Business context and reporting period
The supplied filing is Viad Corp’s unaudited Form 10-Q for the quarter ended September 30, 2016; this does not match the request metadata naming Pursuit Attractions & Hospitality, Inc. Viad operates the Marketing & Events Group and the Travel & Recreation Group, which includes hospitality, attractions, package tours, and transportation businesses. Results are seasonal: Travel & Recreation activity peaks in summer, while event results vary with show timing and rotation.
Financial performance and liquidity
| Metric | Q3 2016 | Q3 2015 | Nine months 2016 | Nine months 2015 |
|---|---|---|---|---|
| Revenue | $382.5 million | $255.9 million | $948.6 million | $837.4 million |
| Operating income | $56.1 million | $13.2 million | $79.3 million | $43.6 million |
| Net income attributable to Viad | $33.8 million | $7.2 million | $46.3 million | $27.6 million |
| Diluted earnings per share | $1.67 | $0.36 | $2.29 | $1.37 |
| Adjusted EBITDA | $65.5 million | $21.0 million | $105.5 million | $68.6 million |
Q3 operating margin was approximately 14.7% and net margin approximately 8.8%; nine-month operating and net margins were approximately 8.4% and 4.9%, respectively. Adjusted EBITDA and segment operating income are non-GAAP measures.
- Nine-month operating cash flow was $115.4 million, up from $76.3 million. Capital expenditures were $32.6 million, versus $19.0 million.
- Investing cash outflow was $177.5 million, including $145.7 million for acquisitions. Financing cash inflow was $59.0 million, primarily reflecting borrowings.
- Cash was $52.7 million at September 30, 2016, compared with $56.5 million at year-end 2015. Current assets were $252.2 million and current liabilities $357.5 million.
- Total debt and capital leases were $194.5 million, versus $127.4 million at year-end. The balance included $96.0 million drawn on the revolver; remaining credit-facility capacity was $77.7 million. The company reported covenant compliance, with leverage of 1.61x against a 3.50x maximum.
- Quarterly and nine-month dividends declared were $0.10 and $0.30 per share, respectively.
Material changes versus prior periods
- Q3 revenue rose 49.4%; nine-month revenue rose 13.3%. Management attributed growth to favorable event/show rotation, acquisitions, same-show growth, and strong park visitation, partly offset by foreign-exchange effects and, year to date, the Banff Gondola renovation closure and transportation downsizing.
- Q3 segment operating income rose to $59.4 million from $14.6 million; nine-month segment operating income increased 76.1% to $87.6 million. The reported improvement reflects higher revenue and operating leverage, as well as acquisitions.
- The company acquired Maligne Lake Tours in January, CATC in March, and ON Services in August 2016. The filing attributes $42.2 million of nine-month revenue to these acquisitions; ON Services contributed $7.8 million in Q3 revenue. ON Services’ preliminary purchase allocation included $36.8 million of goodwill and remains subject to finalization.
- Foreign exchange reduced revenue by approximately $8.0 million in Q3 and $16.4 million year to date. The filing identifies the weaker British pound as the primary driver.
- Restructuring charges increased to $3.7 million for the first nine months from $1.5 million, primarily for Marketing & Events staff reductions and facility consolidations. Q3 also included a $0.1 million impairment charge.
Outlook, risks, and unusual items
- For full-year 2016, management expected Marketing & Events revenue to increase by a high-single-digit rate from 2015, driven in part by approximately $50 million of positive show rotation and continued same-show growth. ON Services was expected to contribute $20–$22 million of revenue and approximately $3.5–$4.5 million of Adjusted Segment EBITDA.
- Management expected a roughly $25 million adverse foreign-exchange effect on Marketing & Events revenue and a $1.5 million adverse effect on segment operating income. It forecast Travel & Recreation revenue growth of 35%–37%, including $34–$35 million of revenue and approximately $12–$13 million of Adjusted Segment EBITDA from Maligne Lake Tours and CATC.
- Travel & Recreation outlook also reflected a roughly $3 million revenue reduction from transportation downsizing and an approximately $1 million adverse foreign-exchange effect on revenue. Management cited strong visitation and revenue-management initiatives.
- Management stated existing liquidity should fund operations and capital commitments for at least 12 months. Approximately $45.7 million of cash was held outside the U.S.; repatriation of certain permanently reinvested earnings could incur about $2.5 million of incremental tax.
- Risk exposures include event/show timing and demand, tourism and discretionary spending, foreign exchange, interest rates, labor relations, and seasonal operations. Viad did not hedge translation exposure and had no foreign-currency forward contracts outstanding at quarter-end.
- Contingencies include $3.9 million of environmental remediation liabilities related to previously sold operations, $9.9 million of maximum potential payments under lease guarantees, and possible multi-employer pension-plan obligations that management said could not be ascertained. The company also disclosed ongoing Chicago Teamsters pension-related discussions and potential labor disruption.
- Management said pending litigation and environmental matters were not expected to materially affect the company after considering recorded amounts and insurance. The filing reported disclosure controls as effective and no material quarterly change in internal control over financial reporting.
Important facts for investors to verify
- Confirm the issuer: the filing text identifies Viad Corp, not Pursuit Attractions & Hospitality, Inc.
- Assess how much reported growth and earnings depended on acquisitions and unusually favorable show rotation, versus organic growth and sustainable margins.
- Track integration and final purchase accounting for ON Services, including the contingent earnout, goodwill, and expected contribution to results.
- Review seasonal working-capital needs, current liabilities, revolver availability, debt classification, and covenant headroom.
- Monitor British pound and Canadian dollar exposure, Banff Gondola renovation impacts, transportation downsizing, and labor/pension negotiations.
- Compare actual full-year results with management’s 2016 outlook; the filing provides expectations rather than a guarantee of performance.