UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
FORM 10-Q
QUARTERLY REPORT PURSUANT TO SECTION 13
OF THE SECURITIES EXCHANGE ACT OF 1934
For the Quarterly Period Ended June 30, 1997
Commission file number 001-11015
VIAD CORP
(Exact name of registrant as specified in its charter)
DELAWARE 36-1169950
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
1850 N. CENTRAL AVE., PHOENIX, ARIZONA 85077
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code (602) 207-4000
Indicate by check mark whether the registrant (1) has filed all
Exchange Act reports required to be filed by Section 13 or 15(d) of
the Securities Exchange Act of 1934 during the preceding 12 months,
and (2) has been subject to such filing requirements for the past
90 days.
Yes x No
--------- ---------
As of July 31, 1997, 96,484,329 shares of Common Stock ($1.50 par
value) were outstanding.
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
VIAD CORP
CONSOLIDATED BALANCE SHEET
June 30, December 31,
(000 omitted) 1997 1996
----------- -----------
ASSETS
Current assets:
Cash and cash equivalents $ 3,073 $ 4,422
Receivables, less allowance of
$11,970 and $12,744 178,786 163,262
Inventories 113,592 93,730
Deferred income taxes 32,834 32,567
Other current assets 62,902 59,562
---------- ----------
391,187 353,543
Funds, agents' receivables and current
maturities of investments restricted
for payment service obligations,
after eliminating $90,000 invested
in Viad commercial paper 528,504 670,258
---------- ----------
Total current assets 919,691 1,023,801
Investments restricted for
payment service obligations 1,277,588 1,144,279
Property and equipment 450,107 473,039
Other investments and assets 117,078 125,705
Investment in discontinued operations 97,958
Deferred income taxes 82,649 47,904
Intangibles 544,146 540,626
---------- ----------
$ 3,391,259 $ 3,453,312
========== ==========
June 30, December 31,
(000 omitted, except share data) 1997 1996
---------- ----------
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable $ 159,204 $ 148,990
Accrued compensation 58,557 68,976
Other current liabilities 218,147 263,049
Current portion of long-term debt 3,219 2,348
---------- ----------
439,127 483,363
Payment service obligations 1,864,870 1,869,480
---------- ----------
Total current liabilities 2,303,997 2,352,843
Long-term debt 446,173 518,779
Pension and other benefits 63,558 61,689
Other deferred items and insurance reserves 100,892 73,291
Minority interests 8,037 7,888
$4.75 Redeemable preferred stock 6,609 6,604
Common stock and other equity:
Common stock, $1.50 par value,
200,000,000 shares authorized,
97,108,724 shares issued 145,663 145,663
Additional capital 291,775 282,203
Retained income 159,182 146,664
Cumulative translation adjustments (1,935) (1,519)
Unearned employee benefits (121,818) (118,766)
Unrealized gain on securities
available for sale 2,989 205
Common stock in treasury, at cost,
740,694 and 1,162,718 shares (13,863) (22,232)
---------- ----------
Total common stock and other equity 461,993 432,218
---------- ----------
$ 3,391,259 $ 3,453,312
========== ==========
<FN>
See Notes to Consolidated Financial Statements.
VIAD CORP
STATEMENT OF CONSOLIDATED INCOME
Quarter ended June 30, 1997 1996
(000 omitted, except per share data) ---------- ----------
REVENUES $ 614,945 $ 568,028
---------- ----------
Costs and expenses:
Costs of sales and services 556,299 513,937
Unallocated corporate expense
and other items, net 7,519 8,886
Sale of accounts receivable expense 1,132 496
Spin-off costs and management transition expenses 12,000
Interest expense 12,339 13,544
Minority interests 120 481
---------- ----------
577,409 549,344
---------- ----------
Income before income taxes 37,536 18,684
Income taxes 10,861 9,678
---------- ----------
INCOME FROM CONTINUING OPERATIONS 26,675 9,006
Income from discontinued operations 5,112
---------- ----------
NET INCOME $ 26,675 $ 14,118
========== ==========
INCOME PER COMMON SHARE:
Continuing operations $ 0.28 $ 0.10
Discontinued operations 0.05
---------- ----------
NET INCOME PER COMMON SHARE $ 0.28 $ 0.15
========== ==========
Dividends declared per common share $ 0.08 $ 0.16
========== ==========
Average outstanding common
and equivalent shares 93,452 90,911
========== ==========
<FN>
See Notes to Consolidated Financial Statements.
VIAD CORP
STATEMENT OF CONSOLIDATED INCOME
Six months ended June 30, 1997 1996
(000 omitted, except per share data) ---------- ----------
REVENUES $ 1,184,671 $ 1,099,751
---------- ----------
Costs and expenses:
Costs of sales and services 1,087,315 1,010,198
Unallocated corporate expense
and other items, net 15,502 17,913
Sale of accounts receivable expense 2,220 1,010
Spin-off costs and management transition expenses 12,000
Interest expense 26,602 27,034
Minority interests 484 635
---------- ----------
1,132,123 1,068,790
---------- ----------
Income before income taxes 52,548 30,961
Income taxes 15,353 13,443
---------- ----------
INCOME FROM CONTINUING OPERATIONS 37,195 17,518
Income from discontinued operations 21,094
---------- ----------
Income before extraordinary charge 37,195 38,612
Extraordinary charge for early retirement
of debt, net of tax benefit of $4,554 (8,458)
---------- ----------
NET INCOME $ 28,737 $ 38,612
========== ==========
INCOME (LOSS) PER COMMON SHARE:
Continuing operations $ 0.39 $ 0.19
Discontinued operations 0.23
---------- ----------
Income before extraordinary charge 0.39 0.42
Extraordinary charge (0.09)
---------- ----------
NET INCOME PER COMMON SHARE $ 0.30 $ 0.42
========== ==========
Dividends declared per common share $ 0.16 $ 0.32
========== ==========
Average outstanding common
and equivalent shares 93,251 90,847
========== ==========
<FN>
See Notes to Consolidated Financial Statements.
/TABLE
VIAD CORP
STATEMENT OF RETAINED INCOME
Six months ended June 30, 1997 1996
(000 omitted) ---------- ----------
Balance, beginning of year $ 146,664 $ 322,439
Net income 28,737 38,612
Dividends on common and preferred shares (15,110) (28,913)
Adjust distribution of consumer products
business to Viad stockholders for post-
closing settlements (1,216)
Other 107 190
---------- ----------
Balance, end of period $ 159,182 $ 332,328
========== ==========
<FN>
See Notes to Consolidated Financial Statements.
VIAD CORP
STATEMENT OF CONSOLIDATED CASH FLOWS
Six months ended June 30, 1997 1996
(000 omitted) ---------- ----------
CASH FLOWS PROVIDED (USED) BY OPERATING ACTIVITIES:
Net income $ 28,737 $ 38,612
Adjustments to reconcile net income to
net cash provided by operating activities:
Depreciation and amortization 39,017 36,655
Deferred income taxes (4,598) 3,429
Income from discontinued operations (21,094)
Extraordinary charge for early retirement of debt 8,458
Spin-off costs and management transition expenses 12,000
Other noncash items, net 5,442 2,284
Change in operating assets and liabilities:
Receivables and inventories (36,928) (84,257)
Payment service assets and
obligations, net 134,553 97,602
Accounts payable and accrued compensation (205) 6,565
Other assets and liabilities, net (23,891) (509)
---------- ----------
Net cash provided by operating activities 150,585 91,287
---------- ----------
CASH FLOWS PROVIDED (USED) BY INVESTING ACTIVITIES:
Capital expenditures (39,347) (32,845)
Purchase of asset previously leased (20,997)
Acquisitions of businesses, net of cash acquired (17,226) (2,451)
Proceeds from sales of property and equipment, net 73,139 5,460
Investments restricted for payment service obligations:
Proceeds from sales and maturities of securities
classified as available for sale 326,102 261,927
Proceeds from maturities of securities
classified as held to maturity 13,670 7,500
Purchases of securities classified as
available for sale (395,797) (232,424)
Purchases of securities classified as
held to maturity (70,369) (126,475)
Investments in and advances from discontinued
operations, net 66,545 22,921
---------- ----------
Net cash used by investing activities (64,280) (96,387)
---------- ----------
CASH FLOWS PROVIDED (USED) BY FINANCING ACTIVITIES:
Payments on long-term borrowings (76,031) (2,260)
Premium paid upon early retirement of debt (13,012)
Net change in short-term borrowings 4,000 13,162
Dividends on common and preferred stock (15,110) (28,913)
Proceeds from sales of treasury stock 12,713 23,621
Net change in receivables sold (5,797)
Cash payments on interest rate swaps (214) (3,643)
---------- ----------
Net cash used by financing activities (87,654) (3,830)
---------- ----------
Net decrease in cash and cash equivalents (1,349) (8,930)
Cash and cash equivalents, beginning of year 4,422 17,945
---------- ----------
CASH AND CASH EQUIVALENTS, END OF PERIOD $ 3,073 $ 9,015
========== ==========
<FN>
See Notes to Consolidated Financial Statements.
VIAD CORP
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE A--Basis of Preparation
The Consolidated Financial Statements of Viad Corp ("Viad")
include the accounts for 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, 1996.
Accounting policies utilized in the preparation of the financial
information herein presented are the same as set forth in Viad's
annual financial statements except as modified for interim
accounting policies which are within the guidelines set forth in
Accounting Principles Board Opinion No. 28, "Interim Financial
Reporting." The interim consolidated financial information is
unaudited. In the opinion of management, all adjustments,
consisting only of normal recurring accruals, necessary to
present fairly Viad's financial position as of June 30, 1997, and
its results of operations and its cash flows for the quarters and
six months ended June 30, 1997 and 1996 have been included.
Interim results of operations are not necessarily indicative of
the results of operations for the full year.
NOTE B--Investments Restricted for Payment Service Obligations
Investments restricted for payment service obligations include
the following debt and equity securities:
June 30, December 31,
1997 1996
----------- -----------
(000 omitted)
Securities available for sale, at
fair value (amortized cost of
$818,287 and $748,642) $ 823,187 $ 748,977
Securities held to maturity, at
amortized cost (fair value of
$462,055 and $403,278) 462,428 405,921
----------- ----------
1,285,615 1,154,898
Less current maturities (8,027) (10,619)
----------- ----------
$ 1,277,588 $ 1,144,279
=========== ==========
NOTE C--Sale of Viad Tower
During May 1997, Viad sold its corporate headquarters building to
a U.S. subsidiary of the Government of Singapore Investment
Corporation for $73,000,000, before expenses of sale. As part of
the transaction, Viad is leasing back the space it currently
occupies for nearly 15 years. Accordingly, the excess of the net
sales price over the net book value of the building was deferred
and is being amortized over the remaining life of the lease.
NOTE D--Debt
At June 30, 1997 and December 31, 1996, Viad classified as long-
term debt $88,000,000 and $84,000,000, respectively, of short-
term borrowings supported by unused commitments under a
$400,000,000 long-term revolving bank credit agreement.
As discussed in Liquidity and Capital Resources, in late March
1997, Viad repurchased $58,414,000 par value of its 10.5 percent
subordinated debentures at a premium, resulting in an
extraordinary after-tax charge of $8,458,000.
NOTE E--Income Taxes
A reconciliation of the provision for income taxes and the amount
that would be computed using statutory federal income tax rates
on income before income taxes for the six months ended June 30,
is as follows:
1997 1996
(000 omitted) ------------ ------------
Computed income taxes at statutory
federal income tax rate of 35% $ 18,392 $ 10,836
Nondeductible goodwill amortization 2,071 1,967
Minority interests 169 222
State income taxes 2,519 1,929
Tax-exempt income (9,059) (5,868)
Spin-off transaction costs 4,200
Adjustment to estimated annual
effective rate 1,175 375
Other, net 86 (218)
----------- -----------
Provision for income taxes $ 15,353 $ 13,443
=========== ===========
NOTE F--Supplementary Information--Revenues and Operating Income
Quarter ended June 30, Six months ended June 30,
------------------------- --------------------------
1997 1996 1997 1996
(000 omitted) ----------- ----------- ----------- -----------
Revenues:
Airline Catering
and Services $ 230,989 $ 214,719 $ 442,818 $ 407,982
Convention Services 222,340 192,904 431,667 387,916
Travel and Leisure
and Payment
Services (1) 161,616 160,405 310,186 303,853
----------- ----------- ----------- -----------
$ 614,945 $ 568,028 $ 1,184,671 $ 1,099,751
=========== =========== =========== ===========
Operating Income:
Airline Catering
and Services $ 21,299 $ 19,974 $ 34,446 $ 32,279
Convention
Services 21,738 18,669 40,227 35,803
Travel and Leisure
and Payment
Services (1) 15,609 15,448 22,683 21,471
----------- ----------- ----------- -----------
Total principal
business segments 58,646 54,091 97,356 89,553
Unallocated
corporate expense
and other
items, net (7,519) (8,886) (15,502) (17,913)
Sale of accounts
receivable expense (1,132) (496) (2,220) (1,010)
----------- ----------- ----------- -----------
$ 49,995 $ 44,709 $ 79,634 $ 70,630
=========== =========== =========== ===========
<FN>
(1) Viad's payment services subsidiary is investing increasing amounts in tax-
exempt securities. On a fully taxable equivalent basis, revenues and operating
income would be higher by $7,477,000 and $4,672,000 for the 1997 and 1996
quarters, respectively, and by $13,937,000 and $9,027,000 for the 1997 and 1996
six month periods, respectively.
NOTE G--Discontinued Operations
The caption, "Income from discontinued operations" presented in the
Statement of Consolidated Income for the quarter and six months
ended June 30, 1996, includes the following, after income taxes
where applicable:
Quarter ended Six months ended
June 30, 1996 June 30, 1996
---------------- ----------------
(000 omitted)
Consumer products business
(spun off August 15, 1996
as The Dial Corporation):
Income from operations $ 21,701 $ 39,349
Spin-off costs and management
transition expenses (4,000) (4,000)
----------- -----------
17,701 35,349
----------- -----------
Canadian intercity bus
transportation business, net
of applicable minority interests
(disposed of May 31, 1996):
Loss from operations (315) (583)
Transaction costs, loss on
disposition and foreign
currency translation losses (15,866) (15,866)
----------- -----------
(16,181) (16,449)
----------- -----------
Cruise line business (sold
April 17, 1997) (1):
Income from operations 3,592 2,194
----------- -----------
Income from discontinued operations $ 5,112 $ 21,094
=========== ===========
<FN>
(1) In March 1997, Viad sold the Star/Ship Atlantic for $70,000,000, before
expenses of sale. In April 1997, Viad finalized the sale of Premier Cruise Lines
for $19,000,000, before expenses of sale.
NOTE H--Dividends Declared Per Common Share
The first and second quarter 1997 common stock dividends of $0.08
per share, when added together with The Dial Corporation's first
and second quarter 1997 dividend declarations of $0.08 per common
share, result in a combined quarterly and six month 1997 dividend
rate for Viad and The Dial Corporation comparable to the 1996
dividend rate of The Dial Corp prior to the spin-off of The Dial
Corporation.
NOTE I--Earnings Per Share
In March 1997, the Financial Accounting Standards Board issued
Statement of Financial Accounting Standards No. 128, "Earnings Per
Share." The Statement requires the dual presentation of basic and
diluted earnings per share ("EPS") on the face of the earnings
statement and requires a reconciliation of the numerators and
denominators of basic and diluted EPS calculations. The Statement
will be effective for Viad's 1997 fiscal year. Early adoption of
the Statement is not permitted. Adoption of this Statement would
not have had a material impact on the EPS calculations for the
quarters and six months ended June 30, 1997 and 1996.
Item 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
RESULTS:
There were no material changes in the nature of Viad's business,
nor were there any other changes in the general characteristics of
its operations as described and discussed in the first paragraph of
the results section of Management's Discussion and Analysis of
Results of Operations and Financial Condition presented in the Viad
Corp Annual Report to Stockholders for the year ended December 31,
1996.
COMPARISON OF SECOND QUARTER OF 1997 TO THE SECOND QUARTER OF 1996:
In the second quarter of 1997, revenues increased $46.9 million, or
8.3 percent, to $614.9 million from $568.0 million in 1996. The
1997 second quarter operating income of Viad's principal business
segments increased $4.6 million, or 8.4 percent, over that of 1996.
Viad's payment services subsidiary continues to invest increasing
amounts of its growing money order and official check funds in tax-
exempt securities. On a fully taxable equivalent basis, revenues
rose 8.7 percent and operating income was up 12.5 percent.
Income from continuing operations for the second quarter of 1997
was $26.7 million, or $0.28 per share. Income from continuing
operations for the second quarter of 1996 was $9.0 million, or
$0.10 per share, after deducting a provision for spin-off costs and
management transition expenses of $12.0 million, or $0.13 per
share.
Net income for the second quarter of 1997 was $26.7 million, or
$0.28 per share. Net income for the second quarter of 1996 was
$14.1 million, or $0.15 per share, which included income from
discontinued operations of $5.1 million, or $0.05 per share. See
Note G of Notes to Consolidated Financial Statements.
There were 2.5 million more average common and equivalent shares
outstanding in the 1997 quarter than in the 1996 quarter, due
primarily to the effects of stock option exercises and other
issuances related to employee benefit and dividend reinvestment
plans.
AIRLINE CATERING AND SERVICES.
The second quarter 1997 revenues of the Airline Catering and
Services group were $231.0 million, a 7.6 percent increase from the
1996 second quarter revenues of $214.7 million. On a fully
comparable basis, the revenue increase was 6.5 percent, as the
reported 1996 revenues did not include two catering kitchens which
had only been 50 percent owned in 1996. Operating income increased
$1.3 million, or 6.6 percent, over that of the 1996 second quarter.
This performance was led by airline catering as into-plane fueling
and ground handling results were essentially even with 1996.
Catering revenues and operating income increased primarily as a
result of new business added over the past year, including the
acquisition of a flight kitchen in Miami in early 1997. Operating
margins decreased slightly to 9.2 percent from 1996's 9.3 percent,
as start-up costs on six new American Airlines catering locations
affected the quarter.
CONVENTION SERVICES.
Convention Services second quarter 1997 revenues increased $29.4
million, or 15.3 percent, to $222.3 million from $192.9 million in
the 1996 second quarter. Operating income increased $3.1 million,
or 16.4 percent, and operating margins improved to 9.8 percent from
9.7 percent in the 1996 second quarter. These increases were
achieved as the result of efficiencies gained from the
consolidation of Giltspur Inc. operations with Exhibitgroup, strong
segment revenue growth and improved cost controls at GES Exposition
Services.
TRAVEL AND LEISURE AND PAYMENT SERVICES.
Revenues of the Travel and Leisure and Payment Services companies
were $161.6 million for the second quarter of 1997, up $1.2 million
from those of the 1996 second quarter. Operating income increased
1.0 percent to $15.6 million. On a fully taxable equivalent basis,
second quarter revenues and operating income would be higher by
$7.5 million and $4.7 million in 1997 and 1996, respectively, for a
2.4 percent revenue increase and a 14.7 percent operating income
increase. The second quarter revenue increase would be 6.9 percent
on a comparable basis, as the Oakbrook Hills Hotel & Resort, sold
June 30, 1996, had contributed revenues in the 1996 quarter.
Operating margins on the fully taxable equivalent basis would be
13.7 percent in the second quarter of 1997, up from 12.2 percent in
the 1996 second quarter.
On the fully taxable equivalent basis, payment services revenues
and operating income increased $10.7 million and $3.2 million,
respectively, over those of 1996's second quarter, primarily as a
result of increased investment income arising from larger
investment balances and the contribution from two acquisitions made
in the first quarter of 1997.
Duty Free and shipboard concession revenues increased $900,000 over
those of the 1996 second quarter, due primarily to increased sales
at Miami International Airport. Due to a change in the mix of
products sold, operating income decreased $100,000.
Travel tour service revenues and operating income decreased
$500,000 and $1.6 million, respectively, from those of the 1996
second quarter, as passenger volumes were down from 1996 levels.
Food service companies revenues declined $200,000 in the 1997
second quarter while operating income remained even with that of
the 1996 second quarter. Increased business at America West Arena
(due to the addition of Phoenix Coyotes hockey games) was offset by
the closure of certain locations in 1996.
UNALLOCATED CORPORATE EXPENSE AND OTHER ITEMS, NET.
Unallocated corporate expense and other items, net, decreased $1.4
million from the second quarter of 1996.
SALE OF ACCOUNTS RECEIVABLE EXPENSE.
Sale of accounts receivable expense was higher by $600,000 in the
second quarter of 1997 compared to the second quarter of 1996, as
the average level of accounts receivable sold was higher in 1997
than in 1996.
INTEREST EXPENSE.
Interest expense decreased $1.2 million in the 1997 second quarter.
As discussed in Note D of Notes to Consolidated Financial
Statements and Liquidity and Capital Resources, Viad repurchased
$58.4 million par value of its 10.5 percent subordinated debentures
in late March 1997, resulting in lower interest expense in the
second quarter of 1997 compared to the 1996 quarter. In addition,
cash proceeds from the sale of the Star/Ship Atlantic in March, the
disposition of Premier Cruise Lines in April and the sale/leaseback
of Viad's corporate headquarters building in May resulted in lower
debt levels and reduced interest expense. See Notes C and G of
Notes to Consolidated Financial Statements.
INCOME TAXES.
The effective tax rate in the 1997 second quarter was 28.9 percent.
Excluding the effects of the $12.0 million provision for spin-off
costs and management transition expenses without tax benefit, the
effective tax rate for the second quarter of 1996 was 31.5 percent.
The reduction in the effective tax rate results primarily from the
increased use of tax-exempt investments by Viad's payment services
subsidiary.
COMPARISON OF FIRST SIX MONTHS OF 1997 TO THE
FIRST SIX MONTHS OF 1996:
Revenues for the first six months of 1997 increased $84.9 million,
or 7.7 percent, to $1.2 billion from $1.1 billion in the same
period of 1996. Operating income of Viad's principal business
segments increased $7.8 million, or 8.7 percent, over that of 1996.
On a fully taxable equivalent basis, revenues rose 8.1 percent and
operating income was up 12.9 percent.
Income from continuing operations for the first six months of 1997
was $37.2 million, or $0.39 per share. Income from continuing
operations for the first six months of 1996 was $17.5 million, or
$0.19 per share, after deducting a provision for spin-off costs and
management transition expenses of $12.0 million, or $0.13 per
share.
For the first six months of 1997, net income was $28.7 million, or
$0.30 per share, after deducting an extraordinary charge of $8.5
million (net of tax benefit of $4.6 million), or $0.09 per share,
for the early retirement of debt. Net income for the first half of
1996 was $38.6 million, or $0.42 per share, which included income
from discontinued operations of $21.1 million, or $0.23 per share.
See Note G of Notes to Consolidated Financial Statements and
Liquidity and Capital Resources.
There were 2.4 million more average common and equivalent shares
outstanding in 1997 than in 1996, due primarily to the effects of
stock option exercises and other issuances related to employee
benefit and dividend reinvestment plans.
AIRLINE CATERING AND SERVICES.
Six month revenues of the Airline Catering and Services group were
$442.8 million in 1997, an 8.5 percent increase from the 1996 first
half revenues of $408.0 million. On a fully comparable basis, the
revenue increase was 6.7 percent, as the reported 1996 revenues did
not include two catering kitchens which had only been 50 percent
owned in 1996. Operating income increased $2.2 million, or 6.7
percent, to $34.4 million in the 1997 first half. Catering
revenues and operating income increased primarily as a result of
new business added, including the acquisition of a flight kitchen
in Miami in early 1997. Operating income from the airplane fueling
and ground handling business was essentially unchanged from 1996.
Operating margins decreased slightly to 7.8 percent from 1996's 7.9
percent, due to start-up costs on six new American Airlines
catering locations added in the second quarter.
CONVENTION SERVICES.
Convention Services' first half revenues of $431.7 million were
$43.8 million, or 11.3 percent, greater than the 1996 six month
period. Operating income increased 12.4 percent to $40.2 million,
and operating margins increased to 9.3 percent from 9.2 percent in
1996. These increases were achieved as a result of efficiencies
gained from the consolidation of Giltspur Inc. operations with
Exhibitgroup, strong segment revenue growth in the second quarter
and improved cost controls at GES Exposition Services.
TRAVEL AND LEISURE AND PAYMENT SERVICES.
For the first six months of 1997, revenues of the Travel and
Leisure and Payment Services companies were $310.2 million, up $6.3
million, or 2.1 percent, from those of the 1996 first half.
Operating income increased 5.6 percent to $22.7 million. On a
fully taxable equivalent basis, six month revenues and operating
income would be higher by $13.9 million and $9.0 million in 1997
and 1996, respectively, for a 3.6 percent revenue increase and a
20.1 percent operating income increase. Excluding the 1996
revenues of Oakbrook Hills Hotel & Resort, sold June 30, 1996, the
six month revenue increase was 7.1 percent. Operating margins on
the fully taxable equivalent basis would be 11.3 percent in the
1997 first half, up from 9.8 percent in the comparable period of
1996.
On the fully taxable equivalent basis, payment services revenues
and operating income increased $16.5 million and $4.6 million,
respectively, over those of 1996's first six months, due
principally to increased investment income arising from larger
investment balances and business generated from two acquisitions
made in the first quarter of 1997.
Duty Free airport and shipboard concession revenues increased $1.7
million over those of the first half of 1996, due to an increase in
the number of shipboard passenger days in the first quarter of 1997
and increased sales at Miami International Airport during the
second quarter of 1997. Due to a change in the mix of products
sold, operating income was even with that of the first half of
1996.
Travel tour service revenues improved $3.5 million over the first
six months of 1996, due in part to the effects of an acquisition
made in the third quarter of 1996. Operating results declined
$900,000 as a consequence of the lower second quarter 1997
passenger volumes.
Revenues of the food service companies for the first half of 1997
were down $300,000 from those of the same period in 1996.
Increased revenues at General Motors (due to strikes at certain
General Motors plants in the first quarter of 1996) and increased
business at America West Arena (due to the addition of Phoenix
Coyotes hockey games) were offset by the closure of certain
locations in 1996. Operating income increased $1.6 million, due
primarily to improved cost efficiencies as compared to the effects
of the strikes on 1996 operations.
UNALLOCATED CORPORATE EXPENSE AND OTHER ITEMS, NET.
Unallocated corporate expense and other items, net, decreased $2.4
million from the same period of 1996.
SALE OF ACCOUNTS RECEIVABLE EXPENSE.
Sale of accounts receivable expense was higher by $1.2 million in
the first half of 1997 compared to the first half of 1996, as the
average level of accounts receivable sold was higher in 1997 than
in 1996.
INTEREST EXPENSE.
Interest expense for the first six months of 1997 decreased
$400,000 from that of the first half of 1996. As discussed in Note
D of Notes to Consolidated Financial Statements and Liquidity and
Capital Resources, Viad repurchased $58.4 million par value of its
10.5 percent subordinated debentures in late March 1997, resulting
in lower interest expense. In addition, proceeds from the sale of
the Star/Ship Atlantic, the disposition of Premier Cruise Lines and
the sale of Viad's corporate headquarters building reduced interest
expense. See Notes C and G of Notes to Consolidated Financial
Statements.
INCOME TAXES.
The effective tax rate for the first half of 1997 was 29.2 percent.
Excluding the effects of the $12.0 million provision for spin-off
costs and management transition expenses without tax benefit, the
effective tax rate for the first six months of 1996 was 31.3
percent. The reduction in the effective tax rate results primarily
from the increased use of tax-exempt investments by Viad's payment
services subsidiary.
LIQUIDITY AND CAPITAL RESOURCES:
In late March 1997, Viad repurchased $58.4 million par value of
its 10.5 percent subordinated debentures at a premium, resulting in
an extraordinary charge of $8.5 million (net of tax benefit of $4.6
million), or $0.09 per share. The tender offer was financed with
general corporate funds, operating cash flow, proceeds from the
sale of certain assets and short-term borrowings. The purpose of
the repurchase was to reduce ongoing interest expense.
As mentioned previously, in May 1997, Viad sold its corporate
headquarters building for $73.0 million, before selling expenses.
In mid-March 1997, Viad sold the Star/Ship Atlantic for $70.0
million, and in April 1997, Viad finalized the sale of Premier
Cruise Lines for $19.0 million. See Notes C and G of Notes to
Consolidated Financial Statements.
Viad's total debt at June 30, 1997 was $449.4 million compared with
$521.1 million at December 31, 1996. The debt-to-capital ratio at
June 30, 1997 was 0.49 to 1, down from 0.54 to 1 at December 31,
1996.
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.
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, 1996.
PART II. OTHER INFORMATION
Item 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
Results of the annual meeting of stockholders of Viad Corp held on
May 13, 1997, were presented in the Form 10-Q for the quarterly
period ended March 31, 1997. No other matters were submitted to a
vote of security holders during the second quarter of 1997.
Item 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibit No. 11 - Statement Re Computation of Per Share
Earnings.
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)
August 11, 1997 By /s/ Richard C. Stephan
------------------------
Richard C. Stephan
Vice President-Controller
(Chief Accounting Officer
and Authorized Officer)