Pursuit Attractions & Hospitality, Inc. annual report, FY2020

Business context and reporting period

The supplied filing is Viad Corp’s Form 10-K for the fiscal year ended December 31, 2020—not a standalone filing by Pursuit Attractions & Hospitality, Inc. Pursuit is one of Viad’s reportable segments, alongside GES North America and GES EMEA. The year was heavily disrupted by COVID-19: live events largely stopped, while Pursuit attractions and lodging reopened gradually, often at reduced capacity. Unless noted, amounts are in U.S. dollars.

Financial performance and liquidity

• Revenue fell 68.1%. GES revenue was $338.6 million, down 68.6%; Pursuit revenue was $76.8 million, down 65.5%.
• Combined costs of services and products exceeded revenue by approximately $116.2 million, an implied gross margin of about negative 28%. Segment operating loss was approximately 28% of revenue.
• The $203.1 million impairment charge was predominantly non-cash and included $185.8 million of goodwill impairment; GES goodwill was fully impaired. Other notable charges included $13.4 million of restructuring costs.
• At year-end, cash and cash equivalents were $39.5 million; total debt and finance lease obligations were $293.7 million, including $270.6 million of debt. The 2018 Credit Facility had $173.5 million of remaining capacity.
• Management reported total available liquidity of $258.0 million, including $39.5 million unrestricted cash, $173.5 million credit capacity, and a $45 million preferred-stock delayed-draw commitment. The credit agreement requires at least $100 million of liquidity.
• Current assets were $91.3 million and current liabilities were $97.7 million. Interest expense rose to $18.3 million from $14.2 million.

Fourth quarter

Q4 2020 revenue was $27.9 million. Operating loss from ongoing operations was $50.3 million and net loss attributable to Viad was $50.5 million. Comparable Q4 2019 revenue was $300.7 million and net loss attributable to Viad was $5.4 million.

Material changes versus the prior year

• COVID-19 cancellations, closures, travel restrictions, and border closures drove steep revenue declines across both businesses. GES event activity remained largely dormant; Pursuit reopened much of its portfolio in the third quarter, at reduced capacity.
• Operating cash flow swung from $108.1 million provided to $80.2 million used. Cash declined from $62.0 million to $39.5 million.
• Viad raised $135 million gross through perpetual convertible preferred stock issued to Crestview Partners, receiving $125.8 million net of issuance costs. The stock carries a 5.5% cumulative dividend and is convertible at $21.25 per common share. A further $45 million was available under a delayed-draw commitment.
• The credit agreement amendment waived financial covenants through September 30, 2022, subject to the minimum-liquidity requirement. Viad was not in compliance with its financial covenants at year-end, but had obtained the waiver.
• Viad cut nonessential capital spending and restructured GES, including exiting 21 leased facilities, selling its San Diego-area warehouse, and closing its U.K. audio-visual business. Dividends and share repurchases were suspended for the foreseeable future.
• Prior-period GES revenue and cost of services were corrected from gross to net for third-party services; the company deemed the correction immaterial. The filing also notes a correction to 2019 debt classification that it deemed immaterial.

Outlook, risks, and unusual items

• Management said existing liquidity was expected to fund operations and commitments for at least 12 months, including approximately $60 million of capital expenditures for selected growth projects. This outlook depends on uncertain pandemic-related recovery and operating conditions.
• Sky Lagoon was anticipated to open in Q2 2021 and FlyOver Las Vegas in Q3 2021; FlyOver Canada Toronto was delayed to near the end of 2023. Project timing and returns remain exposed to pandemic conditions, delays, and cost overruns.
• GES and Pursuit are seasonal, and demand depends on live events, travel, consumer confidence, and discretionary spending. Renewed closures or slow recovery could further weaken revenue, cash flow, and liquidity.
• A July 2020 Ice Explorer accident at the Columbia Icefield resulted in three fatalities and multiple serious injuries. The investigation and potential claims may affect Pursuit’s results and reputation; the company believes insurance is sufficient, subject to customary deductibles.
• Additional risks include potential further impairment, underfunded multi-employer pension plans, union negotiations and work stoppages, foreign-exchange and variable-rate debt exposure, cybersecurity and privacy risks, and legacy environmental and other liabilities. The filing reports $91.7 million of maximum potential payments under lease-related guarantees.
• The independent auditor issued unqualified opinions on the financial statements and internal control over financial reporting. It identified goodwill impairment and self-insurance reserves as critical audit matters.

Most important facts for investors to verify

• Whether reported liquidity remains above the $100 million minimum and whether the delayed-draw preferred commitment was available and accessed.
• The recovery assumptions behind management’s 12-month liquidity outlook and approximately $60 million capital-expenditure plan.
• Potential dilution and cumulative dividend obligations under the convertible preferred stock, including any subsequent conversion or additional issuance.
• Developments in the Ice Explorer investigation, claims, insurance coverage, and resulting operational or reputational impacts.
• Whether project openings, recovery in events and travel, and remaining goodwill valuations support management’s forecasts.
• How the gross-to-net revenue correction and other immaterial prior-period corrections are reflected in subsequent filings.