Viad Corp. 10-Q Summary — Quarter Ended June 30, 2014
Entity note: The supplied filing is for Viad Corp., not Pursuit Attractions & Hospitality, Inc. The summary below reflects the registrant named in the filing.
Business context and reporting period
Viad operates Marketing & Events businesses in the U.S. and internationally, and a Travel & Recreation Group serving destinations including the Canadian Rockies, Glacier National Park and Denali. The report covers the second quarter and six months ended June 30, 2014. Results are unaudited. Travel & Recreation is highly seasonal, with most of its annual revenue earned in the second and third quarters.
Financial performance and liquidity
| Metric | Q2 2014 | Q2 2013 | Six months 2014 | Six months 2013 |
|---|---|---|---|---|
| Revenue | $256.4 million | $246.2 million | $542.0 million | $531.3 million |
| Segment operating income | $14.1 million | $11.5 million | $27.5 million | $25.1 million |
| Income from continuing operations | $7.8 million | $6.4 million | $17.0 million | $14.7 million |
| Net income attributable to Viad | $6.7 million | $6.3 million | $28.6 million | $14.3 million |
| Diluted EPS attributable to Viad | $0.33 | $0.31 | $1.41 | $0.71 |
Q2 revenue increased 4.1%; segment operating income rose 23.4%. The approximate consolidated operating margin was 4.7%, compared with 4.2% a year earlier. Q2 growth reflected U.S. event business and stronger Travel & Recreation attractions; International event revenue and income were pressured by unfavorable show rotation.
Six-month operating cash flow was $28.2 million, versus cash used of $7.7 million in 2013. Capital expenditures were $13.4 million, leaving operating cash flow less capital expenditures of approximately $14.8 million. Investing cash flow included $25.0 million received for Glacier Park’s possessory interest. Cash was $40.2 million at June 30, down from $45.8 million at year-end. Current assets were $211.3 million and current liabilities $168.4 million.
Total debt and capital lease obligations were $11.4 million, including $10.0 million drawn on the revolving facility; $118.7 million of facility capacity remained at June 30. Viad reported compliance with its debt covenants. In July, it borrowed an additional $20.0 million for the West Glacier acquisition and other operating needs. Management said available liquidity was adequate for at least the next 12 months.
Material changes versus the prior period
- Marketing & Events U.S. revenue increased 8.6% in Q2, supported by 4.9% base same-show growth, new business and positive show rotation. International revenue decreased 7.6%, principally due to negative show rotation associated with the biennial Paris Airshow.
- Travel & Recreation revenue rose 13.0% in Q2; segment operating income increased to $5.1 million from $3.3 million. Attractions and package tours drove growth, including the new Glacier Skywalk.
- The Glacier National Park concession contract expired at the end of 2013. Its operations are reported as discontinued; the $25.0 million possessory-interest payment produced a $21.6 million pretax gain in the first half of 2014. This gain materially contributed to six-month net income.
- Q2 included $1.4 million of restructuring charges and a $0.9 million impairment charge for internally developed software. Corporate activities expense increased to $2.0 million from $1.2 million.
- The company paid a $1.50-per-share special dividend in February. Six-month dividends paid were $34.5 million, and open-market share repurchases totaled $10.6 million.
Outlook, commentary and risks
- For full-year 2014, management expected U.S. base same-show revenue to grow at a low- to mid-single-digit rate and show rotation to add approximately $60 million to Marketing & Events revenue. Foreign exchange was expected to add about $8 million to that group’s revenue, with no meaningful operating-income impact.
- Management expected foreign exchange to reduce Travel & Recreation full-year revenue by about $5 million and operating income by about $1 million. Five acquisitions completed since early 2011 were expected to generate approximately $30 million of 2014 revenue, at an average Adjusted EBITDA margin above 30%.
- On July 1, Viad acquired West Glacier Motel & Cabins and Apgar Village Lodge for $16.0 million cash, plus approximately $1.0 million for inventory, subject to adjustments. The acquisition expands the company’s Glacier-area lodging, food, beverage and retail operations.
- Key operating risks include weather and visitor volumes, event timing and show rotation, consumer discretionary spending, foreign exchange exposure, and labor relations. Discussions continued over pension-related terms in Chicago Teamsters Local 727 agreements; potential labor disruptions could affect Marketing & Events results.
- Viad disclosed $4.9 million of environmental remediation liabilities related to previously sold operations, uncertain potential obligations related to underfunded multi-employer pension plans, and up to $10.0 million of guarantees for subsidiary facility leases. Management did not expect litigation or environmental matters, after recorded provisions and insurance, to materially affect results.
- The six-month effective tax rate was 17.0%, compared with 31.0% in 2013, reflecting projected use of foreign tax credits and other deferred-tax adjustments. Management noted that deferred-tax-asset recoverability depends on future taxable income.
Important facts for investors to verify
- Confirm the registrant identity: the filing is Viad Corp., despite the request metadata naming Pursuit Attractions & Hospitality, Inc.
- Check the filing’s Q2 EPS disclosures: the financial statements report diluted continuing-operations EPS of $0.39 and total EPS of $0.33, while the MD&A highlights section describes $0.33 as continuing-operations EPS.
- Separate recurring operating performance from the first-half discontinued-operations gain related to the expired Glacier concession, and review the associated removal of prior-period results.
- Assess the post-quarter West Glacier acquisition, subsequent $20 million borrowing, and the seasonal cash and working-capital profile.
- Monitor event rotation, U.S. labor-cost productivity, Chicago Teamsters negotiations, Canadian-dollar exposure, weather impacts, and the uncertain multi-employer pension exposure.