Viad(VVI) - 2020 Q1 - Quarterly Report

PART I - FINANCIAL INFORMATION Item 1. Financial Statements Presents Viad Corp's unaudited condensed consolidated financial statements for Q1 2020 and 2019, detailing balance sheets, operations, comprehensive loss, equity, and cash flows with notes Condensed Consolidated Balance Sheets Summarizes Viad Corp's financial position, including assets, liabilities, and equity, as of March 31, 2020, and December 31, 2019 Condensed Consolidated Balance Sheets (in thousands) | (in thousands) | March 31, 2020 | December 31, 2019 | | :--------------- | :------------- | :---------------- | | Total Assets | $1,247,461 | $1,318,691 | | Total Liabilities | $822,105 | $765,290 | | Total Stockholders' Equity | $420,448 | $547,229 | - Current assets increased by $51.6 million, primarily driven by a significant increase in cash and cash equivalents from $62.0 million to $130.5 million[17] - Current liabilities saw a substantial increase from $237.3 million to $623.7 million, mainly due to the reclassification of $412.6 million of the 2018 Credit Facility and $5.3 million of the FlyOver Iceland Credit Facility to current liabilities, as the company expects to be unable to meet financial covenants starting Q3 2020[17][103] - Goodwill decreased by $83.4 million, from $288.0 million to $204.6 million, largely due to impairment charges related to COVID-19 impacts[17][93] Condensed Consolidated Statements of Operations Presents Viad Corp's consolidated statements of operations, detailing revenues, expenses, and net loss for Q1 2020 and 2019 Condensed Consolidated Statements of Operations (in thousands, except per share data) | (in thousands, except per share data) | Three Months Ended March 31, 2020 | Three Months Ended March 31, 2019 | | :------------------------------------ | :-------------------------------- | :-------------------------------- | | Total revenue | $306,008 | $285,594 | | Total costs and expenses | $409,786 | $311,123 | | Loss from continuing operations before income taxes | $(103,778) | $(25,529) | | Net loss attributable to Viad | $(86,585) | $(17,777) | | Diluted loss per common share | $(4.29) | $(0.89) | - Total revenue increased by 7.1% YoY, from $285.6 million in Q1 2019 to $306.0 million in Q1 2020[20] - Net loss attributable to Viad significantly widened from $(17.8) million in Q1 2019 to $(86.6) million in Q1 2020, primarily due to $88.4 million in impairment charges in 2020[20] Condensed Consolidated Statements of Comprehensive Loss Details Viad Corp's comprehensive loss, including net loss and other comprehensive income components, for Q1 2020 and 2019 Condensed Consolidated Statements of Comprehensive Loss (in thousands) | (in thousands) | Three Months Ended March 31, 2020 | Three Months Ended March 31, 2019 | | :--------------- | :-------------------------------- | :-------------------------------- | | Net loss | $(88,435) | $(18,221) |\n| Unrealized foreign currency translation adjustments | $(28,158) | $4,780 | | Comprehensive loss attributable to Viad | $(120,148) | $(12,912) | - Comprehensive loss attributable to Viad increased significantly from $(12.9) million in Q1 2019 to $(120.1) million in Q1 2020, largely driven by the increased net loss and negative foreign currency translation adjustments[23] Condensed Consolidated Statements of Stockholders' Equity Outlines changes in Viad Corp's stockholders' equity, including net loss and foreign currency adjustments, for Q1 2020 and 2019 Condensed Consolidated Statements of Stockholders' Equity (in thousands) | (in thousands) | Balance at December 31, 2019 | Balance at March 31, 2020 | | :--------------- | :--------------------------- | :------------------------ | | Total Viad stockholders' equity | $467,498 | $349,295 | | Total Stockholders' Equity | $547,229 | $420,448 | - Total stockholders' equity decreased by $126.8 million from December 31, 2019, to March 31, 2020, primarily due to the net loss of $(86.6) million and negative unrealized foreign currency translation adjustments of $(28.2) million[28] Condensed Consolidated Statements of Cash Flows Presents Viad Corp's cash flow activities from operations, investing, and financing for Q1 2020 and 2019 Condensed Consolidated Statements of Cash Flows (in thousands) | (in thousands) | Three Months Ended March 31, 2020 | Three Months Ended March 31, 2019 | | :--------------- | :-------------------------------- | :-------------------------------- | | Net cash (used in) provided by operating activities | $(4,719) | $8,020 | | Net cash used in investing activities | $(23,161) | $(18,932) | | Net cash provided by financing activities | $99,347 | $9,038 | | Net change in cash and cash equivalents | $68,529 | $(1,420) | | Cash and cash equivalents, end of period | $130,528 | $43,473 | - Operating activities shifted from providing $8.0 million in cash in Q1 2019 to using $4.7 million in Q1 2020, primarily due to unfavorable changes in working capital[36][184] - Financing activities provided significantly more cash, increasing from $9.0 million in Q1 2019 to $99.3 million in Q1 2020, mainly due to increased borrowings under the 2018 Credit Facility to boost liquidity amidst COVID-19[36][187] Notes to Condensed Consolidated Financial Statements Provides detailed explanations of Viad Corp's accounting policies, significant events, and specific financial line items Note 1. Overview and Basis of Presentation Provides an overview of Viad Corp's business segments, the impact of COVID-19, and the basis of financial statement presentation - Viad Corp is an international experiential services company operating through three segments: GES North America, GES EMEA (collectively, GES), and Pursuit[39] - The COVID-19 pandemic has significantly impacted operations, leading to substantial net losses and operating cash outflows, raising substantial doubt about the company's ability to continue as a going concern[44] - The company implemented aggressive cost reduction actions, including furloughs, salary reductions for employees and executives, and suspension of dividends and share repurchases[43] - A non-cash goodwill impairment charge of $72.7 million and an intangible asset impairment charge of $15.7 million were recorded due to COVID-19's impact on the macroeconomic environment and stock price decline[45] Note 2. Revenue and Related Contract Costs and Contract Liabilities Details Viad Corp's revenue recognition policies, contract liabilities, and contract costs by segment and market - GES's service revenue is recognized over the duration of events (typically 1-3 days), while product revenue is recognized upon delivery; Pursuit's service revenue is recognized over time as benefits are consumed, and product revenue at the point of delivery[52][53] Contract Liabilities (in thousands) | Item | Amount | | :--- | :----- | | Balance at December 31, 2019 | $50,796 | | Cash additions | $53,284 | | Revenue recognized | $(64,430) | | Foreign exchange translation adjustment | $(1,482) | | Balance at March 31, 2020 | $38,168 | Contract Costs (in thousands) | Item | Amount | | :--- | :----- | | Balance at December 31, 2019 | $28,496 | | Additions | $11,672 | | Expenses | $(17,679) | | Cancelled | $(2,086) | | Foreign exchange translation adjustment | $(644) | | Balance at March 31, 2020 | $19,759 | GES Revenue by Segment (in thousands) | Segment | Q1 2020 Revenue | Q1 2019 Revenue | | :------ | :-------------- | :-------------- | | GES North America | $251,758 | $223,241 | | GES EMEA | $42,716 | $54,376 | | Total GES | $292,485 | $274,927 | Pursuit Revenue by Market (in thousands) | Market | Q1 2020 Revenue | Q1 2019 Revenue | | :----- | :-------------- | :-------------- | | Banff Jasper Collection | $9,799 | $7,870 | | FlyOver | $2,850 | $1,794 | | Total Pursuit | $13,523 | $10,667 | Note 3. Share-Based Compensation Explains Viad Corp's share-based compensation plans, including expense recognition and available shares for future grants Share-Based Compensation (Income) Expense (in thousands) | Item | Q1 2020 | Q1 2019 | | :--- | :------ | :------ | | Performance unit incentive plan ("PUP") | $(2,635) | $1,423 | | Restricted stock | $650 | $693 | | Restricted stock units | $(160) | $90 | | Total (income) expense before tax benefit | $(2,145) | $2,206 | - Share-based compensation shifted from an expense of $2.2 million in Q1 2019 to an income of $(2.1) million in Q1 2020, primarily due to a decrease in PUP awards value caused by reduced estimated performance achievement and a decline in stock price due to COVID-19[71] - As of March 31, 2020, 1,505,330 shares remained available for future grant under the 2017 Viad Corp Omnibus Incentive Plan[73] Note 4. Acquisitions Summarizes Viad Corp's acquisition activities in 2019, including Belton Chalet, Mountain Park Lodges, and Pursuit Sky Lagoon - In 2019, Viad acquired Belton Chalet for $3.2 million and a 60% equity interest in Mountain Park Lodges for approximately $76 million USD, consolidating 100% of its results[79][80][82] - Identifiable intangible assets from the Mountain Park Lodges acquisition totaled $20.2 million, with a weighted average amortization period of 30.8 years[84] - Viad also acquired a 51% controlling interest in the new entity for the Pursuit Sky Lagoon attraction in Iceland for $13.2 million, expected to open in 2021[85] Note 5. Inventories Details Viad Corp's inventory composition and valuation, primarily for exhibit materials and retail goods Inventories (in thousands) | Component | March 31, 2020 | December 31, 2019 | | :-------- | :------------- | :---------------- | | Raw materials | $11,895 | $11,788 | | Finished goods | $5,633 | $5,481 | | Total Inventories | $17,528 | $17,269 | - Inventories, primarily consisting of exhibit design and construction materials, and retail inventory, are stated at the lower of cost or net realizable value[88] Note 6. Other Current Assets Outlines the components of Viad Corp's other current assets, including income tax receivable and prepaid expenses Other Current Assets (in thousands) | Component | March 31, 2020 | December 31, 2019 | | :-------- | :------------- | :---------------- | | Income tax receivable | $18,492 | $13,250 | | Prepaid software maintenance | $5,110 | $3,875 | | Prepaid insurance | $5,027 | $5,573 | | Total Other current assets | $37,377 | $30,854 | - Other current assets increased by $6.5 million from December 31, 2019, to March 31, 2020, mainly driven by an increase in income tax receivable[89] Note 7. Property and Equipment Presents Viad Corp's property and equipment, net of depreciation, and finance lease right-of-use assets Property and Equipment, Net (in thousands) | Component | March 31, 2020 | December 31, 2019 | | :-------- | :------------- | :---------------- | | Gross property and equipment | $814,105 | $829,525 | | Accumulated depreciation | $(355,439) | $(353,974) | | Property and equipment, net (excluding finance leases) | $458,666 | $475,551 | | Finance lease right-of-use assets, net | $22,956 | $25,350 | | Total Property and equipment, net | $481,622 | $500,901 | - Net property and equipment decreased by $19.3 million from December 31, 2019, to March 31, 2020[90] - Depreciation expense for Q1 2020 was $12.2 million, up from $10.1 million in Q1 2019[90] Note 8. Other Investments and Assets Details Viad Corp's other investments and assets, including cash surrender value of life insurance and contract costs Other Investments and Assets (in thousands) | Component | March 31, 2020 | December 31, 2019 | | :-------- | :------------- | :---------------- | | Cash surrender value of life insurance | $24,951 | $24,873 | | Self-insured liability receivable | $9,982 | $9,982 | | Contract costs | $4,760 | $3,961 | | Total Other investments and assets | $45,544 | $45,119 | - In May 2020, the company terminated legacy life insurance policies on former employees, receiving $24.8 million in cash proceeds[92][144] Note 9. Goodwill and Other Intangible Assets Reports Viad Corp's goodwill and other intangible assets, including impairment charges due to COVID-19 impacts Goodwill Carrying Amount (in thousands) | Segment | December 31, 2019 | March 31, 2020 | | :------ | :---------------- | :------------- | | GES North America | $155,276 | $112,855 | | GES EMEA | $30,829 | $0 | | Pursuit | $101,878 | $91,758 | | Total | $287,983 | $204,613 | - A non-cash goodwill impairment charge of $72.7 million was recorded in Q1 2020, allocated to GES U.S. ($41.9 million), GES EMEA ($29.0 million), and Pursuit's Glacier Park Collection ($1.8 million), due to COVID-19 impacts[95] - Other intangible assets, net, decreased from $94.3 million to $69.2 million, with an impairment charge of $15.7 million related to the U.S. audio-visual production business[97] Note 10. Other Current Liabilities Details the components of Viad Corp's other current liabilities, such as accrued taxes and employee benefit costs Other Current Liabilities (in thousands) | Component | March 31, 2020 | December 31, 2019 | | :-------- | :------------- | :---------------- | | Accrued sales and use taxes | $7,751 | $5,451 | | Commissions payable | $7,450 | $8,274 | | Accrued employee benefit costs | $6,249 | $3,564 | | Accommodation services deposits | $5,863 | $959 | | Total continuing operations | $46,079 | $39,177 | | Total discontinued operations | $671 | $647 | | Total other current liabilities | $46,750 | $39,824 | - Other current liabilities increased by $6.9 million, primarily driven by increases in accrued sales and use taxes, accrued employee benefit costs, and accommodation services deposits[100] Note 11. Other Deferred Items and Liabilities Outlines Viad Corp's other deferred items and liabilities, including foreign deferred tax and pension withdrawal liability Other Deferred Items and Liabilities (in thousands) | Component | March 31, 2020 | December 31, 2019 | | :-------- | :------------- | :---------------- | | Foreign deferred tax liability | $27,374 | $32,570 | | Multi-employer pension plan withdrawal liability | $15,508 | $15,693 | | Self-insured excess liability | $9,982 | $9,982 | | Total continuing operations | $71,461 | $79,343 | | Total discontinued operations | $4,282 | $4,364 | | Total other deferred items and liabilities | $75,743 | $83,707 | - Other deferred items and liabilities decreased by $8.0 million, mainly due to a reduction in foreign deferred tax liability and accrued compensation[101] Note 12. Debt and Finance Lease Obligations Discusses Viad Corp's debt and finance lease obligations, including reclassification to current liabilities due to covenant concerns Debt and Finance Lease Obligations (in thousands) | Item | March 31, 2020 | December 31, 2019 | | :--- | :------------- | :---------------- | | 2018 Credit Facility | $412,551 | $311,464 | | FlyOver Iceland Credit Facility | $5,254 | $5,607 | | Total debt | $416,097 | $315,235 | | Finance lease obligations | $22,749 | $25,257 | | Total debt and finance lease obligations | $438,846 | $340,492 | | Current portion | $(420,830) | $(5,330) | | Long-term debt and finance lease obligations | $18,016 | $335,162 | - The entire $412.6 million balance of the 2018 Credit Facility and $5.3 million of the FlyOver Iceland Credit Facility were reclassified as current liabilities due to expected non-compliance with financial covenants starting Q3 2020[103] - In May 2020, an amendment to the 2018 Credit Agreement waived financial covenants for Q2 2020 and added a new minimum liquidity requirement[106] - As of March 31, 2020, the company was in compliance with all covenants under the 2018 Credit Agreement, with an interest coverage ratio of 9.16 to 1.00 and a leverage ratio of 3.13 to 1.00[104] Note 13. Fair Value Measurements Explains Viad Corp's fair value measurements for financial assets, primarily money market and mutual funds Fair Value Measurements at Reporting Date Using Level 1 Inputs (in thousands) | Asset | March 31, 2020 | December 31, 2019 | | :---- | :------------- | :---------------- | | Money market funds | $77,125 | $123 | | Other mutual funds | $2,633 | $3,107 | | Total assets at fair value on a recurring basis | $79,758 | $3,230 | - Money market funds, classified as available-for-sale, are recorded at fair value using Level 1 inputs, with a significant increase in Q1 2020 due to funds borrowed under the 2018 Credit Facility[112] Note 14. Accumulated Other Comprehensive Income (Loss) Details changes in Viad Corp's accumulated other comprehensive income (loss), mainly from foreign currency adjustments Accumulated Other Comprehensive Income (Loss) (in thousands) | Component | December 31, 2019 | March 31, 2020 | | :-------- | :---------------- | :------------- | | Cumulative Foreign Currency Translation Adjustments | $(23,799) | $(51,957) | | Unrecognized Net Actuarial Loss and Prior Service Credit, Net | $(11,900) | $(11,586) | | Total Accumulated Other Comprehensive Income (Loss) | $(35,699) | $(63,543) | - Accumulated other comprehensive loss increased from $(35.7) million at December 31, 2019, to $(63.5) million at March 31, 2020, primarily due to $(28.2) million in unrealized foreign currency translation adjustments[115] Note 15. Loss Per Share Presents Viad Corp's basic and diluted loss per common share for Q1 2020 and 2019 Loss Per Share (in thousands, except per share data) | Item | Three Months Ended March 31, 2020 | Three Months Ended March 31, 2019 | | :--- | :-------------------------------- | :-------------------------------- | | Net loss attributable to Viad (diluted) | $(86,585) | $(17,777) | | Basic loss attributable to Viad common stockholders | $(4.29) | $(0.89) | | Diluted loss attributable to Viad common stockholders | $(4.29) | $(0.89) | - Basic and diluted loss per common share increased significantly from $(0.89) in Q1 2019 to $(4.29) in Q1 2020, reflecting the higher net loss attributable to Viad[116] Note 16. Income Taxes Discusses Viad Corp's effective tax rate and net cash paid for income taxes for Q1 2020 and 2019 - The effective tax rate decreased to 15.2% for Q1 2020 from 29.8% for Q1 2019, primarily because no tax benefit was recognized on some goodwill impairment charges[117][118] - Net cash paid for income taxes was $3.3 million in Q1 2020, slightly down from $3.4 million in Q1 2019[119] Note 17. Pension and Postretirement Benefits Details Viad Corp's net periodic benefit costs for domestic and foreign pension and postretirement plans Net Periodic Benefit Cost (in thousands) | Component | Domestic Pension Plans (2020) | Domestic Pension Plans (2019) | Postretirement Benefit Plans (2020) | Postretirement Benefit Plans (2019) | Foreign Pension Plans (2020) | Foreign Pension Plans (2019) | | :-------- | :---------------------------- | :---------------------------- | :---------------------------------- | :---------------------------------- | :--------------------------- | :--------------------------- | | Service cost | $0 | $15 | $20 | $110 | $101 | $101 | | Interest cost | $160 | $214 | $88 | $124 | $84 | $94 | | Expected return on plan assets | $(1) | $(34) | $0 | $0 | $(131) | $(122) | | Amortization of prior service credit | $0 | $0 | $(36) | $(47) | $0 | $0 | | Recognized net actuarial loss | $135 | $106 | $82 | $77 | $46 | $38 | | Net periodic benefit cost | $294 | $301 | $149 | $174 | $109 | $111 | - Total net periodic benefit cost for domestic pension plans, postretirement benefit plans, and foreign pension plans was $552 thousand in Q1 2020, compared to $586 thousand in Q1 2019[120] Note 18. Restructuring Charges Summarizes Viad Corp's restructuring charges and changes in related liabilities for Q1 2020 Changes to Restructuring Liability (in thousands) | Item | Balance at December 31, 2019 | Restructuring charges | Cash payments | Adjustment to liability | Balance at March 31, 2020 | | :--- | :--------------------------- | :-------------------- | :------------ | :---------------------- | :------------------------ | | Total | $4,513 | $851 | $(1,293) | $(116) | $3,955 | - Restructuring charges of $851 thousand were recorded in Q1 2020, primarily for severance and related benefits due to headcount reductions at GES and corporate support functions[121][122] Note 19. Leases and Other Presents Viad Corp's total lease assets, liabilities, and lease costs for Q1 2020 and 2019 Total Lease Assets and Liabilities (in thousands) | Item | March 31, 2020 | December 31, 2019 | | :--- | :------------- | :---------------- | | Total lease assets | $119,675 | $128,664 | | Total lease liabilities | $122,142 | $130,288 | Total Lease Cost, Net (in thousands) | Item | Q1 2020 | Q1 2019 | | :--- | :------ | :------ | | Finance lease cost | $1,335 | $656 | | Operating lease cost | $6,727 | $5,992 | | Short-term lease cost | $310 | $215 | | Variable lease cost | $1,699 | $1,815 | | Sublease income | $0 | $(172) | | Total lease cost, net | $10,071 | $8,506 | - The weighted-average remaining lease term for operating leases was 8.21 years and for finance leases was 13.24 years as of March 31, 2020[124] Note 20. Litigation, Claims, Contingencies, and Other Details Viad Corp's involvement in legal actions, environmental liabilities, and third-party guarantees - The company is involved in various legal actions and claims, but believes any resulting liability, after provisions and insurance, will not materially affect its financial position[127] - Environmental remediation liabilities totaled $2.3 million as of March 31, 2020, related to previously sold operations[128] - Guarantees to third parties for leased facilities and equipment amounted to a maximum potential future payment of $75.3 million as of March 31, 2020[129] - The company is self-insured for workers' compensation and general liabilities up to certain limits, with aggregate insurance liabilities of $14.3 million for continuing operations as of March 31, 2020[132] Note 21. Redeemable Noncontrolling Interest Explains Viad Corp's redeemable noncontrolling interest related to the FlyOver Iceland attraction - Viad acquired a 54.5% controlling interest in Esja, which operates the FlyOver Iceland attraction, with minority shareholders holding a put option to sell their shares based on a multiple of EBITDA[134][135] Changes in Redeemable Noncontrolling Interest (in thousands) | Item | Amount | | :--- | :----- | | Balance at December 31, 2019 | $6,172 | | Net loss attributable to redeemable noncontrolling interest | $(517) | | Adjustment to the redemption value | $126 | | Foreign currency translation adjustment | $(873) | | Balance at March 31, 2020 | $4,908 | Note 22. Segment Information Provides revenue and operating income (loss) breakdown for Viad Corp's GES North America, GES EMEA, and Pursuit segments Revenue by Segment (in thousands) | Segment | Q1 2020 Revenue | Q1 2019 Revenue | | :------ | :-------------- | :-------------- | | GES North America | $251,758 | $223,241 | | GES EMEA | $42,716 | $54,376 | | Pursuit | $13,523 | $10,667 | | Total Revenue | $306,008 | $285,594 | Segment Operating Income (Loss) (in thousands) | Segment | Q1 2020 Operating Income (Loss) | Q1 2019 Operating Income (Loss) | | :------ | :------------------------------ | :------------------------------ | | GES North America | $11,966 | $608 | | GES EMEA | $(1,108) | $1,135 | | Pursuit | $(20,274) | $(12,995) | | Total Segment Operating Loss | $(9,416) | $(11,252) | - GES North America's operating income significantly increased from $0.6 million in Q1 2019 to $12.0 million in Q1 2020, while GES EMEA shifted from an income of $1.1 million to a loss of $(1.1) million[139] - Pursuit's operating loss widened from $(13.0) million in Q1 2019 to $(20.3) million in Q1 2020[139] Note 23. Common and Preferred Stock Discusses Viad Corp's common and preferred stock, including the suspension of share repurchases and a stockholder rights plan - The Board of Directors suspended the share repurchase program in March 2020[141] - On March 29, 2020, the Board adopted a short-term stockholder rights plan, declaring a dividend of one preferred stock purchase right per common share, exercisable at $115.00, expiring February 28, 2021[142] Note 24. Subsequent Events Details significant events occurring after March 31, 2020, including additional borrowings and covenant waivers - Subsequent to March 31, 2020, Viad suspended 401(k) Plan employer match contributions, borrowed an additional $31 million under the 2018 Credit Facility, and obtained a waiver of financial covenants for Q2 2020[144] - In May 2020, the company terminated legacy life insurance policies, receiving $24.8 million in cash proceeds[144] Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations This section provides an overview of Viad Corp's business, the significant impact of the COVID-19 pandemic on its operations and financial performance, and a detailed analysis of its financial results for the three months ended March 31, 2020, compared to the prior year. It also discusses liquidity, capital resources, and non-GAAP financial measures Forward-Looking Statements Highlights forward-looking statements regarding Viad Corp's plans, strategies, and outlook, subject to various risks and uncertainties - The report contains forward-looking statements regarding plans, business strategies, and the outlook related to COVID-19's effects on travel, events, and financial performance, subject to various risks and uncertainties[145] Overview Provides an overview of Viad Corp's international experiential services business, including GES and Pursuit segments - Viad Corp is an international experiential services company operating through GES (live events) and Pursuit (travel experiences) segments across multiple countries[147][148][149] Impact of COVID-19 and Going Concern Discusses the severe impact of the COVID-19 pandemic on Viad Corp's operations, liquidity, and going concern ability - The COVID-19 pandemic has caused substantial negative impacts, leading to the shutdown of live event and tourism activities, significant net losses, and operating cash outflows[151] - The company implemented liquidity measures including borrowing $123 million under the 2018 Credit Facility, aggressive cost reductions, executive salary cuts, suspension of dividends and share repurchases, and obtaining a waiver for Q2 2020 financial covenants[151][154] - Goodwill impairment charges of $72.7 million and other intangible asset impairment charges of $15.7 million were recorded due to the deteriorating macroeconomic environment and stock price decline[152] - The company expects to be unable to meet financial covenants starting Q3 2020, leading to the reclassification of $412.6 million of the 2018 Credit Facility and $5.3 million of the FlyOver Iceland Credit Facility as current liabilities, raising substantial doubt about its ability to continue as a going concern[151] Seasonality Explains the seasonal nature of Viad Corp's GES and Pursuit segments and the impact of COVID-19 on their operations - GES's exhibition and event activity varies significantly by quarter and year, while Pursuit experiences peak activity during the summer months, with 85% of its 2019 revenue earned in Q2 and Q3[153] - COVID-19 led to event postponements/cancellations at GES and temporary closures of Pursuit's attractions/lodging, with re-openings expected in June 2020 for Pursuit and Q3 for GES in certain geographies[154][155] Results of Operations Analyzes Viad Corp's financial performance for Q1 2020 compared to Q1 2019, including revenue and operating results Financial Highlights Summarizes key financial metrics for Viad Corp, including total revenue, net loss, and segment operating loss for Q1 2020 and 2019 Financial Highlights (in thousands, except per share data) | Item | Q1 2020 | Q1 2019 | % Change | | :--- | :------ | :------ | :------- | | Total revenue | $306,008 | $285,594 | 7.1% | | Net loss attributable to Viad | $(86,585) | $(17,777) | ** | | Segment operating loss | $(9,416) | $(11,252) | 16.3% | | Diluted loss per common share from continuing operations attributable to Viad common stockholders | $(4.27) | $(0.88) | ** | - Total revenue increased by 7.1% due to positive show rotation and incremental revenue from Pursuit's Mountain Park Lodges acquisition, partially offset by COVID-19 related postponements and unfavorable foreign exchange[158] - Net loss attributable to Viad increased significantly due to $88.4 million in impairment charges, partially offset by higher income tax benefit and lower performance-based compensation[158] Foreign Exchange Rate Variances Details the impact of foreign exchange rate fluctuations on Viad Corp's revenue and segment operating income (loss) FX Impact on Revenue and Segment Operating Income (Loss) (in thousands) | Segment | Revenue FX Impact | Segment Operating Income (Loss) FX Impact | | :------ | :---------------- | :---------------------------------------- | | GES North America (CAD) | $(334) | $(80) | | GES EMEA (GBP, EUR) | $(688) | $(41) | | Pursuit (CAD) | $(38) | $92 | | Total | $(1,060) | $(29) | - Revenue was negatively impacted by $1.1 million due to foreign exchange rate variances, primarily from the British pound, Canadian dollar, and Euro relative to the U.S. dollar[159] Analysis of Revenue and Operating Results by Reportable Segment Provides a detailed analysis of Viad Corp's revenue and operating results for its GES and Pursuit reportable segments GES Analyzes the revenue and operating income (loss) for Viad Corp's GES North America and GES EMEA segments GES Revenue and Segment Operating Income (Loss) (in thousands) | Segment | Q1 2020 Revenue | Q1 2019 Revenue | Q1 2020 Operating Income (Loss) | Q1 2019 Operating Income (Loss) | | :------ | :-------------- | :-------------- | :------------------------------ | :------------------------------ | | North America | $251,758 | $223,241 | $11,966 | $608 | | EMEA | $42,716 | $54,376 | $(1,108) | $1,135 | | Total GES | $292,485 | $274,927 | $10,858 | $1,743 | - GES North America revenue increased 12.8% ($28.5 million) due to positive show rotation, while segment operating income increased $11.4 million due to higher revenue and elimination of performance-based incentives[163][164] - GES EMEA revenue decreased 21.4% ($11.7 million) due to negative show rotation and unfavorable FX impact, leading to a $2.2 million increase in segment operating loss[165] Pursuit Examines the revenue and operating loss for Viad Corp's Pursuit segment by line of business Pursuit Revenue (in thousands) | Line of Business | Q1 2020 Revenue | Q1 2019 Revenue | | :--------------- | :-------------- | :-------------- | | Attractions | $5,278 | $4,668 | | Hospitality | $5,981 | $3,664 | | Transportation | $2,146 | $2,150 | | Travel Planning | $199 | $447 | | Total Pursuit | $13,523 | $10,667 | - Pursuit revenue increased 26.8% ($2.9 million) primarily due to incremental revenue from the Mountain Park Lodges acquisition[170] - Pursuit segment operating loss increased 56.0% ($7.3 million) due to increased seasonal operating losses from the Mountain Park Lodges acquisition and the opening of FlyOver Iceland, along with higher depreciation and amortization[171] Performance Measures Presents key performance indicators for Viad Corp's Pursuit segment, including visitor numbers and RevPAR Pursuit Same-Store Key Performance Indicators | Item | Q1 2020 | Q1 2019 | Change vs. 2019 | | :--- | :------ | :------ | :-------------- | | Attractions: Number of visitors | 106,422 | 151,166 | (29.6)% | | Attractions: Revenue per attraction visitor | $33 | $31 | 6.5% | | Hospitality: RevPAR | $56 | $57 | (1.8)% | | Hospitality: ADR | $101 | $107 | (5.6)% | | Hospitality: Occupancy | 55.6% | 53.2% | 2.4% | - Same-store visitors for attractions decreased by 29.6% due to COVID-19 closures, while revenue per attraction visitor increased by 6.5% due to higher effective ticket prices and dynamic pricing[175] - RevPAR and ADR for hospitality decreased due to COVID-19 closures, despite an increase in occupancy[175] - The opening of FlyOver Canada Toronto is delayed to 2023, while FlyOver Las Vegas and Sky Lagoon are still on track for 2021 openings[174] Other Expenses Details Viad Corp's other expenses, including corporate activities, interest, restructuring, and impairment charges Other Expenses (in thousands) | Item | Q1 2020 | Q1 2019 | % Change | | :--- | :------ | :------ | :------- | | Corporate activities | $789 | $1,833 | (57.0)% | | Interest expense | $4,018 | $2,915 | 37.8% | | Restructuring charges | $851 | $688 | 23.7% | | Legal settlement | $0 | $8,500 | (100.0)% | | Impairment charges | $88,380 | $0 | ** | | Income tax benefit | $(15,797) | $(7,595) | ** | | Loss from discontinued operations | $(454) | $(287) | (58.2)% | - Corporate activities expense decreased by 57.0% due to lower performance-based compensation; Interest expense increased by 37.8% due to higher debt balances[177][178] - Impairment charges of $88.4 million were recorded in Q1 2020, including $72.7 million for goodwill and $15.7 million for other intangible assets[179] - The income tax benefit increased significantly, but the effective tax rate decreased to 15.2% due to no tax benefit recognized on some goodwill impairments[180] Liquidity and Capital Resources Discusses Viad Corp's cash position, debt obligations, and capital resources, emphasizing COVID-19 impacts - Cash and cash equivalents increased to $130.5 million as of March 31, 2020, from $62.0 million at December 31, 2019, primarily due to proactive borrowings under the 2018 Credit Facility[181] - The company expects to be unable to meet financial covenants starting Q3 2020, leading to the reclassification of substantial debt as current liabilities and raising substantial doubt about its going concern ability[182] - As of March 31, 2020, approximately $36.3 million of cash and cash equivalents were held outside the United States[183] Cash Flows Analyzes Viad Corp's net cash flows from operating, investing, and financing activities for Q1 2020 and 2019 Net Cash Flows (in thousands) | Activity | Q1 2020 | Q1 2019 | | :------- | :------ | :------ | | Operating activities | $(4,719) | $8,020 | | Investing activities | $(23,161) | $(18,932) | | Financing activities | $99,347 | $9,038 | - Net cash used in operating activities increased by $12.7 million, primarily due to unfavorable changes in working capital[184] - Net cash used in investing activities increased by $4.2 million due to higher capital expenditures[186] - Net cash provided by financing activities increased by $90.3 million, mainly from increased borrowings under the 2018 Credit Facility[187] Debt and Finance Lease Obligations Refers to detailed discussion on Viad Corp's debt and finance lease obligations, including reclassification to current liabilities - Refer to Note 12 for detailed discussion on debt and finance lease obligations, including the reclassification of debt to current liabilities due to expected covenant non-compliance[188] Share Repurchases Summarizes Viad Corp's common stock repurchases and the suspension of its share repurchase program - The Board of Directors suspended the share repurchase program in March 2020; In Q1 2020, 53,784 shares were repurchased for $2.8 million[189][190] Off-Balance Sheet Arrangements States that Viad Corp has no material off-balance sheet arrangements with unconsolidated special-purpose entities - The company has no material off-balance sheet arrangements with unconsolidated special-purpose entities[191] Critical Accounting Policies and Estimates Notes that discussion of critical accounting policies and estimates is incorporated by reference from the 2019 Form 10-K - Discussion of critical accounting policies and estimates is incorporated by reference from the 2019 Form 10-K[192] Impact of Recent Accounting Pronouncements Refers to Note 1 for information on the impact of recent accounting pronouncements on Viad Corp's financial statements - Refer to Note 1 for information on the impact of recent accounting pronouncements[193] Non-GAAP Measures Explains Viad Corp's use of non-GAAP financial measures like Segment operating income and organic revenue for investor information - The company uses non-GAAP measures like Segment operating income (loss), organic revenue, and organic segment operating income (loss) to provide useful information for investors, excluding impacts from taxes, debt service, impairment, and discontinued operations[194][195][198] Item 3. Quantitative and Qualitative Disclosures About Market Risk Details Viad Corp's exposure to market risks, primarily foreign exchange and interest rate fluctuations - Viad is exposed to foreign exchange risk from operations in Canada, the UK, Iceland, Netherlands, and Germany, impacting consolidated results and net equity through translation adjustments[196][197][198] - Cumulative unrealized foreign currency translation losses in stockholders' equity increased from $23.8 million at December 31, 2019, to $52.0 million at March 31, 2020[197] - The company is exposed to interest rate risk on debt obligations, with borrowings under the 2018 Credit Facility indexed to the prime rate or LIBOR; The potential phase-out of LIBOR after 2021 could lead to higher interest rates and debt obligations[196][200][232] Item 4. Controls and Procedures Confirms the effectiveness of Viad Corp's disclosure controls and procedures and absence of material changes in internal control - Management, including the CEO and CFO, concluded that disclosure controls and procedures were effective as of March 31, 2020[201] - No material changes in internal control over financial reporting occurred during the three months ended March 31, 2020[202] PART II - OTHER INFORMATION Item 1. Legal Proceedings Incorporates by reference information regarding Viad Corp's legal proceedings from Note 20 of the financial statements - Information on legal proceedings is incorporated by reference from Note 20 of the financial statements[205] Item 1A. Risk Factors Outlines significant risks to Viad Corp's operations and financial results, emphasizing COVID-19's profound and uncertain impact - The COVID-19 pandemic has severely impacted financial condition, liquidity, and cash flow, forcing event cancellations and closures, and raising substantial doubt about the company's ability to continue as a going concern[207] - The company faces risks from potential inability to meet debt covenants, requiring further amendments or capital raises, which could lead to acceleration of indebtedness[207] - Other significant risks include the failure of acquisitions to perform as anticipated, vulnerability to general economic downturns, dependence on large exhibition event clients, intense competition, travel industry disruptions, seasonality, and potential increases in multi-employer pension costs[209][211][212][215][216][218][221] - Operational risks include cybersecurity threats, evolving data privacy regulations, and the uncertain impact of the United Kingdom's exit from the European Union[228][229][230] Item 2. Unregistered Sales of Equity Securities and Use of Proceeds Summarizes Viad Corp's common stock repurchases during Q1 2020 and the suspension of the repurchase program Issuer Purchases of Equity Securities (Q1 2020) | Period | Total Shares Purchased | Average Price Paid Per Share | Shares Purchased as Part of Publicly Announced Plans or Programs | | :----- | :--------------------- | :--------------------------- | :------------------------------------------------------------- | | January 1 - January 31, 2020 | 966 | $67.16 | 0 | | February 1 - February 29, 2020 | 69,748 | $53.63 | 53,784 | | March 1 - March 31, 2020 | 744 | $50.55 | 0 | | Total | 71,458 | $53.79 | 53,784 | - During Q1 2020, Viad repurchased 53,784 shares on the open market for $2.8 million; The Board of Directors suspended the share repurchase program in March 2020[236] Item 6. Exhibits Lists the exhibits filed with the Form 10-Q, including key agreements and certifications - Key exhibits include the Rights Agreement (March 30, 2020), Amendment No. 2 to the 2018 Credit Agreement (May 8, 2020), and certifications under the Sarbanes-Oxley Act[237] SIGNATURES Contains the required signatures for the Form 10-Q, certifying its submission on behalf of Viad Corp - The report was signed by Leslie S. Striedel, Chief Accounting Officer, on June 19, 2020[242]