Pursuit Attractions & Hospitality, Inc. annual report, FY2014

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Business context and reporting period

The supplied filing is Viad Corp’s Form 10-K, filed March 12, 2015, for the fiscal year ended December 31, 2014. It is an annual filing, not a standalone fourth-quarter report. The request identifies Pursuit Attractions & Hospitality, Inc.; that name does not match the registrant in the filing, which is Viad Corp.

Viad operates Marketing & Events (about 89% of 2014 revenue) and Travel & Recreation (about 11%). Its three reportable segments are Marketing & Events U.S., Marketing & Events International, and Travel & Recreation. The filing reports significant seasonality, especially in Travel & Recreation, which earned 85% of its 2014 revenue in the second and third quarters.

Financial performance and position

  • Revenue: $1.065 billion, up 11.7% from $953.3 million in 2013. Growth reflected favorable show rotation, same-show gains, acquisitions, and the Glacier Skywalk launch.
  • Profit: Operating income was $45.5 million versus $35.2 million; net income attributable to Viad was $52.4 million versus $21.6 million. Diluted EPS was $2.59 versus $1.06, including $2.02 from continuing operations and $0.57 from discontinued operations. The reported continuing-operations effective tax rate was 0.2%.
  • Segment results: Marketing & Events U.S. revenue was $710.8 million and operating income $21.4 million; International revenue was $249.6 million and operating income $10.3 million; Travel & Recreation revenue was $120.5 million and operating income $28.1 million. Total segment operating income rose 42.8% to $59.9 million.
  • Adjusted EBITDA: $74.0 million, up from $59.2 million. This is a non-GAAP measure; management defines it as net income attributable to Viad before interest, taxes, depreciation and amortization, impairment, accounting changes, and discontinued operations.
  • Cash flow and investment: Operating cash flow was $58.1 million, compared with $6.1 million in 2013. Investing cash outflow was $120.5 million, including $120.3 million for acquisitions and $29.4 million in capital expenditures, partly offset by $28.0 million of proceeds related to Glacier Park discontinued operations.
  • Liquidity and debt: Cash was $57.0 million, total debt and capital leases $141.0 million, and unused credit-facility capacity $159.4 million at year-end. Current assets were $207.9 million and current liabilities $170.9 million. Management said existing liquidity was expected to fund operations and commitments for at least 12 months.
  • Shareholder returns: Dividends declared totaled $1.90 per share in 2014, including a $1.50 special dividend. The company repurchased $10.6 million of shares on the open market during the year.

Fourth-quarter 2014 revenue was $223.2 million. The quarter recorded a $7.3 million operating loss and a $5.9 million net loss attributable to Viad; management cites the seasonal pattern of the businesses and corporate costs among the context for quarterly fluctuations.

Material changes versus the prior comparable period

  • Revenue increased 11.7%; segment operating income increased 42.8%. Adjusted EBITDA rose by $14.8 million.
  • Four acquisitions were completed: West Glacier Properties, Blitz, onPeak and Travel Planners, and N200. Together, the Marketing & Events acquisitions of Blitz, onPeak and N200 contributed $16.7 million in 2014 revenue and $2.5 million in segment EBITDA, with limited post-acquisition reporting periods.
  • Debt increased to $141.0 million from $11.7 million, following acquisition financing and a December 2014 refinancing into a $300 million credit agreement.
  • Operating cash flow improved from $6.1 million to $58.1 million, while acquisition spending substantially increased investing outflows.
  • Income benefited from a tax valuation-allowance release and gains associated with the expired Glacier Park concession contract. These items make reported earnings less directly comparable with underlying operating performance.

Outlook, management commentary, risks and unusual items

  • 2015 outlook: Management expected U.S. base same-show revenue to rise at a mid-single-digit rate, offset by an estimated $75 million net negative effect from show rotation versus 2014. Foreign exchange was expected to reduce Marketing & Events revenue by about $25 million and operating income by about $1 million.
  • Management expected Travel & Recreation revenue to increase at a low-single-digit rate, with currency translation expected to reduce revenue by about $10 million and operating income by about $3 million. It projected the five acquisitions completed since 2011 to produce about $35 million of 2015 revenue at an average Adjusted EBITDA margin above 30%.
  • Tax and discontinued operations: Continuing-operations income tax expense included an approximately $10.9 million third-quarter benefit associated with releasing a valuation allowance on foreign tax credits. The expired Glacier Park concession contract generated a $21.5 million pre-tax possessory-interest gain; related proceeds and other items contributed materially to discontinued-operations income.
  • Operating and financial risks: Show timing and rotation, economic conditions and discretionary customer spending, travel disruptions, weather and other catastrophic events, foreign exchange, competition, labor costs and work stoppages, and customer or venue losses could affect results. Canadian operations are particularly exposed to currency movements and foreign visitor demand.
  • Viad contributed $23.2 million to multi-employer pension plans in 2014; management believed several plans were underfunded, while any additional required funding was not ascertainable. The company also disclosed self-insurance liabilities, environmental remediation liabilities of about $4.7 million, and lease guarantees with maximum potential payments of $5.9 million.
  • The December 2014 credit agreement requires financial covenants and limits dividends and repurchases; Viad reported compliance at year-end. The company did not hedge its foreign-currency translation exposure. Management reported effective disclosure controls and internal control over financial reporting, but excluded the newly acquired Blitz, onPeak and N200 businesses from its internal-control assessment.

Important facts for investors to verify

  • Confirm the intended issuer: the request names Pursuit Attractions & Hospitality, Inc., while the supplied 10-K is for Viad Corp.
  • Review how much of 2014 earnings came from the tax valuation-allowance release and Glacier Park-related discontinued-operation gains, and compare continuing operations with recurring cash generation.
  • Assess acquisition integration, final purchase-price allocations, goodwill and intangible-asset assumptions, and whether management’s 2015 acquisition revenue and margin projections were achieved.
  • Monitor 2015 show rotation, foreign-exchange effects, labor negotiations and multi-employer pension exposure, alongside compliance with credit-agreement covenants and liquidity requirements.