Viad
Annual Report 2017

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W E A R E A L L A B O U T 2 0 1 7 A N N U A L R E P O R T Perched on the summit of Banff’s Sulphur Mountain, the Banff Gondola’s Sky Bistro pairs the grandeur of the Rocky Mountains with a menu that features the unique flavors of Canada through a handpicked selection of locally sourced meats, produce, and ingredients. We generate revenue and shareholder value through our two business units: GES and Pursuit. GES is a global, full- service live events company offering a comprehensive range of services to the world’s leading brands and event organizers. Pursuit is a collection of inspiring and unforgettable travel experiences in Alaska, Glacier National Park, Banff, Jasper, and Vancouver that includes attractions, lodges and hotels, and sightseeing tours that connect guests with iconic places. We are an S&P SmallCap 600 company. Photo: (Top) The Banff Gondola – Banff National Park, Banff, Alberta, Canada, (Bottom) Inforum 2017 – Javits Center, New York, New York Our Poken technology delivers an enhanced experience to visitors and a new level of engagement and lead qualification for exhibitors and sponsors. Using a Smart Badge, visitors ‘opt-in’ by collecting exhibitor content via touch, and at the same time, leaving a digital business card. W E E N H A N C E T H E C U S T O M E R experience From high-impact creative and audio-visual production to leading event technologies and official show services, GES offers a one- stop solution for Live Events. Photo: (Main) Mary Kay Independent Beauty Consultants – Kay Bailey Hutchison Convention Center, Dallas, Texas, (Inset) The Western Veterinary Clinic’s Annual Conference – Mandalay Bay, Las Vegas, Nevada dear fellow shareholders Photo: Maligne Lake Tours – Jasper National Park, Alberta, Canada I am happy to report that 2017 marked another year of solid progress, with both business units delivering strong results. We focused on driving continued organic growth, integrating our recent acquisitions, and making select investments that will accelerate our growth and profitability in future years. Our steadfast focus on our vision has led to a cumulative revenue increase of 37 percent, with a 440 basis point improvement in adjusted segment EBITDA margin over the past four years. During that same time, we have strengthened both of our business units through the acquisition of 11 leading businesses and returned about $77 million to shareholders through dividends and share repurchases. OUR 2017 PERFORMANCE Through a combination of organic growth and contributions from recent acquisitions, we delivered a 10.1 percent increase in income per share before other items in 2017. Our revenue increased 8.5 percent to $1.3 billion and our adjusted segment EBITDA increased 17.2 percent to $152.6 million. Our strong performance helped to drive an above market total shareholder return of 26.6 percent, as compared to 14.6 percent for the Russell 2000 Index. Overall, we are seeing solid business momentum and our teams are executing well. GES HIGHLIGHTS GES delivered revenue of $1.1 billion during 2017, up 7.4 percent from 2016, driven by continued business strength and contributions from our recent acquisitions. Adjusted segment EBITDA increased by $7.0 million to $87.4 million. Our growth during 2017 is particularly impressive considering the revenue headwind of about $37 million we faced from the combination of a low-margin contract that we did not renew, negative show rotation, and unfavorable exchange rate variances. Our efforts to position GES as the preferred global, full-service provider for live events continue to fuel growth. With a robust set of offerings, our international segment delivered organic revenue growth of 16.3 percent during 2017, and we further strengthened our existing relationships with some of Europe’s leading event organizers with multi-year contract renewals. These renewals have a combined lifetime contract value of approximately $100 million and are proof of the strong, collaborative partnerships that we have built with our organizer clients. We are also seeing great success growing our revenue from corporate clients by leveraging our global capabilities to support their event program needs across the EMEA region. THE INVESTMENTS WE HAVE MADE ARE PROVIDING EXCITING AVENUES OF GROWTH WITH ENHANCED PROFITABILITY. In the United States, we saw continued solid base-same show revenue growth of 4.8 percent in 2017 and we continued to make progress integrating ON Services’ audio-visual production services into our mix of offerings. During 2017, we added audio-visual to our scope of services for a number of clients, and we were recently selected by the San Diego Convention Center to be its in-house preferred provider of audio-visual services and the exclusive provider of production rigging services starting in May 2018. We remain focused on driving synergies through ON Services and leveraging its capabilities to gain share in the large corporate event space. Event technology also remains an important element of our growth strategy. As show organizers and corporate brand marketers increasingly leverage technology to drive improved ROI and an enhanced event experience, we are positioning GES to meet their current and future needs. During 2017, we strengthened our registration and data intelligence platform with the purchase of the Poken event engagement technology to deliver even more measurable event insights for organizers, exhibitors and event sponsors. Poken was a niche acquisition that is adding powerful capabilities to our data offering. Overall, GES is well-positioned to continue to capitalize on the momentum we have created over the past four years. For 2018, we expect to drive continued strong underlying business growth that will help offset negative show rotation revenue of approximately $40 million. Our team remains focused on driving outstanding customer experiences that strengthen the core and accelerate growth in higher-margin adjacencies. Photo: Game of Thrones®: The Touring Exhibition On the ‘Buy’ side of our strategy, our late-2016 acquisition of the FlyOver Canada attraction in Vancouver is performing well and meeting our expectations. We are having success driving growth in passengers and effective ticket prices through our revenue management, sales and marketing efforts. We are excited to expand this high-margin concept into Iceland in 2019 and are making good progress with that effort. Overall, 2017 was a year of significant accomplishments and growth for Pursuit. We expect continued growth in 2018 and beyond as we continue to execute our strategy to scale the Pursuit business by growing and enhancing our high-margin attraction and hospitality portfolio. CLOSING I am very proud of our accomplishments in 2017 and excited about our strategic direction and the progress we are making. The investments we have made are providing exciting avenues of growth with enhanced profitability. Our teams remain focused on delivering excellent service for our customers and guests, driving strong results for our shareholders, and executing our strategic goals, to continue enhancing long-term shareholder value. I want to thank Viad’s Board of Directors and the entire Viad team for their contributions to our success. I also want to thank you, my fellow shareholders, for your investment in our company and confidence in our strategy. Sincerely, Steve Moster President & Chief Executive Officer PURSUIT HIGHLIGHTS Pursuit delivered another year of strong growth in 2017 driven by our “Refresh, Build, Buy” strategy and revenue management initiatives. As compared to 2016, revenue grew by 13.4 percent to $173.9 million and adjusted segment EBITDA increased $15.4 million to $65.2 million. We saw significant improvement in our key performance indicators. At our attractions, same- store passengers increased 12.5 percent with revenue per passenger up 27.3 percent. At our hospitality assets, same- store RevPAR increased 6.8 percent. These strong results more than offset revenue declines from our previously announced downsizing of the lower-margin package tours line of business and the fire-related closure of the Mount Royal Hotel. Our recently refreshed Banff Gondola delivered results that far exceeded our expectations. During 2017, revenue grew 57 percent over the pre-renovation period, with passenger growth of 20 percent and a 31 percent increase in revenue per passenger from ticket sales, retail, and dining. Following our success at the Banff Gondola, we completed similar renovations to drive an enhanced guest experience and stronger revenue growth from our dining services at the Glacier Discovery Center, which provides ticketing and guest services for our Glacier Adventure Tour and Glacier Skywalk attractions. Another major ‘Refresh’ project currently in progress is the reconstruction of the Mount Royal Hotel, which was damaged by fire at the end of 2016. Utilizing insurance proceeds of about $30 million and an additional $5 million investment, we are undertaking a complete renovation of the property. With its ideal location in downtown Banff and an enhanced guest experience, we will be able to drive stronger RevPAR and returns from this asset. The project is progressing well, and we are on pace to re-open the hotel by mid-year 2018. A current ‘Build’ initiative for Pursuit is the development of an RV park and cabin village in West Glacier on approximately 100 acres of undeveloped land that we acquired as a part of an acquisition in 2014. This new development will have approximately 100 RV slips and 20 guest cabins. We expect to have the RV park at least partially online during the 2019 season. UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 10-K ⌧ ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the fiscal year ended December 31, 2017 or (cid:4) TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the transition period from ____________ to ____________ Commission file number: 001-11015 Viad Corp (Exact name of registrant as specified in its charter) Delaware State or other jurisdiction of incorporation or organization 1850 North Central Avenue, Suite 1900 Phoenix, Arizona (Address of principal executive offices) 36-1169950 (I.R.S. Employer Identification No.) 85004-4565 (Zip Code) (602) 207-1000 (Registrant’s telephone number, including area code) Securities registered pursuant to Section 12(b) of the Act: Title of each class Common Stock, $1.50 par value Name of each exchange on which registered New York Stock Exchange Securities registered pursuant to Section 12(g) of the Act: None Indicate by check mark if the registrant is a well-known seasoned issuer, as defined by Rule 405 of the Securities Act. Yes ⌧ No (cid:4) Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or 15(d) of the Act. Yes (cid:4) No ⌧ Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ⌧ No (cid:4) Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Website, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§ 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files.) Yes ⌧ No (cid:4) Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K (§ 229.405) is not contained herein, and will not be contained, to the best of registrant’s knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K. ⌧ Indicate by check mark whether registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act. (Check One): Large accelerated filer Non-accelerated filer ⌧ (cid:4) Accelerated filer Smaller reporting company Emerging growth company (cid:4) (cid:4) (cid:4) If an emerging growth company, indicated by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. (cid:4) Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Act). Yes (cid:4) No ⌧ The aggregate market value of the Common Stock (based on its closing price per share on such date) held by non-affiliates on the last business day of the registrant’s most recently completed second fiscal quarter (June 30, 2017) was approximately $948 million. Registrant had 20,422,762 shares of Common Stock ($1.50 par value) outstanding as of January 31, 2018. Documents Incorporated by Reference A portion of the Proxy Statement for the Annual Meeting of Shareholders of Viad Corp, which is scheduled to be held on May 17, 2018, is incorporated by reference into Part III of this Annual Report. INDEX Part I Item 1. Item 1A. Item 1B. Item 2. Item 3. Item 4. Other. Part II Item 5. Item 6. Item 7. Item 7A. Item 8. Item 9. Item 9A. Item 9B. Part III Item 10. Item 11. Item 12. Item 13. Item 14. Part IV Business.................................................................................................................................................. Risk Factors ............................................................................................................................................ Unresolved Staff Comments................................................................................................................... Properties................................................................................................................................................ Legal Proceedings .................................................................................................................................. Mine Safety Disclosures......................................................................................................................... Executive Officers of the Registrant ...................................................................................................... Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities..................................................................................................................................... Selected Financial Data .......................................................................................................................... Management’s Discussion and Analysis of Financial Condition and Results of Operations ................ Quantitative and Qualitative Disclosures About Market Risk ............................................................... Financial Statements and Supplementary Data ...................................................................................... Changes in and Disagreements With Accountants on Accounting and Financial Disclosure ............... Controls and Procedures......................................................................................................................... Other Information................................................................................................................................... Directors, Executive Officers and Corporate Governance ..................................................................... Executive Compensation ........................................................................................................................ Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters.................................................................................................................................................... Certain Relationships and Related Transactions, and Director Independence....................................... Principal Accounting Fees and Services ................................................................................................ Item 15. Item 16. Exhibits and Financial Statement Schedule ........................................................................................... Form 10-K Summary ............................................................................................................................. Page 1 15 18 19 19 20 20 21 23 24 41 42 85 85 88 89 89 89 89 89 89 94 In this report, for periods presented, “we,” “us,” “our,” “the Company,” and “Viad Corp” refer to Viad Corp and its subsidiaries and affiliates. Forward-Looking Statements PART I This Form 10-K contains a number of forward-looking statements. 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. These forward-looking statements are not historical facts, but reflect our current estimates, projections, expectations, or trends concerning future growth, operating cash flows, availability of short-term borrowings, consumer demand, new or renewal investment policies, productivity improvements, ongoing cost reduction efforts, efficiency, competitiveness, business, strategic actions, acquisitions, the timing of new and damaged attractions openings, the sufficiency of our legal services, projections of 2018 revenue, show rotation, same-show rotation, segment operating income, attraction start-up costs, the realization of deferred tax assets, contributions to pension and postretirement benefit plans, legal expenses, tax rates and other tax matters, and foreign exchange rates. Actual results could differ materially from those discussed in the forward-looking statements. Viad’s businesses can be affected by a host of risks and uncertainties, many of which are beyond our control. Important factors that could cause actual results to differ materially from those described in our forward looking statements include, but are not limited to, the risks discussed in Item 1A, “Risk Factors,” included in this Annual Report on Form 10-K for the year ended December 31, 2017 (“2017 Form 10-K”). We disclaim and do not undertake any obligation to update or revise any forward-looking statement in this 2017 Form 10-K except as required by applicable law or regulation. Item 1. BUSINESS We are an international experiential services company with operations principally in the United States, Canada, the United Kingdom, continental Europe, and the United Arab Emirates. We are committed to providing unforgettable experiences to our clients and guests. We operate through two main business groups: • • GES is a world-class live event service provider to some of the most visible and influential events and global brands. Pursuit is a collection of iconic natural and cultural destination travel experiences that enjoy perennial demand. GES accounted for 87% of our 2017 consolidated revenue and 51% of our 2017 consolidated segment operating income(1). Pursuit accounted for 13% of our 2017 consolidated revenue and 49% of our 2017 consolidated segment operating income(1). 2017 REVENUE $1.3B 2017 SEGMENT OPERATING INCOME(1) $97.1M 13% 87% 49% 51% GES Pursuit (1) We define segment operating income as net income attributable to Viad before income (loss) from discontinued operations, corporate activities and eliminations, interest expense and interest income, income taxes, restructuring charges, impairment charges and recoveries, the reduction for income attributable to non-redeemable noncontrolling interest, and the addition for loss attributable to redeemable noncontrolling interest. Refer to Note 22 – Segment Information of the Notes to Consolidated Financial Statements (Part II, Item 8 of this 2017 Form 10-K) for a reconciliation of segment operating income to the most directly comparable GAAP measure. 1 GES is a global, full-service provider for live events that produces exhibitions, conferences, corporate events, and consumer events. GES offers a comprehensive range of live event services, from the design and production of compelling, immersive experiences that engage audiences and build brand awareness, to material handling, rigging, electrical, and other on-site event services. In addition, GES offers clients a full suite of audio-visual services from creative and technology to content and design, along with online tools powered by next generation technologies that help clients easily manage the complexities of their events. For nine years, GES’ National Servicenter® has been certified under the J.D. Power and Associates Certified Call Center ProgramSM, and for eight consecutive years, Ad Age has recognized GES as one of the nation’s largest experiential/event marketing agency networks. GES is included in Event Marketer magazine’s IT List as one of the top 100 event agencies in the industry. GES’ clients include event organizers and corporate brand marketers. Event organizers schedule and run the event from start to finish. Corporate brand marketers include exhibitors and domestic and international corporations that want to promote their brands, services and innovations, feature new products, and build business relationships. GES serves corporate brand marketers when they exhibit at shows and when GES is engaged to manage their global exhibit program or produce their proprietary corporate events. GES operates through two reportable business segments based on geography: • • GES U.S. has a leading position in the U.S. with full-service operations in every major exhibition market, including Las Vegas, Nevada; Chicago, Illinois; Orlando, Florida; New York, New York; and Los Angeles, California. GES International has operating facilities at many of the most active and popular international event destinations and venues, including seven cities in Canada, seven cities in the United Kingdom, two cities in Germany, two cities in the United Arab Emirates, two cities in the Netherlands, one city in Hong Kong, Switzerland, and Romania, and through these facilities offers full-service event operations across the United Kingdom, Europe, and the Middle East. Markets Served GES provides a full suite of services for event organizers and corporate brand marketers across four live event markets: Exhibitions, Conferences, Corporate Events, and Consumer Events (collectively, “Live Events”). 2 LIVE EVENT PRIMARY PURPOSE Exhibitions Facilitates business-to-business and business-to- consumer sales and marketing. % GES 2017 REVENUE Conferences Facilitates attendee education. May also include an expo or trade show to further facilitate attendee education and to facilitate business-to-business and business-to-consumer sales and marketing. Corporate Events Facilitates attendee education of sponsoring company’s products or product ecosystem. Consumer Events Entertains, educates, or creates an experience, typically around a specific genre. 64% 23% 11% 2% 3 Services Offered GES offers a comprehensive range of services and innovative technology, including Core Services, Event Technology, and Audio-Visual, to event organizers and corporate brand marketers. GES Revenue Mix Core Services 88% Event Technology 4% Audio-Visual 8% Core Services For Live Events, GES provides official contracting services and products to event organizers and corporate brand marketers. Contracting services and products are provided primarily to Exhibitions and to a lesser degree to Conferences, Corporate Events, and Consumer Events. GES U.S. Core Services accounted for 57% of Viad’s 2017 consolidated revenue and 61% of Viad’s 2016 and 2015 consolidated revenue. GES International Core Services accounted for 19% of Viad’s 2017 and 2016 consolidated revenue and 23% of Viad’s 2015 consolidated revenue. In general, GES provides the following exclusive and discretionary services and products to Live Event organizers and corporate brand marketers: Exclusive Services Discretionary Services Corporate Brand Marketers Material handling Electrical distribution Cleaning Plumbing Overhead rigging Booth rigging Event Organizers Event planning and production Look and feel design Layout and floor plan designs Furnishings and carpet Show traffic analysis Marketing and strategy Electrical distribution Cleaning Plumbing Overhead rigging Booth rigging Exclusive Products Event Organizers Signage Common area structures Corporate Brand Marketers Creative design and strategy Integrated marketing and pre/post event communications Event surveys Return on investment analysis Online management tools Attendee/exhibit booth traffic analysis Staff training Logistics/transportation Exhibits storage/refurbishment Furnishings and carpet Installation and dismantling labor Tradeshow program management Discretionary Products Corporate Brand Marketers Custom exhibit design/construction Portable/modular exhibits and design Graphics and signage 4 Under various agreements with Live Events organizers, GES is the official services contractor with the exclusive right to provide certain services to exhibitors participating in a Live Event. This gives exhibitors a single point of contact to facilitate a timely, safe, and efficient move-in/out of a Live Event and to facilitate an organized, professional, during-show experience. GES also competes with other service providers to sell discretionary services to exhibitors. Discretionary services include complete event program management, such as creative design, strategy, and planning to corporate brand marketers across all Live Events in which they participate. GES offers a comprehensive range of event technology services, including event accommodation solutions, registration and data analytics, and event management tools. Event accommodation solutions. GES U.S. offers end-to-end event accommodation services in North America. Event accommodations provide the unique potential to serve multiple Live Event participants through a single integrated service network. Event accommodations services include: Researching and selection of local hotels • • Negotiating and contracting • Room block management • Group reservation management • Rate integrity and monitoring • Marketing services • On-site services • Post-event reporting Event Technology Registration and ticketing Lead management Reporting and analytics Registration and data analytics. GES provides event registration and data analytic services including: • • • • Web-based enterprise-wide application • • Attendee engagement • Digital collections Software-as-a-service model or fully managed options Event management tools. GES provides event management services including: • Online ordering capabilities • • • Sponsorship management tools Content management systems Live Event tracking GES U.S. provides all three of the above event technology services which accounted for 2% of Viad’s 2017 consolidated revenue and 3% of Viad’s 2016 and 2015 consolidated revenue. GES International provides registration and data analytics and event management tools, which accounted for 1% of Viad’s 2017, 2016, and 2015 consolidated revenue. GES offers a variety of high-impact multi-media services and technology across all Live Events. GES combines the science of innovative digital solutions with the latest audio-visual technology and superior service to create award-winning attendee engagements. GES expanded its audio-visual services through the 2016 acquisition of ON Event Services, LLC (“ON Services”), which enhances GES’ ability to gain market share in the Corporate Event markets in North America and enables GES to cross-sell its services and technology offerings. Audio-visual services include: Audio-Visual • Video and lighting production • Digital studio services • • • Entertainment services and talent coordination Projection mapping Computer rental and support GES U.S. audio-visual services accounted for 6% of Viad’s 2017 consolidated revenue, 3% of Viad’s 2016 consolidated revenue, and 1% of Viad’s 2015 consolidated revenue. GES International audio- visual services accounted for 2% of Viad’s 2017, 2016, and 2015 consolidated revenue. 5 Seasonality and Show Rotation 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 2017, GES U.S. reported its highest revenue during the first and second quarters. During 2016, GES U.S. reported its highest revenue during the second and third quarters. GES International generally reports its highest revenue during the second and fourth quarters. The following show rotation revenue metric refers to the net change in revenue from 2016 to 2017 due to show movement between quarters and years. Show rotation refers to shows that occur less frequently than annually, as well as annual shows that shift quarters from one year to the next. GES Revenue (in millions) 2017 Show Rotation Revenue (in millions) 100 50 0 -50 -100 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 2017 2016 400 300 200 100 0 Competition In the Live Events industry, GES generally competes across all classes of services and all markets on the basis of discernible differences, value, quality, price, convenience, and service. GES has a competitive advantage through its worldwide network of resources, history of serving as an extension of clients’ teams, experienced and knowledgeable personnel, client-focus, creativity, reliable execution, proprietary technology platforms, and financial strength. All known U.S. competitors and most international competitors are privately held companies that provide limited public information regarding their operations. GES’ primary competitor within its Core Services is The Freeman Company (a privately-held, U.S.-headquartered company); however, there is substantial competition from a large number of service providers in GES’ other service offerings. Growth Strategy GES is committed to become the preferred global, full-service provider for Live Events. GES holds a leading market position in Exhibitions and is pursuing a focused and disciplined growth strategy with the goal of expanding its market share in the currently under-penetrated Conferences, Corporate Events, and Consumer Events markets. GES has uniquely combined the art of high-impact creativity, service, and expertise with the science of easy-to-use technology, strategy, and worldwide logistics to help clients gain a greater return from their events and enhance the exhibitor experience. • • • Global Reach. Leverage global capabilities and large customer base to drive continued growth in new services and other Live Events. Full-Service Provider. Growth of adjacent services to create a unique and integrated offering to deepen client relationships, expand client base, and increase share of total event spend. Live Events. Penetration into other live events to extend industry leadership and leverage capabilities. With our recent acquisitions, GES made significant progress toward creating the most comprehensive suite of services for the Live Events industry, which enhanced overall competitiveness, facilitated growth in under-penetrated areas, and formed a basis for a data platform. We continue to pursue opportunities to acquire businesses with proven products and services that complement, enhance, or expand current businesses or offer growth opportunities. 6 Recent Developments of GES • • • Poken Acquisition. In March 2017, we completed the acquisition of the Poken event engagement technology, a leading cloud-based visitor engagement and measurement platform. The Poken platform offers a seamless ecosystem of tools that enable digital document collection (through its patented “Touch and Glow” technology), visitor-to-visitor engagement, gamification, and metrics reporting. Cross-selling opportunities. GES is effectively positioned to cross-sell an increasingly comprehensive suite of service offerings with a convenient approach to service delivery that differentiates GES from its competition. Registration and data analytic services entrance in the Asia markets. In early 2017, GES officially launched registration and data analytic services in the Asia market with a Hong Kong office. 7 Pursuit is a collection of iconic natural and cultural destination travel experiences in North America that showcase the best of Banff, Jasper, Waterton Lakes, Glacier, Denali, and Kenai Fjords National Parks, and Vancouver, Canada. Through Pursuit’s collection of unique hotels and lodges, world-class recreational attractions, and ground transportation services, it connects guests to iconic places through unforgettable, inspiring experiences. Pursuit draws its guests from major markets, including Canada, the United States, China, the United Kingdom, Australia/New Zealand, Asia Pacific, and Europe. Pursuit markets directly to consumers, as well as through distribution channels that include tour operators, tour wholesalers, destination management companies, and retail travel agencies and organizations. Pursuit comprises the following collections: Banff Jasper Collection Alaska Collection Glacier Park Collection FlyOver Brewster Travel Canada, which is marketed as the Banff Jasper Collection, is a leading travel and tourism provider in the Canadian Rockies in Alberta, Canada with two lodging properties in Banff National Park, one lodging property in Jasper National Park, five world-class recreational attractions, food and beverage services, retail operations, sightseeing and transportation services. The Alaska Collection is a leading travel and tourism provider in Alaska with two lodging properties and a sightseeing excursion in Denali National Park and Preserve, a lodge in Talkeetna, Alaska’s top- rated wildlife and glacier cruise, and two lodging properties located near Kenai Fjords National Park. The Alaska Collection also provides food and beverage services and retail operations. Glacier Park, Inc., which is marketed as the Glacier Park Collection, is an operator of seven lodging properties, 12 retail shops, and 11 dining outlets in and around Glacier National Park in Montana, one of the most visited national parks in the United States, and Waterton Lakes National Park in Alberta, Canada, with a leading share of rooms in that market. Glacier Park, Inc. is an 80% owned subsidiary of ours. located in Vancouver, British Columbia, is a FlyOver Canada, recreational attraction that provides a virtual flight ride experience that combines motion seating, spectacular media, and visual effects including wind, scents, and mist to give the unforgettable experience of flying across Canada. FlyOver Iceland is a recreational attraction currently being built in Reykjavik, Iceland that will provide a virtual flight ride experience over some of Iceland’s most spectacular scenery and natural wonders with the same effects as FlyOver Canada. The new attraction is expected to open in 2019. 8 Pursuit comprises four lines of business: Hospitality, including food and beverage services and retail operations; Attractions, including food and beverage services and retail operations; Transportation; and Travel Planning. These four lines of business work together, driving economies of scope and meaningful scale in and around the iconic destinations of Banff, Jasper, and Waterton Lakes National Parks and Vancouver in Canada, and Glacier, Denali, and Kenai Fjords National Parks in the United States. Hospitality (# of rooms) Attractions Transportation (2) Travel Planning (2) Banff Jasper Collection Elk + Avenue Hotel (164) Glacier View Inn (32) Mount Royal Hotel (133) (1) Alaska Collection Glacier Park Collection FlyOver Denali Backcountry Lodge (42) Denali Cabins (46) Kenai Fjords Wilderness Lodge (8) Seward Windsong Lodge (180) Talkeetna Alaska Lodge (212) Apgar Village Lodge (48) Glacier Park Lodge (162) Grouse Mountain Lodge (145) Motel Lake McDonald (27) Prince of Wales Hotel (86) St. Mary Lodge (127)(3) West Glacier Motel & Cabins (32) Banff Gondola Banff Lake Cruise Columbia Icefield Glacier Adventure Glacier Skywalk Maligne Lake Tours Kenai Fjords Tours Airporter Services Charter Motorcoach Services Sightseeing Tours Corporate Event Management Services Explore Rockies Activity Booking Centers Denali Backcountry Adventure Travel Planning Services FlyOver Canada – Vancouver FlyOver Iceland – Reykjavik(4) (1) (2) (3) (4) The Mount Royal Hotel was damaged by a fire on December 29, 2016, and was closed for reconstruction during 2017. We anticipate re-opening the hotel in mid-year 2018. The number of rooms available at the hotel will decrease from 135 to 133 after the renovation is complete. During 2017, we completed the previously announced downsizing of the Banff Jasper Collection’s third party tour and travel products and exited summer season charter transportation services. During 2017, the Glacier Park Collection added ten tiny homes to the St. Mary Lodge property bringing the total number of rooms from 117 to 127. See “Recent Pursuit Developments” for further discussion. In November 2017, we announced the expansion of our virtual flight ride concept into Iceland’s capital city of Reykjavik. We expect the new attraction to be open in 2019. 9 Pursuit provides lodging accommodations, food and beverage services, and retail operations through its collection of unique hotels and lodges varying from hikers’ cabins to grand and historic lodges. • Mount Royal Hotel and Elk + Avenue Hotel are located in the heart of Banff National Park in downtown Banff, Alberta, Canada. • Glacier View Inn is located on the Columbia Icefield between Lake Louise and Jasper in Jasper National Park. • Denali Backcountry Lodge is located in the heart of the Denali National Park. • Denali Cabins are located near the entrance to the Denali National Park. • Kenai Fjords Wilderness Lodge is located on a private island in Resurrection Bay adjacent to Hospitality • • the Kenai Fjords National Park. Seward Windsong Lodge is located near Kenai Fjords National Park in Seward, Alaska. Talkeetna Alaskan Lodge is located in Talkeetna, Alaska on the south side of Denali National Park. • Apgar Village Lodge and Motel Lake McDonald are located inside Glacier National Park. • Glacier Park Lodge is located in East Glacier, Montana. • Grouse Mountain Lodge is located near Glacier National Park in Whitefish, Montana. • Prince of Wales Hotel is located in Waterton Lakes National Park, Alberta, Canada. • St. Mary Lodge is located outside the east entrance of Glacier National Park in St. Mary, Montana. • West Glacier Motel & Cabins is located outside the west entrance of Glacier National Park. Attractions Pursuit owns and operates the following attractions in the Canadian Rocky Mountains, Vancouver, and in Alaska: Banff Gondola transports visitors to an elevation of over 7,000 feet above sea level to the top of Sulphur Mountain in Banff, Alberta, Canada offering an unobstructed view of the Canadian Rockies and overlooking the town of Banff and the Bow Valley. The Banff Gondola has been honored with two Top Project Awards from Alberta Construction Magazine. The Banff Gondola’s winning categories include the People’s Choice Award in 2016 and the Commercial Award (Under $50 Million) in 2016. The Banff Gondola is currently rated by Trip Advisor as the #1 “Things to do in Banff” and received the Trip Advisor Certificate of Excellence. Banff Lake Cruise provides guests a unique sightseeing experience through interpretive boat cruises on Lake Minnewanka in the Canadian Rockies. The Banff Lake Cruise operations are located adjacent to the town of Banff and include boat tours, small boat rentals, and charter fishing expeditions. 10 Columbia Icefield Glacier Adventure is a tour of the Athabasca Glacier on the Columbia Icefield, and provides guests the experience to view one of the largest accumulations of ice and snow south of the Arctic Circle. Guests ride in a giant “Ice Explorer,” a unique vehicle specially designed for glacier travel. The Columbia Icefield Glacier Adventure received the Trip Advisor Certificate of Excellence. Glacier Skywalk is a 1,312-foot guided interpretive walkway with a 98-foot glass-floored observation area overlooking the Sunwapta Valley, in close proximity to our Columbia Icefield Glacier Adventure attraction in Jasper National Park, Alberta, Canada. Since opening in 2014, the Glacier Skywalk has had robust visitor traffic. It continues to win awards and receive international recognition for its innovative design and environmentally sound architecture, including the prestigious Governor General’s Medals in Architecture in 2016. FlyOver Canada provides a virtual flight ride experience that showcases some of Canada’s most awe-inspiring scenery from coast to coast. The state-of-the-art, multi-sensory experience combines motion seating, spectacular media, and special effects, including wind, scents, and mist, to provide a true flying experience for guests. FlyOver Canada is ideally located in downtown Vancouver. FlyOver Canada is rated by Trip Advisor as the #1 “Fun & Games in Vancouver” and received the Trip Advisor Certificate of Excellence. FlyOver Iceland is a recreational attraction currently being built in Reykjavik, Iceland. Guests will experience an exhilarating virtual flight ride over some of Iceland’s most spectacular scenery and natural wonders with the same effects as FlyOver Canada. We expect the new attraction to open in 2019. Kenai Fjords Tours is a leading Alaska wildlife and glacier day cruise, offering guests unforgettable sights of towering glaciers, humpback and grey whales, orcas, arctic birdlife, sea lions, seals, and porpoises of Kenai Fjords National Park. Tours range from a few hours to full days, with some tours including a full meal of wild Alaska salmon, prime rib, and Alaskan King Crab on Fox Island. Kenai Fjords Tours has received the Trip Advisor Certificate of Excellence. 11 Maligne Lake Tours provides interpretive boat tours and related services at Maligne Lake, the largest lake in Jasper National Park, Alberta, Canada. Maligne Lake Tours has seven tour boats, a marina and day lodge that offers food and beverage and retail services, an historic chalet complex and boat house that offers canoes, kayaks, and rowboats for rental. Maligne Lake Tours received the Trip Advisor Certificate of Excellence. Transportation The Banff Jasper Collection’s transportation operations include sightseeing tours, airport shuttle services, and seasonal charter motorcoach services. The sightseeing services include seasonal half- and full-day tours from Calgary, Banff, Lake Louise, and Jasper, Canada and bring guests to the very best parts of Banff and Jasper National Parks. The charter business operates a fleet of luxury motorcoaches, available for groups of any size, for travel throughout the Canadian provinces of Alberta and British Columbia during the winter months. The Alaska Collection offers a unique sightseeing tour 92 miles deep into Denali National Park. The Banff Jasper Collection offers a full suite of corporate and event management services for meetings, conferences, incentive travel, sports, and special events. Event-related service offerings include staffing, off-site events, tours/activities, team building, accommodations, event management, theme development, production, and audio-visual services. The Banff Jasper Collection also owns and operates eight Explore Rockies activity booking centers throughout Banff and Jasper National Parks and Calgary, Alberta. In 2017, the previously announced third party package tour and travel products to align with its goal of delivering premium experiences and improving its overall profit margin. The Alaska Collection provides complete travel planning services throughout Alaska. the Banff Jasper Collection completed phasing out Travel Planning Seasonality Pursuit experiences peak activity during the summer months. During 2017, 87% of Pursuit’s revenue was earned in the second and third quarters. Pursuit 2017 Revenue (in millions) 120 100 80 60 40 20 0 Q1 Q2 Q3 Q4 Competition Pursuit generally competes on the basis of location, uniqueness of facilities, service, quality, and price. Competition exists both locally and regionally across all four lines of business. The hospitality business has a large number of competitors and competes for leisure travelers (both individual and tour groups) across the United States and Canada. Pursuit’s competitive advantage is its distinctive attractions and iconic destinations. 12 Growth Strategy Pursuit remains focused on delivering inspiring and unforgettable experiences in iconic locations while growing and enhancing its unique portfolio of integrated tourism assets through its Refresh-Build-Buy growth initiatives. • • • Refresh. Refresh assets and processes to optimize market position and maximize returns. Build. Build new assets that create new revenue streams with economies of scale and scope. Buy. Buy strategic assets that drive economies of scale and scope with strong returns. We continue to search for opportunities to acquire or to build high return tourism assets in iconic natural and cultural destinations that enjoy perennial demand, bring meaningful scale and market share, and offer cross-selling advantages with a combination of attractions and hotels. Recent Pursuit Developments • • • • Mount Royal Hotel. On December 29, 2016, the Mount Royal Hotel was damaged by fire and closed. In July 2017, we resolved our property and business interruption insurance claims related to the fire for $36.3 million. We allocated $2.2 million to an insurance receivable, $29.3 million was recorded as an impairment recovery (partially offset by impairment charges of $0.2 million) related to construction costs to re-open the hotel, $2.5 million was recorded as a business interruption gain for the recovery of lost profits, $1.3 million was recorded as contra-expense to offset non-capitalizable costs incurred, and the remaining $1.0 million was recorded as deferred revenue that will be recognized over the periods the business interruption losses are actually incurred. Restorations and improvements will provide an elevated guest experience to room finishes and furnishings, lobby and lounge areas, exterior appearance, heating/cooling, sound insulation, and building systems. We anticipate re- opening the hotel in mid-year 2018. Expansion of FlyOver Concept. On November 3, 2017, we acquired the controlling interest (54.5% of the common stock) in Esja Attractions ehf. (“Esja”). Esja, a private Iceland corporation is developing and will operate Pursuit’s new FlyOver Iceland attraction. This attraction expands our virtual flight ride theater concept into Iceland’s capital city of Reykjavik. Modeled after our highly successful FlyOver Canada attraction, FlyOver Iceland will provide guests an exhilarating virtual flight experience over some of Iceland’s most spectacular scenery and natural wonders. The new attraction is expected to open in 2019. Tiny Home Village. On July 15, 2017, we added ten tiny homes to the St. Mary Lodge property as part of the Glacier Park Collection. The tiny home’s design embraces a number of eco-forward elements, such as a fresh water/gray water system and pint-sized, energy-efficient appliances. Elements of luxury are woven into the design. Homes can accommodate up to four guests, with a sliding barn-style door separating a compact sleeping area from the cozy living area. RV and Cabin Park Development. In 2017, we began developing approximately 100 acres of undeveloped land adjacent to Glacier National Park that we acquired in connection with our 2014 purchase of the West Glacier properties. The new development will include a new RV and cabin park with 102 RV slips, 20 guest cabins, five employee housing cabins, guest registration, and a laundromat. Our site is ideally located at the Glacier Park entrance. We expect half of the new RV and Cabin Park to open during the 2019 season with the remainder opening for the 2020 season. Financial information for our reportable segments and geographic areas is included in Note 22 – Segment Information of the Notes to Financial Statements (Part II, Item 8 of this 2017 Form 10-K). Intellectual Property Our intellectual property rights (including trademarks, patents, copyrights, registered designs, technology, and know-how) are material to our business. We own or have the right to use numerous trademarks and patents in many countries. Depending on the country, trademarks remain valid for as long as we use them, or as long as we maintain their registration status. Trademark registrations are generally for renewable, fixed terms. We also have patents for current and potential products. Our patents cover inventions ranging from a modular structure having a load-bearing surface we use in our event and exhibition services, to a surface- covering installation tool and method that reduces our labor costs and improves worker safety. Our U.S. issued utility patents extend for 20 years from the patent application filing date; and our U.S. issued design patents are currently granted for 14 years from the grant date. We also have an extensive design library. Many of the designs have copyright protection and we 13 have also registered many of the copyrights. In the U.S., copyright protection is for 95 years from the date of publication or 120 years from creation, whichever is shorter. While we believe that certain of our patents, trademarks, and copyrights have substantial value, the loss of any one of them would not have a material adverse effect on our financial condition or results of operations. Our Trademarks Our U.S. registered trademarks and trademarks pending registration, include Global Experience Specialists & design®, GES®, GES Servicenter®, GES National Servicenter®, GES MarketWorks®, The Art and Science of Engagement®, Trade Show Rigging TSR®, TSE Trade Show Electrical & design®, Earth Explorers®, Compass Direct®, ethnoMetrics®, eXPRESSO®, FIT®, ON Services, ON Site Audio Visual & design, FLYOVER®, eco-sense®, ONPEAK®, Above Banff®, Alaska Denali Travel®, Alaska Denali Escapes®, Alaska Heritage Tours®, Kenai Fjords Tours & design®, Kenai Fjords Wilderness Lodge®, Seward Windsong Lodge & design®, Talkeetna Alaskan Lodge®, Explore Rockies®, Denali Backcountry Adventure®, Denali Backcountry Lodge®, and Denali Cabins®. We also own or have the right to use many registered trademarks and trademarks pending registration outside of the United States, including GES®, ShowTech®, Poken®, Visit, Blitz, Brewster Inc. & design®, Brewster Attractions Explore & design®, Brewster Hospitality Refresh & design®, Glacier Skywalk®, Above Banff®, Explore Rockies®, FLYOVER®, Soaring Over Canada®, Elk + Avenue Hotel®, Brewster Epic Summer Pass®, and escape.connect.refresh.explore®. Government Regulation and Compliance Compliance with legal requirements and government regulations represents a normal cost of doing business. The principal rules and regulations affecting our day-to-day business relate to transportation (such as regulations promulgated by the U.S. Department of Transportation and its state counterparts), employees (such as regulations implemented by the Occupational Safety and Health Administration, equal employment opportunity laws, guidelines implemented pursuant to the Americans with Disabilities Act, and general federal and state employment laws), unionized labor (such as guidelines imposed by the National Labor Relations Act), and U.S. and Canadian regulations relating to national parks (such as regulations established by Parks Canada, the U.S. Department of the Interior, and the U.S. National Park Service). Some of our current and former businesses are subject to U.S. federal and state environmental regulations, including laws enacted under the Comprehensive Environmental Response, Compensation and Liability Act, or our state law counterparts. Compliance with federal, state and local environmental, health and safety provisions, including, but not limited to, those regulating the discharge of materials into the environment and other actions relating to the environment, have not had, and are not expected to have, a material effect on our capital expenditures, competitive position, financial condition or results of operations. Employees We had the following number of employees as of December 31, 2017: Number of Employees Regular Full-Time Employees Covered by Collective Bargaining Agreements GES ............................................................................................................................. Pursuit.......................................................................................................................... Viad Corporate ............................................................................................................ Total ...................................................................................................................... 3,092 365 64 3,521 1,142 41 — 1,183 We believe that relations with our employees are good and that collective-bargaining agreements expiring in 2018 will be renegotiated in the ordinary course of business without a material adverse effect on our operations. We are governed by a Board of Directors comprised of seven non-employee directors and one employee director, and we have an executive management team consisting of four executive officers. Financial Information about Segments and Geographic Areas Refer to Note 22 – Segment Information of the Notes to Consolidated Financial Statements (Part II, Item 8 of this 2017 Form 10-K) for segment financial information. 14 Available Information We were incorporated in Delaware in 1991. Our common stock trades on the New York Stock Exchange under the symbol “VVI.” Our website address is www.viad.com. All of our SEC filings, including our Annual Reports on Form 10-K, quarterly reports on Form 10-Q, current reports on Form 8-K, and amendments to those reports, are available free of charge on our website as soon as reasonably practicable after we electronically file that material with, or furnished it to, the SEC. The information contained on our website is neither a part of, nor incorporated by reference into, this 2017 Form 10-K. Our investor relations website is www.viad.com/investors/investor-center/default.aspx and includes key information about our corporate governance initiatives, including our Corporate Governance Guidelines, our Board of Directors committee charters, our Code of Ethics, and information concerning our Board members and how to communicate with them. Item 1A. RISK FACTORS 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. 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 integration of operations; and retain the acquired business’ key personnel and customers. Moreover, our acquisition activity potentially increases our debt, subjects us to new regulatory requirements, distracts our senior management and employees, and exposes us to unknown liabilities or contingencies that we fail to, or are unable to identify prior to closing. If our acquisitions cause us to make changes to our business strategy or if external conditions adversely affect our business operations, we may also be required to record an impairment charge to goodwill or intangible assets. Any of these risks could materially and adversely affect our business, product and service 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. During 2017, no single client accounted for more than 6% of our consolidated revenue. However, 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 adversely affected. Moreover, when event organizers hire GES as the official services contractor, they also grant GES an exclusive right to perform electrical, plumbing services, and other services (the “Event Services”) at the exhibition facility. However, exhibition facilities are under increasing financial pressure to in-source 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 a large number of exhibition facilities choose to in-source Event Services, GES will lose the ability to provide Event Services despite being hired as the official services contractor, 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 team must be able to understand a client’s desires and expectations in order to provide top-quality service. If we lose a key member of our account team, we could also lose customers and our results of operations could be materially and adversely affected. We operate in highly competitive industries. We are engaged in a number of highly competitive industries. Competition in the Live Events industry and the exhibits and experiential environments industries is driven by price and service quality, among other factors. To the extent competitors seek to gain or retain their market presence through aggressive underpricing strategies, we may be required to lower our prices and rates to avoid the loss of related business, thereby adversely affecting our results of operations. In addition, if we are unable to anticipate and respond as effectively as competitors to changing business conditions, including new technologies and business models, we could lose market share to our competitors. Our inability to meet the challenges presented by the competitive environment could materially and adversely affect our results of operations. 15 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, 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, airline accidents, and international political instability and hostilities. Any of these factors, or other unexpected events that affect the availability and pricing of air travel and accommodations, could materially and adversely affect our business and results of operations. 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. The seasonality of our business makes us particularly sensitive to adverse events during peak periods. 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. The peak activity for our Pursuit business is during the summer months. Consequently, during 2017, 87% of Pursuit’s revenue was earned in the second and third quarters. If adverse events or conditions occur during these peak periods our results of operations could be materially and adversely affected. Terrorist attacks, natural disasters, or other catastrophic events could negatively affect our business. The occurrence of catastrophic events ranging from natural disasters (such as hurricanes, fires, and floods), health epidemics or pandemics, acts of war or terrorism, accidents involving our travel offerings or experiences, or the prospect of these events could disrupt our business. Such catastrophic events could have a negative impact on GES’ production facilities, preventing us from timely completing exhibit fabrication and other projects for customers. They could also cause 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 catastrophic events could also have an adverse impact on Pursuit, which is heavily dependent on the ability and willingness of its guests to travel. 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 could impede the guests’ ability to travel, interrupt our business operations, and/or cause damage to our properties. In addition, unfavorable media attention, or negative publicity, in the wake of a catastrophic event 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. We are vulnerable to deterioration in general economic conditions. Our business is sensitive to fluctuations in general economic conditions that affect the cost of materials and operating supplies. 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. We also 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. Consequently, marketing expenditures often are not increased until economic conditions improve. Revenue from our Pursuit operation depends largely on the amount of disposable income that consumers have available for travel and vacations. This amount decreases during periods of weak general economic conditions. Any of these risks could materially and adversely affect our business, product sales, financial condition, and results of operations. Recent U.S. tax legislation may materially and adversely affect our financial condition, results of operations, and cash flows. The Tax Cuts and Jobs Act (the “Tax Act”), enacted in late 2017, makes significant changes to U.S. tax laws and includes numerous provisions that could affect our business. For instance, as a result of lower corporate tax rates, the Tax Act tends to reduce both the value of deferred tax assets and the amount of deferred tax liabilities. It also limits interest rate deductions and the amount of net operating losses that can be used each year and alters the expensing of capital expenditures. Other provisions have tax consequences for our international operations. The Tax Act is unclear in certain respects and will require interpretations and implementing regulations by the Internal Revenue Service, as well as state tax authorities. The Tax Act could also be subject to amendments and technical corrections, any of which could lessen or increase the adverse impacts on our business operations. The accounting treatment of these tax law changes is complex, and some of the changes may affect both current and future periods. Others will primarily affect future periods. As we have discussed elsewhere in this Report on Form 10-K, we believe our analysis and computations of the tax effects of the Tax Act on financial results is substantially, but not entirely, complete. Consistent with guidance from the SEC, our financial statements reflect our estimates of the tax effects of the Tax Act on our business. Although we believe these estimates are reasonable, they are 16 provisional and may be adjusted prior to the end of 2018. Any such adjustments could affect our current or future financial statements, or both. We continue to examine the impact of this tax reform legislation, and as its overall impact is uncertain, we note that the Tax Act could adversely affect our business and financial condition. the Netherlands, Germany, and to a lesser extent, We are subject to currency exchange rate fluctuations. We have operations outside of the U.S. primarily in Canada, the United Kingdom, in certain other countries. During 2017, GES International and Pursuit’s international operations accounted for approximately 30% of our consolidated revenue and 58% of our segment operating income. Consequently, a significant portion of our business is exposed to currency exchange rate fluctuations. 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 do not currently hedge equity risk arising from the translation of non-U.S. denominated assets and liabilities. 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. We are obligated to contribute to multi-employer pension plans under collective-bargaining agreements covering our union-represented employees. We contributed $26.6 million in 2017 and $25.8 million in 2016 to those multi-employer pension plans. These multi-employer plans are managed by third- party boards of trustees. 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. At this time, we cannot determine with any certainty the amount of additional funding, if any, we could be required to make to those plans. However, significant plan contribution increases, could materially and adversely affect our consolidated financial condition, results of operations, and cash flows. Refer to Note 17 – Pension and Postretirement Benefits of the Notes to Consolidated Financial Statements (Part II, Item 8 of this 2017 Form 10- K) for further information. Union-represented labor increases our risk of higher labor costs and work stoppages. A significant portion 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. We are vulnerable to cybersecurity attacks and threats. We regularly collect and process credit, financial, and other personal, sensitive, 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 adversely and materially affect our results of operations. Laws and regulations relating to the handling of personal data could result in increased costs, legal claims, or fines. We store and process personally identifiable information from our customers, employees, and third parties with whom we have business relationships. Legal requirements relating to the collection, storage, handling, and transfer of personal data continue to evolve and could lead to burdensome or inconsistent requirements affecting the location and movement of our customer and internal employee data as well as the management of the data. For example, in July 2016, the EU and the U.S. agreed on a mechanism for companies to transfer data from EU member states to the U.S. This framework, called the Privacy Shield, is Justice in a predecessor mechanism. intended to address identified by the European Court of shortcomings 17 in May 2018, the legal basis for data transfers across to challenges in European courts, which may lead to The Privacy Shield and other mechanisms are currently subject the EU’s new the Atlantic. Also, uncertainty about General Data Protection Regulation (GDPR) will replace the existing EU Data Protection Directive, and it will have a significant impact on how businesses can collect and process the personal data of EU individuals. The GDPR includes a requirement for businesses to self-report personal data breaches to the relevant supervisory authority and, under certain circumstances, to the affected data subjects. It also gives additional rights to individuals whose data are processed, including the “right to erasure” (also commonly known as the right to be forgotten) by having their records erased and the right to data portability. Compliance with the myriad requirements could involve changes in our services, business practices, or internal systems that could likely increase our costs, lower revenue, reduce efficiency, or make it more difficult to compete with Non-U.S.-based firms. 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. Any of these risks could 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 efforts to upgrade some of our Pursuit offerings in order to seize opportunities that complement, 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 risks specific to a project. The occurrence of any of these events could prevent a new capital project from performing in accordance with our commercial expectations and 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 or three years or longer) or may be held at different times of 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. 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. The June 23, 2016 U.K. referendum resulted in a determination that the U.K. should exit the EU. In March 2017, the U.K. government initiated the exit process under Article 50 of the Treaty of the EU, commencing a period of up to two years for the United Kingdom and the other EU member states to negotiate the terms of the withdrawal. The uncertainty surrounding the timing, terms and consequences of the U.K.’s exit could adversely impact customer and investor confidence, result in additional market volatility and adversely affect our businesses and our results of operations and financial condition. Once the U.K. exits from the EU, the regulatory and legal environment that would then govern our U.K. operations will depend on, in certain respects, the nature of the arrangements agreed to between the U.K., the EU, and other trading partners. It is likely that changes to our legal entity structure and operations in Europe will be required as a result of these arrangements, which might result in a less efficient operating model across our European legal entities. Liabilities relating to prior and discontinued operations may adversely affect our results of operations. We, and our predecessors, have a corporate history spanning over eight decades and involving approximately 2,400 previous subsidiaries in diverse businesses, such as the manufacturing of locomotives, buses, industrial chemicals, fertilizers, pharmaceuticals, leather, textiles, food, and fresh meats. Some of those businesses 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 subsidiaries, as well as 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 contradict with current assumptions, which could cause reserves or insurance to become inadequate and, ultimately, materially and adversely affect our results of operations. Item 1B. UNRESOLVED STAFF COMMENTS None. 18 Item 2. PROPERTIES We operate service or production facilities and maintain sales and service offices in the United States, Canada, the United Kingdom, Germany, the United Arab Emirates, the Netherlands, Switzerland, Romania, and Hong Kong. Our principal properties are operated by GES, Pursuit, and Viad Corporate. GES GES U.S. ..................................................... GES International: Canada ...................................................... United Kingdom ....................................... Germany ................................................... United Arab Emirates............................... Netherlands............................................... Switzerland............................................... Romania.................................................... Hong Kong ............................................... Total GES International .............................. Total GES.................................................... Offices Owned Leased Multi-use Facilities(1) Owned Leased — — — — — — — — — — — 19 4 3 1 1 1 1 — 1 12 31 2 — — — — — — — — — 2 30 7 6 2 2 2 — 1 — 20 50 (1) Multi-use facilities include manufacturing, sales and design, office, storage and/or warehouse, and truck marshaling yards. Multi-use facilities vary in size up to approximately 677,800 square feet at GES U.S. and approximately 133,600 square feet at GES International. Pursuit Offices(1)....................................................................................... Retail stores ................................................................................. Bus terminal................................................................................. Garages(1) ..................................................................................... Attractions(1)................................................................................. Hotels/Lodges(1)(2) ........................................................................ Total Pursuit ................................................................................... Owned Leased 2 23 1 4 7 15 52 5 1 — 2 — — 8 (1) (2) Includes four hotels/lodges, an office, all of the owned garages, and all of the Canadian-based attractions situated on land subject to multiple long-term ground leases with the Canadian government. Includes ancillary food and beverage services, retail, and recreational facilities. Viad Headquarters Our headquarters is leased and approximates 19,900 square feet, and is located at 1850 North Central Avenue, Suite 1900 in Phoenix, Arizona 85004-4565. We believe our facilities are adequate and suitable for our business operations and that capacity is sufficient for current needs. For additional information related to our lease obligations, refer to Note 11 – Debt and Capital Lease Obligations and Note 19 – Leases and Other of the Notes to Consolidated Financial Statements (Part II, Item 8 of this 2017 Form 10-K). Item 3. LEGAL PROCEEDINGS Refer to Note 20 – Litigation, Claims, Contingencies, and Other of the Notes to Consolidated Financial Statements (Part II, Item 8 of this 2017 Form 10-K) for information regarding legal proceedings for which we are involved. 19 Item 4. MINE SAFETY DISCLOSURES Not applicable. Other. EXECUTIVE OFFICERS OF THE REGISTRANT Our executive officers as of December 31, 2017 were as follows: Name Steven W. Moster Ellen M. Ingersoll David W. Barry Leslie S. Striedel Age Business Experience During the Past Five Years and Other Information 48 President and Chief Executive Officer of Viad since 2014; President of GES since 2011; President of Global Experience Specialists, Inc., a wholly-owned subsidiary of Viad, since 2010; prior thereto, independent consultant providing marketing and sales consultation services to 3 Day Blinds Corporation, a manufacturer and retailer of custom window coverings, from April 2010 to August 2010; prior thereto, held various positions within Global Experience Specialists, Inc., including Executive Vice President-Chief Sales & Marketing Officer from 2008 to 2010; Executive Vice President-Products and Services from 2006 to 2008; and Vice President-Products & Services Business from 2005 to 2006; and prior thereto, Engagement Manager, Management Strategy Consulting for McKinsey & Company, a multinational management consulting firm, from 2000 to 2004. 53 Chief Financial Officer since July 2002; prior thereto, Vice President-Controller or similar position since 2002; prior thereto, Controller of CashX, Inc., a service provider of stored value internet cards, from June 2001 through October 2001; prior thereto, Operations Finance Director of LeapSource, Inc., a provider of business process outsourcing, from 2000 to June 2001; and prior thereto, Vice President and Controller of Franchise Finance Corporation of America since 1992. 55 President of Pursuit since June 2015; prior thereto, Chief Executive Officer and President of Trust Company of America, the largest independent registered investment adviser custodian in the United States, from 2011 to June 2015; prior thereto, Chief Executive Officer of The Alpine Group of Companies, the largest helicopter skiing company in the world and a division of Intrawest Resorts Holdings, Inc., a public company, from 2004 to 2011; and prior thereto, President and Chief Operating Officer of Intrawest USA, a $500 million division of Intrawest Resorts Holdings, Inc. with 13,000 employees, from 2004 to 2007. 55 Chief Accounting Officer since 2014; prior thereto, Vice President of Finance from March 2014 to April 2014; prior thereto, Vice President of Finance and Administration or similar positions with Colt Defense LLC, a designer, developer and manufacturer of firearms for military, personal defense and recreational purposes, from 2010 to 2013; prior thereto, Vice President of Finance, Director of Financial Reporting and Compliance and Corporate Controller of White Electronics Designs Corp. (now a subsidiary of Microsemi Corporation), a public company manufacturing circuits and semiconductors, from 2004 to 2010; and prior thereto, Corporate Controller of MD Helicopters, an international helicopter manufacturer, Corporate Controller of Fluke Networks (formerly Microtest, Inc.), a publicly- traded manufacturing and technology company, and Senior Tax Manager for KPMG LLP. Our executive officers’ term of office is until our next Board of Directors annual organization meeting to be held on May 17, 2018. 20 PART II Item 5. MARKET FOR REGISTRANT’S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES Market Information Our common stock is traded on the New York Stock Exchange under the symbol VVI. The high and low common stock market prices per share were as follows: First Quarter ................................................................................ $ Second Quarter............................................................................ $ Third Quarter............................................................................... $ Fourth Quarter............................................................................. $ 48.30 48.85 61.65 61.85 $ $ $ $ 42.40 42.05 46.05 53.65 $ $ $ $ 29.84 32.29 37.85 47.40 $ $ $ $ 25.90 27.96 30.21 34.40 2017 2016 High Low High Low Holders As of January 31, 2018, there were 5,600 shareholders of record of our common stock, including 293 shareholders that had not converted their shares following a reverse stock split effective on July 1, 2004. Dividends For the year ended December 31, 2017, our Board of Directors declared the following dividends: Declaration Date November 29, 2017............... August 16, 2017 .................... May 18, 2017 ........................ February 22, 2017 ................. Dividend Per Share $ $ $ $ 0.10 0.10 0.10 0.10 Record Date December 15, 2017 September 8, 2017 June 2, 2017 March 10, 2017 Payable Date January 2, 2018 October 2, 2017 July 3, 2017 April 3, 2017 For the year ended December 31, 2016, our Board of Directors declared the following dividends: Declaration Date December 1, 2016 ................. August 24, 2016 .................... May 19, 2016 ........................ February 24, 2016 ................. Dividend Per Share $ $ $ $ 0.10 0.10 0.10 0.10 Record Date December 16, 2016 September 9, 2016 June 3, 2016 March 11, 2016 Payable Date January 3, 2017 October 3, 2016 July 1, 2016 April 1, 2016 Issuer Purchases of Equity Securities During the fourth quarter of 2017, certain previously owned shares of common stock were surrendered by employees, former employees, and non-employee directors for tax withholding requirements on vested share-based awards. Period October 1, 2017 - October 31, 2017... November 1, 2017 - November 30, 2017.................................................. December 1, 2017 - December 31, 2017.................................................. Total ................................................. Total Number of Shares Purchased Average Price Paid Per Share 2,968 $ 497 $ 11,151 $ 14,616 $ 59.83 55.55 57.60 57.98 Total Number of Shares Purchased as Part of Publicly Announced Plans or Programs — — — — Maximum Number of Shares That May Yet Be Purchased Under the Plans or Programs 440,540 440,540 440,540 440,540 Our Board of Directors has authorized us to repurchase shares of our common stock from time to time at prevailing market prices. As of December 31, 2017, 440,540 shares remain available for repurchase. The Board’s authorization has no expiration date. During the three months ended December 31, 2017, no shares were repurchased on the open market. 21 Performance Graph The following graph compares the change in the cumulative total shareholder return, from December 31, 2012 to December 31, 2017, on our common stock, the Standard & Poor’s SmallCap 600 Media Index, the Standard & Poor’s SmallCap 600 Commercial Services & Supplies Index, the Standard & Poor’s SmallCap 600 Index, the Russell 2000 Index, and Standard & Poor’s 500 Index (assuming reinvestment of dividends, as applicable). The graph assumes $100 was invested on December 31, 2012. $300 $250 $200 $150 $100 $50 $- 2 0 1 2 2 0 1 3 2 0 1 4 2 0 1 5 2 0 1 6 2 0 1 7 Viad Corp S&P 500 Russell 2000 S&P SmallCap 600 S&P 600 Comm. Services & Supplies S&P 600 Media Index 2012 Viad Corp ................................................................ $ 100.00 S&P 500 .................................................................. $ 100.00 Russell 2000 ............................................................ $ 100.00 S&P SmallCap 600 ................................................. $ 100.00 S&P 600 Comm. Services & Supplies.................... $ 100.00 S&P 600 Media Index............................................. $ 100.00 Year Ended December 31, 2013 $ 114.17 $ 132.38 $ 138.82 $ 141.31 $ 143.41 $ 162.65 2014 $ 118.43 $ 150.47 $ 145.64 $ 149.42 $ 142.43 $ 190.80 2015 $ 127.22 $ 152.53 $ 139.21 $ 146.42 $ 139.00 $ 201.03 2016 $ 201.04 $ 170.76 $ 168.84 $ 185.16 $ 177.43 $ 180.37 2017 $ 254.60 $ 208.02 $ 193.54 $ 209.51 $ 189.99 $ 207.93 22 Item 6. SELECTED FINANCIAL DATA (in thousands, except per share data) Summary Statement of Operations Data Revenue (1) : 2017 Year Ended December 31, 2015 2014 2016 2013 Exhibition and event services .......................................................... $ Exhibits and environments .............................................................. Pursuit services ................................................................................ Total revenue .......................................................................................... $ Income from continuing operations (2).................................................... $ Income from continuing operations attributable to Viad common 967,352 165,745 173,868 1,306,965 58,452 stockholders......................................................................................... $ 57,975 Basic and diluted income from continuing operations attributable to Viad common stockholders per share (2).............................................. $ Dividends declared per common share .................................................. $ Other Data 2.84 0.40 Adjusted EBITDA (3) ....................................................................... $ 137,550 (in thousands) Summary Balance Sheet Data 2017 Cash and cash equivalents ............................................................... $ Total assets ...................................................................................... $ Total debt and capital lease obligations........................................... $ Redeemable noncontrolling interest (4) ............................................ $ Total stockholders’ equity ............................................................... $ Non-redeemable noncontrolling interest ......................................... $ 53,723 919,899 209,192 6,648 442,937 13,806 $ $ $ $ $ $ $ $ $ $ $ $ $ 881,137 170,469 153,364 1,204,970 43,479 42,953 2.12 0.40 112,428 $ $ $ $ $ $ $ 799,752 177,126 112,170 1,089,048 27,442 27,000 1.34 0.40 76,801 $ $ $ $ $ $ $ 772,770 171,698 120,519 1,064,987 41,178 40,790 2.02 1.90 73,954 $ $ $ $ $ $ $ 685,350 159,554 108,443 953,347 19,320 19,437 0.96 2.90 59,157 2016 December 31, 2015 2014 2013 20,900 869,816 249,211 370,638 13,283 $ $ $ — $ $ $ 56,531 690,723 127,403 335,338 12,757 $ $ $ — $ $ $ 56,990 712,979 139,056 347,702 12,315 $ $ $ — $ $ $ 45,821 561,424 11,160 — 356,543 9,102 (1) (2) (3) (4) The 2017 amounts include $1.4 million in revenue from our Poken acquisition. The 2016 amounts include an aggregate $55.7 million in revenue from our acquisitions of ON Services, CATC Alaska Tourism Corporation (“CATC”), Maligne Lake Tours Ltd. (“Maligne Lake Tours”), and FlyOver Canada. The 2014 amounts include an aggregate $21.2 million in revenue from our acquisitions of the West Glacier Properties, Blitz, onPeak, and N200. Refer to Note 3 – Acquisition of Businesses of the Notes to Consolidated Financial Statements (Part II, Item 8 of this 2017 Form 10-K). Income from continuing operations includes the following items: • • • Restructuring charges, pre-tax, of $1.0 million in 2017, $5.2 million in 2016, $3.0 million in 2015, $1.6 million in 2014, and $3.8 million in 2013. Refer to Note 18 – Restructuring Charges of the Notes to Consolidated Financial Statements (Part II, Item 8 of this 2017 Form 10-K). Impairment charges (recoveries), pre-tax, net, of $(29.1) million in 2017, $0.2 million in 2016, $0.1 million in 2015, $0.9 million in 2014, and $1.0 million in 2013. Refer to Note 6 – Property and Equipment of the Notes to Consolidated Financial Statements (Part II, Item 8 of this 2017 Form 10-K). Income tax expense in 2017 included a $16.1 million charge related to the Tax Act. Income tax expense in 2015 included a $1.6 million non-cash tax benefit related to deferred taxes associated with certain foreign intangibles. Income tax expense in 2014 included the $11.7 million valuation allowance release related to our foreign tax credit and state net operating loss carryforwards. Refer to Note 16 – Income Taxes of the Notes to Consolidated Financial Statements (Part II, Item 8 of this 2017 Form 10-K). Refer to “Management’s Discussion and Analysis of Financial Condition and Results of Operations” (Part II, Item 7 of this 2017 Form 10-K) for a discussion of the “Non-GAAP Measures.” On November 3, 2017, we acquired the controlling interest (54.5% of the common stock) in Esja, a private corporation in Reykjavik, Iceland, The Esja acquisition contains a put option that gives the minority Esja shareholders the right to sell (or “put”) their Esja shares to us based on a calculated formula within a predefined term. 23 Item 7. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS The following Management’s Discussion and Analysis (“MD&A”) should be read in conjunction with the consolidated financial statements and related notes. The MD&A is intended to assist you in understanding our financial condition and results of operations. This discussion contains forward-looking statements that involve risks and uncertainties. Our actual results could differ materially from those anticipated due to various factors discussed under “Risk Factors,” “Forward- Looking Statements,” and elsewhere in this 2017 Form 10-K. Overview We are an international experiential services company with operations in the United States, Canada, the United Kingdom, continental Europe, and the United Arab Emirates. We are committed to providing unforgettable experiences to our clients and guests. We operate through three reportable business segments: GES U.S., GES International, (collectively, “GES”), and Pursuit. GES is a global, full-service provider for live events that produces exhibitions, conferences, corporate events, and consumer events. GES offers a comprehensive range of live event services and a full suite of audio-visual services from creative and technology to content and design, along with online tools powered by next generation technologies that help clients easily manage the complexities of their events. Pursuit is a collection of iconic natural and cultural destination travel experiences that enjoy perennial demand. Pursuit offers guests distinctive and world renowned experiences through its collection of unique hotels and lodges, world-class recreational attractions, and ground transportation services. 24 Results of Operations Financial Highlights Year Ended December 31, 2017 (in thousands, except per share data) Revenue....................................................... $ 1,306,965 57,707 Net income attributable to Viad .................. $ Segment operating income (1)...................... $ 97,051 Diluted income per common share from continuing operations attributable to Viad common stockholders ................................. $ 2.84 2016 $ 1,204,970 42,269 $ 85,928 $ 2015 $ 1,089,048 26,606 $ 54,584 $ Percentage Change 2017 vs. 2016 Percentage Change 2016 vs. 2015 8.5% 36.5% 12.9% 10.6% 58.9% 57.4% $ 2.12 $ 1.34 34.0% 58.2% 2017 compared with 2016 • • • Total revenue increased $102.0 million or 8.5%, mainly due to the incremental revenue from the ON Services and FlyOver Canada acquisitions, and to a lesser degree, the Poken, and CATC acquisitions, of $52.6 million and underlying growth at GES and Pursuit, offset in part by negative show rotation of approximately $8 million and an unfavorable foreign exchange impact of $5.6 million. Net income attributable to Viad increased $15.4 million or 36.5%, primarily due to impairment recoveries of $29.1 million related to the Mount Royal Hotel fire, higher segment operating income, and a decrease in restructuring charges, offset in part by higher tax expense, including a $16.1 million charge as a result of the Tax Cuts and Jobs Act (the “Tax Act”) enacted on December 22, 2017, higher corporate activities expense due to an increase in performance-based compensation driven by our stock price appreciation, and higher interest expense. Total segment operating income(1) increased $11.1 million or 12.9%, primarily due to the increase in revenue. 2016 compared with 2015 • • • Total revenue increased $115.9 million or 10.6%, mainly due to the incremental revenue from the 2016 acquisitions, primarily CATC, ON Services, and Maligne Lake Tours of $55.7 million, positive show rotation of approximately $52 million, and continued underlying growth in both GES and Pursuit, offset in part by an unfavorable foreign exchange impact of $24.0 million. Net income attributable to Viad increased $15.7 million or 58.9%, primarily due to increased segment operating income at GES and Pursuit, offset in part by higher income tax expense. Total segment operating income(1) increased $31.3 million or 57.4%, primarily due to high flow-through on the increase in revenue. (1) Refer to Note 22 – Segment Information of the Notes to Consolidated Financial Statements (Part II, Item 8 of this 2017 Form 10-K) for a reconciliation of the non-GAAP financial measure, segment operating income, to the most directly comparable GAAP measure. 25 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. 2017 compared with 2016 The following table summarizes the foreign exchange rate variance effects (or “FX Impact”) on revenue and segment operating results from our significant international operations for the years ended December 31, 2017 and 2016, excluding the effect of acquisitions completed during 2017 and 2016: Revenue Weighted-Average Exchange Rates FX Impact Segment Operating Results Weighted-Average Exchange Rates FX Impact 2017 2016 (in thousands) 2017 2016 (in thousands) GES: Canada (CAD)................................................... $ United Kingdom (GBP) .................................... $ Europe (EUR).................................................... $ 0.77 $ 1.29 $ 1.14 $ 0.76 $ 1.35 1.11 775 $ (9,001) $ 970 $ (7,256) 0.77 $ 1.30 $ 1.15 $ 0.76 $ 1.33 1.10 Pursuit: Canada (CAD)................................................... $ 0.78 $ 0.77 1,676 $ (5,580) $ 0.78 $ 0.76 $ (114) (160) 131 (143) 710 567 2016 compared with 2015 The following table summarizes the FX Impact on revenue and segment operating results from our significant international operations for the years ended December 31, 2016 and 2015, excluding the effect of acquisitions completed during 2016: Revenue Weighted-Average Exchange Rates FX Impact Segment Operating Results Weighted-Average Exchange Rates FX Impact 2016 2015 (in thousands) 2016 2015 (in thousands) GES: Canada (CAD)................................................... $ United Kingdom (GBP) .................................... $ Europe (EUR).................................................... $ 0.76 $ 1.35 $ 1.11 $ 0.78 $ 1.53 1.10 (1,852) $ (20,946) $ 150 $ (22,648) 0.76 $ 1.34 $ 1.10 $ 0.79 $ 1.53 1.11 Pursuit: Canada (CAD)................................................... $ 0.77 $ 0.78 (1,307) $ 0.76 $ 0.78 $ (23,955) $ (77) (632) 36 (673) 91 (582) The 2017 and 2016 revenue and segment operating results were primarily impacted by the weakening of the British pound relative to the U.S. dollar. Future changes in the exchange rates may impact overall expected profitability and historical period-to-period comparisons when revenue and segment operating results are translated into U.S. dollars. 26 Analysis of Revenue and Operating Results by Reportable Segment GES 2017 compared with 2016 The following table presents a comparison of GES’ reported revenue and segment operating results to organic revenue(3) and organic segment operating results(3) for the years ended December 31, 2017 and 2016. Year Ended December 31, 2017 Year Ended December 31, 2016 Change As Reported Acquisitions(1)(cid:3)(cid:3)(cid:3) FX Impact Organic(3) As Reported Acquisitions(2) Organic(3)(cid:3) (cid:3)(cid:3) As Reported Organic(3) (cid:3) (in thousands) Revenue: GES: U.S. ............. $ 872,154 $ International .. 282,712 Intersegment eliminations ... (21,769 ) Total GES ...... $ 1,133,097 $ Segment operating income (loss)(4):(cid:3) GES: U.S. ............. $ International .. Total GES ...... $ 34,494 $ 15,475 49,969 $ 72,441 $ — $ 799,713 $ 826,408 $ 248,503 917 (7,256) 289,051 30,737 $ 795,671 5.5% 248,503 13.8% — 0.5% 16.3% — — (20,172) 73,358 $ (7,256) $1,066,995 $1,054,739 $ (21,769) — (20,172 ) 30,737 $1,024,002 (7.9)% 7.4% (7.9)% 4.2% (5,043 ) $ — $ (143) (5,973 ) $ (143) $ (930 ) 39,537 $ 16,548 56,085 $ 40,524 $ 9,699 50,223 $ (764) $ — (764) $ 41,288 (14.9)% 9,699 59.6% (0.5)% 50,987 (4.2)% 70.6% 10.0% (1) Acquisitions include ON Services (acquired August 2016) for GES U.S. and Poken (acquired March 2017) for GES (2) (3) (4) International and GES U.S. To maximize synergies, GES’ existing in-house audio-visual services team was merged into ON Services. Accordingly, GES U.S. acquisitions include results from the existing in-house audio-visual team. Organic revenue and organic segment operating results are non-GAAP financial measures that adjust for the impacts of exchange rate variances and acquisitions, if any, until such acquisitions are included in the entirety of both comparable periods presented. For more information about organic revenue and organic segment operating results, see the “Non- GAAP Measures” section of this MD&A. Refer to Note 22 – Segment Information of the Notes to Consolidated Financial Statements (Part II, Item 8 of this 2017 Form 10-K) for a reconciliation of the non-GAAP financial measure, segment operating income (loss), to the most directly comparable GAAP measure. GES U.S. GES U.S. revenue increased $45.7 million or 5.5%, primarily due to incremental revenue of $41.7 million mainly from the ON Services acquisition and, to a lesser degree, the Poken acquisition, base same-show revenue growth of 4.8%, and new business wins, offset in part by a low margin contract that expired in 2016 and was not renewed and negative show rotation of approximately $11 million. Base same-show revenue represented 35.4% of GES U.S. organic revenue*. Organic revenue* increased $4.0 million or 0.5%. GES U.S. operating income decreased $6.0 million or 14.9%, primarily due to a less favorable mix of revenue, additional depreciation and amortization expense from the acquisition of ON Services and cost increases, offset in part by lower performance-based incentives and income of $2.8 million from a favorable contract settlement. Organic operating income* decreased $1.8 million or 4.2%. GES International GES International revenue increased $34.2 million or 13.8%, primarily due to new business wins, same-show growth, and positive show rotation of approximately $3 million, offset in part by an unfavorable FX Impact of $7.3 million. Organic revenue* increased $40.5 million or 16.3%. GES International operating income increased $5.8 million or 59.6%, primarily due to higher revenue. Organic operating income* increased $6.8 million or 70.6%. * Refer to footnote (3) in the above table for more information about the non-GAAP financial measures of organic revenue and organic segment operating results. 27 2018 Outlook Although GES has a diversified revenue base and long-term contracts for future shows, its revenue is affected by general economic and industry-specific conditions. The prospects for individual shows tend to be driven by the success of the industry related to those shows. In general, the exhibition and event industry is experiencing modest growth. For 2018, we expect GES’ revenue will be up slightly from 2017. Show rotation is expected to have a net negative impact on GES’ revenue of approximately $40 million compared to 2017. We expect GES U.S. base same-show revenue to increase at a mid-single digit rate. We anticipate a favorable FX Impact of approximately $18 million on GES’ 2018 full year revenue and approximately $0.5 million on GES’ segment operating income. The expected FX Impact assumes that the U.S. dollar to the British pound exchange rate will be $1.39 and the U.S. dollar to the Canadian dollar exchange rate will be $0.81 during 2018. For more information about segment operating income, see the “Non-GAAP Measures” section of this MD&A. We are executing a strategic growth plan to position GES as the preferred global, full-service provider for Live Events, with further reach to corporate events, consumer events, conferences, and exhibitions. To support this strategy, since 2014, we have acquired two leading audio-visual production businesses and four leading event technology businesses that complement, enhance, and expand our current business and offer higher-margin growth opportunities. We continue to pursue additional opportunities to acquire businesses with proven products and services to create the most comprehensive suite of services for the Live Events industry. During 2018, we intend to make selective investments in additional resources to capitalize on continued growth opportunities in under-penetrated categories of Live Events, such as corporate events and consumer events, and in cross-selling new services. Additionally, we remain focused on improving GES’ profitability through continued efforts to effectively manage labor costs by driving productivity gains through rigorous and strategic pre-show planning and on-site labor management that reduces the ratio of labor costs to revenue. Improving this metric is our top priority as we continue to develop and enhance tools to support and systematize show site labor planning, measurement, and benchmarking. 2016 compared with 2015 The following table provides a comparison of GES’ reported revenue and segment operating results to organic revenue(2) and organic segment operating results(2) for the years ended December 31, 2016 and 2015. (cid:3) (cid:3) Year Ended December 31, 2016 Year Ended December 31, 2015 Change (cid:3)As Reported Acquisitions(1)(cid:3)(cid:3)(cid:3) FX Impact Organic(2) As Reported Acquisitions Organic(2)(cid:3)(cid:3)(cid:3) As Reported Organic(2) (cid:3) (in thousands) Revenue: GES: U.S. ................. $ 826,408 $ International ... 248,503 Intersegment eliminations .... (20,172 ) Total GES ............ $ 1,054,739 $ Segment operating income (loss)(3):(cid:3) GES: U.S. ................. $ International ... Total GES ............ $ 40,524 $ 9,699 50,223 $ ** Change is greater than +/- 100%. 21,306 $ — $ 805,102 $720,882 $ 271,151 272,634 — (22,648) — $720,882 14.6% (8.9)% — 272,634 11.7% (0.5)% — (20,172) (16,638) 21,306 $ (22,648) $1,056,081 $976,878 $ — — (16,638 ) (21.2)% 8.0% — $976,878 (21.2)% 8.1% (804 ) $ — $ (673) (673) $ — (804 ) $ 41,328 $ 14,563 $ 10,372 12,211 51,700 $ 26,774 $ — $ 14,563 — 12,211 (20.6)% — $ 26,774 87.6% ** ** (15.1)% 93.1% (1) (2) (3) Acquisition for GES U.S. includes ON Services (acquired August 2016). Organic revenue and organic segment operating results are non-GAAP financial measures that adjust for the impacts of exchange rate variances and acquisitions, if any, until such acquisitions are included in the entirety of both comparable periods presented. For more information about organic revenue and organic segment operating results, see the “Non- GAAP Measures” section of this MD&A. Refer to Note 22 – Segment Information of the Notes to Consolidated Financial Statements (Part II, Item 8 of this 2017 Form 10-K) for a reconciliation of the non-GAAP financial measure, segment operating income (loss) to the most directly comparable GAAP measure. 28 GES U.S. GES U.S. revenue increased $105.5 million or 14.6%, primarily due to positive show rotation of approximately $59 million, base same-show revenue growth of 4.1%, the incremental revenue from the acquisition of ON Services of $21.3 million, new business wins, and increased sales to corporate clients. Base same-show revenue represented 39.1% of GES U.S. 2016 organic revenue*. Organic revenue* increased $84.2 million or 11.7%. GES U.S. operating income increased $26.0 million, primarily due to higher revenue and the strong operating leverage that exists within the GES business. ON Services generated a segment operating loss of $0.8 million during our partial year of ownership, which included depreciation and amortization expense of $4.0 million. Organic operating income* increased $26.8 million. GES International GES International revenue decreased $24.1 million or 8.9%, primarily due to an unfavorable FX Impact of $22.6 million and negative show rotation of approximately $7 million, offset in part by new business wins. Organic revenue* decreased $1.5 million or 0.5%. GES International operating income decreased $2.5 million or 20.6%, primarily reflecting lower revenue and investments in personnel and assets to support continued growth of the business. Organic operating income* decreased $1.8 million or 15.1%. * Refer to footnote (2) in the above table for more information about the non-GAAP financial measures of organic revenue and organic segment operating results. Pursuit 2017 compared with 2016 The following table provides a comparison of Pursuit’s reported revenue and segment operating results to organic revenue(2) and organic segment operating results(2) for the years ended December 31, 2017 and 2016. Year Ended December 31, 2017 As FX Reported Acquisitions(1)(cid:3) Impact Organic(2) Year Ended December 31, 2016 As Reported Acquisitions(1) Organic(2)(cid:3)(cid:3)(cid:3) Change As Reported Organic(2) (cid:3) (in thousands) Revenue: Pursuit: Hospitality .............. $ 57,852 $ Attractions .............. 98,525 Transportation ........ 13,873 Travel Planning ...... 4,664 Intra-Segment Eliminations & Other ....................... (1,046 ) Total Pursuit ................ $ 173,868 $ Segment operating income(3):(cid:3) Total Pursuit ................ $ 47,082 $ 13,279 $ 232 $ 44,341 $ 59,757 $ 23,517 1,266 73,742 65,945 211 13,662 11,833 3,374 17,631 26 — 1,264 12,834 $ 46,923 (3.2)% 13,698 52,247 49.4% — 11,833 17.2% 1,540 16,091 (73.5)% (5.5)% 41.1% 15.5% (79.0)% — (1,802) 38,060 $1,676 $134,132 $153,364 $ (987) (59) — (1,802 ) 42.0% 28,072 $125,292 13.4% 45.2% 7.1% 5,819 $ 710 $ 40,553 $ 35,705 $ 6,000 $ 29,705 31.9% 36.5% (1) Acquisitions include CATC (acquired March 2016), FlyOver Canada (acquired December 2016), and FlyOver Iceland (acquired November 2017). (2) Organic revenue and organic segment operating results are non-GAAP financial measures that adjust for the impacts of exchange rate variances and acquisitions, if any, until such acquisitions are included in the entirety of both comparable periods presented. For more information about organic revenue and organic segment operating results, see the “Non- GAAP Measures” section of this MD&A. (3) Refer to Note 22 – Segment Information of the Notes to Consolidated Financial Statements (Part II, Item 8 of this 2017 Form 10-K) for a reconciliation of the non-GAAP financial measure, segment operating income, to the most directly comparable GAAP measure. 29 Pursuit revenue increased $20.5 million or 13.4%, due to strong growth in organic attractions revenue primarily driven by the fully renovated Banff Gondola (which was closed for renovations from October 2015 through April 2016), incremental revenue of $10.0 million primarily from the FlyOver Canada acquisition and, to a lesser degree, the CATC acquisition, and a favorable FX Impact of $1.7 million, offset in part by a reduction in travel planning revenue as Pursuit completed the previously announced downsizing of the Banff Jasper Collection’s package tours line of business and a revenue decline of $5.4 million due to the fire-related closure of the Mount Royal Hotel. Organic revenue* increased $8.8 million or 7.1%. Pursuit operating income increased $11.4 million or 31.9%, primarily due to the increase in revenue from high-margin attractions. Operating income included a $2.5 million business interruption gain for the recovery of lost profits from the Mount Royal Hotel in 2017. Organic operating income* increased $10.8 million or 36.5%. 2018 Outlook For 2018, we expect Pursuit’s revenue to increase at a high-single to low-double digit rate. We expect a favorable impact to Pursuit’s revenue of approximately $5 million from the planned re-opening of the Mount Royal Hotel in mid-year 2018. As of December 31, 2017, we had a deferred business interruption recovery of $1 million relating to 2018 lost profits from the Mount Royal Hotel that will be recognized in Pursuit’s segment operating results during the first half of 2018. We expect to incur start-up costs of approximately $1 million related to the development of our FlyOver Iceland attraction, which is expected to open in 2019. We anticipate a favorable FX Impact of approximately $5 million on Pursuit’s 2018 revenue and approximately $1 million on segment operating income. In addition to these factors, we expect organic growth across the rest of Pursuit’s lines of business. 2016 compared with 2015 The following table provides a comparison of Pursuit’s reported revenue and segment operating results to organic revenue(2) and organic segment operating results(2) for the years ended December 31, 2016 and 2015. (cid:3) (in thousands) Revenue: Pursuit: (cid:3) (cid:3) Year Ended December 31, 2016 Year Ended December 31, 2015 Change As FX Reported Acquisitions(1) Impact Organic(2) As Reported Acquisitions Organic(2)(cid:3)(cid:3)(cid:3) As Reported Organic(2) (cid:3) Hospitality ................ $ 59,757 $ Attractions ................ 65,945 Transportation .......... 11,833 Travel Planning ........ 17,631 Intra-Segment Eliminations & Other ......................... (1,802 ) Total Pursuit .................. $ 153,364 $ Segment operating income(3):(cid:3) Total Pursuit .................. $ 35,705 $ 12,834 $ (328) $ 47,251 $ 41,605 $ (496) 46,398 42,405 20,043 (275) 12,108 13,999 — (233) 16,324 15,863 1,540 — $ 41,605 43.6% — 42,405 55.5% — 13,999 (15.5)% — 15,863 11.1% 13.6% 9.4% (13.5)% 2.9% — (1,702) 34,417 $(1,307) $120,254 $112,170 $ (1,827) 25 (1,702 ) — (5.9)% — $112,170 36.7% (7.3)% 7.2% 7,917 $ 91 $ 27,697 $ 27,810 $ — $ 27,810 28.4% (0.4)% (1) (2) Acquisitions include Maligne Lake Tours (acquired January 2016), CATC (acquired March 2016), and FlyOver Canada (acquired December 2016). Organic revenue and organic segment operating results are non-GAAP financial measures that adjust for the impacts of exchange rate variances and acquisitions, if any, until such acquisitions are included in the entirety of both comparable periods presented. For more information about organic revenue and organic segment operating results, see the “Non- GAAP Measures” section of this MD&A. (3) Refer to Note 22 – Segment Information of the Notes to Consolidated Financial Statements (Part II, Item 8 of this 2017 Form 10-K) for a reconciliation of the non-GAAP financial measure, segment operating income, to the most directly comparable GAAP measure. Pursuit revenue increased $41.2 million or 36.7%, primarily due to incremental revenue of $34.4 million from the 2016 acquisitions of CATC and Maligne Lake Tours, increases across all hospitality assets and attractions, offset in part by the strategic downsizing of the transportation line of business and an unfavorable FX Impact of $1.3 million. Organic revenue* increased $8.1 million or 7.2%. 30 Pursuit operating income increased $7.9 million or 28.4%, primarily due to higher revenue, offset in part by higher accruals for performance-based incentives, acquisition transaction-related costs, and investments to support continued growth of the business. Organic operating income* decreased $0.1 million or 0.4%. * Refer to footnote (2) in the above table for more information about the non-GAAP financial measures of organic revenue and organic segment operating results. Performance Measures We use the following key business metrics, common in the hospitality industry, to evaluate Pursuit’s hospitality business: (cid:120) (cid:120) (cid:120) Revenue per Available Room. RevPAR is calculated as total rooms revenue divided by the total number of room nights available for all comparable Pursuit hospitality properties during the period. Total rooms revenue does not include non-rooms revenue, which consists of ancillary revenue generated by hospitality properties, such as food and beverage and retail revenue. RevPAR measures the period-over-period change in rooms revenue for comparable hospitality properties. RevPAR is affected by average daily rate and occupancy, which have different implications on profitability. Average Daily Rate. ADR is calculated as total rooms revenue divided by the total number of room nights sold for all comparable Pursuit hospitality properties during the period. ADR is used to assess the pricing levels that the hospitality properties are able to generate. Increases in ADR at hospitality properties lead to increases in rooms revenue with no substantial effect on variable costs, therefore having a greater impact on margins than increases in occupancy. Occupancy. Occupancy is calculated as the total number of room nights sold divided by the total number of room nights available for all comparable Pursuit hospitality properties during the period. Occupancy measures the utilization of the available capacity at the hospitality properties. Increases in occupancy result in increases in rooms revenue and additional variable operating costs (including housekeeping services, utilities, and room amenity costs), as well as increased ancillary non-rooms revenue (including food and beverage and retail revenue). We evaluate the performance of Pursuit’s attractions business utilizing the number of passengers and total attractions revenue per passenger. The number of passengers allows us to assess the volume of visitor activity at each attraction during the period. Total attractions revenue per passenger is calculated as total attractions revenue divided by the total number of passengers at all Pursuit attractions during the period. Total attractions revenue includes ticket sales and ancillary revenue generated by attractions, such as food and beverage and retail revenue. Total attractions revenue per passenger measures the total spend per visitor that attraction properties are able to capture, which is important to the profitability of the attractions business. 31 2017 compared with 2016 The following table provides Pursuit’s same-store key performance indicators for the years ended December 31, 2017 and 2016. The same-store metrics indicate the performance of all of 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 in Canada, comparisons to the prior year are on a constant U.S. dollar basis, using the current year quarterly average exchange rates for previous periods, to eliminate the FX Impact. We believe this same-store constant currency basis provides better comparability between reporting periods. 2017 Year Ended December 31, 2016 % Change Same-Store Key Performance Indicators (1) Hospitality: Room nights available ......................................................................... RevPAR ............................................................................................... $ ADR..................................................................................................... $ Occupancy ........................................................................................... 181,242 126 180 70.2% Attractions: Passengers............................................................................................ Revenue per passenger ........................................................................ $ 1,793,779 42 179,420 118 171 69.2% 1,594,508 33 $ $ $ 1.0% 6.8% 5.3% 1.0% 12.5% 27.3% (1) Same-Store Key Performance Indicators exclude the CATC hospitality properties and attraction (acquired in March 2016) and the FlyOver Canada attraction (acquired in December 2016), as we did not own them for the entirety of 2016. Additionally, the Same-Store Key Performance Indicators exclude the Mount Royal Hotel hospitality property due to its fire-related closure (effective December 2016). The Banff Gondola attraction was closed for renovations from October 2015 through April 2016. Accordingly, 2016 includes only eight months of operation whereas 2017 includes the full year of operations. Hospitality. Room nights available increased during 2017 primarily due to changes in the opening dates of certain seasonal properties. RevPAR, ADR, and Occupancy increased during 2017 primarily due to our focus on revenue management and refreshing key assets to enhance the guest experience, as well as strong park visitation during 2017. Attractions. The increase in the number of passengers during 2017 was primarily due to increased visitation at our Banff Gondola, which was closed for renovations during the first four months of 2016. Excluding the Banff Gondola, total same- store attraction passengers increased 53,225 in 2017 primarily driven by our efforts to enhance the guest experience and strong park visitation in Canada. Revenue per passenger increased during 2017 primarily due to higher effective ticket prices driven by our focus on revenue management and refreshing key assets to enhance the guest experience, and higher ancillary revenue primarily resulting from our recent renovations of the food and beverage and retail operations at the Banff Gondola and the food and beverage operations at the Columbia Icefield Glacier Discovery Center. During 2017, Pursuit derived approximately 64% of its revenue and 86% of its segment operating income from its Canadian operations, which are largely dependent on foreign customer visitation. Accordingly, the strengthening or weakening of the Canadian dollar, relative to other currencies, could affect customer volumes and the results of operations. Additionally, Pursuit is affected by consumer discretionary spending on tourism activities. 32 2016 compared with 2015 The following table provides Pursuit’s same-store key performance indicators for the years ended December 31, 2016 and 2015. The same-store metrics indicate the performance of all of 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 in Canada, comparisons to the prior year are on a constant U.S. dollar basis, using the current year quarterly average exchange rates for previous periods, to eliminate the FX Impact. We believe this same-store constant currency basis provides better comparability between reporting periods. 2016 Year Ended December 31, 2015 % Change Same-Store Key Performance Indicators (1) Hospitality: Room nights available......................................................................... RevPAR............................................................................................... $ ADR .................................................................................................... $ Occupancy........................................................................................... 228,290 108 153 71.1% Attractions: Passengers ........................................................................................... Revenue per passenger ........................................................................ $ 1,478,172 31 228,739 97 143 67.4% 1,340,175 31 $ $ $ (0.2)% 11.3% 7.0% 3.7% 10.3% 0.0% (1) Same-Store Key Performance Indicators exclude the Maligne Lake Tours attraction (acquired in January 2016), the CATC hospitality properties and attraction (acquired in March 2016), and the FlyOver Canada attraction (acquired in December 2016), as we did not own them for the entirety of 2016. Same-store passengers and revenue per passenger were affected by the closure of the Banff Gondola from October 2015 through April 2016. Hospitality. Room nights available decreased during 2016 primarily due to changes in the opening dates of certain seasonal Glacier Park, Inc. properties as a result of management’s review of a variety of factors, including weather conditions, opening dates of other properties in the area, and availability of seasonal employees. RevPAR increased during the year ended December 31, 2016 due to increases in both ADR and occupancy across all geographies resulting from our focus on revenue management and strong park visitation in 2016 due in part to favorable weather conditions in contrast to forest fires during the third quarter of 2015. Attractions. The increase in the number of passengers for the year ended December 31, 2016 was primarily due to revenue management initiatives combined with strong park visitation. During the year ended December 31, 2016, the number of passengers increased across all attractions. Growth in passengers was especially strong at the Glacier Skywalk attraction as a result of management’s decision to introduce a combination ticket that included both the Glacier Skywalk and the adjacent Columbia Icefield Glacier Adventure. Additionally, despite the Banff Gondola being partially closed for renovations during most of 2016, it showed strong demand with a 3.8% increase in the number of passengers during 2016 as compared to 2015. Excluding the Banff Gondola passengers, total attraction passengers would have increased 15.1% in 2016. Revenue per passenger remained flat during 2016 primarily due to lower revenue from ancillary food and beverage and retail services at the Banff Gondola due to its partial closure and the greater proportion of total passengers coming from the lower- priced Glacier Skywalk. 33 Corporate Activities (in thousands) Corporate activities ............. $ 2017 2016 2015 Percentage Change 2017 vs. 2016 Percentage Change 2016 vs. 2015 12,877 $ 10,322 $ 9,720 24.8% 6.2% Year Ended December 31, The increase in corporate activities during 2017, as compared to 2016, was primarily due to an increase in performance-based compensation expense driven by our common stock price appreciation relative to December 31, 2016. The increase in corporate activities during 2016, as compared to 2015, was primarily due to an increase in performance-based compensation expense, offset in part by costs related to a shareholder nomination and settlement agreement during 2015 and lower acquisition transaction-related costs in 2016. Interest Expense (in thousands) Interest expense................... $ 2017 2016 2015 Percentage Change 2017 vs. 2016 Percentage Change 2016 vs. 2015 8,304 $ 5,898 $ 4,535 40.8% 30.1% Year Ended December 31, The increase in interest expense during 2017, as compared to 2016, and during 2016, as compared to 2015, was primarily due to higher debt balances resulting from acquisitions completed during 2016 and 2017. Restructuring Charges (in thousands) Restructuring charges.......... $ 2017 2016 2015 Percentage Change 2017 vs. 2016 Percentage Change 2016 vs. 2015 1,004 $ 5,183 $ 2,956 (80.6)% 75.3% Year Ended December 31, Restructuring charges during 2017, 2016 and 2015 were primarily related to the elimination of certain positions and facility consolidations in GES, as well as the elimination of certain positions at our corporate office and at Pursuit. Impairment Charges (Recoveries) (in thousands) Impairment charges (recoveries), net ................... $ ** Change is greater than +/- 100%. Year Ended December 31, 2017 2016 2015 Percentage Change 2017 vs. 2016 Percentage Change 2016 vs. 2015 (29,098) $ 218 $ 96 ** ** On December 29, 2016, the Mount Royal Hotel was damaged by a fire and closed. During July 2017, we resolved our property and business interruption insurance claims related to the fire for a total of $36.3 million. We allocated $2.2 million to an insurance receivable, $29.3 million was recorded as an impairment recovery (partially offset by impairment charges of $0.2 million) related to construction costs to re-open the hotel, $2.5 million was recorded as a business interruption gain for the recovery of lost profits, $1.3 million was recorded as contra-expense to offset non-capitalizable costs we incurred, and the remaining $1.0 million was recorded as deferred income that will be recognized over the periods the business interruption losses are actually incurred. Income Taxes Excluding the impact of a $16.1 million net charge related to the Tax Act, income taxes went from an effective tax rate of 33% for the year ended December 31, 2016 to an effective rate of 28% for the year ended December 31, 2017. The decrease was primarily due to higher foreign income taxed at lower rates, the release of a valuation allowance related to foreign net operating losses, and the adoption of new accounting guidance, effective in the first quarter of 2017, which requires the excess tax benefit on share-based compensation to be recorded to income tax expense rather than equity. The 2016 effective tax rate of 33% increased from 28% in 2015 primarily due to a non-cash tax benefit of $1.6 million recorded in 2015 related to deferred taxes associated with certain foreign intangible assets. 34 Liquidity and Capital Resources Cash and cash equivalents were $53.7 million as of December 31, 2017, as compared to $20.9 million as of December 31, 2016. During the year ended December 31, 2017, we generated net cash flow from operating activities of $112.2 million. We believe that our existing sources of liquidity will be sufficient to fund operations and capital commitments for at least the next 12 months. As of December 31, 2017, approximately $52.0 million of our cash and cash equivalents was held outside of the United States, consisting of $22.6 million in Canada, $8.3 million in the Netherlands, $7.0 million in the United Kingdom, and $4.5 million in certain other countries. In addition, there is $9.6 million in Iceland related to our investment in Esja, which will be used to develop the FlyOver Iceland attraction. With the enactment of the Tax Act on December 22, 2017, we recognized the taxes on the deemed repatriation of all earnings outside of the U.S. as of December 31, 2017. All earnings have been deemed permanently reinvested by management. As of December 31, 2017, the incremental tax associated with these earnings, if the cash balances were repatriated to the United States, would be zero. Cash Flows Operating Activities (in thousands) Net income................................................................................................. $ Depreciation and amortization .................................................................. Deferred income taxes............................................................................... Loss from discontinued operations............................................................ Impairment charges (recoveries) ............................................................... Other non-cash items................................................................................. Changes in assets and liabilities ................................................................ Net cash provided by operating activities ........................................ $ 2017 Year Ended December 31, 2016 2015 58,184 55,114 26,049 268 (29,098) 18,422 (16,716) 112,223 $ $ 42,795 42,743 7,672 684 218 19,239 (13,033) 100,318 $ $ 27,048 35,231 469 394 96 11,090 (14,051) 60,277 2017 compared with 2016 Net cash provided by operating activities increased $11.9 million primarily from results of operations. 2016 compared with 2015 Net cash provided by operating activities increased $40.0 million, primarily from results of operations. 35 Investing Activities (in thousands) Capital expenditures .................................................................................. $ Proceeds from insurance............................................................................ Cash paid for acquired businesses, net ...................................................... Proceeds from dispositions of property and other assets........................... Net cash used in investing activities.................................................. $ 2017 Year Ended December 31, 2016 2015 (56,621) $ 31,570 (1,501) 947 (25,605) $ (49,815) $ — (195,989) 1,166 (244,638) $ (29,839) — (430) 1,542 (28,727) 2017 compared with 2016 Net cash used in investing activities decreased $219.0 million, primarily due to cash payments, net of cash acquired, in 2016 of $196.0 million for the ON Services, FlyOver Canada, CATC, and Maligne Lake Tours acquisitions, and the Mount Royal Hotel fire-related insurance proceeds received in 2017, offset in part by an increase in capital expenditures. 2016 compared with 2015 Net cash used in investing activities increased $215.9 million, primarily due to cash payments, net of cash acquired, of $196.0 million for the 2016 acquisitions of ON Services, FlyOver Canada, CATC, and Maligne Lake Tours, and an increase in capital expenditures, primarily due to the Banff Gondola renovations. Financing Activities (in thousands) Proceeds from borrowings......................................................................... $ Payments on debt and capital lease obligations ........................................ Dividends paid on common stock ............................................................. Debt issuance costs.................................................................................... Common stock purchased for treasury ...................................................... Acquisition of business - deferred consideration ...................................... Other .......................................................................................................... Net cash provided by (used in) financing activities......................... $ 2017 Year Ended December 31, 2016 2015 $ 90,004 (135,801) (8,160) (5) (2,119) — — (56,081) $ 229,701 (108,915) (8,111) (336) (722) (130) 95 111,582 $ $ 50,000 (62,969) (8,036) — (4,816) (896) 1,459 (25,258) 2017 compared with 2016 The change in net cash provided by (used in) financing activities was primarily due to net debt payments of $45.8 million during 2017 compared to net debt proceeds of $120.8 million during 2016 related to the ON Services, CATC, and FlyOver Canada acquisitions completed in 2016 and an increase in cash used for common stock repurchases of $1.4 million. 2016 compared with 2015 The change in net cash provided by (used in) financing activities was primarily due to net debt proceeds of $120.8 million during 2016 related to the ON Services, CATC, and FlyOver Canada acquisitions and a decrease in cash used for common stock repurchases of $4.1 million. Debt and Capital Lease Obligations Refer to Note 11 – Debt and Capital Lease Obligations of the Notes to Consolidated Financial Statements (Part II, Item 8 of this 2017 Form 10-K) for further discussion. Guarantees Refer to Note 11 – Debt and Capital Lease Obligations of the Notes to Consolidated Financial Statements (Part II, Item 8 of this 2017 Form 10-K) for further discussion. 36 Share Repurchases Our Board of Directors has authorized us to repurchase shares of our common stock from time to time at prevailing market prices. No shares were repurchased on the open market during 2017 or 2016. During 2015, we repurchased 141,462 shares on the open market for $3.8 million. As of December 31, 2017, 440,540 shares remained available for repurchase. The Board of Director’s authorization does not have an expiration date. We repurchased 41,532 shares for $2.1 million in 2017, 25,432 shares for $0.7 million during 2016, and 35,649 shares for $1.0 million in 2015 related to tax withholding requirements on vested share-based awards. Contractual Obligations The following table presents our contractual obligations as of December 31, 2017. (in thousands) Revolver and term loan borrowings................................. $ 207,322 156,569 Operating leases ............................................................... Pension and postretirement benefits (1)............................. 33,666 Purchase obligations (2) .................................................... 38,128 2,854 Capital lease obligations .................................................. Total contractual obligations (3)............................... $ 438,539 Total 2018 $ 151,072 23,503 3,945 23,660 1,527 $ 203,707 Payments due by period 2021-2022 2019-2020 $ 56,250 37,564 6,763 8,813 1,311 $ 110,701 $ $ — $ 14,367 6,721 5,655 16 26,759 Thereafter — 81,135 16,237 — — 97,372 $ (1) (2) (3) Estimated contributions related to multi-employer benefit plans are excluded from the table above. Refer to Note 17 – Pension and Postretirement Benefits of the Notes to Consolidated Financial Statements (Part II, Item 8 of this 2017 Form 10-K) for further information. Purchase obligations primarily represent payments due under various licensing agreements and commitments related to consulting and other contracted services that are enforceable and legally binding and that specify all significant terms, including open purchase orders. Aggregate self-insurance liabilities are excluded from the table above as the timing and amounts of future cash outflows are uncertain. Redeemable noncontrolling interest is also excluded from the above table as the redemption value of the put option and the timing and amounts of future cash outflows is uncertain. Refer to Note 9 – Other Current Liabilities, Note 10 – Other Deferred Items and Liabilities, and Note 21 – Redeemable Noncontrolling Interest of the Notes to Consolidated Financial Statements (Part II, Item 8 of this 2017 Form 10-K) for further information. We are plaintiffs or defendants to various actions, proceedings, and pending claims, some of which involve, or may involve, compensatory, punitive, or other damages. Additionally, our business contributes to various multi-employer pension plans based on obligations arising under collective-bargaining agreements covering our union-represented employees. Refer to Note 20 – Litigation, Claims, Contingencies, and Other of the Notes to Consolidated Financial Statements (Part II, Item 8 of this 2017 Form 10-K) for further information. 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 consolidated financial statements and related notes. Refer to Note 11 – Debt and Capital Lease Obligations, Note 19 – Leases and Other, and Note 20 – Litigation, Claims, Contingencies, and Other of the Notes to Consolidated Financial Statements (Part II, Item 8 of this 2017 Form 10-K) for further information. Critical Accounting Policies and Estimates The consolidated financial statements are prepared in accordance with U.S. GAAP. We are required to make estimates and assumptions that affect our reported amounts of assets, liabilities, revenue, and expenses. Critical accounting policies are those policies that are most important to the portrayal of our financial position and results of operations, and that require us to make the most difficult and subjective judgments, often as a result of the need to make estimates of matters that are inherently uncertain. We identified and discussed with our audit committee the following critical accounting policies and estimates and the methodology and disclosures related to those estimates: 37 Goodwill and Other Intangible Assets — Goodwill and other intangible assets with indefinite useful lives are not amortized, but instead are tested for impairment at least annually. Intangible assets with finite lives are amortized over their respective estimated useful lives and are reviewed for impairment if an event occurs or circumstances change that would indicate the intangible asset’s carrying value may not be recoverable. Goodwill is tested for impairment at the reporting unit level on an annual basis as of October 31, and between annual tests if an event occurs or circumstances change that would more-likely-than-not reduce the fair value of a reporting unit below its carrying value. Our reporting units are defined, and goodwill is tested, at either an operating segment level or at the component level of an operating segment, depending on various factors including the internal reporting structure of the operating segment, the level of integration among components, the sharing of assets and other resources among components, and the benefits and likely recoverability of goodwill by the component’s operations. is assigned to, and tested at, GES U.S. goodwill level (all GES domestic operations). GES International goodwill is assigned to and tested based on the segment’s geographical operations (GES Europe, Middle East, and Asia (“GES EMEA”) and GES Canada). Pursuit impairment testing is performed at the reporting unit level (Banff Jasper Collection, the Alaska Collection, the Glacier Park Collection, and FlyOver). the operating segment For purposes of goodwill impairment testing, we use a discounted expected future cash flow methodology (income approach) to estimate the fair value of our reporting units. The estimates and assumptions regarding expected future cash flows, discount rates, and terminal values require considerable judgment and are based on market conditions, financial forecasts, industry trends, and historical experience. The most critical assumptions and estimates in determining the estimated fair value of our reporting units relate to the amounts and timing of expected future cash flows for each reporting unit and the reporting unit cost of capital (discount rate) applied to those cash flows. We estimate the assumed reporting unit cost of capital rates (discount rates) using a build-up method based on the perceived risk associated with the cash flows pertaining to the specific reporting unit. In order to assess the reasonableness of our fair value estimates, we perform a reconciliation of the aggregate fair values of our reporting units to our market capitalization. As noted above, the estimates and assumptions regarding expected future cash flows, discount rates, and terminal values require considerable judgment and are based on market conditions, financial forecasts, industry trends, and historical experience. These estimates have inherent uncertainties, and different assumptions could lead to materially different results. As of December 31, 2017, our aggregate goodwill was $270.6 million. As a result of our most recent impairment analysis performed as of October 31, 2017, the excess of the estimated fair value over the carrying value for each of our reporting units (expressed as a percentage of the carrying amounts) under step one of the impairment test for GES U.S. was 134%, GES EMEA was 214%, GES Canada was 164%, Banff Jasper Collection was 147%, the Alaska Collection was 99%, the Glacier Park Collection was 16%, and FlyOver was 29%. Significant reductions in our expected future revenue, operating income, or cash flow forecasts and projections, or an increase in a reporting unit’s cost of capital, could trigger additional goodwill impairment testing, which may result in impairment charges. If an impairment indicator related to intangible assets is identified, or if other circumstances indicate an impairment may exist, we perform an assessment to determine if an impairment loss should be recognized. This assessment includes a recoverability test to identify if the expected future undiscounted cash flows are less than the carrying value of the related assets. If the results of the recoverability test indicate that expected future undiscounted cash flows are less than the carrying value of the related assets, we perform a measurement of impairment and we recognize any carrying amount in excess of fair value as an impairment. We periodically evaluate the continued recoverability of intangible assets which were previously evaluated due to an impairment indicator to determine if remeasurement is necessary. Income taxes — We are required to estimate and record provisions for income taxes in each of the jurisdictions in which we operate. Accordingly, we must estimate our actual current income tax liability, and assess temporary differences arising from the treatment of items for tax purposes, as compared to the treatment for accounting purposes. These differences result in deferred tax assets and liabilities which are included in the Consolidated Balance Sheets. We use significant judgment in forming conclusions regarding the recoverability of our deferred tax assets and evaluate all available positive and negative evidence to determine if it is more-likely-than-not that the deferred tax assets will be realized. To the extent recovery does not appear likely, a valuation allowance must be recorded. We had gross deferred tax assets of $38.1 million as of December 31, 2017 and $58.3 million as of December 31, 2016, which includes the remeasurement due to the reduction in the U.S. tax rate from 35% to 21% resulting in an $8.0 million reduction in the 2017 gross deferred tax assets. These deferred tax assets reflect the expected future tax benefits to be realized upon reversal of deductible temporary differences, and the utilization of net operating loss and tax credit carryforwards. 38 While we believe that the deferred tax assets, net of existing valuation allowances, will be utilized in future periods, there are inherent uncertainties regarding the ultimate realization of these assets. It is possible that the relative weight of positive and negative evidence regarding the realization of deferred tax assets may change, which could result in a material increase or decrease in our valuation allowance. Such a change could result in a material increase or decrease to income tax expense in the period the assessment was made. Due to the enactment of the Tax Act and the transition to a territorial tax system, we recognized $6.9 million of current federal tax expense and $1.2 million of current state tax expense for the mandatory deemed repatriation of our estimated unremitted earnings as of December 31, 2017. With the transition to a territorial tax system, future dividends will be fully deductible for federal tax purposes, however they may be taxable at the state level. We have not recorded deferred taxes on the incremental additional state taxes or withholding taxes on dividends from our foreign subsidiaries as we intend to reinvest those earnings in our foreign operations. We record uncertain tax positions on the basis of a two-step process: first we determine whether it is more-likely-than-not that the tax positions will be sustained on the basis of the technical merits of the position; and if so, we recognize the largest amount of tax benefit that is more than 50% likely to be realized upon ultimate settlement with the related tax authority. Pension and postretirement benefits — Our pension plans use traditional defined benefit formulas based on years of service and final average compensation. Funding policies provide that payments to defined benefit pension trusts shall be at least equal to the minimum funding required by applicable regulations. We presently anticipate contributing $1.1 million to our funded pension plans and $1.0 million to our unfunded pension plans in 2018. We have defined benefit postretirement plans that provide medical and life insurance for certain eligible employees, retirees, and dependents. The related postretirement benefit liabilities are recognized over the employees’ service period. In addition, we retain the obligations for these benefits for retirees of certain sold businesses. While the plans have no funding requirements, we expect to contribute $1.1 million to the plans in 2018. The discount rates used in determining future pension and postretirement benefit obligations are based on rates determined by actuarial analysis and management review, and reflect the estimated rates of return on a high-quality, hypothetical bond portfolio whose cash flows match the timing and amounts of expected benefit payments. Refer to Note 17 – Pension and Postretirement Benefits of the Notes to Consolidated Financial Statements (Part II, Item 8 of this 2017 Form 10-K) for further information. Share-based compensation — We grant share-based compensation awards to our officers, directors, and certain key employees pursuant to the 2017 Viad Corp Omnibus Incentive Plan, which has a 10-year life and provides for the following types of awards: (a) incentive and non-qualified stock options; (b) restricted stock and restricted stock units; (c) performance units or performance shares; (d) stock appreciation rights; (e) cash-based awards; and (f) certain other stock-based awards. Share-based compensation expense recognized in the consolidated financial statements was $11.0 million in 2017, $8.0 million in 2016, and $3.8 million in 2015, and the total tax benefits related to such costs were $4.1 million in 2017, $3.0 million in 2016, and $1.5 million in 2016. No share-based compensation costs were capitalized during 2017, 2016, or 2015. The fair value of restricted stock awards is based on our stock price on the date of grant. Liability-based awards are recorded at estimated fair value, based on the number of units expected to vest and the level of achievement of predefined performance goals, where applicable, and are remeasured on each balance sheet date based on our stock price, and the Monte Carlo simulation model, until the time of settlement. The Monte Carlo simulation requires the use of a number of assumptions, including historical volatility and correlation of the price of our stock and the price of the common shares of a comparator group, a risk-free rate of return, and an expected term. Equity-based awards (including performance units) are recorded at estimated fair value, based on the number of units expected to vest and the level of achievement of predefined performance goals, until the time of settlement. We use the Black-Scholes option pricing model and key assumptions to determine the fair value of each stock option grant. These assumptions include our expected stock price volatility, the expected period of time the stock option will remain outstanding of which stock options have a ten-year life, the expected dividend yield on our common stock, and the risk-free interest rate. While we have not granted stock options since 2010, changes in the assumptions of any future grants could result in different estimates of the fair value of stock option grants, and consequently impact our future results of operations. Refer to Note 2 – Share-Based Compensation of the Notes to Consolidated Financial Statements (Part II, Item 8 of this 2017 Form 10-K) for further information. Impact of Recent Accounting Pronouncements Refer to Note 1 – Overview and Summary of Significant Accounting Policies of the Notes to Consolidated Financial Statements (Part II, Item 8 of this 2017 Form 10-K) for further information. 39 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 non-GAAP financial measures of Adjusted EBITDA, Segment operating income, organic revenue, and organic segment operating income (collectively, the “Non-GAAP Measures”). The presentation of the Non-GAAP Measures is supplemental to, but not as a substitute for, other measures of financial performance reported in accordance with GAAP. As not all companies use identical calculations, the Non-GAAP Measures may not be comparable to similarly titled measures used by other companies. We believe the presentation of the Non-GAAP Measures provides useful information to investors regarding our results of operations for trending, analyzing, and benchmarking the performance and value of our business. • • • “Adjusted EBITDA” is net income attributable to Viad before our portion of interest expense, income taxes, depreciation and amortization, impairment charges and recoveries, changes in accounting principles, and the effects of discontinued operations. Adjusted EBITDA is used to measure the profit and performance of our operations and to facilitate period-to-period comparisons. Refer to the table below for a reconciliation of Adjusted EBITDA to the most directly comparable GAAP measure. “Segment operating income” is net income attributable to Viad before income (loss) from discontinued operations, corporate activities, interest expense and interest income, income taxes, restructuring charges, impairment losses and recoveries, and the reduction for income attributable to noncontrolling interest. Segment operating income is used to measure the profit and performance of our operating segments to facilitate period-to- period comparisons. “Organic revenue” and “organic segment operating income” are revenue and segment operating income (as defined above), respectively, without the impact of exchange rate variances and acquisitions, if any, until such acquisitions are included in the entirety of both comparable periods. The impact of exchange rate variances is calculated as the difference between current period activity translated at the current period’s exchange rates and the comparable prior period’s exchange rates. We believe that 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 to the most directly comparable GAAP measures. The Non-GAAP Measures are considered useful operating metrics as potential variations arising from taxes, depreciation and amortization, debt service costs, impairment charges and recoveries, changes in accounting principles, and the effects of discontinued operations are eliminated, thus resulting in additional measures considered to be indicative of our ongoing operations and segment performance. Although the Non-GAAP Measures are used as financial measures to assess the performance of the business, the use of these measures is limited because these measures do not consider material costs, expenses, and other items necessary to operate our business. These items include debt service costs, non-cash depreciation and amortization expense associated with long-lived assets, expenses related to U.S. federal, state, local and foreign income taxes, impairment charges or recoveries, and the effects of accounting changes and discontinued operations. Since the Non- GAAP Measures do not consider the above items, a user of our financial information should consider net income attributable to Viad as an important measure of financial performance because it provides a more complete measure of our performance. A reconciliation of net income attributable to Viad to Adjusted EBITDA is as follows: (in thousands) Net income attributable to Viad ................................................................ $ Depreciation and amortization .................................................................. Interest expense ......................................................................................... Income tax expense ................................................................................... Impairment charges (recoveries) ............................................................... Loss from discontinued operations............................................................ Other noncontrolling interest..................................................................... Adjusted EBITDA.............................................................................. $ 2017 Year Ended December 31, 2016 2015 57,707 55,114 8,304 45,898 (29,098) 268 (643) 137,550 $ $ 42,269 42,743 5,898 21,250 218 684 (634) 112,428 $ $ 26,606 35,231 4,535 10,493 96 394 (554) 76,801 The increase in Adjusted EBITDA during 2017 was primarily due to higher segment operating income at Pursuit and a decrease in restructuring charges. The increase in Adjusted EBITDA in 2016 was primarily due to higher segment operating income at GES and Pursuit. Refer to the “Results of Operations” section of this MD&A for a discussion of fluctuations. 40 Forward-Looking Non-GAAP Financial Measure We also provide segment operating income as a forward-looking Non-GAAP Measure within the “Results of Operations” section of this MD&A. We do not provide a reconciliation of this forward-looking Non-GAAP Measure to the most directly comparable GAAP financial measure because, due to variability and difficulty in making accurate forecasts and projections and/or certain information not being ascertainable or accessible, not all of the information necessary for a quantitative reconciliation of this forward-looking Non-GAAP Measure to the most directly comparable GAAP financial measure is available without unreasonable efforts. Consequently, any attempt to disclose such reconciliation would imply a degree of precision that investors could find confusing or misleading. It is probable that this forward-looking Non-GAAP Measure may be materially different from the corresponding GAAP Measure. Item 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK Our market risk exposure relates to fluctuations in foreign exchange rates, interest rates, and certain commodity prices. Foreign exchange risk is the risk that fluctuating exchange rates will adversely affect our financial condition or results of operations. Interest rate risk is the risk that changing interest rates will adversely affect our earnings or financial position. Commodity risk is the risk that changing prices will adversely affect our results of operations. Our foreign operations are primarily in Canada, the United Kingdom, the Netherlands, Germany, and to a lesser extent, in certain other countries. 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 income (loss) in the 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 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 $12.0 million as of December 31, 2017 and $29.1 million as of December 31, 2016. We recorded unrealized foreign currency translation gains in other comprehensive income of $17.1 million during of the year ended December 31, 2017 and foreign currency translation losses of $5.8 million during the year ended December 31, 2016. 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 results 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 results. Refer to “Management’s Discussion and Analysis of Financial Condition and Results of Operations” (Part II, Item 7 of this 2017 Form 10-K) for a discussion on the “Foreign Exchange Rate Variances”. A hypothetical change of 10% in the Canadian dollar exchange rate would result in a change to 2017 operating income of approximately $4.6 million. A hypothetical change of 10% in the British pound exchange rate would result in a change to 2017 operating income of approximately $0.4 million. A hypothetical change of 10% in the Euro exchange rate would result in a change to 2017 operating income of approximately $0.5 million. 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 December 31, 2017 and 2016, we did not have any foreign currency forward contracts outstanding. 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. 41 Item 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA INDEX TO FINANCIAL STATEMENTS Consolidated Balance Sheets ...................................................................................................................................... Consolidated Statements of Operations ....................................................................................................................... Consolidated Statements of Comprehensive Income (Loss) ....................................................................................... Consolidated Statements of Stockholders’ Equity....................................................................................................... Consolidated Statements of Cash Flows ...................................................................................................................... Notes to Consolidated Financial Statements................................................................................................................ Report of Independent Registered Public Accounting Firm ........................................................................................ Schedule II – Valuation and Qualifying Accounts ...................................................................................................... Page 43 44 45 46 47 48 84 95 42 VIAD CORP CONSOLIDATED BALANCE SHEETS (in thousands, except share data) Current assets Assets Cash and cash equivalents.............................................................................................. $ Accounts receivable, net of allowances for doubtful accounts of $2,023 and $1,342, respectively ................................................................................................................. Inventories...................................................................................................................... Other current assets........................................................................................................ Total current assets............................................................................................................ Property and equipment, net ................................................................................................ Other investments and assets ............................................................................................... Deferred income taxes ......................................................................................................... Goodwill .............................................................................................................................. Other intangible assets, net .................................................................................................. Total Assets......................................................................................................................... $ Current liabilities Liabilities and Stockholders’ Equity Accounts payable ........................................................................................................... $ Customer deposits .......................................................................................................... Accrued compensation................................................................................................... Other current liabilities .................................................................................................. Current portion of debt and capital lease obligations .................................................... Total current liabilities...................................................................................................... Long-term debt and capital lease obligations ...................................................................... Pension and postretirement benefits .................................................................................... Other deferred items and liabilities...................................................................................... Total liabilities.................................................................................................................... Commitments and contingencies Redeemable noncontrolling interest .................................................................................... Stockholders’ equity Viad Corp stockholders’ equity: Common stock, $1.50 par value, 200,000,000 shares authorized, 24,934,981 shares issued and outstanding ................................................................................................ Additional capital........................................................................................................... Retained earnings........................................................................................................... Unearned employee benefits and other.......................................................................... Accumulated other comprehensive loss......................................................................... Common stock in treasury, at cost, 4,518,099 and 4,613,520 shares, respectively....... Total Viad stockholders’ equity........................................................................................ Non-redeemable noncontrolling interest ......................................................................... Total stockholders’ equity................................................................................................. Total Liabilities and Stockholders’ Equity...................................................................... $ Refer to Notes to Consolidated Financial Statements. December 31, 2017 2016 53,723 $ 20,900 104,811 30,372 21,030 209,936 305,571 47,512 23,548 270,551 62,781 919,899 77,380 33,415 30,614 38,720 152,599 332,728 56,593 28,135 52,858 470,314 6,648 37,402 574,458 65,836 218 (22,568) (226,215) 429,131 13,806 442,937 919,899 $ $ $ 104,648 31,420 18,449 175,417 279,858 44,297 42,549 254,022 73,673 869,816 67,596 42,723 29,913 30,390 174,968 345,590 74,243 28,611 50,734 499,178 — 37,402 573,841 16,291 172 (39,391) (230,960) 357,355 13,283 370,638 869,816 43 2017 Year Ended December 31, 2016 2015 $ 967,352 165,745 173,868 1,306,965 $ 881,137 170,469 153,364 1,204,970 799,752 177,126 112,170 1,089,048 954,667 165,118 — 10,322 (1,165) 5,898 5,183 218 1,140,241 64,729 21,250 43,479 (684) 42,795 (526) — 42,269 2.12 (0.03) 2.09 20,177 2.12 (0.03) 2.09 19,990 0.40 42,953 (684) 42,269 $ $ $ $ $ $ $ $ 868,369 166,095 — 9,720 (658) 4,535 2,956 96 1,051,113 37,935 10,493 27,442 (394) 27,048 (442) — 26,606 1.34 (0.02) 1.32 19,981 1.34 (0.02) 1.32 19,797 0.40 27,000 (394) 26,606 $ $ $ $ $ $ $ $ VIAD CORP CONSOLIDATED STATEMENTS OF OPERATIONS (in thousands, except per share data) Revenue: Exhibition and event services .............................................................. $ Exhibits and environments................................................................... Pursuit services .................................................................................... Total revenue ........................................................................................... Costs and expenses: Costs of services................................................................................... Costs of products sold .......................................................................... Business interruption gain.................................................................... Corporate activities .............................................................................. Interest income..................................................................................... Interest expense.................................................................................... Restructuring charges........................................................................... Impairment charges (recoveries), net................................................... Total costs and expenses ......................................................................... Income from continuing operations before income taxes .................... Income tax expense ................................................................................... Income from continuing operations....................................................... Loss from discontinued operations............................................................ Net income................................................................................................ Net income attributable to non-redeemable noncontrolling interest ......... Net loss attributable to redeemable noncontrolling interest ...................... Net income attributable to Viad............................................................. $ Diluted income (loss) per common share: Continuing operations attributable to Viad common stockholders ........... $ Discontinued operations attributable to Viad common stockholders........ Net income attributable to Viad common stockholders....................... $ Weighted-average outstanding and potentially dilutive common 1,050,547 161,992 (2,692) 12,877 (319) 8,304 1,004 (29,098) 1,202,615 104,350 45,898 58,452 (268) 58,184 (523) 46 57,707 2.84 (0.01) 2.83 shares ...................................................................................................... 20,405 Basic income (loss) per common share: Continuing operations attributable to Viad common stockholders ........... $ Discontinued operations attributable to Viad common stockholders........ Net income attributable to Viad common stockholders....................... $ Weighted-average outstanding common shares ........................................ Dividends declared per common share...................................................... $ Amounts attributable to Viad common stockholders Income from continuing operations........................................................... $ Loss from discontinued operations............................................................ Net income................................................................................................ $ 2.84 (0.01) 2.83 20,146 0.40 57,975 (268) 57,707 Refer to Notes to Consolidated Financial Statements. 44 CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS) VIAD CORP (in thousands) Net income................................................................................................ $ Other comprehensive income (loss): Unrealized gains (losses) on investments, net of tax effects of $121, $47, and $(78) ...................................................................................... Unrealized foreign currency translation adjustments, net of tax ......... Change in net actuarial gain (loss), net of tax effects of $163, $617, and $653............................................................................................... Change in prior service cost, net of tax effects of $(473), $(219), and $(210) ................................................................................................... Comprehensive income (loss) ................................................................. Comprehensive income attributable to non-redeemable noncontrolling interest ............................................................................ Comprehensive loss attributable to redeemable noncontrolling interest ...................................................................................................... Comprehensive income (loss) attributable to Viad .............................. $ 2017 Year Ended December 31, 2016 2015 58,184 $ 42,795 $ 27,048 195 17,058 344 (774) 75,007 75 (5,827) 894 (357) 37,580 (523) (526) 46 74,530 $ — 37,054 $ (125) (35,673) 2,556 (345) (6,539) (442) — (6,981) Refer to Notes to Consolidated Financial Statements. 45 VIAD CORP CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY Common Stock Additional Capital Retained Earnings (Deficit) — — — — — — 26,606 (8,036) (in thousands) Balance, December 31, 2014............ $ 37,402 $ 582,066 $ (36,427) $ Net income ......................................... Dividends on common stock ($0.40 per share)............................................ Common stock purchased for treasury............................................... Employee benefit plans...................... Share-based compensation—equity awards ................................................ Tax expense from share-based compensation ..................................... Unrealized foreign currency translation adjustment ........................ Unrealized loss on investments.......... Amortization of net actuarial gain ..... Amortization of prior service cost ..... Other, net............................................ Balance, December 31, 2015............ — — — — (102) 576,523 — — — — (9) (17,866) — — — — — 37,402 — (7,957) 2,156 — — 360 — — — — — — — — — — 42,269 (8,111) — (5,251) Net income ......................................... Dividends on common stock ($0.40 per share)............................................ Common stock purchased for treasury............................................... Employee benefit plans...................... Share-based compensation—equity awards ................................................ Tax expense from share-based compensation ..................................... Unrealized foreign currency translation adjustment ........................ Unrealized gain on investments ......... Amortization of net actuarial gain ..... Amortization of prior service cost ..... Other, net............................................ Balance, December 31, 2016............ $ 37,402 $ 573,841 $ 16,291 $ — — — — (51) — — — — (1) — — — — — 2,525 — — — — 95 — — — — — — — — 57,707 (8,160) Net income ......................................... Dividends on common stock ($0.40 per share)............................................ Common stock purchased for treasury............................................... Employee benefit plans...................... Share-based compensation—equity awards ................................................ Unrealized foreign currency translation adjustment ........................ Unrealized gain on investments ......... Amortization of net actuarial loss ...... Amortization of prior service cost ..... Other, net............................................ Balance, December 31, 2017............ $ 37,402 $ 574,458 $ 65,836 $ — — — — (319) — — — — (2) — (2,687) — — — — — 3,623 — — — — Unearned Employee Benefits and Other Accumulated Other Comprehensive Income (Loss) Common Stock in Treasury Total Viad Equity Non- Redeemable Non- Controlling Interest Total Stockholders’ Equity 23 $ — — — — — — — — — — 86 109 — — — — — — — — — — 63 172 $ — — — — — — — — — 46 218 $ (589) $(247,088) $335,387 $ — — — — — — — 26,606 — (8,036) (4,816) 12,493 (4,816) 4,536 — — 2,156 360 (35,673) (125) 2,556 (345) — (34,176) — (35,673) (125) — 2,556 — (345) — (25) — (239,411) 322,581 — — — — — — (5,827) 75 894 (357) — — 42,269 — (8,111) (722) 9,172 (722) 3,921 — — 2,525 95 — (5,827) 75 — 894 — (357) — 12 1 (39,391) $(230,960) $357,355 $ — — — — — 17,058 195 344 (774) — — 57,707 — (8,160) (2,119) 6,864 (2,119) 4,177 — 3,623 — 17,058 195 — 344 — (774) — (275) — (22,568) $(226,215) $429,131 $ 12,315 $ 442 347,702 27,048 — — — — — — — — — — 12,757 526 — — — — — — — — — — 13,283 $ 523 — — — — — — — — — 13,806 $ (8,036) (4,816) 4,536 2,156 360 (35,673) (125) 2,556 (345) (25) 335,338 42,795 (8,111) (722) 3,921 2,525 95 (5,827) 75 894 (357) 12 370,638 58,230 (8,160) (2,119) 4,177 3,623 17,058 195 344 (774) (275) 442,937 Refer to Notes to Consolidated Financial Statements. 46 VIAD CORP CONSOLIDATED STATEMENTS OF CASH FLOWS (in thousands) Cash flows from operating activities Net income ..................................................................................................................... $ Adjustments to reconcile net income to net cash provided by operating activities: Depreciation and amortization................................................................................. Deferred income taxes ............................................................................................. Loss from discontinued operations .......................................................................... Restructuring charges............................................................................................... Impairment charges (recoveries).............................................................................. (Gains) losses on dispositions of property and other assets..................................... Share-based compensation expense......................................................................... Excess tax benefit from share-based compensation arrangements .......................... Other non-cash items, net ........................................................................................ Change in operating assets and liabilities (excluding the impact of acquisitions): Receivables........................................................................................................ Inventories ......................................................................................................... Accounts payable............................................................................................... Restructuring liabilities ..................................................................................... Accrued compensation ...................................................................................... Customer deposits ............................................................................................. Income taxes payable ........................................................................................ Other assets and liabilities, net .......................................................................... Net cash provided by operating activities .................................................................. Cash flows from investing activities Capital expenditures................................................................................................. Proceeds from insurance .......................................................................................... Cash paid for acquired businesses, net .................................................................... Proceeds from dispositions of property and other assets ......................................... Net cash used in investing activities............................................................................ Cash flows from financing activities Proceeds from borrowings ....................................................................................... Payments on debt and capital lease obligations....................................................... Dividends paid on common stock............................................................................ Debt issuance costs .................................................................................................. Common stock purchased for treasury .................................................................... Excess tax benefit from share-based compensation arrangements .......................... Acquisition of business - deferred consideration..................................................... Proceeds from exercise of stock options.................................................................. Net cash provided by (used in) financing activities ................................................... Effect of exchange rate changes on cash and cash equivalents...................................... Net change in cash and cash equivalents.................................................................... Cash and cash equivalents, beginning of year ........................................................... Cash and cash equivalents, end of period .................................................................. $ 2017 Year Ended December 31, 2016 2015 58,184 $ 42,795 $ 27,048 55,114 26,049 268 1,004 (29,098) 1,420 10,969 — 5,029 (2,338) 2,505 7,546 (1,954) (5,152) (10,572) 5,820 (12,571) 112,223 (56,621) 31,570 (1,501) 947 (25,605) 90,004 (135,801) (8,160) (5) (2,119) — — — (56,081) 2,286 32,823 20,900 53,723 $ 42,743 7,672 684 5,183 218 (54) 8,038 (95) 6,167 (9,358) (2,646) 1,770 (3,866) (353) 8,429 (4,630) (2,379) 100,318 (49,815) — (195,989) 1,166 (244,638) 229,701 (108,915) (8,111) (336) (722) 95 (130) — 111,582 (2,893) (35,631) 56,531 20,900 $ 35,231 469 394 2,956 96 (690) 3,848 (418) 5,394 (16,665) 4,872 (2,619) (2,572) 1,469 408 67 989 60,277 (29,839) — (430) 1,542 (28,727) 50,000 (62,969) (8,036) — (4,816) 418 (896) 1,041 (25,258) (6,751) (459) 56,990 56,531 Refer to Notes to Consolidated Financial Statements. 47 VIAD CORP NOTES TO CONSOLIDATED FINANCIAL STATEMENTS Note 1. Overview and Summary of Significant Accounting Policies Basis of Presentation and Principles of Consolidation The accompanying consolidated financial statements of Viad have been prepared in accordance with accounting principles generally accepted in the United States of America (“GAAP”) and include the accounts of Viad and its subsidiaries. All significant intercompany account balances and transactions have been eliminated in consolidation. Nature of Business We are an international experiential services company with operations principally in the United States, Canada, the United Kingdom, continental Europe, the United Arab Emirates, and Hong Kong. We are committed to providing unforgettable experiences to our clients and guests. We operate through three reportable business segments: GES U.S., GES International, (collectively, “GES”), and Pursuit. GES GES is a global, full-service provider for live events that produces exhibitions, conferences, corporate events, and consumer events. GES offers a comprehensive range of live event services and a full suite of audio-visual services from creative and technology to content and design, along with online tools powered by next generation technologies that help clients easily manage the complexities of their events. GES’ clients include event organizers and corporate brand marketers. Event organizers schedule and run the event from start to finish. Corporate brand marketers include exhibitors and domestic and international corporations that want to promote their brands, services and innovations, feature new products, and build business relationships. GES serves corporate brand marketers when they exhibit at shows and when GES is engaged to manage their global exhibit program or produce their proprietary corporate events. Pursuit Pursuit is a collection of iconic natural and cultural destination travel experiences that enjoy perennial demand. Pursuit is comprised of four lines of business: Hospitality, Attractions, Transportation, and Travel Planning. These four lines of business work together, driving economies of scope and meaningful scale in and around the iconic destinations of Banff, Jasper, and Waterton Lakes National Parks and Vancouver in Canada, and Glacier, Denali, and Kenai Fjords National Parks in the United States. Pursuit is comprised of Brewster Travel Canada, which is marketed as the Banff Jasper Collection; the Alaska Collection; Glacier Park, Inc., which is marketed as the Glacier Park Collection, and FlyOver. Significant Accounting Policies Use of Estimates The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities at the date of the financial statements and the reported amounts of revenue and expenses during the reported period. Estimates and assumptions are used in accounting for, among other things, the fair value of our reporting units used to perform annual impairment testing of recorded goodwill; allowances for uncollectible accounts receivable; provisions for income taxes, including uncertain tax positions; valuation allowances related to deferred tax assets; liabilities for losses related to self-insured liability claims; liabilities for losses related to environmental remediation obligations; sublease income associated with restructuring liabilities; assumptions used to measure pension and postretirement benefit costs and obligations; assumptions used to determine share-based compensation costs under the fair value method; assumptions in the redemption value of redeemable noncontrolling interests; and allocation of purchase price of acquired businesses. Actual results could differ from these and other estimates. 48 Cash and Cash Equivalents Cash equivalents are highly-liquid investments with remaining maturities when purchased of three months or less. Cash and cash equivalents consist of cash and bank demand deposits and money market mutual funds. Investments in money market mutual funds are classified as available-for-sale and carried at fair value. Allowances for Doubtful Accounts Allowances for doubtful accounts reflect the best estimate of probable losses inherent in the accounts receivable balance. The allowances for doubtful accounts, including a sales allowance for discounts at the time of sale, are based upon an evaluation of the aging of receivables, historical trends, and the current economic environment. Inventories Inventories, which consist primarily of exhibit design and construction materials and supplies, as well as deferred show costs, including labor, show purchases, and commissions used in providing convention show services, are stated at the lower of cost (first-in, first-out and specific identification methods) or net realizable value. Property and Equipment Property and equipment are stated at cost, net of accumulated depreciation. Property and equipment are depreciated using the straight-line method over the estimated useful lives of the assets: buildings, 15 to 40 years; equipment, 3 to 12 years; and leasehold improvements, over the shorter of the lease term or useful life. Property and equipment are tested for potential impairment whenever events or changes in circumstances indicate that the carrying amount of the long-lived asset may not be recoverable through undiscounted cash flows. Capitalized Software Certain internal and external costs incurred in developing or obtaining internal use software are capitalized. Capitalized costs principally relate to costs incurred to purchase software from third parties, external direct costs of materials and services, and certain payroll-related costs for employees directly associated with software projects once application development begins. Costs associated with preliminary project activities, training, and other post-implementation activities are expensed as incurred. Capitalized software costs are amortized using the straight-line method over the estimated useful lives of the software, ranging from three to ten years. These costs are included in the Consolidated Balance Sheets under the caption “Property and equipment, net.” Goodwill Goodwill is tested for impairment at the reporting unit level on an annual basis as of October 31, and between annual tests if an event occurs or circumstances change that would more-likely-than-not reduce the fair value of a reporting unit below its carrying value. We use a discounted expected future cash flow methodology (income approach) in order to estimate the fair value of our reporting units for purposes of goodwill impairment testing. The estimates and assumptions regarding expected future cash flows, discount rates, and terminal values require considerable judgment and are based on market conditions, financial forecasts, industry trends, and historical experience. These estimates, however, have inherent uncertainties and different assumptions could lead to materially different results. Cash Surrender Value of Life Insurance We have Company-owned life insurance contracts which are intended to fund the cost of certain employee compensation and benefit programs. These contracts are carried at cash surrender value, net of outstanding policy loans. The cash surrender value represents the amount of cash we could receive if the policies were discontinued before maturity. The changes in the cash surrender value of the policies, net of insurance premiums, are included as a component of “Costs of Services” in the Consolidated Statements of Operations. Self-Insurance Liabilities We are self-insured up to certain limits for workers’ compensation, automobile, product and general liability, property loss, and medical claims. We retained certain liabilities related to workers’ compensation and general liability insurance claims in conjunction with previously sold operations. Provisions for losses for claims incurred, including estimated claims incurred but not yet reported, are made based on historical experience, claims frequency, insurance coverage, and other factors. We purchased insurance for amounts in excess of the self-insured levels. 49 Environmental Remediation Liabilities Environmental remediation liabilities represent the estimated cost of environmental remediation obligations primarily associated with previously sold operations. The amounts accrued primarily consist of the estimated direct incremental costs, on an undiscounted basis, for contractor and other services related to remedial actions and post-remediation site monitoring. Environmental remediation liabilities are recorded when the specific obligation is considered probable and the costs are reasonably estimable. Subsequent recoveries from third parties, if any, are recorded through discontinued operations when realized. Environmental insurance is maintained that provides coverage for new and undiscovered pre-existing conditions at both our continuing and discontinued operations. Fair Value of Financial Instruments The carrying value of cash and cash equivalents, receivables, and accounts payable approximate fair value due to the short- term maturities of these instruments. Refer to Note 11 – Debt and Capital Lease Obligations for the estimated fair value of debt obligations. Non-redeemable Noncontrolling Interest and Redeemable Noncontrolling Interest Non-redeemable noncontrolling interest represents the portion of equity in a subsidiary not attributable, directly or indirectly, to us. Our non-redeemable noncontrolling interest relates to the equity ownership that we do not own in Glacier Park, Inc. of 20%. We report non-redeemable noncontrolling interest within stockholders’ equity in the Consolidated Balance Sheets. The amount of consolidated net income attributable to Viad and the non-redeemable noncontrolling interest is presented in the Consolidated Statements of Operations. Noncontrolling interests with redemption features that are not solely within our control are considered redeemable noncontrolling interests. The Esja purchase agreement contains a put option that gives the minority Esja shareholders the right to sell (or “put”) their Esja shares to us based on a calculated formula within a predefined term. This redeemable noncontrolling interest is considered temporary equity and we report it between liabilities and stockholders’ equity in the Consolidated Balance Sheets. The amount of the net income or loss attributable to redeemable noncontrolling interests is recorded to retained earnings and is included in our earnings per share. Refer to Note 21 – Redeemable Noncontrolling Interest for additional information. Foreign Currency Translation Our foreign operations are primarily in Canada, the United Kingdom, the Netherlands, Germany, and to a lesser extent, in certain other countries. 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 income (loss) in the Consolidated Balance Sheets. 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. Revenue Recognition Revenue is recognized when persuasive evidence of an arrangement exists, delivery has occurred or services have been rendered, the sales price is fixed or determinable, and collectability is reasonably assured. GES derives revenue primarily by providing core services, event technology services, and audio-visual services to event organizers and exhibitors participating in live events. GES derives revenue from consumer events by charging visitors to view the touring exhibitions. Exhibition and event service’s revenue is recognized when services are completed, net of commissions. Exhibits and environments revenue is accounted for using the completed-contract method. Pursuit generates revenue through its hospitality, attractions, transportation, and travel planning services. Pursuit’s revenue is recognized at the time services are performed. Insurance Recoveries Receipts from insurance up to the amount of the recognized losses are considered recoveries and are accounted for when they are probable of receipt. Anticipated proceeds in excess of the recognized loss are considered a gain contingency. A contingency gain for anticipated insurance proceeds in excess of losses already recognized is not recognized until all contingencies relating to the insurance claim have been resolved. 50 Insurance proceeds allocated to business interruption gains are reported as cash flows from operating activities, and proceeds allocated to impairment recoveries are reported as cash flows from investing activities. Insurance proceeds used for capitalizable costs are classified as cash flows from investing activities, and proceeds used for non-capitalizable costs are classified as operating activities. On December 29, 2016, the Mount Royal Hotel was damaged by a fire and closed. During the fourth quarter of 2016, we recorded an asset impairment loss of $2.2 million and an offsetting impairment recovery (and related insurance receivable) as the losses related to the fire were covered by our property and business interruption insurance. During July 2017, we resolved our property and business interruption insurance claims for a total of $36.3 million. We allocated $2.2 million to an insurance receivable, $29.3 million was recorded as an impairment recovery (partially offset by impairment charges of $0.2 million) related to construction costs to re-open the hotel, $2.5 million was recorded as a business interruption gain for the recovery of lost profits, $1.3 million was recorded as contra-expense to offset non-capitalizable costs incurred, and the remaining $1.0 million was recorded as deferred revenue, which will be recognized over the periods when the business interruption losses are actually incurred. Share-Based Compensation Share-based compensation costs, related to all share-based payment awards, are recognized and measured using the fair value method of accounting. These awards generally include restricted stock, liability-based awards (including performance units and restricted stock units), and stock options, and contain forfeiture and non-compete provisions. The fair value of restricted stock awards is based on our closing stock price on the date of grant. We issue restricted stock awards from shares held in treasury. Future vesting of restricted stock is generally subject to continued employment. Holders of restricted stock have the right to receive dividends and vote the shares, but may not sell, assign, transfer, pledge, or otherwise encumber the stock, except to the extent restrictions have lapsed and in accordance with our stock trading policy. Restricted stock awards vest between three and five years from the date of grant. Share-based compensation expense related to restricted stock is recognized using the straight-line method over the requisite service period of approximately three years. For awards with a five-year vesting period, expense is recognized based on an accelerated multiple-award approach over a five-year period. For these awards, 40% of the shares vest on the third anniversary of the grant and the remaining shares vest in 30% increments over the subsequent two anniversary dates. Liability-based awards (including performance units and restricted stock units) are recorded at estimated fair value, based on the number of units expected to vest and where applicable, the level of achievement of predefined performance goals. These awards are remeasured on each balance sheet date based on our stock price, and the Monte Carlo simulation model, until the time of settlement. A Monte Carlo simulation requires the use of a number of assumptions, including historical volatility and correlation of our stock price and the price of the common shares of a comparator group, a risk-free rate of return, and an expected term. To the extent earned, liability-based awards are settled in cash based on our stock price. Compensation expense related to liability-based awards is recognized ratably over the requisite service period of approximately three years. Equity-based awards (including performance units) are recorded at estimated fair value, based on the number of units expected to vest and the level of achievement of predefined performance goals, until the time of settlement. To the extent earned, equity-based awards are settled in our common stock. Compensation expense related to equity-based awards is recognized ratably over the requisite service period of approximately three years. The fair value of stock option grants is estimated on the date of grant using the Black-Scholes option pricing model. Share- based compensation expense related to stock option awards is recognized using the straight-line method over the requisite service period of approximately five years. The exercise price of stock options is based on the market value of our common stock at the date of grant. We have not granted stock options since 2010. Common Stock in Treasury Common stock purchased for treasury is recorded at historical cost. Subsequent share reissuances are primarily related to share-based compensation programs and recorded at weighted-average cost. Income Per Common Share We apply the two-class method in calculating income per common share as unvested share-based payment awards that contain nonforfeitable rights to dividends are considered participating securities. Accordingly, such securities are included in the earnings allocation in calculating income per share. The adjustment to the carrying value of the redeemable noncontrolling interest is reflected in income per common share. 51 Impact of Recent Accounting Pronouncements The following table provides a brief description of recent accounting pronouncements: Date of adoption January 1, 2018 January 1, 2019 January 1, 2020 Effect on the financial statements We assigned internal resources and engaged a third-party service provider to assist in evaluating the impact on our accounting policies, processes, and system requirements. Based on our assessment, the adoption of this standard will not have a material impact on our consolidated financial statements. The impact primarily relates to the deferral of certain commissions which were previously expensed as incurred but will generally be capitalized and amortized over the period of contract performance, and the deferral of certain costs incurred in connection with trade shows which were previously expensed as incurred but will generally be capitalized and expensed upon the completion of the show. We adopted the standard on January 1, 2018 and will be using the modified retrospective transition method. Additionally, the new guidance requires enhanced disclosures, including revenue recognition policies to identify performance obligations to customers and significant judgments in measurement and recognition. We are currently evaluating the potential impact the adoption of this new guidance will have on our financial position or results of operations including analyzing our existing operating leases. Based on our current assessment, the adoption of this standard will have a material impact on our Consolidated Balance Sheets, however the income statement is not expected to be materially impacted. We expect the most significant impact will relate to facility and equipment leases, which are currently recorded as operating leases. We are continuing our assessment, which may identify other impacts. We will adopt the standard on January 1, 2019. The adoption of this new guidance is not expected to have a significant effect on our consolidated financial statements and we expect the adoption to reduce the complexity surrounding the analysis of goodwill impairment. Standard Description Standards Not Yet Adopted ASU 2014-09, Revenue from Contracts with Customers (Topic 606) The standard establishes a new recognition model that requires revenue to be recognized in a manner to depict the transfer of goods or services to a customer at an amount that reflects the consideration expected to be received in exchange for those goods or services. We may adopt either retrospectively to each prior period presented with the option to elect certain practical expedients or with the cumulative effect recognized at the date of initial application and providing certain disclosures. ASU 2016-02, Leases (Topic 842) ASU 2017-04, Intangibles - Goodwill and Other (Topic 350) - Simplifying the Test for Goodwill Impairment Subsequent to the issuance of ASU 2014-09, the FASB issued several amendments in 2016 which do not change the core principle of the guidance stated in ASU 2014-09. Rather, they are intended to clarify and improve understanding of certain topics included within the revenue standard. The amendment requires lessees to recognize on their balance sheet a right-of-use asset and a lease liability for leases with lease terms greater than one year. The amendment requires additional disclosures about leasing arrangements, and requires a modified retrospective approach to adoption. Early adoption is permitted. The amendment eliminates the requirement to estimate the implied fair value of goodwill if it was determined that the carrying amount of a reporting unit exceeded its fair value. Goodwill impairment will now be recognized by the amount by which a reporting unit’s carrying value exceeds its fair value, not to exceed the carrying amount of goodwill. The amendment should be applied prospectively and is effective for annual or any interim goodwill impairment tests in fiscal years beginning after December 15, 2019. Early adoption is permitted for interim or annual goodwill impairment tests performed on testing dates after January 1, 2017. 52 Date of adoption Effect on the financial statements January 1, 2017 The adoption of this new guidance resulted in a decrease in tax expense of $1.1 million, or a 1.1% decrease in our effective tax rate, as compared to 2016. Standard Description Standards Recently Adopted ASU 2016-09, Compensation - Stock Compensation (Topic 718) - Improvements to Employee Share- Based Payment Accounting The amendment identifies areas for simplification involving several aspects of accounting for share-based payment transactions, including the income tax consequences, classification of awards as either equity or liabilities, an option to recognize gross stock compensation expense with actual forfeitures recognized as they occur, as well as certain classifications on the statement of cash flows. Note 2. Share-Based Compensation The following table summarizes share-based compensation expense: (in thousands) Performance unit incentive plan (“PUP”) ................................................. $ Restricted stock ......................................................................................... Restricted stock units................................................................................. Share-based compensation before income tax benefit ......................... Income tax benefit ..................................................................................... Share-based compensation, net of income tax benefit ......................... $ 2017 Year Ended December 31, 2016 2015 8,088 2,594 287 10,969 (4,079) 6,890 $ $ 5,703 2,073 262 8,038 (2,988) 5,050 $ $ 1,692 2,111 45 3,848 (1,454) 2,394 We recorded share-based compensation expense through restructuring expense of $0.1 million during 2017, $0.2 million in 2016, and $45,000 in 2015. The 2017 and 2016 amounts relate to PUP and restricted stock units. The 2015 amount related to restricted stock units. No share-based compensation costs were capitalized during 2017, 2016, or 2015. The following table summarizes the activity of the outstanding share-based compensation awards: PUP Awards Restricted Stock Restricted Stock Units Shares Weighted- Average Grant Date Fair Value 25.58 $ 15,982 47.45 2,950 $ 24.97 (6,182) $ — — $ 30.94 $ 12,750 Balance at December 31, 2016 ..................... Granted............................................................ Vested.............................................................. Forfeited .......................................................... Balance at December 31, 2017 ..................... Weighted- Average Grant Date Fair Value Shares 26.11 $ 255,505 47.44 73,557 $ 24.07 (76,082) $ 34.99 (13,642) $ 32.80 $ 239,338 Weighted- Average Grant Date Fair Value Shares 25.96 $ 267,051 46.99 $ 67,029 24.04 (112,548) $ 35.31 (14,633) $ 33.16 $ 206,899 53 Viad Corp Omnibus Incentive Plan We grant share-based compensation awards to our officers, directors, and certain key employees pursuant to the 2017 Viad Corp Omnibus Incentive Plan (the “2017 Plan”). The 2017 Plan was approved by our stockholders and was effective May 18, 2017. The 2017 Plan replaced the 2007 Viad Corp Omnibus Stock Plan (the “2007 Plan”). No further awards may be made under the 2007 Plan, although awards previously granted under the 2007 Plan will remain outstanding in accordance with their respective terms. The 2017 Plan has a 10-year life and provides for the following types of awards: (a) incentive and non- qualified stock options; (b) restricted stock and restricted stock units; (c) performance units or performance shares; (d) stock appreciation rights; (e) cash-based awards; and (f) certain other stock-based awards. In June 2017, we registered 1,750,000 shares of common stock issuable under the 2017 Plan. As of December 31, 2017, there were 1,744,546 shares available for future grant under the 2017 Plan. PUP Awards In February 2016, the PUP Plan was amended to provide that PUP awards earned under the 2007 Plan may be payable in the form of cash or in shares of our common stock (or a combination of both). Previously, payouts could only be made in cash. The vesting of shares is based upon achievement of certain performance-based criteria. The performance period of the shares is three years. During the year ended December 31, 2017, we granted $3.5 million PUP awards of which $1.4 million are payable in shares. Liabilities related to PUP awards were $11.0 million as of December 31, 2017 and $7.6 million as of December 31, 2016. In March 2017, PUP awards granted in 2014 vested and we distributed cash payouts of $3.7 million. In March 2016, PUP awards granted in 2013 vested and we distributed cash payouts of $0.2 million. In March 2015, PUP awards granted in 2012 vested and we distributed cash payouts of $2.4 million. Restricted Stock The grant date fair value of vested restricted stock was $2.7 million in 2017, $2.0 million in 2016, and $2.2 million in 2015. As of December 31, 2017, the unamortized cost of outstanding restricted stock awards was $2.5 million, which we expect to recognize over a weighted-average period of approximately 1.2 years. We repurchased 41,532 shares for $2.1 million in 2017 and 25,432 shares for $0.7 million in 2016 related to tax withholding requirements on vested share-based awards. During 2015, we repurchased 141,462 shares on the open market for $3.8 million and 35,649 shares for $1.0 million related to tax withholding requirements on vested share-based awards. Restricted Stock Units Aggregate liabilities related to restricted stock units was $0.5 million as of December 31, 2017 and $0.4 million as of December 31, 2016. In February 2017, portions of the 2012 and 2014 restricted stock units vested and we distributed cash payouts of $0.3 million. In February 2016, portions of the 2011, 2012, and 2013 restricted stock units vested and we distributed cash payouts of $0.2 million. In February 2015, portions of the 2010, 2011, and 2012 restricted stock units vested and we distributed cash payouts of $0.3 million. Stock Options During the year ended December 31, 2017, there was no stock option activity. As of both December 31, 2017 and 2016, there were 63,773 stock options outstanding and exercisable with a weighted-average exercise price of $16.62 and a weighted- average remaining contractual life of 2 years. As of December 31, 2017, there were no unrecognized costs related to non- vested stock option awards. The following table provides additional stock option information: (in thousands) Total intrinsic value of stock options outstanding(1).................................. $ Total intrinsic value of stock options exercised ........................................ $ Cash received from the exercise of stock options ..................................... $ Tax benefits realized for tax deductions related to stock option exercises .................................................................................................... $ 2017 December 31, 2016 2015 2,473 $ — $ — $ 1,753 $ — $ — $ — $ — $ 740 1,474 898 104 (1) The intrinsic value of stock options outstanding represents the difference between our closing stock price on December 31 of each year and the exercise price, multiplied by the number of in-the-money stock options. 54 Note 3. Acquisition of Businesses 2017 Acquisitions Poken In March 2017, we acquired Poken event engagement technology for total cash consideration of $1.7 million. Transaction costs associated with the acquisition of Poken were $0.3 million in 2017, which are included in cost of services in the Consolidated Statements of Operations. These assets have been included in the consolidated financial statements from the date of acquisition. Esja On November 3, 2017, we acquired the controlling interest (54.5% of the common stock) in Esja, a private corporation in Reykjavik, Iceland. Esja is developing and will operate a new FlyOver Iceland attraction, which is expected to open in 2019. The purchase price was €8.2 million (approximately $9.5 million) in cash, which included a put option that gives the minority Esja shareholders the right to sell (or “put”) their Esja shares to us based on a calculated formula within a predefined term. The noncontrolling interest’s carrying value is determined by the fair value of the noncontrolling interest as of the acquisition date, the noncontrolling interests’ share of the subsequent net income or loss, and the accretion of the redemption value of the put option. As of the transaction date, the fair value of the noncontrolling interest was estimated to be $6.7 million. Due to the recent timing of the acquisition, the fair value of the noncontrolling interest is not yet finalized and is subject to change within the measurement period (up to one year from the acquisition date). Refer to Note 21 – Redeemable Noncontrolling Interest for additional information. Under the acquisition method of accounting, the purchase price is allocated to the assets acquired and liabilities assumed based on their estimated fair values. The excess purchase price over fair value of net assets acquired is recorded as goodwill. Goodwill is included in the Pursuit business group and the primary factor that contributed to the purchase price resulting in the recognition of goodwill relates to future income from operations after opening in 2019. Transaction costs associated with the acquisition of Esja were $0.1 million in 2017, which are included in cost of services in the Consolidated Statements of Operations. The results of operations of Esja have been included in the consolidated financial statements from the date of acquisition. During 2017, Esja had an operating loss of $0.1 million. 2016 Acquisitions Maligne Lake Tours On January 4, 2016, we acquired the assets and operations of Maligne Tours Ltd. (“Maligne Lake Tours”), which provides interpretive boat tours and related services at Maligne Lake, the largest lake in Jasper National Park. The purchase price was $20.9 million Canadian dollars (approximately $15.0 million U.S. dollars) in cash. Transaction costs associated with the Maligne Lake Tours acquisition were $0.1 million in 2017 and $0.1 million in 2016, which are included in cost of services in the Consolidated Statements of Operations and $0.2 million in 2015, which are included in corporate activities in the Consolidated Statements of Operations. The results of operations of Maligne Lake Tours have been included in the consolidated financial statements from the date of acquisition. CATC On March 11, 2016, we acquired 100% of the equity interests in CATC Alaska Tourism Corporation (“CATC”), the operator of an Alaskan tourism business that includes a marine sightseeing tour business, three lodges, and a package tour business. The purchase price was $45.0 million in cash. Transaction costs associated with the CATC acquisition were $0.1 million in 2017, $0.1 million in 2016, and $0.6 million in 2015, which are included in corporate activities in the Consolidated Statements of Operations. The results of operations of CATC have been included in the consolidated financial statements from the date of acquisition. 55 ON Services On August 11, 2016, we acquired the assets and operations of ON Event Services, LLC (“ON Services”), a leading provider of audio-visual production services for live events in the United States. The aggregate purchase price was up to $92.5 million in cash, which included an earnout payment (the “Earnout”) of up to $5.5 million. The fair value of the Earnout was valued on the date of acquisition and was remeasured based on the financial performance of ON Services for 2016. As of the transaction date, the fair value of the Earnout was estimated to be $540,000. Transaction costs associated with the ON Services acquisition were $0.1 million in 2017 and $0.9 million in 2016, which are included in corporate activities in the Consolidated Statement of Operations. The results of operations of ON Services have been included in the consolidated financial statements from the date of acquisition. FlyOver Canada On December 29, 2016, we acquired the assets and operations of FlyOver Canada, a recreational attraction that provides a virtual flight ride experience with a combination of motion seating, spectacular media, and visual effects including wind, scents, and mist. The purchase price was $68.8 million Canadian dollars (approximately $50.9 million U.S. dollars) in cash. Transaction costs associated with the FlyOver Canada acquisition were $0.1 million in 2017 and $0.5 million in 2016, which are included in cost of services in the Consolidated Statements of Operations. The results of operations of FlyOver Canada have been included in the consolidated financial statements from the date of acquisition. The following table summarizes the final allocation of the aggregate purchase price paid and amounts of assets acquired and liabilities assumed based upon the estimated fair value at the date of acquisitions. The balances in the table below remain unchanged from the balances reflected in the Consolidated Balance Sheets in our Annual Report on Form 10-K for the year ended December 31, 2016. Maligne Lake Tours CATC ON Services FlyOver Canada (in thousands) Purchase price paid as: Cash ...................................................................................... $ Working capital adjustment.................................................. Contingent consideration...................................................... Cash acquired ....................................................................... Total purchase price, net of cash acquired................. Fair value of net assets acquired: Accounts receivable ............................................................. Inventories ............................................................................ Prepaid expenses .................................................................. Property and equipment........................................................ Intangible assets ................................................................... Total assets acquired..................................................... Accounts payable ................................................................. Accrued liabilities................................................................. Customer deposits ................................................................ Other liabilities ..................................................................... Total liabilities acquired .................................................... Total fair value of net assets acquired......................... 14,962 — — — 14,962 — 246 2 4,133 9,244 13,625 — — 15 240 255 13,370 $ $ 45,000 (35) — (2,196) 42,769 8 921 82 43,470 980 45,461 306 434 1,952 — 2,692 42,769 $ 87,000 344 540 — 87,884 4,643 256 872 14,827 33,990 54,588 992 564 851 274 2,681 51,907 50,920 — — (6) 50,914 — 11 37 10,867 6,028 16,943 — 118 — — 118 16,825 Excess purchase price over fair value of net assets acquired (“goodwill”) .............................................................. $ 1,592 $ — $ 35,977 $ 34,089 Under the acquisition method of accounting, the purchase prices as shown in the table above are allocated to the tangible and identifiable intangible assets acquired and liabilities assumed based on their estimated fair values. The excess purchase price over fair value of net assets acquired is recorded as goodwill. Goodwill is included in the Pursuit business group for Maligne Lake Tours and FlyOver Canada and in the GES business group for ON Services. The primary factor that contributed to the purchase price resulting in the recognition of goodwill relates to future growth opportunities, and the expansion of the FlyOver concept for FlyOver Canada, when combined with our other businesses. All goodwill is deductible for tax purposes 56 pursuant to Canadian tax regulations for Maligne Lake Tours and FlyOver Canada and over a period of 15 years for ON Services. The estimated values of current assets and liabilities were based upon their historical costs on the date of acquisition due to their short-term nature. Following are the details of the purchase price allocated to the intangible assets acquired for the 2016 Acquisitions: (in thousands, except weighted average life) Customer relationships ............................................................... $ Operating licenses....................................................................... Trade name ................................................................................. Non-compete agreements ........................................................... Fair value of intangible assets acquired...................................... $ Maligne Lake Tours CATC 780 — 200 — 980 ON Services 27,620 $ — 3,190 3,180 33,990 $ $ $ FlyOver Canada 1,592 — 3,710 726 6,028 788 8,313 143 — 9,244 $ $ Weighted average life ................................................................. 26.7 years(1) 5.8 years 10.5 years 9.4 years (1) Largely attributable to operating licenses amortized over the remaining Parks Canada lease of 29 years. Supplementary pro forma financial information The following table summarizes our unaudited pro forma results of operations assuming the 2016 Acquisitions had each been completed on January 1, 2015: (in thousands, except per share data) Revenue ........................................................................................................................ $ Depreciation and amortization...................................................................................... $ Income from continuing operations.............................................................................. $ Net income attributable to Viad.................................................................................... $ Diluted income per share .............................................................................................. $ Basic income per share ................................................................................................. $ Year Ended December 31, 2016 1,250,290 52,074 43,727 42,517 2.10 2.10 $ $ $ $ $ $ 2015 1,183,656 52,631 27,881 27,045 1.35 1.35 Note 4. Inventories The components of inventories consisted of the following: (in thousands) Raw materials ............................................................................................................... $ Work in process ............................................................................................................ Inventories ............................................................................................................. $ December 31, 2017 2016 17,550 12,822 30,372 $ $ 16,846 14,574 31,420 Note 5. Other Current Assets Other current assets consisted of the following: (in thousands) Prepaid vendor payments.............................................................................................. $ Income tax receivable ................................................................................................... Prepaid software maintenance ...................................................................................... Prepaid insurance.......................................................................................................... Prepaid taxes................................................................................................................. Prepaid rent................................................................................................................... Prepaid other................................................................................................................. Other ............................................................................................................................. Other current assets .............................................................................................. $ December 31, 2017 2016 5,048 4,237 3,386 2,610 912 730 2,172 1,935 21,030 $ $ 3,633 3,614 2,804 2,479 850 327 731 4,011 18,449 57 Note 6. Property and Equipment Property and equipment consisted of the following: (in thousands) Land and land interests(1) .............................................................................................. $ Buildings and leasehold improvements ........................................................................ Equipment and other(2).................................................................................................. Gross property and equipment ............................................................................ Accumulated depreciation....................................................................................... Property and equipment, net ............................................................................... $ December 31, 2017 2016 32,544 222,118 351,676 606,338 (300,767) 305,571 $ $ 31,670 185,987 326,868 544,525 (264,667) 279,858 (1) (2) Land and land interests include certain leasehold interests in land within Pursuit for which we are considered to have perpetual use rights. The carrying amount of these leasehold interests was $8.4 million as of December 31, 2017 and $7.9 million as of December 31, 2016. These land interests are not subject to amortization. Equipment and other includes capitalized costs incurred in developing or obtaining internal and external use software. The net carrying amount of capitalized software was $10.1 million as of December 31, 2017 and $11.9 million as of December 31, 2016. Depreciation expense was $42.7 million for 2017, $33.6 million for 2016, and $28.1 million for 2015. Non-cash increases to property and equipment related to assets acquired under capital leases were $2.5 million for 2017, $1.2 million for 2016, and $1.0 million for 2015. Non-cash increases to property and equipment purchases in accounts payable and accrued liabilities were $2.3 million for 2017, $0.9 million for 2016, and $2.3 million for 2015. On December 29, 2016, the Mount Royal Hotel in Banff, Canada was damaged by a fire and closed. As a result of the fire, we recorded an impairment loss of $2.2 million against the net book value of the hotel assets. During 2017, we resolved our property and business interruption insurance claims related to the fire for a total of $36.3 million of which $29.3 million was recorded as an impairment recovery (partially offset by impairment charges of $0.2 million) related to construction costs to re-open the hotel. During 2016, we recorded impairment charges of $0.2 million related to the write-down of certain software and buses in Pursuit. During 2015, we recorded impairment charges of $0.1 million related to the write-off of certain software in Pursuit. Impairment charges (recoveries) are included in the Consolidated Statements of Operations. Note 7. Other Investments and Assets Other investments and assets consisted of the following: (in thousands) Cash surrender value of life insurance.......................................................................... $ Self-insured liability receivable.................................................................................... Workers’ compensation insurance security deposits.................................................... Other mutual funds ....................................................................................................... Other ............................................................................................................................. Other investments and assets ............................................................................... $ December 31, 2017 2016 23,947 10,442 3,550 2,637 6,936 47,512 $ $ 23,197 10,463 4,050 2,062 4,525 44,297 58 Note 8. Goodwill and Other Intangible Assets The changes in the carrying amount of goodwill are as follows: (in thousands) Balance at December 31, 2015 ................................................. $ Business acquisitions .................................................................. Foreign currency translation adjustments ................................... Balance at December 31, 2016 ................................................. Business acquisitions .................................................................. Foreign currency translation adjustments ................................... Balance at December 31, 2017 ................................................. $ GES U.S. 112,300 35,977 — 148,277 — — 148,277 GES International 38,635 $ — (4,175) 34,460 1,060 3,320 38,840 $ $ $ Pursuit 34,288 35,681 1,316 71,285 7,094 5,055 83,434 $ $ Total 185,223 71,658 (2,859) 254,022 8,154 8,375 270,551 The following table summarizes goodwill by reporting unit and segment: (in thousands) GES: U.S........................................................................................................................... $ International: GES EMEA ....................................................................................................... GES Canada....................................................................................................... Total GES .................................................................................................................... Pursuit: Banff Jasper Collection ........................................................................................... Alaska Collection .................................................................................................... Glacier Park Collection ........................................................................................... FlyOver ................................................................................................................... Total Pursuit................................................................................................................ Total Goodwill............................................................................................................. $ December 31, 2017 2016 148,277 $ 148,277 31,612 7,228 187,117 35,305 3,184 1,268 43,677 83,434 270,551 $ 27,694 6,766 182,737 32,587 3,184 1,268 34,246 71,285 254,022 Goodwill is tested for impairment at the reporting unit level on an annual basis as of October 31, and between annual tests if an event occurs or circumstances change that would more-likely-than-not reduce the fair value of a reporting unit below its carrying value. GES U.S. goodwill is assigned to, and tested at, the operating segment level. GES International goodwill is assigned to and tested based on the segment’s geographical operations (GES Europe, Middle East, and Asia (“GES EMEA”) and GES Canada). Pursuit’s impairment testing is performed at the reporting unit level (Banff Jasper Collection, the Alaska Collection, Glacier Park Collection, and FlyOver). As a result of our most recent impairment analysis performed as of October 31, 2017, the excess of the estimated fair value over the carrying value for each of our reporting units (expressed as a percentage of the carrying amounts) under step one of the impairment test for GES U.S. was 134%, GES EMEA was 214%, GES Canada was 164%, the Banff Jasper Collection was 147%, the Alaska Collection was 99%, the Glacier Park Collection was 16%, and FlyOver was 29%. 59 Our accumulated goodwill impairment as of both December 31, 2017 and 2016 was $229.7 million. Other intangible assets consisted of the following: (in thousands) Amortized intangible assets: December 31, 2017 December 31, 2016 Gross Carrying Value Accumulated Amortization Net Carrying Value Gross Carrying Value Accumulated Amortization Net Carrying Value Customer contracts and relationships................ $ 68,798 $ (23,696) $ 45,102 $ 67,762 $ (14,345) $ 53,417 8,663 Operating contracts and licenses ....................... 6,884 Tradenames ....................................................... 3,821 Non-compete agreements.................................. 428 Other.................................................................. Total amortized intangible assets ........................ 73,213 Unamortized intangible assets: (1,094) (2,873) (3,007) (650) (31,320) (652) (1,440) (1,369) (458) (18,264) 9,315 8,324 5,190 886 91,477 8,857 5,760 2,356 246 62,321 9,951 8,633 5,363 896 93,641 Business licenses ............................................... 460 Other intangible assets ......................................... $ 94,101 $ (31,320) $ 62,781 $ 91,937 $ (18,264) $ 73,673 460 460 460 — — Intangible asset amortization expense was $12.4 million during 2017, $9.2 million during 2016, and $7.2 million during 2015. The weighted-average amortization period of customer contracts and relationships is approximately 8.5 years, operating contracts and licenses is approximately 26.3 years, tradenames is approximately 7.0 years, non-compete agreements is approximately 2.2 years, and other amortizable intangible assets is approximately 2.2 years. The estimated future amortization expense related to amortized intangible assets held at December 31, 2017 is as follows: (in thousands) Year ending December 31, 2018 ............................................................................................................................................................. 2019 ............................................................................................................................................................. 2020 ............................................................................................................................................................. 2021 ............................................................................................................................................................. 2022 ............................................................................................................................................................. Thereafter..................................................................................................................................................... Total.................................................................................................................................................................. $ $ 11,013 9,945 8,444 7,447 5,895 19,577 62,321 60 Note 9. Other Current Liabilities Other current liabilities consisted of the following: (in thousands) Continuing operations: Accrued income tax payable ................................................................................... $ Self-insured liability accrual ................................................................................... Commissions payable.............................................................................................. Accrued employee benefit costs.............................................................................. Accrued sales and use taxes .................................................................................... Accrued dividends................................................................................................... Current portion of pension and postretirement liabilities........................................ Deferred rent ........................................................................................................... Accrued rebates ....................................................................................................... Accrued professional fees ....................................................................................... Accrued restructuring.............................................................................................. Other taxes .............................................................................................................. Other........................................................................................................................ Total continuing operations ....................................................................................... Discontinued operations: Environmental remediation liabilities ..................................................................... Self-insured liability accrual ................................................................................... Other........................................................................................................................ Total discontinued operations ................................................................................... Total other current liabilities..................................................................................... $ Note 10. Other Deferred Items and Liabilities Other deferred items and liabilities consisted of the following: December 31, 2017 2016 7,518 6,208 3,235 2,915 2,431 2,094 2,109 1,679 1,106 1,020 722 2,750 3,852 37,639 648 337 96 1,081 38,720 $ $ 758 5,941 639 2,624 4,279 2,119 1,963 1,535 1,078 794 1,924 4,210 1,774 29,638 492 162 98 752 30,390 (in thousands) Continuing operations: Self-insured liability................................................................................................ $ Self-insured excess liability .................................................................................... Accrued compensation ............................................................................................ Foreign deferred tax liability................................................................................... Deferred rent ........................................................................................................... Accrued restructuring.............................................................................................. Other........................................................................................................................ Total continuing operations ....................................................................................... Discontinued operations: Self-insured liability................................................................................................ Environmental remediation liabilities ..................................................................... Accrued income taxes ............................................................................................. Other........................................................................................................................ Total discontinued operations ................................................................................... Total other deferred items and liabilities ................................................................. $ December 31, 2017 2016 12,918 10,442 9,740 8,267 3,855 1,827 1,305 48,354 2,557 1,728 — 219 4,504 52,858 $ $ 12,981 10,463 8,514 2,264 5,271 1,858 1,300 42,651 3,748 3,091 1,045 199 8,083 50,734 61 Note 11. Debt and Capital Lease Obligations The components of long-term debt and capital lease obligations consisted of the following: (in thousands, except interest rates) Revolving credit facility and term loan, 3.1% weighted-average interest rate at December 31, 2017 and 2.6% at December 31, 2016, due through 2019 (1) .............. $ Brewster Inc. revolving credit facility, 2.7% weighted-average interest rate at December 31, 2016 (1)................................................................................................. Less unamortized debt issuance costs........................................................................... Total debt..................................................................................................................... Capital lease obligations, 3.8% weighted-average interest rate at December 31, 2017 and 4.9% at December 31, 2016, due through 2021.......................................... Total debt and capital lease obligations.................................................................... Current portion (2) .................................................................................................... Long-term debt and capital lease obligations .......................................................... $ December 31, 2017 2016 207,322 $ 212,750 — (984) 206,338 2,854 209,192 (152,599) 56,593 $ 36,456 (1,464) 247,742 1,469 249,211 (174,968) 74,243 (1) (2) Represents the weighted-average interest rate in effect at the respective periods for the revolving credit facilities and term loan borrowings, including any applicable margin. The interest rates do not include amortization of debt issuance costs or commitment fees. Borrowings under the revolving credit facilities are classified as current because all borrowed amounts are due within one year. Effective December 22, 2014, we entered into a $300 million Amended and Restated Credit Agreement (the “Credit Agreement”). The Credit Agreement provides for a senior credit facility in the aggregate amount of $300 million, which consists of a $175 million revolving credit facility (the “Revolving Credit Facility”) and a $125 million term loan (the “Term Loan”). The Credit Agreement has a maturity date of December 22, 2019. Proceeds from the loans made under the Credit Agreement were used to refinance certain of our outstanding debt and will be used for general corporate purposes in the ordinary course of business. Under the Credit Agreement, either or both of the Revolving Credit Facility and the Term Loan may be increased up to an additional $100 million under certain circumstances. If such circumstances are met, we may obtain the additional borrowings under the Revolving Credit Facility, the Term Loan, or a combination of the two. The Revolving Credit Facility has a $40 million sublimit for letters of credit. Borrowings and letters of credit can be denominated in U.S. dollars, Euros, Canadian dollars, or British pounds. Our lenders under the Credit Agreement have a first perfected security interest in all of our personal property including GES, GES Event Intelligence Services, Inc., CATC, and ON Services, and 65% of the capital stock of our top-tier foreign subsidiaries. Effective February 24, 2016, we executed an amendment (“Amendment No. 1”) to the Credit Agreement. Amendment No. 1 modified the terms of the financial covenants and the negative covenants related to acquisitions, restricted payments, and indebtedness. The overall maximum leverage ratio and minimum fixed charge coverage ratio are 3.50 to 1.00 and 1.75 to 1.00, respectively, and will remain at those levels for the entire remaining term of the Credit Agreement. Acquisitions in substantially the same or related lines of business are permitted under Amendment No. 1, as long as the pro forma leverage ratio is less than or equal to 3.00 to 1.00. We can make dividends, distributions, and repurchases of our common stock up to $20 million per calendar year. Stock dividends, distributions, and repurchases above the $20 million limit are not subject to a liquidity covenant, and are permitted as long as our pro forma leverage ratio is less than or equal to 2.50 to 1.00 and no default or unmatured default, as defined in the Credit Agreement, exists. Unsecured debt is allowed as long as our pro forma leverage ratio is less than or equal to 3.00 to 1.00. Significant other covenants under the Credit Agreement that were not affected by Amendment No. 1 include limitations on investments, sales/leases of assets, consolidations or mergers, and liens on property. As of December 31, 2017, the fixed charge coverage ratio was 3.10 to 1.00, the leverage ratio was 1.45 to 1.00, and we were in compliance with all covenants under the Credit Agreement. 62 Effective December 28, 2016, Brewster Inc., part of Pursuit, entered into a credit agreement (the “Brewster Credit Agreement”) with a $38 million revolving credit facility (the “Brewster Revolver”). The Brewster Credit Agreement was used in connection with the FlyOver Canada acquisition. Effective December 6, 2017, we amended the Brewster Revolver to reduce the amount to $20 million and extend the maturity date to December 28, 2018. Additional loan proceeds will be used for potential future acquisitions in Canada and other general corporate purposes of Brewster Inc. The lender under the Brewster Revolver has a first perfected security interest in all of Brewster Inc.’s personal property and a guaranty from Brewster Inc.’s immediate parent, Brewster Travel Canada Inc. (secured by its present and future personal property), Viad, and all of its current or future subsidiaries that are required to be guarantors under Viad’s Credit Agreement. The fees on the unused portion of the Brewster Revolver are currently 0.2% annually. As of December 31, 2017, our total debt and capital lease obligations were $209.2 million, consisting of outstanding borrowings under the Term Loan of $75.0 million, the Revolving Credit Facility of $132.3 million, and capital lease obligations of $2.9 million, offset in part by unamortized debt issuance costs of $1.0 million. As of December 31, 2017, capacity remaining under the Revolving Credit Facility was $41.4 million, reflecting borrowings of $132.3 million and $1.3 million in outstanding letters of credit. As of December 31, 2017, Brewster Inc. had $20 million of capacity remaining under the Brewster Revolver. Borrowings under the Revolving Credit Facility (of which GES, GES Event Intelligence Services, Inc., CATC, and ON Services are guarantors) are indexed to the prime rate or the London Interbank Offered Rate, plus appropriate spreads tied to our leverage ratio. Commitment fees and letters of credit fees are also tied to our leverage ratio. The fees on the unused portion of the Revolving Credit Facility are currently 0.3% annually. As of December 31, 2017, on behalf of our subsidiaries, we had certain obligations under guarantees to third parties. These guarantees are not subject to liability recognition in the consolidated financial statements and relate to leased facilities entered into by our subsidiary operations. We would generally be required to make payments to the respective third parties under these guarantees in the event that the related subsidiary could not meet its own payment obligations. The maximum potential amount of future payments that we would be required to make under all guarantees existing as of December 31, 2017 would be $19.3 million. These guarantees relate to facilities leased through October 2027. There are no recourse provisions that would enable us to recover from third parties any payments made under the guarantees. Furthermore, there are no collateral or similar arrangements whereby we could recover payments. Aggregate annual maturities of long-term debt and capital lease obligations as of December 31, 2017 are as follows: (in thousands) Year ending December 31, 2018 .............................................................................................................................. $ 2019 .............................................................................................................................. 2020 .............................................................................................................................. 2021 .............................................................................................................................. 2022 .............................................................................................................................. Total........................................................................................................................ $ Less: Amount representing interest ................................................................... Present value of minimum lease payments ......................................................... Revolving Credit Agreement Capital Lease Obligations 151,072 56,250 — — — 207,322 $ $ $ 1,601 899 454 17 — 2,971 (117) 2,854 As of December 31, 2017, the gross amount of assets recorded under capital leases was $4.8 million and accumulated amortization was $2.0 million. As of December 31, 2016, the gross amount of assets recorded under capital leases was $3.3 million and accumulated amortization was $1.7 million. The amortization charges related to assets recorded under capital leases are included in depreciation expense. Refer to Note 6 – Property and Equipment. The weighted-average interest rate on total debt (including amortization of debt issuance costs and commitment fees) was 3.7% for 2017, 3.1% for 2016 and 3.2% for 2015. The estimated fair value of total debt was $203.2 million as of December 31, 2017 and $252.8 million as of December 31, 2016. The fair value of debt was estimated by discounting the future cash flows using rates currently available for debt of similar terms and maturity. Cash paid for interest on debt was $7.7 million for 2017, $5.5 million for 2016, and $4.2 million for 2015. 63 Note 12. Fair Value Measurements The fair value of an asset or liability is defined as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. The fair value guidance requires an entity to maximize the use of quoted prices and other observable inputs and minimize the use of unobservable inputs when measuring fair value, and also establishes a fair value hierarchy which prioritizes the inputs to valuation techniques used to measure fair value as follows: Level 1 - Quoted prices in active markets for identical assets or liabilities. Level 2 - Observable inputs other than quoted prices included within Level 1 that are observable for the asset or liability, either directly or indirectly. Level 3 - Unobservable inputs to the valuation methodology that are significant to the measurement of fair value. Money market mutual funds and certain other mutual fund investments are measured at fair value on a recurring basis using Level 1 inputs. The fair value information related to these assets is summarized in the following tables: (in thousands) Assets: December 31, 2017 Fair Value Measurements at Reporting Date Using Significant Other Observable Inputs (Level 2) Quoted Prices in Active Markets (Level 1) Significant Unobservable Inputs (Level 3) Money market funds(1).......................................................... $ Other mutual funds(2)............................................................ Total assets at fair value on a recurring basis....................... $ 119 2,637 2,756 $ $ 119 2,637 2,756 $ $ — $ — — $ — — — (in thousands) Assets: December 31, 2016 Fair Value Measurements at Reporting Date Using Significant Other Observable Inputs (Level 2) Quoted Prices in Active Markets (Level 1) Significant Unobservable Inputs (Level 3) Money market funds(1) .......................................................... $ Other mutual funds(2) ............................................................ Total assets at fair value on a recurring basis ....................... $ 118 2,062 2,180 $ $ 118 2,062 2,180 $ $ — $ — — $ — — — (1) Money market funds are included in “Cash and cash equivalents” in the Consolidated Balance Sheets. These investments are classified as available-for-sale and are recorded at fair value. There have been no realized gains or losses related to these investments and we have not experienced any redemption restrictions with respect to any of the money market mutual funds. Other mutual funds are included in “Other investments and assets” in the Consolidated Balance Sheets. These investments are classified as available-for-sale and are recorded at fair value. Unrealized gains of $1.0 million ($0.6 million after-tax) as of December 31, 2017 and $0.7 million ($0.4 million after tax) as of December 31, 2016 are included in “Accumulated other comprehensive income (loss)” (“AOCI”) in the Consolidated Balance Sheets. (2) The carrying values of cash and cash equivalents, receivables, and accounts payable approximate fair value due to the short- term maturities of these instruments. Refer to Note 11 – Debt and Capital Lease Obligations for the estimated fair value of debt obligations. 64 Note 13. Income Per Share The components of basic and diluted income per share are as follows: (in thousands, except per share data) Net income attributable to Viad (diluted) ............................................. $ Less: Allocation to non-vested shares.................................................. Adjustment to carrying value of redeemable noncontrolling interest........ Net income allocated to Viad common stockholders (basic) ............... $ Basic weighted-average outstanding common shares .......................... Additional dilutive shares related to share-based compensation ......... Diluted weighted-average outstanding shares ...................................... Income per share: Basic income attributable to Viad common stockholders ......................... $ Diluted income attributable to Viad common stockholders ...................... $ 2017 Year Ended December 31, 2016 2015 $ $ 57,707 (700) — 57,007 20,146 259 20,405 $ $ 42,269 (571) — 41,698 19,990 187 20,177 26,606 (385) — 26,221 19,797 184 19,981 2.83 2.83 $ $ 2.09 2.09 $ $ 1.32 1.32 Options to purchase 8,000 shares during 2017, 500 shares during 2016, and 4,000 shares during 2015 of common stock were outstanding, but were not included in the computation of dilutive shares outstanding because the effect would be anti- dilutive. Note 14. Preferred Stock Purchase Rights We authorized five million shares of Preferred Stock and two million shares of Junior Participating Preferred Stock, none of which was outstanding on December 31, 2017. Note 15. Accumulated Other Comprehensive Income (Loss) Changes in AOCI by component are as follows: Unrealized Gains on Investments Cumulative Foreign Currency Translation Adjustments Unrecognized Net Actuarial Loss and Prior Service Credit, Net Accumulated Other Comprehensive Income (Loss) 346 $ (23,257) $ (11,265) $ (34,176) 135 (60) 75 421 $ 257 (62) 195 616 $ (5,827) — (5,827) (29,084) $ 17,058 — 17,058 (12,026) $ — 537 537 (10,728) $ — (430) (430) (11,158) $ (5,692) 477 (5,215) (39,391) 17,315 (492) 16,823 (22,568) (in thousands) Balance at December 31, 2015.......................................... $ Other comprehensive income (loss) before reclassifications.............................................................. Amounts reclassified from AOCI, net of tax ................. Net other comprehensive income (loss) ........................... Balance at December 31, 2016.......................................... $ Other comprehensive income before reclassifications ....... Amounts reclassified from AOCI, net of tax ................. Net other comprehensive income (loss) ........................... Balance at December 31, 2017.......................................... $ 65 The following table presents information about reclassification adjustments out of AOCI: (in thousands) Unrealized gains on investments....................................................... $ Tax effect .......................................................................................... $ Recognized net actuarial loss (gains)(1)............................................. $ Amortization of prior service credit(1)............................................... Tax effect .......................................................................................... $ Year Ended December 31, 2016 2017 (100) $ 38 (62) $ $ 507 (1,247) 310 (430) $ (97) 37 (60) 1,440 (575) (328) 537 (1) Amount included in pension expense. Refer to Note 17 – Pension and Postretirement Benefits. Affected Line Item in the Statement Where Net Income is Presented Interest income Income taxes Income taxes 66 Note 16. Income Taxes We record current income tax expense for the amounts that we expect to report and pay on our income tax returns and deferred income tax expense for the change in the deferred tax assets and liabilities. On December 22, 2017, the President of the United States signed into law the Tax Cuts and Jobs Act (the “Tax Act”) that significantly changed the U.S. tax code and reduced the U.S. federal corporate tax rate from 35% to 21%. Deferred tax assets and liabilities are recorded for the difference between the financial statement and tax basis of assets and liabilities, measured at the enacted tax rate applicable when the differences reverse. We recognized deferred tax expense of $8.0 million for the remeasurement of the net deferred tax assets in the fourth quarter of 2017. The Tax Act included the transition from a worldwide system of taxation to a territorial system and required a one-time deemed mandatory repatriation of post-1986 undistributed foreign subsidiary earnings and profits (“E&P”). As of December 31, 2017, we had an estimated $174.0 million of undistributed foreign E&P subject to the deemed mandatory repatriation and recognized current income tax expense of $8.1 million in the fourth quarter of 2017. In addition to the impact recorded as of December 31, 2017, the Tax Act changed existing tax laws, effective January 1, 2018, including the repeal of the corporate alternative minimum tax and the increasing alternative minimum tax credit carryforward utilization, as well as establishing two new taxes, the base erosion anti-abuse tax (“BEAT”) and the global intangible low-taxed income (“GILTI”) tax after the foreign intangible deduction (“FDII”). Under the new BEAT regime, certain payments made to related foreign companies are treated as base-eroding and limits the deductibility of these payments and imposes a minimum tax in excess of regular tax liability. We have reviewed the applicability of the BEAT provisions to our transactions and we do not expect to be subject to BEAT and have not recorded any provision for BEAT in the year ended December 31, 2017. Under the new GILTI regime, earnings of foreign subsidiaries in excess of an allowable return on the subsidiary’s tangible assets are required to be included in our U.S. taxable income. Because of the complexity of the new GILTI tax rules, we are continuing to assess the impact and have not recorded a provision for the GILTI tax in the year ended December 31, 2017. On December 22, 2017, the SEC issued Staff Accounting Bulletin No. 118 (“SAB 118”), which provides guidance on accounting for the tax effects of the Tax Act under U.S. GAAP for SEC registrants who do not have the necessary information available, prepared or analyzed in reasonable detail to complete the accounting for certain income tax effects of the Tax Act. In accordance with SAB 118, to the extent that a company’s accounting is incomplete but it is able to determine a reasonable estimate, it must record a provisional estimate in the financial statements. We have not completed the detailed accounting for all of the income tax effects of the Tax Act, specifically the BEAT and GILTI taxes, since the computations are complex and we need additional time to complete a full analysis. Under SAB 118, we recorded a provisional estimate for the mandatory repatriation of post-1986 undistributed foreign subsidiary E&P of $8.1 million and the remeasurement of the net deferred tax assets of $8.0 million for the year ended December 31, 2017. The ultimate impact may differ from these provisional amounts, possibly materially, due to additional analysis, changes in interpretations and assumptions we have made, additional regulatory guidance that may be issued and actions we may take as a result of the Tax Act. SAB 118 provides a measurement period that should not extend beyond one year from the enactment date and we expect to complete the detailed accounting and include any adjustments within this period. Income from continuing operations before income taxes consisted of the following: (in thousands) Foreign....................................................................................................... $ United States.............................................................................................. Income from continuing operations before income taxes .................... $ 2017 Year Ended December 31, 2016 2015 82,919 21,431 104,350 $ $ 33,611 31,118 64,729 $ $ 35,571 2,364 37,935 67 Significant components of the income tax provision from continuing operations are as follows: (in thousands) Current: United States: 2017 Year Ended December 31, 2016 2015 Federal ............................................................................................ State ................................................................................................ Foreign ................................................................................................. Total current .............................................................................................. Deferred: United States: Federal ............................................................................................ State ................................................................................................ Foreign ................................................................................................. Total deferred ............................................................................................ Income tax expense.................................................................................. $ $ 1,693 2,573 15,583 19,849 19,893 1,761 4,395 26,049 45,898 $ $ 3,685 1,716 8,177 13,578 8,427 (598) (157) 7,672 21,250 $ $ (876) 1,558 9,342 10,024 1,854 (164) (1,221) 469 10,493 We are subject to income tax in jurisdictions in which we operate. A reconciliation of the statutory federal income tax rate to the effective tax rate is as follows: 2017 (in thousands) Computed income tax expense at statutory federal income tax rate of 35% ........................................... $ 36,522 1,160 State income taxes, net of federal benefit............... 1,206 Deemed mandatory repatriation state tax ............... Deemed mandatory repatriation federal tax, net of foreign tax credit..................................................... Remeasurement of deferred taxes due to reduction in U.S. tax rate * ..................................................... Foreign tax rate differential .................................... U.S. tax on current year foreign earnings, net of foreign tax credits ................................................... Change in valuation allowance............................... Other adjustments, net ............................................ (2,726) (796) 627 Income tax expense ......................................... $ 45,898 8,000 (5,031) 6,936 Year Ended December 31, 2016 2015 35.0% $ 22,655 292 — 1.1% 1.2% 35.0% $ 13,277 1,713 — 0.5% — 35.0% 4.5% — 6.6% — — — — 7.7% (4.8)% — (882) — (1.4)% — (1,181) (2.6)% (0.8)% 0.6% (373) 1,230 (1,672) 44.0% $ 21,250 (948) (0.6)% (944) 1.9% (2.6)% (1,424) 32.8% $ 10,493 — (3.1)% (2.5)% (2.5)% (3.7)% 27.7% * Includes $0.6 million increase to the valuation allowance related to the remeasurement of deferred taxes due to the reduction in U.S. tax rate. 68 The components of deferred income tax assets and liabilities included in the Consolidated Balance Sheets are as follows: (in thousands) Deferred tax assets: Tax credit carryforwards ......................................................................................... $ Pension, compensation, and other employee benefits............................................. Provisions for losses................................................................................................ Net operating loss carryforward.............................................................................. State income taxes................................................................................................... Other deferred income tax assets ............................................................................ Total deferred tax assets ................................................................................. Valuation allowance................................................................................................ Foreign deferred tax assets included above............................................................. Net deferred tax assets..................................................................................... Deferred tax liabilities: Property and equipment .......................................................................................... Deferred tax related to life insurance ...................................................................... Goodwill and other intangible assets ...................................................................... Other deferred income tax liabilities....................................................................... Total deferred tax liabilities............................................................................ Foreign deferred tax liabilities included above........................................................ United States net deferred tax assets ........................................................................ $ December 31, 2017 2016 6,654 15,173 5,826 5,195 2,502 2,796 38,146 (4,010) (2,396) 31,740 (10,530) (3,556) (4,299) (463) (18,848) 7,869 20,761 $ $ 11,380 22,868 10,235 5,023 3,790 5,020 58,316 (3,998) (1,972) 52,346 (3,299) (5,642) (4,535) (557) (14,033) 2,852 41,165 We use significant judgment in forming conclusions regarding the recoverability of our deferred tax assets and evaluate all available positive and negative evidence to determine if it is more-likely-than-not that the deferred tax assets will be realized. To the extent recovery does not appear likely, a valuation allowance must be recorded. We had gross deferred tax assets of $38.1 million as of December 31, 2017 and $58.3 million as of December 31, 2016. These deferred tax assets reflect the expected future tax benefits to be realized upon reversal of deductible temporary differences and the utilization of net operating loss and tax credit carryforwards. As of December 31, 2017, foreign tax credit carryforwards were $0.4 million, of which $0.1 million are U.S. foreign tax credits and $0.3 million are United Kingdom foreign tax credits. The U.S. foreign tax credits are subject to a 10-year carryforward period and will expire in 2021. As of December 31, 2017, we had alternative minimum tax credit carryforwards of $6.2 million that will be fully utilized against future tax liabilities before becoming refundable as allowed under the Tax Act. We had gross state and foreign net operating loss carryforwards of $68.4 million as of December 31, 2017 and $63.0 million as of December 31, 2016, for which we had deferred tax assets of $5.2 million as of December 31, 2017 and $5.0 million as of December 31, 2016. The state and foreign net operating loss carryforwards expire on various dates from 2018 through 2038. As of December 31, 2017 and 2016, the valuation allowance was $4.0 million. During 2017, we had a $1.6 million decrease on German foreign net operating loss carryforwards, offset by a $0.3 million increase for the United Kingdom foreign tax credits (although subject to an indefinite carryforward period, do not meet the more likely-than-not threshold for recognition), a $0.5 million increase for the state net operating loss return to provision true up, a $0.6 million increase due to the remeasurement for the reduction in U.S. tax rate, and a $0.2 million increase in foreign exchange. While we believe that the deferred tax assets, net of existing valuation allowances, will be utilized in future periods, there are inherent uncertainties regarding the ultimate realization of these assets. It is possible that the relative weight of positive and negative evidence regarding the realization of deferred tax assets may change, which could result in a material increase or decrease in our valuation allowance. Such a change could result in a material increase or decrease to income tax expense in the period the assessment was made. We have not recorded deferred taxes for certain states or foreign withholding taxes on certain historical unremitted earnings of our subsidiaries located in Canada, the United Kingdom, and the Netherlands as we intend to reinvest those earnings in operations outside of the United States. 69 We exercise judgment in determining the income tax provision for positions taken on prior returns when the ultimate tax determination is uncertain. We classify liabilities associated with uncertain tax positions as non-current liabilities in the Consolidated Balance Sheets unless expected to be paid or released within one year. We had liabilities associated with uncertain tax positions, including interest and penalties, of $1.7 million as of December 31, 2017 and $2.7 million as of December 31, 2016. Uncertain tax positions, including interest and penalties, are classified as a component of income tax expense. During 2017, we decreased the liability for continuing operations uncertain tax positions by $0.1 million due to lapse of statute and we increased accrued interest and penalties for continuing operations positions by $0.1 million. We expect $1.3 million of the continuing operations uncertain tax positions to be resolved or settled within the next twelve months and have classified this amount as a current liability. During 2017, we released the liability for discontinued operations uncertain tax positions of $1.0 million, including $0.4 million in accrued interest and penalties, due to a statute expiration, which was recorded through discontinued operations. We had liabilities associated with discontinued operations uncertain tax positions of zero as of December 31, 2017 and $1.0 million as of December 31, 2016. A reconciliation of the liabilities associated with uncertain tax positions (excluding interest and penalties) is as follows: (in thousands) Balance at December 31, 2014................................................................ $ Additions for tax positions taken in prior years ........................................ Reductions for tax positions taken in prior years ...................................... Reductions for lapse of applicable statutes ............................................... Balance at December 31, 2015................................................................ Additions for tax positions taken in prior years ........................................ Reductions for lapse of applicable statutes ............................................... Balance at December 31, 2016................................................................ Additions for tax positions taken in prior years ........................................ Reductions for lapse of applicable statutes ............................................... Balance at December 31, 2017................................................................ $ Continuing Operations Discontinued Operations Total 1,283 43 (666) (353) 307 1,295 (43) 1,559 43 (177) 1,425 $ $ 636 — — — 636 — — 636 — (636) $ — $ 1,919 43 (666) (353) 943 1,295 (43) 2,195 43 (813) 1,425 We are subject to regular and recurring audits by taxing authorities in jurisdictions in which we operate or have operated in the past, including various foreign countries in addition to the United States, Canada, and the United Kingdom. Our 2014 through 2017 U.S. federal tax years and various state tax years from 2013 through 2017 remain subject to income tax examinations by tax authorities. Tax years 2012 through 2017 remain subject to examination by various foreign taxing jurisdictions. Cash paid for income taxes was $14.6 million during 2017, $14.1 million during 2016, and $10.1 million during 2015. Note 17. Pension and Postretirement Benefits Domestic Plans We have frozen defined benefit pension plans held in trust for certain employees which we funded. We also maintain certain unfunded defined benefit pension plans which provide supplemental benefits to select management employees. These plans use traditional defined benefit formulas based on years of service and final average compensation. Funding policies provide that payments to defined benefit pension trusts shall be at least equal to the minimum funding required by applicable regulations. We also have certain defined benefit postretirement plans that provide medical and life insurance for certain eligible employees, retirees, and dependents. The related postretirement benefit liabilities are recognized over the period that services are provided by employees. In addition, we retained the obligations for these benefits for retirees of certain sold businesses. While the plans have no funding requirements, we may fund the plans. 70 The components of net periodic benefit cost and other amounts recognized in other comprehensive income (loss) of our pension plans consist of the following: (in thousands) Net periodic benefit cost: Service cost .......................................................................................... $ Interest cost .......................................................................................... Expected return on plan assets ............................................................. Recognized net actuarial loss............................................................... Net periodic benefit cost.......................................................................... Other changes in plan assets and benefit obligations recognized in other comprehensive income (loss): Net actuarial loss (gain) ....................................................................... Reversal of amortization item: Net actuarial loss.................................................................................. Total recognized in other comprehensive income (loss) ...................... Total recognized in net periodic benefit cost and other 2017 December 31, 2016 2015 $ 64 803 (176) 433 1,124 114 (433) (319) $ 98 1,032 (256) 423 1,297 1 (423) (422) 101 1,018 (380) 492 1,231 (963) (492) (1,455) comprehensive income (loss) ............................................................... $ 805 $ 875 $ (224) The components of net periodic benefit cost and other amounts recognized in other comprehensive income (loss) of our postretirement benefit plans consist of the following: (in thousands) Net periodic benefit cost: Service cost .......................................................................................... $ Interest cost .......................................................................................... Amortization of prior service credit..................................................... Recognized net actuarial loss............................................................... Net periodic benefit cost.......................................................................... Other changes in plan assets and benefit obligations recognized in other comprehensive income (loss): Net actuarial loss (gain) ....................................................................... Prior service credit ............................................................................... Reversal of amortization item: Net actuarial loss.................................................................................. Prior service credit ............................................................................... Total recognized in other comprehensive income (loss) ...................... Total recognized in net periodic benefit cost and other 2017 December 31, 2016 2015 $ 92 413 (431) 164 238 237 816 (164) 431 1,320 $ 99 573 (503) 295 464 (790) 73 (295) 503 (509) 152 619 (552) 528 747 (1,248) 3 (528) 552 (1,221) comprehensive income (loss) ............................................................... $ 1,558 $ (45) $ (474) 71 The following table indicates the funded status of the plans as of December 31: (in thousands) Change in benefit obligation: Funded Plans Unfunded Plans Postretirement Benefit Plans 2017 2016 2017 2016 2017 2016 Benefit obligation at beginning of year ............. $ 15,027 — Service cost........................................................ 492 Interest cost........................................................ 618 Actuarial adjustments ........................................ — Plan amendments............................................... (697) Benefits paid ...................................................... Benefit obligation at end of year .......................... 15,440 Change in plan assets: $ $ 14,906 — 629 240 — (748) 15,027 9,825 64 311 175 — (518) 9,857 $ 10,049 97 403 (221) — (503) 9,825 $ 13,619 92 413 237 816 (1,370) 13,807 $ 14,573 99 573 (790) 73 (909) 13,619 — Fair value of plan assets at beginning of year ... — Actual return on plan assets............................... 909 Company contributions...................................... (909) Benefits paid ...................................................... — Fair value of plan assets at end of year ............... Funded status at end of year ................................ $ (3,850) $ (4,611) $ (9,857) $ (9,825) $ (13,807) $ (13,619) 10,479 273 412 (748) 10,416 10,416 855 1,016 (697) 11,590 — — 1,370 (1,370) — — — 518 (518) — — — 503 (503) — The net amounts recognized in the Consolidated Balance Sheets under the caption “Pension and postretirement benefits” as of December 31 are as follows: (in thousands) Other current liabilities ........................................... $ Non-current liabilities ............................................. Net amount recognized ........................................... $ 2017 2016 2017 2016 2017 2016 — $ — $ 3,850 3,850 $ 4,611 4,611 $ 809 9,048 9,857 $ $ 699 9,126 9,825 $ 1,112 12,695 $ 13,807 $ 1,094 12,525 $ 13,619 Funded Plans Unfunded Plans Postretirement Benefit Plans Amounts recognized in AOCI as of December 31 are as follows: Funded Plans 2017 (in thousands) Net actuarial loss ....................................... $ 8,681 $ 9,090 $ 2,587 $ 2,496 $ 2,784 $ 2,710 $14,052 $14,296 (1,598) Prior service credit..................................... (351) (1,598) 12,698 Subtotal ............................................... 13,701 1,112 (422) (4,816) Less tax effect............................................ (5,196) 690 $ 8,505 $ 7,882 Total..................................................... $ 5,389 $ 5,643 $ 1,606 $ 1,549 $ 1,510 $ — 9,090 (3,447) — 8,681 (3,292) — 2,496 (947) — 2,587 (981) (351) 2,433 (923) 2016 2016 2017 Unfunded Plans 2016 2017 Postretirement Benefit Plans Total 2017 Total 2016 The estimated net actuarial loss for the postretirement benefit plans that is expected to be amortized from AOCI into net periodic benefit cost in 2018 is approximately $0.2 million. The estimated prior service credit for the postretirement benefit plans that is expected to be amortized from AOCI into net periodic benefit credit in 2018 is approximately $0.2 million. The estimated net actuarial loss that is expected to be amortized from AOCI into net periodic benefit cost in 2018 is approximately $0.1 million for the unfunded benefit plans and $0.4 million for the funded benefit plans. 72 The fair value of the domestic plans’ assets by asset class are as follows: (in thousands) Domestic pension plans: Total Fair Value Measurements at December 31, 2017 Significant Other Observable Inputs (Level 2) Quoted Prices in Active Markets (Level 1) Significant Unobservable Inputs (Level 3) Fixed income securities ......................................................... $ Equity securities .................................................................... Cash ....................................................................................... Other ...................................................................................... Total............................................................................................ $ 5,787 5,390 214 199 11,590 $ $ 5,787 5,390 214 — 11,391 $ $ — $ — — 199 199 $ — — — — — (in thousands) Domestic pension plans: Total Fair Value Measurements at December 31, 2016 Significant Other Observable Inputs (Level 2) Quoted Prices in Active Markets (Level 1) Significant Unobservable Inputs (Level 3) Fixed income securities ......................................................... $ Equity securities .................................................................... Cash ....................................................................................... Other ...................................................................................... Total............................................................................................ $ 5,352 4,580 280 204 10,416 $ $ 5,352 4,580 280 — 10,212 $ $ — $ — — 204 204 $ — — — — — We employ a total return investment approach whereby a mix of equities and fixed income securities is used to maximize the long-term return of plan assets for a prudent level of risk. Risk tolerance is established through careful consideration of plan liabilities, plan funded status, and corporate financial condition. The investment portfolio contains a diversified blend of equity and fixed income securities. Furthermore, equity securities are diversified across U.S. and non-U.S. stocks, as well as growth and value. Investment risk is measured and monitored on an ongoing basis through quarterly investment portfolio reviews and annual liability measurements. We utilize a building-block approach in determining the long-term expected rate of return on plan assets. Historical markets are studied and long-term historical relationships between equity securities and fixed income securities are preserved consistent with the widely accepted capital market principle that assets with higher volatility generate a greater return over the long run. Current market factors such as inflation and interest rates are evaluated before long-term capital market assumptions are determined. The long-term portfolio return also considers diversification and rebalancing. Peer data and historical returns are reviewed relative to our assumed rates for reasonableness and appropriateness. The following pension and postretirement benefit payments, which reflect expected future service, as appropriate, are expected to be paid: (in thousands) 2018 ........................................................................................................... $ 2019 ........................................................................................................... $ 2020 ........................................................................................................... $ 2021 ........................................................................................................... $ 2022 ........................................................................................................... $ 2023-2027.................................................................................................. $ Foreign Pension Plans Funded Plans Unfunded Plans Postretirement Benefit Plans 1,434 927 997 921 990 4,859 $ $ $ $ $ $ 823 738 740 725 709 3,259 $ $ $ $ $ $ 1,132 1,127 1,100 1,066 1,039 4,685 Certain of our foreign operations also maintain defined benefit pension plans held in trust for certain employees which are funded by the companies, and unfunded defined benefit pension plans providing supplemental benefits to select management employees. These plans use traditional defined benefit formulas based on years of service and final average compensation. 73 Funding policies provide that payments to defined benefit pension trusts shall be at least equal to the minimum funding required by applicable regulations. The components of net periodic benefit cost and other amounts recognized in other comprehensive income (loss) included the following: (in thousands) Net periodic benefit cost: Service cost .......................................................................................... $ Interest cost .......................................................................................... Expected return on plan assets ............................................................. Recognized net actuarial loss............................................................... Settlement............................................................................................. Net periodic benefit cost.......................................................................... Other changes in plan assets and benefit obligations recognized in other comprehensive income (loss): Net actuarial loss.................................................................................. Reversal of amortization of net actuarial loss...................................... Total recognized in other comprehensive income (loss) ...................... Total recognized in net periodic benefit cost and other 2017 December 31, 2016 2015 $ 530 492 (602) 155 777 1,352 (106) (155) (261) $ 488 488 (558) 162 — 580 158 (162) (4) comprehensive income ......................................................................... $ 1,091 $ 576 $ The following table represents the funded status of the plans as of December 31: 503 505 (583) 160 — 585 182 (160) 22 607 (in thousands) Change in benefit obligation: Funded Plans 2017 2016 Unfunded Plans 2017 2016 Benefit obligation at beginning of year ................................. $ Service cost............................................................................ Interest cost............................................................................ Actuarial adjustments ............................................................ Benefits paid .......................................................................... Translation adjustment .......................................................... Benefit obligation at end of year .............................................. Change in plan assets: Fair value of plan assets at beginning of year ....................... Actual return on plan assets................................................... Company contributions.......................................................... Benefits paid .......................................................................... Translation adjustment .......................................................... Fair value of plan assets at end of year ................................... Funded status at end of year .................................................... $ $ 10,488 530 406 658 (3,231) 670 9,521 10,576 764 710 (3,231) 674 9,493 (28) $ 9,744 488 400 395 (818) 279 10,488 9,705 617 795 (818) 277 10,576 88 $ $ $ 2,486 — 87 (54) (182) 245 2,582 — — 182 (182) — — (2,582) $ 2,470 — 87 105 (177) 1 2,486 — — 177 (177) — — (2,486) The net amounts recognized in the Consolidated Balance Sheets under the caption “Pension and postretirement benefits” as of December 31 were as follows: (in thousands) Non-current assets ................................................................................ $ Other current liabilities ......................................................................... Non-current liabilities........................................................................... Net amount recognized ......................................................................... $ Funded Plans 2017 2016 Unfunded Plans 2017 2016 (15) $ — 43 28 $ (88) $ — — (88) $ — $ 188 2,394 2,582 $ — 170 2,316 2,486 Net actuarial losses for the foreign funded plans recognized in AOCI were $2.5 million ($1.8 million after-tax) as of December 31, 2017 and $3.3 million ($2.5 million after-tax) as of December 31, 2016. Net actuarial losses for the foreign unfunded plans recognized in AOCI were $0.7 million ($0.5 million after-tax) as of December 31, 2017 and $0.4 million ($0.3 million after-tax) as of December 31, 2016. 74 The fair value information related to the foreign pension plans’ assets is summarized in the following tables: (in thousands) Assets: December 31, 2017 Fair Value Measurements at Reporting Date Using Significant Other Observable Inputs (Level 2) Quoted Prices in Active Markets (Level 1) Significant Unobserved Inputs (Level 3) Fixed income securities ......................................................... $ Equity securities .................................................................... Other ...................................................................................... Total............................................................................................ $ 4,414 4,889 190 9,493 $ $ 4,414 4,466 190 9,070 $ $ — $ 423 — 423 $ — — — — (in thousands) Assets: December 31, 2016 Fair Value Measurements at Reporting Date Using Significant Other Observable Inputs (Level 2) Quoted Prices in Active Markets (Level 1) Significant Unobserved Inputs (Level 3) Fixed income securities ......................................................... $ Equity securities .................................................................... Other ...................................................................................... Total............................................................................................ $ 4,082 4,518 1,976 10,576 $ $ 4,082 4,130 1,976 10,188 $ $ — $ 388 — 388 $ The following payments, which reflect expected future service, as appropriate, are expected to be paid: (in thousands) 2018 .............................................................................................................................. $ 2019 .............................................................................................................................. $ 2020 .............................................................................................................................. $ 2021 .............................................................................................................................. $ 2022 .............................................................................................................................. $ 2023-2027 ..................................................................................................................... $ Funded Plans Unfunded Plans 365 376 378 396 496 2,499 $ $ $ $ $ $ — — — — 191 190 190 190 189 935 Information for Pension Plans with an Accumulated Benefit Obligation in Excess of Plan Assets The accumulated benefit obligations in excess of plan assets as of December 31 were as follows: (in thousands) Projected benefit obligation ........................................................ $ Accumulated benefit obligation .................................................. $ Fair value of plan assets .............................................................. $ (in thousands) Projected benefit obligation ........................................................ $ Accumulated benefit obligation .................................................. $ Fair value of plan assets .............................................................. $ Contributions Domestic Plans Funded Plans Unfunded Plans 2017 2016 2017 2016 15,440 15,440 11,590 $ $ $ 15,027 15,027 10,416 $ $ $ 9,857 9,826 $ $ — $ 9,825 9,737 — Foreign Plans Funded Plans Unfunded Plans 2017 2016 2017 2016 9,521 8,819 9,493 $ $ $ 10,488 9,906 10,576 $ $ $ 2,582 2,582 $ $ — $ 2,486 2,486 — In aggregate for both the domestic and foreign plans, we anticipate contributing $1.1 million to the funded pension plans, $1.0 million to the unfunded pension plans, and $1.1 million to the postretirement benefit plans in 2018. 75 Weighted-Average Assumptions Weighted-average assumptions used to determine benefit obligations as of December 31 were as follows: Domestic Plans Funded Plans 2017 2016 Unfunded Plans 2016 2017 Postretirement Benefit Plans Foreign Plans 2017 2016 2017 2016 Discount rate ............................................. Rate of compensation increase.................. 3.63% 4.12% 3.55% 3.99% 3.59% 4.08% 3.15% 3.52% 2.26% 2.34% N/A 3.00% 3.00% N/A N/A N/A Weighted-average assumptions used to determine net periodic benefit costs as of December 31 were as follows: Domestic Plans Funded Plans 2017 2016 Unfunded Plans 2016 2017 Postretirement Benefit Plans Foreign Plans 2017 2016 2017 2016 Discount rate ............................................. Expected return on plan assets .................. Rate of compensation increase.................. 4.07% 4.33% 3.99% 4.25% 4.08% 4.30% 3.71% 3.77% 0.00% 0.00% 5.09% 4.53% 5.50% 2.25% N/A 2.26% 2.34% N/A N/A N/A 3.00% 3.00% N/A N/A The assumed health care cost trend rate used in measuring the December 31, 2017 accumulated postretirement benefit obligation was 7.5%, declining one-third percent each year to the ultimate rate of 4.5% by the year 2026 and remaining at that level thereafter. The assumed health care cost trend rate used in measuring the December 31, 2016 accumulated postretirement benefit obligation was 7.0%, declining one-quarter percent each year to the ultimate rate of 4.5% by the year 2026 and remaining at that level thereafter. A one-percentage-point increase in the assumed health care cost trend rate for each year would increase the accumulated postretirement benefit obligation as of December 31, 2017 by approximately $1.4 million and the total of service and interest cost components by approximately $0.1 million. A one-percentage-point decrease in the assumed health care cost trend rate for each year would decrease the accumulated postretirement benefit obligation as of December 31, 2017 by approximately $1.1 million and the total of service and interest cost components by approximately $0.1 million. Multi-employer Plans We contribute to defined benefit pension plans under the terms of collective-bargaining agreements that cover our union- represented employees. The financial risks of participating in these multi-employer pension plans generally include the fact that assets contributed to the plan by one employer may be used to provide benefits to employees of other participating employers. Furthermore, if a participating employer ceases to contribute to the plan, the unfunded obligations of the plan may be borne by the remaining participating employers. In addition, if we were to discontinue participating in some of our multi- employer pension plans, we may be required to pay those plans a withdrawal liability amount based on the underfunded status of the plan. We also contribute to defined contribution plans pursuant to collective-bargaining agreements, which are generally not subject to the funding risks inherent in defined benefit pension plans. The overall level of contributions to our multi-employer plans may significantly vary from year to year based on the demand for union-represented labor to support our operations. We do not have any minimum contribution requirements for future periods pursuant to our collective- bargaining agreements for individually significant multi-employer plans. 76 Our participation in multi-employer pension plans for 2017 is outlined in the following table. Unless otherwise noted, the most recent Pension Protection Act zone status available in 2017 and 2016 relates to the plan’s year end as of December 31, 2016 and 2015, respectively, and is based on information received from the plan. Among other factors, plans in the red zone are generally less than 65% funded, plans in the yellow zone are less than 80% funded, and plans in the green zone are at least 80% funded. The “FIP/RP Status Pending/Implemented” column indicates plans for which a financial improvement plan or a rehabilitation plan is either pending or has been implemented. Pension Protection Act Zone Status 2017 2016 FIP/RP Status Pending/ Implemented EIN Plan No. Viad Contributions 2016 2017 2015 Expiration Date of Collective- Bargaining Agreement(s) Surcharge Paid 91- 6145047 95- 6376874 36- 6130207 88- 6023284 51- 6030753 36- 6044243 95- 6392774 95- 6042875 04- 6372430 36- 1416355 94- 6278490 1 Green Green No $ 7,809 $ 6,684 $ 5,632 No 3/31/2020 1 Green Green No 3,087 2,805 2,485 No 8/31/2019 1 Green Yellow Yes 2,390 2,532 1,887 1 Green Green No 1,682 1,402 1,150 No No 5/31/2019 6/16/2018 2 Green Green No 1,099 845 1,190 No 6/6/2021 1 Red Red Yes 1,060 1,151 948 No 12/31/2018 1 Yellow Yellow Yes 1 Green Green No 905 883 701 791 835 Yes continuous 750 No 6/30/2018 1 Red Red Yes 772 552 381 No 3/31/2022 11 Red Red Yes 719 1,203 502 Yes 6/30/2019 1 Green Green No 654 2,900 526 3,585 541 4,259 No 3/31/2018 23,960 22,777 20,560 2,613 2,995 1,428 $26,573 $25,772 $21,988 (in thousands) Pension Fund: Western Conference of Teamsters Pension Plan.... Southern California Local 831—Employer Pension Fund(1).............. Chicago Regional Council of Carpenters Pension Fund................. IBEW Local Union No 357 Pension Plan A ....... Electrical Contractors Assoc. Chicago Local Union 134, IBEW Joint Pension Trust of Chicago Plan #2 ............ Central States, Southeast and Southwest Areas Pension Plan.................. Southern California IBEW-NECA Pension Fund .............................. Southwest Carpenters Pension Trust................. New England Teamsters & Trucking Industry Pension............ Machinery Movers Riggers & Mach Erect Local 136 Supplemental Retirement Plan(1).......... Sign Pictorial & Display Industry Pension Plan(1) ............... All other funds(2) ........... Total contributions to defined benefit plans ..... Total contributions to other plans ..................... Total contributions to multi-employer plans .... (1) We contributed more than 5% of total plan contributions for the 2016 and 2015 plan years based on the plans’ Form (2) 5500s. Represents participation in 35 pension funds during 2017. 77 Other Employee Benefits We match U.S. employee contributions to the 401(k) plan with shares of our common stock held in treasury up to 100% of the first 3% of a participant’s salary plus 50% of the next 2%. The expense associated with our match was $4.2 million for 2017, $3.9 million for 2016, and $3.7 million for 2015. Note 18. Restructuring Charges GES Consolidation We have taken certain restructuring actions designed to reduce our cost structure primarily within GES, as well as the elimination of certain positions at the corporate office. We implemented a strategic reorganization plan in order to consolidate the separate business units within GES U.S. We also consolidated facilities and streamlined our operations in the U.S., the United Kingdom, and Germany. As a result, we recorded restructuring charges in 2017, 2016, and 2015, primarily consisting of severance and related benefits as a result of workforce reductions and charges related to the consolidation and downsizing of facilities representing the remaining operating lease obligations (net of estimated sublease income) and related costs. Other Restructurings We recorded restructuring charges in connection with the consolidation of certain support functions at our corporate headquarters and certain reorganization activities within Pursuit. These charges primarily consist of severance and related benefits due to headcount reductions and charges related to the downsizing of facilities. Changes to the restructuring liability by major restructuring activity are as follows: GES Consolidation Severance & Employee Benefits Facilities Other Restructurings Severance & Employee Benefits (in thousands) Balance at December 31, 2014 ................................................. $ Restructuring charges.................................................................. Cash payments ............................................................................ Adjustment to liability ................................................................ Balance at December 31, 2015 ................................................. Restructuring charges.................................................................. Cash payments ............................................................................ Adjustment to liability ................................................................ Balance at December 31, 2016 ................................................. Restructuring charges.................................................................. Cash payments ............................................................................ Adjustment to liability ................................................................ Balance at December 31, 2017 ................................................. $ 543 1,767 (1,514) (45) 751 3,693 (2,170) — 2,274 442 (1,165) — 1,551 $ $ 1,161 587 (457) — 1,291 759 (1,150) 192 1,092 265 (550) — 807 $ $ 240 602 (601) (7) 234 731 (546) (3) 416 297 (538) 16 191 $ $ Total 1,944 2,956 (2,572) (52) 2,276 5,183 (3,866) 189 3,782 1,004 (2,253) 16 2,549 As of December 31, 2017, the liabilities related to severance and employee benefits are expected to be paid by the end of 2018. Additionally, the liability related to future lease payments will be paid over the remaining lease terms for GES. Refer to Note 22 – Segment Information, for information regarding restructuring charges by segment. 78 Note 19. Leases and Other We entered into operating leases for the use of certain of our offices, equipment, and other facilities. These leases expire over periods up to 40 years. Leases which expire are generally renewed or replaced by similar leases. Some leases contain scheduled rental increases accounted for on a straight-line basis. As of December 31, 2017, our future minimum rental payments and related sublease rentals receivable with respect to non- cancelable operating leases with terms in excess of one year were as follows: (in thousands) 2018 .............................................................................................................................. $ 2019 .............................................................................................................................. 2020 .............................................................................................................................. 2021 .............................................................................................................................. 2022 .............................................................................................................................. Thereafter...................................................................................................................... Total........................................................................................................................ $ Rental Payments Receivable Under Subleases 23,503 20,299 17,265 8,812 5,555 81,135 156,569 $ $ 2,627 2,384 2,209 2,267 2,195 3,657 15,339 Net rent expense under operating leases consisted of the following: (in thousands) Minimum rentals ....................................................................................... $ Sublease rentals ......................................................................................... Total rentals, net ................................................................................ $ 2017 56,575 (1,525) 55,050 $ $ December 31, 2016 48,465 (2,831) 45,634 $ $ 2015 41,564 (3,457) 38,107 The aggregate annual maturities and the related amounts representing interest on capital lease obligations are included in Note 11 – Debt and Capital Lease Obligations. As of December 31, 2017, we had aggregate purchase obligations of $38.1 million related to various licensing agreements, consulting and other contracted services. Note 20. Litigation, Claims, Contingencies, and Other We are plaintiffs or defendants to various actions, proceedings, and pending claims, some of which involve, or may involve, compensatory, punitive, or other damages. Litigation is subject to many uncertainties and it is possible that some of the legal actions, proceedings, or claims could be decided against us. Although the amount of liability as of December 31, 2017 with respect to these matters is not ascertainable, we believe that any resulting liability, after taking into consideration amounts already provided for and insurance coverage, will not have a material effect on our business, financial position, or results of operations. We are subject to various U.S. federal, state, and foreign laws and regulations governing the prevention of pollution and the protection of the environment in the jurisdictions in which we have or had operations. If we fail to comply with these environmental laws and regulations, civil and criminal penalties could be imposed and we could become subject to regulatory enforcement actions in the form of injunctions and cease and desist orders. As is the case with many companies, we also face exposure to actual or potential claims and lawsuits involving environmental matters relating to our past operations. As of December 31, 2017, we had recorded environmental remediation liabilities of $2.4 million related to previously sold operations. Although we are a party to certain environmental disputes, we believe that any resulting liabilities, after taking into consideration amounts already provided for and insurance coverage, will not have a material effect on our financial position or results of operations. As of December 31, 2017, on behalf of our subsidiaries, we had certain obligations under guarantees to third parties. These guarantees are not subject to liability recognition in the consolidated financial statements and relate to leased facilities entered into by our subsidiary operations. We would generally be required to make payments to the respective third parties under these guarantees in the event that the related subsidiary could not meet its own payment obligations. The maximum potential amount of future payments that we would be required to make under all guarantees existing as of December 31, 2017 would be $19.3 million. These guarantees relate to our leased facilities through October 2027. There are no recourse provisions that would enable us to recover from third parties any payments made under the guarantees. Furthermore, there are no collateral or similar arrangements whereby we could recover payments. 79 A significant number of our employees are unionized and we are a party to approximately 100 collective-bargaining agreements, with approximately one-third requiring renegotiation each year. If we are unable to reach an agreement with a union during the collective-bargaining process, the union may call for a strike or work stoppage, which may, under certain circumstances, adversely impact our business and results of operations. We believe that relations with our employees are satisfactory and that collective-bargaining agreements expiring in 2018 will be renegotiated in the ordinary course of business without having a material adverse effect on our operations. We entered into showsite and warehouse agreements with the Chicago Teamsters Local 727, effective January 1, 2014, and those agreements contain provisions that allow the parties to re- open negotiation of the agreements on pension-related issues. We are in informal discussions regarding those issues with all relevant parties to resolve those issues in a manner that will be reasonable and equitable to employees, customers, and shareholders. Although our labor relations are currently stable, disruptions pending the outcome of the Chicago Teamsters Local 727 negotiations could occur, as they could with any collective-bargaining agreement negotiation, with the possibility of an adverse impact on the operating results of GES. Our business contributes to various multi-employer pension plans based on obligations arising under collective-bargaining agreements covering our union-represented employees. Based upon the information available from plan administrators, we believe that several of these multi-employer plans are underfunded. The Pension Protection Act of 2006 requires pension plans underfunded at certain levels to reduce, over defined time periods, the underfunded status. In addition, under current laws, the termination of a plan, or a voluntary withdrawal from a plan by us, or a shrinking contribution base to a plan as a result of the insolvency or withdrawal of other contributing employers to such plan, would require us to make payments to such plan for our proportionate share of the plan’s unfunded vested liabilities. As of December 31, 2017, the amount of additional funding, if any, that we would be required to make related to multi-employer pension plans is not ascertainable. We are self-insured up to certain limits for workers’ compensation, employee health benefits, automobile, product and general liability, and property loss claims. The aggregate amount of insurance liabilities (up to our retention limit) related to our continuing operations was $19.1 million as of December 31, 2017 which includes $13.8 million related to workers’ compensation liabilities, and $5.3 million related to general/auto liability claims. We have also retained and provided for certain insurance liabilities in conjunction with previously sold businesses of $2.9 million as of December 31, 2017, related to workers’ compensation liabilities. Provisions for losses for claims incurred, including estimated claims incurred but not yet reported, are made based on our historical experience, claims frequency, and other factors. A change in the assumptions used could result in an adjustment to recorded liabilities. We have purchased insurance for amounts in excess of the self-insured levels, which generally range from $0.2 million to $0.5 million on a per claim basis. We do not maintain a self-insured retention pool fund as claims are paid from current cash resources at the time of settlement. Our net cash payments in connection with these insurance liabilities were $5.5 million for 2017, $5.0 million for 2016, and $5.6 million for 2015. In addition, as of December 31, 2017, we have recorded insurance liabilities of $10.4 million related to continuing operations, which represents the amount for which we remain the primary obligor after self-insured insurance limits, without taking into consideration the above-referenced insurance coverage. Of this total, $6.9 million related to workers’ compensation liabilities and $3.5 million related to general/auto liability claims which are recorded in other deferred items and liabilities in the Consolidated Balance Sheets with a corresponding receivable in other investments. Note 21. Redeemable Noncontrolling Interest On November 3, 2017, we acquired the controlling interest (54.5% of the common stock) in Esja, a private corporation in Reykjavik, Iceland, which is developing and will operate a new FlyOver Iceland attraction. The Esja acquisition contains a put option that gives the minority Esja shareholders the right to sell (or “put”) their Esja shares to us based on a multiple of 5.0x EBITDA as calculated on the trailing 12 months from the most recently completed quarter before the put option exercise. The put option is only exercisable after 36 months of business operation (the “Reference Date”) and if the FlyOver Iceland attraction has earned a minimum of €3.25 million in unadjusted EBITDA during the most recent fiscal year and during the trailing 12-month period prior to exercise (the “Put Option Condition”). The put option is exercisable during a period of 12 months following the Reference Date (the “Option Period”) and if the Put Option Condition has been met. If the Put Option Condition has not been met during the first Option Period, the Reference Date will be extended for an additional 12 months up to three times. If after 72 months, the FlyOver Iceland attraction has not achieved the Put Option Condition, the put option expires. If the Put Option Condition is met during any of the Option Periods, yet the shares are not exercised prior to the end of the 12-month Option Period, the put option will expire. The noncontrolling interests’ carrying value is determined by the fair market value at acquisition and the subsequent noncontrolling interests’ share of net income or loss. This value is benchmarked against the redemption value of the sellers’ put option. The carrying value is adjusted to the latter, provided that it does not fall below the initial carrying values, as determined by the purchase price allocation. We have made a policy election to reflect any changes caused by such an adjustment in retained earnings, rather than in current earnings. 80 Changes in redeemable noncontrolling interests are as follows: (in thousands) Balance at December 31, 2016 ................................................................................................................ Redeemable noncontrolling interest related to 2017 acquisition.......................................................... Adjustment to the redemption value..................................................................................................... Foreign currency translation adjustment .............................................................................................. Balance at December 31, 2017 ................................................................................................................ $ $ — 6,735 (30) (57) 6,648 Note 22. Segment Information We measure the profit and performance of our operations on the basis of segment operating income which excludes restructuring charges and impairment charges and recoveries. Intersegment sales are eliminated in consolidation and intersegment transfers are not significant. Corporate activities include expenses not allocated to operations. Depreciation and amortization and share-based compensation expense are the only significant non-cash items for the reportable segments. Our reportable segments, with reconciliations to consolidated totals, are as follows: (in thousands) Revenue: GES: 2017 Year Ended December 31, 2016 2015 U.S........................................................................................................ $ International ......................................................................................... Intersegment eliminations .................................................................... Total GES .................................................................................................. Pursuit........................................................................................................ Corporate eliminations (1) .......................................................................... Total revenue ........................................................................................... $ Segment operating income: GES: U.S........................................................................................................ $ International ......................................................................................... Total GES .................................................................................................. Pursuit........................................................................................................ Segment operating income...................................................................... Corporate eliminations (1)..................................................................... Corporate activities .............................................................................. Operating income .................................................................................... Interest income..................................................................................... Interest expense.................................................................................... Restructuring recoveries (charges): GES U.S. .............................................................................................. GES International................................................................................. Pursuit .................................................................................................. Corporate.............................................................................................. Impairment recoveries (charges): $ $ $ 872,154 282,712 (21,769) 1,133,097 173,868 — 1,306,965 34,494 15,475 49,969 47,082 97,051 67 (12,877) 84,241 319 (8,304) 354 (1,061) (86) (211) $ $ $ 826,408 248,503 (20,172) 1,054,739 153,364 (3,133) 1,204,970 40,524 9,699 50,223 35,705 85,928 (743) (10,322) 74,863 1,165 (5,898) (2,893) (1,559) (171) (560) Pursuit .................................................................................................. Income from continuing operations before income taxes .................... $ 29,098 104,350 $ (218) 64,729 $ 720,882 272,634 (16,638) 976,878 112,170 — 1,089,048 14,563 12,211 26,774 27,810 54,584 — (9,720) 44,864 658 (4,535) (541) (1,813) (200) (402) (96) 37,935 (1) Corporate eliminations during 2017 represent the elimination of depreciation expense recorded by Pursuit associated with previously eliminated intercompany profit realized by GES for renovations to Pursuit’s Banff Gondola. Corporate eliminations recorded during 2016 represent the elimination of intercompany revenue and profit realized by GES for work completed on renovations to Pursuit’s Banff Gondola. 81 (in thousands) Assets: GES: 2017 December 31, 2016 2015 U.S........................................................................................................ $ International ......................................................................................... Pursuit........................................................................................................ Corporate and other ................................................................................... $ Depreciation and amortization: GES: U.S........................................................................................................ $ International ......................................................................................... Pursuit........................................................................................................ Corporate and other ................................................................................... $ Capital expenditures: GES: U.S........................................................................................................ $ International ......................................................................................... Pursuit........................................................................................................ Corporate and other(1) ................................................................................ $ 380,909 135,917 350,256 52,817 919,899 29,088 8,176 17,653 197 55,114 17,337 8,084 30,786 414 56,621 $ $ $ $ $ $ 380,951 109,705 301,941 77,219 869,816 21,473 8,092 12,967 211 42,743 14,291 5,033 31,861 (1,370) 49,815 $ $ $ $ $ $ 294,618 115,494 195,527 85,084 690,723 18,658 8,435 7,974 164 35,231 8,066 8,366 13,107 300 29,839 (1) The 2016 amount includes an intercompany elimination for work completed by GES on renovations to Pursuit’s Banff Gondola. Geographic Areas Our foreign operations are located principally in Canada, the United Kingdom, Germany, the United Arab Emirates and the Netherlands. GES revenue is designated as domestic or foreign based on the originating location of the product or service. Long-lived assets are attributed to domestic or foreign based principally on the physical location of the assets. Long-lived assets consist of “Property and equipment, net” and “Other investments and assets.” The table below presents the financial information by major geographic area: (in thousands) Revenue: United States ........................................................................................ $ EMEA .................................................................................................. Canada.................................................................................................. Total revenue ........................................................................................... $ Long-lived assets: United States ........................................................................................ $ EMEA .................................................................................................. Canada.................................................................................................. Total long-lived assets ............................................................................. $ 2017 913,210 209,824 183,931 1,306,965 180,345 43,630 129,108 353,083 December 31, 2016 $ $ $ $ 855,304 205,028 144,638 1,204,970 182,611 37,083 104,461 324,155 $ $ $ $ 2015 726,436 220,046 142,566 1,089,048 139,479 15,714 71,677 226,870 Note 23. Common Stock Repurchases We previously announced our Board of Directors’ authorization to repurchase shares of our common stock from time to time at prevailing market prices. No open market repurchases were made during 2017 or 2016. During 2015, we repurchased 141,462 shares on the open market for $3.8 million. As of December 31, 2017, 440,540 shares remain available for repurchase. We repurchased 41,532 shares for $2.1 million in 2017, 25,432 shares for $0.7 million in 2016, and 35,649 shares for $1.0 million in 2015 related to tax withholding requirements on vested share-based awards. 82 Note 24. Selected Quarterly Financial Information (Unaudited) The following table sets forth selected unaudited consolidated quarterly financial information: 2017 2016 (in thousands, except per share data) Revenue: ............................................. $325,807 $364,774 $339,099 $277,285 $241,362 $324,747 $382,465 $256,396 Operating income (loss): First Quarter Second Quarter Third Quarter Fourth Quarter First Quarter Second Quarter Third Quarter Fourth Quarter Ongoing operations (1) ................... $ 12,684 $ 39,402 $ 47,066 $ (4,726) $ (6,280) $ 34,014 $ 58,917 $ (1,466) (2,932) Corporate activities ....................... (1,519) Restructuring charges.................... Impairment recoveries (charges)... (98) Operating income (loss) ................ $ 12,064 $ 38,473 $ 66,804 $ (7,698) $ (9,183) $ 30,332 $ 54,328 $ (6,015) (4,474) (255) 24,467 (2,772) (1,697) (120) (2,610) (394) 2,384 (2,707) (975) — (1,911) (992) — (3,008) (168) 2,247 (2,785) (187) — Income (loss) from continuing operations attributable to Viad............ $ Net income (loss) attributable to Viad.....$ Basic and Diluted income (loss) per common share: (2)................................ Continuing operations attributable to Viad ........................................... $ Net income (loss) attributable to Viad common stockholders........... $ 7,593 $ 27,438 $ 44,758 $ (21,814) $ (6,797) $ 19,873 $ 34,013 $ (4,136) 6,777 $ 27,947 $ 44,657 $ (21,674) $ (6,983) $ 19,509 $ 33,792 $ (4,049) 0.37 $ 1.35 $ 2.19 $ (1.08) $ (0.34) $ 0.98 $ 1.68 $ (0.21) 0.33 $ 1.37 $ 2.19 $ (1.07) $ (0.35) $ 0.96 $ 1.67 $ (0.20) (1) (2) Represents revenue less costs of services and cost of products sold. The sum of quarterly income per share amounts may not equal annual income per share due to rounding. 83 REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM To the Board of Directors and Stockholders of Viad Corp Opinion on the Financial Statements We have audited the accompanying consolidated balance sheets of Viad Corp and subsidiaries (the “Company”) as of December 31, 2017 and 2016, the related consolidated statements of operations, comprehensive income (loss), stockholders’ equity, and cash flows, for each of the three years in the period ended December 31, 2017, and the related notes and the financial statement schedule listed in the Index at Item 15 (collectively referred to as the “financial statements”). In our opinion, the consolidated financial statements present fairly, in all material respects, the financial position of the Company as of December 31, 2017 and 2016, and the results of its operations and its cash flows for each of the three years in the period ended December 31, 2017, in conformity with accounting principles generally accepted in the United States of America. We have also audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (PCAOB), the Company’s internal control over financial reporting as of December 31, 2017, based on criteria established in Internal Control — Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission and our report dated February 28, 2018, expressed an unqualified opinion on the Company’s internal control over financial reporting. Basis for Opinion These consolidated financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on the Company’s consolidated financial statements based on our audits. We are a public accounting firm registered with the PCAOB and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB. We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the consolidated financial statements are free of material misstatement, whether due to error or fraud. Our audits included performing procedures to assess the risks of material misstatement of the consolidated financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the consolidated financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the consolidated financial statements. We believe that our audits provide a reasonable basis for our opinion. /s/ Deloitte & Touche LLP Phoenix, Arizona February 28, 2018 We have served as the Company’s auditor since at least 1929, however the specific year has not been determined. 84 Item 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE None. Item 9A. CONTROLS AND PROCEDURES 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 December 31, 2017. Based on this evaluation, the CEO and CFO concluded that our disclosure controls and procedures were effective as of December 31, 2017. There were no changes in our internal control over financial reporting during the fourth quarter of 2017 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting. 85 MANAGEMENT’S REPORT ON INTERNAL CONTROL OVER FINANCIAL REPORTING Our management is responsible for establishing and maintaining adequate internal control over financial reporting. Internal control over financial reporting is defined in Rule 13a-15(f) or 15d-15(f) of the Exchange Act as a process designed by, or under the supervision of, our principal executive and principal financial officers and effected by our board of directors, our management and other personnel, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with U.S GAAP and includes those policies and procedures that: • • • Pertain to the maintenance of records that in reasonable detail accurately and fairly reflect the transactions and dispositions of our assets; Provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with U.S. GAAP, and that our receipts and expenditures are being made only in accordance with authorizations of our management and directors; and Provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use or disposition of our assets that could have a material effect on our financial statements. Because of inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate. All internal control systems, no matter how well designed, have inherent limitations. Therefore, even those systems determined to be effective can provide only reasonable assurance with respect to financial statement preparation and presentation. Because of the inherent limitations of internal control, there is a risk that material misstatements may not be prevented or detected on a timely basis by internal control over financial reporting. However, these inherent limitations are known features of the financial reporting process. Therefore, it is possible to design into the process safeguards to reduce, though not eliminate, this risk. Our management performed an assessment of the effectiveness of our internal control over financial reporting using the criteria described in the “Internal Control - Integrated Framework (2013),” issued by the Committee of Sponsoring Organizations of the Treadway Commission. The objective of this assessment was to determine whether our internal control over financial reporting was effective as of December 31, 2017. Based on our assessment, we concluded that, as of December 31, 2017, our internal control over financial reporting is effective based on those criteria. Our independent registered public accounting firm, Deloitte & Touche LLP, has issued a report relating to our audit of the effectiveness of our internal control over financial reporting, which appears on the following page of this 2017 Form 10-K. 86 REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM To the Board of Directors and Stockholders of Viad Corp Opinion on Internal Control over Financial Reporting We have audited the internal control over financial reporting of Viad Corp and subsidiaries (the “Company”) as of December 31, 2017, based on criteria established in Internal Control — Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO). In our opinion, the Company maintained, in all material respects, effective internal control over financial reporting as of December 31, 2017, based on criteria established in Internal Control — Integrated Framework (2013) issued by COSO. We have also audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (PCAOB), the consolidated financial statements and financial statement schedule as of and for the year ended December 31, 2017, of the Company and our report dated February 28, 2018, expressed an unqualified opinion on those consolidated financial statements and financial statement schedule. Basis for Opinion The Company’s management is responsible for maintaining effective internal control over financial reporting and for its assessment of the effectiveness of internal control over financial reporting, included in the accompanying Management’s Report on Internal Control over Financial Reporting. Our responsibility is to express an opinion on the Company’s internal control over financial reporting based on our audit. We are a public accounting firm registered with the PCAOB and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB. We conducted our audit in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether effective internal control over financial reporting was maintained in all material respects. Our audit included obtaining an understanding of internal control over financial reporting, assessing the risk that a material weakness exists, testing and evaluating the design and operating effectiveness of internal control based on the assessed risk, and performing such other procedures as we considered necessary in the circumstances. We believe that our audit provides a reasonable basis for our opinion. Definition and Limitations of Internal Control over Financial Reporting A company’s internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. A company’s internal control over financial reporting includes those policies and procedures that (1) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company; (2) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are being made only in accordance with authorizations of management and directors of the company; and (3) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the company’s assets that could have a material effect on the financial statements. Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate. /s/ Deloitte & Touche LLP Phoenix, Arizona February 28, 2018 87 Item 9B. OTHER INFORMATION Not applicable. 88 PART III Item 10. DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE Information regarding our directors, director nomination procedures, the Audit Committee of our Board of Directors, and compliance with Section 16(a) of the Exchange Act, are included in our Proxy Statement for the Annual Meeting of Shareholders to be held on May 17, 2018 (the “Proxy Statement”), under the captions “Election of Directors,” “Board of Directors and Corporate Governance,” and “Information on Stock Ownership,” and are incorporated herein by reference. Information regarding our executive officers is located in Part I, “Other – Executive Officers of the Registrant” of this 2017 Form 10-K. We adopted a Code of Ethics for all of our directors, officers and employees. A copy of our Code of Ethics is available at our website at www.viad.com/about-us/corporate-governance/documents-and-charters/default.aspx and is also available without charge to any shareholder upon written request to: Viad Corp, 1850 North Central Avenue, Suite 1900, Phoenix, Arizona 85004-4565, Attention: Corporate Secretary. Item 11. EXECUTIVE COMPENSATION Information in the Proxy Statement under the captions “Compensation Discussion and Analysis,” “Board of Directors and Corporate Governance,” and “Executive Compensation” is incorporated herein by reference. Item 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER MATTERS Information in the Proxy Statement under the captions “Executive Compensation” and “Information on Stock Ownership” is incorporated herein by reference. Item 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR INDEPENDENCE Information in the Proxy Statement under the caption “Board of Directors and Corporate Governance” is incorporated herein by reference. Item 14. PRINCIPAL ACCOUNTING FEES AND SERVICES Information regarding principal accounting fees and services and the pre-approval policies and procedures for such fees and services, as adopted by the Audit Committee of the Board of Directors, is contained in the Proxy Statement under the caption “Ratification of the Appointment of Deloitte & Touche LLP as Viad’s Independent Public Accountants for 2018” and is incorporated herein by reference. Item 15. EXHIBITS AND FINANCIAL STATEMENT SCHEDULE (a) Financial Statements and Schedule PART IV See Index to Financial Statements and Financial Statement Schedule at Item 8 of this 2017 Form 10-K. (b) Exhibit Index 89 Exhibit Number 3.A 3.B 4.A1 4.A2 4.A3 4.A4 4.A5 4.A6 4.B1 4.B2 4.B3 Exhibit Description Restated Certificate of Incorporation of Viad Corp, as amended through July 1, 2004 (SEC File No. 001-11015; SEC Film No. 04961107). Incorporated by Reference Form Period Ending Exhibit Filing Date 10-Q 6/30/2004 3.A 8/9/2004 Bylaws of Viad Corp, as amended through December 5, 2013. 8-K 3 12/9/2013 $300,000,000 Amended and Restated Credit Agreement, Amended and Restated Pledge and Security Agreement, Guaranty, and Amended and Restated Subsidiary Pledge and Security Agreement, by and among the Registrant, the initial lenders named therein, and JP Morgan Chase Bank, N.A., as administrative agent, dated as of December 22, 2014. Amendment No. 1, effective as of February 24, 2016, to the $300,000,000 Amended and Restated Credit Agreement, by and among the Registrant, the initial lenders named therein, and JP Morgan Chase Bank, N.A., as administrative agent, dated as of December 22, 2014. 8-K 4 12/23/2014 8-K 4 3/1/2016 Joinder to Guaranty, dated as of August 31, 2016, by and among CIRI Alaska Tourism Corporation, the lenders named therein, and JP Morgan Chase Bank, N.A., as agent, to Guaranty dated as of December 22, 2014. 8-K 4.A 9/2/2016 Joinder to Amended and Restated Subsidiary Pledge and Security Agreement, dated as of August 31, 2016, among CIRI Alaska Tourism Corporation, the guarantors thereunder, to and in favor of JP Morgan Chase Bank, N.A., as agent. Joinder to Guaranty, dated as of July 14, 2017, by and among ON Services and JPMorgan Chase Bank, N.A., as agent, in favor of the agent and the lender parties thereto. Joinder to Amended and Restated Subsidiary Pledge and Security Agreement, dated as of July 14, 2017, by and among ON Services and JPMorgan Chase Bank, N.A., as agent, in favor of the agent and the lender parties thereto. 8-K 4.B 9/2/2016 10-Q 6/30/2017 4.1 8/4/2017 10-Q 6/30/2017 4.2 8/4/2017 Credit Agreement, by and between Brewster Inc. and BMO Harris Bank N.A., dated as of December 28, 2016. 8-K 4 1/3/2017 Joinder to Guaranty Supplement No. 1, dated as of August 31, 2017, by and among ON Services – AV Specialists, Inc., the guarantors thereunder, to and in favor of BMO Harris Bank, N.A., to Guaranty dated as of December 28, 2016. First Amendment to Credit Agreement and Reaffirmation of Guaranties effective as of December 6, 2017, to the Credit Agreement, among Brewster Inc., and BMO Harris Bank N.A., dated as of December 28, 2016. 10-Q 9/30/2017 4.1 11/6/2017 8-K 4.1 12/14/2017 90 2007 Viad Corp Omnibus Incentive Plan, filed as Appendix A to Viad Corp’s Proxy Statement for the 2012 Annual Meeting of Shareholders. DEF 14A 10.A1 + 4/13/2012 Form of Restricted Stock Agreement - Executives, (three-year cliff vesting), effective as of March 26, 2014, pursuant to the 2007 Viad Corp Omnibus Incentive Plan. 10.A2 + 8-K 10.A 3/28/2014 Form of Restricted Stock Units Agreement, effective as of March 26, 2014, pursuant to the 2007 Viad Corp Omnibus Incentive Plan. 10.A3 + Form of Restricted Stock Agreement for Outside Directors, effective as of February 25, 2008, pursuant to the 2007 Viad Corp Omnibus Incentive Plan. 10.A4 + Form of Non-Qualified Stock Option Agreement, effective as of February 25, 2010, pursuant to the 2007 Viad Corp Omnibus Incentive Plan. 10.A5 + Form of Incentive Stock Option Agreement, effective as of February 25, 2010, pursuant to the 2007 Viad Corp Omnibus Incentive Plan. 10.A6 + 8-K 8-K 8-K 8-K Viad Corp Management Incentive Plan, amended as of February 27, 2013, pursuant to the 2007 Viad Corp Omnibus Incentive Plan. 8-K 10.A7 + Viad Corp Performance Unit Incentive Plan, effective as of February 27, 2013, pursuant to the 2007 Viad Corp Omnibus Incentive Plan. 10.A8 + Amendment to the Viad Corp Performance Unit Incentive Plan, as amended February 27, 2013 pursuant to the 2007 Viad Corp Omnibus Incentive Plan, effective as of February 24, 2016. 10.A9 + 8-K 8-K 10.A10 + Form of Performance Unit Agreement, effective as of March 26, 2014, pursuant to the 2007 Viad Corp Omnibus Incentive Plan. 8-K Form of Performance Unit Agreement, effective as of February 24, 2016, pursuant to the 2007 Viad Corp Omnibus Incentive Plan. 10.A11 + 10.B1 + 2017 Viad Corp Omnibus Incentive Plan, effective as of May 18, 2017. Form of Restricted Stock Agreement – Executives, effective as of May 18, 2017, pursuant to the 2017 Viad Corp Omnibus Incentive Plan. 10.B2 + Form of Restricted Stock Units Agreement, effective as of May 18, 2017, pursuant to the 2017 Viad Corp Omnibus Incentive Plan. 10.B3 + 8-K 8-K 8-K 8-K 91 10.B 3/28/2014 10.F 2/28/2008 10.B 2/26/2010 10.A 2/26/2010 10.C 3/5/2013 10.D 3/5/2013 10.B 3/1/2016 10.C 3/28/2014 10.A 3/1/2016 10.1 5/23/2017 10.3 5/23/2017 10.4 5/23/2017 10.B4 10.B5 10.B6 10.B7 10.B8 10.B9 10.B10 10.C1 10.C2 10.C3 10.C4 10.C5 10.C6 10.C7 10.D1 + * + * + * + * + * + + * + + + + + + + + Form of Management Incentive Plan (MIP) Administrative Guidelines, effective February 27, 2018, pursuant to the 2017 Viad Corp Omnibus Incentive Plan, effective as of May 18, 2017. Form of Management Incentive Plan, effective as of February 27, 2018, pursuant to the 2017 Viad Corp Omnibus Incentive Plan, effective as of May 18, 2017. Form of Performance Unit Incentive Plan (“PUP”) Administrative Guidelines, effective February 27, 2018, pursuant to the 2017 Viad Corp Omnibus Incentive Plan, effective as of May 18, 2017. Form of 2017 Viad Corp Omnibus Incentive Plan Performance Unit Agreement, effective February 27, 2018, pursuant to the 2017 Viad Corp Omnibus Incentive Plan, effective as of May 18, 2017. Form of Viad Corp Performance Unit Incentive Plan, effective as of February 27, 2018, pursuant to the 2017 Viad Corp Omnibus Incentive Plan, effective as of May 18, 2017. Form of Restricted Stock Agreement – Non-Employee Directors, effective as of May 18, 2017, pursuant to the 2017 Viad Corp Omnibus Incentive Plan. Form of Restricted Stock Agreement – Non-Employee Directors, effective as of February 27, 2018, pursuant to the 2017 Viad Corp Omnibus Incentive Plan. 8-K 10.2 5/23/2017 Forms of Viad Corp Executive Severance Plans (Tier I and II), amended and restated for Code Section 409A as of January 1, 2005. Form of Viad Corp Executive Severance Plan (Tier I-2013) effective as February 27, 2013. 8-K 8-K Amendment No. 1 to Viad Corp Executive Severance Plan (Tier I), effective as of February 26, 2014. 8-K Severance Agreement (No Change in Control) between Viad Corp and Steven W. Moster, effective as of December 3, 2014. 8-K 10.B 8/29/2007 10.B 3/5/2013 10 3/4/2014 10.B 12/5/2014 Severance Agreement (No Change in Control) between Viad Corp and David W. Barry, effective as of April 22, 2015. 10-K 12/31/2015 10H.4 3/11/2016 Severance Agreement and General Release between Viad Corp and Thomas M. Kuczynski, effective as of April 27, 2016. 8-K/A Severance Agreement and General Release between Viad Corp and Deborah J. DePaoli, effective as of November 29, 2017. 8-K/A Viad Corp Supplemental TRIM Plan, as amended and restated effective January 1, 2005 for Code Section 409A. 8-K 10 4/22/2016 10.1 12/1/2017 10.E 8/29/2007 92 10.E1 10.F1 10.G1 10.H1 10.I1 10.J1 21 23 24 31.1 31.2 32.1 Viad Corp Supplemental Pension Plan, amended and restated as of January 1, 2005 for Code Section 409A. 8-K 10.A 8/29/2007 Viad Corp Defined Contribution Supplemental Executive Retirement Plan, effective as of January 1, 2013. 8-K 10.E 3/5/2013 Executive Officer Pay Continuation Policy adopted February 7, 2007. 8-K 10.A 2/13/2007 Description of Viad Corp Directors Matching 2018 Matching Gift Program. Form of Indemnification Agreement between Viad Corp and Directors of Viad Corp, as approved by Viad Corp stockholders on October 16, 1987. 10-K 12/31/2008 10.1 2/27/2009 Summary of Compensation Program of Non-Employee Directors of Viad Corp, effective as of February 23, 2016. 10-K 12/31/2015 10.K1 3/11/2016 List of Viad Corp Subsidiaries. Consent of Independent Registered Public Accounting Firm to the incorporation by reference into specified registration statements on Form S-8 of its report contained in this Annual Report. Power of Attorney signed by Viad Corp Directors. Certification of Chief Executive Officer of Viad Corp pursuant to Section 302 of the Sarbanes-Oxley Act of 2002. Certification of Chief Financial Officer of Viad Corp pursuant to Section 302 of the Sarbanes-Oxley Act of 2002. + + + + * + + * * * # * # * Certifications of Chief Executive Officer and Chief Financial Officer of Viad Corp pursuant to Section 906 of the Sarbanes- Oxley Act of 2002. # ** 101.INS * XBRL Instance Document. 101.SCH * XBRL Taxonomy Extension Schema Document. 101.CAL * XBRL Taxonomy Extension Calculation Linkbase Document. 101.DEF * XBRL Taxonomy Extension Definition Linkbase Document. 101.LAB * XBRL Taxonomy Extension Label Linkbase Document. 101.PRE * XBRL Taxonomy Extension Presentation Linkbase Document. * ** + Filed herewith Furnished herewith. Management contract or compensation plan or arrangement. 93 # A signed original of this written statement has been provided to Viad Corp and will be retained by Viad Corp and furnished to the SEC upon request. Item 16. FORM 10-K SUMMARY None. 94 VIAD CORP SCHEDULE II – VALUATION AND QUALIFYING ACCOUNTS (in thousands) Allowances for doubtful accounts: December 31, 2015............................................ December 31, 2016............................................ December 31, 2017............................................ Deferred tax valuation allowance: December 31, 2015............................................ December 31, 2016............................................ December 31, 2017............................................ Additions Deductions Balance at Beginning of Year Charged to Expense Charged to Other Accounts Write-Offs Other(1) Balance at End of Year 1,258 1,593 1,342 3,295 2,837 3,998 955 1,355 2,470 — 1,406 1,385 574 41 49 402 — — (1,162) (1,602) (1,529) (860) (176) (1,595) (32) (45) (309) — (69) 222 1,593 1,342 2,023 2,837 3,998 4,010 (1) “Other” primarily includes foreign exchange translation adjustments. 95 Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized, in Phoenix, Arizona, on February 28, 2018. SIGNATURES VIAD CORP By: /s/ Steven W. Moster Steven W. Moster President and Chief Executive Officer Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of Viad Corp and in the capacities and on the dates indicated: Date: February 28, 2018 Date: February 28, 2018 Date: February 28, 2018 Date: February 28, 2018 Principal Executive Officer By: /s/ Steven W. Moster Steven W. Moster President and Chief Executive Officer Principal Financial Officer By: /s/ Ellen M. Ingersoll Ellen M. Ingersoll Chief Financial Officer Principal Accounting Officer By: /s/ Leslie S. Striedel Leslie S. Striedel Chief Accounting Officer Directors Andrew B. Benett* Isabella Cunningham* Richard H. Dozer* Virginia L. Henkels* Edward E. Mace* Robert E. Munzenrider* Joshua E. Schechter* By: /s/ Ellen M. Ingersoll Ellen M. Ingersoll Attorney-in-Fact * Pursuant to power of attorney filed as Exhibit 24 to this 2017 Form 10-K 96 [THIS PAGE INTENTIONALLY LEFT BLANK] [THIS PAGE INTENTIONALLY LEFT BLANK] W E P R O V I D E U N F O R G E T T A B L E experiences From the Kenai Fjords and Seward, up through Talkeetna and into Denali, Pursuit’s Alaska Collection offers visitors the Alaskan trip of a lifetime. Photos: (Main) Kenai Fjords Wilderness Lodge – Kenai Fjords National Park, Fox Island, Alaska, (Inset) Denali Backcountry Lodge – Denali National Park & Preserve, Kantishna, Alaska viad at a glance GES is a leading global provider for live events, offering a comprehensive range of services, including creative design, strategy, audio-visual, show production, and event accommodations — all with an unrivaled global reach. With award-winning services and innovative technology, we help our clients maximize performance and achieve their vision through face-to-face experiences. 4K+ LIVE EVENTS MANAGED ANNUALLY 4MPRE-REGISTRATIONS PROCESSED ANNUALLY 4MROOM NIGHTS BOOKED ANNUALLY viad 2017 financial highlights REVENUE in millions ADJUSTED SEGMENT EBITDA (1) in millions INCOME BEFORE OTHER ITEMS (1) per share . 0 9 8 0 1 $ . . 0 5 0 2 1 $ , . 0 7 0 3 1 $ , . 6 2 5 1 $ . 2 0 3 1 $ . 6 0 9 $ . 2 6 2 $ . 8 3 2 $ . 6 4 1 $ ‘15 ‘16 ‘17 ‘15 ‘16 ‘17 ‘15 ‘16 ‘17 (1) A reconciliation of this non-GAAP measure to its most directly comparable GAAP financial measure can be found on the inside back cover of this report. viad at a glance Pursuit is a collection of inspiring, unforgettable experiences in Alaska, Montana, the Canadian Rockies, and Vancouver, British Columbia. Pursuit’s world-class attractions, distinctive lodges and travel experiences help adventurous people from around the world discover and connect with iconic locations, including Banff, Jasper, Waterton Lakes, Glacier, Denali, and Kenai Fjords national parks. 7WORLD-CLASS ATTRACTIONS 2.5MILLION PASSENGERS ANNUALLY 15DISTINCTIVE LODGING PROPERTIES NET INCOME ATTRIBUTABLE TO VIAD per share OPERATING CASH FLOW in millions DEBT-TO-CAPITAL RATIO . 3 8 2 $ . 9 0 2 $ . 2 3 1 $ . 2 2 1 1 $ . 3 0 0 1 $ . 3 0 6 $ % 3 0 4 . % 2 2 3 . % 8 7 2 . ‘15 ‘16 ‘17 ‘15 ‘16 ‘17 ‘15 ‘16 ‘17 board of directors & leadership team BOARD OF DIRECTORS 4 5 8 1 6 3 2 7 1 Richard H. Dozer (1,3) Chairman of the Board, Viad Corp; Former President, Arizona Diamondbacks, and Former VP and Chief Operating Officer, Phoenix Suns 2 Andrew B. Benett (2,3) Global Chief Commercial Officer of Bloomberg Media Group 3 Isabella Cunningham (2,3) Stan Richards Chair in Advertising and Public Relations at the Stan Richards School of Advertising and Public Relations of the University of Texas at Austin 4 Virginia L. Henkels (1) Former Executive Vice President, Chief Financial Officer, and Treasurer, Swift Transportation Company 5 Edward E. Mace (1,3) 6 Steven W. Moster 7 Robert E. Munzenrider (1,2) 8 Joshua E. Schechter (1,2) President and Chief Executive Officer, Silverwest Hotel LLC President and Chief Executive Officer, Viad Corp; President of GES Retired President, Harmon AutoGlass Chairman of the Board, Support.com LEADERSHIP TEAM BOARD COMMITTEES (1) Audit Committee | Chair: Robert E. Munzenrider (2) Corporate Governance and Nominating Committee | Chair: Andrew B. Benett (3) Human Resources Committee | Chair: Edward E. Mace Steven W. Moster President & Chief Executive Officer, and President of GES Ellen M. Ingersoll Chief Financial Officer David W. Barry President of Pursuit Richard A. Britton Chief Information Officer Trisha L. Fox Chief Human Resources Officer Leslie S. Striedel Chief Accounting Officer corporate information TRANSFER AGENT To submit a change of address, to make inquiries regarding dividend payments, to mail Common Stock certificates for transfer, or to redeem $4.75 Preferred Stock certificates, please contact: EQ Shareowner Services PO Box 64874 St. Paul, MN 55164-0874 1-800-453-2235 https://www.shareowneronline.com Shareholders of record who receive more than one copy of this annual report may contact our transfer agent and arrange to have their accounts consolidated. AWARDS SHAREHOLDER INFORMATION Annual Shareholders Meeting The annual meeting of shareholders is scheduled to be held on: May 17, 2018 8:00 a.m. (MST) Royal Palms Hotel 5200 East Camelback Road Phoenix, AZ 85018 (602) 283-1234 www.royalpalmshotel.com ADJUSTED SEGMENT EBITDA INCOME BEFORE OTHER ITEMS Millions 2015 2016 2017 2017 2017 Per diluted share Viad Consolidated GES Pursuit Viad Consolidated 2015 2016 2017 — — (0.1) Restructuring Charges, Pre-tax 0.15 0.26 0.05 Net Income Attributable to Viad Net Income Attributable to Noncontrolling Interest $ 26.6 $ 42.3 $ 57.7 0.4 0.5 0.5 Net Loss Attributable to Redeemable Noncontrolling Interest Loss from Discontinued Operations 0.4 0.7 0.3 Corporate Activities Expense 9.7 10.3 12.9 Corporate Eliminations Restructuring Charges Impairment Charges (Recoveries) Interest Income Interest Expense — 3.0 0.7 5.2 (0.1) 1.0 0.1 0.2 (29.1) (0.7) (1.2) (0.3) 4.5 5.9 8.3 Income Tax Expense 10.5 21.3 45.9 Segment Operating Income $ 54.6 $ 85.9 $ 97.1 $ 50.0 $ 47.1 FlyOver Iceland Start-up Costs — — 0.1 — 0.1 Acquisition Integration Costs 0.9 1.1 0.3 0.2 0.2 Fire-related Business Interruption Expense Acquisition Transaction- related Costs Adjusted Segment Operating Income — 0.1 — — — — 0.5 0.2 — 0.2 55.5 87.7 97.7 50.1 47.6 Segment Depreciation 27.9 33.4 42.5 26.4 16.1 Segment Amortization 7.2 9.2 12.4 10.8 1.6 Adjusted Segment EBITDA $ 90.6 $ 130.2 $ 152.6 $ 87.4 $ 65.2 s e t a i c o s s A d n A g r e b n e s i E y b n g i s e D Net Income Attributable to Viad $ 1.32 $ 2.09 $ 2.83 Loss from Discontinued Operations Attributable to Viad Income from Continuing Operations Attributable to Viad 0.02 0.03 0.01 1.34 2.12 2.84 Impairment Charges (Recoveries), Pre-tax — 0.01 (1.43) Acquisition-related Costs and Other Non-recurring Expenses, Pre-tax 0.15 0.12 0.06 Tax Expense (Benefit) on Above Items (0.11) (0.13) Charge Related to Tax Reform Favorable Tax Matters — (0.07) — — 0.37 0.79 (0.06) Income Before Other Items $ 1.46 $ 2.38 $ 2.62 Adjusted Segment EBITDA and Income Before Other Items are supplemental to results presented under accounting principles generally accepted in the United States of America (“GAAP”) and may not be comparable to similarly titled measures presented by other companies. These measures are used by management to facilitate period-to-period comparisons and analysis of Viad’s operating performance and liquidity. Management believes these measures are useful to investors in trending, analyzing and benchmarking the performance and value of Viad’s business. These non-GAAP measures should be considered in addition to, but not as a substitute for, other similar measures reported in accordance with GAAP. Note — Certain amounts above may not total due to rounding AWARDS ’17& Cover Photos: (Top) FlyOver Canada – Vancouver, British Columbia, Canada, (Bottom) Haliburton Academy – Omni Dallas Hotel, Dallas, Texas VIAD CORP 1850 N. Central Avenue Suite 1900 Phoenix, AZ 85004-4565 www.viad.com

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