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VIAD CORP - Quarter Report: 2021 March (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 March 31, 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

 

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.)

 

 

1850 North Central Avenue, Suite 1900

Phoenix, Arizona

 

85004-4565

(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 May 3, 2021, there were 20,483,915 shares of Common Stock ($1.50 par value) outstanding.


 


 

 

INDEX

 

 

 

Page

PART I - FINANCIAL INFORMATION

Item 1.

Financial Statements

1

 

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

1

 

Condensed Consolidated Statements of Operations for the Three Months Ended March 31, 2021 and 2020

2

 

Condensed Consolidated Statements of Comprehensive Loss for the Three Months Ended March 31, 2021 and 2020

3

 

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

4

 

Condensed Consolidated Statements of Cash Flows for the Three Months Ended March 31, 2021 and 2020

6

 

Notes to Condensed Consolidated Financial Statements

7

Item 2.

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

30

Item 3.

Quantitative and Qualitative Disclosures About Market Risk

39

Item 4.

Controls and Procedures

40

PART II - OTHER INFORMATION

Item 1.

Legal Proceedings

41

Item 1A.

Risk Factors

41

Item 2.

Unregistered Sales of Equity Securities and Use of Proceeds

41

Item 6.

Exhibits

42

Items 3-5

Not applicable

 

 

 

 

SIGNATURES

43

 

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)

 

 

 

March 31,

 

 

December 31,

 

(in thousands, except share data)

 

2021

 

 

2020

 

Assets

 

 

 

 

 

 

 

 

Current assets

 

 

 

 

 

 

 

 

Cash and cash equivalents

 

$

34,714

 

 

$

39,545

 

Accounts receivable, net of allowances for doubtful accounts of $2,791 and $5,310,

   respectively

 

 

18,472

 

 

 

17,837

 

Inventories

 

 

8,406

 

 

 

8,727

 

Current contract costs

 

 

8,781

 

 

 

7,923

 

Other current assets

 

 

18,448

 

 

 

17,225

 

Total current assets

 

 

88,821

 

 

 

91,257

 

Property and equipment, net

 

 

533,614

 

 

 

492,154

 

Other investments and assets

 

 

15,709

 

 

 

15,492

 

Operating lease right-of-use assets

 

 

81,488

 

 

 

82,739

 

Deferred income taxes

 

 

1,445

 

 

 

563

 

Goodwill

 

 

112,947

 

 

 

99,847

 

Other intangible assets, net

 

 

70,631

 

 

 

71,172

 

Total Assets

 

$

904,655

 

 

$

853,224

 

Liabilities, Mezzanine Equity, and Stockholders’ Equity

 

 

 

 

 

 

 

 

Current liabilities

 

 

 

 

 

 

 

 

Accounts payable

 

$

20,559

 

 

$

21,037

 

Contract liabilities

 

 

26,797

 

 

 

18,595

 

Accrued compensation

 

 

9,507

 

 

 

7,030

 

Operating lease obligations

 

 

14,684

 

 

 

15,697

 

Other current liabilities

 

 

25,000

 

 

 

27,039

 

Current portion of debt and finance lease obligations

 

 

2,800

 

 

 

8,335

 

Total current liabilities

 

 

99,347

 

 

 

97,733

 

Long-term debt and finance lease obligations

 

 

367,418

 

 

 

285,356

 

Pension and postretirement benefits

 

 

27,113

 

 

 

27,264

 

Long-term operating lease obligations

 

 

72,878

 

 

 

70,150

 

Other deferred items and liabilities

 

 

62,467

 

 

 

64,628

 

Total liabilities

 

 

629,223

 

 

 

545,131

 

Commitments and contingencies

 

 

 

 

 

 

 

 

Convertible Series A Preferred Stock, $0.01 par value, 180,000 shares authorized,

  135,000 shares issued and outstanding

 

 

130,667

 

 

 

128,769

 

Redeemable noncontrolling interest

 

 

5,006

 

 

 

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

 

 

566,643

 

 

 

568,100

 

Accumulated deficit

 

 

(296,317

)

 

 

(253,164

)

Accumulated other comprehensive loss

 

 

(26,543

)

 

 

(30,641

)

Common stock in treasury, at cost, 4,456,261 and 4,475,489 shares, respectively

 

 

(224,683

)

 

 

(225,742

)

Total Viad stockholders’ equity

 

 

56,502

 

 

 

95,955

 

Non-redeemable noncontrolling interest

 

 

83,257

 

 

 

78,144

 

Total stockholders’ equity

 

 

139,759

 

 

 

174,099

 

Total Liabilities, Mezzanine Equity, and Stockholders’ Equity

 

$

904,655

 

 

$

853,224

 

 

Refer to Notes to Condensed Consolidated Financial Statements.

1


 

VIAD CORP

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

(Unaudited)

 

 

 

Three Months Ended

 

 

 

March 31,

 

(in thousands, except per share data)

 

2021

 

 

2020

 

Revenue:

 

 

 

 

 

 

 

 

Services

 

$

24,900

 

 

$

264,206

 

Products

 

 

4,035

 

 

 

30,452

 

Total revenue

 

 

28,935

 

 

 

294,658

 

Costs and expenses:

 

 

 

 

 

 

 

 

Costs of services

 

 

56,368

 

 

 

273,052

 

Costs of products

 

 

10,775

 

 

 

31,006

 

Corporate activities

 

 

2,005

 

 

 

789

 

Interest income

 

 

(33

)

 

 

(79

)

Interest expense

 

 

5,118

 

 

 

4,018

 

Other expense, net

 

 

360

 

 

 

419

 

Restructuring charges

 

 

2,826

 

 

 

851

 

Impairment charges

 

 

 

 

 

88,380

 

Total costs and expenses

 

 

77,419

 

 

 

398,436

 

Loss from continuing operations before income taxes

 

 

(48,484

)

 

 

(103,778

)

Income tax benefit

 

 

(3,045

)

 

 

(15,797

)

Loss from continuing operations

 

 

(45,439

)

 

 

(87,981

)

Income (loss) from discontinued operations

 

 

348

 

 

 

(454

)

Net loss

 

 

(45,091

)

 

 

(88,435

)

Net loss attributable to non-redeemable noncontrolling

   interest

 

 

1,445

 

 

 

1,333

 

Net loss attributable to redeemable noncontrolling interest

 

 

494

 

 

 

517

 

Net loss attributable to Viad

 

$

(43,152

)

 

$

(86,585

)

Diluted loss per common share:

 

 

 

 

 

 

 

 

Continuing operations attributable to Viad common stockholders

 

$

(2.23

)

 

$

(4.27

)

Discontinued operations attributable to Viad common stockholders

 

 

0.02

 

 

 

(0.02

)

Net loss attributable to Viad common stockholders

 

$

(2.21

)

 

$

(4.29

)

Weighted-average outstanding and potentially dilutive common

   shares

 

 

20,370

 

 

 

20,215

 

Basic loss per common share:

 

 

 

 

 

 

 

 

Continuing operations attributable to Viad common stockholders

 

$

(2.23

)

 

$

(4.27

)

Discontinued operations attributable to Viad common stockholders

 

 

0.02

 

 

 

(0.02

)

Net loss attributable to Viad common stockholders

 

$

(2.21

)

 

$

(4.29

)

Weighted-average outstanding common shares

 

 

20,370

 

 

 

20,215

 

Dividends declared per common share

 

$

 

 

$

0.10

 

Amounts attributable to Viad common stockholders

 

 

 

 

 

 

 

 

Loss from continuing operations

 

$

(43,500

)

 

$

(86,131

)

Income (loss) from discontinued operations

 

 

348

 

 

 

(454

)

Net loss

 

$

(43,152

)

 

$

(86,585

)

 

Refer to Notes to Condensed Consolidated Financial Statements.

2


 

VIAD CORP

CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE LOSS

(Unaudited)

 

 

 

Three Months Ended

 

 

 

March 31,

 

(in thousands)

 

2021

 

 

2020

 

Net loss

 

$

(45,091

)

 

$

(88,435

)

Other comprehensive income (loss):

 

 

 

 

 

 

 

 

Unrealized foreign currency translation adjustments

 

 

3,977

 

 

 

(28,158

)

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

 

 

177

 

 

 

341

 

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

 

 

(56

)

 

 

(27

)

Comprehensive loss

 

 

(40,993

)

 

 

(116,279

)

Non-redeemable noncontrolling interest:

 

 

 

 

 

 

 

 

Comprehensive loss attributable to non-redeemable

   noncontrolling interest

 

 

1,445

 

 

 

1,333

 

Unrealized foreign currency translation adjustments

 

 

750

 

 

 

(5,719

)

Redeemable noncontrolling interest:

 

 

 

 

 

 

 

 

Comprehensive loss attributable to redeemable noncontrolling interest

 

 

494

 

 

 

517

 

Comprehensive loss attributable to Viad

 

$

(38,304

)

 

$

(120,148

)

 

(1)

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

Refer to Notes to Condensed Consolidated Financial Statements.

3


 

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 and 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

 

Refer to Notes to Condensed Consolidated Financial Statements.

4


 

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

 

 

$

 

Refer to Notes to Condensed Consolidated Financial Statements.

5


 

VIAD CORP

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(Unaudited)

 

 

 

Three Months Ended

 

 

 

March 31,

 

(in thousands)

 

2021

 

 

2020

 

Cash flows from operating activities

 

 

 

 

 

 

 

 

Net loss

 

$

(45,091

)

 

$

(88,435

)

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

 

 

 

 

 

 

 

 

Depreciation and amortization

 

 

13,177

 

 

 

15,285

 

Deferred income taxes

 

 

(3,019

)

 

 

(15,799

)

(Income) loss from discontinued operations

 

 

(348

)

 

 

454

 

Restructuring charges

 

 

2,826

 

 

 

851

 

Impairment charges

 

 

 

 

 

88,380

 

Gains on dispositions of property and other assets

 

 

(9,250

)

 

 

(85

)

Share-based compensation expense (benefit)

 

 

1,763

 

 

 

(2,145

)

Other non-cash items, net

 

 

(171

)

 

 

9,342

 

Change in operating assets and liabilities:

 

 

 

 

 

 

 

 

Receivables

 

 

(1,284

)

 

 

15,651

 

Inventories

 

 

351

 

 

 

(711

)

Current contract costs

 

 

(828

)

 

 

8,970

 

Accounts payable

 

 

(8,440

)

 

 

(1,109

)

Restructuring liabilities

 

 

(2,250

)

 

 

(1,293

)

Accrued compensation

 

 

1,364

 

 

 

(20,551

)

Contract liabilities

 

 

8,148

 

 

 

(12,602

)

Income taxes payable

 

 

(19

)

 

 

17,753

 

Other assets and liabilities, net

 

 

10,352

 

 

 

(18,675

)

Net cash used in operating activities

 

 

(32,719

)

 

 

(4,719

)

Cash flows from investing activities

 

 

 

 

 

 

 

 

Capital expenditures

 

 

(9,371

)

 

 

(23,246

)

Cash paid for acquisitions, net

 

 

(7,415

)

 

 

 

Proceeds from dispositions of property and other assets

 

 

14,106

 

 

 

85

 

Net cash used in investing activities

 

 

(2,680

)

 

 

(23,161

)

Cash flows from financing activities

 

 

 

 

 

 

 

 

Proceeds from borrowings

 

 

40,860

 

 

 

160,755

 

Payments on debt and finance lease obligations

 

 

(8,310

)

 

 

(56,077

)

Dividends paid on common stock

 

 

 

 

 

(2,038

)

Distributions to noncontrolling interest, net of contributions from noncontrolling interest

 

 

(809

)

 

 

(1,526

)

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

 

 

(519

)

 

 

(1,059

)

Common stock purchased for treasury

 

 

 

 

 

(2,785

)

Proceeds from exercise of stock options

 

 

 

 

 

2,077

 

Net cash provided by financing activities

 

 

31,222

 

 

 

99,347

 

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

 

 

151

 

 

 

(2,938

)

Net change in cash, cash equivalents, and restricted cash

 

 

(4,026

)

 

 

68,529

 

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

 

 

41,971

 

 

 

62,004

 

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

 

$

37,945

 

 

$

130,533

 

 

Refer to Notes to Condensed Consolidated Financial Statements.

6


 

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, and FlyOver.

Impact of COVID-19

Starting in mid-March 2020 and extending through the first quarter of 2021, the COVID-19 pandemic had a significant and negative impact on our operations and financial performance, with live events largely shut down and severe tourism activity disruptions. In response to the COVID-19 pandemic, 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 dividend payments and share repurchases, and we availed ourselves of governmental assistance programs for wages and tax relief.

In August 2020, we secured additional capital to strengthen our liquidity position by entering into an investment agreement with funds managed by private equity firm Crestview Partners who made an initial investment of $135 million, offset in part by $9.2 million in fees, in newly issued perpetual convertible preferred stock. Refer to Note 15 – Common and Preferred Stock for further information. In August 2020, we also amended our Second Amended and Restated Credit Agreement (the “2018 Credit Agreement”) to provide financial flexibility, which, among other things waives our financial covenants until September 30, 2022. Refer to Note 12 – Debt and Finance Lease Obligations for further information. During the three months ended March 31, 2021, we continued to preserve cash and closely managed our costs. In connection with the acceleration of COVID-19 vaccination programs in certain of our geographic territories, we began to see early signs of recovery in the travel and hospitality and live event sectors during the first quarter of 2021, with more live event markets opening, smaller scale live events taking place, and an uptick in bookings. Event organizers continue to assess when it will be possible to safely hold larger scale face-to-face live events.

7


 

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 reclassed 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, 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 months ended March 31, 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 March 31, 2020

 

(in thousands)

 

Services Revenue

 

 

Cost of Services

 

As previously reported

 

$

275,556

 

 

$

284,402

 

Gross to net correction for GES

 

 

(11,350

)

 

 

(11,350

)

Total as corrected

 

$

264,206

 

 

$

273,052

 

 

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. Early adoption is permitted, but no earlier than fiscal years beginning after December 15, 2020.

 

1/1/2022

 

We are currently evaluating the potential impact of the adoption of this new guidance on our consolidated financial statements and if there are applicable provisions that will simplify our accounting or reporting we will likely pursue early adoption.

 

 

 

 

 

 

 

 

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.

 

 

8


 

 

 

Significant Accounting Policies

Use of Estimates

The preparation of financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities at the date of the financial statements and the reported amounts of revenue and expenses during the reported period. Estimates and assumptions are used in accounting for, among other things: impairment testing of recorded goodwill and intangible assets 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:

 

 

 

 

 

 

 

 

 

 

 

March 31,

 

 

December 31,

 

(in thousands)

 

2021

 

 

2020

 

Cash and cash equivalents

 

$

34,714

 

 

$

39,545

 

Restricted cash included in other current assets

 

 

3,231

 

 

 

2,426

 

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

 

$

37,945

 

 

$

41,971

 

 

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 54.5% equity ownership interest in Esja Attractions ehf. (“Esja”), which owns the FlyOver Iceland attraction. The Esja shareholders agreement contains a put option that gives the minority Esja

9


 

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

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

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

10


 

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

 

 

14,338

 

Revenue recognized

 

 

(5,647

)

Foreign exchange translation adjustment

 

 

(453

)

Balance at March 31, 2021

 

$

26,856

 

Contract Costs

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

Changes to contract costs are as follows:

(in thousands)

 

 

 

 

Balance at December 31, 2020

 

$

10,835

 

Additions

 

 

4,394

 

Expenses

 

 

(3,237

)

Cancelled

 

 

(432

)

Foreign exchange translation adjustment

 

 

34

 

Balance at March 31, 2021

 

$

11,594

 

As of March 31, 2021, capitalized contract costs consisted of $0.8 million to obtain contracts and $10.8 million to fulfill contracts. We did not recognize an impairment loss with respect to capitalized contract costs during the three months ended March 31, 2021 or 2020.

11


 

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

 

 

 

March 31,

 

(in thousands)

 

2021

 

 

2020

 

Service lines:

 

 

 

 

 

 

 

 

Exhibitions and Conferences

 

$

5,835

 

 

$

201,159

 

Brand experiences

 

 

11,704

 

 

 

68,995

 

Venue services

 

 

1,606

 

 

 

10,981

 

Total revenue

 

$

19,145

 

 

$

281,135

 

 

 

 

 

 

 

 

 

 

Timing of revenue recognition:

 

 

 

 

 

 

 

 

Services transferred over time

 

$

17,015

 

 

$

253,226

 

Products transferred over time(1)

 

 

417

 

 

 

13,027

 

Products transferred at a point in time

 

 

1,713

 

 

 

14,882

 

Total revenue

 

$

19,145

 

 

$

281,135

 

 

 

 

 

 

 

 

 

 

Geographical markets:

 

 

 

 

 

 

 

 

North America

 

$

15,858

 

 

$

242,440

 

EMEA

 

 

3,903

 

 

 

40,684

 

Intersegment eliminations

 

 

(616

)

 

 

(1,989

)

Total revenue

 

$

19,145

 

 

$

281,135

 

 

(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.

 

12


 

 

 

Pursuit

 

 

 

Three Months Ended

 

 

 

March 31,

 

(in thousands)

 

2021

 

 

2020

 

Services:

 

 

 

 

 

 

 

 

Admissions

 

$

1,484

 

 

$

4,102

 

Accommodations

 

 

5,150

 

 

 

4,517

 

Transportation

 

 

537

 

 

 

2,056

 

Travel planning

 

 

714

 

 

 

416

 

Intersegment eliminations

 

 

 

 

 

(111

)

Total services revenue

 

 

7,885

 

 

 

10,980

 

Products:

 

 

 

 

 

 

 

 

Food and beverage

 

 

1,224

 

 

 

1,649

 

Retail operations

 

 

681

 

 

 

894

 

Total products revenue

 

 

1,905

 

 

 

2,543

 

Total revenue

 

$

9,790

 

 

$

13,523

 

 

 

 

 

 

 

 

 

 

Timing of revenue recognition:

 

 

 

 

 

 

 

 

Services transferred over time

 

$

7,885

 

 

$

10,980

 

Products transferred at a point in time

 

 

1,905

 

 

 

2,543

 

Total revenue

 

$

9,790

 

 

$

13,523

 

 

 

 

 

 

 

 

 

 

Markets:

 

 

 

 

 

 

 

 

Banff Jasper Collection

 

$

8,460

 

 

$

9,799

 

Alaska Collection

 

 

289

 

 

 

151

 

Glacier Park Collection

 

 

578

 

 

 

723

 

FlyOver

 

 

463

 

 

 

2,850

 

Total revenue

 

$

9,790

 

 

$

13,523

 

 

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 March 31, 2021, there were 759,578 shares available for future grant under the 2017 Plan.

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

 

 

 

Three Months Ended

 

 

 

March 31,

 

(in thousands)

 

2021

 

 

2020

 

Performance-based restricted stock units

 

$

140

 

 

$

(2,635

)

Restricted stock awards and restricted stock units

 

 

1,244

 

 

 

490

 

Stock options

 

 

379

 

 

 

 

Share-based compensation (income) expense before income tax

 

 

1,763

 

 

 

(2,145

)

Income tax benefit(1)

 

 

(27

)

 

 

(109

)

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

 

$

1,736

 

 

$

(2,254

)

(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.

13


 

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 PRSU shares is based upon the achievement of the performance-based criteria over a three to four-year period. We account for PRSU awards that will be settled in shares of our common stock as equity-based awards. We measure share-based compensation expense of equity-based awards at fair value on the grant date on a straight-line basis over the vesting period. The estimated number of shares to be achieved is updated each reporting period. We account for PRSU awards that will be settled in cash as liability-based awards. We measure share-based compensation expense of liability-based awards at fair value at each reporting date until the date of settlement. Forfeitures are accounted for as they occur.

During the three months ended March 31, 2021, we granted PRSU awards with a grant date fair value of $3.2 million, all of which are payable in shares.

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

As of March 31, 2021, the unamortized cost of outstanding equity-based PRSU awards was $3.1 million, which we expect to recognize over a weighted-average period of approximately 2.8 years. Liabilities related to liability-based PRSU awards were $0.9 million as of March 31, 2021 and $0.8 million as of December 31, 2020.

The following table summarizes the activity of the outstanding PRSU awards:

 

 

 

Equity-Based

PRSU Awards

 

 

Liability-Based

PRSU Awards

 

 

 

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

 

 

 

 

$

 

 

 

(703

)

 

$

56.97

 

Balance at March 31, 2021

 

 

162,993

 

 

$

41.01

 

 

 

78,084

 

 

$

57.12

 

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 March 31, 2021, the unamortized cost of outstanding equity-based restricted stock awards and restricted stock units was $6.8 million, which we expect to recognize over a weighted-average period of approximately 1.3 years. We repurchased 12,055 shares for $0.5 million during the three months ended March 31, 2021 and 17,674 shares for $1.1 million during the three months ended March 31, 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 March 31, 2021 and $0.2 million as of December 31, 2020. During the three months ended March 31, 2021, 3,174 restricted stock units vested, and we paid $0.1 million in cash. During the three months ended March 31, 2020, 2,815 restricted stock units vested, and we paid $0.2 million in cash.

14


 

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

 

 

22,320

 

 

$

44.80

 

 

 

62,919

 

 

$

44.79

 

 

 

 

 

$

 

Vested

 

 

(37,170

)

 

$

53.86

 

 

 

 

 

$

 

 

 

(3,174

)

 

$

52.24

 

Forfeited

 

 

(1,030

)

 

$

56.94

 

 

 

(2,026

)

 

$

19.75

 

 

 

 

 

$

 

Balance at March 31, 2021

 

 

91,227

 

 

$

50.87

 

 

 

212,154

 

 

$

27.00

 

 

 

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 1.0 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 over two 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 March 31, 2021

 

 

342,008

 

 

$

29.98

 

 

$

4,445,085

 

Options exercisable at March 31, 2021

 

 

 

 

$

 

 

$

 

(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 March 31, 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

 

 

 

7.75

 

 

$

19.30

 

 

 

 

 

$

 

$

21.85

 

 

 

54,150

 

 

 

6.41

 

 

$

21.85

 

 

 

 

 

$

 

$

44.80

 

 

 

137,858

 

 

 

6.90

 

 

$

44.80

 

 

 

 

 

$

 

$19.30 - $44.80

 

 

 

342,008

 

 

 

7.20

 

 

$

29.98

 

 

 

 

 

$

 

15


 

 

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 three months ended March 31, 2021 and the underlying assumptions used in assessing fair value:

 

 

 

Three Months Ended

 

 

 

March 31, 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

 

As of March 31, 2021, the total unrecognized compensation cost related to non-vested stock option awards was $3.8 million. We expect to recognize such costs over a weighted-average period of approximately 1.9 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) will be used to fund remaining development and start-up costs. The Golden Skybridge is expected to open in June 2021.

The preliminary recording of the fair value of net assets acquired as of the acquisition date included $2.2 million in property and equipment and $6.8 million 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 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 consolidated financial statements from the date of acquisition.

Due to the recent timing of the acquisition, the purchase price allocation is not yet finalized and is subject to change within the measurement period (up to one year from the acquisition date) as the assessment of acquired assets is finalized.

Transaction costs associated with the acquisition were $0.2 million during 2021, which are included in “Cost 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:

 

 

 

March 31,

 

 

December 31,

 

(in thousands)

 

2021

 

 

2020

 

Raw materials

 

$

2,737

 

 

$

3,362

 

Finished goods

 

 

5,669

 

 

 

5,365

 

Inventories

 

$

8,406

 

 

$

8,727

 

 

 

16


 

 

Note 6. Other Current Assets

Other current assets consisted of the following:

 

 

 

March 31,

 

 

December 31,

 

(in thousands)

 

2021

 

 

2020

 

Prepaid insurance

 

$

4,109

 

 

$

4,297

 

Restricted cash

 

 

3,231

 

 

 

2,426

 

Prepaid software maintenance

 

 

3,179

 

 

 

3,058

 

Prepaid vendor payments

 

 

1,275

 

 

 

1,835

 

Income tax receivable

 

 

905

 

 

 

337

 

Prepaid taxes

 

 

307

 

 

 

345

 

Prepaid other

 

 

1,423

 

 

 

1,296

 

Other

 

 

4,019

 

 

 

3,631

 

Other current assets

 

$

18,448

 

 

$

17,225

 

 

 

Note 7. Property and Equipment

Property and equipment consisted of the following:

 

 

 

March 31,

 

 

December 31,

 

(in thousands)

 

2021

 

 

2020

 

Land and land interests

 

$

30,583

 

 

$

32,849

 

Buildings and leasehold improvements

 

 

382,387

 

 

 

386,751

 

Equipment and other

 

 

411,030

 

 

 

401,288

 

Gross property and equipment

 

 

824,000

 

 

 

820,888

 

Accumulated depreciation

 

 

(354,320

)

 

 

(352,100

)

Property and equipment, net (excluding finance leases)

 

 

469,680

 

 

 

468,788

 

Finance lease ROU assets, net (1)

 

 

63,934

 

 

 

23,366

 

Property and equipment, net

 

$

533,614

 

 

$

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 $10.9 million for the three months ended March 31, 2021 and $12.2 million for the three months ended March 31, 2020.

Property and equipment purchased through accounts payable and accrued liabilities decreased $0.5 million during the three months ended March 31, 2021 and decreased $4.6 million during the three months ended March 31, 2020.

 

Note 8. Other Investments and Assets

Other investments and assets consisted of the following:

 

 

 

March 31,

 

 

December 31,

 

(in thousands)

 

2021

 

 

2020

 

Self-insured liability receivable

 

$

6,358

 

 

$

6,358

 

Other mutual funds

 

 

3,778

 

 

 

3,457

 

Contract costs

 

 

2,813

 

 

 

2,912

 

Other

 

 

2,760

 

 

 

2,765

 

Other investments and assets

 

$

15,709

 

 

$

15,492

 

 

17


 

 

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

 

 

1,324

 

Balance at March 31, 2021

 

$

112,947

 

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.

Although Pursuit’s reporting units continue to operate at a loss due to seasonally closed properties and travel restrictions as a result of the COVID-19 pandemic, we did not record any impairment charges during the first quarter of 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 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:

 

 

 

 

 

March 31, 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

 

6.3

 

$

37,821

 

 

$

(26,676

)

 

$

11,145

 

 

$

38,214

 

 

$

(26,288

)

 

$

11,926

 

Operating contracts and licenses

 

36.4

 

 

42,402

 

 

 

(2,469

)

 

 

39,933

 

 

 

42,012

 

 

 

(2,405

)

 

 

39,607

 

In-place lease

 

13.1

 

 

15,558

 

 

 

(778

)

 

 

14,780

 

 

 

15,347

 

 

 

(656

)

 

 

14,691

 

Tradenames

 

5.0

 

 

5,659

 

 

 

(2,294

)

 

 

3,365

 

 

 

5,940

 

 

 

(2,435

)

 

 

3,505

 

Non-compete agreements

 

0.8

 

 

780

 

 

 

(663

)

 

 

117

 

 

 

770

 

 

 

(616

)

 

 

154

 

Other

 

6.9

 

 

829

 

 

 

(113

)

 

 

716

 

 

 

818

 

 

 

(102

)

 

 

716

 

Total amortized intangible assets

 

 

 

 

103,049

 

 

 

(32,993

)

 

 

70,056

 

 

 

103,101

 

 

 

(32,502

)

 

 

70,599

 

Indefinite-lived intangible assets:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Business licenses

 

 

 

 

575

 

 

 

 

 

 

575

 

 

 

573

 

 

 

 

 

 

573

 

Other intangible assets

 

 

 

$

103,624

 

 

$

(32,993

)

 

$

70,631

 

 

$

103,674

 

 

$

(32,502

)

 

$

71,172

 

 

Intangible asset amortization expense was $1.2 million for the three months ended March 31, 2021 and $2.2 million for the three months ended March 31, 2020. We recorded a non-cash impairment charge to intangible assets of $15.7 million during the three months ended March 31, 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 March 31, 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

 

$

4,039

 

2022

 

 

5,164

 

2023

 

 

4,500

 

2024

 

 

3,539

 

2025

 

 

2,244

 

Thereafter

 

 

50,570

 

Total

 

$

70,056

 

 

18


 

 

 

 

Note 10. Other Current Liabilities

Other current liabilities consisted of the following:

 

 

 

March 31,

 

 

December 31,

 

(in thousands)

 

2021

 

 

2020

 

Continuing operations:

 

 

 

 

 

 

 

 

Self-insured liability

 

$

5,450

 

 

$

5,715

 

Accrued employee benefit costs

 

 

2,879

 

 

 

2,363

 

Accrued sales and use taxes

 

 

1,857

 

 

 

1,547

 

Accrued interest payable

 

 

1,809

 

 

 

3,042

 

Accrued professional fees

 

 

1,635

 

 

 

1,691

 

Current portion of pension and postretirement liabilities

 

 

1,618

 

 

 

1,805

 

Commissions payable

 

 

1,352

 

 

 

903

 

Accrued restructuring

 

 

1,224

 

 

 

2,479

 

Other taxes

 

 

1,824

 

 

 

1,872

 

Other

 

 

4,974

 

 

 

5,123

 

Total continuing operations

 

 

24,622

 

 

 

26,540

 

Discontinued operations:

 

 

 

 

 

 

 

 

Self-insured liability

 

 

226

 

 

 

347

 

Environmental remediation liabilities

 

 

61

 

 

 

61

 

Other

 

 

91

 

 

 

91

 

Total discontinued operations

 

 

378

 

 

 

499

 

Total other current liabilities

 

$

25,000

 

 

$

27,039

 

 

 

Note 11. Other Deferred Items and Liabilities

Other deferred items and liabilities consisted of the following:

 

 

 

March 31,

 

 

December 31,

 

(in thousands)

 

2021

 

 

2020

 

Continuing operations:

 

 

 

 

 

 

 

 

Foreign deferred tax liability

 

$

19,492

 

 

$

21,336

 

Multi-employer pension plan withdrawal liability

 

 

15,849

 

 

 

15,864

 

Self-insured liability

 

 

7,168

 

 

 

6,662

 

Self-insured excess liability

 

 

6,358

 

 

 

6,358

 

Accrued compensation

 

 

5,309

 

 

 

5,821

 

Accrued restructuring

 

 

2,680

 

 

 

2,751

 

Other

 

 

1,464

 

 

 

1,479

 

Total continuing operations

 

 

58,320

 

 

 

60,271

 

Discontinued operations:

 

 

 

 

 

 

 

 

Environmental remediation liabilities

 

 

2,177

 

 

 

2,179

 

Self-insured liability

 

 

1,707

 

 

 

1,639

 

Other

 

 

263

 

 

 

539

 

Total discontinued operations

 

 

4,147

 

 

 

4,357

 

Total other deferred items and liabilities

 

$

62,467

 

 

$

64,628

 

 

 

19


 

 

Note 12. Debt and Finance Lease Obligations

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

 

 

 

March 31,

 

 

December 31,

 

(in thousands, except interest rates)

 

2021

 

 

2020

 

2018 Credit Facility, 4.5% weighted-average interest rate at March 31, 2021 and 4.5% at December 31, 2020, due through 2023(1)

 

$

301,094

 

 

$

266,762

 

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

 

 

5,695

 

 

 

5,820

 

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

 

 

710

 

 

 

705

 

Less unamortized debt issuance costs

 

 

(2,481

)

 

 

(2,737

)

Total debt(2)

 

 

305,018

 

 

 

270,550

 

Finance lease obligations, 9.0% weighted-average interest rate at March 31, 2021 and 8.0% at December 31, 2020, due through 2067(3)

 

 

65,200

 

 

 

23,141

 

Total debt and finance lease obligations(4)

 

 

370,218

 

 

 

293,691

 

Current portion

 

 

(2,800

)

 

 

(8,335

)

Long-term debt and finance lease obligations

 

$

367,418

 

 

$

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 estimated fair value of total debt and finance leases was $329.1 million as of March 31, 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.

(3)

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.

(4)

Cash paid for interest on debt was $5.7 million for the three months ended March 31, 2021 and $3.5 million for the three months ended March 31, 2020.

2018 Credit Agreement

Effective October 24, 2018, we entered into the 2018 Credit Agreement. The 2018 Credit Agreement has a maturity date of October 24, 2023 and provides for a $450 million revolving credit facility (“2018 Credit Facility”). The 2018 Credit Facility may be increased up to an additional $250 million under certain circumstances and has a $20 million sublimit for letters of credit. Borrowings and letters of credit can be denominated in U.S. dollars, Euros, Canadian dollars, or British pounds. Our lenders under the 2018 Credit Agreement have a first perfected security interest in all of our personal property.

Effective August 5, 2020, we entered into an amendment to the 2018 Credit Agreement, which, among other things, (i) waives our financial covenants until September 30, 2022 (the “Covenant Waiver Period”) and (ii) requires us to maintain minimum liquidity of $100 million, with liquidity defined as unrestricted cash and available capacity on our 2018 Credit Facility. The Covenant Waiver Period will be in effect until the earlier of September 30, 2022 or the fiscal quarter when our leverage ratio is less than or equal to 4.00 to 1.00. Post Covenant Waiver Period, the maximum leverage ratio will be less than or equal to 4.50 to 1.00 at September 30, 2022 with a step down to less than or equal to 4.00 to 1.00 at December 31, 2022 and thereafter until the maturity date. The minimum interest coverage ratio will be greater than or equal to 2.00 to 1.00 post Covenant Waiver Period and until maturity of the facility. The interest rate on the borrowings is equal to the London Inter-bank Offered Rate (“LIBOR”) plus 350 basis points, with a LIBOR floor of one percent during the Covenant Waiver Period. The LIBOR floor continues until the end of the 2018 Credit Agreement. A revised pricing grid goes into effect after the Covenant Waiver Period ends. Additionally, we are precluded from paying cash dividends, from issuing unsecured debt, and from accessing the $250 million expansion feature during the Covenant Waiver Period. The amendment allows us to make acquisitions under certain conditions. In connection with the amendment, Viad pledged 100% of the capital stock of its wholly-owned domestic subsidiaries and it top-tier foreign subsidiaries (other than Esja). Fees related to the amendment were approximately $1.7 million. As of March 31, 2021, we were in compliance with the amendment.

As of March 31, 2021, capacity remaining under the 2018 Credit Facility was $139.4 million, reflecting borrowings of $301.1 million and $9.5 million in outstanding letters of credit.

We index borrowings under the 2018 Credit Facility to the prime rate or the LIBOR, plus appropriate spreads tied to our leverage ratio. As LIBOR will begin to be phased out in 2021, our 2018 Credit Facility includes a method for determining an alternative or successor rate of interest that gives consideration to the new prevailing market convention. The vast majority of our borrowings under

20


 

the 2018 Credit Facility are indexed to LIBOR. Commitment fees and letters of credit fees are also tied to our leverage ratio. The fees on the unused portion of the 2018 Credit Facility were 0.50% annually as of March 31, 2021. Only our borrowings under the 2018 Credit Facility and the discount rates we use to account for some leases are indexed to LIBOR. We do not expect the alternative or successor rate to LIBOR to have a material impact on either our 2018 Credit Facility or the accounting for our leases.

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 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.

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 will be used to fund 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)

 

March 31, 2021

 

 

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)

 

 

3,778

 

 

 

3,778

 

 

 

 

 

 

 

Total assets at fair value on a recurring basis

 

$

3,780

 

 

$

3,780

 

 

$

 

 

$

 

21


 

 

 

 

 

 

 

 

 

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

 

 

$

 

 

$

 

 

(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. Loss Per Share

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

 

 

 

Three Months Ended

 

 

 

March 31,

 

(in thousands, except per share data)

 

2021

 

 

2020

 

Net loss attributable to Viad (diluted)

 

$

(43,152

)

 

$

(86,585

)

Convertible preferred stock dividends

 

 

(1,898

)

 

 

 

Adjustment to the redemption value of redeemable noncontrolling interest

 

 

(56

)

 

 

(126

)

Net loss allocated to Viad common stockholders (basic)

 

$

(45,106

)

 

$

(86,711

)

Basic weighted-average outstanding common shares

 

 

20,370

 

 

 

20,215

 

Diluted weighted-average outstanding shares

 

 

20,370

 

 

 

20,215

 

Loss per share:

 

 

 

 

 

 

 

 

Basic loss attributable to Viad common stockholders

 

$

(2.21

)

 

$

(4.29

)

Diluted loss attributable to Viad common stockholders(1)

 

$

(2.21

)

 

$

(4.29

)

 

(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 loss available to common stockholders and assumes conversion of all potential shares other than the participating securities. The as-converted method uses net loss 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 loss per share. The adjustment to the carrying value of the redeemable noncontrolling interest is reflected in loss per common share.

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

 

 

 

Three Months Ended

 

 

 

March 31,

 

(in thousands)

 

2021

 

2020

 

Convertible preferred stock (as converted to common stock)

 

 

6,494

 

 

 

Unvested restricted share-based awards

 

 

38

 

 

84

 

Stock options

 

 

57

 

 

16

 

 

 

22


 

 

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. The Investment Agreement also includes a delayed draw commitment of up to $45 million in additional Convertible Series A Preferred Stock, which we may access during the 12 months following the August 5, 2020 closing date on the same terms and conditions as the initial investment. We have classified the convertible preferred stock as mezzanine equity in our 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 three months ended March 31, 2021, $1.9 million of dividends were deemed declared and paid in-kind.

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

 

 

3,977

 

 

 

 

 

 

3,977

 

Amounts reclassified from AOCI, net of tax

 

 

 

 

 

121

 

 

 

121

 

Net other comprehensive income

 

 

3,977

 

 

 

121

 

 

 

4,098

 

Balance at March 31, 2021

 

$

(12,709

)

 

$

(13,834

)

 

$

(26,543

)

 

(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

 

 

(28,158

)

 

 

 

 

 

(28,158

)

Amounts reclassified from AOCI, net of tax

 

 

 

 

 

314

 

 

 

314

 

Net other comprehensive income (loss)

 

 

(28,158

)

 

 

314

 

 

 

(27,844

)

Balance at March 31, 2020

 

$

(51,957

)

 

$

(11,586

)

 

$

(63,543

)

 

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.

 

 

 

23


 

 

Note 17. Income Taxes

The effective tax rate was 6.3% for the three months ended March 31, 2021 and 15.2% for the three months ended March 31, 2020.

The income tax provision was computed based on our estimated annualized effective tax rate and the full-year forecasted income or loss plus the tax impact of unusual, infrequent, or nonrecurring significant items during the period. The effective tax rate for the three months ended March 31, 2021 was less than the federal statutory rate of 21% primarily as a result of excluding the tax benefits on losses recognized in the United States, United Kingdom, and other European countries where we have a valuation allowance. The effective tax rate for the three months ended March 31, 2020 was less than the federal statutory rate of 21% primarily due to no tax benefit recognized on some of the goodwill impairments.

We paid cash for income taxes of $0.7 million during the three months ended March 31, 2021 and $3.3 million during the three months ended March 31, 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 March 31, 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

 

$

 

 

$

 

 

$

13

 

 

$

15

 

 

$

113

 

 

$

110

 

Interest cost

 

 

114

 

 

 

160

 

 

 

55

 

 

 

88

 

 

 

76

 

 

 

84

 

Expected return on plan assets

 

 

(27

)

 

 

(1

)

 

 

 

 

 

 

 

 

(125

)

 

 

(131

)

Amortization of prior service credit

 

 

 

 

 

 

 

 

(1

)

 

 

(36

)

 

 

 

 

 

 

Recognized net actuarial loss

 

 

151

 

 

 

135

 

 

 

56

 

 

 

82

 

 

 

49

 

 

 

46

 

Net periodic benefit cost

 

$

238

 

 

$

294

 

 

$

123

 

 

$

149

 

 

$

113

 

 

$

109

 

 

 

We expect to contribute $0.8 million to our funded pension plans, $0.9 million to our unfunded pension plans, and $0.9 million to our postretirement benefit plans in 2021. During the three months ended March 31, 2021, we contributed $0.2 million to our funded pension plans, $0.2 million to our unfunded pension plans, and $0.2 million to our postretirement benefit plans.

 

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. In 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 we use at live events and consequently vacated a facility during the first quarter of 2021.

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 and charges related to the downsizing of facilities.

24


 

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

 

 

64

 

 

 

2,719

 

 

 

43

 

 

 

2,826

 

Cash payments

 

 

(419

)

 

 

(1,747

)

 

 

(60

)

 

 

(2,226

)

Non-cash items(1)

 

 

 

 

 

(1,913

)

 

 

 

 

 

(1,913

)

Adjustment to liability

 

 

(10

)

 

 

(18

)

 

 

15

 

 

 

(13

)

Balance at March 31, 2021

 

$

2,075

 

 

$

1,807

 

 

$

22

 

 

$

3,904

 

 

(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 March 31, 2021, $1.5 million of the liabilities related to severance and employee benefits will remain unpaid by the end of 2021. The liability related to future lease payments 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:

 

 

 

 

 

March 31,

 

 

December 31,

 

(in thousands)

 

Classification on the Condensed Consolidated Balance Sheet

 

2021

 

 

2020

 

Assets:

 

 

 

 

 

 

 

 

 

 

Operating lease assets

 

Operating lease ROU assets

 

$

81,488

 

 

$

82,739

 

Finance lease assets (1)

 

Property and equipment, net

 

 

63,934

 

 

 

23,366

 

Total lease assets

 

 

 

$

145,422

 

 

$

106,105

 

 

 

 

 

 

 

 

 

 

 

 

Liabilities:

 

 

 

 

 

 

 

 

 

 

Current:

 

 

 

 

 

 

 

 

 

 

Operating lease obligations

 

Operating lease obligations

 

$

14,684

 

 

$

15,697

 

Finance lease obligations

 

Current portion of debt and finance lease obligations

 

 

2,519

 

 

 

2,514

 

Noncurrent:

 

 

 

 

 

 

 

 

 

 

Operating lease obligations

 

Long-term operating lease obligations

 

 

72,878

 

 

 

70,150

 

Finance lease obligations (1)

 

Long-term debt and finance lease obligations

 

 

62,681

 

 

 

20,627

 

Total lease liabilities

 

 

 

$

152,762

 

 

$

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.

During the three months ended March 31, 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

 

 

 

March 31,

 

(in thousands)

 

2021

 

 

2020

 

Finance lease cost:

 

 

 

 

 

 

 

 

Amortization of ROU assets

 

$

1,070

 

 

$

918

 

Interest on lease liabilities

 

 

1,315

 

 

 

417

 

Operating lease cost

 

 

6,270

 

 

 

6,727

 

Short-term lease cost

 

 

261

 

 

 

310

 

Variable lease cost

 

 

942

 

 

 

1,699

 

Total lease cost, net

 

$

9,858

 

 

$

10,071

 

25


 

 

 

 

 

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

 

 

 

Three Months Ended

 

 

 

March 31,

 

(in thousands)

 

2021

 

 

2020

 

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

 

 

 

 

 

 

 

 

Operating cash flows from operating leases

 

$

6,153

 

 

$

6,529

 

Operating cash flows from finance leases

 

$

274

 

 

$

160

 

Financing cash flows from finance leases

 

$

710

 

 

$

777

 

ROU assets obtained in exchange for lease obligations:

 

 

 

 

 

 

 

 

Operating leases

 

$

6,299

 

 

$

779

 

Finance leases

 

 

42,907

 

 

$

730

 

 

 

 

 

 

 

 

 

 

 

 

March 31,

 

 

December 31,

 

 

 

2021

 

 

2020

 

Weighted-average remaining lease term (years):

 

 

 

 

 

 

 

 

Operating leases

 

 

8.21

 

 

 

8.39

 

Finance leases

 

 

35.44

 

 

 

13.97

 

Weighted-average discount rate:

 

 

 

 

 

 

 

 

Operating leases

 

 

7.02

%

 

 

6.93

%

Finance leases

 

 

9.04

%

 

 

7.99

%

 

As of March 31, 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

 

$

16,616

 

 

$

5,948

 

 

$

22,564

 

2022

 

 

16,932

 

 

 

7,927

 

 

 

24,859

 

2023

 

 

13,847

 

 

 

7,407

 

 

 

21,254

 

2024

 

 

11,982

 

 

 

6,735

 

 

 

18,717

 

2025

 

 

10,689

 

 

 

6,204

 

 

 

16,893

 

Thereafter

 

 

52,037

 

 

 

189,245

 

 

 

241,282

 

Total future lease payments

 

 

122,103

 

 

 

223,466

 

 

 

345,569

 

Less: Amount representing interest

 

 

(34,541

)

 

 

(158,266

)

 

 

(192,807

)

Present value of minimum lease payments

 

 

87,562

 

 

 

65,200

 

 

 

152,762

 

Current portion

 

 

14,684

 

 

 

2,519

 

 

 

17,203

 

Long-term portion

 

$

72,878

 

 

$

62,681

 

 

$

135,559

 

 

As of March 31, 2021, the estimated future minimum rental income under non-cancellable leases, which includes rental income from facilities that we own, are as follows:

 

(in thousands)

 

 

 

 

Remainder of 2021

 

$

1,180

 

2022

 

 

1,088

 

2023

 

 

869

 

2024

 

 

646

 

2025

 

 

493

 

Thereafter

 

 

1,333

 

Total minimum rents

 

$

5,609

 

 

Lease Not Yet Commenced

As of March 31, 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 our 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 22 years.

26


 

 

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 March 31, 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 March 31, 2021, we had recorded environmental remediation liabilities of $2.2 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 March 31, 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 March 31, 2021 would be $90.0 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 $12.6 million as of March 31, 2021, which includes $7.9 million related to workers’ compensation liabilities, and $4.7 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 March 31, 2021. We are also self-insured for certain employee health benefits and the estimated employee health benefit claims incurred but not yet reported was $1.5 million as of March 31, 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 $0.2 million for the three months ended March 31, 2021 and $1.5 million for the three months ended March 31, 2020.

In addition, as of March 31, 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.

27


 

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. Through Esja and its wholly-owned subsidiary, we are operating a 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, rather than to current earnings.

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

 

 

(494

)

Adjustment to the redemption value

 

 

56

 

Capital contribution

 

 

142

 

Foreign currency translation adjustment

 

 

77

 

Balance at March 31, 2021

 

$

5,006

 

 

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:

 

(in thousands)

Glacier Park Inc.

 

 

Brewster (1)

 

 

Sky Lagoon

 

 

Total

 

Balance at December 31, 2020

$

13,953

 

 

$

51,295

 

 

$

12,896

 

 

$

78,144

 

Net loss attributable to non-redeemable noncontrolling interest

 

(729

)

 

 

(87

)

 

 

(629

)

 

 

(1,445

)

Acquisitions

 

 

 

 

6,759

 

 

 

 

 

 

6,759

 

Dividends

 

 

 

 

(951

)

 

 

 

 

 

(951

)

Foreign currency translation adjustments

 

2

 

 

 

654

 

 

 

94

 

 

 

750

 

Balance at March 31, 2021

$

13,226

 

 

$

57,670

 

 

$

12,361

 

 

$

83,257

 

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.

 

28


 

 

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

 

 

 

March 31,

 

(in thousands)

 

2021

 

 

2020

 

Revenue:

 

 

 

 

 

 

 

 

GES

 

$

19,145

 

 

$

281,135

 

Pursuit

 

 

9,790

 

 

 

13,523

 

Total revenue

 

$

28,935

 

 

$

294,658

 

Segment operating income (loss):

 

 

 

 

 

 

 

 

GES

 

$

(19,904

)

 

$

10,858

 

Pursuit

 

 

(18,321

)

 

 

(20,274

)

Segment operating loss

 

 

(38,225

)

 

 

(9,416

)

Corporate eliminations (1)

 

 

17

 

 

 

16

 

Corporate activities

 

 

(2,005

)

 

 

(789

)

Operating loss

 

 

(40,213

)

 

 

(10,189

)

Interest income

 

 

33

 

 

 

79

 

Interest expense

 

 

(5,118

)

 

 

(4,018

)

Other expense

 

 

(360

)

 

 

(419

)

Restructuring charges:

 

 

 

 

 

 

 

 

GES

 

 

(2,783

)

 

 

(656

)

Pursuit

 

 

(23

)

 

 

(1

)

Corporate

 

 

(20

)

 

 

(194

)

Impairment charges:

 

 

 

 

 

 

 

 

GES

 

 

 

 

 

(86,623

)

Pursuit

 

 

 

 

 

(1,757

)

Loss from continuing operations before income taxes

 

$

(48,484

)

 

$

(103,778

)

(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.

 

Note 24. Subsequent Event

On April 30, 2021, we opened Pursuit’s new Sky Lagoon attraction in Reykjavik, Iceland.

 


29


 

 

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 Annual Report on 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 (“LIBOR”) and the Canadian Dollar Offered Rate (“CDOR”).

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.

30


 

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 and extending through the first quarter of 2021, the COVID-19 pandemic had a significant and negative impact on our operations and financial performance, with live events largely shut down and severe tourism activity disruptions. In response to the COVID-19 pandemic, 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 dividend payments and share repurchases, and we availed ourselves of governmental assistance programs for wages and tax relief.

In August 2020, we secured additional capital to strengthen our liquidity position by entering into an investment agreement with funds managed by private equity firm Crestview Partners who made an initial investment of $135 million, offset in part by $9.2 million in fees, in newly issued perpetual convertible preferred stock. Refer to Note 15 – Common and Preferred Stock of the Notes to Condensed Consolidated Financial Statements (Part I, Item 1 of this Form 10-Q) for further information. In August 2020, we also amended our Second Amended and Restated Credit Agreement (the “2018 Credit Agreement”) for our $450 million revolving credit facility (the “2018 Credit Facility”) to provide financial flexibility, which, among other things waives our financial covenants until September 30, 2022. Refer to Note 12 – Debt and Finance Lease Obligations of the Notes to Condensed Consolidated Financial Statements (Part I, Item 1 of this Form 10-Q) for further information.

The extent of the COVID-19 pandemic’s effect on our operational and financial performance will depend on future developments including the duration, spread, and intensity of the virus as well as the success of vaccination efforts, all of which are uncertain and difficult to predict. Due to the evolving and uncertain nature of COVID-19, we are not able at this time to fully estimate the effect of these factors on our business; however, the adverse impact on our business, results of operations, and cash flows has been material. We will continue to evaluate and implement additional cost-cutting measures as are 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. Live event activity was largely cancelled or postponed after mid-March 2020 and continuing into 2021 due to the COVID-19 pandemic.

Pursuit experiences peak activity during the summer months. We experienced lower visitation to Pursuit’s properties in 2020 due to the COVID-19 pandemic as travel restrictions and border closures largely remained in place. We seasonally closed Pursuit’s non-year-round properties during the first quarter of 2021; however, temporary government mandated closures occurred at FlyOver Canada and FlyOver Iceland during the first quarter.

31


 

Results of Operations

Financial Highlights

 

 

 

Three Months Ended

 

 

 

 

 

 

 

March 31,

 

 

 

 

 

(in thousands, except per share data)

 

2021

 

 

2020

 

 

%

Change

 

Total revenue (1)

 

$

28,935

 

 

$

294,658

 

 

 

(90.2

)%

Net loss attributable to Viad

 

$

(43,152

)

 

$

(86,585

)

 

 

50.2

%

Segment operating loss (2)

 

$

(38,225

)

 

$

(9,416

)

 

**

 

Diluted loss per common share

  from continuing operations attributable

  to Viad common stockholders

 

$

(2.23

)

 

$

(4.27

)

 

 

47.8

%

 

** Change is greater than +/- 100%

(1)

As previously disclosed in our 2020 Form 10-K, 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 loss, to the most directly comparable GAAP measure.

 

Total revenue decreased $265.7 million, 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 quarter of 2021. Pursuit temporarily closed its properties in mid-March 2020 through the remainder of the first quarter of 2020. Most of Pursuit’s year-round properties were open during the first quarter of 2021, although there was lower visitation due in part to capacity restrictions in addition to temporary government mandated closures at FlyOver Canada and FlyOver Iceland.

 

Net loss attributable to Viad improved $43.4 million, primarily due to impairment charges of $88.4 million recorded during the three months ended March 31, 2020, offset in part by higher segment operating loss in 2021.

 

Total segment operating loss(2) increased $28.8 million, primarily due to lower revenue at GES and Pursuit as a result of the COVID-19 pandemic in addition to the elimination of performance-based incentives in 2020, offset in part by a $9.1 million gain on sale of a GES warehouse in Orlando.

32


 

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 loss from our significant international operations for the three months ended March 31, 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

 

 

$

54

 

 

$

0.79

 

 

$

0.73

 

 

$

(50

)

United Kingdom (GBP)

 

$

1.38

 

 

$

1.28

 

 

 

158

 

 

$

1.38

 

 

$

1.28

 

 

 

(180

)

Europe (EUR)

 

$

1.20

 

 

$

1.10

 

 

 

20

 

 

$

1.20

 

 

$

1.10

 

 

 

(71

)

 

 

 

 

 

 

 

 

 

 

 

232

 

 

 

 

 

 

 

 

 

 

 

(301

)

Pursuit:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Canada (CAD)

 

$

0.79

 

 

$

0.75

 

 

$

541

 

 

$

0.79

 

 

$

0.74

 

 

$

(509

)

Iceland (ISK)

 

$

0.01

 

 

$

0.01

 

 

 

2

 

 

$

0.01

 

 

$

0.01

 

 

 

(33

)

 

 

 

 

 

 

 

 

 

 

$

543

 

 

 

 

 

 

 

 

 

 

$

(542

)

 

 

 

 

 

 

 

 

 

 

$

775

 

 

 

 

 

 

 

 

 

 

$

(843

)

Revenue and segment operating 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.

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 income (loss) to organic revenue(1) and organic segment operating income (loss)(1) for the three months ended March 31, 2021 and 2020.

 

 

 

Three Months Ended

 

 

Three Months Ended

 

 

 

 

 

 

March 31, 2021

 

 

March 31, 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)

 

$

19,145

 

 

$

 

 

$

232

 

 

$

18,913

 

 

$

281,135

 

 

$

 

 

$

281,135

 

 

 

(93.2

)%

 

 

(93.3

)%

Total GES segment operating income (loss)(3)

 

$

(19,904

)

 

$

 

 

$

(301

)

 

$

(19,603

)

 

$

10,858

 

 

$

 

 

$

10,858

 

 

**

 

 

**

 

** Change is greater than +/- 100%

(1)

As previously disclosed in our 2020 Form 10-K, 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 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.

33


 

(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 income (loss), to the most directly comparable GAAP measure.

 

GES revenue decreased $262.0 million, primarily due to show postponements and cancellations as a result of the COVID-19 pandemic. Live events remained largely shut down during the first quarter of 2021. Revenue earned during 2021 was primarily driven by virtual and hybrid events completed during the first quarter of 2021. Revenue earned during 2020 was primarily driven by shows completed during Q1 2020 before the onset of the pandemic and compensation for work completed on cancelled shows. Organic revenue* decreased  $262.2 million.

GES segment operating loss was $19.9 million during the three months ended March 31, 2021 as compared to income of $10.9 million during the three months ended March 31, 2020. The 2021 loss is primarily due to the decrease in revenue, offset in part by the reduction in operating costs by reducing wages and discretionary costs and a $9.1 million gain on sale of a GES warehouse in Orlando. Organic segment operating loss* was $19.6 million during the three months ended March 31, 2021 as compared to income of $10.9 million during the three months ended March 31, 2020.

* 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 loss to organic revenue(3) and organic segment operating loss(3) for the three months ended March 31, 2021 and 2020.

 

 

 

Three Months Ended

 

 

Three Months Ended

 

 

 

 

 

 

March 31, 2021

 

 

March 31, 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

 

$

2,256

 

 

$

 

 

$

127

 

 

$

2,129

 

 

$

5,278

 

 

$

 

 

$

5,278

 

 

 

(57.3

)%

 

 

(59.7

)%

Hospitality

 

 

6,941

 

 

 

 

 

 

393

 

 

 

6,548

 

 

 

5,981

 

 

 

 

 

 

5,981

 

 

 

16.1

%

 

 

9.5

%

Transportation

 

 

533

 

 

 

 

 

 

31

 

 

 

502

 

 

 

2,146

 

 

 

 

 

 

2,146

 

 

 

(75.2

)%

 

 

(76.6

)%

Travel Planning

 

 

60

 

 

 

 

 

 

4

 

 

 

56

 

 

 

199

 

 

 

 

 

 

199

 

 

 

(69.8

)%

 

 

(71.9

)%

Intra-Segment Eliminations & Other

 

 

 

 

 

 

 

 

(12

)

 

 

12

 

 

 

(81

)

 

 

 

 

 

(81

)

 

 

(100.0

)%

 

**

 

Total Pursuit

 

$

9,790

 

 

$

 

 

$

543

 

 

$

9,247

 

 

$

13,523

 

 

$

 

 

$

13,523

 

 

 

(27.6

)%

 

 

(31.6

)%

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Segment operating loss(4):

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Total Pursuit

 

$

(18,321

)

 

$

(75

)

 

$

(542

)

 

$

(17,704

)

 

$

(20,274

)

 

$

 

 

$

(20,274

)

 

 

9.6

%

 

 

12.7

%

 

 

(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). The Golden Skybridge is expected to open in June 2021.

(3)

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.

(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 loss, to the most directly comparable GAAP measure.

Pursuit revenue decreased $3.7 million or 27.6%, primarily due to the impact of the COVID-19 pandemic as travel restrictions and border closures largely remained in place throughout the first quarter of 2021. Most of Pursuit’s year-round attractions and properties were open during the first quarter of 2021, although there was lower visitation due in part to capacity restrictions in addition to temporary government mandated closures at FlyOver Canada and FlyOver Iceland. In 2020, Pursuit temporarily closed its properties

34


 

in mid-March 2020 through the end of the first quarter of 2020. Organic revenue* decreased $4.3 million or 31.6% during the three months ended March 31, 2021.

Pursuit segment operating loss improved $2.0 million or 9.6%, primarily due to the reduction in operating costs through efforts to maximize profitability in addition to wage subsidies granted by the Canadian government. Organic segment operating loss* decreased $2.6 million.

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

 

 

 

Three Months Ended

 

 

 

March 31,

 

 

 

2021

 

 

2020

 

 

Change vs. 2020

 

Same-Store Key Performance Indicators

 

 

 

 

 

 

 

 

 

 

 

 

Attractions:

 

 

 

 

 

 

 

 

 

 

 

 

Number of visitors

 

 

57,486

 

 

 

163,754

 

 

 

(64.9

)%

Revenue per attraction visitor

 

$

38

 

 

$

33

 

 

 

15.2

%

Effective ticket price

 

$

27

 

 

$

26

 

 

 

3.8

%

Hospitality:

 

 

 

 

 

 

 

 

 

 

 

 

Room nights available (1)

 

 

107,021

 

 

 

91,419

 

 

 

17.1

%

RevPAR (1)

 

$

43

 

 

$

50

 

 

 

(14.0

)%

ADR

 

$

101

 

 

$

102

 

 

 

(1.0

)%

Occupancy (1)

 

 

43.1

%

 

 

48.4

%

 

 

(5.3

)%

(1)

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.

35


 

For the health and well-being of our employees, guests, and community, Pursuit’s year-round attractions and lodging properties were closed temporarily starting in mid-March 2020 and remained closed during the remainder of the first quarter of 2020. We seasonally closed Pursuit’s non-year-round properties during the first quarter of 2021.

Attractions. The decrease in same-store visitors was driven by lower visitation due to the continued border closures and travel restrictions as a result of the COVID-19 pandemic in addition to the temporary government mandated closures at FlyOver Canada and FlyOver Iceland during the first quarter of 2021. Revenue per attraction increased due to higher effective ticket prices and ancillary revenue.

Hospitality. Room nights available increased as most of Pursuit’s year-round properties were open during the first quarter of 2021 whereas in 2020, Pursuit temporarily closed its properties in mid-March 2020 through the end of the first quarter of 2020. The decrease in RevPAR was primarily driven by lower demand at the Mount Royal Hotel and Elk + Avenue Hotel in Banff as a result of the COVID-19 pandemic.

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. 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

 

 

 

 

 

 

 

March 31,

 

 

 

 

 

(in thousands)

 

2021

 

 

2020

 

 

Change vs. 2020

 

Corporate activities

 

$

2,005

 

 

$

789

 

 

**

 

Interest expense

 

$

5,118

 

 

$

4,018

 

 

 

27.4

%

Other expense, net

 

$

360

 

 

$

419

 

 

 

(14.1

)%

Restructuring charges

 

$

2,826

 

 

$

851

 

 

**

 

Impairment charges

 

$

 

 

$

88,380

 

 

 

(100.0

)%

Income tax benefit

 

$

(3,045

)

 

$

(15,797

)

 

 

80.7

%

Income (loss) from discontinued operations

 

$

348

 

 

$

(454

)

 

**

 

** Change is greater than +/- 100%

Corporate Activities – The increase in corporate activities expense during the three months ended March 31, 2021 was primarily due to lower performance-based compensation expense in 2020 as we reduced our estimated performance achievement to zero as a result of COVID-19, offset in part by lower headcount in 2021.

Interest Expense – The increase in interest expense during the three months ended March 31, 2021 was primarily due to higher debt balances in 2021.

Restructuring Charges – Restructuring charges during the three months ended March 31, 2021 were primarily related to facility closures 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 the three months ended March 31, 2020 were primarily related to the elimination of certain positions at GES and our corporate office in response to the COVID-19 pandemic. In 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 we use at live events and consequently vacated a facility during the first quarter of 2021.

Impairment Charges – Due to the deteriorating macroeconomic environment related to the COVID-19 pandemic, resulting in disruptions to our operations and the decline in our stock price, we recorded non-cash goodwill impairment charges of $72.7 million during the three months ended March 31, 2020 related to GES and Pursuit’s Glacier Park Collection reporting units and a non-cash impairment charge to intangible assets of $15.7 million related to GES’ United States audio-visual production business.

Income Tax Benefit – The effective tax rate was 6.3% for the three months ended March 31, 2021 and 15.2% for the three months ended March 31, 2020. The rate for the three months ended March 31, 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 rate for the three months ended March 31, 2020 was lower than the blended statutory rate due to no tax benefit recognized on some of the goodwill impairments.

36


 

Income (Loss) from Discontinued Operations – Income from discontinued operations during the three months ended March 31, 2021 was primarily due to an insurance recovery related to a previously sold operation, offset in part by legal expenses. Loss from discontinued operations during the three months ended March 31, 2020 was primarily due to legal expenses related to previously sold operations.

Liquidity and Capital Resources

Cash, cash equivalents, and restricted cash were $37.9 million as of March 31, 2021, as compared to $42.0 million as of December 31, 2020. Our total available liquidity was $219.1 million, including the available capacity on our 2018 Credit Facility of $139.4 million, unrestricted cash of $34.7 million, and an additional $45.0 million available through the delayed draw commitment from Crestview Partners. During the three months ended March 31, 2021, we used net cash from operating activities of $32.7 million. We believe that our existing sources of liquidity will be sufficient to fund operations and capital commitments, including approximately $60 million in capital expenditures in select maintenance and growth investments, for at least the next 12 months.

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

As of March 31, 2021, we held approximately $32.0 million of our cash and cash equivalents outside of the United States, consisting of $17.8 million in Canada, $6.1 million in the United Kingdom, $3.8 million in the Netherlands, and $4.3 million in certain other countries.

Cash Flows

Operating Activities

 

 

 

Three Months Ended

 

 

 

March 31,

 

(in thousands)

 

2021

 

 

2020

 

Net loss

 

$

(45,091

)

 

$

(88,435

)

Depreciation and amortization

 

 

13,177

 

 

 

15,285

 

Deferred income taxes

 

 

(3,019

)

 

 

(15,799

)

(Income) loss from discontinued operations

 

 

(348

)

 

 

454

 

Restructuring charges

 

 

2,826

 

 

 

851

 

Impairment charges

 

 

 

 

 

88,380

 

Gains on dispositions of property and other assets

 

 

(9,250

)

 

 

(85

)

Share-based compensation expense (benefit)

 

 

1,763

 

 

 

(2,145

)

Other non-cash items

 

 

(171

)

 

 

9,342

 

Changes in assets and liabilities

 

 

7,394

 

 

 

(12,567

)

Net cash used in operating activities

 

$

(32,719

)

 

$

(4,719

)

The increase in net cash used in operating activities of $28.0 million was due to losses at GES and Pursuit as a result of the COVID-19 pandemic, offset in part by a reduction in working capital needed to support lower business volumes and active working capital management.

37


 

Investing Activities

 

 

 

Three Months Ended

 

 

 

March 31,

 

(in thousands)

 

2021

 

 

2020

 

Capital expenditures

 

$

(9,371

)

 

$

(23,246

)

Cash paid for acquisitions, net

 

 

(7,415

)

 

 

 

Proceeds from dispositions of property and other assets

 

 

14,106

 

 

 

85

 

Net cash used in investing activities

 

$

(2,680

)

 

$

(23,161

)

The decrease in net cash used in investing activities of $20.5 million was primarily due to proceeds from the sale of a GES warehouse in Orlando during the first quarter of 2021 and a decrease in capital expenditures.

Financing Activities

 

 

 

Three Months Ended

 

 

 

March 31,

 

(in thousands)

 

2021

 

 

2020

 

Proceeds from borrowings

 

$

40,860

 

 

$

160,755

 

Payments on debt and finance lease obligations

 

 

(8,310

)

 

 

(56,077

)

Dividends paid on common stock

 

 

 

 

 

(2,038

)

Distributions to noncontrolling interest, net of contributions from noncontrolling interest

 

 

(809

)

 

 

(1,526

)

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

 

 

(519

)

 

 

(1,059

)

Common stock purchased for treasury

 

 

 

 

 

(2,785

)

Proceeds from exercise of stock options

 

 

 

 

 

2,077

 

Net cash provided by financing activities

 

$

31,222

 

 

$

99,347

 

The decrease in net cash provided by financing activities of $68.1 million was primarily due to net debt proceeds of $32.6 million during the three months ended March 31, 2021 compared to net debt proceeds of $104.7 million during the three months ended March 31, 2020 under the 2018 Credit Facility.

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

38


 

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 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 attributable to noncontrolling interest. 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 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 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 losses in stockholders’ equity of $12.7 million as of March 31, 2021 and $16.7 million as of December 31, 2020. We recorded unrealized foreign currency translation gains in other comprehensive income of $4.0 million during the three months ended March 31, 2021 and unrealized foreign currency translation losses of $28.2 million during the three months ended March 31, 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 period, even when the functional currency amounts have not changed. Such fluctuations may adversely impact overall

39


 

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 this MD&A.

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 March 31, 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 March 31, 2021. Based on this evaluation, the CEO and CFO concluded that our disclosure controls and procedures were effective as of March 31, 2021.

There were no changes in our internal control over financial reporting during the three months ended March 31, 2021 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

40


 

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 March 31, 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

 

January 1, 2021 - January 31, 2021

 

 

 

 

$

 

 

 

 

 

 

546,283

 

February 1, 2021 - February 28, 2021

 

 

12,024

 

 

$

43.05

 

 

 

 

 

 

546,283

 

March 1, 2021 - March 31, 2021

 

 

31

 

 

$

41.84

 

 

 

 

 

 

546,283

 

Total

 

 

12,055

 

 

$

43.05

 

 

 

 

 

 

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 first 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.

41


 

Item 6. Exhibits

 

 

 

 

 

 

Incorporated by Reference

Exhibit

Number

 

 

 

Exhibit Description

 

Form

 

Period

Ending

 

Exhibit

 

Filing Date

 

 

 

 

 

 

 

 

 

 

 

 

 

10.1

 

 

 

Form of Restricted Stock Units Agreement, by and between Viad Corp and each of Steven W. Moster and Ellen M. Ingersoll, dated February 16, 2021.

 

8-K

 

 

 

10.1

 

2/17/2021

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

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 March 31, 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 March 31, 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 March 31, 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.

 

 

42


 

 

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)

 

 

 

 

 

 

May 7, 2021

 

 

By:

 

/s/ Leslie S. Striedel

(Date)

 

 

 

 

Leslie S. Striedel

 

 

 

 

 

Chief Accounting Officer (Duly Authorized Officer)

 

 

 

 

 

 

 

 

43