# Pursuit Attractions & Hospitality, Inc.: Form 10-Q for the period ended Sep 30, 2017

- Company: [Pursuit Attractions & Hospitality, Inc.](/companies/prsu.md) (CIK 884219)
- Form: 10-Q
- Filed: 2017-11-06
- Accepted by EDGAR: Nov 6, 2017, 12:04 ET
- Period: 2017-09-30
- Accession: 0001564590-17-021682
- Inline XBRL: yes
- Main document: https://www.sec.gov/Archives/edgar/data/884219/000156459017021682/vvi-10q_20170930.htm
- All documents and exhibits: https://www.sec.gov/Archives/edgar/data/884219/000156459017021682/

## Figures reported in this filing

Standardized XBRL line items for the period ended 2017-09-30.

| Line item | Period | Value | XBRL concept |
| --- | --- | ---: | --- |
| Cost of revenue | 3 months, 2017-07-01 to 2017-09-30 | $37.1m | us-gaap:CostOfGoodsSold |
| Cost of revenue | 9 months, 2017-01-01 to 2017-09-30 | $117.1m | us-gaap:CostOfGoodsSold |
| Operating income | 3 months, 2017-07-01 to 2017-09-30 | $43.7m | us-gaap:OperatingIncomeLoss |
| Operating income | 9 months, 2017-01-01 to 2017-09-30 | $91.3m | us-gaap:OperatingIncomeLoss |
| Interest expense | 3 months, 2017-07-01 to 2017-09-30 | $2.1m | us-gaap:InterestExpense |
| Interest expense | 9 months, 2017-01-01 to 2017-09-30 | $6.3m | us-gaap:InterestExpense |
| Income tax | 3 months, 2017-07-01 to 2017-09-30 | $20.0m | us-gaap:IncomeTaxExpenseBenefit |
| Income tax | 9 months, 2017-01-01 to 2017-09-30 | $32.9m | us-gaap:IncomeTaxExpenseBenefit |
| Net income | 3 months, 2017-07-01 to 2017-09-30 | $44.7m | us-gaap:NetIncomeLoss |
| Net income | 9 months, 2017-01-01 to 2017-09-30 | $79.4m | us-gaap:NetIncomeLoss |
| Diluted EPS | 3 months, 2017-07-01 to 2017-09-30 | $2.19 | us-gaap:EarningsPerShareDiluted |
| Diluted EPS | 9 months, 2017-01-01 to 2017-09-30 | $3.89 | us-gaap:EarningsPerShareDiluted |
| Basic EPS | 3 months, 2017-07-01 to 2017-09-30 | $2.19 | us-gaap:EarningsPerShareBasic |
| Basic EPS | 9 months, 2017-01-01 to 2017-09-30 | $3.89 | us-gaap:EarningsPerShareBasic |
| Diluted shares (weighted) | 3 months, 2017-07-01 to 2017-09-30 | 20,436,000 shares | us-gaap:WeightedAverageNumberOfDilutedSharesOutstanding |
| Diluted shares (weighted) | 9 months, 2017-01-01 to 2017-09-30 | 20,382,000 shares | us-gaap:WeightedAverageNumberOfDilutedSharesOutstanding |
| Operating cash flow | 9 months, 2017-01-01 to 2017-09-30 | $114.6m | us-gaap:NetCashProvidedByUsedInOperatingActivities |
| Capital expenditure | 9 months, 2017-01-01 to 2017-09-30 | $39.5m | us-gaap:PaymentsToAcquireProductiveAssets |
| Dividends paid | 9 months, 2017-01-01 to 2017-09-30 | $6.1m | us-gaap:PaymentsOfDividendsCommonStock |
| Share repurchases | 9 months, 2017-01-01 to 2017-09-30 | $1.3m | us-gaap:PaymentsForRepurchaseOfCommonStock |
| Cash and equivalents | at 2017-09-30 | $53.5m | us-gaap:CashAndCashEquivalentsAtCarryingValue |
| Current assets | at 2017-09-30 | $246.3m | us-gaap:AssetsCurrent |
| Total assets | at 2017-09-30 | $952.8m | us-gaap:Assets |
| Current liabilities | at 2017-09-30 | $346.6m | us-gaap:LiabilitiesCurrent |
| Total liabilities | at 2017-09-30 | $484.3m | us-gaap:Liabilities |
| Long-term debt | at 2017-09-30 | $183.6m | us-gaap:LongTermDebtNoncurrent |
| Shareholders' equity | at 2017-09-30 | $454.5m | us-gaap:StockholdersEquity |

## Management's discussion and analysis

As filed, 57,119 characters.

The following Management’s Discussion and Analysis (“MD&A”) should be read in conjunction with the Annual Report on Form 10-K of Viad Corp (“Viad” or the “Company”) for the year ended December 31, 2016 and the condensed consolidated financial statements and accompanying notes included in this Form 10-Q. The MD&A is intended to assist in providing an understanding of the Company’s financial condition and results of operations. This discussion contains forward-looking statements that involve risks and uncertainties. Viad’s actual results could differ materially from those anticipated due to various factors discussed under “Forward-Looking Statements” and elsewhere in this Form 10-Q.

### Overview

Viad operates through three reportable business segments: GES U.S., GES International (collectively, “GES”), and Pursuit.

### GES

GES is a global, full-service provider for live events that produces exhibitions, conferences, corporate events, and consumer events. GES offers a comprehensive range of live event services and a full suite of audio-visual services from creative and technology to content and design, along with online tools powered by next generation technologies that help clients easily manage the complexities of their events.

GES’ clients include event organizers and corporate brand marketers. Corporate brand marketers include exhibitors and domestic and international corporations that want to promote their brands, services and innovations, feature new products, and build business relationships. GES serves corporate brand marketers when they exhibit at shows and when GES is engaged to manage their global exhibit program or produce their proprietary corporate events.

### Markets Served

GES U.S. and GES International both offer a full suite of services for event organizers and corporate brand marketers across four live event markets: (i) Exhibitions; (ii) Conferences; (iii) Corporate Events, and (iv) Consumer Events (collectively, “Live Events”).

### Services Offered

GES offers a comprehensive range of services and innovative technology to event organizers and corporate brand marketers including (i) Core Services; (ii) Event Technology, and (iii) Audio-Visual:

- **Core Services.** GES provides official contracting services and products to event organizers and corporate brand marketers for Live Events. Contracting services and products are provided primarily to Exhibitions and to a lesser degree to Conferences, Corporate Events, and Consumer Events.
- **Event Technology.** GES offers a comprehensive range of event technology services including event accommodation solutions, registration and data analytics, and event management tools.
- ***Event accommodation solutions***. GES U.S. provides end-to-end event accommodation services in North America. GES is responsible for researching and recommending local hotels, securing room blocks, marketing reserved room blocks to event attendees and corporate brand marketers, managing attendee and corporate brand marketer reservations, and addressing any accommodations concerns during the show.
- ***Registration and data analytics***. GES U.S. and GES International provide both a software-as-a-service model and fully managed options for registration and ticketing, lead management, and reporting and analytics. Their multi-lingual and multi-currency technology enables a common platform for global event organizers.
- ***Event management tools***. GES U.S. and GES International provide event management tools for Live Events which include online ordering capabilities, sponsoring management tools, content management systems, and Live Event tracking.
- **Audio-Visual.** GES U.S. and GES International offer a variety of audio-visual and digital services for Live Events and corporate brand marketers. GES combines the science of innovative digital solutions with the latest audio-visual technology and superior service to create award-winning attendee engagements. Services provided include digital design and content, media production, content testing, equipment rental, staging, and creative services.

### Seasonality

GES U.S. and GES International exhibition and event activity can vary significantly from quarter to quarter and year to year depending on the frequency and timing of shows, as some shows are not held each year and some may shift between quarters.

### Pursuit

Pursuit is a collection of iconic natural and cultural destination travel experiences that enjoy perennial demand. Pursuit offers guests distinctive and world renowned experiences through its collection of unique hotels, lodges, recreational attractions, and transportation services. Pursuit is composed of the following collections:

- **Brewster Travel Canada** is a leading travel and tourism provider in the Canadian Rockies in Alberta, Canada with two lodging properties in Banff National Park, one lodging property in Jasper National Park, five world-class recreational attractions, food and beverage services, retail operations, sightseeing and transportation services.
- **Alaska Collection** is a leading travel and tourism provider in Alaska with two lodging properties and a sightseeing excursion in Denali National Park and Preserve, a lodge in Talkeetna, Alaska’s top-rated wildlife and glacier cruise, and two lodging properties located near Kenai Fjords National Park. The Alaska Collection also provides food and beverage services and retail operations with respect to those properties.
- **Glacier Park, Inc.** is an operator of seven lodging properties, 12 retail shops, and 11 dining outlets in and around Glacier National Park in Montana, one of the most visited national parks in the United States, and Waterton Lakes National Park in Alberta, Canada, with a leading share of rooms in that market. Glacier Park, Inc. is an 80 percent owned subsidiary of Viad.
- **FlyOver Canada** is a recreational attraction that provides a virtual flight ride experience located in Vancouver, Canada that combines motion seating, spectacular media, and visual effects including wind, scents, and mist to give the unforgettable experience of flying across Canada.

Pursuit is composed of four lines of business: (i) Hospitality (including food and beverage services and retail operations); (ii) Attractions (including food and beverage services and retail operations); (iii) Transportation; and (iv) Travel Planning. These four lines of business work together, driving economies of scope and meaningful scale in and around the iconic destinations of Banff, Jasper, and Waterton Lakes National Parks and Vancouver in Canada, and Glacier, Denali, and Kenai Fjords National Parks in the United States.

### Seasonality

Pursuit experiences peak activity during the summer months. During 2016, 90 percent of Pursuit’s revenue was earned in the second and third quarters.

### Results of Operations

### Financial Highlights

*(in thousands, except per share data)*

|  | Three Months Ended September 30, 2017 | 2016 | Percentage Change | Nine Months Ended September 30, 2017 | 2016 | Percentage Change |
| --- | ---: | ---: | ---: | ---: | ---: | ---: |
| Revenue | $339,099 | $382,465 | (11.3)% | $1,029,680 | $948,574 | 8.6% |
| Net income attributable to Viad | $44,657 | $33,792 | 32.2% | $79,381 | $46,318 | 71.4% |
| Segment operating income (1) | $48,139 | $59,435 | (19.0)% | $101,333 | $87,591 | 15.7% |
| Diluted income per common share from continuing operations attributable to Viad common stockholders | $2.19 | $1.68 | 30.4% | $3.91 | $2.33 | 67.8% |

### Three months ended September 30, 2017 compared with the three months ended September 30, 2016

- **Total revenue** decreased $43.4 million or 11.3 percent, primarily due to negative show rotation of approximately $75 million at GES. This decrease was offset in part by underlying growth at both GES and Pursuit, incremental revenue from the acquisitions of the business of ON Event Services, LLC (“ON Services”), FlyOver Canada, and the Poken event engagement technology (“Poken”) of $13.1 million, and a favorable foreign exchange impact of $3.4 million. Management defines base same-show revenue as revenue derived from shows that the Company produced out of the same city during the same quarter in each year.
- **Net income attributable to Viad** increased $10.9 million, primarily due to impairment recoveries related to the Mount Royal Hotel fire and higher segment operating income from Pursuit, offset in part by decreased segment operating income at GES primarily due to negative show rotation.
- **Total segment operating income(1)** decreased $11.3 million primarily due to the decrease in revenue.

### Nine months ended September 30, 2017 compared with the nine months ended September 30, 2016

- **Total revenue** increased $81.1 million or 8.6 percent, primarily due to incremental revenue from the acquisitions of ON Services, FlyOver Canada, and Poken of $49.8 million and underlying growth at both GES and Pursuit. This increase was offset in part by an unfavorable foreign exchange impact of $10.6 million and negative show rotation of approximately $6 million.
- **Net income attributable to Viad** increased $33.1 million, primarily due to impairment recoveries related to the Mount Royal Hotel fire, increased segment operating income at Pursuit and GES, and a decrease in restructuring charges, offset in part by higher corporate activities expense due to an increase in performance-based compensation driven by the Company’s stock price appreciation, and higher interest expense.
- **Total segment operating income(1)** increased $13.7 million, primarily due to the increase in revenue.

(1) Refer to Note 19 – Segment Information of the Notes to Condensed Consolidated Financial Statements for a reconciliation of the non-GAAP financial measure, segment operating income, to the most directly comparable GAAP measure.

### Foreign Exchange Rate Variances

Viad conducts its foreign operations primarily in Canada, the United Kingdom, the Netherlands, Germany, and to a lesser extent, in certain other countries.

The following tables summarize the effects of foreign exchange rate variances on revenue and segment operating results (or “FX Impact”) from Viad’s significant international operations for the three and nine months ended September 30, 2017 and 2016, excluding the effect of acquisitions completed during 2017 and 2016:

### Three months ended September 30, 2017 compared with the three months ended September 30, 2016

*(in thousands)*

*(in thousands)*

| GES: | Revenue Weighted-Average Exchange Rates 2017 | 2016 | FX Impact | Segment Operating Results Weighted-Average Exchange Rates 2017 | 2016 | FX Impact |
| --- | ---: | ---: | ---: | ---: | ---: | ---: |
| Canada (CAD) | $0.80 | $0.77 | $680 | $0.80 | $0.77 | $44 |
| United Kingdom (GBP) | $1.32 | $1.31 | 235 | $1.31 | $1.32 | 115 |
| Europe (EUR) | $1.19 | $1.12 | 382 | $1.18 | $1.14 | 13 |
|  |  |  | 1,297 |  |  | 172 |
| Pursuit |  |  |  |  |  |  |
| Canada (CAD) | $0.80 | $0.77 | 2,119 | $0.80 | $0.77 | 1,218 |
|  |  |  | $3,416 |  |  | $1,390 |

### Nine months ended September 30, 2017 compared with the nine months ended September 30, 2016

*(in thousands)*

*(in thousands)*

| GES: | Revenue Weighted-Average Exchange Rates 2017 | 2016 | FX Impact | Segment Operating Results Weighted-Average Exchange Rates 2017 | 2016 | FX Impact |
| --- | ---: | ---: | ---: | ---: | ---: | ---: |
| Canada (CAD) | $0.76 | $0.76 | $(202) | $0.76 | $0.78 | $(221) |
| United Kingdom (GBP) | $1.28 | $1.38 | (11,395) | $1.28 | $1.25 | (210) |
| Europe (EUR) | $1.11 | $1.12 | (100) | $1.12 | $1.13 | (39) |
|  |  |  | (11,697) |  |  | (470) |
| Pursuit |  |  |  |  |  |  |
| Canada (CAD) | $0.78 | $0.77 | 1,134 | $0.78 | $0.77 | 762 |
|  |  |  | $(10,563) |  |  | $292 |

Viad’s three months ended September 30, 2017 revenue and segment operating results were primarily impacted by the strengthening of the Canadian dollar relative to the U.S. dollar. Viad’s nine months ended September 30, 2017 revenue and segment operating results were primarily impacted by the weakening of the British pound and the strengthening of the Canadian dollar relative to the U.S. dollar. Future changes in the exchange rates may impact overall expected profitability and historical period-to-period comparisons when revenue and segment operating results are translated into U.S. dollars.

### Analysis of Revenue and Operating Results by Reportable Segment

### GES

The following tables provide a comparison of GES’ reported revenue and segment operating results to organic revenue(3) and organic segment operating results(3) for the three and nine months ended September 30, 2017 and 2016 in order to better understand the underlying performance of the segment without the effects of acquisitions or FX Impact.

*(in thousands)*

| Revenue: GES: | Three Months Ended September 30, 2017 As Reported | Acquisitions(1) | FX Impact | Organic(3) | Three Months Ended September 30, 2016 As Reported | Acquisitions(2) | Organic(3) | Change As Reported | Organic(3) |
| --- | ---: | ---: | ---: | ---: | ---: | ---: | ---: | ---: | ---: |
| U.S. | $184,761 | $19,063 | $— | $165,698 | $232,484 | $10,354 | $222,130 | (20.5)% | (25.4)% |
| International | 54,040 | 152 | 1,297 | 52,591 | 60,926 | — | 60,926 | (11.3)% | (13.7)% |
| Intersegment eliminations | (6,682) | — | — | (6,682) | (6,425) | — | (6,425) | (4.0)% | (4.0)% |
| Total GES | $232,119 | $19,215 | $1,297 | $211,607 | $286,985 | $10,354 | $276,631 | (19.1)% | (23.5)% |
| **Segment operating income (loss) (4):** |  |  |  |  |  |  |  |  |  |
| GES: |  |  |  |  |  |  |  |  |  |
| U.S. | $(2,851) | $(1,080) | $— | $(1,771) | $14,543 | $458 | $14,085 | \*\* | \*\* |
| International | (2,870) | (269) | 172 | (2,773) | 644 | — | 644 | \*\* | \*\* |
| Total GES | $(5,721) | $(1,349) | $172 | $(4,544) | $15,187 | $458 | $14,729 | \*\* | \*\* |

*(in thousands)*

| Revenue: GES: | Nine Months Ended September 30, 2017 As Reported | Acquisitions(1) | FX Impact | Organic(3) | Nine Months Ended September 30, 2016 As Reported | Acquisitions(2) | Organic(3) | Change As Reported | Organic(3) |
| --- | ---: | ---: | ---: | ---: | ---: | ---: | ---: | ---: | ---: |
| U.S. | $684,003 | $56,544 | $— | $627,459 | $636,299 | $15,398 | $620,901 | 7.5% | 1.1% |
| International | 203,222 | 738 | (11,697) | 214,181 | 187,689 | — | 187,689 | 8.3% | 14.1% |
| Intersegment eliminations | (17,126) | — | — | (17,126) | (15,439) | — | (15,439) | (10.9)% | (10.9)% |
| Total GES | $870,099 | $57,282 | $(11,697) | $824,514 | $808,549 | $15,398 | $793,151 | 7.6% | 4.0% |
| **Segment operating income (loss)(4):** |  |  |  |  |  |  |  |  |  |
| GES: |  |  |  |  |  |  |  |  |  |
| U.S. | $39,319 | $(913) | $— | $40,232 | $37,907 | $543 | $37,364 | 3.7% | 7.7% |
| International | 8,491 | (463) | (470) | 9,424 | 4,951 | — | 4,951 | 71.5% | 90.3% |
| Total GES | $47,810 | $(1,376) | $(470) | $49,656 | $42,858 | $543 | $42,315 | 11.6% | 17.3% |

\*\* Change is greater than +/- 100 percent

(1) Acquisitions include ON Services (acquired August 2016) for GES U.S. and Poken (acquired March 2017) for GES International and GES U.S.

(2) To maximize synergies, GES’ existing in-house audio-visual services team was merged into ON Services. Accordingly, the amounts for GES U.S. acquisitions include results from the existing in-house audio-visual services team.

(3) Organic revenue and organic segment operating results are non-GAAP financial measures that adjust for the impacts of exchange rate variances and acquisitions, if any, until such acquisitions are included in the entirety of both comparable periods presented. For more information about organic revenue and organic segment operating results, see the “Non-GAAP Measures” section of this MD&A.

(4) Refer to Note 19 – Segment Information of the Notes to Condensed Consolidated Financial Statements for a reconciliation of the non-GAAP financial measure, segment operating income (loss), to the most directly comparable GAAP measure.

### Three months ended September 30, 2017 compared with the three months ended September 30, 2016

### GES U.S.

**GES U.S. revenue** decreased $47.7 million or 20.5 percent, primarily due to negative show rotation of approximately $63 million and other non-recurring business in the comparable prior period, offset in part by incremental revenue of $8.7 million from the acquisitions of ON Services and Poken, new business wins, and U.S. base same-show revenue growth of 1.6 percent. U.S. base same-show revenue growth was lower due to one event with a reduced scope of service as result of a venue change. Base same-shows represented 37.0 percent of GES’ U.S. organic revenue\*. Organic revenue\* decreased $56.4 million or 25.4 percent.

**GES U.S. operating results** decreased $17.4 million to an operating loss of $2.9 million. This decrease was primarily due to the decrease in revenue driven by negative show rotation, offset in part by lower performance-based compensation expense and income of $2.8 million from a contract settlement. Organic operating income\* decreased $15.9 million.

### GES International

**GES International revenue** decreased $6.9 million or 11.3 percent, primarily due to negative show rotation of approximately $12 million, offset in part by new business wins and a favorable FX Impact of $1.3 million. Organic revenue\* decreased $8.3 million or 13.7 percent.

**GES International operating results** decreased $3.5 million to an operating loss of $2.9 million. This decrease was primarily due to the decrease in revenue driven by negative show rotation. Organic operating income\* decreased $3.4 million.

### Nine months ended September 30, 2017 compared with the nine months ended September 30, 2016

### GES U.S.

**GES U.S. revenue** increased $47.7 million or 7.5 percent, primarily due to incremental revenue of $41.1 million from the acquisitions of ON Services and Poken and U.S. base same-show revenue growth of 4.4 percent, offset in part by negative show rotation of approximately $7 million. Base same-shows represented 35.4 percent of GES’ U.S. organic revenue\*. Organic revenue\* increased $6.6 million or 1.1 percent.

**GES U.S. operating income** increased $1.4 million or 3.7 percent, primarily due to higher revenue, offset in part by a $7.5 million increase in depreciation and amortization expense primarily due to the acquisition of ON Services. Organic operating income\* increased $2.9 million or 7.7 percent.

### GES International

**GES International revenue** increased $15.5 million or 8.3 percent, primarily due to new business wins, offset in part by an unfavorable FX Impact of $11.7 million. GES International had positive show rotation of approximately $1.0 million. Organic revenue\* increased $26.5 million or 14.1 percent.

**GES International operating income** increased $3.5 million or 71.5 percent, primarily due to higher revenue. Organic operating income\* increased $4.5 million or 90.3 percent.

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

### 2017 Outlook

Although GES has a diversified revenue base and long-term contracts for future shows, its revenue is affected by general economic and industry-specific conditions. The prospects for individual shows tend to be driven by the success of the industry related to those shows. In general, the exhibition and event industry is experiencing modest growth.

For the 2017 full year, management expects GES’ revenue to increase 6 percent to 7 percent versus 2016. The August 2016 acquisition of ON Services and the March 2017 acquisition of Poken are expected to provide incremental revenue of $43 million to $45 million and incremental Adjusted Segment EBITDA of $5 million to $7 million. Show rotation is expected to have a net negative impact on GES’ revenue of approximately $10 million compared to 2016. GES U.S. base same-show revenue is expected to increase at a mid-single digit rate. Management anticipates an unfavorable FX Impact on GES’ 2017 full year revenue and segment operating income of approximately $7 million and $0.2 million, respectively. The expected FX Impact reflects the assumption that the U.S. dollar to the British pound exchange rate will be $1.31 and the U.S. dollar to the Canadian dollar exchange rate will be $0.81 during the fourth quarter of 2017. For more information about Adjusted Segment EBITDA and segment operating income, see the “Non-GAAP Measures” section of this MD&A.

Management is executing a strategic growth plan to position GES as the preferred global, full-service provider for Live Events, with further reach to corporate events, consumer events, conferences, and exhibitions. In support of this strategy, the Company has acquired two leading audio-visual production businesses and four leading event technology businesses since 2014 that complement, enhance, and expand the current business and offer higher-margin growth opportunities. Management continues to pursue additional opportunities to acquire businesses with proven products and services to create the most comprehensive suite of services for the Live Events industry. During 2017, management intends to make selective investments in additional resources to capitalize on continued growth opportunities in under-penetrated categories of Live Events, such as corporate events and consumer events, and in cross-selling new services.

Additionally, management remains focused on improving the profitability of GES through continued efforts to more effectively manage labor costs by driving productivity gains through rigorous and strategic pre-show planning that reduces the ratio of labor costs to revenue. Improving this metric is a top priority of management and the Company continues to develop and enhance tools to support and systematize show site labor planning, measurement, and benchmarking.

### Pursuit

The following tables provide a comparison of Pursuit’s reported revenue and segment operating results to organic revenue(2) and organic segment operating results(2) for the three and nine months ended September 30, 2017 and 2016 in order to better understand the underlying performance of the segment without the effects of acquisitions or FX Impact.

*(in thousands)*

| Revenue: Pursuit: | Three Months Ended September 30, 2017 As Reported | Acquisitions(1) | FX Impact | Organic(2) | Three Months Ended September 30, 2016 As Reported | Acquisitions | Organic(2) | Change As Reported | Organic(2) |
| --- | ---: | ---: | ---: | ---: | ---: | ---: | ---: | ---: | ---: |
| Hospitality | $39,577 | $— | $236 | $39,341 | $39,664 | $— | $39,664 | (0.2)% | (0.8)% |
| Attractions | 59,059 | 4,227 | 1,700 | 53,132 | 42,883 | — | 42,883 | 37.7% | 23.9% |
| Transportation | 6,252 | — | 201 | 6,051 | 5,097 | — | 5,097 | 22.7% | 18.7% |
| Travel Planning | 2,874 | — | 29 | 2,845 | 10,908 | — | 10,908 | (73.7)% | (73.9)% |
| Intra-Segment Eliminations & Other | (782) | — | (47) | (735) | (1,150) | — | (1,150) | 32.0% | 36.1% |
| Total Pursuit | $106,980 | $4,227 | $2,119 | $100,634 | $97,402 | $— | $97,402 | 9.8% | 3.3% |
| **Segment operating income (3):** |  |  |  |  |  |  |  |  |  |
| Total Pursuit | $53,860 | $2,227 | $1,218 | $50,415 | $44,248 | $— | $44,248 | 21.7% | 13.9% |

29

*(in thousands)*

| Revenue: Pursuit: | Nine Months Ended September 30, 2017 As Reported | Acquisitions(1) | FX Impact | Organic(2) | Nine Months Ended September 30, 2016 As Reported | Acquisitions(1) | Organic(2) | Change As Reported | Organic(2) |
| --- | ---: | ---: | ---: | ---: | ---: | ---: | ---: | ---: | ---: |
| Hospitality | $55,279 | $13,440 | $145 | $41,694 | $56,791 | $12,935 | $43,856 | (2.7)% | (4.9)% |
| Attractions | 88,910 | 21,256 | 910 | 66,744 | 61,056 | 13,597 | 47,459 | 45.6% | 40.6% |
| Transportation | 11,906 | — | 120 | 11,786 | 10,150 | — | 10,150 | 17.3% | 16.1% |
| Travel Planning | 4,334 | 1,268 | 9 | 3,057 | 16,861 | 1,529 | 15,332 | (74.3)% | (80.1)% |
| Intra-Segment Eliminations & Other | (848) | — | (50) | (798) | (1,747) | — | (1,747) | 51.5% | 54.3% |
| Total Pursuit | $159,581 | $35,964 | $1,134 | $122,483 | $143,111 | $28,061 | $115,050 | 11.5% | 6.5% |
| **Segment operating income (3):** |  |  |  |  |  |  |  |  |  |
| Total Pursuit | $53,523 | $8,431 | $762 | $44,330 | $44,733 | $8,870 | $35,863 | 19.6% | 23.6% |

(1) Acquisitions for the three months ended September 30, 2017 include FlyOver Canada (acquired December 2016). Acquisitions for the nine month periods include CATC Alaska Tourism Corporation (“CATC”) (acquired March 2016) and FlyOver Canada (acquired December 2016).

(2) Organic revenue and organic segment operating results are non-GAAP financial measures that adjust for the impacts of exchange rate variances and acquisitions, if any, until such acquisitions are included in the entirety of both comparable periods presented. For more information about organic revenue and organic segment operating results, see the “Non-GAAP Measures” section of this MD&A.

(3) Refer to Note 19 – Segment Information of the Notes to Condensed Consolidated Financial Statements for a reconciliation of the non-GAAP financial measure, segment operating income, to the most directly comparable GAAP measure.

### Three months ended September 30, 2017 compared with the three months ended September 30, 2016

**Pursuit revenue** increased $9.6 million or 9.8 percent, due to strong growth from attractions, primarily the Banff Gondola and Columbia Icefield Glacier Adventure attractions, incremental revenue of $4.2 million from the acquisition of FlyOver Canada, and a favorable FX Impact of $2.1 million. This increase was offset in part by a reduction in travel planning as the Company completes the previously announced downsizing of Brewster Travel Canada’s package tours line of business and a revenue decline of $2.1 million due to the fire-related closure of the Mount Royal Hotel. Organic revenue\* increased $3.2 million or 3.3 percent.

**Pursuit operating income** increased $9.6 million or 21.7 percent, primarily due to the increase in revenue from high-margin attractions. Operating income included a $1.1 million business interruption gain for the recovery of lost profits from the Mount Royal Hotel. Organic operating income\* increased $6.2 million or 13.9 percent.

### Nine months ended September 30, 2017 compared with the nine months ended September 30, 2016

**Pursuit revenue** increased $16.5 million or 11.5 percent, due to strong growth from attractions primarily driven by the re-opening of the Banff Gondola (which was closed for renovations from October 2015 through April 2016), incremental revenue of $7.9 million from the acquisitions of FlyOver Canada and CATC, and a favorable FX Impact of $1.1 million. This increase was offset in part by a reduction in travel planning as the Company completes the previously announced downsizing of Brewster Travel Canada’s package tours line of business and a revenue decline of $4.6 million due to the fire-related closure of the Mount Royal Hotel. Organic revenue\* increased $7.4 million or 6.5 percent.

**Pursuit operating income** increased $8.8 million or 19.6 percent, primarily due to the increase in revenue from high-margin attractions. Operating income included a $2.2 million business interruption gain for the recovery of lost profits from the Mount Royal Hotel. Organic operating income\* increased $8.5 million or 23.6 percent.

\* Refer to footnote (2) in the above tables for more information about the non-GAAP financial measures of organic revenue and organic segment operating results.

### Performance Measures

Management uses the following key business metrics to evaluate Pursuit’s hospitality business: revenue per available room (“RevPAR”), average daily rate (“ADR”), and occupancy. These metrics are commonly used in the hospitality industry to measure performance.

- **Revenue per Available Room.** RevPAR is calculated as total rooms revenue divided by the total number of room nights available for all comparable Pursuit hospitality properties during the period. Total rooms revenue does not include non-rooms revenue, which consists of ancillary revenue generated by hospitality properties, such as food and beverage and retail revenue. RevPAR measures the period-over-period change in rooms revenue for comparable hospitality properties. RevPAR is affected by average daily rate and occupancy, which have different implications on profitability.
- **Average Daily Rate.** ADR is calculated as total rooms revenue divided by the total number of room nights sold for all comparable Pursuit hospitality properties during the period. ADR is used to assess the pricing levels that the hospitality properties are able to generate. Increases in ADR at hospitality properties lead to increases in rooms revenue with no substantial effect on variable costs, therefore having a greater impact on margins than increases in occupancy.
- **Occupancy.** Occupancy is calculated as the total number of room nights sold divided by the total number of room nights available for all comparable Pursuit hospitality properties during the period. Occupancy measures the utilization of the available capacity at the hospitality properties. Increases in occupancy result in increases in rooms revenue and additional variable operating costs (including housekeeping services, utilities, and room amenity costs), as well as increased ancillary non-rooms revenue (including food and beverage and retail revenue).

Management evaluates the performance of Pursuit’s attractions business utilizing the number of passengers and total attractions revenue per passenger. The number of passengers allows management to assess the volume of visitor activity at each attraction during the period. Total attractions revenue per passenger is calculated as total attractions revenue divided by the total number of passengers at all Pursuit attractions during the period. Total attractions revenue includes ticket sales and ancillary revenue generated by attractions, such as food and beverage and retail revenue. Total attractions revenue per passenger measures the total spend per visitor that attraction properties are able to capture, which is important to the profitability of the attractions business.

The following table provides Pursuit’s same-store key performance indicators for the three and nine months ended September 30, 2017 and 2016. The same-store metrics below indicate the performance of all Pursuit properties and attractions that were owned by Viad and operating at full capacity, considering seasonal closures, for the entirety of both periods presented. For Pursuit properties and attractions located in Canada, comparisons to the prior year are on a constant U.S. dollar basis, using the current year quarterly average exchange rates for previous periods, to eliminate the FX Impact. Management believes that this same-store constant currency basis provides better comparability between reporting periods.

| Same-Store Key Performance Indicators (1) Hospitality: | Three Months Ended September 30, 2017 | 2016 | % Change | Nine Months Ended September 30, 2017 | 2016 | % Change |
| --- | ---: | ---: | ---: | ---: | ---: | ---: |
| Room nights available | 108,015 | 107,635 | 0.4% | 152,366 | 150,604 | 1.2% |
| RevPAR | $200 | $192 | 4.2% | $140 | $133 | 5.3% |
| ADR | $227 | $213 | 6.6% | $187 | $178 | 5.1% |
| Occupancy | 87.9% | 90.1% | (2.2)% | 75.2% | 74.8% | 0.4% |
| **Attractions:** |  |  |  |  |  |  |
| Passengers | 1,139,516 | 1,092,356 | 4.3% | 1,626,121 | 1,453,899 | 11.8% |
| Revenue per passenger | $48 | $40 | 20.0% | $42 | $33 | 27.3% |

(1) The Same-Store Key Performance Indicators for the three month comparison exclude the FlyOver Canada attraction (acquired in December 2016) as it was not owned by Viad for the entirety of both periods presented. The Same-Store Key Performance Indicators for the nine month comparison exclude the CATC hospitality properties and attraction (acquired in March 2016) and the FlyOver Canada attraction (acquired in December 2016), as they were not owned by Viad for the entirety of both periods presented. Additionally, the Same-Store Key Performance Indicators exclude the Mount Royal Hotel hospitality property due to its fire-related closure (effective December 2016). The Banff Gondola attraction was closed for renovations from October 2015 through April 2016. Accordingly, 2016 includes only five months of operation whereas 2017 includes the full three and nine months of operations.

**Hospitality.** Room nights available increased during the nine months ended September 30, 2017 primarily due to changes in the opening dates for certain seasonal properties. RevPAR increased during the three months ended September 30, 2017 primarily due to an increase in ADR driven by management’s focus on yield management, offset in part by lower occupancy primarily due to forest fires in the Glacier National Park area. RevPAR increased during the nine months ended September 30, 2017 primarily due to an increase in occupancy and an increase in ADR driven by management’s focus on yield management, as well as an increase in occupancy reflecting strong park visitation during the first nine months of 2017.

**Attractions**. The increase in the number of passengers during the three months ended September 30, 2017 was primarily due to management’s efforts to enhance the guest experience and its focus on yield management, combined with strong park visitation in Canada. The increase in the number of passengers during the nine months ended September 30, 2017 was primarily due to the Banff Gondola being closed for renovations during the first four months of 2016. Excluding the Banff Gondola passengers, total same-store attraction passengers for the nine month period would have increased 36,158 in 2017 driven by management’s efforts to enhance the guest experience and its focus on yield management, combined with strong park visitation in Canada.

Revenue per passenger increased during 2017 primarily due to higher effective ticket prices driven by management’s focus on yield management, and higher revenue from ancillary food and beverage and retail services primarily resulting from management’s recent renovations of the retail and food and beverage operations at the Banff Gondola and the food and beverage operations at the Columbia Icefield Glacier Discovery Center.

During 2016, Pursuit derived approximately 59 percent of its revenue and 74 percent of its segment operating income from its Canadian operations, which are largely dependent on foreign customer visitation. Accordingly, the strengthening or weakening of the Canadian dollar, relative to other currencies, could affect customer volumes and the results of operations. Additionally, Pursuit is affected by consumer discretionary spending on tourism activities.

### 2017 Outlook

For the 2017 full year, management expects Pursuit’s revenue to increase 12 percent to 14 percent. The December 2016 acquisition of FlyOver Canada and the March 2016 acquisition of CATC, combined, are expected to provide incremental revenue of $10 million to $11 million and incremental Adjusted Segment EBITDA of $2 million to $3.5 million, which includes an incremental first quarter seasonal operating loss of approximately $2.3 million from CATC.

Additionally, management expects Pursuit’s revenue to be negatively impacted by approximately $13 million as the Company completes the previously announced downsizing of Brewster Travel Canada’s package tours line of business. The fire-related closure of the Mount Royal Hotel is expected to negatively impact revenue by approximately $5 million. Management anticipates a favorable FX Impact on Pursuit’s 2017 full year revenue and segment operating income of approximately $2 million and $0.7 million, respectively. Management expects these factors will be more than offset by organic growth across the rest of Pursuit’s lines of business.

In July 2017, Viad resolved its property and business interruption insurance claims related to the Mount Royal Hotel fire for a total of $36.3 million, inclusive of $9.0 million received during the first and second quarters of 2017. Viad recorded an additional impairment recovery of approximately $24.7 million related to construction costs to re-open the hotel, $1.1 million was recorded as a business interruption gain for the recovery of lost profits, and the remaining $1.5 million was recorded as deferred income that will be recognized over the periods the business interruption losses are actually incurred. Management anticipates recognizing approximately $0.5 million of the business interruption recovery during the remainder of 2017 with approximately $1 million being deferred to the first half of 2018.

The Pursuit guidance ranges include approximately $1 million in revenue and approximately $3 million in adjusted segment EBITDA related to the Mount Royal Hotel, which reflects the 2017 portion of business interruption insurance recoveries (including both business interruption gains for lost profits and contra-expense for on-going operating costs) and the re-opening of most of the property’s retail tenants and one of its dining operations. The hotel itself is expected to remain closed until mid-2018. For more information about Adjusted Segment EBITDA and segment operating income, see the “Non-GAAP Measures” section of this MD&A.

### Corporate Activities

*(in thousands)*

|  | Three Months Ended September 30, 2017 | 2016 | Percentage Change 2017 vs. 2016 | Nine Months Ended September 30, 2017 | 2016 | Percentage Change 2017 vs. 2016 |
| --- | ---: | ---: | ---: | ---: | ---: | ---: |
| Corporate activities | $4,474 | $2,772 | 61.4% | $10,092 | $7,390 | 36.6% |

The increase in corporate activities expense for the three and nine months ended September 30, 2017 was primarily due to an increase in performance-based compensation expense driven by Viad’s common stock price appreciation.

### Interest Expense

*(in thousands)*

|  | Three Months Ended September 30, 2017 | 2016 | Percentage Change 2017 vs. 2016 | Nine Months Ended September 30, 2017 | 2016 | Percentage Change 2017 vs. 2016 |
| --- | ---: | ---: | ---: | ---: | ---: | ---: |
| Interest expense | $2,117 | $1,489 | 42.2% | $6,281 | $4,109 | 52.9% |

The increase in interest expense for the three and nine months ended September 30, 2017 was primarily due to higher debt balances in 2017 resulting from acquisitions completed during August and December of 2016.

### Restructuring Charges

*(in thousands)*

|  | Three Months Ended September 30, 2017 | 2016 | Percentage Change 2017 vs. 2016 | Nine Months Ended September 30, 2017 | 2016 | Percentage Change 2017 vs. 2016 |
| --- | ---: | ---: | ---: | ---: | ---: | ---: |
| Restructuring charges | $255 | $1,697 | (85.0)% | $817 | $3,664 | (77.7)% |

Restructuring charges during the three and nine months ended September 30, 2017 and 2016 were primarily related to the elimination of certain positions and facility consolidations in GES.

### Impairment Charges (Recoveries)

*(in thousands)*

|  | Three Months Ended September 30, 2017 | 2016 | Percentage Change 2017 vs. 2016 | Nine Months Ended September 30, 2017 | 2016 | Percentage Change 2017 vs. 2016 |
| --- | ---: | ---: | --- | ---: | ---: | --- |
| Impairment charges (recoveries) | $(24,467) | $120 | \*\* | $(29,098) | $120 | \*\* |

\*\* Change is greater than +/- 100 percent

On December 29, 2016, the Mount Royal Hotel was damaged by a fire and closed. During July 2017, the Company resolved its property and business interruption insurance claims related to the fire for a total of $36.3 million. During the three months ended September 30, 2017, the Company received insurance proceeds of $27.3 million, of which $24.7 million was recorded as an impairment recovery (partially offset by impairment charges of $0.2 million) related to construction costs to re-open the hotel, $1.1 million was recorded as a business interruption gain for the recovery of lost profits, and the remaining $1.5 million was recorded as deferred income, which will be recognized over the periods the business interruption losses are actually incurred. During the nine months ended September 30, 2017, the Company received $36.3 million in insurance proceeds, of which $2.2 million was allocated to an insurance receivable, $29.3 million was recorded as an impairment recovery (partially offset by impairment charges of $0.2 million) related to construction costs to re-open the hotel, $2.2 million was recorded as a business interruption gain for the recovery of lost profits, $1.1 million was recorded as contra-expense to offset non-capitalizable costs incurred by the Company, and the remaining $1.5 million was recorded as deferred income, which will be recognized over the periods the business interruption losses are actually incurred.

### Income Taxes

The effective tax rates for the three months ended September 30, 2017 and 2016 were 30.4 percent and 33.8 percent, respectively. The effective tax rates for the nine months ended September 30, 2017 and 2016 were 29.0 percent and 33.1 percent, respectively. The decrease for the three months was primarily due to higher foreign income taxed at lower rates. The decrease for the nine months was primarily due to higher foreign income taxed at lower rates, the release of a valuation allowance related to foreign net operating losses, and the adoption of new accounting guidance, effective in the first quarter of 2017, which requires the excess tax benefit on share-based compensation to be recorded to income tax expense rather than equity.

### Discontinued Operations

*(in thousands)*

|  | Three Months Ended September 30, 2017 | 2016 | Percentage Change 2017 vs. 2016 | Nine Months Ended September 30, 2017 | 2016 | Percentage Change 2017 vs. 2016 |
| --- | ---: | ---: | ---: | ---: | ---: | ---: |
| Loss from discontinued operations | $(101) | $(221) | 54.3% | $(408) | $(771) | 47.1% |

The loss from discontinued operations, during the three months ended September 30, 2017, was primarily related to legal expenses associated with previously sold operations. The loss from discontinued operations, during the nine months ended September 30, 2017, was primarily related to legal expenses associated with previously sold operations, offset in part by a reduction in an uncertain tax position due to the lapse of a statute.

### Liquidity and Capital Resources

Cash and cash equivalents were $53.5 million as of September 30, 2017, as compared to $20.9 million as of December 31, 2016. During the nine months ended September 30, 2017, the Company generated net cash flow from operating activities of $114.6 million primarily from results of operations. Management believes that Viad’s existing sources of liquidity will be sufficient to fund operations and capital commitments for at least the next 12 months.

As of September 30, 2017, the Company had approximately $49.0 million of its cash and cash equivalents held outside of the United States, consisting of $31.9 million in Canada, $7.8 million in the Netherlands, $7.0 million in the United Kingdom, $1.2 million in Germany, $0.9 million in the United Arab Emirates, and $0.2 million in certain other countries. There are certain earnings related to the Company’s Canadian and Netherlands operations that have historically been deemed permanently reinvested. As of September 30, 2017, the incremental tax associated with these earnings if the cash balances were repatriated to the United States would approximate $1.6 million.

### Cash Flows

### Operating Activities

*(in thousands)*

|  | Nine Months Ended September 30, 2017 | 2016 |
| --- | ---: | ---: |
| Net income | $80,128 | $47,083 |
| Depreciation and amortization | 42,499 | 31,206 |
| Deferred income taxes | 318 | (3,549) |
| Loss from discontinued operations | 408 | 771 |
| Impairment charges (recoveries) | (29,098) | 120 |
| Other non-cash items | 14,369 | 13,083 |
| Changes in assets and liabilities | 6,019 | 26,708 |
| **Net cash provided by operating activities** | $114,643 | $115,422 |

Net cash provided by operating activities decreased $0.8 million, primarily due to changes in working capital, offset in part by an increase in results of operations.

### Investing Activities

*(in thousands)*

|  | Nine Months Ended September 30, 2017 | 2016 |
| --- | ---: | ---: |
| Capital expenditures | $(39,493) | $(32,582) |
| Proceeds from insurance | 31,570 | — |
| Cash paid for acquired businesses, net | (1,661) | (145,735) |
| Proceeds from dispositions of property and other assets | 734 | 774 |
| **Net cash used in investing activities** | $(8,850) | $(177,543) |

Net cash used in investing activities decreased $168.7 million, primarily due to cash payments, net of cash acquired, of $145.7 million for the 2016 acquisitions of ON Services, CATC, and the business of Maligne Lake Tours Ltd., and the Mount Royal Hotel fire-related insurance proceeds received in 2017, offset in part by an increase in capital expenditures.

### Financing Activities

*(in thousands)*

|  | Nine Months Ended September 30, 2017 | 2016 |
| --- | ---: | ---: |
| Proceeds from borrowings | $60,574 | $153,000 |
| Payments on debt and capital lease obligations | (128,808) | (86,989) |
| Dividends paid on common stock | (6,119) | (6,079) |
| Debt issuance costs | (5) | (340) |
| Common stock purchased for treasury | (1,272) | (679) |
| Other | — | 60 |
| **Net cash provided by (used in) financing activities** | $(75,630) | $58,973 |

Net cash used in financing activities increased $134.6 million primarily due to net debt payments of $68.2 million during the nine months ended September 30, 2017 compared to net debt proceeds of $66.0 million during the nine months ended September 30, 2016.

### Debt and Capital Lease Obligations

Refer to Note 11 – Debt and Capital Lease Obligations of the Notes to Condensed Consolidated Financial Statements for further discussion.

### Share Repurchases

The Board of Directors authorized the Company to repurchase shares of its common stock from time to time at prevailing market prices. No open market repurchases were made during the nine months ended September 30, 2017 or 2016. As of September 30, 2017, 440,540 shares remained available for repurchase. The authorization of the Board of Directors does not have an expiration date. In addition, during the nine months ended September 30, 2017 and 2016, the Company repurchased 26,916 shares for $1.3 million and 24,432 shares for $0.7 million, respectively, related to tax withholding requirements on vested share-based awards.

### Critical Accounting Policies and Estimates

Refer to “Management’s Discussion and Analysis of Financial Condition and Results of Operations” (Part II, Item 7) of Viad’s Annual Report on Form 10-K for the year ended December 31, 2016, for a discussion of critical accounting policies and estimates.

### Impact of Recent Accounting Pronouncements

Refer to Note 1 – Basis of Presentation and Principles of Consolidation of the Notes to Condensed Consolidated Financial Statements for further information.

### Forward-Looking Statements

As provided by the safe harbor provision under the Private Securities Litigation Reform Act of 1995, Viad cautions readers that, in addition to historical information contained herein, this quarterly report includes certain information, assumptions, and discussions that may constitute forward-looking statements. These forward-looking statements are not historical facts, but reflect current estimates, projections, expectations, or trends concerning future growth, operating cash flows, availability of short-term borrowings, consumer demand, new or renewal business, investment policies, productivity improvements, ongoing cost reduction efforts, efficiency, competitiveness, legal expenses, tax rates and other tax matters, foreign exchange rates, and the realization of restructuring cost savings. Actual results could differ materially from those discussed in the forward-looking statements. Viad’s businesses can be affected by a host of risks and uncertainties. Among other things, natural disasters, gains and losses of customers, consumer demand patterns, labor relations, purchasing decisions related to customer demand for exhibition and event services, existing and new competition, industry alliances, consolidation and growth patterns within the industries in which Viad competes, acquisitions, capital allocations, adverse developments in liabilities associated with discontinued operations, changes in the levels of interest rates, and any deterioration in the economy, may individually or in combination impact future results. In addition to factors mentioned elsewhere, economic, competitive, governmental, technological, capital marketplace, and other factors, including terrorist activities or war, a pandemic health crisis, and international conditions, could affect the forward-looking statements in this quarterly report. Additional information concerning business and other risk factors that could cause actual results to materially differ from those in the forward looking statements are discussed in the “Risk Factors” section in Viad’s 2016 Annual Report.

Information about Viad obtained from sources other than the Company may be out-of-date or incorrect. Please rely only on Company press releases, SEC filings, and other information provided by the Company, keeping in mind that forward-looking statements speak only as of the date made. Viad undertakes no obligation to update any forward-looking statements, including prior forward-looking statements, to reflect events or circumstances arising after the date as of which the forward-looking statements were made.

### Non-GAAP Measures

In addition to disclosing financial results that are determined in accordance with U.S. generally accepted accounting principles (“GAAP”), the Company also discloses non-GAAP financial measures of Adjusted EBITDA, Segment operating income, Adjusted Segment EBITDA, organic revenue, and organic segment operating income (collectively, the “Non-GAAP Measures”). The presentation of the Non-GAAP Measures is supplemental to, but not as a substitute for, other measures of financial performance reported in accordance with GAAP. As not all companies use identical calculations, the Non-GAAP Measures may not be comparable to similarly titled measures used by other companies. Management believes that the presentation of the Non-GAAP Measures provides useful information to investors regarding Viad’s results of operations for trending, analyzing, and benchmarking the performance and value of Viad’s business.

- “**Adjusted EBITDA”** is defined by Viad as net income attributable to Viad before the Company’s portion of interest expense, income taxes, depreciation and amortization, impairment charges and recoveries, changes in accounting principles, and the effects of discontinued operations. Adjusted EBITDA is utilized by management to measure the profit and performance of Viad’s operations and to facilitate period-to-period comparisons. Refer to the table below for a reconciliation of Adjusted EBITDA to the most directly comparable GAAP measure.
- “**Segment operating income”** is defined by Viad as net income attributable to Viad before income (loss) from discontinued operations, corporate activities, interest expense and interest income, income taxes, restructuring charges, impairment losses and recoveries, and the reduction for income attributable to noncontrolling interest. Segment operating income is utilized by management to measure the profit and performance of Viad’s operating segments to facilitate period-to-period comparisons.
- “**Adjusted Segment EBITDA”** is defined by Viad as segment operating income (as defined above) before non-cash depreciation and amortization and acquisition integration costs, if any. Adjusted Segment EBITDA is utilized by management to measure the profit and performance of Viad’s operating segments and acquisitions to facilitate period-to-period comparisons. For a discussion of how this metric is used in connection with 2017 full year acquisition performance expectations, refer to the “Forward-Looking Non-GAAP Financial Measures” section of this MD&A. Management believes that Adjusted Segment EBITDA for acquisitions enables investors to assess how effectively management is investing capital into major corporate development projects, both from a valuation and return perspective.
- “**Organic revenue”** and “**organic segment operating income”** are defined by Viad as revenue and segment operating income (as defined above), respectively, without the impact of exchange rate variances and acquisitions, if any, until such acquisitions are included in the entirety of both comparable periods. The impact of exchange rate variances is calculated as the difference between current period activity translated at the current period’s exchange rates and the comparable prior period’s exchange rates. Management believes that the presentation of “organic” results permits investors to better understand Viad’s performance without the effects of exchange rate variances or acquisitions and to facilitate period-to-

period comparisons and analysis of Viad’s operating performance. Refer to the “Results of Operations” section of this MD&A for reconciliations of organic revenue and organic segment operating income to the most directly comparable GAAP measures.

The Non-GAAP Measures are considered useful operating metrics as potential variations arising from taxes, depreciation and amortization, debt service costs, impairment charges and recoveries, changes in accounting principles, and the effects of discontinued operations are eliminated, thus resulting in additional measures considered to be indicative of Viad’s ongoing operations and segment performance. Although the Non-GAAP Measures are used as financial measures to assess the performance of the business, the use of these measures is limited because these measures do not consider material costs, expenses, and other items necessary to operate the business. These items include debt service costs, non-cash depreciation and amortization expense associated with long-lived assets, expenses related to U.S. federal, state, local and foreign income taxes, impairment charges or recoveries, and the effects of accounting changes and discontinued operations. Since the Non-GAAP Measures do not consider the above items, a user of Viad’s financial information should consider net income attributable to Viad as an important measure of financial performance because it provides a more complete measure of the Company’s performance.

A reconciliation of net income attributable to Viad to Adjusted EBITDA is as follows:

*(in thousands)*

|  | Three Months Ended September 30, 2017 | 2016 | Nine Months Ended September 30, 2017 | 2016 |
| --- | ---: | ---: | ---: | ---: |
| Net income attributable to Viad | $44,657 | $33,792 | $79,381 | $46,318 |
| Depreciation and amortization | 15,833 | 12,649 | 42,499 | 31,206 |
| Interest expense | 2,117 | 1,489 | 6,281 | 4,109 |
| Income tax expense | 20,010 | 17,878 | 32,929 | 23,652 |
| Impairment charges (recoveries) | (24,467) | 120 | (29,098) | 120 |
| Loss from discontinued operations | 101 | 221 | 408 | 771 |
| Other noncontrolling interest | (739) | (661) | (697) | (691) |
| **Adjusted EBITDA** | $57,512 | $65,488 | $131,703 | $105,485 |

The decrease in Adjusted EBITDA for the three months ended September 30, 2017 was primarily due to lower segment operating income at GES. The increase in Adjusted EBITDA for the nine months ended September 30, 2017 was primarily due to higher segment operating income at GES and Pursuit. Refer to the “Results of Operations” section of this MD&A for a discussion of fluctuations.

### Forward-Looking Non-GAAP Financial Measures

The Company has also provided Adjusted Segment EBITDA and segment operating income as forward-looking Non-GAAP Measures within the “Results of Operations” section of this MD&A. The Company does not provide reconciliations of these forward-looking Non-GAAP Measures to the most directly comparable GAAP financial measures because, due to variability and difficulty in making accurate forecasts and projections and/or certain information not being ascertainable or accessible, not all of the information necessary for quantitative reconciliations of these forward-looking Non-GAAP Measures to the most directly comparable GAAP financial measures is available to the Company without unreasonable efforts. Consequently, any attempt to disclose such reconciliations would imply a degree of precision that could be confusing or misleading to investors. It is probable that these forward-looking Non-GAAP Measures may be materially different from the corresponding GAAP Measures.

## Market risk

As filed, 3,626 characters.

Viad’s market risk exposures relate to fluctuations in foreign exchange rates, interest rates, and certain commodity prices. Foreign exchange risk is the risk that fluctuating exchange rates will adversely affect Viad’s financial condition or results of operations. Interest rate risk is the risk that changing interest rates will adversely affect the earnings of Viad. Commodity risk is the risk that changing prices will adversely affect results of operations.

Viad conducts its foreign operations primarily in Canada, the United Kingdom, the Netherlands, Germany, and to a lesser extent, in certain other countries. The functional currency of Viad’s foreign subsidiaries is their local currency. Accordingly, for purposes of consolidation, Viad translates the assets and liabilities of its foreign subsidiaries into U.S. dollars at the foreign exchange rates in effect at the balance sheet date. The unrealized gains or losses resulting from the translation of these foreign denominated assets and liabilities are included as a component of accumulated other comprehensive income in Viad’s condensed consolidated balance sheets. As a result, significant fluctuations in foreign exchange rates relative to the U.S. dollar may result in material changes to Viad’s net equity position reported in its condensed consolidated balance sheets. Viad does not currently hedge its equity risk arising from the translation of foreign denominated assets and liabilities. Viad had cumulative unrealized foreign currency translation losses recorded in stockholders’ equity of $10.3 million and $29.1 million as of September 30, 2017 and December 31, 2016, respectively. During the three and nine months ended September 30, 2017, unrealized foreign currency translation gains of $9.1 million and $18.8 million, respectively, were recorded in other comprehensive income. During the three and nine months ended September 30, 2016 an unrealized foreign currency translation loss of $3.8 million and a gain of $0.7 million, respectively, were recorded in other comprehensive income.

For purposes of consolidation, revenue, expenses, gains, and losses related to Viad’s foreign operations are translated into U.S. dollars at the average foreign exchange rates for the period. As a result, Viad’s consolidated results of operations are exposed to fluctuations in foreign exchange rates as revenue and segment operating results of its foreign operations, when translated, may vary from period to period, even when the functional currency amounts have not changed. Such fluctuations may adversely impact overall expected profitability and historical period-to-period comparisons. Viad does not currently hedge its net earnings exposure arising from the translation of its foreign revenue and segment operating results. Refer to “Management’s Discussion and Analysis of Financial Condition and Results of Operations” for a discussion on the “Foreign Exchange Rate Variances.”

Viad is exposed to foreign exchange transaction risk, as its foreign subsidiaries have certain revenue transactions denominated in currencies other than the functional currency of the respective subsidiary. From time to time, Viad utilizes forward contracts to mitigate the impact on earnings related to these transactions due to fluctuations in foreign exchange rates. As of September 30, 2017, Viad did not have any foreign currency forward contracts outstanding.

Viad is exposed to short-term and long-term interest rate risk on certain of its debt obligations. Viad currently does not use derivative financial instruments to hedge cash flows for such obligations.

## Controls and procedures

As filed, 1,353 characters.

Under the supervision and with the participation of management, including the Chief Executive Officer and Chief Financial Officer of Viad, the effectiveness of the design and operation of disclosure controls and procedures has been evaluated as of September 30, 2017, and, based on that evaluation, the Chief Executive Officer and Chief Financial Officer have concluded that these disclosure controls and procedures are effective as of September 30, 2017. Disclosure controls and procedures are designed to ensure that information required to be disclosed in the reports filed or submitted under the Securities Exchange Act of 1934 is recorded, processed, summarized, and reported, within the time periods specified in the SEC’s rules and forms. Disclosure controls and procedures include, without limitation, controls and procedures designed to ensure that information required to be disclosed in such reports is accumulated and communicated to management, including the Chief Executive Officer and Chief Financial Officer, as appropriate, to allow for timely decisions regarding required disclosure.

There were no changes in the Company’s internal control over financial reporting during the three months ended September 30, 2017 that have materially affected, or are reasonably likely to materially affect, internal control over financial reporting.

## Risk factors

As filed, 193 characters.

There were no material changes to the risk factors disclosed in Viad’s Annual Report on Form 10-K for the year ended December 31, 2016, or in our Form 10-Q for the quarter ended March 31, 2017.

Filed Nov 6, 2017.
Source: SEC EDGAR, the filing index for accession 0001564590-17-021682. Last ingested by Listed: Nov 4, 2026, 17:36 ET. No prices; not investment advice.