VIAD CORP, 10-K filed on 3/7/2014
Annual Report
Document and Entity Information (USD $)
In Millions, except Share data, unless otherwise specified
12 Months Ended
Dec. 31, 2013
Jan. 31, 2014
Jun. 30, 2013
Document and Entity Information [Abstract]
 
 
 
Entity Registrant Name
VIAD CORP 
 
 
Entity Central Index Key
0000884219 
 
 
Document Type
10-K 
 
 
Document Period End Date
Dec. 31, 2013 
 
 
Amendment Flag
false 
 
 
Document Fiscal Year Focus
2013 
 
 
Document Fiscal Period Focus
FY 
 
 
Current Fiscal Year End Date
--12-31 
 
 
Entity Well-known Seasoned Issuer
Yes 
 
 
Entity Voluntary Filers
No 
 
 
Entity Current Reporting Status
Yes 
 
 
Entity Filer Category
Accelerated Filer 
 
 
Entity Public Float
 
 
$ 480 
Entity Common Stock, Shares Outstanding
 
20,324,136 
 
Consolidated Balance Sheets (USD $)
In Thousands, unless otherwise specified
Dec. 31, 2013
Dec. 31, 2012
Current assets
 
 
Cash and cash equivalents
$ 45,821 
$ 114,171 
Accounts receivable, net of allowance for doubtful accounts of $877 and $1,150, respectively
61,197 
62,756 
Inventories
27,993 
35,656 
Deferred income taxes
20,577 
26,301 
Other current assets
17,142 
15,534 
Total current assets
172,730 
254,418 
Property and equipment, net
190,330 
197,298 
Other investments and assets
35,026 
32,416 
Deferred income taxes
29,823 
26,104 
Goodwill
129,543 
137,820 
Other intangible assets, net
4,480 
2,521 
Total Assets
561,932 
650,577 
Current liabilities
 
 
Accounts payable
40,941 
57,995 
Other current liabilities
73,489 
107,684 
Current portion of long-term debt and capital lease obligations
10,903 
1,347 
Total current liabilities
125,333 
167,026 
Long-term capital lease obligations
765 
879 
Pension and postretirement benefits
30,672 
37,812 
Other deferred items and liabilities
48,619 
47,828 
Total liabilities
205,389 
253,545 
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
590,862 
593,862 
Retained deficit
(50,393)
(13,034)
Unearned employee benefits and other
(21)
(1,301)
Accumulated other comprehensive income (loss):
 
 
Unrealized gain on investments
429 
275 
Cumulative foreign currency translation adjustments
30,847 
42,158 
Unrecognized net actuarial loss and prior service credit, net
(11,259)
(14,968)
Common stock in treasury, at cost, 4,618,433 and 4,694,468 shares, respectively
(250,426)
(256,333)
Total Viad Corp stockholders’ equity
347,441 
388,061 
Noncontrolling interest
9,102 
8,971 
Total stockholders’ equity
356,543 
397,032 
Total Liabilities and Stockholders’ Equity
$ 561,932 
$ 650,577 
Consolidated Balance Sheets (Parenthetical) (USD $)
In Thousands, except Share data, unless otherwise specified
Dec. 31, 2013
Dec. 31, 2012
Statement of Financial Position [Abstract]
 
 
Allowance for doubtful accounts
$ 877 
$ 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 
Treasury stock, shares
4,694,468 
4,694,468 
Consolidated Statements of Operations (USD $)
In Thousands, except Per Share data, unless otherwise specified
12 Months Ended
Dec. 31, 2013
Dec. 31, 2012
Dec. 31, 2011
Revenues:
 
 
 
Exhibition and event services
$ 685,350 
$ 726,429 
$ 670,054 
Exhibits and environments
159,554 
175,611 
170,496 
Travel and recreation services
127,888 
123,191 
101,814 
Total revenues
972,792 
1,025,231 
942,364 
Costs and expenses:
 
 
 
Costs of services
773,931 
818,837 
752,679 
Costs of products sold
157,745 
164,532 
164,309 
Gain on sale of facility and related land
(4,775)
Corporate activities
6,755 
9,408 
7,682 
Interest income
(550)
(593)
(779)
Interest expense
1,234 
1,303 
1,511 
Restructuring charges
3,891 
4,942 
3,782 
Goodwill impairment charge
4,461 
Other impairment charges
952 
Total costs and expenses
943,644 
998,429 
929,184 
Income from continuing operations before income taxes
29,148 
26,802 
13,180 
Income tax expense
8,590 
20,843 
3,888 
Income from continuing operations
20,558 
5,959 
9,292 
Income from discontinued operations
1,128 
624 
451 
Net income
21,686 
6,583 
9,743 
Net income attributable to noncontrolling interest
(131)
(686)
(533)
Net income attributable to Viad
21,555 
5,897 
9,210 
Diluted income per common share:
 
 
 
Income from continuing operations attributable to Viad common stockholders (per share)
$ 1.01 
$ 0.26 
$ 0.43 
Income from discontinued operations attributable to Viad common stockholders (per share)
$ 0.05 
$ 0.03 
$ 0.02 
Net income attributable to Viad common stockholders (per share)
$ 1.06 
$ 0.29 
$ 0.45 
Weighted-average outstanding and potentially dilutive common shares
20,265 
20,005 
20,055 
Basic income per common share:
 
 
 
Income from continuing operations attributable to Viad common stockholders (per share)
$ 1.01 
$ 0.26 
$ 0.43 
Income from discontinued operations attributable to Viad common stockholders (per share)
$ 0.05 
$ 0.03 
$ 0.02 
Net income attributable to Viad common stockholders (per share)
$ 1.06 
$ 0.29 
$ 0.45 
Weighted-average outstanding common shares
19,850 
19,701 
19,719 
Dividends declared per common share
$ 2.90 
$ 0.28 
$ 0.16 
Amounts attributable to Viad common stockholders
 
 
 
Income from continuing operations
20,427 
5,273 
8,759 
Income from discontinued operations
1,128 
624 
451 
Net income
$ 21,555 
$ 5,897 
$ 9,210 
Consolidated Statements of Comprehensive Income (USD $)
In Thousands, unless otherwise specified
12 Months Ended
Dec. 31, 2013
Dec. 31, 2012
Dec. 31, 2011
Statement of Comprehensive Income [Abstract]
 
 
 
Net income
$ 21,686 
$ 6,583 
$ 9,743 
Other comprehensive income (loss):
 
 
 
Unrealized gains (losses) on investments, net of tax expense (benefit) of $96, $33 and $(36)
154 
53 
(60)
Unrealized foreign currency translation adjustments, net of tax
(11,311)
7,510 
(4,331)
Amortization of net actuarial gain (loss), net of tax expense (benefit) of $2,380, $(574) and $(709)
4,244 
(1,311)
(1,777)
Amortization of prior service credit, net of tax expense (benefit) of $(327), $(433) and $(487)
(535)
(680)
(790)
Comprehensive income
14,238 
12,155 
2,785 
Comprehensive income attributable to noncontrolling interest
(131)
(686)
(533)
Comprehensive income attributable to Viad
$ 14,107 
$ 11,469 
$ 2,252 
Consolidated Statements of Comprehensive Income (Parenthetical) (USD $)
In Thousands, unless otherwise specified
12 Months Ended
Dec. 31, 2013
Dec. 31, 2012
Dec. 31, 2011
Statement of Comprehensive Income [Abstract]
 
 
 
Unrealized investment gains (losses) arising during the period, net of tax expense (benefit)
$ 96 
$ 33 
$ (36)
Amortization of net actuarial loss, net of tax expense (benefit)
2,380 
(574)
(709)
Amortization of prior service credit, net of tax
$ (327)
$ (433)
$ (487)
Consolidated Statements of Cash Flows (USD $)
In Thousands, unless otherwise specified
12 Months Ended
Dec. 31, 2013
Dec. 31, 2012
Dec. 31, 2011
Cash flows from operating activities
 
 
 
Net income
$ 21,686 
$ 6,583 
$ 9,743 
Adjustments to reconcile net income to net cash provided by operating activities:
 
 
 
Depreciation and amortization
28,615 
30,731 
29,126 
Deferred income taxes
1,404 
11,274 
(924)
Income from discontinued operations
(1,128)
(624)
(451)
Restructuring charges
3,891 
4,942 
3,782 
Impairment charges
5,413 
Gain on sale of facility and related land
(4,775)
Gains on dispositions of property and other assets
(265)
(206)
(42)
Share-based compensation expense
5,221 
7,232 
4,413 
Excess tax benefit from share-based compensation arrangements
(422)
(293)
(54)
Other non-cash items, net
4,870 
10,157 
4,659 
Change in operating assets and liabilities (excluding the impact of acquisitions):
 
 
 
Receivables
1,246 
142 
(18,092)
Inventories
7,663 
195 
3,729 
Accounts payable
(15,436)
4,310 
4,372 
Restructuring liabilities
(4,841)
(4,694)
(3,888)
Accrued compensation
(11,707)
1,631 
4,563 
Customer deposits
(20,965)
926 
4,950 
Income taxes payable
218 
467 
(2,694)
Other assets and liabilities, net
(14,633)
(3,587)
(8,456)
Net cash provided by operating activities
6,055 
69,186 
34,736 
Cash flows from investing activities
 
 
 
Capital expenditures
(36,119)
(27,675)
(21,538)
Acquisition of businesses, net of cash acquired
(647)
(23,546)
(41,105)
Proceeds from Sale of Property Held-for-sale
12,696 
Proceeds from sale of land—discontinued operations
1,645 
1,041 
Proceeds from dispositions of property and other assets
464 
322 
440 
Proceeds from sale of short-term investments
384 
Net cash used in investing activities
(21,961)
(49,474)
(62,203)
Cash flows from financing activities
 
 
 
Payments on debt and capital lease obligations
(11,362)
(2,685)
(7,375)
Dividends paid on common stock
(58,914)
(4,454)
(3,241)
Common stock purchased for treasury
(1,328)
(1,656)
(5,230)
Debt issuance costs
(1,001)
Excess tax benefit from share-based compensation arrangements
422 
293 
54 
Proceeds from exercise of stock options
777 
248 
296 
Net cash used in financing activities
(50,405)
(8,254)
(16,497)
Effect of exchange rate changes on cash and cash equivalents
(2,039)
2,337 
(1,501)
Net change in cash and cash equivalents
(68,350)
13,795 
(45,465)
Cash and cash equivalents, beginning of year
114,171 
100,376 
145,841 
Cash and cash equivalents, end of year
45,821 
114,171 
100,376 
Supplemental disclosure of cash flow information
 
 
 
Cash paid for income taxes
8,498 
8,386 
10,213 
Cash paid for interest
1,006 
1,103 
1,088 
Property and equipment acquired under capital leases
832 
1,011 
1,327 
Property and equipment purchases in accounts payable and accrued liabilities
3,204 
4,822 
2,585 
Proceeds from Issuance of Debt
$ 20,000 
$ 0 
$ 0 
Consolidated Statements of Stockholders' Equity (USD $)
In Thousands
Total
Common Stock
Additional Capital
Retained Earnings (Deficit)
Unearned Employee Benefits and Other
Accumulated Other Comprehensive Income
Common Stock in Treasury
Total Viad Equity
Non-Controlling Interest
Beginning Balance at Dec. 31, 2010
$ 386,711 
$ 37,402 
$ 606,902 
$ (19,229)
$ (4,433)
$ 28,851 
$ (270,534)
$ 378,959 
$ 7,752 
Net income
9,743 
 
 
9,210 
 
 
 
9,210 
533 
Payments of Ordinary Dividends, Common Stock
3,241 
 
 
 
 
 
 
 
 
Dividends on common stock
(3,241)
 
 
(3,241)
 
 
 
(3,241)
 
Common stock purchased for treasury
(5,230)
 
 
 
 
 
(5,230)
(5,230)
 
Employee benefit plans
295 
 
(11,086)
 
 
 
11,381 
295 
 
ESOP allocation adjustment
1,490 
 
 
 
1,490 
 
 
1,490 
 
Share-based compensation-equity awards
3,688 
 
3,688 
 
 
 
 
3,688 
 
Tax deficiencies from share-based compensation
(325)
 
(325)
 
 
 
 
(325)
 
Unrealized foreign currency translation adjustment
(4,331)
 
 
 
 
(4,331)
 
(4,331)
 
Unrealized gain (loss) on investments
(60)
 
 
 
 
(60)
 
(60)
 
Amortization of net actuarial loss
(1,777)
 
 
 
 
(1,777)
 
(1,777)
 
Amortization of prior service credit
(790)
 
 
 
 
(790)
 
(790)
 
Other, net
 
(8)
 
 
Ending Balance at Dec. 31, 2011
386,179 
37,402 
599,188 
(13,256)
(2,951)
21,893 
(264,382)
377,894 
8,285 
Net income
6,583 
 
 
5,897 
 
 
 
5,897 
686 
Payments of Ordinary Dividends, Common Stock
4,454 
 
 
 
 
 
 
 
 
Dividends on common stock
(5,674)
 
 
(5,674)
 
 
 
(5,674)
 
Common stock purchased for treasury
(1,656)
 
 
 
 
 
(1,656)
(1,656)
 
Employee benefit plans
248 
 
(9,456)
 
 
 
9,704 
248 
 
ESOP allocation adjustment
1,647 
 
 
 
1,647 
 
 
1,647 
 
Share-based compensation-equity awards
4,036 
 
4,036 
 
 
 
 
4,036 
 
Tax deficiencies from share-based compensation
96 
 
96 
 
 
 
 
96 
 
Unrealized foreign currency translation adjustment
7,510 
 
 
 
 
7,510 
 
7,510 
 
Unrealized gain (loss) on investments
53 
 
 
 
 
53 
 
53 
 
Amortization of net actuarial loss
(1,311)
 
 
 
 
(1,311)
 
(1,311)
 
Amortization of prior service credit
(680)
 
 
 
 
(680)
 
(680)
 
Other, net
 
(2)
(1)
 
 
Ending Balance at Dec. 31, 2012
397,032 
37,402 
593,862 
(13,034)
(1,301)
27,465 
(256,333)
388,061 
8,971 
Net income
21,686 
 
 
 
 
 
 
21,555 
131 
Payments of Ordinary Dividends, Common Stock
58,914 
 
 
 
 
 
 
 
 
Dividends on common stock
(58,914)
 
 
 
 
 
 
(58,914)
 
Common stock purchased for treasury
(1,328)
 
 
 
 
 
(1,328)
(1,328)
 
Employee benefit plans
778 
 
(6,456)
 
 
 
7,234 
778 
 
ESOP allocation adjustment
1,280 
 
 
 
1,280 
 
 
1,280 
 
Share-based compensation-equity awards
3,053 
 
3,053 
 
 
 
 
3,053 
 
Tax benefits from share-based compensation
404 
 
404 
 
 
 
 
404 
 
Tax deficiencies from share-based compensation
404 
 
 
 
 
 
 
 
 
Unrealized foreign currency translation adjustment
(11,311)
 
 
 
 
(11,311)
 
(11,311)
 
Unrealized gain (loss) on investments
154 
 
 
 
 
154 
 
154 
 
Amortization of net actuarial loss
4,244 
 
 
 
 
 
 
4,244 
 
Amortization of prior service credit
(535)
 
 
 
 
 
 
(535)
 
Other, net
 
(1)
   
 
 
Ending Balance at Dec. 31, 2013
$ 356,543 
$ 37,402 
$ 590,862 
$ (50,393)
$ (21)
$ 20,017 
$ (250,426)
$ 347,441 
$ 9,102 
Summary of Significant Accounting Policies
Summary of Significant Accounting Policies
Summary of Significant Accounting Policies
Basis of Presentation and Principles of Consolidation
The consolidated financial statements of Viad Corp (“Viad” or the “Company”) are prepared in conformity with accounting principles generally accepted in the United States of America (“GAAP”) and include the accounts of Viad and all of its subsidiaries. All intercompany account balances and transactions between Viad and its subsidiaries have been eliminated in consolidation.
Nature of Business
Viad’s reportable segments consist of Marketing & Events U.S., Marketing & Events International and Travel & Recreation Group.
Marketing & Events Group
The Marketing & Events Group, comprised of Global Experience Specialists, Inc. and affiliates (“GES”), specializes in all aspects of the design, planning and production of face-to-face events, immersive environments and brand-based experiences for clients, including show organizers, corporate brand marketers and retail shopping centers. In addition, the Marketing & Events Group provides a variety of immersive, entertaining attractions and brand-based experiences, sponsored events, mobile marketing and other branded entertainment and face-to-face marketing solutions for clients and venues, including shopping malls, movie studios, museums and leading consumer brands.
Travel & Recreation Group
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. 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 Lake National Park in Alberta, Canada. As discussed in Note 7 below, Glacier Park’s concession portion of its business with the U.S. National Park Service (the “Park Service”) for Glacier National Park expired on December 31, 2013. Thereafter, the ongoing operations of Glacier Park will 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, Alberta, Canada. 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.
Significant Accounting Policies
Use of Estimates. The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the amounts reported in the consolidated financial statements and accompanying notes. These estimates and assumptions include, but are not limited to:
Fair value of Viad’s reporting units used to perform annual impairment testing of recorded goodwill;
Allowances for uncollectible accounts receivable;
Provisions for income taxes, including uncertain tax positions;
Valuation allowances related to deferred tax assets;
Liabilities for losses related to self-insured liability claims;
Liabilities for losses related to environmental remediation obligations;
Sublease income associated with restructuring liabilities;
Assumptions used to measure pension and postretirement benefit costs and obligations;
Assumptions used to determine share-based compensation costs under the fair value method and
Allocation of purchase price of acquired businesses.
Actual results could differ from these and other estimates.
Cash and Cash Equivalents. Viad considers all highly-liquid investments with remaining maturities when purchased of three months or less to be cash equivalents. Viad’s cash and cash equivalents consist of cash and bank demand deposits, bank time deposits and money market mutual funds. The Company’s investments in money market mutual funds are classified as available-for-sale and carried at fair value.
Inventories. Inventories, which consist primarily of exhibit design and construction materials and supplies used in providing convention show services, are stated at the lower of cost (first-in, first-out and specific identification methods) or market.
Property and Equipment. Property and equipment are stated at cost, net of accumulated depreciation. Property and equipment are depreciated using the straight-line method over the estimated useful lives of the assets: buildings, 15 to 40 years; equipment, 3 to 12 years; and leasehold improvements, over the shorter of the lease term or useful life. Property and equipment are tested for potential impairment whenever events or changes in circumstances indicate that the carrying amount of the long-lived asset may not be recoverable through undiscounted cash flows.
Capitalized Software. Viad capitalizes certain internal and external costs incurred in developing or obtaining internal use software. Capitalized costs principally relate to costs incurred to purchase software from third parties, external direct costs of materials and services, and certain payroll-related costs for employees directly associated with software projects once application development begins. Costs associated with preliminary project activities, training and other post-implementation activities are expensed as incurred. Capitalized software costs are amortized using the straight-line method over the estimated useful lives of the software, ranging from three to ten years. These costs are included in the consolidated balance sheets under the caption “Property and equipment, net.”
Goodwill. Goodwill is tested for impairment at the reporting unit level on an annual basis on October 31 of each year. Goodwill is also tested for impairment between annual tests if an event occurs or circumstances change that would more-likely-than-not reduce the fair value of a reporting unit below its carrying amount. Viad uses a discounted expected future cash flow methodology (income approach) in order to estimate the fair value of its reporting units for purposes of goodwill impairment testing. The estimates and assumptions regarding expected future cash flows, discount rates and terminal values require considerable judgment and are based on market conditions, financial forecasts, industry trends and historical experience. These estimates, however, have inherent uncertainties and different assumptions could lead to materially different results.
Cash Surrender Value of Life Insurance. Viad has Company-owned life insurance contracts which are intended to fund the cost of certain employee compensation and benefit programs. These contracts are carried at cash surrender value, net of outstanding policy loans. The cash surrender value represents the amount of cash the Company could receive if the policies were discontinued before maturity. The changes in the cash surrender value of the policies, net of insurance premiums, are included as a component of “Costs of Services” in the consolidated statements of operations.
Self-Insurance Liabilities. Viad is self-insured up to certain limits for workers’ compensation, automobile, product and general liability, property loss and medical claims. Viad has also retained certain liabilities related to workers’ compensation and general liability insurance claims in conjunction with previously sold operations. Provisions for losses for claims incurred, including estimated claims incurred but not yet reported, are made based on Viad’s prior historical experience, claims frequency and other factors. Viad has purchased insurance for amounts in excess of the self-insured levels.
Environmental Remediation Liabilities. Viad has retained certain liabilities representing the estimated cost of environmental remediation obligations primarily associated with previously sold operations. The amounts accrued primarily consist of the estimated direct incremental costs, on an undiscounted basis, for contractor and other services related to remedial actions and post-remediation site monitoring. Environmental remediation liabilities are recorded when the specific obligation is considered probable and the costs are reasonably estimable. Subsequent recoveries from third parties, if any, are recorded through discontinued operations when realized.
Fair Value of Financial Instruments. The carrying values of cash and cash equivalents, receivables and accounts payable approximate fair value due to the short-term maturities of these instruments. The estimated fair value of debt obligations is disclosed in Note 9.
Foreign Currency Translation. Viad conducts its foreign operations primarily in Canada, the United Kingdom, Germany and to a lesser extent in certain other countries. The functional currency of Viad’s foreign subsidiaries is their local currency. Accordingly, for purposes of consolidation, Viad translates the assets and liabilities of its foreign subsidiaries into U.S. dollars at the foreign exchange rates in effect at the balance sheet date. The unrealized gains or losses resulting from the translation of these foreign denominated assets and liabilities are included as a component of accumulated other comprehensive income in Viad’s consolidated balance sheets. In addition, for purposes of consolidation, the revenues, expenses and gains and losses related to Viad’s foreign operations are translated into U.S. dollars at the average foreign exchange rates for the period.
Revenue Recognition. Viad recognizes revenue when persuasive evidence of an arrangement exists, delivery has occurred or services have been rendered, the sales price is fixed or determinable and collectability is reasonably assured. GES derives revenues primarily by providing show services to exhibitors participating in exhibitions and events and from the design, construction and refurbishment of exhibit booths and holiday themed environments. Service revenue is recognized at the time services are performed. Exhibits and environments revenue is accounted for using the completed-contract method as contracts are typically completed within 3 months of contract signing. The Travel & Recreation Group generates revenues through its attractions, hotels and transportation and sightseeing services. Revenues are recognized at the time services are performed.
Share-Based Compensation. Viad recognizes and measures compensation costs related to all share-based payment awards using the fair value method of accounting. These awards generally include restricted stock, performance-based restricted stock (“PBRS”), stock options and liability-based awards (including performance units, restricted stock units and performance-based restricted stock units). These awards contain forfeiture and non-compete provisions.
The fair value of restricted stock and PBRS awards are based on Viad’s stock price on the date of grant. Viad issues restricted stock and PBRS awards from shares held in treasury. Future vesting of restricted stock and PBRS is generally subject to continued employment with Viad or its subsidiaries. Holders of restricted stock and PBRS have the right to receive dividends and vote the shares, but may not sell, assign, transfer, pledge or otherwise encumber the stock, except to the extent restrictions have lapsed.
Restricted stock awards vest between three and five years from the date of grant. Share-based compensation expense related to restricted stock is recognized using the straight-line method over the requisite service period of approximately three years except for certain awards with a five-year vesting period whereby expense is recognized based on an accelerated multiple-award approach over a five-year period. For these awards, 40 percent of the shares vest on the third anniversary of the grant and the remaining shares vest in 30 percent increments over the subsequent two anniversary dates.
Liability-based awards (including restricted stock units and PBRS units awarded to key employees at certain of the Company’s Canadian operations) are recorded at estimated fair value, based on the number of units expected to vest and the level of achievement of predefined performance goals (where applicable) and are remeasured on each balance sheet date based on Viad’s stock price until the time of settlement. To the extent earned, liability-based awards are settled in cash based on Viad’s stock price. Compensation expense related to liability-based awards is recognized ratably over the requisite service period of approximately three years.
Share-based compensation expense related to PBRS awards is recognized based on an accelerated multiple-award approach over the requisite service period of approximately three years. PBRS vests when certain incentive performance targets established in the year of grant are achieved at target levels. PBRS is subject to a graded vesting schedule whereby one third of the earned shares vest after the first year and the remaining earned shares vest in one-third increments each year over the next two years on the first business day in January.
The fair value of each stock option grant is estimated on the date of grant using the Black-Scholes option pricing model. Share-based compensation expense related to stock option awards is recognized using the straight-line method over the requisite service period of approximately five years. The exercise price of stock options is based on the market value of Viad’s common stock at the date of grant.
Common Stock in Treasury. Common stock purchased for treasury is recorded at historical cost. Subsequent share reissuances are primarily related to share-based compensation programs and recorded at weighted-average cost.
Income Per Common Share. Viad applies the two-class method in calculating income per common share as unvested share-based payment awards that contain nonforfeitable rights to dividends are considered participating securities. Accordingly, such securities are included in the earnings allocation in calculating income per share. Furthermore, Viad funds its matching contributions to employees’ 401(k) accounts through the Company’s leveraged Employee Stock Ownership Plan (“ESOP”) feature of the Company’s 401(k) defined contribution plan. ESOP shares are treated as outstanding for income per share calculations.
Impact of Recent Accounting Pronouncements
In February 2013, the Financial Accounting Standards Board (“FASB”) issued new guidance related to the reporting of amounts reclassified out of accumulated other comprehensive income, 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 14 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 or results of operations.
In January 2014, the FASB issued new guidance, which is codified in ASC 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 annual periods and interim periods beginning after December 15, 2014. Viad has not yet determined if the adoption of this new guidance will have a material impact on its financial condition or results of operations.
Share-Based Compensation
Share-Based Compensation
Share-Based Compensation
Viad grants share-based compensation awards to officers, directors and certain key employees pursuant to the 2007 Viad Corp Omnibus Incentive Plan (the “2007 Plan”). The 2007 Plan has a 10-year life and provides for the following types of awards: (a) incentive and non-qualified stock options; (b) restricted stock and restricted stock units; (c) performance units or performance shares; (d) stock appreciation rights; (e) cash-based awards and (f) certain other stock-based awards. The number of shares of common stock available for grant under the 2007 Plan is limited to 1.7 million shares plus shares awarded under the 1997 Viad Corp Omnibus Incentive Plan (which terminated in May 2007) (the “1997 Plan”) that subsequently cease for any reason to be subject to such awards (other than by reason of exercise or settlement of the awards to the extent the shares are exercised for, or settled in, vested and non-forfeited shares) up to an aggregate maximum of 1.5 million shares. As of December 31, 2013, there were 983,971 total shares available for future grant.
The following table summarizes share-based compensation expense:
(in thousands)
2013
 
2012
 
2011
Restricted stock/PBRS
$
3,073

 
$
3,267

 
$
3,042

Performance unit incentive plan (“PUP”)
1,864

 
2,922

 
714

Restricted stock units/PBRS units
177

 
450

 
120

Stock options
107

 
593

 
537

Total share-based compensation before income tax benefit
5,221

 
7,232

 
4,413

Income tax benefit
(1,936
)
 
(2,574
)
 
(1,594
)
Total share-based compensation, net of income tax benefit
$
3,285

 
$
4,658

 
$
2,819


In addition, $676,000, $253,000 and $124,000 of costs associated with share-based compensation were included in restructuring expense in 2013, 2012 and 2011, respectively. Of the 2013 amount, $154,000 and $329,000 related to the restricted stock units and PUP awards presented below, respectively. Similarly, of the 2012 amount, $94,000 related to PUP awards. No share-based compensation costs were capitalized during 2013, 2012 or 2011.
On October 25, 2013, Viad announced that its Board of Directors declared a special cash dividend of $2.50 per share, or $50.8 million in the aggregate, which was paid on November 14, 2013. In accordance with the mandatory provisions of the 2007 Plan and the 1997 Plan, the Human Resources Committee of Viad’s Board of Directors approved equitable adjustments to outstanding long-term incentive awards of stock options and PUP awards issued pursuant to those plans in order to prevent the special dividends from diluting the rights of participants under those plans. The equitable adjustments 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 dividends, but would be paid only if certain performance goals are met at the end of the 3-year performance period.
Restricted Stock and PBRS. The following table summarizes restricted stock and PBRS activity:
 
Restricted Stock
 
PBRS
 
Shares
 
Weighted-Average
Grant Date
Fair Value
 
Shares
 
Weighted-Average
Grant Date
Fair Value
Balance at January 1, 2011
478,499

 
$
21.51

 
18,830

 
$
33.02

Granted
191,850

 
22.70

 

 

Vested
(91,212
)
 
31.31

 
(18,414
)
 
33.42

Forfeited
(7,115
)
 
20.81

 

 

Balance, December 31, 2011
572,022

 
20.36

 
416

 
15.36

Granted
168,050

 
20.46

 

 

Vested
(219,571
)
 
18.26

 
(416
)
 
15.36

Forfeited
(4,150
)
 
24.80

 

 

Balance, December 31, 2012
516,351

 
21.25

 

 

Granted
101,300

 
27.27

 

 

Vested
(166,320
)
 
20.83

 

 

Forfeited
(20,432
)
 
22.13

 

 

Balance, December 31, 2013
430,899

 
22.78

 

 


The grant date fair value of restricted stock which vested during 2013, 2012 and 2011 was $3.5 million, $4.0 million and $2.9 million, respectively. The grant date fair value of PBRS which vested during 2012 and 2011 was $6,000 and $615,000, respectively. No PBRS vested during 2013. As of December 31, 2013, the unamortized cost of all outstanding stock awards was $3.2 million, which Viad expects to recognize in the consolidated financial statements over a weighted-average period of approximately 1.7 years. During 2013, 2012 and 2011, the Company repurchased 50,156 shares for $1.3 million, 56,885 shares for $1.1 million and 28,627 shares for $679,000, respectively, related to tax withholding requirements on vested share-based awards.
Liability-Based Awards. The following table summarizes the liability-based award activity:
 
PUP Awards
 
Restricted Stock Units
 
PBRS Units
 
Units
 
Weighted-Average
Grant Date
Fair Value
 
Units
 
Weighted-Average
Grant Date
Fair Value
 
Units
 
Weighted-Average
Grant Date
Fair Value
Balance at January 1, 2011
102,960

 
$
33.81

 
26,050

 
$
17.18

 
3,914

 
$
15.36

Granted
95,500

 
23.02

 
12,550

 
23.01

 

 

Vested

 

 

 

 
(1,958
)
 
15.36

Forfeited
(102,960
)
 
33.81

 

 

 

 

Balance, December 31, 2011
95,500

 
23.02

 
38,600

 
19.07

 
1,956

 
15.36

Granted
115,100

 
20.60

 
15,850

 
20.57

 

 

Vested

 

 
(13,100
)
 
15.36

 
(1,956
)
 
15.36

Forfeited

 

 
(850
)
 
20.89

 

 

Balance, December 31, 2012
210,600

 
21.70

 
40,500

 
20.82

 

 

Granted
93,100

 
27.35

 
8,600

 
27.35

 

 

Vested

 

 
(11,300
)
 
19.10

 

 

Forfeited
(3,932
)
 
21.15

 
(9,240
)
 
22.55

 

 

Balance, December 31, 2013
299,768

 
23.46

 
28,560

 
22.91

 

 


As of December 31, 2013 and 2012, Viad had liabilities recorded of $5.9 million and $3.7 million, respectively, related to PUP awards. There were no cash settlements of PUP awards during 2013 or 2012. As of December 31, 2013 and 2012, Viad had aggregate liabilities recorded of $664,000 and $633,000, respectively, related to restricted stock unit liability awards. In February 2013 and 2012, portions of the 2009 and 2010 restricted stock unit awards vested and cash payouts of $300,000 and $257,000 were distributed, respectively. A portion of the 2009 PBRS unit awards vested effective December 31, 2009 and cash payouts of $35,000 and $52,000 were distributed in January 2012 and 2011, respectively.
Stock Options. The following table summarizes stock option activity:
 
Shares
 
Weighted-
Average
Exercise Price
 
Options
Exercisable
Options outstanding at January 1, 2011
763,794

 
$
23.38

 
451,194

Exercised
(14,616
)
 
20.14

 
 
Forfeited or expired
(164,977
)
 
23.88

 
 
Options outstanding at December 31, 2011
584,201

 
23.32

 
396,688

Exercised
(12,099
)
 
19.41

 
 
Forfeited or expired
(208,206
)
 
25.81

 
 
Options outstanding at December 31, 2012
363,896

 
22.03

 
276,009

Exercised
(59,543
)
 
19.42

 
 
Forfeited or expired(1)
(15,853
)
 
40.45

 
 
Award modification
25,823

 
N/A

 
 
Options outstanding at December 31, 2013
314,323

 
19.79

 
314,323


(1) This includes the reversal of previously canceled stock options.
As of December 31, 2013, there were no unrecognized costs related to non-vested stock option awards. No stock options were granted in 2013, 2012 or 2011. As previously discussed above, the equitable adjustments to the outstanding stock options resulting from the special cash dividend paid on November 14, 2013 reduced the exercise price and increased the number of shares of common stock underlying such options.
The following table summarizes information concerning stock options outstanding and exercisable as of December 31, 2013:
 
Options Outstanding
 
Options Exercisable
 
 
 
Weighted-Average
Remaining Contractual Life (in years)
 
Weighted-
Average Exercise Price
 
 
 
Weighted-
Average Exercise Price
Range of Exercise Prices:
Shares
 
 
 
Shares
 
$17.62
262,788

 
5.7
 
$
17.62

 
262,788

 
$
17.62

$22.85
10,895

 
1.9
 
22.85

 
10,895

 
22.85

$31.03
22,118

 
1.2
 
31.03

 
22,118

 
31.03

$35.28
18,522

 
0.1
 
35.28

 
18,522

 
35.28

$17.62 to $35.28
314,323

 
5.1
 
19.79

 
314,323

 
19.79


Additional information pertaining to stock options is provided in the table below:
(in thousands)
2013
 
2012
 
2011
Total intrinsic value of stock options outstanding
$
2,723

 
$
2,329

 
$

Total intrinsic value of stock options exercised
$
1,611

 
$
296

 
$
325

Fair value of stock options vested
$
532

 
$
539

 
$
682

Cash received from the exercise of stock options
$
777

 
$
248

 
$
296

Tax benefits (deficiencies) realized for tax deductions related to stock option exercises and performance-based awards
$
404

 
$
96

 
$
(325
)

The aggregate intrinsic value of stock options outstanding in the table above represents the difference between Viad’s closing stock price on December 31 of each year and the exercise price, multiplied by the number of in-the-money options. The intrinsic value of stock options outstanding therefore changes based on changes in the fair market value of Viad’s common stock.
Acquisition of Businesses
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.
In September 2011, Viad acquired the Denali Backcountry Lodge and Denali Cabins for $15.3 million in cash. Denali Backcountry Lodge is a 42-guest room lodge located within Denali National Park and Preserve in Alaska and Denali Cabins consist of 46 guest cabins near the entrance to Denali National Park and Preserve. These properties are operated by Alaska Denali Travel within the Travel & Recreation Group. The Company recorded $3.2 million of goodwill in connection with the transaction. The amount assigned to other intangible assets of $626,000 relates to customer relationships.
In June 2011, Viad acquired St. Mary Lodge (“St. Mary”) for $15.3 million in cash. St. Mary is a 115-guest room hotel located outside of Glacier National Park’s east entrance and is operated by Glacier Park within the Travel & Recreation Group. The Company recorded $3.1 million of goodwill in connection with the transaction. The amount assigned to other intangible assets of $60,000 relates to a non-amortized business license.
In January 2011, Viad acquired Grouse Mountain Lodge for $10.5 million in cash. Grouse Mountain Lodge is located in Whitefish, Montana and is operated by Glacier Park within the Travel & Recreation Group. The Company recorded $1.3 million of goodwill in connection with the transaction. The amount assigned to other intangible assets of $400,000 relates to a non-amortized business license.
The following information represents the aggregate amounts assigned to the assets and liabilities of the acquisitions that occurred during 2011:
(in thousands)
 
Cash and cash equivalents
$
30

Other current assets
870

Property and equipment
32,905

Goodwill
7,645

Other intangible assets
1,086

Total assets acquired
42,536

Customer deposits
(821
)
Other current liabilities
(198
)
Other long-term liabilities
(382
)
Total liabilities acquired
(1,401
)
Purchase price
$
41,135


The primary factor that contributed to the recognition of goodwill for the 2011 acquisitions relates to future growth opportunities. The acquired goodwill is included in the Travel & Recreation Group and is deductible for tax purposes over a period of 15 years. The transaction costs related to the acquisitions were insignificant. The results of operations of the acquisitions have been included in Viad’s consolidated financial statements from the date of each acquisition. See Note 7 for a discussion of impairment charges on goodwill.
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 year:
(in thousands, except per share data)
2013
 
2012
 
2011
Revenue
$
973,039

 
$
1,027,107

 
$
956,570

Depreciation and amortization
28,697

 
31,131

 
30,648

Segment operating income
45,919

 
41,859

 
28,602

Income from continuing operations
20,444

 
5,269

 
10,674

Net income attributable to Viad
21,572

 
5,893

 
11,125

Diluted net income per share
1.06

 
0.29

 
0.45

Basic net income per share
1.06

 
0.29

 
0.45

Inventories
Inventories
Inventories
The components of inventories as of December 31 were as follows:
(in thousands)
2013
 
2012
Raw materials
$
14,825

 
$
16,422

Work in process
13,168

 
19,234

Inventories
$
27,993

 
$
35,656

Property and Equipment
Property and Equipment
Property and Equipment
In August 2013, Viad sold a facility and the land upon which it was situated within the Marketing & Events Group for $12.7 million (net of selling costs). Viad recorded a gain on the sale of the facility and related land of $4.8 million.
Property and equipment as of December 31 consisted of the following:
(in thousands)
2013
 
2012
Land and land interests
$
23,646

 
$
26,124

Buildings and leasehold improvements
139,889

 
137,293

Equipment and other
294,409

 
310,448

Gross property and equipment
457,944

 
473,865

Accumulated depreciation
(267,614
)
 
(276,567
)
Property and equipment, net
$
190,330

 
$
197,298


Included in the “Equipment and other” caption above are capitalized costs incurred in developing or obtaining internal use software. The net carrying amount of capitalized software was $13.9 million and $14.2 million as of December 31, 2013 and 2012, respectively.
Included in the “Land and land interests” caption above are certain leasehold interests in land within the Travel & Recreation Group for which the Company is considered to have perpetual use rights. The carrying amount of these leasehold interests was $10.0 million and $10.6 million at December 31, 2013 and 2012, respectively. These land interests are not subject to amortization.
Depreciation expense was $27.4 million, $30.0 million and $28.4 million for 2013, 2012 and 2011, respectively. During 2013, Viad recorded impairment charges of $952,000 at the Marketing & Events Group related to the write off of a touring exhibition asset and amounts capitalized for internally developed software that is not anticipated to be put into use. These impairment losses are included in the consolidated statements of operations under the caption “Other impairment charges.”
Other Investments and Assets
Other Investments and Assets
Other Investments and Assets
As of December 31 other investments and assets consisted of the following:
(in thousands)
2013
 
2012
Cash surrender value of life insurance
$
19,690

 
$
19,142

Workers’ compensation insurance security deposits
3,350

 
3,350

Other
11,986

 
9,924

Total other investments and assets
$
35,026

 
$
32,416

Goodwill and Other Intangible Assets
Goodwill and Other Intangible Assets
Goodwill and other Intangible Assets
In August 2013, Viad was notified by the Park Service that the concession contract for Glacier National Park, commencing in 2014, was awarded to another concessionaire. As a result, management revised its outlook for future revenues and earnings from Glacier Park and performed an impairment evaluation of goodwill at the Glacier Park reporting unit. Based on this evaluation, the Company recorded a non-cash impairment charge of $4.5 million representing all goodwill at the Glacier Park reporting unit, of which $892,000 related to the noncontrolling interest. The goodwill impairment loss is included in the consolidated statements of operations under the caption “Goodwill impairment charge.”
The changes in the carrying amount of goodwill were as follows:
(in thousands)
Marketing &
Events U.S.
 
Marketing &
Events
International
 
Travel &
Recreation
Group
 
Total
Balance at January 1, 2012
$
62,686

 
$
22,198

 
$
48,810

 
$
133,694

Business acquisitions

 

 
1,890

 
1,890

Foreign currency translation adjustments

 
856

 
1,380

 
2,236

Balance at December 31, 2012
62,686

 
23,054

 
52,080

 
137,820

Goodwill impairment charge

 

 
(4,461
)
 
(4,461
)
Business acquisition

 
158

 

 
158

Foreign currency translation adjustments

 
(601
)
 
(3,373
)
 
(3,974
)
Balance at December 31, 2013
$
62,686

 
$
22,611

 
$
44,246

 
$
129,543


The following table summarizes goodwill by reporting unit and segment as of December 31:
(in thousands)
2013
 
2012
Marketing & Events Group:
 
 
 
Marketing & Events U.S.
$
62,686

 
$
62,686

Marketing & Events International:
 
 
 
GES United Kingdom
14,049

 
13,894

GES Canada
8,562

 
9,160

Total Marketing & Events Group
85,297

 
85,740

Travel & Recreation Group:
 
 
 
Brewster
41,062

 
44,435

Alaska Denali Travel
3,184

 
3,184

Glacier Park

 
4,461

Total Travel & Recreation Group
44,246

 
52,080

Total Goodwill
$
129,543

 
$
137,820


For impairment testing purposes, the goodwill related to the Marketing & Events U.S. segment is assigned to and tested at the operating segment level. Furthermore, the goodwill related to the Marketing & Events International segment is assigned to and tested based on the segment’s geographical operations. For the Marketing & Events International segment the reporting units are GES United Kingdom and GES Canada. Brewster, Glacier Park and Alaska Denali Travel are considered reporting units for goodwill impairment testing purposes within the Travel & Recreation Group.
As a result of the Company’s most recent analysis performed in October 2013, the excess of the estimated fair values over the carrying values (expressed as a percentage of the carrying amounts) under step one of the impairment test was 139 percent, 58 percent and 59 percent for each of the Marketing & Events Group reporting units in the United States, the United Kingdom and Canada, respectively. For the Brewster and Alaska Denali Travel reporting units, the excess of the estimated fair value over the carrying value was 54 percent and 15 percent, respectively, as of the most recent impairment test. Significant reductions in the Company’s expected future revenues, operating income or cash flow forecasts and projections, or an increase in reporting unit cost of capital, could trigger additional impairment testing, which may result in impairment charges.
As of December 31, 2013, Viad had cumulative goodwill impairment charges of $229.7 million since the adoption of the goodwill impairment testing provisions of ASC Topic 350.
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

Total
$
7,277

 
$
(2,797
)
 
$
4,480


A summary of other intangible assets as of December 31, 2012 is presented below:
(in thousands)
Gross Carrying
Value
 
Accumulated
Amortization
 
Net Carrying
Value
Amortized intangible assets:
 
 
 
 
 
Customer contracts and relationships
$
3,594

 
$
(2,384
)
 
$
1,210

Other
959

 
(108
)
 
851

Total amortized intangible assets
4,553

 
(2,492
)
 
2,061

Unamortized intangible assets:
 
 
 
 
 
Business licenses
460

 

 
460

Total
$
5,013

 
$
(2,492
)
 
$
2,521


Intangible asset amortization expense for 2013, 2012 and 2011 was $1.3 million, $693,000 and $772,000, respectively. The weighted-average amortization period of customer contracts and relationships and other amortizable intangible assets is approximately 5.2 years and 1.8 years, respectively. Estimated amortization expense related to amortized intangible assets for future years is expected to be as follows:
(in thousands)
 
2014
$
996

2015
$
795

2016
$
671

2017
$
553

2018
$
442

Thereafter
$
563

Accrued Liabilities and Other
Accrued Liabilities and Other
As of December 31 other current liabilities consisted of the following:
(in thousands)
2013
 
2012
Continuing operations:
 
 
 
Customer deposits
$
29,207

 
$
50,172

Accrued compensation
15,113

 
25,067

Self-insured liability accrual
7,603

 
8,501

Accrued restructuring
3,877

 
4,084

Accrued employee benefit costs
2,751

 
3,132

Accrued dividends
2,192

 
2,053

Accrued sales and use taxes
1,609

 
3,179

Accrued foreign income taxes
565

 
28

Other
9,573

 
9,998

Total continuing operations
72,490

 
106,214

Discontinued operations:
 
 
 
Self-insured liability accrual
469

 
527

Environmental remediation liabilities
353

 
571

Other
177

 
372

Total discontinued operations
999

 
1,470

Total other current liabilities
$
73,489

 
$
107,684


As of December 31 other deferred items and liabilities consisted of the following:
(in thousands)
2013
 
2012
Continuing operations:
 
 
 
Self-insured liability accrual
$
17,316

 
$
15,579

Accrued compensation
8,349

 
8,061

Foreign deferred tax liability
1,989

 
2,024

Accrued restructuring
1,919

 
3,140

Other
7,552

 
6,734

Total continuing operations
37,125

 
35,538

Discontinued operations:
 
 
 
Environmental remediation liabilities
4,666

 
4,745

Self-insured liability accrual
4,489

 
5,188

Accrued income taxes
1,085

 
1,053

Other
1,254

 
1,304

Total discontinued operations
11,494

 
12,290

Total other deferred items and liabilities
$
48,619

 
$
47,828

Debt
Debt
Long-term debt as of December 31 was as follows:
(in thousands, except interest rates)
2013
 
2012
Revolving credit agreement, 2.2% (2013) weighted-average interest rate at December 31, 2013

$
10,000

 
$

Capital lease obligations, 6.9% (2013) and 6.4% (2012) weighted-average interest rate at December 31, due to 2017
1,668

 
2,226

Total debt
11,668

 
2,226

Current portion
(10,903
)
 
(1,347
)
Long-term capital lease obligations
$
765

 
$
879


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 December 31, 2013, Viad’s total debt of $11.7 million consisted of a $10 million revolver borrowing on the Credit Facility and $1.7 million of capital lease obligations. As of December 31, 2013, Viad had $118.7 million of capacity remaining under its Credit Facility reflecting outstanding letters of credit of $1.3 million and the outstanding balance under the Credit Facility of $10 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 December 31, 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.
Effective November 14, 2013, the Credit Facility was amended to remove the liquidity covenant that required Viad to maintain at all times not less than $50 million of unrestricted cash and cash equivalent investments, as that term is defined in the Credit Facility. With the amendment, the Credit Facility no longer requires any minimum amount of unrestricted cash and cash equivalent investments.
As of December 31, 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 the Company’s subsidiary operations. The Company would generally be required to make payments to the respective third parties under these guarantees in the event that the related subsidiary could not meet its own payment obligations. The maximum potential amount of future payments that Viad would be required to make under all guarantees existing as of December 31, 2013 would be $13.7 million. These guarantees relate to leased facilities and expire through October 2017. There are no recourse provisions that would enable Viad to recover from third parties any payments made under the guarantees. Furthermore, there are no collateral or similar arrangements whereby Viad could recover payments.
Aggregate annual maturities of long-term debt and capital lease obligations as of December 31, 2013 are as follows:
(in thousands)
Revolving Credit Agreement
 
Capital Lease Obligations
2014
$
10,000

 
$
984

2015

 
609

2016

 
186

2017

 
32

2018

 
2

Total
$
10,000

 
1,813

Less: Amount representing interest
 
 
(145
)
Present value of minimum lease payments
 
 
$
1,668


The gross amount of assets recorded under capital leases as of December 31, 2013 was $3.9 million and accumulated amortization was $2.1 million. As of December 31, 2012, the gross amount of assets recorded under capital leases and accumulated amortization was $5.9 million and $2.9 million, respectively. The amortization charges related to assets recorded under capital leases are included in depreciation expense. See Note 5.
The weighted-average interest rate on total debt was 4.2 percent, 8.5 percent and 7.8 percent for 2013, 2012 and 2011, respectively. The estimated fair value of total debt was $11.5 million and $2.1 million as of December 31, 2013 and 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.
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)
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 on a recurring basis
$
2,141

 
$
2,141

 
$

 
$

 
 
 
Fair Value Measurements at Reporting Date Using
(in thousands)
December 31, 2012
 
Quoted Prices
in Active
Markets
(Level 1)
 
Significant
Other
Observable
Inputs
(Level 2)
 
Significant
Unobserved
Inputs
(Level 3)
Assets:
 
 
 
 
 
 
 
Money market funds
$
10,177

 
$
10,177

 
$

 
$

Other mutual funds
1,239

 
1,239

 

 

Total assets at fair value on a recurring basis
$
11,416

 
$
11,416

 
$

 
$


As of December 31, 2013 and 2012, Viad had investments in money market mutual funds of $118,000 and $10.2 million, respectively, which are included in the consolidated balance sheets under the caption “Cash and cash equivalents.” These investments are classified as available-for-sale and were recorded at fair value. There have been no realized or unrealized gains or losses related to these investments and the Company has not experienced any redemption restrictions with respect to any of the money market mutual funds.
As of December 31, 2013 and 2012, Viad had investments in other mutual funds of $2.0 million and $1.2 million, respectively, which are classified in the consolidated balance sheets under the caption “Other investments and assets.” These investments were classified as available-for-sale and were recorded at fair value. As of December 31, 2013 and 2012, there were unrealized gains of $700,000 ($429,000 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.
During 2013, Viad had certain non-financial assets that were measured at fair value on a non-recurring basis using Level 3 inputs. These assets include goodwill and certain property and equipment for which impairment losses were recorded during 2013. The fair value information related to these assets is summarized in the following table:
 
 
 
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)
 
Total Gains (Losses)
Assets:
 
 
 
 
 
 
 
 
 
Goodwill (1)
$

 
$

 
$

 
$

 
$
(4,461
)
Property and equipment(1)

 

 

 

 
(952
)
Total assets at fair value on a non-recurring basis
$

 
$

 
$

 
$

 
$
(5,413
)
(1) See Notes 5 and 7 for details of the impairment charges.
Income Per Share
Income Per Share
Income Per Share
The following are the components of basic and diluted income per share:
(in thousands, except per share data)
2013
 
2012
 
2011
Net income attributable to Viad (diluted)
$
21,555

 
$
5,897

 
$
9,210

Less: Allocation to non-vested shares
(485
)
 
(157
)
 
(248
)
Net income allocated to Viad common stockholders (basic)
$
21,070

 
$
5,740

 
$
8,962

Basic weighted-average outstanding common shares
19,850

 
19,701

 
19,719

Additional dilutive shares related to share-based compensation
415

 
304

 
336

Diluted weighted-average outstanding shares
20,265

 
20,005

 
20,055

Income per share:
 
 
 
 
 
Basic income attributable to Viad common stockholders
$
1.06

 
$
0.29

 
$
0.45

Diluted income attributable to Viad common stockholders(1)
$
1.06

 
$
0.29

 
$
0.45

(1) Diluted income per share amount cannot exceed basic income per share.
Options to purchase 47,000, 110,000 and 304,000 shares of common stock were outstanding during 2013, 2012 and 2011, respectively, but were not included in the computation of dilutive shares outstanding because the effect would be anti-dilutive. Additionally, 415,000, 304,000 and 336,000 share-based compensation awards were considered dilutive and included in the computation of diluted income per share in 2013, 2012 and 2011, respectively.
Employee Stock Ownership Feature of 401Plan
Employee Stock Ownership Feature of 401(k) Plan
Employee Stock Ownership Feature of 401(k) Plan
Viad funds its matching contributions to employees’ 401(k) accounts through the Company’s ESOP portion of the Viad Corp Capital Accumulation Plan (the “401(k) Plan”). All eligible employees of Viad and its participating affiliates, other than certain employees covered by collective-bargaining agreements that do not expressly provide for participation of such employees in an employee stock ownership plan, may participate in the employee stock ownership feature within the 401(k) Plan.
In 1989, the ESOP borrowed $40.0 million (guaranteed by Viad) to purchase treasury shares from the Company. In 2004, Viad borrowed $12.2 million under its revolving credit agreement to pay in full the outstanding ESOP loan and obtain release of Viad from its guarantee of the loan. In connection with the loan payoff, the ESOP entered into a $12.4 million loan with Viad maturing in June 2009 calling for minimum quarterly principal payments of $250,000 plus interest. The same amount, representing unearned employee benefits, was recorded as a reduction of stockholders’ equity. In 2007, the loan agreement between the ESOP and Viad was extended to December 31, 2016. As of December 31, 2013, the balance of the ESOP loan was $44,000 and is included in the consolidated balance sheets under the caption “Unearned employee benefits and other.” The liability is reduced as the ESOP makes principal payments on the borrowing, and the amount offsetting stockholders’ equity is reduced as stock is allocated to employees and benefits are charged to expense. The 401(k) Plan repays the loan using Viad contributions and dividends received on the unallocated Viad shares held by the 401(k) Plan.
Information regarding ESOP transactions is as follows:
(in thousands)
2013
 
2012
 
2011
Amounts paid by ESOP for:
 
 
 
 
 
Debt repayment
$
1,280

 
$
1,647

 
$
1,490

Interest
1

 
5

 
8

Amounts received from Viad as:
 
 
 
 
 
Contributions
1,202

 
1,604

 
1,435

Dividends
79

 
48

 
63


Shares were released for allocation to participants based upon the ratio of the current year’s principal and interest payments to the sum of the total principal and interest payments expected over the remaining life of the loan. Viad recorded expense of $1.3 million, $1.7 million and $1.6 million in 2013, 2012 and 2011, respectively.
Unallocated shares held by the 401(k) Plan totaled 4,361 and 130,577 as of December 31, 2013 and 2012, respectively. Shares allocated during 2013 and 2012 totaled 126,216 and 162,703, respectively. In January 2014, the 4,361 shares remaining in the ESOP as of December 31, 2013 had been fully exhausted. Future matching contributions on employee deferrals will be made from shares held in treasury.
Preferred Stock Purchase Rights
Preferred Stock Purchase Rights
Preferred Stock Purchase Rights
Viad has authorized five million and two million shares of Preferred Stock and Junior Participating Preferred Stock, respectively, none of which was outstanding on December 31, 2013.
On February 28, 2013, Viad’s shareholder rights plan (the “Rights Agreement”), as adjusted in connection with Viad’s one-for-four reverse stock split on July 1, 2004 and as amended on February 28, 2012, terminated on its own terms and the Preferred Stock Purchase Rights issued pursuant to the Rights Agreement expired.
Accumulated Other Comprehensive Income (Notes)
Accumulated Other Comprehensive Income
Accumulated Other Comprehensive Income
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 January 1, 2013
 
$
275

 
$
42,158

 
$
(14,968
)
 
$
27,465

Other comprehensive income before reclassifications
 
215

 
(11,311
)
 
3,421

 
(7,675
)
Amounts reclassified from AOCI, net of tax
 
(61
)
 

 
288

 
227

Net other comprehensive income (loss)
 
154

 
(11,311
)
 
3,709

 
(7,448
)
Balance at December 31, 2013
 
$
429

 
$
30,847

 
$
(11,259
)
 
$
20,017


The following table presents information about reclassification adjustments out of AOCI:
(in thousands)
 
2013
 
2012
 
Affected Line Item in the Statement Where Net Income is Presented
Unrealized gains on investments
 
$
99

 
$
92

 
Interest income
Tax effect
 
(38
)
 
(35
)
 
Income taxes
 
 
$
61

 
$
57

 
Net of tax
 
 
 
 
 
 
 
Recognized net actuarial loss
 
$
(1,349
)
 
$
(1,239
)
 
See Note 16
Amortization of prior service credit
 
902

 
1,113

 
See Note 16
Tax effect
 
159

 
42

 
Income taxes
 
 
$
(288
)
 
$
(84
)
 
Net of tax
Income Taxes
Income Taxes

The following represents a reconciliation of income tax expense and the amount that would be computed using the statutory federal income tax rates:
(in thousands)
2013
 
2012
 
2011
Computed income tax expense at statutory federal income tax rate of 35%
$
10,201

 
35.0
 %
 
$
9,381

 
35.0
 %