

 

$

51,069

 

 

$

17,865

 

Accommodations

 

 

37,553

 

 

 

18,021

 

 

 

54,742

 

 

 

23,994

 

Transportation

 

 

3,453

 

 

 

445

 

 

 

4,913

 

 

 

2,513

 

Travel planning and other

 

 

2,019

 

 

 

855

 

 

 

4,668

 

 

 

1,484

 

Intersegment eliminations

 

 

(406

)

 

 

(144

)

 

 

(463

)

 

 

(261

)

Total services revenue

 

 

82,099

 

 

 

31,406

 

 

 

114,929

 

 

 

45,595

 

Products:

 

 

 

 

 

 

 

 

 

 

 

 

Food and beverage

 

 

18,029

 

 

 

6,783

 

 

 

25,152

 

 

 

9,047

 

Retail operations

 

 

17,427

 

 

 

10,626

 

 

 

23,577

 

 

 

12,960

 

Total products revenue

 

 

35,456

 

 

 

17,409

 

 

 

48,729

 

 

 

22,007

 

Total revenue

 

$

117,555

 

 

$

48,815

 

 

$

163,658

 

 

$

67,602

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Timing of revenue recognition:

 

 

 

 

 

 

 

 

 

 

 

 

Services transferred over time

 

$

82,099

 

 

$

31,406

 

 

$

114,929

 

 

$

45,595

 

Products transferred at a point in time

 

 

35,456

 

 

 

17,409

 

 

 

48,729

 

 

 

22,007

 

Total revenue

 

$

117,555

 

 

$

48,815

 

 

$

163,658

 

 

$

67,602

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Markets:

 

 

 

 

 

 

 

 

 

 

 

 

Banff Jasper Collection

 

$

52,602

 

 

$

26,395

 

 

$

71,720

 

 

$

39,234

 

Alaska Collection

 

 

25,932

 

 

 

5,436

 

 

 

37,279

 

 

 

6,167

 

Glacier Park Collection

 

 

32,081

 

 

 

14,929

 

 

 

43,627

 

 

 

16,813

 

FlyOver

 

 

2,296

 

 

 

2,055

 

 

 

3,494

 

 

 

5,388

 

Sky Lagoon(1)

 

 

4,644

 

 

 

 

 

 

7,538

 

 

 

 

Total revenue

 

$

117,555

 

 

$

48,815

 

 

$

163,658

 

 

$

67,602

 

(1)
We opened Pursuit’s new Sky Lagoon attraction on April 30, 2021 in Reykjavik, Iceland.

Note 3. 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 (the “2017 Plan”). The 2017 Plan 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. In June 2017, we registered 1,750,000 shares of common stock issuable under the 2017 Plan. As of September 30, 2021, there were 736,786 shares available for future grant under the 2017 Plan.

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

 

 

 

Three Months Ended

 

 

Nine Months Ended

 

 

 

September 30,

 

 

September 30,

 

(in thousands)

 

2021

 

 

2020

 

 

2021

 

 

2020

 

Performance-based restricted stock units

 

$

(118

)

 

$

149

 

 

$

488

 

 

$

(2,596

)

Restricted stock awards and restricted stock units

 

 

1,284

 

 

 

1,698

 

 

 

3,964

 

 

 

3,155

 

Stock options

 

 

578

 

 

 

90

 

 

 

1,508

 

 

 

90

 

Share-based compensation expense before income tax

 

 

1,744

 

 

 

1,937

 

 

 

5,960

 

 

 

649

 

Income tax benefit(1)

 

 

(21

)

 

 

 

 

 

(76

)

 

 

 

Share-based compensation expense, net of income tax

 

$

1,723

 

 

$

1,937

 

 

$

5,884

 

 

$

649

 

(1)
The 2021 income tax benefit amount primarily reflects the tax benefit associated with our Canadian-based employees. There was no income tax benefit associated with our employees in the United States and the United Kingdom due to a valuation allowance on our deferred tax assets within these jurisdictions. Refer to Note 17 – Income Taxes.

15


 

Performance-based Restricted Stock Units

Performance-based restricted stock units (“PRSU”) are tied to our stock price and the expected achievement of certain performance-based criteria. The vesting of PRSUs is based upon the achievement of the performance-based criteria over a three to four-year period. We account for PRSUs 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 units to be achieved is updated each reporting period.

We account for PRSUs 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. Forfeitures are recorded when they occur.

During the nine months ended September 30, 2021, we granted PRSUs with a grant date fair value of $3.2 million, all of which are payable in shares.

In 2021, PRSUs granted in 2018 vested; however, as performance metrics were not achieved, no awards were paid in cash or in shares. In 2020, PRSUs granted in 2017 vested and we paid $2.6 million in cash. No PRSUs were paid in shares in 2020.

As of September 30, 2021, the unamortized cost of outstanding equity-based PRSUs was $2.7 million, which we expect to recognize over a weighted-average period of approximately 2.3 years. Liabilities related to liability-based PRSUs were $0.8 million as of September 30, 2021 and $0.8 million as of December 31, 2020.

The following table summarizes the activity of the outstanding PRSUs:

 

 

 

Equity-Based
PRSUs

 

 

Liability-Based
PRSUs

 

 

 

Shares

 

 

Weighted-Average
Grant Date
Fair Value

 

 

Shares

 

 

Weighted-Average
Grant Date
Fair Value

 

Balance at December 31, 2020

 

 

61,208

 

 

$

57.18

 

 

 

121,485

 

 

$

56.34

 

Granted

 

 

101,785

 

 

$

31.28

 

 

 

 

 

$

 

Vested

 

 

 

 

$

 

 

 

(42,698

)

 

$

51.96

 

Forfeited

 

 

 

 

$

 

 

 

(1,041

)

 

$

56.90

 

Balance at September 30, 2021

 

 

162,993

 

 

$

41.01

 

 

 

77,746

 

 

$

57.13

 

Service-based Restricted Stock Awards and Restricted Stock Units

Restricted stock awards and restricted stock units are service-based awards. We account for restricted stock awards and restricted stock units 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.

We account for restricted stock units 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. Forfeitures are recorded when they occur.

As of September 30, 2021, the unamortized cost of outstanding equity-based restricted stock awards and restricted stock units was $5.0 million, which we expect to recognize over a weighted-average period of approximately 1.2 years. We repurchased 25,856 shares for $1.1 million during the nine months ended September 30, 2021 and 17,961 shares for $1.1 million during the nine months ended September 30, 2020 related to tax withholding requirements on vested share-based awards.

Aggregate liabilities related to liability-based restricted stock units were $0.2 million as of September 30, 2021 and $0.2 million as of December 31, 2020. During the nine months ended September 30, 2021, 3,174 restricted stock units vested, and we paid $0.1 million in cash. During the nine months ended September 30, 2020, 2,815 restricted stock units vested, and we paid $0.2 million in cash and $0.8 million in shares.

16


 

The following table summarizes the activity of the outstanding restricted stock awards and restricted stock units:

 

 

 

Equity-Based
Restricted Stock Awards

 

 

Equity-Based
Restricted Stock Units

 

 

Liability-Based
Restricted Stock Units

 

 

 

Shares

 

 

Weighted-Average
Grant Date
Fair Value

 

 

Shares

 

 

Weighted-Average
Grant Date
Fair Value

 

 

Shares

 

 

Weighted-Average
Grant Date
Fair Value

 

Balance at December 31, 2020

 

 

107,107

 

 

$

53.23

 

 

 

151,261

 

 

$

19.51

 

 

 

10,459

 

 

$

51.91

 

Granted

 

 

22,560

 

 

$

44.77

 

 

 

88,367

 

 

$

44.12

 

 

 

 

 

$

 

Vested

 

 

(48,879

)

 

$

49.92

 

 

 

(34,998

)

 

$

19.73

 

 

 

(3,174

)

 

$

52.24

 

Forfeited

 

 

(2,279

)

 

$

56.63

 

 

 

(3,673

)

 

$

19.75

 

 

 

 

 

$

 

Balance at September 30, 2021

 

 

78,509

 

 

$

52.77

 

 

 

200,957

 

 

$

30.29

 

 

 

7,285

 

 

$

53.34

 

Stock Options

We grant non-qualified stock options that are performance-based, as well as non-qualified options that are service-based. The performance-based awards are recognized on a straight-line basis over the performance period ranging from 1.4 to 3.4 years, and the underlying shares expected to be settled are adjusted each reporting period based on estimated future achievement of the respective performance metrics. The service-based awards are recognized on a straight-line basis over the requisite service period on a graded-vesting schedule ranging from two to three years.

The following table summarizes stock option activity:

 

 

 

Shares

 

 

Weighted-Average
Exercise Price

 

 

Aggregate Intrinsic Value(1)

 

Options outstanding at December 31, 2020

 

 

204,150

 

 

$

19.98

 

 

 

 

Granted

 

 

137,858

 

 

$

44.80

 

 

 

 

Exercised

 

 

 

 

$

 

 

 

 

Options outstanding at September 30, 2021

 

 

342,008

 

 

$

29.98

 

 

$

5,276,367

 

Options exercisable at September 30, 2021

 

 

27,075

 

 

$

21.85

 

 

$

637,887

 

(1)
The aggregate intrinsic value of stock options outstanding represents the difference between our closing stock price at the end of the reporting period and the exercise price, multiplied by the number of in-the-money stock options.

The following table summarizes stock options outstanding and exercisable as of September 30, 2021:

 

 

 

 

Options Outstanding

 

 

Options Exercisable

 

 

Range of exercise prices

 

Shares

 

 

Weighted-Average
Remaining Contractual Life
(in years)

 

 

Weighted-Average
Exercise Price

 

 

Shares

 

 

Weighted-Average
Exercise Price

 

$

19.30

 

 

150,000

 

 

 

7.25

 

 

$

19.30

 

 

 

 

 

$

 

$

21.85

 

 

54,150

 

 

 

5.91

 

 

$

21.85

 

 

 

27,075

 

 

$

21.85

 

$

44.80

 

 

137,858

 

 

 

6.40

 

 

$

44.80

 

 

 

 

 

$

 

$

19.30-$44.80

 

 

342,008

 

 

 

6.70

 

 

$

29.98

 

 

 

27,075

 

 

$

21.85

 

The fair value of stock options granted in 2021 was estimated on the date of grant using the Black-Scholes option pricing model.

Following is additional information on stock options granted during the nine months ended September 30, 2021 and the underlying assumptions used in assessing fair value:

 

 

 

Nine Months Ended

 

 

 

September 30, 2021

 

Assumptions used to estimate fair value of stock options granted:

 

 

 

Risk-free interest rate

 

0.50%

 

Expected term (in years)

 

 

4.5

 

Expected volatility

 

55.8%

 

Expected dividend yield

 

 

 

Weighted average grant-date fair value per share of options granted

 

$

20.26

 

 

17


 

As of September 30, 2021, the total unrecognized compensation cost related to non-vested stock option awards was $2.7 million. We expect to recognize such costs over a weighted-average period of approximately 1.5 years.

Note 4. Acquisitions

2021 Acquisitions

Golden Skybridge

On March 18, 2021, we acquired a 60% controlling interest in the Golden Skybridge attraction for total cash consideration of $15 million Canadian dollars (approximately $12 million U.S. dollars), of which $6 million Canadian dollars (approximately $4.8 million U.S. dollars) were primarily used to fund additional experiences. The Golden Skybridge opened in June 2021.

The fair value of net assets acquired as of the acquisition date included $2.2 million U.S. dollars in property and equipment and $6.8 million U.S. dollars in noncontrolling interest. Under the acquisition method of accounting, the purchase price is allocated to the tangible and identifiable intangible assets acquired and liabilities assumed based on their estimated fair values. The excess purchase price over the fair value of net assets acquired of $11.8 million U.S. dollars was recorded as “Goodwill.” Goodwill is included in the Pursuit business group. The primary factor that contributed to the purchase price resulting in the recognition of goodwill related to future growth opportunities when combined with our other businesses. Goodwill is not deductible for tax purposes. We included these assets in the Condensed Consolidated Balance Sheets from the date of acquisition.

Transaction costs associated with the acquisition were $0.3 million U.S. dollars during 2021, which are included in “Costs of services” in the Condensed Consolidated Statements of Operations.

Note 5. Inventories

We state inventories, which consist primarily of exhibit design and construction materials and supplies, as well as retail inventory, at the lower of cost (first-in, first-out and specific identification methods) or net realizable value.

The components of inventories consisted of the following:

 

 

 

September 30,

 

 

December 31,

 

(in thousands)

 

2021

 

 

2020

 

Raw materials

 

$

2,482

 

 

$

3,362

 

Finished goods

 

 

6,269

 

 

 

5,365

 

Inventories

 

$

8,751

 

 

$

8,727

 

 

 

Note 6. Other Current Assets

Other current assets consisted of the following:

 

 

 

September 30,

 

 

December 31,

 

(in thousands)

 

2021

 

 

2020

 

Prepaid software maintenance

 

$

3,887

 

 

$

3,058

 

Income tax receivable

 

 

4,333

 

 

 

337

 

Prepaid insurance

 

 

2,824

 

 

 

4,297

 

Restricted cash

 

 

2,505

 

 

 

2,426

 

Prepaid vendor payments

 

 

2,188

 

 

 

1,835

 

Prepaid taxes

 

 

1,131

 

 

 

345

 

Prepaid other

 

 

1,954

 

 

 

1,296

 

Other

 

 

1,558

 

 

 

3,631

 

Other current assets

 

$

20,380

 

 

$

17,225

 

 

 

18


 

Note 7. Property and Equipment

Property and equipment consisted of the following:

 

 

 

September 30,

 

 

December 31,

 

(in thousands)

 

2021

 

 

2020

 

Land and land interests

 

$

30,504

 

 

$

32,849

 

Buildings and leasehold improvements

 

 

387,955

 

 

 

386,751

 

Equipment and other

 

 

433,412

 

 

 

401,288

 

Gross property and equipment

 

 

851,871

 

 

 

820,888

 

Accumulated depreciation

 

 

(367,854

)

 

 

(352,100

)

Property and equipment, net (excluding finance leases)

 

 

484,017

 

 

 

468,788

 

Finance lease ROU assets, net (1)

 

 

61,263

 

 

 

23,366

 

Property and equipment, net

 

$

545,280

 

 

$

492,154

 

 

(1)
The increase in finance lease ROU assets is primarily due to the commencement of Pursuit’s new Sky Lagoon attraction in Iceland during the first quarter of 2021.

 

Depreciation expense was $10.8 million for the three months ended September 30, 2021 and $32.3 million for the nine months ended September 30, 2021. Depreciation expense was $11.5 million for the three months ended September 30, 2020 and $35.1 million for the nine months ended September 30, 2020.

Property and equipment purchased through accounts payable and accrued liabilities decreased $0.3 million during the nine months ended September 30, 2021 and decreased $6.3 million during the nine months ended September 30, 2020.

Note 8. Other Investments and Assets

Other investments and assets consisted of the following:

 

 

 

September 30,

 

 

December 31,

 

(in thousands)

 

2021

 

 

2020

 

Self-insured liability receivable

 

$

6,358

 

 

$

6,358

 

Other mutual funds

 

 

3,903

 

 

 

3,457

 

Contract costs

 

 

2,561

 

 

 

2,912

 

Other

 

 

2,691

 

 

 

2,765

 

Other investments and assets

 

$

15,513

 

 

$

15,492

 

 

Note 9. Goodwill and Other Intangible Assets

The changes in the carrying amount of goodwill are as follows:

 

(in thousands)

 

Pursuit

 

Balance at December 31, 2020

 

$

99,847

 

Business acquisition

 

 

11,776

 

Foreign currency translation adjustments

 

 

80

 

Balance at September 30, 2021

 

$

111,703

 

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. We use a discounted expected future cash flow methodology (income approach) to estimate the fair value of our reporting units for purposes of goodwill impairment testing.

We recorded non-cash goodwill impairment charges of $185.8 million during the nine months ended September 30, 2020 primarily related to the write-off of all of GES’ goodwill due to the deteriorating macroeconomic environment related to the COVID-19 pandemic. Our remaining goodwill balance as of September 30, 2021 of $111.7 million pertains to our Pursuit business. Although certain of Pursuit’s reporting units continue to operate at a loss due to travel restrictions as a result of the COVID-19 pandemic, we did not record any impairment charges during 2021 as there were no significant changes to our outlook for the future years and the risk profile of the reporting units had not changed.

Given the evolving nature of COVID-19, and the uncertain government and consumer reactions, the estimates and assumptions regarding expected future cash flows, discount rates, and terminal values used in our goodwill impairment analysis require considerable judgment

19


 

and are based on our current estimates of market conditions, financial forecasts, and industry trends. These estimates, however, have inherent uncertainties and different assumptions could lead to materially different results including impairment charges in the future.

Other intangible assets consisted of the following:

 

 

 

 

 

September 30, 2021

 

 

December 31, 2020

 

(in thousands)

 

Useful Life
(Years)

 

Gross
Carrying
Value

 

 

Accumulated
Amortization

 

 

Net
Carrying
Value

 

 

Gross
Carrying
Value

 

 

Accumulated
Amortization

 

 

Net
Carrying
Value

 

Intangible assets subject to amortization:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Customer contracts and relationships

 

6.1

 

$

37,698

 

 

$

(28,398

)

 

$

9,300

 

 

$

38,214

 

 

$

(26,288

)

 

$

11,926

 

Operating contracts and licenses

 

36.0

 

 

41,391

 

 

 

(3,160

)

 

 

38,231

 

 

 

42,012

 

 

 

(2,405

)

 

 

39,607

 

In-place lease

 

13.2

 

 

15,413

 

 

 

(980

)

 

 

14,433

 

 

 

15,347

 

 

 

(656

)

 

 

14,691

 

Tradenames

 

4.6

 

 

5,607

 

 

 

(2,631

)

 

 

2,976

 

 

 

5,940

 

 

 

(2,435

)

 

 

3,505

 

Non-compete agreements

 

0.3

 

 

773

 

 

 

(734

)

 

 

39

 

 

 

770

 

 

 

(616

)

 

 

154

 

Other

 

6.4

 

 

822

 

 

 

(130

)

 

 

692

 

 

 

818

 

 

 

(102

)

 

 

716

 

Total amortized intangible assets

 

 

 

 

101,704

 

 

 

(36,033

)

 

 

65,671

 

 

 

103,101

 

 

 

(32,502

)

 

 

70,599

 

Indefinite-lived intangible assets:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Business licenses

 

 

 

 

573

 

 

 

 

 

 

573

 

 

 

573

 

 

 

 

 

 

573

 

Other intangible assets

 

 

 

$

102,277

 

 

$

(36,033

)

 

$

66,244

 

 

$

103,674

 

 

$

(32,502

)

 

$

71,172

 

 

Intangible asset amortization expense was $1.6 million for the three months ended September 30, 2021 and $4.4 million for the nine months ended September 30, 2021. Intangible asset amortization was $1.5 million for the three months ended September 30, 2020 and $5.2 million for the nine months ended September 30, 2020. We recorded a non-cash impairment charge to intangible assets of $15.7 million during the nine months ended September 30, 2020 related to our United States audio-visual production business. The duration and impact of COVID-19 may result in additional future impairment charges as facts and circumstances evolve.

At September 30, 2021, the estimated future amortization expense related to intangible assets subject to amortization is as follows:

 

(in thousands)

 

 

 

Year ending December 31,

 

 

 

Remainder of 2021

 

$

1,353

 

2022

 

 

5,109

 

2023

 

 

4,451

 

2024

 

 

3,495

 

2025

 

 

2,200

 

Thereafter

 

 

49,063

 

Total

 

$

65,671

 

 

20


 

Note 10. Other Current Liabilities

Other current liabilities consisted of the following:

 

 

 

September 30,

 

 

December 31,

 

(in thousands)

 

2021

 

 

2020

 

Continuing operations:

 

 

 

 

 

 

Accrued sales and use taxes

 

$

6,479

 

 

$

1,547

 

Self-insured liability

 

 

5,066

 

 

 

5,715

 

Accrued employee benefit costs

 

 

4,523

 

 

 

2,363

 

Commissions payable

 

 

4,051

 

 

 

903

 

Accrued interest payable

 

 

3,995

 

 

 

3,042

 

Accrued restructuring

 

 

2,076

 

 

 

2,479

 

Current portion of pension and postretirement liabilities

 

 

1,618

 

 

 

1,805

 

Accrued professional fees

 

 

1,516

 

 

 

1,691

 

Other taxes

 

 

2,187

 

 

 

1,872

 

Other

 

 

4,898

 

 

 

5,123

 

Total continuing operations

 

 

36,409

 

 

 

26,540

 

Discontinued operations:

 

 

 

 

 

 

Self-insured liability

 

 

296

 

 

 

347

 

Environmental remediation liabilities

 

 

62

 

 

 

61

 

Other

 

 

94

 

 

 

91

 

Total discontinued operations

 

 

452

 

 

 

499

 

Total other current liabilities

 

$

36,861

 

 

$

27,039

 

 

Note 11. Other Deferred Items and Liabilities

Other deferred items and liabilities consisted of the following:

 

 

 

September 30,

 

 

December 31,

 

(in thousands)

 

2021

 

 

2020

 

Continuing operations:

 

 

 

 

 

 

Foreign deferred tax liability

 

$

29,482

 

 

$

21,336

 

Multi-employer pension plan withdrawal liability

 

 

14,366

 

 

 

15,864

 

Self-insured liability

 

 

7,754

 

 

 

6,662

 

Self-insured excess liability

 

 

6,358

 

 

 

6,358

 

Accrued compensation

 

 

5,656

 

 

 

5,821

 

Accrued restructuring

 

 

2,640

 

 

 

2,751

 

Other

 

 

1,590

 

 

 

1,479

 

Total continuing operations

 

 

67,846

 

 

 

60,271

 

Discontinued operations:

 

 

 

 

 

 

Environmental remediation liabilities

 

 

2,191

 

 

 

2,179

 

Self-insured liability

 

 

1,619

 

 

 

1,639

 

Other

 

 

250

 

 

 

539

 

Total discontinued operations

 

 

4,060

 

 

 

4,357

 

Total other deferred items and liabilities

 

$

71,906

 

 

$

64,628

 

 

21


 

Note 12. Debt and Finance Lease Obligations

The components of debt and finance lease obligations consisted of the following:

 

 

 

September 30,

 

 

December 31,

 

(in thousands, except interest rates)

 

2021

 

 

2020

 

2021 Credit Facility, 5.5% weighted-average interest rate at September 30, 2021, due through 2028(1)

 

$

400,000

 

 

$

 

2018 Credit Facility, 4.5% weighted-average interest rate at December 31, 2020

 

 

 

 

 

266,762

 

FlyOver Iceland Credit Facility, 4.9% weighted-average interest rate at September 30, 2021 and December 31, 2020, due through 2023(1)

 

 

5,619

 

 

 

5,820

 

FlyOver Iceland Term Loans, 3.8% weighted-average interest rate at September 30, 2021 and December 31, 2020, due through 2024(1)

 

 

689

 

 

 

705

 

Less unamortized debt issuance costs

 

 

(15,525

)

 

 

(2,737

)

Total debt

 

 

390,783

 

 

 

270,550

 

Finance lease obligations, 9.1% weighted-average interest rate at September 30, 2021 and 8.0% at December 31, 2020, due through 2067(2)

 

 

63,597

 

 

 

23,141

 

Total debt and finance lease obligations (3)(4)

 

 

454,380

 

 

 

293,691

 

Current portion

 

 

(8,218

)

 

 

(8,335

)

Long-term debt and finance lease obligations

 

$

446,162

 

 

$

285,356

 

(1)
Represents the weighted-average interest rate in effect at the respective periods, including any applicable margin. The interest rates do not include amortization of debt issuance costs or commitment fees.
(2)
The increase in finance lease obligations is primarily due to the commencement of Pursuit’s new Sky Lagoon attraction in Iceland during the first quarter of 2021, which has a 46-year lease term.
(3)
The estimated fair value of total debt and finance leases was $310.5 million as of September 30, 2021 and $254.0 million as of December 31, 2020. The fair value of debt was estimated by discounting the future cash flows using rates currently available for debt of similar terms and maturity, which is a Level 2 measurement. Refer to Note 13 – Fair Value Measurements.
(4)
Cash paid for interest on debt was $14.9 million for the nine months ended September 30, 2021 and $12.1 million for the nine months ended September 30, 2020.

2021 Credit Facility

Effective July 30, 2021, we refinanced the 2018 Credit Facility with the new $500 million 2021 Credit Facility to provide for financial flexibility to support our growth initiatives. The 2021 Credit Facility provides for a $400 million Term Loan B with a maturity date of July 30, 2028 and a $100 million revolving credit facility with a maturity date of July 30, 2026. The loan proceeds of $400 million were offset in part by $14.8 million in fees. The proceeds from the Term Loan B were used to repay the 2018 Credit Facility and the remaining proceeds will be used to fund future acquisitions and growth initiatives and for general corporate purposes. The following are significant terms under the revolving credit facility:

Maintain minimum liquidity of $75 million through the earlier of (i) June 30, 2022 or (ii) the first fiscal quarter we are in compliance with the financial covenants;
Financial covenants will first be tested as of September 30, 2022 as described below;
Maintain an interest coverage ratio of not less than 2.00 to 1.00, with a step-up to 2.50 to 1.00 on or after December 31, 2022;
Maintain a total net leverage ratio of not greater than 4.50 to 1.00 with a step-down to 4.00 to 1.00 on or after December 31, 2022 and a step-up of 0.5x for four quarters for any material acquisition; and
Interest rate on the Term Loan B of London Interbank Offered Rate (“LIBOR”) plus 5.00%, with a LIBOR floor of 0.50%.

 

As a result of the refinance and the repayment of the 2018 Credit Facility, we recorded $2.1 million of interest expense related to the write-off of unamortized debt issuance costs during the three months ended September 30, 2021.

As of September 30, 2021, capacity remaining under the 2021 Credit Facility was $78.2 million, reflecting borrowings of $400.0 million under the Term Loan B and $21.8 million in outstanding letters of credit.

FlyOver Iceland Credit Facility

Effective February 15, 2019, FlyOver Iceland ehf., (“FlyOver Iceland”) a wholly-owned subsidiary of Esja, entered into a credit agreement with a €5.0 million (approximately $5.6 million U.S. dollars) credit facility (the “FlyOver Iceland Credit Facility”) with a maturity date of March 1, 2022. The loan proceeds were used to complete the development of the FlyOver Iceland attraction. In response to the COVID-19 pandemic, we entered into an addendum to the FlyOver Iceland Credit Facility effective January 8, 2021 wherein the

22


 

principal payments were deferred for twelve months beginning December 1, 2020, with the first payment due December 1, 2021. The addendum also extended the maturity date to September 1, 2023. There were no other changes to the terms of the FlyOver Iceland Credit Facility. During the first quarter of 2021, we obtained a waiver of certain covenants to the FlyOver Iceland Credit Facility through December 2021. We expect to be unable to meet our financial covenants under the FlyOver Iceland Credit Facility for the six months ending December 31, 2021. We have requested a waiver for our covenants.

FlyOver Iceland Term Loans

During 2020, FlyOver Iceland entered into three term loans totaling ISK 90.0 million (approximately $0.7 million U.S. dollars) (the “FlyOver Iceland Term Loans”). The first term loan for ISK 10.0 million was entered into effective October 15, 2020 with a maturity date of April 1, 2023 and bears interest on a seven-day term deposit at the Central Bank of Iceland. The second term loan for ISK 30.0 million was entered into effective October 15, 2020 with a maturity date of October 1, 2024 and bears interest on a seven-day term deposit at the Central Bank of Iceland plus 3.07%. The third term loan for ISK 50.0 million was entered into effective December 29, 2020 with a maturity date of February 1, 2023 and bears interest at one-month Reykjavik InterBank Offered Rate (“REIBOR”) plus 4.99%. The Icelandic State Treasury guarantees supplemental loans provided by credit institutions to companies impacted by the COVID-19 pandemic. Accordingly, the Icelandic State Treasury guaranteed the repayment of up to 85% of the principal and interest on the ISK 10.0 million and ISK 30.0 million term loans and 70% of the principal amount on the ISK 50.0 million term loan. Loan proceeds were used to fund FlyOver Iceland operations.

Note 13. Fair Value Measurements

The fair value of an asset or liability is defined as the price that would be received by selling an asset or paying to transfer a liability in an orderly transaction between market participants at the measurement date. The fair value guidance requires an entity to maximize the use of quoted prices and other observable inputs and minimize the use of unobservable inputs when measuring fair value, and also establishes a fair value hierarchy, which prioritizes the inputs to valuation techniques used to measure fair value as follows:

Level 1 - Quoted prices in active markets for identical assets or liabilities.

Level 2 - Observable inputs other than quoted prices included within Level 1 that are observable for the asset or liability, either directly or indirectly.

Level 3 - Unobservable inputs to the valuation methodology that are significant to the measurement of fair value.

Money market mutual funds and certain other mutual fund investments are measured at fair value on a recurring basis using Level 1 inputs. The fair value information related to these assets is summarized in the following tables:

 

 

 

 

 

 

Fair Value Measurements at Reporting Date Using

 

(in thousands)

 

September 30, 2021

 

 

Quoted Prices
in Active
Markets
(Level 1)

 

 

Significant
Other
Observable
Inputs
(Level 2)

 

 

Significant
Unobservable
Inputs
(Level 3)

 

Assets:

 

 

 

 

 

 

 

 

 

 

 

 

Money market funds (1)

 

$

50,001

 

 

$

50,001

 

 

$

 

 

$

 

Other mutual funds (2)

 

 

3,903

 

 

 

3,903

 

 

 

 

 

 

 

Total assets at fair value on a recurring basis

 

$

53,904

 

 

$

53,904

 

 

$

 

 

$

 

 

 

 

 

 

 

Fair Value Measurements at Reporting Date Using

 

(in thousands)

 

December 31, 2020

 

 

Quoted Prices
in Active
Markets
(Level 1)

 

 

Significant
Other
Observable
Inputs
(Level 2)

 

 

Significant
Unobservable
Inputs
(Level 3)

 

Assets:

 

 

 

 

 

 

 

 

 

 

 

 

Money market funds (1)

 

$

2

 

 

$

2

 

 

$

 

 

$

 

Other mutual funds (2)

 

 

3,457

 

 

 

3,457

 

 

 

 

 

 

 

Total assets at fair value on a recurring basis

 

$

3,459

 

 

$

3,459

 

 

$

 

 

$

 

 

23


 

 

(1)
We include money market funds in “Cash and cash equivalents” in the Condensed Consolidated Balance Sheets. We classify these investments as available-for-sale and record them at fair value. There have been no realized gains or losses related to these investments and we have not experienced any redemption restrictions with respect to any of the money market mutual funds.
(2)
We include other mutual funds in “Other investments and assets” in the Condensed Consolidated Balance Sheets.

The carrying values of cash and cash equivalents, receivables, and accounts payable approximate fair value due to the short-term nature of these instruments. Refer to Note 12 Debt and Finance Lease Obligations for the estimated fair value of debt obligations.

Note 14. Income (Loss) Per Share

The components of basic and diluted income (loss) per share are as follows:

 

 

 

Three Months Ended

 

 

Nine Months Ended

 

 

 

September 30,

 

 

September 30,

 

(in thousands, except per share data)

 

2021

 

 

2020

 

 

2021

 

 

2020

 

Net income (loss) attributable to Viad (diluted)

 

$

15,067

 

 

$

(30,758

)

 

$

(70,111

)

 

$

(323,621

)

Less: Allocation to participating securities

 

 

(3,141

)

 

 

 

 

 

 

 

 

 

Convertible preferred stock dividends paid in cash

 

 

(1,950

)

 

 

 

 

 

(1,950

)

 

 

 

Convertible preferred stock dividends paid in kind

 

 

 

 

 

(1,134

)

 

 

(3,821

)

 

 

(1,134

)

Adjustment to the redemption value of redeemable noncontrolling interest

 

 

(488

)

 

 

(468

)

 

 

(1,091

)

 

 

(926

)

Net income (loss) allocated to Viad common stockholders (basic)

 

$

9,488

 

 

$

(32,360

)

 

$

(76,973

)

 

$

(325,681

)

Add: Allocation to participating securities

 

 

36

 

 

 

 

 

 

 

 

 

 

Net income (loss) allocated to Viad common stockholders (diluted)

 

$

9,524

 

 

$

(32,360

)

 

$

(76,973

)

 

$

(325,681

)

 

 

 

 

 

 

 

 

 

 

 

 

 

Basic weighted-average outstanding common shares

 

 

20,420

 

 

 

20,293

 

 

 

20,396

 

 

 

20,263

 

Additional dilutive shares related to share-based compensation

 

 

322

 

 

 

 

 

 

 

 

 

 

Diluted weighted-average outstanding shares

 

 

20,742

 

 

 

20,293

 

 

 

20,396

 

 

 

20,263

 

Income (loss) per share:

 

 

 

 

 

 

 

 

 

 

 

 

Basic income (loss) attributable to Viad common stockholders

 

$

0.46

 

 

$

(1.59

)

 

$

(3.77

)

 

$

(16.07

)

Diluted income (loss) attributable to Viad common stockholders(1)

 

$

0.46

 

 

$

(1.59

)

 

$

(3.77

)

 

$

(16.07

)

 

(1)
Diluted loss per share amount cannot exceed basic loss per share.

Diluted loss per common share is calculated using the more dilutive of the two-class method or as-converted method. The two-class method uses net income (loss) available to common stockholders and assumes conversion of all potential shares other than the participating securities. The as-converted method uses net income (loss) available to common stockholders and assumes conversion of all potential shares including the participating securities. Dilutive potential common shares include outstanding stock options, unvested restricted share units and convertible preferred stock. We apply the two-class method in calculating loss per common share as unvested share-based payment awards that contain nonforfeitable rights to dividends and preferred stock are considered participating securities. Accordingly, such securities are included in the earnings allocation in calculating income (loss) per share. The adjustment to the carrying value of the redeemable noncontrolling interest is reflected in income (loss) per common share.

We excluded the following weighted-average potential common shares from the calculations of diluted net income (loss) per common share during the applicable periods because their inclusion would have been anti-dilutive:

 

 

 

Three Months Ended

 

 

Nine Months Ended

 

 

 

September 30,

 

 

September 30,

 

(in thousands)

 

2021

 

 

2020

 

 

2021

 

2020

 

Convertible preferred stock

 

 

 

 

 

6,353

 

 

 

6,584

 

 

6,353

 

Unvested restricted share-based awards

 

 

3

 

 

 

135

 

 

 

173

 

 

105

 

Unvested performance share-based awards

 

 

 

 

 

 

 

 

28

 

 

 

Stock options

 

 

138

 

 

 

27

 

 

 

219

 

 

14

 

 

24


 

Note 15. Common and Preferred Stock

Convertible Series A Preferred Stock

On August 5, 2020, we entered into an Investment Agreement with funds managed by private equity firm Crestview Partners, relating to the issuance of 135,000 shares of newly issued Convertible Series A Preferred Stock, par value $0.01 per share, for an aggregate purchase price of $135 million or $1,000 per share. The $135 million issuance was offset in part by $9.2 million of expenses related to the capital raise. We have classified the convertible preferred stock as mezzanine equity in the Condensed Consolidated Balance Sheet due to the existence of certain change in control provisions that are not solely within our control.

The Convertible Series A Preferred Stock carries a 5.5% cumulative quarterly dividend, which is payable in cash or in-kind at Viad’s option and is convertible at the option of the holders into shares of our common stock at a conversion price of $21.25 per share. Upon the occurrence of a change in control event, the holders have a right to require Viad to repurchase such preferred stock. During the nine months ended September 30, 2021, $5.8 million of dividends were deemed declared of which $3.8 million was paid in-kind during the first and second quarters of 2021 and $2.0 million was paid in cash during the third quarter of 2021. We intend to pay preferred stock dividends in cash for the foreseeable future.

Holders of the Convertible Series A Preferred Stock are entitled to vote with holders of Viad’s common stock on an as-converted basis.

Common Stock 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 had repurchased 53,784 shares on the open market for $2.8 million during the three months ended March 31, 2020. As of September 30, 2021, 546,283 shares remain available for repurchase. Additionally, we repurchase shares related to tax withholding requirements on vested restricted stock awards. Refer to Note 3 – Share-Based Compensation.

Note 16. Accumulated Other Comprehensive Income (Loss)

 

Changes in accumulated other comprehensive income (loss) (“AOCI”) by component are as follows:

 

(in thousands)

 

Cumulative
Foreign Currency Translation Adjustments

 

 

Unrecognized Net Actuarial Loss and Prior Service Credit, Net

 

 

Accumulated
Other
Comprehensive
Income (Loss)

 

Balance at December 31, 2020

 

$

(16,686

)

 

$

(13,955

)

 

$

(30,641

)

Other comprehensive income before reclassifications

 

 

(980

)

 

 

 

 

 

(980

)

Amounts reclassified from AOCI, net of tax

 

 

 

 

 

205

 

 

 

205

 

Net other comprehensive income (loss)

 

 

(980

)

 

 

205

 

 

 

(775

)

Balance at September 30, 2021

 

$

(17,666

)

 

$

(13,750

)

 

$

(31,416

)

 

(in thousands)

 

Cumulative
Foreign Currency Translation Adjustments

 

 

Unrecognized Net Actuarial Loss and Prior Service Credit, Net

 

 

Accumulated
Other
Comprehensive
Income (Loss)

 

Balance at December 31, 2019

 

$

(23,799

)

 

$

(11,900

)

 

$

(35,699

)

Other comprehensive loss before reclassifications

 

 

(7,342

)

 

 

 

 

 

(7,342

)

Amounts reclassified from AOCI, net of tax

 

 

 

 

 

354

 

 

 

354

 

Net other comprehensive income (loss)

 

 

(7,342

)

 

 

354

 

 

 

(6,988

)

Balance at September 30, 2020

 

$

(31,141

)

 

$

(11,546

)

 

$

(42,687

)

 

Amounts reclassified that relate to our defined benefit pension and postretirement plans include the amortization of prior service costs and actuarial net losses recognized during each period presented. We recorded these costs as components of net periodic cost for each period presented. Refer to Note 18 – Pension and Postretirement Benefits for additional information.

Note 17. Income Taxes

The effective tax rate was 21.4% for the three months ended September 30, 2021 and a negative 2.7% for the three months ended September 30, 2020. The effective tax rate was a negative 0.2% for the nine months ended September 30, 2021 and a negative 6.8% for the nine months ended September 30, 2020.

25


 

During the three and nine months ended September 30, 2021, we did not use the annualized effective tax rate (“AETR”) to compute the income tax benefit or expense. Instead, the income tax benefit or expense was computed using the actual year-to-date tax rate as the AETR became highly sensitive due to the amount of aggregate projected tax benefit on the projected losses in Canada, the United Arab Emirates, the Netherlands, and immaterial European operations were marginally positive. As the full year projected tax benefit is expected to be marginally positive in these operations, the actual effective tax rate was a better estimate of the current quarter and year to date tax benefit than the amount computed using the AETR.

The 21.4% effective tax rate for the three months ended September 30, 2021 was the result of the taxes on the pre-tax income earned in Canada during the third quarter while excluding the taxes associated with the pre-tax income earned in the United States and the United Kingdom during the quarter. The Company did not recognize any tax benefit or expense on the pre-tax year to date losses and quarter-to-date income earned in the United States and United Kingdom as a full valuation allowance has been continued to be recorded on the net deferred tax assets in the United States and United Kingdom.

The negative effective tax rates for the three and nine months ended September 30, 2020 were due to the recording of a valuation allowance of $25.5 million in the second quarter of 2020 against our remaining United States, United Kingdom, and other European net deferred tax assets as of September 30, 2020, as well as no tax benefits on non-deductible goodwill impairments and losses recognized in those jurisdictions. We recorded the valuation allowance based upon the level of historical losses and the uncertainty and timing of future income.

We received net cash refunds of $3.6 million during the three months ended September 30, 2021 and $3.2 million during the nine months ended September 30, 2021. We received tax refunds in excess of payments of $6.8 million during the three months ended September 30, 2020 and $14.7 million during the nine months ended September 30, 2020.

Note 18. Pension and Postretirement Benefits

The components of net periodic benefit cost of our pension and postretirement benefit plans for the three months ended September 30, 2021 and 2020 consist of the following:

 

 

 

Domestic Plans

 

 

 

 

 

 

 

 

 

Pension Plans

 

 

Postretirement Benefit Plans

 

 

Foreign Pension Plans

 

(in thousands)

 

2021

 

 

2020

 

 

2021

 

 

2020

 

 

2021

 

 

2020

 

Service cost

 

$

 

 

$

 

 

$

24

 

 

$

7

 

 

$

113

 

 

$

112

 

Interest cost

 

 

110

 

 

 

162

 

 

 

41

 

 

 

64

 

 

 

77

 

 

 

87

 

Expected return on plan assets

 

 

(20

)

 

 

(74

)

 

 

 

 

 

 

 

 

(127

)

 

 

(134

)

Amortization of prior service credit

 

 

 

 

 

 

 

 

(1

)

 

 

(36

)

 

 

 

 

 

 

Recognized net actuarial (gain) loss

 

 

157

 

 

 

130

 

 

 

(12

)

 

 

(26

)

 

 

49

 

 

 

48

 

Net periodic benefit cost

 

$

247

 

 

$

218

 

 

$

52

 

 

$

9

 

 

$

112

 

 

$

113

 

 

The components of net periodic benefit cost of our pension and postretirement benefit plans for the nine months ended September 30, 2021 and 2020 consist of the following:

 

 

 

Domestic Plans

 

 

 

 

 

 

 

 

 

Pension Plans

 

 

Postretirement Benefit Plans

 

 

Foreign Pension Plans

 

(in thousands)

 

2021

 

 

2020

 

 

2021

 

 

2020

 

 

2021

 

 

2020

 

Service cost

 

$

 

 

$

 

 

$

52

 

 

$

38

 

 

$

343

 

 

$

330

 

Interest cost

 

 

315

 

 

 

490

 

 

 

136

 

 

 

222

 

 

 

233

 

 

 

254

 

Expected return on plan assets

 

 

(35

)

 

 

(109

)

 

 

 

 

 

 

 

 

(382

)

 

 

(394

)

Amortization of prior service credit

 

 

 

 

 

 

 

 

(4

)

 

 

(109

)

 

 

 

 

 

 

Recognized net actuarial loss

 

 

467

 

 

 

395

 

 

 

86

 

 

 

13

 

 

 

148

 

 

 

138

 

Net periodic benefit cost

 

$

747

 

 

$

776

 

 

$

270

 

 

$

164

 

 

$

342

 

 

$

328

 

 

We expect to contribute $0.8 million to our funded pension plans, $0.8 million to our unfunded pension plans, and $0.9 million to our postretirement benefit plans in 2021. During the nine months ended September 30, 2021, we contributed $0.6 million to our funded pension plans, $0.6 million to our unfunded pension plans, and $0.8 million to our postretirement benefit plans.

 

26


 

Note 19. Restructuring Charges

GES

As part of our efforts to drive efficiencies and simplify our business operations, we took certain restructuring actions designed 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. These initiatives resulted in restructuring charges related to the elimination of certain positions and continuing to reduce our facility footprint at GES, as well as charges related to the closure and liquidation of GES’ United Kingdom-based audio-visual services business. During the fourth quarter of 2020, we entered into an agreement with a third-party to outsource the management, cleaning, and storage of the aisle carpeting that we use at live events, which resulted in restructuring charges in 2021 when we vacated a facility.

Other Restructurings

We recorded restructuring charges in connection with the consolidation of certain support functions at our corporate headquarters and certain reorganization activities within Pursuit. These charges primarily consist of severance and related benefits due to headcount reductions.

Changes to the restructuring liability by major restructuring activity are as follows:

 

 

 

GES

 

 

Other Restructurings

 

 

 

 

(in thousands)

 

Severance &
Employee
Benefits

 

 

Facilities

 

 

Severance &
Employee
Benefits

 

 

Total

 

Balance at December 31, 2020

 

$

2,440

 

 

$

2,766

 

 

$

24

 

 

$

5,230

 

Restructuring charges

 

 

1,640

 

 

 

4,059

 

 

 

100

 

 

 

5,799

 

Cash payments

 

 

(992

)

 

 

(3,296

)

 

 

(91

)

 

 

(4,379

)

Non-cash items(1)

 

 

 

 

 

(1,890

)

 

 

 

 

 

(1,890

)

Adjustment to liability

 

 

(5

)

 

 

(26

)

 

 

(13

)

 

 

(44

)

Balance at September 30, 2021

 

$

3,083

 

 

$

1,613

 

 

$

20

 

 

$

4,716

 

 

(1)
Represents non-cash adjustments related to a write down of certain ROU assets as a result of vacating certain facilities prior to the lease term and the closure and liquidation of GES’ United Kingdom-based audio-visual services business.

 

As of September 30, 2021, $1.5 million of the liabilities related to severance and employee benefits will remain unpaid by the end of 2021. The liabilities related to facilities primarily include non-lease expenses that will be paid over the remaining lease terms. Refer to Note 23 Segment Information for information regarding restructuring charges by segment.

 

Note 20. Leases and Other

The balance sheet presentation of our operating and finance leases is as follows:

 

 

 

 

September 30,

 

 

December 31,

 

(in thousands)

 

Classification on the Condensed Consolidated Balance Sheet

 

2021

 

 

2020

 

Assets:

 

 

 

 

 

 

 

 

Operating lease assets

 

Operating lease ROU assets

 

$

87,935

 

 

$

82,739

 

Finance lease assets (1)

 

Property and equipment, net

 

 

61,263

 

 

 

23,366

 

Total lease assets

 

 

 

$

149,198

 

 

$

106,105

 

 

 

 

 

 

 

 

 

 

Liabilities:

 

 

 

 

 

 

 

 

Current:

 

 

 

 

 

 

 

 

Operating lease obligations

 

Operating lease obligations

 

$

11,058

 

 

$

15,697

 

Finance lease obligations

 

Current portion of debt and finance lease obligations

 

 

3,085

 

 

 

2,514

 

Noncurrent:

 

 

 

 

 

 

 

 

Operating lease obligations

 

Long-term operating lease obligations

 

 

86,165

 

 

 

70,150

 

Finance lease obligations (1)

 

Long-term debt and finance lease obligations

 

 

60,512

 

 

 

20,627

 

Total lease liabilities

 

 

 

$

160,820

 

 

$

108,988

 

 

(1)
The increase in finance lease assets and obligations is primarily due to the commencement of Pursuit’s new Sky Lagoon attraction in Iceland during the first quarter of 2021, which has a 46-year lease term.

27


 

During the first quarter of 2021, we recorded a write down of certain ROU assets as a result of vacating certain facilities prior to the lease term.

The components of lease expense consisted of the following:

 

 

 

Three Months Ended

 

 

Nine Months Ended

 

 

 

September 30,

 

 

September 30,

 

(in thousands)

 

2021

 

 

2020

 

 

2021

 

 

2020

 

Finance lease cost:

 

 

 

 

 

 

 

 

 

 

 

 

Amortization of ROU assets

 

$

1,093

 

 

$

926

 

 

$

3,231

 

 

$

2,767

 

Interest on lease liabilities

 

 

1,405

 

 

 

429

 

 

 

4,193

 

 

 

1,258

 

Operating lease cost

 

 

5,165

 

 

 

6,596

 

 

 

17,328

 

 

 

20,235

 

Short-term lease cost

 

 

394

 

 

 

123

 

 

 

853

 

 

 

465

 

Variable lease cost

 

 

1,059

 

 

 

1,557

 

 

 

3,093

 

 

 

4,615

 

Total lease cost, net

 

$

9,116

 

 

$

9,631

 

 

$

28,698

 

 

$

29,340

 

 

Other information related to operating and finance leases are as follows:

 

 

 

Three Months Ended

 

 

Nine Months Ended

 

 

 

September 30,

 

 

September 30,

 

(in thousands)

 

2021

 

 

2020

 

 

2021

 

 

2020

 

Cash paid for amounts included in the measurement of lease liabilities:

 

 

 

 

 

 

 

 

 

 

 

 

Operating cash flows from operating leases

 

$

5,140

 

 

$

5,644

 

 

$

17,753

 

 

$

18,268

 

Operating cash flows from finance leases

 

$

4,748

 

 

$

839

 

 

$

5,955

 

 

$

1,705

 

Financing cash flows from finance leases

 

$

656

 

 

$

665

 

 

$

2,050

 

 

$

2,235

 

ROU assets obtained in exchange for lease obligations:

 

 

 

 

 

 

 

 

 

 

 

 

Operating leases

 

$

8,033

 

 

$

(3,059

)

 

$

26,968

 

 

$

1,018

 

Finance leases

 

 

1,073

 

 

$

126

 

 

$

42,782

 

 

$

1,894

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

September 30,

 

 

December 31,

 

 

 

 

 

 

 

 

 

2021

 

 

2020

 

Weighted-average remaining lease term (years):

 

 

 

 

 

 

 

 

 

 

 

 

Operating leases

 

 

 

 

 

 

 

 

8.33

 

 

 

8.39

 

Finance leases

 

 

 

 

 

 

 

35.11(1)

 

 

 

13.97

 

Weighted-average discount rate:

 

 

 

 

 

 

 

 

 

 

 

 

Operating leases

 

 

 

 

 

 

 

 

6.72

%

 

 

6.93

%

Finance leases

 

 

 

 

 

 

 

 

9.05

%

 

 

7.99

%

 

(1)
The increase in finance lease assets and obligations is primarily due to the commencement of Pursuit’s new Sky Lagoon attraction in Iceland during the first quarter of 2021, which has a 46-year lease term.

 

As of September 30, 2021, the estimated future minimum lease payments under non-cancellable leases, excluding variable leases and variable non-lease components, are as follows:

 

(in thousands)

 

Operating Leases

 

 

Finance Leases

 

 

Total

 

Remainder of 2021

 

$

5,571

 

 

$

2,142

 

 

$

7,713

 

2022

 

 

19,954

 

 

 

8,269

 

 

 

28,223

 

2023

 

 

17,858

 

 

 

7,750

 

 

 

25,608

 

2024

 

 

16,113

 

 

 

6,699

 

 

 

22,812

 

2025

 

 

14,832

 

 

 

6,168

 

 

 

21,000

 

Thereafter

 

 

60,906

 

 

 

188,955

 

 

 

249,861

 

Total future lease payments

 

 

135,234

 

 

 

219,983

 

 

 

355,217

 

Less: Amount representing interest

 

 

(38,011

)

 

 

(156,386

)

 

 

(194,397

)

Present value of minimum lease payments

 

 

97,223

 

 

 

63,597

 

 

 

160,820

 

Current portion

 

 

11,058

 

 

 

3,085

 

 

 

14,143

 

Long-term portion

 

$

86,165

 

 

$

60,512

 

 

$

146,677

 

 

28


 

 

As of September 30, 2021, the estimated future minimum rental income under non-cancellable leases, which includes rental income from facilities that we own, is as follows:

 

(in thousands)

 

 

 

Remainder of 2021

 

$

411

 

2022

 

 

1,291

 

2023

 

 

1,071

 

2024

 

 

847

 

2025

 

 

694

 

Thereafter

 

 

1,453

 

Total minimum rents

 

$

5,767

 

 

Lease Not Yet Commenced

As of September 30, 2021, we had executed a facility lease for which we did not have control of the underlying assets. Accordingly, we did not record the lease liability and ROU asset on the Condensed Consolidated Balance Sheets. This lease is for the new FlyOver attraction, FlyOver Canada Toronto. We expect the lease commencement date to begin in fiscal year 2022 with a lease term of 20 years.

 

Note 21. Litigation, Claims, Contingencies, and Other

We are plaintiffs or defendants to various actions, proceedings, and pending claims, some of which involve, or may involve, compensatory, punitive, or other damages. Litigation is subject to many uncertainties and it is possible that some of the legal actions, proceedings, or claims could be decided against us. Although the amount of liability as of September 30, 2021 with respect to unresolved legal matters is not ascertainable, we believe that any resulting liability, after taking into consideration amounts already provided for and insurance coverage, will not have a material effect on our business, financial position, or results of 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. We immediately reported the accident to our relevant insurance carriers, who are also supporting the investigation and subsequent claims. Subject to customary deductibles, we believe that our insurance coverage is sufficient to cover potential claims related to this accident.

We are subject to various U.S. federal, state, and foreign laws and regulations governing the prevention of pollution and the protection of the environment in the jurisdictions in which we have or had operations. If we fail to comply with these environmental laws and regulations, civil and criminal penalties could be imposed, and we could become subject to regulatory enforcement actions in the form of injunctions and cease and desist orders. As is the case with many companies, we also face exposure to actual or potential claims and lawsuits involving environmental matters relating to our past operations. As of September 30, 2021, we had recorded environmental remediation liabilities of $2.3 million related to previously sold operations. Although we are a party to certain environmental disputes, we believe that any resulting liabilities, after taking into consideration amounts already provided for and insurance coverage, will not have a material effect on our financial position or results of operations.

As of September 30, 2021, on behalf of our subsidiaries, we had certain obligations under guarantees to third parties. These guarantees are not subject to liability recognition in the condensed consolidated financial statements and relate to leased facilities and equipment leases entered into by our subsidiary operations. We would generally be required to make payments to the respective third parties under these guarantees in the event that the related subsidiary could not meet its own payment obligations. The maximum potential amount of future payments that we would be required to make under all guarantees existing as of September 30, 2021 would be $128.1 million. These guarantees relate to our leased equipment and facilities through January 2040. There are no recourse provisions that would enable us to recover from third parties any payments made under the guarantees. Furthermore, there are no collateral or similar arrangements pursuant to which we could recover payments.

A significant number of our employees are unionized and we are a party to approximately 100 collective-bargaining agreements, with approximately one-third requiring renegotiation each year. If we are unable to reach an agreement with a union during the collective-bargaining process, the union may call for a strike or work stoppage, which may, under certain circumstances, adversely impact our business and results of operations. We believe that relations with our employees are satisfactory and that collective-bargaining agreements expiring in 2021 will be renegotiated in the ordinary course of business. Although our labor relations are currently stable, disruptions could occur, with the possibility of an adverse impact on the operating results of GES.

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. The aggregate amount of insurance liabilities (up to our retention limit) related to our continuing operations was $12.8 million as of September 30, 2021, which includes $7.9 million related to workers’ compensation liabilities, and

29


 

$4.9 million related to general liability claims. We have also retained and provided for certain workers’ compensation insurance liabilities in conjunction with previously sold businesses of $1.9 million as of September 30, 2021. We are also self-insured for certain employee health benefits and the estimated employee health benefit claims incurred but not yet reported was $0.8 million as of September 30, 2021. Provisions for losses for claims incurred, including actuarially derived estimated claims incurred but not yet reported, are made based on our historical experience, claims frequency, and other factors. A change in the assumptions used could result in an adjustment to recorded liabilities. We have purchased insurance for amounts in excess of the self-insured levels, which generally range from $0.2 million to $0.5 million on a per claim basis. We do not maintain a self-insured retention pool fund as claims are paid from current cash resources at the time of settlement. Our net cash payments in connection with these insurance liabilities were $1.0 million for the three months ended September 30, 2021, $2.1 million for the nine months ended September 30, 2021, $1.6 million for the three months ended September 30, 2020, and $4.4 million for the nine months ended September 30, 2020.

In addition, as of September 30, 2021, we have recorded insurance liabilities of $6.4 million related to continuing operations, which represents the amount for which we remain the primary obligor after self-insured insurance limits, without taking into consideration the above-referenced insurance coverage. The $6.4 million is related to workers’ compensation liabilities, which is recorded in other deferred items and liabilities in the Condensed Consolidated Balance Sheets with a corresponding receivable in other investments and assets.

Note 22. Noncontrolling Interest – Redeemable and Non-redeemable

Redeemable noncontrolling interest

On November 3, 2017, we acquired the controlling interest (54.5% of the common stock) in Esja, a private corporation in Reykjavik, Iceland. Subsequent to additional capital contributions, our equity ownership increased to 54.9% as of September 30, 2021. Through Esja and its wholly-owned subsidiary, we are operating the FlyOver Iceland attraction.

The minority Esja shareholders have the right to sell (or “put”) their Esja shares to us based on a multiple of 5.0x EBITDA as calculated on the trailing 12 months from the most recently completed quarter before the put option exercise. The put option is only exercisable after 36 months of business operation (the “Reference Date”) and if the FlyOver Iceland attraction has earned a minimum of €3.25 million in unadjusted EBITDA during the most recent fiscal year and during the trailing 12-month period prior to exercise (the “Put Option Condition”). The put option is exercisable during a period of 12 months following the Reference Date (the “Option Period”) if the Put Option Condition has been met. If the Put Option Condition has not been met during the first Option Period, the Reference Date will be extended for an additional 12 months up to three times. If after 72 months, the FlyOver Iceland attraction has not achieved the Put Option Condition, the put option expires. If the Put Option Condition is met during any of the Option Periods, yet the shares are not exercised prior to the end of the 12-month Option Period, the put option will expire.

The noncontrolling interest’s carrying value is determined by the fair value of the noncontrolling interest as of the acquisition date and the noncontrolling interest’s share of the subsequent net income or loss. This value is benchmarked against the redemption value of the sellers’ put option. The carrying value is adjusted to the redemption value, provided that it does not fall below the initial carrying value, as determined by the purchase price allocation. We have made a policy election to reflect any changes caused by such an adjustment to retained earnings (accumulated deficit), rather than to current earnings (loss).

Changes in the redeemable noncontrolling interest are as follows:

 

(in thousands)

 

 

 

Balance at December 31, 2020

 

$

5,225

 

Net loss attributable to redeemable noncontrolling interest

 

 

(1,221

)

Adjustment to the redemption value

 

 

1,091

 

Capital contributions

 

 

282

 

Foreign currency translation adjustment

 

 

(126

)

Balance at September 30, 2021

 

$

5,251

 

Non-redeemable noncontrolling interest

Non-redeemable noncontrolling interest represents the portion of equity in a subsidiary that is not attributable, directly or indirectly, to us. Our non-redeemable noncontrolling interest relates to the equity ownership interest that we do not own.

Changes in the non-redeemable noncontrolling interest are as follows:

 

30


 

(in thousands)

Glacier Park Inc.

 

 

Brewster (1)

 

 

Sky Lagoon

 

 

Total

 

Balance at December 31, 2020

$

13,953

 

 

$

51,295

 

 

$

12,896

 

 

$

78,144

 

Net (income) loss attributable to non-redeemable noncontrolling interest

 

1,893

 

 

 

1,976

 

 

 

(820

)

 

 

3,049

 

Acquisitions

 

 

 

 

6,759

 

 

 

 

 

 

6,759

 

Dividends

 

 

 

 

(1,160

)

 

 

 

 

 

(1,160

)

Foreign currency translation adjustments

 

1

 

 

 

117

 

 

 

(259

)

 

 

(141

)

Balance at September 30, 2021

$

15,847

 

 

$

58,987

 

 

$

11,817

 

 

$

86,651

 

Equity ownership interest that we do not own

 

20

%

 

 

40

%

 

 

49

%

 

 

 

 

(1)
Includes Mountain Park Lodges and our recently acquired Golden Skybridge at Brewster, part of the Banff Jasper Collection. 

 

 

31


 

Note 23. Segment Information

We measure the profit and performance of our operations on the basis of segment operating income or loss, which excludes restructuring charges and recoveries and impairment charges. Intersegment sales are eliminated in consolidation and intersegment transfers are not significant. Corporate activities include expenses not allocated to operations. Depreciation and amortization and share-based compensation expense are the only significant non-cash items for the reportable segments.

During the first quarter of 2021, we reorganized GES’ operating segments to represent the changes in how our CODM reviews the financial performance of GES and makes decisions regarding the allocation of resources. Accordingly, GES is now a single reportable segment. We made no changes to the Pursuit reportable segment.

Our reportable segments, with reconciliations to consolidated totals, are as follows:

 

 

 

Three Months Ended

 

 

Nine Months Ended

 

 

 

September 30,

 

 

September 30,

 

(in thousands)

 

2021

 

 

2020

 

 

2021

 

 

2020

 

Revenue:

 

 

 

 

 

 

 

 

 

 

 

 

GES

 

$

116,044

 

 

$

13,992

 

 

$

160,109

 

 

$

319,930

 

Pursuit

 

 

117,555

 

 

 

48,815

 

 

 

163,658

 

 

 

67,602

 

Total revenue

 

$

233,599

 

 

$

62,807

 

 

$

323,767

 

 

$

387,532

 

Segment operating income (loss):

 

 

 

 

 

 

 

 

 

 

 

 

GES

 

$

(9,499

)

 

$

(18,248

)

 

$

(56,300

)

 

$

(39,450

)

Pursuit

 

 

49,601

 

 

 

11,467

 

 

 

23,183

 

 

 

(26,499

)

Segment operating income (loss)

 

 

40,102

 

 

 

(6,781

)

 

 

(33,117

)

 

 

(65,949

)

Corporate eliminations (1)

 

 

17

 

 

 

16

 

 

 

52

 

 

 

48

 

Corporate activities

 

 

(3,093

)

 

 

(2,645

)

 

 

(8,104

)

 

 

(5,902

)

Interest expense, net

 

 

(9,518

)

 

 

(5,450

)

 

 

(20,168

)

 

 

(14,399

)

Multi-employer pension plan withdrawal

 

 

 

 

 

 

 

 

(57

)

 

 

(462

)

Other expense, net

 

 

(466

)

 

 

(210

)

 

 

(1,506

)

 

 

(894

)

Restructuring (charges) recoveries:

 

 

 

 

 

 

 

 

 

 

 

 

GES

 

 

(2,129

)

 

 

(10,686

)

 

 

(5,699

)

 

 

(11,371

)

Pursuit

 

 

(32

)

 

 

12

 

 

 

(55

)

 

 

(45

)

Corporate

 

 

(25

)

 

 

(585

)

 

 

(45

)

 

 

(954

)

Impairment charges:

 

 

 

 

 

 

 

 

 

 

 

 

GES

 

 

 

 

 

(676

)

 

 

 

 

 

(201,319

)

Pursuit

 

 

 

 

 

 

 

 

 

 

 

(1,757

)

Income (loss) from continuing operations before income taxes

 

$

24,856

 

 

$

(27,005

)

 

$

(68,699

)

 

$

(303,004

)

(1)
Corporate eliminations represent the elimination of depreciation expense recorded by Pursuit associated with previously eliminated intercompany profit realized by GES for renovations to Pursuit’s Banff Gondola.

 

32


 

Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations

Forward-Looking Statements

This Form 10-Q contains a number of forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. 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 contained in this Quarterly Report on Form 10-Q. Such risks, uncertainties and other important factors include, among others: the factors set forth under “Risk Factors” (Part I, Item 1A) and “Management’s Discussion and Analysis of Financial Condition and Results of Operations” (Part II, Item 7) in our 2020 Form 10-K filed with the United States Securities and Exchange Commission (the “SEC”), as may be updated elsewhere in this report; and the information set forth in other Quarterly Reports on Form 10-Q and Current Reports on Form 8-K that we have filed or will file with the SEC. 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:

the impact of the COVID-19 pandemic on our financial condition, liquidity, and cash flow;
our ability to anticipate and adjust for the impact of the COVID-19 pandemic on our businesses;
general economic uncertainty in key global markets and a worsening of global economic conditions;
travel industry disruptions;
our ability to successfully integrate and achieve established financial and strategic goals from acquisitions;
our dependence on large exhibition event clients;
the importance of key members of our account teams to our business relationships;
the competitive nature of the industries in which we operate;
unanticipated delays and cost overruns of our capital projects, and our ability to achieve established financial and strategic goals for such projects;
seasonality of our businesses;
transportation disruptions and increases in transportation costs;
natural disasters, weather conditions, and other catastrophic events;
our multi-employer pension plan funding obligations;
our exposure to labor cost increases and work stoppages related to unionized employees;
liabilities relating to prior and discontinued operations;
adverse effects of show rotation on our periodic results and operating margins;
our exposure to currency exchange rate fluctuations;
our exposure to cybersecurity attacks and threats;
compliance with laws governing the storage, collection, handling, and transfer of personal data and our exposure to legal claims and fines for data breaches or improper handling of such data; and
changes affecting the London Inter-bank Offered Rate.

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

The following Management’s Discussion and Analysis (“MD&A”) should be read in conjunction with our 2020 Form 10-K and the condensed consolidated financial statements and related notes included in this Form 10-Q. The MD&A is intended to assist in understanding our financial condition and results of operations.

33


 

Overview

We are a leading provider of experiential leisure travel and live events and marketing experiences 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 two reportable business segments: GES and Pursuit:

GES is a global, full-service live events company providing exhibition and conference services, brand experiences, and on-site venue services to the world’s leading brands and event organizers.
Pursuit is an attractions and hospitality company that provides a collection of inspiring and unforgettable experiences in iconic destinations.

COVID-19 Pandemic

Starting in mid-March 2020, the COVID-19 pandemic had a significant and negative impact on our operations and financial performance, with severe disruptions in live event and tourism activity. In response, we implemented aggressive cost reduction measures in 2020 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 common stock dividend payments and share repurchases, and we availed ourselves of governmental assistance programs for wages and other expense relief. Additionally, in May and August 2020, we obtained waivers of the financial covenants under our then $450 million revolving credit facility (“the 2018 Credit Facility”), which we subsequently refinanced in July 2021 as discussed below, and 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 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 Condensed Consolidated Financial Statements (Part I, Item 1 of this Form 10-Q) for further information.

During 2021, we continued to preserve cash and closely manage our costs as pandemic-related restrictions lessened. In connection with COVID-19 vaccination programs, we began to see signs of recovery in the travel and hospitality and live event sectors during early 2021 as people started to feel more comfortable traveling and gathering in larger groups. Pursuit’s operations in the United States experienced strong visitation primarily from domestic travelers, while tourism in Canada remained constrained by border closures. Canada reopened its border with the United States in early August 2021 to fully vaccinated travelers and to travelers from other countries beginning in September 2021, which accelerated short-term bookings from long-haul travelers to our Pursuit operations in Canada. The live event markets also began to re-open in 2021 with smaller scale live events starting to take place during the first half of the year. Toward the end of the second quarter and into the third quarter, we began to see an acceleration in the recovery of in-person trade shows as event organizers began to hold larger scale face-to-face live events.

Effective July 30, 2021, we refinanced our 2018 Credit Facility, which was scheduled to mature on October 24, 2023, with a new $500 million senior secured credit facility (the “2021 Credit Facility”) to provide for financial flexibility to support our growth initiatives. The 2021 Credit Facility provides for a $400 million term loan with a maturity date of July 30, 2028 (“Term Loan B”) and a $100 million revolving credit facility with a maturity date of July 30, 2026. The loan proceeds of $400 million were offset in part by $14.8 million in fees. The proceeds from the Term Loan B were used to repay the 2018 Credit Facility and the remaining proceeds will be used to fund future acquisitions and growth initiatives and for general corporate purposes. Refer to Note 12 – Debt and Finance Lease Obligations of the Notes to Condensed Consolidated Financial Statements (Part I, Item 1 of this Form 10-Q) for further information.

Although we have seen a recent acceleration in demand and bookings and early signs of recovery for travel and in-person live events, we remain cautious as variants of COVID-19, including the predominant Delta variant, have caused an increase in infections and hospitalizations across the United States and globally. Due to the evolving and uncertain nature of COVID-19, and depending on the success of ongoing vaccination and other mitigation efforts as well as the scope and magnitude of infections and hospitalizations, 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 significant. We will continue to evaluate and implement additional actions necessary to mitigate the negative financial and operational impact of COVID-19 on our business.

Seasonality

GES’ live 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. Starting in mid-March 2020, in-person live event activity was largely cancelled or postponed due to the COVID-19 pandemic. The live event markets began to re-open in 2021 with smaller scale live events starting to take place during the first half of the year. Toward the end of the second quarter and into the third quarter, we began to see an acceleration in the recovery of in-person trade shows as event organizers began to hold larger scale face-to-face live events.

34


 

Pursuit’s peak activity occurs during the summer months. During 2020, health and travel restrictions including border closures due to the COVID-19 pandemic resulted in lower visitation to all of Pursuit’s properties. During 2021, as pandemic-related restrictions lessened and as people started to feel more comfortable traveling, visitation to Pursuit’s properties improved from 2020. Pursuit’s experiences in the United States saw a strong recovery in visitation primarily from domestic travelers, while tourism in Canada and Iceland remained constrained by border closures and travel restrictions. Canada reopened its border with the United States in early August 2021 to fully vaccinated travelers and to travelers from other countries beginning in September 2021, which accelerated short-term bookings from long-haul travelers to our Pursuit operations in Canada.

Results of Operations

Financial Highlights

 

 

 

Three Months Ended

 

 

 

 

Nine Months Ended

 

 

 

 

 

 

September 30,

 

 

 

 

September 30,

 

 

 

 

(in thousands, except per share data)

 

2021

 

 

2020

 

 

%
Change

 

2021

 

 

2020

 

 

%
Change

 

Total revenue (1)

 

$

233,599

 

 

$

62,807

 

 

**

 

$

323,767

 

 

$

387,532

 

 

 

(16.5

)%

Net income (loss) attributable to Viad

 

$

15,067

 

 

$

(30,758

)

 

**

 

$

(70,111

)

 

$

(323,621

)

 

 

78.3

%

Segment operating income (loss) (2)

 

$

40,102

 

 

$

(6,781

)

 

**

 

$

(33,117

)

 

$

(65,949

)

 

 

49.8

%

Diluted income (loss) per common share
   from continuing operations
   attributable to Viad common
   stockholders

 

$

0.45

 

 

$

(1.54

)

 

**

 

$

(3.80

)

 

$

(15.98

)

 

 

76.2

%

** Change is greater than +/- 100%

(1)
As previously disclosed in our 2020 Form 10-K, and subsequent to the issuance of the Condensed Consolidated Financial Statements for the quarter ended September 30, 2020, we identified prior period errors related to the recognition of revenue of GES’ third-party services. Revenue from these services should have been recorded on a net basis to reflect only the fees received for arranging these services, whereas previously, we recorded this revenue on a gross basis, thus overstating revenue and cost of services by the same amount. As a result, GES’ 2020 revenue has been corrected to reflect this immaterial gross-to-net adjustment. Refer to Note 1 – Overview and Basis of Presentation of the Notes to Condensed Consolidated Financial Statements (Part I, Item 1 of this Form 10-Q) for additional information.
(2)
Refer to Note 23 Segment Information of the Notes to Condensed Consolidated Financial Statements (Part I, Item 1 of this Form 10-Q) for a reconciliation of the non-GAAP financial measure, segment operating income (loss), to the most directly comparable GAAP measure.

 

Three months ended September 30, 2021 compared with the three months ended September 30, 2020

Total revenue increased $170.8 million during the three months ended September 30, 2021 primarily due to face-to-face live events once again taking place at GES and Pursuit’s increased visitation from domestic travelers in Glacier Park and the Alaska Collection. Canada’s border reopened to the United States in early August 2021 to fully vaccinated travelers and in September 2021 to other countries. Additionally, there continues to be strong regional and national demand from Canadians as they were required to stay closer to home.
Net income attributable to Viad was $15.1 million during the three months ended September 30, 2021 as compared to a loss of $30.8 million during the three months ended September 30, 2020. This improvement was primarily due to improved segment operating results in 2021 and restructuring charges of $11.3 million during the three months ended September 30, 2020 related to transformation efforts at GES to significantly reduce costs and create a lower and more flexible cost structure.
Total segment operating income was $40.1 million during the three months ended September 30, 2021 as compared to a loss of $6.8 million during the three months ended September 30, 2020. This improvement was primarily due to increased revenue at GES and Pursuit in addition to a lower cost structure at GES. The 2020 third quarter operating loss included a $13.5 million gain on the sale of GES’ San Diego facility.

 

Nine months ended September 30, 2021 compared with the nine months ended September 30, 2020

Total revenue decreased $63.8 million or 16.5% during the nine months ended September 30, 2021 primarily due to the impact of the COVID-19 pandemic as GES experienced show postponements and cancellations starting in mid-March 2020. Live events remained largely shut down during the first half of 2021 with large scale in-person events beginning to take place toward the end of the second quarter and into the third quarter. Although Pursuit continued to be affected by pandemic-related restrictions in certain geographies, overall revenue at Pursuit improved from 2020 as health and travel restrictions lessened and people felt more comfortable traveling.

35


 

Net loss attributable to Viad improved $253.5 million during the nine months ended September 30, 2021, primarily reflecting impairment charges of $203.1 million and higher restructuring charges of $6.6 million recorded during the nine months ended September 30, 2020 as compared to the nine months ended September 30, 2021, as well as improved segment operating results during 2021.
Total segment operating loss improved $32.8 million during the nine months ended September 30, 2021, primarily due to higher revenue at Pursuit in addition to the elimination of performance-based incentives in 2020.

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 for the three months ended September 30, 2021 and 2020:

 

 

 

Revenue

 

 

Segment Operating Income (Loss)

 

 

 

Weighted-Average
Exchange Rates

 

 

FX Impact

 

 

Weighted-Average
Exchange Rates

 

 

FX Impact

 

 

 

2021

 

 

2020

 

 

(in thousands)

 

 

2021

 

 

2020

 

 

 (in thousands)

 

GES:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Canada (CAD)

 

$

0.79

 

 

$

0.75

 

 

$

68

 

 

$

0.80

 

 

$

0.75

 

 

$

(51

)

United Kingdom (GBP)

 

$

1.37

 

 

$

1.30

 

 

 

1,060

 

 

$

1.38

 

 

$

1.29

 

 

 

(2

)

Europe (EUR)

 

$

1.18

 

 

$

1.17

 

 

 

2

 

 

$

1.18

 

 

$

1.17

 

 

 

(9

)

 

 

 

 

 

 

 

 

$

1,130

 

 

 

 

 

 

 

 

$

(62

)

Pursuit:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Canada (CAD)

 

$

0.79

 

 

$

0.75

 

 

$

2,885

 

 

$

0.79

 

 

$

0.75

 

 

$

1,289

 

Iceland (ISK)

 

$

0.01

 

 

$

0.01

 

 

 

100

 

 

$

0.01

 

 

$

0.01

 

 

 

(33

)

 

 

 

 

 

 

 

 

$

2,985

 

 

 

 

 

 

 

 

$

1,256

 

Total

 

 

 

 

 

 

 

$

4,115

 

 

 

 

 

 

 

 

$

1,194

 

 

The following table summarizes the FX Impact on revenue and segment operating income (loss) from our significant international operations for the nine months ended September 30, 2021 and 2020:

 

 

 

Revenue

 

 

Segment Operating Income (Loss)

 

 

 

Weighted-Average
Exchange Rates

 

 

FX Impact

 

 

Weighted-Average
Exchange Rates

 

 

FX Impact

 

 

 

2021

 

 

2020

 

 

(in thousands)

 

 

2021

 

 

2020

 

 

 (in thousands)

 

GES:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Canada (CAD)

 

$

0.79

 

 

$

0.73

 

 

$

185

 

 

$

0.80

 

 

$

0.73

 

 

$

(234

)

United Kingdom (GBP)

 

$

1.38

 

 

$

1.28

 

 

 

1,538

 

 

$

1.38

 

 

$

1.27

 

 

 

(535

)

Europe (EUR)

 

$

1.18

 

 

$

1.11

 

 

 

54

 

 

$

1.19

 

 

$

1.11

 

 

 

(32

)

 

 

 

 

 

 

 

 

$

1,777

 

 

 

 

 

 

 

 

$

(801

)

Pursuit:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Canada (CAD)

 

$

0.80

 

 

$

0.75

 

 

$

4,635

 

 

$

0.80

 

 

$

0.74

 

 

$

(250

)

Iceland (ISK)

 

$

0.01

 

 

$

0.01

 

 

 

168

 

 

$

0.01

 

 

$

0.01

 

 

 

(175

)

 

 

 

 

 

 

 

 

$

4,803

 

 

 

 

 

 

 

 

$

(425

)

Total

 

 

 

 

 

 

 

$

6,580

 

 

 

 

 

 

 

 

$

(1,226

)

 

 

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 loss are translated into U.S. dollars.

36


 

Analysis of Revenue and Operating Results by Reportable Segment

GES

During the first quarter of 2021, we reorganized GES’ operating segments to represent the changes in how our chief operating decision maker (“CODM”) reviews the financial performance of GES and makes decisions regarding the allocation of resources. Accordingly, GES is now a single reportable segment.

The following table presents a comparison of GES’ reported revenue and segment operating loss to organic revenue(2) and organic segment operating loss(2) for the three and nine months ended September 30, 2021 and 2020:

 

 

 

Three Months Ended

 

 

Three Months Ended

 

 

 

 

 

 

September 30, 2021

 

 

September 30, 2020

 

 

Change vs. 2020

 

(in thousands)

 

As
Reported

 

 

Acquisitions

 

 

FX
Impact

 

 

Organic(2)

 

 

As
Reported

 

 

Acquisitions

 

 

Organic(2)

 

 

As
Reported

 

 

Organic(2)

 

Total GES revenue(1)

 

$

116,044

 

 

$

 

 

$

1,130

 

 

$

114,914

 

 

$

13,992

 

 

$

 

 

$

13,992

 

 

**

 

 

**

 

Total GES segment operating loss(3)

 

$

(9,499

)

 

$

 

 

$

(62

)

 

$

(9,437

)

 

$

(18,248

)

 

$

 

 

$

(18,248

)

 

 

47.9

%

 

 

48.3

%

 

 

 

Nine Months Ended

 

 

Nine Months Ended

 

 

 

 

 

 

September 30, 2021

 

 

September 30, 2020

 

 

Change vs. 2020

 

(in thousands)

 

As
Reported

 

 

Acquisitions

 

 

FX
Impact

 

 

Organic(2)

 

 

As
Reported

 

 

Acquisitions

 

 

Organic(2)

 

 

As
Reported

 

 

Organic(2)

 

Total GES revenue(1)

 

$

160,109

 

 

$

 

 

$

1,777

 

 

$

158,332

 

 

$

319,930

 

 

$

 

 

$

319,930

 

 

 

(50.0

)%

 

 

(50.5

)%

Total GES segment operating loss(3)

 

$

(56,300

)

 

$

 

 

$

(801

)

 

$

(55,499

)

 

$

(39,450

)

 

$

 

 

$

(39,450

)

 

 

(42.7

)%

 

 

(40.7

)%

 

** Change is greater than +/- 100%

(1)
As previously disclosed in our 2020 Form 10-K, and subsequent to the issuance of the Condensed Consolidated Financial Statements for the quarter ended September 30, 2020, we identified prior period errors related to the recognition of revenue of GES’ third-party services. Revenue from these services should have been recorded on a net basis to reflect only the fees received for arranging these services, whereas previously, we recorded this revenue on a gross basis, thus overstating revenue and cost of services by the same amount. As a result, GES’ 2020 revenue has been corrected to reflect this immaterial gross-to-net adjustment. Refer to Note 1 – Overview and Basis of Presentation of the Notes to Condensed Consolidated Financial Statements (Part I, Item 1 of this Form 10-Q) for additional information.
(2)
Organic revenue and organic segment operating loss are non-GAAP financial measures that adjust for the impacts of exchange rate variances and acquisitions, if any, until such acquisitions are included in the entirety of both comparable periods presented. For more information about organic revenue and organic segment operating loss, see the “Non-GAAP Measures” section of this MD&A.
(3)
Refer to Note 23 Segment Information of the Notes to Condensed Consolidated Financial Statements (Part I, Item 1 of this Form 10-Q) for a reconciliation of the non-GAAP financial measure, segment operating loss, to the most directly comparable GAAP measure.

 

Three months ended September 30, 2021 compared with the three months ended September 30, 2020

GES revenue increased $102.1 million during the three months ended September 30, 2021 as compared to the prior year as face-to-face live event activity increased and large scale events began to take place after being canceled or postponed for most of 2020 and into the first half of 2021. Revenue earned during the third quarter of 2020 was primarily driven by virtual and hybrid events. Organic revenue* increased $100.9 million during the three months ended September 30, 2021.

GES segment operating loss improved $8.7 million primarily due to the increase in revenue and the reduction in operating costs by reducing wages and discretionary costs. Additionally, GES’ operating results included a $13.5 million gain on sale of GES’ San Diego facility during the 2020 third quarter. Excluding this gain, GES’ segment operating results improved by $22.2 million as compared to the three months ended September 30, 2020. Organic segment operating loss* improved $8.8 million during the three months ended September 30, 2021.

Nine months ended September 30, 2021 compared with the nine months ended September 30, 2020

GES revenue decreased $159.8 million, primarily due to show postponements and cancellations as a result of the COVID-19 pandemic beginning in mid-March 2020. During the first half of 2021, GES serviced clients primarily with virtual and hybrid events while in-person events remained largely shut down. Larger-scale in-person events began to take place toward the end of the second quarter and during the third quarter with generally lower exhibitor participation and lower attendance than pre-pandemic occurrences. Revenue earned during 2020 was primarily driven by shows completed during the first quarter of 2020 before the onset of the pandemic,

37


 

compensation for work completed on cancelled shows, the conversion of convention centers into temporary hospitals, and virtual and hybrid events completed during 2020. Organic revenue* decreased $161.6 million during the nine months ended September 30, 2021.

GES segment operating loss increased $16.8 million during the nine months ended September 30, 2021 primarily due to the decrease in revenue, offset in part by the reduction in operating costs by reducing wages and discretionary cost. Additionally, GES’ operating results included a $9.1 million gain on sale of a GES warehouse in Orlando in 2021 and a $13.5 million gain on sale of a GES warehouse in San Diego in 2020. Organic segment operating loss* increased $16.0 million during the nine months ended September 30, 2021.

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

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 loss(3) for the three and nine months ended September 30, 2021 and 2020:

 

 

 

Three Months Ended

 

 

Three Months Ended

 

 

 

 

 

September 30, 2021

 

 

September 30, 2020

 

 

Change vs. 2020

(in thousands)

 

As
Reported

 

 

Acquisitions(2)

 

 

FX
Impact

 

 

Organic(3)

 

 

As
Reported

 

 

Acquisitions(2)

 

 

Organic(3)

 

 

As
Reported

 

Organic(3)

Revenue(1):

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Pursuit:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Attractions

 

$

49,614

 

 

$

2,297

 

 

$

1,763

 

 

$

45,554

 

 

$

17,699

 

 

$

 

 

$

17,699

 

 

**

 

**

Hospitality

 

 

63,151

 

 

 

 

 

 

1,102

 

 

 

62,049

 

 

 

30,403

 

 

 

 

 

 

30,403

 

 

**

 

**

Transportation

 

 

3,468

 

 

 

 

 

 

75

 

 

 

3,393

 

 

 

444

 

 

 

 

 

 

444

 

 

**

 

**

Travel planning and other

 

 

1,728

 

 

 

 

 

 

59

 

 

 

1,669

 

 

 

160

 

 

 

 

 

 

160

 

 

**

 

**

Intra-segment eliminations

 

 

(406

)

 

 

 

 

 

(14

)

 

 

(392

)

 

 

109

 

 

 

 

 

 

109

 

 

**

 

**

Total Pursuit

 

$

117,555

 

 

$

2,297

 

 

$

2,985

 

 

$

112,273

 

 

$

48,815

 

 

$

 

 

$

48,815

 

 

**

 

**

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Segment operating income (4):

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Total Pursuit

 

$

49,601

 

 

$

1,504

 

 

$

1,256

 

 

$

46,841

 

 

$

11,467

 

 

$

 

 

$

11,467

 

 

**

 

**

 

 

 

Nine Months Ended

 

 

Nine Months Ended

 

 

 

 

 

 

September 30, 2021

 

 

September 30, 2020

 

 

Change vs. 2020

 

(in thousands)

 

As
Reported

 

 

Acquisitions(2)

 

 

FX
Impact

 

 

Organic(3)

 

 

As
Reported

 

 

Acquisitions(2)

 

 

Organic(3)

 

 

As
Reported

 

 

Organic(3)

 

Revenue(1):

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Pursuit:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Attractions

 

$

64,799

 

 

$

2,531

 

 

$

2,426

 

 

$

59,842

 

 

$

25,141

 

 

$

 

 

$

25,141

 

 

**

 

 

**

 

Hospitality

 

 

91,971

 

 

 

 

 

 

2,151

 

 

 

89,820

 

 

 

39,382

 

 

 

 

 

 

39,382

 

 

**

 

 

**

 

Transportation

 

 

4,975

 

 

 

 

 

 

140

 

 

 

4,835

 

 

 

2,604

 

 

 

 

 

 

2,604

 

 

 

91.1

%

 

 

85.7

%

Travel planning and other

 

 

2,376

 

 

 

 

 

 

113

 

 

 

2,263

 

 

 

361

 

 

 

 

 

 

361

 

 

**

 

 

**

 

Intra-segment eliminations

 

 

(463

)

 

 

 

 

 

(27

)

 

 

(436

)

 

 

114

 

 

 

 

 

 

114

 

 

**

 

 

**

 

Total Pursuit

 

$

163,658

 

 

$

2,531

 

 

$

4,803

 

 

$

156,324

 

 

$

67,602

 

 

$

 

 

$

67,602

 

 

**

 

 

**

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Segment operating income (loss)(4):

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Total Pursuit

 

$

23,183

 

 

$

1,171

 

 

$

(425

)

 

$

22,437

 

 

$

(26,499

)

 

$

 

 

$

(26,499

)

 

**

 

 

**

 

 

** Change is greater than +/- 100%

(1)
Revenue by line of business does not agree to Note 2 – Revenue and Related Contract Costs and Contract Liabilities in the Notes to Condensed Consolidated Financial Statements (Part I, Item 1 of this Form 10-Q) as the amounts in the above table include product revenue from food and beverage and retail operations within each line of business.
(2)
Acquisitions include the Golden Skybridge (acquired March 2021 and opened June 2021).
(3)
Organic revenue and organic segment operating income (loss) are non-GAAP financial measures that adjust for the impacts of exchange rate variances and acquisitions, if any, until such acquisitions are included in the entirety of both comparable periods presented. For more information about organic revenue and organic segment operating income (loss), see the “Non-GAAP Measures” section of this MD&A.
(4)
Refer to Note 23 Segment Information of the Notes to Condensed Consolidated Financial Statements (Part I, Item 1 of this Form 10-Q) for a reconciliation of the non-GAAP financial measure, segment operating income (loss), to the most directly comparable GAAP measure.

Three months ended September 30, 2021 compared with the three months ended September 30, 2020

Pursuit revenue increased $68.7 million as all of Pursuit’s attractions and properties were open during the third quarter of 2021, although some operated at reduced capacities, whereas 2020 was negatively impacted by the COVID-19 pandemic as travel restrictions and border closures largely remained in place. Glacier Park and the Alaska Collection did not have any COVID-19 related closures

38


 

during the third quarter of 2021 and experienced increased visitation from strong domestic leisure travel. The Canadian border reopened to fully vaccinated travelers from the United States in early August 2021 and to fully vaccinated travelers from other countries in September 2021. In addition to general improvements in leisure travel, Pursuit also opened three new attractions during 2021 that generated an aggregate of $7.4 million in revenue during the third quarter. Organic revenue* increased $63.5 million during the three months ended September 30, 2021.

Pursuit segment operating income improved $38.1 million, primarily due to the increase in revenue and ongoing efforts to maximize profitability. Organic segment operating income* improved $35.4 million during the three months ended September 30, 2021.

Nine months ended September 30, 2021 compared with the nine months ended September 30, 2020

Pursuit revenue increased $96.1 million, as all of Pursuit’s seasonal attractions and properties were open during the second and third quarters of 2021, whereas its properties and attractions were temporarily closed in 2020 from mid-March through most of the second quarter. Additionally, Pursuit experienced much stronger visitation during the third quarter of 2021 versus the third quarter of 2020 as pandemic-related restrictions lessened and as people started to feel more comfortable traveling. Organic revenue* increased $88.7 million during the nine months ended September 30, 2021.

Pursuit segment operating income was $23.2 million during the nine months ended September 30, 2021 as compared to a loss of $26.5 million during the nine months ended September 30, 2020. This improvement was primarily due to the increase in revenue and ongoing efforts to maximize profitability. Organic segment operating income* improved $48.9 million during the nine months ended September 30, 2021.

* 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).

Performance Measures

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

Number of visitors. The number of visitors allows us to assess the volume of tickets sold at each attraction during the period.
Revenue per attraction visitor. Revenue per attraction visitor is calculated as total attractions revenue divided by the total number of visitors at all Pursuit attractions during the period. Total attractions revenue includes ticket sales and ancillary revenue generated by attractions, such as food and beverage and retail revenue. Total attractions revenue per visitor measures the total spend per visitor that attraction properties are able to capture, which is important to the profitability of the attractions business.
Effective ticket price. Effective ticket price is calculated as revenue from the sale of attraction tickets divided by the total number of visitors at all comparable Pursuit attractions during the period.

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

Revenue per Available Room. RevPAR is calculated as total rooms revenue divided by the total number of room nights available for all comparable Pursuit hospitality properties during the period. Total rooms revenue does not include non-rooms revenue, which consists of ancillary revenue generated by hospitality properties, such as food and beverage and retail revenue. RevPAR measures the period-over-period change in rooms revenue per available room for comparable hospitality properties. RevPAR is affected by average daily rate and occupancy, which have different implications on profitability.
Average Daily Rate. ADR is calculated as total rooms revenue divided by the total number of room nights sold for all comparable Pursuit hospitality properties during the period. ADR is used to assess the pricing levels that the hospitality properties are able to realize. Increases in ADR lead to increases in rooms revenue with no substantial effect on variable costs, therefore having a greater impact on margins than increases in occupancy.
Occupancy. Occupancy is calculated as the total number of room nights sold divided by the total number of room nights available for all comparable Pursuit hospitality properties during the period. Occupancy measures the utilization of the available capacity at the hospitality properties. Increases in occupancy result in increases in rooms revenue and additional variable operating costs (including housekeeping services, utilities, and room amenity costs), as well as increases in ancillary non-rooms revenue (including food and beverage and retail revenue).

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 United States, 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.

39


 

 

 

 

Three Months Ended

 

 

Nine Months Ended

 

 

 

September 30,

 

 

September 30,

 

 

 

2021

 

 

2020

 

 

Change vs. 2020

 

 

2021

 

 

2020

 

 

Change vs. 2020

 

Same-Store Key Performance Indicators (1)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Attractions:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Number of visitors

 

 

768,294

 

 

 

382,005

 

 

**

 

 

 

979,869

 

 

 

602,922

 

 

 

62.5

%

Revenue per attraction visitor

 

$

55

 

 

$

49

 

 

 

12.2

%

 

$

55

 

 

$

44

 

 

 

25.0

%

Effective ticket price

 

$

42

 

 

$

33

 

 

 

27.3

%

 

$

42

 

 

$

31

 

 

 

35.5

%

Hospitality:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Room nights available (2)

 

 

195,903

 

 

 

158,162

 

 

 

23.9

%

 

 

454,083

 

 

 

286,184

 

 

 

58.7

%

RevPAR (2)

 

$

180

 

 

$

110

 

 

 

63.6

%

 

$

113

 

 

$

82

 

 

 

37.8

%

ADR

 

$

241

 

 

$

184

 

 

 

31.0

%

 

$

202

 

 

$

154

 

 

 

31.2

%

Occupancy (2)

 

 

74.9

%

 

 

59.8

%

 

 

15.1

%

 

 

56.0

%

 

 

53.0

%

 

 

3.0

%

** Change is greater than +/- 100%

(1)
The Same-Store Key Performance Indicators for attractions exclude the Open Top Touring (opened September 2020), the Sky Lagoon (opened April 2021), the Golden Skybridge (opened June 2021), and FlyOver Las Vegas (opened September 2021).
(2)
The rooms that were out of service as a result of property closures due to the COVID-19 pandemic were excluded from room nights available when calculating hospitality RevPAR and occupancy.

Attractions. The increase in same-store visitors during 2021 reflects the temporary closure of our attractions beginning in mid-March 2020 and extending through most of the second quarter of 2020 as a result of COVID-19 in addition to the reopening of the Canadian border with the United States in early August 2021 to fully vaccinated travelers and to travelers from other countries in September 2021, which accelerated visitation from international travelers. Revenue per attraction increased due to higher effective ticket prices and ancillary revenue.

Hospitality. Room nights available increased as all of Pursuit’s properties were fully open during the second and third quarters of 2021, whereas in 2020, Pursuit temporarily closed its properties in mid-March 2020 through most of the second quarter of 2020. The increase in RevPAR and ADR was primarily driven by Pursuit’s properties being open in 2021.

Pursuit is largely dependent on foreign customer visitation. Travel restrictions and border closures due to the COVID-19 pandemic have negatively affected long-haul travelers to Canada and Iceland. Additionally, the strengthening or weakening of the Canadian dollar, relative to other currencies, could affect customer volumes and the results of operations.

Other Expenses

 

 

 

Three Months Ended

 

 

 

 

 

Nine Months Ended

 

 

 

 

 

 

September 30,

 

 

 

 

 

September 30,

 

 

 

 

(in thousands)

 

2021

 

 

2020

 

 

Change vs. 2020

 

 

2021

 

 

2020

 

 

Change vs. 2020

 

Corporate activities

 

$

3,093

 

 

$

2,645

 

 

 

16.9

%

 

$

8,104

 

 

$

5,902

 

 

 

37.3

%

Interest expense, net

 

$

9,518

 

 

$

5,450

 

 

 

74.6

%

 

$

20,168

 

 

$

14,399

 

 

 

40.1

%

Multi-employer pension plan withdrawal

 

$

 

 

$

 

 

**

 

 

$

57

 

 

$

462

 

 

 

(87.7

)%

Other expense, net

 

$

466

 

 

$

210

 

 

**

 

 

$

1,506

 

 

$

894

 

 

 

68.5

%

Restructuring charges

 

$

2,186

 

 

$

11,259

 

 

 

(80.6

)%

 

$

5,799

 

 

$

12,370

 

 

 

(53.1

)%

Impairment charges

 

$

 

 

$

676

 

 

 

(100.0

)%

 

$

 

 

$

203,076

 

 

 

(100.0

)%

Income tax expense

 

$

5,329

 

 

$

735

 

 

**

 

 

$

118

 

 

$

20,454

 

 

 

(99.4

)%

Income (loss) from discontinued operations

 

$

248

 

 

$

(989

)

 

**

 

 

$

534

 

 

$

(1,822

)

 

**

 

 

** Change is greater than +/- 100%

Corporate Activities – The increase in corporate activities expense during the three months ended September 30, 2021 was primarily due to an FX impact loss of $0.8 million on the repayment of our Canadian debt and lower performance-based compensation expense in 2020 as we reduced our estimated performance achievement to zero as a result of COVID-19. The increase in corporate activities expense during the nine months ended September 30, 2021 was primarily due to lower performance-based compensation expense in 2020.

40


 

Interest Expense, net – The increase in interest expense during the three months ended September 30, 2021 was primarily due to higher interest rates and higher debt balances in 2021. As a result of the refinance and the repayment of the 2018 Credit Facility, we recorded $2.1 million of interest expense related to the write-off of unamortized debt issuance costs during the three months ended September 30, 2021. The increase in interest expense during the nine months ended September 30, 2021 was primarily due to higher debt balances in 2021 and the write-off of unamortized debt issuance costs.

Restructuring Charges – Restructuring charges during the three and nine months ended September 30, 2021 were primarily related to facility closures and the elimination of certain positions at GES. 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. Restructuring charges during 2020 were primarily related to the elimination of certain positions at GES and our corporate office in response to the COVID-19 pandemic, as well as charges related to the closure of GES’ United Kingdom based audio-visual services business during the third quarter of 2020. During the fourth quarter of 2020, we entered into an agreement with a third-party to outsource the management, cleaning, and storage of the aisle carpeting that we use at live events, which resulted in restructuring charges in 2021 when we vacated a facility.

Impairment Charges – Due to the deteriorating macroeconomic environment in 2020 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, a non-cash impairment charge to intangible assets of $15.7 million related to GES’ United States audio-visual production business, and a fixed asset impairment charge of $1.6 million during the nine months ended September 30, 2020. We recorded a fixed asset impairment charge of $0.7 million during the three months ended September 30, 2020.

Income Tax Expense – The effective tax rate was 21.4% for the three months ended September 30, 2021 and a negative 2.7% for the three months ended September 30, 2020. The effective tax rate was a negative 0.2% for the nine months ended September 30, 2021 and a negative 6.8% for the nine months ended September 30, 2020. The effective tax rate for the three months ended September 30, 2021 was the result of income earned in Canada without taxes on income in our jurisdictions with valuation allowances. The rate for the nine months ended September 30, 2021 was lower than the blended statutory rate primarily as a result of excluding the tax benefit on losses recognized in the United States, the United Kingdom, and other European countries where we have a valuation allowance. The negative effective tax rates for 2020 were due to the recording of a valuation allowance against our remaining United States, United Kingdom, and other European countries net deferred tax assets of $25.5 million, as well as no tax benefits on non-deductible goodwill impairments and losses recognized in those jurisdictions.

Income (Loss) from Discontinued Operations – Income from discontinued operations during the three and nine months ended September 30, 2021 was primarily due to a favorable legal settlement and an insurance recovery related to a previously sold operation, offset in part by legal expenses. Loss from discontinued operations during the three and nine months ended September 30, 2020 was primarily due to legal expenses related to previously sold operations.

Liquidity and Capital Resources

Cash, cash equivalents, and restricted cash were $113.3 million as of September 30, 2021, as compared to $42.0 million as of December 31, 2020. During the nine months ended September 30, 2021, we used net cash from operating activities of $2.7 million.

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 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 proceeds from Crestview’s investment were used to repay a portion of our 2018 Credit Facility, provided us additional short-term liquidity to fund capital expenditures, and supported general corporate purposes.

Effective July 30, 2021, we refinanced the 2018 Credit Facility, which was scheduled to mature on October 24, 2023, with a new $500 million 2021 Credit Facility to provide for financial flexibility to support our growth initiatives. The 2021 Credit Facility provides for a $400 million Term Loan B with a maturity date of July 30, 2028 and a $100 million revolving credit facility with a maturity date of July 30, 2026. The loan proceeds of $400 million were offset in part by $14.8 million in fees. The proceeds from the Term Loan B were used to repay the 2018 Credit Facility and the remaining proceeds will be used to fund future acquisitions and growth initiatives and for general corporate purposes. The 2021 Credit Facility requires us to maintain liquidity of $75 million. Refer to Note 12 – Debt and Finance Lease Obligations of the Notes to Condensed Consolidated Financial Statements (Part I, Item 1 of this Form 10-Q) for additional information.

41


 

We believe that our existing sources of liquidity will be sufficient to fund operations and capital commitments, including approximately $75 million in expected capital expenditures in select maintenance and growth investments, for at least the next 12 months.

As of September 30, 2021, we held approximately $56.0 million of our cash and cash equivalents outside of the United States, consisting of $37.1 million in Canada, $8.3 million in the United Kingdom, $5.9 million in the Netherlands, and $4.7 million in certain other countries.

Cash Flows

Operating Activities

 

 

 

Nine Months Ended

 

 

 

September 30,

 

(in thousands)

 

2021

 

 

2020

 

Net loss

 

$

(68,283

)

 

$

(325,280

)

Depreciation and amortization

 

 

39,986

 

 

 

43,051

 

Deferred income taxes

 

 

(131

)

 

 

20,428

 

(Income) loss from discontinued operations

 

 

(534

)

 

 

1,822

 

Restructuring charges

 

 

5,799

 

 

 

12,370

 

Impairment charges

 

 

 

 

 

203,076

 

Gains on dispositions of property and other assets

 

 

(9,345

)

 

 

(14,935

)

Share-based compensation expense

 

 

5,960

 

 

 

649

 

Multi-employer pension plan withdrawal

 

 

57

 

 

 

462

 

Other non-cash items, net

 

 

4,642

 

 

 

10,371

 

Changes in assets and liabilities

 

 

19,136

 

 

 

4,467

 

Net cash used in operating activities

 

$

(2,713

)

 

$

(43,519

)

The decrease in net cash used in operating activities of $40.8 million was primarily due to improved segment operating results at Pursuit.

Investing Activities

 

 

 

Nine Months Ended

 

 

 

September 30,

 

(in thousands)

 

2021

 

 

2020

 

Capital expenditures

 

$

(45,187

)

 

$

(40,057

)

Cash surrender value of life insurance policies

 

 

 

 

 

24,767

 

Cash paid for acquisitions, net

 

 

(7,704

)

 

 

 

Proceeds from dispositions of property and other assets

 

 

14,292

 

 

 

21,788

 

Net cash (used in) provided by investing activities

 

$

(38,599

)

 

$

6,498

 

The increase in net cash used in investing activities of $45.1 million was primarily due to 2020 activity including proceeds from the termination of our life insurance policies and proceeds of $17.1 million from the sale of the GES warehouse in San Diego. In 2021, we used cash from investing activities for the acquisition of the Golden Skybridge, offset in part by the proceeds from the sale of a GES warehouse in Orlando.

42


 

Financing Activities

 

 

 

Nine Months Ended

 

 

 

September 30,

 

(in thousands)

 

2021

 

 

2020

 

Proceeds from borrowings

 

$

451,350

 

 

$

191,733

 

Payments on debt and finance lease obligations

 

 

(335,665

)

 

 

(273,663

)

Dividends paid on common stock

 

 

 

 

 

(4,064

)

Dividends paid on preferred stock

 

 

(1,950

)

 

 

 

Distributions to noncontrolling interest, net of contributions from noncontrolling interest

 

 

(798

)

 

 

(1,526

)

Payments of debt issuance costs

 

 

(1,767

)

 

 

(1,585

)

Payment of payroll taxes on stock-based compensation through shares withheld or repurchased

 

 

(1,119

)

 

 

(1,062

)

Common stock purchased for treasury

 

 

 

 

 

(2,785

)

Proceeds from issuance of Convertible Series A Preferred Stock, net of issuance costs

 

 

 

 

 

125,763

 

Proceeds from exercise of stock options

 

 

 

 

 

2,077

 

Net cash provided by financing activities

 

$

110,051

 

 

$

34,888

 

The increase in net cash provided by financing activities of $75.2 million was primarily due to net debt proceeds of $115.7 million during the nine months ended September 30, 2021 compared to net debt payments of $81.9 million during the nine months ended September 30, 2020. In July 2021, we received $400 million from the Term Loan B of the 2021 Credit Facility, which was used to repay the 2018 Credit Facility. The increase in net cash provided by financing activities was offset in part by proceeds from the issuance of Convertible Series A Preferred Stock in 2020.

Debt and Finance Lease Obligations

Refer to Note 12 – Debt and Finance Lease Obligations of the Notes to Condensed Consolidated Financial Statements (Part I, Item 1 of this Form 10-Q) for further discussion, all of which is incorporated by reference herein.

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 had repurchased 53,784 shares on the open market for $2.8 million during the three months ended March 31, 2020. As of September 30, 2021, 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

Refer to “Management’s Discussion and Analysis of Financial Condition and Results of Operations” (Part II, Item 7) of our 2020 Form 10-K for a discussion of our critical accounting policies and estimates.

43


 

Impact of Recent Accounting Pronouncements

Refer to Note 1 – Overview and Basis of Presentation of the Notes to Condensed Consolidated Financial Statements (Part I, Item 1 of this Form 10-Q) 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.

“Segment operating income (loss)” is net income (loss) attributable to Viad before loss from discontinued operations, corporate activities, interest expense and interest income, income taxes, restructuring charges, impairment charges, and the reduction for income (loss) attributable to noncontrolling interests. Segment operating income (loss) is used to measure the profit and performance of our operating segments to facilitate period-to-period comparisons. Refer to Note 23 – Segment Information of the Notes to Condensed Consolidated Financial Statements (Part I, Item 1 of this Form 10-Q) for a reconciliation of segment operating income (loss) to income (loss) from continuing operations before income taxes.
“Organic revenue” and “organic segment operating income (loss)” are revenue and segment operating income (loss) (as defined above), respectively, without the impact of exchange rate variances and acquisitions, if any, until such acquisitions are included in the entirety of both comparable periods. The impact of exchange rate variances is calculated as the difference between current period activity translated at the current period’s exchange rates and the comparable prior period’s exchange rates. We believe the presentation of “organic” results permits investors to better understand our performance without the effects of exchange rate variances or acquisitions and to facilitate period-to-period comparisons and analysis of our operating performance. Refer to the “Results of Operations” section of this MD&A for reconciliations of organic revenue and organic segment operating income (loss) to the most directly comparable GAAP measures.

We believe non-GAAP Measures are useful operating metrics as they eliminate potential variations arising from taxes, debt service costs, impairment charges, 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 the effects of discontinued operations. As the Non-GAAP Measures do not consider these items, you should consider net income or loss attributable to Viad as an important measure of financial performance because it provides a more complete measure of our performance.

Item 3. 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 Condensed 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 Condensed 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 gain in stockholders’ equity of $17.7 million as of September 30, 2021 and a loss of $16.7 million as of December 31, 2020. We recorded unrealized foreign currency translation losses in other comprehensive income of $1.0 million during the nine months ended September 30, 2021 and unrealized foreign currency translation losses of $7.3 million during the nine months ended September 30, 2020.

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

44


 

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 “Foreign Exchange Rate Variances” section of MD&A included in this Form 10-Q.

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 September 30, 2021 and December 31, 2020, we did not have any outstanding foreign currency forward contracts.

We are exposed to short-term and long-term interest rate risk on certain of our debt obligations.

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

Item 4. Controls and Procedures

We have established disclosure controls and procedures that are designed to ensure that information required to be disclosed in our reports filed or submitted under the Securities Exchange Act of 1934, as amended (the “Exchange Act”) is recorded, processed, summarized, and reported within the time periods specified in SEC rules and forms, and such information is accumulated and communicated to our management, including our Chief Executive Officer (“CEO”) and Chief Financial Officer (“CFO”), as appropriate to allow timely decisions regarding required disclosure. Management, together with our CEO and CFO, evaluated the effectiveness of our disclosure controls and procedures as of September 30, 2021. Based on this evaluation, the CEO and CFO concluded that our disclosure controls and procedures were effective as of September 30, 2021.

There were no changes in our internal control over financial reporting during the three months ended September 30, 2021 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

45


 

PART II - OTHER INFORMATION

Refer to Note 21 – Litigation, Claims, Contingencies, and Other of the Notes to Condensed Consolidated Financial Statements (Part I, Item 1 of this Form 10-Q) for information regarding our legal proceedings.

Item 1A. Risk Factors

In addition to other information set forth in this report, careful consideration should be given to the factors discussed in Part I, Item 1A – Risk Factors and Part II, Item 7 – Management’s Discussion and Analysis of Financial Condition and Results of Operations of our 2020 Form 10-K, which could materially affect our business, financial condition, or future results.

Item 2. Unregistered Sales of Equity Securities and Use of Proceeds

The following table summarizes the total number of shares of our common stock that were repurchased during the three months ended September 30, 2021 pursuant to publicly announced plans or programs, as well as certain previously owned shares of common stock that were surrendered by employees, former employees, and non-employee directors for tax withholding requirements on vested share-based awards.

ISSUER PURCHASES OF EQUITY SECURITIES

 

Period

 

Total Number of
Shares Purchased

 

 

Average Price
Paid
Per Share

 

 

Total Number of
Shares
Purchased
as Part of
Publicly
Announced Plans or
Programs

 

 

Maximum Number
of Shares
That May Yet Be
Purchased
Under the Plans
or Programs

 

July 1, 2021 - July 31, 2021

 

 

 

 

$

 

 

 

 

 

 

546,283

 

August 1, 2021 - August 31, 2021

 

 

1,161

 

 

$

44.73

 

 

 

 

 

 

546,283

 

September 1, 2021 - September 30,
   2021

 

 

 

 

$

 

 

 

 

 

 

546,283

 

Total

 

 

1,161

 

 

$

44.73

 

 

 

 

 

 

546,283

 

 

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. In March 2020, our Board of Directors suspended future dividend payments and our share repurchase program for the foreseeable future. The Board of Directors’ authorization does not have an expiration date. During the third quarter of 2021, 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.

46


 

Item 6. Exhibits

 

 

 

 

 

 

Incorporated by Reference

Exhibit

Number

 

 

 

Exhibit Description

 

Form

 

Period

Ending

 

Exhibit

 

Filing Date

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

10.1

 

 

 

$500,000,000 Credit Agreement among Viad Corp, Bank of America, N.A., and other lenders party thereto, dated as of July 30, 2021.

 

 

 

8-K

 

 

 

 

 

10.1

 

 

 

8/2/2021

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

31.1

 

*

 

Certification of Chief Executive Officer of Viad Corp pursuant to Section 302 of the Sarbanes-Oxley Act of 2002, for the period ended September 30, 2021.

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

31.2

 

*

 

Certification of Chief Financial Officer of Viad Corp pursuant to Section 302 of the Sarbanes-Oxley Act of 2002, for the period ended September 30, 2021.

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

32.1

 

**

 

Certifications of Chief Executive Officer and Chief Financial Officer of Viad Corp pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, for the period ended September 30, 2021.

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

101.INS

 

***

 

Inline XBRL Instance Document

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

101.SCH

 

****

 

Inline XBRL Taxonomy Extension Schema Document.

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

101.CAL

 

****

 

Inline XBRL Taxonomy Extension Calculation Linkbase Document.

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

101.LAB

 

****

 

Inline XBRL Taxonomy Extension Label Linkbase Document.

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

101.PRE

 

****

 

Inline XBRL Taxonomy Extension Presentation Linkbase Document

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

101.DEF

 

****

 

Inline XBRL Taxonomy Extension Definition Linkbase Document.

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

104

 

***

 

Cover Page Interactive Data File

 

 

 

 

 

 

 

 

 

*

 

Filed herewith.

**

 

Furnished herewith.

***

 

The Inline XBRL Instance Document and Cover Page Interactive Data File do not appear in the Interactive Data File because their XBRL tags are embedded within the Inline XBRL document.

****

 

Submitted electronically herewith.

 

 

47


 

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.

 

 

 

 

VIAD CORP

 

 

 

(Registrant)

 

 

 

 

 

 

November 5, 2021

 

 

By:

 

/s/ Leslie S. Striedel

(Date)

 

 

 

 

Leslie S. Striedel

 

 

 

 

 

Chief Accounting Officer and Duly Authorized Officer

 

 

 

 

 

 

 

48