Viad Corp (Exact Name of Registrant As Specified in Its Charter)
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UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 10-Q (Mark One) QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended March 31, 2015 or TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the transition period from to Commission file number: 001 -11015 Viad Corp (Exact name of registrant as specified in its charter) Delaware 36-1169950 State or other jurisdiction of (I.R.S. Employer incorporation or organization Identification No.) 1850 North Central Avenue, Suite 1900 Phoenix, Arizona 85004-4565 (Address of principal executive offices) (Zip Code) (602) 207-1000 (Registrant’s telephone number, including area code) Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes No Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Website, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§ 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files.) Yes No Indicate by check mark whether registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer or a smaller reporting company. See definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act. Large accelerated filer Accelerated filer Non-accelerated filer Smaller reporting company Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Act). Yes No As of April 30, 2015, there were 20,055,616 shares of Common Stock ($1.50 par value) outstanding. Table of Contents INDEX Page PART I - FINANCIAL INFORMATION Item 1. Financial Statements 1 Consolidated Balance Sheets 1 Consolidated Statements of Operations 2 Consolidated Statements of Comprehensive Income 3 Consolidated Statements of Cash Flows 4 Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations 23 Item 3. Quantitative and Qualitative Disclosures About Market Risk 33 Item 4. Controls and Procedures 34 PART II - OTHER INFORMATION Item 1. Legal Proceedings 35 Item 1A. Risk Factors 35 Item 2. Unregistered Sales of Equity Securities and Use of Proceeds 35 Item 3. Defaults Upon Senior Securities 35 Item 4. Mine Safety Disclosures 35 Item 5. Other Information 35 Item 6. Exhibits 36 SIGNATURES 36 Table of Contents PART I - FINANCIAL INFORMATION Item 1. Financial Statements VIAD CORP CONDENSED CONSOLIDATED BALANCE SHEETS (Unaudited) As of March 31, December 31, (in thousands, except share data) 2015 2014 Assets Current assets Cash and cash equivalents $ 57,853 $ 56,990 Accounts receivable, net of allowance for doubtful accounts of $1,680 and $1,258, respectively 99,334 78,121 Inventories 35,551 32,401 Deferred income taxes 26,045 22,943 Other current assets 22,000 17,440 Total current assets 240,783 207,895 Property and equipment, net 190,539 199,571 Other investments and assets 40,551 40,674 Deferred income taxes 30,753 29,639 Goodwill 188,638 194,197 Other intangible assets, net 39,747 42,967 Total Assets $ 731,011 $ 714,943 Liabilities and Stockholders’ Equity Current liabilities Accounts payable $ 81,299 $ 61,789 Customer deposits 53,262 32,720 Accrued compensation 17,543 20,736 Other current liabilities 34,806 27,787 Current portion of debt and capital lease obligations 29,361 27,856 Total current liabilities 216,271 170,888 Long-term debt and capital lease obligations 108,419 113,164 Pension and postretirement benefits 33,527 33,427 Other deferred items and liabilities 49,280 49,762 Total liabilities 407,497 367,241 Commitments and contingencies Stockholders’ equity Viad stockholders’ equity: Common stock, $1.50 par value, 200,000,000 shares authorized, 24,934,981 shares issued 37,402 37,402 Additional capital 578,353 582,066 Retained deficit (40,486 ) (36,427 ) Unearned employee benefits and other 24 23 Accumulated other comprehensive income (loss): Unrealized gain on investments 631 471 Cumulative foreign currency translation adjustments (5,164 ) 12,416 Unrecognized net actuarial loss and prior service credit, net (13,394 ) (13,476 ) Common stock in treasury, at cost, 4,904,495 and 4,842,621 shares, respectively (246,103 ) (247,088 ) Total Viad stockholders’ equity 311,263 335,387 Noncontrolling interest 12,251 12,315 Total stockholders’ equity 323,514 347,702 Total Liabilities and Stockholders’ Equity $ 731,011 $ 714,943 Refer to Notes to Condensed Consolidated Financial Statements. 1 Table of Contents VIAD CORP CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (Unaudited) Three Months Ended March 31, (in thousands, except per share data) 2015 2014 Revenue: Exhibition and event services $ 213,252 $ 231,783 Exhibits and environments 43,676 46,040 Travel and recreation services 7,468 7,818 Total revenue 264,396 285,641 Costs and expenses: Costs of services 225,261 229,582 Costs of products sold 40,260 42,698 Corporate activities 2,810 2,039 Interest income (63 ) (65 ) Interest expense 1,151 298 Restructuring charges 216 211 Total costs and expenses 269,635 274,763 Income (loss) from continuing operations before income taxes (5,239 ) 10,878 Income tax expense (benefit) (3,267 ) 1,697 Income (loss) from continuing operations (1,972 ) 9,181 Income (loss) from discontinued operations (148 ) 15,238 Net income (loss) (2,120 ) 24,419 Net (income) loss attributable to noncontrolling interest 64 (2,537 ) Net income (loss) attributable to Viad $ (2,056 ) $ 21,882 Diluted income (loss) per common share: Continuing operations attributable to Viad common stockholders $ (0.10 ) $ 0.46 Discontinued operations attributable to Viad common stockholders — 0.62 Net income (loss) attributable to Viad common stockholders $ (0.10 ) $ 1.08 Weighted-average outstanding and potentially dilutive common shares 19,736 20,330 Basic income (loss) per common share: Continuing operations attributable to Viad common stockholders $ (0.10 ) $ 0.46 Discontinued operations attributable to Viad common stockholders — 0.62 Net income (loss) attributable to Viad common stockholders $ (0.10 ) $ 1.08 Weighted-average outstanding common shares 19,736 19,949 Dividends declared per common share $ 0.10 $ 1.60 Amounts attributable to Viad common stockholders Income (loss) from continuing operations $ (1,908 ) $ 9,312 Income (loss) from discontinued operations (148 ) 12,570 Net income (loss) $ (2,056 ) $ 21,882 Refer to Notes to Condensed Consolidated Financial Statements. 2 Table of Contents VIAD CORP CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (Unaudited) Three Months Ended March 31, (in thousands) 2015 2014 Net income (loss) $ (2,120 ) $ 24,419 Other comprehensive income (loss): Unrealized gains on investments, net of tax (1) 159 9 Unrealized foreign currency translation adjustments, net of tax (1) (17,579 ) (6,733 ) Amortization of net actuarial gain, net of tax (1) 168 128 Amortization of prior service credit, net of tax (1) (86 ) (92 ) Comprehensive income (loss) (19,458 ) 17,731 Comprehensive (income) loss attributable to noncontrolling interest 64 (2,537 ) Comprehensive income (loss) attributable to Viad $ (19,394 ) $ 15,194 (1) The tax effect on other comprehensive income (loss) is not significant. Refer to Notes to Condensed Consolidated Financial Statements. 3 Table of Contents VIAD CORP CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited) Three Months Ended March 31, (in thousands) 2015 2014 Cash flows from operating activities Net income (loss) $ (2,120 ) $ 24,419 Adjustments to reconcile net income to net cash provided by operating activities: Depreciation and amortization 8,708 6,817 Deferred income taxes (955 ) 9,109 (Income) loss from discontinued operations 148 (15,238 ) Restructuring charges 216 211 Gains on dispositions of property and other assets (37 ) (387 ) Share-based compensation expense 1,231 391 Excess tax benefit from share-based compensation arrangements (283 ) (41 ) Other non-cash items, net 964 948 Change in operating assets and liabilities (excluding the impact of acquisitions): Receivables (21,807 ) (36,372 ) Inventories (3,150 ) (5,110 ) Accounts payable 20,067 36,606 Restructuring liabilities (603 ) (1,860 ) Accrued compensation (4,141 ) 2,833 Customer deposits 20,542 7,454 Income taxes payable (281 ) 265 Other assets and liabilities, net (235 ) (4,875 ) Net cash provided by operating activities 18,264 25,170 Cash flows from investing activities Capital expenditures (5,300 ) (5,516 ) Cash paid for acquired business 279 — Proceeds from dispositions of property and other assets 36 403 Proceeds from possessory interest and personal property—discontinued operations — 25,000 Net cash provided by (used in) investing activities (4,985 ) 19,887 Cash flows from financing activities Proceeds from borrowings 20,000 10,000 Payments on debt and capital lease obligations (23,279 ) (20,238 ) Dividends paid on common stock (2,000 ) (32,517 ) Common stock purchased for treasury (4,702 ) (1,042 ) Excess tax benefit from share-based compensation arrangements 283 41 Proceeds from exercise of stock options 225 1,401 Net cash used in financing activities (9,473 ) (42,355 ) Effect of exchange rate changes on cash and cash equivalents (2,943 ) (1,187 ) Net change in cash and cash equivalents 863 1,515 Cash and cash equivalents, beginning of year 56,990 45,821 Cash and cash equivalents, end of period $ 57,853 $ 47,336 Supplemental disclosure of cash flow information Cash paid for income taxes $ 2,203 $ 1,719 Cash paid for interest $ 908 $ 254 Property and equipment acquired under capital leases $ — $ 253 Property and equipment purchases in accounts payable and accrued liabilities $ 223 $ 1,815 Refer to Notes to Condensed Consolidated Financial Statements.