Ct Healthmarket via BizWire
07-24-2003, 03:20 AM
Viad Corp Announces Second Quarter 2003 Results Earnings Per Share of $0.47; The Company Lowers Full Year Guidance
----------------------------------------------------------------------
PHOENIX--(BUSINESS WIRE)--July 24, 2003--
Viad Corp to Initiate Separation of Payment Services Business
Viad Corp (NYSE:VVI) today announced second quarter 2003 diluted
earnings per share of $0.47 on revenue of $439.8 million, segment
operating income of $59.5 million, and net income of $40.9 million.
Robert H. Bohannon, chairman, president and chief executive
officer said, "Second quarter results exceeded our expectations due to
strong performance in the Convention and Event Services segment. Both
GES and Exhibitgroup/Giltspur benefited from several large tradeshows
that took place in the quarter and also from cost reductions and
improved efficiency. For Payment Services, transaction volumes were
strong, but low interest rates dampened overall results. MoneyGram
showed excellent growth as agent and transaction volumes increased in
both international and domestic markets. We're very pleased with the
growth in this business."
For the six months ended June 30, 2003, diluted earnings per share
were $0.72 on revenue of $854.2 million, segment operating income of
$96.7 million and net income of $62.9 million.
Strategic Direction for Viad Corp
The board of directors of Viad Corp has authorized the company to
pursue the separation of the Travelers Express business from the
remaining Viad businesses by means of a tax-free spin-off. The
transaction would be subject to a number of conditions, including
among other things, receipt of a satisfactory ruling from the Internal
Revenue Service, confirmation that the long-term debt of Travelers
Express would have an investment grade rating, availability of
satisfactory banking and credit arrangements for each of the
businesses, and final approval of the board of directors of Viad. Viad
intends to file for the Internal Revenue Service ruling on or before
August 8, 2003. The company will tender for its public debt concurrent
with the transaction. The transaction is not expected to be
consummated earlier than the first quarter of 2004, and no assurances
can be given that any such transaction will be consummated. An initial
public offering of Travelers Express is not intended at this time.
Citigroup Global Markets Inc. and Lehman Brothers have been retained
to advise Viad in the transaction.
Bohannon said, "We're pleased to announce our intention to
establish Travelers Express as a separate publicly-traded entity. We
believe this is the right time to move forward. As a separate company
Travelers Express will have greater opportunity to grow, and will have
its own equity for acquisitions and strategic investments that will
ultimately benefit shareholders. We look forward to reporting our
progress to you as we proceed toward a separation."
Credit Rating
Bohannon added, "During the quarter, we met with the rating
agencies about the possibility of separating Travelers Express from
the company. In the course of these discussions, we have received
preliminary positive indications that, if Travelers Express is
separated and based on certain balance sheet assumptions, a
stand-alone Travelers Express entity would have an investment grade
rating." Bohannon added, "As we have said many times before, one of
the primary conditions in a separation of Travelers Express is that it
is able to obtain an investment grade rating on a stand-alone basis."
As a result of today's announcement about the company's intention
to separate Travelers Express, there may be negative implications with
respect to Viad's current credit rating from the rating agencies. The
reason for this would be that the existing debt of Viad Corp will, in
all probability, not be investment grade following a separation of
Travelers Express. Bohannon commented, "I want to make it very clear
that as part of the transaction we would tender for all of Viad's
existing public debt."
Second Quarter and Year-to-Date 2003 Financial Highlights
Highlights of the 2003 second quarter, compared to second quarter
and year-to-date 2002 results, are presented below.
Q2 2003 Q2 2002 Change
------- ------- ------
($ in millions)
Revenue $439.8 $404.4 8.8%
Segment operating income $ 59.5 $ 52.5 13.4%
Operating margins (1) 13.5% 13.0% 50 bps
Net income $ 40.9 $ 29.7 37.5%
Cash flow (EBITDA) (3) $ 71.3 $ 59.1 20.6%
Free cash flow (3) $ 20.0 $ 21.1 -5.3%
YTD 2003 YTD 2002 Change
----------- ------------ ------
($ in millions)
Revenue $ 854.2 $ 843.2 1.3%
Segment operating income $ 96.7 $ 98.8 -2.1%
Operating margins (1) 11.3% 11.7% -40 bps
Net income (2) $ 62.9 $ 20.4 NM
Cash flow (EBITDA) (3) $ 118.0 $ 115.3 2.3%
Free cash flow (3) $ 37.8 $ 59.5 -36.5%
(1) For operating margins, the change from the prior year period is
presented in basis points.
(2) 2002 year-to-date net income includes a net of tax goodwill
impairment charge related to the initial adoption of SFAS No. 142
of $37.7 million. Excluding that charge, 2003 year-to-date net
income of $62.9 million would have been up 8.2 percent as compared
to the 2002 amount of $58.1 million.
(3) EBITDA is defined by Viad as income before interest expense,
income taxes, depreciation and amortization and changes in
accounting principles. Free cash flow is defined by Viad as net
cash provided by operating activities, less the change in payment
service assets and obligations, capital expenditures, and
dividends. EBITDA and free cash flow are supplemental to results
presented under accounting principles generally accepted in the
United States of America (GAAP) and may not be comparable to
similarly titled measures presented by other companies. These
non-GAAP measures are used by management to assess the company's
ability to service debt, fund capital expenditures and finance
growth, and should be considered in addition to, but not as a
substitute for, other measures of financial performance and
liquidity reported in accordance with GAAP. See Table Two for a
reconciliation of net income to EBITDA, and a reconciliation of
net cash provided by operating activities to free cash flow.
Also, during the second quarter and year-to-date:
Second Quarter 2003 Six Months Ended June 30, 2003
----------------------------------------------------------------------
-- Debt was reduced by $94 -- Debt was reduced $100 million
million to $262 million compared to December 31, 2002.
compared to first quarter
2003.
-- Cash and corporate -- Cash and corporate investments
investments were $122 decreased by $182 million
million, down $82 million compared to December 31, 2002
from the first quarter after debt pay-down and
2003. In the quarter, acquisition of the minority
the company paid off $100 interest in MoneyGram
million of 6.625 percent International Limited.
medium-term notes.
Payment Services
Payment Services' revenue for the second quarter 2003 grew 6.2
percent to $203.6 million, up from $191.8 million in the second
quarter 2002. Segment operating income was down 10.3 percent to $31.5
million compared with $35.1 million in 2002, and operating margins for
the quarter were 15.5 percent compared with 18.3 percent in the second
quarter of 2002.
MoneyGram's transaction volume grew by 30 percent compared to
second quarter 2002. MoneyGram's agent base increased by 8 percent in
comparison to the prior year quarter.
Payment Services' total average float investment balances were
$7.1 billion for the quarter, up nearly 25 percent from the prior year
quarter. Net float income (float investment income less commission
expenses and excluding gains and losses) was $21.2 million in the
second quarter 2003, down $6.4 million, compared to the prior year
second quarter. See Table Three for current and historical net float
margins.
"MoneyGram had another terrific quarter," said Bohannon.
"Transaction volume and revenue growth were strong. This business has
a bright future in a market that shows no signs of slowing down. In
the Money Order business, Travelers Express experienced margin
improvement in what is already a stellar business. While interest
rates continue to dampen the growth of PrimeLink/Official Check, this
is still a great business that is benefiting the company."
Convention and Event Services
Convention and Event Services' revenue was $223.9 million, an
increase of 12.3 percent from $199.5 million in the second quarter
2002. Segment operating income was up 74.9 percent to $25.2 million
compared with $14.4 million in the 2002 second quarter and operating
margins for the quarter were 11.3 percent compared with 7.2 percent in
the 2002 second quarter. In the second quarter, both GES and
Exhibitgroup/Giltspur benefited as the companies' customers
participated in large tradeshows as well as from operating efficiency
improvements. Also, in the second quarter, GES serviced the Plastics
Show, which occurs every three years and contributed significantly to
revenue and operating income.
Travel and Recreation Services
Travel and Recreation Services' revenue was $12.3 million, a
decrease of 6.4 percent from $13.1 million in the second quarter 2002.
Operating income was $2.8 million, down slightly from $2.9 million in
the 2002 second quarter. These results reflect a continued slowdown in
worldwide travel most recently due to the SARS health issue, which has
affected travel from Asia and Europe to Canada.
2003 Outlook
Viad Corp provides the following guidance for third quarter and
full year 2003. This guidance is subject to change as a variety of
factors can affect actual operating results. These factors are
identified in the safe harbor language at the end of the press
release.
Third Quarter 2003
-- Viad Corp earnings are expected to be lower than third quarter
2002. Diluted EPS is expected to be in the range of $0.25 to
$0.28.
-- Payment Services segment revenue is expected to remain
relatively flat to third quarter 2002 revenue of $203.8
million.
-- Payment Services segment operating income is expected to
decline by a low to mid twenties rate from third quarter 2002
operating income of $33.8 million.
-- Convention and Event Services segment revenue is expected to
decrease at a low to mid twenties rate due to negative show
rotation compared to third quarter 2002 revenue of $171.6
million.
-- Convention and Event Services segment operating income is
expected to fall slightly below breakeven compared to third
quarter 2002 operating income of $2.2 million, due to negative
show rotation.
Full Year 2003
Viad Corp is lowering full year guidance from its previous
guidance range of $1.34 to $1.39. For 2003, diluted EPS is now
expected to be in the range of $1.20 to $1.23. This guidance reflects
even more substantial compression in Travelers Express's net float
margin than projected at the end of first quarter 2003. This
compression is expected to result from lower available yields for new
and reinvested mortgage-security balances. Contributing to margin
compression are fixed rate payment obligations associated with
interest rate swaps. The maturity and turnover of swaps is slower than
that of the investments that are prepaying. Most of the derivative
notional amount of $3.8 billion outstanding at December 31, 2002, will
expire during the period 2005 through 2008. The guidance also assumes
slower seasonal business in the second half for the convention and
event companies.
Payment Services Segment Guidance for Full Year 2003
-- Payment Services segment revenue is expected to grow at a low
to mid single-digit rate in comparison to 2002 revenue of
$773.6 million.
-- Payment Services segment operating income is expected to
decline at a low to mid teens rate in comparison to 2002
operating income of $125.5 million.
The revenue and operating income outlook for Payment Services
assumes that:
-- MoneyGram transaction volume continues to grow at a rate
similar to the first half of 2003.
-- Money Order transaction volumes will be flat to second quarter
2003 levels.
-- Average investable balances are expected to grow between $750
million and $850 million for the year.
-- Net float income will continue to decline through the fourth
quarter, primarily due to continued significant prepayment of
mortgage-related securities.
Convention and Event Services Segment Guidance for Full Year 2003
-- Convention and Event Services segment revenue is expected to
decline at a high single-digit rate in comparison to 2002
revenue of $786.2 million, primarily due to decreased demand
for exhibit construction.
-- Convention and Event Services segment operating income is
expected to increase at a mid to high teens rate in comparison
to 2002 operating income of $37.6 million, primarily due to
ongoing cost reductions and operating process improvements.
Bohannon concluded, "As we look toward 2004, we are more
optimistic. Mortgage refinancing activity is expected to slow down and
almost $1 billion in swaps will mature between now and the first
quarter of 2004, which should benefit Travelers Express. Furthermore,
recent news of optimism about the economy bodes well for all of Viad's
businesses."
Viad is a $1.6 billion revenue S&P MidCap 400 company. Major
subsidiaries include Travelers Express/MoneyGram of Minneapolis, GES
Exposition Services of Las Vegas and Exhibitgroup/Giltspur of Chicago.
For more information, visit the company's Web site at www.viad.com.
Forward Looking Statements
As provided by the safe harbor provision under the "Private
Securities Litigation Reform Act of 1995" Viad cautions readers that,
in addition to historical information contained herein, this press
release includes certain information, assumptions and discussions that
may constitute forward-looking statements. These forward-looking
statements are not historical facts, but reflect current estimates,
projections, or expectations or trends concerning future growth,
operating cash flows, availability of short-term borrowings, consumer
demand, new business, investment policies, productivity improvements,
ongoing cost reduction efforts, efficiency, competitiveness, tax
rates, restructuring plans (including timing and realization of cost
savings), investment yield impairment, and market risk. Actual results
could differ materially from those projected in the forward-looking
statements. Viad's businesses can be affected by a host of risks and
uncertainties. Among other things, gains and losses of customers,
consumer demand patterns, labor relations, purchasing decisions
related to customer demand for convention and event services, existing
and new competition, industry alliances, consolidation, and growth
patterns within the industries in which Viad competes and any further
deterioration in the economy may individually or in combination impact
future results. In addition to factors mentioned elsewhere, economic,
competitive, governmental, technological, capital marketplace and
other factors, including further terrorist activities or war, could
affect the forward-looking statements in this press release.
Information about Viad Corp obtained from sources other than the
company may be out-of-date or incorrect. Please rely only on company
press releases, SEC filings and other information provided by the
company.
VIAD CORP AND SUBSIDIARIES
TABLE ONE - QUARTERLY AND YEAR-TO-DATE RESULTS
(UNAUDITED)
Quarter Ended June 30, Six Months Ended June 30,
-------------------------- -------------------------
(000 omitted, except per share data)
2003 2002 % 2003 2002 %
-------- -------- ------ -------- -------- -----
Revenues (Note A) $439,830 $404,401 8.8% $854,179 $843,223 1.3%
======== ======== ====== ======== ======== =====
Segment operating
income (Note A) $ 59,517 $ 52,461 13.4% $ 96,689 $ 98,787 -2.1%
Restructuring
recovery (Note
B) 1,276 - NM 1,276 - NM
Corporate
activities and
minority
interests (2,956) (7,291) 59.5% (6,701) (11,851) 43.5%
Net interest
expense (3,069) (3,575) 14.2% (6,117) (7,364) 16.9%
-------- -------- ------ -------- -------- -----
Income before
income taxes 54,768 41,595 31.7% 85,147 79,572 7.0%
Income taxes (13,900) (11,880) -17.0% (22,248) (21,461) -3.7%
-------- -------- ------ -------- -------- -----
Income before
change in
accounting
principle 40,868 29,715 37.5% 62,899 58,111 8.2%
Change in
accounting
principle (Note
C) - - NM - (37,739) NM
-------- -------- ------ -------- -------- -----
Net income $ 40,868 $ 29,715 37.5% $ 62,899 $ 20,372 NM
======== ======== ====== ======== ======== =====
Diluted income
per common
share:
Income before
change in
accounting
principle $ 0.47 $ 0.34 38.2% $ 0.72 $ 0.66 9.1%
Change in
accounting
principle - - NM - (0.43) NM
-------- -------- ------ -------- -------- -----
Net income
per share $ 0.47 $ 0.34 38.2% $ 0.72 $ 0.23 NM
======== ======== ====== ======== ======== =====
Basic income per
common share:
Income before
change in
accounting
principle $ 0.47 $ 0.34 38.2% $ 0.72 $ 0.67 7.5%
Change in
accounting
principle - - NM - (0.44) NM
-------- -------- ------ -------- -------- -----
Net income
per share $ 0.47 $ 0.34 38.2% $ 0.72 $ 0.23 NM
======== ======== ====== ======== ======== =====
Common shares treated as
outstanding for net
income per share
calculations:
Average
outstanding
shares 86,224 86,693 -0.5% 86,116 86,394 -0.3%
======== ======== ====== ======== ======== =====
Average
outstanding
and
potentially
dilutive
shares 86,508 87,672 -1.3% 86,418 87,200 -0.9%
======== ======== ====== ======== ======== =====
NM = not meaningful
VIAD CORP AND SUBSIDIARIES
TABLE ONE - NOTES TO QUARTERLY AND YEAR-TO-DATE RESULTS
(UNAUDITED)
(A) Reportable Segments
Quarter Ended June 30, Six Months Ended June 30,
-------------------------- --------------------------
(000 omitted) 2003 2002 % 2003 2002 %
--------- --------- ------ --------- --------- ------
Revenues:
Payment
Services $203,640 $191,822 6.2% $392,651 $372,667 5.4%
Convention
and Event
Services 223,897 199,450 12.3% 445,953 454,257 -1.8%
--------- --------- ------ --------- --------- ------
Reportable
segments 427,537 391,272 9.3% 838,604 826,924 1.4%
Travel and
Recreation
Services 12,293 13,129 -6.4% 15,575 16,299 -4.4%
--------- --------- ------ --------- --------- ------
Total
revenues $439,830 $404,401 8.8% $854,179 $843,223 1.3%
========= ========= ====== ========= ========= ======
Segment
operating
income:
Payment
Services $31,527 $35,144 -10.3% $51,668 $60,729 -14.9%
Convention
and Event
Services 25,200 14,410 74.9% 43,805 36,654 19.5%
--------- --------- ------ --------- --------- ------
Reportable
segments 56,727 49,554 14.5% 95,473 97,383 -2.0%
Travel and
Recreation
Services 2,790 2,907 -4.0% 1,216 1,404 -13.4%
--------- --------- ------ --------- --------- ------
$59,517 $52,461 13.4% $96,689 $98,787 -2.1%
========= ========= ====== ========= ========= ======
(B) Restructuring Recovery -- In the 2001 third quarter, Viad recorded
restructuring charges totaling $66.1 million ($39.9 million
after-tax) consisting of costs associated with the closure and
consolidation of certain facilities, severance and other employee
benefits in the Convention and Event Services segment. In the 2003
second quarter, $1.3 million of the reserve was reversed as
certain costs originally anticipated in the restructuring plan
will not be incurred.
(C) Change in Accounting Principle -- In June 2002, in accordance with
Viad's adoption of SFAS No. 142, a transitional impairment test
for goodwill was completed. This test resulted in a $40.0 million
($37.7 million after-tax) impairment of goodwill associated with
Viad's Convention and Event Services segment. This impairment was
retroactively restated to the first quarter of 2002 as a
cumulative effect of a change in accounting principle in
accordance with SFAS No. 142.
VIAD CORP AND SUBSIDIARIES
TABLE TWO - EBITDA AND FREE CASH FLOW
(UNAUDITED)
Quarter Ended June 30, Six Months Ended June 30,
------------------------- --------------------------
(000 omitted) 2003 2002 % 2003 2002 %
--------- -------- ------ --------- --------- ------
EBITDA:
Net income $40,868 $29,715 37.5% $62,899 $20,372 NM
Change in
accounting
principle - - NM - 37,739 NM
--------- -------- ------ --------- --------- ------
Income before
change in
accounting
principle 40,868 29,715 37.5% 62,899 58,111 8.2%
Interest expense 3,934 4,926 20.1% 8,086 10,007 19.2%
Income taxes 13,900 11,880 -17.0% 22,248 21,461 -3.7%
Depreciation and
amortization 12,579 12,596 0.1% 24,794 25,753 3.7%
--------- -------- ------ --------- --------- ------
EBITDA as
adjusted $71,281 $59,117 20.6% $118,027 $115,332 2.3%
========= ======== ====== ========= ========= ======
Quarter Ended June 30, Six Months Ended June 30,
------------------------- --------------------------
(000 omitted) 2003 2002 % 2003 2002 %
--------- -------- ------ --------- --------- ------
Free Cash Flow:
Net cash
provided by
operating
activities $448,428 $26,796 NM $634,376 $92,616 NM
Change in payment
service assets
and obligations (409,449) 13,099 NM (554,184) 766 NM
--------- -------- ------ --------- --------- ------
Subtotal 38,979 39,895 -2.3% 80,192 93,382 -14.1%
Less:
Capital
expenditures (10,977) (10,707) -2.5% (18,183) (17,711) -2.7%
Dividends paid (8,039) (8,107) 0.8% (16,078) (16,150) 0.4%
Dividend paid
to minority
interest - - NM (8,115) - NM
--------- -------- ------ --------- --------- ------
Free cash flow $19,963 $21,081 -5.3% $37,816 $59,521 -36.5%
========= ======== ====== ========= ========= ======
NM = not meaningful
VIAD CORP AND SUBSIDIARIES
TABLE THREE - NET FLOAT INCOME AND MARGIN
(UNAUDITED)
Analysis of Average Balances, Float and Average Yields and Interest
Rates:
Quarter Ended June 30,
--------------------------------------------------------
2003
-------------------------------------------------------
(000 omitted) Average Income/ Yield/
Balance Expense Rate
-------------- ----------------- ----------------------
Investments
available or
restricted
for payment
service
obligations $7,142,154 $82,017 4.61%
Payment
service
obligations
(1) $5,792,583 60,802 4.21%
-----------------
Net float income
and margin $21,215 1.19%
=================
Six Months Ended June 30,
--------------------------------------------------------
2003
-------------------------------------------------------
(000 omitted) Average Income/ Yield/
Balance Expense Rate
-------------- ----------------- ----------------------
Investments
available or
restricted
for payment
service
obligations $6,940,122 $168,656 4.90%
Payment
service
obligations
(1) $5,568,136 119,728 4.34%
-----------------
Net float income
and margin $48,928 1.42%
=================
Changes in Float Income and Commission Expense - Due to Changes in
Average Investable Balances and Interest Rates:
Quarter Ended June 30,
--------------------------------------------------------
2003 vs. 2002
-------------------------------------------------------
(000 omitted) Balance (2) Yield/Rate (2) Total
-------------- ----------------- -----------------------
Float income $21,163 $(24,879) $(3,716)
Commission
expense $20,331 $(17,617) $2,714
Net float
income $6,824 $(13,254) $(6,430)
Six Months Ended June 30,
--------------------------------------------------------
2003 vs. 2002
-------------------------------------------------------
(000 omitted) Balance (2) Yield/Rate (2) Total
-------------- ----------------- -----------------------
Float income $35,503 $(37,462) $(1,959)
Commission
expense $33,673 $(27,640) $6,033
Net float
income $11,844 $(19,836) $(7,992)
Quarter Ended June 30,
--------------------------------------------------------
2002
--------------------------------------------------------
(000 omitted) Average Income/ Yield/
Balance Expense Rate
---------------- ----------------------- ---------------
Investments
available or
restricted
for payment
service
obligations $5,728,179 $85,733 6.00%
Payment
service
obligations
(1) $4,290,814 58,088 5.43%
-----------------------
Net float income
and margin $27,645 1.94%
=======================
Six Months Ended June 30,
--------------------------------------------------------
2002
--------------------------------------------------------
(000 omitted) Average Income/ Yield/
Balance Expense Rate
---------------- ----------------------- ---------------
Investments
available or
restricted
for payment
service
obligations $5,744,726 $170,615 5.99%
Payment
service
obligations
(1) $4,295,832 113,695 5.34%
-----------------------
Net float income
and margin $56,920 2.00%
=======================
Changes in Float Income and Commission Expense - Due to Changes in
Average Investable Balances and Interest Rates:
Quarter Ended June 30,
--------------------------------------------------------
2002 vs. 2001
--------------------------------------------------------
(000 omitted) Balance (2) Yield/Rate (2) Total
---------------- ----------------------- ---------------
Float income $13,507 $(2,132) $11,375
Commission
expense $14,324 $(7,865) $6,459
Net float
income $4,129 $787 $4,916
Six Months Ended June 30,
--------------------------------------------------------
2002 vs. 2001
--------------------------------------------------------
(000 omitted) Balance (2) Yield/Rate (2) Total
---------------- ----------------------- ---------------
Float income $35,877 $(9,135) $26,742
Commission
expense $39,775 $(26,429) $13,346
Net float
income $10,853 $2,543 $13,396
(1) Commissions are paid to financial institution customers based upon
average outstanding balances generated by the sale of official
check products only. The expense reported includes those payments
made to financial institution customers, costs associated with
swaps and the sale of receivables program. The average balance in
the table reflects only the payment service obligations for which
commissions are paid and does not include the average balance of
the sold receivables ($433 million and $442 million for second
quarter 2003 and 2002, respectively) as these are not recorded on
the Consolidated Balance Sheets. Commission expense is classified
as "Costs of services" in the Consolidated Statements of Income.
(2) Net float income for the "balance" and "yield/rate" columns is not
the net of "float income" and "commission expense" as each of
these amounts is calculated independently.
VIAD CORP AND SUBSIDIARIES
SUPPLEMENTAL TABLE A - RESTATED NET INTEREST MARGINS
(UNAUDITED)
As
Originally As
Reported(a) Restated
--------------------
First quarter 2001 1.94% 1.94%
Second quarter 2001 1.93% 1.88%
Third quarter 2001 2.04% 2.01%
Fourth quarter 2001 2.11% 2.00%
Full year 2001 2.02% 1.96%
First quarter 2002 2.08% 2.06%
Second quarter 2002 1.98% 1.94%
Third quarter 2002 1.70% 1.69%
Fourth quarter 2002 1.71% 1.62%
Full year 2002 1.86% 1.81%
First quarter 2003 1.91% 1.67%
(a) Originally reported amounts from 2001-2002 are from Supplemental
Table A from Viad's fourth quarter 2002 earnings release dated
January 23, 2003. First quarter 2003 originally reported amount is
from Table Three from Viad's first quarter 2003 earnings release
dated April 24, 2003.
----------------------------------------------------------------------
PHOENIX--(BUSINESS WIRE)--July 24, 2003--
Viad Corp to Initiate Separation of Payment Services Business
Viad Corp (NYSE:VVI) today announced second quarter 2003 diluted
earnings per share of $0.47 on revenue of $439.8 million, segment
operating income of $59.5 million, and net income of $40.9 million.
Robert H. Bohannon, chairman, president and chief executive
officer said, "Second quarter results exceeded our expectations due to
strong performance in the Convention and Event Services segment. Both
GES and Exhibitgroup/Giltspur benefited from several large tradeshows
that took place in the quarter and also from cost reductions and
improved efficiency. For Payment Services, transaction volumes were
strong, but low interest rates dampened overall results. MoneyGram
showed excellent growth as agent and transaction volumes increased in
both international and domestic markets. We're very pleased with the
growth in this business."
For the six months ended June 30, 2003, diluted earnings per share
were $0.72 on revenue of $854.2 million, segment operating income of
$96.7 million and net income of $62.9 million.
Strategic Direction for Viad Corp
The board of directors of Viad Corp has authorized the company to
pursue the separation of the Travelers Express business from the
remaining Viad businesses by means of a tax-free spin-off. The
transaction would be subject to a number of conditions, including
among other things, receipt of a satisfactory ruling from the Internal
Revenue Service, confirmation that the long-term debt of Travelers
Express would have an investment grade rating, availability of
satisfactory banking and credit arrangements for each of the
businesses, and final approval of the board of directors of Viad. Viad
intends to file for the Internal Revenue Service ruling on or before
August 8, 2003. The company will tender for its public debt concurrent
with the transaction. The transaction is not expected to be
consummated earlier than the first quarter of 2004, and no assurances
can be given that any such transaction will be consummated. An initial
public offering of Travelers Express is not intended at this time.
Citigroup Global Markets Inc. and Lehman Brothers have been retained
to advise Viad in the transaction.
Bohannon said, "We're pleased to announce our intention to
establish Travelers Express as a separate publicly-traded entity. We
believe this is the right time to move forward. As a separate company
Travelers Express will have greater opportunity to grow, and will have
its own equity for acquisitions and strategic investments that will
ultimately benefit shareholders. We look forward to reporting our
progress to you as we proceed toward a separation."
Credit Rating
Bohannon added, "During the quarter, we met with the rating
agencies about the possibility of separating Travelers Express from
the company. In the course of these discussions, we have received
preliminary positive indications that, if Travelers Express is
separated and based on certain balance sheet assumptions, a
stand-alone Travelers Express entity would have an investment grade
rating." Bohannon added, "As we have said many times before, one of
the primary conditions in a separation of Travelers Express is that it
is able to obtain an investment grade rating on a stand-alone basis."
As a result of today's announcement about the company's intention
to separate Travelers Express, there may be negative implications with
respect to Viad's current credit rating from the rating agencies. The
reason for this would be that the existing debt of Viad Corp will, in
all probability, not be investment grade following a separation of
Travelers Express. Bohannon commented, "I want to make it very clear
that as part of the transaction we would tender for all of Viad's
existing public debt."
Second Quarter and Year-to-Date 2003 Financial Highlights
Highlights of the 2003 second quarter, compared to second quarter
and year-to-date 2002 results, are presented below.
Q2 2003 Q2 2002 Change
------- ------- ------
($ in millions)
Revenue $439.8 $404.4 8.8%
Segment operating income $ 59.5 $ 52.5 13.4%
Operating margins (1) 13.5% 13.0% 50 bps
Net income $ 40.9 $ 29.7 37.5%
Cash flow (EBITDA) (3) $ 71.3 $ 59.1 20.6%
Free cash flow (3) $ 20.0 $ 21.1 -5.3%
YTD 2003 YTD 2002 Change
----------- ------------ ------
($ in millions)
Revenue $ 854.2 $ 843.2 1.3%
Segment operating income $ 96.7 $ 98.8 -2.1%
Operating margins (1) 11.3% 11.7% -40 bps
Net income (2) $ 62.9 $ 20.4 NM
Cash flow (EBITDA) (3) $ 118.0 $ 115.3 2.3%
Free cash flow (3) $ 37.8 $ 59.5 -36.5%
(1) For operating margins, the change from the prior year period is
presented in basis points.
(2) 2002 year-to-date net income includes a net of tax goodwill
impairment charge related to the initial adoption of SFAS No. 142
of $37.7 million. Excluding that charge, 2003 year-to-date net
income of $62.9 million would have been up 8.2 percent as compared
to the 2002 amount of $58.1 million.
(3) EBITDA is defined by Viad as income before interest expense,
income taxes, depreciation and amortization and changes in
accounting principles. Free cash flow is defined by Viad as net
cash provided by operating activities, less the change in payment
service assets and obligations, capital expenditures, and
dividends. EBITDA and free cash flow are supplemental to results
presented under accounting principles generally accepted in the
United States of America (GAAP) and may not be comparable to
similarly titled measures presented by other companies. These
non-GAAP measures are used by management to assess the company's
ability to service debt, fund capital expenditures and finance
growth, and should be considered in addition to, but not as a
substitute for, other measures of financial performance and
liquidity reported in accordance with GAAP. See Table Two for a
reconciliation of net income to EBITDA, and a reconciliation of
net cash provided by operating activities to free cash flow.
Also, during the second quarter and year-to-date:
Second Quarter 2003 Six Months Ended June 30, 2003
----------------------------------------------------------------------
-- Debt was reduced by $94 -- Debt was reduced $100 million
million to $262 million compared to December 31, 2002.
compared to first quarter
2003.
-- Cash and corporate -- Cash and corporate investments
investments were $122 decreased by $182 million
million, down $82 million compared to December 31, 2002
from the first quarter after debt pay-down and
2003. In the quarter, acquisition of the minority
the company paid off $100 interest in MoneyGram
million of 6.625 percent International Limited.
medium-term notes.
Payment Services
Payment Services' revenue for the second quarter 2003 grew 6.2
percent to $203.6 million, up from $191.8 million in the second
quarter 2002. Segment operating income was down 10.3 percent to $31.5
million compared with $35.1 million in 2002, and operating margins for
the quarter were 15.5 percent compared with 18.3 percent in the second
quarter of 2002.
MoneyGram's transaction volume grew by 30 percent compared to
second quarter 2002. MoneyGram's agent base increased by 8 percent in
comparison to the prior year quarter.
Payment Services' total average float investment balances were
$7.1 billion for the quarter, up nearly 25 percent from the prior year
quarter. Net float income (float investment income less commission
expenses and excluding gains and losses) was $21.2 million in the
second quarter 2003, down $6.4 million, compared to the prior year
second quarter. See Table Three for current and historical net float
margins.
"MoneyGram had another terrific quarter," said Bohannon.
"Transaction volume and revenue growth were strong. This business has
a bright future in a market that shows no signs of slowing down. In
the Money Order business, Travelers Express experienced margin
improvement in what is already a stellar business. While interest
rates continue to dampen the growth of PrimeLink/Official Check, this
is still a great business that is benefiting the company."
Convention and Event Services
Convention and Event Services' revenue was $223.9 million, an
increase of 12.3 percent from $199.5 million in the second quarter
2002. Segment operating income was up 74.9 percent to $25.2 million
compared with $14.4 million in the 2002 second quarter and operating
margins for the quarter were 11.3 percent compared with 7.2 percent in
the 2002 second quarter. In the second quarter, both GES and
Exhibitgroup/Giltspur benefited as the companies' customers
participated in large tradeshows as well as from operating efficiency
improvements. Also, in the second quarter, GES serviced the Plastics
Show, which occurs every three years and contributed significantly to
revenue and operating income.
Travel and Recreation Services
Travel and Recreation Services' revenue was $12.3 million, a
decrease of 6.4 percent from $13.1 million in the second quarter 2002.
Operating income was $2.8 million, down slightly from $2.9 million in
the 2002 second quarter. These results reflect a continued slowdown in
worldwide travel most recently due to the SARS health issue, which has
affected travel from Asia and Europe to Canada.
2003 Outlook
Viad Corp provides the following guidance for third quarter and
full year 2003. This guidance is subject to change as a variety of
factors can affect actual operating results. These factors are
identified in the safe harbor language at the end of the press
release.
Third Quarter 2003
-- Viad Corp earnings are expected to be lower than third quarter
2002. Diluted EPS is expected to be in the range of $0.25 to
$0.28.
-- Payment Services segment revenue is expected to remain
relatively flat to third quarter 2002 revenue of $203.8
million.
-- Payment Services segment operating income is expected to
decline by a low to mid twenties rate from third quarter 2002
operating income of $33.8 million.
-- Convention and Event Services segment revenue is expected to
decrease at a low to mid twenties rate due to negative show
rotation compared to third quarter 2002 revenue of $171.6
million.
-- Convention and Event Services segment operating income is
expected to fall slightly below breakeven compared to third
quarter 2002 operating income of $2.2 million, due to negative
show rotation.
Full Year 2003
Viad Corp is lowering full year guidance from its previous
guidance range of $1.34 to $1.39. For 2003, diluted EPS is now
expected to be in the range of $1.20 to $1.23. This guidance reflects
even more substantial compression in Travelers Express's net float
margin than projected at the end of first quarter 2003. This
compression is expected to result from lower available yields for new
and reinvested mortgage-security balances. Contributing to margin
compression are fixed rate payment obligations associated with
interest rate swaps. The maturity and turnover of swaps is slower than
that of the investments that are prepaying. Most of the derivative
notional amount of $3.8 billion outstanding at December 31, 2002, will
expire during the period 2005 through 2008. The guidance also assumes
slower seasonal business in the second half for the convention and
event companies.
Payment Services Segment Guidance for Full Year 2003
-- Payment Services segment revenue is expected to grow at a low
to mid single-digit rate in comparison to 2002 revenue of
$773.6 million.
-- Payment Services segment operating income is expected to
decline at a low to mid teens rate in comparison to 2002
operating income of $125.5 million.
The revenue and operating income outlook for Payment Services
assumes that:
-- MoneyGram transaction volume continues to grow at a rate
similar to the first half of 2003.
-- Money Order transaction volumes will be flat to second quarter
2003 levels.
-- Average investable balances are expected to grow between $750
million and $850 million for the year.
-- Net float income will continue to decline through the fourth
quarter, primarily due to continued significant prepayment of
mortgage-related securities.
Convention and Event Services Segment Guidance for Full Year 2003
-- Convention and Event Services segment revenue is expected to
decline at a high single-digit rate in comparison to 2002
revenue of $786.2 million, primarily due to decreased demand
for exhibit construction.
-- Convention and Event Services segment operating income is
expected to increase at a mid to high teens rate in comparison
to 2002 operating income of $37.6 million, primarily due to
ongoing cost reductions and operating process improvements.
Bohannon concluded, "As we look toward 2004, we are more
optimistic. Mortgage refinancing activity is expected to slow down and
almost $1 billion in swaps will mature between now and the first
quarter of 2004, which should benefit Travelers Express. Furthermore,
recent news of optimism about the economy bodes well for all of Viad's
businesses."
Viad is a $1.6 billion revenue S&P MidCap 400 company. Major
subsidiaries include Travelers Express/MoneyGram of Minneapolis, GES
Exposition Services of Las Vegas and Exhibitgroup/Giltspur of Chicago.
For more information, visit the company's Web site at www.viad.com.
Forward Looking Statements
As provided by the safe harbor provision under the "Private
Securities Litigation Reform Act of 1995" Viad cautions readers that,
in addition to historical information contained herein, this press
release includes certain information, assumptions and discussions that
may constitute forward-looking statements. These forward-looking
statements are not historical facts, but reflect current estimates,
projections, or expectations or trends concerning future growth,
operating cash flows, availability of short-term borrowings, consumer
demand, new business, investment policies, productivity improvements,
ongoing cost reduction efforts, efficiency, competitiveness, tax
rates, restructuring plans (including timing and realization of cost
savings), investment yield impairment, and market risk. Actual results
could differ materially from those projected in the forward-looking
statements. Viad's businesses can be affected by a host of risks and
uncertainties. Among other things, gains and losses of customers,
consumer demand patterns, labor relations, purchasing decisions
related to customer demand for convention and event services, existing
and new competition, industry alliances, consolidation, and growth
patterns within the industries in which Viad competes and any further
deterioration in the economy may individually or in combination impact
future results. In addition to factors mentioned elsewhere, economic,
competitive, governmental, technological, capital marketplace and
other factors, including further terrorist activities or war, could
affect the forward-looking statements in this press release.
Information about Viad Corp obtained from sources other than the
company may be out-of-date or incorrect. Please rely only on company
press releases, SEC filings and other information provided by the
company.
VIAD CORP AND SUBSIDIARIES
TABLE ONE - QUARTERLY AND YEAR-TO-DATE RESULTS
(UNAUDITED)
Quarter Ended June 30, Six Months Ended June 30,
-------------------------- -------------------------
(000 omitted, except per share data)
2003 2002 % 2003 2002 %
-------- -------- ------ -------- -------- -----
Revenues (Note A) $439,830 $404,401 8.8% $854,179 $843,223 1.3%
======== ======== ====== ======== ======== =====
Segment operating
income (Note A) $ 59,517 $ 52,461 13.4% $ 96,689 $ 98,787 -2.1%
Restructuring
recovery (Note
B) 1,276 - NM 1,276 - NM
Corporate
activities and
minority
interests (2,956) (7,291) 59.5% (6,701) (11,851) 43.5%
Net interest
expense (3,069) (3,575) 14.2% (6,117) (7,364) 16.9%
-------- -------- ------ -------- -------- -----
Income before
income taxes 54,768 41,595 31.7% 85,147 79,572 7.0%
Income taxes (13,900) (11,880) -17.0% (22,248) (21,461) -3.7%
-------- -------- ------ -------- -------- -----
Income before
change in
accounting
principle 40,868 29,715 37.5% 62,899 58,111 8.2%
Change in
accounting
principle (Note
C) - - NM - (37,739) NM
-------- -------- ------ -------- -------- -----
Net income $ 40,868 $ 29,715 37.5% $ 62,899 $ 20,372 NM
======== ======== ====== ======== ======== =====
Diluted income
per common
share:
Income before
change in
accounting
principle $ 0.47 $ 0.34 38.2% $ 0.72 $ 0.66 9.1%
Change in
accounting
principle - - NM - (0.43) NM
-------- -------- ------ -------- -------- -----
Net income
per share $ 0.47 $ 0.34 38.2% $ 0.72 $ 0.23 NM
======== ======== ====== ======== ======== =====
Basic income per
common share:
Income before
change in
accounting
principle $ 0.47 $ 0.34 38.2% $ 0.72 $ 0.67 7.5%
Change in
accounting
principle - - NM - (0.44) NM
-------- -------- ------ -------- -------- -----
Net income
per share $ 0.47 $ 0.34 38.2% $ 0.72 $ 0.23 NM
======== ======== ====== ======== ======== =====
Common shares treated as
outstanding for net
income per share
calculations:
Average
outstanding
shares 86,224 86,693 -0.5% 86,116 86,394 -0.3%
======== ======== ====== ======== ======== =====
Average
outstanding
and
potentially
dilutive
shares 86,508 87,672 -1.3% 86,418 87,200 -0.9%
======== ======== ====== ======== ======== =====
NM = not meaningful
VIAD CORP AND SUBSIDIARIES
TABLE ONE - NOTES TO QUARTERLY AND YEAR-TO-DATE RESULTS
(UNAUDITED)
(A) Reportable Segments
Quarter Ended June 30, Six Months Ended June 30,
-------------------------- --------------------------
(000 omitted) 2003 2002 % 2003 2002 %
--------- --------- ------ --------- --------- ------
Revenues:
Payment
Services $203,640 $191,822 6.2% $392,651 $372,667 5.4%
Convention
and Event
Services 223,897 199,450 12.3% 445,953 454,257 -1.8%
--------- --------- ------ --------- --------- ------
Reportable
segments 427,537 391,272 9.3% 838,604 826,924 1.4%
Travel and
Recreation
Services 12,293 13,129 -6.4% 15,575 16,299 -4.4%
--------- --------- ------ --------- --------- ------
Total
revenues $439,830 $404,401 8.8% $854,179 $843,223 1.3%
========= ========= ====== ========= ========= ======
Segment
operating
income:
Payment
Services $31,527 $35,144 -10.3% $51,668 $60,729 -14.9%
Convention
and Event
Services 25,200 14,410 74.9% 43,805 36,654 19.5%
--------- --------- ------ --------- --------- ------
Reportable
segments 56,727 49,554 14.5% 95,473 97,383 -2.0%
Travel and
Recreation
Services 2,790 2,907 -4.0% 1,216 1,404 -13.4%
--------- --------- ------ --------- --------- ------
$59,517 $52,461 13.4% $96,689 $98,787 -2.1%
========= ========= ====== ========= ========= ======
(B) Restructuring Recovery -- In the 2001 third quarter, Viad recorded
restructuring charges totaling $66.1 million ($39.9 million
after-tax) consisting of costs associated with the closure and
consolidation of certain facilities, severance and other employee
benefits in the Convention and Event Services segment. In the 2003
second quarter, $1.3 million of the reserve was reversed as
certain costs originally anticipated in the restructuring plan
will not be incurred.
(C) Change in Accounting Principle -- In June 2002, in accordance with
Viad's adoption of SFAS No. 142, a transitional impairment test
for goodwill was completed. This test resulted in a $40.0 million
($37.7 million after-tax) impairment of goodwill associated with
Viad's Convention and Event Services segment. This impairment was
retroactively restated to the first quarter of 2002 as a
cumulative effect of a change in accounting principle in
accordance with SFAS No. 142.
VIAD CORP AND SUBSIDIARIES
TABLE TWO - EBITDA AND FREE CASH FLOW
(UNAUDITED)
Quarter Ended June 30, Six Months Ended June 30,
------------------------- --------------------------
(000 omitted) 2003 2002 % 2003 2002 %
--------- -------- ------ --------- --------- ------
EBITDA:
Net income $40,868 $29,715 37.5% $62,899 $20,372 NM
Change in
accounting
principle - - NM - 37,739 NM
--------- -------- ------ --------- --------- ------
Income before
change in
accounting
principle 40,868 29,715 37.5% 62,899 58,111 8.2%
Interest expense 3,934 4,926 20.1% 8,086 10,007 19.2%
Income taxes 13,900 11,880 -17.0% 22,248 21,461 -3.7%
Depreciation and
amortization 12,579 12,596 0.1% 24,794 25,753 3.7%
--------- -------- ------ --------- --------- ------
EBITDA as
adjusted $71,281 $59,117 20.6% $118,027 $115,332 2.3%
========= ======== ====== ========= ========= ======
Quarter Ended June 30, Six Months Ended June 30,
------------------------- --------------------------
(000 omitted) 2003 2002 % 2003 2002 %
--------- -------- ------ --------- --------- ------
Free Cash Flow:
Net cash
provided by
operating
activities $448,428 $26,796 NM $634,376 $92,616 NM
Change in payment
service assets
and obligations (409,449) 13,099 NM (554,184) 766 NM
--------- -------- ------ --------- --------- ------
Subtotal 38,979 39,895 -2.3% 80,192 93,382 -14.1%
Less:
Capital
expenditures (10,977) (10,707) -2.5% (18,183) (17,711) -2.7%
Dividends paid (8,039) (8,107) 0.8% (16,078) (16,150) 0.4%
Dividend paid
to minority
interest - - NM (8,115) - NM
--------- -------- ------ --------- --------- ------
Free cash flow $19,963 $21,081 -5.3% $37,816 $59,521 -36.5%
========= ======== ====== ========= ========= ======
NM = not meaningful
VIAD CORP AND SUBSIDIARIES
TABLE THREE - NET FLOAT INCOME AND MARGIN
(UNAUDITED)
Analysis of Average Balances, Float and Average Yields and Interest
Rates:
Quarter Ended June 30,
--------------------------------------------------------
2003
-------------------------------------------------------
(000 omitted) Average Income/ Yield/
Balance Expense Rate
-------------- ----------------- ----------------------
Investments
available or
restricted
for payment
service
obligations $7,142,154 $82,017 4.61%
Payment
service
obligations
(1) $5,792,583 60,802 4.21%
-----------------
Net float income
and margin $21,215 1.19%
=================
Six Months Ended June 30,
--------------------------------------------------------
2003
-------------------------------------------------------
(000 omitted) Average Income/ Yield/
Balance Expense Rate
-------------- ----------------- ----------------------
Investments
available or
restricted
for payment
service
obligations $6,940,122 $168,656 4.90%
Payment
service
obligations
(1) $5,568,136 119,728 4.34%
-----------------
Net float income
and margin $48,928 1.42%
=================
Changes in Float Income and Commission Expense - Due to Changes in
Average Investable Balances and Interest Rates:
Quarter Ended June 30,
--------------------------------------------------------
2003 vs. 2002
-------------------------------------------------------
(000 omitted) Balance (2) Yield/Rate (2) Total
-------------- ----------------- -----------------------
Float income $21,163 $(24,879) $(3,716)
Commission
expense $20,331 $(17,617) $2,714
Net float
income $6,824 $(13,254) $(6,430)
Six Months Ended June 30,
--------------------------------------------------------
2003 vs. 2002
-------------------------------------------------------
(000 omitted) Balance (2) Yield/Rate (2) Total
-------------- ----------------- -----------------------
Float income $35,503 $(37,462) $(1,959)
Commission
expense $33,673 $(27,640) $6,033
Net float
income $11,844 $(19,836) $(7,992)
Quarter Ended June 30,
--------------------------------------------------------
2002
--------------------------------------------------------
(000 omitted) Average Income/ Yield/
Balance Expense Rate
---------------- ----------------------- ---------------
Investments
available or
restricted
for payment
service
obligations $5,728,179 $85,733 6.00%
Payment
service
obligations
(1) $4,290,814 58,088 5.43%
-----------------------
Net float income
and margin $27,645 1.94%
=======================
Six Months Ended June 30,
--------------------------------------------------------
2002
--------------------------------------------------------
(000 omitted) Average Income/ Yield/
Balance Expense Rate
---------------- ----------------------- ---------------
Investments
available or
restricted
for payment
service
obligations $5,744,726 $170,615 5.99%
Payment
service
obligations
(1) $4,295,832 113,695 5.34%
-----------------------
Net float income
and margin $56,920 2.00%
=======================
Changes in Float Income and Commission Expense - Due to Changes in
Average Investable Balances and Interest Rates:
Quarter Ended June 30,
--------------------------------------------------------
2002 vs. 2001
--------------------------------------------------------
(000 omitted) Balance (2) Yield/Rate (2) Total
---------------- ----------------------- ---------------
Float income $13,507 $(2,132) $11,375
Commission
expense $14,324 $(7,865) $6,459
Net float
income $4,129 $787 $4,916
Six Months Ended June 30,
--------------------------------------------------------
2002 vs. 2001
--------------------------------------------------------
(000 omitted) Balance (2) Yield/Rate (2) Total
---------------- ----------------------- ---------------
Float income $35,877 $(9,135) $26,742
Commission
expense $39,775 $(26,429) $13,346
Net float
income $10,853 $2,543 $13,396
(1) Commissions are paid to financial institution customers based upon
average outstanding balances generated by the sale of official
check products only. The expense reported includes those payments
made to financial institution customers, costs associated with
swaps and the sale of receivables program. The average balance in
the table reflects only the payment service obligations for which
commissions are paid and does not include the average balance of
the sold receivables ($433 million and $442 million for second
quarter 2003 and 2002, respectively) as these are not recorded on
the Consolidated Balance Sheets. Commission expense is classified
as "Costs of services" in the Consolidated Statements of Income.
(2) Net float income for the "balance" and "yield/rate" columns is not
the net of "float income" and "commission expense" as each of
these amounts is calculated independently.
VIAD CORP AND SUBSIDIARIES
SUPPLEMENTAL TABLE A - RESTATED NET INTEREST MARGINS
(UNAUDITED)
As
Originally As
Reported(a) Restated
--------------------
First quarter 2001 1.94% 1.94%
Second quarter 2001 1.93% 1.88%
Third quarter 2001 2.04% 2.01%
Fourth quarter 2001 2.11% 2.00%
Full year 2001 2.02% 1.96%
First quarter 2002 2.08% 2.06%
Second quarter 2002 1.98% 1.94%
Third quarter 2002 1.70% 1.69%
Fourth quarter 2002 1.71% 1.62%
Full year 2002 1.86% 1.81%
First quarter 2003 1.91% 1.67%
(a) Originally reported amounts from 2001-2002 are from Supplemental
Table A from Viad's fourth quarter 2002 earnings release dated
January 23, 2003. First quarter 2003 originally reported amount is
from Table Three from Viad's first quarter 2003 earnings release
dated April 24, 2003.
