Business context and reporting period
The supplied filing is Viad Corp’s unaudited Form 10-Q for the quarter and nine months ended September 30, 2013; this differs from the request metadata naming Pursuit Attractions & Hospitality, Inc. Viad operated Marketing & Events businesses in the U.S. and internationally, and a Travel & Recreation Group. Amounts below are in U.S. dollars; financial statement amounts are in millions unless stated otherwise.
Key financial results and liquidity
| Metric | Q3 2013 | Q3 2012 | Nine months 2013 | Nine months 2012 |
|---|---|---|---|---|
| Revenue | $236.5 | $307.5 | $771.0 | $822.7 |
| Income before tax | $16.3 | $31.4 | $36.2 | $40.2 |
| Net income attributable to Viad | $11.9 | $20.0 | $26.2 | $27.1 |
| Diluted EPS | $0.58 | $0.99 | $1.29 | $1.34 |
| Adjusted EBITDA (non-GAAP) | $28.5 | $39.2 | $63.9 | $64.1 |
- Revenue declined 23.1% in Q3 and 6.3% year to date. Viad attributed the Q3 decrease primarily to negative show rotation at Marketing & Events, including the absence of London Olympics work present in 2012; Travel & Recreation revenue grew.
- Q3 net income attributable to Viad fell about 41%; nine-month net income fell about 3%. Q3 results included $1.0 million of discontinued-operations income from a land sale.
- For the first nine months, operating cash flow was $27.3 million versus $68.8 million in 2012, with the decline attributed primarily to working-capital changes. Capital expenditures were $26.9 million; investing cash outflow was $12.8 million.
- At September 30, cash was $120.1 million, current assets $272.9 million, and current liabilities $158.2 million. Total debt was $1.7 million, consisting of capital leases; $128.2 million of the revolving facility remained available, after $1.8 million of letters of credit. The company reported compliance with its credit covenants.
- Viad declared a subsequent special dividend of $2.50 per share, approximately $50.8 million, payable November 14, 2013. Management also expected to declare another $1.50-per-share special dividend, approximately $30.5 million, payable in January 2014.
Material changes and segment performance
- Marketing & Events U.S.: Q3 revenue decreased 28.4% to $120.5 million and segment operating loss widened to $3.7 million. Negative show rotation reduced revenue by approximately $57 million; base same-show revenue grew 5.2%. Nine-month revenue was $494.4 million, down from $540.7 million, while segment operating income increased to $13.0 million from $12.2 million.
- Marketing & Events International: Q3 revenue declined 40.5% to $40.3 million, and the segment moved from $3.4 million operating income to a $4.2 million loss. The comparison reflected approximately $13 million of negative show rotation and approximately $16 million of London Olympics-related revenue in Q3 2012.
- Travel & Recreation: Q3 revenue increased 3.7% to $80.0 million and segment operating income rose to $32.5 million from $31.3 million. Nine-month revenue increased 4.0% to $117.9 million and operating income to $29.5 million from $28.3 million. Alberta flooding reduced estimated revenue by about $1 million in Q3 and about $2 million across Q2 and Q3.
- Q3 included a $4.5 million non-cash goodwill impairment at Glacier Park and $952,000 of other asset impairments. Viad also recorded a $4.8 million gain on the sale of a Marketing & Events facility for $12.7 million net proceeds. The preliminary Glacier Park impairment assessment could be adjusted in Q4.
Outlook, risks and contingencies
- Viad lost the U.S. National Park Service concession contract for Glacier National Park after December 31, 2013. The concession generated approximately 49% of Glacier Park’s 2012 revenue. Management anticipated a $3–$4 million reduction in Glacier Park segment operating income in 2014. Viad expected to receive $25 million for its possessory interest and an estimated $5 million for personal property; the filing says the possessory-interest proceeds will be recorded when received.
- Management expected 2013 Marketing & Events U.S. base same-show revenue growth at a low-single-digit rate, with show rotation reducing full-year revenue by approximately $50 million. It forecast a full-year Marketing & Events operating margin of approximately 2.5% and an approximately $5 million unfavorable foreign-exchange revenue effect for that group. These are management expectations, not guarantees.
- Management expected foreign-exchange movements to reduce Travel & Recreation full-year 2013 revenue by approximately $2 million. The Glacier Skywalk project was expected to generate approximately $5 million of revenue and a 50% operating-income margin in 2014; 2013 project spending was forecast at approximately $12–$14 million.
- Foreign currency movements reduced nine-month revenue by an estimated $6.0 million and segment operating income by $1.1 million versus 2012. Viad said it did not hedge the translation exposure.
- Other disclosed exposures include $15.5 million of maximum potential payments under subsidiary lease guarantees; $5.1 million of environmental remediation liabilities from previously sold operations; and uncertain additional funding obligations for underfunded multi-employer pension plans, which the company said were not ascertainable.
- Management believed available liquidity would fund operations and capital commitments for at least 12 months. However, the announced special dividends are substantial relative to operating cash generation. Cash held outside the U.S. was $52.1 million; repatriating all Canadian cash balances would, the company estimated, incur approximately $1.2 million of incremental tax.
Important facts for investors to verify
- Confirm the issuer identity: this filing is for Viad Corp, not the company named in the request metadata.
- Track the Glacier Park concession transition, receipt and accounting of the expected $25 million and estimated $5 million payments, and any further impairment assessment.
- Verify actual results against management’s show-rotation, margin, foreign-exchange and Glacier Skywalk expectations.
- Assess cash flow and liquidity after payment of the special dividends, planned capital spending, and any changes in working capital.
- Review the full filing and subsequent disclosures for developments in litigation, environmental matters, pension obligations, tax-asset recoverability, and lease guarantees.