UNITED STATES
FORM 10-Q
QUARTERLY REPORT PURSUANT TO SECTION 13
For the Quarterly Period Ended September 30, 2002
VIAD CORP
| DELAWARE | 36-1169950 | |
| (State or other jurisdiction of incorporation or organization) |
(I.R.S. Employer 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 September 30, 2002, 88,091,798 shares of Common Stock ($1.50 par value) were outstanding.
PART I. FINANCIAL INFORMATION
VIAD CORP
| September 30, 2002 | December 31, | |||||||||
| (000 omitted, except share data) | (Unaudited) | 2001 | ||||||||
ASSETS |
||||||||||
Current assets: |
||||||||||
Cash and cash equivalents |
$ | 56,818 | $ | 46,593 | ||||||
Short-term investments |
63,459 | 118,021 | ||||||||
Receivables |
59,220 | 64,134 | ||||||||
Inventories |
45,477 | 55,682 | ||||||||
Deferred income taxes |
38,650 | 45,916 | ||||||||
Other current assets |
33,387 | 48,555 | ||||||||
| 297,011 | 378,901 | |||||||||
Funds, agents’ receivables and current maturities of investments
restricted for payment service obligations |
1,893,534 | 1,476,475 | ||||||||
Total current assets |
2,190,545 | 1,855,376 | ||||||||
Investments in securities |
192,252 | 51,535 | ||||||||
Investments restricted for payment service obligations |
6,124,729 | 5,422,899 | ||||||||
Property and equipment |
250,648 | 260,480 | ||||||||
Other investments and assets |
73,614 | 67,715 | ||||||||
Deferred income taxes |
99,166 | 82,764 | ||||||||
Goodwill |
548,168 | 587,365 | ||||||||
Other intangible assets |
34,342 | 35,925 | ||||||||
| $ | 9,513,464 | $ | 8,364,059 | |||||||
LIABILITIES AND STOCKHOLDERS’ EQUITY |
||||||||||
Current liabilities: |
||||||||||
Short-term bank loans |
$ | — | $ | 457 | ||||||
Accounts payable |
73,002 | 60,913 | ||||||||
Other current liabilities |
234,504 | 203,702 | ||||||||
Current portion of long-term debt |
142,343 | 42,224 | ||||||||
| 449,849 | 307,296 | |||||||||
Payment service obligations |
7,629,880 | 6,649,722 | ||||||||
Total current liabilities |
8,079,729 | 6,957,018 | ||||||||
Long-term debt |
238,824 | 354,147 | ||||||||
Pension and other postretirement benefits |
96,491 | 94,424 | ||||||||
Derivative financial instruments |
236,238 | 91,414 | ||||||||
Other deferred items and insurance liabilities |
127,761 | 135,420 | ||||||||
Minority interests |
8,726 | 5,284 | ||||||||
$4.75 Redeemable preferred stock |
6,697 | 6,679 | ||||||||
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 |
210,592 | 225,003 | ||||||||
Retained income |
800,521 | 762,008 | ||||||||
Unearned employee benefits and other |
(63,223 | ) | (82,952 | ) | ||||||
Accumulated other comprehensive income: |
||||||||||
Unrealized gain on securities classified as available for sale |
98,685 | 29,876 | ||||||||
Unrealized loss on derivative financial instruments |
(151,366 | ) | (53,875 | ) | ||||||
Cumulative translation adjustments |
(11,784 | ) | (13,211 | ) | ||||||
Minimum pension liability adjustment |
(13,739 | ) | (13,739 | ) | ||||||
Common stock in treasury, at cost, 11,648,127 and 10,806,006 shares |
(300,298 | ) | (283,047 | ) | ||||||
Total common stock and other equity |
718,998 | 719,673 | ||||||||
| $ | 9,513,464 | $ | 8,364,059 | |||||||
See Notes to Consolidated Financial Statements.
Page 2
VIAD CORP
| Quarter ended September 30, | Nine months ended September 30, | ||||||||||||||||
| (000 omitted, except per share data) | 2002 | 2001 | 2002 | 2001 | |||||||||||||
Revenues |
$ | 417,977 | $ | 390,086 | $ | 1,271,509 | $ | 1,294,216 | |||||||||
Costs and expenses: |
|||||||||||||||||
Costs of sales and services |
362,031 | 352,911 | 1,106,467 | 1,154,154 | |||||||||||||
Corporate activities and minority interests |
6,390 | 2,353 | 18,241 | 11,033 | |||||||||||||
Net interest expense |
123 | 4,997 | 7,487 | 16,560 | |||||||||||||
Restructuring charges and other items |
(413 | ) | 67,370 | (413 | ) | 96,644 | |||||||||||
| 368,131 | 427,631 | 1,131,782 | 1,278,391 | ||||||||||||||
Income (loss) before income taxes and
change in accounting principle |
49,846 | (37,545 | ) | 139,727 | 15,825 | ||||||||||||
Income tax expense (benefit) |
14,229 | (21,781 | ) | 39,500 | (10,122 | ) | |||||||||||
Income (loss) before change
in accounting principle |
35,617 | (15,764 | ) | 100,227 | 25,947 | ||||||||||||
Change in accounting principle, net of tax |
— | — | (37,739 | ) | — | ||||||||||||
NET INCOME (LOSS) |
$ | 35,617 | $ | (15,764 | ) | $ | 62,488 | $ | 25,947 | ||||||||
DILUTED NET INCOME (LOSS) PER COMMON SHARE |
|||||||||||||||||
Income (loss) per share before change in
accounting principle |
$ | 0.41 | $ | (0.19 | ) | $ | 1.14 | $ | 0.29 | ||||||||
Change in accounting principle, net of tax |
— | — | (0.43 | ) | — | ||||||||||||
Net income (loss) per share |
$ | 0.41 | $ | (0.19 | ) | $ | 0.71 | $ | 0.29 | ||||||||
Average outstanding and potentially
dilutive common shares |
86,616 | 85,560 | 86,961 | 86,347 | |||||||||||||
BASIC NET INCOME (LOSS) PER COMMON SHARE |
|||||||||||||||||
Income (loss) per share before change in
accounting principle |
$ | 0.41 | $ | (0.19 | ) | $ | 1.15 | $ | 0.29 | ||||||||
Change in accounting principle, net of tax |
— | — | (0.44 | ) | — | ||||||||||||
Net income (loss) per share |
$ | 0.41 | $ | (0.19 | ) | $ | 0.71 | $ | 0.29 | ||||||||
Average outstanding common shares |
86,188 | 85,560 | 86,325 | 85,426 | |||||||||||||
Dividends declared per common share |
$ | 0.09 | $ | 0.09 | $ | 0.27 | $ | 0.27 | |||||||||
Preferred stock dividends |
$ | 285 | $ | 285 | $ | 855 | $ | 853 | |||||||||
See Notes to Consolidated Financial Statements.
Page 3
VIAD CORP
| Quarter ended September 30, | Nine months ended September 30, | |||||||||||||||||
| (000 omitted) | 2002 | 2001 | 2002 | 2001 | ||||||||||||||
Net income (loss) |
$ | 35,617 | $ | (15,764 | ) | $ | 62,488 | $ | 25,947 | |||||||||
Other comprehensive income, net of tax: |
||||||||||||||||||
Unrealized gains on securities classified
as available-for-sale: |
||||||||||||||||||
Statement of Financial Accounting Standards
(“SFAS”) No. 133 transition adjustment,
effective January 1, 2001, resulting from the
transfer of securities classified as held-to-maturity to securities classified as
available-for-sale |
— | — | — | 3,772 | ||||||||||||||
Holding gains arising during the period |
40,235 | 53,601 | 77,126 | 65,124 | ||||||||||||||
Reclassification adjustment for net realized
gains included in net income |
(4,864 | ) | (1,814 | ) | (8,317 | ) | (6,281 | ) | ||||||||||
| 35,371 | 51,787 | 68,809 | 62,615 | |||||||||||||||
Unrealized losses on derivative financial
instruments: |
||||||||||||||||||
Cumulative effect of transition adjustment upon
initial application of SFAS No. 133 on
January 1, 2001 |
— | — | — | (7,501 | ) | |||||||||||||
Holding losses arising during the period |
(95,882 | ) | (66,602 | ) | (157,098 | ) | (97,046 | ) | ||||||||||
Net reclassifications from other comprehensive
income to net income |
21,000 | 8,982 | 59,607 | 16,469 | ||||||||||||||
| (74,882 | ) | (57,620 | ) | (97,491 | ) | (88,078 | ) | |||||||||||
Unrealized foreign currency translation adjustments: |
||||||||||||||||||
Holding gains (losses) arising during the period |
(3,440 | ) | (2,820 | ) | 1,427 | (4,006 | ) | |||||||||||
Other comprehensive loss |
(42,951 | ) | (8,653 | ) | (27,255 | ) | (29,469 | ) | ||||||||||
Comprehensive income (loss) |
$ | (7,334 | ) | $ | (24,417 | ) | $ | 35,233 | $ | (3,522 | ) | |||||||
See Notes to Consolidated Financial Statements.
Page 4
VIAD CORP
| Nine months ended September 30, | ||||||||||
| (000 omitted) | 2002 | 2001 | ||||||||
CASH FLOWS PROVIDED (USED) BY OPERATING ACTIVITIES: |
||||||||||
Net income |
$ | 62,488 | $ | 25,947 | ||||||
Adjustments to reconcile net income to net cash
provided by operating activities: |
||||||||||
Depreciation and amortization |
38,720 | 52,582 | ||||||||
Deferred income taxes |
11,815 | (6,634 | ) | |||||||
Change in accounting principle |
40,000 | — | ||||||||
Restructuring charges and other items |
(413 | ) | 96,644 | |||||||
Other noncash items, net |
(10,656 | ) | (9,084 | ) | ||||||
Change in operating assets and liabilities: |
||||||||||
Receivables and inventories |
9,765 | 33,792 | ||||||||
Accounts payable |
12,089 | (17,914 | ) | |||||||
Other assets and liabilities, net |
21,123 | (15,059 | ) | |||||||
| 184,931 | 160,274 | |||||||||
Change in payment service assets and obligations, net |
544,481 | 1,251,213 | ||||||||
Net cash provided by operating activities |
729,412 | 1,411,487 | ||||||||
CASH FLOWS PROVIDED (USED) BY INVESTING ACTIVITIES: |
||||||||||
Capital expenditures |
(27,940 | ) | (36,259 | ) | ||||||
Proceeds from disposals of property and other assets, net of purchases |
650 | (556 | ) | |||||||
Proceeds from sales and maturities of securities |
2,180,632 | 1,754,215 | ||||||||
Purchases of securities |
(2,813,348 | ) | (3,048,231 | ) | ||||||
Net cash used by investing activities |
(660,006 | ) | (1,330,831 | ) | ||||||
CASH FLOWS PROVIDED (USED) BY FINANCING ACTIVITIES: |
||||||||||
Payments on long-term borrowings |
(1,386 | ) | (26,203 | ) | ||||||
Net change in short-term borrowings |
||||||||||