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

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		85004-4545
(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 o 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 July 31, 2011, there were 20,373,132 shares of common stock ($1.50 par value) outstanding.

 

 

PART I—FINANCIAL INFORMATION

Item 1.		Financial Statements.

VIAD CORP

CONDENSED CONSOLIDATED BALANCE SHEETS
(Unaudited)

		June 30, 2011				December 31, 2010
		(in thousands, except share data)
ASSETS
Current assets:
Cash and cash equivalents		$	107,348			$	145,841
Accounts receivable, net of allowance for doubtful accounts of $1,332 and $1,172, respectively			89,889				47,187
Inventories			30,946				38,670
Deferred income taxes			20,901				22,057
Other current assets			22,777				17,160
Total current assets			271,861				270,915
Property and equipment, net			170,651				149,346
Other investments and assets			32,576				31,363
Deferred income taxes			35,158				35,875
Goodwill			133,827				127,441
Other intangible assets, net			1,650				1,563
Total Assets		$	645,723			$	616,503
LIABILITIES AND STOCKHOLDERS’ EQUITY
Current liabilities:
Accounts payable		$	60,183			$	47,933
Other current liabilities			96,158				96,749
Current portion of long-term debt and capital lease obligations			2,299				6,639
Total current liabilities			158,640				151,321
Long-term debt and capital lease obligations			1,950				2,438
Pension and postretirement benefits			33,186				33,008
Other deferred items and liabilities			45,390				43,025
Total liabilities			239,166				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			598,638				606,902
Retained deficit			(6,583	)			(19,229	)
Unearned employee benefits and other			(3,813	)			(4,433	)
Accumulated other comprehensive income (loss):
Unrealized gains on investments			343				282
Cumulative foreign currency translation adjustments			44,591				38,979
Unrecognized net actuarial loss and prior service credit			(10,397	)			(10,410	)
Common stock in treasury, at cost, 4,561,649 and 4,710,988 shares, respectively			(261,013	)			(270,534	)
Total Viad Corp stockholders’ equity			399,168				378,959
Noncontrolling interest			7,389				7,752
Total stockholders’ equity			406,557				386,711
Total Liabilities and Stockholders’ Equity		$	645,723			$	616,503

See Notes to Condensed Consolidated Financial Statements.

VIAD CORP

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

(Unaudited)

		Three months ended June 30,								Six months ended June 30,
		2011				2010				2011				2010
		(in thousands, except per share data)
Revenues:
Convention and event services		$	174,319			$	155,097			$	408,806			$	333,856
Exhibits and environments			40,416				40,813				90,267				78,994
Travel and recreation services			23,957				22,389				29,717				29,802
Total revenues			238,692				218,299				528,790				442,652
Costs and expenses:
Costs of services			190,238				166,712				415,037				347,551
Costs of products sold			38,592				43,862				86,632				87,177
Corporate activities			1,576				2,058				2,847				2,702
Interest income			(176	)			(88	)			(390	)			(184	)
Interest expense			380				473				792				966
Restructuring charges			1,206				559				1,475				2,612
Total costs and expenses			231,816				213,576				506,393				440,824
Income before income taxes			6,876				4,723				22,397				1,828
Income tax expense			2,588				1,790				8,488				1,998
Net income (loss)			4,288				2,933				13,909				(170	)
Net loss attributable to noncontrolling interest			197				95				363				216
Net income attributable to Viad		$	4,485			$	3,028			$	14,272			$	46
Diluted income per common share
Net income attributable to Viad common stockholders		$	0.22			$	0.15			$	0.70			$	—
Weighted-average outstanding and potentially dilutive common shares			20,121				20,375				20,102				20,338
Basic income per common share
Net income attributable to Viad common stockholders		$	0.22			$	0.15			$	0.70			$	—
Weighted-average outstanding common shares			19,816				20,059				19,797				20,055
Dividends declared per common share		$	0.04			$	0.04			$	0.08			$	0.08

See Notes to Condensed Consolidated Financial Statements.

VIAD CORP

CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

(Unaudited)

		Three months ended June 30,								Six months ended June 30,
		2011				2010				2011				2010
		(in thousands)
Net income (loss)		$	4,288			$	2,933			$	13,909			$	(170	)
Other comprehensive income (loss):
Holding gains (losses) arising during the period, net of tax			3				(78	)			61				(19	)
Unrealized foreign currency translation adjustments, net of tax			2,059				(7,956	)			5,612				(3,910	)
Net actuarial loss, net of tax			204				183				408				(1,371	)
Prior service credit, net of tax			(197	)			(175	)			(395	)			(295	)
Total other comprehensive income (loss)			2,069				(8,026	)			5,686				(5,595	)
Comprehensive income (loss)			6,357				(5,093	)			19,595				(5,765	)
Comprehensive loss attributable to noncontrolling interest			197				95				363				216
Comprehensive income (loss) attributable to Viad		$	6,554			$	(4,998	)		$	19,958			$	(5,549	)

See Notes to Condensed Consolidated Financial Statements.

VIAD CORP

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(Unaudited)

		Six months ended June 30,
		2011				2010
		(in thousands)
Cash flows from operating activities:
Net income (loss)		$	13,909			$	(170	)
Adjustments to reconcile net income (loss) to net cash provided by operating activities:
Depreciation and amortization			14,293				14,004
Deferred income taxes			1,808				4,295
Restructuring charges			1,475				2,612
Losses (gains) on dispositions of property and other assets			(8	)			37
Share-based compensation expense			2,293				1,800
Excess tax benefit from share-based compensation arrangements			(54	)			—
Other non-cash items, net			2,411				1,852
Change in operating assets and liabilities:
Receivables			(43,590	)			(23,444	)
Inventories			8,538				6,902
Accounts payable			14,334				14,415
Restructuring liabilities			(2,377	)			(5,016	)
Accrued compensation			7,267				9,342
Customer deposits			(7,390	)			(1,856	)
Income taxes payable			3,141				(130	)
Other assets and liabilities, net			(10,083	)			(6,359	)
Net cash provided by operating activities			5,967				18,284
Cash flows from investing activities:
Capital expenditures			(12,795	)			(8,404	)
Acquisition of businesses, net of cash acquired			(25,800	)			—
Proceeds from dispositions of property and other assets			264				14,541
Net cash provided by (used in) investing activities			(38,331	)			6,137
Cash flows from financing activities:
Payments on debt and capital lease obligations			(5,631	)			(2,869	)
Dividends paid on common stock			(1,630	)			(1,644	)
Common stock purchased for treasury			(679	)			(573	)
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			(8,724	)			(5,048	)
Effect of exchange rate changes on cash and cash equivalents			2,595				(1,744	)
Net increase (decrease) in cash and cash equivalents			(38,493	)			17,629
Cash and cash equivalents, beginning of year			145,841				116,342
Cash and cash equivalents, end of period		$	107,348			$	133,971
Supplemental disclosure of cash flow information
Cash paid for income taxes		$	5,541			$	3,855
Cash paid for interest		$	490			$	511
Equipment acquired under capital leases		$	897			$	390

See Notes to Condensed Consolidated Financial Statements.

VIAD CORP

(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 six months ended June 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”) and Glacier Park, Inc. (“Glacier Park”). 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.

Note 2. Share-Based Compensation

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

		Three months ended June 30,								Six months ended June 30,
		2011				2010				2011				2010
		(in thousands)
Stock options		$	183			$	150			$	330			$	263
Restricted stock/performance-based restricted stock (“PBRS”)			937				804				1,615				1,479
Restricted stock units/PBRS units			46				26				89				61
Performance unit incentive plan (“PUP”)			194				—				259				(3	)
Total share-based compensation before income tax benefit			1,360				980				2,293				1,800
Income tax benefit			(480	)			(347	)			(801	)			(661	)
Total share-based compensation, net of income tax benefit		$	880			$	633			$	1,492			$	1,139

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

The following table summarizes restricted stock and PBRS activity during the six months ended June 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			172,200				23.01				—				—
Vested			(91,212	)			31.31				(18,414	)			33.42
Forfeited			(2,200	)			20.64				—				—
Balance at June 30, 2011			557,287				20.37				416				15.36

The unamortized cost of all outstanding restricted stock and PBRS awards as of June 30, 2011 was $5.2 million, which Viad expects to recognize in its consolidated financial statements over a weighted-average period of approximately 2.4 years. During the six months ended June 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 June 30, 2011, there were 1,000,853 total shares available for future grant.

The following table summarizes the liability-based award activity during the six months ended June 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 June 30, 2011			38,600				19.07				1,956				15.36				95,500				23.02

As of June 30, 2011 and December 31, 2010, Viad had liabilities recorded of $444,000 and $407,000, respectively, related to restricted stock unit and PBRS unit liability awards. A portion of the 2009 PBRS unit award 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 June 30, 2011, Viad had a liability recorded of $259,000 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 six months ended June 30, 2011. In March 2011, 102,960 PUP awards were cancelled as the performance conditions related to those awards for the 2008-2010 period were not achieved.

The following table summarizes stock option activity during the six months ended June 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			(132,231	)			24.17
Options outstanding at June 30, 2011			623,697				23.25				417,118

The total unrecognized cost related to non-vested stock option awards was $957,000 as of June 30, 2011, which Viad expects to recognize in the consolidated financial statements over a weighted-average period of approximately 1.9 years. No stock options were granted during the six months ended June 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 June 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 six months ended June 30, 2011, 100 options were exercised by MoneyGram participants at an exercise price of $19.57.

Note 3. Acquisition of Businesses

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. It is now 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. Supplemental pro forma information for St. Mary was not material to Viad’s financial results for the three and six months ended June 30, 2011 and 2010.

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. Supplemental pro forma information for Grouse Mountain Lodge was not material to Viad’s financial results for the three and six months ended June 30, 2010.

Note 4. Inventories

The components of inventories were as follows:

		June 30,				December 31,
		2011				2010
		(in thousands)
Raw materials		$	19,617			$	18,488
Work in process			11,329				20,182
Inventories		$	30,946			$	38,670

Note 5. Property and Equipment

Property and equipment consisted of the following:

		June 30,				December 31,
		2011				2010
		(in thousands)
Land		$	15,022			$	9,139
Buildings and leasehold improvements			107,733				89,945
Equipment and other			311,781				299,558
			434,536				398,642
Accumulated depreciation			(263,885	)			(249,296	)
Property and equipment, net		$	170,651			$	149,346

Depreciation expense for the three months ended June 30, 2011 and 2010 was $7.1 million and $7.0 million, respectively, and for the six months ended June 30, 2011 and 2010 was $13.9 million and $13.5 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 six months ended June 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			—				—				3,914				3,914
Foreign currency translation adjustments			—				711				1,761				2,472
Balance at June 30, 2011		$	62,686			$	23,166			$	47,975			$	133,827

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

		Gross Carrying				Accumulated				Net Carrying
		Value				Amortization				Value
	(in thousands)
Amortized intangible assets:
Customer contracts and relationships		$	2,535			$	(1,443	)		$	1,092
Proprietary technology			524				(495	)			29
Design libraries			175				(153	)			22
Other			71				(24	)			47
			3,305				(2,115	)			1,190
Unamortized intangible assets:
Business licenses			460				—				460
Total		$	3,765			$	(2,115	)		$	1,650

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 June 30, 2011 and 2010 was $188,000 and $240,000, respectively, and $383,000 and $483,000 for the six months ended June 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		$	344
2012		$	360
2013		$	350
2014		$	119
2015		$	17

Note 7. Accrued Liabilities and Other

Other current liabilities consisted of the following:

		June 30,				December 31,
		2011				2010
		(in thousands)
Continuing operations:
Customer deposits		$	36,804			$	43,411
Accrued compensation			25,451				17,599
Self-insured liability accrual			8,113				8,278
Accrued income taxes			3,289				—
Accrued employee benefit costs			3,025				3,127
Accrued foreign income taxes			2,892				2,852
Accrued restructuring			2,000				4,272
Accrued sales and use taxes			1,185				2,990
Accrued dividends			835				827
Other			10,553				11,084
			94,147				94,440
Discontinued operations:
Environmental remediation liabilities			1,025				1,124
Self-insured liability accrual			469				552
Other			517				633
			2,011				2,309
Total other current liabilities		$	96,158			$	96,749

Other deferred items and liabilities consisted of the following:

		June 30,				December 31,
		2011				2010
		(in thousands)
Continuing operations:
Self-insured liability accrual		$	14,581			$	14,330
Accrued compensation			4,892				5,129
Accrued restructuring			4,816				3,724
Foreign deferred tax liability			1,459				1,582
Accrued income taxes			64				146
Other			5,544				3,945
			31,356				28,856
Discontinued operations:
Self-insured liability accrual			6,826				6,898
Environmental remediation liabilities			4,925				4,953
Accrued income taxes			1,004				987
Other			1,279				1,331
			14,034				14,169
Total other deferred items and liabilities		$	45,390			$	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 June 30, 2011, Viad’s total debt of $4.2 million consisted entirely of capital lease obligations. As of June 30, 2011, Viad had $125.4 million of capacity remaining under its Credit Facility reflecting the 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 June 30, 2011, the fixed-charge coverage and leverage ratios were 3.16 to 1 and 0.25 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 June 30, 2011, Viad was in compliance with all covenants.

The estimated fair value of total debt was $4.2 million and $9.2 million as of June 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 six months ended June 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 (loss)			14,272				(363	)			13,909
Dividends on common stock			(1,630	)			—				(1,630	)
Common stock purchased for treasury			(679	)			—				(679	)
Employee benefit plans			1,931				—				1,931
Unrealized foreign currency translation adjustment			5,612				—				5,612
Unrealized gain on investments			61				—				61
Prior service credit and net actuarial loss			13				—				13
ESOP allocation adjustment			620				—				620
Other			9				—				9
Balance at June 30, 2011		$	399,168			$	7,389			$	406,557

The following represents a reconciliation of the carrying amounts of stockholders’ equity attributable to Viad and the noncontrolling interest for the six months ended June 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 (loss)			46				(216	)			(170	)
Dividends on common stock			(1,644	)			—				(1,644	)
Common stock purchased for treasury			(573	)			—				(573	)
Employee benefit plans			1,708				—				1,708
Unrealized foreign currency translation adjustment			(3,910	)			—				(3,910	)
Unrealized loss on investments			(19	)			—				(19	)
Prior service credit and net actuarial loss			(1,666	)			—				(1,666	)
ESOP allocation adjustment			750				—				750
Other			6				—				6
Balance at June 30, 2010		$	372,213			$	6,900			$	379,113

Viad has announced its intent to repurchase shares of the Company’s common stock from time to time at prevailing market prices. No shares were repurchased during the six months ended June 30, 2011 or 2010. As of June 30, 2011, 304,381 shares remain available for repurchase. Subsequent to June 30, 2011 and prior to the filing of this quarterly report, during the period from August 5, 2011 through August 8, 2011, Viad repurchased an additional 28,900 shares for $528,000. Additionally, during the six months ended June 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 June 30, 2011 Using
										Significant
						Quoted Prices				Other				Significant
						in Active				Observable				Unobserved
		June 30,				Markets				Inputs				Inputs
		2011				(Level 1)				(Level 2)				(Level 3)
		(in thousands)
Assets:
Money market funds		$	1,245			$	1,245			$	—			$	—
Other mutual funds			1,670				1,670				—				—
Total		$	2,915			$	2,915			$	—			$	—

As of June 30, 2011 and December 31, 2010, Viad had investments in money market mutual funds of $1.2 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 both June 30, 2011 and December 31, 2010, Viad had investments in other mutual funds of $1.7 million 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 June 30, 2011 and December 31, 2010, there were unrealized gains on the investments of $562,000 ($343,000 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 June 30,								Six months ended June 30,
		2011				2010				2011				2010
		(in thousands, except per share data)
Basic net income per share
Numerator:
Net income attributable to Viad		$	4,485			$	3,028			$	14,272			$	46
Less: Allocation to non-vested shares			(111	)			(71	)			(370	)			(1	)
Net income allocated to Viad common stockholders		$	4,374			$	2,957			$	13,902			$	45
Denominator:
Weighted-average outstanding common shares			19,816				20,059				19,797				20,055
Net income attributable to Viad common stockholders		$	0.22			$	0.15			$	0.70			$	—
Diluted net income per share
Numerator:
Net income attributable to Viad		$	4,485			$	3,028			$	14,272			$	46
Denominator:
Weighted-average outstanding shares			19,816				20,059				19,797				20,055
Additional dilutive shares related to share-based compensation			305				316				305				283
Weighted-average outstanding and potentially dilutive shares			20,121				20,375				20,102				20,338
Net income attributable to Viad common stockholders (1)		$	0.22			$	0.15			$	0.70			$	—

Options to purchase 330,000 and 480,000 shares of common stock were outstanding during the six months ended June 30, 2011 and 2010, respectively, but were not included in the computation of dilutive shares outstanding because the effect would be anti-dilutive. Additionally, 305,000 and 316,000 share-based compensation awards were considered dilutive and included in the computation of diluted income per share during the three months ended June 30, 2011 and 2010, respectively. During the six months ended June 30, 2011 and 2010, 305,000 and 283,000 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 six months ended June 30:

		2011								2010
		(in thousands)
Computed income tax expense at statutory federal income tax rate of 35%		$	7,839				35.0	%		$	640				35.0	%
State income tax expense (benefit), net of federal benefit or provision			563				2.5	%			(34	)			(1.9	%)
Change in enacted tax law			—				0.0	%			1,279				70.0	%
Other, net			86				0.4	%			113				6.2	%
Income tax expense		$	8,488				37.9	%		$	1,998				109.3	%

In March 2010, the Patient Protection and Affordable Care Act and a related measure, the Health Care and Education Affordability 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 June 30, 2011 and December 31, 2010, Viad had gross deferred tax assets of $63.5 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 June 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 June 30, 2011 and December 31, 2010, Viad did not have any accrued gross liabilities associated with uncertain tax positions for continuing operations. However, as of June 30, 2011 and December 31, 2010, Viad had accrued interest and penalties related to uncertain tax positions for continuing operations of $64,000 and $146,000, respectively. Viad classifies interest and penalties related to income tax liabilities as a component of income tax expense. During the three months ended June 30, 2011 and 2010, Viad recorded a tax-related interest expense credit of $47,000 and expense of $4,000, respectively. During the six months ended June 30, 2011 and 2010, Viad recorded a tax-related interest expense credit of $82,000 and expense of $16,000, 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 June 30, 2011 and December 31, 2010. In addition, as of June 30, 2011 and December 31, 2010, Viad had accrued interest and penalties related to uncertain tax positions for discontinued operations of $369,000 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 both June 30, 2011 and December 31, 2010, liabilities associated with uncertain tax positions (including interest and penalties) of $1.1 million were classified as non-current liabilities, respectively.

Note 13. Pension and Postretirement Benefits

The net periodic benefit cost of Viad’s pension and postretirement benefit plans for the three months ended June 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		$	37			$	53			$	37			$	27			$	94			$	76
Interest cost			300				311				232				265				186				195
Expected return on plan assets			(141	)			(149	)			(33	)			(41	)			(171	)			(151	)
Amortization of prior service cost (credit)			—				10				(319	)			(293	)			—				—
Recognized net actuarial loss			171				138				160				156				—				—
Net periodic benefit cost		$	367			$	363			$	77			$	114			$	109			$	120

The net periodic benefit cost of Viad’s pension and postretirement benefit plans for the six months ended June 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		$	74			$	106			$	74			$	54			$	185			$	151
Interest cost			600				622				464				530				369				387
Expected return on plan assets			(282	)			(298	)			(66	)			(82	)			(337	)			(299	)
Amortization of prior service cost (credit)			—				20				(638	)			(586	)			—				—
Recognized net actuarial loss			341				277				320				313				—				—
Net periodic benefit cost		$	733			$	727			$	154			$	229			$	217			$	239

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 June 30, 2011, Viad had contributed $524,000 to its funded pension plans, $476,000 to its unfunded pension plans and $71,000 to its postretirement benefit plans.

Note 14. Restructuring Charges

During the six months ended June 30, 2011, Viad recorded aggregate restructuring charges of $1.5 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 June 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 six months ended June 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			439				1,036				—				—				1,475
Cash payments			(1,190	)			(849	)			(197	)			(141	)			(2,377	)
Adjustment to liability			(128	)			—				—				(192	)			(320	)
Foreign currency translation adjustment			33				9				—				—				42
Balance at June 30, 2011		$	260			$	5,247			$	—			$	1,309			$	6,816

Note 15. Litigation, Claims, Contingencies and Other

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 June 30, 2011, with respect to certain of these matters is not ascertainable, Viad believes that any resulting liability, after taking into consideration amounts already provided for, including insurance coverage, will not have a material impact on the Company’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, including insurance coverage, will not have a material effect on the Company’s financial position or results of operations. As of June 30, 2011, there was a remaining environmental remediation liability of $6.0 million related to previously sold operations of which $1.1 million was included in the consolidated balance sheets under the caption “Other current liabilities” and $4.9 million under the caption “Other deferred items and liabilities.”

As of June 30, 2011, 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 Viad’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 June 30, 2011 would be $32.4 million. These guarantees relate to leased facilities expiring through October 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.

Viad’s businesses contribute to various multi-employer pension plans based on obligations arising under collective bargaining agreements covering its union-represented employees. 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 June 30, 2011, the amount of additional funding, if any, that Viad would be required to make related to multi-employer pension plans is not ascertainable.

Glacier Park operates the concession portion of its business under a concession contract with the U.S. National Park Service (the “Park Service”) for Glacier National Park. Glacier Park’s original 25-year concession contract with the Park Service that was to expire on December 31, 2005, has been extended for six one-year periods and now expires on December 31, 2011. The Park Service, in its sole discretion, may continue extending Glacier Park’s concession contract in one-year increments. When this contract ultimately expires, Glacier Park will have the opportunity to bid on a new concession contract. If Glacier Park does secure a new contract, possible terms would be for 10, 15 or 20 years. Glacier Park generated approximately 70 percent of its 2010 revenue through its concession contract for services provided within Glacier National Park. If a new concessionaire is selected by the Park Service, Glacier Park’s remaining business would consist of its operations at Waterton Lakes National Park, Alberta, Canada; East Glacier, Montana; Whitefish, Montana and St. Mary, Montana. In such a circumstance, Glacier Park would be entitled to an amount equal to its “possessory interest,” which generally means the value of the structures acquired or constructed, fixtures installed and improvements made to the concession property at Glacier National Park during the term of the concession contract. Glacier Park owns its Glacier Park Lodge operations in East Glacier, Montana, Grouse Mountain Lodge in Whitefish, Montana and St. Mary Lodge & Resort in St. Mary, Montana. Glacier Park also owns the Prince of Wales Hotel in Waterton Lakes National Park, which is operated under a 42-year ground lease with the Canadian government running through January 31, 2052. Glacier Park generated 25 percent of Travel & Recreation Group’s full year 2010 segment operating income.

Note 16. Segment Information

Viad measures profit and performance of its operations on the basis of segment operating income which excludes restructuring charges and recoveries and impairment losses and recoveries. Intersegment sales are eliminated in consolidation and intersegment transfers are not significant. Corporate activities include expenses not allocated to operations. Depreciation and amortization and share-based compensation expense are the only significant non-cash items for the reportable segments. Disclosures regarding Viad’s reportable segments with reconciliations to consolidated totals are as follows:

		Three months ended June 30,								Six months ended June 30,
		2011				2010				2011				2010
		(in thousands)
Revenues:
Marketing & Events Group:
U.S.		$	150,170			$	144,460			$	381,865			$	313,869
International			66,973				56,059				120,927				106,426
Intersegment eliminations			(2,408	)			(4,609	)			(3,719	)			(7,445	)
			214,735				195,910				499,073				412,850
Travel & Recreation Group			23,957				22,389				29,717				29,802
		$	238,692			$	218,299			$	528,790			$	442,652
Segment operating income (loss):
Marketing & Events Group:
U.S.		$	205			$	(2,297	)		$	18,139			$	(2,346	)
International			6,650				6,532				10,435				9,169
			6,855				4,235				28,574				6,823
Travel & Recreation Group			3,007				3,490				(1,453	)			1,101
			9,862				7,725				27,121				7,924
Corporate activities			(1,576	)			(2,058	)			(2,847	)			(2,702	)
			8,286				5,667				24,274				5,222
Interest income			176				88				390				184
Interest expense			(380	)			(473	)			(792	)			(966	)
Restructuring charges:
Marketing & Events U.S.			(1,206	)			(272	)			(1,475	)			(2,325	)
Travel & Recreation Group			—				(235	)			—				(235	)
Corporate			—				(52	)			—				(52	)
Income before income taxes		$	6,876			$	4,723			$	22,397			$	1,828