PURSUIT ATTRACTIONS & HOSPITALITY, INC.
10-Ks and 10-Qs
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Table of Contents
As filed
with the Securities and Exchange Commission on March 4,
2011
UNITED STATES
SECURITIES AND EXCHANGE
COMMISSION
Washington, D.C.
20549
Form 10-K
| (Mark One) | ||
|
þ
|
ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 | |
| For the fiscal year ended December 31, 2010 | ||
|
or
|
||
|
o
|
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 | |
| For the transition period from to | ||
Commission file number:
001-11015
VIAD CORP
(Exact name of registrant as
specified in its charter)
| Delaware | 36-1169950 | ||
|
State or other jurisdiction
of
incorporation or organization |
(I.R.S. Employer
Identification No.) |
||
|
1850 North Central Avenue, Suite 800
Phoenix, Arizona |
85004-4545 |
||
| (Address of principal executive offices) | (Zip Code) |
Registrant’s telephone number, including area code:
(602) 207-4000
Securities registered pursuant to Section 12(b) of the
Act:
|
Title of each class
|
Name of each exchange on which registered
|
|
|
Common Stock, $1.50 par value
|
New York Stock Exchange | |
|
Preferred Stock Purchase Rights
|
New York Stock Exchange |
Securities registered pursuant to Section 12(g) of the
Act: None
Indicate by check mark if the registrant is a well-known
seasoned issuer, as defined by Rule 405 of the Securities
Act. Yes
þ
No
o
Indicate by check mark if the registrant is not required to file
reports pursuant to Section 13 or 15(d) of the
Act. Yes
o
No
þ
Indicate by check mark whether the registrant (1) has filed
all reports required to be filed by Section 13 or 15(d) of
the Securities Exchange Act of 1934 during the preceding
12 months (or for such shorter period that the registrant
was required to file such reports), and (2) has been
subject to such filing requirements for the past
90 days. Yes
þ
No
o
Indicate by check mark whether the registrant has submitted
electronically and posted on its corporate Website, if any,
every Interactive Data File required to be submitted and posted
pursuant to Rule 405 of
Regulation S-T
(§ 232.405 of this chapter) during the preceding
12 months (or for such shorter period that the registrant
was required to submit and post such
files.) Yes
o
No
o
Indicate by check mark if disclosure of delinquent filers
pursuant to Item 405 of
Regulation S-K
is not contained herein, and will not be contained, to the best
of registrant’s knowledge, in definitive proxy or
information statements incorporated by reference in
Part III of this
Form 10-K
or any amendment to this
Form 10-K.
o
Indicate by check mark whether the registrant is a large
accelerated filer, an accelerated filer, a non-accelerated
filer, or a smaller reporting company. See the definitions of
“large accelerated filer,” “accelerated
filer” and “smaller reporting company” in
Rule 12b-2
of the Exchange Act. (Check one):
|
Large accelerated
filer
o
|
Accelerated filer þ |
Non-accelerated
filer
o
(Do not check if a smaller reporting company) |
Smaller reporting company o |
Indicate by check mark whether the registrant is a shell company
(as defined in
Rule 12b-2
of the
Act). Yes
o
No
þ
The aggregate market value of the Common Stock (based on its
closing price per share on such date) held by non-affiliates on
the last business day of the registrant’s most recently
completed second fiscal quarter (June 30, 2010) was
approximately $353 million.
Registrant had 20,214,320 shares of Common Stock
($1.50 par value) outstanding as of January 31, 2011.
Documents
Incorporated by Reference
A portion of the Proxy Statement for the Annual Meeting of
Shareholders of Viad Corp to be held May 17, 2011 is
incorporated by reference into Part III of this Annual
Report.
INDEX
Table of Contents
| Item 1. | Business. |
Viad Corp (together with its subsidiaries, “Viad” or
the “Company”) derives its revenues from services
provided primarily within the exhibition and events industry and
travel and recreation industry. Viad occupies leading positions
as a value added service provider in many of the markets in
which it competes. Viad serves clients predominantly in North
America, the United Kingdom, Germany and the United Arab
Emirates.
Viad organizes its businesses into two main operating groups:
Marketing & Events Group.
The
Marketing & Events Group 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. The mission of the
Marketing & Events Group is to create the world’s
most meaningful and memorable experiences for brand marketers,
show organizers, event attendees and retail shopping centers.
Show organizers include for-profit and
not-for-profit
show owners as well as show management companies. Corporate
brand marketers include exhibitors and domestic and
international corporations which want to promote their brand,
feature new products, services and innovations, and build
business relationships. Retail shopping centers include major
developers, owners and management companies of shopping malls
and lifestyle centers.
Travel & Recreation
Group.
The Travel & Recreation
Group generates its revenues from tourism products and services
including world-class attractions, hotel and concession
operations, transportation services and package tour operations
in and around Western Canada, Glacier National Park in Montana
and Waterton Lakes National Park in Alberta, Canada.
Viad’s two business groups are supported by a centralized
Corporate Services Group, which provides functional support in
the areas of human resources, legal, finance and accounting,
internal auditing, information technology, corporate
development, real estate and tax.
Reportable
Segments
With the two business groups, Viad’s organizational
structure, operational decision-making authority, allocation of
resources and internal reporting are aligned into the following
reportable business segments:
| • | Marketing & Events U.S . segment; | |
| • | Marketing & Events International segment; and | |
| • | Travel & Recreation Group segment. |
No reportable segment has a client comprising more than six
percent of that segment’s revenues, and no client comprises
more than four percent of Viad’s revenues. Viad’s
reportable business segments are described below.
Marketing &
Events U.S. Segment
The Marketing & Events U.S. segment includes the
domestic operations of Global Experience Specialists, Inc.
(“GES”) and affiliates, including those services
formerly provided under the Exhibitgroup/Giltspur and Becker
Group brands. This segment generates revenues from the following
services:
Show Organizer Services.
Under
agreements with show organizers, the Marketing &
Events U.S. segment serves as the official services
contractor of an exhibition, which is also referred to as a
“trade show,” “convention,” or
“show.” As the official services contractor, the
U.S. segment provides the following services to the show
organizer: general event management; planning and consultation;
concept design; exhibition layout and design; graphics and
design; show traffic analysis; carpeting and flooring;
decorating products and accessories; custom graphics; overhead
rigging; cleaning; and temporary electrical, lighting and
plumbing.
Exclusive Services Provided to
Exhibitors.
As the official services
contractor, the U.S. segment is designated by the show
organizer as the exclusive provider of certain services offered
to exhibitors participating in the exhibition. This designation
provides exhibitors with a single point of contact to facilitate
a timely, safe and efficient move-in and move-out of the
exhibition. The exclusive services offered by the
U.S. segment to exhibitors include: material handling
services; overhead rigging; temporary electrical and plumbing;
and cleaning.
Discretionary Services Provided to
Exhibitors.
In addition to the exclusive
services offered to exhibitors, the U.S. segment competes
with other service providers to sell non-exclusive services to
exhibitors, including: custom exhibit design and
1
Table of Contents
construction; portable and “modular” exhibits and
design; integrated marketing, including pre- and post-event
communications and customer relationship management; multimedia
services; event surveys; return on investment analysis; attendee
and exhibit booth traffic analysis; staff training; online
management tools; logistics and freight-forwarding, storage and
refurbishment of exhibits; booth furnishings, carpeting and
signage; in-house installation and dismantling; and various
other show services. The U.S. segment aims to provide these
services, combined with complete event program management and
planning, to corporate brand marketers across all exhibitions
and events in which they participate. The U.S. segment
competes with other service providers to offer these
discretionary services to exhibitors, regardless of whether or
not the U.S. segment is the official services contractor of
the exhibition.
Other Marketing Services.
The
U.S. segment also provides a variety of immersive,
entertaining attractions and brand-based experiences, sponsored
events, mobile marketing and other branded entertainment and
face-to-face
marketing solutions for clients and venues, including shopping
malls, movie studios, museums, leading consumer brands and
casinos. In addition, the U.S. segment offers retail
clients complete turnkey services, including design,
engineering, graphic production, fabrication, warehousing,
shipping, and
on-site
installation of retail merchandising units, kiosks and holiday
environments. The U.S. segment also provides construction
and installation services for permanent installations, including
museum exhibits, corporate lobbies, visitors centers, showrooms,
and retail interiors.
Competition.
The U.S. segment
generally competes in the exhibition and events industry on the
basis of discernible differences, value, quality, price,
convenience and service. Viad believes the primary competitor in
the domestic official services contractor market is The Freeman
Companies (a private company), however, the U.S. segment
encounters substantial competition from a large number of
providers of similar services. No competitor has significant
market share in the other service categories. Most of the
competitors are privately held companies with limited
information available about them.
During 2010, the U.S. segment provided services to over
1,350 exhibitions and events and more than 163,000 exhibitors.
The U.S. segment has full-service operations in every major
exhibition market in the U.S., including: Las Vegas, Nevada;
Chicago, Illinois; Orlando, Florida; New York, New York and Los
Angeles, California. In each of these locations, the
U.S. segment is a leading service provider, servicing some
of the most visible and influential events in its industry.
Marketing &
Events International Segment
The Marketing & Events International segment includes
all foreign operations of the Marketing & Events Group
and consists of two operating segments: Canada and EMEA (Europe,
Middle East, Asia). The International segment offers services
that are similar to those provided by the U.S. segment.
These services are delivered by Viad’s wholly owned
subsidiaries, including: GES Exposition Services (Canada)
Limited, Melville Exhibition and Event Services Limited and
affiliates (collectively “Melville”), SDD Exhibitions
Limited and GES GmbH & Co. KG.
During 2010, the International segment provided services to over
550 exhibitions and events and more than 48,000 exhibitors. The
International segment has full-service operations in many of the
most active and popular exhibition and event destinations,
including 10 Canadian cities, six United Kingdom cities, one
German city, and two cities in the United Arab Emirates. In each
location, the International segment is a leading service
provider, servicing some of the most visible and influential
events in its industry.
Competition.
The International segment
generally competes on the basis of discernible differences,
value, quality, price, convenience and service. This segment is
the largest exhibitions competitor in countries in which it
competes. The International segment encounters competition from
a large number of providers of similar services. Most of the
competitors are privately held companies, with limited
information available about them.
Travel &
Recreation Group Segment
Travel and recreation services are provided by Brewster Inc.
(“Brewster”) and Glacier Park, Inc. (“Glacier
Park”). Glacier Park is an 80 percent owned subsidiary
of Viad.
Brewster
Brewster is a major tourism service operator in Western Canada,
delivering tourism products that include world-class
attractions, transportation services, inbound package tour
operations, hotel operations and corporate and event management.
Attractions.
Brewster’s
attractions include the Banff Gondola, tours of the Athabasca
Glacier on the Columbia Icefield and the Banff Lake Cruise
operations. The Banff Gondola transports visitors to an
elevation of over 7,000 feet above sea level to the top of
Sulphur Mountain in Banff, Alberta, Canada, offering an
unobstructed view of the Canadian Rockies and overlooking the
town
2
Table of Contents
of Banff and the Bow Valley. Tours of the Athabasca Glacier on
the Columbia Icefield provide clients with an opportunity to
experience one of the largest accumulations of ice and snow
south of the Arctic Circle. Icefield customers ride in an
“Ice Explorer,” a unique vehicle specially designed
for glacier travel. Brewster also offers boat tours, small boat
rentals and charter fishing on Lake Minnewanka, which is
situated outside of the town of Banff in the heart of the
Canadian Rockies.
Transportation
Operations.
Brewster’s transportation
operations include charter motorcoach services, sightseeing and
scheduled services and airport service. Brewster operates a
modern fleet of luxury motorcoaches, available for groups of any
size, for travel throughout the Canadian provinces of Alberta
and British Columbia. In addition, Brewster provides year-round
half- and
full-day
sightseeing tours from Calgary, Banff, Lake Louise and Jasper,
Canada.
Package Tour Operations and Corporate and Event
Management.
Brewster’s inbound package
tour operations feature year-round package tours throughout
Canada. These packages include motorcoach, rail, self-drive
automobile, ski and winter touring and consist of both group and
individual tours which may be custom designed at the time of
booking. Brewster also offers a full suite of corporate and
event management services for meetings, conferences, incentive
travel, sports and special events. Event-related service
offerings include staffing, off-site events, tours/activities,
team building, housing, event management, theme development,
production and audio visual services.
Hotels.
Brewster operates two hotels in
Alberta: the Mount Royal Hotel, which is located in the heart of
Banff, and the Glacier View Inn (formerly, the Columbia Icefield
Chalet), which is located on the Columbia Icefields between Lake
Louise and Jasper. The hotels cater principally to leisure
travelers.
Brewster draws its customers from major markets including
Canada, the U.S., the United Kingdom, Australia/New Zealand and
Asia. Brewster markets directly to consumers, as well as through
distribution channels that include tour operators, tour
wholesalers, destination management companies and retail travel
agencies/organizations.
In October 2010, “Brewster Travel Canada” became the
new brand identity of Brewster.
Glacier
Park
Glacier Park is an independent hotel operator and concessionaire
of Waterton-Glacier International Peace Park, which encompasses
Glacier National Park in Montana and Waterton Lakes National
Park in Alberta, Canada. Glacier Park is the largest
concessionaire in Glacier National Park which is among the most
visited National Parks in the U.S. Glacier Park provides
lodging accommodations, food and beverage services, retail
operations, transportation services and tours throughout Glacier
and Waterton-Lakes National Parks.
The operations of Glacier Park are seasonal, typically running
from mid-May until the end of September. During those months,
Glacier and Waterton Lakes National Parks typically host over
two million visitors, the vast majority of whom purchase
services from Glacier Park. During the peak months of July and
August, the occupancy level at Glacier Park’s lodges and
motor inns typically exceeds 90 percent. During the
“shoulder” months of June and September, occupancy
typically exceeds 80 percent.
Individual travelers account for over 80 percent of Glacier
Park’s customers, and the balance of its customers are tour
groups. Demographically, Glacier Park draws over 90 percent
of its customers from the U.S., with approximately
50 percent of them coming from the Northwest and Midwest
regions.
Historic Lodges.
Glacier Park operates
four historic lodges and three
1960s-era
motor inns, with accommodation offerings varying from
hikers’ cabins to suites. In January 2011, Glacier Park
acquired a 145-room hotel in Whitefish, Montana, which is near
Glacier National Park.
Hospitality Services.
Glacier Park has
food and beverage operations providing services to lodging
guests and park visitors. Glacier Park also has retail
operations, including a camp store and gift shops catering to
lodging guests and park visitors.
Tour and Transportation
Services.
Glacier Park utilizes a fleet of
authentic 1930s red touring buses that have rollback canvas tops
to conduct interpretive park tours throughout Glacier and
Waterton Lakes National Parks, including tours of the scenic
Going-to-the-Sun
Road.
Concession Business.
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 six one-year
periods and now expires on December 31, 2011. The Park
Service, in its sole discretion, may continue extending Glacier
Park’s concession contract in one-year
3
Table of Contents
increments. When this contract ultimately expires, Glacier Park
will have the opportunity to bid on a new concession contract.
If Glacier Park does secure a new contract, possible terms would
be for 10, 15 or 20 years. Glacier Park generated
approximately 70 percent of its 2010 revenue through its
concession contract for services provided within Glacier
National Park. If a new concessionaire is selected by the Park
Service, Glacier Park’s remaining business would consist of
its operations at Waterton Lakes National Park; East Glacier,
Montana and Whitefish, Montana. In such a circumstance, Glacier
Park would be entitled to an amount equal to its
“possessory interest,” which generally means the value
of the structures acquired or constructed, fixtures installed
and improvements made to the concession property at Glacier
National Park during the term of the concession contract.
Glacier Park owns its Glacier Park Lodge operations in East
Glacier, Montana as well as the Grouse Mountain Lodge in
Whitefish, Montana (acquired January 5, 2011). Glacier Park
also owns the Prince of Wales Hotel in Waterton Lakes National
Park, which is operated under a ground lease with the Canadian
Government that was recently renewed for a
42-year
term
running through January 31, 2052. Glacier Park generated
approximately 25 percent of the Travel &
Recreation Group’s full year 2010 segment operating income.
Competition.
Viad’s
Travel & Recreation Group segment generally competes
on the basis of location, uniqueness of facilities, service,
quality and price. Competition exists both locally and
regionally in the package-tour business, hotel and restaurant
business and charter service business.
Recent
Business Developments
Over the past two years, Viad reorganized its structure and
rebranded its services.
In July 2009, Viad announced a strategic reorganization to align
operations into two groups: the
Marketing & Events
Group
and the
Travel & Recreation Group
.
The two groups are described above. On the close of business on
December 31, 2009, the operations of the
Marketing & Events U.S. segment were combined
into Global Experience Specialists, Inc. (such operations being
formerly known as GES Expositions Services, Inc.,
Exhibitgroup/Giltspur and The Becker Group).
On February 2, 2010, the Marketing & Events Group
introduced “Global Experience Specialists” as its new
brand which is used in connection with all of the
Marketing & Events Group’s services, replacing
the “GES Exposition Services,”
“Exhibitgroup/Giltspur” and “Becker Group”
brands.
Additionally, Viad has made acquisitions and strategic
investments to grow its business.
Viad expanded into the major exhibition venues of the United
Kingdom with the acquisition of Melville in February 2007.
Melville provided Viad with a platform to continue its
international expansion. In late 2007, Viad expanded into Abu
Dhabi in the United Arab Emirates, and is the exclusive provider
of venue services for exhibitions and events at the Abu Dhabi
National Exhibitions Centre (ADNEC). In January 2009, Viad
extended its logistics and freight forwarding services business
into continental Europe by launching a Melville operation in
Germany. In late 2009, Viad further expanded into the United
Arab Emirates by opening an operation in Dubai, which serviced
its first exhibition as the official services contractor in
February 2010.
On January 4, 2008, Viad acquired The Becker Group. The
Becker Group’s lines of business specialized in creating
immersive, entertaining attractions and brand-based experiences
for year-round branded attractions, sponsored events, mobile
marketing tours, retail marketing (including retail
merchandising units, kiosks and holiday environments) and other
place-based marketing solutions. These lines of business are now
a part of GES within Viad’s Marketing & Events
Group.
Most recently, on January 5, 2011, Viad acquired Grouse
Mountain Lodge, a 145-room, four-season resort hotel located in
Whitefish, Montana. The hotel will be operated by Glacier Park
within Viad’s Travel & Recreation Group segment.
Intellectual
Property
Viad and its subsidiaries own or have the right to many
registered trademarks and trademarks pending registration, used
in their businesses, including GES/Global Experience
Specialists & Design,
GES
®
,
GESCORE
Connect
®
,
ExhibitSelect
®
,
GES
Servicenter
®
,
GES National
Servicenter
®
,
HANG:RZ
®
,
Toys Thru Time Hall of
Fame
®
,
Trade Show
Electrical
®
,
Trade Show Rigging
TSR
®
,
TSE Trade Show Electrical &
Design
®
,
ethnoMetrics
®
,
EMAX
®
,
DEXZ
®
,
WAM! The Wireless
Ambassador
®
,
LUMA2 &
Design
®
and the portfolio of trademarks adopted in association with
Brewster Inc.’s rebranding in 2010 as Brewster Travel
Canada. Viad and its subsidiaries also own or have the right to
many registered trademarks and trademarks pending registration
outside of the United States, including the Melville lion image,
GES Worldwide
Network
®
,
GES/Global Experience Specialists & Design,
Maxim
®
,
Royal Glacier
Tours
®
,
Emax
®
,
and the trademarks associated with Brewster’s rebranding in
2010. United States trademark registrations are for a term of
ten years and are renewable every ten years as long as the
trademarks are used in the regular course of business.
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Table of Contents
The Company owns a number of patents for exhibit technology and
exhibit processes that are cumulatively important to its
business and that it believes provide competitive advantages in
the marketplace for designing and building exhibits. These
include patents relating to modular furniture used in exhibits
and displays and a modular structure having a load-bearing
surface. The Company also owns a number of design patents for
its retail merchandising units. United States utility patents
are currently granted for a term of 20 years from the date
a patent application is filed and United States design patents
are currently granted for a term of 14 years from the date
granted. The Marketing & Events Group has extensive
design libraries with copyright protections and owns copyright
registrations for a number of the designs within its design
libraries. Copyright protection for such work is 95 years
from the date of publication or 120 years from creation,
whichever is shorter.
Although Viad believes that certain of its trademarks, patents
and copyrights have substantial value, it does not believe that
the loss of any one of these patents, trademarks or copyrights
would have a material adverse effect on its financial condition
or results of operations.
Government
Regulation
Compliance with legal requirements and government regulations
represents a normal cost of doing business. The principal
regulations affecting the
day-to-day
businesses are rules and regulations relating to transportation
(such as regulations promulgated by the U.S. Department of
Transportation and its state counterparts), employees (such as
regulations implemented by the Occupational Safety and Health
Administration, equal employment opportunity laws, guidelines
implemented pursuant to the Americans with Disabilities Act and
general federal and state employment laws), unionized labor
(such as guidelines imposed by the National Labor Relations Act)
and U.S. and Canadian regulations relating to national
parks (such as regulations established by the
U.S. Department of the Interior and the U.S. National
Park Service).
Employees
Viad’s businesses had approximately 3,350 employees as
of December 31, 2010 as follows:
|
Regular Full-Time
|
||||||||
|
Approximate
|
Employees Covered by
|
|||||||
|
Number of
|
Collective Bargaining
|
|||||||
| Employees | Agreements | |||||||
|
Marketing & Events Group
|
3,100 | 1,100 | ||||||
|
Travel & Recreation Group
|
250 | 60 | ||||||
Viad believes that relations with its employees are satisfactory
and that collective bargaining agreements expiring in 2011 will
be renegotiated in the ordinary course of business without a
material adverse effect on Viad’s operations.
Viad’s Corporate Services Group had 73 employees as of
December 31, 2010 providing management, financial and
accounting, internal auditing, tax, administrative, information
technology, human resources, corporate development, legal and
other services to its operating units and handling residual
matters pertaining to businesses previously discontinued or sold
by the Company. Viad is governed by a Board of Directors
comprised of eight non-employee directors and one employee
director and has an executive management team consisting of ten
executive officers (including the CEO, who is also an employee
director, and the president of each operating group).
Seasonality
Exhibition and event activity varies significantly depending on
the frequency and timing of shows (some shows are not held each
year and some may shift between quarters). The
Marketing & Events U.S. segment generally reports
its highest revenues during the first quarter of each year,
while the Marketing & Events International segment
generally reports its highest revenues during the second quarter
of each year. Viad’s Travel & Recreation Group
segment experiences peak activity during the summer months and
approximately 80 percent of revenues are earned in the
second and third quarters. Viad’s average segment operating
income during the past three years, as a percentage of the
average full year’s segment operating income during the
past three years, was approximately 35 percent (first
quarter), 38 percent (second quarter), 33 percent
(third quarter) and minus six percent (fourth quarter). See
“Risk Factors — Viad’s businesses are
seasonal, which causes results of operations to fluctuate and
makes results of operations particularly sensitive to adverse
events during peak periods” and “Risk
Factors — Exhibition rotation impacts overall
profitability and makes comparisons between periods
difficult” in Item 1A, which are incorporated herein
by reference; see also Notes 19 and 22 of notes to
consolidated financial statements.
5
Table of Contents
Financial
Information about Restructuring Charges and Recoveries
Information regarding restructuring charges and recoveries is
provided in Note 16 of notes to consolidated financial
statements.
Financial
Information about Segments
Business segment financial information is provided in
Note 19 of notes to consolidated financial statements.
Financial
Information about Geographic Areas
Geographic area financial information is provided in
Note 19 of notes to consolidated financial statements.
Available
Information
Viad’s internet address is
www.viad.com
. Viad uses
its web site as a routine channel for distribution of Company
information, including press releases, financial information and
corporate governance initiatives. Viad posts filings as soon as
reasonably practicable after they are electronically filed with,
or furnished to, the U.S. Securities and Exchange
Commission (“SEC”), including Viad’s annual,
quarterly and current reports, proxy statements, amendments to
those reports or statements, and other information, as well as
transactions in Viad securities by Viad’s directors and
executive officers. All such postings and filings are available
on Viad’s web site free of charge. In addition, Viad’s
web site allows interested persons to sign up to automatically
receive
e-mail
alerts when the Company posts news releases and financial
information. The SEC’s web site,
www.sec.gov
,
contains reports, proxy and information statements, and other
information, regarding issuers that file electronically with the
SEC. Such information also can be read and copied at the
SEC’s public reference section, located in Room 1580,
100 F. Street N.E., Washington, D.C. 20549 and on the
SEC’s internet site at
www.sec.gov
. Information
regarding the operation of the public reference section can be
obtained by calling (800) SEC-0330. The content on any web
site referred to in this
Form 10-K
is not incorporated by reference in this
Form 10-K
unless expressly noted.
Viad’s web site, at
www.viad.com/investors/corp_governance.html
, includes key
information about the Company’s corporate governance
initiatives, including its Corporate Governance Guidelines,
charters of the committees of the Board of Directors, Code of
Ethics and information concerning Viad’s directors and a
method to communicate with them. Viad will make available in
print any of this information upon request to: Corporate
Secretary, Viad Corp, 1850 North Central Avenue, Suite 800,
Phoenix, Arizona
85004-4545.
| Item 1A. | Risk Factors. |
Viad’s operating results are subject to known and unknown
risks. As a result, past financial performance and historical
trends may not be reliable indicators of future performance.
Viad’s
businesses and operating results are adversely affected by
deterioration in general economic conditions.
Viad’s businesses are sensitive to fluctuations in general
economic conditions and are impacted by increases and decreases
in the cost of materials and operating supplies. Operating
results for the Marketing & Events U.S. and
International segments depend largely on the number of
exhibitions held and on the size of exhibitors’ marketing
expenditures, which in turn depend partly on the strength of
particular industries in which exhibitors operate. The number
and size of exhibitions generally decrease when the economy
weakens.
Further, many exhibitors’ marketing budgets are partly
discretionary, and are frequently among the first expenditures
reduced by exhibitors when economic conditions deteriorate,
resulting in reduced spending by exhibitors for the
Company’s services. Marketing expenditures often are not
increased until economic conditions improve. As a result, during
periods of general economic weakness, the operating results for
the Marketing & Events Group are adversely affected.
Similarly, many of the retail shopping mall and lifestyle center
clients of the Marketing & Events Group may reduce
marketing expenditures when economic conditions deteriorate.
Revenues from the Travel & Recreation Group businesses
depend largely on the amount of disposable income that consumers
have available for travel and vacations. This amount decreases
during periods of weak general economic conditions.
Viad’s
results of operations are impacted by changes in foreign
currency exchange rates.
Viad conducts foreign operations primarily in Canada, the United
Kingdom and, to a lesser extent, in certain other countries. The
functional currency of Viad’s foreign subsidiaries is their
local currency. Accordingly, for purposes of consolidation, Viad
6
Table of Contents
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. Significant fluctuations in foreign
exchange rates relative to the U.S. dollar may result in
material changes to Viad’s net equity position reported in
its consolidated balance sheets. Viad has not hedged its equity
risk arising from the translation of foreign denominated assets
and liabilities.
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. As a result, Viad’s
consolidated results of operations are exposed to fluctuations
in foreign exchange rates, even when the functional currency
amounts have not changed. Accordingly, fluctuations in the
exchange rates affect overall profitability and historical
period to period comparisons. Viad has not hedged its net
earnings exposure arising from the translation of its foreign
operating results.
During 2010, $165.0 million of revenue and
$9.5 million of operating income was derived through
Canadian and United Kingdom operations of Viad’s
Marketing & Events International segment. In addition,
$64.2 million of 2010 revenue and $15.8 million of
2010 operating income generated in the Travel &
Recreation Group segment was derived through its Canadian
operations. For this segment, Canadian operations are largely
dependent on foreign customer visitation, and accordingly,
increases in the value of the Canadian dollar compared to other
currencies could adversely affect customer volumes, and
therefore, revenue and operating income in the
Travel & Recreation Group segment.
Exhibition
rotation impacts overall profitability and makes comparisons
between periods difficult.
The business activities of the Marketing & Events
Group are largely dependent upon the frequency, timing and
location of exhibitions and events. Some large exhibitions are
not held annually (they may be held once every two or three
years or longer). Some large exhibitions may be held at a
different time of year than when they have historically been
held. In addition, the same exhibition may be held in different
locations in different years, and may result in Viad generating
lower margins in a given period if the exhibition shifts to a
higher-cost city.
As a consequence of these factors, the operating results for
these businesses may fluctuate significantly from quarter to
quarter or from year to year, making periodic comparisons
difficult.
Viad’s
businesses are adversely affected by disruptions in the travel
industry, particularly those adversely affecting the hotel and
airline industries.
The success of Viad’s businesses depends largely on the
ability and willingness of people, whether exhibitors,
exhibition attendees or others, to travel. Factors adversely
affecting the travel industry as a whole, and particularly the
airline and hotel industries, generally also adversely affect
Viad’s businesses and results of operations. Factors that
could adversely affect the travel industry as a whole include
high or rising fuel prices, increased security and passport
requirements, weather conditions, airline accidents and
international political instability and hostilities. Unexpected
events of this nature, or other events that may have an impact
on the availability and pricing of air travel and
accommodations, could adversely affect Viad’s businesses
and results of operations.
The
failure of a large client to renew its services contract or the
loss of business from convention facilities could adversely
impact revenues.
Although no single client accounts for more than five percent of
the revenue of any of Viad’s reporting segments, the
Marketing & Events U.S. and International
segments have a relatively small number of large exhibition show
organizers and large customer accounts. The loss of any of these
large clients would adversely affect results of operations.
In addition, revenues of the Marketing & Events Group
may be significantly impacted if certain exhibition facilities
choose to in-source electrical, plumbing and other services.
When the Marketing & Events Group is hired as the
official services contractor for an exhibition, the show
organizer contractually grants an exclusive right to perform
these electrical and plumbing services, subject in each case to
the exhibition facility’s option to in-source the services
(either by performing the services themselves or by hiring a
separate service provider). Many exhibition facilities are under
financial pressure as a result of conditions generally affecting
their industry, including an increased supply of exhibitions
space. As a result, some of these facilities have sought to
in-source all or a large portion of these services. If a large
number of facilities with which the Marketing & Events
Group has these relationships seek to move these services
in-house, Viad’s revenues and operating results could be
adversely affected.
7
Table of Contents
Viad’s
key businesses are relationship driven.
The business activities of the Marketing & Events
U.S. and International segments are heavily focused on
client relationships, and, specifically, on the close
collaboration and interaction with the client. These
relationships require the account team to become attuned to the
client’s desires and expectations in order to provide
top-quality service. Viad has in the past lost, and may in the
future lose, important clients (and corresponding revenues) if a
key member of the account team were to cease employment with the
Company and take that customer to a competitor.
Completed
acquisitions may not perform as anticipated or be integrated as
planned.
Viad has acquired businesses and intends to continue to pursue
opportunities to acquire businesses that could complement,
enhance or expand Viad’s current businesses or offer growth
opportunities to Viad. Any acquisition can involve a number of
risks, including: the failure to achieve the financial and
strategic goals and other benefits from the acquisition; the
inability to successfully integrate the acquired business into
Viad’s ongoing businesses; the inability to retain key
personnel or customers of the acquired business; the inability
to successfully integrate financial reporting and internal
control systems; the disruption of Viad’s ongoing
businesses and distraction of senior management and employees of
Viad from other opportunities and challenges due to the
integration of the acquired business; and the potential
existence of liabilities or contingencies not disclosed to or
known by Viad prior to closing the acquisition or not otherwise
provided for through the purchase agreement.
Viad’s
businesses are seasonal, which causes results of operations to
fluctuate and makes results of operations particularly sensitive
to adverse events during peak periods.
The Marketing & Events U.S. segment generally
reports its highest revenues during the first quarter of each
year, while the Marketing & Events International
segment generally reports its highest revenues during the second
quarter of each year. The Travel & Recreation Group
businesses are also seasonal, experiencing peak activity during
the second and third quarters; these quarters accounted for
84 percent of the segment’s 2010 revenues. Because of
the seasonal nature of Viad’s businesses, adverse events or
conditions occurring during peak periods could reduce the
operating results of Viad’s businesses.
Transportation
disruptions and increases in transportation costs could
adversely affect Viad’s businesses and operating
results.
The Marketing & Events U.S. and International
segments rely on independent transportation carriers to send
materials and exhibits to and from exhibitions, warehouse
facilities and customer facilities. If they were unable to
secure the services of these independent transportation carriers
at favorable rates, it could have a material adverse effect on
these businesses and their results of operations. In addition,
disruption of transportation services because of weather-related
problems, strikes, lockouts or other events could adversely
affect their ability to supply services to customers and could
cause the cancellation of exhibitions, which may have a material
adverse effect on these businesses and operating results.
Similarly, disruption of transportation services could adversely
affect the ability of the Marketing & Events Group to
supply time-sensitive holiday-themed exhibits and experiences to
retail shopping mall and lifestyle center customers and could
cause the cancellation of the exhibits and experiences.
Union-represented
labor creates an increased risk of work stoppages and higher
labor costs.
A significant portion of Viad’s employees are unionized and
Viad’s businesses are party to approximately 100
collective-bargaining agreements, with approximately one-fourth
requiring renegotiation each year. If the results of labor
negotiations caused the Company to increase wages or benefits,
which increases total labor costs, the increased costs could
either be absorbed (which would adversely affect operating
margins) or passed on to the customers, which may lead customers
to turn to other vendors in response to higher prices. In either
event, Viad’s businesses and results of operations could be
adversely affected.
Moreover, if the Company were unable to reach an agreement with
a union during the collective bargaining process, the union may
strike or carry-out other types of work stoppages. In such a
circumstance, Viad might be unable to find substitute workers
with the necessary skills to perform many of the services, or
may incur additional costs to do so, which could adversely
affect the Company’s businesses and results of operations.
Obligations
to fund multi-employer pension plans to which Viad contributes
may have an adverse impact on operating results.
Viad’s businesses contribute to various multi-employer
pension plans based on obligations arising under collective
bargaining agreements covering its union-represented employees.
Viad’s contributions to these multi-employer plans in 2010
and 2009 totaled $15.3 million and $15.7 million,
respectively. Viad does not directly manage these multi-employer
plans, which are generally
8
Table of Contents
managed by boards of trustees. 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. Viad cannot determine at this time
the amount of additional funding, if any, it may be required to
make to these plans. However, plan contribution increases, if
any, could have an adverse impact on Viad’s consolidated
financial condition, results of operations and cash flows.
Viad
competes in competitive industries and increased competition
could negatively impact operating results.
Viad is engaged in a number of highly competitive industries.
Competition in the exhibition and events industry and the
exhibits and experiential environments industries is driven by
price and service quality, among other factors. To the extent
competitors seek to gain or retain their market presence through
aggressive underpricing strategies, Viad may be required to
lower its prices and rates to avoid loss of related business,
thereby adversely affecting operating results. In addition, if
Viad is unable to anticipate and respond as effectively as
competitors to changing business conditions, including new
technologies and business models, Viad could lose market share
to its competitors. If Viad were unable to meet the challenges
presented by the competitive environment, results of operations
could be adversely affected.
Liabilities
relating to prior and discontinued operations may adversely
affect results of operations.
Viad and its predecessors have a corporate history spanning over
seven decades and involving approximately 2,400 previous
subsidiaries in diverse businesses, such as the manufacturing of
locomotives, buses, industrial chemicals, fertilizers,
pharmaceuticals, leather, textiles, food and fresh meats. Some
of these businesses used raw materials that have been, and may
continue to be, the subject of litigation. Moreover, some of the
raw materials used and the waste produced by these businesses
have been and are the subject of U.S. federal and state
environmental regulations, including laws enacted under the
Comprehensive Environmental Response, Compensation and Liability
Act, or its state law counterparts. In addition, Viad may incur
other liabilities, resulting from indemnification claims
involving sold subsidiaries, as well as from past operations of
those of predecessors or their subsidiaries. Although the
Company believes it has adequate reserves and sufficient
insurance coverage to cover these future liabilities, results of
operations could be materially affected if future events or
proceedings contradict current assumptions, and reserves or
insurance become inadequate.
Terrorist
attacks, natural disasters or other catastrophic events may have
a negative effect on Viad’s business.
The occurrence of catastrophic events ranging from natural
disasters (such as hurricanes), health epidemics or pandemics,
acts of war or terrorism, or the prospect of these events could
disrupt Viad’s businesses. Such catastrophic events could
impact our production facilities preventing us from timely
completing exhibit fabrication and other projects for customers,
and also could cause a disruption in the services we provide to
our customers at convention centers, exhibition halls, hotels
and other public venues. Such catastrophic events also could
cause a cancellation of exhibitions and other events held in
public venues. If the conditions arising from such events
persist or worsen, Viad could experience continuing or increased
adverse effects on its results of operations and financial
condition.
| Item 1B. | Unresolved Staff Comments. |
None.
| Item 2. | Properties. |
Viad’s businesses operate service or production facilities
and maintain sales and service offices in the United States,
Canada, the United Kingdom, Germany and the United Arab
Emirates. The principal properties of Viad’s businesses as
of December 31, 2010, were:
Viad’s headquarters are located at 1850 North Central
Avenue, Suite 800 in Phoenix, Arizona
85004-4545.
Excluding space which is subleased to third parties, Viad leases
approximately 59,400 square feet.
The Marketing & Events U.S. segment operates 20
offices and 28 multi-use facilities (manufacturing, sales and
design, office
and/or
warehouse and truck marshaling yards). The multi-use facilities
vary in size up to approximately 590,900 square feet. Three
of the multi-use facilities are owned; all other properties are
leased.
9
Table of Contents
The Marketing & Events International segment operates
six offices and 20 multi-use facilities, with three offices and
eight multi-use facilities in Canada, one office and eight
multi-use facilities in the United Kingdom, one office and two
multi-use facilities in Germany and one office and two multi-use
facilities in the United Arab Emirates. The multi-use facilities
vary in size up to approximately 134,000 square feet. One
of the multi-use facilities is owned; all other properties are
leased.
The Travel & Recreation Group segment operates two
offices, nine retail stores, one bus terminal, three garages, an
icefield tour facility, a gondola lift operation, a boat tour
facility and nine hotels/lodges (with approximately 900 rooms
and ancillary foodservice and recreational facilities). All of
the facilities are in the United States or Canada. Four of the
hotels/lodges are owned and the five other hotels/lodges are
operated pursuant to concessionaire agreements. One bus
terminal, three garages and the boat tour facility are owned and
one garage is leased. The icefield tour facility and gondola
lift operation are operated through lease agreements with Parks
Canada and all other properties are leased. In January 2011,
Viad acquired a 145-room hotel with ancillary foodservice
facilities in Whitefish, Montana, which is operated by Glacier
Park within Viad’s Travel & Recreation Group
segment.
Management believes that the Company’s facilities in the
aggregate are adequate and suitable for their purposes and that
capacity is sufficient for current needs.
| Item 3. | Legal Proceedings. |
Viad and certain subsidiaries are plaintiffs or defendants to
various actions, proceedings and pending claims, some of which
involve, or may involve, compensatory, punitive or other
damages. Litigation is subject to many uncertainties and it is
possible that some of the legal actions, proceedings or claims
could be decided against Viad. Although the amount of liability
as of December 31, 2010 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 effect on Viad’s business, financial condition 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 for 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 condition or
results of operations.
Other.
Executive
Officers of Registrant.
The names, ages and positions of Viad’s executive officers
as of the filing of this Annual Report, are listed below:
|
Name
|
Age
|
Business Experience During the Past Five Years and Other Information | ||||
|
Paul B. Dykstra
|
49 |
President and Chief Executive Officer effective April 1, 2006.
Previously Chief Operating Officer since January 2006; prior
thereto, President and Chief Executive Officer of Global
Experience Specialists, Inc., a subsidiary of Viad, since
January 2000; prior thereto, Executive Vice
President-International and Corporate Development of GES since
1999; and prior thereto, Executive Vice President-General
Manager or similar executive positions since 1994 with Travelers
Express Company, Inc., a former subsidiary of Viad.
|
||||
|
Michael M. Hannan
|
45 |
President of Viad’s Travel & Recreation Group since
July 2009 and President of Brewster Inc., a subsidiary of Viad,
since December 2008; prior thereto, Executive Vice President of
Gibralt Capital Corporation, a real estate investment firm
focusing on Canada and the United States, from July 2008 to
November 2008; prior thereto, independent consultant providing
business strategy, corporate development and financial advice to
companies in British Columbia, Canada since January 2007; prior
thereto, Executive Vice President of Intrawest ULC, a leader in
the development and management of experiential destination
resorts, since May 2002; Chief Executive Officer of Versatel
Internet Group, an internet service provider, from February 2000
to December 2001; prior thereto, Chief Financial Officer of
UUNET Canada and Latin America, an internet service provider,
since May 1996.
|
||||
10
Table of Contents
|
Name
|
Age
|
Business Experience During the Past Five Years and Other Information | ||||
|
George N. Hines
|
38 |
Chief Information Officer since December 2009; prior thereto,
Senior Vice President and Transitioning Chief Information
Officer of Stream Global Services, Inc., a business process
outsource provider, since October 2009; prior thereto, Senior
Vice President and Chief Information Officer of eTelecare Global
Solutions, Inc. (merged into Stream Global Services, Inc.) since
August 2007; prior thereto, Chief Information Officer of
PeopleSupport, Inc., a business process outsource provider,
since December 2005; prior thereto, Executive Vice President,
Operations and Chief Technology Officer of ChaseCom Limited
Partnership, a provider of customer contact center services,
since August 2004; prior thereto, Senior Manager —
Telecommunications Industry Practice of Deloitte Consulting LLP
since April 2000; and Manager — Telecommunications
Industry Practice of Ernst & Young LLP from July 1996 to
March 2000.
|
||||
|
Ellen M. Ingersoll
|
46 |
Chief Financial Officer since July 2002; prior thereto, Vice
President-Controller or similar position since January 2002;
prior thereto, Controller of CashX, Inc., a service provider of
stored value internet cards, from June 2001 through October
2001; prior thereto, Operations Finance Director of LeapSource,
Inc., a provider of business process outsourcing, since January
2000; and prior thereto, Vice President and Controller of
Franchise Finance Corporation of America since May 1992.
|
||||
|
Thomas M. Kuczynski
|
46 |
Chief Corporate Development & Strategy Officer since March
2008; prior thereto, Senior Vice President, Corporate
Development & Planning of The Nielsen Company, a media and
marketing information company, since August 2006; prior thereto,
Managing Director of The Pareto Group, a provider of strategic
and investment advisory services, since January 2004; and prior
thereto, Vice President of Penton Media, a business media firm
producing magazines, trade shows, conferences and electronic
media, from January 1999 to October 2003.
|
||||
|
G. Michael Latta
|
48 |
Chief Accounting Officer - Controller since November 2002; prior
thereto, Corporate Controller or similar position for
SpeedFam-IPEC, Inc., a semiconductor equipment manufacturer,
since October 1999; and prior thereto, Controller for Cardiac
Pathways Corporation, a medical device manufacturer, since
September 1994.
|
||||
|
Steven W. Moster
|
41 |
President, GES, since November 1, 2010; prior thereto
independent consultant providing marketing and sales
consultation services to 3 Day Blinds Corporation, a leading
manufacturer and retailer of custom window coverings in the
United States, from April 2010 to August 2010; prior thereto
Executive Vice President - Chief Sales & Marketing Officer
of GES from January 2008 to February 2010; prior thereto
Executive Vice President - Products and Services of GES from
January 2005 to February 2010; prior thereto Vice-President,
Products & Services Business of GES from January 2004 to
January 2005; prior thereto Engagement Manager, Management
Strategy Consulting for McKinsey & Company from August 2000
to January 2004.
|
||||
|
Cindy J. Ognjanov
|
61 |
President and General Manager of Glacier Park, Inc., a
subsidiary of Viad, since October 2002; prior thereto, co-owner
of Omnidine, Inc., a food service consulting firm from April
1999 to October 2002; and prior thereto, rooms and operations
manager for Glacier Park, Inc. from April 1992 through July
1998.
|
||||
11
Table of Contents
|
Name
|
Age
|
Business Experience During the Past Five Years and Other Information | ||||
|
David C. Robertson
|
45 |
Chief Human Resources Officer since August 2010; prior thereto
Senior Vice President of Human Resources, North America &
Asia Pacific, of Insight Enterprises from October 2006 to August
2010; Senior Director of Human Resources, Aerospace Global
Repair Services, of Honeywell International from July 2005 to
October 2006; Director of Human Resources of Honeywell from
September 2003 to June 2005; Director of Human Resources of
America Online, Inc. from February 1999 to August 2003.
|
||||
|
Scott E. Sayre
|
64 |
General Counsel and Secretary since September 2000; prior
thereto, Assistant General Counsel and Secretary from 1997;
prior thereto, Assistant General Counsel from 1992; and prior
thereto, held other positions since joining the Company in 1979.
|
||||
The term of office of the executive officers is until the next
annual organization meeting of the Board of Directors of Viad
which is scheduled for May 17, 2011.
12
Table of Contents
| Item 5. | Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities. |
The principal market on which Viad’s common stock is traded
is the New York Stock Exchange. The common stock is also
admitted for trading on the American, Chicago, National, Pacific
and NASDAQ OMX Exchanges. The following tables summarize the
high and low market prices as reported on the NYSE Composite
Tape and the cash dividends declared for the two years ended
December 31:
SALES
PRICE RANGE OF COMMON STOCK
| 2010 | 2009 | |||||||||||||||
| High | Low | High | Low | |||||||||||||
|
First Quarter
|
$ | 21.87 | $ | 17.33 | $ | 25.89 | $ | 12.29 | ||||||||
|
Second Quarter
|
$ | 25.40 | $ | 17.61 | $ | 19.62 | $ | 13.77 | ||||||||
|
Third Quarter
|
$ | 20.76 | $ | 14.75 | $ | 20.66 | $ | 15.47 | ||||||||
|
Fourth Quarter
|
$ | 27.34 | $ | 17.71 | $ | 21.74 | $ | 16.25 | ||||||||
DIVIDENDS
DECLARED ON COMMON STOCK
| 2010 | 2009 | |||||||
|
February
|
$ | 0.04 | $ | 0.04 | ||||
|
May
|
0.04 | 0.04 | ||||||
|
August
|
0.04 | 0.04 | ||||||
|
December
|
0.04 | 0.04 | ||||||
|
Total
|
$ | 0.16 | $ | 0.16 | ||||
Regular quarterly dividends were paid on Viad common stock on
the first business day of January, April, July and October. The
terms of Viad’s $75 million secured revolving credit
facility, as amended as of November 20, 2009, restrict Viad
from paying more than $5 million in dividends in the
aggregate in any calendar year.
As of January 31, 2011, there were 8,132 shareholders
of record of Viad’s common stock following the
one-for-four
reverse stock split effective on July 1, 2004. There also
were 1,296 shareholders of record as of January 31,
2011 that had not converted pre-split shares into the post-split
common stock. Accordingly, there were a total of
9,428 shareholders of record as of January 31, 2011.
For information regarding security ownership of certain
beneficial owners and management and related shareholder
matters, refer to Part III, Item 12, “Security
Ownership of Certain Beneficial Owners and Management and
Related Stockholder Matters” in this Annual Report.
SHAREHOLDER
RETURN PERFORMANCE GRAPH
Set forth below is a line graph comparing, for the five year
period ended December 31, 2010, the yearly percentage
change in the cumulative total shareholder return on Viad’s
common stock to the cumulative total return of the
Standard & Poor’s SmallCap 600 Media Index,
Standard & Poor’s SmallCap 600 Commercial
Services & Supplies Index, Standard &
Poor’s SmallCap 600 Index, Russell 2000 Index and
Standard & Poor’s 500 Index.
The graph below assumes $100 was invested on December 31,
2005 in Viad common stock, Standard & Poor’s
SmallCap 600 Media Index, Standard & Poor’s
SmallCap 600 Commercial Services & Supplies Index,
Standard & Poor’s SmallCap 600 Index, Russell
2000 Index and Standard & Poor’s 500 Index with
reinvestment of all dividends.
13
Table of Contents
Comparison
of Five-Year Cumulative Total Return
| Year Ended December 31, | ||||||||||||||||||||||||
| 2005 | 2006 | 2007 | 2008 | 2009 | 2010 | |||||||||||||||||||
|
Viad Corp
|
$ | 100.00 | $ | 139.07 | $ | 108.64 | $ | 85.55 | $ | 72.03 | $ | 89.61 | ||||||||||||
|
S&P 500
|
$ | 100.00 | $ | 115.77 | $ | 122.07 | $ | 76.82 | $ | 96.99 | $ | 111.41 | ||||||||||||
|
Russell 2000
|
$ | 100.00 | $ | 118.44 | $ | 116.57 | $ | 77.14 | $ | 98.04 | $ | 124.28 | ||||||||||||
|
S&P SmallCap 600
|
$ | 100.00 | $ | 115.12 | $ | 114.77 | $ | 79.08 | $ | 99.25 | $ | 125.29 | ||||||||||||
|
S&P 600 Comm. Services & Supplies
|
$ | 100.00 | $ | 117.61 | $ | 110.08 | $ | 86.78 | $ | 109.49 | $ | 127.79 | ||||||||||||
|
S&P 600 Media Index
|
$ | 100.00 | $ | 127.07 | $ | 92.53 | $ | 26.82 | $ | 45.75 | $ | 67.34 | ||||||||||||
Set forth below is a table showing that no shares of Viad common
stock were repurchased during the fourth quarter of 2010 by Viad
from employees or former employees surrendering previously owned
Viad common stock (outstanding shares) to pay the taxes in
connection with the vesting of restricted stock awards. The
table also reflects that no shares of Viad common stock were
repurchased by Viad on the open market as part of a repurchase
program.
ISSUER
PURCHASES OF EQUITY SECURITIES
|
Maximum Number (or
|
||||||||||||||||
|
Total Number of
|
Approximate Dollar
|
|||||||||||||||
|
Shares Purchased as
|
Value) of Shares that
|
|||||||||||||||
|
Total Number of
|
Part of Publicly
|
May Yet Be Purchased
|
||||||||||||||
|
Shares Purchased
|
Average Price Paid
|
Announced Plans or
|
Under the Plans or
|
|||||||||||||
|
Period
|
(#) | Per Share ($) | Programs | Programs (1) | ||||||||||||
|
None
|
— | — | — | 304,381 | ||||||||||||
|
Total
|
— | — | — | 304,381 | ||||||||||||
| (1) | In September 2010, Viad announced its intent to repurchase up to an additional 500,000 shares of the Company’s common stock from time to time at prevailing market prices. At the time of the announcement, there were 160,681 shares available for repurchase pursuant to previously announced authorizations. Viad purchased 356,300 shares for $6.3 million during 2010, with 304,381 shares remaining for repurchase. The authorization of the Board of Directors does not have an expiration date. The terms of Viad’s $75 million secured revolving credit facility, as amended as of November 20, 2009, restrict the Company from repurchasing more than $10 million in the aggregate of the Company’s common stock during the remainder of the credit facility term, which expires in June 2011. |
14
Table of Contents
| Item 6. | Selected Financial Data. |
VIAD
CORP
SELECTED FINANCIAL AND OTHER DATA
SELECTED FINANCIAL AND OTHER DATA
| Year Ended December 31, | ||||||||||||||||||||
| 2010 | 2009 | 2008 | 2007 | 2006 | ||||||||||||||||
| (in thousands, except per share data) | ||||||||||||||||||||
|
Statement of Operations Data
|
||||||||||||||||||||
|
Revenues:
|
||||||||||||||||||||
|
Convention and event
services
(1)
|
$ | 590,444 | $ | 582,969 | $ | 804,546 | $ | 719,930 | $ | 612,598 | ||||||||||
|
Exhibits and
environments
(1)(2)
|
166,040 | 147,533 | 229,694 | 199,549 | 164,173 | |||||||||||||||
|
Travel and recreation services
|
88,277 | 75,302 | 86,621 | 84,222 | 79,260 | |||||||||||||||
|
Total revenues
|
$ | 844,761 | $ | 805,804 | $ | 1,120,861 | $ | 1,003,701 | $ | 856,031 | ||||||||||
|
Income (loss) from continuing
operations
(3)
|
$ | 817 | $ | (104,808 | ) | $ | 43,538 | $ | 43,312 | $ | 51,841 | |||||||||
|
Income from discontinued
operations
(4)
|
262 | 679 | 385 | 2,049 | 12,229 | |||||||||||||||
|
Net income (loss)
|
1,079 | (104,129 | ) | 43,923 | 45,361 | 64,070 | ||||||||||||||
|
Net income attributable to noncontrolling interest
|
(636 | ) | (582 | ) | (550 | ) | (764 | ) | (516 | ) | ||||||||||
|
Net income (loss) attributable to Viad
|
$ | 443 | $ | (104,711 | ) | $ | 43,373 | $ | 44,597 | $ | 63,554 | |||||||||
|
Diluted Income (Loss) per Common Share
|
||||||||||||||||||||
|
Income (loss) from continuing operations attributable to Viad
common
stockholders
(3)
|
$ | 0.01 | $ | (5.28 | ) | $ | 2.08 | $ | 2.04 | $ | 2.35 | |||||||||
|
Income from discontinued operations attributable to Viad common
stockholders
(4)
|
0.01 | 0.03 | 0.02 | 0.10 | 0.56 | |||||||||||||||
|
Net income (loss) attributable to Viad common stockholders
|
$ | 0.02 | $ | (5.25 | ) | $ | 2.10 | $ | 2.14 | $ | 2.91 | |||||||||
|
Weighted-average outstanding and potentially dilutive common
shares
|
20,277 | 19,960 | 20,493 | 20,886 | 21,805 | |||||||||||||||
|
Basic Income (Loss) per Common Share
|
||||||||||||||||||||
|
Income (loss) from continuing operations attributable to Viad
common
stockholders
(3)
|
$ | 0.01 | $ | (5.28 | ) | $ | 2.08 | $ | 2.04 | $ | 2.36 | |||||||||
|
Income from discontinued operations attributable to Viad common
stockholders
(4)
|
0.01 | 0.03 | 0.02 | 0.10 | 0.57 | |||||||||||||||
|
Net income (loss) attributable to Viad common stockholders
|
$ | 0.02 | $ | (5.25 | ) | $ | 2.10 | $ | 2.14 | $ | 2.93 | |||||||||
|
Weighted-average outstanding common shares
|
19,955 | 19,960 | 20,172 | 20,423 | 21,333 | |||||||||||||||
|
Dividends declared per common share
|
$ | 0.16 | $ | 0.16 | $ | 0.16 | $ | 0.16 | $ | 0.16 | ||||||||||
|
Balance Sheet Data at Year-End
|
||||||||||||||||||||
|
Total assets
|
$ | 616,503 | $ | 609,186 | $ | 729,404 | $ | 781,363 | $ | 672,564 | ||||||||||
|
Total debt and capital lease obligations
|
9,077 | 12,788 | 12,643 | 14,176 | 15,042 | |||||||||||||||
|
Total stockholders’ equity
|
386,711 | 384,631 | 467,089 | 475,829 | 435,143 | |||||||||||||||
|
Other Data
|
||||||||||||||||||||
|
Adjusted
EBITDA
(5)
|
$ | 32,312 | $ | 12,793 | $ | 104,702 | $ | 86,355 | $ | 85,820 | ||||||||||
| (1) | 2007 amounts include $95.9 million in revenue from Melville which was acquired by Viad on February 1, 2007. | |
| (2) | 2008 amounts include $25.4 million in revenue from Becker Group which was acquired by Viad on January 4, 2008. | |
| (3) | Income from continuing operations includes the following items (see Notes 3 and 16 of notes to consolidated financial statements): |
15
Table of Contents
| Year Ended December 31, | ||||||||||||||||||||
| 2010 | 2009 | 2008 | 2007 | 2006 | ||||||||||||||||
| (in thousands, except per share data) | ||||||||||||||||||||
|
Restructuring charges (recoveries), net of tax
|
$ | 2,613 | $ | 8,677 | $ | 317 | $ | 835 | $ | (122 | ) | |||||||||
|
Restructuring charges (recoveries) per diluted share
|
$ | 0.13 | $ | 0.43 | $ | 0.02 | $ | 0.04 | $ | (0.01 | ) | |||||||||
|
Impairment losses (recoveries), net of tax
|
$ | 268 | $ | 98,197 | $ | 9,405 | $ | (105 | ) | $ | 2,090 | |||||||||
|
Impairment losses (recoveries) per diluted share
|
$ | 0.01 | $ | 4.92 | $ | 0.46 | $ | (0.01 | ) | $ | 0.10 | |||||||||
|
Gains on sale of corporate assets, net of tax
|
$ | — | $ | — | $ | — | $ | — | $ | (2,164 | ) | |||||||||
|
Gains on sale of corporate assets per diluted share
|
$ | — | $ | — | $ | — | $ | — | $ | (0.10 | ) | |||||||||
| (4) | The 2010, 2009 and 2008 amounts relate to certain obligations associated with previously sold operations. The 2007 amount primarily represents the settlement of a real estate participation interest associated with a parcel of land sold by a discontinued operation. The 2006 amount includes $7.4 million (after-tax) related to the reversal of certain liabilities as a result of the expiration of product warranty liabilities associated with a previously sold manufacturing operation. The remaining amounts primarily relate to the favorable resolution of tax and other matters related to previously sold operations. | |
| (5) | See Item 7, “Management’s Discussion and Analysis of Financial Condition and Results of Operations” for a discussion of “Non-GAAP Measures.” |
16
Table of Contents
| Item 7. | Management’s Discussion and Analysis of Financial Condition and Results of Operations. |
The following discussion should be read in conjunction with Viad
Corp’s consolidated financial statements and related notes.
This discussion contains forward-looking statements that involve
risks and uncertainties. Viad Corp’s actual results could
differ materially from those anticipated due to various factors
discussed under “Risk Factors,” “Forward-Looking
Statements” and elsewhere in this Annual Report.
Overview:
Viad’s reportable segments consist of Marketing &
Events U.S., Marketing & Events International and
Travel & Recreation Group.
In July 2009, Viad announced a strategic reorganization to align
its brands and operations into two operating groups: the
Marketing & Events Group and the Travel &
Recreation Group. The operating groups are supported by a
Corporate Services Group that centralizes responsibility for
various corporate functions. On the close of business on
December 31, 2009, substantially all of the domestic
operations of the Marketing & Events Group were
combined into one legal entity by transferring all of the assets
and third party liabilities of Exhibitgroup/Giltspur, a division
of Viad Corp, The Becker Group, Ltd. (“Becker Group”)
and other related entities into GES Exposition Services, Inc.
Furthermore, on February 2, 2010, GES Exposition Services,
Inc. changed its name to Global Experience Specialists, Inc.
(“GES”). The services that were previously provided
under the Company’s brands of
“Exhibitgroup/Giltspur” and “Becker Group”
are now provided under the “Global Experience
Specialists” brand.
Beginning in 2010, the Company changed its reportable segments
as a result of the reorganization and consolidation of business
units within the Marketing & Events Group. The
reportable segments are based on geographical lines of
responsibility and reflect the management structure and internal
organization of the business. Accordingly, the presentation of
segment information for the Marketing & Events Group
is based on the redefined segments, and comparable information
for earlier periods has been restated to reflect the revised
segment structure.
Marketing &
Events Group
The Marketing & Events Group specializes in all
aspects of the design, planning and production of
face-to-face
events, immersive environments and brand-based experiences for
clients, including show organizers, corporate brand marketers
and retail shopping centers. In addition, the
Marketing & Events Group provides a variety of
immersive, entertaining attractions and brand-based experiences,
sponsored events, mobile marketing and other branded
entertainment and
face-to-face
marketing solutions for clients and venues, including shopping
malls, movie studios, museums, leading consumer brands and
casinos.
The composition of the Marketing & Events Group’s
reportable segments reflects geographical lines of
responsibility. The reportable segments are:
1.
Marketing & Events U.S
. segment
includes all domestic GES and affiliated operations, including
those services formerly provided under the Exhibitgroup/Giltspur
and Becker Group brands. The consolidation of the domestic
Marketing & Events Group operations is intended to
provide a fully integrated service delivery network through a
realigned sales organization, shared infrastructure and
facilities, and a common operational platform.
2.
Marketing & Events International
segment includes all foreign operations of the
Marketing & Events Group and consists of two operating
segments: Canada and EMEA (Europe, Middle East, Asia). This
reporting segment includes the operations of the following
companies: GES Exposition Services (Canada) Limited, Melville
Exhibition and Event Services Limited and affiliates
(collectively “Melville”), SDD Exhibitions Limited and
GES GmbH & Co. KG.
Travel &
Recreation Group
Travel and recreation services are provided by Brewster Inc.
(“Brewster”) and Glacier Park, Inc. (“Glacier
Park”).
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 Ice
Explorer Tours, motorcoach services, charter and sightseeing
services, tour boat operations, inbound package tour operations
and hotel operations.
Glacier Park operates four historic lodges and three motor inns
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.
17
Table of Contents
Financial
Highlights
The following 2010 financial highlights are presented in
accordance with accounting principles generally accepted in the
United States of America (“GAAP”):
Viad Corp
(Consolidated)
| — | Total revenues of $844.8 million, an increase of 4.8 percent from 2009 revenues | |
| — | Net income attributable to Viad of $443,000 compared to a loss of $104.7 million in 2009 | |
| — | Diluted income per share of $0.02 compared to a loss per share of $5.25 in 2009 | |
| — | Viad recorded restructuring charges totaling $4.2 million primarily related to reorganization activities in the Marketing & Events Group, comprised of the elimination of certain positions as well as facility consolidations | |
| — | Income from discontinued operations of $262,000 related to the reversal of certain liabilities associated with previously sold operations | |
| — | Cash and cash equivalents were $145.8 million as of December 31, 2010 | |
| — | Debt was $9.1 million as of December 31, 2010 |
Marketing &
Events U.S.
| — | Revenues of $571.0 million, as compared to $568.4 million in 2009 | |
| — | Segment operating loss of $15.2 million, as compared to $22.1 million in 2009 |
Marketing &
Events International
| — | Revenues of $197.8 million, an increase of 14.6 percent from 2009 revenues | |
| — | Segment operating income of $10.1 million compared to $9.2 million in 2009 |
Travel &
Recreation Group
| — | Revenues of $88.3 million, an increase of 17.2 percent from 2009 revenues | |
| — | Segment operating income of $19.9 million, as compared to $17.1 million in 2009 |
Non-GAAP Measures:
The following discussion includes a presentation of Adjusted
EBITDA and Income before impairment losses, which are utilized
by management to measure the profit and performance of
Viad’s operations and to facilitate period to period
comparisons. “Adjusted EBITDA” is defined by Viad as
net income attributable to Viad before interest expense, income
taxes, depreciation and amortization, impairment losses and
recoveries, changes in accounting principles and the effects of
discontinued operations. “Income before impairment
losses” is defined by Viad as income from continuing
operations before the after-tax effect of impairment losses
related to goodwill, other intangible assets and other
long-lived assets. The presentation of Adjusted EBITDA and
Income before impairment losses is supplemental to results
presented under GAAP and may not be comparable to similarly
titled measures used by other companies. Adjusted EBITDA is
considered a useful operating metric as potential variations
arising from taxes, depreciation, debt service costs, impairment
losses and recoveries, changes in accounting principles and the
effects of discontinued operations are eliminated, thus
resulting in an additional measure considered to be indicative
of Viad’s ongoing operations. Income before impairment
losses is utilized by management to review operating results of
the business without the effects of non-cash impairment losses.
These non-GAAP measures should be considered in addition to, but
not as a substitute for, other measures of financial performance
reported in accordance with GAAP.
Management believes that the presentation of Adjusted EBITDA and
Income before impairment losses provides useful information to
investors regarding Viad’s results of operations for
trending, analyzing and benchmarking the performance and value
of Viad’s business. Management uses Adjusted EBITDA and
Income before impairment losses primarily as performance
measures and believes that the GAAP financial measures most
directly comparable to these non-GAAP measures are net income
attributable to Viad and income from continuing operations
attributable to Viad, respectively. Although Adjusted EBITDA is
used as a financial measure to assess the performance of the
business, the use of Adjusted EBITDA is limited because it does
not consider material costs, expenses and other items necessary
to operate the business. These items include debt service costs,
18
Table of Contents
non-cash
depreciation and amortization expense associated with long-lived
assets, expenses related to U.S. federal, state, local and
foreign income taxes, impairment losses or recoveries, and the
effects of accounting changes and discontinued operations.
Similarly, although Income before impairment losses is used as a
financial measure to assess the performance of the business, its
use is limited because it does not consider non-cash goodwill,
other intangible asset and other long-lived asset impairment
losses. Because Adjusted EBITDA and Income before impairment
losses do not consider the above items, a user of Viad’s
financial information should consider net income attributable to
Viad and income from continuing operations attributable to Viad
as important measures of financial performance because they
provide more complete measures of the Company’s performance.
A reconciliation of Adjusted EBITDA to net income (loss)
attributable to Viad is as follows:
| 2010 | 2009 | 2008 | ||||||||||
| (in thousands) | ||||||||||||
|
Adjusted EBITDA
|
$ | 32,312 | $ | 12,793 | $ | 104,702 | ||||||
|
Impairment losses
|
(302 | ) | (116,863 | ) | (11,231 | ) | ||||||
|
Interest expense
|
(1,835 | ) | (1,690 | ) | (1,757 | ) | ||||||
|
Income tax benefit (expense)
|
(1,742 | ) | 28,639 | (20,678 | ) | |||||||
|
Depreciation and amortization
|
(28,252 | ) | (28,269 | ) | (28,048 | ) | ||||||
|
Income from discontinued operations
|
262 | 679 | 385 | |||||||||
|
Net income (loss) attributable to Viad
|
$ | 443 | $ | (104,711 | ) | $ | 43,373 | |||||
The increase in Adjusted EBITDA of $19.5 million from 2009
to 2010 was primarily driven by higher segment operating results
at all operating segments and lower restructuring charges. The
decrease in Adjusted EBITDA of $91.9 million from 2008 to
2009 was primarily driven by lower segment operating results at
all operating segments, restructuring charges and lower interest
income, partially offset by lower corporate activities expense.
A reconciliation of income (loss) before impairment losses
attributable to Viad to income (loss) from continuing operations
attributable to Viad is as follows:
| 2010 | 2009 | 2008 | ||||||||||
| (in thousands) | ||||||||||||
|
Income (loss) before impairment losses attributable to Viad
|
$ | 449 | $ | (7,193 | ) | $ | 52,393 | |||||
|
Impairment losses, net of
tax
(1)
|
(268 | ) | (98,197 | ) | (9,405 | ) | ||||||
|
Income (loss) from continuing operations attributable to Viad
|
$ | 181 | $ | (105,390 | ) | $ | 42,988 | |||||
| (1) | Includes income tax benefits of $34,000, $18.7 million and $1.8 million in 2010, 2009 and 2008, respectively. |
Results
of Operations:
2010
vs. 2009:
Revenues for 2010 increased 4.8 percent to
$844.8 million compared to $805.8 million in 2009.
Viad’s income from continuing operations before income
taxes was $2.6 million for 2010 compared to a loss of
$133.4 million in 2009. Impairment losses for 2010 were
$268,000 (after-tax), or $0.01 per diluted share. In 2009, the
Company recorded impairment losses of $98.2 million
(after-tax), or $4.92 per diluted share, primarily related to
goodwill and other intangible assets in the
Marketing & Events Group, as well as $2.9 million
related to the write down of a non-strategic real estate asset
held for sale as of December 31, 2009. Income attributable
to Viad before impairment losses for 2010 was $449,000, or $0.02
per diluted share, compared to the 2009 loss attributable to
Viad before impairment losses of $7.2 million, or $0.36 per
diluted share. Net restructuring charges in 2010 were
$4.2 million compared to $14.1 million in 2009, both
primarily related to the Marketing & Events Group. The
improved results as compared to 2009 were also the result of
higher revenues, overhead reductions and productivity
improvements driven by the Company’s Lean initiatives.
Net income attributable to Viad for 2010 was $443,000, or $0.02
per diluted share, compared to a loss of $104.7 million, or
$5.25 per diluted share, in 2009. These results include income
from discontinued operations of $262,000, or $0.01 per diluted
share, in 2010 and $679,000, or $0.03 per diluted share, in 2009
relating to obligations associated with previously sold
operations.
During 2010, foreign exchange rate variances resulted in
increases in revenues and segment operating income of
$8.7 million and $1.1 million, respectively, as
compared to 2009. Viad conducts its foreign operations primarily
in Canada and the
19
Table of Contents
United Kingdom and to a lesser extent in certain other
countries. The following table summarizes the effects of foreign
exchange rate variances on full year revenues and segment
operating results from Viad’s significant international
operations:
| Revenues | Segment Operating Results | |||||||||||||||||||||||
|
Weighted Average
|
Effect of Rate
|
Weighted Average
|
Effect of Rate
|
|||||||||||||||||||||
| Exchange Rates |
Variance
|
Exchange Rates |
Variance
|
|||||||||||||||||||||
| 2010 | 2009 | (thousands) | 2010 | 2009 | (thousands) | |||||||||||||||||||
|
Marketing & Events Group:
|
||||||||||||||||||||||||
|
Canada
|
$ | 0.97 | $ | 0.87 | $ | 7,607 | $ | 0.98 | $ | 0.85 | $ | 533 | ||||||||||||
|
United Kingdom
|
$ | 1.54 | $ | 1.56 | $ | (1,823 | ) | $ | 1.52 | $ | 1.49 | $ | 52 | |||||||||||
|
Travel & Recreation Group:
|
||||||||||||||||||||||||
|
Canada
|
$ | 0.96 | $ | 0.89 | $ | 4,387 | $ | 0.94 | $ | 0.92 | $ | 538 | ||||||||||||
Accordingly, Viad’s full year results were primarily
impacted by the strengthening of the Canadian dollar relative to
the U.S. dollar. Future decreases in the exchange rates may
adversely impact overall expected profitability and historical
period-to-period
comparisons when operating results are translated into
U.S. dollars.
Marketing & Events Group.
Revenues
for the Marketing & Events U.S. segment were
$571.0 million for 2010, up 0.4 percent compared to
$568.4 million in 2009. The increase was primarily due to
positive show rotation of $15 million in revenue, mostly
offset by reductions in brand marketer spending and a base
same-show revenue decline of one percent. Management defines
base same-show revenue as revenue from exhibitions and events
that occur in the same quarter and same city every year. Base
same-shows represented 37.1 percent of
Marketing & Events U.S. segment revenues in 2010.
The 2010 segment operating loss was $15.2 million, compared
to a loss of $22.1 million in 2009. The improved operating
results were primarily the result of higher revenues, overhead
reductions of approximately $10 million versus 2009 and
productivity improvements driven by the Company’s Lean
initiatives, partially offset by higher accruals for
performance-based incentives (which were not significant in
2009) and pricing pressures.
Revenues for the Marketing & Events International
segment were $197.8 million for 2010, up 14.6 percent
compared to $172.6 million in 2009. Segment operating
income was $10.1 million in 2010, compared to
$9.2 million in 2009. As discussed above, results in this
segment were impacted by exchange rates during 2010, resulting
in increases of $4.3 million in revenue and $519,000 in
segment operating income, as compared to 2009. Excluding
exchange rate variances, 2010 revenues increased by
$20.8 million, or 12.1 percent, and operating income
increased by $343,000, or 3.7 percent. The increase in
revenue primarily resulted from market share gains, improving
industry trends, a major project for the 2010 Winter Olympic
Games in Canada and positive show rotation of $3 million.
The improved operating income was primarily the result of higher
revenues, partially offset by performance-based incentives and
the reinstatement of full wages after a temporary reduction in
2009.
Although the Marketing & Events Group has a
diversified revenue base and long-term contracts for future
shows, its revenues are affected by general economic and
industry-specific conditions. The prospects for individual shows
tend to be driven by the success of the industry related to
those shows. In general, the exhibition and event industry is
experiencing modest improvement. Following quarterly declines
from the second quarter of 2008 through the first quarter of
2010, Marketing & Events U.S. base same-show
revenues were essentially flat in the 2010 second quarter and
increased by 8.6 percent and 16.6 percent in the 2010
third and fourth quarters, respectively. Excluding the strong
growth of a major auto show, the fourth quarter increase in
U.S. base same-show revenues was 5.4 percent.
In 2011, management expects U.S. same-show revenues to
increase at a mid-single-digit rate. Additionally, management
expects show rotation to positively impact full year revenues by
approximately $10 million. Foreign currency exchange rate
variances are not expected to have a significant impact on full
year 2011 results. Management remains focused on improving the
profitability of the U.S. segment through continued
integration and consolidation of operations to increase capacity
utilization and reduce costs. Management expects to record
restructuring charges of approximately $500,000 in the first
quarter of 2011 as a result of these efforts. Additional charges
may be incurred as additional cost structure improvements are
made.
The Marketing & Events Group is subject to multiple
collective bargaining agreements that affect labor costs, about
one-fourth of which expire each year. Although labor relations
between the Company and labor are currently stable, disruptions
during future contract negotiations could occur, with the
possibility of an adverse impact on the operating results of the
Marketing & Events Group.
Travel & Recreation Group.
Revenues
for the Travel & Recreation Group segment were
$88.3 million, up 17.2 percent compared to 2009
revenues of $75.3 million. Segment operating income was
$19.9 million, up 16.6 percent from 2009 operating
20
Table of Contents
income of $17.1 million. As discussed above, results in
this segment were impacted by exchange rate variances during
2010, resulting in increases of $4.4 million and $538,000
in revenues and segment operating income, respectively, as
compared to 2009. Excluding exchange rate variances, 2010
revenues increased by $8.6 million, or 11.4 percent,
primarily due to initiatives to capture incremental spend per
guest as well as stronger demand for the Company’s tourism
services that was partly related to the centennial anniversary
of Glacier National Park and the 2010 Winter Olympic and
Paralympic Games.
The Travel & Recreation Group segment is affected by
consumer discretionary spending on tourism activities.
Management expects 2011 results from the Travel &
Recreation Group segment to benefit from improved tourism demand
versus 2010. Management anticipates that foreign currency
exchange rate variances versus 2010 will not have a significant
impact on 2011 results. Additionally, management anticipates
lower room revenues at Many Glacier Hotel, a property operated
by Glacier Park, Inc., due to planned construction that will
reduce the number of rooms available during 2011 as compared to
2010. However, management expects the acquisition of Grouse
Mountain Lodge, which is located near Glacier National Park, to
more than offset the revenue decline at Many Glacier Hotel. The
Company acquired the 145-room Grouse Mountain Lodge on
January 5, 2011 for $10.5 million in cash.
During 2010, approximately 73 percent of revenue and
79 percent of segment operating income generated in the
Travel & Recreation Group segment was derived through
its Canadian operations. These operations are largely affected
by foreign customer visitation, and, accordingly, increases in
the value of the Canadian dollar compared to other currencies
could adversely affect customer volumes, revenue and segment
operating income from the Travel & Recreation Group
segment.
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 six one-year
periods and now expires on December 31, 2011. The Park
Service, in its sole discretion, may continue extending Glacier
Park’s concession contract in one-year increments. When
this contract ultimately expires, Glacier Park will have the
opportunity to bid on a new concession contract. If Glacier Park
does secure a new contract, possible terms would be for 10, 15
or 20 years. Glacier Park generated approximately
70 percent of its 2010 revenue through its concession
contract for services provided within Glacier National Park. If
a new concessionaire is selected by the Park Service, Glacier
Park’s remaining business would consist of its operations
at Waterton Lakes National Park, Alberta, Canada; East Glacier,
Montana and Whitefish, Montana. In such a circumstance, Glacier
Park would be entitled to an amount equal to its
“possessory interest,” which generally means the value
of the structures acquired or constructed, fixtures installed
and improvements made to the concession property at Glacier
National Park during the term of the concession contract.
Glacier Park owns its Glacier Park Lodge operations in East
Glacier, Montana as well as the Grouse Mountain Lodge in
Whitefish, Montana (acquired January 5, 2011). Glacier Park
also owns the Prince of Wales Hotel in Waterton Lakes National
Park, which is operated under a ground lease with the Canadian
Government that was recently renewed for a
42-year
term
running through January 31, 2052. Glacier Park generated
approximately 25 percent of the Travel &
Recreation Group’s full year 2010 segment operating income.
Corporate Activities.
Corporate activities
expense of $6.4 million in 2010 increased from
$5.6 million in 2009. This increase was primarily due to
higher performance-based compensation expense in 2010 as
compared to performance-based compensation expense reversals in
2009, partially offset by lower consulting fees in 2010.
Impairment Losses.
In 2010, Viad recorded
impairment losses of $302,000 related to other intangible assets
and certain property and equipment at the Travel &
Recreation Group. In 2009, Viad recorded impairment losses of
$116.9 million, including $112.3 million related to
the non-cash write-down of goodwill and other intangible assets
at the Marketing & Events Group, $1.7 million
related to touring exhibit assets at the Marketing &
Events Group and $2.9 million related to the write-down of
a non-strategic real estate asset held for sale at the
Travel & Recreation Group as of December 31, 2009.
Restructuring Charges.
In 2010, Viad recorded
gross restructuring charges of $5.0 million compared to
$15.4 million in 2009 primarily related to reorganization
activities in the Marketing & Events Group, comprised
of the elimination of certain positions as well as facility
consolidations. In 2010, Viad also reversed restructuring
reserves of $814,000 versus $1.3 million in 2009 primarily
related to revisions in estimated sublease income associated
with certain leased facilities.
Income Taxes.
The effective tax rate for 2010
was 68.1 percent compared to 21.5 percent for 2009.
The relatively high rate for 2010 compared to the statutory rate
was due to the write-off of deferred taxes of $1.3 million
as a result of recent health care legislation, partially offset
by favorable tax resolutions of $514,000. Excluding the effects
of these items, the 2010 effective rate was 38.2 percent.
The relatively low rate for 2009 compared to the statutory rate
was due to the effect of certain nondeductible impairment losses
of $26.8 million, partially offset by favorable tax
resolutions of $3.5 million. Excluding the effects of these
items, the 2009 effective rate was 39.0 percent.
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Table of Contents
2009
vs. 2008:
Revenues for 2009 decreased 28.1 percent to
$805.8 million from $1.1 billion in 2008. Viad’s
loss from continuing operations before income taxes was
$133.4 million for 2009 compared to income of
$64.2 million for 2008. The 2009 loss from continuing
operations attributable to Viad was $105.4 million, or
$5.28 per diluted share, compared to income of
$43.0 million, or $2.08 per diluted share, in 2008. These
declines were largely the result of impairment losses of
$116.9 million as well as recessionary declines in
marketing spending and tourism, negative show rotation revenue
of $87 million and a $31 million decline in revenues
due to unfavorable exchange rate variances. The 2009 impairment
losses primarily related to goodwill and other intangible assets
in the Marketing & Events Group, as well as
$2.9 million related to the write down of a non-strategic
real estate asset held for sale as of December 31, 2009.
Impairment losses were $11.2 million in 2008, primarily
related to goodwill and other intangible assets in the
Marketing & Events Group. The 2009 loss attributable
to Viad before impairment losses was $7.2 million, or $0.36
per diluted share, compared to income attributable to Viad
before impairment losses of $52.4 million, or $2.56 per
diluted share, in 2008.
The net loss attributable to Viad for 2009 was
$104.7 million, or $5.25 per diluted share, compared to net
income of $43.4 million, or $2.10 per diluted share, for
2008. These results include income from discontinued operations
of $679,000, or $0.03 per diluted share, in 2009 and $385,000,
or $0.02 per diluted share in 2008, relating to obligations
associated with previously sold operations.
During 2009, foreign exchange rate variances resulted in a
decrease of $30.8 million in revenues and $3.4 million
in segment operating income as compared to 2008. Viad conducts
its foreign operations primarily in Canada and the United
Kingdom and to a lesser extent in certain other countries. The
following table summarizes the effects of foreign exchange rate
variances on revenues and segment operating results from
Viad’s significant international operations:
| Revenues | Segment Operating Results | |||||||||||||||||||||||
|
Weighted-Average
|
Effect of Rate
|
Weighted-Average
|
Effect of Rate
|
|||||||||||||||||||||
| Exchange Rates |
Variance
|
Exchange Rates |
Variance
|
|||||||||||||||||||||
| 2009 | 2008 | (thousands) | 2009 | 2008 | (thousands) | |||||||||||||||||||
|
Marketing & Events Group:
|
||||||||||||||||||||||||
|
Canada
|
$ | 0.87 | $ | 0.95 | $ | (4,325 | ) | $ | 0.85 | $ | 0.96 | $ | (198 | ) | ||||||||||
|
United Kingdom
|
$ | 1.56 | $ | 1.90 | $ | (21,133 | ) | $ | 1.49 | $ | 1.92 | $ | (2,363 | ) | ||||||||||
|
Travel & Recreation Group:
|
||||||||||||||||||||||||
|
Canada
|
$ | 0.89 | $ | 0.96 | $ | (4,018 | ) | $ | 0.92 | $ | 0.98 | $ | (956 | ) | ||||||||||
Accordingly, Viad’s 2009 results were impacted by the
weakening of the British pound and Canadian dollar relative to
the U.S. dollar.
Marketing & Events Group.
Revenues
for the Marketing & Events U.S. segment were
$568.4 million for 2009, down 30.8 percent compared to
$821.5 million in 2008. Segment operating loss was
$22.1 million in 2009 compared to segment operating income
of $41.5 million in 2008. These declines resulted primarily
from a significant reduction in exhibition marketing spending,
as well as show rotation that negatively impacted revenue by
$87 million versus 2008. Marketing & Events
U.S. base same-show revenues declined 22.5 percent in
2009. Management defines base same-show revenue as revenue from
exhibitions and events that occur in the same quarter and same
city every year. Base same-shows represented 38.0 percent
of Marketing & Events U.S. revenues in 2009.
Additionally, the declines versus 2008 reflect lower sales of
holiday-themed events and experiences and retail merchandising
units as shopping center clients reduced spending in response to
the recession.
Revenues for the Marketing & Events International
segment were $172.6 million for 2009, down
23.6 percent compared to $225.9 million in 2008.
Segment operating income was $9.2 million in 2009, compared
to $18.5 million in 2008. As discussed above, results in
this segment were impacted by exchange rate variances during
2009, resulting in decreases of $26.7 million in revenue
and $2.5 million in segment operating income, as compared
to 2008. Excluding exchange rate variances, 2009 revenues
decreased by $26.5 million, or 11.7 percent, primarily
due to a significant reduction in exhibition marketing spending.
During 2009, Viad revised downward its forecast for future
revenues and earnings in the Marketing & Events Group
based on continued declines in exhibition marketing spending by
its customers and a sharper than expected decline in retail
holiday décor demand. As a result, the Company projected a
more prolonged contraction in its trade show and retail
marketing revenues than was previously anticipated. Due to these
facts and circumstances, Viad performed an impairment evaluation
of goodwill, other intangible assets and certain other
long-lived assets. As a result of the evaluation, Viad recorded
aggregate impairment losses of $114.0 million primarily
related to goodwill and other intangible assets.
In anticipation of revenue pressures in 2009, management began
taking actions to reduce overhead costs during early 2008.
Through continued efforts in this area, management realized a
2009 full year reduction in overhead costs (including
performance-
22
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based incentives) of approximately $41 million in the
Marketing & Events Group as compared to 2008. These
savings were realized in part by the strategic reorganization
announced in July 2009, which included the consolidation of the
GES, Exhibitgroup/Giltspur and Becker Group businesses into the
Marketing & Events Group. Primarily as a result of the
strategic reorganization, Viad recorded restructuring charges of
$14.6 million during 2009 related to the
Marketing & Events Group. In addition, Viad also
reversed restructuring reserves of $1.3 million primarily
related to revisions in estimated sublease income associated
with certain leased facilities.
Travel & Recreation Group.
Revenues
of the Travel & Recreation Group segment were
$75.3 million in 2009, a decrease of 13.1 percent from
$86.6 million in 2008. Segment operating income was
$17.1 million in 2009 compared to $22.0 million in
2008. Operating margins were 22.7 percent in 2009 compared
to 25.4 percent in 2008. As discussed above, results in
this segment were impacted by exchange rate variances during
2009, resulting in decreases of $4.0 million and $956,000
in revenues and segment operating income, respectively, as
compared to 2008. Excluding exchange rate variances, 2009
revenues decreased by $7.3 million, or 8.4 percent,
due to reduced tourism demand resulting from global economic
weakness.
During 2009, the Travel & Recreation Group commenced a
plan to sell a non-strategic real estate asset, which consists
of land, building and related improvements, and which was
expected to be sold within one year. Accordingly, the value of
this asset was remeasured based on the estimated fair value,
less costs to sell. As a result of the remeasurement, the
Company recorded an impairment loss of $2.9 million.
Furthermore, the recorded value of this asset of
$14.0 million was reclassified and presented under the
caption “Asset held for sale” in Viad’s
consolidated balance sheets as of December 31, 2009. Viad
completed the sale of this asset in the first quarter of 2010.
During 2009, approximately 72 percent of revenue and
80 percent of operating income generated by Viad’s
Travel & Recreation Group segment was derived through
its Canadian operations. These operations are largely dependent
on foreign customer visitation, and accordingly, increases in
the value of the Canadian dollar compared to other currencies
could adversely affect customer volumes, and, therefore, revenue
and operating income in the Travel & Recreation Group
segment.
Corporate Activities.
Corporate activities
expense of $5.6 million for 2009 decreased from
$7.5 million in 2008. This decrease was primarily related
to higher incentive compensation expenses in 2008, partially
offset by higher corporate development expenses in 2009.
Interest Income.
Interest income of $579,000
for 2009 decreased from $3.2 million for 2008. The decrease
was due to lower interest rates on invested cash balances, and,
to a lesser extent, a decline in the average cash balance from
2008.
Impairment Losses.
In 2009, Viad recorded
impairment losses of $116.9 million, including
$112.3 million primarily related to the non-cash write-down
of goodwill and other intangible assets at the
Marketing & Events Group, $1.7 million related to
touring exhibit assets at the Marketing & Events Group
and $2.9 million related to the write-down of a
non-strategic real estate asset held for sale as of
December 31, 2009 at the Travel & Recreation
Group. In 2008, Viad recorded impairment losses of
$11.2 million, including $10.2 million related to
goodwill and other intangible assets and $1.0 million
related to a touring exhibit asset at the Marketing &
Events Group.
Restructuring Charges.
In 2009, Viad recorded
restructuring charges of $15.4 million primarily related to
reorganization activities, including facility consolidations. In
2008, Viad recorded restructuring charges of $647,000 primarily
related to corporate office expenses, including the elimination
of certain positions. In 2009 and 2008, Viad also reversed
restructuring reserves of $1.3 million and $141,000,
respectively, primarily related to revisions in estimated
sublease income associated with certain leased facilities.
Income Taxes.
The effective tax rate for 2009
was 21.5 percent compared to 32.2 percent for 2008.
The relatively low rates compared to the statutory rate were
primarily due to certain nondeductible impairment losses
recorded in 2009 and 2008 and also reflect aggregate favorable
resolution of tax matters of $3.5 million and
$5.7 million, respectively. Excluding the effects of these
items, Viad’s effective tax rates were 39.0 percent
and 37.1 percent in 2009 and 2008, respectively.
Liquidity
and Capital Resources:
Cash and cash equivalents were $145.8 million as of
December 31, 2010 as compared to $116.3 million as of
December 31, 2009, with the increase primarily due to cash
flow from operations, partially offset by share repurchases.
Management believes that Viad’s existing sources of
liquidity will be sufficient to fund operations and capital
commitments for at least the next 12 months.
Viad’s total debt as of December 31, 2010 was
$9.1 million compared to $12.8 million as of
December 31, 2009. The
debt-to-capital
ratio was 0.023 to 1 as of December 31, 2010 compared with
0.032 to 1 as of December 31, 2009. Capital is defined as
total debt and capital lease obligations plus total
stockholders’ equity.
23
Table of Contents
Effective November 20, 2009, Viad amended its secured
revolving credit agreement (the “Credit Facility”) to
ensure that the Company continued to meet its obligations under
the Credit Facility given the current economic environment. The
amended Credit Facility provides for a $75 million
revolving line of credit, which was lowered from
$150 million, and may be increased up to an additional
$50 million under certain circumstances. The Credit
Facility borrowings are to be used for general corporate
purposes (including permitted acquisitions) and to support up to
$25 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. Viad is in discussions with its
agent bank on the renewal of the Credit Facility, and expects to
have a Credit Facility in place before its June 15, 2011
expiration.
Borrowings under the Credit Facility (of which GES is a
guarantor) are indexed to the prime rate or the London Interbank
Offered Rate (“LIBOR”), 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
0.375 percent annually. As of December 31, 2010, Viad
had $65.9 million of capacity remaining under its Credit
Facility reflecting an outstanding borrowing of
$4.5 million (indexed to LIBOR) and issued letters of
credit of $4.6 million. As part of the amendment,
Viad’s financial covenants were revised to include a
fixed-charge coverage ratio of not less than 1.00 to 1 and a
leverage ratio (defined as total debt to Adjusted EBITDA) of not
greater than 2.50 to 1. Additionally, Viad must maintain a
consolidated minimum cash balance of $50 million. As of
December 31, 2010, the fixed-charge coverage and leverage
ratios were 1.29 to 1 and 0.71 to 1, respectively. Significant
other covenants include limitations on: investments, common
stock dividends, stock repurchases, additional indebtedness,
sales/leases of assets, acquisitions, consolidations or mergers
and liens on property. The terms of the Credit Facility restrict
Viad from paying more than $5 million in dividends in the
aggregate in any calendar year and also restrict the Company
from repurchasing more than $10 million in the aggregate of
the Company’s common stock during the remainder of the
Credit Facility term. As of December 31, 2010, Viad was in
compliance with all covenants.
As of December 31, 2010, 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, 2010 would be
$36.3 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.
Capital expenditures for 2010 totaled $17.0 million and
primarily related to the purchase of rental inventory, equipment
and computer hardware primarily at the Marketing &
Events U.S. segment and building improvements and equipment
at the Travel & Recreation Group. Capital expenditures
for 2009 totaled $21.3 million and primarily related to the
purchase of equipment, information systems and related costs and
exhibit costs at the Marketing & Events
U.S. segment.
In March 2010, Viad completed the sale of a non-strategic real
estate asset for $14.3 million (net of selling costs). The
asset was previously held in the Travel & Recreation
Group and was classified on Viad’s consolidated balance
sheets under the caption “Asset held for sale” as of
December 31, 2009.
On January 5, 2011, Viad completed the acquisition of
Grouse Mountain Lodge for $10.5 million in cash. Grouse
Mountain Lodge is a 145-room, four-season resort hotel located
in Whitefish, Montana, and will be operated by Glacier Park
within Viad’s Travel & Recreation Group segment.
In September 2010, Viad announced its intent to repurchase up to
an additional 500,000 shares of the Company’s common
stock from time to time at prevailing market prices. At the time
of the announcement, there were 160,681 shares available
for repurchase pursuant to previously announced authorizations.
Viad purchased 356,300 shares for $6.3 million during
2010, with 304,381 shares remaining for repurchase.
Additionally, during 2010, 2009 and 2008, the Company
repurchased 28,407 shares for $573,000, 72,294 shares
for $1.2 million and 50,061 shares for
$1.6 million, respectively, related to tax withholding
requirements on vested share-based awards.
Viad exercises significant judgment in determining its income
tax provision due to transactions, credits and calculations
where the ultimate tax determination is uncertain. During 2009,
Viad paid certain foreign income tax reassessments of
$4.9 million and received tax refunds of $1.9 million
pursuant to a joint settlement with certain Canadian taxing
jurisdictions. During 2010, Viad received income tax refunds of
$5.6 million related to carryback claims associated with
2009 operating losses.
24
Table of Contents
The following table presents Viad’s contractual obligations
as of December 31, 2010:
| Payments due by period | ||||||||||||||||||||
|
Less than
|
More than
|
|||||||||||||||||||
| Total | 1 year | 1-3 years | 3-5 years | 5 years | ||||||||||||||||
| (in thousands) | ||||||||||||||||||||
|
Long-term debt, including current portion
|
$ | 4,461 | $ | 4,461 | $ | — | $ | — | $ | — | ||||||||||
|
Capital lease obligations
|
4,616 | 2,178 | 2,375 | 63 | — | |||||||||||||||
|
Operating leases
|
76,069 | 21,434 | 26,198 | 15,828 | 12,609 | |||||||||||||||
|
Estimated interest
payments
(1)
|
460 | 272 | 170 | 18 | — | |||||||||||||||
|
Pension and postretirement
benefits
(2)
|
38,647 | 3,507 | 7,539 | 7,849 | 19,752 | |||||||||||||||
|
Purchase
obligations
(3)
|
27,315 | 12,962 | 13,038 | 1,208 | 107 | |||||||||||||||
|
Total contractual cash
obligations
(4)
|
$ | 151,568 | $ | 44,814 | $ | 49,320 | $ | 24,966 | $ | 32,468 | ||||||||||
| (1) | Interest payments on capital lease obligations only. Interest payments on variable rate debt (the Credit Facility, as described in Note 9 of notes to consolidated financial statements) are indexed to LIBOR and are excluded from the table. | |
| (2) | Estimated contributions related to multi-employer benefit plans are excluded from the table above. See Note 15 of notes to consolidated financial statements for disclosures regarding those obligations. | |
| (3) | Purchase obligations primarily represent payments due under various licensing agreements and commitments related to product licenses, consulting and other contracted services that are enforceable and legally binding and that specify all significant terms, including open purchase orders. | |
| (4) | Aggregate liabilities associated with uncertain tax positions of $1.1 million (including interest and penalties) are excluded from the table above as the timing and amounts of future cash outflows are highly uncertain. |
Viad and certain of its subsidiaries are plaintiffs or
defendants to various actions, proceedings and pending claims,
some of which involve, or may involve, compensatory, punitive or
other damages. Litigation is subject to many uncertainties and
it is possible that some of the legal actions, proceedings or
claims could be decided against Viad. Although the amount of
liability as of December 31, 2010 with respect to 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 effect on Viad’s business, financial position or
results of operations.
Viad is subject to various U.S. federal, state and foreign
laws and regulations governing the prevention of pollution and
the protection of the environment in the jurisdictions in which
Viad has or had operations. If the Company has failed to comply
with these environmental laws and regulations, civil and
criminal penalties could be imposed and Viad could become
subject to regulatory enforcement actions in the form of
injunctions and cease and desist orders. As is the case with
many companies, Viad also faces exposure to actual or potential
claims and lawsuits involving environmental matters relating to
its past operations. Although it is a party to certain
environmental disputes, Viad believes that any resulting
liabilities, after taking into consideration amounts already
provided for, including insurance coverage, will not have a
material effect on the Company’s financial position,
results of operations or liquidity. As of December 31,
2010, there was a remaining environmental remediation liability
of $6.1 million related to previously sold operations of
which $1.1 million is included in the consolidated balance
sheets under the caption “Other current liabilities”
and $5.0 million under the caption “Other deferred
items and liabilities.”
Viad’s businesses contribute to various multi-employer
pension plans based on obligations arising under collective
bargaining agreements covering its union-represented employees.
Viad’s contributions to these plans in 2010, 2009 and 2008
totaled $15.3 million, $15.7 million and
$21.9 million, respectively. Based upon the information
available to Viad from plan administrators, management believes
that several of these multi-employer plans are underfunded. The
Pension Protection Act of 2006 requires pension plans
underfunded at certain levels to reduce, over defined time
periods, the underfunded status. In addition, under current
laws, the termination of a plan, or a voluntary withdrawal from
a plan by Viad, or a shrinking contribution base to a plan as a
result of the insolvency or withdrawal of other contributing
employers to such plan would require Viad to make payments to
such plan for its proportionate share of the plan’s
unfunded vested liabilities. As of December 31, 2010, the
amount of additional funding, if any, that Viad would be
required to make related to multi-employer pension plans is not
ascertainable.
Off-Balance
Sheet Arrangements:
Viad does not have any “off-balance sheet”
arrangements with unconsolidated special-purpose or other
entities that would materially affect the Company’s
financial position, results of operations, liquidity or capital
resources. Furthermore, Viad does not have any relationships
with special-purpose or other entities that provide off-balance
sheet financing; liquidity, market risk or
25
Table of Contents
credit risk support; or engage in leasing or other services that
may expose the Company to liability or risks of loss that are
not reflected in Viad’s consolidated financial statements
and related notes. See Notes 9, 17 and 18 of notes to
consolidated financial statements.
Critical
Accounting Policies and Estimates:
The preparation of financial statements in conformity with GAAP
requires estimates and assumptions that affect the reported
amounts of assets and liabilities, revenues and expenses, and
related disclosures of contingent assets and liabilities in the
consolidated financial statements. The SEC has defined a
company’s most critical accounting policies as those that
are most important to the portrayal of a company’s
financial position and results of operations, and that require a
company to make its most difficult and subjective judgments,
often as a result of the need to make estimates of matters that
are inherently uncertain. Based on these criteria, Viad has
identified and discussed with its audit committee the following
critical accounting policies and estimates pertaining to Viad,
and the methodology and disclosures related to those estimates:
Goodwill
— Goodwill is not amortized, but
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’s reporting units are defined, and goodwill is tested,
at either an operating segment level or at the component level
of an operating segment, depending on various factors including:
the internal reporting structure of the operating segment, the
level of integration among components, the sharing of assets
among components and the benefits and likely recoverability of
goodwill by the component’s operations.
As of December 31, 2010, Viad had total goodwill of
$127.4 million consisting of $85.1 million related to
the Marketing & Events Group and $42.3 million
related to the Travel & Recreation Group. Within the
Marketing & Events Group, goodwill of
$62.7 million relates to the Marketing & Events
U.S. segment and $22.4 million to the
Marketing & Events International segment. For
impairment testing purposes, the goodwill related to the
Marketing & Events U.S. segment is assigned to
and tested at the operating segment level, which represents all
domestic operations of GES. Furthermore, the goodwill related to
the Marketing & Events International segment is
assigned to and tested at the component level within the
segment’s geographical operations. As of December 31,
2010, the amount of goodwill assigned to the reporting units in
the United Kingdom (Melville) and Canada was $13.3 million
and $9.1 million, respectively. Also, as of
December 31, 2010, the Brewster operating segment (within
the Travel & Recreation Group) had goodwill of
$42.3 million. Brewster is considered a reporting unit for
goodwill impairment testing purposes.
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.
The most critical assumptions and estimates in determining the
estimated fair value of its reporting units relate to the
amounts and timing of expected future cash flows for each
reporting unit and the reporting unit cost of capital (discount
rate) applied to those cash flows. Furthermore, the assumed
reporting unit cost of capital rates (discount rates) are
estimated using a
build-up
method based on the perceived risk associated with the cash
flows pertaining to the specific reporting unit. In order to
assess the reasonableness of its fair value estimates, the
Company performs a reconciliation of the aggregate fair values
of its reporting units to Viad’s market capitalization.
As noted above, 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. As of December 31, 2010, Viad had aggregate
goodwill of $127.4 million recorded in the consolidated
balance sheets. Furthermore, as a result of the Company’s
most recent impairment analysis performed in the fourth quarter
of 2010, 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 were
80 percent, 69 percent and 69 percent,
respectively, for each of the Marketing & Events Group
reporting units in the United States, the United Kingdom
(Melville) and Canada. For the Brewster reporting unit, the
excess of the estimated fair value over the carrying value was
50 percent as of the most recent impairment test. Due to
continued uncertainties in the current economic environment,
reductions in the Company’s expected future revenue,
operating income or cash flow forecasts and projections, or an
increase in reporting unit cost of capital, could trigger
additional goodwill impairment testing, which may result in
impairment losses. Furthermore, management continues to monitor
the market capitalization of the Company as ongoing declines in
market capitalization could be indicative of possible goodwill
impairment. See “Results of Operations” above and
Note 3 of notes to consolidated financial statements for a
discussion of goodwill impairment losses recorded during 2009
and 2008.
26
Table of Contents
Income taxes
— Viad is required to estimate and
record provisions for income taxes in each of the jurisdictions
in which the Company operates. Accordingly, the Company must
estimate its actual current income tax liability, and assess
temporary differences arising from the treatment of items for
tax purposes as compared to the treatment for accounting
purposes. These differences result in deferred tax assets and
liabilities which are included in Viad’s consolidated
balance sheets. The Company must assess the likelihood that
deferred tax assets will be recovered from future taxable income
and to the extent that recovery is not likely, a valuation
allowance must be established. The Company uses significant
judgment in forming a conclusion regarding the recoverability of
its deferred tax assets and evaluates the available positive and
negative evidence to determine whether it is
more-likely-than-not that its deferred tax assets will be
realized in the future. As of December 31, 2010 and 2009,
Viad had gross deferred tax assets of $67.1 million and
$61.2 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.
During 2010 and 2009, Viad recorded pre-tax losses from its
operations in the United States. The Company considered the
negative evidence of these domestic pre-tax operating losses on
the future recoverability of its deferred tax assets. Viad also
considered positive evidence regarding the realization of
deferred tax assets including the Company’s historical and
forecasted taxable income, taxpaying history and future
reversals of deferred tax liabilities. Furthermore, Viad also
considered the fact that goodwill impairment losses are not tax
deductible and thus did not contribute to tax losses in 2009. As
of December 31, 2010 and 2009, Viad had a valuation
allowance of $411,000 and $162,000, respectively, related to
certain state deferred tax assets. With respect to all other
deferred tax assets, management believes that recovery from
future taxable income is more-likely-than-not.
As noted above, Viad uses considerable judgment in forming a
conclusion regarding the recoverability of its deferred tax
assets. As a result, there are inherent uncertainties regarding
the ultimate realization of these assets, which is primarily
dependent on Viad’s ability to generate sufficient taxable
income in future periods. In light of the Company’s recent
domestic operating losses, and the continued uncertainties in
the current economic environment, it is 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 exercises judgment in determining its income tax provision
due to transactions, credits and calculations where the ultimate
tax determination is uncertain. As of December 31, 2010 and
2009, Viad did not have any accrued gross liabilities associated
with uncertain tax positions for continuing operations. However,
as of December 31, 2010 and 2009, Viad had accrued interest
and penalties related to uncertain tax positions for continuing
operations of $146,000 and $407,000, respectively.
During 2010, 2009 and 2008, Viad recorded tax benefits related
to the favorable resolution of tax matters in continuing
operations of $514,000, $3.5 million and $5.7 million,
respectively. These tax resolutions primarily represent the
reversal of amounts accrued for tax and related interest and
penalties in connection with uncertain tax positions which were
effectively settled or for which there was a lapse of the
applicable statute of limitations.
In addition to the above, Viad had accrued gross liabilities
associated with uncertain tax positions for discontinued
operations of $636,000 as of both December 31, 2010 and
2009. In addition, as of December 31, 2010 and 2009, Viad
had accrued interest and penalties related to uncertain tax
positions for discontinued operations of $351,000 and $313,000,
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).
Insurance liabilities
— Viad is self-insured up
to certain limits for workers’ compensation, automobile,
product and general liability and property loss claims. The
aggregate amount of insurance liabilities related to Viad’s
continuing operations was $22.6 million as of
December 31, 2010. Of this total, $16.2 million
related to workers’ compensation liabilities and the
remaining $6.4 million related to general/auto liability
claims. Viad has also retained and provided for certain
insurance liabilities in conjunction with previously sold
businesses totaling $7.5 million as of December 31,
2010, primarily related to workers’ compensation
liabilities. Provisions for losses for claims incurred,
including estimated claims incurred but not yet reported, are
made based on Viad’s historical experience, claims
frequency and other factors. A change in the assumptions used
could result in an adjustment to recorded liabilities. Viad has
purchased insurance for amounts in excess of the self-insured
levels, which generally range from $200,000 to $500,000 on a per
claim basis. Viad does not maintain a self-insured retention
pool fund as claims are paid from current cash resources at the
time of settlement. Viad’s net cash payments in connection
with these insurance liabilities were $6.8 million,
$6.7 million and $8.3 million in 2010, 2009 and 2008,
respectively.
Pension and postretirement benefits
—
Viad’s pension plans use traditional defined benefit
formulas based on years of service and final average
compensation. Funding policies provide that payments to defined
benefit pension trusts shall be at least equal to the minimum
funding required by applicable regulations. The Company
presently anticipates contributing $1.6 million to its
funded pension plans and $943,000 to its unfunded pension plans
in 2011.
27
Table of Contents
Viad and certain of its subsidiaries have defined benefit
postretirement plans that provide medical and life insurance for
certain eligible employees, retirees and dependents. The related
postretirement benefit liabilities are recognized over the
period that services are provided by employees. In addition,
Viad retained the obligations for these benefits for retirees of
certain sold businesses. While the plans have no funding
requirements, Viad expects to contribute $500,000 to the plans
in 2011.
The assumed health care cost trend rate used in measuring the
December 31, 2010 accumulated postretirement benefit
obligation was nine and one-half percent, declining one-half
percent each year to the ultimate rate of five percent by the
year 2019 and remaining at that level thereafter. The assumed
health care cost trend rate used in measuring the
December 31, 2009 accumulated postretirement benefit
obligation was ten percent, declining one-half percent each year
to the ultimate rate of five percent by the year 2019 and
remaining at that level thereafter.
A one-percentage-point increase in the assumed health care cost
trend rate for each year would increase the accumulated
postretirement benefit obligation as of December 31, 2010
by approximately $1.6 million and the total of service and
interest cost components by approximately $124,000. A
one-percentage-point decrease in the assumed health care cost
trend rate for each year would decrease the accumulated
postretirement benefit obligation as of December 31, 2010
by approximately $1.4 million and the total of service and
interest cost components by approximately $104,000.
The weighted-average assumptions used to determine the
postretirement benefit obligations as of December 31 were as
follows:
| Domestic Plans | ||||||||||||||||||||||||||||||||
|
Postretirement
|
||||||||||||||||||||||||||||||||
| Funded Plans | Unfunded Plans | Benefit Plans | Foreign Plans | |||||||||||||||||||||||||||||
| 2010 | 2009 | 2010 | 2009 | 2010 | 2009 | 2010 | 2009 | |||||||||||||||||||||||||
|
Discount rate
|
5.45 | % | 5.90 | % | 5.10 | % | 5.70 | % | 5.10 | % | 5.60 | % | 5.10 | % | 5.60 | % | ||||||||||||||||
The weighted-average assumptions used to determine net periodic
benefit cost were as follows:
| Domestic Plans | ||||||||||||||||||||||||||||||||
|
Postretirement
|
||||||||||||||||||||||||||||||||
| Funded Plans | Unfunded Plans | Benefit Plans | Foreign Plans | |||||||||||||||||||||||||||||
| 2010 | 2009 | 2010 | 2009 | 2010 | 2009 | 2010 | 2009 | |||||||||||||||||||||||||
|
Discount rate
|
5.90 | % | 6.90 | % | 5.70 | % | 6.90 | % | 5.60 | % | 6.90 | % | 5.60 | % | 7.00 | % | ||||||||||||||||
|
Expected return on plan assets
|
6.35 | % | 6.35 | % | N/A | N/A | 6.10 | % | 6.10 | % | 5.75 | % | 6.50 | % | ||||||||||||||||||
The discount rates used in determining future pension and
postretirement benefit obligations are based on rates determined
by actuarial analysis and management review, and reflect the
estimated rates of return on a high-quality, hypothetical bond
portfolio whose cash flows match the timing and amounts of
expected benefit payments. See Note 15 of notes to
consolidated financial statements.
Share-based compensation
— Viad grants
share-based compensation awards to officers, directors and
certain key employees pursuant to the 2007 Viad Corp Omnibus
Incentive Plan (the “2007 Plan”). The 2007 Plan has a
ten-year life and provides for the following types of awards:
(a) incentive and non-qualified stock options;
(b) restricted stock and restricted stock units;
(c) performance units or performance shares; (d) stock
appreciation rights; (e) cash-based awards and
(f) certain other stock-based awards.
Share-based compensation expense recognized in the consolidated
financial statements in 2010, 2009 and 2008 was
$3.5 million, $3.1 million and $6.2 million,
respectively. Furthermore, the total tax benefits related to
such costs were $1.2 million, $1.1 million and
$2.3 million in 2010, 2009 and 2008, respectively. No
share-based compensation costs were capitalized during 2010,
2009 or 2008.
The fair value of restricted stock and performance-based
restricted stock awards are based on Viad’s stock price on
the date of grant. Liability-based awards 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. Viad uses the Black-Scholes option pricing model for
purposes of determining the fair value of each stock option
grant for which key assumptions are necessary. These assumptions
include Viad’s expected stock price volatility; the
expected period of time the stock option will remain
outstanding; the expected dividend yield on Viad common stock,
and the risk-free interest rate. Changes in the assumptions
could result in different estimates of the fair value of stock
option grants, and consequently impact Viad’s results of
operations. See Note 2 of notes to consolidated financial
statements.
28
Table of Contents
Impact of
Recent Accounting Pronouncements:
For a description of recently adopted and issued accounting
pronouncements, including the expected dates of adoption and
estimated effects, if any, on Viad’s consolidated financial
statements, see Note 1 of notes to consolidated financial
statements.
Forward-Looking
Statements:
As provided by the safe harbor provision under the “Private
Securities Litigation Reform Act of 1995,” Viad cautions
readers that, in addition to historical information contained
herein, this Annual Report includes certain information,
assumptions and discussions that may constitute forward-looking
statements. These forward-looking statements are not historical
facts, but reflect current estimates, projections, expectations,
or trends concerning future growth, operating cash flows,
availability of short-term borrowings, consumer demand, new
business, investment policies, productivity improvements,
ongoing cost reduction efforts, efficiency, competitiveness,
legal expenses, tax rates and other tax matters, foreign
exchange rates and the realization of restructuring cost
savings. Actual results could differ materially from those
discussed in the forward-looking statements. Viad’s
businesses can be affected by a host of risks and uncertainties.
Among other things, natural disasters, gains and losses of
customers, consumer demand patterns, labor relations, purchasing
decisions related to customer demand for exhibition and event
services, existing and new competition, industry alliances,
consolidation and growth patterns within the industries in which
Viad competes, acquisitions, adverse developments in liabilities
associated with discontinued operations, any deterioration in
the economy and other risks discussed in Item 1A.,
“Risk Factors,” included in this Annual Report, may
individually or in combination impact future results. In
addition to factors mentioned elsewhere, economic, competitive,
governmental, technological, capital marketplace and other
factors, including terrorist activities or war, a pandemic
health crisis and international conditions, could affect the
forward-looking statements in this Annual Report.
| Item 7A. | Quantitative and Qualitative Disclosures About Market Risk. |
Viad’s market risk exposures relate to fluctuations in
foreign exchange rates, interest rates and certain commodity
prices. Foreign exchange risk is the risk that fluctuating
exchange rates will adversely affect financial condition or
results of operations. Interest rate risk is the risk that
changing interest rates will adversely affect the earnings of
Viad. Commodity risk is the risk that changing prices will
adversely affect results of operations.
Viad conducts its foreign operations primarily in Canada and the
United Kingdom and to a lesser extent in certain other
countries. The functional currency of Viad’s foreign
subsidiaries is their local currency. Accordingly, for purposes
of consolidation, Viad translates the assets and liabilities of
its foreign subsidiaries into U.S. dollars at the foreign
exchange rates in effect at the balance sheet date. The
unrealized gains or losses resulting from the translation of
these foreign denominated assets and liabilities are included as
a component of accumulated other comprehensive income in
Viad’s consolidated balance sheets. As a result,
significant fluctuations in foreign exchange rates relative to
the U.S. dollar may result in material changes to
Viad’s net equity position reported in its consolidated
balance sheets. Viad does not currently hedge its equity risk
arising from the translation of foreign denominated assets and
liabilities. Viad had cumulative unrealized foreign currency
translation gains recorded in stockholders’ equity of
$39.0 million and $31.3 million as of
December 31, 2010 and 2009, respectively. During 2010 and
2009, unrealized foreign currency translation gains of
$7.7 million and $25.1 million, respectively, were
recorded in other comprehensive income.
In addition, for purposes of consolidation, the revenues,
expenses, gains and losses related to Viad’s foreign
operations are translated into U.S. dollars at the average
foreign exchange rates for the period. As a result, Viad’s
consolidated results of operations are exposed to fluctuations
in foreign exchange rates as the operating results of its
foreign operations, when translated, may vary from period to
period, even when the functional currency amounts have not
changed. Such fluctuations may adversely impact overall expected
profitability and historical period to period comparisons. Viad
does not currently hedge its net earnings exposure arising from
the translation of its foreign operating results. As noted
above, Viad primarily conducts its foreign operations in Canada
and the United Kingdom. The following table summarizes the
effect of foreign exchange rate variances on segment operating
results from Viad’s Canadian and United Kingdom operations:
|
Weighted Average
|
Effect of Rate
|
Weighted Average
|
Effect of Rate
|
|||||||||||||||||||||
| Exchange Rates |
Variance
|
Exchange Rates |
Variance
|
|||||||||||||||||||||
| 2010 | 2009 | (thousands) | 2009 | 2008 | (thousands) | |||||||||||||||||||
|
Canadian Operations:
|
||||||||||||||||||||||||
|
Marketing & Events Group
|
$ | 0.98 | $ | 0.85 | $ | 533 | $ | 0.85 | $ | 0.96 | $ | (198 | ) | |||||||||||
|
Travel & Recreation Group
|
$ | 0.94 | $ | 0.92 | $ | 538 | $ | 0.92 | $ | 0.98 | $ | (956 | ) | |||||||||||
|
United Kingdom Operations:
|
||||||||||||||||||||||||
|
Marketing & Events Group
|
$ | 1.52 | $ | 1.49 | $ | 52 | $ | 1.49 | $ | 1.92 | $ | (2,363 | ) | |||||||||||
29
Table of Contents
As the Canadian operations generated aggregate operating income
in 2010, Viad’s segment operating income has been favorably
impacted by $1.1 million from the strengthening of the
Canadian dollar relative to the U.S. dollar. A hypothetical
change of ten percent in the Canadian exchange rate would have
resulted in a change to operating income of approximately
$1.9 million. As the United Kingdom operations generated
aggregate operating income in 2010, Viad’s segment
operating income has been favorably impacted by $52,000 from the
strengthening of the British pound relative to the
U.S. dollar. A hypothetical change of ten percent in the
British pound exchange rate would have resulted in a change to
operating income of approximately $656,000.
Viad is exposed to foreign exchange transaction risk as its
foreign subsidiaries have certain revenue transactions
denominated in currencies other than the functional currency of
the respective subsidiary. From time to time, Viad utilizes
forward contracts to mitigate the impact on earnings related to
these transactions due to fluctuations in foreign exchange
rates. As of December 31, 2010 and 2009, Viad did not have
any significant foreign currency forward contracts outstanding.
Viad is exposed to short-term interest rate risk on certain of
its debt obligations. Viad currently does not use derivative
financial instruments to hedge cash flows for such obligations.
As of December 31, 2010 Viad had variable rate debt
outstanding of $4.5 million under the Credit Facility.
Interest payments related to Viad’s variable rate debt
outstanding are indexed to LIBOR. Assuming a hypothetical
adverse change in short term interest rates of 50 and
100 basis points, Viad’s 2010 income from continuing
operations before income taxes would have been lower by
approximately $200,000 and $230,000, respectively. See
Note 9 of notes to consolidated financial statements.
Viad’s subsidiaries have exposure to changing fuel prices.
Periodically, Brewster enters into futures contracts with an oil
company to purchase two types of fuel and specifies the monthly
total volume, by fuel product, to be purchased over the agreed
upon term of the contract, which is generally no longer than one
year. The main objective of Viad’s risk policy related to
changing fuel prices is to reduce transaction exposure in order
to mitigate the cash flow risk and protect profit margins. There
were no fuel contracts outstanding as of December 31, 2010
or 2009.
| Item 8. | Financial Statements and Supplementary Data. |
Refer to Index to Financial Statements on page 35 for
required information.
| Item 9. | Changes in and Disagreements With Accountants on Accounting and Financial Disclosure. |
None.
| Item 9A. | Controls and Procedures. |
Under the supervision and with the participation of management,
including the Chief Executive Officer and Chief Financial
Officer of Viad, the effectiveness of the design and operation
of disclosure controls and procedures has been evaluated as of
December 31, 2010, and, based on that evaluation, the Chief
Executive Officer and Chief Financial Officer have concluded
that these disclosure controls and procedures are effective as
of December 31, 2010. Disclosure controls and procedures
are designed to ensure that information required to be disclosed
in the reports filed or submitted under the Securities Exchange
Act of 1934 is recorded, processed, summarized and reported,
within the time periods specified in the SEC’s rules and
forms. Disclosure controls and procedures include, without
limitation, controls and procedures designed to ensure that
information required to be disclosed in such reports is
accumulated and communicated to management, including the Chief
Executive Officer and Chief Financial Officer, as appropriate to
allow for timely decisions regarding required disclosure.
There were no changes in the Company’s internal control
over financial reporting during the fourth quarter of 2010 that
have materially affected, or are reasonably likely to materially
affect, internal control over financial reporting.
Management’s report on internal control over financial
reporting and the report of Viad’s independent registered
public accounting firm, Deloitte & Touche LLP, are
provided in this Annual Report immediately prior to the Index to
Financial Statements.
| Item 9B. | Other Information. |
None.
30
Table of Contents
| Item 10. | Directors, Executive Officers and Corporate Governance. |
Information regarding directors of Viad, director nomination
procedures, the Audit Committee of Viad’s Board of
Directors and compliance with Section 16(a) of the
Securities Exchange Act of 1934 are included in the Proxy
Statement for the Annual Meeting of Shareholders of Viad to be
held on May 17, 2011, and are incorporated herein by
reference. Information regarding executive officers of Viad is
located in Part I, “Executive Officers of
Registrant” on page 10 of this Annual Report.
Viad has adopted a Code of Ethics for all directors, officers
and employees of the Company and its subsidiaries. A copy of the
Company’s Code of Ethics is available at Viad’s
website at
www.viad.com/pdf/corpgovernance/CodeofEthics.pdf
and is also available without charge to any shareholder upon
request by writing to: Viad Corp, 1850 North Central Avenue,
Suite 800, Phoenix, Arizona
85004-4545,
Attention: Corporate Secretary.
| Item 11. | Executive Compensation. |
Information regarding executive compensation is contained in the
Proxy Statement for the Annual Meeting of Shareholders of Viad
to be held on May 17, 2011, and is incorporated herein by
reference.
| Item 12. | Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters. |
Information regarding security ownership of certain beneficial
owners and management and information regarding securities
authorized for issuance under equity compensation plans are
contained in the Proxy Statement for the Annual Meeting of
Shareholders of Viad to be held on May 17, 2011, and is
incorporated herein by reference.
| Item 13. | Certain Relationships and Related Transactions, and Director Independence. |
Information regarding director independence, and certain
relationships and related transactions, is contained in the
Proxy Statement for the Annual Meeting of Shareholders of Viad
to be held on May 17, 2011, and is incorporated herein by
reference.
| Item 14. | Principal Accounting Fees and Services. |
Information regarding principal accounting fees and services and
the pre-approval policies and procedures for such fees and
services, as adopted by the Audit Committee of the Board of
Directors, is contained in the Proxy Statement for the Annual
Meeting of Shareholders of Viad to be held on May 17, 2011,
and is incorporated herein by reference.
| Item 15. | Exhibits, Financial Statement Schedules. |
| (a) 1. | The financial statements listed in the accompanying Index to Financial Statements are filed as part of this Annual Report. |
2. The exhibits listed in the accompanying
Exhibit Index are filed as part of this Annual Report.
| (b) | Exhibits |
See Exhibit Index.
| (c) | Financial Statement Schedules |
Schedule II — Valuation and Qualifying Accounts
31
Table of Contents
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the
Securities Exchange Act of 1934, the registrant has duly caused
this Annual Report to be signed on its behalf by the
undersigned, thereunto duly authorized, in Phoenix, Arizona, on
the 4th day of March, 2011.
VIAD CORP
| By: |
/s/
Paul
B. Dykstra
|
Paul B. Dykstra
Chairman of the Board, President and
Chief Executive Officer
Chairman of the Board, President and
Chief Executive Officer
Pursuant to the requirements of the Securities Exchange Act of
1934, this Annual Report has been signed below by the following
persons on behalf of Viad Corp and in the capacities and on the
dates indicated:
| Principal Executive Officer | ||
|
Date: March 4, 2011
|
By:
/s/ Paul
B. Dykstra
Paul
B. Dykstra
Chairman of the Board, President and Chief Executive Officer |
|
| Principal Financial Officer | ||
|
Date: March 4, 2011
|
By:
/s/ Ellen
M. Ingersoll
Ellen
M. Ingersoll
Chief Financial Officer |
|
| Principal Accounting Officer | ||
|
Date: March 4, 2011
|
By:
/s/ G.
Michael Latta
G.
Michael Latta
Chief Accounting Officer-Controller |
|
| Directors | ||
|
Wayne G. Allcott
Daniel Boggan Jr. Isabella Cunningham Richard H. Dozer Jess Hay Robert C. Krueger Robert E. Munzenrider Albert M. Teplin |
||
|
Date: March 4, 2011
|
By:
/s/ Ellen
M. Ingersoll
Ellen
M. Ingersoll
Attorney-in-Fact |
32
Table of Contents
MANAGEMENT’S
REPORT ON INTERNAL CONTROL OVER FINANCIAL REPORTING
The management of Viad Corp is responsible for establishing and
maintaining adequate internal control over financial reporting.
Internal control over financial reporting is defined in
Rule 13a-15(f)
or
15d-15(f)
promulgated under the Securities Exchange Act of 1934 as a
process designed by, or under the supervision of, the
company’s principal executive and principal financial
officers and effected by the company’s board of directors,
management and other personnel, to provide reasonable assurance
regarding the reliability of financial reporting and the
preparation of financial statements for external purposes in
accordance with accounting principles generally accepted in the
United States of America and includes those policies and
procedures that:
| — | Pertain to the maintenance of records that in reasonable detail accurately and fairly reflect the transactions and dispositions of the assets of the company; | |
| — | Provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with accounting principles generally accepted in the United States of America and that receipts and expenditures of the company are being made only in accordance with authorizations of management and directors of the company; and | |
| — | Provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use or disposition of the company’s assets that could have a material effect on the financial statements. |
Because of its inherent limitations, internal control over
financial reporting may not prevent or detect misstatements.
Projections of any evaluation of effectiveness to future periods
are subject to the risk that controls may become inadequate
because of changes in conditions, or that the degree of
compliance with the policies or procedures may deteriorate. All
internal control systems, no matter how well designed, have
inherent limitations. Therefore, even those systems determined
to be effective can provide only reasonable assurance with
respect to financial statement preparation and presentation.
Because of the inherent limitations of internal control, there
is a risk that material misstatements may not be prevented or
detected on a timely basis by internal control over financial
reporting. However, these inherent limitations are known
features of the financial reporting process. Therefore, it is
possible to design into the process safeguards to reduce, though
not eliminate, this risk.
Management assessed the effectiveness of Viad’s internal
control over financial reporting as of December 31, 2010.
In making this assessment, management used the criteria set
forth by the Committee of Sponsoring Organizations of the
Treadway Commission in
Internal Control-Integrated
Framework
.
Based on its assessment, management concluded that, as of
December 31, 2010, Viad’s internal control over
financial reporting is effective based on those criteria.
Viad’s independent registered public accounting firm,
Deloitte & Touche LLP, has issued a report relating to
its audit of the effectiveness of Viad’s internal control
over financial reporting, which appears on page 34 of this
Annual Report.
33
Table of Contents
REPORT OF
INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
Board of Directors and Stockholders of
Viad Corp
Phoenix, Arizona
We have audited the internal control over financial reporting of
Viad Corp and subsidiaries (the “Company”) as of
December 31, 2010, based on criteria established in
Internal Control-Integrated Framework
issued by the
Committee of Sponsoring Organizations of the Treadway
Commission. The Company’s management is responsible for
maintaining effective internal control over financial reporting
and for its assessment of the effectiveness of internal control
over financial reporting, included in the accompanying
Management’s Report on Internal Control over Financial
Reporting. Our responsibility is to express an opinion on the
effectiveness of the Company’s internal control over
financial reporting based on our audit.
We conducted our audit in accordance with the standards of the
Public Company Accounting Oversight Board (United States). Those
standards require that we plan and perform the audit to obtain
reasonable assurance about whether effective internal control
over financial reporting was maintained in all material
respects. Our audit included obtaining an understanding of
internal control over financial reporting, assessing the risk
that a material weakness exists, testing and evaluating the
design and operating effectiveness of internal control based on
the assessed risk, and performing such other procedures as we
considered necessary in the circumstances. We believe that our
audit provides a reasonable basis for our opinion.
A company’s internal control over financial reporting is a
process designed by, or under the supervision of, the
company’s principal executive and principal financial
officers, or persons performing similar functions, and effected
by the company’s board of directors, management, and other
personnel to provide reasonable assurance regarding the
reliability of financial reporting and the preparation of
financial statements for external purposes in accordance with
accounting principles generally accepted in the United States of
America (“generally accepted accounting principles”).
A company’s internal control over financial reporting
includes those policies and procedures that (1) pertain to
the maintenance of records that, in reasonable detail,
accurately and fairly reflect the transactions and dispositions
of the assets of the company; (2) provide reasonable
assurance that transactions are recorded as necessary to permit
preparation of financial statements in accordance with generally
accepted accounting principles, and that receipts and
expenditures of the company are being made only in accordance
with authorizations of management and directors of the company;
and (3) provide reasonable assurance regarding prevention
or timely detection of unauthorized acquisition, use, or
disposition of the company’s assets that could have a
material effect on the financial statements.
Because of the inherent limitations of internal control over
financial reporting, including the possibility of collusion or
improper management override of controls, material misstatements
due to error or fraud may not be prevented or detected on a
timely basis. Also, projections of any evaluation of the
effectiveness of the internal control over financial reporting
to future periods are subject to the risk that the controls may
become inadequate because of changes in conditions, or that the
degree of compliance with the policies or procedures may
deteriorate.
In our opinion, the Company maintained, in all material
respects, effective internal control over financial reporting as
of December 31, 2010, based on the criteria established in
Internal Control-Integrated Framework
issued by the
Committee of Sponsoring Organizations of the Treadway Commission.
We have also audited, in accordance with the standards of the
Public Company Accounting Oversight Board (United States), the
consolidated financial statements and financial statement
schedule as of and for the year ended December 31, 2010, of
the Company and our report dated March 4, 2011, expressed
an unqualified opinion on those consolidated financial
statements and financial statement schedule.
/s/
Deloitte &
Touche llp
Deloitte & Touche LLP
Phoenix, Arizona
March 4, 2011
34
Table of Contents
INDEX TO
FINANCIAL STATEMENTS
| Page | ||||
| F-1 | ||||
| F-2 | ||||
| F-3 | ||||
| F-4 | ||||
| F-5 | ||||
| F-6 | ||||
| F-44 | ||||
| F-45 | ||||
35
Table of Contents
VIAD
CORP
| December 31, | ||||||||
| 2010 | 2009 | |||||||
| (in thousands, except share data) | ||||||||
|
Assets
|
||||||||
|
Current assets:
|
||||||||
|
Cash and cash equivalents
|
$ | 145,841 | $ | 116,342 | ||||
|
Accounts receivable, net of allowance for doubtful accounts of
$1,172 and $3,892, respectively
|
47,187 | 44,767 | ||||||
|
Inventories
|
38,670 | 44,818 | ||||||
|
Deferred income taxes
|
22,057 | 20,150 | ||||||
|
Asset held for sale
|
— | 13,982 | ||||||
|
Other current assets
|
17,160 | 21,476 | ||||||
|
Total current assets
|
270,915 | 261,535 | ||||||
|
Property and equipment, net
|
149,346 | 155,000 | ||||||
|
Other investments and assets
|
31,363 | 29,069 | ||||||
|
Deferred income taxes
|
35,875 | 35,951 | ||||||
|
Goodwill
|
127,441 | 124,931 | ||||||
|
Other intangible assets, net
|
1,563 | 2,700 | ||||||
|
Total Assets
|
$ | 616,503 | $ | 609,186 | ||||
|
Liabilities and Stockholders’ Equity
|
||||||||
|
Current liabilities:
|
||||||||
|
Accounts payable
|
$ | 47,933 | $ | 41,509 | ||||
|
Other current liabilities
|
96,749 | 85,077 | ||||||
|
Current portion of long-term debt and capital lease obligations
|
6,639 | 4,301 | ||||||
|
Total current liabilities
|
151,321 | 130,887 | ||||||
|
Long-term debt and capital lease obligations
|
2,438 | 8,487 | ||||||
|
Pension and postretirement benefits
|
33,008 | 32,767 | ||||||
|
Other deferred items and liabilities
|
43,025 | 52,414 | ||||||
|
Total liabilities
|
229,792 | 224,555 | ||||||
|
Commitments and contingencies (Notes 17 and 18)
|
||||||||
|
Stockholders’ equity:
|
||||||||
|
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
|
606,902 | 606,038 | ||||||
|
Retained deficit
|
(19,229 | ) | (16,405 | ) | ||||
|
Unearned employee benefits and other
|
(4,433 | ) | (5,954 | ) | ||||
|
Accumulated other comprehensive income (loss):
|
||||||||
|
Unrealized gain on investments
|
282 | 154 | ||||||
|
Cumulative foreign currency translation adjustments
|
38,979 | 31,283 | ||||||
|
Unrecognized net actuarial loss and prior service credit
|
(10,410 | ) | (8,385 | ) | ||||
|
Common stock in treasury, at cost, 4,710,988 and
4,379,125 shares, respectively
|
(270,534 | ) | (266,618 | ) | ||||
|
Total Viad Corp stockholders’ equity
|
378,959 | 377,515 | ||||||
|
Noncontrolling interest
|
7,752 | 7,116 | ||||||
|
Total stockholders’ equity
|
386,711 | 384,631 | ||||||
|
Total Liabilities and Stockholders’ Equity
|
$ | 616,503 | $ | 609,186 | ||||
See Notes to Consolidated Financial Statements.
F-1
Table of Contents
VIAD
CORP
| Year Ended December 31, | ||||||||||||
| 2010 | 2009 | 2008 | ||||||||||
| (in thousands, except per share data) | ||||||||||||
|
Revenues:
|
||||||||||||
|
Convention and event services
|
$ | 590,444 | $ | 582,969 | $ | 804,546 | ||||||
|
Exhibits and environments
|
166,040 | 147,533 | 229,694 | |||||||||
|
Travel and recreation services
|
88,277 | 75,302 | 86,621 | |||||||||
|
Total revenues
|
844,761 | 805,804 | 1,120,861 | |||||||||
|
Costs and expenses:
|
||||||||||||
|
Costs of services
|
656,315 | 636,249 | 814,214 | |||||||||
|
Costs of products sold
|
173,690 | 165,367 | 224,645 | |||||||||
|
Corporate activities
|
6,422 | 5,607 | 7,534 | |||||||||
|
Interest income
|
(584 | ) | (579 | ) | (3,242 | ) | ||||||
|
Interest expense
|
1,835 | 1,690 | 1,757 | |||||||||
|
Restructuring charges
|
4,222 | 14,054 | 506 | |||||||||
|
Goodwill impairment losses
|
— | 98,304 | 6,500 | |||||||||
|
Intangible asset impairment losses
|
185 | 14,005 | 3,731 | |||||||||
|
Other impairment losses
|
117 | 4,554 | 1,000 | |||||||||
|
Total costs and expenses
|
842,202 | 939,251 | 1,056,645 | |||||||||
|
Income (loss) from continuing operations before income taxes
|
2,559 | (133,447 | ) | 64,216 | ||||||||
|
Income tax expense (benefit)
|
1,742 | (28,639 | ) | 20,678 | ||||||||
|
Income (loss) from continuing operations
|
817 | (104,808 | ) | 43,538 | ||||||||
|
Income from discontinued operations
|
262 | 679 | 385 | |||||||||
|
Net income (loss)
|
1,079 | (104,129 | ) | 43,923 | ||||||||
|
Net income attributable to noncontrolling interest
|
(636 | ) | (582 | ) | (550 | ) | ||||||
|
Net income (loss) attributable to Viad
|
$ | 443 | $ | (104,711 | ) | $ | 43,373 | |||||
|
Diluted income (loss) per common share
|
||||||||||||
|
Income (loss) from continuing operations attributable to Viad
common stockholders
|
$ | 0.01 | $ | (5.28 | ) | $ | 2.08 | |||||
|
Income from discontinued operations attributable to Viad common
stockholders
|
0.01 | 0.03 | 0.02 | |||||||||
|
Net income (loss) attributable to Viad common stockholders
|
$ | 0.02 | $ | (5.25 | ) | $ | 2.10 | |||||
|
Weighted-average outstanding and potentially dilutive common
shares
|
20,277 | 19,960 | 20,493 | |||||||||
|
Basic income (loss) per common share
|
||||||||||||
|
Income (loss) from continuing operations attributable to Viad
common stockholders
|
$ | 0.01 | $ | (5.28 | ) | $ | 2.08 | |||||
|
Income from discontinued operations attributable to Viad common
stockholders
|
0.01 | 0.03 | 0.02 | |||||||||
|
Net income (loss) attributable to Viad common stockholders
|
$ | 0.02 | $ | (5.25 | ) | $ | 2.10 | |||||
|
Weighted-average outstanding common shares
|
19,955 | 19,960 | 20,172 | |||||||||
|
Dividends declared per common share
|
$ | 0.16 | $ | 0.16 | $ | 0.16 | ||||||
|
Amounts attributable to Viad common stockholders
|
||||||||||||
|
Income (loss) from continuing operations
|
$ | 181 | $ | (105,390 | ) | $ | 42,988 | |||||
|
Income from discontinued operations
|
262 | 679 | 385 | |||||||||
|
Net income (loss)
|
$ | 443 | $ | (104,711 | ) | $ | 43,373 | |||||
See Notes to Consolidated Financial Statements.
F-2
Table of Contents
VIAD
CORP
CONSOLIDATED
STATEMENTS OF COMPREHENSIVE INCOME
| Year Ended December 31, | ||||||||||||
| 2010 | 2009 | 2008 | ||||||||||
| (in thousands) | ||||||||||||
|
Net income (loss)
|
$ | 1,079 | $ | (104,129 | ) | $ | 43,923 | |||||
|
Other comprehensive income (loss):
|
||||||||||||
|
Unrealized gains (losses) on investments:
|
||||||||||||
|
Holding gains (losses) arising during the period, net of tax
expense (benefit) of $82, $137 and $(347)
|
128 | 216 | (543 | ) | ||||||||
|
Unrealized foreign currency translation adjustments
|
7,696 | 25,050 | (41,672 | ) | ||||||||
|
Pension and postretirement benefit plans:
|
||||||||||||
|
Amortization of net actuarial loss, net of tax expense (benefit)
of $1,433, $(2,859) and $(755)
|
(2,109 | ) | (4,164 | ) | (1,219 | ) | ||||||
|
Amortization of prior service credit, net of tax expense
(benefit) of $17, $(353) and $(483)
|
84 | (548 | ) | (757 | ) | |||||||
|
Total other comprehensive income (loss)
|
5,799 | 20,554 | (44,191 | ) | ||||||||
|
Comprehensive income (loss)
|
6,878 | (83,575 | ) | (268 | ) | |||||||
|
Comprehensive income attributable to noncontrolling interest
|
(636 | ) | (582 | ) | (550 | ) | ||||||
|
Comprehensive income (loss) attributable to Viad
|
$ | 6,242 | $ | (84,157 | ) | $ | (818 | ) | ||||
See Notes to Consolidated Financial Statements.
F-3
Table of Contents
VIAD
CORP
| Year Ended December 31, | ||||||||||||
| 2010 | 2009 | 2008 | ||||||||||
| (in thousands) | ||||||||||||
|
Cash flows from operating activities
|
||||||||||||
|
Net income (loss)
|
$ | 1,079 | $ | (104,129 | ) | $ | 43,923 | |||||
|
Adjustments to reconcile net income (loss) to net cash provided
by (used in) operating activities:
|
||||||||||||
|
Depreciation and amortization
|
28,252 | 28,269 | 28,048 | |||||||||
|
Deferred income taxes
|
744 | (8,349 | ) | 6,267 | ||||||||
|
Income from discontinued operations
|
(262 | ) | (679 | ) | (385 | ) | ||||||
|
Restructuring charges
|
4,222 | 14,054 | 506 | |||||||||
|
Impairment charges
|
302 | 116,863 | 11,231 | |||||||||
|
Losses (gains) on dispositions of property and other assets
|
45 | (18 | ) | (77 | ) | |||||||
|
Share-based compensation expense
|
3,518 | 3,093 | 6,246 | |||||||||
|
Excess tax benefit from share-based compensation arrangements
|
(27 | ) | — | (361 | ) | |||||||
|
Other non-cash items, net
|
4,580 | 6,714 | 4,570 | |||||||||
|
Change in operating assets and liabilities (excluding the impact
of acquisitions):
|
||||||||||||
|
Receivables
|
(3,042 | ) | 5,834 | (420 | ) | |||||||
|
Inventories
|
6,148 | 7,493 | 1,381 | |||||||||
|
Accounts payable
|
4,637 | (15,623 | ) | (10,416 | ) | |||||||
|
Restructuring liabilities
|
(6,718 | ) | (7,587 | ) | (2,434 | ) | ||||||
|
Accrued compensation
|
6,966 | (17,620 | ) | (8,292 | ) | |||||||
|
Customer deposits
|
2,000 | (1,600 | ) | (4,713 | ) | |||||||
|
Income taxes payable
|
(1,264 | ) | (4,660 | ) | (6,110 | ) | ||||||
|
Other assets and liabilities, net
|
(7,897 | ) | (28,302 | ) | (3,357 | ) | ||||||
|
Net cash provided by (used in) operating activities
|
43,283 | (6,247 | ) | 65,607 | ||||||||
|
Cash flows from investing activities
|
||||||||||||
|
Capital expenditures
|
(17,040 | ) | (21,315 | ) | (39,046 | ) | ||||||
|
Proceeds from dispositions of property and other assets
|
14,753 | 76 | 281 | |||||||||
|
Acquisition of businesses, net of cash acquired
|
— | — | (23,334 | ) | ||||||||
|
Proceeds from sale of short-term investments
|
— | — | 3,980 | |||||||||
|
Net cash used in investing activities
|
(2,287 | ) | (21,239 | ) | (58,119 | ) | ||||||
|
Cash flows from financing activities
|
||||||||||||
|
Payments on debt and capital lease obligations
|
(4,900 | ) | (3,715 | ) | (2,679 | ) | ||||||
|
Dividends paid on common stock
|
(3,275 | ) | (3,292 | ) | (3,302 | ) | ||||||
|
Common stock purchased for treasury
|
(6,906 | ) | (1,233 | ) | (17,353 | ) | ||||||
|
Debt issuance costs
|
— | (277 | ) | — | ||||||||
|
Excess tax benefits from share-based compensation arrangements
|
27 | — | 361 | |||||||||
|
Proceeds from exercise of stock options
|
593 | — | 3,759 | |||||||||
|
Net cash used in financing activities
|
(14,461 | ) | (8,517 | ) | (19,214 | ) | ||||||
|
Effect of exchange rate changes on cash and cash equivalents
|
2,964 | 4,305 | (5,303 | ) | ||||||||
|
Net change in cash and cash equivalents
|
29,499 | (31,698 | ) | (17,029 | ) | |||||||
|
Cash and cash equivalents, beginning of year
|
116,342 | 148,040 | 165,069 | |||||||||
|
Cash and cash equivalents, end of year
|
$ | 145,841 | $ | 116,342 | $ | 148,040 | ||||||
|
Supplemental disclosure of cash flow information
|
||||||||||||
|
Cash paid during the year for:
|
||||||||||||
|
Income taxes
|
$ | 7,931 | $ | 10,158 | $ | 18,125 | ||||||
|
Interest
|
$ | 1,131 | $ | 1,309 | $ | 1,323 | ||||||
|
Equipment acquired under capital leases
|
$ | 963 | $ | 3,511 | $ | 1,042 | ||||||
See Notes to Consolidated Financial Statements.
F-4
Table of Contents
VIAD
CORP
CONSOLIDATED
STATEMENTS OF STOCKHOLDERS’ EQUITY
|
Unearned
|
Accumulated
|
|||||||||||||||||||||||||||||||||||
|
Retained
|
Employee
|
Other
|
Common
|
Total
|
Non-
|
Total
|
||||||||||||||||||||||||||||||
|
Common
|
Additional
|
Earnings
|
Benefits
|
Comprehensive
|
Stock in
|
Viad
|
Controlling
|
Stockholders’
|
||||||||||||||||||||||||||||
| Stock | Capital | (Deficit) | and Other | Income | Treasury | Equity | Interest | Equity | ||||||||||||||||||||||||||||
| (in thousands) | ||||||||||||||||||||||||||||||||||||
|
Balance, January 1, 2008
|
$ | 37,402 | $ | 635,099 | $ | 51,445 | $ | (8,754 | ) | $ | 46,689 | $ | (292,036 | ) | $ | 469,845 | $ | 5,984 | $ | 475,829 | ||||||||||||||||
|
Net income
|
— | — | 43,373 | — | — | — | 43,373 | 550 | 43,923 | |||||||||||||||||||||||||||
|
Dividends on common stock
|
— | — | (3,302 | ) | — | — | — | (3,302 | ) | — | (3,302 | ) | ||||||||||||||||||||||||
|
Common stock purchased for treasury
|
— | — | — | — | — | (17,353 | ) | (17,353 | ) | — | (17,353 | ) | ||||||||||||||||||||||||
|
Employee benefit plans
|
— | (18,226 | ) | — | — | — | 22,586 | 4,360 | — | 4,360 | ||||||||||||||||||||||||||
|
ESOP allocation adjustment
|
— | — | — | 1,000 | — | — | 1,000 | — | 1,000 | |||||||||||||||||||||||||||
|
Share-based compensation — equity awards
|
— | 6,219 | — | — | — | — | 6,219 | — | 6,219 | |||||||||||||||||||||||||||
|
Tax benefits from share-based compensation
|
— | 562 | — | — | — | — | 562 | — | 562 | |||||||||||||||||||||||||||
|
Unrealized foreign currency translation adjustment
|
— | — | — | — | (41,672 | ) | — | (41,672 | ) | — | (41,672 | ) | ||||||||||||||||||||||||
|
Unrealized loss on investments
|
— | — | — | — | (543 | ) | — | (543 | ) | — | (543 | ) | ||||||||||||||||||||||||
|
Amortization of prior service credit
|
— | — | — | — | (757 | ) | — | (757 | ) | — | (757 | ) | ||||||||||||||||||||||||
|
Amortization of net actuarial loss
|
— | — | — | — | (1,219 | ) | — | (1,219 | ) | — | (1,219 | ) | ||||||||||||||||||||||||
|
ASC Topic 715 transition adjustment
|
— | — | (10 | ) | — | — | — | (10 | ) | — | (10 | ) | ||||||||||||||||||||||||
|
Other, net
|
— | 127 | 52 | (127 | ) | — | — | 52 | — | 52 | ||||||||||||||||||||||||||
|
Balance, December 31, 2008
|
37,402 | 623,781 | 91,558 | (7,881 | ) | 2,498 | (286,803 | ) | 460,555 | 6,534 | 467,089 | |||||||||||||||||||||||||
|
Net income (loss)
|
— | — | (104,711 | ) | — | — | — | (104,711 | ) | 582 | (104,129 | ) | ||||||||||||||||||||||||
|
Dividends on common stock
|
— | — | (3,292 | ) | — | — | — | (3,292 | ) | — | (3,292 | ) | ||||||||||||||||||||||||
|
Common stock purchased for treasury
|
— | — | — | — | — | (1,233 | ) | (1,233 | ) | — | (1,233 | ) | ||||||||||||||||||||||||
|
Employee benefit plans
|
— | (21,398 | ) | — | (30 | ) | — | 21,398 | (30 | ) | — | (30 | ) | |||||||||||||||||||||||
|
ESOP allocation adjustment
|
— | — | — | 1,964 | — | — | 1,964 | — | 1,964 | |||||||||||||||||||||||||||
|
Share-based compensation — equity awards
|
— | 4,899 | — | — | — | — | 4,899 | — | 4,899 | |||||||||||||||||||||||||||
|
Tax deficiencies from share-based compensation
|
— | (1,251 | ) | — | — | — | — | (1,251 | ) | — | (1,251 | ) | ||||||||||||||||||||||||
|
Unrealized foreign currency translation adjustment
|
— | — | — | — | 25,050 | — | 25,050 | — | 25,050 | |||||||||||||||||||||||||||
|
Unrealized gain on investments
|
— | — | — | — | 216 | — | 216 | — | 216 | |||||||||||||||||||||||||||
|
Amortization of prior service credit
|
— | — | — | — | (548 | ) | — | (548 | ) | — | (548 | ) | ||||||||||||||||||||||||
|
Amortization of net actuarial loss
|
— | — | — | — | (4,164 | ) | — | (4,164 | ) | — | (4,164 | ) | ||||||||||||||||||||||||
|
Other, net
|
— | 7 | 40 | (7 | ) | — | 20 | 60 | — | 60 | ||||||||||||||||||||||||||
|
Balance, December 31, 2009
|
37,402 | 606,038 | (16,405 | ) | (5,954 | ) | 23,052 | (266,618 | ) | 377,515 | 7,116 | 384,631 | ||||||||||||||||||||||||
|
Net income
|
— | — | 443 | — | — | — | 443 | 636 | 1,079 | |||||||||||||||||||||||||||
|
Dividends on common stock
|
— | — | (3,275 | ) | — | — | — | (3,275 | ) | — | (3,275 | ) | ||||||||||||||||||||||||
|
Common stock purchased for treasury
|
— | — | — | — | — | (6,905 | ) | (6,905 | ) | — | (6,905 | ) | ||||||||||||||||||||||||
|
Employee benefit plans
|
— | (2,397 | ) | — | — | — | 2,989 | 592 | — | 592 | ||||||||||||||||||||||||||
|
ESOP allocation adjustment
|
— | — | — | 1,518 | — | — | 1,518 | — | 1,518 | |||||||||||||||||||||||||||
|
Share-based compensation — equity awards
|
— | 3,785 | — | — | — | — | 3,785 | — | 3,785 | |||||||||||||||||||||||||||
|
Tax deficiencies from share-based compensation
|
— | (524 | ) | — | — | — | — | (524 | ) | — | (524 | ) | ||||||||||||||||||||||||
|
Unrealized foreign currency translation adjustment
|
— | — | — | — | 7,696 | — | 7,696 | — | 7,696 | |||||||||||||||||||||||||||
|
Unrealized gain on investments
|
— | — | — | — | 128 | — | 128 | — | 128 | |||||||||||||||||||||||||||
|
Amortization of prior service credit
|
— | — | — | — | 84 | — | 84 | — | 84 | |||||||||||||||||||||||||||
|
Amortization of net actuarial loss
|
— | — | — | — | (2,109 | ) | — | (2,109 | ) | — | (2,109 | ) | ||||||||||||||||||||||||
|
Other, net
|
— | — | 8 | 3 | — | — | 11 | — | 11 | |||||||||||||||||||||||||||
|
Balance, December 31, 2010
|
$ | 37,402 | $ | 606,902 | $ | (19,229 | ) | $ | (4,433 | ) | $ | 28,851 | $ | (270,534 | ) | $ | 378,959 | $ | 7,752 | $ | 386,711 | |||||||||||||||
See Notes to Consolidated Financial Statements.
F-5
Table of Contents
VIAD
CORP
YEARS ENDED DECEMBER 31, 2010, 2009 AND 2008
| Note 1. | Summary of Significant Accounting Policies |
Basis
of Presentation and Principles of Consolidation
The consolidated financial statements of Viad Corp
(“Viad” or the “Company”) are prepared in
conformity with accounting principles generally accepted in the
United States of America (“GAAP”) and include the
accounts of Viad and all of its subsidiaries. All intercompany
account balances and transactions between Viad and its
subsidiaries have been eliminated in consolidation.
Nature
of Business
Viad’s reportable segments consist of Marketing &
Events U.S., Marketing & Events International and
Travel & Recreation Group. As discussed below, the
Company changed its reportable segments related to the
Marketing & Events Group during the first quarter of
2010. The Travel & Recreation Group segment consists
of Brewster Inc. (“Brewster”) and Glacier Park, Inc.
(“Glacier Park”). Glacier Park is an 80 percent
owned subsidiary of Viad.
In July 2009, Viad announced a strategic reorganization to align
its brands and operations into two operating groups: the
Marketing & Events Group and the Travel &
Recreation Group. The operating groups are supported by a
Corporate Services Group that centralizes responsibility for
various corporate functions. On the close of business on
December 31, 2009, substantially all of the domestic
operations of the Marketing & Events Group were
combined into one legal entity by transferring all of the assets
and third party liabilities of Exhibitgroup/Giltspur, a division
of Viad, The Becker Group, Ltd. (“Becker Group”) and
other related entities into GES Exposition Services, Inc.
Furthermore, on February 2, 2010, GES Exposition Services,
Inc. changed its name to Global Experience Specialists, Inc.
(“GES”). The services that were previously provided
under the Company’s “Exhibitgroup/Giltspur” and
“Becker Group” brands are now provided under the
“Global Experience Specialists” brand.
Beginning in 2010, the Company changed its reportable segments
as a result of the reorganization and consolidation of business
units within the Marketing & Events Group. The
reportable segments are based on geographical lines of
responsibility and reflect the management structure and internal
organization of the business. Accordingly, the presentation of
segment information for the Marketing & Events Group
is based on the redefined segments, and comparable information
for earlier periods has been restated to reflect the revised
segment structure.
Marketing &
Events Group
The Marketing & Events Group specializes in all
aspects of the design, planning and production of
face-to-face
events, immersive environments and brand-based experiences for
clients, including show organizers, corporate brand marketers
and retail shopping centers. In addition, the
Marketing & Events Group provides a variety of
immersive, entertaining attractions and brand-based experiences,
sponsored events, mobile marketing and other branded
entertainment and
face-to-face
marketing solutions for clients and venues, including shopping
malls, movie studios, museums, leading consumer brands and
casinos.
The composition of the Marketing & Events Group’s
reportable segments reflects geographical lines of
responsibility. The reportable segments are:
1.
Marketing & Events U.S
. segment
includes all domestic GES and affiliated operations, including
those services formerly provided under the Exhibitgroup/Giltspur
and Becker Group brands. The consolidation of the domestic
Marketing & Events Group operations is intended to
provide a fully integrated service delivery network through a
realigned sales organization, shared infrastructure and
facilities, and a common operational platform.
2.
Marketing & Events International
segment includes all foreign operations of the
Marketing & Events Group and consists of two operating
segments: Canada and EMEA (Europe, Middle East, Asia). This
reporting segment includes the operations of the following
companies: GES Exposition Services (Canada) Limited, Melville
Exhibition and Event Services Limited and affiliates
(collectively “Melville”), SDD Exhibitions Limited and
GES GmbH & Co. KG.
Travel &
Recreation Group
Travel and recreation services are provided by Brewster and
Glacier Park.
F-6
Table of Contents
VIAD
CORP
NOTES TO
CONSOLIDATED FINANCIAL
STATEMENTS — (Continued)
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 Ice
Explorer Tours, motorcoach services, charter and sightseeing
services, tour boat operations, inbound package tour operations
and hotel operations.
Glacier Park operates four historic lodges and three motor inns
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.
Significant
Accounting Policies
Use of Estimates.
The preparation of financial
statements in conformity with GAAP requires management to make
estimates and assumptions that affect the amounts reported in
the consolidated financial statements and accompanying notes.
These estimates and assumptions include, but are not limited to:
| — | Estimated fair value of Viad’s reporting units used to perform annual impairment testing of recorded goodwill; | |
| — | Estimated fair value of intangible assets with indefinite lives, for purposes of impairment testing; | |
| — | Estimated allowances for uncollectible accounts receivable; | |
| — | Estimated provisions for income taxes, including uncertain tax positions; | |
| — | Estimated valuation allowances related to deferred tax assets; | |
| — | Estimated liabilities for losses related to self-insured liability claims; | |
| — | Estimated liabilities for losses related to environmental remediation obligations; | |
| — | Estimated sublease income associated with restructuring liabilities; | |
| — | Assumptions used to measure pension and postretirement benefit costs and obligations; | |
| — | Assumptions used to determine share-based compensation costs under the fair value method; and | |
| — | Allocation of purchase price of acquired businesses. |
Actual results could differ from these and other estimates.
Cash and Cash Equivalents.
Viad considers all
highly-liquid investments with remaining maturities when
purchased of three months or less to be cash equivalents.
Viad’s cash and cash equivalents consist of cash and bank
demand deposits, bank time deposits and money market mutual
funds. The Company’s investments in money market mutual
funds are classified as
available-for-sale
and carried at fair value.
Inventories.
Inventories, which consist
primarily of exhibit design and construction materials and
supplies used in providing convention show services, are stated
at the lower of cost
(first-in,
first-out and specific identification methods) or market.
Property and Equipment.
Property and equipment
are stated at cost, net of accumulated depreciation. Property
and equipment are depreciated using the straight-line method
over the estimated useful lives of the assets: buildings, 15 to
40 years; equipment, 3 to 12 years; and leasehold
improvements, over the shorter of the lease term or useful life.
Property and equipment are tested for potential impairment
whenever events or changes in circumstances indicate that the
carrying amount of the long-lived asset may not be recoverable
through undiscounted cash flows. Assets held for sale are stated
at the lower of carrying amount or fair value, less cost to sell.
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.”
F-7
Table of Contents
VIAD
CORP
NOTES TO
CONSOLIDATED FINANCIAL
STATEMENTS — (Continued)
Goodwill and Other Intangible Assets.
Goodwill
is not amortized, but 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. Other intangible assets not subject to
amortization, which primarily consist of trademarks and trade
names, are also tested for impairment annually on October 31 of
each year, or more frequently if events or changes in
circumstances indicate that the asset might be impaired. Other
intangible assets not subject to amortization are also reviewed
annually to determine whether an indefinite useful life remains
appropriate. To the extent that goodwill and another asset of
the same reporting unit are tested for impairment at the same
time, the other asset is tested for impairment before goodwill.
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
Company also uses an income approach to measure the estimated
fair values of its trademarks and trade names not subject to
amortization. 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.
Intangible assets subject to amortization are stated at cost,
net of accumulated amortization, and are tested for potential
impairment whenever events or changes in circumstances indicate
that the carrying amount of the intangible asset may not be
recoverable through undiscounted cash flows. Intangible assets
subject to amortization consist of customer contracts and
relationships, design libraries, non-compete agreements and
proprietary technology. These assets are amortized using the
straight-line method over their estimated useful lives, except
for customer relationship intangibles, which are amortized using
an accelerated method or shortened estimated useful life.
Incentive and Other Upfront Payments.
Certain
upfront payments incurred by GES in connection with long-term
contracts consist of incentive fees and prepaid commissions and
are amortized over the life of the related contract. To the
extent such payments are made to customers of GES, the amortized
amounts are recorded as a reduction of revenue. Incentive and
other upfront payments are classified on the consolidated
balance sheets under the caption “Other current
assets” for the current portion and “Other investments
and assets” for the non-current portion.
Viad reviews the carrying values of its incentive and other
upfront payments for possible impairment whenever events or
changes in circumstances indicate that the carrying amounts may
not be recoverable. Incentive and other upfront payments which
subsequently become refundable are recorded as accounts
receivable and evaluated for collectability in accordance with
Viad’s credit policies.
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 and the United
Kingdom, and to a lesser extent in certain other countries. The
functional currency of Viad’s foreign subsidiaries is their
local currency. Accordingly, for purposes of consolidation, Viad
translates the assets and liabilities of its foreign
subsidiaries into U.S. dollars at the foreign exchange
rates in effect at the balance sheet date. The unrealized gains
or losses resulting from the translation of these foreign
denominated assets and liabilities are included as a component
of accumulated other comprehensive income in Viad’s
consolidated
F-8
Table of Contents
VIAD
CORP
NOTES TO
CONSOLIDATED FINANCIAL
STATEMENTS — (Continued)
balance sheets. In addition, for purposes of consolidation, the
revenues, expenses and gains and losses related to Viad’s
foreign operations are translated into U.S. dollars at the
average foreign exchange rates for the period.
Revenue Recognition.
Viad’s revenue
recognition policies are as follows:
Viad recognizes revenue when persuasive evidence of a sales
arrangement exists, delivery has occurred or services rendered,
the sales price is fixed or determinable and collectability is
reasonably assured. GES derives revenues primarily by providing
show services to exhibitors participating in exhibitions and
events and from the design, construction, refurbishment of
exhibit booths and holiday themed environments. Service revenue
is recognized at the time services are performed. Exhibits and
environments revenue is generally accounted for using the
completed-contract method as contracts are typically completed
within three months of contract signing. The Travel &
Recreation Group generates revenues through its attractions,
hotels and transportation and sightseeing services. Revenues are
recognized at the time services are performed.
Share-Based Compensation.
Viad recognizes and
measures compensation costs related to all share-based payment
awards using the fair value method of accounting. These awards
generally include restricted stock, performance-based restricted
stock (“PBRS”), stock options and liability-based
awards (including performance units, restricted stock units and
performance-based restricted stock units).
The fair value of restricted stock and PBRS awards are based on
Viad’s stock price on the date of grant. Restricted stock
awards vest between three and five years from the date of grant.
Share-based compensation expense related to restricted stock is
recognized using the straight-line method over the requisite
service period of approximately three years except for certain
awards with a five year vesting period whereby expense is
recognized based on an accelerated multiple-awards approach over
a five year period.
Share-based compensation expense related to PBRS awards is
recognized based on an accelerated multiple-award approach over
the requisite service period of approximately three years. PBRS
vests when certain incentive performance targets established in
the year of grant are achieved at target levels. PBRS is subject
to a graded vesting schedule whereby one third of the earned
shares vest after the first year and the remaining earned shares
vest in one-third increments each year over the next two years
on the first business day in January.
Future vesting of restricted stock and PBRS is generally subject
to continued employment with Viad or its subsidiaries. Holders
of restricted stock and PBRS have the right to receive dividends
and vote the shares, but may not sell, assign, transfer, pledge
or otherwise encumber the stock, except to the extent
restrictions have lapsed.
The fair value of each stock option grant is estimated on the
date of grant using the Black-Scholes option pricing model.
Share-based compensation expense related to stock option awards
is recognized using the straight-line method over the requisite
service period of approximately five years.
Liability-based awards are recorded at estimated fair value,
based on the number of units expected to vest and the level of
achievement of predefined performance goals (where applicable)
and are remeasured on each balance sheet date based on
Viad’s stock price until the time of settlement. To the
extent earned, liability-based awards are settled in cash based
on Viad’s stock price. Compensation expense related to
liability-based awards is recognized ratably over the requisite
service period of approximately three years.
Common Stock in Treasury.
Common stock
purchased for treasury is recorded at historical cost.
Subsequent share reissuances are primarily related to
share-based compensation programs and recorded at
weighted-average cost.
Income Per Common Share.
Viad 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 June 2009, the Financial Accounting Standards Board
(“FASB”) issued new guidance related to accounting and
reporting for transfers of financial assets, which is codified
in Accounting Standards Codification (“ASC”) Topic
860. The objective of this guidance is to improve the relevance,
representational faithfulness, and comparability of the
information that a reporting entity provides in its financial
statements about a transfer of financial assets. Viad adopted
the provisions of this guidance on January 1, 2010, which
did not have an impact on Viad’s financial position or
results of operations.
F-9
Table of Contents
VIAD
CORP
NOTES TO
CONSOLIDATED FINANCIAL
STATEMENTS — (Continued)
In June 2009, the FASB issued new guidance related to accounting
and reporting for variable interest entities, which is codified
in ASC Topic 810. This guidance amends previously issued
standards and addresses the effects of the elimination of the
qualifying special-purpose entity concept contained in those
previous standards. Viad adopted the provisions of this guidance
on January 1, 2010, which did not have an impact on
Viad’s financial position or results of operations.
In October 2009, the FASB issued new guidance related to revenue
arrangements with multiple deliverables, which is codified in
ASC Topic 605. This guidance changes the requirements for
establishing separate units of accounting for
multiple-deliverable revenue arrangements and requires revenue
to be allocated to each deliverable based on the relative
selling price. The new guidance is effective prospectively for
revenue arrangements entered into in fiscal years beginning on
or after June 15, 2010, with early adoption permitted
provided that the guidance is retrospectively applied to the
beginning of the period of adoption. Viad will adopt the
provisions of this guidance in the first quarter of 2011. The
adoption of this guidance is not expected to have a material
impact on Viad’s financial position or results of
operations.
In December 2010, the FASB issued new guidance related to
goodwill impairment testing, which is codified in ASC Topic 350.
This guidance modifies step one of the goodwill impairment test
for reporting units with zero or negative carrying amounts. For
those reporting units, an entity is required to perform step two
of the goodwill impairment test if it is more likely than not
that a goodwill impairment exists. In making this assessment,
entities should consider whether there are any adverse
qualitative factors indicating that an impairment may exist.
This new guidance is effective for fiscal years, and interim
periods within those years, beginning after December 15,
2010. Accordingly, Viad will adopt the provisions of this
guidance in the first quarter of 2011, which is not expected to
have a material impact on Viad’s financial position or
results of operations.
In December 2010, the FASB issued new guidance related to the
disclosure of supplemental pro forma information related to
business combinations, which is codified in ASC Topic 805. This
guidance specifies that if any entity presents comparative
financial statements, the entity should disclose revenue and
earnings of the combined entity as though the business
combination that occurred during the current year had occurred
as of the beginning of the comparable prior annual reporting
period only. This guidance also expands the supplemental pro
forma disclosures to include a description of the nature and
amount of material, nonrecurring pro forma adjustments directly
attributable to the business combination included in the
reported pro forma revenue and earnings. This new guidance is
effective prospectively for business combinations for which the
acquisition date is on or after the beginning of the first
annual reporting period beginning on or after December 15,
2010. Accordingly, Viad will adopt the provisions of this
disclosure-only guidance in the first quarter of 2011, which
will not impact Viad’s financial position or results of
operations.
| Note 2. | Share-Based Compensation |
Viad grants share-based compensation awards to officers,
directors and certain key employees pursuant to the 2007 Viad
Corp Omnibus Incentive Plan (the “2007 Plan”). The
2007 Plan has a ten-year life and provides for the following
types of awards: (a) incentive and non-qualified stock
options; (b) restricted stock and restricted stock units;
(c) performance units or performance shares; (d) stock
appreciation rights; (e) cash-based awards and
(f) certain other stock-based awards. The number of shares
of common stock available for grant under the 2007 Plan is
limited to 1,700,000 shares plus shares awarded under the
1997 Viad Corp Omnibus Incentive Plan (which terminated in May
2007) that subsequently cease for any reason to be subject
to such awards (other than by reason of exercise or settlement
of the awards to the extent the shares are exercised for, or
settled in, vested and non-forfeited shares) up to an aggregate
maximum of 1,500,000 shares. As of December 31, 2010,
there were 1,023,024 total shares available for grant under the
2007 Plan. Viad issues shares related to its share-based
compensation awards from shares held in treasury.
F-10
Table of Contents
VIAD
CORP
NOTES TO
CONSOLIDATED FINANCIAL
STATEMENTS — (Continued)
The following table summarizes share-based compensation expense:
| 2010 | 2009 | 2008 | ||||||||||
| (in thousands) | ||||||||||||
|
Stock options
|
$ | 447 | $ | 469 | $ | 1,317 | ||||||
|
Restricted stock/PBRS
|
2,821 | 3,583 | 4,902 | |||||||||
|
Restricted stock units/PBRS units
|
253 | 151 | — | |||||||||
|
Performance units
|
(3 | ) | (1,110 | ) | 27 | |||||||
|
Total share-based compensation before income tax benefit
|
3,518 | 3,093 | 6,246 | |||||||||
|
Income tax benefit
|
(1,225 | ) | (1,125 | ) | (2,344 | ) | ||||||
|
Total share-based compensation, net of income tax benefit
|
$ | 2,293 | $ | 1,968 | $ | 3,902 | ||||||
In addition, $519,000 and $767,000 of costs associated with
share-based compensation were included in restructuring expense
in 2010 and 2009, respectively. No share-based compensation
costs were capitalized during 2010, 2009 or 2008.
In 2010 and 2009, Viad granted shares of restricted stock with a
five year vesting period to certain individuals where
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. All other
restricted stock awards were for a three year period.
The following table summarizes restricted stock and PBRS
activity:
| Restricted Stock | PBRS | |||||||||||||||
|
Weighted-Average
|
Weighted-Average
|
|||||||||||||||
|
Grant Date
|
Grant Date
|
|||||||||||||||
| Shares | Fair Value | Shares | Fair Value | |||||||||||||
|
Balance at January 1, 2008
|
345,800 | $ | 32.40 | 91,912 | $ | 32.85 | ||||||||||
|
Granted
|
104,385 | 33.79 | 55,000 | 33.84 | ||||||||||||
|
Vested
|
(86,600 | ) | 26.30 | (52,084 | ) | 30.79 | ||||||||||
|
Forfeited
|
(5,300 | ) | 34.70 | — | — | |||||||||||
|
Balance at December 31, 2008
|
358,285 | 34.25 | 94,828 | 34.56 | ||||||||||||
|
Granted
|
234,333 | 15.56 | 164,200 | 15.36 | ||||||||||||
|
Vested
|
(189,462 | ) | 31.48 | (46,701 | ) | 34.21 | ||||||||||
|
Forfeited
|
(12,346 | ) | 27.81 | (37,400 | ) | 15.19 | ||||||||||
|
Balance at December 31, 2009
|
390,810 | 24.59 | 174,927 | 20.77 | ||||||||||||
|
Granted
|
157,900 | 19.30 | — | — | ||||||||||||
|
Vested
|
(65,961 | ) | 34.42 | (29,547 | ) | 35.31 | ||||||||||
|
Cancelled
|
— | — | (126,550 | ) | 15.36 | |||||||||||
|
Forfeited
|
(4,250 | ) | 22.55 | — | — | |||||||||||
|
Balance at December 31, 2010
|
478,499 | 21.51 | 18,830 | 33.02 | ||||||||||||
The grant date fair value of restricted stock that vested during
2010, 2009 and 2008 was $2.3 million, $6.0 million and
$2.3 million, respectively. As of December 31, 2010,
the total unrecognized costs related to non-vested restricted
stock awards granted was $3.0 million. Viad expects to
recognize such costs in the consolidated financial statements
over a weighted-average period of approximately 2.0 years.
The grant date fair value of PBRS that vested during 2010, 2009
and 2008 was $1.0 million, $1.6 million and
$1.6 million, respectively. As of December 31, 2010,
the total unrecognized costs related to
non-vested
PBRS awards granted was $1,000. Viad expects to recognize such
costs in the consolidated financial statements over a
weighted-average period of less than one year. During 2010,
126,550 shares of PBRS were cancelled as the performance
conditions related to those shares were not achieved.
During 2010, 2009 and 2008, the Company repurchased
28,407 shares for $573,000, 72,294 shares for
$1.2 million and 50,061 shares for $1.6 million,
respectively, related to tax withholding requirements on vested
share-based awards.
F-11
Table of Contents
VIAD
CORP
NOTES TO
CONSOLIDATED FINANCIAL
STATEMENTS — (Continued)
Viad also grants restricted stock unit and PBRS unit liability
awards to key employees at certain of the Company’s
Canadian operations. The aggregate liability is recorded at
estimated fair value and is remeasured on each balance sheet
date. A portion of the 2009 PBRS unit award vested effective
December 31, 2009 and a cash payout of $37,000 was
distributed in March 2010. During 2010, 8,028 PBRS units were
cancelled as the performance conditions related to those units
were not achieved. As of December 31, 2010 and 2009, Viad
had liabilities recorded of $407,000 and $151,000, respectively,
related to these awards.
The following table summarizes restricted stock unit and PBRS
unit activity:
| Restricted Stock Units | PBRS Units | |||||||||||||||
|
Weighted-Average
|
Weighted-Average
|
|||||||||||||||
|
Grant Date
|
Grant Date
|
|||||||||||||||
| Units | Fair Value | Units | Fair Value | |||||||||||||
|
Balance at January 1, 2009
|
— | $ | — | — | $ | — | ||||||||||
|
Granted
|
13,700 | 15.36 | 13,900 | 15.36 | ||||||||||||
|
Balance at December 31, 2009
|
13,700 | 15.36 | 13,900 | 15.36 | ||||||||||||
|
Granted
|
12,350 | 19.20 | — | — | ||||||||||||
|
Vested
|
— | — | (1,958 | ) | 15.36 | |||||||||||
|
Cancelled
|
— | — | (8,028 | ) | 15.36 | |||||||||||
|
Balance at December 31, 2010
|
26,050 | 17.18 | 3,914 | 15.36 | ||||||||||||
During 2008, Viad granted awards of units under the performance
unit incentive plan (“PUP”) to key employees of
102,960 units. As of December 31, 2009, Viad had a
liability recorded of $23,000 related to the PUP awards. There
was no PUP liability recorded as of December 31, 2010. The
PUP award for the
2007-2009
period vested effective December 31, 2009 and a payout of
$19,000 was distributed in March 2010. The PUP award for the
2006-2008
period vested effective December 31, 2008 and a payout of
$1.8 million was distributed in March 2009. The PUP award
for the
2005-2007
period vested effective December 31, 2007 and a payout of
$6.7 million was distributed in March 2008. No PUP awards
were granted in 2010 or 2009 and no other PUP awards vested
during 2010, 2009 or 2008. Furthermore, there were no other cash
settlements of PUP awards or any other share-based compensation
awards.
Stock options granted in 2010 were for a term of ten years and
become exercisable one third after one year, another third after
two years and the balance after three years from the date of
grant. Stock options granted between 2004 and 2008 were for
contractual terms of seven years and become exercisable, based
on a graded vesting schedule, in annual increments of
20 percent beginning one year after the grant date and
become fully exercisable after five years from the date of
grant. Stock options granted in 2003 were for a term of ten
years and became exercisable one third after one year, another
third after two years and the balance after three years from the
date of grant. Stock options granted in calendar years 2002 and
prior were for a contractual term of ten years and were
exercisable 50 percent after one year from the date of
grant with the balance exercisable after two years from the date
of grant. The exercise price of stock options is based on the
market value of Viad’s common stock at the date of grant.
Stock options granted also contain certain forfeiture and
non-compete provisions.
The fair value of each stock option grant was estimated on the
date of grant using the Black-Scholes option pricing model with
the following assumptions (no options were granted in 2009):
| 2010 | 2008 | |||||||
|
Estimated fair value of stock options granted
|
$ | 5.87 | $ | 8.27 | ||||
|
Expected dividend yield
|
0.8 | % | 0.5 | % | ||||
|
Expected volatility
|
33.2 | % | 25.7 | % | ||||
|
Expected life
|
5 years | 5 years | ||||||
|
Risk-free interest rate
|
2.44 | % | 2.77 | % | ||||
The expected dividend yield was based on Viad’s expectation
of future dividend payouts. The volatility assumption was based
on Viad’s daily historical stock price volatility during
the time period that corresponds to the expected
weighted-average life of the option. The expected life
(estimated period of time outstanding) of stock options granted
was estimated based on historical exercise activity. The
risk-free interest rate assumption was based on the interest
rate of a U.S. Treasury strip for a five-year term from the
date the option was granted.
F-12
Table of Contents
VIAD
CORP
NOTES TO
CONSOLIDATED FINANCIAL
STATEMENTS — (Continued)
The following table summarizes stock option activity:
|
Weighted-
|
||||||||||||
|
Average
|
Options
|
|||||||||||
| Shares | Exercise Price | Exercisable | ||||||||||
|
Options outstanding at January 1, 2008
|
727,438 | $ | 24.93 | 548,117 | ||||||||
|
Granted
|
36,600 | 31.37 | ||||||||||
|
Exercised
|
(145,009 | ) | 22.56 | |||||||||
|
Forfeited or expired
|
(12,369 | ) | 25.65 | |||||||||
|
Options outstanding at December 31, 2008
|
606,660 | 25.86 | 459,612 | |||||||||
|
Forfeited or expired
|
(64,942 | ) | 26.88 | |||||||||
|
Options outstanding at December 31, 2009
|
541,718 | 25.74 | 462,683 | |||||||||
|
Granted
|
280,900 | 19.20 | ||||||||||
|
Exercised
|
(22,311 | ) | 23.21 | |||||||||
|
Forfeited or expired
|
(36,513 | ) | 26.34 | |||||||||
|
Options outstanding at December 31, 2010
|
763,794 | 23.38 | 451,194 | |||||||||
As of December 31, 2010, the total unrecognized cost
related to non-vested stock option awards was $1.3 million.
Viad expects to recognize such costs in the consolidated
financial statements over a weighted-average period of
approximately 2.2 years.
The following table summarizes information concerning stock
options outstanding and exercisable as of December 31, 2010:
| Options Outstanding | Options Exercisable | |||||||||||||||||||
|
Weighted-Average
|
Weighted-
|
Weighted-
|
||||||||||||||||||
|
Remaining
|
Average
|
Average
|
||||||||||||||||||
|
Range of Exercise Prices
|
Shares | Contractual Life | Exercise Price | Shares | Exercise Price | |||||||||||||||
|
$18.40 to $19.20
|
282,150 | 9.1 years | $ | 19.20 | 1,250 | $ | 18.40 | |||||||||||||
|
$19.57 to $24.22
|
199,508 | 0.7 years | 22.64 | 199,508 | 22.64 | |||||||||||||||
|
$24.90 to $26.37
|
184,331 | 1.4 years | 26.14 | 178,331 | 26.18 | |||||||||||||||
|
$26.47 to $31.92
|
55,005 | 1.4 years | 28.61 | 51,185 | 28.36 | |||||||||||||||
|
$33.81 to $38.44
|
42,800 | 3.7 years | 35.86 | 20,920 | 36.33 | |||||||||||||||
|
$18.40 to $38.44
|
763,794 | 4.2 years | 23.38 | 451,194 | 25.31 | |||||||||||||||
In addition to the above, Viad had stock options outstanding
which were granted to employees of MoneyGram International, Inc.
(“MoneyGram”) prior to the spin-off of that company.
As of December 31, 2010, there were 26,562 of such options
outstanding and exercisable, both with exercise prices ranging
from $19.57 to $26.31. The weighted-average remaining
contractual life of these options outstanding was less than one
year. During 2010, a total of 3,423 options were exercised by
MoneyGram employees at exercise prices ranging from $19.52 to
$24.22.
Additional information pertaining to stock options is provided
in the table below:
| 2010 | 2009 | 2008 | ||||||||||
| (in thousands) | ||||||||||||
|
Total intrinsic value of stock options outstanding
|
$ | 2,341 | $ | 76 | $ | 588 | ||||||
|
Total intrinsic value of stock options exercised
|
$ | 544 | $ | — | $ | 4,498 | ||||||
|
Fair value of stock options vested
|
$ | 404 | $ | 645 | $ | 603 | ||||||
|
Cash received from the exercise of stock options
|
$ | 593 | $ | — | $ | 3,759 | ||||||
|
Tax benefits (deficiencies) realized for tax deductions related
to stock option exercises and performance-based awards
|
$ | (524 | ) | $ | (1,251 | ) | $ | 562 | ||||
The aggregate intrinsic value in the table above represents the
difference between Viad’s closing stock price on
December 31, 2010 and the exercise price, multiplied by the
number of
in-the-money
options. The intrinsic value changes based on changes in the
fair market value of Viad’s common stock.
F-13
Table of Contents
VIAD
CORP
NOTES TO
CONSOLIDATED FINANCIAL
STATEMENTS — (Continued)
| Note 3. | Impairment Losses |
During 2010, Viad recorded impairment losses of $302,000 at the
Travel & Recreation Group. Of this amount, $117,000
related to property and equipment and $185,000 to other
intangible assets.
During 2009, Viad revised downward its forecast for future
revenues and earnings in the Marketing & Events Group
based on continued declines in trade show marketing spending by
its customers and a sharper than expected decline in retail
holiday décor demand. As a result, the Company had
projected a more prolonged contraction in its trade show and
retail marketing revenues than was previously anticipated. Due
to these facts and circumstances, Viad performed an interim
impairment evaluation of goodwill, other intangible assets, and
certain other long-lived assets. Accordingly, Viad recorded
aggregate goodwill impairment losses of $98.3 million
related to the Marketing & Events Group, which is
included in the consolidated statements of operations under the
caption “Goodwill impairment losses.” The goodwill
impairment losses consisted of $79.7 million related to the
Marketing & Events U.S. segment and
$18.6 million related to the Marketing & Events
International segment.
As a result of the factors discussed above, Viad also performed
impairment evaluations of other intangible assets during 2009 in
conjunction with its goodwill impairment testing. As a result,
the Company recorded aggregate other intangible asset impairment
losses of $14.0 million during 2009, which are included in
the consolidated statements of operations under the caption
“Intangible asset impairment losses.” Of the total
amount, $9.3 million of impairment losses related to a
trade name, customer relationships, design libraries and
proprietary technology intangible assets related to the
Marketing & Events U.S. segment and
$4.7 million related to various trade names related to the
Marketing & Events International segment. The trade
name impairment losses also resulted from consolidation and
integration activities within the Marketing & Events
Group. Viad also recorded impairment losses of $1.7 million
during 2009 related to touring exhibit assets related to the
Marketing & Events U.S. segment and a loss of
$2.9 million related to the write-down of a non-strategic
real estate asset held in the Travel & Recreation
Group. These charges are included in the consolidated statements
of operations under the caption “Other impairment
losses.” See Notes 6 and 7.
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
Company also uses an income approach to measure the estimated
fair values of the intangible assets and long-lived assets for
which the above impairment losses were recognized. 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
different results.
As of December 31, 2010, Viad had goodwill of
$127.4 million consisting of $85.1 million related to
the Marketing & Events Group and $42.3 million
related to the Travel & Recreation Group. Within the
Marketing & Events Group, goodwill of
$62.7 million relates to the Marketing & Events
U.S. segment and $22.4 million to the
Marketing & Events International segment. For
impairment testing purposes, the goodwill related to the
Marketing & Events U.S. segment is assigned to
and tested at the operating segment level. Furthermore, the
goodwill related to the Marketing & Events
International segment is assigned to and tested at the component
level within the segment’s geographical operations. As of
December 31, 2010, the amount of goodwill assigned to the
reporting units in the United Kingdom (Melville) and Canada was
$13.3 million and $9.1 million, respectively. Also, as
of December 31, 2010, the Brewster operating segment
(within the Travel & Recreation Group) had goodwill of
$42.3 million. Brewster is considered a reporting unit for
goodwill impairment testing purposes.
As a result of the Company’s most recent analysis performed
in the fourth quarter of 2010, 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 were
80 percent, 69 percent and 69 percent,
respectively, for each of the Marketing & Events Group
reporting units in the United States, the United Kingdom
(Melville) and Canada. For the Brewster reporting unit, the
excess of the estimated fair value over the carrying value was
50 percent as of the most recent impairment test.
Significant reductions in the Company’s expected future
revenue, operating income or cash flow forecasts and
projections, or an increase in reporting unit cost of capital,
could trigger additional impairment testing, which may result in
additional impairment losses.
During 2008, Viad performed an impairment evaluation of goodwill
and other intangible assets. During this time frame, Viad
reduced its future revenue, operating income and cash flow
forecasts as the Company determined that the global economic
downturn would lead to overall lower customer spending for its
goods and services. As a result of these facts and
circumstances, Viad recorded a goodwill impairment loss of
$6.5 million related to the Marketing & Events
U.S. segment, which is included in the consolidated
statements of operations under the caption “Goodwill
impairment losses.” In addition, the Company recorded
F-14
Table of Contents
VIAD
CORP
NOTES TO
CONSOLIDATED FINANCIAL
STATEMENTS — (Continued)
aggregate other intangible asset impairment losses of
$3.7 million, which are included in the consolidated
statements of operations under the caption “Intangible
asset impairment losses.” Of the total amount,
$1.1 million of other intangible asset impairments related
to a trade name and a contract-based intangible asset in the
Marketing & Events U.S. segment and
$2.6 million of other intangible asset impairments related
to trade names and customer-related intangible assets in the
Marketing & Events International segment. Viad also
recorded an impairment loss of $1.0 million related to one
of its touring exhibit assets in the Marketing &
Events U.S. segment, which is included in the consolidated
statements of operations under the caption “Other
impairment losses.”
| Note 4. | Acquisition of Businesses |
On January 4, 2008, Viad completed the acquisition of
Becker Group (which was combined into GES, see Note 1),
which provides experiential marketing services including
large-scale holiday-themed events and experiences. The operating
results of Becker Group have been included in Viad’s
consolidated financial statements from the date of acquisition.
In connection with the acquisition, the Company paid
$24.3 million in cash and incurred $325,000 of direct
acquisition costs, which were capitalized in the purchase price.
The following condensed balance sheet information represents the
amounts assigned to each major asset and liability caption of
Becker Group as of the date of acquisition:
| (in thousands) | ||||
|
Cash and cash equivalents
|
$ | 1,263 | ||
|
Accounts receivable
|
1,387 | |||
|
Inventories
|
1,028 | |||
|
Other current assets
|
1,532 | |||
|
Property and equipment
|
1,673 | |||
|
Goodwill
|
11,563 | |||
|
Other intangible assets
|
14,983 | |||
|
Total assets acquired
|
33,429 | |||
|
Accounts payable
|
(1,675 | ) | ||
|
Customer deposits
|
(592 | ) | ||
|
Other current liabilities
|
(1,559 | ) | ||
|
Deferred taxes
|
(4,801 | ) | ||
|
Other non-current liabilities
|
(205 | ) | ||
|
Total liabilities assumed
|
(8,832 | ) | ||
|
Purchase price
|
$ | 24,597 | ||
The Company initially recorded $11.6 million of goodwill in
connection with the transaction, which was included in the
Marketing & Events U.S. reporting segment. The
primary factors that contributed to a purchase price resulting
in the recognition of goodwill included Becker Group’s
strong presence and reputation in its established markets,
future growth opportunities and its experienced management team.
The goodwill related to the acquisition was not deductible for
tax purposes. The amounts initially assigned to other intangible
assets included $3.7 million of trademarks and trade names
not subject to amortization and $11.3 million of intangible
assets subject to amortization. The amortizable intangible
assets consisted of $7.8 million of customer contracts and
relationships, $2.0 million of design libraries,
$1.2 million of non-compete agreements and $233,000 of
proprietary technology.
During 2009 and 2008, Viad recorded goodwill impairment losses
related to Becker Group of $5.1 million and
$6.5 million, respectively. Additionally, during 2009 and
2008, Viad recorded impairment losses related to other
intangible assets of $9.2 million and $1.1 million,
respectively, and impairment losses related to certain other
long-lived assets of $1.7 million and $1.0 million,
respectively. As of December 31, 2010, there was no
remaining goodwill related to the acquisition and the remaining
amount of other intangible assets was $1.2 million, all of
which is subject to amortization. The weighted-average
amortization period of the aggregate amortized intangible assets
as of December 31, 2010 was approximately 3.2 years.
See Notes 3 and 7.
F-15
Table of Contents
VIAD
CORP
NOTES TO
CONSOLIDATED FINANCIAL
STATEMENTS — (Continued)
| Note 5. | Inventories |
The components of inventories as of December 31 were as follows:
| 2010 | 2009 | |||||||
| (in thousands) | ||||||||
|
Raw materials
|
$ | 18,488 | $ | 23,113 | ||||
|
Work in process
|
20,182 | 21,705 | ||||||
|
Inventories
|
$ | 38,670 | $ | 44,818 | ||||
| Note 6. | Property and Equipment |
Property and equipment as of December 31 consisted of the
following:
| 2010 | 2009 | |||||||
| (in thousands) | ||||||||
|
Land
|
$ | 9,139 | $ | 8,997 | ||||
|
Buildings and leasehold improvements
|
89,945 | 84,242 | ||||||
|
Equipment and other
|
299,558 | 291,108 | ||||||
| 398,642 | 384,347 | |||||||
|
Accumulated depreciation
|
(249,296 | ) | (229,347 | ) | ||||
|
Property and equipment, net
|
$ | 149,346 | $ | 155,000 | ||||
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 $17.5 million and $20.5 million as of
December 31, 2010 and 2009, respectively.
Depreciation expense was $27.3 million, $26.5 million
and $25.0 million for 2010, 2009 and 2008, respectively. As
discussed in Note 3 above, Viad recorded an impairment loss
of $117,000 in 2010 related to a tour boat at the
Travel & Recreation Group. Viad also recorded
impairment losses of $1.7 million and $1.0 million
related to its touring exhibit assets at the
Marketing & Events Group in 2009 and 2008,
respectively.
During 2009, Viad commenced a plan of sale related to a
non-strategic real estate asset held in the Travel &
Recreation Group. This asset consisted of land, building and
related improvements, which was expected to be sold within one
year. Accordingly, the value of this asset was remeasured based
on the estimated fair value, less cost to sell. As a result of
the remeasurement, the Company recorded a loss of
$2.9 million in 2009, which is included in the consolidated
statements of operations under the caption “Other
impairment losses.” Furthermore, the recorded value of this
asset of $14.0 million was reclassified and presented under
the caption “Asset held for sale” in the consolidated
balance sheets as of December 31, 2009. Viad completed the
sale of this asset in March 2010 for $14.3 million (net of
selling costs).
| Note 7. | Goodwill and Other Intangible Assets |
As discussed in Note 3 above, Viad recorded impairment
losses of $98.3 million related to goodwill during 2009 at
the Marketing & Events Group. During 2010, Viad
recorded impairment losses of $185,000 related to other
intangible assets at the Travel & Recreation Group.
During 2009, Viad recorded impairment losses of
$14.0 million related to other intangible assets at the
Marketing & Events Group.
As of December 31, 2010, Viad had cumulative goodwill
impairment losses of $225.2 million since the adoption of
the goodwill impairment testing provisions of ASC Topic 350.
F-16
Table of Contents
VIAD
CORP
NOTES TO
CONSOLIDATED FINANCIAL
STATEMENTS — (Continued)
The changes in the carrying amount of goodwill were as follows:
|
Marketing &
|
Travel &
|
|||||||||||||||
|
Marketing &
|
Events
|
Recreation
|
||||||||||||||
| Events U.S. | International | Group | Total | |||||||||||||
| (in thousands) | ||||||||||||||||
|
Balance at January 1, 2009
|
$ | 142,401 | $ | 36,680 | $ | 33,380 | $ | 212,461 | ||||||||
|
Goodwill impairment loss
|
(79,715 | ) | (18,589 | ) | — | (98,304 | ) | |||||||||
|
Foreign currency translation adjustments
|
— | 4,381 | 6,393 | 10,774 | ||||||||||||
|
Balance at December 31, 2009
|
62,686 | 22,472 | 39,773 | 124,931 | ||||||||||||
|
Foreign currency translation adjustments
|
— | (17 | ) | 2,527 | 2,510 | |||||||||||
|
Balance at December 31, 2010
|
$ | 62,686 | $ | 22,455 | $ | 42,300 | $ | 127,441 | ||||||||
A summary of amortized other intangible assets as of
December 31, 2010 is presented below:
|
Gross Carrying
|
Accumulated
|
Net Carrying
|
||||||||||
| Value | Amortization | Value | ||||||||||
| (in thousands) | ||||||||||||
|
Customer contracts and relationships
|
$ | 2,506 | $ | (1,135 | ) | $ | 1,371 | |||||
|
Proprietary technology
|
517 | (448 | ) | 69 | ||||||||
|
Design libraries
|
175 | (110 | ) | 65 | ||||||||
|
Other
|
166 | (108 | ) | 58 | ||||||||
|
Total
|
$ | 3,364 | $ | (1,801 | ) | $ | 1,563 | |||||
A summary of other intangible assets as of December 31,
2009 is presented below:
|
Gross Carrying
|
Accumulated
|
Net Carrying
|
||||||||||
| Value | Amortization | Value | ||||||||||
| (in thousands) | ||||||||||||
|
Amortized intangible assets:
|
||||||||||||
|
Customer contracts and relationships
|
$ | 2,507 | $ | (511 | ) | $ | 1,996 | |||||
|
Non-compete agreements
|
1,952 | (1,865 | ) | 87 | ||||||||
|
Proprietary technology
|
526 | (331 | ) | 195 | ||||||||
|
Design libraries
|
175 | (22 | ) | 153 | ||||||||
|
Other
|
158 | (65 | ) | 93 | ||||||||
| 5,318 | (2,794 | ) | 2,524 | |||||||||
|
Unamortized intangible assets:
|
||||||||||||
|
Trademarks and trade names
|
176 | — | 176 | |||||||||
|
Total
|
$ | 5,494 | $ | (2,794 | ) | $ | 2,700 | |||||
Intangible asset amortization expense for 2010, 2009 and 2008
was $954,000, $1.8 million and $3.1 million,
respectively. The weighted-average amortization period of
customer contracts and relationships, proprietary technology,
design libraries and other amortizable intangible assets is
approximately 3.0 years, 0.9 years, 0.8 years and
5.4 years, respectively. Estimated amortization expense
related to amortized intangible assets for future years is
expected to be as follows:
| (in thousands) | ||||
|
2011
|
$ | 719 | ||
|
2012
|
$ | 360 | ||
|
2013
|
$ | 350 | ||
|
2014
|
$ | 119 | ||
|
2015 and thereafter
|
$ | 15 | ||
F-17
Table of Contents
VIAD
CORP
NOTES TO
CONSOLIDATED FINANCIAL
STATEMENTS — (Continued)
| Note 8. | Accrued Liabilities and Other |
As of December 31 other current liabilities consisted of the
following:
| 2010 | 2009 | |||||||
| (in thousands) | ||||||||
|
Continuing operations:
|
||||||||
|
Customer deposits
|
$ | 43,411 | $ | 41,411 | ||||
|
Accrued compensation
|
17,599 | 10,533 | ||||||
|
Self-insured liability accrual
|
8,278 | 8,078 | ||||||
|
Accrued restructuring
|
4,272 | 5,684 | ||||||
|
Accrued sales and use taxes
|
2,990 | 3,325 | ||||||
|
Accrued foreign income taxes
|
2,852 | 1,118 | ||||||
|
Accrued dividends
|
827 | 845 | ||||||
|
Other
|
14,211 | 12,212 | ||||||
| 94,440 | 83,206 | |||||||
|
Discontinued operations:
|
||||||||
|
Environmental remediation liabilities
|
1,124 | 1,075 | ||||||
|
Self-insured liability accrual
|
552 | 395 | ||||||
|
Other
|
633 | 401 | ||||||
| 2,309 | 1,871 | |||||||
|
Total other current liabilities
|
$ | 96,749 | $ | 85,077 | ||||
As of December 31 other deferred items and liabilities consisted
of the following:
| 2010 | 2009 | |||||||
| (in thousands) | ||||||||
|
Continuing operations:
|
||||||||
|
Self-insured liability accrual
|
$ | 14,330 | $ | 14,083 | ||||
|
Accrued compensation
|
5,129 | 4,979 | ||||||
|
Accrued restructuring
|
3,724 | 5,971 | ||||||
|
Foreign deferred tax liability
|
1,582 | 4,358 | ||||||
|
Accrued income taxes
|
146 | 407 | ||||||
|
Deferred gain on sale of property
|
— | 646 | ||||||
|
Other
|
3,945 | 5,111 | ||||||
| 28,856 | 35,555 | |||||||
|
Discontinued operations:
|
||||||||
|
Self-insured liability accrual
|
6,898 | 8,075 | ||||||
|
Environmental remediation liabilities
|
4,953 | 5,638 | ||||||
|
Accrued income taxes
|
987 | 948 | ||||||
|
Other
|
1,331 | 2,198 | ||||||
| 14,169 | 16,859 | |||||||
|
Total other deferred items and liabilities
|
$ | 43,025 | $ | 52,414 | ||||
F-18
Table of Contents
VIAD
CORP
NOTES TO
CONSOLIDATED FINANCIAL
STATEMENTS — (Continued)
| Note 9. |
|
Long-term debt as of December 31 was as
follows
(1)
:
| 2010 | 2009 | |||||||
| (in thousands) | ||||||||
|
Revolving credit agreement, 3.2% (2010) and 1.3%
(2009) floating rate indexed to LIBOR at December 31,
due 2011
|
$ | 4,461 | $ | 6,943 | ||||
|
Capital lease obligations, 6.5% (2010) and 6.9%
(2009) weighted-average interest rate at December 31,
due to 2014
|
4,616 | 5,845 | ||||||
| 9,077 | 12,788 | |||||||
|
Current portion
|
(6,639 | ) | (4,301 | ) | ||||
|
Long-term debt
|
$ | 2,438 | $ | 8,487 | ||||
| (1) | Rates shown are exclusive of the effects of commitment fees and other costs of long-term bank credit. |
As of December 31, 2010, Viad’s total debt of
$9.1 million consisted of $4.6 million of capital
lease obligations and a $4.5 million borrowing under the
Company’s secured revolving credit agreement (the
“Credit Facility”). Effective November 20, 2009,
Viad amended the Credit Facility to ensure that the Company
continued to meet its obligations under the Credit Facility
given the current economic environment. The amended Credit
Facility provides for a $75 million revolving line of
credit, which was lowered from $150 million, and may be
increased up to an additional $50 million under certain
circumstances. As of December 31, 2010, Viad had
$65.9 million of capacity remaining under its Credit
Facility reflecting an outstanding borrowing of
$4.5 million (indexed to LIBOR) and issued letters of
credit of $4.6 million. The Credit Facility expires on
June 15, 2011 and borrowings are to be used for general
corporate purposes (including permitted acquisitions) and to
support up to $25 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.
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 0.375 percent
annually. As part of the amendment, Viad’s financial
covenants were revised to include a fixed-charge coverage ratio
of not less than 1.00 to 1 and a leverage ratio of not greater
than 2.50 to 1. Additionally, Viad must maintain a consolidated
minimum cash balance of $50 million. As of
December 31, 2010, the fixed-charge coverage and leverage
ratios were 1.29 to 1 and 0.71 to 1, respectively. Significant
other covenants include limitations on: investments, common
stock dividends, stock repurchases, additional indebtedness,
sales/leases of assets, acquisitions, consolidations or mergers
and liens on property. The terms of the Credit Facility restrict
Viad from paying more than $5 million in dividends in the
aggregate in any calendar year and also restrict the Company
from repurchasing more than $10 million in the aggregate of
the Company’s common stock during the remainder of the
Credit Facility term. As of December 31, 2010, Viad was in
compliance with all covenants.
As of December 31, 2010, 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, 2010 would be
$36.3 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.
F-19
Table of Contents
VIAD
CORP
NOTES TO
CONSOLIDATED FINANCIAL
STATEMENTS — (Continued)
Aggregate annual maturities of long-term debt and capital lease
obligations as of December 31, 2010 are as follows:
|
Revolving
|
Capital
|
|||||||
|
Credit
|
Lease
|
|||||||
| Agreement | Obligations | |||||||
| (in thousands) | ||||||||
|
2011
|
$ | 4,461 | $ | 2,450 | ||||
|
2012
|
— | 1,845 | ||||||
|
2013
|
— | 700 | ||||||
|
2014
|
— | 64 | ||||||
|
2015
|
— | 17 | ||||||
|
Total
|
$ | 4,461 | 5,076 | |||||
|
Less: Amount representing interest
|
(460 | ) | ||||||
|
Present value of minimum lease payments
|
$ | 4,616 | ||||||
Included in 2011 under “Revolving Credit Agreement” is
the amount due at the maturity of the Credit Facility.
The gross amount of assets recorded under capital leases as of
December 31, 2010 was $6.4 million and accumulated
amortization was $2.6 million. As of December 31,
2009, the gross amount of assets recorded under capital leases
and accumulated amortization was $6.6 million and
$2.2 million, respectively. The amortization charges
related to assets recorded under capital leases are included in
depreciation expense. See Note 6.
The weighted-average interest rate on total debt was
12.0 percent, 7.6 percent and 8.1 percent, for
2010, 2009 and 2008, respectively. The weighted average interest
rates include the effects of commitment fees and other costs of
long-term bank credit.
The estimated fair value of total debt was $9.2 million and
$12.8 million as of December 31, 2010 and 2009,
respectively. The fair value of debt was estimated by
discounting the future cash flows using rates currently
available for debt of similar terms and maturity.
| Note 10. | 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. Viad’s money market mutual funds are
included under the caption “Cash and cash equivalents”
in the
F-20
Table of Contents
VIAD
CORP
NOTES TO
CONSOLIDATED FINANCIAL
STATEMENTS — (Continued)
consolidated balance sheets and its other mutual fund
investments are included under the caption “Other
investments and assets” in the consolidated balance sheets.
The fair value information related to these assets is summarized
in the following tables:
|
Fair Value Measurements at
|
||||||||||||||||
| December 31, 2010 Using | ||||||||||||||||
|
Significant
|
||||||||||||||||
|
Quoted Prices
|
Other
|
Significant
|
||||||||||||||
|
in Active
|
Observable
|
Unobserved
|
||||||||||||||
|
December 31,
|
Markets
|
Inputs
|
Inputs
|
|||||||||||||
| 2010 | (Level 1) | (Level 2) | (Level 3) | |||||||||||||
| (in thousands) | ||||||||||||||||
|
Assets:
|
||||||||||||||||
|
Money market funds
|
$ | 31,285 | $ | 31,285 | $ | — | $ | — | ||||||||
|
Other mutual funds
|
1,744 | 1,744 | — | — | ||||||||||||
|
Total
|
$ | 33,029 | $ | 33,029 | $ | — | $ | — | ||||||||
|
Fair Value Measurements at
|
||||||||||||||||
| December 31, 2009 Using | ||||||||||||||||
|
Significant
|
||||||||||||||||
|
Quoted Prices
|
Other
|
Significant
|
||||||||||||||
|
in Active
|
Observable
|
Unobserved
|
||||||||||||||
|
December 31,
|
Markets
|
Inputs
|
Inputs
|
|||||||||||||
| 2009 | (Level 1) | (Level 2) | (Level 3) | |||||||||||||
| (in thousands) | ||||||||||||||||
|
Assets:
|
||||||||||||||||
|
Money market funds
|
$ | 27,647 | $ | 27,647 | $ | — | $ | — | ||||||||
|
Other mutual funds
|
1,819 | 1,819 | — | — | ||||||||||||
|
Total
|
$ | 29,466 | $ | 29,466 | $ | — | $ | — | ||||||||
As of December 31, 2010 and 2009, Viad had investments in
money market mutual funds of $31.3 million and
$27.6 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, 2010 and 2009, Viad had investments in
other mutual funds of $1.7 million and $1.8 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, 2010
and 2009, there was an unrealized gain of $462,000 ($282,000
after-tax) and an unrealized gain of $252,000 ($154,000
after-tax), respectively, which are 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 2009, Viad had certain non-financial assets that were
measured at fair value on a non-recurring basis using
Level 3 inputs. These assets included goodwill, intangible
assets, assets held for sale and certain property and equipment
for which losses
F-21
Table of Contents
VIAD
CORP
NOTES TO
CONSOLIDATED FINANCIAL
STATEMENTS — (Continued)
were recognized in 2009. See Notes 3, 6 and 7. The fair
value information related to these assets is summarized in the
following table:
| Fair Value Measurements Using | ||||||||||||||||||||
|
Significant
|
||||||||||||||||||||
|
Quoted Prices
|
Other
|
Significant
|
||||||||||||||||||
|
in Active
|
Observable
|
Unobserved
|
Total
|
|||||||||||||||||
|
December 31,
|
Markets
|
Inputs
|
Inputs
|
Gains
|
||||||||||||||||
| 2009 | (Level 1) | (Level 2) | (Level 3) | (Losses) | ||||||||||||||||
| (in thousands) | ||||||||||||||||||||
|
Assets:
|
||||||||||||||||||||
|
Goodwill
(1)
|
$ | 85,158 | $ | — | $ | — | $ | 84,844 | $ | (98,304 | ) | |||||||||
|
Other intangible
assets
(2)
|
1,652 | — | — | 1,760 | (14,005 | ) | ||||||||||||||
|
Asset held for
sale
(3)
|
14,553 | — | — | 14,553 | (2,854 | ) | ||||||||||||||
|
Property and
equipment
(4)
|
2,220 | — | — | 2,354 | (1,700 | ) | ||||||||||||||
|
Total
|
$ | 103,583 | $ | — | $ | — | $ | 103,511 | $ | (116,863 | ) | |||||||||
| (1) | Goodwill — represents the implied fair value of goodwill related to reporting units for which Viad recorded goodwill impairment losses during 2009. The difference between the carrying amount at December 31, 2009 and the fair value measurement reflects the effect of foreign currency translation adjustments recorded subsequent to the fair value measurement. | |
| (2) | Other intangible assets — represents the estimated fair value of intangible assets for which Viad recorded impairment losses during 2009. The difference between the carrying amount at December 31, 2009 and the fair value measurement reflects the effect of amortization expense recorded subsequent to the fair value measurement. | |
| (3) | Asset held for sale — represents the estimated fair value of a non-strategic real estate asset classified as held for sale at December 31, 2009. The amount recorded in Viad’s consolidated balance sheets of $14.0 million reflects the estimated fair value of $14.6 million, less estimated costs to sell of $600,000. | |
| (4) | Property and equipment — represents the estimated fair value of certain touring exhibit assets in the Marketing & Events U.S. segment for which Viad recorded impairment losses during 2009. The difference between the carrying amount at December 31, 2009 and the fair value measurement reflects the effect of depreciation expense recorded subsequent to the fair value measurement. |
F-22
Table of Contents
VIAD
CORP
NOTES TO
CONSOLIDATED FINANCIAL
STATEMENTS — (Continued)
| Note 11. | Income Per Share |
The following is a reconciliation of the numerators and
denominators of diluted and basic per share computations for net
income (loss) attributable to Viad:
| 2010 | 2009 | 2008 | ||||||||||
| (in thousands, except per share data) | ||||||||||||
|
Basic net income (loss) per share
|
||||||||||||
|
Numerator:
|
||||||||||||
|
Net income (loss) attributable to Viad
|
$ | 443 | $ | (104,711 | ) | $ | 43,373 | |||||
|
Less: Allocation to non-vested shares
|
(11 | ) | — | (961 | ) | |||||||
|
Net income (loss) allocated to Viad common stockholders
|
$ | 432 | $ | (104,711 | ) | $ | 42,412 | |||||
|
Denominator:
|
||||||||||||
|
Weighted-average outstanding common shares
|
19,955 | 19,960 | 20,172 | |||||||||
|
Net income (loss) attributable to Viad common stockholders
|
$ | 0.02 | $ | (5.25 | ) | $ | 2.10 | |||||
|
Diluted net income (loss) per share
|
||||||||||||
|
Numerator:
|
||||||||||||
|
Net income (loss) attributable to Viad
|
$ | 443 | $ | (104,711 | ) | $ | 43,373 | |||||
|
Denominator:
|
||||||||||||
|
Weighted-average outstanding shares
|
19,955 | 19,960 | 20,172 | |||||||||
|
Additional dilutive shares related to share-based compensation
|
322 | — | 321 | |||||||||
|
Weighted-average outstanding and potentially dilutive shares
|
20,277 | 19,960 | 20,493 | |||||||||
|
Net income (loss) attributable to Viad common
stockholders
(1)
|
$ | 0.02 | $ | (5.25 | ) | $ | 2.10 | |||||
| (1) | Diluted income per share amount cannot exceed basic income per share. |
Options to purchase 474,000, 627,000 and 69,000 shares of
common stock were outstanding during 2010, 2009 and 2008,
respectively, but were not included in the computation of
dilutive shares outstanding because the effect would be
anti-dilutive. Additionally, 322,000 and
321,000 share-based compensation awards were considered
dilutive and included in the computation of diluted income per
share during 2010 and 2008, respectively. During 2009,
294,000 share-based compensation awards, that would
normally have been considered dilutive and thus included as
outstanding for purposes of computing diluted income per share,
were excluded due to a net loss reported in 2009, thereby making
such shares anti-dilutive.
| Note 12. | Employee Stock Ownership Plan |
Viad funds its matching contributions to employees’ 401(k)
accounts through the Company’s ESOP portion of the Viad
Corp Capital Accumulation Plan (the “401(k) Plan”).
All eligible employees of Viad and its participating affiliates,
other than certain employees covered by collective bargaining
agreements that do not expressly provide for participation of
such employees in an employee stock ownership plan, may
participate in the employee stock ownership feature within the
401(k) Plan. Effective December 31, 2007, the ESOP merged
into the 401(k) Plan. Prior thereto, the 401(k) Plan and the
ESOP were separate legal entities.
In 1989, the ESOP borrowed $40.0 million (guaranteed by
Viad) to purchase treasury shares from the Company. In July
2004, Viad borrowed $12.4 million under its revolving
credit agreement to pay in full the outstanding ESOP loan and
obtain release of Viad from its guarantee of the loan. In
connection with the loan payoff, the ESOP entered into a
$12.4 million loan with Viad maturing in June 2009 calling
for minimum quarterly principal payments of $250,000 plus
interest. The same amount, representing unearned employee
benefits, was recorded as a reduction of stockholders’
equity. In 2007, the loan agreement between the ESOP and Viad
was extended to December 31, 2016. As of December 31,
2010, the balance of the ESOP loan was $4.5 million and is
included in the consolidated balance sheets under the caption
“Unearned employee benefits and other.” The liability
is reduced as the ESOP makes principal payments on the
borrowing, and the amount offsetting stockholders’ equity
is reduced as stock is
F-23
Table of Contents
VIAD
CORP
NOTES TO
CONSOLIDATED FINANCIAL
STATEMENTS — (Continued)
allocated to employees and benefits are charged to expense. The
401(k) Plan will repay the loan using Viad contributions and
dividends received on the unallocated Viad shares held by the
401(k) Plan.
Information regarding ESOP transactions is as follows:
| 2010 | 2009 | 2008 | ||||||||||
| (in thousands) | ||||||||||||
|
Amounts paid by ESOP for:
|
||||||||||||
|
Debt repayment
|
$ | 1,518 | $ | 1,964 | $ | 1,000 | ||||||
|
Interest
|
12 | 22 | 211 | |||||||||
|
Amounts received from Viad as:
|
||||||||||||
|
Contributions
|
1,444 | 1,872 | 1,064 | |||||||||
|
Dividends
|
86 | 114 | 147 | |||||||||
Shares were released for allocation to participants based upon
the ratio of the current year’s principal and interest
payments to the sum of the total principal and interest payments
expected over the remaining life of the plan. Viad recorded
expense of $1.5 million, $1.4 million and
$1.1 million in 2010, 2009 and 2008, respectively.
Unallocated shares held by the 401(k) Plan totaled 440,369 and
589,859 as of December 31, 2010 and 2009, respectively.
Shares allocated during 2010 and 2009 totaled 149,490 and
193,011, respectively.
| Note 13. | Preferred Stock Purchase Rights |
Viad has one Preferred Stock Purchase Right (“Right”)
outstanding on each outstanding share of its common stock. The
Rights contain provisions to protect shareholders in the event
of an unsolicited attempt to acquire Viad that is not believed
by the Board of Directors to be in the best interest of
shareholders. The Rights are represented by the common share
certificates and are not exercisable or transferable apart from
the common stock until such a situation arises. Viad may redeem
the Rights at $0.01 per Right prior to the time any person or
group has acquired 20 percent or more of Viad’s
shares. Viad has reserved 1.1 million shares of Junior
Participating Preferred Stock for issuance in connection with
the Rights. The Rights will expire in February 2012.
In addition, Viad has authorized 5.0 million and
2.0 million shares of Preferred Stock and Junior
Participating Preferred Stock, respectively, none of which is
outstanding.
| Note 14. | Income Taxes |
The following represents a reconciliation of income tax expense
(benefit) and the amount that would be computed using the
statutory federal income tax rates:
| 2010 | 2009 | 2008 | ||||||||||||||||||||||
| (in thousands) | ||||||||||||||||||||||||
|
Computed income tax expense (benefit) at statutory federal
income tax rate of 35%
|
$ | 896 | 35.0 | % | $ | (46,706 | ) | 35.0 | % | $ | 22,476 | 35.0 | % | |||||||||||
|
State income taxes, net of federal provision
|
(172 | ) | (6.7 | )% | (6,055 | ) | 4.5 | % | 1,865 | 2.9 | % | |||||||||||||
|
Tax resolutions, net
|
(514 | ) | (20.1 | )% | (3,527 | ) | 2.6 | % | (5,706 | ) | (8.9 | )% | ||||||||||||
|
Nondeductible goodwill impairments
|
— | 0.0 | % | 26,831 | (20.1 | )% | 2,562 | 4.0 | % | |||||||||||||||
|
Change in enacted tax law
|
1,279 | 50.0 | % | — | 0.0 | % | — | 0.0 | % | |||||||||||||||
|
Change in valuation allowance
|
249 | 9.7 | % | — | 0.0 | % | — | 0.0 | % | |||||||||||||||
|
Other, net
|
4 | 0.2 | % | 818 | (0.5 | )% | (519 | ) | (0.8 | )% | ||||||||||||||
|
Income tax expense (benefit)
|
$ | 1,742 | 68.1 | % | $ | (28,639 | ) | 21.5 | % | $ | 20,678 | 32.2 | % | |||||||||||
In March 2010, the Patient Protection and Affordable Care Act
and a related measure, the Health Care and Education
Affordability Reconciliation Act of 2010, were both enacted into
law. As a result of this legislation, the tax deductions for the
portion of the prescription drug costs for which Viad receives a
Medicare Part D subsidy have been eliminated for tax years
beginning after December 31, 2012. Accordingly, in 2010,
Viad reduced its deferred tax asset related to its
postretirement benefit
F-24
Table of Contents
VIAD
CORP
NOTES TO
CONSOLIDATED FINANCIAL
STATEMENTS — (Continued)
plan liability to reflect the change in the tax law. The
reduction in the deferred tax asset resulted in an increase to
income tax expense of $1.3 million in 2010.
Viad is subject to regular and recurring audits by the taxing
authorities in the jurisdictions in which the Company conducts
or had previously conducted operations. These include
U.S. federal and most state jurisdictions, and certain
foreign jurisdictions including Canada, the United Kingdom and
Germany.
Viad exercises judgment in determining its income tax provision
due to transactions, credits and calculations where the ultimate
tax determination is uncertain. As of December 31, 2010 and
2009, Viad did not have any accrued gross liabilities associated
with uncertain tax positions for continuing operations. However,
as of December 31, 2010 and 2009, Viad had accrued interest
and penalties related to uncertain tax positions for continuing
operations of $146,000 and $407,000, respectively. Viad
classifies interest and penalties related to income tax
liabilities as a component of income tax expense. The Company
recorded a tax-related interest expense credit of $261,000
during 2010, and tax-related interest expense of $139,000 and
$1.2 million, during 2009 and 2008, respectively.
During 2010, 2009 and 2008, Viad recorded tax benefits related
to the favorable resolution of tax matters in continuing
operations of $514,000, $3.5 million and $5.7 million,
respectively. These tax resolutions primarily represent the
reversal of amounts accrued for tax and related interest and
penalties in connection with uncertain tax positions which were
effectively settled or for which there was a lapse of the
applicable statute of limitations.
In addition to the above, Viad had accrued gross liabilities
associated with uncertain tax positions for discontinued
operations of $636,000 as of both December 31, 2010 and
2009. In addition, as of December 31, 2010 and 2009, Viad
had accrued interest and penalties related to uncertain tax
positions for discontinued operations of $351,000 and $313,000,
respectively. Future tax resolutions or settlements that may
occur related to these uncertain tax positions would be recorded
through discontinued operations (net of federal tax effects, if
applicable). Viad does not expect any of the unrecognized tax
benefits to be recognized during the next 12 months.
The following represents a reconciliation of the total amounts
of liabilities associated with uncertain tax positions
(excluding interest and penalties):
|
Continuing
|
Discontinued
|
|||||||||||
| Operations | Operations | Total | ||||||||||
| (in thousands) | ||||||||||||
|
Balance at January 1, 2008
|
$ | 12,802 | $ | 636 | $ | 13,438 | ||||||
|
Reductions for tax positions taken in prior years
|
(3,818 | ) | — | (3,818 | ) | |||||||
|
Reductions for tax settlements
|
(3,532 | ) | — | (3,532 | ) | |||||||
|
Reductions for lapse of applicable statutes
|
(1,254 | ) | — | (1,254 | ) | |||||||
|
Foreign currency translation adjustment
|
(711 | ) | — | (711 | ) | |||||||
|
Balance at December 31, 2008
|
3,487 | 636 | 4,123 | |||||||||
|
Reductions for tax positions taken in prior years
|
(2,702 | ) | — | (2,702 | ) | |||||||
|
Reductions for tax settlements
|
(174 | ) | — | (174 | ) | |||||||
|
Reductions for lapse of applicable statutes
|
(611 | ) | — | (611 | ) | |||||||
|
Balance at December 31, 2009
|
— | 636 | 636 | |||||||||
|
Reductions for tax positions taken in prior years
|
— | — | — | |||||||||
|
Reductions for tax settlements
|
— | — | — | |||||||||
|
Reductions for lapse of applicable statutes
|
— | — | — | |||||||||
|
Balance at December 31, 2010
|
$ | — | $ | 636 | $ | 636 | ||||||
Viad’s 2005 through 2010 U.S. federal tax years and
various state tax years from 2005 through 2010 remain subject to
income tax examinations by tax authorities. In addition, tax
years from 2006 through 2010 related to Viad’s foreign
taxing jurisdictions also remain subject to examination.
Viad classifies liabilities associated with uncertain tax
positions as non-current liabilities in its consolidated balance
sheets unless they are expected to be paid within the next year.
As of December 31, 2010 and 2009, liabilities associated
with uncertain tax positions (including interest and penalties)
of $1.1 million and $1.4 million, respectively, are
classified as non-current liabilities.
F-25
Table of Contents
VIAD
CORP
NOTES TO
CONSOLIDATED FINANCIAL
STATEMENTS — (Continued)
Deferred income tax assets and liabilities included in the
consolidated balance sheets as of December 31 related to the
following:
| 2010 | 2009 | |||||||
| (in thousands) | ||||||||
|
Deferred tax assets:
|
||||||||
|
Provisions for losses
|
$ | 17,474 | $ | 22,514 | ||||
|
Pension, compensation and other employee benefits
|
20,903 | 18,606 | ||||||
|
Tax credit carryforwards
|
18,631 | 10,968 | ||||||
|
Deferred income
|
1,020 | 1,730 | ||||||
|
State income taxes
|
1,758 | — | ||||||
|
Goodwill and other intangible assets
|
150 | 1,709 | ||||||
|
Net operating loss carryforward
|
3,036 | 2,578 | ||||||
|
Other deferred income tax assets
|
4,126 | 3,109 | ||||||
|
Total deferred tax assets
|
67,098 | 61,214 | ||||||
|
Valuation allowance
|
(411 | ) | (162 | ) | ||||
|
Net deferred tax assets
|
66,687 | 61,052 | ||||||
|
Deferred tax liabilities:
|
||||||||
|
Property and equipment
|
(10,157 | ) | (8,753 | ) | ||||
|
Other deferred income tax liabilities
|
(180 | ) | (556 | ) | ||||
|
Total deferred tax liabilities
|
(10,337 | ) | (9,309 | ) | ||||
|
Foreign deferred tax liabilities included above
|
1,582 | 4,358 | ||||||
|
United States deferred tax assets
|
$ | 57,932 | $ | 56,101 | ||||
Viad is required to estimate and record provisions for income
taxes in each of the jurisdictions in which the Company
operates. Accordingly, the Company must estimate its actual
current income tax liability, and assess temporary differences
arising from the treatment of items for tax purposes as compared
to the treatment for accounting purposes. These differences
result in deferred tax assets and liabilities which are included
in Viad’s consolidated balance sheets. The Company must
assess the likelihood that deferred tax assets will be recovered
from future taxable income and to the extent that recovery is
not likely, a valuation allowance must be established. The
Company uses significant judgment in forming a conclusion
regarding the recoverability of its deferred tax assets and
evaluates the available positive and negative evidence to
determine whether it is more-likely-than-not that its deferred
tax assets will be realized in the future. As of
December 31, 2010 and 2009, Viad had gross deferred tax
assets of $67.1 million and $61.2 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.
During 2010 and 2009, Viad recorded pre-tax losses from its
operations in the United States. The Company considered the
negative evidence of these domestic pre-tax operating losses on
the future recoverability of its deferred tax assets. Viad also
considered positive evidence regarding the realization of
deferred tax assets including the Company’s historical and
forecasted taxable income, taxpaying history and future
reversals of deferred tax liabilities. Furthermore, Viad also
considered the fact that goodwill impairment losses are not tax
deductible and thus did not contribute to tax losses in 2009. As
of December 31, 2010 and 2009, Viad had a valuation
allowance of $411,000 and $162,000, respectively, related to
certain state deferred tax assets. With respect to all other
deferred tax assets, management believes that recovery from
future taxable income is more-likely-than-not.
As noted above, Viad uses considerable judgment in forming a
conclusion regarding the recoverability of its deferred tax
assets. As a result, there are inherent uncertainties regarding
the ultimate realization of these assets, which is primarily
dependent on Viad’s ability to generate sufficient taxable
income in future periods. In light of the Company’s recent
domestic operating losses, and the continued uncertainties in
the current economic environment, it is 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.
F-26
Table of Contents
VIAD
CORP
NOTES TO
CONSOLIDATED FINANCIAL
STATEMENTS — (Continued)
As of December 31, 2010, Viad had tax credit carryforwards
related to alternative minimum tax of $10.0 million that
may be carried forward indefinitely. Additionally, as of
December 31, 2010, Viad had foreign tax credit
carryforwards of $8.4 million, of which $1.9 million
expire in 2019 and $6.5 million expire in 2020; and general
business credits of $239,000, of which $132,000 expire in 2029
and $107,000 expire in 2030.
Viad has not recorded deferred taxes on certain undistributed
earnings of its Canadian subsidiaries as management intends to
reinvest the earnings of those operations. As of
December 31, 2010, there was approximately
$66.0 million of accumulated undistributed earnings related
to Viad’s Canadian subsidiaries. The incremental
unrecognized tax liability (net of estimated foreign tax
credits) related to those undistributed earnings was
approximately $1.9 million. To the extent that
circumstances change and it becomes apparent that some or all of
the undistributed earnings will be remitted to the parent, Viad
would accrue income taxes attributable to such remittance.
Income tax expense (benefit) consisted of the following:
| 2010 | 2009 | 2008 | ||||||||||
| (in thousands) | ||||||||||||
|
Current:
|
||||||||||||
|
United States:
|
||||||||||||
|
Federal
|
$ | (9,286 | ) | $ | (18,057 | ) | $ | 5,879 | ||||
|
State
|
677 | (9,621 | ) | (4,666 | ) | |||||||
|
Foreign
|
9,607 | 7,388 | 13,198 | |||||||||
| 998 | (20,290 | ) | 14,411 | |||||||||
|
Deferred
|
||||||||||||
|
United States:
|
||||||||||||
|
Federal
|
3,212 | (9,136 | ) | 5,152 | ||||||||
|
State
|
(939 | ) | (69 | ) | 1,387 | |||||||
|
Foreign
|
(1,529 | ) | 856 | (272 | ) | |||||||
| 744 | (8,349 | ) | 6,267 | |||||||||
|
Income tax expense (benefit)
|
$ | 1,742 | $ | (28,639 | ) | $ | 20,678 | |||||
During 2010 and 2009, the Company recorded tax deficiencies of
$524,000 and $1.3 million, respectively, related to the
vesting of restricted stock and PBRS and the exercise of stock
options, which were recorded as charges to stockholders’
equity. The aggregate tax benefits realized in connection with
the vesting of restricted stock and PBRS and the exercise of
stock options was $562,000 for 2008, which was recorded as a
credit to stockholders’ equity.
Eligible subsidiaries (including sold and discontinued
businesses up to their respective disposition dates) are
included in the consolidated federal and other applicable income
tax returns of Viad.
United States and foreign income (loss) from continuing
operations before income taxes was as follows:
| 2010 | 2009 | 2008 | ||||||||||
| (in thousands) | ||||||||||||
|
United States
|
$ | (22,592 | ) | $ | (128,789 | ) | $ | 28,988 | ||||
|
Foreign
|
25,151 | (4,658 | ) | 35,228 | ||||||||
|
Income (loss) from continuing operations before income taxes
|
$ | 2,559 | $ | (133,447 | ) | $ | 64,216 | |||||
| Note 15. | Pension and Postretirement Benefits |
Domestic Plans.
Viad has trusteed, frozen
defined benefit pension plans that cover certain employees which
are funded by the Company. Viad also maintains certain unfunded
defined benefit pension plans which provide supplemental
benefits to select management employees. These plans use
traditional defined benefit formulas based on years of service
and final average
F-27
Table of Contents
VIAD
CORP
NOTES TO
CONSOLIDATED FINANCIAL
STATEMENTS — (Continued)
compensation. Funding policies provide that payments to defined
benefit pension trusts shall be at least equal to the minimum
funding required by applicable regulations.
Viad also has certain defined benefit postretirement plans that
provide medical and life insurance for certain eligible
employees, retirees and dependents. The related postretirement
benefit liabilities are recognized over the period that services
are provided by employees. In addition, Viad retained the
obligations for these benefits for retirees of certain sold
businesses. While the plans have no funding requirements, Viad
may fund the plans.
The components of net periodic benefit cost and other amounts
recognized in other comprehensive income of Viad’s pension
plans included the following:
| 2010 | 2009 | 2008 | ||||||||||
| (in thousands) | ||||||||||||
|
Net Periodic Benefit Cost
|
||||||||||||
|
Service cost
|
$ | 145 | $ | 184 | $ | 205 | ||||||
|
Interest cost
|
1,242 | 1,300 | 1,308 | |||||||||
|
Expected return on plan assets
|
(588 | ) | (627 | ) | (843 | ) | ||||||
|
Amortization of prior service cost
|
41 | 44 | 76 | |||||||||
|
Recognized net actuarial loss
|
572 | 367 | 390 | |||||||||
|
Net periodic benefit cost
|
1,412 | 1,268 | 1,136 | |||||||||
|
Other Changes in Plan Assets and Benefits Obligations
|
||||||||||||
|
Recognized in Other Comprehensive Income
|
||||||||||||
|
Net actuarial loss
|
1,190 | 2,746 | 1,422 | |||||||||
|
Reversal of amortization item:
|
||||||||||||
|
Net actuarial loss
|
(572 | ) | (367 | ) | (390 | ) | ||||||
|
Prior service cost
|
(41 | ) | (44 | ) | (76 | ) | ||||||
|
Total recognized in other comprehensive income
|
577 | 2,335 | 956 | |||||||||
|
Total recognized in net period benefit cost and other
comprehensive income
|
$ | 1,989 | $ | 3,603 | $ | 2,092 | ||||||
F-28
Table of Contents
VIAD
CORP
NOTES TO
CONSOLIDATED FINANCIAL
STATEMENTS — (Continued)
The components of net periodic benefit cost and other amounts
recognized in other comprehensive income of Viad’s
postretirement benefit plans included the following:
| 2010 | 2009 | 2008 | ||||||||||
| (in thousands) | ||||||||||||
|
Net Periodic Benefit Cost (Credit)
|
||||||||||||
|
Service cost
|
$ | 130 | $ | 68 | $ | 64 | ||||||
|
Interest cost
|
1,039 | 1,124 | 1,026 | |||||||||
|
Expected return on plan assets
|
(160 | ) | (205 | ) | (351 | ) | ||||||
|
Amortization of prior service credit
|
(1,171 | ) | (1,292 | ) | (1,561 | ) | ||||||
|
Recognized net actuarial loss
|
608 | 358 | 189 | |||||||||
|
Net periodic benefit cost (credit)
|
446 | 53 | (633 | ) | ||||||||
|
Other Changes in Plan Assets and Benefit Obligations
|
||||||||||||
|
Recognized in Other Comprehensive Income (Loss)
|
||||||||||||
|
Net actuarial loss
|
421 | 3,836 | 499 | |||||||||
|
Prior service credit
|
(1,197 | ) | (347 | ) | (245 | ) | ||||||
|
Reversal of amortization item:
|
||||||||||||
|
Net actuarial loss
|
(608 | ) | (358 | ) | (189 | ) | ||||||
|
Prior service credit
|
1,171 | 1,292 | 1,561 | |||||||||
|
Total recognized in other comprehensive income (loss)
|
(213 | ) | 4,423 | 1,626 | ||||||||
|
Total recognized in net period benefit cost and other
comprehensive income
|
$ | 233 | $ | 4,476 | $ | 993 | ||||||
The following table indicates the funded status of the plans as
of December 31:
|
Postretirement
|
||||||||||||||||||||||||
| Funded Plans | Unfunded Plans | Benefit Plans | ||||||||||||||||||||||
| 2010 | 2009 | 2010 | 2009 | 2010 | 2009 | |||||||||||||||||||
| (in thousands) | ||||||||||||||||||||||||
|
Change in benefit obligation:
|
||||||||||||||||||||||||
|
Benefit obligation at beginning of year
|
$ | 12,322 | $ | 10,996 | $ | 9,776 | $ | 8,361 | $ | 19,728 | $ | 16,497 | ||||||||||||
|
Service cost
|
— | — | 145 | 184 | 130 | 68 | ||||||||||||||||||
|
Interest cost
|
703 | 728 | 539 | 572 | 1,039 | 1,124 | ||||||||||||||||||
|
Actuarial adjustments
|
655 | 1,286 | 575 | 1,246 | 526 | 3,805 | ||||||||||||||||||
|
Plan amendments
|
— | — | — | — | (1,197 | ) | (347 | ) | ||||||||||||||||
|
Benefits paid
|
(827 | ) | (688 | ) | (683 | ) | (587 | ) | (1,239 | ) | (1,419 | ) | ||||||||||||
|
Benefit obligation at end of year
|
12,853 | 12,322 | 10,352 | 9,776 | 18,987 | 19,728 | ||||||||||||||||||
|
Change in plan assets:
|
||||||||||||||||||||||||
|
Fair value of plan assets at beginning of year
|
8,814 | 8,817 | — | — | 3,200 | 3,919 | ||||||||||||||||||
|
Actual return on plan assets
|
629 | 413 | — | — | 264 | 173 | ||||||||||||||||||
|
Company contributions
|
242 | 272 | 683 | 587 | 453 | 527 | ||||||||||||||||||
|
Benefits paid
|
(827 | ) | (688 | ) | (683 | ) | (587 | ) | (1,239 | ) | (1,419 | ) | ||||||||||||
|
Fair value of plan assets at end of year
|
8,858 | 8,814 | — | — | 2,678 | 3,200 | ||||||||||||||||||
|
Funded status at end of year
|
$ | (3,995 | ) | $ | (3,508 | ) | $ | (10,352 | ) | $ | (9,776 | ) | $ | (16,309 | ) | $ | (16,528 | ) | ||||||
F-29
Table of Contents
VIAD
CORP
NOTES TO
CONSOLIDATED FINANCIAL
STATEMENTS — (Continued)
The net amounts recognized in Viad’s consolidated balance
sheets under the caption “Pension and postretirement
benefits” as of December 31 were as follows:
|
Postretirement
|
||||||||||||||||||||||||
| Funded Plans | Unfunded Plans | Benefit Plans | ||||||||||||||||||||||
| 2010 | 2009 | 2010 | 2009 | 2010 | 2009 | |||||||||||||||||||
| (in thousands) | ||||||||||||||||||||||||
|
Other current liabilities
|
$ | — | $ | — | $ | 708 | $ | 555 | $ | 488 | $ | 538 | ||||||||||||
|
Non-current liabilities
|
3,995 | 3,508 | 9,644 | 9,221 | 15,821 | 15,990 | ||||||||||||||||||
|
Net amount recognized
|
$ | 3,995 | $ | 3,508 | $ | 10,352 | $ | 9,776 | $ | 16,309 | $ | 16,528 | ||||||||||||
Amounts recognized in accumulated other comprehensive income as
of December 31, 2010 consisted of:
|
Funded
|
Unfunded
|
Postretirement
|
||||||||||||||
| Plans | Plans | Benefit Plans | Total | |||||||||||||
| (in thousands) | ||||||||||||||||
|
Net actuarial loss
|
$ | 7,564 | $ | 3,453 | $ | 7,538 | $ | 18,555 | ||||||||
|
Prior service credit
|
— | — | (5,290 | ) | (5,290 | ) | ||||||||||
|
Subtotal
|
7,564 | 3,453 | 2,248 | 13,265 | ||||||||||||
|
Less tax effect
|
(2,889 | ) | (1,320 | ) | (858 | ) | (5,067 | ) | ||||||||
|
Total
|
$ | 4,675 | $ | 2,133 | $ | 1,390 | $ | 8,198 | ||||||||
Amounts recognized in accumulated other comprehensive income as
of December 31, 2009 consisted of:
|
Funded
|
Unfunded
|
Postretirement
|
||||||||||||||
| Plans | Plans | Benefit Plans | Total | |||||||||||||
| (in thousands) | ||||||||||||||||
|
Net actuarial loss
|
$ | 7,396 | $ | 3,003 | $ | 7,725 | $ | 18,124 | ||||||||
|
Prior service cost (credit)
|
41 | — | (5,264 | ) | (5,223 | ) | ||||||||||
|
Subtotal
|
7,437 | 3,003 | 2,461 | 12,901 | ||||||||||||
|
Less tax effect
|
(2,901 | ) | (1,171 | ) | (2,432 | ) | (6,504 | ) | ||||||||
|
Total
|
$ | 4,536 | $ | 1,832 | $ | 29 | $ | 6,397 | ||||||||
The estimated net actuarial loss for the pension plans that is
expected to be amortized from accumulated other comprehensive
income into net periodic pension cost in 2011 is approximately
$680,000. The estimated net actuarial loss for the
postretirement benefit plans that is expected to be amortized
from accumulated other comprehensive income into net periodic
benefit cost in 2011 is approximately $638,000. The estimated
prior service credit for the postretirement benefit plans that
is expected to be amortized from accumulated other comprehensive
income into net periodic benefit credit in 2011 is approximately
$1.3 million.
F-30
Table of Contents
VIAD
CORP
NOTES TO
CONSOLIDATED FINANCIAL
STATEMENTS — (Continued)
The fair value of the domestic plans’ assets as of December
31 is as follows:
|
Fair Value Measurements at
|
||||||||||||||||
| December 31, 2010 | ||||||||||||||||
|
Significant
|
||||||||||||||||
|
Quoted Prices
|
Other
|
Significant
|
||||||||||||||
|
in Active
|
Observable
|
Unobserved
|
||||||||||||||
|
Markets
|
Inputs
|
Inputs
|
||||||||||||||
|
Asset Category
|
Total | (Level 1) | (Level 2) | (Level 3) | ||||||||||||
| (in thousands) | ||||||||||||||||
|
Domestic Pension Plans:
|
||||||||||||||||
|
U.S. equity securities
|
$ | 2,591 | $ | — | $ | 2,591 | $ | — | ||||||||
|
International equity securities
|
875 | — | 875 | — | ||||||||||||
|
Aggregate fixed income securities
|
2,108 | — | 2,108 | — | ||||||||||||
|
Long-term fixed income securities
|
2,975 | — | 2,975 | — | ||||||||||||
|
Cash
|
77 | 77 | — | — | ||||||||||||
|
Other
|
232 | — | 232 | — | ||||||||||||
| $ | 8,858 | $ | 77 | $ | 8,781 | $ | — | |||||||||
|
Postretirement Benefit Plans:
|
||||||||||||||||
|
U.S. equity securities
|
$ | 362 | $ | — | $ | 362 | $ | — | ||||||||
|
International equity securities
|
121 | — | 121 | — | ||||||||||||
|
Aggregate fixed income securities
|
1,294 | — | 1,294 | — | ||||||||||||
|
Long-term fixed income securities
|
589 | — | 589 | — | ||||||||||||
|
Cash
|
312 | 312 | — | — | ||||||||||||
| $ | 2,678 | $ | 312 | $ | 2,366 | $ | — | |||||||||
|
Fair Value Measurements at
|
||||||||||||||||
| December 31, 2009 | ||||||||||||||||
|
Significant
|
||||||||||||||||
|
Quoted Prices
|
Other
|
Significant
|
||||||||||||||
|
in Active
|
Observable
|
Unobserved
|
||||||||||||||
|
Markets
|
Inputs
|
Inputs
|
||||||||||||||
|
Asset Category
|
Total | (Level 1) | (Level 2) | (Level 3) | ||||||||||||
| (in thousands) | ||||||||||||||||
|
Domestic Pension Plans:
|
||||||||||||||||
|
U.S. equity securities
|
$ | 2,670 | $ | — | $ | 2,670 | $ | — | ||||||||
|
International equity securities
|
860 | — | 860 | — | ||||||||||||
|
Aggregate fixed income securities
|
2,124 | — | 2,124 | — | ||||||||||||
|
Long-term fixed income securities
|
2,859 | — | 2,859 | — | ||||||||||||
|
Cash
|
66 | 66 | — | — | ||||||||||||
|
Other
|
235 | — | 235 | — | ||||||||||||
| $ | 8,814 | $ | 66 | $ | 8,748 | $ | — | |||||||||
|
Postretirement Benefit Plans:
|
||||||||||||||||
|
U.S. equity securities
|
$ | 494 | $ | — | $ | 494 | $ | — | ||||||||
|
International equity securities
|
163 | — | 163 | — | ||||||||||||
|
Aggregate fixed income securities
|
1,727 | — | 1,727 | — | ||||||||||||
|
Long-term fixed income securities
|
750 | — | 750 | — | ||||||||||||
|
Cash
|
66 | 66 | — | — | ||||||||||||
| $ | 3,200 | $ | 66 | $ | 3,134 | $ | — | |||||||||
F-31
Table of Contents
VIAD
CORP
NOTES TO
CONSOLIDATED FINANCIAL
STATEMENTS — (Continued)
Viad employs a total return investment approach whereby a mix of
equities and fixed income securities is used to maximize the
long-term return of plan assets for a prudent level of risk.
Risk tolerance is established through careful consideration of
plan liabilities, plan funded status, and corporate financial
condition. The investment portfolio contains a diversified blend
of equity and fixed income securities. Furthermore, equity
securities are diversified across U.S. and
non-U.S. stocks,
as well as growth and value. Investment risk is measured and
monitored on an ongoing basis through quarterly investment
portfolio reviews and annual liability measurements.
Viad utilizes a building-block approach in determining the
long-term expected rate of return on plan assets. Historical
markets are studied and long-term historical relationships
between equity securities and fixed income securities are
preserved consistent with the widely accepted capital market
principle that assets with higher volatility generate a greater
return over the long run. Current market factors such as
inflation and interest rates are evaluated before long-term
capital market assumptions are determined. The long-term
portfolio return also considers diversification and rebalancing.
Peer data and historical returns are reviewed relative to
Viad’s assumed rates for reasonableness and appropriateness.
The following pension and postretirement benefit payments, which
reflect expected future service, as appropriate, are expected to
be paid, as well as the Medicare Part D subsidy expected to
be received:
|
Postretirement
|
Medicare
|
|||||||||||||||
|
Funded
|
Unfunded
|
Benefit
|
|
|||||||||||||
| Plans | Plans | Plans | Receipts | |||||||||||||
| (in thousands) | ||||||||||||||||
|
2011
|
$ | 671 | $ | 726 | $ | 1,895 | $ | 304 | ||||||||
|
2012
|
747 | 717 | 1,908 | 313 | ||||||||||||
|
2013
|
791 | 807 | 1,958 | 318 | ||||||||||||
|
2014
|
788 | 798 | 1,942 | 323 | ||||||||||||
|
2015
|
811 | 782 | 1,917 | 324 | ||||||||||||
|
2016-2020
|
4,095 | 4,157 | 8,903 | 1,546 | ||||||||||||
Foreign Pension Plans.
Certain of Viad’s
foreign operations also maintain trusteed defined benefit
pension plans covering certain employees which are funded by the
companies and unfunded defined benefit pension plans providing
supplemental benefits to select management employees. These
plans use traditional defined benefit formulas based on years of
service and final average compensation. Funding policies provide
that payments to defined benefit pension trusts shall be at
least equal to the minimum funding required by applicable
regulations. The components of net periodic benefit cost and
other amounts recognized in other comprehensive income included
the following:
| 2010 | 2009 | 2008 | ||||||||||
| (in thousands) | ||||||||||||
|
Net Periodic Benefit Cost
|
||||||||||||
|
Service cost
|
$ | 304 | $ | 269 | $ | 366 | ||||||
|
Interest cost
|
780 | 748 | 750 | |||||||||
|
Expected return on plan assets
|
(597 | ) | (527 | ) | (733 | ) | ||||||
|
Recognized net actuarial loss
|
54 | 11 | — | |||||||||
|
Net periodic benefit cost
|
541 | 501 | 383 | |||||||||
|
Other Changes in Plan Assets and Benefit Obligations
Recognized in Other Comprehensive Income
|
||||||||||||
|
Net actuarial loss
|
299 | 1,177 | 632 | |||||||||
|
Reversal of amortization of net actuarial loss
|
(54 | ) | (11 | ) | — | |||||||
|
Total recognized in other comprehensive income
|
245 | 1,166 | 632 | |||||||||
|
Total recognized in net periodic benefit cost and other
comprehensive income
|
$ | 786 | $ | 1,667 | $ | 1,015 | ||||||
F-32
Table of Contents
VIAD
CORP
NOTES TO
CONSOLIDATED FINANCIAL
STATEMENTS — (Continued)
The following table represents the funded status of the plans as
of December 31:
| Funded Plans | Unfunded Plans | |||||||||||||||
| 2010 | 2009 | 2010 | 2009 | |||||||||||||
| (in thousands) | ||||||||||||||||
|
Change in benefit obligation:
|
||||||||||||||||
|
Benefit obligation at beginning of year
|
$ | 11,308 | $ | 8,047 | $ | 2,905 | $ | 2,558 | ||||||||
|
Service cost
|
304 | 269 | — | — | ||||||||||||
|
Interest cost
|
632 | 595 | 148 | 153 | ||||||||||||
|
Actuarial adjustments
|
632 | 1,694 | 110 | 185 | ||||||||||||
|
Benefits paid
|
(2,014 | ) | (715 | ) | (220 | ) | (215 | ) | ||||||||
|
Translation adjustment
|
591 | 1,418 | (14 | ) | 224 | |||||||||||
|
Benefit obligation at end of year
|
11,453 | 11,308 | 2,929 | 2,905 | ||||||||||||
|
Change in plan assets:
|
||||||||||||||||
|
Fair value of plan assets at beginning of year
|
10,165 | 7,536 | — | — | ||||||||||||
|
Actual return on plan assets
|
1,071 | 1,432 | — | — | ||||||||||||
|
Company contributions
|
1,059 | 617 | 220 | 215 | ||||||||||||
|
Benefits paid
|
(2,014 | ) | (715 | ) | (220 | ) | (215 | ) | ||||||||
|
Translation adjustment
|
553 | 1,295 | — | — | ||||||||||||
|
Fair value of plan assets at end of year
|
10,834 | 10,165 | — | — | ||||||||||||
|
Funded status at end of year
|
$ | (619 | ) | $ | (1,143 | ) | $ | (2,929 | ) | $ | (2,905 | ) | ||||
As of December 31, 2010 and 2009, the foreign funded plans
had liabilities of $619,000 and $1.1 million, respectively.
The unfunded plans had liabilities of $2.9 million as of
both December 31, 2010 and 2009. These amounts are each
included in the consolidated balance sheets under the caption
“Pension and postretirement benefits.”
The net actuarial losses for the foreign funded plans as of
December 31, 2010 and 2009 were $2.9 million
($2.1 million after-tax) and $2.7 million
($2.0 million after-tax), respectively. The net actuarial
losses as of December 31, 2010 and 2009 for the foreign
unfunded plans were $111,000 ($82,000 after-tax) and $29,000
($21,000 after-tax), respectively.
The fair value of the foreign pension plans’ assets by
asset category as of December 31, 2010 is as follows:
|
Fair Value Measurements at
|
||||||||||||||||
| December 31, 2010 | ||||||||||||||||
|
Significant
|
||||||||||||||||
|
Quoted Prices
|
Other
|
Significant
|
||||||||||||||
|
in Active
|
Observable
|
Unobserved
|
||||||||||||||
|
Markets
|
Inputs
|
Inputs
|
||||||||||||||
|
Asset Category
|
Total | (Level 1) | (Level 2) | (Level 3) | ||||||||||||
| (in thousands) | ||||||||||||||||
|
U.S. equity securities
|
$ | 1,024 | $ | 1,024 | $ | — | $ | — | ||||||||
|
International equity securities
|
4,317 | 3,957 | 360 | — | ||||||||||||
|
Canadian fixed income securities
|
5,469 | 5,469 | — | — | ||||||||||||
|
Other
|
24 | 24 | — | — | ||||||||||||
| $ | 10,834 | $ | 10,474 | $ | 360 | $ | — | |||||||||
F-33
Table of Contents
VIAD
CORP
NOTES TO
CONSOLIDATED FINANCIAL
STATEMENTS — (Continued)
The fair value of the foreign pension plans’ assets by
asset category as of December 31, 2009 is as follows:
|
Fair Value Measurements at
|
||||||||||||||||
| December 31, 2009 | ||||||||||||||||
|
Significant
|
||||||||||||||||
|
Quoted Prices
|
Other
|
Significant
|
||||||||||||||
|
in Active
|
Observable
|
Unobserved
|
||||||||||||||
|
Markets
|
Inputs
|
Inputs
|
||||||||||||||
|
Asset Category
|
Total | (Level 1) | (Level 2) | (Level 3) | ||||||||||||
| (in thousands) | ||||||||||||||||
|
U.S. equity securities
|
$ | 622 | $ | 622 | $ | — | $ | — | ||||||||
|
International equity securities
|
3,421 | 3,146 | 275 | — | ||||||||||||
|
Canadian fixed income securities
|
5,951 | 5,951 | — | — | ||||||||||||
|
Cash
|
140 | 140 | — | — | ||||||||||||
|
Other
|
31 | 31 | — | — | ||||||||||||
| $ | 10,165 | $ | 9,890 | $ | 275 | $ | — | |||||||||
The following payments, which reflect expected future service,
as appropriate, are expected to be paid:
|
Funded
|
Unfunded
|
|||||||
| Plans | Plans | |||||||
| (in thousands) | ||||||||
|
2011
|
$ | 302 | $ | 217 | ||||
|
2012
|
383 | 217 | ||||||
|
2013
|
426 | 216 | ||||||
|
2014
|
455 | 216 | ||||||
|
2015
|
572 | 215 | ||||||
|
2016-2020
|
3,080 | 1,063 | ||||||
Information for Pension Plans with an Accumulated Benefit
Obligation in Excess of Plan Assets.
| Domestic Plans | ||||||||||||||||
| Funded Plans | Unfunded Plans | |||||||||||||||
| 2010 | 2009 | 2010 | 2009 | |||||||||||||
| (in thousands) | ||||||||||||||||
|
Projected benefit obligation
|
$ | 12,853 | $ | 12,322 | $ | 10,352 | $ | 9,776 | ||||||||
|
Accumulated benefit obligation
|
12,853 | 12,322 | 10,064 | 9,506 | ||||||||||||
|
Fair value of plan assets
|
8,858 | 8,814 | — | — | ||||||||||||
| Foreign Plans | ||||||||||||||||
| Funded Plans | Unfunded Plans | |||||||||||||||
| 2010 | 2009 | 2010 | 2009 | |||||||||||||
| (in thousands) | ||||||||||||||||
|
Projected benefit obligation
|
$ | 11,453 | $ | 11,308 | $ | 2,929 | $ | 2,905 | ||||||||
|
Accumulated benefit obligation
|
10,608 | 10,135 | 2,929 | 2,905 | ||||||||||||
|
Fair value of plan assets
|
10,834 | 10,165 | — | — | ||||||||||||
Contributions.
The Company anticipates
contributing $1.6 million to its funded pension plans,
$943,000 to its unfunded pension plans and $500,000 to its
postretirement benefit plans in 2011.
Measurement Date.
In 2008, Viad adjusted the
measurement date for certain of its pension and postretirement
benefit plans from November 30 to December 31 to coincide with
its year end statement of financial position. This adjustment
resulted in additional net periodic benefit cost of $85,000
($52,000 after-tax) for the pension plans and an additional net
periodic benefit credit of $45,000 ($42,000 after-tax) for the
postretirement benefit plans. The $10,000 net after-tax
amount has been presented in the consolidated statements of
stockholders’ equity under the caption “ASC Topic 715
transition adjustment.”
F-34
Table of Contents
VIAD
CORP
NOTES TO
CONSOLIDATED FINANCIAL
STATEMENTS — (Continued)
Weighted-Average Assumptions.
Weighted-average
assumptions used to determine benefit obligations as of December
31 were as follows:
| Domestic Plans | ||||||||||||||||||||||||||||||||
|
Postretirement
|
||||||||||||||||||||||||||||||||
| Funded Plans | Unfunded Plans | Benefit Plans | Foreign Plans | |||||||||||||||||||||||||||||
| 2010 | 2009 | 2010 | 2009 | 2010 | 2009 | 2010 | 2009 | |||||||||||||||||||||||||
|
Discount rate
|
5.45 | % | 5.90 | % | 5.10 | % | 5.70 | % | 5.10 | % | 5.60 | % | 5.10 | % | 5.60 | % | ||||||||||||||||
|
Rate of compensation increase
|
N/A | N/A | 4.50 | % | 4.50 | % | N/A | N/A | 3.00 | % | 3.00 | % | ||||||||||||||||||||
Weighted-average assumptions used to determine net periodic
benefit cost were as follows:
| Domestic Plans | ||||||||||||||||||||||||||||||||
|
Postretirement
|
||||||||||||||||||||||||||||||||
| Funded Plans | Unfunded Plans | Benefit Plans | Foreign Plans | |||||||||||||||||||||||||||||
| 2010 | 2009 | 2010 | 2009 | 2010 | 2009 | 2010 | 2009 | |||||||||||||||||||||||||
|
Discount rate
|
5.90 | % | 6.90 | % | 5.70 | % | 6.90 | % | 5.60 | % | 6.90 | % | 5.60 | % | 7.00 | % | ||||||||||||||||
|
Expected long-term return on plan assets
|
6.35 | % | 6.35 | % | N/A | N/A | 6.10 | % | 6.10 | % | 5.75 | % | 6.50 | % | ||||||||||||||||||
|
Rate of compensation increase
|
N/A | N/A | 4.50 | % | 4.50 | % | N/A | N/A | 3.00 | % | 4.00 | % | ||||||||||||||||||||
The assumed health care cost trend rate used in measuring the
December 31, 2010 accumulated postretirement benefit
obligation was nine and one-half percent, declining one-half
percent each year to the ultimate rate of five percent by the
year 2019 and remaining at that level thereafter. The assumed
health care cost trend rate used in measuring the
December 31, 2009 accumulated postretirement benefit
obligation was ten percent, declining one-half percent each year
to the ultimate rate of five percent by the year 2019 and
remaining at that level thereafter.
A one-percentage-point increase in the assumed health care cost
trend rate for each year would increase the accumulated
postretirement benefit obligation as of December 31, 2010
by approximately $1.6 million and the total of service and
interest cost components by approximately $124,000. A
one-percentage-point decrease in the assumed health care cost
trend rate for each year would decrease the accumulated
postretirement benefit obligation as of December 31, 2010
by approximately $1.4 million and the total of service and
interest cost components by approximately $104,000.
Other Employee Benefits.
Contributions to
multi-employer pension plans totaled $15.3 million,
$15.7 million and $21.9 million in 2010, 2009 and
2008, respectively. Costs of the 401(k) Plan and other benefit
plans totaled $1.6 million, $2.0 million and
$1.8 million in 2010, 2009 and 2008, respectively.
| Note 16. | Restructuring Charges and Recoveries |
Marketing &
Events Group Consolidation
Beginning in 2009, Viad commenced certain restructuring actions
designed to reduce the Company’s cost structure primarily
within the Marketing & Events U.S. segment, and
to a lesser extent in the Marketing & Events
International segment. As described in Note 1, the Company
implemented a strategic reorganization plan in order to
consolidate the separate business units within the
Marketing & Events U.S. segment. The Company also
consolidated facilities and streamlined its operations in the
United Kingdom and Germany. As a result, the Company recorded
restructuring charges in 2010 and 2009, primarily consisting of
severance and related benefits as a result of workforce
reductions; and charges related to the consolidation and
downsizing of facilities representing the remaining operating
lease obligations (net of estimated sublease income) and related
costs. The Company expects additional restructuring charges
during 2011 related to the remaining integration activities
within the Marketing & Events Group.
Other
Restructurings
The Company has recorded restructuring charges in connection
with the consolidation of certain support functions at its
corporate headquarters, and certain reorganization activities
within the Travel & Recreation Group. These charges
primarily consist of severance and related benefits due to
headcount reductions. In addition, the Company had recorded
significant
F-35
Table of Contents
VIAD
CORP
NOTES TO
CONSOLIDATED FINANCIAL
STATEMENTS — (Continued)
restructuring charges in past years, primarily within the
Marketing & Events U.S. segment. These legacy
restructuring liabilities represent the remaining contractual
lease obligations on certain facilities, and are subject to
periodic adjustments as a result of changes in estimated
sublease activity and other factors. These adjustments can
result in reversals of previously recorded amounts, or
additional charges in some cases.
The table below represents a reconciliation of beginning and
ending liability balances by major restructuring activity:
|
Marketing & Events Group
|
||||||||||||||||||||
| Consolidation | Other Restructurings | |||||||||||||||||||
|
Severance &
|
Severance &
|
|||||||||||||||||||
| Employee Benefits | Facilities | Employee Benefits | Facilities | Total | ||||||||||||||||
| (in thousands) | ||||||||||||||||||||
|
Balance at January 1, 2008
|
$ | — | $ | — | $ | 144 | $ | 8,877 | $ | 9,021 | ||||||||||
|
Restructuring charges
|
— | — | 381 | 125 | 506 | |||||||||||||||
|
Cash payments
|
— | — | (324 | ) | (2,110 | ) | (2,434 | ) | ||||||||||||
|
Adjustment to liability
|
— | — | — | (242 | ) | (242 | ) | |||||||||||||
|
Foreign currency translation adjustment
|
— | — | — | (307 | ) | (307 | ) | |||||||||||||
|
Balance at December 31, 2008
|
— | — | 201 | 6,343 | 6,544 | |||||||||||||||
|
Restructuring charges (recoveries)
|
8,115 | 7,104 | — | (1,165 | ) | 14,054 | ||||||||||||||
|
Cash payments
|
(5,043 | ) | (525 | ) | (201 | ) | (1,818 | ) | (7,587 | ) | ||||||||||
|
Adjustment to liability
|
(739 | ) | (284 | ) | — | (333 | ) | (1,356 | ) | |||||||||||
|
Balance at December 31, 2009
|
2,333 | 6,295 | — | 3,027 | 11,655 | |||||||||||||||
|
Restructuring charges (recoveries)
|
2,637 | 1,180 | 542 | (137 | ) | 4,222 | ||||||||||||||
|
Cash payments
|
(3,387 | ) | (2,164 | ) | (292 | ) | (875 | ) | (6,718 | ) | ||||||||||
|
Adjustment to liability
|
(466 | ) | (258 | ) | (53 | ) | (373 | ) | (1,150 | ) | ||||||||||
|
Foreign currency translation adjustment
|
(11 | ) | (2 | ) | — | — | (13 | ) | ||||||||||||
|
Balance at December 31, 2010
|
$ | 1,106 | $ | 5,051 | $ | 197 | $ | 1,642 | $ | 7,996 | ||||||||||
As of December 31, 2010, the liability of $1.1 million
and $197,000 related to severance and employee benefits in the
Marketing & Events Group consolidation and other
restructurings, respectively, is expected to be paid by the end
of 2011. Additionally, as of December 31, 2010, the
liability of $5.1 million and $1.6 million related to
facilities in the Marketing & Events Group
consolidation and other restructurings, respectively, relates to
future lease payment obligations to be made over the remaining
lease terms. See Note 19 for information regarding
restructuring charges by segment.
| Note 17. | Leases and Other |
Viad has entered into operating leases for the use of certain of
its offices, equipment and other facilities. These leases expire
over periods up to 41 years. Leases which expire are
generally renewed or replaced by similar leases. Some leases
contain scheduled rental increases accounted for on a
straight-line basis.
F-36
Table of Contents
VIAD
CORP
NOTES TO
CONSOLIDATED FINANCIAL
STATEMENTS — (Continued)
As of December 31, 2010, Viad’s future minimum rental
payments and related sublease rentals receivable with respect to
non-cancelable operating leases with terms in excess of one year
were as follows:
|
Rental
|
Receivable
|
|||||||
| Payments | Under Subleases | |||||||
| (in thousands) | ||||||||
|
2011
|
$ | 21,434 | $ | 2,789 | ||||
|
2012
|
13,909 | 1,430 | ||||||
|
2013
|
12,289 | 879 | ||||||
|
2014
|
11,211 | 841 | ||||||
|
2015
|
4,617 | 730 | ||||||
|
Thereafter
|
12,609 | 1,668 | ||||||
|
Total
|
$ | 76,069 | $ | 8,337 | ||||
Net rent expense under operating leases consisted of the
following:
| 2010 | 2009 | 2008 | ||||||||||
| (in thousands) | ||||||||||||
|
Minimum rentals
|
$ | 29,072 | $ | 31,082 | $ | 37,196 | ||||||
|
Sublease rentals
|
(5,704 | ) | (6,193 | ) | (5,453 | ) | ||||||
|
Total rentals, net
|
$ | 23,368 | $ | 24,889 | $ | 31,743 | ||||||
The aggregate annual maturities and the related amounts
representing interest on capital lease obligations are included
in Note 9.
In addition, as of December 31, 2010, the Company had
aggregate commitments of $6.0 million pursuant to a
licensing agreement, which is payable in annual increments of
$2.0 million.
| Note 18. | Litigation, Claims, Contingencies and Other |
Viad and certain of its subsidiaries are plaintiffs or
defendants to various actions, proceedings and pending claims,
some of which involve, or may involve, compensatory, punitive or
other damages. Litigation is subject to many uncertainties and
it is possible that some of the legal actions, proceedings or
claims could be decided against Viad. Although the amount of
liability as of December 31, 2010 with respect to 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 effect on Viad’s business, financial position or
results of operations.
Viad is subject to various U.S. federal, state and foreign
laws and regulations governing the prevention of pollution and
the protection of the environment in the jurisdictions in which
Viad has or had operations. If the Company has failed to comply
with these environmental laws and regulations, civil and
criminal penalties could be imposed and Viad could become
subject to regulatory enforcement actions in the form of
injunctions and cease and desist orders. As is the case with
many companies, Viad also faces exposure to actual or potential
claims and lawsuits involving environmental matters relating to
its past operations. Although it is a party to certain
environmental disputes, Viad believes that any resulting
liabilities, after taking into consideration amounts already
provided for, including insurance coverage, will not have a
material effect on the Company’s financial position or
results of operations. As of December 31, 2010 and 2009,
Viad had recorded environmental remediation liabilities of
$6.1 million and $6.7 million, respectively, related
to previously sold operations.
As of December 31, 2010, Viad had certain obligations under
guarantees to third parties on behalf of its subsidiaries. These
guarantees are not subject to liability recognition in the
consolidated financial statements and relate to leased
facilities entered into by Viad’s subsidiary operations.
The Company would generally be required to make payments to the
respective third parties under these guarantees in the event
that the related subsidiary could not meet its own payment
obligations. The maximum potential amount of future payments
that Viad would be required to make under all guarantees
existing as of December 31, 2010 would be
$36.3 million. These guarantees primarily 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.
F-37
Table of Contents
VIAD
CORP
NOTES TO
CONSOLIDATED FINANCIAL
STATEMENTS — (Continued)
A significant portion of Viad’s employees are unionized and
the Company is a party to approximately 100 collective
bargaining agreements, with approximately one-fourth requiring
renegotiation each year. As of December 31, 2010,
approximately 35 percent of Viad’s regular full-time
employees are covered by collective bargaining agreements. If
the Company were unable to reach an agreement with a union
during the collective bargaining process, the union may call for
a strike or work stoppage, which may, under certain
circumstances, adversely impact the Company’s businesses
and results of operations. Viad believes that relations with its
employees are satisfactory and that collective bargaining
agreements expiring in 2011 will be renegotiated in the ordinary
course of business without material adverse affect on
Viad’s operations.
Viad’s businesses contribute to various multi-employer
pension plans based on obligations arising under collective
bargaining agreements covering its union-represented employees.
Viad’s contributions to these plans in 2010, 2009 and 2008
totaled $15.3 million, $15.7 million and
$21.9 million, respectively. Based upon the information
available to Viad from plan administrators, management believes
that several of these multi-employer plans are underfunded. The
Pension Protection Act of 2006 requires pension plans
underfunded at certain levels to reduce, over defined time
periods, the underfunded status. In addition, under current
laws, the termination of a plan, or a voluntary withdrawal from
a plan by Viad, or a shrinking contribution base to a plan as a
result of the insolvency or withdrawal of other contributing
employers to such plan would require Viad to make payments to
such plan for its proportionate share of the plan’s
unfunded vested liabilities. As of December 31, 2010, 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 six one-year
periods and now expires on December 31, 2011. The Park
Service, in its sole discretion, may continue extending Glacier
Park’s concession contract in one-year increments. When
this contract ultimately expires, Glacier Park will have the
opportunity to bid on a new concession contract. If Glacier Park
does secure a new contract, possible terms would be for 10, 15
or 20 years. Glacier Park generated approximately
70 percent of its 2010 revenue through its concession
contract for services provided within Glacier National Park. If
a new concessionaire is selected by the Park Service, Glacier
Park’s remaining business would consist of its operations
at Waterton Lakes National Park, Alberta, Canada; East Glacier,
Montana and Whitefish, Montana. In such a circumstance, Glacier
Park would be entitled to an amount equal to its
“possessory interest,” which generally means the value
of the structures acquired or constructed, fixtures installed
and improvements made to the concession property at Glacier
National Park during the term of the concession contract.
Glacier Park owns its Glacier Park Lodge operations in East
Glacier, Montana as well as the Grouse Mountain Lodge in
Whitefish, Montana (acquired January 5, 2011). Glacier Park
also owns the Prince of Wales Hotel in Waterton Lakes National
Park, which is operated under a ground lease with the Canadian
Government that was recently renewed for a
42-year
term
running through January 31, 2052. Glacier Park generated
approximately 25 percent of the Travel &
Recreation Group’s full year 2010 segment operating income.
| Note 19. | Segment Information |
Viad measures profit and performance of its operations on the
basis of segment operating income which excludes restructuring
charges and recoveries and impairment charges and recoveries.
Intersegment sales are eliminated in consolidation and
intersegment transfers are not significant. Corporate activities
include expenses not allocated to operations. Depreciation and
F-38
Table of Contents
VIAD
CORP
NOTES TO
CONSOLIDATED FINANCIAL
STATEMENTS — (Continued)
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:
| 2010 | 2009 | 2008 | ||||||||||
| (in thousands) | ||||||||||||
|
Revenues:
|
||||||||||||
|
Marketing & Events Group:
|
||||||||||||
|
U.S.
|
$ | 570,978 | $ | 568,432 | $ | 821,473 | ||||||
|
International
|
197,787 | 172,648 | 225,912 | |||||||||
|
Intersegment eliminations
|
(12,281 | ) | (10,578 | ) | (13,145 | ) | ||||||
| 756,484 | 730,502 | 1,034,240 | ||||||||||
|
Travel & Recreation Group
|
88,277 | 75,302 | 86,621 | |||||||||
| $ | 844,761 | $ | 805,804 | $ | 1,120,861 | |||||||
|
Segment operating income (loss):
|
||||||||||||
|
Marketing & Events Group:
|
||||||||||||
|
U.S.
|
$ | (15,217 | ) | $ | (22,095 | ) | $ | 41,531 | ||||
|
International
|
10,088 | 9,226 | 18,451 | |||||||||
| (5,129 | ) | (12,869 | ) | 59,982 | ||||||||
|
Travel & Recreation Group
|
19,885 | 17,057 | 22,020 | |||||||||
| 14,756 | 4,188 | 82,002 | ||||||||||
|
Corporate activities
|
(6,422 | ) | (5,607 | ) | (7,534 | ) | ||||||
| 8,334 | (1,419 | ) | 74,468 | |||||||||
|
Interest income
|
584 | 579 | 3,242 | |||||||||
|
Interest expense
|
(1,835 | ) | (1,690 | ) | (1,757 | ) | ||||||
|
Restructuring recoveries (charges):
|
||||||||||||
|
Marketing & Events U.S.
|
(3,232 | ) | (11,980 | ) | 99 | |||||||
|
Marketing & Events International
|
(448 | ) | (1,300 | ) | — | |||||||
|
Travel & Recreation Group
|
(235 | ) | — | — | ||||||||
|
Corporate
|
(307 | ) | (774 | ) | (605 | ) | ||||||
|
Impairment losses:
|
||||||||||||
|
Marketing & Events U.S.
|
— | (90,691 | ) | (8,645 | ) | |||||||
|
Marketing & Events International
|
— | (23,318 | ) | (2,586 | ) | |||||||
|
Travel & Recreation Group
|
(302 | ) | (2,854 | ) | — | |||||||
|
Income (loss) from continuing operations before income taxes
|
$ | 2,559 | $ | (133,447 | ) | $ | 64,216 | |||||
F-39
Table of Contents
VIAD
CORP
NOTES TO
CONSOLIDATED FINANCIAL
STATEMENTS — (Continued)
| 2010 | 2009 | 2008 | ||||||||||
| (in thousands) | ||||||||||||
|
Assets:
|
||||||||||||
|
Marketing & Events Group:
|
||||||||||||
|
U.S.
|
$ | 235,965 | $ | 245,104 | $ | 354,720 | ||||||
|
International
|
83,441 | 78,601 | 88,490 | |||||||||
|
Travel & Recreation Group
|
157,562 | 147,090 | 120,198 | |||||||||
|
Corporate and other
|
139,535 | 138,391 | 165,996 | |||||||||
| $ | 616,503 | $ | 609,186 | $ | 729,404 | |||||||
|
Depreciation and amortization:
|
||||||||||||
|
Marketing & Events Group:
|
||||||||||||
|
U.S.
|
$ | 17,887 | $ | 18,446 | $ | 17,581 | ||||||
|
International
|
4,486 | 4,103 | 4,684 | |||||||||
|
Travel & Recreation Group
|
5,648 | 5,464 | 5,525 | |||||||||
|
Corporate and other
|
231 | 256 | 258 | |||||||||
| $ | 28,252 | $ | 28,269 | $ | 28,048 | |||||||
|
Capital expenditures:
|
||||||||||||
|
Marketing & Events Group:
|
||||||||||||
|
U.S.
|
$ | 9,050 | $ | 14,169 | $ | 25,942 | ||||||
|
International
|
4,776 | 4,842 | 7,128 | |||||||||
|
Travel & Recreation Group
|
3,214 | 2,304 | 5,905 | |||||||||
|
Corporate and other
|
— | — | 71 | |||||||||
| $ | 17,040 | $ | 21,315 | $ | 39,046 | |||||||
Products and Services
Viad’s revenues for each group
of products and services is presented in the following table:
| 2010 | 2009 | 2008 | ||||||||||
| (in thousands) | ||||||||||||
|
Revenues:
|
||||||||||||
|
Convention and event services
|
$ | 590,444 | $ | 582,969 | $ | 804,546 | ||||||
|
Exhibits and environments
|
166,040 | 147,533 | 229,694 | |||||||||
|
Travel and recreation services
|
88,277 | 75,302 | 86,621 | |||||||||
|
Total revenues
|
$ | 844,761 | $ | 805,804 | $ | 1,120,861 | ||||||
Geographic Areas.
Viad’s foreign
operations are located principally in Canada, the United Kingdom
and Germany. Marketing & Events Group revenues are
designated as domestic or foreign based on the originating
location of the product or service. Long-lived assets are
attributed to domestic or foreign based principally on the
physical location of the assets. Long-lived
F-40
Table of Contents
VIAD
CORP
NOTES TO
CONSOLIDATED FINANCIAL
STATEMENTS — (Continued)
assets consist of “Property and equipment, net” and
“Other investments and assets.” The table below
presents the financial information by major geographic area:
| 2010 | 2009 | 2008 | ||||||||||
| (in thousands) | ||||||||||||
|
Revenues:
|
||||||||||||
|
United States
|
$ | 590,163 | $ | 589,344 | $ | 843,194 | ||||||
|
Canada
|
136,066 | 106,093 | 128,417 | |||||||||
|
United Kingdom
|
93,092 | 90,429 | 129,390 | |||||||||
|
Other international
|
25,440 | 19,938 | 19,860 | |||||||||
|
Total revenues
|
$ | 844,761 | $ | 805,804 | $ | 1,120,861 | ||||||
|
Long-lived assets:
|
||||||||||||
|
United States
|
$ | 117,751 | $ | 122,149 | $ | 124,015 | ||||||
|
Canada
|
51,182 | 50,757 | 58,847 | |||||||||
|
United Kingdom
|
8,295 | 8,602 | 7,554 | |||||||||
|
Other international
|
3,481 | 2,561 | 1,559 | |||||||||
|
Total long-lived assets
|
$ | 180,709 | $ | 184,069 | $ | 191,975 | ||||||
| Note 20. | Common Stock Repurchases |
In September 2010, Viad announced its intent to repurchase up to
an additional 500,000 shares of the Company’s common
stock from time to time at prevailing market prices. At the time
of the announcement, there were 160,681 shares available
for repurchase pursuant to previously announced authorizations.
Viad purchased 356,300 shares for $6.3 million during
2010, with 304,381 shares remaining for repurchase. No
shares were repurchased during 2009 and in 2008 Viad repurchased
581,119 shares for $15.7 million. Additionally, during
2010, 2009 and 2008, the Company repurchased 28,407 shares
for $573,000, 72,294 shares for $1.2 million and
50,061 shares for $1.6 million, respectively, related
to tax withholding requirements on vested share-based awards.
| Note 21. | Discontinued Operations |
In 2010, 2009 and 2008, Viad recorded income from discontinued
operations of $262,000, $679,000 and $385,000, respectively,
related to the reversal of certain liabilities associated with
previously sold operations.
| Note 22. | Condensed Consolidated Quarterly Results (Unaudited) |
The following quarterly financial information was derived from
the Company’s interim financial statements and was prepared
in a manner consistent with our annual financial statements and
includes all adjustments (consisting of normal recurring
accruals) considered necessary for a fair presentation.
F-41
Table of Contents
VIAD
CORP
NOTES TO
CONSOLIDATED FINANCIAL
STATEMENTS — (Continued)
|
First
|
Second
|
Third
|
Fourth
|
|||||||||||||
| Quarter | Quarter | Quarter | Quarter | |||||||||||||
| (in thousands, except per share data) | ||||||||||||||||
|
2010
|
||||||||||||||||
|
Revenues:
|
$ | 224,353 | $ | 218,299 | $ | 215,144 | $ | 186,965 | ||||||||
|
Operating income (loss):
|
||||||||||||||||
|
Ongoing
operations
(1)
|
$ | 199 | $ | 7,725 | $ | 9,919 | $ | (3,087 | ) | |||||||
|
Corporate activities
|
(644 | ) | (2,058 | ) | (1,749 | ) | (1,971 | ) | ||||||||
|
Restructuring
charges
(2)
|
(2,053 | ) | (559 | ) | (183 | ) | (1,427 | ) | ||||||||
|
Impairment
losses
(3)
|
— | — | — | (302 | ) | |||||||||||
|
Operating income (loss)
|
$ | (2,498 | ) | $ | 5,108 | $ | 7,987 | $ | (6,787 | ) | ||||||
|
Income (loss) from continuing operations attributable to Viad
|
$ | (2,982 | ) | $ | 3,028 | $ | 4,796 | $ | (4,661 | ) | ||||||
|
Net income (loss) attributable to Viad
|
$ | (2,982 | ) | $ | 3,028 | $ | 4,796 | $ | (4,399 | ) | ||||||
|
Diluted income (loss) per common
share
(4)
:
|
||||||||||||||||
|
Income (loss) from continuing operations attributable to Viad
|
$ | (0.15 | ) | $ | 0.15 | $ | 0.23 | $ | (0.24 | ) | ||||||
|
Net income (loss) attributable to Viad
|
$ | (0.15 | ) | $ | 0.15 | $ | 0.23 | $ | (0.22 | ) | ||||||
|
Basic income (loss) per common
share
(4)
:
|
||||||||||||||||
|
Income (loss) from continuing operations attributable to Viad
|
$ | (0.15 | ) | $ | 0.15 | $ | 0.23 | $ | (0.24 | ) | ||||||
|
Net income (loss) attributable to Viad
|
$ | (0.15 | ) | $ | 0.15 | $ | 0.23 | $ | (0.22 | ) | ||||||
|
First
|
Second
|
Third
|
Fourth
|
|||||||||||||
| Quarter | Quarter | Quarter | Quarter | |||||||||||||
| (in thousands, except per share data) | ||||||||||||||||
|
2009
|
||||||||||||||||
|
Revenues:
|
$ | 240,949 | $ | 213,565 | $ | 181,125 | $ | 170,165 | ||||||||
|
Operating income (loss):
|
||||||||||||||||
|
Ongoing
operations
(1)
|
$ | 6,667 | $ | 9,808 | $ | (2,690 | ) | $ | (9,597 | ) | ||||||
|
Corporate activities
|
(1,503 | ) | (703 | ) | (2,024 | ) | (1,377 | ) | ||||||||
|
Restructuring
charges
(2)
|
(2,732 | ) | (198 | ) | (3,867 | ) | (7,257 | ) | ||||||||
|
Impairment
losses
(3)
|
— | — | (111,356 | ) | (5,507 | ) | ||||||||||
|
Operating income (loss)
|
$ | 2,432 | $ | 8,907 | $ | (119,937 | ) | $ | (23,738 | ) | ||||||
|
Income (loss) from continuing operations attributable to Viad
|
$ | 1,503 | $ | 5,399 | $ | (97,133 | ) | $ | (15,159 | ) | ||||||
|
Net income (loss) attributable to Viad
|
$ | 1,503 | $ | 5,399 | $ | (97,133 | ) | $ | (14,480 | ) | ||||||
|
Diluted income (loss) per common
share
(4)
:
|
||||||||||||||||
|
Income (loss) from continuing operations attributable to Viad
|
$ | 0.07 | $ | 0.26 | $ | (4.86 | ) | $ | (0.76 | ) | ||||||
|
Net (loss) income attributable to Viad
|
$ | 0.07 | $ | 0.26 | $ | (4.86 | ) | $ | (0.72 | ) | ||||||
|
Basic income (loss) per common
share
(4)
:
|
||||||||||||||||
|
Income (loss) from continuing operations attributable to Viad
|
$ | 0.07 | $ | 0.26 | $ | (4.86 | ) | $ | (0.76 | ) | ||||||
|
Net income (loss) attributable to Viad
|
$ | 0.07 | $ | 0.26 | $ | (4.86 | ) | $ | (0.72 | ) | ||||||
| (1) | Represents revenues less costs of services and products sold. |
F-42
Table of Contents
VIAD
CORP
NOTES TO
CONSOLIDATED FINANCIAL
STATEMENTS — (Continued)
| (2) | Includes gross restructuring charges of $5.0 million and reversed $814,000 of restructuring reserves in 2010 and gross restructuring charges of $15.4 million and reversed $1.3 million of restructuring reserves in 2009. | |
| (3) | Viad recorded an impairment charge of $302,000 in the fourth quarter of 2010 related to other intangible assets and property and equipment at Brewster. In the third quarter of 2009, Viad recorded impairment charges of $111.4 million primarily related to goodwill and other intangible assets of which $90.3 million and $21.1 million related to the Marketing & Events U.S. segment and the Marketing & Events International segment, respectively. During the fourth quarter of 2009, Viad recorded impairment charges of $2.7 million related to other intangible assets primarily at the Marketing & Events International segment and $2.9 million related to the write-down of a non-strategic real estate asset held for sale as of December 31, 2009 at Brewster. | |
| (4) | The sum of quarterly income per share amounts may not equal annual income per share due to rounding. |
| Note 23. | Subsequent Event |
On January 5, 2011, Viad completed the acquisition of
Grouse Mountain Lodge for $10.5 million in cash. Grouse
Mountain Lodge is a 145 room, four-season resort hotel located
in Whitefish, Montana, and will be operated by Glacier Park
within the Travel & Recreation Group segment.
F-43
Table of Contents
REPORT OF
INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
Board of Directors and Stockholders
Viad Corp
Phoenix, Arizona
We have audited the accompanying consolidated balance sheets of
Viad Corp and subsidiaries (the “Company”) as of
December 31, 2010 and 2009, and the related consolidated
statements of operations, comprehensive income, cash flows and
stockholders’ equity for each of the three years in the
period ended December 31, 2010. Our audits also included
the financial statement schedule listed in the Index at
Item 15. These consolidated financial statements and
financial statement schedule are the responsibility of the
Company’s management. Our responsibility is to express an
opinion on these consolidated financial statements and financial
statement schedule based on our audits.
We conducted our audits in accordance with the standards of the
Public Company Accounting Oversight Board (United States). Those
standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are
free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in
the financial statements. An audit also includes assessing the
accounting principles used and significant estimates made by
management, as well as evaluating the overall financial
statement presentation. We believe that our audits provide a
reasonable basis for our opinion.
In our opinion, such consolidated financial statements present
fairly, in all material respects, the financial position of the
Company as of December 31, 2010 and 2009, and the results
of its operations and its cash flows for each of the three years
in the period ended December 31, 2010, in conformity with
accounting principles generally accepted in the United States of
America. Also, in our opinion, such financial statement
schedule, when considered in relation to the basic consolidated
financial statements taken as a whole, presents fairly, in all
material respects, the information set forth therein.
We have also audited, in accordance with the standards of the
Public Company Accounting Oversight Board (United States), the
Company’s internal control over financial reporting as of
December 31, 2010, based on the criteria established in
Internal Control-Integrated Framework
issued by the
Committee of Sponsoring Organizations of the Treadway Commission
and our report dated March 4, 2011, expressed an
unqualified opinion on the Company’s internal control over
financial reporting.
/s/
Deloitte &
Touche LLP
Deloitte & Touche LLP
Phoenix, Arizona
March 4, 2011
F-44
Table of Contents
VIAD
CORP
SCHEDULE II —
VALUATION AND QUALIFYING ACCOUNTS
| Additions | Deductions | |||||||||||||||||||||||
|
Balance at
|
Charged to
|
Credited
|
||||||||||||||||||||||
|
Beginning
|
Charged to
|
Other
|
to Other
|
Balance at
|
||||||||||||||||||||
|
Description
|
of Year | Expense | Accounts | Write Offs | Accounts | End of Year | ||||||||||||||||||
| (in thousands) | ||||||||||||||||||||||||
|
Allowance for doubtful accounts:
|
||||||||||||||||||||||||
|
December 31, 2008
|
$ | 1,569 | $ | 1,655 | $ | — | $ | (668 | ) | $ | — | $ | 2,556 | |||||||||||
|
December 31, 2009
|
2,556 | 2,940 | — | (1,604 | ) | — | 3,892 | |||||||||||||||||
|
December 31, 2010
|
3,892 | 615 | — | (3,335 | ) | — | 1,172 | |||||||||||||||||
|
Deferred tax valuation allowance:
|
||||||||||||||||||||||||
|
December 31, 2008
|
$ | 325 | $ | — | $ | — | $ | (163 | ) | $ | — | $ | 162 | |||||||||||
|
December 31, 2009
|
162 | — | — | — | — | 162 | ||||||||||||||||||
|
December 31, 2010
|
162 | 411 | — | (162 | ) | — | 411 | |||||||||||||||||
F-45
Table of Contents
EXHIBIT INDEX
|
Exhibits. #
|
||||
| 3 | .A | Copy of Restated Certificate of Incorporation of Viad Corp, as amended through July 1, 2004, filed as Exhibit 3.A to Viad Corp’s Form 10-Q for the period ended June 30, 2004, is hereby incorporated by reference (SEC File No. 001-11015; SEC Film No. 04961107). | ||
| 3 | .B | Copy of Bylaws of Viad Corp, as amended through February 23, 2011, filed as Exhibit 3 to Viad Corp’s Form 8-K filed March 1, 2011, is hereby incorporated by reference. | ||
| 4 | .A1 | Copy of $75,000,000 Amended and Restated Credit Agreement (senior secured credit facility) dated as of June 15, 2006, filed as Exhibit 4 to Viad Corp’s Form 8-K filed June 19, 2006, is hereby incorporated by reference. | ||
| 4 | .A2 | Copy of Amendment No. 1 to $75,000,000 Amended and Restated Credit Agreement dated as of June 15, 2006, effective as of August 27, 2007, filed as Exhibit 99.1 to Viad Corp’s Form 8-K filed September 5, 2007, is hereby incorporated by reference. | ||
| 4 | .A3 | Copy of Amendment No. 2 to $75,000,000 Amended and Restated Credit Agreement dated as of June 15, 2006, effective as of November 20, 2009, filed as Exhibit 99.1 to Viad Corp’s Form 8-K filed November 24, 2009, is hereby incorporated by reference. | ||
| 4 | .B | Copy of Pledge and Security Agreement, Guaranty, and Subsidiary Pledge and Security Agreement filed with the $75,000,000 Credit Agreement dated as of June 30, 2004, filed as Exhibit 4.A to Viad Corp’s Form 10-Q for the period ended June 30, 2004, is hereby incorporated by reference (SEC File No. 001-11015; SEC Film No. 04961107). | ||
| 4 | .C1 | Copy of Rights Agreement dated February 28, 2002, between Viad Corp and Wells Fargo Bank Minnesota, N.A., which includes the form of Right Certificate as Exhibit A and the Summary of Rights to Purchase Preferred Shares as Exhibit B, incorporated by reference into specified registration statement on Form 8-A filed February 28, 2002 (SEC File No. 001-11015; SEC Film No. 02562458). | ||
| 4 | .C2 | Copy of Certificate of Adjusted Purchase Price or Number of Shares dated July 9, 2004, with Wells Fargo Bank, N.A., as Rights Agent, filed as Exhibit 4.2 to Viad Corp’s Form 8-A/A filed July 9, 2004, is hereby incorporated by reference (SEC File No. 001-11015; SEC Film No. 04907934). | ||
| 10 | .A1 | Copy of 2007 Viad Corp Omnibus Incentive Plan, filed as Annex B to Viad Corp’s Proxy Statement for the 2007 Annual Meeting of Shareholders, filed April 4, 2007, is hereby incorporated by reference.+ | ||
| 10 | .A2 | Copy of form of Performance-Based Restricted Stock Agreement, effective as of February 25, 2008, pursuant to the 2007 Viad Corp Omnibus Incentive Plan, filed as Exhibit 10.B to Viad Corp’s Form 8-K filed February 28, 2008, is hereby incorporated by reference.+ | ||
| 10 | .A3 | Copy of form of Restricted Stock Agreement — Executives, effective as of February 25, 2008, pursuant to the 2007 Viad Corp Omnibus Incentive Plan, filed as Exhibit 10.C to Viad Corp’s Form 8-K filed February 28, 2008, is hereby incorporated by reference.+ | ||
| 10 | .A4 | Copy of form of Restricted Stock Agreement for Outside Directors, effective as of February 25, 2008, pursuant to the 2007 Viad Corp Omnibus Incentive Plan, filed as Exhibit 10.F to Viad Corp’s Form 8-K filed February 28, 2008, is hereby incorporated by reference.+ | ||
| 10 | .A5 | Copy of form of Restricted Stock Agreement — Executives (five-year cliff), effective as of February 23, 2011, pursuant to the 2007 Viad Corp Omnibus Incentive Plan, filed as Exhibit 10.A to Viad Corp’s Form 8-K filed March 1, 2011, is hereby incorporated by reference.+ | ||
| 10 | .A6 | Copy of Performance Unit Agreement, effective as of January 1, 2008, pursuant to the 2007 Viad Corp Omnibus Incentive Plan, filed as Exhibit 10.C to Viad Corp’s Form 8-K filed December 5, 2007, is hereby incorporated by reference.+ | ||
| 10 | .A7 | Copy of form of Performance Unit Agreement, effective as of February 25, 2008, pursuant to 2007 Viad Corp Omnibus Incentive Plan, filed as Exhibit 10.E to Viad Corp’s Form 8-K filed February 28, 2008, is hereby incorporated by reference.+ | ||
| 10 | .A8 | Copy of Viad Corp Management Incentive Plan, amended as of February 26, 2008, pursuant to the 2007 Viad Corp Omnibus Incentive Plan, filed as Exhibit 10.A to Viad Corp’s Form 8-K filed February 28, 2008, is hereby incorporated by reference.+ | ||
| 10 | .A9 | Copy of form of Non-Qualified Stock Option Agreement, effective as of February 25, 2008, pursuant to the 2007 Viad Corp Omnibus Incentive Plan, filed as Exhibit 10.D to Viad Corp’s Form 8-K filed February 28, 2008, is hereby incorporated by reference.+ | ||
| 10 | .A10 | Copy of form of Non-Qualified Stock Option Agreement, effective as of February 25, 2010, pursuant to the 2007 Viad Corp Omnibus Incentive Plan, filed as Exhibit 10.B to Viad Corp’s Form 8-K filed February 26, 2010, is hereby incorporated by reference.+ | ||
| 10 | .A11 | Copy of form of Incentive Stock Option Agreement, effective as of February 25, 2010, pursuant to the 2007 Viad Corp Omnibus Incentive Plan, filed as Exhibit 10.A to Viad Corp’s Form 8-K filed February 26, 2010, is hereby incorporated by reference.+ | ||
Table of Contents
|
Exhibits. #
|
||||
| 10 | .A12 | Copy of form of Restricted Stock Units Agreement, effective as of February 24, 2009, pursuant to the 2007 Viad Corp Omnibus Incentive Plan, filed as Exhibit 10.A to Viad Corp’s Form 8-K filed February 26, 2009, is hereby incorporated by reference.+ | ||
| 10 | .A13 | Copy of form of Performance-Based Restricted Stock Units Agreement, effective as of February 24, 2009, pursuant to the 2007 Viad Corp Omnibus Incentive Plan, filed as Exhibit 10.B to Viad Corp’s Form 8-K filed February 26, 2009, is hereby incorporated by reference.+ | ||
| 10 | .B1 | Copy of 1997 Viad Corp Omnibus Incentive Plan, as amended through February 23, 2006, filed as Exhibit 10.A to Viad Corp’s 8-K filed February 28, 2006, is hereby incorporated by reference.+ | ||
| 10 | .B3 | Copy of form of Performance-Based Restricted Stock Agreement for Executives, pursuant to the 1997 Viad Corp Omnibus Incentive Plan, effective as of February 21, 2007, filed as Exhibit 10.B to Viad Corp’s Form 8-K filed February 27, 2007, is hereby incorporated by reference.+ | ||
| 10 | .B5 | Copy of form of Restricted Stock Agreement for Executives, pursuant to the 1997 Viad Corp Omnibus Incentive Plan, effective as of February 21, 2007, filed as Exhibit 10.A to Viad Corp’s Form 8-K filed February 27, 2007, is hereby incorporated by reference.+ | ||
| 10 | .B6 | Copy of form of Restricted Stock Agreement for Outside Directors, pursuant to the 1997 Viad Corp Omnibus Incentive Plan, effective as of February 21, 2007, filed as Exhibit 10.C to Viad Corp’s Form 8-K filed February 27, 2007, is hereby incorporated by reference.+ | ||
| 10 | .B7 | Copy of Performance Unit Incentive Plan, amended March 29, 2005, pursuant to the 1997 Viad Corp Omnibus Incentive Plan, filed as Exhibit 10.C to Viad Corp’s Form 8-K filed April 5, 2005, is hereby incorporated by reference.+ | ||
| 10 | .B10 | Copy of Viad Corp Management Incentive Plan, as amended March 29, 2005, pursuant to the 1997 Viad Corp Omnibus Incentive Plan, filed as Exhibit 10.A to Viad Corp’s Form 8-K filed April 5, 2005, is hereby incorporated by reference.+ | ||
| 10 | .B11 | Copy of Amendment to Viad Corp Management Incentive Plan, as amended May 15, 2007, pursuant to the 1997 Viad Corp Omnibus Incentive Plan, filed as Exhibit 10.A to Viad Corp’s Form 8-K filed May 21, 2007, is hereby incorporated by reference.+ | ||
| 10 | .B12 | Copy of form of Incentive Stock Option Agreement, as amended through February 19, 2004, pursuant to the 1997 Viad Corp Omnibus Incentive Plan, filed as Exhibit 10.C1 to Viad Corp’s Form 10-Q for the period ended September 30, 2004, is hereby incorporated by reference.+ | ||
| 10 | .B13 | Copy of form of Non-Qualified Stock Option Agreement, as amended through August 13, 2004, pursuant to the 1997 Viad Corp Omnibus Incentive Plan, filed as Exhibit 10.C2 to Viad Corp’s Form 10-Q for the period ended September 30, 2004, is hereby incorporated by reference.+ | ||
| 10 | .C | Copy of Viad Corp Deferred Compensation Plan (Executive) Amended and Restated as of August 13, 2004, filed as Exhibit 10.A to Viad Corp’s Form 10-Q for the period ended September 30, 2004, is hereby incorporated by reference (SEC File No. 001-11015; SEC Film No. 041123501).+ | ||
| 10 | .C1 | Copy of forms of Viad Corp Executive Severance Plans (Tier I and II), amended and restated for Code Section 409A as of January 1, 2005, filed as Exhibit 10.B to Viad Corp’s Form 8-K filed August 29, 2007, is hereby incorporated by reference.+ | ||
| 10 | .C2 | Copy of Executive Officer Pay Continuation Policy adopted February 7, 2007, filed as Exhibit 10.A to Viad Corp’s Form 8-K filed February 13, 2007, is hereby incorporated by reference.+ | ||
| 10 | .D | Copy of Employment Agreement between Viad Corp and Paul B. Dykstra dated as of May 15, 2007, filed as Exhibit 10.B to Viad Corp’s Form 8-K filed May 21, 2007, is hereby incorporated by reference.+ | ||
| 10 | .E | Copy of Viad Corp Supplemental TRIM Plan, as amended and restated effective January 1, 2005 for Code Section 409A, filed as Exhibit 10.E to Viad Corp’s Form 8-K filed August 29, 2007, is hereby incorporated by reference.+ | ||
| 10 | .F | Copy of Viad Corp Supplemental Pension Plan, amended and restated as of January 1, 2005 for Code Section 409A, filed as Exhibit 10.A to Viad Corp’s Form 8-K filed August 29, 2007, is hereby incorporated by reference.+ | ||
| 10 | .G1 | Summary of Compensation Program of Non-Employee Directors of Viad Corp, as amended November 29, 2007, filed as Exhibit 10.A to Viad Corp’s Form 8-K filed December 5, 2007, is hereby incorporated by reference.+ | ||
| 10 | .G2 | Description of Viad Corp Director’s Matching Gift Program, filed as Exhibit 10.Q to Viad Corp’s 1999 Form 10-K, is hereby incorporated by reference (SEC File No. 001-11015; SEC Film No. 572329).+ | ||
| 10 | .H | Copy of form of Indemnification Agreement between Viad Corp and Directors of Viad Corp, as approved by Viad Corp stockholders on October 16, 1987, as updated to reflect revised company name and gender-neutral references only, and filed as Exhibit 10.I to Viad Corp’s Form 10-K filed February 27, 2009, is hereby incorporated by reference.+ | ||
| 10 | .I | Copy of Retirement Plan for Management Employees of Brewster Inc., as amended and restated effective January 1, 2010, and filed as Exhibit 10.J to Viad Corp’s Form 10-K filed March 8, 2010, is hereby incorporated by reference.+ | ||
| 14 | Copy of Code of Ethics of Viad Corp adopted May 13, 2003, filed as Exhibit 14 to Viad Corp’s 2003 Form 10-K, is hereby incorporated by reference (SEC File No. 001-11015; SEC Film No. 04663620). | |||
Table of Contents
|
Exhibits. #
|
||||
| 21 | List of Subsidiaries of Viad Corp.* | |||
| 23 | Consent of Independent Registered Public Accounting Firm to the incorporation by reference into specified registration statements on Form S-3 or on Form S-8 of their report contained in this Annual Report.* | |||
| 24 | Power of Attorney signed by Directors of Viad Corp.* | |||
| 31 | .1 | Exhibit of Certification of Chief Executive Officer of Viad Corp pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.#* | ||
| 31 | .2 | Exhibit of Certification of Chief Financial Officer of Viad Corp pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.#* | ||
| 32 | .1 | Additional Exhibit of Certification of Chief Executive Officer of Viad Corp pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.#* | ||
| 32 | .2 | Additional Exhibit of Certification of Chief Financial Officer of Viad Corp pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.#* | ||
| * | Filed herewith. | |
| + | Management contract or compensation plan or arrangement. | |
| # | A signed original of this written statement has been provided to Viad Corp and will be retained by Viad Corp and furnished to the Securities and Exchange Commission upon request. |
Documents incorporated by reference can be read and copied at
the SEC’s public reference section, located in
Room 1580, 100 F. Street, N.E., Washington, DC 20549, and
on the SEC’s Internet site at www.sec.gov.
TABLE OF CONTENTS
Part IItem 1. BusinessItem 1A. Risk FactorsItem 1B. Unresolved Staff CommentsItem 2. PropertiesItem 3. Legal ProceedingsPart IIItem 5. Market For Registrant S Common Equity, Related Stockholder Matters and Issuer Purchases Of Equity SecuritiesItem 6. Selected Financial DataItem 7. Management S Discussion and Analysis Of Financial Condition and Results Of OperationsItem 7A. Quantitative and Qualitative Disclosures About Market RiskItem 8. Financial Statements and Supplementary DataItem 9. Changes in and Disagreements with Accountants on Accounting and Financial DisclosureItem 9A. Controls and ProceduresItem 9B. Other InformationPart IIIItem 10. Directors, Executive Officers and Corporate GovernanceItem 11. Executive CompensationItem 12. Security Ownership Of Certain Beneficial Owners and Management and Related Stockholder MattersItem 13. Certain Relationships and Related Transactions, and Director IndependenceItem 14. Principal Accounting Fees and ServicesPart IVItem 15. Exhibits, Financial Statement SchedulesNote 1. Summary Of Significant Accounting PoliciesNote 2. Share-based CompensationNote 3. Impairment LossesNote 4. Acquisition Of BusinessesNote 5. InventoriesNote 6. Property and EquipmentNote 7. Goodwill and Other Intangible AssetsNote 8. Accrued Liabilities and OtherNote 9. DebtNote 10. Fair Value MeasurementsNote 11. Income Per ShareNote 12. Employee Stock Ownership PlanNote 13. Preferred Stock Purchase RightsNote 14. Income TaxesNote 15. Pension and Postretirement BenefitsPart D SubsidyNote 16. Restructuring Charges and RecoveriesNote 17. Leases and OtherNote 18. Litigation, Claims, Contingencies and OtherNote 19. Segment InformationNote 20. Common Stock RepurchasesNote 21. Discontinued OperationsNote 22. Condensed Consolidated Quarterly Results (unaudited)Note 23. Subsequent Event