<PAGE>
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
FORM 10-Q
QUARTERLY REPORT PURSUANT TO SECTION 13
OF THE SECURITIES EXCHANGE ACT OF 1934
For the Quarterly Period Ended March 31, 1999
Commission file number 001-11015
VIAD CORP
(Exact name of registrant as specified in its charter)
DELAWARE 36-1169950
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
1850 N. CENTRAL AVE., PHOENIX, ARIZONA 85077
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code (602) 207-4000
Indicate by check mark whether the registrant (1) has filed all Exchange Act
reports required to be filed by Section 13 or 15(d) of the Securities Exchange
Act of 1934 during the preceding 12 months, and (2) has been subject to such
filing requirements for the past 90 days.
Yes X No
------ ------
As of April 30, 1999, 99,564,956 shares of Common Stock ($1.50 par value) were
outstanding.
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PART I. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
VIAD CORP
CONSOLIDATED BALANCE SHEET
<TABLE>
<CAPTION>
March 31, 1999 December 31,
(000 omitted except number of shares) (Unaudited) 1998
----------- -----------
<S> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents $ 31,183 $ 5,197
Receivables 135,193 128,939
Inventories 74,841 73,059
Deferred income taxes 37,398 38,063
Other current assets 49,750 36,867
----------- -----------
328,365 282,125
Funds, agents' receivables and current maturities
of investments restricted for payment service obligations,
after eliminating $90,000 invested in Viad commercial paper 284,339 561,266
----------- -----------
Total current assets 612,704 843,391
Investments restricted for payment service obligations 2,523,828 2,415,588
Property and equipment 444,987 467,577
Other investments and assets 133,560 137,599
Deferred income taxes 85,454 70,860
Intangibles 877,321 867,757
----------- -----------
$ 4,677,854 $ 4,802,772
----------- -----------
----------- -----------
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable $ 145,051 $ 136,805
Accrued compensation 63,406 92,460
Other current liabilities 190,278 164,148
Current portion of long-term debt 32,876 3,105
----------- -----------
431,611 396,518
Payment service obligations 2,830,250 2,999,930
----------- -----------
Total current liabilities 3,261,861 3,396,448
Long-term debt 509,478 531,348
Pension and other benefits 81,530 80,752
Other deferred items and insurance liabilities 161,941 138,622
Minority interests 3,134 3,096
$4.75 Redeemable preferred stock 6,629 6,625
Common stock and other equity:
Common stock, $1.50 par value, 200,000,000 shares
authorized, 99,739,925 shares issued 149,610 149,610
Additional capital 310,169 327,866
Retained income 340,870 328,305
Unearned employee benefits and other (133,746) (162,543)
Accumulated other comprehensive income:
Unrealized gain on securities classified as available for sale 12,677 18,231
Cumulative translation adjustments (6,828) (7,009)
Common stock in treasury, at cost, 746,911 and 344,858 shares (19,471) (8,579)
----------- -----------
Total common stock and other equity 653,281 645,881
----------- -----------
$ 4,677,854 $ 4,802,772
----------- -----------
----------- -----------
</TABLE>
See Notes to Consolidated Financial Statements.
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VIAD CORP
CONSOLIDATED STATEMENT OF INCOME
(Unaudited)
<TABLE>
<CAPTION>
Three months ended March 31,
(000 omitted, except per share data) 1999 1998
---------- ---------
<S> <C> <C>
REVENUES $ 592,449 $ 602,780
---------- ---------
Costs and expenses:
Costs of sales and services 549,164 562,944
Corporate activities, net 4,503 6,205
Interest expense 9,634 11,174
Minority interests 501 276
---------- ---------
563,802 580,599
---------- ---------
Income before income taxes 28,647 22,181
Income taxes 8,262 6,802
---------- ---------
NET INCOME $ 20,385 $ 15,379
---------- ---------
---------- ---------
DILUTED NET INCOME PER COMMON SHARE $ 0.20 $ 0.15
---------- ---------
---------- ---------
BASIC NET INCOME PER COMMON SHARE $ 0.21 $ 0.16
---------- ---------
---------- ---------
Average outstanding common shares 94,640 93,979
Additional dilutive shares related to
stock-based compensation 3,812 3,872
---------- ---------
Average outstanding and potentially
dilutive common shares 98,452 97,851
---------- ---------
---------- ---------
Dividends declared per common share $ 0.08 $ 0.08
---------- ---------
---------- ---------
Preferred stock dividends $ 283 $ 282
---------- ---------
---------- ---------
</TABLE>
See Notes to Consolidated Financial Statements.
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VIAD CORP
CONSOLIDATED STATEMENT OF RETAINED INCOME
(Unaudited)
<TABLE>
<CAPTION>
Three months ended March 31,
(000 omitted) 1999 1998
--------- ---------
<S> <C> <C>
Balance, beginning of year $ 328,305 $ 209,127
Net income 20,385 15,379
Dividends on common and preferred stock (7,887) (7,843)
Other 67 80
--------- ---------
Balance, end of period $ 340,870 $ 216,743
--------- ---------
--------- ---------
</TABLE>
See Notes to Consolidated Financial Statements.
VIAD CORP
CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME
(Unaudited)
<TABLE>
<CAPTION>
Three months ended March 31,
(000 omitted) 1999 1998
-------- --------
<S> <C> <C>
Net income $ 20,385 $ 15,379
-------- --------
Other comprehensive income (loss), net of tax:
Unrealized gain (loss) on securities
classified as available for sale:
Holding losses arising during the period (4,147) (295)
Reclassification adjustment for net realized gains
included in net income (1,407) (1,266)
-------- --------
(5,554) (1,561)
-------- --------
Unrealized foreign currency translation adjustments:
Holding gains arising during the period 181 605
-------- --------
Other comprehensive loss (5,373) (956)
-------- --------
Comprehensive income $ 15,012 $ 14,423
-------- --------
-------- --------
</TABLE>
See Notes to Consolidated Financial Statements.
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VIAD CORP
CONSOLIDATED STATEMENT OF CASH FLOWS
(Unaudited)
<TABLE>
<CAPTION>
Three months ended March 31,
(000 omitted) 1999 1998
--------- ---------
<S> <C> <C>
CASH FLOWS PROVIDED (USED) BY OPERATING ACTIVITIES:
Net income $ 20,385 $ 15,379
Adjustments to reconcile net income to
net cash provided by operating activities:
Depreciation and amortization 21,917 20,309
Deferred income taxes (6,245) 2,679
Other noncash items, net 1,265 (65)
Change in operating assets and liabilities:
Receivables and inventories (5,519) (9,387)
Payment service assets and obligations, net 104,653 142,698
Accounts payable and accrued compensation (24,702) (23,744)
Other assets and liabilities, net 1,164 281
--------- ---------
Net cash provided by operating activities 112,918 148,150
--------- ---------
CASH FLOWS PROVIDED (USED) BY INVESTING ACTIVITIES:
Capital expenditures (10,611) (16,114)
Acquisitions of businesses, net of cash acquired (10,311)
Proceeds from sales of businesses, property and
other assets, net 52,859 3,008
Investments restricted for payment service obligations:
Proceeds from sales and maturities of securities
classified as available for sale 276,623 185,191
Proceeds from maturities of securities
classified as held to maturity 54,227 29,774
Purchases of securities classified as available for sale (440,339) (280,992)
Purchases of securities classified as held to maturity (6,081) (70,991)
--------- ---------
Net cash used by investing activities (83,633) (150,124)
--------- ---------
CASH FLOWS PROVIDED (USED) BY FINANCING ACTIVITIES:
Payments on long-term borrowings (141) (68)
Net change in short-term borrowings 8,000 24,000
Dividends on common and preferred stock (7,887) (7,843)
Proceeds from issuances of treasury stock 6,222 5,163
Common stock purchased for treasury (9,493)
Cash payments on interest rate swap agreements
related to debt (2,129)
--------- ---------
Net cash (used) provided by financing activities (3,299) 19,123
--------- ---------
Net increase in cash and cash equivalents 25,986 17,149
Cash and cash equivalents, beginning of year 5,197 12,341
--------- ---------
CASH AND CASH EQUIVALENTS, END OF PERIOD $ 31,183 $ 29,490
--------- ---------
--------- ---------
</TABLE>
See Notes to Consolidated Financial Statements.
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VIAD CORP
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE A -- BASIS OF PREPARATION
The Consolidated Financial Statements of Viad Corp ("Viad") include the accounts
of Viad and all of its subsidiaries. This information should be read in
conjunction with the financial statements set forth in the Viad Corp Annual
Report to Stockholders for the year ended December 31, 1998.
Accounting policies utilized in the preparation of the financial information
herein presented are the same as set forth in Viad's annual financial statements
except as modified for interim accounting policies which are within the
guidelines set forth in Accounting Principles Board Opinion No. 28, "Interim
Financial Reporting." The interim consolidated financial information is
unaudited. In the opinion of management, all adjustments, consisting only of
normal recurring accruals, necessary to present fairly Viad's financial position
as of March 31, 1999, and its results of operations and its cash flows for the
three months ended March 31, 1999 and 1998 have been included. Interim results
of operations are not necessarily indicative of the results of operations for
the full year.
Certain prior year amounts have been reclassified to conform with the 1999
presentation.
NOTE B -- FUNDS, 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, along with certain additional
subsidiary funds, are invested in permissible securities, principally debt
instruments. Such investments, along with related cash and funds in transit, are
restricted by state regulatory agencies for use by the subsidiary to satisfy the
liability to pay, upon presentment, the face amount of such payment service
obligations. Accordingly, such restricted assets are not available to satisfy
working capital or other financing requirements of Viad.
The following is a summary of asset and liability carrying amounts related to
the payment service obligations, including additional subsidiary funds:
<TABLE>
<CAPTION>
March 31, December 31,
(000 omitted) 1999 1998
----------- -----------
<S> <C> <C>
Funds, agents' receivables and current maturities of
investments restricted for payment service obligations,
including $90,000 invested in Viad commercial paper (1) $ 374,339 $ 651,266
Investments restricted for payment service obligations (2) 2,523,828 2,415,588
----------- -----------
2,898,167 3,066,854
Payment service obligations 2,830,250 2,999,930
----------- -----------
Asset carrying amounts in excess of 1:1 funding
coverage of payment service obligations (2) $ 67,917 $ 66,924
----------- -----------
----------- -----------
</TABLE>
(1) See Note D of Notes to Consolidated Financial Statements for description of
Viad's revolving bank credit agreement, which supports its commercial paper
obligations.
(2) See Note C of Notes to Consolidated Financial Statements for a summary of
investments and their classification and carrying amounts in accordance
with SFAS No. 115, "Accounting for Certain Investments in Debt and Equity
Securities." As detailed therein, securities classified as "available for
sale" are carried at market value and securities classified as "held to
maturity" are carried at amortized
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cost. The market value of securities classified as "held to maturity"
exceeded carrying amounts by $14,978,000 and $16,963,000 at March 31, 1999
and December 31, 1998, respectively.
NOTE C -- INVESTMENTS RESTRICTED FOR PAYMENT SERVICE OBLIGATIONS
Investments restricted for payment service obligations include the following
debt and equity securities:
<TABLE>
<CAPTION>
March 31, December 31,
(000 omitted) 1999 1998
----------- -----------
<S> <C> <C>
Securities classified as available for sale, at fair value
(amortized cost of $2,011,025 and $1,846,144) $ 2,031,806 $ 1,876,031
Securities classified as held to maturity, at amortized cost
(fair value of $516,572 and $566,664) 501,594 549,701
----------- -----------
2,533,400 2,425,732
Less current maturities (9,572) (10,144)
----------- -----------
$ 2,523,828 $ 2,415,588
----------- -----------
----------- -----------
</TABLE>
NOTE D -- DEBT
At March 31, 1999 and December 31, 1998, Viad classified as long-term debt
$208,000,000 and $200,000,000, respectively, of short-term borrowings which,
along with the $90,000,000 commercial paper issued to Viad's payment services
subsidiary, are supported by unused commitments under a $300,000,000
long-term revolving bank credit agreement.
NOTE E -- INCOME TAXES
A reconciliation of the provision for income taxes and the amount that would
be computed using statutory federal income tax rates on income before income
taxes for the three months ended March 31, is as follows:
<TABLE>
<CAPTION>
(000 omitted) 1999 1998
-------- -------
<S> <C> <C>
Computed income taxes at statutory
federal income tax rate of 35% $ 10,026 $ 7,763
Nondeductible goodwill amortization 1,305 1,051
Minority interests 175 97
State income taxes 887 673
Tax-exempt income (6,204) (4,506)
Adjustment to estimated annual effective tax rate 2,500 2,000
Other, net (427) (276)
-------- -------
Provision for income taxes $ 8,262 $ 6,802
-------- -------
-------- -------
</TABLE>
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NOTE F -- SUPPLEMENTARY INFORMATION--REVENUES AND OPERATING INCOME
Viad measures segment profit and performance based on operating segment
income after minority interests and income taxes. Operating income is
presented as additional information. An adjustment is made to the Payment
Services segment to present revenues, operating income and income taxes on a
fully taxable equivalent basis for income resulting from investments in
tax-exempt securities. Intersegment sales and transfers are not significant.
Interest expense is allocated to operations based on net funds advanced
calculated based on current short-term interest rates. Corporate and other
includes expenses of corporate activities and interest expense not allocated
to operating segments, net of applicable income taxes. Total assets did not
materially change from the amount disclosed in the 1998 Annual Report to
Stockholders.
Disclosures regarding Viad's reportable segments under SFAS No. 131 along
with reconciliations to consolidated totals are presented below.
<TABLE>
<CAPTION>
Net Operating Interest Income Tax
(000 omitted) Revenues Income (1) Income Expense (Benefit)
--------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C>
Quarter Ended March 31, 1999:
Payment Services $ 131,135 $ 13,977 $ 24,130 $ -- $ 9,679
Convention and Event Services 235,120 11,347 24,038 5,129 7,497
Airline Catering 217,389 5,129 11,230 1,484 4,617
--------- -------- -------- -------- --------
REPORTABLE SEGMENTS 583,644 30,453 59,398 6,613 21,793
Other:
Travel and recreation services 9,210 (1,036) (1,572) 400 (898)
Sold businesses (2) 10,928 (1,953) (3,208) (201) (1,054)
Corporate and other (7,079) (4,503) 2,822 (246)
--------- -------- -------- -------- --------
Subtotal 603,782 20,385 50,115 9,634 19,595
Less taxable equivalent adjustment (11,333) (11,333) (11,333)
--------- -------- -------- -------- --------
$ 592,449 $ 20,385 $ 38,782 $ 9,634 $ 8,262
--------- -------- -------- -------- --------
--------- -------- -------- -------- --------
Quarter Ended March 31, 1998:
Payment Services $ 76,509 $ 9,402 $ 15,727 $ -- $ 6,325
Convention and Event Services 209,587 9,858 20,000 3,400 6,742
Airline Catering 204,534 4,663 10,617 1,949 4,005
--------- -------- -------- -------- --------
REPORTABLE SEGMENTS 490,630 23,923 46,344 5,349 17,072
Other:
Travel and recreation services 8,065 (1,196) (1,792) 547 (1,067)
Sold businesses (2) 112,316 1,895 3,515 100 1,168
Corporate and other (9,243) (6,205) 5,178 (2,140)
--------- -------- -------- -------- --------
Subtotal 611,011 15,379 41,862 11,174 15,033
Less taxable equivalent adjustment (8,231) (8,231) (8,231)
--------- -------- -------- -------- --------
$ 602,780 $ 15,379 $ 33,631 $ 11,174 $ 6,802
--------- -------- -------- -------- --------
--------- -------- -------- -------- --------
</TABLE>
(1) Net income is after deducting minority interests as follows: Payment
Services, $474,000 (1999); Convention and Event Services, $65,000 (1999);
Travel and recreation services, $(38,000) (1999) and $(76,000) (1998); and
Sold businesses, $352,000 (1998).
(2) The sold businesses category includes operating results up to the
respective dates of sale for ASIG (sold effective as of April 1, 1998),
GLSI (sold on September 15, 1998) and the contract foodservice operations
(sold on January 27, 1999) and public service division units (sold in March
1999) of Restaura, Inc. The sale of the Restaura units was recorded in the
first quarter of 1999 and, after providing for costs of sale and related
expense provisions, the net gain was not material.
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ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
RESULTS:
Viad Corp ("Viad") focuses on three principal service businesses: Payment
Services, Convention and Event Services and Airline Catering.
On January 27, 1999, Viad completed the sale of the contract foodservice
operations of Restaura, Inc. The public service division units of Restaura, Inc.
were sold in March 1999. After providing for costs of sale and related expense
provisions, the net gain was not material. Restaura's operations, along with the
results of the sold Aircraft Services International Group ("ASIG") and Greyhound
Leisure Services, Inc. ("GLSI"), are included in Viad's "Sold businesses"
segment until the respective dates of sale.
There were no other material changes in the nature of Viad's business, nor were
there any other changes in the general characteristics of its operations as
described and discussed in the "Results of Operations" section of Management's
Discussion and Analysis of Results of Operations and Financial Condition
presented in the Viad Corp Annual Report to Stockholders for the year ended
December 31, 1998.
All per share figures discussed are stated on the diluted basis.
COMPARISON OF FIRST QUARTER OF 1999 TO THE FIRST QUARTER OF 1998:
In the first quarter of 1999, revenues decreased $10.3 million, or 1.7 percent,
to $592.4 million from $602.8 million in 1998 as a result of sales of noncore
businesses during 1998 and the first quarter of 1999, partially offset by
revenues of MoneyGram Payment Systems, Inc. ("MoneyGram," acquired as of June 1,
1998). Revenues of ongoing businesses rose 18.6 percent for the quarter.
Net income for the first quarter of 1999 was $20.4 million, or $0.20 per share,
an increase of 33.3 percent on a per share basis from the 1998 first quarter net
income of $15.4 million, or $0.15 per share.
PAYMENT SERVICES. Revenues of the Payment Services segment were $119.8 million
for the first quarter of 1999, up $51.5 million, or 75.5 percent, from 1998
first quarter revenues, while net income increased $4.6 million, or 48.7
percent. A payment services subsidiary invests substantial amounts of its
growing money order and official check funds in tax-exempt securities, which
have lower pre-tax yields but produce higher income on an after-tax basis than
comparable taxable investments. On the fully taxable equivalent basis, first
quarter revenues would have been higher by $11.3 million and $8.2 million in
1999 and 1998, respectively, resulting in a 71.4 percent segment revenue
increase. Results were driven by continuing strong growth in traditional
Travelers Express operations, particularly rapid growth in official check
volume, and by the inclusion of MoneyGram in the 1999 period. Excluding the
results of MoneyGram, revenues on the fully taxable equivalent basis increased
over 20 percent. Operating margins on the fully taxable equivalent basis were
18.4 percent in the first quarter of 1999, down slightly from 20.6 percent in
the 1998 first quarter as a result of changing product mix (both Game Financial,
acquired in December 1997, and MoneyGram have lower operating margins than
Travelers Express' traditional business).
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CONVENTION AND EVENT SERVICES. Convention and Event Services first quarter
1999 revenues increased $25.5 million, or 12.2 percent, to $235.1 million
from $209.6 million in the 1998 first quarter. Net income for the segment
increased 15.1 percent to $11.3 million in the 1999 first quarter, and
operating margins increased from 9.5 percent in the 1998 first quarter to
10.2 percent in the 1999 quarter. Both GES Exposition Services and
Exhibitgroup/Giltspur reported solid gains, including contributions from
acquisitions made during 1998 and early 1999.
AIRLINE CATERING. The first quarter 1999 revenues of the Airline Catering
segment were $217.4 million, an increase of 6.3 percent from the 1998 first
quarter revenues of $204.5 million. Operating margins remained steady at 5.2
percent. The revenue increase resulted from new business added by Dobbs
International Services during 1998, including the Las Vegas kitchen, and by
strong airline traffic. Net income increased 10.0 percent to $5.1 million as
a result of strong cash flow, which lowered interest expense in the 1999
period.
TRAVEL AND RECREATION SERVICES. Revenues of the travel and recreation
businesses increased 14.2 percent from those of the 1998 first quarter,
primarily as a result of non-baseball events held at Bank One Ballpark and an
increase in Canadian winter touring packages. The seasonal net loss for the
first quarter declined slightly. The first and fourth quarters are
historically the slowest for these businesses.
SOLD BUSINESSES. The sold businesses include the results of Restaura, ASIG,
and GLSI up to their respective dates of sale. Revenues of the sold
businesses were $10.9 million in the first quarter of 1999 compared to $112.3
million in the 1998 quarter. The seasonal net loss related to Restaura was
$2.0 million in the first quarter of 1999 compared to net income of $1.9
million for all of the sold businesses in the 1998 quarter.
CORPORATE ACTIVITIES, NET. Corporate activities, net, decreased $1.7 million
in the first quarter of 1999 compared to the first quarter of 1998. In
addition to ongoing cost reduction efforts, Viad increased Corporate expense
allocations charged to its operating subsidiaries in 1999.
INTEREST EXPENSE. Interest expense decreased $1.5 million in the 1999 first
quarter. 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 1998 and early 1999.
INCOME TAXES. The effective tax rate in the 1999 first quarter was 28.8
percent compared to 30.7 percent for the first quarter of 1998. The
relatively low tax rate is primarily attributable to increased tax-exempt
investment income.
LIQUIDITY AND CAPITAL RESOURCES:
Viad's total debt at March 31, 1999 was $542.4 million compared with $534.5
million at December 31, 1998. The debt-to-capital ratio at March 31, 1999 was
0.45 to 1, unchanged from December 31, 1998.
During the first quarter of 1999, approximately 352,000 shares were purchased
for $9.5 million under Viad's stock repurchase program. During the quarter,
Viad received $6.2 million of proceeds from the exercise of stock options.
The purpose of the program is to replenish 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.
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EBITDA (defined as net income before interest expense, income taxes and
depreciation and amortization and including the fully taxable equivalent
adjustment) is a measure of Viad's ability to service debt, fund capital
expenditures and finance growth, and should be considered in addition to, but
not as a substitute for, other measures of financial performance reported in
accordance with generally accepted accounting principles. EBITDA was $71.5
million in the first quarter of 1999, an increase of 15.6 percent over that
of the 1998 quarter.
There were no other material changes in Viad's financial condition nor were
there any substantive changes relative to matters discussed in the Liquidity
and Capital Resources section of Management's Discussion and Analysis of
Results of Operations and Financial Condition as presented in Viad Corp's
Annual Report to Stockholders for the year ended December 31, 1998.
READINESS FOR THE YEAR 2000:
During the quarter, Viad continued the implementation of initiatives
necessary to make its systems, products and infrastructure "Year 2000"
compliant on a timely basis. Viad's overall plan to address the Year 2000
problem is described more fully in its 1998 Annual Report on Form 10-K.
Although no assurances can be made, Viad believes that it has identified all
material systems and applications that are subject to Year 2000 risk and has
either achieved Year 2000 compliance or initiated the implementation of plans
to achieve timely Year 2000 compliance for such systems. A significant
portion of Viad's Year 2000 initiatives have been finished with the remainder
in various stages of completion. 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 25 percent was
expensed in the first quarter of 1999 and approximately 70 percent was
expensed prior to 1999. A substantial portion of the aggregate Year 2000 cost
estimate pertains to efforts at Viad's payment services operations, where
remediation of key systems was completed by the end of the first quarter of
1999. 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 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.
FORWARD-LOOKING STATEMENTS:
As provided by the "Safe Harbor Statement under the Private Securities
Litigation Reform Act of 1995," Viad cautions readers that, in addition to
the historical information contained herein, this Quarterly Report on Form
10-Q includes certain forward-looking statements, assumptions and
discussions, including those relating to expectations of or current trends in
growth in air 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
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expansion of flights to new locations, consumer demand patterns,
purchasing decisions related to customer demand for convention and event
services, existing and new competition, consolidation and growth patterns
within the industries in which Viad competes, and the timely achievement of
Year 2000 compliance by Viad and third parties with whom Viad conducts
business, may individually or in combination impact future results. In
addition to the factors mentioned elsewhere, economic, competitive,
governmental, technological, capital marketplace and other factors could
affect the forward-looking statements contained in this filing.
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
There have been no material changes in Viad's market risk during the quarter
ended March 31, 1999.
PART II. OTHER INFORMATION
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
(a) The annual meeting of stockholders of Viad Corp was held May 11, 1999.
(b) Not applicable--(i) proxies for the meeting were solicited pursuant to
Regulation 14 under the Securities Exchange Act of 1934; (ii) there was
no solicitation in opposition to management's nominees as listed in the
proxy statement; and (iii) all such nominees were elected.
(c) Matters voted upon at the annual meeting for which proxies were
solicited pursuant to Regulation 14 under the Securities Exchange Act
of 1934:
1. The election of Directors as follows:
Judith K. Hofer
---------------
Affirmative Vote.............................................79,666,006
Withheld Authority..............................................602,592
Jack F. Reichert
----------------
Affirmative Vote.............................................79,656,707
Withheld Authority..............................................611,891
2. The appointment of Deloitte & Touche LLP to audit the accounts of
Viad and its subsidiaries for the fiscal year 1999.
Affirmative Vote.............................................80,051,986
Against.........................................................102,615
Abstentions.....................................................113,997
Page 12
<PAGE>
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibit No. 27 - Financial Data Schedule
(b) No reports on Form 8-K were filed by the registrant during the
quarter for which this report is filed.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
VIAD CORP
(Registrant)
By /s/ Jack A. Modzelewski
-----------------------
Jack A. Modzelewski
Chief Financial Officer
(Principal Financial Officer
and Authorized Officer)
May 12, 1999
Page 13
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM VIAD CORP'S
FORM 10-Q FOR THE QUARTER ENDED MARCH 31, 1999 AND IS QUALIFIED IN ITS ENTIRETY
BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1999
<PERIOD-END> MAR-31-1999
<CASH> 31,183
<SECURITIES> 0
<RECEIVABLES> 139,443
<ALLOWANCES> 4,250
<INVENTORY> 74,841
<CURRENT-ASSETS> 612,704
<PP&E> 806,328
<DEPRECIATION> 361,341
<TOTAL-ASSETS> 4,677,854
<CURRENT-LIABILITIES> 3,261,861
<BONDS> 509,478
6,629
0
<COMMON> 149,610
<OTHER-SE> 503,671
<TOTAL-LIABILITY-AND-EQUITY> 4,677,854
<SALES> 0
<TOTAL-REVENUES> 592,449
<CGS> 0
<TOTAL-COSTS> 549,164
<OTHER-EXPENSES> 4,503
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 9,634
<INCOME-PRETAX> 28,647
<INCOME-TAX> 8,262
<INCOME-CONTINUING> 20,385
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 20,385
<EPS-PRIMARY> .21
<EPS-DILUTED> .20
</TABLE>
