# Pursuit Attractions & Hospitality, Inc.: Form 10-Q for the period ended Jun 30, 2020

- Company: [Pursuit Attractions & Hospitality, Inc.](/companies/prsu.md) (CIK 884219)
- Form: 10-Q
- Filed: 2020-08-07
- Accepted by EDGAR: Aug 7, 2020, 20:23 ET
- Period: 2020-06-30
- Accession: 0001564590-20-038464
- Inline XBRL: yes
- Main document: https://www.sec.gov/Archives/edgar/data/884219/000156459020038464/vvi-10q_20200630.htm
- All documents and exhibits: https://www.sec.gov/Archives/edgar/data/884219/000156459020038464/

## Figures reported in this filing

Standardized XBRL line items for the period ended 2020-06-30.

| Line item | Period | Value | XBRL concept |
| --- | --- | ---: | --- |
| Revenue | 3 months, 2020-04-01 to 2020-06-30 | $30.9m | us-gaap:RevenueFromContractWithCustomerExcludingAssessedTax |
| Revenue | 6 months, 2020-01-01 to 2020-06-30 | $336.9m | us-gaap:RevenueFromContractWithCustomerExcludingAssessedTax |
| Operating income | 3 months, 2020-04-01 to 2020-06-30 | −$52.2m | us-gaap:OperatingIncomeLoss |
| Operating income | 6 months, 2020-01-01 to 2020-06-30 | −$62.4m | us-gaap:OperatingIncomeLoss |
| Interest expense | 3 months, 2020-04-01 to 2020-06-30 | $5.2m | us-gaap:InterestExpense |
| Interest expense | 6 months, 2020-01-01 to 2020-06-30 | $9.2m | us-gaap:InterestExpense |
| Income tax | 3 months, 2020-04-01 to 2020-06-30 | $35.5m | us-gaap:IncomeTaxExpenseBenefit |
| Income tax | 6 months, 2020-01-01 to 2020-06-30 | $19.7m | us-gaap:IncomeTaxExpenseBenefit |
| Net income | 3 months, 2020-04-01 to 2020-06-30 | −$206.3m | us-gaap:NetIncomeLoss |
| Net income | 6 months, 2020-01-01 to 2020-06-30 | −$292.9m | us-gaap:NetIncomeLoss |
| Diluted EPS | 3 months, 2020-04-01 to 2020-06-30 | −$10.19 | us-gaap:EarningsPerShareDiluted |
| Diluted EPS | 6 months, 2020-01-01 to 2020-06-30 | −$14.49 | us-gaap:EarningsPerShareDiluted |
| Basic EPS | 3 months, 2020-04-01 to 2020-06-30 | −$10.19 | us-gaap:EarningsPerShareBasic |
| Basic EPS | 6 months, 2020-01-01 to 2020-06-30 | −$14.49 | us-gaap:EarningsPerShareBasic |
| Diluted shares (weighted) | 3 months, 2020-04-01 to 2020-06-30 | 20,282,000 shares | us-gaap:WeightedAverageNumberOfDilutedSharesOutstanding |
| Diluted shares (weighted) | 6 months, 2020-01-01 to 2020-06-30 | 20,249,000 shares | us-gaap:WeightedAverageNumberOfDilutedSharesOutstanding |
| Operating cash flow | 6 months, 2020-01-01 to 2020-06-30 | −$31.2m | us-gaap:NetCashProvidedByUsedInOperatingActivities |
| Capital expenditure | 6 months, 2020-01-01 to 2020-06-30 | $32.5m | us-gaap:PaymentsToAcquireProductiveAssets |
| Dividends paid | 6 months, 2020-01-01 to 2020-06-30 | $4.1m | us-gaap:PaymentsOfDividendsCommonStock |
| Share repurchases | 6 months, 2020-01-01 to 2020-06-30 | $2.8m | us-gaap:PaymentsForRepurchaseOfCommonStock |
| Cash and equivalents | at 2020-06-30 | $154.2m | us-gaap:CashAndCashEquivalentsAtCarryingValue |
| Current assets | at 2020-06-30 | $235.1m | us-gaap:AssetsCurrent |
| Total assets | at 2020-06-30 | $998.5m | us-gaap:Assets |
| Current liabilities | at 2020-06-30 | $119.3m | us-gaap:LiabilitiesCurrent |
| Total liabilities | at 2020-06-30 | $768.1m | us-gaap:Liabilities |
| Long-term debt | at 2020-06-30 | $450.0m | us-gaap:LongTermDebt |
| Shareholders' equity | at 2020-06-30 | $153.8m | us-gaap:StockholdersEquity |

## Management's discussion and analysis

As filed, 51,511 characters.

### Forward-Looking Statements

This Form 10-Q contains a number of forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. Words, and variations of words, such as “will,” “may,” “expect,” “would,” “could,” “might,” “intend,” “plan,” “believe,” “estimate,” “anticipate,” “deliver,” “seek,” “aim,” “potential,” “target,” “outlook,” and similar expressions are intended to identify our forward-looking statements. Forward-looking statements in this Form 10-Q include, among others, statements about our plans, business strategies, initiatives, intentions, goals and the outlook related to the effects of the COVID-19 pandemic, including on the demand for travel, event business and travel experiences, the timing of event and attraction re-openings, financial performance, prospects or future events. There are a number of risks, uncertainties and other important factors, many of which are beyond our control, that could cause our actual results to differ materially from the forward-looking statements contained in this Quarterly Report on Form 10-Q. Such risks, uncertainties and other important factors include, among others: the factors set forth under “Risk Factors” (Part I, Item 1A) and “Management’s Discussion and Analysis of Financial Condition and Results of Operations” (Part II, Item 7) in our Annual Report on Form 10-K filed with the U.S. Securities and Exchange Commission (the “SEC”), as may be updated elsewhere in this report; and the information set forth in other Quarterly Reports on Form 10-Q and Current Reports on Form 8-K that we have filed or will file with the SEC; the short- and longer-term effects of the COVID-19 pandemic, including on the demand for travel, event business and travel experiences, and levels of consumer confidence; actions that governments, businesses, and individuals take in response to the COVID-19 pandemic or any future resurgence, including limiting or banning travel; the impact of the COVID-19 pandemic, and actions taken in response to the COVID-19 pandemic or any future resurgence, on global and regional economies, travel, and economic activity, including the duration and magnitude of its impact on unemployment rates and consumer discretionary spending; the pace of recovery following the COVID-19 pandemic or any future resurgence; COVID-19 may cause us to incur additional expenses. These forward-looking statements are not historical facts and are subject to a host of risks and uncertainties, many of which are beyond our control, which could cause actual results to differ materially from those in the forward-looking statements. We disclaim and do not undertake any obligation to update or revise any forward-looking statement except as required by applicable law or regulation.

The following Management’s Discussion and Analysis (“MD&A”) should be read in conjunction with our 2019 Form 10-K and the condensed consolidated financial statements and related notes included in this Form 10-Q. The MD&A is intended to assist in understanding our financial condition and results of operations.

### Overview

We are an international experiential services company 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 three reportable business segments: GES North America, GES EMEA, (collectively, “GES”), and Pursuit.

### GES

GES is a global, full-service live events company offering a comprehensive range of services to event organizers and corporate brand marketers. Event organizers schedule and run events from start to finish. Corporate brand marketers include exhibitors and domestic and international corporations that want to promote their brands, services and innovation, 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.

### Pursuit

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.

### Impact of COVID-19

On March 11, 2020, the World Health Organization declared COVID-19 a “pandemic.” COVID-19 has spread rapidly, with a high concentration of confirmed cases in the U.S. and other countries in which we operate. The rapid spread has resulted in authorities around the world implementing numerous measures to contain the virus, such as travel bans and restrictions, quarantines, shelter-in-place orders, and business shutdowns. The COVID-19 pandemic and these containment measures have had, and are expected to continue to have, a substantial negative impact on businesses around the world and on global, regional, and national economies.

The COVID-19 pandemic is having and will likely continue to have a significant and negative impact on our operations and financial performance, with live events largely shut down and tourism activity disruptions. As a result, we have taken the following measures to improve our liquidity position and mitigate the negative financial impacts due to COVID-19:

- We implemented aggressive cost reduction actions, including furloughs, layoffs, mandatory unpaid time off, or salary reductions for all employees;
- Our executive management voluntarily reduced its base salaries by 20% to 50%;
- The non-employee members of our Board of Directors agreed to reduce their annual cash retainer and committee retainers by 50% for payments typically made to them in the second quarter of 2020;
- We eliminated all discretionary spending, reduced maintenance capital expenditures to essential levels, and paused spending on the majority of growth projects;
- We suspended future dividend payments, share repurchases, and our 401(k) Plan employer match contributions for the foreseeable future;
- We availed ourselves of governmental assistance programs for wages and tax relief;
- We borrowed the remaining available capacity under the revolving credit facility (the “2018 Credit Facility”) at the beginning of April 2020 as a proactive measure to increase our cash position and preserve financial flexibility;
- In May 2020, we obtained a waiver of our financial covenants for the quarter ending June 30, 2020;
- In May 2020, we terminated our legacy life insurance policies on former employees and received the cash proceeds of $24.8 million;
- In July 2020, we sold a GES warehouse in San Diego and received cash proceeds of $17.0 million;
- In August 2020, we secured a new equity capital investment of up to $180 million through the issuance of perpetual convertible preferred stock; and
- In August 2020, we obtained longer-term financial covenant relief until the end of the third quarter of 2022.

On August 5, 2020, we entered into an investment agreement with funds managed by private equity firm Crestview Partners (the “Investment Agreement”) who made an initial investment of $135 million, net of approximately $9 million in fees, in newly issued perpetual convertible preferred stock that carries a 5.5% dividend, which is payable in cash or in-kind at Viad’s option (the “Convertible Preferred Stock”). The Convertible Preferred Stock is convertible into shares of our common stock at a conversion price of $21.25 per share. The Investment Agreement also includes a delayed draw commitment of up to $45 million in additional Convertible Preferred Stock, which we may access during the next 12 months on the same terms and conditions as the initial investment (subject to shareholder approval). The proceeds from Crestview’s initial investment will be used to repay a portion of our 2018 Credit Facility, provide additional short-term liquidity, fund capital expenditures, and support general corporate purposes. Pursuant to the Investment Agreement, two Crestview Partners’ designees joined our Board of Directors, increasing the size of our board from seven to nine directors. On August 5, 2020 we entered into an amendment to our Second Amended and Restated Credit Agreement (the “2018 Credit Agreement”), which, among other things, (i) waives our financial covenants until the end of the third quarter of 2022 (the “Covenant Waiver Period”) and (ii) requires us to maintain minimum liquidity of $125 million with a step down to $100 million at December 31, 2020. The interest rate on the borrowings is equal to 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. 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 also allows us to make acquisitions under certain conditions. Viad pledged 100% of the capital stock of its top-tier foreign subsidiaries (other than Esja). Fees related to the amendment were approximately $1.6 million.

Due to the deteriorating macroeconomic environment, disruptions to our operations, and the sustained decline in our stock price caused by COVID-19, we determined an interim triggering event had occurred in the first quarter of 2020, which required us to assess the carrying values of goodwill and intangible assets. Based on this assessment, we recorded a non-cash goodwill impairment charge of $72.7 million during the three months ended March 31, 2020 associated with the GES U.S., GES EMEA, and Pursuit’s Glacier Park Collection reporting units. Additionally, during the three months ended March 31, 2020, we recorded a non-cash impairment charge to other intangible assets of $15.7 million related to our U.S. audio-visual production business.

During the second quarter of 2020 and into July, GES continued to experience event postponements and cancellations and we experienced further declines in our stock price. There has also been an increased spread of the COVID-19 virus throughout the United States, which resulted in further closures and governor orders that we believe have increased the uncertainty regarding when the live event industry will re-commence and how long it will take to get back to similar pre-COVID-19 business levels. The uncertainty regarding the duration of the current domestic and global economic conditions and whether further deterioration in the macroeconomic environment will continue as a result of the COVID-19 pandemic was factored into our second quarter goodwill impairment analysis. As a result, we recorded a full impairment charge to the remaining GES goodwill balance of $113.1 million during the three months ended June 30, 2020. Our remaining goodwill balance as of June 30, 2020 of $95.2 million pertains to our

Pursuit business, which phased in most of its attractions and lodging operations in June and July of 2020. The duration and impact of COVID-19 may result in additional future impairment charges as facts and circumstances evolve.

### Seasonality

GES’ exhibition and event activity can vary significantly from quarter to quarter and year to year depending on the frequency and timing of shows. Some shows are not held annually, and some shift between quarters. During 2019, GES reported its highest revenue during the second and fourth quarters.

Pursuit experiences peak activity during the summer months. During 2019, 85% of Pursuit’s revenue was earned in the second and third quarters.

As a result of COVID-19 concerns, we continue to see event postponements and cancellations at GES, as well as some cancelled bookings at Pursuit. To help reduce the spread of COVID-19, Pursuit’s year-round attractions and lodging properties were closed temporarily starting in mid-March and remained closed during most of the second quarter of 2020. As government mandated closures and stay-at-home orders were lifted, we began to restart our business with enhanced health and safety protocols in place. We phased in most of Pursuit’s attractions and lodging operations starting in May and continuing into July. However, exhibition and event activity remain largely closed. For GES, we believe that, as governments continue to lift restrictions, events in certain geographies will gradually increase and we stand ready to reactivate areas of that business when it makes sense to do so. Additionally, in the event of a future resurgence of the virus, we may be required to re-close certain attractions or events based on local or governmental restrictions implemented.

The extent of the COVID-19 pandemic’s effect on our operational and financial performance will depend on future developments including the duration, spread, and intensity of the virus, all of which are uncertain and difficult to predict. Due to the speed with which the situation is developing, we are not able at this time to fully estimate the effect of these factors on our business, however, the adverse impact on our business, results of operations, and cash flows has been material. We will continue to evaluate and implement additional cost-cutting measures as are necessary to mitigate the negative financial and operational impact of COVID-19 on our business. For a discussion of the risks and uncertainties that may affect our business or financial results, refer to “Risk Factors” (Part II, Item 1A of this Form 10-Q).

### Results of Operations

### Financial Highlights

*(in thousands, except per share data)*

|  | Three Months Ended June 30, 2020 | 2019 | % Change | Six Months Ended June 30, 2020 | 2019 | % Change |
| --- | ---: | ---: | --- | ---: | ---: | --- |
| Total revenue | $30,863 | $402,279 | (92.3)% | $336,871 | $687,873 | (51.0)% |
| Net income (loss) attributable to Viad | $(206,278) | $13,824 | \*\* | $(292,863) | $(3,953) | \*\* |
| Segment operating income (loss) (1) | $(49,752) | $46,566 | \*\* | $(59,168) | $35,314 | \*\* |
| Diluted income (loss) per common share from continuing operations attributable to Viad common stockholders | $(10.17) | $0.65 | \*\* | $(14.44) | $(0.22) | \*\* |

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

- **Total revenue** decreased $371.4 million or 92.3%, during the three months ended June 30, 2020 and decreased $351.0 million or 51.0% during the six months ended June 30, 2020. These decreases are primarily due to show postponements and cancellations at GES and the temporary closure of Pursuit’s properties due to the COVID-19 pandemic, negative show rotation of approximately $51 million at GES during the three months ended June 30, 2020, and unfavorable foreign exchange impacts of $0.4 million and $1.5 million during the three and six months ended June 30, 2020, respectively, offset in part by incremental revenue from Pursuit’s Mountain Park Lodges acquisition.
- **Net loss attributable to Viad** was $206.3 million during the three months ended June 30, 2020 as compared to income of $13.8 million during the three months ended June 30, 2019. Net loss attributable to Viad increased $288.9 million during the six months ended June 30, 2020 as compared to the six months ended June 30, 2019. The 2020 net losses are primarily due to lower revenue and impairment charges of $114.0 million and $202.4 million during the three and six months ended June 30, 2020, respectively, valuation allowances of $25.5 million against deferred tax assets as well as no tax benefits on non-deductible goodwill impairments and certain losses recognized, offset in part by lower performance-based compensation expense as we reduced our estimated performance achievement to zero as a result of COVID-19.
- **Total segment operating loss(1)** was $49.7 million during the three months ended June 30, 2020 as compared to income of $46.6 million during the three months ended June 30, 2019. Segment operating loss was $59.2 million during the six months ended June 30, 2020 as compared to income of $35.3 million during the six months ended June 30, 2019. The 2020 losses are primarily due to lower revenue at GES and Pursuit as a result of the COVID-19 pandemic, offset in part by the elimination of performance-based incentives.

(1) Refer to Note 22 – 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.

### Foreign Exchange Rate Variances

We conduct our foreign operations primarily in Canada, the United Kingdom, the Netherlands, Germany, and to a lesser extent, in certain other countries.

The following table summarizes the foreign exchange rate variance effects (or “FX Impact”) on revenue and segment operating income (loss) from our significant international operations for the three and six months ended June 30, 2020 and 2019:

### Three months ended June 30, 2020 compared with the three months ended June 30, 2019

*(in thousands)*

*(in thousands)*

| GES North America: | Revenue Weighted-Average Exchange Rates 2020 | 2019 | FX Impact | Segment Operating Income (Loss) Weighted-Average Exchange Rates 2020 | 2019 | FX Impact |
| --- | ---: | ---: | ---: | ---: | ---: | ---: |
| Canada (CAD) | $0.72 | $0.75 | $(30) | $0.72 | $0.75 | $49 |
| GES EMEA: |  |  |  |  |  |  |
| United Kingdom (GBP) | $1.24 | $1.28 | $(305) | $1.24 | $1.28 | $(44) |
| Europe (EUR) | $1.10 | $1.12 | (14) | $1.10 | $1.12 | 22 |
|  |  |  | (319) |  |  | (22) |
| Pursuit: |  |  |  |  |  |  |
| Canada (CAD) | $0.73 | $0.75 | (47) | $0.72 | $0.75 | 288 |
|  |  |  | $(396) |  |  | $315 |

38

### Six months ended June 30, 2020 compared with the six months ended June 30, 2019

*(in thousands)*

*(in thousands)*

| GES North America: | Revenue Weighted-Average Exchange Rates 2020 | 2019 | FX Impact | Segment Operating Income (Loss) Weighted-Average Exchange Rates 2020 | 2019 | FX Impact |
| --- | ---: | ---: | ---: | ---: | ---: | ---: |
| Canada (CAD) | $0.73 | $0.75 | $(364) | $0.73 | $0.75 | $(31) |
| GES EMEA: |  |  |  |  |  |  |
| United Kingdom (GBP) | $1.27 | $1.29 | $(812) | $1.26 | $1.29 | $(90) |
| Europe (EUR) | $1.10 | $1.13 | (195) | $1.10 | $1.13 | 27 |
|  |  |  | (1,007) |  |  | (63) |
| Pursuit: |  |  |  |  |  |  |
| Canada (CAD) | $0.75 | $0.75 | (85) | $0.73 | $0.75 | 380 |
|  |  |  | $(1,456) |  |  | $286 |

Revenue and segment operating income (loss) were primarily impacted by variances of the British pound, the Canadian dollar, and the Euro relative to the U.S. dollar. Future changes in exchange rates may impact overall expected profitability and historical period-to-period comparisons when revenue and segment operating income (loss) are translated into U.S. dollars.

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

### GES

The following table presents a comparison of GES’ reported revenue and segment operating income (loss) to organic revenue(1) and organic segment operating income (loss)(1) for the three and six months ended June 30, 2020 and 2019.

*(in thousands)*

| Revenue: GES: | Three Months Ended June 30, 2020 As Reported | Acquisitions | FX Impact | Organic(1) | Three Months Ended June 30, 2019 As Reported | Acquisitions | Organic(1) | Change vs. 2019 As Reported | Organic(1) |
| --- | ---: | ---: | ---: | ---: | ---: | ---: | ---: | ---: | ---: |
| North America | $18,776 | $— | $(30) | $18,806 | $283,682 | $— | $283,682 | (93.4)% | (93.4)% |
| EMEA | 7,808 | — | (319) | 8,127 | 69,505 | — | 69,505 | (88.8)% | (88.3)% |
| Intersegment eliminations | (985) | — | — | (985) | (6,317) | — | (6,317) | 84.4% | 84.4% |
| Total GES | $25,599 | $— | $(349) | $25,948 | $346,870 | $— | $346,870 | (92.6)% | (92.5)% |
| **Segment operating income (loss)(2):** |  |  |  |  |  |  |  |  |  |
| GES: |  |  |  |  |  |  |  |  |  |
| North America | $(29,174) | $— | $49 | $(29,223) | $30,589 | $— | $30,589 | \*\* | \*\* |
| EMEA | (2,886) | — | (22) | (2,864) | 4,664 | — | 4,664 | \*\* | \*\* |
| Total GES | $(32,060) | $— | $27 | $(32,087) | $35,253 | $— | $35,253 | \*\* | \*\* |

39

*(in thousands)*

| Revenue: GES: | Six Months Ended June 30, 2020 As Reported | Acquisitions | FX Impact | Organic(1) | Six Months Ended June 30, 2019 As Reported | Acquisitions | Organic(1) | Change vs. 2019 As Reported | Organic(1) |
| --- | ---: | ---: | ---: | ---: | ---: | ---: | ---: | ---: | ---: |
| North America | $270,534 | $— | $(364) | $270,898 | $506,923 | $— | $506,923 | (46.6)% | (46.6)% |
| EMEA | 50,524 | — | (1,007) | 51,531 | 123,881 | — | 123,881 | (59.2)% | (58.4)% |
| Intersegment eliminations | (2,974) | — | — | (2,974) | (9,007) | — | (9,007) | 67.0% | 67.0% |
| Total GES | $318,084 | $— | $(1,371) | $319,455 | $621,797 | $— | $621,797 | (48.8)% | (48.6)% |
| **Segment operating income (loss)(2):** |  |  |  |  |  |  |  |  |  |
| GES: |  |  |  |  |  |  |  |  |  |
| North America | $(17,208) | $— | $(31) | $(17,177) | $31,197 | $— | $31,197 | \*\* | \*\* |
| EMEA | (3,994) | — | (63) | (3,931) | 5,799 | — | 5,799 | \*\* | \*\* |
| Total GES | $(21,202) | $— | $(94) | $(21,108) | $36,996 | $— | $36,996 | \*\* | \*\* |

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

(1) Organic revenue and organic segment operating income (loss) 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 income (loss), see the “Non-GAAP Measures” section of this MD&A.

(2) Refer to Note 22 – 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.

### GES North America

**GES North America revenue** decreased $264.9 million or 93.4% during the three months ended June 30, 2020 and $236.4 million or 46.6% during the six months ended June 30, 2020, primarily due to show postponements and cancellations due to the COVID-19 pandemic as well as negative show rotation of approximately $31 million during the three months ended June 30, 2020. During the six months ended June 30, 2020, we had positive show rotation of approximately $30 million. Revenue earned during the second quarter was primarily driven by compensation for work completed on cancelled shows and the conversion of convention centers into temporary hospitals in early April. Organic revenue\* decreased $264.9 million or 93.4% during the three months ended June 30, 2020 and $236.0 million or 46.6% during the six months ended June 30, 2020.

**GES North America segment operating loss** was $29.2 million during the three months ended June 30, 2020 as compared to income of $30.6 million during the three months ended June 30, 2019. Segment operating loss was $17.2 million during the six months ended June 30, 2020 as compared to income of $31.2 million during the six months ended June 30, 2019. The 2020 losses are primarily due to the decrease in revenue and the elimination of performance-based incentives. Organic segment operating loss\* was $29.2 million during the three months ended June 30, 2020 as compared to income of $30.6 million during the three months ended June 30, 2019. Organic segment operating loss\* was $17.2 million during the six months ended June 30, 2020 as compared to income of $31.2 million during the six months ended June 30, 2019.

### GES EMEA

**GES EMEA revenue** decreased $61.7 million or 88.8% during the three months ended June 30, 2020 and $73.4 million or 59.2% during the six months ended June 30, 2020, primarily due to show postponements and cancellations due to the COVID-19 pandemic as well as negative show rotation of approximately $20 million for the three months ended June 30, 2020 and $25 million for the six months ended June 30, 2020 and unfavorable FX Impacts of $0.3 million during the three months ended June 30, 2020 and $1.0 million during the six months ended June 30, 2020. Revenue earned during the second quarter was primarily driven by compensation for work completed on cancelled shows. Organic revenue\* decreased $61.4 million or 88.3% during the three months ended June 30, 2020 and $72.4 million or 58.4% during the six months ended June 30, 2020.

**GES EMEA segment operating loss** was $2.9 million during the three months ended June 30, 2020 as compared to income of $4.7 million during the three months ended June 30, 2019. Segment operating loss was $4.0 million during the six months ended June 30, 2020 as compared to income of $5.8 million during the six months ended June 30, 2019. The 2020 losses are primarily due to the decrease in revenue. Organic segment operating loss\* was $2.9 million during the three months ended June 30, 2020 as compared to income of $4.7 million during the three months ended June 30, 2019. Organic segment operating loss\* was $3.9 million during the six months ended June 30, 2020 as compared to income of $5.8 million during the six months ended June 30, 2019.

\* Refer to footnote (1) in the above table for more information about the non-GAAP financial measures of organic revenue and organic segment operating income (loss).

### Pursuit

The following table presents a comparison of Pursuit’s reported revenue and segment operating income (loss) to organic revenue(3) and organic segment operating loss(3) for the three and six months ended June 30, 2020 and 2019.

*(in thousands)*

| Revenue(1): Pursuit: | Three Months Ended June 30, 2020 As Reported | Acquisitions(2) | FX Impact | Organic(3) | Three Months Ended June 30, 2019 As Reported | Acquisitions | Organic(3) | Change vs. 2019 As Reported | Organic(3) |
| --- | ---: | ---: | ---: | ---: | ---: | ---: | ---: | ---: | ---: |
| Attractions | $2,164 | $— | $(30) | $2,194 | $29,836 | $— | $29,836 | (92.7)% | (92.6)% |
| Hospitality | 2,998 | 1,104 | (17) | 1,911 | 20,587 | 3,018 | 17,569 | (85.4)% | (89.1)% |
| Transportation | 14 | — | 1 | 13 | 4,007 | — | 4,007 | (99.7)% | (99.7)% |
| Travel Planning | 2 | — | — | 2 | 1,150 | — | 1,150 | (99.8)% | (99.8)% |
| Intra-Segment Eliminations & Other | 86 | — | (1) | 87 | (171) | — | (171) | \*\* | \*\* |
| Total Pursuit | $5,264 | $1,104 | $(47) | $4,207 | $55,409 | $3,018 | $52,391 | (90.5)% | (92.0)% |
| **Segment operating income (loss)(4):** |  |  |  |  |  |  |  |  |  |
| Total Pursuit | $(17,692) | $(1,787) | $288 | $(16,193) | $11,313 | $— | $11,313 | \*\* | \*\* |

*(in thousands)*

| Revenue(1): Pursuit: | Six Months Ended June 30, 2020 As Reported | Acquisitions(2) | FX Impact | Organic(3) | Six Months Ended June 30, 2019 As Reported | Acquisitions | Organic(3) | Change vs. 2019 As Reported | Organic(3) |
| --- | ---: | ---: | ---: | ---: | ---: | ---: | ---: | ---: | ---: |
| Attractions | $7,442 | $— | $(44) | $7,486 | $34,504 | $— | $34,504 | (78.4)% | (78.3)% |
| Hospitality | 8,979 | 4,044 | (28) | 4,963 | 24,251 | 3,018 | 21,233 | (63.0)% | (76.6)% |
| Transportation | 2,160 | — | (11) | 2,171 | 6,157 | — | 6,157 | (64.9)% | (64.7)% |
| Travel Planning | 201 | — | (2) | 203 | 1,597 | — | 1,597 | (87.4)% | (87.3)% |
| Intra-Segment Eliminations & Other | 5 | — | — | 5 | (433) | — | (433) | \*\* | \*\* |
| Total Pursuit | $18,787 | $4,044 | $(85) | $14,828 | $66,076 | $3,018 | $63,058 | (71.6)% | (76.5)% |
| **Segment operating loss(4):** |  |  |  |  |  |  |  |  |  |
| Total Pursuit | $(37,966) | $(4,254) | $380 | $(34,092) | $(1,682) | $— | $(1,682) | \*\* | \*\* |

(1) Revenue by line of business does not agree to Note 2 – Revenue and Related Contract Costs and Contract Liabilities in the Notes to Condensed Consolidated Financial Statements (Part I, Item 1 of this Form 10-Q) as the amounts in the above table include product revenue from food and beverage and retail operations within each line of business.

(2) Acquisitions include Mountain Park Lodges (acquired June 2019) and Belton Chalet (acquired May 2019).

(3) Organic revenue and organic segment operating income (loss) 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 income (loss), see the “Non-GAAP Measures” section of this MD&A.

(4) Refer to Note 22 – 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.

**Pursuit revenue** decreased $50.1 million or 90.5% during the three months ended June 30, 2020 and $47.3 million or 71.6% during the six months ended June 30, 2020, primarily due to temporary closure of Pursuit’s properties due to the COVID-19 pandemic, offset in part by incremental revenue from the Mountain Park Lodges acquisition of $1.1 million and $4.0 million during the three and six months ended June 30, 2020, respectively. Organic revenue\* decreased $48.2 million or 92.0% during the three months ended June 30, 2020 and $48.2 million or 76.5% during the six months ended June 30, 2020.

**Pursuit segment operating loss** was $17.7 million during the three months ended June 30, 2020 as compared to income of $11.3 million during the three months ended June 30, 2019. Segment operating loss increased $36.3 million during the six months ended June 30, 2020 as compared to the six months ended June 30, 2019. The 2020 losses are primarily due to the decrease in revenue. Organic segment operating loss\* was $16.2 million during the three months ended June 30, 2020 as compared to income of $11.3 million during the three months ended June 30, 2019. Organic segment operating loss\* increased $32.4 million during the six months ended June 30, 2020 as compared to the six months ended June 30, 2019.

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

### Performance Measures

We use the following key business metrics to evaluate the performance of Pursuit’s attractions business:

- **Number of visitors**. The number of visitors allows us to assess the volume of tickets sold at each attraction during the period.
- **Revenue per attraction visitor**. Revenue per attraction visitor is calculated as total attractions revenue divided by the total number of visitors at all Pursuit attractions during the period. Total attractions revenue includes ticket sales and ancillary revenue generated by attractions, such as food and beverage and retail revenue. Total attractions revenue per visitor measures the total spend per visitor that attraction properties are able to capture, which is important to the profitability of the attractions business.
- **Effective ticket price**. Effective ticket price is calculated as revenue from the sale of attraction tickets divided by the total number of visitors at all comparable Pursuit attractions during the period.

We use the following key business metrics, common in the hospitality industry, to evaluate Pursuit’s hospitality business:

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

The following table provides Pursuit’s same-store key performance indicators. The same-store metrics indicate the performance of all Pursuit’s properties and attractions that we owned and operated at full capacity, considering seasonal closures, for the entirety of both periods presented. For Pursuit properties and attractions located outside of the U.S., 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. We believe this same-store constant currency basis provides better comparability between reporting periods.

| Same-Store Key Performance Indicators (1) Attractions: | Three Months Ended June 30, 2020 | 2019 | % Change | Six Months Ended June 30, 2020 | 2019 | Change vs. 2019 |
| --- | ---: | ---: | ---: | ---: | ---: | ---: |
| Number of visitors | 36,574 | 650,724 | (94.4)% | 144,785 | 801,890 | (81.9)% |
| Revenue per attraction visitor | $48 | $45 | 6.7% | $37 | $42 | (11.9)% |
| Effective ticket price | $32 | $35 | (8.6)% | $26 | $33 | (21.2)% |
| **Hospitality:** |  |  |  |  |  |  |
| Room nights available (2) | 13,540 | 78,792 | (82.8)% | 49,305 | 118,572 | (58.4)% |
| RevPAR (2) | $32 | $125 | (74.4)% | $50 | $102 | (51.0)% |
| ADR | $167 | $200 | (16.5)% | $109 | $172 | (36.6)% |
| Occupancy (2) | 18.9% | 62.5% | (43.6)% | 45.5% | 59.4% | (13.9)% |

(1) Same-Store Key Performance Indicators for attractions exclude FlyOver Iceland (opened August 2019). Same-Store Key Performance Indicators for hospitality excludes the Glacier Basecamp Lodge (purchased January 2020), West Glacier RV Park & Cabins (opened July 2019), Mountain Park Lodges (acquired in June 2019), and the Belton Chalet (acquired May 2019).

(2) The rooms that were out of service as a result of property closures due to the COVID-19 pandemic were excluded from room nights available when calculating hospitality RevPAR and occupancy.

For the health and well-being of our employees, guests, and community, Pursuit’s year-round attractions and lodging properties were closed temporarily starting in mid-March and remained closed during most of the second quarter of 2020. On May 8, 2020, we re-opened FlyOver Iceland, and during June and July of 2020, the majority of Pursuit’s properties were re-opened. St. Mary Lodge and Glacier Park Lodge remain closed due to a government-imposed closure at the East Glacier entrance at Glacier National Park. In order to mitigate the negative financial and operational impacts, we have eliminated all non-essential capital expenditures. This has resulted in the delay of the opening of FlyOver Canada Toronto, which is now anticipated to open in 2023. FlyOver Las Vegas and the Sky Lagoon are still on track to open in 2021.

**Attractions**. The decrease in same-store visitors was driven by the temporary closure of our attractions in March 2020 as a result of COVID-19. Revenue per attraction visitor increased during the three months ended June 30, 2020 primarily driven by product mix.

**Hospitality**. The decrease in RevPAR and ADR was driven by lower demand as a result of COVID-19.

During 2019, Pursuit derived approximately 66% of its revenue and 88% of its segment operating income from its Canadian operations, which are largely dependent on foreign customer visitation. Accordingly, the reopening of borders and the strengthening or weakening of the Canadian dollar, relative to other currencies, could affect customer volumes and the results of operations.

### Other Expenses

*(in thousands)*

|  | Three Months Ended June 30, 2020 | 2019 | % Change | Six Months Ended June 30, 2020 | 2019 | Change vs. 2019 |
| --- | ---: | ---: | ---: | ---: | ---: | ---: |
| Corporate activities | $2,468 | $3,282 | (24.8)% | $3,257 | $5,115 | (36.3)% |
| Interest expense | $5,186 | $2,957 | 75.4% | $9,204 | $5,872 | 56.7% |
| Multi-employer pension plan withdrawal | $462 | $15,508 | (97.0)% | $462 | $15,508 | (97.0)% |
| Restructuring charges | $260 | $4,455 | (94.2)% | $1,111 | $5,143 | (78.4)% |
| Legal settlement | $— | $— | \*\* | $— | $8,500 | (100.0)% |
| Impairment charges | $114,020 | $— | \*\* | $202,400 | $— | \*\* |
| Income tax expense (benefit) | $35,516 | $6,565 | \*\* | $19,719 | $(1,030) | \*\* |
| Income (loss) from discontinued operations | $(379) | $460 | \*\* | $(833) | $173 | \*\* |

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

**Corporate Activities –** The decrease in corporate activities expense during the three and six months ended June 30, 2020 relative to 2019 was primarily due to lower headcount and lower performance-based compensation expense as we reduced our estimated performance achievement to zero as a result of COVID-19.

**Interest Expense –** The increase in interest expense during the three and six months ended June 30, 2020 was primarily due to higher debt balances in 2020.

**Multi-employer pension plan withdrawal –** During 2019, we finalized the terms of a new collective-bargaining agreement with the Teamsters 727 union. The terms included a withdrawal from the under-funded Central States Pension Plan. Accordingly, we recorded a charge of $15.5 million, which represented the estimated present value of future contributions we will be required to make to the plan as a result of this withdrawal from the plan. Additionally, in 2020 we recorded $0.5 million related to the withdrawal from one of our multi-employer plans.

**Restructuring Charges –** Restructuring charges during the three and six months ended June 30, 2020 and 2019 were primarily related to the elimination of certain positions at GES and Viad’s corporate office.

**Legal Settlement –** During the six months ended June 30, 2019, we recorded a charge to resolve a legal dispute at GES involving a former industry contractor.

**Impairment Charges –** Due to the impact of COVID-19 on our business, we performed interim evaluations of goodwill as of March 31, 2020 and June 30, 2020. During the first quarter of 2020, we recorded a non-cash goodwill impairment charge of $72.7 million associated with GES U.S., GES EMEA, and Pursuit’s Glacier Park Collection reporting units and we recorded a non-cash impairment charge to other intangible assets of $15.7 million related to our U.S. audio-visual production business. During the second quarter of 2020, we recorded a full impairment charge to the remaining GES goodwill balance of $113.1 million in addition to a fixed asset impairment charge of $0.9 million.

**Income Tax Benefit –** The effective tax rate was a negative 20.6% for the three months ended June 30, 2020 and 32.8% for the three months ended June 30, 2019. The effective tax rate was a negative 7.1% for the six months ended June 30, 2020 and 18.7% for the six months ended June 30, 2019. The negative effective tax rates for the three and six months ended June 30, 2020 were due to the recording of a valuation allowance this quarter against our remaining U.S., UK, and other European net deferred tax assets of $25.5 million, as well as no tax benefits on non-deductible goodwill impairments and losses recognized in those jurisdictions.

**Loss from Discontinued Operations –** Loss from discontinued operations during 2020 and 2019 was primarily related to legal expenses related to previously sold operations.

### Liquidity and Capital Resources

We borrowed the remaining available capacity under the 2018 Credit Facility at the beginning of April 2020. Cash and cash equivalents were $154.2 million as of June 30, 2020, as compared to $62.0 million as of December 31, 2019. During the six months ended June 30, 2020, we used net cash in operating activities of $31.2 million. In May 2020, we terminated our legacy life insurance policies on former employees and received $24.8 million.

On August 5, 2020, we entered into an investment agreement with funds managed by private equity firm Crestview Partners (the “Investment Agreement”) who made an initial investment of $135 million, net of approximately $9 million in fees, in newly issued perpetual convertible preferred stock that carries a 5.5% dividend, which is payable in cash or in-kind at Viad’s option (the “Convertible Preferred Stock”). The Convertible Preferred Stock is convertible into shares of our common stock at a conversion price of $21.25 per share. The Investment Agreement also includes a delayed draw commitment of up to $45 million in additional Convertible Preferred Stock, which we may access during the next 12 months on the same terms and conditions as the initial investment (subject to shareholder approval). The proceeds from Crestview’s initial investment will be used to repay a portion of our 2018 Credit Facility, provide additional short-term liquidity, fund capital expenditures, and support general corporate purposes. On August 5, 2020 we entered into an amendment to our 2018 Credit Agreement, which, among other things, (i) waives our financial covenants until the end of the third quarter of 2022 (the “Covenant Waiver Period”) and (ii) requires us to maintain minimum liquidity of $125 million with a step down to $100 million at December 31, 2020. The interest rate on the borrowings is equal to 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. 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 also allows us to make acquisitions under certain conditions. Viad pledged 100% of the capital stock of its top-tier foreign subsidiaries (other than Esja). Fees related to the amendment were approximately $1.6 million.

As of June 30, 2020, we held approximately $47.9 million of our cash and cash equivalents outside of the United States, consisting of $15.6 million in Canada, $12.3 million in the United Kingdom, $9.9 million in the United Arab Emirates, $8.6 million in the Netherlands, and $1.5 million in certain other countries.

### Cash Flows

### Operating Activities

*(in thousands)*

|  | Six Months Ended June 30, 2020 | 2019 |
| --- | ---: | ---: |
| Net loss | $(296,551) | $(4,318) |
| Depreciation and amortization | 29,135 | 27,715 |
| Deferred income taxes | 19,514 | 6,215 |
| (Income) loss from discontinued operations | 833 | (173) |
| Restructuring charges | 1,111 | 5,143 |
| Legal settlement | — | 8,500 |
| Impairment charges | 202,400 | — |
| Multi-employer pension plan withdrawal | 462 | 15,508 |
| Other non-cash items | 8,809 | 6,113 |
| Changes in assets and liabilities | 3,122 | (25,166) |
| **Net cash (used in) provided by operating activities** | $(31,165) | $39,537 |

The main factors driving the increase in cash used in operating activities of $70.7 million were net losses at GES and Pursuit due to the COVID-19 pandemic, offset in part by a favorable change in working capital.

### Investing Activities

*(in thousands)*

|  | Six Months Ended June 30, 2020 | 2019 |
| --- | ---: | ---: |
| Capital expenditures | $(32,516) | $(46,517) |
| Cash surrender value of life insurance policies | 24,767 | — |
| Cash paid for acquisitions, net | — | (72,918) |
| Proceeds from dispositions of property and other assets | 4,654 | 768 |
| **Net cash used in investing activities** | $(3,095) | $(118,667) |

Net cash used in investing activities decreased $115.6 million primarily due to proceeds from the termination of our life insurance policies, the decrease in capital expenditures in 2020, and cash paid for acquisitions in 2019.

### Financing Activities

*(in thousands)*

|  | Six Months Ended June 30, 2020 | 2019 |
| --- | ---: | ---: |
| Proceeds from borrowings | $192,111 | $133,827 |
| Payments on debt and finance lease obligations | (56,078) | (47,862) |
| Dividends paid on common stock | (4,064) | (4,034) |
| Distributions to noncontrolling interest | (1,526) | — |
| Payment of payroll taxes on stock-based compensation through shares withheld or repurchased | (1,062) | (2,994) |
| Common stock purchased for treasury | (2,785) | — |
| Proceeds from exercise of stock options | 2,077 | 92 |
| **Net cash provided by financing activities** | $128,673 | $79,029 |

Cash provided by financing activities increased $49.6 million primarily due to the borrowings under the 2018 Credit Facility as a proactive measure to increase our cash position and preserve financial flexibility in light of current uncertainty in the global markets resulting from COVID-19, offset in part by the repurchase of treasury shares on the open market in 2020.

### Debt and Finance Lease Obligations

Refer to Note 12 – Debt and Finance Lease Obligations of the Notes to Condensed Consolidated Financial Statements for further discussion, all of which is incorporated by reference herein.

### Share Repurchases

Our Board of Directors previously authorized us to repurchase shares of our common stock from time to time at prevailing market prices. Effective February 7, 2019, our Board of Directors authorized the repurchase of an additional 500,000 shares. During the six months ended June 30, 2020, we repurchased 53,784 shares on the open market for $2.8 million. No shares were repurchased on the open market during the six months ended June 30, 2019. As of June 30, 2020, 546,283 shares remained available for repurchase. The Board of Directors’ authorization does not have an expiration date.

Additionally, we repurchased shares related to tax withholding requirements on vested restricted share-based awards.

In March 2020, our Board of Directors suspended our share repurchase program for the foreseeable future.

### Off-Balance Sheet Arrangements

We have not entered into any off-balance sheet arrangements with unconsolidated special-purpose or other entities that would materially affect our financial position, results of operations, liquidity, or capital resources. Furthermore, we do not have any relationships with special-purpose or other entities that provide off-balance sheet financing; liquidity, market risk, or credit risk support; or engage in leasing or other services that may expose us to liability or risks of loss that are not reflected in the condensed consolidated financial statements and related notes. Refer to Note 12 – Debt and Finance Lease Obligations, Note 19 – Leases and Other, and Note 20 – Litigation, Claims, Contingencies, and Other of the Notes to Condensed Consolidated Financial Statements (Part I, Item 1 of this quarterly report on Form 10-Q) for further information, which information is incorporated by reference herein.

### Critical Accounting Policies and Estimates

Refer to “Management’s Discussion and Analysis of Financial Condition and Results of Operations” (Part II, Item 7) of our 2019 Form 10-K, for a discussion of our critical accounting policies and estimates.

### Impact of Recent Accounting Pronouncements

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

### Non-GAAP Measures

In addition to disclosing financial results that are determined in accordance with U.S. generally accepted accounting principles (“GAAP”), we also disclose the following non-GAAP financial measures: Segment operating income (loss), organic revenue, and organic segment operating income (loss) (collectively, the “Non-GAAP Measures”). Our use of 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, our Non-GAAP Measures may not be comparable to similarly titled measures used by other companies. We believe that our use of Non-GAAP Measures provides useful information to investors regarding our results of operations for trending, analyzing, and benchmarking our performance and the value of our business.

- “**Segment operating income (loss)”** is net loss attributable to Viad before loss from discontinued operations, corporate activities, interest expense and interest income, income taxes, restructuring charges, impairment charges, and the reduction for income attributable to noncontrolling interest. Segment operating income (loss) is used to measure the profit and performance of our operating segments to facilitate period-to-period comparisons. Refer to Note 22 – Segment Information of the Notes to Condensed Consolidated Financial Statements for a reconciliation of segment operating income (loss) to loss from continuing operations before income taxes.
- “**Organic revenue”** and “**organic segment operating income (loss)”** are revenue and segment operating income (loss) (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. We believe the presentation of “organic” results permits investors to better understand our performance without the effects of exchange rate variances or acquisitions and to facilitate period-to-period comparisons and analysis of our operating

performance. Refer to the “Results of Operations” section of this MD&A for reconciliations of organic revenue and organic segment operating income (loss) to the most directly comparable GAAP measures.

We believe non-GAAP Measures are useful operating metrics as they eliminate potential variations arising from taxes, debt service costs, impairment charges, and the effects of discontinued operations, resulting in additional measures considered to be indicative of our ongoing operations and segment performance. Although we use Non-GAAP Measures to assess the performance of our business, the use of these measures is limited because these measures do not consider material costs, expenses, and other items necessary to operate our business. These items include debt service costs, expenses related to U.S. federal, state, local and foreign income taxes, impairment charges, and the effects of discontinued operations. As the Non-GAAP Measures do not consider these items, you should consider net income attributable to Viad as an important measure of financial performance because it provides a more complete measure of our performance.

## Market risk

As filed, 3,203 characters.

Our market risk exposure relates to fluctuations in foreign exchange rates and interest rates. Foreign exchange risk is the risk that fluctuating exchange rates will adversely affect our financial condition or results of operations. Interest rate risk is the risk that changing interest rates will adversely affect our financial position or results of operations.

Our foreign operations are primarily in Canada, the United Kingdom, Iceland, the Netherlands, and Germany. The functional currency of our foreign subsidiaries is their local currency. Accordingly, for purposes of consolidation, we translate the assets and liabilities of our foreign subsidiaries into U.S. dollars at the foreign exchange rates in effect at the balance sheet date. The unrealized gains or losses resulting from the translation of these foreign denominated assets and liabilities are included as a component of accumulated other comprehensive loss in the Condensed Consolidated Balance Sheets. As a result, significant fluctuations in foreign exchange rates relative to the U.S. dollar may result in material changes to our net equity position reported in the Condensed Consolidated Balance Sheets. We do not currently hedge our equity risk arising from the translation of foreign denominated assets and liabilities. We recorded cumulative unrealized foreign currency translation losses in stockholders’ equity of $42.2 million as of June 30, 2020 and $23.8 million as of December 31, 2019. We recorded unrealized foreign currency translation losses in other comprehensive income of $18.4 million during the six months ended June 30, 2020 and unrealized foreign currency translation gains of $9.1 million during the six months ended June 30, 2019.

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

We are exposed to foreign exchange transaction risk, as our foreign subsidiaries have certain revenue transactions denominated in currencies other than the functional currency of the respective subsidiary. From time to time, we utilize forward contracts to mitigate the impact on earnings related to these transactions due to fluctuations in foreign exchange rates. As of June 30, 2020 and December 31, 2019, we did not have any outstanding foreign currency forward contracts.

We are exposed to short-term and long-term interest rate risk on certain of our debt obligations. We do not currently use derivative financial instruments to hedge cash flows for such obligations.

## Controls and procedures

As filed, 1,074 characters.

We have established disclosure controls and procedures that are designed to ensure that information required to be disclosed in our reports filed or submitted under the Securities Exchange Act of 1934, as amended (the “Exchange Act”) is recorded, processed, summarized, and reported within the time periods specified in SEC rules and forms, and such information is accumulated and communicated to our management, including our Chief Executive Officer (“CEO”) and Chief Financial Officer (“CFO”), as appropriate to allow timely decisions regarding required disclosure. Management, together with our CEO and CFO, evaluated the effectiveness of our disclosure controls and procedures as of June 30, 2020. Based on this evaluation, the CEO and CFO concluded that our disclosure controls and procedures were effective as of June 30, 2020.

There were no changes in our internal control over financial reporting during the three months ended June 30, 2020 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

## Risk factors

As filed, 25,921 characters.

Our operations and financial results are subject to known and unknown risks. As a result, past financial performance and historical trends may not be reliable indicators of our future performance.

***The recent COVID-19 pandemic and related responsive actions have adversely affected our financial condition, liquidity and cash flow, and may continue to do so in the future.*** The COVID-19 pandemic forced the cancellation of many of our events and the closure of substantially all of our attractions, hotels, and other operations. The substantial reduction in our operations will result in near-term losses and negative cash flow from operations. The full impact of the pandemic on our longer-term operational and financial performance is highly uncertain and will depend on future developments that we cannot predict, including the duration and spread of the pandemic, any future resurgence of COVID-19, and related social-distancing orders, travel restrictions, and/or government limitations on group gatherings. Our GES business depends on exhibitions, conferences, and other live events and the size of marketing expenditures relating to those events. The continuation of government orders prohibiting large group gatherings will continue to significantly and adversely affect our revenue and results of operations. Even if exhibitions or other live events do occur, we also could suffer from reduced spending for our services because many exhibitors’ marketing budgets are partly discretionary and are frequently among the first expenditures reduced when economic conditions deteriorate, and people may be unwilling to attend large group events. In addition, the attractions and hospitality operations within our Pursuit business may be subject to government closure orders designed to limit the spread of COVID-19, which adversely affects our profitability and cash flow. Future revenue from our Pursuit operations will depend on any further spread of the pandemic, our ability to keep our operations open, the willingness of people to travel to our locations, and the amount of disposable income that consumers have available for travel and vacations, which decreases during periods of weak general economic conditions. Both our GES and Pursuit businesses may also experience increased costs in order to supply our customers or guests with personal protection equipment, conduct comprehensive cleaning regiments, and other measures that we determine are in the best interests of our employees, customers, guests, and/or event participants. As a result, any continuation or further deterioration in general economic conditions would materially and further adversely affect our business, financial condition, and results of operations.

***Completed acquisitions may not perform as anticipated or be integrated as planned.*** We regularly evaluate and pursue opportunities to acquire businesses that complement, enhance, or expand our current business, or offer growth opportunities. Our acquired businesses might not meet our financial and non-financial expectations or yield anticipated benefits. Our success depends, in part, on our ability to conform controls, policies and procedures, and business cultures; consolidate and streamline operations and infrastructures; identify and eliminate redundant and underperforming operations and assets; manage inefficiencies associated with the integration of operations; and retain the acquired business’s key personnel and customers. Moreover, our acquisition activity may subject us to new regulatory requirements, distract our senior management and employees, and expose us to unknown liabilities or contingencies that we may fail to identify prior to closing. If we are forced to make changes to our business strategy or if external conditions adversely affect our business operations, including the duration and impact of COVID-19, we may be required to record additional future impairment charges, as we did in the first and second quarters of 2020. Additionally, we may borrow funds to finance strategic acquisitions. Debt leverage resulting from future acquisitions would reduce our debt capacity, increase our interest expense, and limit our ability to capitalize on future business opportunities. Such borrowings may also be subject to fluctuations in interest rates. Any of these risks could materially and adversely affect our business, product and service sales, financial condition, and results of operations.

***We are vulnerable to deterioration in general economic conditions.*** Our business is sensitive to fluctuations in general economic conditions in the U.S. and other global markets in which we operate. The recent decline in global and regional economic conditions, and consumers’ fears that economic conditions will further decline, has caused declining consumer confidence, unemployment, fluctuations in stock markets and interest rates, contraction of credit availability, and other dynamic factors affecting economic conditions generally. The success of our GES business largely depends on the number of exhibitions held, the size of exhibitors’ marketing expenditures, and on the strength of particular industries in which exhibitors operate. The number and size of exhibitions generally decrease when the economy weakens, which our business has experienced due to the COVID-19 pandemic. We also could suffer from reduced spending for our services because many exhibitors’ marketing budgets are partly discretionary and are frequently among the first expenditures reduced when economic conditions deteriorate. In addition, revenue from our Pursuit operations depends largely on the amount of disposable income that consumers have available for travel and vacations, which decreases during periods of weak general economic conditions. As a result, any deterioration in general economic conditions could further materially and adversely affect our business, product sales, financial condition, and results of operations.

***We depend on our large exhibition event clients to renew their service contracts and on our exclusive right to provide those services.*** GES has a number of large exhibition event organizers and large customer accounts. If any of these large clients do not renew their service contracts, our results of operations could be materially and adversely affected.

Moreover, when event organizers hire GES as the official services contractor, they usually also grant GES an exclusive right to perform material handling, electrical, rigging, and other services at the exhibition facility. However, some exhibition facilities have taken certain steps to in-source certain event services (either by performing the services themselves or by hiring a separate service provider) as a result of conditions generally affecting their industry, such as an increased supply of exhibition space. If exhibition facilities choose to in-source certain event services, GES will lose the ability to provide certain event services, and our results of operations could be materially and adversely affected.

***Our business is relationship driven.*** Our GES business is heavily focused on client relationships, and, specifically, on having close collaboration and interaction with our clients. To be successful, our account teams must be able to understand clients’ desires and expectations in order to provide top-quality service. If we are unable to maintain our client relationships, including due to the loss of key members of our account teams, we could also lose customers and our results of operations could be materially and adversely affected.

***We operate in highly competitive and dynamic industries.*** Competition in the Live Events markets is driven by price and service quality, among other factors. To the extent competitors seek to gain or retain market presence through aggressive underpricing strategies, we may be required to lower our prices and rates to avoid the loss of related business. Moreover, customer consolidations and other actions have caused downward pricing pressure for our products and services and could affect our ability to negotiate favorable terms with our customers. If we are unable to anticipate and respond as effectively as our competitors to changing business conditions, including new technologies and business models, we could lose market share. Our inability to meet the challenges presented by the competitive and dynamic environment of our industry could materially and adversely affect our results of operations.

***Travel industry disruptions, particularly those affecting the hotel and airline industries, could adversely affect our business.*** Our business depends largely on the ability and willingness of people, whether exhibitors, exhibition attendees, tourists, or others, to travel. Factors adversely affecting the travel industry, and particularly the airline and hotel industries, generally also adversely affect our business and results of operations. Factors that could adversely affect the travel industry include high or rising fuel prices, increased security and passport requirements, weather conditions, health epidemics and pandemics, airline accidents, acts of terrorism, and international political instability and hostilities. For example, the recent COVID-19 pandemic and social distancing orders resulted in severe global travel restrictions, mandatory shutdowns of show and event venues, hotels, attractions and other operations and limitations on large gatherings of people. These circumstances had severe effects on our businesses. The occurrence of additional disruptions, a prolonged recovery from the COVID-19 pandemic or a spike or resurgence in cases of COVID-19, or other unexpected events that affect the availability and pricing of air travel and accommodations, could further materially and adversely affect our business and results of operations.

***New capital projects may not be commercially successful.*** From time to time, we pursue capital projects, such as our current construction of FlyOver Las Vegas, FlyOver Canada Toronto, the Sky Lagoon, and other efforts to upgrade some of our Pursuit offerings, in order to enhance and expand our business. Capital projects are subject to a number of risks, including unanticipated delays, cost overruns, and the failure to achieve established financial and strategic goals, as well as additional project-specific risks. A prolonged delay in these capital projects could prevent them from performing in accordance with our commercial expectations and could materially and adversely affect our future success, business, and results of operations.

***The seasonality of our business makes us particularly sensitive to adverse events during peak periods.*** The peak activity for our Pursuit business is during the summer months, as 85% of Pursuit’s 2019 revenue was earned in the second and third quarters. Our GES exhibition and event activity varies significantly because it is based on the frequency and timing of shows, many of which are not held each year, and which may shift between quarters. If adverse events or conditions occur during these peak periods, our results of operations could be materially and adversely affected.

***Transportation disruptions and increases in transportation costs could adversely affect our business and results of operations.*** GES relies on independent transportation carriers to send materials and exhibits to and from exhibition, warehouse, and customer facilities. If our customers and suppliers are unable to secure the services of those independent transportation carriers at favorable rates, it could materially and adversely affect our business and results of operations. In addition, disruption of transportation services due to weather-related problems, labor strikes, lockouts, or other events could adversely affect our ability to supply services to customers and could cause the cancellation of exhibitions, which could materially and adversely affect our business and results of operations.

***Natural disasters, weather conditions, and other catastrophic events could negatively affect our business.*** The occurrence of catastrophic events ranging from natural disasters (such as hurricanes, fires, floods, and earthquakes), acts of war or terrorism, accidents involving our travel offerings or experiences, the effects of climate change, including any impact of global warming, or the prospect of these events could disrupt our business. Changes in climates may increase the frequency and intensity of adverse weather patterns and make certain destinations less desirable. Such catastrophic events have, and could have, an adverse impact on Pursuit, which is heavily dependent on the ability and willingness of its guests to travel and/or visit our attractions. Pursuit guests tend to delay or postpone vacations if natural conditions differ from those that typically prevail at competing lodges, resorts, and attractions, and catastrophic events and heightened travel security measures instituted in response to such events could impede the guests’ ability to travel, and interrupt our business operations, including damaging our properties. Such catastrophic events could also have a negative impact on GES, causing a cancellation of exhibitions and other events held in public venues or disrupt the services we provide to our customers at convention centers, exhibition halls, hotels, and other public venues. Such events could also have a negative impact on GES’ production facilities, preventing us from timely completing exhibit fabrication and other projects for customers. In addition, unfavorable media attention, or negative publicity, in the wake of any catastrophic event or accident could damage our reputation or reduce the demand for our services. If the conditions arising from such events persist or worsen, they could materially and adversely affect our results of operations and financial condition.

***Our participation in multi-employer pension plans could substantially increase our pension costs.*** We sponsor a number of defined benefit plans for our U.S. and Canada-based employees. In addition, we are obligated to contribute to multi-employer pension plans under collective bargaining agreements covering our union-represented employees. We contributed $27.3 million in 2019, $26.4 million in 2018, and $26.6 million in 2017 to those multi-employer pension plans. Third-party boards of trustees manage these multi-employer plans. Based upon the information we receive from plan administrators; we believe that several of those multi-employer plans are underfunded. The Pension Protection Act of 2006 requires us to reduce the underfunded status over defined time periods. Moreover, we would be required to make additional payments of our proportionate share of a plan’s unfunded vested liabilities if a plan terminates, or other contributing employers withdraw, due to insolvency or other reasons, or if we voluntarily withdraw from a plan. In 2019, we finalized the terms of a new collective bargaining agreement with the Teamsters Local 727 union. The terms included a withdrawal from the underfunded Central States Pension Plan. Accordingly, we recorded a charge of $15.5 million, which represents the estimated present value of future contributions we will be required to make as a result of the union’s withdrawal and $0.2 million of other withdrawal costs. At this time, we do not anticipate triggering any withdrawal from any other multi-employer pension plan to which we currently contribute. However, significant plan contribution increases could materially and adversely affect our consolidated financial condition, results of operations, and cash flows. Refer to Note 18 – Pension and Postretirement Benefits of the Notes to Consolidated Financial Statements (Part II, Item 8 of the 2019 Form 10-K) for further information.

***Union-represented labor increases our risk of higher labor costs and work stoppages.*** Significant portions of our employees are unionized. We have approximately 100 collective bargaining agreements, and we are required to renegotiate approximately one-third of those each year. If we increase wages or benefits as a result of labor negotiations, either our operating margins will suffer, or we could increase the cost of our services to our customers, which could lead those customers to turn to other vendors with lower prices. Either event could materially and adversely affect our business and results of operations.

Additionally, if we are unable to reach an agreement with a union during the collective bargaining process, the union may strike or carry out other types of work stoppages. If that happens, we might be unable to find substitute workers with the necessary skills to perform many of the services, or we may incur additional costs to do so, both of which could materially and adversely affect our business and results of operations.

***Liabilities relating to prior and discontinued operations may adversely affect our results of operations.*** We and our predecessors have a corporate history spanning decades and involving diverse businesses. Some of those businesses owned properties and used raw materials that have been, and may continue to be, subject to litigation. Moreover, some of the raw materials used and the waste produced by those businesses have been and are the subject of U.S. federal and state environmental regulations, including laws enacted under the Comprehensive Environmental Response, Compensation and Liability Act, or its state law counterparts. In addition, we may incur other liabilities resulting from indemnification claims involving previously sold properties and subsidiaries, or obligations under defined benefit plans or other employee plans, as well as claims from past operations of predecessors or their subsidiaries. Although we believe we have adequate reserves and sufficient insurance coverage to cover those future liabilities, future events or proceedings could render our reserves or insurance protections inadequate, any of which could materially and adversely affect our business and results of operations.

***Show rotation affects our profitability and makes comparisons between periods difficult.*** GES results are largely dependent upon the frequency, timing, and location of exhibitions and events. Some large exhibitions are not held annually (they may be held once every two, three, or four years) or may be held at different times of the year from when they were previously held. In addition, the same exhibition may change locations from year to year resulting in lower margins if the exhibition shifts to a higher-cost location. Any of these factors could cause our results of operations to fluctuate significantly from quarter to quarter or from year to year, making periodic comparisons difficult.

***We are subject to currency exchange rate fluctuations.*** We have operations outside of the U.S. primarily in Canada, the United Kingdom, Iceland, the Netherlands, and Germany. During 2019, GES EMEA, GES Canada, and Pursuit’s international operations accounted for approximately 33% of our consolidated revenue and 66% of our segment operating income. Consequently, a significant portion of our business is exposed to currency exchange rate fluctuations. We do not currently hedge equity risk arising from the translation of non-U.S. denominated assets and liabilities. Our financial results and capital ratios are sensitive to movements in currency exchange rates because a large portion of our assets, liabilities, revenue, and expenses must be translated into U.S. dollars for reporting purposes. The unrealized gains or losses resulting from the currency translation are included as a component of accumulated other comprehensive income (loss) in our consolidated balance sheets. As a result, significant fluctuations in currency exchange rates could result in material changes to the net equity position we report in our consolidated balance sheets.

***We are vulnerable to cybersecurity attacks and threats.*** We regularly collect and process credit, financial, and other personal and confidential information from individuals and entities who attend or participate in events and exhibitions that we produce, or who visit our attractions and other offerings. In addition, our devices, servers, computer systems, and business systems are vulnerable to cybersecurity risk, including cyberattacks, or we may be the target of email scams that attempt to acquire personal information and company assets. Despite our efforts to protect ourselves with insurance, and create security barriers to such threats, including regularly reviewing our systems for vulnerabilities and continually updating our protections, we might not be able to entirely mitigate these risks. Our failure to effectively prevent, detect, and recover from the increasing number and sophistication of information security threats could lead to business interruptions, delays or loss of critical data, misuse, modification, or destruction of information, including trade secrets and confidential business information, reputational damage, and third-party claims, any of which could materially and adversely affect our results of operations.

***Laws and regulations relating to the handling of personal data are evolving and could result in increased costs, legal claims, or fines.*** We store and process the personally identifiable information of our customers, employees, and third parties with whom we have business relationships. The legal requirements restricting the way we store, collect, handle, and transfer personal data continue to evolve, and there are an increasing number of authorities issuing privacy laws and regulations. These data privacy laws and regulations are subject to differing interpretations, creating uncertainty and inconsistency across jurisdictions. Our compliance with these myriad requirements could involve making changes in our services, business practices, or internal systems, any of which could increase our costs, lower revenue, or reduce efficiency. Our failure to comply with existing or new rules could result in significant penalties or orders to stop the alleged noncompliant activity, litigation, adverse publicity, or could cause our customers to lose trust in our services. In addition, if the third parties we work with violate applicable laws, contractual obligations, or suffer a security breach, those violations could also put us in breach of our obligations under privacy laws and regulations. In addition, the costs of maintaining adequate protection, including insurance protection against such threats, as they develop in the future (or as legal requirements related to data security increase) are expected to increase and could be material. Any of these risks could materially and adversely affect our business and results of operations.

***The United Kingdom’s exit from the European Union could adversely affect our business.*** We operate substantial parts of our EU businesses from U.K.-based entities. On January 31, 2020, the U.K. officially withdrew from the EU. The final terms of the withdrawal are being negotiated with the transition period ending on December 31, 2020. The withdrawal could disrupt the free movement of goods, services, and people between the U.K. and the EU. Moreover, the regulatory and legal environment that will govern our U.K. operations is uncertain. Any new arrangements may require us to make changes to our operations in Europe, which could result in a higher cost and less efficient operating model across our European business. These new arrangements could adversely affect our business and results of operations.

***Changes affecting the availability of the London Inter-bank Offered Rate (“LIBOR”) or increases in interest rates may have consequences for us that cannot yet be reasonably predicted.*** Viad has outstanding debt with variable interest rates based on LIBOR. Borrowings under the 2018 Credit Facility are indexed to the prime rate or LIBOR, plus appropriate spreads tied to our leverage ratio. The LIBOR benchmark has been the subject of national, international, and other regulatory guidance and proposals to reform. In July 2017, the United Kingdom Financial Conduct Authority (the authority that regulates LIBOR) announced that it intends to stop compelling banks to submit rates for the calculation of LIBOR after 2021. These reforms may cause LIBOR to perform differently than in the past and LIBOR may ultimately cease to exist after 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 alternative rate could affect the Company's debt and debt payments. At this time, it is not possible to predict the effect of any changes to LIBOR, any phase out of LIBOR or any establishment of alternative benchmark rates. Any new benchmark rate will likely not replicate LIBOR exactly, which could impact our contracts which terminate after 2021. There is uncertainty about how applicable law, the courts or the Company will address the replacement of LIBOR with alternative rates. If LIBOR ceases to exist after 2021, the interest rates under our revolving credit facility and the discount rates we apply to finance lease obligations will be based on the alternative rate, which may result in higher interest rates and debt obligations. In addition, any increases to our benchmark interest rates could have an uncertain impact on our cost of funds and our access to the capital markets, which could impact our results of operations and cash flows. Uncertainty as to the nature of such potential changes may also adversely affect the trading market for our securities.

Filed Aug 7, 2020.
Source: SEC EDGAR, the filing index for accession 0001564590-20-038464. Last ingested by Listed: Nov 4, 2026, 17:36 ET. No prices; not investment advice.