Note 1. Overview and Basis of Presentation
The accompanying unaudited condensed consolidated financial statements were prepared in accordance with accounting principles generally accepted in the United States of America (“GAAP”) and with the instructions to Form 10-Q and Article 10 of Regulation S-X for interim financial information. Accordingly, these financial statements do not include all of the information required by GAAP or SEC rules and regulations for complete financial statements. These financial statements reflect all adjustments (consisting of normal recurring adjustments) necessary for a fair presentation of the results for the interim periods presented. Interim results are not necessarily indicative of the results for the full year. These unaudited condensed consolidated financial statements should be read in conjunction with our Annual Report on Form 10-K for the year ended December 31, 2020, filed with the SEC on March 2, 2021 (“2020 Form 10-K”).
The condensed consolidated financial statements include the accounts of Viad and its subsidiaries. We have eliminated all significant intercompany account balances and transactions in consolidation.
We are a leading provider of experiential leisure travel and live events and marketing experiences with operations in the United States, Canada, the United Kingdom, continental Europe, the United Arab Emirates, and Iceland. We are committed to providing unforgettable experiences to our clients and guests. We operate through two reportable business segments: GES and Pursuit.
GES is a global, full-service provider for live events that partners with show organizers, exhibitors, and brand marketers to create high-value, live events. GES offers a comprehensive range of live event services, from the design and production of compelling, immersive experiences that engage audiences and build brand awareness, to material handling, rigging, electrical, and other on-site event services. In addition, GES offers clients a full suite of audio-visual services from creative and technology to content and design, along with registration, data analytics, engagement, and online tools powered by next generation technologies that help clients easily manage the complexities of their event.
Pursuit is a collection of inspiring and unforgettable travel experiences that include recreational attractions, unique hotels and lodges, food and beverage, retail, sightseeing, and ground transportation services. Pursuit comprises the Banff Jasper Collection, the Alaska Collection, the Glacier Park Collection, and FlyOver.
Starting in mid-March 2020 and extending through the first quarter of 2021, the COVID-19 pandemic had a significant and negative impact on our operations and financial performance, with live events largely shut down and severe tourism activity disruptions. In response to the COVID-19 pandemic, we implemented aggressive cost reduction measures in 2020 to preserve cash, including furloughs, layoffs, mandatory unpaid time off or salary reductions for all employees, and the reduction of discretionary spending. We also suspended future dividend payments and share repurchases, and we availed ourselves of governmental assistance programs for wages and tax relief.
In August 2020, we secured additional capital to strengthen our liquidity position by entering into an investment agreement with funds managed by private equity firm Crestview Partners who made an initial investment of $135 million, offset in part by $9.2 million in fees, in newly issued perpetual convertible preferred stock. Refer to Note 15 – Common and Preferred Stock for further information. In August 2020, we also amended our Second Amended and Restated Credit Agreement (the “2018 Credit Agreement”) to provide financial flexibility, which, among other things waives our financial covenants until September 30, 2022. Refer to Note 12 – Debt and Finance Lease Obligations for further information. During the three months ended March 31, 2021, we continued to preserve cash and closely managed our costs. In connection with the acceleration of COVID-19 vaccination programs in certain of our geographic territories, we began to see early signs of recovery in the travel and hospitality and live event sectors during the first quarter of 2021, with more live event markets opening, smaller scale live events taking place, and an uptick in bookings. Event organizers continue to assess when it will be possible to safely hold larger scale face-to-face live events.
During the first quarter of 2021, we reorganized GES’ operating segments to represent the changes in how our chief operating decision maker (“CODM”) reviews the financial performance of GES and makes decisions regarding the allocation of resources. As a result, we changed the presentation of certain items in GES’ disaggregation of revenue and reportable segments. Refer to Note 2 – Revenue and Related Contract Costs and Contract Liabilities and Note 23 – Segment Information for additional information. We reclassed certain prior-year amounts to conform to current-period presentation. Such reclassifications had no impact on our results of operations or cash flows.
As previously disclosed in our 2020 Form 10-K, we identified prior period errors related to the recognition of revenue of GES’ third-party services. Revenue from these services should have been recorded on a net basis to reflect only the fees received for arranging these services, whereas previously, we recorded this revenue on a gross basis, thus overstating revenue and cost of services by the same amount. As a result, we corrected the accompanying Condensed Consolidated Statements of Operations for the three months ended March 31, 2020 related to this gross-to-net adjustment. We determined that these errors were not material to the previously issued financial statements. Note 2 – Revenue and Related Contract Costs and Contract Liabilities and Note 23 – Segment Information reflect this correction.
Impact of Recent Accounting Pronouncements
The following table provides a brief description of recent accounting pronouncements:
|
Standard
|
|
Description
|
|
Date of adoption
|
|
Effect on the financial statements
|
|
Standards Not Yet Adopted
|
|
ASU 2020-06, Debt - Debt with Conversion and Other Options (Subtopic 470-20) and Derivatives and Hedging - Contracts in Entity’s Own Equity (Subtopic 815-40)
|
|
The amendment simplifies the accounting for convertible instruments by reducing the number of accounting models available for convertible debt instruments and convertible preferred stock. The amendment also requires expanded disclosures about the terms and features of convertible instruments. Early adoption is permitted, but no earlier than fiscal years beginning after December 15, 2020.
|
|
1/1/2022
|
|
We are currently evaluating the potential impact of the adoption of this new guidance on our consolidated financial statements and if there are applicable provisions that will simplify our accounting or reporting we will likely pursue early adoption.
|
|
|
|
|
|
|
|
|
|
Standard
|
|
Description
|
|
Date of adoption
|
|
Effect on the financial statements
|
|
Standards Recently Adopted
|
|
ASU 2019-12, Income Taxes (Topic 740) Simplifying the Accounting for Income Taxes
|
|
The amendment enhances and simplifies various aspects of the income tax accounting guidance, including requirements such as ownership changes in investments, and interim-period accounting for enacted changes in tax law.
|
|
1/1/2021
|
|
The adoption of this new standard on January 1, 2021 did not have a material impact on our consolidated financial statements.
|
8
Significant Accounting Policies
Use of Estimates
The preparation of financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities at the date of the financial statements and the reported amounts of revenue and expenses during the reported period. Estimates and assumptions are used in accounting for, among other things: impairment testing of recorded goodwill and intangible assets and long-lived assets; allowances for uncollectible accounts receivable; sales reserve allowances; provisions for income taxes, including uncertain tax positions; valuation allowances related to deferred tax assets; liabilities for losses related to self-insured liability claims; liabilities for losses related to environmental remediation obligations; sublease income associated with restructuring liabilities; pension and postretirement benefit costs and obligations; share-based compensation costs; the discount rates used to value lease obligations; the redemption value of redeemable noncontrolling interests; and the allocation of purchase price of acquired businesses. Actual results could differ from these and other estimates.
Cash, Cash Equivalents, and Restricted Cash
Cash equivalents are highly-liquid investments with remaining maturities when purchased of three months or less. Cash and cash equivalents consist of cash and bank demand deposits and money market funds. Investments in money market funds are classified as available-for-sale and carried at fair value. Restricted cash represents collateral required for surety bonds, bank guarantees, and letters of credit.
Cash, cash equivalents, and restricted cash balances presented in the Condensed Consolidated Statements of Cash Flows consisted of the following:
|
|
|
|
|
|
|
|
|
|
|
|
|
March 31,
|
|
|
December 31,
|
|
|
(in thousands)
|
|
2021
|
|
|
2020
|
|
|
Cash and cash equivalents
|
|
$
|
34,714
|
|
|
$
|
39,545
|
|
|
Restricted cash included in other current assets
|
|
|
3,231
|
|
|
|
2,426
|
|
|
Cash, cash equivalents, and restricted cash shown in the statement of cash flows
|
|
$
|
37,945
|
|
|
$
|
41,971
|
|
Revenue Recognition
Revenue is measured based on a specified amount of consideration in a contract with a customer, net of commissions paid to customers and amounts collected on behalf of third parties. We recognize revenue when a performance obligation is satisfied by transferring control of a product or delivering the service to a customer.
GES’ service revenue is primarily derived through its comprehensive range of marketing, event production, and other related services to event organizers and corporate brand marketers. GES’ service revenue is earned over time over the duration of the live event, which generally lasts one to three days. Revenue for goods and services provided for which we do not have control of the goods or services before that good or service is transferred to a customer is recorded on a net basis to reflect only the fees received for arranging these services. GES’ product revenue is derived from the build of exhibits and environments and graphics. GES’ product revenue is recognized at a point in time upon delivery of the product.
Pursuit’s service revenue is derived through its admissions, accommodations, transportation, and travel planning services. Pursuit’s product revenue is derived through food and beverage and retail sales. Pursuit’s revenue is recognized at the time services are performed or upon delivery of the product. Pursuit’s service revenue is recognized over time as the customer simultaneously receives and consumes the benefits. Pursuit’s product revenue is recognized at a point in time.
Noncontrolling Interests – Non-redeemable and Redeemable
Non-redeemable noncontrolling interest represents the portion of equity in a subsidiary that is not attributable, directly or indirectly, to us. We report non-redeemable noncontrolling interest within stockholders’ equity in the Condensed Consolidated Balance Sheets. The amount of consolidated net income or loss attributable to Viad and the non-redeemable noncontrolling interest is presented in the Condensed Consolidated Statements of Operations.
We consider noncontrolling interests with redemption features that are not solely within our control to be redeemable noncontrolling interests. Our redeemable noncontrolling interest relates to our 54.5% equity ownership interest in Esja Attractions ehf. (“Esja”), which owns the FlyOver Iceland attraction. The Esja shareholders agreement contains a put option that gives the minority Esja
9
shareholders the right to sell (or “put”) their Esja shares to us based on a calculated formula within a predefined term. This redeemable noncontrolling interest is considered mezzanine equity and we report it between liabilities and stockholders’ equity in the Condensed Consolidated Balance Sheets. The amount of the net income or loss attributable to redeemable noncontrolling interests is recorded in the Condensed Consolidated Statements of Operations and the accretion of the redemption value is recorded as an adjustment to accumulated deficit and is included in our loss per share.
Refer to Note 22 – Noncontrolling Interest – Redeemable and Non-redeemable for additional information.
Convertible Preferred Stock
We record shares of convertible preferred stock based on proceeds received net of costs on the date of issuance. Redeemable preferred stock (including preferred stock that features redemption rights that are either within the control of the holder or subject to redemption upon the occurrence of uncertain events not solely within our control) is classified as mezzanine equity and is reported between liabilities and stockholders’ equity in the Condensed Consolidated Balance Sheets.
Leases
We recognize a right-of-use (“ROU”) asset and lease liability on the balance sheet and classify leases as either finance or operating leases. The classification of the lease determines whether we recognize the lease expense on an effective interest method basis (finance lease) or on a straight-line basis (operating lease) over the lease term. In determining whether an agreement contains a lease, we consider if we have a right to control the use of the underlying asset during the lease term in exchange for an obligation to make lease payments arising from the lease. We recognize ROU assets and lease liabilities at commencement date, which is when the underlying asset is available for use to a lessee, based on the present value of lease payments over the lease term.
Our operating and finance leases are primarily facility, equipment, and land leases. Our facility leases comprise mainly manufacturing facilities, sales and design facilities, offices, storage and/or warehouses, and truck marshaling yards. These facility leases generally have lease terms ranging up to 24 years. Our equipment leases comprise mainly vehicles, hardware, and office equipment, each with various lease terms. Our land leases comprise mainly leases in Canada and Iceland on which our hotels or attractions are located and have lease terms ranging up to 46 years.
If a lease contains a renewal option that is reasonably certain to be exercised, then the lease term includes the optional periods in measuring a ROU asset and lease liability. We evaluate the reasonably certain threshold at lease commencement, and it is typically met if we identify substantial economic incentives or termination penalties. We do not include variable leases and variable non-lease components in the calculation of the ROU asset and corresponding lease liability. For facility leases, variable lease costs include the costs of common area maintenance, taxes, and insurance for which we pay our lessors an estimate that we adjust to actual expense on a quarterly or annual basis depending on the underlying contract terms. We expense these variable lease payments as incurred. Our lease agreements do not contain any significant residual value guarantees or restrictive covenants.
Substantially all of our lease agreements do not specify an implicit borrowing rate, and as such, we utilize an incremental borrowing rate based on lease term and country, in order to calculate the present value of our future lease payments. The discount rate represents a risk-adjusted rate on a collateralized basis and is the expected rate at which we would borrow funds to satisfy the scheduled lease liability payment streams commensurate with the lease term and the country.
We are also a lessor to third party tenants who either lease certain portions of facilities that we own or sublease certain portions of facilities that we lease. We record lease income from owned facilities as rental income and we record sublease income from leased facilities against lease expense in the Condensed Consolidated Statements of Operations. We classify all of our leases for which we are the lessor as operating leases.
10
Note 2. Revenue and Related Contract Costs and Contract Liabilities
GES’ performance obligations consist of services or product(s) outlined in a contract. While we often sign multi-year contracts for recurring events, the obligations for each occurrence are well defined and conclude upon the occurrence of each event. The obligations are typically the provision of services and/or sale of a product in connection with a live event. Revenue for goods and services provided for which we do not have control of the goods or services before that good or service is transferred to a customer is recorded on a net basis to reflect only the fees received for arranging these services. We recognize revenue for services generally at the close of the live event. We recognize revenue for products either upon delivery to the customer’s location, upon delivery to an event that we are serving, or when we have the right to invoice. In circumstances where a customer cancels a contract, we generally have the right to bill the customer for costs incurred to date. Payment terms are generally within 30-60 days and contain no significant financing components.
Pursuit’s performance obligations are short-term in nature. They include the provision of a hotel room, an attraction admission, a chartered or ticketed bus or van ride, the fulfillment of travel planning itineraries, and/or the sale of food, beverage, or retail products. We recognize revenue when the service has been provided or the product has been delivered. When we extend credit, payment terms are generally within 30 days and contain no significant financing components.
Contract Liabilities
GES and Pursuit typically receive customer deposits prior to transferring the related product or service to the customer. We record these deposits as a contract liability, which are recognized as revenue upon satisfaction of the related contract performance obligation(s). GES also provides customer rebates and volume discounts to certain event organizers that we recognize as a reduction of revenue. We include these amounts in the Condensed Consolidated Balance Sheets under the captions “Contract liabilities” and “Other deferred items and liabilities.”
Changes to contract liabilities are as follows:
|
(in thousands)
|
|
|
|
|
|
Balance at December 31, 2020
|
|
$
|
18,618
|
|
|
Cash additions
|
|
|
14,338
|
|
|
Revenue recognized
|
|
|
(5,647
|
)
|
|
Foreign exchange translation adjustment
|
|
|
(453
|
)
|
|
Balance at March 31, 2021
|
|
$
|
26,856
|
|
Contract Costs
GES capitalizes certain incremental costs incurred in obtaining and fulfilling contracts. Capitalized costs principally relate to direct costs of materials and services incurred in fulfilling services of future exhibitions, conferences, and events, and also include up-front incentives and commissions incurred upon contract signing. We expense costs associated with preliminary contract activities (i.e. proposal activities) as incurred. Capitalized contract costs are expensed upon the transfer of the related goods or services and are included in cost of services or cost of products, as applicable. We include the deferred incremental costs of obtaining and fulfilling contracts in the Condensed Consolidated Balance Sheets under the captions “Current contract costs” and “Other investments and assets.”
Changes to contract costs are as follows:
|
(in thousands)
|
|
|
|
|
|
Balance at December 31, 2020
|
|
$
|
10,835
|
|
|
Additions
|
|
|
4,394
|
|
|
Expenses
|
|
|
(3,237
|
)
|
|
Cancelled
|
|
|
(432
|
)
|
|
Foreign exchange translation adjustment
|
|
|
34
|
|
|
Balance at March 31, 2021
|
|
$
|
11,594
|
|
As of March 31, 2021, capitalized contract costs consisted of $0.8 million to obtain contracts and $10.8 million to fulfill contracts. We did not recognize an impairment loss with respect to capitalized contract costs during the three months ended March 31, 2021 or 2020.
11
Disaggregation of Revenue
During the first quarter of 2021, we changed GES’ presentation of certain items in the following disaggregation of revenue table to depict how the nature, amount, timing, and uncertainty of revenue and cash flows are affected by economic factors. All prior periods have been reclassified to conform to this new reporting structure.
The following tables disaggregate GES and Pursuit revenue by major service and product lines, timing of revenue recognition, and markets served:
GES
|
|
|
Three Months Ended
|
|
|
|
|
March 31,
|
|
|
(in thousands)
|
|
2021
|
|
|
2020
|
|
|
Service lines:
|
|
|
|
|
|
|
|
|
|
Exhibitions and Conferences
|
|
$
|
5,835
|
|
|
$
|
201,159
|
|
|
Brand experiences
|
|
|
11,704
|
|
|
|
68,995
|
|
|
Venue services
|
|
|
1,606
|
|
|
|
10,981
|
|
|
Total revenue
|
|
$
|
19,145
|
|
|
$
|
281,135
|
|
|
|
|
|
|
|
|
|
|
|
|
Timing of revenue recognition:
|
|
|
|
|
|
|
|
|
|
Services transferred over time
|
|
$
|
17,015
|
|
|
$
|
253,226
|
|
|
Products transferred over time(1)
|
|
|
417
|
|
|
|
13,027
|
|
|
Products transferred at a point in time
|
|
|
1,713
|
|
|
|
14,882
|
|
|
Total revenue
|
|
$
|
19,145
|
|
|
$
|
281,135
|
|
|
|
|
|
|
|
|
|
|
|
|
Geographical markets:
|
|
|
|
|
|
|
|
|
|
North America
|
|
$
|
15,858
|
|
|
$
|
242,440
|
|
|
EMEA
|
|
|
3,903
|
|
|
|
40,684
|
|
|
Intersegment eliminations
|
|
|
(616
|
)
|
|
|
(1,989
|
)
|
|
Total revenue
|
|
$
|
19,145
|
|
|
$
|
281,135
|
|
|
(1)
|
GES’ graphics product revenue is earned over time over the duration of an event as it is considered a part of the single performance obligation satisfied over time.
|
12
Pursuit
|
|
|
Three Months Ended
|
|
|
|
|
March 31,
|
|
|
(in thousands)
|
|
2021
|
|
|
2020
|
|
|
Services:
|
|
|
|
|
|
|
|
|
|
Admissions
|
|
$
|
1,484
|
|
|
$
|
4,102
|
|
|
Accommodations
|
|
|
5,150
|
|
|
|
4,517
|
|
|
Transportation
|
|
|
537
|
|
|
|
2,056
|
|
|
Travel planning
|
|
|
714
|
|
|
|
416
|
|
|
Intersegment eliminations
|
|
|
—
|
|
|
|
(111
|
)
|
|
Total services revenue
|
|
|
7,885
|
|
|
|
10,980
|
|
|
Products:
|
|
|
|
|
|
|
|
|
|
Food and beverage
|
|
|
1,224
|
|
|
|
1,649
|
|
|
Retail operations
|
|
|
681
|
|
|
|
894
|
|
|
Total products revenue
|
|
|
1,905
|
|
|
|
2,543
|
|
|
Total revenue
|
|
$
|
9,790
|
|
|
$
|
13,523
|
|
|
|
|
|
|
|
|
|
|
|
|
Timing of revenue recognition:
|
|
|
|
|
|
|
|
|
|
Services transferred over time
|
|
$
|
7,885
|
|
|
$
|
10,980
|
|
|
Products transferred at a point in time
|
|
|
1,905
|
|
|
|
2,543
|
|
|
Total revenue
|
|
$
|
9,790
|
|
|
$
|
13,523
|
|
|
|
|
|
|
|
|
|
|
|
|
Markets:
|
|
|
|
|
|
|
|
|
|
Banff Jasper Collection
|
|
$
|
8,460
|
|
|
$
|
9,799
|
|
|
Alaska Collection
|
|
|
289
|
|
|
|
151
|
|
|
Glacier Park Collection
|
|
|
578
|
|
|
|
723
|
|
|
FlyOver
|
|
|
463
|
|
|
|
2,850
|
|
|
Total revenue
|
|
$
|
9,790
|
|
|
$
|
13,523
|
|
Note 3. Share-Based Compensation
We grant share-based compensation awards to our officers, directors, and certain key employees pursuant to the 2017 Viad Corp Omnibus Incentive Plan (the “2017 Plan”). The 2017 Plan has a 10-year term and provides for the following types of awards: (a) incentive and non-qualified stock options; (b) restricted stock awards and restricted stock units; (c) performance units or performance shares; (d) stock appreciation rights; (e) cash-based awards; and (f) certain other stock-based awards. In June 2017, we registered 1,750,000 shares of common stock issuable under the 2017 Plan. As of March 31, 2021, there were 759,578 shares available for future grant under the 2017 Plan.
The following table summarizes share-based compensation (income) expense:
|
|
|
Three Months Ended
|
|
|
|
|
March 31,
|
|
|
(in thousands)
|
|
2021
|
|
|
2020
|
|
|
Performance-based restricted stock units
|
|
$
|
140
|
|
|
$
|
(2,635
|
)
|
|
Restricted stock awards and restricted stock units
|
|
|
1,244
|
|
|
|
490
|
|
|
Stock options
|
|
|
379
|
|
|
|
—
|
|
|
Share-based compensation (income) expense before income tax
|
|
|
1,763
|
|
|
|
(2,145
|
)
|
|
Income tax benefit(1)
|
|
|
(27
|
)
|
|
|
(109
|
)
|
|
Share-based compensation (income) expense, net of income tax
|
|
$
|
1,736
|
|
|
$
|
(2,254
|
)
|
|
(1)
|
The 2021 income tax benefit amount primarily reflects the tax benefit associated with our Canadian-based employees. There was no income tax benefit associated with our employees in the United States and the United Kingdom due to a valuation allowance on our deferred tax assets within these jurisdictions. Refer to Note 17 – Income Taxes.
|
13
Performance-based Restricted Stock Units
Performance-based restricted stock units (“PRSU”) are tied to our stock price and the expected achievement of certain performance-based criteria. The vesting of PRSU shares is based upon the achievement of the performance-based criteria over a three to four-year period. We account for PRSU awards that will be settled in shares of our common stock as equity-based awards. We measure share-based compensation expense of equity-based awards at fair value on the grant date on a straight-line basis over the vesting period. The estimated number of shares to be achieved is updated each reporting period. We account for PRSU awards that will be settled in cash as liability-based awards. We measure share-based compensation expense of liability-based awards at fair value at each reporting date until the date of settlement. Forfeitures are accounted for as they occur.
During the three months ended March 31, 2021, we granted PRSU awards with a grant date fair value of $3.2 million, all of which are payable in shares.
In 2021, PRSU awards granted in 2018 vested; however, as performance metrics were not achieved, no awards were paid in cash or in shares. In 2020, PRSU awards granted in 2017 vested and we paid $2.6 million in cash. No PRSU awards were paid in shares in 2020.
As of March 31, 2021, the unamortized cost of outstanding equity-based PRSU awards was $3.1 million, which we expect to recognize over a weighted-average period of approximately 2.8 years. Liabilities related to liability-based PRSU awards were $0.9 million as of March 31, 2021 and $0.8 million as of December 31, 2020.
The following table summarizes the activity of the outstanding PRSU awards:
|
|
|
Equity-Based
PRSU Awards
|
|
|
Liability-Based
PRSU Awards
|
|
|
|
|
Shares
|
|
|
Weighted-Average
Grant Date
Fair Value
|
|
|
Shares
|
|
|
Weighted-Average
Grant Date
Fair Value
|
|
|
Balance at December 31, 2020
|
|
|
61,208
|
|
|
$
|
57.18
|
|
|
|
121,485
|
|
|
$
|
56.34
|
|
|
Granted
|
|
|
101,785
|
|
|
$
|
31.28
|
|
|
|
—
|
|
|
$
|
—
|
|
|
Vested
|
|
|
—
|
|
|
$
|
—
|
|
|
|
(42,698
|
)
|
|
$
|
51.96
|
|
|
Forfeited
|
|
|
—
|
|
|
$
|
—
|
|
|
|
(703
|
)
|
|
$
|
56.97
|
|
|
Balance at March 31, 2021
|
|
|
162,993
|
|
|
$
|
41.01
|
|
|
|
78,084
|
|
|
$
|
57.12
|
|
Service-based Restricted Stock Awards and Restricted Stock Units
Restricted stock awards and restricted stock units are service-based awards. We account for restricted stock awards and restricted stock units that will be settled in shares of our common stock as equity-based awards. We measure share-based compensation expense of equity-based awards at fair value on the grant date on a straight-line basis over the vesting period.
We account for restricted stock units that will be settled in cash as liability-based awards. We measure share-based compensation expense of liability-based awards at fair value at each reporting date until the date of settlement. Forfeitures are recorded when they occur.
As of March 31, 2021, the unamortized cost of outstanding equity-based restricted stock awards and restricted stock units was $6.8 million, which we expect to recognize over a weighted-average period of approximately 1.3 years. We repurchased 12,055 shares for $0.5 million during the three months ended March 31, 2021 and 17,674 shares for $1.1 million during the three months ended March 31, 2020 related to tax withholding requirements on vested share-based awards.
Aggregate liabilities related to liability-based restricted stock units were $0.2 million as of March 31, 2021 and $0.2 million as of December 31, 2020. During the three months ended March 31, 2021, 3,174 restricted stock units vested, and we paid $0.1 million in cash. During the three months ended March 31, 2020, 2,815 restricted stock units vested, and we paid $0.2 million in cash.
14
The following table summarizes the activity of the outstanding restricted stock awards and restricted stock units:
|
|
|
Equity-Based
Restricted Stock Awards
|
|
|
Equity-Based
Restricted Stock Units
|
|
|
Liability-Based
Restricted Stock Units
|
|
|
|
|
Shares
|
|
|
Weighted-Average
Grant Date
Fair Value
|
|
|
Shares
|
|
|
Weighted-Average
Grant Date
Fair Value
|
|
|
Shares
|
|
|
Weighted-Average
Grant Date
Fair Value
|
|
|
Balance at December 31, 2020
|
|
|
107,107
|
|
|
$
|
53.23
|
|
|
|
151,261
|
|
|
$
|
19.51
|
|
|
|
10,459
|
|
|
$
|
51.91
|
|
|
Granted
|
|
|
22,320
|
|
|
$
|
44.80
|
|
|
|
62,919
|
|
|
$
|
44.79
|
|
|
|
—
|
|
|
$
|
—
|
|
|
Vested
|
|
|
(37,170
|
)
|
|
$
|
53.86
|
|
|
|
—
|
|
|
$
|
—
|
|
|
|
(3,174
|
)
|
|
$
|
52.24
|
|
|
Forfeited
|
|
|
(1,030
|
)
|
|
$
|
56.94
|
|
|
|
(2,026
|
)
|
|
$
|
19.75
|
|
|
|
—
|
|
|
$
|
—
|
|
|
Balance at March 31, 2021
|
|
|
91,227
|
|
|
$
|
50.87
|
|
|
|
212,154
|
|
|
$
|
27.00
|
|
|
|
7,285
|
|
|
$
|
53.34
|
|
Stock Options
We grant non-qualified stock options that are performance-based, as well as non-qualified options that are service-based. The performance-based awards are recognized on a straight-line basis over the performance period ranging from 1.0 to 3.4 years, and the underlying shares expected to be settled are adjusted each reporting period based on estimated future achievement of the respective performance metrics. The service-based awards are recognized on a straight-line basis over the requisite service period on a graded-vesting schedule over two years.
The following table summarizes stock option activity:
|
|
|
Shares
|
|
|
Weighted-Average
Exercise Price
|
|
|
Aggregate Intrinsic Value(1)
|
|
|
Options outstanding at December 31, 2020
|
|
|
204,150
|
|
|
$
|
19.98
|
|
|
|
|
|
|
Granted
|
|
|
137,858
|
|
|
$
|
44.80
|
|
|
|
|
|
|
Exercised
|
|
|
—
|
|
|
$
|
—
|
|
|
|
|
|
|
Options outstanding at March 31, 2021
|
|
|
342,008
|
|
|
$
|
29.98
|
|
|
$
|
4,445,085
|
|
|
Options exercisable at March 31, 2021
|
|
|
—
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
(1)
|
The aggregate intrinsic value of stock options outstanding represents the difference between our closing stock price at the end of the reporting period and the exercise price, multiplied by the number of in-the-money stock options.
|
The following table summarizes stock options outstanding and exercisable as of March 31, 2021:
|
|
|
|
|
Options Outstanding
|
|
|
Options Exercisable
|
|
|
Range of exercise prices
|
|
|
Shares
|
|
|
Weighted-Average
Remaining Contractual Life
(in years)
|
|
|
Weighted-Average
Exercise Price
|
|
|
Shares
|
|
|
Weighted-Average
Exercise Price
|
|
|
$
|
19.30
|
|
|
|
150,000
|
|
|
|
7.75
|
|
|
$
|
19.30
|
|
|
|
—
|
|
|
$
|
—
|
|
|
$
|
21.85
|
|
|
|
54,150
|
|
|
|
6.41
|
|
|
$
|
21.85
|
|
|
|
—
|
|
|
$
|
—
|
|
|
$
|
44.80
|
|
|
|
137,858
|
|
|
|
6.90
|
|
|
$
|
44.80
|
|
|
|
—
|
|
|
$
|
—
|
|
|
$19.30 - $44.80
|
|
|
|
342,008
|
|
|
|
7.20
|
|
|
$
|
29.98
|
|
|
|
—
|
|
|
$
|
—
|
|
15
The fair value of stock options granted in 2021 was estimated on the date of grant using the Black-Scholes option pricing model.
Following is additional information on stock options granted during the three months ended March 31, 2021 and the underlying assumptions used in assessing fair value:
|
|
|
Three Months Ended
|
|
|
|
|
March 31, 2021
|
|
|
Assumptions used to estimate fair value of stock options granted:
|
|
|
|
|
|
Risk-free interest rate
|
|
0.50%
|
|
|
Expected term (in years)
|
|
|
4.5
|
|
|
Expected volatility
|
|
55.8%
|
|
|
Expected dividend yield
|
|
|
—
|
|
|
Weighted average grant-date fair value per share of options granted
|
|
$
|
20.26
|
|
As of March 31, 2021, the total unrecognized compensation cost related to non-vested stock option awards was $3.8 million. We expect to recognize such costs over a weighted-average period of approximately 1.9 years.
Note 4. Acquisitions
2021 Acquisitions
Golden Skybridge
On March 18, 2021, we acquired a 60% controlling interest in the Golden Skybridge attraction for total cash consideration of $15 million Canadian dollars (approximately $12 million U.S. dollars), of which $6 million Canadian dollars (approximately $4.8 million U.S. dollars) will be used to fund remaining development and start-up costs. The Golden Skybridge is expected to open in June 2021.
The preliminary recording of the fair value of net assets acquired as of the acquisition date included $2.2 million in property and equipment and $6.8 million in noncontrolling interest. Under the acquisition method of accounting, the purchase price is allocated to the tangible and identifiable intangible assets acquired and liabilities assumed based on their estimated fair values. The excess purchase price over the fair value of net assets acquired of $11.8 million was recorded as “Goodwill.” Goodwill is included in the Pursuit business group. The primary factor that contributed to the purchase price resulting in the recognition of goodwill related to future growth opportunities when combined with our other businesses. Goodwill is not deductible for tax purposes. We included these assets in the consolidated financial statements from the date of acquisition.
Due to the recent timing of the acquisition, the purchase price allocation is not yet finalized and is subject to change within the measurement period (up to one year from the acquisition date) as the assessment of acquired assets is finalized.
Transaction costs associated with the acquisition were $0.2 million during 2021, which are included in “Cost of services” in the Condensed Consolidated Statements of Operations.
Note 5. Inventories
We state inventories, which consist primarily of exhibit design and construction materials and supplies, as well as retail inventory, at the lower of cost (first-in, first-out and specific identification methods) or net realizable value.
The components of inventories consisted of the following:
|
|
|
March 31,
|
|
|
December 31,
|
|
|
(in thousands)
|
|
2021
|
|
|
2020
|
|
|
Raw materials
|
|
$
|
2,737
|
|
|
$
|
3,362
|
|
|
Finished goods
|
|
|
5,669
|
|
|
|
5,365
|
|
|
Inventories
|
|
$
|
8,406
|
|
|
$
|
8,727
|
|
16
Note 6. Other Current Assets
Other current assets consisted of the following:
|
|
|
March 31,
|
|
|
December 31,
|
|
|
(in thousands)
|
|
2021
|
|
|
2020
|
|
|
Prepaid insurance
|
|
$
|
4,109
|
|
|
$
|
4,297
|
|
|
Restricted cash
|
|
|
3,231
|
|
|
|
2,426
|
|
|
Prepaid software maintenance
|
|
|
3,179
|
|
|
|
3,058
|
|
|
Prepaid vendor payments
|
|
|
1,275
|
|
|
|
1,835
|
|
|
Income tax receivable
|
|
|
905
|
|
|
|
337
|
|
|
Prepaid taxes
|
|
|
307
|
|
|
|
345
|
|
|
Prepaid other
|
|
|
1,423
|
|
|
|
1,296
|
|
|
Other
|
|
|
4,019
|
|
|
|
3,631
|
|
|
Other current assets
|
|
$
|
18,448
|
|
|
$
|
17,225
|
|
Note 7. Property and Equipment
Property and equipment consisted of the following:
|
|
|
March 31,
|
|
|
December 31,
|
|
|
(in thousands)
|
|
2021
|
|
|
2020
|
|
|
Land and land interests
|
|
$
|
30,583
|
|
|
$
|
32,849
|
|
|
Buildings and leasehold improvements
|
|
|
382,387
|
|
|
|
386,751
|
|
|
Equipment and other
|
|
|
411,030
|
|
|
|
401,288
|
|
|
Gross property and equipment
|
|
|
824,000
|
|
|
|
820,888
|
|
|
Accumulated depreciation
|
|
|
(354,320
|
)
|
|
|
(352,100
|
)
|
|
Property and equipment, net (excluding finance leases)
|
|
|
469,680
|
|
|
|
468,788
|
|
|
Finance lease ROU assets, net (1)
|
|
|
63,934
|
|
|
|
23,366
|
|
|
Property and equipment, net
|
|
$
|
533,614
|
|
|
$
|
492,154
|
|
|
(1)
|
The increase in finance lease ROU assets is primarily due to the commencement of Pursuit’s new Sky Lagoon attraction in Iceland during the first quarter of 2021.
|
Depreciation expense was $10.9 million for the three months ended March 31, 2021 and $12.2 million for the three months ended March 31, 2020.
Property and equipment purchased through accounts payable and accrued liabilities decreased $0.5 million during the three months ended March 31, 2021 and decreased $4.6 million during the three months ended March 31, 2020.
Note 8. Other Investments and Assets
Other investments and assets consisted of the following:
|
|
|
March 31,
|
|
|
December 31,
|
|
|
(in thousands)
|
|
2021
|
|
|
2020
|
|
|
Self-insured liability receivable
|
|
$
|
6,358
|
|
|
$
|
6,358
|
|
|
Other mutual funds
|
|
|
3,778
|
|
|
|
3,457
|
|
|
Contract costs
|
|
|
2,813
|
|
|
|
2,912
|
|
|
Other
|
|
|
2,760
|
|
|
|
2,765
|
|
|
Other investments and assets
|
|
$
|
15,709
|
|
|
$
|
15,492
|
|
17
Note 9. Goodwill and Other Intangible Assets
The changes in the carrying amount of goodwill are as follows:
|
(in thousands)
|
|
Pursuit
|
|
|
Balance at December 31, 2020
|
|
$
|
99,847
|
|
|
Business acquisition
|
|
|
11,776
|
|
|
Foreign currency translation adjustments
|
|
|
1,324
|
|
|
Balance at March 31, 2021
|
|
$
|
112,947
|
|
Goodwill is tested for impairment at the reporting unit level on an annual basis as of October 31, and between annual tests if an event occurs or circumstances change that would more-likely-than-not reduce the fair value of a reporting unit below its carrying value. We use a discounted expected future cash flow methodology (income approach) to estimate the fair value of our reporting units for purposes of goodwill impairment testing.
Although Pursuit’s reporting units continue to operate at a loss due to seasonally closed properties and travel restrictions as a result of the COVID-19 pandemic, we did not record any impairment charges during the first quarter of 2021 as there were no significant changes to our outlook for the future years and the risk profile of the reporting units had not changed.
Given the evolving nature of COVID-19, and the uncertain government and consumer reactions, the estimates and assumptions regarding expected future cash flows, discount rates, and terminal values used in our goodwill impairment analysis require considerable judgment and are based on our current estimates of market conditions, financial forecasts, and industry trends. These estimates, however, have inherent uncertainties and different assumptions could lead to materially different results including impairment charges in the future.
Other intangible assets consisted of the following:
|
|
|
|
|
March 31, 2021
|
|
|
December 31, 2020
|
|
|
(in thousands)
|
|
Useful Life
(Years)
|
|
Gross Carrying
Value
|
|
|
Accumulated
Amortization
|
|
|
Net Carrying Value
|
|
|
Gross Carrying
Value
|
|
|
Accumulated
Amortization
|
|
|
Net Carrying Value
|
|
|
Intangible assets subject to amortization:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Customer contracts and relationships
|
|
6.3
|
|
$
|
37,821
|
|
|
$
|
(26,676
|
)
|
|
$
|
11,145
|
|
|
$
|
38,214
|
|
|
$
|
(26,288
|
)
|
|
$
|
11,926
|
|
|
Operating contracts and licenses
|
|
36.4
|
|
|
42,402
|
|
|
|
(2,469
|
)
|
|
|
39,933
|
|
|
|
42,012
|
|
|
|
(2,405
|
)
|
|
|
39,607
|
|
|
In-place lease
|
|
13.1
|
|
|
15,558
|
|
|
|
(778
|
)
|
|
|
14,780
|
|
|
|
15,347
|
|
|
|
(656
|
)
|
|
|
14,691
|
|
|
Tradenames
|
|
5.0
|
|
|
5,659
|
|
|
|
(2,294
|
)
|
|
|
3,365
|
|
|
|
5,940
|
|
|
|
(2,435
|
)
|
|
|
3,505
|
|
|
Non-compete agreements
|
|
0.8
|
|
|
780
|
|
|
|
(663
|
)
|
|
|
117
|
|
|
|
770
|
|
|
|
(616
|
)
|
|
|
154
|
|
|
Other
|
|
6.9
|
|
|
829
|
|
|
|
(113
|
)
|
|
|
716
|
|
|
|
818
|
|
|
|
(102
|
)
|
|
|
716
|
|
|
Total amortized intangible assets
|
|
|
|
|
103,049
|
|
|
|
(32,993
|
)
|
|
|
70,056
|
|
|
|
103,101
|
|
|
|
(32,502
|
)
|
|
|
70,599
|
|
|
Indefinite-lived intangible assets:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Business licenses
|
|
|
|
|
575
|
|
|
|
—
|
|
|
|
575
|
|
|
|
573
|
|
|
|
—
|
|
|
|
573
|
|
|
Other intangible assets
|
|
|
|
$
|
103,624
|
|
|
$
|
(32,993
|
)
|
|
$
|
70,631
|
|
|
$
|
103,674
|
|
|
$
|
(32,502
|
)
|
|
$
|
71,172
|
|
Intangible asset amortization expense was $1.2 million for the three months ended March 31, 2021 and $2.2 million for the three months ended March 31, 2020. We recorded a non-cash impairment charge to intangible assets of $15.7 million during the three months ended March 31, 2020 related to our United States audio-visual production business. The duration and impact of COVID-19 may result in additional future impairment charges as facts and circumstances evolve.
At March 31, 2021, the estimated future amortization expense related to intangible assets subject to amortization is as follows:
|
(in thousands)
|
|
|
|
|
|
Year ending December 31,
|
|
|
|
|
|
Remainder of 2021
|
|
$
|
4,039
|
|
|
2022
|
|
|
5,164
|
|
|
2023
|
|
|
4,500
|
|
|
2024
|
|
|
3,539
|
|
|
2025
|
|
|
2,244
|
|
|
Thereafter
|
|
|
50,570
|
|
|
Total
|
|
$
|
70,056
|
|
18
Note 10. Other Current Liabilities
Other current liabilities consisted of the following:
|
|
|
March 31,
|
|
|
December 31,
|
|
|
(in thousands)
|
|
2021
|
|
|
2020
|
|
|
Continuing operations:
|
|
|
|
|
|
|
|
|
|
Self-insured liability
|
|
$
|
5,450
|
|
|
$
|
5,715
|
|
|
Accrued employee benefit costs
|
|
|
2,879
|
|
|
|
2,363
|
|
|
Accrued sales and use taxes
|
|
|
1,857
|
|
|
|
1,547
|
|
|
Accrued interest payable
|
|
|
1,809
|
|
|
|
3,042
|
|
|
Accrued professional fees
|
|
|
1,635
|
|
|
|
1,691
|
|
|
Current portion of pension and postretirement liabilities
|
|
|
1,618
|
|
|
|
1,805
|
|
|
Commissions payable
|
|
|
1,352
|
|
|
|
903
|
|
|
Accrued restructuring
|
|
|
1,224
|
|
|
|
2,479
|
|
|
Other taxes
|
|
|
1,824
|
|
|
|
1,872
|
|
|
Other
|
|
|
4,974
|
|
|
|
5,123
|
|
|
Total continuing operations
|
|
|
24,622
|
|
|
|
26,540
|
|
|
Discontinued operations:
|
|
|
|
|
|
|
|
|
|
Self-insured liability
|
|
|
226
|
|
|
|
347
|
|
|
Environmental remediation liabilities
|
|
|
61
|
|
|
|
61
|
|
|
Other
|
|
|
91
|
|
|
|
91
|
|
|
Total discontinued operations
|
|
|
378
|
|
|
|
499
|
|
|
Total other current liabilities
|
|
$
|
25,000
|
|
|
$
|
27,039
|
|
Note 11. Other Deferred Items and Liabilities
Other deferred items and liabilities consisted of the following:
|
|
|
March 31,
|
|
|
December 31,
|
|
|
(in thousands)
|
|
2021
|
|
|
2020
|
|
|
Continuing operations:
|
|
|
|
|
|
|
|
|
|
Foreign deferred tax liability
|
|
$
|
19,492
|
|
|
$
|
21,336
|
|
|
Multi-employer pension plan withdrawal liability
|
|
|
15,849
|
|
|
|
15,864
|
|
|
Self-insured liability
|
|
|
7,168
|
|
|
|
6,662
|
|
|
Self-insured excess liability
|
|
|
6,358
|
|
|
|
6,358
|
|
|
Accrued compensation
|
|
|
5,309
|
|
|
|
5,821
|
|
|
Accrued restructuring
|
|
|
2,680
|
|
|
|
2,751
|
|
|
Other
|
|
|
1,464
|
|
|
|
1,479
|
|
|
Total continuing operations
|
|
|
58,320
|
|
|
|
60,271
|
|
|
Discontinued operations:
|
|
|
|
|
|
|
|
|
|
Environmental remediation liabilities
|
|
|
2,177
|
|
|
|
2,179
|
|
|
Self-insured liability
|
|
|
1,707
|
|
|
|
1,639
|
|
|
Other
|
|
|
263
|
|
|
|
539
|
|
|
Total discontinued operations
|
|
|
4,147
|
|
|
|
4,357
|
|
|
Total other deferred items and liabilities
|
|
$
|
62,467
|
|
|
$
|
64,628
|
|
19
Note 12. Debt and Finance Lease Obligations
The components of debt and finance lease obligations consisted of the following:
|
|
|
March 31,
|
|
|
December 31,
|
|
|
(in thousands, except interest rates)
|
|
2021
|
|
|
2020
|
|
|
2018 Credit Facility, 4.5% weighted-average interest rate at March 31, 2021 and 4.5% at December 31, 2020, due through 2023(1)
|
|
$
|
301,094
|
|
|
$
|
266,762
|
|
|
FlyOver Iceland Credit Facility, 4.9% weighted-average interest rate at March 31, 2021 and December 31, 2020, due through 2023(1)
|
|
|
5,695
|
|
|
|
5,820
|
|
|
FlyOver Iceland Term Loans, 3.8% weighted-average interest rate at March 31, 2021 and December 31, 2020, due through 2024(1)
|
|
|
710
|
|
|
|
705
|
|
|
Less unamortized debt issuance costs
|
|
|
(2,481
|
)
|
|
|
(2,737
|
)
|
|
Total debt(2)
|
|
|
305,018
|
|
|
|
270,550
|
|
|
Finance lease obligations, 9.0% weighted-average interest rate at March 31, 2021 and 8.0% at December 31, 2020, due through 2067(3)
|
|
|
65,200
|
|
|
|
23,141
|
|
|
Total debt and finance lease obligations(4)
|
|
|
370,218
|
|
|
|
293,691
|
|
|
Current portion
|
|
|
(2,800
|
)
|
|
|
(8,335
|
)
|
|
Long-term debt and finance lease obligations
|
|
$
|
367,418
|
|
|
$
|
285,356
|
|
|
(1)
|
Represents the weighted-average interest rate in effect at the respective periods, including any applicable margin. The interest rates do not include amortization of debt issuance costs or commitment fees.
|
|
(2)
|
The estimated fair value of total debt and finance leases was $329.1 million as of March 31, 2021 and $254.0 million as of December 31, 2020. The fair value of debt was estimated by discounting the future cash flows using rates currently available for debt of similar terms and maturity, which is a Level 2 measurement. Refer to Note 13 – Fair Value Measurements.
|
|
(3)
|
The increase in finance lease obligations is primarily due to the commencement of Pursuit’s new Sky Lagoon attraction in Iceland during the first quarter of 2021, which has a 46-year lease term.
|
|
(4)
|
Cash paid for interest on debt was $5.7 million for the three months ended March 31, 2021 and $3.5 million for the three months ended March 31, 2020.
|
2018 Credit Agreement
Effective October 24, 2018, we entered into the 2018 Credit Agreement. The 2018 Credit Agreement has a maturity date of October 24, 2023 and provides for a $450 million revolving credit facility (“2018 Credit Facility”). The 2018 Credit Facility may be increased up to an additional $250 million under certain circumstances and has a $20 million sublimit for letters of credit. Borrowings and letters of credit can be denominated in U.S. dollars, Euros, Canadian dollars, or British pounds. Our lenders under the 2018 Credit Agreement have a first perfected security interest in all of our personal property.
Effective August 5, 2020, we entered into an amendment to the 2018 Credit Agreement, which, among other things, (i) waives our financial covenants until September 30, 2022 (the “Covenant Waiver Period”) and (ii) requires us to maintain minimum liquidity of $100 million, with liquidity defined as unrestricted cash and available capacity on our 2018 Credit Facility. The Covenant Waiver Period will be in effect until the earlier of September 30, 2022 or the fiscal quarter when our leverage ratio is less than or equal to 4.00 to 1.00. Post Covenant Waiver Period, the maximum leverage ratio will be less than or equal to 4.50 to 1.00 at September 30, 2022 with a step down to less than or equal to 4.00 to 1.00 at December 31, 2022 and thereafter until the maturity date. The minimum interest coverage ratio will be greater than or equal to 2.00 to 1.00 post Covenant Waiver Period and until maturity of the facility. The interest rate on the borrowings is equal to the London Inter-bank Offered Rate (“LIBOR”) plus 350 basis points, with a LIBOR floor of one percent during the Covenant Waiver Period. The LIBOR floor continues until the end of the 2018 Credit Agreement. A revised pricing grid goes into effect after the Covenant Waiver Period ends. Additionally, we are precluded from paying cash dividends, from issuing unsecured debt, and from accessing the $250 million expansion feature during the Covenant Waiver Period. The amendment allows us to make acquisitions under certain conditions. In connection with the amendment, Viad pledged 100% of the capital stock of its wholly-owned domestic subsidiaries and it top-tier foreign subsidiaries (other than Esja). Fees related to the amendment were approximately $1.7 million. As of March 31, 2021, we were in compliance with the amendment.
As of March 31, 2021, capacity remaining under the 2018 Credit Facility was $139.4 million, reflecting borrowings of $301.1 million and $9.5 million in outstanding letters of credit.
We index borrowings under the 2018 Credit Facility to the prime rate or the LIBOR, plus appropriate spreads tied to our leverage ratio. As LIBOR will begin to be phased out in 2021, our 2018 Credit Facility includes a method for determining an alternative or successor rate of interest that gives consideration to the new prevailing market convention. The vast majority of our borrowings under
20
the 2018 Credit Facility are indexed to LIBOR. Commitment fees and letters of credit fees are also tied to our leverage ratio. The fees on the unused portion of the 2018 Credit Facility were 0.50% annually as of March 31, 2021. Only our borrowings under the 2018 Credit Facility and the discount rates we use to account for some leases are indexed to LIBOR. We do not expect the alternative or successor rate to LIBOR to have a material impact on either our 2018 Credit Facility or the accounting for our leases.
FlyOver Iceland Credit Facility
Effective February 15, 2019, FlyOver Iceland ehf., (“FlyOver Iceland”) a wholly-owned subsidiary of Esja, entered into a credit agreement with a €5.0 million (approximately $5.6 million U.S. dollars) credit facility (the “FlyOver Iceland Credit Facility”) with a maturity date of March 1, 2022. The loan proceeds were used to complete the development of the FlyOver Iceland attraction. In response to the COVID-19 pandemic, we entered into an addendum to the FlyOver Iceland Credit Facility effective January 8, 2021 wherein the principal payments were deferred for twelve months beginning December 1, 2020, with the first payment due December 1, 2021. The addendum also extended the maturity date to September 1, 2023. There were no other changes to the terms of the FlyOver Iceland Credit Facility. During the first quarter of 2021, we obtained a waiver of certain covenants to the FlyOver Iceland Credit Facility through December 2021.
FlyOver Iceland Term Loans
During 2020, FlyOver Iceland entered into three term loans totaling ISK 90.0 million (approximately $0.7 million U.S. dollars) (the “FlyOver Iceland Term Loans”). The first term loan for ISK 10.0 million was entered into effective October 15, 2020 with a maturity date of April 1, 2023 and bears interest on a seven-day term deposit at the Central Bank of Iceland. The second term loan for ISK 30.0 million was entered into effective October 15, 2020 with a maturity date of October 1, 2024 and bears interest on a seven-day term deposit at the Central Bank of Iceland plus 3.07%. The third term loan for ISK 50.0 million was entered into effective December 29, 2020 with a maturity date of February 1, 2023 and bears interest at one-month Reykjavik InterBank Offered Rate (“REIBOR”) plus 4.99%. The Icelandic State Treasury guarantees supplemental loans provided by credit institutions to companies impacted by the COVID-19 pandemic. Accordingly, the Icelandic State Treasury guaranteed the repayment of up to 85% of the principal and interest on the ISK 10.0 million and ISK 30.0 million term loans and 70% of the principal amount on the ISK 50.0 million term loan. Loan proceeds will be used to fund operations.
Note 13. Fair Value Measurements
The fair value of an asset or liability is defined as the price that would be received by selling an asset or paying to transfer a liability in an orderly transaction between market participants at the measurement date. The fair value guidance requires an entity to maximize the use of quoted prices and other observable inputs and minimize the use of unobservable inputs when measuring fair value, and also establishes a fair value hierarchy, which prioritizes the inputs to valuation techniques used to measure fair value as follows:
Level 1 - Quoted prices in active markets for identical assets or liabilities.
Level 2 - Observable inputs other than quoted prices included within Level 1 that are observable for the asset or liability, either directly or indirectly.
Level 3 - Unobservable inputs to the valuation methodology that are significant to the measurement of fair value.
Money market mutual funds and certain other mutual fund investments are measured at fair value on a recurring basis using Level 1 inputs. The fair value information related to these assets is summarized in the following tables:
|
|
|
|
|
|
|
Fair Value Measurements at Reporting Date Using
|
|
|
(in thousands)
|
|
March 31, 2021
|
|
|
Quoted Prices in
Active
Markets
(Level 1)
|
|
|
Significant
Other
Observable
Inputs
(Level 2)
|
|
|
Significant
Unobservable
Inputs
(Level 3)
|
|
|
Assets:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Money market funds (1)
|
|
$
|
2
|
|
|
$
|
2
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
Other mutual funds (2)
|
|
|
3,778
|
|
|
|
3,778
|
|
|
|
—
|
|
|
|
—
|
|
|
Total assets at fair value on a recurring basis
|
|
$
|
3,780
|
|
|
$
|
3,780
|
|
|
$
|
—
|
|
|
$
|
—
|
|
21
|
|
|
|
|
|
|
Fair Value Measurements at Reporting Date Using
|
|
|
(in thousands)
|
|
December 31, 2020
|
|
|
Quoted Prices
in Active
Markets
(Level 1)
|
|
|
Significant
Other
Observable
Inputs
(Level 2)
|
|
|
Significant
Unobservable
Inputs
(Level 3)
|
|
|
Assets:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Money market funds (1)
|
|
$
|
2
|
|
|
$
|
2
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
Other mutual funds (2)
|
|
|
3,457
|
|
|
|
3,457
|
|
|
|
—
|
|
|
|
—
|
|
|
Total assets at fair value on a recurring basis
|
|
$
|
3,459
|
|
|
$
|
3,459
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
(1)
|
We include money market funds in “Cash and cash equivalents” in the Condensed Consolidated Balance Sheets. We classify these investments as available-for-sale and record them at fair value. There have been no realized gains or losses related to these investments and we have not experienced any redemption restrictions with respect to any of the money market mutual funds.
|
|
(2)
|
We include other mutual funds in “Other investments and assets” in the Condensed Consolidated Balance Sheets.
|
The carrying values of cash and cash equivalents, receivables, and accounts payable approximate fair value due to the short-term nature of these instruments. Refer to Note 12 – Debt and Finance Lease Obligations for the estimated fair value of debt obligations.
Note 14. Loss Per Share
The components of basic and diluted loss per share are as follows:
|
|
|
Three Months Ended
|
|
|
|
|
March 31,
|
|
|
(in thousands, except per share data)
|
|
2021
|
|
|
2020
|
|
|
Net loss attributable to Viad (diluted)
|
|
$
|
(43,152
|
)
|
|
$
|
(86,585
|
)
|
|
Convertible preferred stock dividends
|
|
|
(1,898
|
)
|
|
|
—
|
|
|
Adjustment to the redemption value of redeemable noncontrolling interest
|
|
|
(56
|
)
|
|
|
(126
|
)
|
|
Net loss allocated to Viad common stockholders (basic)
|
|
$
|
(45,106
|
)
|
|
$
|
(86,711
|
)
|
|
Basic weighted-average outstanding common shares
|
|
|
20,370
|
|
|
|
20,215
|
|
|
Diluted weighted-average outstanding shares
|
|
|
20,370
|
|
|
|
20,215
|
|
|
Loss per share:
|
|
|
|
|
|
|
|
|
|
Basic loss attributable to Viad common stockholders
|
|
$
|
(2.21
|
)
|
|
$
|
(4.29
|
)
|
|
Diluted loss attributable to Viad common stockholders(1)
|
|
$
|
(2.21
|
)
|
|
$
|
(4.29
|
)
|
|
(1)
|
Diluted loss per share amount cannot exceed basic loss per share.
|
Diluted loss per common share is calculated using the more dilutive of the two-class method or as-converted method. The two-class method uses net loss available to common stockholders and assumes conversion of all potential shares other than the participating securities. The as-converted method uses net loss and assumes conversion of all potential shares including the participating securities. Dilutive potential common shares include outstanding stock options, unvested restricted share units and convertible preferred stock. We apply the two-class method in calculating loss per common share as unvested share-based payment awards that contain nonforfeitable rights to dividends and preferred stock are considered participating securities. Accordingly, such securities are included in the earnings allocation in calculating loss per share. The adjustment to the carrying value of the redeemable noncontrolling interest is reflected in loss per common share.
We excluded the following weighted-average potential common shares from the calculations of diluted net loss per common share during the applicable periods because their inclusion would have been anti-dilutive:
|
|
|
Three Months Ended
|
|
|
|
|
March 31,
|
|
|
(in thousands)
|
|
2021
|
|
2020
|
|
|
Convertible preferred stock (as converted to common stock)
|
|
|
6,494
|
|
|
—
|
|
|
Unvested restricted share-based awards
|
|
|
38
|
|
|
84
|
|
|
Stock options
|
|
|
57
|
|
|
16
|
|
22
Note 15. Common and Preferred Stock
Convertible Series A Preferred Stock
On August 5, 2020, we entered into an Investment Agreement with funds managed by private equity firm Crestview Partners, relating to the issuance of 135,000 shares of newly issued Convertible Series A Preferred Stock, par value $0.01 per share, for an aggregate purchase price of $135 million or $1,000 per share. The $135 million issuance was offset in part by $9.2 million of expenses related to the capital raise. The Investment Agreement also includes a delayed draw commitment of up to $45 million in additional Convertible Series A Preferred Stock, which we may access during the 12 months following the August 5, 2020 closing date on the same terms and conditions as the initial investment. We have classified the convertible preferred stock as mezzanine equity in our Consolidated Balance Sheet due to the existence of certain change in control provisions that are not solely within our control.
The Convertible Series A Preferred Stock carries a 5.5% cumulative quarterly dividend, which is payable in cash or in-kind at Viad’s option and is convertible at the option of the holders into shares of our common stock at a conversion price of $21.25 per share. Upon the occurrence of a change in control event, the holders have a right to require Viad to repurchase such preferred stock. During the three months ended March 31, 2021, $1.9 million of dividends were deemed declared and paid in-kind.
Holders of the Convertible Series A Preferred Stock are entitled to vote with holders of Viad’s common stock on an as-converted basis.
Common Stock Repurchases
Our Board of Directors previously authorized us to repurchase shares of our common stock from time to time at prevailing market prices. Effective February 7, 2019, our Board of Directors authorized the repurchase of an additional 500,000 shares. In March 2020, our Board of Directors suspended our share repurchase program for the foreseeable future. Prior to the suspension, we repurchased 53,784 shares on the open market for $2.8 million during the three months ended March 31, 2020. As of March 31, 2021, 546,283 shares remain available for repurchase. Additionally, we repurchase shares related to tax withholding requirements on vested restricted stock awards. Refer to Note 3 – Share-Based Compensation.
Note 16. Accumulated Other Comprehensive Income (Loss)
Changes in accumulated other comprehensive income (loss) (“AOCI”) by component are as follows:
|
(in thousands)
|
|
Cumulative
Foreign Currency Translation Adjustments
|
|
|
Unrecognized Net Actuarial Loss and Prior Service Credit, Net
|
|
|
Accumulated
Other
Comprehensive
Income (Loss)
|
|
|
Balance at December 31, 2020
|
|
$
|
(16,686
|
)
|
|
$
|
(13,955
|
)
|
|
$
|
(30,641
|
)
|
|
Other comprehensive income before reclassifications
|
|
|
3,977
|
|
|
|
—
|
|
|
|
3,977
|
|
|
Amounts reclassified from AOCI, net of tax
|
|
|
—
|
|
|
|
121
|
|
|
|
121
|
|
|
Net other comprehensive income
|
|
|
3,977
|
|
|
|
121
|
|
|
|
4,098
|
|
|
Balance at March 31, 2021
|
|
$
|
(12,709
|
)
|
|
$
|
(13,834
|
)
|
|
$
|
(26,543
|
)
|
|
(in thousands)
|
|
Cumulative
Foreign Currency Translation Adjustments
|
|
|
Unrecognized Net Actuarial Loss and Prior Service Credit, Net
|
|
|
Accumulated
Other
Comprehensive
Income (Loss)
|
|
|
Balance at December 31, 2019
|
|
$
|
(23,799
|
)
|
|
$
|
(11,900
|
)
|
|
$
|
(35,699
|
)
|
|
Other comprehensive loss before reclassifications
|
|
|
(28,158
|
)
|
|
|
—
|
|
|
|
(28,158
|
)
|
|
Amounts reclassified from AOCI, net of tax
|
|
|
—
|
|
|
|
314
|
|
|
|
314
|
|
|
Net other comprehensive income (loss)
|
|
|
(28,158
|
)
|
|
|
314
|
|
|
|
(27,844
|
)
|
|
Balance at March 31, 2020
|
|
$
|
(51,957
|
)
|
|
$
|
(11,586
|
)
|
|
$
|
(63,543
|
)
|
Amounts reclassified that relate to our defined benefit pension and postretirement plans include the amortization of prior service costs and actuarial net losses recognized during each period presented. We recorded these costs as components of net periodic cost for each period presented. Refer to Note 18 – Pension and Postretirement Benefits for additional information.
23
Note 17. Income Taxes
The effective tax rate was 6.3% for the three months ended March 31, 2021 and 15.2% for the three months ended March 31, 2020.
The income tax provision was computed based on our estimated annualized effective tax rate and the full-year forecasted income or loss plus the tax impact of unusual, infrequent, or nonrecurring significant items during the period. The effective tax rate for the three months ended March 31, 2021 was less than the federal statutory rate of 21% primarily as a result of excluding the tax benefits on losses recognized in the United States, United Kingdom, and other European countries where we have a valuation allowance. The effective tax rate for the three months ended March 31, 2020 was less than the federal statutory rate of 21% primarily due to no tax benefit recognized on some of the goodwill impairments.
We paid cash for income taxes of $0.7 million during the three months ended March 31, 2021 and $3.3 million during the three months ended March 31, 2020.
Note 18. Pension and Postretirement Benefits
The components of net periodic benefit cost of our pension and postretirement benefit plans for the three months ended March 31, 2021 and 2020 consist of the following:
|
|
|
Domestic Plans
|
|
|
|
|
|
|
|
|
|
|
|
|
Pension Plans
|
|
|
Postretirement Benefit Plans
|
|
|
Foreign Pension Plans
|
|
|
(in thousands)
|
|
2021
|
|
|
2020
|
|
|
2021
|
|
|
2020
|
|
|
2021
|
|
|
2020
|
|
|
Service cost
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
13
|
|
|
$
|
15
|
|
|
$
|
113
|
|
|
$
|
110
|
|
|
Interest cost
|
|
|
114
|
|
|
|
160
|
|
|
|
55
|
|
|
|
88
|
|
|
|
76
|
|
|
|
84
|
|
|
Expected return on plan assets
|
|
|
(27
|
)
|
|
|
(1
|
)
|
|
|
—
|
|
|
|
—
|
|
|
|
(125
|
)
|
|
|
(131
|
)
|
|
Amortization of prior service credit
|
|
|
—
|
|
|
|
—
|
|
|
|
(1
|
)
|
|
|
(36
|
)
|
|
|
—
|
|
|
|
—
|
|
|
Recognized net actuarial loss
|
|
|
151
|
|
|
|
135
|
|
|
|
56
|
|
|
|
82
|
|
|
|
49
|
|
|
|
46
|
|
|
Net periodic benefit cost
|
|
$
|
238
|
|
|
$
|
294
|
|
|
$
|
123
|
|
|
$
|
149
|
|
|
$
|
113
|
|
|
$
|
109
|
|
We expect to contribute $0.8 million to our funded pension plans, $0.9 million to our unfunded pension plans, and $0.9 million to our postretirement benefit plans in 2021. During the three months ended March 31, 2021, we contributed $0.2 million to our funded pension plans, $0.2 million to our unfunded pension plans, and $0.2 million to our postretirement benefit plans.
Note 19. Restructuring Charges
GES
As part of our efforts to drive efficiencies and simplify our business operations, we took certain restructuring actions designed to simplify and transform GES for greater profitability. In response to the COVID-19 pandemic in 2020, we accelerated our transformation and streamlining efforts at GES to significantly reduce costs and create a lower and more flexible cost structure focused on servicing our more profitable market segments. These initiatives resulted in restructuring charges related to the elimination of certain positions and continuing to reduce our facility footprint at GES, as well as charges related to the closure and liquidation of GES’ United Kingdom-based audio-visual services business. In the fourth quarter of 2020, we entered into an agreement with a third-party to outsource the management, cleaning, and storage of the aisle carpeting we use at live events and consequently vacated a facility during the first quarter of 2021.
Other Restructurings
We recorded restructuring charges in connection with the consolidation of certain support functions at our corporate headquarters and certain reorganization activities within Pursuit. These charges primarily consist of severance and related benefits due to headcount reductions and charges related to the downsizing of facilities.
24
Changes to the restructuring liability by major restructuring activity are as follows:
|
|
|
GES
|
|
|
Other Restructurings
|
|
|
|
|
|
|
(in thousands)
|
|
Severance &
Employee
Benefits
|
|
|
Facilities
|
|
|
Severance &
Employee
Benefits
|
|
|
Total
|
|
|
Balance at December 31, 2020
|
|
$
|
2,440
|
|
|
$
|
2,766
|
|
|
$
|
24
|
|
|
$
|
5,230
|
|
|
Restructuring charges
|
|
|
64
|
|
|
|
2,719
|
|
|
|
43
|
|
|
|
2,826
|
|
|
Cash payments
|
|
|
(419
|
)
|
|
|
(1,747
|
)
|
|
|
(60
|
)
|
|
|
(2,226
|
)
|
|
Non-cash items(1)
|
|
|
—
|
|
|
|
(1,913
|
)
|
|
|
—
|
|
|
|
(1,913
|
)
|
|
Adjustment to liability
|
|
|
(10
|
)
|
|
|
(18
|
)
|
|
|
15
|
|
|
|
(13
|
)
|
|
Balance at March 31, 2021
|
|
$
|
2,075
|
|
|
$
|
1,807
|
|
|
$
|
22
|
|
|
$
|
3,904
|
|
|
(1)
|
Represents non-cash adjustments related to a write down of certain ROU assets as a result of vacating certain facilities prior to the lease term and the closure and liquidation of GES’ United Kingdom-based audio-visual services business.
|
As of March 31, 2021, $1.5 million of the liabilities related to severance and employee benefits will remain unpaid by the end of 2021. The liability related to future lease payments will be paid over the remaining lease terms. Refer to Note 23 – Segment Information for information regarding restructuring charges by segment.
Note 20. Leases and Other
The balance sheet presentation of our operating and finance leases is as follows:
|
|
|
|
|
March 31,
|
|
|
December 31,
|
|
|
(in thousands)
|
|
Classification on the Condensed Consolidated Balance Sheet
|
|
2021
|
|
|
2020
|
|
|
Assets:
|
|
|
|
|
|
|
|
|
|
|
|
Operating lease assets
|
|
Operating lease ROU assets
|
|
$
|
81,488
|
|
|
$
|
82,739
|
|
|
Finance lease assets (1)
|
|
Property and equipment, net
|
|
|
63,934
|
|
|
|
23,366
|
|
|
Total lease assets
|
|
|
|
$
|
145,422
|
|
|
$
|
106,105
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Liabilities:
|
|
|
|
|
|
|
|
|
|
|
|
Current:
|
|
|
|
|
|
|
|
|
|
|
|
Operating lease obligations
|
|
Operating lease obligations
|
|
$
|
14,684
|
|
|
$
|
15,697
|
|
|
Finance lease obligations
|
|
Current portion of debt and finance lease obligations
|
|
|
2,519
|
|
|
|
2,514
|
|
|
Noncurrent:
|
|
|
|
|
|
|
|
|
|
|
|
Operating lease obligations
|
|
Long-term operating lease obligations
|
|
|
72,878
|
|
|
|
70,150
|
|
|
Finance lease obligations (1)
|
|
Long-term debt and finance lease obligations
|
|
|
62,681
|
|
|
|
20,627
|
|
|
Total lease liabilities
|
|
|
|
$
|
152,762
|
|
|
$
|
108,988
|
|
|
(1)
|
The increase in finance lease assets and obligations is primarily due to the commencement of Pursuit’s new Sky Lagoon attraction in Iceland during the first quarter of 2021, which has a 46-year lease term.
|
During the three months ended March 31, 2021, we recorded a write down of certain ROU assets as a result of vacating certain facilities prior to the lease term.
The components of lease expense consisted of the following:
|
|
|
Three Months Ended
|
|
|
|
|
March 31,
|
|
|
(in thousands)
|
|
2021
|
|
|
2020
|
|
|
Finance lease cost:
|
|
|
|
|
|
|
|
|
|
Amortization of ROU assets
|
|
$
|
1,070
|
|
|
$
|
918
|
|
|
Interest on lease liabilities
|
|
|
1,315
|
|
|
|
417
|
|
|
Operating lease cost
|
|
|
6,270
|
|
|
|
6,727
|
|
|
Short-term lease cost
|
|
|
261
|
|
|
|
310
|
|
|
Variable lease cost
|
|
|
942
|
|
|
|
1,699
|
|
|
Total lease cost, net
|
|
$
|
9,858
|
|
|
$
|
10,071
|
|
25
Other information related to operating and finance leases are as follows:
|
|
|
Three Months Ended
|
|
|
|
|
March 31,
|
|
|
(in thousands)
|
|
2021
|
|
|
2020
|
|
|
Cash paid for amounts included in the measurement of lease liabilities:
|
|
|
|
|
|
|
|
|
|
Operating cash flows from operating leases
|
|
$
|
6,153
|
|
|
$
|
6,529
|
|
|
Operating cash flows from finance leases
|
|
$
|
274
|
|
|
$
|
160
|
|
|
Financing cash flows from finance leases
|
|
$
|
710
|
|
|
$
|
777
|
|
|
ROU assets obtained in exchange for lease obligations:
|
|
|
|
|
|
|
|
|
|
Operating leases
|
|
$
|
6,299
|
|
|
$
|
779
|
|
|
Finance leases
|
|
|
42,907
|
|
|
$
|
730
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
March 31,
|
|
|
December 31,
|
|
|
|
|
2021
|
|
|
2020
|
|
|
Weighted-average remaining lease term (years):
|
|
|
|
|
|
|
|
|
|
Operating leases
|
|
|
8.21
|
|
|
|
8.39
|
|
|
Finance leases
|
|
|
35.44
|
|
|
|
13.97
|
|
|
Weighted-average discount rate:
|
|
|
|
|
|
|
|
|
|
Operating leases
|
|
|
7.02
|
%
|
|
|
6.93
|
%
|
|
Finance leases
|
|
|
9.04
|
%
|
|
|
7.99
|
%
|
As of March 31, 2021, the estimated future minimum lease payments under non-cancellable leases, excluding variable leases and variable non-lease components, are as follows:
|
(in thousands)
|
|
Operating Leases
|
|
|
Finance Leases
|
|
|
Total
|
|
|
Remainder of 2021
|
|
$
|
16,616
|
|
|
$
|
5,948
|
|
|
$
|
22,564
|
|
|
2022
|
|
|
16,932
|
|
|
|
7,927
|
|
|
|
24,859
|
|
|
2023
|
|
|
13,847
|
|
|
|
7,407
|
|
|
|
21,254
|
|
|
2024
|
|
|
11,982
|
|
|
|
6,735
|
|
|
|
18,717
|
|
|
2025
|
|
|
10,689
|
|
|
|
6,204
|
|
|
|
16,893
|
|
|
Thereafter
|
|
|
52,037
|
|
|
|
189,245
|
|
|
|
241,282
|
|
|
Total future lease payments
|
|
|
122,103
|
|
|
|
223,466
|
|
|
|
345,569
|
|
|
Less: Amount representing interest
|
|
|
(34,541
|
)
|
|
|
(158,266
|
)
|
|
|
(192,807
|
)
|
|
Present value of minimum lease payments
|
|
|
87,562
|
|
|
|
65,200
|
|
|
|
152,762
|
|
|
Current portion
|
|
|
14,684
|
|
|
|
2,519
|
|
|
|
17,203
|
|
|
Long-term portion
|
|
$
|
72,878
|
|
|
$
|
62,681
|
|
|
$
|
135,559
|
|
As of March 31, 2021, the estimated future minimum rental income under non-cancellable leases, which includes rental income from facilities that we own, are as follows:
|
(in thousands)
|
|
|
|
|
|
Remainder of 2021
|
|
$
|
1,180
|
|
|
2022
|
|
|
1,088
|
|
|
2023
|
|
|
869
|
|
|
2024
|
|
|
646
|
|
|
2025
|
|
|
493
|
|
|
Thereafter
|
|
|
1,333
|
|
|
Total minimum rents
|
|
$
|
5,609
|
|
Lease Not Yet Commenced
As of March 31, 2021, we had executed a facility lease for which we did not have control of the underlying assets. Accordingly, we did not record the lease liability and ROU asset on our Condensed Consolidated Balance Sheets. This lease is for the new FlyOver Attraction, FlyOver Canada Toronto. We expect the lease commencement date to begin in fiscal year 2022 with a lease term of 22 years.
26
Note 21. Litigation, Claims, Contingencies, and Other
We are plaintiffs or defendants to various actions, proceedings, and pending claims, some of which involve, or may involve, compensatory, punitive, or other damages. Litigation is subject to many uncertainties and it is possible that some of the legal actions, proceedings, or claims could be decided against us. Although the amount of liability as of March 31, 2021 with respect to unresolved legal matters is not ascertainable, we believe that any resulting liability, after taking into consideration amounts already provided for and insurance coverage, will not have a material effect on our business, financial position, or results of operations.
On July 18, 2020, an off-road Ice Explorer operated by our Pursuit business was involved in an accident while enroute to the Athabasca Glacier, resulting in three fatalities and multiple other serious injuries. We continue to support the victims and their families, and we are fully cooperating with the applicable regulatory authorities to investigate this accident. We immediately reported the accident to our relevant insurance carriers, who are also supporting the investigation and subsequent claims. Subject to customary deductibles, we believe that our insurance coverage is sufficient to cover potential claims related to this accident.
We are subject to various U.S. federal, state, and foreign laws and regulations governing the prevention of pollution and the protection of the environment in the jurisdictions in which we have or had operations. If we fail to comply with these environmental laws and regulations, civil and criminal penalties could be imposed, and we could become subject to regulatory enforcement actions in the form of injunctions and cease and desist orders. As is the case with many companies, we also face exposure to actual or potential claims and lawsuits involving environmental matters relating to our past operations. As of March 31, 2021, we had recorded environmental remediation liabilities of $2.2 million related to previously sold operations. Although we are a party to certain environmental disputes, we believe that any resulting liabilities, after taking into consideration amounts already provided for and insurance coverage, will not have a material effect on our financial position or results of operations.
As of March 31, 2021, on behalf of our subsidiaries, we had certain obligations under guarantees to third parties. These guarantees are not subject to liability recognition in the condensed consolidated financial statements and relate to leased facilities and equipment leases entered into by our subsidiary operations. We would generally be required to make payments to the respective third parties under these guarantees in the event that the related subsidiary could not meet its own payment obligations. The maximum potential amount of future payments that we would be required to make under all guarantees existing as of March 31, 2021 would be $90.0 million. These guarantees relate to our leased equipment and facilities through January 2040. There are no recourse provisions that would enable us to recover from third parties any payments made under the guarantees. Furthermore, there are no collateral or similar arrangements pursuant to which we could recover payments.
A significant number of our employees are unionized and we are a party to approximately 100 collective-bargaining agreements, with approximately one-third requiring renegotiation each year. If we are unable to reach an agreement with a union during the collective-bargaining process, the union may call for a strike or work stoppage, which may, under certain circumstances, adversely impact our business and results of operations. We believe that relations with our employees are satisfactory and that collective-bargaining agreements expiring in 2021 will be renegotiated in the ordinary course of business. Although our labor relations are currently stable, disruptions could occur, with the possibility of an adverse impact on the operating results of GES.
We are self-insured up to certain limits for workers’ compensation and general liabilities, which includes automobile, product general liability, and client property loss claims. The aggregate amount of insurance liabilities (up to our retention limit) related to our continuing operations was $12.6 million as of March 31, 2021, which includes $7.9 million related to workers’ compensation liabilities, and $4.7 million related to general liability claims. We have also retained and provided for certain workers’ compensation insurance liabilities in conjunction with previously sold businesses of $1.9 million as of March 31, 2021. We are also self-insured for certain employee health benefits and the estimated employee health benefit claims incurred but not yet reported was $1.5 million as of March 31, 2021. Provisions for losses for claims incurred, including actuarially derived estimated claims incurred but not yet reported, are made based on our historical experience, claims frequency, and other factors. A change in the assumptions used could result in an adjustment to recorded liabilities. We have purchased insurance for amounts in excess of the self-insured levels, which generally range from $0.2 million to $0.5 million on a per claim basis. We do not maintain a self-insured retention pool fund as claims are paid from current cash resources at the time of settlement. Our net cash payments in connection with these insurance liabilities were $0.2 million for the three months ended March 31, 2021 and $1.5 million for the three months ended March 31, 2020.
In addition, as of March 31, 2021, we have recorded insurance liabilities of $6.4 million related to continuing operations, which represents the amount for which we remain the primary obligor after self-insured insurance limits, without taking into consideration the above-referenced insurance coverage. The $6.4 million is related to workers’ compensation liabilities, which is recorded in other deferred items and liabilities in the Condensed Consolidated Balance Sheets with a corresponding receivable in other investments.
27
Note 22. Noncontrolling Interest – Redeemable and Non-redeemable
Redeemable noncontrolling interest
On November 3, 2017, we acquired the controlling interest (54.5% of the common stock) in Esja, a private corporation in Reykjavik, Iceland. Through Esja and its wholly-owned subsidiary, we are operating a FlyOver Iceland attraction.
The minority Esja shareholders have the right to sell (or “put”) their Esja shares to us based on a multiple of 5.0x EBITDA as calculated on the trailing 12 months from the most recently completed quarter before the put option exercise. The put option is only exercisable after 36 months of business operation (the “Reference Date”) and if the FlyOver Iceland attraction has earned a minimum of €3.25 million in unadjusted EBITDA during the most recent fiscal year and during the trailing 12-month period prior to exercise (the “Put Option Condition”). The put option is exercisable during a period of 12 months following the Reference Date (the “Option Period”) if the Put Option Condition has been met. If the Put Option Condition has not been met during the first Option Period, the Reference Date will be extended for an additional 12 months up to three times. If after 72 months, the FlyOver Iceland attraction has not achieved the Put Option Condition, the put option expires. If the Put Option Condition is met during any of the Option Periods, yet the shares are not exercised prior to the end of the 12-month Option Period, the put option will expire.
The noncontrolling interest’s carrying value is determined by the fair value of the noncontrolling interest as of the acquisition date and the noncontrolling interest’s share of the subsequent net income or loss. This value is benchmarked against the redemption value of the sellers’ put option. The carrying value is adjusted to the redemption value, provided that it does not fall below the initial carrying value, as determined by the purchase price allocation. We have made a policy election to reflect any changes caused by such an adjustment to retained earnings, rather than to current earnings.
Changes in the redeemable noncontrolling interest are as follows:
|
(in thousands)
|
|
|
|
|
|
Balance at December 31, 2020
|
|
$
|
5,225
|
|
|
Net loss attributable to redeemable noncontrolling interest
|
|
|
(494
|
)
|
|
Adjustment to the redemption value
|
|
|
56
|
|
|
Capital contribution
|
|
|
142
|
|
|
Foreign currency translation adjustment
|
|
|
77
|
|
|
Balance at March 31, 2021
|
|
$
|
5,006
|
|
Non-redeemable noncontrolling interest
Non-redeemable noncontrolling interest represents the portion of equity in a subsidiary that is not attributable, directly or indirectly, to us. Our non-redeemable noncontrolling interest relates to the equity ownership interest that we do not own.
Changes in the non-redeemable noncontrolling interest are as follows:
|
(in thousands)
|
Glacier Park Inc.
|
|
|
Brewster (1)
|
|
|
Sky Lagoon
|
|
|
Total
|
|
|
Balance at December 31, 2020
|
$
|
13,953
|
|
|
$
|
51,295
|
|
|
$
|
12,896
|
|
|
$
|
78,144
|
|
|
Net loss attributable to non-redeemable noncontrolling interest
|
|
(729
|
)
|
|
|
(87
|
)
|
|
|
(629
|
)
|
|
|
(1,445
|
)
|
|
Acquisitions
|
|
—
|
|
|
|
6,759
|
|
|
|
—
|
|
|
|
6,759
|
|
|
Dividends
|
|
—
|
|
|
|
(951
|
)
|
|
|
—
|
|
|
|
(951
|
)
|
|
Foreign currency translation adjustments
|
|
2
|
|
|
|
654
|
|
|
|
94
|
|
|
|
750
|
|
|
Balance at March 31, 2021
|
$
|
13,226
|
|
|
$
|
57,670
|
|
|
$
|
12,361
|
|
|
$
|
83,257
|
|
|
Equity ownership interest that we do not own
|
|
20
|
%
|
|
|
40
|
%
|
|
|
49
|
%
|
|
|
|
|
|
(1)
|
Includes Mountain Park Lodges and our recently acquired Golden Skybridge at Brewster, part of the Banff Jasper Collection.
|
28
Note 23. Segment Information
We measure the profit and performance of our operations on the basis of segment operating income or loss, which excludes restructuring charges and recoveries and impairment charges. Intersegment sales are eliminated in consolidation and intersegment transfers are not significant. Corporate activities include expenses not allocated to operations. Depreciation and amortization and share-based compensation expense are the only significant non-cash items for the reportable segments.
During the first quarter of 2021, we reorganized GES’ operating segments to represent the changes in how our CODM reviews the financial performance of GES and makes decisions regarding the allocation of resources. Accordingly, GES is now a single reportable segment. We made no changes to the Pursuit reportable segment.
Our reportable segments, with reconciliations to consolidated totals, are as follows:
|
|
|
Three Months Ended
|
|
|
|
|
March 31,
|
|
|
(in thousands)
|
|
2021
|
|
|
2020
|
|
|
Revenue:
|
|
|
|
|
|
|
|
|
|
GES
|
|
$
|
19,145
|
|
|
$
|
281,135
|
|
|
Pursuit
|
|
|
9,790
|
|
|
|
13,523
|
|
|
Total revenue
|
|
$
|
28,935
|
|
|
$
|
294,658
|
|
|
Segment operating income (loss):
|
|
|
|
|
|
|
|
|
|
GES
|
|
$
|
(19,904
|
)
|
|
$
|
10,858
|
|
|
Pursuit
|
|
|
(18,321
|
)
|
|
|
(20,274
|
)
|
|
Segment operating loss
|
|
|
(38,225
|
)
|
|
|
(9,416
|
)
|
|
Corporate eliminations (1)
|
|
|
17
|
|
|
|
16
|
|
|
Corporate activities
|
|
|
(2,005
|
)
|
|
|
(789
|
)
|
|
Operating loss
|
|
|
(40,213
|
)
|
|
|
(10,189
|
)
|
|
Interest income
|
|
|
33
|
|
|
|
79
|
|
|
Interest expense
|
|
|
(5,118
|
)
|
|
|
(4,018
|
)
|
|
Other expense
|
|
|
(360
|
)
|
|
|
(419
|
)
|
|
Restructuring charges:
|
|
|
|
|
|
|
|
|
|
GES
|
|
|
(2,783
|
)
|
|
|
(656
|
)
|
|
Pursuit
|
|
|
(23
|
)
|
|
|
(1
|
)
|
|
Corporate
|
|
|
(20
|
)
|
|
|
(194
|
)
|
|
Impairment charges:
|
|
|
|
|
|
|
|
|
|
GES
|
|
|
—
|
|
|
|
(86,623
|
)
|
|
Pursuit
|
|
|
—
|
|
|
|
(1,757
|
)
|
|
Loss from continuing operations before income taxes
|
|
$
|
(48,484
|
)
|
|
$
|
(103,778
|
)
|
|
(1)
|
Corporate eliminations represent the elimination of depreciation expense recorded by Pursuit associated with previously eliminated intercompany profit realized by GES for renovations to Pursuit’s Banff Gondola.
|
Note 24. Subsequent Event
On April 30, 2021, we opened Pursuit’s new Sky Lagoon attraction in Reykjavik, Iceland.
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