<PAGE>
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d)
of the Securities Exchange Act of 1934
Date of Report: August 15, 1996
VIAD CORP
(Exact name of registrant as specified in its charter)
DELAWARE 001-11015 36-1169950
(State or other jurisdiction of (Commission (I.R.S. Employer
incorporation or organization) File Number) Identification No.)
1850 N. CENTRAL AVE., PHOENIX, ARIZONA 85077
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code (602) 207-4000
<PAGE>
Item 5. Other Events.
The financial statements and other financial information filed
herewith as Exhibit 99 to this report include the
reclassifications mentioned below and are specifically
incorporated by reference into this report. The financial
statements and other information contained in Viad Corp's
("Viad," previously known as The Dial Corp) Annual Report on
Form 10-K for the fiscal year ended December 31, 1995, are
modified or superseded to the extent that the information
contained herein modifies or supersedes such statements and
other information.
On August 15, 1996, Viad completed the spin-off of its
consumer products business, now conducted under the name The
Dial Corporation. In effecting the spin-off, one share of The
Dial Corporation common stock was distributed for each share
of Viad common stock outstanding (the "Distribution").
In addition, effective May 31, 1996, shareholders of a
majority-owned Viad subsidiary, Greyhound Lines of Canada
("GLOC") voted to separate its intercity bus transportation
business and its tourism business into two independent
companies. At the same time, GLOC minority shareholders also
approved an automatic share exchange proposal whereby their
ownership interests in the tourism company, aggregating 31.5
percent, were exchanged for Viad's 68.5 percent ownership
interest in the intercity bus transportation company such that
Viad became the owner of 100 percent of the tourism company in
exchange for its ownership in the intercity bus transportation
company (the "Disposition").
As a result of the Distribution of the consumer products
business and the Disposition of the Canadian intercity bus
transportation business, certain reclassifications have been
made to Viad's consolidated financial statements to present
the consumer products and Canadian intercity bus
transportation businesses as discontinued operations.
<PAGE>
Item 7. Financial Statements and Exhibits.
(c) Exhibits.
(23) Consent of Independent Auditors to the
incorporation by reference into specific
registration statements on Form S-3 or on Form S-8
of their reports contained in or incorporated by
reference into this report.
(99) Additional Exhibits
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of
1934, the registrant has duly caused this report to be signed on
its behalf by the undersigned hereunto duly authorized.
VIAD CORP
By: /s/ Richard C. Stephan
--------------------------
Richard C. Stephan
Vice President-Controller
DATE: September 13, 1996
EXHIBIT 23
INDEPENDENT AUDITORS' CONSENT
We consent to the incorporation by reference in Viad Corp's
Registration Statements No.'s 33-41870, 33-57630, 33-64493, 33-
56531 on Form S-8 and No.'s 33-54465, 333-06357, 33-55360, 33-
64495 on Form S-3 of Viad Corp (formerly named The Dial Corp), of
our report dated February 23, 1996, except for Note D, as to
which the date is September 9, 1996 on the consolidated financial
statements of Viad Corp appearing in this Form 8-K of Viad Corp
for the year ended December 31, 1995.
/s/ Deloitte & Touche LLP
Deloitte & Touche LLP
Phoenix, Arizona
September 9, 1996
EXHIBIT 99
VIAD CORP
<PAGE>
<PAGE>
<TABLE>
<CAPTION>
VIAD CORP SELECTED FINANCIAL AND OTHER DATA
Year ended December 31, 1995 1994 1993 1992 1991
----------- ----------- ----------- ----------- -----------
<S> <C> <C> <C> <C> <C>
OPERATIONS (000 omitted)
Revenues $ 2,072,051 $ 1,902,853 $ 1,441,822 $ 1,465,046 $ 1,481,538
=========== =========== =========== =========== ===========
Income (loss) from continuing
operations (1) $ 30,288 $ 53,599 $ 29,139 $ 6,116 $ (40,763)
Income (loss) from
discontinued operations (2) (32,972) 86,712 112,947 (64,376) (16,845)
----------- ----------- ----------- ----------- -----------
Income (loss) before
extraordinary charge
and cumulative effect of
changes in accounting principle (2,684) 140,311 142,086 (58,260) (57,608)
Extraordinary charge for
early retirement of debt (21,601)
Cumulative effect of changes in
accounting principle (3) (13,875) (23,255)
----------- ----------- ----------- ----------- -----------
Net income (loss) $ (16,559) $ 140,311 $ 120,485 $ (81,515) $ (57,608)
=========== =========== =========== =========== ===========
INCOME (LOSS) PER
COMMON SHARE (dollars)
Continuing operations (1) $ 0.33 $ 0.61 $ 0.33 $ 0.07 $ (0.53)
Discontinued operations (2) (0.37) 1.00 1.32 (0.77) (0.21)
----------- ----------- ----------- ----------- -----------
Income (loss) before
extraordinary charge
and cumulative effect of
changes in accounting principle (0.04) 1.61 1.65 (0.70) (0.74)
Extraordinary charge (0.25)
Cumulative effect of changes
in accounting principle (3) (0.16) (0.28)
----------- ----------- ----------- ----------- -----------
Net income (loss)
per common share $ (0.20) $ 1.61 $ 1.40 $ (0.98) $ (0.74)
=========== =========== =========== =========== ===========
Dividends declared per
common share (4) $ 0.62 $ 0.59 $ 0.56 $ 0.60 $ 0.70
=========== =========== =========== =========== ==========
Average outstanding
common and equivalent
shares (000 omitted) 88,707 86,646 85,406 84,026 79,822
=========== =========== =========== =========== ==========
FINANCIAL POSITION
AT YEAR-END (000 omitted)
Total assets $ 3,723,680 $ 3,247,182 $ 2,726,148 $ 2,596,742 $ 3,068,464
Total debt 889,291 741,969 629,829 675,608 518,887
$4.75 Redeemable
preferred stock 6,597 6,590 6,586 6,586 6,610
Common stock and
other equity (4) 548,169 555,093 469,688 390,395 940,721
=========== =========== =========== =========== ==========
PEOPLE
Stockholders of record 63,925 55,241 51,300 50,688 56,358
Employees of continuing
businesses (average) 25,737 26,882 19,322 20,971 22,950
=========== =========== =========== =========== ==========
<FN>
(1) Includes a one-time gain of $2,260,000 (after-tax) or $0.03 per share, due to the curtailment of
certain postretirement medical benefits in 1995. After deducting restructuring and other charges of
$35,100,000 (after-tax) or $0.40 per share in 1995, $19,800,000 (after-tax) or $0.24 per share in 1992 and
$54,871,000 (after-tax) or $0.69 per share in 1991. Also after deducting $4,818,000 (after-tax), or $0.06
per share, in 1992 for increased ongoing expenses (above 1991 levels) resulting from the adoption of SFAS
No. 106 effective as of January 1, 1992.
(2) See Notes A and D of Notes to Consolidated Financial Statements.
(3) Initial application of SFAS No. 121, "Accounting for the Impairment of Long-Lived Assets and for Long-
Lived Assets to Be Disposed Of" in 1995 and SFAS No. 106, "Employers' Accounting for Postretirement Benefits
Other Than Pensions" in 1992.
(4) Viad's quarterly dividend was increased from $0.15 to $0.16 with the October 2, 1995 payment and from
$0.14 to $0.15 with the July 1, 1994 payment. The declines in dividends declared per common share in 1993
and 1992 and in common stock and other equity in 1992 reflect the spin-off of FINOVA. FINOVA's initial
dividend rate after the spin-off early in 1992 maintained the 1991 annual dividend rate for stockholders who
retained their FINOVA shares following the spin-off.
/TABLE
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF RESULTS OF OPERATIONS AND
FINANCIAL CONDITION OF VIAD CORP
RESULTS OF OPERATIONS:
On August 15, 1996, Viad Corp ("Viad"), previously known as The
Dial Corp, completed the spin-off of its consumer products
business, now conducted under the name The Dial Corporation. In
effecting the spin-off, one share of The Dial Corporation common
stock was distributed for each share of Viad common stock
outstanding (the "Distribution"). See Liquidity and Capital
Resources and Note D of Notes to Consolidated Financial
Statements.
Effective May 31, 1996, shareholders of a majority-owned Viad
subsidiary, Greyhound Lines of Canada ("GLOC") voted to separate
its intercity bus transportation business and its tourism
business into two independent companies. At the same time, GLOC
minority shareholders approved an automatic share exchange
proposal whereby their ownership interests in the tourism
company, aggregating 31.5 percent, were exchanged for Viad's 68.5
percent ownership interest in the intercity bus transportation
company such that Viad became the owner of 100 percent of the
tourism company in exchange for its ownership in the intercity
bus transportation business. See Note D of Notes to Consolidated
Financial Statements.
The accompanying Consolidated Financial Statements of Viad
include the accounts of Viad and all of its subsidiaries. The
statements have been prepared to reflect the historical financial
position and results of operations as adjusted for the
reclassification of the consumer products and Canadian intercity
bus transportation businesses, along with the Transportation
Manufacturing and Service Parts segment which was sold in 1993
and previously reported as discontinued, as discontinued
operations for all periods presented.
1995 VS. 1994:
Revenues for 1995 were $2.1 billion compared with $1.9 billion in
1994.
Income from continuing operations for 1995 was $30.3 million, or
$0.33 per share, after deducting Premier Cruise Lines asset
write-downs of $35.1 million, or $0.40 per share, as discussed
below, and including a $2.3 million gain, or $0.03 per share, on
the curtailment of certain postretirement medical benefits in the
Convention Services segment. Income from continuing operations
in 1995, excluding the asset write-downs and the curtailment
gain, was $63.1 million, or $0.70 per share, compared to $53.6
million, or $0.61 per share, in 1994.
Viad had a net loss of $16.6 million, or $0.20 per share, in 1995
compared with net income of $140.3 million, or $1.61 per share,
in 1994. The 1995 net loss is after deducting a loss from
discontinued operations of $33.0 million, or $0.37 per share,
while the 1994 net income included income from discontinued
operations of $86.7 million, or $1.00 per share. See Note D of
Notes to Consolidated Financial Statements. The 1995 net loss is
also after deducting a one-time charge of $13.9 million, or $0.16
per share, to record the cumulative effect to January 1, 1995, of
the initial application of SFAS No. 121, "Accounting for the
Impairment of Long-Lived Assets and for Long-Lived Assets to Be
Disposed Of." As discussed further in Note C of Notes to
Consolidated Financial Statements, the SFAS No. 121 adjustment is
a non-cash charge for assets held for disposal at January 1,
1995. In the fourth quarter of 1995, Viad elected early adoption
of the new accounting standard as encouraged by the Financial
Accounting Standards Board.
Asset Write-Downs. In the third quarter of 1995, Viad
announced that it would provide $55.5 million ($35.1 million
after-tax) for the write-down of certain Premier Cruise Lines
assets and intangibles, in light of current and anticipated
conditions in its cruise market. The recoverability of operating
assets and related goodwill associated with Premier Cruise Lines
was evaluated based on current projections of the undiscounted
operating income of the cruise operations. Heightened competition
in the three-night and four-night cruise segment and in the Port
Canaveral/Caribbean market, along with falling passenger counts
industry-wide, caused management to lower its projections of
future operating income. As a result, goodwill was written off
and the carrying value of the Star/Ship Majestic was written down
to its estimated net realizable value in the third quarter. See
Note C of Notes to Consolidated Financial Statements.
Airline Catering and Services. Revenues of the Airline
Catering and Services segment increased $36.7 million or 5
percent from 1994 to 1995, with operating income increasing $6.2
million, or 10 percent. The increase is primarily attributed to
having the United Airline flight kitchens, acquired in the first
half of 1994, operational throughout 1995. Additional aircraft
service locations and other new business from continuing
locations also contributed to the increase, partially offset by
the effect of further airline meal service cutbacks on certain
domestic flights of short duration. Operating margins improved to
8.6 percent from 1994's 8.2 percent, as the former United flight
kitchens reached normal efficiency levels during 1995 versus the
start-up and training period in 1994.
Convention Services. Convention Services' 1995 revenues of
$589 million were up $66.3 million, or 13 percent, from those of
the 1994 period, due primarily to acquisitions in 1995, including
Giltspur, Inc., in the fourth quarter of 1995. Excluding the one-
time $3.5 million ($2.3 million after-tax) gain on the
curtailment of certain postretirement medical benefits, operating
income increased $500,000, or 1 percent, while operating margins
decreased to 8.7 percent in 1995 from 9.7 percent in 1994.
Operating income and margins were impacted by certain shows not
repeated each year and by higher costs of staging shows in
certain locales, which more than offset the fourth quarter 1995
contribution from Giltspur.
Travel and Leisure and Payment Services. Revenues of the
Travel and Leisure and Payment Services segment were $682.7
million in 1995, up $66.2 million, or 11 percent, over those of
1994. These companies reported operating income of $3.9 million,
after deducting the previously described $55.5 million write-down
of Premier Cruise Lines assets. Excluding the asset write-downs,
operating income for 1995 was $59.4 million, up $9.9 million, or
20 percent, from that of 1994. Viad's payment services
subsidiary continues to invest increasing amounts in tax-exempt
securities. On a fully taxable equivalent basis, revenues and
operating income would be higher by $16 million and $7.9 million
for 1995 and 1994, respectively. Operating margins on the fully
taxable equivalent basis would be 10.8 percent in 1995, up from
9.2 percent in 1994.
On the fully taxable equivalent basis, 1995 revenues of payment
services would be $41.9 million higher than those of 1994, due
principally to increased investment income, revenues from new
product lines and increased realized investment gains. Investment
income increased due to higher investment yields and higher fund
balances in 1995 than in 1994. On the fully taxable equivalent
basis, payment services operating income would be $12.4 million
above 1994, as the higher revenues more than offset higher
commission expense for official checks and other volume-related
costs.
Duty Free airport and shipboard concession revenues declined $1.4
million from 1994 to 1995, due primarily to 1994 including
revenues of a major shipboard concession phased-out over the
first ten months of 1994 and fewer passenger days for continuing
business, which were offset in part by revenues from a revised
airport concession arrangement late in 1995. Operating income
improved $700,000, due mostly to lower operating expenses and the
effect of higher revenue per passenger day.
Cruise revenues declined $1 million in 1995 compared with 1994
levels. Heightened competition in the Port Canaveral/Caribbean
three-night and four-night cruise market and falling passenger
counts industry-wide continued to negatively impact results. In
addition, two ships were in drydock for repairs for a total of 44
ship days during the first quarter of 1995, and Viad commenced a
four-year charter arrangement in February 1995 to lease one of
its vessels, the Star/Ship Majestic, to a European operator,
thereby decreasing total passenger service revenues. Excluding
the $55.5 million of asset write-downs taken in the third quarter
of 1995, operating results improved $4.6 million from those of
1994 due to lower operating expenses resulting from taking one
vessel out of operation, reduced rent expense following the
purchases during 1995 of two ships previously leased, and other
cost reduction efforts.
Travel tour service revenues and operating income improved $49.9
million and $2.9 million, respectively, from 1994 levels, due
primarily to strong growth in existing package tour operations,
improved passenger volumes and hotel occupancy, favorable foreign
exchange rates, and acquisitions of new tour operations in
Ireland and Canada.
Food service revenues improved $3.1 million from those of 1994.
Increased business at General Motors locations and at the America
West Arena was partly offset by the closing of certain fast food
outlets and the sale of a non-core operation in the second
quarter of 1995. Operating income of the food service companies
increased $100,000 from 1994 to 1995 as operating income
generated from higher revenues was mostly offset by certain one-
time costs associated with the sale of the non-core operation.
Unallocated Corporate Expense and Other Items, Net.
Unallocated corporate expense and other items, net, decreased
$200,000, or 1 percent, from that of 1994.
Interest Expense. Interest expense for 1995 increased $7.5
million over that of 1994, as both debt levels and interest rates
on floating-rate debt were higher in 1995 than in 1994. Debt
level increases are due primarily to the purchase of the
Star/Ship Majestic in February 1995, the purchase of the
Star/Ship Atlantic in July 1995 (both ships were previously
leased), and the acquisition of Giltspur in October 1995.
Income Taxes. Excluding the effects of the asset write-downs,
the 1995 effective tax rate was 28.9 percent, down from 32.6
percent in 1994. This reduction in the effective tax rate
resulted primarily from the increased use of tax-exempt
investments by Viad's payment services subsidiary.
1994 VS. 1993:
Revenues for 1994 were $1.9 billion compared with $1.4 billion in
1993.
Income from continuing operations for 1994 was $53.6 million, or
$0.61 per share, compared to $29.1 million, or $0.33 per share,
in 1993. Results were aided by a full year's results from 1993
acquisitions of convention services businesses and the 1994
phase-in of flight kitchens acquired from United Airlines.
Net income for 1994 was $140.3 million, or $1.61 per share,
compared with net income of $120.5 million, or $1.40 per share in
1993. The 1994 and 1993 net income includes income from
discontinued operations of $86.7 million, or $1.00 per share, and
$112.9 million, or $1.32 per share, respectively. See Note D of
Notes to Consolidated Financial Statements. The 1993 net income
is also after deducting a $21.6 million, or $0.25 per share,
extraordinary charge for the early extinguishment of debt.
Airline Catering and Services. Revenues of the Airline
Catering and Services segment increased $260.9 million or 52
percent from 1993 to 1994, while operating income increased $20.5
million or 49 percent over the same period. Operating margins of
the group declined slightly to 8.2 percent from 1993's 8.4
percent, as the newly acquired flight kitchens went through their
start-up phase in 1994. Revenues and operating income increased
primarily because of the acquisition and integration of fifteen
airline catering kitchens from United Airlines in the U.S. and
four airline catering kitchens in England and Scotland acquired
from a British airline caterer. These acquisitions added
significantly to airline catering's kitchens at international and
major U.S. airports with a large number of longer domestic and
international flights which require more meal service than
average.
Convention Services. Convention Services segment revenues for
1994 increased $166.4 million or 47 percent over those of 1993,
while operating income increased $22.8 million or 82 percent.
These increases were due to the inclusion of businesses acquired
during 1993 for the full year of 1994 and the achievement of
planned operating efficiencies for the merged operations, as
indicated by the improvement in operating margins to 9.7 percent
in 1994 from 7.8 percent in 1993.
Travel and Leisure and Payment Services. Revenues of the
Travel and Leisure and Payment Services segment were up $33.7
million or 6 percent from those of 1993, while operating income
was down $6.9 million or 12 percent from that of 1993. Viad's
payment services subsidiary is investing increasing amounts in
tax-exempt securities. On a fully taxable equivalent basis,
revenues would be up $37.6 million while the operating income
decline would be $3.9 million less, or $3.0 million. Operating
margins, on the fully taxable equivalent basis, declined to 9.2
percent in 1994 from 10.3 percent in 1993.
On the fully taxable equivalent basis, payment services' 1994
revenues would be $5.1 million more than those of 1993, due to
higher interest income from an increase in funds invested and
higher dispenser fee and service charge revenue, offset somewhat
by cancellation of certain money order agents who presented undue
credit risks. Lower operating expenses also contributed to the
increase in operating income, which on the fully taxable
equivalent basis would be $4.3 million higher than that of 1993.
Duty Free airport and shipboard concession operations achieved
increases of $13.8 million in revenue and $1.5 million in
operating income over 1993 levels, due mostly to new business and
higher passenger volumes, offset partially by the phase-out of a
major shipboard concession over the first ten months of 1994, the
loss of an airport contract in the spring of 1994 and reductions
of international flights at two other airports.
Cruise revenues declined $7.6 million in 1994 compared with 1993
levels due to lower Florida tourism and increased competition,
while higher ship leasing costs due to higher interest rates
offset continuing cost reductions and contributed to the $7.3
million decline in operating results.
Travel tour services revenues and operating income increased $2.8
million and $1.7 million, respectively, from those of 1993, due
to increased passenger volumes.
The contract food service group's 1994 revenues increased $13.4
million due to increased production at auto manufacturing plants
and new business, offset somewhat by loss of revenue from the
closing of marginal locations. Excluding a $5 million one-time
gain from the curtailment of a postretirement benefit plan in
1993, operating income was up $700,000 from 1993 levels.
Unallocated Corporate Expense and Other Items, Net.
Unallocated corporate expense and other items, net, increased
$3.3 million or 11 percent from that of 1993.
Interest Expense. Interest expense in 1994 was $2.9 million
lower than in 1993. Higher average debt levels in 1994 related
to expenditures during 1993 and 1994 for acquisitions in the
airline catering and convention services businesses and the
effects of higher floating interest rates, adjusted by the impact
of interest rate swap agreements as discussed in Note H of Notes
to Consolidated Financial Statements, combined to more than
offset the reduction resulting from the prepayment of high-
coupon, fixed-rate debt during the third quarter of 1993.
Income Taxes. The 1994 effective tax rate declined to 32.6
percent from 1993's 38.4 percent (excluding from 1993 the $2.2
million, or $0.03 per share, favorable impact on deferred tax
assets at January 1, 1993, from accounting for the effects of a
one percent increase in the U.S. corporate income tax rate under
the Omnibus Budget Reconciliation Act of 1993, which was signed
into law on August 10, 1993). This reduction in the effective tax
rate results primarily from the increased use of tax-exempt
investments by Viad's payment services subsidiary.
LIQUIDITY AND CAPITAL RESOURCES:
As discussed in Note B of Notes to Consolidated Financial
Statements, during 1995 Viad purchased for $111.1 million two
cruise ships which were previously leased, completed several
business acquisitions for an aggregate purchase price of $93.8
million and made other capital expenditures totaling $62.1
million. These expenditures were funded with operating cash flow
and incremental debt of $147.3 million. As a result, Viad's total
debt at December 31, 1995 increased to $889.3 million from $742.0
million at December 31, 1994. The debt to capital ratio was 0.61
to 1 and 0.57 to 1 at December 31, 1995 and December 31, 1994,
respectively. Capital is defined as total debt plus minority
interests, preferred stock and common stock and other equity.
In connection with the Distribution described in Notes A, D and H
of Notes to Consolidated Financial Statements, in August 1996
Viad borrowed $280 million under a new $350 million bank credit
facility and used the proceeds to repay floating rate
indebtedness of Viad. The credit facility and the related
liability were then assumed by The Dial Corporation upon the
spin-off, effectively transferring a portion of Viad's
outstanding indebtedness to The Dial Corporation. On a pro forma
basis, after giving effect to the assumption of debt by The Dial
Corporation and the reduction of equity upon the Distribution,
Viad's debt-to-capital ratio would have been approximately 0.60
to 1 at December 31, 1995.
In July 1994, a Shelf Registration filed with the Securities and
Exchange Commission became effective. Under the Shelf
Registration, Viad can issue up to an aggregate $500 million of
debt and equity securities. No debt has been issued under the
program and there is no intention to issue any equity securities
at the present time. The Shelf Registration increases Viad's
future financing options.
Viad's payment service operations generate funds from the sale of
money orders and other payment instruments (classified as
"Payment service obligations"). The proceeds of such sales are
invested by Viad's payment services subsidiary, in accordance
with applicable state laws, in highly liquid debt instruments
(classified, along with cash on hand and cash in transit from
agents, as "Funds, agents' receivables and current maturities of
investments restricted for payment service obligations"), which
before consolidating eliminations included investment-grade
commercial paper issued by Viad and supported along with the rest
of Viad's outstanding commercial paper by a credit commitment
under a long-term revolving bank credit agreement, as described
in Note H of Notes to Consolidated Financial Statements; and in a
portfolio of high-quality investments (approximately 99 percent
have ratings of A- or higher or are collateralized by federal
agency securities), including federal, state and municipal
obligations, asset-backed securities and corporate debt
securities (classified as "Investments restricted for payment
service obligations"). These investments are restricted by state
regulatory agencies for use by Viad's payment services subsidiary
to satisfy the liability to pay, upon presentment, the face
amount of such payment service obligations, and accordingly such
assets are not available to satisfy working capital or other
financing requirements of Viad. Fluctuations in the balances of
payment service assets and obligations result from varying levels
of sales of money orders and other payment instruments, the
timing of the collections of agents' receivables and the timing
of the presentment of such instruments.
With respect to working capital, in order to minimize the effects
of borrowing costs on earnings, Viad strives to maintain current
assets (principally cash, inventories and receivables) at the
lowest practicable levels while at the same time taking advantage
of the payment terms offered by trade creditors. These efforts
notwithstanding, working capital requirements fluctuate
significantly from seasonal factors as well as changes in levels
of receivables and inventories caused by numerous business
factors.
Viad satisfies a portion of its working capital and other
financing requirements with short-term borrowings (through
commercial paper, bank note programs and bank lines of credit)
and the sale of receivables. As discussed in Note H of Notes to
Consolidated Financial Statements, short-term borrowings are
supported by a long-term revolving bank credit agreement.
Effective with the Distribution in August 1996, Viad's reduced
borrowings are supported by unused commitments under a new $400
million long-term revolving bank credit agreement which replaced
the prior arrangement.
In addition, as discussed further in Note N of Notes to
Consolidated Financial Statements, Viad has an agreement to sell
up to $75 million ($140 million at December 31, 1995 when
consumer products accounts receivable were included) of accounts
receivable under which the purchaser has agreed to invest
collected amounts in new purchases. The accounts receivable sold
totaled $60.8 million at December 31, 1995. The agreement has a
maturity date of August 1997.
As discussed in Note I of Notes to Consolidated Financial
Statements, in September 1992 Viad sold 10,491,800 shares of
treasury stock to Viad's Employee Equity Trust (the "Trust").
This Trust is being used to fund certain existing employee
compensation and benefit plans over the scheduled 15-year term of
the Trust. The Trust acquired the shares of common stock from
Viad for a $200 million promissory note at the date of sale. For
financial reporting purposes, the Trust is consolidated with
Viad. The fair market value of the shares held by the Trust,
representing unearned employee benefits, was recorded as a
deduction from common stock and other equity, and is reduced as
employee benefits are funded. At December 31, 1995, a total of
6,279,342 shares remained in the Trust and were available to fund
future benefit obligations.
Capital spending has been reduced by obtaining, where
appropriate, equipment and other property under operating leases.
Viad's capital asset needs and working capital requirements are
expected to be financed primarily with internally generated
funds. Except as noted herein, cash flows from operations and the
proceeds from the sale of businesses during the past three years
along with proceeds from the exercise of stock options have been
sufficient to finance capital expenditures, the purchase of
businesses and cash dividends to shareholders. Viad expects these
trends to continue with operating cash flows and proceeds from
the sale of Trust shares and other treasury stock generally being
sufficient to finance its business. Should financing requirements
exceed such sources of funds, Viad believes it has adequate
external financing sources available, including Viad's $500
million Shelf Registration, to cover any such shortfall.
As indicated in Note L of Notes to Consolidated Financial
Statements, while certain pension plans' assets exceed
accumulated benefit obligations, certain other plans' accumulated
benefit obligations exceed assets, although Viad has paid the
minimum funding required by applicable regulations for all plans.
The deficiency in the underfunded plans is expected to be reduced
through the payment of the minimum funding requirement over a
period of several years. Unfunded pension and other
postretirement benefit plans require payments over extended
periods of time. Such future funding and benefit payments are not
expected to materially affect Viad's liquidity.
As of December 31, 1995, Viad has recorded U.S. deferred income
tax assets totaling $87.5 million, which Viad believes to be
fully realizable in future years. The realization of such
benefits will require average annual taxable income over the next
15 years (the current Federal loss carryforward period) of
approximately $17 million. Viad's average U.S. pretax income from
continuing operations, exclusive of nondeductible goodwill
amortization but after deducting asset write-downs, over the past
three years has been approximately $30 million ($49 million
before deducting asset write-downs). Furthermore, approximately
$21 million of the deferred income tax benefits relate to
pensions and other employee benefits which will become deductible
for income tax purposes as they are paid, which will occur over
extended periods of time.
Viad is subject to various environmental laws and regulations of
the United States as well as of the states and other countries in
whose jurisdictions Viad has or had operations and is subject to
certain international agreements. As is the case with many
companies, Viad faces exposure to actual or potential claims and
lawsuits involving environmental matters. Viad believes that any
liabilities resulting therefrom, after taking into consideration
amounts already provided for, but exclusive of any potential
insurance recovery, should not have a material adverse effect on
Viad's financial position or results of operations.
BUSINESS OUTLOOK AND RECENT DEVELOPMENTS:
The challenges for Viad's businesses going into 1996 and beyond
are many. Responding to ongoing competitive challenges from
within the marketplace and the uncertainties of the unpredictable
economic environment will require that Viad continue to focus on
monitoring and reducing costs and expenses in addition to
emphasizing revenue growth. Viad remains aggressive in its
commitment to continue to enhance stockholder value in the years
ahead.
As provided by the "Safe Harbor Statement under the Private
Securities Litigation Reform Act of 1995", Viad cautions readers
that, in addition to the historical information contained herein,
this annual report includes certain forward-looking statements,
assumptions and discussions which involve risks and
uncertainties, including, but not limited to, economic,
competitive and capital marketplace factors which affect Viad's
operations, markets, products, services and prices and could
cause Viad's future results and stockholder values to differ
materially from those expressed in any forward-looking comments
made by, or on behalf of, Viad.
<PAGE>
<PAGE>
MANAGEMENT'S REPORT ON RESPONSIBILITY FOR FINANCIAL REPORTING
The management of Viad Corp has the responsibility for
preparing and assuring the integrity and objectivity of the
accompanying financial statements and other financial information
in this report. The financial statements were developed using
generally accepted accounting principles and appropriate
policies, consistently applied except for the change in 1995 to
comply with new accounting requirements for impairment of long-
lived assets as discussed in Note C of Notes to Consolidated
Financial Statements. They reflect, where applicable,
management's best estimates and judgments and include disclosures
and explanations which are relevant to an understanding of the
financial affairs of the Company.
The Company's financial statements have been audited by Deloitte
& Touche LLP, independent auditors elected by the stockholders.
Management has made available to Deloitte & Touche LLP all of the
Company's financial records and related data, and has made
appropriate and complete written and oral representations and
disclosures in connection with the audit.
Management has established and maintains a system of internal
control that it believes provides reasonable assurance as to the
integrity and reliability of the financial statements, the
protection of assets and the prevention and detection of
fraudulent financial reporting. The system of internal control is
believed to provide for appropriate division of responsibilities
and is documented by written policies and procedures that are
utilized by employees involved in the financial reporting
process. Management also recognizes its responsibility for
fostering a strong ethical climate. This responsibility is
characterized and reflected in the Company's Code of Corporate
Conduct, which is communicated to all of the Company's executives
and managers.
The Company also maintains a comprehensive internal auditing
function which independently monitors compliance and assesses the
effectiveness of the internal controls and recommends potential
improvements thereto. In addition, as part of their audit of the
Company's financial statements, the independent auditors review
and evaluate selected internal accounting and other controls to
establish a basis for reliance thereon in determining the audit
tests to be applied. There is close coordination of audit
planning and coverage between the Company's internal auditing
function and the independent auditors. Management has considered
the recommendations of both internal auditing and the independent
auditors concerning the Company's system of internal control and
has taken actions believed to be cost-effective in the
circumstances to implement appropriate recommendations and
otherwise enhance controls. Management believes that the
Company's system of internal control accomplishes the objectives
discussed herein.
The Board of Directors oversees the Company's financial reporting
through its Audit Committee, which regularly meets with
management representatives and, jointly and separately, with the
independent auditors and internal auditing management to review
accounting, auditing and financial reporting matters.
/s/ Ermo S. Bartoletti
Ermo S. Bartoletti
Vice President--Internal Auditing
/s/ Richard C. Stephan
Richard C. Stephan
Vice President--Controller
<PAGE>
<PAGE>
INDEPENDENT AUDITORS' REPORT
To the Stockholders and Board of Directors of Viad Corp:
We have audited the accompanying consolidated balance sheets of
Viad Corp (formerly named The Dial Corp) as of December 31, 1995
and 1994, and the related consolidated statements of income,
common stock and other equity and of cash flows for each of the
three years in the period ended December 31, 1995. These
financial statements are the responsibility of the Company's
management. Our responsibility is to express an opinion on these
financial statements based on our audits.
We conducted our audits in accordance with generally accepted
auditing standards. Those standards require that we plan and
perform the audit to obtain reasonable assurance about whether
the financial statements are free of material misstatement. An
audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating
the overall financial statement presentation. We believe that our
audits provide a reasonable basis for our opinion.
In our opinion, such consolidated financial statements present
fairly, in all material respects, the financial position of Viad
Corp as of December 31, 1995 and 1994, and the results of its
operations and its cash flows for each of the three years in the
period ended December 31, 1995 in conformity with generally
accepted accounting principles.
As discussed in Note C of Notes to Consolidated Financial
Statements, the Company changed its method of accounting for
impairment of long-lived assets in 1995.
/s/ Deloitte & Touche LLP
Deloitte & Touche LLP
Phoenix, Arizona
February 23, 1996, except for Note D,
as to which the date is September 9, 1996
<PAGE>
<PAGE>
<TABLE>
<CAPTION>
VIAD CORP CONSOLIDATED BALANCE SHEET
December 31, (000 omitted, except share data)
1995 1994
----------- -----------
<S> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents $ 16,133 $ 24,514
Receivables, less allowance of
$14,793 and $16,210 161,600 139,139
Inventories 84,462 70,226
Deferred income taxes 31,639 19,656
Other current assets 42,170 32,839
----------- -----------
336,004 286,374
Funds, agents' receivables and
current maturities of investments
restricted for payment service
obligations, after eliminating
$90,000 and $80,000 invested in
Viad commercial paper 786,081 661,252
----------- -----------
Total current assets 1,122,085 947,626
Investments restricted for
payment service obligations 880,035 678,550
Property and equipment 561,569 467,338
Other investments and assets 103,508 92,445
Investments in discontinued operations 481,269 533,508
Deferred income taxes 55,882 53,751
Intangibles 519,332 473,964
----------- -----------
$ 3,723,680 $ 3,247,182
=========== ===========
</TABLE>
<PAGE>
<PAGE>
<TABLE>
<CAPTION>
<S> <C> <C>
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable $ 118,212 $ 105,691
Accrued compensation 64,918 63,413
Other current liabilities 235,081 203,132
Current portion of long-term debt 77,450 22,280
----------- -----------
495,661 394,516
Payment service obligations 1,739,508 1,438,960
----------- -----------
Total current liabilities 2,235,169 1,833,476
Long-term debt 811,841 718,774
Pension and other benefits 82,588 75,971
Other deferred items and
insurance reserves 26,698 50,439
Commitments and contingent liabilities
(Notes I, M, N and O)
Minority interests 12,618 6,839
$4.75 Redeemable preferred stock 6,597 6,590
Common stock and other equity:
Common stock, $1.50 par value,
200,000,000 shares authorized,
97,108,724 shares issued 145,663 145,663
Additional capital 362,205 308,350
Retained income 322,439 393,233
Cumulative translation adjustments (18,380) (20,910)
Unearned employee benefits (213,996) (176,201)
Unrealized gain (loss) on securities
available for sale, net of tax 1,456 (21,742)
Common stock in treasury, at cost,
2,877,500 and 4,319,624 shares (51,218) (73,300)
----------- -----------
Total common stock and other equity 548,169 555,093
----------- -----------
$ 3,723,680 $ 3,247,182
=========== ===========
See Notes to Consolidated Financial Statements.
</TABLE>
<PAGE>
<PAGE>
<TABLE>
<CAPTION>
VIAD CORP STATEMENT OF CONSOLIDATED INCOME
Year ended December 31, (000 omitted, except per share data)
1995 1994 1993
----------- ----------- -----------
<S> <C> <C> <C>
REVENUES $ 2,072,051 $ 1,902,853 $ 1,441,822
----------- ----------- -----------
Costs and expenses:
Costs of sales and services 1,889,382 1,740,265 1,315,634
Asset write-downs 55,500
Unallocated corporate expense
and other items, net 33,354 33,594 30,314
Interest expense 54,751 47,247 50,175
Minority interests 2,629 2,279 1,902
----------- ----------- -----------
2,035,616 1,823,385 1,398,025
----------- ----------- -----------
Income before income taxes 36,435 79,468 43,797
Income taxes 6,147 25,869 14,658
----------- ----------- -----------
INCOME FROM
CONTINUING OPERATIONS 30,288 53,599 29,139
Income (loss) from
discontinued operations (32,972) 86,712 112,947
----------- ----------- -----------
Income before extraordinary
charge and cumulative effect
of change in accounting
principle (2,684) 140,311 142,086
Extraordinary charge for early
retirement of debt, net of tax
benefit of $11,667 (21,601)
Cumulative effect, net of tax
benefit of $8,459, to January 1,
1995, of initial application of
SFAS No. 121, "Accounting for
the Impairment of Long-Lived
Assets and for Long-Lived Assets
to Be Disposed Of" (13,875)
----------- ----------- -----------
NET INCOME (LOSS) $ (16,559) $ 140,311 $ 120,485
=========== =========== ===========
INCOME (LOSS) PER COMMON SHARE:
Continuing operations $ 0.33 $ 0.61 $ 0.33
Discontinued operations (0.37) 1.00 1.32
----------- ----------- -----------
Income before extraordinary
charge and cumulative
effect of change in
accounting principle (0.04) 1.61 1.65
Extraordinary charge (0.25)
Cumulative effect, to
January 1, 1995, of
initial application of
SFAS No. 121 (0.16)
----------- ----------- -----------
NET INCOME (LOSS) PER
COMMON SHARE $ (0.20) $ 1.61 $ 1.40
=========== =========== ===========
Dividends declared per
common share $ 0.62 $ 0.59 $ 0.56
=========== =========== ===========
Average outstanding common
and equivalent shares 88,707 86,646 85,406
=========== =========== ===========
See Notes to Consolidated Financial Statements.
</TABLE>
<PAGE>
<PAGE>
<TABLE>
<CAPTION>
VIAD CORP STATEMENT OF CONSOLIDATED CASH FLOWS
Year ended December 31, (000 omitted)
1995 1994 1993
----------- ----------- -----------
<S> <C> <C> <C>
CASH FLOWS PROVIDED (USED)
BY OPERATING ACTIVITIES:
Net income (loss) $ (16,559) $ 140,311 $ 120,485
Adjustments to reconcile
net income (loss) to net cash
provided by operating activities:
Depreciation and amortization 79,117 68,988 60,574
Deferred income taxes (11,197) 13,630 28,357
Discontinued operations 32,972 (86,712) (112,947)
Extraordinary charge for
early retirement of debt 21,601
Cumulative effect of change
in accounting principle 13,875
Asset write-downs 55,500
Other noncash items, net 482 6,417 27,427
Change in operating assets
and liabilities:
Receivables and inventories (36,495) (29,361) (27,712)
Payment service assets and
obligations, net 186,908 166,200 141,881
Accounts payable and
accrued compensation (5,240) 19,602 14,086
Other assets and
liabilities, net (33,037) 23,458 (19,486)
----------- ----------- -----------
Net cash provided by
operating activities 266,326 322,533 254,266
----------- ----------- -----------
CASH FLOWS PROVIDED (USED)
BY INVESTING ACTIVITIES:
Capital expenditures (62,127) (68,252) (68,326)
Purchases of cruise ships
previously leased (111,103)
Acquisitions of businesses and
other assets, net of cash
acquired (93,803) (145,042) (137,787)
Proceeds from sales of property
and equipment 11,841 6,256 14,432
Investments restricted for
payment service obligations:
Proceeds from sales and
maturities of securities
classified as available
for sale 485,664 237,972
Proceeds from sales and
maturities of securities
classified as held to
maturity 22,201
Proceeds from sales and
maturities of investments 626,527
Purchases of securities
classified as available
for sale (577,884) (341,716)
Purchases of securities
classified as held to
maturity (103,553) (105,023)
Purchases of investments (767,035)
Proceeds from sale of
shares of MCII 245,700
Investments in and advances
from (to) discontinued
operations, net 19,267 1,829 (44,163)
Other, net (317) (190) (288)
----------- ----------- -----------
Net cash used by
investing activities (409,814) (414,166) (130,940)
----------- ----------- -----------
CASH FLOWS PROVIDED (USED)
BY FINANCING ACTIVITIES:
Proceeds from long-term borrowings 40,000 70,000 229,358
Payments on long-term borrowings (2,314) (2,238) (171,514)
Extraordinary charge for early
retirement of debt (21,601)
Net change in short-term
borrowings classified
primarily as long-term debt 100,388 44,296 (104,942)
Dividends on common and
preferred stock (55,024) (51,401) (48,345)
Minority portion of subsidiary's
special dividend (9,761)
Proceeds from sales of treasury stock 32,062 28,546 43,286
Common stock purchased for treasury (38,642)
Net change in receivables sold 36,797 6,000 15,000
Cash payments on interest
rate swaps (16,802) (17,795) (32,909)
----------- ----------- -----------
Net cash provided (used) by
financing activities 135,107 67,647 (130,309)
----------- ----------- -----------
Net decrease in cash and
cash equivalents (8,381) (23,986) (6,983)
Cash and cash equivalents,
beginning of year 24,514 48,500 55,483
----------- ----------- -----------
CASH AND CASH EQUIVALENTS,
END OF YEAR $ 16,133 $ 24,514 $ 48,500
=========== =========== ===========
See Notes to Consolidated Financial Statements.
</TABLE>
<PAGE>
<PAGE>
<TABLE>
<CAPTION>
VIAD CORP STATEMENT OF CONSOLIDATED COMMON STOCK AND OTHER EQUITY
Year ended December 31, (000 omitted)
1995 1994 1993
----------- ----------- -----------
<S> <C> <C> <C>
COMMON STOCK:
Balance, beginning of year $ 145,663 $ 72,832 $ 72,832
Two-for-one stock split 72,831
----------- ----------- -----------
Balance, end of year $ 145,663 $ 145,663 $ 72,832
=========== =========== ===========
ADDITIONAL CAPITAL:
Balance, beginning of year $ 308,350 $ 378,814 $ 390,790
Two-for-one stock split (72,831)
Treasury shares issued in
connection with employee
benefit plans (752) (2,763) (5,850)
Treasury shares issued in
connection with dividend
reinvestment plan 2,949 1,175 550
Net change in unamortized
amount of performance-based
and restricted stock awards 2,428 (4,456) 2,063
Employee Equity Trust adjustment
to market value 54,484 8,635 (8,723)
Treasury shares issued in
connection with acquisition
of subsidiary (5,202)
Other, net (52) (224) (16)
----------- ----------- -----------
Balance, end of year $ 362,205 $ 308,350 $ 378,814
=========== =========== ===========
RETAINED INCOME:
Balance, beginning of year $ 393,233 $ 304,481 $ 234,655
Net income (loss) (16,559) 140,311 120,485
Dividends on common and
preferred stock (55,024) (51,401) (48,345)
Other, net 789 (158) (2,314)
----------- ----------- -----------
Balance, end of year $ 322,439 $ 393,233 $ 304,481
=========== =========== ===========
CUMULATIVE TRANSLATION
ADJUSTMENTS:
Balance, beginning of year $ (20,910) $ (9,889) $ (11,341)
Unrealized translation gain (loss) 2,530 (11,021) (279)
Disposition of Transportation
Manufacturing and Service
Parts segment 1,731
----------- ----------- -----------
Balance, end of year $ (18,380) $ (20,910) $ (9,889)
=========== =========== ===========
UNEARNED EMPLOYEE BENEFITS:
Balance, beginning of year $ (176,201) $ (189,940) $ (245,155)
Employee benefits earned 16,689 22,374 46,492
Employee Equity Trust adjustment
to market value (54,484) (8,635) 8,723
----------- ----------- -----------
Balance, end of year $ (213,996) $ (176,201) $ (189,940)
=========== =========== ===========
UNREALIZED GAIN (LOSS) ON
SECURITIES AVAILABLE FOR SALE:
Balance, beginning of year $ (21,742) $ --- $ ---
Unrealized loss on securities
available for sale at
January 1, 1994, due to
adoption of SFAS No. 115 (1,369)
Net change in unrealized
gain (loss) 23,198 (20,373)
----------- ----------- -----------
Balance, end of year $ 1,456 $ (21,742) $ ---
=========== =========== ===========
COMMON STOCK IN TREASURY:
Balance, beginning of year $ (73,300) $ (86,610) $ (51,386)
Purchase of shares (38,642)
Shares issued in connection
with employee benefit plans 8,448 4,794 1,934
Shares issued in connection
with dividend reinvestment plan 6,368 4,866 2,233
Shares issued in connection with
acquisition of subsidiary 5,131
Other, net 2,135 3,650 (749)
----------- ----------- -----------
Balance, end of year $ (51,218) $ (73,300) $ (86,610)
=========== =========== ===========
COMMON STOCK AND OTHER EQUITY $ 548,169 $ 555,093 $ 469,688
=========== =========== ===========
See Notes to Consolidated Financial Statements.
</TABLE>
<PAGE>
<PAGE>
VIAD CORP NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Years ended December 31, 1995, 1994 and 1993
A. SIGNIFICANT ACCOUNTING POLICIES
Principles of Consolidation. The Consolidated Financial
Statements of Viad Corp ("Viad"), previously known as The Dial
Corp, include the accounts of Viad and all of its subsidiaries.
On August 15, 1996, Viad spun-off its consumer products business,
now conducted under the name The Dial Corporation. Viad also
disposed of its 68.5 percent ownership interest in its Canadian
intercity bus transportation business on May 31, 1996. The
accompanying financial statements have been prepared to reflect
the historical financial position and results of operations as
adjusted for the reclassification of the consumer products and
Canadian intercity bus transportation businesses, along with the
Transportation Manufacturing and Service Parts segment which was
sold in 1993 and previously reported as discontinued, as
discontinued operations for all periods presented. See Note D of
Notes to Consolidated Financial Statements.
The Consolidated Financial Statements are prepared in accordance
with generally accepted accounting principles, which require
management to make estimates and assumptions that affect the
reported amounts of assets and liabilities and disclosures at the
date of the financial statements and the reported amounts of
revenues and expenses during the reporting period. Actual results
could differ from those estimates.
Intercompany accounts and transactions between Viad and its
subsidiaries have been eliminated in consolidation. Described
below are those accounting policies particularly significant to
Viad, including those selected from acceptable alternatives.
Cash Equivalents. Viad considers all highly liquid investments
with original maturities of three months or less from date of
purchase as cash equivalents.
Inventories. Inventories, which consist primarily of duty-free
merchandise, exhibit materials, and supplies used in providing
services, are stated at the lower of cost (first-in, first-out
and average cost methods) or market.
Funds and Agents' Receivables and Investments Restricted for
Payment Service Obligations. Viad's payment service operations
generate funds from the sale of money orders and other payment
instruments (classified as "Payment service obligations"). The
proceeds of such sales are invested by Viad's payment services
subsidiary, in accordance with applicable state laws, in highly
liquid debt instruments, (classified, along with cash on hand and
cash in transit from agents, as "Funds, agents' receivables and
current maturities of investments restricted for payment service
obligations"), which before consolidating eliminations, included
investment-grade commercial paper issued by Viad and supported
along with the rest of Viad's outstanding commercial paper by a
credit commitment under a long-term revolving bank credit
agreement, as described in Note H of Notes to Consolidated
Financial Statements; and in a portfolio of high-quality
investments (approximately 99 percent have ratings of A- or
higher or are collateralized by federal agency securities),
including federal, state and municipal obligations, asset-backed
securities and corporate debt securities (classified as
"Investments restricted for payment service obligations"). These
investments are restricted by state regulatory agencies for use
by Viad's payment services subsidiary to satisfy the liability to
pay, upon presentment, the face amount of such payment service
obligations and, accordingly such assets are not available to
satisfy working capital or other financing requirements of Viad.
Effective January 1, 1994, Viad adopted Statement of Financial
Accounting Standards ("SFAS") No. 115, "Accounting for Certain
Investments in Debt and Equity Securities." Viad is required by
SFAS No. 115 to classify securities at acquisition into one of
three categories: available for sale, held to maturity, or
trading, with different reporting requirements for each
classification. See Note E of Notes to Consolidated Financial
Statements for a discussion of the classification and reporting
of these securities.
Impairment of Long-Lived Assets. As discussed further in Note C
of Notes to Consolidated Financial Statements, in the fourth
quarter of 1995, Viad elected the early adoption of SFAS No. 121,
"Accounting for the Impairment of Long-Lived Assets and for Long-
Lived Assets to Be Disposed Of." SFAS No. 121 establishes the
accounting standards for the impairment of long-lived assets,
certain identifiable intangibles, and goodwill related to those
assets which are to be held and used and for long-lived assets
and certain identifiable intangibles which are to be disposed of.
In accordance with the provisions of SFAS No. 121, Viad reviews
the carrying values of its long-lived assets and identifiable
intangibles for possible impairment whenever events or changes in
circumstances indicate that the carrying amount of assets to be
held and used may not be recoverable. SFAS No. 121 requires that
for assets to be held and used, if the sum of the expected future
undiscounted cash flows is less than the carrying amount of the
asset, an impairment loss should be recognized, measured as the
amount by which the carrying amount exceeds the fair value of the
asset. For assets to be disposed of, Viad reports long-lived
assets and certain identifiable intangibles at the lower of
carrying amount or fair value less cost to sell.
Property and Equipment. Property and equipment are stated at
cost, net of impairment write-downs.
Depreciation is provided principally by use of the straight-line
method at annual rates as follows:
Buildings 2% to 5%
Machinery and other equipment 5% to 33%
Leasehold improvements Lesser of lease term
or useful life
Intangibles. Intangibles are carried at cost less accumulated
amortization. Intangibles are amortized on the straight-line
method over the estimated lives or periods of expected benefit,
but not in excess of 40 years. Viad evaluates the carrying value
of goodwill and other intangible assets at each reporting period
for possible impairment in accordance with the provisions of SFAS
No. 121 described above. Prior to the adoption of SFAS No. 121,
Viad evaluated the possible impairment of goodwill and other
intangible assets based on the undiscounted projected operating
income of the related business unit.
Pension and Other Benefits. Trusteed, noncontributory pension
plans cover substantially all employees, with benefit levels
supplemented in most cases by defined matching company stock
contributions to employees' 401(k) plans. Defined benefits are
based primarily on final average pay and years of service.
Funding policies provide that payments to defined benefit pension
trusts shall be at least equal to the minimum funding required by
applicable regulations.
Viad has defined benefit postretirement plans that provide
medical and life insurance for eligible retirees and dependents.
The related postretirement benefit liabilities are recognized
over the period that services are provided by employees.
Foreign Currency Translation. In accordance with SFAS No. 52, the
assets and liabilities of Viad's foreign subsidiaries are
translated into U.S. dollars at exchange rates in effect at the
balance sheet date, with resulting unrealized translation gains
and losses accumulated in a separate component of common stock
and other equity. Income and expense items are converted into
U.S. dollars at average rates of exchange prevailing during the
year.
Derivatives. Amounts receivable or payable under interest rate
derivatives are accrued as interest rates change and are
recognized as an adjustment to the expense of the related hedged
transaction as discussed in Notes H and N of Notes to
Consolidated Financial Statements. Gains and losses from foreign
exchange forward contracts which hedge identifiable foreign
currency commitments are deferred and are recognized in income in
the same period as the hedged transaction.
Stock-Based Compensation. In October 1995, the Financial
Accounting Standards Board issued SFAS No. 123, "Accounting for
Stock-Based Compensation." The Statement defines a fair value
based method of accounting for an employee stock option or
similar equity instrument. As permitted by the Statement, Viad
has currently elected to continue to measure cost for its stock-
based compensation plans using the intrinsic value based method
of accounting prescribed by APB Opinion No. 25, "Accounting for
Stock Issued to Employees." Accordingly, beginning with Viad's
1996 Annual Report, Viad will be required to make pro forma
disclosures of net income and earnings per share for 1995 and
1996, as if the fair value based method of accounting defined in
SFAS No. 123 had been applied.
Net Income (Loss) Per Common Share. Net income (loss) per common
share is based on net income (loss) after preferred stock
dividend requirements and the weighted average number of common
shares outstanding during each year after giving effect to stock
options considered to be dilutive common stock equivalents. Fully
diluted net income (loss) per common share is not materially
different from primary net income (loss) per common share.
Employee Stock Ownership Plan ("ESOP") shares are treated as
outstanding for net income (loss) per share calculations. The
average outstanding common and equivalent shares does not include
shares held by the Employee Equity Trust (the "Trust"). Shares
held by the Trust are not considered outstanding for net income
(loss) per share calculations until the shares are released from
the Trust.
B. ACQUISITIONS OF BUSINESSES AND OTHER ASSETS
During 1995, Viad acquired Giltspur, Inc., an exhibit
construction and services company, and several smaller companies.
Also during 1995, Viad acquired all of the common stock of a
payment services company in exchange for approximately 300,000
shares of Viad's common stock. The acquisition was accounted for
as a pooling of interests. Prior period financial statements have
not been restated, as the results of the acquired company are not
significant to the consolidated results of operations. The
accompanying financial statements include the accounts and
results of operations from the date of acquisition.
During 1994, Viad completed its acquisition of the final eleven
of fifteen airline catering kitchens from United Airlines ("UAL")
and also acquired several smaller companies. The first four UAL
flight catering kitchens were purchased by Viad on December 30,
1993. Also in December 1993, Viad acquired the remaining 49%
interest in a joint venture which owns the office building in
Phoenix, Arizona, a portion of which houses Viad's corporate
headquarters and certain subsidiary offices. During 1993, Viad
also purchased three convention services companies.
Except for the pooling of interests transaction described above,
the acquisitions were accounted for as purchases. The purchase
prices, including acquisition costs, were allocated to the net
tangible and intangible assets acquired based on estimated fair
values at the dates of the acquisitions. The difference between
the purchase prices and the related fair values of net assets
acquired represents goodwill which is being amortized on a
straight-line basis over 40 years. The fair value of patents and
other intangible assets included in the acquisitions is amortized
over their estimated useful lives. The results of the acquired
operations have been included in the Statement of Consolidated
Income from the dates of acquisition. The results of operations
of the acquired companies from the beginning of the year to the
dates of acquisition are not material.
Net cash paid, assets acquired and debt and other liabilities
assumed in all acquisitions of businesses accounted for as
purchases for the years ended December 31 were as shown in the
table below.
In February 1995, Viad purchased a cruise ship, previously under
a lease agreement, for $39,447,000. Viad has entered into a four-
year charter arrangement to lease the ship to a European
operator. In July 1995, Viad purchased its other leased cruise
ship for a purchase price of $71,656,000.
<PAGE>
<TABLE>
<CAPTION>
1995
----------------------------------------------------------
Travel and
Leisure and
Convention Payment
(000 omitted) Services Services Total
----------- ----------- -----------
<S> <C> <C> <C>
Assets acquired:
Property and equipment $ 17,161 $ 511 $ 17,672
Intangibles,
primarily goodwill 77,139 6,511 83,650
Other assets 52,761 3,593 56,354
Debt and other
liabilities assumed (60,964) (2,909) (63,873)
----------- ----------- -----------
Net cash paid $ 86,097 $ 7,706 $ 93,803
=========== =========== ===========
1994
-----------------------------------------------------------
Airline Travel and
Catering Leisure and
and Convention Payment
Services Services Services Total
----------- ----------- ----------- -----------
<S> <C> <C> <C> <C>
Assets acquired:
Property and equipment $ 67,452 $ 1,277 $ 4,765 $ 73,494
Intangibles,
primarily goodwill 59,147 4,690 4,110 67,947
Other assets 7,342 2,130 9,472
Debt and other
liabilities assumed (5,871) (5,871)
----------- ----------- ----------- -----------
Net cash paid $ 133,941 $ 2,226 $ 8,875 $ 145,042
=========== =========== =========== ===========
1993
-----------------------------------------------------------
Headquarters Airline
Building Catering
Joint Venture and Convention
Interest Services Services Total
----------- ----------- ----------- -----------
<S> <C> <C> <C> <C>
Assets acquired:
Property and equipment $ 63,086 $ 9,222 $ 17,128 $ 89,436
Intangibles,
primarily goodwill 87 95,646 95,733
Other assets 37,773 37,773
Debt and other
liabilities assumed (85,155) (85,155)
----------- ----------- ----------- -----------
Net cash paid $ 63,086 $ 9,309 $ 65,392 $ 137,787
=========== =========== =========== ===========
</TABLE>
<PAGE>
C. IMPAIRMENT OF LONG-LIVED ASSETS AND ASSET WRITE-DOWNS
Impairment of Long-Lived Assets. In the fourth quarter of 1995,
Viad elected the early adoption of SFAS No. 121, "Accounting for
the Impairment of Long-Lived Assets and for Long-Lived Assets to
Be Disposed Of." The initial application of SFAS No. 121 to long-
lived assets held for disposal at January 1, 1995, resulted in a
non-cash charge of $13,875,000 (net of tax benefit of $8,459,000)
and is reported in the Statement of Consolidated Income as a
cumulative effect of a change in accounting principle. The charge
represents the adjustment required to individually remeasure such
assets at the lower of carrying amount or fair value less cost to
sell. Long-lived assets held for disposal consist principally of
miscellaneous real estate remaining from businesses previously
disposed of by Viad, including former bus terminal properties
retained upon disposition of Greyhound Lines, Inc. in 1987, land
parcels retained upon the spin-off of FINOVA in 1992, and other
non-operating properties. These assets had a total carrying value
of $18,452,000 at December 31, 1995. While these assets are being
actively marketed, Viad expects the period of disposal to exceed
one year for most of the assets.
Asset Write-Downs. In the third quarter of 1995, Viad announced
that it would take asset write-downs totaling approximately
$55,500,000 ($35,100,000 after-tax). The announced charges
provided for the write-down of certain Premier Cruise Lines'
intangibles ($28,000,000 pre-tax) and other assets ($27,500,000
pre-tax), in light of current and anticipated conditions in its
cruise market.
The recoverability of operating assets and related goodwill
associated with Premier Cruise Lines was evaluated based on
current projections of the undiscounted operating income of the
cruise operations. Heightened competition in the three-night and
four-night cruise segment and in the Port Canaveral/Caribbean
market, along with falling passenger counts industry-wide, caused
management to lower its projections of future operating income.
As a result, goodwill was written off and the carrying value of
the Star/Ship Majestic was written down to its estimated net
realizable value in the third quarter.
<PAGE>
D. DISCONTINUED OPERATIONS
On August 15, 1996, Viad completed the spin-off its consumer
products business, now conducted under the name The Dial
Corporation. In effecting the spin-off, the holders of common
stock of Viad received a Distribution of one share of common
stock of The Dial Corporation for each share of Viad common
stock. In conjunction with the spin-off, certain liabilities and
deferred income tax assets related primarily to specified pension
and postretirement plans of former employees of Armour and
Company, which was previously a subsidiary of Viad, were
transferred to and assumed by The Dial Corporation. Accordingly,
income (loss) from operations of the consumer products business,
presented as a discontinued operation, includes expenses arising
from such items. Interest expense was allocated to discontinued
operations based on the lesser of a) interest on the debt and
interest rate swap assumed by The Dial Corporation as described
in Note H of Notes to Consolidated Financial Statements or b) the
amount of intercompany interest that had historically been
charged by Viad on interest-bearing advances based on the prime
lending rate.
Effective May 31, 1996, shareholders of Greyhound Lines of Canada
("GLOC") voted to separate its intercity bus transportation
business and its tourism business into two independent companies.
At the same time, GLOC minority shareholders approved an
automatic share exchange proposal whereby their ownership
interests in the tourism business, aggregating 31.5 percent, were
exchanged for Viad's 68.5 percent ownership interest in the
intercity bus transportation company such that Viad became the
owner of 100 percent of the tourism company in exchange for its
ownership in the intercity bus transportation company. As a
result, the Canadian intercity bus transportation company is
presented as a discontinued operation.
On August 12, 1993, Viad sold, through an initial public
offering, 20 million shares of common stock of Motor Coach
Industries International, Inc. ("MCII"), pursuant to an
underwriting agreement dated August 4, 1993. Transportation
Manufacturing Operations, Inc., Viad's transportation
manufacturing and service parts subsidiary, was transferred to
MCII in connection with the public offering of MCII shares. The
disposition of MCII, the sale of the Canadian transit bus
manufacturing business in June 1993, the sale of certain bus
installment sale receivables in early 1993 and the liquidation,
completed in early 1993, of a trailer manufacturing and transport
services company, completed the disposal of the Transportation
Manufacturing and Service Parts segment, resulting in
presentation as a discontinued operation.
The caption "Income (loss) from discontinued operations" in the
Statement of Consolidated Income for the years ended December 31
includes the following:
<TABLE>
<CAPTION>
(000 omitted) 1995 1994 1993
----------- ----------- -----------
<S> <C> <C> <C>
Income (loss) from operations:
Consumer products
business, net of tax
(benefit) provision of
$(22,974), $52,165 and
$42,495 (1) $ (33,105) $ 84,031 $ 77,785
Canadian intercity bus
transportation business,
net of tax provision of
$4,975, $3,350 and
$4,223 3,954 2,681 3,042
Transportation Manufacturing
and Service Parts segment,
net of tax provision of
$7,685 10,193
Cumulative effect, net of tax
provision of $905, to
January 1, 1995 of initial
application of SFAS No. 121,
to Canadian intercity bus
transportation assets
held for disposal (3,821)
Gain on sale of Transportation
Manufacturing and Service
Parts segment, net of tax
provision of $42,040 40,151
Provisions related to previously
discontinued businesses,
net of tax benefit of $7,776 (18,224)
----------- ----------- -----------
Income (loss) from
discontinued operations $ (32,972) $ 86,712 $ 112,947
=========== =========== ===========
<FN>
(1) After deducting restructuring charges and asset write-downs of
$135,600,000 ($82,100,000 after-tax) in 1995.
</TABLE>
<PAGE>
E. INVESTMENTS IN DEBT AND EQUITY SECURITIES
Effective January 1, 1994, Viad adopted SFAS No. 115, "Accounting
for Certain Investments in Debt and Equity Securities." SFAS No.
115 requires the classification of securities at acquisition into
one of three categories: available for sale, held to maturity, or
trading. Viad has no securities classified in the trading
category. Securities are included in the Consolidated Balance
Sheet under the caption, "Investments restricted for payment
service obligations" except for those securities expected to be
sold or maturing within one year which are included under the
caption, "Funds, agents' receivables and current maturities of
investments restricted for payment service obligations."
Although Viad's investment portfolio exposes Viad to certain
credit risks, Viad believes the high quality of its investments
(approximately 99% of the investments at December 31, 1995 have
ratings of A- or higher or are collateralized by federal agency
securities) reduces this risk substantially. Viad regularly
monitors credit and market risk exposures and takes steps to
mitigate the likelihood of these exposures resulting in actual
loss.
Securities Available for Sale. Securities that are being held for
indefinite periods of time, including those securities which may
be sold in response to needs for liquidity or changes in interest
rates, are classified as securities available for sale and are
carried at fair value, with the net unrealized holding gain or
loss, after-tax, reported as a separate component of common stock
and other equity, with no effect on current results of
operations. The net unrealized gain of $1,456,000 (net of
deferred tax liability of $851,000) at December 31, 1995 and the
net unrealized loss of $21,742,000 (net of deferred tax asset of
$13,415,000) at December 31,1994, are included in the
Consolidated Balance Sheet as a separate component of common
stock and other equity under the caption, "Unrealized gain (loss)
on securities available for sale." The unrealized gain during
1995 was due principally to decreases in market interest rates,
while the increase in the unrealized loss during 1994 was due
principally to increases in market interest rates.
A summary of securities available for sale at December 31, 1995
is set forth below:
<PAGE>
<TABLE>
<CAPTION>
Gross Gross
Amortized Unrealized Unrealized Fair
(000 omitted) Cost Gains Losses Value
----------- ----------- ----------- -----------
<S> <C> <C> <C> <C>
U.S. Government
Agencies $ 49,852 $ 366 $ 64 $ 50,154
Obligations of states
and political
subdivisions 424,860 5,681 1,049 429,492
Corporate debt
securities 101,313 1,116 695 101,734
Mortgage-backed and
other asset-backed
securities 92,478 427 3,180 89,725
Debt securities
issued by
foreign governments 10,261 61 10,200
Preferred stock 22,379 43 277 22,145
----------- ----------- ----------- -----------
Securities available
for sale $ 701,143 $ 7,633 $ 5,326 $ 703,450
=========== =========== =========== ===========
</TABLE>
A summary of securities available for sale at December 31, 1994
is set forth below:
<TABLE>
<CAPTION>
Gross Gross
Amortized Unrealized Unrealized Fair
(000 omitted) Cost Gains Losses Value
----------- ----------- ----------- -----------
<S> <C> <C> <C> <C>
U.S. Government
Agencies $ 5,174 $ --- $ 129 $ 5,045
Obligations of states
and political
subdivisions 283,112 278 20,597 262,793
Corporate debt
securities 63,263 6,325 56,938
Mortgage-backed and
other asset-backed
securities 100,630 7,469 93,161
Debt securities
issued by
foreign governments 16,007 915 15,092
Preferred stock 121 121
----------- ----------- ----------- -----------
Securities available
for sale $ 468,307 $ 278 $ 35,435 $ 433,150
=========== =========== =========== ===========
</TABLE>
Scheduled maturities of securities available for sale at December 31, 1995
were as follows:
<TABLE>
<CAPTION>
Amortized Fair
(000 omitted) Cost Value
----------- -----------
<S> <C> <C>
Due in:
1996 $ 8,650 $ 8,665
1997-2000 174,386 173,536
2001-2005 188,061 191,108
2006 and later 215,189 218,271
Mortgage-backed and
other asset-backed securities 92,478 89,725
Preferred stock 22,379 22,145
----------- ----------
$ 701,143 $ 703,450
=========== ===========
</TABLE>
Actual maturities may differ from scheduled maturities because the
borrowers have the right to call or prepay certain obligations, sometimes
without penalties.
Gross gains of $5,150,000 and $2,472,000 were realized during 1995 and
1994, respectively. Gross losses of $11,000 and $481,000 were realized
during 1995 and 1994, respectively. Gross gains and losses are based on the
specific identification method of determining cost.
Securities Held to Maturity. Securities classified as held to maturity,
which consist of securities that management has the ability and intent to
hold to maturity, are carried at amortized cost, and are summarized as
follows at December 31, 1995:
<TABLE>
<CAPTION>
Gross Gross
Amortized Unrealized Unrealized Fair
(000 omitted) Cost Gains Losses Value
----------- ----------- ----------- -----------
<S> <C> <C> <C> <C>
U.S. Government
Agencies $ 27,458 $ 62 $ 98 $ 27,422
Obligations of states
and political
subdivisions 82,291 1,570 161 83,700
Corporate debt
securities 71,919 32 687 71,264
Other securities 8,603 241 44 8,800
----------- ----------- ----------- -----------
Securities held
to maturity $ 190,271 $ 1,905 $ 990 $ 191,186
=========== =========== =========== ===========
</TABLE>
A summary of securities held to maturity at December 31, 1994,
is set forth below:
<TABLE>
<CAPTION>
Gross Gross
Amortized Unrealized Unrealized Fair
(000 omitted) Cost Gains Losses Value
----------- ----------- ----------- -----------
<S> <C> <C> <C> <C>
U.S. Government
Agencies $ 59,637 $ --- $ 3,750 $ 55,887
Obligations of states
and political
subdivisions 54,545 4,545 50,000
Corporate debt
securities 128,145 12,310 115,835
Other securities 8,266 1,100 7,166
----------- ----------- ----------- -----------
Securities held
to maturity $ 250,593 $ --- $ 21,705 $ 228,888
=========== =========== =========== ===========
</TABLE>
Scheduled maturities of securities held to maturity at December 31,
1995
were as follows:
<TABLE>
<CAPTION>
Amortized Fair
(000 omitted) Cost Value
----------- -----------
<S> <C> <C>
Due in:
1996 $ 5,021 $ 4,978
1997-2000 81,698 81,024
2001-2005 37,487 37,566
2006 and later 66,065 67,618
----------- -----------
$ 190,271 $ 191,186
=========== ===========
</TABLE>
As mentioned above, actual maturities may differ from scheduled
maturities because the borrowers have the right to call or prepay
certain obligations, sometimes without penalties. During 1995, Viad's
payment services subsidiary sold a $6,846,000 security (amortized
cost) classified as held to maturity in response to an issuer's tender
offer to call its outstanding bonds. State money order regulations
require that defined amounts of securities held by Viad's payment
services subsidiary maintain an investment-grade rating to be
classified as permissible investments. The security was sold as Viad's
payment services subsidiary believed that any remaining investment
outstanding after the tender offer would be unrated, thus jeopardizing
the security's classification as a permissible investment. The sale
was an isolated and unusual event that Viad's payment services
subsidiary could not have reasonably anticipated when the security was
classified as held to maturity. There was no gain or loss realized on
the sale.
A one-time reclassification was made effective December 31, 1995 upon
reassessment of the appropriateness of the classifications of all
securities held, as permitted by the Financial Accounting Standards
Board in its November 1995 "Guide to Implementation of Statement 115
on Accounting for Certain Investments in Debt and Equity Securities."
Securities with an amortized cost of $140,884,000 were transferred
from securities classified as held to maturity to securities
classified as available for sale. The related net unrealized gains on
these securities totaling $972,000 (net of deferred taxes of $597,000)
are included in the Consolidated Balance Sheet under the caption,
"Unrealized gain (loss) on securities available for sale," along with
net unrealized gains on securities previously classified as available
for sale.
There were no other sales or transfers of securities classified as
held to maturity during 1995 and 1994.
<PAGE>
F. PROPERTY AND EQUIPMENT
Property and equipment at December 31 consisted of the following:
<TABLE>
<CAPTION>
(000 omitted) 1995 1994
----------- -----------
<S> <C> <C>
Land $ 38,141 $ 49,736
Buildings and leasehold improvements 275,696 265,379
Machinery and other equipment 615,123 475,610
----------- -----------
928,960 790,725
Less accumulated depreciation 367,391 323,387
----------- -----------
Property and equipment $ 561,569 $ 467,338
=========== ===========
</TABLE>
G. INTANGIBLES
Intangibles at December 31 consisted of the following:
<TABLE>
<CAPTION>
(000 omitted) 1995 1994
----------- -----------
<S> <C> <C>
Goodwill $ 547,391 $ 501,221
Other intangibles 61,516 50,201
----------- -----------
608,907 551,422
Less accumulated amortization 89,575 77,458
----------- -----------
Intangibles $ 519,332 $ 473,964
=========== ===========
</TABLE>
<PAGE>
H. DEBT
Long-term debt at December 31 was as follows:
<TABLE>
<CAPTION>
(000 omitted) 1995 1994
----------- -----------
<S> <C> <C>
Senior debt: (1)
Short-term borrowings:
Commercial paper (net of
$90,000 and $80,000 issued
to Viad's payment services
subsidiary), 5.9% (1995)
and 6.2% (1994) weighted average
interest rate at December 31 $ 115,888 $ 94,903
Promissory notes, 6.0% (1995) and
6.3% (1994) weighted average
interest rate at December 31 261,000 180,000
Senior notes, 6.2% (1995) and 6.3%
(1994) weighted average
interest rate at December 31,
due to 2009 389,519 349,454
Guarantee of ESOP debt, floating
rate indexed to LIBOR, 4.6% (1995)
and 5.3% (1994) at December 31,
due to 2009 28,000 30,000
Real estate mortgages and other
obligations, 6.1% (1995) and
6.0% (1994) weighted average
interest rate at December 31,
due to 2014 17,967 9,780
----------- ----------
812,374 664,137
Subordinated debt, 10.5%
debentures, due 2006 76,917 76,917
----------- -----------
889,291 741,054
Less current portion 77,450 22,280
----------- -----------
Long-term debt $ 811,841 $ 718,774
=========== ===========
<FN>
(1) Rates shown are exclusive of the effects of commitment fees and other
costs of long-term revolving bank credit used to support short-term
borrowings, and exclusive of the effects of interest rate swap agreements on
certain short-term and long-term borrowings.
</TABLE>
Interest paid in 1995, 1994 and 1993 was approximately
$67,082,000, $52,271,000 and $52,043,000, respectively.
In July 1994, a Shelf Registration filed with the Securities and
Exchange Commission became effective. Under the Shelf
Registration, Viad can issue up to an aggregate $500,000,000 of
debt and equity securities. No debt has been issued under the
program and there is no intention to issue any equity securities
at the present time. The Shelf Registration increases Viad's
future financing options.
As discussed further in Note N of Notes to Consolidated Financial
Statements, Viad has entered into (a) interest rate swap
agreements which convert floating interest rates on existing and
anticipated replacement short-term borrowings into fixed interest
rates ("pay-fixed swaps") and (b) interest rate swap agreements
which convert fixed interest rates on a portion of the Senior
notes and other debt into floating interest rates ("receive-fixed
swaps"). The net effect of interest rate swap agreements was to
increase interest expense by $4,671,000, $2,863,000 and
$6,112,000 for 1995, 1994 and 1993, respectively. The weighted
average interest rate on total debt, inclusive of the effect of
interest rate swap agreements, was 7.2%, 6.5% and 7.2% for 1995,
1994 and 1993, respectively.
Viad satisfies its short-term borrowing requirements with bank
lines of credit and by the issuance of commercial paper and
promissory notes. At December 31, 1995, outstanding commercial
paper and promissory notes were supported by a credit commitment
available under a long-term revolving bank credit agreement. In
connection with the Distribution as discussed in Notes A and D of
Notes to Consolidated Financial Statements, on August 15, 1996,
Viad borrowed $280,000,000 under a new $350,000,000 bank credit
facility and used the proceeds to repay floating rate
indebtedness of Viad. The credit facility and related liability
were then assumed by The Dial Corporation upon the spin-off,
effectively transferring a portion of Viad's outstanding
indebtedness to The Dial Corporation. In conjunction with the
indebtedness transferred to The Dial Corporation, Viad also
transferred a pay-fixed swap agreement in the notional amount of
$65,000,000 to The Dial Corporation.
Following the Distribution, Viad's reduced borrowings are
supported by unused commitments under a new $400,000,000 long-
term revolving bank credit agreement, which replaced the prior
Viad arrangement and expires on August 15, 2001. Annually, at
Viad's request and with the participating banks' consent, the
term of the agreement may be extended for a further one-year
period. The interest rate applicable to borrowings under the
$400,000,000 credit commitment and the prior commitment is, at
Viad's option, indexed to the bank prime rate or the London
Interbank Offering Rate ("LIBOR"), plus appropriate spreads over
such indices during the period of the credit agreement. The new
agreement also provides for commitment fees, similar to the prior
agreement. Such spreads and fees will change moderately should
Viad's debt ratings change. Viad, in the event that it becomes
advisable, intends to exercise its right under the agreement to
borrow for the purpose of refinancing short-term borrowings;
accordingly, short-term borrowings totaling $376,888,000 and
$274,903,000 at December 31, 1995 and 1994, respectively, have
been classified as long-term debt.
Annual maturities of long-term debt due in the next five years
will approximate $77,450,000 (1996), $2,326,000 (1997),
$32,282,000 (1998), $17,196,000 (1999), $2,191,000 (2000) and
$757,846,000 thereafter, including $376,888,000 which represents
the maturity of short-term borrowings assuming they had been
refinanced utilizing the new revolving credit facility through
August 15, 2001 (and before reduction for the $280,000,000
repayment upon the spin-off of The Dial Corporation on August 15,
1996).
Viad's long-term debt agreements include various restrictive
covenants and require the maintenance of certain defined
financial ratios with which Viad is in compliance.
I. PREFERRED STOCK AND COMMON STOCK AND OTHER EQUITY
At December 31, 1995, there were 97,108,724 shares of common
stock issued and 94,231,224 shares outstanding. At December 31,
1995, a total of 6,279,342 of the outstanding shares were held by
Viad's Employee Equity Trust.
Viad has 442,352 shares of $4.75 Preferred Stock authorized, of
which 376,352 shares are issued. The holders of the $4.75
Preferred Stock are entitled to a liquidation preference of $100
per share and to annual cumulative sinking fund redemptions of
6,000 shares. Viad presently holds 141,305 shares which will be
applied to this sinking fund requirement; the 235,047 shares held
by others are scheduled to be redeemed in the years 2019 to 2058.
In addition, Viad has authorized 5,000,000 and 2,000,000 shares
of Preferred Stock and Junior Participating Preferred Stock,
respectively.
Viad has one Preferred Stock Purchase Right ("Right") outstanding
on each outstanding share of its common stock. The Rights contain
provisions to protect stockholders in the event of an unsolicited
attempt to acquire Viad which is not believed by the Board of
Directors to be in the best interest of stockholders. The Rights
are represented by the common share certificates and are not
exercisable or transferable apart from the common stock until
such a situation arises. The Rights may be redeemed by Viad at
$0.05 per Right prior to the time any person or group has
acquired 20% or more of Viad's shares. Viad has reserved
1,000,000 shares of Junior Participating Preferred Stock for
issuance in connection with the Rights.
Viad funds a portion of its matching contributions to employees'
401(k) plans through a leveraged ESOP. All eligible employees of
Viad and its participating affiliates, other than certain
employees covered by collective bargaining agreements that do not
expressly provide for participation of such employees in an ESOP,
may participate in the ESOP.
The ESOP borrowed $40,000,000 to purchase treasury shares in
1989. The ESOP's obligation to repay this borrowing is guaranteed
by Viad; therefore, the unpaid balance of the borrowing
($28,000,000 and $30,000,000 at December 31, 1995 and 1994,
respectively) has been reflected in the accompanying balance
sheet as long-term debt and the amount representing unearned
employee benefits ($27,971,000 and $29,611,000 at December
31,1995 and 1994, respectively) has been recorded as a deduction
from common stock and other equity. The liability is reduced as
the ESOP repays the borrowing, and the amount in common stock and
other equity is reduced as the employee benefits are charged to
expense. The ESOP intends to repay the loan (plus interest) using
Viad contributions and dividends received on the shares of common
stock held by the ESOP. Information regarding ESOP transactions
for the years ended December 31 was as follows:
<TABLE>
<CAPTION>
(000 omitted) 1995 1994 1993
----------- ----------- -----------
<S> <C> <C> <C>
Amounts paid by ESOP for:
Debt repayment $ 2,000 $ 2,000 $ 2,000
Interest 1,491 1,161 946
Amounts received from Viad as:
Dividends 1,185 1,218 1,244
Capital contributions 2,178 1,785 1,696
</TABLE>
Shares are released for allocation to participants based upon the
ratio of the year's principal and interest payments to the sum of
the total principal and interest payments expected over the life
of the plan. Expense of the ESOP is recognized based upon the
greater of cumulative cash payments to the plan or 80% of the
cumulative expense that would have been recognized under the
shares allocated method, in accordance with Statement of Position
76-3, "Accounting for Certain Employee Stock Ownership Plans" and
Emerging Issues Task Force Abstract No. 89-8, "Expense
Recognition for Employee Stock Ownership Plans." Under this
method, Viad has recorded expense of $1,817,000, $1,684,000 and
$1,782,000 in 1995, 1994 and 1993, respectively.
ESOP shares at December 31 were as follows:
<TABLE>
<CAPTION>
1995 1994
----------- -----------
<S> <C> <C>
Allocated shares 1,016,374 851,589
Shares not committed for allocation 1,807,466 1,972,251
----------- -----------
2,823,840 2,823,840
=========== ===========
</TABLE>
In conjunction with the August 15, 1996 spin-off of Viad's
consumer products business, the ESOP received one share of common
stock of The Dial Corporation for every share of Viad common
stock held by the ESOP. The ESOP is required to sell the shares
of The Dial Corporation and use the proceeds to purchase shares
of Viad's common stock.
In September 1992, Viad sold 10,491,800 shares of treasury stock
to Viad's Employee Equity Trust (the "Trust") for a $200,000,000
promissory note. The Trust is used to fund certain existing
employee compensation and benefit plans over the scheduled 15-
year term. Through December 31, 1995, the Trust had issued
4,212,458 shares to fund such benefits. For financial reporting
purposes, the Trust is consolidated with Viad and the promissory
note is eliminated in consolidation. The fair market value of the
shares held by the Trust, representing unearned employee
benefits, is shown as a deduction from common stock and other
equity and is reduced as employee benefits are funded. All
dividends and interest transactions between the Trust and Viad
are eliminated. Differences between cost and fair value of
shares held and/or released are included in additional capital.
Unearned employee benefits at December 31, 1995 and 1994 were
$186,025,000 and $146,590,000, respectively.
In conjunction with the spin-off of Viad's consumer products
business, The Dial Corporation's newly formed Employee Equity
Trust received one share of common stock of The Dial Corporation
for every share of Viad common stock held by Viad's Trust.
Viad's promissory note was amended such that $53,910,000 of the
remaining principal balance ($108,100,000 as of August 15, 1996)
was assumed by The Dial Corporation's Employee Equity Trust. The
allocation of the promissory note was based on the relative
market capitalizations of Viad and The Dial Corporation
immediately following the Distribution.
At December 31, 1995, retained income of $72,248,000 was
unrestricted as to payment of dividends by Viad.
J. STOCK OPTIONS
Viad's 1992 Stock Incentive Plan ("1992 Plan") provides for the
grant of options and restricted stock, including performance-
based stock, to officers, directors and certain key employees.
The 1992 Plan replaced the 1983 Stock Option and Incentive Plan.
The 1992 Plan provides for the following types of awards: (a)
stock options (both incentive stock options and nonqualified
stock options), (b) Stock Appreciation Rights ("SARs") and (c)
restricted stock, including performance-based stock. The Plan
authorizes the issuance of options for up to 2 1/2% of the total
number of shares of common stock outstanding as of the first day
of each year; provided that any shares available for grant in a
particular calendar year which are not, in fact, granted in such
year shall not be added to shares available for grant in any
subsequent calendar year. In addition to the limitation set forth
above with respect to the number of shares available for grant in
any single calendar year, no more than 10,000,000 shares of
common stock shall be cumulatively available for grant of
incentive options over the life of the Plan. In addition,
1,000,000 shares of Preferred Stock are reserved for distribution
under the 1992 Plan.
The stock options, SARs and Limited SARs ("LSARs") outstanding at
December 31, 1995 are granted for terms of ten years; 50% become
exercisable after one year and the balance become exercisable
after two years from the date of grant. Stock options and
appreciation rights are exercisable based on the market value at
the date of grant. LSARs vest fully at date of grant and are
exercisable only for a limited period (in the event of certain
tenders or exchange offers for Viad's common stock). SARs and/or
LSARs are issued in tandem with certain stock options and the
exercise of one reduces, to the extent exercised, the number of
shares represented by the other(s).
Information with respect to options granted and exercised for the
years ended December 31, at historical number of shares and
option exercise prices, is as follows:
<PAGE>
<TABLE>
<CAPTION>
Average
Option
Price Per
Shares Share
----------- -----------
<S> <C> <C>
Options outstanding at December 31, 1992 7,308,202 $ 14.76
Granted 1,941,400 19.85
Exercised (631,958) 13.34
Canceled (1) (850,904) 17.70
-----------
Options outstanding at December 31, 1993 7,766,740 15.83
Granted 1,449,800 22.98
Exercised (839,124) 14.31
Canceled (2) (205,728) 19.59
-----------
Options outstanding at December 31, 1994 8,171,688 17.18
Granted 1,378,000 24.57
Exercised (1,068,428) 15.29
Canceled (205,336) 21.35
-----------
Options outstanding at December 31, 1995 (3) 8,275,924 18.55
===========
<FN>
(1) Includes options canceled upon disposition of Transportation
Manufacturing and Service Parts segment.
(2) Includes stock options which ceased to be exercisable due to the exercise
of 28,852 related SARs during 1994 (at an average exercise price of $13.60).
Stock appreciation rights expense, equivalent to the difference between the
option exercise price and the average market price of Viad's stock on the date
a right is exercised (included in the Statement of Consolidated Income under
the caption "Unallocated corporate expense and other items, net"), totaled
$240,000 in 1994. There were no SARs exercised in 1995 or 1993.
(3) At December 31, 1995, stock options with respect to 6,274,649 shares were
exercisable at an average price of $16.79 per share.
</TABLE>
In conjunction with the spin-off of Viad's consumer products
business, the number of shares and the exercise price of each
option, related LSAR and SAR held by employees of Viad who
remained employees of Viad after the spin-off were adjusted so
that the aggregate exercise price and the aggregate spread before
the spin-off were preserved at the time of the spin-off. Options
and related LSARs and SARs held by employees of Viad who became
employees of The Dial Corporation were surrendered in accordance
with the related agreements.
Performance-based stock awards (149,500, 184,100 and 151,800
shares awarded in 1995, 1994 and 1993, respectively) vest based
on achievement of performance targets over a three-year period
from the date of grant. In conjunction with the spin-off of
Viad's consumer products business, a holder of unvested
restricted or performance-based stock was credited with the
number of shares of The Dial Corporation common stock equal to
the number of shares of Viad common stock awarded. For awards
outstanding on the Distribution date, the stock awarded
(including shares of The Dial Corporation common stock received
in the Distribution) vests based on achievement of the original
performance targets relative to the S & P 500 stock index and the
original proxy comparator groups existing at the time of each
award. Restricted stock awards (266,352 shares awarded in 1994)
vested over periods not exceeding five years from the date of
grant. There were no restricted stock awards in 1995 or 1993 and
all restricted stock awards had effectively vested by August 15,
1996. Holders of the performance-based and restricted stock have
the right to receive dividends and vote the shares but may not
sell, assign, transfer, pledge or otherwise encumber the stock.
K. INCOME TAXES
Deferred income tax assets (liabilities) included in the
Consolidated Balance Sheet at December 31 related to the
following:
<TABLE>
<CAPTION>
(000 omitted) 1995 1994
----------- -----------
<S> <C> <C>
Property and equipment $ (7,548) $ (11,483)
Pension and other employee benefits 20,647 18,180
Provisions for losses 44,465 40,084
Write-down of intangibles 9,800
Unrealized (gain) loss on securities
available for sale (851) 13,415
Deferred state income taxes 5,158 1,802
Other deferred income tax assets 45,659 31,965
Other deferred income tax liabilities (32,630) (23,209)
----------- -----------
84,700 70,754
Foreign deferred tax liabilities
included above 2,821 2,653
----------- -----------
United States deferred tax assets $ 87,521 $ 73,407
=========== ===========
</TABLE>
The consolidated provision (benefit) for income taxes on income
from continuing operations for the years ended December 31
consisted of the following:
<TABLE>
<CAPTION>
(000 omitted) 1995 1994 1993
----------- ----------- -----------
<S> <C> <C> <C>
Current:
United States:
Federal $ 10,896 $ 6,675 $ (22,820)
State 1,442 1,460 5,447
Foreign 5,006 4,104 3,674
----------- ----------- -----------
17,344 12,239 (13,699)
Deferred (11,197) 13,630 28,357
----------- ----------- -----------
Income taxes $ 6,147 $ 25,869 $ 14,658
=========== =========== ===========
</TABLE>
Income taxes paid in 1995, 1994 and 1993 amounted to $21,502,000,
$58,643,000 and $8,412,000, respectively.
Certain tax benefits related primarily to stock option exercises
and dividends paid to the ESOP are credited to common stock and
other equity and amounted to $2,536,000, $1,939,000 and
$1,913,000 in 1995, 1994 and 1993, respectively.
Eligible subsidiaries (including The Dial Corporation up to the
spin-off date and MCII and certain of its subsidiaries up to the
sale date) are included in the consolidated federal and other
applicable income tax returns of Viad.
Certain benefits of tax losses and credits, which would not have
been currently available to certain subsidiaries, The Dial
Corporation or MCII on a separate return basis, have been
credited to those subsidiaries, The Dial Corporation or MCII by
Viad. These benefits are included in the determination of the
income taxes of those subsidiaries, The Dial Corporation and
MCII, and this policy has been documented by written agreements.
A reconciliation of the provision for income taxes on income from
continuing operations and the amount that would be computed using
statutory federal income tax rates for the years ended December
31 was as follows:
<TABLE>
<CAPTION>
(000 omitted) 1995 1994 1993
----------- ----------- -----------
<S> <C> <C> <C>
Computed income taxes
at statutory federal
income tax rate of 35% $ 12,752 $ 27,814 $ 15,329
Nondeductible
goodwill amortization 2,988 3,529 2,482
Minority interests 920 798 666
State income taxes 1,561 1,611 2,154
Tax-exempt income (10,400) (5,133) (2,579)
Adjustment of deferred tax
assets at January 1, 1993
for enacted change in
tax rate (2,162)
Other, net (1,674) (2,750) (1,232)
----------- ----------- -----------
Income taxes $ 6,147 $ 25,869 $ 14,658
=========== =========== ===========
</TABLE>
United States and foreign income before income taxes from
continuing operations for the years ended December 31 was as
follows:
<TABLE>
<CAPTION>
(000 omitted) 1995 1994 1993
----------- ----------- -----------
<S> <C> <C> <C>
United States $ 18,261 $ 65,629 $ 32,849
Foreign 18,174 13,839 10,948
----------- ----------- -----------
Income before income taxes $ 36,435 $ 79,468 $ 43,797
=========== =========== ===========
</TABLE>
<PAGE>
L. PENSION AND OTHER BENEFITS
In conjunction with the spin-off of Viad's consumer products
business described in Notes A and D of Notes to Consolidated
Financial Statements, certain liabilities and deferred income tax
assets related to specified pension and postretirement plans of
former employees of Armour and Company, which was previously a
subsidiary of Viad, were transferred to and assumed by The Dial
Corporation. Such related assets and liabilities are excluded
from the information presented below.
Pension Benefits. Continuing operations net periodic pension cost
for the years ended December 31 included the following
components:
<TABLE>
<CAPTION>
(000 omitted) 1995 1994 1993
----------- ----------- -----------
<S> <C> <C> <C>
Service cost benefits
earned during the period $ 5,614 $ 6,407 $ 5,342
Interest cost on projected
benefit obligation 11,218 10,310 9,436
Actual return on plan assets (23,200) (1,322) (13,579)
Net amortization and deferral 10,699 (10,549) 1,892
Other items, primarily defined
contribution and multiemployer
plans 11,841 9,490 8,388
----------- ----------- -----------
Net pension cost $ 16,172 $ 14,336 $ 11,479
=========== =========== ===========
</TABLE>
Weighted average assumptions used were:
<TABLE>
<CAPTION>
December 31, 1995 1994 1993
----------- ----------- -----------
<S> <C> <C> <C>
Discount rate for obligation 8.0% 8.5% 7.75%
Rate of increase in
compensation levels 5.0% 5.0% 5.0%
Long-term rate of
return on assets 9.5% 9.5% 9.5%
</TABLE>
The following table indicates the plans' funded status and amounts
recognized in Viad's consolidated balance sheet at December 31:
<TABLE>
<CAPTION>
Underfunded and
Overfunded Plans Unfunded Plans
(Assets Exceed (Accumulated Benefits
Accumulated Benefits) Exceed Assets)
-------------------------- --------------------------
(000 omitted) 1995 1994 1995 1994
----------- ----------- ----------- -----------
<S> <C> <C> <C> <C>
Actuarial present
value of benefit
obligations:
Vested benefit
obligation $ 111,039 $ 92,124 $ 17,161 $ 12,712
=========== =========== =========== ===========
Accumulated
benefit
obligation $ 117,513 $ 98,369 $ 17,697 $ 13,383
=========== =========== =========== ===========
Projected
benefit
obligation $ 137,432 $ 115,219 $ 23,257 $ 17,810
Market value of
plan assets,
primarily equity
and fixed income
securities 143,675 124,899 535 531
----------- ----------- ----------- -----------
Plan assets over
(under) projected
benefit obligation 6,243 9,680 (22,722) (17,279)
Unrecognized
transition (asset)
obligation (4,865) (5,657) 1,447 1,832
Unrecognized prior
service cost 391 388 4,283 5,139
Unrecognized net loss 4,988 5,414 4,506 3,123
Additional minimum
liability (5,724) (6,346)
----------- ----------- ----------- -----------
Prepaid (accrued)
pension cost $ 6,757 $ 9,825 $ (18,210) $ (13,531)
=========== =========== =========== ===========
</TABLE>
<PAGE>
<PAGE>
Postretirement Benefits Other Than Pensions. Viad and its
subsidiaries have defined benefit postretirement plans that provide
medical and life insurance for eligible employees, retirees and
dependents. In addition, Viad retained the obligations for such
benefits for eligible retirees of Greyhound Lines, Inc. (sold in
1987).
Effective January 1, 1992, Viad and its U.S. subsidiaries adopted
the provisions of SFAS No. 106, "Employers' Accounting for
Postretirement Benefits Other Than Pensions" ("OPEB") which requires
that estimated OPEB benefits be accrued during the years the
employees provide services. Viad adopted SFAS No. 106 for its
foreign subsidiaries in 1995; the effect of such adoption was not
material to the consolidated financial statements.
The status of the plans as of December 31 was as follows:
<TABLE>
<CAPTION>
(000 omitted) 1995 1994
----------- -----------
<S> <C> <C>
Accumulated postretirement
benefit obligation:
Retirees $ 27,959 $ 31,604
Fully eligible active plan participants 5,452 5,042
Other active plan participants 8,742 11,266
----------- -----------
Accumulated postretirement
benefit obligation 42,153 47,912
Unrecognized prior service (cost) reduction 1,287 (43)
Unrecognized net gain 4,642 1,958
----------- -----------
Accrued postretirement benefit cost $ 48,082 $ 49,827
=========== ===========
Discount rate for obligation 8.0% 8.5%
</TABLE>
The assumed health care cost trend rate used in measuring the 1995
accumulated postretirement benefit obligation was 12% gradually
declining to 5% by the year 2002 and remaining at that level
thereafter for retirees below age 65, and 8.5% gradually declining
to 5% by the year 2002 and remaining at that level thereafter for
retirees above age 65. This is a 1/2% decrease from the trend rates
used for 1995 and later years in 1994's valuations.
A one-percentage-point increase in the assumed health care cost
trend rate for each year would increase the accumulated
postretirement benefit obligation as of December 31, 1995 by
approximately 11% and the ongoing annual expense by approximately
14%.
The net periodic postretirement benefit cost for the years ended
December 31 includes the following components:
<TABLE>
<CAPTION>
(000 omitted) 1995 1994 1993
----------- ----------- -----------
<S> <C> <C> <C>
Service cost-benefits
attributed to service
during the period $ 1,061 $ 1,793 $ 1,546
Interest cost on the
accumulated postretirement
benefit obligation 3,415 3,776 3,907
Net amortization and deferral (154) 3 (10)
----------- ----------- -----------
Net periodic postretirement
benefit cost (1) $ 4,322 $ 5,572 $ 5,443
=========== =========== ===========
Curtailment gains due to
termination of certain
benefits $ 3,477 $ 500 $ 5,475
=========== =========== ===========
<FN>
(1) Includes benefit costs applicable to retirees of Greyhound Lines, Inc.,
which are classified in the Statement of Consolidated Income under the
caption, "Unallocated corporate expense and other items, net," totaling
$1,500,000, $1,600,000 and $1,900,000 for 1995, 1994 and 1993, respectively.
</TABLE>
M. LEASES
Certain retail facilities, plants, offices and equipment are
leased. The leases expire in periods ranging from one to 51 years
and some provide for renewal options ranging from one to 37
years. Leases which expire are generally renewed or replaced by
similar leases.
At December 31, 1995, Viad's future minimum rental payments and
related sublease rentals receivable with respect to
noncancellable operating leases with terms in excess of one year
were as follows:
<PAGE>
<TABLE>
<CAPTION>
Rentals
Receivable
Rental Under
(000 omitted) Payments Subleases
----------- -----------
<S> <C> <C>
1996 $ 48,029 $ 1,295
1997 37,007 864
1998 31,895 801
1999 26,595 530
2000 17,788 466
Thereafter 169,479 1,400
----------- -----------
Total $ 330,793 $ 5,356
=========== ===========
</TABLE>
At the end of the lease terms, Viad has options to purchase
certain leased assets for an aggregate purchase price of
$27,900,000. If the purchase options are not exercised, Viad will
make residual guarantee payments aggregating $18,500,000 which
are refundable to the extent that the lessors' subsequent sales
prices exceed certain levels.
Information regarding net operating lease rentals for the years
ended December 31 was as follows:
<TABLE>
<CAPTION>
(000 omitted) 1995 1994 1993
----------- ----------- -----------
<S> <C> <C> <C>
Minimum rentals $ 63,126 $ 64,630 $ 93,962
Contingent rentals (1) 4,372 7,434 4,269
Sublease rentals (2,962) (1,974) (23,117)
----------- ----------- -----------
Total rentals, net (2) $ 64,536 $ 70,090 $ 75,114
=========== =========== ===========
<FN>
(1) Contingent rentals on operating leases are based primarily on sales and
revenues for buildings and leasehold improvements and usage for other equipment.
(2) Includes rentals of $5,100,000, $10,800,000 and $9,200,000 for 1995, 1994 and
1993, respectively, for the two cruise ships purchased in 1995 as discussed in
Note B of Notes to Consolidated Financial Statements. Also includes net rentals
of $7,700,000 for 1993 for Viad's corporate headquarters building which was
leased from a joint venture up to December 1993, when Viad acquired the remaining
interest in the joint venture, as discussed in Note B of Notes to Consolidated
Financial Statements.
</TABLE>
At December 31, 1995, Viad was a 50 percent partner in an
unconsolidated joint venture which owned a resort and conference
hotel in Oakbrook, Illinois. Viad had leased the hotel through
September 1, 2002. In addition, Viad and a third party had
agreed to lend the joint venture $10,000,000 and $5,000,000,
respectively, at 8 3/4 percent on July 1, 1997 to be secured by a
second mortgage on the property to prepay $15,000,000 of the
joint venture's nonrecourse first mortgage obligation. Had the
joint venture been unable to repay or refinance the first
mortgage note, Viad had an option to a) purchase the note from
the lender on September 30, 2002, its due date, at its then
unpaid principal amount which was expected to be approximately
$24,650,000 or b) make residual guarantee payments equal to the
greater of $5,000,000 or 150 percent of any shortfall in fair
market value of the hotel compared to the unpaid principal amount
of the note on such date. Viad accounted for its interest in the
joint venture using the equity method. During 1996, Viad
acquired the remaining 50 percent joint venture interest and
simultaneously sold the hotel to a third party which relieved
Viad from all future obligations and commitments. Viad's 1996
minimum rental payments up to the date of sale are included in
the table of future minimum rental payments.
N. FINANCIAL INSTRUMENTS WITH OFF-BALANCE-SHEET RISK AND
FAIR VALUE OF FINANCIAL INSTRUMENTS
Financial Instruments with Off-Balance-Sheet Risk. Viad is a
party to financial instruments with off-balance-sheet risk which
are entered into in the normal course of business to meet its
financing needs and to manage its exposure to fluctuations in
interest rates and foreign exchange rates. These financial
instruments include a revolving sale of receivables agreement,
interest rate swap agreements and foreign exchange forward
contracts. The instruments involve, to a varying degree, elements
of credit, market, interest rate and exchange rate risk in
addition to amounts recognized in the financial statements. Viad
does not hold or issue financial instruments for trading
purposes.
At December 31, 1995, Viad had an agreement to sell undivided
participating interests in a defined pool of trade accounts
receivable from customers of Viad's consumer products business
and airline catering and services subsidiaries in an amount not
to exceed $140,000,000 as a means of accelerating cash flow.
Effective with the spin-off of Viad's consumer products business
on August 15, 1996, the agreement was changed to an amount not to
exceed $75,000,000 and includes defined trade accounts receivable
from customers of Viad's airline catering and services and
convention services businesses. The agreement matures in August
1997 but is expected to be extended annually. From time to time,
as collections reduce accounts receivable included in the pool,
Viad sells participating interests in new receivables. Viad's
expense of selling receivables of its airline catering and
services subsidiaries amounted to approximately $2,157,000,
$1,000,000 and $604,000 in 1995, 1994 and 1993, respectively.
During the third quarter of 1996, Viad reclassified expenses
related to the receivables sales program from Costs of sales and
services for the segment, to Unallocated corporate expense and
other items, net. As a result, total operating income remained
unchanged. This reclassification was made to improve
comparability with other companies.
Under the terms of the receivables sales agreement Viad has
retained substantially the same risk of credit loss as if the
receivables had not been sold as Viad is obligated to replace
uncollectible receivables with new accounts receivable. For the
airline catering and services businesses, the accounts receivable
sold totaled $60,797,000 and $24,000,000 at December 31, 1995 and
December 31, 1994, respectively. The average balance of proceeds
from the sale of accounts receivable approximated $31,600,000,
$22,000,000 and $14,800,000 during 1995, 1994 and 1993,
respectively.
Viad enters into interest rate swap agreements as a means of
managing its interest rate exposure. The agreements are contracts
to exchange fixed and floating interest rate payments
periodically over the life of the agreements without the exchange
of the underlying notional amounts. The notional amounts of such
agreements are used to measure amounts to be paid or received and
do not represent the amount of exposure to credit loss. The
amounts to be paid or received under the interest rate swap
agreements are accrued consistently with the terms of the
agreements and market interest rates. Viad maintains formal
procedures for entering into interest rate swap transactions and
management regularly monitors and reports to the Audit Committee
of the Board of Directors on interest rate swap activity. The
agreements are with major financial institutions which are
currently expected to fully perform under the terms of the
agreements, thereby mitigating the credit risk from the
transactions in the event of nonperformance by the
counterparties. In addition, Viad continuously monitors the
credit ratings of the counterparties and the likelihood of
default is considered remote.
The following table indicates the types of interest rate swap
agreements used as hedges of debt as described in Note H of Notes
to Consolidated Financial Statements and their weighted average
interest rates in effect at December 31. The floating rate
portion of the interest rate swaps is based on LIBOR. Changes in
the LIBOR interest rates could significantly affect the floating
rate information and future cash flows.
<TABLE>
<CAPTION>
1995 1994
----------- -----------
<S> <C> <C>
Pay-fixed swaps:(1)
Notional amount (000 omitted) $ 107,600 $ 140,000
Average pay rate 8.2% 8.4%
Average receive rate 5.7% 5.6%
Receive-fixed swaps:(1)
Notional amount (000 omitted) $ 245,000 $ 295,000
Average pay rate 5.7% 6.1%
Average receive rate 5.7% 5.4%
<FN>
(1) The pay-fixed swap agreements expire as follows: $40,000,000 (1998) and
$67,600,000 (2000). The receive-fixed swap agreements expire as follows:
$15,000,000 (1997), $30,000,000 (2002) and $200,000,000 (2003).
</TABLE>
Viad has also entered into certain interest rate swap agreements
in which Viad agreed to pay or receive an "off-market" fixed
interest rate. The discounted present value of this rate
"premium" or "discount" was paid to Viad in cash at inception of
the agreements. Viad has been amortizing these cash proceeds over
the term of the swaps. Viad entered into such agreements to
provide for an alternative cash source and for income tax
planning purposes. In every case, Viad simultaneously entered
into an exactly paired (with identical notional amount and term)
agreement in which it agreed to receive a fixed rate. The result
in each case was a pair of offsetting swaps which fixed, at a
market discount rate, the future net interest payments to be made
by Viad. The use of these paired swaps has not created any
unusual risk to Viad.
On December 22, 1995, $67,600,000 of certain paired interest rate
swap agreements which were in effect at December 31, 1994,
expired. However, one side of the paired swap agreements had been
extended, which resulted in additional pay-fixed swaps with a
total notional amount of $67,600,000 at December 31, 1995. These
swaps will expire in 2000 and are included in the table above.
On December 31, 1995, Viad had $200,000,000 notional amount
remaining of the paired interest rate swap agreements which fixed
the future net payments owed by Viad against the cash proceeds
received by Viad when the swap agreements were entered, at
discount rates ranging from 7.1% to 10.2% over the original terms
of the paired agreements, which expire in 1996. The terms of one
of these agreements has been extended, which will result in an
additional pay-fixed swap of $100,000,000 commencing in 1996 and
expiring in 2000. This swap will have a pay rate of 8.34% and a
receive rate, based on LIBOR at December 31, 1995, of 5.5%.
Cash consideration received on the paired swaps is amortized as
an offset to expense from net swap payments over the life of the
related swap. Net expense related to these paired swaps of
$2,900,000, $7,500,000 and $6,700,000 for 1995, 1994 and 1993,
respectively, is included in the Statement of Consolidated Income
under the caption, "Unallocated corporate expense and other
items, net." The unamortized balance of the cash consideration
received on the paired swaps ($10,500,000 and $21,000,000 at
December 31, 1995 and 1994, respectively) is included in the
Consolidated Balance Sheet under the caption, "Other deferred
items and insurance reserves."
Viad's payment services subsidiary enters into interest rate swap
agreements to mitigate the effects of interest rate fluctuations
on commissions paid to selling agents of its official check
program. At December 31, 1995, the subsidiary had $275,000,000
notional amounts of such swap agreements, consisting of a
$200,000,000 notional amount with a fixed pay rate of 5.5% and a
variable receive rate of 5.8%, and a $75,000,000 notional amount
with a variable pay rate of 5.1% and a variable receive rate of
4.8%. The net effect of these swap agreements on 1995 income was
not material.
Viad also enters into foreign exchange forward contracts to hedge
identifiable foreign currency commitments including intercompany
transactions with Viad's foreign subsidiaries. These contracts
are purchased to reduce the impact of foreign currency
fluctuations on operating results. Viad does not engage in
foreign currency speculation. While the hedging instruments are
subject to the risk of loss from changes in exchange rates, these
losses would generally be offset by gains on the exposures being
hedged. Gains and losses on those hedging instruments that are
designated and effective as hedges of firmly committed foreign
currency transactions are deferred and recognized in income in
the same period as the hedged transaction. Viad's theoretical
risk in these transactions is the cost of replacing, at current
market rates, these contracts in the event of default by the
other party. Management believes the risk of incurring such
losses is remote as the contracts are entered into with major
financial institutions.
The following table summarizes by major currency the contractual
amounts (stated in U.S. dollar equivalent) to purchase foreign
currencies at December 31, 1995. The contracts mature through
September 1996, with approximately 40% of such contracts expiring
in January 1996. Contracts to sell foreign currencies are not
material.
<TABLE>
<CAPTION>
(000 omitted)
<S> <C>
French franc $ 32,936
Canadian dollar 26,286
British pound 23,569
Italian lira 22,854
Austrian schilling 19,304
Other 8,182
-----------
$ 133,131
===========
</TABLE>
Fair Value of Financial Instruments. The following disclosure of
the estimated fair value of financial instruments is made in
accordance with the requirements of SFAS No. 107, "Disclosures
About Fair Value of Financial Instruments." The estimated fair
value amounts have been determined by Viad using available market
information and valuation methodologies described below. However,
considerable judgment is required in interpreting market data to
develop the estimates of fair value. Accordingly, the estimates
presented herein may not be indicative of the amounts that Viad
could realize in a current market exchange. The use of different
market assumptions or valuation methodologies may have a material
effect on the estimated fair value amounts.
The carrying values of cash and cash equivalents, receivables,
accounts payable and payment service obligations approximate fair
values due to the short-term maturities of these instruments. The
amortized cost and fair value of investments in debt and equity
securities are disclosed in Note E of Notes to Consolidated
Financial Statements. The carrying amounts and estimated fair
values of Viad's other financial instruments at December 31 are
as follows:
<TABLE>
<CAPTION>
1995 1994
-------------------------- --------------------------
Carrying Fair Carrying Fair
(000 omitted) Amount Value Amount Value
----------- ----------- ----------- -----------
<S> <C> <C> <C> <C>
Total debt $ (889,291) $ (913,322) $ (741,969) $ (713,121)
Interest rate
swaps (1) (11,820) (32,731) (23,169) (62,191)
Foreign exchange
forward contracts --- 2,680 --- (1,094)
<FN>
(1) Carrying amount represents accrued interest and the unamortized cash
proceeds.
</TABLE>
The methods and assumptions used to estimate the fair values of
the financial instruments are summarized as follows:
Debt--The fair value of debt was estimated by discounting the
future cash flows using rates currently available for debt of
similar terms and maturity. The carrying values of short-term
bank loans, commercial paper and promissory notes were assumed to
approximate fair values due to their short-term maturities.
Interest rate swaps--The fair values were estimated by
discounting the expected cash flows using rates currently
available for interest rate swaps of similar terms and
maturities. The fair value represents the estimated amount that
Viad would pay to the dealer to terminate the swap agreement at
December 31.
Foreign exchange forward contracts--The fair value is estimated
using quoted exchange rates of these or similar instruments.
O. LITIGATION AND CLAIMS
Several shareholder derivative complaints were filed in the
Delaware Court of Chancery in late December 1995 and early
January 1996 against members of Viad's Board of Directors, and
against Viad as a nominal defendant. A lawsuit also was filed in
the United States District Court, District of Arizona, on
December 21, 1995, against the same parties, against a former
member of Viad's Board, and against certain officers of Viad. The
complaints variously allege fraud, negligence, mismanagement,
corporate waste, invasion of privacy, intentional infliction of
emotional distress, breaches of fiduciary duty, and seek
equitable relief and recovery from or on behalf of Viad for
compensatory and other damages incurred by Viad or the Arizona
case plaintiff as a result of alleged payment of excessive
compensation, improper investments or other improper activities.
Viad and its counsel believe the claims are without merit. In
addition, Viad and certain subsidiaries are plaintiffs or
defendants to various other actions, proceedings and pending
claims, including those matters discussed in more detail below.
Certain of these pending legal actions are or purport to be
shareholder or class actions. Some of the foregoing involve, or
may involve, compensatory, punitive or other damages in material
amounts. Litigation is subject to many uncertainties and it is
possible that some of the legal actions, proceedings or claims
referred to above could be decided against Viad. Although the
amount of liability at December 31, 1995, with respect to these
matters is not ascertainable, Viad believes that any resulting
liability will not materially affect Viad's financial position or
results of operations.
Viad also has been named defendant in multiple lawsuits filed by
several hundred former railroad workers claiming asbestos-related
health conditions. Viad has tolling agreements in place with
approximately 3,400 other claimants. The claims relate to former
subsidiaries and their production of railroad equipment. Due to
their preliminary nature as well as potential insurance
recoveries, the extent of the claims as they relate to Viad is
not ascertainable at this time, however, Viad believes that any
resulting liability will not materially affect its financial
position or results of operations.
During 1995, a federal grand jury resumed an investigation, which
began in early 1994 and was inactive for approximately one year,
of Viad's airline catering subsidiary's billing practices at
several airport flight kitchen locations. The subsidiary has
cooperated fully in the investigation, has identified certain
mistakes made in invoices to certain airline customers and has
tendered reimbursements as appropriate. Viad believes that the
subsidiary and its employees did not intend to improperly invoice
the airlines, that such invoicing was at worst an uncorrected
mutual error by both the subsidiary and the airlines, and that
any resulting liability, after taking into consideration amounts
already provided for, will not materially affect its financial
position or results of operations.
Viad is subject to various environmental laws and regulations of
the United States as well as of the states and other countries in
whose jurisdictions Viad has or had operations and is subject to
certain international agreements. As is the case with many
companies, Viad faces exposure to actual or potential claims and
lawsuits involving environmental matters. Although Viad is a
party to certain environmental disputes, Viad believes that any
liabilities resulting therefrom, after taking into consideration
amounts already provided for, but exclusive of any potential
insurance recoveries, will not have a material adverse effect on
Viad's financial position or results of operations.
P. PRINCIPAL BUSINESS SEGMENTS
Description of Business. Viad operates in three principal
business segments. Viad's Airline Catering and Services segment
engages in airline catering operations, providing in-flight meals
to domestic and international airlines as well as providing
airplane fueling and ground handling services. The Convention
Services business provides decorating, exhibit preparation,
installation, electrical, transportation and management services
for conventions and tradeshows and is a designer and builder of
convention and other exhibits and displays. Viad's Travel and
Leisure and Payment Services business offers money orders
throughout the nation and performs official checks and negotiable
instrument clearing services for banks and credit unions;
operates contract foodservice facilities; and engages in certain
cruise line and hotel/resort operations and recreation and travel
services.
Major Customers. Major customers are defined as those which
individually accounted for more than 10% of the Company's sales.
Sales to one major customer accounted for 13% of Viad's
consolidated sales in 1995 and 1994. Sales to a different major
customer accounted for 12% of Viad's consolidated sales in 1993.
<PAGE>
<TABLE>
<CAPTION>
Year ended December 31, (000 omitted)
1995 1994 1993 1992 1991
----------- ----------- ----------- ----------- -----------
<S> <C> <C> <C> <C> <C>
Revenues:
Airline Catering
and Services $ 800,338 $ 763,658 $ 502,775 $ 527,832 $ 492,151
Convention Services 588,978 522,683 356,267 238,694 212,828
Travel and Leisure
and Payment Services (1) 682,735 616,512 582,780 698,520 776,559
---------- ----------- ----------- ----------- -----------
$ 2,072,051 $ 1,902,853 $ 1,441,822 $ 1,465,046 $ 1,481,538
========== =========== =========== =========== ===========
Operating Income: (2)
Airline Catering
and Services (3) $ 68,712 $ 62,533 $ 41,989 $ 41,391 $ 35,941
Convention Services (4) 54,593 50,614 27,849 20,281 16,795
Travel and Leisure
and Payment Services (1)(4) 3,864 49,441 56,350 34,865 23,335
----------- ----------- ----------- ----------- -----------
Total principal
business segments 127,169 162,588 126,188 96,537 76,071
Unallocated corporate
expense and other items,
net (3) (4) (33,354) (33,594) (30,314) (23,979) (49,508)
----------- ----------- ----------- ----------- -----------
$ 93,815 $ 128,994 $ 95,874 $ 72,558 $ 26,563
=========== =========== =========== =========== ===========
<FN>
(1) Viad's payment services subsidiary is investing increasing amounts in tax-exempt securities. On a fully
taxable equivalent basis, revenues and operating income would be higher by $16,000,000, $7,897,000,
$3,967,000 and $982,000 for 1995, 1994, 1993 and 1992, respectively.
(2) Operating income by segment represents Revenues less Costs of sales and services. Unallocated corporate
and other items, net, are then deducted from total operating income of principal business segments to arrive
at total operating income.
(3) As described in Note N of Notes to Consolidated Financial Statements, during the third quarter of 1996,
Viad reclassified expenses related to its receivables sales program from Costs of sales and services to
Unallocated corporate expense and other items, net. As a result, operating income of the Airline Catering
and Services segment and unallocated corporate expense increased by approximately $2,157,000, $1,000,000,
$604,000, $608,000 and $1,497,000 for 1995, 1994, 1993, 1992 and 1991, respectively. Total operating income
remained unchanged.
(4) Includes a one-time gain of $3,477,000 due to the curtailment of certain postretirement medical
benefits in 1995. After deducting restructuring and other charges of $55,500,000, $30,000,000 and
$40,000,000 for Travel and Leisure and Payment Services in 1995, 1992 and 1991, respectively, and
$24,000,000 charged to Unallocated corporate expense in 1991. Also after deducting a total of $7,600,000
comprised of $749,000, $2,451,000 and $4,400,000 in 1992 for Convention Services, Travel and Leisure and
Payment Services and Unallocated corporate expense, respectively, for increased ongoing expenses (above 1991
levels) resulting from the adoption of SFAS No. 106 effective January 1, 1992.
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
Airline Travel and
Catering Leisure and Principal
and Convention Payment Business
(000 omitted) Services Services Services Segments Corporate Total
----------- ----------- ----------- ----------- ----------- -----------
<S> <C> <C> <C> <C> <C> <C>
1995:
Assets at year end:
Before intangibles
and restricted
assets $ 212,887 $ 198,209 $ 428,089 $ 839,185 $ 217,778 $ 1,056,963
Assets restricted
for payment service
obligations 1,666,116 1,666,116 1,666,116
Investments in
discontinued
operations 481,269 481,269
Intangibles 282,599 186,298 46,185 515,082 4,250 519,332
---------- ---------- ---------- ---------- ---------- ----------
$ 495,486 $ 384,507 $ 2,140,390 $ 3,020,383 $ 703,297 $ 3,723,680
========== ========== ========== ========== ========== ==========
Capital
expenditures (1) $ 15,185 $ 15,035 $ 29,911 $ 60,131 $ 1,996 $ 62,127
========== ========== ========== ========== ========== ==========
Depreciation and
amortization:
Depreciation $ 21,461 $ 10,306 $ 26,716 $ 58,483 $ 5,242 $ 63,725
Amortization of
intangibles 8,775 3,706 2,911 15,392 15,392
---------- ---------- ---------- ---------- ---------- ----------
$ 30,236 $ 14,012 $ 29,627 $ 73,875 $ 5,242 $ 79,117
========== ========== ========== ========== ========== ==========
<FN>
(1) Excluding the purchases of two cruise ships (which were previously leased) by Travel and Leisure and Payment
Services for a purchase price of $111,103,000 (See Note B of Notes to Consolidated Financial Statements).
</TABLE>
<PAGE>
<PAGE>
<TABLE>
<CAPTION>
Airline Travel and
Catering Leisure and Principal
and Convention Payment Business
(000 omitted) Services Services Services Segments Corporate Total
----------- ----------- ----------- ----------- ----------- -----------
<S> <C> <C> <C> <C>
1994:
Assets at year end:
Before intangibles
and restricted
assets $ 231,417 $ 127,191 $ 311,226 $ 669,834 $ 230,074 $ 899,908
Assets restricted
for payment service
obligations 1,339,802 1,339,802 1,339,802
Investments in
discontinued
operations 533,508 533,508
Intangibles 291,337 112,870 64,991 469,198 4,766 473,964
---------- ---------- ---------- ---------- ---------- ----------
$ 522,754 $ 240,061 $ 1,716,019 $ 2,478,834 $ 768,348 $ 3,247,182
========== ========== ========== ========== ========== ==========
Capital expenditures $ 22,214 $ 11,415 $ 31,744 $ 65,373 $ 2,879 $ 68,252
========== ========== ========== ========== ========== ==========
Depreciation and
amortization:
Depreciation $ 20,125 $ 8,370 $ 22,065 $ 50,560 $ 4,982 $ 55,542
Amortization of
intangibles 8,362 2,748 2,336 13,446 13,446
---------- ---------- ---------- ---------- ---------- ----------
$ 28,487 $ 11,118 $ 24,401 $ 64,006 $ 4,982 $ 68,988
========== ========== ========== ========== ========== ==========
</TABLE>
<PAGE>
<PAGE>
<TABLE>
<CAPTION>
Airline Travel and
Catering Leisure and Principal
and Convention Payment Business
(000 omitted) Services Services Services Segments Corporate Total
----------- ----------- ----------- ----------- ----------- -----------
<S> <C> <C> <C> <C>
1993:
Assets at year end:
Before intangibles
and restricted
assets $ 143,085 $ 118,467 $ 342,925 $ 604,477 $ 244,540 $ 849,017
Assets restricted
for payment service
obligations 1,041,660 1,041,660 1,041,660
Investments in
discontinued
operations 448,625 448,625
Intangibles 240,684 79,928 60,084 380,696 6,150 386,846
---------- ---------- ---------- ---------- ---------- ----------
$ 383,769 $ 198,395 $ 1,444,669 $ 2,026,833 $ 699,315 $ 2,726,148
========== ========== ========== ========== ========== ==========
Capital expenditures $ 16,125 $ 11,838 $ 38,726 $ 66,689 $ 1,637 $ 68,326
========== ========== ========== ========== ========== ==========
Depreciation and
amortization:
Depreciation $ 14,222 $ 8,181 $ 22,305 $ 44,708 $ 3,785 $ 48,493
Amortization of
intangibles 7,041 743 4,297 12,081 12,081
---------- ---------- ---------- ---------- ---------- ----------
$ 21,263 $ 8,924 $ 26,602 $ 56,789 $ 3,785 $ 60,574
========== ========== ========== ========== ========== ==========
</TABLE>
<PAGE>
<PAGE>
Q. CONDENSED CONSOLIDATED QUARTERLY RESULTS (UNAUDITED)
<TABLE>
<CAPTION>
First Quarter Second Quarter
-------------------------- --------------------------
(000 omitted) 1995 1994 1995 1994
----------- ----------- ----------- -----------
<S> <C> <C> <C> <C>
Revenues:
Airline Catering
and Services $ 184,456 $ 151,463 $ 206,509 $ 202,225
Convention Services 154,397 127,671 131,588 135,736
Travel and Leisure and
Payment Services (1) 152,453 147,513 168,026 156,495
---------- ---------- ---------- ----------
$ 491,306 $ 426,647 $ 506,123 $ 494,456
========== ========== ========== ==========
Operating Income:
Airline Catering
and Services (2) $ 11,437 $ 8,558 $ 18,592 $ 16,802
Convention Services (3) 15,001 12,392 16,629 14,957
Travel and Leisure and
Payment Services (1) 4,417 2,551 17,025 13,362
---------- ---------- ---------- ----------
Total principal
business segments 30,855 23,501 52,246 45,121
---------- ---------- ---------- ----------
Unallocated corporate expense
and other items, net (2) (9,290) (7,798) (8,329) (7,427)
---------- ---------- ---------- ----------
$ 21,565 $ 15,703 $ 43,917 $ 37,694
========== ========== ========== ==========
Income:
Continuing operations $ 5,224 $ 2,893 $ 21,276 $ 16,926
Discontinued operations 12,462 14,317 26,190 26,467
---------- ---------- ---------- ----------
Income before cumulative
effect of change in
accounting principle 17,686 17,210 47,466 43,393
Cumulative effect of change
in accounting principle (5) (13,875)
---------- ---------- ---------- ----------
Net income $ 3,811 $ 17,210 $ 47,466 $ 43,393
========== ========== ========== ==========
Income per Common
Share (dollars):
Continuing operations $ 0.06 $ 0.03 $ 0.24 $ 0.19
Discontinued operations 0.14 0.17 0.30 0.31
---------- ---------- ---------- ----------
Income before cumulative
effect of change in
accounting principle 0.20 0.20 0.54 0.50
Cumulative effect of change
in accounting principle (5) (0.16)
---------- ---------- ---------- ----------
Net income per common share $ 0.04 $ 0.20 $ 0.54 $ 0.50
========== ========== ========== ==========
/TABLE
<PAGE>
<PAGE>
Q. CONDENSED CONSOLIDATED QUARTERLY RESULTS, continued (UNAUDITED)
<TABLE>
<CAPTION>
Third Quarter Fourth Quarter
-------------------------- --------------------------
(000 omitted) 1995 1994 1995 1994
----------- ----------- ----------- -----------
<S> <C> <C> <C> <C>
Revenues:
Airline Catering
and Services $ 212,951 $ 211,486 $ 196,422 $ 198,484
Convention Services 130,302 124,097 172,691 135,179
Travel and Leisure and
Payment Services (1) 199,422 173,608 162,834 138,896
---------- ---------- ---------- ----------
$ 542,675 $ 509,191 $ 531,947 $ 472,559
========== ========== ========== ==========
Operating Income (Loss):
Airline Catering
and Services (2) $ 21,029 $ 20,223 $ 17,654 $ 16,950
Convention Services 9,896 11,539 13,067 11,726
Travel and Leisure and
Payment Services (1)(4) (28,079) 23,126 10,501 10,402
---------- ---------- ---------- ----------
Total principal
business segments 2,846 54,888 41,222 39,078
---------- ---------- ---------- ----------
Unallocated corporate expense
and other items, net (2) (6,839) (8,630) (8,896) (9,739)
---------- ---------- ---------- ----------
$ (3,993) $ 46,258 $ 32,326 $ 29,339
========== ========== ========== ==========
Income (Loss):
Continuing operations $ (12,122) $ 22,181 $ 15,910 $ 11,599
Discontinued operations (77,615) 23,247 5,991 22,681
---------- ---------- ---------- ----------
Net income (loss) $ (89,737) $ 45,428 $ 21,901 $ 34,280
========== ========== ========== ==========
Income (Loss) per
Common Share (dollars):
Continuing operations $ (0.15) $ 0.25 $ 0.18 $ 0.14
Discontinued operations (0.87) 0.27 0.06 0.25
---------- ---------- ---------- ----------
Net income (loss) per
common share $ (1.02) $ 0.52 $ 0.24 $ 0.39
========== ========== ========== ==========
<FN>
(1) Viad's payment services subsidiary is investing increasing amounts in tax-exempt
securities. On a fully taxable equivalent basis, revenues and operating income would be
higher by the following amounts:
1995 1994
---------- -----------
First Quarter $ 3,443,000 $ 1,514,000
Second Quarter 3,929,000 1,422,000
Third Quarter 4,129,000 2,376,000
Fourth Quarter 4,499,000 2,585,000
(2) As described in Note N of Notes to Consolidated Financial Statements, during the
third quarter of 1996, Viad reclassified expenses related to its receivables sales program
from Costs of sales and services to Unallocated corporate expense and other items, net.
As a result, operating income of the Airline Catering and Services segment and unallocated
corporate expense increased by approximately $411,000, $660,000, $530,000 and $556,000 for
the 1995 first, second, third and fourth quarters, respectively, and by $137,000,
$262,000, $276,000 and $325,000 for the 1994 first, second, third and fourth quarters,
respectively. Total operating income remained unchanged.
(3) Includes a one-time gain of $3,477,000 due to the curtailment of certain
postretirement medical benefits in the second quarter of 1995.
(4) After deducting asset write-downs of $55,500,000 for Travel and Leisure and Payment
Services in the third quarter of 1995 (See Note C of Notes to Consolidated Financial
Statements).
(5) In the fourth quarter of 1995, Viad elected the early adoption of SFAS No. 121
retroactive to January 1, 1995. The effect of this adoption was to decrease
previously reported first quarter 1995 net income by $13,875,000 and first quarter 1995
net income per common share by $0.16 (See Note C of Notes to Consolidated Financial
Statements).
</TABLE>
