UNITED STATES
SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

(Mark one)

þ		QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

o		TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

Commission File Number: 001-11015

VIAD CORP

(Exact name of registrant as specified in its charter)

Delaware		36-1169950
(State or other jurisdiction of		(I.R.S. Employer Identification No.)
incorporation or organization)
1850 North Central Avenue, Suite 1900
Phoenix, Arizona		85004-4565
(Address of principal executive offices)		(Zip Code)

(602) 207-4000
(Registrant’s telephone number, including area code)

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 þ No o

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, 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 þ No o

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer or a smaller reporting company. See definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act.

Large accelerated filer o		Accelerated filer þ		Non-accelerated filer o		Small reporting company o
				(Do not check if a smaller reporting company)

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes o No þ

As of October 31, 2011, there were 20,124,707 shares of common stock ($1.50 par value) outstanding.

 

 

PART I—FINANCIAL INFORMATION

Item 1.		Financial Statements.

VIAD CORP

		September 30, 2011				December 31, 2010
		(in thousands, except share data)
ASSETS
Current assets:
Cash and cash equivalents		$	104,553			$	145,841
Accounts receivable, net of allowance for doubtful accounts of $1,624 and $1,172, respectively			61,931				47,187
Inventories			40,410				38,670
Deferred income taxes			22,922				22,057
Other current assets			19,559				17,160
Total current assets			249,375				270,915
Property and equipment, net			174,022				149,346
Other investments and assets			31,911				31,363
Deferred income taxes			35,901				35,875
Goodwill			131,909				127,441
Other intangible assets, net			2,278				1,563
Total Assets		$	625,396			$	616,503
LIABILITIES AND STOCKHOLDERS’ EQUITY
Current liabilities:
Accounts payable		$	58,089			$	47,933
Other current liabilities			96,256				96,749
Current portion of long-term debt and capital lease obligations			2,200				6,639
Total current liabilities			156,545				151,321
Long-term debt and capital lease obligations			1,420				2,438
Pension and postretirement benefits			32,603				33,008
Other deferred items and liabilities			43,558				43,025
Total liabilities			234,126				229,792
Commitments and contingencies (Note 15)
Stockholders’ equity:
Viad Corp stockholders’ equity:
Common stock, $1.50 par value, 200,000,000 shares authorized, 24,934,981 shares issued			37,402				37,402
Additional capital			599,347				606,902
Retained deficit			(6,145	)			(19,229	)
Unearned employee benefits and other			(3,520	)			(4,433	)
Accumulated other comprehensive income (loss):
Unrealized gains on investments			183				282
Cumulative foreign currency translation adjustments			31,519				38,979
Unrecognized net actuarial loss and prior service credit			(10,543	)			(10,410	)
Common stock in treasury, at cost, 4,809,459 and 4,710,988 shares, respectively			(265,400	)			(270,534	)
Total Viad Corp stockholders’ equity			382,843				378,959
Noncontrolling interest			8,427				7,752
Total stockholders’ equity			391,270				386,711
Total Liabilities and Stockholders’ Equity		$	625,396			$	616,503

See Notes to Condensed Consolidated Financial Statements.

VIAD CORP

		Three months ended September 30,								Nine months ended September 30,
		2011				2010				2011				2010
		(in thousands, except per share data)
Revenues:
Convention and event services		$	121,157			$	130,609			$	529,963			$	464,465
Exhibits and environments			30,540				32,550				120,807				111,544
Travel and recreation services			64,472				51,985				94,189				81,787
Total revenues			216,169				215,144				744,959				657,796
Costs and expenses:
Costs of services			180,517				170,354				595,554				517,905
Costs of products sold			30,240				34,871				116,872				122,048
Corporate activities			2,356				1,749				5,203				4,451
Interest income			(198	)			(174	)			(588	)			(358	)
Interest expense			373				472				1,165				1,438
Restructuring charges			75				183				1,550				2,795
Total costs and expenses			213,363				207,455				719,756				648,279
Income before income taxes			2,806				7,689				25,203				9,517
Income tax expense			523				1,911				9,011				3,909
Net income			2,283				5,778				16,192				5,608
Net income attributable to noncontrolling interest			(1,038	)			(982	)			(675	)			(766	)
Net income attributable to Viad		$	1,245			$	4,796			$	15,517			$	4,842
Diluted income per common share
Net income attributable to Viad common stockholders		$	0.06			$	0.23			$	0.76			$	0.24
Weighted-average outstanding and potentially dilutive common shares			20,033				20,309				20,089				20,332
Basic income per common share
Net income attributable to Viad common stockholders		$	0.06			$	0.23			$	0.76			$	0.24
Weighted-average outstanding common shares			19,711				20,001				19,768				20,037
Dividends declared per common share		$	0.04			$	0.04			$	0.12			$	0.12

See Notes to Condensed Consolidated Financial Statements.

VIAD CORP

		Three months ended September 30,								Nine months ended September 30,
		2011				2010				2011				2010
		(in thousands)
Net income		$	2,283			$	5,778			$	16,192			$	5,608
Other comprehensive income (loss):
Holding gains (losses) arising during the period, net of tax			(160	)			97				(99	)			78
Unrealized foreign currency translation adjustments, net of tax			(13,072	)			6,693				(7,460	)			2,783
Net actuarial loss, net of tax			51				183				459				(1,188	)
Prior service credit, net of tax			(197	)			(175	)			(592	)			(470	)
Total other comprehensive income (loss)			(13,378	)			6,798				(7,692	)			1,203
Comprehensive income (loss)			(11,095	)			12,576				8,500				6,811
Comprehensive income attributable to noncontrolling interest			(1,038	)			(982	)			(675	)			(766	)
Comprehensive income (loss) attributable to Viad		$	(12,133	)		$	11,594			$	7,825			$	6,045

See Notes to Condensed Consolidated Financial Statements.

VIAD CORP

		Nine months ended September 30,
		2011				2010
		(in thousands)
Cash flows from operating activities:
Net income		$	16,192			$	5,608
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization			21,882				21,314
Deferred income taxes			548				(5,217	)
Restructuring charges			1,550				2,795
Losses (gains) on dispositions of property and other assets			(64	)			51
Share-based compensation expense			3,284				2,748
Excess tax benefit from share-based compensation arrangements			(54	)			—
Other non-cash items, net			3,532				3,281
Change in operating assets and liabilities:
Receivables			(16,154	)			(12,801	)
Inventories			(883	)			8,723
Accounts payable			12,665				12,536
Restructuring liabilities			(3,362	)			(5,866	)
Accrued compensation			3,536				7,018
Customer deposits			(3,975	)			2,670
Income taxes payable			2,036				1,983
Other assets and liabilities, net			(5,665	)			429
Net cash provided by operating activities			35,068				45,272
Cash flows from investing activities:
Capital expenditures			(17,251	)			(11,609	)
Acquisition of businesses, net of cash acquired			(41,105	)			—
Proceeds from dispositions of property and other assets			315				14,630
Net cash provided by (used in) investing activities			(58,041	)			3,021
Cash flows from financing activities:
Payments on debt and capital lease obligations			(6,544	)			(3,944	)
Dividends paid on common stock			(2,435	)			(2,466	)
Common stock purchased for treasury			(5,230	)			(6,906	)
Debt issuance costs			(1,001	)			—
Excess tax benefit from share-based compensation arrangements			54				—
Proceeds from exercise of stock options			163				38
Net cash used in financing activities			(14,993	)			(13,278	)
Effect of exchange rate changes on cash and cash equivalents			(3,322	)			770
Net increase (decrease) in cash and cash equivalents			(41,288	)			35,785
Cash and cash equivalents, beginning of year			145,841				116,342
Cash and cash equivalents, end of period		$	104,553			$	152,127
Supplemental disclosure of cash flow information
Income taxes		$	7,805			$	5,680
Interest		$	804			$	792
Equipment acquired under capital leases		$	1,097			$	590

See Notes to Condensed Consolidated Financial Statements.

VIAD CORP
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)

Note 1. Basis of Preparation and Principles of Consolidation

The accompanying unaudited, condensed consolidated financial statements of Viad Corp (“Viad” or the “Company”) have been prepared in accordance with accounting principles generally accepted in the United States of America (“GAAP”) for interim financial information and with the instructions to Form 10-Q and Article 10 of Regulation S-X. Accordingly, they do not include all of the information and footnotes required for complete financial statements. In the opinion of management, all adjustments (consisting of normal recurring accruals) considered necessary for a fair presentation have been included. Operating results for the three and nine months ended September 30, 2011 are not necessarily indicative of the results that may be expected for the year ending December 31, 2011.

For further information, refer to the consolidated financial statements and related footnotes for the year ended December 31, 2010, included in the Company’s Form 10-K (File No. 001-11015), filed with the Securities and Exchange Commission on March 4, 2011.

The condensed consolidated financial statements include the accounts of Viad and all of its subsidiaries. All significant intercompany account balances and transactions between Viad and its subsidiaries have been eliminated in consolidation. Viad’s reporting segments consist of Marketing & Events U.S., Marketing & Events International and the Travel & Recreation Group.

The Marketing & Events Group, comprised of Global Experience Specialists, Inc. and affiliates (“GES”), 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. In addition, the Marketing & Events Group 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 shopping malls, movie studios, museums, leading consumer brands and casinos.

The Travel & Recreation Group segment consists of Brewster Inc. (“Brewster”), Glacier Park, Inc. (“Glacier Park”) and Alaskan Park Properties, Inc. (“Denali”). Brewster provides tourism 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, motorcoach services, charter and sightseeing services, tour boat operations, inbound package tour operations and hotel operations. Glacier Park operates five lodges, three motor inns and one four-season resort hotel and provides food and beverage operations, retail operations and tour and transportation services in and around Glacier National Park in Montana and Waterton Lakes National Park in Alberta, Canada. Glacier Park is an 80 percent owned subsidiary of Viad. Denali operates the Denali Backcountry Lodge, which is the largest of three lodges located within Denali National Park and Preserve in Alaska, and the Denali Cabins, which are located near the entrance to Denali National Park. In addition to lodging, Denali also provides food and beverage operations, and packaged tour and transportation services in and around the park.

Note 2. Share-Based Compensation

The following table summarizes share-based compensation expense for the three and nine months ended September 30:

		Three months ended								Nine months ended
		September 30,								September 30,
		2011				2010				2011				2010
		(in thousands)
Stock options		$	146			$	152			$	476			$	415
Restricted stock/performance-based restricted stock (“PBRS”)			794				736				2,409				2,211
Restricted stock units/PBRS units			(35	)			60				54				125
Performance unit incentive plan (“PUP”)			86				—				345				(3	)
Total share-based compensation before income tax benefit			991				948				3,284				2,748
Income tax benefit			(358	)			(329	)			(1,163	)			(957	)
Total share-based compensation, net of income tax benefit		$	633			$	619			$	2,121			$	1,791

In addition, $124,000 and $509,000 of costs associated with share-based compensation (including $43,000 for the nine months ended September 30, 2010 of restricted stock units and PBRS units presented below) were included in restructuring charges during the nine months ended September 30, 2011 and 2010, respectively.

The following table summarizes restricted stock and PBRS activity during the nine months ended September 30, 2011:

		Restricted Stock								PBRS
						Weighted-Average								Weighted-Average
						Grant Date								Grant Date
		Shares				Fair Value				Shares				Fair Value
Balance at January 1, 2011			478,499			$	21.51				18,830			$	33.02
Granted			177,350				22.91				—				—
Vested			(91,212	)			31.31				(18,414	)			33.42
Forfeited			(4,400	)			21.19				—				—
Balance at September 30, 2011			560,237				20.36				416				15.36

The unamortized cost of all outstanding restricted stock and PBRS awards as of September 30, 2011 was $4.4 million, which Viad expects to recognize in its consolidated financial statements over a weighted-average period of approximately 2.4 years. During the nine months ended September 30, 2011 and 2010, the Company repurchased 28,627 shares for $679,000 and 28,407 shares for $573,000, respectively, related to tax withholding requirements on vested share-based awards. As of September 30, 2011, there were 997,903 total shares available for future grant.

The following table summarizes the liability-based award activity during the nine months ended September 30, 2011:

		Restricted Stock Units								PBRS Units								PUP Awards
						Weighted-Average								Weighted-Average								Weighted-Average
						Grant Date								Grant Date								Grant Date
		Units				Fair Value				Units				Fair Value				Units				Fair Value
Balance at January 1, 2011			26,050			$	17.18				3,914			$	15.36				102,960			$	33.81
Granted			12,550				23.01				—				—				95,500				23.02
Vested			—				—				(1,958	)			15.36				—				—
Cancelled			—				—				—				—				(102,960	)			33.81
Balance at September 30, 2011			38,600				19.07				1,956				15.36				95,500				23.02

As of September 30, 2011 and December 31, 2010, Viad had liabilities recorded of $409,000 and $407,000, respectively, related to restricted stock unit and PBRS unit liability awards. A portion of the 2009 PBRS unit awards vested effective December 31, 2009 and cash payouts of $52,000 and $37,000 were distributed in January 2011 and March 2010, respectively.

As of September 30, 2011, Viad had a liability recorded of $345,000 related to PUP awards. The PUP awards for the 2007-2009 period vested effective December 31, 2009 and a cash payout of $19,000 was distributed in March 2010. No cash payouts of PUP awards were made during the nine months ended September 30, 2011. In March 2011, 102,960 PUP awards for the 2008-2010 period were cancelled as the performance conditions related to those awards were not achieved.

The following table summarizes stock option activity during the nine months ended September 30, 2011:

						Weighted-
						Average				Options
		Shares				Exercise Price				Exercisable
Options outstanding at January 1, 2011			763,794			$	23.38				451,194
Exercised			(7,866	)			20.56
Forfeited or expired			(147,911	)			24.42
Options outstanding at September 30, 2011			608,017				23.17				401,438

The total unrecognized cost related to non-vested stock option awards was $812,000 as of September 30, 2011, which Viad expects to recognize in the consolidated financial statements over a weighted-average period of approximately 1.7 years. No stock options were granted during the nine months ended September 30, 2011.

In addition to the above, Viad had stock options outstanding which were granted to employees of MoneyGram International, Inc. (“MoneyGram”) prior to the spin-off of that company in 2004. As of September 30, 2011, there were 10,864 of such options outstanding and exercisable, both with exercise prices ranging from $19.57 to $26.31. The weighted-average remaining contractual life of these options outstanding was less than one year. During the nine months ended September 30, 2011, 100 options were exercised by MoneyGram participants at an exercise price of $19.57.

Note 3. Acquisition of Businesses

On September 16, 2011, Viad acquired the Denali Backcountry Lodge and Denali Cabins for $15.3 million in cash. Denali Backcountry Lodge is the largest of three lodges located within Denali National Park and Preserve in Alaska and Denali Cabins consist of 46 guest cabins near the entrance to Denali National Park. Denali will operate as a separate business unit within the Travel & Recreation Group. The following information represents the preliminary amounts assigned to the assets and liabilities of Denali as of the date of acquisition:

		(in thousands)
Other current assets		$	43
Property and equipment			11,090
Goodwill			3,482
Other intangible assets			818
Total assets acquired			15,433
Customer deposits			(38	)
Other current liabilities			(90	)
Total liabilities acquired			(128	)
Purchase price		$	15,305

The Company recorded $3.5 million of goodwill in connection with the transaction, which is included in the Travel & Recreation Group. The primary factor that contributed to a purchase price resulting in the recognition of goodwill relates to future growth opportunities. The entire amount of the goodwill is expected to be deductible for tax purposes over a period of 15 years. The amount assigned to other intangible assets includes $633,000 related to non-amortized trade names, $100,000 related to customer relationships and $85,000 related to a non-compete agreement. Transaction costs related to the acquisition were insignificant. The results of operations of Denali have been included in Viad’s consolidated financial statements from the date of acquisition.

On June 29, 2011, Viad acquired St. Mary Lodge & Resort (“St. Mary”) for $15.3 million in cash. St. Mary is a 115-room hotel located outside of Glacier National Park’s east entrance and is operated by Glacier Park within the Travel & Recreation Group. The following information represents the preliminary amounts assigned to the assets and liabilities of St. Mary as of the date of acquisition:

		(in thousands)
Cash and cash equivalents		$	21
Other current assets			715
Property and equipment			13,058
Goodwill			2,583
Other intangible assets			60
Total assets acquired			16,437
Customer deposits			(684	)
Other current liabilities			(46	)
Other long-term liabilities			(382	)
Total liabilities acquired			(1,112	)
Purchase price		$	15,325

The Company recorded $2.6 million of goodwill in connection with the transaction, which is included in the Travel & Recreation Group. The primary factor that contributed to a purchase price resulting in the recognition of goodwill relates to future growth opportunities. The entire amount of the goodwill is expected to be deductible for tax purposes over a period of 15 years. The amount assigned to other intangible assets includes $60,000 related to a non-amortized business license. Transaction costs related to the acquisition were insignificant. The results of operations of St. Mary have been included in Viad’s consolidated financial statements from the date of acquisition.

On January 5, 2011, Viad acquired Grouse Mountain Lodge for $10.5 million in cash. Grouse Mountain Lodge is a 145-room hotel located in Whitefish, Montana, and is operated by Glacier Park within the Travel & Recreation Group. The following information represents the preliminary amounts assigned to the assets and liabilities of Grouse Mountain Lodge as of the date of acquisition:

		(in thousands)
Cash and cash equivalents		$	9
Other current assets			126
Property and equipment			8,750
Goodwill			1,331
Other intangible assets			400
Total assets acquired			10,616
Customer deposits			(99	)
Other current liabilities			(12	)
Total liabilities acquired			(111	)
Purchase price		$	10,505

The Company recorded $1.3 million of goodwill in connection with the transaction, which is included in the Travel & Recreation Group. The primary factor that contributed to a purchase price resulting in the recognition of goodwill relates to future growth opportunities. The entire amount of the goodwill is expected to be deductible for tax purposes over a period of 15 years. The amount assigned to other intangible assets includes $400,000 related to a non-amortized business license. Transaction costs related to the acquisition were insignificant. The results of operations of Grouse Mountain Lodge have been included in Viad’s consolidated financial statements from the date of acquisition.

The following table summarizes the unaudited pro forma results of operations of Viad for the three and nine months ended September 30, 2011 and 2010, assuming that the acquisitions of Denali, St. Mary and Grouse Mountain Lodge had each been completed at the beginning of each period:

		Three months ended September 30,								Nine months ended September 30,
		2011				2010				2011				2010
		(in thousands, except per share data)
Revenue		$	221,335			$	227,169			$	752,868			$	673,567
Net income attributable to Viad		$	2,869			$	7,114			$	17,158			$	6,852
Diluted net income per share		$	0.14			$	0.35			$	0.84			$	0.33
Basic net income per share		$	0.14			$	0.35			$	0.84			$	0.33

Note 4. Inventories

The components of inventories were as follows:

		September 30,				December 31,
		2011				2010
		(in thousands)
Raw materials		$	18,143			$	18,488
Work in process			22,267				20,182
Inventories		$	40,410			$	38,670

Note 5. Property and Equipment

Property and equipment consisted of the following:

		September 30,				December 31,
		2011				2010
		(in thousands)
Land		$	17,846			$	9,139
Buildings and leasehold improvements			109,729				89,945
Equipment and other			306,617				299,558
			434,192				398,642
Accumulated depreciation			(260,170	)			(249,296	)
Property and equipment, net		$	174,022			$	149,346

Depreciation expense for the three months ended September 30, 2011 and 2010 was $7.4 million and $7.1 million, respectively, and for the nine months ended September 30, 2011 and 2010 was $21.3 million and $20.6 million, respectively.

In March 2010, Viad completed the sale of a non-strategic real estate asset within the Travel & Recreation Group consisting of land, building and related improvements for $14.3 million (net of selling costs).

Note 6. Goodwill and Other Intangible Assets

The changes in the carrying amount of goodwill for the nine months ended September 30, 2011 were as follows:

						Marketing &
		Marketing &				Events				Travel &
		Events U.S.				International				Recreation Group				Total
		(in thousands)
Balance at January 1, 2011		$	62,686			$	22,455			$	42,300			$	127,441
Business acquisitions			—				—				7,396				7,396
Foreign currency translation adjustments			—				(465	)			(2,463	)			(2,928	)
Balance at September 30, 2011		$	62,686			$	21,990			$	47,233			$	131,909

A summary of other intangible assets as of September 30, 2011 is presented below:

		Gross Carrying				Accumulated				Net Carrying
		Value				Amortization				Value
		(in thousands)
Amortized intangible assets:
Customer contracts and relationships		$	2,587			$	(1,540	)		$	1,047
Non-compete agreement			85				—				85
Proprietary technology			517				(505	)			12
Other			67				(26	)			41
			3,256				(2,071	)			1,185
Unamortized intangible assets:
Trade names			633				—				633
Business licenses			460				—				460
			1,093				—				1,093
Total		$	4,349			$	(2,071	)		$	2,278

A summary of amortized other intangible assets as of December 31, 2010 is presented below:

		Gross Carrying				Accumulated				Net Carrying
		Value				Amortization				Value
		(in thousands)
Customer contracts and relationships		$	2,506			$	(1,135	)		$	1,371
Proprietary technology			517				(448	)			69
Design libraries			175				(110	)			65
Other			166				(108	)			58
		$	3,364			$	(1,801	)		$	1,563

Intangible asset amortization expense for the three months ended September 30, 2011 and 2010 was $185,000 and $238,000, respectively, and $568,000 and $721,000 for the nine months ended September 30, 2011 and 2010, respectively. Estimated amortization expense related to amortized intangible assets for future periods is expected to be as follows:

		(in thousands)
2011		$	265
2012		$	434
2013		$	349
2014		$	119
2015		$	18

Note 7. Accrued Liabilities and Other

Other current liabilities consisted of the following:

		September 30,				December 31,
		2011				2010
		(in thousands)
Continuing operations:
Customer deposits		$	40,257			$	43,411
Accrued compensation			21,679				17,599
Self-insured liability accrual			7,819				8,278
Accrued foreign income taxes			5,004				2,852
Accrued employee benefit costs			3,232				3,127
Accrued restructuring			1,840				4,272
Accrued sales and use taxes			1,454				2,990
Accrued dividends			826				827
Other			12,182				11,084
			94,293				94,440
Discontinued operations:
Environmental remediation liabilities			936				1,124
Self-insured liability accrual			493				552
Other			534				633
			1,963				2,309
Total other current liabilities		$	96,256			$	96,749

Other deferred items and liabilities consisted of the following:

		September 30,				December 31,
		2011				2010
		(in thousands)
Continuing operations:
Self-insured liability accrual		$	13,442			$	14,330
Accrued compensation			4,984				5,129
Accrued restructuring			3,972				3,724
Foreign deferred tax liability			1,584				1,582
Accrued income taxes			—				146
Other			5,877				3,945
			29,859				28,856
Discontinued operations:
Self-insured liability accrual			6,607				6,898
Environmental remediation liabilities			4,897				4,953
Accrued income taxes			1,015				987
Other			1,180				1,331
			13,699				14,169
Total other deferred items and liabilities		$	43,558			$	43,025

Note 8. Debt

On May 18, 2011, Viad entered into an amended and restated revolving credit agreement (the “Credit Facility”). The Credit Facility provides for a $130 million revolving line of credit, which may be increased up to an additional $50 million under certain circumstances. The term of the Credit Facility is five years (expiring on May 18, 2016) and borrowings are to be used for general corporate purposes (including permitted acquisitions) and to support up to $50 million of letters of credit. The lenders have a first perfected security interest in all of the personal property of Viad and GES, including 65 percent of the capital stock of top-tier foreign subsidiaries. On April 28, 2011, Viad paid off its outstanding borrowing under the previous credit facility of $4.2 million and as of September 30, 2011, Viad’s total debt of $3.6 million consisted entirely of capital lease obligations. As of September 30, 2011, Viad had $125.4 million of capacity remaining under its Credit Facility reflecting outstanding letters of credit of $4.6 million.

Borrowings under the Credit Facility (of which GES is a guarantor) are indexed to 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.

Financial covenants include a fixed-charge coverage ratio of not less than 2.25 to 1 (and a ratio of not less than 2.50 to 1 after the fiscal quarter ending September 30, 2012) and a leverage ratio of not greater than 2.50 to 1. Additionally, Viad must maintain a consolidated minimum cash and cash equivalents balance of $50 million. As of September 30, 2011, the fixed-charge coverage and leverage ratios were 3.08 to 1 and 0.29 to 1, respectively. The terms of the Credit Facility allow Viad to pay up to $10 million in dividends in the aggregate in any calendar year and also allow the Company to purchase up to $10 million in any calendar year of the Company’s common stock. Significant other covenants include limitations on: investments, additional indebtedness, sales/leases of assets, acquisitions, consolidations or mergers and liens on property. As of September 30, 2011, Viad was in compliance with all covenants.

The estimated fair value of total debt was $3.6 million and $9.2 million as of September 30, 2011 and December 31, 2010, respectively. The fair value of debt was estimated by discounting the future cash flows using rates currently available for debt of similar terms and maturity.

Note 9. Stockholders’ Equity

The following represents a reconciliation of the carrying amounts of stockholders’ equity attributable to Viad and the noncontrolling interest for the nine months ended September 30, 2011:

		Total Viad								Total
		Stockholders’				Noncontrolling				Stockholders’
		Equity				Interest				Equity
		(in thousands)
Balance at January 1, 2011		$	378,959			$	7,752			$	386,711
Net income			15,517				675				16,192
Dividends on common stock			(2,435	)			—				(2,435	)
Common stock purchased for treasury			(5,230	)			—				(5,230	)
Employee benefit plans			2,800				—				2,800
Unrealized foreign currency translation adjustment			(7,460	)			—				(7,460	)
Unrealized gain on investments			(99	)			—				(99	)
Prior service credit and net actuarial loss			(133	)			—				(133	)
ESOP allocation adjustment			920				—				920
Other			4				—				4
Balance at September 30, 2011		$	382,843			$	8,427			$	391,270

The following represents a reconciliation of the carrying amounts of stockholders’ equity attributable to Viad and the noncontrolling interest for the nine months ended September 30, 2010:

		Total Viad								Total
		Stockholders’				Noncontrolling				Stockholders’
		Equity				Interest				Equity
		(in thousands)
Balance at January 1, 2010		$	377,515			$	7,116			$	384,631
Net income			4,842				766				5,608
Dividends on common stock			(2,466	)			—				(2,466	)
Common stock purchased for treasury			(6,906	)			—				(6,906	)
Employee benefit plans			2,621				—				2,621
Unrealized foreign currency translation adjustment			2,783				—				2,783
Unrealized loss on investments			78				—				78
Prior service credit and net actuarial loss			(1,658	)			—				(1,658	)
ESOP allocation adjustment			1,100				—				1,100
Other			10				—				10
Balance at September 30, 2010		$	377,919			$	7,882			$	385,801

Viad has announced its intent to repurchase shares of the Company’s common stock from time to time at prevailing market prices. During the three months ended September 30, 2011 and 2010, Viad repurchased 250,760 shares for $4.6 million and 356,300 shares for $6.3 million, respectively. As of September 30, 2011, 53,621 shares remain available for repurchase from the announced authorization. Additionally, during the nine months ended September 30, 2011 and 2010, the Company repurchased 28,627 shares for $679,000 and 28,407 shares for $573,000, respectively, related to tax withholding requirements on share-based awards.

Note 10. Fair Value Measurements

The fair value of an asset or liability is defined as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. The fair value guidance requires an entity to maximize the use of quoted prices and other observable inputs and minimize the use of unobservable inputs when measuring fair value, and also establishes a fair value hierarchy which prioritizes the inputs to valuation techniques used to measure fair value as follows:

Level 1 —		Quoted prices in active markets for identical assets or liabilities.

Level 2 —		Observable inputs other than quoted prices included within Level 1 that are observable for the asset or liability, either directly or indirectly.

Level 3 —		Unobservable inputs to the valuation methodology that are significant to the measurement of fair value.

Viad measures its money market mutual funds and certain other mutual fund investments at fair value on a recurring basis using Level 1 inputs. The fair value information related to these assets is summarized in the following table:

						Fair Value Measurements at September 30, 2011 Using
										Significant
						Quoted Prices				Other				Significant
						in Active				Observable				Unobserved
		September 30,				Markets				Inputs				Inputs
		2011				(Level 1)				(Level 2)				(Level 3)
		(in thousands)
Assets:
Money market funds		$	19,245			$	19,245			$	—			$	—
Other mutual funds			1,331				1,331				—				—
Total		$	20,576			$	20,576			$	—			$	—

As of September 30, 2011 and December 31, 2010, Viad had investments in money market mutual funds of $19.2 million and $31.3 million, respectively, which were included in the consolidated balance sheets under the caption “Cash and cash equivalents.” These investments were classified as available-for-sale and were recorded at fair value. There have been no realized or unrealized gains or losses related to these investments and the Company has not experienced any redemption restrictions with respect to any of the money market mutual funds.

As of September 30, 2011 and December 31, 2010, Viad had investments in other mutual funds of $1.3 million and $1.7 million, respectively, which were classified in the consolidated balance sheets under the caption “Other investments and assets.” These investments were classified as available-for-sale and were recorded at fair value. As of September 30, 2011 and December 31, 2010, there were unrealized gains on the investments of $302,000 ($183,000 after-tax) and $462,000 ($282,000 after-tax), respectively, which were included in the consolidated balance sheets under the caption “Accumulated other comprehensive income (loss).”

The carrying values of cash and cash equivalents, receivables and accounts payable approximate fair value due to the short-term maturities of these instruments. The estimated fair value of debt obligations is disclosed in Note 8.

Note 11. Income Per Share

The following is a reconciliation of the numerators and denominators of basic and diluted per share computations for net income attributable to Viad:

		Three months ended								Nine months ended
		September 30,								September 30,
		2011				2010				2011				2010
		(in thousands, except per share data)
Basic net income per share
Numerator:
Net income attributable to Viad		$	1,245			$	4,796			$	15,517			$	4,842
Less: Allocation to non-vested shares			(34	)			(114	)			(412	)			(126	)
Net income allocated to Viad common stockholders		$	1,211			$	4,682			$	15,105			$	4,716
Denominator:
Weighted-average outstanding common shares			19,711				20,001				19,768				20,037
Net income attributable to Viad common stockholders		$	0.06			$	0.23			$	0.76			$	0.24
Diluted net income per share
Numerator:
Net income attributable to Viad		$	1,245			$	4,796			$	15,517			$	4,842
Denominator:
Weighted-average outstanding shares			19,711				20,001				19,768				20,037
Additional dilutive shares related to share- based compensation			322				308				321				295
Weighted-average outstanding and potentially dilutive shares			20,033				20,309				20,089				20,332
Net income attributable to Viad common stockholders (1)		$	0.06			$	0.23			$	0.76			$	0.24

Options to purchase 313,000 and 474,000 shares of common stock were outstanding during the nine months ended September 30, 2011 and 2010, respectively, but were not included in the computation of dilutive shares outstanding because the effect would be anti-dilutive. Additionally, 322,000 and 308,000 share-based compensation awards were considered dilutive and included in the computation of diluted income per share during the three months ended September 30, 2011 and 2010, respectively. During the nine months ended September 30, 2011 and 2010, 321,000 and 295,000 share-based compensation awards were considered dilutive and included in the computation of diluted income per share, respectively.

Note 12. Income Taxes

The following represents a reconciliation of income tax expense and the amount that would be computed using the statutory federal income tax rates for the nine months ended September 30:

		2011								2010
		(in thousands)
Computed income tax expense at statutory federal income tax rate of 35%		$	8,821				35.0	%		$	3,331				35.0	%
State income tax expense (benefit), net of federal benefit or provision			537				2.1	%			(279	)			(2.9	%)
Tax resolutions, net			(103	)			(0.4	%)			(149	)			(1.6	%)
Change in enacted tax law			—				0.0	%			1,279				13.5	%
Other, net			(244	)			(0.9	%)			(273	)			(2.9	%)
Income tax expense		$	9,011				35.8	%		$	3,909				41.1	%

In March 2010, the Patient Protection and Affordable Care Act and a related measure, the Health Care and Education Reconciliation Act of 2010, were both enacted into law. As a result of this legislation, the tax deductions for the portion of the prescription drug costs for which Viad receives a Medicare Part D subsidy have been eliminated for tax years beginning after December 31, 2012. Accordingly, during the three months ended March 31, 2010, Viad reduced its deferred tax asset related to its postretirement benefit plan liability to reflect the change in the tax law. The reduction in the deferred tax asset resulted in an increase to income tax expense of $1.3 million during the three months ended March 31, 2010.

As of September 30, 2011 and December 31, 2010, Viad had gross deferred tax assets of $64.9 million and $67.1 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.

During 2010 and 2009, Viad recorded pre-tax losses from its operations in the United States. The Company considered the negative evidence of these domestic pre-tax operating losses on the future recoverability of its deferred tax assets. Viad also considered positive evidence regarding the realization of deferred tax assets including the Company’s historical and forecasted taxable income, taxpaying history and future reversals of deferred tax liabilities. Furthermore, Viad also considered the fact that goodwill impairment losses were not tax deductible and thus did not contribute to tax losses in 2009. As of both September 30, 2011 and December 31, 2010, Viad had a valuation allowance of $411,000 related to certain state deferred tax assets. With respect to all other deferred tax assets, management believes that recovery from future taxable income is more-likely-than-not.

Viad uses considerable judgment in forming a conclusion regarding the recoverability of its deferred tax assets. As a result, there are inherent uncertainties regarding the ultimate realization of these assets, which are primarily dependent on Viad’s ability to generate sufficient taxable income in future periods. In light of the Company’s domestic operating losses in 2010 and 2009, and the continued uncertainties in the current economic environment, it is possible that the relative weight of positive and negative evidence regarding the recoverability of Viad’s deferred tax assets may change, which could result in a material increase in the Company’s valuation allowance. If such an increase in the valuation allowance were to occur, it would result in increased income tax expense in the period the assessment was made.

As of September 30, 2011 and December 31, 2010, Viad did not have any accrued gross liabilities associated with uncertain tax positions for continuing operations. Additionally, as of September 30, 2011, Viad did not have any accrued interest and penalties related to uncertain tax positions for continuing operations. As of December 31, 2010, Viad had accrued interest and penalties related to uncertain tax positions for continuing operations of $146,000. Viad classifies interest and penalties related to income tax liabilities as a component of income tax expense. During the three months ended September 30, 2011 and 2010, Viad recorded tax-related interest expense credits of $64,000 and $230,000, respectively. During the nine months ended September 30, 2011 and 2010, Viad recorded tax-related interest expense credits of $146,000 and $214,000, respectively.

In addition to the above, Viad had accrued gross liabilities associated with uncertain tax positions for discontinued operations of $636,000 as of both September 30, 2011 and December 31, 2010. In addition, as of September 30, 2011 and December 31, 2010, Viad had accrued interest and penalties related to uncertain tax positions for discontinued operations of $379,000 and $351,000, respectively. Future tax resolutions or settlements that may occur related to these uncertain tax positions would be recorded through discontinued operations (net of federal tax effects, if applicable).

As of September 30, 2011 and December 31, 2010, liabilities associated with uncertain tax positions (including interest and penalties) of $1.0 million and $1.1 million, respectively, were classified as non-current liabilities.

Note 13. Pension and Postretirement Benefits

The net periodic benefit cost of Viad’s pension and postretirement benefit plans for the three months ended September 30 included the following components:

		Domestic Plans
										Postretirement								Foreign
		Pension Plans								Benefit Plans								Pension Plans
		2011				2010				2011				2010				2011				2010
		(in thousands)
Service cost		$	17			$	53			$	22			$	27			$	92			$	75
Interest cost			292				311				187				265				183				193
Expected return on plan assets			(140	)			(149	)			(35	)			(41	)			(164	)			(149	)
Amortization of prior service cost (credit)			—				10				(320	)			(293	)			—				—
Recognized net actuarial loss			1				139				80				157				—				—
Net periodic benefit cost		$	170			$	364			$	(66	)		$	115			$	111			$	119

The net periodic benefit cost of Viad’s pension and postretirement benefit plans for the nine months ended September 30 included the following components:

		Domestic Plans
										Postretirement								Foreign
		Pension Plans								Benefit Plans								Pension Plans
		2011				2010				2011				2010				2011				2010
		(in thousands)
Service cost		$	91			$	159			$	96			$	81			$	276			$	227
Interest cost			892				933				651				795				551				581
Expected return on plan assets			(422	)			(447	)			(101	)			(123	)			(493	)			(448	)
Amortization of prior service cost (credit)			—				30				(958	)			(879	)			—				—
Recognized net actuarial loss			342				416				400				470				—				—
Net periodic benefit cost		$	903			$	1,091			$	88			$	344			$	334			$	360

Viad expects to contribute $1.7 million to its funded pension plans, $959,000 to its unfunded pension plans and $500,000 to its postretirement benefit plans in 2011. As of September 30, 2011, Viad had contributed $1.1 million to its funded pension plans, $648,000 to its unfunded pension plans and $52,000 to its postretirement benefit plans.

Note 14. Restructuring Charges

During the nine months ended September 30, 2011, Viad recorded aggregate restructuring charges of $1.6 million primarily related to reorganization activities in the Marketing & Events Group, comprised of the elimination of certain positions as well as facility consolidations. The restructuring liabilities at September 30, 2011 related to future lease payment obligations will be made over the remaining lease terms and severance and employee benefits are expected to be paid by the end of 2011.

The table below represents a reconciliation of beginning and ending liability balances by major restructuring activity for the nine months ended September 30, 2011:

		Marketing & Events
		Group Consolidation								Other Restructurings
		Severance &								Severance &
		Employee								Employee
		Benefits				Facilities				Benefits				Facilities				Total
		(in thousands)
Balance at January 1, 2011		$	1,106			$	5,051			$	197			$	1,642			$	7,996
Restructuring charges			514				1,036				—				—				1,550
Cash payments			(1,509	)			(1,175	)			(197	)			(481	)			(3,362	)
Adjustment to liability			(128	)			—				—				(263	)			(391	)
Foreign currency translation adjustment			17				2				—				—				19
Balance at September 30, 2011		$	—			$	4,914			$	—			$	898			$	5,812