UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
☒
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended March 31, 2022
or
☐
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from ____________ to
Commission file number: 001-11015
Viad Corp
(Exact name of registrant as specified in its charter)
Delaware
36-1169950
(State or other jurisdiction of
incorporation or organization)
(I.R.S. Employer
Identification No.)
7000 East 1st Avenue
Scottsdale, Arizona
85251-4304
(Address of principal executive offices)
(Zip Code)
(602) 207-1000
(Registrant’s telephone number, including area code)
Not Applicable
(Former name, former address, and former fiscal year, if changed since last report)
Securities registered pursuant to Section 12(b) of the Act:
Title of each class
Trading Symbol(s)
Name of each exchange on which registered
Common Stock, $1.50 Par Value
VVI
New York Stock Exchange
Preferred Stock Purchase Rights
--
Indicate by check mark whether the registrant: (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ☒ No ☐
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§ 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files.) Yes ☒ No ☐
Indicate by check mark whether registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.
Large accelerated filer
Accelerated filer
Non-accelerated filer
Smaller reporting company
Emerging growth company
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No ☒
As of May 2, 2022, there were 20,590,577 shares of Common Stock ($1.50 par value) outstanding.
INDEX
Page
PART I - FINANCIAL INFORMATION
Item 1.
Financial Statements
1
Condensed Consolidated Balance Sheets as of March 31, 2022 and December 31, 2021
Condensed Consolidated Statements of Operations for the Three Months Ended March 31, 2022 and 2021
2
Condensed Consolidated Statements of Comprehensive Loss for the Three Months Ended March 31, 2022 and 2021
3
Condensed Consolidated Statements of Stockholders’ Equity and Mezzanine Equity for the Three Months Ended March 31, 2022 and 2021
4
Condensed Consolidated Statements of Cash Flows for the Three Months Ended March 31, 2022 and 2021
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
38
Item 4.
Controls and Procedures
39
PART II - OTHER INFORMATION
Legal Proceedings
40
Item 1A.
Risk Factors
Unregistered Sales of Equity Securities and Use of Proceeds
Item 6.
Exhibits
41
Items 3-5
Not applicable
SIGNATURES
42
In this report, for periods presented, “we,” “us,” “our,” “the Company,” and “Viad Corp” refer to Viad Corp and its subsidiaries.
Item 1. Financial Statements
VIAD CORP
CONDENSED CONSOLIDATED BALANCE SHEETS
(Unaudited)
March 31,
December 31,
(in thousands, except share data)
2022
2021
Assets
Current assets
Cash and cash equivalents
$
57,902
61,600
Accounts receivable, net of allowances for doubtful accounts of $2,299 and $1,808, respectively
94,570
91,966
Inventories
9,191
8,581
Current contract costs
20,386
11,105
Prepaid insurance
6,876
10,284
Other current assets
16,727
14,080
Total current assets
205,652
197,616
Property and equipment, net
553,986
549,108
Other investments and assets
16,678
16,718
Operating lease right-of-use assets
104,057
95,915
Deferred income taxes
1,360
1,006
Goodwill
113,233
112,078
Other intangible assets, net
64,582
65,189
Total Assets
1,059,548
1,037,630
Liabilities, Mezzanine Equity, and Stockholders’ Equity
Current liabilities
Accounts payable
74,933
69,657
Contract liabilities
60,644
39,141
Accrued compensation
17,173
12,788
Operating lease obligations
13,602
12,451
Other current liabilities
36,712
28,289
Current portion of debt and finance obligations
11,270
12,800
Total current liabilities
214,334
175,126
Long-term debt and finance obligations
448,156
446,580
Pension and postretirement benefits
24,129
23,692
Long-term operating lease obligations
101,325
93,406
Other deferred items and liabilities
66,387
68,953
Total liabilities
854,331
807,757
Commitments and contingencies
Convertible Series A Preferred Stock, $0.01 par value, 180,000 shares authorized, 135,000 shares issued and outstanding
132,591
Redeemable noncontrolling interest
5,706
5,444
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
Additional capital
567,799
566,741
Accumulated deficit
(380,671
)
(349,720
Accumulated other comprehensive loss
(23,610
(27,429
Common stock in treasury, at cost, 4,352,864 and 4,381,606 shares, respectively
(219,089
(220,712
Total Viad stockholders’ equity
(18,169
6,282
Non-redeemable noncontrolling interest
85,089
85,556
Total stockholders’ equity
66,920
91,838
Total Liabilities, Mezzanine Equity, and Stockholders’ Equity
Refer to Notes to Condensed Consolidated Financial Statements.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
Three Months Ended
(in thousands, except per share data)
Revenue:
Services
151,137
24,900
Products
26,223
4,035
Total revenue
177,360
28,935
Costs and expenses:
Costs of services
171,954
56,368
Costs of products
28,181
10,775
Corporate activities
2,673
2,005
Interest expense, net
5,877
5,085
Other expense, net
638
360
Restructuring charges
654
2,826
Impairment charges
583
—
Total costs and expenses
210,560
77,419
Loss from continuing operations before income taxes
(33,200
(48,484
Income tax benefit
(2,582
(3,045
Loss from continuing operations
(30,618
(45,439
Income from discontinued operations
275
348
Net loss
(30,343
(45,091
Net loss attributable to non-redeemable noncontrolling interest
1,204
1,445
Net loss attributable to redeemable noncontrolling interest
138
494
Net loss attributable to Viad
(29,001
(43,152
Diluted income (loss) per common share:
Continuing operations attributable to Viad common stockholders
(1.54
(2.23
Discontinued operations attributable to Viad common stockholders
0.01
0.02
Net loss attributable to Viad common stockholders
(1.53
(2.21
Weighted-average outstanding and potentially dilutive common shares
20,518
20,370
Basic income (loss) per common share:
Weighted-average outstanding common shares
Amounts attributable to Viad
(29,276
(43,500
CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE LOSS
(in thousands)
Other comprehensive income (loss):
Unrealized foreign currency translation adjustments
3,412
3,977
Change in net actuarial loss, net of tax (1)
407
177
Change in prior service cost, net of tax (1)
(56
Comprehensive loss
(26,524
(40,993
Non-redeemable noncontrolling interest:
Comprehensive loss attributable to non-redeemable noncontrolling interest
737
750
Redeemable noncontrolling interest:
Comprehensive loss attributable to redeemable noncontrolling interest
Comprehensive loss attributable to Viad
(24,445
(38,304
(1)The tax effect on other comprehensive income (loss) is not significant.
CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY AND MEZZANINE EQUITY
Mezzanine Equity
CommonStock
AdditionalCapital
AccumulatedDeficit
Accumulated Other Comprehensive Income (Loss)
CommonStock inTreasury
TotalViadEquity
Non-Redeemable Non-ControllingInterest
TotalStockholders’Equity
Redeemable Non-ControllingInterest
Convertible Series A Preferred Stock
Balance, December 31, 2021
(1,204
(30,205
(138
Dividends on convertible preferred stock
(1,950
Payment of payroll taxes on stock-based compensation through shares withheld
(349
Employee benefit plans
(1,286
1,972
686
Share-based compensation - equity awards
2,385
Unrealized foreign currency translation adjustment
4,149
49
Amortization of net actuarial loss, net of tax
Other, net
(41
351
Balance, March 31, 2022
CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY AND MEZZANINE EQUITY (Continued)
Balance, December 31, 2020
568,100
(253,164
(30,641
(225,742
95,955
78,144
174,099
5,225
128,769
(1,445
(44,597
(494
(1,898
1,898
Capital contribution (distributions) to (from) noncontrolling interest
(951
142
(519
(1,198
1,578
380
1,626
4,727
77
Amortization of prior service cost, net of tax
Acquisitions
6,759
13
(1
12
56
Balance, March 31, 2021
566,643
(296,317
(26,543
(224,683
56,502
83,257
139,759
5,006
130,667
5
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
Cash flows from operating activities
Adjustments to reconcile net loss to net cash provided by (used in) operating activities:
Depreciation and amortization
13,279
13,177
(3,104
(3,019
(275
(348
Gains on dispositions of property and other assets
(74
(9,250
Share-based compensation expense
2,166
1,763
Other non-cash items, net
2,836
(171
Change in operating assets and liabilities:
Receivables
(2,833
(1,284
(919
(9,408
(828
7,426
(8,440
Restructuring liabilities
(534
(2,250
3,363
1,364
21,706
8,148
Income taxes payable
(476
(19
Other assets and liabilities, net
13,876
10,352
Net cash provided by (used in) operating activities
17,923
(32,719
Cash flows from investing activities
Capital expenditures
(12,570
(9,371
Cash paid for acquisitions, net
(7,415
Proceeds from dispositions of property and other assets
76
14,106
Net cash used in investing activities
(12,494
(2,680
Cash flows from financing activities
Proceeds from borrowings
1,013
40,860
Payments on debt and finance obligations
(4,849
(8,310
Dividends paid on preferred stock
Distributions to noncontrolling interest, net of contributions from noncontrolling interest
(809
Payments of debt issuance costs
(313
Payment of payroll taxes on stock-based compensation through shares withheld or repurchased
(518
Net cash (used in) provided by financing activities
(6,617
31,222
Effect of exchange rate changes on cash, cash equivalents, and restricted cash
(178
151
Net change in cash, cash equivalents, and restricted cash
(1,366
(4,026
Cash, cash equivalents, and restricted cash, beginning of year
64,303
41,971
Cash, cash equivalents, and restricted cash, end of period
62,937
37,945
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
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, 2021, filed with the SEC on February 25, 2022 (“2021 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. During the first quarter of 2022, we rebranded GES’ brand experiences business and introduced Spiro to the market to accelerate our growth by servicing the changing needs of today’s brand marketers across a broader spectrum of their experiential marketing needs.
We operate through three reportable segments: Pursuit, Spiro, and GES Exhibitions as further described below. The Spiro and GES Exhibitions reportable segments are both live event businesses, and are collectively referred to as “GES.”
Pursuit
Pursuit is a collection of inspiring and unforgettable travel experiences that includes recreational attractions, unique hotels and lodges, food and beverage, retail, sightseeing, and ground transportation services. Pursuit comprises the Banff Jasper Collection, the Alaska Collection, the Glacier Park Collection, FlyOver, and 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 delivers a broad range of unique and impactful experiences for its clients, including strategic exhibition program management, corporate meetings and events, digital experiences, corporate customer centers, brand and sports activations, product launches, consumer pop-up events, on-site services, and audio visual/technology solutions.
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.
Reclassifications
During the first quarter of 2022, we changed our segment reporting as a result of operational changes and how our chief operating decision maker (“CODM”) reviews the financial performance of GES and makes decisions regarding the allocation of resources. As a result, we changed the presentation of certain items in GES’ disaggregation of revenue and reportable segments. Refer to Note 2 – Revenue and Related Contract Costs and Contract Liabilities and Note 23 – Segment Information for additional information. We also
reclassified certain prior-year amounts to conform to current-period presentation. Such reclassifications had no impact on our results of operations or cash flows.
Impact of COVID-19
Starting in mid-March 2020, the COVID-19 pandemic created severe disruptions in the live event and tourism industries and those disruptions had a significant and negative impact on our operations and financial performance. We are not able to fully estimate the future impact of the pandemic on our business due to the evolving and uncertain nature of COVID-19, including ongoing vaccination and other mitigation efforts as well as the scope and magnitude of variants, infections, and hospitalizations. We will continue to evaluate and implement additional actions necessary to mitigate the negative financial and operational impact of COVID-19 on our business.
Impact of Recent Accounting Pronouncements
The following table provides a brief description of recent accounting pronouncements:
Standard
Description
Date of adoption
Effect on the financial statements
Standards Not Yet Adopted
2021-08, Business Combinations (Topic 805) Accounting for Contract Assets and Contract Liabilitiesfrom 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
We are currently evaluating the potential impact of the adoption of this new guidance on our consolidated financial statements. We do not expect this new guidance will have a material impact on our consolidated financial statements.
Standards Recently Adopted
ASU 2020-06, Debt - Debt with Conversion and Other Options (Subtopic 470-20) and Derivatives and Hedging - Contracts in Entity’s
The amendment simplified the accounting for convertible instruments by reducing the number of accounting models available for convertible debt instruments and convertible preferred stock. The amendment also required expanded disclosures about the terms and features of convertible instruments.
1/1/2022
The adoption of this new standard on January 1, 2022 did not have a material impact on our consolidated financial statements.
ASU 2021-10, Government Assistance (Topic 832) Disclosures by Business Entities about Government Assistance
Amendment improves the transparency of government assistance received by most business entities by requiring annual disclosure of: (1) the types of government assistance received; (2) the accounting for such assistance; and (3) the effect of the assistance on a business entity’s financial statements.
We adopted this new standard on a prospective basis. This new guidance will be effective for our Annual Report on Form 10-K for the year ending December 31, 2022, whereby we will expand our disclosures within the scope of this new standard that are reflected in the financial statements as of the adoption date. We do not expect this new standard to have a material impact our consolidated financial statements or related disclosures.
Significant Accounting Policies
Use of Estimates
The preparation of financial statements in conformity with United States GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities at the date of the financial statements and the reported amounts of revenue and expenses during the reported period. Estimates and assumptions are used in accounting for, among other things: impairment testing of recorded goodwill and intangible assets and long-lived assets; allowances for uncollectible accounts receivable; sales reserve allowances; provisions for income taxes, including uncertain tax positions; valuation allowances related to deferred tax assets; liabilities for losses related to self-insured liability claims; liabilities for losses related to environmental remediation obligations; sublease income associated with restructuring liabilities; pension and postretirement benefit costs and obligations; share-based compensation costs; the discount rates used to value lease obligations; the redemption value of redeemable noncontrolling interests; and the allocation of purchase price of acquired businesses. Actual results could differ from these and other estimates.
8
Cash, Cash Equivalents, and Restricted Cash
Cash equivalents are highly-liquid investments with remaining maturities when purchased of three months or less. Cash and cash equivalents consist of cash and bank demand deposits and money market funds. Investments in money market funds are classified as available-for-sale and carried at fair value. Restricted cash represents collateral required for surety bonds, bank guarantees, letters of credit, and corporate credit cards.
Cash, cash equivalents, and restricted cash balances presented in the Condensed Consolidated Statements of Cash Flows consisted of the following:
Restricted cash included in other current assets
5,035
2,703
Cash, cash equivalents, and restricted cash shown in the statement of cash flows
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. 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 and 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 (loss) per share. Refer to Note 22 – Noncontrolling Interest – Redeemable and Non-redeemable for additional information.
Convertible Preferred Stock
We record shares of convertible preferred stock based on proceeds received net of costs on the date of issuance. Redeemable preferred stock (including preferred stock that features redemption rights that are either within the control of the holder or subject to redemption upon the occurrence of uncertain events not solely within our control) is classified as mezzanine equity and is reported between liabilities and stockholders’ equity in the Condensed Consolidated Balance Sheets.
Leases
We recognize a right-of-use (“ROU”) asset and lease liability on the balance sheet and classify leases as either finance or operating leases. The classification of the lease determines whether we recognize the lease expense on an effective interest method basis (finance lease) or on a straight-line basis (operating lease) over the lease term. In determining whether an agreement contains a lease, we consider
9
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 generally have lease terms ranging up to 24 years. Our equipment leases comprise mainly vehicles, hardware, and office equipment, each with various lease terms. Our land leases comprise mainly leases in Canada and Iceland on which our 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 discount rate represents a risk-adjusted rate on a collateralized basis and is the expected rate at which we would borrow funds to satisfy the scheduled lease liability payment streams commensurate with the lease term and the country.
We are also a lessor to third party tenants who either lease certain portions of facilities that we own or sublease certain portions of facilities that we lease. We record lease income from owned facilities as rental income and we record sublease income from leased facilities as an offset to lease expense in the Condensed Consolidated Statements of Operations. We classify all of our leases for which we are the lessor as operating leases.
Note 2. Revenue and Related Contract Costs and Contract Liabilities
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 these amounts in “Contract liabilities” and “Other deferred items and liabilities” in the Condensed Consolidated Balance Sheets.
Changes to contract liabilities are as follows:
Balance at December 31, 2021
39,662
Cash additions
42,092
Revenue recognized
(19,037
Foreign exchange translation adjustment
(1,656
Balance at March 31, 2022
61,061
10
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:
13,790
Additions
16,017
Expenses
(6,694
36
23,149
As of March 31, 2022, capitalized contract costs consisted of $0.2 million to obtain contracts and $22.9 million to fulfill contracts. We did not recognize an impairment loss with respect to capitalized contract costs during the three months ended March 31, 2022 or 2021.
Disaggregation of Revenue
The following tables disaggregate Pursuit and GES revenue by major service and product lines, timing of revenue recognition, and markets served:
During the first quarter of 2022, we reallocated certain ancillary revenue presented in Pursuit’s services revenue to better align with how we analyze revenue and depict the nature of revenue. All prior periods have been reclassified to conform to this new presentation.
Services:
Ticket revenue
9,202
1,484
Rooms revenue
6,903
4,769
Transportation
1,179
537
Other
1,370
1,095
Total services revenue
18,654
7,885
Products:
Food and beverage
4,093
1,224
Retail operations
1,037
681
Total products revenue
5,130
1,905
23,784
9,790
Timing of revenue recognition:
Services transferred over time
Products transferred at a point in time
Markets:
Banff Jasper Collection
14,330
8,460
Alaska Collection
497
289
Glacier Park Collection
1,009
578
FlyOver
4,139
463
Sky Lagoon(1)
3,809
11
GES
During the first quarter of 2022, we changed our segment reporting as a result of operational changes and how our CODM reviews the financial performance of GES and makes decisions regarding the allocation of resources. Accordingly, GES’ new reportable segments are Spiro and GES Exhibitions. As a result, we changed certain items in the following disaggregation of revenue table. All prior periods have been reclassified to conform to the new reporting structure.
Service lines:
42,816
12,059
111,831
7,152
Intersegment eliminations
(1,071
(66
153,576
19,145
132,483
17,015
Products transferred over time(1)
7,938
417
13,155
1,713
Geographical markets:
North America
129,027
15,858
EMEA
25,813
3,903
(1,264
(616
Note 3. Share-Based Compensation
We grant share-based compensation awards to our officers, directors, and certain key employees pursuant to the 2017 Viad Corp Omnibus Incentive Plan (the “2017 Plan”). The 2017 Plan has a 10-year term and provides for the following types of awards: (a) incentive and non-qualified stock options; (b) restricted stock awards and restricted stock units; (c) performance units or performance shares; (d) stock appreciation rights; (e) cash-based awards; and (f) certain other stock-based awards. In June 2017, we registered 1,750,000 shares of common stock issuable under the 2017 Plan. As of March 31, 2022, there were 427,774 shares available for future grant under the 2017 Plan.
The following table summarizes share-based compensation expense:
Performance-based restricted stock units
14
140
Restricted stock awards and restricted stock units
1,562
1,244
Stock options
590
379
Share-based compensation expense before income tax
Income tax benefit(1)
(17
(27
Share-based compensation expense, net of income tax
2,149
1,736
Performance-based Restricted Stock Units
Performance-based restricted stock units (“PRSUs”) are tied to our stock price and the expected achievement of certain performance-based criteria. The vesting of PRSUs is based upon the achievement of the performance-based criteria over a three to four-year period. We account for PRSUs that will be settled in shares of our common stock as equity-based awards. We measure share-based compensation expense of equity-based awards at fair value on the grant date on a straight-line basis over the vesting period. The estimated number of units to be achieved is updated each reporting period.
We account for PRSUs that will be settled in cash as liability-based awards. We measure share-based compensation expense of liability-based awards at fair value at each reporting date until the date of settlement. Forfeitures are recorded when they occur.
During the three months ended March 31, 2022, we granted PRSUs with a grant date fair value of $2.4 million, all of which are payable in shares.
In 2022, PRSUs granted in 2019 vested and we paid $0.4 million in cash. No PRSUs were paid in shares in 2022. In 2021, PRSUs granted in 2018 vested; however, as performance metrics were not achieved, no awards were paid in cash or in shares.
As of March 31, 2022, the unamortized cost of outstanding equity-based PRSUs was $4.6 million, which we expect to recognize over a weighted-average period of approximately 2.1 years. Liabilities related to liability-based PRSUs were $0.1 million as of March 31, 2022 and $0.7 million as of December 31, 2021.
The following table summarizes the activity of the outstanding PRSU awards:
Equity-Based PRSUs
Liability-Based PRSUs
Shares
Weighted-AverageGrant DateFair Value
134,152
37.30
77,746
57.13
Granted
65,000
36.46
Vested
(36,758
58.31
Forfeited
(461
56.23
199,152
37.03
40,527
56.06
Service-based Restricted Stock Awards and Restricted Stock Units
Restricted stock awards and restricted stock units are service-based awards. We account for restricted stock awards and restricted stock units that will be settled in shares of our common stock as equity-based awards. We measure share-based compensation expense of equity-based awards at fair value on the grant date on a straight-line basis over the vesting period.
We account for restricted stock units that will be settled in cash as liability-based awards. We measure share-based compensation expense of liability-based awards at fair value at each reporting date until the date of settlement. Forfeitures are recorded when they occur.
As of March 31, 2022, the unamortized cost of outstanding equity-based restricted stock awards and restricted stock units was $8.0 million, which we expect to recognize over a weighted-average period of approximately 1.4 years. We withheld 14,750 shares for $0.5 million during the three months ended March 31, 2022 and 12,055 shares for $0.5 million during the three months ended March 31, 2021 related to tax withholding requirements on vested share-based awards.
Aggregate liabilities related to liability-based restricted stock units were $0.1 million as of March 31, 2022 and $0.2 million as of December 31, 2021. During the three months ended March 31, 2022, 3,709 restricted stock units vested, and we paid $0.1 million in cash. During the three months ended March 31, 2021, 3,174 restricted stock units vested, and we paid $0.1 million in cash.
The following table summarizes the activity of the outstanding restricted stock awards and restricted stock units:
Equity-Based Restricted Stock Awards
Equity-Based Restricted Stock Units
Liability-Based Restricted Stock Units
76,792
52.83
239,188
34.74
6,278
55.93
98,926
33.96
(51,331
52.05
(20,540
44.79
(3,709
56.66
(211
(2,811
36.87
(309
56.47
25,250
54.39
314,763
33.82
2,260
54.75
Stock Options
We grant non-qualified stock options that are performance-based, as well as non-qualified stock options that are service-based. The performance-based awards are recognized on a straight-line basis over the respective performance period, and the underlying shares expected to be settled are adjusted each reporting period based on estimated future achievement of the respective performance metrics. The service-based awards are recognized on a straight-line basis over the requisite service period on a graded-vesting schedule ranging from one to three years.
The following table summarizes stock option activity:
Weighted-AverageExercise Price
Aggregate Intrinsic Value(1)
Options outstanding at December 31, 2021
312,008
31.01
233,970
Exercised
(120,000
19.30
Options outstanding at March 31, 2022
425,978
35.93
1,139,798
Options exercisable at March 31, 2022
73,028
36.29
373,364
The following table summarizes stock options outstanding and exercisable as of March 31, 2022:
Options Outstanding
Options Exercisable
Range of exercise prices
Weighted-AverageRemaining Contractual Life (in years)
$21.85
54,150
5.41
21.85
27,075
$33.96
6.90
$44.80
137,858
5.90
44.80
45,953
$21.85 - $44.80
6.39
The fair value of stock options granted in 2022 was estimated on the date of grant using the Black-Scholes option pricing model.
Following is additional information on stock options granted during the three months ended March 31, 2022 and the underlying assumptions used in assessing fair value:
March 31, 2022
Assumptions used to estimate fair value of stock options granted:
Risk-free interest rate
1.86
%
Expected term (in years)
4.5
Expected volatility
58.3
Expected dividend yield
Weighted average grant-date fair value per share of options granted
16.50
As of March 31, 2022, the total unrecognized compensation cost related to non-vested stock option awards was $4.7 million. We expect to recognize such costs over a weighted-average period of approximately 1.7 years.
Note 4. Acquisitions
2021 Acquisition
Golden Skybridge
On March 18, 2021, we acquired a 60% controlling interest in the Golden Skybridge attraction for total cash consideration of $15 million Canadian dollars (approximately $12 million U.S. dollars), of which $6 million Canadian dollars (approximately $4.8 million U.S. dollars) were primarily used to fund additional experiences. The Golden Skybridge opened in June 2021.
The fair value of net assets acquired as of the acquisition date included $2.2 million U.S. dollars in property and equipment and $6.8 million U.S. dollars in noncontrolling interest. Under the acquisition method of accounting, the purchase price is allocated to the tangible and identifiable intangible assets acquired and liabilities assumed based on their estimated fair values. The excess purchase price over the fair value of net assets acquired of $11.8 million U.S. dollars was recorded as “Goodwill.” Goodwill is included in the Pursuit 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 not deductible for tax purposes. We included these assets in the Condensed Consolidated Balance Sheets from the date of acquisition.
Transaction costs associated with the acquisition were $0.4 million U.S. dollars during 2021, which are included in “Costs of services” in the Condensed Consolidated Statements of Operations.
Note 5. Inventories
We state inventories, which consist primarily of exhibit design and construction materials and supplies, as well as retail inventory, at the lower of cost (first-in, first-out and specific identification methods) or net realizable value.
The components of inventories consisted of the following:
Raw materials
1,882
2,350
Finished goods
7,309
6,231
15
Note 6. Other Current Assets
Other current assets consisted of the following:
Restricted cash
Prepaid software maintenance
4,105
4,154
Income tax receivable
1,901
Prepaid vendor payments
1,602
1,604
Prepaid taxes
106
456
Prepaid other
1,854
1,165
1,675
2,097
Note 7. Property and Equipment
Property and equipment consisted of the following:
Land and land interests
30,621
30,532
Buildings and leasehold improvements
411,581
407,930
Equipment and other
420,679
413,684
Gross property and equipment
862,881
852,146
Accumulated depreciation
(372,591
(364,060
Property and equipment, net (excluding finance leases)
490,290
488,086
Finance lease ROU assets, net
63,696
61,022
Depreciation expense was $11.0 million for the three months ended March 31, 2022 and $10.9 million for the three months ended March 31, 2021.
Property and equipment purchased through accounts payable and accrued liabilities decreased $2.1 million during the three months ended March 31, 2022 and decreased $0.5 million during the three months ended March 31, 2021. Capitalized interest was $1.9 million for the three months ended March 31, 2022, which was primarily related to the development of Pursuit’s FlyOver attractions.
Note 8. Other Investments and Assets
Other investments and assets consisted of the following:
Self-insured liability receivable
6,847
Other mutual funds
4,005
4,057
Contract costs
2,763
2,685
3,063
3,129
Note 9. Goodwill and Other Intangible Assets
The changes in the carrying amount of goodwill are as follows:
Foreign currency translation adjustments
1,155
16
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:
December 31, 2021
Useful Life(Years)
GrossCarryingValue
AccumulatedAmortization
NetCarryingValue
Intangible assets subject to amortization:
Customer contracts and relationships
6.1
36,048
(28,277
7,771
36,848
(28,372
8,476
Operating contracts and licenses
35.5
41,354
(2,877
38,477
40,927
(2,660
38,267
In-place lease
12.9
15,628
(1,206
14,422
15,464
(1,084
14,380
Tradenames
4.1
5,685
(3,032
2,653
5,626
(2,819
2,807
5.9
833
(149
684
824
(139
685
Total amortized intangible assets
99,548
(35,541
64,007
99,689
(35,074
64,615
Indefinite-lived intangible assets:
Business licenses
575
574
Other intangible assets
100,123
100,263
Intangible asset amortization expense was $1.2 million for both the three months ended March 31, 2022 and the three months ended March 31, 2021.
At March 31, 2022, the estimated future amortization expense related to intangible assets subject to amortization is as follows:
Year ending December 31,
Remainder of 2022
3,916
2023
4,491
2024
3,530
2025
2,233
2026
2,204
Thereafter
47,633
Total
17
Note 10. Other Current Liabilities
Other current liabilities consisted of the following:
Continuing operations:
Commissions payable
8,862
4,119
Accrued sales and use taxes
6,138
3,428
Self-insured liability
4,977
4,815
Accrued employee benefit costs
4,617
4,164
Accrued professional fees
2,035
1,671
Current portion of pension and postretirement liabilities
1,457
1,637
Accommodation service deposits
780
892
Accrued restructuring
544
864
Accrued interest payable
207
228
Other taxes
1,091
1,042
5,571
4,963
Total continuing operations
36,279
27,823
Discontinued operations:
287
312
Environmental remediation liabilities
52
60
94
Total discontinued operations
433
466
Total other current liabilities
Note 11. Other Deferred Items and Liabilities
Other deferred items and liabilities consisted of the following:
Foreign deferred tax liability
25,620
27,748
Multi-employer pension plan withdrawal liability
14,151
14,260
Self-insured excess liability
5,238
5,119
5,095
5,696
2,664
2,571
2,839
2,758
62,454
64,999
2,169
2,168
1,514
1,535
250
251
3,933
3,954
Total other deferred items and liabilities
18
Note 12. Debt and Finance Obligations
The components of debt and finance obligations consisted of the following:
(in thousands, except interest rates)
2021 Credit Facility, 5.5% weighted-average interest rate at March 31, 2022 and December 31, 2021, due through 2028(1)
398,000
399,000
FlyOver Iceland Credit Facility, 4.9% weighted-average interest rate at March 31, 2022 and December 31, 2021, due through 2025(1)
5,397
5,566
FlyOver Iceland Term Loans, 3.8% weighted-average interest rate at March 31, 2022 and December 31, 2021, due through 2024(1)
712
689
Less unamortized debt issuance costs
(14,419
(14,804
Total debt
389,690
390,451
Finance lease obligations, 9.1% weighted-average interest rate at March 31, 2022 and December 31, 2021, due through 2067
66,414
63,401
Financing arrangements
3,322
5,528
Total debt and finance obligations (2)(3)
459,426
459,380
Current portion
(11,270
(12,800
2021 Credit Facility
Effective July 30, 2021, we entered into a new $500 million credit facility (the “2021 Credit Facility”). The 2021 Credit Facility provides for a $400 million Term Loan B with a maturity date of July 30, 2028 and a $100 million revolving credit facility with a maturity date of July 30, 2026. The proceeds will be used to provide for financial flexibility to fund future acquisitions and growth initiatives and for general corporate purposes.
On March 23, 2022, we entered into an amendment to the 2021 Credit Facility, which modified the revolving credit facility’s financial covenants as detailed below.
Term Loan B
The $400 million Term Loan B proceeds were offset in part by $14.8 million in related fees. The proceeds from the Term Loan B were used to repay the $327 million outstanding balance under our then outstanding $450 million revolving credit facility. The interest rate on the Term Loan B is London Interbank Offered Rate (“LIBOR”) plus 5.00%, with a LIBOR floor of 0.50%. There are no financial covenants under the Term Loan B.
Revolving Credit Facility
The following are significant terms under the revolving credit facility, as amended:
19
As of March 31, 2022, capacity remaining under the 2021 Credit Facility was $87.4 million, reflecting the $100 million revolving credit facility less $12.6 million in outstanding letters of credit.
FlyOver Iceland Credit Facility
Effective February 15, 2019, FlyOver Iceland ehf., (“FlyOver Iceland”) a wholly-owned subsidiary of Esja, entered into a credit agreement with a €5.0 million (approximately $5.6 million U.S. dollars) credit facility (the “FlyOver Iceland Credit Facility”) with a maturity date of March 1, 2022. The loan proceeds were used to complete the development of the FlyOver Iceland attraction.
We 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 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) in January 2022, which was completed, in order to strengthen FlyOver Iceland’s liquidity position. There were no other changes to the terms of the FlyOver Iceland Credit Facility.
FlyOver Iceland Term Loans
During 2020, FlyOver Iceland entered into three term loans totaling ISK 90.0 million (approximately $0.7 million U.S. dollars) (the “FlyOver Iceland Term Loans”). The first term loan for ISK 10.0 million was entered into effective October 15, 2020 with a maturity date of April 1, 2023 and bears interest on a seven-day term deposit at the Central Bank of Iceland. The second term loan for ISK 30.0 million was entered into effective October 15, 2020 with a maturity date of October 1, 2024 and bears interest on a seven-day term deposit at the Central Bank of Iceland plus 3.07%. The third term loan for ISK 50.0 million was entered into effective December 29, 2020 with a maturity date of February 1, 2023 and bears interest at one-month Reykjavik InterBank Offered Rate (“REIBOR”) plus 4.99%. The Icelandic State Treasury guarantees supplemental loans provided by credit institutions to companies impacted by the COVID-19 pandemic. Accordingly, the Icelandic State Treasury guaranteed the repayment of up to 85% of the principal and interest on the ISK 10.0 million and ISK 30.0 million term loans and 70% of the principal amount on the ISK 50.0 million term loan. Loan proceeds were used to fund FlyOver Iceland operations.
We have insurance premium financing arrangements in order to finance certain of our insurance premium payments. The financing arrangements are payable within the next 12 months and bear a weighted average interest rate of 2.11%.
Note 13. Fair Value Measurements
The fair value of an asset or liability is defined as the price that would be received by selling an asset or paying to transfer a liability in an orderly transaction between market participants at the measurement date. The fair value guidance requires an entity to maximize the use of quoted prices and other observable inputs and minimize the use of unobservable inputs when measuring fair value, and also establishes a fair value hierarchy, which prioritizes the inputs to valuation techniques used to measure fair value as follows:
Level 1 - Quoted prices in active markets for identical assets or liabilities.
Level 2 - Observable inputs other than quoted prices included within Level 1 that are observable for the asset or liability, either directly or indirectly.
Level 3 - Unobservable inputs to the valuation methodology that are significant to the measurement of fair value.
20
Money market mutual funds and certain other mutual fund investments are measured at fair value on a recurring basis using Level 1 inputs. The fair value information related to these assets is summarized in the following tables:
Fair Value Measurements at Reporting Date Using
Quoted Pricesin ActiveMarkets(Level 1)
SignificantOtherObservableInputs(Level 2)
SignificantUnobservableInputs(Level 3)
Assets:
Money market funds (1)
Other mutual funds (2)
Total assets at fair value on a recurring basis
11,003
15,060
The carrying values of cash and cash equivalents, receivables, and accounts payable approximate fair value due to the short-term nature of these instruments. Refer to Note 12 – Debt and Finance Obligations for the estimated fair value of debt obligations.
Note 14. Loss Per Share
The components of basic and diluted loss per share are as follows:
Convertible preferred stock dividends paid in cash
Convertible preferred stock dividends paid in kind
Adjustment to the redemption value of redeemable noncontrolling interest
(351
Net loss allocated to Viad common stockholders (basic)
(31,302
(45,106
Add: Allocation to participating securities
Net loss allocated to Viad common stockholders (diluted)
Basic weighted-average outstanding common shares
Additional dilutive shares related to share-based compensation
Diluted weighted-average outstanding shares
Loss per share:
Basic loss attributable to Viad common stockholders
Diluted loss attributable to Viad common stockholders(1)
Diluted loss per common share is calculated using the more dilutive of the two-class method or as-converted method. The two-class method uses net income (loss) available to common stockholders and assumes conversion of all potential shares other than the participating securities. The as-converted method uses net income (loss) available to common stockholders and assumes conversion of all potential shares including the participating securities. Dilutive potential common shares include outstanding stock options, unvested
21
restricted share units and convertible preferred stock. We apply the two-class method in calculating income (loss) per common share as unvested share-based payment awards that contain nonforfeitable rights to dividends and preferred stock are considered participating securities. Accordingly, such securities are included in the earnings allocation in calculating income (loss) per share. The adjustment to the carrying value of the redeemable noncontrolling interest is reflected in income (loss) per common share.
We excluded the following weighted-average potential common shares from the calculations of diluted net income (loss) per common share during the applicable periods because their inclusion would have been anti-dilutive:
Convertible preferred stock
6,674
6,494
Unvested restricted share-based awards
Unvested performance share-based awards
37
166
57
Note 15. Common and Preferred Stock
On August 5, 2020, we entered into an Investment Agreement with funds managed by private equity firm Crestview Partners, relating to the issuance of 135,000 shares of newly issued Convertible Series A Preferred Stock, par value $0.01 per share, for an aggregate purchase price of $135 million or $1,000 per share. The $135 million issuance was offset in part by $9.2 million of expenses related to the capital raise. We have classified the convertible preferred stock as mezzanine equity in the Condensed Consolidated Balance Sheet due to the existence of certain change in control provisions that are not solely within our control.
The Convertible Series A Preferred Stock carries a 5.5% cumulative quarterly dividend, which is payable in cash or in-kind at Viad’s option and is convertible at the option of the holders into shares of our common stock at a conversion price of $21.25 per share. 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 March 31, 2022 and $139.9 million as of March 31, 2021. Upon the occurrence of a change in control event, the holders have a right to require Viad to repurchase such preferred stock. During the three months ended March 31, 2022, $2.0 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 for the foreseeable future. As of March 31, 2022, 546,283 shares remain available for repurchase. Additionally, we repurchase shares related to tax withholding requirements on vested restricted stock awards. Refer to Note 3 – Share-Based Compensation.
Note 16. Accumulated Other Comprehensive Income (Loss)
Changes in accumulated other comprehensive income (loss) (“AOCI”) by component are as follows:
CumulativeForeign Currency Translation Adjustments
Unrecognized Net Actuarial Loss and Prior Service Credit, Net
AccumulatedOtherComprehensiveIncome (Loss)
(16,162
(11,267
Other comprehensive income before reclassifications
Amounts reclassified from AOCI, net of tax
Net other comprehensive income
3,819
(12,750
(10,860
22
Balance at December 31, 2020
(16,686
(13,955
Other comprehensive loss before reclassifications
121
4,098
Balance at March 31, 2021
(12,709
(13,834
Amounts reclassified that relate to our defined benefit pension and postretirement plans include the amortization of prior service costs and actuarial net losses recognized during each period presented. We recorded these costs as components of net periodic cost for each period presented. Refer to Note 18 – Pension and Postretirement Benefits for additional information.
Note 17. Income Taxes
The effective tax rate was 7.8% for the three months ended March 31, 2022 and 6.3% for the three months ended March 31, 2021.
The income tax provision was computed based on our estimated annualized effective tax rate and the full-year forecasted income or loss plus the tax impact of unusual, infrequent, or nonrecurring significant items during the period. The effective tax rates for the three months ended March 31, 2022 and 2021 were less than the federal statutory rate of 21% primarily as a result of excluding the tax benefits on losses recognized in the United States, United Kingdom, and other European countries where we have a valuation allowance.
We paid cash for incomes taxes of $1.4 million during the three months ended March 31, 2022 and $0.7 million during the three months ended March 31, 2021.
Note 18. Pension and Postretirement Benefits
The components of net periodic benefit cost of our pension and postretirement benefit plans for the three months ended March 31, 2022 and 2021 consist of the following:
Domestic Plans
Pension Plans
Postretirement Benefit Plans
Foreign Pension Plans
Service cost
85
113
Interest cost
125
114
54
55
88
Expected return on plan assets
(2
(125
Amortization of prior service credit
Recognized net actuarial loss
134
23
35
Net periodic benefit cost
257
238
109
123
83
Settlement cost
115
533
Total expenses
372
616
We expect to contribute $0.9 million to our funded pension plans, $0.9 million to our unfunded pension plans, and $0.8 million to our postretirement benefit plans in 2022. During the three months ended March 31, 2022, we contributed $0.2 million to our funded pension plans, $0.2 million to our unfunded pension plans, and $0.2 million to our postretirement benefit plans.
Note 19. Restructuring Charges
As part of our efforts to drive efficiencies and simplify our business operations, we took certain restructuring actions designed to simplify and transform GES for greater profitability. In response to the COVID-19 pandemic in 2020, we accelerated our transformation and streamlining efforts at GES to significantly reduce costs and create a lower and more flexible cost structure focused on servicing our more profitable market segments. These initiatives resulted in restructuring charges related to the elimination of certain positions and continuing to reduce our facility footprint at GES, as well as charges related to the closure and liquidation of GES’ United Kingdom-based audio-visual services business.
Other Restructurings
We recorded restructuring charges in connection with the consolidation of certain support functions at our corporate headquarters and certain reorganization activities within Pursuit. These charges primarily consist of severance and related benefits due to headcount reductions.
Changes to the restructuring liability by major restructuring activity are as follows:
Severance &EmployeeBenefits
Facilities
1,976
1,433
26
3,435
229
425
Cash payments
(82
(429
(53
(564
Non-cash items(1)
(355
Adjustment to liability
1,766
1,430
3,208
As of March 31, 2022, $1.5 million of the liabilities related to severance and employee benefits will remain unpaid by the end of 2022. The liabilities related to facilities primarily include non-lease expenses that will be paid over the remaining lease terms. Refer to Note 23 – Segment Information for information regarding restructuring charges by segment.
Note 20. Leases and Other
The balance sheet presentation of our operating and finance leases is as follows:
Classification on the Condensed Consolidated Balance Sheet
Operating lease assets
Operating lease ROU assets
Finance lease assets
Total lease assets
167,753
156,937
Liabilities:
Current:
Finance lease obligations
2,902
2,928
Noncurrent:
63,512
60,473
Total lease liabilities
181,341
169,258
24
The components of lease expense consisted of the following:
Finance lease cost:
Amortization of ROU assets
1,051
1,070
Interest on lease liabilities
1,435
1,315
Operating lease cost
5,822
6,270
Short-term lease cost
364
261
Variable lease cost
1,014
942
Total lease cost, net
9,686
9,858
Other information related to operating and finance leases are as follows:
Cash paid for amounts included in the measurement of lease liabilities:
Operating cash flows from operating leases
5,798
6,153
Operating cash flows from finance leases
1,467
274
Financing cash flows from finance leases
724
710
ROU assets obtained in exchange for lease obligations:
Operating leases
5,560
6,299
Finance leases
3,107
42,907
Weighted-average remaining lease term (years):
8.62
8.54
34.11
34.95
Weighted-average discount rate:
6.97
6.86
9.08
9.06
As of March 31, 2022, the estimated future minimum lease payments under non-cancellable leases, excluding variable leases and variable non-lease components, are as follows:
Operating Leases
Finance Leases
16,842
6,700
23,542
20,952
8,383
29,335
19,060
7,299
26,359
17,697
6,620
24,317
17,319
6,411
23,730
68,801
187,778
256,579
Total future lease payments
160,671
223,191
383,862
Less: Amount representing interest
(45,744
(156,777
(202,521
Present value of minimum lease payments
114,927
16,504
Long-term portion
164,837
25
As of March 31, 2022, the estimated future minimum rental income under non-cancellable leases, which includes rental income from facilities that we own, are as follows:
1,056
1,162
941
784
625
920
Total minimum rents
5,488
Leases Not Yet Commenced
As of March 31, 2022, we had executed a facility lease for which we did not have control of the underlying assets. Accordingly, we did not record the lease liability and ROU asset on our Condensed Consolidated Balance Sheets. This lease is for the new FlyOver attraction, FlyOver Canada Toronto. We expect the lease commencement date to begin in fiscal year 2022 with a lease term of 20 years.
Note 21. Litigation, Claims, Contingencies, and Other
We are plaintiffs or defendants to various actions, proceedings, and pending claims, some of which involve, or may involve, compensatory, punitive, or other damages. Litigation is subject to many uncertainties and it is possible that some of the legal actions, proceedings, or claims could be decided against us. Although the amount of liability as of March 31, 2022 with respect to unresolved legal matters is not ascertainable, we believe that any resulting liability, after taking into consideration amounts already provided for and insurance coverage, will not have a material effect on our business, financial position, or results of operations.
On July 18, 2020, an off-road Ice Explorer operated by our Pursuit business was involved in an accident while enroute to the Athabasca Glacier, resulting in three fatalities and multiple other serious injuries. We continue to support the victims and their families, and we are fully cooperating with the applicable regulatory authorities to investigate this accident. We immediately reported the accident to our relevant insurance carriers, who are also supporting the investigation and subsequent claims. Subject to customary deductibles, we believe that our insurance coverage is sufficient to cover potential claims related to this accident.
We are subject to various 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 March 31, 2022, we had recorded environmental remediation liabilities of $2.2 million related to previously sold operations. Although we are a party to certain environmental disputes, we believe that any resulting liabilities, after taking into consideration amounts already provided for and insurance coverage, will not have a material effect on our financial position or results of operations.
As of March 31, 2022, on behalf of our subsidiaries, we had certain obligations under guarantees to third parties. These guarantees are not subject to liability recognition in the condensed consolidated financial statements and relate to leased facilities and equipment leases entered into by our subsidiary operations. We would generally be required to make payments to the respective third parties under these guarantees in the event that the related subsidiary could not meet its own payment obligations. The maximum potential amount of future payments that we would be required to make under all guarantees existing as of March 31, 2022 would be $99.8 million. These guarantees relate to our leased equipment and facilities through January 2040. There are no recourse provisions that would enable us to recover from third parties any payments made under the guarantees. Furthermore, there are no collateral or similar arrangements pursuant to which we could recover payments.
A significant number of our employees are unionized and we are a party to approximately 100 collective-bargaining agreements, with approximately one-third requiring renegotiation each year. If we are unable to reach an agreement with a union during the collective-bargaining process, the union may call for a strike or work stoppage, which may, under certain circumstances, adversely impact our business and results of operations. We believe that relations with our employees are satisfactory and that collective-bargaining agreements expiring in 2022 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 $10.2 million as of March 31, 2022, which includes $6.2 million related to workers’ compensation liabilities, and $4.0 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 March 31, 2022. We are also self-insured for certain employee health benefits and the estimated employee health benefit claims incurred but not yet reported was $1.2 million as of March 31, 2022. 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 $1.6 million for the three months ended March 31, 2022 and $0.2 million for the three months ended March 31, 2021.
In addition, as of March 31, 2022, we have recorded insurance liabilities of $6.8 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, $6.7 million is related to workers’ compensation liabilities and $0.1 million 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 22. Noncontrolling Interests – Redeemable and Non-redeemable
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 March 31, 2022. Through Esja and its wholly-owned subsidiary, we are operating the FlyOver Iceland attraction.
The minority Esja shareholders have the right to sell (or “put”) their Esja shares to us based on a multiple of 5.0x EBITDA as calculated on the trailing 12 months from the most recently completed quarter before the put option exercise. The put option is only exercisable after 36 months of business operation, which will be August 2022 (the “Reference Date”), and if the FlyOver Iceland attraction has earned a minimum of €3.25 million in unadjusted EBITDA during the most recent fiscal year and during the trailing 12-month period prior to exercise (the “Put Option Condition”). The put option is exercisable during a period of 12 months following the Reference Date (the “Option Period”) if the Put Option Condition has been met. If the Put Option Condition has not been met during the first Option Period, the Reference Date will be extended for an additional 12 months up to three times. If after 72 months, the FlyOver Iceland attraction has not achieved the Put Option Condition, the put option expires. If the Put Option Condition is met during any of the Option Periods, yet the shares are not exercised prior to the end of the 12-month Option Period, the put option will expire.
The noncontrolling interest’s carrying value is determined by the fair value of the noncontrolling interest as of the acquisition date and the noncontrolling interest’s share of the subsequent net income or loss. This value is benchmarked against the redemption value of the sellers’ put option. The carrying value is adjusted to the redemption value, provided that it does not fall below the initial carrying value, as determined by the purchase price allocation. We have made a policy election to reflect any changes caused by such an adjustment to retained earnings (accumulated deficit), rather than to current earnings (loss).
Changes in the redeemable noncontrolling interest are as follows:
Adjustment to the redemption value
Foreign currency translation adjustment
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.
27
Changes in the non-redeemable noncontrolling interest are as follows:
Glacier Park Inc.
Brewster (1)
Sky Lagoon
15,315
58,601
11,640
(735
(362
(107
614
120
14,583
58,853
11,653
Equity ownership interest that we do not own
28
Note 23. 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 CODM in deciding how to allocate resources and assess performance. Our CODM is our Chief Executive Officer.
During the first quarter of 2022, we changed our segment reporting as a result of operational changes and how our CODM reviews the financial performance of GES and makes decisions regarding the allocation of resources. Accordingly, GES’ new reportable segments are Spiro and GES Exhibitions. We made no changes to the Pursuit reportable segment.
We measure the profit and performance of our operations on the basis of segment operating income (loss) which excludes restructuring charges and recoveries and impairment charges. Intersegment sales are eliminated in consolidation and intersegment transfers are not significant. Corporate activities include expenses not allocated to operations.
Our reportable segments, with reconciliations to consolidated totals, are as follows:
GES:
GES intersegment eliminations
Total GES
Segment operating loss:
(21,198
(18,321
(239
(7,169
(1,355
(12,735
(1,594
(19,904
Segment operating loss
(22,792
(38,225
Corporate eliminations (1)
(2,673
(2,005
(5,877
(5,085
(638
(360
Restructuring charges:
(23
(418
(50
(236
(2,733
Corporate
(20
Impairment charges:
(583
29
Additional information of our reportable segments is as follows:
Three Months Ended March 31,
Depreciation:
7,782
6,457
929
1,497
2,291
2,936
11,006
10,902
Amortization:
1,030
130
1,115
2,273
2,275
Capital expenditures:
11,491
9,223
144
148
865
Corporate and other
70
12,570
9,371
No asset information has been provided for our reportable segments as our CODM no longer reviews asset information by reportable segment.
Note 24. Subsequent Event
On April 6, 2022, we completed the acquisition of Glacier Raft Company for $26.5 million, subject to working capital and other customary adjustments. This acquisition was funded via cash on hand of approximately $11.5 million and borrowing under our revolving credit facility of $15.0 million. The Glacier Raft Company provides guided river rafting trips operating in Pursuit’s West Glacier, Montana operations. In addition to its rafting adventures, Glacier Raft Company owns 13 log cabins, a lodge, and a wedding venue located on 50 acres with views into Glacier National Park.
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 “will,” “may,” “expect,” “would,” “could,” “might,” “intend,” “plan,” “believe,” “estimate,” “anticipate,” “deliver,” “seek,” “aim,” “potential,” “target,” “outlook,” and similar expressions are intended to identify our forward-looking statements. Similarly, statements that describe our business strategy, outlook, objectives, plans, initiatives, intentions, or goals also are forward-looking statements. These forward-looking statements are not historical facts and are subject to a host of risks and uncertainties, many of which are beyond our control, which could cause actual results to differ materially from those in the forward-looking statements contained in this Quarterly Report on Form 10-Q. Such risks, uncertainties and other important factors include, among others: the factors set forth under “Risk Factors” (Part I, Item 1A) and “Management’s Discussion and Analysis of Financial Condition and Results of Operations” (Part II, Item 7) in our 2021 Form 10-K filed with the SEC, as may be updated elsewhere in this report; and the information set forth in other Quarterly Reports on Form 10-Q and Current Reports on Form 8-K that we have filed or will file with the SEC. Such risks, uncertainties, and other important factors include, among others: the short- and longer-term effects of the COVID-19 pandemic, including the demand for travel, event business and travel experiences, and levels of consumer confidence; actions that governments, businesses, and individuals take in response to the COVID-19 pandemic or any future resurgence, including limiting or banning travel; the impact of the COVID-19 pandemic, or any future resurgence, on global and regional economies, travel, and economic activity, including the duration and magnitude of its impact on unemployment rates and consumer discretionary spending; and the pace of recovery following the COVID-19 pandemic or any future resurgence.
Important factors that could cause actual results to differ materially from those described in our forward-looking statements include, but are not limited to, the following:
For a more complete discussion of the risks and uncertainties that may affect our business or financial results, refer to “Risk Factors” (Part I, Item 1A) of our 2021 Form 10-K. We disclaim and do not undertake any obligation to update or revise any forward-looking statement except as required by applicable law or regulation.
The following Management’s Discussion and Analysis (“MD&A”) should be read in conjunction with our 2021 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 operate through three reportable segments: Pursuit, Spiro, and GES Exhibitions. The Spiro and GES Exhibitions reportable segments are both live event companies, and are collectively referred to as “GES.”
COVID-19 Pandemic
Starting in mid-March 2020, the COVID-19 pandemic created severe disruptions in the live event and tourism industries and those disruptions had a significant and negative impact on our operations and financial performance. We are not able to fully estimate the future impact of the pandemic on our business due to the evolving and uncertain nature of COVID-19, including ongoing vaccination and other mitigation efforts as well as the scope and magnitude of variants, infections, and hospitalizations. We will continue to evaluate and implement additional actions necessary to mitigate the negative financial and operational impact of COVID-19 on our business. For a discussion of COVID-19 related risks and uncertainties that may affect our business, refer to “Risk Factors” (Part I, Item 1A) of our 2021 Form 10-K.
Seasonality
Pursuit’s peak activity occurs during the summer months. During 2021, 82% of Pursuit’s revenue was earned in the second and third quarters. We seasonally closed Pursuit’s non-year-round properties during the first quarter of 2022.
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. During the first quarter of 2022, we saw an acceleration in the recovery of in-person trade shows as event organizers began to hold larger-scale face-to-face live events amid the COVID-19 pandemic.
Results of Operations
Financial Highlights
Change vs. 2021
**
32.8
Segment operating loss(1)
40.4
Diluted loss per common share from continuing operations attributable to Viad common stockholders
30.9
** Change is greater than +/- 100%
Three months ended March 31, 2022 compared with the three months ended March 31, 2021
32
Analysis of Revenue and Operating Results by Reportable Segment
The following table presents a comparison of Pursuit’s reported revenue and segment operating loss for the three months ended March 31, 2022 and 2021:
Revenue(1):
Pursuit:
Attractions
12,501
2,256
Hospitality
9,415
6,941
35.6
1,288
580
Total Pursuit
Segment operating loss(2):
(15.7
)%
Pursuit revenue increased $14.0 million, which reflects the continued strengthening of leisure travel demand as pandemic-related restrictions eased and as people started to feel more comfortable traveling. Pursuit’s new year-round attractions, the Sky Lagoon and FlyOver Las Vegas, contributed $5.1 million during the three months ended March 31, 2022. All of Pursuit’s year-round attractions and properties were open during the first quarter of 2022. Although most of Pursuit’s year-round attractions and properties were open during the first quarter of 2021, there was lower visitation due in part to pandemic-related capacity restrictions in addition to temporary government mandated closures at FlyOver Canada and FlyOver Iceland.
Pursuit segment operating loss increased $2.9 million primarily due to the increase in operating costs as all of Pursuit’s year-round properties operated at full capacity during the first quarter of 2022 and due to a $2.8 million prior year benefit from the Canadian government’s emergency wage subsidy program, offset in part by higher revenue.
Performance Measures
We use the following key business metrics to evaluate the performance of Pursuit’s attractions business:
33
We use the following key business metrics, common in the hospitality industry, to evaluate Pursuit’s hospitality business:
The following table provides Pursuit’s key performance indicators.
March 31, 2021
As Reported
New Experiences(1)
Same-Store(2)
AsReported
FX Impact(3)
Attractions Key Performance Indicators:
Number of visitors
291,578
106,629
184,949
57,486
Ticket revenue (in thousands)
5,048
1,481
Effective ticket price
31.56
38.96
27.30
25.82
25.77
22.2
6.0
Attractions revenue (in thousands)
5,123
7,378
2,250
Revenue per attraction visitor
42.88
48.05
39.89
39.24
39.15
9.3
1.9
Hospitality Key Performance Indicators:
Room nights available
119,049
109,909
8.3
Rooms revenue (in thousands)
4,764
44.7
44.9
RevPAR
57.99
43.39
43.35
33.6
33.8
Occupancy
50.4
0.0
42.6
18.4
ADR
115.03
101.89
101.77
13.0
Hospitality revenue (in thousands)
6,934
35.8
Attractions. The increase in same-store visitors during 2022 was driven by higher visitation during the first quarter of 2022 due to border closures and travel restrictions during 2021 as a result of the COVID-19 pandemic in addition to the temporary government mandated closures at FlyOver Canada and FlyOver Iceland. Revenue per attraction increased due to higher effective ticket prices and ancillary revenue.
Hospitality. Room nights available increased as all of Pursuit’s year-round properties were open during the first quarter of 2022. Although most of Pursuit year-round properties were open during the first quarter of 2021, there was lower visitation due in part to pandemic-related capacity restrictions. The increase in RevPAR and ADR was primarily driven by revenue management efforts.
34
During the first quarter of 2022, we changed our segment reporting as a result of operational changes and how our CODM reviews the financial performance of GES and makes decisions regarding the allocation of resources. Accordingly, GES’ new reportable segments are Spiro and GES Exhibitions. We reclassified prior periods to conform to the current-period presentation.
The following table presents a comparison of GES’ reported revenue and segment operating loss for the three months ended March 31, 2022 and 2021:
Segment operating loss(1):
96.7
89.4
92.0
Spiro and GES Exhibitions revenue increased $30.8 million and $104.7 million, respectively, as in-person event activity continued to improve due to the resumption of live event activity and the return of large-scale events that were canceled or postponed into the first half of 2021.
Spiro and GES Exhibitions segment operating loss improved $6.9 million and $11.4 million, respectively, primarily due to higher revenue and the continued focus on managing discretionary costs. GES Exhibitions’ operating loss improvement in 2022 was offset in part by a $9.1 million gain on sale of a GES warehouse in Orlando in 2021.
Other Expenses
33.3
15.6
77.2
(76.9
(15.2
(21.0
Corporate Activities – The increase in corporate activities expense during the three months ended March 31, 2022 was primarily due to higher performance-based compensation expense.
Interest Expense, net – The increase in interest expense during the three months ended March 31, 2022 was primarily due to higher interest rates and higher debt balances in 2022, offset in part by $1.9 million in capitalized interest recorded during the three months ended March 31,2022.
Restructuring Charges – Restructuring charges during the three months ended March 31, 2022 were primarily related to severance and facility closures at GES. Restructuring charges during the three months ended March 31, 2021 were primarily related to facility closures and the elimination of certain positions at GES. In response to the COVID-19 pandemic, we accelerated our transformation and streamlining efforts at GES to significantly reduce costs and create a lower and more flexible cost structure focused on servicing our more profitable market segments.
Impairment Charges – Impairment charges during the three months ended March 31, 2022 were related to certain software development costs that are no longer being utilized at GES.
Income Tax Benefit – The effective tax rate was 7.8% for the three months ended March 31, 2022 and 6.3% for the three months ended March 31, 2021. The effective tax rates for both the three months ended March 31, 2022 and 2021 were lower than the blended statutory rate primarily as a result of excluding the tax benefit on losses recognized in the United States, the United Kingdom, and other European countries where we have a valuation allowance.
Income from Discontinued Operations – Income from discontinued operations during the three months ended March 31, 2022 and 2021 was primarily attributable to insurance recoveries related to previously sold operations, offset in part by legal expenses.
Liquidity and Capital Resources
Cash, cash equivalents, and restricted cash were $62.9 million as of March 31, 2022, as compared to $64.3 million as of December 31, 2021. Our total available liquidity was $145.3 million, including the available capacity on our revolving credit facility of $87.4 million ($100 million total facility size, less $12.6 million in outstanding letters of credit) and unrestricted cash of $57.9 million. During the three months ended March 31, 2022, net cash provided by operating activities was $17.9 million.
On August 5, 2020, we entered into an investment agreement with funds managed by private equity firm Crestview Partners (the “Investment Agreement”) who made an investment of $135 million, offset in part by $9.2 million in fees, in newly issued perpetual convertible preferred stock that carries a 5.5% cumulative quarterly dividend, which is payable in cash or in-kind at Viad’s option (the “Convertible Preferred Stock”). The Convertible Preferred Stock is convertible into shares of our common stock at a conversion price of $21.25 per share. The proceeds from Crestview’s investment were used to repay a portion of our then outstanding $450 million revolving credit facility, which we subsequently refinanced in July 2021, and provided us additional short-term liquidity to fund capital expenditures and supported general corporate purposes.
Effective July 30, 2021, we entered into the new $500 million 2021 Credit Facility. The 2021 Credit Facility provides for a $400 million Term Loan B with a maturity date of July 30, 2028 and a $100 million revolving credit facility with a maturity date of July 30, 2026. The $400 million in Term Loan B proceeds were offset in part by $14.8 million in related fees. The proceeds from the Term Loan B were used to repay the $327 million outstanding balance under our then $450 million revolving credit facility. The $100 million revolving credit facility and the remaining proceeds from the Term Loan B have been and will be used to provide for financial flexibility to fund future acquisitions and growth initiatives and for general corporate purposes. On March 23, 2022, we entered into an amendment to the 2021 Credit Facility, which modified the revolving credit facility’s financial covenants. The amended 2021 Credit Facility requires us to maintain liquidity of $75 million under the revolving credit facility until financials and a compliance certificate for the quarter ended September 30, 2022 are provided to the banks, with liquidity defined as unrestricted cash and available capacity on our revolving credit facility, and other financial covenants that began January 1, 2022. 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.
As of March 31, 2022, we held approximately $41.4 million of our cash and cash equivalents outside of the United States, consisting of $19.3 million in Canada, $8.8 million in the United Kingdom, $5.7 million in the Netherlands, $4.5 million in Iceland, and $3.1 million in certain other countries.
We believe that our existing sources of liquidity will be sufficient to fund operations and projected capital outlays, including approximately $100 million in capital expenditures and $26.5 million for the Glacier Raft Company acquisition, for at least the next 12 months.
Cash Flows
Operating Activities
Changes in assets and liabilities
32,201
7,394
The change in net cash provided by (used in) operating activities of $50.6 million was primarily due to improved operating results at GES and an increase to working capital.
Investing Activities
The increase in net cash used in investing activities of $9.8 million was primarily due to the increase in capital expenditures whereas in the 2021 period we received proceeds of $14.1 million primarily from the sale of a GES warehouse in Orlando, offset in part by $7.4 million of cash paid for the acquisition of the Golden Skybridge.
Financing Activities
The change in net cash provided by (used in) financing activities of $37.8 million was primarily due to net debt payments of $3.8 million during the three months ended March 31, 2022 compared to net debt proceeds of $32.6 million during the three months ended March 31, 2021.
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. In March 2020, our Board of Directors suspended our share repurchase program for the foreseeable future. As of March 31, 2022, 546,283 shares remained available for repurchase. The Board of Directors’ authorization does not have an expiration date.
Additionally, we repurchased shares related to tax withholding requirements on vested restricted share-based awards.
Critical Accounting Policies and Estimates
Refer to “Management’s Discussion and Analysis of Financial Condition and Results of Operations” (Part II, Item 7) of our 2021 Form 10-K for a discussion of our critical accounting policies and estimates.
Refer to Note 1 – Overview and Basis of Presentation of the Notes to Condensed Consolidated Financial Statements (Part I, Item 1 of this Form 10-Q) for further information.
Non-GAAP Measures
In addition to disclosing financial results that are determined in accordance with United States generally accepted accounting principles (“GAAP”), we also disclose segment operating income (loss). 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 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 the reduction for income (loss) attributable to noncontrolling interests. Segment operating income (loss) is used to measure the profit and performance of our operating segments to facilitate period-to-period comparisons. Refer to Note 23 – Segment Information of the Notes to Condensed Consolidated Financial Statements (Part I, Item 1 of this Form 10-Q) for a reconciliation of segment operating income (loss) to income (loss) from continuing operations before income taxes.
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 our business. As segment operating income (loss) does not consider these items, net income (loss) attributable to Viad should be considered as an important measure of financial performance because it provides a more complete measure of our performance.
Item 3. Quantitative and Qualitative Disclosures About Market Risk
Our market risk exposure relates to fluctuations in foreign exchange rates and interest rates. Foreign exchange risk is the risk that fluctuating exchange rates will adversely affect our financial condition or results of operations. Interest rate risk is the risk that changing interest rates will adversely affect our financial position or results of operations.
Our foreign operations are primarily in Canada, the United Kingdom, Iceland, the Netherlands, and Germany. The functional currency of our foreign subsidiaries is their local currency. Accordingly, for purposes of consolidation, we translate the assets and liabilities of our foreign subsidiaries into U.S. dollars at the foreign exchange rates in effect at the balance sheet date. The unrealized gains or losses resulting from the translation of these foreign denominated assets and liabilities are included as a component of accumulated other comprehensive income (loss) in the Condensed Consolidated Balance Sheets. As a result, significant fluctuations in foreign exchange rates relative to the U.S. dollar may result in material changes to our net equity position reported in the Condensed Consolidated Balance
Sheets. We do not currently hedge our equity risk arising from the translation of foreign denominated assets and liabilities. We recorded cumulative unrealized foreign currency translation losses in stockholders’ equity of $12.8 million as of March 31, 2022 and $16.2 million as of December 31, 2021. We recorded unrealized foreign currency translation gains in other comprehensive income (loss) of $3.4 million during the three months ended March 31, 2022 and $4.0 million during the three months ended March 31, 2021.
For purposes of consolidation, revenue, expenses, gains, and losses related to our foreign operations are translated into U.S. dollars at the average foreign exchange rates for the period. As a result, our consolidated results of operations are exposed to fluctuations in foreign exchange rates as revenue and segment operating income (loss) of our foreign operations, when translated, may vary from period to period, even when the functional currency amounts have not changed. Such fluctuations may adversely impact overall expected profitability and historical period-to-period comparisons. We do not currently hedge our net earnings exposure arising from the translation of our foreign revenue and segment operating income (loss).
We are exposed to foreign exchange transaction risk, as our foreign subsidiaries have certain revenue transactions and loans denominated in currencies other than the functional currency of the respective subsidiary. As of March 31, 2022 and December 31, 2021, we did not have any outstanding foreign currency forward contracts.
We are exposed to short-term and long-term interest rate risk on certain of our debt obligations.
We do not currently use derivative financial instruments to hedge cash flows for such obligations.
Item 4. Controls and Procedures
We have established disclosure controls and procedures that are designed to ensure that information required to be disclosed in our reports filed or submitted under the Securities Exchange Act of 1934, as amended (the “Exchange Act”) is recorded, processed, summarized, and reported within the time periods specified in 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 March 31, 2022. Based on this evaluation, the CEO and CFO concluded that our disclosure controls and procedures were effective as of March 31, 2022.
There were no changes in our internal control over financial reporting during the three months ended March 31, 2022 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.
Item 1. Legal Proceedings
Refer to Note 21 – Litigation, Claims, Contingencies, and Other of the Notes to Condensed Consolidated Financial Statements (Part I, Item 1 of this Form 10-Q) for information regarding 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 2021 Form 10-K, which could materially affect our business, financial condition, or future results.
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds
The following table summarizes the total number of shares of our common stock that were repurchased during the three months ended March 31, 2022 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 ofShares Purchased
Average PricePaidPer Share
Total Number ofSharesPurchased as Part ofPubliclyAnnounced Plans orPrograms
Maximum Numberof SharesThat May Yet BePurchasedUnder the Plansor Programs
January 1, 2022 - January 31, 2022
786
37.82
546,283
February 1, 2022 - February 28, 2022
March 1, 2022 - March 31, 2022
8,872
36.03
9,658
36.17
Pursuant to previously announced authorizations, our Board of Directors authorized us to repurchase shares of our common stock from time to time at prevailing market prices. Effective February 7, 2019, our Board of Directors authorized the repurchase of an additional 500,000 shares. In March 2020, our Board of Directors suspended future dividend payments and our share repurchase program for the foreseeable future. The Board of Directors’ authorization does not have an expiration date. During the first quarter of 2022, certain previously owned shares of common stock were surrendered by employees, former employees, and non-employee directors for tax withholding requirements on vested share-based awards.
Item 6. Exhibits
Incorporated by Reference
Exhibit
Number
Exhibit Description
Form
Ending
Filing Date
10.1
First Amendment, among the Company, the other loan parties party thereto, the lenders party thereto and Bank of America, N.A., as administrative agent, which amends the Credit Agreement, dated as of July 30, 2021, among the Company, Bank of America, N.A., as administrative agent, and the lenders party thereto from time to time.
8-K
3/24/2022
10.2
*
Form of Restricted Stock Unit Agreement by and between Viad Corp and David Barry, dated March 29, 2022.
10.3
Form of Restricted Stock Units Agreement - Non-Employee Directors (Crestview), effective as of February 24, 2022, pursuant to the 2017 Viad Corp Omnibus Incentive Plan.
10.4
Form of Restricted Stock Units Agreement - Non-Employee Directors (Others), effective as of February 24, 2022, pursuant to the 2017 Corp Omnibus Incentive Plan.
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.
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.
(Registrant)
May 6, 2022
By:
/s/ Leslie S. Striedel
(Date)
Leslie S. Striedel
Chief Accounting Officer and Duly Authorized Officer