Business context and reporting period
Viad Corp’s unaudited Form 10-Q covers the three months ended March 31, 2015. Its businesses comprise Marketing & Events (U.S. and International) and Travel & Recreation. The filing identifies the registrant as Viad Corp, not Pursuit Attractions & Hospitality, Inc.; confirm that this is the intended filing.
Financial performance and position
Unless otherwise noted, amounts are in millions of dollars. Revenue was $264.4, down 7.4% from $285.6 in Q1 2014. The company reported a continuing-operations loss attributable to Viad of $1.9, or $0.10 per share, versus income of $9.3, or $0.46 per share. Net loss attributable to Viad was $2.1, compared with net income of $21.9 a year earlier.
- Segment operating loss was $1.1, versus operating income of $13.4; consolidated operating loss was $3.9, versus income of $11.3.
- Adjusted EBITDA, a non-GAAP measure, was $4.7 versus $18.2. The filing attributes the decline principally to lower Marketing & Events U.S. segment operating income.
- Operating cash flow was $18.3 versus $25.2. Cash and cash equivalents were $57.9 at quarter-end, up from $57.0 at December 31, 2014. Capital expenditures were $5.3.
- Total debt and capital lease obligations were $137.8, down from $141.0 at year-end; $158.7 of credit-facility capacity remained. The company reported compliance with credit covenants.
- Total assets were $731.0 and stockholders’ equity was $323.5. Foreign-currency translation losses of $17.6 were recorded in other comprehensive income.
Material changes versus the prior comparable period
Marketing & Events revenue fell to $256.9 from $277.8, and segment operating income dropped to $3.7 from $18.2. In the U.S., negative show rotation reduced revenue by approximately $42, partly offset by 7.4% base same-show growth and onPeak acquisition revenue. International organic revenue grew 11.0%, but organic segment operating income declined 31.2%, reflecting higher staffing and a less profitable revenue mix. Travel & Recreation revenue was $7.5 versus $7.8; its segment operating loss remained $4.8.
The prior-year comparison includes $15.2 of after-tax discontinued-operations income, principally a gain related to the expired Glacier National Park concession contract. Q1 2015 discontinued operations recorded a $0.1 loss for legal fees. The 2015 dividend declared was $0.10 per share versus $1.60 in Q1 2014, which included a special dividend.
Outlook, commentary, risks and unusual items
- Management expected full-year 2015 Marketing & Events revenue to be comparable to 2014, with underlying growth and acquisitions offsetting approximately $70 of negative show rotation and unfavorable currency translation. It estimated currency effects of approximately $31 lower revenue and $1.5 lower segment operating income.
- Management expected U.S. base same-show revenue to grow at a mid-single-digit rate. The 2014 acquisitions of Blitz, onPeak and N200 were expected to contribute $45–$50 of incremental revenue and $13–$14 of adjusted segment EBITDA, excluding approximately $1.5 of integration costs.
- Management expected Travel & Recreation full-year revenue to be comparable to 2014, with currency translation estimated to reduce revenue by approximately $14 and segment operating income by approximately $4.5. This segment is highly seasonal: 85% of its 2014 revenue was earned in Q2 and Q3.
- Management said existing liquidity should fund operations and capital commitments for at least 12 months. Q1 operating cash flow benefited from increases in accounts payable and customer deposits, partly offset by higher receivables.
- Risks include show timing and rotation, foreign-exchange fluctuations (which the company did not hedge), discretionary tourism demand, labor relations and potential union work stoppages, underfunded multi-employer pension plans, self-insured claims, environmental matters and litigation. The filing states that potential multi-employer plan funding obligations were not ascertainable and that pending legal matters were not expected to have a material effect.
- The Q1 effective tax rate was 62.4%; results included a $1.6 non-cash deferred-tax benefit, described as a non-recurring benefit of $0.08 per share. The company also reported acquisition-related transaction costs and a shareholder nomination and settlement agreement among factors increasing corporate expense.
Important facts for investors to verify
- Confirm the registrant and filing match the intended company: this 10-Q is for Viad Corp, not Pursuit Attractions & Hospitality, Inc.
- Assess how much the revenue and earnings decline reflects show rotation, currency, acquisition integration and underlying operating trends.
- Review the assumptions behind management’s 2015 outlook, especially show rotation, currency impacts and acquisition contribution estimates.
- Monitor covenant headroom, debt and seasonal working-capital movements; reported Q1 operating cash flow included substantial customer-deposit and payable increases.
- Evaluate the potential effects of labor negotiations, pension-plan exposure, environmental remediation and self-insured liabilities.