Viad Corp — 2011 Form 10-K
Filing identity and period: The supplied filing is Viad Corp’s annual report for the fiscal year ended December 31, 2011, filed March 9, 2012. Although the request metadata names Pursuit Attractions & Hospitality, Inc. and 2011 Q4, the filing itself identifies Viad Corp; it reports full-year results and unaudited quarterly results, including Q4.
Business context
Viad operates Marketing & Events businesses in the U.S. and internationally, and a Travel & Recreation group providing attractions, hotels, tours and transportation in Western Canada and U.S. national parks. Its activities are seasonal, and results can vary with event timing and tourism demand.
Financial performance and liquidity
Amounts below are in U.S. dollars; financial statement figures are in millions unless otherwise stated.
| Metric | 2011 | 2010 |
|---|---|---|
| Revenue | $942.4 | $844.8 |
| Income from continuing operations | $9.3 | $0.8 |
| Net income attributable to Viad | $9.2 | $0.4 |
| Diluted EPS attributable to Viad | $0.45 | $0.02 |
| Adjusted EBITDA (non-GAAP) | $43.3 | $32.3 |
| Operating cash flow | $34.7 | $43.3 |
| Cash and cash equivalents at year-end | $100.4 | $145.8 |
| Debt and capital lease obligations at year-end | $3.2 | $9.1 |
Revenue rose 11.6%; management attributed improved earnings chiefly to stronger Marketing & Events results. Income before tax was $13.2 million versus $2.6 million. 2011 net income was approximately 1.0% of revenue. The filing cautions that Adjusted EBITDA is a supplemental non-GAAP measure, not a substitute for GAAP results.
Operating cash flow declined despite higher earnings, with working-capital movements including a $18.1 million use from receivables. Investing activities used $62.2 million, including $41.1 million for acquisitions and $21.5 million in capital expenditures. Financing activities used $16.5 million. Total assets were $617.8 million and stockholders’ equity $386.2 million at year-end.
Viad had a $130 million revolving credit facility, with $125.4 million of capacity available after letters of credit. It reported compliance with covenants; year-end fixed-charge coverage was 2.94:1 and leverage was 0.30:1. The facility requires at least $50 million of consolidated cash. The company declared $0.16 per share in dividends for 2011, subject to facility restrictions.
Segments and changes versus prior year
| Segment | 2011 revenue | 2011 segment operating income (loss) | 2010 comparison |
|---|---|---|---|
| Marketing & Events U.S. | $631.4 million, up 10.6% | $(6.3) million | $(15.2) million loss |
| Marketing & Events International | $218.6 million, up 10.5% | $11.4 million | $10.1 million |
| Travel & Recreation | $101.8 million, up 15.3% | $20.2 million | $19.9 million; margin fell to 19.8% from 22.5% |
The U.S. events segment’s improvement reflected same-show growth, exhibitor spending, new business and favorable show rotation, but it remained loss-making. International growth reflected new shows, rotation and same-show gains; currency translation also contributed. Travel & Recreation revenue benefited from acquisitions and organic growth, while operating income was pressured by lower Glacier National Park visitation, room closures at Many Glacier Hotel and Denali’s seasonal start-up loss. Foreign exchange added $14.1 million to consolidated revenue and $1.7 million to segment operating income versus 2010.
In Q4 2011, revenue was $197.4 million; operating loss was $11.9 million and net loss attributable to Viad was $6.3 million, or $(0.32) per diluted share. This compares with Q4 2010 revenue of $187.0 million and net loss attributable to Viad of $4.4 million, or $(0.22) per diluted share. Q4 is seasonally weak.
Outlook, commentary, risks and unusual items
- For 2012, management expected U.S. Marketing & Events same-show revenue to increase at a mid-single-digit rate, with no meaningful net show-rotation impact. It forecast unfavorable foreign-exchange effects of approximately $9 million in Marketing & Events revenue and $0.5 million in operating income, and approximately $3 million in Travel & Recreation revenue and $1 million in operating income.
- Management expected approximately $1.5 million of additional restructuring charges in Q1 2012 and anticipated about $20 million of 2012 spending to develop the Glacier Discovery Walk.
- Travel & Recreation is highly seasonal: 87% of 2011 segment revenue came in Q2 and Q3. Glacier Park’s National Park Service concession contract, which generated approximately 45% of Glacier Park’s 2011 revenue, was due to expire December 31, 2012, subject to possible one-year extensions and a future rebid.
- Viad acquired Grouse Mountain Lodge, St. Mary Lodge & Resort, Denali Backcountry Lodge and Denali Cabins during 2011 for a combined stated purchase price of about $41.1 million. After year-end, it acquired the Banff International Hotel for $23.5 million, subject to adjustments.
- Key risks include economic weakness and discretionary event and travel spending; event rotation and seasonality; foreign-currency exposure (not hedged for translation risk); union negotiations and labor costs; transportation disruption; competition and customer/facility losses; and integration and performance of acquisitions.
- Multi-employer pension contributions rose to $19.6 million from $15.3 million in 2010; management said several plans were underfunded and potential additional funding or withdrawal liabilities could not be determined. Other notable exposures include $28.5 million maximum potential payments under subsidiary lease guarantees, $5.8 million of environmental remediation liabilities related to prior operations, and $138.4 million of contractual cash obligations. Management believed litigation and environmental claims would not materially affect results after reserves and insurance.
- Restructuring charges were $3.8 million in 2011, primarily for Marketing & Events workforce and facility actions. No impairment losses were recorded in 2011; the 2010 after-tax impairment was $0.3 million. Discontinued-operations income of $0.45 million reflected reversals of liabilities from previously sold operations.
Most important facts for investors to verify
- Confirm the filing entity: the source is Viad Corp, not Pursuit Attractions & Hospitality, Inc.; verify that this is the intended filing.
- Review the full audited statements and notes for cash-flow working-capital movements, acquisition accounting, and the gap between improved annual earnings and lower operating cash flow.
- Track the Glacier Park concession renewal or rebid outcome and the share of revenue exposed to that contract.
- Assess progress in returning Marketing & Events U.S. to segment profitability and the realization of restructuring savings.
- Monitor multi-employer pension exposure, lease guarantees, legacy environmental liabilities, and the credit facility’s cash and covenant requirements.
- Evaluate 2012 guidance against actual same-show trends, foreign-exchange impacts, acquisition performance and planned capital spending.
The independent auditor issued an unqualified opinion on the consolidated financial statements, and management and the auditor reported effective internal control over financial reporting as of December 31, 2011.