Filing summary
Entity note: The supplied filing is Viad Corp’s Form 10-Q, not a filing by Pursuit Attractions & Hospitality, Inc. Pursuit is one of Viad’s reportable segments. The information below summarizes Viad’s consolidated results and highlights Pursuit where relevant.
Business context and reporting period
The filing covers the three months ended March 31, 2018, compared with the same period in 2017. Viad operates GES, a live-events services business, and Pursuit, a collection of destination attractions, lodging, transportation, and travel-planning businesses. Results are seasonal: Pursuit earns most of its revenue in the second and third quarters, while GES results vary with the timing and rotation of shows.
Financial performance and liquidity
- Revenue: $277.4 million, down 14.8% from $325.8 million. Services revenue was $245.5 million and products revenue was $31.9 million.
- Profitability: Operating loss was $13.0 million versus operating income of $10.6 million. Net loss attributable to Viad was $9.4 million, or $0.47 per diluted share, compared with net income of $6.8 million, or $0.33 per share. Segment operating loss was $10.8 million versus income of $13.1 million. Adjusted EBITDA, a non-GAAP measure, was $0.3 million versus $22.3 million.
- Segment results: GES revenue was $267.7 million, down 15.8%, and segment operating income fell to $0.6 million from $23.4 million. Pursuit revenue rose 22.5% to $9.7 million, while its segment operating loss widened to $11.4 million from $10.3 million.
- Cash flow and investment: Operating cash flow was negative $3.4 million, compared with positive $32.2 million. Capital expenditures were $26.6 million, and investing cash outflow was $25.4 million. Financing provided $17.9 million, including $20.7 million of net debt proceeds. Cash declined to $42.3 million from $53.7 million.
- Balance sheet and liquidity: Total assets were $948.1 million and total liabilities were $511.7 million. Current assets of $223.8 million were below current liabilities of $381.7 million. Total debt and capital lease obligations were $231.3 million, including $178.3 million classified as current; reported debt includes $0.9 million of unamortized issuance costs. Viad had $31.2 million of availability under its main revolver and $4.5 million under the Brewster revolver. Management said available liquidity should fund operations and capital commitments for at least 12 months.
- Other metrics: The quarterly dividend was $0.10 per share. The effective tax rate was 30.1%; cash income taxes paid were $9.1 million.
Material changes versus the prior comparable period
- Management attributed the consolidated revenue decline primarily to approximately $56 million of negative GES show rotation, partly offset by $6.2 million of favorable foreign-exchange effects.
- GES U.S. revenue fell 20.7%, primarily from approximately $52 million of negative show rotation and certain non-recurring business, partly offset by 3.7% growth in base same-show revenue. GES International revenue rose 5.1% as reported, but declined 3.9% organically, excluding foreign exchange.
- Pursuit revenue grew on higher visitation and spending at the Banff Gondola and FlyOver Canada, as well as favorable currency effects. Its operating loss increased due to growth-related costs, expense timing, and unfavorable currency effects.
- The comparison was also affected by a $2.4 million impairment recovery in Q1 2017 that did not recur, and a $1.4 million favorable legal settlement recognized in discontinued operations in Q1 2018.
- Operating cash flow declined by $35.7 million, which management attributed primarily to lower income and working-capital changes. Capital expenditures increased from $14.7 million to $26.6 million.
Outlook, commentary, risks, and unusual items
- GES outlook: For full-year 2018, management expected revenue to be up slightly from 2017, with approximately $40 million of net negative show rotation, low- to mid-single-digit growth in GES U.S. base same-show revenue, and favorable foreign-exchange effects of approximately $19 million on revenue and $0.5 million on segment operating income. Management cited labor productivity and cost control as priorities.
- Pursuit outlook: Management expected full-year revenue growth in the high-single- to low-double-digit range. The planned July 2018 reopening of the Mount Royal Hotel was expected to add approximately $5 million of revenue; favorable currency effects were expected to add approximately $2 million. FlyOver Iceland startup costs were expected to be approximately $1 million in 2018; the attraction was expected to open in 2019.
- Key risks and contingencies: Risks include show rotation and seasonality, economic and travel disruptions, foreign-exchange and interest-rate movements, union negotiations and work stoppages, multi-employer pension-plan funding exposure, cybersecurity and data privacy, project delays and cost overruns, and liabilities from previously sold businesses. Viad reported approximately 100 collective-bargaining agreements; the amount, if any, of additional multi-employer pension funding could not be determined.
- Recorded environmental remediation liabilities related to previously sold operations were $2.3 million. Guarantees for leased facilities had a maximum potential payment of $19.1 million through October 2027. Management did not expect pending litigation or environmental matters, after provisions and insurance, to materially affect the company.
- Viad was in compliance with its credit-agreement covenants at quarter-end; leverage and fixed-charge coverage ratios were 1.89x and 2.69x, respectively. The Brewster revolver matures December 28, 2018, and Viad’s main credit agreement matures December 22, 2019.
- The adoption of the new revenue-recognition standard did not materially affect the financial statements. The company was still evaluating the forthcoming lease standard, which it expected to materially increase balance-sheet assets and liabilities.
Important facts for investors to verify
- Confirm the intended issuer: the supplied filing is Viad Corp’s, with Pursuit reported as a segment.
- Review GES show schedules and subsequent results to assess the expected recovery from 2018 show rotation and the company’s revenue and operating-income outlook.
- Monitor cash generation, capital spending, working capital, and the substantial current-liability balance, including revolver borrowings classified as current.
- Check refinancing, repayment, and availability developments for the Brewster facility maturing in December 2018 and the main credit agreement maturing in December 2019.
- Track progress and costs for the Mount Royal Hotel reopening and FlyOver Iceland development, alongside the stated Pursuit growth assumptions.
- Assess exposure to union negotiations, multi-employer pension plans, insurance claims, environmental matters, foreign exchange, and the provisional tax accounting related to U.S. tax reform.