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Note 1. Summary of Significant Accounting Policies
Basis of Presentation and Principles of Consolidation
The consolidated financial statements of Viad Corp (“Viad” or the “Company”) are prepared in conformity with accounting principles generally accepted in the United States of America (“GAAP”) and include the accounts of Viad and all of its subsidiaries. All intercompany account balances and transactions between Viad and its subsidiaries have been eliminated in consolidation.
Nature of Business
Viad’s reportable segments consist of Marketing & Events U.S., Marketing & Events International and Travel & Recreation Group.
Marketing & Events Group
The Marketing & Events Group, comprised of Global Experience Specialists, Inc. and affiliates (“GES”), specializes in all aspects of the design, planning and production of face-to-face events, immersive environments and brand-based experiences for clients, including show organizers, corporate brand marketers and retail shopping centers. In addition, the Marketing & Events Group provides a variety of immersive, entertaining attractions and brand-based experiences, sponsored events, mobile marketing and other branded entertainment and face-to-face marketing solutions for clients and venues, including shopping malls, movie studios, museums and leading consumer brands.
Travel & Recreation Group
Travel and recreation services are provided by Brewster Inc. (“Brewster”), Glacier Park, Inc. (“Glacier Park”) and Alaskan Park Properties, Inc. (“Alaska Denali Travel”).
Brewster provides tourism services in the Canadian Rockies in Alberta and in other parts of Western Canada. Brewster’s operations include the Banff Gondola, Columbia Icefield Glacier Adventure, motorcoach services, charter and sightseeing services, tour boat operations, inbound package tour operations and hotel operations, including the Banff International Hotel acquired on March 7, 2012. The Banff International Hotel is a 162-guest room hotel located in downtown Banff, Alberta, Canada.
Glacier Park operates five lodges, three motor inns and one four-season resort hotel and provides food and beverage operations, retail operations and tour and transportation services in and around Glacier National Park in Montana and Waterton Lakes National Park in Alberta, Canada. Glacier Park is an 80 percent owned subsidiary of Viad.
Alaska Denali Travel operates Denali Backcountry Lodge and Denali Cabins. Denali Backcountry Lodge is a 42-guest room lodge located within Denali National Park and Preserve in Alaska and the Denali Cabins are 46 guest cabins located near the entrance to Denali National Park and Preserve. In addition to lodging, Alaska Denali Travel also provides food and beverage operations and package tour and transportation services in and around Denali National Park and Preserve.
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 amounts reported in the consolidated financial statements and accompanying notes. These estimates and assumptions include, but are not limited to:
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Estimated fair value of Viad’s reporting units used to perform annual impairment testing of recorded goodwill; |
• |
Estimated allowances for uncollectible accounts receivable; |
• |
Estimated provisions for income taxes, including uncertain tax positions; |
• |
Estimated valuation allowances related to deferred tax assets; |
• |
Estimated liabilities for losses related to self-insured liability claims; |
• |
Estimated liabilities for losses related to environmental remediation obligations; |
• |
Estimated 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; and |
• |
Allocation of purchase price of acquired businesses. |
Actual results could differ from these and other estimates.
Cash and Cash Equivalents. Viad considers all highly-liquid investments with remaining maturities when purchased of three months or less to be cash equivalents. Viad’s cash and cash equivalents consist of cash and bank demand deposits, bank time deposits and money market mutual funds. The Company’s investments in money market mutual funds are classified as available-for-sale and carried at fair value.
Inventories. Inventories, which consist primarily of exhibit design and construction materials and supplies used in providing convention show services, are stated at the lower of cost (first-in, first-out and specific identification methods) or market.
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. Viad capitalizes certain internal and external costs incurred in developing or obtaining internal use software. 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 on October 31 of each year. Goodwill is also tested for impairment 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 amount. Viad uses a discounted expected future cash flow methodology (income approach) in order to estimate the fair value of its 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. Viad has 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 the Company 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. Viad is self-insured up to certain limits for workers’ compensation, automobile, product and general liability, property loss and medical claims. Viad has also 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 Viad’s prior historical experience, claims frequency and other factors. Viad has purchased insurance for amounts in excess of the self-insured levels.
Environmental Remediation Liabilities. Viad has retained certain liabilities representing 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.
Fair Value of Financial Instruments. The carrying values of cash and cash equivalents, receivables and accounts payable approximate fair value due to the short-term maturities of these instruments. The estimated fair value of debt obligations is disclosed in Note 9.
Foreign Currency Translation. Viad conducts its foreign operations primarily in Canada, the United Kingdom, Germany and to a lesser extent in certain other countries. The functional currency of Viad’s foreign subsidiaries is their local currency. Accordingly, for purposes of consolidation, Viad translates the assets and liabilities of its 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 in Viad’s consolidated balance sheets. In addition, for purposes of consolidation, the revenues, expenses and gains and losses related to Viad’s foreign operations are translated into U.S. dollars at the average foreign exchange rates for the period.
Revenue Recognition. Viad recognizes revenue 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 revenues primarily by providing show services to exhibitors participating in exhibitions and events and from the design, construction and refurbishment of exhibit booths and holiday themed environments. Service revenue is recognized at the time services are performed. Exhibits and environments revenue is accounted for using the completed-contract method as contracts are typically completed within three months of contract signing. The Travel & Recreation Group generates revenues through its attractions, hotels and transportation and sightseeing services. Revenues are recognized at the time services are performed.
Share-Based Compensation. Viad recognizes and measures compensation costs related to all share-based payment awards using the fair value method of accounting. These awards generally include restricted stock, performance-based restricted stock (“PBRS”), stock options and liability-based awards (including performance units, restricted stock units and performance-based restricted stock units).
The fair value of restricted stock and PBRS awards are based on Viad’s stock price on the date of grant. Viad issues restricted stock and PBRS awards from shares held in treasury. Future vesting of restricted stock and PBRS is generally subject to continued employment with Viad or its subsidiaries. Holders of restricted stock and PBRS 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.
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 except for certain awards with a five-year vesting period whereby expense is recognized based on an accelerated multiple-award approach over a five-year period. For these awards, 40 percent of the shares vest on the third anniversary of the grant and the remaining shares vest in 30 percent increments over the subsequent two anniversary dates.
Share-based compensation expense related to PBRS awards is recognized based on an accelerated multiple-award approach over the requisite service period of approximately three years. PBRS vests when certain incentive performance targets established in the year of grant are achieved at target levels. PBRS is subject to a graded vesting schedule whereby one third of the earned shares vest after the first year and the remaining earned shares vest in one-third increments each year over the next two years on the first business day in January. The fair value of each stock option grant 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 Viad’s common stock at the date of grant. Stock options granted also contain certain forfeiture and non-compete provisions.
Liability-based awards (including grants of restricted stock units and PBRS units awarded to key employees at certain of the Company’s Canadian operations) 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 Viad’s stock price until the time of settlement. To the extent earned, liability-based awards are settled in cash based on Viad’s stock price. Compensation expense related to liability-based awards is recognized ratably over the requisite service period of approximately three years.
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. Viad applies 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. Furthermore, Viad funds its matching contributions to employees’ 401(k) accounts through the Company’s leveraged Employee Stock Ownership Plan (“ESOP”) feature of the Company’s 401(k) defined contribution plan. ESOP shares are treated as outstanding for income per share calculations.
Impact of Recent Accounting Pronouncements
In September 2011, the Financial Accounting Standards Board (“FASB”) issued new guidance related to goodwill impairment testing, which is codified in Accounting Standards Codification (“ASC”) Topic 350. The new guidance simplifies how entities test goodwill for impairment and permits an entity to first assess qualitative factors to determine whether it is more-likely-than-not that the fair value of a reporting unit is less than its carrying amount. If, after performing the assessment, an entity determines that it is not more-likely-than-not that the fair value of a reporting unit is less than its carrying amount, then performing the two-step impairment test is unnecessary. The guidance is effective for annual and interim goodwill impairment tests performed for fiscal years beginning after December 15, 2011. The adoption of this new guidance did not have a material impact on Viad’s financial condition or results of operations. The Company performs its annual goodwill impairment test as of October 31 of each year.
In February 2013, the FASB issued new guidance related to the reporting of amounts reclassified out of accumulated other comprehensive income, which is codified in ASC Topic 220. The new guidance requires entities to provide information about the amounts reclassified out of accumulated other comprehensive income by component. In addition, entities are required to present significant amounts reclassified out of other comprehensive income by the respective line items of net income in certain circumstances, or otherwise cross-reference amounts to other disclosures. The guidance is effective for reporting periods beginning after December 15, 2012, and will not have an impact on Viad’s financial condition or results of operations.
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Note 3. Acquisition of Businesses
On March 7, 2012, Viad acquired the Banff International Hotel and related assets for $23.6 million in cash. The Banff International Hotel is a 162-guest room hotel located in downtown Banff, Alberta, Canada and is operated by Brewster within the Travel & Recreation Group. The following information represents the final amounts assigned to the assets and liabilities of the Banff International Hotel as of the date of acquisition:
(in thousands) | ||||
Cash and cash equivalents |
$ | 10 | ||
Accounts receivable |
23 | |||
Other current assets |
33 | |||
Property and equipment |
20,408 | |||
Goodwill |
1,890 | |||
Other intangible assets |
1,323 | |||
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Total assets acquired |
23,687 | |||
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Customer deposits |
(64 | ) | ||
Other current liabilities |
(67 | ) | ||
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Total liabilities acquired |
(131 | ) | ||
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Purchase price |
$ | 23,556 | ||
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The Company recorded $1.9 million of goodwill in connection with the transaction, which is included in the Travel & Recreation Group. The primary factor that contributed to a purchase price resulting in the recognition of goodwill relates to future growth opportunities. The goodwill is partially deductible for tax purposes pursuant to regulations in Canada. The amount assigned to other intangible assets of $1.3 million relates to an operating contract and customer relationships. The weighted-average amortization period related to the other intangible assets was 7.7 years. Included in the “Property and equipment” caption above are certain leasehold interests of $7.9 million for which the Company is considered to have perpetual use rights of the land related to the Banff International Hotel. These land interests are not subject to amortization. The transaction costs related to the acquisition were insignificant. The results of operations of the Banff International Hotel have been included in Viad’s consolidated financial statements from the date of acquisition.
On September 16, 2011, Viad acquired the Denali Backcountry Lodge and Denali Cabins for $15.3 million in cash. Denali Backcountry Lodge is a 42-guest room lodge located within Denali National Park and Preserve in Alaska and Denali Cabins consist of 46 guest cabins near the entrance to Denali National Park and Preserve. These properties are operated by Alaska Denali Travel within the Travel & Recreation Group. The Company recorded $3.2 million of goodwill in connection with the transaction. The amount assigned to other intangible assets of $626,000 relates to customer relationships.
On June 29, 2011, Viad acquired St. Mary Lodge & Resort (“St. Mary”) for $15.3 million in cash. St. Mary is a 115-guest room hotel located outside of Glacier National Park’s east entrance and is operated by Glacier Park within the Travel & Recreation Group. The Company recorded $3.1 million of goodwill in connection with the transaction. The amount assigned to other intangible assets of $60,000 relates to a non-amortized business license.
On January 5, 2011, Viad acquired Grouse Mountain Lodge for $10.5 million in cash. Grouse Mountain Lodge is located in Whitefish, Montana and is operated by Glacier Park within the Travel & Recreation Group. The Company recorded $1.3 million of goodwill in connection with the transaction. The amount assigned to other intangible assets of $400,000 relates to a non-amortized business license.
The following information represents the aggregate amounts assigned to the assets and liabilities of the acquisitions that occurred during 2011:
(in thousands) | ||||
Cash and cash equivalents |
$ | 30 | ||
Other current assets |
870 | |||
Property and equipment |
32,905 | |||
Goodwill |
7,645 | |||
Other intangible assets |
1,086 | |||
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Total assets acquired |
42,536 | |||
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Customer deposits |
(821 | ) | ||
Other current liabilities |
(198 | ) | ||
Other long-term liabilities |
(382 | ) | ||
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Total liabilities acquired |
(1,401 | ) | ||
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Purchase price |
$ | 41,135 | ||
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The primary factor that contributed to the recognition of goodwill for the 2011 acquisitions relates to future growth opportunities. The acquired goodwill is included in the Travel & Recreation Group and is deductible for tax purposes over a period of 15 years. The transaction costs related to the acquisitions were insignificant. The results of operations of the acquisitions have been included in Viad’s consolidated financial statements from the date of each acquisition.
The following table summarizes the unaudited pro forma results of operations attributable to Viad, assuming that the acquisitions had each been completed at the beginning of each year:
2012 | 2011 | |||||||
(in thousands, except per share data) | ||||||||
Revenue |
$ | 1,025,681 | $ | 954,766 | ||||
Depreciation and amortization |
30,935 | 30,619 | ||||||
Segment operating income |
41,831 | 28,186 | ||||||
Income from continuing operations |
5,251 | 10,379 | ||||||
Net income attributable to Viad |
5,875 | 10,830 | ||||||
Diluted net income per share |
0.29 | 0.53 | ||||||
Basic net income per share |
0.29 | 0.53 |
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Note 4. Inventories
The components of inventories as of December 31 were as follows:
2012 | 2011 | |||||||
(in thousands) | ||||||||
Raw materials |
$ | 16,422 | $ | 18,297 | ||||
Work in process |
19,234 | 17,528 | ||||||
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Inventories |
$ | 35,656 | $ | 35,825 | ||||
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Note 5. Property and Equipment
Property and equipment as of December 31 consisted of the following:
2012 | 2011 | |||||||
(in thousands) | ||||||||
Land and land interests |
$ | 26,124 | $ | 18,134 | ||||
Buildings and leasehold improvements |
137,293 | 109,077 | ||||||
Equipment and other |
310,448 | 310,186 | ||||||
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473,865 | 437,397 | |||||||
Accumulated depreciation |
(276,567 | ) | (263,584 | ) | ||||
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Property and equipment, net |
$ | 197,298 | $ | 173,813 | ||||
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Included in the “Equipment and other” caption above are capitalized costs incurred in developing or obtaining internal use software. The net carrying amount of capitalized software was $14.2 million and $14.9 million as of December 31, 2012 and 2011, respectively.
Included in the “Land and land interests” caption above are certain leasehold interests in land within the Travel & Recreation Group for which the Company is considered to have perpetual use rights. The carrying amount of these leasehold interests was $10.6 million and $2.6 million at December 31, 2012 and 2011, respectively. These land interests are not subject to amortization.
Depreciation expense was $30.0 million, $28.4 million and $27.3 million for 2012, 2011 and 2010, respectively. During 2010, Viad recorded impairment losses of $117,000 at the Travel & Recreation Group related to a tour boat at the Travel & Recreation Group. No impairment losses were recorded during 2012 or 2011.
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Note 6. Other Investments and Assets
As of December 31 other investments and assets consisted of the following:
2012 | 2011 | |||||||
(in thousands) | ||||||||
Cash surrender value of life insurance |
$ | 19,142 | $ | 18,812 | ||||
Workers’ compensation insurance security deposits |
3,350 | 4,658 | ||||||
Other |
9,924 | 7,581 | ||||||
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Total other investments and assets |
$ | 32,416 | $ | 31,051 | ||||
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Note 7. Goodwill and Other Intangible Assets
The changes in the carrying amount of goodwill were as follows:
Marketing & | Travel & | |||||||||||||||
Marketing & | Events | Recreation | ||||||||||||||
Events U.S. | International | Group | Total | |||||||||||||
(in thousands) | ||||||||||||||||
Balance at January 1, 2011 |
$ | 62,686 | $ | 22,455 | $ | 42,300 | $ | 127,441 | ||||||||
Business acquisitions |
— | — | 7,645 | 7,645 | ||||||||||||
Foreign currency translation adjustments |
— | (257 | ) | (1,135 | ) | (1,392 | ) | |||||||||
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Balance at December 31, 2011 |
62,686 | 22,198 | 48,810 | 133,694 | ||||||||||||
Business acquisition |
— | — | 1,890 | 1,890 | ||||||||||||
Foreign currency translation adjustments |
— | 856 | 1,380 | 2,236 | ||||||||||||
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Balance at December 31, 2012 |
$ | 62,686 | $ | 23,054 | $ | 52,080 | $ | 137,820 | ||||||||
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The following table summarizes goodwill by reporting unit and segment as of December 31:
2012 | 2011 | |||||||
(in thousands) | ||||||||
Marketing & Events Group: |
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Marketing & Events U.S. |
$ | 62,686 | $ | 62,686 | ||||
Marketing & Events International: |
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United Kingdom (Melville GES) |
13,894 | 13,291 | ||||||
GES Canada |
9,160 | 8,907 | ||||||
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Total Marketing & Events Group |
85,740 | 84,884 | ||||||
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Travel & Recreation Group: |
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Brewster |
44,435 | 41,165 | ||||||
Glacier Park |
4,461 | 4,461 | ||||||
Alaska Denali Travel |
3,184 | 3,184 | ||||||
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Total Travel & Recreation Group |
52,080 | 48,810 | ||||||
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Total Goodwill |
$ | 137,820 | $ | 133,694 | ||||
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For impairment testing purposes, the goodwill related to the Marketing & Events U.S. segment is assigned to and tested at the operating segment level. Furthermore, the goodwill related to the Marketing & Events International segment is assigned to and tested based on the segment’s geographical operations. For the Marketing & Events International segment the reporting units are United Kingdom (Melville GES) and Canada. Brewster, Glacier Park and Alaska Denali Travel are considered reporting units for goodwill impairment testing purposes within the Travel & Recreation Group.
As a result of the Company’s most recent analysis performed in October 2012, the excess of the estimated fair values over the carrying values (expressed as a percentage of the carrying amounts) under step one of the impairment test was 126 percent, 67 percent and 34 percent for each of the Marketing & Events Group reporting units in the United States, the United Kingdom (Melville GES) and Canada, respectively. For the Brewster, Glacier Park and Alaska Denali Travel reporting units, the excess of the estimated fair value over the carrying value was 58 percent, 37 percent and 14 percent, respectively, as of the most recent impairment test. Significant reductions in the Company’s expected future revenues, operating income or cash flow forecasts and projections, or an increase in reporting unit cost of capital, could trigger additional impairment testing, which may result in impairment losses.
During 2010, Viad recorded impairment losses of $185,000 related to other intangible assets at the Travel & Recreation Group. As of December 31, 2012, Viad had cumulative goodwill impairment losses of $225.2 million since the adoption of the goodwill impairment testing provisions of ASC Topic 350.
A summary of other intangible assets as of December 31, 2012 is presented below:
Gross Carrying | Accumulated | Net Carrying | ||||||||||
Value | Amortization | Value | ||||||||||
(in thousands) | ||||||||||||
Amortized intangible assets: |
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Customer contracts and relationships |
$ | 3,594 | $ | (2,384 | ) | $ | 1,210 | |||||
Other |
959 | (108 | ) | 851 | ||||||||
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4,553 | (2,492 | ) | 2,061 | |||||||||
Unamortized intangible assets: |
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Business licenses |
460 | — | 460 | |||||||||
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Total |
$ | 5,013 | $ | (2,492 | ) | $ | 2,521 | |||||
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A summary of other intangible assets as of December 31, 2011 is presented below:
Gross Carrying | Accumulated | Net Carrying | ||||||||||
Value | Amortization | Value | ||||||||||
(in thousands) | ||||||||||||
Amortized intangible assets: |
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Customer contracts and relationships |
$ | 3,122 | $ | (1,736 | ) | $ | 1,386 | |||||
Other |
68 | (30 | ) | 38 | ||||||||
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3,190 | (1,766 | ) | 1,424 | |||||||||
Unamortized intangible assets: |
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Business licenses |
460 | — | 460 | |||||||||
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Total |
$ | 3,650 | $ | (1,766 | ) | $ | 1,884 | |||||
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Intangible asset amortization expense for 2012, 2011 and 2010 was $693,000, $772,000 and $954,000, respectively. The weighted-average amortization period of customer contracts and relationships and other amortizable intangible assets is approximately 3.7 years and 4.8 years, respectively. Estimated amortization expense related to amortized intangible assets for future years is expected to be as follows:
(in thousands) | ||||
2013 |
$ | 712 | ||
2014 |
$ | 426 | ||
2015 |
$ | 255 | ||
2016 |
$ | 199 | ||
2017 |
$ | 445 | ||
Thereafter |
$ | 24 |
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Note 8. Accrued Liabilities and Other
As of December 31 other current liabilities consisted of the following:
2012 | 2011 | |||||||
(in thousands) | ||||||||
Continuing operations: |
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Customer deposits |
$ | 50,172 | $ | 49,182 | ||||
Accrued compensation |
25,067 | 22,587 | ||||||
Self-insured liability accrual |
8,501 | 6,697 | ||||||
Accrued restructuring |
4,084 | 2,303 | ||||||
Accrued employee benefit costs |
3,132 | 3,730 | ||||||
Accrued dividends |
2,053 | 827 | ||||||
Accrued sales and use taxes |
906 | 1,668 | ||||||
Accrued foreign income taxes |
28 | 234 | ||||||
Other |
12,271 | 8,185 | ||||||
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106,214 | 95,413 | |||||||
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Discontinued operations: |
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Environmental remediation liabilities |
571 | 755 | ||||||
Self-insured liability accrual |
527 | 639 | ||||||
Other |
372 | 524 | ||||||
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1,470 | 1,918 | |||||||
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Total other current liabilities |
$ | 107,684 | $ | 97,331 | ||||
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As of December 31 other deferred items and liabilities consisted of the following:
2012 | 2011 | |||||||
(in thousands) | ||||||||
Continuing operations: |
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Self-insured liability accrual |
$ | 15,579 | $ | 14,403 | ||||
Accrued compensation |
8,061 | 5,538 | ||||||
Accrued restructuring |
3,140 | 4,647 | ||||||
Foreign deferred tax liability |
2,024 | 1,219 | ||||||
Other |
6,734 | 5,900 | ||||||
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35,538 | 31,707 | |||||||
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Discontinued operations: |
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Self-insured liability accrual |
5,188 | 5,351 | ||||||
Environmental remediation liabilities |
4,745 | 4,999 | ||||||
Accrued income taxes |
1,053 | 1,022 | ||||||
Other |
1,304 | 1,133 | ||||||
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12,290 | 12,505 | |||||||
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Total other deferred items and liabilities |
$ | 47,828 | $ | 44,212 | ||||
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Note 9. Debt
Long-term capital lease obligations as of December 31 were as follows:
2012 | 2011 | |||||||
(in thousands) | ||||||||
Capital lease obligations, 6.4% (2012) and 6.2% (2011) weighted-average interest rate at December 31, due to 2017 |
$ | 2,226 | $ | 3,239 | ||||
Current portion |
(1,347 | ) | (2,018 | ) | ||||
|
|
|
|
|||||
Long-term capital leases |
$ | 879 | $ | 1,221 | ||||
|
|
|
|
Effective May 18, 2011, Viad entered into an amended and restated revolving credit agreement (the “Credit Facility”). The Credit Facility provides for a $130 million revolving line of credit, which may be increased up to an additional $50 million under certain circumstances. The term of the Credit Facility is five years (expiring on May 18, 2016) and borrowings are to be used for general corporate purposes (including permitted acquisitions) and to support up to $50 million of letters of credit. The lenders have a first perfected security interest in all of the personal property of Viad and GES, including 65 percent of the capital stock of top-tier foreign subsidiaries. In April 2011, Viad paid off its outstanding borrowing under the previous credit facility of $4.2 million and as of December 31, 2012, Viad’s total debt of $2.2 million consisted entirely of capital lease obligations. As of December 31, 2012, Viad had $128.2 million of capacity remaining under its Credit Facility reflecting outstanding letters of credit of $1.8 million.
Borrowings under the Credit Facility (of which GES is a guarantor) are indexed to the prime rate or the London Interbank Offered Rate, plus appropriate spreads tied to Viad’s leverage ratio. Commitment fees and letters of credit fees are also tied to Viad’s leverage ratio. The fees on the unused portion of the Credit Facility are currently 0.35 percent annually.
The Credit Facility contains various affirmative and negative covenants that are customary for facilities of this type, including a fixed-charge coverage ratio, leverage ratio, minimum cash balance, and dividend limits. Significant other covenants include limitations on: investments, additional indebtedness, sales/leases of assets, acquisitions, consolidations or mergers and liens on property. As of December 31, 2012, Viad was in compliance with all covenants.
Effective December 12, 2012, the Credit Facility was amended to remove the limitation on share repurchases of $10 million in the aggregate per calendar year pursuant to certain conditions. The amendment allows share repurchases unless the Company’s leverage ratio, as defined in the Credit Facility, is greater than 1.50 to 1.00 or a default or an unmatured default, as defined in the Credit Facility, exists. The amendment also allows dividends to be declared and paid in excess of $10 million in the aggregate per calendar year, as well as distributions on its capital stock, as defined in the Credit Facility, unless the Company’s leverage ratio, as defined in the Credit Facility, is greater than 1.50 to 1.00 or a default or an unmatured default, as defined in the Credit Facility, exists.
As of December 31, 2012, Viad had certain obligations under guarantees to third parties on behalf of its subsidiaries. These guarantees are not subject to liability recognition in the consolidated financial statements and relate to leased facilities entered into by the Company’s subsidiary operations. The Company 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 Viad would be required to make under all guarantees existing as of December 31, 2012 would be $21.2 million. These guarantees relate to leased facilities and expire through October 2017. There are no recourse provisions that would enable Viad to recover from third parties any payments made under the guarantees. Furthermore, there are no collateral or similar arrangements whereby Viad could recover payments.
Aggregate annual maturities of capital lease obligations as of December 31, 2012 are as follows:
(in thousands) | ||||
2013 |
$ | 1,421 | ||
2014 |
594 | |||
2015 |
283 | |||
2016 |
34 | |||
2017 |
17 | |||
|
|
|||
Total |
2,349 | |||
Less: Amount representing interest |
(123 | ) | ||
|
|
|||
Present value of minimum lease payments |
$ | 2,226 | ||
|
|
The gross amount of assets recorded under capital leases as of December 31, 2012 was $5.9 million and accumulated amortization was $2.9 million. As of December 31, 2011, the gross amount of assets recorded under capital leases and accumulated amortization was $6.6 million and $3.0 million, respectively. The amortization charges related to assets recorded under capital leases are included in depreciation expense. See Note 5.
The weighted-average interest rate on total debt was 8.5 percent, 7.8 percent and 12.0 percent, for 2012, 2011 and 2010, respectively. The weighted average interest rates include the effects of commitment fees and other costs of long-term bank credit.
The estimated fair value of total debt was $2.1 million and $3.0 million as of December 31, 2012 and 2011, respectively. The fair value of debt was estimated by discounting the future cash flows using rates currently available for debt of similar terms and maturity.
|
Note 10. 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. |
Viad measures its money market mutual funds and certain other mutual fund investments 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:
Fair Value Measurements at December 31, 2012 Using | ||||||||||||||||
Description |
December 31, 2012 |
Quoted Prices
in Active Markets (Level 1) |
Significant Other Observable Inputs (Level 2) |
Significant Unobserved Inputs (Level 3) |
||||||||||||
(in thousands) | ||||||||||||||||
Money market funds |
$ | 10,177 | $ | 10,177 | $ | — | $ | — | ||||||||
Other mutual funds |
1,239 | 1,239 | — | — | ||||||||||||
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|
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|
|
|
|||||||||
Total |
$ | 11,416 | $ | 11,416 | $ | — | $ | — | ||||||||
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|
|
|||||||||
Fair Value Measurements at December 31, 2011 Using | ||||||||||||||||
Description |
December 31, 2011 |
Quoted Prices in Active Markets (Level 1) |
Significant Other Observable Inputs (Level 2) |
Significant Unobserved Inputs (Level 3) |
||||||||||||
(in thousands) | ||||||||||||||||
Money market funds |
$ | 20,862 | $ | 20,862 | $ | — | $ | — | ||||||||
Other mutual funds |
1,373 | 1,373 | — | — | ||||||||||||
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Total |
$ | 22,235 | $ | 22,235 | $ | — | $ | — | ||||||||
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As of December 31, 2012 and 2011, Viad had investments in money market mutual funds of $10.2 million and $20.9 million, respectively, which are included in the consolidated balance sheets under the caption “Cash and cash equivalents.” These investments are classified as available-for-sale and were recorded at fair value. There have been no realized or unrealized gains or losses related to these investments and the Company has not experienced any redemption restrictions with respect to any of the money market mutual funds.
As of December 31, 2012 and 2011, Viad had investments in other mutual funds of $1.2 million and $1.4 million, respectively, which are classified in the consolidated balance sheets under the caption “Other investments and assets.” These investments were classified as available-for-sale and were recorded at fair value. As of December 31, 2012 and 2011, there were unrealized gains of $450,000 ($275,000 after-tax) and $366,000 ($222,000 after-tax), respectively, which were included in the consolidated balance sheets under the caption “Accumulated other comprehensive income (loss).”
The carrying values of cash and cash equivalents, receivables and accounts payable approximate fair value due to the short-term maturities of these instruments. The estimated fair value of debt obligations is disclosed in Note 9.
|
Note 12. Employee Stock Ownership Feature of 401(k) Plan
Viad funds its matching contributions to employees’ 401(k) accounts through the Company’s ESOP portion of the Viad Corp Capital Accumulation Plan (the “401(k) Plan”). All eligible employees of Viad and its participating affiliates, other than certain employees covered by collective-bargaining agreements that do not expressly provide for participation of such employees in an employee stock ownership plan, may participate in the employee stock ownership feature within the 401(k) Plan.
In 1989, the ESOP borrowed $40.0 million (guaranteed by Viad) to purchase treasury shares from the Company. In 2004, Viad borrowed $12.4 million under its revolving credit agreement to pay in full the outstanding ESOP loan and obtain release of Viad from its guarantee of the loan. In connection with the loan payoff, the ESOP entered into a $12.4 million loan with Viad maturing in June 2009 calling for minimum quarterly principal payments of $250,000 plus interest. The same amount, representing unearned employee benefits, was recorded as a reduction of stockholders’ equity. In 2007, the loan agreement between the ESOP and Viad was extended to December 31, 2016. As of December 31, 2012, the balance of the ESOP loan was $1.3 million and is included in the consolidated balance sheets under the caption “Unearned employee benefits and other.” The liability is reduced as the ESOP makes principal payments on the borrowing, and the amount offsetting stockholders’ equity is reduced as stock is allocated to employees and benefits are charged to expense. The 401(k) Plan repays the loan using Viad contributions and dividends received on the unallocated Viad shares held by the 401(k) Plan.
Information regarding ESOP transactions is as follows:
2012 | 2011 | 2010 | ||||||||||
(in thousands) | ||||||||||||
Amounts paid by ESOP for: |
||||||||||||
Debt repayment |
$ | 1,647 | $ | 1,490 | $ | 1,518 | ||||||
Interest |
5 | 8 | 12 | |||||||||
Amounts received from Viad as: |
||||||||||||
Contributions |
1,604 | 1,435 | 1,444 | |||||||||
Dividends |
48 | 63 | 86 |
Shares were released for allocation to participants based upon the ratio of the current year’s principal and interest payments to the sum of the total principal and interest payments expected over the remaining life of the loan. Viad recorded expense of $1.7 million, $1.6 million and $1.5 million in 2012, 2011 and 2010, respectively.
Unallocated shares held by the 401(k) Plan totaled 130,577 and 293,280 as of December 31, 2012 and 2011, respectively. Shares allocated during 2012 and 2011 totaled 162,703 and 147,089, respectively.
|
Note 13. Preferred Stock Purchase Rights
Viad had one Preferred Stock Purchase Right (“Right”) outstanding on each outstanding share of common stock pursuant to a shareholder rights plan (the “Rights Agreement”) adopted by the Board of Directors on February 28, 2002, as adjusted in connection with Viad’s one-for-four reverse stock split on July 1, 2004, and as amended on February 28, 2012. The Rights expired and the Rights Agreement terminated on February 28, 2013 on its own terms.
Viad has authorized five million and two million shares of Preferred Stock and Junior Participating Preferred Stock, respectively, none of which is outstanding.
|
Note 14. Income Taxes
The following represents a reconciliation of income tax expense and the amount that would be computed using the statutory federal income tax rates:
2012 | 2011 | 2010 | ||||||||||||||||||||||
(in thousands) | ||||||||||||||||||||||||
Computed income tax expense at statutory federal income tax rate of 35% |
$ | 9,381 | 35.0 | % | $ | 4,613 | 35.0 | % | $ | 896 | 35.0 | % | ||||||||||||
State income taxes, net of federal provision |
470 | 1.8 | % | (100 | ) | (0.8 | %) | (172 | ) | (6.7 | %) | |||||||||||||
Foreign tax rate differentials |
(2,031 | ) | (7.6 | %) | (1,679 | ) | (12.7 | %) | (1,560 | ) | (61.0 | %) | ||||||||||||
U.S. tax on foreign earnings (net of foreign tax credits) |
(595 | ) | (2.2 | %) | 1,105 | 8.4 | % | 629 | 24.6 | % | ||||||||||||||
Tax resolutions, net |
— | 0.0 | % | (103 | ) | (0.8 | %) | (514 | ) | (20.1 | %) | |||||||||||||
Change in enacted tax law |
— | 0.0 | % | — | 0.0 | % | 1,279 | 50.0 | % | |||||||||||||||
Change in valuation allowance |
14,220 | 53.1 | % | (55 | ) | (0.4 | %) | 249 | 9.7 | % | ||||||||||||||
Proceeds from life insurance |
(472 | ) | (1.8 | %) | — | 0.0 | % | (460 | ) | (18.0 | %) | |||||||||||||
Other, net |
(130 | ) | (0.5 | %) | 107 | 0.8 | % | 1,395 | 54.6 | % | ||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||
Income tax expense |
$ | 20,843 | 77.8 | % | $ | 3,888 | 29.5 | % | $ | 1,742 | 68.1 | % | ||||||||||||
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|
In March 2010, the Patient Protection and Affordable Care Act and a related measure, the Health Care and Education Reconciliation Act of 2010, were both enacted into law. As a result of this legislation, the tax deductions for the portion of the prescription drug costs for which Viad receives a Medicare Part D subsidy have been eliminated for tax years beginning after December 31, 2012. Accordingly, during 2010, Viad reduced its deferred tax asset related to its postretirement benefit plan liability to reflect the change in the tax law. The reduction in the deferred tax asset resulted in an increase to income tax expense of $1.3 million in 2010.
Viad is subject to regular and recurring audits by the taxing authorities in the jurisdictions in which the Company conducts or had previously conducted operations. These include U.S. federal and most state jurisdictions, and certain foreign jurisdictions including Canada, the United Kingdom and Germany.
Viad exercises judgment in determining its income tax provision due to transactions, credits and calculations where the ultimate tax determination is uncertain. As of December 31, 2012 and 2011, Viad did not have any accrued gross liabilities associated with uncertain tax positions for continuing operations. As of December 31, 2010, Viad had accrued interest and penalties related to uncertain tax positions for continuing operations of $146,000. Viad classifies interest and penalties related to income tax liabilities as a component of income tax expense. During 2011, Viad recorded tax-related interest expense credits of $146,000.
During 2011 and 2010, Viad recorded tax benefits related to the favorable resolution of tax matters in continuing operations of $103,000 and $514,000, respectively. These tax resolutions primarily represent the reversal of amounts accrued for tax and related interest and penalties in connection with uncertain tax positions which were effectively settled or for which there was a lapse of the applicable statute of limitations.
In addition to the above, Viad had accrued gross liabilities associated with uncertain tax positions for discontinued operations of $636,000 as of both December 31, 2012 and 2011. In addition, as of December 31, 2012 and 2011, Viad had accrued interest and penalties related to uncertain tax positions for discontinued operations of $418,000 and $386,000, respectively. Future tax resolutions or settlements that may occur related to these uncertain tax positions would be recorded through discontinued operations (net of federal tax effects, if applicable). Viad does not expect any of the unrecognized tax benefits to be recognized during the next 12 months.
The following represents a reconciliation of the total amounts of liabilities associated with uncertain tax positions (excluding interest and penalties):
Continuing | Discontinued | |||||||||||
Operations | Operations | Total | ||||||||||
(in thousands) | ||||||||||||
Balance at January 1, 2010 |
$ | — | $ | 636 | $ | 636 | ||||||
Reductions for tax positions taken in prior years |
— | — | — | |||||||||
Reductions for tax settlements |
— | — | — | |||||||||
Reductions for lapse of applicable statutes |
— | — | — | |||||||||
|
|
|
|
|
|
|||||||
Balance at December 31, 2010 |
— | 636 | 636 | |||||||||
Reductions for tax positions taken in prior years |
— | — | — | |||||||||
Reductions for tax settlements |
— | — | — | |||||||||
Reductions for lapse of applicable statutes |
— | — | — | |||||||||
|
|
|
|
|
|
|||||||
Balance at December 31, 2011 |
— | 636 | 636 | |||||||||
Reductions for tax positions taken in prior years |
— | — | — | |||||||||
Reductions for tax settlements |
— | — | — | |||||||||
Reductions for lapse of applicable statutes |
— | — | — | |||||||||
|
|
|
|
|
|
|||||||
Balance at December 31, 2012 |
$ | — | $ | 636 | $ | 636 | ||||||
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|
|
|
|
|
Viad’s 2009 through 2012 U.S. federal tax years and various state tax years from 2008 through 2012 remain subject to income tax examinations by tax authorities. Additionally, 2005 through 2008 remain subject to examination due to net operating loss carryback claims. In addition, tax years from 2008 through 2012 related to Viad’s foreign taxing jurisdictions also remain subject to examination.
Viad classifies liabilities associated with uncertain tax positions as non-current liabilities in its consolidated balance sheets unless they are expected to be paid within the next year. As of December 31, 2012 and 2011, liabilities associated with uncertain tax positions (including interest and penalties) of $1.1 million and $1.0 million, respectively, were classified as non-current liabilities.
Deferred income tax assets and liabilities included in the consolidated balance sheets as of December 31 related to the following:
2012 | 2011 | |||||||
(in thousands) | ||||||||
Deferred tax assets: |
||||||||
Pension, compensation and other employee benefits |
$ | 26,790 | $ | 22,103 | ||||
Tax credit carryforwards |
25,290 | 25,219 | ||||||
Provisions for losses |
15,229 | 16,038 | ||||||
State income taxes |
2,813 | 2,400 | ||||||
Net operating loss carryforward |
1,755 | 3,086 | ||||||
Deferred income |
— | 125 | ||||||
Other deferred income tax assets |
5,331 | 1,745 | ||||||
|
|
|
|
|||||
Total deferred tax assets |
77,208 | 70,716 | ||||||
Foreign deferred tax assets included above |
(990 | ) | — | |||||
Valuation allowance |
(14,576 | ) | (356 | ) | ||||
|
|
|
|
|||||
Net deferred tax assets |
61,642 | 70,360 | ||||||
|
|
|
|
|||||
Deferred tax liabilities: |
||||||||
Property and equipment |
(8,801 | ) | (7,729 | ) | ||||
Goodwill and other intangible assets |
(1,306 | ) | (1,006 | ) | ||||
Unremitted foreign earnings |
(978 | ) | — | |||||
Other deferred income tax liabilities |
(176 | ) | (287 | ) | ||||
|
|
|
|
|||||
Total deferred tax liabilities |
(11,261 | ) | (9,022 | ) | ||||
|
|
|
|
|||||
Foreign deferred tax liabilities included above |
2,024 | 1,617 | ||||||
|
|
|
|
|||||
United States deferred tax assets |
$ | 52,405 | $ | 62,955 | ||||
|
|
|
|
Viad is required to estimate and record provisions for income taxes in each of the jurisdictions in which the Company operates. Accordingly, the Company must estimate its 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 Viad’s consolidated balance sheets. The Company must assess the likelihood that deferred tax assets will be recovered from future taxable income and to the extent that recovery is not likely, a valuation allowance must be established. The Company uses significant judgment in forming a conclusion regarding the recoverability of its deferred tax assets and evaluates the available positive and negative evidence to determine whether it is more-likely-than-not that its deferred tax assets will be realized in the future. As of December 31, 2012 and 2011, Viad had gross deferred tax assets of $77.2 million and $70.7 million, respectively. 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.
The Company considered all available positive and negative evidence regarding the future recoverability of its deferred tax assets, including the Company’s recent operating history, taxpaying history and future reversals of deferred tax liabilities. The Company also evaluated its ability to utilize its foreign tax credits, given its recent utilization history. These tax credits are subject to a 10-year carryforward period and begin to expire in 2019. Based on the Company’s assessment, it was determined during the fourth quarter of 2012 that the weight of the evidence indicated that certain deferred tax assets associated with foreign tax credit carryforwards no longer met the more-likely-than-not test regarding the realization of those assets. Accordingly, the Company recorded a valuation allowance related to all of its foreign tax credit carryforwards as of December 31, 2012, which resulted in a charge to income tax expense of $13.4 million. As of December 31, 2012 and 2011, Viad had state and foreign net operating loss carryforwards of $82.0 million and $91.9 million, respectively, for which the Company had deferred tax assets of $1.8 million and $2.1 million, respectively. The state and foreign net operating loss carryforwards expire on various dates from 2016 through 2032. During 2012, the Company increased its valuation allowance related to state and foreign net operating loss carryforwards by $805,000. As of December 31, 2012 and 2011, Viad had a valuation allowance of $1.2 million and $356,000, respectively, related to those state and foreign deferred tax assets. With respect to all other deferred tax assets, management believes that recovery from future taxable income is more-likely-than-not.
As noted above, Viad uses considerable judgment in forming a conclusion regarding the recoverability of its deferred tax assets. As a result, there are inherent uncertainties regarding the ultimate realization of these assets, which is primarily dependent on Viad’s ability to generate sufficient taxable income in future periods. In future periods, it is reasonably possible that the relative weight of positive and negative evidence regarding the recoverability of Viad’s deferred tax assets may change, which could result in a material increase in the Company’s valuation allowance. If such an increase in the valuation allowance were to occur, it would result in increased income tax expense in the period the assessment was made.
As of December 31, 2012, Viad had tax credit carryforwards related to alternative minimum tax of $11.4 million that may be carried forward indefinitely. Additionally, as of December 31, 2012, Viad had foreign tax credit carryforwards of $13.4 million, of which $268,000 expire in 2019, $8.3 million expire in 2020, $4.5 million expire in 2021 and $320,000 expire in 2022. As noted above, the Company recorded a valuation allowance of $13.4 million related to the foreign tax credit carryforwards. Viad also had general business credits of $519,000 as of December 31, 2012, which expire at various dates from 2028 to 2032.
Viad has not recorded deferred taxes on certain historical unremitted earnings of its Canadian subsidiaries as management intends to reinvest those earnings in its Canadian operations. As of December 31, 2012, the incremental unrecognized tax liability (net of estimated foreign tax credits) related to those undistributed earnings was approximately $711,000. To the extent that circumstances change and it becomes apparent that some or all of those undistributed earnings will be remitted to the U.S., Viad would accrue income taxes attributable to such remittance.
Income tax expense consisted of the following:
2012 | 2011 | 2010 | ||||||||||
(in thousands) | ||||||||||||
Current: |
||||||||||||
United States: |
||||||||||||
Federal |
$ | (272 | ) | $ | (4,643 | ) | $ | (9,286 | ) | |||
State |
2,189 | 1,292 | 677 | |||||||||
Foreign |
7,652 | 8,163 | 9,607 | |||||||||
|
|
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|
|
|
|||||||
9,569 | 4,812 | 998 | ||||||||||
|
|
|
|
|
|
|||||||
Deferred: |
||||||||||||
United States: |
||||||||||||
Federal |
11,127 | 992 | 3,212 | |||||||||
State |
40 | (1,560 | ) | (939 | ) | |||||||
Foreign |
107 | (356 | ) | (1,529 | ) | |||||||
|
|
|
|
|
|
|||||||
11,274 | (924 | ) | 744 | |||||||||
|
|
|
|
|
|
|||||||
Income tax expense |
$ | 20,843 | $ | 3,888 | $ | 1,742 | ||||||
|
|
|
|
|
|
The aggregate tax benefit realized in connection with the vesting of restricted stock and PBRS and the exercise of stock options was $96,000 for 2012, which was recorded as a credit to stockholders’ equity. During 2011 and 2010, the Company recorded tax deficiencies of $325,000 and $524,000, respectively, related to the vesting of restricted stock and PBRS and the exercise of stock options, which were recorded as charges to stockholders’ equity.
Eligible subsidiaries (including sold and discontinued businesses up to their respective disposition dates) are included in the consolidated federal and other applicable income tax returns of Viad.
United States and foreign income from continuing operations before income taxes was as follows:
2012 | 2011 | 2010 | ||||||||||
(in thousands) | ||||||||||||
United States |
$ | (2,843 | ) | $ | (16,227 | ) | $ | (22,592 | ) | |||
Foreign |
29,645 | 29,407 | 25,151 | |||||||||
|
|
|
|
|
|
|||||||
Income from continuing operations before income taxes |
$ | 26,802 | $ | 13,180 | $ | 2,559 | ||||||
|
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|
|
|
|
|
Note 15. Pension and Postretirement Benefits
Domestic Plans. Viad has trusteed, frozen defined benefit pension plans that cover certain employees which are funded by the Company. Viad also maintains 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.
Viad also has 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, Viad retained the obligations for these benefits for retirees of certain sold businesses. While the plans have no funding requirements, Viad may fund the plans.
The components of net periodic benefit cost and other amounts recognized in other comprehensive income of Viad’s pension plans included the following:
2012 | 2011 | 2010 | ||||||||||
(in thousands) | ||||||||||||
Net Periodic Benefit Cost |
||||||||||||
Service cost |
$ | 104 | $ | 121 | $ | 145 | ||||||
Interest cost |
1,150 | 1,189 | 1,242 | |||||||||
Expected return on plan assets |
(406 | ) | (563 | ) | (588 | ) | ||||||
Amortization of prior service cost |
— | — | 41 | |||||||||
Recognized net actuarial loss |
491 | 457 | 572 | |||||||||
|
|
|
|
|
|
|||||||
Net periodic benefit cost |
1,339 | 1,204 | 1,412 | |||||||||
|
|
|
|
|
|
|||||||
Other Changes in Plan Assets and Benefit Obligations Recognized in Other Comprehensive Income |
||||||||||||
Net actuarial loss |
1,942 | 1,589 | 1,190 | |||||||||
Reversal of amortization item: |
||||||||||||
Net actuarial loss |
(491 | ) | (457 | ) | (572 | ) | ||||||
Prior service cost |
— | — | (41 | ) | ||||||||
|
|
|
|
|
|
|||||||
Total recognized in other comprehensive income |
1,451 | 1,132 | 577 | |||||||||
|
|
|
|
|
|
|||||||
Total recognized in net periodic benefit cost and other comprehensive income |
$ | 2,790 | $ | 2,336 | $ | 1,989 | ||||||
|
|
|
|
|
|
The components of net periodic benefit cost and other amounts recognized in other comprehensive income of Viad’s postretirement benefit plans included the following:
2012 | 2011 | 2010 | ||||||||||
(in thousands) | ||||||||||||
Net Periodic Benefit Cost |
||||||||||||
Service cost |
$ | 146 | $ | 128 | $ | 130 | ||||||
Interest cost |
814 | 868 | 1,039 | |||||||||
Expected return on plan assets |
(74 | ) | (135 | ) | (160 | ) | ||||||
Amortization of prior service credit |
(1,113 | ) | (1,277 | ) | (1,171 | ) | ||||||
Recognized net actuarial loss |
547 | 533 | 608 | |||||||||
|
|
|
|
|
|
|||||||
Net periodic benefit cost |
320 | 117 | 446 | |||||||||
|
|
|
|
|
|
|||||||
Other Changes in Plan Assets and Benefit Obligations Recognized in Other Comprehensive Income |
||||||||||||
Net actuarial loss |
224 | 24 | 421 | |||||||||
Prior service credit |
— | — | (1,197 | ) | ||||||||
Reversal of amortization item: |
||||||||||||
Net actuarial loss |
(547 | ) | (533 | ) | (608 | ) | ||||||
Prior service credit |
1,113 | 1,277 | 1,171 | |||||||||
|
|
|
|
|
|
|||||||
Total recognized in other comprehensive income (loss) |
790 | 768 | (213 | ) | ||||||||
|
|
|
|
|
|
|||||||
Total recognized in net periodic benefit cost and other comprehensive income |
$ | 1,110 | $ | 885 | $ | 233 | ||||||
|
|
|
|
|
|
The following table indicates the funded status of the plans as of December 31:
Postretirement | ||||||||||||||||||||||||
Funded Plans | Unfunded Plans | Benefit Plans | ||||||||||||||||||||||
2012 | 2011 | 2012 | 2011 | 2012 | 2011 | |||||||||||||||||||
(in thousands) | ||||||||||||||||||||||||
Change in benefit obligation: |
||||||||||||||||||||||||
Benefit obligation at beginning of year |
$ | 13,938 | $ | 12,853 | $ | 10,883 | $ | 10,352 | $ | 18,667 | $ | 18,987 | ||||||||||||
Service cost |
— | — | 104 | 121 | 146 | 128 | ||||||||||||||||||
Interest cost |
659 | 678 | 491 | 511 | 814 | 868 | ||||||||||||||||||
Actuarial adjustments |
1,419 | 1,157 | 799 | 609 | 250 | 106 | ||||||||||||||||||
Plan amendments |
— | — | — | — | — | — | ||||||||||||||||||
Benefits paid |
(668 | ) | (750 | ) | (707 | ) | (710 | ) | (1,176 | ) | (1,422 | ) | ||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||
Benefit obligation at end of year |
15,348 | 13,938 | 11,570 | 10,883 | 18,701 | 18,667 | ||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||
Change in plan assets: |
||||||||||||||||||||||||
Fair value of plan assets at beginning of year |
9,846 | 8,858 | — | — | 2,118 | 2,678 | ||||||||||||||||||
Actual return on plan assets |
683 | 741 | — | — | 100 | 217 | ||||||||||||||||||
Company contributions |
763 | 997 | 707 | 710 | 355 | 645 | ||||||||||||||||||
Benefits paid |
(668 | ) | (750 | ) | (707 | ) | (710 | ) | (1,176 | ) | (1,422 | ) | ||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||
Fair value of plan assets at end of year |
10,624 | 9,846 | — | — | 1,397 | 2,118 | ||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||
Funded status at end of year |
$ | (4,724 | ) | $ | (4,092 | ) | $ | (11,570 | ) | $ | (10,883 | ) | $ | (17,304 | ) | $ | (16,549 | ) | ||||||
|
|
|
|
|
|
|
|
|
|
|
|
The net amounts recognized in Viad’s consolidated balance sheets under the caption “Pension and postretirement benefits” as of December 31 were as follows:
Postretirement | ||||||||||||||||||||||||
Funded Plans | Unfunded Plans | Benefit Plans | ||||||||||||||||||||||
2012 | 2011 | 2012 | 2011 | 2012 | 2011 | |||||||||||||||||||
(in thousands) | ||||||||||||||||||||||||
Other current liabilities |
$ | — | $ | — | $ | 816 | $ | 717 | $ | 392 | $ | 440 | ||||||||||||
Non-current liabilities |
4,724 | 4,092 | 10,754 | 10,166 | 16,912 | 16,109 | ||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||
Net amount recognized |
$ | 4,724 | $ | 4,092 | $ | 11,570 | $ | 10,883 | $ | 17,304 | $ | 16,549 | ||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
Amounts recognized in accumulated other comprehensive income as of December 31, 2012 consisted of:
Funded | Unfunded | Postretirement | ||||||||||||||
Plans | Plans | Benefit Plans | Total | |||||||||||||
(in thousands) | ||||||||||||||||
Net actuarial loss |
$ | 9,052 | $ | 4,548 | $ | 6,706 | $ | 20,306 | ||||||||
Prior service credit |
— | — | (2,900 | ) | (2,900 | ) | ||||||||||
|
|
|
|
|
|
|
|
|||||||||
Subtotal |
9,052 | 4,548 | 3,806 | 17,406 | ||||||||||||
Less tax effect |
(3,433 | ) | (1,725 | ) | (1,443 | ) | (6,601 | ) | ||||||||
|
|
|
|
|
|
|
|
|||||||||
Total |
$ | 5,619 | $ | 2,823 | $ | 2,363 | $ | 10,805 | ||||||||
|
|
|
|
|
|
|
|
Amounts recognized in accumulated other comprehensive income as of December 31, 2011 consisted of:
Funded | Unfunded | Postretirement | ||||||||||||||
Plans | Plans | Benefit Plans | Total | |||||||||||||
(in thousands) | ||||||||||||||||
Net actuarial loss |
$ | 8,238 | $ | 3,911 | $ | 7,029 | $ | 19,178 | ||||||||
Prior service credit |
— | — | (4,013 | ) | (4,013 | ) | ||||||||||
|
|
|
|
|
|
|
|
|||||||||
Subtotal |
8,238 | 3,911 | 3,016 | 15,165 | ||||||||||||
Less tax effect |
(3,146 | ) | (1,493 | ) | (1,153 | ) | (5,792 | ) | ||||||||
|
|
|
|
|
|
|
|
|||||||||
Total |
$ | 5,092 | $ | 2,418 | $ | 1,863 | $ | 9,373 | ||||||||
|
|
|
|
|
|
|
|
The estimated net actuarial loss for the pension plans that is expected to be amortized from accumulated other comprehensive income into net periodic pension cost in 2013 is approximately $597,000. The estimated net actuarial loss for the postretirement benefit plans that is expected to be amortized from accumulated other comprehensive income into net periodic benefit cost in 2013 is approximately $566,000. The estimated prior service credit for the postretirement benefit plans that is expected to be amortized from accumulated other comprehensive income into net periodic benefit credit in 2013 is approximately $901,000.
The fair value of the domestic plans’ assets by asset class was as follows:
Fair Value Measurements at December 31, 2012 | ||||||||||||||||
Significant | ||||||||||||||||
Quoted Prices | Other | Significant | ||||||||||||||
in Active | Observable | Unobserved | ||||||||||||||
Markets | Inputs | Inputs | ||||||||||||||
Description |
Total | (Level 1) | (Level 2) | (Level 3) | ||||||||||||
(in thousands) | ||||||||||||||||
Domestic Pension Plans: |
||||||||||||||||
Cash |
$ | 10,401 | $ | 10,401 | $ | — | $ | — | ||||||||
Other |
223 | — | 223 | — | ||||||||||||
|
|
|
|
|
|
|
|
|||||||||
$ | 10,624 | $ | 10,401 | $ | 223 | $ | — | |||||||||
|
|
|
|
|
|
|
|
|||||||||
Postretirement Benefit Plans: |
||||||||||||||||
Cash |
$ | 1,397 | $ | 1,397 | $ | — | $ | — | ||||||||
|
|
|
|
|
|
|
|
Fair Value Measurements at December 31, 2011 | ||||||||||||||||
Significant | ||||||||||||||||
Quoted Prices | Other | Significant | ||||||||||||||
in Active | Observable | Unobserved | ||||||||||||||
Markets | Inputs | Inputs | ||||||||||||||
Description |
Total | (Level 1) | (Level 2) | (Level 3) | ||||||||||||
(in thousands) | ||||||||||||||||
Domestic Pension Plans: |
||||||||||||||||
U.S. equity securities |
$ | 2,849 | $ | — | $ | 2,849 | $ | — | ||||||||
International equity securities |
914 | — | 914 | — | ||||||||||||
Aggregate fixed income securities |
2,373 | — | 2,373 | — | ||||||||||||
Long-term fixed income securities |
3,412 | — | 3,412 | — | ||||||||||||
Cash |
72 | 72 | — | — | ||||||||||||
Other |
226 | — | 226 | — | ||||||||||||
|
|
|
|
|
|
|
|
|||||||||
$ | 9,846 | $ | 72 | $ | 9,774 | $ | — | |||||||||
|
|
|
|
|
|
|
|
|||||||||
Postretirement Benefit Plans: |
||||||||||||||||
U.S. equity securities |
$ | 283 | $ | — | $ | 283 | $ | — | ||||||||
International equity securities |
89 | — | 89 | — | ||||||||||||
Aggregate fixed income securities |
1,034 | — | 1,034 | — | ||||||||||||
Long-term fixed income securities |
490 | — | 490 | — | ||||||||||||
Cash |
222 | 222 | — | — | ||||||||||||
|
|
|
|
|
|
|
|
|||||||||
$ | 2,118 | $ | 222 | $ | 1,896 | $ | — | |||||||||
|
|
|
|
|
|
|
|
The significant amount of investments held in cash in the domestic pension and postretirement plans as of December 31, 2012 was due to a change in the investment custodian during December 2012. All securities held by the previous custodian were liquidated to cash and transferred to the new custodian on December 26, 2012. During January and February 2013, the new custodian invested the plans’ assets in a mix of equities and fixed income securities approximating the same mixes as on December 31, 2011.
Viad employs 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.
Viad utilizes 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 Viad’s 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, as well as the Medicare Part D subsidy expected to be received:
Postretirement | Medicare | |||||||||||||||
Funded | Unfunded | Benefit | Part D Subsidy | |||||||||||||
Plans | Plans | Plans | Receipts | |||||||||||||
(in thousands) | ||||||||||||||||
2013 |
$ | 784 | $ | 832 | $ | 1,768 | $ | 268 | ||||||||
2014 |
762 | 810 | 1,760 | 272 | ||||||||||||
2015 |
791 | 795 | 1,744 | 273 | ||||||||||||
2016 |
737 | 771 | 1,719 | 273 | ||||||||||||
2017 |
774 | 794 | 1,647 | 271 | ||||||||||||
2018-2022 |
4,200 | 4,181 | 7,434 | 1,267 |
Foreign Pension Plans. Certain of Viad’s foreign operations also maintain trusteed defined benefit pension plans covering 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. 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 included the following:
2012 | 2011 | 2010 | ||||||||||
(in thousands) | ||||||||||||
Net Periodic Benefit Cost |
||||||||||||
Service cost |
$ | 491 | $ | 366 | $ | 304 | ||||||
Interest cost |
737 | 729 | 780 | |||||||||
Expected return on plan assets |
(622 | ) | (665 | ) | (597 | ) | ||||||
Recognized net actuarial loss |
201 | 73 | 54 | |||||||||
|
|
|
|
|
|
|||||||
Net periodic benefit cost |
807 | 503 | 541 | |||||||||
|
|
|
|
|
|
|||||||
Other Changes in Plan Assets and Benefit Obligations Recognized in Other Comprehensive Income |
||||||||||||
Net actuarial loss |
958 | 1,936 | 299 | |||||||||
Reversal of amortization of net actuarial loss |
(201 | ) | (73 | ) | (54 | ) | ||||||
|
|
|
|
|
|
|||||||
Total recognized in other comprehensive income |
757 | 1,863 | 245 | |||||||||
|
|
|
|
|
|
|||||||
Total recognized in net periodic benefit cost and other comprehensive income |
$ | 1,564 | $ | 2,366 | $ | 786 | ||||||
|
|
|
|
|
|
The following table represents the funded status of the plans as of December 31:
Funded Plans | Unfunded Plans | |||||||||||||||
2012 | 2011 | 2012 | 2011 | |||||||||||||
(in thousands) | ||||||||||||||||
Change in benefit obligation: |
||||||||||||||||
Benefit obligation at beginning of year |
$ | 13,141 | $ | 11,453 | $ | 2,939 | $ | 2,929 | ||||||||
Service cost |
491 | 366 | — | — | ||||||||||||
Interest cost |
607 | 583 | 130 | 146 | ||||||||||||
Actuarial adjustments |
1,086 | 1,421 | 113 | 173 | ||||||||||||
Benefits paid |
(328 | ) | (351 | ) | (220 | ) | (231 | ) | ||||||||
Translation adjustment |
390 | (331 | ) | 70 | (78 | ) | ||||||||||
|
|
|
|
|
|
|
|
|||||||||
Benefit obligation at end of year |
15,387 | 13,141 | 3,032 | 2,939 | ||||||||||||
|
|
|
|
|
|
|
|
|||||||||
Change in plan assets: |
||||||||||||||||
Fair value of plan assets at beginning of year |
11,028 | 10,834 | — | — | ||||||||||||
Actual return on plan assets |
860 | 100 | — | — | ||||||||||||
Company contributions |
1,111 | 709 | 220 | 231 | ||||||||||||
Benefits paid |
(328 | ) | (351 | ) | (220 | ) | (231 | ) | ||||||||
Translation adjustment |
326 | (264 | ) | — | — | |||||||||||
|
|
|
|
|
|
|
|
|||||||||
Fair value of plan assets at end of year |
12,997 | 11,028 | — | — | ||||||||||||
|
|
|
|
|
|
|
|
|||||||||
Funded status at end of year |
$ | (2,390 | ) | $ | (2,113 | ) | $ | (3,032 | ) | $ | (2,939 | ) | ||||
|
|
|
|
|
|
|
|
As of December 31, 2012 and 2011, the foreign funded plans had liabilities of $2.4 million and $2.1 million, respectively. The unfunded plans had liabilities of $3.0 million and $2.9 million at December 31, 2012 and 2011, respectively. These amounts are each included in the consolidated balance sheets under the caption “Pension and postretirement benefits.”
The net actuarial losses for the foreign funded plans as of December 31, 2012 and 2011 were $5.3 million ($3.9 million after-tax) and $4.6 million ($3.4 million after-tax), respectively. The net actuarial losses as of December 31, 2012 and 2011 for the foreign unfunded plans were $366,000 ($271,000 after-tax) and $269,000 ($199,000 after-tax), respectively.
The fair value of the foreign pension plans’ assets by asset category were as follows:
Fair Value Measurements at December 31, 2012 | ||||||||||||||||
Description |
Total | Quoted Prices in Active Markets (Level 1) |
Significant Other Observable Inputs (Level 2) |
Significant Unobserved Inputs (Level 3) |
||||||||||||
(in thousands) | ||||||||||||||||
U.S. equity securities |
$ | 1,185 | $ | 1,185 | $ | — | $ | — | ||||||||
International equity securities |
4,871 | 4,494 | 377 | — | ||||||||||||
Canadian fixed income securities |
6,744 | 6,744 | — | — | ||||||||||||
Other |
197 | 197 | — | — | ||||||||||||
|
|
|
|
|
|
|
|
|||||||||
$ | 12,997 | $ | 12,620 | $ | 377 | $ | — | |||||||||
|
|
|
|
|
|
|
|
Fair Value Measurements at December 31, 2011 | ||||||||||||||||
Description |
Total | Quoted Prices in Active Markets (Level 1) |
Significant Other Observable Inputs (Level 2) |
Significant Unobserved Inputs (Level 3) |
||||||||||||
(in thousands) | ||||||||||||||||
U.S. equity securities |
$ | 977 | $ | 977 | $ | — | $ | — | ||||||||
International equity securities |
3,995 | 3,639 | 356 | — | ||||||||||||
Canadian fixed income securities |
5,975 | 5,975 | — | — | ||||||||||||
Other |
81 | 81 | — | — | ||||||||||||
|
|
|
|
|
|
|
|
|||||||||
$ | 11,028 | $ | 10,672 | $ | 356 | $ | — | |||||||||
|
|
|
|
|
|
|
|
The following payments, which reflect expected future service, as appropriate, are expected to be paid:
Funded | Unfunded | |||||||
Plans | Plans | |||||||
(in thousands) | ||||||||
2013 |
$ | 385 | $ | 219 | ||||
2014 |
492 | 218 | ||||||
2015 |
612 | 218 | ||||||
2016 |
616 | 217 | ||||||
2017 |
619 | 216 | ||||||
2018-2022 |
3,707 | 1,066 |
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:
Domestic Plans | ||||||||||||||||
Funded Plans | Unfunded Plans | |||||||||||||||
2012 | 2011 | 2012 | 2011 | |||||||||||||
(in thousands) | ||||||||||||||||
Projected benefit obligation |
$ | 15,348 | $ | 13,938 | $ | 11,570 | $ | 10,883 | ||||||||
Accumulated benefit obligation |
15,348 | 13,938 | 11,322 | 10,589 | ||||||||||||
Fair value of plan assets |
10,624 | 9,846 | — | — |
Foreign Plans | ||||||||||||||||
Funded Plans | Unfunded Plans | |||||||||||||||
2012 | 2011 | 2012 | 2011 | |||||||||||||
(in thousands) | ||||||||||||||||
Projected benefit obligation |
$ | 15,387 | $ | 13,141 | $ | 3,032 | $ | 2,939 | ||||||||
Accumulated benefit obligation |
14,307 | 12,049 | 3,032 | 2,939 | ||||||||||||
Fair value of plan assets |
12,997 | 11,028 | — | — |
Contributions. In aggregate for both the domestic and foreign plans, the Company anticipates contributing $1.7 million to the funded pension plans, $1.1 million to the unfunded pension plans and $400,000 to the postretirement benefit plans in 2013.
Weighted-Average Assumptions. Weighted-average assumptions used to determine benefit obligations as of December 31 were as follows:
Domestic Plans | ||||||||||||||||||||||||||||||||
Funded Plans | Unfunded Plans | Postretirement Benefit Plans |
Foreign Plans | |||||||||||||||||||||||||||||
2012 | 2011 | 2012 | 2011 | 2012 | 2011 | 2012 | 2011 | |||||||||||||||||||||||||
Discount rate |
4.11 | % | 4.92 | % | 3.80 | % | 4.75 | % | 3.85 | % | 4.70 | % | 4.06 | % | 4.60 | % | ||||||||||||||||
Rate of compensation increase |
N/A | N/A | 4.50 | % | 4.50 | % | N/A | N/A | 3.00 | % | 3.00 | % |
Weighted-average assumptions used to determine net periodic benefit cost were as follows:
Domestic Plans | ||||||||||||||||||||||||||||||||
Postretirement | ||||||||||||||||||||||||||||||||
Funded Plans | Unfunded Plans | Benefit Plans | Foreign Plans | |||||||||||||||||||||||||||||
2012 | 2011 | 2012 | 2011 | 2012 | 2011 | 2012 | 2011 | |||||||||||||||||||||||||
Discount rate |
4.93 | % | 5.45 | % | 4.75 | % | 5.10 | % | 4.70 | % | 5.10 | % | 4.65 | % | 5.10 | % | ||||||||||||||||
Expected return on plan assets |
4.20 | % | 6.35 | % | N/A | N/A | 4.65 | % | 6.10 | % | 5.45 | % | 5.50 | % | ||||||||||||||||||
Rate of compensation increase |
N/A | N/A | 4.50 | % | 4.50 | % | N/A | N/A | 3.00 | % | 3.00 | % |
The assumed health care cost trend rate used in measuring the December 31, 2012 accumulated postretirement benefit obligation was 8.5 percent, declining one-half percent each year to the ultimate rate of five percent by the year 2019 and remaining at that level thereafter. The assumed health care cost trend rate used in measuring the December 31, 2011 accumulated postretirement benefit obligation was nine percent, declining one-half percent each year to the ultimate rate of five percent by the year 2019 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, 2012 by approximately $1.8 million and the total of service and interest cost components by approximately $120,000. 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, 2012 by approximately $1.5 million and the total of service and interest cost components by approximately $97,000.
Multi-employer Plans. Viad contributes to defined benefit pension plans under the terms of collective-bargaining agreements that cover its 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 Viad were to discontinue its participation in some of its multi-employer pension plans, the Company may be required to pay those plans a withdrawal liability amount based on the underfunded status of the plan. Viad also contributes to defined contribution plans pursuant to its collective-bargaining agreements, which are generally not subject to the funding risks inherent in defined benefit pension plans. The overall level of Viad’s contributions to its multi-employer plans may significantly vary from year to year based on the demand for union-represented labor to support the Company’s operations. Viad does not have any minimum contribution requirements for future periods pursuant to its collective-bargaining agreements for individually significant multi-employer plans.
Viad’s participation in multi-employer pension plans for the year ended December 31, 2012, is outlined in the following table. Unless otherwise noted, the most recent Pension Protection Act zone status available in 2012 and 2011 relates to the plan’s year end as of December 31, 2011 and 2010, respectively, and is based on information received from the plan. Among other factors, plans in the red zone are generally less than 65 percent funded, plans in the yellow zone are less than 80 percent funded, and plans in the green zone are at least 80 percent 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.
Plan | Pension Protection Act Zone Status |
FIP/RP Status Pending/ |
Viad Contributions | Surcharge |
Expiration Date of Collective- |
|||||||||||||||||||||||||||||||
Pension Fund |
EIN | No. | 2012 | 2011 | Implemented | 2012 | 2011 | 2010 | Paid | Agreement(s) | ||||||||||||||||||||||||||
(in thousands) | ||||||||||||||||||||||||||||||||||||
Western Conference of Teamsters Pension Plan |
91-6145047 | 001 | Green | Green | No | $ | 5,694 | $ | 5,720 | $ | 4,551 | No | 11/30/13 to 3/31/15 | |||||||||||||||||||||||
Southern California Local 831—Employer Pension Fund (1) |
95-6376874 | 001 | Green | Green | No | 2,358 | 2,232 | 1,870 | No | 8/31/2014 | ||||||||||||||||||||||||||
National Electrical Benefit Fund |
53-0181657 | 001 | Green | Green | No | 1,814 | 1,691 | 1,313 | No | 5/31/14 to 6/16/14 | ||||||||||||||||||||||||||
Chicago Regional Council of Carpenters Pension Fund (2) |
36-6130207 | 001 | Yellow | Yellow | Yes | 1,749 | 1,411 | 1,018 | No | 5/31/13 to 5/31/14 | ||||||||||||||||||||||||||
Southwest Carpenters Pension Trust |
95-6042875 | 001 | Green | Green | No | 944 | 1,031 | 867 | No | 6/30/2015 | ||||||||||||||||||||||||||
Machinery Movers Riggers & Mach Erect Local 136 Supplemental Retirement Plan (1) (2) |
36-1416355 | 001 | Red | Red | Yes | 930 | 386 | 710 | No | 6/30/2014 | ||||||||||||||||||||||||||
Central States, Southeast and Southwest Areas Pension Plan |
36-6044243 | 001 | Red | Red | Yes | 874 | 725 | 717 | No | 3/31/13 to 7/31/15 | ||||||||||||||||||||||||||
New England Teamsters & Trucking Industry Pension (3) |
04-6372430 | 001 | Red | Red | Yes | 334 | 339 | 290 | No | 3/31/2017 | ||||||||||||||||||||||||||
Steelworkers Pension Trust |
23-6648508 | 499 | Green | Green | No | 326 | 422 | 425 | No | 3/31/13 to 2/28/15 | ||||||||||||||||||||||||||
All other funds (4) |
3,645 | 3,752 | 2,119 | |||||||||||||||||||||||||||||||||
|
|
|
|
|
|
|||||||||||||||||||||||||||||||
Total contributions to defined benefit plans |
18,668 | 17,709 | 13,880 | |||||||||||||||||||||||||||||||||
Total contributions to other plans |
2,001 | 1,892 | 1,469 | |||||||||||||||||||||||||||||||||
|
|
|
|
|
|
|||||||||||||||||||||||||||||||
Total contributions to multi-employer plans |
$ | 20,669 | $ | 19,601 | $ | 15,349 | ||||||||||||||||||||||||||||||
|
|
|
|
|
|
(1) | The Company contributed more than 5 percent of total plan contributions for the 2011 and 2010 plan years based on the plans’ Forms 5500. |
(2) | Zone status as of 6/30/11 and 6/30/10. |
(3) | Zone status as of 9/30/11 and 9/30/10. |
(4) | Represents participation in 39 pension funds during 2012. |
Other Employee Benefits. Costs of the 401(k) Plan and other benefit plans totaled $1.7 million, $1.3 million and $1.6 million in 2012, 2011 and 2010, respectively.
|
Note 16. Restructuring Charges
Marketing & Events Group Consolidation
Beginning in 2009, Viad commenced certain restructuring actions designed to reduce the Company’s cost structure primarily within the Marketing & Events U.S. segment, and to a lesser extent in the Marketing & Events International segment. The Company implemented a strategic reorganization plan in order to consolidate the separate business units within the Marketing & Events U.S. segment. The Company also consolidated facilities and streamlined its operations in the United Kingdom and Germany. As a result, the Company recorded restructuring charges in 2011 and 2010, 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. During 2012, the Company recorded restructuring charges related to leased facility consolidations and optimization of the Marketing & Events U.S. segment’s service delivery network. The Company expects to incur additional restructuring charges during 2013 primarily related to facility consolidations.
Other Restructurings
The Company has recorded restructuring charges in connection with the consolidation of certain support functions at its corporate headquarters, and certain reorganization activities within the Travel & Recreation Group. These charges primarily consist of severance and related benefits due to headcount reductions. In addition, the Company had recorded significant restructuring charges in past years, primarily within the Marketing & Events U.S. segment. These legacy restructuring liabilities represent the remaining contractual lease obligations on certain facilities, and are subject to periodic adjustments as a result of changes in estimated sublease activity and other factors. These adjustments can result in reversals of previously recorded amounts, or additional charges in some cases.
The table below represents a reconciliation of beginning and ending liability balances by major restructuring activity:
Marketing & Events Group Consolidation |
Other Restructurings | |||||||||||||||||||
Severance & | Severance & | |||||||||||||||||||
Employee | Employee | |||||||||||||||||||
Benefits | Facilities | Benefits | Facilities | Total | ||||||||||||||||
(in thousands) | ||||||||||||||||||||
Balance at January 1, 2010 |
$ | 2,333 | $ | 6,295 | $ | — | $ | 3,027 | $ | 11,655 | ||||||||||
Restructuring charges (recoveries) |
2,637 | 1,180 | 542 | (137 | ) | 4,222 | ||||||||||||||
Cash payments |
(3,387 | ) | (2,164 | ) | (292 | ) | (875 | ) | (6,718 | ) | ||||||||||
Adjustment to liability |
(466 | ) | (258 | ) | (53 | ) | (373 | ) | (1,150 | ) | ||||||||||
Foreign currency translation adjustment |
(11 | ) | (2 | ) | — | — | (13 | ) | ||||||||||||
|
|
|
|
|
|
|
|
|
|
|||||||||||
Balance at December 31, 2010 |
1,106 | 5,051 | 197 | 1,642 | 7,996 | |||||||||||||||
Restructuring charges |
1,182 | 2,519 | 26 | 55 | 3,782 | |||||||||||||||
Cash payments |
(1,175 | ) | (2,356 | ) | (199 | ) | (158 | ) | (3,888 | ) | ||||||||||
Adjustment to liability |
(294 | ) | (397 | ) | — | (263 | ) | (954 | ) | |||||||||||
Foreign currency translation adjustment |
12 | 2 | — | — | 14 | |||||||||||||||
|
|
|
|
|
|
|
|
|
|
|||||||||||
Balance at December 31, 2011 |
831 | 4,819 | 24 | 1,276 | 6,950 | |||||||||||||||
Restructuring charges |
2,506 | 2,346 | 90 | — | 4,942 | |||||||||||||||
Cash payments |
(2,670 | ) | (1,567 | ) | (114 | ) | (343 | ) | (4,694 | ) | ||||||||||
Adjustment to liability |
51 | (27 | ) | — | — | 24 | ||||||||||||||
Foreign currency translation adjustment |
2 | — | — | — | 2 | |||||||||||||||
|
|
|
|
|
|
|
|
|
|
|||||||||||
Balance at December 31, 2012 |
$ | 720 | $ | 5,571 | $ | — | $ | 933 | $ | 7,224 | ||||||||||
|
|
|
|
|
|
|
|
|
|
As of December 31, 2012, the liability of $720,000 related to severance and employee benefits in the Marketing & Events Group consolidation is expected to be paid by the end of 2013. Additionally, as of December 31, 2012, the liability of $5.6 million and $933,000 related to facilities in the Marketing & Events Group consolidation and other restructurings, respectively, relates to future lease payment obligations to be made over the remaining lease terms. See Note 19 for information regarding restructuring charges by segment.
|
Note 17. Leases and Other
Viad has entered into operating leases for the use of certain of its 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, 2012, Viad’s 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:
Rental | Receivable | |||||||
Payments | Under Subleases | |||||||
(in thousands) | ||||||||
2013 |
$ | 17,793 | $ | 1,592 | ||||
2014 |
16,320 | 990 | ||||||
2015 |
9,824 | 746 | ||||||
2016 |
6,842 | 494 | ||||||
2017 |
5,288 | 480 | ||||||
Thereafter |
9,323 | 951 | ||||||
|
|
|
|
|||||
Total |
$ | 65,390 | $ | 5,253 | ||||
|
|
|
|
Net rent expense under operating leases consisted of the following:
2012 | 2011 | 2010 | ||||||||||
(in thousands) | ||||||||||||
Minimum rentals |
$ | 36,309 | $ | 30,860 | $ | 29,072 | ||||||
Sublease rentals |
(6,501 | ) | (6,497 | ) | (5,704 | ) | ||||||
|
|
|
|
|
|
|||||||
Total rentals, net |
$ | 29,808 | $ | 24,363 | $ | 23,368 | ||||||
|
|
|
|
|
|
The aggregate annual maturities and the related amounts representing interest on capital lease obligations are included in Note 9.
In addition, as of December 31, 2012, the Company had aggregate purchase obligations of $32.8 million related to various licensing agreements, consulting and other contracted services.
|
Note 18. Litigation, Claims, Contingencies and Other
Viad and certain of its subsidiaries 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 Viad. Although the amount of liability as of December 31, 2012 with respect to these matters is not ascertainable, Viad believes that any resulting liability, after taking into consideration amounts already provided for and insurance coverage, will not have a material effect on Viad’s business, financial position or results of operations.
Viad is 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 Viad has or had operations. If the Company has failed to comply with these environmental laws and regulations, civil and criminal penalties could be imposed and Viad could become subject to regulatory enforcement actions in the form of injunctions and cease and desist orders. As is the case with many companies, Viad also faces exposure to actual or potential claims and lawsuits involving environmental matters relating to its past operations. Although it is a party to certain environmental disputes, Viad believes that any resulting liabilities, after taking into consideration amounts already provided for and insurance coverage, will not have a material effect on the Company’s financial position or results of operations. As of December 31, 2012 and 2011, Viad had recorded environmental remediation liabilities of $5.3 million and $5.8 million, respectively, related to previously sold operations.
As of December 31, 2012, Viad had certain obligations under guarantees to third parties on behalf of its subsidiaries. These guarantees are not subject to liability recognition in the consolidated financial statements and relate to leased facilities entered into by Viad’s subsidiary operations. The Company 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 Viad would be required to make under all guarantees existing as of December 31, 2012 would be $21.2 million. These guarantees relate to leased facilities expiring through October 2017. There are no recourse provisions that would enable Viad to recover from third parties any payments made under the guarantees. Furthermore, there are no collateral or similar arrangements whereby Viad could recover payments.
A significant portion of Viad’s employees are unionized and the Company is a party to approximately 100 collective-bargaining agreements, with approximately one-third requiring renegotiation each year. As of December 31, 2012, approximately 34 percent of Viad’s regular full-time employees are covered by collective-bargaining agreements. If the Company were 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 the Company’s businesses and results of operations. Viad believes that relations with its employees are satisfactory and that collective-bargaining agreements expiring in 2013 will be renegotiated in the ordinary course of business without having a material adverse effect on Viad’s operations.
Viad’s businesses contribute to various multi-employer pension plans based on obligations arising under collective bargaining agreements covering its union-represented employees. Viad’s contributions to these plans in 2012, 2011 and 2010 totaled $20.7 million, $19.6 million and $15.3 million, respectively. Based upon the information available to Viad from plan administrators, management believes 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 Viad, 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 Viad to make payments to such plan for its proportionate share of the plan’s unfunded vested liabilities. As of December 31, 2012, the amount of additional funding, if any, that Viad would be required to make related to multi-employer pension plans is not ascertainable.
Glacier Park operates the concession portion of its business under a concession contract with the U.S. National Park Service (the “Park Service”) for Glacier National Park. Glacier Park’s original 25-year concession contract with the Park Service that was to expire on December 31, 2005 has been extended for eight one-year periods and now expires on December 31, 2013. Glacier Park generated approximately 49 percent of its 2012 revenues through its concession contract for services provided within Glacier National Park.
On December 14, 2012, the Park Service issued a prospectus soliciting proposals from prospective bidders, including Glacier Park, for the award of a 16-year concession contract beginning on January 1, 2014. Glacier Park is currently preparing its bid for the contract, which is due on or before April 16, 2013. Although Viad believes that Glacier Park is well-positioned to win the new contract, if the Park Service selects a new concessionaire, Glacier Park would be entitled to $25 million for its “possessory interest,” which generally means the value of the structures acquired or constructed, fixtures installed and improvements made to the concession property at Glacier National Park during the term of the concession contract, plus an estimated $5 million for the personal property Glacier Park uses at the facilities covered by the concession contract.
If a new concessionaire is selected by the Park Service, Glacier Park would continue to generate revenue from the four properties it owns outside of Glacier National Park: Glacier Park Lodge in East Glacier, Montana; Grouse Mountain Lodge in Whitefish, Montana; St. Mary Lodge & Resort in St. Mary, Montana and the Prince of Wales Hotel in Waterton Lakes National Park, Alberta, which Glacier Park owns and operates under a 42-year ground lease with the Canadian government running through January 31, 2052.
|
Note 19. Segment Information
Viad measures profit and performance of its operations on the basis of segment operating income which excludes restructuring charges and recoveries 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. No reportable segment has a client comprising more than 5.2 percent of that segment’s revenues, and no client comprises more than 3.1 percent of Viad’s revenues. Disclosures regarding Viad’s reportable segments with reconciliations to consolidated totals are as follows:
2012 | 2011 | 2010 | ||||||||||
(in thousands) | ||||||||||||
Revenues: |
||||||||||||
Marketing & Events Group: |
||||||||||||
U.S. |
$ | 676,772 | $ | 631,360 | $ | 570,978 | ||||||
International |
240,137 | 218,639 | 197,787 | |||||||||
Intersegment eliminations |
(14,869 | ) | (9,449 | ) | (12,281 | ) | ||||||
|
|
|
|
|
|
|||||||
902,040 | 840,550 | 756,484 | ||||||||||
Travel & Recreation Group |
123,191 | 101,814 | 88,277 | |||||||||
|
|
|
|
|
|
|||||||
$ | 1,025,231 | $ | 942,364 | $ | 844,761 | |||||||
|
|
|
|
|
|
|||||||
Segment operating income (loss): |
||||||||||||
Marketing & Events Group: |
||||||||||||
U.S. |
$ | 5,579 | $ | (6,269 | ) | $ | (15,217 | ) | ||||
International |
12,321 | 11,449 | 10,088 | |||||||||
|
|
|
|
|
|
|||||||
17,900 | 5,180 | (5,129 | ) | |||||||||
Travel & Recreation Group |
23,962 | 20,196 | 19,885 | |||||||||
|
|
|
|
|
|
|||||||
41,862 | 25,376 | 14,756 | ||||||||||
Corporate activities |
(9,408 | ) | (7,682 | ) | (6,422 | ) | ||||||
|
|
|
|
|
|
|||||||
32,454 | 17,694 | 8,334 | ||||||||||
Interest income |
593 | 779 | 584 | |||||||||
Interest expense |
(1,303 | ) | (1,511 | ) | (1,835 | ) | ||||||
Restructuring charges: |
||||||||||||
Marketing & Events U.S. |
(3,479 | ) | (3,756 | ) | (3,232 | ) | ||||||
Marketing & Events International |
(1,373 | ) | — | (448 | ) | |||||||
Travel & Recreation Group |
(79 | ) | — | (235 | ) | |||||||
Corporate |
(11 | ) | (26 | ) | (307 | ) | ||||||
Impairment losses: |
||||||||||||
Travel & Recreation Group |
— | — | (302 | ) | ||||||||
|
|
|
|
|
|
|||||||
Income from continuing operations before income taxes |
$ | 26,802 | $ | 13,180 | $ | 2,559 | ||||||
|
|
|
|
|
|
2012 | 2011 | 2010 | ||||||||||
(in thousands) | ||||||||||||
Assets: |
||||||||||||
Marketing & Events Group: |
||||||||||||
U.S. |
$ | 203,145 | $ | 213,843 | $ | 235,965 | ||||||
International |
100,387 | 96,996 | 83,441 | |||||||||
Travel & Recreation Group |
223,199 | 194,278 | 157,562 | |||||||||
Corporate and other |
123,846 | 112,711 | 139,535 | |||||||||
|
|
|
|
|
|
|||||||
$ | 650,577 | $ | 617,828 | $ | 616,503 | |||||||
|
|
|
|
|
|
|||||||
Depreciation and amortization: |
||||||||||||
Marketing & Events Group: |
||||||||||||
U.S. |
$ | 17,643 | $ | 17,247 | $ | 17,887 | ||||||
International |
5,162 | 5,027 | 4,486 | |||||||||
Travel & Recreation Group |
7,781 | 6,674 | 5,648 | |||||||||
Corporate and other |
145 | 178 | 231 | |||||||||
|
|
|
|
|
|
|||||||
$ | 30,731 | $ | 29,126 | $ | 28,252 | |||||||
|
|
|
|
|
|
|||||||
Capital expenditures: |
||||||||||||
Marketing & Events Group: |
||||||||||||
U.S. |
$ | 7,525 | $ | 11,692 | $ | 9,050 | ||||||
International |
4,913 | 5,635 | 4,776 | |||||||||
Travel & Recreation Group |
15,201 | 3,271 | 3,214 | |||||||||
Corporate and other |
36 | 940 | — | |||||||||
|
|
|
|
|
|
|||||||
$ | 27,675 | $ | 21,538 | $ | 17,040 | |||||||
|
|
|
|
|
|
Products and Services. Viad’s revenues for each group of products and services are presented in the following table:
2012 | 2011 | 2010 | ||||||||||
(in thousands) | ||||||||||||
Revenues: |
||||||||||||
Exhibition and event services |
$ | 726,429 | $ | 670,054 | $ | 590,444 | ||||||
Exhibits and environments |
175,611 | 170,496 | 166,040 | |||||||||
Travel and recreation services |
123,191 | 101,814 | 88,277 | |||||||||
|
|
|
|
|
|
|||||||
Total revenues |
$ | 1,025,231 | $ | 942,364 | $ | 844,761 | ||||||
|
|
|
|
|
|
Geographic Areas. Viad’s foreign operations are located principally in Canada, the United Kingdom, Germany and the United Arab Emirates. Marketing & Events Group revenues are 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:
2012 | 2011 | 2010 | ||||||||||
(in thousands) | ||||||||||||
Revenues: |
||||||||||||
United States |
$ | 700,414 | $ | 660,998 | $ | 590,163 | ||||||
Canada |
151,070 | 140,374 | 136,066 | |||||||||
United Kingdom |
153,027 | 124,208 | 93,092 | |||||||||
Other international |
20,720 | 16,784 | 25,440 | |||||||||
|
|
|
|
|
|
|||||||
Total revenues |
$ | 1,025,231 | $ | 942,364 | $ | 844,761 | ||||||
|
|
|
|
|
|
|||||||
Long-lived assets: |
||||||||||||
United States |
$ | 141,727 | $ | 145,217 | $ | 117,751 | ||||||
Canada |
76,067 | 47,624 | 51,182 | |||||||||
United Kingdom |
9,757 | 8,165 | 8,295 | |||||||||
Other international |
2,163 | 3,858 | 3,481 | |||||||||
|
|
|
|
|
|
|||||||
Total long-lived assets |
$ | 229,714 | $ | 204,864 | $ | 180,709 | ||||||
|
|
|
|
|
|
|
Note 20. Common Stock Repurchases
In December 2012, Viad announced its intent to repurchase up to an additional one million shares of the Company’s common stock from time to time at prevailing market prices. At the time of the announcement, there were 30,438 shares available for repurchase pursuant to previously announced authorizations. During 2012, 2011 and 2010 Viad repurchased 23,183 shares for $526,000, 250,760 shares for $4.6 million and 356,300 shares for $6.3 million, respectively. As of December 31, 2012, 1,030,438 shares remain available for repurchase. Additionally, during 2012, 2011 and 2010, the Company repurchased 56,885 shares for $1.1 million, 28,627 shares for $679,000 and 28,407 shares for $573,000, respectively, related to tax withholding requirements on share-based awards.
|
Note 21. Discontinued Operations
In 2012, Viad recorded income from discontinued operations of $624,000 primarily related to the sale of land associated with previously sold operations. In 2011 and 2010, Viad recorded income from discontinued operations of $451,000 and $262,000, respectively, related to the reversal of certain liabilities associated with previously sold operations.
|
Note 22. Condensed Consolidated Quarterly Results (Unaudited)
The following quarterly financial information was derived from the Company’s interim financial statements and was prepared in a manner consistent with the annual financial statements and includes all adjustments (consisting of normal recurring accruals) considered necessary for a fair presentation.
First | Second | Third | Fourth | |||||||||||||
Quarter | Quarter | Quarter | Quarter | |||||||||||||
(in thousands, except per share data) | ||||||||||||||||
2012 |
||||||||||||||||
Revenues: |
$ | 268,772 | $ | 246,450 | $ | 307,457 | $ | 202,552 | ||||||||
|
|
|
|
|
|
|
|
|||||||||
Operating income (loss): |
||||||||||||||||
Ongoing operations (1) |
$ | 5,533 | $ | 10,498 | $ | 34,182 | $ | (8,351 | ) | |||||||
Corporate activities |
(1,777 | ) | (2,187 | ) | (2,036 | ) | (3,408 | ) | ||||||||
Restructuring charges |
(2,225 | ) | (678 | ) | (608 | ) | (1,431 | ) | ||||||||
|
|
|
|
|
|
|
|
|||||||||
Operating income (loss) |
$ | 1,531 | $ | 7,633 | $ | 31,538 | $ | (13,190 | ) | |||||||
|
|
|
|
|
|
|
|
|||||||||
Income (loss) from continuing operations attributable to Viad (2) |
$ | 1,027 | $ | 5,451 | $ | 19,976 | $ | (21,181 | ) | |||||||
Net income (loss) attributable to Viad (2) |
$ | 1,027 | $ | 6,090 | $ | 19,976 | $ | (21,196 | ) | |||||||
Diluted income (loss) per common share (2)(3): |
||||||||||||||||
Income (loss) from continuing operations attributable to Viad |
$ | 0.05 | $ | 0.27 | $ | 0.99 | $ | (1.07 | ) | |||||||
Net income (loss) attributable to Viad |
$ | 0.05 | $ | 0.30 | $ | 0.99 | $ | (1.07 | ) | |||||||
Basic income (loss) per common share (2)(3): |
||||||||||||||||
Income (loss) from continuing operations attributable to Viad |
$ | 0.05 | $ | 0.27 | $ | 0.99 | $ | (1.07 | ) | |||||||
Net income (loss) attributable to Viad |
$ | 0.05 | $ | 0.30 | $ | 0.99 | $ | (1.07 | ) |
First | Second | Third | Fourth | |||||||||||||
Quarter | Quarter | Quarter | Quarter | |||||||||||||
(in thousands, except per share data) | ||||||||||||||||
2011 |
||||||||||||||||
Revenues: |
$ | 290,098 | $ | 238,692 | $ | 216,169 | $ | 197,405 | ||||||||
|
|
|
|
|
|
|
|
|||||||||
Operating income (loss): |
||||||||||||||||
Ongoing operations (1) |
$ | 17,259 | $ | 9,862 | $ | 5,412 | $ | (7,157 | ) | |||||||
Corporate activities |
(1,271 | ) | (1,576 | ) | (2,356 | ) | (2,479 | ) | ||||||||
Restructuring charges |
(269 | ) | (1,206 | ) | (75 | ) | (2,232 | ) | ||||||||
|
|
|
|
|
|
|
|
|||||||||
Operating income (loss) |
$ | 15,719 | $ | 7,080 | $ | 2,981 | $ | (11,868 | ) | |||||||
|
|
|
|
|
|
|
|
|||||||||
Income (loss) from continuing operations attributable to Viad |
$ | 9,787 | $ | 4,485 | $ | 1,245 | $ | (6,758 | ) | |||||||
Net income (loss) attributable to Viad |
$ | 9,787 | $ | 4,485 | $ | 1,245 | $ | (6,307 | ) | |||||||
Diluted income (loss) per common share (3): |
||||||||||||||||
Income (loss) from continuing operations attributable to Viad |
$ | 0.48 | $ | 0.22 | $ | 0.06 | $ | (0.35 | ) | |||||||
Net income (loss) attributable to Viad |
$ | 0.48 | $ | 0.22 | $ | 0.06 | $ | (0.32 | ) | |||||||
Basic income (loss) per common share (3): |
||||||||||||||||
Income (loss) from continuing operations attributable to Viad |
$ | 0.48 | $ | 0.22 | $ | 0.06 | $ | (0.35 | ) | |||||||
Net income (loss) attributable to Viad |
$ | 0.48 | $ | 0.22 | $ | 0.06 | $ | (0.32 | ) |
(1) |
Represents revenues less costs of services and products sold. |
(2) |
The fourth quarter of 2012 includes a tax charge of $13.4 million representing a valuation allowance for certain deferred tax assets associated with foreign tax credit carryforwards. |
(3) |
The sum of quarterly income per share amounts may not equal annual income per share due to rounding. |
|
Note 23. Subsequent Event
On February 19, 2013, Viad acquired the assets of Resource Creative Limited (“RCL”) for $647,000 (£420,000) in cash, subject to certain adjustments, plus a deferred payment of up to approximately $280,000 (£180,000). The deferred payment is subject to RCL’s achievement of certain net revenue targets between the acquisition date and December 31, 2014. RCL is a United Kingdom-based company specializing in providing creative graphic services to the exhibition, events and retail markets throughout the United Kingdom and continental Europe. RCL’s operations will be merged with Melville GES’ existing London-based operation and will relocate to a new unit on site at ExCeL London, where Melville GES was recently appointed to supply graphics to ExCeL London’s in-house advertising sales agency, InVision.
|
SCHEDULE II – VALUATION AND QUALIFYING ACCOUNTS
Additions | Deductions | |||||||||||||||||||||||
Balance at | Charged to | Credited | ||||||||||||||||||||||
Beginning | Charged to | Other | to Other | Balance at | ||||||||||||||||||||
Description |
of Year | Expense | Accounts | Write Offs | Accounts | End of Year | ||||||||||||||||||
(in thousands) | ||||||||||||||||||||||||
Allowance for doubtful accounts: |
||||||||||||||||||||||||
December 31, 2010 |
$ | 3,892 | 615 | — | (3,335 | ) | — | $ | 1,172 | |||||||||||||||
December 31, 2011 |
1,172 | 1,696 | — | (1,796 | ) | — | 1,072 | |||||||||||||||||
December 31, 2012 |
1,072 | 708 | — | (630 | ) | — | 1,150 | |||||||||||||||||
Deferred tax valuation allowance: |
||||||||||||||||||||||||
December 31, 2010 |
$ | 162 | 411 | — | (162 | ) | — | $ | 411 | |||||||||||||||
December 31, 2011 |
411 | — | — | (55 | ) | — | 356 | |||||||||||||||||
December 31, 2012 |
356 | 14,220 | — | — | — | 14,576 |
|
Basis of Presentation and Principles of Consolidation
The consolidated financial statements of Viad Corp (“Viad” or the “Company”) are prepared in conformity with accounting principles generally accepted in the United States of America (“GAAP”) and include the accounts of Viad and all of its subsidiaries. All intercompany account balances and transactions between Viad and its subsidiaries have been eliminated in consolidation.
Nature of Business
Viad’s reportable segments consist of Marketing & Events U.S., Marketing & Events International and Travel & Recreation Group.
Marketing & Events Group
The Marketing & Events Group, comprised of Global Experience Specialists, Inc. and affiliates (“GES”), specializes in all aspects of the design, planning and production of face-to-face events, immersive environments and brand-based experiences for clients, including show organizers, corporate brand marketers and retail shopping centers. In addition, the Marketing & Events Group provides a variety of immersive, entertaining attractions and brand-based experiences, sponsored events, mobile marketing and other branded entertainment and face-to-face marketing solutions for clients and venues, including shopping malls, movie studios, museums and leading consumer brands.
Travel & Recreation Group
Travel and recreation services are provided by Brewster Inc. (“Brewster”), Glacier Park, Inc. (“Glacier Park”) and Alaskan Park Properties, Inc. (“Alaska Denali Travel”).
Brewster provides tourism services in the Canadian Rockies in Alberta and in other parts of Western Canada. Brewster’s operations include the Banff Gondola, Columbia Icefield Glacier Adventure, motorcoach services, charter and sightseeing services, tour boat operations, inbound package tour operations and hotel operations, including the Banff International Hotel acquired on March 7, 2012. The Banff International Hotel is a 162-guest room hotel located in downtown Banff, Alberta, Canada.
Glacier Park operates five lodges, three motor inns and one four-season resort hotel and provides food and beverage operations, retail operations and tour and transportation services in and around Glacier National Park in Montana and Waterton Lakes National Park in Alberta, Canada. Glacier Park is an 80 percent owned subsidiary of Viad.
Alaska Denali Travel operates Denali Backcountry Lodge and Denali Cabins. Denali Backcountry Lodge is a 42-guest room lodge located within Denali National Park and Preserve in Alaska and the Denali Cabins are 46 guest cabins located near the entrance to Denali National Park and Preserve. In addition to lodging, Alaska Denali Travel also provides food and beverage operations and package tour and transportation services in and around Denali National Park and Preserve.
Use of Estimates. The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the amounts reported in the consolidated financial statements and accompanying notes. These estimates and assumptions include, but are not limited to:
• |
Estimated fair value of Viad’s reporting units used to perform annual impairment testing of recorded goodwill; |
• |
Estimated allowances for uncollectible accounts receivable; |
• |
Estimated provisions for income taxes, including uncertain tax positions; |
• |
Estimated valuation allowances related to deferred tax assets; |
• |
Estimated liabilities for losses related to self-insured liability claims; |
• |
Estimated liabilities for losses related to environmental remediation obligations; |
• |
Estimated 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; and |
• |
Allocation of purchase price of acquired businesses. |
Actual results could differ from these and other estimates.
Cash and Cash Equivalents. Viad considers all highly-liquid investments with remaining maturities when purchased of three months or less to be cash equivalents. Viad’s cash and cash equivalents consist of cash and bank demand deposits, bank time deposits and money market mutual funds. The Company’s investments in money market mutual funds are classified as available-for-sale and carried at fair value.
Inventories. Inventories, which consist primarily of exhibit design and construction materials and supplies used in providing convention show services, are stated at the lower of cost (first-in, first-out and specific identification methods) or market.
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. Viad capitalizes certain internal and external costs incurred in developing or obtaining internal use software. 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 on October 31 of each year. Goodwill is also tested for impairment 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 amount. Viad uses a discounted expected future cash flow methodology (income approach) in order to estimate the fair value of its 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. Viad has 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 the Company 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. Viad is self-insured up to certain limits for workers’ compensation, automobile, product and general liability, property loss and medical claims. Viad has also 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 Viad’s prior historical experience, claims frequency and other factors. Viad has purchased insurance for amounts in excess of the self-insured levels.
Environmental Remediation Liabilities. Viad has retained certain liabilities representing 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.
Fair Value of Financial Instruments. The carrying values of cash and cash equivalents, receivables and accounts payable approximate fair value due to the short-term maturities of these instruments. The estimated fair value of debt obligations is disclosed in Note 9.
Foreign Currency Translation. Viad conducts its foreign operations primarily in Canada, the United Kingdom, Germany and to a lesser extent in certain other countries. The functional currency of Viad’s foreign subsidiaries is their local currency. Accordingly, for purposes of consolidation, Viad translates the assets and liabilities of its 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 in Viad’s consolidated balance sheets. In addition, for purposes of consolidation, the revenues, expenses and gains and losses related to Viad’s foreign operations are translated into U.S. dollars at the average foreign exchange rates for the period.
Revenue Recognition. Viad recognizes revenue 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 revenues primarily by providing show services to exhibitors participating in exhibitions and events and from the design, construction and refurbishment of exhibit booths and holiday themed environments. Service revenue is recognized at the time services are performed. Exhibits and environments revenue is accounted for using the completed-contract method as contracts are typically completed within three months of contract signing. The Travel & Recreation Group generates revenues through its attractions, hotels and transportation and sightseeing services. Revenues are recognized at the time services are performed.
Share-Based Compensation. Viad recognizes and measures compensation costs related to all share-based payment awards using the fair value method of accounting. These awards generally include restricted stock, performance-based restricted stock (“PBRS”), stock options and liability-based awards (including performance units, restricted stock units and performance-based restricted stock units).
The fair value of restricted stock and PBRS awards are based on Viad’s stock price on the date of grant. Viad issues restricted stock and PBRS awards from shares held in treasury. Future vesting of restricted stock and PBRS is generally subject to continued employment with Viad or its subsidiaries. Holders of restricted stock and PBRS 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.
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 except for certain awards with a five-year vesting period whereby expense is recognized based on an accelerated multiple-award approach over a five-year period. For these awards, 40 percent of the shares vest on the third anniversary of the grant and the remaining shares vest in 30 percent increments over the subsequent two anniversary dates.
Share-based compensation expense related to PBRS awards is recognized based on an accelerated multiple-award approach over the requisite service period of approximately three years. PBRS vests when certain incentive performance targets established in the year of grant are achieved at target levels. PBRS is subject to a graded vesting schedule whereby one third of the earned shares vest after the first year and the remaining earned shares vest in one-third increments each year over the next two years on the first business day in January. The fair value of each stock option grant 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 Viad’s common stock at the date of grant. Stock options granted also contain certain forfeiture and non-compete provisions.
Liability-based awards (including grants of restricted stock units and PBRS units awarded to key employees at certain of the Company’s Canadian operations) 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 Viad’s stock price until the time of settlement. To the extent earned, liability-based awards are settled in cash based on Viad’s stock price. Compensation expense related to liability-based awards is recognized ratably over the requisite service period of approximately three years.
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. Viad applies 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. Furthermore, Viad funds its matching contributions to employees’ 401(k) accounts through the Company’s leveraged Employee Stock Ownership Plan (“ESOP”) feature of the Company’s 401(k) defined contribution plan. ESOP shares are treated as outstanding for income per share calculations.
Impact of Recent Accounting Pronouncements
In September 2011, the Financial Accounting Standards Board (“FASB”) issued new guidance related to goodwill impairment testing, which is codified in Accounting Standards Codification (“ASC”) Topic 350. The new guidance simplifies how entities test goodwill for impairment and permits an entity to first assess qualitative factors to determine whether it is more-likely-than-not that the fair value of a reporting unit is less than its carrying amount. If, after performing the assessment, an entity determines that it is not more-likely-than-not that the fair value of a reporting unit is less than its carrying amount, then performing the two-step impairment test is unnecessary. The guidance is effective for annual and interim goodwill impairment tests performed for fiscal years beginning after December 15, 2011. The adoption of this new guidance did not have a material impact on Viad’s financial condition or results of operations. The Company performs its annual goodwill impairment test as of October 31 of each year.
In February 2013, the FASB issued new guidance related to the reporting of amounts reclassified out of accumulated other comprehensive income, which is codified in ASC Topic 220. The new guidance requires entities to provide information about the amounts reclassified out of accumulated other comprehensive income by component. In addition, entities are required to present significant amounts reclassified out of other comprehensive income by the respective line items of net income in certain circumstances, or otherwise cross-reference amounts to other disclosures. The guidance is effective for reporting periods beginning after December 15, 2012, and will not have an impact on Viad’s financial condition or results of operations.
|
(in thousands) | ||||
Cash and cash equivalents |
$ | 10 | ||
Accounts receivable |
23 | |||
Other current assets |
33 | |||
Property and equipment |
20,408 | |||
Goodwill |
1,890 | |||
Other intangible assets |
1,323 | |||
|
|
|||
Total assets acquired |
23,687 | |||
|
|
|||
Customer deposits |
(64 | ) | ||
Other current liabilities |
(67 | ) | ||
|
|
|||
Total liabilities acquired |
(131 | ) | ||
|
|
|||
Purchase price |
$ | 23,556 | ||
|
|
(in thousands) | ||||
Cash and cash equivalents |
$ | 30 | ||
Other current assets |
870 | |||
Property and equipment |
32,905 | |||
Goodwill |
7,645 | |||
Other intangible assets |
1,086 | |||
|
|
|||
Total assets acquired |
42,536 | |||
|
|
|||
Customer deposits |
(821 | ) | ||
Other current liabilities |
(198 | ) | ||
Other long-term liabilities |
(382 | ) | ||
|
|
|||
Total liabilities acquired |
(1,401 | ) | ||
|
|
|||
Purchase price |
$ | 41,135 | ||
|
|
2012 | 2011 | |||||||
(in thousands, except per share data) | ||||||||
Revenue |
$ | 1,025,681 | $ | 954,766 | ||||
Depreciation and amortization |
30,935 | 30,619 | ||||||
Segment operating income |
41,831 | 28,186 | ||||||
Income from continuing operations |
5,251 | 10,379 | ||||||
Net income attributable to Viad |
5,875 | 10,830 | ||||||
Diluted net income per share |
0.29 | 0.53 | ||||||
Basic net income per share |
0.29 | 0.53 |
|
2012 | 2011 | |||||||
(in thousands) | ||||||||
Raw materials |
$ | 16,422 | $ | 18,297 | ||||
Work in process |
19,234 | 17,528 | ||||||
|
|
|
|
|||||
Inventories |
$ | 35,656 | $ | 35,825 | ||||
|
|
|
|
|
2012 | 2011 | |||||||
(in thousands) | ||||||||
Land and land interests |
$ | 26,124 | $ | 18,134 | ||||
Buildings and leasehold improvements |
137,293 | 109,077 | ||||||
Equipment and other |
310,448 | 310,186 | ||||||
|
|
|
|
|||||
473,865 | 437,397 | |||||||
Accumulated depreciation |
(276,567 | ) | (263,584 | ) | ||||
|
|
|
|
|||||
Property and equipment, net |
$ | 197,298 | $ | 173,813 | ||||
|
|
|
|
|
2012 | 2011 | |||||||
(in thousands) | ||||||||
Cash surrender value of life insurance |
$ | 19,142 | $ | 18,812 | ||||
Workers’ compensation insurance security deposits |
3,350 | 4,658 | ||||||
Other |
9,924 | 7,581 | ||||||
|
|
|
|
|||||
Total other investments and assets |
$ | 32,416 | $ | 31,051 | ||||
|
|
|
|
|
Marketing & | Travel & | |||||||||||||||
Marketing & | Events | Recreation | ||||||||||||||
Events U.S. | International | Group | Total | |||||||||||||
(in thousands) | ||||||||||||||||
Balance at January 1, 2011 |
$ | 62,686 | $ | 22,455 | $ | 42,300 | $ | 127,441 | ||||||||
Business acquisitions |
— | — | 7,645 | 7,645 | ||||||||||||
Foreign currency translation adjustments |
— | (257 | ) | (1,135 | ) | (1,392 | ) | |||||||||
|
|
|
|
|
|
|
|
|||||||||
Balance at December 31, 2011 |
62,686 | 22,198 | 48,810 | 133,694 | ||||||||||||
Business acquisition |
— | — | 1,890 | 1,890 | ||||||||||||
Foreign currency translation adjustments |
— | 856 | 1,380 | 2,236 | ||||||||||||
|
|
|
|
|
|
|
|
|||||||||
Balance at December 31, 2012 |
$ | 62,686 | $ | 23,054 | $ | 52,080 | $ | 137,820 | ||||||||
|
|
|
|
|
|
|
|
2012 | 2011 | |||||||
(in thousands) | ||||||||
Marketing & Events Group: |
||||||||
Marketing & Events U.S. |
$ | 62,686 | $ | 62,686 | ||||
Marketing & Events International: |
||||||||
United Kingdom (Melville GES) |
13,894 | 13,291 | ||||||
GES Canada |
9,160 | 8,907 | ||||||
|
|
|
|
|||||
Total Marketing & Events Group |
85,740 | 84,884 | ||||||
|
|
|
|
|||||
Travel & Recreation Group: |
||||||||
Brewster |
44,435 | 41,165 | ||||||
Glacier Park |
4,461 | 4,461 | ||||||
Alaska Denali Travel |
3,184 | 3,184 | ||||||
|
|
|
|
|||||
Total Travel & Recreation Group |
52,080 | 48,810 | ||||||
|
|
|
|
|||||
Total Goodwill |
$ | 137,820 | $ | 133,694 | ||||
|
|
|
|
Gross Carrying | Accumulated | Net Carrying | ||||||||||
Value | Amortization | Value | ||||||||||
(in thousands) | ||||||||||||
Amortized intangible assets: |
||||||||||||
Customer contracts and relationships |
$ | 3,594 | $ | (2,384 | ) | $ | 1,210 | |||||
Other |
959 | (108 | ) | 851 | ||||||||
|
|
|
|
|
|
|||||||
4,553 | (2,492 | ) | 2,061 | |||||||||
Unamortized intangible assets: |
||||||||||||
Business licenses |
460 | — | 460 | |||||||||
|
|
|
|
|
|
|||||||
Total |
$ | 5,013 | $ | (2,492 | ) | $ | 2,521 | |||||
|
|
|
|
|
|
A summary of other intangible assets as of December 31, 2011 is presented below:
Gross Carrying | Accumulated | Net Carrying | ||||||||||
Value | Amortization | Value | ||||||||||
(in thousands) | ||||||||||||
Amortized intangible assets: |
||||||||||||
Customer contracts and relationships |
$ | 3,122 | $ | (1,736 | ) | $ | 1,386 | |||||
Other |
68 | (30 | ) | 38 | ||||||||
|
|
|
|
|
|
|||||||
3,190 | (1,766 | ) | 1,424 | |||||||||
Unamortized intangible assets: |
||||||||||||
Business licenses |
460 | — | 460 | |||||||||
|
|
|
|
|
|
|||||||
Total |
$ | 3,650 | $ | (1,766 | ) | $ | 1,884 | |||||
|
|
|
|
|
|
(in thousands) | ||||
2013 |
$ | 712 | ||
2014 |
$ | 426 | ||
2015 |
$ | 255 | ||
2016 |
$ | 199 | ||
2017 |
$ | 445 | ||
Thereafter |
$ | 24 |
|
2012 | 2011 | |||||||
(in thousands) | ||||||||
Continuing operations: |
||||||||
Customer deposits |
$ | 50,172 | $ | 49,182 | ||||
Accrued compensation |
25,067 | 22,587 | ||||||
Self-insured liability accrual |
8,501 | 6,697 | ||||||
Accrued restructuring |
4,084 | 2,303 | ||||||
Accrued employee benefit costs |
3,132 | 3,730 | ||||||
Accrued dividends |
2,053 | 827 | ||||||
Accrued sales and use taxes |
906 | 1,668 | ||||||
Accrued foreign income taxes |
28 | 234 | ||||||
Other |
12,271 | 8,185 | ||||||
|
|
|
|
|||||
106,214 | 95,413 | |||||||
|
|
|
|
|||||
Discontinued operations: |
||||||||
Environmental remediation liabilities |
571 | 755 | ||||||
Self-insured liability accrual |
527 | 639 | ||||||
Other |
372 | 524 | ||||||
|
|
|
|
|||||
1,470 | 1,918 | |||||||
|
|
|
|
|||||
Total other current liabilities |
$ | 107,684 | $ | 97,331 | ||||
|
|
|
|
As of December 31 other deferred items and liabilities consisted of the following:
2012 | 2011 | |||||||
(in thousands) | ||||||||
Continuing operations: |
||||||||
Self-insured liability accrual |
$ | 15,579 | $ | 14,403 | ||||
Accrued compensation |
8,061 | 5,538 | ||||||
Accrued restructuring |
3,140 | 4,647 | ||||||
Foreign deferred tax liability |
2,024 | 1,219 | ||||||
Other |
6,734 | 5,900 | ||||||
|
|
|
|
|||||
35,538 | 31,707 | |||||||
|
|
|
|
|||||
Discontinued operations: |
||||||||
Self-insured liability accrual |
5,188 | 5,351 | ||||||
Environmental remediation liabilities |
4,745 | 4,999 | ||||||
Accrued income taxes |
1,053 | 1,022 | ||||||
Other |
1,304 | 1,133 | ||||||
|
|
|
|
|||||
12,290 | 12,505 | |||||||
|
|
|
|
|||||
Total other deferred items and liabilities |
$ | 47,828 | $ | 44,212 | ||||
|
|
|
|
|
2012 | 2011 | |||||||
(in thousands) | ||||||||
Capital lease obligations, 6.4% (2012) and 6.2% (2011) weighted-average interest rate at December 31, due to 2017 |
$ | 2,226 | $ | 3,239 | ||||
Current portion |
(1,347 | ) | (2,018 | ) | ||||
|
|
|
|
|||||
Long-term capital leases |
$ | 879 | $ | 1,221 | ||||
|
|
|
|
(in thousands) | ||||
2013 |
$ | 1,421 | ||
2014 |
594 | |||
2015 |
283 | |||
2016 |
34 | |||
2017 |
17 | |||
|
|
|||
Total |
2,349 | |||
Less: Amount representing interest |
(123 | ) | ||
|
|
|||
Present value of minimum lease payments |
$ | 2,226 | ||
|
|
|
Fair Value Measurements at December 31, 2012 Using | ||||||||||||||||
Description |
December 31, 2012 |
Quoted Prices
in Active Markets (Level 1) |
Significant Other Observable Inputs (Level 2) |
Significant Unobserved Inputs (Level 3) |
||||||||||||
(in thousands) | ||||||||||||||||
Money market funds |
$ | 10,177 | $ | 10,177 | $ | — | $ | — | ||||||||
Other mutual funds |
1,239 | 1,239 | — | — | ||||||||||||
|
|
|
|
|
|
|
|
|||||||||
Total |
$ | 11,416 | $ | 11,416 | $ | — | $ | — | ||||||||
|
|
|
|
|
|
|
|
|||||||||
Fair Value Measurements at December 31, 2011 Using | ||||||||||||||||
Description |
December 31, 2011 |
Quoted Prices in Active Markets (Level 1) |
Significant Other Observable Inputs (Level 2) |
Significant Unobserved Inputs (Level 3) |
||||||||||||
(in thousands) | ||||||||||||||||
Money market funds |
$ | 20,862 | $ | 20,862 | $ | — | $ | — | ||||||||
Other mutual funds |
1,373 | 1,373 | — | — | ||||||||||||
|
|
|
|
|
|
|
|
|||||||||
Total |
$ | 22,235 | $ | 22,235 | $ | — | $ | — | ||||||||
|
|
|
|
|
|
|
|
|
2012 | 2011 | 2010 | ||||||||||
(in thousands) | ||||||||||||
Amounts paid by ESOP for: |
||||||||||||
Debt repayment |
$ | 1,647 | $ | 1,490 | $ | 1,518 | ||||||
Interest |
5 | 8 | 12 | |||||||||
Amounts received from Viad as: |
||||||||||||
Contributions |
1,604 | 1,435 | 1,444 | |||||||||
Dividends |
48 | 63 | 86 |
|
2012 | 2011 | 2010 | ||||||||||||||||||||||
(in thousands) | ||||||||||||||||||||||||
Computed income tax expense at statutory federal income tax rate of 35% |
$ | 9,381 | 35.0 | % | $ | 4,613 | 35.0 | % | $ | 896 | 35.0 | % | ||||||||||||
State income taxes, net of federal provision |
470 | 1.8 | % | (100 | ) | (0.8 | %) | (172 | ) | (6.7 | %) | |||||||||||||
Foreign tax rate differentials |
(2,031 | ) | (7.6 | %) | (1,679 | ) | (12.7 | %) | (1,560 | ) | (61.0 | %) | ||||||||||||
U.S. tax on foreign earnings (net of foreign tax credits) |
(595 | ) | (2.2 | %) | 1,105 | 8.4 | % | 629 | 24.6 | % | ||||||||||||||
Tax resolutions, net |
— | 0.0 | % | (103 | ) | (0.8 | %) | (514 | ) | (20.1 | %) | |||||||||||||
Change in enacted tax law |
— | 0.0 | % | — | 0.0 | % | 1,279 | 50.0 | % | |||||||||||||||
Change in valuation allowance |
14,220 | 53.1 | % | (55 | ) | (0.4 | %) | 249 | 9.7 | % | ||||||||||||||
Proceeds from life insurance |
(472 | ) | (1.8 | %) | — | 0.0 | % | (460 | ) | (18.0 | %) | |||||||||||||
Other, net |
(130 | ) | (0.5 | %) | 107 | 0.8 | % | 1,395 | 54.6 | % | ||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||
Income tax expense |
$ | 20,843 | 77.8 | % | $ | 3,888 | 29.5 | % | $ | 1,742 | 68.1 | % | ||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
Continuing | Discontinued | |||||||||||
Operations | Operations | Total | ||||||||||
(in thousands) | ||||||||||||
Balance at January 1, 2010 |
$ | — | $ | 636 | $ | 636 | ||||||
Reductions for tax positions taken in prior years |
— | — | — | |||||||||
Reductions for tax settlements |
— | — | — | |||||||||
Reductions for lapse of applicable statutes |
— | — | — | |||||||||
|
|
|
|
|
|
|||||||
Balance at December 31, 2010 |
— | 636 | 636 | |||||||||
Reductions for tax positions taken in prior years |
— | — | — | |||||||||
Reductions for tax settlements |
— | — | — | |||||||||
Reductions for lapse of applicable statutes |
— | — | — | |||||||||
|
|
|
|
|
|
|||||||
Balance at December 31, 2011 |
— | 636 | 636 | |||||||||
Reductions for tax positions taken in prior years |
— | — | — | |||||||||
Reductions for tax settlements |
— | — | — | |||||||||
Reductions for lapse of applicable statutes |
— | — | — | |||||||||
|
|
|
|
|
|
|||||||
Balance at December 31, 2012 |
$ | — | $ | 636 | $ | 636 | ||||||
|
|
|
|
|
|
2012 | 2011 | |||||||
(in thousands) | ||||||||
Deferred tax assets: |
||||||||
Pension, compensation and other employee benefits |
$ | 26,790 | $ | 22,103 | ||||
Tax credit carryforwards |
25,290 | 25,219 | ||||||
Provisions for losses |
15,229 | 16,038 | ||||||
State income taxes |
2,813 | 2,400 | ||||||
Net operating loss carryforward |
1,755 | 3,086 | ||||||
Deferred income |
— | 125 | ||||||
Other deferred income tax assets |
5,331 | 1,745 | ||||||
|
|
|
|
|||||
Total deferred tax assets |
77,208 | 70,716 | ||||||
Foreign deferred tax assets included above |
(990 | ) | — | |||||
Valuation allowance |
(14,576 | ) | (356 | ) | ||||
|
|
|
|
|||||
Net deferred tax assets |
61,642 | 70,360 | ||||||
|
|
|
|
|||||
Deferred tax liabilities: |
||||||||
Property and equipment |
(8,801 | ) | (7,729 | ) | ||||
Goodwill and other intangible assets |
(1,306 | ) | (1,006 | ) | ||||
Unremitted foreign earnings |
(978 | ) | — | |||||
Other deferred income tax liabilities |
(176 | ) | (287 | ) | ||||
|
|
|
|
|||||
Total deferred tax liabilities |
(11,261 | ) | (9,022 | ) | ||||
|
|
|
|
|||||
Foreign deferred tax liabilities included above |
2,024 | 1,617 | ||||||
|
|
|
|
|||||
United States deferred tax assets |
$ | 52,405 | $ | 62,955 | ||||
|
|
|
|
2012 | 2011 | 2010 | ||||||||||
(in thousands) | ||||||||||||
Current: |
||||||||||||
United States: |
||||||||||||
Federal |
$ | (272 | ) | $ | (4,643 | ) | $ | (9,286 | ) | |||
State |
2,189 | 1,292 | 677 | |||||||||
Foreign |
7,652 | 8,163 | 9,607 | |||||||||
|
|
|
|
|
|
|||||||
9,569 | 4,812 | 998 | ||||||||||
|
|
|
|
|
|
|||||||
Deferred: |
||||||||||||
United States: |
||||||||||||
Federal |
11,127 | 992 | 3,212 | |||||||||
State |
40 | (1,560 | ) | (939 | ) | |||||||
Foreign |
107 | (356 | ) | (1,529 | ) | |||||||
|
|
|
|
|
|
|||||||
11,274 | (924 | ) | 744 | |||||||||
|
|
|
|
|
|
|||||||
Income tax expense |
$ | 20,843 | $ | 3,888 | $ | 1,742 | ||||||
|
|
|
|
|
|
2012 | 2011 | 2010 | ||||||||||
(in thousands) | ||||||||||||
United States |
$ | (2,843 | ) | $ | (16,227 | ) | $ | (22,592 | ) | |||
Foreign |
29,645 | 29,407 | 25,151 | |||||||||
|
|
|
|
|
|
|||||||
Income from continuing operations before income taxes |
$ | 26,802 | $ | 13,180 | $ | 2,559 | ||||||
|
|
|
|
|
|
|
2012 | 2011 | 2010 | ||||||||||
(in thousands) | ||||||||||||
Net Periodic Benefit Cost |
||||||||||||
Service cost |
$ | 104 | $ | 121 | $ | 145 | ||||||
Interest cost |
1,150 | 1,189 | 1,242 | |||||||||
Expected return on plan assets |
(406 | ) | (563 | ) | (588 | ) | ||||||
Amortization of prior service cost |
— | — | 41 | |||||||||
Recognized net actuarial loss |
491 | 457 | 572 | |||||||||
|
|
|
|
|
|
|||||||
Net periodic benefit cost |
1,339 | 1,204 | 1,412 | |||||||||
|
|
|
|
|
|
|||||||
Other Changes in Plan Assets and Benefit Obligations Recognized in Other Comprehensive Income |
||||||||||||
Net actuarial loss |
1,942 | 1,589 | 1,190 | |||||||||
Reversal of amortization item: |
||||||||||||
Net actuarial loss |
(491 | ) | (457 | ) | (572 | ) | ||||||
Prior service cost |
— | — | (41 | ) | ||||||||
|
|
|
|
|
|
|||||||
Total recognized in other comprehensive income |
1,451 | 1,132 | 577 | |||||||||
|
|
|
|
|
|
|||||||
Total recognized in net periodic benefit cost and other comprehensive income |
$ | 2,790 | $ | 2,336 | $ | 1,989 | ||||||
|
|
|
|
|
|
2012 | 2011 | 2010 | ||||||||||
(in thousands) | ||||||||||||
Net Periodic Benefit Cost |
||||||||||||
Service cost |
$ | 146 | $ | 128 | $ | 130 | ||||||
Interest cost |
814 | 868 | 1,039 | |||||||||
Expected return on plan assets |
(74 | ) | (135 | ) | (160 | ) | ||||||
Amortization of prior service credit |
(1,113 | ) | (1,277 | ) | (1,171 | ) | ||||||
Recognized net actuarial loss |
547 | 533 | 608 | |||||||||
|
|
|
|
|
|
|||||||
Net periodic benefit cost |
320 | 117 | 446 | |||||||||
|
|
|
|
|
|
|||||||
Other Changes in Plan Assets and Benefit Obligations Recognized in Other Comprehensive Income |
||||||||||||
Net actuarial loss |
224 | 24 | 421 | |||||||||
Prior service credit |
— | — | (1,197 | ) | ||||||||
Reversal of amortization item: |
||||||||||||
Net actuarial loss |
(547 | ) | (533 | ) | (608 | ) | ||||||
Prior service credit |
1,113 | 1,277 | 1,171 | |||||||||
|
|
|
|
|
|
|||||||
Total recognized in other comprehensive income (loss) |
790 | 768 | (213 | ) | ||||||||
|
|
|
|
|
|
|||||||
Total recognized in net periodic benefit cost and other comprehensive income |
$ | 1,110 | $ | 885 | $ | 233 | ||||||
|
|
|
|
|
|
Postretirement | ||||||||||||||||||||||||
Funded Plans | Unfunded Plans | Benefit Plans | ||||||||||||||||||||||
2012 | 2011 | 2012 | 2011 | 2012 | 2011 | |||||||||||||||||||
(in thousands) | ||||||||||||||||||||||||
Change in benefit obligation: |
||||||||||||||||||||||||
Benefit obligation at beginning of year |
$ | 13,938 | $ | 12,853 | $ | 10,883 | $ | 10,352 | $ | 18,667 | $ | 18,987 | ||||||||||||
Service cost |
— | — | 104 | 121 | 146 | 128 | ||||||||||||||||||
Interest cost |
659 | 678 | 491 | 511 | 814 | 868 | ||||||||||||||||||
Actuarial adjustments |
1,419 | 1,157 | 799 | 609 | 250 | 106 | ||||||||||||||||||
Plan amendments |
— | — | — | — | — | — | ||||||||||||||||||
Benefits paid |
(668 | ) | (750 | ) | (707 | ) | (710 | ) | (1,176 | ) | (1,422 | ) | ||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||
Benefit obligation at end of year |
15,348 | 13,938 | 11,570 | 10,883 | 18,701 | 18,667 | ||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||
Change in plan assets: |
||||||||||||||||||||||||
Fair value of plan assets at beginning of year |
9,846 | 8,858 | — | — | 2,118 | 2,678 | ||||||||||||||||||
Actual return on plan assets |
683 | 741 | — | — | 100 | 217 | ||||||||||||||||||
Company contributions |
763 | 997 | 707 | 710 | 355 | 645 | ||||||||||||||||||
Benefits paid |
(668 | ) | (750 | ) | (707 | ) | (710 | ) | (1,176 | ) | (1,422 | ) | ||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||
Fair value of plan assets at end of year |
10,624 | 9,846 | — | — | 1,397 | 2,118 | ||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||
Funded status at end of year |
$ | (4,724 | ) | $ | (4,092 | ) | $ | (11,570 | ) | $ | (10,883 | ) | $ | (17,304 | ) | $ | (16,549 | ) | ||||||
|
|
|
|
|
|
|
|
|
|
|
|
Fair Value Measurements at December 31, 2012 | ||||||||||||||||
Significant | ||||||||||||||||
Quoted Prices | Other | Significant | ||||||||||||||
in Active | Observable | Unobserved | ||||||||||||||
Markets | Inputs | Inputs | ||||||||||||||
Description |
Total | (Level 1) | (Level 2) | (Level 3) | ||||||||||||
(in thousands) | ||||||||||||||||
Domestic Pension Plans: |
||||||||||||||||
Cash |
$ | 10,401 | $ | 10,401 | $ | — | $ | — | ||||||||
Other |
223 | — | 223 | — | ||||||||||||
|
|
|
|
|
|
|
|
|||||||||
$ | 10,624 | $ | 10,401 | $ | 223 | $ | — | |||||||||
|
|
|
|
|
|
|
|
|||||||||
Postretirement Benefit Plans: |
||||||||||||||||
Cash |
$ | 1,397 | $ | 1,397 | $ | — | $ | — | ||||||||
|
|
|
|
|
|
|
|
Fair Value Measurements at December 31, 2011 | ||||||||||||||||
Significant | ||||||||||||||||
Quoted Prices | Other | Significant | ||||||||||||||
in Active | Observable | Unobserved | ||||||||||||||
Markets | Inputs | Inputs | ||||||||||||||
Description |
Total | (Level 1) | (Level 2) | (Level 3) | ||||||||||||
(in thousands) | ||||||||||||||||
Domestic Pension Plans: |
||||||||||||||||
U.S. equity securities |
$ | 2,849 | $ | — | $ | 2,849 | $ | — | ||||||||
International equity securities |
914 | — | 914 | — | ||||||||||||
Aggregate fixed income securities |
2,373 | — | 2,373 | — | ||||||||||||
Long-term fixed income securities |
3,412 | — | 3,412 | — | ||||||||||||
Cash |
72 | 72 | — | — | ||||||||||||
Other |
226 | — | 226 | — | ||||||||||||
|
|
|
|
|
|
|
|
|||||||||
$ | 9,846 | $ | 72 | $ | 9,774 | $ | — | |||||||||
|
|
|
|
|
|
|
|
|||||||||
Postretirement Benefit Plans: |
||||||||||||||||
U.S. equity securities |
$ | 283 | $ | — | $ | 283 | $ | — | ||||||||
International equity securities |
89 | — | 89 | — | ||||||||||||
Aggregate fixed income securities |
1,034 | — | 1,034 | — | ||||||||||||
Long-term fixed income securities |
490 | — | 490 | — | ||||||||||||
Cash |
222 | 222 | — | — | ||||||||||||
|
|
|
|
|
|
|
|
|||||||||
$ | 2,118 | $ | 222 | $ | 1,896 | $ | — | |||||||||
|
|
|
|
|
|
|
|
Funded | Unfunded | |||||||
Plans | Plans | |||||||
(in thousands) | ||||||||
2013 |
$ | 385 | $ | 219 | ||||
2014 |
492 | 218 | ||||||
2015 |
612 | 218 | ||||||
2016 |
616 | 217 | ||||||
2017 |
619 | 216 | ||||||
2018-2022 |
3,707 | 1,066 |
Funded | Unfunded | Postretirement | ||||||||||||||
Plans | Plans | Benefit Plans | Total | |||||||||||||
(in thousands) | ||||||||||||||||
Net actuarial loss |
$ | 9,052 | $ | 4,548 | $ | 6,706 | $ | 20,306 | ||||||||
Prior service credit |
— | — | (2,900 | ) | (2,900 | ) | ||||||||||
|
|
|
|
|
|
|
|
|||||||||
Subtotal |
9,052 | 4,548 | 3,806 | 17,406 | ||||||||||||
Less tax effect |
(3,433 | ) | (1,725 | ) | (1,443 | ) | (6,601 | ) | ||||||||
|
|
|
|
|
|
|
|
|||||||||
Total |
$ | 5,619 | $ | 2,823 | $ | 2,363 | $ | 10,805 | ||||||||
|
|
|
|
|
|
|
|
Amounts recognized in accumulated other comprehensive income as of December 31, 2011 consisted of:
Funded | Unfunded | Postretirement | ||||||||||||||
Plans | Plans | Benefit Plans | Total | |||||||||||||
(in thousands) | ||||||||||||||||
Net actuarial loss |
$ | 8,238 | $ | 3,911 | $ | 7,029 | $ | 19,178 | ||||||||
Prior service credit |
— | — | (4,013 | ) | (4,013 | ) | ||||||||||
|
|
|
|
|
|
|
|
|||||||||
Subtotal |
8,238 | 3,911 | 3,016 | 15,165 | ||||||||||||
Less tax effect |
(3,146 | ) | (1,493 | ) | (1,153 | ) | (5,792 | ) | ||||||||
|
|
|
|
|
|
|
|
|||||||||
Total |
$ | 5,092 | $ | 2,418 | $ | 1,863 | $ | 9,373 | ||||||||
|
|
|
|
|
|
|
|
Postretirement | ||||||||||||||||||||||||
Funded Plans | Unfunded Plans | Benefit Plans | ||||||||||||||||||||||
2012 | 2011 | 2012 | 2011 | 2012 | 2011 | |||||||||||||||||||
(in thousands) | ||||||||||||||||||||||||
Other current liabilities |
$ | — | $ | — | $ | 816 | $ | 717 | $ | 392 | $ | 440 | ||||||||||||
Non-current liabilities |
4,724 | 4,092 | 10,754 | 10,166 | 16,912 | 16,109 | ||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||
Net amount recognized |
$ | 4,724 | $ | 4,092 | $ | 11,570 | $ | 10,883 | $ | 17,304 | $ | 16,549 | ||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
Domestic Plans | ||||||||||||||||
Funded Plans | Unfunded Plans | |||||||||||||||
2012 | 2011 | 2012 | 2011 | |||||||||||||
(in thousands) | ||||||||||||||||
Projected benefit obligation |
$ | 15,348 | $ | 13,938 | $ | 11,570 | $ | 10,883 | ||||||||
Accumulated benefit obligation |
15,348 | 13,938 | 11,322 | 10,589 | ||||||||||||
Fair value of plan assets |
10,624 | 9,846 | — | — |
Foreign Plans | ||||||||||||||||
Funded Plans | Unfunded Plans | |||||||||||||||
2012 | 2011 | 2012 | 2011 | |||||||||||||
(in thousands) | ||||||||||||||||
Projected benefit obligation |
$ | 15,387 | $ | 13,141 | $ | 3,032 | $ | 2,939 | ||||||||
Accumulated benefit obligation |
14,307 | 12,049 | 3,032 | 2,939 | ||||||||||||
Fair value of plan assets |
12,997 | 11,028 | — | — |
Domestic Plans | ||||||||||||||||||||||||||||||||
Funded Plans | Unfunded Plans | Postretirement Benefit Plans |
Foreign Plans | |||||||||||||||||||||||||||||
2012 | 2011 | 2012 | 2011 | 2012 | 2011 | 2012 | 2011 | |||||||||||||||||||||||||
Discount rate |
4.11 | % | 4.92 | % | 3.80 | % | 4.75 | % | 3.85 | % | 4.70 | % | 4.06 | % | 4.60 | % | ||||||||||||||||
Rate of compensation increase |
N/A | N/A | 4.50 | % | 4.50 | % | N/A | N/A | 3.00 | % | 3.00 | % |
Domestic Plans | ||||||||||||||||||||||||||||||||
Postretirement | ||||||||||||||||||||||||||||||||
Funded Plans | Unfunded Plans | Benefit Plans | Foreign Plans | |||||||||||||||||||||||||||||
2012 | 2011 | 2012 | 2011 | 2012 | 2011 | 2012 | 2011 | |||||||||||||||||||||||||
Discount rate |
4.93 | % | 5.45 | % | 4.75 | % | 5.10 | % | 4.70 | % | 5.10 | % | 4.65 | % | 5.10 | % | ||||||||||||||||
Expected return on plan assets |
4.20 | % | 6.35 | % | N/A | N/A | 4.65 | % | 6.10 | % | 5.45 | % | 5.50 | % | ||||||||||||||||||
Rate of compensation increase |
N/A | N/A | 4.50 | % | 4.50 | % | N/A | N/A | 3.00 | % | 3.00 | % |
Plan | Pension Protection Act Zone Status |
FIP/RP Status Pending/ |
Viad Contributions | Surcharge |
Expiration Date of Collective- |
|||||||||||||||||||||||||||||||
Pension Fund |
EIN | No. | 2012 | 2011 | Implemented | 2012 | 2011 | 2010 | Paid | Agreement(s) | ||||||||||||||||||||||||||
(in thousands) | ||||||||||||||||||||||||||||||||||||
Western Conference of Teamsters Pension Plan |
91-6145047 | 001 | Green | Green | No | $ | 5,694 | $ | 5,720 | $ | 4,551 | No | 11/30/13 to 3/31/15 | |||||||||||||||||||||||
Southern California Local 831—Employer Pension Fund (1) |
95-6376874 | 001 | Green | Green | No | 2,358 | 2,232 | 1,870 | No | 8/31/2014 | ||||||||||||||||||||||||||
National Electrical Benefit Fund |
53-0181657 | 001 | Green | Green | No | 1,814 | 1,691 | 1,313 | No | 5/31/14 to 6/16/14 | ||||||||||||||||||||||||||
Chicago Regional Council of Carpenters Pension Fund (2) |
36-6130207 | 001 | Yellow | Yellow | Yes | 1,749 | 1,411 | 1,018 | No | 5/31/13 to 5/31/14 | ||||||||||||||||||||||||||
Southwest Carpenters Pension Trust |
95-6042875 | 001 | Green | Green | No | 944 | 1,031 | 867 | No | 6/30/2015 | ||||||||||||||||||||||||||
Machinery Movers Riggers & Mach Erect Local 136 Supplemental Retirement Plan (1) (2) |
36-1416355 | 001 | Red | Red | Yes | 930 | 386 | 710 | No | 6/30/2014 | ||||||||||||||||||||||||||
Central States, Southeast and Southwest Areas Pension Plan |
36-6044243 | 001 | Red | Red | Yes | 874 | 725 | 717 | No | 3/31/13 to 7/31/15 | ||||||||||||||||||||||||||
New England Teamsters & Trucking Industry Pension (3) |
04-6372430 | 001 | Red | Red | Yes | 334 | 339 | 290 | No | 3/31/2017 | ||||||||||||||||||||||||||
Steelworkers Pension Trust |
23-6648508 | 499 | Green | Green | No | 326 | 422 | 425 | No | 3/31/13 to 2/28/15 | ||||||||||||||||||||||||||
All other funds (4) |
3,645 | 3,752 | 2,119 | |||||||||||||||||||||||||||||||||
|
|
|
|
|
|
|||||||||||||||||||||||||||||||
Total contributions to defined benefit plans |
18,668 | 17,709 | 13,880 | |||||||||||||||||||||||||||||||||
Total contributions to other plans |
2,001 | 1,892 | 1,469 | |||||||||||||||||||||||||||||||||
|
|
|
|
|
|
|||||||||||||||||||||||||||||||
Total contributions to multi-employer plans |
$ | 20,669 | $ | 19,601 | $ | 15,349 | ||||||||||||||||||||||||||||||
|
|
|
|
|
|
2012 | 2011 | 2010 | ||||||||||
(in thousands) | ||||||||||||
Net Periodic Benefit Cost |
||||||||||||
Service cost |
$ | 491 | $ | 366 | $ | 304 | ||||||
Interest cost |
737 | 729 | 780 | |||||||||
Expected return on plan assets |
(622 | ) | (665 | ) | (597 | ) | ||||||
Recognized net actuarial loss |
201 | 73 | 54 | |||||||||
|
|
|
|
|
|
|||||||
Net periodic benefit cost |
807 | 503 | 541 | |||||||||
|
|
|
|
|
|
|||||||
Other Changes in Plan Assets and Benefit Obligations Recognized in Other Comprehensive Income |
||||||||||||
Net actuarial loss |
958 | 1,936 | 299 | |||||||||
Reversal of amortization of net actuarial loss |
(201 | ) | (73 | ) | (54 | ) | ||||||
|
|
|
|
|
|
|||||||
Total recognized in other comprehensive income |
757 | 1,863 | 245 | |||||||||
|
|
|
|
|
|
|||||||
Total recognized in net periodic benefit cost and other comprehensive income |
$ | 1,564 | $ | 2,366 | $ | 786 | ||||||
|
|
|
|
|
|
Funded Plans | Unfunded Plans | |||||||||||||||
2012 | 2011 | 2012 | 2011 | |||||||||||||
(in thousands) | ||||||||||||||||
Change in benefit obligation: |
||||||||||||||||
Benefit obligation at beginning of year |
$ | 13,141 | $ | 11,453 | $ | 2,939 | $ | 2,929 | ||||||||
Service cost |
491 | 366 | — | — | ||||||||||||
Interest cost |
607 | 583 | 130 | 146 | ||||||||||||
Actuarial adjustments |
1,086 | 1,421 | 113 | 173 | ||||||||||||
Benefits paid |
(328 | ) | (351 | ) | (220 | ) | (231 | ) | ||||||||
Translation adjustment |
390 | (331 | ) | 70 | (78 | ) | ||||||||||
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|
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|
|
|||||||||
Benefit obligation at end of year |
15,387 | 13,141 | 3,032 | 2,939 | ||||||||||||
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|
|
|
|
|
|||||||||
Change in plan assets: |
||||||||||||||||
Fair value of plan assets at beginning of year |
11,028 | 10,834 | — | — | ||||||||||||
Actual return on plan assets |
860 | 100 | — | — | ||||||||||||
Company contributions |
1,111 | 709 | 220 | 231 | ||||||||||||
Benefits paid |
(328 | ) | (351 | ) | (220 | ) | (231 | ) | ||||||||
Translation adjustment |
326 | (264 | ) | — | — | |||||||||||
|
|
|
|
|
|
|
|
|||||||||
Fair value of plan assets at end of year |
12,997 | 11,028 | — | — | ||||||||||||
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|
|
|
|
|||||||||
Funded status at end of year |
$ | (2,390 | ) | $ | (2,113 | ) | $ | (3,032 | ) | $ | (2,939 | ) | ||||
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|
|
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|
Fair Value Measurements at December 31, 2012 | ||||||||||||||||
Description |
Total | Quoted Prices in Active Markets (Level 1) |
Significant Other Observable Inputs (Level 2) |
Significant Unobserved Inputs (Level 3) |
||||||||||||
(in thousands) | ||||||||||||||||
U.S. equity securities |
$ | 1,185 | $ | 1,185 | $ | — | $ | — | ||||||||
International equity securities |
4,871 | 4,494 | 377 | — | ||||||||||||
Canadian fixed income securities |
6,744 | 6,744 | — | — | ||||||||||||
Other |
197 | 197 | — | — | ||||||||||||
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|
|
|
|
|
|||||||||
$ | 12,997 | $ | 12,620 | $ | 377 | $ | — | |||||||||
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|
|
|
Fair Value Measurements at December 31, 2011 | ||||||||||||||||
Description |
Total | Quoted Prices in Active Markets (Level 1) |
Significant Other Observable Inputs (Level 2) |
Significant Unobserved Inputs (Level 3) |
||||||||||||
(in thousands) | ||||||||||||||||
U.S. equity securities |
$ | 977 | $ | 977 | $ | — | $ | — | ||||||||
International equity securities |
3,995 | 3,639 | 356 | — | ||||||||||||
Canadian fixed income securities |
5,975 | 5,975 | — | — | ||||||||||||
Other |
81 | 81 | — | — | ||||||||||||
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|
|
|
|
|
|
|||||||||
$ | 11,028 | $ | 10,672 | $ | 356 | $ | — | |||||||||
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|
|
|
Postretirement | Medicare | |||||||||||||||
Funded | Unfunded | Benefit | Part D Subsidy | |||||||||||||
Plans | Plans | Plans | Receipts | |||||||||||||
(in thousands) | ||||||||||||||||
2013 |
$ | 784 | $ | 832 | $ | 1,768 | $ | 268 | ||||||||
2014 |
762 | 810 | 1,760 | 272 | ||||||||||||
2015 |
791 | 795 | 1,744 | 273 | ||||||||||||
2016 |
737 | 771 | 1,719 | 273 | ||||||||||||
2017 |
774 | 794 | 1,647 | 271 | ||||||||||||
2018-2022 |
4,200 | 4,181 | 7,434 | 1,267 |
|
Marketing & Events Group Consolidation |
Other Restructurings | |||||||||||||||||||
Severance & | Severance & | |||||||||||||||||||
Employee | Employee | |||||||||||||||||||
Benefits | Facilities | Benefits | Facilities | Total | ||||||||||||||||
(in thousands) | ||||||||||||||||||||
Balance at January 1, 2010 |
$ | 2,333 | $ | 6,295 | $ | — | $ | 3,027 | $ | 11,655 | ||||||||||
Restructuring charges (recoveries) |
2,637 | 1,180 | 542 | (137 | ) | 4,222 | ||||||||||||||
Cash payments |
(3,387 | ) | (2,164 | ) | (292 | ) | (875 | ) | (6,718 | ) | ||||||||||
Adjustment to liability |
(466 | ) | (258 | ) | (53 | ) | (373 | ) | (1,150 | ) | ||||||||||
Foreign currency translation adjustment |
(11 | ) | (2 | ) | — | — | (13 | ) | ||||||||||||
|
|
|
|
|
|
|
|
|
|
|||||||||||
Balance at December 31, 2010 |
1,106 | 5,051 | 197 | 1,642 | 7,996 | |||||||||||||||
Restructuring charges |
1,182 | 2,519 | 26 | 55 | 3,782 | |||||||||||||||
Cash payments |
(1,175 | ) | (2,356 | ) | (199 | ) | (158 | ) | (3,888 | ) | ||||||||||
Adjustment to liability |
(294 | ) | (397 | ) | — | (263 | ) | (954 | ) | |||||||||||
Foreign currency translation adjustment |
12 | 2 | — | — | 14 | |||||||||||||||
|
|
|
|
|
|
|
|
|
|
|||||||||||
Balance at December 31, 2011 |
831 | 4,819 | 24 | 1,276 | 6,950 | |||||||||||||||
Restructuring charges |
2,506 | 2,346 | 90 | — | 4,942 | |||||||||||||||
Cash payments |
(2,670 | ) | (1,567 | ) | (114 | ) | (343 | ) | (4,694 | ) | ||||||||||
Adjustment to liability |
51 | (27 | ) | — | — | 24 | ||||||||||||||
Foreign currency translation adjustment |
2 | — | — | — | 2 | |||||||||||||||
|
|
|
|
|
|
|
|
|
|
|||||||||||
Balance at December 31, 2012 |
$ | 720 | $ | 5,571 | $ | — | $ | 933 | $ | 7,224 | ||||||||||
|
|
|
|
|
|
|
|
|
|
|
Rental | Receivable | |||||||
Payments | Under Subleases | |||||||
(in thousands) | ||||||||
2013 |
$ | 17,793 | $ | 1,592 | ||||
2014 |
16,320 | 990 | ||||||
2015 |
9,824 | 746 | ||||||
2016 |
6,842 | 494 | ||||||
2017 |
5,288 | 480 | ||||||
Thereafter |
9,323 | 951 | ||||||
|
|
|
|
|||||
Total |
$ | 65,390 | $ | 5,253 | ||||
|
|
|
|
2012 | 2011 | 2010 | ||||||||||
(in thousands) | ||||||||||||
Minimum rentals |
$ | 36,309 | $ | 30,860 | $ | 29,072 | ||||||
Sublease rentals |
(6,501 | ) | (6,497 | ) | (5,704 | ) | ||||||
|
|
|
|
|
|
|||||||
Total rentals, net |
$ | 29,808 | $ | 24,363 | $ | 23,368 | ||||||
|
|
|
|
|
|
|
2012 | 2011 | 2010 | ||||||||||
(in thousands) | ||||||||||||
Revenues: |
||||||||||||
Marketing & Events Group: |
||||||||||||
U.S. |
$ | 676,772 | $ | 631,360 | $ | 570,978 | ||||||
International |
240,137 | 218,639 | 197,787 | |||||||||
Intersegment eliminations |
(14,869 | ) | (9,449 | ) | (12,281 | ) | ||||||
|
|
|
|
|
|
|||||||
902,040 | 840,550 | 756,484 | ||||||||||
Travel & Recreation Group |
123,191 | 101,814 | 88,277 | |||||||||
|
|
|
|
|
|
|||||||
$ | 1,025,231 | $ | 942,364 | $ | 844,761 | |||||||
|
|
|
|
|
|
|||||||
Segment operating income (loss): |
||||||||||||
Marketing & Events Group: |
||||||||||||
U.S. |
$ | 5,579 | $ | (6,269 | ) | $ | (15,217 | ) | ||||
International |
12,321 | 11,449 | 10,088 | |||||||||
|
|
|
|
|
|
|||||||
17,900 | 5,180 | (5,129 | ) | |||||||||
Travel & Recreation Group |
23,962 | 20,196 | 19,885 | |||||||||
|
|
|
|
|
|
|||||||
41,862 | 25,376 | 14,756 | ||||||||||
Corporate activities |
(9,408 | ) | (7,682 | ) | (6,422 | ) | ||||||
|
|
|
|
|
|
|||||||
32,454 | 17,694 | 8,334 | ||||||||||
Interest income |
593 | 779 | 584 | |||||||||
Interest expense |
(1,303 | ) | (1,511 | ) | (1,835 | ) | ||||||
Restructuring charges: |
||||||||||||
Marketing & Events U.S. |
(3,479 | ) | (3,756 | ) | (3,232 | ) | ||||||
Marketing & Events International |
(1,373 | ) | — | (448 | ) | |||||||
Travel & Recreation Group |
(79 | ) | — | (235 | ) | |||||||
Corporate |
(11 | ) | (26 | ) | (307 | ) | ||||||
Impairment losses: |
||||||||||||
Travel & Recreation Group |
— | — | (302 | ) | ||||||||
|
|
|
|
|
|
|||||||
Income from continuing operations before income taxes |
$ | 26,802 | $ | 13,180 | $ | 2,559 | ||||||
|
|
|
|
|
|
2012 | 2011 | 2010 | ||||||||||
(in thousands) | ||||||||||||
Assets: |
||||||||||||
Marketing & Events Group: |
||||||||||||
U.S. |
$ | 203,145 | $ | 213,843 | $ | 235,965 | ||||||
International |
100,387 | 96,996 | 83,441 | |||||||||
Travel & Recreation Group |
223,199 | 194,278 | 157,562 | |||||||||
Corporate and other |
123,846 | 112,711 | 139,535 | |||||||||
|
|
|
|
|
|
|||||||
$ | 650,577 | $ | 617,828 | $ | 616,503 | |||||||
|
|
|
|
|
|
|||||||
Depreciation and amortization: |
||||||||||||
Marketing & Events Group: |
||||||||||||
U.S. |
$ | 17,643 | $ | 17,247 | $ | 17,887 | ||||||
International |
5,162 | 5,027 | 4,486 | |||||||||
Travel & Recreation Group |
7,781 | 6,674 | 5,648 | |||||||||
Corporate and other |
145 | 178 | 231 | |||||||||
|
|
|
|
|
|
|||||||
$ | 30,731 | $ | 29,126 | $ | 28,252 | |||||||
|
|
|
|
|
|
|||||||
Capital expenditures: |
||||||||||||
Marketing & Events Group: |
||||||||||||
U.S. |
$ | 7,525 | $ | 11,692 | $ | 9,050 | ||||||
International |
4,913 | 5,635 | 4,776 | |||||||||
Travel & Recreation Group |
15,201 | 3,271 | 3,214 | |||||||||
Corporate and other |
36 | 940 | — | |||||||||
|
|
|
|
|
|
|||||||
$ | 27,675 | $ | 21,538 | $ | 17,040 | |||||||
|
|
|
|
|
|
2012 | 2011 | 2010 | ||||||||||
(in thousands) | ||||||||||||
Revenues: |
||||||||||||
Exhibition and event services |
$ | 726,429 | $ | 670,054 | $ | 590,444 | ||||||
Exhibits and environments |
175,611 | 170,496 | 166,040 | |||||||||
Travel and recreation services |
123,191 | 101,814 | 88,277 | |||||||||
|
|
|
|
|
|
|||||||
Total revenues |
$ | 1,025,231 | $ | 942,364 | $ | 844,761 | ||||||
|
|
|
|
|
|
2012 | 2011 | 2010 | ||||||||||
(in thousands) | ||||||||||||
Revenues: |
||||||||||||
United States |
$ | 700,414 | $ | 660,998 | $ | 590,163 | ||||||
Canada |
151,070 | 140,374 | 136,066 | |||||||||
United Kingdom |
153,027 | 124,208 | 93,092 | |||||||||
Other international |
20,720 | 16,784 | 25,440 | |||||||||
|
|
|
|
|
|
|||||||
Total revenues |
$ | 1,025,231 | $ | 942,364 | $ | 844,761 | ||||||
|
|
|
|
|
|
|||||||
Long-lived assets: |
||||||||||||
United States |
$ | 141,727 | $ | 145,217 | $ | 117,751 | ||||||
Canada |
76,067 | 47,624 | 51,182 | |||||||||
United Kingdom |
9,757 | 8,165 | 8,295 | |||||||||
Other international |
2,163 | 3,858 | 3,481 | |||||||||
|
|
|
|
|
|
|||||||
Total long-lived assets |
$ | 229,714 | $ | 204,864 | $ | 180,709 | ||||||
|
|
|
|
|
|
|
First | Second | Third | Fourth | |||||||||||||
Quarter | Quarter | Quarter | Quarter | |||||||||||||
(in thousands, except per share data) | ||||||||||||||||
2012 |
||||||||||||||||
Revenues: |
$ | 268,772 | $ | 246,450 | $ | 307,457 | $ | 202,552 | ||||||||
|
|
|
|
|
|
|
|
|||||||||
Operating income (loss): |
||||||||||||||||
Ongoing operations (1) |
$ | 5,533 | $ | 10,498 | $ | 34,182 | $ | (8,351 | ) | |||||||
Corporate activities |
(1,777 | ) | (2,187 | ) | (2,036 | ) | (3,408 | ) | ||||||||
Restructuring charges |
(2,225 | ) | (678 | ) | (608 | ) | (1,431 | ) | ||||||||
|
|
|
|
|
|
|
|
|||||||||
Operating income (loss) |
$ | 1,531 | $ | 7,633 | $ | 31,538 | $ | (13,190 | ) | |||||||
|
|
|
|
|
|
|
|
|||||||||
Income (loss) from continuing operations attributable to Viad (2) |
$ | 1,027 | $ | 5,451 | $ | 19,976 | $ | (21,181 | ) | |||||||
Net income (loss) attributable to Viad (2) |
$ | 1,027 | $ | 6,090 | $ | 19,976 | $ | (21,196 | ) | |||||||
Diluted income (loss) per common share (2)(3): |
||||||||||||||||
Income (loss) from continuing operations attributable to Viad |
$ | 0.05 | $ | 0.27 | $ | 0.99 | $ | (1.07 | ) | |||||||
Net income (loss) attributable to Viad |
$ | 0.05 | $ | 0.30 | $ | 0.99 | $ | (1.07 | ) | |||||||
Basic income (loss) per common share (2)(3): |
||||||||||||||||
Income (loss) from continuing operations attributable to Viad |
$ | 0.05 | $ | 0.27 | $ | 0.99 | $ | (1.07 | ) | |||||||
Net income (loss) attributable to Viad |
$ | 0.05 | $ | 0.30 | $ | 0.99 | $ | (1.07 | ) |
First | Second | Third | Fourth | |||||||||||||
Quarter | Quarter | Quarter | Quarter | |||||||||||||
(in thousands, except per share data) | ||||||||||||||||
2011 |
||||||||||||||||
Revenues: |
$ | 290,098 | $ | 238,692 | $ | 216,169 | $ | 197,405 | ||||||||
|
|
|
|
|
|
|
|
|||||||||
Operating income (loss): |
||||||||||||||||
Ongoing operations (1) |
$ | 17,259 | $ | 9,862 | $ | 5,412 | $ | (7,157 | ) | |||||||
Corporate activities |
(1,271 | ) | (1,576 | ) | (2,356 | ) | (2,479 | ) | ||||||||
Restructuring charges |
(269 | ) | (1,206 | ) | (75 | ) | (2,232 | ) | ||||||||
|
|
|
|
|
|
|
|
|||||||||
Operating income (loss) |
$ | 15,719 | $ | 7,080 | $ | 2,981 | $ | (11,868 | ) | |||||||
|
|
|
|
|
|
|
|
|||||||||
Income (loss) from continuing operations attributable to Viad |
$ | 9,787 | $ | 4,485 | $ | 1,245 | $ | (6,758 | ) | |||||||
Net income (loss) attributable to Viad |
$ | 9,787 | $ | 4,485 | $ | 1,245 | $ | (6,307 | ) | |||||||
Diluted income (loss) per common share (3): |
||||||||||||||||
Income (loss) from continuing operations attributable to Viad |
$ | 0.48 | $ | 0.22 | $ | 0.06 | $ | (0.35 | ) | |||||||
Net income (loss) attributable to Viad |
$ | 0.48 | $ | 0.22 | $ | 0.06 | $ | (0.32 | ) | |||||||
Basic income (loss) per common share (3): |
||||||||||||||||
Income (loss) from continuing operations attributable to Viad |
$ | 0.48 | $ | 0.22 | $ | 0.06 | $ | (0.35 | ) | |||||||
Net income (loss) attributable to Viad |
$ | 0.48 | $ | 0.22 | $ | 0.06 | $ | (0.32 | ) |
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