<PAGE>
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SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
--------------------------
FORM 10-K
ANNUAL REPORT PURSUANT TO SECTION 13 OF THE
SECURITIES EXCHANGE ACT OF 1934
For the Fiscal Year Ended December 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 Identification No.)
Incorporation or Organization)
Viad Tower, Phoenix, Arizona 85077
(Address of Principal Executive Offices) (Zip Code)
Registrant's Telephone Number, Including Area Code: 602-207-4000
--------------------------
Securities registered pursuant to Section 12(b) of the Act:
NAME OF EACH EXCHANGE
TITLE OF EACH CLASS ON WHICH REGISTERED
------------------- ---------------------
Common Stock, $1.50 par value New York Stock Exchange
$4.75 Preferred Stock (stated value
$100 per share) New York Stock Exchange
Securities registered pursuant to Section 12(g) of the Act: NONE
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months, and (2) has been subject to such filing
requirements for the past 90 days. Yes X No ___
---
Indicate by check mark if disclosure of delinquent filers pursuant to Item
405 of Regulation S-K is not contained herein, and will not be contained, to the
best of registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendment to this
Form 10-K. [X]
As of March 12 , 1999, 99,082,458 shares of Common Stock ($1.50 par value)
were outstanding and the aggregate market value of the Common Stock (based on
its closing price per share on such date) held by nonaffiliates was
approximately $2.54 billion.
DOCUMENTS INCORPORATED BY REFERENCE
DOCUMENTS WHERE INCORPORATED
A portion of Proxy Statement for Annual Meeting of
Shareholders to be held May 11, 1999 Part III
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<PAGE>
PART I
ITEM 1. BUSINESS.
Viad Corp ("Viad" or the "Corporation") is comprised of operating
companies and a division which constitute a diversified services business.
Most of Viad's services are provided to businesses for use by their
customers. Accordingly, the Corporation markets its services to
approximately 76,000 retail and financial locations primarily in the U.S.
(payment services), numerous trade show organizers and exhibitors (convention
and exhibit services), more than 100 domestic and international airlines
(in-flight food service), and others. Occupying the number one or number two
position in many of the markets in which they compete, each of the
Corporation's businesses seek to provide quality, convenient and
cost-effective services with a discernible difference to the ultimate users
and thereby be considered a value-added provider by Viad's business customers.
Viad's services are classified into three reportable business segments,
namely (1) Payment Services, (2) Convention and Event Services, and (3)
Airline Catering. The Corporation also provides travel and recreation
services. A description of each of the Viad reportable business segments,
the travel and recreation businesses, and recent developments relating to
each follows.
VIAD BUSINESS UNITS
Viad is built around several operating groups which are leading
competitors in their businesses, including companies engaged in payment
services (Travelers Express Company, Inc., MoneyGram Payment Systems, Inc.,
and Game Financial Corporation), convention and event services (GES
Exposition Services, Inc. and Exhibitgroup/Giltspur division), and airline
catering (Dobbs International Services, Inc.). Viad business units also
provide travel tour services (Brewster Transport Company Limited) and
recreation services (ProDine division and Glacier Park, Inc.).
<PAGE>
PAYMENT SERVICES
Viad's payment services business is conducted by the Travelers Express
group of companies. These companies engage in a variety of payment service
activities, including issuance and processing of money orders, processing of
official checks and share drafts, and money transfer and cash access services.
Travelers Express sells money orders to the public through approximately
52,600 retail and financial locations in the United States and Puerto Rico,
and is one of the nation's leading issuers of money orders, issuing more than
274 million money orders in 1998. Travelers Express also provides processing
services for approximately 5,000 banks, credit unions and other financial
institutions which offer official checks (used by financial institutions in
place of their own bank check or cashier's check) and share drafts (the
credit union industry's version of a personal check). In addition, MoneyGram
Payment Systems, Inc. ("MoneyGram"), a subsidiary of Travelers Express,
provides money transfer services through approximately 26,000 agent locations
in 110 countries worldwide. Another subsidiary, Game Financial Corporation
("Game Financial"), provides cash access services, including credit card
advances, check cashing and ATM services to 77 casinos in the gaming
industry. The company also provides in-person bill payment services for
utility companies and others, and high volume processing of refund and rebate
checks, food vouchers, gift certificates and other financial instruments.
Game Financial was acquired in December 1997 and MoneyGram was acquired
effective June 1, 1998. These major acquisitions provide new products for
Travelers Express and provide an opportunity for Travelers Express and the
acquired companies to cross-sell their existing products and services.
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CONVENTION AND EVENT SERVICES
Convention and event services are provided by the Corporation's GES
Exposition Services and Exhibitgroup/Giltspur companies.
GES Exposition Services ("GES"), North America's leading supplier of
convention services to trade associations, show management companies and
exhibitors, provides tradeshow design and planning, decorating, exhibit
design, installation and dismantling, display rental, custom graphics,
furnishings, audio visual, electrical, logistics, transportation and
management services for conventions, tradeshows, and corporate and special
events. GES provides convention services through a network of offices in
North America's most active and popular tradeshow service markets, and is
also an official contractor for ZD Events, Inc., one of the largest
independent producers of trade shows in the world and the operator of COMDEX,
the largest technology trade show in North America. GES acquired ESR
Exposition Services, Inc., a tradeshow contractor headquartered in Teterboro,
New Jersey, in May 1998. The company also acquired the trade show business
of Puliz of Utah, Inc. and Puliz Moving and Storage, Inc., in June 1998, and
electrical contractor business of Ainsworth Electric Company Limited in July
1998. The Puliz businesses are headquartered in Reno, Nevada, and Ainsworth
Electric is headquartered in Toronto, Ontario, Canada.
Exhibitgroup/Giltspur ("EXG") operates the largest exhibit and display
business in the world. EXG is a designer, builder and installer of
convention, tradeshow, museum and other exhibits and displays with locations
in 26 U.S. cities, one Canadian city and two German cities, and an
international network of strategic partners in 21 countries. The company
also offers exhibition marketing, planning and strategy services, including
advertising, multimedia, video and event design. In April 1998, the company
added retail kiosks to its product mix by acquisition of T.L. Horton Design,
a business headquartered in Dallas, Texas. EXG also acquired Dimension
Works, Inc. and the business of Impact Group, Inc., in November, 1998, and an
80% interest in Voblo Innenausbau in September 1998. The acquisition of
Voblo, an exhibit company headquartered outside of Dusseldorf, Germany, will
permit EXG to compete in the European trade show market. EXG is operated as
a division of Viad.
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<PAGE>
AIRLINE CATERING
Airline catering operations are conducted by Dobbs International
Services, Inc. Dobbs International, which has been conducting airline
catering operations since 1941, is the second largest domestic in-flight
caterer. At the end of 1998, Dobbs International's in-flight catering
operations were preparing and providing in-flight meals, snacks, beverages
and related services to more than 100 domestic and international airlines at
46 airports in the United States and 5 airports in the United Kingdom. Dobbs
International prepares approximately 145 million meals or snacks per year.
The four largest customers of Dobbs International are United Airlines, Delta
Airlines, American Airlines, and Northwest Airlines. Dobbs International
and/or its predecessors have provided airline catering services to these and
other customers for over 50 years, on average.
Dobbs International will enter a new market in April 1999 as a result of
a seven-year contract to provide food service for National Railroad Passenger
Corporation, commonly known as "Amtrak." The company will manage the operation
of Amtrak's 14 commissaries nationwide and will provide food service to
railroad operations in major cities throughout the country. In June 1998,
Dobbs International also acquired a flight kitchen in Las Vegas, Nevada.
Dobbs International has been involved in a "Quality Improvement Process"
for many years and has been consistently recognized by its customers and
suppliers as a superior caterer due to its high standards of quality,
excellence and innovation.
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<PAGE>
TRAVEL AND RECREATION SERVICES
Travel and recreation services are provided by the Brewster Transport
and ProDine business units.
Brewster Transport Company Limited, an Alberta, Canada corporation,
operates tour and charter buses in the Canadian Rockies, and engages in
travel agency, hotel and snocoach tour operations. Brewster Transport owns
and operates 96 intercity coaches and 4 transit buses, as well as 18
snocoaches which transport sightseers on tours of the glaciers of the
Columbia Icefield.
The Corporation's ProDine recreation division acts as the prime
concessionaire for all food and beverage services at the America West Arena
and Bank One Ballpark in Phoenix, Arizona. America West Arena is the home of
the Phoenix Suns basketball and Phoenix Coyotes hockey teams, and Bank One
Ballpark is the home of the Arizona Diamondbacks major league baseball
franchise. The division, through a subsidiary, also operates 7 historic
lodges in and around Glacier National Park in Montana and Canada.
COMPETITION
The Corporation's businesses generally compete on the basis of price,
value, quality, discernible difference, convenience and service, and encounter
substantial competition from a large number of providers of similar services,
including numerous well-known local, regional and national companies, private
payment service companies and the U.S. Postal Service (money orders), many of
which have greater resources than the Corporation. Travelers Express also
competes on the basis of quality and number of sales outlet locations, business
automation, technology and accounting controls, and Dobbs International also
competes on the basis of reliability, condition of kitchen facilities and truck
fleet, and on-time record. The U.S. Postal Service, First Data Corporation and
its subsidiary Western Union Financial Services, Inc., and American Express are
the principal competition of Travelers Express, and SC International Services,
Inc. (LSG Sky Chefs) is the principal competitor of Dobbs International. On a
national basis, Freeman Decorating Company is the principal competitor of GES
Exposition, and George P. Johnson, Co. Inc. is the principal competitor of
Exhibitgroup/Giltspur.
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PATENTS AND TRADEMARKS
United States patents are currently granted for a term of 20 years from
the date a patent application is filed. The Viad companies own a number of
patents which give them competitive advantages in the marketplace, including
a number of patents owned by Exhibitgroup/Giltspur covering exhibit systems
and by Travelers Express for automated money order dispensing systems. The
Travelers Express patents cover security, automated reporting and control,
and other features which are important in the issuance of money orders.
United States trademark registrations are for a term of 10 years,
renewable every 10 years as long as the trademarks are used in the regular
course of trade. The Viad companies maintain a portfolio of trademarks
representing substantial goodwill in the businesses using the marks.
Many trademarks used by Viad and its subsidiaries, including the
TRAVELERS EXPRESS, MONEYGRAM, EXHIBITGROUP/GILTSPUR, GES, DOBBS, and DOBBS
INTERNATIONAL SERVICES service marks, have substantial importance and value.
Certain rights in software held by Travelers Express and its subsidiaries
also provide competitive advantage.
GOVERNMENT REGULATION
Compliance with legal requirements and government regulations are a
day-to-day integral part of the Corporation's operations and represent a
normal cost of doing business. Financial transaction reporting and state
banking department regulations affect Travelers Express; state gaming
department regulations affect Game Financial; and food safety and airport
security regulations are of importance to Dobbs International.
Environmental, labor and employment and other regulations affect virtually
all operations. As is the case with many companies, the Corporation faces
exposure to actual or potential claims and lawsuits involving environmental
matters. Although the Corporation is a party to certain environmental
disputes, the Corporation believes that any liabilities resulting therefrom,
after taking into consideration amounts already provided for, exclusive of
any potential insurance recoveries, will not have a material effect on the
Corporation's financial position or results of operations.
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<PAGE>
EMPLOYEES
EMPLOYMENT AT DECEMBER 31, 1998
<TABLE>
<CAPTION>
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REGULAR FULL TIME
EMPLOYEES COVERED BY
APPROXIMATE NUMBER OF COLLECTIVE BARGAINING
SEGMENT EMPLOYEES AGREEMENTS
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<S> <C> <C>
Payment Services 1,800 0
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Convention and 4,500 2,000
Event Services
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Airline Catering 12,400 8,000
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Travel and Recreation 1,100* 100
Services
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</TABLE>
* Excludes employees of the contract foodservice operations of Restaura,
Inc., which were sold January 27, 1999.
Viad believes that relations with its employees are satisfactory and
that collective bargaining agreements expiring in 1999 will be renegotiated
in the ordinary course of business without adverse effect on Viad's
operations.
Viad had 129 employees at its corporate center at December 31, 1998,
providing management, financial and accounting, tax, administrative, legal
and other services to its operating units and handling residual matters
pertaining to businesses previously discontinued or sold by the Corporation.
Viad is managed by a Board of Directors comprised of seven nonemployee
directors and one employee director and has an executive management team
consisting of seven Viad officers (including the one employee director) and
four principal executives of significant operating divisions or companies.
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<PAGE>
SEASONALITY
The first quarter is normally the slowest quarter of the year for Viad.
Due to increased leisure travel during the summer and year-end holidays,
Viad's airline catering and travel and recreation operations generally
experience peak activity at these times. Convention and event service
companies generally experience increased activity during the first half of
the year. As a result of these factors, Viad's 1998 quarterly diluted
earnings per share (before nonrecurring items), as a percentage of the full
year's earnings, were approximately 12% (first quarter), 28% (second
quarter), 33% (third quarter), and 27% (fourth quarter). See Note [R] of
Notes to Consolidated Financial Statements.
OTHER MATTERS
The Corporation disposed of several noncore businesses during 1998 and
early 1999. Effective April 1, 1998, the Corporation sold its Aircraft
Services International group of companies, which conducted aircraft fueling
and ground handling operations, and on September 15, 1998, the Corporation
completed the sale of Greyhound Leisure Services, Inc., which conducted
duty-free and shipboard concessions business. Restaura, Inc., a dining
services company, was sold in late January 1999. (See Notes C and S of Notes
to Consolidated Financial Statements for further information.)
SHELF REGISTRATION
The Corporation has a shelf registration on file with the Securities and
Exchange Commission covering $500 million of debt and equity securities. To
date, no securities have been offered under the registration.
BUSINESS SEGMENTS
Business segment information is set forth in Exhibit 13.
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<PAGE>
ITEM 2. PROPERTIES.
Viad and its subsidiaries operate service or production facilities, and
maintain sales and service offices in the United States, Canada, the United
Kingdom and Germany. The Corporation also conducts business in certain other
foreign countries.
Viad's headquarters are located at Viad Tower in Phoenix, Arizona. Viad
leases seven floors (consisting of approximately 159,000 square feet).
PAYMENT SERVICES operates 17 offices (including Travelers Express corporate
headquarters located in Minneapolis, Minnesota) and three payment services
processing centers, two of which are located in Minnesota and one in Colorado.
All of the facilities are leased.
CONVENTION AND EVENT SERVICES operates 17 offices and 82 multi-use
facilities (exhibit construction, office and/or warehouse). The principal
facilities, used in the design and production of exhibits and in connection
with providing trade show and exposition services, range in size from
approximately 100,000 square feet to 475,000 square feet. All of the
properties are in the United States, except for one office and eight
multi-use facilities that are located in Canada, and three multi-use
facilities that are located in Germany. Five of the multi-use facilities are
owned; all other properties are leased. GES and Exhibit/Giltspur corporate
headquarters are located in Las Vegas, Nevada, and Roselle, Illinois,
respectively.
AIRLINE CATERING operates eight administrative offices (including Dobbs
International's corporate headquarters located in Memphis, Tennessee), one
maintenance garage and 64 catering kitchens. All of the properties are in
the United States, except for five catering kitchens that are located in the
United Kingdom. Twelve of the catering kitchens are owned. All other
properties are leased, except for two catering kitchens provided by airlines
to which services are rendered.
The catering kitchens, aggregating approximately three million square
feet, are located at or near major airports. Actual sizes of the kitchens
vary, depending on the level of business activity at each location.
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<PAGE>
TRAVEL AND RECREATION SERVICES operates two offices, two retail stores,
three bus terminals, four garages and nine hotels/lodges (with approximately
900 rooms, and ancillary foodservice and recreational facilities). All of
the properties are in the United States, except for one retail store, the bus
terminals, garages, icefield tour facility, and three hotels/lodges that are
located in Canada. Travel and Recreation Services owns four hotels/lodges
and five other hotels/lodges are operated pursuant to a concessionaire
agreement. One bus terminal and three garages are owned; the icefield tour
facility is jointly owned and operated with Parks Canada; all other
properties are leased.
Management believes that Viad's facilities in the aggregate are adequate
and suitable for their purposes and that capacity is sufficient for current
needs.
ITEM 3. LEGAL PROCEEDINGS
The Corporation and certain subsidiaries are plaintiffs or defendants to
various actions, proceedings and pending claims, including pending or
potential claims by or on behalf of approximately 6,500 former railroad
workers claiming asbestos-related health conditions from exposure to railroad
equipment made by former subsidiaries. Certain of these pending legal
actions are or purport to be class actions. Some of the foregoing involve,
or may involve, compensatory, punitive or other damages. Litigation is
subject to many uncertainties and it is possible that some of the legal
actions, proceedings or claims could be decided against the Corporation.
Although the amount of liability at December 31, 1998, with respect to these
matters is not ascertainable, Viad believes that any resulting liability will
not have a material effect on the Corporation's financial position or results
of operations.
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<PAGE>
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITYHOLDERS.
No matters were submitted to a vote of securityholders during the fourth
quarter of 1998.
OPTIONAL ITEM. EXECUTIVE OFFICERS OF REGISTRANT.
The names, ages and positions of the executive officers of the
Corporation as of March 12, 1999, are listed below:
<TABLE>
<CAPTION>
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EXECUTIVE
POSITION
HELD
NAME AGE OFFICE SINCE
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<S> <C> <C> <C>
Robert H. Bohannon 54 Chairman of the Board, 1997
President and Chief
Executive Officer of the
Corporation
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John A. Modzelewski 51 Chief Financial Officer of 1999
the Corporation
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Ronald G. Nelson 57 Vice President-Finance and 1987
Treasurer of the
Corporation
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Peter J. Novak 59 Vice President and General 1996
Counsel of the Corporation
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Scott E. Sayre 52 Secretary and Associate 1997
General Counsel of the
Corporation
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Richard C. Stephan 59 Vice President-Controller 1980
of the Corporation (Retiring
March 31, 1999)
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Wayne A. Wight 56 Vice President-Corporate 1998
Development of the
Corporation
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George H. Alvord 52 President and Chief 1999
Executive Officer of Dobbs
International Services,
Inc., a subsidiary of the
Corporation
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Charles J. Corsentino 52 President and Chief 1991
Executive Officer of
Exhibitgroup/Giltspur, a
division of the Corporation
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Philip W. Milne 40 President and Chief 1996
Executive Officer of
Travelers Express Company,
Inc., a subsidiary of the
Corporation
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Paul B. Mullen 44 President and Chief 1996
Executive Officer of GES
Exposition Services, Inc.
a subsidiary of the
Corporation
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</TABLE>
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<PAGE>
Each of the foregoing officers, with the exceptions set forth below, has
served in the same, similar or other executive positions with Viad or its
subsidiaries for more than the past five (5) years.
Prior to February 1999, Mr. Alvord served as Vice President-Marketing
and Sales of Dobbs International Services, Inc., since November, 1987.
Prior to January 1997, Mr. Bohannon served as President and Chief
Operating Officer of the Corporation since August 15, 1996. Prior thereto he
was President and Chief Executive Officer of Travelers Express Company, Inc.
since 1993.
Prior to August 1996, Mr. Milne was Vice President-General
Manager-Retail Payment Products of Travelers Express Company, Inc., since
May, 1993.
Prior to February 1999, Mr. Modzelewski was a Senior Vice President of
PaineWebber Incorporated since 1996, and prior thereto was a First Vice
President of that company.
Prior to May 1996, Mr. Mullen was President and Chief Executive Officer
of Giltspur, Inc., since 1995. Prior thereto he was Executive Vice President
and Chief Operating Officer of Giltspur, Inc. since 1994, and prior to that,
he was President of the Pittsburgh Division of Giltspur, Inc. since 1992.
Prior to February 1996, Mr. Novak was Deputy General Counsel of the
Corporation, and prior to serving in that position was Group General Counsel
of the Corporation.
Prior to January 1997, Mr. Sayre served as Assistant Secretary and
Assistant General Counsel of the Corporation since February 1996, and prior
thereto was Assistant General Counsel.
Prior to February 1998, Mr. Wight served as Executive Director-Corporate
Development of the Corporation since 1992.
The term of office of the executive officers is until the next annual
organization meetings of the Boards of Directors of Viad or appropriate
subsidiaries, all of which are scheduled for May or June of this year.
The Directors of Viad are divided into three classes, with the terms of
one class of Directors to expire at each Annual Meeting of Stockholders. The
current term of office of Robert H. Bohannon is scheduled to expire at the
2000 Annual Meeting of Stockholders.
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<PAGE>
PART II
ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS.
The principal market on which the common stock of Viad is traded is the
New York Stock Exchange. The common stock is also admitted for trading on
the Midwest, Pacific, Philadelphia and Cincinnati Exchanges. The following
tables summarize the high and low market prices as reported on the New York
Stock Exchange Composite Tape and the cash dividends declared for the two
years ended December 31, 1998:
<TABLE>
<CAPTION>
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Sales Price Range of Common Stock
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Calendar 1998 1997
Quarters High Low High Low
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<S> <C> <C> <C> <C>
First $25.0625 $18.5625 $18.0000 $14.8750
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Second 27.7500 23.4375 19.5000 14.6250
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Third 29.7500 20.6250 20.3750 17.0000
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Fourth 30.5625 21.5625 20.3125 17.1250
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</TABLE>
<TABLE>
<CAPTION>
Dividends Declared on Common Stock
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1998 1997
-------------------------------
<S> <C> <C>
February $ .08 $ .08
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May .08 .08
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August .08 .08
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November .08 .08
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TOTAL $0.32 $0.32
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</TABLE>
Regular quarterly dividends have been paid on the first business day of
January, April, July and October.
As of March 12, 1999, there were 34,303 stockholders of record of Viad's
common stock.
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<PAGE>
ITEM 6. SELECTED FINANCIAL DATA.
Applicable information is included in Exhibit 13.
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF RESULTS OF OPERATIONS AND
FINANCIAL CONDITION.
Applicable information is included in Exhibit 13.
ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK.
See Management's Discussion and Analysis of Results of Operations
and Financial Condition included in Exhibit 13.
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA.
1. Financial Statements--See Item 14 hereof.
2. Supplementary Data--See Condensed Consolidated Quarterly Results
in Exhibit 13.
ITEM 9. DISAGREEMENTS ON ACCOUNTING AND FINANCIAL DISCLOSURE.
None.
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<PAGE>
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT.
The information regarding Directors of the Registrant is included in
Viad's Proxy Statement for Annual Meeting of Stockholders to be held
on May 11, 1999 ("Proxy Statement") and is incorporated herein and
made a part hereof. The information regarding executive officers of
the Registrant is found as an Optional Item in Part I hereof.
ITEM 11. EXECUTIVE COMPENSATION.
The information is contained in the Proxy Statement and is
incorporated herein and made a part hereof.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT.
The information is contained in the Proxy Statement and is
incorporated herein and made a part hereof.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS.
None.
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K.
(a) The following documents are filed as a part of the report:
FINANCIAL STATEMENTS.
The following are included in Exhibit 13: Independent Auditors'
Report and Consolidated Financial Statements (Balance Sheet, Statements of
Income, Comprehensive Income, Common Stock and Other Equity, Cash Flows,
and Notes to Financial Statements).
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<PAGE>
EXHIBITS. #
<TABLE>
<S> <C>
3.A Copy of Restated Certificate of Incorporation of Viad Corp, as amended
through August 15, 1996, filed as Exhibit 3.A to Viad's 1996 Form 10-K,
is hereby incorporated by reference.
3.B Copy of Bylaws of Viad Corp, as amended through November 19, 1998.
4.A Instruments with respect to issues of long-term debt have not been filed
as exhibits to this Annual Report on Form 10-K if the authorized
principal amount of any one of such issues does not exceed 10% of total
assets of the Corporation and its subsidiaries on a consolidated basis.
The Corporation agrees to furnish a copy of each such instrument to the
Securities and Exchange Commission upon request.
4.B Copy of Amended and Restated Credit Agreement dated as of July 24, 1996,
among Viad, the Bank parties thereto, Citicorp USA, Inc., as
Administrative Agent, and Bank of America National Trust and Savings
Association as Documentation Agent, filed as Exhibit 4.B to Viad's 1996
Form 10-K, is hereby incorporated by reference.
4.B1 First Amendment dated as of August 1, 1997, to Amended and Restated
Credit Agreement, filed as Exhibit 4.B1 to Viad's 1997 Form 10-K, is
hereby incorporated by reference.
4.B2 Second Amendment dated as of September 11, 1997, to Amended and Restated
Credit Agreement, filed as Exhibit 4.B2 to Viad's 1997 Form 10-K, is
hereby incorporated by reference.
</TABLE>
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<PAGE>
<TABLE>
<S> <C>
10.A1 Copy of Viad Corp 1983 Stock Option and Incentive Plan, filed as Exhibit
(28) to Viad's Registration Statement on Form S-8 (Registration No.
33-41870), is hereby incorporated by reference.+
10.A2 Copy of amendment, effective August 1, 1994, to Viad Corp 1983 Stock
Option and Incentive Plan, filed as Exhibit 10.H2 to Viad's 1994 Form
10-K, is hereby incorporated by reference.+
10.B1 Copy of Viad Corp 1992 Stock Incentive Plan as amended August 15, 1996,
filed as Exhibit 4.3 to Viad's Form S-8 Registration Statement
(#333-63397), is hereby incorporated by reference.+
10.B2 Copy of amendment, effective August 1, 1994, to Viad Corp 1992 Stock
Incentive Plan, filed as Exhibit 10.I2 to Viad's 1994 Form 10-K, is
hereby incorporated by reference.+
10.C Copy of 1997 Viad Corp Omnibus Incentive Plan, as amended through
February 18, 1999.+
10.D Copy of Viad Corp Management Incentive Plan (pursuant to the Viad 1997
Omnibus Incentive Plan), as amended March 23, 1999.*+
10.E Copy of Viad Corp Performance Unit Incentive Plan, as amended through
March 23, 1999.*+
10.F Copy of Viad Corp Performance-Based Stock Plan, as amended and restated
effective May 1998, filed as Exhibit 10D to Viad's Second Quarter 1998
Form 10Q, is hereby incorporated by reference.+
</TABLE>
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<PAGE>
<TABLE>
<S> <C>
10.G Copy of form of Viad Corp 1983 Stock Option and Incentive Plan Amended
and Restated Restricted Stock Agreements dated August 12, 1994, between
Viad and certain executive officers, filed as Exhibit 10.R to Viad's 1994
Form 10-K, is hereby incorporated by reference.+
10.H Copy of form of Viad Corp 1992 Stock Incentive Plan Restricted Stock
Agreements dated August 12, 1994, between Viad and certain executive
officers, filed as Exhibit 10.S to Viad's 1994 Form 10-K, is hereby
incorporated by reference.+
10.I Viad Corp Deferred Compensation Plan Amended and Restated as of August
21, 1997, filed as Exhibit 10.A to Viad's Third Quarter 1997 Form 10-Q,
is hereby incorporated by reference.+
10.J1 Copy of form of Executive Severance Agreement between Viad Corp and
Chairman, President and Chief Executive Officer, filed as Exhibit
(10)(G)(i) to Viad's 1991 Form 10-K, is hereby incorporated by
reference.+
10.J2 Copy of forms of Viad Corp Executive Severance Plans covering certain
executive officers, filed as Exhibit (10)(G)(ii) to Viad's 1992 Form
10-K, is hereby incorporated by reference.+
10.K Description of Spousal Income Continuation Plan, filed as Exhibit 10(Q)
to Viad's 1985 Form 10-K, is hereby incorporated by reference.+
10.L Copy of Employment Agreement between Viad Corp and Robert H. Bohannon
dated April 1, 1998, filed as
</TABLE>
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<TABLE>
<S> <C>
Exhibit 10 to Viad's First Quarter 1998 Form 10-Q, is hereby incorporated
by reference.+
10.M Copy of Employment Agreement between Viad Corp and Paul B. Mullen dated
April 25, 1996, filed as Exhibit 10.O to Viad's 1996 Form 10-K, is hereby
incorporated by reference.+
10.N Copy of Consulting Agreement between Viad Corp and Richard C. Stephan
dated December 4, 1998, and effective as of April 1, 1999.*
10.O Copy of Viad Corp Supplemental TRIM Plan, filed as Exhibit 10.M to Viad's
1994 Form 10-K, is hereby incorporated by reference.+
10.P Copy of Viad Corp Supplemental Pension Plan (Amended and Restated as of
September 30, 1997) (Previously Amended and Restated as of January 1,
1987) dated December 30, 1997 filed as Exhibit 10.Q to Viad's 1997 Form
10K, is hereby incorporated by reference.+
10.Q Copy of Travelers Express Company, Inc. Supplemental Pension Plan dated
December 30, 1997, filed as Exhibit 10.R to Viad's 1997 Form 10-K, is
hereby incorporated by reference.+
10.R Copy of GES Exposition Services, Inc. Supplemental Executive Retirement
Plan, as amended effective January 1, 1998, filed as Exhibit 10.S to
Viad's 1997 Form 10-K, is hereby incorporated by reference.+
10.S Copy of Viad Corp Deferred Compensation Plan for Directors, as Amended
and Restated July 25, 1996, filed
</TABLE>
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<TABLE>
<S> <C>
as Exhibit 10.D to Viad's 1996 Form 10-K, is hereby incorporated by
reference.+
10.T Copy of Viad Corp Director's Charitable Award Program as amended through
March 15, 1996, filed as Exhibit 10.T to Viad's 1995 Form 10-K, is hereby
incorporated by reference.+
13 Financial Information set forth in Annual Report to Securityholders.*
21 List of Subsidiaries of Viad.*
23 Independent Auditors' Consent to the incorporation by reference into
specified registration statements on Form S-3 or on Form S-8 of their
report contained in this report.*
24 Power of Attorney signed by Directors of Viad.*
27 Financial Data Schedule.*
</TABLE>
* Filed herewith.
+ Management contract or compensation plan or arrangement.
# Viad Corp was previously named The Dial Corp.
Note: The 1998 Annual Report to Securityholders will be furnished to the
Commission when, or before, it is sent to securityholders.
(b) REPORTS ON FORM 8-K.
The Corporation filed no reports on Form 8-K during the last quarterly
period covered by this report.
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SIGNATURES
Pursuant to the requirements of Section 13 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, in Phoenix, Arizona, on
the 24th day of March, 1999.
VIAD CORP
By: /s/ Robert H. Bohannon
Chairman of the Board, President
and Chief Executive Officer
Pursuant to the requirements of the Securities Exchange Act of 1934, this
report has been signed below by the following persons on behalf of the
Registrant and in the capacities and on the dates indicated:
Principal Executive Officer
Date: March 24, 1999 By: /s/ Robert H. Bohannon
Director; Chairman of the Board,
President and Chief Executive
Officer
Principal Financial Officer
Date: March 24, 1999 By: /s/ John A. Modzelewski
Chief Financial Officer
Principal Accounting Officer
Date: March 24, 1999 By: /s/ Richard C. Stephan
Vice President-Controller
Directors
Jess Hay
Judith K. Hofer
Jack F. Reichert
Linda Johnson Rice
Douglas L. Rock
John C. Tolleson
Timothy R. Wallace
Date: March 24, 1999 By: /s/ Richard C. Stephan
Attorney-in-Fact
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Exhibit 3.B
BYLAWS
OF
VIAD CORP
INCORPORATED UNDER THE LAWS OF THE STATE OF DELAWARE
AS AMENDED NOVEMBER 19, 1998
ARTICLE I
OFFICES AND RECORDS
SECTION 1.1. DELAWARE OFFICE. The principal office of the Corporation
in the State of Delaware shall be located in the City of Wilmington, County
of New Castle, and the name and address of its registered agent is The
Corporation Trust Company, 1209 Orange Street, Wilmington, Delaware.
SECTION 1.2. OTHER OFFICES. The Corporation may have such other
offices, either within or without the State of Delaware, as the Board of
Directors may designate or as the business of the Corporation may from time
to time require.
SECTION 1.3. BOOKS AND RECORDS. The books and records of the
Corporation may be kept at the Corporation's headquarters in Phoenix, Arizona
or at such other locations as may from time to time be designated by the
Board of Directors.
ARTICLE II
STOCKHOLDERS
SECTION 2.1. ANNUAL MEETING. The annual meeting of the stockholders
of the Corporation shall be held on the second Tuesday in May of each year,
if not a legal holiday, and if a legal holiday then on the next succeeding
business day, at 9:00 a.m., local time, at the principal executive offices of
the Corporation, or at such other date, place and/or time as may be fixed by
resolution of the Board of Directors.
SECTION 2.2. SPECIAL MEETING. Subject to the rights of the holders of
the Series $4.75 Preferred Stock, without par value but with a stated value
of $100 per share (the "$4.75 Preferred Stock"), any series of preferred
stock, par value $.01 per share (the "Preferred Stock"), or any other series
or class of stock as set forth in the Certificate of Incorporation of the
Corporation to elect additional directors under
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specified circumstances, special meetings of the stockholders may be called
only by the Chairman of the Board or by the Board of Directors pursuant to a
resolution adopted by a majority of the total number of directors which the
Corporation would have if there were no vacancies (the "Whole Board").
SECTION 2.3. PLACE OF MEETING. The Board of Directors may designate
the place of meeting for any meeting of the stockholders. If no designation
is made by the Board of Directors, the place of meeting shall be the
principal office of the Corporation.
SECTION 2.4. NOTICE OF MEETING. Written or printed notice, stating
the place, day and hour of the meeting and the purpose or purposes for which
the meeting is called, shall be prepared and delivered by the Corporation not
less than ten days nor more than sixty days before the date of the meeting,
either personally, or by mail, to each stockholder of record entitled to vote
at such meeting. If mailed, such notice shall be deemed to be delivered when
deposited in the United States mail with postage thereon prepaid, addressed
to the stockholder at his address as it appears on the stock transfer books
of the Corporation. Such further notice shall be given as may be required by
law. Meetings may be held without notice if all stockholders entitled to vote
are present, or if notice is waived by those not present. Any previously
scheduled meeting of the stockholders may be postponed by resolution of the
Board of Directors upon public notice given prior to the time previously
scheduled for such meeting of stockholders.
SECTION 2.5. QUORUM AND ADJOURNMENT. Except as otherwise provided by
law or by the Certificate of Incorporation, the holders of a majority of the
voting power of the outstanding shares of the Corporation entitled to vote
generally in the election of directors (the "Voting Stock"), represented in
person or by proxy, shall constitute a quorum at a meeting of stockholders,
except that when specified business is to be voted on by a class or series
voting as a class, the holders of a majority of the shares of such class or
series shall constitute a quorum for the transaction of such business. The
chairman of the meeting or a majority of the voting power of the shares of
Voting Stock so represented may adjourn the meeting from time to time,
whether or not there is such a quorum (or in the case of specified business
to be voted on a class or series, the chairman or a majority of the shares of
such class or series so represented may adjourn the meeting with respect to
such specified business). No notice of the time and place of adjourned
meetings need be given except as required by law. The stockholders present at
a duly organized meeting may continue to transact business until adjournment,
notwithstanding the withdrawal of enough stockholders to leave less than a
quorum.
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SECTION 2.6. PROXIES. At all meetings of stockholders, a stockholder
may vote by proxy executed in writing by the stockholder or as otherwise
permitted by law, or by his duly authorized attorney-in-fact. Such proxy must
be filed with the Secretary of the Corporation or his representative at or
before the time of the meeting.
SECTION 2.7. NOTICE OF STOCKHOLDER BUSINESS AND NOMINATIONS.
(A) ANNUAL MEETINGS OF STOCKHOLDERS. (1) Nominations of persons for
election to the Board of Directors of the Corporation and the proposal of
business to be considered by the stockholders may be made at an annual
meeting of stockholders (a) pursuant to the Corporation's notice of meeting
delivered pursuant to Section 2.4 of these Bylaws, (b) by or at the direction
of the Chairman or the Board of Directors or (c) by any stockholder of the
Corporation who is entitled to vote at the meeting, who complied with the
notice procedures set forth in clauses (2) and (3) of this paragraph (A) and
this Bylaw and who was a stockholder of record at the time such notice is
delivered to the Secretary of the Corporation.
(2) For nominations or other business to be properly brought before an
annual meeting by a stockholder pursuant to clause (c) of paragraph (A)(1) of
this Bylaw, the stockholder must have given timely notice thereof in writing
to the Secretary of the Corporation. To be timely, a stockholder's notice
shall be delivered to the Secretary at the principal executive offices of the
Corporation not less than ninety days nor more than one hundred twenty days
prior to the first anniversary of the preceding year's annual meeting;
PROVIDED, HOWEVER, that in the event that the date of the annual meeting is
advanced by more than thirty days, or delayed by more than sixty days, from
such anniversary date, notice by the stockholder to be timely must be so
delivered not earlier than the one hundred twentieth day prior to such annual
meeting and not later than the close of business on the later of the
ninetieth day prior to such annual meeting or the tenth day following the day
on which public announcement of the date of such meeting is first made. Such
stockholder's notice shall set forth (a) as to each person whom the
stockholder proposes to nominate for election or reelection as a director all
information relating to such person that is required to be disclosed in
solicitations of proxies for election of directors, or is otherwise required,
in each case pursuant to Regulation 14A under the Securities Exchange Act of
1934, as amended (the "Exchange Act"), including such person's written
consent to being named in the proxy statement as a nominee and to serving as
a director if elected; (b) as to any other business that the stockholder
proposes to bring before the meeting, a brief description of the business
desired to be brought before the meeting, the reasons for conducting such
business at the meeting and any material interest in such business of such
stockholder and the beneficial owner, if any, on whose behalf the proposal is
made; and (c) as to the stockholder giving the notice and the beneficial
owner, if any, on whose behalf the nomination or proposal is made (i) the
name and address of such stockholder, as they appear on the Corporation's
books, and of such beneficial owner and (ii) the class and number
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of shares of the Corporation which are owned beneficially and of record by
such stockholder and such beneficial owner.
(3) Notwithstanding anything in the second sentence of paragraph (A)
(2) of this Bylaw to the contrary, in the event that the number of directors
to be elected to the Board of Directors of the Corporation is increased and
there is no public announcement naming all of the nominees for director or
specifying the size of the increased Board of Directors made by the
Corporation at least eighty days prior to the first anniversary of the
preceding year's annual meeting, a stockholder's notice required by this
Bylaw shall also be considered timely, but only with respect to nominees for
any new positions created by such increase, if it shall be delivered to the
Secretary at the principal executive offices of the Corporation not later
than the close of business on the tenth day following the day on which such
public announcement is first made by the Corporation.
(B) SPECIAL MEETINGS OF STOCKHOLDERS. Only such business shall be
conducted at a special meeting of stockholders as shall have been brought
before the meeting pursuant to the Corporation's notice of meeting pursuant
to Section 2.4 of these Bylaws. Nominations of persons for election to the
Board of Directors may be made at a special meeting of stockholders at which
directors are to be elected pursuant to the Corporation's notice of meeting
(a) by or at the direction of the Board of Directors or (b) by any
stockholder of the Corporation who is entitled to vote at the meeting, who
complies with the notice procedures set forth in this Bylaw and who is a
stockholder of record at the time such notice is delivered to the Secretary
of the Corporation. Nominations by stockholders of persons for election to
the Board of Directors may be made at such a special meeting of stockholders
if the stockholder's notice as required by paragraph (A) (2) of this Bylaw
shall be delivered to the Secretary at the principal executive offices of the
Corporation not earlier than the one hundred twentieth day prior to such
special meeting and not later than the close of business on the later of the
ninetieth day prior to such special meeting or the tenth day following the
day on which public announcement is first made of the date of the special
meeting and of the nominees proposed by the Board of Directors to be elected
at such meeting.
(C) GENERAL. (1) Only persons who are nominated in accordance with
the procedures set forth in this Bylaw shall be eligible to serve as
directors and only such business shall be conducted at a meeting of
stockholders as shall have been brought before the meeting in accordance with
the procedures set forth in this Bylaw. Except as otherwise provided by law,
the Restated Certificate of Incorporation or these Bylaws, the chairman of
the meeting shall have the power and duty to determine whether a nomination
or any business proposed to be brought before the meeting was made in
accordance with the procedures set forth in this Bylaw and, if any proposed
nomination or business is not in compliance with this Bylaw, to declare that
such defective proposal or nomination shall be disregarded.
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(2) For purposes of this Bylaw, "public announcement" shall mean
disclosure in a press release reported by the Dow Jones News Service,
Associated Press or comparable national news service or in a document
publicly filed by the Corporation with the Securities and Exchange Commission
pursuant to Section 13,14 or 15(d) of the Exchange Act.
(3) Notwithstanding the foregoing provisions of this Bylaw, a
stockholder shall also comply with all applicable requirements of the
Exchange Act and the rules and regulations thereunder with respect to the
matters set forth in this Bylaw. Nothing in this Bylaw shall be deemed to
affect any rights of stockholders to request inclusion of proposals in the
Corporation's proxy statement pursuant to Rule 14a-8 under the Exchange Act.
SECTION 2.8. PROCEDURE FOR ELECTION OF DIRECTORS. Election of
directors at all meetings of the stockholders at which directors are to be
elected shall be by written ballot, and, except as otherwise set forth in the
Certificate of Incorporation with respect to the right of the holders of the
$4.75 Preferred Stock, any series of Preferred Stock or any other series or
class of stock to elect additional directors under specified circumstances, a
plurality of the votes cast thereat shall elect. Except as otherwise provided
by law, the Certificate of Incorporation or these Bylaws, all matters other
than the election of directors submitted to the stockholders at any meeting
shall be decided by a majority of the votes cast with respect thereto.
SECTION 2.9. INSPECTORS OF ELECTIONS; OPENING AND CLOSING THE POLLS.
(A) The Board of Directors by resolution shall appoint one or more
inspectors, which inspector or inspectors may include individuals who serve
the Corporation in other capacities, including, without limitation, as
officers, employees, agents or representatives of the Corporation, to act at
the meeting and make a written report thereof. One or more persons may be
designated as alternate inspectors to replace any inspector who fails to act.
If no inspector or alternate has been appointed to act, or if all inspectors
or alternates who have been appointed are unable to act, at a meeting of
stockholders, the chairman of the meeting shall appoint one or more
inspectors to act at the meeting. Each inspector, before discharging his or
her duties, shall take and sign an oath faithfully to execute the duties of
inspector with strict impartiality and according to the best of his or her
ability. The inspectors shall have the duties prescribed by the General
Corporation Law of the State of Delaware.
(B) The chairman of the meeting shall fix and announce at the meeting
the date and time of the opening and the closing of the polls for each matter
upon which the stockholders will vote at a meeting.
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SECTION 2.10. NO STOCKHOLDER ACTION BY WRITTEN CONSENT. Subject to the
rights of the holders of the $4.75 Preferred Stock, any series of Preferred
Stock or any other series or class of stock as set forth in the Certificate
of Incorporation to elect additional directors under specific circumstances,
any action required or permitted to be taken by the stockholders of the
Corporation must be effected at an annual or special meeting of stockholders
of the Corporation and may not be effected by any consent in writing by such
stockholders.
ARTICLE III
BOARD OF DIRECTORS
SECTION 3.1. GENERAL POWERS. The business and affairs of the
Corporation shall be managed by or under the direction of its Board of
Directors. In addition to the powers and authorities by these Bylaws
expressly conferred upon them, the Board of Directors may exercise all such
powers of the Corporation and do all such lawful acts and things as are not
by law or by the Certificate of Incorporation or by these Bylaws required to
be exercised or done by the stockholders.
SECTION 3.2. NUMBER, TENURE AND QUALIFICATIONS. Subject to the rights
of the holders of the $4.75 Preferred Stock, any series of Preferred Stock,
or any other series or class of stock as set forth in the Certificate of
Incorporation, to elect directors under specified circumstances, the number
of directors shall be fixed from time to time exclusively pursuant to a
resolution adopted by a majority of the Whole Board, but shall consist of not
more than seventeen nor less than three directors. The directors, other than
those who may be elected by the holders of the $4.75 Preferred Stock, any
series of Preferred Stock, or any other series or class of stock as set forth
in the Certificate of Incorporation, shall be divided, with respect to the
time for which they severally hold office, into three classes, as nearly
equal in number as possible, with the term of office of the first class to
expire at the 1992 annual meeting of stockholders, the term of office of the
second class to expire at the 1993 annual meeting of stockholders and the
term of office of the third class to expire at the 1994 annual meeting of
stockholders. Each director shall hold office until his or her successor
shall have been duly elected and qualified. At each annual meeting of
stockholders, commencing with the 1992 annual meeting, (i) directors elected
to succeed those directors whose terms then expire shall be elected for a
term of office to expire at the third succeeding annual meeting of
stockholders after their election, with each director to hold office until
his or her successor shall have been duly elected and qualified, and (ii) if
authorized by a resolution of the Board of Directors, directors may be
elected to fill any vacancy on the Board of Directors, regardless of how such
vacancy shall have been created.
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Notwithstanding the foregoing, no outside director shall be nominated by
the Board of Directors for election as a director for another term of office
unless such term of office shall begin before he attains age 72, provided,
however, that any outside director who had attained age 65 on May 10, 1983
may be nominated by the Board of Directors for election as a director for
another term of office unless such term of office shall begin before he
attains age 72; and no inside director's term of office shall continue after
he attains age 65 or after the termination of his services as an officer or
employee of the Corporation, unless such continuance is approved by a
majority of the outside directors on the Board of Directors at the time the
disqualifying event occurs and each time thereafter that such inside director
is nominated for reelection. The term "outside director" means any person who
has never served as an officer or employee of the Corporation or an affiliate
and the term "inside director" means any director who is not an "outside
director." Any person who is ineligible for re-election as a director under
this paragraph may, by a majority vote of the Board of Directors, be
designated as a "Director Emeritus" and as such shall be entitled to receive
notice of, and to attend meetings of, the Board of Directors, but shall not
vote at such meetings.
SECTION 3.3. REGULAR MEETINGS. A regular meeting of the Board of
Directors shall be held without other notice than this Bylaw immediately
after, and at the same place as, each annual meeting of stockholders. The
Board of Directors may, by resolution, provide the time and place for the
holding of additional regular meetings without other notice than such
resolution.
SECTION 3.4. SPECIAL MEETINGS. Special meetings of the Board of
Directors shall be called at the request of the Chairman of the Board, the
President or a majority of the Board of Directors. The person or persons
authorized to call special meetings of the Board of Directors may fix the
place and time of the meetings.
SECTION 3.5. NOTICE. Notice of any special meeting shall be given to
each director at his business or residence in writing or by telegram or by
telephone communication. If mailed, such notice shall be deemed adequately
delivered when deposited in the United States mails so addressed, with
postage thereon prepaid, at least five days before such meeting. If by
telegram, such notice shall be deemed adequately delivered when the telegram
is delivered to the telegraph company at least twenty-four hours before such
meeting. If by facsimile transmission, such notice shall be transmitted at
least twenty-hours before such meeting. If by telephone, the notice shall be
given at least twelve hours prior to the time set for the meeting. Neither
the business to be transacted at, nor the purpose of, any regular or special
meeting of the Board of Directors need be specified in the notice of such
meeting, except for amendments to these Bylaws as provided under Section 7.1
of Article VII hereof. A meeting may be held at any time without notice if
all the directors are present or if those not present waive notice of the
meeting in writing, either before or after such meeting.
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SECTION 3.6. QUORUM. A whole number of directors equal to at least a
majority of the Whole Board shall constitute a quorum for the transaction of
business, but if at any meeting of the Board of Directors there shall be less
than a quorum present, a majority of the directors present may adjourn the
meeting from time to time without further notice. The act of the majority of
the directors present at a meeting at which a quorum is present shall be the
act of the Board of Directors. The directors present at a duly organized
meeting may continue to transact business until adjournment, notwithstanding
the withdrawal of enough directors to leave less than a quorum.
SECTION 3.7. VACANCIES. Subject to the rights of the holders of the
$4.75 Preferred Stock, any series of Preferred Stock or any other series or
class of stock, as set forth in the Certificate of Incorporation, to elect
additional directors under specified circumstances, and unless the Board of
Directors otherwise determines, vacancies resulting from death, resignation,
retirement, disqualification, removal from office or other cause, and newly
created directorships resulting from any increase in the authorized number of
directors, may be filled only by the affirmative vote of a majority of the
remaining directors, though less than a quorum of the Board of Directors, and
directors so chosen shall hold office for a term expiring at the annual
meeting of stockholders at which the term of office of the class to which
they have been elected expires and until such director's successor shall have
been duly elected and qualified. No decrease in the number of authorized
directors constituting the Whole Board shall shorten the term of any
incumbent director.
SECTION 3.8. EXECUTIVE COMMITTEE. The Board of Directors, immediately
following each annual meeting of stockholders or a special meeting of the
same held in lieu of the annual meeting for the election of directors, shall
meet and shall appoint from its number an Executive Committee of such number
of members as from time to time may be selected by the Board, to serve until
the next annual or special meeting at which a majority of directors is
elected or until the respective successor of each is duly appointed. The
Executive Committee shall possess and may exercise all the powers and
authority of the Board of Directors in the management and direction of the
business and affairs of the Corporation, except as limited by law and except
for the power to change the membership or to fill vacancies in the Board or
said Committee. The Board shall have the power at any time to change the
membership of said Committee, to fill vacancies in it or to make rules for
the conduct of its business.
SECTION 3.9. REMOVAL. Subject to the rights of the holders of the
$4.75 Preferred Stock, any series of Preferred Stock or any other series or
class of stock, as set forth in the Certificate of Incorporation, to elect
additional directors under specified circumstances, any director, or the
entire Board of Directors, may be removed from office at any time, but only
for cause and only by the affirmative vote of the holders of at least 80
percent of the voting power of the then outstanding Voting Stock, voting
together as a single class.
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ARTICLE IV
OFFICERS
Section 4.1. ELECTED OFFICERS. The elected officers of the
Corporation shall be a Chairman of the Board, a President, a Secretary, a
Treasurer, and such other officers as the Board of Directors from time to
time may deem proper. The Chairman of the Board shall be chosen from the
directors. All officers chosen by the Board of Directors shall each have
such powers and duties as generally pertain to their respective offices,
subject to the specific provisions of this Article IV. Such officers shall
also have such powers and duties as from time to time may be conferred by the
Board of Directors or by any committee thereof.
SECTION 4.2. ELECTION AND TERM OF OFFICE. The elected officers of the
Corporation shall be elected annually by the Board of Directors at the
regular meeting of the Board of Directors held after each annual meeting of
the stockholders. If the election of officers shall not be held at such
meeting, such election shall be held as soon thereafter as convenient.
Subject to Section 4.7 of these Bylaws, each officer shall hold office until
his successor shall have been duly elected and shall have qualified or until
his death or until he shall resign.
SECTION 4.3. CHAIRMAN OF THE BOARD. The Chairman of the Board shall
preside at all meetings of the stockholders and of the Board of Directors.
The Chairman of the Board shall be responsible for the general management of
the affairs of the Corporation and shall perform all duties incidental to his
office which may be required by law and all such other duties as are properly
required of him by the Board of Directors. Except where by law the signature
of the President is required, the Chairman of the Board shall possess the
same power as the President to sign all certificates, contracts, and other
instruments of the Corporation which may be authorized by the Board of
Directors. He shall make reports to the Board of Directors and the
stockholders, and shall perform all such other duties as are properly
required of him by the Board of Directors. He shall see that all orders and
resolutions of the Board of Directors and of any committee thereof are
carried into effect.
SECTION 4.4. PRESIDENT. The President shall act in a general
executive capacity and shall assist the Chairman of the Board in the
administration and operation of the Corporation's business and general
supervision of its policies and affairs. The President shall, in the absence
of or because of the inability to act of the Chairman of the Board, perform
all duties of the Chairman of the Board and preside at all meetings of
stockholders and of the Board of Directors. The President may sign, alone or
with the Secretary, or an Assistant Secretary, or any other proper officer of
the Corporation authorized by the Board of Directors, certificates,
contracts, and other instruments of the Corporation as authorized by the
Board of Directors.
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SECTION 4.5. SECRETARY. The Secretary shall give, or cause to be
given, notice of all meetings of stockholders and Directors and all other
notices required by law or by these Bylaws, and in case of his absence or
refusal or neglect so to do, any such notice may be given by any person
thereunto directed by the Chairman of the Board or the President, or by the
Board of Directors, upon whose request the meeting is called as provided in
these Bylaws. He shall record all the proceedings of the meetings of the
Board of Directors, any committees thereof and the stockholders of the
Corporation in a book to be kept for that purpose, and shall perform such
other duties as may be assigned to him by the Board of Directors, the
Chairman of the Board or the President. He shall have the custody of the
seal of the Corporation and may affix the same to all instruments requiring
it, and attest to the same.
SECTION 4.6. TREASURER. The Treasurer shall have the custody of the
corporate funds and securities and shall keep full and accurate account of
receipts and disbursements in books belonging to the Corporation. The
Treasurer shall deposit all moneys and other valuables in the name and to the
credit of the Corporation in such depositaries as may be designated by the
Board of Directors. The Treasurer shall disburse the funds of the
Corporation as may be ordered by the Board of Directors, the Chairman of the
Board, or the President, taking proper vouchers for such disbursements. The
Treasurer shall render to the Chairman of the Board, the President and the
Board of Directors, whenever requested, an account of all his transactions as
Treasurer and of the financial condition of the Corporation. If required by
the Board of Directors, the Treasurer shall give the Corporation a bond for
the faithful discharge of his duties in such amount and with such surety as
the Board of Directors shall prescribe.
SECTION 4.7. REMOVAL. Any officer elected by the Board of Directors
may be removed by a majority of the members of the Whole Board whenever, in
their judgment, the best interests of the Corporation would be served
thereby. No elected officer shall have any contractual rights against the
Corporation for compensation by virtue of such election beyond the date of
the election of his successor, his death, his resignation or his removal,
whichever event shall first occur, except as otherwise provided in an
employment contract or an employee plan.
SECTION 4.8. VACANCIES. A newly created office and a vacancy in any
office because of death, resignation, or removal may be filled by the Board
of Directors for the unexpired portion of the term at any meeting of the
Board of Directors.
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ARTICLE V
STOCK CERTIFICATES AND TRANSFERS
SECTION 5.1. STOCK CERTIFICATES AND TRANSFERS
(A) The interest of each stockholder of the Corporation shall be
evidenced by certificates for shares of stock in such form as the appropriate
officers of the Corporation may from time to time prescribe, provided, that
the Board of Directors may provide by resolution or resolutions that some or
all of any or all classes or series of the stock of the Corporation shall be
uncertificated shares. Notwithstanding the adoption of such a resolution by
the Board of Directors, every holder of uncertificated shares shall be
entitled to have a certificate signed by, or in the name of the corporation
by the Chairman or Vice-Chairman of the Board of Directors, or the President
or Vice-President, and by the Treasurer or an Assistant Treasurer, or the
Secretary or an Assistant Secretary of the Corporation representing the
number of shares registered in certificate form. Except as otherwise
expressly provided by law, the rights and obligations of the holders of
uncertificated stock and the rights and obligations of the holders of
certificates representing stock of the same class and series shall be
identical.
(B) The certificates of stock shall be signed, countersigned and
registered in such manner as the Board of Directors may by resolution
prescribe, which resolution may permit all or any of the signatures on such
certificates to be in facsimile. In case any officer, transfer agent or
registrar who has signed or whose facsimile signature has been placed upon a
certificate has ceased to be such officer, transfer agent or registrar before
such certificate is issued, it may be issued by the Corporation with the same
effect as if he were such officer, transfer agent or registrar at the date of
issue.
(C) The shares of the stock of the Corporation represented by
certificates shall be transferred on the books of the Corporation by the
holder thereof in person or by his attorney, upon surrender for cancellation
of certificates for the same number of shares, with an assignment and power
of transfer endorsed thereon or attached thereto, duly executed, with such
proof of the authenticity of the signature as the corporation or its agents
may reasonably require. Upon receipt of proper transfer instructions from
the registered owner of uncertificated shares such uncertificated shares
shall be canceled and issuance of new equivalent uncertificated shares or
certificated shares shall be made to the person entitled thereto and the
transaction shall be recorded upon the books of the Corporation. Within a
reasonable time after the issuance or transfer of uncertificated stock, the
corporation shall send to the registered owner thereof a written notice
containing the information required to be set forth or stated on certificates
pursuant to the Delaware General Corporation Law or, unless otherwise
provided by the Delaware General Corporation Law, a statement that the
Corporation will furnish without
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charge to each stockholder who so requests the powers, designations,
preferences and relative participating, optional or other special rights of
each class of stock or series thereof and the qualifications, limitations or
restrictions of such preferences and/or rights.
SECTION 5.2. LOST, STOLEN, OR DESTROYED CERTIFICATES. No Certificate
for shares or uncertificated shares of stock in the Corporation shall be
issued in place of any certificate alleged to have been lost, destroyed or
stolen, except on production of such evidence of such loss, destruction or
theft and on delivery to the Corporation of a bond of indemnity in such
amount, upon such terms and secured by such surety, as the Board of Directors
or any financial officer may in its or his discretion require.
ARTICLE VI
MISCELLANEOUS PROVISIONS
SECTION 6.1. FISCAL YEAR. The fiscal year of the Corporation shall
begin on the first day of January and end on the thirty-first day of December
of each year.
SECTION 6.2. DIVIDENDS. The Board of Directors may from time to time
declare, and the Corporation may pay, dividends on its outstanding shares in
the manner and upon the terms and conditions provided by law and its Restated
Certificate of Incorporation.
SECTION 6.3. SEAL. The corporate seal shall be in circular form and
shall have inscribed thereon the name of the Corporation and the words
"Corporate Seal--Delaware."
SECTION 6.4. WAIVER OF NOTICE. Whenever any notice is required to be
given to any stockholder or director of the Corporation under the provisions
of the General Corporation Law of the State of Delaware, a waiver thereof in
writing, signed by the person or persons entitled to such notice, whether
before or after the time stated therein, shall be deemed equivalent to the
giving of such notice. Neither the business to be transacted at, nor the
purpose of, any annual or special meeting of the stockholders of the Board of
Directors need be specified in any waiver of notice of such meeting.
SECTION 6.5. AUDITS. The accounts, books and records of the
Corporation shall be audited upon the conclusion of each fiscal year by an
independent certified public accountant selected by the Board of Directors,
and it shall be the duty of the Board of Directors to cause such audit to be
made annually.
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SECTION 6.6. RESIGNATIONS. Any director or any officer, whether
elected or appointed, may resign at any time by serving written notice of
such resignation on the Chairman of the Board, the President or the
Secretary, and such resignation shall be deemed to be effective as of the
close of business on the date said notice is received by the Chairman of the
Board, the President, or the Secretary or at such later date as is stated
therein. No formal action shall be required of the Board of Directors or the
stockholders to make any such resignation effective.
SECTION 6.7. INDEMNIFICATION AND INSURANCE. (A) Each person who was
or is made a party or is threatened to be made a party to or is involved in
any action, suit, or proceeding, whether civil, criminal, administrative or
investigative (hereinafter a "proceeding"), by reason of the fact that he or
she or a person of whom he or she is the legal representative is or was a
director, officer or employee of the Corporation or is or was serving at the
request of the Corporation as a director, officer, employee or agent of any
other corporation or of a partnership, joint venture, trust or other
enterprise, including service with respect to employee benefit plans, whether
the basis of such proceeding is alleged action in an official capacity as a
director, officer, employee or agent or in any other capacity while serving
as a director, officer, employee or agent, shall be indemnified and held
harmless by the Corporation to the fullest extent authorized by the General
Corporation Law of the State of Delaware as the same exists or may hereafter
be amended (but, in the case of any such amendment, only to the extent that
such amendment permits the Corporation to provide broader indemnification
rights than said law permitted the Corporation to provide prior to such
amendment), against all expense, liability and loss (including, without
limitation, attorneys' fees, judgments, fines, ERISA excise taxes or
penalties and amounts paid or to be paid in settlement) reasonably incurred
by such person in connection therewith and such indemnification shall
continue as to a person who has ceased to be a director, officer, employee or
agent and shall inure to the benefit of his or her heirs, executors and
administrators; PROVIDED, HOWEVER, that except as provided in paragraph (B)
of this Bylaw with respect to proceedings seeking to enforce rights to
indemnification, the Corporation shall indemnify any such person seeking
indemnification in connection with a proceeding (or part thereof) initiated
by such person only if such proceeding (or part thereof) was authorized by
the Board of Directors of the Corporation.
(B) If a claim under paragraph (A) of this Bylaw is not paid in full by
the Corporation within thirty days after a written claim has been received by
the Corporation, the claimant may at any time thereafter bring suit against
the Corporation to recover the unpaid amount of the claim and, if successful
in whole or in part, the claimant shall be entitled to be paid also the
expense of prosecuting such claim. It shall be a defense to any such action
(other than an action brought to enforce a claim for expenses incurred in
defending any proceeding in advance of its final disposition where the
required undertaking, if any is required, has been tendered to the
Corporation) that the claimant has not met the standards of conduct which
make it permissible under the General Corporation Law of the State of
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Delaware for the Corporation to indemnify the claimant for the amount
claimed, but the burden of proving such defense shall be on the Corporation.
Neither the failure of the Corporation (including its Board of Directors,
independent legal counsel or stockholders) to have made a determination prior
to the commencement of such action that indemnification of the claimant is
proper in the circumstances because he or she has met the applicable standard
of conduct set forth in the General Corporation Law of the State of Delaware,
nor an actual determination by the Corporation (including its Board of
Directors, independent legal counsel or stockholders) that the claimant has
not met such applicable standard of conduct, shall be a defense to the action
or create a presumption that the claimant has not met the applicable standard
of conduct.
(C) Following any "change in control" of the Corporation of the type
required to be reported under Item 1 of Form 8-K promulgated under the
Exchange Act, any determination as to entitlement to indemnification shall be
made by independent legal counsel selected by the claimant, which independent
legal counsel shall be retained by the Board of Directors on behalf of the
Corporation.
(D) The right to indemnification and the payment of expenses incurred
in defending a proceeding in advance of its final disposition conferred in
this Bylaw shall not be exclusive of any other right which any person may
have or hereafter acquire under any statute, provision of the Certificate of
Incorporation, Bylaws, agreement, vote of stockholders or disinterested
directors or otherwise.
(E) The Corporation may maintain insurance, at its expense, to protect
itself and any director, officer, employee or agent of the Corporation or
another corporation, partnership, joint venture, trust or other enterprise
against any expense, liability or loss, whether or not the Corporation would
have the power to indemnify such person against such expense, liability or
loss under the General Corporation Law of the State of Delaware.
(F) The Corporation may, to the extent authorized from time to time by
the Board of Directors, grant rights to indemnification, and rights to be
paid by the Corporation the expenses incurred in defending any proceeding in
advance of its final disposition, to any agent of the Corporation to the
fullest extent of the provisions of this Bylaw with respect to the
indemnification and advancement of expenses of directors, officers and
employees of the Corporation.
(G) The right to indemnification conferred in this Bylaw shall be a
contract right and shall include the right to be paid by the Corporation the
expenses incurred in defending any such proceeding in advance of its final
disposition; PROVIDED, HOWEVER, that if the General Corporation Law of the
State of Delaware requires, the payment of such expenses incurred by a
director or officer in his or her capacity as a director or officer (and not
in any other capacity in which service was or is rendered by such person
while a director or officer, including, without limitation, service to an
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employee benefit plan) in advance of the final disposition of a proceeding,
shall be made only upon delivery to the Corporation of an undertaking by or
on behalf of such director or officer, to repay all amounts so advanced if it
shall ultimately be determined that such director or officer is not entitled
to be indemnified under this Bylaw or otherwise.
(H) Any amendment or repeal of this Article VI shall not adversely
affect any right or protection existing hereunder in respect of any act or
omission occurring prior to such amendment or repeal.
SECTION 6.8. ELECTION NOT TO BE SUBJECT TO ARIZONA CONTROL SHARE
ACQUISITIONS STATUTE. The Corporation elects not to be subject to Title 10,
Chapter 23, Article 2 of the Arizona Revised Statutes, relating to "Control
Share Acquisitions."
ARTICLE VII
AMENDMENTS
SECTION 7.1. AMENDMENTS. These Bylaws may be amended, added to,
rescinded or repealed at any meeting of the Board of Directors or of the
stockholders, provided notice of the proposed change was given in the notice
of the meeting and, in the case of a meeting of the Board of Directors, in a
notice given no less than twenty-four hours prior to the meeting; PROVIDED,
HOWEVER, that, in the case of amendments by stockholders, notwithstanding any
other provisions of these Bylaws or any provision of law which might
otherwise permit a lesser vote or no vote, but in addition to any affirmative
vote of the holders of any particular class or series of stock required by
law, the Certificate of Incorporation or these Bylaws, the affirmative vote
of the holders of at least 80 percent of the voting power of the then
outstanding Voting Stock, voting together as a single class, shall be
required to alter, amend or repeal any provision of these Bylaws.
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Exhibit 10.C
1997 VIAD CORP OMNIBUS INCENTIVE PLAN,
AS AMENDED THROUGH FEBRUARY 18, 1999
SECTION 1. PURPOSE; DEFINITIONS.
The purpose of the Plan is to give the Company a significant advantage
in attracting, retaining and motivating officers, employees and directors and
to provide the Company and its subsidiaries with the ability to provide
incentives more directly linked to the profitability of the Company's
businesses and increases in stockholder value. It is the current intent of
the Committee that the Plan shall replace the 1992 Stock Incentive Plan for
purposes of new Awards and that the Viad Corp Management Incentive Plan, the
Viad Corp Performance Unit Incentive Plan, and the Viad Corp
Performance-Based Stock Plan continue under the auspices of Sections 7 and 8
hereof subject to the discretion of the Committee under the terms and
conditions of this Plan.
For purposes of the Plan, the following terms are defined as set forth
below:
(a) "AFFILIATE" means a corporation or other entity controlled by the
Company and designated by the Committee as such.
(b) "AWARD" means an award of Stock Appreciation Rights, Stock Options,
Restricted Stock or Performance-Based Awards.
(c) "AWARD CYCLE" will mean a period of consecutive fiscal years or
portions thereof designated by the Committee over which Awards of Restricted
Stock or Performance-Based Awards are to be earned.
(d) "BOARD" means the Board of Directors of the Company.
(e) "CAUSE" means (1) the conviction of a participant for committing a
felony under federal law or the law of the state in which such action
occurred, (2) dishonesty in the course of fulfilling a participant's
employment duties or (3) willful and deliberate failure on the part of a
participant to perform his employment duties in any material respect, or such
other events as will be determined by the Committee. The Committee will have
the sole discretion to determine whether "Cause" exists, and its
determination will be final.
(f) "CHANGE IN CONTROL" and "CHANGE IN CONTROL PRICE" have the meanings
set forth in Sections 9(b) and (c), respectively.
(g) "CODE" means the Internal Revenue Code of 1986, as amended from
time to time, and any successor thereto.
<PAGE>
(h) "COMMISSION" means the Securities and Exchange Commission or any
successor agency.
(i) "COMMITTEE" means the Committee referred to in Section 2.
(j) "COMMON STOCK" means common stock, par value $1.50 per share, of
the Company.
(k) "COMPANY" means Viad Corp, a Delaware corporation.
(l) "COMPANY UNIT" means any subsidiary, group of subsidiaries, line of
business or division of the Company, as designated by the Committee.
(m) "DISABILITY" means permanent and total disability as determined
under procedures established by the Committee for purposes of the Plan.
(n) "EXCHANGE ACT" means the Securities Exchange Act of 1934, as
amended from time to time, and any successor thereto.
(o) "FAIR MARKET VALUE" means, as of any given date, the mean between
the highest and lowest reported sales prices of the Stock on the New York
Stock Exchange Composite Tape or, if not listed on such exchange, on any
other national exchange on which the Stock is listed or on the Nasdaq Stock
Market. If there is no regular public trading market for such Stock, the Fair
Market Value of the Stock will be determined by the Committee in good faith.
In connection with the administration of specific sections of the Plan, and
in connection with the grant of particular Awards, the Committee may adopt
alternative definitions of "Fair Market Value" as appropriate.
(p) "INCENTIVE STOCK OPTION" means any Stock Option intended to be and
designated as an "incentive stock option" within the meaning of Section 422
of the Code.
(q) "MIP" means the Company's Management Incentive Plan providing
annual cash bonus awards to participating employees based upon predetermined
goals and objectives.
(r) "NET INCOME" means the consolidated net income of the Company
determined in accordance with GAAP before extraordinary, unusual and other
non-recurring items.
(s) "NON-EMPLOYEE DIRECTOR" means a member of the Board who qualifies
as a "Non-Employee Director" as defined in Rule 16b-3(b)(3), as promulgated
by the Commission under the Exchange Act, or any successor definition adopted
by the Commission.
(t) "NON-QUALIFIED STOCK OPTION" means any Stock Option that is not an
Incentive Stock Option.
<PAGE>
(u) "PERFORMANCE GOALS" means the performance goals established by the
Committee in connection with the grant of Restricted Stock or
Performance-Based Awards. In the case of Qualified Performance-Based Awards,
such goals (1) will be based on the attainment of specified levels of one or
more of the following measures with respect to the Company or any Company
Unit, as applicable: sales or revenues, costs or expenses, net profit after
tax, gross profit, operating profit, base earnings, return on actual or pro
forma equity or net assets or capital, net capital employed, earnings per
share, earnings per share from continuing operations, operating income,
operating income margin, net income, stockholder return including performance
(total stockholder return) relative to the S&P 500 or similar index or
performance (total stockholder return) relative to the proxy comparator
group, in both cases as determined pursuant to Rule 402(l) of Regulation S-K
promulgated under the Exchange Act, cash generation, unit volume and change
in working capital and (2) will be set by the Committee within the time
period prescribed by Section 162(m) of the Code and related regulations.
(v) "PERFORMANCE-BASED AWARD" means an Award made pursuant to Section 8.
(w) "PERFORMANCE-BASED RESTRICTED STOCK AWARD" has the meaning set
forth in Section 7(c)(1) hereof.
(x) "PLAN" means the 1997 Viad Corp Omnibus Incentive Plan, As Amended,
as set forth herein and as hereafter amended from time to time.
(y) "PREFERRED STOCK" means preferred stock, par value $0.01, of the
Company.
(z) "QUALIFIED PERFORMANCE-BASED AWARDS" means an Award of Restricted
Stock or a Performance-Based Award designated as such by the Committee at the
time of grant, based upon a determination that (1) the recipient is or may be
a "covered employee" within the meaning of Section 162(m)(3) of the Code in
the year in which the Company would expect to be able to claim a tax
deduction with respect to such Restricted Stock or Performance-Based Award
and (2) the Committee wishes such Award to qualify for the exemption from the
limitation on deductibility imposed by Section 162(m) of the Code that is set
forth in Section 162(m)(4)(C).
(aa) "RESTRICTED STOCK" means an award granted under Section 7.
(bb) "RETIREMENT," except as otherwise determined by the Committee,
means voluntary separation of employment, voluntary termination of employment
or voluntary resignation from employment (a) at or after attaining age 55 on
pension or vested to receive pension under a pension plan of the Corporation
upon election, or (b) upon or after attaining age 55 and not less than five
years' continuous service with the Corporation or an
<PAGE>
affiliate of the Corporation, whether or not vested for pension. Retirement
shall be deemed to occur at the close of business on the last day of the
employee's participation on the payroll of the Corporation whether receiving
compensation for active employment, accrued vacation, salary continuation
(regular way or lump sum) or like employment programs.
(cc) "RULE 16b-3" means Rule 16b-3, as promulgated by the Commission
under Section 16(b) of the Exchange Act, as amended from time to time.
(dd) "STOCK" means the Common Stock or Preferred Stock.
(ee) "STOCK APPRECIATION RIGHT" means a right granted under Section 6.
(ff) "STOCK OPTION" means an option granted under Section 5.
(gg) "TERMINATION OF EMPLOYMENT" means the termination of the
participant's employment with the Company and any subsidiary or Affiliate. A
participant employed by a subsidiary or an Affiliate will also be deemed to
incur a Termination of Employment if the subsidiary or Affiliate ceases to be
such a subsidiary or Affiliate, as the case may be, and the participant does
not immediately thereafter become an employee of the Company or another
subsidiary or Affiliate. Transfers among the Company and its subsidiaries
and Affiliates, as well as temporary absences from employment because of
illness, vacation or leave of absence, will not be considered a Termination
of Employment.
In addition, certain other terms used herein have definitions given to
them in the first place in which they are used.
SECTION 2. ADMINISTRATION.
The Plan will be administered by the Human Resources Committee of the
Board pursuant to authority delegated by the Board in accordance with the
Company's By-Laws. If at any time there is no such Human Resources Committee
or such Human Resources Committee shall fail to be composed of at least two
directors each of whom is a Non-Employee Director and is an "outside
director" under Section 162(m)(4) of the Code, the Plan will be administered
by a Committee selected by the Board and composed of not less than two
individuals, each of whom is such a Non-Employee Director and such an
"outside director."
The Committee will have plenary authority to grant Awards pursuant to
the terms of the Plan to officers, employees and directors of the Company and
its subsidiaries and Affiliates, but the Committee may not grant MIP Awards
larger than the limits provided in Section 3.
Among other things, the Committee will have the authority, subject to
the terms of the Plan:
<PAGE>
(a) to select the officers, employees and directors to whom Awards may
from time to time be granted;
(b) to determine whether and to what extent Incentive Stock Options,
Non-Qualified Stock Options, Stock Appreciation Rights, Restricted Stock and
Performance-Based Awards or any combination thereof are to be granted
hereunder;
(c) to determine the number of shares of Stock or the amount of cash to
be covered by each Award granted hereunder;
(d) to determine the terms and conditions of any Award granted
hereunder (including, but not limited to, the option price (subject to
Section 5(a)), any vesting condition, restriction or limitation (which may be
related to the performance of the participant, the Company or any subsidiary,
Affiliate or Company Unit) and any rule concerning vesting acceleration or
waiver of forfeiture regarding any Award and any shares of Stock relating
thereto, based on such factors as the Committee will determine) provided,
however, that the Committee will have no power to accelerate the vesting, or
waive the forfeiture, regarding any Award and any shares of Stock relating
thereto, except in connection with a "change of control" of the Company, the
sale of a subsidiary or majority-owned affiliate of the Company (and then
only with respect to participants employed by each such subsidiary or
affiliate), the death or disability of a participant or termination of
employment of a participant, and, further provided, however, that the
Committee will have no power to accelerate the vesting, or waive the
forfeiture, of any Qualified Performance-Based Awards;
(e) to modify, amend or adjust the terms and conditions, at any time or
from time to time, of any Award, including but not limited to Performance
Goals; provided, however, that the Committee may not adjust upwards the
amount payable with respect to any Qualified Performance-Based Award or waive
or alter the Performance Goals associated therewith and provided, further,
however, that the Committee may not reprice Stock Options except for an
amount of Stock Options representing not more than 10% of then outstanding
Stock Options;
(f) to determine to what extent and under what circumstances Stock and
other amounts payable with respect to an Award will be deferred; and
(g) to determine under what circumstances a Stock Option may be settled
in cash or Stock under Section 5(j).
The Committee will have the authority to adopt, alter or repeal such
administrative rules, guidelines and practices governing the Plan as it from
time to time deems advisable, to interpret the terms and provisions of the
Plan and any Award issued under the Plan (and any agreement relating thereto)
and to otherwise supervise the administration of the Plan.
<PAGE>
The Committee may act only by a majority of its members then in office,
except that the members thereof may (1) delegate to designated officers or
employees of the Company such of its powers and authorities under the Plan as
it deems appropriate (provided that no such delegation may be made that would
cause Awards or other transactions under the Plan to fail to be exempt from
Section 16(b) of the Exchange Act or that would cause Qualified
Performance-Based Awards to cease to so qualify) and (2) authorize any one or
more members or any designated officer or employee of the Company to execute
and deliver documents on behalf of the Committee.
Any determination made by the Committee or pursuant to delegated
authority pursuant to the provisions of the Plan with respect to any Award
will be made in the sole discretion of the Committee or such delegates at the
time of the grant of the Award or, unless in contravention of any express
term of the Plan, at any time thereafter. All decisions made by the
Committee or any appropriately delegated officer(s) or employee(s) pursuant
to the provision of the Plan will be final and binding on all persons,
including the Company and Plan participants.
Notwithstanding anything to the contrary in the Plan, the Committee will
have the authority to modify, amend or adjust the terms and conditions of any
Award as appropriate in the event of or in connection with any
reorganization, recapitalization, stock split, stock dividend, combination or
exchange of shares, merger, consolidation or any change in the capital
structure of the Company.
SECTION 3. STOCK SUBJECT TO PLAN AND LIMITS ON AWARDS.
(a) Subject to adjustment as provided herein, the number of shares of
Common Stock of the Company available for grant under the Plan in each
calendar year (including partial calendar years) during which the Plan is in
effect shall be equal to two percent (2.0%) of the total number of shares of
Common Stock of the Company outstanding as of the first day of each such year
for which the Plan is in effect; provided that any shares available for grant
in a particular calendar year (or partial calendar year) which are not, in
fact, granted in such year shall be added to the shares available for grant
in any subsequent calendar year.
(b) Subject to adjustment as provided herein, the number of shares of
Stock covered by Awards granted to any one participant will not exceed
750,000 shares for any consecutive three-year period and the aggregate dollar
amount for Awards denominated solely in cash will not exceed $7.5 million for
any such period.
(c) In addition, and subject to adjustment as provided herein, no more
than 7.5 million shares of Common Stock will be cumulatively available for
the grant of Incentive Stock Options over the life of the Plan.
<PAGE>
(d) Shares subject to an option or award under the Plan may be
authorized and unissued shares or may be "treasury shares." In the event of
any merger, reorganization, consolidation, recapitalization, spin-off, stock
dividend, stock split, extraordinary distribution with respect to the Stock
or other change in corporate structure affecting the Stock, such substitution
or adjustments will be made in the aggregate number and kind of shares
reserved for issuance under the Plan, in the aggregate limit on grants to
individuals, in the number, kind, and option price of shares subject to
outstanding Stock Options and Stock Appreciation Rights, in the number and
kind of shares subject to other outstanding Awards granted under the Plan
and/or such other equitable substitutions or adjustments as may be determined
to be appropriate by the Committee or the Board, in its sole discretion;
provided, however, that the number of shares subject to any Award will always
be a whole number.
(e) Awards under the MIP may not exceed in the case of (i) the
Company's Chief Executive Officer, one and one-half percent (1.5%) of net
income as defined; (ii) a president of any of the Company's operating
companies, whether or not incorporated, six-tenths of one percent (0.6%) of
net income as defined; and (iii) all other executive officers of the Company
individually, one-half of one percent (0.5%) of net income as defined.
SECTION 4. ELIGIBILITY.
Officers, employees and directors of the Company, its subsidiaries and
Affiliates who are responsible for or contribute to the management, growth
and profitability of the business of the Company, its subsidiaries and
Affiliates are eligible to be granted Awards under the Plan.
SECTION 5. STOCK OPTIONS.
Stock Options may be granted alone or in addition to other Awards
granted under the Plan and may be of two types: Incentive Stock Options and
Non-Qualified Stock Options. Any Stock Option granted under the Plan will be
in such form as the Committee may from time to time approve.
The Committee will have the authority to grant any optionee Incentive
Stock Options, Non-Qualified Stock Options or both types of Stock Options (in
each case with or without Stock Appreciation Rights). Incentive Stock
Options may be granted only to employees of the Company and its subsidiaries
(within the meaning of Section 424(f) of the Code). To the extent that any
Stock Option is not designated as an Incentive Stock Option or even if so
designated does not qualify as an Incentive Stock Option, it will be deemed
to be a Non-Qualified Stock Option.
Stock Options will be evidenced by option agreements, the terms and
provisions of which may differ. An option agreement will indicate on its
face whether it is an agreement for an Incentive Stock Option or a
Non-Qualified Stock Option. The grant of a Stock Option will occur on the
date the Committee by
<PAGE>
resolution selects an individual to be a participant in any grant of a Stock
Option, determines the number of shares of Stock to be subject to such Stock
Option to be granted to such individual and specifies the terms and
provisions of the Stock Option. The Company will notify a participant of any
grant of a Stock Option, and a written option agreement or agreements will be
duly executed and delivered by the Company to the participant.
Anything in the Plan to the contrary notwithstanding, no term of the
Plan relating to Incentive Stock Options will be interpreted, amended or
altered nor will any discretion or authority granted under the Plan be
exercised so as to disqualify the Plan under Section 422 of the Code or,
without the consent of the optionee affected, to disqualify any Incentive
Stock Option under such Section 422.
Stock Options granted under the Plan will be subject to the following
terms and conditions and will contain such additional terms and conditions as
the Committee will deem desirable:
(a) OPTION PRICE. The option price per share of Stock purchasable
under a Stock Option will be determined by the Committee and set forth in the
option agreement, and will not be less than the Fair Market Value of the
Stock subject to the Stock Option on the date of grant.
(b) OPTION TERM. The term of each Stock Option will be fixed by the
Committee, but no Incentive Stock Option may be exercisable more than 10
years after the date the Incentive Stock Option is granted.
(c) EXERCISABILITY. Except as otherwise provided herein, Stock Options
will be exercisable at such time or times and subject to such terms and
conditions as will be determined by the Committee. If the Committee provides
that any Stock Option is exercisable only in installments, the Committee may,
subject to the provisions of Section 2(d) hereof, at any time waive such
installment exercise provisions, in whole or in part, based on such factors
as the Committee may determine. In addition, the Committee may, subject to
the provisions of Section 2(d) hereof, at any time accelerate the
exercisability of any Stock Option.
(d) METHOD OF EXERCISE. Subject to the provisions of this Section 5,
Stock Options may be exercised, in whole or in part, at any time during the
option term by giving written notice of exercise to the Company specifying
the number of shares of Stock subject to the Stock Option to be purchased.
Such notice must be accompanied by payment in full of the purchase price
by certified or bank check or such other instrument as the Company may
accept. An option agreement may provide that, if approved by the Committee,
payment in full or in part or payment of tax liability, if any, relating to
such exercise may also be made in the form of unrestricted Stock al-
<PAGE>
ready owned by the optionee of the same class as the Stock subject to the
Stock Option and, in the case of the exercise of a Non-Qualified Stock
Option, Restricted Stock subject to an Award hereunder which is of the same
class as the Stock subject to the Stock Option (in both cases based on the
Fair Market Value of the Stock on the date the Stock Option is exercised);
provided, however, that, in the case of an Incentive Stock Option, the right
to make a payment in the form of already owned shares of Stock of the same
class as the Stock subject to the Stock Option may be authorized only at the
time the Stock Option is granted. In addition, an option agreement may
provide that, in the discretion of the Committee, payment for any shares
subject to a Stock Option or tax liability associated therewith may also be
made by instruction to the Committee to withhold a number of such shares
having a Fair Market Value on the date of exercise equal to the aggregate
exercise price of such Stock Option.
If payment of the option exercise price of a Non-Qualified Stock Option
is made in whole or in part in the form of Restricted Stock, the number of
shares of Stock to be received upon such exercise equal to the number of
shares of Restricted Stock used for payment of the option exercise price will
be subject to the same forfeiture restrictions to which such Restricted Stock
was subject, unless otherwise determined by the Committee.
No shares of Stock will be issued until full payment therefor has been
made. Subject to any forfeiture restrictions that may apply if a Stock
Option is exercised using Restricted Stock, an optionee will have all of the
rights of a stockholder of the Company holding the class or series of Stock
that is subject to such Stock Option (including, if applicable, the right to
vote the shares and the right to receive dividends), when the optionee has
given written notice of exercise, has paid in full for such shares and, if
requested, has given the representation described in Section 12(a).
(e) NONTRANSFERABILITY OF STOCK OPTIONS. (1) No Stock Option will be
transferable by the optionee other than (A) by will or by the laws of descent
and distribution or (B) in the case of a Non-Qualified Stock Option, pursuant
to a qualified domestic relations order (as defined in the Code or Title I of
the Employee Retirement Income Security Act of 1974, as amended, or the rules
thereunder). All Stock Options will be exercisable, during the optionee's
lifetime, only by the optionee or by the guardian or legal representative of
the optionee, it being understood that the terms "holder" and "optionee"
include the guardian and legal representative of the optionee named in the
option agreement and any person to whom a Stock Option is transferred by will
or the laws of descent and distribution or pursuant to a qualified domestic
relations order.
(2) Notwithstanding Section 5(e)(1) above, the Committee may grant
Stock Options that are transferable, or amend
<PAGE>
outstanding Stock Options to make them transferable, by the optionee (any
such Stock Option so granted or amended a "Transferable Option") to one or
more members of the optionee's immediate family, to partnerships of which the
only partners are members of the optionee's immediate family, or to trusts
established by the optionee for the benefit of one or more members of the
optionee's immediate family. For this purpose the term "immediate family"
means the optionee's spouse, children or grandchildren. Consideration may not
be paid for the transfer of a Transferable Option. A transferee described in
this Section 5(e)(2) shall be subject to all terms and conditions applicable
to the Transferable Option prior to its transfer. The option agreement with
respect to a Transferable Option shall set forth its transfer restrictions,
such option agreement shall be approved by the Committee, and only Stock
Options granted pursuant to a stock option agreement expressly permitting
transfer pursuant to this Section 5(e)(2) shall be so transferable.
(f) TERMINATION BY DEATH. If an optionee's employment terminates by
reason of death, any Stock Option held by such optionee may thereafter be
exercised, to the extent then exercisable, or on such accelerated basis as
the Committee may determine, for a period of one year (or such other period
as the Committee may specify in the option agreement) from the date of such
death or until the expiration of the stated term of such Stock Option,
whichever period is the shorter.
(g) TERMINATION BY REASON OF DISABILITY. If an optionee's employment
terminates by reason of Disability, any Stock Option held by such optionee
may thereafter be exercised by the optionee, to the extent it was exercisable
at the time of termination, or on such accelerated basis as the Committee may
determine, for a period of three years (or such shorter period as the
Committee may specify in the option agreement) from the date of such
termination of employment or until the expiration of the stated term of such
Stock Option, whichever period is the shorter; provided, however, that if the
optionee dies within such three-year period (or such shorter period), any
unexercised Stock Option held by such optionee will, notwithstanding the
expiration of such three-year (or such shorter) period, continue to be
exercisable to the extent to which it was exercisable at the time of death
for a period of 12 months from the date of such death or until the expiration
of the stated term of such Stock Option, whichever period is the shorter. In
the event of termination of employment by reason of Disability, if an
Incentive Stock Option is exercised after the expiration of the exercise
periods that apply for purposes of Section 422 of the Code, such Stock Option
will thereafter be treated as a Non-Qualified Stock Option.
(h) TERMINATION BY REASON OF RETIREMENT. If an optionee's employment
terminates by reason of Retirement, any Stock Option held by such optionee
may thereafter be exercised by the optionee, to the extent it was exercisable
at the time of termination, or on such accelerated basis as the Committee may
<PAGE>
determine, for a period of five years (or such shorter period as the
Committee may specify in the option agreement) from the date of such
termination of employment or until the expiration of the stated term of such
Stock Option, whichever period is the shorter; provided, however, that if the
optionee dies within such five-year period (or such shorter period), any
unexercised Stock Option held by such optionee will, notwithstanding such
five-year (or such shorter) period, continue to be exercisable to the extent
to which it was exercisable at the time of death for a period of 12 months
from the date of such death or until the expiration of the stated term of
such Stock Option, whichever period is the shorter. In the event of
termination of employment by reason of Retirement, if an Incentive Stock
Option is exercised after the expiration of the exercise periods that apply
for purposes of Section 422 of the Code, such Stock Option will thereafter be
treated as a Non-Qualified Stock Option.
(i) OTHER TERMINATION. Unless otherwise determined by the Committee,
if an optionee incurs a Termination of Employment for any reason other than
death, Disability or Retirement or Cause, any Stock Option held by such
optionee will thereupon terminate, except that such Stock Option, to the
extent then exercisable, or subject to the provisions of Section 2(d) hereof,
on such accelerated basis as the Committee may determine, may be exercised
for the lesser of three months from the date of such Termination of
Employment or the balance of such Stock Option's term; provided, however,
that if the optionee dies within such three-month period, any unexercised
Stock Option held by such optionee will, notwithstanding the expiration of
such three-month period, continue to be exercisable to the extent to which it
was exercisable at the time of death for a period of 12 months from the date
of such death or until the expiration of the stated term of such Stock
Option, whichever period is the shorter. In the event of Termination of
Employment, if an Incentive Stock Option is exercised after the expiration of
the exercise periods that apply for purposes of Section 422 of the Code, such
Stock Option will thereafter be treated as a Non-Qualified Stock Option.
(j) CASHING OUT OF STOCK OPTION. On receipt of written notice of
exercise, the Committee may elect to cash out all or part of the shares of
Stock for which a Stock Option is being exercised by paying the optionee an
amount, in cash or Stock, equal to the excess of the Fair Market Value of the
Stock over the option price times the number of shares of Stock for which the
Option is being exercised on the effective date of such cash-out.
(k) CHANGE IN CONTROL CASH-OUT. Subject to Section 12(h), but
notwithstanding any other provision of the Plan, during the 60-day period
from and after a Change in Control (the "Exercise Period"), unless the
Committee determines otherwise at the time of grant, an optionee will have
the right, whether or not the Stock Option is fully exercisable and in lieu
of the payment of the exercise price for the shares of Stock being purchased
under
<PAGE>
the Stock Option and by giving notice to the Company, to elect (within
the Exercise Period) to surrender all or part of the Stock Option to the
Company and to receive cash, within 30 days of such notice, in an amount
equal to the amount by which the Change in Control Price per share of Stock
on the date of such election will exceed the exercise price per share of
Stock under the Stock Option (the "Spread") multiplied by the number of
shares of Stock granted under the Stock Option as to which the right granted
under this Section 5(k) will have been exercised.
SECTION 6. STOCK APPRECIATION RIGHTS.
(a) GRANT AND EXERCISE. Stock Appreciation Rights may be granted in
conjunction with all or part of any Stock Option granted under the Plan. In
the case of a Non-Qualified Stock Option, such rights may be granted either
at or after the time of grant of such Stock Option. In the case of an
Incentive Stock Option, such rights may be granted only at the time of grant
of such Stock Option. A Stock Appreciation Right will terminate and no
longer be exercisable upon the termination or exercise of the related Stock
Option.
A Stock Appreciation Right may be exercised by an optionee in accordance
with Section 6(b) by surrendering the applicable portion of the related Stock
Option in accordance with procedures established by the Committee. Upon such
exercise and surrender, the optionee will be entitled to receive an amount
determined in the manner prescribed in Section 6(b). Stock Options which
have been so surrendered will no longer be exercisable to the extent the
related Stock Appreciation Rights have been exercised.
(b) TERMS AND CONDITIONS. Stock Appreciation Rights will be subject to
such terms and conditions as will be determined by the Committee, including
the following:
(1) Stock Appreciation Rights will be exercisable only at such
time or times and to the extent that the Stock Options to which they
relate are exercisable in accordance with the provisions of Section 5 and
this Section 6;
(2) Upon the exercise of a Stock Appreciation Right, an optionee
will be entitled to receive an amount in cash, shares of Stock or both
equal in value to the excess of the Fair Market Value of one share of
Stock as of the date of exercise over the option price per share
specified in the related Stock Option multiplied by the number of shares
in respect of which the Stock Appreciation Right has been exercised, with
the Committee having the right to determine the form of payment;
(3) Stock Appreciation Rights will be transferable only to
permitted transferees of the underlying Stock Option in accordance with
Section 5(e).
SECTION 7. RESTRICTED STOCK.
<PAGE>
(a) ADMINISTRATION. Shares of Restricted Stock may be awarded either
alone or in addition to other Awards granted under the Plan. The Committee
will determine the individuals to whom and the time or times at which grants
of Restricted Stock will be awarded, the number of shares to be awarded to
any participant, the conditions for vesting, the time or times within which
such Awards may be subject to forfeiture and any other terms and conditions
of the Awards, in addition to those contained in Section 7(c).
(b) AWARDS AND CERTIFICATES. Shares of Restricted Stock will be
evidenced in such manner as the Committee may deem appropriate, including
book-entry registration or issuance of one or more stock certificates.
Except as otherwise set forth in a Restricted Stock Agreement, any
certificate issued in respect of shares of Restricted Stock will be
registered in the name of such participant and will bear an appropriate
legend referring to the terms, conditions, and restrictions applicable to
such Award, substantially in the following form:
"The transferability of this certificate and the shares of stock
represented hereby are subject to the terms and conditions (including
forfeiture) of the 1997 Incentive Plan and a Restricted Stock Agreement.
Copies of such Plan and Agreement are on file at the offices of Viad Corp,
Viad Tower, Phoenix, Arizona."
The Committee may require that the certificates evidencing such shares be
held in custody by the Company until the restrictions thereon have lapsed and
that, as a condition of any Award of Restricted Stock, the participant has
delivered a stock power, endorsed in blank, relating to the Stock covered by
such Award.
(c) TERMS AND CONDITIONS. Shares of Restricted Stock will be subject
to the following terms and conditions:
(1) The Committee may, prior to or at the time of grant, designate an
Award of Restricted Stock as a Qualified Performance-Based Award, in which
event it will condition the grant or vesting, as applicable, of such
Restricted Stock upon the attainment of Performance Goals. If the
Committee does not designate an Award of Restricted Stock as a Qualified
Performance-Based Award, it may also condition the grant or vesting thereof
upon the attainment of Performance Goals or such other performance-based
criteria as the Committee shall establish (such an Award, a
"Performance-Based Restricted Stock Award"). Regardless of whether an
Award of Restricted Stock is a Qualified Performance-Based Award or a
Performance-Based Restricted Stock Award, the Committee may also condition
the grant or vesting upon the continued service of the participant. The
provisions of Restricted Stock Awards (including the conditions for grant
or vesting and any applicable Performance Goals) need not be the same with
respect to each recipient. The Committee may
<PAGE>
at any time, in its sole discretion, subject to the provisions of Section
7(c)(10), accelerate or waive, in whole or in part, any of the foregoing
restrictions; provided, however, that in the case of Restricted Stock
that is a Qualified Performance-Based Award, the applicable Performance
Goals have been satisfied.
(2) Subject to the provisions of the Plan and the Restricted Stock
Agreement referred to in Section 7(c)(8), during the period set by the
Committee, commencing with the date of such Award for which such
participant's continued service is required (the "Restriction Period") and
until the later of (A) the expiration of the Restriction Period and (B) the
date the applicable Performance Goals (if any) are satisfied, the
participant will not be permitted to sell, assign, transfer, pledge or
otherwise encumber shares of Restricted Stock.
(3) Except as provided in this paragraph (3) and Sections 7(c)(1) and
(2) and the Restricted Stock Agreement, the participant will have, with
respect to the shares of Restricted Stock, all of the rights of a
stockholder of the Company holding the class or series of Stock that is the
subject of the Restricted Stock, including, if applicable, the right to
vote the shares and the right to receive any dividends. If so determined
by the Committee in the applicable Restricted Stock Agreement and subject
to Section 12(f) of the Plan, (A) dividends consisting of cash, stock or
other property (other than Stock) on the class or series of Stock that is
the subject of the Restricted Stock shall be automatically deferred and
reinvested in additional Restricted Stock (in the case of stock or other
property, based on the fair market value thereof, and the Fair Market Value
of the Stock, in each case as of the record date for the dividend) held
subject to the vesting of the underlying Restricted Stock, or held subject
to meeting any Performance Goals applicable to the underlying Restricted
Stock, and (B) dividends payable in Stock shall be paid in the form of
Restricted Stock of the same class as the Stock with which such dividend
was paid and shall be held subject to the vesting of the underlying
Restricted Stock, or held subject to meeting any Performance Goals
applicable to the underlying Restricted Stock.
(4) Except to the extent otherwise provided in the applicable
Restricted Stock Agreement, Section 7(c)(1), 7(c)(2), 7(c)(5) or 9(a)(2),
upon a participant's Termination of Employment for any reason during the
Restriction Period or before any applicable Performance Goals are met, all
shares still subject to restriction will be forfeited by the participant.
(5) Except to the extent otherwise provided in Section 9(a)(2) and
Sections 7(c)(9) and (10), in the event that a
<PAGE>
participant retires or such participant's employment is involuntarily
terminated (other than for Cause), the Committee will have the discretion
to waive in whole or in part any or all remaining restrictions (other
than, in the case of Restricted Stock which is a Qualified
Performance-Based Award, satisfaction of the applicable Performance Goals
unless the participant's employment is terminated by reason of death or
Disability) with respect to any or all of such participant's shares of
Restricted Stock.
(6) Except as otherwise provided herein or as required by law, if and
when any applicable Performance Goals are satisfied and the Restriction
Period expires without a prior forfeiture of the Restricted Stock,
unlegended certificates for such shares will be delivered to the
participant upon surrender of legended certificates.
(7) Awards of Restricted Stock, the vesting of which is not
conditioned upon the attainment of Performance Goals or other
performance-based criteria, is limited to twenty percent (20%) of the
number of shares of Common Stock of the Corporation available for grant
under the Plan in each calendar year.
(8) Each Award will be confirmed by, and be subject to the terms of,
a Restricted Stock Agreement.
(9) Performance-Based Restricted Stock will be subject to a minimum
one-year performance period and Restricted Stock which is not
performance-based will be subject to a minimum three-year vesting period.
(10) There will be no vesting acceleration, or waiver of forfeiture
regarding any Award and any shares of Stock relating thereto, except in
connection with a "change of control" of the Company, the sale of a
subsidiary or majority-owned affiliate of the Company (and then only with
respect to participants employed by each subsidiary or affiliate), the
death or disability of a participant, or termination of employment of a
participant.
SECTION 8. PERFORMANCE-BASED AWARDS.
(a) ADMINISTRATION. Performance-Based Awards may be awarded either
alone or in addition to other Awards granted under the Plan. Subject to the
terms and conditions of the Plan, the Committee shall determine the officers
and employees to whom and the time or times at which Performance-Based Awards
will be awarded, the number or amount of Performance-Based Awards to be
awarded to any participant, whether such Performance-Based Award shall be
denominated in a number of shares of Stock, an amount of cash, or some
combination thereof, the duration of the Award Cycle and any other terms and
conditions of the Award, in addition to those contained in Section 8(b).
<PAGE>
(b) TERMS AND CONDITIONS. Performance-Based Awards will be subject to
the following terms and conditions:
(1) The Committee may, prior to or at the time of the grant,
designate Performance-Based Awards as Qualified Performance-Based Awards,
in which event it will condition the settlement thereof upon the attainment
of Performance Goals. If the Committee does not designate
Performance-Based Awards as Qualified Performance-Based Awards, it may also
condition the settlement thereof upon the attainment of Performance Goals
or such other performance-based criteria as the Committee shall establish.
Regardless of whether Performance-Based Awards are Qualified
Performance-Based Awards, the Committee may also condition the settlement
thereof upon the continued service of the participant. The provisions of
such Performance-Based Awards (including without limitation any applicable
Performance Goals) need not be the same with respect to each recipient.
Subject to the provisions of the Plan and the Performance-Based Award
Agreement referred to in Section 8(b)(5), Performance-Based Awards may not
be sold, assigned, transferred, pledged or otherwise encumbered during the
Award Cycle.
(2) Unless otherwise provided by the Committee (A) from time to time
pursuant to the administration of particular Award programs under this
Section 8, such as the Viad Corp Management Incentive Plan, the Viad Corp
Performance Unit Incentive Plan or the Viad Corp Performance-Based Stock
Plan or (B) in any agreement relating to an Award, and except as provided
in Section 8(b)(3), upon a participant's Termination of Employment for any
reason prior to the payment of an Award under this Section 8, all rights to
receive cash or Stock in settlement of the Award shall be forfeited by the
participant.
(3) In the event that a participant's employment is terminated (other
than for Cause), or in the event a participant retires, the Committee shall
have the discretion to waive, in whole or in part, any or all remaining
payment limitations (other than, in the case of Awards that are Qualified
Performance-Based Awards, satisfaction of the applicable Performance Goals
unless the participant's employment is terminated by reason of death or
Disability) with respect to any or all of such participant's Awards.
(4) At the expiration of the Award Cycle, the Committee will evaluate
the Company's performance in light of any Performance Goals for such Award,
and will determine the extent to which a Performance-Based Award granted to
the participant has been earned, and the Committee will then cause to be
delivered to the participant, as specified in the grant of such Award: (A)
a number of shares of Stock equal to the number of shares determined by the
Committee to have been earned or (B) cash equal to the amount determined
<PAGE>
by the Committee to have been earned or (C) a combination of shares of
Stock and cash if so specified in the Award.
(5) No Performance-Based Award may be assigned, transferred, or
otherwise encumbered except, in the event of the death of a participant, by
will or the laws of descent and distribution.
(6) Each Award will be confirmed by, and be subject to, the terms of
a Performance-Based Award Agreement.
(7) Performance-Based Awards will be subject to a minimum one-year
performance period.
SECTION 9. CHANGE IN CONTROL PROVISIONS.
(a) IMPACT OF EVENT. Notwithstanding any other provision of the Plan
to the contrary, in the event of a Change in Control:
(1) Any Stock Options and Stock Appreciation Rights outstanding as of
the date such Change in Control is determined to have occurred and not then
exercisable and vested will become fully exercisable and vested to the full
extent of the original grant;
(2) The restrictions and conditions to vesting applicable to any
Restricted Stock will lapse, and such Restricted Stock will become free of
all restrictions and become fully vested and transferable to the full
extent of the original grant;
(3) Performance-Based Awards will be considered to be earned and
payable to the extent, if any, and in an amount, if any, and otherwise, in
accordance with the provisions of the agreement relating to such Awards.
(b) DEFINITION OF CHANGE IN CONTROL. For purposes of the Plan, a
"Change in Control" will mean the happening of any of the following events:
(1) An acquisition by any individual, entity or group (within the
meaning of Section 13(d)(3) or 14(d)(2) of the Exchange Act) (a "Person") of
beneficial ownership (within the meaning of Rule 13d-3 promulgated under the
Exchange Act) of twenty percent (20%) or more of either (A) the then
outstanding shares of common stock of the Company (the "Outstanding Company
Common Stock") or (B) the combined voting power of the then outstanding
voting securities of the Company entitled to vote generally in the election
of directors (the "Outstanding Company Voting Securities"); excluding,
however, the following: (i) any acquisition directly from the Company, other
than an acquisition by virtue of the exercise of a conversion privilege
unless the security being so converted was itself acquired directly from the
Company, (ii) any acquisition by the Company, (iii) any acquisition by any
employee benefit plan (or related trust)
<PAGE>
sponsored or maintained by the Company or any corporation controlled by the
Company or (iv) any acquisition by any corporation pursuant to a transaction
which complies with clauses (A), (B) and (C) of subsection (3) of this
Section 9(b); or
(2) A change in the composition of the Board such that the
individuals who, as of February 20, 1997, constitute the Board (such Board
will be hereinafter referred to as the "Incumbent Board") cease for any
reason to constitute at least a majority of the Board; provided, however, for
purposes of this Section 9(b), that any individual who becomes a member of
the Board subsequent to February 20, 1997, whose election, or nomination for
election by the Company's stockholders, was approved by a vote of at least a
majority of those individuals who are members of the Board and who were also
members of the Incumbent Board (or deemed to be such pursuant to this
proviso) will be considered as though such individual were a member of the
Incumbent Board; but, provided further, that any such individual whose
initial assumption of office occurs as a result of either an actual or
threatened election contest (as such terms are used in Rule 14a-11 of
Regulation 14A promulgated under the Exchange Act) or other actual or
threatened solicitation of proxies or consents by or on behalf of a Person
other than the Board will not be so considered as a member of the Incumbent
Board; or
(3) The approval by the stockholders of the Company of a
reorganization, merger or consolidation or sale or other disposition of all
or substantially all of the assets of the Company ("Corporate Transaction")
(or, if consummation of such Corporate Transaction is subject, at the time of
such approval by stockholders, to the consent of any government or
governmental agency, the earlier of the obtaining of such consent or the
consummation of the Corporate Transaction); excluding, however, such a
Corporate Transaction pursuant to which (A) all or substantially all of the
individuals and entities who are the beneficial owners, respectively, of the
Outstanding Company Common Stock and Outstanding Company Voting Securities
immediately prior to such Corporate Transaction will beneficially own,
directly or indirectly, more than sixty percent (60%) of, respectively, the
outstanding shares of common stock, and the combined voting power of the then
outstanding voting securities entitled to vote generally in the election of
directors, as the case may be, of the corporation resulting from such
Corporate Transaction (including, without limitation, a corporation which as
a result of such transaction owns the Company or all or substantially all of
the Company's assets either directly or through one or more subsidiaries) in
substantially the same proportions as their ownership, immediately prior to
such Corporate Transaction, of the Outstanding Company Common Stock and
Outstanding Company Voting Securities, as the case may be, (B) no Person
(other than the Company, any employee benefit plan (or related trust) of the
Company or such corporation resulting from such Corporate Transaction) will
beneficially own, directly or indirectly, twenty percent (20%) or more of,
respectively, the
<PAGE>
outstanding shares of common stock of the corporation resulting from such
Corporate Transaction or the combined voting power of the outstanding voting
securities of such corporation entitled to vote generally in the election of
directors except to the extent that such ownership existed prior to the
Corporate Transaction and (C) individuals who were members of the Incumbent
Board will constitute at least a majority of the members of the board of
directors of the corporation resulting from such Corporate Transaction; or
(4) The approval by the stockholders of the Company of a complete
liquidation or dissolution of the Company.
(c) CHANGE IN CONTROL PRICE. For purposes of the Plan, "Change in
Control Price" means the higher of (1) the highest reported sales price,
regular way, of a share of Stock in any transaction reported on the New York
Stock Exchange Composite Tape or other national exchange on which such shares
are listed or on The Nasdaq Stock Market during the 60-day period prior to
and including the date of a Change in Control or (2) if the Change in Control
is the result of a tender or exchange offer or a Corporate Transaction, the
highest price per share of Stock paid in such tender or exchange offer or
Corporate Transaction; provided, however, that in the case of Incentive Stock
Options and Stock Appreciation Rights relating to Incentive Stock Options,
the Change in Control Price will be in all cases the Fair Market Value of the
Stock on the date such Incentive Stock Option or Stock Appreciation Right is
exercised. To the extent that the consideration paid in any such transaction
described above consists all or in part of securities or other non-cash
consideration, the value of such securities or other non-cash consideration
will be determined in the sole discretion of the Board.
SECTION 10. TERM, AMENDMENT AND TERMINATION.
The Plan will terminate May 31, 2007, but may be terminated sooner at
any time by the Board, provided that no Incentive Stock Options shall be
granted under the Plan after February 19, 2007. Awards outstanding as of the
date of any such termination will not be affected or impaired by the
termination of the Plan.
The Board may amend, alter, or discontinue the Plan, but no amendment,
alteration or discontinuation will be made which would (a) impair the rights
of an optionee under a Stock Option or a recipient of a Stock Appreciation
Right, Restricted Stock Award or Performance-Based Award theretofore granted
without the optionee's or recipient's consent, except such an amendment which
is necessary to cause any Award or transaction under the Plan to qualify, or
to continue to qualify, for the exemption provided by Rule 16b-3, or (b)
disqualify any Award or transaction under the Plan from the exemption
provided by Rule 16b-3. In addition, no such amendment may be made without
the approval of the Company's stockholders to the extent such approval is
required by law or agreement.
<PAGE>
The Committee may amend the terms of any Stock Option or other Award
theretofore granted, prospectively or retroactively, but no such amendment
will (1) impair the rights of any holder without the holder's consent except
such an amendment which is necessary to cause any Award or transaction under
the Plan to qualify, or to continue to qualify, for the exemption provided by
Rule 16b-3 or (2) amend any Qualified Performance-Based Award in such a way
as to cause it to cease to qualify for the exemption set forth in Section
162(m)(4)(C). The Committee may also substitute new Stock Options for
previously granted Stock Options, including previously granted Stock Options
having higher option prices; provided, however, that the Committee may take
such action only with respect to Stock Options representing not more than 10%
of then outstanding Stock Options.
Subject to the above provisions, the Board will have authority to amend
the Plan to take into account changes in law and tax and accounting rules, as
well as other developments and to grant Awards which qualify for beneficial
treatment under such rules without stockholder approval.
SECTION 11. UNFUNDED STATUS OF PLAN.
It is presently intended that the Plan constitute an "unfunded" plan for
incentive and deferred compensation. The Committee may authorize the
creation of trusts or other arrangements to meet the obligations created
under the Plan to deliver Stock or make payments; provided, however, that,
unless the Committee otherwise determines, the existence of such trusts or
other arrangements is consistent with the "unfunded" status of the Plan.
SECTION 12. GENERAL PROVISIONS.
(a) The Committee may require each person purchasing or receiving
shares pursuant to an Award to represent to and agree with the Company in
writing that such person is acquiring any shares without a view to the
distribution thereof. The certificates for such shares may include any legend
which the Committee deems appropriate to reflect any restrictions on transfer.
All certificates for shares of Stock or other securities delivered under
the Plan will be subject to such stock transfer orders and other restrictions
as the Committee may deem advisable under the rules, regulations and other
requirements of the Commission, any stock exchange upon which the Stock is
then listed and any applicable federal or state securities law, and the
Committee may cause a legend or legends to be put on any such certificates to
make appropriate reference to such restrictions.
Notwithstanding any other provision of the Plan or agreements made
pursuant thereto, the Company shall not be required to issue or deliver any
certificate or certificates for shares of Stock under the Plan prior to
fulfillment of all of the following conditions:
<PAGE>
(1) Listing or approval for listing upon notice of issuance, of such
shares on the New York Stock Exchange, Inc., or such other securities
exchange as may at the time be the principal market for the Stock;
(2) Any registration or other qualification of such shares of the
Company under any state or federal law or regulation, or the maintaining in
effect of any such registration or other qualification which the Committee
shall, in its absolute discretion upon the advice of counsel, deem
necessary or advisable; and
(3) Obtaining any other consent, approval, or permit from any state
or federal governmental agency which the Committee shall, in its absolute
discretion after receiving the advice of counsel, determine to be necessary
or advisable.
(b) Nothing contained in the Plan will prevent the Company or any
subsidiary or Affiliate from adopting other or additional compensation
arrangements for its employees.
(c) The adoption of the Plan will not confer upon any employee any
right to continued employment nor will it interfere in any way with the right
of the Company or any subsidiary or Affiliate to terminate the employment of
any employee at any time.
(d) No later than the date as of which an amount first becomes
includible in the gross income of the participant for Federal income tax
purposes with respect to any Award under the Plan, the participant will pay
to the Company, or make arrangements satisfactory to the Company regarding
the payment of, any federal, state, local or foreign taxes of any kind
required by law to be withheld with respect to such amount. Unless otherwise
determined by the Company, withholding obligations may be settled with Stock,
including Stock that is part of the Award that gives rise to the withholding
requirement. The obligations of the Company under the Plan will be
conditional on such payment or arrangements, and the Company and its
Affiliates will, to the extent permitted by law, have the right to deduct any
such taxes from any payment otherwise due to the participant. The Committee
may establish such procedures as it deems appropriate, including the making
of irrevocable elections, for the settlement of withholding obligations with
Stock.
(e) At the time of grant, the Committee may provide in connection with
any grant made under the Plan that the shares of Stock received as a result
of such grant will be subject to a right of first refusal pursuant to which
the participant will be required to offer to the Company any shares that the
participant wishes to sell at the then Fair Market Value of the Stock,
subject to such other terms and conditions as the Committee may specify at
the time of grant.
<PAGE>
(f) The reinvestment of dividends in additional Restricted Stock at the
time of any dividend payment will only be permissible if sufficient shares of
Stock are available under Section 3 for such reinvestment (taking into
account then outstanding Stock Options and other Awards).
(g) The Committee will establish such procedures as it deems
appropriate for a participant to designate a beneficiary to whom any amounts
payable in the event of the participant's death are to be paid or by whom any
rights of the participant, after the participant's death, may be exercised.
(h) Notwithstanding any other provision of the Plan or any agreement
relating to any Award hereunder, if any right granted pursuant to this Plan
would make a Change in Control transaction ineligible for
pooling-of-interests-accounting under APB No. 16 that, but for the nature of
such grant, would otherwise be eligible for such accounting treatment, the
Committee will have the ability, in its sole discretion, to substitute for
the cash payable pursuant to such grant Common Stock with a Fair Market Value
equal to the cash that would otherwise be payable hereunder.
(i) The Plan and all Awards made and actions taken thereunder will be
governed by and construed in accordance with the laws of the State of
Delaware.
SECTION 13. EFFECTIVE DATE OF PLAN.
The Plan will be effective on the later of (a) the time it is approved
by the Board and (b) the time certain provisions of the Plan are approved by
stockholders for tax purposes.
SECTION 14. DIRECTOR STOCK OPTIONS.
(a) Each director of the Company who is not otherwise an employee of
the Company or any of its subsidiaries or Affiliates, will (1) on the date of
his or her first election as a director of the Company (such initial grant
being an "Initial Grant"), and (2) annually on the Monday preceding the
second Tuesday of May, during such director's term (the "Annual Grant"),
automatically be granted Non-Qualified Stock Options to purchase Common Stock
having an exercise price per share of Common Stock equal to 100% of Fair
Market Value per share of Common Stock at the date of grant of such
Non-Qualified Stock Option. The number of shares subject to each such
Initial Grant, and each such Annual Grant, will be equal to the annual
retainer fee in effect at the date of grant for non-employee directors of the
Company divided by an amount equal to one-third (1/3) of the Fair Market
Value of the Common Stock at the date of grant, rounded to the nearest 100
shares. A non-employee director who is first elected as a director of the
Company during the course of a year (i.e., on a date other than the date of
the Annual Grant) will, in addition to the Initial Grant, receive upon
election a grant of Non-Qualified Stock Options prorated to reflect the
number of months served in the initial year of service, with the number of
shares
<PAGE>
of Common Stock subject to such Stock Option being equal to (1) the number of
shares subject to the Initial Grant multiplied by (2) a fraction the
numerator of which will be the number of months from the date of such
election through the date of the next Annual Grant and the denominator of
which will be twelve (12).
(b) An automatic director Stock Option will be granted hereunder only
if as of each date of grant the director (1) is not otherwise an employee of
the Company or any of its subsidiaries or Affiliates, (2) has not been an
employee of the Company or any of its subsidiaries or Affiliates for any part
of the preceding fiscal year, and (3) has served on the Board continuously
since the commencement of his term.
(c) Except as expressly provided in this Section 14, any Stock Option
granted hereunder will be subject to the terms and conditions of the Plan as
if the grant were made pursuant to Section 5 hereof including, without
limitation, the rights set forth in Section 5(j) hereof.
<PAGE>
Exhibit 10.D
VIAD CORP
ANNUAL MANAGEMENT INCENTIVE PLAN
PURSUANT TO THE VIAD 1997 OMNIBUS INCENTIVE PLAN
AS AMENDED MARCH 23, 1999
I. PURPOSE:
The purpose of the Viad Corp Management Incentive Plan (Plan) is to provide
key executives of Viad Corp and its subsidiaries with an incentive to
achieve goals as set forth under this Plan for each calendar year (Plan
Year) for their respective companies and to provide effective management
and leadership to that end.
II. PHILOSOPHY:
The Plan will provide key executives incentive bonuses based upon
appropriately weighted pre-defined net income and other performance
measurements.
III. SUBSIDIARIES, SUBSIDIARY GROUPS AND DIVISIONS:
A. Each subsidiary, subsidiary group, line of business or division listed
below is a "Company" for the purposes of this Plan:
NAME OF COMPANY
Brewster Transport Company Limited
Dobbs International Services, Inc. group
Exhibitgroup/Giltspur group
GES Exposition Services, Inc. group
Recreation Division (ProDine) group
Travelers Express Company, Inc. group
Viad Corp may, by action if its Board of Directors or its Human Resources
Committee, add or remove business units on the list of participant
companies from time to time.
1
<PAGE>
B. FUNDING LIMIT:
A "funding limit" shall be established annually for each Company
participant who has been designated an Executive Officer as defined
under Section 16b of the Securities Exchange Act. The funding limit
shall be an amount determined by multiplying the actual net income of
the Company for the Plan Year by the percent of such income approved
by the Human Resources Committee of the Viad Corp Board of Directors
(Committee) for such funding limit. The subsidiary executive cannot
be paid a larger bonus than the funding limit provided by this clause,
but may be paid less in the discretion of the HR Committee based on
the Performance Goals set forth below and other such factors which the
HR Committee may consider.
C. PERFORMANCE GOALS:
1. NET INCOME:
An appropriate "net income" target for the plan year for each
Company will be recommended by the Chief Executive Officer of
Viad Corp to the Committee for approval taking into account
overall corporate objectives, historical income and Plan Year
financial plan income (on the same basis as determined below)
and, if appropriate, other circumstances.
Net income to be used in calculating the bonus pool of each
Company shall mean net income (after deducting charges against
income for all incentives earned, including those earned under
this Plan as detailed below) adjusted to appropriately exclude
the effects of gains and losses from the sale or other
disposition of capital assets other than vehicles. There will be
an addback to actual net income for any additional intercompany
interest cost (net of tax) incurred during the year by a
subsidiary as the result of any special dividend paid (in excess
of 100% of net income for the year). In addition, an addback to
actual net income will be allowed for any increased cost to a
subsidiary if there is an increase in the actual formula
allocation of corporate overhead over amounts included in the
Plan for the year.
Special treatment of any other significant unusual or
non-recurring items (for purposes of determining actual Plan Year
net income) arising after a Company's targets are set
2
<PAGE>
may be recommended by the Chief Executive Officer of Viad Corp
to the Committee for approval, including, for example,
appropriate adjustment of net income target to reflect planned
effects of an acquisition approved after target has been set.
Other examples include extraordinary items, effects of a
change in accounting principles or a change in federal income
tax rates.
Incentives to be paid under this Plan must be deducted from the
subsidiary corporation's earnings by the end of the year. Goals
must be achieved after deducting from actual results all
incentive compensation applicable to the year, including those
incentives earned under this Plan.
2. VALUE ADDED MEASUREMENT:
An appropriate "Value Added" target for the plan year for each
Company will be recommended by the Chief Executive Officer of
Viad Corp to the Committee for approval. This measurement is
intended to place increased emphasis on securing an adequate
return to Viad on all capital employed in the business (e.g.,
receivables, inventory, fixed assets, and goodwill). Viad Value
Added (VVA) compares net operating income to the return required
on capital invested in the business.
In calculating the bonus pool of each Company, VVA shall mean Net
Operating Profit After Taxes (NOPAT is defined as sales minus
operating expenses minus taxes) minus a Capital Charge calculated
by multiplying a Cost of Capital times the actual Capital
(Capital is defined as net working capital plus fixed capital).
Certain adjustments are necessary to determine NOPAT and Capital,
or set forth in the VVA user guide.
3. OTHER PERFORMANCE MEASUREMENTS:
An appropriate number of performance measurements other than net
income and VVA will be established for each Company, to place
increased emphasis on areas of importance to achieving overall
corporate objectives, with the Chief Executive Officer of Viad to
recommend to the HR committee the measures to be used and, at the
end of the year, the level of achievement against each. Measures
which may be used include, but are not limited to:
3
<PAGE>
1) Operating income margin growth*
2) Revenue growth*
3) Control/reduce workers compensation and liability
claims/costs
4) Profitability per employee
5) Growth in funds for payment service
* Fully taxable equivalent basis (where appropriate)
4. ESTABLISHING TARGETS:
The actual targets for net income, for VVA and for the categories
of discretionary performance measurements to be employed will be
established by the Committee no later than 90 days after the
beginning of the Plan Year after receiving the recommendations of
the Chief Executive Officer of Viad Corp.
D. PARTICIPANT ELIGIBILITY:
The Committee will select the Executive Officers as defined under
Section 16b of the Securities Exchange Act eligible for participation
no later than 90 days after the beginning of the Plan Year. Other
personnel will be eligible for participation as designated by each
Company President or Chief Executive Officer and recommended to the
Chief Executive Officer of Viad Corp for approval, limited only to
those executives who occupy a position in which they can significantly
affect operating results as pre-defined by appropriate and consistent
criteria, i.e., base salary not less than $49,000 per year, or base
salary not less than 50% of the Company's Chief Executive Officer, or
position not more than the third organizational level below the
Company Chief Executive Officer or another applicable criteria.
NOTE: Individuals not qualifying under the criteria established for
the Plan Year who were included in the previous year will be
grandfathered (continue as qualified participants until retirement,
reassignment, or termination of employment) if designated by the
Company President or Chief Executive Officer, and approved by the
Chief Executive Officer of Viad Corp.
E. TARGET BONUSES:
Target bonuses will be approved by the Committee for each Executive
Officer in writing within the following parameters no later than 90
days after the beginning of the Plan Year and will be
4
<PAGE>
expressed as a percentage of salary paid during the year. Target
bonuses for other eligible personnel will be established in writing
within the following parameters subject to approval by the Chief
Executive Officer of Viad Corp.
Actual bonus awards will be dependent on Company performance versus
the targets established. A threshold performance will be required
before any bonus award is earned under the net income goal. Awards
will also be capped when stretch performance levels are achieved.
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------
As a Percentage of Salary
Subsidiary Positions Threshold** Target Cap
- ----------------------------------------------------------------------------------
<S> <C> <C> <C>
Chief Executive Officer/President* 22.5% 45% 80.325%
20.0% 40% 71.4%
Executive Vice President-Senior Vice 20.0% 40% 71.4%
President, and Other Operating Executives
Vice Presidents* 17.5% 35% 62.475%
15.0% 30% 53.55%
Key Management Reporting to Officers* 12.5% 25% 44.625%
10.0% 20% 35.7%
Staff Professionals* 7.5% 15% 26.775%
5.0% 10% 17.85%
- ----------------------------------------------------------------------------------
</TABLE>
* Target Bonus, as determined by the Committee, is dependent upon
organization reporting relationships.
** Reflects minimum achievement of both performance targets. Threshold could
be lower if minimum achievement of only one performance target is met.
F. BONUS POOL TARGET:
1. The "Bonus Pool Target" will be initially established no later
than 90 days after the beginning of the Plan Year and will be
adjusted to equal the sum of the target bonuses of all designated
participants in each Company based upon actual Plan Year
salaries, as outlined in paragraph D above, plus 15% for Special
Achievement Awards.
2. The bonus pool will accrue ratably such that
5
<PAGE>
a) on 60% of the sum of target bonuses:
(i) no bonus will be earned if less than 90% of the net
income target is achieved;
(ii) 50% (threshold) to 100% will be earned if 90% to 100%
of the net income target is achieved.
(iii) 100% to 178.5% will be earned if 100% to 110% of the
net income target is achieved.
b) on 30% of the sum of target bonuses:
(i) No bonuses will be earned if less than 90% of the VVA
target is achieved;
(ii) 50% (threshold) to 100% will be earned if 90% to 100%
of the VVA target is achieved.
(iii) 100% to 178.5% (cap) will be earned if 100% to 110% of
the VVA target is achieved.
Notwithstanding 2.a) i), ii) and iii) and 2.b) i), ii)
and iii), of this paragraph F, the ratable accrual of
the net income and VVA targets may be established for
threshold within the range of above 90%, up to and
including 95% and for maximum within the range of
below 110% down to 105%, for a Company as may be
designated by the Committee after considering the
recommendations of the Chief Executive Officer of Viad
Corp; however, the Committee may, when appropriate,
adjust such ranges upward or downward.
Further, the bonus pool shall include any excess of
the funding limit established pursuant to paragraph B
for a Company's Executive Officer(s) over the amount
of bonus pool funds otherwise provided with respect to
such person(s) pursuant to 2a) and b) of this
Paragraph F.
c) on 10% of the sum of target bonuses:
(i) No bonuses will be earned if achievement relating to
the other designated performance measurements is
considered unsatisfactory;
6
<PAGE>
(ii) 50% (threshold) to 178.5% will be earned as determined
by the Committee after considering the recommendation
of the Chief Executive Officer of Viad of the level of
acceptable achievement relating to the other
designated performance measurements.
3. Bonus pool accruals not paid out shall not be carried forward to
any succeeding year.
G. INDIVIDUAL BONUS AWARDS:
1. Indicated bonus awards will be equal to the product of the target
bonus percentage times the weighted average percentage of bonus
pool accrued as determined in paragraph F above times the
individual's actual base salary earnings during the Plan Year,
subject to adjustments as follows:
a) discretionary upwards or downward adjustment of formula
bonus awards by the Committee after considering the
recommendation of the Company President or Chief Executive
Officer with the approval of the Chief Executive Officer of
Viad Corp for those executives not affected by Section
162(m) of the Internal Revenue Code, and
b) discretionary downward adjustment of awards by the Committee
for those executive officers affected by Section 162(m) of
the Internal Revenue Code, and
c) no individual award may exceed the individual's capped
target award or the funding limit with respect to Executive
Officers, and the aggregate recommended bonuses may not
exceed the bonus pool accrued for other than Special
Achievement Awards.
2. Bonuses awarded to the participating management staff of
subsidiary groups may be paid from funds accrued based upon the
target bonus for such participant(s) times the weighted average
performance of the Companies in the subsidiary group, subject to
adjustments as above.
7
<PAGE>
IV. VIAD CORP CORPORATE STAFF:
A. FUNDING LIMIT:
A "funding limit" shall be established annually for each Corporate
participant who has been designated an Executive Officer as defined
under Section 16b of the Securities Exchange Act. The funding limit
will be an amount determined by multiplying the actual net income from
continuing operations of the Corporation (as used in the income per
share calculation described herein) for the Plan Year by the percent
of such income approved by the Committee for such funding limit. The
executive cannot be paid a larger bonus than the funding limit
provided by this clause, but may be paid less in the discretion of the
Committee based on the Performance Goals set forth below and such
other factors which the Committee may consider.
B. PERFORMANCE GOALS:
1. INCOME PER SHARE:
An appropriate "income per share" from continuing operations
target for Viad Corp will be recommended by the Chief Executive
Officer of Viad Corp to the Committee for approval after
considering historical income per share from continuing
operations, Plan Year financial plan income, overall corporate
objectives, and, if appropriate, other circumstances.
Income per share from continuing operations is determined before
extraordinary items, effects of changes in accounting principles
or a change in federal income tax rates after the target has been
set. (For example, new FASB release on Accounting for
Derivatives, to be effective for periods after December 15, 1999,
which could be adopted earlier, but was not taken into account in
setting 1999 target income per share.) Reclassification of a
major business unit to discontinued operations status after
targets have been set would also require adjustment because of
effect on continuing operations results. While gains on
disposition of a business would normally not be included in
determining actual Plan Year net income or income per share, in
the event of the sale of a subsidiary or major business unit, a
portion of gain would be included equal to the difference between
the sold unit's planned net income for the year and actual
results to date of sale plus calculated interest savings on
proceeds for the balance of the year, so that actual results are
not penalized for selling a business.
8
<PAGE>
Incentives to be paid under this Plan must be deducted from the
corporation's earnings by the end of the year. Goals must be
achieved after deducting from actual results all incentive
compensation applicable to the year, including those incentives
earned under this Plan.
2. VALUE ADDED MEASUREMENT:
An appropriate "Value Added" target for the plan year for
Corporate will be recommended by the Chief Executive Officer of
Viad for approval by the Human Resources Committee. This
measurement is intended to place increased emphasis on securing
an adequate return to Viad on all capital employed in the
business (e.g., receivables, inventory, fixed assets, and
goodwill). Viad Value Added (VVA) compares operating income to
the return required on capital invested in the business.
In calculating the bonus pool for Corporate, VVA shall mean Net
Operating Profit After Taxes (NOPAT is defined as sales minus
operating expenses minus taxes) minus a Capital Charge calculated
by multiplying a Cost of Capital times the actual Capital
(Capital is defined as net working capital plus fixed capital).
Certain adjustments are necessary to determine NOPAT and Capital,
as set forth in the VVA user guide.
3. OTHER PERFORMANCE MEASUREMENTS:
An appropriate number of performance measurements other than
income per share will be established for Corporate, with the
Chief Executive Officer of Viad to recommend to the Human
Resources Committee the level of achievement against each of the
measures.
The measures to be considered include, but are not limited to:
1) Reduction of investment in non-core assets
2) Management of 'legacy' liabilities of discontinued and/or
sold businesses (primarily for legal, self-insurance,
reinsurance and environmental matters)
3) Strategic positioning through effective portfolio management
4) Corporate center cost control
5) Through analysis and support, identify and help correct
problems in operating units
9
<PAGE>
4. ESTABLISHING TARGETS:
The actual targets for income per share, for VVA and for the
performance measurements to be used will be established by the
Committee no later than 90 days after the beginning of the Plan
year after receiving the recommendations of the Chief Executive
Officer of Viad Corp.
C. PARTICIPANT ELIGIBILITY:
The Committee will select the Executive Officers as defined under
Section 16b of the Securities Exchange Act eligible for participation
no later than 90 days after the beginning of the Plan Year. Other
personnel will be eligible for participation as recommended by the
appropriate staff Vice President and as approved by the Chief
Executive Officer of Viad Corp, limited only to those executives who
occupy a position in which they can significantly affect operating
results as defined by the following criteria:
a) Salary grade 25 and above; and
b) Not more than Organizational Level Four below the Chief
Executive Officer.
NOTE: Individuals not qualifying under the criteria established for
the Plan Year who were included in the previous year will be
grandfathered (continue as qualified participants until retirement,
reassignment, or termination of employment) if designated by the
appropriate Vice President and approved by the Chief Executive Officer
of Viad Corp.
D. TARGET BONUSES:
Target bonuses will be approved by the Committee for each Executive
Officer in writing within the following parameters no later than 90
days after the beginning of the Plan Year and will be expressed as a
percentage of salary. Target bonuses for other eligible personnel
will be established in writing within the following parameters subject
to approval by the Chief Executive Officer of Viad Corp.
Actual bonus awards will be dependent on Company performance versus
the targets established. A threshold performance will be required
before any bonus award is earned under the income per share goal.
Awards also will be capped when stretch performance levels are
achieved.
10
<PAGE>
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------
As a Percentage of Salary
Corporate Positions Threshold** Target Cap
- ----------------------------------------------------------------------------------
<S> <C> <C> <C>
Chairman, President & Chief
Executive Officer 37.50% 75% 135.0%
Senior Advisory Group 22.50% 45% 76.5%
Corporate Staff Officers 20.00% 40% 68.0%
Staff Directors* 17.50% 35% 59.5%
15.00% 30% 51.0%
12.50% 25% 42.5%
10.00% 20% 34.0%
Staff Professionals* 7.50% 15% 25.5%
5.00% 10% 17.0%
- ----------------------------------------------------------------------------------
</TABLE>
* Target Bonus, as determined by the Committee, is dependent upon
Organization Reporting Relationships.
** Reflects minimum of achievement of both performance targets.
Threshold could be less if minimum achievement of only one performance
target is met.
E. BONUS POOL TARGET:
1. The "Bonus Pool Target" will be established no later than 90 days
after the beginning of the Plan year and will be adjusted to
equal the sum of the target bonuses of all qualified participants
based upon actual Plan Year base salaries, as outlined in
paragraph C above, plus 15% for Special Achievement Awards.
2. The bonus pool will accrue ratably such that
a) on 60% of the sum of the target bonuses:
(i) no bonus will be earned if less than 90% of income per
share target is achieved;
(ii) 50% to 100% will be earned if 90% to 100% of income
per share target is achieved; and
(iii) 100% to 170% (180% in the case of Chairman, President
and Chief Executive Officer) will be earned
11
<PAGE>
if 100% to 110% of income per share target is
achieved.
b) on 30% of the sum of target bonuses:
(i) no bonus will be earned if less than 90% of the VVA
target is achieved;
(ii) from 50% (threshold) to 100% will be earned if 90% to
100% of the VVA target is achieved.
(iii) 100% to 170% (180% in the case of Chairman, President
and Chief Executive Officer) (cap) will be earned if
100% to 110% of the VVA target is achieved.
provided no less than an amount equal to 12.5% of the actual
bonus accruals earned under section III of this Plan or any
Line of Business Incentive Plan established after 1984, for
participants under section III herein will be earned
hereunder, up to an aggregate maximum of 170% of Bonus Pool
Target and transferred by the companies covered in section
III, herein, to Viad Corp. For purposes of this
determination only, the 178.5% upper limit shall not apply
on such actual bonus accrual calculations for subsidiaries,
subsidiary groups and divisions, and the calculation will
exclude the excess if any, of funding limit amounts over
bonus pool funds otherwise calculated under this provision.
c) on 10% of the sum of target bonuses:
(i) no bonus will be earned if achievement relating to the
other designated performance measurements is
considered unsatisfactory;
(ii) from 50% (threshold) to 170% (180% in the case of
Chairman, President and Chief Executive Officer) will
be earned as designated by the Committee after
considering the recommendation of the Chief Executive
Officer of Viad of the level of acceptable achievement
relating to the other designated performance measures
12
<PAGE>
d) Notwithstanding 2.a) i), ii) and iii) and 2.b) i), ii) and
iii) of this paragraph E, the ratable accrual of the income
per share and VVA targets may be established for threshold
within the range of above 90% up to and including 95% and
for maximum within the range of below 110% down to 105% as
may be designated by the Committee; however, the Committee
may, when appropriate, adjust such ranges upward or
downward. Further, the bonus pool shall include any excess
of the funding limit established pursuant to Paragraph B for
each Corporate Executive Officer over the amount of bonus
pool funds otherwise provided with respect to such persons
pursuant to 2 a) and b) of this Paragraph E.
3. Bonus pool accruals not paid out shall not be carried forward to
any succeeding year.
F. INDIVIDUAL BONUS AWARDS:
Indicated bonus awards will be equal to the product of the target
bonus percentage times the weighted average percentage of bonus pool
accrued as determined in paragraph D above times the individual's
actual Plan Year base salary earnings, subject to adjustments as
follows:
a) discretionary upward or downward adjustment of formula
awards by the Committee after considering the
recommendations of the Chief Executive Officer of Viad Corp
for those executives not affected by Section 162(m) of the
Internal Revenue Code.
b) discretionary downward adjustment of awards by the Committee
for those Executive Officers affected by Section 162(m) of
the Internal Revenue Code, and
c) no individual award may exceed the individual's capped
target award or the funding limit with respect to Executive
Officers and the aggregate recommended bonuses may not
exceed the bonus pool for other than Special Achievement
Awards.
V. SPECIAL ACHIEVEMENT AWARDS:
Special bonuses of up to 15% of base salary for exceptional performance
to employees (primarily exempt employees) who are not participants in
this Plan, including newly hired employees, may be recommended at the
discretion of the
13
<PAGE>
Chief Executive Officer to the Committee from the separate funds for
discretionary awards provided for under paragraphs III F and IV E.
VI. APPROVAL AND DISTRIBUTION:
The individual incentive bonus amounts and the terms of payment thereof
will be fixed following the close of the Plan Year by the Committee. Any
award made under this Plan is subject to the approval of this Plan by the
stockholders of Viad Corp.
VII. COMPENSATION ADVISORY COMMITTEE:
The Compensation Advisory Committee is appointed by the Chief Executive
Officer of Viad Corp to assist the Committee in the implementation and
administration of this Plan. The Compensation Advisory Committee shall
propose administrative guidelines to the Committee to govern
interpretations of this Plan and to resolve ambiguities, if any, but the
Compensation Advisory Committee will not have the power to terminate,
alter, amend, or modify this Plan or any actions hereunder in any way at
any time.
VIII. SPECIAL COMPENSATION STATUS:
All bonuses paid under this Plan shall be deemed to be special
compensation and, therefore, unless otherwise provided for in another plan
or agreement, will not be included in determining the earnings of the
recipients for the purposes of any pension, group insurance or other plan
or agreement of a Company or of Viad Corp. Participants in this Plan
shall not be eligible for any contractual or other short-term (sales,
productivity, etc.) incentive plan except in those cases where
participation is weighted between this Plan and any such other short-term
incentive plan.
IX. DEFERRALS:
Participants subject to taxation of income by the United States may submit
to the Committee, prior to November 15 of the year in which the bonus is
being earned a written request that all or a portion, but not less than a
specified minimum, of their bonus awards to be determined, if any, be
irrevocably deferred substantially in accordance with the terms and
conditions of a deferred compensation plan approved by the Board of
Directors of Viad Corp or, if applicable, one of its subsidiaries.
Participants subject to taxation of income by other jurisdictions may
submit to the Committee a written request that all or a portion of their
bonus awards be deferred in accordance with the terms and conditions of a
plan which is adopted by the Board of Directors of a participant's
Company. Upon the receipt of any such request, the Committee thereunder
shall determine whether
14
<PAGE>
such request should be honored in whole or part and shall forthwith
advise each participant of its determination on such request.
15
<PAGE>
X. PLAN TERMINATION:
This plan shall continue in effect until such time as it may be canceled
or otherwise terminated by action of the Board of Directors of Viad Corp
and will not become effective with respect to any Company unless and until
its Board of Directors adopts a specific plan for such Company. While it
is contemplated that incentive awards from the Plan will be made, the
Board of Directors of Viad Corp, or any other Company hereunder, may
terminate, amend, alter, or modify this Plan at any time and from time to
time. Participation in the Plan shall create not right to participate in
any future year's Plan.
XI. EMPLOYEE RIGHTS:
No participant in this Plan shall be deemed to have a right to any part or
share of this Plan. This Plan does not create for any employee or
participant any right to be retained in service by any Company, nor affect
the right of any such Company to discharge any employee or participant
from employment. Except as provided for in administrative guidelines, a
participant who is not an employee of Viad Corp or one of its
subsidiaries on the date bonuses are paid will not receive a bonus
payment.
EFFECTIVE DATE:
The Plan shall be effective January 1, 1997, provided however, that any
award made under this Plan is subject to the approval of the Viad 1997
Omnibus Incentive Plan by the stockholders of Viad Corp.
16
<PAGE>
VIAD CORP
Exhibit 10.E
PERFORMANCE UNIT INCENTIVE PLAN
PURSUANT TO THE VIAD 1997 OMNIBUS INCENTIVE PLAN
AS AMENDED MARCH 23, 1999
1. PURPOSE
The purpose of the Plan is to promote the long-term interests of the
Corporation and its shareholders by providing a means for attracting and
retaining designated key executives of the Corporation and its Affiliates
through a system of cash rewards for the accomplishment of long-term
predefined objectives.
2. DEFINITIONS
The following definitions are applicable to the Plan:
"Affiliate" - Any "Parent Corporation" or "Subsidiary Corporation" of the
Corporation as such terms are defined in Section 425(e) and (f), or
the successor provisions, if any, respectively, of the Code (as
defined herein).
"Award" - The grant by the Committee of a Performance Unit or Units as
provided in the Plan.
"Board" - The Board of Directors of Viad Corp.
"Code" - The Internal Revenue Code of 1986, as amended, or its successor
general income tax law of the United States.
"Committee" - The Human Resources Committee of the Board.
"Corporation" - Viad Corp.
"Participant" - Any executive of the Corporation or any of its Affiliates
who is selected by the Committee to receive an Award.
"Performance Period" - The period of time selected by the Committee for the
purpose of determining performance goals and measuring the degree of
accomplishment. Generally, the Performance Period will be a period of
three successive fiscal years of the Corporation.
"Performance Unit Award" - An Award.
"Plan" - The Performance Unit Incentive Plan of the Corporation.
"Unit" - The basis for any Award under the Plan.
1
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3. ADMINISTRATION
The Plan shall be administered by the Committee. Except as limited by the
express provisions of the Plan, the Committee shall have sole and complete
authority and discretion to (i) select Participants and grant Awards; (ii)
determine the number of Units to be subject to Awards generally, as well as
to individual Awards granted under the Plan; iii) determine the targets
that must be achieved in order for the Awards to be payable and the other
terms and conditions upon which Awards shall be granted under the Plan;
(iv) prescribe the form and terms of instruments evidencing such grants;
and (v) establish from time to time regulations for the administration of
the Plan, interpret the Plan, and make all determinations deemed necessary
or advisable for the administration of the Plan.
4. PERFORMANCE GOALS
The Performance Unit Incentive Plan is intended to provide Participants
with a substantial incentive to achieve or surpass two pre-defined
long-range financial goals which have been selected because they are key
factors (goals) in increasing shareholder value.
The first goal for each SUBSIDIARY Participant principally emphasizes
growth in Average Three-Year Net Income.
The first goal for CORPORATE Participants also emphasizes Growth in Average
Three-Year Net Income but the target will be based on income per share from
continuing operations, the most appropriate measure in increasing
shareholder value.
The second goal for CORPORATE and SUBSIDIARY Participants is a Viad Value
Added (VVA) measure.
5. DETERMINATION OF TARGETS
A. AVERAGE THREE-YEAR GROWTH IN SUBSIDIARY EARNINGS
An appropriate average three-year net income target for the
Performance Period for each Subsidiary Company will be established
taking into account historical income, financial plan income for the
Performance Period, overall Corporate objectives, and if appropriate,
other circumstances. An appropriate range of values above and below
such target will then be selected to measure achievement above or
below the target.
B. AVERAGE GROWTH IN THREE-YEAR VIAD INCOME PER SHARE
2
<PAGE>
An appropriate average three-year "Income Per Share" from continuing
operations target for Viad Corp will be established after considering
historical income per share from continuing operations, financial plan
income for the Performance Period, overall Corporate objectives and,
if appropriate, other circumstances. An appropriate range of values
above and below such target will then be selected to measure
achievement above or below the target.
C. VALUE ADDED MEASUREMENT:
The VVA measurement is intended to place increased emphasis on
securing an adequate return to Viad on all capital employed in the
business (e.g., receivables, inventory, fixed assets, and goodwill).
VVA compares net operating income to the return required on capital
invested in the business.
In calculating the bonus pool of each Company, VVA shall mean Net
Operating Profit After Taxes (NOPAT is defined as sales minus
operating expenses minus taxes) minus a Capital Charge calculated by
multiplying a Cost of Capital times the actual Capital (Capital is
defined as net working capital plus fixed capital). Certain
adjustments are necessary to determine NOPAT and Capital, as set forth
in the VVA user guide.
D. ESTABLISHING TARGETS
The appropriate weighting of goals, targets, range of values above and
below such targets and the Performance Period to be used as a basis
for the measurement of performance for Awards under the Plan will be
determined by the Committee no later than 90 days after the beginning
of each new Performance Period during the life of the Plan, after
giving consideration to the recommendations of the Chief Executive
Officer of Viad Corp. Performance Units will be earned based upon the
degree of achievement of pre-defined targets over the Performance
Period following the date of grant. Earned Units can range, based on
operating performance using an award range of values, from 0% to 200%
of the target Units.
6. OTHER PLAN PROVISIONS
Subsidiary net income and Viad income per share from continuing operations
are determined before extraordinary items, effects of changes in accounting
principles or a change in federal income tax rates after the target has
been set. (For example, new FASB release on Accounting for Derivatives to
be effective for periods after December 15, 1999 but not considered when
targets were set). Reclassification of a major business unit to
discontinued operations status after targets have been set would also
require adjustment because of effect on Viad continuing operations
results. While gains on disposition of a business would normally not be
3
<PAGE>
included in determining income per share, in the event of the sale of a
subsidiary or major business unit, a portion of gain would be included
for the difference between the sold unit's planned net income for the
performance period and actual results to date of sale plus calculated
interest savings on proceeds for the balance of the performance period,
so that actual results are not penalized for selling a business.
There will be an addback to actual net income for any additional
intercompany interest cost (net of tax) incurred by a subsidiary as the
result of any special dividend paid (in excess of 100% of net income for a
year) during the applicable performance period. In addition, an addback to
actual net income will be allowed for any increased cost to a subsidiary
for an increase in the formula allocation of corporate overhead over
amounts included in the Plan/Forecast at the beginning of the applicable
performance period.
Incentives to be paid under this Plan must be deducted from the subsidiary
corporation's and the Corporation's earnings during the Performance Period
(generally in the third year, when the amounts to be paid can be reasonably
estimated). Goals must be achieved after deducting from actual results all
incentive compensation applicable to such performance periods, including
those incentives earned under this Plan.
7. RANGE OF PERFORMANCE AWARDS
The range of values for the Corporation's or a Subsidiary Company's net
income or income per share performance and the VVA measurement is set at a
minimum of 80% of target for threshold and capped at 120% of the target.
Notwithstanding the foregoing, targets may be established for threshold
within the range of above 80% up to and including 95% and for maximum
within the range of below 120% down to 105%, as may be designated by the
Committee; however, the Committee may, when appropriate, adjust such ranges
upward or downward.
Performance Units will be earned based upon the degree of achievement of
each of the pre-defined targets (net income or income per share and VVA)
over the Performance Period following the date of grant. A range of values
will be established for the net income or income per share target (to carry
a 70% weighting) and for the VVA measurement (to carry a 30% weighting).
8. PARTICIPANT ELIGIBILITY
Personnel will be eligible for participation as recommended by the Viad
Corp, Chief Executive Officer for approval by the Committee no later than
90 days after the beginning of each new Performance Period during the life
of the Plan, limited only to those key executives who contribute in a
substantial measure to the successful performance of the Corporation or its
Affiliates.
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<PAGE>
The Chief Executive Officer will recommend for approval by the Committee
which Affiliates among its Affiliates should be included in the Plan.
5
<PAGE>
9. AWARD DETERMINATION
The number of Units to be awarded will be determined, generally, by
multiplying a factor times the Participant's annual base salary in effect
at the time the Award is granted and dividing the result by the average of
the high and low of the Corporation's Common Stock on the date of approval
of the grant by the Committee. The Award factor will be recommended by the
Chief Executive Officer of Viad Corp for approval by the Committee annually
no later than 90 days after the beginning of each new performance period.
The Committee may adjust the number of Units awarded in its discretion.
10. GENERAL TERMS AND CONDITIONS
The Committee shall have full and complete authority and discretion, except
as expressly limited by the Plan, to grant Units and to provide the terms
and conditions (which need not be identical among Participants) thereof.
Without limiting the generality of the foregoing, the Committee may specify
a Performance Period of not less than two years or not more than five
years, rather than the three-year Performance Period provided for above,
and such time period will be substituted as appropriate to properly effect
the specified Performance Period. No Participant or any person claiming
under or through such person shall have any right or interest, whether
vested or otherwise, in the Plan or in any Award thereunder, contingent or
otherwise, unless and until all the terms, conditions, and provisions of
the Plan and its approved administrative requirements that affect such
Participant or such other person shall have been complied with. Nothing
contained in the Plan or its Administrative Guidelines shall (i) require
the Corporation to segregate cash or other property on behalf of any
Participant or (ii) affect the rights and power of the Corporation or its
Affiliates to dismiss and/or discharge any Participant at any time.
Any recapitalization, reclassification, stock split, stock dividend sale of
assets, combination or merger not otherwise provided for herein which
affects the outstanding shares of Common Stock of the Corporation or any
other change in the capitalization of the Corporation affecting the Common
Stock shall be appropriately adjusted for by the Committee or the Board,
and any such adjustments shall be final, conclusive and binding.
11. PAYMENTS OF AWARDS
(a) Performance Unit Awards which may become payable under this Plan shall
be calculated as determined by the Committee but any resulting Performance
Unit Award payable shall be subject to the following calculation: each Unit
payable shall be multiplied by the average of the daily means of the market
prices of the Corporation's Common Stock during the ten trading day period
beginning on the day following public announcement of the Corporation's
year-end financial results following the Performance Period. Distribution
of the Award will be made within ninety (90) days
6
<PAGE>
following the close of the Performance Period. For those Executive
Officers affected by Section 162(m) of the Internal Revenue Code, awards
will be subject to discretionary downward adjustment by the Committee.
(b) Performance Unit Awards granted under this Plan shall be payable during
the lifetime of the Participant to whom such Award was granted only to such
Participant; and, except as provided in (d) and (e) of this Section 7, no
such Award will be payable unless at the time of payment such Participant
is an employee of and has continuously since the grant thereof been an
employee of, the Corporation or an Affiliate. Neither absence on leave, if
approved by the Corporation, nor any transfer of employment between
Affiliates or between an Affiliate and the Corporation shall be considered
an interruption or termination of employment for purposes of this Plan.
(c) Prior to the expiration of the Performance Period, all Participants
will be provided an irrevocable option to defer all or a portion of any
earned Performance Unit Award, if there be one but not less than $1,000, in
written form as prescribed by the Board under the provisions of a deferred
compensation plan for executives of the Corporation and its Affiliates, if
one be adopted.
(d) If a Participant to whom a Performance Unit Award was granted shall
cease to be employed by the Corporation or its Affiliate for any reason
(other than death, disability, or retirement) prior to the completion of
any applicable Performance Period, said Performance Unit Award will be
withdrawn and subsequent payment in any form at any time will not be made.
(e) If a Participant to whom a Performance Unit Award was granted shall
cease to be employed by the Corporation or its Affiliate due to early,
normal, or deferred retirement, or in the event of the death or disability
of the Participant, during the Performance Period stipulated in the
Performance Unit Award, such Award shall be prorated for the period of time
from date of grant to date of retirement, disability or death, as
applicable, and become payable within ninety (90 days) following the close
of the Performance Period to the Participant or the person to whom interest
therein is transferred by will or by the laws of descent and distribution.
Performance Unit Awards shall be determined at the same time and in the
same manner (except for applicable proration) as described in Section
11(a).
(f) There shall be deducted from all payment of Awards any taxes required
to be withheld by any Federal, State, or local government and paid over to
any such government in respect to any such payment.
12. ASSIGNMENTS AND TRANSFERS
No award to any Participant under the provisions of the Plan may be
assigned, transferred, or otherwise encumbered except, in the event of
death of a Participant, by will or the laws of descent and distribution.
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<PAGE>
13. AMENDMENT OR TERMINATION
The Board may amend, suspend, or terminate the Plan or any portion thereof
at any time provided, however, that no such amendment, suspension, or
termination shall invalidate the Awards already made to any Participant
pursuant to the Plan, without his consent.
14. EFFECTIVE DATE
The Plan shall be effective January 1, 1997, provided however, that any
Award made under this Plan is subject to the approval of the Viad 1997
Omnibus Incentive Plan by the stockholders of Viad Corp.
8
<PAGE>
Exhibit 10.N
AGREEMENT
This Agreement ("Agreement") shall become effective April 1, 1999
("Effective Date") between Viad Corp, a Delaware corporation ("Corporation"),
and Richard C. Stephan ("Consultant").
Whereas, Consultant will provide services to the Corporation under the
terms of this Agreement; and
Whereas, Consultant has elected to retire as an officer and employee of
the Corporation and its subsidiaries and affiliates effective March 31, 1999;
Now, therefore, Corporation and Consultant agree as follows:
1. RETENTION AS CONSULTANT. Corporation hereby retains Consultant during
the term hereof. Consultant hereby accepts such undertaking and commits his
availability to perform the consulting services herein defined. The Vice
President-Controller of the Corporation or his designee ("Contact Person")
shall be responsible for assigning work to Consultant.
2. CONSULTING SERVICES. Consultant shall perform the following services
for the Corporation ("Services"):
a) Assist with quarterly closings;
b) Assist with year-end 1999 and 2000 closings;
c) Assist as needed on Special Projects (acquisitions, dispositions,
reorganizations, etc.); and
d) Serve as the Corporation's Representative with respect to the
Corporation's investment in the Diamondbacks baseball franchise.
Contact Person shall coordinate with Consultant as to dates or times
when Services are required, it being understood that five to seven full-time
days will be required for each quarterly closing, ten to fourteen full-time
days will be required for each year-end closing, and reasonable amounts of
time will be required to provide other Services hereunder.
3. OFFICE. The Corporation, at its sole expense, shall provide reasonable
support facilities to Consultant at Viad Tower, Phoenix, Arizona, including
parking, access to and utilization of an office, and telephone and
secretarial services.
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<PAGE>
4. TERM. The term of this Agreement shall commence April 1, 1999, for a
two-year period expiring March 31, 2001, subject to earlier termination as
provided in Section 10 ("Term").
5. COMPENSATION AND OTHER MATTERS. In consideration of the performance and
observance by Consultant of his agreements hereunder, Corporation during the
term of this Agreement shall:
a) Pay Consultant $70,000 per annum, payable pro rata on a monthly
basis in arrears;
b) Reimburse Consultant or pay directly for up to $5,000 per annum for
financial services provided to Consultant by AYCO; and
c) Provide continued coverage to Consultant under the Limited
Executive Medical Plan of the Corporation, such coverage to be
provided to Consultant at a cost equal to the COBRA premium
applicable to such coverage. Normal COBRA period for such coverage
to begin at the termination of this Agreement for the statutory
period and thereafter retiree medical premiums and coverages under
the Viad Corp Medical Plan shall apply. Equivalent coverage will be
provided in the event that COBRA is or becomes unavailable.
6. EXPENSES. Corporation shall reimburse Consultant for all reasonable,
ordinary and necessary business expenses, including business travel, incurred
by Consultant in the performance of Services hereunder, provided such
expenses are substantiated and documented as may be required by Corporation.
7. INDEPENDENT CONTRACTOR. It is the intention of the parties hereto that
Consultant shall be an independent contractor in the performance of Services
hereunder, and that nothing herein contained shall be construed to be
inconsistent with his status as an independent contractor.
Consultant hereby resigns as an officer and employee of the Corporation
effective March 31, 1999. It is understood that the fees or any other
amounts Corporation pays Consultant under this Agreement shall not be
considered salary for pension or any other purposes, and Consultant will not
be entitled to any of the other fringe and supplemental benefits of
Corporation; that Corporation shall have no liability whatsoever to
Consultant on account of this Agreement except payment of the amounts
provided for hereunder; and that Corporation shall pay no employment-related
withholding or other taxes or charges of any nature, nor be subject to
liability for any torts or other wrongs committed by Consultant.
2
<PAGE>
8. CONSULTANT SKILLS. Consultant shall devote his best efforts and skills
to the performance of Services hereunder. Consultant shall act in accordance
with his own expertise, experience, manner and methods and shall not be
subject to the supervision and control of employees or executives of the
Corporation in the day-to-day exercise of his expertise or the application of
his experience, or manner and methods of service; and Consultant shall comply
with all applicable governmental laws, rules and regulations with reference
to taxation and otherwise, provided, however, that nothing in this section
shall be construed to relieve Consultant from any obligation to act in
accordance with policies and procedures established by the Corporation with
respect to its contractors generally, or in accordance with general
instructions from the Corporation with respect to Consultant's assignments.
9. COVENANTS AND RESTRICTIONS. A material portion of the consideration to
Consultant provided herein is intended as consideration for the following
covenants and restrictions:
9.1 While representing Corporation, its subsidiaries and affiliates
hereunder, Consultant shall make no representation in any way detrimental
to their interests, nor shall Consultant at any time hold himself out as
an agent, officer or employee of any of them for any purpose, including
reporting to any governmental authority, excepting pursuant to special
powers that may be granted from time to time by the chief executive
officer of the Corporation.
9.2 Consultant agrees that during the Term and thereafter he will not
disclose to others any of Corporation's, its subsidiaries' or affiliates'
business information, including, without limitation, business plans or
strategies, financial information, organization, budget, marketing
expenditures, acquisitions, investigations, new products, customer or
supplier lists (including price lists) or any information or data of a
secret or confidential nature, unless and to the extent such information
becomes publicly available or he is instructed by the chief executive
officer of the Corporation to the contrary during the term of this
Agreement.
9.3 During the Term, Consultant shall not serve as an advisor, consultant,
agent or employee of any entity engaged in competition with Corporation or
any subsidiary or affiliate for which Consultant is performing or has
performed services hereunder.
10. TERMINATION. Either party may terminate this Agreement prior to the
expiration of the Term specified in Section 4 herein, for any reason or no
reason, on sixty (60) days' prior written notice of such termination.
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<PAGE>
11. EFFECT OF TERMINATION. Upon termination of this Agreement, Corporation
shall pay Consultant the portion of any fee or other compensation earned or
accrued up to the date of termination, but shall not be obligated to pay any
fee or other compensation in respect of any period after the date of
termination.
12. NOTICES. All notices or other relevant communications to be given
hereunder shall be in writing and shall be deemed to have been effectually
given if delivered or mailed by certified, registered, express or similar
method of mail, postage prepaid, addressed as follows:
To Consultant: Richard C. Stephan
6121 North 34th Place
Paradise Valley, Arizona 85253
To Corporation: Viad Corp
1850 North Central Avenue
Phoenix, Arizona 85077
Attn: Vice President and General Counsel
or to such other person or address as either party may notify the other in
writing. The effective date of any such notice or communication shall be the
date of mailing.
13. ENTIRE AGREEMENT. This Agreement constitutes the entire agreement and
understandings of the parties hereto with respect to the Corporation's
retention of Consultant to provide Services and supersedes any and all prior
agreements and understandings, whether oral or written, relating to such
Services. This Agreement shall not be modified or amended except by written
agreement signed by Consultant and by a duly authorized officer of
Corporation.
14. PARTIAL INVALIDITY. The invalidity, by statute, court decision or
otherwise, of any term or condition of this Agreement shall not affect the
validity or enforceability or any other term or condition hereof.
15. ASSIGNS. This Agreement shall be binding upon and shall inure to the
benefit of the successors and assigns of Corporation, whether by merger,
consolidation, sale of shares or assets or operation of law, but shall not be
assignable by Consultant.
16. OTHER MATTERS. This Agreement is entered into between Corporation and
Consultant in connection with the retirement of Consultant as an officer and
employee of the Corporation. Notwithstanding anything to the contrary
herein, it is agreed with respect to such retirement as follows:
4
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a) RETIREMENT. Consultant shall retire as an officer and employee of
the Corporation and its subsidiaries and affiliates effective March
31, 1999.
b) VACATION PAY. Consultant shall be entitled to vacation pay earned
in 1998 for 1999 (five weeks) plus vacation pay earned in 1999
through the date of Consultant's retirement (one quarter of five
weeks) in accordance with normal policy of the Corporation, less
excess vacation days taken in 1998 and any vacation days taken in
1999.
c) PENSION. Consultant shall receive his qualified pension benefit
under the Viad Corp Retirement Income Plan. No additions,
reductions, offsets or withholdings shall be made with respect to
the Supplemental Pension Trust applicable to Consultant.
d) DISCLOSURE. The retirement of Consultant as an officer and
employee of the Corporation shall be announced internally on or about
December 15, 1998. No press release or other public announcement of
Consultant's retirement shall be made without the written consent of
Consultant and Corporation.
By their signatures below, the parties hereto evidence their complete
agreement as of December 4, 1998, to all the terms and conditions hereof.
Signed this 4th day of December, 1998.
VIAD CORP CONSULTANT
/s/ Peter J. Novak /s/ Richard C. Stephan
---------------------------------- ------------------
Vice President and General Counsel
5
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Viad Corp Selected Financial and Other Data
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31, 1998 1997 1996 1995 1994
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
OPERATIONS (000 omitted)
Revenues(1) $2,542,135 $2,417,470 $2,263,228 $1,976,745 $1,806,597
====================================================================================================================================
Income from continuing operations(2) $ 150,640 $ 97,794 $ 69,071 $ 70,781 $ 61,173
Income (loss) from discontinued operations(3) (40,694) (73,465) 79,138
Extraordinary charge for early retirement of debt (8,458)
Cumulative effect of change in accounting principle(4) (13,875)
- ------------------------------------------------------------------------------------------------------------------------------------
Net income (loss) $ 150,640 $ 89,336 $ 28,377 $ (16,559) $ 140,311
====================================================================================================================================
DILUTED INCOME PER COMMON SHARE (dollars)
Continuing operations(2) $ 1.52 $ 1.03 $ 0.74 $ 0.79 $ 0.69
Discontinued operations(3) (0.44) (0.83) 0.92
Extraordinary charge (0.09)
Cumulative effect of change in accounting principle(4) (0.16)
- ------------------------------------------------------------------------------------------------------------------------------------
Diluted net income (loss) per common share $ 1.52 $ 0.94 $ 0.30 $ (0.20) $ 1.61
====================================================================================================================================
Average outstanding and potentially dilutive
common shares (000 omitted) 98,367 93,786 91,339 88,479 86,507
====================================================================================================================================
BASIC INCOME PER COMMON SHARE (dollars)
Continuing operations(2) $ 1.58 $ 1.06 $ 0.76 $ 0.80 $ 0.71
Discontinued operations(3) (0.45) (0.84) 0.93
Extraordinary charge (0.09)
Cumulative effect of change in accounting principle(4) (0.16)
- ------------------------------------------------------------------------------------------------------------------------------------
Basic net income (loss) per common share $ 1.58 $ 0.97 $ 0.31 $ (0.20) $ 1.64
====================================================================================================================================
Average outstanding common shares (000 omitted) 94,382 90,804 88,814 86,543 84,861
====================================================================================================================================
Dividends declared per common share(5) $ 0.32 $ 0.32 $ 0.48 $ 0.62 $ 0.59
====================================================================================================================================
FINANCIAL POSITION AT YEAR-END (000 omitted)
Total assets $4,802,772 $3,730,313 $3,453,312 $3,716,548 $3,228,083
Total debt(5) 534,453 410,140 521,127 889,291 741,969
$4.75 Redeemable preferred stock 6,625 6,612 6,604 6,597 6,590
Common stock and other equity(5) 645,881 529,161 432,218 548,169 555,093
====================================================================================================================================
OTHER DATA
EBITDA (000 omitted)(1,6) $ 300,405 $ 266,100 $ 240,943 $ 218,737 $ 200,633
Debt-to-capital ratio(7) 45% 43% 54% 61% 57%
Market capitalization (000 omitted)(5) $2,882,567 $1,818,276 $1,478,256 $2,605,575 $1,825,178
Stockholders of record 37,960 52,953 69,772 63,925 55,241
====================================================================================================================================
</TABLE>
(1) A Viad payment services subsidiary is investing increasing amounts in
tax-exempt securities. On a fully taxable equivalent basis using a combined
income tax rate of 39%, revenues and EBITDA would be higher by $39,309,000,
$28,724,000, $21,489,000, $16,000,000 and $7,897,000 for 1998, 1997, 1996,
1995 and 1994, respectively.
(2) Includes nonrecurring gains on sales of businesses of $32,855,000, or $0.33
per diluted share ($0.34 per basic share) and a provision for payments
previously received pursuant to patent infringement litigation of
$6,917,000, or $0.07 per diluted and basic share in 1998; and a
nonrecurring gain on the sale of Viad's interest in the Phoenix Suns of
$19,025,000, or $0.21 per diluted and basic share, and nonrecurring
spin-off costs and management transition expenses of $28,985,000, or $0.32
per diluted and basic share, in 1996. See Note C of Notes to Consolidated
Financial Statements. Excluding these items, diluted income per share was
$1.26 in 1998 and $0.85 in 1996.
(3) See Note D of Notes to Consolidated Financial Statements.
(4) Initial application of SFAS No. 121, "Accounting for the Impairment of
Long-Lived Assets and for Long-Lived Assets to Be Disposed Of."
(5) The declines in dividends declared per common share in 1997 and 1996, as
well as the decline in total debt, common stock and other equity and market
capitalization in 1996, reflect the spin-off of the consumer products
business to stockholders on August 15, 1996.
(6) EBITDA is defined as income from continuing operations before interest
expense, income taxes, depreciation and amortization and the nonrecurring
items described above. EBITDA data are presented as a measure of the
ability to service debt, fund capital expenditures and finance growth. Such
data should not be considered an alternative to net income, operating
income, cash flows from operations or other operating or liquidity
performance measures prescribed by generally accepted accounting
principles. Cash expenditures for various long-term assets, interest
expense and income taxes have been, and will be, incurred which are not
reflected in the EBITDA presentations.
(7) Debt-to-capital is defined as total debt divided by capital. Capital is
defined as total debt plus minority interests, preferred stock and common
stock and other equity.
<PAGE>
RESULTS OF OPERATIONS:
Viad Corp ("Viad") focuses on three principal service businesses: Payment
Services, Convention and Event Services and Airline Catering.
Effective June 1, 1998, Viad acquired MoneyGram Payment Systems, Inc.
("MoneyGram"), a provider of consumer money wire transfer services.
MoneyGram's operations from the date of acquisition are included in Viad's
Payment Services reportable segment.
During 1998, Viad continued to dispose of noncore businesses and assets in order
to concentrate on its core businesses. Effective April 1, 1998, Viad sold its
Aircraft Services International Group ("ASIG"), which conducted aircraft fueling
and ground-handling operations. On September 15, 1998, Viad sold its duty-free
and shipboard concessions business, Greyhound Leisure Services, Inc. ("GLSI").
As discussed further under "Recent Developments," Viad completed the sale of the
contract foodservice operations of Restaura, Inc. in late January 1999. ASIG's
and GLSI's operations are included in Viad's results through the respective sale
dates and, along with the results of the sold contract foodservice operations,
are reported under "Sold businesses" in the segment information presented in
Note Q of Notes to Consolidated Financial Statements.
In early 1997, Viad finalized the sale of Premier Cruise Lines; in May 1997,
Viad sold its corporate headquarters building; and in October 1997, Viad
completed the sale of two small United Kingdom travel tour companies, with the
gain on sale recognized in 1998 after release of all related guarantees and
bonding.
During 1996, Viad spun off its consumer products business to stockholders and
disposed of its 68.5 percent ownership interest in its Canadian intercity bus
transportation business. See Note D of Notes to Consolidated Financial
Statements.
The following discussion and analysis should be read in conjunction with the
accompanying Consolidated Financial Statements, which include the accounts of
Viad and all of its subsidiaries. All per share figures discussed are stated on
the diluted basis.
1998 vs. 1997:
Revenues for 1998 were $2.54 billion compared with $2.42 billion in 1997. A Viad
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, and excluding the effects of the sold businesses
noted previously, revenues increased 16 percent.
Net income for 1998 was $150.6 million, or $1.52 per share. Excluding the gains
on sales of businesses of $32.9 million, or $0.33 per share, and the provision
for payments previously received pursuant to patent litigation of $6.9 million,
or $0.07 per share, income was $124.7 million, or $1.26 per share. See Note C of
Notes to Consolidated Financial Statements. Income before an extraordinary
charge for 1997 was $97.8 million, or $1.03 per share. Net income for 1997 was
$89.3 million, or $0.94 per share, after deducting the extraordinary charge of
$8.5 million, or $0.09 per share, for the early retirement of debt.
<TABLE>
<CAPTION>
(000 omitted, except per share data) 1998 1997
- -------------------------------------------------------------------------
<S> <C> <C>
INCOME BEFORE EXTRAORDINARY CHARGE (1997):
BEFORE NONRECURRING ITEMS $ 124,702 $ 97,794
Gains on sales of businesses 32,855
Provision for payments previously
received pursuant to patent
infringement litigation (6,917)
- -------------------------------------------------------------------------
INCOME BEFORE EXTRAORDINARY CHARGE $ 150,640 $ 97,794
=========================================================================
DILUTED INCOME PER COMMON SHARE
BEFORE EXTRAORDINARY CHARGE:
BEFORE NONRECURRING ITEMS $ 1.26 $ 1.03
Gains on sales of businesses 0.33
Provision for payments previously
received pursuant to patent
infringement litigation (0.07)
- -------------------------------------------------------------------------
INCOME PER COMMON SHARE
BEFORE EXTRAORDINARY CHARGE $ 1.52 $ 1.03
=========================================================================
</TABLE>
There were 4.6 million more average outstanding and potentially dilutive common
shares in 1998 than in 1997, due primarily to the acquisition of Game Financial
Corporation ("Game") in December 1997 (for approximately 2.6 million shares of
Viad stock), stock option exercises and the effects of a higher Viad stock price
on the calculation of additional common shares arising from unexercised stock
options. A stock repurchase program commenced in July 1998 to replace common
shares issued upon exercise of stock options and in connection with other stock
compensation plans.
<PAGE>
PAYMENT SERVICES. Revenues of the Payment Services segment were $391.8 million
in 1998 compared to $206.2 million in 1997. On the fully taxable equivalent
basis, 1998 revenues of the Payment Services segment would be higher by $39.3
million and $28.7 million in 1998 and 1997, respectively, resulting in an 84
percent segment revenue increase. Excluding the effects in 1998 and 1997 of the
patent litigation matter discussed in Note C of Notes to Consolidated Financial
Statements, net income increased $11.5 million, or 29 percent, in 1998. These
results were accomplished despite incremental costs to remediate key systems to
be Year 2000 compliant and were driven by continuing strong growth in
traditional Travelers Express money order and official check operations,
supplemented by Game and MoneyGram results.
CONVENTION AND EVENT SERVICES. Revenues of the Convention and Event Services
segment were $849.2 million in 1998, an increase of $21.7 million, or 3 percent,
from 1997 revenues of $827.5 million. GES Exposition Services ("GES")
concentrated on eliminating low-margin business during 1998, resulting in a
disproportionately low revenue increase. Net income for the segment increased
$7.6 million, or 22 percent, to $42.9 million in 1998 from $35.3 million in
1997. Both GES and Exhibitgroup/Giltspur had solid gains in net income due to
improved cost controls and higher margin business in 1998.
AIRLINE CATERING. Revenues for the Airline Catering segment were $892.0 million,
an increase of $89.7 million, or 11 percent, over 1997 revenues of $802.3
million. Net income was $37.0 million, an 11 percent increase over that of 1997.
These results were accomplished primarily as a result of new business added over
the past year, including the acquisition of a catering kitchen in Las Vegas in
the second quarter of 1998, and by strong airline traffic. Net income grew at
the same rate as revenues despite the start-up of new and replacement kitchens
and the effects of the Northwest Airlines strike in the third quarter of 1998,
as strong cash flow resulted in lower interest expense.
TRAVEL AND RECREATION SERVICES. The ongoing travel and recreation businesses
include the Canadian travel tour service subsidiary, which operates tours and
charters in the Canadian Rockies and engages in hotel operations and snocoach
tours of the Columbia Icefield; and the Recreation Division of Viad, which
operates concessions at America West Arena and Bank One Ballpark in Phoenix,
Arizona, and also operates, through a subsidiary, the historic lodges at Glacier
National Park. Revenues of the travel and recreation businesses increased $11.7
million, or 13 percent, to $103.0 million in 1998. The revenue increase resulted
primarily from the first year's operation of concessions at Bank One Ballpark,
home of the new Arizona Diamondbacks major league baseball franchise, partially
offset by a decline in Japanese and other Asian tourism into Canada. Net income
for the travel and recreation businesses was $9.5 million, an increase of $1.7
million, or 21 percent, over that of 1997, primarily from the addition of the
Bank One Ballpark operation as well as improved cost controls.
SOLD BUSINESSES. As noted previously, the sold businesses include the results of
ASIG, GLSI, the Restaura contract foodservice operations, and the United Kingdom
travel and tour companies, Jetsave and Crystal Holidays. Revenues of the sold
businesses were $306.1 million in 1998 compared to $490.2 million in 1997. Net
income of the sold businesses was $9.2 million in 1998 compared to $18.4 million
in 1997.
CORPORATE ACTIVITIES, NET. These expenses decreased $7.4 million from 1997 to
1998. In addition to ongoing cost reduction efforts, Viad began charging its
operating companies an increased allocation of corporate expenses in 1998.
INTEREST EXPENSE. Interest expense decreased from $48.7 million in 1997 to $40.8
million in 1998. Interest expense from new borrowings for the June 1998
acquisition of MoneyGram was more than offset by the effects of repayment of
debt and termination of related interest rate swap agreements with proceeds from
the sales of noncore assets and businesses in 1997 and 1998.
INCOME TAXES. Excluding the effect of nonrecurring items, the 1998 effective tax
rate was 28.2 percent, down from 29.6 percent in 1997. The relatively low
effective tax rate is primarily attributable to increased tax-exempt investment
income.
<PAGE>
1997 vs. 1996:
Revenues for 1997 were $2.42 billion compared with $2.26 billion in 1996. On a
fully taxable equivalent basis, and excluding businesses sold, revenues rose 9
percent.
Income from continuing operations was $97.8 million, or $1.03 per share, in
1997. Before nonrecurring items, 1996 income from continuing operations was
$79.0 million, or $0.85 per share. After a nonrecurring gain on the sale of
Viad's interest in the Phoenix Suns of $19.0 million, or $0.21 per share, and
nonrecurring spin-off costs and management transition expenses of $29.0 million,
or $0.32 per share, 1996 income from continuing operations was $69.1 million, or
$0.74 per share.
Viad reported 1997 net income of $89.3 million, or $0.94 per share, compared to
$28.4 million, or $0.30 per share, in 1996. The 1997 net income is after
deducting an extraordinary charge of $8.5 million, or $0.09 per share, for early
retirement of debt. The 1996 net income is after deducting a loss from
discontinued operations of $40.7 million, or $0.44 per share. Discontinued
operations included the consumer products, Canadian intercity bus transportation
and cruise line businesses. See Note D of Notes to Consolidated Financial
Statements.
PAYMENT SERVICES. Revenues of the Payment Services companies were $206.2
million in 1997, up $36.2 million over those of 1996. On the fully taxable
equivalent basis, revenues would be higher by $28.7 million and $21.5 million
in 1997 and 1996, respectively, resulting in a 23 percent segment revenue
increase. Net income increased $7.2 million, or 21 percent. The growth over
1996 was due to an increase in money order and official check volume, as well
as business generated from several smaller acquisitions made in 1997. The
acquisition of Game was completed in December 1997 but had little impact on
1997 results.
CONVENTION AND EVENT SERVICES. Revenues of the Convention and Event Services
segment were $827.5 million, an increase of $53.5 million, or 7 percent, over
1996 revenues of $774.0 million. Included in 1996 were nonrecurring revenues
from the Atlanta Olympic Games and the Democratic National Convention. Net
income increased $3.9 million, or 13 percent, as a result of efficiencies
from the consolidation of Exhibitgroup/Giltspur facilities, better margins
from building exhibits, and improved show management cost controls at GES.
AIRLINE CATERING. Revenues of the Airline Catering segment were $802.3 million,
an increase of $68.1 million, or 9 percent, over 1996 revenues of $734.2
million. On a fully comparable basis, the revenue increase was 7 percent, as
reported 1996 revenues did not include two catering kitchens which had only been
50 percent owned in 1996 but were wholly owned in 1997. Net income increased
$2.3 million, or 7 percent, over 1996. Catering revenues and net income
increased primarily as a result of new business added during 1997, including the
acquisition of a flight kitchen in Miami and expansion of its American Airlines
business to Miami and five other new cities, which was phased in beginning in
the 1997 second quarter.
TRAVEL AND RECREATION SERVICES. Revenues and net income of the travel and
recreation businesses decreased $100,000 and $200,000, respectively, from 1996
to 1997, as a decline in Japanese tourism into Canada in the second half of 1997
was mostly offset by increased concession business at America West Arena, due to
having a full year of Phoenix Coyotes hockey games in 1997 compared to calendar
year 1996's initial (September through December) hockey schedule.
SOLD BUSINESSES. Revenues of the sold businesses described above decreased $3.4
million from 1996 to 1997, while net income from the sold businesses increased
$2.2 million over the same period, as Restaura's results recovered from 1996's
General Motors strike activity.
CORPORATE ACTIVITIES, NET. These expenses decreased $3.8 million in 1997 from
those in 1996, primarily as a result of cost reduction efforts.
INTEREST EXPENSE. Interest expense in 1997 decreased $4.4 million from that of
1996. Viad repurchased $58.4 million par value of its 10.5 percent subordinated
debentures at a premium in March 1997, resulting in the extraordinary charge for
early retirement of debt and lower ongoing interest expense. In addition,
proceeds from the sales of noncore assets and businesses resulted in lower debt
levels and reduced interest expense.
INCOME TAXES. The 1997 effective tax rate was 29.6 percent. Excluding the
effect of nonrecurring items, the 1996 effective tax rate was 30.4 percent.
The reduction in the effective tax rate results primarily from the increased
tax-exempt investment income.
<PAGE>
LIQUIDITY AND CAPITAL RESOURCES:
Proceeds from the previously discussed sales of noncore assets and businesses
in 1997 and 1998 were used to repay short-term borrowings and, in 1998, to
terminate certain related interest rate swap agreements, resulting in lower
ongoing interest expense.
In mid-1998, Viad completed its cash tender offer for MoneyGram at $17.35 per
share, for a total acquisition cost of approximately $286.5 million. The
acquisition was financed with cash and short-term borrowings supported by Viad's
long-term revolving bank credit agreement.
Viad's total debt at December 31, 1998, was $534.5 million compared with $410.1
million at December 31, 1997. The debt-to-capital ratio at December 31, 1998,
was 0.45 to 1, up slightly from 0.43 to 1 at December 31, 1997. Capital is
defined as total debt plus minority interests, preferred stock and common stock
and other equity.
Under a Shelf Registration filed in 1994 with the Securities and Exchange
Commission, Viad can issue up to an aggregate $500 million of debt and equity
securities. No securities have yet been issued under the program.
With respect to working capital, in order to minimize the effects of borrowing
costs on earnings, Viad strives to maintain current assets (principally cash,
inventories and receivables) at the lowest practicable levels while at the same
time taking advantage of the payment terms offered by trade creditors and
obtaining advance deposits from customers for certain projects and services.
These efforts notwithstanding, working capital requirements fluctuate
significantly from seasonal factors as well as changes in levels of receivables
and inventories caused by numerous business factors.
Viad satisfies a portion of its working capital and other financing
requirements with short-term borrowings (through commercial paper, bank note
programs and bank lines of credit) and the sale of trade accounts receivable.
As discussed in Note I of Notes to Consolidated Financial Statements,
short-term borrowings are supported by a $300 million long-term revolving
bank credit agreement.
As discussed in Note O of Notes to Consolidated Financial Statements, Viad has
an agreement to sell up to $75 million of trade accounts receivable under which
the purchaser has agreed to invest collected amounts in new purchases on a
revolving basis. The accounts receivable sold totaled $75 million at December
31, 1998. The agreement expires in August 1999 but is expected to be extended
annually.
During July 1998, Viad announced a stock repurchase program for the purpose of
replacing common shares issued upon exercise of stock options and in connection
with other stock compensation plans, with the intended effect of reducing
dilution caused by the issuance of such shares. In 1998, a total of 909,000
shares were purchased under the program for $23 million. Total proceeds received
from the issuances of treasury stock related to stock option exercises in 1998
were $17 million.
Capital spending has been reduced by obtaining, where appropriate, equipment
and other property under operating leases. Viad's capital asset needs and
working capital requirements are expected to be financed primarily with
internally generated funds.
Cash flows from operations, trade accounts receivable sales and proceeds from
the sales of noncore businesses and assets during the past three years have
generally been sufficient to fund capital expenditures, purchase businesses and
pay cash dividends to stockholders. Viad expects these trends to continue, with
operating cash flows and, to a lesser extent, proceeds from the sale of noncore
businesses and assets generally being sufficient to finance its business. Should
financing requirements exceed such sources of funds, Viad believes it has
adequate external financing sources available, including Viad's $300 million
long-term revolving bank credit agreement and its $500 million Shelf
Registration, to cover any such shortfall.
EBITDA 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, defined as income from
continuing operations before interest expense, income taxes, depreciation and
amortization and nonrecurring items and including the fully taxable equivalent
adjustment, increased 15 percent to $340 million in 1998, while EBITDA in 1997
increased 12 percent to $295 million.
<PAGE>
Viad's payment service operations generate funds from the sale of money orders
and other payment instruments (classified as "Payment service obligations"). The
proceeds of such sales are invested by a payment services subsidiary, in
accordance with applicable state laws, in high-quality, readily liquid debt
instruments (classified, along with cash on hand and cash in transit from
agents, as "Funds, agents' receivables and current maturities of investments
restricted for payment service obligations"), which before consolidating
eliminations included investment-grade commercial paper issued by Viad and
supported along with the rest of Viad's outstanding commercial paper by a credit
commitment under a long-term revolving bank credit agreement, as described in
Note I of Notes to Consolidated Financial Statements; and in a portfolio of
longer-term high-quality investments (approximately 99 percent of the
investments at December 31, 1998, have ratings of A- or higher or are
collateralized by federal agency securities), including federal, state and
municipal obligations, asset-backed securities and corporate debt securities
(classified as "Investments restricted for payment service obligations"). These
investments are restricted by state regulatory agencies for use by the payment
services subsidiary to satisfy the liability to pay, upon presentment, the face
amount of such payment service obligations. Accordingly such restricted assets
are not available to satisfy working capital or other financing requirements of
Viad. Fluctuations in the balances of payment service assets and obligations
result from varying levels of sales of money orders and other payment
instruments, the timing of the collections of agents' receivables and the timing
of the presentment of such instruments.
In September 1997, Viad's payment services subsidiary entered into a
five-year agreement to sell, on a periodic basis, undivided percentage
ownership interests in certain receivables in an amount not to exceed $250
million. In June 1998, the maximum amount to be sold under the agreement was
increased to $400 million, and the expiration date was extended to June 30,
2003. Items in the program include receivables from bill payment and money
order agents. The receivables are sold in order to accelerate payment
services' cash flow for investments in admissible securities.
As discussed in Note J of Notes to Consolidated Financial Statements, Viad sold
treasury stock in 1992 to Viad's Employee Equity Trust (the "Trust") for a $200
million promissory note. This Trust is being used to fund certain existing
employee compensation and benefit plans over the scheduled 15-year term of the
Trust. For financial reporting purposes, the Trust is consolidated with Viad.
The fair market value of the shares held by the Trust, representing unearned
employee benefits, was recorded as a deduction from common stock and other
equity, and is reduced as employee benefits are funded. At December 31, 1998, a
total of 4,495,736 shares remained in the Trust and were available to fund
future benefit obligations.
As indicated in Note M of Notes to Consolidated Financial Statements, Viad has
certain unfunded pension and other postretirement benefit plans that require
payments over extended periods of time. Such future benefit payments are not
expected to materially affect Viad's liquidity.
As of December 31, 1998, Viad has recorded U.S. deferred income tax assets
totaling $109 million, which Viad believes to be fully realizable in future
years. The realization of such benefits will require average annual taxable
income over the next 15 years (the current Federal net operating loss
carryforward period) of approximately $21 million. Viad's average U.S. pretax
income from continuing operations, exclusive of nondeductible goodwill
amortization and minority interests, over the past three years has been $146
million. Furthermore, $48 million of the deferred income tax benefits relate to
unfunded pension, compensation and other employee benefits which will become
deductible for income tax purposes as paid, which will occur over extended
periods of time.
Viad is subject to various environmental laws and regulations of the United
States as well as of the states and other countries in whose jurisdictions Viad
has or had operations and is subject to certain international agreements. As is
the case with many companies, Viad faces exposure to actual or potential claims
and lawsuits involving environmental matters. Although Viad is a party to
certain environmental disputes, Viad believes that any liabilities resulting
therefrom, after taking into consideration amounts already provided for,
exclusive of any potential insurance recovery, should not have a material effect
on Viad's financial position or results of operations.
<PAGE>
QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK:
Viad's primary market risk exposure is interest rate risk.
As discussed in Notes A and F of Notes to Consolidated Financial Statements,
Viad's portfolio of investment securities arises primarily from the sale of
payment instruments (principally money orders and official checks) by a Viad
payment services subsidiary. The proceeds of such sales are invested in
permissible securities (primarily debt instruments), in accordance with
applicable state laws, pending the settlement, upon presentment, of the payment
instrument obligations. Although Viad's investment portfolio exposes Viad to
certain credit risks, Viad believes the high quality of its investments reduces
this risk substantially (approximately 99 percent of the investments at December
31, 1998, have ratings of A- or higher or are collateralized by federal agency
securities).
As discussed in Note O of Notes to Consolidated Financial Statements,
derivatives are used as part of Viad's risk management strategy to manage
exposure to fluctuations in short-term interest rates. Derivatives are not used
for speculative purposes.
A portion of Viad's payment services business involves the payment of
commissions to selling agents of its official check program. A Viad payment
services subsidiary has also entered into agreements to sell receivables from
its bill payment and money order agents. The commissions and expense of selling
receivables are computed based on short-term variable interest rates, and thus
Viad is subject to risk arising from changes in such rates. Viad has hedged a
substantial portion of this risk through the purchase of swap agreements which
convert the variable rate payments to a fixed rate.
Viad is also exposed to short-term interest rate risk on certain of its debt
obligations and trade accounts receivable sales. Viad currently does not use
derivative financial instruments to hedge cash flows for such obligations.
A 10 percent proportionate increase (decrease) in short-term interest rates in
1999, as compared to the average level of interest rates in 1998, would result
in an increase (decrease) in pre-tax income of approximately $900,000. This
estimate takes into consideration expected investment positions, commissions
paid to selling agents, growth in new business, agents' receivable sales and the
effects of the swap agreements. The estimate also assumes that the borrowing
level and trade accounts receivable sales levels subject to fluctuating interest
rates will approximate 1998 levels.
READINESS FOR THE YEAR 2000:
Viad is continuing the implementation of initiatives necessary to make its
systems, products and infrastructure "Year 2000" compliant on a timely basis,
including replacing and/or updating certain systems. Internal initiatives to
address Year 2000 compliance within each business unit have been broken down
into various phases, including the following:
1. Identification of business systems and applications subject to Year 2000
risk;
2. Assessment of such business systems and applications to determine the
appropriate method of correcting Year 2000 problems;
3. Implementation of corrective measures to bring systems and applications to
Year 2000 compliance;
4. Testing and maintaining Year 2000 compliance.
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. Viad's entire Year 2000 project is expected to be
completed by mid-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
$13.5 million, of which approximately 60 percent and 10 percent was expensed in
1998 and 1997, respectively. 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, with the
remaining systems scheduled for completion by the end of 1999's first
<PAGE>
quarter. The Year 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 is also communicating with key vendors, service providers, customers and
other third parties with whom business is conducted to determine the nature
of any impact of Year 2000 issues on Viad. While Viad does not anticipate
any material adverse effect on its business or its financial position or
results of operations as a result of failure of such parties to achieve Year
2000 readiness, no assurance can be given that the parties on whom Viad
relies will have accurately assessed and completed their Year 2000
remediation requirements. Viad's aggregate cost estimate does not include any
expenses that may be incurred as a result of the failure of any such parties
to become Year 2000 compliant.
In response to a specific requirement set forth in a recent Securities and
Exchange Commission release, Viad believes that the most reasonably likely worst
case scenario would involve the failure by Viad to achieve timely Year 2000
compliance of its remaining systems and/or the failure of third parties to be
Year 2000 compliant, which in turn would result in increased costs associated
with additional staffing and remediation efforts to address shortfalls in
systems compliance and increased costs to meet processing, service and
production requirements, all of which could have a material adverse effect on
Viad and its results of operations. As a part of its Year 2000 initiative, Viad
is developing contingency plans for actions that would need to be taken in the
event any critical system of Viad and/or key vendors, service providers,
customers and other third parties with whom Viad conducts business was not Year
2000 compliant.
Viad believes, based on information available to date, that it will be able to
accomplish its total Year 2000 transition by mid-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.
RECENT DEVELOPMENTS:
In late January 1999, Viad completed the sale of the contract foodservice
operations of Restaura, Inc. Viad is retaining Restaura's leisure and
entertainment group that includes the restaurant and concession contracts at
Bank One Ballpark and America West Arena, as well as Glacier Park, Inc. The sale
will be recorded in the first quarter of 1999. Proceeds from the sale will be
used to reduce debt and acquire growth businesses in Viad's core subsidiaries.
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 Annual Report includes certain
forward-looking statements, assumptions and discussions, including those
relating to expectations of or current trends in airline traffic, 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, the rate of expansion of flights to new
locations, consumer demand patterns, purchasing decisions related to customer
demand for convention and event services, existing and new competition, industry
alliances, 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
Annual Report.
<PAGE>
VIAD CORP CONSOLIDATED BALANCE SHEET
<TABLE>
<CAPTION>
DECEMBER 31, (000 omitted, except share data) 1998 1997
- ----------------------------------------------------------------------------------------------------------------
<S> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents $ 5,197 $ 12,341
Receivables 128,939 131,620
Inventories 73,059 105,331
Deferred income taxes 38,063 29,444
Other current assets 36,867 29,207
- ----------------------------------------------------------------------------------------------------------------
282,125 307,943
Funds, agents' receivables and current maturities of investments
restricted for payment service obligations, after
eliminating $90,000 invested in Viad commercial paper 561,266 617,887
- ----------------------------------------------------------------------------------------------------------------
Total current assets 843,391 925,830
Investments restricted for payment service obligations 2,415,588 1,615,464
Property and equipment 467,577 470,052
Other investments and assets 137,599 113,274
Deferred income taxes 70,860 74,659
Intangibles 867,757 531,034
- ----------------------------------------------------------------------------------------------------------------
$4,802,772 $3,730,313
================================================================================================================
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable $ 136,805 $ 145,641
Accrued compensation 92,460 75,589
Other current liabilities 164,148 134,477
Current portion of long-term debt 3,105 32,291
- ----------------------------------------------------------------------------------------------------------------
396,518 387,998
Payment service obligations 2,999,930 2,248,004
- ----------------------------------------------------------------------------------------------------------------
Total current liabilities 3,396,448 2,636,002
Long-term debt 531,348 377,849
Pension and other benefits 80,752 62,988
Other deferred items and insurance liabilities 138,622 109,323
Commitments and contingent liabilities (Notes N, O and P)
Minority interests 3,096 8,378
$4.75 Redeemable preferred stock 6,625 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 327,866 291,414
Retained income 328,305 209,127
Unearned employee benefits and other (162,543) (121,968)
Accumulated other comprehensive income:
Unrealized gain on securities classified as
available for sale, net of tax 18,231 13,625
Cumulative translation adjustments (7,009) (3,022)
Common stock in treasury, at cost, 344,858 and 516,926 shares (8,579) (9,625)
- ----------------------------------------------------------------------------------------------------------------
Total common stock and other equity 645,881 529,161
- ----------------------------------------------------------------------------------------------------------------
$4,802,772 $3,730,313
================================================================================================================
</TABLE>
See Notes to Consolidated Financial Statements.
<PAGE>
VIAD CORP CONSOLIDATED STATEMENT OF INCOME
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31, (000 omitted, except per share data) 1998 1997 1996
- -------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
REVENUES $2,542,135 $2,417,470 $2,263,228
- -------------------------------------------------------------------------------------------------------------------------------
Costs and expenses:
Costs of sales and services 2,303,548 2,199,340 2,061,875
Corporate activities, net 21,913 29,294 33,102
Interest expense 40,818 48,652 53,019
Nonrecurring items:
Gains on sales of businesses (54,639)
Provision for payments previously received
pursuant to patent infringement litigation 10,642
Gain on sale of interest in Phoenix Suns (30,489)
Spin-off costs and management transition expenses 33,000
Minority interests 2,165 1,237 1,752
- -------------------------------------------------------------------------------------------------------------------------------
2,324,447 2,278,523 2,152,259
- -------------------------------------------------------------------------------------------------------------------------------
Income before income taxes 217,688 138,947 110,969
Income taxes 67,048 41,153 41,898
- -------------------------------------------------------------------------------------------------------------------------------
INCOME FROM CONTINUING OPERATIONS 150,640 97,794 69,071
Loss from discontinued operations (40,694)
- -------------------------------------------------------------------------------------------------------------------------------
Income before extraordinary charge 150,640 97,794 28,377
Extraordinary charge for early retirement of debt, net of tax
benefit of $4,554 (8,458)
- -------------------------------------------------------------------------------------------------------------------------------
NET INCOME $ 150,640 $ 89,336 $ 28,377
===============================================================================================================================
DILUTED INCOME PER COMMON SHARE
Continuing operations $ 1.52 $ 1.03 $ 0.74
Discontinued operations (0.44)
- -------------------------------------------------------------------------------------------------------------------------------
Income before extraordinary charge 1.52 1.03 0.30
Extraordinary charge (0.09)
- -------------------------------------------------------------------------------------------------------------------------------
Diluted net income per common share $ 1.52 $ 0.94 $ 0.30
===============================================================================================================================
Average outstanding and potentially dilutive common shares 98,367 93,786 91,339
===============================================================================================================================
BASIC INCOME PER COMMON SHARE
Continuing operations $ 1.58 $ 1.06 $ 0.76
Discontinued operations (0.45)
- -------------------------------------------------------------------------------------------------------------------------------
Income before extraordinary charge 1.58 1.06 0.31
Extraordinary charge (0.09)
- -------------------------------------------------------------------------------------------------------------------------------
Basic net income per common share $ 1.58 $ 0.97 $ 0.31
===============================================================================================================================
Average outstanding common shares 94,382 90,804 88,814
===============================================================================================================================
Dividends declared per common share $ 0.32 $ 0.32 $ 0.48
===============================================================================================================================
</TABLE>
See Notes to Consolidated Financial Statements.
<PAGE>
VIAD CORP CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31, (000 omitted) 1998 1997 1996
- -------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
NET INCOME $150,640 $ 89,336 $ 28,377
Other comprehensive income:
Unrealized gain (loss) on securities classified as available for sale:
Holding gains (losses) arising during the period, net of
tax provision (benefit) of $7,562, $11,410 and $(56) 11,827 17,846 (87)
Reclassification adjustment for net realized gains included in net
income, net of tax provision of $4,617, $2,830 and $745 (7,221) (4,426) (1,164)
- -------------------------------------------------------------------------------------------------------------------------------
4,606 13,420 (1,251)
- -------------------------------------------------------------------------------------------------------------------------------
Unrealized foreign currency translation adjustments:
Holding gains (losses) arising during the period (4,038) (2,591) 19
Reclassification adjustment for sales of investments in
foreign entities included in net income 51 1,088 12,266
- -------------------------------------------------------------------------------------------------------------------------------
(3,987) (1,503) 12,285
- -------------------------------------------------------------------------------------------------------------------------------
Other comprehensive income 619 11,917 11,034
- -------------------------------------------------------------------------------------------------------------------------------
Comprehensive income $151,259 $101,253 $ 39,411
===============================================================================================================================
</TABLE>
See Notes to Consolidated Financial Statements.
<PAGE>
VIAD CORP CONSOLIDATED STATEMENT OF COMMON STOCK AND OTHER EQUITY
<TABLE>
<CAPTION>
Common Shares
---------------------------------------
Employee
Equity Common
(000 omitted) Issued Trust Treasury Stock
- -------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
BALANCE, DECEMBER 31, 1995 97,109 (6,279) (2,878) $ 145,663
Net income
Dividends on common and preferred stock
Distribution of consumer products business to Viad stockholders
Disposition of Canadian intercity bus transportation business
Treasury shares issued in connection with dividend reinvestment plan 517
Employee benefit plans 608 1,200
Employee Equity Trust adjustment to market value
Unrealized translation gain
Unrealized loss on securities classified as available for sale
Other, net (2)
- -------------------------------------------------------------------------------------------------------------------------------
BALANCE, DECEMBER 31, 1996 97,109 (5,671) (1,163) 145,663
Net income
Dividends on common and preferred stock
Treasury shares acquired in connection with dividend reinvestment plan (90)
Employee benefit plans 598 797
Employee Equity Trust adjustment to market value
Acquisition of subsidiary accounted for as a pooling of interests 2,631 3,947
Unrealized translation loss
Unrealized gain on securities classified as available for sale
Other, net (61)
- -------------------------------------------------------------------------------------------------------------------------------
BALANCE, DECEMBER 31, 1997 99,740 (5,073) (517) 149,610
Net income
Dividends on common and preferred stock
Employee benefit plans 577 1,081
Employee Equity Trust adjustment to market value
Treasury shares acquired (909)
Unrealized translation loss
Unrealized gain on securities classified as available for sale
Other, net
- -------------------------------------------------------------------------------------------------------------------------------
BALANCE, DECEMBER 31, 1998 99,740 (4,496) (345) $ 149,610
===============================================================================================================================
</TABLE>
See Notes to Consolidated Financial Statements.
<PAGE>
<TABLE>
<CAPTION>
Unearned
Employee
Additional Retained Benefits
(000 omitted) Capital Income and Other
- ----------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
BALANCE, DECEMBER 31, 1995 $ 362,205 $ 322,439 $ (213,996)
Net income 28,377
Dividends on common and preferred stock (43,869)
Distribution of consumer products business to Viad stockholders (88,607) (160,026) 88,607
Disposition of Canadian intercity bus transportation business
Treasury shares issued in connection with dividend reinvestment plan 3,168
Employee benefit plans (7,916) 20,045
Employee Equity Trust adjustment to market value 13,422 (13,422)
Unrealized translation gain
Unrealized loss on securities classified as available for sale
Other, net (69) (257)
- ----------------------------------------------------------------------------------------------------------------------
BALANCE, DECEMBER 31, 1996 282,203 146,664 (118,766)
Net income 89,336
Dividends on common and preferred stock (30,295)
Treasury shares acquired in connection with dividend reinvestment plan (329)
Employee benefit plans (7,017) 11,591
Employee Equity Trust adjustment to market value 14,793 (14,793)
Acquisition of subsidiary accounted for as a pooling of interests 875 4,382
Unrealized translation loss
Unrealized gain on securities classified as available for sale
Other, net 889 (960)
- ----------------------------------------------------------------------------------------------------------------------
BALANCE, DECEMBER 31, 1997 291,414 209,127 (121,968)
Net income 150,640
Dividends on common and preferred stock (31,480)
Employee benefit plans (15,422) 11,317
Employee Equity Trust adjustment to market value 51,892 (51,892)
Treasury shares acquired
Unrealized translation loss
Unrealized gain on securities classified as available for sale
Other, net (18) 18
- ----------------------------------------------------------------------------------------------------------------------
BALANCE, DECEMBER 31, 1998 $ 327,866 $ 328,305 $ (162,543)
======================================================================================================================
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
Accumulated Other Comprehensive Income
-------------------------------------------------------
Unrealized Gain
on Securities Subtotal
Classified as Cumulative Accumulated Other
Available Translation Comprehensive
(000 omitted) for Sale Adjustments Income
- -------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
BALANCE, DECEMBER 31, 1995 $ 1,456 $ (18,380) $ (16,924)
Net income
Dividends on common and preferred stock
Distribution of consumer products business to Viad stockholders 4,576 4,576
Disposition of Canadian intercity bus transportation business 12,266 12,266
Treasury shares issued in connection with dividend reinvestment plan
Employee benefit plans
Employee Equity Trust adjustment to market value
Unrealized translation gain 19 19
Unrealized loss on securities classified as available for sale (1,251) (1,251)
Other, net
- -------------------------------------------------------------------------------------------------------------------------------
BALANCE, DECEMBER 31, 1996 205 (1,519) (1,314)
Net income
Dividends on common and preferred stock
Treasury shares acquired in connection with dividend reinvestment plan
Employee benefit plans
Employee Equity Trust adjustment to market value
Acquisition of subsidiary accounted for as a pooling of interests
Unrealized translation loss (1,503) (1,503)
Unrealized gain on securities classified as available for sale 13,420 13,420
Other, net
- -------------------------------------------------------------------------------------------------------------------------------
BALANCE, DECEMBER 31, 1997 13,625 (3,022) 10,603
Net income
Dividends on common and preferred stock
Employee benefit plans
Employee Equity Trust adjustment to market value
Treasury shares acquired
Unrealized translation loss (3,987) (3,987)
Unrealized gain on securities classified as available for sale 4,606 4,606
Other, net
- -------------------------------------------------------------------------------------------------------------------------------
BALANCE, DECEMBER 31, 1998 $ 18,231 $ (7,009) $ 11,222
===============================================================================================================================
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
Common
Stock in
(000 omitted) Treasury Total
- -------------------------------------------------------------------------------------------------------
<S> <C> <C>
BALANCE, DECEMBER 31, 1995 $ (51,218) $ 548,169
Net income 28,377
Dividends on common and preferred stock (43,869)
Distribution of consumer products business to Viad stockholders (155,450)
Disposition of Canadian intercity bus transportation business 12,266
Treasury shares issued in connection with dividend reinvestment plan 9,417 12,585
Employee benefit plans 19,584 31,713
Employee Equity Trust adjustment to market value --
Unrealized translation gain 19
Unrealized loss on securities classified as available for sale (1,251)
Other, net (15) (341)
- -------------------------------------------------------------------------------------------------------
BALANCE, DECEMBER 31, 1996 (22,232) 432,218
Net income 89,336
Dividends on common and preferred stock (30,295)
Treasury shares acquired in connection with dividend reinvestment plan (1,817) (2,146)
Employee benefit plans 15,410 19,984
Employee Equity Trust adjustment to market value --
Acquisition of subsidiary accounted for as a pooling of interests 9,204
Unrealized translation loss (1,503)
Unrealized gain on securities classified as available for sale 13,420
Other, net (986) (1,057)
- -------------------------------------------------------------------------------------------------------
BALANCE, DECEMBER 31, 1997 (9,625) 529,161
Net income 150,640
Dividends on common and preferred stock (31,480)
Employee benefit plans 24,027 19,922
Employee Equity Trust adjustment to market value --
Treasury shares acquired (22,979) (22,979)
Unrealized translation loss (3,987)
Unrealized gain on securities classified as available for sale 4,606
Other, net (2) (2)
- -------------------------------------------------------------------------------------------------------
BALANCE, DECEMBER 31, 1998 $ (8,579) $ 645,881
=======================================================================================================
</TABLE>
<PAGE>
VIAD CORP CONSOLIDATED STATEMENT OF CASH FLOWS
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31, (000 omitted) 1998 1997 1996
- -------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
CASH FLOWS PROVIDED (USED) BY OPERATING ACTIVITIES
Net income $ 150,640 $ 89,336 $ 28,377
Adjustments to reconcile net income to net cash provided
by operating activities:
Depreciation and amortization 85,896 78,501 74,444
Deferred income taxes (905) 846 8,685
Spin-off costs and management transition expenses 33,000
Loss from discontinued operations 40,694
Extraordinary charge for early retirement of debt 8,458
Gains on sales of businesses, property and other assets, net (72,885) (17,341) (42,382)
Other noncash items, net 15,227 10,352 13,774
Change in operating assets and liabilities:
Receivables and inventories (26,964) (21,057) 10,356
Payment service assets and obligations, net 779,217 466,559 236,736
Accounts payable and accrued compensation 24,683 13,097 38,472
Other assets and liabilities, net (38,053) (44,188) (73,896)
- -------------------------------------------------------------------------------------------------------------------------------
Net cash provided by operating activities 916,856 584,563 368,260
- -------------------------------------------------------------------------------------------------------------------------------
CASH FLOWS PROVIDED (USED) BY INVESTING ACTIVITIES
Capital expenditures (77,317) (107,973) (82,149)
Purchase of asset previously leased (20,986)
Acquisitions of businesses, net of cash acquired (351,900) (19,017) (21,731)
Proceeds from sales of businesses, property and other assets, net 194,247 205,059 62,061
Investments restricted for payment service obligations:
Proceeds from sales and maturities of securities classified
as available for sale 839,128 819,813 581,192
Proceeds from maturities of securities classified as held to maturity 103,231 48,201 25,584
Purchases of securities classified as available for sale (1,602,002) (1,141,753) (630,685)
Purchases of securities classified as held to maturity (96,309) (191,340) (241,616)
Investments in and advances (to) from discontinued operations, net (21,337) 33,156
- -------------------------------------------------------------------------------------------------------------------------------
Net cash used by investing activities (990,922) (429,333) (274,188)
- -------------------------------------------------------------------------------------------------------------------------------
CASH FLOWS PROVIDED (USED) BY FINANCING ACTIVITIES
Proceeds from long-term borrowings 3,926
Payments on long-term borrowings (32,639) (76,046) (77,615)
Premium paid upon early retirement of debt (13,012)
Net change in short-term borrowings classified as long-term debt 150,000 (34,000) (12,888)
Dividends on common and preferred stock (31,480) (30,295) (43,869)
Proceeds from issuances of treasury stock 17,216 12,466 40,032
Common stock purchased for treasury (22,979)
Cash payments on interest rate swap agreements related to debt (17,122) (6,424) (13,255)
- -------------------------------------------------------------------------------------------------------------------------------
Net cash provided (used) by financing activities 66,922 (147,311) (107,595)
- -------------------------------------------------------------------------------------------------------------------------------
Net increase (decrease) in cash and cash equivalents (7,144) 7,919 (13,523)
Cash and cash equivalents, beginning of year 12,341 4,422 17,945
- -------------------------------------------------------------------------------------------------------------------------------
CASH AND CASH EQUIVALENTS, END OF YEAR $ 5,197 $ 12,341 $ 4,422
===============================================================================================================================
</TABLE>
See Notes to Consolidated Financial Statements.
<PAGE>
Viad Corp Notes to Consolidated Financial Statements
Years ended December 31, 1998, 1997 and 1996
A. SIGNIFICANT ACCOUNTING POLICIES
PRINCIPLES OF CONSOLIDATION. The Consolidated Financial Statements of Viad Corp
("Viad") include the accounts of Viad and all of its subsidiaries.
The Consolidated Financial Statements are prepared in accordance with generally
accepted accounting principles, which require management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and
disclosures at the date of the financial statements and the reported results of
operations during the period. Actual results may vary from those estimates.
Intercompany accounts and transactions between Viad and its subsidiaries have
been eliminated in consolidation. Described below are those accounting policies
significant to Viad, including those selected from acceptable alternatives.
CASH EQUIVALENTS. Viad considers all highly liquid investments with original
maturities of three months or less as cash equivalents.
INVENTORIES. Inventories, which consist primarily of exhibit materials, food and
supplies used in providing services, are stated at the lower of cost (first-in,
first-out and average cost methods) or market.
FUNDS AND AGENTS' RECEIVABLES AND INVESTMENTS RESTRICTED FOR PAYMENT SERVICE
OBLIGATIONS. A Viad 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 primarily in permissible securities, principally debt instruments
(classified, along with cash on hand and cash in transit from agents, as
"Funds, agents' receivables and current maturities of investments restricted
for payment service obligations"), which before consolidating eliminations,
included investment-grade commercial paper issued by Viad and supported along
with the rest of Viad's outstanding commercial paper by a credit commitment
under a long-term revolving bank credit agreement, as described in Note I;
and in a portfolio of high-quality, longer-term debt instruments
(approximately 99% of the investments at December 31, 1998, have ratings of
A- or higher or are collateralized by federal agency securities), including
federal, state and municipal obligations, asset-backed securities and
corporate debt securities (classified as "Investments restricted for payment
service obligations"). These investments are restricted by state regulatory
agencies for use by Viad's payment services subsidiary to satisfy the
liability to pay, upon presentment, the face amount of such payment service
obligations. Accordingly, such restricted assets are not available to satisfy
working capital or other financing requirements of Viad.
In accordance with Statement of Financial Accounting Standards ("SFAS") No. 115,
"Accounting for Certain Investments in Debt and Equity Securities," Viad
classifies securities as either available for sale or held to maturity.
LONG-LIVED ASSETS. Viad reviews the carrying values of its long-lived assets and
identifiable intangibles for possible impairment whenever events or changes in
circumstances indicate that the carrying amount may not be recoverable in
accordance with the provisions of SFAS No. 121, "Accounting for the Impairment
of Long-Lived Assets and for Long-Lived Assets to Be Disposed Of."
PROPERTY AND EQUIPMENT. Property and equipment are stated at cost, net of
impairment write-downs and accumulated depreciation. Property and equipment are
depreciated principally over the following useful lives: buildings, from 15 to
40 years; equipment, from 3 to 10 years; and leasehold improvements over the
lesser of the lease term or useful life.
INTANGIBLES. Intangibles are carried at cost less accumulated amortization.
Intangibles are amortized on the straight-line method over the estimated lives
or periods of expected benefit, but not in excess of 40 years. Viad evaluates
the carrying value of goodwill and other intangible assets at each reporting
period for possible impairment in accordance with the provisions of SFAS No.
121.
PENSION AND OTHER BENEFITS. Trusteed, noncontributory pension plans cover a
significant portion of employees, with benefit levels supplemented in most
cases by defined matching company stock contributions to employees' 401(k)
plans. The 401(k) plans are available to almost all employees, including
those not covered by the defined benefit plans. Defined benefits are based
primarily on final average pay and years of service. Funding policies provide
that payments to defined benefit pension trusts shall be at least equal to
the minimum funding required by applicable regulations. Certain defined
pension benefits, primarily those in excess of benefit levels permitted under
qualified pension plans, are unfunded.
Viad has unfunded defined benefit postretirement plans that provide medical and
life insurance for certain eligible employees, retirees and dependents. The
related postretirement benefit liabilities are recognized over the period that
services are provided by employees.
DERIVATIVES. Derivatives are used as part of Viad's risk management strategy to
manage exposure to fluctuations in interest rates. Derivatives are not used for
speculative purposes. Amounts receivable or payable under swap agreements are
accrued and recognized as an adjustment to the expense of the related
transaction.
In June 1998, the Financial Accounting Standards Board ("FASB") issued SFAS No.
133, "Accounting for Derivative Instruments and Hedging Activities." SFAS No.
133, which will be effective for Viad's financial statements as of January 1,
2000, requires that entities record all derivatives as assets or liabilities,
measured at fair value, with the change in fair value recognized in earnings or
in other comprehensive income, depending on the use of the derivative and
whether it qualifies for hedge accounting. Viad is in the process of evaluating
the impact which will result upon adoption of this standard.
STOCK-BASED COMPENSATION. As permitted by SFAS No. 123, "Accounting for
Stock-Based Compensation," Viad uses the intrinsic value method prescribed by
APB No. 25, "Accounting for Stock Issued to Employees," and related
interpretations in accounting for its stock-based compensation plans.
NET INCOME PER COMMON SHARE. Employee Stock Ownership Plan ("ESOP") shares are
treated as outstanding for net income per share calculations. Shares held by the
Employee Equity Trust (the "Trust") are not considered outstanding for net
income per share calculations until the shares are released from the Trust.
RECLASSIFICATIONS. Certain prior year amounts have been reclassified to conform
with the 1998 presentation.
<PAGE>
B. ACQUISITIONS OF BUSINESSES
Effective June 1, 1998, Viad acquired MoneyGram Payment Systems, Inc.
("MoneyGram"), a provider of consumer money wire transfer services. Also during
1998, Viad acquired an airline catering flight kitchen as well as several
convention and event services companies.
During 1997, Viad acquired an airline catering flight kitchen and several
payment services businesses, including the nation's largest processor of rebate
checks and a regional money order business. In addition, in December 1997, Viad
acquired all of the common stock of Game Financial Corporation ("Game") in
exchange for 2,631,000 shares of Viad's common stock. Game provides cash access
services to casinos and other gaming establishments. The Game acquisition was
accounted for as a pooling of interests.
During 1996, Viad purchased two convention and event services companies and the
remaining interest in two airline catering joint ventures. Viad also acquired
the remaining minority interest in its Canadian tourism business, Brewster
Transport Company Limited, in a noncash exchange, as described in Note D.
Except for the Game pooling, the acquisitions were accounted for as purchases.
The purchase prices, including acquisition costs, were allocated to the net
tangible and identifiable intangible assets acquired based on estimated fair
values at the dates of the acquisitions. The difference between the purchase
prices and the related fair values of net assets acquired represents goodwill.
Viad is still gathering certain information required to complete the allocation
of the MoneyGram purchase price. Further adjustments may arise as a result of
this analysis.
The accompanying financial statements include the accounts and results of
operations from the dates of acquisition. The results of operations of the
acquired companies from the beginning of the year to the dates of acquisition
are not material to the consolidated results of operations. In addition,
prior period financial statements have not been restated for the pooling of
interests, as the results of Game for such periods were not significant.
Net cash paid, assets acquired and debt and other liabilities assumed in all
acquisitions of businesses accounted for as purchases for the years ended
December 31 were as follows:
<TABLE>
<CAPTION>
(000 omitted) 1998 1997 1996
- ------------------------------------------------------------------------
<S> <C> <C> <C>
Assets acquired:
Property and equipment $ 19,008 $ 3,119 $ 3,813
Intangibles, primarily goodwill(1) 362,996 15,710 16,620
Other assets 41,873 188 9,517
Debt and other liabilities assumed (71,977) (8,219)
- ------------------------------------------------------------------------
Net cash paid $351,900 $19,017 $21,731
========================================================================
</TABLE>
(1) Excludes additional goodwill of $15,688,000 recorded in 1996 in connection
with the acquisition of the remaining minority interest in the Canadian
tourism business in a noncash exchange.
<PAGE>
C. NONRECURRING ITEMS
Effective April 1, 1998, Viad sold its Aircraft Services International Group
("ASIG"), which conducted aircraft fueling and ground-handling operations. After
repaying short-term borrowings with proceeds of the sale, Viad terminated
related interest rate swap agreements. The gain on the sale of ASIG, after
deducting costs of sale and related expense provisions, was $21,155,000
($13,201,000 after-tax).
On September 15, 1998, Viad completed the sale of its duty-free and shipboard
concessions business, Greyhound Leisure Services, Inc. ("GLSI"). The gain on
sale, after deducting costs of sale and related expense provisions, was
$26,684,000 ($15,650,000 after-tax).
In the fourth quarter of 1998, Viad obtained release of all guarantees and
bonding relating to its former United Kingdom travel and tour subsidiaries,
Crystal Holidays and Jetsave, which had been sold in October 1997. Accordingly,
the gain on sale of these subsidiaries, which was deferred pending resolution of
the contingencies, was recognized in 1998's fourth quarter. The gain on sale of
Crystal Holidays and Jetsave, after deducting costs of sale and related expense
provisions, was $6,800,000 ($4,004,000 after-tax).
On January 27, 1999, Viad sold the contract foodservice operations of Restaura,
Inc. Viad is retaining the leisure and entertainment group that includes the
restaurant and concession contracts at Bank One Ballpark and America West Arena,
as well as Glacier Park, Inc. The sale will be recorded in the first quarter of
1999.
Results of operations of the sold companies up to dates of sale are summarized
in Note Q.
Following protracted efforts, including formal mediation, to settle patent
infringement litigation initiated by Viad's payment services subsidiary,
Travelers Express Company, Inc. ("TECI"), against Integrated Payment Systems
("IPS"), a subsidiary of First Data Corporation, TECI petitioned the Federal
District Court in May 1998 to set aside a settlement term sheet entered into
over three years previously because of the parties' failure to agree on final
settlement terms. At the same time, TECI tendered back to IPS amounts which IPS
had paid to TECI pursuant to the term sheet. The Court granted TECI's motion and
set a future trial date for its patent infringement lawsuit against IPS. While
TECI expects a favorable outcome, the timing and amount of recovery pursuant to
litigation cannot be assured. Accordingly, TECI recorded a one-time provision in
the second quarter of 1998 for payments received from IPS and recorded as income
in prior years, plus interest thereon and related expenses totaling $10,642,000
($6,917,000 after-tax).
On December 31, 1996, Viad sold its 26 percent limited partnership interest in
the Phoenix Suns National Basketball Association team. The gain, after deducting
transaction costs and carrying amount of the investment, was $30,489,000
($19,025,000 after-tax).
As discussed in Note D, on August 15, 1996, Viad completed the spin-off of its
consumer products business to stockholders. Spin-off costs and management
transition expenses totaling $33,000,000 ($28,985,000 after-tax) were recorded
as expenses of continuing operations. In addition, $5,000,000 of such costs,
without tax benefit, were allocated to the consumer products business and are
classified as discontinued operations expense. These charges are comprised
primarily of spin-off transaction costs, professional fees and compensation
required by certain former executive officers' employment contracts.
<PAGE>
D. DISCONTINUED OPERATIONS
On August 15, 1996, Viad completed the spin-off of its consumer products
business, now conducted under the name The Dial Corporation. In effecting the
spin-off, the holders of common stock of Viad received a distribution (the
"Distribution") of one share of common stock of The Dial Corporation for each
share of Viad common stock.
In connection with the Distribution, Viad borrowed $280,000,000 under a new
$350,000,000 bank credit facility and used the proceeds to repay floating-rate
indebtedness of Viad. The credit facility and related liability were then
assumed by The Dial Corporation upon the spin-off. Viad also transferred a
variable-to-fixed interest rate swap agreement in the notional amount of
$65,000,000 to The Dial Corporation. Interest expense of $13,096,000 in 1996 was
allocated to the consumer products business based on interest on the debt and
interest rate swap assumed by The Dial Corporation.
Effective May 31, 1996, shareholders of Greyhound Lines of Canada ("GLOC") voted
to separate its intercity bus transportation business and its tourism business
into two independent companies. At the same time, GLOC minority shareholders
approved an automatic share exchange proposal whereby their ownership interests
in the tourism business, aggregating 31.5 percent, were exchanged for Viad's
68.5 percent ownership interest in the intercity bus transportation company such
that Viad became the owner of 100 percent of the tourism company, Brewster
Transport Company Limited, in exchange for its ownership in the intercity bus
transportation company.
In February 1997, Viad's Board of Directors approved plans to dispose of
Viad's cruise line business, operated by Premier Cruise Lines. In March 1997,
Viad sold the Star/Ship Atlantic, and on April 17, 1997, Viad finalized the
sale of Premier Cruise Lines.
Revenues applicable to the operations of the discontinued consumer products,
Canadian intercity bus transportation and cruise line businesses totaled
$998,792,000 in 1996.
The caption "Loss from discontinued operations" in the Consolidated Statement
of Income for the year ended December 31, 1996, includes the following:
<TABLE>
<CAPTION>
(000 omitted)
- --------------------------------------------------------------------------
<S> <C>
Consumer products business income from operations,
net of tax provision of $22,817(1) $ 30,620
- --------------------------------------------------------------------------
Canadian intercity bus transportation business:
Loss from operations, net of tax benefit of $510 (583)
Transaction costs, loss on disposition
and foreign currency translation losses(2) (15,866)
- --------------------------------------------------------------------------
(16,449)
- --------------------------------------------------------------------------
Cruise line business:
Loss from operations, net of tax benefit of $174 (70)
Provision for loss on disposal, net of tax benefit
of $19,250(3) (35,750)
- --------------------------------------------------------------------------
(35,820)
- --------------------------------------------------------------------------
Provisions related to previously discontinued
businesses, net of tax benefit of $10,955(4) (19,045)
- --------------------------------------------------------------------------
Loss from discontinued operations $(40,694)
==========================================================================
</TABLE>
(1) After spin-off costs and management transition expenses of $5,000,000,
without tax benefit.
(2) Includes spin-off and exchange transaction costs of $1,579,000 associated
with the disposition of the Canadian intercity bus transportation business,
along with a noncash loss recorded on the disposition of $2,021,000 and
recognition of unrealized foreign currency translation losses of
$12,266,000. The translation losses had previously been deducted from
common stock and other equity in accordance with SFAS No. 52.
(3) Includes a $1,950,000 (after-tax) provision for operating losses during the
phase-out period.
(4) Represents additional provisions for self insurance, legal and remediation
matters arising from previously discontinued businesses.
<PAGE>
E. EARNINGS PER SHARE
The following is a reconciliation of the numerators and denominators of diluted
and basic per share computations for income from continuing operations as
required by SFAS No. 128, "Earnings Per Share":
<TABLE>
<CAPTION>
(000 omitted, except per share data) 1998 1997 1996
- -------------------------------------------------------------------------------
<S> <C> <C> <C>
Income from continuing operations $150,640 $97,794 $69,071
Less: Preferred stock dividends (1,129) (1,127) (1,125)
- -------------------------------------------------------------------------------
Income available to common
stockholders $149,511 $96,667 $67,946
===============================================================================
Average outstanding common shares 94,382 90,804 88,814
Additional dilutive shares related to
stock-based compensation 3,985 2,982 2,525
- -------------------------------------------------------------------------------
Average outstanding and potentially
dilutive common shares 98,367 93,786 91,339
===============================================================================
Diluted income per share from
continuing operations $1.52 $1.03 $0.74
===============================================================================
Basic income per share from
continuing operations $1.58 $1.06 $0.76
===============================================================================
</TABLE>
<PAGE>
F. INVESTMENTS IN DEBT AND EQUITY SECURITIES
As discussed in Note A, a Viad payment services subsidiary generates funds from
the issuance of money orders and other payment instruments, with the related
liability classified as "Payment service obligations." The 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 subsidiary to satisfy the liability to
pay, upon presentment, the face amount of such payment service obligations.
Accordingly, such restricted assets are not available to satisfy working capital
or other financing requirements of Viad. Securities are included in the
Consolidated Balance Sheet under the caption, "Investments restricted for
payment service obligations," except for those securities expected to be sold or
maturing within one year, which are included under the caption, "Funds, agents'
receivables and current maturities of investments restricted for payment service
obligations."
The following is a summary of amounts related to the payment service
obligations, including excess funds, at December 31:
<TABLE>
<CAPTION>
(000 omitted) 1998 1997
- ------------------------------------------------------------------------------
<S> <C> <C>
Restricted assets:
Funds, agents' receivables and current
maturities of investments restricted for
payment service obligations, including
$90,000 invested in Viad commercial paper(1) $ 651,266 $ 707,887
Investments restricted for payment
service obligations(2) 2,415,588 1,615,464
- ------------------------------------------------------------------------------
3,066,854 2,323,351
Payment service obligations 2,999,930 2,248,004
- ------------------------------------------------------------------------------
Asset carrying amounts in excess of 1:1 funding
coverage of payment service obligations(2) $ 66,924 $ 75,347
==============================================================================
</TABLE>
(1) See Note I for description of Viad's revolving bank credit
agreement, which supports its commercial paper obligations.
(2) The fair value of investments restricted for payment service obligations
(less current maturities) was $2,432,431,000 and $1,626,321,000 at
December 31, 1998 and 1997, respectively; the aggregate fair value of
restricted assets was $3,083,697,000 and $2,334,208,000 at December 31,
1998 and 1997, respectively; and the aggregate fair value of restricted
assets in excess of 1:1 funding coverage of payment service obligations was
$83,767,000 and $86,204,000 at December 31, 1998 and 1997, respectively.
Securities are classified as available for sale or held to maturity as required
by SFAS No. 115.
Viad regularly monitors credit and market risk exposures and takes steps to
mitigate the likelihood of these exposures resulting in actual loss. Although
Viad's investment portfolio exposes Viad to certain credit risks, Viad
believes the high quality of its investments reduces this risk substantially
(approximately 99% of the investments at December 31, 1998 have ratings of A-
or higher or are collateralized by federal agency securities).
SECURITIES CLASSIFIED AS AVAILABLE FOR SALE. Securities that are being held for
indefinite periods of time, including those securities which may be sold in
response to needs for liquidity or changes in interest rates, are classified as
securities available for sale and are carried at fair value. The net unrealized
holding gains of $18,231,000 and $13,625,000 (net of deferred tax liability of
$11,656,000 and $8,710,000, respectively) at December 31, 1998 and 1997,
respectively, are included in the Consolidated Balance Sheet as a component of
"Accumulated other comprehensive income." The increase in the unrealized gain
during 1998 and 1997 was due principally to decreases in longer-term market
interest rates.
A summary of securities classified as available for sale at December 31, 1998 is
presented below:
<TABLE>
<CAPTION>
Gross Gross
Amortized Unrealized Unrealized Fair
(000 omitted) Cost Gains Losses Value
- -----------------------------------------------------------------------------
<S> <C> <C> <C> <C>
U.S. Government
agencies $ 16,193 $ 2 $ 14 $ 16,181
Obligations of states and
political subdivisions 954,237 30,613 397 984,453
Corporate debt securities 16,937 2,963 13,974
Mortgage-backed and other
asset-backed securities 778,417 7,306 2,789 782,934
Preferred stock 80,360 700 2,571 78,489
- -----------------------------------------------------------------------------
Securities classified as
available for sale $1,846,144 $38,621 $ 8,734 $1,876,031
=============================================================================
</TABLE>
A summary of securities classified as available for sale at December 31, 1997
is presented below:
<TABLE>
<CAPTION>
Gross Gross
Amortized Unrealized Unrealized Fair
(000 omitted) Cost Gains Losses Value
- -----------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Obligations of states and
political subdivisions $ 616,826 $19,796 $ 19 $ 636,603
Corporate debt securities 21,913 7 1,865 20,055
Mortgage-backed and other
asset-backed securities 393,140 3,301 254 396,187
Preferred stock 42,492 1,433 64 43,861
- -----------------------------------------------------------------------------
Securities classified as
available for sale $1,074,371 $24,537 $2,202 $1,096,706
=============================================================================
</TABLE>
Gross gains of $11,843,000, $7,986,000 and $3,039,000 were realized during 1998,
1997 and 1996, respectively. Gross losses of $5,000, $730,000 and $1,130,000
were realized during 1998, 1997 and 1996, respectively. Gross gains and losses
are based on the specific identification method of determining cost.
SECURITIES CLASSIFIED AS HELD TO MATURITY. Securities classified as held to
maturity, which consist of securities that management has the ability and intent
to hold to maturity, are carried at amortized cost, and are summarized as
follows at December 31, 1998:
<TABLE>
<CAPTION>
Gross Gross
Amortized Unrealized Unrealized Fair
(000 omitted) Cost Gains Losses Value
- -----------------------------------------------------------------------------
<S> <C> <C> <C> <C>
U.S. Government
agencies $ 55,059 $ 441 $ 30 $ 55,470
Obligations of states and
political subdivisions 350,374 15,573 112 365,835
Corporate debt securities 20,507 193 33 20,667
Mortgage-backed and other
asset-backed securities 120,743 1,384 316 121,811
Other securities 3,018 137 2,881
- -----------------------------------------------------------------------------
Securities classified as
held to maturity $549,701 $17,591 $628 $566,664
=============================================================================
</TABLE>
A summary of securities classified as held to maturity at December 31, 1997, is
presented below:
<TABLE>
<CAPTION>
Gross Gross
Amortized Unrealized Unrealized Fair
(000 omitted) Cost Gains Losses Value
- -----------------------------------------------------------------------------
<S> <C> <C> <C> <C>
U.S. Government
agencies $ 57,110 $ -- $ 563 $ 56,547
Obligations of states and
political subdivisions 307,652 11,293 48 318,897
Corporate debt securities 55,707 397 55,310
Mortgage-backed and other
asset-backed securities 125,273 985 86 126,172
Other securities 3,031 460 2,571
- -----------------------------------------------------------------------------
Securities classified as
held to maturity $548,773 $12,278 $1,554 $559,497
=============================================================================
</TABLE>
SCHEDULED MATURITIES. Scheduled maturities of securities at December 31, 1998 is
presented below:
<TABLE>
<CAPTION>
Available for Sale Held to Maturity
----------------------- ----------------------
Amortized Fair Amortized Fair
(000 omitted) Cost Value Cost Value
- ---------------------------------------------------------------------
<S> <C> <C> <C> <C>
Due in:
1999 $ 2,790 $ 2,792 $ 7,352 $ 7,472
2000-2003 30,012 29,402 58,260 58,690
2004-2008 330,576 341,420 94,880 97,929
2009 and later 624,786 641,791 268,466 280,762
Mortgage-backed and
other asset-backed
securities 777,620 782,137 120,743 121,811
Preferred stock 80,360 78,489
- ---------------------------------------------------------------------
$1,846,144 $1,876,031 $549,701 $566,664
=====================================================================
</TABLE>
Actual maturities may differ from scheduled maturities because the borrowers
have the right to call or prepay certain obligations, sometimes without
penalties. Maturities of mortgage-backed and other asset-backed securities
depend on the repayment characteristics and experience of the underlying
obligations.
<PAGE>
G. PROPERTY AND EQUIPMENT
Property and equipment at December 31 consisted of the following:
<TABLE>
<CAPTION>
(000 omitted) 1998 1997
- ------------------------------------------------------------
<S> <C> <C>
Land $ 31,242 $ 35,779
Buildings and leasehold improvements 279,242 257,134
Equipment 532,331 567,463
- ------------------------------------------------------------
842,815 860,376
Less accumulated depreciation 375,238 390,324
- ------------------------------------------------------------
Property and equipment $467,577 $470,052
============================================================
</TABLE>
H. INTANGIBLES
Intangibles at December 31 consisted of the following:
<TABLE>
<CAPTION>
(000 omitted) 1998 1997
- ------------------------------------------------------------
<S> <C> <C>
Goodwill $ 935,691 $577,434
Other intangibles 69,183 72,605
- ------------------------------------------------------------
1,004,874 650,039
Less accumulated amortization 137,117 119,005
- ------------------------------------------------------------
Intangibles $ 867,757 $531,034
============================================================
</TABLE>
<PAGE>
I. DEBT
Long-term debt at December 31 was as follows:
<TABLE>
<CAPTION>
(000 omitted) 1998 1997
- -----------------------------------------------------------------------------
<S> <C> <C>
Senior debt:(1)
Short-term borrowings:
Promissory notes, 5.8% (1998) and 6.2% (1997)
weighted average interest rate
at December 31 $148,000 $ 50,000
Commercial paper, 5.8% weighted
average interest rate at December 31(2) 52,000
Senior notes, 6.2% weighted average interest
rate at December 31, due to 2009 269,711 299,647
Guarantee of ESOP debt, floating rate indexed
to LIBOR, 4.6% (1998) and 5.0% (1997) at
December 31, due to 2009 22,000 24,000
Real estate mortgages and other obligations,
5.7% (1998) and 5.4% (1997) weighted
average interest rate at December 31,
due to 2016 24,239 17,990
- -----------------------------------------------------------------------------
515,950 391,637
Subordinated debt, 10.5% debentures, due 2006 18,503 18,503
- -----------------------------------------------------------------------------
Total debt 534,453 410,140
Less current portion 3,105 32,291
- -----------------------------------------------------------------------------
Long-term debt $531,348 $377,849
=============================================================================
</TABLE>
(1) Rates shown are exclusive of the effects of commitment fees and other costs
of long-term revolving bank credit used to support short-term borrowings,
and for 1997, exclusive of the effects of interest rate swap agreements
related to certain short-term and long-term borrowings.
(2) After eliminating $90,000,000 of commercial paper issued by Viad to a
payment services subsidiary.
Viad satisfies its short-term borrowing requirements with bank lines of
credit and the issuance of commercial paper and promissory notes. At December
31, 1998, outstanding promissory notes and commercial paper, including the
commercial paper issued to a Viad payment services subsidiary, are supported
by unused commitments under a $300,000,000 long-term revolving bank credit
agreement, which expires on August 15, 2002. Annually, at Viad's request and
with the participating banks' consent, the term of the agreement may be
extended for another one-year period. The interest rate applicable to
borrowings under the $300,000,000 credit commitment is, at Viad's option,
indexed to the bank prime rate or the London Interbank Offering Rate
("LIBOR"), plus appropriate spreads over such indices during the period of
the credit agreement. The agreement also provides for commitment fees. Such
spreads and fees will change moderately should Viad's debt ratings change.
Viad, in the event that it becomes advisable, intends to exercise its right
under the agreement to borrow for the purpose of refinancing short-term
borrowings; accordingly, short-term borrowings totaling $200,000,000 and
$50,000,000 at December 31, 1998 and 1997, respectively, have been classified
as long-term debt.
Annual maturities of long-term debt due in the next five years will approximate
$3,105,000 (1999), $32,810,000 (2000), $68,588,000 (2001), $242,609,000 (2002),
$102,459,000 (2003) and $84,882,000 thereafter. Included in the year 2002 is
$200,000,000 which represents the maturity of short-term borrowings assuming
they had been refinanced utilizing the revolving credit facility described
above.
Viad previously entered into (a) interest rate swap agreements which converted
floating interest rates on existing and anticipated replacement short-term
borrowings into fixed interest rates ("variable-to-fixed swaps") and (b)
interest rate swap agreements which converted fixed interest rates on a portion
of the Senior notes into floating interest rates ("fixed-to-variable swaps").
The net effect of such interest rate swap agreements was to increase interest
expense by $2,296,000, $5,041,000 and $3,404,000 for 1998, 1997 and 1996,
respectively. As discussed in Note C, after repaying short-term borrowings with
proceeds from the sale of ASIG, Viad terminated related interest rate swap
agreements. At December 31, 1998, there were no interest rate swap agreements
used to hedge debt obligations.
The weighted average interest rate on total debt, inclusive of the effect of
interest rate swap agreements and excluding interest expense unrelated to debt
obligations, was 6.7%, 7.5% and 7.8% for 1998, 1997 and 1996, respectively.
Excluding the interest rate swap agreements, the weighted average interest rate
related to debt obligations was 6.3%, 6.5% and 7.4% for 1998, 1997 and 1996,
respectively.
Interest paid in 1998, 1997 and 1996 was $38,427,000, $40,211,000 and
$61,402,000, respectively, including amounts charged to discontinued operations
in 1996.
Under a Shelf Registration filed in 1994 with the Securities and Exchange
Commission, Viad can issue up to an aggregate $500,000,000 of debt and equity
securities. No securities have been issued under the program.
Viad's long-term debt agreements include various restrictive covenants and
require the maintenance of certain defined financial ratios with which Viad is
in compliance.
<PAGE>
J. PREFERRED STOCK AND COMMON STOCK AND OTHER EQUITY
Viad has 442,352 shares of $4.75 Preferred Stock authorized, of which 358,352
shares are issued. The holders of the $4.75 Preferred Stock are entitled to a
liquidation preference of $100 per share and to annual cumulative sinking fund
redemptions of 6,000 shares. Viad presently holds 123,373 shares which will be
applied to this sinking fund requirement; the 234,979 shares held by others are
scheduled to be redeemed in the years 2019 to 2058. In addition, Viad has
authorized 5,000,000 and 2,000,000 shares of Preferred Stock and Junior
Participating Preferred Stock, respectively.
Viad has one Preferred Stock Purchase Right ("Right") outstanding on each
outstanding share of its common stock. The Rights contain provisions to protect
stockholders in the event of an unsolicited attempt to acquire Viad which is not
believed by the Board of Directors to be in the best interest of stockholders.
The Rights are represented by the common share certificates and are not
exercisable or transferable apart from the common stock until such a situation
arises. The Rights may be redeemed by Viad at $0.025 per Right prior to the time
any person or group has acquired 20% or more of Viad's shares. Viad has reserved
1,000,000 shares of Junior Participating Preferred Stock for issuance in
connection with the Rights.
Viad funds a portion of its matching contributions to employees' 401(k) plans
through a leveraged ESOP. All eligible employees of Viad and its participating
affiliates, other than certain employees covered by collective bargaining
agreements that do not expressly provide for participation of such employees in
an ESOP, may participate in the ESOP.
The ESOP borrowed $40,000,000 to purchase treasury shares in 1989. The ESOP's
obligation to repay this borrowing is guaranteed by Viad; therefore, the unpaid
balance of the borrowing ($22,000,000 and $24,000,000 at December 31, 1998 and
1997, respectively) has been reflected in the accompanying balance sheet as
long-term debt. The same amounts, representing unearned employee benefits, have
been recorded as a deduction from common stock and other equity. The liability
is reduced as the ESOP repays the borrowing, and the amount in common stock and
other equity is reduced as the employee benefits are charged to expense. The
ESOP intends to repay the loan (plus interest) using Viad contributions and
dividends received on the shares of common stock held by the ESOP.
Information regarding ESOP transactions for the years ended December 31 was as
follows:
<TABLE>
<CAPTION>
(000 omitted) 1998 1997 1996
- ---------------------------------------------------------------------
<S> <C> <C> <C>
Amounts paid by ESOP for:
Debt repayment $2,000 $2,000 $2,000
Interest 1,098 1,187 1,200
Amounts received from Viad as:
Dividends 884 856 999
Contributions 2,205 2,226 2,064
</TABLE>
Shares are released for allocation to participants based upon the ratio of the
year's principal and interest payments to the sum of the total principal and
interest payments expected over the remaining life of the plan. Expense of the
ESOP is recognized based upon the greater of cumulative cash payments to the
plan or 80% of the cumulative expense that would have been recognized under the
shares allocated method, in accordance with Emerging Issues Task Force Abstract
No. 89-8, "Expense Recognition for Employee Stock Ownership Plans." Under this
method, Viad has recorded expense of $2,205,000, $2,123,000 and $2,138,000 in
1998, 1997 and 1996, respectively.
Unallocated shares held by the ESOP totaled 2,575,000 and 2,867,000 at December
31, 1998 and 1997, respectively. Shares allocated during 1998 and 1997 totaled
292,000 and 297,000, respectively.
In 1992, Viad sold treasury stock to Viad's Employee Equity Trust (the "Trust")
for a $200,000,000 promissory note. The Trust is used to fund certain existing
employee compensation and benefit plans. For financial reporting purposes, the
Trust is consolidated with Viad and the promissory note ($43,315,000 at December
31, 1998) and dividend and interest transactions are eliminated in
consolidation. The fair market value of the 4,495,736 remaining shares held by
the Trust at December 31, 1998, representing employee benefits, is shown as a
deduction from common stock and other equity and is reduced as employee benefits
are funded. The difference between the cost and fair value of shares held is
included in additional capital. Related unearned employee benefits at December
31, 1998 and 1997 were $136,558,000 and $97,968,000, respectively.
At December 31, 1998, retained income of $169,736,000 was unrestricted as to
payment of dividends by Viad. A total of 94,899,331 common shares were issued
and outstanding for income per share calculations at December 31, 1998, after
deducting treasury shares and the Trust shares.
<PAGE>
K. STOCK-BASED COMPENSATION
In 1997, stockholders adopted the 1997 Viad Corp Omnibus Incentive Plan
("Omnibus Plan"). The Omnibus Plan, which replaced prior incentive plans,
provides for the following types of awards to officers, directors and certain
key employees: (a) stock options (both incentive stock options and nonqualified
stock options); (b) stock appreciation rights ("SARs"); (c) restricted stock;
and (d) performance-based awards. The number of shares available for grant under
the Omnibus Plan in each calendar year is equal to 2% of the total number of
shares of common stock outstanding as of the first day of each year. Any shares
available for grant in a particular calendar year which are not, in fact,
granted in such year shall be added to the shares available for grant in any
subsequent calendar year. In addition, no more than 7,500,000 shares of common
stock will be cumulatively available for incentive stock option grants over the
life of the Omnibus Plan.
Stock options are granted for terms of ten years at an exercise price based on
the market value at the date of grant. Stock options are exercisable 50% after
one year with the balance exercisable after two years from the date of grant.
SARs and Limited SARs ("LSARs") were granted, with terms of ten years, under
the 1983 Stock Option and Incentive Plan. SARs are exercisable under the same
terms as stock options, while LSARs vest fully at date of grant and are
exercisable only for a limited period (in the event of certain tender or
exchange offers for Viad's common stock). SARs and/or LSARs are issued in
tandem with certain stock options and the exercise of one reduces, to the
extent exercised, the number of shares represented by the other(s). SAR
exercises totaled 2,812 and 131,520 shares in 1997 and 1996, respectively.
There were no SARs exercised in 1998.
Performance-based stock awards (97,600, 120,900 and 141,700 shares awarded in
1998, 1997 and 1996, respectively, at an estimated fair value per share of
$24.78, $18.34 and $13.88, respectively) vest at the end of a three-year
period from the date of grant, based on total shareholder return relative to
the applicable stock index and the proxy comparator groups specified at the
time of each award. Vested shares with respect to performance periods
beginning in 1995, 1994 and 1993 totaled 83,226 in 1998, 109,787 in 1997 and
39,596 in 1996, respectively. Throughout the performance period, holders of
the performance-based stock have the right to receive dividends and vote the
shares but may not sell, assign, transfer, pledge or otherwise encumber the
stock.
Information with respect to stock options for the years ended December 31, at
historical number of shares and option exercise prices, is as follows:
<TABLE>
<CAPTION>
Weighted
Average
Shares Exercise Price(1)
- ------------------------------------------------------------------------------------------
<S> <C> <C>
Options outstanding at December 31, 1995 8,275,924 $18.55
Before spin-off of the consumer products business:
Granted 50,000 28.75
Exercised (1,488,373) 15.44
Canceled (159,070) 15.20
Modification due to the Distribution, net(3) 1,968,392 N/A
After spin-off of the consumer products business:
Granted 1,691,100 13.88
Exercised (236,229) 9.26
Canceled (78,837) 12.80
- ----------------------------------------------------------------------
Options outstanding at December 31, 1996(2) 10,022,907 10.82
Granted 1,143,100 18.33
Conversion of Game options(4) 235,228 7.95
Exercised (1,391,630) 9.73
Canceled (202,578) 13.91
- ----------------------------------------------------------------------
Options outstanding at December 31, 1997(2) 9,807,027 11.72
Granted 962,100 24.79
Exercised (1,883,697) 10.05
Canceled (163,511) 18.84
- ----------------------------------------------------------------------
Options outstanding at December 31, 1998(2) 8,721,919 13.38
======================================================================
</TABLE>
(1) Weighted average exercise prices for 1995 and 1996 up to the date of
modification are based on original grant pricing before modification due to
the Distribution described in Note D.
(2) Options exercisable totaled 7,342,669 shares, 8,052,840 shares and
7,580,872 shares at December 31, 1998, 1997 and 1996, respectively.
(3) Net of options surrendered by employees of Viad who became employees of The
Dial Corporation after the Distribution.
(4) Existing Game options were converted into options to purchase Viad shares
upon the acquisition of Game (see Note B). The original number of Game
stock options and exercise prices were adjusted to reflect the acquisition
exchange ratio.
The following tables summarize information concerning stock options outstanding
and exercisable at December 31, 1998:
<TABLE>
<CAPTION>
Options Outstanding
- -------------------------------------------------------------------------
Weighted
Weighted Average
Range of Remaining Exercise
Exercise Prices Shares Contractual Life Price
- -------------------------------------------------------------------------
<S> <C> <C> <C>
$3.93 to $7.54 1,201,668 1.9 years $ 6.90
$9.33 to $12.22 3,209,057 4.0 years 10.96
$13.05 to $18.06 2,411,500 6.2 years 13.51
$18.34 to $25.25 1,899,694 8.8 years 21.41
---------
$3.93 to $25.25 8,721,919 5.4 years 13.38
=========
</TABLE>
<TABLE>
<CAPTION>
Options Exercisable
- -------------------------------------------------------------------------
Weighted
Average
Range of Exercise
Exercise Prices Shares Price
- -------------------------------------------------------------------------
<S> <C> <C>
$3.93 to $7.54 1,201,668 $ 6.90
$9.33 to $12.22 3,209,057 10.96
$13.05 to $18.06 2,404,700 13.50
$18.34 to $25.25 527,244 18.56
---------
$3.93 to $25.25 7,342,669 11.67
=========
</TABLE>
Viad applies APB No. 25 and related interpretations in accounting for its
stock-based compensation plans. Accordingly, no compensation expense has been
recognized for its stock-based compensation plans other than for
performance-based stock awards and SAR exercises, which gave rise to
compensation expense aggregating $3,753,000, $3,858,000 and $4,444,000 in
1998, 1997 and 1996, respectively.
Assuming Viad had recognized compensation cost for stock options and
performance-based stock awards in accordance with the fair value method of
accounting defined in SFAS No. 123, income from continuing operations and
diluted income per share from continuing operations would be as presented in the
accompanying table. The effects of applying SFAS No. 123 in this disclosure are
not necessarily indicative of future amounts.
<TABLE>
<CAPTION>
(000 omitted, except per share data) 1998 1997 1996
- --------------------------------------------------------------------
<S> <C> <C> <C>
Income from continuing operations $150,640 $97,794 $69,071
Additional compensation:(1)
Stock option grants and
performance-based stock awards (4,631) (3,279) (2,876)
Modification of existing stock
option grants(2) (5,716)
- ---------------------------------------------------------------------
Pro forma income from continuing
operations $146,009 $94,515 $60,479
=====================================================================
Pro forma diluted income per share
from continuing operations $ 1.48 $ 1.00 $ 0.65
=====================================================================
</TABLE>
(1) Compensation cost calculated under SFAS No. 123 is expensed ratably
over the vesting period. Compensation cost is net of estimated
forfeitures and the tax benefit on nonqualified stock options.
(2) In connection with the spin-off of the consumer products business on
August 15, 1996, the number of shares and the exercise price of each
option held by employees of Viad who remained employees of Viad
after the spin-off were modified so that the aggregate exercise
price and the aggregate spread before the spin-off were preserved at
the time of the spin-off. SFAS No. 123 requires such options
modified as a result of a spin-off to be treated as new grants.
For purposes of applying SFAS No. 123, the estimated fair value of stock
options granted during 1998, 1997 and 1996 was $7.16, $5.04 and $3.47 per
share, respectively. The fair value of each stock option grant is estimated
on the date of grant using the Black-Scholes option pricing model with the
following assumptions:
<TABLE>
<CAPTION>
1998 1997 1996
- ---------------------------------------------------------
<S> <C> <C> <C>
Expected dividend yield 1.3% 1.7% 2.3%
Expected volatility 24.4% 23.6% 22.0%
Risk-free interest rate 5.78% 6.13% 6.38%
Expected life 5 years 5 years 5 years
</TABLE>
<PAGE>
L. INCOME TAXES
Deferred income tax assets (liabilities) included in the Consolidated Balance
Sheet at December 31 related to the following:
<TABLE>
<CAPTION>
(000 omitted) 1998 1997
- -----------------------------------------------------------------------------
<S> <C> <C>
Property and equipment $(26,133) $(28,721)
Deferred income 10,178 10,568
Pension, compensation and other
employee benefits 48,196 38,287
Provisions for losses 46,241 35,509
Unrealized gain on securities classified
as available for sale (11,656) (8,710)
Deferred state income taxes 6,419 7,091
Capital loss carryforward 20,170
Alternative minimum tax credit carryforward 5,193
Other deferred income tax assets 44,710 42,989
Other deferred income tax liabilities (23,923) (23,890)
- -----------------------------------------------------------------------------
99,225 93,293
Foreign deferred tax liabilities included above 9,698 10,810
- -----------------------------------------------------------------------------
United States deferred tax assets $108,923 $104,103
=============================================================================
</TABLE>
The provision for income taxes on income from continuing operations for the
years ended December 31 consisted of the following:
<TABLE>
<CAPTION>
(000 omitted) 1998 1997 1996
- -----------------------------------------------------------------------------
<S> <C> <C> <C>
Current:
United States:
Federal $ 50,501 $ 25,233 $ 19,827
State 9,420 6,094 6,528
Foreign 8,032 8,980 6,858
- -----------------------------------------------------------------------------
67,953 40,307 33,213
Deferred (905) 846 8,685
- -----------------------------------------------------------------------------
Income taxes $ 67,048 $ 41,153 $ 41,898
=============================================================================
</TABLE>
Certain tax benefits related primarily to stock option exercises and dividends
paid to the ESOP are credited to common stock and other equity and amounted to
$6,875,000, $2,491,000 and $3,401,000 in 1998, 1997 and 1996, respectively.
Eligible subsidiaries (including the consumer products business up to the
spin-off date) are included in the consolidated federal and other applicable
income tax returns of Viad. Certain benefits of filing such returns,
including tax losses and credits which would not have been available to
certain subsidiaries on a separate return basis, have been credited to such
subsidiaries by Viad. These benefits are included in the determination of the
income taxes of those subsidiaries.
Income taxes paid in 1998, 1997 and 1996, including amounts paid on behalf of
the consumer products business for the periods up to the spin-off date as part
of consolidated federal and other applicable tax returns of Viad, amounted to
$24,721,000, $21,689,000 and $19,792,000, respectively.
A reconciliation of the provision for income taxes on income from continuing
operations and the amount that would be computed using statutory federal income
tax rates for the years ended December 31 was as follows:
<TABLE>
<CAPTION>
(000 omitted) 1998 1997 1996
- -------------------------------------------------------------------------------
<S> <C> <C> <C>
Computed income taxes at statutory
federal income tax rate of 35% $76,191 $48,631 $38,839
Nondeductible goodwill amortization 4,051 3,466 3,410
Minority interests 758 433 613
State income taxes 5,608 4,341 5,636
Tax-exempt income (21,519) (15,725) (11,764)
Spin-off costs and management
transition expenses 6,300
Other, net 1,959 7 (1,136)
- -------------------------------------------------------------------------------
Income taxes $67,048 $41,153 $41,898
===============================================================================
</TABLE>
United States and foreign income before income taxes from continuing operations
for the years ended December 31 was as follows:
<TABLE>
<CAPTION>
(000 omitted) 1998 1997 1996
- -------------------------------------------------------------------------------
<S> <C> <C> <C>
United States $195,313 $118,159 $ 88,819
Foreign, principally Canada and
United Kingdom 22,375 20,788 22,150
- -------------------------------------------------------------------------------
Income before income taxes $217,688 $138,947 $110,969
===============================================================================
</TABLE>
<PAGE>
M. PENSION AND OTHER BENEFITS
PENSION BENEFITS. The following table indicates the plans' funded status and
amounts recognized in Viad's Consolidated Balance Sheet at December 31:
<TABLE>
<CAPTION>
Funded Plans Unfunded Plans
---------------------- --------------------
(000 omitted) 1998 1997 1998 1997
- -------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Change in projected
benefit obligation:
Benefit obligation at
beginning of year $161,846 $148,052 $ 28,930 $ 24,626
Service cost 4,936 5,716 804 689
Interest cost 12,007 11,408 2,258 2,067
Plan amendments 181 272 997 1,787
Actuarial adjustments(1) 19,835 5,486 2,899 1,390
Curtailments (2,658) (1,738) (133)
Benefits paid (9,339) (7,350) (1,812) (1,629)
- -------------------------------------------------------------------------------
Benefit obligation
at end of year(2) 186,808 161,846 33,943 28,930
- -------------------------------------------------------------------------------
Change in plan assets:
Fair value of plan assets
at beginning of year 180,990 152,108 N/A N/A
Actual return on plan assets 35,133 36,186
Company contributions 42 46 1,812 1,629
Benefits paid (9,339) (7,350) (1,812) (1,629)
- -------------------------------------------------------------------------------
Fair value of plan assets
at end of year 206,826 180,990 N/A N/A
- -------------------------------------------------------------------------------
Plan assets over (under)
projected benefit obligation 20,018 19,144 (33,943) (28,930)
Unrecognized net transition
(asset) obligation (2,128) (3,032) 565 835
Unrecognized prior
service cost 577 576 6,024 6,360
Unrecognized actuarial
(gain) loss (9,181) (10,288) 7,588 5,330
- -------------------------------------------------------------------------------
Net amount recognized $ 9,286 $ 6,400 $(19,766) $(16,405)
===============================================================================
</TABLE>
(1) The increased actuarial adjustment in 1998 arose primarily as a result of
the reduction in the discount rate assumption from 7.5% to 7.0%.
(2) The accumulated benefit obligation for the unfunded pension plans was
$27,074,000 and $23,261,000 as of December 31, 1998 and 1997, respectively.
The total amounts recognized in Viad's Consolidated Balance Sheet at December
31 were as follows:
<TABLE>
<CAPTION>
Funded Plans Unfunded Plans
---------------------- --------------------
(000 omitted) 1998 1997 1998 1997
- -------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Prepaid pension cost $ 9,346 $ 6,482 $ -- $ --
Accrued pension liability (137) (150) (27,469) (23,862)
Intangible asset 13 22 6,301 6,624
Common stock and
other equity 64 46 1,402 833
- -------------------------------------------------------------------------------
Net amount recognized $ 9,286 $ 6,400 $(19,766) $(16,405)
===============================================================================
</TABLE>
Weighted average assumptions used at December 31 were as follows:
<TABLE>
<CAPTION>
1998 1997
- -------------------------------------------------------------------------------
<S> <C> <C>
Discount rate 7.0% 7.5%
Expected return on plan assets 10.0% 9.5%
Rate of compensation increase 4.5% 4.5%
</TABLE>
Net periodic pension cost for defined benefit plans for the years ended December
31 includes the following components:
<TABLE>
<CAPTION>
(000 omitted) 1998 1997 1996
- -------------------------------------------------------------------------------
<S> <C> <C> <C>
Service cost $ 5,740 $ 6,405 $ 6,341
Interest cost 14,265 13,475 12,757
Expected return on plan assets (15,551) (13,953) (13,060)
Amortization of prior service cost 591 500 182
Recognized net actuarial loss 511 211 178
- -------------------------------------------------------------------------------
Net periodic pension cost $ 5,556 $ 6,638 $ 6,398
===============================================================================
</TABLE>
Curtailment gains totaling $1,868,000 in 1998 were primarily attributable to the
sales of businesses. Net curtailment gains totaling $1,632,000 in 1997 were
primarily attributable to freezing plan benefits for a business subsequently
sold. Curtailment gains totaling $987,000 in 1996 were attributable to an
acquired convention and event services company.
Contributions to multiemployer pension plans totaled $11,779,000, $12,141,000
and $10,737,000 in 1998, 1997 and 1996, respectively. Costs of 401(k) defined
contribution and other pension plans totaled $3,885,000, $5,020,000 and
$4,414,000 in 1998, 1997 and 1996, respectively.
POSTRETIREMENT BENEFITS OTHER THAN PENSIONS. Viad and certain of its
subsidiaries have unfunded defined benefit postretirement plans that provide
medical and life insurance for eligible employees, retirees and dependents. In
addition, Viad retained the obligations for such benefits for certain retirees
of sold businesses.
The status of the plans as of December 31 is set forth below:
<TABLE>
<CAPTION>
(000 omitted) 1998 1997
- -------------------------------------------------------------------------------
<S> <C> <C>
Change in accumulated benefit obligation:
Benefit obligation at beginning of year $45,584 $41,159
Service cost 878 967
Interest cost 2,997 3,165
Plan amendments (2,777)
Actuarial adjustments 2,433 3,020
Curtailments (4,983)
Benefits paid (3,129) (2,727)
- -------------------------------------------------------------------------------
Benefit obligation at end of year 41,003 45,584
Unrecognized prior service reduction 3,277 1,115
Unrecognized net actuarial gain 3,203 4,175
- -------------------------------------------------------------------------------
Accrued postretirement benefit cost $47,483 $50,874
===============================================================================
Discount rate 7.0% 7.5%
</TABLE>
The assumed health care cost trend rate used in measuring the 1998 and 1997
accumulated postretirement benefit obligation was 9% and 10%, respectively,
gradually declining to 5% by the year 2002 and remaining at that level
thereafter for retirees below age 65, and 7% and 7.5%, respectively, gradually
declining to 5% by the year 2002 and remaining at that level thereafter for
retirees above age 65.
The net periodic postretirement benefit cost for the years ended December 31
includes the following components:
<TABLE>
<CAPTION>
(000 omitted) 1998 1997 1996
- -------------------------------------------------------------------------------
<S> <C> <C> <C>
Service cost $ 878 $ 967 $ 794
Interest cost 2,997 3,165 2,936
Amortization of prior service cost (218) (86) (86)
Recognized net actuarial gain (38) (229) (452)
- -------------------------------------------------------------------------------
Net periodic postretirement benefit cost $3,619 $3,817 $3,192
===============================================================================
</TABLE>
Curtailment gains totaling $5,147,000 in 1998 were primarily attributable to the
sales of businesses. There were no curtailment gains or losses in 1997 or 1996.
A one-percentage-point increase in the assumed health care cost trend rate for
each year would increase the accumulated postretirement benefit obligation as of
December 31, 1998 by approximately $4,373,000 and the ongoing annual expense by
approximately $557,000. A one-percentage-point decrease in the assumed health
care cost trend rate for each year would decrease the accumulated postretirement
benefit obligation as of December 31, 1998 by approximately $3,578,000 and the
ongoing annual expense by approximately $445,000.
<PAGE>
N. LEASES
Certain offices, equipment, and facilities for convention services, exhibit
construction and catering are leased. The leases expire over periods generally
ranging from one to 12 years and some provide for renewal options ranging from
one to 33 years. Leases which expire are generally renewed or replaced by
similar leases.
At December 31, 1998, Viad's future minimum rental payments and related sublease
rentals receivable with respect to noncancelable operating leases with terms in
excess of one year were as follows:
<TABLE>
<CAPTION>
Rentals
Receivable
Rental Under
(000 omitted) Payments Subleases
- -------------------------------------------------------------------------------
<S> <C> <C>
1999 $ 45,057 $ 2,387
2000 38,335 1,541
2001 32,863 936
2002 29,766 440
2003 25,546 145
Thereafter 174,193 709
- -------------------------------------------------------------------------------
Total $345,760 $ 6,158
===============================================================================
</TABLE>
In May 1997, Viad sold its corporate headquarters and is leasing back a portion
of the building. The future minimum rental payments are included in the table
above. The excess of the net sales price over the net book value of the building
was deferred and is being amortized over the term of the leaseback.
Information regarding net operating lease rentals for the years ended December
31 was as follows:
<TABLE>
<CAPTION>
(000 omitted) 1998 1997 1996
- -------------------------------------------------------------------------------
<S> <C> <C> <C>
Minimum rentals $ 53,784 $ 58,446 $ 60,522
Contingent rentals(1) 751 562 887
Sublease rentals (1,936) (2,116) (2,025)
- -------------------------------------------------------------------------------
Total rentals, net $ 52,599 $ 56,892 $ 59,384
===============================================================================
</TABLE>
(1) Contingent rentals on operating leases, which are based primarily on
sales and revenues for buildings and leasehold improvements and on
usage for other equipment, exclude contingent fees under concession
agreements.
O. FINANCIAL INSTRUMENTS WITH OFF-BALANCE-SHEET RISK AND FAIR VALUE OF FINANCIAL
INSTRUMENTS
FINANCIAL INSTRUMENTS WITH OFF-BALANCE-SHEET RISK. Viad is a party to
financial instruments with off-balance-sheet risk which are entered into in
the normal course of business to meet financing needs and to manage exposure
to fluctuations in interest rates. These financial instruments include sale
of receivable agreements and interest rate swap agreements. The instruments
involve, to a varying degree, elements of credit and interest rate risk in
addition to amounts recognized in the financial statements.
At December 31, 1998, Viad had an agreement to sell, on a revolving basis,
undivided participating interests in a defined pool of trade accounts receivable
from customers of Viad's Airline Catering and Convention and Event Services
operations in an amount not to exceed $75,000,000 as a means of accelerating
cash flow. The agreement expires in August 1999 but is expected to be extended
annually. Under the terms of the trade receivables sales agreement, Viad has
retained substantially the same risk of credit loss as if the receivables had
not been sold, as Viad is obligated to replace uncollectible receivables with
new trade accounts receivable. The average balance of proceeds from the sale of
trade accounts receivable approximated $74,630,000, $75,000,000 and $51,500,000
during 1998, 1997 and 1996, respectively. The expense of selling such
receivables, discounted based on short-term interest rates, was $4,404,000,
$4,483,000 and $3,029,000 in 1998, 1997 and 1996, respectively, and is included
in "Costs of sales and services."
In September 1997, a Viad payment services subsidiary entered into an
agreement to sell, on a periodic basis, undivided percentage ownership
interests in certain agents' receivables in an amount not to exceed
$250,000,000. In June 1998, the maximum amount to be sold under the agreement
was increased to $400,000,000. The agreement expires in June 2003. Items in
the program include receivables from bill payment and money order agents. The
receivables are sold in order to accelerate payment services' cash flow for
investment in the admissible securities described in Note F. The average
agents' receivables sold approximated $262,000,000 and $125,000,000 during
1998 and the latter part of 1997, respectively. The agents' receivables are
sold at a discount based on short-term variable interest rates. The expense
of selling such receivables was $16,768,000 and $2,790,000 in 1998 and 1997,
respectively, and is included in "Costs of sales and services."
A portion of the payment services subsidiary's business involves the payment
of commissions to selling agents of its official check program. The
commissions are computed based on short-term variable interest rates.
Variable-to-fixed rate swap agreements have been entered into to mitigate the
effects of fluctuations on commission expense and on the net proceeds from
the agents' receivables sales.
The notional amount of the variable-to-fixed swap agreements totaled
$1,425,000,000 at December 31, 1998, with an average pay rate of 5.5% and an
average receive rate of 4.9%. The variable-rate portion of the swaps is
generally based on LIBOR, treasury bill or federal funds rates. The
agreements expire as follows: $150,000,000 (1999), $100,000,000 (2000),
$250,000,000 (2002), $875,000,000 (2003) and $50,000,000 (2007).
The notional amounts of such agreements are used to measure amounts to be
paid or received and do not represent the amount of exposure to credit loss.
The amounts to be paid or received under the swap agreements are accrued
consistently with the terms of the agreements and market interest rates and
are recognized as an adjustment to the expense of the related transaction.
Viad maintains formal procedures for entering into swap transactions, and
management regularly monitors and reports to the Audit Committee of the Board
of Directors on swap activity. The agreements are with major financial
institutions which are currently expected to fully perform under the terms of
the agreements, thereby mitigating the credit risk from the transactions in
the event of nonperformance by the counterparties. In addition, Viad
continuously monitors the credit ratings of the counterparties, and the
likelihood of default is considered remote.
FAIR VALUE OF FINANCIAL INSTRUMENTS. The carrying values of cash and cash
equivalents, receivables, accounts payable and payment service obligations
approximate fair values due to the short-term maturities of these
instruments. The amortized cost and fair value of investments in debt and
equity securities are disclosed in Note F. The carrying amounts and estimated
fair values of Viad's other financial instruments at December 31 are as
follows:
<TABLE>
<CAPTION>
1998 1997
----------------------- -----------------------
Carrying Fair Carrying Fair
(000 omitted) Amount Value Amount Value
- -------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Total debt $(534,453) $(541,055) $(410,140) $(414,173)
Swap agreements(1) (903) (25,097) (4,357) (20,753)
</TABLE>
(1) Carrying amount represents accrued interest.
The methods and assumptions used to estimate the fair values of the financial
instruments are summarized below. Considerable judgment is required in
interpreting market data to develop the estimates of fair value. Accordingly,
the estimates presented herein may not be indicative of the amounts that Viad
could realize in a current market exchange. The use of different market
assumptions or valuation methodologies may have a material effect on the
estimated fair value amounts.
Debt--The fair value of debt was estimated by discounting the future cash
flows using rates currently available for debt of similar terms and maturity.
The carrying values of the commercial paper and promissory notes were assumed
to approximate fair values due to their short-term maturities.
Swap agreements--The fair value represents the estimated amount that Viad
would pay to counterparties to terminate the swap agreements at December 31.
P. LITIGATION, CLAIMS AND OTHER CONTINGENCIES
Viad and certain subsidiaries are plaintiffs or defendants to various
actions, proceedings and pending claims, including pending or potential
claims by or on behalf of approximately 6,500 former railroad workers
claiming asbestos-related health conditions from exposure to railroad
equipment made by former subsidiaries. Certain of these pending legal actions
are or purport to be class actions. Some of the foregoing involve, or may
involve, compensatory, punitive or other damages. Litigation is subject to
many uncertainties and it is possible that some of the legal actions,
proceedings or claims could be decided against Viad. Although the amount of
liability at December 31, 1998, with respect to these matters is not
ascertainable, Viad believes that any resulting liability will not have a
material effect on Viad's financial position or results of operations.
Viad is subject to various environmental laws and regulations of the United
States as well as of the states and other countries in whose jurisdictions
Viad has or had operations and is subject to certain international
agreements. As is the case with many companies, Viad faces exposure to actual
or potential claims and lawsuits involving environmental matters. Although
Viad is a party to certain environmental disputes, Viad believes that any
liabilities resulting therefrom, after taking into consideration amounts
already provided for, exclusive of any potential insurance recoveries, will
not have a material effect on Viad's financial position or results of
operations.
<PAGE>
Q. SEGMENT INFORMATION
SFAS No. 131, "Disclosures about Segments of an Enterprise and Related
Information," adopted effective December 31, 1998, changes the way Viad
reports information about its operating segments. SFAS No. 131 requires
disclosure of certain financial information for reportable operating segments
based on management's internal organizational decision-making structure.
Viad measures segment profit and performance based on operating segment
income from continuing operations after minority interests and income taxes,
but before nonrecurring items.
The accounting policies of the operating segments are the same as those
described in Note A, except that an adjustment is made to the Payment
Services segment to present revenues, operating income and income taxes on a
fully taxable equivalent basis to reflect amounts invested in tax-exempt
securities. Intersegment sales and transfers are not significant. Interest
expense is allocated to operations based on net funds advanced and current
short-term interest rates. Income taxes are allocated based primarily on
separate return calculations for each business. Certain benefits of filing
combined and/or consolidated state income tax returns, including tax losses
and credits which would not have been available to certain subsidiaries on a
separate return basis, have been credited to such subsidiaries by Viad.
Depreciation and amortization are the only significant noncash items for the
reportable segments.
Viad's reportable segments include Payment Services, Convention and Event
Services and Airline Catering. The Payment Services segment sells money
orders through agents, performs official check and negotiable instrument
clearing services for banks and credit unions, and provides cash access
services to gaming establishments throughout the United States. In addition,
the segment provides consumer money wire transfer services throughout the
world. The Convention and Event Services segment provides decorating, exhibit
preparation, installation and dismantling, and electrical, transportation and
management services for conventions, tradeshows, associations and other
corporate events; and designs and builds convention, tradeshow, museum and
other exhibits and displays throughout the world. The Airline Catering
segment provides in-flight meals, snacks, beverages and related services to
domestic and international airlines throughout the United States, as well as
in foreign countries.
The remaining categories represent sold businesses, other businesses below
reportable segment quantitative thresholds and corporate and other. These
categories are presented to reconcile to total results. Travel and Recreation
Services includes Viad's Canadian travel tour service subsidiary, which
operates tours and charters in the Canadian Rockies and engages in hotel
operations and snocoach tours of the Columbia Icefield; and the Recreation
Division of Viad, which operates concessions at America West Arena and Bank
One Ballpark in Phoenix, Arizona, and through a subsidiary, operates historic
lodges at Glacier National Park. Sold businesses includes ASIG, GLSI, Jetsave
and Crystal Holidays and the contract foodservice operations of Restaura,
Inc. as described in Note C. Corporate and other includes expenses of
corporate activities and interest expense not allocated to operating
segments, net of applicable income taxes.
MAJOR CUSTOMERS. Major customers are defined as those which individually
accounted for more than 10% of Viad's revenues. Sales to one major customer
in the Airline Catering segment accounted for 12%, 12% and 13% of Viad's
consolidated revenues in 1998, 1997 and 1996, respectively.
Disclosures regarding Viad's reportable segments under SFAS No. 131 with
reconciliations to consolidated totals are presented in the accompanying
table. The information for 1997 and 1996 has been restated to conform to the
new presentation. While classification and presentation differ from amounts
previously reported, the adoption of SFAS No. 131 did not affect Viad's
consolidated financial position, results of operations or cash flows as
previously reported.
<PAGE>
<TABLE>
<CAPTION>
Income from
Continuing Income
Operations Operating Interest Taxes
(000 omitted) Revenues (after-tax)(1,2) Income(3) Expense (Benefit)
- --------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
1998:
Payment Services $431,157(5) $51,467 $87,206(5) $ -- $ 34,536(5)
Convention and Event Services 849,165 42,924 87,446 16,159 28,353
Airline Catering 892,038 37,038 70,661 6,894 26,729
- -------------------------------------------------------------------------------------------------------------------------------
Reportable segments 2,172,360 131,429 245,313 23,053 89,618
Other:
Travel and Recreation Services 102,952 9,523 17,729 1,688 6,160
Sold businesses 306,132 9,215 14,854 47 4,998
Corporate and other (25,465) (21,913) 16,030 (12,478)
Gains on sales of businesses 32,855 21,784
Provision for patent infringement
payments received (6,917) (10,642) (3,725)
- -------------------------------------------------------------------------------------------------------------------------------
Subtotal 2,581,444 150,640 245,341 40,818 106,357
Less: Fully taxable equivalent adjustment (39,309) (39,309) (39,309)
Elimination of Viad commercial paper
- -------------------------------------------------------------------------------------------------------------------------------
$2,542,135 $150,640 $206,032 $40,818 $ 67,048
================================================================================================================================
1997:
Payment Services $234,891(5) $41,243 $65,348(5) $ -- $ 24,105(5)
Convention and Event Services 827,500 35,298 72,753 12,718 24,737
Airline Catering 802,313 33,460 66,198 7,742 24,996
- --------------------------------------------------------------------------------------------------------------------------------
Reportable segments 1,864,704 110,001 204,299 20,460 73,838
Other:
Travel and Recreation Services 91,256 7,863 14,590 497 5,949
Sold businesses 490,234 18,370 27,965 (670) 9,309
Corporate and other (38,440) (29,294) 28,365 (19,219)
- --------------------------------------------------------------------------------------------------------------------------------
Subtotal 2,446,194 97,794 217,560 48,652 69,877
Less: Fully taxable equivalent adjustment (28,724) (28,724) (28,724)
Elimination of Viad commercial paper
- --------------------------------------------------------------------------------------------------------------------------------
$2,417,470 $97,794 $188,836 $48,652 $ 41,153
================================================================================================================================
1996:
Payment Services $191,455(5) $34,063 $56,019(5) $ -- $ 21,956(5)
Convention and Event Services 774,040 31,368 64,042 11,206 21,468
Airline Catering 734,213 31,179 61,850 7,394 23,277
- --------------------------------------------------------------------------------------------------------------------------------
Reportable segments 1,699,708 96,610 181,911 18,600 66,701
Other:
Travel and Recreation Services 91,401 8,076 14,561 639 5,807
Sold businesses 493,608 16,178 26,370 (513) 8,992
Corporate and other (41,833) (33,102) 34,293 (25,562)
Gain on sale of interest in Phoenix Suns 19,025 11,464
Spin-off costs and management
transition expenses (28,985) (4,015)
- --------------------------------------------------------------------------------------------------------------------------------
Subtotal 2,284,717 69,071 189,740 53,019 63,387
Less: Fully taxable equivalent adjustment (21,489) (21,489) (21,489)
Elimination of Viad commercial paper
- --------------------------------------------------------------------------------------------------------------------------------
$2,263,228 $69,071 $168,251 $53,019 $ 41,898
================================================================================================================================
</TABLE>
<TABLE>
<CAPTION>
Depreciation
and Capital
(000 omitted) Assets Amortization Expenditures
- -----------------------------------------------------------------------------------------------
<S> <C> <C> <C>
1998:
Payment Services $3,534,073(4) $17,908 $16,938
Convention and Event Services 546,428 23,072 22,949
Airline Catering 500,780 27,591 25,596
- -----------------------------------------------------------------------------------------------
Reportable segments 4,581,281 68,571 65,483
Other:
Travel and Recreation Services 78,700 5,162 7,413
Sold businesses 35,219 8,030 3,662
Corporate and other 197,572 4,133 759
Gains on sales of businesses
Provision for patent infringement
payments received
- ----------------------------------------------------------------------------------------------
Subtotal 4,892,772 85,896 77,317
Less: Fully taxable equivalent adjustment
Elimination of Viad commercial paper (90,000)
- ----------------------------------------------------------------------------------------------
$4,802,772 $85,896 $77,317
==============================================================================================
1997:
Payment Services $2,440,143(4) $10,908 $10,195
Convention and Event Services 424,789 20,192 26,561
Airline Catering 508,267 25,527 37,298
- ----------------------------------------------------------------------------------------------
Reportable segments 3,373,199 56,627 74,054
Other:
Travel and Recreation Services 80,852 3,998 19,082
Sold businesses 148,099 12,825 13,962
Corporate and other 218,163 5,051 875
- ----------------------------------------------------------------------------------------------
Subtotal 3,820,313 78,501 107,973
Less: Fully taxable equivalent adjustment
Elimination of Viad commercial paper (90,000)
- ----------------------------------------------------------------------------------------------
$3,730,313 $78,501 $107,973
==============================================================================================
1996:
Payment Services $2,033,242(4) $ 9,122 $ 7,969
Convention and Event Services 412,854 18,140 25,258
Airline Catering 475,914 26,311 18,133
- ----------------------------------------------------------------------------------------------
Reportable segments 2,922,010 53,573 51,360
Other:
Travel and Recreation Services 67,359 3,708 7,691
Sold businesses 208,952 11,671 20,993
Corporate and other 344,991 5,492 2,105
Gain on sale of interest in Phoenix Suns
Spin-off costs and management
transition expenses
- ----------------------------------------------------------------------------------------------
Subtotal 3,543,312 74,444 82,149
Less: Fully taxable equivalent adjustment
Elimination of Viad commercial paper (90,000)
- ----------------------------------------------------------------------------------------------
$3,453,312 $74,444 $82,149
==============================================================================================
</TABLE>
(1) Income from continuing operations is after deducting minority interests as
follows: Payment Services $1,203,000 (1998); Convention and Event Services
$10,000 (1998); Travel and Recreation Services $358,000 (1998), $281,000
(1997) and $39,000 (1996); and Sold businesses $594,000 (1998), $956,000
(1997) and $1,713,000 (1996).
(2) Net income was $150,640,000, $89,336,000 and $28,377,000 in 1998, 1997 and
1996, respectively, after deducting an extraordinary charge of $8,458,000
for the early retirement of debt in 1997 and after deducting a loss from
discontinued operations of $40,694,000 in 1996.
(3) Operating income by segment is presented as additional information. The
definition of operating income is revenues less (a) cost of sales and
services, including depreciation, amortization and the expense of selling
receivables, and (b) cost of corporate activities, net.
(4) Includes assets restricted for payment service obligations of
$3,066,854,000 (1998), $2,323,351,000 (1997) and $1,938,919,000 (1996),
including $90,000,000 invested in Viad commercial paper.
(5) The fully taxable equivalent adjustment for Payment Services' income from
tax-exempt securities is calculated based on a combined income tax rate of
39%.
<PAGE>
R. CONDENSED CONSOLIDATED QUARTERLY RESULTS (UNAUDITED)
<TABLE>
<CAPTION>
First Second Third Fourth
(000 omitted, except per share data) Quarter Quarter Quarter Quarter Total
- -------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
1998:
Revenues(1) $602,780 $657,071 $672,393 $609,891 $2,542,135
Operating income(1,2) 33,631 48,433 69,161 54,807 206,032
Net income(3) 15,379 40,622 57,033 37,606 150,640
Diluted income per common share(3) 0.15 0.41 0.58 0.38 1.52
Basic income per common share(3) 0.16 0.43 0.60 0.39 1.58
=================================================================================================
Fully taxable equivalent adjustment(1) 8,231 9,616 10,459 11,003 39,309
=================================================================================================
1997:
Revenues(1) $569,726 $614,945 $622,226 $610,573 $2,417,470
Operating income(1) 29,639 49,995 60,235 48,967 188,836
Net income:
Before extraordinary charge 10,520 26,675 33,850 26,749 97,794
Extraordinary charge (8,458) (8,458)
- -------------------------------------------------------------------------------------------------
Net income 2,062 26,675 33,850 26,749 89,336
=================================================================================================
Diluted income per common share:
Before extraordinary charge 0.11 0.28 0.36 0.28 1.03
Extraordinary charge (0.09) (0.09)
- -------------------------------------------------------------------------------------------------
Diluted income per common share 0.02 0.28 0.36 0.28 0.94
=================================================================================================
Basic income per common share:
Before extraordinary charge 0.11 0.29 0.37 0.29 1.06
Extraordinary charge (0.09) (0.09)
- -------------------------------------------------------------------------------------------------
Basic income per common share 0.02 0.29 0.37 0.29 0.97
=================================================================================================
Fully taxable equivalent adjustment(1) 6,460 7,477 7,103 7,684 28,724
=================================================================================================
</TABLE>
(1) A Viad payment services subsidiary is investing increasing amounts in
tax-exempt securities. On a fully taxable equivalent basis using a
combined income tax rate of 39%, revenues and operating income would be
higher by the fully taxable equivalent adjustments shown above.
(2) After deducting a $10,642,000 provision for payments previously received
pursuant to patent infringement litigation in the second quarter of 1998
as described in Note C.
(3) Includes a gain on the sale of ASIG of $13,201,000 (after-tax), or $0.13
per diluted share ($0.14 per basic share), in the second quarter of
1998; a provision for payments previously received pursuant to patent
infringement litigation of $6,917,000 (after-tax), or $0.07 per diluted
and basic share, also in the second quarter of 1998; a gain on the sale
of GLSI of $15,650,000 (after-tax), or $0.16 per diluted and basic
share, in the third quarter of 1998; and a gain on the sale of Jetsave
and Crystal Holidays of $4,004,000 (after-tax), or $0.04 per diluted and
basic share, in the fourth quarter of 1998 (see Note C). Excluding these
items, 1998 diluted income per common share was:
First Quarter $ 0.15
Second Quarter 0.35
Third Quarter 0.42
Fourth Quarter 0.34
------
Total $ 1.26
======
<PAGE>
MANAGEMENT'S REPORT ON RESPONSIBILITY FOR FINANCIAL REPORTING
The management of Viad Corp has the responsibility for preparing and assuring
the integrity and objectivity of the accompanying financial statements and other
financial information in this report. The financial statements were developed
using generally accepted accounting principles and appropriate policies,
consistently applied. They reflect, where applicable, management's best
estimates and judgments and include disclosures and explanations which are
relevant to an understanding of the financial affairs of Viad.
Viad's financial statements have been audited by Deloitte & Touche LLP.
Management has made available to Deloitte & Touche LLP all of Viad's financial
records and related data, and has made appropriate and complete written and oral
representations and disclosures in connection with the audit.
Management has established and maintains a system of internal control that it
believes provides reasonable assurance as to the integrity and reliability of
the financial statements, the protection of assets and the prevention and
detection of fraudulent financial reporting. The system of internal control
is believed to provide for appropriate division of responsibilities and is
documented by written policies and procedures that are utilized by employees
involved in the financial reporting process. Management also recognizes its
responsibility for fostering a strong ethical climate. This responsibility is
characterized and reflected in Viad's Code of Corporate Conduct, which is
communicated to all Viad executives and managers as part of an overall
Corporate Compliance Program.
Viad also maintains a comprehensive internal auditing function which
independently monitors compliance and assesses the effectiveness of the
internal controls and recommends potential improvements thereto. In addition,
as part of their audit of Viad's financial statements, the independent
auditors review and evaluate selected internal accounting and other controls
to establish a basis for reliance thereon in determining the audit tests to
be applied. There is close coordination of audit planning and coverage
between Viad's internal auditing function and the independent auditors.
Management has considered the recommendations of both internal auditing and
the independent auditors concerning Viad's system of internal control and has
taken actions believed to be cost-effective in the circumstances to implement
appropriate recommendations and otherwise enhance controls. Management
believes that Viad's system of internal control accomplishes the objectives
discussed herein.
The Board of Directors oversees Viad's financial reporting through its Audit
Committee. The Audit Committee regularly meets with management representatives
and, jointly and separately, with the independent auditors and internal auditing
management to review interest rate swap activity, accounting, auditing and
financial reporting matters, the effectiveness of the Corporate Compliance
Program, and during 1998, progress toward Year 2000 compliance.
/s/ Richard C. Stephan /s/ R.G. Nelson
Richard C. Stephan Ronald G. Nelson
Vice President -- Controller Vice President -- Finance
and Treasurer
<PAGE>
INDEPENDENT AUDITORS' REPORT
To the Stockholders and Board of Directors of Viad Corp:
We have audited the accompanying consolidated balance sheets of Viad Corp as of
December 31, 1998 and 1997, and the related consolidated statements of income,
comprehensive income, common stock and other equity and of cash flows for each
of the three years in the period ended December 31, 1998. These financial
statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these financial statements based on
our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements are free
of material misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the financial statements.
An audit also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating the overall
financial statement presentation. We believe that our audits provide a
reasonable basis for our opinion.
In our opinion, such consolidated financial statements present fairly, in all
material respects, the financial position of Viad Corp as of December 31, 1998
and 1997, and the results of its operations and its cash flows for each of the
three years in the period ended December 31, 1998 in conformity with generally
accepted accounting principles.
/s/ Deloitte & Touche LLP
Deloitte & Touche LLP
Phoenix, Arizona
February 19, 1999
<PAGE>
Exhibit 21
VIAD CORP
(DELAWARE)
Active Subsidiaries and Affiliates* as of December 31, 1998
AIRLINE CATERING GROUP
Greyhound-Dobbs Incorporated (Delaware)
DOBBS INTERNATIONAL SERVICES, INC. (Delaware)
Dobbs Houses International, Inc. (Delaware)
CONVENTION & EVENT SERVICES GROUP
Dimension Works, Inc. (Illinois)
EXG, Inc. (Delaware)
Giltspur Exhibits of Canada, Inc. (Ontario)
GES Exposition Services (Canada) Limited (Canada)
Exposervice Standard Inc. (Canada)
Clarkson-Conway Inc. (Canada)
Stampede Display and Convention Services Ltd. (Alberta)
GES EXPOSITION SERVICES, INC. (Nevada)
Concourse Graphics, Inc. (Delaware)
ESR Exposition Service, Inc. (New Jersey)
Expo Accessories, Inc. (New York)
Expo Display & Design, Inc. (New Jersey)
Expo-Tech Electrical & Plumbing Services, Inc. (California)
Shows Unlimited, Inc. (Nevada)
United Exposition Service Redevelopment Corporation (Missouri)
David H. Gibson Company, Inc. (Texas)
Las Vegas Convention Service Co. (Nevada)
Viad Holding GmbH (Germany)
Voblo Verwaltungs GmbH (Germany) (80%)
CORPORATE AND OTHER
GCMC Inc. (Arizona)
Viad Realty Corporation (Arizona)
Greyhound Realty of Texas Inc. (Texas)
VREC, Inc. (Delaware)
<PAGE>
TRAVEL & RECREATION SERVICES GROUP
Glacier Park, Inc. (Arizona) (80%)
Waterton Transport Company, Limited (Alberta)
Greyhound Support Services, Inc. (Delaware) (I)
Greyhound Maintenance, Inc. (Arizona)
ProDine, Inc. (Arizona)
RESTAURA, INC. (Michigan)
TRANSPORTATION LEASING CO. (California)~~
Greyhound Canada Holdings, Inc. (Alberta)~~
Brewster Tours Inc. (Canada)
BREWSTER TRANSPORT COMPANY LIMITED (Alberta)
Cascade Holdings (Banff) Inc. (Alberta)
PAYMENT SERVICES GROUP
TRAVELERS EXPRESS COMPANY, INC. (Minnesota)
CAG Inc. (Nevada)
FSMC, Inc. (Minnesota)
Game Financial Corporation (Minnesota)
GameCash, Inc. (Minnesota)
Game Financial Corporation of Louisiana (Louisiana)
Game Financial Corporation of Mississippi (Mississippi)
Game Financial Corporation of Wisconsin (Wisconsin)
MoneyGram Payment Systems, Inc. (Delaware)
Consorcio Oriental LLC (Delaware)
Mid-America Money Order Company (Kentucky)
MoneyGram Payment Systems (Canada), Inc. (Ontario)
MoneyGram Finance Inc. (Delaware)
MoneyGram International Limited (United Kingdom) (51%)
MoneyLine Express, Inc. (Wisconsin)
Travelers Express Co. (P.R.) Inc. (Puerto Rico)
Viad Service Companies Limited (United Kingdom)
Dobbs International (U.K.) Limited (United Kingdom)#
# Indicates an Airline Catering Subsidiary
- --Indicates a Corporate and Other Subsidiary
*Parent-subsidiary or affiliate relationships are shown by marginal
indentation. State, province or country of incorporation and ownership
percentage are shown in parentheses following name, except that no ownership
percentage appears for subsidiaries owned 100% (in the aggregate) by Viad
Corp.
<PAGE>
EXHIBIT 23
INDEPENDENT AUDITORS' CONSENT
To The Board of Directors
Viad Corp
Phoenix, Arizona
We consent to the incorporation by reference in Registration Statement Nos.
33-54465, 333-06357, and 33-55360 on Form S-3 and Nos. 33-41870, 333-63397,
333-27327, 33-56531, and 333-35231 on Form S-8 of Viad Corp, of our report
dated February 19, 1999, appearing in this Annual Report on Form 10-K of Viad
Corp for the year ended December 31, 1998.
/s/ DELOITTE & TOUCHE LLP
- -------------------------
Phoenix, Arizona
March 23, 1999
<PAGE>
Exhibit 24
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that each director whose signature
appears below constitutes and appoints Robert H. Bohannon and Richard C.
Stephan, and each of them severally, his or her true and lawful
attorneys-in-fact and agents, with full power of substitution and
resubstitution, for him or her and in his or her name, place and stead, in
any and all capacities, to sign the Form 10-K Annual Report of Viad Corp for
the fiscal year ended December 31, 1998, and any and all amendments thereto,
and to file the same, with all exhibits thereto, and other documents in
connection therewith, with the Securities and Exchange Commission, granting
unto said attorneys-in-fact and agents, and each of them, full power and
authority to do and perform each and every act and thing requisite or
necessary to be done in and about the premises, as fully to all intents and
purposes as he or she might or could do in person, hereby ratifying and
confirming all that said attorneys-in-fact and agents or either of them, or
their or his or her substitutes or substitute, may lawfully do or cause to be
done by virtue hereof.
/s/ Jess Hay February 18, 1999
----------------------
/s/ Judith K. Hofer February 18, 1999
----------------------
/s/ Jack F. Reichert February 18, 1999
----------------------
/s/ Linda Johnson Rice February 18, 1999
----------------------
/s/ Douglas L. Rock February 18, 1999
----------------------
/s/ John C. Tolleson February 18, 1999
----------------------
/s/ Timothy R. Wallace February 18, 1999
----------------------
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM VIAD CORP'S
FORM 10-K FOR THE YEAR ENDED DECEMBER 31, 1998 AND IS QUALIFIED IN ITS ENTIRETY
BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-START> JAN-01-1998
<PERIOD-END> DEC-31-1998
<CASH> 5,197
<SECURITIES> 0
<RECEIVABLES> 133,005
<ALLOWANCES> 4,066
<INVENTORY> 73,059
<CURRENT-ASSETS> 843,391
<PP&E> 842,815
<DEPRECIATION> 375,238
<TOTAL-ASSETS> 4,802,772
<CURRENT-LIABILITIES> 3,396,448
<BONDS> 531,348
6,625
0
<COMMON> 149,610
<OTHER-SE> 496,271
<TOTAL-LIABILITY-AND-EQUITY> 4,802,772
<SALES> 0
<TOTAL-REVENUES> 2,542,135
<CGS> 0
<TOTAL-COSTS> 2,314,190
<OTHER-EXPENSES> 21,913
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 40,818
<INCOME-PRETAX> 217,688
<INCOME-TAX> 67,048
<INCOME-CONTINUING> 150,640
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 150,640
<EPS-PRIMARY> 1.58
<EPS-DILUTED> 1.52
</TABLE>
