Business context and reporting period
Issuer discrepancy: The supplied filing is Viad Corp’s Form 10-K, not a filing for Pursuit Attractions & Hospitality, Inc. This summary therefore covers Viad Corp. The filing reports the fiscal year ended December 31, 2013; it is not a standalone fourth-quarter filing, though fourth-quarter results are included.
Viad operates Marketing & Events services (about 87% of 2013 consolidated revenue) and Travel & Recreation services (about 13%). Its reportable segments are Marketing & Events U.S., Marketing & Events International, and Travel & Recreation Group.
Financial performance
| Metric | FY 2013 | FY 2012 |
|---|---|---|
| Revenue | $972.8 million | $1,025.2 million |
| Income from continuing operations | $20.6 million | $6.0 million |
| Net income attributable to Viad | $21.6 million | $5.9 million |
| Diluted EPS | $1.06 | $0.29 |
| Adjusted EBITDA (non-GAAP) | $62.8 million | $58.2 million |
| Operating cash flow | $6.1 million | $69.2 million |
| Capital expenditures | $36.1 million | $27.7 million |
| Cash and cash equivalents at year-end | $45.8 million | $114.2 million |
| Total debt and capital leases at year-end | $11.7 million | $2.2 million |
Revenue fell 5.1%, while continuing-operations pretax income was $29.1 million versus $26.8 million. Net income included $1.1 million from discontinued operations. Adjusted EBITDA increased about 8.0%; it is a company-defined non-GAAP measure and should not be viewed as a substitute for GAAP results.
Segment results: Marketing & Events U.S. revenue was $628.9 million (down 7.1%) and segment operating income was $11.0 million (versus $5.6 million). International revenue was $229.3 million (down 4.5%) and segment operating income was $9.1 million (versus $12.3 million). Travel & Recreation revenue was $127.9 million (up 3.8%) and segment operating income was $25.8 million (up from $24.0 million); its reported operating margin was 20.2%, compared with 19.5%.
Fourth-quarter 2013 revenue was $201.8 million, operating loss was $6.9 million, and net loss attributable to Viad was $4.6 million. The business is seasonal, and the fourth quarter is typically weak.
Current assets were $172.7 million and current liabilities were $125.3 million at year-end. The $130 million revolving credit facility had $118.7 million of remaining capacity, including the effect of letters of credit; Viad reported compliance with its covenants. The company said available liquidity was sufficient for operations and commitments for at least 12 months.
Material changes versus the prior period
- Consolidated revenue decreased 5.1%, principally reflecting negative exhibition show rotation in the U.S. and the absence of 2012 London Olympics-related work in International; currency movements also reduced revenue by about $7.0 million.
- U.S. Marketing & Events operating income improved despite lower revenue, supported by cost efficiencies and a $4.8 million gain on sale of a New Jersey facility. The sale generated $12.7 million net proceeds.
- Travel & Recreation results improved, but June 2013 flooding in Alberta was estimated to reduce revenue by about $2 million.
- Operating cash flow declined sharply to $6.1 million, mainly reflecting working-capital outflows, including decreases in customer deposits, accounts payable, and accrued compensation.
- Cash fell by $68.4 million, principally reflecting $58.9 million of dividends paid, including the $50.8 million special dividend paid in November 2013, alongside investing and debt activity.
Outlook, commentary, risks, and unusual items
- Glacier National Park concession: Glacier Park’s National Park Service concession contract expired December 31, 2013, and was awarded to another operator. The concession generated about 47% of Glacier Park’s 2013 revenue. Viad received $25 million in January 2014 for its possessory interest and expected a further approximately $5 million for personal property. Management forecast a roughly $19 million full-year revenue decline and a $3.5–$4 million reduction in Glacier Park operating income in 2014. Viad recorded a $4.5 million non-cash goodwill impairment, eliminating Glacier Park’s goodwill.
- Management outlook: For 2014, management expected U.S. base same-show revenue growth in the low-to-mid-single digits and a net positive show-rotation revenue contribution of approximately $55 million. It expected currency to have no meaningful impact on Marketing & Events, but an approximately $3 million unfavorable revenue impact on Travel & Recreation.
- The Glacier Skywalk was expected to open in May 2014. Management projected $4.5–$5 million of 2014 revenue and an operating margin above 50% for the attraction.
- Management expected four Travel & Recreation acquisitions completed since 2011 to generate approximately $27 million of 2014 revenue at an average Adjusted EBITDA margin above 30%, with 3% revenue growth expected for that acquired revenue base.
- Viad was evaluating strategic alternatives, including a potential separation of the two business groups, with J.P. Morgan Securities as financial advisor. No separation decision had been made and there was no assurance a transaction would occur or enhance shareholder value. A further $1.50-per-share special dividend, approximately $30.5 million, was paid in February 2014; future special dividends were not assured.
- Other notable items include $3.9 million of restructuring charges, $952,000 of other impairment charges, and a 2012 $13.4 million tax valuation allowance that depressed the prior-year comparison. In 2013, the effective tax rate was 29.5%, versus 77.8% in 2012.
- Key risks include economic sensitivity and discretionary customer spending, exhibition timing and rotation, seasonality, travel disruptions and severe weather, foreign exchange exposure (not hedged for translation effects), customer or venue losses, labor negotiations and multi-employer pension exposure, and legacy environmental or discontinued-operation liabilities. The company reported $13.7 million of maximum potential payments under lease guarantees and $5.0 million of environmental remediation liabilities for previously sold operations; potential additional multi-employer pension funding was not ascertainable.
Important facts for investors to verify
- Confirm the intended issuer: this filing is for Viad Corp, not Pursuit Attractions & Hospitality, Inc.
- Track the post-concession performance of Glacier Park against management’s 2014 revenue and operating-income decline estimates, and confirm receipt of the anticipated additional approximately $5 million payment.
- Assess whether operating cash flow recovers after the unusually large 2013 working-capital outflows and whether capital spending converts into expected Skywalk returns.
- Monitor execution of the U.S. show-rotation and base same-show outlook, as well as International segment performance after the Olympics comparison.
- Review the strategic alternatives process and the effect of dividends on liquidity, credit-facility capacity, and future capital allocation.
- Evaluate exposure to union negotiations and underfunded multi-employer pension plans, foreign exchange movements, and deferred-tax-asset recoverability.