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, 2013—not a filing under the name Pursuit Attractions & Hospitality, Inc. Viad reported Marketing & Events U.S., Marketing & Events International, and Travel & Recreation operations. Figures below are in U.S. dollars; financial statement amounts are in millions unless noted.
Financial performance and liquidity
| Metric | Q2 2013 | Q2 2012 | Six months 2013 | Six months 2012 |
|---|---|---|---|---|
| Revenue | $249.3 | $246.5 | $534.5 | $515.2 |
| Income before tax | $8.8 | $7.5 | $19.9 | $8.8 |
| Net income attributable to Viad | $6.3 | $6.1 | $14.3 | $7.1 |
| Diluted earnings per share | $0.31 | $0.30 | $0.71 | $0.35 |
| Adjusted EBITDA, non-GAAP | $16.6 | $16.0 | $35.3 | $24.9 |
Q2 revenue rose 1.2%; six-month revenue rose 3.7%. Approximate consolidated net margin was 2.4% in Q2 2013 and 2.7% in Q2 2012; for the first six months, approximately 2.6% and 1.3%, respectively, based on net income attributable to Viad divided by revenue. The six-month effective tax rate was 30.4%, versus 31.6%.
Q2 segment results: Marketing & Events U.S. revenue was $155.5 million and operating income $2.6 million, down from $165.5 million and $5.6 million. International revenue was $68.6 million and operating income $5.6 million, up from $54.7 million and $2.3 million. Travel & Recreation revenue was $29.5 million and operating income $2.7 million, broadly level with the prior-year quarter.
Cash and equivalents were $83.1 million at June 30, down from $114.2 million at December 31, 2012. Six-month operating cash flow was negative $7.7 million, compared with positive $17.0 million a year earlier; capital expenditures were $15.7 million. Total debt consisted of capital lease obligations and was $1.9 million. The $130 million revolving facility had $128.2 million available, including $1.8 million in letters of credit; no revolver borrowing was reported. The company reported covenant compliance and a $50 million minimum-cash requirement. Total current assets were $245.6 million versus current liabilities of $149.7 million.
Material changes and management commentary
- Q2 U.S. Marketing & Events revenue declined 6.0%, principally because of approximately $6 million in negative show rotation and fewer short-term bookings than in a strong prior-year quarter; base same-show revenue increased 2.6%. For the six months, U.S. segment operating income improved to $16.7 million from $12.8 million.
- International Marketing & Events growth reflected positive show rotation; management cited approximately $15 million of positive rotation in Q2 and $18 million for the six-month period. Foreign exchange reduced Q2 revenue by $2.1 million and segment operating results by $226,000; the six-month impacts were $3.6 million and $431,000.
- Alberta flooding in June disrupted access to Brewster properties and attractions. Management estimated a roughly $1 million adverse Q2 revenue impact and said Q3 could be similarly affected; road access to Banff was restored before the Canada Day holiday.
- Six-month restructuring charges were $1.5 million, down from $2.9 million. Charges mainly related to facility consolidations and position reductions in Marketing & Events.
- Six-month comprehensive income attributable to Viad was $3.0 million, including an $11.4 million foreign-currency translation loss in other comprehensive income.
Outlook, risks and unusual items
- Management expected 2013 U.S. base same-show revenue to increase at a low-single-digit rate, with show rotation reducing full-year revenue by approximately $55 million. It expected a full-year Marketing & Events operating margin of approximately 2.5% and an approximately $9 million adverse foreign-exchange impact on group revenue.
- Management expected foreign exchange to reduce 2013 Travel & Recreation revenue by approximately $4 million. It also estimated that four acquisitions made since early 2011 would generate approximately $25 million of 2013 revenue at an average Adjusted EBITDA margin above 30%, with near-8% growth in 2013 and mid-single-digit annual growth from 2013 to 2015.
- Glacier Park’s National Park Service concession contract was due to expire December 31, 2013; the company had bid for a new 16-year contract beginning in 2014. Losing the award could affect a business that generated about 49% of Glacier Park’s 2012 revenue. Viad said possessory-interest compensation would be $25 million, plus an estimated $5–$6 million for personal property, if another operator were selected.
- Management planned to sell its New Jersey facility and land for approximately $12.8 million in Q3 2013, with an estimated pretax gain of $4.8 million, partly offset by Q4 relocation costs. Separately, a Utah land sale completed in July was expected to yield approximately $1.6 million net of estimated selling costs and be recorded in discontinued operations.
- Other risks include foreign-exchange movements, event-industry and consumer-demand conditions, labor negotiations, tourism disruption, underfunded multi-employer pension plans, uncertain tax-asset recoverability, litigation and environmental matters. Environmental remediation liabilities were $5.2 million; maximum potential payments under lease guarantees were $17.1 million. Potential additional multi-employer pension funding was not ascertainable.
- Management said existing liquidity should fund operations and capital commitments for at least 12 months. The Glacier Skywalk project was expected to require approximately $12–$14 million in 2013 to complete, funded from operating cash.
Most important facts to verify
- Confirm the issuer identity: the filing and financial statements identify Viad Corp, despite the request metadata naming Pursuit Attractions & Hospitality, Inc.
- Review the cash-flow working-capital movements underlying the $7.7 million operating cash outflow and the decline in cash.
- Track the Glacier National Park concession award, including the potential revenue implications and stated compensation if Viad loses the contract.
- Assess actual versus forecast impacts of Alberta flooding, foreign exchange, show rotation, the New Jersey facility sale, and Glacier Skywalk spending.
- Monitor credit-facility covenant headroom, the minimum-cash requirement, contingent obligations, and the recoverability of deferred tax assets.