Business context and reporting period
The supplied filing is Viad Corp’s unaudited Form 10-Q for the quarter and six months ended June 30, 2016. This differs from the request metadata naming Pursuit Attractions & Hospitality, Inc.; the filing identifies Viad Corp as the registrant. Viad operates Marketing & Events (U.S. and International) and Travel & Recreation businesses.
Financial performance
Amounts below are in millions of dollars unless noted.
| Metric | Q2 2016 | Q2 2015 | Six months 2016 | Six months 2015 |
|---|---|---|---|---|
| Revenue | $324.7 | $317.0 | $566.1 | $581.4 |
| Operating income | $31.3 | $34.3 | $23.1 | $30.4 |
| Income from continuing operations | $19.8 | $22.2 | $12.8 | $20.2 |
| Net income attributable to Viad | $19.5 | $22.4 | $12.5 | $20.3 |
| Diluted EPS | $0.96 | $1.12 | $0.62 | $1.01 |
| Operating margin, calculated | 9.6% | 10.8% | 4.1% | 5.2% |
- Six-month operating cash flow was $54.4 million, compared with $38.0 million a year earlier. The increase primarily reflected working-capital changes, including higher customer deposits and accounts payable; receivables and inventory used cash.
- Investing cash outflow was $77.4 million, including $57.8 million paid net for acquisitions and $20.6 million of capital expenditures. Financing cash outflow was $2.1 million. Cash declined to $31.2 million from $56.5 million at year-end 2015.
- At June 30, total debt and capital lease obligations were $131.0 million, including $47.6 million current; the weighted-average borrowing rate was 2.5%. The company reported $145.7 million of remaining credit-facility capacity and compliance with its covenants.
- Current assets were $219.9 million and current liabilities $273.2 million. Management said available liquidity was sufficient for operations and capital commitments for at least 12 months.
- Dividends declared were $0.10 per share in Q2 and $0.20 for the six-month period.
Material changes versus prior comparable periods
- Q2 revenue rose 2.4%, but six-month revenue declined 2.6%. Q2 growth included $10.9 million from acquisitions and 2.6% base same-show growth; negative show rotation and currency effects partly offset the increase. For the first half, negative show rotation, unfavorable foreign exchange, and Banff Gondola renovation closures weighed on revenue.
- Six-month segment operating income fell 19.9%. Marketing & Events International was the principal weakness: first-half revenue declined 16.0% as reported (11.3% organically), and segment operating income fell 64.6%. U.S. segment operating income increased 8.1% for the half.
- Travel & Recreation first-half revenue increased 20.5% as reported, substantially reflecting the 2016 acquisitions; organic revenue declined 5.1%. First-half segment operating income fell 65.2%, primarily due to the Banff Gondola closure.
- Viad acquired Maligne Lake Tours in January for approximately $15.0 million and CATC in March for $45.0 million. Together, the acquisitions contributed $10.9 million of Q2 revenue. CATC’s purchase allocation showed no goodwill; Maligne generated $1.4 million of goodwill. Purchase accounting remained subject to finalization.
Outlook, commentary and risks
- For 2016, management expected Marketing & Events revenue to increase at a mid- to high-single-digit rate versus 2015, supported by approximately $50 million of positive show rotation, new business and same-show growth. It anticipated foreign-exchange headwinds of about $24 million to revenue and $1.5 million to segment operating income, and mid-single-digit U.S. base same-show revenue growth.
- Management expected Travel & Recreation revenue to increase 30%–32% versus 2015. Maligne and CATC were expected to contribute $31–$33 million of revenue and approximately $10–$12 million of Adjusted Segment EBITDA. Streamlining package tours and transportation was expected to reduce revenue by about $5 million; Banff Gondola renovations were expected to reduce revenue by about $1 million.
- Seasonality is significant: Travel & Recreation peaks in summer, and 87% of its 2015 revenue was earned in the second and third quarters. Event revenue also varies with show timing and rotation. Interim results may not indicate full-year results.
- Risks include foreign-exchange exposure (the company did not hedge translation exposure), consumer demand, event timing, labor relations and union negotiations, underfunded multi-employer pension plans, and acquisition integration. The company had $4.3 million of environmental remediation liabilities for previously sold operations, and guarantees on leased facilities with maximum potential payments of $9.0 million. Management did not expect litigation or environmental matters, after reserves and insurance, to materially affect results.
- Restructuring charges were $2.0 million in the first half; related liabilities were $2.6 million at June 30. Discontinued operations recorded a $0.6 million first-half loss, primarily from reserve adjustments and legal fees related to previously sold businesses.
Important facts for investors to verify
- Confirm the issuer identity: the supplied filing is for Viad Corp, notwithstanding the Pursuit Attractions & Hospitality metadata.
- Track International Marketing & Events performance, show rotation, and currency impacts against management’s full-year outlook.
- Assess whether the acquisitions deliver the forecast revenue and Adjusted Segment EBITDA, and review final purchase-accounting allocations and integration progress.
- Monitor seasonal liquidity, working-capital movements, debt capacity and covenant headroom, as well as Banff Gondola renovation impacts.
- Review labor negotiations, multi-employer pension exposure, environmental and discontinued-operation liabilities, and other contingencies as new information becomes available.