-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, BCLPlnxzyIDkjOhHyiU1pELYDwkxo9y1zRTWPdaUOabk06ocJjvnK4QqxPgwhhcN MNk02AthQ5uTFn7brrUw8Q== 0001047469-99-019610.txt : 19990513 0001047469-99-019610.hdr.sgml : 19990513 ACCESSION NUMBER: 0001047469-99-019610 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 19990331 FILED AS OF DATE: 19990512 FILER: COMPANY DATA: COMPANY CONFORMED NAME: VIAD CORP CENTRAL INDEX KEY: 0000884219 STANDARD INDUSTRIAL CLASSIFICATION: RETAIL-EATING PLACES [5812] IRS NUMBER: 361169950 STATE OF INCORPORATION: DE FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-Q SEC ACT: SEC FILE NUMBER: 001-11015 FILM NUMBER: 99617961 BUSINESS ADDRESS: STREET 1: 1850 N CENTRAL AVE STREET 2: SUITE 2212 CITY: PHOENIX STATE: AZ ZIP: 85077 BUSINESS PHONE: 6022074000 MAIL ADDRESS: STREET 1: 1850 NORTH CENTRAL AVE STREET 2: SUITE 2212 CITY: PHOENIX STATE: AZ ZIP: 85077 FORMER COMPANY: FORMER CONFORMED NAME: DIAL CORP /DE/ DATE OF NAME CHANGE: 19930823 10-Q 1 10-Q UNITED STATES SECURITIES AND EXCHANGE COMMISSION WASHINGTON, DC 20549 FORM 10-Q QUARTERLY REPORT PURSUANT TO SECTION 13 OF THE SECURITIES EXCHANGE ACT OF 1934 For the Quarterly Period Ended March 31, 1999 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 April 30, 1999, 99,564,956 shares of Common Stock ($1.50 par value) were outstanding. Page 1 PART I. FINANCIAL INFORMATION ITEM 1. FINANCIAL STATEMENTS VIAD CORP CONSOLIDATED BALANCE SHEET
March 31, 1999 December 31, (000 omitted except number of shares) (Unaudited) 1998 ----------- ----------- ASSETS Current assets: Cash and cash equivalents $ 31,183 $ 5,197 Receivables 135,193 128,939 Inventories 74,841 73,059 Deferred income taxes 37,398 38,063 Other current assets 49,750 36,867 ----------- ----------- 328,365 282,125 Funds, agents' receivables and current maturities of investments restricted for payment service obligations, after eliminating $90,000 invested in Viad commercial paper 284,339 561,266 ----------- ----------- Total current assets 612,704 843,391 Investments restricted for payment service obligations 2,523,828 2,415,588 Property and equipment 444,987 467,577 Other investments and assets 133,560 137,599 Deferred income taxes 85,454 70,860 Intangibles 877,321 867,757 ----------- ----------- $ 4,677,854 $ 4,802,772 ----------- ----------- ----------- ----------- LIABILITIES AND STOCKHOLDERS' EQUITY Current liabilities: Accounts payable $ 145,051 $ 136,805 Accrued compensation 63,406 92,460 Other current liabilities 190,278 164,148 Current portion of long-term debt 32,876 3,105 ----------- ----------- 431,611 396,518 Payment service obligations 2,830,250 2,999,930 ----------- ----------- Total current liabilities 3,261,861 3,396,448 Long-term debt 509,478 531,348 Pension and other benefits 81,530 80,752 Other deferred items and insurance liabilities 161,941 138,622 Minority interests 3,134 3,096 $4.75 Redeemable preferred stock 6,629 6,625 Common stock and other equity: Common stock, $1.50 par value, 200,000,000 shares authorized, 99,739,925 shares issued 149,610 149,610 Additional capital 310,169 327,866 Retained income 340,870 328,305 Unearned employee benefits and other (133,746) (162,543) Accumulated other comprehensive income: Unrealized gain on securities classified as available for sale 12,677 18,231 Cumulative translation adjustments (6,828) (7,009) Common stock in treasury, at cost, 746,911 and 344,858 shares (19,471) (8,579) ----------- ----------- Total common stock and other equity 653,281 645,881 ----------- ----------- $ 4,677,854 $ 4,802,772 ----------- ----------- ----------- -----------
See Notes to Consolidated Financial Statements. Page 2 VIAD CORP CONSOLIDATED STATEMENT OF INCOME (Unaudited)
Three months ended March 31, (000 omitted, except per share data) 1999 1998 ---------- --------- REVENUES $ 592,449 $ 602,780 ---------- --------- Costs and expenses: Costs of sales and services 549,164 562,944 Corporate activities, net 4,503 6,205 Interest expense 9,634 11,174 Minority interests 501 276 ---------- --------- 563,802 580,599 ---------- --------- Income before income taxes 28,647 22,181 Income taxes 8,262 6,802 ---------- --------- NET INCOME $ 20,385 $ 15,379 ---------- --------- ---------- --------- DILUTED NET INCOME PER COMMON SHARE $ 0.20 $ 0.15 ---------- --------- ---------- --------- BASIC NET INCOME PER COMMON SHARE $ 0.21 $ 0.16 ---------- --------- ---------- --------- Average outstanding common shares 94,640 93,979 Additional dilutive shares related to stock-based compensation 3,812 3,872 ---------- --------- Average outstanding and potentially dilutive common shares 98,452 97,851 ---------- --------- ---------- --------- Dividends declared per common share $ 0.08 $ 0.08 ---------- --------- ---------- --------- Preferred stock dividends $ 283 $ 282 ---------- --------- ---------- ---------
See Notes to Consolidated Financial Statements. Page 3 VIAD CORP CONSOLIDATED STATEMENT OF RETAINED INCOME (Unaudited)
Three months ended March 31, (000 omitted) 1999 1998 --------- --------- Balance, beginning of year $ 328,305 $ 209,127 Net income 20,385 15,379 Dividends on common and preferred stock (7,887) (7,843) Other 67 80 --------- --------- Balance, end of period $ 340,870 $ 216,743 --------- --------- --------- ---------
See Notes to Consolidated Financial Statements. VIAD CORP CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME (Unaudited)
Three months ended March 31, (000 omitted) 1999 1998 -------- -------- Net income $ 20,385 $ 15,379 -------- -------- Other comprehensive income (loss), net of tax: Unrealized gain (loss) on securities classified as available for sale: Holding losses arising during the period (4,147) (295) Reclassification adjustment for net realized gains included in net income (1,407) (1,266) -------- -------- (5,554) (1,561) -------- -------- Unrealized foreign currency translation adjustments: Holding gains arising during the period 181 605 -------- -------- Other comprehensive loss (5,373) (956) -------- -------- Comprehensive income $ 15,012 $ 14,423 -------- -------- -------- --------
See Notes to Consolidated Financial Statements. Page 4 VIAD CORP CONSOLIDATED STATEMENT OF CASH FLOWS (Unaudited)
Three months ended March 31, (000 omitted) 1999 1998 --------- --------- CASH FLOWS PROVIDED (USED) BY OPERATING ACTIVITIES: Net income $ 20,385 $ 15,379 Adjustments to reconcile net income to net cash provided by operating activities: Depreciation and amortization 21,917 20,309 Deferred income taxes (6,245) 2,679 Other noncash items, net 1,265 (65) Change in operating assets and liabilities: Receivables and inventories (5,519) (9,387) Payment service assets and obligations, net 104,653 142,698 Accounts payable and accrued compensation (24,702) (23,744) Other assets and liabilities, net 1,164 281 --------- --------- Net cash provided by operating activities 112,918 148,150 --------- --------- CASH FLOWS PROVIDED (USED) BY INVESTING ACTIVITIES: Capital expenditures (10,611) (16,114) Acquisitions of businesses, net of cash acquired (10,311) Proceeds from sales of businesses, property and other assets, net 52,859 3,008 Investments restricted for payment service obligations: Proceeds from sales and maturities of securities classified as available for sale 276,623 185,191 Proceeds from maturities of securities classified as held to maturity 54,227 29,774 Purchases of securities classified as available for sale (440,339) (280,992) Purchases of securities classified as held to maturity (6,081) (70,991) --------- --------- Net cash used by investing activities (83,633) (150,124) --------- --------- CASH FLOWS PROVIDED (USED) BY FINANCING ACTIVITIES: Payments on long-term borrowings (141) (68) Net change in short-term borrowings 8,000 24,000 Dividends on common and preferred stock (7,887) (7,843) Proceeds from issuances of treasury stock 6,222 5,163 Common stock purchased for treasury (9,493) Cash payments on interest rate swap agreements related to debt (2,129) --------- --------- Net cash (used) provided by financing activities (3,299) 19,123 --------- --------- Net increase in cash and cash equivalents 25,986 17,149 Cash and cash equivalents, beginning of year 5,197 12,341 --------- --------- CASH AND CASH EQUIVALENTS, END OF PERIOD $ 31,183 $ 29,490 --------- --------- --------- ---------
See Notes to Consolidated Financial Statements. Page 5 VIAD CORP NOTES TO CONSOLIDATED FINANCIAL STATEMENTS NOTE A -- BASIS OF PREPARATION The Consolidated Financial Statements of Viad Corp ("Viad") include the accounts of Viad and all of its subsidiaries. This information should be read in conjunction with the financial statements set forth in the Viad Corp Annual Report to Stockholders for the year ended December 31, 1998. 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 March 31, 1999, and its results of operations and its cash flows for the three months ended March 31, 1999 and 1998 have been included. Interim results of operations are not necessarily indicative of the results of operations for the full year. Certain prior year amounts have been reclassified to conform with the 1999 presentation. NOTE B -- FUNDS, AGENTS' RECEIVABLES AND INVESTMENTS RESTRICTED FOR PAYMENT SERVICE OBLIGATIONS A Viad payment services subsidiary generates funds from the sale of money orders and other payment instruments, with the related liability classified as "Payment service obligations." The proceeds of such sales, along with certain additional subsidiary funds, are invested in permissible securities, principally debt instruments. Such investments, along with related cash and funds in transit, are restricted by state regulatory agencies for use by the subsidiary to satisfy the liability to pay, upon presentment, the face amount of such payment service obligations. Accordingly, such restricted assets are not available to satisfy working capital or other financing requirements of Viad. The following is a summary of asset and liability carrying amounts related to the payment service obligations, including additional subsidiary funds:
March 31, December 31, (000 omitted) 1999 1998 ----------- ----------- Funds, agents' receivables and current maturities of investments restricted for payment service obligations, including $90,000 invested in Viad commercial paper (1) $ 374,339 $ 651,266 Investments restricted for payment service obligations (2) 2,523,828 2,415,588 ----------- ----------- 2,898,167 3,066,854 Payment service obligations 2,830,250 2,999,930 ----------- ----------- Asset carrying amounts in excess of 1:1 funding coverage of payment service obligations (2) $ 67,917 $ 66,924 ----------- ----------- ----------- -----------
(1) See Note D of Notes to Consolidated Financial Statements for description of Viad's revolving bank credit agreement, which supports its commercial paper obligations. (2) See Note C of Notes to Consolidated Financial Statements for a summary of investments and their classification and carrying amounts in accordance with SFAS No. 115, "Accounting for Certain Investments in Debt and Equity Securities." As detailed therein, securities classified as "available for sale" are carried at market value and securities classified as "held to maturity" are carried at amortized Page 6 cost. The market value of securities classified as "held to maturity" exceeded carrying amounts by $14,978,000 and $16,963,000 at March 31, 1999 and December 31, 1998, respectively. NOTE C -- INVESTMENTS RESTRICTED FOR PAYMENT SERVICE OBLIGATIONS Investments restricted for payment service obligations include the following debt and equity securities:
March 31, December 31, (000 omitted) 1999 1998 ----------- ----------- Securities classified as available for sale, at fair value (amortized cost of $2,011,025 and $1,846,144) $ 2,031,806 $ 1,876,031 Securities classified as held to maturity, at amortized cost (fair value of $516,572 and $566,664) 501,594 549,701 ----------- ----------- 2,533,400 2,425,732 Less current maturities (9,572) (10,144) ----------- ----------- $ 2,523,828 $ 2,415,588 ----------- ----------- ----------- -----------
NOTE D -- DEBT At March 31, 1999 and December 31, 1998, Viad classified as long-term debt $208,000,000 and $200,000,000, respectively, of short-term borrowings which, along with the $90,000,000 commercial paper issued to Viad's payment services subsidiary, are supported by unused commitments under a $300,000,000 long-term revolving bank credit agreement. NOTE E -- INCOME TAXES A reconciliation of the provision for income taxes and the amount that would be computed using statutory federal income tax rates on income before income taxes for the three months ended March 31, is as follows:
(000 omitted) 1999 1998 -------- ------- Computed income taxes at statutory federal income tax rate of 35% $ 10,026 $ 7,763 Nondeductible goodwill amortization 1,305 1,051 Minority interests 175 97 State income taxes 887 673 Tax-exempt income (6,204) (4,506) Adjustment to estimated annual effective tax rate 2,500 2,000 Other, net (427) (276) -------- ------- Provision for income taxes $ 8,262 $ 6,802 -------- ------- -------- -------
Page 7 NOTE F -- SUPPLEMENTARY INFORMATION--REVENUES AND OPERATING INCOME Viad measures segment profit and performance based on operating segment income after minority interests and income taxes. Operating income is presented as additional information. An adjustment is made to the Payment Services segment to present revenues, operating income and income taxes on a fully taxable equivalent basis for income resulting from investments in tax-exempt securities. Intersegment sales and transfers are not significant. Interest expense is allocated to operations based on net funds advanced calculated based on current short-term interest rates. Corporate and other includes expenses of corporate activities and interest expense not allocated to operating segments, net of applicable income taxes. Total assets did not materially change from the amount disclosed in the 1998 Annual Report to Stockholders. Disclosures regarding Viad's reportable segments under SFAS No. 131 along with reconciliations to consolidated totals are presented below.
Net Operating Interest Income Tax (000 omitted) Revenues Income (1) Income Expense (Benefit) --------- -------- -------- -------- -------- Quarter Ended March 31, 1999: Payment Services $ 131,135 $ 13,977 $ 24,130 $ -- $ 9,679 Convention and Event Services 235,120 11,347 24,038 5,129 7,497 Airline Catering 217,389 5,129 11,230 1,484 4,617 --------- -------- -------- -------- -------- REPORTABLE SEGMENTS 583,644 30,453 59,398 6,613 21,793 Other: Travel and recreation services 9,210 (1,036) (1,572) 400 (898) Sold businesses (2) 10,928 (1,953) (3,208) (201) (1,054) Corporate and other (7,079) (4,503) 2,822 (246) --------- -------- -------- -------- -------- Subtotal 603,782 20,385 50,115 9,634 19,595 Less taxable equivalent adjustment (11,333) (11,333) (11,333) --------- -------- -------- -------- -------- $ 592,449 $ 20,385 $ 38,782 $ 9,634 $ 8,262 --------- -------- -------- -------- -------- --------- -------- -------- -------- -------- Quarter Ended March 31, 1998: Payment Services $ 76,509 $ 9,402 $ 15,727 $ -- $ 6,325 Convention and Event Services 209,587 9,858 20,000 3,400 6,742 Airline Catering 204,534 4,663 10,617 1,949 4,005 --------- -------- -------- -------- -------- REPORTABLE SEGMENTS 490,630 23,923 46,344 5,349 17,072 Other: Travel and recreation services 8,065 (1,196) (1,792) 547 (1,067) Sold businesses (2) 112,316 1,895 3,515 100 1,168 Corporate and other (9,243) (6,205) 5,178 (2,140) --------- -------- -------- -------- -------- Subtotal 611,011 15,379 41,862 11,174 15,033 Less taxable equivalent adjustment (8,231) (8,231) (8,231) --------- -------- -------- -------- -------- $ 602,780 $ 15,379 $ 33,631 $ 11,174 $ 6,802 --------- -------- -------- -------- -------- --------- -------- -------- -------- --------
(1) Net income is after deducting minority interests as follows: Payment Services, $474,000 (1999); Convention and Event Services, $65,000 (1999); Travel and recreation services, $(38,000) (1999) and $(76,000) (1998); and Sold businesses, $352,000 (1998). (2) The sold businesses category includes operating results up to the respective dates of sale for ASIG (sold effective as of April 1, 1998), GLSI (sold on September 15, 1998) and the contract foodservice operations (sold on January 27, 1999) and public service division units (sold in March 1999) of Restaura, Inc. The sale of the Restaura units was recorded in the first quarter of 1999 and, after providing for costs of sale and related expense provisions, the net gain was not material. Page 8 ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS RESULTS: Viad Corp ("Viad") focuses on three principal service businesses: Payment Services, Convention and Event Services and Airline Catering. On January 27, 1999, Viad completed the sale of the contract foodservice operations of Restaura, Inc. The public service division units of Restaura, Inc. were sold in March 1999. After providing for costs of sale and related expense provisions, the net gain was not material. Restaura's operations, along with the results of the sold Aircraft Services International Group ("ASIG") and Greyhound Leisure Services, Inc. ("GLSI"), are included in Viad's "Sold businesses" segment until the respective dates of sale. There were no other material changes in the nature of Viad's business, nor were there any other changes in the general characteristics of its operations as described and discussed in the "Results of Operations" section of Management's Discussion and Analysis of Results of Operations and Financial Condition presented in the Viad Corp Annual Report to Stockholders for the year ended December 31, 1998. All per share figures discussed are stated on the diluted basis. COMPARISON OF FIRST QUARTER OF 1999 TO THE FIRST QUARTER OF 1998: In the first quarter of 1999, revenues decreased $10.3 million, or 1.7 percent, to $592.4 million from $602.8 million in 1998 as a result of sales of noncore businesses during 1998 and the first quarter of 1999, partially offset by revenues of MoneyGram Payment Systems, Inc. ("MoneyGram," acquired as of June 1, 1998). Revenues of ongoing businesses rose 18.6 percent for the quarter. Net income for the first quarter of 1999 was $20.4 million, or $0.20 per share, an increase of 33.3 percent on a per share basis from the 1998 first quarter net income of $15.4 million, or $0.15 per share. PAYMENT SERVICES. Revenues of the Payment Services segment were $119.8 million for the first quarter of 1999, up $51.5 million, or 75.5 percent, from 1998 first quarter revenues, while net income increased $4.6 million, or 48.7 percent. A payment services subsidiary invests substantial amounts of its growing money order and official check funds in tax-exempt securities, which have lower pre-tax yields but produce higher income on an after-tax basis than comparable taxable investments. On the fully taxable equivalent basis, first quarter revenues would have been higher by $11.3 million and $8.2 million in 1999 and 1998, respectively, resulting in a 71.4 percent segment revenue increase. Results were driven by continuing strong growth in traditional Travelers Express operations, particularly rapid growth in official check volume, and by the inclusion of MoneyGram in the 1999 period. Excluding the results of MoneyGram, revenues on the fully taxable equivalent basis increased over 20 percent. Operating margins on the fully taxable equivalent basis were 18.4 percent in the first quarter of 1999, down slightly from 20.6 percent in the 1998 first quarter as a result of changing product mix (both Game Financial, acquired in December 1997, and MoneyGram have lower operating margins than Travelers Express' traditional business). Page 9 CONVENTION AND EVENT SERVICES. Convention and Event Services first quarter 1999 revenues increased $25.5 million, or 12.2 percent, to $235.1 million from $209.6 million in the 1998 first quarter. Net income for the segment increased 15.1 percent to $11.3 million in the 1999 first quarter, and operating margins increased from 9.5 percent in the 1998 first quarter to 10.2 percent in the 1999 quarter. Both GES Exposition Services and Exhibitgroup/Giltspur reported solid gains, including contributions from acquisitions made during 1998 and early 1999. AIRLINE CATERING. The first quarter 1999 revenues of the Airline Catering segment were $217.4 million, an increase of 6.3 percent from the 1998 first quarter revenues of $204.5 million. Operating margins remained steady at 5.2 percent. The revenue increase resulted from new business added by Dobbs International Services during 1998, including the Las Vegas kitchen, and by strong airline traffic. Net income increased 10.0 percent to $5.1 million as a result of strong cash flow, which lowered interest expense in the 1999 period. TRAVEL AND RECREATION SERVICES. Revenues of the travel and recreation businesses increased 14.2 percent from those of the 1998 first quarter, primarily as a result of non-baseball events held at Bank One Ballpark and an increase in Canadian winter touring packages. The seasonal net loss for the first quarter declined slightly. The first and fourth quarters are historically the slowest for these businesses. SOLD BUSINESSES. The sold businesses include the results of Restaura, ASIG, and GLSI up to their respective dates of sale. Revenues of the sold businesses were $10.9 million in the first quarter of 1999 compared to $112.3 million in the 1998 quarter. The seasonal net loss related to Restaura was $2.0 million in the first quarter of 1999 compared to net income of $1.9 million for all of the sold businesses in the 1998 quarter. CORPORATE ACTIVITIES, NET. Corporate activities, net, decreased $1.7 million in the first quarter of 1999 compared to the first quarter of 1998. In addition to ongoing cost reduction efforts, Viad increased Corporate expense allocations charged to its operating subsidiaries in 1999. INTEREST EXPENSE. Interest expense decreased $1.5 million in the 1999 first quarter. Interest expense from new borrowings for the June 1998 acquisition of MoneyGram was more than offset by the effects of repayment of debt and termination of related interest rate swap agreements with proceeds from the sales of noncore assets and businesses in 1998 and early 1999. INCOME TAXES. The effective tax rate in the 1999 first quarter was 28.8 percent compared to 30.7 percent for the first quarter of 1998. The relatively low tax rate is primarily attributable to increased tax-exempt investment income. LIQUIDITY AND CAPITAL RESOURCES: Viad's total debt at March 31, 1999 was $542.4 million compared with $534.5 million at December 31, 1998. The debt-to-capital ratio at March 31, 1999 was 0.45 to 1, unchanged from December 31, 1998. During the first quarter of 1999, approximately 352,000 shares were purchased for $9.5 million under Viad's stock repurchase program. During the quarter, Viad received $6.2 million of proceeds from the exercise of stock options. The purpose of the program is to replenish common shares issued upon exercise of stock options and in connection with other stock compensation plans, with the intended effect of reducing dilution caused by the issuance of such shares. Page 10 EBITDA (defined as net income before interest expense, income taxes and depreciation and amortization and including the fully taxable equivalent adjustment) is a measure of Viad's ability to service debt, fund capital expenditures and finance growth, and should be considered in addition to, but not as a substitute for, other measures of financial performance reported in accordance with generally accepted accounting principles. EBITDA was $71.5 million in the first quarter of 1999, an increase of 15.6 percent over that of the 1998 quarter. There were no other material changes in Viad's financial condition nor were there any substantive changes relative to matters discussed in the Liquidity and Capital Resources section of Management's Discussion and Analysis of Results of Operations and Financial Condition as presented in Viad Corp's Annual Report to Stockholders for the year ended December 31, 1998. READINESS FOR THE YEAR 2000: During the quarter, Viad continued the implementation of initiatives necessary to make its systems, products and infrastructure "Year 2000" compliant on a timely basis. Viad's overall plan to address the Year 2000 problem is described more fully in its 1998 Annual Report on Form 10-K. Although no assurances can be made, Viad believes that it has identified all material systems and applications that are subject to Year 2000 risk and has either achieved Year 2000 compliance or initiated the implementation of plans to achieve timely Year 2000 compliance for such systems. A significant portion of Viad's Year 2000 initiatives have been finished with the remainder in various stages of completion. Viad's entire Year 2000 project is expected to be completed by mid-1999. Incremental costs (primarily for software consultants and outside programming help) necessary to bring systems and applications into Year 2000 compliance are being expensed as incurred. Viad currently estimates that the incremental cost of its Year 2000 projects will total approximately $13.5 million, of which approximately 25 percent was expensed in the first quarter of 1999 and approximately 70 percent was expensed prior to 1999. A substantial portion of the aggregate Year 2000 cost estimate pertains to efforts at Viad's payment services operations, where remediation of key systems was completed by the end of the first quarter of 1999. The Year 2000 costs are exclusive of costs which would have been incurred as part of normal systems and application replacements and/or upgrades to meet current and future business needs. Viad continues to monitor and evaluate the additional efforts and costs associated with the Year 2000 initiative. Viad believes, based on information available to date, that it will be able to accomplish its total Year 2000 transition by mid-1999, without any material adverse effect on its business operations, products, financial position or results of operations. However, due to the complexity and pervasiveness of the Year 2000 issues and in particular the uncertainty regarding the compliance programs of third parties, no assurance can be given that successful transition will be achieved by the Year 2000 deadline or that Viad would not suffer any material adverse effect on its business, financial position or results of operations if such changes are not completed timely. FORWARD-LOOKING STATEMENTS: As provided by the "Safe Harbor Statement under the Private Securities Litigation Reform Act of 1995," Viad cautions readers that, in addition to the historical information contained herein, this Quarterly Report on Form 10-Q includes certain forward-looking statements, assumptions and discussions, including those relating to expectations of or current trends in growth in air traffic, consumer demand, new business, ongoing cost reduction efforts, Year 2000 compliance issues and market risk disclosures. Such statements involve risks and uncertainties which may cause results to differ materially from those set forth in those statements. Among other things, the rate of Page 11 expansion of flights to new locations, consumer demand patterns, purchasing decisions related to customer demand for convention and event services, existing and new competition, consolidation and growth patterns within the industries in which Viad competes, and the timely achievement of Year 2000 compliance by Viad and third parties with whom Viad conducts business, may individually or in combination impact future results. In addition to the factors mentioned elsewhere, economic, competitive, governmental, technological, capital marketplace and other factors could affect the forward-looking statements contained in this filing. ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK There have been no material changes in Viad's market risk during the quarter ended March 31, 1999. PART II. OTHER INFORMATION ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS (a) The annual meeting of stockholders of Viad Corp was held May 11, 1999. (b) Not applicable--(i) proxies for the meeting were solicited pursuant to Regulation 14 under the Securities Exchange Act of 1934; (ii) there was no solicitation in opposition to management's nominees as listed in the proxy statement; and (iii) all such nominees were elected. (c) Matters voted upon at the annual meeting for which proxies were solicited pursuant to Regulation 14 under the Securities Exchange Act of 1934: 1. The election of Directors as follows: Judith K. Hofer --------------- Affirmative Vote.............................................79,666,006 Withheld Authority..............................................602,592 Jack F. Reichert ---------------- Affirmative Vote.............................................79,656,707 Withheld Authority..............................................611,891 2. The appointment of Deloitte & Touche LLP to audit the accounts of Viad and its subsidiaries for the fiscal year 1999. Affirmative Vote.............................................80,051,986 Against.........................................................102,615 Abstentions.....................................................113,997 Page 12 ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K (a) Exhibit No. 27 - Financial Data Schedule (b) No reports on Form 8-K were filed by the registrant during the quarter for which this report is filed. SIGNATURES Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized. VIAD CORP (Registrant) By /s/ Jack A. Modzelewski ----------------------- Jack A. Modzelewski Chief Financial Officer (Principal Financial Officer and Authorized Officer) May 12, 1999 Page 13 EX-27 2 EXHIBIT 27
5 THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM VIAD CORP'S FORM 10-Q FOR THE QUARTER ENDED MARCH 31, 1999 AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS. 1,000 3-MOS DEC-31-1999 MAR-31-1999 31,183 0 139,443 4,250 74,841 612,704 806,328 361,341 4,677,854 3,261,861 509,478 6,629 0 149,610 503,671 4,677,854 0 592,449 0 549,164 4,503 0 9,634 28,647 8,262 20,385 0 0 0 20,385 .21 .20
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