EXHIBIT 99
Viad Corp Announces Third Quarter 2004 Results;
Loss per Share of $3.14, After Non-Cash Goodwill and Intangible Asset
Impairment Charges of $80.8 Million After-Tax or $3.71 per Share
PHOENIX--(BUSINESS WIRE)--Oct. 29, 2004--
Income Before Impairment Losses of $0.57 per Share
Viad Corp (NYSE:VVI) today announced third quarter 2004 revenue of
$218.6 million, segment operating income of $23.5 million, and a net
loss of $68.3 million, or $3.14 per diluted share, which includes
non-cash charges for goodwill and intangible asset impairment of $80.8
million, after-tax, or $3.71 per share. Income before impairment
losses was $12.6 million, or $0.57 per share.
Robert H. Bohannon, chairman, president and chief executive
officer said, "As expected, our third quarter operating results were
significantly better than last year. This improvement was largely due
to positive show rotation at GES and terrific revenue growth in our
Travel and Recreation Services segment as the result of improved
travel trends. Exhibitgroup's new exhibit construction revenue was
weaker than anticipated, causing their results to fall significantly
short of our expectations."
Non-Cash Goodwill and Intangible Asset Impairment Charges
Statement of Financial Accounting Standards No. 142, "Goodwill and
Other Intangible Assets," requires companies to test goodwill and
certain intangible assets for impairment on an annual basis.
Impairment testing is also required between annual tests if an event
occurs or circumstances change that would more likely than not reduce
the fair value of a reporting unit below its carrying amount.
During the third quarter 2004, Exhibitgroup's operating results
were affected by a significant reduction in revenue from new exhibit
construction that caused management to reduce its outlook for the full
year. Customer orders for new exhibit construction have declined even
further than management anticipated, resulting in a less profitable
mix of business. Visibility in the segment remains poor and management
is not able to determine when an increase in new exhibit orders will
materialize or when the mix of business will improve. As a result of
this potential impairment indicator, Viad performed an interim
goodwill impairment test for the Exhibitgroup reporting unit in
connection with the preparation of its third quarter 2004 financial
statements. Based on this interim testing, management concluded that a
goodwill impairment loss was necessary and that a trademark intangible
impairment loss was probable. Accordingly, Viad recorded a charge of
$80.4 million ($76.6 million after-tax), representing the entire
carrying amount of Exhibitgroup's goodwill, and a charge of $7.0
million ($4.2 million after-tax) representing management's preliminary
estimate of the trademark's impairment (resulting in a remaining
trademark book value of $5.9 million). Management intends to finalize
the valuation of the trademark during the fourth quarter.
Viad uses a discounted expected future cash flow methodology in
order to estimate the fair value of its reporting units and its
intangible assets. The estimates and assumptions regarding expected
future cash flows, terminal values and the discount rate require
considerable judgment and are based on historical experience,
financial forecasts and industry trends and conditions. These
estimates, however, have inherent uncertainties, and different
assumptions could lead to materially different results.
Third Quarter and Year-to-Date 2004 Financial Highlights
Highlights of the 2004 third quarter, compared to third quarter
2003 results, and year-to-date results are presented below.
Q3 2004 Q3 2003 Change
---------- ------- ------
($ in millions)
Revenue $ 218.6 $165.1 32.4%
Segment operating income $ 23.5 $ 8.8 166.8%
Operating margins (a) 10.8% 5.3% 550 bps
Income before impairment losses (b) $ 12.6 $ 1.9 NM
Net (loss) income $ (68.3) $ 1.9 NM
Adjusted EBITDA (b) $ 24.4 $ 9.8 147.9%
Cash from operations $ 11.0 $ 19.2 -42.8%
Free cash flow (b) $ 7.7 $ 15.8 -51.4%
YTD 2004 YTD 2003 Change
---------- -------- ------
($ in millions)
Revenue $ 633.5 $626.6 1.1%
Segment operating income $ 58.6 $ 51.0 14.9%
Operating margins (a) 9.3% 8.1% 120 bps
Income before impairment losses (b) $ 29.3 $ 20.9 39.9%
Net (loss) income $ (51.5) $ 20.9 NM
Adjusted EBITDA (b) $ 63.4 $ 57.7 9.8%
Cash from operations $ 31.8 $ 39.4 -19.4%
Free cash flow (b) $ 22.5 $ 29.4 -23.4%
(a) For operating margins, the change from the prior year period is
presented in basis points.
(b) Income before impairment losses is defined by Viad as net income
before after-tax impairment charges related to goodwill and
intangible assets. Adjusted EBITDA is defined by Viad as net
income before interest expense, income taxes, depreciation and
amortization, goodwill and intangible asset impairments, changes
in accounting principles and the effects of discontinued
operations. Free cash flow is defined by Viad as net cash provided
by operating activities minus capital expenditures and dividends.
Income before impairment losses, adjusted EBITDA and free cash
flow are supplemental to results presented under accounting
principles generally accepted in the United States of America
(GAAP) and may not be comparable to similarly titled measures
presented by other companies.
These non-GAAP measures are used by management to facilitate
period-to-period comparisons and analysis of Viad's operating
performance and liquidity. Free cash flow is also used by
management to assess the company's ability to service debt, fund
capital expenditures and finance growth. Management believes these
non-GAAP measures are useful to investors in benchmarking and
trending the performance and value of Viad's business. These
non-GAAP measures should be considered in addition to, but not as
a substitute for, other similar measures reported in accordance
with GAAP. See Table Two for a reconciliation of net income to
income before impairment losses, net income to Adjusted EBITDA and
of net cash provided by operating activities to free cash flow.
In addition to the impairment charges, the following items were
included in Viad's 2004 third quarter and year-to-date results:
-- A $2.4 million tax benefit related to favorable tax
settlements.
-- A restructuring charge of $530,000 (after-tax) related to the
consolidation of leased office space. Year-to-date Viad has
recorded net restructuring charges of $1.1 million
(after-tax).
At the end of the third quarter 2004:
-- Debt totaled $22.7 million, relatively unchanged from the
second quarter. The debt-to-capital ratio was 6.1 percent, up
from the second quarter due to the impairment charges recorded
in the third quarter.
-- Cash and cash equivalents were $119.3 million, up $8.8 million
from the second quarter after payment of accrued spin-off
related costs.
GES Exposition Services (GES)
GES' revenue for the third quarter 2004 increased $44.4 million or
46.1 percent to $140.7 million, up from $96.3 million in the third
quarter 2003. Segment operating income increased to $11.6 million from
$1.2 million in 2003, and operating margins for the quarter were 8.2
percent compared with 1.3 percent in the third quarter of 2003. The
improvement from the prior year was due to positive show rotation and
the reduction of certain performance-based incentive accruals.
Bohannon said, "GES performed very well on the top line, as
several large shows rotated into the quarter. However, certain
challenges on the cost side, as well as the continued difficulties in
obtaining price increases, put pressure on margins. These challenges
included increased costs associated with new revenue initiatives that
are still in the ramp-up phase, increased fuel costs, hurricane
activity in the Southeast, the union strike in Las Vegas, and margin
pressures on certain exhibitor services. Although the strike cost us
about $1.3 million pre-tax, mainly related to security, we believe
that it was settled favorably and on terms that will help us keep
future price increases at a moderate level for the already
cost-conscious exhibitors."
Exhibitgroup/Giltspur (Exhibitgroup)
Exhibitgroup's revenue was $38.1 million during the third quarter
2004, an increase of 5.8 percent from $36.0 million in the third
quarter 2003. The improvement in revenue was due to the occurrence of
an air show in England that did not take place in the 2003 third
quarter. This was mostly offset by a significant decline in revenue
from new exhibit construction, which resulted in a less profitable mix
of business and a decrease in operating results. Exhibitgroup's
segment operating loss for the quarter was $4.9 million versus a loss
of $3.5 million in the 2003 third quarter.
Bohannon said, "We are disappointed with Exhibitgroup's results
for the quarter. New exhibit construction revenue declined even
further than anticipated, resulting in a decline in operating income.
In addition, we continue to see a lot of pricing irrationality in the
marketplace. Because of this, we have substantially reduced our
expectations for the fourth quarter. We do, however, believe in the
potential of this company, particularly once corporate spending on new
exhibit construction picks up. We are also encouraged by
Exhibitgroup's strong and improving win rate on new client signings,
although at this point, we don't know when spending on new exhibits
will materialize."
Travel and Recreation Services
Travel and Recreation Services' revenue for the 2004 third quarter
was $39.7 million, up 21.4 percent compared to $32.7 million in the
third quarter 2003. Operating income was up 52.2 percent to $16.9
million compared to $11.1 million in 2003, and operating margins
improved 860 basis points to 42.6 percent from 34.0 percent in the
2003 third quarter.
Bohannon said, "Our Travel and Recreation Services segment
delivered great results this quarter. Not only did Brewster and
Glacier benefit from improving travel trends, but they also drove
margin expansion through good cost control. After a very challenging
2003, this segment is clearly back on track."
2004 Outlook
Guidance provided by Viad is subject to change as a variety of
factors can affect actual operating results. Those factors are
identified in the safe harbor language at the end of the press
release.
The following guidance for the remainder of 2004 reflects a
reduced outlook for both Exhibitgroup and GES. Traditionally a strong
quarter for Exhibitgroup, Viad expects fourth quarter new exhibit
construction revenue to decline at a rate consistent with that
experienced in the third quarter. This will put pressure on
Exhibitgroup's revenue and margins. The company also expects that
margins at GES will be negatively impacted by margin pressures on
certain exhibitor services, high fuel costs, and increased costs
associated with revenue growth initiatives that are still in the
ramp-up phase.
Fourth Quarter 2004
For the fourth quarter, Viad's net loss per share is expected to
be in the range of $0.25 to $0.31. Segment revenue is expected to
decrease by a mid to high-single digit rate from the prior year amount
of $143.9 million. Segment operating results are expected to decrease
by $8 to $11 million from approximately breakeven in 2003. Implicit
within this guidance are the following segment revenue and operating
income expectations.
Segment Segment
Revenue Operating Income
------------------- ----------------------
low-end high-end low-end high-end
($ in millions)
GES $90 to $92 $(5.4) to $(3.9)
Exhibitgroup $36 to $39 $(3.6) to $(2.1)
Travel & Recreation $5 $5 $(1.8) $(1.8)
------ ---------- --------- ---------
$131 to $136 $(10.8) to $(7.8)
====== ========== ========= =========
Full Year 2004
For the full year, Viad's net loss is expected to be in the range
of $2.61 to $2.67 per share. Income before impairment losses is
expected to be in the range of $1.04 to $1.10 per share. Segment
revenue is expected to be flat to slightly down from the prior year
amount of $770.5 million. Segment operating income is expected to
decrease at a low to mid-single digit rate from $51.2 million in 2003.
Implicit within this guidance, are the following segment revenue and
operating income expectations.
Segment Segment
Revenue Operating Income
-------------------- ---------------------
low-end high-end low-end high-end
($ in millions)
GES $532 to $534 $40.8 to $42.3
Exhibitgroup $167 to $170 $(11.5) to $(10.0)
Travel & Recreation $66 $66 $18.5 $18.5
-------- ------ ------- ---------
$765 to $770 $47.8 to $50.8
======== ====== ======= =========
Bohannon said, "We are still seeing signs of improvement in the
tradeshow industry, such as same-show-growth, increased exhibitor
presence and increased attendance. However, the market is still very
challenging. Exhibiting companies continue to be very cost-conscious
as they attempt to maximize the return on their restricted marketing
dollars and we do not know when our clients will increase their
marketing budgets. In the meantime, GES and Exhibitgroup will stay
focused on cost control and on providing quality, value-added products
and services to exhibitors at a fair price. As of the end of the third
quarter, the Travel and Recreation segment's year is substantially
complete and year-to-date results have exceeded our expectations. Both
Brewster and Glacier posted their strongest results since 2000. We are
very pleased by the rebound in this segment."
Bohannon concluded, "I am also happy to report that we have
identified good opportunities to reduce corporate costs going forward
and we continue to look for more. We remain steadfast in our
commitment to drive shareholder value."
Conference Call and Webcast
Viad Corp will hold a conference call with investors and analysts
for a review of third quarter 2004 results on Friday, October 29, 2004
at 9 a.m. (EDT). To join the live conference call, dial 800-967-7134
or access the webcast through Viad's Web site at www.viad.com. A
replay will be available for a limited time at 888-203-1112, passcode
823288, or visit the Viad Web site and link to a replay of the
webcast.
Viad is an S&P SmallCap 600 company. Major subsidiaries include
GES Exposition Services of Las Vegas, Exhibitgroup/Giltspur of
Chicago, Brewster Transport Company Limited of Banff, Alberta, Canada,
and Glacier Park, Inc. of Phoenix. 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, 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, and the realization of restructuring cost savings. 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 natural disasters,
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 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 AND YEAR-TO-DATE RESULTS
(UNAUDITED)
Three months ended Nine months ended
September 30, September 30,
--------------------------- ------------------------
(000 omitted,
except per
share data) 2004 2003 % 2004 2003 %
-------- -------- ------- -------- -------- -----
Revenues (Note
A) $218,581 $165,068 32.4% $633,514 $626,596 1.1%
======== ======== ======= ======== ======== =====
Segment operating
income (Note A) $ 23,529 $ 8,820 166.8% $ 58,613 $ 51,018 14.9%
Corporate
activities and
minority
interests (4,085) (5,596) 27.0% (10,442) (12,626) 17.3%
Restructuring
(charges)
recoveries, net
(Note B) (850) 200 NM (1,703) 1,476 NM
Impairment
losses (Note C) (87,408) - NM (87,408) - NM
Net interest
expense (394) (295) -33.6% (1,000) (2,629) 62.0%
-------- -------- ------- -------- -------- -----
Income (loss)
before income
taxes (69,208) 3,129 NM (41,940) 37,239 NM
Income tax
(expense) benefit 933 (1,182) -178.9% (9,594) (16,299) 41.1%
-------- -------- ------- -------- -------- -----
Net income
(loss) $(68,275) $ 1,947 NM $(51,534) $ 20,940 NM
======== ======== ======= ======== ======== =====
Diluted income
(loss) per
common share $ (3.14) $ 0.09 NM $ (2.37) $ 0.97 NM
======== ======== ======= ======== ======== =====
Basic income
(loss) per
common share $ (3.14) $ 0.09 NM $ (2.37) $ 0.97 NM
======== ======== ======= ======== ======== =====
Common shares treated as
outstanding for net
income per share
calculations:
Average
outstanding
shares 21,767 21,568 0.9% 21,726 21,542 0.9%
======== ======== ======= ======== ======== =====
Average
outstanding
and
potentially
dilutive
shares 21,767 21,680 0.4% 21,726 21,631 0.4%
======== ======== ======= ======== ======== =====
NM = not meaningful
VIAD CORP AND SUBSIDIARIES
TABLE ONE - NOTES TO QUARTERLY AND YEAR-TO-DATE RESULTS
(UNAUDITED)
(A) Reportable Segments
Three months ended Nine months ended
September 30, September 30,
-------------------------- --------------------------
(000 omitted) 2004 2003 % 2004 2003 %
-------- -------- ------ -------- -------- -------
Revenues:
GES Exposition
Services $140,745 $ 96,332 46.1% $441,700 $411,586 7.3%
Exhibitgroup/
Giltspur 38,129 36,033 5.8% 130,834 166,732 -21.5%
Travel and
Recreation
Services 39,707 32,703 21.4% 60,980 48,278 26.3%
-------- -------- ------ -------- -------- -------
Total
revenues $218,581 $165,068 32.4% $633,514 $626,596 1.1%
======== ======== ====== ======== ======== =======
Segment operating income:
GES Exposition
Services $ 11,554 $ 1,215 NM $ 46,225 $ 42,356 9.1%
Exhibitgroup/
Giltspur (4,947) (3,515) -40.7% (7,880) (3,340) -135.9%
Travel and
Recreation
Services 16,922 11,120 52.2% 20,268 12,002 68.9%
-------- -------- ------ -------- -------- -------
$ 23,529 $ 8,820 166.8% $ 58,613 $ 51,018 14.9%
======== ======== ====== ======== ======== =======
NM = not meaningful
(B) Restructuring Charges and Recoveries -- Viad recorded a
restructuring charge of $853,000 ($530,000 after-tax) in the
second quarter of 2004 primarily related to planned employee
reductions. Additionally, in the third quarter of 2004, Viad
recorded a restructuring charge of $850,000 ($530,000 after-tax)
related to the consolidation of leased office space. In the third
quarter of 2001, Viad recorded restructuring charges totaling
$66.1 million ($39.9 million after-tax) consisting of costs
associated with the closure and consolidation of certain
facilities, severance and other employee benefits in the GES and
Exhibitgroup segments. In the second and third quarters of 2003,
$1.3 million ($770,000 after-tax) and $200,000 ($120,000
after-tax), respectively, of the reserves were reversed as certain
costs originally anticipated in the restructuring plan will not be
incurred.
(C) Impairment Losses -- In the third quarter of 2004, Exhibitgroup's
operating results were affected by a significant reduction in
revenue from new exhibit construction that caused management to
reduce its outlook for the full year. Customer orders for new
exhibit construction declined even further than management
anticipated, resulting in a less profitable mix of business.
Visibility in this segment remains poor and management is not able
to determine when the mix of business will improve. As a result of
this potential impairment indicator, Viad completed an interim
impairment test of the goodwill and intangible trademark asset at
Exhibitgroup. Based on this testing, Viad recorded impairment
charges of $80.4 million ($76.6 million after-tax) and $7.0
million ($4.2 million after-tax) related to goodwill and the
intangible trademark asset, respectively.
VIAD CORP AND SUBSIDIARIES
TABLE TWO - INCOME BEFORE IMPAIRMENT LOSSES, ADJUSTED EBITDA
AND FREE CASH FLOW
(UNAUDITED)
Three months ended Nine months ended
September 30, September 30,
-------------------------- -------------------------
(000 omitted) 2004 2003 % 2004 2003 %
-------- ------- ------- -------- -------- ------
Income before impairment losses:
Net income
(loss) $(68,275) $ 1,947 NM $(51,534) $ 20,940 NM
Impairment
losses, net
of tax 80,831 - NM 80,831 - NM
-------- ------- ------- -------- -------- ------
Income before
impairment
losses $ 12,556 $ 1,947 NM $ 29,297 $ 20,940 39.9%
======== ======= ======= ======== ======== ======
Three months ended Nine months ended
September 30, September 30,
-----------------------------------------------------
($ per diluted
share) 2004 2003 % 2004 2003 %
-------- ------- ------- -------- -------- ------
Income before impairment losses:
Net income
(loss) $ (3.14) $ 0.09 NM $ (2.37) $ 0.97 NM
Impairment
losses, net
of tax 3.71 - NM 3.72 - NM
-------- ------- ------- -------- -------- ------
Income before
impairment
losses $ 0.57 $ 0.09 NM $ 1.35 0.97 39.2%
======== ======= ======= ======== ======== ======
Three months ended Nine months ended
September 30, September 30,
-------------------------- -------------------------
(000 omitted) 2004 2003 % 2004 2003 %
-------- ------- ------- -------- -------- ------
Adjusted EBITDA:
Net income
(loss) $(68,275) $ 1,947 NM $(51,534) $ 20,940 NM
Impairment
losses 87,408 - NM 87,408 - NM
Interest expense 776 336 -131.0% 1,734 2,901 40.2%
Income tax expense
(benefit) (933) 1,182 -178.9% 9,594 16,299 41.1%
Depreciation
and amortization 5,398 6,366 15.2% 16,195 17,604 8.0%
-------- ------- ------- -------- -------- ------
Adjusted
EBITDA $ 24,374 $ 9,831 147.9% $ 63,397 $ 57,744 9.8%
======== ======= ======= ======== ======== ======
Three months ended Nine months ended
September 30, September 30,
-------------------------- -------------------------
(000 omitted) 2004 2003 % 2004 2003 %
-------- ------- ------- -------- -------- ------
Free Cash Flow:
Net cash
provided by
operating
activities $ 10,999 $19,240 -42.8% $ 31,775 $ 39,428 -19.4%
Less:
Capital
expenditures (3,292) (3,397) 3.1% (9,266) (10,037) 7.7%
-------- ------- ------- -------- -------- ------
Free cash
flow $ 7,707 $15,843 -51.4% $ 22,509 $ 29,391 -23.4%
======== ======= ======= ======== ======== ======
NM = not meaningful
CONTACT: Viad Corp
Carrie Long, 602-207-2681 (Investor Relations)
clong@viad.com