Business context and reporting period
This is Viad Corp’s unaudited Form 10-Q for the quarter ended September 30, 2012, with comparisons to 2011 and year-to-date results through September 30. The filing describes Marketing & Events U.S., Marketing & Events International, and Travel & Recreation. Entity check: the supplied filing identifies Viad Corp as the registrant; it does not identify Pursuit Attractions & Hospitality, Inc.
Financial results and condition
Amounts below are in millions of U.S. dollars, except per-share data and percentages.
| Metric | Q3 2012 | Q3 2011 | Nine months 2012 | Nine months 2011 |
|---|---|---|---|---|
| Revenue | $307.5 | $216.2 | $822.7 | $745.0 |
| Income before taxes | $31.4 | $2.8 | $40.2 | $25.2 |
| Net income attributable to Viad | $20.0 | $1.2 | $27.1 | $15.5 |
| Diluted EPS | $0.99 | $0.06 | $1.34 | $0.76 |
| Adjusted EBITDA (non-GAAP) | $39.2 | $9.7 | $64.1 | $47.6 |
- Revenue increased 42.2% in Q3 and 10.4% for the nine-month period. Net margin attributable to Viad was approximately 6.5% in Q3 versus 0.6%; year to date it was approximately 3.3% versus 2.1%.
- Q3 segment operating income: Marketing & Events U.S. recorded a $0.6 million loss (prior-year loss $17.1 million); International earned $3.4 million (prior-year loss $3.1 million); Travel & Recreation earned $31.3 million (prior-year $25.6 million).
- Operating cash flow for the first nine months was $68.8 million, versus $35.1 million. Investing cash outflow was $42.2 million, including $23.5 million for the Banff International Hotel acquisition and $19.9 million of capital expenditures. Financing cash outflow was $5.4 million.
- Cash and equivalents were $124.2 million at September 30, up from $100.4 million at year-end 2011. Current assets were $290.8 million and current liabilities $197.0 million (current ratio approximately 1.48).
- Total debt and capital lease obligations were $2.3 million, all capital leases. The $130 million revolving credit facility had $125.5 million of capacity available after letters of credit; the company reported compliance with covenants. The reported debt-to-capital ratio was 0.005 to 1.
- Q3 adjusted EBITDA margin was approximately 12.7%, versus 4.5% a year earlier; nine-month margin was approximately 7.8%, versus 6.4%. Adjusted EBITDA is a company-defined non-GAAP measure.
Material changes versus prior comparable periods
- Q3 performance improved substantially, mainly due to positive show rotation and stronger same-show revenues in Marketing & Events, services for the 2012 London Olympics and Paralympics, and increased Travel & Recreation hospitality and attractions activity.
- Q3 Marketing & Events U.S. revenue rose 44.1%; approximately $56 million of positive show rotation revenue and 7.3% growth in base same-show revenue contributed. International revenue rose 76.0%, including Olympic-related work and approximately $11 million of positive show rotation revenue.
- Travel & Recreation Q3 revenue rose 19.7%; hospitality revenue increased 32.5%, and attractions revenue increased 10.2%. Recent acquisitions and additional available hotel rooms contributed to growth.
- For the first nine months, restructuring charges increased to $3.5 million from $1.6 million. Cash increased, while accounts receivable, accounts payable, and total liabilities also rose from year-end 2011.
- Foreign exchange rate movements reduced year-to-date revenue by approximately $7.5 million and segment operating results by approximately $0.8 million. Q3 foreign exchange reduced revenue by approximately $2.5 million and segment operating results by approximately $0.4 million.
Outlook, management commentary, risks and unusual items
- Management expected 2012 U.S. base same-show revenue growth at a mid-single-digit rate and positive full-year show rotation revenue of approximately $16 million. It estimated 2012 foreign-exchange headwinds of $4.6 million to Marketing & Events revenue and $0.15 million to its segment operating income.
- Management expected 2012 foreign-exchange headwinds of $1.9 million to Travel & Recreation revenue and $0.75 million to segment operating income. It projected that four acquisitions made since early 2011 would generate approximately $23 million of 2012 revenue at an average Adjusted EBITDA margin above 30%, with high-single-digit annual revenue growth from 2012 to 2015 and expanding margins.
- Management anticipated approximately $12 million of 2012 spending on the Glacier Discovery Walk; $7.6 million had been incurred through September 30. Management said existing liquidity should fund operations and capital commitments for at least the next 12 months.
- Glacier Park’s National Park Service concession contract was due to expire December 31, 2012; the company expected a one-year extension through 2013, but continuation and renewal were not assured. The concession generated approximately 45% of Glacier Park’s 2011 revenue. If another operator were selected, Viad said Glacier Park would be entitled to an estimated $25 million possessory interest, plus the value of certain personal property.
- Other notable exposures include $23.0 million of maximum potential payments under subsidiary lease guarantees, a $5.4 million environmental remediation liability for previously sold operations, and possible additional funding obligations for underfunded multi-employer pension plans that management said were not ascertainable.
- Management cited foreign-exchange exposure (not currently hedged), tourism and consumer-discretionary demand, economic and industry conditions, labor negotiations, and potential goodwill impairment as risks. It reported no material effect expected from pending litigation or environmental disputes after considering recorded provisions and insurance.
- In August, the board approved a 150% increase in the quarterly dividend, from $0.04 to $0.10 per share; the $0.10 dividend was paid October 1, 2012. The company also recorded $0.639 million of discontinued-operations income from a land sale and $3.5 million of restructuring charges, primarily for facility consolidation and position eliminations.
Important facts for investors to verify
- Confirm issuer identity: this filing is for Viad Corp, not Pursuit Attractions & Hospitality, Inc.
- Check whether expected Glacier Park concession extensions and any subsequent contract award or renewal occurred.
- Assess sustainability of unusually strong Q3 results, including show rotation, Olympic-related work, seasonal tourism, and acquired-property contributions.
- Track foreign-exchange effects, restructuring costs and savings, and progress on the Glacier Discovery Walk against expected spending.
- Review the status and potential cash impact of lease guarantees, environmental remediation, and multi-employer pension exposure.
- Evaluate liquidity and covenant headroom alongside the increased dividend and management’s stated 12-month liquidity outlook.