Exhibit 99.1
Viad Corp Resolves Previously Announced Issue Related
to Structured Note Accounting
Results for 2002 and 2001 to be Restated
Company to Host Conference Call Today at 9:00 a.m. EDT
PHOENIX--(BUSINESS WIRE)--May 16, 2003--Viad Corp (NYSE:VVI) today
announced that the company has resolved open accounting matters
related to certain structured notes held by its Travelers Express
subsidiary.
Travelers Express' float portfolio of approximately $7.3 billion
at March 31, 2003 consists of a variety of investments, predominantly
mortgage-backed and other asset-backed securities as well as municipal
bonds. Included in other asset-backed securities were $260 million of
structured notes (prior to adjustment), which represented less than 4
percent of the total portfolio. The notes have two components,
generally a zero coupon, principal-protected, U.S. Treasury security
and the residual cash flow interest of a collateralized debt
obligation.
The company has determined, with concurrence from its external
auditors, that the U.S. Treasury and residual cash flow components of
certain structured notes must be accounted for as separate securities
in the financial statements. The company, with concurrence from its
external auditors, has also determined that the majority of the
structured notes should have been accounted for under EITF No.
99-20(1) rather than EITF No. 96-12(2). EITF No. 99-20 generally
requires investments to be written down to fair value when adverse
changes in actual or projected cash flows occur.
(1) Emerging Issues Task Force No. 99-20 "Recognition of Interest
Income and Impairment on Purchased and Retained Beneficial
Interests in Securitized Financial Assets" (EITF No. 99-20)
(2) Emerging Issues Task Force No. 96-12 "Recognition of Interest
Income and Balance Sheet Classification of Structured Notes"
(EITF No. 96-12)
Due to the reduction of actual and projected cash flows from the
residual interests, and based on the retroactive application of EITF
No. 99-20 to certain structured notes purchased by Travelers Express,
and because certain structured notes must be accounted for as separate
securities, the company has recorded aggregate impairment losses and
interest income adjustments of $60 million ($37.3 million, after-tax).
The $60 million includes both the $19.8 million ($12.0 million
after-tax) and the estimated $10 million to $15 million ($6.1 million
to $9.1 million after-tax) previously announced on April 24th. The
charges, which relate only to the residual interest component of the
notes, reflect a reduction in estimated future cash flows but have no
immediate effect on cash.
The impairment losses and the separation of the components of the
securities under EITF No. 99-20 relate to the first quarter of 2003 as
well as to 2002 and 2001. Therefore, the company will restate 2002 and
2001 full year net income by $18.2 million and $6.5 million,
respectively, and record charges of $12.6 million after-tax in the
first quarter of 2003. Viad will amend its 2002 Form 10-K to reflect
the 2002 and 2001 charges. The effect of the restatement is summarized
below and is presented in Table One of this press release.
- -0-
*T
Viad Corp
(millions, except
per share data) Full Year Full Year
Q1 Q1 2003 Full Year 2002 Full Year 2001
2003(3) (Revised) 2002 (Restated) 2001 (Restated)
------- --------- --------- ---------- --------- ----------
Revenue $415.4 $414.3 $1,647.0 $1,618.1 $1,659.4 $1,652.0
Net Income $22.7 $22.0 $76.1 $57.9 $51.1 $44.6
Diluted EPS $0.26 $0.25 $0.86 $0.65 $0.58 $0.50
Payment Services Full Full Year Full Full Year
Segment Q1 Q1 2003 Year 2002 Year 2001
2003(3) (Revised) 2002 (Restated) 2001 (Restated)
------- --------- ------- ---------- ------- ----------
Revenue $190.0 $189.0 $802.5 $773.6 $713.9 $706.5
Operating
Income $21.2 $20.1 $154.4 $125.5 $129.8 $122.4
(3) See Viad Corp press release of April 24, 2003
*T
Robert H. Bohannon, chairman, president and chief executive
officer said, "Although we are disappointed by the impairment charge
and the consequent need to restate results, we are pleased that this
matter has been promptly resolved. The charge in no way diminishes the
fundamental strength of Travelers Express' business or its ability to
produce strong results in the future. After these charges, we have $46
million remaining in the residual interest piece of these structured
notes, which is less than one percent of the total portfolio."
Bohannon added, "Now that a different accounting method for
treating these investments has been determined and the charges taken,
we believe future exposure associated with these notes has been
diminished. In addition, the inclusion of a principal guaranteed
instrument in the structure assures the return of our initial
investment."
Background
Travelers Express began purchasing structured notes in 1999 and
accounted for them under EITF No. 96-12. A newer accounting method,
EITF No. 99-20, became effective in the second quarter of 2001.
Approximately $175 million of the total $260 million in structured
note purchases were transacted prior to the second quarter of 2001. It
was determined that the company should continue to account for the
structured notes under EITF No. 96-12 because of certain principal
protection features and the high credit rating of the notes.
On April 10, 2003, the company announced a pre-tax charge of $11.8
million. This adjustment to interest income (a component of revenue)
related to certain structured note securities held by Travelers
Express accounted for in accordance with 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. The adjustment was
prompted by a reduction in estimated future cash flows for these
securities.
On April 22, 2003 the company's external auditors advised Viad
that EITF No. 99-20 should be followed and not EITF No. 96-12. As a
result, on April 24, 2003, Viad announced first quarter earnings
including an impairment charge of $19.8 million under EITF No. 99-20
(which included the $11.8 million previously announced on April 10,
2003 as well as an additional $8.0 million). At that time, Viad also
announced that the company was determining, with its external
auditors, whether or not the individual components of the structured
notes needed to be accounted for separately as a U.S. Treasury
security and a residual interest in a collateralized debt obligation,
possibly resulting in additional charges of $10 million to $15
million. The subsequent evaluation and analysis resulted in total
impairment charges of $60 million, which includes the $19.8 million
($12.0 million after tax) and the $10 million to $15 million ($6.1
million to $9.1 million after tax) reported on April 24, 2003.
Conference Call Information
Viad Corp will hold a conference call on May 16, 2003 at 9:00 a.m.
EDT to discuss the contents of this press release. Participants should
call 800/406-5356 to join the call.
About Travelers Express
Travelers Express Company, Inc. is engaged in a variety of payment
services activities including issuance and processing of money orders,
processing official checks and share drafts and money transfer and
cash access services. Travelers Express' revenue and income are
derived from transaction fees and investment income. Funds generated
from the sale of official checks, money orders and other payment
instruments are invested in permissible securities, principally
high-quality debt instruments. These investments are restricted to
satisfy the liability to pay upon presentment the face amount of
payment services obligations. The composition of the float portfolio,
investment income, regulatory oversight, and other pertinent
information is contained in Viad's First Quarter 2003 Form 10-Q which
can be found at www.viad.com.
About Viad Corp
Viad is a $1.6 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), 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 -- FINANCIAL RESULTS
(UNAUDITED)
Quarter
Ended
March 31, Year Ended December 31,
-----------------------
(000 omitted, except per share
data) 2003 2002 2001
----------- ----------- -----------
As As Restated
Revised (1)
Revenues (Note A) $414,349 $1,618,105 $1,652,022
=========== =========== ===========
Segment operating income (Note B) $37,172 $156,695 $76,669
Corporate activities and minority
interests (3,745) (22,670) (17,007)
Net interest expense (3,048) (8,737) (20,284)
----------- ----------- -----------
Income before income taxes 30,379 125,288 39,378
Income tax (expense) benefit (8,348) (29,663) 7,110
----------- ----------- -----------
Income before change in accounting
principle 22,031 95,625 46,488
Change in accounting principle - (37,739) (1,884)
----------- ----------- -----------
Net income $22,031 $57,886 $44,604
=========== =========== ===========
Diluted net income per common
share:
Income before change in
accounting principle $0.25 $1.09 $0.52
Change in accounting principle - (0.44) (0.02)
----------- ----------- -----------
Net income per share $0.25 $0.65 $0.50
=========== =========== ===========
Basic net income per common share:
Income before change in
accounting principle $0.25 $1.10 $0.53
Change in accounting principle - (0.44) (0.02)
----------- ----------- -----------
Net income per share $0.25 $0.66 $0.51
=========== =========== ===========
Common shares treated as
outstanding for net income per
share calculations:
Average outstanding shares 86,008 86,178 85,503
=========== =========== ===========
Average outstanding and
potentially dilutive shares 86,326 86,716 86,322
(1) Quarterly amounts have been revised from those presented in the
company's first quarter 2003 earnings release on April 24, 2003.
VIAD CORP AND SUBSIDIARIES
TABLE ONE -- NOTES TO FINANCIAL RESULTS
(UNAUDITED)
(A) Restatement -- As a result of the first quarter 2003 evaluation of
certain structured investments within Viad's payment services
float portfolio, it was determined that other-than-temporary
impairment losses and interest income adjustments of $60.0 million
(pre-tax) should be recorded. As these charges did not relate
exclusively to the first quarter of 2003, but also to the 2002 and
2001 financial results, Viad intends to restate its 2002 and 2001
consolidated financial statements.
A summary of the effects of the revision of first quarter 2003
results and the restatement of 2002 and 2001 are as follows:
Quarter Ended
(000 omitted, March 31, 2003
except per
share data)
--------------------------
As As Revised (1)
Previously
Reported
Payment
Services:
Revenue $190,021 $189,011
=========== ==============
Operating
income $21,151 $20,141
=========== ==============
Total Company:
Revenue $415,359 $414,349
=========== ==============
Income before
change in
accounting
principle $22,742 $22,031
Change in
accounting
principle - -
----------- --------------
Net income $22,742 $22,031
=========== ==============
Diluted income per common
share:
Income before
change in
accounting
principle $0.26 $0.25
Change in
accounting
principle - -
----------- --------------
Net income per
share $0.26 $0.25
=========== ==============
Basic income per common
share:
Income before
change in
accounting
principle $0.26 $0.25
Change in
accounting
principle - -
----------- --------------
Net income $0.26 $0.25
=========== ==============
Year Ended December 31,
------------------------------------------------------
(000 omitted,
except per
share data) 2002 2001
---------------------------- -------------------------
As Previously As Restated As Previously As Restated
Reported Reported
Payment
Services:
Revenue $802,498 $773,619 $713,893 $706,525
============== ============= ============= ===========
Operating
income $154,399 $125,520 $129,768 $122,400
============== ============= ============= ===========
Total Company:
Revenue $1,646,984 $1,618,105 $1,659,390 $1,652,022
============== ============= ============= ===========
Income before
change in
accounting
principle $113,833 $95,625 $51,134 $46,488
Change in
accounting
principle (37,739) (37,739) - (1,884)
-------------- ------------- ------------- -----------
Net income $76,094 $57,886 $51,134 $44,604
============== ============= ============= ===========
Diluted income per common
share:
Income before
change in
accounting
principle $1.30 $1.09 $0.58 $0.52
Change in
accounting
principle (0.44) (0.44) - (0.02)
-------------- ------------- ------------- -----------
Net income per
share $0.86 $0.65 $0.58 $0.50
============== ============= ============= ===========
Basic income per common
share:
Income before
change in
accounting
principle $1.31 $1.10 $0.58 $0.53
Change in
accounting
principle (0.44) (0.44) - (0.02)
-------------- ------------- ------------- -----------
Net income $0.87 $0.66 $0.58 $0.51
============== ============= ============= ===========
(1) Quarterly amounts have been revised from those presented in the
company's first quarter earnings release on April 24, 2003.
VIAD CORP AND SUBSIDIARIES
TABLE ONE -- NOTES TO FINANCIAL RESULTS (CONTINUED)
(UNAUDITED)
(A) Restatement (continued)
(000 omitted, except 2002 First Quarter 2002 Second Quarter
per share data)
----------------------- -----------------------
As Previously As As Previously As
Reported Restated Reported Restated
Payment Services:
Revenue $187,044 $180,845 $195,932 $191,822
============= ========= ============= =========
Operating income $31,784 $25,585 $39,254 $35,144
============= ========= ============= =========
Total Company:
Revenue $445,021 $438,822 $408,511 $404,401
============= ========= ============= =========
Income before change
in accounting
principle $32,344 $28,396 $32,266 $29,715
Change in accounting
principle (37,739) (37,739) - -
------------- --------- ------------- ---------
Net income (loss) $(5,395) $(9,343) $32,266 $29,715
============= ========= ============= =========
Diluted income (loss) per common
share:
Income before
change in
accounting
principle $0.37 $0.33 $0.36 $0.34
Change in
accounting
principle (0.44) (0.44) - -
------------- --------- ------------- ---------
Net income (loss)
per share $(0.07) $(0.11) $0.36 $0.34
============= ========= ============= =========
Basic income (loss) per common
share:
Income before
change in
accounting
principle $0.37 $0.33 $0.37 $0.34
Change in
accounting
principle (0.44) (0.44) - -
------------- --------- ------------- ---------
Net income (loss)
per share $(0.07) $(0.11) $0.37 $0.34
============= ========= ============= =========
(000 omitted, except 2001 First Quarter 2001 Second Quarter
per share data)
----------------------- -----------------------
As Previously As As Previously As
Reported Restated Reported Restated
Payment Services:
Revenue $166,396 $166,396 $174,243 $173,585
============= ========= ============= =========
Operating income $21,893 $21,893 $30,905 $30,247
============= ========= ============= =========
Total Company:
Revenue $459,564 $459,564 $444,566 $443,908
============= ========= ============= =========
Income (loss) before
change in
accounting
principle $24,302 $24,302 $17,409 $16,994
Change in accounting
principle - - - (1,884)
------------- --------- ------------- ---------
Net income (loss) $24,302 $24,302 $17,409 $15,110
============= ========= ============= =========
Diluted income (loss) per common
share:
Income (loss)
before change in
accounting
principle $0.28 $0.28 $0.20 $0.19
Change in
accounting
principle - - - (0.02)
------------- --------- ------------- ---------
Net income (loss)
per share $0.28 $0.28 $0.20 $0.17
============= ========= ============= =========
Basic income (loss) per common
share:
Income (loss)
before change in
accounting
principle $0.28 $0.28 $0.20 $0.20
Change in
accounting
principle - - - (0.02)
------------- --------- ------------- ---------
Net income (loss)
per share $0.28 $0.28 $0.20 $0.18
============= ========= ============= =========
(000 omitted, except 2002 Third Quarter 2002 Fourth Quarter
per share data)
------------------------ -----------------------
As Previously As As Previously As
Reported Restated Reported Restated
Payment Services:
Revenue $209,176 $203,848 $210,346 $197,104
============== ========= ============= =========
Operating income $39,088 $33,760 $44,273 $31,031
============== ========= ============= =========
Total Company:
Revenue $417,977 $412,649 $375,475 $362,233
============== ========= ============= =========
Income before change
in accounting
principle $35,617 $32,257 $13,606 $5,257
Change in accounting
principle - - - -
-------------- --------- ------------- ---------
Net income (loss) $35,617 $32,257 $13,606 $5,257
============== ========= ============= =========
Diluted income (loss) per common
share:
Income before
change in
accounting
principle $0.41 $0.37 $0.15 $0.06
Change in
accounting
principle - - - -
-------------- --------- ------------- ---------
Net income (loss)
per share $0.41 $0.37 $0.15 $0.06
============== ========= ============= =========
Basic income (loss) per common
share:
Income before
change in
accounting
principle $0.41 $0.37 $0.16 $0.06
Change in
accounting
principle - - - -
-------------- --------- ------------- ---------
Net income (loss)
per share $0.41 $0.37 $0.16 $0.06
============== ========= ============= =========
(000 omitted, except 2001 Third Quarter 2001 Fourth Quarter
per share data)
------------------------ -----------------------
As Previously As As Previously As
Reported Restated Reported Restated
Payment Services:
Revenue $181,083 $176,064 $192,171 $190,480
============== ========= ============= =========
Operating income $33,441 $28,422 $43,529 $41,838
============== ========= ============= =========
Total Company:
Revenue $390,086 $385,067 $365,174 $363,483
============== ========= ============= =========
Income (loss) before
change in
accounting
principle $(15,764) $(18,928) $25,187 $24,120
Change in accounting
principle - - - -
-------------- --------- ------------- ---------
Net income (loss) $(15,764) $(18,928) $25,187 $24,120
============== ========= ============= =========
Diluted income (loss) per common
share:
Income (loss)
before change in
accounting
principle $(0.19) $(0.22) $0.29 $0.28
Change in
accounting
principle - - - -
-------------- --------- ------------- ---------
Net income (loss)
per share $(0.19) $(0.22) $0.29 $0.28
============== ========= ============= =========
Basic income (loss) per common
share:
Income (loss)
before change in
accounting
principle $(0.19) $(0.22) $0.29 $0.28
Change in
accounting
principle - - - -
-------------- --------- ------------- ---------
Net income (loss)
per share $(0.19) $(0.22) $0.29 $0.28
============== ========= ============= =========
VIAD CORP AND SUBSIDIARIES
TABLE ONE -- NOTES TO FINANCIAL RESULTS (CONTINUED)
(UNAUDITED)
(B) Reportable Segments
Quarter Ended
March 31, Year Ended December 31,
-----------------------
(000 omitted) 2003 2002 2001
-------------- ----------- -----------
As Revised (1) As Restated
Revenues:
Payment Services $189,011 $773,619 $706,525
Convention and Event Services 222,056 786,233 884,044
-------------- ----------- -----------
Reportable segments 411,067 1,559,852 1,590,569
Travel and Recreation Services 3,282 58,253 61,453
-------------- ----------- -----------
Total Revenues $414,349 $1,618,105 $1,652,022
============== =========== ===========
Segment operating income
(loss):
Payment Services $20,141 $125,520 $122,400
Convention and Event Services 18,605 37,614 36,293
-------------- ----------- -----------
Reportable segments 38,746 163,134 158,693
Travel and Recreation Services (1,574) 13,743 14,698
-------------- ----------- -----------
Subtotal 37,172 176,877 173,391
Restructuring charges and
other items:
Payment Services - (440) (5,947)
Convention and Event
Services - (19,742) (90,775)
Travel and Recreation
Services - - -
-------------- ----------- -----------
Total Segment Operating
Income $37,172 $156,695 $76,669
============== =========== ===========
(1) Quarterly amounts have been revised from those presented in the
company's first quarter earnings release on April 24, 2003.
CONTACT: Viad Corp
Patricia D. Phillips, 602/207-1040 (Investor Relations)
pphillip@viad.com