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Note 1. Summary of Significant Accounting Policies
Basis of Presentation and Principles of Consolidation
The consolidated financial statements of Viad Corp (“Viad” or the “Company”) are prepared in conformity with accounting principles generally accepted in the United States of America (“GAAP”) and include the accounts of Viad and all of its subsidiaries. All intercompany account balances and transactions between Viad and its subsidiaries have been eliminated in consolidation.
Nature of Business
Viad’s reportable segments consist of Marketing & Events U.S., Marketing & Events International and Travel & Recreation Group.
Marketing & Events Group
The Marketing & Events Group, comprised of Global Experience Specialists, Inc. and affiliates (“GES”), specializes in all aspects of the design, planning and production of face-to-face events, immersive environments and brand-based experiences for clients, including show organizers, corporate brand marketers and retail shopping centers. In addition, the Marketing & Events Group provides a variety of immersive, entertaining attractions and brand-based experiences, sponsored events, mobile marketing and other branded entertainment and face-to-face marketing solutions for clients and venues, including shopping malls, movie studios, museums, 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:
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Estimated fair value of Viad’s reporting units used to perform annual impairment testing of recorded goodwill; |
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Estimated fair value of intangible assets with indefinite lives, for purposes of impairment testing; |
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Estimated allowances for uncollectible accounts receivable; |
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Estimated provisions for income taxes, including uncertain tax positions; |
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Estimated valuation allowances related to deferred tax assets; |
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Estimated liabilities for losses related to self-insured liability claims; |
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Estimated liabilities for losses related to environmental remediation obligations; |
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Estimated sublease income associated with restructuring liabilities; |
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Assumptions used to measure pension and postretirement benefit costs and obligations; |
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Assumptions used to determine share-based compensation costs under the fair value method; and |
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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.
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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.
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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:
(in thousands) | ||||
Other current assets |
$ | 43 | ||
Property and equipment |
11,630 | |||
Goodwill |
3,184 | |||
Other intangible assets |
626 | |||
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Total assets acquired |
15,483 | |||
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Customer deposits |
(38 | ) | ||
Other current liabilities |
(140 | ) | ||
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Total liabilities acquired |
(178 | ) | ||
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Purchase price |
$ | 15,305 | ||
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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:
(in thousands) | ||||
Cash and cash equivalents |
$ | 21 | ||
Other current assets |
701 | |||
Property and equipment |
12,525 | |||
Goodwill |
3,130 | |||
Other intangible assets |
60 | |||
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Total assets acquired |
16,437 | |||
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Customer deposits |
(684 | ) | ||
Other current liabilities |
(46 | ) | ||
Other long-term liabilities |
(382 | ) | ||
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Total liabilities acquired |
(1,112 | ) | ||
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Purchase price |
$ | 15,325 | ||
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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:
(in thousands) | ||||
Cash and cash equivalents |
$ | 9 | ||
Other current assets |
126 | |||
Property and equipment |
8,750 | |||
Goodwill |
1,331 | |||
Other intangible assets |
400 | |||
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Total assets acquired |
10,616 | |||
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Customer deposits |
(99 | ) | ||
Other current liabilities |
(12 | ) | ||
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Total liabilities acquired |
(111 | ) | ||
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Purchase price |
$ | 10,505 | ||
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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 |
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Note 5. Inventories
The components of inventories as of December 31 were as follows:
2011 | 2010 | |||||||
(in thousands) | ||||||||
Raw materials |
$ | 18,297 | $ | 18,488 | ||||
Work in process |
17,528 | 20,182 | ||||||
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Inventories |
$ | 35,825 | $ | 38,670 | ||||
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Note 6. Property and Equipment
Property and equipment as of December 31 consisted of the following:
2011 | 2010 | |||||||
(in thousands) | ||||||||
Land |
$ | 18,134 | $ | 9,139 | ||||
Buildings and leasehold improvements |
109,077 | 89,945 | ||||||
Equipment and other |
310,186 | 299,558 | ||||||
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437,397 | 398,642 | |||||||
Accumulated depreciation |
(263,584 | ) | (249,296 | ) | ||||
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Property and equipment, net |
$ | 173,813 | $ | 149,346 | ||||
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Included in the “Equipment and other” caption above are capitalized costs incurred in developing or obtaining internal use software. The net carrying amount of capitalized software was $14.9 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).
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Note 7. Other Investments and Assets
As of December 31 other investments and assets consisted of the following:
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 | ||||||
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Total other investments and assets |
$ | 31,051 | $ | 31,363 | ||||
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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:
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 | |||||||||||
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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 | ) | |||||||||
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Balance at December 31, 2011 |
$ | 62,686 | $ | 22,198 | $ | 48,810 | $ | 133,694 | ||||||||
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A summary of other intangible assets as of December 31, 2011 is presented below:
Gross Carrying Value |
Accumulated Amortization |
Net Carrying Value |
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(in thousands) | ||||||||||||
Amortized intangible assets: |
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Customer contracts and relationships |
$ | 3,122 | $ | (1,736 | ) | $ | 1,386 | |||||
Other |
68 | (30 | ) | 38 | ||||||||
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3,190 | (1,766 | ) | 1,424 | |||||||||
Unamortized intangible assets: |
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Business licenses |
460 | — | 460 | |||||||||
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Total |
$ | 3,650 | $ | (1,766 | ) | $ | 1,884 | |||||
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A summary of amortized other intangible assets as of December 31, 2010 is presented below:
Gross Carrying Value |
Accumulated Amortization |
Net Carrying Value |
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(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 | ||||||||
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Total |
$ | 3,364 | $ | (1,801 | ) | $ | 1,563 | |||||
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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 |
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Note 9. Accrued Liabilities and Other
As of December 31 other current liabilities consisted of the following:
2011 | 2010 | |||||||
(in thousands) | ||||||||
Continuing operations: |
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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 | ||||
|
|
|
|
|
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.
|
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:
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 | $ | — | $ | — | ||||||||
|
|
|
|
|
|
|
|
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.
|
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.
|
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.
|
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 | ) | |||||
|
|
|
|
|
|
|
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 | |||||||||
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Net periodic benefit cost |
1,204 | 1,412 | 1,268 | |||||||||
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Other Changes in Plan Assets and Benefits Obligations Recognized in Other Comprehensive Income |
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Net actuarial loss |
1,589 | 1,190 | 2,746 | |||||||||
Reversal of amortization item: |
||||||||||||
Net actuarial loss |
(457 | ) | (572 | ) | (367 | ) | ||||||
Prior service cost |
— | (41 | ) | (44 | ) | |||||||
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Total recognized in other comprehensive income |
1,132 | 577 | 2,335 | |||||||||
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Total recognized in net period benefit cost and other comprehensive income |
$ | 2,336 | $ | 1,989 | $ | 3,603 | ||||||
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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 | |||||||||
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Net periodic benefit cost |
117 | 446 | 53 | |||||||||
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Other Changes in Plan Assets and Benefit Obligations Recognized in Other Comprehensive Income (Loss) |
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Net actuarial loss |
24 | 421 | 3,836 | |||||||||
Prior service credit |
— | (1,197 | ) | (347 | ) | |||||||
Reversal of amortization item: |
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Net actuarial loss |
(533 | ) | (608 | ) | (358 | ) | ||||||
Prior service credit |
1,277 | 1,171 | 1,292 | |||||||||
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Total recognized in other comprehensive income (loss) |
768 | (213 | ) | 4,423 | ||||||||
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Total recognized in net period benefit cost and other comprehensive income (loss) |
$ | 885 | $ | 233 | $ | 4,476 | ||||||
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The following table indicates the funded status of the plans as of December 31:
Funded Plans | Unfunded Plans | Postretirement Benefit Plans |
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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 | ) | ||||||||||||
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Benefit obligation at end of year |
13,938 | 12,853 | 10,883 | 10,352 | 18,667 | 18,987 | ||||||||||||||||||
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Change in plan assets: |
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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 | ) | ||||||||||||
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Fair value of plan assets at end of year |
9,846 | 8,858 | — | — | 2,118 | 2,678 | ||||||||||||||||||
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Funded status at end of year |
$ | (4,092 | ) | $ | (3,995 | ) | $ | (10,883 | ) | $ | (10,352 | ) | $ | (16,549 | ) | $ | (16,309 | ) | ||||||
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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 | ||||||||||||||||||
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Net amount recognized |
$ | 4,092 | $ | 3,995 | $ | 10,883 | $ | 10,352 | $ | 16,549 | $ | 16,309 | ||||||||||||
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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 | ) | ||||||||||
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Subtotal |
8,238 | 3,911 | 3,016 | 15,165 | ||||||||||||
Less tax effect |
(3,146 | ) | (1,493 | ) | (1,153 | ) | (5,792 | ) | ||||||||
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Total |
$ | 5,092 | $ | 2,418 | $ | 1,863 | $ | 9,373 | ||||||||
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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 | ) | ||||||||||
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Subtotal |
7,564 | 3,453 | 2,248 | 13,265 | ||||||||||||
Less tax effect |
(2,889 | ) | (1,320 | ) | (858 | ) | (5,067 | ) | ||||||||
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Total |
$ | 4,675 | $ | 2,133 | $ | 1,390 | $ | 8,198 | ||||||||
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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 | — | ||||||||||||
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$ | 9,846 | $ | 72 | $ | 9,774 | $ | — | |||||||||
Postretirement Benefit Plans: |
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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 | — | — | ||||||||||||
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$ | 2,118 | $ | 222 | $ | 1,896 | $ | — | |||||||||
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Fair Value Measurements at December 31, 2010 | ||||||||||||||||
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 |
$ | 2,591 | $ | — | $ | 2,591 | $ | — | ||||||||
International equity securities |
875 | — | 875 | — | ||||||||||||
Aggregate fixed income securities |
2,108 | — | 2,108 | — | ||||||||||||
Long-term fixed income securities |
2,975 | — | 2,975 | — | ||||||||||||
Cash |
77 | 77 | — | — | ||||||||||||
Other |
232 | — | 232 | — | ||||||||||||
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$ | 8,858 | $ | 77 | $ | 8,781 | $ | — | |||||||||
Postretirement Benefit Plans: |
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U.S. equity securities |
$ | 362 | $ | — | $ | 362 | $ | — | ||||||||
International equity securities |
121 | — | 121 | — | ||||||||||||
Aggregate fixed income securities |
1,294 | — | 1,294 | — | ||||||||||||
Long-term fixed income securities |
589 | — | 589 | — | ||||||||||||
Cash |
312 | 312 | — | — | ||||||||||||
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$ | 2,678 | $ | 312 | $ | 2,366 | $ | — | |||||||||
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Viad employs a total return investment approach whereby a mix of equities and fixed income securities is used to maximize the long-term return of plan assets for a prudent level of risk. Risk tolerance is established through careful consideration of plan liabilities, plan funded status, and corporate financial condition. The investment portfolio contains a diversified blend of equity and fixed income securities. Furthermore, equity securities are diversified across U.S. and non-U.S. stocks, as well as growth and value. Investment risk is measured and monitored on an ongoing basis through quarterly investment portfolio reviews and annual liability measurements.
Viad utilizes a building-block approach in determining the long-term expected rate of return on plan assets. Historical markets are studied and long-term historical relationships between equity securities and fixed income securities are preserved consistent with the widely accepted capital market principle that assets with higher volatility generate a greater return over the long run. Current market factors such as inflation and interest rates are evaluated before long-term capital market assumptions are determined. The long-term portfolio return also considers diversification and rebalancing. Peer data and historical returns are reviewed relative to Viad’s assumed rates for reasonableness and appropriateness.
The following pension and postretirement benefit payments, which reflect expected future service, as appropriate, are expected to be paid, as well as the Medicare Part D subsidy expected to be received:
Funded Plans |
Unfunded Plans |
Postretirement Benefit Plans |
Medicare Part D Subsidy Receipts |
|||||||||||||
(in thousands) | ||||||||||||||||
2012 |
$ | 750 | $ | 734 | $ | 1,810 | $ | 328 | ||||||||
2013 |
785 | 827 | 1,856 | 334 | ||||||||||||
2014 |
776 | 805 | 1,848 | 339 | ||||||||||||
2015 |
802 | 791 | 1,834 | 341 | ||||||||||||
2016 |
751 | 767 | 1,817 | 339 | ||||||||||||
2017-2021 |
4,184 | 4,173 | 8,365 | 1,606 |
Foreign Pension Plans. Certain of Viad’s foreign operations also maintain trusteed defined benefit pension plans covering certain employees which are funded by the companies and unfunded defined benefit pension plans providing supplemental benefits to select management employees. These plans use traditional defined benefit formulas based on years of service and final average compensation. Funding policies provide that payments to defined benefit pension trusts shall be at least equal to the minimum funding required by applicable regulations. The components of net periodic benefit cost and other amounts recognized in other comprehensive income included the following:
2011 | 2010 | 2009 | ||||||||||
(in thousands) | ||||||||||||
Net Periodic Benefit Cost | ||||||||||||
Service cost |
$ | 366 | $ | 304 | $ | 269 | ||||||
Interest cost |
729 | 780 | 748 | |||||||||
Expected return on plan assets |
(665 | ) | (597 | ) | (527 | ) | ||||||
Recognized net actuarial loss |
73 | 54 | 11 | |||||||||
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Net periodic benefit cost |
503 | 541 | 501 | |||||||||
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|
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Other Changes in Plan Assets and Benefit Obligations Recognized in Other Comprehensive Income |
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Net actuarial loss |
1,936 | 299 | 1,177 | |||||||||
Reversal of amortization of net actuarial loss |
(73 | ) | (54 | ) | (11 | ) | ||||||
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Total recognized in other comprehensive income |
1,863 | 245 | 1,166 | |||||||||
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Total recognized in net periodic benefit cost and other comprehensive income |
$ | 2,366 | $ | 786 | $ | 1,667 | ||||||
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The following table represents the funded status of the plans as of December 31:
Funded Plans | Unfunded Plans | |||||||||||||||
2011 | 2010 | 2011 | 2010 | |||||||||||||
(in thousands) | ||||||||||||||||
Change in benefit obligation: |
||||||||||||||||
Benefit obligation at beginning of year |
$ | 11,453 | $ | 11,308 | $ | 2,929 | $ | 2,905 | ||||||||
Service cost |
366 | 304 | — | — | ||||||||||||
Interest cost |
583 | 632 | 146 | 148 | ||||||||||||
Actuarial adjustments |
1,421 | 632 | 173 | 110 | ||||||||||||
Benefits paid |
(351 | ) | (2,014 | ) | (231 | ) | (220 | ) | ||||||||
Translation adjustment |
(331 | ) | 591 | (78 | ) | (14 | ) | |||||||||
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Benefit obligation at end of year |
13,141 | 11,453 | 2,939 | 2,929 | ||||||||||||
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Change in plan assets: |
||||||||||||||||
Fair value of plan assets at beginning of year |
10,834 | 10,165 | — | — | ||||||||||||
Actual return on plan assets |
100 | 1,071 | — | — | ||||||||||||
Company contributions |
709 | 1,059 | 231 | 220 | ||||||||||||
Benefits paid |
(351 | ) | (2,014 | ) | (231 | ) | (220 | ) | ||||||||
Translation adjustment |
(264 | ) | 553 | — | ||||||||||||
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Fair value of plan assets at end of year |
11,028 | 10,834 | — | — | ||||||||||||
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Funded status at end of year |
$ | (2,113 | ) | $ | (619 | ) | $ | (2,939 | ) | $ | (2,929 | ) | ||||
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As of December 31, 2011 and 2010, the foreign funded plans had liabilities of $2.1 million and $619,000, respectively. The unfunded plans had liabilities of $2.9 million at both December 31, 2011 and 2010. These amounts are each included in the consolidated balance sheets under the caption “Pension and postretirement benefits.”
The net actuarial losses for the foreign funded plans as of December 31, 2011 and 2010 were $4.6 million ($3.4 million after-tax) and $2.9 million ($2.1 million after-tax), respectively. The net actuarial losses as of December 31, 2011 and 2010 for the foreign unfunded plans were $269,000 ($199,000 after-tax) and $111,000 ($82,000 after-tax), respectively.
The fair value of the foreign pension plans’ assets by asset category were as follows:
Fair Value Measurements at December 31, 2011 | ||||||||||||||||
Asset Category |
Total | Quoted Prices in Active Markets (Level 1) |
Significant Other Observable Inputs (Level 2) |
Significant Unobserved Inputs (Level 3) |
||||||||||||
(in thousands) | ||||||||||||||||
U.S. equity securities |
$ | 977 | $ | 977 | $ | — | $ | — | ||||||||
International equity securities |
3,995 | 3,639 | 356 | — | ||||||||||||
Canadian fixed income securities |
5,975 | 5,975 | — | — | ||||||||||||
Other |
81 | 81 | — | — | ||||||||||||
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$ | 11,028 | $ | 10,672 | $ | 356 | $ | — | |||||||||
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Fair Value Measurements at December 31, 2010 | ||||||||||||||||
Asset Category |
Total | Quoted Prices in Active Markets (Level 1) |
Significant Other Observable Inputs (Level 2) |
Significant Unobserved Inputs (Level 3) |
||||||||||||
(in thousands) | ||||||||||||||||
U.S. equity securities |
$ | 1,024 | $ | 1,024 | $ | — | $ | — | ||||||||
International equity securities |
4,317 | 3,957 | 360 | — | ||||||||||||
Canadian fixed income securities |
5,469 | 5,469 | — | — | ||||||||||||
Other |
24 | 24 | — | — | ||||||||||||
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$ | 10,834 | $ | 10,474 | $ | 360 | $ | — | |||||||||
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The following payments, which reflect expected future service, as appropriate, are expected to be paid:
Funded Plans |
Unfunded Plans |
|||||||
(in thousands) | ||||||||
2012 |
$ | 326 | $ | 219 | ||||
2013 |
445 | 218 | ||||||
2014 |
475 | 218 | ||||||
2015 |
597 | 217 | ||||||
2016 |
601 | 216 | ||||||
2017-2021 |
3,316 | 1,066 |
Information for Pension Plans with an Accumulated Benefit Obligation in Excess of Plan Assets as of December 31 were as follows:
Domestic Plans | ||||||||||||||||
Funded Plans | Unfunded Plans | |||||||||||||||
2011 | 2010 | 2011 | 2010 | |||||||||||||
(in thousands) | ||||||||||||||||
Projected benefit obligation |
$ | 13,938 | $ | 12,853 | $ | 10,883 | $ | 10,352 | ||||||||
Accumulated benefit obligation |
13,938 | 12,853 | 10,589 | 10,064 | ||||||||||||
Fair value of plan assets |
9,846 | 8,858 | — | — |
Foreign Plans | ||||||||||||||||
Funded Plans | Unfunded Plans | |||||||||||||||
2011 | 2010 | 2011 | 2010 | |||||||||||||
(in thousands) | ||||||||||||||||
Projected benefit obligation |
$ | 13,141 | $ | 11,453 | $ | 2,939 | $ | 2,929 | ||||||||
Accumulated benefit obligation |
12,049 | 10,608 | 2,939 | 2,929 | ||||||||||||
Fair value of plan assets |
11,028 | 10,834 | — | — |
Contributions. In aggregate for both the domestic and foreign plans, the Company anticipates contributing $1.6 million to the funded pension plans, $952,000 to the unfunded pension plans and $450,000 to the postretirement benefit plans in 2012.
Weighted-Average Assumptions. Weighted-average assumptions used to determine benefit obligations as of December 31 were as follows:
Domestic Plans | ||||||||||||||||||||||||||||||||
Funded Plans | Unfunded Plans | Postretirement Benefit Plans |
Foreign Plans | |||||||||||||||||||||||||||||
2011 | 2010 | 2011 | 2010 | 2011 | 2010 | 2011 | 2010 | |||||||||||||||||||||||||
Discount rate |
4.92 | % | 5.45 | % | 4.75 | % | 5.10 | % | 4.70 | % | 5.10 | % | 4.60 | % | 5.10 | % | ||||||||||||||||
Rate of compensation increase |
N/A | N/A | 4.50 | % | 4.50 | % | N/A | N/A | 3.00 | % | 3.00 | % |
Weighted-average assumptions used to determine net periodic benefit cost were as follows:
Domestic Plans | ||||||||||||||||||||||||||||||||
Funded Plans | Unfunded Plans | Postretirement Benefit Plans |
Foreign Plans | |||||||||||||||||||||||||||||
2011 | 2010 | 2011 | 2010 | 2011 | 2010 | 2011 | 2010 | |||||||||||||||||||||||||
Discount rate |
5.45 | % | 5.90 | % | 5.10 | % | 5.70 | % | 5.10 | % | 5.60 | % | 5.10 | % | 5.60 | % | ||||||||||||||||
Expected long-term return on plan assets |
6.35 | % | 6.35 | % | N/A | N/A | 6.10 | % | 6.10 | % | 5.50 | % | 5.75 | % | ||||||||||||||||||
Rate of compensation increase |
N/A | N/A | 4.50 | % | 4.50 | % | N/A | N/A | 3.00 | % | 3.00 | % |
The assumed health care cost trend rate used in measuring the December 31, 2011 accumulated postretirement benefit obligation was nine percent, declining one-half percent each year to the ultimate rate of five percent by the year 2019 and remaining at that level thereafter. The assumed health care cost trend rate used in measuring the December 31, 2010 accumulated postretirement benefit obligation was nine and one-half percent, declining one-half percent each year to the ultimate rate of five percent by the year 2019 and remaining at that level thereafter.
A one-percentage-point increase in the assumed health care cost trend rate for each year would increase the accumulated postretirement benefit obligation as of December 31, 2011 by approximately $1.7 million and the total of service and interest cost components by approximately $112,000. A one-percentage-point decrease in the assumed health care cost trend rate for each year would decrease the accumulated postretirement benefit obligation as of December 31, 2011 by approximately $1.5 million and the total of service and interest cost components by approximately $93,000.
Multi-employer Plans. Viad contributes to defined benefit pension plans under the terms of collective-bargaining agreements that cover its union-represented employees. The financial risks of participating in these multi-employer pension plans generally include the fact that assets contributed to the plan by one employer may be used to provide benefits to employees of other participating employers. Furthermore, if a participating employer ceases to contribute to the plan, the unfunded obligations of the plan may be borne by the remaining participating employers. In addition, if Viad were to discontinue its participation in some of its multi-employer pension plans, the Company may be required to pay those plans a withdrawal liability amount based on the underfunded status of the plan. Viad also contributes to defined contribution plans pursuant to its collective-bargaining agreements, which are generally not subject to the funding risks inherent in defined benefit pension plans. The overall level of Viad’s contributions to its multi-employer plans may significantly vary from year-to-year based on the demand for union-represented labor to support the Company’s operations. Viad does not have any minimum contribution requirements for future periods pursuant to its collective-bargaining agreements for individually significant multi-employer plans. Contributions to multi-employer pension plans totaled $19.6 million, $15.3 million and $15.7 million in 2011, 2010 and 2009, respectively.
Viad’s participation in multi-employer pension plans for the year ended December 31, 2011, is outlined in the following table. Unless otherwise noted, the most recent Pension Protection Act zone status available in 2011 and 2010 relates to the plan’s year end as of December 31, 2010 and 2009, respectively, and is based on information received from the plan. Among other factors, plans in the red zone are generally less than 65 percent funded, plans in the yellow zone are less than 80 percent funded, and plans in the green zone are at least 80 percent funded. The “FIP/RP Status Pending/Implemented” column indicates plans for which a financial improvement plan or a rehabilitation plan is either pending or has been implemented.
Pension Fund |
EIN | Plan No. |
Pension Protection Act Zone Status |
FIP/RP Status Pending/ Implemented |
Viad Contributions | Surcharge Paid |
Expiration Date of Collective- Bargaining Agreement(s) |
|||||||||||||||||||||||||||||
2011 | 2010 | 2011 | 2010 | 2009 | ||||||||||||||||||||||||||||||||
(in thousands) | ||||||||||||||||||||||||||||||||||||
Western Conference of Teamsters Pension Plan |
91-6145047 | 001 | Green | Green | No | $ | 5,720 | $ | 4,551 | $ | 4,998 | No | |
3/31/12 to 5/31/14 |
|
|||||||||||||||||||||
Southern California Local 831 - Employer Pension Fund (1) |
95-6376874 | 001 | Green | Green | No | 2,232 | 1,870 | 1,710 | No | 8/31/2014 | ||||||||||||||||||||||||||
National Electrical Benefit Fund |
53-0181657 | 001 | Green | Green | No | 1,691 | 1,313 | 1,260 | No | |
6/16/12 to 6/3/14 |
|
||||||||||||||||||||||||
Chicago Regional Council of Carpenters Pension Fund (2) |
36-6130207 | 001 | Yellow | Yellow | Yes | 1,411 | 1,018 | 908 | No | |
5/31/13 to 5/31/14 |
|
||||||||||||||||||||||||
Southwest Carpenters Pension Trust |
95-6042875 | 001 | Green | Green | No | 1,031 | 867 | 714 | No | 8/31/2014 | ||||||||||||||||||||||||||
Central States, Southeast and Southwest Areas Pension Plan |
36-6044243 | 001 | Red | Red | Yes | 725 | 717 | 702 | No | |
7/31/12 to 12/31/13 |
|
||||||||||||||||||||||||
Steelworkers Pension Trust |
23-6645808 | 499 | Green | Green | No | 422 | 425 | 403 | No | |
2/28/12 to 6/30/14 |
|
||||||||||||||||||||||||
Machinery Movers Riggers & Mach Erectors Local 136 Supplemental Retirement Plan (1) (2) |
36-1416355 | 001 | Red | Red | Yes | 386 | 710 | 292 | No | 6/30/2014 | ||||||||||||||||||||||||||
New England Teamsters & Trucking Industry Pension (3) |
04-6372430 | 001 | Red | Red | Yes | 339 | 290 | 248 | No | 3/31/2012 | ||||||||||||||||||||||||||
All other funds (4) |
3,752 | 2,119 | 3,152 | |||||||||||||||||||||||||||||||||
|
|
|
|
|
|
|||||||||||||||||||||||||||||||
Total contributions to defined benefit plans |
17,709 | 13,880 | 14,387 | |||||||||||||||||||||||||||||||||
Total contributions to other plans |
1,892 | 1,469 | 1,317 | |||||||||||||||||||||||||||||||||
|
|
|
|
|
|
|||||||||||||||||||||||||||||||
Total contributions to multi-employer plans |
$ | 19,601 | $ | 15,349 | $ | 15,704 | ||||||||||||||||||||||||||||||
|
|
|
|
|
|
(1) | The Company contributed more than 5 percent of total plan contributions for the 2010 and 2009 plan years based on the plans’ Forms 5500. |
(2) | Zone status as of 6/30/10 and 6/30/09. |
(3) | Zone status as of 9/30/10 and 9/30/09. |
(4) | Represents participation in 39 pension funds during 2011. |
Other Employee Benefits. Costs of the 401(k) Plan and other benefit plans totaled $1.3 million, $1.6 million and $2.0 million in 2011, 2010 and 2009, respectively.
|
Note 17. Restructuring Charges
Marketing & Events Group Consolidation
Beginning in 2009, Viad commenced certain restructuring actions designed to reduce the Company’s cost structure primarily within the Marketing & Events U.S. segment, and to a lesser extent in the Marketing & Events International segment. The Company implemented a strategic reorganization plan in order to consolidate the separate business units within the Marketing & Events U.S. segment. The Company also consolidated facilities and streamlined its operations in the United Kingdom and Germany. As a result, the Company recorded restructuring charges in 2010 and 2009, primarily consisting of severance and related benefits as a result of workforce reductions; and charges related to the consolidation and downsizing of facilities representing the remaining operating lease obligations (net of estimated sublease income) and related costs. During 2011, the Company recorded restructuring charges related to leased facility consolidations and optimization of the Marketing & Events U.S. service delivery network. The Company expects additional restructuring charges during 2012 primarily related to facility consolidations.
Other Restructurings
The Company has recorded restructuring charges in connection with the consolidation of certain support functions at its corporate headquarters, and certain reorganization activities within the Travel & Recreation Group. These charges primarily consist of severance and related benefits due to headcount reductions. In addition, the Company had recorded significant restructuring charges in past years, primarily within the Marketing & Events U.S. segment. These legacy restructuring liabilities represent the remaining contractual lease obligations on certain facilities, and are subject to periodic adjustments as a result of changes in estimated sublease activity and other factors. These adjustments can result in reversals of previously recorded amounts, or additional charges in some cases.
The table below represents a reconciliation of beginning and ending liability balances by major restructuring activity:
Marketing & Events
Group Consolidation |
Other Restructurings | |||||||||||||||||||
Severance & Employee Benefits |
Facilities | Severance & Employee Benefits |
Facilities | Total | ||||||||||||||||
(in thousands) | ||||||||||||||||||||
Balance at January 1, 2009 |
$ | — | $ | — | $ | 201 | $ | 6,343 | $ | 6,544 | ||||||||||
Restructuring charges (recoveries) |
8,115 | 7,104 | — | (1,165 | ) | 14,054 | ||||||||||||||
Cash payments |
(5,043 | ) | (525 | ) | (201 | ) | (1,818 | ) | (7,587 | ) | ||||||||||
Adjustment to liability |
(739 | ) | (284 | ) | — | (333 | ) | (1,356 | ) | |||||||||||
|
|
|
|
|
|
|
|
|
|
|||||||||||
Balance at December 31, 2009 |
2,333 | 6,295 | — | 3,027 | 11,655 | |||||||||||||||
Restructuring charges (recoveries) |
2,637 | 1,180 | 542 | (137 | ) | 4,222 | ||||||||||||||
Cash payments |
(3,387 | ) | (2,164 | ) | (292 | ) | (875 | ) | (6,718 | ) | ||||||||||
Adjustment to liability |
(466 | ) | (258 | ) | (53 | ) | (373 | ) | (1,150 | ) | ||||||||||
Foreign currency translation adjustment |
(11 | ) | (2 | ) | — | — | (13 | ) | ||||||||||||
|
|
|
|
|
|
|
|
|
|
|||||||||||
Balance at December 31, 2010 |
1,106 | 5,051 | 197 | 1,642 | 7,996 | |||||||||||||||
Restructuring charges |
1,182 | 2,519 | 26 | 55 | 3,782 | |||||||||||||||
Cash payments |
(1,175 | ) | (2,356 | ) | (199 | ) | (158 | ) | (3,888 | ) | ||||||||||
Adjustment to liability |
(294 | ) | (397 | ) | — | (263 | ) | (954 | ) | |||||||||||
Foreign currency translation adjustment |
12 | 2 | — | — | 14 | |||||||||||||||
|
|
|
|
|
|
|
|
|
|
|||||||||||
Balance at December 31, 2011 |
$ | 831 | $ | 4,819 | $ | 24 | $ | 1,276 | $ | 6,950 | ||||||||||
|
|
|
|
|
|
|
|
|
|
As of December 31, 2011, the liability of $831,000 and $24,000 related to severance and employee benefits in the Marketing & Events Group consolidation and other restructurings, respectively, is expected to be paid by the end of 2012. Additionally, as of December 31, 2011, the liability of $4.8 million and $1.3 million related to facilities in the Marketing & Events Group consolidation and other restructurings, respectively, relates to future lease payment obligations to be made over the remaining lease terms. See Note 20 for information regarding restructuring charges by segment.
|
Note 18. Leases and Other
Viad has entered into operating leases for the use of certain of its offices, equipment and other facilities. These leases expire over periods up to 40 years. Leases which expire are generally renewed or replaced by similar leases. Some leases contain scheduled rental increases accounted for on a straight-line basis.
As of December 31, 2011, Viad’s future minimum rental payments and related sublease rentals receivable with respect to non-cancelable operating leases with terms in excess of one year were as follows:
Rental Payments |
Receivable Under Subleases |
|||||||
(in thousands) | ||||||||
2012 |
$ | 16,699 | $ | 1,902 | ||||
2013 |
15,911 | 1,146 | ||||||
2014 |
14,285 | 845 | ||||||
2015 |
7,738 | 613 | ||||||
2016 |
4,871 | 358 | ||||||
Thereafter |
12,793 | 1,247 | ||||||
|
|
|
|
|||||
Total |
$ | 72,297 | $ | 6,111 | ||||
|
|
|
|
Net rent expense under operating leases consisted of the following:
2011 | 2010 | 2009 | ||||||||||
(in thousands) | ||||||||||||
Minimum rentals |
$ | 30,860 | $ | 29,072 | $ | 31,082 | ||||||
Sublease rentals |
(6,497 | ) | (5,704 | ) | (6,193 | ) | ||||||
|
|
|
|
|
|
|||||||
Total rentals, net |
$ | 24,363 | $ | 23,368 | $ | 24,889 | ||||||
|
|
|
|
|
|
The aggregate annual maturities and the related amounts representing interest on capital lease obligations are included in Note 10.
In addition, as of December 31, 2011, the Company had aggregate purchase obligations of $24.0 million related to various licensing agreements, consulting and other contracted services.
|
Note 19. Litigation, Claims, Contingencies and Other
Viad and certain of its subsidiaries are plaintiffs or defendants to various actions, proceedings and pending claims, some of which involve, or may involve, compensatory, punitive or other damages. Litigation is subject to many uncertainties and it is possible that some of the legal actions, proceedings or claims could be decided against Viad. Although the amount of liability as of December 31, 2011 with respect to these matters is not ascertainable, Viad believes that any resulting liability, after taking into consideration amounts already provided for and insurance coverage, will not have a material effect on Viad’s business, financial position or results of operations.
Viad is subject to various U.S. federal, state and foreign laws and regulations governing the prevention of pollution and the protection of the environment in the jurisdictions in which Viad has or had operations. If the Company has failed to comply with these environmental laws and regulations, civil and criminal penalties could be imposed and Viad could become subject to regulatory enforcement actions in the form of injunctions and cease and desist orders. As is the case with many companies, Viad also faces exposure to actual or potential claims and lawsuits involving environmental matters relating to its past operations. Although it is a party to certain environmental disputes, Viad believes that any resulting liabilities, after taking into consideration amounts already provided for and insurance coverage, will not have a material effect on the Company’s financial position or results of operations. As of December 31, 2011 and 2010, Viad had recorded environmental remediation liabilities of $5.8 million and $6.1 million, respectively, related to previously sold operations.
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 Viad’s subsidiary operations. The Company would generally be required to make payments to the respective third parties under these guarantees in the event that the related subsidiary could not meet its own payment obligations. The maximum potential amount of future payments that Viad would be required to make under all guarantees existing as of December 31, 2011 would be $28.5 million. These guarantees relate to leased facilities expiring through October 2017. There are no recourse provisions that would enable Viad to recover from third parties any payments made under the guarantees. Furthermore, there are no collateral or similar arrangements whereby Viad could recover payments.
A significant portion of Viad’s employees are unionized and the Company is a party to approximately 100 collective-bargaining agreements, with approximately one-third requiring renegotiation each year. As of December 31, 2011, approximately 34 percent of Viad’s regular full-time employees are covered by collective-bargaining agreements. If the Company were unable to reach an agreement with a union during the collective-bargaining process, the union may call for a strike or work stoppage, which may, under certain circumstances, adversely impact the Company’s businesses and results of operations. Viad believes that relations with its employees are satisfactory and that collective-bargaining agreements expiring in 2012 will be renegotiated in the ordinary course of business without having a material adverse effect on Viad’s operations.
Viad’s businesses contribute to various multi-employer pension plans based on obligations arising under collective bargaining agreements covering its union-represented employees. Viad’s contributions to these plans in 2011, 2010 and 2009 totaled $19.6 million, $15.3 million and $15.7 million, respectively. Based upon the information available to Viad from plan administrators, management believes that several of these multi-employer plans are underfunded. The Pension Protection Act of 2006 requires pension plans underfunded at certain levels to reduce, over defined time periods, the underfunded status. In addition, under current laws, the termination of a plan, or a voluntary withdrawal from a plan by Viad, or a shrinking contribution base to a plan as a result of the insolvency or withdrawal of other contributing employers to such plan, would require Viad to make payments to such plan for its proportionate share of the plan’s unfunded vested liabilities. As of December 31, 2011, the amount of additional funding, if any, that Viad would be required to make related to multi-employer pension plans is not ascertainable.
Glacier Park operates the concession portion of its business under a concession contract with the U.S. National Park Service (the “Park Service”) for Glacier National Park. Glacier Park’s original 25-year concession contract with the Park Service that was to expire on December 31, 2005, has been extended for seven one-year periods and now expires on December 31, 2012. The Park Service, in its sole discretion, may continue extending Glacier Park’s concession contract in one-year increments beyond 2012. When this contract ultimately expires, Glacier Park will have the opportunity to bid on a new concession contract. If Glacier Park does secure a new contract, possible terms would be for 10, 15 or 20 years. Glacier Park generated approximately 45 percent of its 2011 revenue through its concession contract for services provided within Glacier National Park. If a new concessionaire is selected by the Park Service, Glacier Park’s remaining business would consist of its operations at Waterton Lakes National Park, Alberta, Canada; East Glacier, Montana; Whitefish, Montana and St. Mary, Montana. In such a circumstance, Glacier Park would be entitled to an amount equal to its “possessory interest,” which generally means the value of the structures acquired or constructed, fixtures installed and improvements made to the concession property at Glacier National Park during the term of the concession contract. Glacier Park owns Glacier Park Lodge in East Glacier, Montana; Grouse Mountain Lodge in Whitefish, Montana and St. Mary Lodge & Resort in St. Mary, Montana. Glacier Park also owns the Prince of Wales Hotel in Waterton Lakes National Park, which is operated under a 42-year ground lease with the Canadian government running through January 31, 2052. Glacier Park generated 19 percent of the Travel & Recreation Group’s 2011 segment operating income.
|
Note 20. Segment Information
Viad measures profit and performance of its operations on the basis of segment operating income which excludes restructuring charges and recoveries and impairment charges and recoveries. Intersegment sales are eliminated in consolidation and intersegment transfers are not significant. Corporate activities include expenses not allocated to operations. Depreciation and amortization, and share-based compensation expense are the only significant non-cash items for the reportable segments. Disclosures regarding Viad’s reportable segments with reconciliations to consolidated totals are as follows:
2011 | 2010 | 2009 | ||||||||||
(in thousands) | ||||||||||||
Revenues: |
||||||||||||
Marketing & Events Group: |
||||||||||||
U.S. |
$ | 631,360 | $ | 570,978 | $ | 568,432 | ||||||
International |
218,639 | 197,787 | 172,648 | |||||||||
Intersegment eliminations |
(9,449 | ) | (12,281 | ) | (10,578 | ) | ||||||
|
|
|
|
|
|
|||||||
840,550 | 756,484 | 730,502 | ||||||||||
Travel & Recreation Group |
101,814 | 88,277 | 75,302 | |||||||||
|
|
|
|
|
|
|||||||
$ | 942,364 | $ | 844,761 | $ | 805,804 | |||||||
|
|
|
|
|
|
|||||||
Segment operating income (loss): |
||||||||||||
Marketing & Events Group: |
||||||||||||
U.S. |
$ | (6,269 | ) | $ | (15,217 | ) | $ | (22,095 | ) | |||
International |
11,449 | 10,088 | 9,226 | |||||||||
|
|
|
|
|
|
|||||||
5,180 | (5,129 | ) | (12,869 | ) | ||||||||
Travel & Recreation Group |
20,196 | 19,885 | 17,057 | |||||||||
|
|
|
|
|
|
|||||||
25,376 | 14,756 | 4,188 | ||||||||||
Corporate activities |
(7,682 | ) | (6,422 | ) | (5,607 | ) | ||||||
|
|
|
|
|
|
|||||||
17,694 | 8,334 | (1,419 | ) | |||||||||
Interest income |
779 | 584 | 579 | |||||||||
Interest expense |
(1,511 | ) | (1,835 | ) | (1,690 | ) | ||||||
Restructuring charges: |
||||||||||||
Marketing & Events U.S. |
(3,756 | ) | (3,232 | ) | (11,980 | ) | ||||||
Marketing & Events International |
— | (448 | ) | (1,300 | ) | |||||||
Travel & Recreation Group |
— | (235 | ) | — | ||||||||
Corporate |
(26 | ) | (307 | ) | (774 | ) | ||||||
Impairment losses: |
||||||||||||
Marketing & Events U.S. |
— | — | (90,691 | ) | ||||||||
Marketing & Events International |
— | — | (23,318 | ) | ||||||||
Travel & Recreation Group |
— | (302 | ) | (2,854 | ) | |||||||
|
|
|
|
|
|
|||||||
Income (loss) from continuing operations before income taxes |
$ | 13,180 | $ | 2,559 | $ | (133,447 | ) | |||||
|
|
|
|
|
|
2011 | 2010 | 2009 | ||||||||||
(in thousands) | ||||||||||||
Assets: |
||||||||||||
Marketing & Events Group: |
||||||||||||
U.S. |
$ | 213,843 | $ | 235,965 | $ | 245,104 | ||||||
International |
96,996 | 83,441 | 78,601 | |||||||||
Travel & Recreation Group |
194,278 | 157,562 | 147,090 | |||||||||
Corporate and other |
112,711 | 139,535 | 138,391 | |||||||||
|
|
|
|
|
|
|||||||
$ | 617,828 | $ | 616,503 | $ | 609,186 | |||||||
|
|
|
|
|
|
|||||||
Depreciation and amortization: |
||||||||||||
Marketing & Events Group: |
||||||||||||
U.S. |
$ | 17,247 | $ | 17,887 | $ | 18,446 | ||||||
International |
5,027 | 4,486 | 4,103 | |||||||||
Travel & Recreation Group |
6,674 | 5,648 | 5,464 | |||||||||
Corporate and other |
178 | 231 | 256 | |||||||||
|
|
|
|
|
|
|||||||
$ | 29,126 | $ | 28,252 | $ | 28,269 | |||||||
|
|
|
|
|
|
|||||||
Capital expenditures: |
||||||||||||
Marketing & Events Group: |
||||||||||||
U.S. |
$ | 11,692 | $ | 9,050 | $ | 14,169 | ||||||
International |
5,635 | 4,776 | 4,842 | |||||||||
Travel & Recreation Group |
3,271 | 3,214 | 2,304 | |||||||||
Corporate and other |
940 | — | — | |||||||||
|
|
|
|
|
|
|||||||
$ | 21,538 | $ | 17,040 | $ | 21,315 | |||||||
|
|
|
|
|
|
Products and Services. Viad’s revenues for each group of products and services are presented in the following table:
2011 | 2010 | 2009 | ||||||||||
(in thousands) | ||||||||||||
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 | ||||||
|
|
|
|
|
|
Geographic Areas. Viad’s foreign operations are located principally in Canada, the United Kingdom, Germany and the United Arab Emirates. Marketing & Events Group revenues are designated as domestic or foreign based on the originating location of the product or service. Long-lived assets are attributed to domestic or foreign based principally on the physical location of the assets. Long-lived assets consist of “Property and equipment, net” and “Other investments and assets.” The table below presents the financial information by major geographic area:
2011 | 2010 | 2009 | ||||||||||
(in thousands) | ||||||||||||
Revenues: |
||||||||||||
United States |
$ | 660,998 | $ | 590,163 | $ | 589,344 | ||||||
Canada |
140,374 | 136,066 | 106,093 | |||||||||
United Kingdom |
124,208 | 93,092 | 90,429 | |||||||||
Other international |
16,784 | 25,440 | 19,938 | |||||||||
|
|
|
|
|
|
|||||||
Total revenues |
$ | 942,364 | $ | 844,761 | $ | 805,804 | ||||||
|
|
|
|
|
|
|||||||
Long-lived assets: |
||||||||||||
United States |
$ | 145,217 | $ | 117,751 | $ | 122,149 | ||||||
Canada |
47,624 | 51,182 | 50,757 | |||||||||
United Kingdom |
8,165 | 8,295 | 8,602 | |||||||||
Other international |
3,858 | 3,481 | 2,561 | |||||||||
|
|
|
|
|
|
|||||||
Total long-lived assets |
$ | 204,864 | $ | 180,709 | $ | 184,069 | ||||||
|
|
|
|
|
|
|
Note 21. Common Stock Repurchases
Viad has announced its intent to repurchase shares of the Company’s common stock from time to time at prevailing market prices. During 2011 and 2010, Viad repurchased 250,760 shares for $4.6 million and 356,300 shares for $6.3 million, respectively, and did not repurchase any shares in 2009. As of December 31, 2011, 53,621 shares remain available for repurchase from the announced authorization. Additionally, 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 share-based awards.
|
Note 22. Discontinued Operations
In 2011, 2010 and 2009, Viad recorded income from discontinued operations of $451,000, $262,000 and $679,000, respectively, related to the reversal of certain liabilities associated with previously sold operations.
|
Note 23. Condensed Consolidated Quarterly Results (Unaudited)
The following quarterly financial information was derived from the Company’s interim financial statements and was prepared in a manner consistent with the annual financial statements and includes all adjustments (consisting of normal recurring accruals) considered necessary for a fair presentation.
First | Second | Third | Fourth | |||||||||||||
Quarter | Quarter | Quarter | Quarter | |||||||||||||
2011 | (in thousands, except per share data) | |||||||||||||||
Revenues: |
$ | 290,098 | $ | 238,692 | $ | 216,169 | $ | 197,405 | ||||||||
|
|
|
|
|
|
|
|
|||||||||
Operating income (loss): |
||||||||||||||||
Ongoing operations (1) |
$ | 17,259 | $ | 9,862 | $ | 5,412 | $ | (7,157 | ) | |||||||
Corporate activities |
(1,271 | ) | (1,576 | ) | (2,356 | ) | (2,479 | ) | ||||||||
Restructuring charges (2) |
(269 | ) | (1,206 | ) | (75 | ) | (2,232 | ) | ||||||||
|
|
|
|
|
|
|
|
|||||||||
Operating income (loss) |
$ | 15,719 | $ | 7,080 | $ | 2,981 | $ | (11,868 | ) | |||||||
|
|
|
|
|
|
|
|
|||||||||
Income (loss) from continuing operations attributable to Viad |
$ | 9,787 | $ | 4,485 | $ | 1,245 | $ | (6,758 | ) | |||||||
Net income (loss) attributable to Viad |
$ | 9,787 | $ | 4,485 | $ | 1,245 | $ | (6,307 | ) | |||||||
Diluted income (loss) per common share (4) : |
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Income (loss) from continuing operations attributable to Viad |
$ | 0.48 | $ | 0.22 | $ | 0.06 | $ | (0.35 | ) | |||||||
Net income (loss) attributable to Viad |
$ | 0.48 | $ | 0.22 | $ | 0.06 | $ | (0.32 | ) | |||||||
Basic income (loss) per common share (4) : |
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Income (loss) from continuing operations attributable to Viad |
$ | 0.48 | $ | 0.22 | $ | 0.06 | $ | (0.35 | ) | |||||||
Net income (loss) attributable to Viad |
$ | 0.48 | $ | 0.22 | $ | 0.06 | $ | (0.32 | ) |
First | Second | Third | Fourth | |||||||||||||
Quarter | Quarter | Quarter | Quarter | |||||||||||||
2010 | (in thousands, except per share data) | |||||||||||||||
Revenues: |
$ | 224,353 | $ | 218,299 | $ | 215,144 | $ | 186,965 | ||||||||
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Operating income (loss): |
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Ongoing operations (1) |
$ | 199 | $ | 7,725 | $ | 9,919 | $ | (3,087 | ) | |||||||
Corporate activities |
(644 | ) | (2,058 | ) | (1,749 | ) | (1,971 | ) | ||||||||
Restructuring charges (2) |
(2,053 | ) | (559 | ) | (183 | ) | (1,427 | ) | ||||||||
Impairment losses (3) |
— | — | — | (302 | ) | |||||||||||
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Operating income (loss) |
$ | (2,498 | ) | $ | 5,108 | $ | 7,987 | $ | (6,787 | ) | ||||||
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Income (loss) from continuing operations attributable to Viad |
$ | (2,982 | ) | $ | 3,028 | $ | 4,796 | $ | (4,661 | ) | ||||||
Net income (loss) attributable to Viad |
$ | (2,982 | ) | $ | 3,028 | $ | 4,796 | $ | (4,399 | ) | ||||||
Diluted income (loss) per common share (4) : |
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Income (loss) from continuing operations attributable to Viad |
$ | (0.15 | ) | $ | 0.15 | $ | 0.23 | $ | (0.24 | ) | ||||||
Net income (loss) attributable to Viad |
$ | (0.15 | ) | $ | 0.15 | $ | 0.23 | $ | (0.22 | ) | ||||||
Basic income (loss) per common share (4) : |
||||||||||||||||
Income (loss) from continuing operations attributable to Viad |
$ | (0.15 | ) | $ | 0.15 | $ | 0.23 | $ | (0.24 | ) | ||||||
Net income (loss) attributable to Viad |
$ | (0.15 | ) | $ | 0.15 | $ | 0.23 | $ | (0.22 | ) |
(1) | Represents revenues less costs of services and products sold. |
(2) | Includes restructuring charges of $3.8 million in 2011 and gross restructuring charges of $5.0 million and $814,000 of reversed restructuring reserves in 2010. |
(3) | Viad recorded an impairment charge of $302,000 in the fourth quarter of 2010 related to other intangible assets and property and equipment at Brewster. |
(4) | The sum of quarterly income per share amounts may not equal annual income per share due to rounding. |
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Note 24. Subsequent Event
On March 7, 2012, Viad acquired the Banff International Hotel and related assets for $23.5 million in cash, subject to certain adjustments. The Banff International Hotel is a 162-guest room commercial hotel located in Banff, Alberta, Canada.
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VIAD CORP
SCHEDULE II – VALUATION AND QUALIFYING ACCOUNTS
Additions | Deductions | |||||||||||||||||||||||
Description |
Balance at Beginning of Year |
Charged to Expense |
Charged to Other Accounts |
Write Offs | Credited to Other Accounts |
Balance at End of Year |
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(in thousands) | ||||||||||||||||||||||||
Allowance for doubtful accounts: |
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December 31, 2009 |
$ | 2,556 | $ | 2,940 | $ | — | $ | (1,604 | ) | $ | — | $ | 3,892 | |||||||||||
December 31, 2010 |
3,892 | 615 | — | (3,335 | ) | — | 1,172 | |||||||||||||||||
December 31, 2011 |
1,172 | 1,696 | — | (1,796 | ) | — | 1,072 | |||||||||||||||||
Deferred tax valuation allowance: |
||||||||||||||||||||||||
December 31, 2009 |
$ | 162 | $ | — | $ | — | $ | — | $ | — | $ | 162 | ||||||||||||
December 31, 2010 |
162 | 411 | — | (162 | ) | — | 411 | |||||||||||||||||
December 31, 2011 |
411 | — | — | (55 | ) | — | 356 |