VIAD CORP, 10-Q filed on 8/8/2013
Quarterly Report
Document and Entity Information
6 Months Ended
Jun. 30, 2013
Jul. 31, 2013
Document Document And Entity Information [Abstract]
 
 
Document Type
10-Q 
 
Amendment Flag
false 
 
Document Period End Date
Jun. 30, 2013 
 
Document Fiscal Year Focus
2013 
 
Document Fiscal Period Focus
Q2 
 
Entity Registrant Name
VIAD CORP 
 
Entity Central Index Key
0000884219 
 
Current Fiscal Year End Date
--12-31 
 
Entity Filer Category
Accelerated Filer 
 
Entity Common Stock, Shares Outstanding
 
20,322,104 
Condensed Consolidated Balance Sheets (USD $)
In Thousands, unless otherwise specified
Jun. 30, 2013
Dec. 31, 2012
Current assets:
 
 
Cash and cash equivalents
$ 83,142 
$ 114,171 
Accounts receivable, net of allowance for doubtful accounts of $1,328 and $1,150, respectively
84,122 
62,756 
Inventories
31,267 
35,656 
Deferred income taxes
21,999 
26,301 
Other current assets
25,049 
15,534 
Total current assets
245,579 
254,418 
Property and equipment, net
193,485 
197,298 
Other investments and assets
31,311 
32,416 
Deferred income taxes
25,152 
26,104 
Goodwill
133,422 
137,820 
Other intangible assets, net
4,910 
2,521 
Total Assets
633,859 
650,577 
Current liabilities:
 
 
Accounts payable
57,941 
57,995 
Other current liabilities
90,701 
107,684 
Current portion of capital lease obligations
1,038 
1,347 
Total current liabilities
149,680 
167,026 
Long-term capital lease obligations
905 
879 
Pension and postretirement benefits
36,745 
37,812 
Other deferred items and liabilities
49,036 
47,828 
Total liabilities
236,366 
253,545 
Commitments and contingencies (Note 16)
   
   
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
589,152 
593,862 
Retained deficit
(2,782)
(13,034)
Unearned employee benefits and other
(803)
(1,301)
Accumulated other comprehensive income (loss):
 
 
Unrealized gains on investments
330 
275 
Cumulative foreign currency translation adjustments
30,735 
42,158 
Unrecognized net actuarial loss and prior service credit, net
(14,887)
(14,968)
Common stock in treasury, at cost, 4,612,803 and 4,694,468 shares, respectively
(250,157)
(256,333)
Total Viad Corp stockholders' equity
388,990 
388,061 
Noncontrolling interest
8,503 
8,971 
Total stockholders' equity
397,493 
397,032 
Total Liabilities and Stockholders' Equity
$ 633,859 
$ 650,577 
Condensed Consolidated Balance Sheets (Parenthetical) (USD $)
In Thousands, except Share data, unless otherwise specified
Jun. 30, 2013
Dec. 31, 2012
Statement Of Financial Position [Abstract]
 
 
Allowance for doubtful accounts
$ 1,328 
$ 1,150 
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 
Common stock in treasury, shares
4,612,803 
4,694,468 
Condensed Consolidated Statements of Operations (USD $)
In Thousands, except Per Share data, unless otherwise specified
3 Months Ended 6 Months Ended
Jun. 30, 2013
Jun. 30, 2012
Jun. 30, 2013
Jun. 30, 2012
Revenues:
 
 
 
 
Convention and event services
$ 177,582 
$ 170,195 
$ 411,745 
$ 386,083 
Exhibits and environments
42,231 
46,746 
84,829 
92,902 
Travel and recreation services
29,501 
29,509 
37,903 
36,237 
Total revenues
249,314 
246,450 
534,477 
515,222 
Costs and expenses:
 
 
 
 
Costs of services
197,254 
192,844 
428,751 
414,953 
Costs of products sold
41,179 
43,108 
82,018 
84,238 
Corporate activities
1,167 
2,187 
1,973 
3,964 
Interest income
(137)
(123)
(275)
(292)
Interest expense
323 
302 
619 
660 
Restructuring charges
773 
678 
1,493 
2,903 
Total costs and expenses
240,559 
238,996 
514,579 
506,426 
Income from continuing operations before income taxes
8,755 
7,454 
19,898 
8,796 
Income tax expense
2,695 
2,253 
6,048 
2,780 
Income from continuing operations
6,060 
5,201 
13,850 
6,016 
Income from discontinued operations
 
639 
 
639 
Net income
6,060 
5,840 
13,850 
6,655 
Net loss attributable to noncontrolling interest
193 
250 
468 
462 
Net income
6,253 
6,090 
14,318 
7,117 
Diluted income per common share
 
 
 
 
Income from continuing operations attributable to Viad common stockholders
$ 0.31 
$ 0.27 
$ 0.71 
$ 0.32 
Income from discontinued operations attributable to Viad common stockholders
 
$ 0.03 
 
$ 0.03 
Net income attributable to Viad common stockholders
$ 0.31 
$ 0.30 
$ 0.71 
$ 0.35 
Weighted-average outstanding and potentially dilutive common shares
20,159 
19,961 
20,177 
19,950 
Basic income per common share
 
 
 
 
Income from continuing operations attributable to Viad common stockholders
$ 0.31 
$ 0.27 
$ 0.71 
$ 0.32 
Income from discontinued operations attributable to Viad common stockholders
 
$ 0.03 
 
$ 0.03 
Net income attributable to Viad common stockholders
$ 0.31 
$ 0.30 
$ 0.71 
$ 0.35 
Weighted-average outstanding common shares
19,860 
19,716 
19,825 
19,680 
Dividends declared per common share
$ 0.10 
$ 0.04 
$ 0.20 
$ 0.08 
Amounts attributable to Viad common stockholders
 
 
 
 
Income from continuing operations
6,253 
5,451 
14,318 
6,478 
Income from discontinued operations
 
639 
 
639 
Net income
$ 6,253 
$ 6,090 
$ 14,318 
$ 7,117 
Condensed Consolidated Statements of Comprehensive Income (USD $)
In Thousands, unless otherwise specified
3 Months Ended 6 Months Ended
Jun. 30, 2013
Jun. 30, 2012
Jun. 30, 2013
Jun. 30, 2012
Statement Of Income And Comprehensive Income [Abstract]
 
 
 
 
Net income
$ 6,060 
$ 5,840 
$ 13,850 
$ 6,655 
Other comprehensive (loss) income:
 
 
 
 
Unrealized gain (loss) on investments, net of tax
(6)
(42)
55 
51 
Unrealized foreign currency translation adjustments, net of tax
(5,295)
(3,390)
(11,423)
996 
Amortization of net actuarial loss, net of tax
180 
174 
361 
349 
Amortization of prior service credit, net of tax
(140)
(172)
(280)
(344)
Net other comprehensive income (loss), Accumulated Other Comprehensive Income
(5,261)
(3,430)
(11,287)
1,052 
Comprehensive income
799 
2,410 
2,563 
7,707 
Comprehensive loss attributable to noncontrolling interest
193 
250 
468 
462 
Comprehensive income attributable to Viad
$ 992 
$ 2,660 
$ 3,031 
$ 8,169 
Condensed Consolidated Statements of Cash Flows (USD $)
In Thousands, unless otherwise specified
6 Months Ended
Jun. 30, 2013
Jun. 30, 2012
Cash flows from operating activities:
 
 
Net income
$ 13,850 
$ 6,655 
Adjustments to reconcile net income to net cash (used in) provided by operating activities:
 
 
Depreciation and amortization
14,338 
15,000 
Deferred income taxes
6,371 
3,828 
Income from discontinued operations
 
(639)
Restructuring charges
1,493 
2,903 
Gains on disposition of property and other assets
(196)
(129)
Share-based compensation expense
2,367 
2,854 
Excess tax benefit from share-based compensation arrangements
(389)
(269)
Other non-cash items, net
2,739 
2,566 
Change in operating assets and liabilities (excluding the impact of acquisitions):
 
 
Receivables
(21,851)
(23,267)
Inventories
4,389 
(13,139)
Accounts payable
327 
17,098 
Restructuring liabilities
(2,341)
(1,938)
Accrued compensation
(11,130)
(4,091)
Customer deposits
(8,922)
15,006 
Income taxes payable
(415)
107 
Other assets and liabilities, net
(9,195)
(5,560)
Net cash (used in) provided by operating activities
(7,735)
16,985 
Cash flows from investing activities:
 
 
Capital expenditures
(15,705)
(14,088)
Acquisition of businesses, net of cash acquired
(647)
(23,546)
Proceeds from dispositions of property and other assets
433 
168 
Proceeds from sale of land - discontinued operations
 
1,041 
Net cash used in investing activities
(15,919)
(36,425)
Cash flows from financing activities:
 
 
Payments on debt and capital lease obligations
(690)
(1,444)
Dividends paid on common stock
(4,066)
(1,623)
Common stock purchased for treasury
(1,252)
(1,000)
Excess tax benefit from share-based compensation arrangements
389 
269 
Proceeds from exercise of stock options
540 
89 
Net cash used in financing activities
(5,079)
(3,709)
Effect of exchange rate changes on cash and cash equivalents
(2,296)
797 
Net change in cash and cash equivalents
(31,029)
(22,352)
Cash and cash equivalents, beginning of year
114,171 
100,376 
Cash and cash equivalents, end of period
83,142 
78,024 
Supplemental disclosure of cash flow information
 
 
Cash paid for income taxes
4,299 
5,103 
Cash paid for interest
510 
511 
Property and equipment acquired under capital leases
462 
363 
Property and equipment purchases in accounts payable and accrued liabilities
$ 4,441 
$ 1,273 
Basis of Preparation and Principles of Consolidation
Basis of Preparation and Principles of Consolidation

Note 1. Basis of Preparation 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. 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 six months ended June 30, 2013, are not necessarily indicative of the results that may be expected for the year ending December 31, 2013.

For further information, refer to the consolidated financial statements and related footnotes for the year ended December 31, 2012, included in the Company’s Form 10-K (File No. 001-11015), filed with the Securities and Exchange Commission on March 11, 2013.

The condensed consolidated financial statements 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. Viad’s reporting segments consist of Marketing & Events U.S., Marketing & Events International and the Travel & Recreation 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.

The Travel & Recreation Group segment consists of Brewster Inc. (“Brewster”), Glacier Park, Inc. (“Glacier Park”) and Alaskan Park Properties, Inc. (“Alaska Denali Travel”). Brewster provides tourism services in the Canadian Rockies in Alberta and in other parts of Western Canada. Brewster’s operations include the Banff Gondola, Columbia Icefield Glacier Adventure, motorcoach services, charter and sightseeing services, tour boat operations, inbound package tour operations and hotel operations. Glacier Park operates five lodges, three motor inns and one four-season resort hotel and provides food and beverage operations, retail operations and tour and transportation services in and around Glacier National Park in Montana and Waterton Lakes National Park in Alberta, Canada. Glacier Park is an 80 percent owned subsidiary of Viad. Alaska Denali Travel operates Denali Backcountry Lodge and Denali Cabins. 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.

Share-Based Compensation
Share-Based Compensation

Note 2. Share-Based Compensation

The following table summarizes share-based compensation expense:

 

     Three months ended June 30,     Six months ended June 30,  
     2013     2012     2013     2012  
     (in thousands)              

Restricted stock

   $ 947      $ 971      $ 1,720      $ 1,720   

Performance unit incentive plan (“PUP”)

     (339     434        524        672   

Stock options

     6        153        101        302   

Restricted stock units

     (66     79        22        160   
  

 

 

   

 

 

   

 

 

   

 

 

 

Total share-based compensation before income tax benefit

     548        1,637        2,367        2,854   

Income tax benefit

     (230     (591     (903     (1,031
  

 

 

   

 

 

   

 

 

   

 

 

 

Total share-based compensation, net of income tax benefit

   $ 318      $ 1,046      $ 1,464      $ 1,823   
  

 

 

   

 

 

   

 

 

   

 

 

 

The following table summarizes the activity of the outstanding share-based compensation awards:

 

     Restricted Stock      Restricted Stock Units      PUP Awards  
           Weighted-            Weighted-            Weighted-  
           Average            Average            Average  
           Grant Date            Grant Date            Grant Date  
     Shares     Fair Value      Units     Fair Value      Units     Fair Value  

Balance at January 1, 2013

     516,351      $ 21.25         40,500      $ 20.82         210,600      $ 21.70   

Granted

     99,400        27.35         8,600        27.35         93,100        27.35   

Vested

     (155,486     20.87         (11,300     19.10         —          —     

Forfeited

     (3,606     23.20         (7,165     21.80         (432     20.60   
  

 

 

      

 

 

      

 

 

   

Balance at June 30, 2013

     456,659        22.69         30,635        23.06         303,268        23.43   
  

 

 

      

 

 

      

 

 

   

The unamortized cost of all outstanding restricted stock awards as of June 30, 2013, was $4.9 million, which Viad expects to recognize in the consolidated financial statements over a weighted-average period of approximately 2.0 years. During the six months ended June 30, 2013 and 2012, the Company repurchased 47,160 shares for $1.3 million and 50,894 shares for $1.0 million, respectively, related to tax withholding requirements on vested share-based awards. As of June 30, 2013, there were 1,004,579 total shares available for future grant.

As of June 30, 2013 and December 31, 2012, Viad had liabilities recorded of $355,000 and $633,000, respectively, related to restricted stock unit liability awards. A portion of the 2009 and 2010 restricted stock unit awards vested in February 2013 and 2012, respectively, and cash payouts of $300,000 and $257,000 were distributed in February 2013 and 2012, respectively. In addition, a portion of the 2009 performance-based restricted stock unit awards vested effective December 31, 2009, and cash payouts of $35,000 were distributed in January 2012.

As of June 30, 2013 and December 31, 2012, Viad had liabilities recorded of $4.2 million and $3.7 million, respectively, related to PUP awards. There were no PUP awards which vested during the six months ended June 30, 2013 or 2012. Furthermore, there were no cash settlements of PUP awards during the six months ended June 30, 2013 or 2012.

The following table summarizes stock option activity:

 

           Weighted-         
           Average      Options  
     Shares     Exercise Price      Exercisable  

Options outstanding at January 1, 2013

     363,896      $ 22.03         276,009   

Exercised

     (47,343     19.48      

Forfeited or expired

     (27,086     28.28      
  

 

 

      

Options outstanding at June 30, 2013

     289,467        21.87         287,467   
  

 

 

      

The total unrecognized cost related to non-vested stock option awards was $7,000 as of June 30, 2013, which Viad expects to recognize in the consolidated financial statements over a weighted-average period of approximately less than one year. No stock options were granted during the six months ended June 30, 2013.

Acquisition of Businesses
Acquisition of Businesses

Note 3. Acquisition of Businesses

On February 19, 2013, Viad acquired the assets of Resource Creative Limited (“RCL”) for $647,000 in cash, subject to certain adjustments, plus a deferred payment of up to approximately $278,000, which is contingent upon RCL’s performance. 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 final amounts assigned to the assets of RCL as of the acquisition date included: property and equipment of $72,000, goodwill of $158,000 and other intangible assets of $695,000. In addition, a liability of $278,000 was recorded as of the acquisition date related to the contingent consideration. The primary factor that contributed to a purchase price resulting in the recognition of goodwill relates to future growth opportunities. The goodwill is deductible for tax purposes over a period of 15 years. The amounts assigned to other intangible assets included: $564,000 of customer relationships and $131,000 of noncompete agreements. The weighted-average amortization period related to the other intangible assets was 4.5 years. The transaction costs related to the acquisition were insignificant. The results of operations of RCL have been included in Viad’s consolidated financial statements from the date of acquisition.

In March 2012, Viad acquired the Banff International Hotel and related assets for $23.6 million in cash. The Banff International Hotel is a 162-guest room hotel located in downtown Banff, Alberta, Canada and is operated by Brewster within the Travel & Recreation Group. The following information represents the final amounts assigned to the assets and liabilities of the Banff International Hotel as of the date of acquisition:

 

     (in thousands)  

Cash and cash equivalents

   $ 10   

Accounts receivable

     23   

Other current assets

     33   

Property and equipment

     20,408   

Goodwill

     1,890   

Other intangible assets

     1,323   
  

 

 

 

Total assets acquired

     23,687   
  

 

 

 

Customer deposits

     (64

Other current liabilities

     (67
  

 

 

 

Total liabilities acquired

     (131
  

 

 

 

Purchase price

   $ 23,556   
  

 

 

 

The goodwill recorded in connection with the transaction is included in the Travel & Recreation Group. The primary factor that contributed to a purchase price resulting in the recognition of goodwill relates to future growth opportunities. The goodwill is deductible for tax purposes pursuant to regulations in Canada. The amount assigned to other intangible assets relates to an operating contract and customer relationships. The weighted-average amortization period related to the other intangible assets was 7.7 years. The transaction costs related to the acquisition were insignificant. The results of operations of the Banff International Hotel have been included in Viad’s consolidated financial statements from the date of acquisition.

The following table summarizes the unaudited pro forma results of operations attributable to Viad assuming that the acquisitions above had each been completed at the beginning of each period:

 

     Three months ended June 30,      Six months ended June 30,  
     2013      2012      2013      2012  
     (in thousands, except per share data)  

Revenue

   $ 249,314       $ 246,601       $  534,724       $ 516,040   

Depreciation and amortization

     8,041         7,354         15,097         14,583   

Segment operating income

     10,498         9,796         23,339         15,185   

Net income attributable to Viad

     6,253         6,047         14,327         6,985   

Diluted net income per share

     0.31         0.30         0.71         0.34   

Basic net income per share

     0.31         0.30         0.71         0.34   
Inventories
Inventories

Note 4. Inventories

The components of inventories were as follows:

 

     June 30,      December 31,  
     2013      2012  
     (in thousands)  

Raw materials

   $ 16,645       $ 16,422   

Work in process

     14,622         19,234   
  

 

 

    

 

 

 

Inventories

   $ 31,267       $ 35,656   
  

 

 

    

 

 

 
Property and Equipment
Property and Equipment

Note 5. Property and Equipment

Property and equipment consisted of the following:

 

     June 30,     December 31,  
     2013     2012  
     (in thousands)  

Land and land interests

   $ 25,527      $ 26,124   

Buildings and leasehold improvements

     140,473        137,293   

Equipment and other

     308,139        310,448   
  

 

 

   

 

 

 
     474,139        473,865   

Accumulated depreciation

     (280,654     (276,567
  

 

 

   

 

 

 

Property and equipment, net

   $ 193,485      $ 197,298   
  

 

 

   

 

 

 

Depreciation expense for the three months ended June 30, 2013 and 2012, was $7.0 million and $7.9 million, respectively, and for the six months ended June 30, 2013 and 2012, was $13.7 million and $14.7 million, respectively.

Other Investments and Assets
Other Investments and Assets

Note 6. Other Investments and Assets

Other investments and assets consisted of the following:

 

     June 30,      December 31,  
     2013      2012  
     (in thousands)  

Cash surrender value of life insurance

   $ 19,238       $ 19,142   

Workers’ compensation insurance security deposits

     3,350         3,350   

Other

     8,723         9,924   
  

 

 

    

 

 

 

Total other investments and assets

   $ 31,311       $ 32,416   
  

 

 

    

 

 

 
Goodwill and Other Intangible Assets
Goodwill and Other Intangible Assets

Note 7. Goodwill and Other Intangible Assets

The changes in the carrying amount of goodwill for the six months ended June 30, 2013, were as follows:

 

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

Balance at January 1, 2013

   $ 62,686       $ 23,054      $ 52,080      $ 137,820   

Business acquisition

     —           158        —          158   

Foreign currency translation adjustments

     —           (1,659     (2,897     (4,556
  

 

 

    

 

 

   

 

 

   

 

 

 

Balance at June 30, 2013

   $ 62,686       $ 21,553      $ 49,183      $ 133,422   
  

 

 

    

 

 

   

 

 

   

 

 

 

 

The following table summarizes goodwill by reporting unit and segment:

 

     June 30,      December 31,  
     2013      2012  
     (in thousands)  

Marketing & Events Group:

     

Marketing & Events U.S.

   $ 62,686       $ 62,686   

Marketing & Events International:

     

GES United Kingdom

     12,907         13,894   

GES Canada

     8,646         9,160   
  

 

 

    

 

 

 

Total Marketing & Events Group

     84,239         85,740   
  

 

 

    

 

 

 

Travel & Recreation Group:

     

Brewster

     41,538         44,435   

Glacier Park

     4,461         4,461   

Alaska Denali Travel

     3,184         3,184   
  

 

 

    

 

 

 

Total Travel & Recreation Group

     49,183         52,080   
  

 

 

    

 

 

 

Total goodwill

   $ 133,422       $ 137,820   
  

 

 

    

 

 

 

A summary of other intangible assets as of June 30, 2013, is presented below:

 

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

Amortized intangible assets:

       

Contracts and customer relationships

   $ 5,428       $ (1,960   $ 3,468   

Other

     1,152         (170     982   
  

 

 

    

 

 

   

 

 

 
     6,580         (2,130     4,450   

Unamortized intangible assets:

       

Business licenses

     460         —          460   
  

 

 

    

 

 

   

 

 

 

Total

   $ 7,040       $ (2,130   $ 4,910   
  

 

 

    

 

 

   

 

 

 

A summary of other intangible assets as of December 31, 2012 is presented below:

 

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

Amortized intangible assets:

       

Contracts and customer relationships

   $ 3,594       $ (2,384   $ 1,210   

Other

     959         (108     851   
  

 

 

    

 

 

   

 

 

 
     4,553         (2,492     2,061   

Unamortized intangible assets:

       

Business licenses

     460         —          460   
  

 

 

    

 

 

   

 

 

 

Total

   $ 5,013       $ (2,492   $ 2,521   
  

 

 

    

 

 

   

 

 

 

During the six months ended June 30, 2013, Viad recorded a contract-related intangible asset of $2.1 million in connection with a preferred supplier agreement. Intangible asset amortization expense for the three months ended June 30, 2013 and 2012 was $320,000 and $186,000, respectively, and $612,000 and $321,000 for the six months ended June 30, 2013 and 2012, respectively. Estimated amortization expense related to amortized intangible assets for future periods is expected to be as follows:

 

     (in thousands)  

2013

   $ 631   

2014

     955   

2015

     757   

2016

     638   

2017

     844   

Thereafter

     625
Accrued Liabilities and Other
Accrued Liabilities and Other

Note 8. Accrued Liabilities and Other

Other current liabilities consisted of the following:

 

     June 30,
2013
     December 31,
2012
 
     (in thousands)  

Continuing operations:

     

Customer deposits

   $ 41,250       $ 50,172   

Accrued compensation

     16,490         25,067   

Self-insured liability accrual

     7,368         8,501   

Accrued employee benefit costs

     3,834         3,132   

Accrued restructuring

     2,677         4,084   

Accrued dividends

     2,066         2,053   

Accrued foreign income taxes

     1,827         28   

Accrued sales and use taxes

     1,151         3,179   

Other

     12,792         9,998   
  

 

 

    

 

 

 
     89,455         106,214   
  

 

 

    

 

 

 

Discontinued operations:

     

Self-insured liability accrual

     565         527   

Environmental remediation liabilities

     446         571   

Other

     235         372   
  

 

 

    

 

 

 
     1,246         1,470   
  

 

 

    

 

 

 

Total other current liabilities

   $ 90,701       $ 107,684   
  

 

 

    

 

 

 

Other deferred items and liabilities consisted of the following:

 

     June 30,
2013
     December 31,
2012
 
     (in thousands)  

Continuing operations:

     

Self-insured liability accrual

   $ 17,498       $ 15,579   

Accrued compensation

     6,054         8,061   

Accrued restructuring

     3,699         3,140   

Foreign deferred tax liability

     1,991         2,024   

Other

     7,767         6,734   
  

 

 

    

 

 

 
     37,009         35,538   
  

 

 

    

 

 

 

Discontinued operations:

     

Self-insured liability accrual

     4,934         5,188   

Environmental remediation liabilities

     4,745         4,745   

Accrued income taxes

     1,069         1,053   

Other

     1,279         1,304   
  

 

 

    

 

 

 
     12,027         12,290   
  

 

 

    

 

 

 

Total other deferred items and liabilities

   $ 49,036       $ 47,828
Debt and Capital Leases
Debt and Capital Leases

Note 9. Debt and Capital Leases

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 June 30, 2013 and December 31, 2012, Viad’s total debt of $1.9 million and $2.2 million, respectively, consisted entirely of capital lease obligations. As of June 30, 2013, Viad had $128.2 million of capacity remaining under the Credit Facility reflecting outstanding letters of credit of $1.8 million.

Borrowings under the Credit Facility (of which GES is a guarantor) are indexed to the prime rate or the London Interbank Offered Rate, plus appropriate spreads tied to Viad’s leverage ratio. Commitment fees and letters of credit fees are also tied to Viad’s leverage ratio. The fees on the unused portion of the Credit Facility are currently 0.35 percent annually.

 

The Credit Facility contains various affirmative and negative covenants that are customary for facilities of this type, including a fixed-charge coverage ratio, leverage ratio, minimum cash balance, dividend limits and share repurchase restrictions. Significant other covenants include limitations on: investments, additional indebtedness, sales/leases of assets, acquisitions, consolidations or mergers and liens on property. As of June 30, 2013, Viad was in compliance with all covenants.

In December 2012, the Credit Facility was amended to remove the limitation on share repurchases of $10 million in the aggregate per calendar year pursuant to certain conditions. The amendment allows share repurchases unless the Company’s leverage ratio, as defined in the Credit Facility, is greater than 1.50 to 1.00 or a default or an unmatured default, as defined in the Credit Facility, exists. The amendment also allows dividends to be declared and paid in excess of $10 million in the aggregate per calendar year, as well as distributions on its capital stock, as defined in the Credit Facility, unless the Company’s leverage ratio, as defined in the Credit Facility, is greater than 1.50 to 1.00 or a default or an unmatured default, as defined in the Credit Facility, exists.

The estimated fair value of total debt was $1.8 million and $2.1 million as of June 30, 2013 and December 31, 2012, 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.

Stockholders' Equity
Stockholders' Equity

Note 10. Stockholders’ Equity

The following represents a reconciliation of the carrying amounts of stockholders’ equity attributable to Viad and the noncontrolling interest for the six months ended June 30, 2013:

 

     Total Viad           Total  
     Stockholders’     Noncontrolling     Stockholders’  
     Equity     Interest     Equity  
     (in thousands)  

Balance at January 1, 2013

   $ 388,061      $ 8,971      $ 397,032   

Net income (loss)

     14,318        (468     13,850   

Dividends on common stock

     (4,066     —          (4,066

Common stock purchased for treasury

     (1,252     —          (1,252

Employee benefit plans

     2,717        —          2,717   

Unrealized foreign currency translation adjustment

     (11,423     —          (11,423

Unrealized gain on investments

     55        —          55   

Prior service credit and net actuarial loss

     81        —          81   

ESOP allocation adjustment

     500        —          500   

Other

     (1     —          (1
  

 

 

   

 

 

   

 

 

 

Balance at June 30, 2013

   $ 388,990      $ 8,503      $ 397,493   
  

 

 

   

 

 

   

 

 

 

The following represents a reconciliation of the carrying amounts of stockholders’ equity attributable to Viad and the noncontrolling interest for the six months ended June 30, 2012:

 

     Total Viad           Total  
     Stockholders’     Noncontrolling     Stockholders’  
     Equity     Interest     Equity  

Balance at January 1, 2012

   $ 377,894      $ 8,285      $ 386,179   

Net income (loss)

     7,117        (462     6,655   

Dividends on common stock

     (1,623     —          (1,623

Common stock purchased for treasury

     (1,000     —          (1,000

Employee benefit plans

     2,279        —          2,279   

Unrealized foreign currency translation adjustment

     996        —          996   

Unrealized gain on investments

     51        —          51   

Prior service credit and net actuarial loss

     5        —          5   

ESOP allocation adjustment

     650        —          650   

Other

     (2     (1     (3
  

 

 

   

 

 

   

 

 

 

Balance at June 30, 2012

   $ 386,367      $ 7,822      $ 394,189   
  

 

 

   

 

 

   

 

 

 

 

In December 2012, Viad announced its intent to repurchase up to an additional one million shares of the Company’s common stock from time to time at prevailing market prices. At the time of the announcement, there were 30,438 shares available for repurchase pursuant to previously announced authorizations. No shares were repurchased during the six months ended June 30, 2013 or 2012. As of June 30, 2013, 1,030,438 shares remain available for repurchase. Additionally, during the six months ended June 30, 2013 and 2012, the Company repurchased 47,160 shares for $1.3 million and 50,894 shares for $1.0 million, respectively, related to tax withholding requirements on share-based awards.

Changes in accumulated other comprehensive income (“AOCI”) by component were as follows:

 

     Unrealized
Gains on
Investments
    Cumulative
Foreign
Currency
Translation
Adjustments
    Unrecognized
Net Actuarial
Loss and
Prior Service
Credit
    Accumulated
Other
Comprehensive
Income
 
     (in thousands)  

Balance at January 1, 2013

   $ 275      $ 42,158      $ (14,968   $ 27,465   

Other comprehensive income before reclassifications

     91        (11,423     —          (11,332

Amounts reclassified from AOCI, net of tax

     (36     —          81        45   
  

 

 

   

 

 

   

 

 

   

 

 

 

Net other comprehensive income (loss)

     55        (11,423     81        (11,287
  

 

 

   

 

 

   

 

 

   

 

 

 

Balance at June 30, 2013

   $ 330      $ 30,735      $ (14,887   $ 16,178   
  

 

 

   

 

 

   

 

 

   

 

 

 

The following table presents information about reclassification adjustments out of AOCI for the six months ended June 30:

 

     2013     2012     Affected Line Item in
the Statement Where
Net Income is
Presented
     (in thousands)      

Unrealized gain on investments

   $ (57   $ (12   Interest income
     21        4      Income tax expense
  

 

 

   

 

 

   
   $ (36   $ (8   Net of tax
  

 

 

   

 

 

   

Recognized net actuarial loss

   $ 584      $ 565      See (1) below

Amortization of prior service credit

     (453     (557   See (1) below
     (50     (4   Income tax benefit
  

 

 

   

 

 

   
   $ 81      $ 4      Net of tax
  

 

 

   

 

 

   

 

(1) Amount is included in pension expense. See Note 14 for additional information.
Fair Value Measurements
Fair Value Measurements

Note 11. Fair Value Measurements

The fair value of an asset or liability is defined as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. The fair value guidance requires an entity to maximize the use of quoted prices and other observable inputs and minimize the use of unobservable inputs when measuring fair value, and also establishes a fair value hierarchy which prioritizes the inputs to valuation techniques used to measure fair value as follows:

 

Level 1 – Quoted prices in active markets for identical assets or liabilities.

 

Level 2 – Observable inputs other than quoted prices included within Level 1 that are observable for the asset or liability, either directly or indirectly.

 

Level 3 – Unobservable inputs to the valuation methodology that are significant to the measurement of fair value.

 

Viad measures its money market mutual funds and certain other mutual fund investments at fair value on a recurring basis using Level 1 inputs. The fair value information related to these assets is summarized in the following table:

 

            Fair Value Measurements at June 30, 2013 Using  
                   Significant         
            Quoted Prices      Other      Significant  
            in Active      Observable      Unobserved  
     June 30,      Markets      Inputs      Inputs  

Description

   2013      (Level 1)      (Level 2)      (Level 3)  
     (in thousands)  

Money market funds

   $ 7,179       $ 7,179       $ —         $ —     

Other mutual funds

     1,235         1,235         —           —     
  

 

 

    

 

 

    

 

 

    

 

 

 

Total

   $ 8,414       $ 8,414       $ —         $ —     
  

 

 

    

 

 

    

 

 

    

 

 

 

As of June 30, 2013 and December 31, 2012, Viad had investments in money market mutual funds of $7.2 million and $10.2 million, respectively, which are included in the consolidated balance sheets under the caption “Cash and cash equivalents.” These investments were 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 June 30, 2013 and December 31, 2012, Viad had investments in other mutual funds of $1.2 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 June 30, 2013, and December 31, 2012, there were unrealized gains on the investments of $540,000 ($330,000 after-tax) and $450,000 ($275,000 after-tax), respectively, which were included in the consolidated balance sheets under the caption “Accumulated other comprehensive income (loss).”

The carrying values of cash and cash equivalents, receivables and accounts payable approximate fair value due to the short-term maturities of these instruments. The estimated fair value of debt obligations is disclosed in Note 9.

Income Per Share
Income Per Share

Note 12. Income Per Share

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

 

     Three months ended
June 30,
    Six months ended
June 30,
 
     2013     2012     2013     2012  
     (in thousands, except per share data)  

Basic net income per share

        

Numerator:

        

Net income attributable to Viad

   $ 6,253      $ 6,090      $ 14,318      $ 7,117   

Less: Allocation to non-vested shares

     (142     (163     (338     (194
  

 

 

   

 

 

   

 

 

   

 

 

 

Net income allocated to Viad common stockholders

   $ 6,111      $ 5,927      $ 13,980      $ 6,923   
  

 

 

   

 

 

   

 

 

   

 

 

 

Denominator:

        

Weighted-average outstanding common shares

     19,860        19,716        19,825        19,680   
  

 

 

   

 

 

   

 

 

   

 

 

 

Net income attributable to Viad common stockholders

   $ 0.31      $ 0.30      $ 0.71      $ 0.35   
  

 

 

   

 

 

   

 

 

   

 

 

 

Diluted net income per share

        

Numerator:

        

Net income attributable to Viad

   $ 6,253      $ 6,090      $ 14,318      $ 7,117   
  

 

 

   

 

 

   

 

 

   

 

 

 

Denominator:

        

Weighted-average outstanding common shares

     19,860        19,716        19,825        19,680   

Additional dilutive shares related to share-based compensation

     299        245        352        270   
  

 

 

   

 

 

   

 

 

   

 

 

 

Weighted-average outstanding and potentially dilutive shares

     20,159        19,961        20,177        19,950   
  

 

 

   

 

 

   

 

 

   

 

 

 

Net income attributable to Viad common stockholders (1)

   $ 0.31      $ 0.30      $ 0.71      $ 0.35   
  

 

 

   

 

 

   

 

 

   

 

 

 

 

(1)

Diluted income per share cannot exceed basic income per share.

 

Options to purchase 48,000 and 390,000 shares of common stock were outstanding during the six months ended June 30, 2013 and 2012, respectively, but were not included in the computation of dilutive shares outstanding because the effect would be anti-dilutive. Additionally, 299,000 and 245,000 share-based compensation awards were considered dilutive and included in the computation of diluted income per share during the three months ended June 30, 2013 and 2012, respectively. During the six months ended June 30, 2013 and 2012, 352,000 and 270,000 share-based compensation awards were considered dilutive and included in the computation of diluted income per share, respectively.

Income Taxes
Income Taxes

Note 13. Income Taxes

The effective tax rates for the six months ended June 30, 2013 and 2012 were 30.4 percent and 31.6 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.

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. As of June 30, 2013 and December 31, 2012, Viad had gross deferred tax assets of $75.4 million and $77.2 million, respectively. These deferred tax assets reflect the expected future tax benefits to be realized upon reversal of deductible temporary differences and the utilization of net operating loss and tax credit carryforwards.

The Company considered all available positive and negative evidence regarding the future recoverability of its deferred tax assets, including the Company’s recent operating history, taxpaying history and future reversals of deferred tax liabilities. The Company also evaluated its ability to utilize its foreign tax credits, given its recent utilization history. These tax credits are subject to a 10-year carryforward period and begin to expire in 2019. Based on the Company’s assessment, it was determined during the fourth quarter of 2012 that the weight of the evidence indicated that certain deferred tax assets associated with foreign tax credit carryforwards no longer met the more-likely-than-not test regarding the realization of those assets. As of June 30, 2013 and December 31, 2012, Viad had a valuation allowance of $14.7 million and $14.6 million, respectively, related to certain federal, state and foreign deferred tax assets. With respect to all other deferred tax assets, management believes that recovery from future taxable income is more-likely-than-not.

As noted above, Viad uses considerable judgment in forming a conclusion regarding the recoverability of its deferred tax assets. As a result, there are inherent uncertainties regarding the ultimate realization of these assets, which is primarily dependent 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 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.

Viad had accrued gross liabilities associated with uncertain tax positions for discontinued operations of $636,000 as of both June 30, 2013 and December 31, 2012. In addition, as of June 30, 2013 and December 31, 2012, Viad had accrued interest and penalties related to uncertain tax positions for discontinued operations of $433,000 and $418,000, 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. As of both June 30, 2013 and December 31, 2012, liabilities associated with uncertain tax positions (including interest and penalties) of $1.1 million were classified as non-current liabilities.

Pension and Postretirement Benefits
Pension and Postretirement Benefits

Note 14. Pension and Postretirement Benefits

The net periodic benefit cost of Viad’s pension and postretirement benefit plans for the three months ended June 30 included the following components:

 

     Domestic Plans              
                 Postretirement     Foreign  
     Pension Plans     Benefit Plans     Pension Plans  
     2013     2012     2013     2012     2013     2012  
                 (in thousands)              

Service cost

   $ 30      $ 27      $ 46      $ 42      $ 134      $ 122   

Interest cost

     261        290        173        227        175        183   

Expected return on plan assets

     (100     (70     —          (19     (175     (155

Amortization of prior service credit

     —          —          (225     (279     —          —     

Recognized net actuarial loss

     149        128        141        155        10        —     
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Net periodic benefit cost

   $ 340      $ 375      $ 135      $ 126      $ 144      $ 150   
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

The net periodic benefit cost of Viad’s pension and postretirement benefit plans for the six months ended June 30 included the following components:

 

     Domestic Plans              
                 Postretirement     Foreign  
     Pension Plans     Benefit Plans     Pension Plans  
     2013     2012     2013     2012     2013     2012  
                 (in thousands)              

Service cost

   $ 60      $ 54      $ 92      $ 79      $ 271      $ 244   

Interest cost

     522        587        346        424        356        371   

Expected return on plan assets

     (200     (221     —          (41     (355     (313

Amortization of prior service credit

     —          —          (450     (557     —          —     

Recognized net actuarial loss

     298        258        282        309        20        —     
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Net periodic benefit cost

   $ 680      $ 678      $ 270      $ 214      $ 292      $ 302   
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Viad expects to contribute $2.7 million to its funded pension plans, $1.0 million to its unfunded pension plans and $400,000 to its postretirement benefit plans in 2013. During the six months ended June 30, 2013, Viad contributed $1.8 million to its funded pension plans, $537,000 to its unfunded pension plans and $42,000 to its postretirement benefit plans.

Restructuring Charges
Restructuring Charges

Note 15. Restructuring Charges

During the six months ended June 30, 2013, Viad recorded net restructuring charges of $1.5 million primarily related to facility consolidations and the elimination of certain positions in the Marketing & Events Group. The amounts included in the restructuring liability as of June 30, 2013, related to future lease obligations which will be paid over the remaining lease terms, and severance and employee benefits that are expected to be paid by the end of 2013. The table below represents a reconciliation of Viad’s restructuring liability by major restructuring activity:

 

     Marketing & Events                    
     Group Consolidation     Other Restructurings        
     Severance &           Severance &              
     Employee           Employee              
     Benefits     Facilities     Benefits     Facilities     Total  
                 (in thousands)              

Balance at January 1, 2013

   $ 720      $ 5,571      $ —        $ 933      $ 7,224   

Restructuring charges

     1,703        440        42        (692     1,493   

Cash payments

     (993     (1,094     (13     (241     (2,341
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Balance at June 30, 2013

   $ 1,430      $ 4,917      $ 29      $ —        $ 6,376   
Litigation, Claims, Contingencies and Other
Litigation, Claims, Contingencies and Other

Note 16. 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 June 30, 2013, with respect to certain of these matters is not ascertainable, Viad believes that any resulting liability, after taking into consideration amounts already provided for, including insurance coverage, will not have a material impact on the Company’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, including insurance coverage, will not have a material effect on the Company’s financial position or results of operations. As of June 30, 2013, there was a remaining environmental remediation liability of $5.2 million related to previously sold operations of which $446,000 was included in the consolidated balance sheets under the caption “Other current liabilities” and $4.7 million under the caption “Other deferred items and liabilities.”

As of June 30, 2013, 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 June 30, 2013, would be $17.1 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.

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 June 30, 2013, the amount of additional funding, if any, that Viad would be required to make related to multi-employer pension plans is not ascertainable.

Glacier Park operates the concession portion of its business under a concession contract with the U.S. National Park Service (the “Park Service”) for Glacier National Park. Glacier Park’s original 25-year concession contract with the Park Service that was to expire on December 31, 2005, has been extended for eight one-year periods and now expires on December 31, 2013. Glacier Park generated approximately 49 percent of its 2012 revenues through its concession contract for services provided within Glacier National Park.

On December 14, 2012, the Park Service issued a prospectus soliciting proposals from prospective bidders, including Glacier Park, for the award of a 16-year concession contract beginning on January 1, 2014. Glacier Park submitted its bid for the contract on April 16, 2013. Although Viad believes that Glacier Park is well-positioned to win the new contract, if the Park Service selects a new concessionaire, Glacier Park would be entitled to $25 million for its “possessory interest,” which generally means the value of the structures acquired or constructed, fixtures installed and improvements made to the concession property at Glacier National Park during the term of the concession contract, plus an additional estimated $5 million to $6 million for the personal property Glacier Park uses at the facilities covered by the concession contract.

If a new concessionaire is selected by the Park Service, Glacier Park would continue to generate revenue from the four properties it owns outside of Glacier National Park: Glacier Park Lodge in East Glacier, Montana; Grouse Mountain Lodge in Whitefish, Montana; St. Mary Lodge in St. Mary, Montana and the Prince of Wales Hotel in Waterton Lakes National Park, Alberta, Canada, which Glacier Park owns and operates under a 42-year ground lease with the Canadian government running through January 31, 2052. Glacier Park generated 24 percent of the Travel & Recreation Group’s 2012 segment operating income.

 

Segment Information
Segment Information

Note 17. 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. For the purpose of discussing segment operations, Viad refers to segment operating income as calculated by subtracting segment direct expenses from segment revenues. 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:

 

     Three months ended
June  30,
    Six months ended
June 30,
 
     2013     2012     2013     2012  
     (in thousands)  

Revenues:

        

Marketing & Events Group:

        

U.S.

   $ 155,511      $ 165,472      $ 373,852      $ 372,346   

International

     68,591        54,659        128,639        112,437   

Intersegment eliminations

     (4,289     (3,190     (5,917     (5,798
  

 

 

   

 

 

   

 

 

   

 

 

 
     219,813        216,941        496,574        478,985   

Travel & Recreation Group

     29,501        29,509        37,903        36,237   
  

 

 

   

 

 

   

 

 

   

 

 

 
   $ 249,314      $ 246,450      $ 534,477      $ 515,222   
  

 

 

   

 

 

   

 

 

   

 

 

 

Segment operating income (loss):

        

Marketing & Events Group:

        

U.S.

   $ 2,601      $ 5,572      $ 16,716      $ 12,820   

International

     5,588        2,348        9,980        6,205   
  

 

 

   

 

 

   

 

 

   

 

 

 
     8,189        7,920        26,696        19,025   

Travel & Recreation Group

     2,692        2,578        (2,988     (2,994
  

 

 

   

 

 

   

 

 

   

 

 

 
     10,881        10,498        23,708        16,031   

Corporate activities

     (1,167     (2,187     (1,973     (3,964
  

 

 

   

 

 

   

 

 

   

 

 

 
     9,714        8,311        21,735        12,067   

Interest income

     137        123        275        292   

Interest expense

     (323     (302     (619     (660

Restructuring charges:

        

Marketing & Events U.S.

     (318     (484     (124     (2,487

Marketing & Events International

     (426     (181     (1,327     (403

Travel & Recreation Group

     —          —          (13     —     

Corporate

     (29     (13     (29     (13
  

 

 

   

 

 

   

 

 

   

 

 

 

Income from continuing operations before income taxes

   $ 8,755      $ 7,454      $ 19,898      $ 8,796   
  

 

 

   

 

 

   

 

 

   

 

 

 

 

     June 30,
2013
     December 31,
2012
 
     (in thousands)  

Assets:

     

Marketing & Events U.S.

   $ 220,396       $ 203,145   

Marketing & Events International

     87,399         100,387   

Travel & Recreation Group

     226,105         223,199   

Corporate and other

     99,959         123,846   
  

 

 

    

 

 

 
   $ 633,859       $ 650,577   
  

 

 

    

 

 

 
Discontinued Operations
Discontinued Operations

Note 18. Discontinued Operations

In June 2012, Viad recorded income from discontinued operations of $639,000 related to the sale of land associated with previously sold operations.

Impact of Recent Accounting Pronouncements
Impact of Recent Accounting Pronouncements

Note 19. Impact of Recent Accounting Pronouncements

In February 2013, the Financial Accounting Standards Board (“FASB”) issued new guidance related to the reporting of amounts reclassified out of AOCI, which is codified in Accounting Standards Codification (“ASC”) Topic 220. The new guidance requires entities to provide information about the amounts reclassified out of accumulated other comprehensive income by component. In addition, entities are required to present significant amounts reclassified out of other comprehensive income by the respective line items of net income in certain circumstances, or otherwise cross-reference amounts to other disclosures. The adoption of this new guidance did not have an impact on Viad’s financial condition or results of operations. See Note 10 for required disclosures.

In July 2013, the FASB issued new guidance related to the financial statement presentation of an unrecognized tax benefit when a net operating loss carryforward, a similar tax loss or a tax credit carryforward exists, which is codified in ASC Topic 740. This new guidance is effective prospectively for fiscal years, and interim periods within those years, beginning after December 15, 2013. Retrospective application is permitted. Management does not believe that this guidance will have an impact on Viad’s financial condition and results of operations.

Subsequent Event
Subsequent Event

Note 20. Subsequent Event

In July 2013, Viad completed the sale of certain land located in Utah associated with previously sold operations for approximately $1.6 million (net of estimated selling costs). The sale transaction will be recorded in discontinued operations in the third quarter of 2013.

 

Share-Based Compensation (Tables)

The following table summarizes share-based compensation expense:

 

     Three months ended June 30,     Six months ended June 30,  
     2013     2012     2013     2012  
     (in thousands)              

Restricted stock

   $ 947      $ 971      $ 1,720      $ 1,720   

Performance unit incentive plan (“PUP”)

     (339     434        524        672   

Stock options

     6        153        101        302   

Restricted stock units

     (66     79        22        160   
  

 

 

   

 

 

   

 

 

   

 

 

 

Total share-based compensation before income tax benefit

     548        1,637        2,367        2,854   

Income tax benefit

     (230     (591     (903     (1,031
  

 

 

   

 

 

   

 

 

   

 

 

 

Total share-based compensation, net of income tax benefit

   $ 318      $ 1,046      $ 1,464      $ 1,823   

The following table summarizes the activity of the outstanding share-based compensation awards:

 

     Restricted Stock      Restricted Stock Units      PUP Awards  
           Weighted-            Weighted-            Weighted-  
           Average            Average            Average  
           Grant Date            Grant Date            Grant Date  
     Shares     Fair Value      Units     Fair Value      Units     Fair Value  

Balance at January 1, 2013

     516,351      $ 21.25         40,500      $ 20.82         210,600      $ 21.70   

Granted

     99,400        27.35         8,600        27.35         93,100        27.35   

Vested

     (155,486     20.87         (11,300     19.10         0        0   

Forfeited

     (3,606     23.20         (7,165     21.80         (432     20.60   
  

 

 

      

 

 

      

 

 

   

Balance at June 30, 2013

     456,659        22.69         30,635        23.06         303,268        23.43   
  

 

 

      

 

 

      

 

 

   

The following table summarizes stock option activity:

 

           Weighted-         
           Average      Options  
     Shares     Exercise Price      Exercisable  

Options outstanding at January 1, 2013

     363,896      $ 22.03         276,009   

Exercised

     (47,343     19.48      

Forfeited or expired

     (27,086     28.28      
  

 

 

      

Options outstanding at June 30, 2013

     289,467        21.87         287,467   
  

 

 

      
Acquisition of Businesses (Tables)

The following information represents the final amounts assigned to the assets and liabilities of the Banff International Hotel as of the date of acquisition:

 

     (in thousands)  

Cash and cash equivalents

   $ 10   

Accounts receivable

     23   

Other current assets

     33   

Property and equipment

     20,408   

Goodwill

     1,890   

Other intangible assets

     1,323   
  

 

 

 

Total assets acquired

     23,687   
  

 

 

 

Customer deposits

     (64

Other current liabilities

     (67
  

 

 

 

Total liabilities acquired

     (131
  

 

 

 

Purchase price

   $ 23,556   
  

 

 

 

The following table summarizes the unaudited pro forma results of operations attributable to Viad assuming that the acquisitions above had each been completed at the beginning of each period:

 

     Three months ended June 30,      Six months ended June 30,  
     2013      2012      2013      2012  
     (in thousands, except per share data)  

Revenue

   $ 249,314       $ 246,601       $  534,724       $ 516,040   

Depreciation and amortization

     8,041         7,354         15,097         14,583   

Segment operating income

     10,498         9,796         23,339         15,185   

Net income attributable to Viad

     6,253         6,047         14,327         6,985   

Diluted net income per share

     0.31         0.30         0.71         0.34   

Basic net income per share

     0.31         0.30         0.71         0.34   
Inventories (Tables)
Components of Inventories

The components of inventories were as follows:

 

     June 30,      December 31,  
     2013      2012  
     (in thousands)  

Raw materials

   $ 16,645       $ 16,422   

Work in process

     14,622         19,234   
  

 

 

    

 

 

 

Inventories

   $ 31,267       $ 35,656   
  

 

 

    

 

 

 
Property and Equipment (Tables)
Summary of Property and Equipment

Property and equipment consisted of the following:

 

     June 30,     December 31,  
     2013     2012  
     (in thousands)  

Land and land interests

   $ 25,527      $ 26,124   

Buildings and leasehold improvements

     140,473        137,293   

Equipment and other

     308,139        310,448   
  

 

 

   

 

 

 
     474,139        473,865   

Accumulated depreciation

     (280,654     (276,567
  

 

 

   

 

 

 

Property and equipment, net

   $ 193,485      $ 197,298   
  

 

 

   

 

 

 
Other Investments and Assets (Tables)
Summary of Other Investments and Assets

Other investments and assets consisted of the following:

 

     June 30,      December 31,  
     2013      2012  
     (in thousands)  

Cash surrender value of life insurance

   $ 19,238       $ 19,142   

Workers’ compensation insurance security deposits

     3,350         3,350   

Other

     8,723         9,924   
  

 

 

    

 

 

 

Total other investments and assets

   $ 31,311       $ 32,416
Goodwill and Other Intangible Assets (Tables)

The changes in the carrying amount of goodwill for the six months ended June 30, 2013, were as follows:

 

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

Balance at January 1, 2013

   $ 62,686       $ 23,054      $ 52,080      $ 137,820   

Business acquisition

     —           158        —          158   

Foreign currency translation adjustments

     —           (1,659     (2,897     (4,556
  

 

 

    

 

 

   

 

 

   

 

 

 

Balance at June 30, 2013

   $ 62,686       $ 21,553      $ 49,183      $ 133,422   
  

 

 

    

 

 

   

 

 

   

 

 

 

 

The following table summarizes goodwill by reporting unit and segment:

 

     June 30,      December 31,  
     2013      2012  
     (in thousands)  

Marketing & Events Group:

     

Marketing & Events U.S.

   $ 62,686       $ 62,686   

Marketing & Events International:

     

GES United Kingdom

     12,907         13,894   

GES Canada

     8,646         9,160   
  

 

 

    

 

 

 

Total Marketing & Events Group

     84,239         85,740   
  

 

 

    

 

 

 

Travel & Recreation Group:

     

Brewster

     41,538         44,435   

Glacier Park

     4,461         4,461   

Alaska Denali Travel

     3,184         3,184   
  

 

 

    

 

 

 

Total Travel & Recreation Group

     49,183         52,080   
  

 

 

    

 

 

 

Total goodwill

   $ 133,422       $ 137,820  

A summary of other intangible assets as of June 30, 2013, is presented below:

 

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

Amortized intangible assets:

       

Contracts and customer relationships

   $ 5,428       $ (1,960   $ 3,468   

Other

     1,152         (170     982   
  

 

 

    

 

 

   

 

 

 
     6,580         (2,130     4,450   

Unamortized intangible assets:

       

Business licenses

     460         —          460   
  

 

 

    

 

 

   

 

 

 

Total

   $ 7,040       $ (2,130   $ 4,910   
  

 

 

    

 

 

   

 

 

 

A summary of other intangible assets as of December 31, 2012 is presented below:

 

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

Amortized intangible assets:

       

Contracts and customer relationships

   $ 3,594       $ (2,384   $ 1,210   

Other

     959         (108     851   
  

 

 

    

 

 

   

 

 

 
     4,553         (2,492     2,061   

Unamortized intangible assets:

       

Business licenses

     460         —          460   
  

 

 

    

 

 

   

 

 

 

Total

   $ 5,013       $ (2,492   $ 2,521  

Estimated amortization expense related to amortized intangible assets for future periods is expected to be as follows:

 

     (in thousands)  

2013

   $ 631   

2014

     955   

2015

     757   

2016

     638   

2017

     844   

Thereafter

     625   

 

Accrued Liabilities and Other (Tables)

Other current liabilities consisted of the following:

 

     June 30,
2013
     December 31,
2012
 
     (in thousands)  

Continuing operations:

     

Customer deposits

   $ 41,250       $ 50,172   

Accrued compensation

     16,490         25,067   

Self-insured liability accrual

     7,368         8,501   

Accrued employee benefit costs

     3,834         3,132   

Accrued restructuring

     2,677         4,084   

Accrued dividends

     2,066         2,053   

Accrued foreign income taxes

     1,827         28   

Accrued sales and use taxes

     1,151         3,179   

Other

     12,792         9,998   
  

 

 

    

 

 

 
     89,455         106,214   
  

 

 

    

 

 

 

Discontinued operations:

     

Self-insured liability accrual

     565         527   

Environmental remediation liabilities

     446         571   

Other

     235         372   
  

 

 

    

 

 

 
     1,246         1,470   
  

 

 

    

 

 

 

Total other current liabilities

   $ 90,701       $ 107,684   
  

 

 

    

 

 

 

Other deferred items and liabilities consisted of the following:

 

     June 30,
2013
     December 31,
2012
 
     (in thousands)  

Continuing operations:

     

Self-insured liability accrual

   $ 17,498       $ 15,579   

Accrued compensation

     6,054         8,061   

Accrued restructuring

     3,699         3,140   

Foreign deferred tax liability

     1,991         2,024   

Other

     7,767         6,734   
  

 

 

    

 

 

 
     37,009         35,538   
  

 

 

    

 

 

 

Discontinued operations:

     

Self-insured liability accrual

     4,934         5,188   

Environmental remediation liabilities

     4,745         4,745   

Accrued income taxes

     1,069         1,053   

Other

     1,279         1,304   
  

 

 

    

 

 

 
     12,027         12,290   
  

 

 

    

 

 

 

Total other deferred items and liabilities

   $ 49,036       $ 47,828
Stockholders' Equity (Tables)

The following represents a reconciliation of the carrying amounts of stockholders’ equity attributable to Viad and the noncontrolling interest for the six months ended June 30, 2013:

 

     Total Viad           Total  
     Stockholders’     Noncontrolling     Stockholders’  
     Equity     Interest     Equity  
     (in thousands)  

Balance at January 1, 2013

   $ 388,061      $ 8,971      $ 397,032   

Net income (loss)

     14,318        (468     13,850   

Dividends on common stock

     (4,066     —          (4,066

Common stock purchased for treasury

     (1,252     —          (1,252

Employee benefit plans

     2,717        —          2,717   

Unrealized foreign currency translation adjustment

     (11,423     —          (11,423

Unrealized gain on investments

     55        —          55   

Prior service credit and net actuarial loss

     81        —          81   

ESOP allocation adjustment

     500        —          500   

Other

     (1     —          (1
  

 

 

   

 

 

   

 

 

 

Balance at June 30, 2013

   $ 388,990      $ 8,503      $ 397,493   
  

 

 

   

 

 

   

 

 

 

The following represents a reconciliation of the carrying amounts of stockholders’ equity attributable to Viad and the noncontrolling interest for the six months ended June 30, 2012:

 

     Total Viad           Total  
     Stockholders’     Noncontrolling     Stockholders’  
     Equity     Interest     Equity  

Balance at January 1, 2012

   $ 377,894      $ 8,285      $ 386,179   

Net income (loss)

     7,117        (462     6,655   

Dividends on common stock

     (1,623     —          (1,623

Common stock purchased for treasury

     (1,000     —          (1,000

Employee benefit plans

     2,279        —          2,279   

Unrealized foreign currency translation adjustment

     996        —          996   

Unrealized gain on investments

     51        —          51   

Prior service credit and net actuarial loss

     5        —          5   

ESOP allocation adjustment

     650        —          650   

Other

     (2     (1     (3
  

 

 

   

 

 

   

 

 

 

Balance at June 30, 2012

   $ 386,367      $ 7,822      $ 394,189   

Changes in accumulated other comprehensive income (“AOCI”) by component were as follows:

 

     Unrealized
Gains on
Investments
    Cumulative
Foreign
Currency
Translation
Adjustments
    Unrecognized
Net Actuarial
Loss and
Prior Service
Credit
    Accumulated
Other
Comprehensive
Income
 
     (in thousands)  

Balance at January 1, 2013

   $ 275      $ 42,158      $ (14,968   $ 27,465   

Other comprehensive income before reclassifications

     91        (11,423     —          (11,332

Amounts reclassified from AOCI, net of tax

     (36     —          81        45   
  

 

 

   

 

 

   

 

 

   

 

 

 

Net other comprehensive income (loss)

     55        (11,423     81        (11,287
  

 

 

   

 

 

   

 

 

   

 

 

 

Balance at June 30, 2013

   $ 330      $ 30,735      $ (14,887   $ 16,178  

The following table presents information about reclassification adjustments out of AOCI for the six months ended June 30:

 

     2013     2012     Affected Line Item in
the Statement Where
Net Income is
Presented
     (in thousands)      

Unrealized gain on investments

   $ (57   $ (12   Interest income
     21        4      Income tax expense
  

 

 

   

 

 

   
   $ (36   $ (8   Net of tax
  

 

 

   

 

 

   

Recognized net actuarial loss

   $ 584      $ 565      See (1) below

Amortization of prior service credit

     (453     (557   See (1) below
     (50     (4   Income tax benefit
  

 

 

   

 

 

   
   $ 81      $ 4      Net of tax
  

 

 

   

 

 

   

 

(1) Amount is included in pension expense. See Note 14 for additional information.
Fair Value Measurements (Tables)
Fair Value Information Related to Assets

The fair value information related to these assets is summarized in the following table:

 

            Fair Value Measurements at June 30, 2013 Using  
                   Significant         
            Quoted Prices      Other      Significant  
            in Active      Observable      Unobserved  
     June 30,      Markets      Inputs      Inputs  

Description

   2013      (Level 1)      (Level 2)      (Level 3)  
     (in thousands)  

Money market funds

   $ 7,179       $ 7,179       $ —         $ —     

Other mutual funds

     1,235         1,235         —           —     
  

 

 

    

 

 

    

 

 

    

 

 

 

Total

   $ 8,414       $ 8,414       $ —         $ —     
  

 

 

    

 

 

    

 

 

    

 

 

 
Income Per Share (Tables)
Reconciliation of the Numerators and Denominators of Basic and Diluted Earnings Per Share Computations

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

 

     Three months ended
June 30,
    Six months ended
June 30,
 
     2013     2012     2013     2012  
     (in thousands, except per share data)  

Basic net income per share

        

Numerator:

        

Net income attributable to Viad

   $ 6,253      $ 6,090      $ 14,318      $ 7,117   

Less: Allocation to non-vested shares

     (142     (163     (338     (194
  

 

 

   

 

 

   

 

 

   

 

 

 

Net income allocated to Viad common stockholders

   $ 6,111      $ 5,927      $ 13,980      $ 6,923   
  

 

 

   

 

 

   

 

 

   

 

 

 

Denominator:

        

Weighted-average outstanding common shares

     19,860        19,716        19,825        19,680   
  

 

 

   

 

 

   

 

 

   

 

 

 

Net income attributable to Viad common stockholders

   $ 0.31      $ 0.30      $ 0.71      $ 0.35   
  

 

 

   

 

 

   

 

 

   

 

 

 

Diluted net income per share

        

Numerator:

        

Net income attributable to Viad

   $ 6,253      $ 6,090      $ 14,318      $ 7,117   
  

 

 

   

 

 

   

 

 

   

 

 

 

Denominator:

        

Weighted-average outstanding common shares

     19,860        19,716        19,825        19,680   

Additional dilutive shares related to share-based compensation

     299        245        352        270   
  

 

 

   

 

 

   

 

 

   

 

 

 

Weighted-average outstanding and potentially dilutive shares

     20,159        19,961        20,177        19,950   
  

 

 

   

 

 

   

 

 

   

 

 

 

Net income attributable to Viad common stockholders (1)

   $ 0.31      $ 0.30      $ 0.71      $ 0.35   
  

 

 

   

 

 

   

 

 

   

 

 

 

 

(1)

Diluted income per share cannot exceed basic income per share.

Pension and Postretirement Benefits (Tables) (Foreign Pension Plans [Member])
Components of Net Periodic Benefit Cost of Viad's Pension and Post Retirement Benefit Plan

The net periodic benefit cost of Viad’s pension and postretirement benefit plans for the three months ended June 30 included the following components:

 

     Domestic Plans              
                 Postretirement     Foreign  
     Pension Plans     Benefit Plans     Pension Plans  
     2013     2012     2013     2012     2013     2012  
                 (in thousands)              

Service cost

   $ 30      $ 27      $ 46      $ 42      $ 134      $ 122   

Interest cost

     261        290        173        227        175        183   

Expected return on plan assets

     (100     (70     —          (19     (175     (155

Amortization of prior service credit

     —          —          (225     (279     —          —     

Recognized net actuarial loss

     149        128        141        155        10        —     
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Net periodic benefit cost

   $ 340      $ 375      $ 135      $ 126      $ 144      $ 150   
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

The net periodic benefit cost of Viad’s pension and postretirement benefit plans for the six months ended June 30 included the following components:

 

     Domestic Plans              
                 Postretirement     Foreign  
     Pension Plans     Benefit Plans     Pension Plans  
     2013     2012     2013     2012     2013     2012  
                 (in thousands)              

Service cost

   $ 60      $ 54      $ 92      $ 79      $ 271      $ 244   

Interest cost

     522        587        346        424        356        371   

Expected return on plan assets

     (200     (221     —          (41     (355     (313

Amortization of prior service credit

     —          —          (450     (557     —          —     

Recognized net actuarial loss

     298        258        282        309        20        —     
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Net periodic benefit cost

   $ 680      $ 678      $ 270      $ 214      $ 292      $ 302
Restructuring Charges (Tables)
Reconciliation of Beginning and Ending Liability Balances by Major Restructuring Activity

The table below represents a reconciliation of Viad’s restructuring liability by major restructuring activity:

 

     Marketing & Events                    
     Group Consolidation     Other Restructurings        
     Severance &           Severance &              
     Employee           Employee              
     Benefits     Facilities     Benefits     Facilities     Total  
                 (in thousands)              

Balance at January 1, 2013

   $ 720      $ 5,571      $ —        $ 933      $ 7,224   

Restructuring charges

     1,703        440        42        (692     1,493   

Cash payments

     (993     (1,094     (13     (241     (2,341
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Balance at June 30, 2013

   $ 1,430      $ 4,917      $ 29      $ —        $ 6,376
Segment Information (Tables)
Disclosures regarding Viad’s reportable segments with reconciliations to consolidated totals are as follows:

 

     Three months ended
June  30,
    Six months ended
June 30,
 
     2013     2012     2013     2012  
     (in thousands)  

Revenues:

        

Marketing & Events Group:

        

U.S.

   $ 155,511      $ 165,472      $ 373,852      $ 372,346   

International

     68,591        54,659        128,639        112,437   

Intersegment eliminations

     (4,289     (3,190     (5,917     (5,798
  

 

 

   

 

 

   

 

 

   

 

 

 
     219,813        216,941        496,574        478,985   

Travel & Recreation Group

     29,501        29,509        37,903        36,237   
  

 

 

   

 

 

   

 

 

   

 

 

 
   $ 249,314      $ 246,450      $ 534,477      $ 515,222   
  

 

 

   

 

 

   

 

 

   

 

 

 

Segment operating income (loss):

        

Marketing & Events Group:

        

U.S.

   $ 2,601      $ 5,572      $ 16,716      $ 12,820   

International

     5,588        2,348        9,980        6,205   
  

 

 

   

 

 

   

 

 

   

 

 

 
     8,189        7,920        26,696        19,025   

Travel & Recreation Group

     2,692        2,578        (2,988     (2,994
  

 

 

   

 

 

   

 

 

   

 

 

 
     10,881        10,498        23,708        16,031   

Corporate activities

     (1,167     (2,187     (1,973     (3,964
  

 

 

   

 

 

   

 

 

   

 

 

 
     9,714        8,311        21,735        12,067   

Interest income

     137        123        275        292   

Interest expense

     (323     (302