Exhibit 99.1
Viad Corp Announces First Quarter 2003 Results;
Earnings Per Share of $0.26
PHOENIX--(BUSINESS WIRE)--April 24, 2003--
Reflecting an Impairment Charge of $8.0 Million, in Addition to
the $11.8 Million Impairment Charge Announced April 10, 2003
Viad Corp (NYSE:VVI) today announced first quarter 2003 diluted
earnings per share of $0.26 on revenue of $415.4 million, segment
operating income of $38.2 million and net income of $22.7 million.
These results reflect an impairment charge related to certain
structured notes held by Travelers Express under Emerging Issues Task
Force (EITF) No. 99-20 "Recognition of Interest Income and Impairment
on Purchased and Retained Beneficial Interests in Securitized
Financial Assets" in the amount of $19.8 million ($12.0 million
after-tax, $0.14 per diluted share). This amount includes the $11.8
million ($7.1 million after-tax) impairment adjustment to investment
income announced by the company on April 10, 2003.
The company started purchasing structured notes in 1999 and
accounted for them under EITF No. 96-12. As announced April 10, 2003,
as a result of the normal review of investment portfolio yield and the
change in expected cash flows for certain structured notes, the
company announced an impairment charge of $11.8 million ($7.1 million
after-tax, $0.08 per diluted share) based on EITF No. 96-12. The
company's external auditors reviewed and concurred with the amount of
the adjustment and the application of EITF No. 96-12. On the afternoon
of April 22, 2003, Viad was informed by its external auditors that
they believed the adjustment should have been made under EITF No.
99-20, which became effective second quarter, 2001. Accordingly, the
additional impairment charge of $8.0 million ($4.8 million after-tax)
represents the difference between EITF No. 96-12 and EITF No. 99-20.
Had EITF No. 99-20 been applied retroactively, there would not have
been a material affect on prior years' results.
In addition to the foregoing, on the evening of April 23, 2003,
the company was informed by its external auditors that the structured
notes may need to be accounted for separately as a U.S. government
strip security and an equity tranche of a collateralized debt
obligation. The company and its external auditors are reviewing this
issue further and the impact, if any, may result in additional
impairment of as much as $10 million to $15 million.
Robert H. Bohannon, chairman, president and chief executive
officer, said, "Needless to say, we are dismayed that the impairment
related to these securities has produced this outcome."
Bohannon, speaking about first quarter operating performance said,
"First quarter results fell below our initial expectations. Payment
Services showed great growth in MoneyGram, but overall Payment
Services' results were dampened by the impairment charge. Travelers
Express saw good agent and transaction volume growth driven by
international and Express Payment growth. Convention and Event
Services segment performance was slightly below expectations. GES
demonstrated solid performance despite challenging conditions in the
convention and tradeshow industry and adverse show rotation, while
Exhibitgroup is continuing its turnaround effort by driving down
costs."
First Quarter 2003 Financial Highlights
Highlights of the 2003 first quarter, compared to first quarter
2002 results, are presented below.
2003 2002 Change
---------- -------- --------
($ in millions)
Revenue $415.4 $445.0 -6.7%
Segment operating income $38.2 $52.5 -27.3%
Operating margins (a) 9.2% 11.8% -260 bps
Income (before 2002 change in accounting
principle) $22.7 $32.3 -29.7%
Cash flow (EBITDA) (b) $47.8 $62.4 -23.5%
Free cash flow (b) $17.9 $38.4 -53.6%
(a) For operating margins, the change from the prior year quarter is
presented in basis points.
(b) EBITDA is defined by Viad as income before interest expense,
income taxes, depreciation and amortization and changes in
accounting principles. Free cash flow is defined by Viad as net
cash provided by operating activities, less the change in payment
service assets and obligations, capital expenditures, and
dividends. EBITDA and free cash flow are supplemental to results
presented under accounting principles generally accepted in the
United States of America and may not be comparable to similarly
titled measures presented by other companies. These non-GAAP
measures are used by management to assess the company'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 and liquidity reported in
accordance with GAAP. See Table Two for a reconciliation of net
income to EBITDA, and a reconciliation of net cash provided by
operating activities to free cash flow.
Also, during the period:
-- Debt was reduced by $6 million to $356 million compared to the
fourth quarter 2002.
-- Cash and corporate investments were $203 million, down $100
million from the fourth quarter 2002 after completion of the
acquisition of the minority interest of MoneyGram
International Limited (MIL) for approximately $98 million in
cash plus a dividend of approximately $8 million.
Payment Services
Payment Services' revenue for the first quarter 2003 grew 1.6
percent to $190.0 million, up from $187.0 million in the first quarter
2002. Segment operating income was down 33.5 percent to $21.2 million
compared with $31.8 million in 2002, and operating margins for the
quarter were 11.1 percent compared with 17.0 percent in the first
quarter of 2002. These results reflect the impairment under EITF No.
99-20 ($19.8 million or $12.0 million after-tax).
MoneyGram performed well in the first quarter. MoneyGram's
transaction volume grew by 34 percent as compared to first quarter
2002. MoneyGram's agents increased by 10 percent in comparison to the
prior year quarter to over 60,000.
Payment Services' total average investable balances were $6.8
billion for the quarter, up 17 percent from the prior year quarter.
Net float income (float investment income less commission expense) was
$32.0 million in the first quarter 2003, up $2.4 million, or 8.0
percent compared to the prior year first quarter.
Convention and Event Services
Convention and Event Services' revenue was $222.1 million, a
decrease of 12.9 percent from $254.8 million in the first quarter
2002. Segment operating income was down 16.4 percent to $18.6 million
compared with $22.2 million in the 2002 first quarter and operating
margins for the quarter were 8.4 percent compared with 8.7 percent in
the 2002 first quarter. Segment results reflect continued weakness in
demand for exhibit construction and unfavorable show rotation. In the
first quarter of 2002, GES serviced the ConExpo/ConAgra tradeshow,
which contributed significantly to revenue and operating income in
that quarter. This show takes place every other year and hence did not
occur in the first quarter of 2003.
Travel and Recreation Services
Travel and Recreation Services' revenue was $3.3 million, an
increase of 3.5 percent from $3.2 million in the first quarter 2002.
Operating loss was $1.6 million compared with $1.5 million in the 2002
first quarter. These results reflect the typical seasonal pattern for
the first quarter.
2003 Outlook
Viad provides the following guidance for 2003 full year and second
quarter. This guidance is subject to change as a variety of factors
can affect actual operating results. These factors are identified in
the safe harbor language at the end of the press release. The guidance
given does not consider the resolution of the accounting treatment
related to the separation of the individual structured notes into two
separate securities which could have an impact of $10 million to $15
million.
Second Quarter 2003
-- Earnings are expected to be favorable compared to the second
quarter of 2002. This translates into expected diluted EPS in
the range of $0.41 to $0.44.
-- Payment Services segment revenue is expected to grow at a mid
single-digit rate compared to second quarter 2002 while
operating income is expected to be flat.
-- Convention and Event Services segment revenue is expected to
grow at a low single-digit rate compared to second quarter
2002 and operating income is expected to improve at a
double-digit growth rate compared to 2002 due to positive show
rotation and cost reductions.
Full Year 2003
-- Diluted EPS is expected to be in the range of $1.34 to $1.39.
This guidance reflects the impairment charge taken in the
first quarter and lower projected interest rates for the year.
-- Payment Services segment revenue is expected to grow at a low
to mid single-digit rate.
-- Payment Services segment operating income is expected to
decline at a low double-digit rate, primarily related to the
current quarter impairment.
-- The revenue and operating income outlook for Payment Services
assumes that:
-- MoneyGram transaction volume continues to grow at a rate
similar to the first quarter.
-- Money Order transaction volumes will stay flat in the
first half of the year but begin to increase in the latter
half of the year.
-- Average investable balances are expected to grow $750
million to $850 million for the year.
-- The investment yield on the float portfolio is expected to
continue to decline for the remainder of the year.
-- There is continued risk of another Fed Funds rate cut and
that mortgage refinancing activity will continue, which
impacts portfolio yields.
-- Convention and Event Services segment revenue is expected to
decline at a mid single- to low double-digit rate from 2002,
primarily due to decreased demand for exhibit construction.
-- Convention and Event Services segment operating income is
expected to increase at a low double-digit rate from 2002,
primarily due to ongoing cost improvements.
Viad is a $1.65 billion revenue S&P MidCap 400 company. Major
subsidiaries include Travelers Express/MoneyGram of Minneapolis, GES
Exposition Services of Las Vegas and Exhibitgroup/Giltspur of Chicago.
For more information, visit the company's Web site at www.viad.com.
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 historical information contained herein, this press
release includes certain information, assumptions and discussions that
may constitute forward-looking statements. These forward-looking
statements are not historical facts, but reflect current estimates,
projections, or expectations or trends concerning future growth,
operating cash flows, availability of short-term borrowings, consumer
demand, new business, investment policies, productivity improvements,
ongoing cost reduction efforts, efficiency, competitiveness, tax
rates, restructuring plans (including timing and realization of cost
savings), investment yield impairment, and market risk. Actual results
could differ materially from those projected in the forward-looking
statements. Viad's businesses can be affected by a host of risks and
uncertainties. Among other things, gains and losses of customers,
consumer demand patterns, labor relations, purchasing decisions
related to customer demand for convention and event services, existing
and new competition, industry alliances, consolidation, and growth
patterns within the industries in which Viad competes and any further
deterioration in the economy may individually or in combination impact
future results. In addition to factors mentioned elsewhere, economic,
competitive, governmental, technological, capital marketplace and
other factors, including further terrorist activities or war, could
affect the forward-looking statements in this press release.
Information about Viad Corp obtained from sources other than the
company may be out-of-date or incorrect. Please rely only on company
press releases, SEC filings and other information provided by the
company.
VIAD CORP AND SUBSIDIARIES
TABLE ONE - QUARTERLY RESULTS
(UNAUDITED)
Quarter Ended March 31,
------------------------
(000 omitted, except per share data) 2003 2002 %
------------------------
Revenues (Note A) $415,359 $445,021 -6.7%
========================
Segment operating income (Note A) $38,182 $52,525 -27.3%
Corporate activities and minority interests (3,745) (4,560) 17.9%
Net interest expense (3,048) (3,789) 19.6%
------------------------
Income before income taxes 31,389 44,176 -28.9%
Income taxes (8,647) (11,832) 26.9%
------------------------
Income before change in accounting principle 22,742 32,344 -29.7%
Change in accounting principle (Note B) - (37,739) NM
------------------------
Net income (loss) $22,742 $(5,395) NM
========================
Diluted income per common share:
Income before change in accounting principle $0.26 $0.37 -29.7%
Change in accounting principle - (0.44) NM
------------------------
Net income (loss) per share $0.26 $(0.07) NM
========================
Basic income per common share:
Income before change in accounting principle $0.26 $0.37 -29.7%
Change in accounting principle - (0.44) NM
------------------------
Net income (loss) per share $0.26 $(0.07) NM
========================
Common shares treated as outstanding for net
income per share calculations:
Average outstanding shares 86,008 86,095 -0.1%
========================
Average outstanding and potentially
dilutive shares 86,326 86,728 -0.5%
========================
NM = not meaningful
VIAD CORP AND SUBSIDIARIES
TABLE ONE - NOTES TO QUARTERLY RESULTS
(UNAUDITED)
(A) Reportable Segments
Quarter Ended March 31,
--------------------------------
(000 omitted) 2003 2002 %
--------------------------------
Revenues:
Payment Services $190,021 $187,044 1.6%
Convention and Event Services 222,056 254,807 -12.9%
--------------------------------
Reportable segments 412,077 441,851 -6.7%
Travel and Recreation Services 3,282 3,170 3.5%
--------------------------------
Total Revenues $415,359 $445,021 -6.7%
================================
Segment operating income:
Payment Services $21,151 $31,784 -33.5%
Convention and Event Services 18,605 22,244 -16.4%
--------------------------------
Reportable segments 39,756 54,028 -26.4%
Travel and Recreation Services (1,574) (1,503) -4.7%
--------------------------------
Total Segment Operating Income $38,182 $52,525 -27.3%
================================
(B) Change in Accounting Principle -- In June 2002, in accordance with
Viad's adoption of SFAS No. 142, a transitional impairment test
for goodwill was completed. This test resulted in a $40.0 million
($37.7 million after-tax) impairment of goodwill associated with
Viad's Convention and Event Services segment. This impairment was
retroactively restated to the first quarter of 2002 as a
cumulative effect of a change in accounting principle in
accordance with SFAS No. 142.
VIAD CORP AND SUBSIDIARIES
TABLE TWO - EBITDA AND FREE CASH FLOW
(UNAUDITED)
Quarter Ended March 31,
-------------------------
(000 omitted) 2003 2002 %
-------------------------
EBITDA:
Net income (loss) $22,742 $(5,395) NM
Change in accounting principle - 37,739 NM
-------------------------
Income before change in accounting principle 22,742 32,344 -29.7%
Interest expense 4,152 5,081 18.3%
Income taxes 8,647 11,832 26.9%
Depreciation and amortization 12,215 13,157 7.2%
-------------------------
EBITDA as adjusted $47,756 $62,414 -23.5%
=========================
Quarter Ended March 31,
-------------------------
(000 omitted) 2003 2002 %
-------------------------
Free Cash Flow:
Net cash provided by operating activities $185,948 $65,820 182.5%
Change in payment service assets and
obligations (144,735)(12,333) NM
-------------------------
Subtotal 41,213 53,487 -22.9%
Less:
Capital expenditures (7,206) (7,004) -2.9%
Dividends paid (8,039) (8,043) 0.0%
Dividend paid to minority interest (8,115) - NM
-------------------------
Free cash flow $17,853 $38,440 -53.6%
=========================
NM = not meaningful
VIAD CORP AND SUBSIDIARIES
TABLE THREE - NET FLOAT INCOME AND MARGIN
(UNAUDITED)
Analysis of Average Balances, Float and Average Yields and
Interest Rates:
Quarter Ended March 31,
-------------------------------------
2003
-------------------------------------
(000 omitted) Average Income/ Yield/
Balance Expense Rate
-------------------------------------
Investments available or
restricted for payment
service obligations $6,779,048 $90,916 5.44%
Payment service obligations (1) $5,343,688 58,926 4.47%
------------
Net float income and margin $31,990 1.91%
============
Quarter Ended March 31,
-------------------------------------
2002
------------------------------------
(000 omitted) Average Income/ Yield/
Balance Expense Rate
------------------------------------
Investments available or
restricted for payment
service obligations $5,776,049 $85,217 5.98%
Payment service obligations (1) $4,300,849 55,607 5.24%
------------
Net float income and margin $29,610 2.08%
============
Changes in Float Income and Commission Expense - Due to Changes in
Average Investable Balances and Interest Rates:
Quarter Ended March 31,
-------------------------------------
2003 vs. 2002
-------------------------------------
(000 omitted) Balance(2) Yield/Rate(2) Total
-------------------------------------
Float Income $14,798 $(9,099) $5,699
Commission expense $13,483 $(10,164) $3,319
Net float income $5,142 $(2,762) $2,380
Quarter Ended March 31,
-------------------------------------
2002 vs. 2001
------------------------------------
(000 omitted) Balance(2) Yield/Rate(2) Total
------------------------------------
Float Income $22,818 $(7,116) $15,702
Commission expense $26,277 $(19,390) $6,887
Net float income $6,826 $1,989 $8,815
(1) Commissions are paid to financial institution customers based upon
average outstanding balances generated by the sale of official
check products only. The expense reported includes those payments
made to financial institution customers, costs associated with
swaps and the sale of receivables program. The average balance in
the table reflects only the payment service obligations for which
commissions are paid and does not include the average balance of
the sold receivables ($442 million and $445 million for first
quarter 2003 and 2002, respectively) as these are not recorded on
the Consolidated Balance Sheets. Commission expense is classified
as "Costs of services" in the Consolidated Statements of Income.
(2) Net float income for the "balance" and "yield/rate" columns is not
the net of "float income" and "commission expense" as each of
these amounts is calculated independently.
CONTACT: Viad Corp
(Investor Relations)
Patricia D. Phillips, 602/207-1040
pphillip@viad.com