UNITED STATES
SECURITIES AND EXCHANGE COMMISSION

FORM 10-Q

(Mark one)

Commission File Number: 001-11015

VIAD CORP

(602) 207-4000

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.

Indicate by check mark whether the registrant is an accelerated filer (as defined in Rule 12b-2 of the Exchange Act).

As of October 31, 2004, 22,137,392 shares of common stock ($1.50 par value) were outstanding.

Table of Contents

PART I–FINANCIAL INFORMATION

Item 1. Financial Statements

VIAD CORP

See Notes to Consolidated Financial Statements.

¹ Amounts derived from the audited combined financial statements of “New” Viad as of December 31, 2003.

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VIAD CORP

See Notes to Consolidated Financial Statements.

¹ Amounts derived from the audited combined financial statements of “New” Viad.

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VIAD CORP

See Notes to Consolidated Financial Statements.

¹ Amounts derived from the unaudited combined financial statements of “New” Viad.

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VIAD CORP

See Notes to Consolidated Financial Statements.

¹ Amounts derived from the unaudited combined financial statements of “New” Viad.

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VIAD CORP

Note 1 – Basis of Preparation and Principles of Consolidation

Spin-off of MoneyGram International

     On June 30, 2004, Viad Corp (“Viad” or the “Company”) separated its payment services business from its other businesses by means of a tax-free spin-off. To effect the separation, Travelers Express Company, Inc. became a subsidiary of MoneyGram International, Inc. (“MoneyGram”), a newly-formed, wholly-owned subsidiary of Viad, and Viad distributed all of the shares of MoneyGram common stock as a dividend on Viad common stock on the date of the spin-off. The continuing business of Viad consists of the businesses of convention show services, exhibit design and construction and travel and recreation services operations, as well as Viad’s centralized corporate functions located in Phoenix, Arizona.

     Due to the relative significance of MoneyGram as compared to the remaining businesses of Viad, the transaction was accounted for as a reverse spin-off in accordance with Emerging Issues Task Force (“EITF”) Issue No. 02-11, “Accounting for Reverse Spin-offs.” Accordingly, MoneyGram was considered the divesting entity for accounting purposes and is the accounting successor to Viad with respect to the historical consolidated financial statements of Viad prior to the spin-off. Conversely, the remaining combined businesses of Viad (excluding MoneyGram) represent the entity which was “spun-off” from MoneyGram International (accounting successor to Viad Corp).

     In connection with the completion of the spin-off, Viad Corp (accounting predecessor to MoneyGram International) repaid its commercial paper outstanding on June 30, 2004 of $188.0 million and provided notice of redemption to the holders of its $4.75 mandatorily redeemable preferred stock for which the Company irrevocably deposited $24.0 million in a trust clearing account for the benefit of the holders of the preferred shares. Also in June 2004, Viad Corp (accounting predecessor to MoneyGram International) repurchased medium-term notes of $31.9 million and subordinated debt of $17.2 million (excluding tender premiums) pursuant to the completion of tender offers which commenced in May 2004. In April 2004, Viad Corp (accounting predecessor to MoneyGram International) retired industrial revenue bonds for $9.0 million. Also in connection with the spin-off, Viad Corp’s (accounting predecessor to MoneyGram International) existing bank credit facilities were terminated on the date of the transaction and were replaced by Viad’s new credit facility providing availability of $150 million (see Note 8). In the third quarter of 2004, Viad recorded an adjustment related to the spin-off transaction which resulted in an increase of $2.7 million to “Other current liabilities” and a corresponding decrease to “Additional capital.”

     In addition, at the annual Viad stockholder meeting in May 2004, Viad’s stockholders approved a one-for-four reverse stock split of the Company’s common stock whereby, upon completion of the MoneyGram spin-off, every four shares of Viad common stock held on June 30, 2004, became one share of Viad common stock. The accompanying consolidated financial statements reflect the effects of the one-for-four reverse stock split for all periods presented.

Basis of Presentation

     The accompanying unaudited consolidated financial statements of Viad have been prepared in accordance with accounting principles generally accepted in the United States of America for interim financial information and with the instructions to Form 10-Q and Article 10 of Regulation S-X. Accordingly, they do not include all of the information and footnotes required for complete financial statements. In the opinion of management, all adjustments (consisting of normal recurring accruals) considered necessary for a fair presentation have been included. Operating results for the three and nine months ended September 30, 2004 are not necessarily indicative of the results that may be expected for the year ending December 31, 2004. Certain prior period amounts have been reclassified to conform to the current period presentation.

     As a result of the spin-off transaction, Viad redefined its reportable segments to reflect a disaggregated presentation of the former “Convention and Event Services” segment and the inclusion of the businesses comprising Travel and Recreation Services as a reportable segment. Although Viad’s two convention and event services businesses continue to meet the aggregation criteria pursuant to Statement of Financial Accounting Standards (“SFAS”) No. 131, “Disclosures about Segments of an Enterprise and Related Information,” a disaggregated presentation of these businesses is considered appropriate due to their relative size and importance to Viad as a result of the spin-off. The Travel and Recreation Services businesses are included as a reportable segment for Viad as they meet the quantitative thresholds of SFAS No. 131. Therefore, Viad’s reporting segments consist of: GES Exposition Services, Inc. (“GES”), Exhibitgroup/Giltspur (“Exhibitgroup”) and Travel and Recreation Services.

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     The consolidated financial statements include the accounts of Viad and all of its wholly-owned subsidiaries. All significant intercompany account balances and transactions between Viad and its subsidiaries have been eliminated in consolidation. In periods ended prior to the spin-off, the Company’s financial statements reflect the combined financial position, results of operations and cash flows of the GES, Exhibitgroup and Travel and Recreation Services businesses, and centralized corporate functions of Viad, all of which were under common ownership and common management, as if it were a separate entity for all periods presented. The combined financial information for periods prior to the spin-off may not necessarily reflect the financial position, results of operations and cash flows of “New” Viad in the future or, had it operated as a separate, independent company, during the periods presented.

Note 2 – Stock-Based Compensation

     In 1997, Viad’s stockholders adopted the Viad Corp Omnibus Incentive Plan (the “Omnibus Plan”). The Omnibus Plan provides for the following types of awards to officers, directors and certain key employees: (a) incentive and nonqualified stock options; (b) stock appreciation rights; (c) restricted stock; and (d) performance-based awards. The number of shares of Viad common stock available for grant under the Omnibus Plan in each calendar year is limited to two percent of the total number of shares of common stock outstanding as of the first day of each year, provided that any shares available for grant in a particular year which are not, in fact, granted in such year shall be added to the shares available for grant in any subsequent calendar year.

     Stock options granted in 2004 were for a term of seven years at an exercise price based on the market value at the date of grant and become exercisable in annual increments of twenty percent beginning one year after grant date and become fully exercisable after five years from the date of grant. Stock options granted since 1998 contain certain forfeiture and noncompete provisions.

     As a result of the spin-off of MoneyGram, each option to purchase shares of Viad common stock was converted to consist of an adjusted option to purchase the same number of shares of Viad common stock and a new option to purchase the same number of shares of MoneyGram common stock. The exercise price and number of shares subject to the Viad and MoneyGram options were adjusted so that the two options had a combined intrinsic economic value equal to the intrinsic economic value of the Viad option before taking into account the effect of the distribution. The options will otherwise generally continue to be and become exercisable on substantially the same terms and conditions set forth in the Omnibus Plan and underlying option agreements.

     As permitted by SFAS No. 123, “Accounting for Stock-Based Compensation,” Viad uses the intrinsic value method of accounting for stock-based compensation awards prescribed by Accounting Principles Board (“APB”) Opinion No. 25, “Accounting for Stock Issued to Employees” and related interpretations in accounting for its stock-based compensation plans. Assuming Viad had recognized compensation expense for stock options and performance-based stock awards in accordance with the fair value method of accounting defined in SFAS No. 123, net income (loss) and diluted and basic income (loss) per share for the three and nine months ended September 30 would be as presented in the table below. Compensation cost calculated under SFAS No. 123 is recognized ratably over the vesting period and is net of estimated forfeitures and tax effects.

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     For purposes of applying SFAS No. 123, the estimated fair value of stock options granted during 2004 and 2003 was $6.91 and $5.03 per share, respectively. The fair value of each stock option grant was estimated on the date of grant using the Black-Scholes option pricing model with the following assumptions:

Note 3 — Acquisition of Business

     In May 2004, GES acquired a convention services contractor in Edmonton, Canada. The net purchase price of $2.7 million was allocated to the net tangible and identifiable intangible assets and liabilities acquired based on the estimated fair values at the date of acquisition. The amount paid in excess of the estimated fair values was recorded to goodwill. In connection with the transaction, GES recorded goodwill of $2.1 million, amortizable intangible assets of $904,000 and other net liabilities of $282,000 (including acquisition and assumed liabilities of $1.1 million). The amount of goodwill expected to be deductible for tax purposes is not significant. The accompanying consolidated financial statements include the accounts and results of operations from the date of acquisition. The results of operations from the beginning of the year to the date of acquisition were not significant to Viad’s consolidated results of operations.

Note 4 — Inventories

     The components of inventories were as follows:

Note 5 — Property and Equipment

     Property and equipment consisted of the following:

     Depreciation expense for the three months ended September 30, 2004 and 2003 was $5.3 million and $6.3 million, respectively. For the nine months ended September 30, 2004 and 2003, depreciation expense was $16.1 million and $17.5 million, respectively.

Note 6 — Goodwill and Other Intangible Assets

     The changes in the carrying amount of goodwill for the nine months ended September 30, 2004 were as follows:

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     In the third quarter of 2004, Exhibitgroup’s results of operations were affected by a significant reduction in revenue from new exhibit construction resulting in a less profitable mix of business. Customer orders for new exhibit construction declined further than management anticipated and Exhibitgroup’s full year financial forecast was reduced. As a result of these factors, 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, on the consolidated statements of income under the caption “Goodwill and intangible asset impairment losses.”

     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.

     A summary of other intangible assets at September 30, 2004 is presented below:

     A summary of other intangible assets at December 31, 2003 is presented below: