<PAGE>
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
FORM 10-Q
QUARTERLY REPORT PURSUANT TO SECTION 13
OF THE SECURITIES EXCHANGE ACT OF 1934
For the Quarterly Period Ended March 31, 1998
Commission file number 001-11015
VIAD CORP
(Exact name of registrant as specified in its charter)
DELAWARE 36-1169950
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
1850 N. CENTRAL AVE., PHOENIX, ARIZONA 85077
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code (602) 207-4000
Indicate by check mark whether the registrant (1) has filed all
Exchange Act reports required to be filed by Section 13 or 15(d)
of the Securities Exchange Act of 1934 during the preceding 12
months, and (2) has been subject to such filing requirements for
the past 90 days.
Yes x No
--------- ---------
As of April 30, 1998, 99,243,565 shares of Common Stock ($1.50
par value) were outstanding.
<PAGE>
<TABLE>
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
VIAD CORP
CONSOLIDATED BALANCE SHEET
<CAPTION>
March 31, December 31,
(000 omitted) 1998 1997
----------- -----------
<S> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents $ 29,490 $ 12,341
Receivables, less allowance of
$4,787 and $4,805 136,554 131,620
Inventories 109,414 105,331
Deferred income taxes 28,837 29,444
Other current assets 36,191 29,207
---------- ----------
340,486 307,943
Funds, agents' receivables and
current maturities of investments
restricted for a subsidiary's payment
service obligations, after eliminating
$90,000 of the subsidiary's funds
invested in Viad commercial paper 495,685 617,887
---------- ----------
Total current assets 836,171 925,830
Investments restricted for subsidiary's
payment service obligations 1,749,852 1,615,464
Property and equipment 461,129 470,052
Other investments and assets 107,280 113,274
Deferred income taxes 74,580 74,659
Intangibles 526,794 531,034
---------- ----------
$ 3,755,806 $ 3,730,313
========== ==========
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
March 31, December 31,
(000 omitted, except number of shares) 1998 1997
---------- ----------
<S> <C> <C>
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable $ 138,809 $ 145,641
Accrued compensation 58,677 75,589
Other current liabilities 140,202 134,477
Current portion of long-term debt 32,177 32,291
---------- ----------
369,865 387,998
Payment service obligations of subsidiary 2,266,553 2,248,004
---------- ----------
Total current liabilities 2,636,418 2,636,002
Long-term debt 401,911 377,849
Pension and other benefits 64,352 62,988
Other deferred items and
insurance reserves 99,190 109,323
Minority interests 8,475 8,378
$4.75 Redeemable preferred stock 6,615 6,612
Common stock and other equity:
Common stock, $1.50 par value,
200,000,000 shares authorized,
99,739,925 shares issued 149,610 149,610
Additional capital 310,686 291,414
Retained income 216,743 209,127
Unearned employee benefits and other (136,621) (121,968)
Unrealized gain on securities
available for sale 12,064 13,625
Cumulative translation adjustments (2,417) (3,022)
Common stock in treasury, at cost,
587,553 and 516,926 shares (11,220) (9,625)
---------- ----------
Total common stock and other equity 538,845 529,161
---------- ----------
$ 3,755,806 $ 3,730,313
========== ==========
<FN>
See Notes to Consolidated Financial Statements.
</TABLE>
<PAGE>
<TABLE>
VIAD CORP
STATEMENT OF CONSOLIDATED INCOME
<CAPTION>
Three months ended March 31, 1998 1997
(000 omitted, except per share data) ---------- ----------
<S> <C> <C>
REVENUES $ 602,780 $ 569,726
---------- ----------
Costs and expenses:
Costs of sales and services 561,848 531,016
Corporate activities and
nonoperating items, net 6,205 7,983
Sale of trade accounts receivable expense 1,096 1,088
Interest expense 11,174 14,263
Minority interests 276 364
---------- ----------
580,599 554,714
---------- ----------
Income before income taxes 22,181 15,012
Income taxes 6,802 4,492
---------- ----------
INCOME BEFORE EXTRAORDINARY CHARGE 15,379 10,520
Extraordinary charge for early retirement
of debt, net of tax benefit of $4,554 (8,458)
---------- ----------
NET INCOME $ 15,379 $ 2,062
========== ==========
DILUTED INCOME PER COMMON SHARE:
Income before extraordinary charge $ 0.15 $ 0.11
Extraordinary charge (0.09)
---------- ----------
Diluted net income per common share $ 0.15 $ 0.02
========== ==========
BASIC INCOME PER COMMON SHARE:
Income before extraordinary charge $ 0.16 $ 0.11
Extraordinary charge (0.09)
---------- ----------
Basic net income per common share $ 0.16 $ 0.02
========== ==========
Average outstanding common shares 93,979 90,044
Additional dilutive shares related to
stock-based compensation 3,872 2,795
---------- ----------
Average outstanding and potentially
dilutive common shares 97,851 92,839
========== ==========
Dividends declared per common share $ 0.08 $ 0.08
========== ==========
Preferred stock dividends $ 282 $ 282
========== ==========
<FN>
See Notes to Consolidated Financial Statements.
</TABLE>
<PAGE>
<TABLE>
VIAD CORP
STATEMENT OF RETAINED INCOME
<CAPTION>
Three months ended March 31, 1998 1997
(000 omitted) ---------- ----------
<S> <C> <C>
Balance, beginning of year $ 209,127 $ 146,664
Net income 15,379 2,062
Dividends on common and preferred stock (7,843) (7,552)
Adjust distribution of consumer products
business to Viad stockholders for post-
closing settlements (1,216)
Other 80 13
---------- ----------
Balance, end of period $ 216,743 $ 139,971
========== ==========
<FN>
See Notes to Consolidated Financial Statements.
</TABLE>
<TABLE>
VIAD CORP
STATEMENT OF COMPREHENSIVE INCOME
<CAPTION>
Three months ended March 31, 1998 1997
(000 omitted) ---------- ----------
<S> <C> <C>
Net income $ 15,379 $ 2,062
---------- ----------
Other comprehensive income, net of tax:
Foreign currency translation adjustments 605 (753)
Unrealized gain (loss) on securities
classified as available for sale:
Unrealized holding losses arising
during the period (295) (4,172)
Reclassification adjustment for realized
gains included in net income (1,266) (345)
---------- ---------
Other comprehensive loss (956) (5,270)
---------- ---------
Comprehensive income (loss) $ 14,423 $ (3,208)
========== =========
<FN>
See Notes to Consolidated Financial Statements.
</TABLE>
<PAGE>
<TABLE>
VIAD CORP
STATEMENT OF CONSOLIDATED CASH FLOWS
<CAPTION>
Three months ended March 31, 1998 1997
(000 omitted) ---------- ----------
<S> <C> <C>
CASH FLOWS PROVIDED (USED) BY OPERATING ACTIVITIES:
Net income $ 15,379 $ 2,062
Adjustments to reconcile net income to
net cash provided by operating activities:
Depreciation and amortization 20,309 19,372
Deferred income taxes 2,679 4,128
Extraordinary charge for early retirement of debt 8,458
Other noncash items, net 148 2,689
Change in operating assets and liabilities:
Receivables and inventories (9,387) (44,952)
Payment service assets and obligations, net 142,698 49,972
Accounts payable and accrued compensation (23,744) (12,865)
Other assets and liabilities, net 281 (11,169)
---------- ----------
Net cash provided by operating activities 148,363 17,695
---------- ----------
CASH FLOWS PROVIDED (USED) BY INVESTING ACTIVITIES:
Capital expenditures (16,114) (13,849)
Acquisitions of businesses, net of cash acquired (17,555)
Proceeds from sales of businesses, property and
other assets, net 2,795 70,277
Investments restricted for payment service obligations:
Proceeds from sales and maturities of securities
classified as available for sale 185,191 178,557
Proceeds from maturities of securities
classified as held to maturity 29,774 6,841
Purchases of securities classified as
available for sale (280,992) (150,726)
Purchases of securities classified as
held to maturity (70,991) (65,352)
Investments in and advances to
discontinued operations, net (3,920)
---------- ----------
Net cash (used) provided by investing activities (150,337) 4,273
---------- ----------
CASH FLOWS PROVIDED (USED) BY FINANCING ACTIVITIES:
Payments on long-term borrowings (68) (58,528)
Premium paid upon early retirement of debt (13,012)
Net change in short-term borrowings 24,000 53,856
Dividends on common and preferred stock (7,843) (7,552)
Proceeds from sales of treasury stock 5,163 5,164
Cash payments on interest rate swaps (2,129) (2,157)
---------- ----------
Net cash provided (used) by financing activities 19,123 (22,229)
---------- ----------
Net increase (decrease) in cash and cash equivalents 17,149 (261)
Cash and cash equivalents, beginning of year 12,341 4,422
---------- ----------
CASH AND CASH EQUIVALENTS, END OF PERIOD $ 29,490 $ 4,161
========== ==========
<FN>
See Notes to Consolidated Financial Statements.
</TABLE>
<PAGE>
VIAD CORP
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE A--Basis of Preparation
The Consolidated Financial Statements of Viad Corp ("Viad") include
the accounts of Viad and all of its subsidiaries. This information
should be read in conjunction with the financial statements set
forth in the Viad Corp Annual Report to Stockholders for the year
ended December 31, 1997.
Accounting policies utilized in the preparation of the financial
information herein presented are the same as set forth in Viad's
annual financial statements except as modified for interim
accounting policies which are within the guidelines set forth in
Accounting Principles Board Opinion No. 28, "Interim Financial
Reporting." The interim consolidated financial information is
unaudited. In the opinion of management, all adjustments,
consisting only of normal recurring accruals, necessary to present
fairly Viad's financial position as of March 31, 1998, and its
results of operations and its cash flows for the three months ended
March 31, 1998 and 1997 have been included. Interim results of
operations are not necessarily indicative of the results of
operations for the full year.
Certain prior year amounts have been reclassified to conform with
the 1998 presentation.
NOTE B--Fiduciary Assets Restricted for Payment Service Obligations
Viad's payment services subsidiary generates funds from the sale of
money orders and other payment instruments, with the related
liability classified as "Payment service obligations." The
proceeds of such sales are invested in permissible securities,
principally debt instruments. Such investments, along with related
cash and funds in transit, are restricted by state regulatory
agencies for use by the subsidiary to satisfy the liability to pay,
upon presentment, the face amount of such payment service
obligations. Accordingly, such fiduciary assets are not available
to satisfy working capital or other financing requirements of Viad.
Following is a summary of amounts related to the payment service
obligations as of March 31, 1998, including excess funds:
<TABLE>
(000 omitted)
<S> <C>
Fiduciary Assets:
Funds, agents' receivables and current
maturities of investments restricted
for payment service obligations,
including $90,000 invested in Viad
commercial paper (1) $ 585,685
Investments restricted for payment
service obligations (2) 1,749,852
----------
2,335,537
Payment service obligations 2,266,553
----------
Asset carrying amounts in excess
of 1:1 funding coverage of
payment service obligations (2) $ 68,984
==========
<FN>
(1) See Note D of Notes to Consolidated Financial Statements for description
of Viad's revolving bank credit agreement, which supports its commercial paper
obligations.
(2) See Note C of Notes to Consolidated Financial Statements for a summary of
investments and their classification and carrying amounts in accordance with
SFAS No. 115, "Accounting for Certain Investments in Debt and Equity
Securities." As detailed therein, securities classified as "available for
sale" are carried at market value, and the market value of securities
classified as "held to maturity" exceeded carrying amounts by $10,415,000 at
March 31, 1998.
</TABLE>
NOTE C--Investments Restricted for Payment Service Obligations
Investments restricted for payment service obligations include
the following debt and equity securities:
<TABLE>
<CAPTION>
March 31, December 31,
1998 1997
(000 omitted) ----------- -----------
<S> <C> <C>
Securities available for sale, at
fair value (amortized cost of
$1,172,041 and $1,074,371) $ 1,191,818 $ 1,096,706
Securities held to maturity, at
amortized cost (fair value of
$600,411 and $559,497) 589,996 548,773
----------- ----------
1,781,814 1,645,479
Less current maturities (31,962) (30,015)
----------- ----------
$ 1,749,852 $ 1,615,464
=========== ==========
</TABLE>
NOTE D--Debt
At March 31, 1998 and December 31, 1997, Viad classified as long-
term debt $74,000,000 and $50,000,000, respectively, of short-
term borrowings which, along with the $90,000,000 commercial
paper issued to Viad's payment services subsidiary, are supported
by unused commitments under a $300,000,000 long-term revolving
bank credit agreement.
In late March 1997, Viad repurchased $58,414,000 par value of its
10.5 percent subordinated debentures at a premium, resulting in
an extraordinary charge of $8,458,000.
NOTE E--Income Taxes
A reconciliation of the provision for income taxes and the amount
that would be computed using statutory federal income tax rates
on income before income taxes for the three months ended March
31, is as follows:
<TABLE>
<CAPTION>
1998 1997
(000 omitted) ------------ ------------
<S> <C> <C>
Computed income taxes at statutory
federal income tax rate of 35% $ 7,763 $ 5,254
Nondeductible goodwill amortization 1,051 1,039
Minority interests 97 127
State income taxes 673 829
Tax-exempt income (5,350) (4,199)
Adjustment to estimated annual
effective rate 2,000 1,750
Other, net 568 (308)
----------- -----------
Provision for income taxes $ 6,802 $ 4,492
=========== ===========
</TABLE>
NOTE F--Supplementary Information--Revenues and Operating Income
<TABLE>
<CAPTION>
Three months ended March 31,
------------------------------------------------------------
Revenues Operating Income
--------------------------- ----------------------------
1998 1997 1998 1997
(000 omitted) ----------- ----------- ----------- -----------
<S> <C> <C> <C> <C>
Airline Catering
and Services (1) $ 235,128 $ 211,829 $ 13,932 $ 13,147
Convention
Services (1) 209,587 209,327 20,347 18,489
Travel and Leisure
and Payment
Services (1)(2) 158,065 148,570 6,653 7,074
----------- ----------- ----------- -----------
Total principal
business
segments (1) $ 602,780 $ 569,726 40,932 38,710
=========== ===========
Corporate activities
and nonoperating
items, net (1) (6,205) (7,983)
Sale of trade
accounts receivable
expense (1,096) (1,088)
----------- -----------
$ 33,631 $ 29,639
=========== ===========
<FN>
(1) In 1998, Viad began charging its operating subsidiaries an increased
allocation of Corporate expenses, which for the first quarter of 1998 equaled
about 75 percent of the reduction in expense for Corporate activities. The
increased charges for Corporate expenses reduced 1998 operating income of Viad's
segments, resulting in lower reported increases over 1997 segment operating
income levels.
(2) 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 $8,231,000 and $6,460,000 for the 1998 and 1997
quarters, respectively.
</TABLE>
NOTE G--Impact of New Accounting Pronouncement
In March 1998, the American Institute of Certified Public
Accountants issued Statement of Position ("SOP") 98-1, "Accounting
for the Costs of Computer Software Developed or Obtained for
Internal Use." The SOP, which becomes effective in 1999, outlines
capitalization criteria for certain development costs of software
to be used internally. Viad expects to adopt the SOP in the first
quarter of 1999 for software developmental costs incurred in that
quarter and thereafter. The effect of the adoption of SOP 98-1 on
Viad's consolidated financial position or results of operations has
not yet been determined.
<PAGE>
Item 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
RESULTS:
There were no material changes in the nature of Viad's business,
nor were there any other changes in the general characteristics of
its operations as described and discussed in the first paragraph of
the results section of Management's Discussion and Analysis of
Results of Operations and Financial Condition presented in the Viad
Corp Annual Report to Stockholders for the year ended December 31,
1997.
All per share figures discussed are stated on the diluted basis.
COMPARISON OF FIRST QUARTER OF 1998 TO THE FIRST QUARTER OF 1997:
In the first quarter of 1998, revenues increased $33.1 million, or
5.8 percent, to $602.8 million from $569.7 million in 1997. The
1998 first quarter operating income of Viad's principal business
segments increased $2.2 million, or 5.7 percent, over that of 1997.
Viad's payment services subsidiary continues to invest increasing
amounts of its growing money order and official check funds in tax-
exempt securities. On a fully taxable equivalent basis, revenues
rose 6.0 percent and operating income of principal business
segments increased $4.0 million, or 8.8 percent.
Income for the first quarter of 1998 was $15.4 million, or $0.15
per share, compared to income before extraordinary charge of $10.5
million, or $0.11 per share, for the 1997 quarter. There were 5
million more average outstanding and potentially dilutive common
shares outstanding in 1998 than in 1997, due primarily to the
acquisition of Game Financial Corporation in December 1997 (for
approximately 2.6 million shares of Viad common stock), stock
option exercises over the past year and the effects of a higher
Viad stock price on the calculation of additional common shares
arising from unexercised stock options.
Net income for the first quarter of 1998 was $15.4 million, or
$0.15 per share. Net income for the first quarter of 1997 was $2.1
million, or $0.02 per share, after deducting an extraordinary
charge of $8.5 million (net of tax benefit of $4.6 million), or
$0.09 per share, for the early retirement of debt.
In 1998, Viad began charging its operating subsidiaries an
increased allocation of Corporate expenses. The increased charges
for Corporate expenses reduced 1998 operating income of Viad's
segments, resulting in lower reported increases over 1997 segment
operating income levels.
AIRLINE CATERING AND SERVICES.
The first quarter 1998 revenues of the Airline Catering and
Services group were $235.1 million, an 11.0 percent increase from
the 1997 first quarter revenues of $211.8 million. Operating
income increased $800,000, or 6.0 percent (8.3 percent before the
increased corporate allocation), over that of the 1997 first
quarter. Revenues and operating income increased due to new
catering business added throughout 1997 and increased traffic and
flights. Revenues and operating income from the airplane fueling
and ground handling business were essentially even. On April 6,
1998, Viad announced the sale of its Aircraft Services
International Group ("ASIG"), which constituted the fueling and
ground handling portion of Viad's airline catering and services
segment. See Recent Developments. Operating margins decreased
slightly to 5.9 percent (6.1 percent before the increased corporate
allocation) from 1997's 6.2 percent due to lower margins at ASIG.
CONVENTION SERVICES.
Convention Services first quarter 1998 revenues increased $300,000,
or 0.1 percent, to $209.6 million from $209.3 million in the 1997
first quarter, as GES Exposition Services continued to eliminate
low-margin business in the 1998 quarter. Operating income
increased $1.9 million, or 10.0 percent (13.0 percent before the
increased corporate allocation), and operating margins increased
from 8.8 percent in the 1997 quarter to 9.7 percent (10.0 percent
before the increased corporate allocation) in 1998, due to improved
cost controls and higher margin business.
TRAVEL AND LEISURE AND PAYMENT SERVICES.
Revenues of the Travel and Leisure and Payment Services companies
were $158.1 million for the first quarter of 1998, up $9.5 million,
or 6.4 percent, from those of the 1997 first quarter. Operating
income decreased 6.0 percent to $6.7 million. On the fully taxable
equivalent basis, first quarter revenues and operating income would
have been higher by $8.2 million and $6.5 million in 1998 and 1997,
respectively, resulting in a 7.3 percent revenue increase and a
10.0 percent (13.7 percent before the increased corporate
allocation) operating income increase. The results of Game
Financial Corporation ("Game"), which was acquired in December
1997, substantially offset prior-year revenues and operating income
from Crystal Holidays and Jetsave, two small British travel
companies sold in October 1997. Operating margins on the fully
taxable equivalent basis would be 9.0 percent (9.3 percent before
the increased corporate allocation) in the first quarter of 1998,
up from 8.7 percent in the 1997 first quarter.
On the fully taxable equivalent basis, payment services revenues
and operating income increased $24.1 million and $2.7 million,
respectively, over those of 1997's first quarter, primarily due to
acquisitions made in 1997, including Game in December 1997. In
addition, larger investment balances resulted in increased
investment income.
Duty Free and shipboard concession revenues decreased $500,000 from
those of the 1997 first quarter. One customer had a cruise ship
in extended drydock during the first quarter of 1998, contributing
to fewer shipboard passenger days. Operating income increased
$200,000 over that of the 1997 first quarter, due primarily to cost
controls.
Travel tour service revenues decreased $400,000 from those of the
1997 first quarter, primarily as a result of weaker off-season
package tour traffic. Operating income was even with that of the
1997 first quarter, as operating cost reductions offset the revenue
decline.
Restaura foodservice revenues and operating income for the 1998
first quarter decreased from those of the 1997 first quarter by
$1 million and $700,000, respectively. A portion of the revenue
decrease is attributable to a major customer experiencing reduced
overtime and weekend production at several locations. The decline
in operating income was caused in part by start-up costs of
concession operations at Bank One Ballpark (in preparation for the
inaugural season of the Arizona Diamondbacks major league baseball
franchise).
CORPORATE ACTIVITIES AND NONOPERATING ITEMS, NET.
Corporate activities and nonoperating items, net, decreased $1.8
million in the first quarter of 1998 compared to the first quarter
of 1997. As discussed above, Viad began charging its operating
subsidiaries an increased allocation of Corporate expenses in 1998.
Approximately 75 percent of the first quarter decline in corporate
expenses is due to the increased allocation to Viad's segments.
SALE OF TRADE ACCOUNTS RECEIVABLE EXPENSE.
Expenses from the sale of trade accounts receivable in the first
quarter of 1998 were essentially even with those of the 1997 first
quarter, as the level of trade receivables sold was unchanged from
the prior year.
INTEREST EXPENSE.
Interest expense decreased $3.1 million from that of the 1997 first
quarter, due to the repayment of debt from proceeds from the sales
of noncore assets and businesses in 1997. In addition, in late
March 1997, Viad repurchased $58.4 million par value of its 10.5
percent subordinated debentures, resulting in lower interest
expense going forward.
INCOME TAXES.
The effective tax rate in the 1998 first quarter was 30.7 percent,
up from 29.9 percent in the 1997 first quarter, as increases in
tax-exempt income by Viad's payment services subsidiary are slowing
relative to overall income growth.
LIQUIDITY AND CAPITAL RESOURCES:
Viad's total debt at March 31, 1998 was $434.1 million compared
with $410.1 million at December 31, 1997. The debt-to-capital
ratio at March 31, 1998 was 0.44 to 1 compared to 0.43 to 1 at
December 31, 1997.
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.
RECENT DEVELOPMENTS:
On April 6, 1998, Viad announced the sale of Aircraft Services
International Group ("ASIG"), which conducted fueling and ground
handling operations. The sale proceeds were used to repay short-
term borrowings. ASIG's operations are included in Viad's Airline
Catering and Services segment. Gain on sale of ASIG, after
deducting costs of sale, related expense provisions and income
taxes, will be recorded in second quarter 1998 results.
On April 6, 1998, Viad announced that it had signed an agreement
and plan of merger with MoneyGram Payment Systems, Inc.
("MoneyGram") pursuant to which Viad would acquire MoneyGram.
MoneyGram is a provider of consumer money wire transfer services,
and the MoneyGram business is intended to be part of Viad's
Travelers Express Company. On April 10, 1998, Viad commenced a
cash tender offer, through the filing of Schedule 14D-1 with the
Securities and Exchange Commission, for all outstanding shares of
MoneyGram at a purchase price of $17 per share. Such offer was
scheduled to expire on May 8, 1998.
At the close of business on May 8, 1998, there were 4,976,441
shares tendered, representing approximately 30.1 percent of the
outstanding MoneyGram shares. The cash tender offer was increased
to $17.35 per share on May 11, 1998, which would result in a total
purchase price of approximately $306 million, including fees and
expenses related to the offer. The revised offer is scheduled to
expire on May 22, 1998. Viad also stated that it will not further
increase its offer price above $17.35 per share. The offer is
subject to the valid tender of a majority of MoneyGram's
outstanding shares.
There were no other material changes in Viad's financial condition
nor were there any substantive changes relative to matters
discussed in the Liquidity and Capital Resources section of
Management's Discussion and Analysis of Results of Operations and
Financial Condition as presented in Viad Corp's Annual Report to
Stockholders for the year ended December 31, 1997.
PART II. OTHER INFORMATION
Item 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
(a) The annual meeting of stockholders of Viad Corp was held
May 12, 1998.
(b) Not applicable--(i) proxies for the meeting were
solicited pursuant to Regulation 14 under the Securities
Exchange Act of 1934; (ii) there was no solicitation in
opposition to management's nominees as listed in the
proxy statement; and (iii) all such nominees were
elected.
(c) Matters voted upon at the annual meeting for which
proxies were solicited pursuant to Regulation 14 under
the Securities Exchange Act of 1934:
1. The election of Directors as follows:
Jess Hay
---------
Affirmative Vote . . . . . . . . . . . . . . . . . . 76,332,440
Withheld Authority . . . . . . . . . . . . . . . . . . .629,031
Linda Johnson Rice
-------------------
Affirmative Vote . . . . . . . . . . . . . . . . . . 76,339,450
Withheld Authority . . . . . . . . . . . . . . . . . . .622,021
Timothy R. Wallace
-------------------
Affirmative Vote . . . . . . . . . . . . . . . . . . 76,347,636
Withheld Authority . . . . . . . . . . . . . . . . . . .613,835
2. The appointment of Deloitte & Touche LLP to audit
the accounts of Viad and its subsidiaries for the
fiscal year 1998.
Affirmative Vote . . . . . . . . . . . . . . . . . . 76,523,432
Against. . . . . . . . . . . . . . . . . . . . . . . . .179,786
Abstentions. . . . . . . . . . . . . . . . . . . . . . .258,253
Item 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibit No. 10 - Employment Agreement
Exhibit No. 27 - Financial Data Schedule
(b) No reports on Form 8-K were filed by the
registrant during the quarter for which this
report is filed. However, a report on Form 8-K
was filed April 10, 1998, reporting under Items 5
and 7 Viad's press release announcement that Viad
had commenced a cash tender offer, through the
filing of Schedule 14D-1 with the Securities and
Exchange Commission, for all outstanding shares of
MoneyGram Payment Systems, Inc. at a purchase
price of $17 per share and, in a separate
announcement, that Viad had sold Aircraft Services
International Group. In addition, a report on
Form 8-K was filed May 13, 1998, reporting under
Items 5 and 7 Viad's press release announcement
that Viad had increased the MoneyGram cash tender
offer to $17.35 per share and had extended the
scheduled expiration date to May 22, 1998. See
Recent Developments.
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 thereunto duly authorized.
VIAD CORP
(Registrant)
May 13, 1998 By /s/ Richard C. Stephan
-------------------------
Richard C. Stephan
Vice President-Controller
(Chief Accounting Officer
and Authorized Officer)
Exhibit 10
EMPLOYMENT AGREEMENT
AGREEMENT by and between Viad Corp, a Delaware corporation
(the "Company"), and Robert H. Bohannon (the "Executive"), dated
as of the 1st day of April, 1998.
WHEREAS, the Board of Directors of the Company (the "Board")
has determined that it is in the best interests of the Company
and its shareholders to employ the Executive as Chief Executive
Officer ("CEO"), and the Executive desires to serve in that
capacity;
NOW, THEREFORE, IT IS HEREBY AGREED AS FOLLOWS:
1. EMPLOYMENT PERIOD. (a) The Company shall employ the
Executive, and the Executive shall serve the Company, on the
terms and conditions set forth in this Agreement, for the
Employment Period (as defined in the next sentence). The
"Employment Period" shall mean the period beginning on April 1,
1998, and ending on March 31, 2001; provided, however, that on
April 1, 1999, and on each subsequent anniversary of such date
(each such anniversary thereof being hereinafter referred to as a
"Renewal Date"), unless previously terminated, the Employment
Period shall be automatically extended by one year.
(b) This Employment Agreement shall terminate
automatically when the Executive reaches the age of 65 years old.
No notice shall be required.
2. POSITION AND DUTIES. (a) During the Employment
Period, the Executive shall serve as Chairman and CEO of the
Company and, subject to the direction of the Board, shall have
full authority for management of the Company and all its
operations, financial affairs, facilities and investments. The
Executive shall serve as a member of the Board, shall act as the
duly authorized representative of the Board and shall be an
ex-officio member of all committees of the Board to which he is
appointed.
(b) During the Employment Period, and excluding any
periods of vacation and sick leave to which the Executive is
entitled, the Executive shall devote reasonable attention and
time during normal business hours to the business and affairs of
the Company and, to the extent necessary to discharge the
responsibilities assigned to the Executive under this Agreement,
use the Executive's reasonable best efforts to carry out such
responsibilities faithfully and efficiently. It shall not be
considered a violation of the foregoing for the Executive to (A)
serve on corporate, civic or charitable boards or committees, (B)
deliver lectures, fulfill speaking engagements or teach at
educational institutions and (C) manage personal investments, so
long as such activities do not significantly interfere with the
performance of the Executive's responsibilities as an employee of
the Company in accordance with this Agreement.
(c) The Executive's services shall be performed
primarily at Viad Tower, Phoenix, Arizona, or such other location
designated by the Board.
3. COMPENSATION. (a) BASE SALARY. During the Employment
Period, the Executive shall receive an annual base salary
("Annual Base Salary") of $750,000.00, payable twice each month.
During the Employment Period, the Annual Base Salary shall be
reviewed for possible increase at least annually. Annual
increases shall be no less than the lesser of 5% or the increase
in the Consumer Price Index ("CPI") for prior annual period. Any
increase in the Annual Base Salary shall not limit or reduce any
other obligation of the Company under this Agreement.
(b) ANNUAL BONUS. In addition to the Annual Base
Salary, the Executive shall be awarded, for each calendar year or
portion thereof, ending during the Employment Period, an annual
bonus (the "Annual Bonus") as determined by the Board. Each
Annual Bonus or Management Incentive Plan ("MIP"), as it is
sometimes called, shall be paid in a single cash lump sum no
later than 90 days after the end of the calendar year for which
the Annual Bonus is awarded, unless the Executive elects in
writing, before the end of the year for which the Annual Bonus is
to be awarded, to defer receipt of the Annual Bonus.
(c) OTHER BENEFITS. During the Employment Period:
the Executive shall be entitled to participate in all incentive,
savings and retirement plans, practices, policies and programs of
the Company to the same extent as peer executives; and (ii) the
Executive and/or the Executive's family, as the case may be,
shall be eligible for participation in, and shall receive all
benefits under, all welfare benefit plans, practices, policies
and programs provided by the Company (including, without limita-
tion, medical, prescription, dental, disability, salary con-
tinuance, employee life insurance, group life insurance,
accidental death and travel accident insurance plans and
programs) to the same extent as peer executives. The term "peer
executives" means senior vice presidents of the Company.
(d) EXPENSES. During the Employment Period, the
Executive shall be entitled to receive prompt reimbursement for
all reasonable expenses incurred by the Executive in carrying out
the Executive's duties under this Agreement, provided that the
Executive complies with the policies, practices and procedures of
the Company for submission of expense reports, receipts, or
similar documentation of such expenses.
(e) FRINGE BENEFITS. During the Employment Period,
the Executive shall be entitled to fringe benefits, such as tax
and financial planning services, payment of lunch and country
club dues, use of an automobile and payment of related expenses,
use of company aircraft, and an annual physical.
(f) VACATION. During the Employment Period, the
Executive shall be entitled to paid vacation of five weeks per
year.
4. EARLY TERMINATION OF EMPLOYMENT. (a) DEATH OR
DISABILITY. The Executive's employment shall terminate
automatically upon the Executive's death during the Employment
Period. The Company shall be entitled to terminate the
Executive's employment because of the Executive's Disability
during the Employment Period. "Disability" means that the
Executive has been unable, for a period of 180 consecutive
business days, to perform the Executive's duties under this
Agreement, as a result of physical or mental illness or injury,
and a physician selected by the Company or its insurers, and
acceptable to the Executive or the Executive's legal
representative, has determined that the Executive's incapacity is
total and permanent. A termination of the Executive's employment
by the Company for Disability shall be communicated to the
Executive by written notice, and shall be effective on the 30th
day after receipt of such notice by the Executive (the
"Disability Effective Date"), unless the Executive returns to
full-time performance of the Executive's duties before the
Disability Effective Date.
(b) EARLY TERMINATION BY THE COMPANY. The Company may
terminate the Executive's employment during the Employment Period
at any time, without a stated reason, by a vote of a majority of
the Board, excluding Executive. The Board shall also determine
the date of Early Termination.
(c) EARLY TERMINATION FOR CAUSE. The Company may
terminate the Executive's employment for cause as defined below
in accordance with the following procedure:
Cause defined: For purposes of the Agreement, the Company
shall have "Cause" to terminate the Executive's employment
upon (A) the willful and continued failure by the Executive
to substantially perform his duties (other than any such
failure resulting from the Executive's incapacity due to
physical or mental illness) after demand for substantial
performance is delivered by the Company specifically
identifying the manner in which the Company believes the
Executive has not substantially performed his duties, or (B)
the willful engaging by the Executive in misconduct which is
materially injurious to the Company, monetarily or
otherwise. No act, or failure to act, on the Executive's
part shall be considered "willful" unless done, or omitted
to be done, by him not in good faith and without reasonable
belief that his action or omission was in the best interest
of the Company. Notwithstanding the foregoing, the
Executive shall not be deemed to have been terminated for
Cause unless and until there shall have been delivered to
the Executive a copy of a resolution, duly adopted by the
affirmation vote of not less than three-quarters (3/4) of
the entire membership of the Board, excluding Executive, at
a meeting of the Board called and held for such purposes
(after reasonable notice to the Executive and an opportunity
for him, together with his counsel, to be heard before the
Board), finding that in the good faith opinion of the Board,
the Executive was guilty of conduct set forth above in
clause (A) or (B).
(d) EARLY TERMINATION BY EXECUTIVE. The Executive may
terminate employment voluntarily at any time after giving the
Company at least 180 day's advance written notice.
5. OBLIGATIONS OF THE COMPANY. (a) DEATH OR DISABILITY.
If the Executive's employment is terminated by reason of the
Executive's death or Disability during the Employment Period, the
Company shall pay the Pro Rata Benefits or Obligations to the
Executive or the Executive's estate or legal representative, as
applicable, in a lump sum in cash within 90 days after the Date
of Death or Disability Termination, and the Company shall have no
further obligations under this Agreement.
(b) EARLY TERMINATION BY THE BOARD. If, during the
Employment Period, the Company terminates the Executive's
employment, other than for Death or Disability, the Company shall
pay the amounts and provide the benefits described below to the
Executive and shall, at its sole expense as incurred, provide the
Executive with outplacement services, the scope and provider of
which shall be selected by the Executive in the Executive's sole
discretion. The payments and benefits provided pursuant to this
paragraph (b) of Section 5 are intended as liquidated damages for
a termination of the Executive's employment by the Company and
shall be the sole and exclusive remedy therefor. The amounts to
be paid and the benefits to be provided as described above are:
(i) Severance pay equal to three times the sum of
(1) the Annual Current Salary and (2) the average
of the last three annual Bonuses or MIP awards
paid to Executive, such payment to be made in a
lump sum;
(ii) Performance Based Stock ("PBS") and
Performance Unit Incentive Plans ("PUP") awards to
Executive as of the date of Early Termination
shall be prorated to the date of Early Termination
and the Executive shall be paid in accordance with
the respective PBS or PUP plans but no new PBS or
PUP awards shall be granted after the date of
Early Termination;
(iii) All stock options awarded to Executive
shall vest as of the day of Early Termination;
(iv) Executive shall be provided with Executive
Medical Coverage for a period of three years from
the date of Early Termination; and
(v) Executive shall be entitled to pension
credits for the period of three years from the
date of Early Termination in accordance with the
Company's pension plans.
(c) UPON EARLY TERMINATION FOR CAUSE. The Executive
shall be paid:
(i) 1 year's salary.
(ii) Accrued MIP prorated to date of early
termination.
(iii) PUP and PBS shall terminate without any
further payments.
(d) UPON EARLY TERMINATION BY EXECUTIVE. The
Executive shall be paid:
(i) One year's salary and shall be credited with
one additional year's pension credit.
(ii) Prorated MIP to date of Early Termination.
(iii) PBS and PUP awards, outstanding as of the
date of Early Termination, shall lapse and no
vesting of PBS awards shall occur and no payments
for PUP shall be paid to the Executive.
(iv) Executive shall be entitled to exercise only
stock options which have vested prior to Early
Termination by Executive.
(e) UPON ORDINARY RETIREMENT. The Executive shall be
paid:
(i) Salary and accrued MIP, PUP, and PBS
prorated to the date of Ordinary Retirement.
(ii) All accrued other benefits as of the date of
Ordinary Retirement shall be paid to the Executive
in accordance with their respective plans.
(iii) Life-time executive medical benefits for the
Executive.
(iv) Other benefits as may be determined by the
Board.
6. NON-EXCLUSIVITY OF RIGHTS. Nothing in this Agreement
shall prevent or limit the Executive's continuing or future
participation in any plan, program, policy or practice provided
by the Company or any of its affiliated companies for which the
Executive may qualify, nor, subject to paragraph (f) of Section
10, shall anything in this Agreement limit or otherwise affect
such rights as the Executive may have under any contract or
agreement with the Company or any of its affiliated companies.
Vested benefits and other amounts that the Executive is otherwise
entitled to receive under any plan, policy, practice or program
of, or any contract or agreement with, the Company or any of its
affiliated companies on or after the Date of Termination shall be
payable in accordance with such plan, policy, practice, program,
contract or agreement. Specifically, in the event of a "Change
of Control," as defined in the Executive Severance Agreement
applicable to the Executive, the terms of the Executive Severance
Agreement shall control to the extent they provide an additional
or enhanced benefit.
7. FULL SETTLEMENT. The Company's obligation to make the
payments provided for in, and otherwise to perform its
obligations under, this Agreement shall not be affected by any
set-off, counterclaim, recoupment, defense or other claim, right
or action that the Company may have against the Executive or
others. In no event shall the Executive be obligated to seek
other employment or take any other action by way of mitigation of
the amounts payable to the Executive under any of the provisions
of this Agreement.
8. CONFIDENTIAL INFORMATION; NONCOMPETITION. (a) The
Executive shall hold in a fiduciary capacity for the benefit of
the Company all secret or confidential information, knowledge or
data relating to the Company or any of its affiliated companies
and their respective businesses that the Executive obtains during
the Executive's employment by the Company or any of its
affiliated companies and that is not public knowledge (other than
as a result of the Executive's violation of this paragraph (a) of
Section 8) ("Confidential Information"). The Executive shall not
communicate, divulge or disseminate Confidential Information at
any time during or after the Executive's employment with the
Company, except with the prior written consent of the Company or
as otherwise required by law or legal process.
(b) During the Noncompetition Period (as defined
below), the Executive shall not, without the prior written
consent of the Board, engage in or become associated with a
Competitive Activity. For purposes of this paragraph (b) of
Section 8: (i) the "Noncompetition Period" means three (3) years
from the date of Early Termination or Ordinary Retirement; (ii) a
"Competitive Activity" means any business or other endeavor that
engages in businesses similar to those conducted by the Company;
and (iii) the Executive shall be considered to have become
"associated with a Competitive Activity" if he becomes directly
or indirectly involved as an owner, employee, officer, director,
independent contractor, agent, partner, advisor, or in any other
capacity calling for the rendition of the Executive's personal
services, with any individual, partnership, corporation or other
organization that is engaged in a Competitive Activity. Not-
withstanding the foregoing, the Executive may make and retain
investments during the Employment Period in not more than five
percent of the equity of any entity engaged in a Competitive
Activity, if such equity is listed on a national securities ex-
change or regularly traded in an over-the-counter market.
9. SUCCESSORS. (a) This Agreement is personal to the
Executive and, without the prior written consent of the Company,
shall not be assignable by the Executive otherwise than by will
or the laws of descent and distribution. This Agreement shall
inure to the benefit of and be enforceable by the Executive's
legal representatives.
(b) This Agreement shall inure to the benefit of and
be binding upon the Company and its successors and assigns.
(c) The Company shall require any successor (whether
direct or indirect, by purchase, merger, consolidation or
otherwise) to all or substantially all of the business and/or
assets of the Company expressly to assume and agree to perform
this Agreement in the same manner and to the same extent that the
Company would have been required to perform it if no such
succession had taken place. As used in this Agreement, "Company"
shall mean both the Company as defined above and any such
successor that assumes and agrees to perform this Agreement, by
operation of law or otherwise.
10. MISCELLANEOUS. (a) This Agreement shall be governed
by, and construed in accordance with, the laws of the State of
Arizona, without reference to principles of conflict of laws.
The captions of this Agreement are not part of the provisions
hereof and shall have no force or effect. This Agreement may not
be amended or modified except by a written agreement executed by
the parties hereto or their respective successors and legal
representatives.
(b) All notices and other communications under this
Agreement shall be in writing and shall be given by hand delivery
to the other party or by registered or certified mail, return
receipt requested, postage prepaid, addressed as follows:
IF TO THE EXECUTIVE:
Robert H. Bohannon
2410 Viad Tower
1850 N. Central Avenue
Phoenix, AZ 85077
IF TO THE COMPANY:
Viad Corp
2212 Viad Tower
1850 N. Central Avenue
Phoenix, AZ 85077
Attention: General Counsel
or to such other address as either party furnishes to the other
in writing in accordance with this paragraph (b) of Section 11.
Notices and communications shall be effective when actually
received by the addressee.
(c) The invalidity or unenforceability of any pro-
vision of this Agreement shall not affect the validity or
enforceability of any other provision of this Agreement. If any
provision of this Agreement shall be held invalid or un-
enforceable in part, the remaining portion of such provision,
together with all other provisions of this Agreement, shall
remain valid and enforceable and continue in full force and
effect to the fullest extent consistent with law.
(d) Notwithstanding any other provision of this
Agreement, the Company may withhold from amounts payable under
this Agreement all federal, state, local and foreign taxes that
are required to be withheld by applicable laws or regulations.
(e) The Executive's or the Company's failure to insist
upon strict compliance with any provision of, or to assert any
right under, this Agreement (including, without limitation, the
right of the Executive to terminate employment for Good Reason
pursuant to paragraph (c) of Section 4 of this Agreement) shall
not be deemed to be a waiver of such provision or right or of any
other provision of or right under this Agreement.
(f) The Executive and the Company acknowledge that
this Agreement supersedes any other agreement between them
concerning the subject matter hereof.
(g) This Agreement may be executed in several
counterparts, each of which shall be deemed an original, and
said counterparts shall constitute but one and the same
instrument.
IN WITNESS WHEREOF, the Executive has hereunto set the
Executive's hand and, pursuant to the authorization of its Board
of Directors, the Company has caused this Agreement to be
executed in its name on its behalf, all as of the day and year
first above written
/s/ Robert H. Bohannon
VIAD CORP
By: /s/ Peter J. Novak
Vice President &
General Counsel
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<LEGEND> THIS SCHEDULE CONTAINS SUMMARY FINANCIAL
INFORMATION EXTRACTED FROM VIAD CORP'S
FORM 10-Q FOR THE QUARTERLY PERIOD ENDED
MARCH 31, 1998 AND IS QUALIFIED IN ITS
ENTIRETY BY REFERENCE TO SUCH FINANCIAL
STATEMENTS.
<MULTIPLIER> 1,000
<CAPTION>
Exhibit 27
VIAD CORP
FINANCIAL DATA SCHEDULE
<S> <C>
<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-END> MAR-31-1998
<PERIOD-TYPE> 3-MOS
<CASH> 29,490
<SECURITIES> 0
<RECEIVABLES> 141,341
<ALLOWANCES> 4,787
<INVENTORY> 109,414
<CURRENT-ASSETS> 836,171
<PP&E> 858,418
<DEPRECIATION> 397,289
<TOTAL-ASSETS> 3,755,806
<CURRENT-LIABILITIES> 2,636,418
<BONDS> 401,911
<COMMON> 149,610
6,615
0
<OTHER-SE> 389,235
<TOTAL-LIABILITY-AND-EQUITY> 3,755,806
<SALES> 0
<TOTAL-REVENUES> 602,780
<CGS> 0
<TOTAL-COSTS> 561,848
<OTHER-EXPENSES> 7,301
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 11,174
<INCOME-PRETAX> 22,181
<INCOME-TAX> 6,802
<INCOME-CONTINUING> 15,379
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 15,379
<EPS-PRIMARY> 0.16
<EPS-DILUTED> 0.15
</TABLE>
