Filing summary
Entity and period: The supplied metadata identifies Pursuit Attractions & Hospitality, Inc., but the filing text is Viad Corp’s Form 10-Q for the quarter ended September 30, 2011. The figures and discussion below are for Viad Corp; confirm the intended issuer before relying on this summary. Financial statement amounts are unaudited and in U.S. dollars.
Business context and reporting period
Viad operates Marketing & Events businesses in the U.S. and internationally, and a Travel & Recreation Group with tourism, lodging, food, retail, and transportation operations. The filing reports Q3 and year-to-date results through September 30, 2011, compared with the corresponding 2010 periods.
Key financial metrics
| Metric | Three months ended September 30 | Nine months ended September 30 |
|---|---|---|
| Revenue | $216.2 million, versus $215.1 million in 2010 | $745.0 million, versus $657.8 million |
| Income before taxes | $2.8 million, versus $7.7 million | $25.2 million, versus $9.5 million |
| Net income attributable to Viad | $1.2 million, versus $4.8 million | $15.5 million, versus $4.8 million |
| Diluted earnings per share | $0.06, versus $0.23 | $0.76, versus $0.24 |
| Adjusted EBITDA (non-GAAP) | $9.7 million, versus $14.5 million | $47.6 million, versus $31.5 million |
| Operating cash flow | Not presented by quarter | $35.1 million, versus $45.3 million |
Q3 net income attributable to Viad was approximately 0.6% of revenue, compared with 2.2% in Q3 2010; the nine-month figures were approximately 2.1% and 0.7%, respectively. These are calculated ratios, not company-reported margins.
At September 30, cash and cash equivalents were $104.6 million, total debt and capital lease obligations were $3.6 million, and the company had $125.4 million of unused revolving-credit capacity after letters of credit. The $130 million secured revolver expires May 18, 2016. Current assets were $249.4 million and current liabilities were $156.5 million. Total assets were $625.4 million and stockholders’ equity was $391.3 million. The company declared dividends of $0.04 per share for Q3.
Material changes versus the prior comparable period
- Q3 revenue increased 0.5%, but net income attributable to Viad fell to $1.2 million from $4.8 million. Management attributed the weaker results primarily to lower Marketing & Events Group results.
- Marketing & Events U.S. Q3 revenue declined 6.6% to $116.8 million, with a $17.1 million segment operating loss versus a $9.5 million loss. Negative show rotation, less favorable revenue mix, and higher incentive accruals contributed.
- Marketing & Events International Q3 revenue rose 1.0% to $38.5 million, while its segment operating loss widened to $3.1 million from $2.0 million. Excluding favorable currency effects, revenue and operating results declined.
- Travel & Recreation Q3 revenue rose 24.0% to $64.5 million and segment operating income increased 19.1% to $25.6 million. Acquisitions and stronger Brewster results contributed; construction-related room reductions and lower Glacier National Park visitation partly offset growth.
- Nine-month revenue increased 13.3% and net income attributable to Viad rose to $15.5 million from $4.8 million. Marketing & Events U.S. moved from an $11.9 million segment operating loss to $1.1 million of income; lower restructuring charges also supported the comparison.
- Nine-month operating cash flow declined by $10.2 million year over year. Investing activities used $58.0 million, including $41.1 million for acquisitions and $17.3 million of capital expenditures. Cash fell $41.3 million from year-end 2010.
Outlook, risks, contingencies, and unusual items
- Management expected 2011 Marketing & Events U.S. same-show revenue to increase about 10%, with show rotation adding approximately $15 million of revenue. It expected currency movements to benefit full-year Marketing & Events revenue by about $9 million and operating income by $0.3 million.
- Management expected currency to benefit Travel & Recreation full-year revenue by approximately $4.3 million and operating income by $1.4 million. It anticipated segment operating margin of about 20% for 2011, versus 22.5% in 2010, reflecting Denali’s seasonal fourth-quarter losses and reduced Many Glacier capacity. Denali was expected to be slightly dilutive to 2011 earnings.
- Management said existing liquidity was expected to fund operations and capital commitments for at least 12 months. At September 30, the company complied with credit-facility covenants; fixed-charge coverage was 3.08-to-1 and leverage was 0.29-to-1. The facility requires minimum cash of $50 million and permits specified annual dividend and share-repurchase limits.
- Glacier Park’s National Park Service concession contract was due to expire December 31, 2011, after prior annual extensions. Glacier Park generated about 70% of its 2010 revenue through that contract; future extensions were at the Park Service’s discretion, and the company would have to bid for a replacement contract.
- Foreign exchange affected reported results and equity; Q3 translation losses of $13.1 million were recorded in other comprehensive income. Viad said it did not hedge translation exposure or net earnings exposure.
- Other disclosed exposures include $5.8 million of environmental remediation liabilities related to previously sold operations, up to $30.4 million of potential payments under subsidiary lease guarantees, and potentially additional contributions to underfunded multi-employer pension plans, for which the amount was not ascertainable. Management did not expect litigation or environmental matters, after recorded provisions and insurance, to have a material impact.
- The company recorded $1.6 million of restructuring charges in the first nine months, mainly for Marketing & Events reorganization and facility consolidation; a $0.5 million Q3 accrual related to a Chicago labor-dispute settlement was also disclosed. The Q3 effective tax rate was 18.6%; the nine-month rate was 35.8%.
Important facts for investors to verify
- Confirm the intended issuer: the metadata names Pursuit Attractions & Hospitality, Inc., while the filing is for Viad Corp.
- Check the status and terms of the Glacier National Park concession after its December 31, 2011 expiration date, and the related revenue and earnings exposure.
- Assess whether Marketing & Events U.S. can improve segment profitability amid show-rotation volatility, cost pressures, and labor negotiations.
- Review the acquired properties’ seasonal performance and contribution, especially the expected fourth-quarter losses at Denali and the projected Travel & Recreation margin decline.
- Monitor cash generation, acquisition and capital spending, share repurchases, and compliance with the revolver’s minimum-cash and other covenants.
- Evaluate the potential effects of currency changes, environmental remediation, lease guarantees, and pension-plan funding exposure.