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VIAD CORP - Quarter Report: 2023 September (Form 10-Q)

10-Q

 

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

 

FORM 10-Q

 

 

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

For the quarterly period ended September 30, 2023

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

 

img215028553_0.jpg 

Viad Corp

(Exact name of registrant as specified in its charter)

 

 

Delaware

 

36-1169950

(State or other jurisdiction of

incorporation or organization)

 

(I.R.S. Employer

Identification No.)

 

 

7000 East 1st Avenue

Scottsdale, Arizona

 

85251-4304

(Address of principal executive offices)

 

(Zip Code)

(602) 207-1000

(Registrant’s telephone number, including area code)

Not Applicable

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

 

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

 

Title of each class

 

Trading Symbol(s)

 

Name of each exchange on which registered

Common Stock, $1.50 Par Value

 

VVI

 

New York Stock Exchange

 

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

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

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

 

Large accelerated filer

 

 

Accelerated filer

 

 

 

 

 

 

 

 

Non-accelerated filer

 

 

Smaller reporting company

 

 

 

 

 

 

 

 

Emerging growth company

 

 

 

 

 

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

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

As of November 1, 2023, there were 20,919,370 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 September 30, 2023 and December 31, 2022

1

 

Condensed Consolidated Statements of Operations for the Three and Nine Months Ended September 30, 2023 and 2022

2

 

Condensed Consolidated Statements of Comprehensive Income (Loss) for the Three and Nine Months Ended September 30, 2023 and 2022

3

 

Condensed Consolidated Statements of Stockholders’ Equity and Mezzanine Equity for the Three Months Ended March 31, June 30, and September 30, 2023 and 2022

4

 

Condensed Consolidated Statements of Cash Flows for the Nine Months Ended September 30, 2023 and 2022

6

 

Notes to Condensed Consolidated Financial Statements

7

Item 2.

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

31

Item 3.

Quantitative and Qualitative Disclosures About Market Risk

40

Item 4.

Controls and Procedures

41

PART II - OTHER INFORMATION

Item 1.

Legal Proceedings

42

Item 1A.

Risk Factors

42

Item 2.

Unregistered Sales of Equity Securities, Use of Proceeds, and Issuer Purchases of Equity Securities

42

Item 5.

Other Information

42

Item 6.

Exhibits

43

 

 

 

SIGNATURES

44

 

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

 

 

 

 


 

PART I - FINANCIAL INFORMATION

Item 1. Financial Statements

VIAD CORP

CONDENSED CONSOLIDATED BALANCE SHEETS

(Unaudited)

 

 

 

September 30,

 

 

December 31,

 

(in thousands, except share data)

 

2023

 

 

2022

 

Assets

 

 

 

 

 

 

Current assets

 

 

 

 

 

 

Cash and cash equivalents

 

$

106,268

 

 

$

59,719

 

Accounts receivable, net of allowances of $2,900 and $2,174, respectively

 

 

134,997

 

 

 

122,373

 

Inventories

 

 

10,697

 

 

 

10,785

 

Current contract costs

 

 

34,120

 

 

 

14,331

 

Prepaid insurance

 

 

4,591

 

 

 

13,370

 

Other current assets

 

 

27,677

 

 

 

18,977

 

Total current assets

 

 

318,350

 

 

 

239,555

 

Property and equipment, net

 

 

571,372

 

 

 

549,578

 

Other investments and assets

 

 

17,703

 

 

 

17,457

 

Operating lease right-of-use assets

 

 

112,763

 

 

 

102,777

 

Deferred income taxes

 

 

2,623

 

 

 

565

 

Goodwill

 

 

121,595

 

 

 

121,429

 

Other intangible assets, net

 

 

56,138

 

 

 

58,985

 

Total Assets

 

$

1,200,544

 

 

$

1,090,346

 

Liabilities, Mezzanine Equity, and Stockholders’ Equity

 

 

 

 

 

 

Current liabilities

 

 

 

 

 

 

Accounts payable

 

$

81,494

 

 

$

73,020

 

Contract liabilities

 

 

82,398

 

 

 

43,950

 

Accrued compensation

 

 

29,760

 

 

 

25,839

 

Operating lease obligations

 

 

14,854

 

 

 

13,463

 

Other current liabilities

 

 

50,234

 

 

 

41,653

 

Current portion of debt and finance obligations

 

 

8,191

 

 

 

13,192

 

Total current liabilities

 

 

266,931

 

 

 

211,117

 

Long-term debt and finance obligations

 

 

460,181

 

 

 

456,752

 

Pension and postretirement benefits

 

 

16,199

 

 

 

16,769

 

Long-term operating lease obligations

 

 

110,067

 

 

 

101,297

 

Other deferred items and liabilities

 

 

68,325

 

 

 

70,024

 

Total liabilities

 

 

921,703

 

 

 

855,959

 

Commitments and contingencies

 

 

 

 

 

 

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

 

 

132,591

 

 

 

132,591

 

Redeemable noncontrolling interest

 

 

4,808

 

 

 

4,956

 

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

 

 

571,501

 

 

 

570,271

 

Accumulated deficit

 

 

(308,787

)

 

 

(334,301

)

Accumulated other comprehensive loss

 

 

(46,655

)

 

 

(47,185

)

Common stock in treasury, at cost, 4,027,453 and 4,216,044 shares, respectively

 

 

(201,711

)

 

 

(211,657

)

Total Viad stockholders’ equity

 

 

51,750

 

 

 

14,530

 

Non-redeemable noncontrolling interest

 

 

89,692

 

 

 

82,310

 

Total stockholders’ equity

 

 

141,442

 

 

 

96,840

 

Total Liabilities, Mezzanine Equity, and Stockholders’ Equity

 

$

1,200,544

 

 

$

1,090,346

 

 

Refer to Notes to Condensed Consolidated Financial Statements.

1


 

VIAD CORP

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

(Unaudited)

 

 

 

Three Months Ended

 

 

Nine Months Ended

 

 

 

September 30,

 

 

September 30,

 

(in thousands, except per share data)

 

2023

 

 

2022

 

 

2023

 

 

2022

 

Revenue:

 

 

 

 

 

 

 

 

 

 

 

 

Services

 

$

285,119

 

 

$

306,199

 

 

$

765,598

 

 

$

711,468

 

Products

 

 

80,780

 

 

 

76,522

 

 

 

181,403

 

 

 

167,816

 

Total revenue

 

 

365,899

 

 

 

382,721

 

 

 

947,001

 

 

 

879,284

 

Costs and expenses:

 

 

 

 

 

 

 

 

 

 

 

 

Costs of services

 

 

222,794

 

 

 

251,433

 

 

 

681,409

 

 

 

646,564

 

Costs of products

 

 

67,063

 

 

 

64,932

 

 

 

161,602

 

 

 

152,431

 

Corporate activities

 

 

3,579

 

 

 

3,768

 

 

 

10,255

 

 

 

9,881

 

ON Services sale purchase price adjustment

 

 

 

 

 

 

 

 

204

 

 

 

 

Interest expense, net

 

 

12,476

 

 

 

10,252

 

 

 

37,081

 

 

 

23,890

 

Other expense, net

 

 

554

 

 

 

280

 

 

 

1,533

 

 

 

1,530

 

Restructuring charges

 

 

480

 

 

 

1,387

 

 

 

1,125

 

 

 

3,467

 

Impairment charges

 

 

 

 

 

 

 

 

 

 

 

583

 

Total costs and expenses

 

 

306,946

 

 

 

332,052

 

 

 

893,209

 

 

 

838,346

 

Income from continuing operations before income taxes

 

 

58,953

 

 

 

50,669

 

 

 

53,792

 

 

 

40,938

 

Income tax expense

 

 

9,173

 

 

 

8,810

 

 

 

13,623

 

 

 

9,587

 

Income from continuing operations

 

 

49,780

 

 

 

41,859

 

 

 

40,169

 

 

 

31,351

 

Income (loss) from discontinued operations

 

 

(654

)

 

 

(42

)

 

 

(855

)

 

 

285

 

Net income

 

 

49,126

 

 

 

41,817

 

 

 

39,314

 

 

 

31,636

 

Net income attributable to non-redeemable noncontrolling
   interest

 

 

(7,716

)

 

 

(3,784

)

 

 

(8,221

)

 

 

(3,031

)

Net (income) loss attributable to redeemable noncontrolling interest

 

 

(139

)

 

 

88

 

 

 

270

 

 

 

354

 

Net income attributable to Viad

 

$

41,271

 

 

$

38,121

 

 

$

31,363

 

 

$

28,959

 

Diluted income per common share:

 

 

 

 

 

 

 

 

 

 

 

 

Continuing operations attributable to Viad common stockholders

 

$

1.44

 

 

$

1.29

 

 

$

0.96

 

 

$

0.78

 

Discontinued operations attributable to Viad common stockholders

 

 

(0.03

)

 

 

 

 

 

(0.04

)

 

 

0.01

 

Net income attributable to Viad common stockholders

 

$

1.41

 

 

$

1.29

 

 

$

0.92

 

 

$

0.79

 

Weighted-average outstanding and potentially dilutive common
   shares

 

 

21,174

 

 

 

20,889

 

 

 

21,025

 

 

 

20,781

 

Basic income per common share:

 

 

 

 

 

 

 

 

 

 

 

 

Continuing operations attributable to Viad common stockholders

 

$

1.46

 

 

$

1.30

 

 

$

0.97

 

 

$

0.79

 

Discontinued operations attributable to Viad common stockholders

 

 

(0.03

)

 

 

 

 

 

(0.04

)

 

 

0.01

 

Net income attributable to Viad common stockholders

 

$

1.43

 

 

$

1.30

 

 

$

0.93

 

 

$

0.80

 

Weighted-average outstanding common shares

 

 

20,885

 

 

 

20,612

 

 

 

20,825

 

 

 

20,567

 

Amounts attributable to Viad

 

 

 

 

 

 

 

 

 

 

 

 

Income from continuing operations

 

$

41,925

 

 

$

38,163

 

 

$

32,218

 

 

$

28,674

 

Income (loss) from discontinued operations

 

 

(654

)

 

 

(42

)

 

 

(855

)

 

 

285

 

Net income

 

$

41,271

 

 

$

38,121

 

 

$

31,363

 

 

$

28,959

 

 

Refer to Notes to Condensed Consolidated Financial Statements.

2


 

VIAD CORP

CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS)

(Unaudited)

 

 

 

Three Months Ended

 

 

Nine Months Ended

 

 

 

September 30,

 

 

September 30,

 

(in thousands)

 

2023

 

 

2022

 

 

2023

 

 

2022

 

Net income

 

$

49,126

 

 

$

41,817

 

 

$

39,314

 

 

$

31,636

 

Other comprehensive income (loss):

 

 

 

 

 

 

 

 

 

 

 

 

Unrealized foreign currency translation adjustments

 

 

(7,840

)

 

 

(26,846

)

 

 

110

 

 

 

(34,977

)

Change in fair value of interest rate cap

 

 

(122

)

 

 

 

 

 

316

 

 

 

 

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

 

 

60

 

 

 

444

 

 

 

48

 

 

 

910

 

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

 

 

17

 

 

 

67

 

 

 

56

 

 

 

67

 

Comprehensive income (loss)

 

 

41,241

 

 

 

15,482

 

 

 

39,844

 

 

 

(2,364

)

Non-redeemable noncontrolling interest:

 

 

 

 

 

 

 

 

 

 

 

 

Comprehensive income attributable to non-redeemable noncontrolling interest

 

 

(7,716

)

 

 

(3,784

)

 

 

(8,221

)

 

 

(3,031

)

Unrealized foreign currency translation adjustments

 

 

(1,513

)

 

 

(5,056

)

 

 

287

 

 

 

(6,333

)

Redeemable noncontrolling interest:

 

 

 

 

 

 

 

 

 

 

 

 

Comprehensive (income) loss attributable to redeemable noncontrolling interest

 

 

(139

)

 

 

88

 

 

 

270

 

 

 

354

 

Comprehensive income (loss) attributable to Viad

 

$

31,873

 

 

$

6,730

 

 

$

32,180

 

 

$

(11,374

)

 

(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, 2022

 

$

37,402

 

 

$

570,271

 

 

$

(334,301

)

 

$

(47,185

)

$

(211,657

)

$

14,530

 

$

82,310

 

$

96,840

 

 

 

$

4,956

 

 

$

132,591

 

Net loss

 

 

 

 

 

 

 

 

(20,869

)

 

 

 

 

 

 

 

 

(20,869

)

 

 

(398

)

 

 

(21,267

)

 

 

 

(123

)

 

 

 

Dividends on convertible preferred stock

 

 

 

 

 

 

 

 

(1,950

)

 

 

 

 

 

 

 

 

(1,950

)

 

 

 

 

 

(1,950

)

 

 

 

 

 

 

 

Change in fair value of interest rate cap

 

 

 

 

 

 

 

 

 

 

 

(800

)

 

 

 

 

 

(800

)

 

 

 

 

 

(800

)

 

 

 

 

 

 

 

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

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(204

)

 

 

(204

)

 

 

 

 

 

(204

)

 

 

 

 

 

 

 

Employee benefit plans

 

 

 

 

 

(4,677

)

 

 

 

 

 

 

 

 

5,468

 

 

 

791

 

 

 

 

 

 

791

 

 

 

 

 

 

 

 

Share-based compensation - equity awards

 

 

 

 

 

3,064

 

 

 

 

 

 

 

 

 

 

 

 

3,064

 

 

 

 

 

 

3,064

 

 

 

 

 

 

 

 

Unrealized foreign currency translation adjustment

 

 

 

 

 

 

 

 

 

 

 

1,195

 

 

 

 

 

 

1,195

 

 

 

565

 

 

 

1,760

 

 

 

 

142

 

 

 

 

Amortization of net actuarial loss, net of tax

 

 

 

 

 

 

 

 

 

 

 

(45

)

 

 

 

 

 

(45

)

 

 

 

 

 

(45

)

 

 

 

 

 

 

 

Amortization of prior service cost, net of tax

 

 

 

 

 

 

 

 

 

 

 

35

 

 

 

 

 

 

35

 

 

 

 

 

 

35

 

 

 

 

 

 

 

 

Other, net

 

 

 

 

 

3

 

 

 

 

 

 

 

 

 

2

 

 

 

5

 

 

 

 

 

 

5

 

 

 

 

 

 

 

 

Balance, March 31, 2023

 

$

37,402

 

 

$

568,661

 

 

$

(357,120

)

 

$

(46,800

)

 

$

(206,391

)

 

$

(4,248

)

 

$

82,477

 

 

$

78,229

 

 

 

$

4,975

 

 

$

132,591

 

Net income (loss)

 

 

 

 

 

 

 

 

10,961

 

 

 

 

 

 

 

 

 

10,961

 

 

 

903

 

 

 

11,864

 

 

 

 

(286

)

 

 

 

Dividends on convertible preferred stock

 

 

 

 

 

 

 

 

(1,950

)

 

 

 

 

 

 

 

 

(1,950

)

 

 

 

 

 

(1,950

)

 

 

 

 

 

 

 

Distributions from noncontrolling interest

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(1,126

)

 

 

(1,126

)

 

 

 

 

 

 

 

Change in fair value of interest rate cap

 

 

 

 

 

 

 

 

 

 

 

1,238

 

 

 

 

 

 

1,238

 

 

 

 

 

 

1,238

 

 

 

 

 

 

 

 

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

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(4

)

 

 

(4

)

 

 

 

 

 

(4

)

 

 

 

 

 

 

 

Employee benefit plans

 

 

 

 

 

(1,773

)

 

 

 

 

 

 

 

 

2,628

 

 

 

855

 

 

 

 

 

 

855

 

 

 

 

 

 

 

 

Share-based compensation - equity awards

 

 

 

 

 

2,830

 

 

 

 

 

 

 

 

 

 

 

 

2,830

 

 

 

 

 

 

2,830

 

 

 

 

 

 

 

 

Unrealized foreign currency translation adjustment

 

 

 

 

 

 

 

 

 

 

 

6,755

 

 

 

 

 

 

6,755

 

 

 

1,235

 

 

 

7,990

 

 

 

 

38

 

 

 

 

Amortization of net actuarial loss, net of tax

 

 

 

 

 

 

 

 

 

 

 

33

 

 

 

 

 

 

33

 

 

 

 

 

 

33

 

 

 

 

 

 

 

 

Amortization of prior service cost, net of tax

 

 

 

 

 

 

 

 

 

 

 

4

 

 

 

 

 

 

4

 

 

 

 

 

 

4

 

 

 

 

 

 

 

 

Other, net

 

 

 

 

 

15

 

 

 

 

 

 

 

 

 

(2

)

 

 

13

 

 

 

 

 

 

13

 

 

 

 

 

 

 

 

Balance, June 30, 2023

 

$

37,402

 

 

$

569,733

 

 

$

(348,109

)

 

$

(38,770

)

 

$

(203,769

)

 

$

16,487

 

 

$

83,489

 

 

$

99,976

 

 

 

$

4,727

 

 

$

132,591

 

Net income

 

 

 

 

 

 

 

 

41,271

 

 

 

 

 

 

 

 

 

41,271

 

 

 

7,716

 

 

 

48,987

 

 

 

 

139

 

 

 

 

Dividends on convertible preferred stock

 

 

 

 

 

 

 

 

(1,950

)

 

 

 

 

 

 

 

 

(1,950

)

 

 

 

 

 

(1,950

)

 

 

 

 

 

 

 

Change in fair value of interest rate cap

 

 

 

 

 

 

 

 

 

 

 

(122

)

 

 

 

 

 

(122

)

 

 

 

 

 

(122

)

 

 

 

 

 

 

 

Employee benefit plans

 

 

 

 

 

(966

)

 

 

 

 

 

 

 

 

2,058

 

 

 

1,092

 

 

 

 

 

 

1,092

 

 

 

 

 

 

 

 

Share-based compensation - equity awards

 

 

 

 

 

2,722

 

 

 

 

 

 

 

 

 

 

 

 

2,722

 

 

 

 

 

 

2,722

 

 

 

 

 

 

 

 

Unrealized foreign currency translation adjustment

 

 

 

 

 

 

 

 

 

 

 

(7,840

)

 

 

 

 

 

(7,840

)

 

 

(1,513

)

 

 

(9,353

)

 

 

 

(58

)

 

 

 

Amortization of net actuarial loss, net of tax

 

 

 

 

 

 

 

 

 

 

 

60

 

 

 

 

 

 

60

 

 

 

 

 

 

60

 

 

 

 

 

 

 

 

Amortization of prior service cost, net of tax

 

 

 

 

 

 

 

 

 

 

 

17

 

 

 

 

 

 

17

 

 

 

 

 

 

17

 

 

 

 

 

 

 

 

Other, net

 

 

 

 

 

12

 

 

 

1

 

 

 

 

 

 

 

 

 

13

 

 

 

 

 

 

13

 

 

 

 

 

 

 

 

Balance, September 30, 2023

 

$

37,402

 

 

$

571,501

 

 

$

(308,787

)

 

$

(46,655

)

 

$

(201,711

)

 

$

51,750

 

 

$

89,692

 

 

$

141,442

 

 

 

$

4,808

 

 

$

132,591

 

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

 

 

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, 2021

 

$

37,402

 

 

$

566,741

 

 

$

(349,720

)

 

$

(27,429

)

$

(220,712

)

$

6,282

 

$

85,556

 

$

91,838

 

 

 

$

5,444

 

 

$

132,591

 

Net loss

 

 

 

 

 

 

 

 

(29,001

)

 

 

 

 

 

 

 

 

(29,001

)

 

 

(1,204

)

 

 

(30,205

)

 

 

 

(138

)

 

 

 

Dividends on convertible preferred stock

 

 

 

 

 

 

 

 

(1,950

)

 

 

 

 

 

 

 

 

(1,950

)

 

 

 

 

 

(1,950

)

 

 

 

 

 

 

 

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

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(349

)

 

 

(349

)

 

 

 

 

 

(349

)

 

 

 

 

 

 

 

Employee benefit plans

 

 

 

 

 

(1,286

)

 

 

 

 

 

 

 

 

1,972

 

 

 

686

 

 

 

 

 

 

686

 

 

 

 

 

 

 

 

Share-based compensation - equity awards

 

 

 

 

 

2,385

 

 

 

 

 

 

 

 

 

 

 

 

2,385

 

 

 

 

 

 

2,385

 

 

 

 

 

 

 

 

Unrealized foreign currency translation adjustment

 

 

 

 

 

 

 

 

 

 

 

3,412

 

 

 

 

 

 

3,412

 

 

 

737

 

 

 

4,149

 

 

 

 

49

 

 

 

 

Amortization of net actuarial loss, net of tax

 

 

 

 

 

 

 

 

 

 

 

407

 

 

 

 

 

 

407

 

 

 

 

 

 

407

 

 

 

 

 

 

 

 

Other, net

 

 

 

 

 

(41

)

 

 

 

 

 

 

 

 

 

 

 

(41

)

 

 

 

 

 

(41

)

 

 

 

351

 

 

 

 

Balance, March 31, 2022

 

$

37,402

 

 

$

567,799

 

 

$

(380,671

)

 

$

(23,610

)

 

$

(219,089

)

 

$

(18,169

)

 

$

85,089

 

 

$

66,920

 

 

 

$

5,706

 

 

$

132,591

 

Net income (loss)

 

 

 

 

 

 

 

 

19,839

 

 

 

 

 

 

 

 

 

19,839

 

 

 

451

 

 

 

20,290

 

 

 

 

(128

)

 

 

 

Dividends on convertible preferred stock

 

 

 

 

 

 

 

 

(1,950

)

 

 

 

 

 

 

 

 

(1,950

)

 

 

 

 

 

(1,950

)

 

 

 

 

 

 

 

Distributions from noncontrolling interest

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(570

)

 

 

(570

)

 

 

 

 

 

 

 

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

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(5

)

 

 

(5

)

 

 

 

 

 

(5

)

 

 

 

 

 

 

 

Employee benefit plans

 

 

 

 

 

(648

)

 

 

 

 

 

 

 

 

1,481

 

 

 

833

 

 

 

 

 

 

833

 

 

 

 

 

 

 

 

Share-based compensation - equity awards

 

 

 

 

 

3,370

 

 

 

 

 

 

 

 

 

 

 

 

3,370

 

 

 

 

 

 

3,370

 

 

 

 

 

 

 

 

Unrealized foreign currency translation adjustment

 

 

 

 

 

 

 

 

 

 

 

(11,543

)

 

 

 

 

 

(11,543

)

 

 

(2,014

)

 

 

(13,557

)

 

 

 

(167

)

 

 

 

Amortization of net actuarial loss, net of tax

 

 

 

 

 

 

 

 

 

 

 

59

 

 

 

 

 

 

59

 

 

 

 

 

 

59

 

 

 

 

 

 

 

 

Other, net

 

 

 

 

 

(25

)

 

 

 

 

 

 

 

 

 

 

 

(25

)

 

 

 

 

 

(25

)

 

 

 

412

 

 

 

 

Balance, June 30, 2022

 

$

37,402

 

 

$

570,496

 

 

$

(362,782

)

 

$

(35,094

)

 

$

(217,613

)

 

$

(7,591

)

 

$

82,956

 

 

$

75,365

 

 

 

$

5,823

 

 

$

132,591

 

Net income

 

 

 

 

 

 

 

 

38,121

 

 

 

 

 

 

 

 

 

38,121

 

 

 

3,784

 

 

 

41,905

 

 

 

 

(88

)

 

 

 

Dividends on convertible preferred stock

 

 

 

 

 

 

 

 

(1,950

)

 

 

 

 

 

 

 

 

(1,950

)

 

 

 

 

 

(1,950

)

 

 

 

 

 

 

 

Employee benefit plans

 

 

 

 

 

(2,079

)

 

 

 

 

 

 

 

 

2,655

 

 

 

576

 

 

 

 

 

 

576

 

 

 

 

 

 

 

 

Share-based compensation - equity awards

 

 

 

 

 

2,492

 

 

 

 

 

 

 

 

 

 

 

 

2,492

 

 

 

 

 

 

2,492

 

 

 

 

 

 

 

 

Unrealized foreign currency translation adjustment

 

 

 

 

 

 

 

 

 

 

 

(26,846

)

 

 

 

 

 

(26,846

)

 

 

(5,056

)

 

 

(31,902

)

 

 

 

(478

)

 

 

 

Amortization of net actuarial loss, net of tax

 

 

 

 

 

 

 

 

 

 

 

444

 

 

 

 

 

 

444

 

 

 

 

 

 

444

 

 

 

 

 

 

 

 

Amortization of prior service cost, net of tax

 

 

 

 

 

 

 

 

 

 

 

67

 

 

 

 

 

 

67

 

 

 

 

 

 

67

 

 

 

 

 

 

 

 

Other, net

 

 

 

 

 

4

 

 

 

 

 

 

 

 

 

(1

)

 

 

3

 

 

 

 

 

 

3

 

 

 

 

 

 

 

 

Balance, September 30, 2022

 

$

37,402

 

 

$

570,913

 

 

$

(326,611

)

 

$

(61,429

)

 

$

(214,959

)

 

$

5,316

 

 

$

81,684

 

 

$

87,000

 

 

 

$

5,257

 

 

$

132,591

 

Refer to Notes to Condensed Consolidated Financial Statements.

5


 

VIAD CORP

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(Unaudited)

 

 

 

Nine Months Ended

 

 

 

September 30,

 

(in thousands)

 

2023

 

 

2022

 

Cash flows from operating activities

 

 

 

 

 

 

Net income

 

$

39,314

 

 

$

31,636

 

Adjustments to reconcile net income to net cash provided by operating activities:

 

 

 

 

 

 

Depreciation and amortization

 

 

37,707

 

 

 

39,442

 

Deferred income taxes

 

 

(923

)

 

 

(646

)

(Income) loss from discontinued operations

 

 

855

 

 

 

(285

)

Restructuring charges

 

 

1,125

 

 

 

3,467

 

Impairment charges

 

 

 

 

 

583

 

Gains on dispositions of property and other assets

 

 

(99

)

 

 

(209

)

Share-based compensation expense

 

 

8,647

 

 

 

7,998

 

Other non-cash items, net

 

 

4,423

 

 

 

11,894

 

Change in operating assets and liabilities:

 

 

 

 

 

 

Receivables

 

 

(12,528

)

 

 

(62,503

)

Inventories

 

 

130

 

 

 

(3,125

)

Current contract costs

 

 

(19,849

)

 

 

(15,333

)

Accounts payable

 

 

9,904

 

 

 

34,939

 

Restructuring liabilities

 

 

(1,001

)

 

 

(2,442

)

Accrued compensation

 

 

2,126

 

 

 

11,093

 

Contract liabilities

 

 

38,425

 

 

 

24,174

 

Income taxes payable

 

 

1,285

 

 

 

8,538

 

Other assets and liabilities, net

 

 

7,013

 

 

 

16,264

 

Net cash provided by operating activities

 

 

116,554

 

 

 

105,485

 

Cash flows from investing activities

 

 

 

 

 

 

Capital expenditures

 

 

(54,739

)

 

 

(54,770

)

Cash paid for acquisitions, net

 

 

(41

)

 

 

(25,494

)

Proceeds from sale of ON Services

 

 

1,168

 

 

 

 

Proceeds from dispositions of property and other assets

 

 

108

 

 

 

237

 

Net cash used in investing activities

 

 

(53,504

)

 

 

(80,027

)

Cash flows from financing activities

 

 

 

 

 

 

Proceeds from borrowings

 

 

49,044

 

 

 

94,849

 

Payments on debt and finance obligations

 

 

(54,235

)

 

 

(86,643

)

Dividends paid on preferred stock

 

 

(5,850

)

 

 

(5,850

)

Distributions to noncontrolling interest, net of contributions from noncontrolling interest

 

 

(1,126

)

 

 

(570

)

Payments of debt issuance costs

 

 

(226

)

 

 

(418

)

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

 

 

(508

)

 

 

(940

)

Net cash (used in) provided by financing activities

 

 

(12,901

)

 

 

428

 

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

 

 

(348

)

 

 

(5,989

)

Net change in cash, cash equivalents, and restricted cash

 

 

49,801

 

 

 

19,897

 

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

 

 

64,564

 

 

 

64,303

 

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

 

$

114,365

 

 

$

84,200

 

 

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 United States Securities and Exchange Commission (“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, 2022, filed with the SEC on February 28, 2023 (“2022 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 global provider of extraordinary experiences, including hospitality and leisure activities, experiential marketing, and live events.

We operate through three reportable segments: Pursuit, Spiro, and GES Exhibitions. Spiro and GES Exhibitions are both live event businesses and are referred to collectively as “GES.”

Pursuit

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

Spiro

Spiro is an experiential marketing agency that partners with leading brands around the world to manage and elevate their global experiential marketing activities. Spiro builds immersive experiences with its clients starting with the strategic plan, creating the content and design, and finishing with the delivery and execution. Spiro also delivers a broad range of unique and impactful experiences for its clients, including meetings and events, exhibition and program management, environments and permanent installations, brand and product activations, and marketing and measurement.

GES Exhibitions

GES Exhibitions is a global exhibition services company with a legacy spanning over 90 years and teams throughout North America, Europe, and the Middle East. GES Exhibitions partners with leading exhibition and conference organizers as a full-service provider of strategic and logistics solutions to manage the complexity of their shows, including strategy, creative & design, registration & engagement, accommodations, logistics & management, material handling, overhead sign hanging, graphics and other rental and labor services. GES Exhibitions also serves as an in-house or preferred provider of electrical and other event services within event venues, including convention centers and conference hotels.

7


 

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 Recently Adopted

Accounting Standards Update (“ASU”) 2021-08, Business Combinations (Topic 805) Accounting for Contract Assets and Contract Liabilities
from Contracts with Customers

 

Amendment relates to the application of Topic 805, Business Combinations, to contracts with a customer acquired in a business combination after the acquirer has adopted Topic 606. ASU 2021-08 requires contract assets and contract liabilities to be accounted for as if they (the acquirer) entered into the original contract at the same time and same date as the acquiree.

 

1/1/2023

 

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

ASU 2022-04, Liabilities - Supplier Finance Programs (Subtopic 405-50) Disclosure of Supplier Finance Program Obligations

 

Amendment requires that a buyer in a supplier finance program disclose key terms about the program in connection with the purchase of goods and services along with information about their obligations under these programs, including a rollforward of those obligations.

 

1/1/2023

 

We provide disclosure about supplier finance programs in Note 12 - Debt and Finance Obligations under the heading “Financing arrangements.” The required rollforward requirement is effective in the first quarter of 2024. The adoption of this new standard on January 1, 2023, did not otherwise have a material impact on our related disclosures.

 

Significant Accounting Policies

Use of Estimates

The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities at the date of the financial statements and the reported amounts of revenue and expenses during the reported period. Estimates and assumptions are used in accounting for, among other things: impairment testing of recorded goodwill and intangible assets and long-lived assets; allowances for uncollectible accounts receivable; sales reserve allowances; provisions for income taxes, including uncertain tax positions; valuation allowances related to deferred tax assets; liabilities for losses related to self-insured liability claims; liabilities for losses related to environmental remediation obligations; sublease income associated with restructuring liabilities; pension and postretirement benefit costs and obligations; share-based compensation costs; the discount rates used to value lease obligations; the redemption value of redeemable noncontrolling interests; and the allocation of purchase price of acquired businesses. These estimates and assumptions may change as a result of the impact of global economic conditions, global inflationary pressures, and volatility in foreign exchange rates. 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. Restricted cash represents collateral required for surety bonds, bank guarantees, letters of credit, and corporate credit cards.

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

 

 

 

September 30,

 

 

December 31,

 

(in thousands)

 

2023

 

 

2022

 

Cash and cash equivalents

 

$

106,268

 

 

$

59,719

 

Restricted cash included in other current assets

 

 

8,097

 

 

 

4,845

 

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

 

$

114,365

 

 

$

64,564

 

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.

Pursuit’s service revenue is derived through its admissions, accommodations, and transportation services. Product revenue is derived through food and beverage and retail sales. Revenue is recognized at the time services are performed or upon delivery of the product.

8


 

Pursuit’s service revenue is recognized over time as the customer simultaneously receives and consumes the benefits, and product revenue is recognized at a point in time.

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, environments, and graphics and is recognized at a point in time upon delivery of the product.

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 56.4% equity ownership interest in Esja Attractions ehf. (“Esja”), which owns the FlyOver Iceland attraction. The Esja shareholders agreement contains a put option that gives the minority Esja shareholders the right to sell (or “put”) their Esja shares to us based on a calculated formula within a predefined term. This redeemable noncontrolling interest is considered mezzanine equity and we report it between liabilities and stockholders’ equity in the Condensed Consolidated Balance Sheets. The amount of the net income or loss attributable to redeemable noncontrolling interests is recorded in the Condensed Consolidated Statements of Operations and the accretion of the redemption value is recorded as an adjustment to accumulated deficit and is included in our income per share. Refer to Note 23 – Noncontrolling Interests – 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. Dividends paid-in-kind increase the redemption value of the preferred stock. 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 Condensed Consolidated Balance Sheets 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 for our GES business. These facility leases have lease terms ranging up to 29 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 Pursuit 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 is adjusted 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 incremental borrowing

9


 

rate represents a risk-adjusted rate on a collateralized basis and is the expected rate at which we would borrow funds to satisfy the scheduled lease liability payment streams commensurate with the lease term and the country.

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

Note 2. Revenue and Related Contract Costs and Contract Liabilities

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, 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.

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.

Contract Liabilities

Pursuit and GES 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 customer deposits in “Contract liabilities” and “Other deferred items and liabilities” in the Condensed Consolidated Balance Sheets.

Changes to contract liabilities are as follows:

 

(in thousands)

 

 

 

Balance at December 31, 2022

 

$

44,757

 

Cash additions

 

 

185,615

 

Revenue recognized

 

 

(147,819

)

Foreign exchange translation adjustment

 

 

(9

)

Balance at September 30, 2023

 

$

82,544

 

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 live events, and also include up-front incentives and commissions incurred upon contract signing. We expense costs associated with preliminary contract activities (i.e. proposal activities) as incurred. Capitalized contract costs are expensed upon the transfer of the related goods or services and are included in “Costs of services” or “Costs of products” as applicable. We include the deferred incremental costs of obtaining and fulfilling contracts in “Current contract costs” and “Other investments and assets” in the Condensed Consolidated Balance Sheets.

Changes to contract costs are as follows:

 

(in thousands)

 

 

 

Balance at December 31, 2022

 

$

16,568

 

Additions

 

 

57,186

 

Expenses

 

 

(37,920

)

Foreign exchange translation adjustment

 

 

(41

)

Balance at September 30, 2023

 

$

35,793

 

As of September 30, 2023, capitalized contract costs consisted of $2.3 million to obtain contracts and $33.5 million to fulfill contracts. We did not recognize an impairment loss with respect to capitalized contract costs during the three and nine months ended September 30, 2023 or 2022.

10


 

Disaggregation of Revenue

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

Pursuit

 

 

 

Three Months Ended

 

 

Nine Months Ended

 

 

 

September 30,

 

 

September 30,

 

(in thousands)

 

2023

 

 

2022

 

 

2023

 

 

2022

 

Services:

 

 

 

 

 

 

 

 

 

 

 

 

Ticket revenue

 

$

71,741

 

 

$

60,825

 

 

$

122,545

 

 

$

99,364

 

Rooms revenue

 

 

48,674

 

 

 

42,453

 

 

 

78,370

 

 

 

69,915

 

Transportation

 

 

6,010

 

 

 

6,251

 

 

 

11,644

 

 

 

11,185

 

Other

 

 

8,994

 

 

 

7,581

 

 

 

13,694

 

 

 

11,968

 

Total services revenue

 

 

135,419

 

 

 

117,110

 

 

 

226,253

 

 

 

192,432

 

Products:

 

 

 

 

 

 

 

 

 

 

 

 

Food and beverage

 

 

28,394

 

 

 

25,105

 

 

 

47,897

 

 

 

41,369

 

Retail operations

 

 

23,127

 

 

 

21,581

 

 

 

33,927

 

 

 

31,378

 

Total products revenue

 

 

51,521

 

 

 

46,686

 

 

 

81,824

 

 

 

72,747

 

Total revenue

 

$

186,940

 

 

$

163,796

 

 

$

308,077

 

 

$

265,179

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Timing of revenue recognition:

 

 

 

 

 

 

 

 

 

 

 

 

Services transferred over time

 

$

135,419

 

 

$

117,110

 

 

$

226,253

 

 

$

192,432

 

Products transferred at a point in time

 

 

51,521

 

 

 

46,686

 

 

 

81,824

 

 

 

72,747

 

Total revenue

 

$

186,940

 

 

$

163,796

 

 

$

308,077

 

 

$

265,179

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Markets:

 

 

 

 

 

 

 

 

 

 

 

 

Banff Jasper Collection

 

$

96,503

 

 

$

80,829

 

 

$

161,022

 

 

$

134,121

 

Alaska Collection

 

 

26,846

 

 

 

25,591

 

 

 

40,000

 

 

 

39,407

 

Glacier Park Collection

 

 

42,806

 

 

 

41,080

 

 

 

57,991

 

 

 

55,670

 

FlyOver

 

 

9,675

 

 

 

8,276

 

 

 

22,550

 

 

 

18,285

 

Sky Lagoon

 

 

11,110

 

 

 

8,020

 

 

 

26,514

 

 

 

17,696

 

Total revenue

 

$

186,940

 

 

$

163,796

 

 

$

308,077

 

 

$

265,179

 

 

11


 

GES

 

 

 

Three Months Ended

 

 

Nine Months Ended

 

 

 

September 30,

 

 

September 30,

 

(in thousands)

 

2023

 

 

2022

 

 

2023

 

 

2022

 

Service lines:

 

 

 

 

 

 

 

 

 

 

 

 

Spiro

 

$

58,887

 

 

$

73,277

 

 

$

199,617

 

 

$

205,518

 

GES Exhibitions

 

 

122,115

 

 

 

147,872

 

 

 

446,146

 

 

 

414,303

 

Intersegment eliminations

 

 

(2,043

)

 

 

(2,224

)

 

 

(6,839

)

 

 

(5,716

)

Total revenue

 

$

178,959

 

 

$

218,925

 

 

$

638,924

 

 

$

614,105

 

 

 

 

 

 

 

 

 

 

 

 

 

Timing of revenue recognition:

 

 

 

 

 

 

 

 

 

 

 

 

Services transferred over time

 

$

149,700

 

 

$

189,089

 

 

$

539,345

 

 

$

519,036

 

Products transferred over time(1)

 

 

13,518

 

 

 

11,231

 

 

 

42,497

 

 

 

35,194

 

Products transferred at a point in time

 

 

15,741

 

 

 

18,605

 

 

 

57,082

 

 

 

59,875

 

Total revenue

 

$

178,959

 

 

$

218,925

 

 

$

638,924

 

 

$

614,105

 

 

 

 

 

 

 

 

 

 

 

 

 

Geographical markets:

 

 

 

 

 

 

 

 

 

 

 

 

North America

 

$

148,569

 

 

$

186,787

 

 

$

506,816

 

 

$

505,484

 

EMEA

 

 

42,325

 

 

 

43,088

 

 

 

154,506

 

 

 

127,435

 

Intersegment eliminations

 

 

(11,935

)

 

 

(10,950

)

 

 

(22,398

)

 

 

(18,814

)

Total revenue

 

$

178,959

 

 

$

218,925

 

 

$

638,924

 

 

$

614,105

 

 

(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.

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, as amended (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 reserved 1,750,000 shares of common stock for issuance under the 2017 Plan. On May 24, 2022, we amended and restated the 2017 Plan, which among other things, increased the number of shares reserved for issuance under the 2017 Plan by 840,000 shares, bringing the total number of reserved shares to 2,590,000. As of September 30, 2023, there were 879,550 shares available for future grant under the 2017 Plan.

The following table summarizes share-based compensation expense:

 

 

 

Three Months Ended

 

 

Nine Months Ended

 

 

 

September 30,

 

 

September 30,

 

(in thousands)

 

2023

 

 

2022

 

 

2023

 

 

2022

 

Performance-based restricted stock units

 

$

845

 

 

$

16

 

 

$

2,486

 

 

$

735

 

Restricted stock awards and restricted stock units

 

 

1,540

 

 

 

1,705

 

 

 

4,864

 

 

 

5,054

 

Stock options

 

 

350

 

 

 

808

 

 

 

1,297

 

 

 

2,209

 

Share-based compensation expense before income tax

 

 

2,735

 

 

 

2,529

 

 

 

8,647

 

 

 

7,998

 

Income tax benefit(1)

 

 

(34

)

 

 

(31

)

 

 

(100

)

 

 

(78

)

Share-based compensation expense, net of income tax

 

$

2,701

 

 

$

2,498

 

 

$

8,547

 

 

$

7,920

 

(1)
The 2023 and 2022 income tax benefit amount primarily reflects the tax benefit associated with our Canadian-based employees.

12


 

Note 4. Acquisition and Disposition

2022 Acquisition

Glacier Raft Company

On April 6, 2022, we acquired the Glacier Raft Company, which provides guided river rafting trips operating in Pursuit’s West Glacier, Montana operations. The Glacier Raft Company also owns 13 log cabins, a lodge, and a wedding venue located on 50 acres with views into Glacier National Park. The purchase price was $26.5 million in cash. This acquisition was funded via cash on hand of approximately $11.5 million and borrowings under our revolving credit facility of $15.0 million.

The following table summarizes the final allocation of the aggregate purchase price and amounts of assets acquired and liabilities assumed based upon the estimated fair value at the date of acquisition. During the first quarter of 2023, we made a purchase accounting measurement period adjustment of approximately $41,000 to working capital based on refinements to assumptions used in the preliminary valuation.

(in thousands)

 

 

 

Purchase price paid as:

 

 

 

Cash

 

$

26,507

 

Working capital adjustment

 

 

(920

)

Purchase price adjustment

 

 

125

 

Cash acquired

 

 

(177

)

Purchase price, net of cash acquired

 

 

25,535

 

 

 

 

 

Fair value of net assets acquired:

 

 

 

Inventory

 

 

370

 

Prepaid expenses and other

 

 

57

 

Property and equipment

 

 

6,487

 

Intangible assets

 

 

3,400

 

Total assets acquired

 

 

10,314

 

Customer deposits

 

 

1,575

 

Other current liabilities

 

 

32

 

Total liabilities assumed

 

 

1,607

 

Total fair value of net assets acquired

 

 

8,707

 

Excess purchase price over fair value of net assets acquired (“goodwill”)

 

$

16,828

 

Under the acquisition method of accounting, the purchase price as shown in the table above 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 was recorded as “Goodwill.” Goodwill relating to the Glacier Raft Company acquisition is included in the Pursuit reportable segment. 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 deductible for tax purposes. We included these assets in the Condensed Consolidated Balance Sheets from the date of acquisition.

Following are details of the purchase price allocated to the intangible assets acquired for the Glacier Raft Company:

(in thousands)

 

Amount

 

 

Weighted Average Life

Customer relationships

 

$

1,800

 

 

12 years

Operating licenses

 

 

1,300

 

 

17 years

Trade name

 

 

300

 

 

8 years

Total

 

$

3,400

 

 

14 years

The results of operations of the Glacier Raft Company have been included in the consolidated financial statements from the date of acquisition.

2022 Disposition

ON Services

On December 15, 2022, we completed the sale of substantially all of the assets of GES’ United States audio-visual production business, ON Services – AV Specialists, Inc. (“ON Services”), for approximately $30.0 million, subject to customary working capital adjustments. We recognized a gain on sale of $19.6 million. During the second quarter of 2023, we made a sale purchase price adjustment of approximately $0.2 million. ON Services had a net carrying value of $10.4 million, which included $4.9 million of net working capital and net non-current assets of $5.5 million. Working capital consisted primarily of accounts receivable of $8.2 million and other current

13


 

assets of $0.7 million, offset in part by current liabilities of $4.0 million. Net non-current assets consisted primarily of property and equipment of $6.0 million, offset in part by other liabilities of $0.5 million. The staging business of ON Services was included in the Spiro reportable segment and the venue services business in the United States was included in the GES Exhibitions reportable segment. The ON Services sale did not represent a strategic shift that has or will have a major effect on our operations and financial results, and therefore was not classified as a discontinued operation for any of the periods presented.

Note 5. Inventories

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

The components of inventories consisted of the following:

 

 

 

September 30,

 

 

December 31,

 

(in thousands)

 

2023

 

 

2022

 

Raw materials

 

$

979

 

 

$

1,403

 

Finished goods

 

 

9,718

 

 

 

9,382

 

Inventories

 

$

10,697

 

 

$

10,785

 

 

Note 6. Other Current Assets

Other current assets consisted of the following:

 

 

 

September 30,

 

 

December 31,

 

(in thousands)

 

2023

 

 

2022

 

Restricted cash

 

$

8,097

 

 

$

4,845

 

Prepaid software maintenance

 

 

6,552

 

 

 

4,650

 

Prepaid project deposit

 

 

3,615

 

 

 

3,615

 

Prepaid vendor payments

 

 

2,982

 

 

 

2,084

 

Prepaid taxes

 

 

1,841

 

 

 

142

 

Income tax receivable

 

 

277

 

 

 

322

 

Prepaid other

 

 

2,218

 

 

 

1,836

 

Other

 

 

2,095

 

 

 

1,483

 

Other current assets

 

$

27,677

 

 

$

18,977

 

 

Note 7. Property and Equipment, Net

Property and equipment consisted of the following:

 

 

 

September 30,

 

 

December 31,

 

(in thousands)

 

2023

 

 

2022

 

Land and land interests

 

$

30,944

 

 

$

30,902

 

Buildings and leasehold improvements

 

 

433,421

 

 

 

409,852

 

Equipment and other

 

 

442,708

 

 

 

413,485

 

Gross property and equipment

 

 

907,073

 

 

 

854,239

 

Accumulated depreciation

 

 

(392,169

)

 

 

(362,195

)

Property and equipment, net (excluding finance leases)

 

 

514,904

 

 

 

492,044

 

Finance lease ROU assets, net

 

 

56,468

 

 

 

57,534

 

Property and equipment, net

 

$

571,372

 

 

$

549,578

 

 

Depreciation expense was $10.1 million during the three months ended September 30, 2023 and $31.0 million during the nine months ended September 30, 2023. Depreciation expense was $10.5 million during the three months ended September 30, 2022 and $32.3 million during the nine months ended September 30, 2022.

Capitalized interest was $0.6 million during the three months ended September 30, 2023 and $1.3 million during the nine months ended September 30, 2023. Capitalized interest was $0.1 million during the three months ended September 30, 2022 and $2.7 million during the nine months ended September 30, 2022, which was primarily related to the development of Pursuit’s FlyOver attractions.

14


 

 

Note 8. Other Investments and Assets

Other investments and assets consisted of the following:

 

 

 

September 30,

 

 

December 31,

 

(in thousands)

 

2023

 

 

2022

 

Self-insured liability receivable

 

$

8,211

 

 

$

8,211

 

Other mutual funds

 

 

3,898

 

 

 

3,490

 

Contract costs

 

 

1,673

 

 

 

2,237

 

Other

 

 

3,921

 

 

 

3,519

 

Other investments and assets

 

$

17,703

 

 

$

17,457

 

 

Note 9. Goodwill and Other Intangible Assets, Net

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

 

(in thousands)

 

 

 

Balance at December 31, 2022

 

$

121,429

 

Foreign currency translation adjustments

 

 

125

 

Other(1)

 

 

41

 

Balance at September 30, 2023

 

$

121,595

 

 

(1)
Represents a purchase accounting measurement period adjustment related to the Glacier Raft Company acquisition. Refer to Note 4 – Acquisition and Disposition for additional information.

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.

Other intangible assets consisted of the following:

 

 

 

 

 

September 30, 2023

 

 

December 31, 2022

 

(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

 

7.8

 

$

34,574

 

 

$

(29,317

)

 

$

5,257

 

 

$

37,194

 

 

$

(30,109

)

 

$

7,085

 

Operating contracts and licenses

 

33.6

 

 

39,740

 

 

 

(4,412

)

 

 

35,328

 

 

 

38,993

 

 

 

(3,504

)

 

 

35,489

 

In-place lease

 

33.0

 

 

14,418

 

 

 

(1,705

)

 

 

12,713

 

 

 

14,420

 

 

 

(1,404

)

 

 

13,016

 

Tradenames

 

3.5

 

 

5,545

 

 

 

(3,852

)

 

 

1,693

 

 

 

5,546

 

 

 

(3,324

)

 

 

2,222

 

Other

 

4.4

 

 

769

 

 

 

(188

)

 

 

581

 

 

 

770

 

 

 

(163

)

 

 

607

 

Total amortized intangible assets

 

 

 

 

95,046

 

 

 

(39,474

)

 

 

55,572

 

 

 

96,923

 

 

 

(38,504

)

 

 

58,419

 

Indefinite-lived intangible assets:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Business licenses

 

 

 

 

566

 

 

 

 

 

 

566

 

 

 

566

 

 

 

 

 

 

566

 

Other intangible assets, net

 

 

 

$

95,612

 

 

$

(39,474

)

 

$

56,138

 

 

$

97,489

 

 

$

(38,504

)

 

$

58,985

 

 

15


 

 

Intangible asset amortization expense (excluding amortization expense of ROU assets) was $1.3 million during the three months ended September 30, 2023 and $3.6 million during the nine months ended September 30, 2023. Intangible asset amortization expense was $1.4 million during the three months ended September 30, 2022 and $4.0 million during the nine months ended September 30, 2022.

At September 30, 2023, the estimated future amortization expense related to intangible assets subject to amortization is as follows:

 

(in thousands)

 

 

 

Year ending December 31,

 

 

 

Remainder of 2023

 

$

1,032

 

2024

 

 

3,635

 

2025

 

 

2,337

 

2026

 

 

2,304

 

2027

 

 

1,907

 

Thereafter

 

 

44,357

 

Total

 

$

55,572

 

 

Note 10. Other Current Liabilities

Other current liabilities consisted of the following:

 

 

 

September 30,

 

 

December 31,

 

(in thousands)

 

2023

 

 

2022

 

Continuing operations:

 

 

 

 

 

 

Foreign income taxes payable

 

$

9,036

 

 

$

8,354

 

Accrued sales and use taxes and personal property taxes

 

 

9,202

 

 

 

4,082

 

Accrued concession fees

 

 

6,525

 

 

 

4,297

 

Commissions payable

 

 

5,460

 

 

 

5,059

 

Self-insured liability

 

 

4,497

 

 

 

4,909

 

Accrued employee benefit costs

 

 

4,043

 

 

 

4,920

 

Current portion of pension and postretirement liabilities

 

 

1,258

 

 

 

1,426

 

Accrued professional fees

 

 

1,180

 

 

 

898

 

Accommodation service deposits

 

 

991

 

 

 

2,208

 

Other

 

 

6,925

 

 

 

4,958

 

Total continuing operations

 

 

49,117

 

 

 

41,111

 

Discontinued operations:

 

 

 

 

 

 

Self-insured liability

 

 

92

 

 

 

458

 

Environmental remediation liabilities

 

 

25

 

 

 

46

 

Other

 

 

1,000

 

 

 

38

 

Total discontinued operations

 

 

1,117

 

 

 

542

 

Total other current liabilities

 

$

50,234

 

 

$

41,653

 

 

16


 

Note 11. Other Deferred Items and Liabilities

Other deferred items and liabilities consisted of the following:

 

 

 

September 30,

 

 

December 31,

 

(in thousands)

 

2023

 

 

2022

 

Continuing operations:

 

 

 

 

 

 

Foreign deferred tax liability

 

$

26,121

 

 

$

27,564

 

Multi-employer pension plan withdrawal liability

 

 

13,462

 

 

 

13,815

 

Self-insured excess liability

 

 

8,211

 

 

 

8,211

 

Self-insured liability

 

 

6,796

 

 

 

5,028

 

Accrued compensation

 

 

5,176

 

 

 

4,977

 

Accrued restructuring

 

 

2,686

 

 

 

3,245

 

Other

 

 

1,973

 

 

 

3,071

 

Total continuing operations

 

 

64,425

 

 

 

65,911

 

Discontinued operations:

 

 

 

 

 

 

Environmental remediation liabilities

 

 

2,163

 

 

 

2,177

 

Self-insured liability

 

 

1,737

 

 

 

1,631

 

Other

 

 

 

 

 

305

 

Total discontinued operations

 

 

3,900

 

 

 

4,113

 

Total other deferred items and liabilities

 

$

68,325

 

 

$

70,024

 

 

Note 12. Debt and Finance Obligations

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

 

 

 

September 30,

 

 

December 31,

 

(in thousands, except interest rates)

 

2023

 

 

2022

 

2021 Credit Facility - Term Loan B, 10.8% interest rate at September 30, 2023 and 9.4% at December 31, 2022, due through 2028(1)

 

$

392,000

 

 

$

395,000

 

Jasper Term Loan, 6.5% interest rate at September 30, 2023, due through 2028(1)

 

 

12,367

 

 

 

 

Jasper Revolving Credit Facility, 9.5% weighted-average interest rate at September 30, 2023, due through 2028(1)

 

 

5,164

 

 

 

 

Forest Park Hotel Construction Loan, 8.8% interest rate at December 31, 2022(1)

 

 

 

 

 

11,491

 

FlyOver Iceland Credit Facility, 8.7% interest rate at September 30, 2023 and 6.9% at December 31, 2022, due through 2027(1)

 

 

4,108

 

 

 

4,965

 

FlyOver Iceland Term Loans, 13.7% weighted-average interest rate at September 30, 2023 and 10.1% at December 31, 2022, due through 2024(1)

 

 

500

 

 

 

594

 

Less unamortized debt issuance costs

 

 

(9,273

)

 

 

(11,848

)

Total debt

 

 

404,866

 

 

 

400,202

 

Finance lease obligations, 9.2% weighted-average interest rate at September 30, 2023 and 9.1% at December 31, 2022, due through 2067

 

 

63,506

 

 

 

64,729

 

Financing arrangements

 

 

 

 

 

5,013

 

Total debt and finance obligations (2)(3)

 

 

468,372

 

 

 

469,944

 

Current portion

 

 

(8,191

)

 

 

(13,192

)

Long-term debt and finance obligations

 

$

460,181

 

 

$

456,752

 

(1)
Represents the weighted-average interest rate in effect as of the end of 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 $326.7 million as of September 30, 2023 and $301.8 million as of December 31, 2022. 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 14 – Fair Value Measurements for additional information.
(3)
Cash paid for interest on debt was $35.7 million during the nine months ended September 30, 2023 and $23.7 million during the nine months ended September 30, 2022.

2021 Credit Facility

Effective July 30, 2021, we entered into a $500 million credit facility (the “2021 Credit Facility”). The 2021 Credit Facility provides for a $400 million term loan (“Term Loan B”) and a $100 million revolving credit facility (“Revolving Credit Facility”). The proceeds of

17


 

the Term Loan B, net of $14.8 million in related fees, were used to repay the $327 million outstanding balance under our then $450 million revolving credit facility and to provide for financial flexibility to fund future acquisitions and growth initiatives and for general corporate purposes.

LIBOR Transition Amendment

On February 6, 2023, we entered into the LIBOR Transition Amendment to the 2021 Credit Facility to replace the London Interbank Offered Rate (“LIBOR”) with the Secured Overnight Financing Rate (“SOFR”). In accordance with the LIBOR replacement provisions outlined in the 2021 Credit Facility, additional credit spread adjustments apply to SOFR ranging from 0.11448% (for a one-month duration) up to 0.71513% (for a 12-month duration).

Term Loan B

The Term Loan B has a maturity date of July 30, 2028 and is subject to quarterly amortization of principal of $1.0 million. Interest rates are based on SOFR (plus additional credit spread adjustments as detailed above under “LIBOR Transition Amendment”) plus a 5.00% credit spread, with a SOFR floor of 0.50%. The Term Loan B carries no financial covenants.

As discussed in Note 13 – Derivative, we entered into an interest rate cap agreement that manages our exposure to interest rate increases on $300 million of borrowings under the Term Loan B and provides us with the right to receive payment if the one-month SOFR exceeds 5.0% (“strike rate”).

Revolving Credit Facility

The Revolving Credit Facility has a maturity date of July 30, 2026. As of September 30, 2023, capacity remaining under the Revolving Credit Facility was $95.0 million, reflecting $100.0 million total facility size, less $5.0 million in outstanding letters of credit.

In addition to borrowing based on one, three, six, or twelve month SOFR tenors (plus additional credit spread adjustments as detailed above under “LIBOR Transition Amendment”), we also have the option to borrow based on the “Base Rate”, which for any day is a fluctuating rate equal to the highest of the Fed Funds Rate plus 0.50%, Bank of America’s publicly announced “prime rate”, and SOFR plus 1.00%. Credit spreads for SOFR and Base Rate borrowings are based on Viad’s total net leverage ratio and range from 2.50% to 3.50% for SOFR borrowings and from 1.50% to 3.50% for Base Rate borrowings. Additionally, a 1.00% floor applies to the Base Rate.

The Revolving Credit Facility includes an undrawn fee ranging from 0.30% to 0.50% that is based on Viad’s total net leverage ratio.

The Revolving Credit Facility carries financial covenants. On March 23, 2022, we entered into the First Amendment to the 2021 Credit Facility and on March 28, 2023, we entered into the Second Amendment to the 2021 Credit Facility. The amendments modified the financial covenants to the following:

Maintain a total net leverage ratio of not greater than 4.00 to 1.00; and
Maintain an interest coverage ratio of not less than 2.00 to 1.00.

As of September 30, 2023, our total net leverage ratio was 2.54 to 1.00, the interest coverage ratio was 2.97 to 1.00, and we were in compliance with all covenants under the Revolving Credit Facility.

In addition to U.S. dollar borrowings, we may borrow funds on the Revolving Credit Facility in Canadian Dollars based on the Canadian Dollar Offered Rate, Pound Sterling based on the Sterling Overnight Index Average, and Euros based on the Euro Interbank Offered Rate, plus applicable credit spreads. No such borrowings had been made as of September 30, 2023.

On October 6, 2023, we entered into a third amendment to the 2021 Credit Facility, which among other things: increased the principal amount of the Revolving Credit Facility by $70 million, bringing the total amount of revolving capacity to $170 million. In connection with the amendment, we prepaid $70 million of the outstanding balance on our existing Term Loan B using $60 million from the Revolving Credit Facility and $10 million of cash from the Company’s balance sheet. The credit spread on the Term Loan B is 5.00% for SOFR borrowings, which is 200 basis points higher than the current credit spread on our Revolving Credit Facility. Refer to Note 25 – Subsequent Event for additional information.

Forest Park Hotel Construction Loan Facility

Effective May 17, 2022, Pursuit, through a 60% owned subsidiary, entered into a construction loan facility for borrowings up to $17.0 million Canadian dollars (approximately $13.3 million U.S. dollars) for the development and construction of the Forest Park Hotel in Jasper National Park. Construction of the hotel was completed in August 2022. During January 2023, we completed our final borrowing under the construction loan facility bringing the total amount borrowed to approximately $16.8 million Canadian dollars.

The construction loan facility required interest only payments at Canada Prime plus 2.35% through January 31, 2023, at which time it was converted to a 6.5% fixed rate term loan. On May 16, 2023, Pursuit entered into an amendment to the Forest Park Hotel Construction

18


 

Loan Facility wherein the loan was converted into a $27.0 million Canadian dollar (approximately $20.0 million U.S. dollars) credit facility (the “Jasper Credit Facility”). See below for additional details.

Jasper Credit Facility

The Jasper Credit Facility provides for a $17.0 million Canadian dollar term loan (“Jasper Term Loan”) and a $10.0 million Canadian dollars revolving credit facility (“Jasper Revolving Credit Facility”). The Jasper Credit Facility matures on January 31, 2028.

The Jasper Revolving Credit Facility carries financial covenants as follows:

Maintain a pre-compensation fixed-charge coverage ratio of not less than 1.30 to 1.00 during all periods; and
Maintain a post-compensation fixed-charge coverage ratio of not less than 1.10 to 1.00 during all periods.

As of September 30, 2023, the pre-compensation and post-compensation fixed-charge coverage ratio was 3.91 to 1.00, and Pursuit was in compliance with all covenants under the Jasper Credit Facility.

Jasper Term Loan

The proceeds of the Jasper Term Loan reflect the outstanding balance of the Forest Park Construction Loan Facility at the time it was converted to the Jasper Term Loan of $16.8 million Canadian dollars. The Jasper Term Loan bears interest at a 6.5% fixed rate.

Jasper Revolving Credit Facility

The proceeds of the Jasper Revolving Credit Facility will be used to fund capital improvements. As of September 30, 2023, capacity remaining under the Jasper Revolving Credit Facility was $3.0 million Canadian dollars (approximately $2.2 million U.S. dollars). The Jasper Revolving Credit Facility bears interest at the Canadian Prime Rate plus 2.25%.

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 an original maturity date of March 1, 2022. The loan proceeds were used to complete the development of the FlyOver Iceland attraction. The loan bears interest at the three month Euro Interbank Offered Rate plus 4.9%.

FlyOver Iceland entered into an addendum effective December 1, 2021 wherein the principal payments were deferred for twelve months beginning December 1, 2021, with the first payment due December 1, 2022. The addendum extended the maturity date to March 1, 2025, which was further extended to September 1, 2027 by way of an option as permitted in the addendum, and provided for a semi-annual waiver of certain covenants through June 30, 2022 with the first testing date as of December 31, 2022. Conditions to the addendum included securing additional capital of ISK 75.0 million (approximately $0.6 million), which was completed in January 2022, in order to strengthen FlyOver Iceland’s liquidity position. There were no other changes to the terms of the FlyOver Iceland Credit Facility. Effective November 2, 2022, FlyOver Iceland received a financial covenant waiver for the 2022 through 2023 testing periods.

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 and matured on April 1, 2023. It bore interest on a seven-day term deposit rate 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 an original maturity date of February 1, 2023 and bears interest at one-month Reykjavik InterBank Offered Rate (“REIBOR”) plus 4.99%. Effective November 23, 2022, FlyOver Iceland entered into an amendment to the ISK 50.0 million term loan wherein the maturity date was extended to February 1, 2024. The Icelandic State Treasury guarantees supplemental loans provided by credit institutions to companies impacted by the COVID-19 pandemic. Accordingly, the Icelandic State Treasury guaranteed the repayment of up to 85% of the principal and interest on the ISK 10.0 million and ISK 30.0 million term loans and 70% of the principal amount on the ISK 50.0 million term loan. Loan proceeds were used to fund FlyOver Iceland operations.

19


 

 

Note 13. Derivative

Interest Rate Cap

On January 4, 2023, we entered into an interest rate cap agreement with an effective date of January 31, 2023. The interest rate cap manages our exposure to interest rate increases on $300 million in borrowings under the Term Loan B and provides us with the right to receive payment if the one-month SOFR exceeds 5.0% (“strike rate”). Beginning on February 28, 2023, we pay a fixed monthly deferred premium based on an annual rate of 0.3335% for the interest rate cap, which matures on January 31, 2025.

We designated the interest rate cap as a cash flow hedge designed to hedge the variability of the SOFR-based interest payments on the Term Loan B. Changes in the fair value of the interest rate cap are recorded in “Accumulated other comprehensive income (loss)” (“AOCI”) in the Condensed Consolidated Balance Sheets. Amounts accumulated in AOCI are reclassified to “Interest expense, net” in the Condensed Consolidated Statements of Operations when the hedged item affects earnings. We recognized $0.1 million of unrealized losses in AOCI during the three months ended September 30, 2023 and unrealized gains of $0.3 million during the nine months ended September 30, 2023. We reclassified approximately $0.3 million to Interest expense, net, during the three months ended September 30, 2023 and $0.4 million during the nine months ended September 30, 2023. We estimate that $1.2 million will be reclassified to earnings within the next 12 months.

The fair value of the interest rate cap is as follows:

 

 

 

 

September 30,

 

 

December 31,

 

(in thousands)

 

Classification

 

2023

 

 

2022

 

Derivatives designated as hedging instruments

 

 

 

 

 

 

 

 

Interest rate cap - short-term

 

Other current assets

 

$

421

 

 

$

 

Interest rate cap - long-term

 

Other investments and assets

 

 

136

 

 

 

 

Total derivatives designated as hedging instruments

 

 

 

$

557

 

 

$

 

The fair value of the interest rate cap is determined using widely accepted valuation techniques and reflects the contractual terms of the interest rate cap including the period to maturity. While there are no quoted prices in active markets, our calculation uses observable market-based inputs, including interest rate curves. The interest rate cap is classified as Level 2 within the fair value hierarchy. Refer to Note 14 – Fair Value Measurements for related fair value disclosures.

Note 14. 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.

The fair value of assets and liabilities measured at fair value on a recurring basis are as follows:

 

 

 

 

 

 

Fair Value Measurements at Reporting Date Using

 

(in thousands)

 

September 30, 2023

 

 

Quoted Prices
in Active
Markets
(Level 1)

 

 

Significant
Other
Observable
Inputs
(Level 2)

 

 

Significant
Unobservable
Inputs
(Level 3)

 

Assets:

 

 

 

 

 

 

 

 

 

 

 

 

Other mutual funds (1)

 

$

3,898

 

 

$

3,898

 

 

$

 

 

$

 

Interest rate cap (2)

 

 

557

 

 

 

 

 

 

557

 

 

 

 

Total assets at fair value on a recurring basis

 

$

4,455

 

 

$

3,898

 

 

$

557

 

 

$

 

 

20


 

 

 

 

 

 

 

 

Fair Value Measurements at Reporting Date Using

 

(in thousands)

 

December 31, 2022

 

 

Quoted Prices
in Active
Markets
(Level 1)

 

 

Significant
Other
Observable
Inputs
(Level 2)

 

 

Significant
Unobservable
Inputs
(Level 3)

 

Assets:

 

 

 

 

 

 

 

 

 

 

 

 

Other mutual funds (1)

 

$

3,490

 

 

$

3,490

 

 

$

 

 

$

 

Total assets at fair value on a recurring basis

 

$

3,490

 

 

$

3,490

 

 

$

 

 

$

 

 

(1)
We include other mutual funds in “Other investments and assets” in the Condensed Consolidated Balance Sheets.
(2)
Refer to Note 13 - Derivative.

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

Note 15. Income Per Share

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

 

 

 

Three Months Ended

 

 

Nine Months Ended

 

 

 

September 30,

 

 

September 30,

 

(in thousands, except per share data)

 

2023

 

 

2022

 

 

2023

 

 

2022

 

Net income attributable to Viad

 

$

41,271

 

 

$

38,121

 

 

$

31,363

 

 

$

28,959

 

Less: Allocation to participating securities

 

 

(9,522

)

 

 

(9,368

)

 

 

(6,194

)

 

 

(5,991

)

Convertible preferred stock dividends paid in cash

 

 

(1,950

)

 

 

(1,950

)

 

 

(5,850

)

 

 

(5,850

)

Adjustment to the redemption value of redeemable noncontrolling interest

 

 

 

 

 

 

 

 

 

 

 

(763

)

Net income allocated to Viad common stockholders (basic)

 

$

29,799

 

 

$

26,803

 

 

$

19,319

 

 

$

16,355

 

Add: Allocation to participating securities

 

 

98

 

 

 

94

 

 

 

44

 

 

 

46

 

Net income allocated to Viad common stockholders (diluted)

 

$

29,897

 

 

$

26,897

 

 

$

19,363

 

 

$

16,401

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Basic weighted-average outstanding common shares

 

 

20,885

 

 

 

20,612

 

 

 

20,825

 

 

 

20,567

 

Additional dilutive shares related to share-based compensation

 

 

289

 

 

 

277

 

 

 

200

 

 

 

214

 

Diluted weighted-average outstanding shares

 

 

21,174

 

 

 

20,889

 

 

 

21,025

 

 

 

20,781

 

Income per share:

 

 

 

 

 

 

 

 

 

 

 

 

Basic income per common share attributable to Viad common stockholders

 

$

1.43

 

 

$

1.30

 

 

$

0.93

 

 

$

0.80

 

Diluted income per common share attributable to Viad common stockholders

 

$

1.41

 

 

$

1.29

 

 

$

0.92

 

 

$

0.79

 

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

21


 

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

 

 

 

Three Months Ended

 

 

Nine Months Ended

 

 

 

September 30,

 

 

September 30,

 

(in thousands)

 

2023

 

 

2022

 

 

2023

 

2022

 

Unvested restricted share-based awards

 

 

4

 

 

 

2

 

 

 

42

 

 

29

 

Unvested performance share-based awards

 

 

159

 

 

 

 

 

 

125

 

 

11

 

Stock options

 

 

372

 

 

 

138

 

 

 

372

 

 

216

 

 

Note 16. 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 (the “Investment Agreement”), relating to the issuance of 135,000 shares of newly issued Convertible Series A Preferred Stock, par value $0.01 per share (the “Convertible Preferred Stock”), for an aggregate purchase price of $135 million or $1,000 per share. The $135 million issuance was offset in part by $9.2 million of expenses related to the capital raise. We have classified the Convertible Preferred Stock as mezzanine equity in the Condensed Consolidated Balance Sheet due to the existence of certain change in control provisions that are not solely within our control.

The Convertible Series A Preferred Stock carries a 5.5% cumulative quarterly dividend, which is payable in cash or in-kind at Viad’s option and is convertible at the option of the holders into shares of our common stock at a conversion price of $21.25 per share. Dividends paid-in-kind increase the redemption value of the preferred stock. The redemption value of the preferred stock was $141.8 million as of each of September 30, 2023 and December 31, 2022. Upon the occurrence of a change in control event, the holders have a right to require Viad to repurchase such preferred stock. During the nine months ended September 30, 2023, $5.9 million of dividends were declared, all of which were paid in cash. We intend to pay preferred stock dividends in cash for the foreseeable future.

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

Common Stock Repurchases

Our Board of Directors previously authorized us to repurchase shares of our common stock from time to time at prevailing market prices. Effective February 7, 2019, our Board of Directors authorized the repurchase of an additional 500,000 shares. In March 2020, our Board of Directors suspended our share repurchase program. As of September 30, 2023, 546,283 shares remain available for repurchase under all prior authorizations.

Note 17. Accumulated Other Comprehensive Income (Loss)

 

Changes in AOCI by component are as follows:

 

(in thousands)

 

Cumulative
Foreign Currency Translation Adjustments

 

 

Unrecognized Net Actuarial Loss and Prior Service Credit, Net

 

 

Unrealized Gain on Interest Rate Cap

 

 

Accumulated
Other
Comprehensive
Income (Loss)

 

Balance at December 31, 2022

 

$

(42,983

)

 

$

(4,202

)

 

$

 

 

$

(47,185

)

Other comprehensive income before reclassifications

 

 

110

 

 

 

 

 

 

556

 

 

 

666

 

Amounts reclassified from AOCI, net of tax

 

 

 

 

 

104

 

 

 

(240

)

 

 

(136

)

Net other comprehensive income

 

 

110

 

 

 

104

 

 

 

316

 

 

 

530

 

Balance at September 30, 2023

 

$

(42,873

)

 

$

(4,098

)

 

$

316

 

 

$

(46,655

)

 

22


 

 

(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, 2021

 

$

(16,162

)

 

$

(11,267

)

 

$

(27,429

)

Other comprehensive loss before reclassifications

 

 

(34,977

)

 

 

 

 

 

(34,977

)

Amounts reclassified from AOCI, net of tax

 

 

 

 

 

977

 

 

 

977

 

Net other comprehensive income (loss)

 

 

(34,977

)

 

 

977

 

 

 

(34,000

)

Balance at September 30, 2022

 

$

(51,139

)

 

$

(10,290

)

 

$

(61,429

)

 

Amounts reclassified from AOCI 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 19 – Pension and Postretirement Benefits for additional information.

Note 18. Income Taxes

The effective tax rate was 15.6% for the three months ended September 30, 2023 and 25.3% for the nine months ended September 30, 2023. The effective tax rate was 17.4% for the three months ended September 30, 2022 and 23.4% for the nine months ended September 30, 2022.

The income tax provision for 2023 was computed based on our estimated Annualized Effective Tax Rate (“AETR”) and the full-year forecasted income or loss plus the tax impact of unusual, infrequent, or nonrecurring significant items during the period. The amount and change of pre-tax income and loss recognized between jurisdictions impacted the reported effective tax rate for the three months and nine months ended September 30, 2023 as we do not recognize a tax benefit on losses in the United States and other European countries where we have a valuation allowance while recognizing tax expense in Canada, Netherlands, Saudi Arabia, and Iceland. The rate was lower than the 21% federal rate for the three months ended September 30, 2023 and higher than 21% for the nine months ended September 30, 2023 due to the mix of income in jurisdictions where we have recorded a valuation allowance and the change in income or loss in those jurisdictions.

The effective tax rate for the nine months ended on September 30, 2023 was further impacted by the release of $2.1 million of our valuation allowance during the first quarter on the deferred tax assets recorded on certain U.S. separate state filing, partially offset by $0.8 million of foreign withholding taxes where no benefit of the foreign tax credit was recorded.

We paid net cash for income taxes of $3.3 million during the three months ended September 30, 2023 and $16.0 million during the nine months ended September 30, 2023. We received net cash refunds of $2.1 million during the three months ended September 30, 2022 and $1.3 million during the nine months ended September 30, 2022.

Note 19. Pension and Postretirement Benefits

The components of net periodic benefit cost of our pension and postretirement benefit plans for the three months ended September 30, 2023 and 2022 consist of the following:

 

 

 

Domestic Plans

 

 

 

 

 

 

 

 

 

Pension Plans

 

 

Postretirement Benefit Plans

 

 

Foreign Pension Plans

 

(in thousands)

 

2023

 

 

2022

 

 

2023

 

 

2022

 

 

2023

 

 

2022

 

Service cost

 

$

 

 

$

 

 

$

4

 

 

$

5

 

 

$

44

 

 

$

75

 

Interest cost

 

 

212

 

 

 

109

 

 

 

74

 

 

 

26

 

 

 

94

 

 

 

78

 

Expected return on plan assets

 

 

(15

)

 

 

21

 

 

 

 

 

 

 

 

 

(87

)

 

 

(97

)

Amortization of prior service credit

 

 

(13

)

 

 

 

 

 

27

 

 

 

23

 

 

 

 

 

 

 

Recognized net actuarial loss (gain)

 

 

77

 

 

 

65

 

 

 

(62

)

 

 

(160

)

 

 

35

 

 

 

34

 

Net periodic benefit cost (income)

 

$

261

 

 

$

195

 

 

$

43

 

 

$

(106

)

 

$

86

 

 

$

90

 

Settlement cost

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Total expenses (income)

 

$

261

 

 

$

195

 

 

$

43

 

 

$

(106

)

 

$

86

 

 

$

90

 

 

23


 

The components of net periodic benefit cost of our pension and postretirement benefit plans for the nine months ended September 30, 2023 and 2022 consist of the following:

 

 

 

Domestic Plans

 

 

 

 

 

 

 

 

 

Pension Plans

 

 

Postretirement Benefit Plans

 

 

Foreign Pension Plans

 

(in thousands)

 

2023

 

 

2022

 

 

2023

 

 

2022

 

 

2023

 

 

2022

 

Service cost

 

$

 

 

$

 

 

$

16

 

 

$

25

 

 

$

132

 

 

$

236

 

Interest cost

 

 

634

 

 

 

359

 

 

 

260

 

 

 

134

 

 

 

277

 

 

 

245

 

Expected return on plan assets

 

 

(95

)

 

 

70

 

 

 

 

 

 

 

 

 

(259

)

 

 

(320

)

Amortization of prior service credit

 

 

(29

)

 

 

 

 

 

85

 

 

 

67

 

 

 

 

 

 

 

Recognized net actuarial (gain) loss

 

 

219

 

 

 

333

 

 

 

(150

)

 

 

(114

)

 

 

102

 

 

 

105

 

Net periodic benefit cost

 

$

729

 

 

$

762

 

 

$

211

 

 

$

112

 

 

$

252

 

 

$

266

 

Settlement cost

 

 

 

 

 

115

 

 

 

 

 

 

 

 

 

 

 

 

533

 

Total expenses

 

$

729

 

 

$

877

 

 

$

211

 

 

$

112

 

 

$

252

 

 

$

799

 

 

We expect to contribute $0.6 million to our funded pension plans, $0.8 million to our unfunded pension plans, and $0.7 million to our postretirement benefit plans in 2023. During the nine months ended September 30, 2023, we contributed $0.5 million to our funded pension plans, $0.6 million to our unfunded pension plans, and $0.4 million to our postretirement benefit plans.

 

Note 20. 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. These initiatives resulted in restructuring charges related to the elimination of certain positions and continuing to reduce our facility footprint at GES.

Other Restructurings

We recorded restructuring charges in connection with certain reorganization activities within Pursuit. These charges primarily consist of severance and related benefits due to headcount reductions.

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

 

 

 

GES

 

 

Other Restructurings

 

 

 

 

(in thousands)

 

Severance &
Employee
Benefits

 

 

Facilities

 

 

Severance &
Employee
Benefits

 

 

Total

 

Balance at December 31, 2022

 

$

1,609

 

 

$

1,818

 

 

$

12

 

 

$

3,439

 

Restructuring charges

 

 

460

 

 

 

456

 

 

 

209

 

 

 

1,125

 

Cash payments

 

 

(426

)

 

 

(548

)

 

 

(223

)

 

 

(1,197

)

Adjustment to liability

 

 

 

 

 

10

 

 

 

2

 

 

 

12

 

Balance at September 30, 2023

 

$

1,643

 

 

$

1,736

 

 

$

 

 

$

3,379

 

 

As of September 30, 2023, $1.5 million of the liabilities related to severance and employee benefits and $1.5 million of liabilities related to facilities will remain unpaid by the end of 2023. The liabilities related to facilities primarily include dilapidations and non-lease expenses that will be paid over the remaining lease terms. Refer to Note 24 Segment Information for information regarding restructuring charges by segment.

 

24


 

Note 21. Leases and Other

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

 

 

 

 

September 30,

 

 

December 31,

 

(in thousands)

 

Classification on the Condensed Consolidated Balance Sheet

 

2023

 

 

2022

 

Assets:

 

 

 

 

 

 

 

 

Operating lease ROU assets

 

Operating lease ROU assets

 

$

112,763

 

 

$

102,777

 

Finance lease ROU assets

 

Property and equipment, net

 

 

56,468

 

 

 

57,534

 

Total lease ROU assets

 

 

 

$

169,231

 

 

$

160,311

 

 

 

 

 

 

 

 

 

 

Liabilities:

 

 

 

 

 

 

 

 

Current:

 

 

 

 

 

 

 

 

Operating lease obligations

 

Operating lease obligations

 

$

14,854

 

 

$

13,463

 

Finance lease obligations

 

Current portion of debt and finance obligations

 

 

2,680

 

 

 

2,978

 

Noncurrent:

 

 

 

 

 

 

 

 

Operating lease obligations

 

Long-term operating lease obligations

 

 

110,067

 

 

 

101,297

 

Finance lease obligations

 

Long-term debt and finance obligations

 

 

60,826

 

 

 

61,751

 

Total lease liabilities

 

 

 

$

188,427

 

 

$

179,489

 

 

The components of lease expense consisted of the following:

 

 

 

Three Months Ended

 

 

Nine Months Ended

 

 

 

September 30,

 

 

September 30,

 

(in thousands)

 

2023

 

 

2022

 

 

2023

 

 

2022

 

Finance lease cost:

 

 

 

 

 

 

 

 

 

 

 

 

Amortization of ROU assets

 

$

1,092

 

 

$

1,060

 

 

$

3,196

 

 

$

3,156

 

Interest on lease liabilities

 

 

1,430

 

 

 

1,478

 

 

 

4,267

 

 

 

4,380

 

Operating lease cost

 

 

6,753

 

 

 

6,426

 

 

 

19,546

 

 

 

18,452

 

Short-term lease cost

 

 

1,431

 

 

 

968

 

 

 

2,816

 

 

 

2,081

 

Variable lease cost

 

 

1,220

 

 

 

1,420

 

 

 

3,958

 

 

 

3,966

 

Total lease cost, net

 

$

11,926

 

 

$

11,352

 

 

$

33,783

 

 

$

32,035

 

 

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

 

 

 

Three Months Ended

 

 

Nine Months Ended

 

 

 

September 30,

 

 

September 30,

 

(in thousands)

 

2023

 

 

2022

 

 

2023

 

 

2022

 

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

 

 

 

 

 

 

 

 

 

 

 

 

Operating cash flows from operating leases

 

$

6,862

 

 

$

5,480

 

 

$

20,183

 

 

$

17,347

 

Operating cash flows from finance leases

 

$

1,512

 

 

$

1,551

 

 

$

4,564

 

 

$

4,517

 

Financing cash flows from finance leases

 

$

687

 

 

$

854

 

 

$

2,415

 

 

$

2,451

 

ROU assets obtained in exchange for lease obligations:

 

 

 

 

 

 

 

 

 

 

 

 

Operating leases

 

$

5,803

 

 

$

8,095

 

 

$

23,390

 

 

$

18,806

 

Finance leases(1)

 

$

433

 

 

$

805

 

 

$

796

 

 

$

5,129

 

 

(1)
Includes terminations of equipment finance leases that occurred during the first quarter of 2023.

 

 

 

 

 

 

 

September 30,

 

 

December 31,

 

 

 

 

 

 

 

2023

 

 

2022

 

Weighted-average remaining lease term (years):

 

 

 

 

 

 

 

 

 

 

Operating leases

 

 

 

 

 

 

7.80

 

 

 

8.51

 

Finance leases

 

 

 

 

 

 

33.94

 

 

 

34.07

 

Weighted-average discount rate:

 

 

 

 

 

 

 

 

 

 

Operating leases

 

 

 

 

 

 

7.87

%

 

 

7.25

%

Finance leases

 

 

 

 

 

 

9.16

%

 

 

9.12

%

 

25


 

As of September 30, 2023, 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 2023

 

$

3,983

 

 

$

2,136

 

 

$

6,119

 

2024

 

 

27,391

 

 

 

8,052

 

 

 

35,443

 

2025

 

 

25,157

 

 

 

7,227

 

 

 

32,384

 

2026

 

 

24,255

 

 

 

6,552

 

 

 

30,807

 

2027

 

 

20,752

 

 

 

6,250

 

 

 

27,002

 

Thereafter

 

 

70,664

 

 

 

180,718

 

 

 

251,382

 

Total future lease payments

 

 

172,202

 

 

 

210,935

 

 

 

383,137

 

Less: Amount representing interest

 

 

(47,281

)

 

 

(147,429

)

 

 

(194,710

)

Present value of minimum lease payments

 

 

124,921

 

 

 

63,506

 

 

 

188,427

 

Current portion

 

 

(14,854

)

 

 

(2,680

)

 

 

(17,534

)

Long-term portion

 

$

110,067

 

 

$

60,826

 

 

$

170,893

 

 

As of September 30, 2023, 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 2023

 

$

869

 

2024

 

 

1,925

 

2025

 

 

1,722

 

2026

 

 

1,562

 

2027

 

 

918

 

Thereafter

 

 

2,838

 

Total minimum rents

 

$

9,834

 

Lease Not Yet Commenced

As of September 30, 2023, 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 a new FlyOver attraction, FlyOver Canada Toronto. The lease commencement date was originally planned for 2023, however, it has been postponed due to permitting and other related delays. Upon commencement date, it will have a lease term of 20 years.

Note 22. Litigation, Claims, Contingencies, and Other

We are plaintiffs or defendants in various actions, proceedings, and pending claims, some of which involve, or may involve, compensatory, punitive, or other damages. Litigation is subject to many uncertainties and it is possible that some of the legal actions, proceedings, or claims could be decided against us. Although the amount of liability as of September 30, 2023 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 immediately reported the accident to our relevant insurance carriers, who have supported our investigation and subsequent claims relating to the accident. In May 2023, we resolved charges from the Canadian office of Occupational Health and Safety in relation to this accident, resulting in fines and related payments in an aggregate amount of $0.5 million Canadian dollars (approximately $0.3 million U.S. dollars). We continue to manage our legal defense of various claims from the victims and their families. In addition, we believe that our reserves and, subject to customary deductibles, our insurance coverage is sufficient to cover potential claims related to this accident.

We are subject to various United States federal, state, and foreign laws and regulations governing the prevention of pollution and the protection of the environment in the jurisdictions in which we have or had operations. If we fail to comply with these environmental laws and regulations, civil and criminal penalties could be imposed, and we could become subject to regulatory enforcement actions in the form of injunctions and cease and desist orders. As is the case with many companies, we also face exposure to actual or potential claims and lawsuits involving environmental matters relating to our past operations. As of September 30, 2023, 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.

26


 

As of September 30, 2023, on behalf of our subsidiaries, we had certain obligations under guarantees to third parties. These guarantees are not subject to liability recognition in the condensed consolidated financial statements and relate to leased facilities and equipment leases entered into by our subsidiary operations. We would generally be required to make payments to the respective third parties under these guarantees in the event that the related subsidiary could not meet its own payment obligations. The maximum potential amount of future payments that we would be required to make under all guarantees existing as of September 30, 2023 would be approximately $86.0 million. These guarantees relate to our leased equipment and facilities through January 2044. 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 2023 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 $11.3 million as of September 30, 2023, which includes $6.7 million related to workers’ compensation liabilities, and $4.6 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 $1.8 million as of September 30, 2023. 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 September 30, 2023. Provisions for losses for claims incurred, including actuarially derived estimated claims incurred but not yet reported, are made based on our historical experience, claims frequency, and other factors. A change in the assumptions used could result in an adjustment to recorded liabilities. We have purchased insurance for amounts in excess of the self-insured levels, which generally range from $0.2 million to $0.5 million on a per claim basis. We do not maintain a self-insured retention pool fund as claims are paid from current cash resources at the time of settlement. Our net cash payments in connection with these insurance liabilities were $1.2 million for the three months ended September 30, 2023 and $3.4 million for the nine months ended September 30, 2023 and $0.9 million for the three months ended September 30, 2022 and $3.5 million for the nine months ended September 30, 2022.

In addition, as of September 30, 2023, we have recorded insurance liabilities of $8.2 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. Of this total, $6.4 million is related to workers’ compensation liabilities and $1.8 million is related to general/auto liability claims, which is recorded in “Other deferred items and liabilities” in the Condensed Consolidated Balance Sheets with a corresponding receivable in “Other investments and assets.”

Note 23. Noncontrolling Interests – Redeemable and Non-redeemable

Redeemable noncontrolling interest

On November 3, 2017, we acquired the controlling interest (54.5% of the common stock) in Esja, a private corporation in Reykjavik, Iceland. Subsequent to additional capital contributions, our equity ownership increased to 56.4% as of September 30, 2023. Through Esja and its wholly-owned subsidiary, we are operating the FlyOver Iceland attraction.

The minority Esja shareholders have the right to sell (or “put”) their Esja shares to us based on a multiple of 5.0x EBITDA as calculated on the trailing 12 months from the most recently completed quarter before the put option exercise. The put option is only exercisable after August 2022 (the “Reference Date”), and in the event 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 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 Put Option Condition has not been met as of September 30, 2023. If the FlyOver Iceland attraction has not achieved the Put Option Condition by December 31, 2024, the put option expires.

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

27


 

Changes in the redeemable noncontrolling interest are as follows:

 

(in thousands)

 

 

 

Balance at December 31, 2022

 

$

4,956

 

Net loss attributable to redeemable noncontrolling interest

 

 

(270

)

Foreign currency translation adjustment

 

 

122

 

Balance at September 30, 2023

 

$

4,808

 

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, 2022

$

16,690

 

 

$

55,702

 

 

$

9,918

 

 

$

82,310

 

Net income attributable to non-redeemable noncontrolling interest

 

2,268

 

 

 

3,733

 

 

 

2,220

 

 

 

8,221

 

Distributions to non-controlling interests

 

 

 

 

 

 

 

(1,126

)

 

 

(1,126

)

Foreign currency translation adjustments

 

(5

)

 

 

(60

)

 

 

352

 

 

 

287

 

Balance at September 30, 2023

$

18,953

 

 

$

59,375

 

 

$

11,364

 

 

$

89,692

 

Equity ownership interest that we do not own

 

20

%

 

 

40

%

 

 

49

%

 

 

 

 

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

Note 24. Segment Information

An operating segment is defined as a component of an enterprise that engages in business activities for which discrete financial information is available and regularly reviewed by the chief operating decision maker (“CODM”) in deciding how to allocate resources and assess performance. Our CODM is our Chief Executive Officer.

We measure the profit and performance of our operations on the basis of segment operating income which excludes restructuring charges, impairment charges, and certain other corporate expenses that are not allocated to the reportable segments. Intersegment sales are eliminated in consolidation and intersegment transfers are not significant. Corporate activities include expenses not allocated to operations.

28


 

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

 

 

Three Months Ended

 

 

Nine Months Ended

 

 

 

September 30,

 

 

September 30,

 

(in thousands)

 

2023

 

 

2022

 

 

2023

 

 

2022

 

Revenue:

 

 

 

 

 

 

 

 

 

 

 

 

Pursuit

 

$

186,940

 

 

$

163,796

 

 

$

308,077

 

 

$

265,179

 

GES:

 

 

 

 

 

 

 

 

 

 

 

 

Spiro

 

 

58,887

 

 

 

73,277

 

 

 

199,617

 

 

 

205,518

 

GES Exhibitions

 

 

122,115

 

 

 

147,872

 

 

 

446,146

 

 

 

414,303

 

GES intersegment eliminations

 

 

(2,043

)

 

 

(2,224

)

 

 

(6,839

)

 

 

(5,716

)

Total GES

 

 

178,959

 

 

 

218,925

 

 

 

638,924

 

 

 

614,105

 

Total revenue

 

$

365,899

 

 

$

382,721

 

 

$

947,001

 

 

$

879,284

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Segment operating income (loss):

 

 

 

 

 

 

 

 

 

 

 

 

Pursuit

 

$

81,375

 

 

$

59,749

 

 

$

72,074

 

 

$

44,122

 

GES:

 

 

 

 

 

 

 

 

 

 

 

 

Spiro

 

 

179

 

 

 

3,720

 

 

 

11,632

 

 

 

18,328

 

GES Exhibitions

 

 

(5,529

)

 

 

2,870

 

 

 

20,235

 

 

 

17,788

 

Total GES

 

 

(5,350

)

 

 

6,590

 

 

 

31,867

 

 

 

36,116

 

Segment operating income

 

 

76,025

 

 

 

66,339

 

 

 

103,941

 

 

 

80,238

 

Corporate eliminations (1)

 

 

17

 

 

 

17

 

 

 

49

 

 

 

51

 

Corporate activities

 

 

(3,579

)

 

 

(3,768

)

 

 

(10,255

)

 

 

(9,881

)

ON Services sale purchase price adjustment

 

 

 

 

 

 

 

 

(204

)

 

 

 

Interest expense, net

 

 

(12,476

)

 

 

(10,252

)

 

 

(37,081

)

 

 

(23,890

)

Other expense, net

 

 

(554

)

 

 

(280

)

 

 

(1,533

)

 

 

(1,530

)

Restructuring charges:

 

 

 

 

 

 

 

 

 

 

 

 

Pursuit

 

 

(192

)

 

 

 

 

 

(201

)

 

 

 

Spiro

 

 

(155

)

 

 

(71

)

 

 

(331

)

 

 

(1,297

)

GES Exhibitions

 

 

(125

)

 

 

(1,316

)

 

 

(585

)

 

 

(2,140

)

Corporate

 

 

(8

)

 

 

 

 

 

(8

)

 

 

(30

)

Impairment charges:

 

 

 

 

 

 

 

 

 

 

 

 

GES Exhibitions

 

 

 

 

 

 

 

 

 

 

 

(583

)

Income from continuing operations before income taxes

 

$

58,953

 

 

$

50,669

 

 

$

53,792

 

 

$

40,938

 

 

(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.

29


 

Additional information of our reportable segments is as follows:

 

 

Three Months Ended

 

 

Nine Months Ended September 30,

 

 

 

September 30,

 

 

September 30,

 

(in thousands)

 

2023

 

 

2022

 

 

2023

 

 

2022

 

Depreciation:

 

 

 

 

 

 

 

 

 

 

 

 

Pursuit

 

$

7,708

 

 

$

7,501

 

 

$

24,121

 

 

$

23,149

 

Spiro

 

 

527

 

 

 

912

 

 

 

1,627

 

 

 

2,693

 

GES Exhibitions

 

 

1,830

 

 

 

2,058

 

 

 

5,148

 

 

 

6,419

 

Corporate

 

 

18

 

 

 

9

 

 

 

57

 

 

 

27

 

 

 

$

10,083

 

 

$

10,480

 

 

$

30,953

 

 

$

32,288

 

Amortization:

 

 

 

 

 

 

 

 

 

 

 

 

Pursuit

 

$

1,356

 

 

$

1,351

 

 

$

3,811

 

 

$

3,846

 

Spiro

 

 

69

 

 

 

57

 

 

 

194

 

 

 

160

 

GES Exhibitions

 

 

920

 

 

 

1,068

 

 

 

2,749

 

 

 

3,148

 

 

 

$

2,345

 

 

$

2,476

 

 

$

6,754

 

 

$

7,154

 

Capital expenditures:

 

 

 

 

 

 

 

 

 

 

 

 

Pursuit

 

$

18,945

 

 

$

20,178

 

 

$

44,260

 

 

$

48,888

 

Spiro

 

 

892

 

 

 

1,042

 

 

 

2,157

 

 

 

1,628

 

GES Exhibitions

 

 

2,703

 

 

 

1,898

 

 

 

8,301

 

 

 

4,146

 

Corporate and other

 

 

6

 

 

 

13

 

 

 

21

 

 

 

108

 

 

 

$

22,546

 

 

$

23,131

 

 

$

54,739

 

 

$

54,770

 

We do not report total assets by segment because this is not a metric used to allocate resources or evaluate segment performance by our CODM.

Note 25. Subsequent Event

On October 6, 2023, we entered into a third amendment to the 2021 Credit Facility, which among other things:

increased the principal amount of the Revolving Credit Facility by $70 million, bringing the total amount of revolving capacity to $170 million, and
added Brewster Inc., an Alberta corporation and a wholly-owned subsidiary of the Company, as a co-borrower.

In connection with the amendment, we prepaid $70 million of the outstanding balance on our existing Term Loan B using $60 million from the Revolving Credit Facility and $10 million of cash from the Company’s balance sheet. The credit spread on the Term Loan B is 5.00% for SOFR borrowings, which is 200 basis points higher than the current credit spread on our Revolving Credit Facility.

 

 

 

 

30


 

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

Forward-Looking Statements

This Quarterly Report on Form 10-Q (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 “aim,” “anticipate,” “believe,” “could,” “deliver,” “estimate,” “expect,” “intend,” “may,” “might,” “outlook,” “plan,” “potential,” “seek,” “target,” “will,” 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.

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:

general economic uncertainty in key global markets and a worsening of global economic conditions;
travel industry disruptions;
the impact of our overall level of indebtedness, as well as our financial covenants, on our operational and financial flexibility;
identified material weakness in our internal control over financial reporting;
seasonality of our businesses;
the impact of the COVID-19 pandemic on our financial condition, liquidity, and cash flow;
our ability to anticipate and adjust for new and emerging challenges presented by the ramifications of the COVID-19 pandemic on our businesses;
unanticipated delays and cost overruns of our capital projects, and our ability to achieve established financial and strategic goals for such projects;
our exposure to labor shortages, turnover, and labor cost increases;
the importance of key members of our account teams to our business relationships;
our ability to manage our business and continue our growth if we lose any of our key personnel;
the competitive nature of the industries in which we operate;
our dependence on large exhibition event clients;
adverse effects of show rotation on our periodic results and operating margins;
transportation disruptions and increases in transportation costs;
natural disasters, weather conditions, accidents, and other catastrophic events;
our exposure to labor cost increases and work stoppages related to unionized employees;
our multi-employer pension plan funding obligations;
our ability to successfully integrate and achieve established financial and strategic goals from acquisitions;
our exposure to cybersecurity attacks and threats;
our exposure to currency exchange rate fluctuations;
liabilities relating to prior and discontinued operations; and
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.

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 2022 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 of Financial Condition and Results of Operations (“MD&A”) should be read in conjunction with our 2022 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.

Overview

We are a leading global provider of extraordinary experiences, including hospitality and leisure activities, experiential marketing, and live events. We operate through three reportable segments: Pursuit, Spiro, and GES Exhibitions. Spiro and GES Exhibitions are both live event businesses, and are collectively referred to as “GES.”

31


 

Current Macroeconomic Factors

International tourism and live event activity continues to improve and demand for our products and services remains strong despite ongoing macroeconomic volatility. During the nine months ended September 30, 2023, we operated with little to no COVID-19 related disruptions, and supply chain and labor challenges continued to improve. Changes in macroeconomic factors, particularly high inflation and the resulting rise in interest rates, have increased our interest expense. Any future impacts from these and other macroeconomic developments on our operations cannot be predicted with certainty, but could have adverse effects on our business, financial condition, and results of operations.

Seasonality

Pursuit’s peak activity occurs during the summer months. During 2022, 81% of Pursuit’s revenue was earned in the second and third quarters.

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.

Results of Operations

Financial Highlights

 

 

 

Three Months Ended

 

 

 

 

Nine Months Ended

 

 

 

 

 

 

September 30,

 

 

 

 

September 30,

 

 

 

 

(in thousands, except per share data)

 

2023

 

 

2022

 

 

%
Change

 

2023

 

 

2022

 

 

%
Change

 

Total revenue

 

$

365,899

 

 

$

382,721

 

 

(4.4)%

 

$

947,001

 

 

$

879,284

 

 

 

7.7

%

Net income attributable to Viad

 

$

41,271

 

 

$

38,121

 

 

8.3%

 

$

31,363

 

 

$

28,959

 

 

 

8.3

%

Segment operating income(1)

 

$

76,025

 

 

$

66,339

 

 

14.6%

 

$

103,941

 

 

$

80,238

 

 

 

29.5

%

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

 

$

1.44

 

 

$

1.29

 

 

11.6%

 

$

0.96

 

 

$

0.78

 

 

 

23.1

%

 

 

(1)
Refer to Note 24 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, to the most directly comparable GAAP measure.

Three months ended September 30, 2023 compared with the three months ended September 30, 2022

Total revenue decreased $16.8 million during the three months ended September 30, 2023 primarily due to decreased revenue at GES of $40.0 million due to negative show rotation from major non-annual shows of approximately $50 million and the sale of substantially all of the assets of ON Services in December of 2022, which contributed revenue of $13.8 million during the three months ended September 30, 2022, offset in part by increased live event activity and new client wins at GES. Pursuit revenue increased $23.1 million primarily due to stronger international tourism in Western Canada and Iceland.
Net income attributable to Viad increased $3.2 million during the three months ended September 30, 2023, primarily driven by increased revenue and segment operating income at Pursuit, offset in part by higher interest expense, net, of $2.2 million during the 2023 period and lower revenue and segment operating results at GES.
Segment operating income increased $9.7 million during the three months ended September 30, 2023, primarily due to higher revenue at Pursuit as demand for its products and services increased, offset in part by lower revenue at GES due to negative show rotation from non-annual shows and the sale of substantially all of the assets of ON Services in December of 2022.

32


 

Nine months ended September 30, 2023 compared with the nine months ended September 30, 2022

Total revenue increased $67.7 million during the nine months ended September 30, 2023 primarily due to increased revenue at Pursuit of $42.9 million, which was driven by stronger international visitation. GES revenue increased $24.8 million primarily due to live event activity strength, offset in part by the sale of substantially all of the assets of ON Services in December of 2022, which contributed revenue of $37.8 million during the nine months ended September 30, 2022, and negative show rotation from major non-annual shows of approximately $33 million.
Net income attributable to Viad increased $2.4 million during the nine months ended September 30, 2023, primarily reflecting higher segment operating income, offset in part by higher interest expense, net, of $13.2 million, and higher income tax expense of $4.0 million.
Segment operating income increased $23.7 million during the nine months ended September 30, 2023, primarily due to higher revenue at Pursuit and GES.

Analysis of Revenue and Operating Results by Reportable Segment

Pursuit

The following table presents a comparison of Pursuit’s reported revenue and segment operating income for the three and nine months ended September 30, 2023 and 2022:

 

 

 

Three Months Ended

 

 

 

 

 

Nine Months Ended

 

 

 

 

 

 

September 30,

 

 

 

 

 

September 30,

 

 

 

 

(in thousands)

 

2023

 

 

2022

 

 

%
Change

 

 

2023

 

 

2022

 

 

%
Change

 

Revenue(1):

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Pursuit:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Attractions

 

$

95,820

 

 

$

81,330

 

 

 

17.8

%

 

$

162,850

 

 

$

132,927

 

 

 

22.5

%

Hospitality

 

 

84,345

 

 

 

75,327

 

 

 

12.0

%

 

 

131,984

 

 

 

118,843

 

 

 

11.1

%

Transportation

 

 

5,560

 

 

 

6,173

 

 

 

(9.9

)%

 

 

10,974

 

 

 

11,298

 

 

 

(2.9

)%

Other

 

 

1,215

 

 

 

966

 

 

 

25.8

%

 

 

2,269

 

 

 

2,111

 

 

 

7.5

%

Total Pursuit

 

$

186,940

 

 

$

163,796

 

 

 

14.1

%

 

$

308,077

 

 

$

265,179

 

 

 

16.2

%

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Segment operating income(2):

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Total Pursuit

 

$

81,375

 

 

$

59,749

 

 

 

36.2

%

 

$

72,074

 

 

$

44,122

 

 

 

63.4

%

 

(1)
Revenue by line of business does not agree to Note 2 – Revenue and Related Contract Costs and Contract Liabilities of 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)
Refer to Note 24 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, to the most directly comparable GAAP measure.

Three months ended September 30, 2023 compared with the three months ended September 30, 2022

Pursuit revenue increased $23.1 million primarily due to increases in attractions revenue of $14.5 million and hospitality revenue of $9.0 million. The growth in attractions revenue was driven primarily by stronger international tourism to Western Canada and Iceland, as well as higher revenue per attraction visitor of 2.4%. The growth in hospitality revenue was driven primarily by revenue management efforts to drive stronger Revenue per Available Room (“RevPAR”) and increased guest demand in Western Canada, as well as higher ancillary revenue and an increase in room nights available of 2.7% with the addition of the Forest Park Alpine Hotel, which opened in August 2022.

Pursuit segment operating income increased $21.6 million from the prior year period primarily due to the increase in revenue, offset in part by the increase in operating costs to support higher business volume during the three months ended September 30, 2023.

Nine months ended September 30, 2023 compared with the nine months ended September 30, 2022

Pursuit revenue increased $42.9 million primarily due to increases in attractions revenue of $29.9 million and hospitality revenue of $13.1 million. The growth in attractions revenue was driven primarily by stronger international tourism to Western Canada and Iceland, as well as higher revenue per attraction visitor of 1.8%. The growth in hospitality revenue was driven primarily by revenue management

33


 

efforts to drive stronger RevPAR and increased guest demand in Western Canada, as well as higher ancillary revenue and an increase in room nights available of 3.4% with the addition of the Forest Park Alpine Hotel, which opened in August 2022.

Pursuit segment operating income increased $28.0 million from the prior year period primarily due to the increase in revenue, offset in part by the increase in operating costs to support higher business volume during the nine months ended September 30, 2023.

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”). 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”). 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 key performance indicators:

 

 

 

Three Months Ended

 

 

Three Months Ended

 

 

 

 

 

 

 

 

 

September 30, 2023

 

 

September 30, 2022

 

 

% Change

 

 

 

As
Reported

 

 

New Experiences(1)

 

 

Same-Store(2)

 

 

As
Reported

 

 

New Experiences(1)

 

 

FX Impact(3)

 

 

Same-Store(2)

 

 

As
Reported

 

 

Same-Store(2)

 

Attractions Key Performance Indicators:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Number of visitors

 

 

1,668,203

 

 

 

28,623

 

 

 

1,639,580

 

 

 

1,450,559

 

 

 

30,879

 

 

 

 

 

 

1,419,680

 

 

 

15.0

%

 

 

15.5

%

Ticket revenue (in thousands)

 

$

71,741

 

 

$

2,265

 

 

$

69,476

 

 

$

60,825

 

 

$

2,465

 

 

$

821

 

 

$

57,539

 

 

 

17.9

%

 

 

20.7

%

Effective ticket price

 

$

43.01

 

 

$

79.14

 

 

$

42.37

 

 

$

41.93

 

 

$

79.82

 

 

$

 

 

$

40.53

 

 

 

2.6

%

 

 

4.6

%

Attractions revenue (in thousands)

 

$

95,820

 

 

$

4,325

 

 

$

91,495

 

 

$

81,330

 

 

$

4,582

 

 

$

1,127

 

 

$

75,621

 

 

 

17.8

%

 

 

21.0

%

Revenue per attraction visitor

 

$

57.44

 

 

$

151.10

 

 

$

55.80

 

 

$

56.07

 

 

$

148.38

 

 

$

 

 

$

53.27

 

 

 

2.4

%

 

 

4.8

%

Hospitality Key Performance Indicators:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Room nights available

 

 

202,356

 

 

 

10,212

 

 

 

192,144

 

 

 

197,065

 

 

 

7,484

 

 

 

 

 

 

189,581

 

 

 

2.7

%

 

 

1.4

%

Rooms revenue (in thousands)

 

$

48,674

 

 

$

3,281

 

 

$

45,393

 

 

$

42,453

 

 

$

1,152

 

 

$

565

 

 

$

40,736

 

 

 

14.7

%

 

 

11.4

%

RevPAR

 

$

240.54

 

 

$

321.33

 

 

$

236.24

 

 

$

215.43

 

 

$

153.90

 

 

$

 

 

$

214.88

 

 

 

11.7

%

 

 

9.9

%

Occupancy

 

 

89.6

%

 

 

90.6

%

 

 

89.5

%

 

 

85.3

%

 

 

39.5

%

 

 

 

 

 

87.1

%

 

 

4.3

%

 

 

2.4

%

ADR

 

$

268.49

 

 

$

354.60

 

 

$

263.85

 

 

$

252.62

 

 

$

389.38

 

 

$

 

 

$

246.79

 

 

 

6.3

%

 

 

6.9

%

Hospitality revenue (in thousands)

 

$

84,345

 

 

$

3,554

 

 

$

80,791

 

 

$

75,327

 

 

$

1,456

 

 

$

726

 

 

$

73,145

 

 

 

12.0

%

 

 

10.5

%

 

34


 

 

 

 

Nine Months Ended

 

 

Nine Months Ended

 

 

 

 

 

 

 

 

 

September 30, 2023

 

 

September 30, 2022

 

 

% Change

 

 

 

As
Reported

 

 

New Experiences(1)

 

 

Same-Store(2)

 

 

As
Reported

 

 

New Experiences(1)

 

 

FX Impact(3)

 

 

Same-Store(2)

 

 

As
Reported

 

 

Same-Store(2)

 

Attractions Key Performance Indicators:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Number of visitors

 

 

2,991,656

 

 

 

36,951

 

 

 

2,954,705

 

 

 

2,485,057

 

 

 

37,329

 

 

 

 

 

 

2,447,728

 

 

 

20.4

%

 

 

20.7

%

Ticket revenue (in thousands)

 

$

122,545

 

 

$

2,891

 

 

$

119,654

 

 

$

99,364

 

 

$

2,945

 

 

$

2,495

 

 

$

93,924

 

 

 

23.3

%

 

 

27.4

%

Effective ticket price

 

$

40.96

 

 

$

78.25

 

 

$

40.50

 

 

$

39.98

 

 

$

78.89

 

 

$

 

 

$

38.37

 

 

 

2.4

%

 

 

5.5

%

Attractions revenue (in thousands)

 

$

162,850

 

 

$

5,528

 

 

$

157,322

 

 

$

132,927

 

 

$

5,399

 

 

$

3,435

 

 

$

124,093

 

 

 

22.5

%

 

 

26.8

%

Revenue per attraction visitor

 

$

54.43

 

 

$

149.60

 

 

$

53.24

 

 

$

53.49

 

 

$

144.64

 

 

$

 

 

$

50.70

 

 

 

1.8

%

 

 

5.0

%

Hospitality Key Performance Indicators:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Room nights available

 

 

481,121

 

 

 

29,192

 

 

 

451,929

 

 

 

465,307

 

 

 

8,887

 

 

 

 

 

 

456,420

 

 

 

3.4

%

 

 

(1.0

)%

Rooms revenue (in thousands)

 

$

78,370

 

 

$

5,250

 

 

$

73,120

 

 

$

69,915

 

 

$

1,469

 

 

$

1,481

 

 

$

66,965

 

 

 

12.1

%

 

 

9.2

%

RevPAR

 

$

162.89

 

 

$

179.83

 

 

$

161.80

 

 

$

150.25

 

 

$

165.27

 

 

$

 

 

$

146.72

 

 

 

8.4

%

 

 

10.3

%

Occupancy

 

 

75.0

%

 

 

68.9

%

 

 

75.4

%

 

 

71.8

%

 

 

43.0

%

 

 

 

 

 

72.4

%

 

 

3.2

%

 

 

3.0

%

ADR

 

$

217.09

 

 

$

261.08

 

 

$

214.49

 

 

$

209.20

 

 

$

384.30

 

 

$

 

 

$

202.69

 

 

 

3.8

%

 

 

5.8

%

Hospitality revenue (in thousands)

 

$

131,984

 

 

$

5,650

 

 

$

126,334

 

 

$

118,843

 

 

$

1,885

 

 

$

1,905

 

 

$

115,053

 

 

 

11.1

%

 

 

9.8

%

 

(1)
New experiences comprise the following attractions that were opened or acquired after January 1, 2022: the Glacier Raft Company (acquired April 2022) and Forest Park Alpine Hotel (opened August 2022).
(2)
Same-Store metrics include only attractions and lodging properties that Pursuit operated at full capacity, considering seasonal closures, for the entirety of both periods presented. For experiences located outside the United States, financial metric comparisons to the prior year are expressed on a constant U.S. dollar basis.
(3)
Foreign exchange rate variance effects (or “FX Impact”) represents the adjustments necessary to express prior financial metrics on a constant U.S. dollar basis, using the current year quarterly average exchange rates for previous periods to eliminate the impact of changes in exchange rates for same-store Pursuit experiences located outside of the United States.

Attractions. The increase in number of attractions visitors during the three and nine months ended September 30, 2023 was primarily driven by strengthening international tourism to Western Canada and Iceland. The increase in same-store effective ticket price during the three and nine months ended September 30, 2023 was driven by revenue management efforts.

Attractions ticket revenue on a same-store basis increased $11.9 million on a 15.5% increase in visitors and a 4.6% increase in effective ticket price during the three months ended September 30, 2023 and increased $25.7 million on a 20.7% increase in visitors and a 5.5% increase in effective ticket price during the nine months ended September 30, 2023.

Hospitality. The increase in room nights available during the three and nine months ended September 30, 2023 was primarily driven by the addition of the Forest Park Hotel, which opened in August 2022. The increase in RevPAR during the three and nine months ended September 30, 2023 was due to increases in ADR and occupancy primarily driven by revenue management efforts and increased guest demand in Western Canada.

During the three months ended September 30, 2023, rooms revenue on a same-store basis increased $4.7 million on a 9.9% increase in RevPAR and a 1.4% increase in room nights available. During the nine months ended September 30, 2023 rooms revenue on a same-store basis increased $6.2 million on a 10.3% increase in RevPAR and a 1.0% decrease in room nights available.

GES

The following table presents a comparison of GES’ reported revenue and segment operating income during the three and nine months ended September 30, 2023 and 2022:

 

 

Three Months Ended

 

 

 

 

 

Nine Months Ended

 

 

 

 

 

 

September 30,

 

 

 

 

 

September 30,

 

 

 

 

(in thousands)

 

2023

 

 

2022

 

 

%
Change

 

 

2023

 

 

2022

 

 

%
Change

 

Revenue:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

GES:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Spiro

 

$

58,887

 

 

$

73,277

 

 

 

(19.6

)%

 

$

199,617

 

 

$

205,518

 

 

 

(2.9

)%

GES Exhibitions

 

 

122,115

 

 

 

147,872

 

 

 

(17.4

)%

 

 

446,146

 

 

 

414,303

 

 

 

7.7

%

Intersegment eliminations

 

 

(2,043

)

 

 

(2,224

)

 

 

8.1

%

 

 

(6,839

)

 

 

(5,716

)

 

 

(19.6

)%

Total GES

 

$

178,959

 

 

$

218,925

 

 

 

(18.3

)%

 

$

638,924

 

 

$

614,105

 

 

 

4.0

%

Segment operating income (loss)(1):

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

GES:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Spiro

 

$

179

 

 

$

3,720

 

 

 

(95.2

)%

 

$

11,632

 

 

$

18,328

 

 

 

(36.5

)%

GES Exhibitions

 

 

(5,529

)

 

 

2,870

 

 

**

 

 

 

20,235

 

 

 

17,788

 

 

 

13.8

%

Total GES

 

$

(5,350

)

 

$

6,590

 

 

**

 

 

$

31,867

 

 

$

36,116

 

 

 

(11.8

)%

 

35


 

 

(1)
Refer to Note 24 Segment Information of the Notes to Condensed Consolidated Financial Statements (Part I, Item 1 of this Form 10-Q) for a reconciliation of the non-GAAP financial measure, segment operating income (loss), to the most directly comparable GAAP measure.

Three months ended September 30, 2023 compared with the three months ended September 30, 2022

Spiro revenue decreased $14.4 million primarily due to negative show rotation from major non-annual shows of approximately $12 million during the three months ended September 30, 2023, and the sale of substantially all of the assets of ON Services in December of 2022, which contributed revenue of $6.7 million during the three months ended September 30, 2022, offset in part by higher revenue from existing clients and new client wins.

GES Exhibitions revenue decreased $25.8 million primarily due to negative show rotation from major non-annual shows of approximately $38 million during the three months ended September 30, 2023 and the sale of substantially all of the assets of ON Services in December of 2022, which contributed revenue of $7.1 million during the three months ended September 30, 2022, offset in part by same-show revenue growth of approximately 13.9% and higher revenue from new clients.

Spiro segment operating income decreased $3.5 million primarily due to decreased revenue.

GES Exhibitions segment operating loss was $5.5 million during the three months ended September 30, 2023 as compared to segment operating income of $2.9 million during the three months ended September 30, 2022. This decrease is primarily due to decreased revenue.

Nine months ended September 30, 2023 compared with the nine months ended September 30, 2022

Spiro revenue decreased $5.9 million primarily due to the sale of substantially all of the assets of ON Services in December of 2022, which contributed revenue of $20.9 million during the nine months ended September 30, 2022, offset in part by new clients obtained during 2023 and positive show rotation of approximately $3 million.

GES Exhibitions revenue increased $31.8 million, primarily due to same-show revenue growth of approximately 20.6% and higher revenue from new clients, offset in part by negative show rotation of approximately $36 million and the sale of substantially all of the assets of ON Services in December of 2022, which contributed revenue of $16.9 million during the nine months ended September 30, 2022.

Spiro segment operating income decreased $6.7 million primarily due to lower revenue and the restaffing of the workforce from pandemic levels.

GES Exhibitions segment operating income increased $2.4 million, primarily due to the increase in revenue, offset in part by the restaffing of the workforce from pandemic levels.

36


 

Other Expenses

 

 

 

Three Months Ended

 

 

 

 

 

Nine Months Ended

 

 

 

 

 

 

September 30,

 

 

 

 

 

September 30,

 

 

 

 

(in thousands)

 

2023

 

 

2022

 

 

% Change

 

 

2023

 

 

2022

 

 

% Change

 

Corporate activities

 

$

3,579

 

 

$

3,768

 

 

 

(5.0

)%

 

$

10,255

 

 

$

9,881

 

 

 

3.8

%

ON Services sale purchase price adjustment

 

$

 

 

$

 

 

 

 

 

$

204

 

 

$

 

 

**

 

Interest expense, net

 

$

12,476

 

 

$

10,252

 

 

 

21.7

%

 

$

37,081

 

 

$

23,890

 

 

 

55.2

%

Other expense, net

 

$

554

 

 

$

280

 

 

 

97.9

%

 

$

1,533

 

 

$

1,530

 

 

 

0.2

%

Restructuring charges

 

$

480

 

 

$

1,387

 

 

 

(65.4

)%

 

$

1,125

 

 

$

3,467

 

 

 

(67.6

)%

Impairment charges

 

$

 

 

$

 

 

 

 

 

$

 

 

$

583

 

 

 

(100.0

)%

Income tax expense

 

$

9,173

 

 

$

8,810

 

 

 

4.1

%

 

$

13,623

 

 

$

9,587

 

 

 

42.1

%

Income (loss) from discontinued operations

 

$

(654

)

 

$

(42

)

 

**

 

 

$

(855

)

 

$

285

 

 

**

 

 

** Change is greater than +/- 100%

Interest Expense, net – The increase in interest expense during the three and nine months ended September 30, 2023 was primarily due to higher interest rates in 2023, and to a lesser extent to a $1.4 million reduction in capitalized interest recorded during the nine months ended September 30, 2023 as compared to the nine months ended September 30, 2022.

Restructuring Charges – The decrease in restructuring charges during the three and nine months ended September 30, 2023 reflects primarily our 2022 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.

Income Tax Expense – The effective tax rate was 15.6% for the three months ended September 30, 2023 and 17.4% for the three months ended September 30, 2022. The effective tax rate was 25.3% for the nine months ended September 30, 2023 and 23.4% for nine months ended September 30, 2022. The effective rate differed from the 21% federal rate for the three months ended September 30, 2023 and 2022 as a result of excluding the tax benefit in jurisdictions where we have a valuation allowance and the change in income or loss in those jurisdictions. The effective rate differed from the 21% federal rate for the nine months ended September 20, 2023 and 2022 also as a result of excluding tax benefits in certain jurisdictions and the mix of income or loss by jurisdiction, partially offset by the $2.1 million benefit taken in the first quarter of 2023 on certain separate U.S. state jurisdictions.

Income (Loss) from Discontinued Operations – The loss from discontinued operations during the three and nine months ended September 30, 2023 was primarily due to legal matters related to previously sold operations.

Liquidity and Capital Resources

We believe that our existing sources of liquidity will be sufficient to fund operations and projected capital outlays for at least the next 12 months and the longer term.

When assessing our current sources of liquidity, we include the following:

 

 

September 30,

 

 

December 31,

 

(in thousands)

 

2023

 

 

2022

 

Unrestricted cash and cash equivalents(1)

 

$

106,268

 

 

$

59,719

 

Available capacity on Revolving Credit Facility(2)

 

 

95,039

 

 

 

86,670

 

Total available liquidity

 

$

201,307

 

 

$

146,389

 

 

(1)
As of September 30, 2023, we held $77.7 million of our cash and cash equivalents outside of the United States, consisting of $43.8 million in Canada, $12.5 million in Iceland, $8.9 million in the Netherlands, $5.0 million in the United Arab Emirates, $4.9 million in the United Kingdom, $2.2 million in Germany, and $0.4 million in other countries.
(2)
Includes our total Revolving Credit Facility of $100 million less outstanding letters of credit of $5.0 million as of September 30, 2023 and $13.3 million as of December 31, 2022.

Cash provided by operating activities, supplemented by our existing cash and cash equivalents, is our primary source of liquidity for funding our strategic business requirements. During the nine months ended September 30, 2023, net cash provided by operating activities was $116.6 million.

Our short-term and long-term funding requirements include debt obligations, capital expenditures, working capital requirements, and potential acquisitions and strategic investments as we focus on scaling Pursuit with investments in high-return unforgettable, inspiring

37


 

experiences through its Refresh, Build, Buy growth strategy. Our projected capital outlays can be adjusted for changes in the operating environment.

Debt Obligations

Effective July 30, 2021, we entered into the $500 million 2021 Credit Facility. The 2021 Credit Facility provides for a $400 million Term Loan B and a $100 million Revolving Credit Facility. The proceeds of the Term Loan B, net of $14.8 million in related fees, were used to repay the $327 million outstanding balance under our then $450 million revolving credit facility and to provide for financial flexibility to fund future acquisitions and growth initiatives and for general corporate purposes. On January 4, 2023, we entered into an interest rate cap agreement with an effective date of January 31, 2023. The interest rate cap manages our exposure to interest rate increases on $300 million in borrowings under the Term Loan B. Refer to Note 13 – Derivative of the Notes to Condensed Consolidated Financial Statements (Part I, Item 1 of this Form 10-Q) for additional information.

The Revolving Credit Facility carries financial covenants. On March 28, 2023, we entered into the Second Amendment to the 2021 Credit Facility, which modified the interest coverage financial covenant. As of September 30, 2023, we were in compliance with all covenants under the Revolving Credit Facility. Refer to Note 12 – Debt and Finance Obligations of the Notes to Condensed Consolidated Financial Statements (Part I, Item 1 of this Form 10-Q) for additional information.

On October 6, 2023, we entered into a Third Amendment to the 2021 Credit Facility, which among other things: increased the principal amount of the Revolving Credit Facility by $70 million, bringing the total amount of revolving capacity to $170 million. In connection with the amendment, we prepaid $70 million of the outstanding balance on our existing Term Loan B using $60 million from the Revolving Credit Facility and $10 million of cash from the Company’s balance sheet. The credit spread on the Term Loan B is 5.00% for SOFR borrowings, which is 200 basis points higher than the current credit spread on our Revolving Credit Facility. Refer to Note 25 – Subsequent Event of the Notes to Condensed Consolidated Financial Statements (Part I, Item 1 of this Form 10-Q) for additional information.

Capital Expenditures

As of September 30, 2023, we have planned capital expenditures of approximately $80 million to $90 million for the next 12 months, including approximately $30 million on select growth projects, such as the development of FlyOver Chicago. We intend to continue making selective investments to advance Pursuit’s Refresh, Build, Buy growth strategy while maintaining a solid liquidity position.

Other Obligations

We have additional obligations as part of our ordinary course of business, beyond those committed for debt obligations and capital expenditures. Refer to Note 21 – Leases and Other and Note 19 – Pension and Postretirement Benefits of the Notes to Condensed Consolidated Financial Statements (Part I, Item 1 of this Form 10-Q) for further information. The expected timing of payments of our obligations is estimated based on current information. Timing of payments and actual amounts paid may be different, depending on changes to agreed-upon amounts for certain obligations.

Cash Flows

Operating Activities

 

 

 

Nine Months Ended

 

 

 

September 30,

 

(in thousands)

 

2023

 

 

2022

 

Net income

 

$

39,314

 

 

$

31,636

 

Depreciation and amortization

 

 

37,707

 

 

 

39,442

 

Deferred income taxes

 

 

(923

)

 

 

(646

)

(Income) loss from discontinued operations

 

 

855

 

 

 

(285

)

Restructuring charges

 

 

1,125

 

 

 

3,467

 

Impairment charges

 

 

 

 

 

583

 

Gains on dispositions of property and other assets

 

 

(99

)

 

 

(209

)

Share-based compensation expense

 

 

8,647

 

 

 

7,998

 

Other non-cash items, net

 

 

4,423

 

 

 

11,894

 

Changes in operating assets and liabilities

 

 

25,505

 

 

 

11,605

 

Net cash provided by operating activities

 

$

116,554

 

 

$

105,485

 

Net cash provided by operating activities increased $11.1 million primarily due to improved segment operating results at Pursuit.

38


 

Investing Activities

 

 

 

Nine Months Ended

 

 

 

September 30,

 

(in thousands)

 

2023

 

 

2022

 

Capital expenditures

 

$

(54,739

)

 

$

(54,770

)

Cash paid for acquisitions, net

 

 

(41

)

 

 

(25,494

)

Proceeds from sale of ON Services

 

 

1,168

 

 

 

 

Proceeds from dispositions of property and other assets

 

 

108

 

 

 

237

 

Net cash used in investing activities

 

$

(53,504

)

 

$

(80,027

)

Net cash used in investing activities decreased $26.5 million primarily due to cash paid for the Glacier Raft Company acquisition in April of 2022.

Financing Activities

 

 

 

Nine Months Ended

 

 

 

September 30,

 

(in thousands)

 

2023

 

 

2022

 

Proceeds from borrowings

 

$

49,044

 

 

$

94,849

 

Payments on debt and finance obligations

 

 

(54,235

)

 

 

(86,643

)

Dividends paid on preferred stock

 

 

(5,850

)

 

 

(5,850

)

Distributions to noncontrolling interest, net of contributions from noncontrolling interest

 

 

(1,126

)

 

 

(570

)

Payments of debt issuance costs

 

 

(226

)

 

 

(418

)

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

 

 

(508

)

 

 

(940

)

Net cash (used in) provided by financing activities

 

$

(12,901

)

 

$

428

 

The change in net cash (used in) provided by financing activities of $13.3 million was primarily due to net debt payments of $5.2 million during the nine months ended September 30, 2023 compared to net debt proceeds of $8.2 million during the nine months ended September 30, 2022.

Debt and Finance Obligations

Refer to Note 12 – Debt and Finance 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. As of September 30, 2023, 546,283 shares remained available for repurchase under all prior authorizations. In March 2020, our Board of Directors suspended our share repurchase program. The Board of Directors’ authorization does not have an expiration date.

Critical Accounting Estimates

Refer to Part II, Item 7 – Management’s Discussion and Analysis of Financial Condition and Results of Operations of our 2022 Form 10-K for a discussion of our critical accounting estimates.

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 Measure

In addition to disclosing financial results that are determined in accordance with GAAP, we also disclose segment operating income (loss) as a non-GAAP financial measure. Our use of segment operating income (loss) 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, segment operating income (loss) may not be comparable to similarly titled measures used by other companies. We believe that our use of segment

39


 

operating income (loss) provides useful information to investors regarding our results of operations for trending, analyzing, and benchmarking our performance and the value of our business.

“Segment operating income (loss)” is net income (loss) attributable to Viad before income (loss) from discontinued operations, corporate activities, interest expense and interest income, income taxes, restructuring charges, impairment charges, and certain other corporate expenses and charges that are not allocated to the reportable segments, and the reduction for income (loss) attributable to noncontrolling interests. Segment operating income (loss) is used to measure the profit and performance of our operating segments to facilitate period-to-period comparisons. Refer to Note 24 – Segment Information of the Notes to Condensed Consolidated Financial Statements (Part I, Item 1 of this Form 10-Q) for a reconciliation of segment operating income (loss) to income (loss) from continuing operations before income taxes.

We believe segment operating income (loss) is a useful operating metric as it eliminates potential variations arising from taxes, debt service costs, impairment charges, restructuring charges, the reduction of income (loss) attributable to non-controlling interests, and the effects of discontinued operations, resulting in an additional measure considered to be indicative of our ongoing operations and segment performance. Although we use segment operating income (loss) to assess the performance of our business, the use of this measure is limited because this measure does not consider material costs, expenses, and other items necessary to operate, or resulting from, our business. As segment operating income (loss) does not consider these items, net income attributable to Viad should be considered 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. The foreign exchange risk is composed of both potential losses from the translation of foreign currency financial information and the remeasurement of foreign currency transactions. 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, United Arab Emirates, 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 AOCI 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 $42.9 million as of September 30, 2023 and $43.0 million as of December 31, 2022. We recorded unrealized foreign currency translation gains in other comprehensive income (loss) of $0.1 million during the nine months ended September 30, 2023 and unrealized foreign currency translation losses of $35.0 million during the nine months ended September 30, 2022.

For purposes of consolidation, revenue, expenses, gains, and losses related to our foreign operations are translated into U.S. dollars at the average foreign exchange rates for the period. As a result, our consolidated results of operations are exposed to fluctuations in foreign exchange rates as revenue and segment operating income (loss) of our foreign operations, when translated, may vary from period to period, even when the functional currency amounts have not changed. Such fluctuations may adversely impact overall expected profitability and historical period-to-period comparisons. We do not currently hedge our earnings exposure arising from the translation of our foreign revenue and segment operating income (loss).

We are exposed to foreign exchange transaction risk, as our foreign subsidiaries have certain loans and leases denominated in currencies other than the functional currency of the respective subsidiary. As of September 30, 2023, we had long-term contractual liabilities that were denominated in nonfunctional currencies of $47.0 million. As foreign exchange rates fluctuate, these liabilities are remeasured, and the corresponding adjustment is recorded in the Condensed Consolidated Statements of Operations. As of September 30, 2023 and December 31, 2022, we did not have any outstanding foreign currency forward contracts.

On January 4, 2023, we entered into an interest rate cap agreement with an effective date of January 31, 2023 to hedge cash flows on $300 million of our Term Loan B. Refer to Note 13 – Derivative of the Notes to Condensed Consolidated Financial Statements (Part I, Item 1 of this Form 10-Q) for further information. We are exposed to short-term and long-term interest rate risk on certain of our other debt obligations.

40


 

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, is recorded, processed, summarized, and reported within the time periods specified in the SEC’s rules and forms, and such information is accumulated and communicated to our management, including our Chief Executive Officer (“CEO”) and Chief Financial Officer (“CFO”), as appropriate to allow timely decisions regarding required disclosure. Management, together with our CEO and CFO, evaluated the effectiveness of our disclosure controls and procedures as of September 30, 2023. Based on this evaluation, the CEO and CFO concluded that our disclosure controls and procedures were effective as of September 30, 2023.

Changes in Internal Control over Financial Reporting

There were no changes in our internal control over financial reporting that materially affected, or are reasonably likely to materially affect, our internal control over financial reporting during the three months ended September 30, 2023.

41


 

PART II - OTHER INFORMATION

Refer to Note 22 – 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 legal proceedings in which we are involved, which information is incorporated by reference herein.

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 2022 Form 10-K, which could materially affect our business, financial condition, or future results.

Item 2. Unregistered Sales of Equity Securities, Use of Proceeds, and issuer purchases of equity securities

The following table summarizes the total number of shares of our common stock that were repurchased during the three months ended September 30, 2023 pursuant to publicly announced plans or programs, as well as certain previously owned shares of common stock that were surrendered by employees, former employees, and non-employee directors for tax withholding requirements on vested share-based awards.

ISSUER PURCHASES OF EQUITY SECURITIES

 

Period

 

Total Number of
Shares Purchased

 

 

Average Price
Paid
Per Share

 

 

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

 

 

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

 

July 1, 2023 - July 31, 2023

 

 

 

 

$

 

 

 

 

 

 

546,283

 

August 1, 2023 - August 31, 2023

 

 

 

 

$

 

 

 

 

 

 

546,283

 

September 1, 2023 - September 30, 2023

 

 

 

 

$

 

 

 

 

 

 

546,283

 

Total

 

 

 

 

$

 

 

 

 

 

 

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.

Item 5. OTHER INFORMATION

Securities Trading Plans of Directors and Executive Officers

During the three months ended September 30, 2023, no director or officer of the Company adopted or terminated a “Rule 10b5-1 trading arrangement” or “non-Rule 10b5-1 trading arrangement,” as each term is defined in Item 408(a) of Regulation S-K.

42


 

Item 6. Exhibits

 

Incorporated by Reference

Exhibit

Number

Exhibit Description

Form

Period

Ending

Exhibit

Filing Date

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

10.1

 

 

 

Third Amendment, dated as of October 6, 2023, among the Company, Brewster Inc., as a co-borrower, the other loan parties party thereto, the lenders party thereto, the revolver increase lenders party thereto, the L/C issuers party thereto, the swing line lender and Bank of America, N.A., as administrative agent, which amends the Credit Agreement, dated as of July 30, 2021 (as amended by the First Amendment, dated as of March 23, 2022, and the Second Amendment, dated as of March 28, 2023), among the Company, Bank of America, N.A., as administrative agent, the swing line lender and the lenders and L/C issuers party thereto from time to time.

 

 

 

 

 

 

 

 

 

 

 

8-K

 

 

 

 

 

 

 

 

 

 

 

 

 

10.1

 

 

 

 

 

 

 

 

 

 

 

10/11/2023

 

 

 

 

 

 

 

 

 

 

 

 

 

 

31.1

*

 

Certification of Chief Executive Officer of Viad Corp pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

31.2

*

 

Certification of Chief Financial Officer of Viad Corp pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

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.

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

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.

 

 

43


 

SIGNATURES

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

 

 

 

 

VIAD CORP

 

 

 

(Registrant)

 

 

 

 

 

 

November 3, 2023

 

 

By:

 

/s/ Leslie S. Striedel

(Date)

 

 

 

 

Leslie S. Striedel

 

 

 

 

 

Chief Accounting Officer and Duly Authorized Officer

 

 

 

 

 

 

 

44