VIAD CORP, 10-Q filed on 5/9/2014
Quarterly Report
Document and Entity Information
3 Months Ended
Mar. 31, 2014
Apr. 30, 2014
Document and Entity Information [Abstract]
 
 
Entity Registrant Name
VIAD CORP 
 
Entity Central Index Key
0000884219 
 
Document Type
10-Q 
 
Document Period End Date
Mar. 31, 2014 
 
Amendment Flag
false 
 
Document Fiscal Year Focus
2014 
 
Document Fiscal Period Focus
Q1 
 
Current Fiscal Year End Date
--12-31 
 
Entity Filer Category
Accelerated Filer 
 
Entity Common Stock, Shares Outstanding
 
20,440,808 
Consolidated Balance Sheets (USD $)
In Thousands, unless otherwise specified
Mar. 31, 2014
Dec. 31, 2013
Dec. 31, 2012
Current assets
 
 
 
Cash and cash equivalents
$ 47,336 
$ 45,821 
$ 114,171 
Accounts receivable, net of allowance for doubtful accounts of $1,101 and $877, respectively
97,330 
61,197 
 
Inventories
33,103 
27,993 
 
Deferred income taxes
14,953 
20,577 
 
Other current assets
20,841 
17,142 
 
Total current assets
213,563 
172,730 
 
Property and equipment, net
179,833 
190,330 
 
Other investments and assets
34,578 
35,026 
 
Deferred income taxes
31,119 
29,823 
 
Goodwill
127,430 
129,543 
 
Other intangible assets, net
4,136 
4,480 
 
Total Assets
590,659 
561,932 
 
Current liabilities
 
 
 
Accounts payable
76,158 
40,941 
 
Customer deposits
36,661 
29,207 
 
Accrued compensation
20,433 
15,113 
 
Other current liabilities
35,531 
29,169 
 
Current portion of debt and capital lease obligations
919 
10,903 
 
Total current liabilities
169,702 
125,333 
 
Long-term capital lease obligations
749 
765 
 
Pension and postretirement benefits
31,080 
30,672 
 
Other deferred items and liabilities
46,315 
48,619 
 
Total liabilities
247,846 
205,389 
 
Commitments and contingencies
 
   
   
Viad Corp stockholders’ equity:
 
 
 
Common stock, $1.50 par value, 200,000,000 shares authorized, 24,934,981 shares issued
37,402 
37,402 
 
Additional capital
585,107 
590,862 
 
Retained deficit
(61,029)
(50,393)
 
Unearned employee benefits and other
21 
(21)
 
Accumulated other comprehensive income (loss):
 
 
 
Unrealized gain on investments
438 
429 
 
Cumulative foreign currency translation adjustments
24,114 
30,847 
 
Unrecognized net actuarial loss and prior service credit, net
(11,223)
(11,259)
 
Common stock in treasury, at cost, 4,518,446 and 4,618,433 shares, respectively
(243,657)
(250,426)
 
Total Viad Corp stockholders’ equity
331,173 
347,441 
 
Noncontrolling interest
11,640 
9,102 
 
Total stockholders’ equity
342,813 
356,543 
397,032 
Total Liabilities and Stockholders’ Equity
$ 590,659 
$ 561,932 
 
Consolidated Balance Sheets (Parenthetical) (USD $)
In Thousands, except Share data, unless otherwise specified
Mar. 31, 2014
Dec. 31, 2013
Statement of Financial Position [Abstract]
 
 
Allowance for doubtful accounts
$ 1,101 
$ 877 
Common stock, par value
$ 1.50 
$ 1.50 
Common stock, shares authorized
200,000,000 
200,000,000 
Common stock, shares issued
24,934,981 
24,934,981 
Treasury stock, shares
4,518,446 
4,618,433 
Consolidated Statements of Operations (USD $)
In Thousands, except Per Share data, unless otherwise specified
3 Months Ended
Mar. 31, 2014
Mar. 31, 2013
Revenue:
 
 
Exhibition and event services
$ 231,783 
$ 234,163 
Exhibits and environments
46,040 
42,598 
Travel and recreation services
7,818 
8,398 
Total revenues
285,641 
285,159 
Costs and expenses:
 
 
Costs of services
229,582 
230,725 
Costs of products sold
42,698 
40,839 
Corporate activities
2,039 
806 
Interest income
(65)
(138)
Interest expense
298 
296 
Restructuring charges
211 
720 
Total costs and expenses
274,763 
273,248 
Income from continuing operations before income taxes
10,878 
11,911 
Income tax expense
1,697 
3,636 
Income from continuing operations
9,181 
8,275 
Income (loss) from discontinued operations
15,238 
(485)
Net income
24,419 
7,790 
Net (income) loss attributable to noncontrolling interest
(2,537)
275 
Net income attributable to Viad
21,882 
8,065 
Diluted income per common share:
 
 
Income from continuing operations attributable to Viad common stockholders (per share)
$ 0.46 
$ 0.42 
Income from discontinued operations attributable to Viad common stockholders (per share)
$ 0.62 
$ (0.02)
Net income attributable to Viad common stockholders (per share)
$ 1.08 1
$ 0.40 1
Weighted-average outstanding and potentially dilutive common shares
20,330 
20,193 
Basic income per common share:
 
 
Income from continuing operations attributable to Viad common stockholders (per share)
$ 0.46 
$ 0.42 
Income from discontinued operations attributable to Viad common stockholders (per share)
$ 0.62 
$ (0.02)
Net income attributable to Viad common stockholders (per share)
$ 1.08 
$ 0.40 
Weighted-average outstanding common shares
19,949 
19,790 
Dividends declared per common share
$ 1.6 
$ 0.10 
Amounts attributable to Viad common stockholders
 
 
Income from continuing operations
9,312 
8,453 
Income from discontinued operations
12,570 
(388)
Net income
$ 21,882 
$ 8,065 
Consolidated Statements of Comprehensive Income (USD $)
In Thousands, unless otherwise specified
3 Months Ended
Mar. 31, 2014
Mar. 31, 2013
Statement of Comprehensive Income [Abstract]
 
 
Net income
$ 24,419 
$ 7,790 
Other comprehensive income (loss):
 
 
Unrealized gains on investments, net of tax(1)
1
61 1
Unrealized foreign currency translation adjustments, net of tax(1)
(6,733)1
(6,128)1
Amortization of net actuarial gain, net of tax(1)
128 1
181 1
Amortization of prior service credit, net of tax(1)
(92)1
(140)1
Comprehensive income
17,731 
1,764 
Comprehensive (income) loss attributable to noncontrolling interest
(2,537)
275 
Comprehensive income attributable to Viad
$ 15,194 
$ 2,039 
Consolidated Statements of Cash Flows (USD $)
In Thousands, unless otherwise specified
3 Months Ended
Mar. 31, 2014
Mar. 31, 2013
Cash flows from operating activities
 
 
Net income
$ 24,419 
$ 7,790 
Adjustments to reconcile net income to net cash provided by operating activities:
 
 
Depreciation and amortization
6,817 
6,860 
Deferred income taxes
9,109 
3,275 
Income (loss) from discontinued operations
(15,238)
485 
Restructuring charges
211 
720 
Gains on dispositions of property and other assets
(387)
(152)
Share-based compensation expense
391 
1,819 
Excess tax benefit from share-based compensation arrangements
(41)
(378)
Other non-cash items, net
948 
1,641 
Change in operating assets and liabilities (excluding the impact of acquisitions):
 
 
Receivables
(36,372)
(22,612)
Inventories
(5,110)
1,700 
Accounts payable
36,606 
12,368 
Restructuring liabilities
(1,860)
(1,443)
Accrued compensation
2,833 
(11,035)
Customer deposits
7,454 
(8,414)
Income taxes payable
265 
(41)
Other assets and liabilities, net
(4,875)
1,842 
Net cash provided by (used in) operating activities
25,170 
(5,575)
Cash flows from investing activities
 
 
Proceeds from possessory interest—discontinued operations
25,000 
Proceeds from dispositions of property and other assets
403 
173 
Capital expenditures
(5,516)
(8,320)
Acquisition of business, net of cash acquired
(647)
Net cash provided by (used in) investing activities
19,887 
(8,794)
Cash flows from financing activities
 
 
Dividends paid on common stock
(32,517)
(2,034)
Payments on debt and capital lease obligations
(20,238)
(483)
Proceeds from borrowings
10,000 
Common stock purchased for treasury
(1,042)
(1,187)
Excess tax benefit from share-based compensation arrangements
41 
378 
Proceeds from exercise of stock options
1,401 
535 
Net cash used in financing activities
(42,355)
(2,791)
Effect of exchange rate changes on cash and cash equivalents
(1,187)
(1,284)
Net change in cash and cash equivalents
1,515 
(18,444)
Cash and cash equivalents, beginning of year
45,821 
114,171 
Cash and cash equivalents, end of year
47,336 
95,727 
Supplemental disclosure of cash flow information
 
 
Cash paid for income taxes
1,719 
2,181 
Cash paid for interest
254 
234 
Property and equipment acquired under capital leases
253 
393 
Property and equipment purchases in accounts payable and accrued liabilities
$ 1,815 
$ 1,179 
Basis of Presentation and Principles of Consolidation
Summary of Significant Accounting Policies
Basis of Presentation and Principles of Consolidation
The accompanying unaudited, condensed consolidated financial statements of Viad Corp (“Viad” or the “Company”) have been prepared in accordance with accounting principles generally accepted in the United States of America (“GAAP”) for interim financial information and with the instructions to Form 10-Q and Article 10 of Regulation S-X. Accordingly, they do not include all of the information and footnotes required for complete financial statements. The condensed consolidated financial statements of Viad include the accounts of Viad and all of its subsidiaries. All significant intercompany account balances and transactions between Viad and its subsidiaries have been eliminated in consolidation.
In the opinion of management, all adjustments (consisting of normal recurring accruals) considered necessary for a fair presentation have been included. Operating results for the three months ended March 31, 2014 are not necessarily indicative of the results that may be expected for the year ending December 31, 2014.
For further information, refer to the consolidated financial statements and related footnotes for the year ended December 31, 2013 included in the Company’s Form 10-K, filed with the Securities and Exchange Commission on March 7, 2014.
Nature of Business
Viad’s reportable segments consist of Marketing & Events U.S., Marketing & Events International (together the “Marketing & Events Group”) and the Travel & Recreation Group.
Marketing & Events Group
The Marketing & Events Group, comprised of Global Experience Specialists, Inc. and affiliates (“GES”), specializes in all aspects of the design, planning and production of face-to-face events, immersive environments and brand-based experiences for clients, including show organizers, corporate brand marketers and retail shopping centers. In addition, the Marketing & Events Group provides a variety of immersive, entertaining attractions and brand-based experiences, sponsored events, mobile marketing and other branded entertainment and face-to-face marketing solutions for clients and venues, including shopping malls, movie studios, museums and leading consumer brands.
Travel & Recreation Group
The Travel & Recreation Group consists of Brewster Inc. (“Brewster”), Glacier Park, Inc. (“Glacier Park”) and Alaskan Park Properties, Inc. (“Alaska Denali Travel”). Brewster provides tourism products and experiential 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, Glacier Skywalk (opened May 1, 2014), motorcoach services, charter and sightseeing services, tour boat operations, inbound package tour operations and hotel operations. During 2013, Glacier Park, an 80 percent owned subsidiary of Viad, operated five lodges, three motor inns and one four-season resort hotel and provided 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’s concession contract with the U.S. National Park Service (the “Park Service”) for Glacier National Park expired on December 31, 2013. The ongoing operations of Glacier Park as of January 1, 2014 include: Glacier Park Lodge in East Glacier, Montana; Grouse Mountain Lodge in Whitefish, Montana; St. Mary Lodge in St. Mary, Montana; Motel Lake McDonald, an in-holding within Glacier National Park; and the Prince of Wales Hotel in Waterton Lakes National Park. Alaska Denali Travel operates the Denali Backcountry Lodge and Denali Cabins. In addition to lodging, Alaska Denali Travel also provides food and beverage operations and package tour and transportation services in and around Denali National Park and Preserve.
With regard to Glacier Park’s concession operations within Glacier National Park, refer to Note 20, Discontinued Operations for further discussion.
Impact of Recent Accounting Pronouncements
In January 2014, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update No. 2014-05, Service Concession Arrangements (Topic 853), related to the accounting for service concession arrangements between a public-sector entity grantor and an operating entity under which the operating entity operates the grantor’s infrastructure. The new guidance specifies that an entity should not account for a service concession arrangement that is within its scope as a lease. Furthermore, the guidance also specifies that the infrastructure used in a service concession arrangement should not be recognized as property, plant and equipment of the operating entity. The guidance is effective for interim and annual periods beginning after December 15, 2014. The adoption of this new guidance is not expected to have a material impact on Viad’s financial condition or results of operations.
In April 2014, the FASB issued Accounting Standards Update No. 2014-08, Presentation of Financial Statements (Topic 205) and Property, Plant, and Equipment (Topic 360): Reporting Discontinued Operations and Disclosures of Disposals of Components of an Entity. The new guidance changes the criteria for reporting discontinued operations while enhancing disclosures. Under the standard, only disposals representing a strategic shift in operations, such as a disposal of a major geographic area, a major line of business or a major equity method investment, may be presented as discontinued operations. This guidance is effective for interim and annual periods beginning after December 15, 2014. The Company has not yet determined if the adoption of this new guidance will have a material impact on its financial position or results of operations.
Share-Based Compensation
Share-Based Compensation
Share-Based Compensation
The following table summarizes share-based compensation expense for the three months ended March 31:
(in thousands)
2014
 
2013
Restricted stock
$
654

 
$
773

Performance unit incentive plan (“PUP”)
(231
)
 
863

Restricted stock units
(32
)
 
88

Stock options

 
95

Share-based compensation before income tax benefit
391

 
1,819

Income tax benefit
(152
)
 
(654
)
Share-based compensation, net of income tax benefit
$
239

 
$
1,165


In addition, a $311,000 reversal of PUP expense was recorded through restructuring expense for the three months ended March 31, 2014.
On January 24, 2014, Viad announced that its Board of Directors declared a special cash dividend of $1.50 per share, or $30.5 million in the aggregate, to shareholders of record at the close of business on February 7, 2014. The dividend was paid on February 14, 2014. In accordance with the mandatory provisions of the 2007 Viad Corp Omnibus Incentive Plan (the “2007 Plan”) and the 1997 Viad Corp Omnibus Incentive Plan, the Human Resources Committee of Viad’s Board of Directors approved equitable adjustments to the outstanding long-term incentive awards of stock options and PUP awards issued pursuant to those plans in order to prevent the special dividend from diluting the rights of participants under those plans. The equitable adjustment to the outstanding stock options reduced the exercise price and increased the number of shares of common stock underlying such options. The equitable adjustment to the PUP awards reflects the effect of the special dividend, but will be paid only if certain performance goals are met at the end of the 3-year performance period.
The following table summarizes the activity of the outstanding share-based compensation awards:
 
Restricted Stock
 
PUP Awards
 
Restricted Stock Units
 
Shares
 
Weighted-Average
Grant Date
Fair Value
 
Units
 
Weighted-Average
Grant Date
Fair Value
 
Units
 
Weighted-Average
Grant Date
Fair Value
Balance, December 31, 2013
430,899

 
$
22.78

 
299,768

 
$
23.46

 
28,560

 
$
22.91

Granted
83,300

 
23.95

 
123,300

 
23.71

 
6,700

 
24.95

Vested
(132,255
)
 
22.67

 
(94,600
)
 
23.01

 
(9,890
)
 
23.45

Forfeited
(5,140
)
 
22.44

 

 

 

 

Balance, March 31, 2014
376,804

 
23.09

 
328,468

 
23.69

 
25,370

 
23.24


As of March 31, 2014, the unamortized cost of all outstanding restricted stock awards was $4.4 million, which Viad expects to recognize in the consolidated financial statements over a weighted-average period of approximately 2.0 years. During the three months ended March 31, 2014 and 2013, the Company repurchased 44,358 shares for $1.0 million and 44,606 shares for $1.2 million, respectively, related to tax withholding requirements on vested share-based awards. As of March 31, 2014, there were 906,468 total shares available for future grant in accordance with the provisions of the 2007 Plan.
As of March 31, 2014 and December 31, 2013, Viad had liabilities recorded of $2.4 million and $5.9 million, respectively, related to PUP awards. In March 2014, the PUP units granted in 2011 vested and cash payouts totaling $2.9 million were distributed. There were no cash settlements of PUP awards during the three months ended March 31, 2013.
As of March 31, 2014 and December 31, 2013, Viad had aggregate liabilities recorded of $400,000 and $664,000, respectively, related to restricted stock unit liability awards. In February 2014, portions of the 2009, 2010 and 2011 restricted stock unit awards vested and cash payouts totaling $232,000 were distributed. Similarly, in February 2013 portions of the 2009 and 2010 restricted stock unit awards vested and cash payouts of $300,000 were distributed.
The following table summarizes stock option activity:
 
Shares
 
Weighted-
Average
Exercise Price
 
Options
Exercisable
Options outstanding at December 31, 2013
314,323

 
$
19.79

 
314,323

Exercised
(36,815
)
 
19.26

 
 
Forfeited or expired
(18,522
)
 
35.28

 
 
Award modification
17,865

 
N/A

 
 
Options outstanding at March 31, 2014
276,851

 
17.69

 
276,851


As of March 31, 2014, there were no unrecognized costs related to non-vested stock option awards. As previously discussed, the equitable adjustment to the outstanding stock options resulting from the February 14, 2014 special cash dividend reduced the exercise price and increased the number of shares of common stock underlying such options as reflected on the “Award modification” line above.
Acquisition of Business
Acquisition of Businesses
Acquisition of Business
In February 2013, Viad acquired the assets of Resource Creative Limited (“RCL”) for $647,000 in cash. RCL is a United Kingdom-based company specializing in providing creative graphic services to the exhibition, events and retail markets throughout the United Kingdom and continental Europe. The purchase price is subject to certain adjustments, plus a deferred payment of up to approximately £180,000, which is contingent upon RCL’s achievement of certain net revenue targets between the acquisition date and December 31, 2014. RCL exceeded the first net revenue target for the period ended December 31, 2013 and, consequently, a deferred payment installment in the amount of $147,000 (£90,000) was paid in March 2014.
Inventories
Inventories
Inventories
The components of inventories consisted of the following as of the respective periods:
(in thousands)
March 31,
2014
 
December 31, 2013
Raw materials
$
16,059

 
$
14,825

Work in process
17,044

 
13,168

Inventories
$
33,103

 
$
27,993

Other Current Assets (Notes)
Other Current Assets
Other Current Assets
Other current assets consisted of the following as of the respective periods:
(in thousands)
March 31,
2014
 
December 31, 2013
Income tax receivable
$
2,609

 
$
2,035

Prepaid vendor payments
2,558

 
2,008

Prepaid insurance
1,928

 
2,260

Assets held for sale
1,814

 

Prepaid rent
1,488

 
284

Prepaid other
6,181

 
6,977

Other
4,263

 
3,578

Other current assets
$
20,841

 
$
17,142

Property and Equipment
Property and Equipment
Property and Equipment, Net
Property and equipment consisted of the following as of the respective periods:
(in thousands)
March 31,
2014
 
December 31,
2013
Land and land interests
$
23,258

 
$
23,646

Buildings and leasehold improvements
129,431

 
139,889

Equipment and other
289,541

 
294,409

Gross property and equipment
442,230

 
457,944

Less: accumulated depreciation
(262,397
)
 
(267,614
)
Property and equipment, net
$
179,833

 
$
190,330


Depreciation expense for the three months ended March 31, 2014 and 2013 was $6.5 million and $6.6 million, respectively.
Other Investments and Assets
Other Investments and Assets
Other Investments and Assets
Other investments and assets consisted of the following as of the respective periods:
(in thousands)
March 31,
2014
 
December 31,
2013
Cash surrender value of life insurance
$
19,849

 
$
19,690

Workers’ compensation insurance security deposits
3,350

 
3,350

Other
11,379

 
11,986

Other investments and assets
$
34,578

 
$
35,026

Goodwill and Other Intangible Assets
Goodwill and Other Intangible Assets
Goodwill and Other Intangible Assets
The changes in the carrying amount of goodwill for the three months ended March 31, 2014 were as follows:
(in thousands)
Marketing &
Events U.S.
 
Marketing &
Events
International
 
Travel &
Recreation
Group
 
Total
Balance at December 31, 2013
$
62,686

 
$
22,611

 
$
44,246

 
$
129,543

Foreign currency translation adjustments

 
(242
)
 
(1,871
)
 
(2,113
)
Balance at March 31, 2014
$
62,686

 
$
22,369

 
$
42,375

 
$
127,430


The following table summarizes goodwill by reporting unit and segment as of the respective periods:
(in thousands)
March 31,
2014
 
December 31,
2013
Marketing & Events Group:
 
 
 
Marketing & Events U.S.
$
62,686

 
$
62,686

Marketing & Events International:
 
 
 
GES United Kingdom
14,139

 
14,049

GES Canada
8,230

 
8,562

Total Marketing & Events Group
85,055

 
85,297

Travel & Recreation Group:
 
 
 
Brewster
39,191

 
41,062

Alaska Denali Travel
3,184

 
3,184

Total Travel & Recreation Group
42,375

 
44,246

Goodwill
$
127,430

 
$
129,543


A summary of other intangible assets as of March 31, 2014 is presented below:
(in thousands)
Gross Carrying
Value
 
Accumulated
Amortization
 
Net Carrying
Value
Amortized intangible assets:
 
 
 
 
 
Customer contracts and relationships
$
5,680

 
$
(2,828
)
 
$
2,852

Other
1,066

 
(242
)
 
824

Total amortized intangible assets
6,746

 
(3,070
)
 
3,676

Unamortized intangible assets:
 
 
 
 
 
Business licenses
460

 

 
460

Other intangible assets
$
7,206

 
$
(3,070
)
 
$
4,136


A summary of other intangible assets as of December 31, 2013 is presented below:
(in thousands)
Gross Carrying
Value
 
Accumulated
Amortization
 
Net Carrying
Value
Amortized intangible assets:
 
 
 
 
 
Customer contracts and relationships
$
5,537

 
$
(2,521
)
 
$
3,016

Other
1,280

 
(276
)
 
1,004

Total amortized intangible assets
6,817

 
(2,797
)
 
4,020

Unamortized intangible assets:
 
 
 
 
 
Business licenses
460

 

 
460

Other intangible assets
$
7,277

 
$
(2,797
)
 
$
4,480


Intangible asset amortization expense for the three months ended March 31, 2014 and 2013 was $310,000 and $292,000, respectively. Estimated amortization expense related to amortized intangible assets for future years is expected to be as follows:
(in thousands)
 
2014
$
682

2015
$
791

2016
$
671

2017
$
550

2018
$
432

Thereafter
$
550

Other Current Liabilities
Other Current Liabilities
Other Current Liabilities
Other current liabilities consisted of the following as of the respective periods:
(in thousands)
March 31,
2014
 
December 31, 2013
Continuing operations:
 
 
 
Self-insured liability accrual
$
7,512

 
$
7,603

Accrued employee benefit costs
4,930

 
2,751

Accrued sales and use taxes
4,003

 
1,609

Accrued restructuring
2,919

 
3,877

Accrued dividends
2,208

 
2,192

Accrued professional fees
1,499

 
1,832

Deferred rent
1,354

 
1,558

Accrued foreign income taxes
346

 
565

Other
9,794

 
6,183

Total continuing operations
34,565

 
28,170

Discontinued operations:
 
 
 
Self-insured liability accrual
470

 
469

Environmental remediation liabilities
334

 
353

Other
162

 
177

Total discontinued operations
966

 
999

Other current liabilities
$
35,531

 
$
29,169

Other Deferred Liabilities (Notes)
Other Deferred Items and Liabilities
Other Deferred Items and Liabilities
Other deferred items and liabilities consisted of the following as of the respective periods:
(in thousands)
March 31,
2014
 
December 31, 2013
Continuing operations:
 
 
 
Self-insured liability accrual
$
17,814

 
$
17,316

Accrued compensation
5,599

 
8,349

Foreign deferred tax liability
2,012

 
1,989

Accrued restructuring
1,556

 
1,919

Other
8,090

 
7,552

Total continuing operations
35,071

 
37,125

Discontinued operations:
 
 
 
Environmental remediation liabilities
4,653

 
4,666

Self-insured liability accrual
4,439

 
4,489

Accrued income taxes
906

 
1,085

Other
1,246

 
1,254

Total discontinued operations
11,244

 
11,494

Other deferred items and liabilities
$
46,315

 
$
48,619

Debt
Debt
Debt and Capital Lease Obligations
Viad’s total debt as of March 31, 2014 and December 31, 2013 was $1.7 million and $11.7 million, respectively. The debt-to-capital ratio was 0.005 to 1 and 0.032 to 1 as of March 31, 2014 and December 31, 2013, respectively. Capital is defined as total debt and capital lease obligations plus total stockholders’ equity.
In May 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. As of March 31, 2014, Viad’s total debt of $1.7 million consisted entirely of capital lease obligations. As of March 31, 2014, Viad had $128.7 million of capacity remaining under its Credit Facility reflecting outstanding letters of credit of $1.3 million.
Borrowings under the Credit Facility (of which GES is a guarantor) are indexed to the prime rate or the London Interbank Offered Rate, plus appropriate spreads tied to Viad’s leverage ratio. Commitment fees and letters of credit fees are also tied to Viad’s leverage ratio. The fees on the unused portion of the Credit Facility are currently 0.35 percent annually.
The Credit Facility contains various affirmative and negative covenants that are customary for facilities of this type, including a fixed-charge coverage ratio, leverage ratio and dividend and share repurchase limits. Significant other covenants include limitations on: investments, additional indebtedness, sales/leases of assets, acquisitions, consolidations or mergers and liens on property. As of March 31, 2014, Viad was in compliance with all covenants.
As of March 31, 2014, 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 March 31, 2014 would be $11.8 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.
The estimated fair value of total debt was $1.6 million and $11.5 million as of March 31, 2014 and December 31, 2013, respectively. The fair value of debt was estimated by discounting the future cash flows using rates currently available for debt of similar terms and maturity.
Fair Value Measurements
Fair Value Measurements
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 Reporting Date Using
(in thousands)
March 31, 2014
 
Quoted Prices in
Active
Markets
(Level 1)
 
Significant
Other
Observable
Inputs
(Level 2)
 
Significant
Unobserved
Inputs
(Level 3)
Assets:
 
 
 
 
 
 
 
Money market funds
$
1,818

 
$
1,818

 
$

 
$

Other mutual funds
2,014

 
2,014

 

 

Total assets at fair value
$
3,832

 
$
3,832

 
$

 
$

 
 
 
Fair Value Measurements at Reporting Date Using
(in thousands)
December 31, 2013
 
Quoted Prices
in Active
Markets
(Level 1)
 
Significant
Other
Observable
Inputs
(Level 2)
 
Significant
Unobserved
Inputs
(Level 3)
Assets:
 
 
 
 
 
 
 
Money market funds
$
118

 
$
118

 
$

 
$

Other mutual funds
2,023

 
2,023

 

 

Total assets at fair value
$
2,141

 
$
2,141

 
$

 
$


As of March 31, 2014 and December 31, 2013, Viad had investments in money market mutual funds of $1.8 million and $118,000, 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 both March 31, 2014 and December 31, 2013, Viad had investments in other mutual funds of $2.0 million, 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 March 31, 2014 and December 31, 2013, there were unrealized gains of $705,000 ($438,000 after-tax) and $700,000 ($429,000 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 11, Debt and Capital Lease Obligations.
Stockholders' Equity (Notes)
Stockholders' Equity
Stockholders' Equity

The following represents a reconciliation of the carrying amounts of stockholders’ equity attributable to Viad and the noncontrolling interest for the three months ended March 31, 2014 and 2013:
(in thousands)
 
Total Viad Stockholders’ Equity
 
Noncontrolling Interest
 
Total Stockholders’ Equity
Balance at December 31, 2013
 
$
347,441

 
$
9,102

 
$
356,543

Net income
 
21,882

 
2,537

 
24,419

Dividends on common stock
 
(32,517
)
 

 
(32,517
)
Common stock purchased for treasury
 
(1,042
)
 

 
(1,042
)
Employee benefit plans
 
2,052

 

 
2,052

Unrealized foreign currency translation adjustment
 
(6,733
)
 

 
(6,733
)
ESOP allocation adjustment
 
44

 

 
44

Other
 
46

 
1

 
47

Balance at March 31, 2014
 
$
331,173

 
$
11,640

 
$
342,813

(in thousands)
 
Total Viad Stockholders’ Equity
 
Noncontrolling Interest
 
Total Stockholders’ Equity
Balance at December 31, 2012
 
$
388,061

 
$
8,971

 
$
397,032

Net income (loss)
 
8,065

 
(275
)
 
7,790

Dividends on common stock
 
(2,034
)
 

 
(2,034
)
Common stock purchased for treasury
 
(1,187
)
 

 
(1,187
)
Employee benefit plans
 
1,792

 

 
1,792

Unrealized foreign currency translation adjustment
 
(6,128
)
 

 
(6,128
)
Unrealized gain on investments
 
61

 

 
61

Prior service credit and net actuarial loss
 
41

 

 
41

ESOP allocation adjustment
 
250

 

 
250

Other
 
1

 

 
1

Balance at March 31, 2013
 
$
388,922

 
$
8,696

 
$
397,618


Changes in accumulated other comprehensive income (“AOCI”) by component were as follows:
(in thousands)
 
Unrealized Gains on Investments
 
Cumulative Foreign Currency Translation Adjustments
 
Unrecognized Net Actuarial Loss and Service Credit
 
Accumulated Other Comprehensive Income
Balance at December 31, 2013
 
$
429

 
$
30,847

 
$
(11,259
)
 
$
20,017

Other comprehensive income before reclassifications
 
22

 
(6,733
)
 

 
(6,711
)
Amounts reclassified from AOCI, net of tax
 
(13
)
 

 
36

 
23

Net other comprehensive income (loss)
 
9

 
(6,733
)
 
36

 
(6,688
)
Balance at March 31, 2014
 
$
438

 
$
24,114

 
$
(11,223
)
 
$
13,329


The following table presents information about reclassification adjustments out of AOCI for the three months ended March 31:
 
 
 
 
Affected Line Item in the Statement Where Net Income is Presented
(in thousands)
 
2014
 
2013
 
Unrealized gains on investments
 
$
21

 
$
27

 
Interest income
Tax effect
 
(8
)
 
(9
)
 
Income taxes
 
 
$
13

 
$
18

 
Net of tax
 
 
 
 
 
 
 
Recognized net actuarial loss(1)
 
$
(205
)
 
$
(290
)
 
 
Amortization of prior service credit(1)
 
148

 
225

 
 
Tax effect
 
21

 
24

 
Income taxes
 
 
$
(36
)
 
$
(41
)
 
Net of tax
(1) Amount included in pension expense. Refer to Note 16, Pension and Postretirement Benefits.
Income Per Share
Income Per Share
Income Per Share
The following are the components of basic and diluted income per share for the three months ended March 31:
(in thousands, except per share data)
2014
 
2013
Net income attributable to Viad (diluted)
$
21,882

 
$
8,065

Less: Allocation to non-vested shares
(424
)
 
(198
)
Net income allocated to Viad common stockholders (basic)
$
21,458

 
$
7,867

Basic weighted-average outstanding common shares
19,949

 
19,790

Additional dilutive shares related to share-based compensation
381

 
403

Diluted weighted-average outstanding shares
20,330

 
20,193

Income per share:
 
 
 
Basic income attributable to Viad common stockholders
$
1.08

 
$
0.40

Diluted income attributable to Viad common stockholders(1)
$
1.08

 
$
0.40

(1) Diluted income per share amount cannot exceed basic income per share.
There were 381,000 and 403,000 share-based compensation awards considered dilutive and included in the computation of diluted income per share for the three months ended March 31, 2014 and 2013, respectively. Additionally, options to purchase 34,000 and 54,000 shares of common stock were outstanding during the three months ended March 31, 2014 and 2013, respectively, but were not included in the computation of dilutive shares outstanding because the effect would be anti-dilutive.
Income Taxes
Income Taxes
Income Taxes
The effective tax rates for continuing operations for the three months ended March 31, 2014 and 2013 were 15.6 percent and 30.5 percent, respectively. The effective tax rates for discontinued operations for the three months ended March 31, 2014 and 2013 were 29.1 percent and 36.8 percent, respectively.
The income tax provisions were computed based on the Company’s estimated effective tax rate and forecasted income by jurisdiction expected to be applicable for the full fiscal year, including the impact of any unusual or infrequent items. The relatively low effective tax rates compared to the federal statutory rate of 35 percent were primarily due to foreign income which is taxed at lower rates. Additionally, 2014 was favorably impacted by the projected utilization of foreign tax credit carryforwards and other deferred tax adjustments.
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 March 31, 2014 and December 31, 2013, Viad had gross deferred tax assets of $67.7 million and $77.0 million, respectively. These deferred tax assets reflect the expected future tax benefits to be realized upon reversal of deductible temporary differences, and the utilization of net operating loss and tax credit carryforwards.
The Company considered all available positive and negative evidence regarding the future recoverability of its deferred tax assets, including the Company’s recent operating history, taxpaying history and future reversals of deferred tax liabilities. The Company also evaluated its ability to utilize its foreign tax credits, given its recent utilization history. These tax credits are subject to a 10-year carryforward period and begin to expire in 2019. As of December 31, 2013, $10.9 million of the $12.4 million valuation allowance recorded was related to foreign tax credits. The Company is projecting the utilization of $3.6 million of additional foreign tax credits in 2014, due to projected 2014 operations.
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 upon 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 or decrease in the Company’s valuation allowance. If such an increase or decrease in the valuation allowance were to occur, it would result in increased or decreased income tax expense in the period the assessment was made.
Viad had accrued gross liabilities associated with uncertain tax positions for continuing operations of $1.1 million and $736,000 as of March 31, 2014 and December 31, 2013, respectively. In addition, as of March 31, 2014 and December 31, 2013, Viad had accrued interest and penalties related to uncertain tax positions for continuing operations of $56,000 and $20,000, respectively. Viad also had accrued gross liabilities associated with uncertain tax positions for discontinued operations of $636,000 as of both March 31, 2014 and December 31, 2013. In addition, as of March 31, 2014 and December 31, 2013, Viad had accrued interest and penalties related to uncertain tax positions for discontinued operations of $458,000 and $450,000, respectively. Future tax resolutions or settlements that may occur related to these uncertain tax positions would be recorded through either continuing or discontinued operations (net of federal tax effects, if applicable). As of March 31, 2014 and December 31, 2013, the Company had liabilities associated with uncertain tax positions (including interest and penalties) of $2.2 million and $1.8 million, respectively, which were classified as both current and non-current liabilities. The Company expects the majority of the unrecognized tax benefits to be recognized by March 31, 2015.
Pension and Postretirement Benefits
Pension and Postretirement Benefits
Pension and Postretirement Benefits
The net periodic benefit cost of Viad’s pension and postretirement plans for the three months ended March 31 included the following components:
 
 
Domestic Plans
 
 
 
 
 
 
Pension Plans
 
Postretirement Benefit Plans
 
Foreign Pension Plans
(in thousands)
 
2014
 
2013
 
2014
 
2013
 
2014
 
2013
Service cost
 
$
23

 
$
30

 
$
34

 
$
46

 
$
104

 
$
137

Interest cost
 
280

 
261

 
176

 
173

 
160

 
181

Expected return on plan assets
 
(103
)
 
(100
)
 

 

 
(161
)
 
(180
)
Amortization of prior service credit
 

 

 
(148
)
 
(225
)
 

 

Recognized net actuarial loss
 
104

 
149

 
101

 
141

 
3

 
10

Net periodic benefit cost
 
$
304

 
$
340

 
$
163

 
$
135

 
$
106

 
$
148


Viad expects to contribute $1.4 million to its funded pension plans, $941,000 to its unfunded pension plans and $950,000 to its postretirement benefit plans in 2014. During the three months ended March 31, 2014, Viad contributed $217,000 to its funded pension plans and $201,000 to its unfunded pension plans. However, due to timing of the fundings, Viad made no contributions to its postretirement benefit plans during the three months ended March 31, 2014.
Restructuring Charges
Restructuring Charges
Restructuring Charges
Marketing & Events Group Consolidation
Viad executed 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.
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.
The table below represents a reconciliation of beginning and ending liability balances by major restructuring activity:
 
Marketing & Events
Group Consolidation
 
Other Restructurings
 
 
(in thousands)
Severance &
Employee
Benefits
 
Facilities
 
Severance &
Employee
Benefits
 
Total
Balance at December 31, 2013
$
1,240

 
$
3,565

 
$
991

 
$
5,796

Restructuring charges (recoveries)
492

 

 
(281
)
 
211

Cash payments
(893
)
 
(136
)
 
(831
)
 
(1,860
)
Adjustment to liability
64

 

 
264

 
328

Balance at March 31, 2014
$
903

 
$
3,429

 
$
143

 
$
4,475


As of March 31, 2014, the liabilities related to severance and employee benefits are expected to be paid by the end of 2014. Additionally, the liability of $3.4 million related to future lease payments will be paid over the remaining lease terms at the Marketing & Events Group. Refer to Note 19, Segment Information, for information regarding restructuring charges by segment.
Litigation, Claims, Contingencies and Other
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 March 31, 2014 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 March 31, 2014, Viad had recorded environmental remediation liabilities of $5.0 million related to previously sold operations.
As of March 31, 2014, 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 March 31, 2014 would be $11.8 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. If the Company was 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 2014 will be renegotiated in the ordinary course of business without having a material adverse effect on Viad’s operations. The Company entered into new showsite and warehouse agreements with the Chicago Teamsters Local 727, effective January 1, 2014, and those agreements contain provisions that allow the parties to re-open negotiation of the agreements on pension-related issues. The Company is in informal discussions regarding those issues with all relevant parties and is working diligently to resolve those issues in a manner that will be reasonable and equitable to employees, customers and shareholders. Although the Company’s labor relations are currently stable, disruptions pending the outcome of the Chicago Teamsters Local 727 negotiations could occur, as they could with any collective-bargaining agreement negotiation, with the possibility of an adverse impact on the operating results of the Marketing & Events Group.
Viad’s businesses contribute to various multi-employer pension plans based on obligations arising under collective-bargaining agreements covering its union-represented employees. 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 March 31, 2014, the amount of additional funding, if any, that Viad would be required to make related to multi-employer pension plans is not ascertainable.
Viad is self-insured up to certain limits for workers’ compensation, employee health benefits, automobile, product and general liability and property loss claims. The aggregate amount of insurance liabilities (up to the Company’s retention limit) related to Viad’s continuing operations was $21.4 million as of March 31, 2014. Of this total, $12.9 million related to workers’ compensation liabilities, $1.1 million related to employee health benefits and the remaining $7.4 million related to general/auto liability claims. Viad has also retained and provided for certain insurance liabilities in conjunction with previously sold businesses totaling $4.9 million as of March 31, 2014, primarily related to workers’ compensation liabilities. Provisions for losses for claims incurred, including estimated claims incurred but not yet reported, are made based on Viad’s historical experience, claims frequency and other factors. A change in the assumptions used could result in an adjustment to recorded liabilities. Viad has purchased insurance for amounts in excess of the self-insured levels, which generally range from $200,000 to $500,000 on a per claim basis. Viad does not maintain a self-insured retention pool fund as claims are paid from current cash resources at the time of settlement. Viad’s net cash payments in connection with these insurance liabilities were $4.3 million for the three months ended March 31, 2014.
In addition, as of March 31, 2014 Viad had recorded insurance liabilities of $5.0 million related to continuing operations in excess of the self-insured levels for which Viad remains the primary obligor. Of this total, $1.7 million related to workers’ compensation liabilities and the remaining $3.3 million related to general liability claims. The Company has recorded these amounts in other deferred items and liabilities in Viad’s Condensed Consolidated Balance Sheets with a corresponding receivable in other investments and assets.
On December 31, 2013, Glacier Park’s concession contract to operate lodging, tour and transportation and other hospitality services for Glacier National Park expired. Glacier Park generated approximately 47 percent of its 2013 revenue through its concession contract for services provided within Glacier National Park. Upon completion of the contract term, in January 2014 the Company received cash payments totaling $25.0 million for the Company’s “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. The Company anticipates a cash payment of approximately $5 million for the personal property Glacier Park used at the facilities covered by the concession contract, which remains subject to negotiation with the successor concessionaire.
Glacier Park continues to generate revenue from the five properties it owns: St. Mary Lodge in St. Mary, Montana; Glacier Park Lodge in East Glacier, Montana; Grouse Mountain Lodge in Whitefish, Montana; the Prince of Wales Hotel in Waterton Lakes National Park, Alberta; and Motel Lake McDonald, which is located inside Glacier National Park. Glacier Park also continues to operate the food and beverage services with respect to these properties and the retail shops located near Glacier National Park. The five properties Glacier Park currently owns contain 52 percent of the rooms that Glacier Park operated in 2013.
Segment Information
Segment Information
Segment Information
Viad’s reportable segments consist of Marketing & Events U.S., Marketing & Events International and Travel & Recreation Group.
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 for the three months ended March 31 with reconciliations to consolidated totals are as follows:
(in thousands)
2014
 
2013
Revenue:
 
 
 
Marketing & Events Group:
 
 
 
U.S.
$
221,395

 
$
218,341

International
58,718

 
60,048

Intersegment eliminations
(2,290
)
 
(1,628
)
Total Marketing & Events Group
277,823

 
276,761

Travel & Recreation Group
7,818

 
8,398

Total revenue
$
285,641

 
$
285,159

Segment operating income (loss):

 
 
Marketing & Events Group:
 
 
 
U.S.
$
15,851

 
$
14,115

International
2,319

 
4,392

Total Marketing & Events Group
18,170

 
18,507

Travel & Recreation Group
(4,809
)
 
(4,912
)
Segment operating income
13,361

 
13,595

Corporate activities
(2,039
)
 
(806
)
Operating income
11,322


12,789

Interest income
65

 
138

Interest expense
(298
)
 
(296
)
Restructuring recoveries (charges):
 
 
 
Marketing & Events U.S.
38

 
194

Marketing & Events International
(530
)
 
(901
)
Travel & Recreation Group
206

 
(13
)
Corporate
75

 

Income from continuing operations before income taxes
$
10,878

 
$
11,911

Discontinued Operations
Discontinued Operations
Discontinued Operations
On December 31, 2013, Glacier Park’s concession contract with the Park Service to operate lodging, tour and transportation and other hospitality services for Glacier National Park expired. Upon completion of the contract, the Company received cash payments in January 2014 totaling $25.0 million resulting in a pre-tax gain of $21.6 million for the Company’s possessory interest. The gain after-tax on the possessory interest was $15.2 million with $2.7 million attributable to the noncontrolling interest. These amounts are included in income (loss) from discontinued operations and net (income) loss attributable to noncontrolling interest in Viad’s Condensed Consolidated Statements of Operations, respectively. The net book value of the remaining personal property assets held for sale at Glacier Park totals $1.8 million and these assets are included in other current assets in Viad’s Condensed Consolidated Balance Sheets at March 31, 2014.
The following summarizes Glacier Park’s operating results for the three months ended March 31, which are presented in income (loss) from discontinued operations, net of tax, in Viad’s Condensed Consolidated Statements of Operations:
(in thousands)
 
2014
 
2013
Total revenue
 
$

 
$
4

Costs and expenses
 
(68
)
 
(772
)
Loss from discontinued operations, before income taxes
 
(68
)
 
(768
)
Income tax benefit
 
20

 
283

Loss from discontinued operations, net of tax
 
(48
)
 
(485
)
Gain on sale of discontinued operations, net of tax
 
15,286

 

Income (loss) from discontinued operations
 
15,238

 
(485
)
(Income) loss from discontinued operations attributable to noncontrolling interest
 
(2,668
)
 
97

Income (loss) from discontinued operations attributable to Viad
 
$
12,570

 
$
(388
)

The following is a reconciliation of net income (loss) attributable to the noncontrolling interest for the three months ended March 31:
(in thousands)
 
2014
 
2013
Loss from continuing operations
 
$
(131
)
 
$
(178
)
Income (loss) from discontinued operations
 
2,668

 
(97
)
Net income (loss) attributable to noncontrolling interest
 
$
2,537

 
$
(275
)
Subsequent Event
Subsequent Event
Subsequent Event

As part of the Company’s share repurchase program, during the period from April 30, 2014 through May 8, 2014, the Company repurchased approximately 220,000 shares on the open market at a total cost of $5.1 million.
Basis of Presentation and Principles of Consolidation (Policies)
The accompanying unaudited, condensed consolidated financial statements of Viad Corp (“Viad” or the “Company”) have been prepared in accordance with accounting principles generally accepted in the United States of America (“GAAP”) for interim financial information and with the instructions to Form 10-Q and Article 10 of Regulation S-X. Accordingly, they do not include all of the information and footnotes required for complete financial statements. The condensed consolidated financial statements of Viad include the accounts of Viad and all of its subsidiaries. All significant intercompany account balances and transactions between Viad and its subsidiaries have been eliminated in consolidation.
In the opinion of management, all adjustments (consisting of normal recurring accruals) considered necessary for a fair presentation have been included. Operating results for the three months ended March 31, 2014 are not necessarily indicative of the results that may be expected for the year ending December 31, 2014.
For further information, refer to the consolidated financial statements and related footnotes for the year ended December 31, 2013 included in the Company’s Form 10-K, filed with the Securities and Exchange Commission on March 7, 2014.
Nature of Business
Viad’s reportable segments consist of Marketing & Events U.S., Marketing & Events International (together the “Marketing & Events Group”) and the Travel & Recreation Group.
Marketing & Events Group
The Marketing & Events Group, comprised of Global Experience Specialists, Inc. and affiliates (“GES”), specializes in all aspects of the design, planning and production of face-to-face events, immersive environments and brand-based experiences for clients, including show organizers, corporate brand marketers and retail shopping centers. In addition, the Marketing & Events Group provides a variety of immersive, entertaining attractions and brand-based experiences, sponsored events, mobile marketing and other branded entertainment and face-to-face marketing solutions for clients and venues, including shopping malls, movie studios, museums and leading consumer brands.
Travel & Recreation Group
The Travel & Recreation Group consists of Brewster Inc. (“Brewster”), Glacier Park, Inc. (“Glacier Park”) and Alaskan Park Properties, Inc. (“Alaska Denali Travel”). Brewster provides tourism products and experiential 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, Glacier Skywalk (opened May 1, 2014), motorcoach services, charter and sightseeing services, tour boat operations, inbound package tour operations and hotel operations. During 2013, Glacier Park, an 80 percent owned subsidiary of Viad, operated five lodges, three motor inns and one four-season resort hotel and provided 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’s concession contract with the U.S. National Park Service (the “Park Service”) for Glacier National Park expired on December 31, 2013. The ongoing operations of Glacier Park as of January 1, 2014 include: Glacier Park Lodge in East Glacier, Montana; Grouse Mountain Lodge in Whitefish, Montana; St. Mary Lodge in St. Mary, Montana; Motel Lake McDonald, an in-holding within Glacier National Park; and the Prince of Wales Hotel in Waterton Lakes National Park. Alaska Denali Travel operates the Denali Backcountry Lodge and Denali Cabins. In addition to lodging, Alaska Denali Travel also provides food and beverage operations and package tour and transportation services in and around Denali National Park and Preserve.
With regard to Glacier Park’s concession operations within Glacier National Park, refer to Note 20, Discontinued Operations for further discussion.
Share-Based Compensation (Tables)
The following table summarizes share-based compensation expense for the three months ended March 31:
(in thousands)
2014
 
2013
Restricted stock
$
654

 
$
773

Performance unit incentive plan (“PUP”)
(231
)
 
863

Restricted stock units
(32
)
 
88

Stock options

 
95

Share-based compensation before income tax benefit
391

 
1,819

Income tax benefit
(152
)
 
(654
)
Share-based compensation, net of income tax benefit
$
239

 
$
1,165

The following table summarizes the activity of the outstanding share-based compensation awards:
 
Restricted Stock
 
PUP Awards
 
Restricted Stock Units
 
Shares
 
Weighted-Average
Grant Date
Fair Value
 
Units
 
Weighted-Average
Grant Date
Fair Value
 
Units
 
Weighted-Average
Grant Date
Fair Value
Balance, December 31, 2013
430,899

 
$
22.78

 
299,768

 
$
23.46

 
28,560

 
$
22.91

Granted
83,300

 
23.95

 
123,300

 
23.71

 
6,700

 
24.95

Vested
(132,255
)
 
22.67

 
(94,600
)
 
23.01

 
(9,890
)
 
23.45

Forfeited
(5,140
)
 
22.44

 

 

 

 

Balance, March 31, 2014
376,804

 
23.09

 
328,468

 
23.69

 
25,370

 
23.24

The following table summarizes stock option activity:
 
Shares
 
Weighted-
Average
Exercise Price
 
Options
Exercisable
Options outstanding at December 31, 2013
314,323

 
$
19.79

 
314,323

Exercised
(36,815
)
 
19.26

 
 
Forfeited or expired
(18,522
)
 
35.28

 
 
Award modification
17,865

 
N/A

 
 
Options outstanding at March 31, 2014
276,851

 
17.69

 
276,851

Inventories (Tables)
Components of Inventories
The components of inventories consisted of the following as of the respective periods:
(in thousands)
March 31,
2014
 
December 31, 2013
Raw materials
$
16,059

 
$
14,825

Work in process
17,044

 
13,168

Inventories
$
33,103

 
$
27,993

Other Current Assets (Tables)
Schedule of Other Current Assets
Other current assets consisted of the following as of the respective periods:
(in thousands)
March 31,
2014
 
December 31, 2013
Income tax receivable
$
2,609

 
$
2,035

Prepaid vendor payments
2,558

 
2,008

Prepaid insurance
1,928

 
2,260

Assets held for sale
1,814

 

Prepaid rent
1,488

 
284

Prepaid other
6,181

 
6,977

Other
4,263

 
3,578

Other current assets
$
20,841

 
$
17,142

Property and Equipment (Tables)
Schedule of Property and Equipment
Property and equipment consisted of the following as of the respective periods:
(in thousands)
March 31,
2014
 
December 31,
2013
Land and land interests
$
23,258

 
$
23,646

Buildings and leasehold improvements
129,431

 
139,889

Equipment and other
289,541

 
294,409

Gross property and equipment
442,230

 
457,944

Less: accumulated depreciation
(262,397
)
 
(267,614
)
Property and equipment, net
$
179,833

 
$
190,330

Other Investments and Assets (Tables)
Summary of other investments and assets
Other investments and assets consisted of the following as of the respective periods:
(in thousands)
March 31,
2014
 
December 31,
2013
Cash surrender value of life insurance
$
19,849

 
$
19,690

Workers’ compensation insurance security deposits
3,350

 
3,350

Other
11,379

 
11,986

Other investments and assets
$
34,578

 
$
35,026

Goodwill and Other Intangible Assets (Tables)
The changes in the carrying amount of goodwill for the three months ended March 31, 2014 were as follows:
(in thousands)
Marketing &
Events U.S.
 
Marketing &
Events
International
 
Travel &
Recreation
Group
 
Total
Balance at December 31, 2013
$
62,686

 
$
22,611

 
$
44,246

 
$
129,543

Foreign currency translation adjustments

 
(242
)
 
(1,871
)
 
(2,113
)
Balance at March 31, 2014
$
62,686

 
$
22,369

 
$
42,375

 
$
127,430

The following table summarizes goodwill by reporting unit and segment as of the respective periods:
(in thousands)
March 31,
2014
 
December 31,
2013
Marketing & Events Group:
 
 
 
Marketing & Events U.S.
$
62,686

 
$
62,686

Marketing & Events International:
 
 
 
GES United Kingdom
14,139

 
14,049

GES Canada
8,230

 
8,562

Total Marketing & Events Group
85,055

 
85,297

Travel & Recreation Group:
 
 
 
Brewster
39,191

 
41,062

Alaska Denali Travel
3,184

 
3,184

Total Travel & Recreation Group
42,375

 
44,246

Goodwill
$
127,430

 
$
129,543

A summary of other intangible assets as of March 31, 2014 is presented below:
(in thousands)
Gross Carrying
Value
 
Accumulated
Amortization
 
Net Carrying
Value
Amortized intangible assets:
 
 
 
 
 
Customer contracts and relationships
$
5,680

 
$
(2,828
)
 
$
2,852

Other
1,066

 
(242
)
 
824

Total amortized intangible assets
6,746

 
(3,070
)
 
3,676

Unamortized intangible assets:
 
 
 
 
 
Business licenses
460

 

 
460

Other intangible assets
$
7,206

 
$
(3,070
)
 
$
4,136


A summary of other intangible assets as of December 31, 2013 is presented below:
(in thousands)
Gross Carrying
Value
 
Accumulated
Amortization
 
Net Carrying
Value
Amortized intangible assets:
 
 
 
 
 
Customer contracts and relationships
$
5,537

 
$
(2,521
)
 
$
3,016

Other
1,280

 
(276
)
 
1,004

Total amortized intangible assets
6,817

 
(2,797
)
 
4,020

Unamortized intangible assets:
 
 
 
 
 
Business licenses
460

 

 
460

Other intangible assets
$
7,277

 
$
(2,797
)
 
$
4,480

Estimated amortization expense related to amortized intangible assets for future years is expected to be as follows:
(in thousands)
 
2014
$
682

2015
$
791

2016
$
671

2017
$
550

2018
$
432

Thereafter
$
550

Other Current Liabilities (Tables)
Other Current Liabilities
Other current liabilities consisted of the following as of the respective periods:
(in thousands)
March 31,
2014
 
December 31, 2013
Continuing operations:
 
 
 
Self-insured liability accrual
$
7,512

 
$
7,603

Accrued employee benefit costs
4,930

 
2,751

Accrued sales and use taxes
4,003

 
1,609

Accrued restructuring
2,919

 
3,877

Accrued dividends
2,208

 
2,192

Accrued professional fees
1,499

 
1,832

Deferred rent
1,354

 
1,558

Accrued foreign income taxes
346

 
565

Other
9,794

 
6,183

Total continuing operations
34,565

 
28,170

Discontinued operations:
 
 
 
Self-insured liability accrual
470

 
469

Environmental remediation liabilities
334

 
353

Other
162

 
177

Total discontinued operations
966

 
999

Other current liabilities
$
35,531

 
$
29,169

Other Deferred Liabilities (Tables)
Other deferred items and liabilities
Other deferred items and liabilities consisted of the following as of the respective periods:
(in thousands)
March 31,
2014
 
December 31, 2013
Continuing operations:
 
 
 
Self-insured liability accrual
$
17,814

 
$
17,316

Accrued compensation
5,599

 
8,349

Foreign deferred tax liability
2,012

 
1,989

Accrued restructuring
1,556

 
1,919

Other
8,090

 
7,552

Total continuing operations
35,071

 
37,125

Discontinued operations:
 
 
 
Environmental remediation liabilities
4,653

 
4,666

Self-insured liability accrual
4,439

 
4,489

Accrued income taxes
906

 
1,085

Other
1,246

 
1,254

Total discontinued operations
11,244

 
11,494

Other deferred items and liabilities
$
46,315

 
$
48,619

Fair Value Measurements (Tables)
Fair Value, Assets Measured on Recurring Basis
The fair value information related to these assets is summarized in the following tables:
 
 
 
Fair Value Measurements at Reporting Date Using
(in thousands)
March 31, 2014
 
Quoted Prices in
Active
Markets
(Level 1)
 
Significant
Other
Observable
Inputs
(Level 2)
 
Significant
Unobserved
Inputs
(Level 3)
Assets:
 
 
 
 
 
 
 
Money market funds
$
1,818

 
$
1,818

 
$