Note 3. Acquisition of Businesses

2016 Acquisitions

Maligne Lake Tours

On January 4, 2016, the Company 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, subject to certain adjustments.

The following table summarizes the updated allocation of the aggregate purchase price paid and the amounts of assets acquired and liabilities assumed based on the estimated fair value as of the acquisition date. During 2016, the Company made a purchase accounting measurement period adjustment of approximately $240,000 to other liabilities based on refinements to assumptions used in the preliminary valuation. The allocation of the purchase price was completed as of December 31, 2016.

(in thousands)
Purchase price paid as:
Cash			$	14,962

Fair value of net assets acquired:
Inventories	$	246
Prepaid expenses		2
Property and equipment		4,133
Intangible assets		9,244
Total assets acquired		13,625
Customer deposits		15
Other liabilities		240
Total liabilities assumed		255
Total fair value of net assets acquired				13,370
Excess purchase price over fair value of net assets acquired (“goodwill”)			$	1,592

Under the acquisition method of accounting, the purchase price as shown in the table above is allocated to the tangible and identifiable intangible assets acquired and liabilities assumed based on their estimated fair values. The excess purchase price over the fair value of net assets acquired was 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 growth opportunities when combined with Pursuit’s other businesses. Goodwill is expected to be deductible for tax purposes pursuant to Canadian tax regulations. 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. Transaction costs associated with the acquisition of Maligne Lake Tours were $0.1 million in 2016 which are included in cost of services in Viad’s Consolidated Statements of Operations and $0.2 million in 2015 which are included in corporate activities in Viad’s Consolidated Statements of Operations.

Identified intangible assets acquired in the Maligne Lake Tours acquisition totaled $9.2 million and consist of operating licenses of $8.3 million, customer relationships of $0.8 million, and trade name of $0.1 million. The weighted-average amortization period related to the intangible assets is 26.7 years, largely attributable to operating licenses amortized over the remaining Parks Canada lease of 29 years.

The results of operations of Maligne Lake Tours have been included in Viad’s consolidated financial statements from the date of acquisition. During 2016, revenue and operating income related to Maligne Lake Tours were $6.3 million and $1.9 million, respectively.

CATC

On March 11, 2016, the Company acquired 100 percent of the equity interests in CATC Alaska Tourism Corporation, formerly known as CIRI 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, subject to certain adjustments.

The following table summarizes the updated allocation of the aggregate purchase price paid and the amounts of assets acquired and liabilities assumed based on the estimated fair value as of the acquisition date. During 2016, the Company made certain purchase accounting measurement period adjustments based on refinements to assumptions used in the preliminary valuation of approximately $89,000 from working capital receivable, $105,000 to accounts payable, and $16,000 from accrued liabilities. The allocation of the purchase price was completed as of December 31, 2016.

(in thousands)
Purchase price paid as:
Cash			$	45,000
Working capital				(35	)
Cash acquired				(2,196	)
Purchase price, net of cash acquired				42,769

Fair value of net assets acquired:
Accounts receivable	$	8
Inventories		921
Prepaid expenses		82
Property and equipment		43,470
Intangible assets		980
Total assets acquired		45,461
Accounts payable		306
Accrued liabilities		434
Customer deposits		1,952
Total liabilities assumed		2,692
Total fair value of net assets acquired				42,769
Excess purchase price over fair value of net assets acquired (“goodwill”)			$	—

Under the acquisition method of accounting, the purchase price as shown in the table above is allocated to the tangible and identifiable intangible assets acquired and liabilities assumed based on their estimated fair values. 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. Transaction costs associated with the acquisition of CATC were $0.1 million in 2016, $0.6 million in 2015, and $0.1 million in 2014 and are included in corporate activities in Viad’s Consolidated Statements of Operations.

Identified intangible assets acquired in the CATC acquisition totaled $1.0 million and consist of customer relationships of $0.8 million and trade names of $0.2 million. The weighted-average amortization period related to the intangible assets is 5.8 years.

The results of operations of CATC have been included in Viad’s consolidated financial statements from the date of acquisition. During 2016, revenue and operating income related to CATC were $28.0 million and $6.0 million, respectively.

ON Services

On August 11, 2016, the Company 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, subject to certain adjustments, 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. As of December 31, 2016, the Company determined the fair value of the Earnout was zero as ON Services did not meet its 2016 financial target. Refer to Note 12 – Fair Value Measurements for the estimated fair value of the Earnout as of December 31, 2016.

The following table summarizes the updated allocation of the aggregate purchase price paid and the amounts of assets acquired and liabilities assumed based on the estimated fair value as of the acquisition date. During 2016, the Company made certain purchase accounting measurement period adjustments based on refinements to assumptions used in the preliminary valuation of approximately $628,000 from working capital receivable, $170,000 from accounts receivable, $14,000 from inventories, $102,000 from prepaid expenses, $650,000 to intangible assets, $113,000 to accounts payable, and $92,000 to accrued liabilities. The allocation of the purchase price was completed as of December 31, 2016.

(in thousands)
Purchase price paid as:
Cash			$	87,000
Working capital adjustment				344
Contingent consideration				540
Purchase price				87,884

Fair value of net assets acquired:
Accounts receivable	$	4,643
Inventories		256
Prepaid expenses		872
Property and equipment		14,827
Intangible assets		33,990
Total assets acquired		54,588
Accounts payable		992
Accrued liabilities		564
Customer deposits		851
Other liabilities		274
Total liabilities assumed		2,681
Total fair value of net assets acquired				51,907
Excess purchase price over fair value of net assets acquired (“goodwill”)			$	35,977

Under the acquisition method of accounting, the purchase price as shown in the table above is allocated to the tangible and identifiable intangible assets acquired and liabilities assumed based on their estimated fair values. The excess purchase price over the fair value of net assets acquired was recorded as goodwill. Goodwill is included in the GES business group and the primary factor that contributed to the purchase price resulting in the recognition of goodwill primarily relates to future growth opportunities when combined with GES’ other businesses. Goodwill is expected to be deductible for tax purposes over 15 years. 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. Transaction costs associated with the acquisition of ON Services were $0.9 million in 2016 and were included in corporate activities in Viad’s consolidated statement of operations.

Identified intangible assets acquired in the ON Services acquisition totaled $34.0 million and consist of customer relationships of $27.6 million, trade names of $3.2 million, and non-compete agreements of $3.2 million. The weighted-average amortization period related to the intangible assets is 10.5 years.

The results of operations of ON Services have been included in Viad’s consolidated financial statements from the date of acquisition. During 2016, revenue and operating loss related to ON Services were $21.3 million and $0.8 million, respectively.

FlyOver Canada

On December 29, 2016, the Company acquired the assets and operations of FlyOver Canada, a recreational attraction that provides a virtual flight ride experience with a combination of motion seating, a four-story movie screen, and media and visual effects. The purchase price was $68.8 million Canadian dollars (approximately $50.9 million U.S. dollars) in cash, subject to certain adjustments.

The following table summarizes the preliminary recording of the fair value of the assets acquired and liabilities assumed as of the acquisition date. Due to the recent timing of the acquisition, the purchase price allocation is not yet finalized and is subject to change within the measurement period (up to one year from the acquisition date) as the assessment of property and equipment and intangible assets is finalized.

(in thousands)
Purchase price paid as:
Cash			$	50,920
Cash acquired				(6	)
Purchase price, net of cash acquired				50,914

Fair value of net assets acquired:
Inventories	$	11
Prepaid expenses		37
Property and equipment		10,867
Intangible assets		6,028
Total assets acquired		16,943
Accrued liabilities		118
Total liabilities acquired		118
Total fair value of net assets acquired				16,825
Excess purchase price over fair value of net assets acquired (“goodwill”)			$	34,089

Under the acquisition method of accounting, the purchase price as shown in the table above is allocated to the tangible and identifiable intangible assets acquired and liabilities assumed based on their estimated fair values. The excess purchase price over the fair value of net assets acquired was recorded as goodwill. Goodwill of FlyOver Canada is included in the Pursuit business group and is a separate reporting unit. The primary factor that contributed to the purchase price resulting in the recognition of goodwill relates to future growth opportunities and expansion of the FlyOver concept. Goodwill is expected to be deductible for tax purposes pursuant to Canadian tax regulations. 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. Transaction costs associated with the acquisition of FlyOver Canada were $0.5 million in 2016 and are included in cost of services in Viad’s Consolidated Statements of Operations.

Identified intangible assets acquired in the FlyOver Canada acquisition totaled $6.0 million and consist of trade names of $3.7 million, customer relationships of $1.6 million, and non-compete agreements of $0.7 million. The weighted-average amortization period related to the intangible assets is 9.4 years.

The results of operations of FlyOver Canada have been included in Viad’s consolidated financial statements from the date of acquisition. During 2016, revenue and operating income related to FlyOver Canada were $72,000 and $5,000, respectively.

2014 Acquisitions

West Glacier Properties

In July 2014, the Company acquired the West Glacier Motel & Cabins, the Apgar Village Lodge and related land, food and beverage services, and retail operations (collectively, the “West Glacier Properties”). The purchase price was $16.5 million in cash with a working capital adjustment of $0.3 million related to certain current assets and liabilities.

Transaction costs associated with the acquisition of the West Glacier Properties were $0.2 million in 2014 and were included in corporate activities in Viad’s Consolidated Statements of Operations. The results of operations of the West Glacier Properties have been included in Viad’s consolidated financial statements from the date of acquisition. During 2014, revenue of $4.6 million and operating income of $1.5 million related to the West Glacier Properties were included in Viad’s Consolidated Statements of Operations.

Blitz

In September 2014, the Company acquired Blitz Communications Group Limited and its affiliates (collectively, “Blitz”), which has offices in the United Kingdom and is a leading audio-visual staging and creative services provider for the live events industry in the United Kingdom and continental Europe. The purchase price was £15 million (approximately $24.4 million) in cash.

Transaction costs associated with the acquisition of Blitz were $0.1 million in 2015 and $0.8 million in 2014 and are included in corporate activities in Viad’s Consolidated Statements of Operations. The results of operations of Blitz have been included in Viad’s consolidated financial statements from the date of acquisition. During 2014, revenue of $10.1 million and operating income of $0.4 million related to Blitz have been included in Viad’s Consolidated Statements of Operations.

onPeak LLC

In October 2014, the Company acquired onPeak LLC for a purchase price of $43.0 million in cash. Of the initial purchase price, $4.1 million was deposited at closing into escrow to secure post-closing purchase price adjustments, resolution of certain tax matters and other indemnity claims. onPeak LLC provides event accommodations services in North America to the live events industry.

Transaction costs associated with the acquisition of onPeak LLC were $0.2 million in 2015 and $0.5 million in 2014 and are included in corporate activities in Viad’s Consolidated Statements of Operations. The results of operations of onPeak LLC have been included in Viad’s consolidated financial statements from the date of acquisition. During 2014, revenue of $2.7 million and an operating loss of $0.7 million related to onPeak LLC have been included in Viad’s Consolidated Statements of Operations.

Travel Planners, Inc.

In October 2014, the Company acquired Travel Planners, Inc. for a purchase price of $33.7 million in cash less a working capital adjustment of $0.3 million. Of the purchase price, $8.8 million was deposited at closing into escrow to secure post-closing purchase price adjustments, resolution of certain tax matters, and other indemnity claims. An additional amount of $0.9 million was paid during 2015 to Travel Planners, Inc. as a result of an election made by the Company to treat the purchase as an asset acquisition for tax purposes. Travel Planners, Inc. provides event accommodations services in North America to the live events industry. Travel Planners, Inc. was merged into onPeak LLC in January 2015 and is collectively referred to as “onPeak.”

Transaction costs associated with the acquisition of Travel Planners, Inc. were $0.2 million in 2015 and $0.5 million in 2014 and are included in corporate activities in Viad’s Consolidated Statements of Operations. The results of operations of Travel Planners, Inc. have been included in Viad’s consolidated financial statements from the date of acquisition. During 2014, revenue of $3.4 million and operating income of $0.5 million related to Travel Planners, Inc. have been included in Viad’s Consolidated Statements of Operations.

N200

In November 2014, the Company acquired N200 Limited and its affiliates (collectively, “N200”) for €9.7 million (approximately $12.1 million) in cash, plus an earnout payment (the “Earnout”) of up to €1.0 million. The amount of the Earnout was based on N200’s achievement of established financial targets for the twelve-month period ended June 30, 2015. N200 exceeded those financial targets and, consequently, on October 5, 2015, the Company paid the full €1.0 million (approximately $1.1 million) Earnout to the former owners of N200. N200, which has offices in the United Kingdom and the Netherlands, is a leading event registration and data intelligence services provider for the live events industry in continental Europe.

Transaction costs associated with the acquisition of N200 were $0.2 million in 2015 and $1.0 million in 2014 and are included in corporate activities in Viad’s Consolidated Statements of Operations. The results of operations of N200 have been included in Viad’s consolidated financial statements from the date of acquisition. During 2014, revenue of $0.4 million and an operating loss of $0.2 million related to N200 have been included in Viad’s Consolidated Statements of Operations.

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 the Company’s Annual Report on Form 10-K for the year ended December 31, 2015.

	West Glacier Properties		Blitz			onPeak LLC			Travel Planners, Inc.			N200
(in thousands)
Purchase price paid as:
Cash	$	16,544	$	24,416		$	42,950		$	33,674		$	12,068
Additional purchase price paid for tax election		—		—			—			896			—
Working capital adjustment		—		—			—			(279	)		458
Working capital adjustment payable		320		—			—			—			—
Contingent consideration		—		—			—			—			1,145
Cash acquired		—		(190	)		(4,064	)		(4,204	)		(943	)
Total purchase price		16,864		24,226			38,886			30,087			12,728

Fair value of net assets acquired:
Accounts receivable		—		264			4,008			1,450			1,732
Prepaid expenses		24		410			640			120			115
Inventories		1,374		433			—			—			46
Property and equipment		14,510		5,951			2,450			93			1,280
Intangible assets		189		8,692			14,100			14,400			3,682
Other non-current assets		—		—			129			—			—
Total assets acquired		16,097		15,750			21,327			16,063			6,855
Accounts payable		—		1,232			738			488			421
Accrued liabilities		35		2,246			3,341			1,557			1,057
Customer deposits		402		199			4,225			4,525			569
Deferred tax liability		—		468			3,028			—			986
Revolving credit facility		—		488			—			—			—
Accrued dilapidations		—		417			—			—			—
Other liabilities		64		—			129			—			106
Total liabilities acquired		501		5,050			11,461			6,570			3,139
Total fair value of net assets acquired		15,596		10,700			9,866			9,493			3,716
Excess purchase price over fair value of net assets acquired (“goodwill”)	$	1,268	$	13,526		$	29,020		$	20,594		$	9,012

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 the West Glacier Properties, in GES International for Blitz and N200, and in GES U.S. for onPeak LLC and Travel Planners, Inc. and the primary factor that contributed to the purchase price resulting in the recognition of goodwill relates to future growth opportunities when combined with the Company’s other businesses. All goodwill is deductible for tax purposes over a period of 15 years for West Glacier Properties and Travel Planners, Inc., while $9.9 million of onPeak LLC’s $29.0 million goodwill is deductible and will be amortized over 15 years. 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 2014 Acquisitions:

(in thousands, except weighted average life)	West Glacier Properties		Blitz		onPeak LLC		Travel Planners, Inc.		N200
Customer relationships	$	—	$	6,808	$	13,800	$	13,500	$	3,309
Non-compete agreements		—		1,413		—		—		124
Trade name		—		471		300		300		125
Favorable lease contracts		189		—		—		600		124
Fair value of intangible assets acquired	$	189	$	8,692	$	14,100	$	14,400	$	3,682
Weighted average life	3.5 years		6.9 years		9.9 years		9.8 years		7.4 years

Supplementary pro forma financial information

The following table summarizes the unaudited pro forma results of operations attributable to Viad, assuming the 2016 acquisitions had each been completed on January 1, 2015:

	Year Ended December 31,
(in thousands, except per share data)	2016		2015
Revenue	$	1,250,290	$	1,183,656
Depreciation and amortization	$	52,074	$	52,631
Income from continuing operations	$	43,727	$	27,881
Net income attributable to Viad	$	42,517	$	27,045
Diluted income per share ⁽¹⁾	$	2.10	$	1.35
Basic income per share	$	2.10	$	1.35

⁽¹⁾Diluted income per share amount cannot exceed basic income per share.