<PAGE> 1
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, 2000
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 March 31, 2000, 93,699,554 shares of Common Stock ($1.50 par value) were
outstanding.
<PAGE> 2
PART I. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
VIAD CORP
CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
March 31, 2000 December 31,
(000 omitted, except number of shares) (Unaudited) 1999
- --------------------------------------------------------------------------------------------------------
<S> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents $ 32,335 $ 33,106
Short-term investments 73,889 95,545
Receivables 78,909 43,276
Inventories 89,806 73,687
Deferred income taxes 33,575 36,990
Other current assets 42,367 36,664
- --------------------------------------------------------------------------------------------------------
350,881 319,268
Funds, agents' receivables and current maturities
of investments restricted for payment service obligations,
after eliminating $37,500 and $50,000 invested in Viad
commercial paper 568,617 602,893
- --------------------------------------------------------------------------------------------------------
Total current assets 919,498 922,161
Investments in securities 170,541 173,359
Investments restricted for payment service obligations 3,033,031 2,936,171
Property and equipment 308,310 313,623
Other investments and assets 109,731 121,159
Deferred income taxes 101,190 115,058
Intangibles 650,895 629,340
- --------------------------------------------------------------------------------------------------------
$ 5,293,196 $ 5,210,871
========================================================================================================
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Short-term bank loans $ 13,803 $ 13,855
Accounts payable 89,679 82,465
Other current liabilities 200,765 204,228
Current portion of long-term debt 27,823 32,814
- --------------------------------------------------------------------------------------------------------
332,070 333,362
Payment service obligations 3,596,213 3,587,834
- --------------------------------------------------------------------------------------------------------
Total current liabilities 3,928,283 3,921,196
Long-term debt 399,883 342,603
Pension and other benefits 71,537 71,402
Other deferred items and insurance liabilities 150,513 154,435
Minority interests 4,118 5,950
$4.75 Redeemable preferred stock 6,644 6,640
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 266,893 289,798
Retained income 661,045 643,352
Unearned employee benefits and other (104,251) (129,818)
Accumulated other comprehensive income:
Unrealized loss on securities classified as available for sale (54,361) (70,021)
Cumulative translation adjustments (5,290) (4,935)
Minimum pension liability adjustment (1,674) (1,674)
Common stock in treasury, at cost, 6,040,371 and 5,497,132 shares (179,754) (167,667)
- --------------------------------------------------------------------------------------------------------
Total common stock and other equity 732,218 708,645
- --------------------------------------------------------------------------------------------------------
$ 5,293,196 $ 5,210,871
========================================================================================================
</TABLE>
See Notes to Consolidated Financial Statements.
Page 2
<PAGE> 3
VIAD CORP
CONSOLIDATED STATEMENTS OF INCOME
(Unaudited)
<TABLE>
<CAPTION>
Three months ended March 31,
(000 omitted, except per share data) 2000 1999
- --------------------------------------------------------------------------
<S> <C> <C>
Revenues:
Ongoing operations $ 408,219 $ 362,477
Sold businesses 10,928
- --------------------------------------------------------------------------
Revenues from continuing operations 408,219 373,405
- --------------------------------------------------------------------------
Costs and expenses:
Costs of sales and services 366,928 343,005
Corporate activities 4,761 5,153
Other investment income (4,478)
Interest expense 6,611 6,495
Minority interests 138 501
- --------------------------------------------------------------------------
373,960 355,154
- --------------------------------------------------------------------------
Income before income taxes 34,259 18,251
Income taxes 8,206 3,401
- --------------------------------------------------------------------------
INCOME FROM CONTINUING OPERATIONS 26,053 14,850
Income from discontinued operations 5,535
- --------------------------------------------------------------------------
NET INCOME $ 26,053 $ 20,385
==========================================================================
DILUTED NET INCOME PER COMMON SHARE:
CONTINUING OPERATIONS $ 0.28 $ 0.15
Discontinued operations 0.05
- --------------------------------------------------------------------------
Net income per share $ 0.28 $ 0.20
==========================================================================
BASIC NET INCOME PER COMMON SHARE:
Continuing operations $ 0.29 $ 0.15
Discontinued operations 0.06
- --------------------------------------------------------------------------
Net income per share $ 0.29 $ 0.21
==========================================================================
Average outstanding common shares 89,847 94,640
Additional dilutive shares related to
stock-based compensation 2,358 3,812
- --------------------------------------------------------------------------
Average outstanding and potentially
dilutive common shares 92,205 98,452
==========================================================================
Dividends declared per common share $ 0.09 $ 0.08
==========================================================================
Preferred stock dividends $ 283 $ 283
==========================================================================
</TABLE>
See Notes to Consolidated Financial Statements.
Page 3
<PAGE> 4
VIAD CORP
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
(Unaudited)
<TABLE>
<CAPTION>
Three months ended March 31,
(000 omitted) 2000 1999
- ------------------------------------------------------------------------------------------------
<S> <C> <C>
Net income $ 26,053 $ 20,385
- ------------------------------------------------------------------------------------------------
Other comprehensive income (loss), net of tax:
Unrealized gain (loss) on securities
classified as available for sale:
Holding gains (losses) arising during the period, net of
tax provision (benefit) of $10,106 and $(2,651) 15,806 (4,147)
Reclassification adjustment for net realized gains
included in net income, net of tax provision of $94
and $900 (146) (1,407)
- ------------------------------------------------------------------------------------------------
15,660 (5,554)
- ------------------------------------------------------------------------------------------------
Unrealized foreign currency translation adjustments:
Holding (losses) gains arising during the period (355) 181
- ------------------------------------------------------------------------------------------------
Other comprehensive income (loss) 15,305 (5,373)
- ------------------------------------------------------------------------------------------------
Comprehensive income $ 41,358 $ 15,012
================================================================================================
</TABLE>
See Notes to Consolidated Financial Statements.
Page 4
<PAGE> 5
VIAD CORP
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
<TABLE>
<CAPTION>
Three months ended March 31,
(000 omitted) 2000 1999
- ---------------------------------------------------------------------------------------
<S> <C> <C>
CASH FLOWS PROVIDED (USED) BY OPERATING ACTIVITIES:
Net income $ 26,053 $ 20,385
Adjustments to reconcile net income to
net cash provided by operating activities:
Depreciation and amortization 16,121 15,120
Deferred income taxes 8,592 (4,984)
Income from discontinued operations (5,535)
Other noncash items, net 1,133 619
Change in operating assets and liabilities:
Receivables and inventories (39,990) (11,314)
Payment service assets and obligations, net 45,869 105,714
Accounts payable and accrued compensation (15,864) (17,110)
Other assets and liabilities, net 6,922 (815)
- ---------------------------------------------------------------------------------------
Net cash provided by operating activities 48,836 102,080
- ---------------------------------------------------------------------------------------
CASH FLOWS PROVIDED (USED) BY INVESTING ACTIVITIES:
Capital expenditures (7,307) (10,346)
Acquisitions of businesses, net of cash acquired (24,179) (10,311)
Cash provided by discontinued operations 4,639
Proceeds from sales of businesses, property and
other assets, net 104 52,797
Proceeds from sales and maturities of securities 432,925 330,850
Purchases of securities (482,143) (446,420)
- ---------------------------------------------------------------------------------------
Net cash used by investing activities (80,600) (78,791)
- ---------------------------------------------------------------------------------------
CASH FLOWS PROVIDED (USED) BY FINANCING ACTIVITIES:
Payments on long-term borrowings (30,161) (141)
Net change in short-term borrowings 81,948 8,000
Dividends on common and preferred stock (8,403) (7,887)
Exercise of stock options 1,263 6,222
Common stock purchased for treasury (13,654) (9,493)
- ---------------------------------------------------------------------------------------
Net cash provided (used) by financing activities 30,993 (3,299)
- ---------------------------------------------------------------------------------------
Net (decrease) increase in cash and cash equivalents (771) 19,990
Cash and cash equivalents, beginning of year 33,106 15,554
- ---------------------------------------------------------------------------------------
CASH AND CASH EQUIVALENTS, END OF PERIOD $ 32,335 $ 35,544
=======================================================================================
</TABLE>
See Notes to Consolidated Financial Statements.
Page 5
<PAGE> 6
VIAD CORP
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
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 on Form 10-K for the year ended December 31, 1999.
Accounting policies utilized in the preparation of this interim financial
information 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, 2000, and its results of operations and its cash flows for the
three months ended March 31, 2000 and 1999 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 2000
presentation.
NOTE B -- ASSETS RESTRICTED FOR PAYMENT SERVICE OBLIGATIONS
Viad's Payment Services subsidiaries generate funds from the sale of money
orders and other payment instruments, with the related liabilities classified as
"Payment service obligations." Substantially all of 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. In addition, certain funds and other
investments and the fair value of off-balance-sheet swap agreements (described
below) of Payment Services subsidiaries are available if necessary to meet such
obligations. Accordingly, such assets of Payment Services subsidiaries are not
available to satisfy working capital or other financing requirements of Viad.
As described in notes to Viad's annual financial statements, a Payment Services
subsidiary hedges a substantial portion of the variable rate commission payments
to its selling agents and the variable rate expense of selling receivables from
its bill payment and money order agents through the purchase of swap agreements.
The swap agreements effectively convert such variable rate payments to fixed
rate payments. The fair value of such swap agreements, while not recorded on
Viad's Consolidated Balance Sheets, normally increases when the fair values of
fixed rate, long-term debt investments held by Payment Services subsidiaries
decline (and vice versa).
Under normal circumstances, the swap agreements will not be terminated prior to
maturity, nor is there any requirement to sell long-term debt securities prior
to maturity, as the funds flow from ongoing sales of money orders and other
payment instruments and funds from maturing long-term and short-term investments
are expected to be adequate to settle payment service items as they are
presented.
Page 6
<PAGE> 7
The following is a summary of asset and liability carrying amounts related to
the payment service obligations, including additional subsidiary funds and the
fair value of related off-balance-sheet swap agreements:
<TABLE>
<CAPTION>
March 31, December 31,
(000 omitted) 2000 1999
- -----------------------------------------------------------------------------------------------
<S> <C> <C>
Funds, agents' receivables and current maturities of
investments restricted for payment service obligations,
including $37,500 and $50,000 invested in
Viad commercial paper (1) $ 606,117 $ 652,893
Investments restricted for payment service obligations (2) 3,033,031 2,936,171
Other assets available for payment service obligations 7,801 3,009
Payment service obligations (3,596,213) (3,587,834)
Fair value of off-balance-sheet swap agreements (3) 65,199 56,708
- -----------------------------------------------------------------------------------------------
Total $ 115,935 $ 60,947
===============================================================================================
</TABLE>
(1) The commercial paper is supported by Viad's revolving bank credit agreement
(see Note D).
(2) Securities classified as "available for sale" are carried at market value
and securities classified as "held to maturity" are carried at amortized
cost in accordance with SFAS No. 115, "Accounting for Certain Investments
in Debt and Equity Securities." The decrease in the unrealized loss for the
first quarter of 2000 was due principally to decreases in longer-term
market interest rates (see Note C).
(3) The fair value represents the estimated amounts that Viad would receive
from counterparties to terminate the swap agreements at March 31, 2000 and
December 31, 1999. The increase in the fair value for the first quarter of
2000 was due principally to increases in short-term interest rates.
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) 2000 1999
- -------------------------------------------------------------------------------------------------
<S> <C> <C>
Securities classified as available for sale, at fair value
(amortized cost of $2,289,221 and $2,278,793) $ 2,202,888 $ 2,167,250
Securities classified as held to maturity, at amortized cost
(fair value of $842,775 and $771,668) 851,452 788,068
- -------------------------------------------------------------------------------------------------
3,054,340 2,955,318
Less current maturities (21,309) (19,147)
- -------------------------------------------------------------------------------------------------
$ 3,033,031 $ 2,936,171
=================================================================================================
</TABLE>
NOTE D -- DEBT
At March 31, 2000 and December 31, 1999, Viad classified as long-term debt
$126,000,000 and $44,000,000, respectively, of short-term borrowings which,
along with the $37,500,000 and $50,000,000, respectively, of 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.
Page 7
<PAGE> 8
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) 2000 1999
- --------------------------------------------------------------------------------
<S> <C> <C>
Computed income taxes at statutory
federal income tax rate of 35% $ 11,991 $ 6,388
Nondeductible goodwill amortization 703 695
State income taxes 788 302
Tax-exempt income (7,850) (6,204)
Adjustment to estimated annual effective tax rate 2,500 2,500
Other, net 74 (280)
- --------------------------------------------------------------------------------
Income taxes $ 8,206 $ 3,401
================================================================================
</TABLE>
NOTE F -- SEGMENT INFORMATION
Viad measures profit and performance of its operations on the basis of operating
income before nonrecurring items. Previously, Viad measured and presented profit
and performance based on income from continuing operations after minority
interests and income taxes, but before nonrecurring items. An adjustment is made
to the Payment Services segment to present revenues and operating income on a
fully taxable equivalent basis for income resulting from investments in
tax-exempt securities. Intersegment sales and transfers are not significant.
Corporate activities include expenses not allocated to operations. Consolidated
revenues, operating income and interest expense reflect the elimination of
intercompany interest payments on investments in Viad commercial paper by a
Payment Services subsidiary.
Page 8
<PAGE> 9
Disclosures regarding Viad's reportable segments along with reconciliations to
consolidated totals are presented below.
<TABLE>
<CAPTION>
Three months ended March 31,
(000 omitted) 2000 1999
- -------------------------------------------------------------------------------
<S> <C> <C>
Revenues:
Payment Services $ 151,850 $ 131,135
Convention and Event Services 261,852 235,120
- -------------------------------------------------------------------------------
Reportable segments 413,702 366,255
Travel and recreation services 9,801 9,210
- -------------------------------------------------------------------------------
SUBTOTAL, ONGOING OPERATIONS 423,503 375,465
Sold travel & recreation businesses (1) 10,928
Intercompany interest elimination (945) (1,655)
- -------------------------------------------------------------------------------
Subtotal 422,558 384,738
Less taxable equivalent adjustment (14,339) (11,333)
- -------------------------------------------------------------------------------
$ 408,219 $ 373,405
===============================================================================
Operating income:
Payment Services $ 29,746 $ 24,130
Convention and Event Services 27,464 24,038
- -------------------------------------------------------------------------------
Reportable segments 57,210 48,168
Travel and recreation services (635) (1,572)
- -------------------------------------------------------------------------------
SUBTOTAL, ONGOING OPERATIONS 56,575 46,596
Sold travel & recreation businesses (1) (3,208)
Corporate activities (4,761) (5,153)
Intercompany interest elimination (945) (1,655)
- -------------------------------------------------------------------------------
Subtotal 50,869 36,580
Less taxable equivalent adjustment (14,339) (11,333)
- -------------------------------------------------------------------------------
36,530 25,247
Other investment income 4,478
Interest expense (6,611) (6,495)
Minority interests (138) (501)
- -------------------------------------------------------------------------------
Income before income taxes $ 34,259 $ 18,251
===============================================================================
</TABLE>
(1) The sold travel and recreation businesses category includes operating
results up to the respective dates of sale for businesses which have not
been classified as discontinued operations.
Page 9
<PAGE> 10
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
RESULTS:
Viad Corp ("Viad") focuses on two principal service businesses: Payment Services
and Convention and Event Services.
There were no material changes in the nature of Viad's business, nor were there
any other changes in the general characteristics of its operations as described
and discussed in the "Results of Operations" section of Management's Discussion
and Analysis of Results of Operations and Financial Condition presented in the
Viad Corp Annual Report on Form 10-K for the year ended December 31, 1999.
All per share figures discussed are stated on the diluted basis.
COMPARISON OF FIRST QUARTER OF 2000 TO THE FIRST QUARTER OF 1999:
In the first quarter of 2000, revenues increased $34.8 million, or 9.3 percent,
to $408.2 million from $373.4 million in 1999. The 1999 revenues include $10.9
million related to noncore travel and recreation businesses sold in the first
quarter of 1999, but not classified as discontinued operations. Revenues of
ongoing businesses on a fully taxable equivalent basis, excluding the sold
travel and recreation businesses, rose 12.8 percent for the quarter.
Income from continuing operations for the first quarter of 2000 was $26.1
million, or $0.28 per share, an increase of 86.7 percent on a per share basis
from the 1999 first quarter income from continuing operations of $14.9 million,
or $0.15 per share. Net income for the 2000 quarter was also $26.1 million, or
$0.28 per share, compared to $20.4 million, or $0.20 per share, in the 1999
quarter. The 1999 quarter included $5.5 million, or $0.05 per share, from
discontinued operations, representing the operating results of Dobbs
International Services, Inc. ("Dobbs"), sold July 1, 1999.
There were 6.2 million fewer average outstanding and potentially dilutive common
shares in 2000 than in 1999, due primarily to stock repurchases made in 1999 and
2000. In addition, a lower Viad stock price in 2000 contributed to fewer
additional dilutive shares related to unexercised stock options.
PAYMENT SERVICES. A Payment Services subsidiary invests substantial amounts of
its growing money order and official check funds in tax-exempt securities, which
have lower pre-tax yields but produce higher income on an after-tax basis than
comparable taxable investments. On the fully taxable equivalent basis, first
quarter revenues of the Payment Services segment were $151.9 million, up $20.7
million, or 15.8 percent from 1999 first quarter revenues. Operating income
increased $5.6 million, or 23.3 percent. Operating margins on the fully taxable
equivalent basis were 19.6 percent in the first quarter of 2000, up from 18.4
percent in the 1999 first quarter. Results were driven by continued strong
growth in money order, official check and Game Financial operations, with the
addition of key new accounts contributing to the gains. Transaction volume for
MoneyGram grew approximately 13 percent over the prior year, with strong growth
in Latin America and international, offset partially by some softness in
transaction volume in the Mexico corridor.
CONVENTION AND EVENT SERVICES. Convention and Event Services revenues increased
$26.7 million, or 11.4 percent, to $261.9 million in the first quarter of 2000.
Operating income for the segment increased 14.3 percent to $27.5 million in the
2000 first quarter. Operating margins increased to 10.5 percent, up from 10.2
percent in the 1999 first quarter, with continued focus on productivity
improvements and cost reductions. Both GES Exposition Services and
Exhibitgroup/Giltspur reported solid gains in revenues and operating income.
Page 10
<PAGE> 11
TRAVEL AND RECREATION SERVICES. Revenues of the travel and recreation businesses
increased 6.4 percent from those in the 1999 first quarter, primarily as a
result of higher room rates at hotels operated in Canada. The seasonal operating
loss for the first quarter declined due to the increase in revenues. The first
and fourth quarters are historically the slowest for these businesses.
CORPORATE ACTIVITIES. Expenses of corporate activities decreased 7.6 percent in
the first quarter of 2000 compared to the first quarter of 1999.
OTHER INVESTMENT INCOME. Other investment income of $4.5 million in the 2000
first quarter was generated from the investment of the cash proceeds remaining
from the July 1, 1999 sale of Dobbs after repayment of short-term borrowings,
repurchase of treasury shares and the funding of acquisitions.
INTEREST EXPENSE. Interest expense increased slightly in the 2000 first quarter
over that of the first quarter of 1999, but decreased $300,000 from interest
expense in the fourth quarter of 1999. Lower average borrowings during the
quarter were partially offset by the effects of an increase in short-term
interest rates.
INCOME TAXES. The effective tax rate in the 2000 first quarter was 24.0 percent
compared to 18.6 percent for the first quarter of 1999 and 20.5 percent for the
1999 full year. The relatively low effective tax rate is primarily attributable
to tax-exempt investment income from Viad's Payment Services businesses. The tax
rate is expected to increase as tax-exempt investment income becomes a lower
proportion of pre-tax income from continuing operations.
LIQUIDITY AND CAPITAL RESOURCES:
Viad's total debt at March 31, 2000 was $441.5 million compared with $389.3
million at December 31, 1999. The debt-to-capital ratio at March 31, 2000 was
0.37 to 1, compared with 0.35 to 1 at December 31, 1999. The increase since
year-end was primarily attributable to a seasonal increase in working capital
and the repurchase of treasury shares.
During the first quarter of 2000, Viad repurchased 586,000 treasury shares for
$13.7 million under Viad's stock repurchase programs. Net proceeds from the
exercise of stock options, including tax benefits on stock option exercises,
totaled $1.3 million during the quarter.
The balance of the investments in securities arising from the July 1, 1999 sale
of Dobbs totaled $244.4 million at March 31, 2000. The balance declined $24.5
million during the 2000 first quarter, primarily as a result of funding
strategic acquisitions.
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 is defined by Viad as
income from continuing operations before interest expense, income taxes,
depreciation and amortization and includes the fully taxable equivalent
adjustment. EBITDA was $71.3 million in the first quarter of 2000, an increase
of 39.3 percent over that of the 1999 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, 1999.
Page 11
<PAGE> 12
FORWARD-LOOKING STATEMENTS:
As provided by the safe harbor provision 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 future growth,
productivity improvements, consumer demand, new business, investment policies,
cost reduction efforts and market risk disclosures. Such statements involve
risks and uncertainties which may cause results to differ materially from those
set forth in those statements. Among other things, consumer demand patterns,
purchasing decisions related to customer demand for convention and event
services, existing and new competition, industry alliances and consolidation and
growth patterns within the industries in which Viad competes may individually or
in combination impact future results. In addition to the factors mentioned
elsewhere, economic, competitive, governmental, technological, capital
marketplace and other factors could affect the forward-looking statements
contained in this filing.
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
As described in Note B, debt and equity securities classified as "available for
sale" are carried at fair value, with the net unrealized holding gain or loss
included in the Consolidated Balance Sheets as a component of "Accumulated other
comprehensive income." 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 agent commissions
and expense of selling receivables are computed based on short-term variable
interest rates that subject Viad 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 fixed rates. Viad is also
exposed to short-term interest rate risk on certain of its debt obligations and
trade accounts receivable sales.
Based on a hypothetical 10 percent proportionate increase in interest rates from
the average level of interest rates during the last twelve months, and taking
into consideration expected investment positions, commissions payable to selling
agents, growth in new business, the effects of the swap agreements and the
expected borrowing level of variable-rate debt, the annual decrease in pre-tax
income would be approximately $2.0 million. A hypothetical 10 percent
proportionate decrease in interest rates, based on the same set of assumptions,
would result in an annual increase in pre-tax income of approximately $2.1
million.
The fair value of securities classified as available for sale, the fair value of
the swap agreements and the fair value of fixed-rate debt are sensitive to
changes in interest rates. A 10 percent proportionate increase in interest rates
would result in an estimated decrease in the fair value of securities classified
as available for sale of approximately $82.2 million (along with an after-tax
decrease in accumulated other comprehensive income of approximately $50.2
million), an estimated off-balance-sheet increase in the fair value of Viad's
swap agreements of approximately $39.1 million and an estimated
off-balance-sheet decrease in the fair value of Viad's fixed-rate debt of
approximately $3.3 million. A 10 percent proportionate decrease in interest
rates would result in an estimated increase in the fair value of securities
classified as available for sale of approximately $78.5 million (along with an
after-tax increase in accumulated other comprehensive income of approximately
$47.9 million), an estimated off-balance-sheet decrease in the fair value of
Viad's swap agreements of approximately $39.1 million and an estimated
off-balance-sheet increase in the fair value of Viad's fixed-rate debt of
approximately $3.4 million.
Page 12
<PAGE> 13
PART II. OTHER INFORMATION
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
No matters were submitted to a vote of security holders during the first quarter
of 2000.
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/ Catherine L. Stevenson
--------------------------
Catherine L. Stevenson
Vice President - Controller
(Chief Accounting Officer
and Authorized Officer)
April 26, 2000
Page 13
<PAGE> 14
INDEX TO EXHIBITS
EXHIBIT
NUMBER DESCRIPTION OF EXHIBITS
- -------- -------------------------
27 Financial Data Schedule
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM VIAD CORP'S
FORM 10-Q FOR THE QUARTERLY PERIOD ENDED MARCH 31, 2000 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-31-2000
<PERIOD-END> MAR-31-2000
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6,644
0
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