Business context and reporting period
The supplied filing is Viad Corp’s unaudited Form 10-Q for the quarter and nine months ended September 30, 2015; it does not identify Pursuit Attractions & Hospitality, Inc. as the registrant. Viad operated Marketing & Events businesses and a Travel & Recreation Group.
Financial performance
| Metric | Q3 2015 | Q3 2014 | Nine months 2015 | Nine months 2014 |
|---|---|---|---|---|
| Revenue | $255.9 million | $299.8 million | $837.4 million | $841.8 million |
| Operating income | $13.2 million | $29.5 million | $43.6 million | $53.0 million |
| Net income attributable to Viad | $7.2 million | $29.6 million | $27.6 million | $58.2 million |
| Diluted EPS from continuing operations | $0.37 | $1.53 | $1.38 | $2.38 |
| Operating cash flow | Not provided for quarter | Not provided for quarter | $76.3 million | $82.0 million |
Q3 operating margin was approximately 5.2%, versus 9.9% a year earlier; nine-month operating margin was approximately 5.2%, versus 6.3%. These percentages are calculated from reported revenue and operating income. Adjusted EBITDA was $21.0 million in Q3 and $68.6 million year to date, down from $35.9 million and $72.1 million, respectively.
At September 30, 2015, cash and cash equivalents were $75.3 million, total debt and capital lease obligations were $116.9 million, and unused credit-facility capacity was $172.5 million. The company reported compliance with all debt covenants. Nine-month capital expenditures were $19.0 million; operating cash flow less capital expenditures was approximately $57.3 million. Current assets were $261.1 million and current liabilities $210.7 million.
Material changes versus prior comparable periods
- Q3 revenue fell 14.6% and nine-month revenue declined 0.5%. Management attributed the weakness principally to negative show rotation and unfavorable foreign exchange; Q3 also compared against certain non-recurring prior-year events.
- Marketing & Events Group segment operating income was a $14.8 million loss in Q3, versus $2.4 million income; year-to-date income declined to $19.0 million from $29.6 million. Travel & Recreation Group segment income was $29.4 million in Q3 and $30.8 million year to date, with foreign exchange weighing on reported results.
- Q3 net income was also affected by the absence of a $10.1 million tax benefit recorded in Q3 2014. Nine-month 2014 results included a $12.6 million after-tax gain related to the expired Glacier National Park concession contract.
- Cash increased from $57.0 million at December 31, 2014. Debt declined from $141.0 million, while foreign-currency translation losses reduced accumulated other comprehensive income.
Outlook, commentary, risks and contingencies
- For full-year 2015, management expected Marketing & Events revenue to increase by low single digits versus 2014, with U.S. base same-show revenue growth in the mid-single digits. Negative show rotation was estimated at approximately $70 million.
- Management expected the Travel & Recreation Group’s full-year revenue to decline by mid-single digits, citing unfavorable currency translation and forest fires affecting certain Glacier Park properties.
- Management forecast 2015 revenue and Adjusted segment EBITDA of approximately $63–$65 million and $17–$18 million, respectively, for the Blitz, onPeak and N200 acquisitions; EBITDA guidance excluded approximately $1.2 million of integration costs.
- Key operating exposures include event timing and show rotation, foreign exchange (the company did not hedge translation exposures), tourism demand, weather and natural disasters, and labor relations. The filing describes informal discussions on pension-related issues with Chicago Teamsters Local 727 and notes potential disruption risk.
- Viad reported $4.5 million of environmental remediation liabilities related to previously sold operations, and estimated maximum payments of $2.9 million under subsidiary lease guarantees. Potential additional multi-employer pension funding was not ascertainable. Management did not expect pending litigation or environmental matters, after reserves and insurance, to materially affect results.
- Management said existing liquidity should fund operations and capital commitments for at least 12 months. Approximately $62.1 million of cash was held outside the United States; estimated incremental tax on repatriation of specified Canadian earnings was approximately $0.2 million.
Important facts for investors to verify
- Confirm the intended issuer: the supplied filing is for Viad Corp, not Pursuit Attractions & Hospitality, Inc.
- Assess whether show rotation, foreign exchange and acquisition integration materially alter the full-year outlook and segment profitability.
- Track the Travel & Recreation impact of forest fires, tourism demand, Canadian-dollar movements and seasonal operating patterns.
- Review debt covenant headroom, cash availability and the distribution restrictions under the credit agreement.
- Monitor labor negotiations, multi-employer pension exposure, environmental remediation and other discontinued-operation liabilities.