Pursuit Attractions & Hospitality, Inc.: Form 10-Q for the period ended Sep 30, 2010

The following discussion should be read in conjunction with Viad Corp’s condensed consolidated financial statements and related notes. This discussion contains forward-looking statements that involve risks and uncertainties. Viad Corp’s actual results could differ materially from those anticipated due to various factors discussed under “Forward-Looking Statements” and elsewhere in this quarterly report.

Overview:

Viad Corp (“Viad” or the “Company”) operates in three reportable business segments: Marketing & Events U.S., Marketing & Events International and Travel & Recreation Group. As discussed below, the Company changed its reporting segments related to the Marketing & Events Group during the first quarter of 2010.

In July 2009, Viad announced a strategic reorganization to align its brands and operations into two operating groups: the Marketing & Events Group and the Travel & Recreation Group. The operating groups are supported by a Corporate Services Group that centralizes responsibility for various corporate functions. Immediately following the close of business on December 31, 2009, substantially all of the domestic operations of the Marketing & Events Group were combined into one legal entity by transferring all of the assets and third party liabilities of Exhibitgroup/Giltspur, a division of Viad Corp, The Becker Group, Ltd. (“Becker Group”) and other related entities into GES Exposition Services, Inc. Furthermore, on February 2, 2010, GES Exposition Services, Inc. changed its name to Global Experience Specialists, Inc. (“GES”). The services that were previously provided under the Company’s brands of “Exhibitgroup/Giltspur” and “Becker Group” are now provided under the “Global Experience Specialists” brand.

Marketing & Events Group — In connection with the reorganization and consolidation of business units within the Marketing & Events Group, the Company changed its management structure and internal organization in a manner that caused a change to the composition of its reportable segments, which was effective in the first quarter of 2010. Accordingly, the Marketing & Events Group consists of two reporting segments based on geographical lines of responsibility, the U.S. segment and International segment, as follows:

1. Marketing & Events U.S., which includes all domestic GES and affiliated operations, including those services formerly provided under the Exhibitgroup/Giltspur and Becker Group brands. The consolidation of the domestic Marketing & Events Group operations is aimed to provide a fully integrated service delivery network through a realigned sales organization, shared infrastructure and facilities, and a common operational platform.

2. Marketing & Events International, which includes all foreign operations of the Marketing & Events Group and consists of two operating segments: Canada and EMEA (Europe, Middle East, Africa). This reporting segment includes the operations of the following companies: GES Exposition Services (Canada) Limited, Giltspur Exhibits of Canada, Inc., Melville Exhibition and Event Services Limited and Melville Data Services Limited (collectively “Melville”) and affiliates, SDD Exhibitions and GES GmbH & Co. KG.

Beginning in the first quarter of 2010, the presentation of segment information for the Marketing & Events Group is based on the redefined segments, and comparable prior year information has been restated to reflect the revised segment structure.

The Marketing & Events Group specializes in all aspects of the design, planning and production of face-to-face events, immersive environments and brand-based experiences for clients, including show organizers, corporate brand marketers and retail shopping centers. Show organizers include for-profit and not-for-profit show owners as well as show management companies. Corporate brand marketers include exhibitors and other major domestic and international corporations. Retail shopping centers include major developers, owners and management companies of shopping malls and lifestyle centers.

Under its agreements with show organizers, the Marketing & Events Group serves as the official services contractor, providing services to the show organizer, and is designated as the exclusive provider of certain services to exhibitors participating in the exhibition or event. Show organizer services generally include: general event management; planning and consultation; concept design; exhibition layout and design; graphics and design; show traffic analysis; carpeting and flooring; decorating products and accessories; custom graphics; overhead rigging; cleaning; and electrical, lighting and plumbing distribution. Exclusive exhibitor services provide exhibitors with a single point of contact to facilitate a timely, safe and efficient move-in and move-out of the show. These services typically include: material handling services; overhead rigging; electrical distribution; and cleaning.

In addition to exclusive exhibitor services, the Marketing & Events Group competes with other providers to sell non-exclusive services to exhibitors, including: custom exhibit design and construction; portable and “modular” exhibits and design; integrated marketing, including pre- and post-event communications and customer relationship management; multimedia services; event surveys; return on investment analysis; attendee and exhibit booth traffic analysis; staff training; online management tools; logistics, storage and refurbishment of exhibits; booth furnishings, carpeting and signage; in-house installation and dismantling; and various other show services. The Marketing & Events Group aims to provide these services, combined with complete event program management and planning, to corporate brand marketer clients across all exhibitions and events in which they participate regardless of whether or not it is the official services contractor.

The Marketing & Events Group also provides a variety of immersive, entertaining attractions and brand-based experiences, sponsored events, mobile marketing and other branded entertainment and face-to-face marketing solutions for clients and venues, including shopping malls, movie studios, museums, leading consumer brands and casinos. In addition, the Marketing & Events Group offers retail clients complete turnkey services, including design, engineering, graphic production, fabrication, warehousing, shipping, and on-site installation of retail merchandising units, kiosks and holiday environments. The Marketing & Events Group also provides construction and installation services for permanent installations, including museum exhibits, corporate lobbies, visitors centers, showrooms, and retail interiors.

Travel & Recreation Group — Brewster Inc. (“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 Ice Explorer Tours, motorcoach services, charter and sightseeing services, tour boat operations, inbound package tour operations and hotel operations. Glacier Park, Inc. (“Glacier Park”) operates four historic lodges and three motor inns 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.

The following are financial highlights of the third quarter of 2010 presented in accordance with accounting principles generally accepted in the United States of America (“GAAP”):

Viad Corp (Consolidated)

• Total revenues of $215.1 million compared to $181.1 million in the third quarter of 2009
• Net income attributable to Viad of $4.8 million versus a loss of $97.1 million in the third quarter of 2009
• Diluted income per share of $0.23 versus a loss per share of $4.86 in the third quarter of 2009
• Cash and cash equivalents totaled $152.1 million as of September 30, 2010
• Debt was $9.6 million as of September 30, 2010

Marketing & Events U.S.

• Revenues of $125.1 million, an increase of 19.5 percent from the third quarter of 2009
• Segment operating loss of $9.5 million, as compared to a loss of $19.6 million in the third quarter of 2009

Marketing & Events International

• Revenues of $38.1 million, an increase of 16.2 percent from the third quarter of 2009
• Segment operating loss of $2.0 million, as compared to a loss of $2.6 million in the third quarter of 2009

Travel & Recreation Group

• Revenues of $52.0 million, an increase of 11.9 percent from the third quarter of 2009
• Segment operating income of $21.5 million, an increase of 10.0 percent from the third quarter of 2009

Non-GAAP Measures:

The following discussion includes a presentation of Adjusted EBITDA and Income before impairment losses, which are utilized by management to measure the profit and performance of Viad’s operations and to facilitate period to period comparisons. “Adjusted EBITDA” is defined by Viad as net income attributable to Viad before interest expense, income taxes, depreciation and amortization, impairment losses and recoveries, changes in accounting principles and the effects of discontinued operations. “Income before impairment losses” is defined by Viad as net income attributable to Viad before the after-tax effect of impairment losses related to goodwill, other intangible assets and other long-lived assets. The presentation of Adjusted EBITDA and Income before impairment losses is supplemental to results presented under GAAP and may not be comparable to similarly titled measures used by other companies. Adjusted EBITDA is considered a useful operating metric as potential variations arising from taxes, depreciation, debt service costs, impairment losses and recoveries, changes in accounting principles and the effects of discontinued operations are eliminated, thus resulting in an additional measure considered to be indicative of Viad’s ongoing operations. Income before impairment losses is utilized by management to review operating results of the business without the effects of noncash impairment losses. These non-GAAP measures should be considered in addition to, but not as a substitute for, other measures of financial performance reported in accordance with GAAP.

Management believes that the presentation of Adjusted EBITDA and Income before impairment losses provides useful information to investors regarding Viad’s results of operations for trending, analyzing and benchmarking the performance and value of Viad’s business. Management uses Adjusted EBITDA and Income before impairment losses primarily as performance measures and believes that the GAAP financial measure most directly comparable to these non-GAAP measures is net income attributable to Viad. Although Adjusted EBITDA is used as a financial measure to assess the performance of the business, the use of Adjusted EBITDA is limited because it does not consider material costs, expenses and other items necessary to operate the business. These items include debt service costs, non-cash depreciation and amortization expense associated with long-lived assets, expenses related to U.S. federal, state, local and foreign income taxes, impairment losses or recoveries, and the effects of accounting changes and discontinued operations. Similarly, although Income before impairment losses is used as a financial measure to assess the performance of the business, its use is limited because it does not consider non-cash goodwill, other intangible asset and other long-lived asset impairment losses. Because Adjusted EBITDA and Income before impairment losses do not consider the above items, a user of Viad’s financial information should consider net income attributable to Viad as an important measure of financial performance because it provides a more complete measure of the Company’s performance.

A reconciliation of Adjusted EBITDA to net income (loss) attributable to Viad is as follows:

(in thousands)

The increase in Adjusted EBITDA of $16.0 million for the third quarter of 2010 compared to the third quarter of 2009 was primarily driven by higher segment operating results at the Marketing & Events U.S. segment and the Travel & Recreation Group and lower restructuring charges. The increase in Adjusted EBITDA of $7.5 million for the first nine months of 2010 compared to 2009 was primarily due to higher segment operating results at the Travel & Recreation Group and lower restructuring charges. See “Results of Operations” below for a discussion of fluctuations.

A reconciliation of income (loss) before impairment losses attributable to Viad to net income (loss) attributable to Viad is as follows:

(in thousands)

Results of Operations:

Comparison of Third Quarter of 2010 to the Third Quarter of 2009

Revenues for the third quarter of 2010 increased 18.8 percent to $215.1 million compared to $181.1 million in the third quarter of 2009. Viad’s income before income taxes was $7.7 million for the third quarter of 2010 compared to a loss of $120.2 million in the third quarter of 2009. The 2010 third quarter net income attributable to Viad was $4.8 million, or $0.23 per diluted share, compared to a loss of $97.1 million, or $4.86 per diluted share, in the third quarter of 2009. In the 2009 third quarter, the Company recorded impairment losses of $94.2 million (after-tax), or $4.71 per diluted share, primarily related to goodwill and other intangible assets in the Marketing & Events Group. The 2009 third quarter loss attributable to Viad before impairment losses was $3.0 million, or $0.15 per diluted share. There were no impairment losses in the third quarter of 2010. The improved results as compared to the 2009 third quarter were also the result of higher revenues, overhead reductions and productivity improvements driven by the Company’s Lean initiatives.

During the third quarter of 2010, foreign exchange rate variances resulted in a decrease of $215,000 in revenues and an increase of $578,000 in segment operating income as compared to the third quarter of 2009. Viad conducts its foreign operations primarily in Canada and the United Kingdom and to a lesser extent in certain other countries. The following table summarizes the effect of foreign exchange rate variances on revenues and segment operating results from Viad’s significant international operations for the third quarter:

Accordingly, Viad’s third quarter results were impacted by the strengthening of the Canadian dollar and weakening of the British pound relative to the U.S. dollar. Future decreases in the exchange rates may adversely impact overall expected profitability and historical period-to-period comparisons when operating results are translated into U.S. dollars.

Marketing & Events Group. Revenues for the Marketing & Events U.S. segment were $125.1 million for the third quarter of 2010, up 19.5 percent compared to $104.7 million in the third quarter of 2009. The increase was primarily due to positive show rotation of $17 million and base same-show revenue increases of 8.6 percent in the third quarter of 2010. Management defines base same-show revenue as revenue from exhibitions and events that occur in the same quarter and same city every year. Base same-shows represented 33.8 percent of 2010 third quarter Marketing & Events U.S. revenues. Segment operating loss was $9.5 million in the third quarter of 2010, compared to a loss of $19.6 million in the third quarter of 2009. The improved operating results were primarily due to increases in revenues, overhead reductions and productivity improvements driven by the Company’s Lean initiatives.

Revenues for the Marketing & Events International segment were $38.1 million for the third quarter of 2010, up 16.2 percent compared to $32.8 million in the third quarter of 2009. Segment operating loss was $2.0 million in the third quarter of 2010, compared to a loss of $2.6 million in the third quarter of 2009. As discussed above, results in this segment were impacted by exchange rates during the 2010 third quarter, resulting in decreases of $1.6 million in revenue and $50,000 in segment operating income, as compared to the third quarter of 2009. Excluding exchange rate variances, 2010 third quarter revenues increased by $6.9 million, or 21.0 percent, primarily resulting from positive show rotation of $8 million.

Although the Marketing & Events Group has a diversified revenue base and long-term contracts for future shows, its revenues are affected by general economic and industry-specific conditions. In general, the exhibition and event industry is experiencing modest improvement; however, the prospects for individual shows tend to be driven by the success of the industry related to those shows. For the 2010 full year, management expects U.S. same-show revenues to decline at a single-digit rate, reflecting decreases during the first and second quarters, partially offset by increases during the second half of the year. Management expects demand from shopping center clients for holiday-themed events and experiences and retail merchandising units to improve somewhat over 2009 levels but to remain below historical levels. Accordingly, management anticipates that the pricing environment will remain challenging. Additionally, management expects show rotation to positively impact full year revenues by $15 million to $20 million due to a few major, non-annual shows that occurred in 2010, while foreign currency exchange rate variances are not expected to have a significant impact on full year 2010 results.

In anticipation of recessionary pressures on revenues, management began taking actions to reduce overhead costs during early 2008, and in early 2009, management began implementing changes to its Marketing & Events Group service delivery processes based on ‘Lean’ principles in order to further increase efficiencies, decrease costs and enhance service levels. Also in 2009, management commenced the integration of GES Exposition Services, Exhibitgroup/Giltspur and Becker Group to form the new Global Experience Specialists organization. As a result of these efforts, management realized a reduction in Marketing & Events Group overhead costs of approximately $41 million during 2009 and anticipates a further reduction in U.S. overhead costs of approximately $10 million during 2010, partially offset by accruals for performance-based incentives. Additionally, management anticipates realizing more than $10 million in variable cost savings from its Lean initiatives during 2010, offsetting general market pressures on margins.

As part of the business integration, the Marketing & Events U.S. sales force was combined and aligned with its primary customer segments – exhibition sales, brand marketer sales (which primarily represents exhibitor sales) and retail sales. These sales forces are supported by an integrated service delivery network, shared infrastructure and facilities, and a common operational platform.

Management remains focused on improving the profitability of the Marketing & Events Group through continued integration and consolidation of operations to increase capacity utilization and reduce costs, as well as leveraging the collective strengths and capabilities of the combined organization to increase productivity and win market share by delivering comprehensive, innovative, value-added solutions that enable clients to generate a higher return on their face-to-face marketing investments.

The Marketing & Events Group is subject to multiple collective bargaining agreements that affect labor costs, about one-third of which expire each year. Although labor relations between the companies and labor are currently stable, disruptions during future contract negotiations could occur, with the possibility of an adverse impact on the operating results of the Marketing & Events Group.

Travel & Recreation Group. Revenues for the Travel & Recreation Group segment were $52.0 million, up 11.9 percent compared to third quarter 2009 revenues of $46.5 million. Segment operating income was $21.5 million, up 10.0 percent from 2009 operating income of $19.5 million. As discussed above, results in this segment were impacted by exchange rate variances during the 2010 third quarter, resulting in increases of $1.4 million and $626,000 in revenues and segment operating income, respectively, as compared to the third quarter of 2009. Excluding exchange rate variances, 2010 third quarter revenues increased by $4.1 million, or 8.9 percent, primarily due to stronger demand for the Company’s tourism services as well as initiatives to capture incremental spend per guest.

The Travel & Recreation Group segment is affected by consumer discretionary spending on tourism activities. As the economy stabilizes, management expects results from the Travel & Recreation Group segment to benefit from improved tourism demand versus 2009. Additionally, management anticipates that foreign currency exchange rate variances will have a moderately favorable impact on full year 2010 results.

During 2009, approximately 72 percent of revenue and 80 percent of segment operating income generated in the Travel & Recreation Group segment was derived through its Canadian operations. These operations are largely affected by foreign customer visitation, and, accordingly, increases in the value of the Canadian dollar compared to other currencies could adversely affect customer volumes, revenue and operating income from the Travel & Recreation Group segment.

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 five one-year periods and now expires on December 31, 2010. 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. 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 and East Glacier, 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 concessions contract. Glacier Park owns its Glacier Park Lodge operations in East Glacier. Glacier Park also owns the Prince of Wales Hotel in Waterton Lakes National Park, which is operated under a ground lease with the Canadian government that was recently renewed for a 42-year term running through January 31, 2052. Glacier Park generated 25 percent of Travel & Recreation Group’s full year 2009 segment operating income.

Corporate Activities. Corporate activities expense totaled $1.7 million in the third quarter of 2010 compared to $2.0 million in the third quarter of 2009. The decrease was primarily due to lower consulting fees in the 2010 quarter as compared to the 2009 quarter, partially offset by an accrual for performance-based incentives.

Restructuring Charges. Viad recorded restructuring charges of $183,000 in the third quarter of 2010 related to reorganization activities resulting from the elimination of certain positions. In the third quarter of 2009, Viad recorded restructuring charges of $5.2 million related to facility consolidations and other reorganization activities. Also in the third quarter of 2009, Viad reversed $1.3 million of restructuring reserves due to a revision in estimated sublease income associated with certain leased facilities.

Income Taxes. The effective tax rate in the third quarter of 2010 was 24.9 percent, compared to 19.9 percent in the third quarter of 2009. The lower rate in 2009 was primarily due to goodwill impairment losses in 2009, as well as the resolution of tax matters of $149,000 in 2010 versus $3.3 million in 2009. Excluding these items, the effective tax rates in the third quarters of 2010 and 2009 would have been 26.8 percent and 39.2 percent, respectively.

Comparison of First Nine Months of 2010 to the First Nine Months of 2009

Revenues for the first nine months of 2010 increased 3.5 percent to $657.8 million compared to $635.6 million during the first nine months of 2009. Viad’s income before income taxes was $9.5 million for the first nine months of 2010 compared to a loss of $109.3 million in the comparable period in 2009. Net income attributable to Viad for the first nine months of 2010 was $4.8 million, or $0.24 per diluted share, compared to a net loss of $90.2 million, or $4.52 per diluted share, during the first nine months of 2009. In the 2009 third quarter, the Company recorded impairment losses of $94.2 million (after-tax), or $4.72 per diluted share, primarily related to goodwill and other intangible assets in the Marketing & Events Group. Income attributable to Viad before impairment losses for the first nine months of 2009 was $3.9 million, or $0.20 per diluted share. There were no impairment losses for the comparable period in 2010. The improved results as compared to the 2009 period were also the result of increased revenues, overhead reductions and productivity improvements driven by the Company’s Lean initiatives, partially offset by accruals for 2010 performance-based incentives (versus incentive reversals in the 2009 period).

During the first nine months of 2010, foreign exchange rate variances resulted in increases of $9.3 million and $1.2 million in revenues and segment operating income, respectively, as compared to the first nine months of 2009. Viad conducts its foreign operations primarily in Canada and the United Kingdom and to a lesser extent in certain other countries. The following table summarizes the effect of foreign exchange rate variances on revenues and segment operating results from Viad’s significant international operations for the first nine months of the year:

Accordingly, Viad’s nine-month results were favorably impacted by the strengthening of the Canadian dollar relative to the U.S. dollar. Viad’s nine-month results were also impacted by the strengthening of the British pound relative to the U.S. dollar during the first four months of 2010, followed by its subsequent weakening during the last five months of the period. Future decreases in the exchange rates may adversely impact overall expected profitability and historical period-to-period comparisons when operating results are translated into U.S. dollars.

Marketing & Events Group. Revenues for the Marketing & Events U.S. segment were $439.0 million for the first nine months of 2010, down 1.5 percent compared to $445.8 million in 2009. The revenue decline was due primarily to lower same-show revenues and pricing pressures, largely offset by positive show rotation of approximately $20 million in revenue. Base same-show revenues declined 4.0 percent during the first nine months of 2010. Management defines base same-show revenue as revenue from exhibitions and events that occur in the same quarter and same city every year. Base same-shows represented approximately 40 percent of Marketing & Events U.S. revenues for the first nine months of 2010. Segment operating loss was $11.9 million in the first nine months of 2010, compared to a loss of $12.5 million in the 2009 period. The improved operating results were largely the result of overhead reductions and productivity improvements driven by the Company’s Lean initiatives, partially offset by accruals for 2010 performance-based incentives (versus incentive reversals in 2009).

Revenues for the Marketing & Events International segment were $144.6 million for the first nine months of 2010, up 12.3 percent from $128.8 million in 2009. Segment operating income was $7.1 million in the first nine months of 2010, compared to $6.8 million in the 2009 period. As discussed above, results in this segment were impacted by exchange rates during the first nine months of 2010, resulting in increases of $5.2 million and $454,000 in revenues and segment operating income, respectively, as compared to 2009. Excluding exchange rate variances, revenues for the first nine months of 2010 increased by $10.6 million, or 8.2 percent, and segment operating income decreased by $168,000. The increase in revenue primarily resulted from a major project for the 2010 Winter Olympic Games in Canada, improving industry trends, same-show growth and market share gains, partially offset by a reduction in revenues of approximately $1 million due to show rotation. The decline in operating income was primarily the result of a less profitable mix of business during the 2010 first quarter.

Travel & Recreation Group. Revenues from the Travel & Recreation Group segment were $81.8 million for the first nine months of 2010, up 17.6 percent compared to 2009 revenues of $69.6 million. Segment operating income was $22.6 million compared to $19.4 million in 2009. As discussed above, results in this segment were impacted by exchange rate variances during the first nine months of 2010, resulting in increases of $4.1 million and $707,000 in revenues and segment operating income, respectively, as compared to 2009. Excluding exchange rate variances, revenues for the first nine months of 2010 increased by $8.1 million, or 11.7 percent, primarily due to stronger demand for the Company’s tourism services as well as initiatives to capture incremental spend per guest.

Corporate Activities. Corporate activities expense totaled $4.5 million in the first nine months of 2010, compared to $4.2 million in the comparable period in 2009. The increase was primarily due to higher performance-based compensation expense in the first nine months of 2010 as compared to performance-based compensation expense reversals in the 2009 period, partially offset by lower consulting fees in the 2010 period.

Restructuring Charges. Viad recorded restructuring charges of $2.8 million in the first nine months of 2010, compared to $8.1 million in the comparable period in 2009. The charges primarily related to reorganization activities in the Marketing & Events Group, comprised of the elimination of certain positions as well as facility consolidations. Additionally, during the first nine months of 2009, Viad reversed $1.3 million of restructuring reserves due to a revision in estimated sublease income associated with certain leased facilities.

Income Taxes. The effective tax rate in the first nine months of 2010 was 41.1 percent, compared to 18.1 percent in the comparable period in 2009. The low rate in 2009 was primarily due to goodwill impairment losses in 2009 and the resolution of tax matters in 2010 resulting in net expense of $1.1 million versus the favorable resolution of tax matters of $3.3 million in 2009. Excluding these items, the effective tax rate in the first nine months of 2010 and 2009 would have been 29.2 percent and 36.5 percent, respectively.

Liquidity and Capital Resources:

Cash and cash equivalents were $152.1 million as of September 30, 2010 as compared to $116.3 million as of December 31, 2009, with the increase primarily due to cash flow from operations and proceeds from the sale of certain assets, partially offset by capital expenditures and common stock share repurchases. Management believes that Viad’s existing sources of liquidity will be sufficient to fund operations and capital commitments for at least the next 12 months.

Viad’s total debt as of September 30, 2010 was $9.6 million compared to $12.8 million as of December 31, 2009. The debt-to-capital ratio was 0.024 to 1 as of September 30, 2010 compared with 0.032 to 1 as of December 31, 2009. Capital is defined as total debt and capital lease obligations plus total stockholders’ equity.

Effective November 20, 2009, Viad amended its secured revolving credit agreement (the “Credit Facility”) to ensure that the Company continued to meet its obligations under the Credit Facility given the current economic environment. The amended Credit Facility provides for a $75 million revolving line of credit, and may be increased up to an additional $50 million under certain circumstances. The Credit Facility expires on June 15, 2011 and borrowings are to be used for general corporate purposes (including permitted acquisitions) and to support up to $25 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.

Borrowings under the Credit Facility (of which GES is a guarantor) are indexed to the prime rate or the London Interbank Offered Rate (“LIBOR”), 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 0.50 percent annually. As of September 30, 2010, Viad had $65.5 million of capacity remaining under its Credit Facility reflecting an outstanding borrowing of $4.9 million and issued letters of credit of $4.6 million. As part of the amendment, Viad’s financial covenants were amended and include a fixed-charge coverage ratio of not less than 0.80 to 1 through the third quarter of 2010 and 1.00 to 1 thereafter and a leverage ratio (defined as total debt to Adjusted EBITDA) of not greater than 2.50 to 1. Additionally, Viad must maintain a consolidated minimum cash balance of $50 million. As of September 30, 2010, the fixed-charge coverage and leverage ratios were 1.27 to 1 and 0.87 to 1, respectively. Significant other covenants include limitations on: investments, common stock dividends, stock repurchases, additional indebtedness, sales/leases of assets, acquisitions, consolidations or mergers and liens on property. The terms of the Credit Facility restrict Viad from paying more than $5 million in dividends in the aggregate in any calendar year and also restrict the Company from repurchasing more than $10 million in the aggregate of the Company’s common stock during the remainder of the Credit Facility term. As of September 30, 2010, Viad was in compliance with all covenants.

As of September 30, 2010, 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 primarily relate to leased facilities and credit or loan arrangements with banks, 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 September 30, 2010 would be $38.6 million. These guarantees primarily 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.

Capital expenditures for the first nine months of 2010 totaled $11.6 million and primarily related to the purchase of rental inventory, equipment and computer hardware primarily at the Marketing & Events U.S. segment and building improvements and equipment at the Travel & Recreation Group. For the first nine months of 2009, capital expenditures totaled $18.7 million and primarily related to the purchase of equipment and information systems and related costs, as well as exhibit costs, at the Marketing & Events U.S. segment.

During the first quarter of 2010, Viad completed the sale of a non-strategic real estate asset for $14.3 million (net of selling costs). The asset was previously held in the Travel & Recreation Group and was classified on Viad’s consolidated balance sheets under the caption “Asset held for sale” as of December 31, 2009.

In September 2010, Viad announced its intent to repurchase up to an additional 500,000 shares of the Company’s common stock from time to time at prevailing market prices. At the time of the announcement, there were 160,681 shares available for repurchase pursuant to previously announced authorizations. Viad purchased 356,300 shares for $6.3 million during the three months ended September 30, 2010, with 304,381 shares remaining for repurchase from the recently announced authorization. Additionally, during the nine months ended September 30, 2010 and 2009, the Company repurchased 28,407 shares for $573,000 and 68,988 shares for $1.2 million, respectively, related to tax withholding requirements on share-based awards.

Viad exercises significant judgment in determining its income tax provision due to transactions, credits and calculations where the ultimate tax determination is uncertain. Accordingly, Viad has recorded accrued liabilities associated with uncertain tax positions. The final resolution or settlement of uncertain tax positions could result in future cash payments. During the first quarter of 2009, Viad paid certain foreign income tax reassessments of $4.9 million and received tax refunds of $1.9 million pursuant to a joint settlement agreement with certain Canadian taxing jurisdictions.

During the second quarter of 2010, Viad received income tax refunds of $5.6 million related to carryback claims associated with 2009 operating losses.

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 September 30, 2010 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 Viad’s business, financial position or results of operations.

Viad is subject to various U.S. federal, state and foreign laws and regulations governing the prevention of pollution and the protection of the environment in the jurisdictions in which Viad has or had operations. If the Company has failed to comply with these environmental laws and regulations, civil and criminal penalties could be imposed and Viad could become subject to regulatory enforcement actions in the form of injunctions and cease and desist orders. As is the case with many companies, Viad also faces exposure to actual or potential claims and lawsuits involving environmental matters relating to its past operations. Although it is a party to certain environmental disputes, Viad believes that any resulting liabilities, after taking into consideration amounts already provided for, including insurance coverage, will not have a material impact on the Company’s financial position, results of operations or liquidity. As of September 30, 2010, there was a remaining environmental remediation liability of $6.1 million related to previously sold operations of which $913,000 was included in the consolidated balance sheets under the caption “Other current liabilities” and $5.2 million under the caption “Other deferred items and liabilities.”

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 September 30, 2010, the amount of additional funding, if any, that Viad would be required to make related to multi-employer pension plans is not ascertainable.

Off-Balance Sheet Arrangements:

Viad does not have any “off-balance sheet” arrangements with unconsolidated special-purpose or other entities that would materially affect the Company’s financial position, results of operations, liquidity or capital resources. Furthermore, Viad does not have any relationships with special-purpose or other entities that provide off-balance sheet financing; liquidity, market risk or credit risk support; or engage in leasing or other services that expose the Company to liability or risks of loss that are not reflected in Viad’s consolidated financial statements.

Critical Accounting Policies and Estimates:

The preparation of financial statements in conformity with GAAP requires estimates and assumptions that affect the reported amounts of assets and liabilities, revenues and expenses, and related disclosures of contingent assets and liabilities in the consolidated financial statements. The SEC has defined a company’s most critical accounting policies as those that are most important to the portrayal of a company’s financial position and results of operations, and that require a company to make its most difficult and subjective judgments, often as a result of the need to make estimates of matters that are inherently uncertain. Based on these criteria, Viad has identified and discussed with its audit committee the following critical accounting policies and estimates pertaining to Viad, and the methodology and disclosures related to those estimates:

Goodwill and other intangible assets — Goodwill is not amortized, but tested for impairment at the reporting unit level on an annual basis on October 31 of each year. Goodwill is also tested for impairment between annual tests if an event occurs or circumstances change that would more-likely-than-not reduce the fair value of a reporting unit below its carrying amount. Viad’s reporting units are defined, and goodwill is tested, at either an operating segment level, or at the component level of an operating segment, depending on various factors including the internal reporting structure of the operating segment, the level of integration among components, the sharing of assets among components, and the benefits and likely recoverability of goodwill by the component’s operations.

As of September 30, 2010, Viad had goodwill of $85.0 million related to its Marketing & Events Group, which consisted of $62.7 million related to the Marketing & Events U.S. segment and $22.3 million related to the Marketing & Events International segment. For goodwill impairment testing purposes, this goodwill is assigned to and tested at the component level within the respective segment’s geographical operations. As of September 30, 2010, the amount of goodwill assigned to each of the discrete reporting units in the United States, the United Kingdom (Melville) and Canada was $62.7 million, $13.5 million and $8.8 million, respectively. Also, as of September 30, 2010, the Brewster operating segment (within the Travel & Recreation Group) had goodwill of $40.8 million. Brewster is considered a reporting unit for goodwill impairment testing purposes.

Viad uses a discounted expected future cash flow methodology (income approach) in order to estimate the fair value of its reporting units for purposes of goodwill impairment testing. The estimates and assumptions regarding expected future cash flows, discount rates and terminal values require considerable judgment and are based on market conditions, financial forecasts, industry trends and historical experience.

The most critical assumptions and estimates in determining the estimated fair value of its reporting units relate to the amounts and timing of expected future cash flows for each reporting unit and the reporting unit cost of capital (discount rate) applied to those cash flows. Furthermore, the assumed reporting unit cost of capital rates (discount rates) are estimated using a build-up method based on the perceived risk associated with the cash flows pertaining to the specific reporting unit. In order to assess the reasonableness of its fair value estimates, the Company performs a reconciliation of the aggregate fair values of its reporting units to Viad’s market capitalization.

As noted above, the estimates and assumptions regarding expected future cash flows, discount rates and terminal values require considerable judgment and are based on market conditions, financial forecasts, industry trends and historical experience. These estimates, however, have inherent uncertainties and different assumptions could lead to materially different results. As of September 30, 2010, Viad had aggregate goodwill of $125.8 million recorded in the consolidated balance sheets. Furthermore, as a result of the Company’s most recent impairment analysis performed in the fourth quarter of 2009, the excess of the estimated fair values over the carrying values (expressed as a percentage of the carrying amounts) under step one of the impairment test were 35 percent, 52 percent and 54 percent, respectively, for each of the Marketing & Events reporting units in the United States, the United Kingdom (Melville) and Canada. For the Brewster reporting unit, the excess of the estimated fair value over the carrying value was 46 percent as of the most recent impairment test. Due to continued uncertainties in the current economic environment, reductions in the Company’s expected revenue, operating income or cash flow forecasts and projections, or an increase in reporting unit cost of capital, could trigger additional goodwill impairment testing, which may result in impairment losses.

Other intangible assets not subject to amortization, which consist of trademarks and trade names, are also tested for impairment annually on October 31 of each year, or more frequently if events or changes in circumstances indicate that the asset might be impaired. Other intangible assets not subject to amortization are also reviewed annually to determine whether an indefinite useful life remains appropriate. The Company also uses an income approach to measure the estimated fair values of its trademarks and trade names not subject to amortization. Intangible assets subject to amortization are stated at cost, net of accumulated amortization, and are tested for potential impairment whenever events or changes in circumstances indicate that the carrying amount of the intangible asset may not be recoverable through undiscounted cash flows. Intangible assets subject to amortization primarily consist of customer contracts and relationships, non-compete agreements, proprietary technology and design libraries.

As of September 30, 2010, the Company had aggregate intangible assets not subject to amortization of $177,000, and aggregate intangible assets subject to amortization of $1.8 million. Due to continued uncertainties in the current economic environment, reductions in the Company’s expected revenue, operating income or cash flow forecasts and projections could trigger additional impairment testing for these intangible assets, which may result in impairment losses.

Income taxes — Viad is required to estimate and record provisions for income taxes in each of the jurisdictions in which the Company operates. Accordingly, the Company must estimate its actual current income tax liability, and assess temporary differences arising from the treatment of items for tax purposes as compared to the treatment for accounting purposes. These differences result in deferred tax assets and liabilities which are included in Viad’s consolidated balance sheets. The Company must assess the likelihood that deferred tax assets will be recovered from future taxable income and to the extent that recovery is not likely, a valuation allowance must be established. The Company uses significant judgment in forming a conclusion regarding the recoverability of its deferred tax assets and evaluates the available positive and negative evidence to determine whether it is more likely-than-not that its deferred tax assets will be realized in the future. As of September 30, 2010 and December 31, 2009, Viad had gross deferred tax assets of $63.5 million and $61.2 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.

For the cumulative three-year period ending December 31, 2009, Viad had a pre-tax operating loss, which was primarily the result of the goodwill and other impairment losses recorded during 2009. The Company considered the negative evidence of this cumulative pre-tax operating loss position 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 the goodwill impairment losses are not tax deductible, and thus do not contribute to tax losses. As of both September 30, 2010 and December 31, 2009, Viad had a valuation allowance of $162,000 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.

As noted above, 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 is primarily dependent on Viad’s ability to generate sufficient taxable income in future periods. In light of the Company’s recent operating losses, and the risks and 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.

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 first quarter of 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 first quarter of 2010.

Viad is subject to regular and recurring audits by the taxing authorities in the jurisdictions in which the Company conducts or had previously conducted operations. These include U.S. federal and most state jurisdictions, and certain foreign jurisdictions including Canada, the United Kingdom and Germany.

Viad exercises judgment in determining its income tax provision due to transactions, credits and calculations where the ultimate tax determination is uncertain. As of September 30, 2010 and December 31, 2009, Viad did not have any accrued gross liabilities associated with uncertain tax positions for continuing operations. However, as of September 30, 2010 and December 31, 2009, Viad had accrued interest and penalties related to uncertain tax positions for continuing operations of $193,000 and $407,000, respectively.

During the nine months ended September 30, 2010 and 2009, Viad recorded tax benefits related to the favorable resolution of tax matters in continuing operations of $149,000 and $3.3 million, respectively. These favorable tax resolutions represent the reversal of amounts accrued for tax and related interest and penalties in connection with uncertain tax positions which were effectively settled or for which there was a lapse of the applicable statute of limitations.

In addition to the above, Viad had accrued gross liabilities associated with uncertain tax positions for discontinued operations of $636,000 as of both September 30, 2010 and December 31, 2009. In addition, as of September 30, 2010 and December 31, 2009, Viad had accrued interest and penalties related to uncertain tax positions for discontinued operations of $341,000 and $312,000, 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).

In the first quarter of 2009, Viad paid reassessments of $4.9 million and received aggregate tax refunds of $1.9 million related to a Canadian tax settlement agreement.

During the second quarter of 2010, Viad received income tax refunds of $5.6 million related to carryback claims associated with 2009 operating losses.

Viad does not record deferred taxes on the undistributed earnings of its Canadian subsidiaries as management presently intends to reinvest the earnings of those operations. As of December 31, 2009, there was approximately $84.6 million of accumulated undistributed earnings related to Viad’s Canadian subsidiaries, the majority of which have been previously reinvested in the assets of those foreign operations. The incremental unrecognized tax liability (net of estimated foreign tax credits) related to those undistributed earnings was approximately $2.3 million. To the extent that circumstances change and it becomes apparent that some or all of the undistributed earnings will be remitted to the parent, Viad would accrue incremental U.S. income taxes and foreign withholding taxes attributable to such remittance. Furthermore, there have been certain legislative initiatives, which could potentially result in the reduction or elimination of the deferral of U.S. income taxes on unrepatriated foreign earnings. If such initiatives were to become enacted tax law, the Company may be required to record additional income tax expense, which could have a negative impact on Viad’s financial position and results of operations.

Insurance liabilities — Viad is self-insured up to certain limits for workers’ compensation, automobile, product and general liability and property loss claims. The aggregate amount of insurance liabilities related to Viad’s continuing operations was $23.3 million as of September 30, 2010. Of this total, $17.1 million related to workers’ compensation liabilities and the remaining $6.2 million related to general/auto liability claims. Viad has also retained and provided for certain insurance liabilities in conjunction with previously sold businesses totaling $8.2 million as of September 30, 2010, primarily related to workers’ compensation liabilities. Provisions for losses for claims incurred, including estimated claims incurred but not yet reported, are made based on Viad’s historical experience, claims frequency and other factors. A change in the assumptions used could result in an adjustment to recorded liabilities. Viad has purchased insurance for amounts in excess of the self-insured levels, which generally range from $200,000 to $500,000 on a per claim basis. Viad does not maintain a self-insured retention pool fund as claims are paid from current cash resources at the time of settlement. Viad’s net cash payments in connection with these insurance liabilities were $4.8 million and $6.2 million for the first nine months of 2010 and 2009, respectively.

Pension and postretirement benefits — Viad’s pension plans use traditional defined benefit formulas based on years of service and final average compensation. Funding policies provide that payments to defined benefit pension trusts shall be at least equal to the minimum funding required by applicable regulations. The Company presently anticipates contributing $1.1 million to its funded pension plans and $790,000 to its unfunded pension plans in 2010, of which the Company has contributed $921,000 and $622,000 as of September 30, 2010, respectively.

Viad and certain of its subsidiaries have defined benefit postretirement plans that provide medical and life insurance for certain eligible employees, retirees and dependents. The related postretirement benefit liabilities are recognized over the period that services are provided by employees. In addition, Viad retained the obligations for these benefits for retirees of certain sold businesses. While the plans have no funding requirements, Viad expects to contribute $182,000 to the plans in 2010, of which $84,000 has been contributed as of September 30, 2010.

The assumed health care cost trend rate used in measuring the December 31, 2009 accumulated postretirement benefit obligation was ten percent, declining one-half percent each year to the ultimate rate of five percent by the year 2019 and remaining at that level thereafter.

A one-percentage-point increase in the assumed health care cost trend rate for each year would increase the accumulated postretirement benefit obligation as of December 31, 2009 by $1.5 million and the total of service and interest cost components by $102,000. A one-percentage-point decrease in the assumed health care cost trend rate for each year would decrease the accumulated postretirement benefit obligation as of December 31, 2009 by $1.3 million and the total of service and interest cost components by $88,000.

The weighted-average discount rates used to determine the domestic funded pension, domestic unfunded pension and postretirement benefit obligations as of December 31, 2009 were 5.90 percent, 5.70 percent and 5.60 percent, respectively. The weighted-average discount rate used to determine the foreign pension benefit obligations as of December 31, 2009 was 5.60 percent. The weighted-average discount rates used to determine the 2009 net periodic benefit cost for the domestic and foreign pension plans were 6.90 percent and 7.00 percent, respectively. The discount rates used in determining future pension and postretirement benefit obligations are based on rates determined by actuarial analysis and management review, and reflect the estimated rates of return on a high-quality, hypothetical bond portfolio whose cash flows match the timing and amounts of expected benefit payments.

The expected return on plan assets used to determine net periodic benefit cost for the Company’s domestic and foreign pension plans for 2009 was 6.35 percent and 6.50 percent, respectively. The expected return on plan assets used to determine net periodic benefit cost for postretirement benefit plans for 2009 was 6.10 percent.

Share-based compensation — Viad grants share-based compensation awards to officers, directors and certain key employees pursuant to the 2007 Viad Corp Omnibus Incentive Plan (the “2007 Plan”). The 2007 Plan has a ten-year life and provides for the following types of awards: (a) incentive and non-qualified stock options; (b) restricted stock and restricted stock units; (c) performance units or performance shares; (d) stock appreciation rights; (e) cash-based awards and (f) certain other stock-based awards. The number of shares of common stock available for grant under the 2007 Plan is limited to 1,700,000 shares plus shares awarded under the 1997 Viad Corp Omnibus Incentive Plan (which terminated in May 2007) that subsequently cease for any reason to be subject to such awards (other than by reason of exercise or settlement of the awards to the extent the shares are exercised for, or settled in, vested and non-forfeited shares) up to an aggregate maximum of 1,500,000 shares. Viad issues shares related to its share-based compensation awards from shares held in treasury.

Share-based compensation expense recognized in the consolidated financial statements during the three months ended September 30, 2010 and 2009 was $948,000 and $1.0 million, respectively, and $2.7 million and $2.2 million during the nine months ended September 30, 2010 and 2009, respectively. In addition, $509,000 of costs associated with share-based compensation were included in restructuring expense during the nine months ended September 30, 2010. Furthermore, the total tax benefits related to share-based compensation expense were $329,000 and $381,000 for the three months ended September 30, 2010 and 2009, respectively, and $957,000 and $788,000 during the nine months ended September 30, 2010 and 2009, respectively. No share-based compensation costs were capitalized during the nine months ended September 30, 2010 or 2009.

The fair value of restricted stock and performance-based restricted stock awards are based on Viad’s stock price on the date of grant. Liability-based awards are recorded at estimated fair value, based on the number of units expected to vest and the level of achievement of predefined performance goals (where applicable) and are remeasured on each balance sheet date based on Viad’s stock price until the time of settlement. Viad uses the Black-Scholes option pricing model for purposes of determining the fair value of each stock option grant for which key assumptions are necessary. These assumptions include Viad’s expected stock price volatility; the expected period of time the stock option will remain outstanding; the expected dividend yield on Viad common stock, and the risk-free interest rate. Changes in the assumptions could result in different estimates of the fair value of stock option grants, and consequently impact Viad’s results of operations.

Impact of Recent Accounting Pronouncements:

In June 2009, the Financial Accounting Standards Board (“FASB”) issued new guidance related to accounting and reporting for transfers of financial assets, which is codified in Accounting Standards Codification (“ASC”) Topic 860. The objective of this guidance is to improve the relevance, representational faithfulness, and comparability of the information that a reporting entity provides in its financial statements about a transfer of financial assets. Viad adopted the provisions of this guidance on January 1, 2010, which did not have an impact on Viad’s financial position or results of operations.

In June 2009, the FASB issued new guidance related to accounting and reporting for variable interest entities, which is codified in ASC Topic 810. This guidance amends previously issued standards and addresses the effects of the elimination of the qualifying special-purpose entity concept contained in those previous standards. Viad adopted the provisions of this guidance on January 1, 2010, which did not have an impact on Viad’s financial position or results of operations.

In October 2009, the FASB issued new guidance related to revenue arrangements with multiple deliverables, which is codified in ASC Topic 605. This guidance changes the requirements for establishing separate units of accounting for multiple-deliverable revenue arrangements and requires revenue to be allocated to each deliverable based on the relative selling price. The new guidance is effective prospectively for revenue arrangements entered into in fiscal years beginning on or after June 15, 2010, with early adoption permitted provided that the guidance is retrospectively applied to the beginning of the period of adoption. Viad will adopt the provisions of this guidance on January 1, 2011. The adoption of this guidance is not expected to have a material impact on Viad’s financial position or results of operations.

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 quarterly report includes certain information, assumptions and discussions that may constitute forward-looking statements. These forward-looking statements are not historical facts, but reflect current estimates, projections, expectations, or trends concerning future growth, operating cash flows, availability of short-term borrowings, consumer demand, new business, investment policies, productivity improvements, ongoing cost reduction efforts, efficiency, competitiveness, legal expenses, tax rates and other tax matters, foreign exchange rates and the realization of restructuring cost savings. Actual results could differ materially from those discussed in the forward-looking statements. Viad’s businesses can be affected by a host of risks and uncertainties. Among other things, natural disasters, gains and losses of customers, consumer demand patterns, labor relations, purchasing decisions related to customer demand for exhibition and event services, existing and new competition, industry alliances, consolidation and growth patterns within the industries in which Viad competes, acquisitions, adverse developments in liabilities associated with discontinued operations, and any 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, a pandemic health crisis and international conditions, could affect the forward-looking statements in this quarterly report. Additional information concerning business and other risk factors that could cause actual results to materially differ from those in the forward looking statements are discussed in “Risk Factors” in the risk factors sections included in Viad’s 2009 Annual Report.

Viad’s market risk exposures relate to fluctuations in foreign exchange rates, interest rates and certain commodity prices. Foreign exchange risk is the risk that fluctuating exchange rates will adversely affect Viad’s financial condition or results of operations. Interest rate risk is the risk that changing interest rates will adversely affect the earnings of Viad. Commodity risk is the risk that changing prices will adversely affect results of operations.

Viad conducts its foreign operations primarily in Canada and the United Kingdom and to a lesser extent in certain other countries. The functional currency of Viad’s foreign subsidiaries is their local currency. Accordingly, for purposes of consolidation, Viad translates the assets and liabilities of its foreign subsidiaries into U.S. dollars at the foreign exchange rates in effect at the balance sheet date. The unrealized gains or losses resulting from the translation of these foreign denominated assets and liabilities are included as a component of accumulated other comprehensive income in Viad’s consolidated balance sheets. As a result, significant fluctuations in foreign exchange rates relative to the U.S. dollar may result in material changes to Viad’s net equity position reported in its consolidated balance sheets. Viad does not currently hedge its equity risk arising from the translation of foreign denominated assets and liabilities. Viad had cumulative unrealized foreign currency translation gains recorded in equity of $34.1 million and $31.3 million as of September 30, 2010 and December 31, 2009, respectively. During the three and nine months ended September 30, 2010, unrealized foreign currency translation gains of $6.7 million and $2.8 million were recorded in other comprehensive income, respectively.

In addition, for purposes of consolidation, the revenues, expenses, gains and losses related to Viad’s foreign operations are translated into U.S. dollars at the average foreign exchange rates for the period. As a result, Viad’s consolidated results of operations are exposed to fluctuations in foreign exchange rates as the operating results of its foreign operations, when translated, may vary from period to period, even when the functional currency amounts have not changed. Such fluctuations may adversely impact overall expected profitability and historical period to period comparisons. Viad does not currently hedge its net earnings exposure arising from the translation of its foreign operating results. As noted above, Viad primarily conducts its foreign operations in Canada and the United Kingdom. The following table summarizes the effect of foreign exchange rate variances on segment operating results from Viad’s Canadian and United Kingdom operations for the three months ended September 30:

The following table summarizes the effect of foreign exchange rate variances on segment operating results from Viad’s Canadian and United Kingdom operations for the nine months ended September 30:

As the Canadian operations generated aggregate operating income for the third quarter of 2010, Viad’s segment operating income has been favorably impacted by $532,000 from the strengthening of the Canadian dollar relative to the U.S. dollar. As the United Kingdom operations generated aggregate operating losses in the third quarter of 2010, Viad’s segment operating income has been favorably impacted by $28,000 from the weakening of the British pound relative to the U.S. dollar. As the Canadian operations generated aggregate operating income in the first nine months of 2010, Viad’s segment operating income has been favorably impacted by $1.1 million from the strengthening of the Canadian dollar relative to the U.S. dollar. As the United Kingdom operations generated aggregate operating income in the first nine months of 2010, Viad’s segment operating income has been favorably impacted by $67,000 from the strengthening of the British pound relative to the U.S. dollar.

Viad is exposed to short-term interest rate risk on certain of its debt obligations. Viad currently does not use derivative financial instruments to hedge cash flows for such obligations. As of September 30, 2010, Viad had variable rate debt outstanding of $4.9 million under the Credit Facility. Interest payments related to Viad’s variable rate debt outstanding are indexed to the prime rate or LIBOR.

Under the supervision and with the participation of management, including the Chief Executive Officer and Chief Financial Officer of Viad, the effectiveness of the design and operation of disclosure controls and procedures has been evaluated as of September 30, 2010, and, based on that evaluation, the Chief Executive Officer and Chief Financial Officer have concluded that these disclosure controls and procedures are effective as of September 30, 2010. Disclosure controls and procedures are designed to ensure that information required to be disclosed in the reports filed or submitted under the Securities Exchange Act of 1934 is recorded, processed, summarized and reported, within the time periods specified in the SEC’s rules and forms. Disclosure controls and procedures include, without limitation, controls and procedures designed to ensure that information required to be disclosed in such reports is accumulated and communicated to management, including the Chief Executive Officer and Chief Financial Officer, as appropriate, to allow for timely decisions regarding required disclosure.

There were no changes in the Company’s internal control over financial reporting during the third quarter of 2010 that have materially affected, or are reasonably likely to materially affect, internal control over financial reporting.

In addition to the other information set forth in this report, you should carefully consider the factors discussed in “Item 1A. Risk Factors” of Part 1 and “Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations” in Part II of Viad’s Annual Report on Form 10-K for the year ended December 31, 2009, which could materially affect the Company’s business, financial condition and/or future results.