10-K 1 viad2014123110-k.htm 10-K VIAD 2014.12.31 10-K

As filed with the Securities and Exchange Commission on March 12, 2015
 
 
 
 
 
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
 
 
 
 
 
 
FORM 10-K
 
 
 
 
 
 (Mark One)
ý
ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the fiscal year ended December 31, 2014
or
¨
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from                      to                     
Commission file number: 001-11015 
 
 
 
 
 
Viad Corp
(Exact name of registrant as specified in its charter)
 
 
 
 
 
Delaware
 
36-1169950
State or other jurisdiction of
incorporation or organization
 
(I.R.S. Employer
Identification No.)
 
 
1850 North Central Avenue, Suite 1900
Phoenix, Arizona
 
85004-4565
(Address of principal executive offices)
 
(Zip Code)
Registrant’s telephone number, including area code:
(602) 207-1000
Securities registered pursuant to Section 12(b) of the Act:
Title of each class
 
Name of each exchange
on which registered
Common Stock, $1.50 par value
 
New York Stock Exchange
Securities registered pursuant to Section 12(g) of the Act: None
 
 
 
 
 
 
Indicate by check mark if the registrant is a well-known seasoned issuer, as defined by Rule 405 of the Securities Act.    Yes  ý    No  ¨
Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or 15(d) of the Act.    Yes  ¨    No  ý
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.    Yes  ý    No  ¨
Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Website, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§ 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files.)    Yes  ý    No  ¨
Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of registrant’s knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K.   ¨
Indicate by check mark whether registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See definition of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act. (Check One):
Large accelerated filer
 
¨
  
Accelerated filer
 
ý
 
 
 
 
Non-accelerated filer
 
¨  
  
Smaller reporting company
 
¨
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Act).    Yes  ¨    No  ý
The aggregate market value of the Common Stock (based on its closing price per share on such date) held by non-affiliates on the last business day of the registrant’s most recently completed second fiscal quarter (June 30, 2014) was approximately $477 million.
Registrant had 20,098,781 shares of Common Stock ($1.50 par value) outstanding as of January 31, 2015.
Documents Incorporated by Reference
A portion of the Proxy Statement for the Annual Meeting of Shareholders of Viad Corp, which is scheduled to be held on May 21, 2015, is incorporated by reference into Part III of this Annual Report.
 
 
 
 
 



INDEX
 
 
 
 
 
 
Page
 
 
Item 1.
Item 1A.
Item 1B.
Item 2.
Item 3.
Item 4.
Other.
 
 
Item 5.
Item 6.
Item 7.
Item 7A.
Item 8.
Item 9.
Item 9A.
Item 9B.
 
 
Item 10.
Item 11.
Item 12.
Item 13.
Item 14.




PART I
Item 1. Business.
Viad Corp (together with its subsidiaries, “Viad” or the “Company”) derives its revenue from experiential services provided primarily within the exhibition and events industry and the travel and recreation industry. Viad occupies leading positions as a value-added service provider in many of the markets in which it competes. Viad serves clients predominantly in the United States, Canada, the United Kingdom, Germany and the United Arab Emirates.
Viad operates two business groups:
Marketing & Events Group. The Marketing & Events Group is a global event marketing company that helps clients gain more awareness, more involvement and more value from their trade show programs and other live events. The Marketing & Events Group specializes in all aspects of the design, planning and production of face-to-face events, immersive environments and brand-based experiences for clients, including show organizers, corporate brand marketers and retail shopping centers. The mission of the Marketing & Events Group is to create the world’s most meaningful and memorable experiences for show organizers, brand marketers, event attendees and retail shopping centers. Show organizers include for-profit and not-for-profit show owners as well as show management companies. Corporate brand marketers include exhibitors and domestic and international corporations that want to promote their brands, services and innovations, feature new products and build business relationships. Viad’s retail shopping center customers include major developers, owners and management companies of shopping malls and lifestyle centers. In 2014, Viad derived approximately 89 percent of its consolidated revenue from products and services provided by the Marketing & Events Group.
Travel & Recreation Group. The Travel & Recreation Group is an experiential leisure travel provider serving the needs of regional and long-haul visitors to iconic natural and cultural destinations in North America. The Travel & Recreation Group generates its revenue from tourism products and experiential services, including the Glacier Skywalk and other world-class attractions, hotel operations, transportation services and package tour operations in and around Western Canada, Glacier National Park in Montana, Denali National Park and Preserve in Alaska and Waterton Lakes National Park in Alberta, Canada. In 2014, Viad derived approximately 11 percent of its consolidated revenue from services provided by the Travel & Recreation Group.
Viad’s two business groups are supported by the Viad corporate and Shared Services group, which provides functional support to Viad’s operating units in the areas of management, finance and accounting, internal auditing, information technology, legal, insurance, corporate development, real estate and tax. The group also handles matters pertaining to businesses previously discontinued or sold by the Company.
Recent Business Developments
In connection with the Company’s strategic review of opportunities to enhance shareholder value, the Company paid a special cash dividend of $2.50 per share, or $50.8 million in the aggregate, on November 14, 2013. On February 14, 2014, the Company paid a second special cash dividend of $1.50 per share, or $30.5 million in the aggregate. In April 2014, the Company concluded its strategic review and announced the Company’s go-forward strategy to maximize returns on investment for Viad shareholders: accelerate the growth of both business groups and continue to drive operational efficiencies and margin expansion.
The growth strategy for the Marketing & Events Group, which is comprised of Global Experience Specialists, Inc. and affiliates (“GES”), is to establish GES as the preferred global, full-service provider for live events, with further reach to corporate and consumer events, exhibitions, congresses and conferences. The Company expects to do this through the acquisition of businesses that compete in industry sectors with higher profit margins, add new, value-added services for GES’ customers that complement and enhance its existing businesses and further leverage GES’ global capabilities. For the Travel & Recreation Group, the Company continues to execute on its Refresh-Build-Buy growth strategy, which is focused on refreshing existing assets to drive both rate and volume growth, building new assets and buying assets that add scale to the business and generate strong returns on investment.

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In 2014, the Company completed the following key acquisitions:
West Glacier Properties: On July 1, 2014, the Company acquired the West Glacier Motel & Cabins, the Apgar Village Lodge and related land, food and beverage services and retail operations (collectively, the “West Glacier Properties”). The West Glacier Properties acquisition complements the Travel & Recreation Group’s existing assets and increases its presence in the Glacier National Park area, reinforcing the Company’s position as the “Gateway to Glacier”
Blitz: On September 16, 2014, the Company acquired Blitz Communications Group Limited and affiliates (collectively, “Blitz”), a leading audio-visual staging and creative services provider for the live events industry in the United Kingdom and continental Europe. The addition of Blitz has allowed the Marketing & Events Group to obtain a prominent role in the United Kingdom audio-visual market
onPeak: On October 7, 2014, the Company acquired onPeak LLC and Travel Planners, Inc. By acquiring these companies, which provide event accommodations services to the majority of the top 100 U.S. events, the Marketing & Events Group became the leading event accommodations service provider in the United States
N200: On November 24, 2014, the Company acquired N200 Limited and affiliates (collectively, “N200”), Europe’s leading event registration and data intelligence services provider for the live events industry. The acquisition of N200 affords clients of the Marketing & Events Group yet another value-added service within a high-margin industry sector
 
In late 2013, the Marketing & Events Group announced the formation of its U.S. in-house audio-visual (“AV”) team. In 2014, this team produced organic growth for the Marketing & Events Group, servicing 17 events and growing a solid pipeline for 2015 and beyond. AV services naturally complement the Company’s existing suite of solutions for live events and enhance the Marketing & Events Group’s ability to provide a more comprehensive portfolio of service offerings to its customers. The creation of an in-house AV team enables the Company to service a customer throughout an entire event, from creative and technology to content and design. The addition of Blitz to the Company’s in-house U.S. services expands the size and geographic reach of the Marketing & Events Group’s AV operations and creates a stable and integrated platform for growth.

On May 1, 2014, the Company successfully launched the Glacier Skywalk attraction, a fully accessible, cliff-edge walkway that leads to a glass-floored observation platform 918 feet (280 meters) above the Sunwapta Valley in close proximity to the Company’s Columbia Icefield attraction in Jasper National Park, Alberta, Canada. During its first year of operation, the Glacier Skywalk drew nearly 300,000 visitors.
Reportable Segments
Within the two business groups, Viad’s organizational structure, operational decision-making authority, allocation of resources and internal reporting are aligned into the following reportable business segments:
Marketing & Events U.S. segment;
Marketing & Events International segment; and
Travel & Recreation Group segment.
No reportable segment has a single client comprising more than 6.3 percent of that segment’s revenue, and no single client comprises more than 4.2 percent of Viad’s revenue. See “The failure of a large client to renew its services contract or the loss of business from convention facilities could adversely impact revenue” under “Item 1A - Risk Factors” for a discussion of the risks related to Viad’s client relationships which is incorporated herein by reference.
Viad’s reportable business segments are described below.
Marketing & Events U.S. Segment
During 2014, the Marketing & Events U.S. segment (the “U.S. segment”) provided services to over 1,200 exhibitions and events and more than 173,000 exhibitors. The U.S. segment has full-service operations in every major exhibition market in the United States, including Las Vegas, Nevada; Chicago, Illinois; Orlando, Florida; New York, New York and Los Angeles, California. In each of these locations, the U.S. segment is a leading event marketing agency that produces exhibitions, events, exhibits and retail environments, and services some of the most visible and influential events in its industry. The U.S. segment generates revenue from two lines of business: exhibition and event services and exhibits and environments. In 2014, U.S. segment exhibition and event services accounted for 50% of Viad’s consolidated revenue, as compared to 47% and 48% in 2013 and 2012, respectively. U.S. segment exhibits and environments accounted for 17% of Viad’s consolidated revenue in 2014, as compared to 18% and 17% in 2013 and 2012, respectively.

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Within its two lines of business, the U.S. segment offers the following services:
Show Organizer Services. Under agreements with show organizers, the U.S. segment serves as the official services contractor of an exhibition, which is also referred to as a “trade show,” “convention” or “show.” As the official services contractor, the U.S. segment provides the following services to the show organizer: general event management; planning and consultation; concept design; exhibition layout and design; graphics and design; online management tools; show traffic analysis; marketing and strategy; carpeting and flooring; signage; decorating products and accessories; custom graphics; overhead rigging; booth rigging; AV services; temporary electrical, lighting and plumbing services and cleaning.
Exclusive Services Provided to Exhibitors. As the official services contractor, the U.S. segment is designated by the show organizer as the exclusive provider of certain services offered to exhibitors participating in the exhibition. This designation provides exhibitors with a single point of contact to facilitate a timely, safe and efficient move-in and move-out of the exhibition and to facilitate an organized, professional during-show experience. The exclusive services offered by the U.S. segment to exhibitors include material handling services; overhead rigging; AV services; booth rigging; temporary electrical, lighting and plumbing services and cleaning.
Discretionary Services Provided to Exhibitors. In addition to the exclusive services offered to exhibitors, the U.S. segment competes with other service providers to sell non-exclusive services to exhibitors, including custom exhibit design and construction; portable and “modular” exhibits and design; integrated marketing, including pre- and post-event communications; AV and multimedia services; event surveys; return on investment analysis; attendee and exhibit booth traffic analysis; staff training; online management tools; logistics and freight-forwarding; storage and refurbishment of exhibits; booth furnishings, carpeting and signage; in-house installation and dismantling and various other show services. The U.S. segment offers those services, combined with complete event program management and planning, to corporate brand marketers across all exhibitions and events in which they participate. The U.S. segment competes with other service providers to offer those discretionary services to exhibitors, regardless of whether or not the U.S. segment is the official services contractor of the exhibition.
Event Accommodations Services to Show Organizers, Exhibitors and Attendees. On October 7, 2014, the Company acquired onPeak LLC and Travel Planners, Inc. (collectively, “onPeak”) for a purchase price of $43.0 million and $33.7 million, respectively, in cash, subject to certain adjustments. onPeak is a leading provider of event accommodations services in North America. Event accommodations services effectively augment the U.S. segment’s services by offering another important logistical benefit through a single, seamless process. The U.S. segment acts as the exclusive distributor of accommodations services for a convention, trade show or other live event, and is responsible for researching and recommending local hotels, securing room blocks, marketing reserved room blocks to event attendees and exhibitors, managing attendee and exhibitor reservations and addressing any accommodations concerns during the show. Event accommodations offers the U.S. segment the unique potential to serve multiple live event participants through a single integrated service network. Event attendees and exhibitors benefit from the U.S. segment’s accommodations services by receiving convenient and affordable hotel accommodations, and show organizers benefit from the U.S. segment’s management of complex hotel booking administration before, during and after the event. The U.S. segment also helps drive revenue per available room (“RevPAR”) for hotels by acting as a direct sales channel to high-value, professional guests. In 2014, onPeak offered event accommodations services to the majority of the top 100 U.S. events.
Audio-Visual Services to Organizers and Exhibitors. In late 2013, the Marketing & Events Group announced the formation of a domestic in-house AV team, which produced organic growth and positioned the team as a potential source of revenue growth for the U.S. segment in 2015 and beyond. Through its AV team, the U.S. segment offers a variety of AV solutions, including digital design and content, media production, content testing, equipment rental, staging and creative services. AV services allows customers to use the Company as a single point of contact throughout a given event and avoid the increased cost associated with outsourced third-party AV service providers. From a market perspective, the creation of the in-house AV team expanded the scale of the U.S. segment’s service offerings and reinforced the Company’s position as a leading full-service provider of event services.
Corporate Events. In addition to the exclusive and elective services offered in the context of a tradeshow, the U.S. segment also offers expertise in corporate event services, which represents a growing market for the Marketing & Events Group. Corporate events include user week conferences, value-added reseller conferences, sales meetings and new product or service launches. For corporate event customers, the U.S. segment provides an array of planning, logistics and production services similar to the services described above and offered in the context of a tradeshow.
Other Marketing Services. The U.S. segment also provides a variety of immersive, entertaining attractions and brand-based experiences, sponsored events, mobile marketing and other branded entertainment and face-to-face marketing solutions for clients and venues, including movie studios, leading consumer brand marketers, shopping malls and museums. In addition,

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the U.S. segment offers retail clients complete turnkey services, including design, engineering, graphic production, fabrication, warehousing, shipping and on-site installation of retail merchandising units, kiosks and holiday environments. The U.S. segment also provides construction and installation services for permanent installations, including museum exhibits, corporate lobbies, visitor centers, showrooms and retail interiors.
Competition. The U.S. segment generally competes in the exhibition and events industry on the basis of discernible differences, value, quality, price, convenience and service. The primary Viad competitor in the domestic official services contractor market is The Freeman Company (a private company); however, the U.S. segment encounters substantial competition from a large number of providers. No competitor has significant market share in the other categories of offerings of the U.S. segment. All known competitors of the U.S. segment are privately held companies which provide limited public information concerning their operations.
Marketing & Events International Segment
The Marketing & Events International segment (the “International segment”) includes all foreign operations of the Marketing & Events Group and consists of two operating segments: Canada and EMEA (Europe, Middle East and Asia). Like the U.S. segment, the International segment generates its revenue from its exhibition and event services and exhibits and environments lines of business. In 2014, International segment exhibition and event services accounted for 17% of Viad’s consolidated revenue, as compared to 18% in each of the previous two years. International segment exhibits and environments accounted for 7% of Viad’s consolidated revenue in 2014, as compared to 6% in each of the previous two years. The International segment also offers services that are similar to those provided by the U.S. segment. Those services are delivered by Viad’s wholly-owned subsidiaries, including GES Exposition Services (Canada) Limited, Global Experience Specialists (GES) Limited and affiliates, SDD Exhibitions Limited and GES GmbH & Co. KG.
During 2014, the International segment provided services to nearly 1,000 exhibitions and events and more than 37,000 exhibitors. The International segment has full-service operations at many of the most active and popular exhibition and event destinations, including nine Canadian cities, six United Kingdom cities, one German city, two cities in the United Arab Emirates and three cities in the Netherlands. In each of those locations, the International segment is a leading service provider, servicing some of the most visible and influential events in its industry. Viad acquired two companies in 2014 for the International segment that expand the segment’s live event services and further the Company’s growth strategy to transform the Marketing & Events Group into the preferred global full service provider to live events. On September 16, 2014, the Company acquired Blitz for £15.0 million (approximately $24.4 million) in cash, subject to certain adjustments. Blitz, located in the United Kingdom, is a leading AV staging and creative services provider for the live events industry in the United Kingdom and continental Europe. On November 24, 2014, the Company acquired N200, a premier event registration and data intelligence services provider for the live events industry in the United Kingdom and the Netherlands, for €9.7 million (approximately $12.1 million) in cash, subject to certain adjustments, plus an earnout payment of up to €1.0 million. The amount of the earnout payment is based on N200’s achievement of established financial targets for N200’s 2015 fiscal year.
Competition. The International segment generally competes on the basis of discernible differences, value, quality, price, convenience and service. The International segment is the largest provider of exhibition and event services in the countries in which it competes. The International segment encounters competition from a large number of providers of similar services. Most of the competitors are privately held companies which provide limited public information concerning their operations.
Travel & Recreation Group Segment
Travel and recreation services are provided by Brewster Inc. (“Brewster”), Glacier Park, Inc. (“Glacier Park”) and Alaskan Park Properties, Inc. (“Alaska Denali Travel”). Brewster and Alaska Denali Travel are wholly-owned subsidiaries of Viad, and Glacier Park is an 80 percent owned subsidiary of Viad.
Brewster
Brewster is a major tourism service operator in Western Canada, delivering tourism products that include world-class hospitality services, attractions, inbound package tour operations and corporate and event management and transportation services.
Hospitality. Brewster operates three hotels in Alberta: the Mount Royal Hotel and the Banff International Hotel, both of which are located in the heart of Banff National Park in downtown Banff, Alberta, Canada, and the Glacier View Inn, which is located on the Columbia Icefield between Lake Louise and Jasper. The hotels cater principally to leisure travelers.

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Attractions. Brewster’s attractions include the Banff Gondola, the Columbia Icefield Glacier Adventure, the Glacier Skywalk and the Banff Lake Cruise operations. The Banff Gondola transports visitors to an elevation of over 7,000 feet above sea level to the top of Sulphur Mountain in Banff, Alberta, Canada, offering an unobstructed view of the Canadian Rockies and overlooking the town of Banff and the Bow Valley. The Columbia Icefield Glacier Adventure includes tours of the Athabasca Glacier on the Columbia Icefield, and provides customers with an opportunity to experience one of the largest accumulations of ice and snow south of the Arctic Circle. Icefield customers ride in an “Ice Explorer,” a unique vehicle specially designed for glacier travel. Brewster also offers boat tours, small boat rentals and charter fishing on Lake Minnewanka, which is situated outside of the town of Banff in the heart of the Canadian Rockies. In May 2014, Viad launched the Glacier Skywalk, a 1,312-foot guided interpretive walkway with a 98-foot glass-floored observation area overlooking the Sunwapta Valley in close proximity to the Company’s Columbia Icefield attraction in Jasper National Park, Alberta, Canada. Since its opening, the Glacier Skywalk attraction has experienced robust visitor traffic and received several architectural and engineering awards for its design.
Package Tour Operations and Corporate and Event Management. Brewster’s inbound package tour operations offer year-round package tours throughout Canada and typically feature Brewster’s attractions, transportation services and hotels. In addition to Brewster products, the packages may also include rail, self-drive automobiles, ski and winter touring, group and individual tours and other tourism products to provide a fulsome experience that may be custom designed at the time of booking. Brewster also offers a full suite of corporate and event management services for meetings, conferences, incentive travel, sports and special events. Event-related service offerings include staffing, off-site events, tours/activities, team building, accommodations, event management, theme development, production and AV services.
Transportation Operations. Brewster’s transportation operations include charter motorcoach services, sightseeing, scheduled services and airport shuttle service. Brewster operates a modern fleet of luxury motorcoaches, available for groups of any size, for travel throughout the Canadian provinces of Alberta and British Columbia. In addition, Brewster provides seasonal half- and full-day sightseeing tours from Calgary, Banff, Lake Louise and Jasper, Canada.
Brewster draws its customers from major markets, including Canada, the United States, the United Kingdom, Australia/New Zealand and Asia. Brewster markets directly to consumers, as well as through distribution channels that include tour operators, tour wholesalers, destination management companies and retail travel agencies and organizations.
Brewster generated approximately 87 percent of the Travel & Recreation Group’s 2014 segment operating income.
Glacier Park
Glacier Park is a hotel owner and operator, with properties located in and around Waterton-Glacier International Peace Park, which encompasses Glacier National Park in Montana, one of the most visited national parks in the United States, and Waterton Lakes National Park in Alberta, Canada. Glacier Park provides lodging accommodations, food and beverage services, retail operations and transportation services in and around Glacier and Waterton Lakes National Parks.
The operations of Glacier Park are predominately seasonal, typically running from late May until the end of September. During the peak months of July and August, the occupancy level at Glacier Park’s lodges and motor inns typically exceeds 95 percent. During the “shoulder” months of June and September, occupancy typically exceeds 70 percent.
Individual travelers account for over 80 percent of Glacier Park’s customers, and the balance of its customers are tour groups. Demographically, Glacier Park draws over 90 percent of its customers from the United States, with approximately 40 percent of the U.S. customers coming from the Northwest and Midwest regions.
Historic Lodges and Hotel Accommodations. Glacier Park owns and operates seven properties, with accommodation offerings varying from hikers’ cabins to hotel suites, including St. Mary Lodge, a 115-room, full-service resort lodge located outside the east entrance to Glacier National Park in St. Mary, Montana; Glacier Park Lodge, a historic lodge in East Glacier, Montana; Grouse Mountain Lodge, a full-season lodge offering golf, skiing in the winter, hiking in the summer and other seasonal recreational activities, located near Glacier National Park in Whitefish, Montana; the Prince of Wales Hotel in Waterton Lakes National Park, Alberta, Canada, which is situated on land for which the Company has a 42-year ground lease with the Canadian government running through January 31, 2052; the West Glacier Motel & Cabins in West Glacier, Montana, and Motel Lake McDonald and the Apgar Village Lodge, which are located inside Glacier National Park. Glacier Park also operates the food and beverage services with respect to those properties and the retail shops located near Glacier National Park.
On July 1, 2014, the Company acquired the West Glacier Properties for $16.5 million in cash, with a working capital adjustment of $0.3 million and subject to certain other adjustments. The West Glacier Motel & Cabins is a 32-room property situated on approximately 200 acres at the west entrance of Glacier National Park, and its full-service amenities include a

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restaurant, grocery store, gift shops, a gas station and employee accommodations. The Apgar Village Lodge is a 48-room property situated on a 3.8 acre private in-holding inside Glacier National Park with overnight accommodations, a gift shop and employee accommodations.
Alaska Denali Travel
Alaska Denali Travel owns and operates two properties: Denali Backcountry Lodge, a property having 42 guest rooms on six acres inside Denali National Park and Preserve, and Denali Cabins, with 46 guest cabins on six acres near the entrance to Denali National Park and Preserve. Alaska Denali Travel provides food and beverage services with respect to those properties, and operates day trips to the Denali Backcountry Lodge via the scenic park road and a package tours sales and marketing program. Alaska Denali Travel’s operating season runs from June until the end of September.
Competition. The Travel & Recreation Group generally competes on the basis of location, uniqueness of facilities, service, quality and price. Competition exists both locally and regionally in the package tour business, hotel and restaurant business and charter service business.
Intellectual Property
Viad and its subsidiaries own or have the right to use registered trademarks and trademarks pending registration, used in their businesses, including Global Experience Specialists & design®, GES®, GES Servicenter®, GES National Servicenter®, GES MarketWorks®, The Art and Science of Engagement®, Trade Show Rigging TSR®, TSE Trade Show Electrical & design®, Earth Explorers®, Compass Direct®, ethnoMetrics®, eXPRESSO®, FIT®, eco-sense®, and the trademarks in the 2012 Alaska Denali Travel rebranding program, including Alaska Denali TravelSM, Alaska Denali Escapes®, Denali Backcountry Adventure®, Denali Backcountry Lodge® and Denali Cabins®. Viad and its subsidiaries also own or have the right to use many registered trademarks and trademarks pending registration outside of the United States, including GES®, ShowTech®, Brewster Travel Canada & design®, Brewster Attractions Explore & design®, Brewster Hospitality Refresh & design®, Glacier Skywalk® and escape.connect.refresh.explore®. United States trademark registrations are for a term of 10 years and are renewable every 10 years as long as the trademarks are used in the regular course of business.
The Company owns patents that it believes provide competitive advantages in the marketplace for its exhibit and exhibition services. Its patented technology relating to a modular structure having a load-bearing surface provides efficiencies and cost savings in the design, manufacture, assembly, take down and maintenance of displays and exhibitions. Its patented invention relating to a surface-covering installation tool and method not only reduces direct labor costs, but provides improved worker safety. The Company also owns a number of design patents for its retail merchandising units. United States utility patents are currently granted for a term of 20 years from the date a patent application is filed and United States design patents are currently granted for a term of 14 years from the date granted. The Marketing & Events Group has extensive design libraries with copyright protections and owns copyright registrations for a number of the designs within its design libraries. Copyright protection for such work is 95 years from the date of publication or 120 years from creation, whichever is shorter.
Although Viad believes that certain of its patents, trademarks and copyrights have substantial value, it does not believe that the loss of any one of those patents, trademarks or copyrights would have a material adverse effect on its financial condition or results of operations, or the financial condition or results of operations of any of its reporting segments.
Government Regulation and Compliance
Compliance with legal requirements and government regulations represents a normal cost of doing business. The principal regulations affecting the day-to-day businesses are rules and regulations relating to transportation (such as regulations promulgated by the U.S. Department of Transportation and its state counterparts), employees (such as regulations implemented by the Occupational Safety and Health Administration, equal employment opportunity laws, guidelines implemented pursuant to the Americans with Disabilities Act and general federal and state employment laws), unionized labor (such as guidelines imposed by the National Labor Relations Act) and U.S. and Canadian regulations relating to national parks (such as regulations established by the U.S. Department of the Interior and the U.S. National Park Service).
Some of Viad’s current and former businesses are subject to U.S. federal and state environmental regulations including laws enacted under the Comprehensive Environmental Response, Compensation and Liability Act, or its state law counterparts. Compliance with federal, state and local environmental, health and safety provisions, including, but not limited to, those regulating the discharge of materials into the environment and other actions relating to the environment, have not had, and are not expected to have, a material effect on Viad’s capital expenditures, competitive position, financial condition or results of operations. See “Item 1A - Risk Factors - Liabilities relating to prior and discontinued operations may adversely affect results of operations”

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for a discussion of the risks related to liabilities arising from the Company’s compliance with federal, state and local environmental laws, which is incorporated herein by reference.
Employees
Viad’s businesses had approximately 3,810 employees as of December 31, 2014 as follows:
 
Approximate
Number of
Employees
 
Regular Full-Time
Employees Covered by
Collective Bargaining
Agreements
Marketing & Events Group
3,143

 
1,053

Travel & Recreation Group
529

 
98

Viad Corporate and Shared Services Group
138

 

Total
3,810

 
1,151

Viad believes that relations with its employees are satisfactory and that collective-bargaining agreements expiring in 2015 will be renegotiated in the ordinary course of business without a material adverse effect on Viad’s operations.
Viad is governed by a Board of Directors comprised of eight non-employee directors and one employee director, and has an executive management team consisting of six executive officers.
Seasonality
Exhibition and event activity for the U.S. and the International segments varies significantly depending on the frequency and timing of shows (some shows are not held each year and some may shift between quarters). The Travel & Recreation Group segment experiences peak activity during the summer months and during 2014, 85 percent of its revenue was earned in the second and third quarters. Viad’s average segment operating income during the past three years, as a percentage of the average full year’s segment operating income during the past three years, was approximately 23 percent (first quarter), 26 percent (second quarter), 61 percent (third quarter) and negative 10 percent (fourth quarter). See “Viad’s businesses are seasonal, which causes results of operations to fluctuate and makes results of operations particularly sensitive to adverse events during peak periods” and “Exhibition rotation impacts overall profitability and makes comparisons between periods difficult” under “Item 1A Risk Factors,” which are incorporated herein by reference; also refer to Note 22, Segment Information and Note 25, Condensed Consolidated Quarterly Results (Unaudited), of Notes to Consolidated Financial Statements.
Financial Information about Restructuring Charges
Information regarding restructuring charges is provided in Note 19, Restructuring Charges, of Notes to Consolidated Financial Statements.
Financial Information about Segments
Business segment financial information is provided in Note 22, Segment Information, of Notes to Consolidated Financial Statements.
Financial Information about Geographic Areas
Geographic area financial information is provided in Note 22, Segment Information, of Notes to Consolidated Financial Statements.
Available Information
Viad’s internet address is www.viad.com. Viad uses its web site as a routine channel for distribution of Company information, press releases, financial information and corporate governance initiatives. Viad posts filings as soon as reasonably practicable after they are electronically filed with, or furnished to, the U.S. Securities and Exchange Commission (“SEC”), including Viad’s annual, quarterly and current reports, proxy statements, amendments to those reports or statements and other information, as well as transactions in Viad securities by Viad’s directors and executive officers. All such postings and filings are available on Viad’s web site free of charge. In addition, Viad’s web site allows interested persons to sign up to automatically receive e-mail alerts when the Company posts news releases and financial information. The SEC’s web site, www.sec.gov, contains reports, proxy and information statements and other information regarding issuers that file electronically with the SEC. Such information

7


also can be read and copied at the SEC’s public reference section, located in Room 1580, 100 F Street N.E., Washington, D.C. 20549. Information regarding the operation of the public reference section can be obtained by calling (800) SEC-0330. The content on any web site referred to in this Form 10-K is not incorporated by reference in this Form 10-K unless expressly noted.
Viad’s web site, http://viad.investorroom.com/, includes key information about the Company’s corporate governance initiatives, including its Corporate Governance Guidelines, charters of the committees of the Board of Directors, Code of Ethics and information concerning Viad’s directors and a method to communicate with them. Viad will make available in print any of this information upon request to: Corporate Secretary, Viad Corp, 1850 North Central Avenue, Suite 1900, Phoenix, Arizona 85004-4565.
Item 1A. Risk Factors.
Viad’s operating results are subject to known and unknown risks. As a result, past financial performance and historical trends may not be reliable indicators of future performance.
Viad’s future payment of special dividends should not be relied upon as a way to realize any future gains on an investment.
The Board of Directors generally declares and pays regular dividends to Viad’s shareholders on a quarterly basis and also has paid special dividends, most recently in February 2014. The decision to declare a special dividend and the amount, timing and payment of any such dividend are at the sole discretion of the Board. Factors in any decision to declare a dividend would include the amount of funds legally available and an evaluation of the Company’s financial condition, capital requirements, future prospects and other factors deemed relevant by the Board. Accordingly, investors should not rely on the future payment of special dividends as a way to realize gains on their investment.
Viad’s businesses and operating results are adversely affected by deterioration in general economic conditions.
Viad’s businesses are sensitive to fluctuations in general economic conditions and are impacted by increases and decreases in the cost of materials and operating supplies. Operating results for the Marketing & Events U.S. and International segments depend largely on the number of exhibitions held and on the size of exhibitors’ marketing expenditures, which in turn depend partly on the strength of particular industries in which exhibitors operate. The number and size of exhibitions generally decrease when the economy weakens.
Further, many exhibitors’ marketing budgets are partly discretionary, and are frequently among the first expenditures reduced by exhibitors when economic conditions deteriorate, resulting in reduced spending by exhibitors for the Company’s services. Marketing expenditures often are not increased until economic conditions improve. As a result, during periods of general economic weakness, the operating results for the Marketing & Events Group are adversely affected. Similarly, many of the retail shopping mall and lifestyle center clients of the Marketing & Events Group may reduce marketing expenditures when economic conditions deteriorate.
Revenues from the Travel & Recreation Group businesses depend largely on the amount of disposable income that consumers have available for travel and vacations. This amount decreases during periods of weak general economic conditions.
Viad’s results of operations are impacted by changes in foreign currency exchange rates.
Viad conducts foreign operations primarily in Canada, the United Kingdom and, to a lesser extent, in certain other countries. The functional currency of Viad’s foreign subsidiaries is their local currency. Accordingly, for purposes of consolidation, Viad translates the assets and liabilities of its foreign subsidiaries into U.S. dollars at the foreign exchange rates in effect at the balance sheet date. The unrealized gains or losses resulting from the translation of those foreign denominated assets and liabilities are included as a component of accumulated other comprehensive income in Viad’s consolidated balance sheets. Significant fluctuations in foreign exchange rates relative to the U.S. dollar may result in material changes to Viad’s net equity position reported in its consolidated balance sheets. Viad has not hedged its equity risk arising from the translation of foreign denominated assets and liabilities.
In addition, for purposes of consolidation, the revenue, expenses and gains and losses related to Viad’s foreign operations are translated into U.S. dollars at the average foreign exchange rates for the period. As a result, Viad’s consolidated results of operations are exposed to fluctuations in foreign exchange rates, even when the functional currency amounts have not changed. Accordingly, fluctuations in the exchange rates affect overall profitability and historical period-to-period comparisons. Viad has not hedged its net earnings exposure arising from the translation of its foreign operating results.

8


During 2014, the Marketing & Events Group derived approximately 26 percent of its revenue and 33 percent of its segment operating income from its International segment. The Travel & Recreation Group derived approximately 75 percent of its 2014 revenue and 90 percent of its 2014 segment operating income from its Canadian operations. For this segment, Canadian operations are largely dependent on foreign customer visitation, and accordingly, increases in the value of the Canadian dollar as compared to other currencies could adversely affect customer volumes, and, therefore, revenue and segment operating income in the Travel & Recreation Group.
Exhibition rotation impacts overall profitability and makes comparisons between periods difficult.
The business activities of the Marketing & Events Group are largely dependent upon the frequency, timing and location of exhibitions and events. Some large exhibitions are not held annually (they may be held once every two or three years or longer). Some large exhibitions may be held at a different time of year than when they have historically been held. In addition, the same exhibition may be held in different locations in different years, and may result in Viad generating lower margins in a given period if the exhibition shifts to a higher-cost city.
As a consequence of those factors, the operating results for those businesses may fluctuate significantly from quarter to quarter or from year to year, making periodic comparisons difficult.
Viad’s businesses are adversely affected by disruptions in the travel industry, particularly those adversely affecting the hotel and airline industries.
The success of Viad’s businesses depends largely on the ability and willingness of people, whether exhibitors, exhibition attendees or others, to travel. Factors adversely affecting the travel industry as a whole, and particularly the airline and hotel industries, generally also adversely affect Viad’s businesses and results of operations. Factors that could adversely affect the travel industry as a whole include high or rising fuel prices, increased security and passport requirements, weather conditions, airline accidents and international political instability and hostilities. Unexpected events of this nature, or other events that may have an impact on the availability and pricing of air travel and accommodations, could adversely affect Viad’s businesses and results of operations.
The failure of a large client to renew its services contract or the loss of business from convention facilities could adversely impact revenue.
Although no single client accounted for more than 6.3 percent of the revenue of any of Viad’s reporting segments in 2014, the Marketing & Events U.S. and International segments have a relatively small number of large exhibition show organizers and large customer accounts. The loss of any of these large clients could adversely affect Viad’s results of operations.
In addition, revenue of the Marketing & Events Group may be significantly impacted if certain exhibition facilities choose to in-source electrical, plumbing or other services. When the Marketing & Events Group is hired as the official services contractor for an exhibition, the show organizer contractually grants an exclusive right to perform those electrical and plumbing services, subject in each case to the exhibition facility’s option to in-source the services (either by performing the services themselves or by hiring a separate service provider). Many exhibition facilities are under financial pressure as a result of conditions generally affecting their industry, including an increased supply of exhibition space. As a result, some of those facilities have sought to in-source all or a large portion of those services. If a large number of facilities with which the Marketing & Events Group has those relationships moves those services in-house, Viad’s revenue and operating results could be adversely affected.
Viad’s key businesses are relationship driven.
The business activities of the Marketing & Events U.S. and International segments are heavily focused on client relationships, and, specifically, on the close collaboration and interaction with the client. Those relationships require the account team to become attuned to the client’s desires and expectations in order to provide top-quality service. Viad has in the past lost, and may in the future lose, important clients (and corresponding revenue) if a key member of the account team were to cease employment with the Company and take those customers to a competitor.
Completed acquisitions may not perform as anticipated or be integrated as planned.
Viad has acquired businesses and intends to continue to pursue opportunities to acquire businesses that complement, enhance or expand Viad’s current businesses or offer growth opportunities to Viad. Any acquisition can involve a number of risks, including the failure to achieve the financial and strategic goals and other benefits from the acquisition; the inability to successfully integrate the acquired business into Viad’s ongoing businesses; the inability to retain key personnel or customers of the acquired business; the inability to successfully integrate financial reporting and internal control systems; increased debt;

9


new regulatory requirements; the disruption of Viad’s ongoing businesses and distraction of senior management and employees of Viad from other opportunities and challenges due to the integration of the acquired business; and the potential existence of liabilities or contingencies not disclosed to or known by Viad prior to closing the acquisition or not otherwise provided for through the purchase agreement. If Viad makes changes to its business strategy or if external conditions adversely affect its business operations, the Company may also be required to record an impairment charge to goodwill or intangible assets.
Viad’s businesses are seasonal, which causes results of operations to fluctuate and makes results of operations particularly sensitive to adverse events during peak periods.
Exhibition and event activity for the U.S. and International segments varies significantly depending on the frequency and timing of shows, as some shows are not held each year and some may shift between quarters. The Travel & Recreation Group businesses are generally also seasonal, experiencing peak activity during the second and third quarters. Those quarters accounted for 85 percent of the segment’s 2014 revenue. Because of the seasonal nature of Viad’s businesses, adverse events or conditions occurring during peak periods could adversely affect the operating results of Viad’s businesses.
New capital projects may not be commercially successful.
From time to time, in an effort to seize opportunities that complement, enhance and expand its businesses, Viad pursues new capital projects. Capital projects are subject to a number of risks, including unanticipated delays and cost overruns, failure to achieve established financial and strategic goals and the inability to successfully integrate into Viad’s ongoing businesses, as well as additional risks specific to a project. The occurrence of any of the events described above could prevent a new capital project from performing in accordance with Viad’s commercial expectations and could have a material adverse effect on its businesses and results of operations.
Transportation disruptions and increases in transportation costs could adversely affect Viad’s businesses and operating results.
The Marketing & Events U.S. and International segments rely on independent transportation carriers to send materials and exhibits to and from exhibitions, warehouse facilities and customer facilities. If they were unable to secure the services of those independent transportation carriers at favorable rates, it could have a material adverse effect on these businesses and their results of operations. In addition, disruption of transportation services because of weather-related problems, strikes, lockouts or other events could adversely affect their ability to supply services to customers and could cause the cancellation of exhibitions, which may have a material adverse effect on its businesses and operating results. Similarly, disruption of transportation services could adversely affect the ability of the Marketing & Events Group to supply time-sensitive holiday-themed exhibits and experiences to retail shopping mall and lifestyle center customers and could cause the cancellation of the exhibits and experiences.
Union-represented labor creates an increased risk of work stoppages and higher labor costs.
A significant portion of Viad’s employees are unionized and Viad’s businesses are party to approximately 100 collective-bargaining agreements, with approximately one-third requiring renegotiation each year. If the results of labor negotiations caused the Company to increase wages or benefits, which increases total labor costs, the increased costs could either be absorbed (which would adversely affect operating margins) or passed on to customers, which may lead customers to turn to other vendors in response to higher prices. In either event, Viad’s businesses and results of operations could be adversely affected.
Moreover, if the Company were unable to reach an agreement with a union during the collective-bargaining process, the union may strike or carry out other types of work stoppages. In such a circumstance, Viad might be unable to find substitute workers with the necessary skills to perform many of the services, or may incur additional costs to do so, which could adversely affect the Company’s businesses and results of operations.
Obligations to fund multi-employer pension plans to which Viad contributes may have an adverse impact on operating results.
Viad’s businesses contribute to various multi-employer pension plans based on obligations arising under collective-bargaining agreements covering its union-represented employees. Viad’s contributions to those multi-employer plans in 2014 and 2013 totaled $23.2 million and $20.3 million, respectively. Viad does not directly manage those multi-employer plans, which are generally managed by boards of trustees. Based upon the information available to Viad from plan administrators, management believes that several of those multi-employer plans are underfunded. The Pension Protection Act of 2006 requires pension plans underfunded at certain levels to reduce, over defined time periods, the underfunded status. In addition, under current laws, the termination of a plan, or a voluntary withdrawal from a plan by Viad, or a shrinking contribution base to a plan as a result of the insolvency or withdrawal of other contributing employers to such plan, would require Viad to make payments to such plan

10


for its proportionate share of the plan’s unfunded vested liabilities. Viad cannot determine at this time the amount of additional funding, if any, it may be required to make to those plans. However, plan contribution increases, if any, could have an adverse impact on Viad’s consolidated financial condition, results of operations and cash flows.
Viad competes in competitive industries and increased competition could negatively impact operating results.
Viad is engaged in a number of highly competitive industries. Competition in the exhibition and events industry and the exhibits and experiential environments industries is driven by price and service quality, among other factors. To the extent competitors seek to gain or retain their market presence through aggressive underpricing strategies, Viad may be required to lower its prices and rates to avoid loss of related business, thereby adversely affecting operating results. In addition, if Viad is unable to anticipate and respond as effectively as competitors to changing business conditions, including new technologies and business models, Viad could lose market share to its competitors. If Viad were unable to meet the challenges presented by the competitive environment, results of operations could be adversely affected.
Liabilities relating to prior and discontinued operations may adversely affect results of operations.
Viad and its predecessors have a corporate history spanning over eight decades and involving approximately 2,400 previous subsidiaries in diverse businesses, such as the manufacturing of locomotives, buses, industrial chemicals, fertilizers, pharmaceuticals, leather, textiles, food and fresh meats. Some of those businesses used raw materials that have been, and may continue to be, the subject of litigation. Moreover, some of the raw materials used and the waste produced by those businesses have been and are the subject of U.S. federal and state environmental regulations, including laws enacted under the Comprehensive Environmental Response, Compensation and Liability Act, or its state law counterparts. In addition, Viad may incur other liabilities, resulting from indemnification claims involving sold subsidiaries, as well as from past operations of predecessors or their subsidiaries. Although the Company believes it has adequate reserves and sufficient insurance coverage to cover those future liabilities, results of operations could be materially affected if future events or proceedings contradict current assumptions, and reserves or insurance become inadequate.
Terrorist attacks, natural disasters or other catastrophic events may have a negative effect on Viad’s business
The occurrence of catastrophic events ranging from natural disasters (such as hurricanes and floods), health epidemics or pandemics, acts of war or terrorism, or the prospect of these events could disrupt Viad’s businesses. Such catastrophic events could impact the Marketing & Events Group’s production facilities, preventing the Company from timely completing exhibit fabrication and other projects for customers, and also could cause a cancellation of exhibitions and other events held in public venues or a disruption in the services the Company provides to its customers at convention centers, exhibition halls, hotels and other public venues. Such catastrophic events also could adversely impact the Travel & Recreation Group businesses, which are heavily dependent on the ability and willingness of its guests to travel. The guests serviced by the Travel & Recreation Group tend to delay or postpone vacations if natural conditions differ from those that typically prevail at competing lodges, resorts and attractions during a given season, and catastrophic events could impede the guests’ ability to travel, interrupt the Company’s business operations and/or cause damage to the Company’s properties. If the conditions arising from such events persist or worsen, Viad could experience continuing or increased adverse effects on its results of operations and financial condition.
Improper disclosure of personal data could result in liability and harm the Company’s reputation.
Viad’s businesses store and process a significant amount of personally identifiable information in connection with the services they provide to customers. If the Company’s security controls over personal data, training of employees and vendors on data security and other practices and procedures do not prevent the improper disclosure of personally identifiable information, the Company’s reputation could be harmed, and the Company could face legal exposure to customers and other liabilities under laws that protect personal data, resulting in increased costs or loss of revenue. Certain of the Company’s services also enable its customers to store and process personal data. Perceptions that the Company’s services do not adequately protect the privacy of personal information could adversely affect Viad’s businesses and results of operations.
Item 1B. Unresolved Staff Comments.
None.

11


Item 2. Properties.
Viad’s businesses operate service or production facilities and maintain sales and service offices in the United States, Canada, the United Kingdom, Germany, the United Arab Emirates and the Netherlands. The principal properties of Viad are operated by the Marketing & Events Group, the Travel & Recreation Group and Viad Corporate and Shared Services as follows:
Marketing & Events U.S. Segment. The Marketing & Events U.S. segment operates 19 offices and 24 multi-use facilities (manufacturing, sales and design, office, storage and/or warehouse and truck marshaling yards). The multi-use facilities vary in size up to approximately 592,100 square feet. Two of the multi-use facilities are owned; all other properties are leased.
Marketing & Events International Segment. The Marketing & Events International segment operates 12 offices and 22 multi-use facilities, with three offices and nine multi-use facilities in Canada, four offices and eight multi-use facilities in the United Kingdom, one office and two multi-use facilities in Germany, one office and three multi-use facilities in the United Arab Emirates and three offices and one multi-use facility in the Netherlands. The multi-use facilities vary in size up to approximately 133,600 square feet. All properties are leased.
Travel & Recreation Group Segment. The Travel & Recreation Group segment operates four offices, 20 retail stores, one bus terminal, five garages, an icefield attraction, an observation platform attraction, a gondola lift attraction, a boat tour attraction and 12 hotels/lodges (including ancillary food service and recreational facilities). All of the facilities are in the United States or Canada. The bus terminal, all of the hotels/lodges, one office, four garages, the icefield attraction, the gondola lift attraction, the observation platform attraction and the boat tour attraction are owned. One garage and three offices are leased, and three hotels/lodges, an office and all of the garages and attractions are situated on land subject to multiple long-term ground leases with the Canadian government.
Viad Headquarters. The Company’s headquarters are leased and approximate 24,700 square feet, and are located at 1850 North Central Avenue, Suite 1900 in Phoenix, Arizona 85004-4565.
Management believes that the Company’s facilities in the aggregate are adequate and suitable for their purposes and that capacity is sufficient for current needs.
Item 3. Legal Proceedings.
Viad and certain subsidiaries are plaintiffs or defendants to various actions, proceedings and pending claims, some of which involve, or may involve, compensatory, punitive or other damages. Litigation is subject to many uncertainties and it is possible that some of the legal actions, proceedings or claims could be decided against Viad. Although the amount of liability as of December 31, 2014 with respect to certain of these matters is not ascertainable, Viad believes that any resulting liability, after taking into consideration amounts already provided for and insurance coverage, will not have a material effect on Viad’s business, financial condition or results of operations.
Viad is subject to various U.S. federal, state and foreign laws and regulations governing the prevention of pollution and the protection of the environment in the jurisdictions in which Viad has or had operations. If the Company has failed to comply with these environmental laws and regulations, civil and criminal penalties could be imposed and Viad could become subject to regulatory enforcement actions in the form of injunctions and cease and desist orders. As is the case with many companies, Viad also faces exposure for actual or potential claims and lawsuits involving environmental matters relating to its past operations. Although it is a party to certain environmental disputes, Viad believes that any resulting liabilities, after taking into consideration amounts already provided for and insurance coverage, will not have a material effect on the Company’s financial condition or results of operations. Refer to “Business - Government Regulation and Compliance” in Item 1; also refer to Note 21, Litigation, Claims, Contingencies and Other of Notes to Consolidated Financial Statements.
Item 4. Mine Safety Disclosures.
None.

12


Other. Executive Officers of the Registrant.
The names, ages and positions of Viad’s executive officers as of the filing of this Annual Report are listed below:
Name
Age
 
Business Experience During the Past Five Years and Other Information
Steven W. Moster
45
 
President and Chief Executive Officer of Viad since December 2014; Group President of the Marketing & Events Group since May 2011; President of GES, a wholly-owned subsidiary of Viad, since November 1, 2010; prior thereto, independent consultant providing marketing and sales consultation services to 3 Day Blinds Corporation, a manufacturer and retailer of custom window coverings, from April 2010 to August 2010; prior thereto, Executive Vice President-Chief Sales & Marketing Officer of GES from January 2008 to February 2010; prior thereto, Executive Vice President-Products and Services of GES from January 2005 to February 2010; prior thereto Vice President-Products & Services Business of GES from January 2004 to January 2005; and prior thereto, Engagement Manager, Management Strategy Consulting for McKinsey & Company, a multinational management consulting firm, from August 2000 to January 2004.

Deborah J. DePaoli
50
 
General Counsel and Secretary since May 2011; prior thereto, Deputy General Counsel and Assistant Secretary since 2009; prior thereto, Assistant General Counsel and Assistant Secretary since 2004; prior thereto, held other attorney positions since joining Viad in 2000; prior thereto, Vice President and General Counsel, Outings on the Links, Inc. since 1996; and prior thereto, Senior Associate and various legal positions with Gallagher & Kennedy, P.A. since 1991.
Ellen M. Ingersoll
50
 
Chief Financial Officer since July 2002; prior thereto, Vice President-Controller or similar position since January 2002; prior thereto, Controller of CashX, Inc., a service provider of stored value internet cards, from June 2001 through October 2001; prior thereto, Operations Finance Director of LeapSource, Inc., a provider of business process outsourcing, since January 2000; and prior thereto, Vice President and Controller of Franchise Finance Corporation of America since May 1992.
Thomas M. Kuczynski
50
 
Chief Corporate Development & Strategy Officer since March 2008; prior thereto, Senior Vice President, Corporate Development & Planning of The Nielsen Company, a media and marketing information company, since August 2006; prior thereto, Managing Director of The Pareto Group, a provider of strategic and investment advisory services, since January 2004; and prior thereto, Vice President of Penton Media, Inc., a business media firm producing magazines, trade shows, conferences and electronic media, from January 1999 to October 2003.
Kelly A. Smith

51
 
Chief Marketing & Commercial Officer since October 2014; prior thereto, Chief Marketing Officer of The Pampered Chef, a provider of high quality cookware through a distributor network of independent consultants, from 2012 to 2014; prior thereto, Senior Vice President, Corporate Marketing of NAVTEQ Corporation, a provider of geographic information systems data and electronic navigable maps, from 2008 to 2012; prior thereto, VP, Global Marketing & Communications of NAVTEQ Corporation from 2003 to 2007; prior thereto, VP, North America Marketing & Communications of NAVTEQ Corporation from 2001 to 2003; and prior thereto, various marketing positions at Leo Burnett and DMB&B, multinational advertising agencies servicing blue-chip clients.

Leslie S. Striedel

52
 
Chief Accounting Officer since April 2014; prior thereto, Vice President of Finance from March 2014 to April 2014; prior thereto, Vice President of Finance and Administration or similar positions with Colt Defense LLC, a designer, developer and manufacturer of firearms for military, personal defense and recreational purposes, from 2010 to 2013; prior thereto, Vice President of Finance, Director of Financial Reporting and Compliance and Corporate Controller of White Electronics Designs Corp. (now a subsidiary of Microsemi Corporation), a $100 million public company manufacturing circuits and semiconductors, from 2004 to 2010; and prior thereto, Corporate Controller of MD Helicopters, an international helicopter manufacturer, Corporate Controller of Fluke Networks (formerly Microtest, Inc.), a publicly-traded manufacturing and technology company, and Senior Tax Manager of KPMG LLP.

The term of office of the executive officers is until the next annual organization meeting of the Board of Directors of Viad, which is scheduled for May 21, 2015.


13


PART II
Item 5. Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities.
The principal market on which Viad’s common stock is traded is the New York Stock Exchange. The common stock is also admitted for trading on the Chicago and National Exchanges. The following tables summarize the high and low market prices as reported on the NYSE Euronext Composite Tape and the cash dividends declared for the two years ended December 31:
SALES PRICE RANGE OF COMMON STOCK
 
2014
 
2013
 
High
 
Low
 
High
 
Low
First Quarter
$
28.62

 
$
23.27

 
$
28.59

 
$
25.26

Second Quarter
$
25.52

 
$
21.95

 
$
27.71

 
$
23.49

Third Quarter
$
23.27

 
$
20.22

 
$
28.46

 
$
21.89

Fourth Quarter
$
27.41

 
$
19.92

 
$
28.97

 
$
23.91

DIVIDENDS DECLARED ON COMMON STOCK
 
2014
 
2013
January
$
1.50

 
$

February
0.10

 
0.10

May
0.10

 
0.10

August
0.10

 
0.10

October

 
2.50

December
0.10

 
0.10

Total
$
1.90

 
$
2.90

Quarterly dividends were paid on Viad’s common stock on the first business day of January, April, July and October. In addition on January 24, 2014 and October 25, 2013, Viad announced that its Board of Directors declared special cash dividends of $1.50 and $2.50 per share, respectively, to shareholders of record at the close of business on February 7, 2014 and November 7, 2013, respectively. Effective December 2014, the Company entered into an Amended and Restated Credit Agreement (the “Credit Agreement”). The terms of the Credit Agreement allow Viad to pay dividends or purchase the Company’s common stock up to $20 million in the aggregate in any calendar year, with additional dividends, share repurchases or distributions of stock permitted if the Company’s leverage ratio is less than or equal to 2.00 to 1.00, and the Liquidity Amount (defined as cash in the U.S. and Canada plus available revolver borrowings on a pro forma basis) is not less than $100 million, and no default or unmatured default, as defined in the Credit Agreement, exists. For additional information, refer to Note 11, Debt, of Notes to Consolidated Financial Statements.
As of January 31, 2015, there were a total of 7,114 shareholders of record of Viad’s common stock, including 486 shareholders that had not converted their shares following a stock split effective on July 1, 2004.
For information regarding security ownership of certain beneficial owners and management and related shareholder matters, refer to Part III, “Item 12, Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters” in this Annual Report.






14


SHAREHOLDER RETURN PERFORMANCE GRAPH
Set forth below is a line graph comparing, for the five-year period ended December 31, 2014, the yearly percentage change in the cumulative total shareholder return on Viad’s common stock to the cumulative total return of the Standard & Poor’s SmallCap 600 Media Index, Standard & Poor’s SmallCap 600 Commercial Services & Supplies Index, Standard & Poor’s SmallCap 600 Index, Russell 2000 Index and Standard & Poor’s 500 Index.
The graph below assumes $100 was invested on December 31, 2009 in Viad’s common stock, Standard & Poor’s SmallCap 600 Media Index, Standard & Poor’s SmallCap 600 Commercial Services & Supplies Index, Standard & Poor’s SmallCap 600 Index, Russell 2000 Index and Standard & Poor’s 500 Index with reinvestment of all dividends.
 
Year Ended December 31,
 
2009
 
2010
 
2011
 
2012
 
2013
 
2014
Viad Corp
$
100.00

 
$
124.44

 
$
86.08

 
$
135.55

 
$
154.76

 
$
160.53

S&P 500
$
100.00

 
$
115.06

 
$
117.49

 
$
136.27

 
$
180.40

 
$
205.05

Russell 2000
$
100.00

 
$
126.81

 
$
121.51

 
$
141.40

 
$
196.29

 
$
205.93

S&P SmallCap 600
$
100.00

 
$
126.29

 
$
127.57

 
$
148.36

 
$
209.65

 
$
221.68

S&P 600 Comm. Services & Supplies
$
100.00

 
$
116.75

 
$
102.09

 
$
133.50

 
$
191.45

 
$
190.14

S&P 600 Media Index
$
100.00

 
$
147.21

 
$
113.73

 
$
129.33

 
$
210.35

 
$
246.76


Set forth below is a table showing the total number of shares of Viad’s common stock that were repurchased during the fourth quarter of 2014 by Viad either on the open market as part of a repurchase program or from employees, former employees and non-employee directors surrendering previously owned Viad common stock (outstanding shares) to pay the taxes in connection with the vesting of restricted stock awards.

15





ISSUER PURCHASES OF EQUITY SECURITIES
Period
Total Number of Shares Purchased (#)
 
Average Price Paid
Per Share ($)
 
Total Number of Shares Purchased as Part of publicly
Announced Plans or Programs
 
Maximum Number (or
Approximate Dollar
Value) of Shares that
May Yet Be Purchased
Under the Plans or Programs(1)
November 2014
1,543

 
24.61

 

 
582,002

December 2014
25,518

 
25.34

 

 
582,002

Total
27,061

 
25.30

 

 
582,002

 (1) Viad has announced the authorization of its Board of Directors to repurchase shares of the Company’s common stock from time to time at prevailing market prices. No shares were repurchased on the open market during 2013. As of December 31, 2014, 582,002 shares remained available for repurchase. The authorization of the Board of Directors does not have an expiration date. Subsequent to December 31, 2014, the Company repurchased141,462 shares on the open market at a cost of approximately $3.8 million. Refer to Note 26, Subsequent Event, of Notes to Consolidated Financial Statements.

Effective December 2014, the Company entered into an Amended and Restated Credit Agreement (the “Credit Agreement”). The terms of the Credit Agreement allow Viad to pay dividends or purchase the Company’s common stock up to $20 million in the aggregate in any calendar year, with additional dividends, share repurchases or distributions of stock permitted if the Company’s leverage ratio is less than or equal to 2.00 to 1.00, and the Liquidity Amount (defined as cash in the U.S. and Canada plus available revolver borrowings on a pro forma basis) is not less than $100 million, and no default or unmatured default, as defined in the Credit Agreement, exists. For additional information, refer to Note 11, Debt, of Notes to Consolidated Financial Statements.

16


Item 6. Selected Financial Data.
VIAD CORP
SELECTED FINANCIAL AND OTHER DATA
 
Year Ended December 31,
(in thousands, except for per share data)
2014
 
2013
 
2012
 
2011
 
2010
Statement of Operations Data(1)
 
 
 
 
 
 
 
 
 
Revenues(2):
 
 
 
 
 
 
 
 
 
Exhibition and event services
$
772,770

 
$
685,350

 
$
726,429

 
$
670,054

 
$
590,444

Exhibits and environments
171,698

 
159,554

 
175,611

 
170,496

 
166,040

Travel and recreation services(3),(4)
120,519

 
108,443

 
104,604

 
87,219

 
70,014

Total revenues
$
1,064,987

 
$
953,347

 
$
1,006,644

 
$
927,769

 
$
826,498

Income (loss) from continuing operations(5)
$
41,178

 
$
19,320

 
$
3,553

 
$
7,544

 
$
(1,637
)
Income from discontinued operations(6)
14,389

 
2,366

 
3,030

 
2,199

 
2,716

Net income
55,567

 
21,686

 
6,583

 
9,743

 
1,079

Net income attributable to noncontrolling interest
(3,213
)
 
(131
)
 
(686
)
 
(533
)
 
(636
)
Net income (loss) attributable to Viad
$
52,354

 
$
21,555

 
$
5,897

 
$
9,210

 
$
443

Diluted Income (Loss) per Common Share
 
 
 
 
 
 
 
 
 
Income (loss) from continuing operations attributable to Viad common stockholders(5)
$
2.02

 
$
0.96

 
$
0.17

 
$
0.36

 
$
(0.09
)
Income from discontinued operations attributable to Viad common stockholders(6)
0.57

 
0.10

 
0.12

 
0.09

 
0.11

Net income attributable to Viad common stockholders
$
2.59

 
$
1.06

 
$
0.29

 
$
0.45

 
$
0.02

Weighted-average outstanding and potentially dilutive common shares
20,133

 
20,265

 
20,005

 
20,055

 
20,277

Basic Income (Loss) per Common Share
 
 
 
 
 
 
 
 
 
Income (loss) from continuing operations attributable to Viad common stockholders(5)
$
2.02

 
$
0.96

 
$
0.17

 
$
0.36

 
$
(0.09
)
Income from discontinued operations attributable to Viad common stockholders(6)
0.57

 
0.10

 
0.12

 
0.09

 
0.11

Net income attributable to Viad common stockholders
$
2.59

 
$
1.06

 
$
0.29

 
$
0.45

 
$
0.02

Weighted-average outstanding common shares
19,804

 
19,850

 
19,701

 
19,719

 
19,955

Dividends declared per common share
$
1.90

 
$
2.90

 
$
0.28

 
$
0.16

 
$
0.16

Balance Sheet Data at Year-End
 
 
 
 
 
 
 
 
 
Total assets
$
714,943

 
$
561,932

 
$
650,577

 
$
617,828

 
$
616,503

Total debt and capital lease obligations
141,020

 
11,668

 
2,226

 
3,239

 
9,077

Total stockholders’ equity
347,702

 
356,543

 
397,032

 
386,179

 
386,711

Noncontrolling interest
12,315

 
9,102

 
8,971

 
8,285

 
7,752

Other Data
 
 
 
 
 
 
 
 
 
Adjusted EBITDA(7)
$
73,954

 
$
59,157

 
$
53,971

 
$
40,527

 
$
28,372

(1) 2013 and prior years have been adjusted for discontinued operations associated with the expiration of the Glacier Park concession contract on December 31, 2013.
(2) 2014 amounts include an aggregate $21.2 million in revenue from the following acquisitions that occurred throughout 2014: West Glacier Properties, Blitz, onPeak and N200. Refer to Note 3, Acquisition of Businesses, of Notes to Consolidated Financial Statements.
(3) 2012 amounts include $5.2 million in revenue from the Banff International Hotel which was acquired in March 2012.
(4) 2011 amounts include an aggregate $9.7 million in revenue from Grouse Mountain Lodge, St. Mary Lodge, Denali Backcountry Lodge and Denali Cabins which were acquired in 2011.

17


(5) Income from continuing operations includes the following items:
Restructuring charges, net of tax, of $1.0 million, $2.6 million, $3.3 million, $2.5 million and $2.6 million in 2014, 2013, 2012, 2011, and 2010, respectively. Refer to Note 19, Restructuring Charges, of Notes to Consolidated Financial Statements.
Impairment charges, net of tax, of $0.5 million, $1.6 million and $0.3 million in 2014, 2013, and 2010, respectively. Refer to Note 6, Property and Equipment and Note 8, Goodwill and Other Intangible Assets, of Notes to Consolidated Financial Statements.
Income tax expense in 2014 included a release of $11.7 million of the valuation allowance related to our foreign tax credit and state NOL carryforwards. Refer to Note 17, Income Taxes, of Notes to Consolidated Financial Statements.
Income tax expense in 2012 included a $13.4 million valuation allowance for certain deferred assets associated with foreign tax credit carryforwards. Refer to Note 17, Income Taxes, of Notes to Consolidated Financial Statements.
(6) The amounts primarily relate to the gain on the possessory interest and personal property proceeds from the expiration of the Glacier Park concession contract in 2014, the sale of land in 2013 and 2012 associated with previously sold operations and the operations related to the Glacier Park concession contract and obligations associated with previously sold operations for 2010-2013. Refer to Note 24, Discontinued Operations, of Notes to Consolidated Financial Statements.
(7) See Item 7, “Management’s Discussion and Analysis of Financial Condition and Results of Operations” for a discussion of “Non-GAAP Measure.”

18


Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations.
The following discussion should be read in conjunction with Viad Corp’s consolidated financial statements and related notes. This discussion contains forward-looking statements that involve risks and uncertainties. Viad Corp’s actual results could differ materially from those anticipated due to various factors discussed under “Risk Factors,” “Forward-Looking Statements” and elsewhere in this Annual Report.
Overview
Viad Corp (“Viad” or the “Company”) operates in three reportable business segments: Marketing & Events U.S., Marketing & Events International and Travel & Recreation Group.
The Marketing & Events Group, comprised of Global Experience Specialists, Inc. and affiliates (“GES”), is a global event marketing company that helps clients gain more awareness, more involvement and more value from their trade show programs and other live events. The Marketing & Events Group specializes in all aspects of the design, planning and production of face-to-face events, immersive environments and brand-based experiences for clients, including show organizers, corporate brand marketers and retail shopping centers. The mission of the Marketing & Events Group is to create the world’s most meaningful and memorable experiences for show organizers, brand marketers, event attendees and retail shopping centers. Show organizers include for-profit and not-for-profit show owners as well as show management companies. Corporate brand marketers include exhibitors and domestic and international corporations that want to promote their brands, services and innovations, feature new products and build business relationships. Viad’s retail shopping center customers include major developers, owners and management companies of shopping malls and leisure centers.
On September 16, 2014, the Company acquired Blitz Communications Group Limited and affiliates (collectively, “Blitz”), which has offices in the United Kingdom and is a leading audio-visual staging and creative services provider for the live events industry in the United Kingdom and continental Europe. The purchase price was £15.0 million (approximately $24.4 million) in cash, subject to certain adjustments.
On October 7, 2014, the Company acquired onPeak LLC and Travel Planners, Inc. (collectively, “onPeak”) for a purchase price of $43.0 million and $33.7 million, respectively, in cash, subject to certain adjustments. Both acquired companies provide event accommodations services in North America to the live events industry.
On November 24, 2014, the Company acquired N200 Limited and affiliates (collectively, “N200”) for €9.7 million (approximately $12.1 million) in cash, subject to certain adjustments, plus an earnout payment (the “Earnout”) of up to €1.0 million. The amount of the Earnout is based on N200’s achievement of established financial targets for fiscal 2015 (ending June 30). N200, which has offices in the United Kingdom and the Netherlands, is a leading event registration and data intelligence services provider for the live events industry in the United Kingdom and the Netherlands.

The Travel & Recreation Group is an experiential leisure travel provider serving the needs of regional and long-haul visitors to iconic natural and cultural destinations in North America. The Travel & Recreation Group segment consists of Brewster Inc. (“Brewster”), Glacier Park, Inc. (“Glacier Park”) and Alaskan Park Properties, Inc. (“Alaska Denali Travel”). Brewster provides tourism products and experiential services in the Canadian Rockies in Alberta and in other parts of Western Canada. Brewster’s operations include the Banff Gondola, Columbia Icefield Glacier Adventure, Glacier Skywalk (opened May 2014), Banff Lake Cruise, motorcoach services, charter and sightseeing services, inbound package tour operations and hotel operations.

During 2014, Glacier Park owned and operated seven properties, with accommodation offerings varying from hikers’ cabins to hotel suites, including St. Mary Lodge, a 115-room, full-service resort lodge located outside the east entrance to Glacier National Park in St. Mary, Montana; Glacier Park Lodge, a historic lodge in East Glacier, Montana; Grouse Mountain Lodge, a full-season lodge offering golf, skiing in the winter, hiking in the summer and other seasonal recreational activities, located near Glacier National Park in Whitefish, Montana; the Prince of Wales Hotel in Waterton Lakes National Park, Alberta, Canada, which is situated on land for which the Company has a 42-year ground lease with the Canadian government running through January 31, 2052; the West Glacier Motel & Cabins in West Glacier, Montana, and Motel Lake McDonald and the Apgar Village Lodge, which are located inside Glacier National Park. Glacier Park also operates the food and beverage services with respect to those properties and the retail shops located near Glacier National Park. With regard to Glacier Park’s concession operations within Glacier National Park, refer to Note 24, Discontinued Operations, of Notes to Consolidated Financial Statements.

On July 1, 2014, the Company acquired the West Glacier Motel & Cabins, the Apgar Village Lodge and related land, food and beverage services and retail operations (collectively, the “West Glacier Properties”). The West Glacier Motel & Cabins is a 32-room property situated on approximately 200 acres at the west entrance of Glacier National Park, and its full-

19


service amenities include a restaurant, grocery store, gift shops, a gas station and employee accommodations. The Apgar Village Lodge is a 48-room property situated on a 3.8 acre private in-holding inside Glacier National Park with overnight accommodations, a gift shop and employee accommodations. The purchase price was $16.5 million in cash with a working capital adjustment of $0.3 million, subject to certain adjustments. For additional information, refer to Note 3Acquisition of Businesses, of Notes to Consolidated Financial Statements.
Alaska Denali Travel operates the Denali Backcountry Lodge and Denali Cabins. In addition to lodging, Alaska Denali Travel also provides food and beverage operations and package tour and transportation services in and around Denali National Park and Preserve.
Financial Highlights
The following 2014 financial highlights are presented in accordance with accounting principles generally accepted in the United States of America (“GAAP”):
Viad Corp (Consolidated)
Total revenues of $1.1 billion, an increase of 11.7 percent from 2013 revenues
Net income attributable to Viad of $52.4 million, as compared to $21.6 million in 2013
Diluted income per share of $2.59, as compared to $1.06 in 2013
Restructuring charges totaling $1.6 million primarily related to the elimination of certain positions in the Marketing & Events Group, partially offset by recoveries related to updated estimates of facility contractual arrangements
Income from discontinued operations of $14.4 million primarily related to the gain on the possessory interest and personal property at Glacier Park
Cash and cash equivalents were $57.0 million as of December 31, 2014
Debt was $141.0 million as of December 31, 2014
Marketing & Events U.S.
Revenues of $710.8 million, an increase of 13.0 percent from 2013 revenues
Segment operating income of $21.4 million, as compared to $11.0 million in 2013
Marketing & Events International
Revenues of $249.6 million, an increase of 8.9 percent from 2013 revenues
Segment operating income of $10.3 million, as compared to $9.1 million in 2013
Travel & Recreation Group
Revenues of $120.5 million, an increase of 11.1 percent from 2013 revenues
Segment operating income of $28.1 million, as compared to $21.8 million in 2013
Non-GAAP Measure:
The following discussion includes a presentation of Adjusted EBITDA, which is utilized by management to measure the profit and performance of Viad’s operations and to facilitate period-to-period comparisons. “Adjusted EBITDA” is defined by Viad as net income attributable to Viad before interest expense, income taxes, depreciation and amortization, impairment charges and recoveries, changes in accounting principles and the effects of discontinued operations. The presentation of Adjusted EBITDA is supplemental to results presented under GAAP and may not be comparable to similarly titled measures used by other companies. Adjusted EBITDA is considered a useful operating metric as potential variations arising from taxes, depreciation, debt service costs, impairment charges and recoveries, changes in accounting principles and the effects of discontinued operations are eliminated, thus resulting in an additional measure considered to be indicative of Viad’s ongoing operations. This non-GAAP measure should be considered in addition to, but not as a substitute for, other measures of financial performance reported in accordance with GAAP.
Management believes that the presentation of Adjusted EBITDA provides useful information to investors regarding Viad’s results of operations for trending, analyzing and benchmarking the performance and value of Viad’s business. Management uses Adjusted EBITDA primarily as a performance measure and believes that the GAAP financial measure most directly comparable to this non-GAAP measure is net income attributable to Viad. Although Adjusted EBITDA is used as a financial measure to assess the performance of the business, the use of Adjusted EBITDA is limited because it does not consider material costs,

20


expenses and other items necessary to operate the business. These items include debt service costs, non-cash depreciation and amortization expense associated with long-lived assets, expenses related to U.S. federal, state, local and foreign income taxes, impairment charges or recoveries, and the effects of accounting changes and discontinued operations. Because Adjusted EBITDA does not consider the above items, a user of Viad’s financial information should consider net income attributable to Viad as an important measure of financial performance because it provides a more complete measure of the Company’s performance.
A reconciliation of net income attributable to Viad to Adjusted EBITDA is as follows:
(in thousands)
2014
 
2013
 
2012
Net income attributable to Viad
$
52,354

 
$
21,555

 
$
5,897

Depreciation and amortization
30,382

 
27,634

 
29,843

Interest expense
2,137

 
1,250

 
1,345

Income tax expense (benefit)
(239
)
 
8,206

 
19,435

Impairment charges
884

 
2,630

 

Income from discontinued operations
(11,564
)
 
(2,118
)
 
(2,549
)
Adjusted EBITDA
$
73,954

 
$
59,157

 
$
53,971

The increase in Adjusted EBITDA of $14.8 million from 2013 to 2014 was primarily due to higher segment operating income at both the Marketing & Events Group and Travel & Recreation Group and lower restructuring charges, partially offset by higher corporate costs. The increase in Adjusted EBITDA of $5.2 million from 2012 to 2013 was primarily due to higher segment operating results at the Travel & Recreation Group, as well as lower corporate costs and restructuring charges. See “Results of Operations” below for a discussion of fluctuations.
Results of Operations:
2014 vs. 2013:
The following are consolidated highlights:
Total revenue was $1.1 billion, as compared to $953.3 million in 2013. The increase in revenue was primarily driven by positive show rotation, continued same-show growth, and the acquisitions of onPeak, Blitz and N200 in the Marketing & Events Group U.S. and International segments. The increase in the Travel & Recreation Group revenue was primarily due to Brewster’s attractions, with the Glacier Skywalk (opened May 2014) driving growth at our attractions and the acquisition of the West Glacier Properties.
Total segment operating income was $59.9 million, as compared to $41.9 million in 2013. The increase in segment operating income was primarily driven by higher revenue and increased margins in all three reportable segments.
Diluted income per share from continuing operations attributable to Viad shareholders was $2.02, as compared to $0.96 in 2013.
Income from discontinued operations attributable to Viad was $11.6 million, as compared to income of $2.1 million in 2013, primarily related to the expiration of Glacier Park’s concession contract with the Park Service on December 31, 2013. The Company’s 2013 results related to the operations of Glacier Park’s concession contract business have been reclassified as discontinued operations.
Net income attributable to Viad was $52.4 million, as compared to $21.6 million in 2013.


21


Foreign Exchange Rate Variances
Viad conducts its foreign operations primarily in Canada, the United Kingdom, Germany and to a lesser extent in certain other countries.
During 2014, foreign exchange rate variances resulted in decreases in revenue and segment operating income of $0.3 million and $0.6 million, respectively, as compared to 2013. The following table summarizes the effects of foreign exchange rate variances on year over year revenue and segment operating results from Viad’s international operations, excluding the effect of 2014 acquisitions:
 
Revenues
 
Segment Operating Results
 
Weighted-Average
Exchange Rates
 
Effect of Rate
Variance (in thousands)
 
Weighted-Average
Exchange Rates
 
Effect of Rate
Variance (in thousands)
 
2014
 
2013
 
 
2014
 
2013
 
Marketing & Events Group:
 
 
 
 
 
 
 
 
 
 
 
Canada
$
0.90

 
$
0.97

 
$
(4,635
)
 
$
0.88

 
$
0.99

 
$
(211
)
United Kingdom
$
1.65

 
$
1.56

 
$
9,105

 
$
1.66

 
$
1.57

 
$
460

Germany
$
1.32

 
$
1.33

 
$
(58
)
 
$
1.35

 
$
1.33

 
$
2

 
 
 
 
 
$
4,412

 
 
 
 
 
251

Travel & Recreation Group:
 
 
 
 
 
 
 
 
 
 
 
Canada
$
0.92

 
$
0.96

 
$
(4,735
)
 
$
0.93

 
$
0.96

 
$
(877
)
 
 
 
 
 
$
(323
)
 
 
 
 
 
$
(626
)
Viad’s results were primarily impacted by the weakening of the Canadian dollar and the strengthening of the British pound relative to the U.S. dollar. Future changes in the exchange rates may impact overall expected profitability and historical period-to-period comparisons when operating results are translated into U.S. dollars.
Analysis of Operating Results by Reportable Segment
 
Year Ended December 31,
(in thousands)
2014
 
2013
 
 Change
Revenue:
 
 
 
 
 
 
 
Marketing & Events Group:
 
 
 
 
 
 
 
U.S.
$
710,835

 
$
628,856

 
$
81,979

 
13.0
%
International
249,649

 
229,312

 
$
20,337

 
8.9
%
Intersegment eliminations
(16,016
)
 
(13,264
)
 
$
(2,752
)
 
20.7
%
Total Marketing & Events Group
944,468

 
844,904

 
$
99,564

 
11.8
%
Travel & Recreation Group
120,519

 
108,443

 
$
12,076

 
11.1
%
Total revenue
$
1,064,987

 
$
953,347

 
$
111,640

 
11.7
%
Segment operating income:
 
 
 
 
 
 
 
Marketing & Events Group:
 
 
 
 
 
 
 
U.S.
$
21,400

 
$
11,024

 
$
10,376

 
94.1
%
International
10,339

 
9,068

 
1,271

 
14.0
%
Total Marketing & Events Group
31,739

 
20,092

 
11,647

 
58.0
%
Travel & Recreation Group
28,127

 
21,819

 
6,308

 
28.9
%
Segment operating income
$
59,866

 
$
41,911

 
$
17,955

 
42.8
%
Marketing & Events Group
Seasonality. Exhibition and event activity can vary significantly from quarter to quarter and year to year, depending on the frequency and timing of shows (some shows are not held each year and some may shift between quarters). The rotation metric helps explain the show movement between quarters and years. Show rotation refers to shows that occur less frequently than annually, as well as annual shows that shift quarters from one year to the next.

22


U.S. Segment. Revenue for the Marketing & Events U.S. segment was $710.8 million in 2014, up 13.0 percent, as compared to $628.9 million in 2013. Segment operating income increased $10.4 million to $21.4 million, as compared to 2013. Organic increases, excluding the acquisition of onPeak, were $75.9 million in revenue and $10.6 million in operating income. Revenue was primarily impacted by positive show rotation revenue of approximately $69 million, base same-show revenue growth of 6.4 percent, and higher revenue from corporate clients, partially offset by the loss of the International Consumer Electronics Show. Management defines base same-show revenue as revenue derived from shows that the Company produced out of the same city during the same quarter in each year. Base same-shows represented 39 percent of Marketing & Events U.S. segment revenue in 2014. Operating income was also affected by a non-recurring gain of $4.8 million in 2013 related to the sale of a facility as well as higher performance-based incentives in 2014.
International Segment. Revenue for the Marketing & Events International segment in 2014 was affected by exchange rate variances, which had a favorable impact on revenue and segment operating income of $4.4 million and $0.3 million, respectively, as compared to 2013. Excluding exchange rate variances, revenue increased by $15.9 million, or 6.9 percent, and segment operating results increased by $1.0 million, or 11.2 percent. Organic growth, excluding the acquisitions of Blitz and N200 as well as the impact of exchange rate variances, was $5.3 million in revenue and $0.8 million in operating income. These increases were primarily driven by new business wins, partially offset by negative show rotation revenue of approximately $4 million.
2015 Outlook. Although the Marketing & Events Group has a diversified revenue base and long-term contracts for future shows, its revenue is affected by general economic and industry-specific conditions. The prospects for individual shows tend to be driven by the success of the industry related to those shows. In general, the exhibition and event industry is experiencing modest growth.
For the 2015 full year, management expects U.S. base same-show revenue to increase at a mid-single digit rate and show rotation to have a net negative impact on revenue of approximately $75 million versus 2014. Additionally, management anticipates that foreign currency exchange rate variances versus 2014 will have an unfavorable impact on the Marketing & Events Group’s 2015 full year revenue and operating income of approximately $25 million and $1 million, respectively.
Management remains focused on improving the profitability of the Marketing & Events U.S. segment through continued efforts to more effectively manage labor costs by driving productivity gains through rigorous and strategic pre-show planning that reduces the ratio of labor costs to revenue. Improving this metric is a top priority of management and the Company continues to develop and enhance tools to support and systematize show site labor planning, measurement and benchmarking.
Additionally, management is executing a strategic growth plan to transform the Marketing & Events Group into the preferred global full service provider to the live events market, which includes adding complementary and higher-margin service lines to its existing official services contracting business. In connection with this plan, the Company completed the following key acquisitions during 2014:
Blitz, a leading audio-visual staging and creative services provider for the live events industry in Europe. The addition of Blitz, effective September 16, 2014, provided international scale to the Marketing & Events Group’s existing U.S. in-house audio-visual operations that were launched in late 2013.
onPeak, which provides event accommodations services to approximately 60 percent of the top 250 U.S. events. Upon acquiring these companies, effective October 7, 2014, the Marketing & Events Group became the leading event accommodations service provider in the United States.
N200, Europe’s leading event registration and data intelligence service provider for the live events industry. This acquisition, effective November 24, 2014, affords clients yet another value-added service and adds another high-margin business to the Marketing & Events Group.
Collectively, the acquisitions of Blitz, onPeak and N200 contributed revenue and segment EBITDA of $16.7 million and $2.5 million, respectively, to the Marketing & Events Group’s 2014 results. Segment EBITDA is defined as segment operating income plus depreciation and amortization expense. In 2015, management expects these acquisitions to collectively provide revenue of about $62 million to $67 million and segment EBITDA of about $14.5 million to $15.5 million. These acquisitions offer cross-selling opportunities across the Marketing & Events Group’s customer base, which is resulting in expanded business relationships with existing customers and creating new competitive advantages for the Marketing & Events Group as it increasingly becomes a full-service provider for live events.

23


Travel & Recreation Group
Seasonality. The Travel & Recreation Group segment experiences peak activity during the summer months. During 2014, 85 percent of its revenue was earned in the second and third quarters.
Results for the Travel & Recreation Group segment for 2014 were affected by exchange rate variances, which had an unfavorable impact on revenue and segment operating income of $4.7 million and $0.9 million, respectively, as compared to 2013. Excluding exchange rate variances, revenue increased by $16.8 million, or 15.5 percent, and segment operating income increased by $7.2 million, or 32.9 percent.
The following table provides Travel & Recreation Group revenue by line of business:
 
Year Ended December 31,
(in thousands)
2014
 
2013
 
Change
Revenues:
 
 
 
 
 
 
 
Hospitality
$
42,689

 
$
38,236

 
$
4,453

 
11.6
 %
Attractions
44,691

 
36,102

 
8,589

 
23.8
 %
Package tours
19,336

 
18,950

 
386

 
2.0
 %
Transportation
15,954

 
17,247

 
(1,293
)
 
(7.5
)%
Intra-segment eliminations & other
(2,151
)
 
(2,092
)
 
(59
)
 
2.8
 %
Total
$
120,519

 
$
108,443

 
$
12,076

 
11.1
 %
Revenue. The increases in revenue in 2014 were primarily driven by attractions and hospitality. The improved results from attractions were primarily due to the opening of the new Glacier Skywalk attraction and increased passenger counts at the Columbia Icefield Glacier Adventure, the Banff Gondola, and the Banff Lake Cruise. Hospitality revenue increased primarily due to the acquisition of the West Glacier Properties on July 1, 2014, which added $4.6 million of revenue. Excluding the West Glacier Properties, hospitality revenue decreased slightly versus the comparable periods in 2013 primarily due to declines at the Denali Backcountry Lodge and Glacier Park Lodge. The Denali Backcountry Lodge was negatively affected by flooding at the end of June 2014 and Glacier Park Lodge experienced especially strong occupancy in 2013 as a result of its centennial anniversary. Declines at these properties were partially offset by increases at the Banff International Hotel, the Mount Royal Hotel and the Glacier View Inn, which benefitted from strong visitation to Banff and Jasper National Parks, as well as Grouse Mountain Lodge driven by the Company’s renovations in 2012 and 2013.
Transportation revenue decreased as compared to the prior year primarily as a result of unfavorable foreign exchange rate variances and reduced business for the Denali Backcountry Adventure. Package tours revenue increased primarily due to higher group and individual business, partially offset by unfavorable exchange rate variances.
Performance Measures. Management uses the following key business metrics to evaluate the Travel & Recreation Group hospitality business: revenue per available room (“RevPAR”), average daily rate (“ADR”) and occupancy. These metrics are commonly used in the hospitality industry to measure performance.
Revenue per Available Room. RevPAR is calculated as total rooms revenue divided by the total number of room nights available for all comparable Travel & Recreation Group hospitality properties during the period. Total rooms revenue does not include non-rooms revenue, which consists of ancillary revenue generated by hospitality properties, such as food and beverage and retail revenue. RevPAR measures the period-over-period change in rooms revenue for comparable hospitality properties. RevPAR is affected by average daily rate and occupancy, which have different implications on profitability.
Average Daily Rate. ADR is calculated as total rooms revenue divided by the total number of room nights sold for all comparable Travel & Recreation Group hospitality properties during the period. ADR is used to assess the pricing levels that the hospitality properties are able to generate. Increases in ADR at hospitality properties lead to increases in rooms revenue with no substantial effect on variable costs, therefore having a greater impact on margins than increases in occupancy.
Occupancy. Occupancy is calculated as the total number of room nights sold divided by the total number of room nights available for all comparable Travel & Recreation Group hospitality properties during the period. Occupancy measures the utilization of the available capacity at the hospitality properties. Increases in occupancy result in increases in rooms revenue and additional variable operating costs (including housekeeping services, utilities and room amenity costs), as well as increased ancillary non-rooms revenue (including food and beverage and retail revenue).

24


Management evaluates the performance of the Travel & Recreation Group attractions business utilizing the number of passengers and total attractions revenue per passenger. The number of passengers allows management to assess the volume of visitor activity at each attraction during the period. Total attractions revenue per passenger is calculated as total attractions revenue divided by the total number of passengers at all Travel & Recreation Group attractions during the period. Total attractions revenue includes ticket sales and ancillary revenue generated by attractions, such as food and beverage and retail revenue. Total attractions revenue per passenger measures the total spend per visitor that attraction properties are able to capture, which is important to the profitability of the attractions business.
The following table provides Travel & Recreation Group same-store key performance indicators for the twelve months ended December 31, 2014 and 2013. The same-store metrics below indicate the performance of all Travel & Recreation Group properties and attractions that were owned by Viad and operating at full capacity, considering seasonal closures, for the entirety of both periods presented. For Travel & Recreation Group properties and attractions located in Canada, comparisons to the prior year are on a constant U.S. dollar basis, using the current year quarterly average exchange rates for previous periods, to eliminate the positive or negative effects that result from translating. Management believes that this same-store constant currency basis provides better comparability between reporting periods. The same-store key performance indicators presented below exclude the hospitality metrics for the West Glacier Properties (acquired July 1, 2014), as well as the attraction metrics for the Glacier Skywalk attraction (opened May 2014) as they do not have comparable results for the same periods in 2013.
 
2014
 
2013
 
Change
Hospitality:
 
 
 
 
 
Room nights available
218,913

 
220,989

 
(0.9
)%
RevPAR
$
102

 
$
97

 
5.2
 %
ADR
$
149

 
$
151

 
(1.3
)%
Occupancy
68.2
%
 
64.4
%
 
3.8
 %
Attractions:
 
 
 
 
 
Passengers
1,053,496

 
915,598

 
15.1
 %
Total attraction revenue per passenger
$
37

 
$
37

 
 %
 
Hospitality. The increase in RevPAR in 2014 was primarily due to higher occupancy and ADR at the Mount Royal Hotel, the Banff International Hotel, and the Glacier View Inn driven by increased visitation to Banff and Jasper National Parks. The Grouse Mountain Lodge also experienced higher RevPAR driven by the Company’s renovations in 2012 and 2013. These increases were partially offset by reduced occupancy at the Denali Backcountry Lodge, which experienced flooding early in its operating season, and at Glacier Park Lodge, which experienced especially strong occupancy in 2013 as a result of its centennial anniversary. The decrease in ADR was primarily driven by offering lower rates at the Prince of Wales Hotel in response to softer demand as compared to prior year and higher occupancy during the off-peak season at the Grouse Mountain Lodge when rates were lower. The decrease in room nights available from 2013 to 2014 was due to changes in seasonal opening and closing dates of certain Glacier Park properties. Management schedules opening and closing dates to optimize profitability based on anticipated travel patterns, and forecasted occupancy levels and operating expenses.
Attractions. The number of passengers increased in 2014 at all three of Brewster’s attractions (Columbia Icefield Glacier Adventure, Banff Gondola, and Banff Lake Cruise). The attractions benefited from increased park visitation traffic, favorable weather conditions, and strong combination ticket sales with the Glacier Skywalk. The Banff Lake Cruise experienced a substantial increase in individual traffic as a result of implementing additional departure times in 2014.
During 2014, approximately 75 percent of revenue and 90 percent of segment operating income generated in the Travel & Recreation Group segment were derived through its Canadian operations. These operations are largely affected by foreign customer visitation, and, accordingly, increases in the value of the Canadian dollar, as compared to other currencies, could adversely affect customer volumes, revenue and segment operating income for the Travel & Recreation Group. Additionally, the Travel & Recreation Group is affected by consumer discretionary spending on tourism activities.
For the 2015 full year, management expects the Travel & Recreation Group’s revenue to increase by a low single-digit rate from 2014 driven by the growth of the underlying business, largely offset by unfavorable currency translation. Management anticipates that foreign currency exchange rate variances versus 2014 will have an unfavorable impact on the Travel & Recreation Group’s 2015 full year revenue and operating income of approximately $10 million and $3 million, respectively. Also, management anticipates the five acquisitions completed by Viad since the beginning of 2011 will generate approximately $35 million in revenue in 2015 with an average Adjusted EBITDA margin (defined as Adjusted EBITDA divided by revenue) of

25


more than 30 percent. By leveraging economies of scale and scope and repositioning the acquired assets for higher returns, management expects to realize continued revenue growth and expanding Adjusted EBITDA margins in future years.
Corporate Activities. Corporate activities expense of $14.3 million in 2014 increased from $6.8 million. This increase was primarily related to acquisition transaction-related costs of $4.2 million, CEO transition costs of $2.7 million, and higher 401(k) employer matching contributions expense due to the depletion of the Company’s common stock held in the Employee Stock Ownership Plan feature of the Company’s 401(k). Matching contributions are now funded from shares of Viad common stock held in treasury which have a higher cost to the Company.
Restructuring Charges. In 2014, Viad recorded net restructuring charges of $1.6 million ($1.0 million after-tax) primarily related to updated estimates of facility contractual arrangements and the elimination of certain positions in the Marketing & Events Group. In 2013, Viad recorded net restructuring charges of $3.8 million ($2.6 million after-tax) primarily related to facility consolidations and the elimination of certain positions in the Marketing & Events Group. In addition, restructuring charges related to the elimination of certain positions in the Travel & Recreation Group and at Viad corporate were also recorded in 2013.
Impairment Charges. In 2014, Viad recorded impairment charges of $0.9 million ($0.5 million after-tax) at the Marketing & Events Group primarily related to the write-off of certain internally developed software. In 2013, Viad recorded impairment charges of approximately $3.1 million ($1.6 million after-tax) related to the non-cash write-down of goodwill at Glacier Park of $2.1 million ($1.0 million after-tax) and $1.0 million ($0.6 million after-tax) related to the write-off of certain assets within the Marketing & Events Group.
Income Taxes. The effective tax rate for 2014 was 0.2 percent, as compared to 30.1 percent for 2013. The decrease in the effective tax rate for 2014 was primarily due to a benefit related to the reversal of a valuation allowance associated with foreign tax credits. During the third quarter of 2014, it was determined that certain deferred tax assets associated with foreign tax credits, for which a valuation allowance had previously been established, once again met the “more-likely-than-not” test in the accounting standards regarding the realization of those assets. Accordingly, Viad recorded a tax benefit of $10.1 million to income tax expense during the 2014 third quarter.
Discontinued Operations. On December 31, 2013, Glacier Park’s concession contract with the Park Service to operate lodging, tour and transportation and other hospitality services for Glacier National Park expired. Upon completion of the contract term, Viad received cash payments in January 2014 totaling $25.0 million for the Company’s possessory interest. This resulted in a pre-tax gain of $21.5 million and an after-tax gain of $13.5 million that was recorded as income from discontinued operations. In addition, 2014 income from discontinued operations included approximately $0.7 million, net of tax, related to the gain on sale of personal property at Glacier Park, as well as an insurance recovery of $0.3 million, net of tax, and adjustments to reserves related to certain liabilities associated with previously sold operations.
The Company’s 2013 results related to the operations of Glacier Park’s concession contract business have been reclassified as discontinued operations. Accordingly, for the 2013 full year, approximately $19 million in revenue and $4 million in operating income has been reclassified as discontinued operations.
Glacier Park continues to generate revenue from the seven properties it owns: St. Mary Lodge in St. Mary, Montana; Glacier Park Lodge in East Glacier, Montana; Grouse Mountain Lodge in Whitefish, Montana; the Prince of Wales Hotel in Waterton Lakes National Park, Alberta; the West Glacier Motel & Cabins in West Glacier, Montana; and Motel Lake McDonald and the Apgar Village Lodge, which are located inside Glacier National Park. Glacier Park also continues to operate the food and beverage operations and package tour and transportation services with respect to these properties and the retail shops located near Glacier National Park.
In addition, 2013 income from discontinued operations included $1.1 million, net of tax, primarily related to the sale of land associated with a previously sold operation.


26


2013 vs. 2012:

The following are consolidated highlights:
Total revenue was $953.3 million, as compared to $1.0 billion in 2012. The decrease in revenue was primarily driven by negative show rotation and services provided in 2012 in connection with the Summer Olympic and Paralympic Games by the Marketing & Events Group.
Total segment operating income was $41.9 million, as compared to $38.2 million in 2012. The increase in operating results, despite revenue declines, was primarily driven by continued same-show growth and focus on margin improvement at the Marketing & Events Group, as well as expanded revenues at all three operating units within the Travel & Recreation Group.
Diluted income per share from continuing operations attributable to Viad shareholders was $0.96, as compared to $0.17 in 2012.
Income from discontinued operations attributable to Viad was $2.1 million and $2.5 million in 2013 and 2012, respectively. This related partly to the operations of the Glacier Park concession contract of $1.0 million and $1.9 million in 2013 and 2012, respectively. The Company’s 2013 and 2012 results related to the operations of Glacier Park’s concession contract business have been reclassified as discontinued operations. Additionally, the Company had income from the sale of land associated with a previously sold operation of $1.1 million and $0.6 million for 2013 and 2012, respectively.
Net income attributable to Viad was $21.6 million, as compared to $5.9 million in 2012.
Foreign Exchange Rate Variances
Viad conducts its foreign operations primarily in Canada, the United Kingdom, Germany and to a lesser extent in certain other countries.
During 2013, foreign exchange rate variances resulted in decreases in revenues and segment operating income of $7.0 million and $1.0 million, respectively, as compared to 2012. The following table summarizes the effects of foreign exchange rate variances on revenue and segment operating results from Viad’s significant international operations:
 
Revenues
 
Segment Operating Results
 
Weighted-Average
Exchange Rates
 
Effect of Rate
Variance (in thousands)
 
Weighted-Average
Exchange Rates
 
Effect of Rate
Variance (in thousands)
 
2013
 
2012
 
 
2013
 
2012
 
Marketing & Events Group:
 
 
 
 
 
 
 
 
 
 
 
Canada
$
0.97

 
$
1.00

 
$
(2,103
)
 
$
0.99

 
$
1.04

 
$
(65
)
United Kingdom
$
1.56

 
$
1.59

 
$
(2,582
)
 
$
1.57

 
$
1.60

 
$
(138
)
Germany
$
1.33

 
$
1.29

 
$
419

 
$
1.33

 
$
1.27

 
$
(37
)
 
 
 
 
 
(4,266
)
 
 
 
 
 
(240
)
Travel & Recreation Group:
 
 
 
 
 
 
 
 
 
 
 
Canada
$
0.96

 
$
1.00

 
$
(2,756
)
 
$
0.96

 
$
1.00

 
$
(790
)
 
 
 
 
 
$
(7,022
)
 
 
 
 
 
$
(1,030
)
Viad’s results were primarily impacted by the weakening of the Canadian dollar and British pound relative to the U.S. dollar. Future changes in the exchange rates may impact overall expected profitability and historical period-to-period comparisons when operating results are translated into U.S. dollars.

27


Analysis of Operating Results by Reportable Segment
 
Year Ended December 31,
(in thousands)
2013
 
2012
 
 Change
Revenue:
 
 
 
 
 
 
 
Marketing & Events Group:
 
 
 
 
 
 
 
U.S.
$
628,856

 
$
676,772

 
$
(47,916
)
 
(7.1
)%
International
229,312

 
240,137

 
$
(10,825
)
 
(4.5
)%
Intersegment eliminations
(13,264
)
 
(14,869
)
 
$
1,605

 
(10.8
)%
Total Marketing & Events Group
844,904

 
902,040

 
$
(57,136
)
 
(6.3
)%
Travel & Recreation Group
108,443

 
104,604

 
$
3,839

 
3.7
 %
Total revenue
$
953,347

 
$
1,006,644

 
$
(53,297
)
 
(5.3
)%
Segment operating income:
 
 
 
 
 
 
 
Marketing & Events Group:
 
 
 
 
 
 
 
U.S.
$
11,024

 
$
5,579

 
$
5,445

 
97.6
 %
International
9,068

 
12,321

 
(3,253
)
 
(26.4
)%
Total Marketing & Events Group
20,092

 
17,900

 
2,192

 
12.2
 %
Travel & Recreation Group
21,819

 
20,291

 
1,528

 
7.5
 %
Segment operating income
$
41,911

 
$
38,191

 
$
3,720

 
9.7
 %
Marketing & Events Group
U.S. Segment. Revenue for the Marketing & Events U.S. segment was $628.9 million for 2013, down 7.1 percent, as compared to $676.8 million in 2012. The decrease was primarily due to negative show rotation revenue of approximately $54 million, partially offset by base same-show revenue increases of 3.1 percent. Base same-shows represented 46 percent of Marketing & Events U.S. segment revenue in 2013. The 2013 segment operating income was $11.0 million, as compared to $5.6 million in 2012. The improved operating results were primarily due to lower performance-based incentives, the third quarter gain on sale of a facility in New Jersey and ongoing efforts to drive operating efficiencies.
International Segment. Results for the Marketing & Events International segment were affected by exchange rate variances, which had an unfavorable impact on revenue of $4.3 million and segment operating income of $0.2 million, as compared to 2012. Excluding exchange rate variances, 2013 revenue decreased by $6.6 million, or 2.7 percent, and segment operating income decreased by $3.0 million, or 24.5 percent. These decreases were primarily driven by services provided for the 2012 London Summer Olympics and Paralympic Games, partially offset by positive show rotation revenue of approximately $6 million.
Travel & Recreation Group
Seasonality. The Travel & Recreation Group segment experiences peak activity during the summer months. During 2013, 83 percent of its revenue was earned in the second and third quarters.
Results for the Travel & Recreation Group segment for 2013 were affected by exchange rate variances, which had an unfavorable impact on revenue and segment operating income of $2.8 million and $0.8 million, respectively, as compared to 2012. Excluding exchange rate variances, revenue increased by $6.6 million, or 6.3 percent, and segment operating income increased by $2.3 million, or 11.4 percent.
During 2013, results were negatively impacted by extensive flooding that took place on June 20, 2013, in Alberta, Canada. Major pieces of infrastructure in the province were affected and many roads became impassable, which temporarily restricted access to Brewster’s hotel properties and attractions in the area. The provincial authorities were able to restore road access to Banff for both commercial and private vehicles by June 26, 2013, ahead of the Canada Day holiday weekend. Management started seeing more normalized occupancy and visitor traffic in August. Management estimates that the flooding had an unfavorable impact on 2013 revenue of approximately $2 million. Brewster recovered well from the flooding that occurred in late June and delivered solid growth for the full year across nearly all of its lines of business.

28


The following table provides Travel & Recreation Group revenue by line of business:
(in thousands)
2013
 
2012
 
Change
Revenues:
 
 
 
 
 
 
 
Hospitality
$
38,236

 
$
36,089

 
$
2,147

 
5.9
 %
Attractions
36,102

 
35,434

 
668

 
1.9
 %
Package tours
18,950

 
18,805

 
145

 
0.8
 %
Transportation
17,247

 
16,858

 
389

 
2.3
 %
Intra-segment eliminations & other
(2,092
)
 
(2,582
)
 
490

 
(19.0
)%
Total
$
108,443

 
$
104,604

 
$
3,839

 
3.7
 %
Revenue. The increase in revenue in 2013 was primarily driven by hospitality and attractions. The revenue growth from hospitality properties was primarily due to improved results at most of the lodges and hotels. Glacier Park saw strong results, particularly at the Grouse Mountain Lodge, which was recently updated and refreshed. In addition, the Banff International Hotel, which was acquired on March 7, 2012, benefited from a full first quarter contribution. The improved results from attractions were primarily due to increased passenger counts at the Columbia Icefield Glacier Adventure, the Banff Gondola, and the Banff Lake Cruise.
The following table provides Travel & Recreation Group same-store key performance indicators. The same-store key performance indicators presented below exclude the metrics for the Banff International Hotel (acquired in March 2012), as well as all of the hospitality properties and the Red Bus Tours attraction that were part of Glacier Park’s expired concession contract with the Park Service.
 
2013
 
2012
 
Change
Hospitality:
 
 
 
 
 
Room nights available
161,859

 
163,434

 
(1.0
)%
RevPAR
$
110

 
$
99

 
11.1
 %
ADR
$
166

 
$
159

 
4.4
 %
Occupancy
66.1
%
 
62.5
%
 
3.6
 %
Attractions:
 
 
 
 
 
Passengers
915,598

 
906,645

 
1.0
 %
Total attraction revenue per passenger
$
39

 
$
38

 
2.6
 %
Hospitality. The increase in RevPAR reflects improvement across most properties. The Grouse Mountain Lodge experienced particularly strong growth in occupancy driven by the Company’s renovations in 2012 and 2013. The increase in ADR was primarily driven by the Denali Backcountry Lodge, St. Mary Lodge and Resort, and the Glacier Park Lodge. The Denali Backcountry Lodge experienced stronger bookings than expected in 2013, which allowed management to offer higher rates. In addition, the Glacier Park Lodge centennial anniversary in 2013 increased demand for Glacier Park properties, which was matched with higher rates. The decrease in room nights available from 2012 to 2013 was due to changes in seasonal opening and closing dates of certain Glacier Park properties. Management schedules opening and closing dates to optimize profitability based on anticipated travel patterns, and forecasted occupancy levels and operating expenses.
Attractions. The number of passengers increased in 2013 at all three of Brewster attractions (Banff Gondola, Columbia Icefield Glacier Adventure, and Banff Lake Cruise), despite the flood impact. The increase in revenue per passenger was mainly driven by increased ticket prices at the Banff Gondola attraction.
For the 2013 full year, approximately 75 percent of revenue and 88 percent of segment operating income generated in the Travel & Recreation Group segment were derived through its Canadian operations. These operations are largely affected by foreign customer visitation, and, accordingly, increases in the value of the Canadian dollar, as compared to other currencies, could adversely affect customer volumes, revenue and segment operating income for the Travel & Recreation Group. Additionally, the Travel & Recreation Group is affected by consumer discretionary spending on tourism activities.
Corporate Activities. Corporate activities expense of $6.8 million in 2013 decreased from $9.4 million in 2012. This decrease was primarily due to lower performance-based compensation expense in 2013, as well as higher costs in 2012 related to the amendment and restatement of the Company’s shareholder rights plan and higher legal costs related to employee benefits

29


associated with previously divested operations. These decreases were partially offset by 2013 costs related to the Company’s strategic review process.
Restructuring Charges. In 2013, Viad recorded net restructuring charges of $3.8 million, as compared to $4.9 million in 2012. The 2013 charges primarily related to reorganization activities in the Marketing & Events Group, comprised of the elimination of certain positions. In addition, restructuring charges related to the elimination of certain positions in the Travel & Recreation Group and at Viad corporate were also recorded in 2013.
Impairment Charges. Viad recorded a non-cash impairment charge of approximately $3.1 million in 2013 related to the non-cash write down of goodwill at the Glacier Park reporting unit of $2.1 million and $1.0 million related to the write-off of certain assets within the Marketing & Events Group.
Income Taxes. The effective tax rate for 2013 was 30.1 percent, as compared to 84.6 percent for 2012. The high rate for 2012, as compared to the statutory rate, was due to the charge to income tax expense of $13.4 million, representing a valuation allowance for certain deferred tax assets associated with foreign tax credit carryforwards.
Discontinued Operations. On December 31, 2013, Glacier Park’s concession contract with the Park Service to operate lodging, tour and transportation and other hospitality services for Glacier National Park expired. The Company’s 2013 and 2012 results related to the operations of Glacier Park’s concession contract business have been reclassified as discontinued operations. Accordingly, for both the 2013 and 2012 full year, approximately $19 million in revenue and $4 million in operating income have been reclassified as discontinued operations.
In addition, 2013 and 2012 income from discontinued operations included $1.1 million, net of tax, and $0.6 million, net of tax, primarily related to the sale of land associated with a previously sold operation.
Liquidity and Capital Resources
Cash and cash equivalents were $57.0 million as of December 31, 2014, as compared to $45.8 million as of December 31, 2013. During 2014, the Company generated net cash flows from operating activities of $58.1 million primarily driven by operating results, somewhat offset by changes in working capital. Management believes that Viad’s existing sources of liquidity will be sufficient to fund operations and capital commitments for at least the next 12 months.
As of December 31, 2014, the Company had approximately $40.1 million of its cash and cash equivalents held outside of the United States. Of the total amount, $24.3 million was held in Canada, $11.7 million in the United Kingdom, $2.1 million in Germany, $1.0 million in the United Arab Emirates and $1.0 million in the Netherlands. There were certain historical earnings related to its Canadian operations which, if repatriated to the United States, would result in incremental income tax expense. The incremental tax liability as of December 31, 2014 that would result assuming all foreign cash balances were repatriated to the United States would be approximately $1.0 million.
Cash Flows
Operating Activities
(in thousands)
 
2014
 
2013
 
2012
Net income
 
$
55,567

 
$
21,686

 
$
6,583

Depreciation and amortization
 
30,792

 
27,967

 
30,133

Income from discontinued operations
 
(14,389
)
 
(2,366
)
 
(3,030
)
Other non-cash items
 
34

 
13,769

 
33,106

Changes in assets and liabilities
 
(13,914
)
 
(55,001
)
 
2,394

Net cash provided by operating activities
 
$
58,090

 
$
6,055

 
$
69,186

2014 - Non-cash items include $2.9 million of share-based compensation expense and $1.6 million of restructuring charges. The changes in assets and liabilities primarily consisted of a $12.6 million unfavorable change in other assets and liabilities, an $10.4 million increase in receivables and a $6.4 million decrease in customer deposits, partially offset by a $18.1 million increase in accounts payable.

30


2013 - Non-cash items consisted of $5.2 million of share-based compensation expense and $3.0 million of impairment charges offset by a gain on facility and related land of $4.8 million and $3.8 million of restructuring charges. The changes in assets and liabilities primarily consisted of a $21.0 million decrease in customer deposits, a $15.4 million decrease in accounts payable and an $11.7 million decrease in accrued compensation.
2012 - Non-cash items primarily consisted of $11.3 million of deferred income taxes related to the valuation allowance for foreign tax credit carryforwards and $7.2 million of share-based compensation expense. The changes in assets and liabilities primarily consisted of a $4.7 million decrease in restructuring liabilities partially offset by a $4.3 million increase in accounts payable.
Investing Activities
(in thousands)
 
2014
 
2013
 
2012
Proceeds from possessory interest and personal property - discontinued operations
 
$
28,000

 
$

 
$

Proceeds from dispositions of property and other assets
 
1,109

 
464

 
322

Acquisition of businesses, net of cash acquired
 
(120,251
)
 
(647
)
 
(23,546
)
Capital expenditures
 
(29,389
)
 
(36,119
)
 
(27,675
)
Proceeds from sale of facility and related land
 

 
12,696

 

Proceeds from the sale of land - discontinued operations
 

 
1,645

 
1,041

Proceeds from sale of short-term investments
 

 

 
384

Net cash used in investing activities
 
$
(120,531
)
 
$
(21,961
)
 
$
(49,474
)
2014 - Cash used in investing activities was driven by $120.3 million of costs related to the acquisitions of the West Glacier Properties, Blitz, onPeak and N200 and $29.4 million of capital expenditures primarily related to the construction of a versatile wall system at the Marketing & Events U.S. segment and equipment and computer hardware at both the Marketing & Events Group and Travel & Recreation Group. This was partially offset by $28.0 million received for the Company’s possessory interest and personal property at Glacier Park. For additional information, refer to Note 3, Acquisition of Businesses and Note 24, Discontinued Operations, of Notes to Consolidated Financial Statements.
2013 - Cash used in investing activities of $22.0 million was driven by $36.1 million of capital expenditures primarily related to the construction of the Glacier Skywalk at the Travel & Recreation Group of $12.7 million as well as equipment and computer hardware at the Marketing & Events U.S. segment. Partially offsetting this was $14.3 million of proceeds from the sale of a facility and related land in the Marketing & Events Group and the sale of land from a discontinued operation.
2012 - Cash used in investing activities primarily consisted of $27.7 million used for capital expenditures related to the purchase of rental inventory, equipment and computer hardware and leasehold improvements at the Marketing & Events U.S. segment as well as Glacier Skywalk construction costs of $8.9 million (with an accrued capital expenditure amount of $2.6 million as of December 31, 2012) and building and other improvements at the Travel & Recreation Group, and $23.5 million used for the acquisition of the Banff International Hotel and related assets, net of cash acquired.
Financing Activities
(in thousands)
 
2014
 
2013
 
2012
Proceeds from borrowings
 
$
189,512

 
$
20,000

 
$

Payments on debt and capital lease obligations
 
(61,461
)
 
(11,362
)
 
(2,685
)
Dividends paid on common stock
 
(38,387
)
 
(58,914
)
 
(4,454
)
Common stock purchased for treasury
 
(12,321
)
 
(1,328
)
 
(1,656
)
Debt issuance costs
 
(1,671
)
 

 

Other
 
1,269

 
1,199

 
541

Net cash provided by (used in) financing activities
 
$
76,941

 
$
(50,405
)
 
$
(8,254
)
2014 - Cash provided by financing activities primarily consisted of $128.1 million of net proceeds from borrowings, partially offset by $38.4 million used for payments of dividends on common stock. On January 24, 2014 Viad announced that

31


its Board of Directors declared special cash dividends of $1.50 per share to shareholders of record at the close of business on February 7, 2014.
2013 - Cash used in financing activities primarily consisted of $58.9 million used for payments of dividends on common stock, partially offset by net proceeds from borrowings of $8.6 million. On October 25, 2013, Viad announced that its Board of Directors declared special cash dividends of $2.50 per share to shareholders of record at the close of business on November 7, 2013.
2012 - Cash used in financing activities primarily consisted of $4.5 million used for payments of dividends on common stock and $2.7 million used for payments on debt and capital lease obligations. In August 2012, Viad’s Board of Directors approved a 150 percent increase in the quarterly dividend from $0.04 per share to $0.10 per share.

Debt

Effective December 22, 2014, Viad entered into a $300 million Amended and Restated Credit Agreement (the “Credit Agreement”). The Credit Agreement amends and replaces in its entirety the Company’s $180 million revolving credit facility under the Amended and Restated Credit Agreement dated as of May 18, 2011. The Credit Agreement provides for a senior credit facility in the aggregate amount of $300 million, which consists of a $175 million revolving credit facility (the “Revolving Credit Facility”) and a $125 million term loan (the “Term Loan”). Loans under the Credit Agreement have a maturity date of December 22, 2019, and proceeds from the loans made under the Credit Agreement were used to refinance certain outstanding debt of the Company and will be used for the Company’s general corporate purposes in the ordinary course of its business. Under the Credit Agreement, the Revolving Credit Facility and/or the Term Loan may be increased up to an additional $100 million under certain circumstances. If such circumstances are met, the Company may obtain the additional borrowings under the Revolving Credit Facility, the Term Loan, or a combination of the two facilities. The Revolving Credit Facility has a $40 million sublimit for letters of credit. Borrowings and letters of credit can be denominated in U.S. dollars, Euros, Canadian dollars or British pounds.

Viad’s lenders have a first perfected security interest in all of the personal property of Viad, GES and GES Event Intelligence Services, Inc., including 65 percent of the capital stock of top-tier foreign subsidiaries. Financial covenants include a fixed charge coverage ratio of not less than 1.75 to 1.00, with a step-up to 2.00 to 1.00 for the fiscal quarter ending June 30, 2016. Viad must maintain a leverage ratio of not greater than 3.00 to 1.00, with a step-down to 2.75 to 1.00 for the fiscal quarter ending March 31, 2016 and a step-down to 2.50 to 1.00 for the fiscal quarter ending March 31, 2017. As of December 31, 2014, the fixed charge coverage ratio was 2.61 to 1.00, and the leverage ratio was 1.73 to 1.00. The terms of the Credit Agreement allow Viad to pay dividends or purchase the Company’s common stock up to $20 million in the aggregate in any calendar year, with additional dividends, share repurchases or distributions of stock permitted if the Company’s leverage ratio is less than or equal to 2.00 to 1.00, and the Liquidity Amount (defined as cash in the U.S. and Canada plus available revolver borrowings on a pro forma basis) is not less than $100 million, and no default or unmatured default, as defined in the Credit Agreement, exists. Significant other covenants include limitations on investments, additional indebtedness, sales/leases of assets, acquisitions, consolidations or mergers and liens on property. As of December 31, 2014, Viad was in compliance with all covenants.
As of December 31, 2014, Viad’s total debt of $141.0 million consisted of outstanding borrowings under the Term Loan and Revolving Credit Facility of $125.0 million and $14.5 million, respectively, and capital lease obligations of $1.5 million. As of December 31, 2014, Viad had $159.4 million of capacity remaining under its Credit Facility reflecting outstanding letters of credit of $1.1 million and the outstanding balance under the Revolving Credit Facility of $14.5 million.
Borrowings under the Revolving Credit Facility (of which GES and GES Event Intelligence Services, Inc. are guarantors) are indexed to the prime rate or the London Interbank Offered Rate, plus appropriate spreads tied to Viad’s leverage ratio. Commitment fees and letters of credit fees are also tied to Viad’s leverage ratio. The fees on the unused portion of the Credit Facility are currently 0.35 percent annually.
Guarantees
As of December 31, 2014, Viad had certain obligations under guarantees to third parties on behalf of its subsidiaries. These guarantees are not subject to liability recognition in the consolidated financial statements and relate to leased facilities entered into by the Company’s subsidiary operations. The Company would generally be required to make payments to the respective third parties under these guarantees in the event that the related subsidiary could not meet its own payment obligations. The maximum potential amount of future payments that Viad would be required to make under all guarantees existing as of December 31, 2014 would be $5.9 million. These guarantees relate to leased facilities and expire through October

32


2017. There are no recourse provisions that would enable Viad to recover from third parties any payments made under the guarantees. Furthermore, there are no collateral or similar arrangements whereby Viad could recover payments.
Share Repurchases
Viad has announced the authorization of its Board of Directors to repurchase shares of the Company’s common stock on the open market from time to time at prevailing market prices. During 2014, the Company repurchased 448,436 shares on the open market at a total cost of $10.6 million. No shares were repurchased on the open market during 2013. As of December 31, 2014, 582,002 shares remained available for repurchase. Additionally, during 2014 and 2013, the Company withheld 72,996 shares for $1.8 million and 50,156 shares for $1.3 million, respectively, related to tax withholding requirements on share-based awards.
Subsequent to December 31, 2014, the Company repurchased141,462 shares on the open market at a cost of approximately $3.8 million. Refer to Note 26, Subsequent Event, of Notes to Consolidated Financial Statements.
Contractual Obligations
The following table presents Viad’s contractual obligations as of December 31, 2014:
 
Payments due by period
(in thousands)
Less than
1 year
 
1-3 years
 
3-5 years
 
More than
5 years
 
Total
Revolver and term loan borrowings
$
27,000

 
$
37,500

 
$
75,000

 
$

 
$
139,500

Operating leases
$
16,343

 
$
26,824

 
$
18,627

 
$
9,755

 
$
71,549

Pension and postretirement benefits(1)
3,179

 
6,831

 
7,102

 
18,329

 
35,441

Purchase obligations(2)
17,735

 
9,069

 
1,437

 
4

 
28,245

Capital lease obligations
856

 
661

 
3

 

 
1,520

Estimated interest payments
81

 
57

 

 

 
138

Total contractual cash obligations(3)
$
38,194

 
$
43,442

 
$
27,169

 
$
28,088

 
$
136,893

(1) Estimated contributions related to multi-employer benefit plans are excluded from the table above. Refer to Note 18, Pension and Postretirement Benefits, of Notes to Consolidated Financial Statements for disclosures regarding those obligations.
(2) Purchase obligations primarily represent payments due under various licensing agreements and commitments related to consulting and other contracted services that are enforceable and legally binding and that specify all significant terms, including open purchase orders.
(3) Aggregate self-insurance liabilities of $32.1 million are excluded from the table above as the timing and amounts of future cash outflows are uncertain. Refer to Note 9, Other Current Liabilities and Note 10, Other Deferred Liabilities, of Notes to Consolidated Financial Statements.
Viad and certain of its subsidiaries are plaintiffs or defendants to various actions, proceedings and pending claims, some of which involve, or may involve, compensatory, punitive or other damages. Litigation is subject to many uncertainties and it is possible that some of the legal actions, proceedings or claims could be decided against Viad. Although the amount of liability as of December 31, 2014 with respect to these matters is not ascertainable, Viad believes that any resulting liability, after taking into consideration amounts already provided for and insurance coverage, will not have a material effect on Viad’s business, financial position or results of operations.
Viad is subject to various U.S. federal, state and foreign laws and regulations governing the prevention of pollution and the protection of the environment in the jurisdictions in which Viad has or had operations. If the Company has failed to comply with these environmental laws and regulations, civil and criminal penalties could be imposed and Viad could become subject to regulatory enforcement actions in the form of injunctions and
cease and desist orders. As is the case with many companies, Viad also faces exposure to actual or potential claims and lawsuits involving environmental matters relating to its past operations. Although it is a party to certain environmental disputes, Viad believes that any resulting liabilities, after taking into consideration amounts already provided for and insurance coverage, will not have a material effect on the Company’s financial position, results of operations or liquidity. As of December 31, 2014, there was a remaining environmental remediation liability of approximately $4.7 million related to previously sold operations of which $0.4 million is included in the consolidated balance sheets under the caption “Other current liabilities” and $4.4 million under the caption “Other deferred items and liabilities.”

33


Viad’s businesses contribute to various multi-employer pension plans based on obligations arising under collective-bargaining agreements covering its union-represented employees. Viad’s contributions to these plans in 2014, 2013 and 2012 totaled $23.2 million, $20.3 million and $20.7 million, respectively. Based upon the information available to Viad from plan administrators, management believes that several of these multi-employer plans are underfunded. The Pension Protection Act of 2006 requires pension plans underfunded at certain levels to reduce, over defined time periods, the underfunded status. In addition, under current laws, the termination of a plan, or a voluntary withdrawal from a plan by Viad, or a shrinking contribution base to a plan as a result of the insolvency or withdrawal of other contributing employers to such plan, would require Viad to make payments to such plan for its proportionate share of the plan’s unfunded vested liabilities. As of December 31, 2014, the amount of additional funding, if any, that Viad would be required to make related to multi-employer pension plans is not ascertainable.
Off-Balance Sheet Arrangements:
Viad does not have any “off-balance sheet” arrangements with unconsolidated special-purpose or other entities that would materially affect the Company’s financial position, results of operations, liquidity or capital resources. Furthermore, Viad does not have any relationships with special-purpose or other entities that provide off-balance sheet financing; liquidity, market risk or credit risk support; or engage in leasing or other services that may expose the Company to liability or risks of loss that are not reflected in Viad’s consolidated financial statements and related notes. See Notes 11, 20 and 21 of Notes to Consolidated Financial Statements.
Critical Accounting Policies and Estimates:
The preparation of financial statements in conformity with GAAP requires estimates and assumptions that affect the reported amounts of assets and liabilities, revenues and expenses, and related disclosures of contingent assets and liabilities in the consolidated financial statements. The SEC has defined a company’s most critical accounting policies as those that are most important to the portrayal of a company’s financial position and results of operations, and that require a company to make its most difficult and subjective judgments, often as a result of the need to make estimates of matters that are inherently uncertain. Based on these criteria, Viad has identified and discussed with its audit committee the following critical accounting policies and estimates pertaining to Viad, and the methodology and disclosures related to those estimates:
Goodwill — Goodwill is not amortized, but tested for impairment at the reporting unit level on an annual basis as of October 31 of each year. Goodwill is also tested for impairment 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. Viad’s reporting units are defined, and goodwill is tested, at either an operating segment level or at the component level of an operating segment, depending on various factors including the internal reporting structure of the operating segment, the level of integration among components, the sharing of assets and other resources among components and the benefits and likely recoverability of goodwill by the component’s operations.
For impairment testing purposes, the goodwill related to the Marketing & Events U.S. segment is assigned to and tested at the operating segment level, which represents all domestic operations of GES. Furthermore, the goodwill related to the Marketing & Events International segment is assigned to and tested based on the segment’s geographical operations. For the Marketing & Events International segment the reporting units are GES United Kingdom and GES Canada. Brewster, Glacier Park and Alaska Denali Travel are considered reporting units for goodwill impairment testing purposes.

34


As of December 31, 2014, Viad had total goodwill of $194.2 million consisting of $152.8 million related to the Marketing & Events Group and $41.4 million related to the Travel & Recreation Group. The following table summarizes goodwill balances by reporting unit and segment as of December 31:
(in thousands)
2014
 
2013
Marketing & Events Group:
 
 
 
Marketing & Events U.S.
$
110,618

 
$
62,686

Marketing & Events International:
 
 
 
GES United Kingdom
34,396

 
14,049

GES Canada
7,825

 
8,562

Total Marketing & Events Group
152,839

 
85,297

Travel & Recreation Group:
 
 
 
Brewster
36,906

 
41,062

Alaska Denali Travel
3,184

 
3,184

Glacier Park
1,268

 

Total Travel & Recreation Group
41,358

 
44,246

Total Goodwill
$
194,197

 
$
129,543

Viad uses a discounted expected future cash flow methodology (income approach) in order to estimate the fair value of its reporting units for purposes of goodwill impairment testing. The estimates and assumptions regarding expected future cash flows, discount rates and terminal values require considerable judgment and are based on market conditions, financial forecasts, industry trends and historical experience.
The most critical assumptions and estimates in determining the estimated fair value of its reporting units relate to the amounts and timing of expected future cash flows for each reporting unit and the reporting unit cost of capital (discount rate) applied to those cash flows. Furthermore, the assumed reporting unit cost of capital rates (discount rates) are estimated using a build-up method based on the perceived risk associated with the cash flows pertaining to the specific reporting unit. In order to assess the reasonableness of its fair value estimates, the Company performs a reconciliation of the aggregate fair values of its reporting units to Viad’s market capitalization.
As noted above, the estimates and assumptions regarding expected future cash flows, discount rates and terminal values require considerable judgment and are based on market conditions, financial forecasts, industry trends and historical experience. These estimates, however, have inherent uncertainties and different assumptions could lead to materially different results. As of December 31, 2014, Viad had aggregate goodwill of $194.2 million recorded in the consolidated balance sheets. Furthermore, as a result of the Company’s most recent impairment analysis performed as of October 31, 2014, the excess of the estimated fair value over the carrying value (expressed as a percentage of the carrying amounts) under step one of the impairment test was 142 percent, 48 percent and 52 percent for each of the Marketing & Events Group reporting units in the United States, the United Kingdom and Canada, respectively. For the Brewster, Glacier Park and Alaska Denali Travel reporting units, the excess of the estimated fair value over the carrying value was 167 percent, 16 percent and 14 percent, respectively, as of the most recent impairment test. Significant reductions in the Company’s expected future revenues, operating income or cash flow forecasts and projections, or an increase in reporting unit cost of capital, could trigger additional goodwill impairment testing, which may result in impairment charges. See “Results of Operations” above and Note 8 of Notes to Consolidated Financial Statements for a discussion of the goodwill impairment loss recorded during 2013 related to Glacier Park.
Income taxes — Viad is required to estimate and record provisions for income taxes in each of the jurisdictions in which the Company operates. Accordingly, the Company must estimate its actual current income tax liability, and assess temporary differences arising from the treatment of items for tax purposes, as compared to the treatment for accounting purposes. These differences result in deferred tax assets and liabilities which are included in Viad’s consolidated balance sheet. The Company uses significant judgment in forming conclusions regarding the recoverability of its deferred tax assets and evaluates all available positive and negative evidence to determine if it is more-likely-than-not that the deferred tax assets will be realized. To the extent recovery does not appear likely, a valuation allowance must be recorded. As of December 31, 2014 and 2013, Viad had gross deferred tax assets of $69.2 million and $77.0 million, respectively. These deferred tax assets reflect the expected future tax benefits to be realized upon reversal of deductible temporary differences, and the utilization of net operating loss and tax credit carryforwards.


35


During the third quarter of 2014, the Company released a $10.9 million valuation allowance associated with foreign income tax credits. The Company considered all available positive and negative evidence regarding the future recoverability of the foreign tax credits, including recent operating history, future reversals of deferred tax liabilities, utilization history and projected future U.S. taxable income. Based on the evaluation of all positive and negative evidence, it was determined to be more likely than not that the foreign tax credits carryforwards would be utilized before their expiration. At the end of 2014, the remaining foreign tax credit carryforwards are $12.7 million. If not utilized, the tax credits will begin to expire during 2020.
While management believes that the deferred tax assets, net of existing valuation allowances will be utilized in future periods, there are inherent uncertainties regarding the ultimate realization of these assets. It is possible that the relative weight of positive and negative evidence regarding the realization of deferred tax assets may change, which could result in a material increase or decrease in the Company’s valuation allowance. Such a change could result in a material increase or decrease to income tax expense in the period the assessment was made.
Viad has not recorded deferred taxes on certain historical unremitted earnings of its Canadian subsidiaries as management intends to reinvest those earnings in its Canadian operations. As of December 31, 2014, the incremental unrecognized tax liability (net of estimated foreign tax credits) related to those undistributed earnings was approximately $350,000. To the extent that circumstances change and it becomes apparent that some or all of those undistributed earnings will be remitted to the U.S., Viad would accrue income taxes attributable to such remittance.
The Company records uncertain tax positions in accordance with ASC 740 on the basis of a two-step process in which a determination is first made as to whether it is more likely than not that the tax positions will be sustained on the basis of the technical merits of the position. For all tax positions meeting this threshold, Viad recognizes the largest amount of tax benefit that is more than 50 percent likely to be realized upon ultimate settlement with the related tax authority.
Pension and postretirement benefits — Viad’s pension plans use traditional defined benefit formulas based on years of service and final average compensation. Funding policies provide that payments to defined benefit pension trusts shall be at least equal to the minimum funding required by applicable regulations. The Company presently anticipates contributing $1.4 million to its funded pension plans and $0.8 million to its unfunded pension plans in 2015.
Viad and certain of its subsidiaries have defined benefit postretirement plans that provide medical and life insurance for certain eligible employees, retirees and dependents. The related postretirement benefit liabilities are recognized over the period that services are provided by employees. In addition, Viad retained the obligations for these benefits for retirees of certain sold businesses. While the plans have no funding requirements, Viad expects to contribute $1.1 million to the plans in 2015.
The assumed health care cost trend rate used in measuring the December 31, 2014 accumulated postretirement benefit obligation was 7.5 percent, declining one-quarter percent each year to the ultimate rate of 5.0 percent by the year 2024 and remaining at that level thereafter. The assumed health care cost trend rate used in measuring the December 31, 2013 accumulated postretirement benefit obligation was 8.0 percent, declining one-half percent each year to the ultimate rate of 5.0 percent by the year 2019 and remaining at that level thereafter.
A one-percentage-point increase in the assumed health care cost trend rate for each year would increase the accumulated postretirement benefit obligation as of December 31, 2014 by approximately $1.8 million and the total of service and interest cost components by approximately $0.1 million. A one-percentage-point decrease in the assumed health care cost trend rate for each year would decrease the accumulated postretirement benefit obligation as of December 31, 2014 by approximately $1.5 million and the total of service and interest cost components by approximately $0.1 million.
The weighted-average assumptions used to determine the pension and postretirement benefit obligations as of December 31 were as follows:
 
Domestic Plans
 
 
 
 
 
Funded Plans
 
Unfunded Plans
 
Postretirement
Benefit Plans
 
Foreign Plans
 
2014
 
2013
 
2014
 
2013
 
2014
 
2013
 
2014
 
2013
Discount rate
4.01
%
 
4.89
%
 
3.90
%
 
4.60
%
 
4.00
%
 
4.65
%
 
3.85
%
 
4.67
%
Rate of compensation increase
N/A

 
N/A

 
3.00
%
 
3.00
%
 
N/A

 
N/A

 
3.00
%
 
3.00
%

36


Weighted-average assumptions used to determine net periodic benefit cost were as follows:
 
Domestic Plans
 
 
 
 
 
 
 
 
 
 
 
 
 
Postretirement
Benefit Plans
 
 
 
 
 
Funded Plans
 
Unfunded Plans
 
 
Foreign Plans
 
2014
 
2013
 
2014
 
2013
 
2014
 
2013
 
2014
 
2013
Discount rate
4.90
%
 
4.09
%
 
4.60
%
 
3.80
%
 
4.65
%
 
3.85
%
 
4.67
%
 
4.03
%
Expected return on plan assets
4.15
%
 
3.90
%
 
N/A

 
N/A

 
0.00
%
 
0.00
%
 
5.69
%
 
5.44
%
Rate of compensation increase
N/A

 
N/A

 
3.00
%
 
4.50
%
 
N/A

 
N/A

 
3.00
%
 
3.00
%
The discount rates used in determining future pension and postretirement benefit obligations are based on rates determined by actuarial analysis and management review, and reflect the estimated rates of return on a high-quality, hypothetical bond portfolio whose cash flows match the timing and amounts of expected benefit payments. See Note 18 of Notes to Consolidated Financial Statements.
Share-based compensation — Viad grants share-based compensation awards to officers, directors and certain key employees pursuant to the 2007 Viad Corp Omnibus Incentive Plan which has a 10-year life and provides for the following types of awards: (a) incentive and non-qualified stock options; (b) restricted stock and restricted stock units; (c) performance units or performance shares; (d) stock appreciation rights; (e) cash-based awards and (f) certain other stock-based awards.
Share-based compensation expense recognized in the consolidated financial statements in 2014, 2013 and 2012 was $2.9 million, $5.2 million and $7.2 million, respectively. Furthermore, the total tax benefits related to such costs were $1.1 million, $1.9 million and $2.6 million in 2014, 2013 and 2012, respectively. No share-based compensation costs were capitalized during 2014, 2013 or 2012.
The fair value of restricted stock and performance-based restricted stock awards are based on Viad’s stock price on the date of grant. Liability-based awards are recorded at estimated fair value, based on the number of units expected to vest and the level of achievement of predefined performance goals (where applicable) and are remeasured on each balance sheet date based on Viad’s stock price or the Monte Carlo simulation model until the time of settlement. The fair value of performance-based awards based on a market condition is determined using a Monte Carlo simulation. A Monte Carlo simulation requires the use of a number of assumptions, including historical volatility and correlation of the price of Viad’s stock and the price of the common shares of a comparator group, a risk-free rate of return and an expected term.Viad uses the Black-Scholes option pricing model for purposes of determining the fair value of each stock option grant for which key assumptions are necessary. These assumptions include Viad’s expected stock price volatility, the expected period of time the stock option will remain outstanding, the expected dividend yield on Viad’s common stock and the risk-free interest rate. While the Company has not granted stock options since 2010, changes in the assumptions could result in different estimates of the fair value of stock option grants, and consequently impact Viad’s future results of operations. See Note 2 of Notes to Consolidated Financial Statements.
Impact of Recent Accounting Pronouncements:
For a description of recently issued accounting pronouncements, including the expected dates of adoption and estimated effects, if any, on Viad’s consolidated financial statements, see Note 1 of Notes to Consolidated Financial Statements.
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 Annual Report 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 or renewal business, investment policies, productivity improvements, ongoing cost reduction efforts, efficiency, competitiveness, legal expenses, tax rates and other tax matters, foreign exchange rates and the realization of restructuring cost savings. Actual results could differ materially from those discussed 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 exhibition and event services, existing and new competition, industry alliances, consolidation and growth patterns within the industries in which Viad competes, acquisitions, capital allocations, adverse developments in liabilities associated with discontinued operations and any deterioration in the economy and other risks discussed in Item 1A, “Risk Factors,” included in this Annual Report, may individually or in combination impact future results. In addition to factors mentioned elsewhere, economic, competitive,

37


governmental, technological, capital marketplace and other factors, including terrorist activities or war, a pandemic health crisis and international conditions, could affect the forward-looking statements in this Annual Report.
Item 7A. Quantitative and Qualitative Disclosures About Market Risk.
Viad’s market risk exposures relate to fluctuations in foreign exchange rates, interest rates and certain commodity prices. Foreign exchange risk is the risk that fluctuating exchange rates will adversely affect Viad’s financial condition or results of operations. Interest rate risk is the risk that changing interest rates will adversely affect the earnings of Viad. Commodity risk is the risk that changing prices will adversely affect results of operations.
Viad conducts its foreign operations primarily in Canada, the United Kingdom, Germany and to a lesser extent in certain other countries. The functional currency of Viad’s foreign subsidiaries is their local currency. Accordingly, for purposes of consolidation, Viad translates the assets and liabilities of its foreign subsidiaries into U.S. dollars at the foreign exchange rates in effect at the balance sheet date. The unrealized gains or losses resulting from the translation of these foreign denominated assets and liabilities are included as a component of accumulated other comprehensive income in Viad’s consolidated balance sheets. As a result, significant fluctuations in foreign exchange rates relative to the U.S. dollar may result in material changes to Viad’s net equity position reported in its consolidated balance sheets. Viad does not currently hedge its equity risk arising from the translation of foreign denominated assets and liabilities. Viad had cumulative unrealized foreign currency translation gains recorded in stockholders’ equity of $12.4 million and $30.8 million as of December 31, 2014 and 2013, respectively. During 2014 and 2013, unrealized foreign currency translation losses of $18.4 million and $11.3 million, respectively, were recorded in other comprehensive income.
In addition, for purposes of consolidation, the revenues, expenses, gains and losses related to Viad’s foreign operations are translated into U.S. dollars at the average foreign exchange rates for the period. As a result, Viad’s consolidated results of operations are exposed to fluctuations in foreign exchange rates as the operating results of its foreign operations, when translated, may vary from period-to-period, even when the functional currency amounts have not changed. Such fluctuations may adversely impact overall expected profitability and historical period-to-period comparisons. Viad does not currently hedge its net earnings exposure arising from the translation of its foreign operating results.
The following table summarizes the effect of foreign exchange rate variances on year-over-year revenue and segment operating results from Viad’s international operations, excluding 2014 acquisitions:
 
Revenues
 
Segment Operating Results
 
Weighted-Average
Exchange Rates
 
Effect of Rate
Variance (thousands)
 
Weighted-Average
Exchange Rates
 
Effect of Rate
Variance (thousands)
 
2014
 
2013
 
 
2014
 
2013
 
Canadian Operations:
 
 
 
 
 
 
 
 
 
 
 
Marketing & Events Group
$
0.90

 
$
0.97

 
$
(4,635
)
 
$
0.88

 
$
0.99

 
$
(211
)
Travel & Recreation Group
$
0.92

 
$
0.96

 
$
(4,735
)
 
$
0.93

 
$
0.96

 
$
(877
)
 
 
 
 
 
(9,370
)
 
 
 
 
 
(1,088
)
United Kingdom Operations:
 
 
 
 
 
 
 
 
 
 
 
Marketing & Events Group
$
1.65

 
$
1.56

 
$
9,105

 
$
1.66

 
$
1.57

 
$
460

German Operations:
 
 
 
 
 
 
 
 
 
 
 
Marketing & Events Group
$
1.32

 
$
1.33

 
$
(58
)
 
$
1.35

 
$
1.33

 
$
2


As the Canadian operations generated aggregate operating income in 2014, Viad’s segment operating income has been unfavorably impacted by $1.1 million from the weakening of the Canadian dollar relative to the U.S. dollar. As the United Kingdom operations generated aggregate operating income in 2014, Viad’s segment operating income has been favorably impacted by $0.5 million from the strengthening of the British pound relative to the U.S. dollar. The change in the Euro exchange rate relative to the U.S. dollar did not have a meaningful impact on Viad's segment operating income.
A hypothetical change of 10 percent in the Canadian exchange rate would have resulted in a change to operating income of approximately $2.6 million. A hypothetical change of 10 percent in the British pound exchange rate would have resulted in a change to operating income of approximately $0.9 million, including the results from the acquisition of Blitz that was completed during the third quarter of 2014. A hypothetical change of 10 percent in the Euro exchange rate would not have resulted in a meaningful change to operating income, including the results from the acquisition of N200 that was completed during the fourth quarter of 2014.

38


Viad is exposed to foreign exchange transaction risk as its foreign subsidiaries have certain revenue transactions denominated in currencies other than the functional currency of the respective subsidiary. From time to time, Viad utilizes forward contracts to mitigate the impact on earnings related to these transactions due to fluctuations in foreign exchange rates. As of December 31, 2014 and 2013, Viad did not have any significant foreign currency forward contracts outstanding.
Viad is exposed to short-term and long-term interest rate risk on certain of its debt obligations. Viad currently does not use derivative financial instruments to hedge cash flows for such obligations.
Viad’s subsidiaries have exposure to changing fuel prices. Periodically, Brewster enters into futures contracts with an oil company to purchase two types of fuel and specifies the monthly total volume, by fuel product, to be purchased over the agreed upon term of the contract, which is generally no longer than one year. The main objective of Viad’s risk policy related to changing fuel prices is to reduce transaction exposure in order to mitigate the cash flow risk and protect profit margins. There were no fuel contracts outstanding as of December 31, 2014 or 2013.
Item 8. Financial Statements and Supplementary Data.
Refer to Index to Financial Statements for required information.
Item 9. Changes in and Disagreements With Accountants on Accounting and Financial Disclosure.
None.
Item 9A. Controls and Procedures.

Under the supervision and with the participation of management, including the Chief Executive Officer and Chief Financial Officer of Viad, the effectiveness of the design and operation of disclosure controls and procedures has been evaluated as of December 31, 2014, and, based on that evaluation, the Chief Executive Officer and Chief Financial Officer have concluded that these disclosure controls and procedures are effective as of December 31, 2014. Disclosure controls and procedures are designed to ensure that information required to be disclosed in the reports filed or submitted under the Securities Exchange Act of 1934 is recorded, processed, summarized and reported, within the time periods specified in the SEC’s rules and forms. Disclosure controls and procedures include, without limitation, controls and procedures designed to ensure that information required to be disclosed in such reports is accumulated and communicated to management, including the Chief Executive Officer and Chief Financial Officer, as appropriate to allow for timely decisions regarding required disclosure.

In accordance with the SEC's published guidance, our management has excluded from its assessment the internal control over financial reporting at Blitz, onPeak and N200, which we acquired on September 16, 2014, October 7, 2014 and November 24, 2014, respectively, and whose financial statements constitute 19.3% of total assets and 1.6% of revenues of our consolidated financial statement amounts as of and for the year ended December 31, 2014.
There were no changes in the Company’s internal control over financial reporting during the fourth quarter of 2014 that have materially affected, or are reasonably likely to materially affect, internal control over financial reporting.
Management’s report on internal control over financial reporting and the report of Viad’s independent registered public accounting firm, Deloitte & Touche LLP, are provided in this Annual Report immediately prior to the Index to Financial Statements.
Item 9B. Other Information.
None.

39


PART III
Item 10. Directors, Executive Officers and Corporate Governance.
Information regarding directors of Viad, director nomination procedures, the Audit Committee of Viad’s Board of Directors and compliance with Section 16(a) of the Securities Exchange Act of 1934, as amended, are included in the Proxy Statement for the Annual Meeting of Shareholders of Viad to be held on May 21, 2015, under the captions “Election of Directors,” “Board of Directors and Corporate Governance” and “Information on Stock Ownership,” and are incorporated herein by reference. Information regarding executive officers of Viad is located in Part I, “Other - Executive Officers of Registrant” of this Annual Report.
Viad has adopted a Code of Ethics for all directors, officers and employees of the Company and its subsidiaries. A copy of the Company’s Code of Ethics is available at Viad’s website at www.viad.com/pdf/corpgovernance/CodeofEthics.pdf and is also available without charge to any shareholder upon request by writing to: Viad Corp, 1850 North Central Avenue, Suite 1900, Phoenix, Arizona 85004-4565, Attention: Corporate Secretary.
Item 11. Executive Compensation.
Information regarding executive compensation is contained in the Proxy Statement for the Annual Meeting of Shareholders of Viad to be held on May 21, 2015, under the captions “Compensation Discussion and Analysis,” “Board of Directors and Corporate Governance” and “Executive Compensation,” and is incorporated herein by reference.
Item 12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters.
Information regarding security ownership of certain beneficial owners and management and information regarding securities authorized for issuance under equity compensation plans are contained in the Proxy Statement for the Annual Meeting of Shareholders of Viad to be held on May 21, 2015, under the captions “Executive Compensation” and “Information on Stock Ownership,” and is incorporated herein by reference.
Item 13. Certain Relationships and Related Transactions, and Director Independence.
Information regarding director independence, and certain relationships and related transactions, is contained in the Proxy Statement for the Annual Meeting of Shareholders of Viad to be held on May 21, 2015, under the caption “Board of Directors and Corporate Governance,” and is incorporated herein by reference.
Item 14. Principal Accounting Fees and Services.
Information regarding principal accounting fees and services and the pre-approval policies and procedures for such fees and services, as adopted by the Audit Committee of the Board of Directors, is contained in the Proxy Statement for the Annual Meeting of Shareholders of Viad to be held on May 21, 2015, under the caption “Ratification of the Appointment of Deloitte & Touche LLP as Viad’s Independent Public Accountants for 2015” and is incorporated herein by reference.
PART IV
Item 15. Exhibits, Financial Statement Schedules.
(a)
1. The financial statements listed in the accompanying Index to Financial Statements are filed as part of this Annual Report.
2. The exhibits listed in the accompanying Exhibit Index are filed as part of this Annual Report.
(b)
Exhibits
See Exhibit Index.
(c)
Financial Statement Schedules
Schedule II – Valuation and Qualifying Accounts.





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SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused this Annual Report to be signed on its behalf by the undersigned, thereunto duly authorized, in Phoenix, Arizona, on March 12, 2015.
 
 
 
 
VIAD CORP
 
 
 
 
 
 
 
 
By:
 
/s/ Steven W. Moster
 
 
 
 
 
 
Steven W. Moster
 
 
 
 
 
 
President and Chief Executive Officer