Viad Corp. 2012 Form 10-K Summary
Entity and period: The supplied filing is Viad Corp’s Form 10-K, filed March 11, 2013, for the fiscal year ended December 31, 2012. It is not a filing for Pursuit Attractions & Hospitality, Inc.; the company name in the request metadata does not match the filing.
Business context
Viad provides exhibition, event and experiential marketing services, as well as tourism, hospitality and recreation services. Its reportable segments are Marketing & Events U.S., Marketing & Events International, and Travel & Recreation. Operations are seasonal, and the Travel & Recreation segment earned 87% of its 2012 revenue in the second and third quarters.
Financial performance and liquidity
- Revenue was $1.025 billion, up 8.8% from $942.4 million in 2011. Continuing-operations pretax income was $26.8 million versus $13.2 million.
- Net income attributable to Viad was $5.9 million, or $0.29 per diluted share, compared with $9.2 million, or $0.45, in 2011. The 2012 result included a $13.4 million tax charge for a valuation allowance on foreign tax credit carryforwards; the effective tax rate was 77.8%, versus 29.5%.
- Adjusted EBITDA, a non-GAAP measure, was $58.2 million, up from $43.3 million. Management attributed the increase mainly to improved segment results, partly offset by higher restructuring charges and corporate costs.
- Segment results: Marketing & Events U.S. revenue was $676.8 million and operating income was $5.6 million, versus a $6.3 million loss. International revenue was $240.1 million and operating income was $12.3 million, versus $11.4 million. Travel & Recreation revenue was $123.2 million and operating income was $24.0 million, versus $20.2 million; its operating margin was 19.5%, compared with 19.8%.
- Operating cash flow was $69.2 million, versus $34.7 million. Capital expenditures were $27.7 million; operating cash flow less capital expenditures was approximately $41.5 million.
- Cash and cash equivalents were $114.2 million at year-end, compared with $100.4 million. Current assets were $254.4 million and current liabilities were $167.0 million. Total debt and capital lease obligations were $2.2 million; the company also had a $130 million revolving credit facility, with $128.2 million of capacity available after letters of credit.
- Total assets were $650.6 million and stockholders’ equity was $397.0 million. Dividends declared were $0.28 per share, up from $0.16 in 2011.
Material changes and notable items
- Growth reflected same-show increases, new business wins, approximately $16 million of favorable revenue from non-annual show rotation, and contributions from acquisitions and tourism operations. Foreign exchange reduced 2012 revenue by $6.6 million and segment operating income by $886,000 versus 2011.
- Viad acquired the Banff International Hotel in March 2012 for $23.6 million. It began construction of the Glacier Skywalk; 2012 project spending was $8.9 million, with approximately $12 million to $14 million expected in 2013 to complete it.
- In December 2012, the board authorized a strategic review, including a potential separation of the Travel & Recreation and Marketing & Events groups. No decision to separate had been made.
- Net restructuring charges were $4.9 million, primarily for Marketing & Events reorganizations and facility consolidations. Management expected further restructuring charges, primarily facility-related.
- The Glacier National Park concession contract expires December 31, 2013. Glacier Park was bidding for a new 16-year contract starting in 2014; the bid was due April 16, 2013. The contract supported approximately 49% of Glacier Park’s 2012 revenue. If it lost the contract, the filing estimates compensation of $25 million for possessory interest plus about $5 million for personal property.
- After year-end, Viad acquired U.K.-based Resource Creative Limited for $647,000 in cash, subject to adjustments, plus a potential deferred payment of approximately $280,000 tied to revenue targets.
Outlook, risks and contingencies
- For 2013, management expected Marketing & Events U.S. base same-show revenue to rise at a low- to mid-single-digit rate, but show rotation to reduce full-year revenue by approximately $55 million to $60 million. It targeted a full-year Marketing & Events operating margin of about 2.5% through efficiencies and new business wins.
- Management expected the four acquisitions made since the beginning of 2011 to generate approximately $25 million of 2013 revenue at an average Adjusted EBITDA margin above 30%, with mid-single-digit compound annual revenue growth and expanding margins through 2015. These are management expectations, not guarantees.
- Key risks include economic weakness affecting discretionary event and tourism spending; exhibition timing and rotation; travel disruptions; foreign-exchange exposure, which Viad did not hedge for translation of foreign net assets or earnings; customer loss or venues bringing services in-house; union negotiations and work stoppages; and seasonality.
- Several multi-employer pension plans were believed to be underfunded. Contributions were $20.7 million in 2012, and any additional funding or withdrawal liability was not ascertainable. The company also disclosed $21.2 million of potential payments under subsidiary lease guarantees, $5.3 million of environmental remediation liabilities tied to prior operations, and ongoing litigation and environmental disputes that management did not expect to have a material effect after reserves and insurance.
- The company reported compliance with its credit-facility covenants, including a $50 million minimum cash requirement. It reported no material off-balance-sheet financing arrangements. Deloitte issued unqualified opinions on the financial statements and internal control over financial reporting.
Most important facts for investors to verify
- Whether Glacier Park won the 2014–2029 National Park Service concession and the resulting impact on Travel & Recreation revenue and earnings.
- Progress and actual costs, opening timing, and returns for the Glacier Skywalk project.
- Delivery of 2013 segment outlook, particularly the expected show-rotation headwind and targeted Marketing & Events margin.
- Recoverability of deferred tax assets and whether further valuation allowances affect earnings.
- Funding exposure from multi-employer pension plans, lease guarantees, environmental liabilities and other contingencies.
- Any outcome of the strategic review, including whether a separation is pursued and its costs, terms and shareholder effects.