Viad Corp (VVI) 2002 Q3 法說會逐字稿

Good day everyone and welcome to the Viad third quarter 2002 earnings release.

Today's conference is being recorded.

At this time I would like to turn the call over to Ms. Ellen Ingersoll the Chief Financial Officer.

Please go ahead.

Thank you.

Good morning and thank you for attending our conference call.

I'd like to remind everyone that certain statements made during this conference call which are not historical facts may constitute forward-looking statements.

Actual results may differ materially from those projected in the forward-looking statements.

Additional information concerning business and other risk factors that could cause actual results to materially driver from those in the forward-looking statements is contained under the caption forward-looking statements in the financial statements filed with the Securities and Exchange Commission.

Before we begin today, I remind you that beginning with the first quarter of 2002 financial results reflect the implementation of statements and financial accounting standards #142.

This pronouncement means goodwill is no longer amortized through expenses the comparability in our comments we'll present results without goodwill amortization in the third quarter 2001.

Also the 2001 numbers discussed throughout this conference call will be before restructuring charges and other items.

Lastly, the payments and revenues and operating income are presented on a taxable equivalent basis.

I'd like to introduce Bob Bohannon Chairman, CEO and President.

Thank you for being with us today.

We have the operating company presidents with us Kim Fracalossi, (ph) Exhibitgroup-Giltspur, Paul Dykstra, GES and Phil Milne Travelers Express (ph).

You just heard from Ellen here in Phoenix.

For the quarter earnings were 41 cents up 17.1 percent compared to last year's third quarter EPS of 35.

Revenues were up 6.2 to 426 million.

Operating income not quite 64 million, 14 percent from 56.1 in the third quarter of 2001.

Margins increased to 15 percent from 14 in the third quarter of 2001.

But included in these results are additional payment services gain of three and a half cents per share over the third quarter of last year and we'll explain that later on.

And an interest income tax receivable recorded this quarter two and a half cents per share, which was related to the federal tax refund of $16 million received in October.

And we'll talk about that a little later on too.

At quarter end, the financial strength of the company continued to improve.

Cash and corporate investments stand at 293 million.

The 293 million does not include the 16 million federal income tax refund.

Debt decreased by six million to 381 million.

Cash flow and EBITDA basis was 75.4 million for the quarter.

Up from 68 five in the third quarter of '01.

As we talked about before in these calls, we believe that by ensuring the financial strength of the company, particularly in a weak economic environment, we can thus support our operating companies to improve and grow.

The segma (ph) highlights in the quarter, Travelers showed revenue growth of 13.1 percent this quarter.

Op income growth 1.3 percent primarily due to lower interest rates.

Performance in the convention and event services segment was in line with our expectations.

Revenues were flat to last year's third quarter.

While operating income was up considerably to positive levels.

Before I discuss the operating segment, company results in more detail, I'll briefly discuss the results of the travel and recreation businesses.

In the third quarter, Brewster Transportation (ph) and Glacier Park (ph) combined had operating revenue income that were flat to the September, excuse me, third quarter '01.

I think these results are terrific given the travel environment over the last year.

Now on to the convention events segment.

This segment delivers solid performance this quarter despite of the continued weak market.

GES had the strongest performance of the two companies in the segment with significant revenue and operating income growth.

Exhibit gross revenues fell in comparison to last year, but the company did show some improvement in operating income.

Both companies are starting to reflect the impact of the restructuring program that we announced in the third quarter of 2001.

Segment had revenues of not quite 172 million, essentially flat and up slightly to last year's 171.

Operating income for the segment was 2.2 million versus a loss of 5.2 million in the prior year's third quarter.

End margins were 1.3 percent up from last year's loss.

And now I'd like turn it over to Paul Dykstra to add some comments about GES.

Paul.

Thanks Bob, good morning.

GES had a good quarter.

Both revenues and operating income were greater in comparison to the third quarter of last year.

Cash flow was strong.

Even when we consider the negative impact that we had last year on 9- 11, our last year's third quarter results, our growth this year was very strong.

In the '02 third quarter we benefited from the year's International Manufacturing Technology Show which is new to the mix of business.

INTS is one of the largest trade shows in the world and in 2000 was the largest show in North America.

I want to point out this show does not occur next year.

This is an every other year show.

And we're currently in process of securing a contract for 2004.

In the 2002 third quarter, we also benefited from some positive show rotation that included the woodworking show.

Operating income was strongly positive in the quarter reflecting the improved revenue and cost reductions from our restructuring.

It doesn't mean we stop looking for ways to improve costs.

We got a number of programs underway to improve labor utilization and costs and we're rolling out new technology and best practices to drive additional productivity.

As always, we're focused on continuous reinvention to enhance the value we provide to show management and exhibitors, both in customer service enhancement and new product offerings.

In terms of the show environment, we're asked quite often these days if the convention industry has bottomed out.

And I'm not sure that anyone definitively knows the answer to that question.

But I'll tell you we've experienced a stabilization in shows in the last couple of quarters.

By that I mean that overall shows are down in terms of the number of exhibitors but, on a positive note, trends don't seem to be getting any worse.

Generally, shows reflect the industry that they operate in.

For example, telecom and technology shows are very soft while medical, auto and home building executors are doing relatively well.

In terms of an outlook for 2003, 2003 is going to be a challenge.

We have two large shows that will not recur in 2003, further we don't expect to see any market up-tick next year in terms of number of exhibitors.

As general softness in the economy continues.

However, because of the restructuring and the significant improvements in work processes, we expect to show positive operating income growth in 2003 over 2002.

In addition, convention center expansion stayed on track to grow 7.1 percent from 2001 to 2002, an increase of slightly more than 11 million square feet.

And although the number of exhibiting companies dropped slightly last quarter, attendance was up, indicating trade shows are still a great way to check out new products and kick the tires .With that I'll pass it back to you, Bob.

Thanks.

And as you know Kim Fracalossi (ph) the former Chief Financial Officer is now heading up Exhibitgroup-Giltspur and Kim would you talk about Exhibitgroup-Giltspur, please..

Thanks Bob.

Good morning.

The environment is still challenging here for us at Exhibitgroup-Giltspur but we're not seeing a pickup in the new exhibit construction spending.

We are encouraged by our customers continuing commitment to trade shows.

Our customers understand that trade shows, conventions and corporate sponsored events are one of the most cost-effective means to talk to their own customers and to make perspective customers.

And for them to better understand the competitive land escape and to do some fundamental market research, all at one time, at in one location.

This continuing customer support for trade shows reinforces our belief in the fundamentals of the industry.

So, although we're in a protracted down turn, exacerbated by the events of September 11th and the sharply reduced business investment in technology, we do not believe that these short-term dislocations represent any long-term threat to the overall health of the trade show industry.

Exhibitgroup-Giltspur's revenue was down significantly from prior year's third quarter, but was in line with our last forecast.

Our revenue remains under pressure in an environment of corporate spending and we're not seeing any relief at the present time.

Our Fortune 1000 customers are continuing to defer new buying decisions and closely monitoring their budgets.

They're finding ways to make attrition on spending.

As an example customers are making due with exhibits by extending the life of these exhibits with refurbish many times.

While customers are attending trade shows, they're reducing the number of people they send, using exhibit space more efficiently, and substituting standard furnishings instead of the higher end options.

Now although our revenues were lower Exhibitgroup-Giltspur has realized an improvement in growth margin.

We have lowered our fixed overhead base and restructuring efforts over the past year and we have improved our cash flow.

We will continue to drive down costs and improve efficiency through several ongoing initiatives.

But the full benefits of leveraging this lower cost structure will not be realized until the revenue stabilizes and some growth resumes.

Unfortunately, the environment of continuing top line erosion masks can many of the improvements we have and does not allow us to leverage that cost structure to its full advantage.

The good news is that Exhibitgroup-Giltspur is financially and structurally strong, fully able to weather the economic storm.

As the down turn continues, Exhibitgroup-Giltspur will continue to gain market share when our weaker competitors drop out of the market.

Also during this time, our financial strength will continue to allow us to selectively spend in strategic areas strengthen our leadership position enhance our customer and shareholder proposition.

None of our competitors have the finances to support that Viad provides and cannot make the same investments that we are currently making.

To sum it up, we do not believe this down turn represents a permanent change in the Exhibit building industry.

We believe it's a cyclical business and, as with all economic cycles, we expect rebound in time.

We mentioned before we are continuing to fix our fixed cost structure and are selectively investing in areas that provide competitive advantage and drive shareholder value.

With this action and what we've done in the past, we expect 2003 to be better than 2002 with respect to our operating income.

When our industry rebounds we will have positioned Exhibitgroup-Giltspur to be in the lead.

Now I'll turn it back to you Bob.

Thanks, Kim.

On payment services, Travelers showed 13.1 percent revenue growth this quarter with operating income growth of 1.3 percent.

Revenue growth is driven by high investable balances from Official Check and very strong growth in MoneyGram.

Also to note the third quarter revenues include gains associated with the sale of municipal securities.

These gains amounted to about three and a half cents a share, earnings per share.

Without these additional gains, the revenue growth would have been about 10 to 11 percent.

Viad's operating income over the last couple of questioners made us change our strategy and tax position and as result and as a part of continuing tax planning, Travelers Express may continue to sell some municipals next year.

So let me now turn the call over to you, Phil to give more detail on travelers.

Thanks, Bob and good morning everyone.

Both revenues and operating income were negatively affected this quarter by lower interest rates that continued to decline on us in the third quarter.

Liquid or short-term investment rates were down about 200 basis points in this year's third quarter compared to the same quarter last year.

Core or long-term portfolio rates were down 100 basis points compared to last year.

Negative net investment revenue effective rates of this quarter over third quarter last year was in excess of $9 million.

The effective lower rates was also intensified by significant increase in cash balances.

In the quarter there was a refinance wave that produced a high level of Official Check coming into the portfolio.

This money was invested for short-term intervals because refinance money moved in and out quickly.

Our spread comes from money invested over the longer term.

The result was the balance grew quickly but the more liquid portion dropped virtually nothing to the bottom line due to the short tenure of these funds.

Although interest rates spreads and the mortgage refinancing impacted our third quarter, our core operating businesses continued to perform very have very well.

MoneyGram continues to be a growth engine for us overall transaction volume was up 30 percent this quarter over third quarter of last year.

Contributing to this excellent transaction growth were strong performances by international, express payment product and our domestic to domestic corridors.

International transactions grew by 72 percent and domestics, which includes express payment grew by 48 percent.

Growth to Mexico quarter was down slightly over last year but our fixed price product, Cambiotus (ph) continued to grow in the high teens, well over half of our Mexico volume comes from our Cambiotus (ph) product.

Asia based growth for MoneyGram also continues to be a very positive story led by internationally grew by 25 year over year.

Some highlights would include the addition of the Canadian Post Office to our distribution network.

This signing will make the Canada post our largest MoneyGram agent in Canada.

The roll off already has begun with an 80 store pilot then we'll expand to over one thousand locations.

What is exciting is studies have shown there's five to six million immigrants in Canada we expect this opportunity to be big.

MoneyGrams is now offered in over 28 hundred U.S.

WalMart locations and the launch of this product continues to exceed our expectations.

We continue to work on signage in the stores and for the first time we appeared in the WalMart circular in October.

We signed new agents in key countries including Banco Del-[inaudible] in Ecuador with 212 locations and Assin Bank (ph) in Malaysia with 86 locations.

With the momentum from key signings this year such as WalMart and Super Value, we're also having a record year in signing new billers for express payment, adding clients such as Americredit Mortgage (ph) and C West Auto Finance (ph).

On the technology front our Star (ph) MoneyGram pilot will kick off in December with a full blown consumer testing beginning in the first quarter of 2003.

Star (ph) MoneyGram is our ATM to ATM money transfer with Concorde ESS.

Once it's fully rolled out it will give us access to 200,000 ATMs for person to person money transfers.

Moving on to Official Check this product continues to be a driver of revenue growth at Travelers Express.

By overall investment balances grew by slightly more than 20 percent, Official Check investment balances grew over 30 percent in the third quarter.

As was mentioned earlier, a portion of this growth is coming from the mortgage refinancing boom, we're also on track to have another outstanding year on new sales and our installation backlog stands at $176 million.

Our new Official Check product Prime Link (ph) is now fully through beta testing is ready to roll out.

To refresh everyone's memories it offers secure printing of Official Check that at remote locations via the Internet.

We're in the process of hiring and training separate sales force in this product and we intend to target non-bank financial institutions as well as banks.

Money orders continue to be a challenge for us as volume was down slightly as compared to the third quarter of last year.

We continue to selectively prune agents to preserve the credit quality of our portfolio and as we talked about increase the standards to become an agent.

Nonetheless, this is a great business with high margins and strong cash flow and with an improving credit environment, we would expect to increase the growth rates of new agents.

To summarize, on performance and prospects, Travelers Express is performing very well in a tough interest rate environment.

We continue to add new Official Check customers and have a solid backlog in new sales pipeline.

We're very excited about Prime Link and believe it will be a significant producer of new business in 2003.

Although interest rat spreads will continue to be a challenge in the fourth quarter, the portfolio is performing as it was designed.

That's to minimize the earnings impact of large swings in interest rates.

As rates stabilize we would expect to realize the benefits associated with a more stable market.

For the fourth quarter, we would expect to see continuing of interest rate dynamics that we experienced in the third quarter.

In addition, we would expect a refinancing boom to continue through the fourth quarter and fuel our short-term cash portfolio with non-core funds These two events will continue to put pressure on net investment spreads, by pushing operating income down in the fourth quarter by mid to high single digits.

If rates in the fourth quarter of 2002 were static with rates in the fourth quarter of 2001, we would have added $9 million to our income forecast.

However, we expect quarter four to end this trend as we hit the trough on net investment spread compression.

Before I address 2003, I'd like to point out we're seeing sequential growth fourth quarter over third in 2002.

In 2003, we expect to benefit from a more stable and normalized interest rate environment.

Better comparables on interest rates.

Continued strong growth in MoneyGram and Official Check, improving credit environment in the money order business, and the launch of our Prime Link product.

We expect this to translate into low double digit operating income for the first quarter of 2003 and low double digit revenue growth.

Through all of this, we're forecasting our tenth consecutive year of record earnings in 2002, a strong 2003, and a continue focus on profitable growth that meets our margin requirements and really adds to shareholder value.

Bob, I'll turn it back over to you.

Thanks I'll have Ellen Ingersoll to (inaudible).

Cash flow EBITDA on a gross up basis was 75.4 million versus 68.5 million in 2001 and that's up 10.2 percent.

Free cash flow defined as cash from operations, excluding the change in Travelers payment service assets and obligations, less capital expenditures in dividends was 53.3 million for the quarter.

And this is net of investments settled after quarter end, versus 52.6 million last year.

Again, payment services total average balance were up 21 percent for the quarter nearly 24 percent year-to-date.

The Official Check balances were up 31 percent for the quarter and about 35 percent year-to-date.

As of September 30, 2002 we had total cash in corporate investments, net of investments settled after quarter end of 293 million.

This is an increase of 22 million from the June 30, 2002 balance of 271 million.

Our total debt at the end of the quarter was 381 million, bringing our debt to capital to 34.2 percent.

We paid down about six million in the quarter from 387 million at the end of June.

Our net interest expense for the quarter included interest income of 3.5 million that Bob had mentioned earlier, related to a federal tax refund of 16 million, which was received in October of 2002.

Without factoring in that tax interest income, net interest expense for the quarter decreased 28 percent when compared to the third quarter of 2001.

And that was primarily due to average, lower average debt balances and slightly lower interest rates.

Depreciation and amortization for the quarter was 13 million, down 3.4 percent on a comparable basis with last year's 13.4 million.

Our capital expenditures for the quarter were 10.2 million, which is down from 11.5 million in the prior year's third quarter.

For the full year, we still expect capital expenditures to be slightly less than last year's 50 million.

The income tax rate for the third quarter of 2002 was 28.5 percent versus 18.6 percent for 2001.

And the 2002 nine month rate was 28.2 compared to 24.1 for 2001.

Our average outstanding and potentially diluted shares for the quarter were 86,616,000, compared to 86,280,000 in the third quarter of 2001.

And in the third quarter, we bought back 1.2 million treasury shares for approximately 26.3 million.

And now I'll turn it back to Bob.

OK.

Before wrapping up on the comments and opening the call to questions, let me give you some guidance for the fourth quarter.

We anticipate earnings per share to be in the range of 24 to 27 cents.

In comparison to the 2001 fourth quarter, we expect payment services segment revenue growth in the high single to low double digits.

Payment services operating income to decline in the mid to high single digits, as lower interest rates continue to take their toll.

However, as Phil talked about, in the first quarter we believe that operating income growth will be back in the low double digit range.

That low double digit growth in the first quarter is expected because we'll have a more favorable comparable period, first quarter 2003 over first quarter 2002, the strong 2002 growth MoneyGram and Official Checks and, three, we have seen a little back-up in the interest rates as they have started to stabilize a bit.

Convention and event services segment revenue to decline 15 to 20 percent largely due to the lack of new exhibit construction at Exhibitgroup-Giltspur.

Convention and event services operating income will be flat to last year.

For the full year then that would put us at EPS in the range of $1.38 to $1.41.

That is down slightly I think by prior guidance.

Payment services revenue growth for the full year high single low double digits and consistent with prior guidance, convention and event services segment for the full year revenue down 10 to 15 percent.

This year has been very challenging for our companies.

Travelers because of the rates, Exhibitgroup and GES because of the overall economic conditions.

But I think as Paul and Kim and Phil talked about, they absolutely, and we do, too, believe in the viability and strength of the business models.

Overall, we think we've had good performance in a weak economic environment and I think that's evidence of that viability.

Travelers continues to drive the revenue growth.

We think the rates are a temporary thing.

MoneyGram and Official Checks continue to surpass the expectations.

And so while I'm very frustrated, I know Phil and his people are very frustrated by the persistence of these low rates on the float balances, it is a temporary situation.

And this is a business where increasing interest rates should bode well for it.

The convention event businesses are growing more efficient and profitable, with cash flow growing steadily every quarter.

And again all of this is being accomplished during one of the most difficult economic environments I know that I've experienced and I think any of us have experienced in a very long time.

So with that, Kent, we're ready now to take questions.

Thank you, Mr. Bohannon.

The question and answer session will be conducted electronically.

If you would like to ask a question, please do so by pressing the star key followed by the digit one on your touch-tone telephone.

If you're using a speaker phone, make sure you mute function is turned off to allow your signal to reach our equipment.

We'll proceed in the order you signal us and we'll take as many questions as time permits.

Press star 1 on your touch-tone telephone to ask a question.

And first we'll go with Adam Waldo (ph) from Lehman Brothers.

Good morning.

A couple of questions, if I may organization the payment services side either for Phil or for Ellen, as is appropriate.

I was a little bit surprised in the third quarter both by the impact of interest rates and more importantly with respect to your fourth quarter guidance.

And I wonder, given the latter (ph) swaps program you maintain if you could give us a little more color on what happened.

Was it the volume title in the yield curve that caught you by surprise?

Phil?

Hi, Adam, I think first of all, if you looked at the five-year treasury was down about 114 basis points third quarter this year from third quarter last year.

And short-term rates came down dramatically as well.

And the whole yield curve flattened out.

There was a tremendous amount of volatility.

And the fact then that with rates being solo I think every person in the country refinanced their mortgage you had the flood of cash coming through.

I think those would be the three things that hit us on the interest rate side.

Phil, can you maybe give us a directional quantification of the impact of each factor, or is that a little hard to parse apart.

I think it would be a little hard to parse apart.

But if you look at what happened during the third quarter it is interest rates.

And it's kind of interesting to look at.

If we had had last year's rates on this year's volume it would be another $9 million.

You can kind of get an idea of the impact that it's had.

Are you assuming similar levels of volatility then in the yield curve during the fourth quarter in your new guidance to be conservative?

Yeah, we are.

We're also seeing that refinance wave continue through October as well.

And we'll probably see that continue through towards the end of the year.

And so I think that's really what we're looking at when we look at the fourth quarter.

OK.

And over on the convention and events side, Paul and Kim, strong quarter surprising in light of what you were expecting in your analyst meeting back in May.

I wonder if you can give us a sense as we look to the fourth quarter, are you seeing some trade show cancellations or other factors that a little bit weaker than what you would have expected a few months ago?

Paul, do you want to take the GES part and we'll follow up with Kim on the Exhibitgroup.

Repeat your question.

The third quarter I think was surprisingly strong to those of us who obviously were at your analyst meeting in May.

And the fourth quarter guidance implicitly I think is a little bit softer than we would have expected obviously in this kind of environment forecasting is difficult.

I wonder, have you seen some trade show cancellations or other factors that have occurred in the last call at four or five months that maybe cause a slightly softer out look in the fourth quarter.

This is Bob.

Let me add a comment and then I'll ask Paul and Kim to comment.

I think the difference you're seeing in the fourth quarter is not so much softness.

In GES, for example, you get a few shows, reasonable shows in October, but beyond that, there's not a lot of action on the show side in November and December.

And so the driver in convention historically in the fourth quarter has been Exhibitgroup-Giltspur as they designed and built the exhibits for the first and second quarter shows.

So we are not seeing a lot of new construction that historically we would have done in the fourth quarter.

And that's why we are suggesting that the revenues will probably be down 10, 15 percent operating income flat.

So Paul would you pick up from there and then Kim..

Sure.

I don't think we're seeing any increase of cancellations of shows.

In fact I'm not aware of any.

We're seeing continued stability, I think, and that's a good sign, where things aren't getting any worse.

And certainly shows reflect the industries that they're in.

So far what we've seen in the fourth quarter seems to be very consistent with what we saw, I think, in the third quarter and second quarter, Adam.

Kim Fracalossi (ph): Adam, what we're seeing is that there's a cutback in budget.

So the companies aren't necessarily canceling the fact that they're going or not going to a trade show.

For most of the ones we're talking to, but let's say they had a budget of 300,000 and we're pretty set to go, they may come back say I need to knock 25 to 50,000 out of that, how can we rework it.

So that's the primary thing, we're seeing a cutback on budgets as we speak.

But we also actually had a couple of big shows have seen a couple premiere clients pull out.

Now they haven't been our customers but we've heard some of them are pulling out.

That's why we're a bit cautious here in the fourth.

Are you still seeing the make shift towards re-furbs that's been going on.

That's ongoing we haven't seen a significant shift but the shift down at the beginning of the year that we saw and talked about still exists.

Thank you all very much.

Thank you.

Next we have Michael Millman (ph) from Salomon Smith Barney.

Thank you.

Also a few questions.

On financial services as well, can you give us some idea of the revenue and payment services, how much is fees and how much is interest?

Also, we had a thought and evidently not a correct thought, that when rates changed you were able to renegotiate contracts with all of your Asian customers so your average revenue would remain kind of the same, which doesn't seem to be an accurate view, but maybe there's something to that long-term.

Could you also tell us in fact what is the current flow?

You gave some numbers on changes but not on the actual numbers.

In terms of the individual operations, maybe you can talk about those on an apples to apples basis.

And you've given some idea of their growth in revenue but maybe we can talk about what the bottom line looked like a little bit.

Also, in MoneyGram, I think you indicated that transactions were up 30 percent.

Maybe you can talk about how that - what that meant for revenues.

And also I think when you gave the pieces, I believe domestic and I think international were up far more than that.

So I'm not sure what pieces are missing that get you to 30 percent.

And in the convention, could you talk about the impact of those two conventions that are not going to be showing next year and what quarters they were?

I guess one - what's this third quarter one?

On the convention piece, we did have the international machine technology show that occurred in the third quarter.

I'll ask Paul to reference the other.

And so we've got two big ones rotating out.

We do have a big one coming in respect to plastics.

So Paul would you pick up on that.

The other one is Con Expo Con Ag which is an every three year show in the first quarter.

And plastics will rotate in.

In the second quarter.

Can you give us some idea, quantify what they mean?

In respect to the two, the two shows rotating out about I think 30 million revenue, correct, 28 to 30 million.

Correct.

And the show rotation coming in, if you add it all up, would probably be with respect to 12 to 15 million dollars.

Would that be a good number, Paul?

Yes, correct..

Phil, would you pick up on Mike's other questions on fees and interest rate changes and renegotiating contracts and the revenue, the transaction growth, domestic, international and what that [inaudible] Is on that.

Maybe to start with MoneyGram and work our way back, revenue grew pretty close to the transaction rate.

Fee per transactions held up extremely well.

We haven't seen any degradation in that.

I would say the only difference it would be the mix between express payment and the regular transaction, express payment is at a lower price point and growing very quickly.

So revenue was fairly close to the volume growth.

I think the issue in domestic and express payment growing at 48 percent, international 72, is just a mix issue.

International and that part are not the biggest chunk of the business yet.

So those are growing at a faster clip than some of the other segments, which brings - there's a smaller part.

So that explains that differential.

Besides domestic and international what is there?

You have Latin America.

You have all the other corridors that we do.

And of course Mexico, which was slightly down.

When you say international, you're just talking about U.S. domestic to Europe or are you talking about international to international.

International to international.

In terms of re-pricing on OCs, I think as the spreads have changed on new business ,we've re-priced that to maintain the margins that we've always had.

And we are not going out and re-pricing existing business except as those contracts come up.

But I think the bigger issue has been on rates is the amount of cash that has flowed through the system with the re-finances and investing that in the short term portfolio which is at very low rates.

You have a flood of cash coming in, and we know that's short term, just re-financing, not really core - we're investing that in overnight rates.

Could you quantify that for us?

That would be more than half of the issue on rates - would be that volume coming through with low rates. (inaudible)

Fees versus what the float is - we've never historically disclosed that number, what that mix is.

Isn't this a good time, since rates have become so important?

At this point, we'd rather not disclose that and the portfolio is a significant portion of our revenue and operating income.

Could you give us an idea of what the average float is, or the average float in the quarter?

Kim Fracalossi (ph): Total payment services average float is about 6.2 billion compared to 5.1 in the '01 Q3.

What about the profitability of the three segments?

He's talking MoneyGram, Official Check and he's talking money orders..

We've never historically given out the profitability of those, Mike.

Maybe if you could ask it in a different way I'll try to get where you're going with it.

I think we could say that the Official Check fees on the profitability side historically, I mean that has been in excess of 15 percent growth, talking profitability now.

MoneyGram we're seeing some very strong profitability growth.

And money orders has essentially been flat.

So you might can be add a little better description on that.

That's exactly it we're seeing very strong growth in MoneyGram and that has really been a great story for us.

Money orders, they are flat as we have really pruned the agent base, we've been very careful about who we're bringing on.

Can you give us some idea of, if not the actual margins, the direction of margins for those businesses?

Yes, MoneyGram year-over-year '02 to '01 is going to be up significantly.

The margin would be up significantly?

Yes.

On the Official Check fees, hard to make apples to apples because of the interest rates.

Money orders will be down slightly.

Again that's interest rate driven.

Phil, do you want to add to that?

No, I think we're seeing very strong margin growth in MoneyGram as we're getting, we're doing a great job on the cost side and leveraging the back office as we build the business.

Money orders slightly down just because of the volume and of course interest rates.

And Official Checks is a little hard to pin down.

The bulk of the issue on Official Checks is the interest rate, it's the cash coming through on refinances at low rates.

We continue to do a good job at the back office bringing costs out on the operating side.

So that would probably be the way I would characterize it, Mike.

Thank you very much.

And next with Midwest Research we have Cartek Metta (ph).

Tony Minochio (ph) actually with Midwest.

A couple of questions here if you can, please.

First of all, on the convention event services business, can you help me understand how much of a fixed cost expense structure there is in that business?

Does it vary from quarter to quarter?

Paul, Kim?

Kim Fracalossi (ph): I can probably start.

On the entire segment the fixed cost structure has improved for both of us with the restructure that went on.

And given the reduced overhead as a percent of reduced revenue, the overhead as a percent of revenue has actually, for us we've improved it a little more than half of a percentage point.

But the breakout is probably mid 30s of a fixed cost structure versus low 60s of variable.

And that's something we've been driving to improve the variability of the business and lower the cost structure.

Is that overall CES or is that for the Exhibitgroup piece.

Kim Fracalossi (ph): I think that's the blended rate on all.

And Paul can talk to his a little bit, if his leans a little bit more on variable than mine.

I would say ours is pretty consistent with that.

On payment services, maybe I'm not understanding this completely here on the margin.

Shortfall here in the quarter.

Can you give a little clarification on how much that was impacted because of the interest rate reinvestments being lower and how much maybe just through the mix and is WalMart a reason for that mix negativity?

A lot of people that do business with WalMart usually find profits not to be as great as other customers.

Tony, it has nothing to do with it.

WalMart has nothing to do with that.

We did have some margin compression due to the product mix, MoneyGram is very strong.

Official Check.

Their margins are less than money order.

And they continue that growth.

You'll see some margin compression because of the product mix.

But the big issue was on the interest rates.

We keep 5-6, 700 million depending on the time or the day of the month, that type thing.

We have to keep in the overnight market because of liquidity purposes.

Just from quarter to quarter three 2001 to 2002 you had well over 200 basis points differential just in the overnight market.

And beyond that, God I'm just looking back from a month ago,I know it's well over 100 points.

But if you look at five-year treasuries, two-year treasuries, ten-year, whatever you look at rates are just down significantly this quarter compared to quarter 3, 2001.

Phil would you pick up on that and add a little more color.

Sure.

Just to comment on WalMart.

There's no margin compression due to WalMart.

And we have what we think is a favorable deal.

I think they would also agree they got a favorable deal and that roll out continues to go extremely well.

We're very pleased with the growth that we're getting, and are confident about the future of that what it's going to mean to us as a business.

That continues to be a very exciting story for us.

Really if you look at the margin in the third quarter, as Bob said, some of this is just natural from a mix standpoint because money orders is the highest margin product and that is flat.

And the fastest growing product is MoneyGram.

And although we're increasing margins it's nowhere near what money orders is.

So you're going to get some of that naturally as a business.

And the rest of it is interest rates, as Bob said.

OK.

But the bulk it's fair to say it's interest rates.

A little bit more on interest rates.

The investment balance is 6.2 billion currently.

How much, is there a general amount of that that comes due each quarter that needs to be reinvested that we should be aware of?

I know that obviously the new funds that flow in are going to be impacted with lower rates.

But how much of the existing balance might need to be reinvested from quarter to quarter?

Tony.

Obviously we get new money in as new customers come in.

And we'll go invest that.

And you do get some pay downs as bonds mature.

I wouldn't say a significant number.

Maybe 100 million a month or so.

Per month..

I think the way you could look at it Tony would be the average duration, Phil, is slightly over, under four years, correct?

Correct.

So while you can't take the 25 percent each year as the rule, because a lot of it has come on over the last two or three years, that would be an indicator of over time what you would be looking at, if you think about it in terms of the average duration.

But I think the big issue here for Travelers has been this refinance market, because we are at levels, refinance activity that have not been seen in this country in quite some time, if ever.

And that's what's driving a lot of this turnover, if you will.

Thank you.

We'll proceed with Dris Upitus (ph) at CSFB.

Given the lower interest rates you're talking about driving the strong refinancing as you look out to interest rates stabilizing are you concerned at all that you might face a challenge in the volumes in the size of your investable balance if a year from now you're not seeing the same level of activity?

No, we're not really seeing an issue of that Dris, because we continue to have strong new sales in backlog.

The way we look at it, this money is just going to flow through.

We don't look at it as core and it's going to flow through the system probably through the fourth quarter and we're back to in the first quarter really just putting the new business on and getting the natural growth out of the business.

So it's not something that concerns us.

And with Prime Link coming on board and the backlog that we have on new business and the pipeline, which is also very strong, no, that's not a concern for us.

Is it not a concern in part I think you said that that tends to be in the system for such a short time that it's - that you invest it only at a shorter term interest rate?

Because seems one of the factors that drove interest rate challenge this quarter was high volumes.

That's exactly right, Dris (ph).

And we saw that picking up in late August and rolling through September.

And it's still there in October.

But that will not probably flow through into the first quarter of next year.

So you're right, there's really nothing to do with it but to invest it in short-term rates on an overnight basis which has caused the issue for us.

It's not really the core flow that's been the problem.

It's been the flow through on the refinances.

OK.

It sounds to me like having none of the refinancing activity though would be worse than having some of it at a low interest rate, though?

Right?

I'm sorry, would you...

If a year from now refinancing activity is much lower and you have, say it's down 50 or down, given the levels of refinancing right now you can envision that being down 70 or 80 percent year-over-year I would think.

I would think even if it's a low interest rate and it's on a short-term, that you're better off having that business than not at all?

The way we look at it is from housing starts and from the sale of homes and from normalized refinancing activities, that's what we consider core.

And that's very good business for us and we will resume with those levels, we think, in the first quarter.

So it's really the issue once again has really been this huge wave going through in the third quarter and going into the fourth quarter.

The refinance index was up like 150 percent year-over-year.

And you really just can't go out and place those funds long-term because you know they're not going to be there.

OK.

And you mentioned the first quarter and I think in the press release you said that you envisioned returning to a double digit growth rate on the operating income side of payment in the first quarter.

Given that the first quarter of 2002 you had very strong year-over-year margin improvement, and then this third quarter we've seen year-over-year decline of about 250 basis points, isn't that going to be a challenge as you still have to anniversary this weakness in that the first quarter just seems surprising that you would be able to continue this strength..

What I think we're seeing we're flushing this issue through in the third and fourth quarter and the refinances will flush through.

We have better comparables going into the fourth quarter.

We'll have a more better pattern on Official Check we have a strong momentum on MoneyGram heading the first of the year.

You can see that in those numbers.

And so yeah, - no, we're confident in that guidance.

OK.

And then just the last question.

To what extent, because I know that MoneyGram, which is obviously the fastest growing piece here, is the lowest margin of the three pieces of payment.

To what extent is there a mixed challenge as you look at money orders especially, which is the highest margin down slightly year-over-year?

I would think that's contributing somewhat to the margin compression.

I know interest rates is a factor.

But I would think this would be a pretty significant issue as well.

If you look margin compression in the first quarter the bulk of it are interest rates.

We're always ^ fighting the issue of the mix because MoneyGram is at a lower margin.

It's increasing, though, Dris (ph), as we get more and more leverage out of the back office and continue to grow the business.

And the operations folks are doing a great job of driving down the cost per transaction.

So, yeah, you will get some of that, just as a normal part of our business.

But the good news is we are making great progress on bringing overall MoneyGram margins up as we grow the business.

OK.

Can you give a sense for - you've talked about those margins being up significantly.

Is that five percentage points?

Ten?

Two?

We've never really gotten specifically down into the margins for the business.

But we are making really strong progress on it and feel very good about it.

And I think from a cost standpoint, we're doing a great job in the back office of continuing to get good leverage out of all the products.

OK.

Great.

With Gardener Russo and Gardener (ph), we have T. Charlie Quinn (ph).

Congratulations on a very good quarter, especially given the various negative outside influences.

I just have several - a couple questions here.

Phil I have to ask, could you quantify because you said you phrased it this way, core versus non-core float.

And second question would be also to Phil, could you talk about MoneyGram in terms of the U.S. to Mexico channel.

Seems as if Western Union had pretty good numbers.

I'm wondering what the competitive dynamics are in that market, if things have changed considerably.

The last question would be, Bob, could you update us on the spin-off of Travelers Express.

Phil, take the first part first.

Core versus non-core, probably in the third quarter we would have said 40 percent of it was probably from the refinancing boom.

Of the growth.

I'll clarify that.

U.S. to Mexico, we continue to see our fixed price product to Cambio Plus (ph).

It's growing in the high teens and the traditional product is declining.

We are still bullish about Mexico.

We think it's a great opportunity and we're going to continue to be excited about our opportunities down there.

We've got good distribution.

We think with Cambio Plus (ph) We have the right product set.

Overall we're still up in Mexico, and we really like the opportunity down there.

So we're not too concerned about it.

I think quarter over quarter sometimes you're going to be up a little bit and you'll be down a little bit.

But we see good prospects for us down there.

Phil, describe the traditional product versus what you're pushing.

The traditional product was much of a - it's a product that was based on a fee depending on the size of the transaction.

And as we rolled out, WalMart, (iaudible) and some other distribution we went with the Cambio Plus (ph) product which fixed the price out and fixed the FX.

That's been a popular option.

And we've seen tremendous growth in that product.

And look forward to seeing that continued growth.

OK.

Thank you.

In respect to the spin side, and if any of you on the call are not current, we've announced in the second quarter earnings call that we had taken an after tax charge related to legal fees, et cetera, in respect to the potential parcel spin of Travelers Express, that we had pulled that back, given the market, equity market conditions, the credit market conditions and so forth.

And that we would certainly rethink that once things seem to stabilize.

I know that you can go to 100 different people and I think get 100 different answers in respect to whether or not things have stabilized.

We thankfully have not seen, in the last month or two, any big credit pickups in respect to some large companies defaulting, that type of thing.

We think that is good news.

On the equity markets, all of you are certainly much more versed on that than I am.

You can read some that say that we're on the way back, perhaps.

You can read others that say no, it's still too high.

Don't know.

And so I think there's still a lot of uncertainty, particularly in the equity markets and certainly still some in on the credit market side.

The best advice we have received is that by the experts, if you will, is that you certainly would not want to do something given the level of uncertainty.

You would need some stability there.

So I don't know who is right and I don't know who is wrong.

What we, though, are continuing to do.

And I can tell you about a lot of the things we wish we could go back and do all over again because we screwed them up, but I think one of the better decisions we made was about 18 months ago and Kim Fracalossi (ph) was here at that time.

We sat down and said gee a lot of things going on and we don't understand it.

But until we figure it out, we are just going to start building cash.

And as a result of that we, over the last 18 months, we've undertaken a big effort, in respect to cash flow.

And as we had talked about earlier, 293 million at the end of the quarter, debt of 381.

If you take that, project it forward, and nothing else happened, I suspect that by end of the second quarter of 2003 we would probably be pretty close to net debt having - excuse me.

Zero debt on a net basis if in fact we did nothing with the money.

But my point of all that is all that does is whether the market is uncertain or not, I know reasonable people can disagree, but as we continue to build the cash, it gives us I think even more strategic options toward whether we partial spend, you name it.

There's a whole host of things.

So until we can sort it all out, figure it all out, we'll continue to rely upon the best advice we can get on these things and hopefully continue to build cash.

Thanks for your thoughts.

Thank you

With Kidren Capital (ph) we have Chuck Webster (ph).

A few questions for you.

I never thought I'd ask this but what's the outlook for travel for Q4 and '03 periods?

On the travel side, Glacier Park, essentially they shut down at the end of the September because in Glacier Park you have the thing they call going to the Sun Road.

And because of the snow levels, the whole park gets shut down.

So the fourth quarter is really no revenue to speak of.

The same is true of in Brewster, the ice field shuts down very early October.

But let me ask Ellen to give the fourth quarter outlook for travel on the actual numbers.

Exactly what you said, Bob.

They are basically in a low revenue mode.

Quarter over quarter they're looking about flat.

So there isn't going to be a huge decline in the fourth quarter.

Compared to fourth quarter of last year.

So what are you looking at for '03.

On the travel side, again I referenced my comments both to Brewster and Glacier did a great job given the environment because the quarter they were flat and the third quarter is their strongest quarter.

They've done an awful lot by taking costs out that type of thing.

We believe that on the Glacier piece that we'll continue to get a bit more drive traffic in '03, a continuous of what we saw in 2002.

That's making a lot of assumptions that a lot of foreign traffic will not be coming in.

We'll pick up more U.S. traffic.

On Brewster, we did see this year where we got a bit more of the Canadian traffic into Brewster.

Some more U.S. traffic and less Asian traffic.

We don't anticipate that for '03 at this point that things are going to improve significantly at all.

We think that probably, though, worse case, that these two companies will be flat to '02.

We've not finalized the plans yet, but they could be up slightly up a bit.

But we're not basing any improvement, though, on any big pickup in travel.

OK.

Thanks.

Following your cash comment on the spin, what's your orientation towards share repurchase and with the acquisition market as you see it?

In the third quarter we did repurchase 1.2 million shares.

We are likely to do a bit more share repurchasing, because we had announced that I think at the end of the second we do somewhere probably between a million, two million shares.

We're likely to do a bit more.

On the acquisition piece, there is nothing big as this on the table.

We've been working at Travelers, but we're kind of at a sales pace on that right now.

On the Exhibitgroup-Giltspur piece, we've had a lot of offers, but things we won't touch because we're convinced that given the makeup of that industry, prices still have a ways to come down before we would be interested.

So we keep looking at things and probing and that type of thing, but there's nothing on the horizon.

Thanks.

Last question, I want to make sure I understand that Travelers or the payment service dynamic, you mentioned Phil, $9 million was the interest rate hit in Q3 or add back factor, if you will.

How do I compare that to the per share number you talked about, Bob?

In other words, what's the net tax rate on that municipal gain that you reported?

What's the apples to apples comparison in EBIT.

If we took the 9 million that Phil talked about?

Compare that to the number you cited of, was it three and a half cents?

Yes.

What's that equate to on a tax equivalent EBIT base

The gains was about 5 million bucks more this quarter.

So we had 5 million more in gains this quarter.

We had 9 million less in the interest income revenue.

And what are you anticipating, I think I Phil said 9 million might be the good number for Q4, same magnitude?

We've not in the forecast that we gave we did not build in any municipal bond sales.

We may, depends on the market - we know because of alternative tax positions, et cetera, unless there was a huge overnight pickup tomorrow on the convention side, that type of thing, we know over the next year and '03 that we're going to have to, if things continue as they are going right now, sell to more municipals.

Then it gets down to the market timing, that type of thing.

And the numbers that the mid single to high single digit number that Phil gave you, we have not factored any appreciable sale of the municipal securities.

Phil is that correct?

That's correct.

Next we'll here from Eunice Perry (ph) with Glenview Capital (ph).

What is the duration of your investment portfolio right now?

Running about four years.

And how does that - do you have the number for either last quarter or the last year's same quarter?

As far as duration?

Yes.

I think it would be about the same; is that correct?

There's not been a big change in duration, correct?

I think I would characterize it is down slightly from last year.

And the four years is where we try to target to be.

The second question is I'm just trying to reconcile sort of what we talked, the guidance after the second quarter versus where we are now.

And the variance seems to be one because of lower interest rates and, second, because, and I may be wrong here, because of lower operating income from convention and event services business.

Because your revenue from that business is still within your range of down 10 to 15.

But it seems like you're going to earn lower operating income.

Is that right?

Are you talking third or fourth quarter?

I'm talking full year guidance you gave at the end of second quarter versus where we are now.

I think that is still staying pretty consistent with - I believe what we gave at the end of the second quarter was that on the - help me out -

The revenue guidance is the same.

The op income guidance we dropped a little bit.

That was your question.

That's all I wanted to clarify.

And that would be.

GES is actually better than we thought it would be and Exhibitgroup is worse than it would be because of the new construction builds have just not come back.

The third question you obviously assumed some level of interest rates in giving guidance.

Would you be willing to disclose that going forward, because that would help us a lot?

I think we can certainly give some general things.

In respect to what we talk about on travel is, for example, when we gave the second quarter guidance, we certainly did not anticipate rates or the refinance wave we have gotten hit with to be as severe.

We knew it was going to hurt but we did not anticipate it would be as severe.

And, for example, because we've had to ease up on the after tax municipals over the last few years, the options, because we cannot do equities nor would we want to do equities, the options are then in corporate and mortgage backed securities.

So the big player on the mortgage backed security side and essentially what we have had a huge speed up on, if you're sitting, for example, with a mortgage back of six and a half percent, all of a sudden you get much, much faster prepayment on that than anyone anticipated.

As you know they have tables on the mortgage backs to predict prepaid speeds.

And you end up with the money and all of a sudden you're coming off with a six and a half percent coupon.

You're out in the marketplace with 100 basis points or greater or less than what you're getting paid off on.

So that's taken a huge toll, and the prepaid side itself was at much faster levels than we thought, even though with had upped those significantly.

The same thing on the rate side.

I'm not looking back to the end of the quarter, but, gosh, if you look at, for example, five-year treasuries, September 23rd they were down to 276.

I'm not even certain that was their low point.

260 was the low point.

So we didn't anticipate perhaps as well as we should have what the bottoms on those things would be.

Are you just assuming for the fourth quarter flat quarter over quarter treasuries?

What Phil - you've got all the direct build assumptions.

My assumption is what you guys are assuming is that things will not get worse on the interest side, interest rates will not go lower.

Yes we are assuming it's pretty much where it is and towards the end of the third quarter there.

Does your guidance include in the fourth quarter any buy back?

No.

You have an authorization of two million, you've done 1.2?

We have an authorization in - but we can certainly do more than two million.

We have more authorization in hand.

Thank you very much

Next we have a follow-up with Michael Millman (ph) from Salomon Smith Barney.

Thank you.

I guess a lot of us have asked this in different ways.

But maybe I'll try again.

And that is, the refi issue, can we say - I guess some of the questions have been, gee, the refi was additional business and so if your average was X and now you've got another 100 million pick a number, shouldn't that have been a benefit even if you only get one percent on it rather than a negative?

And if it goes away, that is going to take away some income, not benefit some income.

Now related to just what you were saying, some of your longer term investments have prepaid much quicker.

But I'm not sure how to look at this issue.

Maybe you can go over it again.

I'm going to take a little bit more of a swing at it.

I believe that Phil has Bill Putney (ph) with him in his office.

He's Vice President and Chief Investment Officer at Travelers, and hopefully he'll be able to do a little better job than I've been able to do or Phil has been able to do in trying to explain why this extra business so to speak is not a benefit.

The piece that I would mention on this business is when we price the Official Check product, Phil and Bill and his team price that with the assumption that they will be able to take and that and invest it at a longer duration than overnight.

And that's all built into the pricing model.

So when you have a situation of where you are basing your customers' pricing on something longer than overnight, and then all of a sudden you have that customer and you're getting some normal business, if you will, but you also then are getting some extraordinary refinance business, you can only take that money and put it in very, very short duration.

So as a result of that, depending on the particular deal and the way you have with the customer, you could definitely take that and not make money on it.

And that's the first piece.

The second piece, though, on the whole refinance activity, I know I just talked about this, but, again, the best way I can talk about it is if you have a mortgage backed security and it's yielding 6.5 percent, and if you assume the 20 percent prepaid speed on it and all of a sudden it's 40, you're getting your money back at a much faster and quicker clip.

And if you take that money today and you go back out in the marketplace, we know that from just a year ago the rates and the durations that we generally use are down over 100 basis points.

So no one anticipated back when they purchased the security anything other than the Fannie Mae and Freddie Mac prepaid speeds.

And Phil I've probably confused it more.

Let's see if Bill Putney (ph) can help us all out.

Because we don't want anybody confused on this.

It's confusing enough to us.

I don't want anybody to be confused.

So Bill can you step in and try to put some sense to this whole thing.

Bill Putney (ph): Yes.

Actually, I think you did a good job on that, Bob.

You have the refinances flowing through rather quickly.

And it's large dollars.

And with overnight rates, Mike, you just can't make a spread on those funds because we know they're not going to stick around.

So we're stuck really putting them in overnight rates, which are at historic lows, I think over the last 40 or 50 years.

That's really the issue you can't make a spread on that business because you can't take it out for any terms.

So it's business it's flowing through quickly.

It's outside of what we would term normal business.

And it's really our ability to invest that and make a spread in the overnight market with rates as they are, you just can't do it.

What you're saying, Bill, is this additional business is not profitable business.

And besides that, because of prepayments, some of the short-term funding has gone from, and maybe you can help us out, from 500 million to 700 million?

This is Phil.

That would be a great way to look at it.

We're not making any money on the flow through of the refinances.

And yes the short-term cash position has ballooned because of the refinances.

You're exactly right.

Can you give us some idea or quantify what the short-term position has to ballooned to or from and to?

You look at the gross of the Official Check portfolio, probably 40 percent of that growth in the third quarter was due to the refinances.

Do we know what the Official Check portfolio was?

We do not separate out versus the total portfolio, Mike.

But it's a significant amount of dollars for us and you hit the nail on the head.

We really just don't have an opportunity to make money on those balances as they come through.

And that really was the issue for us.

So what you're hoping is that as things normalize, you'll go back to your normal duration?

That's exactly right.

And I think that's a great point.

The Official Check business is a great business for us.

It has been and it will be.

And we're just dealing with an aberration in the market with record refinances flowing through.

Once that is done we should return to a more normalized business on that.

We still love the Official Check business, it's a wonderful business for us, we just have to fight through the short-term impact of all the cash flowing through.

The Official Check business you said 40 percent of its growth was from refinancing.

That would be a good stab at it.

Bill, are you on the line?

Bill Putney (ph): I am.

Want to comment?

I think you did a nice job, as well as Phil.

The easiest way to look at it those non-core balances Phil has been talking about, growth year-over-year.

The easiest way to look at it is we do a commission sharing with the banks and we typically will pay the bank like fed funds.

If it's short-term in nature, I have to invest in a money market type instrument.

So we're not going to make the spread that we would normally make on core balances where we could invest in longer term investments.

I hope all of that helps.

Thank you very much.

Next we'll go to Michael Peterson (ph) with (inaudible) Investment Management.

I wanted to follow on that quickly last question.

Because I don't think Mike got his answer.

Let me see if you can paraphrase this.

You're making incrementally nothing on the stuff flowing through.

The reason you're actually worse off sequentially or whatever, you're actually getting prepayments on the MBS which I think is a second issue.

I think that's what Bob was making the distinction on, but I'm not sure that that's what came out in the last question.

Is that a correct interpretation?

That's why you're actually worse - when refi goes away it actually gets better because you don't get prepayment on MBS.

That's correct, Phil, Bill

That's exactly right

Next we have a follow-up with Eunice Puri (ph) From (inaudible).

My question was answered.

Let's take one more question

At this time there are no further questions in the queue.

Thanks very much for attending the call and we'll keep pushing hard.

Again, I'd like point out that I like what I'm starting to see on the convention side.

We believe we probably are at about at GES we're not certain of that Exhibit group, but Kim and her group are going to continue to look at that.

Travelers - we're going through a very temporary faze that has a lot of factors converging in the third quarter and fourth quarter.

Phil's people believed, their numbers indicate, that certainly the first quarter of '03 you'll get back to a more normalized types of travels if you will.

Again, thanks very much for being with us.

Good-bye

That does conclude today's conference.

Thank you for your participation and have a great day.