VIAD CORP, 10-K filed on 3/9/2012
Annual Report
Document and Entity Information (USD $)
In Millions, except Share data, unless otherwise specified
12 Months Ended
Dec. 31, 2011
Jan. 31, 2012
Jun. 30, 2011
Document and Entity Information [Abstract]
 
 
 
Entity Registrant Name
VIAD CORP 
 
 
Entity Central Index Key
0000884219 
 
 
Document Type
10-K 
 
 
Document Period End Date
Dec. 31, 2011 
 
 
Amendment Flag
false 
 
 
Document Fiscal Year Focus
2011 
 
 
Document Fiscal Period Focus
FY 
 
 
Current Fiscal Year End Date
--12-31 
 
 
Entity Well-known Seasoned Issuer
Yes 
 
 
Entity Voluntary Filers
No 
 
 
Entity Current Reporting Status
Yes 
 
 
Entity Filer Category
Accelerated Filer 
 
 
Entity Public Float
 
 
$ 440 
Entity Common Stock, Shares Outstanding
 
20,144,912 
 
Consolidated Balance Sheets (USD $)
In Thousands, unless otherwise specified
Dec. 31, 2011
Dec. 31, 2010
Current assets:
 
 
Cash and cash equivalents
$ 100,376 
$ 145,841 
Accounts receivable, net of allowance for doubtful accounts of $1,072 and $1,172, respectively
63,583 
47,187 
Inventories
35,825 
38,670 
Deferred income taxes
24,200 
22,057 
Other current assets
14,647 
17,160 
Total current assets
238,631 
270,915 
Property and equipment, net
173,813 
149,346 
Other investments and assets
31,051 
31,363 
Deferred income taxes
38,755 
35,875 
Goodwill
133,694 
127,441 
Other intangible assets, net
1,884 
1,563 
Total Assets
617,828 
616,503 
Current liabilities:
 
 
Accounts payable
51,448 
47,933 
Other current liabilities
97,331 
96,749 
Current portion of long-term debt and capital lease obligations
2,018 
6,639 
Total current liabilities
150,797 
151,321 
Long-term debt and capital lease obligations
1,221 
2,438 
Pension and postretirement benefits
35,419 
33,008 
Other deferred items and liabilities
44,212 
43,025 
Total liabilities
231,649 
229,792 
Commitments and contingencies (Notes 18 and 19)
   
   
Viad Corp stockholders' equity:
 
 
Common stock, $1.50 par value, 200,000,000 shares authorized, 24,934,981 shares issued
37,402 
37,402 
Additional capital
599,188 
606,902 
Retained deficit
(13,256)
(19,229)
Unearned employee benefits and other
(2,951)
(4,433)
Accumulated other comprehensive income (loss):
 
 
Unrealized gain on investments
222 
282 
Cumulative foreign currency translation adjustments
34,648 
38,979 
Unrecognized net actuarial loss and prior service credit
(12,977)
(10,410)
Common stock in treasury, at cost, 4,790,920 and 4,710,988 shares, respectively
(264,382)
(270,534)
Total Viad Corp stockholders' equity
377,894 
378,959 
Noncontrolling interest
8,285 
7,752 
Total stockholders' equity
386,179 
386,711 
Total Liabilities and Stockholders' Equity
$ 617,828 
$ 616,503 
Consolidated Balance Sheets (Parenthetical) (USD $)
In Thousands, except Share data, unless otherwise specified
Dec. 31, 2011
Dec. 31, 2010
Consolidated Balance Sheets [Abstract]
 
 
Allowance for doubtful accounts
$ 1,072 
$ 1,172 
Common stock, par value
$ 1.50 
$ 1.50 
Common stock, shares authorized
200,000,000 
200,000,000 
Common stock, shares issued
24,934,981 
24,934,981 
Treasury stock, shares
4,790,920 
4,710,988 
Consolidated Statements of Operations (USD $)
In Thousands, except Per Share data, unless otherwise specified
12 Months Ended
Dec. 31, 2011
Dec. 31, 2010
Dec. 31, 2009
Revenues:
 
 
 
Convention and event services
$ 670,054 
$ 590,444 
$ 582,969 
Exhibits and environments
170,496 
166,040 
147,533 
Travel and recreation services
101,814 
88,277 
75,302 
Total revenues
942,364 
844,761 
805,804 
Costs and expenses:
 
 
 
Costs of services
752,679 
656,315 
636,249 
Costs of products sold
164,309 
173,690 
165,367 
Corporate activities
7,682 
6,422 
5,607 
Interest income
(779)
(584)
(579)
Interest expense
1,511 
1,835 
1,690 
Restructuring charges
3,782 
4,222 
14,054 
Goodwill impairment losses
 
 
98,304 
Intangible asset impairment losses
 
185 
14,005 
Other impairment losses
 
117 
4,554 
Total costs and expenses
929,184 
842,202 
939,251 
Income (loss) from continuing operations before income taxes
13,180 
2,559 
(133,447)
Income tax expense (benefit)
3,888 
1,742 
(28,639)
Income (loss) from continuing operations
9,292 
817 
(104,808)
Income from discontinued operations
451 
262 
679 
Net income (loss)
9,743 
1,079 
(104,129)
Net income attributable to noncontrolling interest
(533)
(636)
(582)
Net income (loss) attributable to Viad
9,210 
443 
(104,711)
Diluted income (loss) per common share
 
 
 
Income (loss) from continuing operations attributable to Viad common stockholders
$ 0.43 
$ 0.01 
$ (5.28)
Income from discontinued operations attributable to Viad common stockholders
$ 0.02 
$ 0.01 
$ 0.03 
Net income (loss) attributable to Viad common stockholders
$ 0.45 
$ 0.02 
$ (5.25)
Weighted-average outstanding and potentially dilutive common shares
20,055 
20,277 
19,960 
Basic income (loss) per common share
 
 
 
Income (loss) from continuing operations attributable to Viad common stockholders
$ 0.43 
$ 0.01 
$ (5.28)
Income from discontinued operations attributable to Viad common stockholders
$ 0.02 
$ 0.01 
$ 0.03 
Net income (loss) attributable to Viad common stockholders
$ 0.45 
$ 0.02 
$ (5.25)
Weighted-average outstanding common shares
19,719 
19,955 
19,960 
Dividends declared per common share
$ 0.16 
$ 0.16 
$ 0.16 
Amounts attributable to Viad common stockholders
 
 
 
Income (loss) from continuing operations
8,759 
181 
(105,390)
Income from discontinued operations
451 
262 
679 
Net income (loss)
$ 9,210 
$ 443 
$ (104,711)
Consolidated Statements of Comprehensive Income (USD $)
In Thousands, unless otherwise specified
12 Months Ended
Dec. 31, 2011
Dec. 31, 2010
Dec. 31, 2009
Consolidated Statements of Comprehensive Income [Abstract]
 
 
 
Net income (loss)
$ 9,743 
$ 1,079 
$ (104,129)
Other comprehensive income (loss):
 
 
 
Unrealized gain (loss) on investments
(60)
128 
216 
Unrealized foreign currency translation adjustments, net of tax
(4,331)
7,696 
25,050 
Amortization of net actuarial loss
(1,777)
(2,109)
(4,164)
Amortization of prior service credit, net of tax benefit of $487, $17 and $353
(790)
84 
(548)
Total other comprehensive income (loss)
(6,958)
5,799 
20,554 
Comprehensive income (loss)
2,785 
6,878 
(83,575)
Comprehensive income attributable to noncontrolling interest
(533)
(636)
(582)
Comprehensive income (loss) attributable to Viad
$ 2,252 
$ 6,242 
$ (84,157)
Consolidated Statements of Comprehensive Income (Parenthetical) (USD $)
In Thousands, unless otherwise specified
12 Months Ended
Dec. 31, 2011
Dec. 31, 2010
Dec. 31, 2009
Consolidated Statements of Comprehensive Income [Abstract]
 
 
 
Unrealized investment gains (losses) arising during the period, net of tax expense (benefit)
$ (36)
$ 82 
$ 137 
Amortization of net actuarial loss, net of tax expense (benefit)
(709)
1,433 
(2,859)
Amortization of prior service credit, net of tax
$ 487 
$ 17 
$ 353 
Consolidated Statements of Cash Flows (USD $)
In Thousands, unless otherwise specified
12 Months Ended
Dec. 31, 2011
Dec. 31, 2010
Dec. 31, 2009
Cash flows from operating activities
 
 
 
Net income (loss)
$ 9,743 
$ 1,079 
$ (104,129)
Adjustments to reconcile net income (loss) to net cash provided by (used in) operating activities:
 
 
 
Depreciation and amortization
29,126 
28,252 
28,269 
Deferred income taxes
(924)
744 
(8,349)
Income from discontinued operations
(451)
(262)
(679)
Restructuring charges
3,782 
4,222 
14,054 
Impairment charges
 
302 
116,863 
Losses (gains) on dispositions of property and other assets
(42)
45 
(18)
Share-based compensation expense
4,413 
3,518 
3,093 
Excess tax benefit from share-based compensation arrangements
(54)
(27)
 
Other non-cash items, net
4,659 
4,580 
6,714 
Change in operating assets and liabilities (excluding the impact of acquisitions):
 
 
 
Receivables
(18,092)
(3,042)
5,834 
Inventories
3,729 
6,148 
7,493 
Accounts payable
4,372 
4,637 
(15,623)
Restructuring liabilities
(3,888)
(6,718)
(7,587)
Accrued compensation
4,563 
6,966 
(17,620)
Customer deposits
4,950 
2,000 
(1,600)
Income taxes payable
(2,694)
(1,264)
(4,660)
Other assets and liabilities, net
(8,456)
(7,897)
(28,302)
Net cash provided by (used in) operating activities
34,736 
43,283 
(6,247)
Cash flows from investing activities
 
 
 
Capital expenditures
(21,538)
(17,040)
(21,315)
Acquisition of businesses, net of cash acquired
(41,105)
 
 
Proceeds from dispositions of property and other assets
440 
14,753 
76 
Net cash used in investing activities
(62,203)
(2,287)
(21,239)
Cash flows from financing activities
 
 
 
Payments on debt and capital lease obligations
(7,375)
(4,900)
(3,715)
Dividends paid on common stock
(3,241)
(3,275)
(3,292)
Common stock purchased for treasury
(5,230)
(6,906)
(1,233)
Debt issuance costs
(1,001)
 
(277)
Excess tax benefits from share-based compensation arrangements
54 
27 
 
Proceeds from exercise of stock options
296 
593 
 
Net cash used in financing activities
(16,497)
(14,461)
(8,517)
Effect of exchange rate changes on cash and cash equivalents
(1,501)
2,964 
4,305 
Net change in cash and cash equivalents
(45,465)
29,499 
(31,698)
Cash and cash equivalents, beginning of year
145,841 
116,342 
148,040 
Cash and cash equivalents, end of year
100,376 
145,841 
116,342 
Supplemental disclosure of cash flow information
 
 
 
Cash paid for income taxes
10,213 
7,931 
10,158 
Cash paid for interest
1,088 
1,131 
1,309 
Equipment acquired under capital leases
$ 1,327 
$ 963 
$ 3,511 
Consolidated Statements of Stockholders' Equity (USD $)
In Thousands
Total
Common Stock
Non- Controlling Interest
Additional Capital
Retained Earnings (Deficit)
Unearned Employees Benefits and Other
Accumulated Other Comprehensive Income
Common Stock in Treasury
Total Viad Equity
Balance at Dec. 31, 2008
$ 467,089 
$ 37,402 
$ 6,534 
$ 623,781 
$ 91,558 
$ (7,881)
$ 2,498 
$ (286,803)
$ 460,555 
Net income (loss)
(104,129)
 
582 
 
(104,711)
 
 
 
(104,711)
Dividends on common stock
(3,292)
 
 
 
(3,292)
 
 
 
(3,292)
Common stock purchased for treasury
(1,233)
 
 
 
 
 
 
(1,233)
(1,233)
Employee benefit plans
(30)
 
 
(21,398)
 
(30)
 
21,398 
(30)
ESOP allocation adjustment
1,964 
 
 
 
 
1,964 
 
 
1,964 
Share-based compensation--equity awards
4,899 
 
 
4,899 
 
 
 
 
4,899 
Tax deficiencies from share-based compensation
(1,251)
 
 
(1,251)
 
 
 
 
(1,251)
Unrealized foreign currency translation adjustment
25,050 
 
 
 
 
 
25,050 
 
25,050 
Unrealized gain (loss) on investments
216 
 
 
 
 
 
216 
 
216 
Amortization of prior service credit
548 
 
 
 
 
 
(548)
 
(548)
Amortization of net actuarial loss
(4,164)
 
 
 
 
 
(4,164)
 
(4,164)
Other, net
60 
 
 
40 
(7)
 
20 
60 
Balance at Dec. 31, 2009
384,631 
37,402 
7,116 
606,038 
(16,405)
(5,954)
23,052 
(266,618)
377,515 
Net income (loss)
1,079 
 
636 
 
443 
 
 
 
443 
Dividends on common stock
(3,275)
 
 
 
(3,275)
 
 
 
(3,275)
Common stock purchased for treasury
(6,905)
 
 
 
 
 
 
(6,905)
(6,905)
Employee benefit plans
592 
 
 
(2,397)
 
 
 
2,989 
592 
ESOP allocation adjustment
1,518 
 
 
 
 
1,518 
 
 
1,518 
Share-based compensation--equity awards
3,785 
 
 
3,785 
 
 
 
 
3,785 
Tax deficiencies from share-based compensation
(524)
 
 
(524)
 
 
 
 
(524)
Unrealized foreign currency translation adjustment
7,696 
 
 
 
 
 
7,696 
 
7,696 
Unrealized gain (loss) on investments
128 
 
 
 
 
 
128 
 
128 
Amortization of prior service credit
(84)
 
 
 
 
 
84 
 
84 
Amortization of net actuarial loss
(2,109)
 
 
 
 
 
(2,109)
 
(2,109)
Other, net
11 
 
 
 
 
 
11 
Balance at Dec. 31, 2010
386,711 
37,402 
7,752 
606,902 
(19,229)
(4,433)
28,851 
(270,534)
378,959 
Net income (loss)
9,743 
 
533 
 
9,210 
 
 
 
9,210 
Dividends on common stock
(3,241)
 
 
 
(3,241)
 
 
 
(3,241)
Common stock purchased for treasury
(5,230)
 
 
 
 
 
 
(5,230)
(5,230)
Employee benefit plans
295 
 
 
(11,086)
 
 
 
11,381 
295 
ESOP allocation adjustment
1,490 
 
 
 
 
1,490 
 
 
1,490 
Share-based compensation--equity awards
3,688 
 
 
3,688 
 
 
 
 
3,688 
Tax deficiencies from share-based compensation
(325)
 
 
(325)
 
 
 
 
(325)
Unrealized foreign currency translation adjustment
(4,331)
 
 
 
 
 
(4,331)
 
(4,331)
Unrealized gain (loss) on investments
(60)
 
 
 
 
 
(60)
 
(60)
Amortization of prior service credit
790 
 
 
 
 
 
(790)
 
(790)
Amortization of net actuarial loss
(1,777)
 
 
 
 
 
(1,777)
 
(1,777)
Other, net
 
 
(8)
 
Balance at Dec. 31, 2011
$ 386,179 
$ 37,402 
$ 8,285 
$ 599,188 
$ (13,256)
$ (2,951)
$ 21,893 
$ (264,382)
$ 377,894 
Summary of Significant Accounting Policies
Summary of Significant Accounting Policies

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, leading consumer brands and casinos.

Travel & Recreation Group

Travel and recreation services are provided by Brewster Inc. (“Brewster”), Glacier Park, Inc. (“Glacier Park”) and Alaskan Park Properties, Inc. (“Alaskan Park Properties”).

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.

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.

In September 2011, Alaskan Park Properties, Viad’s wholly-owned subsidiary, acquired 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, Alaskan Park Properties 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:

 

   

Estimated fair value of Viad’s reporting units used to perform annual impairment testing of recorded goodwill;

 

   

Estimated fair value of intangible assets with indefinite lives, for purposes of impairment testing;

 

   

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 10.

Foreign Currency Translation. Viad conducts its foreign operations primarily in Canada and the United Kingdom, 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’s revenue recognition policies are as follows:

Viad recognizes revenue when persuasive evidence of a sales 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, 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. 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-awards 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. Viad issues restricted stock and PBRS awards from shares held in treasury.

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.

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.

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 May 2011, the Financial Accounting Standards Board (“FASB”) issued new guidance related to fair value measurement and disclosure requirements, which is codified in Accounting Standards Codification (“ASC”) Topic 820. The new guidance is intended to clarify the application of existing fair value measurement and disclosure requirements, and also changes certain principles and disclosures. The guidance is effective for fiscal years and interim periods beginning after December 15, 2011. The adoption of this new guidance is not expected to have a material impact on Viad’s financial condition or results of operations.

In June 2011, the FASB issued new guidance related to the presentation of comprehensive income, which is codified in ASC Topic 220. The new guidance requires entities to present the total of comprehensive income, the components of net income and the components of other comprehensive income in one of two formats: 1) in a single continuous statement, or 2) in two separate but consecutive statements. The guidance is effective for fiscal years and interim periods beginning after December 15, 2011, and will not have an impact on Viad’s financial condition or results of operations.

In September 2011, the FASB issued new guidance related to goodwill impairment testing, which is codified in 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 is not expected to have a material impact on Viad’s financial condition or results of operations.

In September 2011, the FASB issued new guidance related to disclosures regarding employer’s participation in multi-employer pension plans, which is codified in ASC Topic 715. The new guidance requires employers that participate in multi-employer pension plans to provide additional quantitative and qualitative information about their involvement in those plans. The guidance is effective for annual periods for fiscal years ending after December 15, 2011. The adoption of this disclosure-only guidance did not impact Viad’s financial condition or results of operations.

Share-Based Compensation
Share-Based Compensation

Note 2. Share-Based Compensation

Viad grants share-based compensation awards to officers, directors and certain key employees pursuant to the 2007 Viad Corp Omnibus Incentive Plan (the “2007 Plan”). The 2007 Plan has a ten-year life and provides for the following types of awards: (a) incentive and non-qualified stock options; (b) restricted stock and restricted stock units; (c) performance units or performance shares; (d) stock appreciation rights; (e) cash-based awards and (f) certain other stock-based awards. The number of shares of common stock available for grant under the 2007 Plan is limited to 1,700,000 shares plus shares awarded under the 1997 Viad Corp Omnibus Incentive Plan (which terminated in May 2007) that subsequently cease for any reason to be subject to such awards (other than by reason of exercise or settlement of the awards to the extent the shares are exercised for, or settled in, vested and non-forfeited shares) up to an aggregate maximum of 1,500,000 shares. As of December 31, 2011, there were 1,023,839 total shares available for future grant.

The following table summarizes share-based compensation expense:

 

                         
     2011     2010     2009  
    (in thousands)  

Stock options

  $ 537     $ 447     $ 469  

Restricted stock/PBRS

    3,042       2,821       3,583  

Restricted stock units/PBRS units

    120       253       151  

Performance unit incentive plan (“PUP”)

    714       (3     (1,110
   

 

 

   

 

 

   

 

 

 

Total share-based compensation before income tax benefit

    4,413       3,518       3,093  

Income tax benefit

    (1,594     (1,225     (1,125
   

 

 

   

 

 

   

 

 

 

Total share-based compensation, net of income tax benefit

  $ 2,819     $ 2,293     $ 1,968  
   

 

 

   

 

 

   

 

 

 

In addition, $124,000, $519,000 and $767,000 of costs associated with share-based compensation were included in restructuring expense in 2011, 2010 and 2009, respectively. No share-based compensation costs were capitalized during 2011, 2010 or 2009.

 

Restricted Stock and PBRS. The following table summarizes restricted stock and PBRS activity:

 

                                 
    Restricted Stock     PBRS  
         

Weighted-Average

Grant Date

         

Weighted-Average

Grant Date

 
    Shares     Fair Value     Shares     Fair Value  

Balance at January 1, 2009

    358,285     $ 34.25       94,828     $ 34.56  

Granted

    234,333       15.56       164,200       15.36  

Vested

    (189,462     31.48       (46,701     34.21  

Forfeited

    (12,346     27.81       (37,400     15.19  
   

 

 

           

 

 

         

Balance at December 31, 2009

    390,810       24.59       174,927       20.77  

Granted

    157,900       19.30       —         —    

Vested

    (65,961     34.42       (29,547     35.31  

Cancelled

    —         —         (126,550     15.36  

Forfeited

    (4,250     22.55       —         —    
   

 

 

           

 

 

         

Balance at December 31, 2010

    478,499       21.51       18,830       33.02  

Granted

    191,850       22.70       —         —    

Vested

    (91,212     31.31       (18,414     33.42  

Forfeited

    (7,115     20.81       —         —    
   

 

 

           

 

 

         

Balance at December 31, 2011

    572,022       20.36       416       15.36  
   

 

 

           

 

 

         

The grant date fair value of restricted stock vesting during 2011, 2010 and 2009 was $2.9 million, $2.3 million and $6.0 million, respectively. The grant date fair value of PBRS vesting during 2011, 2010 and 2009 was $615,000, $1.0 million and $1.6 million, respectively. As of December 31, 2011, the unamortized cost of all outstanding restricted stock and PBRS awards was $4.0 million, which Viad expects to recognize in the consolidated financial statements over a weighted-average period of approximately 2.3 years. During 2011, 2010 and 2009, the Company repurchased 28,627 shares for $679,000, 28,407 shares for $573,000 and 72,294 shares for $1.2 million, respectively, related to tax withholding requirements on vested share-based awards.

Liability-Based Awards. The following table summarizes the liability-based award activity:

 

                                                 
    Restricted Stock Units     PBRS Units     PUP Awards  
     Units     Weighted-Average
Grant Date

Fair Value
    Units     Weighted-Average
Grant Date

Fair Value
    Units     Weighted-Average
Grant Date

Fair Value
 

Balance at January 1, 2009

    —       $ —         —       $ —         102,960     $ 33.81  

Granted

    13,700       15.36       13,900       15.36       —         —    
   

 

 

           

 

 

           

 

 

         

Balance at December 31, 2009

    13,700       15.36       13,900       15.36       102,960       33.81  

Granted

    12,350       19.20       —         —         —         —    

Vested

    —         —         (1,958     15.36       —         —    

Cancelled

    —         —         (8,028     15.36       —         —    
   

 

 

           

 

 

           

 

 

         

Balance at December 31, 2010

    26,050       17.18       3,914       15.36       102,960       33.81  

Granted

    12,550       23.01       —         —         95,500       23.02  

Vested

    —                 (1,958     15.36       —         —    

Cancelled

    —                 —                 (102,960     33.81  
   

 

 

           

 

 

           

 

 

         

Balance at December 31, 2011

    38,600       19.07       1,956       15.36       95,500       23.02  
   

 

 

           

 

 

           

 

 

         

As of December 31, 2011 and 2010, Viad had aggregate liabilities recorded of $475,000 and $407,000, respectively, related to restricted stock unit and PBRS unit liability awards. A portion of the 2009 PBRS unit awards vested effective December 31, 2009 and cash payouts of $52,000 and $37,000 were distributed in January 2011 and March 2010, respectively. During 2010, 8,028 PBRS units were cancelled as the performance conditions related to those units were not achieved.

As of December 31, 2011, Viad had a liability recorded of $714,000 related to PUP awards. The PUP awards for the 2007-2009 period vested effective December 31, 2009 and a cash payout of $19,000 was distributed in March 2010. No cash payouts of PUP awards were made during 2011. In March 2011, 102,960 PUP awards for the 2008-2010 period were cancelled as the performance conditions related to those awards were not achieved. No PUP awards were granted in 2010 or 2009 and no other PUP awards vested during 2011, 2010 or 2009. Furthermore, there were no other cash settlements of PUP awards or any other share-based compensation awards.

 

Stock Options. The following table summarizes stock option activity:

 

                         
    Shares     Weighted-
Average
Exercise Price
    Options
Exercisable
 

Options outstanding at January 1, 2009

    606,660     $ 25.86       459,612  

Forfeited or expired

    (64,942     26.88          
   

 

 

                 

Options outstanding at December 31, 2009

    541,718       25.74       462,683  

Granted

    280,900       19.20          

Exercised

    (22,311     23.21          

Forfeited or expired

    (36,513     26.34          
   

 

 

                 

Options outstanding at December 31, 2010

    763,794       23.38       451,194  

Exercised

    (14,616     20.14          

Forfeited or expired

    (164,977     23.88          
   

 

 

                 

Options outstanding at December 31, 2011

    584,201       23.32       396,688  
   

 

 

                 

As of December 31, 2011, the total unrecognized cost related to non-vested stock option awards was $667,000. Viad expects to recognize such costs in the consolidated financial statements over a weighted-average period of approximately 1.2 years. No stock options were granted in 2011 or 2009.

The following table summarizes information concerning stock options outstanding and exercisable as of December 31, 2011:

 

                                         
    Options Outstanding     Options Exercisable  

Range of Exercise Prices

  Shares     Weighted-Average
Remaining
Contractual Life
    Weighted-
Average
Exercise Price
    Shares     Weighted-
Average
Exercise Price
 

$18.40 to $19.20

    265,084       8.0 years     $ 19.20       94,891     $ 19.19  

$19.57 to $26.07

    134,732       0.9 years       23.41       130,732       23.36  

$26.31 to $26.37

    101,860       0.1 years       26.31       101,860       26.31  

$26.47 to $38.44

    82,525       1.7 years       32.77       69,205       32.31  
   

 

 

                   

 

 

         

$18.40 to $38.44

    584,201       4.1 years       23.32       396,688       24.68  
   

 

 

                   

 

 

         

In addition to the above, Viad had stock options outstanding which were granted to employees of MoneyGram International, Inc. (“MoneyGram”) prior to the spin-off of that company. As of December 31, 2011, there were 5,889 of such options outstanding and exercisable, both with exercise prices ranging from $19.57 to $26.07. The weighted-average remaining contractual life of these options outstanding was less than one year. During 2011, 100 options were exercised by MoneyGram participants at an exercise price of $19.57.

Stock options granted in 2010 were for a term of ten years and become exercisable one third after one year, another third after two years and the balance after three years from the date of grant. Stock options granted between 2004 and 2008 were for contractual terms of seven years and become exercisable, based on a graded vesting schedule, in annual increments of 20 percent beginning one year after the grant date and become fully exercisable after five years from the date of grant. Stock options granted in 2003 were for a term of ten years and became exercisable one third after one year, another third after two years and the balance after three years from the date of grant. Stock options granted in calendar years 2002 and prior were for a contractual term of ten years and were exercisable 50 percent after one year from the date of grant with the balance exercisable after two years from the date of grant.

The fair value of the 2010 stock option grant was estimated on the date of grant using the Black-Scholes option pricing model assuming Viad’s expected stock price volatility of 33.2 percent, a five year expected period of time the stock options will remain outstanding, an expected dividend yield on Viad common stock of 0.8 percent and a risk-free interest rate estimate of 2.44 percent. The expected dividend yield was based on Viad’s expectation of future dividend payouts. The volatility assumption was based on Viad’s daily historical stock price volatility during the time period that corresponds to the expected weighted-average life of the option. The expected life (estimated period of time outstanding) of stock options granted was estimated based on historical exercise activity. The risk-free interest rate assumption was based on the interest rate of a U.S. Treasury strip for a five-year term from the date the option was granted.

 

Additional information pertaining to stock options is provided in the table below:

 

      $,000000       $,000000       $,000000  
    2011     2010     2009  
          (in thousands)        

Total intrinsic value of stock options outstanding

  $ —       $ 2,341     $ 76  

Total intrinsic value of stock options exercised

  $ 325     $ 544     $ —    

Fair value of stock options vested

  $ 682     $ 404     $ 645  

Cash received from the exercise of stock options

  $ 296     $ 593     $ —    

Tax deficiencies realized for tax deductions related to stock option exercises and performance-based awards

  $ 325     $ 524     $ 1,251  

The aggregate intrinsic value of stock options outstanding in the table above represents the difference between Viad’s closing stock price on December 31 of each year and the exercise price, multiplied by the number of in-the-money options. The intrinsic value of stock options outstanding therefore changes based on changes in the fair market value of Viad’s common stock.

Impairment Losses
Impairment Losses

Note 3. Impairment Losses

During 2010, Viad recorded impairment losses of $302,000 at the Travel & Recreation Group. Of this amount, $117,000 related to property and equipment and $185,000 to other intangible assets.

During 2009, Viad revised downward its forecast for future revenues and earnings in the Marketing & Events Group based on continued declines in trade show marketing spending by its customers and a sharper than expected decline in retail holiday décor demand. As a result, the Company had projected a more prolonged contraction in its trade show and retail marketing revenues than was previously anticipated. Viad recorded aggregate goodwill impairment losses of $98.3 million related to the Marketing & Events Group, which is included in the consolidated statements of operations under the caption “Goodwill impairment losses.” The goodwill impairment losses consisted of $79.7 million related to the Marketing & Events U.S. segment and $18.6 million related to the Marketing & Events International segment.

As a result of the factors discussed above, Viad also recorded aggregate other intangible asset impairment losses of $14.0 million during 2009, which are included in the consolidated statements of operations under the caption “Intangible asset impairment losses.” Of the total amount, $9.3 million of impairment losses related to intangible assets in the Marketing & Events U.S. segment and $4.7 million related to the Marketing & Events International segment. The impairment losses also resulted from consolidation and integration activities within the Marketing & Events Group. Viad also recorded impairment losses of $1.7 million during 2009 related to touring exhibit assets related to the Marketing & Events U.S. segment and a loss of $2.9 million related to the write-down of a non-strategic real estate asset held in the Travel & Recreation Group. These charges are included in the consolidated statements of operations under the caption “Other impairment losses.” See Notes 6 and 8.

As of December 31, 2011, Viad had goodwill of $133.7 million consisting of $84.9 million related to the Marketing & Events Group and $48.8 million related to the Travel & Recreation Group. Within the Marketing & Events Group, goodwill of $62.7 million relates to the Marketing & Events U.S. segment and $22.2 million to the Marketing & Events International segment. 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 at the component level within the segment’s geographical operations. As of December 31, 2011, the amount of goodwill assigned to the reporting units in the United Kingdom (Melville) and Canada was $13.3 million and $8.9 million, respectively. Also, as of December 31, 2011, the Brewster, Glacier Park and Alaskan Park Properties operating segments (within the Travel & Recreation Group) had goodwill of $41.2 million, $4.4 million and $3.2 million (acquired in September 2011), respectively. Brewster, Glacier Park and Alaskan Park Properties are considered reporting units for goodwill impairment testing purposes.

As a result of the Company’s most recent analysis performed in the fourth quarter of 2011, 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 89 percent, 43 percent and 30 percent for each of the Marketing & Events Group reporting units in the United States, the United Kingdom (Melville) and Canada, respectively. For the Brewster and Glacier Park reporting units, the excess of the estimated fair value over the carrying value was 44 percent and 48 percent, respectively, as of the most recent impairment test. Significant reductions in the Company’s expected future revenue, 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 additional impairment losses.

 

Acquisition of Businesses
Acquisition of Businesses

Note 4. Acquisition of Businesses

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. Alaskan Park Properties is operated as a separate business unit within the Travel & Recreation Group. The following information represents the amounts assigned to the assets and liabilities of Alaskan Park Properties as of the date of acquisition:

 

      $,0000000  
    (in thousands)  

Other current assets

  $ 43  

Property and equipment

    11,630  

Goodwill

    3,184  

Other intangible assets

    626  
   

 

 

 

Total assets acquired

    15,483  
   

 

 

 
   

Customer deposits

    (38

Other current liabilities

    (140
   

 

 

 

Total liabilities acquired

    (178
   

 

 

 

Purchase price

  $ 15,305  
   

 

 

 

The Company recorded $3.2 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 entire amount of the goodwill is expected to be deductible for tax purposes over a period of 15 years. The amount assigned to other intangible assets of $626,000 relates to customer relationships. Transaction costs related to the acquisition were insignificant. The results of operations of Alaskan Park Properties have been included in Viad’s consolidated financial statements from the date of acquisition. There were no revenues related to Alaskan Park Properties included in Viad’s consolidated statement of operations for the year ended December 31, 2011 due to the timing of the acquisition. However, a net loss of $306,000 related to Alaskan Park Properties was included in Viad’s 2011 consolidated statement of operations.

On June 29, 2011, Viad acquired St. Mary Lodge & Resort (“St. Mary”) for $15.3 million in cash. St. Mary is a 115-room hotel located outside of Glacier National Park’s east entrance and is operated by Glacier Park within the Travel & Recreation Group. The following information represents the amounts assigned to the assets and liabilities of St. Mary as of the date of acquisition:

 

      $,0000000  
    (in thousands)  

Cash and cash equivalents

  $ 21  

Other current assets

    701  

Property and equipment

    12,525  

Goodwill

    3,130  

Other intangible assets

    60  
   

 

 

 

Total assets acquired

    16,437  
   

 

 

 
   

Customer deposits

    (684

Other current liabilities

    (46

Other long-term liabilities

    (382
   

 

 

 

Total liabilities acquired

    (1,112
   

 

 

 

Purchase price

  $ 15,325  
   

 

 

 

The Company recorded $3.1 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 entire amount of the goodwill is expected to be deductible for tax purposes over a period of 15 years. The amount assigned to other intangible assets of $60,000 relates to a non-amortized business license. Transaction costs related to the acquisition were insignificant. The results of operations of St. Mary have been included in Viad’s consolidated financial statements from the date of acquisition. During 2011, revenues of $5.5 million and net income of $938,000 related to St. Mary were included in Viad’s consolidated statement of operations.

 

On January 5, 2011, Viad acquired Grouse Mountain Lodge for $10.5 million in cash. Grouse Mountain Lodge is a 145-room hotel located in Whitefish, Montana, and is operated by Glacier Park within the Travel & Recreation Group. The following information represents the amounts assigned to the assets and liabilities of Grouse Mountain Lodge as of the date of acquisition:

 

      $,00000000  
    (in thousands)  

Cash and cash equivalents

  $ 9  

Other current assets

    126  

Property and equipment

    8,750  

Goodwill

    1,331  

Other intangible assets

    400  
   

 

 

 

Total assets acquired

    10,616  
   

 

 

 
   

Customer deposits

    (99

Other current liabilities

    (12
   

 

 

 

Total liabilities acquired

    (111
   

 

 

 

Purchase price

  $ 10,505  
   

 

 

 

The Company recorded $1.3 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 entire amount of the goodwill is expected to be deductible for tax purposes over a period of 15 years. The amount assigned to other intangible assets of $400,000 relates to a non-amortized business license. Transaction costs related to the acquisition were insignificant. The results of operations of Grouse Mountain Lodge have been included in Viad’s consolidated financial statements from the date of acquisition. During 2011, revenues of $4.2 million and net income of $283,000 related to Grouse Mountain Lodge were included in Viad’s consolidated statement of operations.

The following table summarizes the unaudited pro forma results of operations attributable to Viad for 2011 and 2010, assuming that the acquisitions of Denali Backcountry Lodge and Denali Cabins, St. Mary and Grouse Mountain Lodge had each been completed at the beginning of each year:

 

                 
    2011     2010  
    (in thousands, except per share data)  

Revenue

  $ 950,273     $ 861,059  

Income from continuing operations

  $ 10,376     $ 1,688  

Net income

  $ 10,827     $ 1,950  

Diluted net income per share

  $ 0.53     $ 0.10  

Basic net income per share

  $ 0.53     $ 0.10  
Inventories
Inventories

Note 5. Inventories

The components of inventories as of December 31 were as follows:

 

      $,0000000       $,0000000  
    2011     2010  
    (in thousands)  

Raw materials

  $ 18,297     $ 18,488  

Work in process

    17,528       20,182  
   

 

 

   

 

 

 

Inventories

  $ 35,825     $ 38,670  
   

 

 

   

 

 

 
Property and Equipment
Property and Equipment

Note 6. Property and Equipment

Property and equipment as of December 31 consisted of the following:

 

      $,0000000       $,0000000  
    2011     2010  
    (in thousands)  

Land

  $ 18,134     $ 9,139  

Buildings and leasehold improvements

    109,077       89,945  

Equipment and other

    310,186       299,558  
   

 

 

   

 

 

 
      437,397       398,642  

Accumulated depreciation

    (263,584     (249,296
   

 

 

   

 

 

 

Property and equipment, net

  $ 173,813     $ 149,346  
   

 

 

   

 

 

 

 

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 $14.9 million and $17.5 million as of December 31, 2011 and 2010, respectively.

Depreciation expense was $28.4 million, $27.3 million and $26.5 million for 2011, 2010 and 2009, respectively. As discussed in Note 3 above, Viad recorded an impairment loss of $117,000 in 2010 related to a tour boat at the Travel & Recreation Group. Viad also recorded impairment losses of $1.7 million related to certain touring exhibit assets at the Marketing & Events Group in 2009.

During 2009, Viad commenced a plan of sale related to a non-strategic real estate asset held in the Travel & Recreation Group. This asset consisted of land, building and related improvements, which was expected to be sold within one year. Accordingly, the value of this asset was remeasured based on the estimated fair value, less cost to sell. As a result of the remeasurement, the Company recorded a loss of $2.9 million in 2009, which is included in the consolidated statements of operations under the caption “Other impairment losses.” Viad completed the sale of this asset in March 2010 for $14.3 million (net of selling costs).

Other Investments and Assets
Other Investments and Assets

Note 7. Other Investments and Assets

As of December 31 other investments and assets consisted of the following:

 

      $,000000       $,000000  
    2011     2010  
    (in thousands)  

Cash surrender value of life insurance

  $ 18,812     $ 18,072  

Workers’ compensation insurance security deposits

    4,658       3,906  

Other

    7,581       9,385  
   

 

 

   

 

 

 

Total other investments and assets

  $ 31,051     $ 31,363  
   

 

 

   

 

 

 
Goodwill and Other Intangible Assets
Goodwill and Other Intangible Assets

Note 8. Goodwill and Other Intangible Assets

As discussed in Note 3 above, Viad recorded impairment losses of $98.3 million related to goodwill during 2009 at the Marketing & Events Group. During 2010, Viad recorded impairment losses of $185,000 related to other intangible assets at the Travel & Recreation Group. During 2009, Viad recorded impairment losses of $14.0 million related to other intangible assets at the Marketing & Events Group.

As of December 31, 2011, Viad had cumulative goodwill impairment losses of $225.2 million since the adoption of the goodwill impairment testing provisions of ASC Topic 350.

The changes in the carrying amount of goodwill were as follows:

 

      $,000000       $,000000       $,000000       $,000000  
    Marketing &
Events U.S.
    Marketing &
Events
International
    Travel &
Recreation
Group
    Total  
          (in thousands)        

Balance at January 1, 2010

  $ 62,686     $ 22,472     $ 39,773     $ 124,931  

Foreign currency translation adjustments

    —         (17     2,527       2,510  
   

 

 

   

 

 

   

 

 

   

 

 

 

Balance at December 31, 2010

    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  
   

 

 

   

 

 

   

 

 

   

 

 

 

 

A summary of other intangible assets as of December 31, 2011 is presented below:

 

                         
    Gross Carrying
Value
    Accumulated
Amortization
    Net Carrying
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  
   

 

 

   

 

 

   

 

 

 

A summary of amortized other intangible assets as of December 31, 2010 is presented below:

 

                         
    Gross Carrying
Value
    Accumulated
Amortization
    Net Carrying
Value
 
          (in thousands)        

Customer contracts and relationships

  $ 2,506     $ (1,135   $ 1,371  

Proprietary technology

    517       (448     69  

Design libraries

    175       (110     65  

Other

    166       (108     58  
   

 

 

   

 

 

   

 

 

 

Total

  $ 3,364     $ (1,801   $ 1,563  
   

 

 

   

 

 

   

 

 

 

Intangible asset amortization expense for 2011, 2010 and 2009 was $772,000, $954,000 and $1.8 million, respectively. The weighted-average amortization period of customer contracts and relationships and other amortizable intangible assets is approximately 3.3 years and 5.8 years, respectively. Estimated amortization expense related to amortized intangible assets for future years is expected to be as follows:

 

         
    (in thousands)  

2012

  $ 539  

2013

  $ 498  

2014

  $ 237  

2015

  $ 90  

2016 and thereafter

  $ 60  

 

Accrued Liabilities and Other
Accrued Liabilities and Other

Note 9. Accrued Liabilities and Other

As of December 31 other current liabilities consisted of the following:

 

                 
    2011     2010  
    (in thousands)  

Continuing operations:

               

Customer deposits

  $ 49,182     $ 43,411  

Accrued compensation

    22,587       17,599  

Self-insured liability accrual

    6,697       8,278  

Accrued employee benefit costs

    3,730       3,127  

Accrued restructuring

    2,303       4,272  

Accrued sales and use taxes

    1,668       2,990  

Accrued dividends

    827       827  

Accrued foreign income taxes

    234       2,852  

Other

    8,185       11,084  
   

 

 

   

 

 

 
      95,413       94,440  
   

 

 

   

 

 

 

Discontinued operations:

               

Environmental remediation liabilities

    755       1,124  

Self-insured liability accrual

    639       552  

Other

    524       633  
   

 

 

   

 

 

 
      1,918       2,309  
   

 

 

   

 

 

 

Total other current liabilities

  $ 97,331     $ 96,749  
   

 

 

   

 

 

 

As of December 31 other deferred items and liabilities consisted of the following:

 

                 
    2011     2010  
    (in thousands)  

Continuing operations:

               

Self-insured liability accrual

  $ 14,403     $ 14,330  

Accrued compensation

    5,538       5,129  

Accrued restructuring

    4,647       3,724  

Foreign deferred tax liability

    1,219       1,582  

Accrued income taxes

    —         146  

Other

    5,900       3,945  
   

 

 

   

 

 

 
      31,707       28,856  
   

 

 

   

 

 

 

Discontinued operations:

               

Self-insured liability accrual

    5,351       6,898  

Environmental remediation liabilities

    4,999       4,953  

Accrued income taxes

    1,022       987  

Other

    1,133       1,331  
   

 

 

   

 

 

 
      12,505       14,169  
   

 

 

   

 

 

 

Total other deferred items and liabilities

  $ 44,212     $ 43,025  
   

 

 

   

 

 

 

 

Debt
Debt

Note 10. Debt

Long-term debt as of December 31 was as follows (1):

 

                 
    2011     2010  
    (in thousands)  

Capital lease obligations, 6.2% (2011) and 6.5% (2010) weighted-average interest rate at December 31, due to 2015

  $ 3,239     $ 4,616  

Revolving credit agreement, 2.9% (2011) and 3.2% (2010) floating rate indexed to LIBOR at December 31, repaid in 2011

    —         4,461  
   

 

 

   

 

 

 
      3,239       9,077  

Current portion

    (2,018     (6,639
   

 

 

   

 

 

 

Long-term debt

  $ 1,221     $ 2,438  
   

 

 

   

 

 

 

 

(1) 

Rates shown are exclusive of the effects of commitment fees and other costs of long-term bank credit.

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, 2011, Viad’s total debt of $3.2 million consisted entirely of capital lease obligations. As of December 31, 2011, Viad had $125.4 million of capacity remaining under its Credit Facility reflecting outstanding letters of credit of $4.6 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.

Financial covenants include a fixed-charge coverage ratio of not less than 2.25 to 1 (and a ratio of not less than 2.50 to 1 after the fiscal quarter ending September 30, 2012) and a leverage ratio of not greater than 2.50 to 1. Additionally, Viad must maintain a consolidated minimum cash and cash equivalents balance of $50 million. As of December 31, 2011, the fixed-charge coverage and leverage ratios were 2.94 to 1 and 0.30 to 1, respectively. The terms of the Credit Facility allow Viad to pay up to $10 million in dividends in the aggregate in any calendar year and also allow the Company to purchase up to $10 million in any calendar year of the Company’s common stock. 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, 2011, Viad was in compliance with all covenants.

As of December 31, 2011, 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, 2011 would be $28.5 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, 2011 are as follows:

 

         
    (in thousands)  

2012

  $ 2,450  

2013

    1,075  

2014

    231  

2015

    42  
   

 

 

 

Total

    3,798  

Less: Amount representing interest

    (559
   

 

 

 

Present value of minimum lease payments

  $ 3,239  
   

 

 

 

The gross amount of assets recorded under capital leases as of December 31, 2011 was $6.6 million and accumulated amortization was $3.0 million. As of December 31, 2010, the gross amount of assets recorded under capital leases and accumulated amortization was $6.4 million and $2.6 million, respectively. The amortization charges related to assets recorded under capital leases are included in depreciation expense. See Note 6.

The weighted-average interest rate on total debt was 7.8 percent, 12.0 percent and 7.6 percent, for 2011, 2010 and 2009, 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 $3.0 million and $9.2 million as of December 31, 2011 and 2010, 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.

Fair Value Measurements
Fair Value Measurements

Note 11. 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:

 

      $,000000000       $,000000000       $,000000000       $,000000000  
          Fair Value Measurements at December 31, 2011 Using  
    December 31,
2011
    Quoted Prices in
Active Markets
(Level 1)
    Significant
Other
Observable
Inputs

(Level 2)
    Significant
Unobserved
Inputs

(Level 3)
 
          (in thousands)        

Assets:

                               

Money market funds

  $ 20,862     $ 20,862     $ —       $ —    

Other mutual funds

    1,373       1,373       —         —    
   

 

 

   

 

 

   

 

 

   

 

 

 

Total

  $ 22,235     $ 22,235     $ —       $ —    
   

 

 

   

 

 

   

 

 

   

 

 

 

 

      $,000000000       $,000000000       $,000000000       $,000000000  
          Fair Value Measurements at December 31, 2010 Using  
    December 31,
2010
    Quoted Prices in
Active Markets
(Level 1)
    Significant
Other
Observable
Inputs

(Level 2)
    Significant
Unobserved
Inputs

(Level 3)
 
          (in thousands)        

Assets:

                               

Money market funds

  $ 31,285     $ 31,285     $ —       $ —    

Other mutual funds

    1,744       1,744       —         —    
   

 

 

   

 

 

   

 

 

   

 

 

 

Total

  $ 33,029     $ 33,029     $ —       $ —    
   

 

 

   

 

 

   

 

 

   

 

 

 

As of December 31, 2011 and 2010, Viad had investments in money market mutual funds of $20.9 million and $31.3 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, 2011 and 2010, Viad had investments in other mutual funds of $1.4 million and $1.7 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, 2011 and 2010, there were unrealized gains of $366,000 ($222,000 after-tax) and $462,000 ($282,000 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 10.

 

 

Income Per Share
Income Per Share

Note 12. Income Per Share

The following is a reconciliation of the numerators and denominators of diluted and basic per share computations for net income (loss) attributable to Viad:

 

                         
    2011     2010     2009  
    (in thousands, except per share data)  

Basic net income (loss) per share

                       

Numerator:

                       

Net income (loss) attributable to Viad

  $ 9,210     $ 443     $ (104,711

Less: Allocation to non-vested shares

    (248     (11     —    
   

 

 

   

 

 

   

 

 

 

Net income (loss) allocated to Viad common stockholders

  $ 8,962     $ 432     $ (104,711
   

 

 

   

 

 

   

 

 

 
       

Denominator:

                       

Weighted-average outstanding common shares

    19,719       19,955       19,960  
   

 

 

   

 

 

   

 

 

 
       

Net income (loss) attributable to Viad common stockholders

  $ 0.45     $ 0.02     $ (5.25
   

 

 

   

 

 

   

 

 

 
       

Diluted net income (loss) per share

                       

Numerator:

                       

Net income (loss) attributable to Viad

  $ 9,210     $ 443     $ (104,711
   

 

 

   

 

 

   

 

 

 
       

Denominator:

                       

Weighted-average outstanding shares

    19,719       19,955       19,960  

Additional dilutive shares related to share-based compensation

    336       322       —    
   

 

 

   

 

 

   

 

 

 

Weighted-average outstanding and potentially dilutive shares

    20,055       20,277       19,960  
   

 

 

   

 

 

   

 

 

 

Net income (loss) attributable to Viad common stockholders (1)

  $ 0.45     $ 0.02     $ (5.25
   

 

 

   

 

 

   

 

 

 

 

(1) 

Diluted income per share amount cannot exceed basic income per share.

Options to purchase 304,000, 474,000 and 627,000 shares of common stock were outstanding during 2011, 2010 and 2009, respectively, but were not included in the computation of dilutive shares outstanding because the effect would be anti-dilutive. Additionally, 336,000 and 322,000 share-based compensation awards were considered dilutive and included in the computation of diluted income per share in 2011 and 2010, respectively. During 2009, 294,000 share-based compensation awards, that would normally have been considered dilutive and thus included as outstanding for purposes of computing diluted income per share, were excluded due to a net loss reported in 2009, thereby making such shares anti-dilutive.

Employee Stock Ownership Plan
Employee Stock Ownership Plan

Note 13. Employee Stock Ownership 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 July 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, 2011, the balance of the ESOP loan was $3.0 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 will repay 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:

 

                         
    2011     2010     2009  
          (in thousands)        

Amounts paid by ESOP for:

                       

Debt repayment

  $ 1,490     $ 1,518     $ 1,964  

Interest

    8       12       22  

Amounts received from Viad as:

                       

Contributions

    1,435       1,444       1,872  

Dividends

    63       86       114  

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 plan. Viad recorded expense of $1.6 million, $1.5 million and $1.4 million in 2011, 2010 and 2009, respectively.

Unallocated shares held by the 401(k) Plan totaled 293,280 and 440,369 as of December 31, 2011 and 2010, respectively. Shares allocated during 2011 and 2010 totaled 147,089 and 149,490, respectively.

Preferred Stock Purchase Rights
Preferred Stock Purchase Rights

Note 14. Preferred Stock Purchase Rights

Viad has one Preferred Stock Purchase Right (“Right”) outstanding on each outstanding share of its 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 Agreement is designed to assist Viad’s Board of Directors in enabling all of Viad’s shareholders to realize the long-term value of their investment in the Company, in ensuring that all of Viad’s shareholders receive fair and equal treatment in the event of any proposed takeover of the Company and in protecting Viad and its shareholders from abusive takeover tactics. Each Right represents the right to purchase one twenty-fifth of a share of Series A Junior Participating Preferred Stock. Subject to the terms and conditions of the Rights Agreement, Rights become exercisable ten days following the public announcement of the acquisition by a person or group of beneficial ownership of 20 percent or more of Viad’s outstanding common stock. If such a person or group acquires beneficial ownership of 20 percent or more of the common stock, each Right (other than such person’s or group’s Rights, which will become void) will entitle the holder to purchase, at the Right’s then-current exercise price, Viad’s common stock having a market value equal to twice the exercise price. Moreover, at any time after a person or group acquires 20 percent or more of Viad’s outstanding common stock (unless such person or group acquires 50 percent or more), the Board of Directors may exchange one share of Viad’s common stock for each outstanding right (other than rights owned by such person or group, which would have become void). In addition, if the Company is acquired in a merger or other business combination transaction after a person has acquired 20 percent or more of Viad’s outstanding common stock, each Right will entitle its holder to purchase, at the Right’s then-current exercise price, a number of the acquiring company’s common shares having a market value of twice the exercise price.

The Board of Directors may redeem the Rights at an initial redemption price of $0.01 per Right at any time before any person or group acquires 20 percent or more of Viad’s outstanding common stock. If not redeemed, the Rights will expire on February 28, 2015, subject to early termination on February 28, 2013, if the Rights Agreement is not ratified by shareholders before such date. In addition, if Viad receives a “qualifying offer” (which includes certain all-cash fully financed tender offers or exchange offers for all of Viad’s outstanding common stock), under certain circumstances, holders of 10 percent of Viad’s outstanding common stock (excluding shares held by the offeror and its affiliates and associates) may direct the Board of Directors to call a special meeting of shareholders to consider a resolution exempting such “qualifying offer” from the Rights Agreement.

Viad has authorized 5 million and 2 million shares of Preferred Stock and Junior Participating Preferred Stock, respectively, none of which is outstanding. The 2 million shares of Junior Participating Preferred Stock have been reserved for issuance in connection with the Rights.

 

Income Taxes
Income Taxes

Note 15. Income Taxes

The following represents a reconciliation of income tax expense (benefit) and the amount that would be computed using the statutory federal income tax rates:

 

                                                 
    2011     2010     2009  
                (in thousands)              

Computed income tax expense (benefit) at statutory federal income tax rate of 35%

  $ 4,613       35.0   $ 896       35.0   $ (46,706     35.0

State income taxes, net of federal provision

    (100     (0.8 %)      (172     (6.7 %)      (6,055     4.5

Tax resolutions, net

    (103     (0.8 %)      (514     (20.1 %)      (3,527     2.6

Nondeductible goodwill impairments

    —         0.0     —         0.0     26,831       (20.1 %) 

Change in enacted tax law

    —         0.0     1,279       50.0     —         0.0

Change in valuation allowance

    (55     (0.4 %)      249       9.7     —         0.0

Other, net

    (467     (3.5 %)      4       0.2     818       (0.5 %) 
   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Income tax expense (benefit)

  $ 3,888       29.5   $ 1,742       68.1   $ (28,639     21.5
   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

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, 2011 and 2010, 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 and 2010, Viad recorded tax-related interest expense credits of $146,000 and $261,000, respectively.

During 2011, 2010 and 2009, Viad recorded tax benefits related to the favorable resolution of tax matters in continuing operations of $103,000, $514,000 and $3.5 million, 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, 2011 and 2010. In addition, as of December 31, 2011 and 2010, Viad had accrued interest and penalties related to uncertain tax positions for discontinued operations of $386,000 and $351,000, 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
Operations
    Discontinued
Operations
    Total  
          (in thousands)        

Balance at January 1, 2009

  $ 3,487     $ 636     $ 4,123  

Reductions for tax positions taken in prior years

    (2,702     —         (2,702

Reductions for tax settlements

    (174     —         (174

Reductions for lapse of applicable statutes

    (611     —         (611
   

 

 

   

 

 

   

 

 

 

Balance at December 31, 2009

    —         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  
   

 

 

   

 

 

   

 

 

 

Viad’s 2008 through 2011 U.S. federal tax years and various state tax years from 2007 through 2011 remain subject to income tax examinations by tax authorities. Additionally, 2005 and 2006 remain subject to examination due to net operating loss carryback claims. In addition, tax years from 2007 through 2011 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, 2011 and 2010, liabilities associated with uncertain tax positions (including interest and penalties) of $1.0 million and $1.1 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:

 

                 
    2011     2010  
    (in thousands)  

Deferred tax assets:

               

Tax credit carryforwards

  $ 25,219     $ 18,631  

Pension, compensation and other employee benefits

    22,103       20,903  

Provisions for losses

    16,038       17,474  

Net operating loss carryforward

    3,086       3,036  

State income taxes

    2,400       1,758  

Deferred income

    125       1,020  

Goodwill and other intangible assets

    —         150  

Other deferred income tax assets

    1,745       4,126  
   

 

 

   

 

 

 

Total deferred tax assets

    70,716       67,098  

Valuation allowance

    (356     (411
   

 

 

   

 

 

 

Net deferred tax assets

    70,360       66,687  
   

 

 

   

 

 

 

Deferred tax liabilities:

               

Property and equipment

    (7,729     (10,157

Goodwill and other intangible assets

    (1,006     —    

Other deferred income tax liabilities

    (287     (180
   

 

 

   

 

 

 

Total deferred tax liabilities

    (9,022     (10,337
   

 

 

   

 

 

 

Foreign deferred tax liabilities included above

    1,617       1,582  
   

 

 

   

 

 

 

United States deferred tax assets

  $ 62,955     $ 57,932  
   

 

 

   

 

 

 

 

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, 2011 and 2010, Viad had gross deferred tax assets of $70.7 million and $67.1 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 and projected taxable income, taxpaying history and future reversals of deferred tax liabilities. Furthermore, Viad also considered the fact that goodwill impairment losses are not tax deductible and thus did not contribute to tax losses. As of December 31, 2011 and 2010, Viad had state net operating loss carryforwards of $91.9 million and $79.0 million, respectively, for which the Company had deferred tax assets of $2.1 million and $2.2 million, respectively. The state net operating loss carryforwards expire on various dates from 2016 through 2031. As of December 31, 2011 and 2010, Viad had a valuation allowance of $356,000 and $411,000, respectively, related to those state 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, 2011, Viad had tax credit carryforwards related to alternative minimum tax of $9.9 million that may be carried forward indefinitely. Additionally, as of December 31, 2011, Viad had foreign tax credit carryforwards of $15.3 million, of which $1.9 million expire in 2019, $8.3 million expire in 2020 and $5.1 million expire in 2021.

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, 2011, the incremental unrecognized tax liability (net of estimated foreign tax credits) related to those undistributed earnings was approximately $2.3 million. 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 (benefit) consisted of the following:

 

                         
    2011     2010     2009  
          (in thousands)        

Current:

                       

United States:

                       

Federal

  $ (4,643   $ (9,286   $ (18,057

State

    1,292       677       (9,621

Foreign

    8,163       9,607       7,388  
   

 

 

   

 

 

   

 

 

 
      4,812       998       (20,290
   

 

 

   

 

 

   

 

 

 

Deferred

                       

United States:

                       

Federal

    992       3,212       (9,136

State

    (1,560     (939     (69

Foreign

    (356     (1,529     856  
   

 

 

   

 

 

   

 

 

 
      (924     744       (8,349
   

 

 

   

 

 

   

 

 

 

Income tax expense (benefit)

  $ 3,888     $ 1,742     $ (28,639
   

 

 

   

 

 

   

 

 

 

 

During 2011, 2010 and 2009, the Company recorded tax deficiencies of $325,000, $524,000 and $1.3 million, 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 (loss) from continuing operations before income taxes was as follows:

 

                         
    2011     2010     2009  
          (in thousands)        

United States

  $ (16,227   $ (22,592   $ (128,789

Foreign

    29,407       25,151       (4,658
   

 

 

   

 

 

   

 

 

 

Income (loss) from continuing operations before income taxes

  $ 13,180     $ 2,559     $ (133,447
   

 

 

   

 

 

   

 

 

 
Pension and Postretirement Benefits
Pension and Postretirement Benefits

Note 16. 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:

 

                         
    2011     2010     2009  
    (in thousands)  

Net Periodic Benefit Cost

                       

Service cost

  $ 121     $ 145     $ 184  

Interest cost

    1,189       1,242       1,300  

Expected return on plan assets

    (563     (588     (627

Amortization of prior service cost

    —         41       44  

Recognized net actuarial loss

    457       572       367  
   

 

 

   

 

 

   

 

 

 

Net periodic benefit cost

    1,204       1,412       1,268  
   

 

 

   

 

 

   

 

 

 
       

Other Changes in Plan Assets and Benefits Obligations Recognized in Other Comprehensive Income

                       

Net actuarial loss

    1,589       1,190       2,746  

Reversal of amortization item:

                       

Net actuarial loss

    (457     (572     (367

Prior service cost

    —         (41     (44
   

 

 

   

 

 

   

 

 

 

Total recognized in other comprehensive income

    1,132       577       2,335  
   

 

 

   

 

 

   

 

 

 

Total recognized in net period benefit cost and other comprehensive income

  $ 2,336     $ 1,989     $ 3,603  
   

 

 

   

 

 

   

 

 

 

 

The components of net periodic benefit cost and other amounts recognized in other comprehensive income of Viad’s postretirement benefit plans included the following:

 

                         
    2011     2010     2009  
          (in thousands)        

Net Periodic Benefit Cost

                       

Service cost

  $ 128     $ 130     $ 68  

Interest cost

    868       1,039       1,124  

Expected return on plan assets

    (135     (160     (205

Amortization of prior service credit

    (1,277     (1,171     (1,292

Recognized net actuarial loss

    533       608       358  
   

 

 

   

 

 

   

 

 

 

Net periodic benefit cost

    117       446       53  
   

 

 

   

 

 

   

 

 

 
       

Other Changes in Plan Assets and Benefit Obligations Recognized in Other Comprehensive Income (Loss)

                       

Net actuarial loss

    24       421       3,836  

Prior service credit

    —         (1,197     (347

Reversal of amortization item:

                       

Net actuarial loss

    (533     (608     (358

Prior service credit

    1,277       1,171       1,292  
   

 

 

   

 

 

   

 

 

 

Total recognized in other comprehensive income (loss)

    768       (213     4,423  
   

 

 

   

 

 

   

 

 

 

Total recognized in net period benefit cost and other comprehensive income (loss)

  $ 885     $ 233     $ 4,476  
   

 

 

   

 

 

   

 

 

 

The following table indicates the funded status of the plans as of December 31:

 

                                                 
    Funded Plans     Unfunded Plans     Postretirement
Benefit Plans
 
    2011     2010     2011     2010     2011     2010  
                (in thousands)              

Change in benefit obligation:

                                               

Benefit obligation at beginning of year

  $ 12,853     $ 12,322     $ 10,352     $ 9,776     $ 18,987     $ 19,728  

Service cost

    —         —         121       145       128       130  

Interest cost

    678       703       511       539       868       1,039  

Actuarial adjustments

    1,157       655       609       575       106       526  

Plan amendments

    —         —         —         —         —         (1,197

Benefits paid

    (750     (827     (710     (683     (1,422     (1,239
   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Benefit obligation at end of year

    13,938       12,853       10,883       10,352       18,667       18,987  
   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 
             

Change in plan assets:

                                               

Fair value of plan assets at beginning of year

    8,858       8,814       —         —         2,678       3,200  

Actual return on plan assets

    741       629       —         —         217       264  

Company contributions

    997       242       710       683       645       453  

Benefits paid

    (750     (827     (710     (683     (1,422     (1,239
   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Fair value of plan assets at end of year

    9,846       8,858       —         —         2,118       2,678  
   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 
             

Funded status at end of year

  $ (4,092   $ (3,995   $ (10,883   $ (10,352   $ (16,549   $ (16,309
   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

The net amounts recognized in Viad’s consolidated balance sheets under the caption “Pension and postretirement benefits” as of December 31 were as follows:

 

                                                 
    Funded Plans     Unfunded Plans     Postretirement
Benefit Plans
 
    2011     2010     2011     2010     2011     2010  
    (in thousands)  

Other current liabilities

  $ —       $ —       $ 717     $ 708     $ 440     $ 488  

Non-current liabilities

    4,092       3,995       10,166       9,644       16,109       15,821  
   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Net amount recognized

  $ 4,092     $ 3,995     $ 10,883     $ 10,352     $ 16,549     $ 16,309  
   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Amounts recognized in accumulated other comprehensive income as of December 31, 2011 consisted of:

 

                                 
    Funded
Plans
    Unfunded
Plans
    Postretirement
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  
   

 

 

   

 

 

   

 

 

   

 

 

 

Amounts recognized in accumulated other comprehensive income as of December 31, 2010 consisted of:

 

                                 
    Funded
Plans
    Unfunded
Plans
    Postretirement
Benefit Plans
    Total  
    (in thousands)  

Net actuarial loss

  $ 7,564     $ 3,453     $ 7,538     $ 18,555  

Prior service credit

    —         —         (5,290     (5,290
   

 

 

   

 

 

   

 

 

   

 

 

 

Subtotal

    7,564       3,453       2,248       13,265  

Less tax effect

    (2,889     (1,320     (858     (5,067
   

 

 

   

 

 

   

 

 

   

 

 

 

Total

  $ 4,675     $ 2,133     $ 1,390     $ 8,198  
   

 

 

   

 

 

   

 

 

   

 

 

 

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 2012 is approximately $520,000. 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 2012 is approximately $617,000. 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 2012 is approximately $1.1 million.

The fair value of the domestic plans’ assets by asset class were as follows:

 

                                 
    Fair Value Measurements at December 31, 2011  

Asset Category

  Total     Quoted Prices
in Active
Markets
(Level 1)
    Significant
Other
Observable
Inputs
(Level 2)
    Significant
Unobserved
Inputs
(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     $ —    
   

 

 

   

 

 

   

 

 

   

 

 

 

 

                                 
    Fair Value Measurements at December 31, 2010  

Asset Category

  Total