<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 June 30, 1999
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 July 31, 1999, 97,286,659 shares of Common Stock ($1.50 par value) were
outstanding.
<PAGE>
PART I. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
VIAD CORP
CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
JUNE 30, 1999 DECEMBER 31,
(000 OMITTED, EXCEPT NUMBER OF SHARES) (UNAUDITED) 1998
- ---------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents $ 25,106 $ 15,554
Receivables 78,278 97,262
Inventories 76,274 61,185
Deferred income taxes 43,871 31,954
Other current assets 45,507 32,992
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269,036 238,947
Funds, agents' receivables and current maturities of
investments restricted for payment service obligations,
after eliminating $90,000 invested in Viad commercial paper 562,796 561,266
- ---------------------------------------------------------------------------------------------------------------------------------
Total current assets 831,832 800,213
Investments restricted for payment service obligations 2,717,359 2,415,588
Property and equipment 284,003 294,595
Investment in discontinued operations 437,576 386,300
Other investments and assets 108,006 121,856
Deferred income taxes 102,193 66,814
Intangibles 626,834 602,926
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$ 5,107,803 $ 4,688,292
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- ---------------------------------------------------------------------------------------------------------------------------------
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Short-term bank loans $ 23,000 $ -
Accounts payable 114,266 109,332
Accrued compensation 39,709 57,404
Other current liabilities 143,873 118,661
Current portion of long-term debt 32,816 3,105
- ---------------------------------------------------------------------------------------------------------------------------------
353,664 288,502
Payment service obligations 3,378,542 2,999,930
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Total current liabilities 3,732,206 3,288,432
Long-term debt 509,236 531,348
Pension and other benefits 74,686 74,529
Other deferred items and insurance liabilities 166,684 138,381
Minority interests 3,657 3,096
$4.75 Redeemable preferred stock 6,632 6,625
Common stock and other equity:
Common stock, $1.50 par value, 200,000,000 shares
authorized, 99,739,925 shares issued 149,610 149,610
Additional capital 311,196 327,866
Retained income 376,246 328,305
Unearned employee benefits and other (145,579) (162,543)
Accumulated other comprehensive income:
Unrealized (loss) gain on securities classified as
available for sale, net of tax (27,408) 18,231
Cumulative translation adjustments (5,806) (7,009)
Common stock in treasury, at cost, 1,437,080 and 344,858 shares (43,557) (8,579)
- ---------------------------------------------------------------------------------------------------------------------------------
Total common stock and other equity 614,702 645,881
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$ 5,107,803 $ 4,688,292
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- ---------------------------------------------------------------------------------------------------------------------------------
</TABLE>
See Notes to Consolidated Financial Statements.
Page 2
<PAGE>
VIAD CORP
CONSOLIDATED STATEMENTS OF INCOME
(Unaudited)
<TABLE>
<CAPTION>
QUARTER ENDED JUNE 30, SIX MONTHS ENDED JUNE 30,
(000 OMITTED, EXCEPT PER SHARE DATA) 1999 1998 1999 1998
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
REVENUES $ 420,396 $ 427,855 $ 793,801 $ 793,841
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Costs and expenses:
Costs of sales and services 365,648 383,533 708,653 724,541
Corporate activities, net 5,141 6,137 10,294 13,430
Interest expense 7,132 6,714 13,627 14,305
Nonrecurring item (provision for payments
previously received pursuant to patent
infringement litigation) 10,642 10,642
Minority interests 785 190 1,286 466
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378,706 407,216 733,860 763,384
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Income before income taxes 41,690 20,639 59,941 30,457
Income taxes 8,666 3,371 12,067 4,757
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INCOME FROM CONTINUING OPERATIONS 33,024 17,268 47,874 25,700
Income from discontinued operations 11,143 23,354 16,678 30,301
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NET INCOME $ 44,167 $ 40,622 $ 64,552 $ 56,001
- ------------------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------------------
DILUTED INCOME PER COMMON SHARE:
Continuing operations $ 0.33 $ 0.18 $ 0.48 $ 0.26
Discontinued operations 0.12 0.23 0.17 0.30
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Diluted net income per common share $ 0.45 $ 0.41 $ 0.65 $ 0.56
- ------------------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------------------
BASIC INCOME PER COMMON SHARE:
Continuing operations $ 0.34 $ 0.18 $ 0.49 $ 0.27
Discontinued operations 0.12 0.25 0.18 0.32
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Basic net income per common share $ 0.46 $ 0.43 $ 0.67 $ 0.59
- ------------------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------------------
Average outstanding common shares 94,863 94,419 94,751 94,199
Additional dilutive shares related
to stock-based compensation 3,645 4,196 3,729 4,034
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Average outstanding and potentially
dilutive common shares 98,508 98,615 98,480 98,233
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- ------------------------------------------------------------------------------------------------------------------------------------
Dividends declared per common share $ 0.09 $ 0.08 $ 0.17 $ 0.16
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Preferred stock dividends $ 282 $ 282 $ 565 $ 564
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</TABLE>
See Notes to Consolidated Financial Statements.
Page 3
<PAGE>
VIAD CORP
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
(Unaudited)
<TABLE>
<CAPTION>
QUARTER ENDED JUNE 30, SIX MONTHS ENDED JUNE 30,
(000 OMITTED) 1999 1998 1999 1998
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Net income $ 44,167 $ 40,622 $ 64,552 $ 56,001
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Other comprehensive income (loss), net of tax:
Unrealized (loss) gain on securities
classified as available for sale:
Holding (losses) gains arising during the period (39,283) 4,329 (43,430) 4,034
Reclassification adjustment for realized
gains included in net income (802) (2,388) (2,209) (3,654)
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(40,085) 1,941 (45,639) 380
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Unrealized foreign currency translation adjustments:
Holding gains (losses) arising during the period 1,022 (2,632) 1,203 (2,027)
Reclassification adjustment for sale of
investment in a foreign entity included
in net income 51 51
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1,022 (2,581) 1,203 (1,976)
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Other comprehensive loss (39,063) (640) (44,436) (1,596)
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Comprehensive income $ 5,104 $ 39,982 $ 20,116 $ 54,405
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</TABLE>
See Notes to Consolidated Financial Statements.
Page 4
<PAGE>
VIAD CORP
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
<TABLE>
<CAPTION>
SIX MONTHS ENDED JUNE 30,
(000 OMITTED) 1999 1998
- ----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
CASH FLOWS PROVIDED (USED) BY OPERATING ACTIVITIES:
Net income $ 64,552 $ 56,001
Adjustments to reconcile net income to net cash
provided by operating activities:
Depreciation and amortization 29,808 26,256
Deferred income taxes (9,025) (8,071)
Income from discontinued operations (16,678) (30,301)
Gains on sales of businesses and assets, net (4,391) (6,108)
Other noncash items, net 6,136 5,514
Change in operating assets and liabilities:
Receivables and inventories 5,849 (12,674)
Payment service assets and obligations, net 397,054 384,483
Accounts payable and accrued compensation (16,655) 7,624
Other assets and liabilities, net (5,695) (26,314)
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Net cash provided by operating activities 450,955 396,410
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CASH FLOWS PROVIDED (USED) BY INVESTING ACTIVITIES:
Capital expenditures (25,456) (31,725)
Acquisitions of businesses, net of cash acquired (10,587) (221,962)
Proceeds from sales of businesses, property and other assets, net 53,991 95,752
Investments restricted for payment service obligations:
Proceeds from sales and maturities of securities
classified as available for sale 504,144 442,260
Proceeds from maturities of securities
classified as held to maturity 77,172 44,668
Purchases of securities classified as available for sale (938,963) (774,236)
Purchases of securities classified as held to maturity (42,245) (86,082)
Net investments and advances (to) from discontinued operations (34,598) 28,802
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Net cash used by investing activities (416,542) (502,523)
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CASH FLOWS PROVIDED (USED) BY FINANCING ACTIVITIES:
Payments on long-term borrowings (2,337) (2,163)
Net change in short-term borrowings 33,000 153,878
Dividends on common and preferred stock (16,754) (15,713)
Proceeds from issuances of treasury stock, net of exchanges 16,240 8,342
Common stock purchased for treasury (55,010)
Cash payments on interest rate swap agreements related to debt (17,122)
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Net cash (used) provided by financing activities (24,861) 127,222
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Net increase in cash and cash equivalents 9,552 21,109
Cash and cash equivalents, beginning of year 15,554 17,097
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CASH AND CASH EQUIVALENTS, END OF PERIOD $ 25,106 $ 38,206
- ----------------------------------------------------------------------------------------------------------------------------------
- ----------------------------------------------------------------------------------------------------------------------------------
</TABLE>
See Notes to Consolidated Financial Statements.
Page 5
<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, 1998.
On July 1, 1999, Viad completed the previously announced sale of Dobbs
International Services, Inc. ("Dobbs"), its airline catering business. Viad had
previously sold its Aircraft Service International Group ("ASIG"), which
performed aircraft fueling and ground-handling operations, as of April 1, 1998.
The sale of Dobbs completed the disposition of Viad's airline catering and
services segment. The accompanying financial statements have been prepared to
reflect Viad's historical financial position and results of operations as
adjusted for the reclassification of the airline catering and services
businesses as discontinued operations.
Current and prior year consolidated revenues, operating income and interest
expense also reflect the elimination of intercompany interest payments on
$90,000,000 invested in Viad commercial paper by a Payment Services subsidiary.
The elimination has no effect on Viad's income from continuing operations or net
income.
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 June 30, 1999, its results of operations for the quarters and six months
ended June 30, 1999 and 1998, and its cash flows for the six months ended June
30, 1999 and 1998 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 1999
presentation.
NOTE B - FIDUCIARY ASSETS RESTRICTED FOR PAYMENT SERVICE OBLIGATIONS
Viad's Payment Services subsidiaries generate funds from the sale of money
orders and other payment instruments, with the related liabilities classified as
"Payment service obligations." The proceeds of such sales, along with certain
additional subsidiary funds, are invested primarily 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
subsidiaries to satisfy the liability to pay, upon presentment, the face amount
of such payment service obligations. In addition, certain funds and other
investments of Payment Services subsidiaries are available for such obligations.
Accordingly, such assets of Payment Services subsidiaries are not available to
satisfy working capital or other financing requirements of Viad.
As described in notes to Viad's annual financial statements, a Payment Services
subsidiary hedges a substantial portion of the variable rate commission payments
to its selling agents through the purchase of swap agreements, which convert the
variable rate commission payments to fixed rate payments. The fair value of such
swap agreements, while not recorded on Viad's balance sheet, generally increases
when market values of fixed rate debt investments held by Payment Services
subsidiaries decline (and vice versa).
Under normal circumstances, the swap agreements will not be terminated prior to
maturity, nor is there any requirement to sell long-term debt securities prior
to maturity, as the funds flow from ongoing sales of money orders and other
payment instruments and funds from maturing long-term and short-term investments
are expected to be adequate to settle payment service items as they are
presented.
Page 6
<PAGE>
Presented as additional information below is a summary of asset and liability
carrying amounts related to the payment service obligations, followed by the
fair value of related off-balance-sheet swap agreements:
<TABLE>
<CAPTION>
JUNE 30, DECEMBER 31,
(000 OMITTED) 1999 1998
- ---------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Funds, agents' receivables and current maturities of
investments restricted for payment service obligations,
including $90,000 invested in Viad commercial paper (1) $ 652,796 $ 651,266
Investments restricted for payment service obligations (2) 2,717,359 2,415,588
Other assets available for payment service obligations 38,724 33,987
- ---------------------------------------------------------------------------------------------------------------------------
3,408,879 3,100,841
Payment service obligations 3,378,542 2,999,930
- ---------------------------------------------------------------------------------------------------------------------------
Carrying amount of assets in excess of 1:1 funding
coverage of payment service obligations (2) 30,337 100,911
Fair value (liability) of off-balance-sheet swap agreements (3) 41,721 (25,097)
- ---------------------------------------------------------------------------------------------------------------------------
Total (2) $ 72,058 $ 75,814
- ---------------------------------------------------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------------------------------------------------
</TABLE>
(1) See Note D for a description of Viad's revolving bank credit agreement,
which supports its commercial paper obligations.
(2) See Note C 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 securities
classified as "held to maturity" are carried at amortized cost. The market value
of securities classified as "available for sale" was less than amortized cost by
$44,933,000 at June 30, 1999, and exceeded amortized cost by $29,887,000 at
December 31, 1998. The market value of securities classified as "held to
maturity" exceeded carrying amounts by $2,054,000 and $16,963,000 at June 30,
1999 and December 31, 1998, respectively.
(3) The fair value represents the estimated amount that Viad would receive from
(pay to) counterparties to terminate the swap agreements at June 30, 1999 and
December 31, 1998.
NOTE C - INVESTMENTS RESTRICTED FOR PAYMENT SERVICE OBLIGATIONS
Investments restricted for payment service obligations include the following
debt and equity securities:
<TABLE>
<CAPTION>
JUNE 30, DECEMBER 31,
(000 OMITTED) 1999 1998
- --------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Securities available for sale, at fair value (1)
(amortized cost of $2,282,383 and $1,846,144) $ 2,237,450 $ 1,876,031
Securities held to maturity, at amortized cost
(fair value of $516,805 and $566,664) 514,751 549,701
- --------------------------------------------------------------------------------------------------------------------------
2,752,201 2,425,732
Less current maturities (34,842) (10,144)
- --------------------------------------------------------------------------------------------------------------------------
$ 2,717,359 $ 2,415,588
- --------------------------------------------------------------------------------------------------------------------------
- --------------------------------------------------------------------------------------------------------------------------
</TABLE>
(1) The net unrealized holding gains (losses) included in the Consolidated
Balance Sheets as a component of "Accumulated other comprehensive income" were
$(27,408,000), net of a deferred tax asset of $17,525,000 at June 30, 1999, and
$18,231,000, net of a deferred tax liability of $11,656,000 at December 31,
1998. The unrealized holding loss arising during 1999 is due principally to
increased market interest rates.
NOTE D - DEBT
At June 30, 1999 and December 31, 1998, Viad classified as long-term debt
$210,000,000 and $200,000,000, respectively, of short-term borrowings which,
along with the $90,000,000 of 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.
Page 7
<PAGE>
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 six months ended June 30, is as follows:
<TABLE>
<CAPTION>
(000 OMITTED) 1999 1998
- --------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Computed income taxes at statutory federal income tax rate of 35% $ 20,979 $ 10,660
Nondeductible goodwill amortization 1,624 1,026
Minority interests 450 163
State income taxes 1,244 1,065
Tax-exempt income (13,271) (9,770)
Adjustment to estimated annual effective rate 1,750 1,500
Other, net (709) 113
- --------------------------------------------------------------------------------------------------------------------------
Provision for income taxes $ 12,067 $ 4,757
- --------------------------------------------------------------------------------------------------------------------------
- --------------------------------------------------------------------------------------------------------------------------
</TABLE>
NOTE F - SUPPLEMENTARY INFORMATION--REVENUES AND OPERATING INCOME
Viad measures segment profit and performance based on operating segment
income from continuing operations after minority interests and income
taxes, but before nonrecurring items. Operating income by segment is
presented as additional information. An adjustment is made to the Payment
Services segment to present revenues and operating income on a fully
taxable equivalent basis for income resulting from investments in
tax-exempt securities. Intersegment sales and transfers are not
significant. Interest expense is allocated to operations based on net funds
advanced calculated based on current short-term interest rates. Corporate
and other includes expenses of corporate activities and interest expense
not allocated to operating segments. Total assets by segment did not
materially change from the amount disclosed in the 1998 Annual Report to
Stockholders.
Disclosures regarding Viad's reportable segments under SFAS No. 131 along
with reconciliations to consolidated totals are presented below.
Page 8
<PAGE>
<TABLE>
<CAPTION>
QUARTER ENDED JUNE 30, 1999 QUARTER ENDED JUNE 30, 1998
----------------------------------------------- ----------------------------------------------
INCOME FROM INCOME FROM
CONTINUING OPERATING INTEREST CONTINUING OPERATING INTEREST
(000 OMITTED) REVENUES OPERATIONS INCOME EXPENSE REVENUES OPERATIONS INCOME EXPENSE
---------- ---------- ---------- ----------- ---------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Payment Services $ 141,845 $ 17,772 $ 30,322 $ - $ 95,603 $ 11,176 $ 18,873 $ -
Convention and Event Services 259,831 16,880 33,292 5,143 228,585 13,575 26,297 3,925
---------- ---------- ---------- ----------- ---------- ---------- ---------- ----------
Reportable Segments 401,676 34,652 63,614 5,143 324,188 24,751 45,170 3,925
Other:
Travel and recreation services 33,301 3,203 5,715 380 30,898 2,467 4,501 500
---------- ---------- ---------- ----------- ---------- ---------- ---------- ----------
Subtotal, ongoing operations 434,977 37,855 69,329 5,523 355,086 27,218 49,671 4,425
Sold travel and recreation
businesses (1) 84,069 3,766 5,951 176
Corporate and other (4,831) (5,141) 3,280 (6,799) (6,137) 3,797
Intercompany interest
elimination (2) (1,671) (1,671) (1,671) (1,684) (1,684) (1,684)
Nonrecurring item (3) (6,917) (10,642)
---------- ---------- ---------- ----------- ---------- ---------- ---------- ----------
Subtotal 433,306 33,024 62,517 7,132 437,471 17,268 37,159 6,714
Less taxable equivalent adjustment (12,910) (12,910) (9,616) (9,616)
---------- ---------- ---------- ----------- ---------- ---------- ---------- ----------
Totals as reported $ 420,396 $ 33,024 $ 49,607 $ 7,132 $ 427,855 $ 17,268 $ 27,543 $ 6,714
---------- ---------- ---------- ----------- ---------- ---------- ---------- ----------
---------- ---------- ---------- ----------- ---------- ---------- ---------- ----------
SIX MONTHS ENDED JUNE 30, 1999 SIX MONTHS ENDED JUNE 30, 1998
----------------------------------------------- ----------------------------------------------
INCOME FROM INCOME FROM
CONTINUING OPERATING INTEREST CONTINUING OPERATING INTEREST
REVENUES OPERATIONS INCOME EXPENSE REVENUES OPERATIONS INCOME EXPENSE
---------- ---------- ---------- ----------- ---------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Payment Services $ 272,980 $ 31,749 $ 54,452 $ - $ 172,112 $ 20,578 $ 34,600 $ -
Convention and Event Services 494,951 28,227 57,330 10,272 438,172 23,433 46,297 7,325
---------- ---------- ---------- ----------- ---------- ---------- ---------- ----------
Reportable Segments 767,931 59,976 111,782 10,272 610,284 44,011 80,897 7,325
Other:
Travel and recreation services 42,511 2,167 4,143 780 38,963 1,271 2,709 1,047
---------- ---------- ---------- ----------- ---------- ---------- ---------- ----------
Subtotal, ongoing operations 810,442 62,143 115,925 11,052 649,247 45,282 83,606 8,372
Sold travel and recreation
businesses (1) 10,928 (1,953) (3,208) (201) 165,791 4,056 6,891 308
Corporate and other (12,316) (10,294) 6,102 (16,721) (13,430) 8,975
Intercompany interest
elimination (2) (3,326) (3,326) (3,326) (3,350) (3,350) (3,350)
Nonrecurring item (3) (6,917) (10,642)
---------- ---------- ---------- ----------- ---------- ---------- ---------- ----------
Subtotal 818,044 47,874 99,097 13,627 811,688 25,700 63,075 14,305
Less taxable equivalent adjustment (24,243) (24,243) (17,847) (17,847)
---------- ---------- ---------- ----------- ---------- ---------- ---------- ----------
Totals as reported $ 793,801 $ 47,874 $ 74,854 $ 13,627 $ 793,841 $ 25,700 $ 45,228 $ 14,305
---------- ---------- ---------- ----------- ---------- ---------- ---------- ----------
---------- ---------- ---------- ----------- ---------- ---------- ---------- ----------
</TABLE>
(1) The sold travel and recreation businesses category includes operating
results up to the respective dates of sale for businesses which have not
been classified as discontinued operations, including Greyhound Leisure
Services, Inc., (sold on September 15, 1998) and the contract foodservice
operations (sold on January 27, 1999) and public service division units
(sold in March 1999) of Restaura, Inc.
(2) Current and prior year consolidated revenues, operating income and interest
expense reflect the elimination of intercompany interest payments on
$90,000,000 invested in Viad commercial paper by a Payment Services
subsidiary. The elimination has no effect on Viad's income from continuing
operations or net income.
(3) The nonrecurring item represents a provision for repayment of amounts
previously received by Travelers Express, Viad's Payment Services
subsidiary, under a proposed litigation settlement term sheet.
Page 9
<PAGE>
NOTE G - DISCONTINUED OPERATIONS
On July 1, 1999, Viad completed the previously announced sale of Dobbs, its
airline catering business. Effective April 1, 1998, Viad sold ASIG, which
conducted aircraft fueling and ground-handling operations. The sale of Dobbs
completed the disposition of Viad's airline catering and services segment.
The historical financial statements have been reclassified to present revenues
and operating results of Viad's airline catering and services businesses up to
the respective disposition dates of ASIG and Dobbs, as well as the gain on sale
of ASIG, as discontinued operations. The gain on the sale of Dobbs, after
deducting costs of sale, related expense provisions and taxes, will be recorded
in the third quarter of 1999 and reported as discontinued operations.
Revenues applicable to the airline catering and services segment totaled
$220,790,000 and $227,532,000 for the quarters ended June 30, 1999 and 1998,
respectively, and $438,179,000 and $462,660,000 for the six month periods ended
June 30, 1999 and 1998, respectively.
The caption, "Income from discontinued operations" presented in the Consolidated
Statements of Income includes the following, net of applicable income taxes:
<TABLE>
<CAPTION>
QUARTER ENDED JUNE 30, SIX MONTHS ENDED JUNE 30,
(000 OMITTED) 1999 1998 1999 1998
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Income from operations:
Dobbs $ 11,143 $ 10,153 $ 16,678 $ 15,443
ASIG 1,657
- ------------------------------------------------------------------------------------------------------------------------------------
11,143 10,153 16,678 17,100
Gain on sale of ASIG 13,201 13,201
- ------------------------------------------------------------------------------------------------------------------------------------
Income from discontinued operations $ 11,143 $ 23,354 $ 16,678 $ 30,301
- ------------------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
Page 10
<PAGE>
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
RESULTS:
Viad Corp ("Viad") focuses on two principal service businesses: Payment Services
and Convention and Event Services.
On July 1, 1999, Viad completed the previously announced sale of its airline
catering business, conducted by Dobbs International Services, Inc. ("Dobbs").
Effective April 1, 1998, Viad had previously sold its Aircraft Services
International Group ("ASIG"), which conducted aircraft fueling and
ground-handling operations. The sale of Dobbs completed the disposition of
Viad's airline catering and services segment. The financial statements have been
prepared to reflect Viad's historical financial position and results of
operations as adjusted for the reclassification of the airline catering and
services businesses up to the respective disposition dates of Dobbs and ASIG, as
well as the gain on sale of ASIG, as discontinued operations. The gain on the
sale of Dobbs, after deducting costs of sale, related expense provisions and
taxes, will be recorded in the third quarter of 1999 and reported as
discontinued operations.
Current and prior year consolidated revenues, operating income and interest
expense reflect the elimination of intercompany interest payments on $90 million
invested in Viad commercial paper by a Payment Services subsidiary. The
elimination has no effect on Viad's income from continuing operations or net
income.
On January 27, 1999, Viad completed the sale of the contract foodservice
operations of Restaura, Inc. The public service division units of Restaura, Inc.
were sold in March 1999. After providing for costs of sale and related expense
provisions, the net gain was not material. Restaura's operations, along with the
results of Greyhound Leisure Services, Inc. ("GLSI"), sold September 15, 1998,
are included in Viad's "Sold travel and recreation businesses" category up to
the respective dates of sale.
There were no other 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 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, 1998.
All per share figures discussed are stated on the diluted basis.
COMPARISON OF SECOND QUARTER OF 1999 TO THE SECOND QUARTER OF 1998:
In the second quarter of 1999, revenues from continuing operations decreased
$7.5 million, or 1.7 percent, to $420.4 million from $427.9 million in 1998 as a
result of noncore travel and recreation businesses sold during 1998 and the
first quarter of 1999, but not classified as discontinued operations. Revenues
of ongoing operations, excluding the sold travel and recreation businesses, rose
22.2 percent for the quarter.
Income from continuing operations for the second quarter of 1999 was $33.0
million, or $0.33 per share. Excluding the nonrecurring provision for payments
previously received pursuant to patent infringement litigation of $6.9 million
(after-tax), or $0.07 per share, the second quarter 1998 income from continuing
operations was $24.2 million, or $0.25 per share.
Net income for the second quarter of 1999 was $44.2 million, or $0.45 per share,
including discontinued operations income (representing the operating results of
Dobbs) of $11.1 million, or $0.12 per share. The 1998 second quarter net income
was $40.6 million, or $0.41 per share, including
Page 11
<PAGE>
discontinued operating income (Dobbs) of $10.2 million, or $0.10 per share,
the $13.2 million, or $0.13 per share, gain on sale of ASIG and after
deducting the $6.9 million, or $0.07 per share, nonrecurring item described
above.
<TABLE>
<CAPTION>
QUARTER ENDED JUNE 30,
(000 OMITTED) 1999 1998
- -------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
INCOME FROM CONTINUING OPERATIONS,
BEFORE NONRECURRING ITEM $ 33,024 $ 24,185
Nonrecurring item (provision for patent infringement
payments received) (6,917)
- -------------------------------------------------------------------------------------------------------------------------
Income from continuing operations 33,024 17,268
Income from discontinued operations:
INCOME FROM OPERATIONS 11,143 10,153
Gain on sale of ASIG 13,201
- -------------------------------------------------------------------------------------------------------------------------
Net income $ 44,167 $ 40,622
- -------------------------------------------------------------------------------------------------------------------------
- -------------------------------------------------------------------------------------------------------------------------
DILUTED INCOME PER COMMON SHARE:
INCOME FROM CONTINUING OPERATIONS,
BEFORE NONRECURRING ITEM $ 0.33 $ 0.25
Nonrecurring item (provision for patent infringement
payments received) (0.07)
- -------------------------------------------------------------------------------------------------------------------------
Income from continuing operations 0.33 0.18
Income from discontinued operations:
INCOME FROM OPERATIONS 0.12 0.10
Gain on sale of ASIG 0.13
- -------------------------------------------------------------------------------------------------------------------------
Diluted net income per common share $ 0.45 $ 0.41
- -------------------------------------------------------------------------------------------------------------------------
- -------------------------------------------------------------------------------------------------------------------------
</TABLE>
PAYMENT SERVICES. A Payment Services subsidiary invests substantial amounts of
its growing money order and official check funds in tax-exempt securities, which
have lower pre-tax yields but produce higher income on an after-tax basis than
comparable taxable investments. On the fully taxable equivalent basis, second
quarter 1999 revenues of the Payment Services segment were $141.8 million, up
$46.2 million, or 48.4 percent, from 1998 second quarter revenues. Net income
increased $6.6 million, or 59.0 percent. Results were driven by continuing
strong growth in Travelers Express traditional operations, higher investment
income due to increased invested funds, and by the inclusion of MoneyGram
Payment Systems, Inc. ("MoneyGram", acquired as of June 1, 1998) for two
additional months in the 1999 period. Excluding the results of MoneyGram from
both periods, revenues on the fully taxable equivalent basis increased 18.7
percent. Operating margins on the fully taxable equivalent basis were 21.4
percent in the second quarter of 1999, up slightly from 19.7 percent in the 1998
second quarter.
CONVENTION AND EVENT SERVICES. Convention and Event Services' second quarter
1999 revenues increased $31.2 million, or 13.7 percent, to $259.8 million from
$228.6 million in the 1998 second quarter. Net income for the segment increased
24.3 percent to $16.9 million in the 1999 second quarter, and operating margins
increased from 11.5 percent in the 1998 second quarter to 12.8 percent in the
1999 second quarter as a result of eliminating low margin business throughout
1998. Both GES and Exhibitgroup/Giltspur reported improved results, including
contributions from small acquisitions made during 1998 and early 1999,
supplemented by results from a major trade show held every three years.
TRAVEL AND RECREATION SERVICES. Revenues of the ongoing travel and recreation
businesses were $33.3 million for the second quarter of 1999, up $2.4 million,
or 7.8 percent, from 1998 second quarter revenues. Net income increased
$700,000, or 29.8 percent. The increases were primarily as a
Page 12
<PAGE>
result of higher independent and group tour revenues in Canada and more games
held at Bank One Ballpark in the second quarter of 1999 versus the second
quarter of 1998.
CORPORATE ACTIVITIES, NET. Corporate activities, net, decreased $1.0 million in
the second quarter of 1999 compared to the second quarter of 1998. In addition
to ongoing cost reduction efforts, Viad increased Corporate expense allocations
to its operating subsidiaries in 1999.
INTEREST EXPENSE. Interest expense in the 1999 second quarter increased $400,000
over interest expense in the 1998 second quarter. This resulted from increased
interest expense related to borrowings for the June 1998 acquisition of
MoneyGram and Viad's stock repurchase programs, offset partially by the effects
of the repayment of debt and termination of related interest rate swap
agreements with proceeds from the sales of noncore assets and businesses in 1998
and early 1999.
INCOME TAXES. The effective tax rate for continuing operations in the 1999
second quarter was 20.8 percent compared to 16.3 percent for the second quarter
1998. Excluding the effects of the $6.9 million nonrecurring provision for
patent infringement litigation, the effective tax rate for the second quarter of
1998 was 22.7 percent. The lower comparable tax rate in 1999 is primarily
attributable to increased tax-exempt investment income in 1999.
COMPARISON OF FIRST SIX MONTHS OF 1999 TO THE FIRST SIX MONTHS OF 1998:
Revenues of $793.8 million for the first six months of 1999 were essentially
even with 1998's six month revenues. Excluding the revenues of noncore travel
and recreation businesses sold during 1998 and the first quarter of 1999 but not
classified as discontinued operations, revenues of ongoing operations rose 24.5
percent.
Income from continuing operations for the first six months of 1999 was $47.9
million, or $0.48 per share. Excluding the $6.9 million, or $0.07 per share,
nonrecurring item previously described, income from continuing operations for
the first six months of 1998 was $32.6 million, or $0.33 per share.
Net income for the first six months of 1999 was $64.6 million, or $0.65 per
share, including $16.7 million, or $0.17 per share, income from discontinued
operations, representing the operating results of Dobbs. Net income for the
first six months of 1998 was $56.0 million, or $0.56 per share, including $17.1
million, or $0.17 per share, income representing the discontinued operating
results of Dobbs and ASIG, the $13.2 million, or $0.13 per share, gain on sale
of ASIG and after deducting the $6.9 million, or $0.07 per share, nonrecurring
item.
<TABLE>
<CAPTION>
SIX MONTHS ENDED JUNE 30,
(000 OMITTED) 1999 1998
- -----------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
INCOME FROM CONTINUING OPERATIONS,
BEFORE NONRECURRING ITEM $ 47,874 $ 32,617
Nonrecurring item (provision for patent infringement
payments received) (6,917)
- -----------------------------------------------------------------------------------------------------------------------------
Income from continuing operations 47,874 25,700
Income from discontinued operations:
INCOME FROM OPERATIONS 16,678 17,100
Gain on sale of ASIG 13,201
- -----------------------------------------------------------------------------------------------------------------------------
Net income $ 64,552 $ 56,001
- -----------------------------------------------------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------------------------------------------
</TABLE>
Page 13
<PAGE>
<TABLE>
<CAPTION>
<S> <C> <C>
DILUTED INCOME PER COMMON SHARE:
INCOME FROM CONTINUING OPERATIONS,
BEFORE NONRECURRING ITEM $ 0.48 $ 0.33
Nonrecurring item (provision for patent infringement
payments received) (0.07)
- -----------------------------------------------------------------------------------------------------------------------------
Income from continuing operations 0.48 0.26
Income from discontinued operations:
INCOME FROM OPERATIONS 0.17 0.17
Gain on sale of ASIG 0.13
- -----------------------------------------------------------------------------------------------------------------------------
Diluted net income per common share $ 0.65 $ 0.56
- -----------------------------------------------------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------------------------------------------
</TABLE>
PAYMENT SERVICES. On the fully taxable equivalent basis, revenues of the Payment
Services segment for the first six months of 1999 were $273.0 million, up $100.9
million, or 58.6 percent, from 1998 six month revenues, while net income
increased $11.2 million, or 54.3 percent. Results were driven by continuing
strong growth in traditional Travelers Express operations, particularly growth
in official check volume, and by the inclusion of MoneyGram in all of the 1999
period. Excluding the results of MoneyGram from both periods, revenues on the
fully taxable equivalent basis increased 19.8 percent. Operating margins on the
fully taxable equivalent basis were 19.9 percent for six months 1999, down
slightly from 20.1 percent in the 1998 six months as a result of changing
product mix.
CONVENTION AND EVENT SERVICES. Convention and Event Services' 1999 six month
revenues of $495.0 million were $56.8 million, or 13.0 percent, greater than the
1998 six month period. Net income for the segment increased 20.5 percent to
$28.2 million, and operating margins increased to 11.6 percent from 10.6 percent
in 1998. As noted above, revenues and operating results have improved as a
result of concentrating on higher-margin business, contributions from small
acquisitions and the favorable benefits of show rotation from a major trade
show.
TRAVEL AND RECREATION SERVICES. For the first six months of 1999, revenues of
the ongoing travel and recreation businesses were $42.5 million, up $3.5
million, or 9.1 percent, from the first six months 1998, while net income
increased $900,000. The increases were primarily as a result of higher
independent and group tour revenues in Canada (despite a late spring opening)
and more games held at Bank One Ballpark in the second quarter of 1999 versus
the second quarter of 1998.
CORPORATE ACTIVITIES, NET. Corporate activities, net, decreased $3.1 million in
the first six months of 1999 compared to the same period in 1998. The decrease
was a result of ongoing cost reduction efforts as well as an increased Corporate
expense allocation to Viad's operating subsidiaries in 1999.
INTEREST EXPENSE. Interest expense for the first six months of 1999 was $13.6
million compared to $14.3 million for the comparable period of 1998. Increased
interest expense from new borrowings for the June 1998 acquisition of MoneyGram
and Viad's stock repurchase programs was more than offset by the effects of the
repayment of debt and termination of related interest rate swap agreements with
proceeds from the sale of noncore assets and businesses in 1998 and early 1999.
INCOME TAXES. The effective tax rate for the first six months of 1999 was 20.1
percent compared to 15.6 percent for six months 1998. Excluding the effects of
the $6.9 million nonrecurring provision for patent infringement litigation, the
effective tax rate for the first six months of 1998 was 20.6 percent. The lower
comparable tax rate in 1999 is primarily attributable to increased tax-exempt
investment income in 1999.
Page 14
<PAGE>
LIQUIDITY AND CAPITAL RESOURCES:
Viad's total debt at June 30, 1999 was $565.1 million compared with $534.5
million at December 31, 1998. The debt-to-capital ratio at June 30, 1999 was
0.47 to 1 compared to 0.45 to 1 at December 31, 1998. The increase in the
debt-to-capital ratio is due primarily to the increase in debt resulting from
Viad's stock repurchase programs and the reduction in equity from unrealized
holding losses arising during the 1999 six month period on securities classified
as available for sale (see Note C of Notes to Consolidated Financial
Statements).
On July 1, 1999, Viad received approximately $780 million in cash proceeds upon
the sale of Dobbs. A portion of the proceeds was immediately used to repay
short-term borrowings, with the balance temporarily invested in debt securities.
As announced previously, Viad ultimately anticipates utilizing the net proceeds
(after payment of taxes on the gain on sale of Dobbs) to repurchase $100 million
to $150 million of its common stock, to repay $100 million of debt, and to fund
strategic acquisitions in Viad's core business areas.
During the first six months of 1999, approximately 1,852,000 shares of Viad
common stock were purchased for a total price of $55.0 million under Viad's
stock repurchase programs. During the first six months of 1999, Viad received
$16.2 million net proceeds from the exercise of stock options. In conjunction
with the sale of Dobbs, Viad repurchased approximately 1,163,000 shares in July
1999.
EBITDA (defined as income from continuing operations before interest expense,
income taxes, depreciation and amortization and nonrecurring items and including
the fully taxable equivalent adjustment) is a measure of Viad's ability to
service debt, fund capital expenditures and finance growth, and should be
considered in addition to, but not as a substitute for, other measures of
financial performance reported in accordance with generally accepted accounting
principles. EBITDA for the first six months of 1999 was $127.6 million, an
increase of 28.3 percent over that of the comparable 1998 period.
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, 1998.
READINESS FOR THE YEAR 2000:
During the quarter and six months ended June 30, 1999, Viad completed several
projects and continued the implementation of initiatives necessary to make its
systems, products and infrastructure "Year 2000" compliant on a timely basis.
Viad's overall plan to address the Year 2000 problem is described more fully in
the 1998 Annual Report on Form 10-K.
Although no assurances can be made, Viad believes that it has identified all
material systems and applications that are subject to Year 2000 risk and has
either achieved Year 2000 compliance or initiated the implementation of plans to
achieve timely Year 2000 compliance for such systems. A significant portion of
Viad's Year 2000 initiatives have been finished with the remainder in various
stages of completion. Testing and finalization of Viad's entire Year 2000
project will be timely completed in all material respects by the end of 1999.
Incremental costs (primarily for software consultants and outside programming
help) necessary to bring systems and applications into Year 2000 compliance are
being expensed as incurred. Viad currently estimates that the incremental cost
of its Year 2000 projects will total approximately $14 million, of which
approximately 25 percent has been expensed to date in 1999 and approximately 70
percent was expensed by the end of 1998. A substantial portion of the aggregate
Year 2000 cost estimate pertains to efforts at Viad's payment services
operations, where remediation of several key systems has already been completed.
The Year
Page 15
<PAGE>
2000 costs are exclusive of costs which would have been incurred as part of
normal systems and application replacements and/or upgrades to meet current
and future business needs. Viad continues to monitor and evaluate the
additional efforts and costs associated with the Year 2000 initiative.
Viad believes, based on information available to date, that it will be able to
accomplish its total Year 2000 testing and transition by the end of 1999,
without any material adverse effect on its business operations, products,
financial position or results of operations. However, due to the complexity and
pervasiveness of the Year 2000 issues and in particular the uncertainty
regarding the compliance programs of third parties, no assurance can be given
that successful transition will be achieved by the Year 2000 deadline or that
Viad would not suffer any material adverse effect on its business, financial
position or results of operations if such changes are not completed timely.
FORWARD-LOOKING STATEMENTS:
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 Quarterly Report on Form 10-Q
includes certain forward-looking statements, assumptions and discussions,
including those relating to expectations of or current trends in consumer
demand, new business, ongoing cost reduction efforts, Year 2000 compliance
issues and market risk disclosures. Such statements involve risks and
uncertainties which may cause results to differ materially from those set forth
in those statements. Among other things, consumer demand patterns, purchasing
decisions related to customer demand for convention and event services, existing
and new competition, consolidation and growth patterns within the industries in
which Viad competes, and the timely achievement of Year 2000 compliance by Viad
and third parties with whom Viad conducts business, may individually or in
combination impact future results. In addition to the factors mentioned
elsewhere, economic, competitive, governmental, technological, capital
marketplace and other factors could affect the forward-looking statements
contained in this filing.
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
As explained in Notes B and C of Notes to Consolidated Financial Statements,
debt and equity securities classified as "available for sale" are carried at
fair value, with the net unrealized holding gain or loss included in the
Consolidated Balance Sheets as a component of "Accumulated other comprehensive
income." In addition, although a substantial portion of the variable rate
commission payments to selling agents of Viad's payments services business is
hedged into fixed commission payments through the purchase of swap agreements,
the fair value of such swap agreements is not recorded on Viad's balance sheet.
The fair value of the securities classified as available for sale and the fair
value of the swap agreements are sensitive to changes in interest rates. Based
on a hypothetical 10 percent proportionate change in interest rates from the
average level of interest rates during the last twelve months, and taking into
consideration expected investment positions, commissions paid to selling agents,
growth in new business, the effects of the swap agreements as well as the
expected borrowing level of variable-rate debt, the change in pre-tax income
would not be material. However, a 10 percent proportionate increase in interest
rates would result in an estimated decrease in the fair value of securities
classified as available for sale by approximately $71 million (along with an
after-tax decrease in accumulated other comprehensive income of approximately
$43 million) and an estimated off-balance-sheet increase in the fair value of
Viad's swap agreements by approximately $39 million. A 10 percent proportionate
decrease in interest rates would result in an estimated increase in the fair
value of securities classified as available for sale by approximately $69
million (along with an after-tax increase in accumulated other comprehensive
income of approximately $42 million) and an estimated off-balance-sheet decrease
in the fair value of Viad's swap agreements by approximately $39 million.
Page 16
<PAGE>
PART II. OTHER INFORMATION
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
Results of the annual meeting of stockholders of Viad Corp held on May 11, 1999,
were presented in the Form 10-Q for the quarterly period ended March 31, 1999.
No other matters were submitted to a vote of security holders during the second
quarter of 1999.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibit No. 27.1 -- Financial Data Schedule
Exhibit No. 27.2 -- Restated Financial Data Schedule
Exhibit No. 27.3 -- Restated Financial Data Schedule
(b) A report on Form 8-K dated May 18, 1999, was filed by the registrant
during the quarter for which this report is filed. The Form 8-K
reported under Items 5 and 7 Viad's press release announcement of the
sale of Viad's airline catering business, Dobbs International Services,
Inc.
In addition, a report on Form 8-K dated July 1, 1999, was filed by the
registrant. The Form 8-K reported under Items 2 and 7 the completion of
the previously announced sale of the airline catering business for
aggregate cash consideration of approximately $780 million and provided
pro forma financial information giving effect to the sale transaction.
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)
August 11, 1999 BY /S/ CATHERINE L. STEVENSON
---------------------------
Catherine L. Stevenson
Controller
(Chief Accounting Officer
and Authorized Officer)
Page 17
<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 JUNE 30, 1999 AND IS QUALIFIED IN ITS
ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1999
<PERIOD-END> JUN-30-1999
<CASH> 25,106
<SECURITIES> 0
<RECEIVABLES> 81,233
<ALLOWANCES> 2,955
<INVENTORY> 76,274
<CURRENT-ASSETS> 831,832
<PP&E> 523,967
<DEPRECIATION> 239,964
<TOTAL-ASSETS> 5,107,803
<CURRENT-LIABILITIES> 3,732,206
<BONDS> 509,236
6,632
0
<COMMON> 149,610
<OTHER-SE> 465,092
<TOTAL-LIABILITY-AND-EQUITY> 5,107,803
<SALES> 0
<TOTAL-REVENUES> 793,801
<CGS> 0
<TOTAL-COSTS> 708,653
<OTHER-EXPENSES> 10,294
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 13,627
<INCOME-PRETAX> 59,941
<INCOME-TAX> 12,067
<INCOME-CONTINUING> 47,874
<DISCONTINUED> 16,678
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 64,552
<EPS-BASIC> .67
<EPS-DILUTED> .65
</TABLE>
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE INTERIM
FINANCIAL STATEMENTS BELOW HAVE BEEN RESTATED TO REFLECT THE HISTORICAL
FINANCIAL POSITION AND RESULTS OF OPERATIONS AS ADJUSTED FOR THE
RECLASSIFICATION OF THE AIRLINE CATERING AND SERVICES SEGMENT AS DISCONTINUED
OPERATIONS AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FIN STMTS.
</LEGEND>
<RESTATED>
<MULTIPLIER> 1,000
<S> <C> <C> <C> <C>
<PERIOD-TYPE> 3-MOS 9-MOS 6-MOS 3-MOS
<FISCAL-YEAR-END> DEC-31-1999 DEC-31-1998 DEC-31-1998 DEC-31-1998
<PERIOD-END> MAR-31-1999 SEP-30-1998 JUN-30-1998 MAR-31-1998
<CASH> 35,544 19,212 38,206 26,204
<SECURITIES> 0 0 0 0
<RECEIVABLES> 108,836 86,333 92,495 93,960
<ALLOWANCES> 3,066 3,811 3,770 3,097
<INVENTORY> 65,042 63,391 95,901 97,738
<CURRENT-ASSETS> 567,261 347,829 909,603 767,308
<PP&E> 513,689 528,367 542,442 505,544
<DEPRECIATION> 236,785 249,068 250,370 232,425
<TOTAL-ASSETS> 4,566,694 3,994,253 4,387,427 3,631,075
<CURRENT-LIABILITIES> 3,157,910 2,663,916 3,068,739 2,523,388
<BONDS> 509,478 475,053 531,103 401,911
6,629 6,622 6,618 6,615
0 0 0 0
<COMMON> 149,610 149,610 149,610 149,610
<OTHER-SE> 503,671 479,137 424,725 389,235
<TOTAL-LIABILITY-AND-EQUITY> 4,566,694 3,994,253 4,387,427 3,631,075
<SALES> 0 0 0 0
<TOTAL-REVENUES> 373,405 1,227,454 793,841 365,986
<CGS> 0 0 0 0
<TOTAL-COSTS> 343,005 1,118,167 735,183 341,008
<OTHER-EXPENSES> 5,153 19,254 13,430 7,293
<LOSS-PROVISION> 0 0 0 0
<INTEREST-EXPENSE> 6,495 21,144 14,305 7,591
<INCOME-PRETAX> 18,251 94,002 30,457 9,818
<INCOME-TAX> 3,401 23,574 4,757 1,386
<INCOME-CONTINUING> 14,850 70,428 25,700 8,432
<DISCONTINUED> 5,535 42,606 30,301 6,947
<EXTRAORDINARY> 0 0 0 0
<CHANGES> 0 0 0 0
<NET-INCOME> 20,385 113,034 56,001 15,379
<EPS-BASIC> .21 1.19 .59 .16
<EPS-DILUTED> .20 1.14 .56 .15
</TABLE>
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE ANNUAL
FINANCIAL STATEMENTS BELOW HAVE BEEN RESTATED TO REFLECT THE HISTORICAL
FINANCIAL POSITION AND RESULTS OF OPERATIONS AS ADJUSTED FOR THE
RECLASSIFICATION OF THE AIRLINE CATERING AND SERVICES SEGMENT AS DISCONTINUED
OPERATIONS AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FIN STMTS.
</LEGEND>
<RESTATED>
<MULTIPLIER> 1,000
<S> <C> <C> <C>
<PERIOD-TYPE> YEAR YEAR YEAR
<FISCAL-YEAR-END> DEC-31-1996 DEC-31-1997 DEC-31-1998
<PERIOD-END> DEC-31-1996 DEC-31-1997 DEC-31-1998
<CASH> 5,951 17,097 15,554
<SECURITIES> 0 0 0
<RECEIVABLES> 100,517 80,988 100,140
<ALLOWANCES> 9,922 2,780 2,878
<INVENTORY> 82,356 92,892 61,185
<CURRENT-ASSETS> 967,969 857,258 800,213
<PP&E> 541,392 511,460 547,436
<DEPRECIATION> 238,197 228,162 252,841
<TOTAL-ASSETS> 3,344,844 3,609,208 4,688,292
<CURRENT-LIABILITIES> 2,254,973 2,525,313 3,288,432
<BONDS> 518,688 377,849 531,348
6,604 6,612 6,625
0 0 0
<COMMON> 145,663 149,610 149,610
<OTHER-SE> 286,555 379,551 496,271
<TOTAL-LIABILITY-AND-EQUITY> 3,344,844 3,609,208 4,688,292
<SALES> 0 0 0
<TOTAL-REVENUES> 1,397,925 1,486,351 1,612,759
<CGS> 0 0 0
<TOTAL-COSTS> 1,275,613 1,351,717 1,464,794
<OTHER-EXPENSES> 35,542 31,388 24,207
<LOSS-PROVISION> 0 0 0
<INTEREST-EXPENSE> 38,381 34,296 27,212
<INCOME-PRETAX> 44,126 67,713 127,865
<INCOME-TAX> 13,984 11,194 30,521
<INCOME-CONTINUING> 30,142 56,519 97,344
<DISCONTINUED> (1,765) 41,275 53,296
<EXTRAORDINARY> 0 (8,458) 0
<CHANGES> 0 0 0
<NET-INCOME> 28,377 89,336 150,640
<EPS-BASIC> .31 .97 1.58
<EPS-DILUTED> .30 .94 1.52
</TABLE>
